MonitorsPublished on Dec 14, 2004
Energy News Monitor I Volume I, Issue 25
Nuclear Energy: Stagnation or Renaissance?

Global scenario is not reassuring


The future of nuclear energy has never been certain.  It has had its period of revival and gloom but none have managed to establish a sustained view. It is reassuring to note that 440 first generation nuclear plants that currently produce about 17 per cent of the world's power will continue to do so for many decades. Nuclear plants are also being commissioned every year by different countries, most notably Asian countries.  On the other hand there is the reality that there were almost no new orders for nuclear power plants from North America and Western Europe in the last three decades.  These two markets - North America and Europe currently account for about two thirds of the world's installed nuclear capacity.  39 orders for nuclear power plants placed in the United States after 1973 have been cancelled.  Countries in Western Europe have even legislated decommissioning of nuclear plants.  Sweden, for example, has gone from being the world leader in per capita nuclear power generation to being the first country to formally decide, through a referendum, to phase out its nuclear plants and focus on new and renewable sources of energy.  Germany is expected to follow and shut down its nuclear plants before their lifetime. 


Reactors under construction between 2002 and 2006 are expected to add only 26 GWe capacity.  Russia, India, Japan, South Korea and China have nuclear expansion plans slated for completion between 2006 and 2015 but these are expected to add only about 18 GWe capacity.  In total 44 GWe of capacity planned by 2015 will only add 12 per cent to the 2001 total.  These capacity additions are largely based on first generation commercial nuclear technology initiated in the 1960s.  These do not amount to a revival as that would need a significant commitment to a new generation of nuclear reactors based on substantially new technology.


Perceptions remain unchanged


Four key concerns dominate the nuclear debate: cost, safety of the nuclear fuel cycle, proliferation and waste management.  Though some gains have been made on mastering all challenges, none have been able to alter perceived shortcomings of nuclear energy over the last few decades. 


Most operating plants are found to be economical only when sunk costs - capital and construction costs - are ignored.  Alternative sources such as natural gas on combined cycle turbine technology and coal are less expensive when capital and operating costs are included. Operating costs of coal fall between nuclear and gas when SO2 and NOx controls are included. 


Comparative power costs - global


CASE 2000$

Real levelised Cost cents/Kwe-hr

Nuclear (LWR)

- Reduce construction cost by 25%

- Reduce construction time 5-4 years

- Further reduce O & M to 13 million/kWe-hr

- Reduce cost of capital to gas/coal






Pulversised coal


CCGT (low gas prices $ 3.77 /(MCF)


CCGT (moderate gas price $ 4.42/(MCF)


CCGT (high gas prices $ 6.72/(MCF)


Gas costs reflect real, levelised acquisition cost per 1000 over the economic life of the project

Source: MIT. 2003. The Future of Nuclear Energy.


On the other hand some lifecycle assessments have concluded that energy inputs for nuclear energy is only about 5-10 percent of output which only hydro power could beat.  Internalising the cost of externalities - CO2 emissions - also make nuclear energy more than competitive. 


Perceived concern of safety - in nuclear fuel cycle facilities and in transportation of fissile material is another factor that has been a serious obstacle to nuclear power at least in the western world.  An MIT study on the future of nuclear power surveyed US attitudes towards nuclear power and concluded that public perceptions of nuclear energy was almost entirely informed by their perceptions of technology rather than by politics or demographics. Here facts contradict perception - public are exposed to greater amounts of natural radiation than from normal operation of nuclear reactors.  More informed opinions focus on safety risks associated with waste disposal.


The risk of proliferation from operations of the commercial nuclear fuel cycle is also not near acceptable levels.  Existing stocks of separated plutonium around the world are directly usable for weapons.  Nuclear facilities, especially those with enrichment and reprocessing technology, with inadequate regulation or control, risk bringing nations closer to weapons capability.  Ironically nations with greater prospects for nuclear energy expansion are also those with security challenges - particularly concerning nuclear weapons.


Disposal of radioactive waste streams at various stages of the nuclear fuel cycle has also been a persistent concern.  No country has succeeded in finding a sustainable solution to this problem.  Geological repositories have been acknowledged as a viable solution but the fact that this requires a high degree of involvement on operations and management from regulatory and governmental bodies make it an expensive process.


The risk factors specific to nuclear energy make government involvement unavoidable as they concern national security and public safety. The inevitable involvement of the government and regulatory bodies both at the national and global level increase the uncertainty component for nuclear investments.   


Drivers for nuclear energy


1. Power sector growth


It is widely acknowledged that the power sector will register the highest growth rate among all final forms of energy.  The share of electricity in total final consumption is expected to grow from 18 per cent in 2000 to 22 per cent in 2030.  Electricity demand growth is strongest in developing countries where demand is expected to grow at 4 per cent per year[1] more than tripling by 2030.  As per an IAEA estimate a cumulative investment of $ 10 trillion is needed to meet the growing electricity demand which is 60 per cent of total investment in the energy sector.  Out of this more than half will need to be invested in developing countries.  Two thirds of this will be in developing Asia.



Currently per capita consumption of power in the developing world is much lower than that of the developed world.  Gross power generation in India, for example, is about 500,000 million units which in absolute terms is a staggering figure but when translated into per capita terms it is a meagre 592 units (including T & D and other losses, metered consumption is about 25 per cent less) which is less than one twentieth of that consumed in OECD countries.



If consumption has to be raised to half of OECD levels by 2050 - by which time the Indian population would have grown to 1.5 billion - India would require to invest substantially in building capacity.  What fuel is going to generate all that power? One analysis[2] concludes that if India produces 70 per cent of power from coal using 70 per cent of known coal for power requirements in 2050, coal reserves would not last until 2070. 




Potential (GWe-year)


80 billion tonnes (proven)



0.75 billon tonne


Natural gas

692 billion cubic meters



84 GW at 60% PLF



78,000 tonne metal

PHWR - 420

FBR - 54,000


518,000 tonne metal

In breeders 358,000

Assumptions: For coal, oil and gas: Complete source is used for electricity generation with thermal efficiency, Ŋ = 30 % and calorific value for coal = 5000 kcal/Kg, Oil = 10.200 kcal/Kg & Gas = 9150 kcal/1000 m3.  For nuclear: Fuel burnup in PHWRs = 6700 MWD per tonne & Ŋ = 29 %, FBRs can use 60 % uranium with Ŋ = 42%.  Breeders can use 60 % thorium and Ŋ = 42%.

  Source: Grover, R B. 2000. Nuclear Energy: Current Trends, Current Science, V 78, N. 10, 25 May 2000.


Limited availability of fossil fuels, primarily coal, definitely makes a strong case for nuclear energy but avoided emission of CO2 must also be factored into the argument. 


2. Co2 emissions pricing


One factor that has received inadequate attention in the ongoing nuclear debate is the costly impacts of climate change caused by anthropogenic emissions of green house gases.  Nuclear option is a perfect solution because it emits no green house gases other than those associated with building the plant and mining the ore. 




If CO2 emissions carry a significant price, nuclear power could become a vital option for power generation.  It is a carbon free source of power and it can make a significant contribution to future power supply.  Even when the full energy chain is evaluated, nuclear generation produces only 9 g/Kwh, an order of magnitude less than coal fired plants, and also less than PV generation[3].  If all the power currently generated by nuclear plants is replaced by coal plants the word’s CO2 emissions would increase by 2. 3 GtC equivalent of more than one third of the total produced by fossil-fuel combustion in the year 2000[4].  The impressive total of avoided emissions through nuclear power generation is almost never mentioned in the current debates on reduction of green house gas emission. 


HTFC: High Temperature Fuel Cells; BIGSTIG: Biomass Integrated-Gasifier steam injected gas turbine.  


The per capita carbon emission by developed countries is above 10 tonnes per year while that for India is only about 1 tonne per year.  Until 1970, developing countries were not significant emitters of green house gases.  Driven by the substantial increase in economic growth rates, they are now among the fastest growing emitters.  In 1950 North America and Western Europe accounted for 68 per cent of global emissions.  In 1987 they represented only 38 per cent.  In contrast the share of developing countries increased from 7 per cent to 28 per cent in the same period. On a per capita basis, if the consumption of the Indian population is raised to levels comparable to that of the developed world the emission levels will be staggering.  

Nuclear generation also produces no SO2, the cause of acid deposition or NOx gases that contribute to precipitation and photochemical smog.  The energy density of nuclear fuel makes it very efficient in the conversion process. 1 Kg of uranium can generate 50 MWh compared to 3 kWh generated by 1 Kg of coal.  The high power implies that the land claimed by nuclear sites is one to three orders of magnitude smaller than the total needed for renewable sources such as solar and wind.    


Technology & resource self sufficiency: Advantage India


India’s first phase of nuclear reactors use natural uranium in Pressurised Heavy Water Reactors (PHWR).  Fourteen PHWRs of total capacity 2720 MWe are operating.  An additional capacity of 3960 MWe (6PHWRs & 2 light water reactors) are under construction to reach a total nuclear power capacity of 6680 MWe by 2008.  Average capacity factor of Indian plants has increased from 60 per cent in 1995 to about 82 per cent in 2001.  PHWR technology and associated fuel cycle facilities are already in the industrial domain. On discharge, the spent fuel is reprocessed in a ‘closed cycle’ where the unused fissionable material is recycled as fuel.  The ‘one-through’ approach disposes spent fuel as waste.  The once-through fuel cycle is said to have an advantage in terms of cost and proliferation resistance since there is no reprocessing and separation of actinides as opposed to the closed cycles have an advantage over the once through cycle in terms of resource utilization.


With estimated uranium resources of 50,000 tonnes a total capacity of 12 GWe is possible but that would last only for 30 years[5] as only 0.6 per cent of Uranium gets converted into energy in a PHWR.


India’s second phase of nuclear programme uses the Fast Breeder Reactor (FBR) technology backed by reprocessing plants and plutonium based fuel fabrication plants.  A 40 MW Fast Breeder test Reactor attained criticality in 1985.  Construction of the first prototype fast breeder reactor of 500 MWe capacity is expected within the 10th plan period (2002-2007). 


At this point nuclear energy remains an option in the energy alternatives portfolio.  India’s mature capabilities in nuclear power technology with almost 170 reactor years of experience and safety measures that are in confirmation with the Atomic Energy Regulatory Board (which are in line with international standards) give it a critical advantage in appropriating the value of the option – when its time comes!


Team Energy ORF (Views are personal)

The energy paradigm: back to the future- PM


(Excerpts from the Prime Minister’s message at the meeting of the advisory council on trade and industry on the need to de-politicise energy pricing)


“ This reminder is none too early. Non-market based energy pricing distorts choices consumers and firms make about how much and what type of energy to use. These sentiments were also echoed at a BBC-sponsored discussion on the ‘Energy Challenge’ at the recent India Economic Summit of the World Economic Forum. The round-table discussion in which I participated covered a gamut of subjects, from energy pricing, demand-supply balances, environmental consequences, to the need for greater R&D into affordable and environmentally friendly sources of energy.


Consider the following facts:


While energy intensity is expected to marginally improve (decrease) by 1.2% per year in industrial economies and 1.8% in the developing countries, the overall magnitude of energy use will rise (International Energy Outlook (IEO). The IEO projects that world marketed energy consumption will increase by 54% before 2025, with the fastest growth in consumption from India and China. Developing Asia (including India and China) would account for 40% of this increase. India will consume over 5 million barrels of oil a day by 2030, over double its current consumption. India itself, the world’s sixth largest energy consumer, currently relies on coal for more than half of its total energy needs.


We can clearly see that fossil fuels drive the economy, and that the need for this fuel will increase over the coming decades. The projected supply of oil and importantly, the limits of supply, however, depend on the assumptions made and the methodology employed in making these calculations. M Hubbert predicted in 1949 that “the oil age would be short,” and reiterated this basic message through his career. The World Energy Outlook (WEO) now projects that supply will be fine to 2030, but there are uncertainties beyond. The deadlines have been progressively extended as new technologies for exploration and extraction get developed. Never-theless, the cost of extraction will continue to rise.


Coal and natural gas reserves are projected to last longer - one estimate of natural gas availability from the WEO notes that we have 66 more years’ worth (at current production) of natural gas available. Whatever the deadline for depletion, or at least the point at which the energy required to extract fossil fuels exceeds the energy content of the fuels: hydrocarbon resources are finite. The depletion of oil in particular will alter economic activity both in terms of the cost of energy as an input as well as the availability of essential petrochemical compounds.


·         Estimates show that the overall magnitude of energy use will rise


·         The depletion of oil in particular will alter economic activity


·         We need to begin now to develop policies to ensure future prosperity


The environmental consequences of continued dependence on fossil fuels are perhaps more immediate. Global emissions are likely to grow at 62% over the next three years and the developing countries will overtake the developed economies by 2020. Even though emission intensity is expected to decline, there will be severe consequences arising out of inevitable climate changes arising from global warming. Regardless of what version of the doomsday scenario one accepts, we need to begin now to develop policies to ensure future prosperity.


First, we need to diversify the coming risks due to environmental changes. Some areas would get warmer, others colder. Some areas will see rainfall increase and others a decrease. Even if now, the climate is not unbearable, the adjustment of infrastructure usage and lifestyle to newer locations would entail significant transitional costs, both economic and human. The sea level will rise, affecting coastal areas (including low-lying cities such as Mumbai). Weather models provide some indication of the impact of warming, but there is still great uncertainty. The challenge is to develop appropriate insurance scheme and contracts.


Second, we need to stem the impact that energy use has on the environment. We must provide a mechanism to internalise the positive externalities of sustainable energy use. Currently, the costs of more efficient or environmentally sound technologies are borne by individuals, while the environmental benefits are spread round the world. There’s little incentive to switch to new technologies or conserve energy. How does one get consumers and industries to internalise the costs of energy use? One critical factor would be to encourage a move to efficiency based on domestic pricing of electricity. It’s essential to have prices reflecting the cost of energy while encouraging consumers to make the right decision as well as international arrangements on to cap emissions and permitting firms to trade emission rights.


Third, huge investments will be needed for extracting raw energy resources and related infrastructure with rising costs. IEO projects an investment requirement of $500 billion. Financing this would be a major challenge and resources will only be forthcoming if pricing distortions are minimised.


Fourth, we need to strengthen diplomatic alliances and agreements to provide a framework for allocation and supply chains for increasingly scarce resources. WEO estimates that 85% of the increase in production of primary energy over the next two decades will take place outside of the Oecd. Gas reserves are heavily concentrated in Russia, the Middle East and the transition countries. Energy users are generally located elsewhere, creating challenges for linking these two groups across political jurisdictions.


Fifth, it’s time to appreciate the limitations of continuing dependence on conventional energy sources and move towards new technology to fill this gap. Governments can ferment R&D in the short run with an enabling fiscal package but only a sensible pricing policy would lead to sustained research as well as comparative economic production. We would need to effectively address the multiplicity of economic and environmental challenges. The changing energy paradigm compels us to get “Back to the Future.”



Russian-Indian Power Market: Stable Business and real opportunities


Russian-Indian economic relations have a long history. The partnership of two states has always been diversified. Traditionally one of the key directions of the bilateral cooperation is electric power. Continued economic growth in India is stimulating power consumption in the country. Power shortage of up to 40 thousand MW per year is a real problem that the Indian economy may face. The government is undertaking urgent measures to develop power complex, relying on comprehensive cooperation with big foreign companies. Projects for construction of power plants, transmission and distribution lines worth up to 15 billion rupees with 100 per cent foreign ownership receive official support. Power plant generating power for domestic needs have the right to sell up to half generated power to foreign consumers, India which is usually represented by such corporations as NTPC (thermal power) and NHPC (hydro power) prefer to cooperate with partners that have an experience  of working in the country.


The Russian Federal State Enterprise Foreign Economic Association “Technopromexport” is well known in India for a number of big projects. Among early projects was construction of such power plants as Bhakra HPP, Neyveli TPP, Lower Sileru HPP, Obra TPP with total capacity exceeding 1600 MW. Many of power projects, put into operation by Technopromexport have been awarded special  prizes for high efficiency, and Neyveli TPP (600 MW) was acknowledged with governmental prizes, Vindhyachal TPP, constructed by Technopromexport’s specialists, is among the best thermal power plants in India by a number of economic parameters. Stable work of power projects, constructed with assistance of the Russian side plays a very important role for development of not only industrial regions of India (states Madhya Pradesh and West Bengal) but for traditionally agricultural regions (states Gujarat, Maharashtra).


Among the projects that Technopromexport is currently carrying out in India are reconstruction  of Obra TPP and supply and erection of hydro-mechanical equipment for Indira Sugar HPP, The nearest plans include participation in tender for construction of Barh TPP. Together with this the Company’s specialists provide training of local personnel of power plants.


Technopromexport has been cooperating with Indian power professionals since 1960’s. Since then the Company has put into operation 11 power facilities of total capacity over 3000 MW, which accounts for about 10% of the Indian overall power market. This is a significant contribution in development of bilateral cooperation in the sector. Partnership between Russian and Indian power specialists may become a basement for realization of the next big projects, in particular, construction of new power units and transmission lines of different voltage.


“Indian power professionals acknowledge high professionalism of Russian specialists and accurate fulfilling of the contractual obligations” – Sergey Molozhavy, Head of Technopromex–port, said – “We hope that bilateral cooperation in this field will be reflected in realization of the program for development of India’s power sector”.


It’s natural that big Russian companies, specializing in construction of power projects, that possess an experience of working on the international market, show interest in developing cooperation with India. The leading Russian companies have been actively present on the Indian power market for more than 40 years. For this whole period the power sector has been considered one of the priorities in Russian-Indian economic relations, which is proved by the intergovernmental agreements. It’s obvious, that rapid restoration of Russian economic presence in India meets the interests of both countries.


Courtesy RIA Novosti

Vladimir Putin official visit to India – December 2004












ONGC in JV for coal gasification


December 13, 2004. Oil and Gas Corporation Ltd, India’s integrated petroleum public sector undertaking, is in talks with Coal India Ltd (CIL) and Neyveli Lignite Corporation Ltd (NLCL) to form joint ventures in the field of underground coal gassification (UCG).  With the signing of the technology sharing pact with Russia’s Skochinsky Institute of Mining (SIM), it is going to look for possible UCG sites for our first pilot project. The survey for the sites would be jointly carried out by SIM and the Institute of Reservoir Studies which is run by ONGC in 10-15 prospective sites. The survey and pilot project would cost us around $15 million. ONGC and SIM would come out with a detailed work plan on developing and applying the technology in Gujarat, Tamil Nadu, Rajasthan, Bihar, Madhya Pradesh and West Bengal. With the huge gap between demand and indigenous supply of energy in India, gas from UCG is an attractive alternative.


ONGC for state gassification project


December 11, 2004. Oil and Natural Gas Corporation Ltd would sign a contract with the Skochinsky Institute of Mining (SIM) in Russia to set up an underground coal gassification (UCG) project in Gujarat. In November ONGC had signed a memorandum of understanding with SIM, which is run by the National Mining Research Centre of Russia, to enter into the business of UCG. The project, rated to be with the highest potential among all such prospective UCG projects earmarked by ONGC, would result in investment worth around Rs 5,000 crore (Rs 50 billion) in Gujarat in the next four years. It is believed that ONGC would make the most of the required investment.  UCG is the process to convert the un-mineable underground coal or lignite into combustible gases by gassifying the coal where ever it is lying.


In this chemical process coal is subjected to gassification agents like air, steam and oxygen, and the coal is converted from solid to a mixture of gases, liquids and also ash by heat and chemical reactions. Subsequently, the produced gases are a mix of combustible and non-combustible gases. The gases produced after such process could either be used as fuel gas and also for power generation, besides their possible usage as a feedstock for liquid fuels and petrochemicals

IOC to team up with OIL for exploration


December 08, 2004. Two companies will bid together for acquiring properties abroad and within India for exploration projects. The agreement is also expected to culminate into IOC acquiring OIL. The financial strength of the IOC balance sheet would be used for pushing OIL aggressively into the overseas oil equity business. IOC has equity in 12 exploration blocks under the new exploration and licensing policy but in all these blocks, it is in tie-ups with the Oil and Natural Gas Corporation. OIL is a small exploration and production company with a historic legacy of possessing vital geological data but it lacks financial resources to acquire oil and gas properties abroad. IOC, BPCL and HPCL along with GAIL Ltd have been pleading with the government that they be allowed access to equity oil abroad. The IOC-OIL joint venture will concentrate on acquiring small and medium size oil and gas properties while OVL's role would be re-drafted into a company that would focus primarily on taking over big investment properties.



Petronet LNG gets second carrier


December 12, 2004. Petronet LNG Ltd has taken delivery of its second LNG carrier that will shore up imports at its Dahej terminal in Gujarat to 5 million tonnes. The 138,000 cubic metre LNG tanker was named 'Rahi'.


Three refineries to supply diesel for Pakistan


December 13, 2004. The Indian Oil Corporation has shortlisted three refineries for supplying diesel to Karachi. These include the Reliance refinery in Jamnagar, the Oil and Natural Gas Corporation’s refinery in Mangalore and its own refinery at Koyali in Gujarat. The company was waiting for Pakistan to take diesel out of the negative list of exports from India. Pakistan State Oil Corporation had identified Karachi, Jhelum and Lahore for getting 2.6 million tonnes of diesel from IOC. The Pakistani company identified a requirement of 1.2 million tonnes in Lahore, 1 million tonnes in Karachi and 0.4 million tonnes in Jhelum. Pakistan currently imports most of its diesel from the West Asia. It imports 4.5 million tonnes diesel out of a total requirement of 7.2 million tonnes. 


ONGC plans refinery


December 13, 2004. Oil and Natural Gas Corporation, with 30 per cent share in British firm Cairn Energy’s commercial oil and gas discovery in Rajasthan, is planning to set up a 3-5 million tonne refinery. The public sector company is working on acquiring Cairn Energy’s stake in the Mangala oil field, considered to be the biggest discovery in India after Bombay High. The refinery, which will entail an investment of up to Rs 5,000 crore (Rs 50 billion), is expected to process crude available from discoveries in Rajasthan.  Cairn Energy is involved in exploration across a 4,970 square km block in Rajasthan’s Barmer region. It holds 100 per cent of the block, while ONGC has the rights to 30 per cent of any development area resulting from a commercial discovery. The first stage of commercial oil production from RJ ON 90/1 block, held by Cairn, is scheduled to commence in the first quarter of 2005. A number of companies like Cairn Energy, ONGC, Oil India Limited, Essar Oil, Polish Oil and Gas Company, and Phoenix Overseas, are busy exploring in Rajasthan. A total of six blocks are under exploration in Rajasthan in addition to ONGC’s and OIL’s nominated blocks. 


Margin of refiners rises


December 10, 2004. The increase in international petroleum prices has resulted in an average 76 per cent jump in the gross refining margin of refineries during July-September, 2004. It rose to Rs 2,258.28 per million tonne from Rs 1,284.49 a year ago.  The increase results from the fact that refineries are paid the import parity price for petroleum products by the oil marketing companies which actually sell the product to retail consumers. The price of the Indian basket of crude oil was at $38.82 per barrel in November. On the other hand, globally, kerosene was at $53.56 per barrel, LPG was at $469 per mt, petrol at $51.74 per barrel and diesel at $50.90 per barrel during the month. Indian refiners, therefore, enjoy a reasonable spread between the crude oil price and the product price. 


HPCL plans LNG unit in Mangalore


December 9, 2004. Hindustan Petroleum Corporation is in talks with Mangalore Refineries and Petrochemicals to set up a 5 million tonne per annum liquefied natural gas terminal at Mangalore at an estimated cost of Rs 2,500 crore (Rs 25 billion). In the venture, HPCL can market the LNG while the procurement of the product (LNG) will be done by MRPL and Oil and Natural Gas Corporation (ONGC). Overall, the country consumes close to 70 million square cubic metre of gas (mmscm) as against the immediate requirement of 120 mmscm of gas. There is immediate need of gas and the market could develop even further with several power projects coming up in the southern states. For LNG, the MRPL-HPCL combine is scouting for suppliers in the Middle East.  HPCL has also decided to invest an additional Rs 2,000 crore (Rs 20 billion) in upgrading its refineries, particularly the Visakhapatnam refinery to process “more of sour crude which is cheap. On one hand, it is adding 800 retail outlets across the country and on the other, it is busy re-siteing non-performing petrol stations. Moreover, HPCL is spending Rs 1,500 crore (Rs 15 billion) over a period of three years in upgrading its existing retail outlets under ‘Project Aakarshan’. 


Shell still in race to buy HPCL


December 08, 2004. Royal Dutch-Shell is interested in buying state-owned HPCL if the government decides to disinvest the company. Shell opened its first petrol station after 1976, when it (then known as Burmah Shell) left the country after the government bought its assets, in Bangalore. The company is sourcing the products of Mangalore Refineries and Petrochemicals Limited. Shell has a licence to open a network of 2,000 petrol pump stations in India. Shell has said that in the first phase, which would see the company rolling out such stations in south India, it proposed to invest Rs 250 crore (Rs 2.5 billion).  In the second and third phase, the company plans to roll out stations nationally. But these two phases would depend on the success of the first one. Shell has invested $850 million in India since 1994. 


Transportation / Trade


Wartsila inks deal with Gail


December 13, 2004. Wartsila India has executed an agreement with Gail India for supply of gas at Malanpur, Madhya Pradesh for a 25 MW, gas-based group captive power plant. The power plant is to be set up together with local industries. The gas supply is expected to commence in June 2006.


GAIL not to buy Kolkata gas supply firm


December 10, 2004. Gail (India) Ltd has dumped plans of immediately entering the gas supply market in the city and its suburbs by refusing to buy out the state government-owned company, Greater Calcutta Gas Supply Corporation Ltd (GCGSCL), which owns the underground gas pipelines across Kolkata. Gail’s interest in the region and GCGSCL, had abated after the state government backed out of its promise to offer a stake in Haldia Petrochemicals Ltd (HPL). Gail had evinced interest in the century-old company which has exclusive right of way for gas pipeline to develop a city gas distribution system on the lines of Delhi and Mumbai.


GAIL to jointly bid for Syria-Lebanon pipeline


December 10, 2004. GAIL (India) plans to make a joint bid with Egypt’s National Gas Co for the operations and maintenance contract of a gas transmission pipeline from Syria to Lebanon. The 64-kilometre, 24-inch pipeline, also called the GASYLE I, will transport natural gas from Syrian Petroleum Co’s Baniyas plant in Syria to the Beddawi power plant in northern Lebanon. About half of the pipeline will be in Lebanon, while the other half will be in Syria. The pipeline is expected to transmit 1.5 million metric standard cubic meters per day of gas to the power plant. 


GAIL to float separate entity for trading


December 9, 2004. Gas Authority of India Ltd is floating a separate corporate entity for its trading activities in India and abroad. The proposed natural gas regulatory regime envisages unbundling of trading and transmission business. Therefore, Gail proposed to separate trading and transmission of its gas activities.

Policy / Performance


Ministry may seal fate of ONGC projects 


December 13, 2004. Petroleum and natural gas ministry has asked Oil and Natural Gas Corporation to limit its activities to only drilling and exploration of oil and gas and allow the public sector oil and power companies to do their job.  The ministry has also directed the corporation to invest 50% of its profits in the existing drilling and exploration activities of oil and gas.  The directive of the ministry has put a big question mark on the fate of the various forthcoming power and petroleum projects worth Rs 40,000 crore (Rs 400 billion) in Karnataka, Gujarat and Tripura. The worst affected projects of the corporation will include plan for setting up a Rs 25,000 crore (Rs 250 billion) Petroleum Park in Manglore, MoU for which has already been signed in August this year. The park will have LNG terminal, petrochemical and power plants. To run the project successfully, the company has a large investment plan for creating rail, road and power supply network. Another project which will have corporation’s participation upto Rs 15,000 crore (Rs 150 billion) is at Dahej for building a special economic zone for which an agreement has also been entered into.


Indo-Norwegian oil projects get a boost


December 9, 2004. Indo-Norwegian collaborative research projects have got a boost, with Norway providing funds worth 50 million Norwegian kroner (Rs 350 million) over a five-year period. About 20 scientific projects would be taken up. Under Indo-Norwegian Projects on Institutional Cooperation (INPIC), an important project to enhance secondary oil recovery from oil wells in the country is being launched from February 2005 by a Minister from Norway. The Hyderabad-based National Geophysical Research Institute (NGRI) will lead the two-year project with expertise from Norway.  The recovery of secondary oil currently is between 25 per cent and 28 per cent in India, while Norway has rates of 60-65 per cent. By enhancing recovery, huge sums of money are saved and returns on higher yields will earn more. The NGRI is discussing with the Oil and Natural Gas Corporation (ONGC) and other oil companies, which have wells, to use the expertise to enhance oil recovery. A combination of NGRI-developed Fractal monitoring (a mathematical approach, which helps to find out the location of oil in reservoirs) and the 4-D technique of Norway would be used to pinpoint places where water can be injected to create adequate pressure to push oil upwards in the well for easy recovery. 






BHEL ready for higher capacity plants 


December 13, 2004. Bharat Heavy Electricals Ltd (Bhel), Trichy, which is globally competitive in the design, manufacture and commissioning of power plants up to 500 mw capacity is ready to go in for power plants of higher capacities ranging from 800 mw to 1000 mw. This is in tune with the national plan to double the power generation capacity in the country by 2012. The Central Electricity Authority (CEA) recommends that the future thermal power plants should be super critical in technology and should be of higher capacity. With the global environmental and emission concerns on the rise the thermal power plants have to be more efficient and more envrionment-friendly with the adoption of state-of-the-art power generation technologies. Bhel reduced the project delivery cycles of 250 mw power plants from 36-39 months to 30 months and of the 500 mw ones to 36-39 months from 48 months with no compromise on quality, reliability, plant load factor and plant availability.


Tehri project near completion


December 13, 2004. The Tehri Power Project was in its last phase of completion and would be inaugurated in the end of February next year.


Bhel's thermal sets achieve record


December 13, 2004.  Thermal sets manufactured by the company also recorded a 73.9 per cent Plant Load Factor with an Operating Availability of 83 per cent as against 71.9 per cent PLF and 82.3 per cent during the review period. Dahanu thermal power station in Maharashtra equipped with two Bhel-built units of 250 MW each operated at a record PLF of 100 per cent. A total of 33 thermal units with Bhel-make equipment, operating at Singrauli, Kota, Sabarmati, Kothangudem, Vijaywada, Dadri, Badarpur, Bhatinda, Wanakbori, Korba, Mettur, Unchahar, Rayalseema, Chandrapur and Tuticorin registered a high PLF of above 90 per cent. The installed capacity of Bhel utility sets (thermal, hydro, gas and nuclear) stands at over 71,255 MW - more than 64 per cent in the totally installed power generating capacity in the country. 


APGenco to set up gas based projects


December 12 , 2004. Andhra Pradesh Generation Corporation proposes to set up two gas-based power projects of 1400 MW each at Vemagiri and Shankarapalli in the State. Reliance Industries has come forward to supply 14 MCMD (million cubic metres of gas a day) to the two projects from its Krishna-Godavari D-6 block by mid 2008. The time schedule for the two projects is being worked out to match the gas availability. The corporation also proposes to set up a 500-MW unit at Bhoopalapalli for which coal linkage from Singareni Collieries Company Ltd is available. The Rural Electrification Corporation has, in-principle, agreed to finance the project and the approval is expected shortly. The project is likely to be started by March 2005. The first 200 MW unit of the Rayalaseema Thermal Power Project Stage-II would be completed by March 2006 and the second unit of equal capacity by July in the same year. The Pochampad Hydro Electric Scheme Stage-II is expected to be commissioned by December 2006. The revised bid documents of the Vijayawada Thermal Power Station Stage IV have been finalised and APGenco is planning to open price bids by the first week of February 2005. On the other hand, all the civil works of the 6x39 MW Jurala Hydro Electric Station are in progress and the first unit of the project is expected to be commissioned by March 2007.


Race for Neepco Tripura unit hots up


December 11, 2004. Public sector equipment giant, Bharat Heavy Electrical Ltd and Sumitomo Corporation have emerged the front runners for the Rs 1,000 crore (Rs 10 billion), 280 MW Tripura gas based power project at Monar in Tripura of North Eastern Electric Power Corporation Ltd. (Neepco). Neepco had initially received bids from seven power equipment manufacturing giants for the project. These included BHEL, Mitsubishi Heavy Industries, Marubeni Corporation, Alstom Power, General Electric, Siemens and SCL. Price bids would be invited by the end of December. The project would have six gas turbine units and three steam turbines units. It is scheduled to be completed in four years.  A Shillong based power generation company, Neepco has entered into talks with Tata Power and BSES for setting up a joint venture generating company in Arunachal Pradesh where the latter would hold minority stake. The joint venture company would have a total generating capacity of 2,920 MW under joint venture agreement with private parties. The four projects with a total generating capability of 2,920MW, will be combination of three 600MW hydel power plants and one 1,120 MW unit. With average cost of 1MW of hydel power plant estimated at Rs 2.8 crore (Rs 28 million), the total cost of the project was expected to be around Rs 8,400 crore (Rs 84 billion) while cost of power generated was estimated at Rs 1.58 per unit. 


Jindal Stainless' power plant


December 8, 2004.. Jindal Stainless proposes to set up a captive thermal power plant at a cost Rs. 850 crores (Rs 8.5 billion) to meet its future requirements in Orissa. The plant will have two modules of 125 MW each. The expected date of completion for the first module would be 24 months. The major order has been placed with the BHEL.


Transmission/ Distribution / Trade


PTC inks pact with firms for 9000 mw


December 13, 2004. PTC India has signed a memorandum of understanding (MoU) with different entities for a total capacity of 9000 mw and has signed a power purchase agreement (PPA) for projects with a cumulative capacity of 2000 mw. The corporation has signed an agreement with the Oil and Natural Gas Corporation to set up a 1,000 mw power plant at Palatal in Tripura. It is also setting up the 300 mw Lanco Amarkantak plant at Chattisgarh and has picked up 11 per cent equity at Rs 30 crore (Rs 300 million).  The corporation has also picked up equity in the 750 mw hydro unit - West Citi power project in Nepal. The project to be commissioned in the next five years will supply electricity to the northern states of India. The company was also holding talks with Essar, Torrent and GMR Group for trading of power generated from their respective projects, which are in the pipeline.


BESCOM launches energy efficiency program 


December 10, 2004. BESCOM (Bangalore Electricity Supply Company Ltd) launched energy efficient lighting program for Bangalore city. Under this program, BESCOM offers compact flurescent lamps (CFLs) to replace the conventional lamps.  According to BESCOM officials, every light replaced with CFL, will result in a saving of about Rs 17 per month for a consumer. BELP will reach out to 1.6 million residential consumers through direct sale and monthly installment schemes. Consumers will have the option of either direct purchase of CFL or an installment scheme where cost of CFL is recovered through nine monthly installments along with the bill amount.


Texmaco gets order from NTPC


December 13, 2004. Texmaco has received an order worth Rs 38 crore (Rs 380 million) form National Thermal Power Corporation (NTPC), for its Khalgaon Super Thermal Power Project in Bihar, for supply of 200 Merry-Go-Round wagons within a period of 27 months. The release added that these Merry-Go-Round wagons are special electro-pneumatically operated bottom discharged hopper wagons meant for transportation of coal to thermal power plants.


Grid station commissioned at Bawana


December 8, 2004. North Delhi Power Ltd (NDPL) commissioned Delhi's first 66-kV remote-operated, unmanned Grid Station at Bawana. The NDPL Bawana Clear Water Grid is fully remote-controlled and would be operated through radio frequency from NDPL's Power System Control located at Ranibagh.


MSEB to transfer assets


December 8, 2004. The loss-making Maharashtra State Electricity Board’s assets close to Rs 85,000 crore (Rs 850 billion) would be transferred to three state-run companies after its restructuring scheduled to be complete by June 10, 2005. MSEB’s assets comprise power plants with installed capacity of 9,711 mw, transmission and distribution network in addition to administrative buildings. MSEB has created these assets in last 44 years. MSEB’s assets will be transferred to three state-owned companies in the most transparent manner. All stakeholders including MSEB unions will be taken into confidence.


REL seeks licence for Westren India


December 7, 2004. Reliance Energy Limited has applied to the Central Electricity Regulatory Commission (CERC) seeking licence for transmission of power in western India. REL has applied for licence for 20 lines and 13 sub-stations in western India. A Malaysian company, in a joint venture with an Ahmedabad-based company, has also approached the CERC seeking a similar licence in Bina-Nagda sector.


REL arms to invest in Delhi's distribution 


December 7, 2004. The two Delhi-based power distribution arms of Reliance Energy Ltd are to invest about Rs 3,700 crore (Rs 37 billion) by the end of 2005-06 to strengthen the power distribution network in the Capital. REL subsidiaries — BSES Rajdhani Power Ltd and BSES Yamuna Power Ltd — would pump in Rs 2,800 crore  (Rs 28 billion) during the current fiscal. The companies would invest close to Rs 1,000 crore (Rs 10 billion) in 2005-06. The company also plans to spend Rs 500 crore (Rs 5 billion) to build a high voltage distribution system, which would cut the company's commercial losses. Reliance Energy is the country's second largest private power generator with a capacity of over 900 MW. The company acquired 51 per cent stake in two of the three distribution companies in the Capital from the Delhi Government in 2002.

Policy / Performance


IDBI approves funds for power projects 


December 13, 2004. IDBI Ltd, which has transferred its fund-based exposure of Rs 1,200 crore (Rs 12 billion) in the now closed Dabhol project to the stressed assets stabilisation fund (SASF), has sanctioned Rs 900 crore (Rs 9 billion) during last four months to power projects with total generation capacity of 1,700 mw. The total funding by the Indian lenders and bankers, including IDBI Ltd during the same period has been worth Rs 4,000 crore (Rs 40 billion). IDBI Ltd’s total exposure in the power sector was to the tune of Rs 7,500 crore (Rs 75 billion) by end of March this year.


Energy sector spending low


December 14, 2004. The mid-year review has lamented the slow pace of expenditure in the energy sector, while expressing satisfaction with the spending on agriculture, education, rural development and physical infrastructure like roads. The introduction of a cost-plus subsidy structure for kerosene and domestic cooking gas and some delays in the pre-audit of claims has resulted in a decrease of subsidy on these fuels. In the power sector there are many hurdles to the unscheduled interchange market becoming a true spot market for electricity. The unscheduled interchange market, which penalises buyers for unplanned offtake of electricity from the grid and rewards suppliers for meeting such unplanned offtake, has helped improve grid discipline.


Energy sector needs investment


December 13, 2004. India would need an investment of about $300 billion in the next 15 years to meet the growing demand in the energy sector, including power, oil and gas, and the private sector would have a crucial role to play. The state electricity boards are close to bankruptcy while the regulatory framework unclear for the private sector.  And the private sector participation is significantly less than what it should be.  There is a need of adding 10,000 MW of power every year for the next 10 years which would entail an investment of $100 billion and another $25 billion would be required for transmission.   On the oil and gas exploration front, the private sector share is only 17 per cent.  As against the world average of one per cent of the GDP, there is a need to invest 2-3 per cent of GDP in the energy sector in India as it is a developing nation. The transmission infrastructure would require an investment of about $100-150 billion. The necessary financial resources could be raised from the capital markets as has been shown by the overwhelming response to the recent NTPC and PTC issues.

Subsidised power widens rural wealth gap


December 11, 2004. Subsidies were difficult to prune largely for political reasons, the World Bank had admitted in a recent report. The World Bank suggested that subsidised power to farmers provided marginal benefits, while free power would actually harm the farming sector. Low agricultural tariff lowered the incentive for supplying quality power to the farmers by power utilities. In addition, the rationing regime that governed the supply of power to agriculture was exposed to fiscal pressure and indiscipline. 


Contrary to the general belief about the positive effects of subsidised power to the agricultural sector, the report said improvement in quality of supply would help farmers more, specially smaller farmers. The report warned that the benefits of cheap power went overwhelmingly to rich farmers and hurt poor farmers. It cited evidence to prove that farmers with irrigation got on average an input subsidy which was 15 times more than that enjoyed by farmers without irrigation, who were the poor farmers. The same was true within the community of generally better-off minority of pump set owners. In Karnataka, only 22 per cent of farmers with less than one hectare owned a pump, whereas 70 per cent of farmers with 4 hectare or more had a pump. The sub-1-hectare farmer got a benefit of Rs 3,300 per year per pump while the average subsidy enjoyed by farmers owning more than 4 hectare of cultivable land was nearly Rs 29,710 per year. The agricultural power supply to farmers was often unmetered and nearly free.  Payment if any was in the form of a lump sum.  In consequence, power producers supplied limited power which hurt both the agricultural requirement and the state’s budget. The subsidised power sector lacked commercial discipline and had very poor utility-customer relationship. Non-paying customers were not disconnected. The government often failed to compensate the power company for losses incurred due to supply of power at non-remunerative rates. According to Planning Commission estimates, the implicit power subsidy given to agricultural consumers grew fourfold from 1992-93 to Rs 305 billion in 2001-02. 


Per capita power use may double


December 11, 2004. The per capita consumption of electricity in the country may double within the next eight years. The consumption at present was 592 kilo watt hour (kwh) and it would be doubled by the year 2012. The 592 kwh was inclusive of power loss and transmission loss. The power ministry plans to add 1 lakh mega watt (100,000 mw) capacity before the year 2012 to the existing capacity of 1.14 lakh mw (114,000 mw). The CEA had recommended installation of mega thermal power projects instead of starting small projects. The CEA had given the nod to start work on 15 power projects which could genarate about 600 mw each.


Capital subsidy on rural power schemes to be increased


December 11, 2004. The Government proposes to increase the capital subsidy on schemes such as rural electrification distribution backbone and village electricity infrastructure. The current subsidy of 40 per cent is to be hiked to 90 per cent. This is intended to strengthen the power distribution network in villages. The Centre is also considering a 100-per cent grant for connecting households below the poverty line.  The proposed measure is to replace the existing scheme of accelerated electrification of one lakh (100,000) villages and one crore (10 million) households. The scheme is to be implemented by the Ministry of Power with the Rural Electrification Corporation (REC) as the nodal agency to administer the subsidy and provide financial aid. REC will provide a single-window service to facilitate implementation of the scheme and also provide promotional support for the programme for the next five years. Since the task is huge, the Government will make available the services of Central public sector undertakings to the States, as per their willingness and needs, to ensure timely completion of the projects.


Oil duty structure to be overhauled  


December 8, 2004. The government is set to overhaul the tax structure in the petroleum sector in the forthcoming Budget. Besides reducing the differential in customs duty on crude oil and finished petroleum products, a shift to a specific excise duty regime is likely. Differential duties on crude and petroleum products result in hidden subsidies for refineries and marketing companies. They also create opportunities for adulteration and diversion of products from intended uses.  The high-level task force set up under chief economic advisor Ashok Lahiri to review the tax structure in the petroleum sector, is veering round to the view that the duty on crude oil may be halved to 5% from 10% now. Customs duty on petrol and diesel too can be cut significantly from the present 20% to result in a differential of 6-8% between crude and products. The only constraint before the Lahiri task force is the adverse impact such a move would have on revenue collections. Two rounds of excise and customs duty cuts on petroleum products in June and August this year have already cost the exchequer a revenue loss of almost Rs 5,000 crore (Rs 50 billion). In its mid-term review of the petroleum sector, the Planning Commission too has questioned the high incidence of taxes in the sector. A uniform or specific excise duty structure not only provides certainty in revenue collections but also ensures that prices do not rise sharply when global crude oil prices surge. The existing tax and duty structure leads to irrational fuel choices as well as practices like invoicing sales in states with low taxes. States are simultaneously being urged to consider paring the sales tax on crude and petroleum products. They had mopped up Rs 35,180 crore (Rs 351.8 billion) as sales tax and other local taxes on petroleum products last year.


States agree to forego free hydro power


December 10, 2004. A number of states have agreed not to take free power they get from hydro projects for the time being. The power ministry is proceeding on a case-by-case basis to convince states to forego some free power in the initial years in order to make the projects viable. Jammu and Kashmir and Arunachal Pradesh have agreed to the proposal. However, it is being opposed by states like Himachal Pradesh, Uttaranchal and Meghalaya states with significant hydro power potential. At present, states where the projects come up, get 12 per cent of the power generated each year free of cost. The cost is recovered from the rest of the electricity being sold, which makes the rates uncompetitive for the paying consumers. An earlier attempt by the power ministry to move a Cabinet note to the effect had to be abandoned in the face of stiff opposition from some states. The issue is therefore being taken up on a case-by-case basis.  The total cost of generation for hydel projects decreases over time. Once the loan is paid off, the project only has to bear the variable cost and therefore the tariff comes down sharply. There is usually an attempt to back-end the tariff in order to ensure that power is not too expensive in the initial years when the fixed costs are being paid.


Government for 99 new coal projects


December 09, 2004. Coal India Ltd will increase coal production to 512 million tonnes by 2011-12 by augmenting production from ongoing projects and those identified to be taken up under the Eleventh Plan period. Government would take up 99 coal projects in the country. Of these, 64 will start production during the Tenth Plan itself. 


States have time to end power subsidy


December 08, 2004.  There is no time limit for phasing out of cross subsidy at the state level as per the new electricity Act. Unlike the time limit of five years in case of open access in distribution, which has been in the limelight, there is no provision in the Act pertaining to phasing of cross subsidy. It remains in the hand of ERC in consultation with the stakeholders including the state government. Not a single state ERC has set any time-bound programme for phasing out cross subsidy. In case of any development in future regarding cross subsidy, the state government could issue directives in public interest. 








Shell invests in Qatari gas


December 7, 2004. The British- Dutch Royal Dutch Shell group announced determination to spend $ 6 billion for establishing a factory to transform gas into a liquid fuel in Qatar. Qatar's minister of energy and industry Abdullah Bin Hamad al-Ateyah said that the country has contracted for the establishment of two units to liquefy natural gas at a capacity of 8 million metric tons annually so as to contribute to the increasing demands for the Qatari gas internationally.  Al-Ateyah said that Qatar has been exporting liquid gas since years to Japan, South Korea, India and Spain with contracts confirmed for exportation to Italy, Belgium, France and Britain and future plans to export gas for the USA and Taiwan. Shell had signed an agreement with Qatar's oil company at a volume of $ 5 billion in October of 2003. Factories in these projects convert natural gas into fuels and oil byproducts like Diesel which Europe faces a shortage, as oil refining companies do not have enough capacity to meet the increasing demands for this material.  Qatar signed deals worth $ 20 billion with the aim of establishing projects for converting natural gas into liquid within plans aiming to make use of its huge reserves of natural gas.


Shell Canada finds gas in Alberta


December 8, 2004. Shell Canada Ltd., the country’s 2nd largest oil producer and refiner, has made a major gas find in the foothills of western Alberta, a region where it has been active for decades, the country's No. 2 oil producer and refiner said. Shell Canada said a deep exploration well it drilled near the town of Rocky Mountain House, 200 km (125 miles) northwest of Calgary, may have found reserves of 500 billion to 800 billion cubic feet of natural gas in place.  That makes it one of the largest recent discoveries in Western Canada, a key gas supplier to the United States, but considered a mature region where production has flattened out. New geophysical technology aided Shell in its search. The C$12 million ($9.8 million) well was drilled to 5,100 metres (16,730 feet) and tested at 30 million cubic feet a day, a healthy rate for much of Alberta.


ChevronTexaco makes UK oil & gas find


December 8, 2004. ChevronTexaco and its partners have made a "signifcant" offshore oil and gas discovery in the Faroe-Shetland Channel on the UK continental shelf, the company said. The find was made in the Rosebank/Lochnagar well in licence P1026 which encompasses blocks 213/26 and 213/27, said ChevronTexaco, which has a 40 percent stake in the licence. "The well, located in 3,600 feet (1,100 meters) of water and completed on August 30, 2004, encountered two oil and gas accumulations for a total net pay of 169 feet (52 meters)," the company said.


OPEC warns oil supply cuts for 2005


December 10, 2004. OPEC oil producers said that ministerial meeting would rein in oversupply to bolster falling prices and that the organization would have to reduce output quotas early next year.  Ministers from Kuwait, the UAE, Libya, Venezuela and Algeria urged the group to cut back on more than 1 million b/d of supply in excess of quota targets after oil prices this week fell to four-month lows. “I think we have to cut off all our overproduction,” said Kuwait Oil Minister Sheikh Ahmad Al-Fahd Al-Sabah. “I think over the last six weeks the prices were a surprise for everybody.” Producers fear rising inventories in consuming nations could further lower prices which have already dropped by $13, or nearly 25 percent from record highs in late October.  Saudi Arabia’s Minister of Petroleum and Mineral Resources Ali Al-Naimi, who has played down fears of a glut, said that he came to the meeting with an open mind.   OPEC’s second biggest producer Iran said OPEC would need to cut an existing 27 million b/d output target for the second quarter when demand seasonally declines. Kuwait also called for a second quarter cut in quotas.  OPEC will meet again in late January or early February, officials said.


The Organization of the Petroleum Exporting Countries has been producing at the highest level in 25 years to meet rising demand in the United States and China and compensate for disruptions to supply from Iraq.  OPEC’s ministerial monitoring committee, which advises the conference on market conditions, will recommend that the group now pull back supply to comply with existing output quotas, a cartel delegate said. “Overproduction has achieved its purpose of bringing the price down,” said Nigerian Presidential Adviser on Petroleum Edmund Daukoru. “It was not meant to crash the price, it was meant to moderate the price.”  Consumer nations have urged OPEC not to pull back production, saying oil stocks must rebuild to calm volatile prices and underpin economic growth. “Given where inventories are, OPEC production probably needs to stay about where it is. We think on average we’ll need more OPEC crude next year than we got this year,” said Guy Caruso, head of the US government’s Energy Information Administration.


Petrobras may pump Santos gas in 2008


December 10, 2004. Brazil's state oil company Petrobras may bring forward the start of natural gas production from a giant reserve in the Santos basin to 2008 as it expects gas consumption to rise over 14 percent a year. Petroleo Brasileiro SA (Petrobras) Gas and Energy Director Ildo Sauer said he was talking to the exploration and production department to begin output at the Mexilhao field before the original planned start in 2009. He said the early start to the project would depend on the development of the market for natural gas in Brazil, which is still fledgling but growing fast. Consumption grew this year by 14 percent, reaching an average of 32.7 million cubic meters per day.  It is expected to continue to grow at 14-14.2 percent annually until 2010, when sales to the market should reach 77 million cubic meters per day, so jointly with Petrobras' own consumption it will reach a 100 million cubic meter per day mark.


Statoil finds oil near Gullfaks


December 10, 2004. Norwegian energy group Statoil has made an oil discovery in the North Sea between the Gullfaks and Visund fields, the Norwegian Petroleum Directorate said. The licence holders are considering applying for permission for test production, the directorate said in a statement. The prospect lies in block 34/10 and partly in block 34/7 covered by production licences 050 and 120, it said.


East Timor turns to China for energy


December 12, 2004. East Timor will entrust China's biggest oil firm PetroChina to look for its inland oil and gas deposits, President Xanana Gusmao said on a visit to the island nation's leading donor Japan. PetroChina will complete surveys to locate and estimate the size of oil and natural gas at the field in southern East Timor, Mr Gusmao told. East Timor plans to launch full-scale energy development in the field in 2006 and will welcome Japanese and other foreign companies, except for oil majors, to take part in it, he said.


Gas exploration as option for fertilizer maker


December 13, 2004. Ballance Agri-Nutrients is to become involved in on shore oil and gas exploration in Taranaki in an attempt to secure future gas supplies for its Kapuni urea manufacturing plant. The initiative is just one of a number we are taking to potentially broaden future supplies of natural gas. Kapuni is a major user of natural gas, converting some 7 petajoules of natural gas a year into 260,000 tonnes of urea to supply New Zealand farmers with nitrogen fertiliser.  The existing supply contracts for natural gas come to an end in mid 2006. In addition to being in ongoing discussion with gas field owners regarding future supplies, it is, in a modest way, also looking at becoming partially self sufficient.  Earlier this year it purchased the rights to an on shore exploration permit which covers 68 sq kilometers of north and central Taranaki. Subject to the New Zealand Government approval, Ballance will transfer a 60% working interest in the permit area to Swift Energy Company, an experienced energy partner. Swift will also become the operator of the permit and manage the permit on behalf of a newly formed Ballance Swift Joint Venture.

ConocoPhillips to invest in China project


December 13, 2004. 3 U.S. oil company ConocoPhillips approved pumping in about $1.8 billion in cash over several years to develop an oilfield in China's Bohai Bay. The development phase, or the second phase, will build on the results from drilling and production in the first phase of the project. ConocoPhillips, which signed a deal with Chinese oil producer CNOOC in 1994 for the rights to explore a 1.6 million-acre area in the Bohai Bay, said the Peng Lai field is already producing about 20,000 b/d. Final go-ahead for the project is subject to approval by the overall development plan by the Chinese National Development and Reform Commission, ConocoPhillips said.


BP begins Holstein production


December 13, 2004. BP announced start-up of oil and natural gas production from the Holstein development, located in the deepwater Gulf of Mexico, approximately 100 miles South of Grand Isle, La. BP is the Operator of Holstein with a 50% working interest. Shell also has a 50% working interest. Located in approximately 4,300 feet of water in Green Canyon Block 645, the Holstein spar is the largest of its kind in the world. Production began on Dec. 9 and will increase over the next year as additional wells are completed and brought online. At peak production, the facility will produce more than 100,000 barrels of oil and 90 million standard cubic feet of gas per day.


Statoil to double oil & gas exploration


December 13, 2004. Norwegian oil and gas group Statoil plans to take part in 18-20 oil and gas exploration wells off Norway next year, more than double the total of eight in 2004, the company said. "Statoil has an exploration budget of 1.8 billion Norwegian crowns ($290.8 million) for next year, compared with roughly 1.1 billion in 2004," it added.  "Three of the 2005 wells are due to be drilled in the Barents Sea, seven to nine in the Norwegian Sea and nine to 11 in the North Sea," it said in a statement, which also said that the total would be 18-20. Thirteen of the 2005 wells would be operated by Statoil. Statoil estimates that some 15 billion barrels of oil equivalent remain to be discovered in the Norwegian Sea, eight billion in the Barents Sea and five billion in the North Sea. Statoil has been involved in eight exploration wells in 2004, including five as operator.


BP sights on Libya's oil and gas


December 14, 2004. Oil giant BP is in talks with Libya's State-owned National Oil Corporation about investing in massive projects in the energy-rich Arab nation that could be worth billions of pounds. Discussions are at an early stage but involve a range of huge, integrated projects, including construction of a gas liquefication project, gas pipelines and gas field development in partnership with the NOC.  Although Libya has huge proved reserves, about 75% of its territory has not been explored for oil and the potential for additions to reserves is massive. Production is just over 1.6m b/d, but NOC hopes to ramp up oil and gas output to 3 million b/d by the end of the decade. Gas is particularly under-exploited. NOC plans to develop local gas markets as well as expanding exports with new LNG capacity, enabling it to sell increasing volumes to lucrative markets such as the European Union and the US. Libya's exploration-permit programme has attracted interest from 122 companies, 63 of which have been given the green light to bid.


Indonesia to award contracts  


December 10, 2004. The Indonesian government will sign various contracts on the supply and production of oil and gas worth more than 4 billion US dollars with investors. The deals will include 15 oil and gas production sharing contracts worth 190.14 million dollars and 18 natural gas supply contracts worth 4.03 billion dollars, said Iin Arifin Takhyan, director general of the oil and gas department under the Ministry of Energy and Mineral Resources. The joint production contracts will cover oil and gas blocs in East Java, Papua, East Kalimantan and Aceh. The government also plans to offer 10 new off-shore oil and gas blocs in Natuna, Makassar Strait, Arafuru Sea, Southeast Sulawesi and onshore blocs in South Sumatra in 2005, he said.




Benham gets refinery contract 


December 12, 2004.  Benham, based in Oklahoma City, has been awarded a $23 million contract to engineer and build a diesel "hydrotreater" for Dallas-based Holly Corp.'s refinery in Woods Cross, Utah. Benham's oil-and-gas division in Tulsa will do the work for Holly Refining & Marketing Co., a wholly owned subsidiary of Holly.  The system at the refinery north of Salt Lake City will produce 10,000 barrels of ultra-low-sulfur diesel and jet fuel per day by June 2006, Benham said. The system will mean the refinery can meet the earliest deadline for new requirements of the Environmental Protection Agency, the company said.


Transportation / Trade


Mexico saves on natural gas imports 


December 7, 2004.  The multiple service contracts (MSCs) through which Mexico's state oil company Pemex has brought the private sector into natural gas production in the Burgos basin have allowed Mexico to reduce its natural gas imports by US$110mn since MSCs' implementation in April, Pemex said in a statement. Under MSCs, Spain's Repsol YPF operates the Monterrey-Reynosa block, a consortium led by Argentina's Techint operates the Misión block, a consortium of Brazil's Petrobras, Japan's Teikoku and Mexico's Diavaz won the Cuervito and Fronterizo blocks and US-based Lewis Energy operates the Olmos block.  Pemex expects gas production from MSCs to reach 89 million cubic feet a day (mcf/d) at year-end. Before awarding Olmos, Pemex said it anticipated eventual production of 400mcf/d from the four blocks awarded up to that point. Domestic production costs are some US$2.5/thousand cubic feet, compared to the US$5.5/thousand cubic feet that Mexico pays for imports from the US, the statement said. In 2003 Mexico spent US$2bn on natural gas imports, 35% of the country's trade deficit, the statement said.  Pemex awarded the Pandura-Anáhuac block, which is the first of the four blocks that comprise the second MSC round, to a local consortium made up of Industrial Perforadora de Campeche and Compañía de Desarrollo de Servicios Petroleros.


Indonesia cuts Asia LNG supplies


December 8, 2004. Indonesia has cancelled 10 cargoes of liquefied natural gas (LNG) for delivery to Taiwan's Chinese Petroleum Corp. in 2005 due to ongoing supply problems, an official at government-run CPC said. The shortfall amounts to about 600,000 tonnes of super-cooled, compressed gas, or 17 percent of CPC's annual 3.5 million tonne contract with Pertamina, Indonesia's state oil and gas firm.  Indonesia's oil and gas watchdog, BPMIGAS, said in November that the world's biggest LNG exporter was struggling to meet supply commitments and might have to buy up to 50 spot cargoes to cover its contracts. BPMIGAS also said it was in talks with buyers Japan, Taiwan and South Korea over rescheduling cargoes or reducing volumes. Its exports have been cut by declining domestic production and the diversion of supplies to the domestic market.  Indonesia's total supply shortage may be 35 cargoes at 60,000 tonnes per cargo, so it's about a 2-million tonne shortage.  The balance of the supply shortage would be borne mostly by Japanese buyers. Japan is the biggest buyer of LNG and imported just over 59 million tonnes in 2003.  The report said supplies to Japan would be cut by 11 percent or 1.74 million tonnes, to South Korea by 1.0 million tonnes and by 600,000 tonnes to Taiwan.


Brazil to build pipeline in Amazon


December 8, 2004. After years of discussions with Indian tribes and environmentalists, Brazil plans to start building the first gas pipeline in the heart of the Amazon jungle an important step toward its dream of energy self-sufficiency. At a cost of $430 million, natural gas from the remote Coari fields will flow 180 miles to this sweltering Amazon city of 1.2 million people. From here, the gas will be shipped to power 13 thermoelectric plants that now run on diesel fuel, decreasing the country's reliance on imported oil.  Brazil still imports nearly one-fourth of the oil it needs, estimated at more than 2 million b/d, including natural gas from neighboring Bolivia. But with rising production from its offshore oil fields and natural gas flowing from Coari within two years, Brazil expects to be self-sufficient by 2006.  The pipeline project began five years ago, when Coari's reserves proved sufficient to pump up to 4.5 million cubic meters of gas daily to Manaus. But environmental groups and Indian leaders worried that building the pipeline would damage the rainforest, home to many of Brazil's 700,000 Indians. Petrobras will finance up to 20 percent of the project.


Three LNG terminals required by 2010: Mexico


December 9, 2004. Mexico will need at least three liquefied natural gas (LNG) terminals to be operating by 2010 to assure power supplies. The country will need 60-63 new power plants by that date to meet anticipated demand growth of 5.6%. The new plants will add 25,000MW capacity and bring the country's total number of plants to some 250.  At present, the CFE buys its gas from state oil company Pemex, which either produces it itself or imports from the US. But because of insufficient gas production in Mexico, the CFE tendered the construction of an LNG terminal and supply of LNG at Altamira on the Caribbean coast, and is expected to call a similar tender for a terminal on the Pacific coast, probably at Manzanillo.


Indonesia power signs gas supply deals


December 12, 2004. Indonesia state Electricity Company PT Perusahaan Listrik Negara has signed final long-term gas supply deals with Amerada Hess and CNOOC Ltd worth more than $2 billion. U.S.-based Amerada Hess would supply a PLN power plant in East Java with around 100 million cubic feet of gas per day from 2007. Amerada would get the gas from its offshore fields in East Java.  PLN will buy the gas at $2.38 per million British thermal unit (BTU) from Amerada Hess for 20 years. The value of the contract is $2.19 billion. China's offshore oil and gas producer CNOOC would supply 80 million cubic feet per day of gas to a 740 megawatt gas-fired power plant in Cilegon, West Java from 2006 for 12 years. PLN would pay for the gas at $2.68 per million BTU. The value of the contract was $954 million.


ChevronTexaco seals gas deal


December 13, 2004. ChevronTexaco Corp. and Cheniere Energy Inc. said they had signed a 20-year contract giving ChevronTexaco 700 million cubic feet of capacity at a planned LNG facility at Sabine Pass in Louisiana. The agreement includes options that allow ChevronTexaco Global Gas to increase its capacity to up to 1.0 billion cubic feet per day (cfd) or reduce it to 500 million cfd. Last week, ChevronTexaco and Cheniere failed to reach an agreement for the oil major to buy a stake in the plant, which is expected to begin operation in late 2007.  Cheniere's proposed Sabine Pass receiving terminal at the border of Texas and Louisiana is one of dozens of planned "regasification" plants in the United States that would return the super-cooled LNG unloaded by ships to its gaseous form. High U.S. natural gas prices have triggered a rush to construct new LNG terminals that would allow companies to import natural gas supplies from producing regions around the world.


Moscow, Athens agree to build pipeline


December 10, 2004. Russian President Vladimir Putin and Prime Minister of Greece Konstandinos Karamanlis, agreed to launch the construction of the Burgas-Alexandroupolis oil pipeline in the near future. The blueprints for the oil pipeline from Burgas, Bulgaria, to Alexandroupolis, Greece, were ready ten years ago. The pipe should run for about 300km and its throughput capacity should be 35 million metric tons of oil a year.  Russia has the biggest interest in the project, above all because the new pipe will deliver Russian oil to the Mediterranean bypassing the Turkish straits. Turkey has recently decided to limit traffic through the straits for environmental considerations. In point of fact, Ankara is trying to force Moscow to deliver more oil to the West not through Novorossiisk but through the new pipeline from Baku to Ceyhan, which has not been completed yet. The Burgas-Alexandroupolis project could have gathered dust for many more years if not for Turkey's limitations, which made the oil route via Bulgaria and Greece look much more promising than before. Mr. Putin confirmed Russia's readiness to increase natural gas deliveries to Greece and to contribute to the development of its energy infrastructure


Policy / Performance


Petroleum demand to grow 37% by 2025 - EIA


December 9, 2004. U.S. petroleum demand is expected to grow by a projected 37 percent by 2025, forcing the nation to rely even more on foreign suppliers to meet its growing oil thirst, the government said. Petroleum demand is set to grow at an average rate of 1.5 percent to 27.93 million b/d in 2025 from 20.45 million b/d in 2004, according to the U.S. Energy Information Administration's long-term forecast. The EIA's long-term forecast projected energy supply, demand and prices for 2010, 2015, 2020, and 2025. It did not include estimates for next year. Imports from the Middle East, Venezuela and other foreign suppliers will grow to to 19.11 million b/d in 2025 from 11.78 million b/d in 2004, the statistical arm of the U.S. Energy Department said.


World oil demand growth to slow sharply in 2005


December 10, 2004. World oil demand growth in 2005 will slow from a 28-year high this year in part because a squeeze on fuel supplies for Chinese power generation should ease, the International Energy Agency said. In its monthly oil market report, the IEA shaved its estimate for 2005 demand growth by 70,000 b/d to 1.38 million b/d on the 83.7 million b/d world market.  That would put growth in 2005 at 1.7%, down from 3.3% or 2.63 million b/d this year when China led the steepest increase in world oil demand since 1976. World growth in 2003 was 1.8 million b/d, 2.3%, led by 11% China growth. Chinese demand growth in 2005 is forecast at 360,000 b/d, 5.7%, down from this year’s explosive 14.7% or 810,000 b/d, when fuel consumption raced ahead of economic growth, said the IEA. The report estimated Chinese third quarter oil consumption slowed as expected to 8.6% after gains of 19% and 25% in the first and second quarters of 2004. “Barring any hard landing, we expect continued Chinese economic expansion to keep fuelling steep oil demand growth through 2005 and beyond,” the IEA said. “But we anticipate this to be partially offset in the short to medium term by reduced diesel demand growth for standalone generators as non-oil power generating capacity is gradually catching up with power demand.”  The IEA said this year’s record high oil prices appeared to have little impact so far on world oil demand. It said non-OECD growth continued to be supported by government subsidies on retail fuel prices.


High oil prices to hurt Asia’s growth: UN 


December 13, 2004. High and volatile oil prices will continue to restrain economic growth in the Asia-Pacific region next year, a UN agency said in a report released. The Economic and Social Commission for Asia and the Pacific said the region’s economic growth would fall to 6.2% in 2005 from an estimated 6.9% in 2004 and 6.2% in 2003 if, as it assumed, the 2005 average oil price was $38 a barrel compared with $30 this year. “Overall, the outlook for 2005 has deteriorated,” ESCAP Executive Secretary Kim Hak-Su said. Net oil importers in Asia - especially China, India, Taiwan and Thailand - have already experienced upward pressures on overall consumer prices in 2004 as a result of higher commodity prices, higher capacity utilisation and higher oil prices, Kim said. “If prices remain at their present levels up to mid-2005, there could be a modest adverse impact on GDP growth in the region in 2005,” Kim said. The Opec had been pumping well above its 27 million b/d formal target this year to cool a price surge that saw US crude hit a record $55.67 a barrel in late October. But prices have fallen sharply since then, tumbling about 25% as oil supplies have risen, and Opec ministers feared a surplus could bring the market down further, especially in the second quarter when demand usually falls after winter. But ESCAP said oil prices were likely to remain volatile for several more months, at least until after the northern hemisphere winter ends by May.


Pak plan to focus on LNG import


December 11, 2004. The government is preparing a 15-year "National Energy Security Plan" (2004-05 -2018-19), which will focus on imports of liquefied natural gas (LNG) as it is now being considered as a crucial step for the future energy security of the country. For entry of important LNG import market, substantial investment of $600-800 million will need to be made in Pakistan for setting up LNG re-gasification terminal and allied port facilities. This will need to be coupled with long term LNG take-off agreements with the gas companies.  These are crucial steps for providing Pakistan with energy stability over the 15 year period which is a pre-condition for the economic take-off of the country. These suggestions are contained in a draft of 15-year Energy Plan, which was developed by the Oil Companies Advisory Committee (OCAC) and Petroleum Institute of Pakistan (PIP) and has been sent to the government.


Iran plans to replace oil with gas


December 11, 2004. The government’s policy on replacement of oil with gas will help fetch the country by 1.5-2 billion dollars per each South Pars phase annually, said the managing director of the Oil and Gas Pars Company. Iran’s daily gas output will go beyond 100 million cubic meters by March 20, 2005. The North Pars field, 120km south of Bushehr, holds a reservoir of 58 trillion cubic feet (TCF), out of which 48 TCF is accessible. “We have also planned to obtain sour gas from the field,” said the managing director. South Pars is expected to yield some 25 trillion cubic feet of gas as all 20 phases are completed.






Pak call to build hydel, thermal power plants


December 8, 2004. The government has been urged to build new hydel and thermal power houses in public sectors on war-footing to generate cheap electricity for industry and agriculture to face the globalization challenge next year. The voice was demanded by the Pakistan Wapda Hydro Electric Central Labour Union and Karachi Electric Supply Company Employees Union at a joint meeting held at the Bakhtiar Labour Hall here.  The office-bearers of the two unions said the power tariff in Pakistan was the highest in the world at present and reduction in it was the need of the hour. They opined that the cheap electricity could be generated only by the public sector hydel and thermal power houses as power costs in the country had increased to the highest in the world after installation of thermal power houses in the private sector. The unions formed a six-member committee to coordinate efforts for tackling the problems being faced by the power sector workers and resisting the privatization of the public sector power generation and distribution units under the World Bank pressure.


Big power projects launched in Pakistan


December 8, 2004. Peshawar Electric Supply Corporation's Chief Executive Brig Tahir Saeed Malik informed that Pesco had launched mega developmental projects in the NWFP at a cost of Rs 8 billion to overcome the problem of low voltage and to streamline the power supply system. He said the bulk of the amount would be spent on these projects in the Hazara Division, adding the projects include installations of a 220KV Grid Station in Mansehra, a 220KV Tarbela-Mansehra Transmission Line and 220KV Sangjani-Mansehra Transmission Line.  He told elected representatives about different steps taken by the present management to help consumers. They include setting up of a Customer Services Centre and one-window operation. He said he had arranged Rs 10 million for the system improvement and completion of development schemes in Haripur to improve the entire network and distribution system of Pesco in the province.



TransAlta halves Alberta power-plant plan


December 10, 2004. TransAlta Corp. has halved the size of a proposed coal-fired power plant in central Alberta, partly to help avoid a glut of generation capacity in the western Canadian province, it said. TransAlta, known for coal, natural gas and wind power plants in Canada, the United States in Mexico, wants to amend its application to regulators to allow for a 450 megawatt plant at the site of its Keephills station, 70 km (45 miles) west of Edmonton.  The plant, which would employ new, more efficient technology would cost C$750 million ($615 million), the company said. It first announced plans for a C$1.8 billion plant at the site, with capacity of 900 MW, in early 2001.


Iran to generate power in Senegal


December 13, 2004. Iranian minister of energy sign a contract with his counterpart in Senegal to execute a series of technical-financial projects including a power transmission line with a capacity of 225 KW. The minister heads an economic delegation that would continue the journey into Nigeria to negotiate how Iranian companies could share in Nigerian market in the industry sector.  Iran and Nigeria had firstly a joint commission in March early this year in order to boost trade exchange between the two sides. As a result of the gathering, the two sides agreed in April to renovate Nigerian power plants and turbines in cooperation with Iranian forces. The establishment of new dams and more power plants by Iranian subcontractors were discussed as well.


Mitsubushi invests in SA's nuclear plans 


December 14, 2004. Mitsubishi Heavy Industries had signed a deal to design and develop a helium-driven turbo-generator system, the major component of a nuclear power plant planned by South Africa, it said. PBMR, a South African nuclear power engineering company set up in 1999 to develop pebble bed modular reactors, plans to use the system at a plant to be built at Koeberg, near Cape Town. South Africa planned to introduce at least eight modules, with the first commercial reactor to start by 2013, the Japanese firm said.  A 1320 megawatt plant can be built by configuring eight 165MW reactors at one site. PBMR is owned by Eskom, the Industrial Development Corporation and British Nuclear Fuels. The pebble bed reactor is a small and cost-efficient reactor with power generating capabilities that require relatively low initial investment.


Electricity supply to US federal Govt buildings


December 13, 2004. Pepco Energy Services, a subsidiary of Pepco Holdings, Inc. and a leader in energy and energy-related services, announced that it has been awarded a contract by the U.S. General Services Administration to supply 330 megawatts of electricity to more than 100 federal government buildings in Washington, D.C. The 10 month contract which begins in January, 2005 calls for Pepco Energy Services to provide power to such Washington area landmarks as the U.S. Capitol, the Smithsonian Institution, the National Gallery of Art and the Kennedy Center. In addition, Pepco Energy Services will be supplying electricity to the U.S. Departments of Agriculture, Commerce, Energy, Interior, Justice, Labor, State, Transportation and the Treasury, as well as the EPA, FBI and GSA Headquarters.  Savings to the federal government is estimated to be over $13.7 Million.


Pakistan to set up three power projects


December 10, 2004. Pakistan has decided to start next month the international competitive bidding (ICB) for the setting up of three thermal power projects with a total capacity of 1,400 mw to overcome increasing power shortages in Punjab and Balochistan. The projects are expected to attract around $1.4 billion foreign direct investment in the country's power sector that had brought in more than $3 billion in the early 1990s. These projects will become commercially operational by 2008-09. The projects include a 450-mw dual-fired (gas and oil) project at Faisalabad, a 600-mw low BTU (British thermal unit) gas-based project at Uch gas field in Balochistan, and a 350-mw dual-fuel (gas and oil) at Chichuki Malian near Lahore. The government has estimated that power shortages in the Wapda system would be to the tune of over 1,000 mw by next year, which will increase at a rate of 6-8 per cent every year in view of economic growth.  KESC has also indicated a shortfall of more than 600 mw in its system during the current fiscal year and 1,260 mw by the year 2009-10. This means that the country will be facing an overall power shortage of up to 2,000 mw by next year.  The PPIB has also issued letters of interest (LoIs) to nine local and international consortia to set up over $1 billion worth of nine thermal power projects of 1,045 mw.  These include three LoIs for the setting up of two dual-fuel 300 mw projects by Tapal Group and Fauji Foundation in Karachi and a 200-mw of dual-fuel project by Orient Power in Balloki near Lahore. Similarly, Fauji Foundation has also been granted LoI to set up a low-BTU gas-based plant at Dharki, Sindh, by using Mari gas which is owned by the foundation itself. Another LoI has been issued to ETA-Ascon of the UAE to develop a 123-mw low BTU gas-based plant at Jarwar, Sindh.


Transmission / Distribution / Trade


Power sales contract from NASA


December 7, 2004. Calpine has been selected by the U.S. Defense Energy Support Center to provide electricity to the National Aeronautics and Space Administration (NASA) Johnson Space Center in Houston, Texas. Calpine will provide full requirements retail service for an estimated peak load of up to 35 megawatts a day. The 24-month contract begins in January 2005. Calpine is one of the largest independent power producers in the Electric Reliability Council of Texas, with 11 power plants in commercial operation capable of generating more than 7,300 megawatts of electricity.


Private producers to expand S A's grid


December 8, 2004. Plans to allow independent power producers to provide SA's new power capacity took a concrete step forward when the minerals and energy department invited parties to express interest in building two new power stations for R6bn.The plants, which are likely to start operating in 2008, are expected to significantly reduce the power cuts bedevilling the economy. The much-delayed introduction of independent power producers is aimed at bringing competition to power utility Eskom, which produces 95% of SA's electricity. More competition is also expected to further reduce the cost of SA's electricity, which is generally regarded as among the world's cheapest.  SA's excess peaking capacity is expected to run out in 2006 and become depleted by 2010. To avert this, the department said 5000MW would be required in the next five years. About 1000 MW of this would be generated from gas turbines and would be available by 2008.  The winning bidder would be required to build a single 1000MW plant or two plants of 500MW each, in different locations.


ASEAN to commission 5 power links


December 14, 2004. The Association of South-East Asian Nations (Asean) expects five of its 14 planned power interconnections, approved under the Asean Plan of Action for Energy Cooperation, to be commissioned between 2005 and 2009. An official at the Asean Secretariat said the five new interconnections will include the construction of the transmission lines linking Peninsular Malaysia with Sumatra, and Sarawak with West Kalimantan. Work on the transmission grids is expected to start next year, while the commissioning of the interconnections is scheduled to begin by 2009. Apart from the two projects, the other three interconnections expected to be ready for commissioning in 2005-2009 are the transmission grids linking Vietnam with Cambodia, Thailand with Cambodia, and Thailand with Laos. The official said the Vietnam-Cambodia interconnection is scheduled to be commissioned between 2005 and 2007, for Thailand-Cambodia by 2007, and Thailand-Laos by 2009. The remaining seven interconnections, which are expected to be commissioned after 2009, are Sarawak-Peninsular Malaysia; Batam-Bintan-Singapore-Johor; Philippines-Sabah; Sarawak-Sabah-Brunei; Laos-Vietnam; Thailand-Myanmar; and Laos-Cambodia.


Policy / Performance


Russia may stop exporting energy by 2010 


December 7, 2004. Owing to a low energy efficiency of the economy, Russia may stop the export of energy resources by 2010. "If we cannot raise energy efficiency but will develop the oil-and-gas complex, we may stop exporting energy resources because they will be absorbed by the domestic market,” Mr Igor Bashmakov said. He said, one of the main problems in implementing the energy strategy lies in the fact that Russia does not have a state policy of raising energy efficiency. "Without the state's participation, the market cannot efficiently regulate energy saving.”  Mr. Zhilin's said that the coefficient of efficiency of the energy installations working on gas in Russia is 33%, whereas in Europe this index exceeds 55%. The implementation of measures to save energy resources can reduce their spending in the country by 40-48% , or by 360-430 million tons of conventional fuel a year.


U.S Energy security needs funds


December 8, 2004. Future energy security will require development of new nuclear power plants, coal that is less polluting and tougher federal requirements on automobile fuel economy, a nonpartisan panel of energy experts says. The privately funded panel, charged two years ago with developing a consensus energy blueprint, concludes in a report that the government will need to spend billions of dollars to ensure future energy security.  The recommendations of the 16-member National Commission on Energy Policy are viewed as significant because the commission includes a wide cross-section of energy experts, including Republicans and Democrats, industry executives, environmentalists, labor leaders and former government officials responsible for energy. The group has no actual authority except to make its recommendations known to the Bush administration and members of Congress where lawmakers for four years have been stymied in trying to produce a national energy agenda.  A key finding by the panel is the need for greater government involvement in developing new and more environmentally friendly energy sources, including a proposed doubling of money for federal energy research and development. Among the group's recommendations will be that the government impose a mandatory permit program aimed at reducing so-called greenhouse gas pollution mainly carbon dioxide from burning fossil fuels believed to contribute to climate change and that it "significantly strengthen" vehicle fuel efficiency standards to reduce oil consumption. 


Hydropower project in China


December 8, 2004. DKLS Industries Bhd is proposing to invest in a power plant in China for RM21.9 million. Its proposed investment for a 30 per cent interest in Szechuan Province PuGe YongYu Hydropower Development Co Ltd will be via its wholly-owned subsidiary DKLS Energy Sdn Bhd. DKLS Energy signed a joint-venture agreement with Fujian Province Yon Xi County An Te Power Ltd to subscribe for up to a total value of 47.19 yuan million, or 30 per cent, of the enlarged share capital of YongYu Hydropower. YongYu Hydropower is a concession company in China that is involved in the development of hydropower resources in the valley of Xiluo River, situated in the north of PuGe County, south of ZhaoJue County, east of XiChang City and west of BuTu County. The hydropower resources will consist of three regulative backbone reservoirs with a total capacity of up to 60 million cubic metres of water and nine units of cascading hydropower plants with generation capacity of 192 MW. The project will be developed over four phases and the total development cost is expected to be about 1.16 billion yuan. The hydropower resources plant will be capable of producing 938 million kWh of electricity annually upon completion in 2010.


Syria, Egypt, Turkey joint energy project


December 13, 2004. Syrian Minister of Petroleum and Mineral Resources Ibrahim Haddad agreed with Egyptian Minister of Oil Samih Fahmi and Turkish Minister of Energy and Natural Resources Hilmi Guler on studying a three-way project to exploit phosphate available on the Syrian-Turkish border areas. The three ministers also agreed in a Cairo meeting to set up a common working group to study the economic feasibility of the project, followed by a visit by an Egyptian team to Syria and Turkey to discuss the technical details.


Russia, Iran, Azerbaijan discuss power cooperation


December 11, 2004.  CEO of the Unified Energy System of Russia (UES), Anatoly Chubais, discussed electric power cooperation with Iran at negotiations with Iranian Energy Minister Habibollah Bitaraf and the management of the Iranian power operator Tavanir in Tehran. The negotiations resulted, in particular, in signing a protocol on synchronizing the operation of the Russian, Iranian, and Azerbaijani power grids. The document, which obliges the three countries to synchronize the operation of their power grids in 2006, was signed by UES board member Andrei Rappoport, who arrived in Tehran as part of the Russian delegation, and the management of Tavanir and Azenergy companies. The protocol provides for building new power transmission lines between Russia and Azerbaijan and between Azerbaijan and Iran.  Another area of power cooperation between Russia and Iran is joint involvement in the construction of the Sangtuda hydropower plant in Tajikistan.


Kenya launches energy plan


December 8, 2004. The Government launched an energy reform initiative that will cost Sh19.4 billion. Energy Minister Simeon Nyachae said the project would help improve the delivery of energy services in Kenya. In the last five years, power outages and the high cost of electricity has been a major issue that has continued to slow down the recovery of the Kenyan economy. Energy Permanent Secretary Patrick Nyoike said the project would last four years and lapse in the fiscal year ending in 2008/09. He said the Government, through Kenya Power and Lighting Company (KPLC) would also reduce system losses from 18.7 per cent and reduce power outages, which now average 11,000 per month. Nyoike said the programme intends to increase Kenya’s export capacity for Liquefied Petroleum Gas (LPG) and reduce incidences of fuel adulteration.


Boom of new power plants a concern: China


December 12, 2004. Power plants are going up across electricity-hungry China, but the government is worried about the worsening pollution and possible power surplus the rapid construction may lead to. Power plants with a total generation capacity of 280 million kilowatts are under construction in China, according to the State Development and Reform Commission. Some local governments and companies began building the new power plants without proper approval from the central government. The building frenzy was triggered by the shortage of 10 million to 13 million kilowatts of electricity in the fourth quarter of this year.  Half of the power plants, which will be put into operation in 2005 and 2006, are not approved, said a source with the State Power Grid. The boom of power plants will increase pollution, worsen resource shortages and break the country's power supply plan, said Ma Kai, minister in charge of SDRC. The State Environmental Protection Administration also said that it has received environmental impact reports of 200 would-be power plants in the first 11 months of this year. If all these power plants were put into use, they would consume 400 million tons of coal annually, producing 5 million tons of sulfur dioxide and 53.26 million tons of dust every year, said Pan Yue, SEPA deputy director.


China’s coal imports raise global prices 


December 10, 2004. China’s hunger for coal to fuel its sizzling economy is leading the country to step up imports, transforming the once dirt-cheap commodity into the next black gold and pushing international prices up 50% this year. The world’s largest producer, China will also cut back exports of coal next year to meet rising domestic demand while it cracks down on unsafe mining after a series of fatal disasters.  China is the world’s second-largest coal exporter, accounting for about 20% of world shipments. A cut in Chinese exports would drive up demand for Australian and Indonesian coal from large consumers such as Japan and South Korea. Coal provides up to 70% of China’s energy needs. As its economy grows more than 9% this year, the world’s second-largest energy consumer faces a power shortage and transport bottlenecks that could starve up to 200 million Chinese of the coal required to heat their homes. Analysts said China’s combined imports of thermal and coking coal were heading for 18 million tonne this year, up 64% from 11 million in 2003. With demand growing, the price of thermal coal used for power generation had risen 50% to more than $60 a tonne since the start of the year, analysts said. Term prices for coking coal, the form used in steel production, were set to almost double next year, to $100 a tonne or above from below $60 this year, they said. China remains a net exporter of thermal coal, which fires three quarters of its massive power industry. But it has switched to a net importer of coking coal, to help feed growth of more than 20% this year in what is the world’s largest steel sector. Analysts said net imports of coking coal to China would be about five million tonne this year, climbing to seven million in 2005.


Renewable Energy Trends




Help for setting up waste energy plant


December 7, 2004. The Delhi Mayor, A. R. Verma, has sought support of the Congress president, Sonia Gandhi, setting up of a "waste-to-energy plant'' in the Capital. Stating that the project required clearances from various Ministries like the Union Urban Development Ministry, the Union Science and Technology Ministry, the Union Environment Ministry and the Union Ministry of Non-Conventional Energy Resources, besides those from Delhi Government, Mr. Verma requested Ms. Gandhi to direct the Ministries concerned to take up the project on a priority basis.  With a population of 140 lakhs (14 million), Delhi on an average generates solid waste of about 7,000 metric tonnes every day and it is a stupendous task to dispose of this waste. Almost every landfill site in the city and surrounding places is full. As a result, solid waste management has become a major problem for the Capital, which is also causing environmental problems. Setting of a waste-to-energy plant, where solid waste is used to generate electricity.


US grant for bio-diesel project 


December 8, 2004. Renewable energy company Bhoruka Power Corporation Ltd said it has received a grant of $100,000 from the US government to conduct a detailed feasibility report for a bio-diesel project in Karnataka. The agreement has been signed on behalf of US government through the US Trade and Development Agency. The study in Gulbarga district is likely to be completed by April next year. The study envisages use of Neem or Pongamia non-edible oilseeds for production of bio-diesel as well as power.


Validation of bio-diesel project


December 14, 2004. The German Technical Cooperation (GTZ) has approved to fund the validation process of the bio-diesel project of Southern Online Bio Technologies Ltd (SBT). SBT has signed an agreement with DNV, a Denmark company, for validation of its project. GTZ, an organisation working under German Government, had already spent Rs 13 lakh (Rs 1.3 million) on SBT bio-diesel project to get the Host Country Approval and was currently spending an additional Rs 6 lakh (Rs 600,000) for its validation.




On-grid solar power plant in the Philipines


December 8, 2004. President Arroyo led the ceremonial switch on of the country’s first on-grid solar power plant in Cagayan de Oro City in Mindanao. Energy Secretary Vincent S. Perez opened one-megawatt (MW) solar power facility, joined Mrs. Arroyo in the inauguration of the $5.3-million solar power project which uses 6,480 units of polycrystalline silicon solar cells from Japan’s Sharp Corp.  Perez said these solar cells capture the sun’s light to convert into electricity. Solar energy is strategically tapped as energy resource in providing electricity in far-flung areas with the installation of off-grid power systems. State-run Philippine National Oil Co. (PNOC), through its solar home systems distribution project in the Cordillera Administrative Region also aims to install some 15,000 solar home system units in rural, unelectrified households. Based on the updated Power Development Plan, Mindanao would need additional generating capacity of 150 megawatts (MW) by next year. The only committed project in Mindanao, however, is the 200-MW clean coal project which is expected to come on stream in 2006. 


Rice hull as fuel for electricity


December 9, 2004. This potential has been initially found by researchers, among them those of the Department of Agriculture-Philippine Rice Research Institute in efforts to tap rice biomass as a power generator resource. Rice biomass such as straw, hulls, chaff, bran, and brewer have valuable use in energy, agriculture, and industry, it was reported at the National Rice Biomass Conference held last Nov. 24 at PhilRice in Muñoz, Nueva Ecija. During the conference, which focused on how to fully develop rice hull’s potential in generating heat and power, processes such as gasification, carbonization, and combined heat and power generation plant were showcased. PhilRice is currently innovating on these processes to make them cheaper and affordable to farmers. The research was started last year with funding support from the New Energy and Industriial Technology Development Organization (NEDO).


Paper plant to harness wood power 


December 8, 2004. A new power station is to be built in Markinch A traditional paper mill in Fife is to use a new "green" method of generating power using wood. Tullis Russell confirmed plans to build a £73m combined heat and power station at its Markinch base. The plant will replace an existing coal and gas fired power station, which has been in daily operation for 60 years. The company said the new station would be completely fuelled by wood and wood-crops planted and grown specifically for use as a fuel source. The innovative method is being funded jointly by Tullis Russell and energy firm Scottish BioPower


Uruguay calls for Brazilian power bids


December 9, 2004. Uruguay's state power company UTE has called for bids for the 12-month supply of 72MW of interruptible power from Brazil from January 1, according to UTE information. Bids presented  will be opened the same day and the contract offered to the lowest bidder. In the event of equal prices being offered, bidders will have 48 hours in which to submit a different price. Contract signing is dependent on Brazil's electricity regulator Aneel certifying that the vendor meets technical requirements to sell power, and Brazil's grid operator ONS will coordinate the dispatch of the power. The vendor will be responsible for securing all export permits and for paying duties, and is required to deliver the power at the Rivera node on the two countries' border. Uruguay has turned to Brazil a number of times this year to cover domestic shortages, as well as to buy cheaper power than Uruguay can generate itself. A 1,000MW transmission line between the neighbors is under consideration.


Atomic energy industry needs investment


December 9, 2004. The Russian atomic energy industry needs a stable investment mechanism to develop properly, Mikhail Rogov, Deputy Director General of the Rosenergoatom concern, stated at parliamentary hearings Russian Energy Strategy: Problems and Solutions. "In particular, it is necessary to lift the restrictions concerned with the risk of loan capital withdrawal and secure state guarantees of to use credit resources," Mr. Rogov said. According to the official, in 2005 investment in the Russian atomic energy industry will shrink to 21.4 bln rubles ($1 = 27.98 rubles), as compared to 25.4 bln rubles in 2004. Rosenergoatom intends to put into operation three 1,000 kW per hour atomic reactors by 2010, the Deputy Director General said.


Wind energy sector receives boost in Kazakhstan


December 9, 2004. In a major initiative to increase the use of alternative energy sources in Kazakhstan, the United Nations Development Programme (UNDP) and the Kazakh government have launched a three-year programme to develop the country’s wind sector. Although significant resources in the form of hydro, solar and wind energy are available, 98 percent of all energy consumed in the former Soviet republic comes from coal, oil and gas.  The project envisages the construction of a 5-megawatt (MW) wind power plant to prepare the basis for further investment in the sector, while at the same time mitigating the potential risks of future commercial investors. The project follows a comprehensive UNDP two-year study on wind potential in the Jungar Gates region of southeastern Kazakhstan, an area identified as having one of the highest wind potentials in the world. UNDP estimates the country’s wind energy potential at 1,820 billion kilowatts per hour (KWh), making it particularly promising.  If the government could achieve its goal of supporting 500 MW of installed wind power capacity by 2030 (producing 1.8 billion KWh annually), a reduction of 1.7 million mt of CO2 emissions, 10,000 mt of SO2 emissions, 5,000 mt of NOx emissions, and 10,000 mt of volatile ash emissions compared with coal-fired power plants, was possible. The cumulative impact of the new 5-MW pilot project will be a decrease of 400,000 mt of CO2 over 20 years.


New Zealand opens wind farm


December 10, 2004. New Zealand PM is to open Te Apiti, the largest wind farm in the Southern Hemisphere. Te Apiti will provide enough competitively priced power to meet the needs of 32,000 households. This is an exceptional site for a wind farm. It is expected to be able to supply power for over 40 per cent of the time, compared to the 20 to 30 per cent which is the norm for wind farms internationally. New Zealand and Meridian is at the forefront of its development. Generation from wind has grown fourfold this year - from 40 to 160 megawatts - by the end of the year to April, and there will be more coming.


First wind power unit in Kansas


December 12, 2004. PPM Energy, a U.S. subsidiary of ScottishPower, is building its first wind power plant in Kansas. The Empire District Electric Co. announced that it has signed a 20-year contract with Portland-based PPM to purchase the energy generated at the 150-megawatt Elk River Windfarm in Butler County, Kan. Empire based in Joplin, Mo., anticipates that it will purchase approximately 550,000 megawatt hours of energy annually from the project.


Registered with the Registrar of News Paper for India under No. DELENG / 2004 / 13485


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[1] Compared to 2.4 per cent global growth rates

[2] R B Grover. 2001. Nuclear Power & Sustainable Development. IAEA Side event. 19 April 2001. 

[3] Smil, V. 2003. Energy at the cross roads. MIT press

[4] Ibid.

[5] Bhoje, S.B. 2002. Prototype Fast Breeder Reactor. An International Journal of Nuclear Power. V. 16. N.12

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