MonitorsPublished on Oct 26, 2004
Energy News Monitor I Volume I, Issue 18
Free power to all pump owners: Fit example of bad governance

Excerpts from the presentation of Mr Girish Sant, Prayas Energy Group, 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.  Transcript edited for print. 


First there is a distinction between the farmers who receive canal irrigation and get more subsidy and the farmers who have put up their own farms, have their own wells or have to lift water all the way out from a deep well, (if it is a hilly region). There is discrimination against those farmers. Second our whole agriculture system is trapped in a cycle of inefficiency. Beginning with the Electricity Board whose losses are 40 per cent by the time electricity reaches the farmer, a lot of money has been lost and the cost of supply has gone up.


Pumping systems are inefficient. Irrigation process is very inefficient. Then comes the cropping pattern; in Maharashtra, huge amounts of water is used by sugarcane growers. Our yields are also very low, which are roughly about one-third of Chinese average yield which is not even the best yield. Our processing at the next level, of sugar factories for instance, is also inefficient. And finally in marketing, storage and everything related to processing is excessively inefficient.


So, actually we are adding a huge amount of inefficiency at each point. There is a whole cycle of inefficiency and within that cycle if you want to make profits you are going to need a huge amount of subsidy input. This is a problem issue and now it has become an impossible issue. So, we have to, in a larger process, address this whole cycle of inefficiency and not just tinker with one component. Hence, it has to be a joint effort by the ground water department, the agriculture department and the industry department, which deals with the agriculture processing.


Bharat Patankar, who represents farmers, is a very senior activist representing drought prone farmers and his was one of the groups that have been demanding metered supply be made compulsory for all farmers. They have been saying that since the supply is not metered, the poor farmer is discriminated against because he doesn’t consume while the richer farmer does. So in that sense Bharat Patankar too would have been on the same side of the current debate. 


We know that there are some very valid points from the farmer’s point of view.  nabard for instance, gives loans for all these lift irrigation schemes. Till very recently, the whole economics used to be worked out based on the assumption that electricity tariffs would approximately be Rs 100 per HP per year. They never realized that electricity tariffs can go up; they worked out a cost-benefit analysis under such a low electricity tariff and then passed the scheme.


Now the whole scheme in place is designed to pump water for Rs 100/HP.  If you charge electricity at Rs 2 or Rs 1.80 it will not be economical. The farmer is locked into infrastructure which is created because of historical low prices.  That is the structure that has been developed.


What is the quantum of subsidy that we are talking about today and over the next five years? Who benefits? What will be the impact and the consequences?


According to mseb’s affidavit it should be around 1700-1800 crores (Rs 17-18 billion) per year as per the existing tariff set up by the commission. The existing tariff set up by the commission for agriculture is around Rs 1.80, whereas the average cost of supply is around Rs 3.  Even then as per merc, farmers are getting a cost subsidy in the tariff i.e. the difference between Rs 3 and Rs 1.80 that is Rs 1.20.  The merc wants to increase it to Rs 3 in few years. Some of the commissions are taking a view that the average cost of supply is not the appropriate value under the new Electricity Act. With the new Act they are taking a view that cost to serve needs to be slightly lower for agriculture because power to agriculture is cut off when the demand is at the peak. So they should be charged full cost and cost to serve becomes around Rs 2. But even with that assumption, merc’s tariff today is more or less the same as the cost to serve. So the farmers’ bills are unlikely to go down.


In addition, the Maharashtra government would be subsidizing all the lift irrigation schemes owned by the state government to lift water from Krishna in the upper regions, which are drought prone areas. On a conservative estimate, around 500 mw would be constructed in the next five years, which means that the government’s expenditure for delivering water would be 600 crores or Rs 6 billion (300 crores or Rs 3 billion units per year multiplied by approximately Rs 2). In addition to that there are four lakh (400,000) pending agricultural connections. For each connection mseb says that it needs an investment of about Rs 50,000, in terms of constructing the poles, upgrading the distribution system since the load increases from time to time etc.  The minister apparently has directed mseb to release all of those connections immediately. Whether it would be possible to physically release those connection immediately, is a debatable issue. But as and when it does happen, it would require an investment of another 2000 crores (Rs 20 billion).


In addition to this, since the Maharashtra government announced this subsidy the difference in the tariff set by merc has to be filled in by the government’s budgetary provision. So the government has to actually allocate that amount in the budget. 



Why did subsidies increase? If the agriculture usage goes up, which I assume would be about 5 per cent per year and if the agriculture tariff goes up by say 10 per cent per year, naturally subsidies will increase.  Once power is made free, it is very unlikely that any farmer will pay the arrears. At the end of five years, that would put a burden of an additional 2000 crores (Rs 20 billion) over the existing 1800 crores (Rs 18 billion) annual arrears based on the assumptions of increasing consumption and increasing tariff.


A conservative estimate of additional demand gives a value of about 500 MW.  The Irrigation Commission estimates it to be 1500 MW.  Well, even if that doesn’t happen, this estimate shows that in the next five years this subsidy will be 14,000 crores (Rs 140 billion) and you can compare that to Maharashtra government’s budget for five years, it is around 60,000 crores (Rs 600 billion) in the Tenth Plan. So, the 14,000 crores (Rs 140 billion), which were not planned suddenly comes up and it is a substantial part of the Rs 60,000 crore budget (Rs 600 billion). It is large enough to upset the whole budget.


Who benefits then? As young engineers we were trying to do energy efficiency studies with renewable energy and how the DSM (Demand side management) should be done etc. When we made presentations to electricity boards we realized that their most serious problem is agriculture subsidy.


They wanted urgent money. IPPs (Independent Power Projects) came into the picture since they wanted to get foreign equity to build new projects. Hence around 1995 we decided to study those two issues. First was obviously Enron because that was the first IPP project. The second thing we studied was agricultural subsidies.



Percentage of farmers who benefit from free power



The graph illustrates that the first 3-4 per cent of the farmers get a large chunk of the subsidy. 80 per cent of the farmers don’t get subsidy at all.  This is based on available data. It revealed that agriculture consumption was much lower than what was being projected earlier because the real distribution losses might be much more.



Subsidy distribution is highly skewed and not just highly skewed in terms of number of farmers but also highly skewed in terms of area.  About two-thirds of the subsidy goes to Western Maharashtra and rest one-third to Marathawada, Vidharbha, Konkan put together.  So we see that basically it is the richer area and the richer farmers who get free electricity. Do you think that 24 lakh (2.4 million) farmers have pump sets in Maharashtra? Obviously not.


To quote from an article ‘Poor houses using even one unit per day have to pay a fairly decent tariff, (I think around Rs 1.50 or so). But the farmer who consumes about 15 to even 30 units per day is not expected to pay with this new announcement’. 


Isn’t this quite skewed? About 3.5% of the area in the state grows sugarcane and this uses 70% of water, not just from canals but also from government supply. We don’t have exact numbers because government data with respect to agriculture and ground water is inadequate and of very little value[1].


More water and more land attract more subsidies while no water and no pump attracts no subsidy.  That is the basic principle followed.   


Moving from agriculture to the larger issue of power sector, the Electricity Act allows captive users to set up their power plants without any restrictions. merc has been very progressive with respect to captive power plants and has passed a landmark judgment, and allowed large growth in captive power plants. It appears then that in the next four years about 500-600 MW of new captive plants will come in the state, which will reduce mseb’s revenue by about 15-20 per cent. Though large investment is required to be made, mseb finances will worsen in the future.  With industries stepping out of the mseb network, the finances of mseb are bound to fall.


Now with depleting funds in the mseb treasury chest and the government busy paying for the subsidies would mean no money for capacity expansion.  That would lead to more load shedding since one can’t strengthen the whole distribution and transmission network without any investment. As unreliability and load shedding increases, farmers would be the first casualties.  Today, in Maharashtra farmers get at least 8-10 hours of supply if not more.  In many states like Karnataka, it is between 3 hours and 5 hours. In Andhra, they are fighting for 8 hours of supply. Maharashtra is in that sense is better off. 


One of the farmer leaders said that the farmers don’t want free power but reliable power for which they are willing to pay. This whole issue is going to go towards the situation that power will be free but there will not be any power in the first place.


The other implication that such a move would have is the developing of a culture that essentially decides “don’t pay, wait and you will get it free”. In fact, some movements have already started in some places.  Some agitations started in urban areas where the leader is said to have suggested that no one should pay electricity bills. In Karnataka, farmers burnt their meters, while in Haryana, the Electricity Board employees were kept hostage by the villagers who refused to pay but demanded their connections be started again. So this kind of culture is very dangerous because it can completely breakdown the law and order situation. And in Maharashtra it can increase the tension between Western Maharashtra and other regions. This could also snowball into other poor consumers including tribals, slum dwellers in cities and towns, cottage industries etc. who would demand an explanation for the deprivation.


Looking at the other side of the story, while in the power sector one talks of thousands of crores, the other sectors like health, education etc. earn very little by way of revenue. And the money that is earned by the government never goes to the people for whom it is meant.  A standing example in that sense is the demand by the PDS (Public Distribution System) activists to bring down the cost of grains so as to supply the entire 25 per cent of the population living below the poverty line.


The conclusion is such populist policies can be anti poor. They can increase social tensions rather than reducing it. They can encourage culture of free riding and overall it can lead to a society that is far away from where it should rightfully be.   


Girish Sant, Prayas Energy Group

[email protected]

(Views are personal)



Russia-India Nuclear Cooperation: A foundation to build upon


Russian-Indian nuclear energy cooperation has a long history and great potential. The cooperation began in 1979, when the Soviet Union and India signed their first science and technological cooperation agreement on the peaceful use of nuclear energy.  In 1988, the Soviet Union and India signed a cooperation agreement on the construction of a nuclear power plant in India, and ten years later, an additional protocol to that agreement which marked the start of the Kudankulam nuclear power plant project in Tamilnadu.  Russia, the legal successor to the Soviet Union, has always paid considerable attention to its political and economic ties with India. During the Indian prime minister’s visit to Russia in November 2001, the Atomic Energy Ministry of the Russian Federation signed a memorandum on implementing the Kudankulam project with the Indian government’s nuclear energy commission.  India’s need for large and stable sources of electricity continues to grow. India has an advanced nuclear physics scientific base and highly skilled personnel working in its nuclear industry. Russian and Indian nuclear energy industry is based on the closed loop nuclear fuel cycle.   The closed loop nuclear fuel cycle requires fast plutonium reactors and Russia is a leader in this field. Russia’s current cooperation with India in the nuclear sphere is based on the construction of the Kudankulam nuclear power plant, which will have two 1,000 MW water-cooled and water-moderated reactors. The project began on March 31, 2002 and both reactors are planned to be put into operation in 2007 and 2008. The construction of the Kudankulam power plant highlights the mutually advantageous and long-term cooperation between Russian and Indian organizations. Participation in the project is important for Russia because the project will increase Russia’s high-tech exports. Long-term cooperation would be facilitated by these power units’ uninterrupted fuel cycle.  This joint project will require $2.6 billion to complete and Russia is providing a $1.5 billion state loan. The financial scheme was built on the experience of similar contracts in several countries. The Indian side is doing all the construction work, while Russian companies are supplying the high-tech equipment. Russian reactors are known in the world for their exceptional safety.   The project is regarded as one of utmost importance for the Federal Nuclear Energy Agency (Rosatom) and the agency will try hard to ensure the successful implementation of the project. Expanded Russian-Indian cooperation in the field of peaceful use of nuclear energy meets Russia’s strategic interests. Rosatom is ready to expand such cooperation, provided that Russia abides by its current international commitments. The International Atomic Energy Agency (IAEA) will control all nuclear power plants that are currently being constructed. By constructing nuclear power plants in other parts of the world, Russia can assert itself on the global high-tech market.  Indian representatives will receive the body of the first nuclear power unit reactor in an impressive setting at the Izhora factory in St. Petersburg in late October 2004. The power plant construction is proceeding as planned.


Alexander Rumyanstev

Director, Russian Federation Nuclear Energy Agency 

(Views are those of the author)

Courtesy RIA Novosti 


Russia’s Oil Sector Still Attractive for World Companies


Notwithstanding the Yukos situation, the world's leading oil companies are still sure of the attraction of the Russian oil sector, Igor Yurgens, vice-president of the Russian Industrialists' and Entrepreneurs' Union (RSPP), has said. For doing work here in the present conditions, one has to run a sure business and have firm agreements with the government marking off each other's interests. "Such work is complicated but, as before, extremely profitable. Alongside the domestic producers, ConocoPhillips, Total, Shell are a demonstration of such attractiveness," Yurgens said.  As regards dangers facing other companies operating in the raw-materials sector, he noted that members of the RSPP bureau are not having such fears.  "Meanwhile, those working in the sector of strategic raw materials should bear in mind that oil, gas and other energy carriers are not just commodities but also an element of the state strategy. This is why doing work in such sectors will become even harder for private businessmen," Yurgens warned.  As to the possible sale of Yuganskneftegaz, the basic production asset of Yukos, Yurgens said he trusts the declarations by the management of Gazprom, Surgutneftegaz, TNK-BP and other large operators that Yuganskneftegaz is of no interest to them and buying it would entail many lawsuits.

"Only a few are willing to buy the assets," Yurgens said. He is also perplexed by the recent evaluation of Yuganskneftegaz. The Russian Justice Ministry said, with reference to the assessor Dresdner Kleinwort Wasserstein, that the cost of Yuganskneftegaz may be $ 10.4 billion.  This sum is the lowest evaluation; RIA Novosti quotes a ministerial source as saying.  "It looks like an attempt to understate the cost in order to sell the asset at a low price," Yurgens said.  Meanwhile, the State Duma rejected the proposal of independent deputy Vladimir Ryzhkov to interpellate the Justice Ministry and the Federal Property Fund for getting a copy of the official assessor's report.

Russian oil revenues less than Foreign Companies’ despite record prices


The current spread between the price for benchmark Brent and Russian Urals oil has soared to $8 per barrel, a ten-year high. The average Brent-Urals spread, according to Christopher Weafer of Alfa Bank, has stood at $1.3 per barrel over the past decade.  Referring to Mr. Weafer's data, Vedomosti writes that the Russian budget could have received an additional $2.4 billion, and Russia's oil companies an additional $600 million ($3 billion in total) if the spread had remained the same. Mr. Weafer, who estimated Russia's 2004 oil revenue at $55 billion, is sure that the spread will reduce soon.

According to Vladimir Milov, the president of the Institute for Energy Policy, lower demand for Urals crude is due to tighter environmental requirements. European refineries want oil with a lower sulfur content, which comes primarily from Iraq and the United Arab Emirates. A manager with a Russian oil major said Russia was flooding its own market. While the Brent price depends only on supply and demand, the Urals has a certain critical demand in Europe. Meanwhile, an unexpectedly sharp increase in supply of oil from Primorsk increased pressure on the price first in Rotterdam and then - as a result of arbitrage supplies - in the Mediterranean.  "A decisive blow on the high-sulfur crude market came with increased production of this oil in Iraq," the manager said. He argues the trend can only be broken if Russia starts working on non-traditional markets in North America and Southeast Asia.

Exclusive news from Russia

Courtesy RIA Novosti 









India, Russia to explore alternative fuels


October 19, 2004. The Government has called for technological collaboration between India and Russia to explore the use of gas hydrates as an alternative source of energy. Gas hydrates are crystalline solids found at a depth of about a kilometre from the ocean floor and contain methane gas. The Minister of State for Science & Technology and Ocean Development, Mr Kapil Sibal, said gas hydrates could be the answer to the challenges faced by the country in the energy sector. 


Oil prices will moderate: IEA


October 19, 2004. Record global crude oil prices are likely to be short term phenomena, according to the Deputy Secretary General of the OECD Richard Hecklinger. Predicting that these will moderate, he observed that the impact of high prices has not been as devastating as the ‘oil shock' of the seventies largely due to the lower reliance on hydrocarbons in the world economy. He felt prices have risen now due to increasing demand from countries like China as well as fears of supply and security. He therefore felt prices should moderate in future. He said the surge in prices had created ‘a great deal of difficulty' in the global economy, impeding growth and raising inflationary pressures. He maintained that the technology was the long-term solution to meeting this crisis by development of alternative energy sources and reducing the reliance on hydrocarbons. During the first OECD-India Roundtable, he said as far as the difference in foreign direct investment flows to China and India was concerned, one should see the trends rather than the precise volumes.


Imaging earth’s interiors to locate oil reserves 


October 21, 2004. The efforts of the Oil Industry Development Board (OIDB), electromagnetic techniques (EM), otherwise known as magnetotellurics (MT), used for mapping mineral zones and hydrothermal deposits, have become a matter of interest not only for geoscientists but even for the oil conglomerates. The techniques, along with three-dimension modelling, have attracted partners from the oil and diamond industries, to know the secrets of the earth’s interior. After a long ride from analogtelluric and magnetotelluric and now to digital data acquisition systems, the National Geophysical Research Institute (NGRI) has successfully applied few techniques for oil exploration in Gujarat, Nagpur-Wardha, Upper Assam, etc.  NGRI is planning to experiment with lake MT, radio MT and also foray into marine MT. Previously, the oil industry was exploring the already known areas and the situation is saturated as the structures are drilled to the maximum.  As part of its pilot venture into marine MT, it is also planning to explore those smaller lakes, especially through a collaboration with a German institute to know the structure in and around the Nagarjunasagar waterbody. 


IOC to acquire gas block in Iran


October 21, 2004. IOC will buy a gas block in the gigantic South Pars gas field of Iran and is looking to buyout a mid-sized European oil firm. “The Iranian oil minister has agreed to give IOC one of the 12 blocks carved for development of the gigantic South Pars gas field,” S Ramachandran, chairman, IOC, said. IOC will partner National Iranian Oil Company in development of the block and may look for a western oil major for collaboration at a later stage. “We plan to put up a plant to liquefy the gas produced from the block and ship it to India,” he said, adding some big firms have shown interest in partnering IOC in putting up the liquefaction facility.  


ONGC refinery gets OHSAS certification


October 20, 2004. The ONGC's Tatipaka complex near Nagaram has received the OHSAS 18001 certification for occupational health system. The complex, comprising a GCS (Group Collecting Station for crude oil and gas) and a mini refinery had earlier been certified for ISO 14001 for environmental management system and ISO 9001 for quality management systems. The OHSAS 18001 accreditation comes during the third year of the operation of the mini refinery, which is certified 99.8 per cent energy efficient by the Energy Audit Group and has a zero accident rate in its operational history.


GSPCL finds gas from new well at Hazira 


October 22, 2004. Gujarat State Petroleum Corporation Limited (GSPCL) has discovered gas from a new offshore well at Hazira field on the west coast of Gujarat. From an initial production of 0.5 metric million standard cubic meters per day (mmscmd) of gas from the new well, GSPCL, in collaboration with Niko Resources Ltd, is firming up plans of achieving a production of 5 mmscmd by the end of the current fiscal. The Hazira field is spread over 50 square km area and GSPCL holds 67% stake in the joint venture effort. The Strat well has the uniqueness of being drilled in the downside through part (Hanging Wall) of Hazira structure. As per the company’s estimates, the field has 28 billion cubic meters of gas resources and potential to produce 5,000 barrels of crude oil per day. The company has, recently, started the business of Regassified Liquid Natural Gas (RLNG) where GSPCL has entered into a contract with Gail (India) to purchase RLNG which it would sell through the pipeline network of its wholly owned subsidiary Gujarat State Petronet.


ONGC set to submit Ecuador bids 


October 25, 2004. Oil and Natural Gas Corporation (ONGC), which has been eyeing various oil blocks across the world, would be submitting bids for five oil blocks in Ecuador in Latin America this November. ONGC Videsh (OVL), the company’s arm for overseas operations, is currently preparing the bid documents. The company would also bid for oil blocks in Libya and negotiations are on with the Dubai-based Al Thani group for properties outside Libya.  The Canadian major, EnCana, had earlier in September offered its equity in five blocks in Ecuador and of these blocks, four are already producing oil and reportedly have rich reserves.  The Canadian major also has put up a proposal to offload 36.3 per cent of its equity in the 500-km long crude pipeline, Oleoducto de Crudos Pesados, with a capacity of 450,000 b/d. 


OVL is more interested in the oil blocks and also some more oil blocks besides the five which have been put for equity partnership. Major global petroleum companies from Spain, China and the US are expected to submit bids for the Ecuador blocks and finalisation of the bids will be done only by early December. OVL has already finalised negotiations with the Al Thani group for 15 oil blocks and is also trying to pick up stakes in few more blocks outside Libya in which Al Thani has interests. Bidding for the Libyan blocks are also expected to commence this fiscal year.  


Gail seeks stake in oilfields trail 


October 25, 2004. Gail India Ltd is planning a major push in the gas exploration & production business in India. Gail’s core business is natural gas transmission and gas marketing but the company wants to strengthen its position in the upstream natural gas exploration and production (E&P) business. The company feels that being a part of the entire value chain would help in reducing the cost of gas. This assumes significance as global major Shell is in the final stages of setting up a 2.5 million tonne LNG terminal at Hazira in Gujarat. Gail is studying various options to transport the gas either through offshore and onshore pipeline routes or as liquefied natural gas (LNG). Apart from gas, the company holds a participating interest in 12 exploration blocks, comprising two blocks in the first round of New Exploration Licensing Policy (NELP), six blocks in NELP II, 2 blocks in NELP IV two “farm-in” blocks. Of these, four are on-land blocks and eight are offshore blocks.


Reliance KG block plan


October 26, 2004. Reliance Industries will invest Rs 15,000 crore (Rs 150 billion) towards gas pipeline and development plan for producing gas from the KG-D6 block.  Anil Ambani, vice chairman and managing director, Reliance Industries, said that the company has already submitted a production profile plan to initially produce 40 million cubic metres of gas per day from the D6 block to the directorate general of hydrocarbons.


ONGC to set up petrochem complex at Dahej


October 26, 2004. As part of its new corporate strategy for downward integration, the public sector Oil and Natural Gas Corporation (ONGC) has decided to set up a petrochemical complex and a special economic zone (SEZ) at Dahej in Gujarat, besides mega power projects at Mangalore and Tripura. The Rs 4,500 crore (Rs 45 billion) petrochemical complex, based on liquefied natural gas (LNG) or naphtha, will be located at the proposed Dahej SEZ, adjoining the 5 mtpa petronet LNG terminal. The ONGC had entered into an agreement with Gujarat Industrial Development Corporation (GIDC) to set up the SEZ in collaboration with a domestic developer. The SEZ would have its captive power plant and talks are on to finalize the partner. 




Duty-free import of petro goods to hit local refiners


October 24, 2004. India’s free trade agreement with the Gulf countries, currently under discussion, could be a wake-up call for domestic petro refineries, which enjoy substantial import tariff protection at present.  Gulf Co-operation Council (GCC) members mainly Saudi Arabia and Kuwait will strongly lobby to push crude and petro products at zero duty into India. If implemented, duty-free import is bound to put pressure on the refining margins enjoyed by domestic refiners based on the import-parity formula. For the GCC members, oil is an item they will want to push in India, which is projected as one of the biggest energy consumers over the next decade. Nearly a third of India’s import bill is accounted for by oil. The Gulf region has two-thirds of the global oil reserves, with Saudi Arabia and Kuwait having established themselves as leading suppliers. Hence, it’s natural for the GCC to push oil in India at zero duty, while allowing market access for domestic manufactured goods into their market.


The bulk of oil imports into India come from the Gulf region. As of now, the GCC accounts for nearly 11% of India’s total exports. If petro products are included in the India-GCC free trade list, then duties on oil will become zero in India for all practical purposes, given the Gulf’s dominance in the oil sector. The import duty on crude currently stands at 10%, while the duty on petro products is higher at 15%. Scrapping of this duty would benefit customers, while refineries would feel the heat as they would have to trim their refining margins. Interestingly, the discussion on the India-GCC FTA is picking up pace at a time when there is pressure on the government to prune duties on crude and petroleum products to keep prices in the domestic market in check. Due to high crude prices in the global market, hovering at around $55 per barrel now, there is heavy pressure on India. While oil companies want another hike in prices of petrol and diesel, the government is hesitant as this might lead to higher inflation.


Oil PSUs may lose jet fuel monopoly


October 25, 2004. The civil aviation ministry wants to end the monopoly of public sector oil companies in the supply of aviation turbine fuel (ATF). It has sought the nod of the Prime Minister’s Office (PMO) for this move, aimed at checking the price spiral in the domestic market. It has also proposed a uniform 4 per cent sales tax across the states.  The ministry also wants public sector oil companies to rationalise ATF prices in line with international prices. The civil aviation ministry’s appeal comes at a time when domestic carriers have twice hiked air fares by 10 per cent each in less than three months. 


The price of ATF in the country has touched an unprecedented level of Rs 30,800 a kilolitre in October up from Rs 26,000 a kilolitre in June. In comparison, international prices of ATF vary between Rs 13, 600 and 19,300 a kilolitre.  Domestic carriers have also pointed out that the unprecedented rise in crude oil prices globally and the consequential increase in the price of ATF has hit their bottom lines.  ATF constitutes about 30 per cent of the operating cost of airlines in India compared with 10-15 per cent for international carriers. A major reason for this was the high sales tax levied by some state governments. The ministry wants to categorise ATF as a declared good to cap the sales tax at 4 per cent for domestic airlines. Airlines also pointed out that ATF sold to international flights of foreign carriers was exempt from sales tax, while it was levied on ATF sold to Indian carriers. 


Central India refinery delayed for 10 years


October 24, 2004. The Central India Refinery, a project that will cost about Rs 7,000 crore (Rs 70 billion) sanctioned in 1995 and to have been commissioned in December 1999, will be complete only by April 2009. In recent months, the agreement with Oman Oil has taken place and past claims have been reimbursed. The supplementary agreement for the changes in the joint venture agreement is being readied. This is after Oman Oil, in February 2001 decided not to invest further in the project because of the delays. This meant investments by BPCL and a revised government approval. After the Tata Institute of Social Science said the project would bring socio-economic benefits to the state, the Madhya Pradesh government has agreed to look at the issue favourably. Another issue was the completion of the critical evaluation about the project’s viability. There was also the question of HPCL’s participation in the project. According to the petroleum ministry, it has asked EIL to estimate the costs and profitability situation. BPCL is also working on getting HPCL to join as early as possible.


In the past, there was an initial delay in the finalisation of the contract for the feed. This was ready only in 1997. The environmental clearances came only in March 2000 after a delay of nearly five years. Then, there was a restraint order by the chief wildlife warden, Gujarat, on the pipeline through the marine sanctuary. The restraint on the pipeline was finally cleared by the courts a year later. Meanwhile, work on the project to reshape the project began in August & EIL is in charge. There was a delay in the issue for bids of the turnkey documents. Now, BPCL wants to “implement the project using conventional strategy.” It could be completed in four years after project work restarts.


Transport / Trade


HPCL, PLL to partner ONGC in LNG plan


October 25, 2004. Hindustan Petroleum Corp (HPCL) and Petronet LNG (PLL) will partner with ONGC in the liquefied natural gas (LNG) import terminal ONGC plans to be put up at Mangalore in Karnataka. The Mangalore LNG project will come up only if there is unmet demand after Petronet LNG's Kochi and bankrupt energy major Enron Corp's Dabhol terminals are put into operation.  The board of Petronet LNG, in which ONGC is an equal promoter, will meet this week to approve start of construction on the Rs 1600 crore (Rs 16 billion)  Kochi terminal in Kerala. The Dabhol terminal, on the other hand, is nearly complete and the government is likely to auction it by the next year.


Gail-British Petroleum-Tata combine, Reliance Industries, British Gas, Royal Dutch/Shell and IOC-Petronet LNG consortia are among the companies eyeing to take over the Dabhol LNG project and the adjoining 2184 MW power plant.  ONGC plans to invest Rs 25,000 crore (Rs 250 billion) in the project which will include LNG imports, its shipping and transportation, an LNG jetty and a regasification plant, a c-2/c-3 extraction plant, a 1445 MW power plant and basic petrochemical complex, including a dual feed cracker and associated facilities. Investments will also be made in pipeline transportation of LNG from Mangalore to Ennore via Bangalore and Bidadi, to Kochi and Goa for merchant sale. Also on the cards is a 1100 MW power plant at Ennore. The Mangalore hub will be set up in a special economic zone. Petronet LNG, in which ONGC, Gail, IOC and BPCL are equal promoters, has already begun operation of the country's first LNG import project at Dahej in Gujarat and would complete the Kochi terminal by 2008.  Besides Dahej, Kochi and Dabhol terminals, Royal Dutch/Shell is also putting up an LNG terminal at Hazira in Gujarat, and demand for natural gas on the west coast would have to be assessed before beginning work on the Mangalore project.


Dahej LNG terminal to be fully operational next year


October 24, 2004. The Petronet LNG Ltd (PLL)'s terminal would utilise its full capacity from next year after taking delivery of the second LNG tanker, named Rahi, scheduled for December 16. The terminal, which has been utilising only 50 per cent of its capacity for want of the second specially built LNG tanker, would be handling five million tonnes of LNG per annum (mmtpa) from 2005 once the second tanker would become operational, senior officials at the terminal said. They said that there was "very good demand" and given this situation the terminal capacity would be raised to 10 mmtpa by 2008. With an additional investment of around Rs 800 crore (Rs 8 billion), the capacity could be expanded, they said. The company has already earmarked the area for putting up the additional tank for the expansion.


The demand of GAIL (India) Ltd from this terminal for its customers in 2004-05 would be 5.02 mmscmd while its demand from April 2005 onwards is estimated at 10.53 mmscmd. The IOC's demand for the current fiscal is 2.5 mmscmd and from the next fiscal it would be 15.26 mmscmd while BPCL would have a demand of 0.84 mmscmd in 2004-05 and 1.75 mmscmd from April next. In addition, there would be more customers to be supplied with re-gassified LNG from April next, they added. They said that Rahi would also have a cargo carrying capacity of 138,097.2 cum. PLL had signed time charter agreements for the two latest generation membrane type LNG tankers of cargo carrying capacity of 1,38,000 cubic metres for transportation of LNG from the port of loading at Ras Laffan, Qatar to unloading at PLL at Dahej on March 2001 for 25 years, they said. The two-time charters were later novated by consortium to India LNG Transport Company Ltd. The PLL had taken delivery of the first tanker Disha on January 9, 2004.


LNG Petronet board may approve Kochi terminal project  


October 26, 2004. Close on the heels of the international container transshipment terminal finally set to become a reality, Kochi awaits another major project, an LNG terminal which could change the industrial scenario in Kerala. The board meeting of LNG Petronet, a consortium of Gail, ONGC, IOC and BPCL, on October 29 is expected to give its nod for the Rs 1,600 crore (Rs 16 billion), 2.5-mtpa (million tonne per annum) terminal to be set up at Puthuvypu, of Kochi. This has already got the Union petroleum ministry’s sanction, according to a top official of Petronet which has already invested Rs 30 crore (Rs 300 million) for the project.


However, the issue of marketing rights remains to be settled for which both Gail and BPCL backed by its subsidiary Kochi Refineries Ltd (KRL) have staked claim. Already, Petronet and Gail are in the race for setting up an LNG terminal of 2.5 mt capacity proposed by NTPC, which is on an expansion spree. As per the NTPC bid, the terminal has been proposed at the same Puthuvypu site and gas would be taken to the NTPC plant at Kayamkulam through pipelines. A decision on the NTPC terminal would take sometime before the final bidding. According to the official, the capacity could be upped when the NTPC plan kicked off as it was in talks for sourcing the gas from Iran. In the absence of its anchor customer NTPC, Petronet is believed to insist on a written assurance from end-users for purchase of 2.5 mt.  According to a recent study undertaken by FEDO, the engineering division of FACT, even without NTPC there would be sufficient demand for regassified LNG from the Kochi terminal.


Reliance to set up AP gas pipeline network


October 26, 2004. Reliance Industries will invest Rs 5,000 crore (Rs 50 billion) in building its pipeline network to evacuate natural gas from its Krishna Godavari find.  The company expects comprehensive clearance for the network from the ministry of petroleum and natural gas in a few weeks, Anil Ambani, vice-chairman and managing director, Reliance, said. Mr Ambani ruled out the possibility of taking on another partner for the gas field’s development, saying there was no value in it.


Policy / Performance


Roorkee institute devises safe CNG technology


October 22, 2004. Institute in Roorkee has claimed to have developed a new technology for making light-weight cylinders that store CNG at a low pressure to prevent accidents and make roads safer. The new system, developed in collaboration with Russians, would also save the country valuable foreign exchange as currently natural gas is compressed into CNG at gas stations using imported compressors which cost about Rs 5 crore (Rs 50 million). A few Indian companies had come up with compressors at a cost of about Rs 25–30 lakh (Rs 2.5-3 million), which compress natural gas at a lower pressure of 100 bar against 200 bar now. The new system would allow the use of gas at a lower pressure, making utilisation of indigenous compressors. The development is part of the Integrated Long-term Programme of Cooperation in Science and Technology (ILTP) between India and Russia, which began in 1987.  From the Russian side, the partner was the Central Research Institute for Special Machinery. 


Need to protect ONGC’s credit-worthiness


October  21, 2004. Prime Minister, Manmohan Singh, lauded the performance of Oil and Natural Gas Corporation (ONGC) and said a way has to be found to protect the company’s credit worthiness which was being affected due to fuel subsidies. “ONGC is making constructive contribution of Rs 4,000 crore (Rs 40 billion) to subsidise petro products and all this is having an adverse effect on the investment worthiness,” the Prime minister said. Mr Singh also wanted ONGC to make “bold and innovative” moves to find more oil and gas as the government attaches highest priority to energy security of the country.


SMEs urged to shift to natural gas


October 25, 2004. Minister of state for Energy and Petrochemicals Saurabh Dalal asked small and medium enterprises (SMEs) in Gujarat to switch to natural gas for use as fuel in clusters. This will enable Gujarat State Petroleum Corporation (GSPC) to provide them gas faster and at a more competitive price, he explained. GSPC has started supplying 15,000 cubic metres of re-gassified liquefied natural gas (RLNG) to Charotar Gas Sahakari Mandali (CGSM), the country’s first co-operative engaged in gas distribution. To begin with, the co-operative sector company will supply gas to about 40 SME industrial units and 500 households in Anand district including Vallabh Vidyanagar campus, the university’s science laboratories and kitchens in different hostels. 


Gazprom & Gail to sign agreement


October 25, 2004. Gazprom and GAIL are planning to sign a cooperation agreement shortly.  Alexei Miller, Chief Executive of Gazprom, and Banerjee, CEO of GAIL, examined cooperation options in tapping India's oil and gas reserves and developing its gas transportation infrastructure. They also considered some of the issues related to the implementation of the product sharing agreement on an Indian gas field in the Bay of Bengal. This agreement had been signed between the two companies and the government of India.  Also the Gazprom CEO had a meeting with the Indian Minister of Gas and Petroleum, Mani Shankar Aiyar. The two officials agreed it was necessary to step up Gazprom's cooperation with oil and gas companies of India, such as GAIL and ONGC, in tapping that country's oil and gas reserves, developing its gas transportation infrastructure, including underground storages, and implementing projects to supply natural gas. The execution of the product sharing agreement on Indian deep-water gas reserves in the Bay of Bengal also came under consideration.


The product sharing agreement on India's offshore gasfield in the Bay of Bengal was signed on October 4, 2000, between GAIL, Gazprom, and the Indian Oil and Gas Ministry. It provides for joint exploration, recovery and distribution of the deposit's hydrocarbons. The recoverable fuel reserves, believed to lie 4,000 to 6,500 meters below the sea level, total an estimated 248 to 376 million tons, including 319 billion cubic meters of natural gas, 37.6 million tons of gas condensate, and 18.8 million tons of crude oil. The exploration program is designed for a seven-year period.


Centre open to 49% stake sale in oil PSUs 


October 26, 2004. The government is open to disinvesting up to 49% in oil PSUs as selling 49% and leaving a 51% stake in government hands would still leave the government with enough manoeuvrability.  As far as disinvestment proceeds are concerned, the best course, in his opinion, is to set up a National Equity Fund. All proceeds from disinvestment would flow into this fund. While the corpus of the fund would remain untouched, the interest and dividend earned could be used to fund social sector development. In effect, it would be like another UTI-II. Disinvestment proceeds could be used for retiring debt but the Prime Minister feels there is little point in doing that when we are not able to get our fiscal deficit under control. The best way of reducing fiscal deficit, in his opinion, is to keep the growth of debt under check. The government is only concerned with maintaining the public sector character of PSUs. And that will happen as long as 51% of the equity is in government hands. Such disinvestment would also not run counter to the government’s promise in the CMP that profit-making companies would not be privatised, he added. The government will soon be coming out with a white paper on disinvestment.






Bhilwara group in pact with Norway co for hydro project


October 19, 2004. The LNJ Bhilwara Group announced a joint venture agreement with Norway based hydro power major Statkraft Norfund (SN) Power Invest AS for executing hydroelectric projects in India. As part of the agreement, the LNJ Bhilwara Group will offload 49 per cent equity in Malana Power Company to SN Power for Rs 207 crore. (Rs 2.07 billion). The group already has a 86-MW hydroelectric plant at Malana in Himachal Pradesh, and the joint venture will take up the 192-MW Allain Duhangan project in the State. Malana Power Company will have 90 per cent equity in Allain Duhangan Hydro Power Ltd, amounting to Rs 282 crore (Rs 2.82 billion). The Rs 900-crore (Rs 9 billion) project will be implemented with a debt-equity ratio of 65:35.  The project will begin in 2005 and is likely to be commissioned in 2008. The project will generate power at a cost of Rs 2.75 per unit during the first year of operation with the tariff reducing over time.


BHEL bags Rs 1.9 billion order from Reliance


October 19, 2004. Outbidding leading multinational equipment suppliers, engineering major Bharat Heavy Electricals Limited (BHEL) has won a prestigious contract for three gas turbine generator sets from Reliance Industries. Under the order, valued at over Rs. 190 crore (Rs 1.9 billion), BHEL will supply two Frame-6 gas turbine generator sets for RIL's Hazira petrochemical project and one Frame-6 gas turbine generator set for its Jamnagar refinery, both in Gujarat.


BARC to hand over nuclear project


October 21, 2004. The country's strategic laboratory Bhabha Atomic Research Centre (BARC) is working out modalities to hand over its first major public domain project and design of  the newly-developed 300 MW Advanced Heavy Water Reactor (AHWR) for safety regulation to the Atomic Energy Regulatory Board (AERB).  The transfer of power of safety review of the AHWR by the AERB will be done for the first time since the issuance of the formal gazette notification by the President of India in May 2000, under which the safety regulation of BARC and its facilities were transferred from AERB to the BARC Safety Council constituted by its director following Pokhran II nuclear tests.


APGenco to take up coal mining in Orissa


October 21, 2004. As part of its effort to augment coal supplies for present as well as future needs, the Andhra Pradesh Power Generation Corporation (APGenco) is planning to take up captive mining in the Mahanadi Coal Fields (MCL) in Orissa.  The APGenco officials, in a letter to Coal India Limited (CIL), requested the coal body to allot a coal block at Utkal in MCL for captive mining purposes.  The availability of coal supplies have been one of the crucial prerequisites for the state's energy development programme as the fuel scarcity could adversely hamper the capacity-addition plan in the thermal sector, especially with the country facing coal scarcity. In fact, the acute coal shortage has made the Union government ask Punjab to go in for imports to meet its coal requirements. At present, the state power utility is purchasing about 8 million tonnes of coal from Talcher (MCL) and around 10 million tonnes from Singareni Collieries for its generating stations. As per the expansion plans announced by APGenco, the new units need another 8 million tonnes of coal. 


Bhel wins contract for power project in Chattisgarh


October 22, 2004. Bharat Heavy Electricals Limited (Bhel) has won a contract for Jindal Power Ltd's 1,000 MW thermal power project in Chhattisgarh. This is its first major contract from an independent power producer (IPP).  The contract for the plant with four 250 Mw units has been valued at Rs 1,774 crore (Rs 17.74 billion). The project is being implemented in two phases consisting of two units of 250 MW each. The first two units are targeted for commissioning in 32 and 35 months, respectively. The turbine generators and boilers will be manufactured at the company's Haridwar and Trichy plants, respectively, while the C&I system will be supplied by Bhel's electronics division in Bangalore. Bhel's Ranipet plant will manufacture and supply the electrostatic precipitators. 


Bhel has fully established state-of-the-art technology for the manufacture of thermal sets of up to 500 MW and has the capability to manufacture sets up to 1000 Mw. Till date, all the ten 250 MW thermal units operating in the country have been supplied and commissioned by Bhel. Bhel has recently commissioned a unit of 250 MW (Unit 7) at the Tau Devi Lal thermal Power Station, Panipat. Another 250 MW unit (Unit 8) at the same power station is also in advanced stages of completion and is likely to be commissioned by Bhel on schedule.  Now, Bhel is executing orders for two units each of a 250 MW capacity for Korba East thermal power station of the Chattisgarh State Electricity Board, Lehra Mohabbat station of the Punjab State Electricity Board, and Mejia and Chandrapura stations of the Damodar Valley Corporation, in addition to one unit each at Parli and Paras thermal power station of the Maharashtra State Electricity Board, and the Santaldih thermal power station of the West Bengal Power Development Corporation, besides the Tau Devi Lal thermal power station.


Himachal hydel power deal signed


October 22, 2004. Sutlej Jal Vidyut Nigam Limited (SJVNL) a central public sector company, will build a major hydropower project in Himachal Pradesh at Rs 1,926 crore (Rs 19.26 billion).   To be implemented as a "run of river scheme", the project will use de silted tail race water of the upstream 1,500 MW Nathpa Jhakri Hydroelectric Project (NJPC), the country's largest hydropower project commissioned in April this year by SJVNL. With a peaking capacity of 434 MW, the project, on completion, will generate 1,946 million units.  The state government will have an equity participation of 30 per cent.  The state will also get 12 % of the energy generated free of cost.


Nuclear power in Asia


October 22, 2004.  35 years ago, two nuclear power units at Tarapur started supplying power to the grids of Maharashtra and Gujarat. India was the first country in Asia (excluding the former Soviet Union) to harness nuclear energy commercially for power production. Japan followed a few years later using U.S. nuclear technology, as indeed India did for Tarapur. Taiwan and South Korea followed suit, also using U.S.-derived nuclear technology. South Korea additionally went in for some Canadian nuclear units as India did with greater commitment. A feature common to Japan, South Korea and Taiwan is their near total dependence on imported energy sources. It was not until the 1990s that China began to use nuclear electricity. It has received technology from France, Russia and Canada and developed its own technology in a limited way. Pakistan imported a small nuclear power unit from Canada in the 1960s; recently a Chinese-built unit entered into service and a second one is being built. The United States built a nuclear power unit in the Philippines in the 1980s but it never functioned; it got entangled in the corruption of the Marcos era.


At the ‘International Conference on Fifty years of Nuclear Power  the Next Fifty Years' (June 27 to July 2, 2004), the International Atomic Energy Agency noted that 22 of the last 31 nuclear power plants connected to the world's electricity grids were built in Asia. What is equally impressive is that of the 27 nuclear power plants now under construction globally, 18 are in Asia (nine of them in India). In the early decades of nuclear power development, namely from the 1960s through the 1980s, there was rapid construction of nuclear power units in the U.S., Europe, the Soviet Union, and Japan. The nuclear accidents at Three Mile Island in the U.S. in the late 1970s, and at Chernobyl, USSR, in 1986 led to a strong anti-nuclear sentiment in the U.S. and Europe. In the aftermath of these two mishaps, the global nuclear community embarked on a programme of active exchange of operating practices to improve safety at all nuclear power plants worldwide. The World Association of Nuclear Operators (WANO) came into existence and resulted in peer reviews and rapid transmittal of safety related experience among plant operators.  However, as a result of the erosion of public confidence, very few new nuclear units were taken up for construction in the U.S. and Europe, with the notable exception of France. The other countries shifted to gas-based generation using combined cycle plants, which could be constructed at lower cost and in shorter time while giving high thermal efficiency. Natural gas transported through pipelines from the North Sea, Russia, the Middle East, and Central Asia has powered electricity generation in Europe and North Africa.


India to begin building its first fast breeder Nuclear reactor


October 22, 2004. Marking a new stage in its nuclear energy programme, India will formally begin the construction of its ambitious prototype Fast Breeder Reactor (FBR) close to its 500 MWe nuclear power plant at Kalpakkam.  Prime Minister Manmohan Singh launched the FBR project, costing Rs. 3, 500 crores (Rs 35 billion), which is expected to propel the country towards an era of cheaper power, multiply its fissile material inventory and clear the way for the introduction of thorium-based atomic power systems.  The 500 MW prototype FBR (PFBR) marks the beginning of the second stage of India's nuclear energy programme. The first stage was the era of pressurised heavy water reactors and other associated fuel cycle facilities. The prototype reactor is the culmination of more than a decade of research that covered the successful operation of a test breeder reactor, the Fast Breeder Test Reactor (FBTR). The DAE envisages an installed nuclear power capacity of 20,000 Megawatts by the year 2020, of which 30 per cent will come from fast breeder reactors. Scientists believe that by 2011, the cost of nuclear energy could be reduced to Rs 3.20 per unit and to Rs 2.50 per unit by 2020. This can be achieved primarily because the unique feature of a fast breeder reactor is that it can produce more fuel than what it consumes. The Prime Minister, Manmohan Singh, said that  the technology roadmap prepared by the Department of Atomic Energy (DAE) for launching the third stage of the nuclear power programme by using thorium will receive the Government's full support.


The Indira Gandhi Centre for Atomic Research, Kalpakkam, has designed and developed the PFBR. Under the first stage, 12 Pressurised Heavy Water Reactors (PHWRs) are already generating electricity. Fast breeder reactor technology is of crucial importance in enhancing our nuclear power. By launching its commercial application, we are indeed entering a new and more advanced stage of nuclear energy production, a technology mastered only by a select group of countries,'' Dr. Singh said. The country had embarked on a major programme to generate 20,000 MWe of nuclear electricity by 2020. By 2008, the DAE would add 4,000 MWe which would include two reactors of 1,000 MWe each being built at Koodankulam, Tamil Nadu, with Russian assistance, he said. The PFBR is being constructed on the shores of the Bay of Bengal at Kalpakkam, adjacent to the two PHWRs of the Madras Atomic Power Station. They are called breeder reactors because they breed more fuel than they consume. The PFBR would use the plutonium-uranium oxide as fuel, and liquid sodium as coolant.



NTPC gets coal block for captive consumption


October 23, 2004. National Thermal Power Corporation (NTPC) has finally been awarded a coal-mining block for captive consumption by the Union Coal Ministry. With NTPC's aggressive capacity expansion programme based on new coal-fired stations, this comes as a shot in the arm. NTPC can now control the fuel cost for a new power plant, which constitutes around 50 per cent of the tariff. This assumes further significance, in the wake of the recent hardening of coal prices. Over the last year, coal prices have risen sharply resulting in the generation tariff rising by around 15 paise per unit or 10 per cent of NTPC's average generation tariff.  Another dimension to this issue is that NTPC feels that it can sharply reduce the cost of extraction of coal by using global practices. NTPC has been awarded ‘in-principle' the Pakri Barwadih coal block in the North Karanpura coalfields in Bihar. Currently, around 82 per cent of NTPC's stations are coal-fired with the remaining 18 per cent operating on natural gas.  Nine of NTPC's 13 coal-fired stations are located at the ‘pit head.' Of this, seven are located within 25 kilometres of the coal mine and these stations are serviced by dedicated railways, which are owned and operated by NTPC, thus ensuring greater security of fuel supply.


ONGC to set up power plant in Tripura


October 25, 2004. Oil major Oil and Natural Gas Corporation Ltd, (ONGC) which is eyeing the emerging power generation and distribution sector, has finalised its plan to set up its first power plant in Tripura.  The power plant will be of 750 MW capacity, to be set up by ONGC alongwith partnering companies, IL&FS and Tripura Power Development Corporation (TPDC).  The proposed plant will require an investment of Rs 3,000 crore (Rs 30 billion) and it will be a gas-based power plant.  The company has been seriously pursuing its plan for the offshore grid project which is expected to generate around 25-300 MW of saleable power. The Tripura project is expected to be operational in three years.


BHEL to de-bottleneck existing caps


October 25, 2004. The power equipment major Bharat Heavy Electricals Ltd., (BHEL) announced an investment of upto Rs 1,000 crore (Rs 10 billion) in the next two years for expanding capacities to meet requirements of 11th and 12th five year plans. Currently, BHEL is meeting demand for adding about 5000 MW annually. However, it has the capacity to add upto 6000 MW a year.  Going by the Government's plan to add one lakh (100,000) MW in the next 10 years, it is looking at a capacity of delivering about 10,000 MW a year.   The investment of Rs 1000 crore (Rs 10 billion) was however not for greenfield projects but for de-bottlenecking the existing capacities and expanding them to meet greater demand. The fresh investment would be distributed at all the major plants of BHEL at Hardwar, Bhopal, Bangalore and Tiruchirapalli. With an order book of over Rs 30,000 crore (Rs 300 billion). 


ONGC likely to bid for Dabhol project


October 25, 2004. Oil & Natural Gas Corporation (ONGC) is planning to expand its presence in the power sector and may also consider bidding for the Dabhol power project. The company has also lined up an investment of over Rs 2,500 crore (Rs 25 billion) to upgrade its 150 offshore platforms.  The bidding, if takes place, will entirely be from internal accruals. ONGC will explore possibilities to expand its power business and for this purpose has lined up a number of large power projects.


Policy / Performance


USAID to fund DRUM project


October 20, 2004. U S Agency for International Development (USAID) has signed a memorandum of understanding (MoU) with the Indian government to fund the distribution reform up gradation management (DRUM) project. The agency will grant $30 million to the project.  The project is aimed at increasing the energy efficiency in the rural areas and will be initially implemented in the seven of the Indian states.    The DRUM project will be initially implemented in the six states Karnataka, Maharashtra, Gujarat, Orissa, West Bengal, Uttar Pradesh and Delhi to reduce the principal technical losses in the rural sectors. With the DRUM project, best of technology, financial management system and best management practices will be applied to curve the energy losses in the rural sector.  USAID is in talks with few of the banks in the country to provide finance for conversion guarantee from old equipment, motors to the new technology, to increase energy efficiency. USAID has already tied up with Gujarat Energy Development Agency (GEDA) to support the small and medium enterprises in Gujarat state. Later the same model will be applied in other states to enhance the energy efficiency of the SME sector. 


The DRUM project is implemented in respect of the increasing commercial losses of the state electricity boards (SEBs).Total commercial losses of SEBs in 1992-1993 was around Rs 5000 crore (Rs 50 billion) without subsidy, which increased to Rs 3,50,00 crore (Rs 350 billion)  in 2001-2002. DRUM will be implemented in the rural areas as agriculture sector is one of the biggest users of electricity. The probable technical losses in the agricultural sector include 62 per cent at generation thermal, 8 per cent at generation electrical, 6 per cent transmission, 10 per cent distribution and 50 per cent at end-user. 


‘Let Panchayats handle rural power’


October 19, 2004. For years, governments have spent vast sums on rural electrification with claims of high levels of achievement. Yet, the latest census shows that hardly 44% of rural households have electricity. Villages have street lights that don't work. The green revolution had groundwater pumped by electricity, but supply is erratic. Rural electrification has mostly aimed to connect villages to the grid by extending already overburdened low voltage lines. This has further increased transmission losses and lowered voltage quality. Different ministries have their own programmes, with little coordination. The ministry of non-conventional energy has developed many ways of using solar power and biomass (wood chips, leaves, paddy husk, etc) to generate electricity. The ministry of power releases figures annually showing its achievements through the Rural Electrification Corporation, more a funding than a real development agency. Ireda, the renewables development agency, has many experiments and projects largely to encourage hydro-power. So too do NGOs and research institutes.


L&T picks up 6% in Koneseema 


October 22, 2004.  Engineering and construction (E&C) major Larsen & Toubro (L&T) has picked up a 6% stake in Koneseema power project situated in the east Godavari district of Andhra Pradesh. Sources close to the development said that the stake was picked up to facilitate the smooth execution of the 445 mw power project.  This investment is in lieu of L&T being selected as an engineering and construction contractor to execute the power project. The 6% stake in the project would be a portfolio investment for L&T. Apart from L&T, the other players in E&C consortium are LMZE of Russia and LMZE of India.  The power project has tied up for gas allocation of 1.6 MCMD and fallback gas allocation of 0.4 MCMD. The PPA was finally amended and signed on November 21, 2003. The project will use naphtha.

Himachal interests in hydro projects to be protected


October 24, 2004.  The Himachal Pradesh government  said it would continue to press for legitimate equity participation in 2051 MW Parbati and 800 MW Koldam hydro power projects and seek revision of agreements signed by the previous BJP government to protect the interests of the state.  Hydro power was a major source of revenue for the government and it would take all possible steps to make the state financially stable. The government had been able to get 30% equity participation in 439 MW Rampur project in joint sector with Sutlej Jal Vidyut Nigam and had protected the interests of the electricity board engineers and employees working with the Nigam. The Chief Minister said that a separate Pabbar Jal Vidyut Vikas Nigam had been set up for execution of the 144 MW Sawara-Kuddu, 46 MW Chirgaon-Majhgaon and 70 MW Dhamwari-Sunda projects. 


India, Russia to co-operate for energy security


October 25, 2004. India will sign a memorandum of understanding with Russia next month to begin cooperation in underground coal gasification for the country's energy security. It is envisaged that a pilot project of 100 wells in 4 stage technology would mark the beginning of cooperation between the two countries. During the visit, Mr Aiyar voiced the government's desire to cooperate with Russia to put to use technology developed by the Skochinsky institute in underground coal gasification for energy security in the country.  Stressing on the key role of coal, especially that lying below 600 mts depths, Mr Aiyar said with nearly 63 billion tonnes of such coal in Mehsana-Ahmedabad block and nearly 60 billion tonnes in Patan-Tharad block, recoverable energy, nearly 70 times of the free gas reserves held by the largest producer of natural gas in India ONGC, could be extracted. The minister said energy security could be augmented by converting deep coal deposits in clean, environment friendly energy through the commercial techniques developed by the institute.


AP govt dithers over free power policy 


October 26, 2004. Regardless of what the Commission on Farmers Welfare (CFW) has suggested, Andhra Pradesh Chief Minister Y S Rajasekhara Reddy is still undecided over ‘free power'.  The government plans to hold an all-party meeting before implementing the staggered tariffs for agriculture power. It may be recalled that the government had proposed to levy at least Rs 1 per unit for those farmers holding over 20 acres cultivable land in the uplands. Besides, it also proposes to fix different power tariffs for horticulture and commercial crops. Even in its preliminary recommendations, CFW had suggested implementation of a structured tariff system based on the crop and cultivable land. However, the commission is of the opinion that free power alone is not sufficient to ameliorate the sufferings of the farmers, but it is definitely to be considered as one of the influencing factors.


The state's power utility, AP Transco, has readied itself with a policy paper on ‘free power' based on various studies including closely examining the Karnataka pattern of tariff structure.  Though the Chief Minister had reviewed the power sector recently, he did not evince much interest to know about the free power policy. Unless the government decide on the power policy now, it would be difficult for the power utility to provide electricity for the Rabi crops.


Power units top waste water generation


October 26, 2004. Thermal power plants have been significantly contributing to the rising volume of waste water that is generated by major industrial sources, adding to country's pollution load in a major way.  Out of the total volume 83,048 million litre per day (mld) of waste water generated, around 90 per cent i.e. 79,975 mld, came from thermal power plants, said a paper published by the ministry of water resources, government of India (GOI) at the 'National conference on water quality issues- 2004'.  The second largest contributing group was engineering industries led by electroplating units.  The other significant contributors of waste water were paper mills, steel plants, textile industries and sugar factories.  Estimates said only about 26 per cent of the total 22,900 mld of waste water generated was treated before disposal. The rest was disposed untreated.









BP to sell its stake in Ormen Lange gas field


October 19, 2004. BP said it was seeking offers for its interest in the Ormen Lange offshore Norwegian gas field, which was at the centre of a reserves booking controversy in June. BP, the world's second-largest oil group, said it had held discussions with potential buyers and hoped to reach agreement on a sale by the end of 2004, with completion early in 2005.  The company said the 10 percent stake could be worth hundreds of millions of dollars, was being sold to redirect resources to more strategic projects.


320 million bbl offshore find in Vietnam


October 19, 2004. A group of oil firms, including state oil monopoly Petrovietnam, has found a new oilfield offshore northern Vietnam with recoverable reserves estimated at 320 million barrels. An appraisal well would be drilled at the end of this year or early 2005, and it would take around 36 months to put the field into production. Initial analysis of oil sample from the Yen Tu-1X well in Block 106 showed the crude is light and sweet with an American Petroleum Institute (API) gravity degree of 43.2, and pour point of 4.5 degree. The country's benchmark light sweet Bach Ho crude has an API gravity degree of 40.5 and a sulphur content of 0.035 percent. Vietnam had said its crude output in the first nine months of this year would have surged 13.9 percent from a year earlier to 14.92 million tonnes, or 399,110 barrels per day (b/d).


The booming Asia-Pacific region faces a dire crude deficit, producing about 7.7 million b/d against demand of nearly 23 million b/d. Light sweet crudes are sought after by most Asian refiners in a region thirsty for auto fuels and heating oil, as their facilities are not sophisticated enough to process large volumes of the heavy-sour Middle Eastern grades, except in Japan, South Korea and Singapore.


Petrobras mulls JV with Russian firms 


October 19, 2004. Brazil's federal energy company Petrobras could sign several commercial agreements with Russian oil and gas companies for hydrocarbon exploration and the construction of pipelines in Brazil.  An initial Brazil-Russia committee to study a partnership between Petrobras and Russian gas company Gazprom could be set up. Agreements could be signed on November 22 during a scheduled visit by Russian premier Vladimir Putin to Brazil. Petrobras' international affairs director Nestor Cerveró confirmed the talks after returning from a technical mission to Russia.  Russian gas company Stroitransgaz is eyeing investment in Brazil's natural gas pipeline network expansion program, while oil industry technology company Zarubejneft is studying investments in new and mature oil fields through a partnership with Petrobras.


Additionally, the Hidroproekt institute and Brazilian engineering firms Energ Power, CR Almeida and EIT could form a group to bid for hydropower licenses in India while Russian turbine manufacturer Silovye Machiny should sign a contract to supply hydroelectric turbines for the Corumbá III hydroelectric project.


Gas find in southeastern Bolivia 


October 19, 2004.  Total SA, Paris, and Tecpetrol SA, Buenos Aires, reported the first discovery on the Ipati Block in southeastern Bolivia. The Incahuasi X1 exploratory well flowed more than 35 MMcfd of gas through a 44/64 in. choke from an undisclosed interval. TD is 5,150 m.  Site of the discovery is in the Chaco basin 300 km south of Santa Cruz and about 165 km north of the border with Argentina.  Total 80% and Tecpetrol 20% are partners in the Ipati and adjacent Aquio blocks. Total said the discovery strengthens its position as a gas operator in Bolivia. Present in the country since 1996, the group discovered Itau gas field in 1999 in the XX Block, which it operates with a 45% interest.  Total also has a 15% interest in San Alberto and San Antonio fields, which have supplied gas to Brazil since 1999 and to Argentina since 2004.


Yukos resumes full oil supplies to China


October 20, 2004. Russian oil major Yukos has resumed full rail supplies to China after reducing them by two thirds several weeks ago when it could not pay carriage charges.  Yukos, Russia's largest oil exporter, suspended all deliveries to the China National Petroleum Company (CNPC), representing some 400,000 tonnes per month or 100,000 b/d, in September citing financial difficulties. The firm said then it would undersupply 1 million tonnes of oil before the year-end as it lacked enough cash to pay for transit fees. Yukos' bank accounts have been frozen by bailiffs seeking to recover more than $8 billion in back taxes. Supplies to Sinopec of about 200,000 tonnes per month, continued as normal. Supplying China is Russian railways' (RZhD) key expansion project and officials want to boost shipments to 300,000 b/d by 2006.


BP to raise Vietnam gas supply in 2005


October 21, 2004. Energy giant BP says it plans to boost indigenous gas supply to Vietnam's power plants next year by 30 percent to 3.15 billion cubic metres.  BP, which supplies natural gas from the Lan Tay-Lan Do field to gas-fired power plants in southern Vietnam, also plans to expand its gas terminal to increase production capacity. The company said in September it would invest between $600 million and $650 million ( £ 330-358 million pounds) to develop another offshore gas field, the Hai Thach field, in southern Vietnam to boost natural gas output.


Norsk Hydro favored on Nigeria Aje oil & gas bid 


October 22, 2004. Norsk Hydro is the favored bidder on a Nigerian oil and gas field and should sign a contract finalizing the deal within weeks. If it wins the bid it placed earlier this week, it would mark Hydro's entry into Nigeria.  Hydro would act as operator, partnering with U.S.-based Syntroleum Corp. (SYNM) and Sovereign Oil & Gas to develop Nigerian Yinka Folawiyo Petroleum Ltd.'s Aje field off the coast of western Nigeria.  According to Syntroleum, two test wells on the Aje field show the potential to produce 40,000 b/d light, sweet crude and 20,000 b/d of gas-to-liquid products and natural gas liquids.  The GTL process converts natural gas into extremely pure, synthetic crude oil virtually free of contaminants such as sulfur, aromatics and metals. Syntroleum plans to process the GTL on a barge.


Lukoil to boost oil production


October 22, 2004. The Board of Directors of Lukoil have approved key figures of the plan, budget and the investment program of the Lukoil group for 2005.  Lukoil based its projects on the forecasted average price for the benchmark Urals blend of $28 in 2005. According to approved documents, the company projects a 4-percent boosting of oil production. It is expected to produce 90.2m tons of oil. The company is to produce 7.8bn cubic meters of gas, which is 20 percent higher than the estimated gas production in 2004.  As for the downstream indicators, the company wants to increase oil exports. The company plans to export 49m tons of oil in 2005, which is 11 percent more compared to forecasted oil exports for 2004. Lukoil wants to process 11m tons of raw materials at its foreign refineries compared to 8.4m tons in 2004.


Eighth Discovery in Bohai Bay, China


October 25, 2004. Kerr-McGee Corp. continues its exploration success in Bohai Bay, China, announcing its eighth discovery, the CFD 14-5-1 well in block 09/18 where Kerr-McGee holds a 100% foreign contractor's interest. The well is located in 75 feet of water and was drilled to a total depth of 13,970 feet. It encountered 85 feet of net oil pay in the Eocene Shahejie sand section, with an initial wellsite API gravity of 26 degrees.  The Shengli Complex, Dagang and Jidong fields contain an estimated 2.5 billion barrels of recoverable reserves from the Shahejie zone. Kerr-McGee's discovery, along with other Shahejie fields in the shallow water, extends the play type into Bohai Bay.   Kerr-McGee will submit an appraisal plan for the CFD 14-5 area to the government and the first appraisal well is expected to spud prior to the end of 2004. Currently, the company is preparing to spud the CFD 11-1N-1 exploration prospect on block 04/36.


The company's most recent discovery is located approximately 20 miles southwest of Kerr-McGee's CFD 11-1 and CFD 11-2 development, which began production in July. Production is on line from 15 wells with current gross rates of more than 30,000 b/d. Additional development drilling is ongoing and the company expects to increase gross production rates to approximately 40,000 to 45,000 b/d by mid-2005.


Development of oil & gas opportunities in Iraq


October 26, 2004. Sonoran Energy, Inc. announced that the Company has signed a Memorandum of Understanding ("MOU") with a company operating in Iraq to develop oil and gas opportunities in Iraq. The initial MOU with Al Azharan Group will lead to the establishment of a partnership operation specializing in the oil and gas exploration and production activities within this lucrative Iraqi market.


Export of oil from Russia to grow till 2010


October 26, 2004. The export of oil from Russia will grow till the year of 2010 and will then remain at a stable level, Minister of Industry and Energy Viktor Khristenko stated.  “The oil export from Russia depends both on the output and consumption of oil on the domestic market. According to the forecasts, up-till 2010 the growth rates of oil output in Russia will be substantially higher than the growth rates of oil refinement for the domestic needs. As a result, the export of oil from Russia will keep growing till 2010, and then oil export will remain at a stable level," Mr. Khristenko said. He noted that the world output of oil increased by 7.1% in 2000-2004. Developing countries currently account for more than 70% of the growth of oil consumption in the world. On the whole, the consumption of oil in the world has grown by 7.5% since 2000. "This means that the growth of oil output in the world was lower than the growth of oil consumption," the Minister concluded.  He forecast that the output of oil in Russia, with the average price of Russian oil on the world market being $20-35 per barrel, can reach 550-590 million tons a year by 2020.  This will become possible first of all due to the development of new deposits, the Minister noted. "Due to the high oil prices on the world market, the growth of output has exceeded the forecast laid down in Russia's Energy Strategy. In the new conditions, the forecast of the growth of oil output in Russia may be changed," Mr. Khristenko went on to say.  More than 3,000 deposits of hydrocarbon raw materials have been discovered and prospected in Russia by the moment, with only half of them having been developed, the Minister noted.




Petrochemical sector thriving


October 25, 2004. Unknown to many, petrochemicals is a thriving industry which is similar to the more glamorous sectors such as oil and gas. According to the latest statistics, the global petrochemical market is estimated at US$2 trillion. Asia alone represents about one-third of the total. The global annual compounded growth rate (CAGR) is about 2.8% but many believe that the CAGR in Asia-Pacific is even higher, driven by China's strong economic growth spurred by aggressive manufacturing activities – activities that utilise, among others, petrochemical products.  The petrochemical industry typically grew at 1.4 times the gross domestic product (GDP) rate on a global basis.


Yemen to build Red Sea refinery 


October 22, 2004. Yemeni and foreign businesses are to launch construction of an oil refinery on the Red Sea early next year with start-up capacity of 50,000-60,000 b/d.  The $300 million refinery is to be built at Ras Issa near a terminal in Hudeida, 270km west of Sanaa, 40 per cent financed by local businessmen and the rest by a consortium of foreign banks and investors.  The project is targeted to go online in early 2007 to meet growing demand in Yemen, which has two other refineries, in the southern region of Aden and Marib to the east of the capital. Built in 1954 by British Petroleum before being nationalised towards the end of the 1960s, Aden's refinery has a capacity of 150,000 b/d.  In the oil-rich region of Marib, the Safer facility produces 10,000 b/d of refined products as well as enough gas to cover Yemen's domestic needs, according to officials. Yemen has plans for a $900m refinery in the southeastern region of Al Mukallah to be financed by Saudi and Emirati investors.

Transportation / Trade


India, Iran discuss gas pipeline project


October 19, 2004. A high-level Indian delegation returned from Iran where it discussed, among other things, the proposed gas pipeline project that would link the two countries via Pakistan.  India's National Security Adviser Jyotindra Nath Dixit, who has been holding quiet talks with his Pakistani counterpart Mr Tariq Aziz on issues ranging from the pipeline to the Kashmir dispute, led the Indian side to Tehran. He was accompanied by Indian foreign ministry's point man for Pakistan, Iran and Afghanistan, Mr Arun Singh.  An Indian foreign ministry statement said Mr Dixit's talks with his Iranian counterpart Dr Hassan Rouhani included discussion on cooperation in energy sector and its beneficial impact on the region. They reaffirmed the commitment of their governments to intensify cooperation in sectors such as energy, transit and trade leading to far-reaching benefits for the entire region.  The Iranian side apprised Mr Dixit of its efforts on peaceful use of nuclear energy.  The pipeline project has been discussed in the past at the highest levels by all the three countries at regular intervals, the latest being the support it received during talks last month between Indian Prime Minister Manmohan Singh and President Gen Pervez Musharraf.


Lukoil to use Gazprom pipeline  


October 19, 2004. Lukoil expects to reach an agreement with Gazprom on the transmission of gas from offshore fields in the northern part of the Caspian Sea.  They plan to use the Makat-North Caucasus pipeline, which is also used to transit Central Asian gas.  Lukoil has already signed an agreement with Gazprom on the sale of gas that Lukoil would produce at the Nakhodkinskoye field in the Yamal-Nenets autonomous district. Lukoil is working on 10 oil and gas structures in the northern Caspian. It has carried out exploration drilling at five structures: Khvalynskaya, 170 Km, Shirotnaya, Sarmatskaya, and Rakushechnaya.  Eight wells had been drilled there and five large multi-layer oil/gas, gas and gas condensate fields had been discovered by October 1, 2004. Lukoil puts the total recoverable hydrocarbon reserves in the Northern block at about 766.1 million tonnes of fuel equivalent. This includes 78.2 million tonnes of oil, 655 billion cubic meters of gas, and 32.9 million tonnes of condensate. Lukoil plans to start production there in 2008.  Central is located 150 kilometers from Makhachkala in the Russian sector of the Caspian.  Lukoil puts Central's recoverable reserves at 521.1 million tonnes of oil and 91.7 billion cubic meters of associated gas. 


Gazprom, Repsol may join forces in U.S. LNG business


October 22, 2004. Russian gas monopoly Gazprom and Spanish energy group Repsol YPF may join forces to ship super-cooled liquefied natural gas (LNG) to North American markets, Gazprom said.  Gazprom is keen to supply U.S. markets, but as yet has no LNG facility of its own to supercool gas for onward shipment. It has signed an agreement with Petro-Canada for a $2 billion LNG terminal project that will ship 3.5 million tonnes a year of LNG to North America from 2009.  Gazprom was looking to learn more about the LNG business by swapping its pipeline gas in Europe against LNG with major oil firms, such as BP. One of Respol's biggest LNG projects is in Trinidad and Tobago, where it has a joint venture with BP and BG. Last year, it signed a deal with a U.S. unit of oil major Royal Dutch/Shell to supply two billion cubic metres of liquefied natural gas up to the end of 2005 from the plant.


BASF-YPC becomes user of China cross-country pipeline 


October 22, 2004. BASF-YPC Co., Ltd., has become a major user of natural gas supplied through China's cross-country natural gas transportation project, according to an agreement it signed with PetroChina Co., Ltd., a leading oil and gas company listed in Shanghai, Hong Kong and New York. BASF-YPC is a 50-50 joint venture between BASF and China Petroleum and Chemical Corporation (Sinopec), established in 2000 with a total investment of more than 300 million US dollars. The company will build and operate a steam cracker (600,000 tons ethylene per year) and nine downstream plants on its 220-hectare site by the Yangtze River. The plants will be completed by the end of 2004 and are expected to begin commercial operation in mid-2005. BASF-YPC will produce about 1.7 million tons of high quality chemicals and polymers per year for the rapidly growing Chinese market.  A 6-kilometer-long direct branch pipeline 406 mm in diameter - has been built exclusively for gas supply to BASF-YPC.BASF-YPC will consume 600 million cubic meters of natural gas annually.


The company's use of natural gas will help protect the local environment as it will not produce furnace coal ash, slag or sulfurdioxide. By using natural gas, the plant also requires less land. BASF, which is headquartered in Germany, is the largest foreign investor in China's chemical industry. It has so far set up 10 solely-owned companies and nine joint ventures in the country, with a total investment of about 600 million US dollars and more than 3,800 local employees.


Gazprom considers exporting gas to Spain


October 22, 2004. Gazprom is considering the possibility of exporting gas to Spain. The prospects of the Russian gas shipments to Spain were discussed during a meeting between Gazprom CEO Alexei Miller and the president of the Spanish Repsol YPF, Alfonso Cortina. Imported natural gas and liquefied natural gas makes up a significant part of gas shipments to the Spanish market.  Spain's reserves account for only 1% of Spain's gas consumption a year. The sides also discussed the possibilities of cooperation in the organization of liquefied natural gas shipments to the American market and the development of joint oil and gas projects with countries with emerging economies.  Repsol YPF operates in over 28 countries and is currently the leader in Spain and Argentina's oil and gas markets. It is also a large player in Peru and Ecuador. The company produces an estimated at 1.1 million b/d and its oil and gas deposits are estimated at 5.4 billion barrels. Repsol YPF is the third largest liquefied natural gas producer in the world (3 million metric tons a year). Repsol YPF imports, stores, and distributes natural gas in Spain and South America


Lukoil commissions export pipeline in Egypt 


October 21, 2004. Lukoil Overseas Holding Ltd. has put into operation a 100 km oil pipeline connecting Khurghada, Egypt, to General Petroleum Co.'s Ras El Bikhar terminal and the Geisum terminal at Gebel Az Zeit on the country's western Red Sea coast.  The $8 million pipeline is designed to transport as much as 24,000 b/d of oil from the West Esh El-Mallaha (WEEM) block, which produced 545,200 tonnes of oil in 2003. Construction of an oil processing facility and additional drilling are scheduled for 2005. Lukoil Overseas holds 50% of the concession, on which the discovery was made in January 1998.


Husky looking at sale of oil pipelines


October 21, 2004. Husky Energy is considering options for its more than 2,000 kilometres of heavy oil pipelines, including a sale or conversion into an income trust. The network of pipelines transports heavy crude from the Cold Lake region of northeastern Alberta and west-central Saskatchewan to Husky's Lloydminster upgrader near the boundary between the two provinces. Husky decided against any immediate action because of its plan to start building its $600-million Tucker oilsands facility, which would likely use the pipelines to move bitumen to the upgrader.


Policy / Performance


Turkey and Iran discuss Iran gas export to Europe


October 25, 2004. A Turkish energy delegation held talks with Iranian officials on transfer of Iranian gas to Europe via Turkey.  Upon their arrival in Iran, the Turkish energy officials and their Iranian counterparts have also discussed the dispute between the two countries over price of Iranian natural gas exported to Turkey.  The Turkish energy officials have called for lower price of gas exported from Iran, according to the source.  The Turkish delegation has conferred with senior officials of National Iranian Oil Company (NIOC) and National Iranian Gas Company. Turkish Minister of State for Trade Affairs Korshad Tuzman, in his recent visit to Tehran, said that the energy ministers of the two countries were holding talks on the price of gas.


Trans Energy to acquire wells


October 25, 2004.  Trans Energy Inc. announced an agreement to buy 229 oil and gas wells in northern West Virginia. Trans Energy plans to close on the acquisition of about 15,000 acres of leases from Irving, Texas-based Texas Energy Inc. within 30 days.  The assets to be acquired include wells, pipelines, gas purchase agreements, oil hauling agreements, equipment, and rights of way. Ninety-eight of the wells in Wetzel and Marion counties are producing, with another 100 sites to be drilled, Trans Energy said.


Nova Scotia says no to $640M energy deal


October 25, 2004. The government of Nova Scotia has rejected a $640-million offshore oil and gas revenue-sharing deal from Ottawa, saying it's holding out for something better. The province's energy minister, Cecil Clarke, said the eight-year deal is no good because it doesn't factor in revenue from offshore oil or gas wells that could be developed in the future.






Iran to construct gas power plant in Zimbabwe


October 20, 2004. Energy Minister Habibollah Bitaraf has said Iran is to construct a gas power plant in Zimbabwe.  Bitaraf's remarks were made during a meeting with Zimbabwean Ambassador to Tehran S.C. Chiketa.  Bitaraf, during the meeting, expressed Iran's readiness to bolster economic ties with African countries, saying Iran-Zimbabwe cooperation should focus on projects that can be implemented easily. He spoke of the existing economic ties between the energy ministries of the two countries in the renovation of power plants, installation of transformers and training of Zimbabwean personnel.


$1 bn for 'cleaner' gas-fired power in Victoria


October 20, 2004. Origin Energy announced plans for a gas-fired electricity plant in Victoria at almost twice the running cost of a coal-fired plant and also sought approval for a $1billion power plant in southwestern Victoria, using gas piped from its own fields in the Otway Basin in Bass Strait. This could mean a big increase in power prices or a new carbon tax regime.  At 1000 megawatts, it would be the biggest new power station built in Victoria since Loy Yang in the 1980s and an important new infrastructure project for the country's manufacturing heartland. It would supply "baseload" power, available constantly, and if all approvals are forthcoming it could be operating in four years. The announcement signals the Bracks Government is turning away from using its 500-year supply of cheap power from brown coal because it is the most greenhouse-intensive fuel source available.


Joint project to give power to Africa


October 21 2004.  The energy ministers of Angola, Botswana, the Democratic Republic of Congo (DRC), Namibia and South Africa will sign an agreement about a joint power project. The project, known as the Western Power Corridor Project, is being put together by the power utilities of the five countries and is intended to provide low cost, environmentally friendly energy. It is also meant to ensure that economic development in the region is not constrained by energy shortages and is part of the New Partnership for African Development, a statement by the department of minerals and energy affairs read. Its goals include building hydro-power stations in the DRC, Angola and Namibia and increasing trade in electricity by investing in joint venture projects that allow sharing of capital costs.


Japan keen on power plant in Iraq


October 21, 2004. Japan has proposed dispatching a team to Iraq's Al-Muthanna Province tasked with examining the possibility of building a power plant. If realized, the proposal, submitted to the governor of the province, would broaden the scope of Japanese aid at a time when security in Iraq remains volatile. Hopes were high in the province that Japanese aid would represent a solution to local economic woes.  Yet local people have voiced strong dissatisfaction over the activities of GSDF troops, which are viewed as having fallen short of expectations. Al-Muthanna has repeatedly asked Japan to partake in large-scale projects aimed at rebuilding Iraq's infrastructure. Under the plan, the ministry would likely send the first team "as soon as possible," and follow it up with several more missions over a one-year period before making a final decision.


New hydel power stations 'a must': Pakistan


October 20, 2004. The Electric Power Forum has urged President Pervez Musharraf and Prime Minister Shaukat Aziz to make adequate resources available to Wapda for the proposed combined cycle thermal power house and new hydel power stations to avoid heavy power loadshedding next summer.  The construction of new dams and hydel and thermal power stations was necessary as hydel power generation had been reduced from 3,200MW last summer to 1,245MW this year. Power demand was expected to increase by another 1,000MW next year.  Meeting increasing demand from the thermal power generated by the private companies was not advisable because their price was the highest in the world. The Wapda could generate thermal power at Rs 1.25 per unit but was being forced to purchase it at Rs 3 per unit from the private companies against national interest.


Bahrain demolishes old power plants


October 21, 2004. Bahrain's second oldest power plant, which has been operating on just two of its 11 turbines for many years, is now being demolished. The Manama Power Station, in Umm Al Hassam, is a landmark structure built over 50 years ago. But a decision was taken to demolish the plant because it had outlived its lifespan, said Electricity and Water Under-Secretary Dr Abdul Majeed Al Awadhi.  The BD495,000 demolition work is being carried out by Cebarco Bahrain, under a contract awarded by the ministry through the Tender Board. However, the two remaining working units will be maintained for two years, while the plant itself is being replaced by a new 220kv high-voltage sub-station. 


Cogeneration power plant near Dead Sea


October 25, 2004. Israel Chemicals Ltd. (ICL) multinational fertilizer and specialty chemical company announced that its proposal to build a cogeneration (a process which simultaneously produces electricity and steam) power station near the Dead Sea has been approved by Israel's Infrastructure Ministry.  The Group formed its proposal in light of an Israeli government directive passed in April 2002 designed to encourage private-sector generation of electricity. Under this directive, industrial companies are allowed to increase production of electricity beyond their internal needs, and to sell the excess to the Israel Electric Company and others.  Having secured government approval for its proposal, the ICL Group has now progressed to the project planning stage. The Group plans to build a cogeneration power station capable of producing 400-700 megawatts per year. Of this, approximately 200 megawatts per year will be used by ICL Group plants, and the remainder sold according to the terms stipulated in the proposal.


The Group is currently in discussion with a number of companies interested in building the plant. It is also studying the feasibility of powering the plant via natural gas, a more economic and ecologically-friendly fuel than fuel oil. Such a plan would be dependent upon the establishment of a new line to bring natural gas from Israel's coast to the town of Sdom on the Dead Sea, a project scheduled for completion in 2007.


Mitsui, International Power to build power plants in SA 


October 24, 2004. Berkshire Hathaway's MidAmerican Energy, Mitsui, and International Power might bid to build power plants in South Africa as part of a R107 billion expansion, the energy ministry said. Tata Power and CDC Globeleq also might respond to a tender for a 1 400 megawatt power plant, which would cost about R2 billion. The government said that it must add 7 000MW to capacity to avert power shortages starting in 2007. Private firms would be allowed to build plants for the first time, breaking the monopoly of Eskom.  The company that won the contract would get guaranteed sales.  The plan already included R23 billion of private investment.


Saudi Arabia to set up power plant in Iran


October 24, 2004. Head of Iran Power Development Organization said that a combined cycle power plant will be established by Saudi Arabia in Tabriz, capital city of East Azarbaijan Province.  On the basis of a BOT (build-operate-transfer) agreement reached between the country’s Ministry of Finance and Economic Affairs and a Saudi company, the Arab party will construct a 1,000MW power plant.  The plant will cost some 500 million euros, and the agreement is expected to be finalized by March 20, 2005. Iran’s private sector has already started building three power plants of Southern Isfahan, Rudshur, and Parehsar and the Tabriz power plant is the fourth.


Gas power plants: Waste of Bangladesh gas resources


October 24, 2004.  According to observers, by overexploiting gas in the power sector without trying to find out alternative energy the Power Development Board (PDB) of Bangladesh is running the risk of being bogged down in a severe energy crisis in the future. Alongside using gas in a highly wasteful and unplanned way, the Board could not explore any renewable energy for its plants in the last thirty years, they added Upon an appraisal of the fallout of the single-fuel power plants, the annual report for 2002-2003 of PDB itself has said, although Bangladesh has gas reserves, the resource is destined to be exhausted by 2015 if new gas fields are not put into operation.  The report expresses its concern at too much dependence on the single-fuel system and suggested exploring renewable energy resources for power generation. The gas-based power plants in the country consume nearly half the country’s total production of gas. The country at present is producing 1280-1300mmcf of gas per day.


The Ministry of Power sources said the government had not formed a policy guideline in exploring renewable energy resource for power. Seven years ago the Power Development Board proposed to install wind power, micro-hydro and solar power plants in its drive to use renewable sources for generating electricity. Under this plan the PDB had identified some remote and off-grid areas in the country - Barkol, Bilaicharri in the Chittagong Hill Tracts area and Angarpota-Dahagram enclaves and some adjoining areas of Teesta Barrage in Rangpur district.  It may be mentioned that about 200 points have installed the home solar system at Juricharri upazila in the Chittagong Hill Tracts area. According to the plan, 100 more home solar system connections would be given in the area.  It may be mentioned that under the renewable energy programme, the PDB has approved 11 new projects at a cost of Tk 23.48 crore. These projects are the Chittagong Hill Tracts Solar PV Electrification Project, the 20KW micro-hydro power plant at Barkal, installation of an 8 X 225 KW wind turbine power plant, feasibility study of a solar electric power plant, energy conservation pilot projects by Intelligent Motor Controller, solar electric power plants, the energy conservation pilot project by CFL, centralised solar photovoltaic power plants, renewable energy hybrid power plants, electrification of Saint Martins Island by renewable energies and electrification of Dahagram and Angarpota by solar energy.


Tunesia’s Barca power project update


October 22, 2004. On 27 May 2003 BG Group and the Tunisian Government entered into a Memorandum of Understanding (MoU) for the development of a 500 megawatt (MW) CCGT power plant.  Discussions on this project have not yet been concluded. BG Group does not therefore expect the Barca project to contribute to its 2006 power target as originally planned. As a result, BG Group is revising its 2006 power target to 2.8 gigawatts (GW) from 3.3 (GW), a reduction of 500MW. This will not have a material impact on BG Group's earnings or cash flow and all other 2006 targets remain unchanged.  BG Group continues to believe that the Barca power plant is an economic project, which uses untreated gas to meet Tunisia's recognised power needs. The Company will continue to work with the Tunisian Government to develop the Barca proposal and other opportunities for using gas from its reserves to meet the country's energy requirements.


LNG prospect fuelling power investment in Canada


October 25, 2004. The first shipment of LNG to Irving Canaport is still three years away, but already the LNG project is fuelling the prospect of further investment in the energy sector in New Brunswick. Irving Oil announced that it will be applying for a permit for a new gas-fired power plant. The plant would have a capacity of 500-750 megawatts, and would provide power to the New Brunswick power grid. The approved LNG terminal at Canaport has opened a world of new opportunities for New Brunswick. Given those opportunities, and in anticipation of New Brunswick's growing demand for economical power, Irving Oil has decided to seek a permit for a new gas fired power plant.


Iran’s power output hits 100b Kw/h


October 25, 2004. Through using all the capacities of the country’s power plants Iran produced 100 billion kilowatts per hour in the past seven months of the year, corroborating 8.6% growth in comparison with the corresponding period last year. “This summer, we reached a maximum power consumption of 29,200 megawatts”, said the Energy Minister, Habibollah Bitaraf, adding that it showed 8% increase. In the southern parts of the country, however, the figure was considerably higher (25%), the minister implied. “With both state and private investments in the power sector in the next ten years, it is hoped that the country’s power demands would be achieved in the near future”, Bitaraf stated. According to the experts, Iran’s overall power capacity now exceeds 34,470 megawatts as a result of remarkable progress in power plant construction and related compartments.


Policy / Performance


Russia produces more electrical energy


October 21, 2004. In September Russia boosted the production of electrical energy by 0.7 percent. Energy companies produced 68.6bn kilowatt-hour, according to data released by the Russian Federal Statistics Service. Hydro power stations accounted for 19.8 percent of the overall energy produced in Russia from January to September compared to 17.9 percent a year earlier.



Renewable Energy Trends


Renewable Trends: National


Govt steps to boost solar power use


October 23, 2004. Delhi Government has decided to pass an order for compulsory use of solar power for advertising hoardings and water heating in government and other categories of buildings in the Capital. The proposal for compulsory use of solar power will soon be put up before the Delhi Cabinet for its approval.  The decision followed President APJ Abdul Kalam's advice to the department to go eco-friendly while addressing its sesquicentennial (150 years) celebrations in August this year.  The State Government should have passed such an order earlier to save electricity and make solar energy mandatory for advertising hoardings and water heating in government and other buildings in the city. As per the Andhra Government order, all Municipal Commissioners and civic bodies like Public Works Department (PWD), Urban Development, Jal Board, Power companies shall take immediate action for installation of solar water system on existing Municipal Corporations and Urban Development bodies' buildings and any new building being built by them.  The order also says that conventional lights of advertisement hoardings shall be replaced by solar photo voltaic power at the cost of the franchise and conventional lamps of all street lights shall be replaced by solar photovoltaic power. The building plan of hospitals, nursing homes, hotels, guest houses, lodges and multi-storey buildings would be allowed only if they make a provision for solar water heating system and energy efficient lamps.


ONGC to set up wind farm in Saurashtra


October 25, 2004. Petroleum major Oil and Natural Gas Corporation Ltd (ONGC) has appointed a consultant to finalise the setting up of a 150 MW wind farm in Saurashtra.  ONGC, which signed a memorandum of understanding (MoU) with Gujarat Industrial Development Corporation (GIDC), a Government of Gujarat enterprise, to setup a Special Economic Zone (SEZ) at Dahej in Bharuch district last November, is now looking for a third equity partner for the project. A special purpose vehicle (SPV), Dahej SEZ Ltd, has already been formed to set up the zone. The plant which would be more for captive consumption and is expected to be operationally commissioned by 2007.  ONGC will also setup a C-2 (methane) extraction plant in Dahej within the SEZ for which the Board has already approved an investment of Rs 900 crore (Rs 9 billion) in the first phase of the Project.


Rajasthan unfurls non-conventional energy policy


October 25, 2004. The Rajasthan Government announced its new non- conventional energy policy providing for purchase of 400 MW electricity by the State-run power distribution companies from wind power energy sources. The power distribution companies would purchase electricity at the rate of Rs 3.39 per unit this year from wind energy projects of 250 MW capacity each in which 50 per cent of the total project cost had already been invested. According to the policy these distribution companies would purchase electricity at the rate of Rs 2.97 per unit from other projects of different capacities. The policy envisages that wind power generators would construct pooling station for windfarm interconnection and would pay Rs 2 (Rs 200,000) lakh per MW to distribution companies for developing interconnection facility at receiving station. The private sector wind power generators would also have to bear the cost of developing transmission system from producing to receiving station. Non-conventional power producers would be given 50 per cent relief in payment of electricity tax, according to the policy.


Renewable Trends: Global


New wind farm in Texas


October 19, 2004. FPL Energy, LLC, a subsidiary of FPL Group announced it will build, own and operate a new wind farm in Texas, the Callahan Divide Wind Energy Center, to be located in Taylor County, Texas. The 114-megawatt Callahan Divide Wind Energy Center will be comprised of 76 1.5-megawatt wind turbines spread over a 6,000 acre site approximately 12 miles southwest of Abilene. Construction is expected to begin in the next few weeks and be completed no later than the first quarter 2005.  The Callahan Divide project is FPL Energy's second announced wind project in 2004. The company previously announced the 106.5-megawatt Weatherford Wind Energy Center in Oklahoma. FPL Energy is a leading wholesale generator utilizing clean fuels such as natural gas, wind, solar, hydroelectric and nuclear to generate electricity.


Canada government support for wind power 


October 19, 2004. A Canadian wind-power producer received $24.7 million (Can.) in financing from the Ministry of Natural Resources Canada (NRCan) as the government reaffirmed its commitment to the wind-power industry. Minister of Natural Resources Canada R. John Effort said his department invested in the Summerview Wind Farm near Pincher Creek, Alta. He spoke during the Canadian Wind Energy Association of Canada Conference in Montréal.  The Summerview Wind Farm, built by Calgary-based Vision Quest Windelectric Inc., has a 68.4 Mw capacity and represents the first phase of a 130-Mw project. Vision Quest Windelectric is an independent subsidiary of TransAlta Corp., Calgary.


Norway's largest wind park


October 20, 2004. Norway's largest wind-driven power plant is to be built at Ytre Vikna in Nord-Troendelag. The windmill park will also be one of the largest in the world, and will consist of 99 wind driven generators, which will produce around 870 GWh.  This is enough energy to cover the annual consumption of electricity of around 43,000 homes. The project is scheduled to be completed at latest by the fall of 2009. Total cost is estimated at around NOK 2.5 billion, including a new distribution line.


Willow branches fuel power supply


October 21, 2004. Utility firm RWE npower will start burning willow branches as well as coal at its Didcot power plant after signing the country's first major purchase order for renewable biomass supplies. German-owned RWE npower said it will take 30,000 tonnes of processed coppice willow annually from ESD Biomass, in a deal which would help it meet tough new rules on renewable energy. Biomass is usually mixed in a ratio of 10 percent with low-sulphur coal and is seen as one way Britain could cut carbon dioxide emissions which are blamed for contributing to global warming. The two firms said the pact represents a major boost for the embryonic biomass sector. 


The agreement also represents an important new market for some farmers who are keen to diversify into new areas in the wake of recent EU agriculture reforms, the company said. Several other UK power firms are testing biomass fuels such as wood chips, chicken litter and cereal pellets to generate electricity, including the country's largest coal-fired plant Drax, which is owned by a group of banks. Environment experts say if the trial at one of Drax's six power units is successful, willow-based biomass could eventually provide five percent of the power station's fuel by 2009 and cut out 700,000 tones of carbon dioxide emissions.


Law on renewable energy in pipeline in China


October 21, 2004. China's continued power shortage is pushing the government to take additional actions including legislation to promote the development of renewable energy.  State entities concerned are drafting a law which will make it compulsory for power grid companies to buy electricity generated by renewable energies, such as water, wind, solar, biomass, geothermal and marine-based power, and all end users will share the costs, according to Li Junfeng, secretary-general of the Chinese Renewable Energy Association.  The draft law is now being circulated among ministries and big State-owned corporations for review and advice. A revised draft will be submitted to top leaders of the National People's Congress Standing Committee this month for discussion, Li told China Daily. By 2020, China's gross energy consumption is estimated to reach 3 billion metric tons of coal equivalent per year. China's journey towards a country of renewable energy has started. From 2003 to 2005, over 20 wind mills of China will invite international bidding.


Wind-power plant in Abu Dhabi


October 25, 2004. Sir Bani Yas, the island off the west coast of Abu Dhabi, has earned a marked distinction for its programme of captive breeding of endangered animals, many of which have been reintroduced into the wild. Now, it has acquired a new feather to its cap with the commissioning of the first-ever wind power plant in the region. Inaugurated by Mr Shaikh Mansour bin Zayed Al Nahyan, Director-General of the Office.


Implemented by the consortium of Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ) GmbH and Dornier Consulting-DaimlerChrysler Services, the wind power plant weighing 77 tonnes has a rated power of 850kw. It can generate power at wind speeds as low as 5 metres per second.  The plant has been specially designed to sustain severe climatic conditions.  Electricity generated by the plant will be fed into the local power grid of Sir Bani Yas island. The project is regarded as the first of its kind and an important step into the future use of alternative, environment-friendly energy resources.


Waves for renewable energy in UK


October 25, 2004. Denmark catches the most wind for power. Japan absorbs the most sun. Now Britain wants to rule the waves. Wave and tidal stream machines are the latest exploratory technology in the rush to find alternative energy sources to replace fossil fuels with soaring price tags.  Denmark beat out Britain after a strong showing in the early stages of the race to build a viable wind power industry, but the United Kingdom has a terrific opportunity to develop a wave and tidal power industry, Wright said. Portugal, Japan, the United States, Australia and South Africa are also among the countries that want to pool energy from the natural flow of the ocean. But the global wave industry is still small and Britain wants to develop it on a large commercial scale and then export the technology.


World’s 1st solar-hydro power project


October 23, 2004. The International Finance Corp. (IFC), the investment arm of the World Bank, and Cagayan de Oro Electric Power and Light Co. (Cepalco), one of the country’s biggest power utility firms, formally launched a first-of-its-kind photovoltaic (PV) solar-hydro tandem project worth $5.4 million.  Cepalco chairman and CEO Ramon Abaya said the project involved the construction of a 950-kilowatt (kw) grid-connected solar PV power plant in a two-hectare land along with a seven-megawatt (MW) Bubunawan hydropower facility both located in Cepalco’s franchise area in north central Mindanao.


Danish firm to invest in wind power project


October 25, 2004. Filipino-Danish firm San Carlos Wind Power Corp. will invest P2.9 billion for the construction of a 30 MW wind power project in two barangays in San Carlos City, Negros Occidental. The Board of Investments (BOI) has given the project the fiscal and other incentive package on a pioneer status under the existing guidelines of the 2004 Investment Priorities Plan (IPP) for power generation using new and renewable energy sources.  The BOI said the project also met the minimum investment requirement for wind technologies at $1.25 million. The project was conceptualized in 1999 by Smith Bell Wind Technologies Inc., a unit of the Smith Bell Group of Companies.  For the development of the project, Smith Bell Wind teamed up with Global Renewable Energy Partners to establish and organize the San Carlos Wind Power Corp.  The joint venture’s wind farm will comprise of 16 to 20 wind turbine generators each with a capacity of 1.5 to two MW with a total rated capacity of 30 MW. The site, located around Mt. Malindog in Prosperidad and Linubagan, is situated between 700-800 meters above sea level. The project is expected to start commercial operations by July 2006. 


DOE clean coal technology plant


October 22, 2004. Southern Company announced that the company has been selected by the U.S. Department of Energy (DOE) to build an advanced 285-megawatt coal gasification facility in central Florida as part of the energy department's Clean Coal Power Initiative. The plant will gasify coal using state-of-the-art emissions controls, showcasing the cleanest, most efficient coal-fired power technology in the world. The technology to be used is based on the transport gasifier that Southern Company, DOE and others have been developing at the Power Systems Development Facility near Wilsonville, Ala. The plant will turn the coal into gas for generating electricity while significantly reducing emissions of sulfur dioxide, nitrogen oxides and mercury.


Southern Company's partner in the project is Orlando Utilities Commission (OUC). Southern Company is developing the facility through its Southern Power subsidiary, which builds, owns, and manages the company's competitive generation assets. Current plans are for the facility to be built at OUC's Stanton Energy Center in Orange County, Fla., near Orlando. The cost of the project will be shared by DOE, Southern Company and OUC. The expected date for commercial operation is early 2010.


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[1] We actually wanted to write an article on agricultural and electricity data titled ‘Nothing official about it’, but then Pepsi used it and we decided not to go ahead with that!

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