Energy News Monitor I Volume I, Issue 15

Market Intervention: Wrong Response to Oil Price Hikes

 

Market Intervention: Wrong Response to Oil Price Hikes

 

The government’s response to the recent increase in crude price has the short sighted objective of insulating the consumer from price increases through reductions in customs and excise duties.  These interventions not only sustain long term inefficiency in energy use, add to the volatility in the global oil market and more importantly increasing our dependence on oil - a fuel we don’t have enough of.  

 

These measures are intended to protect the poor but it is common knowledge that that it is the middle class and not so poor who consume subsidised petroleum products such as LPG and SKO. The really poor do not possess the necessary facilities or appliances that use these fuels. The continued ‘management’ of petrol and diesel even after the so called dismantling of Administered Price Mechanism (APM) protects the not so poor consumer and inhibits development of alternatives to oil. 

High oil prices do hurt the Indian economy, specially of they are sustained over a period of more than 6 months Energy intensive manufacturing sectors will suffer from cost increases; an increase in the import bill will lead to deterioration in the trade balance apart from feeding inflation.  The price increase can also be magnified by currency adjustments, which may lead to a drop in international competitiveness and so in exports. Inflationary pressures from sustained oil prices could stall economic recovery. Economic deterioration caused by high oil prices may also limit the effect of international development assistance, as that could be equal or greater than the additional oil bill. Measures currently implemented to curb the impact of oil price increases effectively subsidize energy consumption can reduce but not neutralize the effect of high oil prices. On the other hand these subsidies will become more costly as oil price go up thus weakening the government budget. 

Oil Intensity of India is High

On average oil importing developing countries use more than twice as much oil to produce one unit of economic output (‘oil intensity’) as do OECD countries. India for example, uses more than twice as much oil as OECD countries per unit of GDP. While oil intensity in OECD countries has halved between 1970 and today, this ratio is still increasing in many developing countries.

In OECD countries, the share of oil in total commodity imports (by value) has fallen from 13 per cent to 4 per cent since the late 1970s.  In India crude oil imports accounted for some 31 per cent of all imports in 2000-01 compared to 25 per cent the previous year. Energy consumption growth in India has been outpacing GDP growth rates in the past few decades.  The share of oil in commercial energy consumption is about 40% and growing.  

The International Energy Agency (IEA) summarizes the estimated additional bill for select developing countries with oil dependencies ranging from 20 per cent to almost 100 per cent. 

 

	Oil as % of total energy consumption	Oil Imports as % total oil use	Percentage Growth of Oil Import Bill April 1999 to march 2000
Brazil	50	50	147
India	19	61	178
China	18	20	252
Philippines	51	96	164
Thailand	47	87	163

Since developing countries such as China and India are growing as key market drivers for oil demand, periodic market interventions in these countries make forecasting global demand difficult.  This contributes to the short term volatility in the oil market.  These measures also insulate consumers from energy price increases and therefore demand fails to respond to price.  At the same time these initiatives offer no incentive for investing energy efficiency. 

Globally oil price increases do have an impact on demand - but often small. For instance, during 1979-83, when oil prices rose by about 115 per cent in nominal terms, the volume of demand in Organisation for Economic Cooperation and Development (OECD) countries dropped by a mere 5 per cent.  During the oil shock of 1973-74 oil prices rose by about 295 per cent decelerating oil consumption and consequently in economic growth. 

Energy Efficiency is Key

Energy efficiency should in fact become the most important component of our energy policy as a country with low energy intensity stands out as country which is capable of doing more with less. An energy efficient India will compete effectively in global markets and stand out in environmental efficiency. 

While the possibility of implementing efficiency measures exists all along the energy extraction and delivery chain, measures targeting the demand side have been to have significant impact.  As for consumption of petroleum products implementation of fuel efficiency standards have resulted in substantial reduction in oil consumption in developed countries.  The Corporate Average Fuel Economy Law (CAFE) introduced in the United States in the 1970s resulted in improving the fuel efficiency of new cars by over 40 per cent between 1978 and 1987.  Around the same period, America’s GDP rose by 27 per cent but its oil use dropped by 17 per cent and the volume of its oil imports fell by nearly 50 per cent.  Japan and European countries have achieved even greater levels of oil efficiency through systematic implementation of efficiency policies.   

While India has enacted the Energy Conservation Act and put in place an institutional framework to implement efficiency policies through the Bureau of Energy Efficiency (BEE) along with the Petroleum Conservation Research Association (PCRA) specifically set up for efficiency improvements in the oil sector.  However none of these institutions generate a debate on conservation at a time when it is necessary.  Efforts are half hearted and fragmented.  PCRA’s efforts in saving oil has apparently resulted in substantial oil savings as demonstrated in its website, but not many of  direct oil consumers have even heard of PCRA.

What is required to really make a difference in oil consumption is serious targeted policy implementation. 

Energy Efficiency: International Best Practices

In developed countries which have made significant gains in energy efficiency, an integrated approach where a number of policies and programmes are combined to create an overall industrial energy-efficiency policy that addresses a variety of needs in many industrial sectors has been found to be the most effective.  Such an integrated approach has been incorporated in industrial sector voluntary agreement programmes that were established in a number of countries in the 1990s.

 

What are voluntary agreements?

 

Agreements to meet specific energy efficiency targets, often voluntary, are made between the government and industry (say Automobile) to promote actions with desirable social, industrial and environmental outcomes based primarily on the participating industry’s self-interest.  Targets may be in terms of specific energy use or carbon emissions reduction commitment. 

 

These agreements typically have a 5-10 year outlook and involve all stakeholders in a particular industry. An analysis of seven Voluntary Agreement Programmes in Europe and US found that 50 per cent of efficiency improvements could be attributed to these programmes.  In the Netherlands the historical energy intensity improvement rate of 1 per cent per annum was more than doubled when Voluntary Agreements were introduced over a 10 year period.  In addition to direct energy savings, voluntary agreements were also found to be effective in:

 

§   Changing the attitude and awareness of managerial and technical staff regarding efficiency.

§   Addressing market, institutional, regulatory and other barriers to technology adoption and innovation

§   Fostering market transformation and to establish greater potential for sustainable energy efficiency investments

§   Promoting positive dynamic interactions between different actors involved n technology research and deployment and market development.

 

Experience in designing and implementing Voluntary Agreements show that the following are essential for successful implementation:

 

§   Comprehensive assessment of enterprise energy-efficiency potential

§   Ambitious but realistic targets with specific timetables

§   Clear monitoring guidelines and evaluation of progress using physical energy efficiency measurements

§   Long lasting government support in the form of policies that facilitate implementation of energy efficiency mechanisms.

 

 

The current debate in the gas and power industry is over whether or not the networks that transport electricity or gas between suppliers and consumers should be controlled by monopolies? Networks exist as natural monopolies because the following characteristics:

 

§ High sunk costs

§ Low marginal costs

§ Declining average costs

 

Huge fixed costs are involved in laying pipelines or transmission lines and once they are paid for the cost of supplying one additional unit of electricity or gas (marginal cost) is almost zero. The huge sunk costs act as an entry barrier for new players.  Having two suppliers of gas/power each with their own source would also double the cost. Since most of the transport/transmission assets are specific (to a particular use) they cannot be transferred to alternative uses.  

 

Economies of scale associated with transmission and pipeline networks are often so substantial that a single firm can offer the service at lower unit cost, and thus more efficiently than two or more firms.  The long run average cost fall over a wide range of production rates that only one firm can survive in the industry. Natural monopolies are a case of market failure resulting in conflict between cost efficiency and competition.  Monopolies are generally associated with the following problems:    

 

§ Deadweight welfare loss due to allocative inefficiency

§ Productive inefficiency (lack of competition)

§ Collusion among firms

§ Predatory pricing

§ Pre-emptive investments

 

These inefficiencies warrant the role of a regulator.  The challenge for the regulator is to govern these industries so that both, the cost advantage of production from a single firm can be realised without the problems that are associated with natural monopolies.

 

Are monopolies ‘natural’?

 

Some industries which were traditionally considered to be natural monopolies are no longer so because of technological changes within the industry. For example in power generation the optimal size for efficiency has fallen from 1000 MW to 100 MW in the last 30 years.  With sunk cost lowered substantially the rationale for a monopolistic power generator no longer exists.  Likewise in telecommunications the network used to be owned and operated by a fully integrated monopolistic national provider until mobile technology was developed.

 

Unbundling of vertically integrated units in these industries has also contributed to reducing sunk costs thus lowering barriers to entry for more players in a market.  Thus new technologies and innovative methods of industrial structuring that have evolved in the recent past make industries or segments of an industry efficient at lower levels of output reducing the degree of monopolisation in an industry if not completely eliminating it.

 

Now at least some degree of competition possible in industries such as gas transportation and power transmission traditionally considered to be natural monopolies. 

Are monopolies necessary?

 

There is a view that monopolies lead to monopoly rents which provide the necessary incentive for innovation and more importantly the financial resources needed for innovation. Microsoft has used this argument to defend its case on appropriating monopoly rents in the desk top operating systems segment. Pharmaceutical companies and high technology companies use patents to protect monopoly rents at least over a fixed period of time to support their large R & D budgets. 

 

This may be true, at least to a certain extent, for products with short lifecycles that depend heavily on frequent innovation. Innovations in these product markets consume substantial amount of financial and human resources of the innovating firm but at the same time be replicated at a fraction of the cost by competitors.  These issues however do not fully apply to transmission and pipeline networks.  As today’s technology stands transmission networks and pipelines have long lifecycles, carry intermediate goods that are not dependant on frequent innovation. 

 

Role of the Regulator: Static Vs Dynamic Efficiency

 

While the boundaries of monopolies are being redrawn by technology and structural changes within the industry it is essential to define the larger objective of the regulator. 

 

The role of the regulator is in reality not limited to ensuring cost efficiencies while minimising problems associated with monopolies; these are just static efficiency goals.  There are on the other hand larger goals for the regulator for guaranteeing dynamic efficiency considerations such as equitable development, faster growth rates and distributional efficiency for the nation as a whole.

 

The crucial question for the regulator is whether a private monopoly will make adequate investment that will serve all future developmental needs. It has been found that higher static efficiency does not actually lead to higher dynamic efficiency which is more important in the long term. In a monopolistic industry regulation is often driven not by the purpose of restricting and controlling the decisions of economic agents and restraining their rent seeking behaviour but as a response to political or interest group demands.  Regulation can also become a victim of ‘regulatory capture’ where the regulator tends to adopt the point of view of the regulated industry.  Very often regulators are former government employees who may not be truly independent. 

 

Alternatives to Regulation

 

Competition for markets (right to be the natural monopolist), contestability of markets and intermodal competition (competition between piped gas and LNG for example) are suggested as alternatives to regulation. 

 

The right to be the natural monopolist:  Gas pipelines and Transmission lines in circumstances where the supply and demand centres are far apart still involve high sunk costs resulting in high entry barriers which make them insufficiently contestable. In that case the owner of the network that will carry either gas or power, essentially the State, franchises the service provisioning operation to the player who offers the most attractive terms to the consumer. This solution is possible only if none of the players competing to be the ‘monopolistic’ provider are also owners of the network. 

 

Contestability of markets: If the barriers of entry into the market can be lowered, some degree of competition can be introduced in the market. Decentralising generation with units of lower output capacity geographically spread out lowers the barrier for entry for players in the transmission segment. 

 

Inter-modal competition: Monopolistic competition among various modes of transporting gas could be a way to introduce inter-modal competition. This is already happening in the case of transportation of gas across continents.  Though pipelines have an economic advantage, political costs and risks involved in pipelines crossing national borders make the LNG option more attractive.  In the case of power, competition between grid based and decentralised power can introduce a degree of inter-modal competition. 

 

Concluding remarks

 

Transport of gas and power are both undergoing substantial changes. The effectiveness of regulatory policies set today - on the structure of the industry, on entry conditions, on price and non-price barriers, on access to third parties will determine the development of these sectors tomorrow.  In this ever changing scenario where technology constantly re-writes the structure of an industry, the role of the regulator is constantly find ways to introduce competition in an industry where intimately the role of the regulator is made redundant.  In other words the mandate for the regulator is to to write the script for his own extinction!

 

Team Energy ORF

Senior Research Fellow, Observer Research Foundation

[email protected]

 

NEWS BRIEF

 

 

OIL & GAS

 

 

Reliance, Niko to invest $2 bn in gas field

 

October 6, 2004. Reliance Industries and Canada’s Niko Resources plan to invest more than $2 billion in their gas field off Andhra Pradesh and pump out 1 billion cubic feet a day by 2007.  The development plan, however, needs the government’s approval before Reliance, which owns 90 per cent of the D-6 deep-sea block, and partner Niko can pump out the gas. Pipelines to transport gas to customers would either be built by Reliance, which is also the operator of the block, or state-run GAIL India, which operated the country’s largest network of gas pipelines.  13 wells had been drilled in the D-6 block and 11 trillion cubic feet of proven and probable reserves had been established in 10 wells appraised so far. Only a small portion of the gas-rich exploration block in the Bay of Bengal had been drilled so far. Wells had been drilled in an area of 1,800 sq km (700 sq miles) and another 2,500 sq km of the block was being assessed, Sampson said.  Reliance and Niko had also announced a new gas discovery in the NEC-25 block off the eastern coast of India in August. The new discovery was in shallow water and could hold more than 1 trillion cubic feet of gas.  Encouraged by its discoveries in the country, Niko is keen to bid for more exploration opportunities in the fifth round of India’s New Exploration Licensing Policy (NELP-5), which is expected to be announced in the next few months. 

 

21 gas, oil blocks in NELP V

 

October 7, 2004. The government would put up 21 oil and gas exploration blocks for bidding in January next year, Petroleum Minister Mani Shankar Aiyar said. It is also setting up two committees, one at the ministerial level and another at the secretarial level, to expedite the process of obtaining clearances.  This time, the government could concentrate on promoting NELP-5 among representatives of foreign companies that had a presence in India.

 

Oil price: consumers to be protected

 

October 7, 2004. The petroleum minister Mani Shankar Aiyar indicated that petrol and diesel prices would not be allowed to rise despite international crude prices touching an all time high of $51 a barrel. “We will continue to protect domestic consumers from the worst surge in crude prices,” Aiyar said. “Consumers need not worry. They have elected a government which has consumers' interest in mind and has ensured that petrol and diesel prices were not increased in the last two months,” he said.  Aiyar said the country had enough foreign exchange reserves to meet increased oil import bill.

 

GAIL to lose monopoly status

 

October 7, 2004. The petroleum minister Mani Shankar Aiyar said that GAIL India Ltd would lose its monopoly over gas transportation with private players being allowed to lay pipelines. “We have a situation where private companies are allowed to produce gas and also to market it. Not to allow them to transport gas to consumers will be unjust. I see GAIL as a dominant player in natural gas transportation, but also competing with private gas producers,” he said.  GAIL has hitherto been the only company with the authority to lay pipelines for transporting natural gas. But with companies like Reliance Industries making big gas finds, there have been demands to open up the sector. While ruling out formation of regional gas grids, Aiyar said a national grid was the ultimate objective. 

 

DGH to be revamped

 

October 7, 2004. The petroleum minister Mani Shankar Aiyar Aiyar said the Directorate General of Hydrocarbons would be revamped and upgraded very soon. Vacant posts are to be filled up and officials from Oil and Natural Gas Corporation (ONGC), who are on deputation there are to be returned as soon as possible. “ONGC is an interested party and should not be represented in the regulatory regime,” he said.  The Petroleum and Natural Gas Regulatory Bill was in the final stages of being cleared and should be placed in Parliament during the Winter Session, Aiyar said, adding that a regulator could be in place by next year.

 

‘Rising oil prices need a permanent solution’

 

October 8, 2004. Measures like cutting back on excise and customs duties can only be a temporary solution. When global oil prices rise, there is no way a country like India, that imports 70% of its total oil requirements, can escape the consequences. If domestic prices are not allowed to rise in tandem, the impact will be felt somewhere else in the economy, usually in the form of higher oil subsidies and hence lower profits and dividends of public sector oil majors. And contrary to what politicians might like to believe, this is far worse than the alternative of allowing prices to rise. The reason is that higher oil prices hit mostly those who are better off, while a worsening fisc hits everyone, the poor most of all. And if as now, it seems as though high and rising prices are here to stay, then the government will have no option but to take a hard look at its present policies. Most subsidies do not really go to the poor. Subsidised kerosene is used to adulterate diesel while subsidised LPG is mostly consumed by the middle and upper middle classes. It is imperative, therefore, that the government looks for a more permanent solution. The ideal solution, of course, would be to dismantle the administered price mechanism (APM) altogether and allow prices to reflect higher global prices. This would automatically result in a cutback in demand and ease the pressure. Of course, prices would rise across the board as the impact of more costly oil is felt on things like transportation. But that is something that cannot be helped. As the latest issue of the London Economist points out, the biggest beneficiaries of oil subsidies are politicians who use them to buy votes. It is time the public saw through that.

 

Reliance exploration plan approved 

 

October 8, 2004. The government has accorded environmental clearance to Reliance India Ltd’s (RILs) Rs 4,000 crore (Rs 40 billion) oil and gas exploration project off the coast of Saurashtra.  The project is envisaged to carry out exploratory and appraisal drilling of 20 wells in four blocks spread in more than 26,000 sq km area. The cost of each project in the region of Rs 1,000 crore (Rs 10 billion). The clearance from the ministry of environment & forests comes with a number of conditions. The drilling operation should be intimated at least one month in advance to the wildlife warden who has jurisdiction over the nearest coastal area, so that he could monitor its impact on wildlife. The approval of the director general of shipping, Mumbai, is also mandatory, again one month in advance. The clearance prohibits the use of diesel-base mud, allowing only water-base mud drilling fluid. Further, the chemical additives used in the water-base drilling fluid should be biodegradable.

 

 

Bihar gives Cairn Energy prospecting licence 

 

October 11, 2004. The Bihar state cabinet has cleared the Scottish firm Cairn Energy Search Ltd’s (CESL) proposal for exploring crude and natural gas in 13 districts of the state, covering 15,550 sq km in the Ganga valley basin. The prospecting licence granted by the state government will be valid for seven years. The state cabinet cleared the proposal at its meeting last week. An order to this effect is expected to be issued by the government after the state law department clears the draft agreement between the government and Cairn Energy in this regard. State government officials said the company was expected to begin work on exploration immediately there after. The 13 districts where the company has been granted prospecting licence for exploring oil and natural gas are: Madhubani, Saharsa, Madhepura, Samastipur, Seohar, Supaul, Begusarai, Khagharia, parts of Bhagalpur, Patna, Sitamarhi, Purnea and Darbhanga.

 

 

ONGC-Coal India team up for coal gasification 

 

October 11, 2004. ONGC is expecting to double natural gas production in the country with underground coal gassification (UCG) project. Subir Raha, chairman and managing director of ONGC, said 200 million cubic meter per day could be produced by this process.  The project is at the pilot stage now and the commercial production will start by 2007-08. At present, natural gas production is pegged at 100 million cubic meter per day with ONGC having a share of 85 per cent. The pilot project will start this fiscal in eastern India. CIL is believed to have asked for 40 per cent stake in the project. Raha said holding pattern was under negotiation. ONGC has already tied up with a Russian outfit, Stochinsky Institute, for UCG.  The institute is one of the oldest in the world working on this process. A Russian team has already visited India in June. The company also has set up a special team for this project.  The gas extracted from UCG would be low pressure, ideal for generation of power. In case rich gas is found, methanol, DME could be extracted from them. 

 

Oil pricing scheme review necessary

 

October 11, 2004. The Finance and Petroleum Ministries made an effort to restructure the oil pricing and duty structure in July when a price band formula was evolved to take care of minor fluctuations in the world markets. The scheme, however, did not find favour with the oil companies. The net result is that prices of petrol and diesel not being raised, as it would increase the inflationary pressures. This is possible by a review of the import duty structure on crude oil and petroleum products such as petrol and diesel as well a study of the actual realisations from these levies in the current fiscal. The Ministries normally make an assessment of the revenue from the oil sector, based on world prices, which were estimated to range around $29 a barrel for this financial year.  Since prices have shot up to around $40 a barrel for the Indian basket of crudes, the actual revenue receipts from crude oil and products would be substantially higher than the original projections.  It should thus be possible to reduce the duties for the rest of the year without making a significant dent in the resource mobilisation efforts. One round of such cuts was effected in August but it should be possible to reduce duties even further, given the huge rise in world prices.

 

 

 

BPCL, HPCL to sign contract with SCI

 

October 7, 2004. BPCL and HPCL are set to finalise contract of affreightment (CoA) with Shipping Corporation of India (SCI) to import higher volumes of crude oil. The import by each oil company, according to informed sources at BPCL, might be in the region of about 8-million tonnes (mt) under new contracts, as compared to 6.5-mt under the earlier contracts.

 

IOC to buy 11,500 tn of fuel

 

October 12, 2004. Indian Oil Corporation has issued a tender to buy 11,500 tonnes of high-sulphur fuel oil for delivery to three ports in late October and early November. The volume, comprising three 180-centistoke (cst) fuel oil parcels, is for delivery from Oct. 28-Nov. 3 into New Mangalore, Tuticorin and Goa. The tender closes on Oct. 13 and will remain valid until Oct. 14. IOC last bought a similar cargo, for a three-port discharge, from the United Arab Emirates' FAL Oil but the price was not disclosed. The cargo was for delivery between October 2^nd - 12^th. 

 

HPCL bets on non-fuel products

 

October 12, 2004. Hindustan Petroleum is betting big on business from retailing non-fuel products. While the segment is very nascent netting Rs 10 crore (Rs 100 million), HPCL is hoping that it will grow to contribute a sizable chunk of the turnover. In developed countries, allied retail business forms up to 60% of the total revenue earned by fuel stations.  Apart from retailing fuel, HPCL has signed up with banks and fast food companies in urban circles and is looking at stocking fertilisers, seeds and LPG cylinders in its rural fuel stations. HPCL plans to set up 500 of these Hamara Pumps for the rural markets in the near future. At present, there are 50 such rural pumps. HPCL has also embarked on a beautification drive of all its petrol stations to bring it under the Club HP brand umbrella. HPCL has already given a facelift to 150 such outlets at Rs 10 lakh (Rs 1 million) per station. It is expected to cover 500 stations by 2005.  Hindustan Petroleum Corporation Ltd will establish 500 new retail outlets, 70 per cent of them in the rural areas by March 2005. The company is also set to call for global tenders for 500 fully automated or e-fuel stations.  The company currently has about 5,800 retail outlets of which about 485 have been added this financial year. HPCL plans to roll out a sales promotion campaign in Andhra Pradesh targeting the high speed diesel customers. When these customers purchase fuel from HPCL bunks, they notch up loyalty bonus points which in turn entitle them to host of attractive prizes.

 

SC cancels 297 petrol, kerosene outlets

 

October 11, 2004. The Supreme Court gave approval to the cancellation of 297 allotments of petrol stations and kerosene outlets, made by the previous NDA government, found "tainted" by a two-member judicial committee recommending the setting aside of all of them. A Bench of Mr Justice Y. K. Sabharwal and Mr Justice D. M. Dharmadhikari said none of these cases would be reopened. "There is no question of reopening them, the matter stands cleared," the court said. The committee, comprising former Supreme Court Judge S. C. Agrawal and former Delhi High Court Judge P. K. Bahri, had examined all 409 allotments and recommended the cancellation of 297 as they had been found to be made to ineligible candidates, the Bench said. The panel, which was set up by the apex court in 2000, had submitted its report on September 29 last. "The committee in all had considered 409 cases of allotment and recommended that 297 are 'tainted' as the selection of candidates could not be said to be made on merit, or that allottees did not fulfil the selection criteria of eligibility," the court said after perusing the report. The committee was appointed by the Supreme Court to scrutinise the allotments after the Vajpayee government had cancelled over 3,000 allotments in 2000 in the wake of a national daily publishing a series of articles alleging that the then Petroleum Minister, Mr Ram Naik, had made allotments.

 

Panipat may become petrochemical hub

 

October 11, 2004. Panipat, where IOC is setting up a naphtha cracker unit adjacent to its refinery, may be converted into a "petrochemical hub". The Haryana government and IOC are jointly conducting a study to convert the proposed petrochemical complex into a petrochemical hub. IOC is planning to manufacture paraxylene (PX) with a capacity of 350,000 tonnes and purified terephthalic acid (PTA) with a capacity of 530,000 tonnes. The PX/PTA complex is being set up on 750 acres of land adjacent to Panipat Refinery at an estimated cost of Rs 4,228 crore (Rs 42.28 billion). In the meantime, IOC's refinery expansion project at Panipat is struggling to meet the revised deadline of October 2005. Sluggish progress in the project implementation is mainly due to the financial problems faced by the contractors like Bridge & Roof Company and RSB Industries which are engaged in fabrication and structural work.

 

Engineers India bags 2 pipeline projects 

 

October 6, 2004. Engineers India Ltd (EIL) has bagged two assignments for implementing Hindustan Petroleum Corporation Ltd’s pipeline projects. The first assignment is for providing consultancy services for the Mundra-Delhi multiproduct pipeline. This project consists of cross country pipeline of 1,050 km from Mundra to Delhi with tap-off locations at Palanpur, Ajmer, Rewari and Bahadurgarh along with all the associated station facilities including intermediate pumping stations. The project has to be executed in 30 months, said a company release. Scope of EIL services includes basic design and detailed engineering, procurement services, inspection and expediting, construction supervision, project management and commissioning assistance. The project will cater to the market of northern India. Another assignment includes provision of engineering and project management consultancy services for the Loni (Pune)-Sholapur multiproduct pipeline of HPCL. This project involves derating of Trombay-Vashi sections of existing Mumbai-Pune multiproducts pipeline and its extension to Sholapur via Miraj.

 

Gail against opening gas pipelines to private sector

 

October 8, 2004. State-run gas firm Gail has protested Petroleum Minister Mani Shankar Aiyar's plans to open up laying of natural gas pipelines to the private sector saying competition cannot protect consumer interest. Aiyar had said he was against Gail monopoly over the proposed 8000-km National Gas Grid that would connect gas sources to consumption points. Gail chief Proshanto Banerjee has written a letter to Petroleum Secretary S C Tripathi saying the revised draft on the National Gas Pipeline Policy that allows producers and importers of natural gas to lay pipelines to consumers, "might lead to skewed development of gas market in the country."

 

 

BP walks out of IOC's LNG project

 

October 11, 2004. British firm BP Amoco has pulled out of Indian Oil Corporation's proposed Rs 6,100 crore (Rs 61 billion) LNG import project at Krishnapatnam in Andhra Pradesh, prompting the state-run firm to think of setting up the project on its own. Power and fertiliser industries, the largest consumers of natural gas in India, are willing to pay no more than $3.5 per million British thermal unit (MBTU) for the fuel while the landed price of LNG on Indian coast itself worked out to about $5 per MBTU. Regasification cost, taxes and transportation rates add another dollar to the price. BP felt it cannot deliver LNG at that price. Malaysia's Petronas, the other foreign LNG supplier in the IOC-led consortium for Krishnapatnam project, had quoted $3.63 per MBTU (without regasification and transportation charges) in National Thermal Power Corporation's tender for 3 million tonnes of LNG for its Kawas and Gandhar project in Gujarat.

 

 

Pricing of gas key issue for Kochi LNG terminal

 

October 8, 2004. Even as the promoters of Petronet LNG Ltd (PLL) are preparing to meet later this month to discuss the Kochi LNG terminal and take a final decision on it, one of the major hurdles that has been holding up the project for so long is understood to be the pricing of the gas to the consumers. Though the Gas Authority of India Ltd (GAIL), the distributors of the gas, had entered into marketing agreements with a slew of prospective consumers a couple of months ago, there has been no final word as yet on the pricing of the gas. At a time when the oil and gas prices are high, it is felt that prospective consumers should be given an idea about the likely price of the gas if the agreements are to be converted into firm commitments. For this, GAIL has to undertake a price sensitivity study and arrive at a price band. The pricing of the gas will also depend on the Petronet's demand for a reduction in the sales tax on LNG. The State Government has slapped a 28 per cent tax on LNG in the Budget for the current year and the demand is to bring it down to 15 per cent or even below. Though there will be a revenue loss for the Government in the initial years, it will pay rich dividends in the long run.

 

 

Gas starved steel firms

 

October 12, 2004. The gas-based steel manufacturing companies are perplexed over the government's policy of supplying natural gas to the fertiliser and power companies on a priority basis. Barely coming out from recession caused by anti-dumping initiatives by the developed countries, the industry is facing acute problem owing to fuel supply restrictions.  Of the total natural gas produced in the country 80 per cent is being supplied to the fertiliser and power sector, the remaining 20 per cent is distributed between steel, transport and other sectors. However, with increased demand for natural gas as fuel by the transportation sector, the steel industry whose requirement is roughly 6 per cent of the total production gets only 3 per cent of its share. The country produces roughly 65 million metric standard cubic meters (MMSCM) per day of natural gas, while the demand from the steel producers is roughly 4 MMSCM. Further added to their woes have been a proposal to increase gas price by Rs 960 per 1000 cubic metres applicable for the steel sector.

 

This shortage of natural gas supply is also forcing the companies to restrict their production capacity. In total, the companies primarily Ispat Industries, Essar Steel and Vikram Steel, produces and exports around 6 million tonnes quality flat product, but even as international demand for the product has risen, the companies are unable to fulfil their commitment. Industry sources said the companies are in a position to jack up production by at least 10 per cent but are unable to do so because of lack of adequate fuel supply. The cost of production too has increased because in order to meet the current production, these companies are forced to purchase liquified natural gas (LNG) which costs Rs 7 per SCM as compared to the compressed natural gas (CNG) that costs around Rs 4 per SCM.

 

‘Cut sales tax on petroleum products’ 

 

October 7, 2004. Petroleum minister Mani Shankar Aiyar is seeking Prime Minister Manmohan Singh’s intervention to impress upon states the need to reduce sales tax on petroleum products. In states like Maharashtra this is as high as 65%. Mr Aiyar is expected to meet Dr Singh on October 15, the next scheduled date for revision of prices of petroleum products.  Oil marketing companies (OMCs) have not revised the prices of petroleum products since July although the price of crude oil in the international market has pierced the psychological mark of $50 per barrel. However, they have been mounting pressure on the government for an upward revision in prices. Mr Aiyar, who has been resisting any increase in prices, wants states to share the burden of spiralling crude prices in the international market by reducing sales tax on petroleum products. The petroleum ministry has already prepared a note requesting the PM to ask the state governments to slash sales tax and other local taxes levied on petroleum products to give relief to consumers.

 

 

Regulator for oil & gas sector by early 2005 

 

October 7, 2004. A regulator for the petroleum and gas sector would be in place by early next year. The government would also be putting 21 new oil and gas exploration blocks for bidding in January. Petroleum minister Mani Shankar Aiyar said the Cabinet would be clearing a Bill for the regulator soon which would be placed in Parliament during the winter session. The Petroleum and Natural Gas Regulatory Bill provides for setting up of a regulator. On the proposed merger of public sector oil companies, the minister said he was considering six options. The government would also be constituting an advisory committee on synergy in the energy sector, he said adding that its role would be only consultative and would be asked to come out with a report in two months.

 

Making money in the oil value chain: ICRA

 

October 8, 2004. The entry on new players in petroleum marketing has raised a lot of excitement, but it is the refining segment of the oil business that is currently making money. Marketing operations have been incurring losses under the existing duty and pricing structure, with companies being denied permission to raise prices. Reduction in subsidy on LPG and SKO under the Union budget had negative implications for marketing operations of oil companies, the ICRA information, grading and research service (Ingres) said in a report released recently. The first quarter of 2004-05 witnessed strong growth in refining margins coupled with provisioning for discount receivable from ONGC,Gail and OIL on account of their sharing of subsidy under-recovery on LPG for domestic users and SKO distributed through the PDS. Thanks to government policy, some of the under-recovery burden was passed on to ONGC, Gail and OIL to reduce losses suffered by refining and marketing PSU companies.  Government refusal to allow increase in retail prices of auto fuel hit oil marketing companies, said the report.  At the same time, recent changes in the duty structure had lowered the duty protection enjoyed by refineries and could erode refining margins but still ensured adequate profits, ICRA said.

 

Oil Ministry tells agencies to curb LPG release

 

October 11, 2004. In a bid to put a tab on the alleged misuse of subsidised domestic LPG for commercial purposes, the Petroleum Ministry has directed all its agencies to restrict the release of cylinders to one in 21 days to the domestic consumers. Earlier, there was no ceiling on the issuance of cylinder to the consumers and cylinders were available in plenty. The LPG agents feel that the decision would come heavily on the consumers in the winter, when the demand for LPG goes up. Various petroleum companies have already reduced supply of LPG cylinders to the gas agencies to ensure brake on the misuse of the subsidised LPG.

 

 

Surging oil imports fail to fuel customs mopup

 

October 9, 2004. Global crude prices have risen steadily and the country's oil imports have also surged by 55% during the first five months of the current fiscal. However, what is puzzling is that the customs revenue from crude and other petro-products mainly LPG which is imported has grown by just around 10%. Collections from crude and other petro-products stood at around Rs 4,560 crore (Rs 45.6 billion) up to the end of August this year compared to Rs 4,141 crore (Rs 41.41 billion)  in the same period last year, according to the latest commodity-wise break up on customs revenues collated by the finance ministry. Crude imports touched the 50 million tonne mark in the first half and is estimated to reach around 100 million tonnes at the end of the current fiscal. The total crude import in fiscal 2003-04 was 90.5 million tonnes.  Last fiscal, the government mopped up Rs 10,669 crore (Rs 106/69 billion) as customs revenue from crude and petro products which was roughly 21% of the net customs revenue.

 

 

Petroleum regulator to impose hefty penalties 

 

October 8, 2004. The proposed Petroleum and Natural Gas Regulatory Board will be vested with powers to impose strict penalties on violators. The Board, which will have one chairperson and a maximum of four members, can also involve central investigating agencies, like CBI, to assist it.  According to the Petroleum and Natural Gas Regulatory Board Bill, 2004, “If a person contravenes the directions of the Board, such person shall be punishable with a fine which may extend to Rs 25 crore (Rs 250 million) and in case of continuing contravention with additional fine which may extend to Rs 10 lakh (Rs 1 million) per day for every day during which contravention continues.”  The Bill has also proposed similar punishment for entities who market petroleum, petroleum products or natural gas or operate an LNG terminal without valid authorisation. If there are violations on directions issued by the Board on transportation rate in respect of a common carrier, or display of maximum retail prices at outlets, the penalty shall not exceed Rs 1 crore (Rs 100 million) for each contravention. Any continuation of the violation will attract a penalty of Rs 10 lakh (Rs 1 million) per day for every day of the violation.

 

 

PM to review petrol, diesel prices

 

October 12, 2004. Prime Minister Manmohan Singh will this week review petrol and diesel prices, which have remained unchanged since August despite crude oil surging to an all-time high of over $53/barrel. Aiyar will meet Singh to brief him on the impact of rising crude prices on the Indian economy and the burden on state-run oil firms due to unchanged prices. "Interests of consumers will be the foremost consideration. We want indian oil companies to make their contribution for protection of the economy and share the burden on consumers," he said indicating that a close to Rs 3 per litre hike in diesel prices and Rs 0.50 per litre in petrol prices, needed to put domestic prices in step with international trend, may not be carried through.  Any hike in petrol and diesel prices at this juncture will fuel inflation, hovering at more than 7%.

 

POWER

 

 

Captive power plants in Maharashtra 

 

October 11, 2004. The Maharashtra Government has called for final bids from Tata Power, Reliance Energy, Wartsila, L&T and BHEL to set up captive power plants at state-owned industrial parks by October 15. This move is expected to prove a definite setback to the Maharashtra State Electricity Board, which was hitherto the sole energy supplier to the industrial estates run by the Maharashtra Industrial Development Corporation. As per the new plan, the private power companies will set up captive generation units at various MIDCs, beginning with Thane-Belapur and Nagpur. Companies located in the industrial parks would then have the option to buy power from the captive plant, thus cutting MSEB out of the scheme of things.

 

 

ONGC to offer gas-based power to villages

 

October 12, 2004. ONGC will offer free commercially non-viable oil and gas wells to village bodies for rural electrification, Petroleum and Panchayati Raj minister Mani Shankar Aiyar said. The move came after Aiyar called for help from the corporate sector to contribute to developing rural business hubs with the help of panchayats across the country. "ONGC will set up from its funds small power plants using hydrocarbon available in isolated wells for village panchayats," Aiyar said. The surplus electricity after meeting local needs could be sold to the state electricity board, thereby giving additional source of revenue for panchayat bodies. State governments should give village and district panchayats license to generate electricity from bio-mass and other locally available waste material, Aiyar said. It plans to set up small gas-fired power plants of 1 mw to 5 mw capacity, in collaboration with the panchayats. The power from these plants will cost around Rs 2.50 per unit.

 

 

Power utilities facing shortage of coal

 

October 11, 2004. The Haryana Power Utilities are facing shortage of coal at all its thermal power generation units. As against the norms for maintaining 21 days stock of coal for thermal power generation, the state has coal stocks left for just 10 days.  Senior officials in the Haryana Power Generation Corporation (HPGC) inform that they are left with a weeks’ stock of one lakh (100,000) metric tonnes of coal for the six units of Tau Devi Lal Thermal Power Plant at Panipat, and 30,000 metric tonnes of coal for the three units at the Faridabad Thermal Power Plant, which would suffice for just 10 days. It is learnt that the monthly requirement of coal at the six units (four units of 110 MW and two of 210 MW) at Panipat is 450,000 metric tonnes. The average monthly coal requirement at the three units (each of 55 MW) at Faridabad is 90,000 metric tonnes. With the seventh unit at Tau Devi Lal Thermal Power Plant ready for commissioning on October 16, the authorities here are in a fix because of the ongoing shortage of coal for operating the new unit.

 

The thermal power plants in the state have been facing this shortage in coal for the past two months, and have been unable to maintain the mandatory coal stocks as advised by the Central Electricity Authority. They say that last month a situation arose where they were left with stock for just four days. The Central Electricity Authority says that the thermal plants should maintain stocks for 21 days, which can vary to stocks for 15 days in exceptional circumstances. It is learnt that over the year’s coal production had decreased in the mines of Bihar and Jharkhand, from where the state Power Utilities gets its supply. As a result, the coal prices have shot up by 17 per cent since June 16 this year. They are also facing problem for ferrying coal from the mines to the thermal plants by rail. The HPGC authorities have also taken up the matter of regular supply of coal, and its pricing, and regular availability of trains for ferrying coal, with the Union Power Ministry. The state government had raised the demand for setting up a regulatory body for coal pricing, and rail freight charges, during a recent meeting of Council for Power Utilities, and in another meeting of Northern Regional Electricity Board.

 

NHPC’s contract to Austrian company 

 

October 06, 2004. National Hydro Electric Power Ltd (NHPC) has awarded the electro-mechanical work for its 132mw Teesta (low dam III) to an Austrian company VA-Tech Hydro Pvt Ltd. The contract is valued at Rs 222 crore (Rs 2.22 billion) and has to be executed in 39 months. The project will include the design, manufacture, supply installation and commissioning of the complete electro-mechanical equipment comprising 4 units of 33 MW Kaplan turbines, alternators, digital governors and excitation systems, state of the art control monitoring and protection equipment, step-up transformers, 220KV GIS and other auxiliaries.  The products and services of these companies are sourced from more than 160 years of experience of VA Tech Hydro GmbH. VA Tech Hydro GmbH, belonging to VA Tech AG, Austria’s largest engineering group is currently ranked number 2 globally in the hydro sector. And, on the other hand VA Tech Hydro India is an important source for generator supplies for other group companies. Apart from catering to domestic customers, Bhopal factory has executed export orders as well as in-house orders for VA Tech Hydro for third countries.

 

 

Eastern energy to set up plant in Jharkhand

 

October 07, 2004. The US power giant Eastern Energy Limited (EEL) will set up a 1000 MW power plant in Jharkhand at a cost of Rs 5,000 crore (Rs 50 billion). According to an agreement between EEL and the Jharkhand government, the company will not secure any loans from the state but would mobilise funds from the international markets. The tariff structure will be decided by the Jharkhand State Electricity Tariff Regulatory Authority. Since coal was available at a cheap rate in Jharkhand, consumers are expected to get electricity at a reasonable rate from EEL. The EEL project involves setting up of four coal-based power plants, each having a capacity of 250 MW. Work on the project is scheduled to begin soon after the power purchase agreement (PPA) is signed between the EEL and the Jharkhand government. Production would begin within three years of the PPA being signed. EEL was already producing power in Gujarat and Maharashtra. Though the state government is yet to allot land to the EEL for the project, work on the power plants would begin by the end of the current fiscal.

 

NFC bags Rs 1 billion worth orders

 

October 7, 2004. The Nuclear Fuel Complex (NFC) has secured orders worth over Rs 100 crore (Rs 1 billion) to supply critical components and systems within the next two years, to the newer generation reactors such as the Prototype Fast Breeder Reactor (PFBR) and the upscaled 540 MW Tarapur Atomic Power Station (3&4), being built by the Department of Atomic Energy (DAE). The NFC will fabricate and supply 5000 seamless steel tubes, each of 23-metre length to go into the steam generators for the 500-MW PFBR, being constructed in Kalpakkam in Tamil Nadu. Work on this nuclear power project began very recently and the reactor is expected to go critical in 2009. NFC, the Hyderabad-based key supplier of fuel and reactor components to the country's nuclear power programme, the prototypes of the 9 chrome-1 molybdinum tubes have been evaluated and found suitable for the nine steam generators to be constructed in the PFBR. It will supply stainless steel tubes of hexagonal shape and fuel and blanket assembly tubes for the PFBR. This would be a continuing order in the country's Fast Breeder Programme, which is expected to lead towards the use of thorium (widely found in India) as the fuel (current reactors use uranium) in future reactors.

 

Rannhill to weigh India power plant spend

 

October 11, 2004. Malaysian engineering and energy firm Ranhill Bhd will decide whether or not to invest in a $1-billion Indian power project after it finalises due diligence this month. If a deal is reached, Ranhill would invest $192 million as 30 per cent of the project would be funded by equity and 70 per cent by debts from Indian banks. Ranhill has been diversifying into overseas markets to offset a decreasing number of infrastructure projects in Malaysia, which aims to curb spending and balance the country's budget by 2006. In August, Ranhill signed a conditional agreement to acquire a 64 per cent stake in Nagarjuna Power Corp Ltd, which is building a 1,015-megawatt coal-fired power plant in Karnataka. Nagarjuna Fertilizer and Chemical would have the remaining 36 per cent interest in the project, which would make Nagarjuna Power the largest private-sector power producer in Karnataka. The country’s power demand is growing on the back of a robust economy. India needs $665 billion to double its generation capacity to 200,000 megawatts by 2012, the International Energy Agency says.

 

 

Coal India aims at 445 MT output by 2012

 

October 11, 2004. Projecting a production target of 445 million tonne by the end of 11th plan period, the public sector Coal India Ltd has identified 99 projects to be taken up during the tenth plan period. Expecting major contribution from the new mines, CIL targets 17.43 MT production from the existing mines and 135.87 MT from the completed projects during the terminal year of the 11th plan - 2011-2012. Of the 99 projects outlined, total investment envisaged for 27 projects of Rs 100 crore (Rs 1 billion) or more each is Rs 17,212 crore (Rs 172.12 billion).

 

Coal shortage hits power plants in Punjab

 

October 11, 2004. Coal shortage in India has hit the power situation in Punjab badly. It has affected two major thermal plants, Guru Nanak Dev Thermal Plant and Guru Hargobind Thermal Plant, at Lehra Mohabat. If the situation does not improve quickly then these plants face the grim prospects of facing closure as the existing resources deplete. Guru Nanak Dev Thermal Plant, which had four units of 110 mw each, had been getting 3,000 mt to 3,500 mt of coal daily against its daily consumption of 4,500 mt. Similarly, the Guru Hargobind Thermal Plant, which had two units of 210 mw each, had been getting 3,000 mt of coal against its daily consumption of 6,000 mt.

 

 

Bhel receives Rs. 6.25 billion contract

 

October 12, 2004. Bharat Heavy Electricals Ltd (Bhel) has bagged an order worth Rs 625 crore (Rs 6.25 billion) from Madhya Pradesh Electricity Board (MPSEB) for setting up a 210mw unit at Amarkantak thermal power station. The project relates to setting up of one unit of 210mw capacity thermal plant on a turnkey basis in 29 months, said a release. The present contract envisages complete design, engineering, manufacture, supply, erection, testing and commissioning of main plant. The commissioning of this project will help in improving the power situation in the power deficit state. The order follows an earlier turnkey contract, placed on Bhel by MPSEB, for setting up one unit of 500MW capacity at Birsinghpur thermal power station.

 

Karnataka Power may diversify

 

October 6, 2004. The State-owned power utility, Karnataka Power Corporation Ltd (KPCL), has proposed entering into natural gas trading in an attempt to become a diversified energy company. If allowed to become a gas trader, it would do so through its special purpose vehicle, KPC Bidadi Power Company Ltd. The proposal involved laying pipelines along some of the national highway corridors within the State initially and later, extend it to the neighbouring States as well. This pipeline would, in turn, have feeders in the smaller town and villages. The proposal would aim to restrict consumption of imported fuels. Demand from the Southern regions for gas is currently estimated at around 60 million metric standard cubic metres per day (mmscmd) and is expected to rise to about 90 million mmscmd. The State-owned transport utilities were targeted to consume at least 200 mega-watts (MW) equivalent per day. This would translate into approximately 166.22 mmscmd. KPC Bidadi is implementing the 1400-MW gas-based power station on the outskirts of Bangalore, the only State-owned utility to do so. The fuel supplier is expected to be selected shortly for the Rs 4,200-crore (Rs 42 billion) project, targeted to become operational by 2007-08.

 

 

Tata Power to sell Wadi units

 

October 08, 2004. Tata Power plans to sell two power generation units located at Wadi in Gulbarga district of Karnataka to Associated Cement Companies (ACC) for Rs 238 crore (Rs 2.38 billion). The company has informed the stock exchange that it proposes “to transfer power generation units number one and two comprising of turbines and steam generators as a “going concern” on a slump sale basis to ACC for Rs 238 crore (Rs 2.38 billion)”.   By virtue of ACC then being a Tata group company, the power plant at Wadi was transferred to Tata Power. Besides ACC, the captive power plant of Tata Steel, 307.5 MW Jojobera Thermal station was also transferred to Tata Power. With ACC out of its fold, Tata Power plans to sell the power unit to the cement major. The Wadi unit continues to meet the entire power requirements of ACC at Wadi. In 2002-03, the Wadi unit recorded the highest-ever generation of 478 MUs compared with 403 MUs in the previous year, an increase of 18.4 per cent. As a result, the plant load factor increased to 72.7 per cent from 61.4 per cent in the previous year.

 

BHEL bags Rs 5.5 billion order

 

October 6, 2004. The Bharat Heavy Electricals Ltd. (BHEL) has bagged a Rs. 550 crore (Rs 5.5 billion) order for setting up a 330 MW gas-based power plant in Rajasthan. Under the deal, BHEL would set up the combined cycle power plant for Rajasthan Vidyut Utpadan Nigam at Dholpur in 27 months. The State-run company would design, manufacture, supply and commission two 110 MW gas turbines with generators, matching heat recovery steam generators (HRSG) and one 110 MW steam turbine generator with associated auxiliaries.

 

 

Korean bank gives $354 million loan to NTPC

 

October 05, 2004. In its first loan to Indian power sector, Korea's Export-Import Bank will provide $354 million to state-run National Thermal Power Corporation for its 1980 MW super critical technology power plant at Sipat in Chhattisgarh. At an initial ceremony, Gyu Lee, Deputy President of Korean Export-Import Bank (KEXIM), held discussions with NTPC's top brass and the two sides decided on a loan amount of $354 million for Sipat's phase I power project. NTPC is developing the 1980 MW (3x660) plant in Sipat and the first unit is scheduled to be completed in April 2008, second in February 2009 and the last in December 2009. KEXIM will be financing the super critical steam generator project of the phase I. According to the statement, Doosan Heavy Industries and Construction Company, a power plant supplier from Korea, has executed a contract with NTPC for the supply of the steam generators. The company claimed to have successfully commissioned many super critical power plants in various countries. Sipat's phase II of 1000 MW (2x500) is scheduled to be completed by December 2007. 

 

Financial closure for 5000 MW IPPs

 

October 8, 2004. Financial closures have been achieved for nearly 5,000 MW of additional generating capacity in nine months. In the previous 10 years, the private sector had added only 7,000 MW.  The latest closure has been in respect of the Mangalore Power Company’s 1,000 MW project in Karnataka, the twelfth this calendar year. The target for private sector additions to capacity for the Tenth Plan is only 7,121 MW. By the end of the 10^th Plan, it should surprise no one if total private sector capacity is around 20,000 MW.

 

Cross-subsidies to continue

 

October 09, 2004. Cross subsidies in the electricity sector are here to stay, although in smaller doses. The new electricity policy, expected to be placed before the cabinet shortly, will allow generators to continue imposing higher power tariffs for industrial and commercial consumers even while it would move towards a more targeted subsidy regime. In a clear departure from the Electricity Act 2003, which talks about reduction and elimination of cross subsidies, the proposed electricity policy calls for reduction of subsidies, but does not talk of ending cross subsidies? Cross subsidies usually refers to the amount over and above the cost to serve, which includes generation, distribution costs inclusive of losses. Cross subsidies paid by a section of consumers, industry and commercial, usually amounts to about Rs 1.50 per unit on an average. The proposed electricity policy refers to a regime where subsidies would be targeted at a smaller section.

 

 

Karnataka panchayats take over local power distribution

 

October 10, 2004. Karnataka, which has taken the lead in power sector reforms, has successfully added a dimension to it by embarking on an empowerment programme of the gram panchayat to reform the rural electricity distribution system. Through a pilot project aimed at involving the gram panchayats in managing electricity distribution and bill collections, the Government has decided to replicate the United States Agency for International Development (USAID)-sponsored Participatory Rural Energy Services in Karnataka (PRESK) throughout the State.  As a first step, the Government has decided to transfer PRESK to a new cell to be created within the Mahatma Gandhi Institute of Rural Energy and Development. PRESK focused on inter-related problems of poor power quality and supply, rural sector subsidies, water resources, and farming practices. Four taluks comprising 112 gram panchayats were selected for the pilot project. The PRESK mission worked with the State Government and the Bangalore Electricity Supply Company (BESCOM) to enhance communications with the panchayats, train panchayat members in electricity supply support services, and transfer best practices for water, farming and electricity management to them

 

 

OIL & GAS

 

 

Gazprom in talks with Shell over Sakhalin 2

 

October 10, 2004. Russian gas giant Gazprom might take a significant equity stake in the Royal Dutch/Shell-led Sakhalin-2 oil and gas fields.  The chance of a deal by the end of the year was put at 50-50.  Shell controls 55 percent of Sakhalin 2, with the remainder split equally between Japanese companies Mitsui & Co. and Mitsubishi Corp.

 

No plan to raise output, says Opec chief

 

October 9, 2004. The Organisation of Petroleum Exporting Countries has no plan to raise output despite record oil prices, the group’s president said. “We have no plans to raise production further because the current rise in oil prices is due to non-fundamental factors”.  Mr Purnomo, who is also Indonesia’s energy minister, predicted oil prices would fall below $50 a barrel early next year, saying that elections in Iraq planned for January are expected to be smooth. Demand is also expected to ease in the western hemisphere during spring, he added. 

 

OVL's Sudan unit reaches record production

 

October 7, 2004. ONGC Videsh Ltd's first oil producing property abroad, the Greater Nile Petroleum Operating Co in Sudan, has reached a record production level of 327,000 b/d.  The record production was the highlight of the first ever meeting of the Board of Directors of GNPOC in India last week.  The average production was in the range of 260,000 b/d (13 million tonnes per annum) when OVL acquired 25 per cent stake in the project on March 12, 2003. The maximum production potential of the field has been enhanced to 333,000 b/d and with the existing facilities it is expected that OVL and its partners Petronas of Malaysia and CNCP of China would be able to maintain the production level in the range of 320,000 b/d during the remaining part of the year. The capacity of the pipeline that carries the crude produced at the field has also been augmented to 310,000 b/d.

 

BP’s Sakhalin-5 well strikes big oil

 

October 6, 2004. Oil major BP has discovered significant oil and gas reserves on the first exploration well of its Sakhalin-5 block, confirming the huge potential of waters near Russia's remote eastern island, BP said. BP and Rosneft signed an operational and shareholding deal in July for the Sakhalin-5 project, where total development costs are put at $2.5-$5 billion over the next decade. BP agreed to fund the exploration phase of the project. The project has forecast reserves of 4.4 billion barrels of oil and maximum expected oil and condensate output of 700,000 b/d similar to that of OPEC member Qatar.  Partners would meet in the next few months to discuss further exploration activities as they have to drill four more wells under the licence terms. BP said in a statement a number of high quality sandstone reservoirs had been discovered in the well on Sakhalin-5 block, also known as Kaigansky-Vasukansky.  BP, a pioneer of the 21st century boom in Russian oil investment, has kept its Sakhalin interests separate from its $7 billion plus Russian oil joint venture TNK-BP, into which it wrapped its other Russian interests last year.

 

UAE, Kuwait to hike oil production capacity

 

October 10, 2004. The UAE and Kuwait plan to increase oil production capacity by nearly 300,000 b/d and 200,000 b/d respectively in the short term in a bid to stabilise the market, which has been rocked by high oil prices touching $53 per barrel prior to the week end.  UAE also plans to increase overall capacity by 2006 from the present 2.5 million b/d to 3.5 million b/d. Kuwait's Energy Minister, Sheikh Ahmed Fahad Al Sabah, said that Kuwait would also increase capacity in the short term by 200,000 b/d. Kuwait currently produces 2.5 million b/d. The Kuwaiti Minister said that the high oil prices were acceptable given the political developments and tensions in some oil producing countries and elsewhere, but that OPEC would work towards bringing stability in the market. Saudi Arabia's Oil Minister, Mr Ali Al Naimi, said that as most of the global demand was for light or sweet crude, Saudi Arabia would focus on producing and exporting more light crude to the international oil market. He did not disclose any specific figures for increased production by the kingdom. OPEC has currently increased its production ceiling at its last meeting in Vienna to 1 million b/d, from November 1, to reach 27 mb/d (except Iraq). The UAE Minister, Mr Al Nassiri, said that OPEC producers are currently producing to their utmost capacity and any short-term crisis would lead to a sharp price hike. “The Gulf countries are investing in the oil sector to increase their output capacity in anticipation of any crisis or any world demand in the medium or long term," he said. He indicated that producers were not only challenged by maintaining stability in the oil market, but also face the problem of increasing production capacity to meet rising demand for oil, particularly from some developing countries like China and India.

 

Sasol discovers two new oil fields

 

October 6, 2004. South Africa Sasol announced increased gross oil production at the Etame oil field, offshore southern Gabon in West Africa, from 15,000 b/d to greater than 22,000 b/d through the successful completion of an additional production well, and also the discovery of two promising new oil fields nearby. The Etame oil field was discovered in 1998 and started producing oil in September 2002 at a steady rate of about 15000 b/d. Sasol has a 27.75% shareholding in this field. The additional production well, Etame 5-H, has a substantial horizontal section and a tested flow rate of about 9200 b/d, pushing overall production at Etame by nearly 50% to in excess of 22,000 b/d. The latest oil field was discovered at Avouma, about 20 km south-east of Etame and the discovery well flowed at about 6600 barrels of oil per day - the highest ever flow rate achieved to date in Gabon from a vertical exploration or appraisal well.

 

US releases more reserve oil

 

October 6, 2004. Astra Oil and Premcor Inc. will receive a combined 1.5 million barrels of sweet crude oil from the U.S. Strategic Petroleum Reserve in October to offset supply disruptions caused by Hurricane Ivan, the Department of Energy said.  This brings the total amount of oil taken from the reserve since mid-September to 4.7 million barrels, earmarked to help refineries in hurricane-hit areas. Premcor will receive 500,000 barrels of sweet crude for its refinery in Memphis, Tenn., the Energy Department said. The oil will be shipped during October from the U.S. reserve, a series of underground salt cavern located near the Gulf of Mexico.

 

 

Newfield signs exploration agreement with BP

 

October 7, 2004. Newfield Exploration Company and BP Exploration Operating Company Limited signed an agreement to explore and develop the remaining hydrocarbon potential surrounding BP's operated West Sole Field in the Southern Gas Basin of the North Sea. Newfield expects to spud the first exploratory well in early 2005 and has an option to drill two additional wells to retain interest in the acreage under this agreement.

 

 

Norway, UK clear path for 2 N. Sea energy projects

 

Oct 8, 2004. Norway and Britain have agreed to remove bureaucratic hurdles to two new North Sea oil developments spanning the sea boundary between the two countries, the Norwegian Oil and Energy Ministry said. The deal could become a model for regulating other cross-border energy projects, Oil and Energy Minister Thorhild Widvey said. The deal paves the way for the development of the cross-border Boa and Playfair fields, by assigning authority to regulate the developments in each case to the country that has the biggest interest in the resources, the ministry said. The Boa field is part of the Alvheim development operated by U.S. producer Marathon. The Norwegian oil ministry said earlier that it had approved Alvheim, which is expected to come on stream in the first quarter of 2007.  "Both governments recognised that these fields are relatively small and that under current plans the extensions onto the neighbouring continental shelf would be unlikely to have a significant impact on overall recovery," the ministry said. Norway is the world's third biggest oil exporter after Saudi Arabia and Russia, pumping about 3 million b/d.

 

Opec hikes supply to 25-year high

 

October 6, 2004. Opec oil producers pushed supply to fresh 25-year highs in September as Iraq increased exports to post-war highs and other members pumped at just about full blast, an agency survey released showed. Total September output from the Organisation of the Petroleum Exporting Countries rose 690,000 b/d to 30.2 m b/d, the highest since late ‘79, according to the survey of consultants, shippers, industry and Opec sources. 

 

Total gas find in Bolivia

 

October 11, 2004. Total confirmed that the French oil major had made a significant gas discovery in Bolivia's Ipati Block 300 km (190 miles) south of Santa Cruz. The Incahuasi X1 exploratory well, drilled to a depth of 5,150 metres, tested at more than 1 million cubic metres of gas per day through a 44/64-inch choke, Total said in a statement, adding its potential was currently being appraised. The Bolivian government said that Total has discovered a "mega" natural gas field of a possible 12 trillion cubic feet. Total said the first discovery in the Ipati permit, which it entered in March 2003, strengthens its position as a gas operator in the Andean nation, where it has been present since 1996. Total Exploration and Production Bolivia, a Total unit, operates the Ipati Block in which it has an 80 percent interest.

 

 

ChevronTexaco to reduce flaring in Angola

 

October 11, 2004. Houston-based Paragon Engineering Services Inc. announced it is supporting ChevronTexaco on a major Front End Engineering contract for five projects to support the reduction of routine natural gas flaring offshore and onshore Angola.  As part of its Area "A" Gas Management Program in Angola, ChevronTexaco's wholly owned subsidiary and Block 0 operator Cabinda Gulf Oil Company Ltd. (CABGOC), together with its Block 0 Partners, Sociedade Nacional de Combustiveis de Angola (Sonangol), Elf Petroleum Angola (Total) and Agip Angola Ltd. (Agip), awarded a contract to Paragon that includes an integrated effort in the offshore Takula, Wamba, Numbi and Malongo areas and the onshore Malongo Terminal as well as a separate project for Malongo West gas injection.

 

Gazprom signs LNG deal with Petro-Canada

 

October 11, 2004. Russian gas monopoly Gazprom has signed a memorandum with Petro-Canada on a liquefied natural gas deal to give Gazprom entry to North American markets, Russia's foreign ministry said. Under a deal announced last week by Gazprom Chief Executive Alexei Miller, the duo will consider a jointly built LNG terminal in the Baltic port of Ust Luga near St. Petersburg and a receiving terminal on the U.S. coast. A foreign ministry spokesman said they signed a memorandum of understanding, "under which the two companies will jointly study the possibility of delivering Russian LNG to Canada." Gazprom, the world's largest gas firm, is keen to supply hungry U.S. markets, but as yet has no LNG facility of its own to supercool gas for onward shipment.

 

ChevronTexaco finds gas in Venezuela

 

October 11, 2004. ChevronTexaco Corp. said an affiliate found a significant amount of natural gas in a Venezuelan field, a boost to the oil company's efforts to develop a commercial natural gas base in the Latin American country.  ChevronTexaco said its offshore Loran 2X well encountered five gas sand intervals for a total gross thickness of 494 feet (149 meters). The company has completed testing of two major reservoirs in Block 2, which it operates in partnership with U.S. oil company ConocoPhillips, and plans to drill two more wells by the end of the year.

 

New Australian gas project 

 

October 12, 2004.  Santos Ltd (Santos), Australia Worldwide Exploration Limited (AWE) and Mitsui & Co, Ltd (Mitsui) announced the formal go-ahead for the development of a new Australian gas field - the Casino project in the offshore Otway Basin, Victoria. The $200 million development approval follows the granting of the necessary Board approvals to commit to the project as well as the finalisation of a larger gas sales agreement with SPI Electricity Pty Ltd, trading as TXU. Gas production is expected to start in the first quarter of 2006, subject to normal regulatory approvals. Major gas sales agreement Under the new gas sales agreement, Santos, AWE and Mitsui have the option to supply TXU with up to 420 petajoules (PJ) of gas over 12 years for the Victorian or South Australian markets. This is an exploration-enabling contract in that it caters for the immediate commercialisation of future gas discoveries. The deal could be worth in excess of $1.7 billion to the joint venture producers for gas and associated condensate, subject to future exploration success.

 

 

Shell's Bonga on-stream mid-2005

 

October 6, 2004. Nigeria's Shell-operated Bonga major deep water oil project, plagued by delays, should be pumping by mid-2005, a senior Nigerian oil official said. The $2.7 billion, 250,000 b/d Royal Dutch/Shell project was originally scheduled to start this year.  Nigeria planned a new oil licensing round early next year in which 26 blocks including 10 deep water projects would be available. Oil majors were expected to scramble for the deep water projects but ther others were available for independent players like Irish firm Tullow Oil Plc, Ogunjana said.  Some oil majors were also abandoning smaller fields with reserves of 50 million to 60 million barrels of oil for deep water projects, leaving "stranded fields" that needed development and extraction of oil, Ogunjana said.

 

 

Tehran refinery to increase gasoline output

 

October 10, 2004. Tehran refinery is planning to increase quality of its kerosene and diesel, ramp up gasoline production and reduce mazut output. Managing director of the refinery noted that gasoline production rise by Tehran refinery will be a great help to preventing excessive gasoline imports. Abbas Kazemi stated that increasing quality of products and gasoline output as well as separating sulfur from kerosene and diesel is among major projects underway at Tehran refinery. Kazemi said another project to be carried out by the refinery includes converting heavy crude cuts to gasoline. Construction of Tehran refinery started in 1965 by two foreign companies and it was officially inaugurated in 1968. The initial production capacity of Tehran refinery was 85,000 b/d, which increased to 100,000 b/d after changes made in 1973. At present, the refinery is capable of daily production of 250,000 barrels various crude products.

 

FPCC to expand oil-refinery capacity

 

October 11, 2004. Formosa Petrochemical Corp. (FPCC), an oil subsidiary of the Formosa Plastics Group, has resolved to invest NT$10 billion to expand daily oil-refinery capacity to 600,000 barrels from present 450,000 barrels. FPCC estimated its earnings from oil sales to exceed those from petrochemical materials in the next two years. To meet the promising future of the domestic oil-product industry, the company has decided to increase investments to expand oil-refining capacity.

 

 

Pakistan’s gas import plans

 

October 10, 2004.  The government of Pakistan has made Sui Northern Gas Pipelines Limited (SNGPL) as leader of the Inter State Gas Pipeline (ISGP) project dealing with the import of gas from three proposed options of Turkmenistan, Iran and Qatar.  President Pervez Musharraf has directed the Petroleum Ministry to take a decision on selecting one proposed gas import project by December 2004, as the country would need sufficient gas for domestic use after 2010.  So far, the government is still undecided about selecting any one of the three gas import projects - Turkmenistan-Afghanistan-Pakistan (TAP) project, Iran-Pakistan project and Qatar gas project - and these projects are awaiting a go-ahead from the Government of Pakistan for sometime.  Petroleum sector experts believe that for Pakistan, Iran gas pipeline is more practical and viable but the only hitch that is hampering the kick-start of the project is the Indian response.  India’s willingness to join the project will make the project economically feasible. Experts feel that the recent meeting of President Musharraf with Indian Prime Minister Manmohan Singh in New York on September 24 has given a new ray of hope to the $4.15 billion Iran-Pakistan-India gas pipeline project where India showed keenness on the pipeline project.

 

 

Libya-Italy gas pipeline inaugurated

 

October 10, 2004. Italian Prime Minister Silvio Berlusconi and Libyan leader Moammer Gaddafi opened a gas pipeline between their countries, calling it a new era of “friendship and cooperation” across the Mediterranean. The two leaders inaugurated the 540km West Libyan Gas pipeline at Mellita. The project, started in 2003, has been built by Italian oil groups ENI and Agip in partnership with Libya’s state oil company NOC. It will carry some 10 billion cubic metres of gas a year from Mellitah on Libya’s west coast to Gela in Sicily and then on into southern Europe. Fuad Al Kreikshi, president of EN Libya, said the total investment on what he called the longest gas pipeline under the Mediterranean amounted to $6.6 billion.

 

BP signs LNG deal with U.S. Sempra

 

October 11, 2004. BP Plc. has signed an agreement to supply U.S. firm Sempra Energy with 3.7 million tonnes of liquefied natural gas (LNG) a year for 20 years, Indonesia's oil and gas. BP Migas said in a statement the LNG will come from BP's Tangguh gas field in Papua province, 3,000 km (1,880 miles) east of Jakarta, which holds 14.4 trillion cubic feet of certified natural gas reserves.  Tangguh will begin to deliver gas in 2008 to Sempra's planned LNG terminal near Ensenada in Baja California, Mexico, said BP Migas, the government agency that monitors and regulates foreign oil and gas activities in Indonesia. 

 

 

Marginal wells become profitable

 

October 6, 2004. The world oil market continues to make new highs over $50.00/barrel and the natural gas market for November and December looks to yield prices between $7.00 to $10.00 per 1,000 cubic feet, making the economics of producing even marginal wells very promising. American Energy Production Inc. announced its wholly owned subsidiary Bend Arch Petroleum Inc. purchased a Crane Carrier Well Servicing Unit. With the purchase of a portable well servicing rig, Bend Arch Petroleum Inc. can immediately work on oil and natural gas wells and not have to depend on well servicing contractors. This well servicing unit has a hydraulically raised derrick and can be on location and ready to work in a matter of minutes. The first application of this well servicing unit is on the recently purchased 10 natural gas wells in Western Palo Pinto County.

 

Kinder Morgan to expand Colorado pipeline

 

October 6, 2004. Kinder Morgan Inc. said it plans to raise capacity on its 300-mile TransColorado natural gas pipeline at a cost of less than $20 million. The Houston-based energy company said the project will add 300,000 dekatherms of capacity per day on the line running from western Colorado to northwest New Mexico.

 

 

Australian gas industry needs regulatory reform 

 

October 12, 2004.  As global demand for gas rises the time is ripe for regulatory reform to give the Australian gas energy industry renewed momentum, ExxonMobil said. ExxonMobil's director of gas and power, Australia, Nick Heath said gas demand is expected to increase over the next two decades with natural gas capturing one-third of all incremental global energy growth, driven by increasing demand for power generation.  Mr Heath said that until 2020, worldwide gas demand is forecast to grow at about 2.4 per cent per year, nearly the same pace as anticipated worldwide economic growth. This compares with 1.75 per cent per year for oil and 1.5 per cent with coal. But there were a number of hurdles to overcome if it is to deliver on its potential in the power industry. These include allowing the gas market to operate freely, providing economic incentives for exploration and development of new gas supplies and addressing differentials in the cost of resource taxation between coal and gas.

 

 

Kuwait to spend $40 bln on energy projects

 

October 10, 2004. Kuwait plans to spend $40 billion on mega projects in the next two decades to upgrade the key oil sector of the Gulf Arab state, Energy Minister Sheikh Ahmad al-Fahd al-Sabah said. It is expected that $40 billion will be spent during the coming 20 years on giant projects. One plan is the controversial $7 billion Project Kuwait to invite international oil companies to upgrade northern oil fields. The plan to raise production to 900,000 b/d from the current 450,000 b/d is opposed by some members of parliament, but Sheikh Ahmad said there was nothing unconstitutional about it and it may be presented soon to the house for discussion. OPEC nation Kuwait, which controls 10 percent of global oil reserves, pumps oil full speed at 2.5 million b/d. But it has a long-term plan to increase total upstream capacity to 3.5 million b/d by 2010 and 4 million b/d or more by 2020. Sheikh Ahmad said Kuwait is not able to boost its production much without the know-how and advanced technology of the international firms interested in Project Kuwait. They are ChevronTexaco, ExxonMobil and BP.

 

POWER

 

 

KEPCO to build heat power plant in Indonesia

 

October 8, 2004. The state-run Korea Electric Power Corp. (KEPCO) will seek to build a $500 million thermal power plant project in Indonesia in return for securing natural gas, according to the Ministry of Commerce, Industry and Energy (MOCIE). MOCIE Minister Lee Hee-beom and his Indonesian counterpart Purnomo Yusgiantoro agreed upon the project. If the thermal plant generating 750 megawatts of power is constructed, Korea is expected to secure 3 million tons of natural gas per year, while Indonesia could ease its electric power shortage, the ministry said.

 

Iran, Russia near deal on nuclear plant

 

October 10, 2004. Russia and Iran are on the verge of closing an $800 million deal to start up Iran's first nuclear power plant, the countries' foreign ministers announced. Such a deal would be a major blow to U.S.-led efforts to derail Iran's nuclear program, which many suspect is intended at least in part to make nuclear weapons. Iranian leaders deny any atomic ambitions, although Iranian scientists are developing technology that could be used to make highly enriched uranium for weapons. Russian Foreign Minister Sergei Lavrov said he and his Iranian counterpart, Kamal Kharrazi, ironed out their differences over providing fuel for Iran's first reactor near the southern port city of Bushehr. The two also discussed international concerns over Iran's nuclear program and ballistic missile technology. Iranian authorities had planned to start operations at the Bushehr plant by mid-2004, providing 1,000 megawatts of power.

 

IPPs to develop hydro power projects in Pakistan

 

October 11, 2004. The Private Power and Infrastructure Board (PPIB) has recently achieved a historical landmark by according and arranging all necessary approvals of the government for establishing the first ever hydroelectric power station in the private sector. All requisite documentation having been completed, there appears to be no hurdle now in implementing the project on a fast track. The signing of the standard security package agreements and documents took place, in April this year, for the implementation of Upper Jhehlum Canal/New Bong Escape project, of 79 MW capacity that will be located downstream of the Mangla Dam. The government signed with the sponsors the security package documents that include Implementation Agreement (IA), Power Purchase Power Purchase Agreement (PPA) and Water Use Agreement (WUA).

 

 

Korea's Kepco to build power plant in Java 

 

October 11, 2004. Korea Electric Power Corp. will implement its US$350 million investment project to build a 740-gas fired power plant in Cilegon, West Java. The power plant will be built at the location of a liquefied natural gas (LNG) terminal to be built by PLN in Cilegon, PLN President Eddie Widiono Suwondho said. A memorandum of understanding has been signed with Kepco to build the power plant, to be finished by 2009. PLN plans to build the LNG receiving terminal to facilitate the supply of gas to feed power plants in Java. The terminal is expected to be operational in 2007. PLN is set to replace or modify its diesel oil powered electricity generation plants to use gas or coal as fuel with soaring oil price.

 

AES to start Bulgarian power project

 

October 11, 2004. The Bulgarian government said that the U.S.-based utility AES Corp. was ready to launch the long-delayed one billion euros project to build a coal-fired power plant in Bulgaria as of next year. The Balkan state signed a 980 million euro ($1.22 billion) deal with AES for the construction of a 670-megawatt plant at its Maritsa East power complex in 2001, but the project did not kick off because AES had difficulties on securing the funding. The company was ready to launch the project as of next year and on its own.  It will allow the country to become an important power centre in the Balkans," the government said in a statement. Italian energy company ENEL and Japan's Mitsui both have expressed interest to join the delayed project at Maritsa East One section of the coal and power complex, which generates 30 percent of the EU aspirant state electricity.

 

Shell kicks off auction of power venture

 

October 12, 2004. Royal Dutch/Shell has begun an auction of its InterGen power joint venture as part of its plan to focus on production and exploration. Shell and its partner, U.S. building firm Bechtel, are trying to sell their global power assets in one swoop, rather than piecemeal. The assets are valued at $3 billion (1.7 billion pounds) including debt, the source estimated. InterGen, set up in 1995 and 68-percent owned by Shell, runs power plants around the world with total capacity of 16,200 megawatts about a fifth of the UK's total. But because many of the plants are only partly owned by InterGen, its net generating capacity is just 6,000 megawatts. Shell and Bechtel issued investment banks a 6-page "teaser", a document that describes the assets put on the auction block.  Shell said it planned $10 billion to $12 billion of asset sales for 2004 to 2006.

 

Portlands power plant in Toronto

 

October 11, 2004. A 550-megawatt power plant, to be built on the site of the Hearn generating station on Unwin Avenue in the eastern Portlands, has been widely promoted as a shining example of energy efficiency. It's getting special treatment because Toronto needs a new generating station. The coal-burning Lakeview station is to close next year. The Portlands plant will be fuelled by natural gas, which is far more efficient than coal and emits a small fraction as much pollution. Under a long-standing proposal, the heat created by the plant's giant turbines was to be captured, turned into steam, and fed by pipes to heat nearby industries and businesses. In other words, heat that would normally be wasted, blown away in the wind, would be recycled an a process known as co-generation. It is widely practised in enlightened jurisdictions around the world. In many places, whenever a new factory or electrical plant is built, a co-generation operation is built alongside to retrieve energy.

 

Russia and Iran to sign contract on fuel supplies

 

October 10, 2004. Russia and Iran will sign a contract to provide fuel for the nuclear power plant in Bushehr in the near future, in addition to a document on spent fuel return to Russia, Russian Foreign Minister Sergei Lavrov told journalists following talks with his Iranian counterpart Kamal Kharrazi. Mr. Lavrov pointed out Russo-Iranian relations are developing under no pressure exerted by the US or any other state.

 

 

Laying of power lines for Thar plant ordered

 

October 7, 2004.  The federal government of Pakistan directed Wapda to construct a 500-KV transmission line at a cost of Rs 5.5 billion for 600-mw power dispersal of the Thar Coal Power Project. It also constituted a seven-member committee headed by Sindh Minister for Mines and Mineral Development and directed it to visit China next week to negotiate tariff and other matters relating to the project with the Chinese Shenhua group. The committee comprises representatives of Wapda, ministries of water and power and petroleum and natural resources and Private Power and Infrastructure Board (PPIB). The decisions were taken at a meeting presided over by Federal Minister for Water and Power Liaquat Ali Jatoi. The meeting reviewed the progress of the project. The Chinese company was facing difficulties in ground work and infrastructure problems, and had expressed its inability to continue the work. Pakistan's Ambassador to China had recently written to the government that withdrawal of the Chinese company from the Thar project would be a setback for the country. On this, the prime minister had asked the water and power minister to resolve the problems and get the project going.

 

Iran to connect power grid to European, Russian networks

 

October 8, 2004. Iran is considering connection of its power grid to European and Russian electricity networks in the near future, said Habibollah Bitaraf, the Iranian Ministry of Energy. Bitaraf said that grounds should be paved for Iran’s connection to the electricity networks in Europe and Russia in future, in addition to connection to the neighboring countries. Given that great amount of electricity is exchanged in the networks of Europe and Russia, Iran’s connection to these networks would bring about many advantages for the energy market, he added. Iran’s electricity network is presently connected to those of Turkey, Armenia, Azerbaijan, Turkmenistan, and Iraq, with the voltage of 130 KV, the minister explained, noting that however, it is not in a proper situation, since the connection with some countries is at the low voltage, while transmitting electricity to cities and villages in these countries has been taken into consideration. He stated that presently 80 concrete dams are about to be constructed and studies are being conducted on 150 huge dams, 20% of which are concrete.

 

ODL: Next generation lighting

 

October 6, 2004. New environmentally friendly technology slashes LED light bulb cost up to 80% and delivers lowest total cost of ownership, best light quality and energy performance for commercial and residential markets versus incandescent, fluorescent, and other LED bulbs. At a time of sharply rising energy costs, super-efficient, cost-effective lighting for commercial, industrial, and residential applications takes a long-awaited, major step forward today with the introduction of Optimized Digital Lighting (ODL)  a revolutionary LED (light emitting diode) light bulb, representing the first 100% digital and 100% solid state, high performance, low cost LED floodlight from Lighting Science, Inc., a subsidiary of The Phoenix Group Corporation (PXGC) of Dallas, Texas. According to Lighting Science, Optimized Digital Lighting(TM) LED R-30 light bulbs are now available costing up to 80% less than other comparable LED light bulbs currently on the market and delivering longer useful lives.

 

ODL(TM) R-30 bulbs from Lighting Science consume only 5.6 watts of electricity and replace 65-watt incandescent bulbs and 15-watt fluorescent bulbs. Compared to existing analog incandescent units that are widely used in commercial and residential applications, ODL lamps reduce energy usage by almost 90% for the same end lumens, with a useful life that is up to 25 times longer (50,000 hours). Relative to fluorescent lighting, ODL units reduce energy usage by as much as 50%. ODL bulbs use the same light fixtures as incandescent and compact fluorescent bulbs. Lighting Science technology delivers significant savings in initial costs as well as in operating energy costs, the best light quality, functionality, and up to 30% greater light output per watt compared to other LEDs. Applications include hotels, restaurants, retail stores, outdoor facilities, governmental facilities and residential lighting.  Invented in 1968, LED technology uses semiconductors to convert electricity into light.

 

 

Report on proposed Malaysian power plant under scrutiny

 

October 8, 2004. The Department of Environment (DOE) is studying the Detailed Environmental Impact Assessment report on the proposed 1,400MW power plant using coal at Kuala Lukut. Deputy Minister of Natural Resources and Environment Datuk S. Sothinathan said the public could also study the report which was being displayed until Oct 15 and were welcome to give written comments to the department before Oct 29. The written comments must be submitted to the DOE director-general in Putrajaya.  Sothinathan said Jimah Energy Ventures Sdn Bhd would carry out the RM6bil project. He also said the project involved the reclamation of a mangrove swamp and the construction of a jetty, a coal-based power plant and 500kv power transmission lines. 

 

 

 

SREI solar power for four districts

 

October 06, 2004. Srei Renewable Energy Unit (SREU), promoted by SREI Infrastructure Finance Ltd has launched easy financing schemes for solar home lighting system in the four West Bengal districts of East and West Midnapur and North & South 24 Parganas. The financing schemes start with an attractive monthly installment of Rs 237 to a maximum of Rs 1019 per month for periods ranging from 18 months to 60 months. The initial down payment would range between 10-50 per cent. This is a micro-finance project where a poor farmer can also afford our scheme for a solar home lightning system". Prior to this scheme, SREU has financed over 6500 units of solar home lighting systems, 1500 units of solar lanterns (Kargil in 2000-2001), 500 units of solar water pumps and 1000 units of solar water heating systems across the country. 

 

Renewable energy to include existing hydroelectric power

 

October 8, 2004. The Los Angeles City Council has authorized the Los Angeles Department of Water and Power (LADWP) to include all existing hydroelectric power excluding the Hoover Dam Power Plant in creating a renewable energy plan that calls for increasing renewable power to 20% of the city's energy mix by the year 2017. Currently, state law requires investor owned utilities, such as Southern California Edison, to generate at least 20% of their electricity by the year 2017. The state law, which does not apply directly to municipal utilities such as LADWP, defines what is considered renewable resources. These include solar, wind, geothermal, biomass and small hydroelectric (30 megawatts or less). The City Council voted October 5 to exclude Hoover Dam Power Plant, which supplies Los Angeles with up to 491 megawatts of power, as a renewable energy source in the LADWP's proposed Renewable Energy Standard (RPS).

 

Firelog with 100% renewable resources

 

October 11, 2004. This fall, North America's firelog brand leader, Duraflame, Inc., will be addressing two important corporate issues with the introduction of a new product, the All Natural Firelog. Faced with a shrinking supply of petroleum wax and a rise in woodburning fireplace restrictions by air quality districts in the West, Duraflame's product development team set out this past year to determine how to make the next generation of manufactured firelogs. The result is a firelog comprised completely of renewable resources that produces very little smoke. This firelog is made of recycled biomass and plant waxes and oils and produces more than three-quarter's less particulate emissions than a comparable firewood fire. "The All Natural Firelog will make recommending the use of firelogs an even better air quality policy for reducing emissions from residential fireplaces."

 

 

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