MonitorsPublished on Oct 19, 2004
Energy News Monitor I Volume I, Issue 17
Bust the Free Power Myth for Agriculture

The recent General Election results especially in Andhra Pradesh have created an impression in states that elections are won on the basis of assurances of free power to farmers.  The new government in Andhra Pradesh has fulfilled the promise during swearing in ceremony itself.  This single decision of the government costs the exchequer a huge sum of Rs. 1,800 crores (Rs 18 billion) as subsidy, which will increase every year due to new connections.  The state will also face increase in power theft and several other attendant adverse consequences on power distribution and on its financial position. However, it has now dawned on the AP Government that more than two lakh (200,000) unauthorized connections have sprung up threatening the collapse of distribution system and the Government is desperately devising measures to control unauthorized connections even by  disconnecting against opposition from its political allies.  Farmer’s suicides are continuing unabatedly, despite free power.  Apparently, it is only the beginning of free power problems for the Chief Minister.


The free power syndrome soon caught up with Tamil Nadu.  It has been emulated by Maharashtra despite opposition from Government departments as the state is facing a heavy debt burden of one lakh crores (Rs 1 trillion roughly $ 21.825 billion).  The state would be saddled with an upfront payment of annual subsidy of Rs 3000 crores (Rs 30 billion); subsidy will go up by Rs 300 crores (Rs 3 billion) every year for new connections; one time waiver will result in loss of Rs 2000 crores (Rs 20 billion) of arrears.  This vitiates the repayment culture of all consumers and makes the metering programme meaningless. However both the ruling coalition and opposition are claiming credit for this populist measure to garner farmers’ vote banks on the eve of ensuing State Elections. 


An objective analysis of past election results reveals that at the time of General Elections in 1999 in Andhra Pradesh, the electoral manifesto of the Congress party  promised supply of free power, if elected.  The farming community did not bite this offer, as it was evident from the return of TDP with thumping majority in Assembly.  However multiplicity of factors resulted in the rout of TDP this time and not promise of free power, as the suicides are continuing even now. Similarly Madhya Pradesh extended several concessions in electricity before 2003 elections but Congress was unseated.  The moral of the story is that the farmer does not want free power but wants quantitatively and qualitatively reliable power at a reasonable tariff.


Chief Ministers of Punjab, Himachal Pradesh, Rajasthan and Madhya Pradesh except Andhra Pradesh irrespective of the party affiliations, spoke in one voice at recently held “India Today - State of the States” conclave against free power for farmers and have emphasized that farmers need uninterrupted power at proper voltage, even if they had to pay and not free power.


Free power makes state’s economy totally unviable


The Boards have energized on high priority more than 13 million pump-sets since the 5th Five Year plan as rural electrification has been included under the ‘Minimum Needs Programme’.  The initial impact of subsidy was small and could easily be funded through government budgets. Over the years, the consumption has increased to over 30 per cent and the quantum of subsidy increased manifold with disastrous consequences on the finances of State Electricity Boards (SEBs) and State Governments. The subsidy is contributing for inefficient and indiscriminate on-farm use, wastage, over extraction of water, soil damage, environmental degradation, declining water tables and distortions in crop pattern leading to shortage of drinking water.  Rural electricity distribution is basically characterized by increasing system losses, frequent break-downs, failure of distribution transformers, burning of motors, etc. Though there is a need to improve the situation, many political parties are unwilling to address the issue of subsidies, as agriculture sector is considered a ‘big vote bank’.  A survey in Haryana revealed that farmers’ actual consumption is twenty seven percent lower than estimated and Boards find it convenient to show pilferage as agricultural consumption.


An essential part of power sector reforms is the review of existing subsidy arrangements; assessment of the need; redesigning the eligibility criteria; determination of optimal levels and implementation of mechanisms chosen.  A recent World Bank analysis of power subsidies in AP showed that large farmers got an implicit subsidy of over Rs 50,000/- per year, small farmers got around Rs 8000/- and landless farmers got nothing at all.


The poor, illiterate and the sick pay for the ‘free’ power.  Rajadhyaksha Committee in Maharashtra has highlighted that about 80 percent of farmers  get nothing,  as they  have no pumps, another 4 per cent having metered supply get only 1 per cent and only 2 percent farmers in Maharashtra are the main beneficiaries of subsidy.


Another World Bank study has revealed that an annual subsidy of Rs 30,000 crores (Rs 300 billion) in the country equals about two and a half times the annual revenue expenditure for canal irrigation, two times the expenditure for rural development, two times the expenditure for health, and about 25 per cent of India’s fiscal deficit. If power subsidies to agriculture were reduced by only one third, the savings for a single year would be sufficient to fill every teacher vacancy in the country and provide every school with running water and toilet facilities.  Many farmers are willing to pay higher tariffs provided they get better quality supply, which will also help the investment climate for rural industries and services, and would generate much-needed employment and income opportunities in rural areas.


Very Poor Farmers need Subsidised Power


There are many who suggest that agricultural subsidies should be removed altogether.  This suggestion needs to be considered from social-equity angle.  The Government supplies water from irrigation projects built at enormous costs, at no cost to the farmers, whereas farmers who depend on ground water, have to purchase pumps, maintain them and also pay for electricity. Thus, removing agricultural subsidies altogether would harm these farmers who depend on ground water.


It is nobody’s case that subsidies should be eliminated totally though there is an urgent need to target them towards well defined recipients. Affirmative action by the government to provide universal access at affordable tariffs makes a strong case to provide agricultural subsidy for a small number of deserving marginal, well targeted group of farmers, limited to a specified level of consumption and not to all farmers; the big farmers pay close to cost of supply, if not cost of supply itself. 


The disastrous consequences of highly subsidised or free power were recognized as early as 1993, when the National Development Council appointed a Committee under Sh. Sharad Pawar, then Chief Minister of Maharashtra which recommended a minimum agricultural tariff of fifty paise (Rs 0.50) per unit in the country.  Chief Ministers while approving Common Minimum National Action Plan for Power (CMNPP) in 1996, while I was Union Power Secretary, decided to fix a minimum tariff at fifty paise (Rs 0.50) per unit which was to be increased to fifty percent of cost of supply in three years.  Though the Electricity Regulatory Commission Bill 1997 introduced in the Lok Sabha, contained this provision, due to political pressure, this provision was deleted in Electricity Regulations Act 1998. 


Though it is legally possible for states to extend subsidies, it would be impossible to make budget provisions year after year, as there is a steady deterioration in the revenue streams primarily due to inadequate resource mobilization for fear of displeasing the electorate.  They are also competing demands on the limited resources  from other sectors including rural roads and other connectivity, schools, hospitals, drinking water, social sectors and over all rural development for which UPA government is committed.  Power tariff for agriculture should therefore be treated as an economic issue rather than an electoral issue. 


There is an imperative need for UPA Government to arrive at a national political consensus so that agricultural tariffs are uniformly fixed by bringing a suitable legislation and also target these subsidies to small, deserving and marginal farmers only.


P Abraham

Former Secretary, Ministry of Power, GoI

[email protected]

(Views are those of the author)


Implications of Free Power to Farmers in Maharashtra


Excerpts from the observations of Mr Venkatchari, Former Member, Maharashtra Electricity Regulatory Commission (MERC) in a Panel Discussion on “Implications of free power to farmers in Maharashtra’ organized by the Observer Research Foundation, Mumbai Chapter on September 28, 2004.


On the introduction of consultation & transparency in the MERC


“I would like to give a background of the entire (electricity tariff setting) process, which before 1999 was a hush-hush one. Earlier though the Electricity Act of 1948 laid down a certain legal procedure in which the service provider (mseb) is supposed to fix the electricity tariffs, the provider would prepare and send the proposal, which would inevitably be in terms of tariff enhancement, to the state government to take a decision considering political sensitivity of the issue. The proposal, would tour the various departments i.e. energy, finance, planning, agriculture and industries and then come before the Cabinet, which would wait for an appropriate time to take a decision on the issue, seeing beforehand no possibility of elections at any level. No questions asked or answered. However the Electricity Supply Act of 1998 brought an entire paradigm shift. Hence when the commission was appointed, a provision was made in the Act enabling consumer representation in every hearing, which would be in the nature of quasi-judicial proceedings. This is where Prayas, Mumbai Grahak Panchayat etc. stepped in”.


“The second thing that we sought to bring was complete transparency. The government did not want to interfere since the commission was appointed and the Mahashtra State Electricity Board (mseb) had to come to us (MERC) with their proposal. The Board was then told to put the proposal on their website and make copies available throughout the state. The commission then published a public notice that any objection about the proposal should be sent in the form of a written affidavit before a particular date. Having received affidavits a schedule of public hearings was announced and the six divisional headquarters: Mumbai, Pune, Nashik, Amravati, Aurangabad and Nagpur were fixed as venues; full publicity was given in all the newspapers inviting consumers, irrespective of whether they had filed affidavits or not, to express their problems to a representative of the mseb who would reply to the points that were raised. Depending on the number of affidavits from each area, the number of days of hearing was fixed. This experience was very fascinating. In Aurangabad, where the Board taking the Commission lightly sent, as its representative, an Executive Engineer, who obviously couldn’t face the questions. After his miserable performance, the next hearing was attended by the Superintending Engineer, the following one by the Chief Engineer and the hearings in Pune and Mumbai were attended by the Chairperson of the Board and his top ranking officers from the technical and the accounts sections.  After having gone through the hearings, the proposal was scrutinized and, not surprisingly, rejected. mseb was asked to come up with a new proposal in 15 days, which it did. The 30-odd-page document was now a humungous 500-page volume containing almost all the information required. The mseb was then asked to make copies of this and send it to all the people who had objected, this time without the nominal charge. This proposal was then re-scrutinized and the first order of May 2000 was issued”.


On goals of tariff determination policy


“The situation, before the order aiming to go towards the average cost of supply was passed, was thus: the farmers were paying ridiculous rate of something like Rs 0.55 or Rs 0.60 per unit.  That was raised to Rs 1.10 and we started pressing it from the other side too. Railway traction was the most expensive because it was paid by the central government and one kept increasing it from year to year. The money has to come from the central treasury to the mseb and so the railways did not really bother. The result was that electricity traction rate went up to Rs 4.75.  Thus with the lowest at a ridiculously low rate, the average cost of supply came to something around Rs 3.00”.


“The goal then was clear – tariff schedule had to be compressed from both ends and average cost of supply be approached.  Cross subsidization had to be removed, to the maximum extent if not entirely. According to the law, the right to determine tariff was given to the merc; and the government and the service provider came into the picture only as information givers. The only place where the merc’s decision could be challenged would be in the High Court or the Supreme Court. The idea was to bring tariff determination into the avowed purpose of legislation, remove the political element, give it to a body of experts to make the procedure judicial and to involve the consumers’ representatives in the entire process.”

“When the order was issued, mseb came up on review and while the review petition was in process, a high-ranking official of the state government approached the commission, unofficially and requested the tariff to be reconsidered in the light of farmers and the power loom owners in Bhiwandi, Ichhalkaranji, Ramtek etc. since it was creating political problems for the government. When we refused to reconsider, an invitation for a cup of tea with the Chief Minister was forwarded. However it was made clear to the gentleman that the issue of reconsidering the tariff would not be discussed at the meeting. The matter ended at that and the review order was passed”.


On free power to farmers


“I have to mention the efforts of a very senior former minister of the Maharashtra government, who represented the farmers lobby and presented the story of the farmers mainly of the lift irrigation societies. He said that there were 50 members of the Lift Irrigation Society. Hence if one is looking at total consumption, it should be looked at, at an individual and not a collective level. And since these were small-time farmers, the costs involved in cultivating the farm would make them end up in heavy debt with the moneylenders. Hence he made a very strong plea that considering the cost of agriculture what the farmers receive as price for their output is not sufficient since it is not a free market economy where they can fix the price and therefore, they are being continuously impoverished and the existing subsidy should be continued. He supported his argument by exemplifying the subsidies in the farming sector in various countries like France, Ireland and United States”.


“In Christian theology there is a concept of the original sin. The original sin so far as the electricity sector is concerned dates back 1976-77. That was the year in Andhra Pradesh and Maharashtra that for the first time the concept of horsepower tariff was introduced. Till then we knew only metered consumption. A committee was appointed in Maharashtra under a former Chairperson of the Madhya Pradesh Electricity Board. But before he could complete his report, there were a lot of complaints from farmers about metering, quality of meters, etc. So the state government, with Vasantdada Patil as the Chief Minister, took the decision based on Andhra Pradesh’s model and moved away from metered consumption to the horsepower tariff. And once Maharashtra and Andhra did it every other state started doing it because the politicians ultimately saw it as a popular measure”.


On budget implications of free power


“The second point I want to make is about the question about budget implications – Do the state government finances permit extending free power? I would like to mention that the finances of Maharashtra are in a desperate and terrible state. Going by figures the debt of Maharashtra, which was in the region of 17000 crores (Rs 170 billion) in 1994 but it shot up to 48000 crores (Rs 480 billion) in October 1999. When the matter was discussed by group of ministers at the highest level, the Secretary presented a paper pointing out that Rs 48000 crores (Rs 480 billion) is the quantum of public debt. When he finished his presentation he was told that it was it was ‘okay’ and that when they (ministers) asked for money they should not be refused !


That was the reaction of the ministers at that time. From October 1999 till last year, the public debt grew to 83000 crores (Rs 830 billion). Then it further increased to 100,000 crores (Rs 1 trillion). Now the official figure is said to be about Rs 93000 crores (Rs 930 billion). Till four months ago, a representative of the finance department had to be in Delhi every 11th day because the government was in continuous overdraft and if we exceeded 11 days then the cheques of the state government would start bouncing. So the person would be there to ensure that that the amount would be brought as a ‘ways and means advances’ from the central government. Only recently, because of a loan of 2000 crores (Rs 20 billion) taken from the Life Insurance Corporation of India and Hudco, this 11 days cycle has been stopped and now we are no longer in a state of overdraft. It is a terrible situation we (Maharashtra) are in. We are deeply in the debt trap. To sum up, the answer to your question, ‘Do the state finances permit extending free power is a loud ‘no’!”

(Views are personal) 


Financial performance of SEBs







Cost of supply (paise / Kwh)



Average tariff (paise / Kwh)



% of recovery



Average agriculture tariff (paise / Kwh)



Commercial losses (with subsidy)



Commercial losses (without subsidy)



Net internal resources



Subsidy for domestic consumers



Subsidy for agriculture consumers



Gross subsidy*



Subvention received



Uncovered subsidy



Gross subsidy per unit of sales (paise / Kwh)




*      Gross subsidy includes subsidy for domestic consumers, agricultural consumers and on interstate sales.


Source: Planning Commission – 2002


Important input based subsidies: 1994-95


(Rs million)



As % of




All India

As % of





























Total Non- Merit Eco. Serv. Sub.







Subsidisation of Power through SEBs


(Rs million)










from other Users#



required to


break even

A. Pradesh


















Delhi (DVB)


















H.  Pradesh






J & Kashmir


















M. Pradesh




































Tamil Nadu






U.  Pradesh






W. Bengal



















Source: Planning Commission - 2000

Notes:  # mainly industrial and commercial users,

* paise per kwh.




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ONGC targets industrial gas unit of AV Birla Company


October 14, 2004. ONGC is learnt to have approached HGI Industries, the industrial gas and alloy-maker company of the AV Birla group, for buying out HGI's industrial gas unit at Mangalore. The HGI unit supplies industrial gas to Mangalore Refinery and Petrochemicals (MRPL), which is currently majority-owned by ONGC. But there was no confirmation that the AV Birla group had any plans for hiving off HGI's gas unit at Mangalore. HGI's Mangalore gas unit was mainly set up for supplying nitrogen gas to MRPL. After buying out the Birla group's stake in MRPL, ONGC is now keen to take over the gas unit, which is critical to the refinery's functioning. The unit currently produces 10 million sm3 of nitrogen gas annually.


ONGC signs agreement with GNPC for exploration


October 15, 2004. ONGC Videsh, the overseas arm of Oil and Natural Gas Corp, said it has signed an agreement with the Ghana National Petroleum Corp (GNPC) for cooperation in exploration and production. OVL was seeking opportunities to invest in oil and gas projects in Ghana. The MoU also envisages enhancing bilateral cooperation in E&P activities, including training of GNPC staff in India. The purpose of this agreement was the desire by GNPC to leverage on OVL's significant competence and know-how in E&P activities, as well as lay down the principles for future co-operation.  India imports 70 per cent of its crude oil, mostly from the Middle East, and has aggressively sought opportunities to invest in overseas oil and gas projects as domestic output is shrinking. OVL has operations in 10 countries including Vietnam, China and Australia, and has the backing of the oil ministry, which wants the company to spend at least $ 1 billion a year to acquire foreign operations. 


ONGC plans foray into oil recovery consultancy


October 14, 2004. After the increase in recoveries from the Mehsana, Balol and Santhal fields in Gujarat, by using the in-situ combustion method, ONGC is planning to take up consultancy on oil recovery as a business venture. The company has already adopted a Rs 1,200 crore (Rs 12 billion) programme for implementation of the technology in all fields containing high viscosity oil commonly known as ‘heavy oil'. Called Enhanced Oil Recovery (EOR), the technique require oxidising some of the oil in the reservoir to make the oil lighter and increase the flow of recovery. The oxidisation is brought about by generating heat inside the reservoir. Worldwide, the technology is in demand as recovery rates are lower in fields containing heavy oil. A pilot EOR project will also be launched in Bombay High where the company has already increased its recoveries.


‘ONGC should rethink investing Rs 250 million in Mangalore' 


October 18, 2004. Union petroleum and natural gas minister Mani Shankar Aiyar said ONGC should "rethink" its plans to invest Rs 25,000 crore (Rs 250 million) in a petroleum complex in Mangalore and instead focus on its "core competence" of exploration and production of crude oil. "ONGC should be doing its core competence business rather than diversifying into too many activities.  "If we do not have another Bombay High (oil wells), our self reliance on production of oil will decline to 15% in future," he said. Describing the proposed investment of Rs 250 million as "humongous", Mr Aiyar said a "rethink is required" adding, the Karnataka government should also involve other oil firms including private petrochemical units in the proposed special economic zone (SEZ). "We have to see whether these projects are techno-economically feasible...There should be a due diligence and a proper feasibility report before finalising on investments," he said, but added the Centre was behind the project.



IOC to set up LNG terminal in TN


October 19, 2004. Indian Oil, the country's largest refiner, will set up a liquefied natural gas import terminal at Ennore in Tamil Nadu, for which it has floated an international tender to source LNG. IOC plans to build the terminal to cater to the fuel needs of its subsidiary Chennai Petroleum Corp and supply regassified LNG to prospective industries in Tamil Nadu and Karnataka who are willing to switch over from liquid fuel to natural gas. IOC has called for bids seeking 2.5 million tonnes per annum (130 trillion British thermal units) LNG for 20 years with a possibility of doubling the quantity.  IOC has already entered into heads of agreement with some power companies in Tamil Nadu for sale of regassified LNG. IOC is now planning its own terminal away from AP, which is the landfall point of Reliance Industries' gigantic gas field in Krishna Godavari basin in the Bay of Bengal.


MRPL awards ISOM project to L&T


October 15, 2004. Mangalore Refinery & Petrochemicals or MRPL has awarded a contract for ISOM project on turnkey basis to Larsen & Toubro at a cost of Rs 267 crore (Rs 2.67 billion), according to a release issued to the BSE. This project is towards upgradation of MRPL refinery for producing Euro III / Euro IV Compliant Petrol. MRPL Refinery is already having facilities for producing Euro III Grade High Speed Diesel Oil, the release added.


HPCL, IOC to team up for refinery project 


October 15, 2004. State run Hindustan Petroleum Corp Ltd (HPCL) said that it plans to share the cost of expanding Indian Oil Corp's (IOC) Panipat refinery and wants half the additional output in return. State-run IOC, India's largest refiner, plans to double the capacity of the Panipat refinery in northern India to 240,000 barrels per day (b/d) by the middle of next year.  Oil firms can buy IOC’s refined products to cater to customers in northern India, but HPCL wants an assured northern India supply as the oil product market is becoming more competitive. Apart from a share of output in Panipat, HPCL was also going ahead with its proposal to build a 180,000-b/d refinery in Punjab. Oil ministry officials said HPCL was also exploring options to set up a refinery in other states in northern India if it gets the appropriate fiscal concessions. Indian states, vying for investment, often offer attractive tax concessions to lure large companies to set up projects that boost government revenues and generate employment. In total, India has 18 refineries which can process 2.5 million b/d.


IOC, Petronet joint bid for Enron assets


October 17, 2004. Indian Oil Corp and Petronet LNG Ltd may team up to bid together for the bankrupt US energy firm Enron Corp's 2,184 mw power plant and an adjacent liquified natural gas (LNG) import terminal at Dabhol in Maharashtra. The Petroleum Ministry mandated Petronet LNG, which built the country's first LNG terminal at Dahej in Gujarat, to construct another at Kochi in Kerala and also bid along with one of its promoters for the only other LNG terminal on the West Coast at Dabhol. The government-sponsored roadmap to put back the 2184 mw power plant in operation by 2005 involves Indian financial institutions buying out the overseas debt of around Rs 2,900 crore ($640 million) after which the search for new promoter would be launched. Besides Tata-Gail-BP combine, the companies who have expressed interest in buying out the Dabhol plant include Reliance Industries, British Gas and Royal Dutch/Shell. European oil major Totalfina and French state-owned Gaz De France are also said to be interested in the Dabhol plant which Enron built at a cost of $2.9 billion. Both BPCL and Gail wanted to build their own terminals in Kerala- BPCL at Kochi and Gail at Kayamkulam, but Tripathi, the petroleum secretary, ruled that Petronet, which had five years ago planned the Kochi terminal, would take the lead.


Transport / Trade


GAIL-Iran LNG deal to boost Petronet


October 18, 2004. In search of an alternative long-term source for liquefied natural gas (LNG) other than Qatar, GAIL India, one of the major stakeholders in Petronet LNG (PLL), has finalised a gas purchase pact with the National Iranian Oil Company (NIOC). GAIL will buy 2.5 Million metric tonne per annum (MMTPA) of LNG from Iran. With this deal, PLL's plan for doubling capacity of its LNG terminal at Dahej in Gujarat, from existing 5 MMTPA to 10 MMTPA, has gained momentum as PLL has already signed agreement with RasGas of Qatar to source an additional 2.5 MMTPA of LNG apart from its current purchase of 5 MMTPA from the Qatar firm. The gas may be unloaded at Dahej terminal for regassification and then sold through GAIL's pipelines to prospective customers.  With the expansion of PLL's present capacity and plans for setting up new LNG terminals elsewhere in the country, GAIL was also trying to work out sources for more LNG which can be regassified at PLL terminals and then sold as RLNG to various industries. 


By 2012, natural gas demand is expected to reach 90 MMSCMD at a delivered price of $ 4 per MMBTU which could almost double, if the delivered price settles close to $3 per MMBTU. In 2-4 years, around 1000 MW gas-based capacity is expected to come in various parts of India, including the upcoming projects such as National Thermal Power Corporation's 2300 MW power project at Kayamkulam, 1360 mw project at Dadri by Reliance Energy and 1000 MW power project at Bawana. 


Piped gas for Ghaziabad and beyond


October 16, 2004.  Indraprastha Gas Limited is now planning to take the supply of piped natural gas (PNG) to other townships in the National Capital Region. However, it will first be entering Ghaziabad, Noida, Greater Noida, Faridabad and Gurgaon with a pilot project which would envisage construction of some compressed natural gas (CNG) stations. Thereafter if the response is good, the company would take its PNG project into these fast developing townships. Further with all the satellite townships now having a large number of newly developed areas, it is with consummate ease that it would be able to market the PNG as well. Meanwhile, the supply of PNG in Delhi has been a major success. Already, over 16,000 households and around 120 commercial units, including 18 large ones, are using piped gas.


The response to the PNG project has been overwhelming with over 60 per cent of the occupied houses in all the colonies where the supply has reached opting for piped gas supply. And out of the remaining 40 per cent households, he said, most were either vacant or were having tenants residing in them. The reasons for people opting for PNG have been many. While one of them is the constant supply, the others relate to safety and convenience associated in the supply. Combustible mixture of natural gas and air does not ignite if the mixture is leaner than 5 per cent and richer than 15 per cent of the air-fuel ratio required for ignition. This narrow inflammability range makes PNG one of the safest fuels in the world. Also, since natural gas is lighter than air, in the event of a leak, it just rises and disperses into thin air given adequate ventilation. But liquefied petroleum gas (LPG) being heavier than air settles at the bottom near the floor surface which leads to an explosion if the gas accumulates.


Shell may not supply LNG to Maharashtra


October 17, 2004. Shell India is unlikely to sell liquefied natural gas imported at its Hazira terminal to customers in Maharashtra. Delays in laying GAIL's Dahej-Uran pipeline as the reason for Shell's decision. Shell, however, "hopes that the pipeline will be in place early so that these customers (Maharashtra) can be accessed". The company, which was in negotiations to supply LNG to fertiliser, power and steel companies in and around Maharashtra's Uran and Thane industrial area from its 2.5 million tonne Hazira LNG terminal in Gujarat, has told consumers to "not depend" on its plans. There is enough demand to absorb Shell's entire 2.5 million tonnes LNG in Gujarat itself.  The Petroleum Ministry has raised doubts about the viability of GAIL's 489-km Dahej-Uran pipeline that is to bring LNG into Maharashtra. The Ministry has written to GAIL raising questions about its ability to tie up enough gas supplies to fulfil its current commitments it was said.  GAIL is already falling short in supplying to customers along the Hazira-Barauni-Jagdishpur trunk line and its Dahej-Vijaipur pipeline. It will still be short of gas even after receiving 2.5 million tonnes from Petronet LNG's Dahej terminal. 

Policy / Performance


China welcomes Indian investment in oil and gas sector


 October 13, 2004. The Chinese Ambassador, Hua Junduo, has proposed that India and China should explore the possibility of "mutual investment" in hydrocarbons. He said Indian companies are welcome to invest in oil and gas exploration and production in China. Similarly, Chinese oil companies would also explore prospects for investing in the refining, exploration and production as well as petrochemicals sectors. He said his country was greatly interested in the Asian oil buyers-sellers meeting that Mr. Aiyar had convened in January next year. This would bring the four big Asian importing countries of India, China, Korea and Japan together at a meeting with major oil exporters such as Saudi Arabia, Kuwait and Iran.

Aiyar bets on gas reserves off Bay of Bengal


October 18, 2004. Union minister of petroleum & natural gas advocated exploration of the huge gas reserves off the Bay of Bengal from Tamil Nadu coast to Myanmar coast for self-reliance in fuel supplies and less dependence on imported crude oil.  Aiyar said there was an urgent need to substitute oil with natural gas as prospects of discovering oil was limited and the self-reliance ratio in oil production was declining.  "Our self-reliance in oil production is currently about 30 per cent against 50 per cent two decades ago. With oil discovery and production in the country growing at just 7-8 per cent annually, the self-reliance ratio may decline to 15 per cent in the next decade. In such a scenario, we need to concentrate on tapping the gas reserves off the Bay of Bengal right from Tamil Nadu coast to North-East and Mynmar coast, including the Bangladesh coast," Aiyar said. 


Aiyar called for greater investments in exploration and production of natural gas across the eastern coast. He said though Reliance had discovered one of the largest gas reserves in the Krishna-Godavari basin off the Andhra coast, similar reserves were found in Mahanadi basin off the Orissa coast, Sunderbans in West Bengal and in the North East. "Preliminary explorations indicate Bangladesh is floating on a lake of natural gas. It is being dubbed as the future Qatar of South Asia. GAIL, OVL (Oil Videsh Ltd) of ONGC have discovered huge gas reserves in A-1 and A-3 blocks off the coast of Myanmar in Bay of Bengal. Similarly, off the Tamil Nadu coast at PY-1 and PY-3 (Pondicherry) gas reserves have been identified. So much gas is available off the eastern coast that Bay of Bengal has the potential to emerge as the North Sea of East in future," Aiyar disclosed.






Delhi's power stations running out of steam


October 12, 2004.  Technical snags and lack of maintenance continue to plague the power stations under government-owned generation company Genco in Delhi. While one unit of Rajghat Thermal Power Station (RTPS) is not functioning since October 4, one of the six units of Gas Turbine has also been shut down. One unit of Badarpur Thermal plant has been shut down while Indraprastha power plant has been functioning on 36% of its capacity. While the installed capacity for RTPS is 135 MW it is producing only 67.5 MW at present. In fact, the Comptroller Auditor General's (CAG) report of 2002 had even advised shutting down of the plant as it was incurring a loss of Rs 386.81 crore (Rs 3.86 billion) because of a shortfall in generation of power. Instead of a national average of 5,350 units RTPS production ranged between 3,973-6,978 units.


The report also noted that RTPS has suffered forced shutdowns due to turbine tripping, breakdown of main oil pump and grid failure, all examples of lack of proper maintenance. The condition of the Indraprastha Thermal power plant commissioned in the 1960s is even worse. It is the oldest plant in the capital and is functioning at 36% of its capacity. Though the plan to modernise and redevelop the plant has got financial approval there has not been much headway since May. Power experts say that redeveloping a coal-based plant is unlikely to be effective for more than a few years. The most recent power plant in Delhi the Gas Turbine has installed capacity of 280 MW and the plant produces 175 MW on its better days. 


Many firms keen on 1,000-mw UP project 


October 19, 2004. Aditya Birla Group, Torrent, GMR, China Light & Power and Reliance Energy Limited (REL) have so far bought the bid document for the 1,000 MW coal-based project in Uttar Pradesh. The UP State Power Generation Corporation Limited (UPPCL) has proposed to set up the 1,000 MW on build-own-operate-maintain (BOOM) basis at Anpara. It would be implemented on 70:30 debt equity ratio. UPPCL's move has come at a time when REL has already launched the construction on its 3,740 MW Dadri project and Tata Power Company has also initiated steps for the development of 1,000 MW project.  The developer is expected to finance, develop, construct, commission, own, operate and maintain 2 X 500 MW Anpara "C" project situated in Sonebhadra district. The project would share certain common facilities with the existing Anpara "A" (3 X 210 MW) and Anpara "B" (2 X 500 MW) thermal power stations. These power stations are owned by UPPCL.  The power generated from the project will be essentially committed to UP.


Jindal plans 150 MW coal power plant 


October 19, 2004. Jindal Stainless is planning to set up a 150 MW captive thermal power plant based on coal to cut down its power cost. The move to opt for coal is intended to insulate the company from oil price hikes. A final decision on the issue will be taken shortly.  The increased oil prices have resulted in cost of generation going up in the current year, as the company's power generating capacity is based on oil, he added.  Power cost has reduced from 7.9% of net sales last year to 7.5% in the just concluded year ending March 31, 2004. The proposed expansion will enable the company to further bring down its power bill as a percentage of its net sales, analysts said. Jindal Stainless already has a 100% captive power based on oil, apart from coal-based 40 MW plant under implementation at the new facility being proposed in Orissa.


Power project on Balason River, West Bengal


October 18, 2004. As part of the thrust "micro-hydro electric projects" the SEB is preparing to construct a 24-MW unit on the Balason River at an estimated cost of Rs 92 crore (Rs 920 million). The formalities are expected to be cleared soon for the construction to begin. The project, whose two stages are estimated to be over in 12 months, has been awarded to Kolkata-based Electrosteel Castings Ltd for execution.  According to the "Executive Summary" of the project, ECL has in the past been involved in power generation project only once "a co-generation power plant of 3 MW at Khardah." The task of preparing the Environment Impact Assessment Study a mandatory obligation exercise for the project was carried out by Nagpur-based National Environment Engineering Research Institute. The project, which is located near Dhajea will also harness the Balason's tributary, the Rangbang River. The power potential is envisaged to be between 18 MW and 24 MW, according to the Summary.


Norwegian firm joins Indian hydropower venture 


October 19, 2004. Norwegian energy sector investment firm Statkraft Norfund Power Invest (SN Power) has entered a joint venture in India to operate an 86 MW hydropower plant and to build a 192 MW plant, the company said. State-owned SN Power will get 49 per cent of the venture with India's LNJ Bhilwara Group and will invest about $45 million in the two stations, which have a total investment budget of about $300 million, a company official said.  The joint venture will operate the Malana power station and pursue plans to build the larger Allain Duhangan plant, both in the Kullu valley in Himachal Pradesh, SN Power said. "Construction of Allain Duhangan is planned to begin in early 2005, with commercial operation starting in 2008-9," SN Power said. "The power generated will go into the northern grid which supplies New Delhi and the rest of the northern region," the company said, and added that the region currently has a deficit of 1,500 megawatts. The Malana plant started operating in 2001 and generates 350 gigawatt hours of electricity yearly, SN Power said. It is the first project in India for SN Power, which invests in hydropower projects in emerging markets from Latin America to Asia.


Bhel sets up 250 MW unit in Haryana


October 17,2004. As part of the Rs 1,438 crore (Rs 14.38 billion) EPC contact, Bhel has commissioned the first 250 mega watt thermal generating unit in Haryana. With joint effort of Bhel and Haryana Power generation Corporation Ltd officials, the unit was commissioned in Panipat and an additional 60 lakh (6 million) unit of electricity will be added to Haryana grid, Bhel said in a statement. The unit was dedicated to the people of Haryana by President APJ Abdul Kalam. To commission the project in tight schedule, Bhel took advance engineering, manufacturing and procurement action besides adopting methods and techniques like optimum utilisation of resources, effective use of resources, effective IT useage, and deployment of state-of-the-art construction aids.


Jindal Power is setting up 1000MW power project in Raigarh


October 17, 2004. Jindal Power have finalised orders with Bharat Heavy Electricals (BHEL) for supply, erection and commissioning of Boiler- Turbine Generator Packages (BTGP) in respect of total 1000MW power project. JPL has paid an advance of Rs 80.49 crore (Rs 804.9 million) to BHEL for supply of BTGPs for first 500 MW Power Project. Advance for second 500MW Power Project will be released to BHEL shortly. First 500MW power project will be completed by October, 2007.


Himachal has surplus hydel potential


October 17, 2004. Himachal Pradesh is fast becoming as the ‘Hydel Power State' of the country. The State has more than 20,000 MW of hydel potential, which is about 25 per cent of the total available potential of the country. Since the demand for power was growing at a much faster pace than the availability of power, the Government had assigned utmost priority to the power sector. The Government has made a perspective plan to harness 2773 MW under 10th Plan and 7755 MW under 11th Plan. As such by the end of 2012, at least 10, 528 MW potential was proposed to be added by execution of various hydel projects in the State. The  Government was adopting a prudent policy under which projects would be developed in the State sector and private sector besides joint venture between the State of Himachal with Central Power Sector undertakings and with other State Governments. Nathpa-Jhakri (1500 MW) and Chamera-II (300 MW) have been commissioned in the recent past. At present seven hydroelectric projects with aggregate generation capacity of 322.5 MW are under execution under State sector by State Electricity Board. In order to give an extra boost to the transmission and distribution side, a large number of schemes had been prepared to strengthen the present transmission system under Accelerated Power Development and Reform Programme.


TPC to seek $2 per million btu for Bangladesh project 


October 14, 2004. Tata Power Company (TPC) is looking at the gas price of around $2 per mmbtu for setting up a 1,000-mw power project in Bangladesh. TPC inked Expression of Interest (EoI) with the Bangladesh Board of Investment (BoI) for the same, will need about one million tonne of gas annually.  The company estimates the per megawatt cost of Rs 2.50 to Rs 2.75 crore (Rs 27.5 million) for the proposed 1,000 mw gas project. The company may have to sell some amount of power to Bangladesh, use some for captive purpose and the balance will be transmitted to India.  Details are being worked out as Bangladesh authorities will like the power to be supplied at the least cost.  Analyst tracking the power sector said that the gas price of around $2 per million BTU is quite competitive.  According to a five-point wishlist, Tata group chairman Ratan Tata sought facilitation of speedy implementation of the project, good pieces of land, smooth supply of gas for 20 years, competitive price of gas and similar incentives given by the Bangladesh government to other export-oriented industries in Bangladesh.


Thermal plant stone laid inn Haryana


October 14, 2004. Haryana Chief Minister Om Parkash Chautala laid the foundation stone of the Din Bandhu Sir Chhotu Ram Yamuananagar Thermal Power Plant (2X 300 MW).  Addressing a public gathering, Mr Chautala claimed that the late Chaudhary Devi Lal conceived the thermal plant but the project could not take off because of the Congress government at the Centre. According to him the then Central government (of Congress) on March 28, 1993 had written to the state government that there were no funds for the plant. Reliance Energy bagged the Rs 2,097 crore (Rs 20.97 billion) turnkey EPC (engineering, procurement and construction) contract in a competitive bid awarded on September 30. The first unit of the project would be commissioned by March 2007


Alamatti powerhouse unit to be opened


October 14, 2004. The stage is set for the inauguration of the 55-MW second unit of the Alamatti Dam Powerhouse. All installations are ready for the second unit. According to sources in Karnataka Power Corporation Limited (KPCL), a subsidiary of the State Government, the trial run is expected to be conducted soon. The Rs. 674.38-crore (Rs 6.74 billion) powerhouse, which is coming up at the dam across the Krishna, will have an installed capacity of 290 MW on its completion. It comprises a mini unit of 15 MW and five units of 55 MW each. KPCL, which has a financial tie-up with the Power Finance Corporation, has spent Rs. 350 crores (Rs 3.5 billion) on the project so far. The second unit would be synchronised by October 29 and the third, fourth and fifth units by January 14, February 25 and April 29, respectively. The last (sixth) unit would be in place by July 1, 2005. The work was ahead of schedule by at least three to four weeks, he claimed. The 15-MW mini plant, which was commissioned early this year, has so far generated 30 million units, and KPCL has set a target of 300 million units for the current season.


President to inaugurate Panipat thermal unit


October 12, 2004. The President, A.P.J. Abdul Kalam, will dedicate to the people of the State the 250 MW seventh unit of the Tau Devi Lal Thermal Power Station at Panipat. The seventh unit of the project has been completed in a record 30 months by Bharat Heavy Electricals Limited. With the addition of this unit, the power generation capacity of the State would increase to 1,110 MW. Also, additional 60 lakh (6 million) units of electricity would be generated per day from this unit, which has been set up through modern management techniques and rigorous monitoring by the State Government. The eighth unit of 250 MW of this power station is in an advanced stage of construction and would be commissioned in December 2004, two months ahead of schedule. The cost of the project for turn key execution is Rs 1,785 crores (Rs 17.85 billion), which is the lowest among the contemporaneous projects. The State Government has contributed 20 per cent of the project cost by way of equity and remaining 80 per cent has been raised as loan from the Power Finance Corporation.

Transmission / Distribution / Trade


BSES launches scheme for street lights


October 17, 2004. In view of the festive season, the BSES, which is responsible for distribution of electricity in two-thirds of the Capital, launched a special drive christened "Roshni" to ensure that over 2.3 lakh (230,000) streetlights in its distribution area function properly from late evening till early morning. The BSES said these streetlights would be switched on during sunset hours to add to the festive spirit, which has been heralded by the beginning of the Navratras and the holy month of Ramadan, which would be followed by Dussehra, Durga Puja and Deepawali.  In order to make the drive successful, BSES has requested the Delhi Transco to ensure that the 50 MW of power required for lighting these streetlights was made available without any interruption.


Tungathurthy substation in Hyderabad


October 15, 2004. The Chief Minister, Dr Y.S. Rajasekhara Reddy, will commission on 132 KV substation and transmission line constructed at a cost of Rs 7 crore (Rs 70 million) at Tungathurthy in Nalgonda district. The substation was constructed under the Rs 1,436-crore (Rs 14.36 billion) special scheme taken up by the Transmission Corporation of AP for strengthening the power distribution system. 


Scheme to strengthen power transmission in South


October 14, 2004. The Cabinet Committee on Economic Affairs has approved an investment of Rs. 285 crores (Rs 2.85 billion) for strengthening the power transmission system in the Southern region. The project is expected to help particularly Bangalore in getting a more reliable power supply. The Union Finance Minister, P. Chidambaram, said the project envisaged establishment of a 400 kV DC transmission line from Raichur to Gooty, which would serve as a trunk corridor for transfer of bulk power from the Eastern to the Western region through Parli-Raichur-Gooty-Hiriyur-Mysore. This would help strengthen the existing transmission network in Southern region to cater to growth in installed capacity and power demand and provide for a more reliable power supply to Bangalore through 400 kV Neelamangala-Somanhally transmission line.


Power Grid in pact with Dutch firm for global bids


October 14, 2004. Power Grid Corporation of India Ltd has signed a memorandum of understanding with ECC Kema, a Netherlands firm, to bid jointly for international projects. The company's international bids have largely proved unsuccessful but for the one project in Afghanistan. Power Grid, which lost out on three bids in Africa, is now looking at doing better armed with a partner whose expertise is in transmission system design, pricing and low despatch systems. To start with the duo are bidding for projects in Uzbekistan. With a domestic investment target of Rs 71,000 crore (Rs 710 billion) by 2012, the corporation is negotiating for loans grossing about $ 2 billion from World Bank and Asian Development Bank (ADB). Of the targeted Rs 71,000 crore (Rs 710 billion), the corporation will have to independently raise Rs 51,000 crore (Rs 510 billion), with only Rs 20,000 crore (Rs 200 billion) earmarked to be brought though private participation. Having developed the northern, eastern and southern regions well, the National Grid will now turn its attention on the western region and is looking at an investment of $ 1 billion there, next. With National Grid which currently has the transmission capacity for 9,000 MW, will go up to 9,500 MW by December. 


PowerGrid plans Rs 50 billion investment in southern region 


October 13, 2004. Power Grid Corporation of India, which has invested Rs 5,580 crore (Rs 55.80 billion) in the southern states of Andhra Pradesh, Karnataka, Tamil Nadu, Kerala and Pondicherry, would invest about Rs 5,000 crore (Rs 50 billion), including Rs 1,500 crore (Rs 15 billion) in Tamil Nadu, on projects under implementation or on new projects by 2007. The investments would mainly be on inter-regional links connecting the region and on upgradation or augmentation of the existing links.  The Cabinet Committee on Economic Affairs (CCEA) would decide on a Rs 600 crore (Rs 6 billion) project for 'system strengthening' in the region soon. This would include a power ring around the Chennai metro. The major inter-regional links are the southern region-western region 1000 MW high voltage direct current (HVDC) back-to-back station at Chandrapur, southern region-eastern Region 500 MW HVDC back-to-back at Gajuwaka and southern region-eastern region interconnector-II - 2000 MW HVDC Bi-pole from Talcher to Kolar.


Tatas to help save power on Raisina Hill


October 19, 2004. With the energy crisis looming large over the country, the first citizen of India, President APJ Abdul Kalam is setting up standards for saving power. Following an energy audit carried out in Rashtrapati Bhavan, Kalam has asked the Bureau of Energy Efficiency (BEE) to implement steps for saving energy in the Capital's Lutyens built structure spread over 200,000 square feet with 340 rooms spanning four floors. Following a tender, Tata Honeywell Limited has been awarded the task to save energy in Rashtrapati Bhavan. Also, at least eight more such important buildings in New Delhi have been earmarked by the Bureau of Energy Efficiency, including the Prime Minister's Office (PMO), where such energy savings and energy efficiency improvement activities is to be undertaken in the recent future through the Energy Service Company (ESCO) participation. The entire process, proactively handled by Kalam himself, is however, on the line of the Federal Energy Management Programme (FEMP), which has recently improved energy efficiency leading to huge energy savings in the White House. 


Discoms keen on own plants


October 19, 2004. Officials apprised Ms Dikshit that Tata Powers and BSES are keen to set up their own power plants in Delhi.  Efforts are on to acquire land for the building of 1000 MW power plant in north Delhi area.  Only 33-35 per cent power is generated in Delhi. The rest is to be purchased form other states. Also, the problem faced due to failures in Northern Grid can be avoided.


Policy / Performance


Dabhol revival may cost Rs 18 billion


October 19, 2004. The finance ministry has estimated that about Rs 1,800 crore (Rs 18 billion) would be needed to restart the Dabhol Power Plant (DPC), lying idle for the past three years.  It has asked the power ministry to take up this (cost) aspect at the next meeting of the empowered Group of Ministers, which is looking into the ways to restart the plant.  This cost is required to complete the Liquified Natural Gas (LNG) plant, completion of Phase-II and payment of contractual charges to GE and Bechtel, the ministry of finance said in a communication to the power ministry.  Besides the financial assessment, the ministry has estimated that it would take 18 months to complete all these facilities before regenerating power from the plant.  If the plant is to be run on LNG, Phase-I, Phase-II and LNG plant as well as breakwater will have to be completed. Thus, an early solution to the troubled DPC looks difficult, especially in the backdrop of GE and Bechtel threatening to walk out of the deal.  The take-or-pay pact with Oman Gas for LNG would also need to be re-negotiated. This would require cancelling the old PPA for which GE may not agree, it said. As per the proposal by GE, state-run NTPC and Gail would be included as the prime contractor and interim operator respectively till a new vendor was found. 


Rising LNG prices hold up Dabhol Power revival


October 13, 2004. High prices of liquefied natural gas (LNG) in the international market are the latest roadblock holding up the revival of the Dabhol Power project. The beleaguered project is threatening to become unviable, as LNG prices have shot up by over 60% during the past year. The state government had said that electricity from the power plant should not cost more than Rs 2.70. At the current LNG price levels of $5.15 per million British thermal unit (mBtu), the cost of electricity from Dabhol will spiral to around Rs 4 per unit, making it completely unviable.  With LNG prices shooting up, talks between Indian lenders to DPC, led by IDBI, and the offshore lenders have hit another hurdle. LNG industry analysts have predicted a further rise in prices. They say the current levels of $5.15 per mBtu will be the low for the year. Power and fertiliser industries, the largest consumers of natural gas in India, are willing to pay no more than $3.5 per mBtu for the fuel, while the landed price of LNG on the Indian coast itself works out to over $5.2 per mBtu. Regasification costs, taxes and transportation rates add another dollar to the price.


Power demand to increase in Delhi


October 19, 2004. The Delhi government announced that there were adequate tie-ups with trading agencies like Tata Power, Adani Exports and Power Trading Corporation for the city's electricity supply. Power demand is estimated to shoot up to 3400 MW. And though agreements for November and January have been firmed up, Delhi is likely to have a rough December. As of now, there is a shortage of 85 MW for December. The city's residents have had a tough time this summer due to lack of enough supply from Nathpa Jhakri power plant. This, coupled with low rainfall, led to shortage in the capital that is heavily dependent on outside sources. While BSES had completed electrification of 300 of the 479 unauthorised colonies, NDPL had finished the electrification process altogether. Delhi chief minister Sheila Dikshit has asked the chief secretary to convene a meeting with industry associations as most of the rural and industrial electrification is being done by the associations themselves.

 ‘Minimise power losses’


October 16, 2004. President A P J Abdul Kalam has asked the industry to minimise the losses from transmission.  Kalam said that Gujarat and Rajasthan should be the hub of India solar energy as both the state enjoy 'sun shining' throughout the year. Saying that the country's major concern is now the loss of power in transmission, which in India ranges from a whooping 40 to 50 per cent.  "When we generate 78,000 MW of power, the consumer get only 47,000 MW, whereas in the developed countries, the loss is only around 15 per cent. Hence, comparatively we have an additional loss of 19,000 MW of power and to produce this 19,000 MW power, we need to invest at least Rs 76,000 crore (Rs 760 billion) as one MW of power costs minimum Rs 4 crore (Rs 40 million). "This is the magnitude of the problem we are facing and I urge the industry to take urgent action to remedy the situation and bring down losses working on mission mode. In this collaboration between producers, transmission engineers and R&D specialists is required," Kalam said.


Investment in power sector increases


October 16, 2004. While strategic investors are in talks to pick up minority stakes in Reliance Energy's Dadri power project and Torrent's new mega project in Surat, foreign institutional investors (FIIs) have picked up substantial stakes in Reliance Energy and Tata Power. The just-concluded initial public offer from National Thermal Power Corporation seems to have attracted a large number of foreign institutional investors. Industry officials said Reliance Energy (REL) is likely to offload a part of its equity stake to some foreign investors in its Dadri project. Torrent is planning to offload a 40% stake in its new 1,050-MW project in Surat. The project has already achieved financial closure, with IDFC lead-arranging the debt, of over Rs 2,000 crore (Rs 20 billion).  Reliance Energy has also seen its FII stake going up from 14% to 17% during the second quarter ended September 30. The New Economy Fund has picked up 1% in the company, while the Government of Singapore has sold part of its stake. Other major FIIs still holding REL shares are Emerging Markets Growth, City Group Global Markets Mauritius and Small Cap World Fund.


Strategy to strengthen power sector


october 15, 2004. The United Progressive Alliance Government will ensure that all the 1.25 lakh (125,000) villages in the country have power supply in the next five years, the Union Power Minister, P.M. Sayeed, has said. Mr. Sayeed said the target for power generation under the 10th Plan was 41,000 MW and 60,000 MW at the end of the 11th Plan. Mr. Sayeed said the Centre had decided to adopt a three-pronged strategy aimed at strengthening the power sector. They included increase in generation capacity in phases, bifurcation of regional distribution units and proper distribution to all end users. He said preventing transmission and distribution losses would result in a net saving of 23 per cent of the power generated. He said the power cables in many places should be replaced to prevent transmission and distribution losses. He urged the governments to initiate action in this connection.


$30 mn Indo-US power reform initiative launched 


October 14, 2004. The US and India launched a $30 million five-year initiative to expand bilateral co-operation on electricity distribution reform in India. Representatives of the government and the US Agency for International Development (USAID) will co-operate to bring light and opportunity to millions of people across India through the Distribution Reform, Upgrades and Management (DRUM) project. At the launch, US ambassador David C Mulford said: "We are partnering with the government of India to demonstrate that commercially-viable power utilities are key to meeting consumer needs and expanding supply." This project furthers the co-operative relationship that continues to evolve between the two democracies, he added. Power secretary RV Shahi inaugurated the event, which included a signing ceremony between the US department of agriculture's rural utilities service (RUS) and the Indian Rural Electrification Corporation (REC). These American and Indian counterparts will examine the US experience in rural electrification and then tailor it to India's context.


‘Power generation should be given to panchayats'


October 14, 2004. The Rajasthan Minister for Rural Development and Panchayati Raj, Kalulal Gujjar, has called upon the Centre to bring about reforms in the policies in the power sector and amend the energy laws to devolve the right of power generation and distribution on village panchayats. This significant step would help strengthen the Panchayati Raj system at the grassroot level, Mr. Gujjar said.  He welcomed the proposal for power production by the public sector units and private companies with the cooperation of village panchayats and expressed the hope that it would make the roots of Panchayati Raj stronger. The Minister, while requesting the Centre to take steps for providing the generation, transmission and distribution rights to village panchayats, sought more resources and authority to the panchayat bodies.


Efficient use of energy vital for economic growth


October 14, 2004. The Chief Minister, N. Dharam Singh, flanked by William Ramsey, Deputy Executive Director, International Energy Agency, and the Minister for Energy, H.D. Revanna, at the workshop on ‘Standards and labelling for consumer appliances,' in Bangalore. Energy, an important component of economic growth, has to be efficiently used to "bridge the gap between demand and supply," the Chief Minister, N. Dharam Singh, said. He stressed the country's energy needs had to keep up with its socio-economic and developmental objectives. Karnataka had quite a few projects on hand the second unit of the 290 mega watt (MW) Alamatti hydel project was ready for commissioning while work on the 1,400 MW combined cycle project in Bidadi was progressing. But, massive increase in generation capacity would not alone meet the developmental needs of a growing economy, especially one that hoped to achieve double-digit annual growth. For that, productivity had to improve and energy costs should come down. "We need to shift our energy policy from a supply-dominated approach to an integrated one comprising investment in capacity addition, efficiency in generation, transmission and distribution, and more end-use efficiency and renewable technologies," he stressed.








CNOOC’s Bohai Bay oil fields start production


October 12, 2004. CNOOC Ltd. China's dominant offshore producer of crude oil and natural gas, said oil fields at its project in Bohai Bay have started operation, producing about 16,000 barrels of oil per day. The BZ 25-1/BZ 25-1S project, 83.8 percent owned by CNOOC and 16.2 percent by U.S. based ChevronTexaco Corp, has come on stream successfully, it said in a statement. The project is located in the east part of China's Bohai Bay in 20 meters of water, 127 kilometre southeast of Longkou City. Phase two is expected to be on stream by early 2006.


ChevronTexaco announces deepwater oil discovery


October 12, 2004. Chevron Overseas Congo Ltd, a subsidiary of ChevronTexaco Corp. and its partners announced a significant discovery at the Lianzi-1 exploration well in the deepwater area between the Republics of Angola and Congo. The discovery, in the shared 14K/A-IMI Unit, is on the same stratigraphic trend as previous Block 14 deepwater crude oil discoveries at Landana (1998) and Tombua (2001) in Angola.The Lianzi-1 exploration well was drilled in 909 meters (2,984 feet) of water. The well encountered two oil bearing reservoirs and a drill stem test of one of the intervals flowed at a rate of more than 5,000 barrels of oil per day (40 degrees API) on 40/64 inch choke.


Adnoc plans mega oil and gas projects


13 October 2004. Deputy executive chairman of the Abu Dhabi National Oil Company (Adnoc) Abdullah bin Nasir Al Suwaidi has said that Adnoc and its other companies of the group were planning mega projects to increase oil and gas output in the near future. Al Suwaidi, who is also the chairman of the company’s exploration and development department, said the projects were being implemented on the government’s directives to sustain current output ceiling and increase it at carefully studied rate that conform to international approach to tackle the increase in demand for the commodity.  He disclosed that UAE’s crude oil output currently stands at 2.5 million b/d. However, this will rise to 3 million b/d according to the plan and programme, he said and added that various scenarios had been drawn to raise the production.  He said the production capacity of the Abu Dhabi Company for onshore oil operations (Adco) from the current ceiling of 1.2 million b/d to 1.4 million b/d while Abu Dhabi’s offshore oil output capacity will also be boosted from the current 47,000 b/d to 600,000 b/d by the Abu Dhabi Marine Operating Company (Adma-opco). This is to be achieved by using modern technology to develop the upper Zakum field to increase its current output of about 550,000 b/d.


Russia ready to sell major Yukos field


October 13, 2004.  The battle between Russian President Vladimir Putin and Yukos, the country's largest oil producer, intensified after government officials announced plans to sell the company's key energy fields at rock-bottom prices. Yukos' Yuganskneftegaz fields, which pump roughly 1 million barrels a day, will be sold for $10.4 billion, a nearly 60 percent discount from previous valuations, according to the Interfax news agency. Those fields contain reserves estimated at 90 billion barrels, or 20 percent of Russia's total reserves, according to Yukos' estimates. This latest move on Yukos and Mikhail Khodorkovsky, who stepped down as chief executive after being jailed nearly one year ago on tax-evasion charges, looks like the beginning of the Kremlin's endgame to dismantle the oil producer.


Opec 'ready with spare capacity'


October 13, 2004. The oil ministers of Opec heavyweights Saudi Arabia and Kuwait have pledged to maintain output after prices hit new peaks at the end of last week. But though they are maintaining spare capacity, they stressed bringing it onstream was unlikely to cool prices. Prices are expected to come under renewed pressure as a four-day oil workers strike begins in Nigeria, Africa's biggest oil producer.  The head of Nigeria's main union body has been freed after a day in custody. Against the twin pressures of unabated high global demand and concern over supplies, US light crude ended the week at $53.31. In London Brent crude reached a record £49.75 before closing at $49.71


Lukoil hires Schlumberger for Saudi gas seismic


October 13, 2004. Russian oil major Lukoil said it had hired a unit of the world's largest oil services firm Schlumberger to explore for gas in its joint venture with Saudi Aramco. Lukoil said that it had signed a contract for 2D and 3D seismic surveys on onshore Contract Area A in the northern part of Rub al-Khali desert in Saudi Arabia. The contractor for the project, WesternGeco, a division of Schlumberger, was selected at a tender, the statement said without giving details. Work will begin next month and be conducted through 2005 to prepare the structure for exploration drilling in 2006. Lukoil, one of Russia's two top producers with output of 1.7 million b/d, has said it would borrow $215 million to fund exploration on the block over the next five years, which includes a seismic survey and 9 exploration wells.  In January, Lukoil joined a small club of foreign energy firms with a foothold in Saudi Arabia, announcing a deal to find and pump gas in the world's top oil producing nation under a project known as Block A, covering 29,900 square kilometres.


14.2 trillion cu.m. of South Pars gas belongs to Iran


October 17, 2004. Those neighboring countries entering into partnership with Iran in joint oil and gas fields should regard Iran’s indisputable share of these fields. Alireza Montahai, an expert in the National Iranian Oil Company (NIOC), said Iran shares considerable parts of oil and gas fields with Qatar, Oman, Saudi Arabia, Kuwait, Iraq, Turkmenistan, and the UAE, adding that they extract oil and gas from the joint fields more than Iran. Iran’s share of South Pars gas include 7% of the total world capacity (14.2 trillion cubic meters), Montahai uttered. “It comprises 38.6% of the country’s gas reserve,” he added.


Trinidad raises first offshore gas rig


October 17, 2004. The drilling platform being built for bp Trinidad and Tobago LLC the Trinidad branch of London-based BP Amoco PLC s scheduled to be completed in March and be fully operational in January 2006. Several other platforms already are extracting natural gas off the former British colony, but the one under construction in the southern town of La Brea is the first to be built in the country instead of along the U.S. Gulf coast. When the 900-ton, four-level platform is complete, it will be lifted with cranes and installed 30 miles off Trinidad's southeast coast.  The platform will extract some crude oil, but its primary purpose is to extract natural gas for plants operated by Atlantic LNG in the southern town of Point Fortin, about 45 miles south of the capital, Port-of-Spain.


Vietnam seeks bids in S. China Sea


October 16, 2004. Vietnam, Southeast Asia's third-largest oil producer, is looking for bids to explore parts of the South China Sea that the government said may hold the equivalent of a sixth of the nation's total oil and natural gas reserves. An area known as the Phu Khanh Basin may contain the equivalent of 5.4 billion barrels of oil, or 16 percent of the 33.6 billion estimated to lie in Vietnam's continental shelf.  Bids are due at the end of March for nine exploration areas. Record-high oil prices above $50 a barrel probably will spur interest in the region from companies.  The country's biggest oil field, Bach Ho, is located in Cuu Long. Operated by a Russian-Vietnamese joint venture, the field has produced about 239,000 barrels a day this year. The second-biggest field, Su Tu Den, in which Houston-based ConocoPhillips is the top foreign investor, is also in Cuu Long and was producing about 88,000 b/d earlier this month.


China's Sinopec sees 2005 crude imports up 10pct


October 18, 2004. China's Sinopec Corp. Asia's biggest refiner, expects its crude oil imports to rise by 10 percent in 2005 from this year's estimated 100 million tonnes, the company's president said. "We expect China's oil products demand growth to slow slightly from this year to about 8-10 percent," Wang Jiming said.

Norsk Hydro sticks to long-term oil/gas output goal


Oct 18, 2004. Norway's Norsk Hydro  said that it stuck by a target to raise oil and gas production yearly by an average of at least eight percent through 2007 despite a rig workers' strike seen denting 2005 output.  Production would catch up with the goal even though the strike, which has lasted since July, could have a slight impact on 2005 oil and gas output.


Iran to invest $130b in upstream energy sector by 2020


October 19, 2004.  Iran is set to invest 130 billion dollars in upstream energy sector from 2005 to 2020, said a National Iranian Oil Company (NIOC) official here. Samad Mo’men-Bellah added, “Out of the figure, 40 billion dollars goes for development of the oil sector, 45 billion dollars for gas, 25 billion dollars for petrochemicals, and 20 billion dollars for power projects. The investments would help Iran increase the oil output by 250,000 b/d by the next yearend, said the official adding that gas sector would witness a 20 percent growth in production.  According to the latest reports, Iran’s in-place oil reserves surmount 92 billion barrels, seven percent of the world’s total reserves. The figure is predicted to reach 133 billion barrels due to future exploration. Most of Iran’s reserves are recorded on southwestern oilfields and joint borders with Iraq and Persian Gulf littoral states, noted Mo’men-Bellah. According to him, 25 out of 32 oil reserves of the country are offshore.


Japan to ask China not to explore for gas in Japanese waters 


October 18, 2004. Japan will urge China to stop gas exploration projects in the East China Sea if they occur within Japan's economic waters and will discuss the issue in bilateral talks planned later this month, senior government officials said. Japan and China have agreed to hold senior bilateral working-level talks on the issue Oct. 25 in Beijing. Hosoda, Japan's top government spokesman, said that exploring for energy resources in the area "is a pressing issue given the current situation of oil," and that the two countries should first fix a line dividing their economic zones through negotiations. 




Asia exporting 80,000T Oct diesel to S. America


October 12, 2004. Asia is exporting at least 80,000 tonnes of gas oil to South America in October and the short-lived export opportunity across geographies helped to ease the regional supply burden amid thin demand, traders said. The price spread between U.S. Gulf December waterbond (barge) diesel and October benchmark Singapore gas oil swaps, including premiums, was pegged at around $6.70 a barrel.


BOC to supply hydrogen to BP and Sunoco


October 13, 2004. BOC a leading supplier of hydrogen and other gases to the global refining industry will build a world scale hydrogen and utilities complex to supply BP and Sunoco oil refineries in Toledo, Ohio. The complex will be capable of supplying over 120 million standard cubic feet a day of hydrogen (H2) to the Sunoco and BP refineries and to other potential customers in the region. BOC will also provide steam to the Sunoco refinery from the facility, which will be located at the Sunoco refinery. BOC is investing more than $100 million in the facility, subject to a favorable outcome of certain tax incentive considerations, which are anticipated to be finalized in the next two months. With the current schedule, construction is scheduled to start in November and the project is expected to be completed in the fourth quarter of 2005. BOC's partner for engineering and constructing the facility is LindeBOC Process Plants of Tulsa, Oklahoma. The complex will provide Sunoco and BP with a highly reliable and cost-effective source of hydrogen to enable the refineries to meet their production requirements for cleaner burning, ultra-low sulfur gasoline and diesel fuels.

Transportation / Trade


Alaska Pipeline years off


October 12, 2004. Energy companies planning a $20-billion gas pipeline to U.S. consuming markets from Alaska welcomed new federal loan guarantees but cautioned that other issues must be resolved before the huge project proceeds. Even if remaining items including a new fiscal plan from the Alaska government, a streamlined regulatory process in Canada and improvements in technology allowing lower costs are resolved quickly, it will be more than a decade before the gas can flow, officials say.  The U.S. Senate approved legislation to provide $18 billion in loan guarantees to cover 80 percent of costs. The bill also included language to speed up the permitting process for building the pipeline. The language on the pipeline was originally part of a broad energy bill that has been bogged down in the Senate. The moves gave new life to plans for a 3,500 mile (5,630 km) pipeline which would ship 4.5 billion cubic feet a day to the Chicago area via the Alaska Highway and through Canada.


Sempra and BP sign natural gas deal


October 12, 2004. BP and its Indonesian natural-gas partners have signed a 20-year agreement to provide 500 million cubic feet of liquid natural gas per day to a receiving terminal that Sempra Energy LNG plans to have operational by 2008. Sempra Energy LNG, a subsidiary of Sempra Energy of San Diego, expects to sign construction contracts later this year for the Energia Costa Azul terminal. The terminal will be based on the western coast of Baja California, Mexico, and is a joint project with Shell International Gas, a division of Royal Dutch/Shell. The gas supplies will be shipped from a natural-gas liquification terminal in Tangguh, Indonesia. BP is the largest stakeholder in the $5 billion Tangguh facility. The agreement will provide half of the Baja terminal's daily capacity of 1 billion cubic feet. Liquid natural gas is formed when natural gas is cooled to -260 degrees Fahrenheit. 


Gazprom, Petro-Canada eye Russian LNG by 2009


October 12, 2004. Russian gas monopoly Gazprom and Petro-Canada aim to start delivering Russian liquefied natural gas to North American markets by 2009 under a memorandum signed by the two firms. The two will consider building an LNG terminal in the Baltic port of Ust Luga near St. Petersburg, which would produce 500 million cubic feet a day or 3.5 million tonnes a year 2.5 percent of current global output and cost $1.2 billion-$1.5 billion. At the other end, in Canada, the re-gasification (terminal) would cost in the order of $500 million. Gazprom, the world's largest gas firm, is keen to supply U.S. markets, but as yet has no LNG facility of its own.  Gazprom has also been in talks with BP Plc. to swap its pipeline gas in Europe for BP's LNG and begin deliveries as early as 2005.


Alaska governor suggests state share in gas pipeline


October 13, 2004. Alaska's governor said that the state should consider investing in a massive natural gas pipeline proposed to ship natural gas from the North Slope to the Lower 48 states. Gov. Frank Murkowski, a Republican, told a state legislative committee that a state share in the project similar to the 12.5 percent royalty share in most oil fields  could help jump-start the long-desired project. Murkowski said the state should assume some of the financial responsibility for the project, which was approved by Congress earlier this week. The pipeline would be one of the largest private construction projects ever and take 10 years to build. Alaska House Minority Leader Ethan Berkowitz, an Anchorage Democrat and frequent Murkowski critic, said state investment in the pipeline is "clearly something we ought to take a look at" but also called for safeguards for the public to avoid any potential losses from partial ownership.


S. Korea's LG-Caltex LNG import set to grow


October 13, 2004. LG-Caltex Oil Corp.'s imports of liquefied natural gas (LNG) into South Korea may grow by more than 5-10 percent a year from 2008, an official with ChevronTexaco International Gas said. However, nagging uncertainties over plans to open up the country's gas and power sectors make it difficult to decide on further investments in the growing market. LG-Caltex Oil, South Korea's second-biggest oil refiner, plans to import about 1.5 million tonnes a year of LNG from 2008 for its own consumption and for its power generating affiliates.  The country's LNG demand for heating is set for higher growth and LG-Caltex's Yosu refinery may switch to using gas from fuel oil, he said.


Guangzhou hikes piped gas price 


October 13, 2004. The price for piped natural gas rose in Guangzhou, capital of south China's Guangdong Province, for the first time since 1995. Users now have to pay 2.5 yuan (30 US cents) per cubic meter of piped gas, compared with the previous price of 2.2 yuan (26 US cents). The Guangzhou Provincial Price Bureau said the hike was a result of rising raw material prices and production costs, as well as recent record high international crude oil prices.  The operator of the city's gas resources, the Guangzhou Gas Company, had requested the increase, which the bureau agreed to after a public hearing. Nevertheless, piped gas is becoming increasingly popular among local residents given that the price of bottled liquefied petroleum gas has been rising since last November. The price of one bottle of LPG climbed over the 80-yuan (US$9.80) barrier this month. It was just 60 yuan (US$7.30) in November last year. At some outlets in the city, the price per 15-kilogram bottle has soared to 85 yuan (US$10.40).


Dolphin Energy to sell natural gas to RAK


October 14, 2004. Dolphin Energy Limited will sell natural gas to the emirate of Ras Al Khaimah beginning March 2005. The gas will be delivered to the Ras Al Khaimah Gas Commission via a tie-in, near Qidfa in Fujairah with the existing Emarat gas pipeline network which serves the country's northern emirates. A quantity of 40 million cubic feet will be supplied daily for a period of two years and five months through to end of July 2007.  The gas sales agreement was signed yesterday by Shaikh Saud bin Saqr Al Qassimi, Crown Prince and Deputy Ruler of Ras Al Khaimah on behalf of Ras Al Khaimah Gas Commission and Ahmed Ali Al Sayegh, Chief Executive Officer of Dolphin. Dolphin is supplying gas to the emirate, further to the company's signing a Gas Sales and Purchase Agreement (GSPA) with Oman Oil Company in February 2003.


Russia LNG project to supply N. America


October 14, 2004. A consortium led by Royal Dutch/Shell Group that is developing gas reserves off Russia's Sakhalin Island said it has struck a $6 billion deal to supply liquefied natural gas, or LNG, to energy-hungry North America. Sakhalin Energy Investment Ltd., operator of the Sakhalin-2 project, said it signed an agreement to ship 40.7 million short tons of LNG to a regasification terminal in Mexico. Shell, which is building the Energia Costa Azul terminal in Baja California with California's Sempra Energy, is the buyer of the gas. The deal is the first that would funnel Russian LNG to the United States, whose demand for natural gas is surging as domestic supply dwindles. Under the agreement, Sakhalin Energy, whose partners also include Japan's Mitsui & Co. Ltd. and Mitsubishi Corp. will eventually send 1.76 million short tons of LNG, and shipments will begin in 2008. Sakhalin Energy's LNG production capacity is set to reach 10.56 million short tons a year.


Iran's peace pipe for South Asia


October 15, 2004.  Khalid Ahmed, executive director of the Daily Times and The Friday Times, speaking at a gathering of Indian and Pakistan journalists in New Delhi, stressed the important role that the gas pipeline from Iran to India could have in breaking the South Asian stalemate.  Ahmed thought that apart from the US$600 million that Pakistan stands to earn annually in transit fees, the pipeline would offer the government an opportunity to more effectively administer and modernize its "ungovernable" tribal population. "It is not a question of how much Pakistan will earn, but the fact that a pipeline will force Pakistani authorities to impose municipal laws in tribal areas, overruling their tribal decrees," he said. On the Indian side, a long-term supporter for the pipeline has been the distinguished energy expert R K Pachauri, who is director of the independent The Energy Research Institute recalled that soon after Ali Shams Ardekani, an Iranian economist (who also served a term as deputy foreign minister), first broached the idea of feeding energy-hungry India through a gas pipeline in 1989, many Indian politicians said the country could not mortgage its energy future to Pakistan. They then initiated a costly, time-consuming study for an alternate undersea pipeline.


Papua new Guinea-Australia gas pipeline


October 15, 2004. Cheetah Oil & Gas Ltd. the owners of the Highlands Gas Project have announced their decision to proceed to the Front End Engineering and Design (FEED) phase of development, at a projected cost of between US$80 million and US$100 million. The decision to proceed with the FEED development and engineering stage is based upon the success of Esso Highlands Limited (a subsidiary of ExxonMobil), operator of the Highlands Gas Project, in signing two new long term conditional gas sales agreements with Queensland Alumina Limited and CS Energy. The Highlands Gas Project is owned by Esso Highlands Limited; Oil Search, MRDC; and, Nippon Oil exploration, and is a proposed natural gas pipeline originating in Papua New Guinea and continuing to Brisbane, Australia. Cheetah Oil & Gas Ltd. is the second-largest petroleum license holder in the country of Papua New Guinea, behind only InterOil Corporation which controls 8.8 million acres.


Poland to buy compressed gas from Norway


October 18, 2004.  Poland intends to buy compressed natural gas from Norway until a planned pipeline between the two countries is completed, Polish Prime Minister Marek Belka said. "The projects for building such a pipeline are not very clear. While waiting for them to be realized some day we are interested in buying compressed gas," Belka said at a press conference with his Norwegian counterpart Kjell Magne Bondevik. Belka said Poland's national gas company PGNiG has signed a letter of intent on compressed gas purchases with Norway's Statoil, but gave no further details. Poland found its gas supplies from Russia temporarily cut off earlier this year when Gazprom halted deliveries to Belarus for nonpayment, leading Warsaw to explore the possibility of a pipeline with Norway to diversify its natural gas supply.


Shell to sell LPG arm


October 13, 2004. Goldman Sachs Capital Partners has teamed up with Kohlberg, Kravis Roberts, the US private equity firm, to bid for Royal Dutch/Shell's liquefied petroleum gas (LPG) business, which is valued at more than £1 billion. Shell has mandated Citigroup to sell the LPG business. The sale of the LPG unit is part of a $10 billion-$12 billion (£5.5 billion-£6.7 billion) asset disposal programme implemented by Shell in the wake of its reserves overbooking scandal. The company is selling underperforming and non-core operations to help it finance $45 billion of capital spending over the next three years as it tries to revitalise its stagnant exploration and production business.  As well as disposals in its downstream business, Shell also plans $5 billion of asset sales in exploration and production over the next three years. Recent sales include all of its oilfields in Bangladesh and Thailand. 

Policy / Performance


India, Vietnam give priority to energy cooperation


October 18, 2004. India and Vietnam blueprinted a three-year action plan to expand bilateral cooperation in diverse fields, even as the 12th meeting of the Joint Commission identified energy and information technology as possible priority areas alongside human resource development.  The energy sector was being considered important for "long-term" cooperation. While the Gas Authority of India could help Vietnam in the CNG sub-sector, Indian presence was already felt in the oil sector. India had evinced interest in refinery projects in Vietnam and also the downstream marketing of the refined products. This could be done through joint ventures or holding subsidiaries, it was suggested. The possibility of India's participation in Vietnamese power projects was also discussed. New Delhi was assisting Vietnam in research on peaceful uses of atomic energy, according to officials.


China scrambles to secure oil to meet import growth


October 13, 2004. China is scouring the world to secure more crude oil after record imports this year to fuel its projected strong but moderating economic growth in 2005, oil officials and analysts say. Chinese state oil traders forecast a rise of up to 20 percent, or more than 400,000 b/d., on top of the 2.5 million b/d it is buying now.  "We are hard pressed to fill that up from different sources," said a trader with Sinopec Corp, Asia's largest refiner. The Beijing-controlled state oil company is touting a new crude procurement strategy under the slogan: "Stabilising supply from the Middle East, develop Africa and explore the Caspian and neighbouring regions."  "China is getting into a global grasp, working up the whole world," said Al Troner, president of Seattle-based Asia Pacific Energy Consulting Inc. Oil demand in the world's seventh-larget economy is expected to slow to 5.6 percent from a heady 14.6 percent this year, the International Energy Agency said citing energy conservation measures and growth in coal-and-hydro-fired power generations. 


Petrobras hikes Brazilian gas prices


October 14, 2004. State-owned oil giant Petrobras raised Brazilian gas and diesel prices in response to soaring international petroleum costs, but investors who wanted a bigger hike sent the company's shares down. Petrobras, whose full name is Petroleo Brasileiro, raised the refinery price for gasoline 2.4 percent and set it 4.8 percent higher for diesel.  Consumers in the country of 182 million are expected to pay 1.6 percent more at the pumps on average for gas and 3.8 percent more for diesel when the increases go into effect, the company said. Investors had been hoping for increases of 10 percent or more, and sent Petrobras shares down 1.5 percent in Sao Paulo.  Petrobras produces nearly all petroleum in Brazil, but Latin America's largest country remains a net oil importer. Petrobras last raised gas and diesel prices in June, when crude oil prices were at about US$40 (€ 32.4) per barrel. Crude punched through the $54 (€43.74) per barrel level before easing slightly.


India in competition with China for oil blocks


October 15, 2004. Asian giants and economic rivals India and China are locked in battle to secure stakes in oil fields and blocks in the new energy haven of West Africa, officials and analysts say. Angola’s state-owned Sonangol reportedly blocked an Indian move to buy Anglo-Dutch energy giant Shell’s 50 per cent share in Block 18 for about 620 million dollars.  India’s state-run Oil and Natural Gas Corporation (ONGC) had almost closed with Shell, but the Chinese evidently cut a deal with the Angolan government at the last minute, resulting in Sonangol exercising its pre-emption rights. This stymied Shell’s move to sell its stake to ONGC, a deal that would have yielded about five million tonnes of crude oil daily for New Delhi from 2008-2009.   China managed to swing the deal by offering aid to the tune of $ 2 billion for a variety of projects to Angola, compared to India’s offer of $ 200 million for developing railways.  Aid-for-oil is part of a deliberate strategy adopted by the Chinese across West Africa, whose oil potential came into focus after the September 11 terror attacks, the analysts add. The amount of oil in the region is yet to be mapped, but Indian officials point to US studies which say Washington can rely on Gulf of Guinea reserves to cut its dependence on crude from the volatile Middle East by 25 per cent in the next decade. 


China plans revamp of overseas oil business


October 18, 2004.  China is considering ways to restructure the overseas businesses of its largest oil and gas producer, CNPC, including a $5 billion asset injection plan. PetroChina might need to pay $5 billion for CNPC's assets if the idea were to take off, the paper said, citing an unidentified source.  If the plan were to succeed, industry sources said, it could help oil-starved China streamline the overseas operations of the two companies. China, the world's second-largest oil consumer that imports 40 percent of its 6 million barrels of daily oil demand, has been driving its oil firms to acquire overseas assets since 1993. CNPC has poured billions of dollars into assets in Sudan, Kazakhstan, the Middle East and South America. Its annual overseas equity production of crude oil has reached more than 10 million tonnes.


Iran, Kuwait resume gas exports negotiations


October 18, 2004. An Iranian delegation arrived in Kuwait city to resume negotiations on gas exports to the Persian Gulf country.  This round of discussions aims to finalize an agreement and will focus on the quality amount and price of gas exports from Iran to Kuwait.  The official said that Kuwait has informed Iran it is not satisfied with quality and proposed price of gas and wants to negotiate a better rate. Kuwait has said that upon ratification of an agreement with Iran technical work for laying the pipeline will start immediately. The initial estimates are that the pipeline expenses will hover around $200 million. Kuwait has no gas reserves and in addition to Iran is negotiating with Iraq and Qatar for imports of gas. An official said in August that although Iran has embarked on extensive development of its gas fields, "it has only five percent of world gas production.  To achieve this aim INGC has four Liquid National Gas (LNG) projects deigned and is reviewing several other project for exports of gas to Persian Gulf Littoral states, Caucuses, Europe, Pakistan and India, Javadi underlined. The country produces 313 million cubic meters of gas daily which is slated to increase to 580 million cubic meters by the end of the fourth five-year development plan (March 2005-2010).






KEPCO to build power plant in China


October 14, 2004. State-run Korea Electric Power Corp. (KEPCO), the country's dominant power producer, broke the ground for the construction of two thermal power plants, each with a 50,000 kilowatt power generation capacity, in Henan Province, China, the company said. It said the plant-building project will step up the company's entry into the Chinese market. Following the completion of construction in July 2006, KEPCO will also take charge of operating the plants for 23 years and receive more than 10 percent in dividends per year, the company said.


Iranian nuclear power plant completed


October 14, 2004. Russia and Iran have finished construction of the Bushehr atomic power plant in the Islamic republic - a project the US fears Tehran could use to make nuclear arms. Diplomats in Moscow said the announcement made after Russian Foreign Minister Sergei Lavrov visited Iran, reflected Russia's readiness to press ahead with the project in return for Tehran's increased cooperation with the International Atomic Energy Agency (IAEA).


Durban's green power plant


October 14, 2004. The first "Green electricity" plant in Africa will go into operation in Durban next year. It will convert the "amazing power potential" of landfill methane gas from three local sites - in Mariannhill, La Mercy and Basasar Road in Springfield - to a total of 10 megawatts (MW) of electricity.  It will feed into Durban's grid and be enough to power 10 000 homes, said John Parkin, deputy head of plant and disposal at the municipality's Durban Solid Waste. The gas is produced from waste at the sites and is normally burned off to reduce odour problems.


Iran's power production to hit 12,000 MW


October 18, 2004. According to the Majlis approval, TAVANIR (Iran Power Generation, Transmission and Distribution Management Co.), in cooperation with the private sector intends to generate 12,000 MW electricity in upcoming years. The ever-increasing rise in the country's power consumption determines future of Iran's power industry.  Scientific estimations indicate that country's need for power will reach 60 MW in the next ten years for which new installations should be established equitable with the current ones. It is obvious that TAVANIR and Ministry of Energy would not be able to provide these installations without assistance of other organizations. Given that in the Third Socioeconomic and Cultural Development Plan and thereby the forth one it is planned to use capacities of the private sector, he noted that the Ministry of Energy has made programs that domestic capitals are used for achieving purposes of these development plans and amending power shortages. In future, Iran will produce electricity through the private sector as presently certain industrial factories are being managed by this sector. So far the private sector has taken measures in producing electricity, as its first power plant will come on stream in south of Isfahan in the closing months of the current Iranian year. The first phase (with the production capacity of 750 MW) of Rudshur 2000-MW Power Plant in south Tehran will also be operational next year.


Pak Govt's support sought for power projects


October 17, 2004. The Karachi Electric Supply Corporation (KESC) has sought support of Sindh government in implementing some approved projects relating to increase in local power generation facilities to overcome power shortage. According to the normal power load growth, the city would face power shortage of 394 MW in 2005 and 506 MW in 2006 even after availing 500 MW electricity from the national grid. While in 2007 there would be a shortage of 98 MW after availing 1000 MW from national grid (Hubco-KESC link would be established) and 80 MW from the DHA Co-generation plant. Therefore it is essential that besides the early link-up with Hubco, 150-200 MW power plants were needed on war footing within the city as it takes at least three years to set-up and start generation from a power plant. MD-KESC also suggested to the government that it should encourage and allow power plants up to 50 MW, which was within their jurisdiction in order to compensate the power shortages.


Russia invests $250 million to build Tajik hydroelectric power plant


October 16, 2004. Russia will invest $250 million in the forthcoming construction of the Sangtuda hydroelectric power plant in Tajikistan, 50 million of this out of the Tajik debt to Russia, Alexei Kudrin, Russia's Finance Minister, said. The arrangement will bring Russia a solid block of plant shares as soon as construction finishes. Other investors are welcome to join, he added.  If the plant is not built within four years, before December 31, 2008, or Tajikistan fails to transfer construction-oriented fifty million dollars out of its debt to Russia; or, again, if Russia does not obtain the expected stock, the fifty million will automatically rejoin the Tajik debt with four years' interest.  Russia reckoned with an understanding for the upcoming construction agreement even this year, and so did not collect six million dollar interest on the Tajik debt.


Coal gasification plant plan in the US


October 13, 2004. Cinergy Corp. expects to file plans before year's end to build a $900 million plant in Indiana to generate electricity from a process known as coal gasification.  Cinergy needs 1,000 megawatts of new electric capacity to serve its 1.6 million customers in Ohio, Kentucky and Indiana, and a coal gasification plant will help fill that gap. Last February Cinergy wanted to build a new plant using an environmentally friendly coal technology known as integrated gasification combined cycle. The process converts coal to a synthetic gas, which is then used to operate electric turbines. Cinergy is in talks with General Electric Co., the leading maker of gas-fired turbines, and Bechtel Corp., the giant engineering and construction company. Rogers said Cinergy would seek approval for the 600-megawatt plant. The company is leaning toward locating the plant near its Edwardsport, Ind., generating station north of Evansville. That plant now has three coal-fired generating units producing 160 megawatts of electricity.


Chile hikes power generator prices by 10 percent


October 18, 2004. Chile's government hiked by 10 percent the prices that electricity distributors pay to power generators, citing tight supply of natural gas from Argentina and higher oil and coal prices. The hike in the rates, called node prices, applies to the main transmission grid in central Chile, or the SIC, for the November to April period. The node prices represent between 40 percent and 50 percent of the electricity bill paid by end users and are set every six months by the government's National Energy Commission. Prices for the central system, which serves 90 percent of the population, were raised 6.7 percent last time around and were lowered before that. The commisison also raised node prices by 12 percent for the northern electrical system, SING, which supplies the country's huge copper mining industry.


Tatas to set up power plants in Bangladesh


October 19, 2004. The Tata Group of India has expressed keen interest in setting up both coal- and gas-based power plants in Bangladesh. In a faxed message to the Energy and Mineral Resources Ministry in Dhaka, the Indian business conglomerate thanked state minister A.K.M. Mosharraf Hossain for warm hospitality and showed interest in setting up a coal-based power plant in northern Bangladesh, said a ministry source. According to the energy ministry, some one million tons of coal will be produced only from the Barapukuria coalmine in Dinajpur district every year. State Minister for Energy and Mineral Resources Mosharraf told newsmen that the quality of the Bangladesh coal is superior to that of any country in South Asia in terms of fuel power. He requested Ratan N. Tata to set up a coal-based power plant in Bangladesh during the Tata Group chairman's recent visit to Bangladesh.


China official calls for more power stations


October 19, 2004. China needs to build more power stations to overcome the power shortages impeding the Chinese economy's rapid development, a senior official said. Zhang Guobao, vice-minister of the National Development and Reform Commission, said that China will require a power supply of 11,000 billion kilowatt hours by 2020, needing generating units with a total capacity of 2,400,000 megawatts.  China is building new power stations with a combined capacity of 160,000 megawatts generating units this year to meet increased demand, Zhang told 2,000 delegates from 37 countries and regions at the 15th Conference on Electric Power Supply Industry. ABB, the world's leading power and automation technology group, said China had decided to build 144 new power plants this year.  Official statistics show that the capacity of generating units which are under construction far exceeds 160,000 megawatts, reaching 240,000 megawatts. But many are very small generating units under a capacity of 135 megawatts, Zhang said.


Transmission / Trade


Alstom nets deals in power, transport


October 13, 2004. French industrial conglomerate Alstom has clinched a package of power and transportation deals worth more than €1.4 billion (US$1.68 billion) in the past four days during the visit to China of French President Jacques Chirac. An Alstom consortium was awarded a 134 million euro ($ 160 million) contract to supply Metropolis trains for the extension of Shanghai's metro line 1. The consortium, in which Alstom holds one third of the shares, will supply altogether 16 trainsets.  The French company also signed an agreement to transfer wet flue gas desulfurization technology to Harbin Power Equipment Company. The technology is used to reduce the emission of sulfur dioxide from power plants. The two contracts came three days after Alstom netted several contracts, worth a combined 1.36 billion euros (US$1.63 billion), to deliver trains, locomotives, hydroelectric turbines and pumping equipment to the Chinese market.


Shell considers sale of power venture


October 12, 2004. Royal Dutch/Shell group said it and Bechtel Corp were considering the sale of their power joint venture InterGen, which a source close to the situation valued at up to $3 billion, including debt. It was said that the process was at an early stage and that there could be no certainty of a sale.


Policy / Performance


SK strengthens ties with Vietnam in energy


October 13, 2004. SK Group, South Korea's fourth-largest conglomerate, said it will provide Vietnam with technological know-how in energy development and further expand its telecommunications business there.SK Corp., the group's oil-refining unit, signed an agreement with Vietnam's state-run oil company PetroVietnam to transfer technology and expertise on building and operating oil refineries, the group said.


BNB to lend US$175mn to power projects


October 14, 2004. Brazilian regional development bank Banco do Nordeste (BNB) expects to approve 500mn reais (US$175mn) in loans for electricity projects in the northeastern region by the end of the year, the bank's special projects superintendent Cláudio Frota told BNamericas.  The projects include wind and small-scale hydroelectric generation projects under the federal government's alternative energy source incentive program Proinfa and power distribution expansion projects, all located in the northeastern region where BNB operates. 


Pakistan, China sign document for Thar plant


October 15, 2004. Pakistan and China here signed a formal document on a work schedule for the construction of two Thar coal power plants of 300 megawatts each, worth $1 billion. The document was signed by a top official of the state-run Chinese company Shinhua Group, Wu Yuan and the leader of Pakistan delegation, Irfanullah Khan Marwat, Sindh Minister for Mines and Mineral Development. The company has given a commitment that it will start the work on the site by September, 2005. The first power project of 300 mw is expected to be functional by early 2008 and the second by September 2008. Marwat said that the Thar coal project will open new avenues in the field of coal-based power generation.


China power may buy parent assets


October 18, 2004 China Power International Development Ltd., a unit of the nation's fifth-biggest utility, may buy assets from its parent as early as mid-2005 as part of plans to triple capacity in five years.  The company may buy two of six plants it manages for the state- owned parent once restructuring is completed in about six months. It may also exercise an option to buy 25 percent of China-listed Shanghai Electric Power Co. The three assets would double the company's capacity to 6,112 megawatts.


Pak ministry told to prepare alternative energy plan


October 18, 2004. The Senate Standing Committee on Petroleum and Natural Resources has directed the Ministry of Petroleum to prepare an alternative energy plan and ensure effective use of available resources. Presided over by Senator Syed Dilawar Abbas, the committee, in a meeting held at the Parliament House, also called upon the government to gear up its efforts to optimize use of natural resources and look for mechanized production of minerals.


Renewable Energy Trends


Renewable Trends: National


ONGC, RIL adjudged greenest companies


October 18, 2004. Oil and Natural Gas Corporation has been adjudged the greenest company in the country while Reliance Industries has been ranked second by a survey conducted by Business Today - ACNielsen ORG-MARG. Five oil and petroleum sector companies, ONGC, RIL, BPCL, HPCL and Castrol India, are among the top 20 green companies, according to the survey. The other companies in the list include Ranbaxy Laboratories, Hindustan Lever, Larsen & Toubro, Maruti Udyog, and Hero Honda Motors, the survey added. 


Call to perfect know-how for bio-diesel production


October 12, 2004. The President, A.P.J. Abdul Kalam, today called for special efforts to scale up the technology recently developed by Daimler-Benz in collaboration with CSIR laboratories for the production of bio-diesel using the seeds of jatropha plants. Pointing out that the scientists have been successful in operating a Benz car from Pune to Delhi using a 10 per cent blend of the bio-diesel without any modification to the engine, he said it was time steps were taken to set up a fully integrated plant that would produce the bio-diesel on a commercial scale. He said technical consultants should come out with proposals that would help in setting up such plants. Several foreign consultants have evinced interest in taking up jatropha plantation and commissioning of plants in different areas of the country.


Clean energy becoming profitable


October 14, 2004. The recent decision by the Russian Government to ratify the Kyoto Protocol spells good news for project developers in India and other developing countries who are investing in renewable energy, energy efficiency and municipal waste to energy projects. Speaking at a discussion on `Opportunities, challenges and issues in the clean development mechanism (CDM) market', organised by Senergy Global, Ken Newcombe, senior manager of the World Bank's Carbon Funds, said there was an unlimited capacity to sell in the CDM market but time was running out. "The Russian ratification would bring the Kyoto Protocol into force enabling such projects to attract additional revenue from the sales of carbon emission reductions (CERs) through the CDM," he said.

Renewable Trends: Global


BT signs biggest 'green' power deal


October 14, 2004: Telecoms giant BT announced the world's biggest purchase of 'green' electricity in a deal that will see virtually all the company's power needs supplied by environmentally friendly energy. Under three-year contracts with British Gas and power worth several hundred million pounds, BT's depots, offices and 6,500 telephone exchanges will be powered mainly from sustainable resources such as wave, solar, wind and hydro-electric schemes. The deal will save emissions equivalent to the amount of carbon dioxide produced by more than 100,000 cars. The move was welcomed by the Government and campaign groups.


100 wind turbines to Alaska village


October 14, 2004 Northern Power Systems, Inc., a subsidiary of Distributed Energy Systems Corp., has been awarded a $1.9 million contract from Anchorage-based Alaska Village Electric Cooperative (AVEC) for seven of Northern's NorthWind(R) 100 wind turbines. The advanced-design 100 kW wind turbines will generate renewable electric power for 3 remote communities, in western Alaska, served by AVEC.


Sierra Club pushes renewable energy


October 14, 2004. A cleaner environment and a national policy promoting clean-fuel technology will create a million jobs and save the country billions of dollars between now and 2025, according to a report released by the Sierra Club and the United Steelworkers of America. The study, done by the nonprofit organization Redefining Progress, says a sound energy policy that pushes for renewable energy sources will create 65,000 jobs in Ohio and an additional 10,600 jobs in Kentucky.


FedEx to build solar-power system at Calif. Hub


October 18, 2004. FedEx Corp. the world's largest air-express shipper said it was building the nation's second largest private solar power system atop its hub in Oakland, California. The 904-kilowatt system will be second in size only to Fala Direct Marketing's solar system in Long Island, New York, which is 1.02 megawatts. FedEx's project, to be built at its hub at Oakland's international airport, is scheduled to begin operations in May, 2005. The Oakland solar project will provide about 25 percent of FedEx's annual power at the hub, where 1,700 people work. FedEx would not say how much the system will cost to build, but said up to 50 percent of the cost will be funded by state money administered through utility Pacific Gas and Electric. The project will convert light from the sun into electricity through nearly 5,800 solar panels built by Sharp. The panels will be installed by private company PowerLight, which this summer said it was helping to build the world's largest solar energy system in Germany which will be 10 megawatts.


GE has won $1.3 bln of wind turbine business


October 18, 2004. General Electric Co. said it has more than $1.3 billion in new orders and commitments for wind turbines, spurred by the recent approval of a government tax credit for renewable energies. GE's energy division has contracts to supply more than 750 megawatts enough power for 200,000 households of wind turbines for delivery this year and in 2005. It has commitments for another 750 megawatts, the company said in a statement. Earlier this month, the federal government approved an extension of the Renewable Energy Production Tax Credit, which provides a 1.8-cent per kilowatt hour credit for electricity produced during the first 20 years of operation. The credit will remain in place through December 2005. That is encouraging developers of wind projects to move forward, said Steve Zwolinski, the head of GE Energy's wind energy business.  GE targets wind turbines, solar energy and power plants that burn coal more cleanly as growth engines for its energy business as regulations tighten and power suppliers seek cleaner forms of energy.


Hydrogen Technology Park in Southfield


October 18, 2004.  The DTE Energy Hydrogen Technology Park, a three-year project between the Department of Energy (DOE) and DTE Energy to develop, install and operate a multi-use hydrogen station was inaugurated this week. The park will produce hydrogen from water using renewable energy and electrolysis enough hydrogen to operate a 10 stationary fuel cell generators for 10 hours a day and to re-fuel three fuel cell vehicles per day.


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