MonitorsPublished on Sep 15, 2004
Energy News Monitor I Volume I, Issue 13
Vulnerability of LNG Tankers

Early this year, India received its first consignment of 138,000 cubic metres of liquefied natural gas (LNG) from Qatar. The consignment was part of a 25-year supply agreement between the two countries.  ‘Disha’ India’s only LNG tanker loaded the first consignment at Qatar's Ras Laffan port for Petronet LNG's Dahej terminal in Gujarat. The Indian LNG transport fleet comprising of Disha and other tankers would carry about 7.5 million tonnes of Qatari LNG to India per year over the next 25 years.


Meanwhile, India and Iran have been engaged in negotiations on a variety of energy related issues that include long-term purchases of LNG, Indian participation in three Iranian oilfields and joint exploration of gas fields. The other areas for cooperation include investments in petrochemical projects in both countries. At the same time, India and Iran have also been discussing the issue of transporting LNG through Pakistan by pipelines. New Delhi appears to have taken a very cautious approach to the pipeline project because it fears such a pipeline could be held hostage to its long-running tensions with Pakistan.


The Director General Shipping has issued a notification that makes it mandatory to import LNG on Indian ships alone. According to the notification a licence for chartering a LNG vessel will be given only if the LNG ship is an Indian flag vessel. This is further amplified by another stipulation that the Indian partner must hold not less than 26 per cent stake in the joint venture company owning the LNG carrier. Currently, there are only two LNG vessels plying to India for Petronet’s Dahej regassification plant.  Interestingly, the state-run SCI has a 29% stake in the shipping company owning the two LNG vessels. These vessels are operating on  Malta flags. Reports suggest that these shipping companies will have to register in India in five years’ time by when these vessels should ply as Indian flag vessels. The shipping ministry has argued that this policy has been put in place to promote Indian tonnage and LNG tonnage in particular.


Another interesting facet of this directive is that LNG tankers hired on long-term time charter basis must employ a minimum of two Indian officers and two trainee officers/cadets (one each on the engineering and deck side respectively). Also the partners of the LNG tanker owning company must agree to transfer technology to the Indian partner such that within five years of the date of registering the vessel, the tanker will be managed, maintained and operated by the Indian partner with Indian crew/personnel.


While these are purely economic considerations, the security dimensions of foreign flag chartering appear to have been missed.


Vulnerability of Transportation of Strategic Cargo by Foreign-flag


A large number of oil/LNG tankers sail under flag of convenience (FOC) registry. The details of some of the flags of convenience registries are as below:



Number of tankers

% of total tonnage
















Marshall Is



St. Vincent







During Operation Desert Shield and Desert Storm in the Persian Gulf in 1990 and 1991, US Department of Defence chartered foreign-flagged and crewed ships at what many said was exorbitant cost. There were several documented cases of foreign crews refusing to bring cargoes to points in and near the war zone. For instance, a German-owned, Cypriot-flag vessel, Eagle Nova, with German officers and Burmese crew refused to enter the war zone and deliver US military supplies into the Persian Gulf. On another occasion, 27 Muslim crewmembers of a Bangladeshi FOC ship decided to desert their vessel in Oakland, California rather than carry military cargo to the Persian Gulf.


Today, foreign-flag sealift option is not a favoured option with the US military. Security concerns and timely delivery has prompted the Military Sealift Command (MSC) to buy its own fleet of ships. The MSC has three squadrons of ships, totaling 15 Maritime Pre-positioning Force (MPF) vessels that are pre-positioned in the Mediterranean Sea, British Indian Ocean Territory of Diego Garcia, and Guam in the Pacific Ocean. These vessels are stocked with military equipment and other supplies for the Marine Corps, the Army and the Air Force. For instance, during Operation Iraqi Freedom, each vessel carried containers filled with vast quantities of spare parts, ammunition, medical supplies, food, vehicles, and other equipment for sustained deployment. Besides, the MSC also requisitioned vessels from the US Ready Reserve Force (RRF) and commercial vessel ‘under US flag only’ were also activated for the war in Iraq.


Indian Shipping Scene


Indian shipping plays a major role in national economic development. It ranks 17th in the world in terms of fleet ownership. The total tonnage under Indian Flag has remained stagnant since 1996 at around 6 to 7 million GRT. Only 35 % of Indian cargo is transported onboard Indian ships. The rest is transported through operators belonging to several national fleets. The Indian fleet consists of a variety of vessels such as crude oil tankers, oil product carriers, chemical tankers, passenger-cum-cargo ships, bulk carriers, ore/ bulk/ oil (OBO) carriers and off shore supply vessels OSV).


Tonnage tax, charged as a flat rate on the gross registered tonnage of companies, is a peculiar feature of the global shipping industry. Levy of corporate tax or minimum alternate tax (MAT) acts as a disincentive to fleet acquisition in an industry characterised by low margins. In the absence of tonnage tax, Indian companies have been acquiring vessels registered under FOC system. Tolani Shipping applied for a Singapore flag for one of its ships, while Essar went to Marshal islands.


According to the Lloyds List reports, Italian ship owners association had asked its members to abandon the Italian flag and some 400 ships were ready to join the FOC fleet. Tonnage tax and the withdrawal of tax breaks for crews plying Italy's coastal had rendered the Italian flag uncompetitive forcing Italian ship owners to take advantage of the tax regimes on offer in FOC countries.


National Maritime Policy


In August 2004, the Indian Ministry of Shipping announced the draft “Policy for Maritime Sector (ports, shipping & inland water transport)”. According to the document, the policy aims to expand Indian tonnage, maximize flow of investments (domestic and foreign) and assure the emergence of core competent and globally accepted maritime personnel.  As regards the LNG Shipping, the policy will ‘provide a regulatory environment for participation of Indian companies and transportation of LNG to India on Indian flag’.  Besides, the procedures for registration of vessels would be simplified and made user-friendly through suitable amendment of the relevant part of the Merchant Shipping Act. These are indeed noteworthy developments.


National Security Issues


Today, seventy percent of Indian energy requirements of crude oil and gas are shipped from foreign sources. There has been an increased focus on the safety and security of energy shipments and the prevention of any disruption of supply. Also, nineteen percent of Indian oil and gas demands are met from offshore basins. Following the September 11 attacks, the possibility of maritime terrorism is of increasing concern. A terrorist attack on an LNG tanker, especially in port, would result in considerable human and material damage as well as environmental destruction. Similarly, LNG regasification terminals, oil refineries and petrochemical complexes, are especially vulnerable to sabotage.


Terrorism stalks the maritime environment. The terrorists recognize maritime infrastructure as the soft underbelly of states that can be attacked with less effort. More importantly they have the capacity and capability to disrupt and destroy maritime enterprise and threaten peaceful use of the seas. It is a wakeup call for naval forces and coast guards to reinforce their capabilities to challenge the menace of terrorism at sea. Some of the major policy challenges to India’s security include the surveillance and security of the extended maritime zones, an increase in national flag shipping, enhanced effective security apparatus for both major and minor ports and the strengthening of regulatory and enforcement mechanisms in India’s maritime zones.


Concluding Remarks


The world is passing through a difficult phase of terrorism and the vulnerability of maritime shipping has been amply exposed.  It is also a reminder that countries need to revitalize national fleets and avoid chartering foreign vessels when strategic cargo like oil and LNG are transported. This requirement becomes more critical during periods of war. In India, this issue has been ignored too long and need to be given greater attention specifically so when there was only one Indian flagged tanker during the 1971 Indo-Pakistan war.


LNG is the fuel of the 21st century. India’s projected requirement for natural gas in 2020 will be around 80 to 90 million tonnes a year. Even if India develops its own gas resources, it will still need a large amount of gas in the years to come. Gas as a component of the national energy basket is projected to grow from a level of eight per cent at present to about 20 per cent by 2025. This will call for greater imports and greater demand for LNG tankers thus adding to greater needs for security of transport. The Director General Shipping’s new directive would be able to address some of the economic concerns but what is more important that national policies relating to maritime issues particularly maritime transportation  incorporate security concerns too.

Dr Vijay Sakhuja

 Research Fellow at Observer Research Foundation, New Delhi

[email protected]



Fuel for the Poor: Sense from the Census


Many are probably not aware that the recently released census 2001 includes data that categorises different types of houses in India and the fuels used in them for cooking and lighting.  A general overview of the data suggests that a large number of households still depend on biomass for cooking and Kerosene for lighting.  What requires serious thought is the continuing use of biomass and kerosene for heating and lighting by a large number of households.  The problem is not so much the fuels but the way in which they are used giving very low thermal and combustion efficiencies.  This not only makes the share of energy expenditure higher for poorer households but also takes away valuable time which could be used more productively. In terms of household income, it is estimated that the lowest quintile spends about 8.5 per cent of their income on energy against 5 per cent spent by the highest quintile.  In addition the inefficient way in which these fuels are used result in the emission of substantial quantities of green house gases (GHGs) which is not in the interest of sustainable development of the nation.  


As per the census, only 64 per cent of the houses are classified as ‘good’ while 34 per cent are classified as ‘liveable’.  Even within the ‘good’ category there may be substantial variations.  Data classified on the basis of material used on walls or roof put more than half the houses under the ‘non-standard’ category.  Non-standard housing is a barrier to investing in higher quality fuels such as LPG or electricity for cooking or lighting even for those who can afford the initial investment.  These require investment in fixtures and facilities which the ‘house’ must not only hold together but also protect. 



Census 2001.  Standard roof includes concrete & tiles; Non-standard roof includes GI sheets, stone, brick, mud, wood, plastic, bamboo, etc. Standard wall includes concrete, burnt-brick; stone, Non-standard wall includes GI sheets, stone, brick, mud, wood, plastic, bamboo, etc.


If the demand from millions of households in rural households is primarily for lighting up a small ‘liveable’ dwelling area for a short period of time or cooking one small meal a day the wisdom in meeting this demand with ‘massive addition to generating capacity and expansion of the transmission & distribution network’ as stated in the draft National Electricity Policy’ requires to be questioned.  This need may be more appropriately served with locally available resources for generation of power or just by better designed traditional lighting & heating devices. 


Lower quality of fuel leads to lower quality of life


The predominant fuel used for cooking and occasionally for heating in rural areas is biomass.  The Regional Wood Energy Development Programme in Asia[1] estimates that wood fuel, dung and agricultural residue met 95 per cent of fuel needs in rural areas.  Every component of the series of  the activities required to gather, process and use these fuels is energy inefficient. Gathering of wood is predominantly carried out by women who lose a large share of the calories from their daily meal carrying about 20 Kg of wood over distances of about 5 kilometres every day[2]. 



Wood in general has lower thermal efficiency with net calorific value four times lower than that of alternative fuels such as Kerosene and LPG.  Traditional stoves in which wood (or animal dung) is burnt are poorly designed with only about 8 per cent combustion efficiency.   Low combustion efficiency results in emission of substantial amount of fuel carbons as products of incomplete combustion which include carbon monoxide, methane, non-methane organics as well as carbon-di-oxide.  This is true even for fossil fuels such as coal and kerosene but since millions of small wood stoves are used in India the amount of Green House Gases (GHGs) they emit in total cannot be ignored.


Census 2001


Given the low input and maintenance cost of firewood along with their easy (often free) availability in rural areas it is likely to remain the fuel of choice for millions for many decades.  Globally over half the people relying on biomass live in India and China. As per data from the International Energy Agency (IEA), 585 million people in India, which is about 58 per cent of the population, depend on biomass for their energy needs. The share of biomass in residential energy consumption in India is more than 80 per cent, second only to sub Saharan Africa where it is 90 per cent. The IEA expects the share of biomass us in India to remain high at about 70 per cent even in 2030.  The share of people using biomass may decrease but the absolute numbers will increase to more than 650 million by 2030. Since biomass is likely to dominate energy demand it is important to focus on development of efficient biomass technologies. 


The programme to introduce improved cook stoves in India has seen their numbers increase from 0.8 million in 1985 to about 12 million in 1992.  Against a thermal efficiency of about 8 per cent for normal stoves, the improved stoves were said to offer about 24-26 per cent efficiency theoretically.  However even after a decade, the level of penetration was not what one would have expected given the theoretical advantages.  A survey[3] showed that only 12 per cent of the working improved cook stoves could claim 16 per cent or higher efficiency. 50 per cent worked at an efficiency of 10% or less showing no saving over traditional models.  One third of the stoves installed became non-functional within a year of installation.  About 15 per cent of the stoves did not survive the first three months.  Construction and installation defects are cited as the primary reasons for disuse.  These imperfections often made the stoves less efficient than the traditional models.  Improper maintenance was also cited as one of the reasons.  Another significant reason is the indifference of users as they have little or no financial stake in the stoves installed in their houses as ‘efficient’ stoves are often subsidised by the government.   The cost of a regular stove can be small (~Rs 10) while the cost of pipes and chimneys provided in the efficient stove be much more (~ Rs 50).  Cases of these being sold away in the market or being used for other purposes have also been reported, demonstrating the low value placed by the beneficiary in efficiency. 


In contrast, bio-gas stoves promoted by the Ministry of Non-Conventional Energy Sources has not only been accepted by the villagers but also demanded by them.  Though there is a subsidy component there is a financial commitment from the beneficiary in the order of Rs 5000.  Acceptance of biogas by the user is primarily because benefits of using bio-gas are more visible than the efficient stove.  Biogas, which in India is made mostly from anaerobic digesters is actually better than even LPG stoves with only 10 % of LPG Global Warming Commitments (GWC) and more than a factor of 200 less than the most GWC intensive solid biomass fuel stove combinations as illustrated in the table below. 


Efficiencies & Emissions for Major Fuels used in Indian Household Stoves










methane organics



























































Source: Smith, K.R. Uma R. et al Greenhouse Gases from small-scale combustion devices in developing countries. Summary of main report for USEPA


The study which forms the basis of this discussion also found that in some circumstances a switch from solid biomass fuels, even if renewably harvested, to kerosene or LPG can be recommended for the purpose of reducing Green House Gas emissions.  This is because of their substantial production of fuel carbon as products of incomplete combustion.  To be Green House Gas neutral, not only must biomass fuel cycles be based on renewable harvesting but they must have close to 100 % combustion efficiency which is not true in most cases of the current set-up.  India’s biomass stoves represent about 27 per cent of global total emitting about 3.2 GT of Methane emissions.  The remarkable performance of biogas is due to the double advantage of being a gas when burned and renewable when harvested.  This indicates a huge potential for processed biomass fuels to reduce the GWC of cooking through combustion efficiency and environmental efficiency. 


Lighting needs of rural areas are ‘light’


Lighting is generally obtained from flame based devices such as hurricane lanterns which use Kerosene as fuel or even candles.  The quality of light emitted by these devices is poor giving less than 100 lumens.




Census 2001


The flame is a product of incomplete combustion giving out soot, carbon monoxide and carbon di-oxide.  In addition to adding to GHG emissions it also causes severe respiratory illnesses among the poor who live in small houses with no ventilation.  Light from pressurised lamps (petromax lamps) is comparable to that from light bulbs or florescent lamps and offer a good opportunity for providing affordable, appropriate and adequate lighting for most rural lighting needs.  Its portability is an added advantage for rural lifestyles.  The thermo luminescent mantle which is a crucial element in a pressurised lamp is manufactured by the unorganised sector and is of poor quality resulting in frequent replacements.  The cost of replacing the mantle increases the running cost of the lantern.  According to a paper on R & D strategy for lighting and cooking energy for rural households from the Nimbkar Agricultural Research Institute[4] the technology of the producing the mantle has not changed since ‘Aurbach developed them Germany in late 1880s’.  If sufficient investment is made to find alternative materials for the mantle using current knowledge of material science the pressurised lamp can be an ideal solution for the lighting needs of the rural poor.  The pressurised lantern can also be made a multi-fuel device capable of using kerosene, ethanol or LPG so that the user can switch fuels depending on availability and cost.  The above cited paper also notes that with improvement in quality of mantles the overall ‘power plant to light efficiency’ of pressurised lanterns could be superior to electric lighting.  Currently overall power plant to light efficiency for fluorescent lamp is about 14 lumans per Watt including power plant efficiency of 30 per cent and Transmission & Distribution loss of 20 per cent and fluorescent lamp efficiency of 60 lumans per watt.


Quality Energy in sachets!


In the short term focus on ways to improve efficiency of traditional heating and lighting devices may be wiser than investing in large power supply projects because as the census illustrates many do not have the necessary infrastructure (like standard housing) or financial capability to purchase power.  Consumers of these fuels have short time horizons.  They have low purchasing power.  A large proportion of consumers make short-term price decisions and not long-term value decisions. The success of selling Fast Moving Consumer Goods (FMCG) in small/tiny units, often in sachets, illustrates that low unit prices are most attractive for the price sensitive Indian consumer even if that in reality means a higher total cost in the longer run.  This also signals time horizons of less than a day for purchasing decisions on FMCG products.  This time horizon could be slightly larger in the case of purchase of energy services but not sufficient to call for life cycle decisions.  Lack of property rights and titles (home ownership) introduces uncertainty in decision making that shortens time horizon of energy investment decisions.  The current demand for energy from poor households is primarily for what may be called energy in ‘sachets’. Efficient woodstoves or biogas stoves and cost/fuel efficient petromax lamps may meet this demand more efficiently!

Lydia Powell

Senior Research Fellow, Observer Research Foundation, New Delhi

[email protected]










ONGC to invest $536 million in Mumbai High 


September 14, 2004. India's state-owned Oil & Natural Gas Corp. plans to invest 24.84 billion rupees ($536 million) in its largest oilfield Mumbai High during the current fiscal year, which ends March 31, 2005. Although much of this investment is targeted towards ongoing redevelopment to increase production from the ageing asset off Mumbai, at least half the sum is being directed towards new projects. The efforts since the program's initiation have yielded an additional 50,000 tonnes of oil and oil-equivalent gas. This year, ONGC will be investing money in laying the two Mumbai High-to-Uran trunk pipelines, which will be the largest of their kind in the Asia-Pacific region. The Rs 28 billion pipelines - 261 km for oil and 246 km for gas will - link Mumbai High to Uran on the western coast, south of Mumbai city.   ONGC is also planning to invest Rs 10.48 billion on setting up nine well platforms in Mumbai High (South).  The company will increase production by 0.5 million tonnes/year from 2006 onwards, keeping crude production stable at the existing fields, which had been experiencing a 5%/year decline in production.  ONGC also is targeting a 1million tonne/year increase in production by 2007, the last year of its tenth 5-year plan. 50% of world production came from medium and small fields, with barely 20% coming from giant fields.


India asks OPEC to remove ‘Asian Premium’


September 18, 2004. India has sought removal of Asian premium being charged from oil consumers in this region and called for a universal selling price. At a meeting of Organisation of Petroleum Exporting Countries (Opec) in Vienna, petroleum minister Mani Shanker Aiyar said that even as two-thirds of the West Asian production of the organisation was to Asian countries, the continent as a whole paid $5-10 billion per year towards the so-called Asian oil premium.  A developing country like India alone spent close to $1 billion every year as Asian premium on crude purchases from West Asia. Of the $18.36 billion (Rs 84,236 crore) India spent in 2003-04 on importing 90.839 million tonne of crude oil to meet 71% of its requirement, over $750 million was premium. With growing dependance on imported crude, this figure is growing further. The premium paid by Asian buyers is over and above the prices paid by their European and American counterparts because of Asia’s reliance on oil from this region. The continent imports more than 65% of its daily oil requirement of about 22 million barrels per day (bpd), with a little over 12 million bpd coming from the western region.   India has argued that charging developing Asia a premium while offering discount to the developed west is a conundrum that calls for rectification in the vital area of international trade in fossil fuels.  Major consuming countries of Asia including India, China, Japan and Korea had already consulted each other and their principal suppliers on how they could secure equitable access to West Asian Opec oil. Towards this, India is organising later this year a meeting of Asia’s top suppliers and buyers of crude oil in New Delhi.  Opec president Purnomo Yusgiantoro and Saudi Arabian oil minister Ali al-Naimi are said to have agreed to attend the meeting being organised jointly with the International Energy Forum.


An alternative model of oil products’ market has been suggested by Japan in this regard. There is at present no properly prepared oil product market in the major consuming centres of Asia — India, China, Japan and South Korea.  


India's 2004 crude consumption, imports increase; products use, exports grow 


September 20, 2004. India has experienced a sharp upward trend in 2004 both in its refined products consumption and in refinery runs, leading to a consequent surge in products exports, reports FACTS Inc. analyst Hassaan Vahidy in the Honolulu-based company's fall 2004 preliminary forecast of India's demand, supply, and trade in refined products and crude oil markets. After 3 years of virtually zero growth, oil products consumption is projected to increase by some 140,000 b/d in 2004. FACTS Inc. estimates that India will refine some 160,000 b/d more crude oil in 2004 than the 2.47 million b/d refined in 2003, and it will export a total of 400,000 b/d of refined products, compared with 300,000 b/d in 2003. Although the country's crude production also has increased—to 684,000 b/d in 2004 from 654,000 b/d in 2003—production remains insufficient to fill the increased throughput of the refineries and therefore crude oil imports are poised to grow to 1.95 million b/d in 2004 from 1.8 million b/d in 2003. 


The most notable products growth has been in diesel consumption. Incremental growth for 2003-04 is expected to be as high as 50,000 b/d, spurred by overall higher economic activity, especially in agriculture.  Another factor in products growth was a late 2003 government ban on private imports of kerosene. Privately imported kerosene was being adulterated into diesel, resulting in lower reported sales for the fuel. The FACTS report factors in these figures in its refined product consumption figures.  Election activity through the first quarter of this year also contributed to the consumption increase by keeping domestic petroleum products prices fixed—even as international prices rose throughout fourth quarter 2003 and the first quarter of 2004—shielding Indian consumers from high prices elsewhere and avoiding any dampening impact on consumption.  This led to a 10% growth increase in diesel use, a 13% growth in jet fuel use, and a 7% gasoline consumption increase throughout first quarter 2004 over first half of 2003.  Through 2001-03, CNG use replaced significant volumes of diesel, but under the current scenario CNG conversion has peaked unless increased volumes of gas enter the market. Furthermore, for 2004 diesel consumption will be measured from a low base. LPG continued to grow at double-digit rates and naphtha consumption increased—a reversal from previous years stemming from decline in the power sector.  India's petrochemical capacity has been running at higher utilization rates, driving naphtha consumption through 2004. For the first half of 2004 India's oil product consumption has grown at 8% over the first half of 2003, with signs of a slowdown in the second half of this year because oil companies are now allowed to revise prices, which in the event of high international prices would impact Indian oil consumption.  For the year as a whole, FACTS expects India's oil products consumption to grow at 5-6% compared with 0% for 2001-03. For 2005, growth is forecast at 70-80,000 b/d, with continued growth in LPG, gasoline, diesel, and naphtha and with the high petrochemical utilization trend expected to continue.  A slowdown in the growth of diesel is projected for a few years beyond 2005 because of substitution of CNG, especially around Mumbai because of increased volumes of LNG imports. Beyond 2005, India's oil product consumption is expected to be 3.0-3.5%/year. Debottlenecking and optimization exercises by India refineries this year enabled crude run averages to exceed 2.6 million b/d, even though current refining capacity was rated at 2.5 million b/d. The increased crude runs were driven both by increased domestic consumption and the improvement in regional refining profitability. Significant increases came from Indian Oil Corp. (IOC) Ltd.'s Koyali, Haldia, and Panipat refineries, and Mumbai-based Reliance Industries Ltd., which finished a debottlenecking project early this year at its Jamnagar refinery, managed runs of almost 700,000 b/d through this year. ONGC subsidiary Mangalore Refinery & Petrochemicals Ltd. also increased crude throughput substantially. More increases are projected for the near future.


Iran offers OVL 20% stake in oilfield


September 21, 2004. Iran has offered India a 20 per cent stake in the producing Yadevaran oilfield on nomination basis to get New Delhi to buy five million tonnes per annum of LNG at 2.57 dollars per million British Thermal Unit (mBtu). Iran's Energy Minister Bijan Zanganeh made the offer to Petroleum Minister Mani Shankar Aiyar when the two met on sidelines of the Opec conference in Vienna last week.  Tehran agreed to give ONGC Videsh on nomination basis a 20 per cent stake in Yadevaran oilfield, which is said to have a potential to produce 300,000 barrels per day, after an operator, most likely a Chinese firm, is selected through international bidding.  India insisted on getting liquefied natural gas at 2.40 dollars per mBtu, lower than $2.53 per mBtu price at which New Delhi is importing LNG from Qatar. 



ONGC to up Tatipaka refinery capacity


September 20, 2004. Operating capacity to be doubled to 0.2 million metric tonnes this fiscal. Oil and Natural Gas Corporation (ONGC) is all set to double the operating capacity of its mini-refinery at Tatipaka village in the Konaseema region. ONGC has its base office for the Krishna-Godavari (K-G) Project at Rajahmundry.  The refinery in Konaseema processes crude oil extracted from its wells and is now set to double its operating capacity from 0.1 million metric tonnes a year to 0.2 million metric tonnes by the end of the current fiscal.  The Rajahmundry unit, which launched its drilling operations for oil and gas in 1978, has grown to the present level of productive stage, which the ONGC calls ‘asset stage’.  In monetary terms, the refined oil is worth nearly Rs 60 crore (Rs 600 million) a year. It registered an annual production of 2.8 lakh (280,000) metric tonnes of crude oil, against an annual target of 2.32 lakh (232,000) metric tonnes in 2003-04, and gas production of 1,932 million cubic metres, the official said.


IOC, OIL may float overseas venture 


September 15, 2004. Indian Oil Corporation (IOC) and Oil India Ltd (OIL) are close to striking a strategic alliance for jointly undertaking oil exploration in India and abroad. Under the terms being negotiated, OIL will get into an exclusivity arrangement with IOC for all future farm-in opportunities for exploration blocks in India and abroad. The two will also bid jointly for blocks to be offered by the government under the fifth round of New Exploration and Licensing Policy (NELP-5).  In order to reduce its dependence on imported crude, IOC has proposed that equity oil from overseas fields (where the duo will jointly pitch for an equity stake) to be brought to India be processed at OIL refineries. The exact percentage of equity oil coming to IOC’s refineries or the exact division of assets and income coming to IOC’s or OIL’s balance sheets are issues which will be decided later.  The two companies will initially look at farm-in opportunities in countries in West Asia, Persian Gulf, East and West Africa and the Far East.


The alliance with IOC will provide OIL with the financial muscle to seek business opportunities in exploration abroad. The ministry has already said that it was against the idea of downstream companies venturing independently into upstream exploration activities. However, as 70% of the country’s crude oil needs are being met from imports, it is felt that OVL alone cannot succeed in fully securing India’s energy needs.


Record rise in production of petroleum products 


September 20, 2004. The first quarter of the current fiscal witnessed an all-time high rise in India’s production of petroleum products. As per official data, the rise was 12.6% during April-June against mere 3.6% in the same period last year. On an average, in any quarter the increase in production of petroleum products is around 3-5 per cent.  The main reasons for this jump are the increased sales volumes and less upliftment from Reliance Industries Ltd (RIL), pending finalisation of its product offtake agreement with Indian Oil. Additionally, demand was up 17 per cent in the first quarter. In order to meet additional sales volume and less upliftment from RIL, higher crude processing by refineries was necessary. The upsurge in international crude oil prices in the first quarter led to higher refinery margins and almost all refineries processed crude beyond their rated capacities. Increased processing also resulted in higher margins for oil refining companies in the first quarter.


Crude imports during the first quarter increased by 16% to 9,669 thousand metric tonne (tmt), against 8,342 tmt in the same period last fiscal. In order to avoid any disruption in demand, higher crude processing by refineries was necessary due to higher sales volume during the first quarter of 2004-05. Product sales, including exports, in the first quarter grew by 1,059 tmt to 12,827 tmt. Alongside, upliftment from RIL was lower by 730 tmt  at 632 tmt against 1,362 tmt in the same period in the previous fiscal. The country’s biggest refiner, Indian Oil, processed 12,793 tmt of crude in the first quarter against 10,778 tmt in the same period last fiscal. The increased processing of 2,015 tmt of crude gave 1,854 tmt of petroleum products.


Transport / Trade


India, Pakistan and the 'peace' pipeline


September 15, 2004.  A meeting between the Indian and Pakistani foreign ministers in Delhi is planned for early September to discuss the a natural gas pipeline project.  The pipeline is viewed as a "peace pipeline", implying its potential as a confidence-building measure (CBM) for the two countries, despite the deep differences. It is also considered a "win-win geo-economic" idea for both India and Pakistan. The alternative Turkmenistan-Afghanistan-Pakistan (TAP) pipeline has also been talked about.  While the proposed TAP project would supply natural gas from the Daulatabad fields in southeast Turkmenistan to Afghanistan, Pakistan and then on to India, the Iran-Pakistan-India line would deliver the gas from Iran to India through Pakistan. The United States is keenly interested in the sourcing of natural gas supplies for the rapidly growing Indian market. Early September, the US Trade Development Agency signed an agreement with the Gas Authority of India for its partial funding (US$700,000) of a feasibility study for a natural gas grid in India. The US has thereby underlined its keenness to be involved in India's multi-billion dollar market for gas distribution.  Pakistan has been working on both the TAP and the Iran-Pakistan-India pipeline project. According to Pakistan's oil ministry, its demand for natural gas is expected to grow at about 6% annually. Pakistan's oil minister went on record in August as saying that by the end of the year, Islamabad hoped to prioritize between the TAP, the Iranian project and an altogether third variant, namely, an Oman-Pakistan gas pipeline project.


Gail firms up RoUs for Kerala LNG pipeline


September 15, 2004. Gas Authority of India (Gail) is conducting surveys and rights-of-use (RoUs) for the 550-km pipelines to be laid in Kerala for the proposed LNG terminal coming up at Kochi. Contrary to doubts expressed in various quarters about the user base for LNG in the state, Gail is bullish that a wide user base, including small industrial clusters, exists in the state. Initial surveys of gas requirement by Kerala-based companies had shown that the state could absorb 12.36m standard cubic metres of gas per day.  Fertilisers and Chemicals Travancore, a unit of BSES Kerala Power, and the state electricity board’s diesel plant in Kochi are expected to be among the key customers in the state. Gail has already received right of use (RoU) for about half the length that the pipelines will traverse through the state. While the Kochi-Mangalore and the Kochi-Coimbatore-Bangalore pipelines will pass entirely over land, the proposed link to Kayamkulam may be laid offshore. The outlay for the project is in the region of Rs 2,000 crore (Rs 20 billion).


Piped gas in parts of Delhi


September 17, 2004. Indraprastha Gas Limited (IGL) which had inaugurated the PNG project in April this year, has commenced the gas supply in Patparganj and Rohini Sector 13. IGL has also started two round-the-clock control rooms (customer service centres) in Patparganj and Rohini. These are in addition to the five existing control rooms in various parts of Delhi.


GAIL rejects revised Tapti gas price


September 18, 2004. GAIL (India) Ltd has refused to pay the revised price of natural gas produced from Tapti field in Mumbai offshore, saying the price should not be raised till Reliance Industries, one of the three promoters of Panna/Mukta and Tapti fields, brings its Bay of Bengal gas to market. GAIL has, since July, refused to honour invoices drawn at 4.8 dollars per million British thermal unit (mBtu) for the gas it buys from British Gas-Oil and Natural Gas Corp-RIL combine and is willing to part with not more than the last price of 3.11 dollars per mBtu. RIL had discovered 14 trillion cubic feet of gas reserves in deepsea which it plans to put to production by 2007. BG-ONGC-Reliance, the joint operators of the Panna/Mukta and Tapti oil and gas fields, had in June raised the ceiling price of Tapti gas to 5.57 dollars per million British thermal unit (mBtu) from 3.11 dollars per mBtu. Currently, the 5.2 million standard cubic metres per day of Tapti gas is sold to GAIL at a price between 2.11 and 3.11 dollars per mBtu. The GAIL director said the Indian market could not absorb such a steep hike in gas prices.


Review of Gail tariffs on HBJ route in pipeline


September 21, 2004. The government is reviewing the tariffs charged by Gail India on the HBJ gas pipeline route for the first time since 1987, when the pipeline was operational. Tariffs on gas pipeline routes are being reviewed to reduce the delivered price of gas. A moderate reduction in tariffs may be possible given the change in corporate tax rates. This may bring some good news for power companies such as NTPC and fertiliser plants of Iffco and Kribhco which are reeling under high production costs, thanks to the increased fuel costs.  The power and fertiliser ministries have made a case for reviewing the gas transportation charges. Several key players in the power and fertiliser industry feel that the tariffs charged by Gail on the HBJ pipeline should be reviewed as this would ultimately reduce the delivered price of gas. The change in the tax rates may lend itself to cutting tariffs overall. Cost of levies like corporate tax is a part of the cost taken into account while calculating the transportation tariff. Corporate tax levies have come down from 43% to around 37.5%.


It was in 1997, when HBJ tariffs were increased from Rs 850 to Rs 1,150 per 1000 cubic metre. The Tariff Commission, under the ministry of commerce and industry, is currently examining the transportation charges of gas along the HBJ pipeline and other gas pipelines like Dahej Bijapur pipeline. Gail charges a tariff of Rs 1,150 per 1000 cubic metres which translates to around 60 cents per mmbtu over a 20-year period.  According to the policy which governs the HBJ pipeline tariff, Gail’s gas transportation charges are based on a levelised tariff principle applicable uniformly for 20 years. In this case the depreciation rate is levelised over the 20-year period. In the newly-constructed Dahej Bijapur pipeline where customers are paying only between Rs 633 to Rs 653 per 1000 cubic metres. In this case, Gail has back loaded the depreciation charges. In other words, gas transportation rates would increase 5% every year to take care of the increased depreciation charges. Interestingly, customers along the HBJ, the main inter-state trunk pipeline now end up paying different tariffs at the same point. While the tariff for the regassified LNG is based on a reduced rate (because of backoading depreciation) consumers of domestically produced gas pay Rs 1,150 per 1000 cubic metre. 


‘Inter-state gas pipelines are natural monopolies’


September 20, 2004. The building of an inter-state high pressure gas pipeline has generated debate in the country. The government has started a review of its earlier decision of nominating the public sector gas company GAIL Ltd as the sole agency for setting up the National Gas Grid.  GAIL chairman and managing director Proshanto Banerjee, says a single nodal agency should build the Rs 20,000 crore (Rs 200 billion) networks. GAIL wants it should be made the sole agency for building the National Gas Grid (NGG). At present, GAIL owns and operates about 5,400 km gas pipeline systems in the country. Out of this, about 3,400 km is inter-state gas pipeline system.  GAIL has embarked upon building an additional 8,000 km inter-state high pressure gas pipeline network, called the ‘National Gas Grid’, at an investment of about Rs 20,000 crore (Rs 200 billion) to provide inter-connectivity between regions. GAIL is suggesting the single agency concept for the development of the NGG, which would then support several intra-state pipeline systems and CityGas distribution networks, to be developed by multiple players.  There are several key factors like operational compatibility of different sections of the pipelines, minimisation of overall transportation tariff and incorporation of a central gas management system to provide gas swap facilities, all of which are compelling reasons for development of an integrated grid by a single agency. 


Policy / Performance


Andhra to take stake in GSPCL


September 21, 2004. The Andhra Pradesh government has decided to take a stake in the Rs 500-crore (Rs 5 billion) Gujarat State Petroleum Corporation (GSPCL), which was earlier awarded the KG-OSN-2001/3 exploration block on the shelf part of Krishna-Godavari basin under the third round of the New Exploration Licensing Policy (Nelp-III). GSPCL is going to be one of the important players alongside ONGC, Reliance in the ongoing oil and gas exploration activities in the K-G Basin off the Andhra coast, in the Bay of Bengal.  Based on the geo-scientific interpretation of available data, the block KG-OSN-2001/3 is one of the most prospective blocks in the region and thus, the probability of success of the block is very high. The success of surrounding blocks of Cairn Energy (Ravva) and Reliance, further ascertains the presence of prolific hydrocarbon reserves in this block. The state government’s decision is viewed as part of its efforts to have a say on the gas that would be evacuated from K-G basin via Andhra Pradesh. 


The AP government wants all the players in the K-G Basin including Reliance and GSPCL to meet the needs of Andhra Pradesh before transporting it to other parts of the country. The government is also keen to get the share of gas resources exploited in the K-G Basin at cheaper rates for the state's needs. Even though the state has no direct say over the gas finds, it is the state government that has to grant ground permission to lay pipelines for the evacuation of gas from the sea to these companies. 


The government is also understood to leverage this power to have a say over the future gas supplies from the K-G Basin. Towards this direction, the state government has recently constituted a cabinet sub-committee to look into the issues pertaining to the gas supply including the present and future needs of various sectors in Andhra Pradesh.  The state government has already urged the Reliance group to allocate their future gas from KB Bain fields to the state on priority basis besides inviting the group to set up gas-based power projects with a capacity of 2,000 mw to 3,000 mw near Kakinada.  The Andhra government is considering the gas resources as a key asset for the industrialisation of the state and also to supply power at cheaper rates. 


Ministries differ on subsidies to oil companies 


September 20, 2004. The ministries of finance and petroleum differ on the quantum of subsidies to be provided to the oil marketing companies (OMCs) on domestic LPG and PDS kerosene during 2004-07. Differing interpretations of the Cabinet decision on phasing out of subsidies on these two products have resulted in a difference of a little over Rs 1,400 crore (Rs 14 billion) in the amounts worked out by the two ministries for the three-year period. While the finance ministry has zeroed in on a figure of Rs 8,888 crore (Rs 88.88 billion), the petroleum ministry has worked out the subsidy requirement on these two products during 2004-07 at Rs 10,296 crore (Rs 102.96 billion). The issue has also been referred to finance minister P Chidambaram by petroleum minister Mani Shankar Aiyar.






CIL plans to turn total energy company 


September 18, 2004. Coal India Ltd (CIL) and its subsidiaries are planning to take up coal bed methane (CBM) business in a big way as a part of its strategy to become a total energy company. The West Bengal government has also shown keen interest in CIL’s efforts to develop CBM business and has assured all help. The state is keen to use CBM as fuel for existing and up-coming industrial units in Asansol-Durgapur and adjoining areas. CIL wants to become a total energy company and diversification into the CBM business as it is already in an advantageous position to embark upon this business. CIL already has a system for detailed coal exploration. It can be augmented easily with minimum cost to create coalfield-wise CBM specific data base.  This will entail the company to take judicious techno-economic and commercial decision with less investment risk. Substantial coal resource is available for the development of CBM in CIL’s existing and future mining areas. With encouraging exploratory results from many of the CBM blocks, investment risk, at least for Damodar Valley coalfields, is expected to be much less.


In addition to increasing availability of energy resource to the nation, it will supplement the economic viability of coal mines and companies besides making mining safe. It could be one of the instruments in reviving loss-making coal companies like ECL and BCCL. At present, a consortium of CIL and the Oil & Natural Gas Corp (ONGC) is working at two blocks in Jharia and Raniganj coalfields for CBM development and commercial exploitation on nomination basis. The purpose is to develop expertise by Indian public sector companies in this area. The Coal Mine Planning & Development Institute (CMPDI), a Ranchi-based subsidiary of CIL has taken up the job on behalf of CIL. In a single test well of ONGC at Jharia CBM block in the last couple of years, an average flow of 10,000 cubic metre of gas from five coal seams have been obtained during the production testing. A demonstration project at Moonidih and Sudamdih mines of Bharat Coking Coal Ltd (BCCL), another subsidiary of CIL, is under implementation jointly by CMPDI and BCCL. This project is intended to acquire exposure in CBM production from virgin and working mines as well as its utilisation technique.


Co-generation power project in AP


September 17, 2004.The Chief Minister, Dr Y.S. Rajasekhara Reddy, inaugurated a co-generation power project of The India Cements Ltd (ICL) at Vishnupuram in Nalgonda district. The 8 MW power project, based on "waste heat recovery system", has been implemented under the "Green Aid Plan", jointly promoted by the Union Ministry of Finance and the Ministry of Economy, Trade and Industry of Japan.  Its objective is to contribute to the efficient use of energy and protection of the environment. Waste heat is recovered as steam from the gas exhausted from pre-heater and air-quenching cooler in the cement plant for generation of power. The Government of Japan has supplied the core equipment for the project through Kawasaki Heavy Industries, which is the basic designer and manufacturer of the waste heat recovery system. The project is unique and first of its kind in India.


Thermal power plants in AP face coal shortage


September 17, 2004. The five thermal plants in Andhra Pradesh are facing severe shortage of coal and they have stocks barely sufficient for a week. The Union government's ban on the use of the French 'Blasting Gallery' technology has affected the coal production of Singareni Collieries Company Limited (SCCL), as four of its mines stopped production from April 1, 2004, following the ban. Notwithstanding the acute shortage of coal supplies in the state as well as the entire country, the Centre banned the use of P2-based explosives following the PWG's bid on the life of the then chief minister N Chandrababu Naidu. According to sources, the P2-based explosives are used in the making of bombs, which can be detonated through wireless or remote devices. 


However, APGenco officials say that there is no cause for immediate worry, though the coal stock position in the power utility's thermal plants is not satisfactory. Save for Rayalaseema Thermal Power Project (RTPP) of Muddanur in Kadapa district, which has stocks that will last for 10 days, the stocks are very meagre at the two other major stations of the state power utility at Kottagudem (KTPS) and Vijayawada (VTPS).

G M R Group targets 3,300 MW generation in five years


September 21, 2004. The Rs 2,500 crore (Rs 25 billion) G M R Group, one of the fast growing infrastructure companies in the country, has outlined plans to generate 3,300 MW of power in five years time. The group currently generates nearly 800 MW of power from its three power plants in Karnataka, Andhra Pradesh and Tamil Nadu.   The financing will be through a mix of debt and equity and according to Rao, financing is no longer a problem for the group. He said usually, the group adopts a 70:30 debt equity ratio for its power projects and highlighted the fact that India Development Fund recently invested Rs 100 crore (Rs 1 billion) in one of the group companies for expansion. 


55 mt coal shortage by 2006-07


September 20, 2004. The gap between demand and availability of coal is projected to increase to 95 million in 2011-12 according to Pradeep Kumar, additional secretary, ministry of coal and mines. The deficit between demand and availability was projected to be 55 million tonne in 2006-07 and 95 million tonne in 2011-12.  The gaps have to be made up either by increasing indigenous production capacity by allowing private sector investment and or by increasing imports of coal. The government was exploring different options to mitigate the problem. The government was also charting out measures to meet the requirement of less than 34 per cent ash coal. “Twin actions of setting up washeries through BOO operators by CIL and by private investors are on the agenda of the government,” he said. 


Bhel-Itochu combine bags Rs 14 billion order


September 19, 2004. The Bhel-Itochu combine has bagged the over Rs 1,400 crore (Rs 14 billion) main-plant contract for the 420 mw Bakreswar-Stage II thermal venture being promoted by state-owned West Bengal Power Development Corporation Ltd (WBPDCL). The decision to rope in the Bhel-Itochu duo was taken by the WBPDCL board.  The Bhel-Itochu combine had handled the EPC (engineering procurement & construction) job for the 630 mw Bakreswar-Stage I in the early 90s. Actual placement of equipment orders for the main-plant package will transpire after the Japan Bank of International Cooperation (JBIC) gives the go-ahead to WBPDCL. Soft loans from JBIC will make up 85% of Bakreswar-II’s project financing. While WBPDCL will directly handle the balance 15% funds requirement.


Transmission / Distribution / Trade


Kalpataru Power expects surge in demand


September 17, 2004. Kalpataru Power Transmission (KPTL), a leader in the field of turnkey projects for power transmission lines, plans to reap rich rewards from Power Grid Corporation’s (PGCIL’s) proposed national grid. The corporation proposes to invest up to Rs 70,000 crore (Rs 700 billion) in the grid till 2012, which will create an inter-regional transmission capacity of about 30,000 mega watts.  Besides the inter-regional capacity to be created by PGCIL, the company hopes to see a surge in spending by state electricity boards (SEBs) on the new transmission and distribution network, upgradation and modernisation. Apart from catering to the domestic demand, the Gandhinagar-based company is targeting the international markets in a big way. It is currently executing a $12 million turnkey job in Zambia and supplies transmission line towers to Australia, Indonesia, UAE, Vietnam. The average physical exports of the company have been over 35 per cent of its total business in the last five years. 


Long-term gas supply: Wartsila in talks with GAIL, GSPC


September 15, 2004. Wartsila India, makers of diesel-fired power generating sets is in talks with GAIL India and Gujarat State Petroleum Corporation for long-term natural gas supply. Rising international oil prices, coupled with improving natural gas supplies within India has prompted Wartsila, major manufacturer and supplier of 1 MW - 6 MW DG sets, to focus on setting up gas-fired captive power plants for its customers.  The company’s growth is expected to come primarily from natural gas based power projects. The company is in talks with GAIL India for roughly 3 lakh (300,000) cubic metres per day gas supplies to two upcoming projects of around 30 MW each that it is developing for customers in Madhya Pradesh, and a similar quantity from GSPC for projects on the west coast.


Wartsila India provides engines, equipment, operation and lifetime care services for captive projects and is a 100-per cent subsidiary of Finnish major, Wartsila. The company has set up close to 500 MW out of the 2,800 MW captive power capacities in India.


Reliance energy to rename Delhi distribution firms


September 17, 2004. The two Reliance Energy (REL -owned distribution companies in New Delhi - BSES Yamuna Power and BSES Rajdhani Power - will soon be renamed.  Senior officials said the new names will be coined soon, and will reflect the Reliance name.  REL is now investing Rs 2,000 crore (Rs 20 billion) to enhance systems, connectivity, ERP systems and communication facilities. It has also claimed to be putting in place the world’s best billing and customer care system.


Tata Power to offer pre-paid power


September 21, 2004. Tata Power Co Ltd announced plans to introduce pre-paid electricity for consumers in Delhi starting October. The services would be launched by Tata Power’s distribution arm North Delhi Power Co Ltd.  With this, Delhi would become the second city in the country to start such services. In Mumbai, pre-paid power service is already being provided by Brihanmumbai Electricity Supply and Transport Undertaking. To begin with, pre-paid power would be available under a coupon system in select areas of the Capital on a trial basis, NDPL said.


The coupons would be sold through local banks besides NDPL’s consumer care centres for various denominations starting at a minimum of Rs 100. Under the scheme, new electricity meters would be made available to consumers in Rohini, Pitampura and Civil Lines localities of Delhi. To promote the scheme, NDPL would install around 1,250 meters each priced at Rs 2,000  at its own cost, Sardana said.  The pre-paid offer would be convenient and would also help consumers manage their budget better. To prevent meter tampering, the coupons sold to customers would carry a unique number, corresponding with a unique meter.  NDPL in which Tata Power holds 51 per cent stake currently supplies power to north and north-western parts of the capital. 


Policy / Performance


Jharkhand regulator order on DVC


September 15, 2004. The Jharkhand State Electricity Regularity Commission has directed Damodar Valley Corporation (DVC) to fix tariffs for power distribution in Jharkhand as per the provisions of the Electricity Act, 2003. Citing the section of the Electricity Act, 2003 the commission maintained that distributing licensees are not entitled to fix the tariff rates and it was on JSERC to fix the tariff for DVC’s power.  JSERC also asked DVC and Jharkhand State Electricity Board to take permission from the Jharkhand government for sale of power by DVC under the section 18(3) of the DVC Act, 1948.


Punjab to get extra power from October


September 18, 2004. The ministry of power has conceded in principle the long pending demand of Punjab government to allocate 150 MW of power from Rajasthan Atomic Power Station (RAPS) plant from October 1 to augment its power supply in the wake of acute shortage of approximately 80 lakh (8 million) units per day.  The decision was taken at a meeting between Union power minister P M Sayeed and Punjab Chief Minister Amarinder Singh held at New Delhi. Amarinder Singh had impressed upon the Union minister to increase the share of Punjab in the Nathpa-Jhakri power project that was likely to be re-allocated to the states by month-end.


Jharkhand, Bihar, Bengal power plants worst performers


September 17, 2004. Power plants in Andhra Pradesh and Tamil Nadu and those run by the National Thermal Power Corporation have emerged as among the best performing generating stations during 2003-04, according to a study by the Associated Chambers of Commerce and Industry (Assocham).  The plants in Jharkhand, Bihar and West Bengal have registered the worst performance, says the study.


The 1260-MW Vijaywada power plant of APGenco and the 840-MW Mettur plant of Tamil Nadu State Electricity Board recorded the highest plant load factor of 91.30 per cent followed by 420 MW Rayalseema, also of APGenco, which recorded a PLF of 90.3 per cent during 2003-04, an Assocham release said.  NTPC operated as many as seven power plants with a PLF, which is an important indicator of efficiency, of more than 82 per cent during the period. NTPC's 1,000 MW Rihand plant had a PLF of 90.60 per cent, the 2,100 MW Korba plant a PLF of 88.5 per cent and the 1,000 MW Simhadri plant recorded a PLF of 87.90 per cent. The worst performing power plants were those run by the State generation entities of Bihar, Jharkhand and West Bengal. The Barauni and Muzaffarpur thermal power plants of BSEB had a PLF of 10.10 and 4.0 per cent respectively. Chanderpur power station of Damodar Valley Corporation recorded a PLF of 19.8 per cent while the 840 MW Patratu plant of Jharkhand hand SEB had a PLF of just 15.8 per cent, the chamber said. Plants run by West Bengal State utility also recorded low PLF, with 480 MW Santaldih of 28.70 per cent, 130 MW New Cassipore of 41.60 per cent and 530 MW Bandel a PLF of 36.40 per cent, the chamber said. The reason for their bad performance was the negligence of the authorities concerned, it added.


KSEB awaits Centre's nod for new projects


September 17, 2004. The Kerala State Electricity Board (KSEB) is awaiting Central clearance for a host of new hydel projects with a total installed capacity of 403 MW. The projects awaiting either environmental or forest clearance, or both, from the Union Ministry concerned are Athirapally (163 MW), Thottiyar (70 MW), Mankulam (40 MW) and Pathrakkadavu (70 MW). One more project, Pallivasal extension (60 MW), has obtained environment clearance, while it does not require forest clearance.  The Pathrakkadavu project is envisaged in the vicinity of Silent Valley project that was abandoned some years ago following protests from environmentalists. Faced with a similar situation, a public hearing on the project was held in March. As of now, an environment impact assessment is in progress. According to the data available from a recent review meeting of KSEB, two ongoing extension schemes at Kuttiadi and Neriamangalam will add another 125 MW to the State's total hydel installed capacity.


Of them, the work on the Kuttiadi scheme (100 MW) is targeted to be completed in May 2007, while the Neriamangalam scheme (25 MW) is scheduled to go on stream in July 2006. These apart, KSEB has taken up modernisation and upgradation of existing generating equipment at Neriamangalam at an estimated cost of Rs 58 crore (Rs 580 million), which will increase the installed capacity to 54 MW from 45 MW. A similar exercise is on at Sabarigiri for raising the installed capacity to 335 MW from 300 MW. At present, the total installed capacity of KSEB hydel projects is 1,808 MW and that of captive plants 33 MW.  Total thermal power generation in the State is 771 MW, comprising Kozhikode and Brahmapuram diesel power projects of KSEB (234 MW), BSES and Kasargod projects of independent power producers (177 MW) and the Kayamkulam project of National Thermal Power Corporation (360 MW). The State is also importing power to the tune of 781 MW. It is anticipating allocation of another 989 MW from new Central projects.  According to the 16th power survey, the State will require 4,304 MW by 2006-07, the terminal year of the 10th Plan. The expected total availability of power by then is to be 3,248 MW, leaving a gap of 1,056 MW.


‘Electricity regulators have limited role to play'


September 20, 2004. The Chairman of West Bengal Electricity Regulatory Commission, Mr S.N. Ghosh, is uncertain about the usefulness of electricity regulatory commissions (ERCs) operating in different States, which were set up in compliance with the Electricity Act, 2003. His worry is based on the fact that there is no cohesive approach among ERCs towards framing legislative, administrative and legal policies in determining rational (actual) tariff structure for electricity. Mr M. Ghosh said that ERCs at present had a limited role to play in the fragmented and regionalised market. Generation and transmission were still confined to specific regions in the absence of total coverage of the country through transmission network. Unless a "single market" was created for electricity, ERCs would not be able to act in a cohesive manner, he felt.


He felt that power generation capacity would have to be made with proportionate forward integration of the transmission and distribution systems. Unless this approach was followed, he felt that the power availability situation would not improve in the country. He said that one had to keep in mind the fact that electricity had become a tradable commodity instead of being just a development input.  In spite of the amendment of electricity acts on three occasions since 1948 to 2003, Mr Ghosh observed that the State still enjoyed the authority to dominate the power generation sector because generation was a capital-intensive activity. Under the Central Electricity Act, 1998, private investors were allowed to set up thermal power projects for captive consumption purposes.


Centre bars Kerala from entering into direct PPAs


September 20, 2004. Kerala’s attempts to sign direct power purchase agreements (PPA) with mega power projects have come a cropper in view of its dismal record in power sector reforms. The Union Ministry of Power disallowed at least two projects from entering into direct power purchase agreements with Kerala. The two projects were the 1000 MW Tuticorin thermal station and the 1015 MW Mangalore Power Project. The Rs 4,500 crore (Rs 45 billion) Tuticorin power project is jointly promoted by the Centrally-owned Neyveli Lignite Corporation, the Tamil Nadu Electricity Board and the Tuticorin Port Trust. The Mangalore Power project, estimated to cost Rs 4,500 crore (Rs 45 billion), is promoted by the Nagarjuna group.  Both these project promoters have already sent draft PPAs to Kerala. In the case of the NPCL, it was estimated at 100 MW. From Tuticorin, Kerala was expected to have a share of at least 250 MW. Kerala had sought these arrangements in view of the high peak deficit by 2006-07. Peak deficit by the Power Ministry was estimated at 1509 MW and the energy deficit at 7,213 million units. The Ministry's opposition stemmed from Kerala's non-compliance with the guidelines for power sector reforms. Under these guidelines, power-purchasing States are to undertake in principle to privatise distribution in all cities having a population of more than one million within a fixed time frame.


Redraft power policy: Plan Panel


September 21, 2004. Planning Commission has said the power ministry has drafted the National Electricity Policy (NEP) poorly. The draft confuses policies with policy objectives, targets and the strategies to achieve those targets, the panel has said. The document, which includes considerable material that does not typically belong to a policy statement, requires a major redrafting effort, it said. The draft policy as presented fails to address core issues relating to the development of the power system-based on optimal utilisation of resources such as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy. The draft also fails to identify any specific policy initiatives that would address key problems the sector faces. The major problems comprised raising the level of competition in the sector and shifting away from the cost plus pricing regime, removing bottlenecks to open access, handling the legacy of existing contracts, raising the level of redundancy in generation, transmission & distribution and a system operation at 75-80 per cent plant load factor (PLF) that is not a desirable outcome from system stability considerations. 









Murphy oil announces new oil discovery in deepwater Malaysia


September 14, 2004. Murphy Oil Corporation announced that it discovered oil in multiple zones at the Senangin #1 exploration well. Drilled in 4,695 feet of water in Block K, offshore deepwater Sabah, the well reached a total measured depth of 15,962 feet. This latest oil discovery in deepwater Sabah further extends the proven play fairway and is an important new addition to our list of discoveries in Malaysia.


OPEC plans to discuss raising its output ceiling 


September 15, 2004. OPEC oil ministers meeting in Vienna are considering changes to the group's formal output ceiling even as crude prices remain high despite the cartel's efforts to lower them. The meeting comes as producers are pumping more oil than is consumed. "The market is well supplied" with oil, Ali al-Naimi, Saudi Arabia's oil minister and OPEC's most influential representative, said in Vienna. "Prices don't reflect market fundamentals." Al-Naimi has called in recent months for oil prices of around $25 a barrel.


Shell gets 2 licences in UK's offshore round


September 18, 2004. Britain has awarded oil and gas major Shell two North Sea oil and gas exploration licences in the UK's 22nd offshore round for the UK Continental Shelf, Shell said. Both licences are in the deep water Atlantic area west of Shetland and comprise a total of eight blocks. One is a frontier licence with BP as a partner. The other is a traditional licence with BP, ChevronTexaco and Faroe Petroleum as partners. Shell will be operator in both cases.  Oil and gas production from the UK North Sea is declining as fields mature, leaving the country increasingly dependent on imports.


Indonesia urges Caltex oil recovery project at Minas


September 16, 2004. Indonesia, with its oil production in decline, has urged Caltex Pacific Indonesia to develop a tertiary oil recovery project for the Minas field to boost production, energy watchdog BP Migas said. Caltex is the biggest oil contractor operating in Indonesia and produced 508,000 barrels per day (bpd) in August compared with 497,000 bpd in July. Indonesia's oil production is declining because many wells are ageing.  The Minas field was currently producing around 100,000 bpd of crude oil. Indonesia produced 965,000 bpd of crude in August, compared with 947,300 bpd in July. The country's condensate output was down to 127,000 bpd in August from 132,000 bpd in July. Indonesia, Asia's only member of the Organisation of the Petroleum Exporting Countries, has a quota of 1.347 million bpd from the cartel.


Libya hopes to renew U.S. term oil sales in 2005


September 17, 2004. Libya, released from U.S. sanctions, is pushing hard to revive long-term crude oil sales agreements with American refiners for the first time in more than two decades. Potential customers for the country's state-owned National Oil Corp (NOC) are primarily major U.S. refiners located on the east coast Valero, Sunoco and ConocoPhillips as well as ChevronTexaco. Talks with refiners for year-long crude sales agreements usually begin in mid-October, giving the NOC plenty of time to hammer out new deals.


The United States was a major market for Libyan crude before the U.S. imposed an imports ban in 1982. It had been taking more than 700,000 bpd in the late 1970s. The OPEC member is likely be keen to diversify its rising supplies away from Europe, which takes nearly all its exports.  Exports have risen from around 1.1 million barrels per day (bpd) to 1.3 million bpd this year as OPEC members pumped at full throttle in an effort to cool record high prices. Only about 60,000 bpd is sold into Asia, the rest staying in Europe. U.S. refiners should be equally eager to get a hold of Libya's easier-to-refine, low-density oil that is in such high demand. Heavier crudes are worth around $10 less than lighter ones, their biggest discount ever. On a spot basis, the north African producer has been selling about one million barrels a month (33,000 bpd) of crude to the U.S. since Washington eased the trade embargo this April, allowing American companies to once again buy oil from Libya.


OPEC hikes quota by 1 million barrel/day 


September 15, 2004. Opec decided to increase its official output by 1 million barrel per day (mbd) from November 1, Iranian oil minister Bijan Namdar Zangeneh and his Algerian counterpart Chakib Khelil said.  The increase to 27 MBD was meant as a signal to the oil market that the cartel plans to maintain its current output.  “Opec is producing two million (barrels) over the official ceiling. Now we have legitimised half of it,” he said. The minister added that the cartel believed the market was well-supplied and the quota was largely a sign of goodwill towards petroleum consumers.  Saudi Arabian oil minister Ali al-Nuaimi said that the quota hike was decided upon “to narrow the gap between the real productions of 28 mbp. Instead of being at 26 we will be at 27.” Opec has for the past two months been exceeding its quota in response to record prices driven by terror fears and rising demand in China.


China to start search for oil, gas in disputed Spratlys


September 18, 2004. The Philippine National Oil Co. (PNOC) and its Chinese counterpart will start soon a $7.5-million marine seismic study to determine if there are oil and gas resources in the disputed Spratlys island. The study will focus on determining the petroleum potential of the area. CNOOC will bid for the equipment to be used in the seismic undertaking. The two oil firms will need to go through their respective governments in applying for an exploration contract if they found oil resources and decide to explore the areas further.


Discovery in Yemen 


September 17, 2004. TransGlobe Energy reports that the An Nagyah #10 well on Block S-1 in Yemen was drilled to a total depth of 1,144 meters and completed as an Upper Lam oil well, flowing at a stabilized rate of 1,547 barrels of light (42 degree API) oil per day. The An Nagyah #10 well encountered the Upper Lam sandstones with a 33 meter oil bearing interval. A 26.0 meter reservoir interval in the oil bearing section was perforated between 1,030 and 1,056 meters.

India’s OVL may invest $1.5 billion for blocks in Ecuador


September 16, 2004. India’s ONGC Videsh Ltd’s (OVL) may invest in Ecuador oil fields making it its largest one-time investment by an Indian firm abroad. Although aware that it may have to invest $1.5 billion in one go, OVL has decided to bid for EnCana Corp’s producing blocks, either with a foreign partner or alone. Though OVL’s endeavor would be to identify a foreign partner to jointly bid for the EnCana’s share, in case a “tie up with the partners does not become feasible within the time limit available, then OVL would bid alone”. The reason for OVL’s desperation is that the acquisition would provide India 90,000 barrels per day as well as an opportunity to expand its operations in Latin America that accounts for 10 per cent of world’s proven oil reserves.  EnCana’s 2003 production in Ecuador averaged 62,300 bpd and the current production is reportedly about 90,000 bpd, which is slated to reach 115,000 bpd in 2005. As on July 1, EnCana’s share of equity reserves was estimated at 329 million barrels with proven reserves pegged at 217 million barrels. Additional possible and risked exploration reserves are estimated in excess of 267 million barrels.  EnCana has put on offer its equity in five oil blocks, of which four are producing, and 36.3 per cent stake in the 500-km Oleoducto de Crudos Pesados crude pipeline that has a capacity of 450,000 barrels per day.


S. Korea signs deal on Kazakh oil project


September 19, 2004. South Korea state-run Korea National Oil Corp. (KNOC) has signed a deal with Kazakhstan's state oil firm KazMunaiGas to set up an upstream oil project in the oil-rich Caspian Sea. The deal, announced by a presidential aide, was struck during the South Korean President Roh Moo-hyun's visit to Kazakhstan for talks with Kazakh President Nursultan Nazarbayev.  No value has been given to the project, but it would aim to develop between 600 million and 800 million barrels of oil.


CBM drilling increases in Canada


September 21, 2004. A big energy-industry push into gas production from coal seams will boost oil and gas drilling activity in Canada in 2005 to levels that will exceed this year's frenzied pace. Production of coal bed methane (CMB), a controversial new source of natural gas the development of which is in the early stages in Canada, will help boost the number of wells drilled in Canada next year to a record 24,500, from 23,300 this year.  It's likely that the number of wells directed specifically at CBM will increase to 3,000, from the 1,500 drilled this year.  CBM is cheap, it's a plentiful resource, it's low risk, and the characteristics are such that it's a desirable thing to have in your production portfolio, because it has low declines, and if some of the initial work is correct, it's economic at gas prices of US$3.50, US$4 per thousand cubic feet. In Alberta alone, there are an estimated 500 trillion cubic feet of gas trapped in coal seams.


Australia's mosaic discovers oil, gas plays in S.E. Queensland 


September 21, 2004.  Sydney oil and gas junior Mosaic Oil NL announced the discovery of oil and gas plays at an untried area in south east Queensland. Mosaic said the wild cat well drilled outside any conventional structure at Rockhampton High in south east Queensland had struck quality oil and gas shows overnight. Mosaic said tests showed the possibility of oil over a 12 metre interval in the younger Lower Triassic Rewan Formation between 2316 and 2328 metres.


Exports from Iraq north oil fields normal


September 21, 2004. Exports from Iraq's northern oil fields are back to normal after a spate of attacks earlier this month that crippled a key pipeline, the state-run Northern Oil Co. said. The country is now pumping an average of 600,000 barrels of oil per day from Kirkuk's huge oilfield to an export terminal in Ceyhan, Turkey. Saboteurs wrecked a recently repaired pipeline junction at the northern city of Beiji last week, shutting down the line to Ceyhan. The burning oil also melted power cables, setting off a cascade of power blackouts. The sabotage came just two days after Northern Oil engineers had completed a two-mon th replacement of critical valves destroyed by a previous bombing. Insurgents waging a 17-month campaign here have repeatedly targeted Iraq's crucial oil infrastructure in a bid to destabilize Iraq and undermine the U.S.-backed interim authorities. With crude oil selling above $40 a barrel, the frequent sabotage has cost Iraq more than $2 billion.


Yukos to cut Chinese oil exports


September 21, 2004. Yukos said it would cut some crude oil exports to China because, with its accounts frozen by the government, it could not finance the upfront rail cost of shipping the oil. The news pushed world oil prices back over $46 a barrel, and raised the stakes in the company's continuing standoff with the Kremlin over a $7 billion back tax bill.  On Sept. 28, Yukos will suspend shipment of 100,000 barrels a day of crude via rail to the China National Petroleum Corp. Prime Minister Mikhail Fradkov of Russia is scheduled to meet Wen Jiabao, the Chinese premier, in Moscow to discuss, among other issues, oil cooperation. Yukos move humiliates the Kremlin at a crucial juncture. While only marginally important to Yukos' bottom line, the export cuts to China are a serious embarrassment to Russia's president, Vladimir Putin, who in recent weeks pledged to allies and the international community that Russia would not disrupt oil exports to global markets.  The move highlighted how the Russian government has yet to resolve the turmoil surrounding Yukos, which produces a fifth of Russia's oil and 2 percent of the world's supply.


Chinese seek oil shipments from Yukos


September 20, 2004. China National Petroleum Corp. is in talks with Yukos in an effort to convince the Russian oil supplier to renew needed shipments of crude oil. The company had fulfilled all contract terms and hoped to see shipments resumed.  Yukos, Russia's largest crude producer, confirmed that it is suspending 400,000 metric tons a month, or about 100,000 barrels a day, of rail exports to the company, which is also known as CNPC, due to high shipping costs. That represents about 60 percent of the firm's total China shipments. The Chinese executive accused Yukos of attempting to prod CNPC to pressure the Chinese government to provide aid to the struggling Russian firm, whose management says is close to bankruptcy. Yukos notified CNPC that it had stopped loading crude shipments.


Total makes oil discovery offshore Congo


September 20, 2004. French oil group Total SA made a new oil discovery in ultra-deep waters off the coast of the Republic of Congo. It said in a statement that the well, Pegase Nord Marine 1, was drilled to a total depth of 3,622 metres and tested at a flow rate of 14,360 barrels of oil per day. The discovery is the second on the Mer Tres Profonde Sud permit following the completion of the Andromede Marine 1 discovery well in May 2000.




Isfahan refinery to triple gasoline output


September 15, 2004. Director of engineering plans of Isfahan Oil Reining Company noted that the refinery was planning to ramp up gasoline production threefold from about 11 percent of total input crude oil to 31.5 percent of input crude. The refinery’s Public Relations Department quoted Ali Mohammad Namazi as saying that based on studies of RFCC and FCCC models and determination of optimal capacity it is known that the refinery can increase gasoline production by three times.  The current capacity of the refinery (375,000 barrels per day) is more economical than increasing the production capacity up to 425,000 barrels a day.


Isfahan refinery to cut MTBE consumption


September 20, 2004. Director of engineering affairs of Isfahan refiner’s projects noted that the refiner’s major development plan will reduce MTBE (Methyl Tertiary Butyl Ether) consumption from about 7,000 barrels a day to only 283 barrels per day. Mohammad Ali Namazi state that other results of the development project included increasing gasoline production from 41,000 barrels with an octane figure of 87 to 120,000 barrels high –quality gasoline including 23,500 barrels per day super with an octane number of 95 and 95,000 barrels high-quality gasoline per day with an octane figure of 90.


Irish firm signs accord to develop N. Korea's petroleum industry 


September 20, 2004. Aminex PLC, a midsize oil and gas company listed in London and Dublin, said it has signed a 20-year agreement with the government of North Korea to assist in the development of the petroleum industry in the country, onshore and offshore. Under the agreement, signed June 30 in Pyongyang, Aminex will initially provide technical assistance to North Korea, while in return receiving a royalty on hydrocarbons produced from new drilling in the country, and being entitled to a carried working interest in any wells drilled by incoming companies, the company said.  The company will also have a prior right to explore in its own name, either alone or with international industry partners, anywhere in the country, it said. According to Aminex, North Korea has an existing petroleum industry and several wells have been drilled onshore and offshore over a 25-year period, resulting in limited discoveries of oil.


Bahrain to build huge petrochemical plant


September 21, 2004. A Kuwaiti banking company has announced plans to develop a $1.3 billion combined petrochemical, power and water generation complex in the tiny Persian Gulf kingdom of Bahrain.  Kuwait Finance House (KFH) Bahrain, a subsidiary of Kuwait's first Islamic bank, said the project is a first for the region and is aimed at meeting Bahrain's increasing demands for power and potable water.  The project is expected to be completed in the first quarter of 2008, according to the company. A feasibility study has been carried out in conjunction with an international consortium including General Electric (GE) Energy, Weir International and Stone and Webster.


Transportation / Trade


Sweden approves new gas pipeline plans


September 16, 2004. The Swedish government approved plans to build a natural gas pipeline from Germany to Sweden, government officials said. The pipeline, called the Baltic Gas Interconnector, will run 130 miles from Rostock, Germany, to Trelleborg on Sweden's southern tip. It will be built by Swedish gas company Sydkraft Gas AB, a subsidiary of European energy giant E.On. The pipeline will be the second gas line into Sweden. It is scheduled to be completed in 2009.


Oil pipeline from Siberia


September 21, 2004. When Chinese Premier Wen Jiabao visits Moscow, it will be keenly watched if he can persuade his Russian counterpart Mikhail Fradkov to stick to an original agreement to build a pipeline to transport US$150 billion (S$254 billion) worth of oil from Siberia to China. That agreement was signed by Chinese President Hu Jintao and Russia President Vladimir Putin in May last year. The last time a Russian prime minister came to Beijing, in September last year, the then premier Mikhail Kasyanov told Mr Wen that the pipeline project had been postponed so as to conduct environmental studies.   Since then, Japan has reportedly swooped in under China's nose with US$7 billion in financing to persuade Russia to build a link to the Pacific instead of the US$2.8-billion route to China backed by OAO Yukos Oil, Russia's top crude exporter. Russia is expected to make a final decision by year-end. China's Assistant Foreign Minister Li Hui admitted that China had no inkling on which route its northern neighbour preferred. 


China's rationale for wanting to build the oil pipeline ending in Daqing: The world's seventh-largest economy needs more energy to fuel its economic growth. It already accounts for 30 per cent of the increase in oil demand growth this year and next year. Over the next three decades, China will account for 20 per cent of the world's incremental energy demand, and 16 per cent of the rise in oil demand alone, says the International Energy Agency. Most of China's oil imports enter the country via railways.  But the risk of rail transportation was highlighted when Yukos partly suspended its deliveries to China National Petroleum Corp (CNPC) this month because it could not pay its railway bills and export duties. Yukos was forced to cut production and exports after bailiffs froze its bank accounts as part of efforts to recover more than US$7 billion in back taxes for 2000-2001. However, Yukos is honouring its oil export commitment to another major Chinese oil company, Sinopec, to supply an expected 750,000 tonnes of oil by the end of the year.


Qatar may sell India additional 2.5m tons of LNG in 2005


September 21, 2004. Qatar may sell India an additional 2.5 million metric tons of liquefied natural gas in 2005, in a bid to enable India to meet its growing energy needs.  Petronet LNG Ltd., a consortium of India's state-controlled petroleum companies, is the sole importer of LNG in India. Petronet will be importing 2.5 million tons of LNG from Qatar this year and another 5 million tons in 2005 under a contract previously signed with Ras Laffan Liquefied Natural Gas Co.or RasGas.  Besides Qatar, India is also looking at other countries as possible sources for LNG, in a bid to get long-term LNG supplies at competitive prices and to bridge the supply-demand gap of the domestically produced gas. Indian gas available for sale is currently around 80 million cubic meters a day, which meets only about 70% of the country's demand. India's gas reserves are sufficient to last about 28 years at current production rates if there are no new discoveries, the latest Indian government estimates show.

Petronas and PTT to buy gas from field in Gulf of Thailand


September 15, 2004. PTT Plc and Petroliam Nasional Bhd (Petronas) will buy gas from a field shared by Malaysia and Thailand starting January after the construction of a US$900mil pipeline and separation plant, a Thai government official said. PTT, Thailand's biggest energy company, and Petronas will buy 390 million cu ft of natural gas a day from the A18 field of the Malaysia-Thailand Joint Development Area in the Gulf of Thailand.  PTT and Petronas would double the gas purchase from the field to 790 million cu ft a day from January 2008. The gas purchase contract would be signed for 20 years. Petronas and Amerada Hess Corp, the fifth biggest US oil company, are jointly developing the A18 gas field with equal ownership. 


Indonesia sees Sempra gas deal in early October


September 16, 2004. Indonesia expects BP Plc. to sign a final deal to supply liquefied natural gas (LNG) to U.S. firm Sempra Energy in early October, oil and gas watchdog BP Migas said. The LNG will come from BP's Tangguh gas field in Papua province, 3,000 km east of Jakarta, which holds 14.4 trillion cubic feet of certified natural gas reserves. The energy company plans to build two new LNG plants with a combined capacity of around seven million tonnes of LNG per year. The Tangguh LNG complex would cost around $4.7 billion, more than the $3 billion previously estimated, including development of upstream activities and two LNG plants with a capacity of seven million tonnes a year. 


Intelsat signs two oil and gas companies 


September 14, 2004.  Intelsat announced two separate deals to lease transponder capacity to companies in the oil and gas industry. One agreement involves a long-term contract for capacity on its IA-6 satellite with CapRock Communications, a Houston-based satellite- communications service provider focused on such remote industrial markets as oilfield, construction, maritime, mining and disaster relief. CapRock will provide access to the IA-6 satellite via one of its six international teleports, with managed services controlled through its 24/7 global network operations center in Houston. The agreement is Intelsat's first thrust in the North American energy market. Another Houston-based company, SkyPort International, agreed to purchase two long-term capacity leases on Intelsat's IA-7 satellite over North America.


New triple point solution for global oil operations


September 16, 2004. Triple Point Technology Inc., the leading provider of commodity trading and risk management systems designed to reduce transaction costs, increase operational efficiencies, and precisely measure and monitor market risk, has signed Glencore International AG as its second customer for the newly available Triple Point PhysOps XL(TM) supply chain management solution. Glencore, a privately-owned, diversified natural resources group, will deploy PhysOps XL to manage the logistical complexities and improve the supply chain operations of its global petroleum businesses.


Policy / Performance


Russia to merge Gazprom and Rosneft


September 14, 2004. Russian President Vladimir Putin said that he backed the idea to merge gas monopoly Gazprom with medium-sized state oil firm Rosneft in a move to boost state control over Gazprom. Gazprom has Gas reserves - 28 trillion cubic metres of gas, or 16 percent of the world's proven gas reserves. Gas output was 540 billion cubic metres (bcm) in 2003, or one fifth of the world's gas output. 140 bcm of gas was exported to 20 European countries in 2003, covering one quarter of Europe's gas consumption.  Gazprom plans to produce 580 bcm by 2010, export 200 bcm a year to Europe by 2010-2015. Key projects include pipeline to north-western Europe under the Baltic Sea; first Russian liquefied natural gas (LNG) production at the huge Barents Sea Shtokman field, an LNG plant in Russia's Arctic, LNG sales to the United States, a pipeline to China. Oil and gas condensate production at 10 million tonnes in 2003, gas condensate reserves of 1.28 billion tonnes, oil reserves at 0.57 billion tonnes (4.2 billion barrels). Rosneft has Oil reserves 1.4 billion tonnes (10.3 billion barrels) at of the end of 2003. Gas reserves at 4.3 trillion cubic metres. Rosneft produced 19.4 million tonnes (390,000 barrels per day) in 2003, and plans to boost output to over 900,000 bpd in 2015 due to new fields in Siberia and Russia's far eastern Sakhalin island. Key projects include Vankor East Siberian group of fields with Total named as a possible partner. Sakhalin oil and gas projects with ExxonMobil and BP among the key partners. Rosneft is also a partner of Gazprom in the giant Shtokman field on the Barents Sea.


Oil can’t overshadow trade with Saudi Arabia, says envoy to India


September 18, 2004. Saudi Arabia, world’s biggest exporter of crude, has said that oil cannot overshadow other commodities being traded with India. Figures of 2002-03 indicate that India sourced 18.816 mmt out of its total oil import of 81.989 mmt from Saudi Arabia. Saudi Arabia’s ambassador to India, Saleh Mohammad Al Ghamdi, said oil reflected only the visible trade with India while the invisible trade included many services like information technology, manpower etc. “Saudi Arabia believes in an open investment policy, technology transfer and a two-way trade,” he said.  “The economy of both countries are growing, there is a positive sign of growth in two-way trade. We are engaged in introducing various measures to diversify our economy and reducing the dependence on oil. And we invite India to cash in on this opportunity,” he said. Whether India’s taking oil fields abroad will effect imports from Saudi Arabia, he said, “We welcome India’s taking equity in oil fields abroad. It shows sign of growth and development of India’s oil and gas industry. Saudi Arabia is the largest supplier of oil to India and our share is 25% of the total India’s import.”


Global oil spending surges 9% in 2003


September 17, 2004. Worldwide spending on oil and gas reserves jumped 9 per cent in 2003 to $161 billion, led by BP, which invested $14.7 billion, according to a report released by consultancies John S. Harold Inc. and Harrison Love grove & Co. The increase in spending, which includes exploration, development and acquisition costs, followed a 4.4 per cent decline in 2002, the consultancy said in its survey of 194 oil and gas companies' data filed with the US Securities and Exchange Commission.  After BP, Exxon Mobil was the second-largest upstream capital investor at about $11.1 billion, followed by Royal Dutch/Shell Group at $10.8 billion and Devon Energy at $8.1 billion. The increases were driven by record cash flows, which surged 24 per cent to $197 billion because of high energy prices. Capital continued to flow out of North America, which has seen spending decrease by 22 per cent since 2001. That money has been directed to South and Central America, Africa and the Middle East, which have seen spending jump 60 per cent in the past three years, the consultants said.






Japan's Tokyo Gas invest in Mexico power business


September 14, 2004.  Tokyo Gas Co., Japan's biggest gas distributor, said it would take a 24.5 percent stake in a $460 million power generation business in Mexico. Tokyo Gas will invest in a power generation station in Bajio, 260 kilometres northwest of Mexico City, its first investment in an overseas power business. Electricity generated at the 601-megawatt Bajio plant has been sold to Mexico's state-run electricity company and other local users.


Pak to expedite Thar power plant


September 15. 2004.  The government has decided to expedite the process of setting up a coal-fired power plant in Thar by negotiating tariff with the Chinese group, Shenhua. This decision was taken in view of rising international oil prices coupled with increasing energy demands, and so that 50 per cent of the total energy requirement could be met through coal generation. With eyes on obtaining 2,000-3,000 mw power generation from the plant by 2010-11, the government has released money for completion of infrastructure development in Thar on schedule, and was taking necessary measures to make the Sindh Coal Authority more effective and a result-oriented organisation.


Zambia, Iran sign accord on power plant construction


September 15, 2004. The Zambia Electricity Supply Company (ZESCO) has signed a memorandum of understanding (MOU) with Farab International of Iran for construction of the 100 million dollar Itezhi-tezhi hydropower plant on the Kafue River.  The accord would pave the way for signing an engineering, procurement and construction contract in January 2005. The power plant in Zambia's southern province will have a capacity of 120 megawatts. If everything goes well, the construction work will begin in September 2005 and be completed in July 2008. The Itezhi-tezhi power plant is part of the Zambian government's ambitious plan to develop its rich hydropower resources and boost its export to neighboring countries. It is in discussion with a Chinese firm on the building of a bigger power plant at the Lower Kafue Gorge, while construction work to link up its power grid with that of Kenya and Tanzania will be formally kicked off next year. Both projects will cost over 600 million dollars.


Tenaris to invest 109 million euros in Italy power plant


September 16, 2004. Tenaris, an Argentine-owned firm headquartered in Luxembourg, said that it will invest 109 million euros ($131 million) to build a gas-driven electricity plant in Italy. Tenaris said its Italian unit, Dalmine SpA, would consume about 60 percent of the new plant's power to produce seamless pipes. The plant will have enough capacity to meet power needs during peak production periods, the company said.


400 MW waste-to-energy plant in Taiwan


September 16, 2004. Digital Gas, Inc. Digital Gas announced that its subsidiary, Digital Energy & Farming Asia LLC ("DEFA"), has signed an agreement to join the Quanta Energy Environment Consortium, which has received approval from the Taiwan Government to build two 400-MW waste-to-energy plants in Taiwan.  Quanta received foreign investment approvals from the Investment Commission of the Ministry of Economy on August 10, 2004 for the plants which are anticipated to cost $425 million each. After it obtains a business license, which is a formality after the payment of a fee, the Taipei County Government, which has reserved a 50-acre site for the Quanta Consortium in the Economic Development Zone, will transfer the land to the consortium. Known as the "Reclaimed Land Under Sanying Bridge," the property is valued at US$142,830,000. The consortium's second plant will be located in Kao-hsiung County.  The waste-to-energy plants will employ a waste-processing technology that converts municipal, industrial, and residential waste streams to a by-product that, when burned, is not only environmentally clean and safe, but is 50-80% more efficient than burning conventional RDF.

$ 1.3 billion Power plant in Bahrain 


September 20, 2004. A $1.3 billion (BD491 million) combined power, water and petrochemical plant is to be built in Bahrain. It was announced by Kuwait Finance House (KFH) Bahrain, which will arrange the financing. A site is being finalised with the Industry Ministry and the project is expected to be complete by the first quarter of 2008, said KFH. It said the project will help meet Bahrain’s growing power and water needs, as well generate export revenue. "This is a unique project and a compelling investment opportunity which we intend to maximise for the benefit of the Bahrain economy and our stakeholders," said its general manager Abdulhakeem Al Khayyat. Feasibility studies were carried out in conjunction with a word-class consortium consisting of partners such as General Electric Energy, Weir International and Stone & Webster, in co-operation with Uhde and Chicago Bridge & Iron Company, said KFH.


Policy / Performance


China & Russia in energy cooperation


September 18, 2004. Chinese Premier Wen Jiabao's visit to Russia next week will play a major role in economic and energy cooperation between the two countries, a senior Foreign Ministry official said. China's oil demand is booming alongside its economy and the country is looking to diversify imports away from the volatile Middle East and rely more on Russia, one of the few countries in the world where output has been growing in recent years. Assistant Foreign Minister Li Hui said it was still unclear if Russia's plans to build an oil pipeline running east would ultimately include a branch to China. He said that Russia's oil development strategy did, however, include plans for an oil pipeline to China. 'Recently, we have received various kinds of information that shows that Russia will continue with this decision,' he told a news conference, without elaborating on the subject. 


South Korea, Kazakhstan sign energy agreement


September 20, 2004. South Korea and Kazakhstan agreed to strengthen bilateral cooperation in energy and mineral resources. During a summit meeting at the Kazakh presidential palace, President Roh Moo-hyun and Kazakh President Nursultan Nazarbayev agreed to jointly develop the Caspian oil field and a uranium field in southern Kazakhstan. Toward that end, the two nations signed an agreement and a memorandum of understanding (MOU) on joint exploration of energy and mining resources, a protocol on Seoul's purchasing 69 percent of equity in ground mining in the Tenge area of Kazakhstan. Seoul and Astana also inked an MOU for the exploration of a uranium mine and for the setup of an economic cooperation council between the two nations. Chung said the council aims to open its first session in March next year. Roh and Nazarbayev expressed satisfaction over the steady development in bilateral ties since the setup of diplomatic relations, while vowing to solidify ties in various areas like energy, science and technology. The Kazakh president also reconfirmed his support for the Seoul government's security policy toward peace and prosperity in Northeast Asia and the Korean peninsula.


Energy reserves show potential in China


September 21, 2004. China has great potential in developing its petroleum and natural gas industries, said Vice-Minister Zhang Guobao in charge of the National Development and Reform Commission (NDRC). The summit was jointly hosted by the country's four conglomerates: China National Petroleum Corp, China Petroleum and Chemical Corp, China National Offshore Oil Corp and Sinochem Corp. According to the nation's third natural resources survey, China's total oil reserves had reached 102.1 billion tons and its natural gas resources topped 47.4 trillion cubic metres, Zhang said.  Proven exploitable oil reserves are 14 to 16 billion tons, while those of natural gas are 10 to 15 trillion cubic metres. "Potential for further development still exists, as only 40 per cent of oil reserves and 20 per cent of gas resources are proven," Zhang said. It is estimated that in the next 10 to 15 years, the development of natural gas sector will enter a stable period of fast growth. By 2020, newly-increased, exploitable gas reserves will be more than 100 billion cubic metres a year.


Renewable Energy Trends


Renewable Trends: National


BSNL to power rural telephone exchanges with solar energy 


September 17, 2004. The UP east circle of Bharat Sanchar Nigam Limited (BSNL) has come out with a novel idea of energising telephone exchanges in rural areas, where either there is no power, or is only available for a few hours, with solar energy. There are about 1,751 rural exchanges in UP east circle of BSNL, of which 1,644 telephone exchanges are very small, with erratic power supply. The UP east circle has decided to run these telephone exchanges with solar panels.  It would be a cost effective idea, right from the procurement of solar panels to the smooth running of rural exchanges. BSNL also plans to distribute wireless in local loop (WLL) handsets in a big way in UP east. It already has got approval for 23,000 new WLL handsets, which would be available in a few days time. This would help in reducing the load on phone exchanges and resultantly about 38,000 solar panels would be surplus and available to the department for further utilization. The CGM observed that even if 30,000 solar panels are available to UP east, these would take care of about 1,500 rural telephone exchanges. One unit is formed of 16 solar panels while mid sized rural exchanges may need bigger units made of 32 solar panels. This way, the department hopes to cover about 1,500 of the total 1,600 plus rural and remote exchanges with solar panels.


Indian Railways signal drive to promote use of bio-diesel


September 15, 2004. The Indian Railways has seriously taken the government’s call to assist in the country’s efforts to produce bio-fuel. Being the largest consumer of diesel, it has started a drive to produce bio-diesel for its captive consumption. The lead in this regard has been taken by the Kharagpur division of the south-eastern railways. As it is proved that jatropha oil is a perfect blend for diesel, the division has drawn up a plan to gradually increase the ratio of jatropha oil in its blend with diesel. Initially it intends produce bio-diesel by mid-September 2005, which will be blended with 5% jetropha oil. The vegetable oil’s ratio, as per the plan, will be raised up to 20% by 2008. To make it happen, the division has decided to utilise its vacant land to raise jatropha plantation. In the first phase of the programme, which should end by mid-September 2005, our target is to raise 10 lakh (100,000) jatropha trees in 500 hectares of land.


Since the division wants to produce the blended diesel all by itself, it will soon set up a solvent extraction plant, along with an esterification plant to refine the crude jatropha oil. The oil plant which will be put up at an unused diesel car shed in Kharagpur will cost Rs 2 crore (Rs 20 million). Few months ago, the northern railways had test-run the Delhi-Amritsar Jan Shatabdi Express on the jetropha oil blended bio-diesel, which was produced by IOC. The railways has decided to get into the production of jetropha oil to realise a part of the Planning Commission’s mission to bring about 20 million hectares of land under Jatropha cultivation by the end of the 10th Plan.


Indian government wants hydrogen energy to reach common man


September 15, 2004. The government will ensure that all commercially viable hydrogen energy technologies made available to the common people, said Union minister for non-conventional energy sources Vilas  Muttemwar.  The government has made a modest beginning by supporting a broad-based programme on R& D and demonstration for over a decade on different aspects of hydrogen energy, including production, storage and utilisation of  hydrogen as a fuel. The Board accepted the recommendations of the group on hydrogen energy, constituted by the Planning Commission. The group had recommended several projects on hydrogen production, storage, delivery and application to be taken up in the first phase of hydrogen energy programme in the next three years. A budgetary provision of Rs 250 crore (Rs 2.5 billion) was also recommended. The group had also recommended provision of low interest loans at 3 percent accelerated depreciations on investments in hydrogen energy development. These were large scale production of hydrogen through nuclear route by Dr Anil Kokodkar, chairman of Atomic Energy Commission, infrastructure for blending in CNG vehicles in and around Delhi by NR Raje, director R& D, Indian Oil Corporation and hydrogen applications in automobiles through demonstration projects by Dr V Sumantran of Society for Indian Automobile Manufacturers. It was decided that the concerned group will soon start work on these projects.


The Union minister for non-conventional energy sources is working out details of the National Hydrogen Road Map which will provide the basis for co-ordinated development on all aspects of hydrogen energy, including production, storage, transport, distribution, safety standards and applications. A steering group under Tata is working on preparation of an action plan on specific demonstration projects and related the Wednesday’s Board meeting were the Planning Commission member (energy), Kirit Parikh, Tata Sons Chairman Ratan Tata, Mahindra & Mahindra vice-president Anand Mahindra, CII president SK Munjal and Assocahm president MK Sangai.


Biofuels can fuel india’s carbon trading potential 


September 20, 2004. India can tap the $52-billion global market for carbon trading by encouraging production and use of biofuels and plantation of trees having oil-bearing seeds and materials, like Jatropha and Pongamia species. Other plantations having oil-bearing seeds or materials are Sal, Mahua, Kokum, Pilu, Phulwara, Dhupa, Neem,  Mango, Kusum, Karanja, Ratanjyot, Jatropa, Tumba, Jojoba, Simarouba


Biofuels, apart from enhancing energy security, ensuring employment and development and mitigation environmental pollution, can be instrumental in carbon trading if certain criteria of the clean development mechanism (CMD) of the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC) are fulfiled, said experts.


According to a recent study by Point Carbon, the potential of global carbon market over the next several years is around $52 billion per annum. Growing at a rate of 4% per year, India, the sixth largest producer of greenhouse gases (GHGs), contributing almost 3% of the world’s total emissions (including CH4 from waste generated by cattle) is seen as one of the most attractive destinations for CMD linked investments. Estimates put the cumulative foreign direct investment (FDI) on account of such projects at about $2 billion, growing at the rate of $200 per year.


In light of increased evidences of climate change effects and their mitigation methodologies, several carbon market and investment mechanisms are slowly evolving. Though the carbon market dynamics are not transparent, the scenario indicates a huge potential in future. Till January 2004, the total volume traded in project based transactions is 78 million tonne of carbon dioxide emissions (CO2e). The buyer side included Japan with 41 per cent, The Netherlands and CFB with 23% each. According to estimates, if the CMD captures at least 35% of the global market, the estimated value to the concerned countries would be $18 billion.


A study jointly done by Srikanta K Panigrahi, consultant with the Planning Commission, A Mohana Reddy, director, ZenthEnergy, Hyderabad and P Narendra, a senior consultant of the same company said that as per one estimate, each tonne of bio-diesel produced or consumed leads to a reduction of GHGs by about three times ie avoids 3 tonne of CO2e. These reductions in GHG emissions can be accumulated and traded as carbon credits. The CMD facilitates selling of these reductions in terms of certified emission reductions (CERs), a unit of which equals to one tonne of CO2e.


The study further said that the present market price of carbon credits is around $5 per CER, which translates into additional revenue of Rs 690 per tonne of bio-diesel consumed of 75 paise per litre of bio-diesel consumed. This additional revenue from sale of carbon credits can be used to raise plantations of trees having oil bearing seeds and materials or meet unforeseen expenses during stabilisation period of bio-diesel technology, the study suggested. The study pointed out that during 2011-12 there would be a reduction in GHG emissions to an extent of 40 million CO2e with 20% bio-diesel blend in the country.


It also said that largescale plantation of trees having oil-bearing seeds and materials, like Jatropha and Pongamia species will fix carbon by photosynthesis via the carbon cycle. When the oil derived from these seeds is burnt, same amount of CO2 is emitted as was sequestered. Bio-diesel avoids release of anthropogenic emissions like CH4 and N2O as is the case with conventional petroleum diesel.


Thus the consumption of bio-diesel as an energy source either in stationery or mobile combustion leads to “no net-addition of CO2 to the atmosphere.”


Renewable Trends: Global


Wind Power Project plugs into Alberta electrical grid


September 17, 2004. The $48-million Magrath Wind Power Project is an equal partnership between Suncor Energy Inc., EHN Wind Power Canada Inc. and Enbridge Inc. The project's 20 turbines have the capacity to generate 30 megawatts of green electricity - enough to power approximately 13,000 homes.  Enbridge has purchased one third of the facility's electricity for its pipeline operations. The remaining electricity will be distributed to consumers through the Alberta electrical grid. EHN will operate the facility, which is located seven kilometres west of the town of Magrath.  Magrath's zero-emissions electricity production is expected to offset the equivalent of approximately 82,000 tonnes of carbon dioxide per year - equal to taking about 12,000 vehicles off the road. The opening ceremony featured speeches from Premier Klein and senior representatives from the Government of Canada and partner companies.


European future in climate change must involve renewable


September 22, 2004.  The European Commission has launched stakeholder consultation on the continent’s approach to the future international fight against climate change, and is soliciting input on how EU countries should address the challenge after 2012 when the current Kyoto Protocol targets end. The online consultation will allow stakeholders to contribute to the debate on the future of global climate policy, and the EC will use the contributions in the development of the EU’s future climate change policy.  The first Kyoto commitment period will end in 2012; already now, EU needs to prepare what comes after. The International Energy Agency estimates that energy investment decisions until 2030 will determine the mix of energy technologies and the magnitude of GHG emissions into the second half of this century. In Europe, 700 GW of generation capacity (equivalent to currently installed capacity and of which 50% will involve replacement of old plants) needs to be installed by 2030 at an investment cost of Euro 1,200 billion.


International solar group renews call for global transition to renewables


September 22, 2004. An aggressive transition to renewable energy may take more than 50 years to stabilize the environment due to over-use of fossil fuels, says the International Solar Energy Society.  Fossil fuel resources dominate the global energy market, but they are declining and will deplete within the next few decades, the group says. The decline in conventional resources has resulted in armed conflicts which could grow in intensity and frequency in the future. 


Japanese firm to supply two geothermal plants to Iceland


September 22, 2004. Mitsubishi Heavy Industries will build two 40 MW geothermal power plants near the capital of Iceland.  MHI will work with German engineering company Balcke Durr on the turnkey order from Reykjavik Energy, a municipal utility in Iceland. The order marks the eighth geothermal power plant consigned to MHI by the power provider. The two plants will each consist of a 40 MW steam turbine, generator, condenser and cooling tower. Both units will be commissioned by October 2006 at Hellisheidi, 20 km east of Reykjavik. MHI had previously received orders for six geothermal plants from Reykjavik Energy, for total capacity 180 MW, since its first order for the Krafla facility was delivered in 1978. The steam turbines will be manufactured at its Nagasaki Shipyard while the generators will be made by Mitsubishi Electric. Balcke-Durr will fabricate the condensers and cooling towers, and the electrical output will be supplied to local aluminum refineries. MHI has delivered 2,000 MW of geothermal power plants to ten other countries around the world, including the United States, Mexico, the Philippines, Indonesia, New Zealand, Costa Rica, El Salvador and Kenya. A turnkey contract covers all equipment supply and installation, with the facility turned over to the client ready for operation.  Geothermal generation requires a water or steam at 250"C from underground reservoirs, and involves no fuel combustion and no emission of CO2. Iceland is located where the Eurasian and North American plates meet, and relies on hydroelectric generation for 90% of its power and the remainder from geothermal.


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[1] Saxena, N.C. 1997. ‘The wood fuel Scenario & Policy Issues in India’. Centre for sustainable development. LBS National Academy of Administration. 

[2] International Energy Agency. 2002. World Energy Outlook. Energy & Poverty’

[3] Quoted in Saxena, N.C. 1997. ‘The wood fuel scenario and policy issues in India’ Centre for Sustainable Development LBS National Academy of Administration, Mussoorie.  

[4] Rajavanshi, A.K. 2003. ‘R&D Strategy for lighting and cooking energy for rural households’. Nimbkar Agricultural Research Institute. 

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