MonitorsPublished on Jan 26, 2010
Energy News Monitor I Volume I, Issue 32
Energy Injustice in India: Hiding Behind Poor (part IV)

Continued from Volume VI, Issue No. 31…


Sustainability of centralised supply system and conventional power plants


nherent with a grid based centralized generation system are the need for long lengths of transmission lines, complex network of distribution systems, and the associated equipment such as transformers.  Each of these add to the complexity, reduced reliability and increased capital & operational costs. Such centralized generation systems also need huge organizational structure with large manpower leading to human resource issues.  These centralized generation systems also are found to be economical only with large size power plants and concentrated loads.  But Indian villages are wide spread and cannot provide any substantial loads individually as in the case of towns and cities.  Large size power plants, whether they are fossil fuel based or dam based, also demand a lot of societal resources such as precious lands, water, coal, construction materials etc. They also lead to large scale displacement of villagers and tribals, and generally lead to their impoverishment as has been experienced in our own country.

While the centralized generation systems provides direct employment to a minute section of the society; leads to increase in GDP of the country; and provides for high per capita consumption of urban rich, it has also consumed a lot of country’ natural resources and capital, and heavily impacted its environment.  Whereas the installed generation capacity of the centralized electricity generation system and the per capita consumption of urban masses has been increasing phenomenally, the rural populations have been deleteriously impacted by such a ‘DEVELOPMENTAL PROCESS’ in the form of loosing their natural habitats and livelihoods, but they have not been adequately benefitted from it.

Almost all of the present generating capacity, except for few captive power plants and recently added non-conventional energy sources, are of centralized generation in nature and are connected to the grid. Most of them being in public sector, there is a serious case of low efficiency. Electricity generating plant capacity utilization has been poor due to various reasons: system inefficiency, inadequate supply of coal and gas, failure of monsoons for water supply etc.  National average of plant load factor (PLF) of coal based power stations is said to be about 74% as against best practice of about 95%. This efficiency gap alone, if bridged, can provide tens of thousand of additional power at no great additional cost. Himalayan hydel plants are facing frequent shutdowns because of higher silt loads than that has been designed for. Nuclear power plants, which have also been established at huge costs to the society, have also not lived upto the expectations with low plant utilization factor and fuel supply shortages.

Though these conventional centralized generation plants have been established at huge costs to the society, they have not served the rural population well, who have borne most of the burden of such plants associated with economic, social and environmental aspects.

The centralized generation/distribution model has inherent problems attached to it in terms of equity also. In a case of power shortage it will be the rural poor that are going to suffer. It is the electricity at the end of the chain that will get shut down. The concept of LIFO is what is prevalent at the moment. The poor is the last to get power (Last In) and the first to get shut out of power (First Out). Clearly the present model is not the best way forward in any welfare society.

Grid based centralized generation systems have fossil fuel based and dam based power plants at their core. These plants are increasingly being seen as un-sustainable.  With fast depleting coal reserves, unacceptably high levels of import of petroleum products; and social & environmental issues associated with large dams such conventional power plants cannot be in the long term interest of the society. There is already a strongly emerging international opinion that the GHG emissions should peak latest by 2015, and thereafter should decrease sharply in order to mitigate the Global Warming.  Hence the fossil fuel based and dam based power plants supported by grid based centralized electricity supply systems cannot be seen as a sustainable option; certainly from rural perspective.

Whereas the grid based centralized generation system has failed to meet the basic energy needs of the majority of the country’s population, who are living in rural areas, few recent initiatives in the private sector to provide electricity to un-electrified villages through stand alone community based non-conventional energy power plants fed by bio-mass OR wind OR solar OR micro-hydel power have established that they are the appropriate solution to the energy requirements of most sections of the country. The major advantages which are associated with these alternatives are the shorter gestation periods, low societal impacts, and their immense suitability to rural needs.

There is clearly an urgent need for a paradigm shift in our energy policy: instead of blindly adding millions of MW of additional capacity based on conventional power sources and centralized power supply system, we need to adopt an ‘integrated energy resource management’ approach which will have renewable energy sources and decentralized supply systems at its core.

There are growing  indications that in view of the huge societal costs associated with economic, social and environmental aspects of grid based centralized generation system of conventional power sources, the decentralized electric supply systems based on renewable energy sources are hugely economical in the long run.  They are found to be the best option for the accelerated electrification of smaller loads and rural house holds.

Decentralised electricity supply systems – the only logical option ahead

As compared to grid based centralized generation system, the distributed/decentralised electricity supply systems based on renewable energy sources such as solar, bio-mass, wind, micro-hydel etc. are getting widely recognized as much better options to meet much of our legitimate energy needs, especially of rural population. In order to provide reliable electricity supply for the development of rural masses early there is no alternative but to replicate the success stories mentioned in this study on a wider scale. 

Such an approach will provide many other sustainable benefits:

·       Provide a sustainable, environmentally and people friendly energy supply model;

·       In the short term to medium term it will drastically reduce the need for additional fossil fuel based, dam based power stations and the associated transmission & distribution network; in the long term it is likely to lead to eliminating the need for fossil fuel power plants altogether;

·       Will greatly reduce the burden on the grid based power supply system, drastically reduce the T&D losses, and vastly improve the power supply to those consumers essentially needing the grid supply;

·       Will assist in drastically reducing the GHG emissions, and enhance the country’s image as a responsible global leader;

·       Will accelerate the rural electrification due to shorter gestation period of individual projects;

·       Will lead to increase in rural employment opportunities, and hence in minimizing urban migration;

·       Will provide the rural people a good control of their energy sources.

In summary, an objective overview of the electricity scenario in the country provides a sad picture of electricity injustice of huge proportions, which is not leading to the welfare of the rural communities.  Unless urgent corrective measures are taken to set right this injustice the overall development of the country will greatly suffer, while accelerating the addition of GHG emissions against our own national as well as global interests.

to be continued…

Views are those of the author

Author can be contacted at [email protected]



Energy in India’s Future: Insights (part –XVII)

Jacques Lesourne and William C. Ramsay*


Continued from Volume VI, Issue No. 31…


Exploration and production sector


xploration and production (E&P) of oil and gas in the economy is dominated by state-owned enterprises, although the government has taken steps in the recent years to deregulate the hydrocarbons industry and encourage greater private/foreign involvement. India’s state-owned Oil and Natural Gas Corporation (ONGC) is the largest oil company, and also the country’s largest company overall by market capitalization. Government of India’s holding after issuing of shares in ONGC is 74.1%.32 ONGC is the dominant player in India’s upstream sector, accounting for roughly three-fourths of the country’s oil output during 2006 followed by Oil India Ltd (OIL), another GoI owned company (Table 25). In order to boost hydrocarbon explorations in the country, the Government of India introduced a New Exploration Licensing Policy (NELP) in the year 1997–98. The main objective of the NELP is to attract the latest technology and investment in exploration from national or international E&P companies.33 Companies like Reliance, Cairn Energy, British Gas, Essar Oil, Videocon, Prize Petroleum (50% stake in Prize Petroleum is owned by a GoI-owned company, etc.), are engaged in the exploration and production (E&P) of oil and natural gas in the country. Of these, Reliance has discovered the most oil and gas resources in the deep waters of the Krishna-Godavari basin. The peak gain from the two fields is expected to be around 9,400 b/d and the gas production, 2.7 mcm/d (million standard cubic meters per day).

India’s search for reliable supplies of oil and gas from abroad has motivated her to acquire equity stakes in E&P projects overseas through overseas investment arms of National Oil companies. ONGC’s subsidiary ONGC Videsh is the most significant of them, as discussed earlier (see Box 1, previous issue 31).

Table 25. Major corporate crude oil and natural gas production in 2007 (in Mtoe)

Source: Modified from Ministry of Petroleum and Natural Gas (MoPNG),

Refinery sector

The refinery sector has seen significant development in terms private sector participation. By the end of March 2007, two private players, Reliance Refinery at Jam Nagar, Gujarat (operating since 2000) and Essar Oil Limited at Vadinar, Gujarat (operating since November 2006) owned nearly 22% and 7% of the total installed capacity (149 million tons) in the country respectively. India’s share in refinery installed capacity was 3.4% of the world total in 2005. Due to significant capacity additions in the refinery sector, India is a net exporter of petroleum products since 2002. Exports mostly come from private refining capacity in Gujarat, initially launched by Reliance but with a presence of foreign companies as well (Total, Shell …). But a new geographical location is now developing on the eastern coast and the city of Visakhapatnam (i.e. a project led by Total in technical partnership with Mittal Steel). An incentive for investment in export-oriented refinery capacity is maintained through a differential tariff regime. Tariffs on imports of petroleum products are higher (10%) than crude imports (5%) which translates into an effective rate of protection of 40% for the refinery sector.

Retail marketing sector

Finally, oil products are sold to the public at large through an extensive retail network run by three major companies owned by the federal government. Private entry in this sector has been limited because of the complex pricing regime in place. Prior to the dismantling of the administered pricing mechanism (APM), effective from April 2002, the government had an oil coordinating committee responsible for maintaining an oil pool account. Under the oil pool, certain petrol products like aviation turbine fuels, petrol and diesel were priced higher to cross-subsidize kerosene, LPG and naphtha. However, it was decided to subsidize directly the supply of kerosene and domestic LPG. The oil marketing companies (OMCs) were to adjust the retail selling prices of the other products in line with international prices during this period. However, in compliance with government directions, the OMCs did not make adjustment in prices of kerosene and domestic LPG, resulting in substantial losses on these two products. With the sharp rise in prices at the international level, the burden of subsidy on PDS kerosene and domestic LPG ballooned to 250 billion rupees (around 5 billion euros). In addition to this, the government took back the control of price setting for petrol and diesel, and restrained the “pass-through” of the international prices to domestic consumers.

Issues and prospects

The oil and gas sector is vital in determining the environmental and economic sustainability of the country, as it is increasingly a place for corporate moves. Given the structure of national resources, the sector can hardly be de-linked from India’s diplomacy and the policy challenges in terms of operation, planning and coordination with social and environmental programs. There is most certainly a need for progress on several fronts:

·          A better public-private coordination in infrastructure planning, operations and retailing in the commercial and residential markets for oil and gas. As the public sector will not be willing to abandon its role, there has to be a way to establish joint-ventures between the public and private sectors.

·          There is a need for a multi-modal, multi-energies agency at least in the rural sector, where the public companies would be called upon to revise their tariff, subsidy structure, and mode of governance with locally elected structures.

As in many other sectors, a need for “islanding” of reforms according to the nature of the economic environment and purpose of use of energy is increasingly needed in a country which does not have a completely unitarian state structure (see Ruet, 2005, and Hussain and Ruet, 2006).

Electricity sector

Under the Constitution of India, electricity is a joint responsibility of the Central and state governments: with policy being the prerogative of the former and the latter enjoying the right to operate the sector. This industry evolved as a vertically integrated industry under the ownership of the State Electricity Boards (SEBs) and electricity departments in every state of India. They virtually owned every generation, transmission and distribution asset. Slowly these SEBs began to be used as political tools by the respective state governments (Dubash and Rajan 2001). Politicians in government usually reduced tariffs for agricultural and domestic consumers without any earmarking of how much subsidy had to be paid by the government to SEBs. As a result of this SEBs soon faced financial losses. Due to these problems, the World Bank helped India create National Thermal Power Corporation (NTPC) and National Hydro Power Corporation (NHPC) during the second half of the 1970s under the ownership of the Government of India. SEBs were expected to buy power from these companies. After the creation of these companies the World Bank has always funded projects through these organizations. The idea was to make SEBs pay for every unit of power they needed. The end result of such policy was that SEBs continued with ever increasing losses because under the above mechanism there was nothing that made state government responsible for the financial viability of the SEBs. On the other hand the NTPC continued earning profits along with capacity growth. In India, this distorted the real situation from the original intentions of the Constitution, to the advantage of the central government. Today the NTPC is the most dominant player in the power generation market of India. A part of its installed capacity growth was due to asset transfers from the SEBs in cases of default. In 1989 Power Grid Corporation of India Ltd. (PGCIL) was incorporated under the ownership of the central government to coordinate the interstate transfer of electricity. In the early 1990s, comprehensive reforms in the electricity sector were initiated, which allowed private and foreign investment in almost every segment of the industry. As a part of the reforms many SEBs were unbundled vertically as well as horizontally. Orissa and Delhi went to the extent of privatization of distribution assets. As a result of this, significant generation capacity was added by the private sector, though not as much as expected (24% of the total Installed capacity as of 2008). The future step in reforms is to have a spot market for electricity. The total installed capacity of electricity generation was 157 GW for the year 2006–07. The majority of the electricity generated came from coal fueled thermal plants (72%). Electricity consumes 73% of the total coal produced in the country. The next important contributions to electricity generations come from hydro plants (14%), followed by gas fuelled plants (10%) and the rest (4%) comes from diesel, nuclear and renewables.

The electricity sector is faced with shortages. Peak and energy shortages for electricity in 2006–07 were estimated to be 14.8% and 8.4%, respectively. This has forced many industrial units to build generation capacity for their own needs. In addition to this many households do not have access to electricity. According to the latest information available from the Census of India, 44% of the houses were yet to have electricity in their homes in 2001.

The evolution of the sector can best be understood in the larger terms of the struggle between the federal and the state levels. As electricity has seen the largest systemic changes, we examine this sector more closely.

Retreat of the federated states’ public sector or comeback of the Government of India?

In the face of the factual preeminence of the States, an attempt by the Center to regain the upper hand started right from the 1980s. The creation of the National Thermal Power Corporation and of the National Hydro Power Corporation (NHPC), a hydroelectric production company, the set-up in 1992 of Powergrid as a “Central Undertaking” for developing interconnections between the States and building a single national network out of the five Indian electrical regions, reinforced the Government of India in the direction of the earlier near-monopoly previously held by state governments in implementing electricity policies.

This come-back of the Center has been very successful. Since in 2008, it controls 32% of the generation (as against 64% for the SEBs and 4% for the private sector up to 1999). Power Finance Corporation—created as a public body in charge of financing projects for the SEBs outside the classic public investment financing systems—has established some conditions on loans aimed at institutional reforms, along with a system of control over their implementation.

In this context, to what extent can the recent evolution in this sector be explained by the influence of the forces internal to India and to what extent are they due to the external pressure exercised by lending organizations?

In 1991–92, the Government of India decided to open up the generation of power to private investment, including foreign investment. The Center having acquired greater control over generation than it had over the transmission and distribution networks, found it simpler and quicker at the time to open up generation alone. Moreover, this enabled it to avoid entering into a debate over the matter of a public service on a network enjoying a status of natural monopoly at the level of the federated states. Regulations guaranteed a 16% rate of profit to independent producers, as against the earlier regulation of 3%. Despite that, out of the 20 GW hoped for from the private sector by the Planning Commission for the Eighth Plan (1992–97), only 2.7 GW were added. However the question is not always just of regulation, but also of technological and investment choices.  The reports by the Planning Commission, as well as experts’ analyses have long lamented that investment choices by the public sector tend to favor the construction of new power plants to a better maintenance or restructuring of existing infrastructure. There has been little economic assessment of this untapped potential, except for calculations elsewhere (Ruet, 2006a). We calculated the compared internal rate of return of rehabilitation projects (transmission, plant load factor, reduction of losses, and so on) vis-à-vis generating capacity addition (Table 26).

Table 26. Profitability of alternative strategies to bridge the energy gap (%)


Internal rate of return (%)



Actual tariffs


With tariffs increase (average tariff to cover costs)


Actual tariffs

New plants




Mixed strategy

– 45% New plants

– 55% Correction of Plant Load Factor of existing plants




Mixed strategy

– 30% New plants

– 70% technical losses improvement




Elimination of nontechnical losses




Even at then current subsidized tariffs, and even at an early stage of reforms (1997), rehabilitation strategies were economically more viable than capacity addition; an adjustment in tariffs would have made them quite profitable. In 2002, after subsequent tariff increases had happened these measures would have still been profitable… simply because the objective situation of the network had worsened and the potential for better management had widened. Retrospectively, one can even see that a regulatory regime based on tariffs covering costs has been detrimental to genuine incentives to lower the cost structure (siddigui 2007).

Indeed, what can be considered as a second phase of the reforms, initiated in 1995, brought out unexpected results on the relations between the Center and the States. In 1996, the Chief Ministers of the States and the representatives of the Government of India met and it was decided that the States which so desired, could also open up transmission and distribution to private investors. It was also agreed in principle that a Central Electricity Regulatory Commission (CERC), and a State Electricity Regulatory Commission (SERC) would be created, independent of governments. This agreement did not yet fix the modalities for the setting up of these Commissions nor their attributions. It is notable that while the conference was encouraged by the World Bank and while it marked symbolically the turning point in the “globalization” of the sector, the Government of India organized it at a time when it was experiencing no particularly pressing financial problem, and was not bound by any loan conditionality. As for the States, a former Joint Secretary for Power, acknowledged during a conversation that the Chief Ministers did not really feel greatly bound by this declaration, which opened up a possibility of an inflow of private capital but without specifying the constraints it would bring on the Commissions. A legal Act has finally established the creation of these Commissions in 1998.

This opening up to private capital and disengagement of the States has several advantages for the Center. It is, in the last resort, the financial guarantor of the States, and the burden of public investments in deficit sectors is considered too heavy today as compared to the small operational control that it exercises over them. This absence of control proceeds from two factors. Firstly, the tariff and redistributive policies appear ill-adapted to the objectives of the Center, the subsidies going more to the rich farmers than to the poor peasants, whereas the social cost of the sector is large since a not negligible share of the budget transfers is used up by the power sector at the expense of direct social programs. Secondly, the use of the sector for local electoral ends does not bring it any direct advantage at the Center level and even works against it keeping in mind the fragmented political situation in India. That is why the Government of India has extended to all the generators, and therefore to itself, the possibility of formulating tariffs on the principle of a profitability of 16% of the assets and imposing cuts on the SEBs which are bad debtors. The effect has been to place its company, NTPC, acknowledged moreover as being technically efficient, in a favorable situation. This has also resulted in accentuating the financial pressure on the SEBs and therefore the pressure exerted by the Center on the States, thus forcing them to undertake reforms. The States on their part have tried to oppose the views of the Center concerning the Regulatory Commissions, and the Electricity Regulatory Commissions Act which were adopted in 1998 without fixing a minimal tariff (but while maintaining most of the other characteristics, which by itself constitutes a forward thrust by the Center). The Commissions have since 1998 gradually been set up in most of the States.

Ultimately, only Orissa (in 1999) and Delhi (in 2002) have undergone privatization of the distribution of electricity. Both experiments have shown that improvements are longer to come than anticipated.

To conclude on privatization of distribution, a “privatization market” is still missing: such a market implies buyers and sellers.  India is constituted with an important enough number of States, to have a number of sellers (the States who potentially, sooner or later, will be willing to privatize) as well as potential takers. But the privatization of utilities in India suffers from two drawbacks:34

·       The privatization market is currently not large enough on the demand side (there are not enough private takers for SEBs), especially because high risks are perceived: hence the risk of (negative) competition among States,

·       The market is not a single market and is actually segmented between “relatively privatizable” and “less privatizable” SEBs. One SEB cannot be straightforward compared to another, and there are few learning mechanisms that may produce standard information available to every market player. Hence the risk of “undervaluing” SEBs, as well as not to bring enough new takers, which reinforces the first drawback for a durable timeframe.

Table 27. The feasibility domain of management contracts and privatization

Source: Ruet (2005).

No single solution can fit Indian states’ diversity. We have suggested elsewhere (Ruet 2005) the following approach. If one crosses these two parameters, income and governance, four subcases appear in this very simple stylization (Table 27).

·       When both governance and income are high, everything is feasible once well-defined. The state can choose according to the trade-off described earlier, between early privatization and higher selling value.

·       When the income is high and the governance low, the board is economically attractive and a privatization is in a sense more secured for the private sector as there is no risk that a poor governance ultimately hijacks it from its efforts and investment (this case may have been the scenario in Delhi).

·       When the income is low, though the attractiveness is low, a management contract can bring reasonable income to a contractor if governance is high. In these States, management contracts should be favored (Andhra Pradesh might be an example of this, though it rather wanted to privatize its SEB).

·       When both income and governance are low, the situation is problematic. If the income is too low, the investor is not interested in a privatization, for there is nothing to secure that way. Still, a management contract will remain the only feasible solution, while offering low credibility because of the low governance. On these states, the support of the central government will be essential. Orissa is in one of the two latter categories, depending on the assumption made on its level of governance; in both cases, sticking to a well-defined management contract would have been better.

This model is designed for a state; however, it can be considered that its recommendations do not depend upon the geographical scale of the area it is applied to.

Identifying new trends and potentials

The Future: Business models and urban models

This section flags some issues that are still partly open for research, but where significant experience has nonetheless been gained to attest the industrial and urban potentials of new modes of organization around energy.

India today is a laboratory for the kind of linkages it shows as well as new trajectories it attempts or deploys. By definition, these are not stabilized and we cannot venture into prediction. But rather we’d like to illustrate the dynamism of questions and solutions around energy issues through a few examples in which we believe there is the potential for a trend. We start with examples of energy-focused companies developing their own markets by bypassing (regulated) networks and either developing large generation capacities to directly access industrial customers, or with a more decentralized series of strategies, trying to tap a large potential of individual or collective (housing societies) consumers. We then provide a variant of this with the—somehow generalizing—case of industrial companies diversifying into the energy sector. We then continue with smaller, very decentralized, sometimes micro-financed models. We ultimately survey some feedback effects: in size, at the level of the metropolis; in infrastructure conception, with the example of water-energy linkage.

The making of a ‘sector’? The private energy company as a new player in India

Reliance Energy may be the group which has made the most fantastic leap, quite apart from its oil discovery. From a small electricity group in the 1990s (earlier listed as Bombay Suburban Electric Supply, then acquired by Reliance Industries), it went on to become a prime investor. Its most recent projects in conventional electricity amount to 12.5 billion euros, including a thermal plant of an installed capacity of 12 GW (for 8.5 billion euros) that will be the largest coal plant in the world (the group is familiar to this strategy: its refinery was built as the largest in Asia, by that time by itself outstripping total national demand). Other significant investors in the sector are TATA, GVK, GMR, ESSAR (coal and gas) or Jaiprakash (hydel). As foreign companies go, contracts are substantially smaller35. In the 1990s, the dominance of NOCs has gradually been reduced. In the upstream segment, there is a growth of private domestic players like Reliance Industries Ltd. (RIL), which is a national entity, regional players like Essar, Gujarat State Petroleum Corporation Ltd. (GSPCL) and foreign firms, who usually venture into this segment through strategic alliances. In the downstream segment, NOCs like IOC, HPCL and BPCL are facing competition from private players like RIL, Essar Oil and Shell. The presence of the private sector in the refining segment has been established with RIL setting up a 27 million metric tons per annum (mmt/a) refinery (expanded to 33 mmt/a) at Jamnagar, Gujarat. This presence would increase with the proposed commissioning of the 10.5 mmt/a Essar Oil refinery at Vadinar coupled with future expansion plans of Reliance (Chemtech Foundation 2004). In the marketing sector, apart from existing firms, the government has granted marketing rights to other firms for opening retail outlets, including ONGC, Numaligarh Refineries Ltd. (NRL), Shell, Reliance and Essar Oil since they satisfy the criteria. In the case of the transportation and distribution network, public firms are going in for expansions and extensions of their existing pipeline network, while private firms, like RIL are laying new product pipelines. GAIL is maintaining its dominance in natural gas distribution with its plans to lay approximately 7,900 km of pipelines over the next 5–6 years, forming the National Gas Grid. RIL is also working on developing its 95-pipeline network for transporting the gas produced in the Krishna-Godavari basin, besides also linking areas where it is exploring gas to its Jamnagar refinery. Further, joint ventures have emerged to distribute gas to specific cities (e.g. Mahanagar Gas, a joint venture between GAIL and British Petroleum for Mumbai; and Indraprastha Gas, a joint venture between GAIL with BPCL for Delhi). Other joint ventures have also been formed through public-private holdings. Petronet LNG is one such holding company formed for importing LNG and for investing in companies involved in specific pipeline projects36.



33. Until the year 2008, 110 blocks have been awarded under five rounds of NELP bidding. Fifty-five blocks have been offered under NELP VI round of bidding. The seventh round of NELP is also in progress with 57 blocks on offer.

34. For a detailed analysis, refer to Ruet (2006) and Ruet (forthcoming).

35. To give just an example, Alstom recently gained an order of 175 million euros from Gujarat State Electricity Corporation (GSECL), representing 370 MW. A smaller, independent French renewable generator, Velcan Energy, announced in 2007 a contract for the concession of two hydropower plants totalling 50 MW.

36. This paragraph draws from Deepa Menon-Choudhary and P.R.Shukla; see footnote above.


* Editors


to be continued…



Note: Part V of the article on Oil & Gas Discovery & Production in India: Historical Milestones, part XIII of the article on Gas in India – Issues, Opportunities and Challenges will be published in Volume VI, Issue 33






ONGC approves D1 spend

January 26, 2010. Oil and Natural Gas Corporation (ONGC) has set aside 21.6 billion rupees ($470 million) for the integrated development of D1 marginal field off Mumbai.  The projected output for D1 field is 36,000 barrels per day from the financial year of 2012 to 2013, ONGC said in a statement. Construction on the D1 development is expected to take 27 months to complete from the date of a contract award.  Upstream has earlier reported the national oil company is set to issue formal tender documents for the charter of a floating production, storage and offloading vessel during the first half of this year to develop the D1 field. The FPSO charter is expected to last for five years.   In addition to the D1 development, the board of ONGC has also approved a 7.2 billion rupee budget for the acquisition of a newbuild multi-support vessel. The MSV is due for delivery in September 2012. ONGC now owns two MSVs and operates two other chartered units.

NTPC to bid for gas blocks with ONGC

January 24, 2010. Power producer NTPC is keen to bid for gas blocks in India and abroad with Oil and Natural Gas Corporation Ltd as partner.  ONGC would help the firms take on the competition from global players, especially the Chinese firms. ONGC has recently lost a bid to a consortium led by China National Offshore Oil Corporation for Hassi Bir Rekaiz acreage in Algeria’s latest licensing round.  Earlier, ONGC Videsh Ltd — the overseas arm of ONGC — was outbid by a consortium of China National Petroleum Corp, Petronas Cargali of Malaysia and France’s Total for the Halfaya oilfield in Iraq’s second post-war bid round.  The explorer is planning to bid for Indonesia’s 24 new oil and gas blocks, six blocks across New Zealand’s Reinga Basin and others in Africa and Latin America. In Nelp VIII, the PSU power producer had joined hands with ONGC to win two shallow water blocks.

Essar Oil to invest $400 mn in Ranigunj gas project

January 21, 2010. Essar Exploration and Production Ltd, an arm of Essar Oil, will invest $400 million (Rs 20 bn) in its coal bed methane gas project at Ranigunj in West Bengal by 2012.  The company has got another block in Rajmahal in Jharkhand.


SVL to set up 10 mt oil refinery in Malaysia

January 23, 2010. SVL Oil and Gas SDN BHD Malaysia, an associate company of the Chennai-based SVL Engineering Group, plans to set up a 10-million tonne per annum refinery in Malaysia, with an investment of Rs 170-180 bn.  An agreement was signed between SVL and the state of Perak in Malaysia, in the presence of the latter’s chief minister, Zambry Bin Abdul Kadir. The refinery will be built in 36-42 months and will be commissioned by mid-2014.The project will be implemented in three phases – the study stage will commence immediately, the detailed engineering and commissioning work would happen in the second phase and expansion of the refining and addition of petrochemicals would happen in the final stage.

IOC seeks govt help for Iran share

January 22, 2010. State-owned Indian Oil Corporation (IOC), the country’s largest fuel retailer in terms of volumes, has sought the government’s intervention to participate in $12.5billion Iranian projects as a third partner in the ONGC-Hinduja group consortium. Iran has offered a 40% interest to ONGC and the Hindujas for developing the $7.9-billion South Pars phase-12 field and a 20% stake in the $4.5-billion liquefied natural gas (LNG) terminal project with a commitment to supply minimum 6 mt gas annually to India. The South Pars-12 field has over 35 trillion cubic feet of proven reserves, about two-and-a-half times the reserves of RIL’s KG-D 6 block.

Transportation / Trade

Take up jet fuel pricing with Oil Ministry, House panel tells Nacil

January 26, 2010. The Parliamentary Standing Committee on Transport, Tourism and Culture has recommended that National Aviation Company of India, the new company created through the merger of Air India and Indian, take up the issue of aviation turbine fuel (ATF) pricing by oil marketing companies (OMCs) with the Ministry of Petroleum and Natural Gas. The Committee, which submitted its report, was informed that the ATF prices without sales tax were 17 per cent costlier here as compared to international prices due to the pricing mechanism being followed by the OMCs. Domestic airlines often complain that the high ATF prices were one of the primary reasons for the huge losses reported by the industry. The Geneva-based International Air Transport Association (IATA) had estimated that the Indian aviation industry is likely to post a loss of about $$1.5 billion during 2009. The report adds that the Committee sees “no reason” as to why aviation turbine fuel should be given ‘declared good status' at this point of time.

LIC buys 1.69 pc stake in Essar Oil

January 23, 2010. State-run life insurance company, Life Insurance Corporation bought 1.69% stake in Essar Oil, an integrated oil and gas company for an aggregate of Rs 2,800 million. It bought a total of 20 million shares of the company at the rate of Rs 140 a share on the National Stock Exchange (NSE).

Oil product sales up 2.7 pc in Dec

January 20, 2010. Growing demand saw domestic oil product sales rise 2.7 per cent year-on-year in December 2009. However, crude oil imports fell marginally by 0.3 per cent. Oil product imports dropped 36.5 per cent during the month.

According to the Petroleum Planning and Analysis Cell industry performance analysis (provisional), oil products sales rose to 11.885 million tonnes in December from 11.567 mt in the same month of the previous year.  Diesel sales jumped 13.5 per cent to 5.036 mt.

Petrol consumption rose 18.9 per cent to 1.105 mt. Import of oil products fell to 989,900 tonnes. This was because of expansion in local refinery capacities. Crude oil imports marginally fell to 10.433 mt. Oil product exports dropped 10.7 per cent to 2.408 mt.

Policy / Performance

Haldia to reopen by Jan-end with higher capacity

January 26, 2010. Haldia Petrochemicals (HPL) is all set to reopen by month-end, after a closure of almost three months, with higher ethylene capacity.

The company had to shut down the naphtha cracker plant in November last year to commission the Rs 12.3 bn Project Supermax, which is aimed at increasing the ethylene capacity from 5.2 kilo tonne per annum (ktpa) to 6.7 ktpa.  

The profitability of the company has taken a hit in the period November 2009 to January 2010 due to the closure of the plant. In this period, HPL has made a trading profit of Rs 20 mn by selling polymers which it had imported from Japan and Korea.

India plans new refinery for Port Harcourt

January 26, 2010. What may perhaps be a long sought for solution to perennial fuel scarcity in Nigeria may be in the offing as India unfolded high level interest in partnering with the federal government and other stakeholders in the development of the nation’s oil and gas sector. 

Minister of Oil and Natural Gas of India, Shri Murli Deora, who disclosed this when he led a delegation of oil and gas investors and operators in the Indian energy industry on a visit to the Minister of Petroleum Resources, Rilwanu Lukman, in Abuja, said the country is ready to avail its world class refining capacity to Nigeria for her refineries.

Mr. Deora said India, which has been involved in the operation and maintenance of the existing Port Harcourt Refinery in the last 15 to 20 years, is already planning the construction of a new refinery in the area, adding that feasibility studies have been completed.

GST: Centre, States differ on taxing alcohol, petro goods

January 25, 2010. The Centre has rejected the States' suggestion that alcoholic beverages may be kept out of the purview of proposed Goods and Services Tax (GST) system. The Revenue Department has taken a stance that alcoholic beverages should be brought under the purview of GST and that the State excise duty can be charged over and above GST.

The Centre has also rejected the States' proposed move to adopt a two-rate structure. There should be a single rate of SGST both for goods and services. There should be one CGST rate both for goods as well as services, the Revenue Department has said.

Another important area where the Centre and the States now have a differing stance is on the levy of GST on petroleum products. The first discussion paper of the States suggested that sales tax continue to be levied by the States on these products with prevailing floor rate.

However, the Revenue Department in the Union Finance Ministry has said that petroleum products may be levied to GST and in select cases credit of GST paid on these items may be disallowed in order to minimise the possibility of misuse.

Deora on an energy hunt to Africa

January 24, 2010. In order to provide a boost to India's attempts to acquire energy security, the Petroleum Minister, Mr Murli Deora, is visiting four nations - Nigeria, Angola, Sudan and Uganda. The Minister's visit gathers significance in the backdrop of the recently-concluded second India Africa Hydrocarbons Conference at New Delhi.

At the conference, the Minister had expressed the intent of Indian companies to source Liquefied Natural Gas (LNG) as well as equity participation in existing and upcoming LNG terminals in Africa. 

Mr Deora described India as a “stable, long-term and growing market for Africa's natural gas,” at the conference, and declared that Indian companies were “interested in sourcing LNG as well as equity participation in existing and upcoming LNG terminals in Africa.”

Oil companie asked to double gas production in 5-years: Minister

January 22, 2010. Indian oil companies have been mandated to double their gas production in the next 5-years, a Central Government Minister said. "They (oil companies) have been mandated to double their gas production in the next 5-years which would require extensive investment in processes and technologies," Minister of State for Petroleum and Natural Gas, Jitin Prasada, said.  Prasada said that the Government's thrust was on boosting availability of energy resources indigenously.

Accordingly, the total sedimentary basin area to be brought under exploration coverage is targeted to be increased to 80 per cent during the current Five Year Plan period, he said. "In addition to oil and gas exploration, India has initiated steps towards exploration of alternative sources of hydrocarbons like coal bed methane and underground coal gasification," the Minister said.

CAG wants govt to force Cairn to open its books

January 21, 2010. The Comptroller & Auditor General of India, country’s statutory auditor, has sought government intervention to access financial records of Cairn India-operated Rajasthan oil fields. It has not yet received records of Cairn’s Barmer oil fields (RJ-ON-90 /1) for auditing.

The government had asked CAG to look into accounts of all energy firms producing oil and gas in the country last year after Anil Ambani-led RNRLalleged that Reliance Industries (RIL) was inflating capital expenditure on KG-D 6 to make unjustified profits.

Cairn India has contested that such an audit by CAG. Under the production-sharing contract (PSC), audits of expenditure on the Rajasthan block RJ-ON-90 /1 are already undertaken by the government of India and the director general hydrocarbons (DGH).

ONGC to shell out Rs 34.97 bn as fuel subsidy in Q3

January 20, 2010. ONGC will fork out Rs 34.97 bn towards auto fuel subsidy in the third quarter of the current fiscal. ONGC will bear Rs 34.97 bn of the Rs 43.61 bn revenue loss incurred by public sector oil marketing companies (OMCs) on sale of petrol and diesel at government-controlled price during the quarter.  While Oil India Ltd will share the burden of Rs 4.67 bn, GAIL (India) will bear Rs 3.97 bn for the third quarter of the fiscal.

ONGC, along with Oil India and GAIL, shares partial burden of the revenue loss incurred by the OMCs — Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation. The upstream companies and GAIL give discounts on crude oil and petroleum products they sell to retailers.

Govt plans new mechanism for fuel subsidy sharing

January 20, 2010. The Central Government will prepare a new mechanism for sharing subsidy on fuels. It will help public sector oil marketing companies (OMCs) and upstream companies such as ONGC, Oil India and GAIL (India) who suffer losses from selling fuel below market price. The government plans to implement the new mechanism by the end of this fiscal year.

The public sector upstream companies bear the burden of losses incurred by the three OMCs - Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation by selling petrol and diesel. The government subsidized the prices of fuel to control inflation.

The government had decided to compensate full losses incurred on the sale of cooking fuel, LPG and kerosene.  The finance ministry has agreed to give Rs 120 bn in cash for the fiscal to IOC, HPCL and BPCL. The amount is less than half of the losses they will incur on selling LPG and kerosene in the financial year 2009-10.



Private players to tap hydro energy

January 26, 2010. After throwing open thermal power generation to private players, the UP Power Corporation Limited (UPPCL) is mulling to repeat the act with hydro power as well. A decision to this effect was taken at a review meeting presided over by UPPCL chairman-cum-managing director Navneet Sehgal. It was decided in the meeting that various bunds and canals would be tapped for production of electricity.

The UPPCL has sought participation of Non conventional Energy Development Authority (Neda) and hydro electricity corporation. While Neda would be identifying 15 such projects, the hydro-electric corporation would be taking up 21 of them.

The canals which have been identified to have the potential to such projects include, Upper Ganga canal, Sharda canal, Hathnikund link canal, Rihand dam toe, Ramganga feeder.

Peak power demand to widen to 12.6 pc this year

January 20, 2010. The country's peak power capacity deficit is likely to widen to 12.6 per cent of the total capacity in 2010 up from 11.9 per cent last year, according to a survey findings of consultancy firm KPMG.

A report compiled by the KPMG's Global Advisory Practice team titled ‘Think Bric' notes that the electricity consumption in India, currently at 600 trillion kilowatt annually, is set to double by 2020, by then it will potentially surpass Russia's consumption levels.

To cater to the nearly double the current consumption capacity, the total generating capacity should jump by 90 giga Watt (90,000 MW) to 241 GW (241,000 MW). This could be with increased emphasis on nuclear, clean coal including solar and small hydel projects.

Transmission / Distribution / Trade

Dwarka gets a new grid station

January 22, 2010. Chief minister Sheila Dikshit inaugurated power discom BSES Rajdhani's fourth grid station in Dwarka. Besides improving the power supply situation in Sectors 12, 13, 17, 18 and 19 and adjoining areas of Dwarka, this Grid will also provide electricity to two private hotels that have been specially built to cater to the visitors for the 2010 Commonwealth Games.  

Other large customers who will benefit from this Grid include Guru Gobind Singh IP University, Delhi Jal Board Pumping Station and a mall. This state-of-the-art 66/11 KV Grid sub-station, has been constructed at a total cost of over Rs 140 mn, keeping in mind the present and future requirement of this fast developing sub-city. The Grid will have an initial capacity of 40 MVA (2x20 MVA), which will be expanded to 65 MVA over the next few months.

New Indo-Nepal transmission project on cards

January 22, 2010. The Central transmission utility Power Grid Corporation of India Ltd (PowerGrid) organised the second stakeholders meeting on the Indo-Nepal Cross Border Transmission Project here, and was attended by senior officials from Government of Nepal, Nepal Electricity Authority, Satluj Jal Vidyut Nigam Ltd. (SJVNL), Infrastructure Leasing and Financial Services Ltd. (IL&FS) and IPPs putting up hydropower projects in Nepal. 

The project consists of putting up an extra high voltage transmission corridor between Muzaffarpur in India and Dhalkeabar in Nepal and is the first high capacity cross border transmission corridor for bulk transfer of power between India and Nepal.

Two joint venture – one Indian and the other Nepal – companies will implement the Indo-Nepal Transmission Line project. PowerGrid, SJVNL, Nepal Electricity Authority and IL&FS are the stakeholders. The project, expected to be complete by year 2012, will be at an estimated cost of Rs.205 crore (Rs 2.05 bn) 

Policy / Performance

Highways minister delays Assam power project

January 25, 2010. Highways minister Kamal Nath may have been harping upon exceeding the target of laying 20 km of new roads in the country every day but his ministry has been dragging its feet since August 2009 over repairing a bridge in Assam, leaving state-run hydel utility NHPC stranded with vital equipment for a 2,000 mw project.

In a letter to surface transport secretary Brahm Dutt, power secretary Harishankar Brahma has said the bridge over Ranganadi river in North Lakhimpur district is vital for NHPC to move equipment for its Lower Subansiri project in Arunachal Pradesh.

The bridge is on NH-52, the only major road link with Arunachal. Since August 13, 2009, the bridge has been blocked for vehicles carrying more than 18 tonnes of load.

The equipment for the Subansiri project far exceeds this limit. NHPC has urged the highways authority to repair the bridge by April 2010 so that heavy equipment could be moved before the onset of monsoon.

NHPC also built a parallel bridge for general traffic so that movement of vehicles did not suffer while the original bridge was being renovated. Though the new bridge was completed sometime ago, the highways authority is yet to clear the proposal for restoration of the original bridge.

Proposed changes in Mines Act will not limit powers of States

January 22, 2010. The Union Coal Minister, Mr Sriprakash Jaiswal, indicated that the proposed amendments to the Mines and Mineral (Development & Regulation) Act would not completely deprive the State Government of its existing powers to allocate captive coal mines to user industries. This is in addition to adopting the auction route for allocating captive mines. According to him, the amendment bill would be tabled in the upcoming Budget session of Parliament.

The Coal Minister said that securing environmental clearances for coal mining projects had proved to be a major challenge to meeting the country's coal production targets. “Production targets cannot be met until and unless we get clearances in time. Consultations are currently on between the Union Ministry of Environment and Forests to resolve the issue,” he said.

UN certifies Adani's Mundra unit as first global project under CDM

January 21, 2010. The United Nations Framework for Convention on Climate Change (UNFCCC) has certified the coal-based thermal power project of Adani Power Ltd (APL) at Mundra, Gujarat, as the first Clean Development Mechanism (CDM) project in the world. 

APL's first super-critical technology-based upcoming project at Mundra has got this distinction from the UN body authorised under the Kyoto Protocol to register such projects after elaborate and stringent scrutiny.

Currently, APL is setting up 9,240 MW thermal power generation capacity, including 4,620 MW at Mundra, 3,300 MW at Tiroda (Maharashtra) and 1,320 MW at Kawai (Rajasthan).

Out of the total 9,240 MW capacity, more than 85 per cent is based on environment friendly super-critical technology. The first two super-critical units of 660 MW each at Mundra, which are expected to be commissioned in 2010-11, have received this distinction, a company spokesman said.

At present, sub-critical coal-fired power generation is the commonly used technology with no super-critical or advanced super-critical plants in operation in India. Super-critical coal-fired power plants are highly efficient compared to sub-critical ones.

Kashmir to fully tap hydro power

January 21, 2010. Keeping Jammu and Kashmir’s immense hydro energy potential in mind, the state is drawing up a comprehensive plan to put in place a three-track hydro power generation strategy and rope in investors in the field. The decision was taken at a meeting of senior government officials with the Himalayan Power Producers Association. The draft power policy will be placed on the internet in the public domain to receive suggestions, comments and views from experts and the general public in order to make the document comprehensive, holistic and befitting, a statement said. Under the three-tier power development programme, the power projects will be constructed in public-private partnership, inviting investment from outside and by the state government itself in the public sector.  The state has embarked upon gigantic programmes to double its power production in the next five years and add nearly 3,000 MW to the system in the same period. Currently, the state is generating 1,800 MW.

NTPC to get into LNG value chain

January 20, 2010. To mitigate fuel risks, NTPC Ltd plans to get into the liquefied natural gas fuel chain by leveraging the upcoming Dabhol LNG terminal. The country's largest power generator is also setting up a dedicated coal import cell within the organisation instead of routing it through external agencies such as MMTC Ltd for importing coal.

Besides plans to commence production from domestic coal blocks allotted to it by fiscal 2011-12, the state-owned company is also close to striking a coal block deal in Mozambique or Indonesia as a strategic move to boost fuel security. On the coal front, after experiencing delay in imports routed through MMTC, the company is developing expertise internally to source fuel from abroad. The Government had mandated State-run MMTC to import 12.5 mt of coal on behalf of NTPC earlier last year. The award of the tender, reissued at the end of August, faced delays, hitting production at some of NTPC's plants.

Ultra mega power plants on the anvil in Orissa, Chhattisgarh

January 20, 2010. The Power Finance Corporation will float RFQs (request for qualifications) for ultra mega power projects (UMPP) in Orissa and Chhattisgarh in the next 15 days, said Mr Sushil Kumar Shinde, Union Power Minister.  On the issue of Reliance Power winning three UMPPs, Mr Shinde clarified that there was no cap on bidding for more except that the company should complete at least one project before bidding for new ones. He said that 11,000 MW capacity addition had been achieved thus far in the current Five Year Plan of the targeted 78,700 MW.  He hoped that at least 60,000 MW would be added to the grid by the end of the plan in 2012. Mr Shinde said the Power Ministry was planning extra high voltage (765 kV) and HVDC (high voltage direct current) transmission corridors to transmit a large quantum of power from resource-rich areas such as Orissa, Chhattisgarh and Jharkhand to deficit areas in the North and the West.




KazMunaiGas sets sights on production growth

January 26, 2010. KazMunaiGas Exploration Production announced that in the full year ended December 31, 2009 it produced 11,497 thousand tonnes of crude oil (232 kbopd), which includes the Company's stakes in both JV Kazgermunai LLP and CCEL. This is 458 thousand tonnes, or 3.8% less than in 2008.  KMG EP's production from its core assets (Uzenmunaigas and Embamunaigas) was 8,962 thousand tonnes of crude oil (181 kbopd), 508 thousand tonnes less than in 2008. The decline was due to KMG EP's planned reduction in drilling and production in 2009 in a lower oil price environment. Production was also adversely impacted by severe weather conditions in the beginning of the year and interruptions in power supply in the first and third quarters of 2009.

Yellowglen yields gas in greater Gorgon Area

January 26, 2010. Chevron announced further exploration drilling success in the Greater Gorgon Area in the Carnarvon Basin offshore Western Australia. The well was drilled to a total depth of 9,050 feet (2,760 meters). Results indicate a gas column of approximately 450 feet (137 meters).   Chevron Australia is the operator of WA-268-P with a 50 percent interest.

ExxonMobil finds possible oil, gas in Philippines,

January 22, 2010. ExxonMobil Corp. found hydrocarbon in the waters of Tawi-Tawi in the southern Philippines, which could mean either an oil or gas reserve in the area.  ExxonMobil will proceed with the drilling of a second well after spending about $100 million for the first well.

Texas Wildcatter Moncrief hits latest Gusher Beneath old fields

January 20, 2010. William “Tex” Moncrief, the billionaire wildcatter and scion of one of the founding families of the Texas oil industry, is betting the key to finding new gushers is to go deeper than anyone has gone before. Moncrief agreed in September to help finance McMoRan Exploration Co.’s $70 million Davy Jones well off the Louisiana coast in exchange for a 10 percent stake in the prospect. The gamble paid off when New Orleans-based McMoRan said the well hit what may be one of the biggest Gulf of Mexico oil and gas discoveries in decades. Moncrief bought a piece of Davy Jones after being impressed by McMoRan’s success with a former Exxon Mobil Corp. well known as Blackbeard at a then-record depth of 32,997 feet (10,057 meters).


Permit for plastic-to-oil demo plant

January 25, 2010. Plas2Fuel is planning to build a small plant in Tigard, Ore., this year to showcase its technology that converts scrap plastic back into crude oil. The company has applied for an environmental permit. The plant will be able to produce just over a half-million gallons of crude annually, first converting the plastic to gas in four natural gas-fired "reclamation chambers," then condensing the gases into a final product is a high quality crude. A refinery has already agreed to take the oil. The plant will serve as a "showcase" for potential customers, Ulum said, illustrating how the technology can promote re-use of plastic that typically heads to the landfill.

Refineries a drag on global oil profits

January 22, 2010. It is no secret that bad results at the world's largest oil companies' refining units will hurt fourth-quarter profits, so investors are primed to look past those losses for signs of recovery. Crude prices in the fourth-quarter rose nearly 30 percent from a year earlier, but those gains are both positive and negative for the world's integrated oil companies. The higher prices lift exploration and production profits, but hurt refining margins at a time when the worldwide economic slowdown is still weighing on fuel demand. In fact, average global refining margins in the fourth quarter fell to their lowest level since the first quarter of 1995, according to data from BP Plc. To cope with the refining weakness, oil companies are taking a hard look at their refining business.

U.S. major Chevron Corp warned investors that fourth-quarter refining margins will be weak and said it will cut jobs and exit some markets.  Conoco has said its refining unit will record a loss in the quarte and Barclays Capital analyst Paul Cheng estimates Exxon Mobil Corp's global refining business will have a fourth-quarter loss of $190 million.  Exxon is expected to report a decline of about 30 percent in its fourth-quarter earnings.  Royal Dutch Shell Plc is expected to report a 24 percent drop in quarterly earnings as weak refining margins and cuts to fuel production weigh on profits. By contrast, analysts expect BP to report higher fourth-quarter profits, driven by good results in its oil and gas business and a higher weighting toward oil. Lagged tax charges also weighed on profits at TNK-BP in the year-ago quarter.

Transportation / Trade

Kyushu Electric signs on for Chevron's LNG

January 26, 2010. Chevron signed multiple Heads of Agreements (HOAs) with Kyushu Electric Power Co., Inc. for the delivery of liquefied natural gas (LNG) from the Chevron-operated Gorgon and Wheatstone natural gas projects.

Under the agreements, Kyushu Electric anticipates receiving 0.3 million tons per annum (mtpa) of LNG from the Gorgon Project, for 15 years. Under the agreement, Kyushu Electric also intends to acquire 1.83 percent of Chevron's equity share in the Wheatstone field licenses and a 1.37 percent interest in the Wheatstone natural gas processing facilities to be developed onshore near Onslow in northwestern Australia. Additionally, Kyushu Electric expects to purchase 0.7 mtpa of LNG from the Wheatstone Project for up to 20 years. This sales volume is net of the LNG that Kyushu Electric will lift as an equity participant in Wheatstone. Including this equity participation, Kyushu Electric will take delivery of 0.8 mtpa of LNG from the Wheatstone Project.

Oxford Catalysts signs GTL agreement with PTT

January 25, 2010. Oxford Catalysts Group PLC has signed a binding memorandum of understanding with the Thai state-owned energy company, PTT Public Company Limited, Thailand's largest listed company, for the development and commercialization of small scale land based gas-to-liquid (GTL) facilities based on the Group's microchannel reactor and catalyst technologies.

Under the terms of the agreement, PTT will provide funding of $5 million over 2 years for the development and commercialization of the Group's Steam Methane Reforming (SMR) technology, a key component in the GTL process. In addition, PTT will invest in microchannel reactor testing facilities, to be located at the PTT Research and Technology Institute near Bangkok, to accelerate the project. The Agreement also provides a framework for future investment by PTT in other microchannel reactor applications and associated catalyst developments.

Air Products to supply LNG heat exchangers for Gorgon

January 22, 2010. Air Products has signed an agreement with Chevron Australia Pty Ltd. to supply its proprietary liquefied natural gas (LNG) process technology and equipment for three process trains producing up to 15 million tons of LNG per annum at the Gorgon Project located offshore Western Australia.

LNG production is scheduled to begin in 2014. Under the agreement, Air Products will provide three separate units of its proprietary propane pre-cooled mixed refrigerant process using the SplitMR machinery configuration.

The LNG units will operate offshore Western Australia on Barrow Island.  Air Products' involvement in LNG projects in Australia dates back to the late 1980s and early 90s when it delivered process technology and MCR cryogenic heat exchangers for the first three trains at the North West Shelf Venture LNG Project.

Policy / Performance

Realm Energy seeks European Shale rights

January 26, 2010. Realm Energy has applied for oil and gas rights in multiple countries throughout Continental Europe. The applications were filed following a rigorous evaluation of high potential shale deposits throughout the continent and, if successful, will permit Realm Energy to bring North American technological advancements in shale gas and oil extraction to Europe. 

Realm Energy is now concentrating on eight discrete sedimentary basins in seven European countries and submitted applications for oil and gas rights that collectively extend over 1.5 million acres of land. Realm Energy received confirmation of receipt from government bodies that its applications are under active consideration.

Bankers gears up 2nd rig in Albania

January 26, 2010. Bankers confirmed that on January 25, 2010 the Crosco drilling rig Skytop 3 (depth capacity 3,000 meters) commenced drilling its first of several horizontal wells planned for the Patos Marinza oil field in Albania.

Well No. 5027 is located in the northern portion of the field, has a target depth of 2,285 meters with a lateral length of 525 meters in the D3 zone of the Lower Driza Formation. This is the first of three wells that will be drilled by the Crosco rig from the same pad before moving to a new location.

French govt warns total over refinery closure, job losses

January 26, 2010. The French government is ready to pressure Total SA to prevent it from shutting down a refinery in northern France that would lead to hundreds of job losses, the industry minister said. Total announced in December that it was considering shutting down its refinery in Flanders, near Dunkirk, which employs 370 people directly and 450 subcontractors.

Bahrain to award deep gas deal in first half 2010

January 25, 2010. Bahrain’s National Oil and Gas Authority (NOGA) is mulling over two exploration bids from Canadian Natural Resources and U.S.-based Occidental Petroleum Corp. for a deep gas exploration project.

Bahrain's oil and gas minister Abdul Hussain Mirza confirmed to local media that NOGA will award the deal to one of the companies during the first half of 2010. Bahrain was seeking to develop its onshore natural gas fields at a depth of up to 20,000 feet (6,096 meters) below sea level to meet rising demand for gas supplies.

Eni may raise Uganda oil stakes offer

January 24, 2010. Italy's Eni may offer the Ugandan government a cash sweetener of up to $300m to win a $1.5 billion bid for stakes in the country's main oil prospects and thwart a rival offer from British explorer Tullow.  Eni was said to be considering putting additional cash of between $200 million and $300 million towards the deal for a stake in three oil blocks owned by Britain's Heritage Oil.  It said some of this could go to Heritage investors but most could go to the Ugandan government. Heritage, Tullow's partner in Uganda, agreed in November to sell its stake in the blocks to Eni for $1.5 billion.

Ghana Minister says Aker's offshore license invalid

January 22, 2010. In a letter to Aker, Ghana's Minister of Energy asserts that the company's offshore exploration and development license in Ghana is invalid. Aker does not see any foundation for such an assertion. In November 2008, Aker was awarded an ownership interest in and operatorship of a petroleum offshore exploration and development license at a deepwater field off the coast of Ghana on Africa's west coast.

The petroleum agreement had been negotiated with the national oil company GNPC and the then current government of Ghana, and was presented to and ratified by Ghana's Parliament. Subsequently, elections have been held in Ghana and a new government is in power.

BP Refining Chief: EU needs practical carbon policies

January 22, 2010. The European Union should stop wringing its hands after the disappointment of the Copenhagen climate talks and embark on practical policies that will begin to reduce carbon use, a senior BP PLC executive said.

Rather than focusing on the long-term objective of halving carbon usage by 2050--an effort called "polishing the diamond"--the EU should take early material steps toward increasing energy efficiency and cutting carbon usage. These practical policies would include emphasizing the importance of natural gas in electricity generation, boosting nuclear-power generation and reconsidering policies in the EU encouraging the use of diesel in passenger cars.

Orinoco oil reserves total 513 bn barrels

January 22, 2010. The U.S. Geological Service said that Venezuela's oil-rich Orinoco Belt holds 513 billion barrels of recoverable oil -- far more reserves than originally estimated. The assessment, the U.S. government agency says, is the first to identify how much oil is technically recoverable using currently available technologies and methods. Previous projections estimated the quantity of available reserves in the area, located in eastern Venezuela, at between 230 billion to 300 billion barrels of heavy oil.

The area contains "the largest accumulation ever assessed" by the U.S. Geologic Service, the agency said.  The news enhances the profile of Venezuela's oilpatch at a time when large, easy-to-access oil deposits are becoming scarce and big oil producing companies are scrambling to replace their dwindling output and reserves.

Oil heading for $70.92, Commerzbank says

January 21, 2010. Crude oil may plunge toward $70 a barrel after failing to break resistance around $84, according to technical analysts at Commerzbank AG.   Oil futures in New York have lost almost 7 percent since reaching a one-year high of $83.95 a barrel on Jan. 11. Prices have peaked in the short-term and will extend their slide until reaching a trend line linking price lows in 2009, according to analysts at Commerzbank, last year’s third most-accurate oil forecaster in a survey by Bloomberg. Last year’s minimum support line connects weekly price lows such as $58.32 a barrel on July 17 and $68.59 on Dec. 18.  Prices may then rise toward a resistance level between $85.82 and $86.24 a barrel, defined by oil’s low points in December 2007 and February 2008.



Georgia Power: Plant Vogtle costs will vary

January 26, 2010. The actual cost of constructing two reactors at Plant Vogtle will vary widely from original projections, but the Public Service Commission only needs to act if the variations exceed a secret percentage. In some periods, the costs will be less than projected -- as in the case with the first six months, and some periods will be higher. Those periods of savings will cushion the upward swings and balance out. The commission completed its first, semi-annual review of construction costs at the nuclear plant near Augusta. It votes next month on whether to approve the money spent so far. Also next month, the company files its expenses since August.

Cold spells to hasten thermal coal recovery

January 22, 2010. The cold spells sweeping across the globe could brighten the prospects for U.S. thermal coal producers as early as the first quarter, with huge stockpiles of the commodity being burned to keep homes and offices warmer.  Demand for thermal, or steam coal -- used to fuel about half the electricity generated in the United States -- was earlier expected to pick up only in late 2010 or in 2011, after the economic slowdown and unseasonably cool summers put a damper on energy demand. Large production cuts undertaken for about a year at miners that primarily ship coal to utilities -- including the nation's top three companies Peabody Energy Corp, Arch Coal Inc, Consol Energy Inc -- has also helped keep inventory under check.  Coal supply at U.S. power generators dropped to 60 days on January 11, after hovering around the 70 day-range over a couple of months till early December.  Coal prices have seen a sharp rise in January in the United States, the world's largest electricity producer, after having risen marginally since the middle of last year.

Venezuela’s Planta Centro generator sputters amid energy crisis

January 22, 2010. Planta Centro, Venezuela’s biggest fossil-fueled power plant is operating at less than a fifth of its designed capacity, exacerbating a power crisis that has shuttered businesses from aluminum plants to shopping malls.

The plant operated at 267 megawatts of power on Jan. 20, or at about 13 percent of its 2,000 megawatt capacity. The plant hasn’t produced at more than 26 percent of capacity in at least three months, according to CNG. Venezuela is suffering its most severe electricity crisis in six years because of growing demand and a drought which cut water levels in the hydro dams that provide 73 percent of the country’s power. Guri Lake, the biggest reservoir, is at 53 percent of useful capacity. 

Chavez halted production lines at state-run aluminum and steel companies in December to save 558 megawatts of electricity. Customers of Edelca, the utility that serves the country’s heavy industries, used 20 percent of Venezuela’s power in the first 11 months of last year, according to CNG’s November monthly report.

Transmission / Distribution / Trade

Power supply still thin in Luzon

January 26, 2010. Philippines - Metro Manila and some parts of Luzon are no longer on a brownout "red alert" but power supply remains thin, according to the National Grid Corp. of the Philippines (NGCP).

Several areas of Metro Manila and Luzon were placed on a brownout "red alert" after a unit of the Sual coal power plant shut down due to feedwater pump trouble.

US Rural electric cooperatives agree to purchase power from ethanol-linked plant

January 26, 2010. Abengoa Bioenergy has signed an agreement that brings a proposed combination cellulosic ethanol and power plant near Hugoton, Kan., closer to reality. Mid-Kansas Electric Co., a group of five rural electric cooperatives in western Kansas, has agreed to purchase the electricity from a 75-megawatt power plant that would be adjacent to the cellulosic ethanol plant.  Abengoa, based in Spain, is the largest producer of ethanol in Europe and a large producer in the U.S. 

The Kansas ethanol plant, expected to produce 15 million gallons of fuel annually, would use cellulose such as corn stalks, wheat straw and switchgrass. The biomass also would be used to produce power.

Major power breakdown in Balochistan

January 24, 2010. The electricity supply to as many as 25 districts of Balochistan province has been suspended by dint of mishap in major electricity transmission line.

Due to breakdown in major power transmission lines from Guddo Barrage to Balochistan, two transmission lines of 220 and 132 kilowatt were tripped down, cutting electricity supply to a total of 25 districts in province including provincial capital Quetta.

Policy / Performance

China's power generation capacity to hit 950 mn kws by end of 2010 

January 26, 2010. China, with the world's second largest power capacity after the United States, will add 85 million kilowatts of new capacity in 2010 to bring the total to around 950 million kilowatts, industry association said.  Of the newly increased capacity, 55 million kilowatts will be coal-fired, 15 million kilowatts for hydropower, 13 million kilowatts for wind power and 1.08 million kilowatts for nuclear power, the China Electricity Council (CEC) said in a report.

Power consumption increase is estimated to quicken to 9 percent in 2010 from 6 percent in 2009 to 3.97 trillion kilowatt-hours driven by continuous economic recovery, the report said.

The nation will spend 660 billion yuan (97 billion U.S. dollars) upgrading power infrastructure, less than 2009's 755.8 billion yuan.  The association said power coal will face pressure for price hikes in 2010 due to tight supply.  It called for further reform of electricity prices and give market a bigger say in setting power coal prices to make them better reflect real demand.

South Korea may spend $24 bn on Smart power grid by 2030

January 25, 2010. South Korea, Asia’s fourth-largest energy user, may spend about 27.5 trillion won ($24 billion) by 2030 building so-called smart power grids. The private sector is expected to invest 24.8 trillion won, with the balance being met by the government, the Ministry of Knowledge Economy said.

Smart grids deliver electricity to consumers from producers using digital technology that reduces costs, saves energy and increases reliability. General Electric Co. said in February that the market for the networks would grow to $12 billion in five years. 

South Korea’s adoption of the technology may cut its greenhouse-gas emissions by 230 million metric tons and reduce crude oil imports by 440 million barrels by 2030.

Mitsubishi Heavy expects first Europe reactor sale

January 25, 2010. Mitsubishi Heavy Industries Ltd., which has developed the world’s biggest atomic reactor, expects to win its first nuclear power plant order in Europe next year, challenging Areva SA in its own backyard.  Japan’s largest heavy machinery maker anticipates a “high possibility” of a utility in northern Europe selecting its new 1,700-megawatt model that comes with advanced fault detection technology. The U.K. and Switzerland have also sought atomic plant proposals from Mitsubishi Heavy. The Finnish utility known as TVO, said it shortlisted Mitsubishi Heavy’s EU-APWR model along with reactors from Areva, Toshiba Corp., GE Hitachi Nuclear Energy and Korea Hydro & Nuclear Power Co. Asian suppliers are making competition tougher for France’s Areva, the world’s biggest reactor builder, which lost a $20 billion contract in the United Arab Emirates last month to a group led by Korea Electric Power Corp.

Russia to build 6-8 nuclear power plants in West Bengal

January 23, 2010. Russia will build six to eight nuclear power generating units in Haripur in West Bengal, the head of Russian Atomic Energy Corporation (Rosatom), Sergei Kiriyenko said yesterday in Moscow.  He noted that India's decision on new construction site is crucial. 

The Nuclear Power Corporation of India Ltd (NPCIL) is constructing the Kudankulam project jointly with Russia, which is committed to supplying fuel for the reactor's life time. On 7 December 2009, India and Russia signed a broad-based agreement in civil nuclear field that will ensure transfer of technology and uninterrupted uranium fuel supplies to its nuclear reactors and inked three pacts in the defence sector. The agreements were signed after talks between prime minister Manmohan Singh and Russian president Dmitry Medvedev at the Kremlin.

NM governor takes aim at coal-fired power plants

January 22, 2010. Gov. Bill Richardson has painted a target on New Mexico's coal-fired power plants, saying they provide a major source of electricity for homes and businesses in the state but pump far too much pollution into the air. 

Part of Richardson's solution includes legislation to give state regulators the power to deny new permits or revoke existing permits after a track record of air quality violations. State laws that govern water, solid wastes and hazardous materials already include a so-called "bad actor" clause, but the air quality act does not.

Richardson also plans to tackle emissions blamed for global warming with legislation that would lay the groundwork for a future cap-and-trade program, either as part of the Western Climate Initiative's plan to reduce greenhouse gas emissions or as a mandate from the federal government.

LCCI suggests cheaper means of power generation

January 22, 2010. The Lahore Chamber of Commerce and Industry (LCCI) has urged the government to adopt cheaper means of electricity generation as thermal power would hardly serve the purpose of economic turnaround at this point in time. They said the availability of power was not the only issue being faced by the business community.  They said China was producing more than 50 per cent of its electricity through coal means while India was producing 40 per cent, but unfortunately in Pakistan less than one per cent of power was being produced despite the fact that coal was available in abundance. They said Pakistan is rich in natural resources, having coal reserves around 185 billion tons only in Thar, which are equivalent to 618 billion barrels of crude oil.

Renewable Energy / Climate Change Trends


Govt working on climate blueprint

January 25, 2010. Having agreed to accede to the January 31 UN deadline, the govt has started working on a blueprint detailing emission cut targets and climate steps to be submitted under the Copenhagen Accord. The BASIC bloc comprising India, China, South Africa and Brazil agreed to stick to the deadline to submit the voluntary mitigation actions including carbon emission cuts -- which would eventually lead to reduction in greenhouse gas emissions -- to the UNFCCC. Senior environment officials under the chairmanship of Joint Secretary (Climate) J M Mausker held a meeting to discuss the strategy, a day after India announced its intention to abide by January 31 deadline. The official said India's submission will be same as its official announcement at Copenhagen meet last year of bringing down its carbon intensity -- amount of carbon emitted by per unit of GDP -- by 20-25 per cent by 2020 on 2005 levels.

Hyderabad co to invest Rs 500 mn to generate biomass power in Gujarat

January 24, 2010. Hyderabad-based Junagarh Power Projects Pvt Ltd plans to invest Rs 500 mn to set up a 10 megawatt biomass-based, renewable energy power project in Junagarh district of Gujarat this year. The power plant, to be set up at Khokharda village under Vanthall taluka of Junagarh, will use locally available biomass residues such as cotton, sesame stalks and groundnut shells as fuel for generation of electricity. The State Government's Gujarat Energy Development Agency (GEDA) has given licence to the company for the plant to be registered as a Clean Development Mechanism (CDM) activity for its contribution to environmental and social sustainability. Companies setting up such non-conventional, green energy and environment-friendly plants to produce up to 15 MW of power do not require environment clearance, the official said. Incentives and subsidies would be payable to the company as per rules.

India may start renewable-energy credits trade in May

January 22, 2010. India may let power companies start trading renewable-energy credits in May in a push to create a multibillion-dollar market to encourage reductions in greenhouse-gas emissions. India is pressing ahead with its own efforts to fight climate change after last month’s Copenhagen talks failed to reach a new global climate treaty. The move puts the world’s fourth-largest emitter ahead of China and other developing nations in creating a domestic emissions-trading market to boost investment in solar, wind and other clean-energy projects.

The plan would require power distributors including billionaire Anil Ambani’sReliance Infrastructure Ltd, Tata Power Co. and large-scale consumers to ensure a portion of the electricity they carry comes from renewable sources. If their supply of clean energy falls short, companies must buy certificates from others with surpluses, an incentive for renewable-energy production and a more stable market. Similar rules exist in the U.K. and some U.S. and Australian states.

Funds for climate change missions in Union Budget: Saran

January 21, 2010. India’s eight ambitious missions to address climate change may get funds in the Union Budget that will be presented in Parliament next month. “The ministries implementing the missions will be provided the necessary budget for it. We are tying up funds domestically,” Prime Minister’s Special Envoy on Climate Change Shyam Saran said.  He said each of the missions would be discussed at the Planning Commission and will be incorporated in the Plan. Prime Minister Manmohan Singh launched the National Solar Mission that aims to generate 20,000 MW solar power by 2022 recently.

The mission is one of the eight announced as India’s National Action Plan on Climate Change (NAPCC).  Besides solar mission, India plans to deal with global warming through achieving enhanced energy efficiency, promoting a sustainable habitat, efficient use of water, sustaining the Himalayan ecosystem, increasing forest cover, adapting to sustainable agriculture, and developing strategic knowledge on climate change.

IPCC admits to error on Himalayan glacier report

January 20, 2010. In a major climb down, the United Nations climate change panel admitted to an error in its contentious report on Himalayan glaciers and has expressed regrets for the same.

The Intergovernmental Panel on Climate Change (IPCC) led by Dr R.K.Pachauri said that its conclusion on the melting of Himalayan glaciers by 2035 was based on “poorly substantiated” estimates. 

IPCC, in a statement in Geneva, said that clear and well established standards of evidence laid down by the panel “were not applied properly” while drafting the observations on the timeline for disappearance of Himalayan glaciers. “The chair, vice chairs and co-chairs of IPCC regret the poor application of well established procedures in this instance,” it said.

The IPCC in a 2007 report had claimed that the Himalayan glaciers could melt away by 2035, raising the heckles of the environment ministry. In turn, the ministry came out with its own report in November last stating that though the Himalayan glaciers were receding, there was no scientific evidence to suggest they will disappear.


Taiwan hopes solar power plant will boost its solar energy industry

January 26, 2010. Taiwan is home to Asia's largest solar power plant. The island hopes this new facility will boost its solar energy industry. Sitting on a two-hectare site in southern Taiwan's Kaohsiung County, the massive energy farm is equipped with 141 huge solar panels. Together, they can produce 100 megawatts of electricity each year.  Established by Taiwan's Institute of Nuclear Energy Research, the facility - which started operating last December - will help Taiwan cut its carbon emissions significantly.

Texas extends lead in wind power generation

January 26, 2010. Texas consolidated its lead in 2009 as the state with the most energy generated from wind, according to a study from the American Wind Energy Association.  Texas added 2,292 megawatts of wind power last year, bringing the state's total to 9,410 megawatts of installed wind power last year. That's way ahead of the total installed wind power for the remaining top five. Iowa has a total of 3,670 megawatts of wind; California, with 2,794 megawatts; Washington, 1,980 megawatts; and Minnesota, 1,809 megawatts.

Bill Gates says climate cash may hit health aid

January 26, 2010. Rich nations' cash pledges to combat climate change must not come at the cost of healthcare spending, Microsoft co-founder Bill Gates warned. The entrepreneur-turned-philanthropist said that money promised at last month's Copenhagen summit to enable developing countries to tackle climate change could cut into healthcare aid budgets. A total of 30 billion dollars was pledged at Copenhagen for 2010-2012 to help poor countries in the frontline of climate change, and wealthy nations sketched a target of providing 100 billion dollars annually by 2020. Gates' charity, the Bill and Melinda Gates Foundation, has committed nearly one billion dollars to health and development projects in India, especially targeting AIDS and polio.

Climate fund 'recycled' from existing aid budget, UK government admits

January 25, 2010. A £1.5bn pledge by Gordon Brown to help poor countries cope with the ravages of climate change will drain funds from existing overseas aid programmes to improve health, education and water supplies, the government admitted.

The move appears to undermine repeated government pledges that such climate aid should be additional to existing overseas development aid (ODA). The prime minister announced the £1.5bn "fast start" finance in December, in an attempt to kick-start negotiations at the faltering UN climate talks in Copenhagen. At the time, Brown said it was "to help developing countries adapt to climate change, use clean technology and protect forests".  The UK money was part of a £6.5bn package to be paid by EU countries from 2010 to 2012.

Maldives keen on tie-ups with Indian cos in renewable energy

January 23, 2010. Maldives president Mohammed Nasheed said his country was in talks with various Indian companies to tap renewable energy sector in the island nation.

Stating that much of energy and its resources were untapped particularly in ocean currents, Nasheed said if that could be developed under cooperation with India, it would lead to a win-win situation.   

Climate bill setback forces clean development rethink

January 22, 2010. Still reeling from disappointing UN climate talks in Copenhagen in December, clean energy project developers were dealt another blow this week when U.S. Democrats lost their Senate supermajority, potentially killing a federal cap-and-trade scheme for years to come.

Although the passage of a U.S. bill to cap greenhouse gas emissions in 2010 was far from certain, the election of a Republican in Massachusetts to the Senate derailed any momentum President Obama had following his healthcare push toward introducing a cap-and-trade scheme this year.  This coupled with a disappointing UN climate summit in the Danish capital last month where leaders from over 190 countries failed to agree a legally-binding pact to succeed the Kyoto Protocol, is causing concern for some clean energy project developers and forcing them to reassess their game plan.

China's BYD to invest $3.3 bn in solar battery plant

January 22, 2010. Chinese car and battery maker BYD Co Ltd, 10 percent owned by U.S. billionaire Warren Buffett's Berkshire Hathaway, will invest 22.5 billion yuan ($3.30 billion) over five years to build China's largest solar power battery plant, a report said. Shenzhen-based BYD, which aims to sell 800,000 vehicles next year, will build the plant in China's Shaanxi province.

The plant will have capacity to produce a total of 5,000 megawatts of batteries. In December, BYD received 15 billion yuan in credit from the Bank of China.  The company is likely to use the credit to invest in new areas, such as solar energy and new energy vehicles.

Climate talks bigger threat to Saudi than oil rivals

January 22, 2010. United Nations climate talks are a bigger threat to top oil exporter Saudi Arabia than increased oil supplies from rival producers, its lead climate negotiator said. Saudi Arabia's economy depends on oil exports so stands to be one of the biggest losers in any pact that curbs oil demand by penalizing carbon emissions. 

Saudi depends on oil income for nearly 90 percent of state revenue and exports make up 60 percent of its gross domestic product. Rival producers such as Iraq and Brazil have plans for significant increases in output, with Baghdad agreeing deals that could raise its capacity to around 12 million barrels per day and threaten Saudi market dominance. The kingdom has a production capacity of 12.5 million barrels per day.

Climate talks posed a bigger threat, he said, and subsidies for the development of renewable energy were distorting market economics in the sector, he said. Subsidies for other energy sources such as coal made little sense, he said. The possibility that oil demand might peak this decade was a "serious problem" for Saudi Arabia, he said. The kingdom had looked at the assumptions behind studies that pointed to demand peaking in 2016 and saw "some truth in it," he said.

EU carbon soften on weak energy, tumbling equities

January 22, 2010. European carbon emissions futures declined extending the previous session's losses, as weak energy prices and tumbling equities offered little support.  Proposals by U.S. President Barack Obama to impose new restrictions on banks sent Asian stock markets and commodities tumbling.

Weak German power and British natural gas prices have also dulled carbon permit demand for utilities. Hopes for stronger world action in 2010 to curb climate change have dimmed after the U.S. Democrats lost a key Senate seat to a Republican opposed to capping emissions, experts said on Wednesday.  U.N. climate talks in Mexico in November will be undermined if the United States has not set caps on carbon emissions. U.N.-backed certified emissions reductions were slow to trade.

EU to stick with lower climate offer to U.N

January 22, 2010. The European Union will stick with its lowest offer for cutting carbon emissions under a U.N. climate accord, fulfilling the wishes of industry, a draft letter shows. The 27-nation bloc has committed to unilaterally cut carbon dioxide to 20 percent below 1990 levels over the next decade.

Ahead of the U.N. climate talks in Copenhagen in December it offered to deepen those cuts to 30 percent if other rich countries made similar efforts. That offer still stands, according to the draft letter to top U.N. climate official Yvo de Boer. But it is unlikely to be carried out because the Copenhagen talks ended with a weak deal.  Experts say the total cuts offered there by rich countries amount to no more than 18 percent and fall far short of the 25-40 percent that U.N. scientists outline as necessary to avert dangerous climate change.

South Korea said to win $6 bn wind, solar order

January 21, 2010. A South Korean group led by Samsung C&T Corp. may win an order from Canada to develop a $6 billion wind and solar power project in the province of Ontario. The 2,500-megawatt project will include 1,000 wind turbines that will account for 80 percent of the total capacity, said the people who declined to be identified before an announcement is made in Ontario later today. The group comprising Samsung C&T and Korea Electric Power Corp. will sign the deal with the provincial government, they said. The contract would be Korea Electric’s second overseas power plant order in a month after securing a $20 billion contract on Dec. 27 to construct atomic generators in the United Arab Emirates. Samsung C&T, South Korea’s second-biggest construction company, said on Sept. 29 it was in talks with Ontario to build wind and solar farms.

Climate bill prospects fade with Republican U.S. Senate Victory

January 20, 2010. Prospects for legislation to limit carbon-dioxide emissions dimmed in the U.S. Senate after Republican Scott Brown’s upset victory in Massachusetts.   Brown, winner of the Senate seat held by the late Senator Edward M. Kennedy for almost 50 years, opposes the emissions- trading program that Obama says is needed to fight climate change. Opponents say cap-and-trade would boost costs and cut jobs in an economy that already has a 10 percent unemployment rate. Some lawmakers were describing the cap-and-trade measure as unlikely this year even before Brown’s win. There won’t be enough political will left to undertake such a disputed measure after the fight over health-care legislation, Senator Byron Dorgan, a Democrat from North Dakota who recently announced his retirement, said. The House of Representatives passed a cap-and-trade bill in June. Senate Majority Leader Harry Reid, a Nevada Democrat, has said the Senate would take up a similar measure later this year.

RWE to build world’s largest pellet plant to cut carbon output

January 20, 2010. RWE AG, Germany’s second-largest utility, will build the world’s biggest plant for wood pellets in the U.S. state of Georgia, allowing it to lower carbon- dioxide emissions at a Dutch power plant.  The company will spend about 120 million euros ($170 million) on the facility, which will have an annual capacity of 750,000 metric tons and start in 2011, Essen, Germany-based RWE said today. The pellets will be shipped to the Netherlands to supplement hard coal at the 1,245-megawatt Amercentrale station. RWE, Europe’s largest corporate emitter of the gas blamed for global warming, is seeking to lower emission and boost power generation as the cost of polluting rises. Using biomass in power plants is only profitable if the utility has control over its fuel supply.

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