MonitorsPublished on Apr 23, 2008
Energy Nationalism and Global Energy Security
Energy Nationalism and Global Energy Security

(Highlights of the speech by Ambassador Arne Walther [with the Ministry of Foreign Affairs in Norway] given at Windsor Energy Group Annual Consultation at Windsor Castle in the United Kingdom)

My experience as a national and international civil servant leaves me in no doubt about the continued variety and importance of core national interests in the broader international efforts to meet the global challenge of energy security. And that is for energy-importing, as well as energy-exporting countries, and industrialized states, as well as developing countries.

On this subject, I would like to leave with you today what I refer to as a dual bottom line. That energy nationalism — as any other natural resource nationalism — is natural; and that energy resource nationalism must be addressed in dialogue at a global political level. We must avoid misunderstandings that lead to conflict. And we must look to concerted action in the long-term, bearing in mind the common interests of both producers and consumers of energy.

Natural resource nationalism is natural

Energy security concerns continue to top the international political agenda. Why is that? It is not because it is a goal in itself — which it is not. It is because every country needs energy as a means to reach the respective economic and social objectives. Look at the facts. Energy affects commercial and political relations between countries. It fuels the world economy. Production and consumption of energy impact the global environment. Energy influences, and is influenced by, international politics. Energy is a challenge for the industry that has to harness it. It is also a challenge for national and international leaderships that have to govern it. Energy, in fact, goes to the very core of the political, economic and environmental interests of individual countries, as well as those of the global community.

So what is energy nationalism? Well, it is often used as a label for what is seen as the wicked and unjust policies of greedy resource owners, out to economically harm countries, or pressure politically innocent nations dependent on energy imports.

With national oil companies now controlling some 80 per cent of global proven oil reserves and oil prices at record high levels, we hear complaints about the energy nationalism of the crude oil and natural gas-exporting countries when:

·    they increase taxes and royalties;

·    they exercise greater control (majority share) over investment decisions, projects and exports;

·    contracts are renegotiated and they impose new con-tract terms;

·    they tie the core-business investment decisions of international companies to non-core activities.

The wider concept

Petroleum resources were in place on planet Earth long before humans carved it up into nation states and long before those states claimed sovereign rights over the natural resources found within their territories. Energy nationalism has been around for quite some time. And as long as there are nation states to call the energy shots, we should expect it to remain so. It should not surprise us that governments see a political imperative in making the most out of their particular national and natural endowment for their social and economic development.

But I would not limit the concept of energy nationalism to resource host countries. In my view, even non-host governments pursue policies of energy nationalism, in the sense they seek the natural resources of others as cheaply and as reliably as possible for their own domestic social and economic development. Just as those countries that are blessed with energy resources use their position of resource advantage to pursue wider economic and geopolitical objectives, so also will countries that lack such resources use their position of advantage in other areas to pursue their wider economic and geopolitical objectives. And the latter would include policy measures aimed at securing energy supplies in a way that would affect the vital interests of energy-exporting countries. I would also include the national policies of energy independence under the label of energy nationalism.

Good or bad?

The energy nationalism of both energy-exporting and energy-importing countries can be both good and bad. It is good when it is a win-win situation — that is one that benefits the social and economic development of the host country concerned, while also benefiting the interests of cooperating countries and companies. It is bad when it is a win-lose situation — xenophobic and detrimental to the vital interests of others.

If and when the policies of extreme energy nationalism result in win-lose situations, we need some form of agreed third-party or international mechanisms that can be called upon to mediate and arbitrate, in order to put things right. It is equally important to foster ongoing dialogue, both between governments and between governments and companies, to prevent things from deteriorating too far and getting out of hand. A dialogue that enhances an awareness of the long-term common interests of all sides can be identified as a win-win situation. The IEF is there for just that purpose — dialogue among ministers — while its International Energy Business Forum is there for dialogue among ministers and CEOs.

Curse or blessing?

I would expect that the increasing call around the world for good governance and transparency can increase, rather than decrease, energy nationalism. The citizens of both host and non-host countries expect their governments to provide the benefits of the world’s energy resources for the betterment of their lives. The fulfillment of these public energy expectations is important and can, in both energy-exporting and energy-importing countries, actually boil down to the political survival of governments.

It is often said that for most new petroleum host countries, the discovery of oil has been more of a curse than a blessing. My own country, Norway, is a notable exception. This is because the Norwegian oil saga took off in the 1970s on the basis of a democratic, well-functioning society with established political, legal and commercial institutions. The political desire has always been to go forward carefully and not let the ‘oil bonanza’ over heat the economy, or disrupt the traditional pattern of Norwegian society. In claiming sovereignty and exercising national control over the resources, the government set up a state oil company. Then it invited international companies to come and compete, acknowledging Norway’s need for their technological expertise and risk capital. Imposing high taxes and tough conditions, Norway has always been keen to offer international companies predictability in framework conditions, based a desire to establish the long-term presence of the best international companies available.

Consequently, Norway has attracted the quality segment of the international oil industry, while still pursuing a policy of energy resource nationalism. The country’s production and exports of oil and natural gas were welcomed as an indigenous OECD source of energy that offset fears of dependence on external sources that could exacerbate energy insecurity. Norway prides itself on being a reliable supplier of substantial amounts of oil and natural gas to its main trading partners and political allies, contributing to their energy security on a long-term basis. In short, the policies of Norway’s energy nationalism have been a win-win situation in relation to the country’s foreign partners.

Heightened energy consciousness

A feature of our present day, not least amplified by last year’s Nobel Peace Prize award to Al Gore and the Intergovernmental Panel on Climate Change (IPCC), as well as the landmark climate change negotiations in Bali, is that energy and environmental uncertainties are prompting countries and groups of countries to re-think their fundamental policies. Diversity is widely seen as being the key to policies for ensuring energy security. That means diversity of suppliers, diversity of the energy mix for consumers, as well as diversity of markets for the host country producers. However, the policy tuning of one country to meet the new challenges and reduce the level of its own particular energy uncertainties, can also exacerbate the uncertainties, or create new ones, for others.

Amid the uncertainties, there is a fundamental certainty — that the world will need more and cleaner energy, that the energy is used in a more efficient way, and that the resources are accessible and affordable to a larger share of the world’s population. 

The challenges of energy security and climate change are interlinked. Policies and measures to meet the climate change challenge should not jeopardize energy security. And the policies devised to enhance energy security should not exacerbate the effectiveness of climate change abatement measures.

In a landscape of common energy and environmental vulnerabilities and uncertainties, host and non-host country policies of energy nationalism will evolve against a complex backdrop of factors, including:

·          fossil fuels will remain paramount for quite some time with increasing attention to the development of alternatives;

·          environmental and climate change concerns will grow, not least in public opinion;

·          rising energy demand will increase the need to conserve and improve energy efficiency, and develop more cost-efficient technology;

·          there will be question marks on how to facilitate more predictable and equitable investment conditions;

·          increasing energy trade will be witnessed, due to the geographical mismatch of centres for oil and gas production and centres for consumption;

·          the vulnerability of energy production and supply to politically motivated disruptions, terrorist attacks, technical mishaps and the forces of nature will have to be considered;

·          competition for energy resources will increase, as will competition between energy resources;

·          a new set of cooperative relationships between national and international oil companies will come to fruition;

·          increasing bilateral and regional cooperation to address immediate concerns will be seen;

·          nations will opt for policies of energy interdependence, or energy independence for energy security;

·          increasing demands for equitable access to energy will be seen for a quarter of the world’s population that does not have

·          there will be a continuing shift towards Asia of global economic gravity with geopolitical and energy implications.

to be continued


Courtesy: OPEC bulletin

Energy Audit of Hydro-Power Stations

By S.Jothibasu, Engg. Officer 3, Energy Conservation & Development Division


Hydro generation provides clean, pollution-less, green energy. The hydel thermal mix which was 80:20 at the time of India’s independence has almost reversed due to the hydro resources development not keeping pace with the thermal developments.

Indian hydel power stations (HPS) are of the run-of-river type, storage type or irrigation canal based. The Indian stations can be broadly divided into those energized by Himalayan rivers and non-Himalayan rivers from the view point of silt in the water. Hydel stations in India are much older than thermal plants. Plants of over 50 years age are not uncommon.

The present hydro capacity is around 35 GW giving an energy generation of ~120 TWh at an average plant load factor of around 38% and availability factor of ~88%. The average number of forced outage hours are around 615h per year. The hydro generation is shared by ~800 units (~275 stations) with individual unit capacities ranging from3 MW to 250 MW.

Hydel turbines are initially designed for high efficiencies of the order of 89.0-93.0 %. The generator efficiencies are around 97.0-98.0 % while the transformer efficiencies are over 99.0 %. Over a period of time, these efficiencies drop down due to various reasons such as silt initiated erosion, higher clearances, internal leakages, excessive mechanical losses in bearings, etc..

The standardised range of turbines are classified based on their head-discharge characteristics (H-Q) as follows:

·          Pelton wheels for high heads (H:50-500m,Q:0.1-2.0m3/s)

·          Francis turbines for medium heads (H:10-200m, Q:0.2.0-8.0m3/s)

·          Kaplan turbines for medium heads (H:4-20m, Q:1-10.0m3/s)

·          Banki or bulb turbines of ultra low heads (H:2-5m, Q:1.0-20.0m3/s)

Figure 1: Efficiency of modern turbines

         Load factor

While the efficiency characteristics (variation of efficiency with load) is nearly flat for Pelton wheels it is quite steep for the other turbines. The peak efficiency occurs at 70-75 % load for Pelton wheels and Kaplan turbines while for the others, the peak occurs at 85-90 % load. The turbines are generally oversized so that the peak efficiency occurs at the rated conditions (100% maximum continuous rating). The generator is in the range of 97-98 % and also varies with loading. At part loads, the generator efficiencies are lower. Figure 1 gives typical efficiencies of hydro turbine units. Typical efficiencies of generators are given in Figure 2.

Figure 2: Efficiency of modern generator

             Load factor

The overall efficiency of a hydel plant is determined not only by the turbine and the generator but also by the auxiliaries, the water conduits, the river water intake, vector sector gates for control of water, discharge regulator, draft tubes, penstocks, governing system, trash racks, silt strainers, etc..

Energy Conservation and Development Division has carried out Energy audits for several hydro-power stations. The energy audits address the energy balance, power balance, capacity adequacy, present operating energy efficiencies, etc. As a part of energy audit, energy efficiency performance of major equipment in hydro stations are evaluated and recommendations are given for improvement along with financial viability. Typical energy performance parameters of different hydro-turbine systems evaluated are given in Figure 3. It can be seen that there is difference between design and operating efficiencies for which energy efficiency improvement measures need to be under taken by the Hydel Power Stations.

Figure 3: Turbine efficiency of various units tested

Unit No.

Unit # 1, 2, 3: Francis turbine rated for 115 MW, 137.3 m3/s flow, 94.5 m net head and 92.5 % efficiency.

Unit # 4, 5, 6: Kaplan turbines rated for 40.5MW, 188.6m3/s flow, 24.3 m net head and 92.4 % efficiency.

Unit # 7, 8, 9: Francis turbines rated for 35 MW, 14.0 m3/s flow, 298 m net head and 88.0 % efficiency.

Courtesy: Central Power Research Institute (CPRI News No. - 102)





Foreign oilfields investment yields $10 bn in returns

April 29, 2008. India's investment in taking stakes in oil and gas fields abroad has given back Rs 40,000 crore ($9.9 bn) in returns. The overseas arm of state-run Oil and Natural Gas Corp (ONGC), has invested over Rs 21,000 crore ($5.2 bn) overseas and OIL-IOC combine invested over Rs 2,000 crore ($495 mn). The investments have cumulatively yielded 28.14 mt of oil and oil equivalent gas. Rs 40,000 crore ($9.9 bn) has been recovered (from these investments). State-run Companies have acquired exploration and production assets in 23 countries including Australia, Brazil, Colombia, Cuba, Egypt, Gabon, Iran, Iraq, Libya, Myanmar, Nigeria, Oman, Qatar, Russia, Sudan, Syria, East Timor, Vietnam, Yemen and Venezuela. Of these, production has already started in six projects in Vietnam, Sudan, Russia, Syria and Colombia. In 2006-07, domestic crude oil production was 31.5 mt while consumption was 120.74 mt, underlining the need to invest in equity oil abroad. Currently, the overseas investment is yielding 8.76 mt of oil and oil equivalent gas.

Reliance KG fields may go on stream by August

April 29, 2008. The Reliance Industries Ltd-controlled gas fields in the Krishna-Godavari basin could go on stream by August. RIL wants vacation of the stay, given in the interim order of May 3, 2007, of the High Court, which has restrained RIL from creating any third party rights and use or supply gas committed to RNRL to any other party. RNRL power plants would be coming up in three years time. RNRL’s contention right through the case has been that the current gas supply agreement, which exists between the two companies, is unbankable. The Union Government through the Union Petroleum Ministry on April 11 had moved to Bombay High Court and had filed a notice of motion, wanting to be an intervener in the case. In the proceeding, the matter did not come up for argument.

Crude oil output up 0.4 pc last fiscal

April 29, 2008. The country’s crude oil production during the last financial year ended March 31 rose marginally by 0.4 per cent from the year earlier. The output for the year stood at 34.12 mt. The natural gas production during last fiscal was 32.27 bcm, up by 1.7 per cent from the previous year. During the year under review, the refinery production saw an increase of 6.5 per cent to 156.09 mt. In March, the crude oil output stood at 2.92 mt, down 0.3 per cent compared with the same month the previous year. The targeted crude oil production for March was 3.02 mt. In March, gas production stood at 2.74 bcm, down 1.4 per cent for the same month the previous year. The refining in March stood at 13.53 mt. Overall capacity utilisation by oil refiners in 2007-08 was at 104.8 per cent. In March, overall capacity utilisation by oil refiners was at 107.2 per cent.

Hinduja-OVL receives Iran nod for oil stake

April 28, 2008. The Hinduja group-ONGC Videsh combine has won approval of Iran to conduct due diligence for taking stakes in one of the largest oil and gas fields in the Persian Gulf nation. The deal for the projects, signed by the Hindujas with Nico, a wholly-owned subsidiary of National Iranian Oil Co, in August 2007, was not taking off presumably due to a concerted attempt by China, with all its influence, to get the same. As per the deal, the Hindujas group will take a 45% stake in Azadegan Oilfield.

Cairn gets double the quantity of oil from Andhra reserves

April 28, 2008. Cairn India, which operates Ravva oil & gas field off the Andhra Pradesh coastline, managed to extract 200 mn barrels of oil from the field which was estimated to contain extractable reserves of 101 mn barrels. The 200-millionth barrel was produced very recently on April 26. Cairn India and its joint venture partners ONGC, Videocon and Ravva Oil have managed to produce double the amount of reserves from the field compared to what was estimated. Also, the operating costs are among the lowest for a field of that size anywhere in the world. Cairn holds a 22.5% working interest as the operator in the Ravva field, while the remaining interests are held by ONGC (40%), Videocon Industries (25%) and Ravva Oil (12.5%). The field generates revenue worth $5 mn per day and about $900 mn has been invested so far at Ravva. Average gross production from the field for 2007 was 60,441 boepd (comprising average oil production of 48,078 bopd and average gas production of 74.18 mmscfd).

IOC mines private sector for associates in oil sands

April 25, 2008. State-owned Indian Oil Corp. Ltd (IOC) has dropped plans to go it alone, and is in talks with Indian private sector companies for jointly acquiring stakes in oil sand blocks in Canada. The change in strategy is because the company wants to mitigate its risks, as it is strapped for investible resources, having to absorb growing losses due to subsidy sharing on the sale of petroleum products. Even a small stake in oil sand blocks could run into billions of dollars, simply because it is very expensive to extract oil from oil sands which are essentially deposits of bitumen (a kind of coal) which is first converted to crude oil using specialized technology and then further refined to produce petroleum products. IOC has been in talks with Shell Canada Ltd and BP Plc. to buy a 10-20% stake in oil sand blocks in Canada. However, the spurt in international prices in the last one year, with prices topping $100 (Rs 4,000) per barrel, and the reluctance of the government to pass it on to consumers has meant that oil companies have had to absorb the subsidy. The total losses of the marketing companies in 2007-08 was Rs 77,304.50 crore ($19.3 bn). This is expected to double to Rs 1.5 trillion this fiscal. Companies have therefore begun to roll back their investment plans or reconfigure them as joint ventures with private companies. IOC had planned to invest Rs 56,000 crore ($13.9 bn) by 2012 and at present has total debt on its books of Rs 34,000 crore ($8.5 bn). The owners of Canadian oil sand blocks are, for their part, keen on foreign investment because of the high capital expenditure, estimated at $ 123.55 bn, for commissioning future oil sand projects.

Canada’s oil sands are estimated to have reserves of 173.7 bn barrels; they currently produce a mn barrels a day of crude. Venezuela, too, has significant deposits of oil sands. With crude oil prices touching $115 per barrel, expensive alternatives such as oil sands are now in focus. Oil sands have become a viable option with crude oil prices skyrocketing. However, due to the rising crude oil prices, there has been a significant impact on the oil marketing companies and they have not been sufficiently compensated for it. Partnering with private sector companies also help in less regulated markets, where there is a need to take quick actions, which is not the case with the PSUs (public sector undertakings). IOC ended 2006-07 with Rs2.21 trillion ($55.1 bn) in revenues and Rs7,499 crore ($1.9 bn) in net profit; in the first nine months of 2007-08 ended December, it returned a net profit of Rs7,377 crore ($1.8 bn) on revenues of Rs1.77 trillion ($44.1 bn).

RIL's MA field development plan approved

April 24, 2008. The Management Committee, comprising oil industry contractors and government of India nominees, has approved the field development plan of MA Field (Dhirubhai-26) of Reliance Industries Ltd. The field is in contact area of KG-D6, located in the deep waters of Krishna Godavari basin off the east cost of Andhra Pradesh. The field was discovered by RIL in 2006 and a development plan was submitted to Director General Hydrocarbons, Ministry of Petroleum and Natural gas and other Management Committee members for approval.

The Management Committee was constituted under the Production Sharing Contract. The plan includes production through a floating production storage and offloading platform. The field is estimated to produce a peak oil production of 40,000 barrels of oil per day and an estimated gas of 240-350 mmscfd. The production is likely to commence in second half of 2008 and this will be the first deep water production by any Indian company. The MA oil field development plan is in addition to the development plan for gas field D1-D3, within the same block. RIL acquired the KG-D6 block under National Exploration and Licensing Policy (NELP) I. Niko Ltd holds 10 per cent participating interest in the block. 

ONGC invests $3 bn under oil recovery schemes

April 24, 2008. Oil and Natural Gas Corporation Limited (ONGC) has made an investment of Rs 134.34 bn ($3.35 bn) upto March 2008 under Improved Oil Recovery (IOR)/Enhanced Oil Recovery (EOR) Schemes of the company. The total approved cost of IOR-EOR schemes of ONGC is of the order of Rs140.60bn. ONGC has identified 14 of its major oil and gas fields which contribute nearly 80% of the total production, for implementing IOR and EOR schemes. The schemes aim to augment oil and gas production in Mumbai High, Heera, Neelam, Gandhar, Kalol, Sanand, North Kadi, Santhal, Balol, Jotana, Sobhasan, Lakwa, Geleki and Rudra Sagar fields. ONGC is implementing proven new technologies under Improved Oil Recovery (IOR)/Enhanced Oil Recovery (EOR) projects such as various well techniques like drilling of horizontal and multilateral wells by side-track in oil wells, work over, hydro-fracturing, acidisation etc. to augment oil production.


I-T holiday extension brings cheer to three PSU refineries

April 29, 2008. The upcoming public sector refineries Paradeep, Bina, and Bhatinda got a boost after the Finance Minister, Mr P. Chidambaram, extended the seven-year Income-Tax holiday to refineries being commissioned by March 31, 2012. However, confusion continued to prevail on whether the tax benefit would be available for companies getting into oil and gas exploration and production. According to the Finance Minister, a new proposal in the Bill seeks to insert a new proviso in sub-section (9) of section 80-IB so as to provide that no deduction shall be allowed to an undertaking engaged in refining of mineral oil, if it begins refining on or after April 1, 2009. The Finance Bill proposal would have meant that Bharat Petroleum Ltd’s Bina refinery, Indian Oil Corporation’s Paradeep refinery and HPCL-Mittal combine’s Bhatinda refinery would have been at a disadvantage as they are to be commissioned from 2010-12. However, confusion continued on whether the tax breaks for oil and gas production under Section 80- IB (9) would be given or not.

The Industry and the Petroleum Ministry have been seeking clarifications so that the prospective bidders for the Seventh round of New Exploration Licensing Policy (NELP) can come with absolute clarity. If there is no tax holiday for E&P companies then the NELP bid document would be required to accordingly state that production of natural gas is not eligible for tax breaks. Some concerns have been expressed regarding the scope of Section 80-IB (9) of the Income-Tax Act this sub-Section allows a 100 per cent tax exemption in respect of an undertaking which begins commercial production or refining of mineral oil for a period of seven consecutive assessment years.

Oil firms use premium fuels to beat price curbs

April 29, 2008. In a bid to reduce over Rs 450 crore ($111.5 mn) of daily retail losses from subsidised fuel sales, the country's government-owned oil marketing companies have started selling only premium fuels high-performance petrol and diesel mixed with additives in many petrol pumps in the major fuel-consuming cities of Delhi and Mumbai. Indian Oil Corporation (IOC), the country's largest petroleum product marketer, has already started selling only premium fuels in nearly 25 of the 50 fuel stations it has in Mumbai, and in almost 10 of 50 outlets in Delhi.

Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) are also planning to follow IOC's example. Premium petrol and diesel, unlike normal petrol and diesel, are outside the purview of price control. Their prices are loosely pegged to normal petrol and diesel prices but the oil marketing companies suffer lower losses on such sales. The price of premium petrol is Rs 3 more per litre than normal petrol while premium diesel is around Rs 2.50 more per litre than normal diesel.

Petrol and diesel prices in Delhi (Rs/litre)
















Consumption of premium fuels rose almost 89 per cent in 2007-08 over 2006-07. Premium petrol and diesel contributed almost 35 per cent of the total petrol and diesel sold by IOC, Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) in 2007-08, up from 15 per cent in 2006-07. 

According to the three companies premium fuels will make up nearly 45 per cent of the total volume of petrol and diesel sold this financial year.  IOC, BPCL and HPCL are losing around Rs 13 for every litre of diesel they sell and around Rs 11 for every litre of petrol. Raising diesel prices by even 50 paise per litre would help cut retail losses by around Rs 54 lakh per day for IOC alone. Most of the fuel stations selling only premium petrol and diesel are company-owned and -operated.

IOC to establish 10 auto LPG stations in Tiruchi

April 28, 2008. Indian Oil Corporation will soon establish auto LPG refilling stations in 10 locations in the Tiruchirapalli division. The division, comprising eight revenue districts and two union territories of puducherry and Karaikal, would have three LPG outlets before July at Tiruchirapalli, Thanjavur and Ulundurpet. Seven more outlets at Chidambaram, Puducherry, Neyveli, Ulundurpet would be commissioned before end of this fiscal. As of now there are 303 retail outlets in this division. 

Reliance to commission refinery in September

April 24, 2008. Reliance Industries Ltd will commission its new 580,000 barrels per day (bpd) oil refinery at Jamnagar complex in September after test runs in July. Reliance Industries, which operates a 660,000-bpd refinery, is setting up the new plant through its subsidiary Reliance Petroleum, in which Chevron Corp holds a 5 percent stake. Together the two refineries will form the world's biggest refining complex that will process 1.24 million bpd of crude. Trial runs are planned to begin in July and should be over by end-August, so that the refinery can be commissioned on some auspicious day in September. The early commissioning gives Reliance a bigger head start to capitalise on robust refining profits before other export-focused refineries, the biggest of which are being built in the Middle East, weaken margins when they launch early next decade.

Transportation / Trade

GAIL to lay TAPI pipeline

April 28, 2008. State-run GAIL India Ltd will be part of a consortium that will be building the $7.6 bn Turkmenistan-Afghanistan-Pakistan-India gas pipeline by 2015. Unlike the rival pipeline from Iran, the 1,680 kilometer long pipeline from Dauletabad gas field in Turkmenistan will be built and operated by a consortium of national oil Companies from the four countries. India last week formally joined the US-backed project to meet its growing energy needs. The rival Iran-Pakistan-India gas pipeline is to be built by the three nations separately Iran is to build the section of the pipeline that fall in its territory, while Pakistan will construct the 1,035-km length from Iran-Pakistan border to Pakistan-India border. India will lay the line from its border with Pakistan to the consumption centre. The Steering Committee meeting of TAPI project, called by the project sponsor Asian Development Bank in Islamabad, endorsed GAIL's participation in the consortium. TAPI pipeline will run from the Dauletabad gas field in Turkmenistan to Afghanistan. From there it will be constructed alongside the highway running from Herat to Kandahar and then through Quetta and Multan in Pakistan. The final destination of the pipeline will be the Indian town of Fazilka, near the border between Pakistan and India. The pipeline will transport 100 mmscmd of gas from the Dauletabad gas field, of which India's share is likely to be 60 mmscmd.

Italy's Eni makes open offer for 20 pc in HOEC

April 24, 2008. Italy's energy firm Eni has offered to buy an additional 20 per cent stake in Hindustan Oil Exploration Co for Rs 144.2 a share. The open offer for the 20 per cent stake comes after Eni SpA bought UK crude producer Burren Energy Plc, which owns 27.17 per cent of Hindustan Oil Exploration Co (HOEC). The transaction led to indirect purchase of 27.17 per cent interest in HOEC. Indian takeover rules obligate Eni Holding to make an open offer for not less than 20 per cent of HOEC's outstanding shares. The aggregate consideration payable under the offer (assuming full acceptance) is Rs 376.58 crore ($93.8 mn). Last year, Eni bought Burren Energy for $3.6 bn to add production capacity in Africa, the Caspian and India. Eni UK Holding Plc plans to acquire as many as 26,115,455 fully paid up shares of HOEC representing an aggregate 20 per cent of its equity share at a price of Rs 144.2 per share. The open offer was made by Eni UK Holding Plc along with Burren Energy India Ltd and Burren Shakti Ltd, which are acting in concert for this offer. Burren Energy is the holding company of Burren Shakti Ltd and Burren Energy India Ltd, which together own 27.12 per cent in HOEC. The offer would start on June 11, and close on June 30.

Policy / Performance

Uttarakhand to explore gas-based projects

April 28, 2008. The Uttarakhand government plans to tap alternative sources of energy, particularly the gas-based sector, to meet the growing power demand. For this purpose, the government has already roped in GAIL to jointly examine various project opportunities for natural gas and undertake extension of the National Gas Grid to Uttarakhand. A possible pact with other private players like Reliance Industries is also being explored. After the declaration of state's new hill industrial policy this year, power demand in the state, which is around 20 to 22 million units, is likely to increase by 17 to 20 percent annually as industries continue to set up new units in the state. The State Industrial Development Corporation of Uttarakhand Limited (SIDCUL), which has developed several modern industrial estates, has signed a Memorandum of Understanding (MoU) with GAIL to give a fillip to gas-based energy projects. And now, a feasibility report is being prepared on the gas-based projects. An assessment exercise for natural gas and allied products is also being conducted in the state. It will also promote usage of gas like Compressed Natural Gas (CNG), Regasified Liquefied Natural Gas (RLNG) and Piped Natural Gas (PNG) in the state. GAIL's existing HBJ (Hazira-Bijaipur-Jagdishpur) trunk pipeline networks in Uttar Pradesh and its nearest tapping point is at Bareilly from where clean fuel could be made available to Uttarakhand via two routes. The first route will lay a pipeline network to Rudrapur, Ramnagar and Haldwani from Bareilly. The other route would be an extension of gas pipeline from Dadri.

ONGC figures low in transparency international report

April 28, 2008. Anti-corruption group Transparency International has placed India's flagship explorer Oil and Natural Gas Corp (ONGC) in the lowest tier for transparency in revenue disclosures. TI report, which placed 42 oil and gas companies into three tiers based on their level of transparency in revenue disclosure, clubbed ONGC with China's CNOOC and CNPC, Russia's Lukoil and US-based ExxonMobil Corp in the lowest tier for disclosing information only by geographical segment and providing almost no additional information. Royal/Dutch Shell, Brazil's Petrobras, Norway's StatoilHydro, BG Group of UK and Petro-Canada were among the best performing companies. TI used publicly available records to measure companies' payments to host governments, their operations and contributions to corporate anti-corruption programmes. ONGC, faired in the top tier when it came to disclosure of revenue at home, providing information about regulatory structure and procurement practices and disclosure of anti-corruption programmes. However, when it came to operations outside home country, ONGC fell in the lowest tier for disclosing only by geographical segment and providing almost no additional information relevant to revenue transparency. BP Plc, Chevron Corp, Conoco-Philips, Eni of Italy and Total of France were in the middle tier of companies that disclose revenue by geographic region and could improve by giving a country-by-country breakdown. Firms in the highest tier disclose payments systematically on a country-by-country basis and go beyond the mandatory reporting regulations. 

Iran to discuss pipeline with India, Pakistan

April 27, 2008. Iranian President Mahmoud Ahmadinejad will visit India and Pakistan for talks on issues including longstanding plans for a pipeline to supply Iranian gas to the two Asian states. The three countries have discussed the pipeline for years. They have agreed in principle on a pricing formula but India dropped out of talks in mid-2007, saying it first wanted to resolve issues with Pakistan such as transit fees. India and Pakistan were just days or weeks away from finalising terms on the cross-border pipeline. According to Iran and Pakistan, they would go ahead with the project without India if necessary. The $7.6 bn project has been dubbed the Pipeline for Peace and Progress because of the mutual benefits it will bring to India and Pakistan, two countries that have fought three wars since they were divided by the partition of India in 1947. The nuclear-armed rivals are both desperate to tie up future energy supplies to fuel their fast growing economies. The United States has tried to discourage India and Pakistan from any deal with Iran in the past because of Tehran's suspected ambitions to build nuclear arms. Iran denies any such ambitions. The pipeline would initially transport 60 mcm of gas (2.2 bcf) daily to Pakistan and India, half for each country. The pipeline's capacity would later rise to 150 mcm. Iran has the world's second largest reserves of gas after Russia but has been slow to develop exports partly because of US sanctions. 

Talks on stake in Iran gas block likely

April 26, 2008. The visit of Iranian President Mahmoud Ahmadinejad next week may boost state-owned ONGC’s chances of buying an equity stake in phase 12 of South Pars block in gas-rich Iran. Discussions for development of phase 11 and 13 of the South Pars block is also on the cards, if Shell and Total of France fail to sign a deal by June. The ONGC chairman and other officials were scheduled to meet Iranian officials in Rome for buying an equity in Iran’s South Pars gas block. With petroleum minister Murli Deora’s cancelled visit to Rome, the matter is likely to come up during Iran’s president visit to New Delhi next week. Iran last week set a deadline for Total of France and Royal Dutch Shell to finalise the deal to develop phase 11 and 13 of the South Pars by June or it will consider allocating the blocks to other firms. Iran is drawing interest from Indian and Chinese firms that are keen to tap the world’s second-largest oil and gas reserve and are less susceptible than many other companies to western pressure over Tehran’s nuclear programme. Besides, India is likely to kick-start the stall negotiations over the Iran-Pakistan-India (IPI) pipeline project and will also push for the 5 mt of LNG deal. ONGC, through its overseas investment arm ONGC Videsh (OVL), and the Hinduja Group are together eyeing a role in developing the South Pars Phase 12 gas field and the Azadegan oil asset. A venture in Iran would be OVL’s second entry into the hydrocarbon-rich nation, where it operates the Farsi block.

India joins mega gas pipeline project

April 25, 2008. India has formally joined the Turkmenistan-Afghanistan-Pakistan (TAP) pipeline project as it seeks to import more natural gas to fuel an economy that is growing at 8-9% an year. The project has now been officially renamed as the Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipeline. A decision to this effect was taken at the 10th steering committee meeting of the project that was held on 23-24 April in Islamabad. Petroleum minister Murli Deora represented India in the meeting. The decision to go-ahead with the Tapi project comes at a time when India and Pakistan are yet to resolve key differences over a similar project to transport natural gas from Iran through a pipeline. The Tapi project also has the backing of the US, which opposes the Iran-Pakistan-India gas pipeline project.

 The project was conceived in 2002 to transport gas from Turkmenistan to the other three Asian nations. The gas is expected to flow to India in 2014. Transportation tariff will be based on the cost of service method. The 1,680-km long pipeline will supply 90 mmscmd of gas. The project will help promote energy security of the participating countries and strength regional cooperation. During the meeting in Islamabad, an Intergovernmental Framework Agreement to facilitate implementation of the Project was initiated by oil ministers of the four countries. As per the text of the agreement, the pipeline will be executed by a consortium. The next meeting of the Steering Committee will be held in India. The gas will be supplied from Douletabad and other fields in Turkmenistan and the principle of unobstructed transit of natural gas, in accordance with international norms, will be followed. The safety and security of the pipeline and related infrastructure will be provided by concerned governments in their respective territories. The length of the pipeline in Turkmenistan, Afghanistan and Pakistan up to India border is 145 km, 735 km and 800 km, respectively. Gas utilization by Afghanistan will be about to 5 mmscmd in the first two year and 14 mmscmd from the third year onward, with the remaining quantity of gas would be equally shared by India and Pakistan.

Punjab for zero levy on ethanol

April 24, 2008. In a move that would set an example for other states, the Punjab government has decided to withdraw all state-level taxes and levies on ethanol. Punjab levies 20% sales tax (plus 2% surcharge) and Re 1/lt import permit fee on ethanol. The move will help the Centre’s move to implement a 10% ethanol blended petrol (EBP) scheme from October 2008. Punjab government has issued a direction in this regard after Prime Minister Manmohan Singh requested states to exempt ethanol from taxes and levies. While the Centre has made it mandatory to sell 5% ethanol-doped petrol across the country (except for J&K, north-eastern states and island territories), oil marketing companies (OMCs) are finding it difficult to implement the direction due to high cost of ethanol. Sales tax on ethanol varies from 4% to 20% in different states. Besides, states levy various surcharge, export fee (from one state to another state), import permit fee, license fee, administration fee and state excise. For example, in Maharastra, sales tax is 4%, in Goa it is 19% and sales tax in Tamil Nadu is 8% (plus 5% surcharge on sales tax). The duty rationalisation will also help in having a price parity between imported ethanol and domestically-procured ethanol. Currently, on an average oil companies pay Rs 28/lt for ethanol procured domestically whereas its landed cost at Indian ports is estimated at around Rs 21/lt. Even domestic movement of ethanol is difficult due to state levies. Rationalisation of state levies is also important for the success of EBP scheme as all states do not produce ethanol. Ethanol producing states are UP, Karnataka, Tamil Nadu, AP, Maharastra, Gujarat and Bihar. Oil companies are facing difficulty in procuring the required quantity of ethanol. The production and movement of ethanol is controlled by state excise departments. Purchase of ethanol requires permits from excise departments. The permits are given for limited quantity and for limited period.

‘Remove 5 pc customs duty on crude’: Deora

April 24, 2008. The finance ministry is under tremendous pressure from the petroleum ministry to abolish the 5% customs duty on crude oil. With the price of crude oil that India imports has crossed an all-time high of US$110 a barrel and the government is worried over the increasing losses on fuel sales by state-run oil marketing firms. A duty cut will also help in averting the financial bankruptcy of public sector oil Companies. Petroleum minister Murli Deora has already conveyed to finance minister P Chidambaram and to the Prime Minister Manmohan Singh that import duty on crude oil should be removed in line with the recent cut in import duties of food commodities.



Centre urged to take up power projects in NE

April 27, 2008. The Northeastern States have urged the Centre to build power projects in the region under the ‘Bharat Nirman’ package to cater to the electricity requirements of the eight NE States. The Northeastern States have a collective power generation capacity of 76,000 MW, mostly hydel, which should be tapped to meet the electricity requirements of this region and other parts of the country. According to North East Regional Power Committee (NERPC), in view of the huge financial cost of power projects, the Centre should build such projects in the Northeastern States on the lines of the road infrastructure being laid under the ‘Bharat Nirman’ package. The power projects in the North East should be funded entirely by the Centre unlike the other development plans in this region on the funding ratio of 90:10. The power situation in the region would improve in future after speedy execution of hydel and thermal power projects underway in the eight States. The NERPC also discussed coordination among its constituent States on the accelerated development of the power sector in the North East to press the Centre for taking up measures for overall development of the region.

PM dedicates J&K hydel plant to nation

April 26, 2008. Prime Minister Manmohan Singh dedicated the 390-MW Dulhasti hydel power project in Jammu and Kashmir to the nation and promised maximum help from the Centre for multifaceted development of the state. Built on river Chenab in the newly-created Kishtwar district, the project was termed by Singh as another milestone in tapping the vast hydro power potential in the state. The foundation stone for it was laid 25 years ago by the then Prime Minister Indira Gandhi. When Gandhi laid the foundation stone for the project on April 19, 1983, its cost was estimated at Rs 183 crores ($45.6 mn), but was finally completed last year at an investment of Rs 5,228 crores ($1.3 bn). 

Hindujas may invest $10 bn in power sector

April 25, 2008. Hinduja Group will invest $10 bn in various power projects across India by 2018, starting with setting up of 2,000 MW generation capacity in Andhra Pradesh. The group, run by London-based Hinduja family, will create a power generation capacity of 10,000 MW over the next ten years, for which it is negotiating with 7-8 states. The first of this would be the 2,000 MW Vizag project in Andhra Pradesh. The group's total investment in the country's power sector would work out to be around ten billion dollars (about Rs 40,000 crore), given the average cost of about $1bn for creating 1,000 MW capacity. The group will also consider bidding for upcoming ultra- mega power projects (UMPPs) as and when the government invites bids for the same and that any decision in that regard would be taken only after the bids are invited and on a case-to-case basis. Out of the group's overall 10,000 MW power generation plan, Vizag project is expected to be the first to reach financial closure. 

Tata Power ties up debt for $4 bn project

April 25, 2008. Indian power utility Tata Power Ltd has signed agreements with a consortium of banks to part fund its upcoming 4,000 MW power plant in the Western state of Gujarat. Debt from Indian banks and multilateral agencies would account for three quarters of the project cost, which is estimated at $4.2 bn. It has already announced the completion of signing of financial agreements for the project under the Special Purpose Vehicle (SPV) christened as Coastal Gujarat Power Limited (CGPL). According to Tata Power, the first of the five power units will be set up in September 2011 and the entire plant would be commissioned by 2012. The project consists of 5 units, each of 800 MW which will generate saleable power of 3800 MW to be supplied to five states namely Gujarat, Maharashtra, Rajasthan, Haryana and Punjab. The Site preparatory works are in progress and orders for all major equipments have been placed. About $1.8 bn would funded via external commercial borrowings from agencies including the Asian Development Bank (ADB) and the International Finance Corp, the private sector lending arm of the World Bank. ADB has approved a loan for $450 mn for the project. Another Rs 55.5 bn ($1.38 bn) would be rupee denominated loans from Indian financial institutions and the remainder would be equity. The Company has signed the contract for complete boiler island scope on Engineering - Procurement - Construction (EPC) basis with Doosan Heavy Industries & Construction Co Ltd, Korea and contract for supply of Steam Turbine Generators with Toshiba Corporation. The project has been covered by insurance cover by Oriental Insurance Co Limited. Mumbai-based Tata Power is spending more than $6 bn to quadruple domestic capacity to 10,000 MW by 2013 from 2,300 MW, to meet the demands of the nation's power deficit.

R-Power’s Butibori project to begin soon

April 24, 2008. The 300 MW Group Captive Power Project (GCPP) being set up by Vidarbha Industries Power (VIPL), a special purpose vehicle (SPV) formed by Reliance Power, at Butibori near Nagpur in Maharashtra, will soon enter the construction phase. The required land has been acquired and the Maharashtra Pollution Control Board (MPCB) has given the green signal for setting up the project. Reliance Power will soon award the engineering, procurement and construction (EPC) contract for the Rs 1500 crore ($373.8 mn) project. The project is expected to take off by 2010. The Butibori project is one of the first major power projects being set up in India under the GCPP concept. Power produced from the plant will be mainly supplied to the industrial consumers in Maharashtra at subsidised tariffs. The project was awarded to Reliance Power by Maharashtra Industrial Development Corporation (MIDC), a nodal development agency of the Maharashtra government, through a competitive international bidding process. The project will be beneficial to the consumers and developers alike. Industrial consumers will get discounted tariff upto 25 paise a unit and developers will garner better returns as the tariff will be higher than long-term power purchase agreements (PPA). Reliance Power has ensured coal linkage for the project from Western Coalfields. Maharashtra Industrial Development Corporation (MIDC) has allotted the land and committed adequate water from the Wadgaon dam near Nagpur. Other statutory approvals and environmental clearances are expected soon. Reliance Power is setting up 13 power projects with a combined capacity of 28,200 MW. This includes two ultra mega power projects of 4000 MW capacity at Sasan and Krishnapatinam.

RPL eyes coal trade, new 4 GW plant

April 23, 2008. Combining its success in acquiring overseas coal blocks with plans to enter the shipping business, Reliance Power Ltd (RPL), part of the Reliance-Anil Dhirubhai Ambani Group, is exploring getting into the business of selling coal to other big consumers in India. In a related development, since it has secured abundant coal blocks, Reliance is also proposing another 4,000 MW imported coal-based power project in India, apart from the proposed ultra mega power project (UMPP) at Krishnapatnam that may involve an investment of Rs 16,000 crore ($4 bn). Its stakes in the Indonesian coal blocks can support one more 4,000 MW imported coal-based power project in India, apart from servicing the needs of its 4,000 MW UMPP and the 1,200 MW project at Shahpur. The size of the market for imported coal that goes into power generation in India is around 20 mtpa and is expected to double by 2012 as more thermal power projects go onstream. If it starts to sell coal, Reliance will have to compete with, among others, Dubai’s Coal and Oil Group Llc., PTC India Ltd and MMTC Ltd in the coal trading business. The big buyers of imported coal for the power sector include NTPC Ltd, India’s largest power generation company, as well as several other independent power producers. Reliance will be investing around $1 bn, or nearly Rs 4,000 crore ($1 bn), to acquire stakes in the Indonesian coal mines. It also plans to invest around $1 bn for the purchase of capesize vessels, large cargo ships, for transporting coal from overseas for its power projects in India. Even though 78% of India’s coal production is dedicated to power generation, the sector is expected to need 545 mt of coal by 2012, not counting the new needs of so-called UMPPs. Domestic coal supplies are expected to provide only around 482 mt.

Transmission / Distribution / Trade

Tata Power refinances bridge loan for stake in coal companies

April 29, 2008. Tata Power Company Ltd. announced the refinancing of its bridge loan taken for the acquisition of 30% equity stakes (the purchase) in major Indonesian thermal coal producers, PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia (Arutmin) (together the coal companies), as well as related trading companies owned by PT Bumi Resources Tbk (Bumi). The company has successfully refinanced $650 mn out of a total of $950 mn bridge loan taken at the time of acquisition. The $950 mn bridge loan had a tenor of 1 year of which $850 mn is being refinanced with long-term loans. The refinancing consists of a non-recourse $580 mn facility and a $270 mn facility with recourse to the company. The non-recourse facility has a door-to-door tenor of 6 years and the recourse facility has a door-to-door tenor of 7 year and the pricing on the facilities is competitive for loans of such nature. The financing has been provided by a group of banks led by 5 mandated lead arrangers including Barclays Capital, Bank of India, ICICI Bank State Bank of India and Sumitomo Mitsui Banking Corporation. The Company will evaluate the option of refinancing the balance $100 mn of the bridge loan at an appropriate time within the residual bridge loan tenor. The Coal Companies (KPC and Arutmin) are together among the top three largest exporting thermal coal mines in the world. They have excellent co export infrastructure and are strategically well placed to act as a source of supply for increasing regional demand. Together, KPC and Arutmin produced approximately 54.2 mt of coal in 2007. Fast growing regional demand for thermal coal coupled with supply constraints in certain exporting countries has led to sharply higher coal prices.

TNEB plans ECS route to accept bill payments

April 29, 2008. Electronic clearing service (ECS) payment through post offices and ‘all time’ collection centres are some of the initiatives the Tamil Nadu Electricity Board (TNEB) is currently considering, to make bill payments easy for consumers. Currently, around 1.75 crore  TNEB customers pay their bills at 1,725 collection centres across the State, which amount to revenues of about Rs 700 crore ($173.4 mn) a day. These retail customers contribute about 55 per cent to TNEB’s total revenues. Under ECS, the board is currently in the process of identifying banks where such a tie-up is possible. Once this is in place, the banks will receive request of bill payment from TNEB and automatically debit the necessary amount from the customer’s account. Modelled on the lines of centres in Bangalore and Hyderabad, the all-time collection centres would be similar to ATMs where one can walk in, enter one’s 10-digit customer account code, see the balance and make a payment through cash or cheque. Billing of Energy Services by TNEB (called project BEST) has been conceptualised in two phases. Phase-I, operational from last year, involved computerising 615 urban collection centres at a cost of Rs 51.23 crore ($12.7 mn). Phase-II, currently under implementation, plans to cover 1,805 rural centres at a cost of Rs 87.93 crore ($21.8 mn). Around 1.25 crore customers are expected to benefit from this. Tenders for both phases were won by Gemini Communications Ltd.

Alstom may join new NTPC-BHEL venture

April 29, 2008. Alstom Projects India Ltd may partner with NTPC-BHEL Power Projects Pvt. Ltd to manufacture turbines and generators. The new firm is a 50:50 joint venture (JV) created by Bharat Heavy Electricals Ltd (BHEL) and NTPC Ltd to carry out contracts for engineering procurement and construction of power projects. It will also manufacture power generation equipment in the country. Alstom already manufacture boilers, and are now interested in manufacturing turbines and generators as well. The new JV will have to partner for technology with players such as Alstom, Siemens or GE. The Alstom partnership in the new JV is logical as they already have an existing relationship with BHEL and this is what they are trying to leverage in the new JV. The new company has a paid-up capital of Rs5 crore ($1.2 bn) and plans to manufacture boilers at Visakhapatnam (Andhra Pradesh), turbines and generators at Pune (Maharashtra), and the balance of plant equipment at Durgapur (West Bengal).

BHEL bags $841 mn order in Chhattisgarh

April 28, 2008. State-run Bharat Heavy Electricals Ltd secured orders worth Rs 3,368 crore ($840.7 mn) from Chhattisgarh State Electricity Board for supplying and installing power equipments to its projects. BHEL would supply and install the Main Plant Package for three 500 MW coal-based units at two power projects in Chhattisgarh. The company would work towards setting up of a 500 MW unit at Korba West thermal power plant and two 500 MW units at the upcoming Marwa thermal power plant. These units would add 36 mn units to the grid on commissioning. BHEL's contract in the project would include design, engineering, manufacturing, supply, commissioning of steam turbines, generators and boilers. The state-owned engineering giant manufactured thermal, hydro, gas and nuclear sets generated over five per cent more power in the last fiscal giving boost to power generation in the country. The power stations equipped with BHEL sets have won maximum Meritorious Productivity Awards from the government.

Bihar's assent to NTPC proposal for power distribution

April 27, 2008. The Bihar government accepted the Centre's proposal to allow the National Thermal Power Corporation (NTPC) at Kahalgaon to directly distribute electricity to the areas within a radius of 10-12 kms, meeting the long-pending demand of locals. The Centre directed the authorities to start preparations for supplying power to the promised areas without delay.

Delhi’s wait for more power gets longer

April 23, 2008.  The Capital’s wait for an additional 600 MW of power to meet its peak demand has just got longer. With the commissioning of the 1,000 MW Tehri pump storage scheme in Uttarakhand now delayed, the city will be able to receive its share of 600 MW from the project only after 2012. The Tehri scheme, foundation stone for which was laid in July 2006, is aimed at generating 1,000 MW of power and for providing balance load to the thermal base generation during off-peak hours. The storage pump will generate hydro-electricity by storing and producing electricity to supply high peak demands by moving water between reservoirs at different elevations. Though Delhi will pay for the power that will be generated at Tehri, it will still work out to be cheaper than the power that can be purchased in the open market to meet the peak demand. Delhi will return 600 MW at night, but will be able to claim the same quantum to meet the peak demand. The Tehri scheme is part of the 2,400 MW Tehri hydropower complex in Uttarakhand targeted to add 1,400 MW of new hydropower capacity. It will have four turbines of 250 MW each and the beneficiary States of Delhi, Punjab, Haryana and Rajasthan, that will supply input power for the pumping operation, will receive power in return to meet their peak demand.

SAIL plans to import 12.5 mt coal

April 23, 2008. Steel Authority of India Ltd (SAIL) proposes to import an estimated 12.5 mt coal in the current fiscal (as compared to 9.7 mt in 2007-08) but the distribution of the projected import among the three east coast ports , namely, Haldia, Paradip and Visakhapatnam, is yet to be finalised. One reason for this may be the uncertainty over the availability of coal (and at competitive price) in the world market. Also, it is not clear how much of the projected import will the each port be in a position to handle. The apprehension may not be totally unfounded. For 2007-08, SAIL initially had set the coal import target at 13 mt to be divided among the three ports in the following proportions: Haldia 6 mt, Vizag 5 mt and Paradip 2 mt. Subsequently, the target was revised downwards in view of the uncertainty over coal availability in the international market, particularly the problems at the loading ports in Australia. The revised target was set at 10.26 mt to be divided among the three ports in the proportions of Visakhapatnam 4.32 mt, Haldia 4.66 and Paradip 1.28 mt. However, the year ended with a total import of 9.7 mt and the distribution among three ports was Visakhapatnam 4.03 mt, Haldia 4.59 mt and Paradip 1.08 mt. Haldia, though it handled the bulk of SAIL’s coal import in 2007-08, may find it difficult to handle very large volumes.

Policy / Performance

ADB loan to Himachal to execute power projects

April 29, 2008. The state government in Himachal Pradesh is set to renew its efforts to play a major role in power production in the state with the Asian Development Bank sanctioning a loan Rs 3,200 crore ($792.7 mn) for the execution of three major power projects. While it has been the government’s long cherished dream to have more share in electricity produced in the state, with no funds at hand the state has always played a good host to either PSUs like Satluj Jal Vidyut Nigan Limited (SJVN), NHPC, NTPC and later on to private players like the JP Group. Out of the total 6310 MW of hydel potential harnessed so far, only 468 MW has been exploited in the state sector. So while the Bhakra Beas Management Board reaps in the profits from the Satluj-Beas river system, SJVN now is set to monopolize the upper Sutlej basin whereas NHPC has set its base in the Ravi basin. All that the state gets is some free power and lately a minor cost sharing arrangement as in the case of Nathpa-Jhakri project executed by SJVN. The state’s only major venture, the 126-MW Larji project, executed by the state electricity board turned out to be a major embarrassment for the government following huge time and cost over-runs, and also large-scale financial irregularities. After this bitter experience, the state decided to form a separate corporation to execute power projects in the state. Initially, three projects - 240-MW Kashang, 100-MW Sainj , 402-MW Shongtong-Karcham projects and the 111-MW Sawra Kuddu projects - to Himachal Power Corporation. But, facing shortage of funds none of these were initiated, but now the state is set to soon get Rs 1700 crore ($421.1 mn) in October as the first instalment of the loan for the projects involving an expenditure of 4,500 crore ($1.1 bn). It will have to pay back only 10 per cent of the amount $79.3 mn (Rs 320 crore) over a long period. The Centre will pay 5.5 per cent interest on the loan but it will be given as a grant to the state. The Centre is giving 90 per cent of the loan amount as a grant under the plan drawn out to make the state self-reliant by exploiting its huge potential for hydel generation.

Most states yet to formulate plan for rural electrification

April 28, 2008. Majority of the states have not yet formulated the plan for implementation of the Centre's ambitious rural electrification programme. Twelve states viz., Chattisgarh, Gujarat, Maharashtra, Himachal Pradesh, Madhya Pradesh, Mizoram, Nagaland, Orissa, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal have so far formulated the plan for implementing the programme. The Centre is also planning to request state governments to set up a committee headed by Chief Secretary and comprising the secretaries of Power, Rural Development, Home, Revenue, Forests and Environment to resolve inter-departmental issues. This committee will also ensure that there is no delay in issuance of safety clearance prior to taking over of completed RGGVY assets by state utilities. The Centre has been asking states to take suitable action for expeditious implementation of rural electrification works under RGGVY projects within stipulated timelines.

Coal, power ministries lock horns over fuel

April 28, 2008. The Union power ministry has opposed a move by its coal counterpart to ration out access to what it believes is a limited number of coal blocks, implying that some power plants planning to start operations by 2012 will not have assured supplies and might have to import coal. It could also upset the power ministry’s plans to produce more electricity in the country as quickly as possible. The so-called linkage means a coal-fired power plant is assured of supply, which requires approval from a committee headed by the coal ministry. The committee is yet to discuss such coal linkages for the power and cement sectors although a meeting was scheduled on April 7. It is expected to consider linkages for around 20 independent power producers that would add capacity to generate 15,000 MW of energy in the 11th Plan that ends in 2012. Earlier, power projects were directly awarded coal linkages. However, scarce resources and increasing applicants prompted the government to introduce a system of awarding letters of assurance (LoAs). These letters are converted to linkages after a project completes financial closure, which occurs when the promoters make legally binding commitments to mobilize funds. The coal ministry has issued LoAs of around 200 mtpa, in line with India’s coal distribution policy, according to which, the demand of the power sector has to be fully met. However, there is no coal available to cater to these LoAs. According to India’s economic survey for 2007-08, growth in coal production has dropped from a high of 6.2% between April and December 2006 to 4.9% in the same period in 2007. The country has an installed power generation capacity of 141,080 MW and plans to add 78,577 MW more by 2012. Of this, around 46,600 MW is expected to come from coal-based projects. Around 67% of India’s electricity production capacity is based on coal. The power sector currently needs around 390 mtpa of the fuel. Even though 78% of the coal produced in the country is used to generate power, projected supply falls well short of demand. The energy sector, excluding the planned 4,000 MW power projects, is expected to need 545 mtpa of coal by 2012, compared with domestic coal supplies of around 482 mtpa. The shortfall will have to be made up through imports.

Bihar asks Nepal to establish energy teamwork

April 28, 2008. Bihar Chief Minister Nitish Kumar has asked Nepal to take a cue from Bhutan and harness water resources with India so that the Nepalese economy is strengthened manifold by sale of surplus hydel power. According to him if the water resource of the two countries is properly harnessed, the economy of Nepal will increase manifold as Nepal has the potential to produce about 85,000 MW hydel energy which it could sell to India after meeting its requirements and thus can experience a rise in its GDP and per capita income. According to Kumar, cooperation in the field of water resources development would help create irrigation facilities, generate hydro-electricity and provide important navigation facilities to land-locked Nepal which shares a 700 km porous border with Bihar.

GoM calls for power sector disinvestment

April 28, 2008. To meet the UPA administration’s ambitious target of adding fresh capacity of 1,11,000 MW during the 11th Five-Year Plan, the group of ministers (GoM) examining the finances of the power sector has proposed that the government divest up to 49% of its stake in profitable central power sector Companies. They include NTPC, PFC, REC, PGCIL and NHPC. The GoM, headed by Planning Commission deputy chairman Montek Singh Ahluwalia, has suggested a combination of initial public offerings and follow-on public offers to generate about Rs 1,66,000 crore ($41.4 bn). But this would cover no more than a third of the Rs 4,38,319 crore ($109.4 bn) investment required in the sector during the 11th Plan period. To ensure that funds from any such disinvestment are ploughed back for investment, the ministerial panel has recommended they be routed through the new National Electricity Fund announced in this year’s Budget. Disinvestment funds usually go into the National Investment Fund that finances social sector projects and reviving sick PSUs. While the UPA’s National Common Minimum Programme rules out privatisation of profit-making PSUs, it allows them to access the capital market to enhance their equity base. As the Companies earmarked for possible disinvestment are Navratnas, the government would first have to change its current policy that prohibits stake sales in such organisations. The money raised from the disinvestments would be used to fund power projects, as well as improve outdated transmission & distribution systems in many states. Another significant suggestion made by the GoM is that rural electrification, decentralised distributed generation projects, and micro hydel projects with investments of less than Rs 10 crore ($2.5 mn) each be treated as ‘priority sector lending’ by the banking sector. Other measures suggested by the panel include asking RBI to waive ECB norms for the power sector so that foreign currency funds can be raised for rupee expenditure. Under this plan, PFC and REC may be allowed to borrow funds from overseas Markets through the automatic route.

 ‘Gadgil formula on power sharing be reviewed’: MoP

April 26, 2008. The V N Gadgil formula giving priority to home states and areas where thermal or hydel power plants were located, was being considered for thorough overhaul by the Centre. According to the Union Minister of State for Power Jairam Ramesh, the home states to be given priority for sharing the optimum generation of the National Thermal Power Plant (NTPC) or any other thermal or hydel project of the central government.  

Captive coal blocks to be sold to steel, cement company

April 26, 2008. A large number of coal blocks lying in the command areas of the public sector coal companies - Coal India Ltd (CIL) and Singareni Collieries Company Ltd (SCCL), will be auctioned by the Government on commercial basis to the highest bidder for captive use of cement and steel companies. These coal blocks would be those not required by these two companies according to their production programme during the Eleventh Plan period. Already two such blocks with Western Coalfields Ltd (WCL) in Madhya Pradesh have been identified, namely Tandsi-III & Extension and Thesgora-B/Rudrapur. Identifying other blocks lying in the command areas of the other coal producing companies based on technological and quality considerations are currently underway. However, it may take some time before auctioning actually takes off because certain formalities need to be cleared. Currently, the Mines and Minerals (Development and Regulation) Act (MMDR) does not permit the Government to auction coal blocks commercially through an open bidding system. The existing provisions in the Act demands that an empowered committee, usually headed by the Coal Secretary, decide on allocation based on a case to case basis on merit. Apart from delay in decision making, the process has also come in for criticism on account of non-transparency.

Haryana to spend $60 mn on reforms

April 26, 2008. The Haryana Power Utilities will spend Rs 239 crore ($59.5 mn) on power reforms in district Gurgaon by the year 2011. Under this ambitious plan, new sub stations would be set up and the capacity of existing sub stations would be augmented and new transmission lines would be laid in a phased manner. Apart from this, three sub stations of 66 KV capacity each, would also be set up by the private colonisers for which necessary approval has been granted to them by the Power Utilities. A 220 KV sub station, set up at a cost of Rs 19 crore ($4.7 mn) at Daultabad, has commenced functioning and a 66 KV sub station has also become functional. It was set up at a cost of Rs five crore ($1.2 mn). The capacity of nine sub stations of 66 KVeach was being augmented at a cost of Rs. 19 crore ($4.7 mn). In Gurgaon, 79 lakh units of electricity were supplied per day in the year 2006-07 which was 21 per cent more as compared to the supply of electricity in 2005-06. 

Captive power producers too may get mega project sops

April 25, 2008. Union Power Ministry has informed the parliamentary standing committee on energy that it is considering a proposal to extend the fiscal incentives of the mega power policy to captive and merchant power plants both private sector enterprises. However, it would seem that the Union power ministry has not considered extending the same benefit to the state sector power projects. At present, captive power plants account for an installed capacity of 22,335 MW. While the standing committee has supported the ministry’s proposal, it would like a similar tax holiday for the state sector as well. But for the time being, it is only the captive and merchant power plants that are on the agenda. In the past, the ministry of power had sought to extend the tax benefits of the mega power policy to all power projects, a stand that found support in the Planning Commission’s Integrated Energy Policy. However, the finance ministry has always been lukewarm to this proposal. The proposal would ensure zero customs duty on import of capital equipment for the projects, deemed export benefits, and an income tax holiday regime as per Section 80IA of the I-T Act. 

Kashmir govt preparing white paper on Baglihar

April 25, 2008. The state government has decided to bring out a white paper on the Baglihar project seeking to make public what it felt was wrong with the deal concluded by the previous National Conference regime. The government - feeling handicapped - decided the least it could do was to issue a white paper on the subject making clear to the public as to what was wrong in the contract and why the 450 MW hydroelectric project that should have been commissioned three years ago was still nowhere close to completion. The government had proposed a penalty of Rs 81 crore ($20.2 mn) on the contractors for their failure to the meet the deadlines. Baglihar hydroelectric project, located on river Chenab, would have an underground powerhouse with three 150 MW turbines. The project promoters, state-owned J and K Power Development Corp., had signed an EPC contract with the construction major, Jaiprakash Associates, in April 1999, giving a completion schedule of five years. The project has, however, been delayed for more than one reason. Pakistan had raised objections to the project after India gave notice of undertaking it way back in 1992. These were raised more vehemently subsequent to the construction contract being signed in 1999.

Govt approves Neyveli’s power project at Tuticorin

April 25, 2008. The Union Cabinet gave its approval for Neyveli Lignite Corporation’s 2X500 MW coal based thermal power project at Tuticorin in Joint Venture with Tamil Nadu Electricity Board, at an estimated cost of Rs 49.09 bn on April, 2007 price level (PL) with Interest During Construction (IDC) of Rs 5.97 bn and Foreign Exchange (FE) component of Rs. 7.16 bn (equivalent to US $ 169.884 mn). The Cabinet also approved the formation of the Joint Venture Company of NLC with TNEB by the name of NLC-Tamil Nadu Power LTd. as per the Memorandum of Articles (MoA) and Articles of Association (AoA) for setting up of a 1000 MW coal based Thermal Power Project named Tuticorin Thermal Power Project at Tuticorin, Tamil Nadu with share holding of 89% of the equity capital by LNC and 11% by TNEB. The power generated from Tuticorin Power Project (2x500 MW) units would cater to the demand of the States in the Southern Region.

Global tenders by PSUs may hit BHEL's chances

April 25, 2008. In what may come as a big setback for BHEL’s plans to foray into manufacturing super critical thermal power stations, it is unlikely to get bulk orders from central power utilities like NTPC on a negotiated basis. Instead, the government is considering a proposal to permit NTPC to go in for international competitive bids (ICB) for sourcing their requirement of 660 MW and 800 MW super critical sets for their upcoming seven power projects. The ICB would have mandatory technology transfer and domestic manufacturing clause. The cushion of bulk orders is important for BHEL to absorb the new technology that is expected to become a benchmark for future power projects. BHEL had sought bulk orders of 8 to 10 units to give it a comfort level for making investment in the domestic manufacturing (of boilers and turbines) of super critical equipment. In fact, ministry of heavy industries had moved a note before the Cabinet proposing bulk order for 10 units of 800 MW sets by central government utility companies. The proposal could not get through and was referred back to a high powered group headed by finance minister P Chidambaram for preparing a comprehensive policy in this regard. As per the new proposal, NTPC would invite ICB for sourcing equipment for its seven power plants expected to go on-stream during 11th and 12th Plans. While the winning bidder (L1) in first four projects would get orders, it has been decided to give second best bidder (L2) the remaining three projects to broad-base manufacturing of power equipment that is monopolised by BHEL at present. Both these companies have tie-ups with global companies like Siemens, Alstom, Mitsubishi, Toshiba preventing their direct participation in the bids. However, concerns have been raised that ICB with restrictions on sole participation from companies having local tie-ups could invite bids from countries like Russia, Korea, Poland, Czechoslovakia and more importantly China in the 660 MW category. Most of the supplies from these countries are unreliable and do not follow global standardisation norms that could negatively impact the government’s ambitious target to add over 78,500 MW of generation capacity by 2012. 

BHEL sets generate 454.6 bn units of power

April 24, 2008. Power equipments built by state-run Bharat Heavy Electricals Ltd (BHEL) registered a record generation of 454.6 bn units of electricity in 2007-08, compared to 432.6 bn units in the year-ago period. BHEL manufactured thermal, hydro, gas and nuclear sets generated over five per cent more power in the last fiscal giving boost to power generation in the country. 200-500 MW thermal sets made by BHEL form the backbone of the country's thermal generating capacity.

NHPC to take up Loktak hydel project

April 23, 2008. National Hydroelectric Power Corporation Ltd has finally come forward to form a joint venture company with the Manipur government to develop the much-delayed 90 MW Loktak downstream hydroelectric power project in the northeast state. The state government recently approved the shareholder agreement to form the JV. The project was cleared by the Centre in 1999 with all the clearances in place. However, the project has been hanging fire due to local militancy and other issues. The project, which was initially undertaken by the state government, had already seen an expenditure of around Rs 40 crore ($10 mn) and was eventually abandoned due to cost escalation. The project was approved at a completion cost of Rs 6.9767 bn ($174.5 mn) including an interest during construction (IDC) component of Rs 5.60 crore ($1.4 mn). The corresponding tariff at that time was Rs 4.10 per unit, which has since gone up.




Nigeria’s Usan field gets makeover in Q1 ’08

April 29, 2008. During the first quarter of 2008, Nexen commenced development of the Usan field, offshore Nigeria. The field development plan includes a floating production, storage and offloading vessel with a storage capacity of two million barrels of oil. All major contracts for deep-water facilities have been awarded and contractors are mobilizing for detailed engineering and project execution. The capital investment is expected to be within the range of US$1.6 to US$2.0 bn over the development period, with an estimated 2008 capital commitment of approximately US$300 mn. The Usan field is expected to come on stream in early 2012 and will ramp up to a peak production rate of 180,000 bbls/d. The Usan field development is located in OML 138 and is covered by the original production sharing contract for OPL 222 issued in 1993, with the Nigerian National Petroleum Corporation as concessionaire. The contract conveys the right to develop and produce crude oil and continue with exploration activity. The Usan field was discovered in 2002 and is located approximately 100 kilometers offshore in water depths ranging from 750 to 850 meters. Nexen has a 20% interest in exploration and development along with Elf Petroleum Nigeria Limited (20% and Operator), Chevron Petroleum Nigeria Limited (30%) and Esso Exploration and Production Nigeria (Offshore East) Limited (30%).

Oil, natural gas found in Southern Colombia

April 29, 2008. State-controlled Ecopetrol found oil and natural gas in the Southern Colombian province of Huila and would begin evaluating the discovery's potential in the next few days. The find occurred at the Tempranillo-1 well, located in the Upper Magdalena Valley basin, which is part of the Brisas-Lomalarga-Dina-Potrerillo block. During these tests, crude and gas flowed naturally. The crude is light and flowed at rates that varied between 1,600 and 2,400 barrels per day. According to the the oil company gas output was between 2 mn and 2.75 mcf per day. With the results obtained in the initial tests, Ecopetrol will draft a plan to evaluate the discovery's potential. Ecopetrol holds all of the Brisas-Lomalarga-Dina-Potrerillo block, which covers 10,184 hectares (39.3 square miles).

Steady oil output at Liaohe over the next 10 years

April 28, 2008. PetroChina, the country's top oil and gas producer, aims to keep the output of the Liaohe field China's largest heavy oil field steady at 12 mt a year for the next 10 years. The company will increase exploration in the field's western onshore block and a shallow water area. PetroChina produced 12.06 mt of crude oil in 2007 from the Liaohe field, located in the northeastern province of Liaoning. Liaohe, the country's second largest onshore field, added 53.63 mt of proven oil reserves in 2007.

Domestic Energy announces Chattanooga Shale plan

April 28, 2008. Domestic Energy Corp., an independent oil and gas exploration and development firm, announced that it plans to become one of the early participants in the new Chattanooga Shale natural gas development in Tennessee. Domestic Energy has people in the gas fields of Tennessee, launching its bid to become one of the large independents operating in the state. Last year, Consol Energy, Inc. drilled the first horizontal well in the region that had initial production of 3.9 mmcf of gas per day. That put the energy industry on notice that the Chattanooga shale is, in fact, an economically viable source of natural gas. Industry sources believe the Tennessee Chattanooga Shale gas play could eventually encompass 6,000 square miles and contain 5 trillion cubic feet of recoverable natural gas.

CNEPH increases crude oil production

April 28, 2008. China North East Petroleum Holdings (CNEPH), Limited, a leading oil producing company in Northern China, announced preliminary results for its 2008 first quarter oil production. Driven by production from new wells and increased capacity from existing wells, crude oil production for the quarter ended March 31, 2008 increased 11,324 tons (83,571 barrels) to 15,691 tons (115,800 barrels) from 4,367 tons (32,228 barrels) for the quarter ended March 31, 2007. On a sequential basis, crude oil production increased 3,057 tons (22,561 barrels), or 24%, compared to the quarter ended December 31, 2007.

Yuma discovers oil, gas in West Black Bay area

April 28, 2008. Yuma Exploration and Production Company Inc. announced a discovery in Plaquemines Parish, Louisiana in the West Black Bay area. The Rapala Well (S.L. 195) produced at a rate of 531 BOPD and 1 mmcfd. Yuma generated this 3D prospect internally and has approximately 20% working interest in this prospect. This well is operated by Helis Oil & Gas Company, L.L.C.

GE technology selected to increase production in Oman

April 24, 2008. For more efficient extraction of gas from depleted wells in four of its gas fields, Petroleum Development Oman (PDO) has turned to advanced, high-pressure compression technology from GE Oil & Gas. Under a multi-year, multi-project contract valued at more than $250 mn, GE will supply 16 electric motor-driven centrifugal compressors for high-pressure injection applications in the Kauther, Saih Nihayda and Yibal gas fields of Oman. The compressors will be manufactured at GE Oil & Gas facilities in Florence, Italy and will be shipped to Oman over the period of 2009-2015, for a total of 14 projects that will come on line between 2010 and 2016. The new projects reinforce GE's existing relationship with PDO, a major exploration and production company in the Sultanate of Oman. Last year, GE received two contracts from PDO to supply centrifugal compressors for projects in the Saih Rawl gas field of central Oman and the Harweel oil field of south Oman. PDO accounts for more than 80% of the country's crude oil production and nearly all of its natural gas supply. The company is owned by the government of Oman (60%), the Shell Group (34%), Total (4%) and Partex (2%). Gas fields, however, are operated by PDO exclusively on behalf of the Omani government. In addition to Oman, GE Oil & Gas is active throughout the Middle East, where the demand for technology and services to support the oil and gas industry continues to grow.

Increased production, budget in ’08 for XTO

April 23, 2008. XTO Energy Inc. is providing operational and financial guidance for 2008 based on current expectations for production, expenses, recently announced acquisitions and other parameters resulting from ongoing operations and development budget activities. These estimates do not include derivative fair value gains and losses, the effects of possible future acquisitions or divestitures, or unforeseen events. The Company is increasing its 2008 production volume growth target from 20% to 23%. The Company is increasing its budget for development and exploration expenditures from $2.6 bn to $3.0 bn. Expenditures for construction of pipeline infrastructure, compression and processing facilities will increase from $400 mn to $500 mn.

Rosneft preps to drill 2 wells offshore at West Kamchatka

April 23, 2008. The Russian oil big-leaguer, Rosneft, wants to drill two wells offshore at its block in West Kamchatka. In April, the company will seek permission from the Russian Federal Service for Natural Resources Agency, which will extend Rosneft's license past its August 1 expiration date. According to reports, the Federal Service for Natural Resources Agency has already stated that it will extend Rosneft's license. The West Kamchatka shelf is located in the Sea of Okhotsk offshore eastern Russia. Rosneft signed an agreement with Korea National Oil Corporation (KNOC) in December 2005, giving KNOC a 40% stake in the development project. Reserve estimates for the area make the shelf comparable to the Sakhalin-1 and -2 projects, with 900 mt of fuel equivalent.


Sinclair begins $1 bn Tulsa refinery expansion

April 29, 2008. Sinclair Tulsa Refining Co. broke ground on an expansion project that is contributing millions to local businesses. Sinclair has placed orders or committed to place orders totaling $150 mn with Tulsa area suppliers and fabricators. The total project, estimated to cost $1 bn, will boost production at Sinclair's west Tulsa refinery and cut the plant's emissions. Sinclair announced plans to increase production at the refinery last fall. The project will raise output by 60 percent and allow the plant to refine low-quality, heavy sour crude oil. Refining capacity will jump to 115,000 barrels of crude per day when the project is completed in 2010. The current capacity is 70,000 barrels. The expansion follows a growing trend in the refining industry. A new refinery has not been built in the United States since 1976, but the industry has engaged in expansion building out existing facilities to meet a growing demand for fuel. Refiners have added the equivalent of a new refinery every year for the last decade. The bulk of the production gains at Sinclair will be made in diesel fuel. The refinery will add more than 36,000 barrels per day of ultra low-sulfur diesel, bringing its total production of the fuel to 56,300 barrels per day. Diesel prices continue to set records nationwide. Gasoline production at the Sinclair refinery will grow by 22 percent to nearly 49,000 barrels per day.

Crosstex to build gas processing plant in Barnett Shale region

April 28, 2008. Crosstex Energy, L.P., announced plans to construct an $80 mn natural-gas processing facility called Bear Creek in the Barnett Shale region of North Texas. The new plant, which is expected to become operational in the third quarter of 2009, will have a gas processing capacity of 200 million cubic feet per day (MMcf/d), increasing the company's total processing capacity in the Barnett Shale to 485 MMcf/d. The Bear Creek plant will be strategically located near Crosstex's midstream assets in Hood County. Crosstex currently operates three gas processing plants in the Barnett Shale region with a total capacity of 285 MMcf/d. Crosstex Energy, L.P., a midstream natural gas company headquartered in Dallas, operates over 5,000 miles of pipeline, 12 processing plants, four fractionators and approximately 190 natural gas amine-treating plants and dew-point control plants. Crosstex currently provides services for over 3.5 bcf per day of natural gas, or approximately seven percent of marketed U.S. daily production. Crosstex Energy, Inc. (the Corporation), owns the two percent general partner interest, a 36 percent limited partner interest, and the incentive distribution rights of Crosstex Energy, L.P.

Petrobras eyes more int’l downstream projects

April 28, 2008. Petrobras has been assessing a growing number of downstream projects (refining, marketing, and transportation) abroad. The business plan's figures of the company for the 2008-2012 period, calls for $15 bn in investments abroad, 70% of which in the exploration and production area. More downstream projects are being analyzed abroad, mentioning the refining, transportation, and marketing areas. For 2012, the goal of the company is to produce 436,000 barrels of oil equivalent per day (boed) and to reach 348,000 barrels per day in refining capacity compared to the current 200,000. These areas are getting Petrobras' attention because they add value to the oil, and, at this moment, the Company has surplus production, highlighting the recent acquisition of the Nansei Sekiyu refinery, in Okinawa, Japan, which marked Petrobras' entry in Eastern Asia as an operator. The investments that have been foreseen for the area also include adapting and expanding the refining capacity in the United States (Pasadena refinery), in addition to adapting the refining capacity in Argentina. The partnership with the Brazilian industry is also present in Petrobras' foreign investments. Between 2006 and 2007, there was an increase of nearly 50% in the national industry's supplies to projects carried out by Petrobras' International Area.

Transportation / Trade

Energy Transfer Partners completes East Texas pipeline

April 29, 2008. Energy Transfer Partners, L.P. reported the completion of its Southeast Bossier 42-inch natural gas pipeline project in East Texas. The $468 mn Southeast Bossier Pipeline consists of more than 150 miles of predominately 42-inch pipe, originating near Farrar, Texas and ending near Silsbee, Texas. The pipeline connects the Partnership's East Texas and Cleburne to Carthage pipelines with its Texoma Pipeline, north of Beaumont. This newly constructed pipeline provides producers in the Barnett Shale and Bossier Sand development plays of Central and East Texas up to 900,000 Mcf/d of initial capacity and will bring the Partnership's total transport capacity from these rapidly expanding producing basins to more than 4 Bcf per day. In addition to completing the Southeast Bossier Pipeline, the Partnership also has several other projects currently under construction that are expected to be in service throughout the remainder of 2008 and into 2009. Energy Transfer Partners, L.P. (ETP) is a publicly traded partnership owning and operating a diversified portfolio of energy assets. ETP has pipeline operations in Arizona, Colorado, Louisiana, New Mexico and Utah, and owns the largest intrastate pipeline system in Texas. ETP's natural gas operations include intrastate natural gas gathering and transportation pipelines, natural gas treating and processing assets and three natural gas storage facilities located in Texas. These assets include approximately 14,000 miles of intrastate pipeline in service, with approximately 500 miles of intrastate pipeline under construction, and 2,400 miles of interstate pipeline. ETP is also one of the three largest retail marketers of propane in the United States, serving more than one million customers across the country.

BP sees 0.2 mn boepd output hit from $100/barrel oil price

April 29, 2008. BP Plc estimated that a $100 a barrel oil price will cut the UK oil group's overall production by around 200,000 barrels of oil equivalent per day (boepd). A high oil price will reduce the volume of oil and gas that BP is entitled to under its various production sharing contracts (PSCs). If oil prices stay at around $100 a barrel, BP's output for 2008 should be fairly flat from the 2007 level of 3.818 mn boepd. Without the PSC pricing impact, output for this year is likely to grow at around 5 percent, reflecting production start-ups of major fields, including Greater Plutonio in Angola and Atlantis in the Gulf of Mexico and Thunder Horse. The 250,000-barrel a day Thunder Horse project is on track to start production towards the end of 2008, and that BP is keeping its guidance for 2009 of over 4 mn boepd. In the first quarter of 2008, the group's production was broadly unchanged at 3.913 mn boepd. TNK-BP, BP's Russian joint venture, contributed 906,000 boepd to the total, down from 930,000 boepd previously.

35 pc of Iraq's pipeline network is operational

April 29, 2008. Iraq has failed to attract foreign investment due to persistent violence, and around 65 percent of the oil pipeline network remained idle due to sabotage and lack of repairs last year. Since 2003, the U.S. Congress has approved $46 bn to rebuild Iraq's devastated infrastructure, including oil production plants and pipelines. The expectation after the U.S. invasion had been that it would take up to 18 months for Iraq to assume responsibility for reconstruction efforts, using its oil revenues. But the Iraqi government has failed to lure international companies or even local contractors to improve the ailing industry, despite repeatedly seeking bids sometimes more than 10 times for one project.

Iraq which sits on the world's third-largest oil reserves, totaling more than 115 bn barrels wants to raise its oil output from 2.4 mn barrels a day now to 3 mn barrels a day by the end of 2008 by bringing in foreign companies, and is targeting production of 4.5 mn barrels a day by the end of 2013. But the industry lacks modern equipment and training after decades of U.N. sanctions, war and Saddam Hussein's ruinous rule. Pipelines have frequently been targeted by insurgents or saboteurs trying to pilfer oil.

Policy / Performance

Russia, Greece sign South Stream deal

April 29, 2008. Russia and Greece signed an intergovernmental agreement on cooperation in the construction and operation of the Greek section of the South Stream gas pipeline. The deal was signed by the Russian industry and energy minister and the Greek development minister after talks between Russian President Vladimir Putin and Greek Prime Minister Kostas Karamanlis. The Greek section of the South Stream gas pipeline will have an estimated capacity of 10 bcm of natural gas a year. The South Stream is a joint project of Russian gas monopoly Gazprom and Italian energy giant Eni, which implies the deliveries of Russian and, possibly, Central Asian gas to Europe across the Black Sea.

Ahmadinejad inaugurates refinery project in Sri Lanka

April 29, 2008. Iranian President Mahmoud Ahmadinejad inaugurated the construction of an oil refinery expansion project in the outskirts of Sri Lanka's capital. The inauguration of the project by the visiting Iranian leader followed the signing of agreements for Teheran to provide assistance to the tune of $1.5 bn for infrastructure development projects. The expansion of the oil refinery project will help the Sri Lankan government to increase the refinery capacity to 100,000 barrels per day from 50,000 barrels and reduce imports of refined fuel.

Romania, Serbia and Croatia agree $6 bn oil pipeline

April 23, 2008. Romania, Serbia and Croatia signed an agreement in Bucharest to build a pan-European oil pipeline, but Slovenia and Italy have yet to confirm their participation in the project. The agreement calls for the creation of a company to develop the 3.5 bn euro ($5.6 bn) pipeline between the Romanian port of Constanta and Trieste in Italy. The new company, made up of Romania's Conpet and Oil Terminal, Serbia's Transnafta and Croatia's Janaf, will be officially registered in London, where it will be based. The project, which has the European Union's backing, calls for the construction of a 1,300 kilometer pipeline to bring oil from the Black Sea to Central Europe in a bid to reduce dependence on Russian oil.



Authority approves power plant for New York City

April 29, 2008. The New York Power Authority is authorizing a new power plant in Queens to help feed New York City's growing need for power. The state authority has selected Astoria Energy LLC to build a new gas-fuelled plant in Queens under a 20-year contract. The decision will help make up for the loss of the Charles Poletti Power Project in Queens, which is due to close in 2010. The power will serve government customers, including the New York City schools and hospitals, subways and commuter trains, and public housing.

Transmission / Distribution / Trade

Complaint results in $225 mn in electricity savings

April 29, 2008. Maryland regulators have announced that ratepayers will save an estimated $225 mn in electricity payments between June 2011 and May 2012. As per the Maryland Public Service Commission the savings is the result of a complaint filed with federal energy regulators. The Federal Energy Regulatory Commission has ruled that PJM Interconnection, L.L.C. did not follow the necessary procedures to seek an increase in power system reliability payments to be determined in an upcoming auction.

Areva wins power supply contract for Algeria refinery

April 29, 2008. AREVA's Transmission and Distribution division has been awarded a 32-million euro contract with NAFTEC, a subsidiary of Sonatrach, for its oil refinery located in Skikda (northeast Algeria). AREVA will provide a turnkey installation composed of gas-insulated switchgear and power transformers. This equipment will ensure a power supply to the refinery, the biggest in Africa, and optimize its production capacity. This new contract confirms the expertise of AREVA's Transmission and Distribution division in the oil industry. Moreover, Algerian Authorities' will to invest in infrastructures in order to double the national grid capacity by 2012, confirms AREVA's development plan in the country. With manufacturing facilities in 43 countries and a sales network in more than 100 countries, AREVA offers customers reliable technological solutions for CO2-free power generation and electricity transmission and distribution. AREVA's T&D division is an active player around the globe. It designs, manufactures and supplies a complete range of equipment, systems and services for all stages in the transfer of electricity, from the generator to the large end-user.

New Zealand electricity company to sell Wellington power network

April 28, 2008. Vector, New Zealand's largest electricity and natural gas supplier, agreed to sell an electricity network to Cheung Kong Infrastructure Holdings for 785 million New Zealand dollars but it would seek to buy more electricity or natural gas networks. The deal, worth the equivalent of $615 mn, is expected to gain approval from New Zealand's Overseas Investment Office. Cheung Kong has been expanding abroad to counter slower growth in the local power market. The company owns power, gas, water and road assets in Australia, China and Britain. Vector, which is based in Auckland, would use sale proceeds to pay off some of its $3.4 bn in debt because it expected tougher markets to create buying opportunities. The sale price was at the top end of analysts' expectations of $700 mn to $800 mn. Vector has 27,115 kilometers, or about 16,850 miles, of electricity lines and 10,000 kilometers of gas pipelines, serving around 810,000 consumers. The company has about 45 percent of New Zealand's electricity metering market. The competition regulator is considering imposing price controls on Vector, having accused it of abusing its monopoly position in some areas.

Gas, electricity bills to state CO2 emissions in Japan

April 26, 2008. In about a year, people will be able to check how much carbon dioxide is being emitted from their households and cars by looking at their gas and electricity bills and their gasoline receipts. The plan to introduce such a measure is included in a bill that was jointly submitted to the Diet by the Liberal Democratic Party, New Komeito and the Democratic Party of Japan. The bill seeks to amend another bill that has already been submitted to the current Diet session to revise the law promoting measures to fight global warming. The additional bill requires companies supplying consumers with electricity, gas, gasoline and other fuels to make efforts to provide information on how much CO2 is emitted as a result of the amount of energy used. While the bill only requires efforts to be made, the energy industry has already made clear it is ready to provide the information. Thus the amount of CO2 emissions will be printed on gas and electricity bills as well as on gasoline receipts, possibly from next April. The amount of CO2 emitted from households and offices is rising sharply. From fiscal 1990 to fiscal 2006, CO2 emission from households increased by 30.4 percent, and that from businesses by 41.7 percent. The amendment bill is aimed at making each person aware of how much CO2 they produce at home and at work.

Company blames Meralco for electricity rate hikes

April 25, 2008. According to the Philippine Electric Market Corp. (PEMC), the recent spike in consumers’ power bills under franchise areas of the Manila Electric Co. (Meralco) in April came about because the Lopez-owned utility bought electricity in the spot market during times when prices were high. Meralco’s spot purchases of electricity averaged P8.94 per kilowatt hour in the March 2008 supply month, PEMC, which operates the Wholesale Electricity Spot Market (WESM). This was significantly higher than the average of the spot market for this month. Meralco had bought 9.15 percent of its power supply from the spot market in March. The higher prices in the spot market were driven by the rise in temperature causing higher demand during the period. Besides the increase in temperature, there was also a marked decline in the availability and dispatch of coal plants from 29.9 percent in February to 21.3 percent in March with Calaca and Masinloc on outage. Combined, the plants have over 1,200 MW in capacity. Besides Calaca and Masinloc, other plants were on intermittent outages during the period as well. Much of the energy sold in the spot market was traded by government-owned and government-administered generators of the National Power Corp. (Napocor) and Power Sector Assets and Liabilities Management.

Policy / Performance

Duke Energy doesn't have to reveal nuclear plant cost estimates

April 29, 2008. North Carolina regulators ruled that Duke Energy Carolinas' updated cost estimates for its proposed Lee Nuclear Station are trade secrets and don't have to be made public. The N.C. Utilities Commission denied requests from several groups to disclose the estimates to the public. Duke argued that it is in sensitive negotiations with suppliers and releasing those estimates now would make it impossible for the Charlotte-based utility to negotiate the best possible price for contracts to build the plant. Duke is considering building a two-reactor, 2,234 MW nuclear facility near Gaffney, S.C. The company concedes its original cost estimate of $6 bn is out of date. Two Florida utilities recently estimated the cost of plants similar to the Lee facility at between $12.5 bn and $18 bn. Public advocacy groups led by the N.C. Waste Awareness & Reduction Network had asked the commission to make Duke's latest estimates public. The groups contended ratepayers need a clear indication of the Lee plant's cost. The commission is deciding whether it is reasonable and prudent for Duke to spend about $230 mn through the end of next year on planning for the project. The groups argue the public can not make a determination on prudence without knowing the ultimate cost of the plant.

Russia to examine Iran's nuclear ideas

April 29, 2008. Russia was ready to examine Iranian proposals to end a deadlock over Tehran's disputed nuclear program. The United States and European states accuse the Islamic Republic of mastering technology to make nuclear weapons under cover of a civilian program. Russia supports the Islamic Republic of Iran's right in using peaceful nuclear energy. Iran has not revealed details about its proposals. Iran's proposed package is a new chance for constructive cooperation aimed at creating regional and international peace and stability. Iran's failure to convince world powers about its intentions has led to three rounds of U.N. sanctions since 2006. Russia and China have been reluctant backers of imposing penalties. The U.N. Security Council has demanded Iran halt uranium enrichment, the part of Tehran's nuclear program that most worries the West because it can be used to make fuel for power plants or, if desired, material for bombs. Russia, which this year finished shipping nuclear fuel to Iran's first nuclear power station, has tried to use a mixture of persuasion and warnings to push Iran to be more open about its nuclear program.

Higher energy costs from climate bills

April 29, 2008. People will be paying higher energy prices under a Senate bill to limit greenhouse gases, but how much will depend on how well the country can shift away from burning fossil fuels. As per the Energy Information Administration, annual energy costs could increase on average of as little as $30 or as much as 10 times that much by 2020. The projected cost increases per household ranged from $76 a year more to as much as $723 a year more by 2030. The difference depends on how successful the country will be in replacing significant amounts of energy production from coal and oil to nuclear power as well as solar and wind energy, and how successfully it adopts conservation measures. As per the report, the U.S. economy will continue to grow, but at a lower pace. The Senate bill, calls for capping carbon dioxide emissions from power plants, transportation and industrial sources to attain a reduction of 70 percent in greenhouse gases by mid-century. The bill is expected to come up for Senate debate in June, although it is unlikely that it will pass this year. Some Republican senators have vowed to force a filibuster unless it is dramatically changed. Lieberman welcomed the EIA analysis saying it shows overall economic growth would not change much if the carbon dioxide and other greenhouse gas restrictions are enacted. Another analysis by the Environmental Protection Agency had come to similar conclusions. The EPA study also had a wide range of potential energy cost scenarios. The EIA report used a half dozen computer models to reach its range of cost estimates.

Dhaka, Beijing discuss nuclear, military cooperation

April 26, 2008. Keen to set up a nuclear power reactor by 2015, Bangladesh has proposed to China that an arrangement akin to what the latter has with Pakistan should be evolved to push the sole project conceived way back in 1961. China's keen interest in the development of Rooppur Nuclear Power Plant was announced by Foreign Affairs Advisor Iftekhar Ahmed Chowdhury. Several countries and agencies have shown interest, and some like Canada and the erstwhile Soviet Union, have submitted project reports since the project was mooted in 1961. Some including the US backed out. India had also shown interest after the emergence of Bangladesh in 1971. Last December, Bangladesh formally approached the International Atomic Energy Agency (IAEA). Its plan to install its first nuclear power plant by 2015 to meet the country's increasing electricity demand was received positively by the IAEA. Bangladesh is planning to set up a nuclear power plant with a generation capacity between 700 MW and 1,000 MW at Rooppur in Pabna district, 125 km northwest of capital Dhaka. China has heavily aided Pakistan's nuclear power reactor at Chashma as part of its strategic ties that cover the entire range of military and security relations as well. China is a major military hardware supplier to Bangladesh.

Renewable Energy Trends


Srei building photovoltaic factory, power plant at Haldia

April 29, 2008. Srei, along with American firm Persius, will invest Rs 4,000 crore ($1 bn) to build a photovoltaic factory and a 100 MW captive power plant at Haldia. German chip manufacturer Centrotherm will provide technological know-how in the factory to produce solar panels from raw silica. There are only three to four factories in the world which single-handedly manufacture solar panels from raw silica. The factory, expected to be operational in the next two years, will be the first such factory to be set up in the country. The factory will initially produce 5,000 tonnes of polysilicon a year in phase I, which will be scaled up to 10,000 tonnes in phase II. The photovoltaic cells made from it will produce 500 MW power. The factory will also manufacture computer chips by further refining the photovoltaic cells at a later stage.

Equipments on alternative energy resources

April 28, 2008. According to the Ministry of New and Renewable energy Sources several renewable energy based systems/ devices such as, solar water heating systems, solar cookers, solar photovoltaic lighting systems, biogas plants, pumping systems, biomass gasifiers, water pumping wind mills, micro-hydel units, etc. have been developed and are being promoted under different schemes / progammes of the Ministry. Most of the above mentioned gadgets are made by private sector and are available commercially from the manufacturers and distributors through their dealers network. Some of these gadgets are also being marketed through Akshay Urja Shops in different States/ UTs and also by respective State Nodal Agencies for renewable energy. Soft loans @ 7.5% interest rate for the establishment of these shops and recurring grant and performance based incentive during first two years of their operation are being provided. The Government is already providing capital subsidy ranging from about 10 to 90% of benchmark cost of certain systems / devices depending on the region and user category to make the same affordable. This apart, a scheme for providing soft loans at interest rates of 2-5% to different categories of users of solar water heating systems is also operational through various banks and financial institutions. Further, to increase the outreach of these devices, it is envisaged to expand the network of Akshay Urja Shops in various parts of the country during the 11th Plan period.

Goldstone, Korean firm tie up for solar panel fab facility

April 28, 2008. Goldstone Infratech Ltd announced it has partnered with Korean semiconductor expert Dr. June Min’s project TF SolarPower and Jusung Engineering to set up a Rs 600-crore ($149.8 mn) solar panel fab facility in the Fab City located near Hyderabad. The joint venture TF (Thin Film) SolarPower will have 56 per cent stake of Goldstone, a domestic maker of polymer insulators, and 46 per cent between Dr. June Min and Jusung, a Korean equipment supplier. This project will be set up in 50 acres site allotted to Dr. June Min in the Fab City and have a debt equity ratio of 1.5:1. Commercial production is likely by the first quarter of 2009. Based on the project progress, the capacity of the plant will be ramped up to 350 MW in Phase-I with a total project outlay of Rs 2,800 crore ($699 mn) within four to five years. The plant is based on Jusung’s patented 3D cell design technology, which is similar to LCD panels. Dr. June Min, was in the limelight after he presented a proposal to set up the country’s first semiconductor fab with an outlay of about Rs 6,000 crore ($1.5 bn). However, due to difficulties in securing necessary funding for the project, this is yet to be executed.

India should access tech for tapping solar energy’: UNIDO expert

April 25, 2008. India must move quickly to create large-scale capacities for solar grade silicon, the main constituent of solar cells, to realise its renewable energy plans and combat power shortage. The country is now deficient in power to the extent of 25,000 MW. Worried over the environmental impact of fossil fuel-fired power plants, many countries have started ramping up their solar power-generation capacity. India should take this opportunity to access technology and set up four to five poly silicon plants with an annual capacity of about 3,000 tonne, which could help generate 1,000 to 1,200 MW solar power every year, MRLN Murthy, a UNIDO consultant on solar energy and a honorary scientific consultant to the government’s principal scientific adviser. India should stop depending on waste silicon coming from the semiconductor industry. China has already set up poly silicon plants and may well forge ahead as the top generator of solar power. International Energy Foundation experts have indicated that by 2050, a sizeable chunk of power-generation would be done by nuclear and renewable energy sources, especially solar energy. The demand for solar energy is increasing at the rate of 30% annually around the globe and about 50-60% for grid-connected solar power. Japan, Germany and the US have started programmes to install solar roof tops in a big way. Several Indian solar energy companies had to curtail their production due to paucity of silicon wafers (most of the solar wafers are imported since indigenous solar wafer production is insignificant) due to worldwide shortage of feedstock solar grade silicon. Many have been forced to shelve their expansion plans, too. 

India spent Rs 410 mn on alternative fuel research

April 25, 2008. India has spent about Rs 410 mn on research and development on alternative fuels during the last three years. The MNRE has been given the responsibility for preparing the national policy on bio-fuels and setting up of a National Bio-fuel Development Board. The draft policy, aims at promoting the cultivation, production and use of biofuels to partially replace petrol and diesel for transport, has been submitted for necessary approvals. Volatile crude oil prices have pushed consumers to use more green fuels produced from renewable resources. Ethanol and biodiesel are seen as a way to lessen dependence on foreign oil and reduce greenhouse gases. India consumes 40 mt of diesel a year. In 2003, the government announced plans to replace around five percent of consumption with biodiesel from Jatropha.

BPCL to invest $66 mn in biodiesel firm

April 24, 2008. Indian state-run refiner Bharat Petroleum Corp Ltd would invest 2.66 bn rupees ($66 mn) to buy a third of a joint venture to produce biodiesel. The company will partner Mumbai-based firm Shapoorji Pallonji and southern India-based Nandan Biomatrix to extract biodiesel from Jatropha and Karanj plantations in the northern state of Uttar Pradesh. Extracts from the seeds of these plants are to be used to produce oil that will eventually replace approximately 1 mt of diesel. The joint venture would build 10 biodiesel producing units over the next 10 years. Indian oil firms are diversifying into production of alternative or green fuels to reduce dependence on imported crude oil, which has hit record highs. Bharat Petroleum Corporation Ltd (BPCL) Board of Directors has approved the proposal for joint venture.


Approved financing commitments for ultra-clean FuelCell Energy power plant

April 29, 2008. Energy East Corporation (EAS) and FuelCell Energy, Inc. (FCEL) announced that the Connecticut Department of Public Utility Control has approved their financing commitment for the Milford, Conn. DFC-ERG(tm) project. Under the financial commitment, Energy East will provide 80 percent of the construction phase financing and will acquire 80 percent of the completed project. The parties can now sign an Energy Purchase Agreement with Connecticut Light and Power. DFC-ERG Milford, LLC will produce 9.0 MW of ultra-clean electric power using three of FuelCell Energy's DFC3000(tm) power plants in combination with a 1.8 MW pipeline turbo expander. The DFC-ERG system will capture the heat byproduct from FuelCell Energy's fuel cells to use in the turbo expander.

The turbo expander will generate electricity using the pressure differential between the transportation and distribution pipes at Southern Connecticut Gas Company's Milford, Conn. gate station. This means that DFC-ERG installations turn the cost of wasted energy into ultra-clean, revenue-producing energy. The DFC-ERG has an electrical efficiency of approximately 60 percent, compared to 30-40 percent for other similarly sized combustion-based power generation systems. This high efficiency second to none in the distributed energy market means that less fuel is needed to create a unit of energy and significantly lower levels of CO2, a major greenhouse gas, are produced.

Exelon, Epuron ally on Phila solar power plant

April 29, 2008. The city of Philadelphia has agreed to lease brownfield land at the Philadelphia Navy Yard to Epuron LLC for a solar-generation plant which is expected to produce from 1 to 1.4 MW of electricity enough to power 200 homes for a year. It will have the environmental impact of planting 300 acres of trees. Epuron will sell the power to Exelon Generation Co., the Kennett Square, Pa.-based power-generation subsidiary of Chicago-based Exelon Corp. Epuron has a 20-year agreement to sell power to Exelon from a solar plant it is developing in Falls, Pa.

That plant is expected to produce 3 MW of power, making it the fourth-largest solar plant in the country. Epuron LLC, which set up shop in Philadelphia in 2006, is the U.S. subsidiary of Epuron GmbH, the project development and finance arm of Conergy AG, which also makes solar-power equipment. Epuron GmbH and Conergy are based in Hamburg, Germany. Philadelphia was recently named a Solar American City. Philadelphia will receive $200,000 from the Department of Energy to study how to triple the capacity of photovoltaic installations, like the ones to be installed at the Navy Yard, in Philadelphia by 2011.

Commercial cellulosic ethanol ready in ’10

April 29, 2008. Commercial production of cellulosic ethanol will be ready to start in 2010, according to a key technology provider to the renewable-fuels industry, Novozymes, also predicted a three-way battle among producers in the U.S, China and Brazil to build the first full-scale refinery making ethanol from plant waste. Copenhagen-based Novozymes is the world's largest supplier of enzymes used to create ethanol from agricultural products such as corn and sugar. The company is also working with South Dakota-based POET Energy LLC, one of the world's largest ethanol producers, and other partners to make the gasoline substitute from plant waste. The production of cellulosic ethanol is viewed by policy and industry experts as the next frontier for the renewable fuels sector. More than half of the 35 billion gallons in annual production in the proposed new U.S. ethanol mandate is expected to be made from plant waste and other products such as switchgrass that aren't used for food. The first production in the U.S. and China is expected to be from corn cobs, while Brazil is focused on waste from its vast sugar harvest. Scientists are also looking at producing ethanol from corn stovers, wood pulp and a range of other plant products. Novozymes is working with partners in all three countries.

Nippon to mass-produce biofuel compound in Japan

April 28, 2008. Japan's largest oil refiner, Nippon Oil Corp., plans to mass-produce a biofuel component at the end of next year. The company will invest about 2 billion yen ($19.1 million) in its Negishi refinery in Yokohama to build a facility capable of turning out 100,000 kiloliters of ethyl tertiary butyl ether (ETBE) a year. ETBE, a combination of plant-derived ethanol and a petroleum product, is mixed with gasoline to create biofuel. Japan currently imports all ETBE used for biofuel from countries such as Brazil. Nippon Oil aims to purchase bioethanol from domestic sources in Hokkaido for some 40 yen per liter.  ($1 = 104.44 yen)

Electricity through wave power

April 28, 2008. A prototype of what is likely to be the first turbine for tapping the tidal energy of New Zealand waters is sailing around Scottish seas bolted to a ship. Christchurch company Neptune Power wants to begin installing an experimental turbine in Cook Strait, based on the design being tested off Scotland. Neptune received resource consent from the Greater Wellington Regional Council this month for a trial that can last up to 10 years. Neptune was awaiting the results of the shipboard testing before buying a turbine from the unnamed manufacturer. So far it has been established that the turbine rotates as intended and now performance and reliability testing is under way. The turbine Neptune intends installing at a cost of $10 million 4.5 km off Wellington's Island Bay will have a maximum generation capacity of 1 MW enough for about 500 homes. That is a fraction of the 12 GW of power 1.5 times New Zealand's present generation capacity.

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