A role for coal in India’s energy future

No resource scarcity

 

Fossil fuels have so far had a longer future than expected.  Coal may not be an exception.  It is sustaining its dominance in the power sector taking on the competition from gaseous fossil fuels.  With abundance and technology favouring its survival, it will probably go further taking on competition even from renewables in the long run.  

 

 

 

(Note: Here % in brackets shows production as a percentage of proved reserves)

Coals dominance can be attributed, at least partly, to its abundance.  Resources of coal in the world are so large that there is no anticipation of a shortage in the next 200 years.  Though only 10 per cent of prospects have been explored estimates of reserves range from 6.2 - 11.4 Trillion tonnes (Tt).  The size of available reserves does not offer a compelling reason to explore further and as a result there has been very little upward revision of coal reserves in the last few decades.  This is in contrast to the case of oil and gas reserves for which there is continuous exploration and the consequent upward revision of reserve estimates.  The reserve to production ratio for coal is close to 230 which is three times as large for gas and four times as large for oil.  Unlike oil, coal resources are more evenly spread around the world. 

 

 

Coal's future is not a question of resource availability or production cost but one of environmental acceptability. Emissions of particulate matter, sulphur and nitrogen may have solutions but the largest problem is that of CO2 emission.  Coal's future will therefore largely depend on the ability to control emissions of CO2 during the use of coal. 

 

But there is scarcity in quality 

 

When environmental externalities dominate interests, quality of coal also becomes important.  While coal resources are dispersed, quality coal is more concentrated contrary to common perception.  About 69 per cent of worlds coal reserves are in the 5 nations with the largest coal reserves - US, Russia, China, Australia and Germany. 

 

The situation for India is not very different.  Out of a reserve estimate of nearly 240 billion tonnes only about 84 billion tonnes are proven.  Most of the reserves of coal are concentrated in the eastern, central and southern regions of India.  The reserves to production ratio based on proved reserves gives a very comforting figure of 230 years but that conceals many realities. Non coking coal amounts to about 85 per cent of the total and less than 25 per cent of this is of superior quality.  Of reserves within 600 meters only 20 per cent is of superior quality. 

 

 

Coal’s dominance in the power sector may continue

 

Developments in two of its key markets - power production and iron & steel production will to a large extent influence coal’s future.  Though coal is indispensable in steel making the growth rates for steel are not likely to be large.

 

(Here renewable includes hydro capacity also)

 

In addition efficiency gains in steel production technology are slowly decreasing the role of coal in steel production.  Growth of the market for power is very promising especially in large developing countries like India.  Coal has in fact been the fuelling nearly 38 per cent of global power generation.  This share has remained unchanged since 1990.  As for India 74 per cent of coal goes for power generation, while 10 percent is used by the steel industry, 5 per cent by the cement industry and the rest by the domestic sector and other industries. 

 

Projected demand

(Million tonnes)

 

So far coal has been able to offer what power producers look for - stable supplies from diversified sources, low price volatility, easy to handle transport and store, low hazard potential and proven low cost technologies.  When environmental costs are added to this list coal’s attractiveness is diminished and competition from natural gas appears strong.  The ability of coal to compete with natural gas on both these grounds would be key to its survival in the future.   

 

India must address the efficiency challenge

 

India together with China is expected to account for more than 92 per cent of total expected increase in coal production by 2020 (EIA).  The challenge for India is creating the necessary environment for profitable and environmentally efficient exploitation of available coal reserves. Coal production has kept up with consumption until very recently meeting the requirement of all sectors except the steel sector.  About 10 million tonnes of low ash coal is being imported annually partly to meet the shortfall in coking coal and partly for blending for improving the quality of the blend.  Besides over 2 million tonnes of steam coal is being imported by coastal power and few cement plants. Studies demonstrate wide gaps in the future availability of coal and ground realities do not favour reduction in these gaps in the future.  Though the state continues to be the dominant player in the coal industry, budgetary support for the industry has been reduced considerably since the 1990s.  The administrative price structure has not been remunerative enough to generate investible surplus for improving quality.  Mines that have been allocated for development have not been developed for reasons of non-viability. Areas that can be developed economically do not have adequate transport infrastructure. 

 

To bring up coal production to about 375 million tonnes over the next 15 years an investment of about $ 10 billion is required. This means an annual capacity increase of about 25 million tonnes.   With little or no state budgetary support for the coal sector, private investment becomes absolutely necessary, but for that more than mere invitations to the private sector are required. 

 

Availability of coal

(Million tonnes)

 

Technology is only part of the answer

 

Private sector participation requires a well functioning market all along the value chain starting from coal to the final end product - power.   A number of challenges need to be addressed along the value chain. 

 

To begin with coals conversion has to be made less CO₂ intensive.  While it has been recognised that Indian coals contain a high proportion of inherent ash, it has also been demonstrated that it is often not practical to wash these coals to below 25 per cent economically because of very low yield due to difficult washability characteristics of thermal coal in India.  This reduces Plant Load Factor of Indian power plants to about 60 percent compared to global average of 85-90 per cent.  Because of the high ash content considerable oil support is required by the Indian power plants. Yet delivery of product that has uniform top size, a uniform ash content of about 30-35 per cent and is devoid of extraneous material such as stones, metal bars, timber, overburden contaminants, may be very attractive to power plant and it is an achievable target. The extent of reduction in ash content will be dictated by the distance at which thermal power plants are located from the coal mines and by other economical factors. Inferior grades of Indian coal has ash content of about 42-45 per cent.  In order to produce boiler feed coal of required quality (less than 34% ash) benefication of run of mine coal is necessary.   

 

There are other technology options to enhance efficiency. The average efficiency of fossil fuel fired electricity generation has been stagnant in affluent countries since the early 1960s.  Clean Coal Technologies which have received attention and funding from coal dependent countries has tried to focus on preparing coal before combustion, burning it more efficiently and minimizing or eliminating solid and gaseous emissions.

 

The more advanced Integrated Gasifier Combined Cycle (IGCC) plants that have a third cycle for power generation and therefore enhance efficiency of the fuel is yet to make a significant impact. The IGCC technology is however already in operation in fertilizer plants in the country.  The country’s first biomass plant also proposes to use a pressurised boiler with IGCC technology. 

 

Supercritical boilers which operate at pressure levels of 200 bar and above further raise the efficiency of the power plant.  These power plants operate at pressures and temperatures that remove the distinction between liquid and gas phases of water as they form a homogeneous fluid.  Though there is one proposed project based on this technology, most of the projects of India’s 10^th plan period are expected to use be sub-critical boilers.  The 11^th plan period projects could however adapt supercritical technology. 

 

Apart from power coal could become competitive even in other markets such as household heating and cooking if it can be converted into gas at acceptable costs and minimum environmental costs. 

 

Flue Gas Desulphurification (FGD) in the west has greatly reduced acid deposition. This of course requires additional energy.  Fly ash removal needs at least 2-4 per cent of the generated energy and depending on the process FGD can use about 8 per cent of gross power generation.  Effective controls can therefore lower a plant's overall efficiency. 

 

NOx emissions elimination with overall rise in energy conversion efficiency through the Fluidised Bed Combustion (FBC) did not deliver as much as it promised.  FBC was overshadowed by the widespread embrace of gas turbine generation but the atmospheric version of that technique is now a commercial option. This process is competitive with natural gas fired combined cycle systems for new installations. Pressurised fluidised bed combustion (PFBC) produces gas that is capable of driving a gas turbine and operating in a cycle. India’s coal based power plants use AFBC rather than PFBC. 

 

Second generation PFBC integrated with a coal gasifier are expected to take up a small fraction of the space taken up by conventional units and are expected to be commercially available before 2010.  These will combine near zero NOx, SO2 and particulate matter emissions with overall 52 percent conversion efficiency.  This process would represent a 30-50 per cent efficiency gain compared to conversion achieved in standard coal-fired power plants. 

 

Cogeneration is another concept that produces both electrical energy and necessary thermal energy on site.  Integrated combined cycle (IGCC) combined gas-turbine and steam cycles achieve roughly 45 per cent efficiency and lower NOx emissions.  Combined cycle gas turbines on the other hand achieve higher efficiencies, are more economical and more importantly emit only half as much CO2. 

 

 

Policy must facilitate efficiency

 

Most of the coal is despatched by rail in India.  The high ash content in coal imposes additional strain on the already congested rail infrastructure.  The anticipated demand for coal by the power plants situated at different distances from the mines is given in the table below:

 

Consumption of coal in power stations located more than 500 km from the coal sources require 275 million tonnes of coal in 2009-10.  Over three fold projected increase in consumption in distant power stations will substantially add to the strain on the railway system.   With rail transport option unavailable for distances less than 50 km, truck transportation which is three to four times as expensive is used.  This often results in the absurd situation of coal being more expensive at distances closer to the pit head. 

 

The freight equalisation policy seeks to overcome cost differentials in fuels arising out of distance between plant and coal source equalises freight costs across plants.  Thus plants located at pit head have the same freight charges as those located hundreds of kilometres away.   With price of coal not reflecting true cost, the comparative advantage of locations with coal reserves is completely destroyed.  In addition this hinders the profitable use competing fuels such as natural gas in locations where coal has a real cost disadvantage. 

 

Reforms in the demand end of the power sector are also necessary for facilitating efficiency gains in the supply side.  Reforms, especially in pricing of power will assure returns for the investor thus facilitating private sector involvement in the coal sector. 

 

Free power to farmers: The role and nature of the Indian State

 

Excerpts from the observations of Dr Aruna Pense of the Universirty of Mumbai 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.

 

“The two recent decisions of the Government of Maharashtra namely the providing of free power and giving debt relief to the farmers make us ponder over the nature of the state today, what the state is up to and whose interests is it representing and what are its scope and limitations? The state, in a democratic capitalist society, though represents dominant class interests, makes it seem that it is actually representing the interests of different classes. It wants to project its image as an autonomous body representing common good and being above the classes. Whether the state indeed is above class interest can be tested when major decisions of allocation of resources are made. This allocation shows the class character of the state. The allocation decisions also indicate the struggles of various classes to get their share in the given pie. The decisions to provide free power and debt relief to farmers seem to be sops given to the agricultural sector. One tends to think that the state once again is tilting towards farmers. But which class interest is it really protecting?

I want to relate this particular issue to the farmer movements. Twenty years ago the farmers in the country had resorted to a strong movement demanding remunerative prices and decrease in the input prices or increase in subsidies for the inputs. The movement was strong in the areas where capitalist development of agriculture had started and then stagnated due to the imbalance in the inter-sectoral terms of trade. At that time, the agrarian oligarchs used the movement to pressurize their partners in the political power to bring the issue of remunerative price on the national agenda and reassert their political position vis-à-vis the industrial and mercantile capital. That movement was a populist movement because it talked of class unity of the farmers against the industry and urban sector and encapsulated in the slogan ‘Bharat’ versus ‘India’.

 

It claimed to be a revolutionary movement but was basically an oppositional movement representing and intra-class struggle. Movements in Maharashtra concentrated on remunerative prices whereas in the other states like Punjab and Karnataka, farmers were demanding reduction in input prices including cheap or free power. In Maharashtra it had claimed the remunerative prices would take care of their interests themselves whatever input prices may be. Remunerative prices issue was then accepted by all the major parties, not in Maharashtra but at the national level and later became part of the government policy. The farmer’s movement also became weak and lost its edge. The ruling block had made the adjustments and compromises that were required for the smooth functioning of the state. This time around there isn’t even a very strong movement of farmers. From the time of the Dunkel draft introduction, the differences in the farmers came to the fore. The organizations in Maharashtra welcomed wto and the process of globalization-privatization and the new liberal policies in general, whereas the Punjab and Karnataka farmers’ movements opposed it. In Maharashtra also a group of Shetkari Sangathana activists were opposed to globalization. Even in the face of increasing suicide of farmers the movement did not get much momentum.

 

It is in this backdrop the decisions of the Maharashtra government have to be seen. The present organizations across the country have been making a demand for debt relief. Though Shetkari Sangathana in Maharashtra does not want state interference as per the new liberal ideology, it nonetheless had made a demand for subsidies on power and debt relief. The present indebtedness is certainly an issue of long standing and the government had to address it. The suicides of the farmers necessitated a quick decision, especially since it could became an election issue. Debt relief in that light is a very important action. The indebtedness farmers’ issue is one that has been reoccurring right from the time of the British. The other issues have been changing as per the changes in economy. The earlier demands for fair share by share croppers, land rights, land redistribution, input prize reduction, subsidies and remunerative prices have been the successive issues occurring in peasant struggle and all these issues have been accompanied by the debt issue. The government has also taken debt relief measures from time to time. But will the fresh measures resolve the problem or is it only a temporary breather and whether the incidents of suicide decrease are yet to be seen. The measure certainly does not address the cause of indebtedness. The government does not really make serious investment in agriculture to encourage it the way it does the industry.

 

The question is that when the state is retracting from the social responsibilities like pds, education and health, why has it intervened so strongly in this area, which caters to mostly the rich farmers and the nascent agrarian capitalism? It indicates that the state, contrary to its claims, is very much a class institution and acts to promote and protect the interests of the dominant and ruling classes. However, to maintain the façade of its autonomy, it has taken one obvious proper step (though how proper it is has to be seen) of debt relief. It wants to demonstrate its ability to bring about class conciliation. The debt relief measure could also be useful for rural markets as the purchasing power of the people may be released. Thus, in the face of the onslaught of globalization on the state, the state is also trying to retain its power by asserting itself as the allocator of the vital resources by allocating these resources to the dominant classes – industrial and agricultural both - and at the same time cutting the edge of class conflict by giving relief, not power to the poor. The other measure – free power to agriculture, as discussed earlier, will largely benefit the rich and the middle farmers. Power is mostly used for running pumps on wells, in lift irrigation or sprinklers. Free power, as noted earlier, would perhaps be disastrous for the Maharashtra economy. Its long-term consequences could also be serious as power is mostly used for irrigating cash crops where more water may be utilized affecting ground water level adversely. The most important resource is thus distributed unevenly favoring the dominant class. Data supports this observation. Free power will also perhaps lead to the bankruptcy of the State Electricity Boards, thus clearing the field for private sector players and the huge monetary burden on the government. The power issue may have been hijacked by the Chief Minister of Maharashtra from Shiv Sena or BJP, but one must note any political party is ultimately representing the same class or classes. The state action is thus a class action and it has come at this time because elections are round the corner and every party is trying to consolidate its constituency.

 

Moscow praises latest IAEA resolution on Iran

 

Senior Russian diplomats and nuclear experts have welcomed the very mild resolution on Iranian nuclear programs adopted by International Atomic Energy Agency's Board of Governors. A positive solution of the problem is more than a matter of prestige for Russia, even though Moscow mediated Tehran's talks with the EU Troika. Russian diplomats interacted closely with both parties in a bid to "defuse the situation this way," as Russian Foreign Minister Sergei Lavrov put it.   The most important aspect of the "consensus" resolution, Mr. Lavrov stressed, is that it leaves the Iranian issue within the framework of the IAEA. The resolution no longer features a provision to the effect that the Iranian nuclear file could be turned over to the UN Security Council for examination if Iran failed to honor its commitments. Iran will undoubtedly profit from some other provisions in the document. In particular, the resolution expressly states that Iran is not striving to develop nuclear weapons by developing its own civilian nuclear programs. One can safely say that this is a diplomatic victory for Tehran, Gennady Yevstafyev, a Russian expert on nuclear non-proliferation issues, believes.   The resolution praises Tehran's decision to suspend uranium-enrichment operations "as a voluntary confidence building measure", which is another victory for Iran, the expert noted. Tehran maintained this position from the start of negotiations with the IAEA and then the EU Troika. Iran has de facto reserved the right to develop its nuclear fuel production program under the Nuclear Non-Proliferation Treaty.   And, finally, Russia has its own interests to consider in solving this problem. Tensions have now been defused around Iran's nuclear programs, thereby facilitating more intensive Russian-Iranian nuclear cooperation. Russia's Federal Nuclear Energy Agency (Rosatom) believes that Moscow and Tehran can soon conclude an agreement on building a second power unit at the nuclear power plant in Bushehr. This document might be signed December 15-16, when Moscow hosts a session of the Russian-Iranian commission for trade and economic relations, Rosatom spokesman Nikolai Shingarev noted. This commission is co-chaired by Rosatom head Alexander Rumyantsev.   The IAEA resolution on Iran gives one ample reason to believe that most Agency members are confident that Iran will not violate the nuclear non-proliferation regime. However, one country cannot agree with this: the United States. It seems that Washington will maintain this position in the foreseeable future. The US called on the IAEA to be vigilant, making it clear that it might unilaterally propose sanctions against Iran.   So, will the US try to exacerbate the situation around Iran? Firm support from Russia, China and the EU has so far prevented the Iranian nuclear file from being sent to the Security Council, so the US is unlikely to take any unilateral steps.

 

 

Pyotr Goncharov

RIA Novosti commentator

 

 

Russian, Indian gas companies sign agreement on gas deliveries to India

 

December 3, 2004.  Gas deliveries to India will be the main sphere of cooperation between Gazprom, Russia's gas monopoly, and Gas Authority of India Limited.   A relevant agreement between the companies was signed by Gazprom chief Alexei Miller and his Indian partner, Proshanto Banerjee.   The agreement reads that the two companies will look into the possibility of supplying gas to India and conduct the supplies, which will be the main sphere of their activities. Besides, under the agreement the companies can work together in the oil sector.   Gazprom and Gas Authority of India Limited will join efforts in many areas ranging from prospecting to the construction and maintenance of oil trunk lines, and in the sphere of gas processing and supplies of equipment for the oil and gas sector.   The companies will also study the possibility of prospecting and producing gas hydrate off the shores of India and extracting methane from coal beds.   The agreement also envisages cooperation in improving the skills of and re-training personnel, and exchanging experts.   The companies are expected to establish a steering committee to oversee activities under the agreement.   India's proven natural gas reserves are 850 billion cubic meters. India produces 30 billion cubic meters of gas annually, which is consumed domestically. The country's domestic demand for natural gas has been forecasted to rise to 37 billion cubic meters in 2005, while it will grow to 43 billion in 2006 and to 110 billion cubic meters by 2010. India's proved oil reserves are 700 million metric tons. In 2003, the country produced 36.7 million metric tons, while oil consumption reached 113 million metric tons. Saudi Arabia, Nigeria, the United Arab Emirates and Iran are India's major oil suppliers. Gazprom and Gas Authority of India Limited have worked together at Block 26 in the Bay of Bengal under the October 3, 2000 production sharing agreement and the June 7, 2001 bilateral working agreement. The agreement envisages prospecting activities, hydrocarbon production and sales. The program of prospecting activities at Block 26 was drawn up for the period of 7 years.  

 

(Courtesy RIA Novosti)

 

 

 

Putin on Russian-Indian Fuel-and-Energy Cooperation    

 

December 3, 2004.  Gazprom may take part in an international tender for conducting prospecting operations on the Bay of Bengal shelf and developing regional oil-and-gas deposits, President Vladimir Putin of the Russian Federation said.   Such Russian companies as Zarubezhneft, Stroitransgaz, Neftegazexport and Tyumenneftegeophysica have also been operating for quite a while on Indian territory; they are ready to help develop India's oil-and-gas deposits, the Russian leader told the Hindu newspaper of India.  During Mr. Putin's visit Russian OAO Stroitransgaz also signed some important documents for expanding on cooperation in India and third countries with Indian Oil Corporation Ltd., Essar Ltd., Indian Engineers corporation and GAIL. In particular, Stroitransgaz is going to take part in gas pipeline construction projects Iran-Pakistan-India, Bangladesh-India and Myanmar-India. As about third countries, Stroitransgaz reached a preliminary agreement for taking part in gas and oil pipelines construction in North Africa, Algeria and Libya. Among other important proposals of Stroitransgaz to its Indian counterparts is more active participation in investments projects including those in Russia and other CIS countries.   Russian companies will offer state-of-the-art technologies for increasing oil-well yield, for reactivating old-time "idle" oil-fields and developing various deposits that contain hard-to-extract oil, Putin stressed.   In other words, they will offer such technologies for completing various production tasks, which are perceived as particularly topical by India, Putin went on to say.   Most importantly, enhanced Russian-Indian energy partnership benefits the economies of our two countries, Putin noted.   According to Putin, India currently imports 73 percent of all oil being used by it. The new Indian Government wants to attain eight-percent annual economic growth, Putin said; India's fuel-and-energy demand will increase already in the near future, Putin added.   Russia, which is India's long-standing and time-tested partner, is ready to make its contribution toward ensuring the resurgent Indian economy's energy stability, the Russian leader stressed.   Putin mentioned the participation of the Indian oil-and-gas corporation and Russia's Rosneft oil company in the Sakhalin-1 project (in the Russian Far East) as an example of that successful Russian-Indian cooperation. The Indian corporation plans to invest $1.7 billion into this project; this will become its largest foreign-investment project, Putin noted.   To the best of my knowledge, the drilling rig has already been assembled; and drilling operations have commenced; the partners intend to launch oil production over the 2006 period, the Russian head of state noted.

 

 

NEWS BRIEF

 

 

OIL & GAS

 

 

Upstream

 

OVL to seek assets in the Caspian Sea

 

December 7, 2004. To enhance energy security of the country, OVL is pursuing acquisition of equity oil as well as oil and gas exploration acreages and producing properties in several identified countries, including those in the Caspian Sea area. OVL's proposal to invest in oil fields in Caspian Sea area is at an initial stage of consideration. Public sector oil companies - OVL, Indian Oil Corp (IOC), Oil India and Gail - have participating interest in oil and gas projects in Vietnam, Sudan, Russia, Iraq, Iran, Myanmar, Libya, Syria, Australia and Ivory Coast.

 

ONGC to expand Tripura capacity

 

December 6, 2004. ONGC plans to invest Rs 400 crore (Rs 4 billion) to step up natural gas production capacity in Tripura from 1.7 million cubic metre to 4.5 million cubic metre by 2007. Almost 90 per cent of the production in the State will be used for captive consumption in the proposed 750 MW gas based power plant. Apart from drilling four new wells, the investment plan also includes setting up of three new gas storage stations and laying a pipeline connecting the production wells to the power plant. The existing two gas storage stations will also be revamped. The power project is being taken up in collaboration with IL&FS and Tripura State Power Development Corporation.

 

ONGC, Gazprom to join hands

 

December 06, 2004. ONGC Videsh Ltd (OVL) and Russian gas major Gazprom will jointly take up upstream oil and gas projects in Russia, India and other countries. The two companies initialed a memorandum of understanding which will be signed later this month in Moscow. The MoU will enable OVL to broaden its presence in Russian oil and gas sector while Gazprom would register its presence in the growing gas market of India along with Oil and Natural Gas Corporation. The two sides would also cooperate in a few strategic hydrocarbon provinces of the world. The MoU could also include joint bidding for the assets of troubled Russian company Yukos. Russia is selling Yukos's main oil producing unit, Yuganskneftegaz, and has set $8.65 billion as the starting price for the auction on December 19. Yugansk produces 1 million b/d of oil or over 60 per cent of Yukos output. 

 

ONGC to develop Vankor field along with Total    

 

November 30, 2004.  Following French-Belgium Total, the Indian oil and gas state company ONGC also voiced its interest in developing the Vankor field in the Krasnoyarsk territory, East Siberia, with recoverable reserves estimated at 125 mln tons of oil and 79 bln cu m of natural gas. Industrial production on the field is to begin in 2008 and will equal 6 mln tons annually. ONGC accounts 77 pct of oil and 81 pct of gas produced in India and holds a 22-pct stake in the Sakhalin 1 project.   In November, representatives of its international division ONGC Videsh visited Moscow, a top manager of the Indian company told RIA Novosti. "Now we are in talks with Rosneft [whose subsidiary holds the license on Vankor] on purchasing a stake in the field," he said. He did not elaborate.   According to a Rosneft spokesman, ONGC asked for geological information on the field. The Russian company, however, intends to carry out follow-up exploration on its own, thus increasing the cost of the reserves and only then to decide on attracting outside investors, he pointed out.   "Although Rosneft is a state-owned company, it is a business project, so the main criterion for its decision will be economic expediency," says a spokesman for the Russian Industry and Energy Ministry. Yet he recalled that India was "Russia's strategic partner in South Asia and if its participation is commercially expedient and passes all stages of state expertise, cooperation may take place."   Analysts believe that the decision will be up not to Rosneft, but to Gazprom, whose alliance makes it possible to develop such a large field. Others, however, point out that after the merger Gazprom will not necessarily want to invest in the costly project.   They recall that beside ONGC Total has also shown interest in the Vankor field and has long been in talks with Rosneft. "There is a demand for the project, and it is good for Rosneft," says Valery Nesterov of the Troika Dialog investment company. He does not rule out that the company will cooperate both with the Indian and the French companies, but predicts that the final decision will not be made soon, probably, only in a year.  

(Courtesy RIA Novosti)

 

ONGC in race for Ecuador fields

 

December 03, 2004. State run ONGC has bid for acquiring Canadian firm EnCana's stake in a cluster of oilfields in Ecuador. ONGC Videsh has bid for assets which include the Canadian's stake in the Amazon blocks 14, 17 and Tarapoa, with combined output of 66,891 b/d. EnCana assets are worth about $1.5 billion and OVL has put in slightly more than the stated amount. ONGC is seeking overseas petroleum assets as its domestic output has declined and no large fields have been discovered recently in India, which imports 70 per cent of its crude oil requirements.  EnCana owns a 36.26 per cent stake in a new 450,000 b/d heavy crude pipeline from the Amazon oil blocks to the Pacific coast, and has reserved space to ship more than 108,000 b/d. EnCana also owns a 40 per cent stake in oil block 15, operated by Occidental Petroleum Corp.

 

OVL fails to get stake in Angola oil block

 

December 03, 2004. OVL had failed to get a 50 per cent stake in Angola’s offshore Block 18 oilfield after the African country’s national oil company, Sonangol, exercised its pre-emption rights. OVL had entered into an agreement with Shell in April this year to acquire a 50 per cent stake in Angola’s offshore Block 18 oilfield. The acquisition was subject to the waiver of pre-emption rights by other partners in the block, British Petroleum and Sonangol, as well as consent from Angola’s government. However, while BP gave its consent, Sonangol exercised its pre-emption rights as a result of which, the deal could not be concluded. 

 

ONGC deal for Australian firm 

 

December 01, 2004. ONGC has awarded a $215.35-million contract for G1-GS15 field offshore in Krishna-Godavari basin to Australia-based Clough Engineering. The company will produce 1 mt of low sulphur crude oil and 6 billion cubic metre of natural gas over the expected field life of 15 years. The project will create India’s first digital oil and natural gas field incorporating remotely monitored and controlled smart wells.

 

 

Shell returns to fuel retailing

 

December 3, 2004. Royal Dutch-Shell has made a come back after nearly three decades in fuel retailing in India setting up its first petrol pump in Bangalore. Shell, which has the licence to set up 2,000 petrol pumps in the country, will invest Rs 250 crore (Rs 2.5 billion) in the first phase of its retail network. It is initially targeting south Indian states. The company is sourcing petrol and diesel from Mangalore Refinery and Petrochemicals Ltd.

 

IOC, IBP on retail expansion spree

 

December 6, 2004. IOC and its group company IBP Ltd plans to focus on branded outlets in retailing of petroleum products. The under recoveries during the first six months of the current year due to non-revision of retail prices notwithstanding, the companies are continuing focus on retailing. IBP recorded Rs 69 crore (Rs 690 million) losses during April-September 2004. IBP’s 70 per cent sale comes from diesel where the government does not plan to bring import parity immediately. The government on November 4 decided to bring diesel at 50 per cent parity though at the current level the parity is 100 per cent. The continuing retail expansion is aimed at creating captive consumers before the private sector players gain ground in product retailing. IBP would merge with IOC by the end of financial year but the IBP brand would be retained. IOC wants to use the brand’s strength in the southern and eastern region to its advantage. 

 

Gazprom offers GAIL stake in gas cracker unit

 

December 7, 2004. Russian energy major Gazprom has offered GAIL India equity in a gas based petrochemical plant in eastern Russia. The proposal for the gas cracker unit is distinct from the strategic cooperation agreement signed between the two companies.  GAIL has been offered management and marketing rights for the plant which will utilise gas available from the Sakhalin project. Indian upstream company OVL has 20 per cent equity in the first phase of Sakhalin. Gazprom may also take on board a third equity partner in the gas cracker unit.  The Gazprom-GAIL partnership for Nakhodka gas cracker would be under the clause on “utilisation and processing of gas” in the strategic cooperation agreement. Gazprom and GAIL are already working on the block N 26 in the Bay of Bengal within the framework of a production sharing agreement signed in October, 2000. They are also likely to tie up for the fifth round of blocks to be put up for bidding by the Centre under the NELP.

 

HPCL bags city CNG supply licence

 

December 07, 2004. The Gujarat government has issued a licence to Hindustan Petroleum Corporation Ltd to set up a compressed natural gas network in Ahmedabad. GAEL had bagged the CNG distribution mandate a year back. The entry of the second player is because of delays on the part of GAEL in setting up the distribution network. HPCL has to set up nine CNG daughter stations and one mother station by March 2005.  The government has been trying to convert most of the public transport buses to be CNG-powered. HPCL already holds the licences for laying CNG and piped natural gas (PNG) distribution network in Mehsana and Gandhinagar. Even other petroleum majors like Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Indo-Burma Petroleum (IBP) have been asked by the state government to install CNG dispensers along with their retail petroleum outlets in Ahmedabad. 

 

ONGC to hike MRPL capacity

 

December 2, 2004.  ONGC hopes to begin marketing of LPG and kerosene soon. ONGC have applied to the government for permission to sell kerosene through Public Distribution System and through open market. It has also sought permission for bulk sale of LPG. The company plans to increase capacity of its subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL) to 15 million tonne at an investment of Rs 2,000 crore (Rs 20 billion)  by 2007 and has applied for permission to begin marketing of LPG and kerosene.

 

IOC eyes stake in Nigerian refineries

 

December 1, 2004. Indian Oil Corporation is keen on acquiring stake in three refineries in Nigeria and is eyeing refinery turnaround jobs in African and West Asian countries. IOC has submitted Expression of Interest (EoI) for acquiring 51 per cent stake in Nigerian government owned Port Harcourt, Warri and Kuduna refineries. Chinese national oil company will be the IOC's competitor in the race to acquire 150,000 b/d Port Harcourt refinery and 140,000 b/d northern Kaduna plant.

 

Pak State Oil invites IOC to supply diesel

 

December 7, 2004. Pakistan State Oil Corporation has invited a commercial offer from Indian Oil to import almost 3m tonnes of diesel annually for three cities Lahore, Karachi and Jhelum. This is the first time that Pakistan has officially invited India to supply diesel to meet its energy requirements. Currently, diesel is on the negative list of Pakistan’s imports from India. Pakistan currently imports most of its diesel requirements from Kuwait. Of the total 2.6m tonnes, Lahore is expected to take about 1.2m tonnes, while Karachi would require 1m tonne. The balance would be exported to Jhelum.

 

GSPC to lay gas lines in district hubs

 

December 04, 2004. The Gujarat government has asked the Gujarat State Petroleum Corporation Ltd to provide a gas pipeline network to all district headquarters. GSPC, a state government enterprise, is the nodal agency for oil and gas in Gujarat. GSPL, a subsidiary of GSPC, at present provide 8 million standard cubic metre of gas in the state.  GSPL is laying a gas grid that will pass through all major parts of the state and will provide gas for industrial and domestic use. Till date seven district headquarters of the state have been covered under the GSPL gas grid. These districts include Surat, Bharuch, Vadodara, Anand, Kheda, Ahmedabad and Gandhinagar.  There is a demand of 2.3 million cubic metre from power projects alone, and considering the demand from all industries and domestic users, the demand could be 50 million tonne per annum. Thus, there is a need for more gas and a third LNG terminal, apart from being helpful to meet the local demand. GSPL is involved in developing energy transportation infrastructure and connecting natural gas supply basins and LNG terminals to growing markets. The company’s natural gas operations in Gujarat are aimed at leveraging integrated energy resources. A proposed pipeline infrastructure of more than 2,200 km in Gujarat has been planned, of which 360 km are operational between Hazira and Kalol.  GSPL transports more than 9 million metric standard cubic metre per day (MMSCMD) of gas, including three MMSCMD of LNG. The company has already made investments in excess of Rs 1,000 crore (Rs 10 billion). 

 

Gail, Gazprom in gas deal

 

December 04, 2004. Gail India and Russian energy major Gazprom entered into a strategic cooperation agreement under which projects would be taken up for the delivery of natural gas to India and opportunities for transnational pipelines would be explored. Another agreement for undertaking construction, ownership and operations of gas pipeline projects in different countries in the world was signed by GAIL and Stroytransgaz of Russia. 

 

GAIL completes phase-I of ERP project

 

December 03, 2004. GAIL (India) Ltd has completed the first phase of electronic resource planning implementation of the Jamnagar Loni LPG pipeline. 60 per cent of overall progress of the project has been achieved. The entire project is scheduled to be completed by October 2005 at a cost implication of Rs 55 crore (Rs 550 million). The next project of ERP implementation is for LPG Gandhar and Vaghodia. It will cover the functions like transmission of natural gas and liquefied petroleum gas, trading of natural gas, LPG production, petrochemical complex, telecom, exploration and production etc.

 

GAIL plans to invest in Assam

 

December 03, 2004. GAIL India Ltd, the country’s integrated gas company, intends to invest Rs 1,500 crore (Rs 15 billion) to Rs 2,000 crore  (Rs 20 billion) in its gas cracker project at Assam. The state government of Assam and Numaligarh Refineries Ltd are also expected to participate in the project. GAIL is expected to give a new lease of life to the long overdue Rs 2,500 crore (Rs 25 billion) gas cracker project, which was promised as part of the economic package under the Assam Accord. The project will be gas-based having an installed capacity to produce 180,000 tonne per annum of ethylene.  Besides the Assam project, GAIL is augmenting the capacity of its petrochemical plant in Auraiya, Uttar Pradesh. GAIL is also in talks with the Kerala State Industrial Development Corporation to set up a gas-based cracker based on the LNG feedstock from Petronet LNG’s proposed project in Kochi. 

 

ONGC, GAIL to be spared from subsidy burden 

 

December 6, 2004. The petroleum and natural gas ministry may spare Oil and Natural Gas Corporation (ONGC) and GAIL India from the burden of subsidy on kerosene, which the two share along with other oil marketing companies. The total subsidy that is borne by them for all petroleum products including petrol, diesel and LPG is to the extent of Rs 3,000 crore (Rs 30 billion) each year.  ONGC and GAIL have been sharing the subsidy on all petroleum products for the last three years. Earlier, the burden was shared only by the oil marketing companies — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and IBP Ltd. Apart from the oil products, ONGC also has to bear the subsidy on gas. The gas sold by ONGC is priced at 60% below the market price. The only petroleum product on which ONGC is allowed to charge market price is crude.

 

Govt set to allow private players in ATF supply

 

December 6, 2004. The Government is set to allow private players to supply aviation turbine fuel (ATF), which is currently a monopoly of the three State-owned firms (PSUs), IOC, BPCL and HPCL. ATF was one of the major operating costs of airlines in the country, accounting for about 28-30 per cent of the total operating costs as against the global level of about 15 per cent.

 

OIDB to set up strategic oil reserves

 

December 3, 2004. The Government is examining the possibility of using the Oil Industry Development Board (OIDB) as a mechanism for setting up strategic oil reserves in the country instead of framing a separate legislation in this regard. Government is also looking at covering the political risk involved in acquiring oil equity abroad with the OIDB. The OIDB having a corpus of several million rupees, fetches the exchequer Rs 4,500 crore (Rs 45 billion) per annum through the OIDB cess. Though termed as cess, the funds actually flow into the Consolidated Fund of India. The OIDB has necessary provisions to set up strategic reserves.

 

India looks to Russia for more oil

Deecember 2, 2004.  India and Russia are set to ink a strategic agreement for co-operation in the energy sector. Even as petroleum minister Mani Shankar Aiyar is pushing for crude oil imports from the Middle East, efforts are on to form strategic partnerships with oil suppliers from countries such as Russia, Khazakstan and Azerbaijan. This agreement will focus on joint efforts to explore ways of getting crude oil from Russia and Central Asian countries to India besides picking up equity in oil and gas fields in Russia. The agreement would also touch upon various pipeline options for transporting crude oil from Russia and Central Asian countries to Asia Pacific region. An official note on “co-operation between Asia Pacific & Russia and Central Asian countries in the hydrocarbon sector” says that the freight diseconomy involved in moving Russian, Kazakh and Azerbaijan crude oil to Asia Pacific can be overcome by transporting the crude oil from these countries to Mediterranean and then through the new pipeline being constructed in consortium with Egypt for transporting oil from Medi-terranean to Red Sea. From Red sea, oil can be moved to India through VLCCs. A crude oil pipeline project jointly by Russia, Kazakh, Iran, Iraq and India can also be considered originating in Russia and traversing Kazakh, Iran, Pakistan and then to India. Also link pipelines can be considered from Iraq and Azerbaijan to this mainline. This transnational pipeline will permit transportation of crude oil from Russia, Kazakh, Azerbaijan, Iran and Iraq to India in a cost effective manner.

Govt to phase out subsidies on LPG, kerosene by 2007

 

December 2, 2004. The Government will phase out subsidies on LPG and kerosene by March 2007. Subsidies on LPG and kerosene, estimated at Rs 3,500 crore for 2004-05, were to be eliminated from the next fiscal, but the UPA Government has decided to extend it by two years. The Rs 22.58 per cylinder subsidy on LPG budgeted in the 2004-05 Budget is likely to be enhanced to about Rs 40 and that on kerosene to Rs 1.10 per litre from Rs 0.81 per litre.

 

Putin visit: oil firms to ink pacts 

 

December 02, 2004. Leading Russian oil and gas companies are entering into strategic alliances with their Indian counterparts. Russian pipeline construction major Stroytransgaz (OAO Stroytransgaz), Gazprom and Lukoil will sign three MoUs with domestic gas major Gail India Ltd. Alongside, agreements will also be inked between ONGC and Smedvig, Statoil, Transocean Sedcoforex, besides the above three companies. Collaborations between ONGC and Russian companies will be in the field of oil exploration in India, Russia and third countries; technical know-how for setting up coal gassification projects in India, and also jointly undertaking pipeline projects. Gail India Ltd and Stroytransgaz are entering into an MoU primarily for undertaking construction, ownership and operations of gas pipeline projects in different countries in the world. The Russian company is already in India and has been involved in some of the gas, water and slurry pipeline projects in the country.

India's oil reserves will last only till '16

 

December 02, 2004. India has oil reserves to last only till 2016, if no new discovery is made. As on April 1, 2004, balance recoverable oil plus oil equivalent of gas (O+OEG) is of the order of 1,658 million tones. New areas are being opened up for exploration and national oil companies are implementing enhanced exploration programmes to discover more oil and gas in the country. Ninety exploration blocks have been awarded under the New Exploration Licensing Policy. Exploration work in NELP blocks has already led to 19 oil and gas discoveries so far.

 

Indian petrol, diesel prices highest in SAARC countries 

 

December 02, 2004.  A quick comparison of the pricing of petroleum products in the sub-continent reveals that consumers in Pakistan, Bangladesh, Sri Lanka and Nepal pay substantially more for kerosene and cooking gas than their Indian counterparts. The retail selling price of a 14.2-kg cooking gas cylinder in neighbouring Pakistan is Rs 355.66, in Sri Lanka Rs 384.08 and Nepal Rs 470.54 compared to Rs 281.60 in India. Similarly, a litre of kerosene in Pakistan costs Rs 18.19, twice as much as as in India. Bangaldesh, Nepal and Sri Lanka too charge much more at Rs 15.19, Rs 15.06 and Rs 11.05, respectively compared to India’s Rs 9.01 a litre. 

 

The pricing structure in India is skewed against petrol and diesel consumers. Multiple taxes on petrol have ensured that the selling price of petrol, for instance, in Delhi at Rs 37.84 a litre is more than double its original price (without customs and excise duties and sales tax) of Rs 17.42 a litre. Similarly, duties account for almost 46% of the retail selling price of Rs 26.28 a litre for diesel in Delhi. In the case of cooking gas and kerosene, however, taxes account for a much smaller percentage of the retail selling price. While all duties including sales tax account for less than a quarter of the selling price of cooking gas (Rs 281.60 a cylinder), they account for 30% in the case of kerosene (Rs 9.01 a litre).

 

Gail & partners to activate Dabhol Plant

 

November 30, 2004. The Public sector gas major Gail (India) has obtained a major concession supplying LNG contract for a 12 year period from the union government to make the controversial Dabhol Power Plant operational. Currently, Gail along with NTPC, SBI Caps and IDBI has been entrusted with the task of reviving the Dabhol Power Plant by the union government.

 

This group plans to get the plant going in all probability by the 3rd quarter of the next calendar year. Each partner in this venture (reviving Dabhol) has been entrusted with a specific task. It will be Gail's job to make the plant operational by finding the source of LNG at the right price to make selling of power attractive to end-users. The project has been split into two parts one involved reviving the plant and another to put the operational/running plant for sale. The revival of the plant involved an investment of Rs 500 crore (Rs 5 billion) which is being chipped in by the partners and for which a special purpose vehicle (SPV) was set up to do the residual work and revive the plant. 

 

POWER

 

 

NTPC's feasibility study at Ramanathapuram

 

December 6, 2004. National Thermal Power Corporation Ltd (NTPC) has undertaken a feasibility study for setting up a 1,000 MW thermal power project in the coastal areas of Ramanathapuram district. NTPC is scouting for 1,800 acres to set up the main plant, ash disposal unit and a township for the employees.

 

ONGC plans power project in Tripura

 

December 6, 2004. The Oil and Natural Gas Corporation in collaboration with Infrastructure Leasing and Financial Services and the Tripura Power Development Corporation has firmed up plans for a Rs. 3,500 crore (Rs 35 billion) gas based power project in Tripura. The proposal is for a 750 MW co-generation waste heat recovery power plant. This is expected to be the biggest ever investment in any of the Northeast States.

 

Neyveli Lignite, ONGC in JV talks

 

December 06, 2004. Neyveli Lignite Corporation Ltd (NLCL) has entered into talks with Oil and Natural Gas Corporation Ltd (ONGC) for setting up its first joint venture lignite gassification plant that would be used to generate power. This is for the first time that a lignite gassification plant would be set up in India. The government has already cleared the proposal for lignite gassification a few days back. The idea is to initially set up a pilot plant which would be followed by another prototype 10 to 15 mw power plant. 

 

Power generation increases 

 

December 02, 2004. The overall electricity generation in the country during October 2004 increased by 4 per cent to 48,635 million units compared to 46,844 million units in the same month last year. The plant load factor in thermal sector stood at 71.3 per cent as against 71.7 per cent in the year ago period. The PLF in nuclear power was 76.9 per cent over 70.2 per cent in October 2003. 

Reliance Energy to bid for UP project

 

December 3, 2004. Reliance Energy will participate in the international bidding process for the proposed 1,000 mw thermal Anpara C project in Uttar Pradesh. The board of the company also approved an investment of Rs 1,500 crore (Rs 15 billion) for the project, with a debt-equity ratio of 70:30. The power produced at Anpara will be sold to distribution companies by way of a long-term power purchase agreement. The project will be set up along with the existing 3x210 mw Anpara ‘A’ and 2x500 mw Anpara ‘B’ sites. The total generation capacity at the Anpara site will be about 2,630 mw.  The recent announcements indicate that Reliance Energy wants to be a major player in the entire value chain of energy in Uttar Pradesh. REL has also proposed the setting up of a 3,600 mw power plant at Dadri. Bids for private sector participation in the Rs 4,000 crore (Rs 40 billion) Anpara project were invited by the state-owned Uttar Pradesh Rajya Vidyut Nigam Limited (UPRVUNL). 

 

Cabinet nod for Neyvilli project

 

December 2, 2004. The Cabinet Committee on Economic Affairs approved Neyvilli Lignite Corporation’s Rs 1,100 crore (Rs 11 billion) thermal power project and the related Rs 250 crore (Rs 2.5 billion) mine project. Both the projects will be based in Barsinagar in Rajasthan. The proposed lignite mine, with the capacity of 2.1 million tonnes per annum, will meet the requirements of the 2x250 megawatt thermal power project. The power plant will cater to the demands of Rajasthan and the northern region. 

 

BHEL gets order for substation 

 

December 6, 2004. Engineering major BHEL has received Rs 30 crore (Rs 300 million) turnkey order for setting up a 220 kv grid substation at Pantnagar in Uttaranchal. The project, aimed at improving the power supply in Pantnagar and its adjoining areas, will be commissioned by the public sector company in 12 months. BHEL is also executing a contract for setting up a 220 kv grid substation and extension of existing 132 kv substation at Ramnagar in Roorkee.

 

Kayamkulam NTPC to take over Tamil Nadu Power 

 

December 6, 2004. Tamil Nadu Power will be soon back to Kayamkulam National Thermal Power Corporation (NTPC) fold on short-term open-access basis. The present NTPC Kerala State Electricity Board (KSEB) contract will mature for renewal on March 2005. There is little chance of KSEB going back to the present contract with NTPC. Escalating naphtha costs have made power from 350-MW combined cycle plant unapproachable, unless the corporation fastracks its Rs 6,600-crore (Rs 66 billion) expansion project to replace expensive naphtha with LNG. According to NTPC, the deadline for this is only 2007. Kayamkulam unit is NTPC’s smallest plant, but it is not beyond slapping Rs 9.5 crore (Rs 95 million) every month in idling penalty on an SEB for power not purchased. Although KSEB had agreed to it in a contract five years ago, the penalty clause has started hurting when the Board recently tasted self-sufficiency in power. A year of good rains, hydel reservoirs are poised to bring much beyond the estimated 6,000 million units for 2004-2005. Kerala has eased off not only NTPC, but also BSES Kochi and Kasargod Power Station. For the last four months, KSEB has paid nearly Rs 38 crore (Rs 380 million) in fixed cost to NTPC.  Meanwhile, Tamil Nadu Electricity Board (TNEB) is paying Rs 9.5 crore (Rs 95 million) every month as its share of the fixed cost clause with NTPC Kayamkulam. Tamil Nadu, which harnesses Kayamkulam NTPC power with coal-based power from Orissa through the central pool, gets it at prices less than Rs 3 per unit. For Kerala, the four-fold increase in naphtha prices has made the cost as high as Rs 4.70 per unit. Its hydel power is now produced at 85 paise per unit. Rains, in short, have pitchforked Kerala on a strong bargaining wicket with NTPC.

 

REL to bid for distribution companies in U.P.

 

December 1, 2004. Reliance Energy Ltd (REL) under way for divestment by the Government of Uttar Pradesh (U.P.) of its majority stake in the five power distribution companies (discoms). The five discoms are responsible for distribution and supply of electricity in the State of Uttar Pradesh and are headquartered in Meerut, Agra, Lucknow, Varanasi and Kanpur. The five discoms together cater to about 8.5 million consumers over 240,000 sq. km. with a peak demand of about 6500 mw. The aggregate annual revenue of the discoms is about Rs. 7,500 crores (Rs 75 billion). U.P. thus has more than three times the number of electricity consumers than Delhi and its demand and revenues are almost double that of Delhi. The disinvestment was a part of an extensive reform programme undertaken by the U.P. Government in the power sector and was supported by the World Bank.

 

Russian fuel for Tarapur ruled out

 

December 5, 2004. Russia, which provided 50 tonnes of enriched uranium to keep the Tarapur nuclear power plant going in 2001, has expressed its inability to supply much-needed nuclear fuel again for the plant. Russia was bound by the guidelines of the Nuclear Suppliers Group (NSG), which prevented it from providing the fuel.

 

‘Energy conservation gets little attention'

 

December 4, 2004. The need for energy conservation, in the light of increasing oil prices and the fact that energy bill is a significant component of production cost in manufacturing sector. Though free power was available to farmers in India, there was no online monitoring system to quantify the actual utilization. While the issue of curbing the oil prices was discussed in Parliament, there was no discussion on conserving energy or scaling down consumption. Energy conservation measures involved least investment and assured returns. It is the easiest, fastest and most effective means of increasing profits.

 

No Coal blocks for Videocon, Lloyds Metal, Kalinga

 

December 2, 2004. The Coal Ministry has cancelled the allocation of coal blocks to Kalinga Power, the Videocon group and Lloyds Metal, as there has been no progress in respect of the projects for which the linkages were provided to them earlier. The step follows a decision taken to this effect by the screening committee in the Ministry of Coal.  The Coal Ministry has also decided to make fresh allocations of 35 coal blocks with reserves of around 400 million tonnes to power, cement and steel plants.

 

Coal gasification projects hits a snag

 

December 2, 2004. ONGC Ltd's ambitious move to take up coal gasification projects jointly with Coal India Ltd (CIL) has suffered a setback as the latter's board has expressed reservations in undertaking such ventures as per terms specified by the ONGC in its draft proposal. However, the board is believed to have asked ONGC to review its proposal, particularly regarding the equity holding pattern in the joint venture company. ONGC has been actively considering exploitation of coal gas from virgin coal deposits by introducing "underground coal gasification" (UCG) technology. ONGC has identified NMRC-Skochinsky Institute of Mining, Russia, as consultant for the UGC application.  The UGC process is a new method for exploitation for coal deposits by "in-situ" coal conversion to a fuel. Under the process there is no need to develop a virgin coal mine. Coal is burnt inside the deposit to produce coal gas. Subsequently, the same gas can be pumped out and sent through a pipeline to the gas consuming industries.

 

Free power for AP farmers to stay  

 

December 02, 2004. The free power for agriculture sector will continue in Andhra Pradesh for the next fiscal 2005-06. While there is no increase in the tariff rate for the domestic and LT users, the power utility has also suggested a reduction of 4.1% in the tariff for industrial users. This measure would benefit in boosting the industrial growth in the state and help in generating employment. Further, to provide reliable and good quality power to the industrial users, APTransco has set up 900 exclusive industrial feeder lines in the state. The industrial tariff for high tension category has been reduced from the existing Rs 3.50 per kwh to Rs 3.40 per kwh in case of 11 kv transformer, Rs 3.35 per kwh in case of 220 kv transformer and Rs 3.25 per kwh in case of 132 kv transformer.  The power utilities have estimated a revenue generation of Rs 9,274 crore (Rs 92.74 billion) for the year 2005-06 as against the revenue requirement of Rs 11,180 crore (Rs 11.18 billion), leaving a gap of Rs 1,906 crore (Rs 19.06 billion). The revenue gap is due to meet supplemental power purchase bills and higher depreciation and interest costs on the capital expenditure. The revenue gap for the current year is estimated to increase by Rs 336 crore (Rs 3.36 billion), more than the subsidy announced by the government. The increase in the revenue gap is due to excessive power bought at higher rates by the earlier government in order to save the standing crop. On the operational front, the distribution licensees have proposed to reduce the transmission and distribution (T&D) losses to 21.38% for the year 2005-06 as against estimated 23.10% in the current year 2004-05.

 

State government to bail out MSEB 

 

December 02, 2004. The debit-ridden Maharashtra government agreed to bail out the ailing Mahararashtra State Electricity Board (MSEB) by providing about Rs 1,000 crore (Rs 10 billion) to compensate its loss on account of free power supply to farmers and subsidy for low tariff for powerlooms. The state is also providing Rs 160 crore (Rs 1.6 billion) to MSEB for the drawal of 500 mw from Tata Power Company for the next two months to tackle the mounting power demand in the state. The state government had paid Rs 402 crore (Rs 4.02 billion) in cash to MSEB for free power supply launched since July 1 this year. Now, the state government will pay Rs 407 crore (Rs 4.07 billion) to MSEB for the quarter ending March next year.

 

CESC unbundling plan on backburner

 

December 01, 2004. CESC Ltd which was toying with the idea of unbundling its generation and distribution business into two separate entities has shelved the plan.  The company now intends to keep both the business under the same company.  Keeping the two businesses, distribution and generation, under CESC itself would be beneficial in terms of balance-sheet perspective and so CESC does not intend to separate the two aspects. 

 

ICICI consortium to fund CESC's

 

December 1, 2004. An ICICI Bank-led consortium, which will include IFC, Washington, will fund a sizeable chunk of CESC’s upcoming Rs 1,000 crore (Rs 10 billion) Budge Budge III 250 MW thermal venture. The ICICI-led consortium will comprise other local and global lenders as well. The specific debt instrument and the quantum would be finalised only after the Union ministry of environment & forests issued the statutory clearances for setting up a third unit at Budge Budge.

 

GAIL in pact with Russian institute

 

November 30, 2004. The Skochinsky Mining Institute of Russia and GAIL are entering into a Memorandum of Collaboration for undertaking in-situ gasification of lignite in Mannargudi, Tamil Nadu, and Barmer, Rajasthan. Both areas have vast deposits of lignite which cannot be mined economically. Such resources provide a favourable setting for commercial application of in-situ gasification technologies to produce syn gas. Skochinsky has developed the in-situ gasification technology for development of commercial projects. Under the framework, GAIL and Skochinsky Mining Institute would jointly undertake the evaluation of lignite resources in Mannargudi and Barmer and design pilot projects which would eventually lead to large-scale commercial applications.

 

 

OIL & GAS

 

 

Oman forecasts lower oil output

 

December 6, 2004. Oman, which has been battling to halt a drop in oil production, is estimating a lower daily output of 750 000 barrels next year, the national economy minister said. "Oman's daily oil production is expected to be approximately 750,000 (barrels) in 2005. The target is made after considering all technical factors that are affecting the production," Ahmad bin Abdel Nabi Meki said. Estimated production for next year is 4.1 percent down on the figure for the first nine months of 2004 and 8.4 percent lower than output for all of last year. Oman exported 197.4 million barrels of crude in the first nine months of this year, 5.5 percent lower than the same period of 2003. Daily average production in 2003 was 819 500 barrels, down 8.7 percent from 898,000 the year before. State-run Petroleum Development Oman (PDO), an exploration and production company, last week attributed the drop to a steep decline in its daily output from 840,000 b/d in 2000 to 660, 000 b/d by the end of last month. Oman, a small non-OPEC oil producer, remains heavily dependent on oil revenues, which account for around 80 percent of the country's export earnings and 40 percent of GDP.

 

Shell project to boost Saudi gas reserves

 

December 6, 2004. A Saudi gas deal awarded last year to Royal Dutch/Shell Group will add at least 15 trillion cubic feet to Saudi Arabia's gas reserves. This would amount to an increase of almost 6.7 percent. Saudi Arabia, the world's biggest exporter of oil, had rejected the pricing of gas offered by the major companies and any involvement in the oil upstream, which is monopolized by the national oil company, Saudi Aramco. The gas initiative is a very inclusive program that included, apart from opening the upstream segment, the chemical and the power sector. Under the deal with Shell, the oil giant will lead a consortium of several companies to explore and produce gas in a massive area in the Empty Quarter. It will lead the activities in two of the three core ventures identified by the Saudi authorities for gas exploitation. Saudi Arabia's proven gas reserves are estimated at more than 224tcf, and Aramco plans to increase natural gas production from three to five tcf annually. Shell holds 40 per cent of the consortium, and is partnered by Aramco and Total Ventures Saudi Arabia, which each hold 30 per cent.

 

Philippines approves exploration contracts

 

December 6, 2004. Malacañang has approved two new oil and gas exploration service contracts (SCs). Energy Secretary Vincent S. Perez said these new SCs were awarded following the recent decision of the Supreme Court to declare the Philippine Mining Act constitutional. Perez said President Arroyo approved the SC between the Department of Energy and Japanese firm Japan Petroleum Exploration Co., Ltd. (Japex) for oil and gas exploration over the Tañon Strait in Negros Occidental; and South Sea Petroleum Holdings Ltd. for oil exploration over the Agusan-Davao Basin in Davao province. First phase of the work program covering the conduct of geophysical survey over Tañon Straits costs about $500,000 and $200,000 over Agusan-Davao Basin. Japex is expected to infuse another $3 million for the drilling of the first exploration well. South Sea Petroleum, on the other hand, is investing another $750,000 for the first exploration well. The two companies, Perez said, plan to drill three to four wells each to determine commercial viability of the petroleum reserves.

 

PetroChina starts production at Tarim field

 

December 3, 2004. Top Chinese state oil group, CNPC, said it had started pumping natural gas from one of the country's largest fields in the far-flung Tarim Basin in Northwest Xinjiang region. Kela-2 field, operated by CNPC's Hong Kong and New York-listed unit, PetroChina feeds into the giant 4,000-km (2,485-mile) West-to-East pipeline linking Xinjiang and Shanghai on the east coast. The field, which has a recoverable reserve of 229 billion cubic metres (8.087 trillion cu ft), started production on Dec. 1, China National Petroleum Corp. said. No daily production is given but CNPC said the field had a capacity to produce 10.8 billion cu metre of gas a year. PetroChina started up the $8.5 billion West-to-East pipeline in late August

 

Iran plans to increase gas output 

 

December 4, 2004. Iran plans to increase its gas output up to 310 billion cu.m. by 2015 and 400 billion cu.m. by 2025 from 122.5 billion cu.m. now, according to the statistics released by Ministry of Oil. Iran’s huge gas resources that is estimated at 27.57 trillion cu.m. have made the government to take fundamental measures to develop gas fields across the country. Iran ranks first in possessing gas resources but fourth in production capacity after Russia with 554.9, the U.S. with 547.7, and Canada with 183.5 billion cu.m. per annum. The domestic population using natural gas reached 37.1 million in 2002 from 19 million in 1997. The figure expects to be 40 million  nearly 90% of urban population by March 2005.

 

BHP Billiton to fast track Scarborough project 

 

December 3, 2004. The world's biggest diversified miner BHP Billiton Ltd wants to fast track the Scarborough gas project off Western Australia, even if it's not a priority for partner Exxon Mobil Corp. BHP Billiton would also continue to ramp up exploration at its emerging third core business in the Gulf of Mexico. The Energy division's two core petroleum businesses are the Bass Strait off eastern Australia and the Pacific Basin of WA, where the Exxon Mobile-operated Scarborough gas field lies off the same coast as the North West Shelf Venture.  The Scarborough project was a priority for BHP Billiton although not for partner Exxon Mobile. The Scarborough project prefeasibility proposal includes a 6 million tonnes per annum LNG plant, in the Pilbara region, that would take gas from Scarborough about 280km northwest of Onslow. The project is being considered to supply gas to the United States west coast energy market through BHP Billiton's proposed Cabrillo Port project or potentially to the Chinese market.

 

Deal for Algerian gas project 

      

December 2, 2004. The Algerian Minister of Energy and Mines, Chakib Khelil, and the Chairmen of Repsol YPF, Antonio Brufau, and Gas Natural SDG, Salvador Gabarró, have signed in Algiers the largest contract for a gas project ever undertaken by an international consortium in Algeria. Repsol YPF and Gas Natural SDG will develop an integrated project for the joint exploration, production, and marketing of LNG in the Gassi Touil zone, in east Algeria, awarded under a tender offered last 17 November.  Winning this contract places Repsol YPF in a leading position in Algeria, and provides Gas Natural SDG its first direct access to natural gas reserves to cover growing demand from the gas market. This liquefaction plant will have a capacity for 5.2 Bcm/year of LNG, equivalent to 20% of Spain’s domestic consumption, and could be enlarged in the future with a second train to optimise the project. The plant could go into commercial operation in 2009. The two companies will produce gas reserves already discovered in Gassi Touil, Rhourde Nouss, and Hamra, and will undertake exploration in the area under concession to discover additional oil and gas reserves for their subsequent development and production.

 

Syria signs exploration contract

 

December 1, 2004. A contract for the exploration of oil and mineral resources was signed Wednesday between the Syrian Petroleum Company (SPC) and Norwegian D N O ASA and English Dove Energy Oil Companies in the Region Seven. The contract provides that the government grants the SPC and the contracting company the exclusive right of oil exploration and its development. The preliminary period should be 36 months from the date of signing the contract. The contracting company has to spend USD 3,5 million for surveys and geological studies on a 500 KM area. The Syrian share will amount to 65 pct and the contracting company 35 pct if production is less than 15,000 b/d, and the percentage will increase to reach 77 per cent if the production amount 100,000 b/d. As for gas, the production will be set according to the amount excavated.

 

Berry petroleum buys natural gas fields

 

December 6, 2004. Oil and gas producer Berry Petroleum Co. said it agreed with J-W Operating Co. and others to buy their interests in the Niobrara fields in northeastern Colorado for $110 million, effective Nov. 1, 2004. The deal is expected to close during the first quarter of 2005 and will be financed by bank borrowings under the company's existing credit facility. Berry will own a 52 percent stake in the property. The properties include more than 130,000 acres which produce 9 million cubic feet of natural gas per day, and have an estimated proved natural gas reserve of 87 billion cubic feet.  The acquisition also includes about 200 miles of a pipeline gathering system and gas compression facilities for delivery into interstate gas lines which amounts for about 10 percent of the value of the deal. Berry said its 2005 budget for the properties is between $4 million and $8 million and will bring its production target for 2005 to more than 23,000 barrels of oil equivalent per day.

 

Aramco finds gas in Saudi Arabia 

 

December 6, 2004. Saudi Aramco reported that its Midrikah-1 well found natural gas in what it called Midrikah field in Saudi Arabia's Eastern Province, 30 km south of Ghawar oil field. The Midrikah-1 well on test produced an average 38 MMcfd of natural gas with 1,650 b/d of condensate on Nov. 22, the company said. The permanent production capacity of the well is expected to exceed the current test level of production. Midrikah field is 300 km southwest of Dhahran and 270 km southeast of Riyadh.

 

Petrobras finds light oil in Sergipe-Alagoas basin 

 

December 7, 2004. State-owned Petróleo Brasileiro SA (Petrobras) has discovered light oil in its 1-FRO-3-AL wildcat well on Block BT-SEAL-2 in the Sergipe-Alagoas basin, Brazil. It encountered the reservoir at 965 m. The well verified oil pay indicated in seismic data. It is 37 km southeast of Maceió, Alagoas state. The discovery is part of a trend toward light oil and natural gas in Petrobras's exploration. From August 1998 through August 2003 the company spent nearly $3.1 billion, drilled 386 exploration wells, and shot 330,000 km of 2D seismic and 60,000 sq km of 3D seismic data. The effort has led to discovery of 1.96 billion bbl of crude oil and 14.8 tcf of natural gas, mainly in the Campos, Espirito Santo, Sergipe-Alagoas, and Santos basins.

 

Greentree Gas & Oil reports a new discovery

   

December 7, 2004. Greentree Gas & Oil Ltd. is pleased to announce a new discovery and an update on field activities. In the West Lorne project, GGOL No. 65 encountered significant natural gas flows from both the Silurian A-2 unit and the Silurian Grimsby formations. GGOL No. 65 was an exploratory step-out from a number of recent prolific Grimsby formation discoveries in the West Lorne area that reported initial flow rates of between 1.2 and 4.2 MMcf/d. The Company is moving ahead with running production casing and completion of potentially both zones. Production rates will be released following completion activities. Greentree has production infrastructure and approximately 4,000 acres of leases in the immediate area of the well location.

 

 

Nepal faces oil shortage

 

December 7, 2004. Major cities throughout Nepal are suffering from a short supply as Nepal Oil Corporation (NOC) has failed to procure petroleum products from Indian Oil Corporation because of its large unpaid dues. The problem has been aggravated by NOC employees going on a strike and stopping oil supply for three hours each day from 5^th December, urging the government to hike the oil price to cut down the whopping NOC losses. Due to unfavourable differences with international prices, which have risen alarmingly over the last few months, the daily loss of NOC has crossed 23m Nepali rupees (330,000 US dollars). Because of mounting dues, the state-run monopolistic enterprise could not afford to procure petroleum products from Indian Oil Corporation, its unique supplier, for the last 10 days, and its employees consider the losses to be "unsustainable". The situation could worsen after the corporation's current stock runs out, which could meet the demand for another 10 days only. Long queues of people and vehicles are seen at petrol pumps in Nepal's major cities including the capital Kathmandu.

 

China invests in world-class refinery 

 

December 3, 2004. China National Offshore Oil Corporation (CNOOC), the largest offshore oil producer in the country that its oil refinery project in Nanhai District, Huizhou City, Guangdong Province started construction and would be completed in 2008. It is scheduled to involve a total investment of CNY 16 billion. Insiders reveal that the oil refinery project is planned to gain an annual capacity of processing 12 million tons of heavy crude oil produced from Bohai Sea. It will be the largest single series of oil refinery project in China. Zheng Changbo, the assistant to president of CNOOC. Impressively, the refinery project is near the CNOOC Shell Petroleum Project and the power station of the Huizhou LNG (liquefied natural gas) Project, which are under construction currently. So a world-class production base integrated energy and chemical industries will come out in Nanhai District in the near future.

 

Venezuela considers Petrochemical Corpn.

 

December 6, 2004.Venezuelan President Hugo Ch ávez has announced plans to create a petrochemical corporation as soon as possible. Chavez said the corporation would develop the Venezuelan petrochemical business and complement manufacturing joint agreements recently signed with Iran and Russia.

 

 

US demand to spur LNG trade 

 

December 6, 2004. Trade in liquefied natural gas (LNG) might treble by 2015, driven by growth in imports to the US, which by then might rival Japan as the world's largest LNG importer. Global LNG trade might reach 360 million tons by 2015, divided about equally between the Atlantic and the Asia-Pacific regions. Asia-Pacific last year accounted for two-thirds of total LNG trade of 123 million tons as firms bought the fuel, mostly for use in power generation. ExxonMobil and ChevronTexaco are building LNG import terminals in the US as production of the fuel lags demand. BHP Billiton and Woodside Petroleum, Australia's two largest oil and gas producers are among companies proposing to develop LNG import terminals on the US west coast. LNG is natural gas cooled to liquid form, reducing it to one six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline. US energy secretary Spencer Abraham said in January the US would need to boost gas imports more than tenfold by 2010 to meet demand. Abdul Rashim Hashim, the vice-president for gas at Malaysia's Petroliam Nasional, said LNG demand might grow by about 12 percent a year in the Americas region through 2025, outstripping 6 percent in Europe and 5 percent in the Asia-Pacific region. Global LNG consumption might rise at about 6.7 percent a year.

 

Turkey, energy cooperation with Russia

 

December 5, 2004. Turkish Energy and Natural Resources Minister Hilmi Guler has stated that Russia is interested in cooperating with Turkey in the areas of natural gas, oil, privatization of energy agencies, electric and natural gas distribution. Guler told that he has discussed such issues as natural gas pipelines, construction of a natural gas reserve area under the Salt Lake and distribution of natural gas in Turkish cities.  Guler expressed that his ministry gave a lecture to the Russian delegation on oil transferred through the Bosphorus strait. ''Our Russian friends are interested in construction of dams and nuclear power stations,'' remarked Guler. According to Kristenko, ''Russia has extensive experience in the construction of nuclear power stations which she wants to share with Turkey.''

 

Few planned U.S. LNG terminals expected on stream

 

December 2, 2004. The United States may be the future driving force of the liquefied natural gas (LNG) market, but only a handful of the around 50 planned terminals may ever come to fruition, industry executives said. U.S. domestic gas supplies are gradually being used up, prompting the world's largest energy consumer to look for other sources mainly LNG, or super-cool, compressed gas, shipped in tankers across the Atlantic.  Most of the approved terminals, experts say, are likely to be onshore in the Gulf of Mexico, where many energy producers are already located. Projects on the West and East Coast of the United States are likely to face more difficulties, experts said.  Though these spots are a potential point of arrival for international trade, they are often far from end-consumers and subject to protests from local communities, dubbed "nimby" or "not in my back yard" campaigns. It is likely that the United States would not decentralise power to approve LNG terminal projects, a move that would open the way for local protests to more easily block plans.  Richard Grant, President and CEO of Tractebel LNG North America, agreed. The reality is the United States needs the gas and needs it in the market.  Some projections have the United States importing some 4 billion cubic feet of LNG annually by 2010

 

Brazil Amazon gas pipeline work to start

 

December 6, 2004. Construction of a natural gas pipeline through the Amazon jungle will begin in January under strict environmental controls, Brazilian state oil company Petrobras said. The center-left government of President Luiz Inacio Lula da Silva is building the 383 km (240 mile) pipeline from the town of Coari to Amazonas state capital Manaus to drive economic growth and development among the 20 million people who live in Brazil's Amazon region. Petrobras is Brazil's record holder for environmental fines. But the company has made the Urucu plant a showcase for efforts to clean up its act after a huge oil spill in Rio de Janeiro's Guanabara Bay and pollution of two rivers in southern Brazil between 2000 and 2003. Petrobras will give $15 million to Amazonas state to compensate seven local communities affected by the pipeline, which is due to be completed in December 2006.  Environmentalists fear the proposed 522 km (324 mile) pipeline through the heart of the Amazon rainforest could open up the jungle home to 30 percent of the planet's animal and plant species to illegal logging, settlement and mineral extraction. Petrobras expects the project to gain approval from Brazil's environmental agency Ibama and work to start in 2007.

 

Shell plans to double LNG sales

 

December 6, 2004. Anglo-Dutch oil giant Shell plans to double its LNG sales by the end of the decade to retain its leading role in the growing LNG market. With sales of about 10 million tonnes a year, Shell is the top private supplier of LNG gas that is super-cooled into a liquid form for transport by tanker to consumer markets where it is processed back into gas.Shell and TransCanada Corp. in November proposed a $700 million LNG terminal for Long Island Sound, New York, the latest of several LNG projects to help meet surging gas demand in the United States.  Van der Veer said that Shell was planning to take LNG from Nigeria to the U.S. East Coast while supplies from the Sakhalin project in Russia's Far East will head to the U.S. west coast. The Shell-led Sakhalin Energy's huge Sakhalin II project is one of Russia's most challenging and ambitious projects that aims to produce 9.6 million tonnes from 2007. Shell is also one of a number of multinational shareholders in the huge Nigerian Liquefied Natural Gas (NLNG) plant, that aims to produce 22 million tonnes per year by 2007.

 

 

Africa should use natural gas at home

 

November 30, 2004. Observations made in a conference implied that exporting to the West is only part of the solution for Africa's surplus of natural gas, much of which is flared for lack of a market. While prospects of growing natural gas exports probably will end flaring.  Producer nations must find more use for the resource than shipping it away.  Radical new policies are required to reduce energy poverty in sub-Saharan Africa and domestic market reforms are needed to create conditions that attract investment. Establishing a gas-fired power grid in one of the poorest areas on the planet comes with an estimated $2.1 trillion price tag over the next 30 years. Traditionally gas has been flared or exported.  New uses electric power and petroleum products also must be grown if the nations ever hope to use their riches to build sustainable economies.

 

Kuwait to invest in oil sector

 

December 6, 2004. OPEC-member Kuwait is planning to invest up to $40 billion over the next 15 years to modernize its outdated oil facilities and boost capacity to four million barrels a day, the chief executive of the state energy company said.  It has a large number of projects to raise its output capacity to 4 million b/d by 2020.  This needs an investment of $20 billion. State-owned Kuwait Oil Tanker Company has recently signed contracts to build seven oil tankers of different sizes to modernize its fleet.  The cost of the order is more than $600 million. The emirate will spend some 10 billion dollars on the oil sector within the next few years. Kuwait has the sixth largest OPEC quota at 2.167 million b/d but its actual production is around 2.5 million b/d. It sits on 10 percent of the world’s proven reserves of around 100 billion barrels. Kuwait has also approved the building of a fourth refinery to become a strategic source of fuel for power stations.  The new refinery with a capacity of 480,000 b/d is expected to cost $3 billion to $4 billion. Bidding for the refinery is expected to open soon.  Kuwait’s three refineries - l-Ahmadi, Mina Abdullah and Shuaiba are all in the southern oil-rich region and have a total capacity of around 920,000 b/d. The emirate also plans two major petrochemical projects at a cost of some $3 billion in cooperation with a foreign partner and the domestic private sector.

 

Iran to invest in oil, gas sectors

 

December 6, 2004.  Deputy Oil Minister Akbar Torkan said that $70 billion will be invested in the oil and gas sectors in the fourth five-year economic development plan (2005-10). He said that $44 billion would be invested in upstream industries, $12 billion in the petrochemical sector and $10 billion in the refining sector. He said $16.6 billion out of the sum would be provided from domestic sources, while $25 billion investment would be on buy-back scheme and $28 billion in finance form.  He added that private sector would directly undertake 50 percent of investment in petrochemical development projects, while the remaining 50 percent investment would be in partnership with the private sector, and the Petrochemical Company and through issuance of participation bonds. He said should the ongoing process of oil production and recovery continue worldwide, the US would possess oil for 11 years, while the Persian Gulf would have energy reserves for 100 years. The world's total oil reserves is 1,050 billion barrels of which 700 billion barrels (70 percent) is owned by five countries, including Iran, Saudi Arabia, Iraq, the UAE and Kuwait, said Torkan.  He said Iran also has a share of 17 percent or 17,000 billion cubic meters in the world's gas reserves. Despite having the world's second largest gas reserves, Iran is the fourth major gas supplier with 122 billion cubic meters of production. He said 4 million barrels of oil are produced daily in Iran, aiming investment for a targeted 5,400,000 b/d production. He said the government plans to raise its daily gas production to 900 million cubic meters from 400 million cubic meters. Iran also plans to raise its downstream production to 2,600,000 barrels from 1,600,000 barrels. He concluded that Iran is expected to produce $20 billion worth of petrochemical products in the next 10 years.

 

POWER

 

 

Hydroelectric project sold in Idaho

 

December 3, 2004. Innergex Power Income Fund has reached a deal to buy the Horseshoe Bend hydroelectric project in Idaho for $14.2 million. The project is being bought from a related party, Innergex II, which was set up three years ago to build, own and operate hydroelectric power plants and wind farms in North America. The two Innergex entities have a co-operation agreement giving Innergex Power Income Fund right of first offer on an Innergex II asset. The Quebec-based fund said the deal for the project, located on Idaho's Payette River, will increase its yearly cash distribution by one cent per unit to $0.945 per unit. Innergex Power Income Fund is an open-ended income trust that, with the Idaho asset purchase, will indirectly own nine hydroelectric power generating facilities with a total installed capacity of 80 megawatts, including the Horseshoe Bend project. Innergex II owns, operates and develops more than 250 megawatt hydroelectric projects and is a partner of the Cartier Wind Energy partnership to develop 740 megawatt wind energy projects in Quebec.

 

Iran’s power production capacity increased

 

December 2, 2004. Inauguration of the fist phase of Damavand’s gas-fueled power plant has increased Iran’s electricity production capacity by 954 MW. The gas-fueled part of the plant will be built in two phases (each phase comparing six units) and, thus far, seven units have been made operational. Damavand power plant is Iran’s biggest combined cycle power plant whose gas section includes 12 gas-fueled turbines (each capable of producing 159 MW of electricity) and is to produce a total of 1,908 MW of electricity. The plant is currently working on oil and gas. The steam section of the plan will include six turbines, each capable of producing about 90 MW of electricity. When in full swing, the combined cycle power plant will generate 2,800 MW of electricity.

 

3 more gas fired plants in Pakistan

 

December 2, 2004. The Water and Power Development Authority (Wapda) has sought federal government's permission to install three more gas-powered power projects of 352MW in Karachi , Lahore and Faisalabad at a cost of Rs4 billion to meet the growing power needs. These units would be run on natural gas. However, high-speed diesel will also be used as back-up fuel. Besides, a complete power plant with eight gas-powered projects of 30MW each and seven gas turbines of 16MW each will be donated by the United Arab Emirates (UAE) to help meet power shortage. The installation of additional gas turbines of 120MW each in Karachi and Fisalabad and 112MW in Lahore would meet the power needs during low water periods. The major equipment of the project, not available locally, will be imported from aboard. International donor agencies are expected to offer Rs1.2 billion, out of total of Rs4 billion cost. The sources said that it had been agreed that proportional cost would also be paid by the Karachi Electricity Supply Company (KESC) and that any issue regarding cost-sharing would be resolved with the help of the ministry of water and power. The work on the project is expected to begin during 2004-05 and will be completed by 2005-06. Natural gas will be supplied from the existing network of Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC).

 

 

Armenia, Iran to build another power line

 

December 4, 2004.  Armenia and Iran agreed to build a third high-voltage transmission line that will connect their power grids in time for an anticipated sharp increase in Armenian electricity supplies to the Islamic Republic. Energy Minister Armen Movsisian and his visiting Iranian counterpart Habibollah Bitaraf signed the agreement just two days after inaugurating in southeastern Armenia the second power line constructed with an $8.5 million Iranian loan. They said the construction of the third, twice as powerful line will begin soon and will be completed within two years.  The Iranian government will underwrite the $25 million construction work with another loan. Officials said it will likewise be repaid with electricity generated by Armenian power plants. Movsisian argued that Armenia needs extra capacity to substantially boost the volume of its energy deliveries to Iran in 2007 when it is expected to start importing Iranian natural gas through a pipeline which is currently under construction. Work on its 42-kilometer Armenian section got underway in the presence of Prime Minister Andranik Markarian and the two energy ministers.

 

Supply contract for Baltimore

 

December 3, 2004. Constellation Energy announced that its subsidiary, Constellation NewEnergy, has been awarded a $61 million electricity purchase agreement covering a dozen area government and school systems, including Baltimore City and Baltimore County. The 30-month agreement with the Baltimore Regional Cooperative Purchasing Committee (BRCPC), which totals 71 megawatts, also includes government operations and colleges in Anne Arundel, Harford and Howard counties, as well as public buildings in the City of Annapolis and Aberdeen, Md. Major facilities covered by the agreement include the Baltimore City Police Department, Anne Arundel Community College, Essex Community College, Dundalk Community College, Catonsville Community College and Howard Community College. The BRCPC is a standing committee of the Baltimore Metropolitan Council.

 

Brazil to build new lines

 

December 1, 2004. Brazil's federal government has started procedures to tender 15 new 30-year build and operate transmission line licenses in 2005. Power regulator Aneel is concluding studies and bidding rules should be announced by the beginning of the second quarter 2005. Lines could total some 3,000km, of which the longest one would be the North-South III link, stretching 1,558km and costing an estimated 1.23bn reais (US$454mn). In 2004, Brazil tendered 13 licenses for the construction and operation of 2,900km of transmission lines. The government plans to strengthen the national grid linking the country's northern region to the south and expand the grid in the northeastern region and in the southeastern state of Minas Gerais.

 

Island eyed for power line to U.S.

 

December 1, 2004. Esquimalt may soon become a key focal point for electrical power distribution in the Pacific Northwest - and possibly reducing the need for a power plant at Duke Point. Sea Breeze Power Corp. announced plans to build a 1,100 MW transmission line between southern Vancouver Island and Port Angeles, Wash. last week. With environmental studies already underway and a series of public consultations to follow, Sea Breeze Pacific Regional Transmission System CEO Tony Duggleby anticipates that construction on the new line could begin by late 2006.  The transmission line began as a way to move power from Sea Breeze's 450kW Knob Hill wind farm on the northern Island to the United States, but evolved as a standalone project with significant benefit for the Island, said Duggleby. If it proceeds, the $300-million project would provide Vancouver Island with a vital third link to the continental power grid while eliminating many of the founding arguments for a gas-fired power station at Duke Point in Nanaimo. Currently the Island gains power from the Mainland through two different lines - one known as the Cheekye-Dunsmiur connection, the other linking Tsawassen to Duncan.  A second connection to the main northwestern power grid offers Vancouver Island a measure of reliability, said Duggleby. "Vancouver Island becomes an integrated part of the mainland system rather than an appendage, because power (will) flow through the Island, rather than to it."  If construction starts in late 2006, power could turn on by the summer of 2007.

 

AEP signs 3-year power deal to supply Texas co-op

 

December 7, 2004. American Electric Power Co. Inc. said it has signed a 3-year deal to supply power to a Texas electric cooperative. The Columbus, Ohio-based power company said it will supply Rockwall, Texas-based Rayburn Country Electric Cooperative Inc.'s load in the Electric Reliability of Texas (ERCOT) beginning in June 2005. The company already supplies Rayburn's load in the Southwest Power Pool through an existing wholesale power contract. Rayburn Electric has a peak load in excess of 700 megawatts. AEP was selected through a competitive bid process to serve Rayburn's ERCOT load. Pricing details were not disclosed.

 

China inks road map for energy conservation 

 

December 7, 2004. China, grappling with its worst energy crunch in two decades, aims to save millions of tonnes of coal and oil a year by putting “conservation first” and making industry more efficient, the government has said. The State Development and Reform Commission recently issued China’s first medium and long-term plan for energy conservation, setting targets to help the world’s second-biggest energy user ensure sound economic growth. “On the one hand, we should expand domestic exploration and development, speed up construction of energy projects and fully use overseas resources,” said the report issued late last month.  “On the other hand, we should insist on conservation first and set up an energy-saving society.”  Under the plan, China will aim to burn 2.25 tonnes of coal for every 10,000 yuan ($1,200) worth of GDP by 2010, down from 2.68 tonnes per 10,000 yuan in 2002. By 2020, the level should be 1.54 tonnes of coal per 10,000 yuan of GDP. China’s economy, which grew 9.1% in the year through the third quarter, is driving demand for coal, oil and power that far outstrips domestic supplies.

 

 

 

Third-party wind power sale in Gujarat

 

December 4, 2004. The Gujarat government has decided to come up with a policy on non-conventional sources of energy by the end of the current fiscal. The new policy, which is aimed at promoting wind and solar energy in the state, will be announced shortly. In view of representations made by sector players and the Indian Wind Energy Association (IWEA), the state government may allow third-party sale of power generated from wind farms in the new policy. Recently, Karnataka, Maharashtra and Rajasthan have allowed third-party sale of wind power. Madhya Pradesh is also considering a similar move, while Gujarat and Tamil Nadu are the only states which have put restrictions on third-party sale of wind power.  Gujarat has highest gross wind power potential of over 9,675 mw, followed by Andhra Pradesh Karnataka, Madhya Pradesh, Rajasthan, Maharashtra and Tamil Nadu assuming one per cent of land availability for wind power generation in the potential area. The state ranks fourth regarding generation potential at 1,780 mw. It follows Maharashtra, Andhra Pradesh, Tamil Nadu, assuming 20 per cent grid penetration. Grid capacity includes the share of capacity allocated to a state from the central sector power generating utilities.  India is the fifth largest market for wind energy in the world in terms of installed capacity. But only 3,000 mw of generation capacity has been installed till September 2004 against the mapped potential of over 45,000 mw. According to IWEA data, Gujarat has the second highest number of potential sites (34) for wind farms. This is against 41 in Tamil Nadu, 32 in Andhra Pradesh, 28 in Maharashtra and 25 in Karnataka. The tenth five year plan has a goal of generating around 1,500 mw of energy from wind farms envisaging a financial requirement of Rs 7,500 crore (Rs 75 billion). But the budgetary allocation has been to the tune of Rs 125 crore (Rs 1.25 billion) only and the balance has to be raised through private participation. 

 

Wind power generation poised for rapid growth

 

December 4, 2004. Wind power generation in the country is poised for a major growth in the coming years. Venture capitalists, who hesitated to fund wind power projects a decade ago, are now going out of their way to finance wind energy initiatives. The wind power field was currently witnessing a record number of installations and wind turbines with higher yield and technology were finding their way into the country. This year, there is a possibility of installation of wind power projects to the tune of 1,000 MW, taking the total wind power generation in India to 3,500 MW.

 

Wind turbine generator in Tamil Nadu

 

December 3, 2004. The Chief Minister, Ms J. Jayalalithaa, will be inaugurating the 2-MW wind turbine generator at Chettikulam near Koodangulam in Tirunelveli district on December 8. The first of its kind in Asia, the generator has been designed and developed by the Pune-based Suzlon Energy Ltd. The plant has generated more than 1.2 million units of electricity. The regular generation will begin from March next.

 

Scientists look to Space for energy source

 

December 1, 2004.  Space holds the key to an inexhaustible and non-polluting energy supply, according to Mr N.T. Nair, Technical Advisor to the Energy Management Division of CMS Computers, Thiruvananthapuram. He said the Space-Solar Power (SSP), a constellation of orbiting satellites serving as hi-tech space dams could in the foreseeable future catch the flood of energy flowing relentlessly from the Sun and then pump it to Earth via laser or microwave beam using a rectifier-antenna (Rectenna). On Earth, it would be converted into electricity and fed into power grids to be tapped by terrestrial customers. SSP would employ satellites in geostationary orbit (35,800 km) or on the surface of the moon, fitted with efficient solar cells.  Photo-voltaic (PV) arrays in space would receive, on an average, eight times the sunlight compared to Earth. They are also unaffected by cloud cover, atmospheric dust or by the day-night cycle of the Earth. PV technology has achieved a conversion efficiency of 42-56 per cent (as against 7-9 per cent earlier). Lasers are also under consideration for beaming, in place of microwaves, but prevented only by a treaty between the US and Russia.  He said using today's technology, it is estimated that SSP power would cost 60-80 cents per kWh, compared to a ruling market price of 5-6 cents. But, in 15-25 years' time, the same could be supplied at 7-10 cents. There are some issues that militate against exercising the SSP option - such as the very large size of antennas required, international legal, political and social acceptability, health and environmental hazards from laser or microwave beams broadcast from Space and very high initial costs. But efforts are already on to deal with these engineering and economical challenges one by one.

 

 

Second wind power project in Washington

 

December 1, 2004. Puget Sound Energy (the utility subsidiary of Puget Energy  announced its second wind power project in Washington state, bringing the utility's proposed ownership of wind energy to nearly 400 megawatts. PSE recently signed a letter of intent (LOI) with Blue Sky Wind LLC, an affiliate of RES America Developments Inc. and Renewable Energy Systems, Ltd., to acquire 100-percent ownership of the proposed Hopkins Ridge Wind Project located in Eastern Washington's Columbia County. The estimated cost to complete the project is approximately $200 million. If permitting and other critical-path activities go as planned, the project could begin providing PSE customers with 150 megawatts (MW) of wind power by sometime between late 2005 to mid-2006.

 

GE to research production of hydrogen from renewables

 

December 1, 2004. General Electric’s Global Research group will lead US$11 million of research projects into the development of hydrogen from various energy sources.  The Department of Energy selected GE to lead the effort as part of a $75 million research effort to support the Hydrogen Fuel Initiative of president George Bush. DOE says the research effort reflects the emphasis placed on renewables and distributed production of hydrogen.  One of the three programs involves solar electrochemical water splitting, where GE and the California Institute of Technology will develop designs for a solar-to-hydrogen system. The idea is to develop a system that will employ solar energy to extract hydrogen from water using a photoelectrochemical process. The team wants to develop devices with solar-to-hydrogen efficiency of 9%, a lifetime of 10,000 hours, and a hydrogen cost of $22 per kilogram by 2010, $5/kg by 2015 and ultimately become cost competitive with gasoline. The second program will involve the University of Minnesota and Argonne National Laboratory, to develop a compact reforming technology that will enable hydrogen to be produced from renewable fuels such as methanol and ethanol or from natural gas. The proposed hydrogen reformer would allow significantly greater compactness and lower capital costs than conventional approaches.  The third program will involve Northwestern University and Functional Coating Technology to develop an electrolyzer concept that is efficient and environmentally friendly. Current electrolysis production technologies are energy-intensive and not cost-competitive on a large scale, but a reversible solid oxide electrolysis cell hydrogen production system can produce either hydrogen or electricity on demand and is “a pathway to a cost-competitive, distributed renewable system.” The research will address major technical and economic hurdles in renewable and distributed hydrogen production technologies that must be overcome to make hydrogen-powered transportation a reality. The three programs will focus on near- and long-term solutions with sustainable technologies, and were chosen through a competitive solicitation process.  GE Global Research will contribute $2.5 million with the balance coming from DOE and other industry partners. Current research projects include solar PV, wind, solid oxide fuel cells and coal gasification.

 

Significant potential for CHP in Europe

 

December 1, 2004.  There is “significant growth potential” for cogeneration in Europe, with payback periods as short as three years, according to fact sheets produced by COGEN Europe.  The first five fact sheets have been prepared to outline the status of micro-CHP technologies and markets in Germany, Britain, the Netherlands, Portugal and the Czech Republic. The fact sheets show that a variety of cogeneration products in Europe are already available commercially or close to market entry, and the documents will “increase awareness of these new efficient and advanced heating appliances and give information on the potential for their wider use in order to prepare create a more sustainable energy future in Europe.” Combined Heat & Power, or cogeneration, is the simultaneous production of heat and electricity, currently used to produce 11% of Europe's electricity and heat. The European Cogeneration Directive defines micro-CHP as a unit with capacity of less than 50 kW electric, and uses a range of technologies such as gas turbines, Sterling engines, organic rankine engines, or fuel cells. Micro-CHP units replace or complement conventional heat boilers but, unlike a boiler, generate electricity and heat at very high efficiencies. There are 38 million homes in Germany, with half in buildings with a central communal heating system and, therefore, suitable for micro-CHP units. Natural gas and fuel oil are used as heating fuels by three-quarters of these homes, and the fact sheets estimate that a 5 kW unit in a three-family house would cost Euro 15,000 to install, but would generate 24,750 kWh of electricity and 52,200 kWh of heat, with annual savings of Euro 2,267. Of the 24 million homes in the UK, 16 million could be suitable for micro-CHP and total penetration would account for 20 GW of electrical capacity. The UK housing stock has relatively low levels of insulation and requires higher levels of heating than much of northwest Europe, and 1 kW micro-CHP units could reduce a typical home’s CO2 emissions by 1.5 tonnes a year. A unit installed in a three-bedroom semi-detached house would cost £500 above a boiler to generate 2,400 kWh of electricity and produce 18,000 kWh of heat, for annual savings of £150 and a simple payback of 3.3 years.

 

The Dutch market also offers “considerable potential” for 1 kW micro-CHP units in 6.5 million homes, most of which have access to natural gas. The Dutch micro-CHP working group has identified 3.5 million homes with average heat demand, and total penetration of this segment would reduce CO² emissions by up to 1.4 megatonne. In Portugal, the estimated technical market for CHP less than 150 kW capacity is 500 MW which, if realized, would reduce CO² emissions by 287,000 tonnes of a year. In the Czech Republic, a 22 kW unit running for 4,000 hours a year would save 18 tonnes of CO² compared to separate heat and electricity production. “The wider use of micro-CHP helps to save fuel, cut GHG emissions to fight global climate change, and make electricity and heat supply to consumers more affordable,” says COGEN Europe. “These advantages make micro-CHP a state a state-of-the-art heating appliance for a more sustainable energy future in Europe.”

 

Pakistan PM urges AEDB to set up wind & solar energy units

 

December 7, 2004. Prime Minister Shaukat Aziz directed the Chairman Alternate Energy Development Board (AEDB) to accelerate efforts to set up wind mills and solar energy units to meet the ever-growing energy needs of the country. The prime minister noted there was great potential for generation of electricity through non-conventional means as solar and wind energy was not only cost-effective, but also environment- friendly.

 

The Chairman, AEDB said that setting up of solar and wind mill units, he hoped, would help a great deal in improving the standard and quality of life of the people in the rural areas and provide motivation to work more. The AEDB has identified areas in Sindh, Balochistan and other parts of the country for establishment of wind mills and solar energy projects to provide electricity to the energy deficit areas.

 

 

 

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