MonitorsPublished on Jul 21, 2004
Energy News Monitor I Volume I, Issue 4

Second part of edited text of Roundtable held on ‘Pipeline for Peace’ at the Observer Research Foundation on 3 July 2004.  Ambassador S K Lambah was Chairman and Mr Usman Aminuddin, former Minister for Oil & Natural Resources, Pakistan was key participant. 


Chairman: If India makes most of the pipeline it would meet just about 10% of its total requirements.  So far what we have been discussing is that the long-term benefits of the project outweigh the concerns.  There is agreement on economic necessities. Security concerns are there but concerns seem to be largely misunderstandings.   


Air Commodore Jasjit Singh: I think there is always been this concern on US policy towards Iran and therefore, this project will automatically be rejected. I think looking at the fact of pipelines going westwards from Iran, it is not of much concern.  I don’t assume this as a given thing. Of course, the US will make noises, especially if their companies are not going to benefit out of it. I think there is far greater commercial interest rather than simply a larger, strategic, political objective. Knowing fully well the Afghanistan situation, where the US takes great interest in how much gas it and how much it doesn’t.  In fact it was a US institution that was funding the study with the UNDP in the mid 90s. I had asked at that time on what outcome the US was expecting and a representative said that they might not oppose it so much.


Mr Aminuddin:  Now, on the Iran line the situation has changed.  If the situation between India and Pakistan eased, perceptions can be changed.  It is not that we are going to be rigid and staid.  Again, as I said, funding is important. You are not going to depend on the World Bank or Asian Bank or IMF for funding. Funding will be raised from the capital market and that is a strong point. Irrespective of the opposition, my submission is that the US can’t stop it.


Air Commodore Jasjit Singh: I am not aware that the US is putting pressure on India buying oil from Iraq? So, the question is, if there is a pipeline through Pakistan is there pressure on Pakistan? I don't think so. I think given the nature of relationship post 9/11, it may not happen. There is going to be the same very loud noises.  There might be a lot more opposition if they find that the commercial benefit is going to somebody else because finally that will matter one way or the other. So, it may be wise to think of American financial institutions being involved in this process.  I am only mentioning another perspective.  Yes, there is a threat, it may the next target but I also do not see the evidence by which Americans are actually going to stop the flow of energy from Iran. In fact, it is much clearer today than ten years ago.  Central Asian energy will otherwise keep going to China or Russia. So, I look at this from a geo strategic position - what is it that they are going to do if they get some benefits and what is it that they are going to do if they don't get any benefit. I don't think that Iran is all that unhappy about co-operation with the US. I am not more optimistic but I want that we look at these possibilities and not just take American opposition for granted.


Mr Aminuddin: I am not really saying with certainty that there will be a problem.  We know that there is opposition and we notice the problem. I am only trying to say that it is a problem area.  But I of course at the same time problem areas or perceptions of it can be changed.


Chairman: I thought there would be some discussion on the South Asia Infrastructure Fund that Mr Aminuddin has discussed yesterday. Can we have views on that?   


Air Commodore Jasjit Singh: ADB had certain views on this I thought. I don't know what the latest position is. Not on SAIF, but in terms of funding of energy projects.


Mr Aminuddin: The Asian Bank study that was commissioned was done primarily for the TAP project. It came out about 4-5 years ago but it was not a very good one as security concerns were not addressed at all.  And the second issue that was not addressed was the size of actual reserves and the extent of foreign participation. That is a big question mark and I think in a closed type of system, where information is not available you tend to take a rough estimate of original gas in place. I think something in the range of 18-20 tcf is left, not more than that.  There is also no information in terms of participation that would be allowed.  So that is the case with the Asian Bank study.

Ambassador Ansari: Could we get a little more from you on this question of security concerns?  Let us, for the sake argument; look at the worst possible scenario.  What kind of responses would Pakistan, as a signatory to an agreement, be in a position to take, to address the worst-case scenario?


Mr Aminuddin:  Let's take a hypothetical scenario that Pakistan turns off the gas supply and that I think is the worst scenario. You can't have a worse scenario because we talked about the fact that if a line is blown up it can be restored in about two or three days. We also talked about the possibility of storage in Iran of about 1 tcf or 2 tcf or sites in Pakistan where there is possibility of substantial storage.  So, these are issues which can be sorted out.  The worst-case scenario is therefore Pakistan turning off the gas.  In the framework of cross-border pipelines, several agreements will be signed between the three countries. These are multilateral, multinational agreements. Breaking an agreement of this nature is not permitted. You cannot break this agreement.  But there are other options.  One of the aspects that can be looked at is Pakistan’s deficiency in high-speed diesel.  We had two very serious situations - one was the Iraqi invasion of Kuwait when we were left high and dry in the sense that supplies were stopped of diesel fuel. The second was of course the fire that Kuwait was fighting. At that time we looked at the option of including India as a substitute but the political situation did not permit that. One of the options could be that 50% of diesel imports that we are going to make - make a long-term agreement that we will keep importing this from India.  It is like India saying: ‘fine, give us some security - if you turn off our gas, we’ll turn of your diesel’.  Now, you cannot get 2-3 million tonnes of diesel overnight and Pakistan will be in a difficult situation if 3 million tonnes of diesel demand is unmet. Power plants will come to stand still; railways will come to stand still because the main consumers of diesel in Pakistan are the railways and heavy transport.


Chairman:  You are not going to import your entire diesel from India are you?  So you will not be that dependent on our diesel. 


Mr Aminuddin: This idea was initiated from the discussions yesterday.  There are many permutations. The issue is that this is the first discussion in five years where something is being discussed. There is a perception about Pakistan, perception about India, perception of re-direction and many more.  I tried to give my idea of the way forward, through a South Asia Infrastructure Fund. If we have a platform of this type we can discuss issues that have been brought up. But again as I said the comfort level is important. 


Ambassador Ansari:  You see at the first stage, I don’t think that this concept of mutual inconvenience is what will motivate thinking at the first stage till we have developed confidence mechanisms. As per what you said earlier, the dependence of Pakistan would be much less both in percentage and in quantitative terms compared to dependence of India once this tap is opened. How do we develop, for the sake of argument or for the sake of psychological satisfaction - I am looking at worst-case scenario - a concept of ‘mutually assured inconvenience’?


Mr Aminuddin: As I was talking earlier on, the prospectively of hydrocarbons in the Indus basin delta are much more in the Pakistani side. Now we have started work on the offshore for the first time - there are great possibilities that we would have heavy discovery of hydrocarbons.  That is our hope.  If that happens, then in Pakistan we don’t have the market for it.  We will either convert it into electricity and use it domestically or send it to the world market.  The easiest would be to export the gas to India. In our latest petroleum policy, it has been laid out - in order to increase flexibility - that if any producer wants to export gas to India it can do so. So, Pakistan is a potential exporter of gas to India. Our market does not have the demand that yours has.   You ask what is the best thing we can do if you shut off the gas? Do we shut off the water? Do we shut off the diesel? So, security is an issue. How to find a way around this? I suggested one way, which is stakeholders, which in my perception, the best option - better than what governments can provide. You cannot get better security than the involvement of people who are going to put their money in it.   Now, there may be other viewpoints that say this is not good enough but in my view people who are going to invest in the project is the strongest security that can be offered.


Mr R P Sharma: It is going to be an economic question.  The security aspects have already been brought out.  Assuming that Pakistan has no stake - they don't need gas or they have discovered their own gas and they don't have any additional requirement - should we still be in the business or not? As a matter of fact we should be in business because it helps and supports Indian economy, irrespective of whether Pakistan is losing or gaining.  If I am gaining, I should really be in the business. I should try to protect myself from security problems and think about how I can take care of myself. If I really cannot answer that, probably I shouldn't go into the business.  We, the professionals should take care of our interests.


About terrorism, I will be only too happy if terrorists break this pipeline because they will be finished by their own actions. I need not to be so disturbed. Three billion cubic meters of gas being flared to the air will destroy so much if it is not controlled from their side.  I need not control anything.  So, terrorism will be taken care of by those who propagate it and not by me. I need to only request Iran that they will, under no case, stop the piping of the gas and they will see that at no stage the pumping of the gas stops. I think these are issues, which are hypothetical. You have seen the Russian pipeline where eleven countries are involved but the supply has never stopped even for a single day.


Regarding security, I can see something regarding LNG already.  We are already importing LNG. Iran is getting into the business of LNG. Iran needs to guarantee that, should the situation arise that terrorists stop gas to India, they will start supplying LNG to India.  I see LNG facilities as security or as insurance. The main feeling we are now getting through discussions with Iran is the economics of the project. Now, the Ambassador and Mr Aminuddin have said that probably piped gas is the best option.  But the question is if pipeline is really the best option.  Because over the last ten years there has been so much of technological improvements and gains in the economies of scale that LNG cost has come down about a dollar per million btu. The benefit has not yet been passed onto the consumers.  Now with China and India getting into the market, the price of LNG has started going down further.  In fact, only yesterday, the Iranian team offered LNG at 2.2 dollars per million btu to India. It translates into a delivered price- after regasification - of less then 3 dollars per million btu. Now, the issue is whether I am getting that pipeline gas at a price less then that? If not, then probably this is not an option.  So, we really need to address the economic question.  If the cost of piped gas is going to be less than LNG at 2.5 dollars per million btu, then it is an option.  But after including transit fee etc this may not be the case. 


Yesterday Mr Aminuddin clarified that he has not asked for 750 million dollars per annum transit fee for Pakistan. It is probably a figure quoted by Iran. May be it will be less.  Could this transit fee be around 60-70 cents with shipping and transportation only 30 cents? If so, piped gas is not an option.  If I am the company, which were to import gas, I am not even wiling to look at that option if that is the transit fee.  Because I know for sure that I can get unrestricted supply through the LNG route.  We have the capability to bring LNG to any port of our choice.  In that case I do not need the pipeline. 


If political clearance is there, economics is the only question that needs to be answered.  There was a time when anyone talking about a pipeline through Pakistan would be considered a traitor.  So, if that political clearance is given I think these technical and economic issues can be discussed and a solution found.  The only thing is that the project should be economically viable, price should be affordable, and the fundamentals of the project should be strong.  You have also talked about mutual dependence.  If that is the case then there could be a condition that the Pakistan power generation with piped gas is carried out in India.  If Pakistan does not give gas Pakistan doesn't get power.  Some mutual agreement can be worked out. But I don't think that there is such a thing, which really cannot be addressed and cannot be resolved through discussion.  As the minister was saying piped gas is transported in Europe through seven countries some of which do not even use the gas.  


Mr D V Kapur: I have no comments on what has been said because I tend to agree with it.  One small suggestion I would like to make, which in my view will be rather a practical one that improves the practicability of having this co-operation. I am not even using the word pipeline. The basic question is of having cooperation between Iran, Pakistan and India with regard to the use of Iranian gas in Pakistan and India. Well, economics of pipelines are not cleared. Broadly, we all have reached some figures but exact figures have got to be worked out. In any case, to have the project implemented and start gaining out of it is going to take some years. It is not a project, which can be completed in terms of two years or three years from today. It is going to take a little longer.


So my suggestion is that this co-operation should include not only the pipeline but also the alternative route of LNG. There should be an agreement about the pipeline but supplementing that agreement there should also be an agreement about some sort of a joint venture between India and Pakistan exploiting Iranian gas, purchasing raw gas from Iran and putting a joint liquefaction plant. It is a joint plant - joint investment, joint shipping with some ships coming to Karachi port where they have regasification plants and some ships coming to the west coast of India or wherever we have regasification plants.  This part of the agreement could be implemented two to there years prior to the main agreement. Once we start co-operating I am sure we will find many more opportunities.  We will be sitting together, we will be working together for transportation of the same product and I am sure that in that situation as partners when we see a more economical alternative, we will opt for that.  So right in our thinking, we enlarge the scope or the alternatives of  bringing the gas to our country.


Mr Aminuddin: As I already mentioned earlier Iran is already working on a project to export gas to Europe by 2010. Just to keep our traditional approach it will be talking to Pakistan with a positive approach.  Iran is also working on a gas to liquid project. That is of course for the future but that is what they are doing for exports.


Mr Kapur: I should have mentioned that while I said LNG, it has to be understood that in place technology should be used based on purchase of raw gas at 40-50 cents. Then we will have a LNG regasified at a very competitive price.  Many people think only of 4-5 dollars when there is talk of LNG.  That is not the case.  While suggesting LNG route alternative as a supplement - I am not saying independent but as a supplement - only because this is also reasonably competitive route based on today’s technology. 


Air Commodore Jasjit Singh: As I have seen in the last 14-15 years, there has been a problem in what might be called informed public opinion. This is not to say that there is no political will.  I am afraid we need to think about a lot more of these very uncomfortable scenarios. If Pakistan turns off the gas do we turn off the water? Ask any farmer in Punjab, they will be affected psychologically and economically if there is no water for just a week. I think the immediate problem is to educate public opinion through joint studies. I doubt if the governments will undertake such an effort. If we look at each of these options and then prepare a list of good options to clear the air, a lot of misperception, which have grown during period of tension, can be settled.  


Mr Aminuddin: We have been trying consistently from December of 1999, at the level of secretaries, to say that we are behind this project from Iranian point of view. Of course, from the Iranian perspective it would be Pakistan supporting this project. But at every level, for the last five years, there has been a consistent effort to move forward. I think more confidence-building measures should come from India. For any consuming country, security is of importance, whether it is for oil or gas.  There is consistency of approach by Pakistan for the last five years but I think more is required.  I again want to say that unless there is political will to unleash participation of the private sector we will not succeed. Look at the state of institutions in every country in the world. The example of nationalization in other countries is disastrous. If you can involve the private sector in whatever form then broad guidelines of the issues will be taken care of.  In my perception this is a way forward and the fastest way forward. No investor is going to put in their money unless they are going to secure it.


Ambassador Ansari: I have one more question. In terms the mechanics of putting it on the agenda, I mean if there is an agreement, it has to be an exercise to be done essentially in the private sector. But to give the political clearance, the government would have to take it on, not just on their national agendas but on their common agenda. We therefore, need to bring it on to the Indo-Pak agenda, which would mean, I imagine, on the composite dialogue agenda, which is the only existing agenda between the two countries. Now if we bring it on to that agenda would it be subject to the vagaries of that composite dialogue. We all know what those complications are.


Mr Aminuddin: If it comes on the agenda, what could happen? What could happen is that it became a negotiating point: ‘You settle Kashmir and we will give you the pipeline’. I would not, personally myself, like to see it at that level, but way beyond that level because we are committed to this process. The exporting country is committed to the process.  You had a statement by the Pakistani Minister that there is support for the project.  There was a statement by the Indian government that they would buy this gas if Pakistan ensures security. So this discussion is already going on. If you put this on the agenda, it could become a negotiating factor. This is my perception.


Comment: Instead of an agenda between India and Pakistan, could it not be a three-way discussion with Iran, India and Pakistan discussing this together.


Mr Aminuddin:  The first proposal that I had given in 1999-2000 that India, Iran and Pakistan should meet on neutral ground.  If a tripartite meeting is arranged between the heads of the three governments this could have been fruitful. That's what has been proposed in the past and I think that could be a strong message for a move forward but Iran’s involvement is necessary. 


Mr I L Budhiraja: You said that you believe that Pakistan is going to be a big producer of gas.  You could consider India's involvement in the exploration process, and it would be in our mutual interest to bring that gas to both our countries.


Mr Aminuddin: I think the only gas that could be brought from Pakistan into India is either from the Sind area or deep-water offshore gas. The most feasible would be the Gwadhar Iran coast or the Indus Basin.  We have only started exploration in the area.  We have professionals who think that the hydrocarbons would lie in the Pakistani border. But there again, as I said, those are possibilities. To bring an offshore discovery it into commercial production, it would take about 7 years and almost 60 billion dollars investment for development. But in the case of Iran gas, according to the study of BHP, only about 42 months are needed to deliver gas to India from financial closure. 


Mr Vivek Karandikar: For a commodity of this nature, the suppliers generally ask for a ‘Take or Pay’ contract.  In the situation involved here would there be matching “Deliver or Pay’ commitment coming from the suppliers?                         


Mr Aminuddin: There could be many permutations in many areas that we have broadly covered like buying, selling and transit of gas.


Mr R P Sharma: You said that this pipeline could be built in two or three years. If you take the case of Iran they allocate a particular block for each project. There are a number of blocks and each block is assigned for a particular project. They have allocated about seven blocks, which are exclusively for Iranian requirement. Then there are blocks for export. For each LNG terminal they have assigned a special block. But for this project they are yet to identity a block.  Since our friends are here they should really look into it and in case project is on, they should think of setting up a block for this project.


Chairman: Any view from the Iranian representative, in general? I am not talking of this in particular.


Mr M H Baniasadi: I absolutely agree. We are waiting and watching for you to decide.  Any time and anywhere the Iranian government is ready to submit to the Head of the State to go ahead with this project but we are waiting for you to go ahead.


Mr D V Kapur:  As the minister has said Pakistan did not quote the $ 700 million transit fee.  It was probably an Iranian statement.  No Pakistani representative has said that the price will be 2 dollars at the Pakistan border. If these two statements are of Iranian origin, then, to my mind, this project is not there.  If the gas is 2 dollars at the Pakistan border plus 700 million dollars of transit fee plus transportation cost up to India then this project is going to be non-viable. Iran must clarify that.


Mr Baniasadi: Lets first sort out our brotherhood and then discuss other points. 


Mr D V Kapur: This clarification on pricing might enhance this project.


Mr Baniasadi: Naturally.  As the minister said, there are a lot of agreements that will be signed with the different groups and they will cover this issue.


Mr D V Kapur:  I am not talking of a very specific price but some range of price, which is far away from what was said because this current range will make - as any professional will tell you - the project unviable.


Mr Baniasadi: I think that the political will of Iran will support this project and help it to come to agreeable terms.


Mr Aminuddin: I think perception is very important.  Iran has to understand that both Pakistan and India can and will survive without Iranian gas.  We can also survive without transit fee, it is not an issue. We survived for 54 years without it and we could survive for another 54 years.  We also propose, as any country would do -Pakistan and India - a move towards self-sufficiency.  In this situation there are endless efforts to develop alternative sources. I think this perception should be understood by now.  India will survive without the gas and so will we.  I think that is an important factor. 


On the question of involvement of international consortia, I think dealing with institutions like IMF, World Bank, Asian Bank is not easy. I would not like to say much more on that.  Pakistan has just come out of the dictates of IMF.  With the capability of our capital markets, our private sector I think we can do it ourselves. We have the technical capability. We have the brainpower.  I have posed this idea in the form of South Asian Infrastructure Fund.  There are funds from the private sector. There are pension funds and so on and so forth and the whole variety of combinations. This is the first time that I have come forward or perhaps anybody has come forward, with the idea of joint stakeholders because I sincerely believe that stakeholders are the best security.  When you are putting your own money in, you are very concerned about security. So, it is this broad spectrum of funding of a project from the stakeholders within the three countries.

Chairman: The consensus that I gather here is so strong that it is very easy for me to summarise five pints on what this round table recommends:


§   There should be discussions on energy co-operation between the two countries, particularly in the private sector.

§   Tripartite discussions including Iran should also take place.

§   There is consensus that while discussing the pipeline you would also take the LNG into mind.

§   Cost effectiveness is very important and that element has to be considered because without that nothing can move further.

§   Finally, the idea of the South Asian Infrastructure Fund has been mooted should be discussed further, particularly with the private sector of the two countries.





                           Trends in the Indian Petroleum Sector

Item                                                                                      Percent change over

                                                                                                  previous year

                                          2000-01           2003-04           2001-02           2003-04

                                                                  (million tones)

1.  Crude oil production    32.43              33.38              -1.2                   1.0


i) On-shore                       11.79               11.46               0.8                   -0.1

a)               ONGC               8.43                 8.39               2.5                   -0.7

b)               OIL                   3.28                 3.00              -3.0                   1.7

c)               JVC                   0.08                 0.07            -12.5                   0.0


ii) Off-shore                     20.64               21.92              -2.4                   1.6

a)               ONGC             16.63               17.68              -3.4                   0.7

b)               JVC                   4.01                 4.24               1.5                   5.7


2.  Refinery crude           103.44             121.84              3.7                   8.2



3.  Production on POL      95.61             113.46               4.6                   8.9

     products of which

     Production from            2.05                  2.32               -                       -



4.  Natural gas production 29.48              31.96               0.8                   1.8

     (Billion cubic metres)


Source: Ministry of Petroleum & Natural Gas.







As far as possible, text is reproduced word for word in order to avoid misinterpretation. 


Disclaimer: All views expressed above are those of the speakers.









India's crude reserves may exhaust in 20 years


July 15, 2004. India's crude oil reserves are likely to be exhausted in less than 20 years from now, while its natural gas reserves will last another 28 years, oil and gas industry experts said at a CII lecture. At the current rate of production, India has only 18-20 years of oil buffer and about 28 years of gas reserves.  The recent gas finds - 14.5 trillion cubic feet (tcf) in offshore Andhra Pradesh and 4-5 tcf in offshore Orissa by Reliance industries and ONGC's discovery of large oil and gas reserves both on the east and the west coast - will augment natural gas production in the country.  It is estimated that natural gas production will reach 195-200 million standard cubic meters per day (MMSCMD) in 7-8 years from the current levels of 81 MMSCMD. India is 70% import-dependant to meet its 120m tonnes of crude oil requirement.  Oil production will peak in less than 10 years time which emphasises the need for a national energy security plan for a unified approach to energy security. 


New taxes to hit ONGC profits


July 14, 2004. Oil and Natural Gas Corporation said that new taxes imposed in the federal budget will hit its 2004/05 profit by Rs 3 billion ($65.72 million).  Preliminary estimates say that it would cost ONGC about Rs 3 billion a year on the bottom line. The Budget had imposed a 2 per cent additional levy on all taxes and also introduced a 10 per cent service tax on surveys conducted by oil exploration firms.


Gujarat Petroleum postpones drilling


July 14, 2004. Technical delays on the Perro Negro 3 has forced Gujarat Petroleum to push back plans to spud the first well at its KG offshore NELP-III block KG-OSN-2001/3. High expectations surround the prospectively of this block where GSPC (80%) and partners GeoGlobal of Canada (10%) and Jubilant Enpro of India (10%) were hoping to spud the well by the end of June. Current plans are to spud the well at the end of the end of July.  The rig was already on location and its equipment was being tested ahead of drilling when problems arose with the engine. Attempts to repair the engine failed, forcing Saipem to replace it. Perro Negro 3 is on a four-firm, six-optional well contract and is sitting in water depths of between 20 and 40 meters. Target depth for the first well is around 3,500 meters.


Govt turns down ONGC's joint venture proposal


July 15, 2004. The Government has turned down public sector undertaking (PSU) Oil and Natural Gas Corporation's (ONGC) proposal to operate its retail and shipping business through joint ventures where it holds 49 per cent. It has argued that such joint ventures are not bound by mandatory checks of PSU watchdogs such as the Central Vigilance Commission given the joint venture's non-public sector status. ONGC, in a board proposal had proposed that it be allowed to set up a joint venture company with 49 per cent equity that commissions retail outlets. Further, the joint venture undertakes quick investment decisions that cannot await procedures that public sector undertakings are mandated to follow. As part of the twin proposal, it has also proposed to lease its shipping assets to a joint venture company consisting of shipyards and service firms, both in the public and private sector.


ONGC in talks for coal gasification projects


July 18, 2004. As part of its strategy to find out alternative sources of gas, ONGC Ltd is actively considering exploitation of coal gas from virgin coal deposits by introducing "underground coal gasification (UCG)" technology with Coal India Limited (CIL). If it turns out to be commercially viable, ONGC's move is sure to give a major boost to a number of natural gas-based industries in the country.  ONGC is learnt to have identified NMRC-Skochinsky Institute of Mining, Russia, as a consultant for the UCG application. The UCG process is a new method for exploitation of coal deposits by "in-situ" coal conversion to a fuel. Under the process in question there is no need to develop a virgin mine. CIL has been approached because it has many identified virgin coal blocks under its command, which are planned to be developed during the Tenth and Eleventh Plans.




MRPL refinery running above capacity


July 14, 2004. Mangalore Refinery and Petrochemicals Ltd is processing 240,000 barrels a day of crude oil, company chairman Subir Raha told reporters. "The demand is good and we are running the refinery at 20 per cent above the name-plate capacity," he said, adding the company planned a two-week maintenance shutdown by September.


IOC offers HPCL 25% stake in Panipat refinery


July 14, 2004. The country's largest oil refining and marketing company, IndianOil has offered Hindustan Petroleum an equity stake in its 6-million tonne (mt) Panipat refinery. The two companies will form an unincorporated joint venture, in which HPCL will be a financial investor and have access to up to 3 mt of petroleum product. IOC will handle the operations and maintenance of the refinery. The Panipat refinery is currently being expanded to 12 mt and IOC has already drawn up further plans to raise it to 15 mt. HPCL has the option of picking up a 25% stake in the venture, at a price to be decided after valuation. HPCL's product offtake will be linked to the stake it acquires in the refinery. A product-sharing arrangement, which is very common in upstream oil production fields, will be tried for the first time in a refinery project in India. 


Gail taps Mitsui for HDPE plant technology 


July 16, 2004. Gail (India) Ltd has signed a technology agreement with Mitsui Chemicals Japan for setting up a new, dedicated high density poly-ethylene (HDPE) plant with a capacity of 1,00,000 tonne per annum (tpa) at its petrochemical complex at Pata in Uttar Pradesh. The project, with an estimated cost of Rs 4.67 billion, is scheduled for completion by April 2006.  The plant shall also have the capability to produce MDPE and PE-100 grades.  Gail already operates an HDPE plant of 100,000 tpa capacity based on Mitsui's technology at its petrochemical complex at Pata. WIth this addition, the company's present polymer capacity of 310,000 tpa will increase to 410,000 tpa with the new plant being set up. 


Transport / Trade


Kochi project hinges on LNG sale


July 14, 2004. The Kochi project of Petronet LNG Limited (PLL) will be implemented only if the company is assured of selling at least 60 per cent of its proposed import of liquefied natural gas (LNG). PLL, a joint venture company promoted by GAIL (India) Limited, Oil and Natural Gas Corporation, Bharat Petroleum Corporation and Indian Oil Corporation, had decided to put up a 2.5 million tonnes per annum (mmtpa) LNG terminal at Kochi.  The Kochi terminal was conceived in view of the proposed expansion of Kayamkulam power plant of the National Thermal Power Corporation (NTPC).  Land for the project was allotted at Puthuvypeen Island. PLL completed pre-project engineering activities and obtained necessary clearances and approvals from concerned departments. 


Gail targets expansion in Egypt


July 15, 2004. Gas authority of India Limited (GAIL), which already has two city gas business ventures operating in Egypt in association with Shell International, is close to acquiring equity in a third company in Egypt. The move is expected to enhance GAIL's stature in the gas distribution domain. In the domestic market, GAIL is contemplating to expand its city gas distribution business to 22 more cities in addition to its operations in Delhi, Mumbai and Hyderabad.  Some of the cities where GAIL would be entering the city gas business were Agra, Lucknow and Bareily. These cities will be covered through a joint venture project with the Indian Oil Corporation.


Seventeen firms to support gas grid: Gail


July 16, 2004. Gail (India) Ltd claimed the support of 17 companies for its "right" to implement the Rs 230 billion National Gas Grid spread over 8,000 km.    British Gas, Exxon, Indian Oil Corporation, Hindustan Petroleum, Oil and Natural Gas Corporation, Gujarat State Petroleum Corporation, Gujarat Gas, Oil India Ltd, Assam Gas, Indraprastha Gas, Kochi Refineries, AP Transco, Confederation of Indian Industry and Ficci are among the agencies which have supported Gail's proposal, company executives said.  The government is, however, yet to finalise the gas pipeline policy.  Gail was offering competitive pipeline tariff, which was 16 per cent lower than private players.  According to GAIL entry of large number of players would result in setting up of parallel pipelines and sub-optimal capacity utilisation.  It envisages a single agency building inter-state transmission grid should be implemented based on international standards. 


Kerala pleads for Kochi LNG project


July 15, 2004.  In a letter to Mr Chandran Pillai, CITU leader and M P (Rajya Sabha), the Union Petroleum Minister has said that the terminal would come up if the PLL tender becomes acceptable to the NTPC or there were other users to absorb 60 per cent of the capacity of the terminal. "As LNG projects have strict `Take or Pay' Clause, PLL will take steps to execute the project if either their bid is accepted by NTPC or alternative marketing tie-ups for at least 60 per cent of the proposed terminal capacity is achieved," the letter said.  Mr Pillai aid that the Union Government should initiate steps to make the NTPC the anchor customer of the terminal. According to him, there are chances that the terminal would be shifted to Kayamkulam where the NTPC has its power plant, which would be expanded to 2,300 MW using LNG in the next Plan from the present naphtha-fuelled 350 MW. Since an international container transhipment terminal is expected to come up in Kochi soon, locating the LNG terminal here at a faster pace would be in the interest of the industry in the State, he claimed. Surprisingly, he said, GAIL, which is a stakeholder in PLL had also participated in the tender for supply of gas to NTPC.


Gail plans to invest $5 billion in national gas grid


July 17, 2004. India's largest natural gas transmission company, GAIL Ltd., plans to invest about Rs 230 billion ($5 billion) in a national gas grid which will help bridge the country's widening energy gap and enable industries to switch to cleaner fuel, the company's chairman said yesterday. GAIL did not give a timeframe for completing the grid, which will not only create an integrated domestic market for natural gas, but also link into supplies from Iran, Turkmenistan, Bangladesh and Myanmar. The state-owned company has already completed construction of a 610-kilometer pipeline to transport gas from Dahej port on the western coast to Vijaipur in central India. The company plans to build eight more such pipelines across the country to complete the grid.


Reliance petitions government on Kakinada-Uran pipeline


July 18, 2004. Reliance Industries has petitioned Petroleum Minister Mani Shankar Aiyar to secure the right to lay a pipeline for transporting gas from its gigantic gas field in Bay of Bengal to the customers in the western India.  At issue is securing the rights to implement the 1,400-km gas pipeline from Kakinada in Andhra Pradesh to Uran in Maharashtra for feeding National Thermal Power Corp's Kawas and Gandhar projects with the D6 gas find it made in Krishna Godavari basin, off the Andhra coast. Reliance stated that it had contractual rights under the New Exploration Licensing Policy, under which it won the D6 block through competitive bidding, to market produce from the block and it proposes to use substantial volumes of gas for captive use in its own plants located in west and north India.  The Kakinada-Uran pipeline was crucial for the company to meet the contract it had won from NTPC for supply of gas for 17 years at a delivered price of 2.97 dollars per mmbtu.


Policy / Performance


Four Indian oil companies in Fortune 500


July 14, 2004. Four Indian companies, Indian Oil, Bharat Petroleum, Hindustan Petroleum and Reliance Industries, are in this year's list of 500 top companies worldwide compiled by Fortune magazine. Hindustan Petroleum, Bharat Petroleum and Reliance Industries made it to the list this year, while Indian Oil improved on last year's position. However, none of them were listed among the Top 50 Asian companies.  Indian Oil, with a revenue of more than $25,316 million, was ranked 189th, a slight improvement over last year's 191st position. Its revenue, the magazine said, increased 12.5 per cent since 2002 and profits at $1,631 million were up 19.9 per cent.  The company employs 37,158 people and its assets have been estimated by the magazine at $13,956.6 million.  Bharat Petroleum, with a revenue of $12,053.7 million, trails at the 450th position. Its revenue is up 16.1 per cent since 2002 and profits at $442.8 million have gone up 38 per cent.  At 462, Hindustan Petroleum is next, with revenue of $11,750.5 million and a profit of $430.2 million. Its revenue since 2002 has gone up 12.9 per cent and profits by 41.8 per cent.  Reliance Industries follows at the 482nd spot. Its $11,327.7 million revenue shows an increase of 19.4 per cent since 2002 and its profits at $1,125.5 million are up 32.7 per cent.  


High oil taxes make people work harder 


July 14, 2004. A National Bureau of Economic Research (US) working paper by Sarah West and Roberton Williams examines the impact of gasoline prices on work decisions in trying to arrive at an optimal gasoline tax. The paper argues that the tax on gasoline should equal the cost to society of its use. The lack of incentive for users to curb gasoline consumption stems from the fact that the costs - pollution, accidents, noise and traffic congestion - are borne by others, points out the report. It says, "If the gas tax equals marginal damage, then the cost of gasoline to the driver is the same as the cost to society". The ideal gasoline tax policy according to West and Williams should depend on how gas prices affect work decisions. Whether a tax increases or decreases the effort put into work depends on what impact it has on leisure activities. And as higher gasoline taxes make leisure driving more expensive, it could encourage people to spend more time at work and enhance output. Their empirical study seems to indicate that this is actually the case. An increase in gasoline tax and reduction in income tax prompts people to work more.  The study reveals that a 10 per cent increase in gasoline prices leads to a 4.3 per cent decline in consumption - roughly 37 gallons per household per year. Such an increase also results in an increase in hours worked by 0.07 per cent - 2 hours per household per year. While this might look very insignificant in terms of the total hours worked, the authors argue that it still substantially increases the optimal gas tax as the labour market is far larger than the gasoline market. Their optimal gas tax stands higher at $1.19 than the 88 cents per gallon estimated by researchers based on marginal damage, due to the work encouragement factor.


Revised Tapti gas price ceiling unwelcome


July 15, 2004.  The recent revision in the ceiling prices of the gas from the Tapti fields has come under attack from its buyer, Gail India Ltd.  The Tapti consortium that includes British Gas, ONGC and Reliance, had been selling gas to the government nominee Gail, at a ceiling price of $3.11 per mmbtu till June this year. However as per the provisions in the production sharing contract (PSC) the consortium was allowed to review the price band after seven years.  The latest revision in the ceiling prices is as per the laid down formula of taking the average prices of the designated fuel oil basket in the last 18 months. Given that fuel prices have remained firm in the last few months, the consortium has upped the ceiling price to $5.57 per mmbtu. However, this is way above the average gas prices of even private players. Most gas consumers buy the fuel at administered rates which are heavily subsidised. The Tapti consortium price fixed in 1997 which set a floor of $2.11 per mmbtu and a ceiling of $3.11 per mmbtu was based on a crude price ranging between $16 to $20 per barrel.  While sources in the consortium say that the revision in prices is only as per the PSC provisions Gail officials say that it has to have parity with market realities.


Gail plans to raise $150 million via ECB


July 16, 2004. Gail (India) Ltd said it proposes to raise $150 million through external commercial borrowing (ECB) to part fund its capital expenditure of Rs 37 billion during the current financial year. The company has also lined up investments of Rs 107 billion in putting up petrochemical plants in southern and eastern parts of the country.  The company proposes to raise Rs 24 billion debt during the year to meet its investment requirements. The ECB is expected to be completed in the next two-three months. Gail proposes to borrow $100 million with a green shoe option to retain an additional $ 50 million.  Of the Rs 37 billion investments during the year, over a third amounting to around Rs 25 billion will be invested in pipeline projects and about Rs 4 billion is proposed to be invested to expand the capacity of its Pata Petrochemical Complex. Gail has already borrowed Rs 5 billion loan from Bank of India and will draw another Rs 2 billion from the State Bank of India.  Of the Rs 107 billion investments in petrochem, Rs 70 billion would be spent on a complex in Kasargod (Kerala) and Rs 25 billion in the Assam Gas cracker project. The Kasargod plant will produce 800 kilo tonnes ethylene annually and 400 kilo tonnes of propylene. 


No oil price hike this month


July 16, 2004. The public sector oil companies have decided not to hike fuel prices, at least for the current fortnight, and instead absorb the likely increase in prices.  The hike in fuel prices in the current fortnight was mooted earlier as the UPA government is yet to finalise the pricing policy for the sector and the Finance Ministry has turned down the Petroleum Ministry's proposal for reduction in customs duty on petroleum products including petrol, diesel and kerosene. Ministry sources said the absorption was possible as the proposed hike was marginal - less than Rs 0.50, and this was coupled with the transporters request of keeping the prices unchanged. Even though the price hike was a better option, it was kept unchanged as the price-band formula is yet to be worked upon.  The industry that has been hit hard because of imposition of service tax and an additional cess on top of international crude price hike has been vying for an increase in prices. The Petroleum Ministry also favoured fixing a limit on upward and downward revision of prices, sources said adding that no concrete decision to this effect has been finalised.  The customs duty on petrol and diesel is at present 20 per cent and that on LPG and kerosene at 10 per cent. This is particularly hitting the domestic oil company’s bottom line as they are unable to determine the selling prices. To this effect, the Petroleum Ministry has proposed to Finance Ministry to make a comprehensive pricing policy to ensure consumers' protection in time of high volatility in international crude prices. Consumers at large have to shell out a massive Rs 190 billion every year on fuel prices, taking into account the customs duty component on retail pricing, the sources said. The subsidy burden too has taken toll on oil PSUs profitability, last fiscal, the net profit of oil PSUs in total was to the tune of Rs 330 billion and even as the figures may remain unchanged the companies are apprehensive of the impact of service tax and cess blow.


Oil companies face Rs 50 billion-subsidy bill


July 20, 2004. Oil marketing companies - IOC, HPCL, BPCL and IBP may have to absorb 80 per cent of the subsidy bill for cooking gas and kerosene is estimated to reach Rs 50 billion by the end of Q1 2004-05. The budget has provided for less than Rs 9 billion per quarter.  It is estimated that market leader IOC will bear a subsidy bill of Rs 24 billion but will manage to retain its profits at last year's levels, thanks to the high refining margins. The performance of the other oil companies may not be as bright.  While IBP is set to register losses (being an exclusive marketing company), BPCL and HPCL may also find the going tough. Last year, while the oil marketing companies managed to record higher profits despite the subsidy burden companies like ONGC recorded a fall in their net profits by 17% primarily due to the subsidy burden and the appreciation of the rupee. However, oil-marketing companies who are forced to foot the shortfall in the subsidy bill have pressed that the entire industry or all stakeholders including upstream companies should share the subsidy burden. 


ONGC, Gail to bear LPG, kerosene subsidy burden


July 19, 2004. Oil and Natural Gas Corp and Gail may continue to bear a part of the Rs 90 billion under-recoveries estimated on LPG and kerosene due to no change in their prices despite rise in the cost and a cut in the government subsidies. The subsidy-sharing scheme being drawn up by the Ministry of Petroleum and Natural Gas may see petrol and diesel cross-subsidise LPG and kerosene with both upstream and downstream firms sharing half of the estimated under-recoveries.


Oil Pricing: Single hybrid price band model


July 20, 2004. The government has finalised the package on pricing of domestic petroleum products by the oil marketing companies (OMCs) in the wake of price fluctuations in the international oil market. In a note (dated July 13) prepared for the committee of secretaries (CoS), the petroleum ministry has decided on a "single hybrid price band" model, with a width of plus-minus 10 per cent, for autonomous adjustment of petrol and diesel prices by the oil companies. Alongside, instead of considering the FOB prices, the band will be linked to the exchange rate adjusted C&F prices of products. This will help the oil companies to factor in the rupee-dollar variations while deciding on the pricing of these two products. As per the final proposal, OMCs will be allowed to, without any prior consultation with the government, decide the retail selling prices of petrol and diesel based on the previous fortnight's average international price. The caveat: this will be permitted, provided "the exchange rate-adjusted C&F product price is within a band of plus-minus 10 per cent of the mean of last three month's rolling average prices and last one year's rolling average prices".






IL&FS to set up ONGC’s Tripura station


July 12, 2004. Infrastructure Leasing and Financial Services (IL&FS), and the Oil and Natural Gas Corp (ONGC), have entered into an agreement to set up a gas based power project in Tripura. The proposed plant will utilize ONGC’s 4 mscmd capacity in the state which is currently producing only 1.45 mscmd on account of weak demand. ONGC is likely to retain a 51% controlling stake in the plant with the rest coming in from IL&FS and other FI’s. Power from the proposed station is likely to be evacuated to the north western states and discussions with the Power Trading Corporation Ltd, PTC, are reportedly underway.


Reliance proposes 2000 MW plant for AP


July 16, 2004. Reliance Power has proposed setting up a 2000 MW gas based plant at Kakinada in Andhra Pradesh to utilise its gas reserves in the Krishna-Godavari Basin.  The plant has been proposed on the lines of the Dadri mega power project in UP which could eventually be scaled up to 8000 MW. The company is seeking a UP like package for the Andhra project and is yet to submit a detailed project report for the project. The Reliance offer is a quick response to chief minister Y S Rajasekhara Reddy’s invitation to utilize the gas finds for the state’s energy requirements.


Damodar Valley Corporation Projects update


July 15, 2004.The 630 MW Mejia Thermal Power Station (MTPS), of the Damodar Valley Corporation, DVC, is set to emerge as the company’s biggest generating station with the commissioning of the 210 MW unit 4 later this year. With unit 4, MTPS’s total installed capacity will reach 840 MW shifting the 780 MW Chandrapura Thermal Power Station (CTPS), to 2nd place. The MTPS has had troubles since commissioning of its 1st unit in 1997 but the plant reported a net profit of Rs 25.82 billion in 2003-04 and even surpassed its generating target and clocked 4026 million units. However, coal supplies at the station remain a cause of concern with both poor quality and non-availability forcing backing down of generation. Each of the 210 MW at MTPS requires 1 million tonnes of coal per annum and despite a dedicated merry-go-round system of coal dispatch agreement with Bharat Coking Coal Ltd the plant is often forced to go days without fresh supplies of coal.


Orissa Pit Head Power Project draws interest


July 19, 2004.The Orissa government’s decision to set up pit head power generating stations has drawn interest from three companies which include the Tatas, Neyvelly Lignite Corporation and MGM of Bangalore. Neyvelly Lignite has come forward with a 200 MW coal fired power plant at Banharpali while MGM, Bangalore has sought approval for a 1000 MW power station at Jharsuguda. The Tatas keen to set up a coal based station at Talcher are yet to announce the size of the proposed station. The 3 proposed stations are located close to the Talcher-Ib Valley coal belt.


1,015 MW Nagarjuna power plant on course 


July 18, 2004. Nagarjuna Power Corporation Ltd’s (NPCL), proposed 1,015-MW thermal power plant is likely to commence construction by the end of the year. The 507.5* 2 MW station is likely to be operational in 38 months from the date of financial closure. The plant is likely to go commercial in 2008 and deliver power at Rs 2.1 per unit during the 1st year of operation. The coal fired plant will source coal form Australia, South Africa and Indonesia through the Mangalore port and transport the same to the plant by rail. The station has already received all statutory clearances from the government.


S Kumars Maheshwar Project facing trouble 


July 19, 2004.The S Kumars promoted 400 MW Maheshwar project has come under FI review over lack of progress on the project and the promoter’s lag in filling up the equity component. The Rs 22.81 billion project has already had cost escalation from Rs 22.34 billion since appraisal in March 2003. Lenders including IFCI, along with banks and other financial institutions are reviewing the project where project work has been at a standstill since October 2001. The S Kumars are required to infuse Rs 1.85 billion in an equity component of Rs 7.5 billion in the project while project debt of Rs 14.941 billion in rupee terms is expected to finance the rest.


Transmission / Trade


MMTC eyes power trading business 


July 14, 2004. The state owned Minerals and Metals Trading Corporation (MMTC), is eying diversification into the power trading business and has approached the Central Electricity Regulatory Commission (CERC), for grant of an inter-state trading licence. MMTC, the biggest trading house in the country, has applied for a Category ‘C’ licence and is targeting power trade of 200-500 million units during 2004-05 which would eventually go up to 3,000 million units over the next five years.


Rural electrification agreement signed


July 15, 2004. The Rural Electrification Corporation (REC) has signed a significant agreement with the Power grid Corporation of India Limited (PGCIL), and National Hydroelectric Power Corporation (NHPC), to take up rural electrification throughout the country. The partnership as part of the government’s Accelerated Rural Electrification Programme (AREP), is soon expected to include the National Thermal Power Corporation (NTPC), and Damodar Valley Corporation (DVC), in its fold. PGCIL, NTPC and NHPC collectively own a third of the nation’s generation and transmission assets and the coming together is expected to help push the government’s ambitious target of electrification of 125,000 villages through an earmarked fund of Rs 170 billion.


Power Grid Corp. to revamp Western Grid 


July 19, 2004. Power Grid Corporation of India (PGCIL) is launching an ambitious program to refurbish the Western Grid with a total outlay of Rs 38.9 billion. The projects to be implemented through the joint venture agreements will involve strengthening of the transmission infrastructure in Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh and Goa. PGCIL is undertaking the mammoth exercise in view of the grid disturbances during November December 2003 and the exercise is directed to ensure that the voltage on all 400 kv lines never drops below the 360 kv mark. The Western Region has a thermal hydro mix of the order of 84:16 with a total installed capacity of 31,564.22 MW.




Reliance revises tariffs in Mumbai


July 19, 2004. Reliance Energy (REL), following a Maharashtra Electricity Regulatory Commission (MERC), order has decided to slash average tariff by 8.5% in the city. The revised tariffs are to come into effect from July 1, 2004 and will benefit approximately 2.2 million consumers in the financial capital of the country. The utility is also expected to carry out a refund of excess security deposit which has now been limited by the commission to one month billing amount as per the average consumption over the last 12 months. In addition, the utility has also made its tariffs telescopic in nature wherein consumers with high consumption will pay higher tariffs only for excess consumption and enjoy lower tariffs for the initial units. Also, the fuel adjustment charge (FAC), has been done away with in the recent tariff order and merged with the basic tariff applicable to all consumers.


Policy / Performance


Power producers target IPO’s


July 13, 2004. The poor market perception to energy stocks withstanding, domestic generating companies Jaiprakash group and the Gujarat Industries Power Company (GIPCL), are planning public issues to fund their expansion plans. The Delhi based Jaiprakash group is targeting to raise Rs 3-3.5 billion through its IPO while the GIPCL, already listed on the BSE,  is looking at nearly Rs 15 billion to chart out its aggressive growth plans. The two companies’ are likely to approach the market during the 3rd quarter of the current year. 


Kerala power tariffs remain unchanged


July 12, 2004.The government of  Kerala has decide not to go in for a tariff hike in the state despite the State Electricity Board (SEB), showing a shortfall of Rs 296 crores for the current year.  The state electricity regulator had earlier suggested that the government write off Rs 2 billion and provide the SEB a subsidy of Rs 960 million. The SEB is also expected to receive Rs 800 million from the Accelerated Power Development and Reforms Programme (APDRP), as reward for efficiency improvement in the state.


AP says no to free power for domestic users 


July 12, 2004. Andhra Pradesh State Finance Minister, Mr K. Rosaiah has clarified that the state government was not evaluating any proposal for supply of free power to domestic consumers in the state.  The minister has also stated that the government was working on a policy for free power in the state which would be unveiled soon. It may be recalled that the congress government in AP was the first to ride to office on the ticket of free power for farmers in the state in May 2004.The cue, since than has been picked up by other sates slated to go for polls in the near future. The notables among them are Tamil Nadu, Karnataka and Maharashtra.


Maharashtra’s free power bill: Rs 20 billion


July 12, 2004. The Shiv Sena supreme Bal Thackeray’s promise to go in for free power for power for farmers on return to power is likely to cost the debt ridden state of Maharashtra an additional Rs 20 billion per annum. The state currently has 13 million electricity consumers 35% of whom are agricultural consumers. As per the proviso of the Electricity Act 2003, the state government will be directly required to compensate the restructured SEB through budgetary provisions should it decide to provide free/subsidized power to select consumers. The state government is already reeling under the Rs 850 billion debt burden and would be hard pressed to find resources for the proposed political largesse.


Planning Commission to review IPF equity


July 13, 2004.The Planning Commission is expected to hold a special meeting on the issue of the government's participation in the Power Finance Corporation’s proposed India Power Fund (IPF).  The IPF floated by the Power Finance Corporation seeks to meet the equity requirements for the power sector in the country. The PFC had made an initial contribution of Rs 2 billion to the fund in February 2004 with in-principle commitments from Punjab National Bank, Canara bank and other FI’s for contribution to the corpus. However, participation by PSU’s like NTPC etc have to cleared by the Cabinet Committee on Economic Affairs (CCEA). The IPF was launched to develop a corpus of Rs 70 billion over time to meet about 10% of the Rs 700 billion equity required for power projects in the country till 2012.








Oil discovery offshore Gabon at 6,600 barrels per day


July 13, 2004. Pan Ocean Energy Corporation Limited  announced today that its EAVOM-1 well, offshore Gabon, has been confirmed as an oil discovery following a drill stem test of the vertical well which flowed 6,600 barrels oil per day (b/d) of 37 degree to 38 degree API crude. EAVOM-1 flowed oil on a 40/64 inch choke from six metres of perforations in the Gamba sandstone section at a flowing wellhead pressure was 5,143 kPa 746 psi). Currently the partners are performing additional tests of a lower interval after which the plan is to suspend the wellbore in the normal course. EAVOM-1 is the second discovery made on the Etame permit this year. PanOcean holds 33.9% interest in both wells. EAVOM-1 is located within the Etame Permit approximately 16.5 kilometres southeast of the main Etame field, which is currently producing 15,000 b/d.


Gas, oil discovery in Pakistan    


July 15, 2004.  The government announced the success of an oil and gas production well in Sindh by the private operator namely Orient Petroleum. This would suffice import substitution to the tune of 25 million dollars from the overall oil import bill of over 3 billion dollars annually. The government was committed to raise the oil and gas production in the country in order to curtail the dependence on the import of oil. So far, Pakistan has been able to generate not much more than 15 per cent of its annual requirement and the rest of the petroleum required is imported.  A plan was underway to enhance the oil production in the country by increasing the oil production from 600,000 to 100,000 barrels and the natural gas from three to five billion cubic feet per day in the next few years.


Unocal eyes first gas sale in Vietnam by 2008


July 13, 2004. U.S. energy firm Unocal aims to earn revenue from its vast natural gas reserves in Vietnam by 2008 at the earliest when it starts supplying gas to a major power plant in southern Vietnam, the company's top executive said on Tuesday. Unocal had invested around $190 million in exploration the last 10 years but did not detail the revenue forecast from the gas sales.  The oil firm has said it had around 10 trillion cubic feet of gas in its three blocks offshore southern Vietnam and its focus now is to bring that gas to market.


Development agreement signed for Namibia 


July 13, 2004. Tullow Oil PLC, Dublin, reported that its subsidiary Energy Africa, operator of Kudu gas field off the southern Africa nation of Namibia, has begun Phase II predevelopment following the signing of a joint development agreement with Namcor-the National Petroleum Corp. of Namibia and Tullow's 10% partner in the field-and with Namibian power utility company NamPower relative to the planned development of Kudu field as part of a gas-to-power project.  Gas would be piped to shore for treatment and delivery to an 800 MW power station near Oranjemund to be developed and operated by NamPower with technical assistance from South Africa utility Eskom.


Pakistan invites bids for exploration rights


July 14, 2004.  The Ministry of Petroleum and Natural Resources (MPNR) has sought bids to grant petroleum exploration rights of five blocks in offshore Indus in Sindh. The ministry has floated an international tender recently to seek interest from parties for carrying out exploration activities in offshore Indus-J, K, L, M and N. The technical identification of the area is block No 2266-4, 2266-5, 2265-2, 2366-4 and 2366-5 in Zone-0 of Sindh province. The parties will submit their bids to the ministry on August 12 after which it would be examined whose offer is the best.


World oil demand likely to ease by 2005


July 13, 2004. World oil demand will continue to grow rapidly in '05 fed by global economic expansion, though gains will not be quite as dramatic as this year, the International Energy Agency said. Global fuel consumption is forecast to grow by 1.8m barrels per day (b/d) or 2.2% to 83.2m b/d next year, said the IEA, which advises 26 industrialised nations on energy policy. It would mark only a modest slowdown from a 2.5m b/d jump projected for this year, as China and the United States drove the fastest growth in 24 years. 


Board concerned over Iraq oil production


July 14, 2004. The international board charged with monitoring Iraq's oil revenue says it is concerned about the lack of equipment measuring how much crude is being extracted and about contracts awarded by the former U.S.-controlled administration without competitive bidding. In a report to the Security Council, the board raised several "areas of concern" about the Development Fund for Iraq and the country's oil production and sales which it said could be used to divert money from the reconstruction fund. The International Advisory and Monitoring Board was authorized by the Security Council in May 2003 to ensure the "transparent" operation of the fund, which was set up at the Central Bank in Baghdad to receive Iraq's oil revenue and frozen assets from the ousted regime led by Saddam Hussein for use in rebuilding the country. The fund was controlled by the United States and Britain, Iraq's occupying powers, until the June 28 transfer of sovereignty to the new interim government. A council resolution in early June transferred control of the fund to the interim government and continued the board's mandate until after elections to be held by Dec. 31, 2005.


Non-OPEC oil supply to maintain pace


July 14, 2004. Non-Opec oil production will repeat this year's strong growth to rise by 1.2m barrels per day (b/d) in '05, spurred on by the former Soviet Union, Angola and Brazil according to the IEA.  Russia and other former Soviet states remain the driving force behind oil supply growth, although their growth rate will slow to 5,85,000 bpd versus 790,000 b/d in '04, the International Energy Agency (IEA) said in its monthly report. Africa will contribute 375,000 b/d of global growth largely from new fields in Angola, while Brazil is the main force behind 285,000 b/d in increased Latin American production next year, the IEA added. 


Exxon enters Qatar gas project


July 14, 2004.  An ExxonMobil subsidiary has agreed to build a $7 billion gas-to-liquids project in Qatar, the world's largest energy company said. ExxonMobil Qatar GTL and the Qatar government have agreed to the principal terms of the project, which will be further defined in a 25-year development and production sharing agreement.  Exxon is paying for 100 percent of the project's estimated capital cost, with production slated to start in 2011. Exxon said the facility would be the largest single, fully integrated GTL project in the world. GTL technology enables producers to turn natural gas into synthetic oil. Exxon has spent $600 million on GTL research over the past 20 years. The company signed a letter-of-intent to conduct a feasibility study on the GTL project in June 2001.  On June 24, Qatar Petroleum and Exxon announced an agreement to supply liquefied natural gas to Britain. Liquefied natural gas is natural gas cooled to liquid form so it can be transported by ship to receiving terminals where it is turned back into gas and channeled into pipelines.


Another successful well in Yemen


July 14, 2004. Vintage Petroleum, Inc. announced that the An Nagyah #8 well in the Republic of Yemen has tested light (43 degree API) oil from the sub-salt Upper Lam formation. The well, an appraisal well defining the eastern limit of the An Nagyah structure, was drilled to continue the evaluation of the sub-salt Lam formation and is the fourth consecutive successful well drilled at the company's An Nagyah field this year. The An Nagyah #8 well was drilled to a total depth of 3,966 feet (1,209 meters). Electric log analysis indicates a gross interval of 43 feet (13 meters) that is oil bearing in this well. A 34 foot (10 meter) interval in the Upper Lam formation was perforated between 3,345 and 3,379 feet (1,020 to 1,030 meters) and tested at a stabilized flow rate of approximately 607 barrels of light, water-free oil with a flowing tubing pressure of 63 pounds per square inch. The Upper Lam interval tested in the An Nagyah #8 correlates to the interval in the other An Nagyah wells, including the #7 well which was completed in late May and delineated the extension of the structure to the west. With the addition of the An Nagyah #7 and #8 wells, combined gross productive capacity from the five wells exceeds 3,800 barrels (1,976 net) of oil per day.


Large Canadian oil sands project awarded


July 14, 2004. Fluor Corporation announced that it has been awarded a contract worth approximately $570 million for work on the Long Lake Project, a joint venture between OPTI Canada Inc. and Nexen Canada Ltd. to produce a premium synthetic crude oil from oil sands bitumen. Fluor booked the award in its second quarter. Long Lake is the country's first oil sands project to integrate steam-assisted gravity drainage extraction technology with on-site upgrading and employs a new approach to the upgrading process. Together, these provide a significant operating cost advantage over current approaches to synthetic crude production from oil sands bitumen, at a comparable capital cost. Fluor will perform detailed engineering and procurement services for the three main upgrader process units and for the utilities and offsite areas of the project. It has been extensively involved with the project's front-end engineering and design since December 2001. Spanning more than 85 square miles, OPTI/Nexen's Long Lake lease is strategically situated in an area of high-quality, high-prospective oil sands just southeast of Fort McMurray, Alberta, Canada. Long Lake's recoverable bitumen reserves and resources have been independently estimated at 1.9 billion barrels.


Pertamina close to oil exploration in Iraq 


July 14, 2004. PT Pertamina plans to conduct exploration activities in Iraq as soon as it has been formally awarded a contract on Iraq's block 3 in the Western Desert and may also undertake another exploration project equal with the Tuba field which is producing some 100,000 barrels of oil per day, a spokesman said.  Pertamina had previously delayed its exploration activities in Iraq due to the unfavorable security situation in the country following the US attack to topple Saddam Hussein. The contract in the Western Desert was given to Pertamina in April 2002 by the government of Saddam Hussein.  The Western Desert field, situated some 100 miles south of Baghdad, holds about three million barrels of oil and Pertamina had planned to invest US$24 million over a period of three years in the project.


Georgia agrees to buy Iranian gas


July 14, 2004. Georgia has arranged to start importing natural gas from Iran as early as January-February next year in a bid to guarantee its energy security and to avoid force-majeure.  The agreement was reached during Georgian President Mikheil Saakashvili's visit to Iran last week. Georgia currently receives gas produced in Turkmenistan via Russia under contracts with Russian gas monopoly Gazprom and the Itera energy group. Above all, Georgia is worried about accidents occurring along the gas pipeline that links Georgia with Russia. It is said that the infrastructure to import gas from Iran existed but needed to be rehabilitated. The pipeline runs across Azerbaijan and used to supply Georgia with gas in Soviet times. Georgian experts think it would only take four months at the most to renovate the line at a cost of approximately $1.8 million. Iranian gas was of high quality and costlier than Russian gas. Georgia received 1.009 billion cubic meters (bcm) of gas in 2003 - 257 million cu m of it from under contracts with Gazprom's export arm Gazexport and 752 million cu m under contracts with Itera.


Husky buys private firm to increase Alberta gas output


July 15, 2004. Husky Energy Inc. Canada's No. 5 oil producer and refiner, said on Thursday it bought privately held Temple Exploration Inc. for C$115 million ($87 million) to boost natural gas output in Alberta. Husky, controlled by Hong Kong tycoon Li Ka-shing, said Temple produces 18.7 million cubic feet of gas and 1,284 barrels of natural gas liquids a day in northwest Alberta's Deep Basin region. The lands are ripe for exploration, and Husky plans to drill 25 wells by 2006, it said. The deal is expected to boost earnings and cash flow per share, Lau said. Temple's proven reserves total 21.4 billion cubic feet of gas and 7.6 billion cubic feet equivalent of gas liquids, Husky said.


Industry sees 40 percent more Canadian oil by 2015


July 15, 2004. Flow of investment in Alberta's vast oil sands is projected to lift Canadian crude production by nearly 40 percent to 3.6 million barrels a day by 2015, the energy industry's main lobby group said on Thursday. That volume, which is just under the current output of No. 2 OPEC producer Iran, will be driven by an estimated C$30 billion ($23 billion) in oil sands spending to meet the growing North American thirst for secure energy supplies, the Canadian Association of Petroleum Producers said in a new forecast. The group predicted that by 2015, seven out of every 10 barrels produced in Canada will be derived from northeastern Alberta's oil sands, up from 40 percent today.


Hunt Oil signs exploration deal with Senegal


July 15, 2004. U.S. energy group Hunt Oil signed a five-year deal with Senegal's state oil firm Petrosen to explore for oil and gas off the West African country's Atlantic coast. The $9 million deal gives Texas-based Hunt the right to explore the Rufisque and Sangomare offshore blocks which cover an area of almost 15,000 square km (5,800 sq miles), a Senegalese official said. Small amounts of natural gas -- around 170 million cubic metres -- have been found off Senegal, while the waters off the Casamance region to the south contain some one billion barrels of proven but unexploited heavy oil deposits.


OPEC boosts oil output target


July 16, 2004. With the price of oil stuck above $40 a barrel, OPEC decided to raise its daily production target by 500,000 barrels, or 2 percent, in an effort to keep crude prices from lurching even higher.  The OPEC made the increase automatically, by mutual agreement, and cancelled a formal meeting it had planned for its members on July 21 at its headquarters in Vienna, Austria, said OPEC president Purnomo Yusgiantoro. The increase will take effect Aug. 1. Although oil-exporting countries are happy to maximize profits, OPEC and its de facto leader Saudi Arabia worry that global economic growth and the long-term demand for crude could suffer if prices spike to punishing heights.  However, few analysts expect the increase in OPEC's target to do much to reduce prices from current levels. Most of the group's members are already pumping all they can to satisfy strong demand, and oil markets had already factored the increase into prices. Contracts of U.S. light crude for August delivery fell 20 cents to settle at $40.77 a barrel on the New York Mercantile Exchange.


Egypt signs oil exploration deals


July 16, 2004. Egypt signed two deals for a total of 30 million dollars for a US firm and a Tunisian company to search for oil in the country's vast western desert, the Petroleum Ministry said. Petroleum Minister Sameh Fahmy signed the agreements with representatives of the US firm, Merlon, and Tunisia's HBS, a ministry statement said. The first contract, worth an estimated 18 million dollars, was awarded to Merlon, which will explore a 4,500 square kilometre stretch of desert in the Fayoum area.


Venezuela favours no output hike in oil


July 16, 2004. Venezuela could favour scrapping a 500,000 barrel per day (b/d) output increase which oil cartel OPEC plans to implement starting August 1, the country's oil minister Rafael Ramirez said.  The OPEC is expected to meet in Vienna next week to discuss production policy. The producer group had agreed in June to raise oil output by 2m b/d from July 1 and then by an additional 500,000 b/d from August 1 to help cool down oil prices, which had hit 21-year highs of over $42 a barrel.  Oil prices initially fell after OPEC agreed to the two-part output increase.  But prices for US crude futures have recently climbed over $40 a barrel again, prompting some OPEC members to say the August hike will not be up for review at the July 21 meeting. 


OPEC may cancel meet, raise supply


July 16, 2004. OPEC oil producers may cancel their July 21 ministerial meeting and simply implement a planned increase in official supply quotas, an OPEC spokesman said. OPEC will implement a planned 500,000 barrels per day (b/d) increase in formal quotas from August 1 if the meeting is cancelled. The group, which controls around half the world's oil exports, has already raised output limits by 2m b/d to 25.5m b/d from July 1 to cool prices which last month hit a 21-year high.  The increases mean little for the global 81m b/d market as OPEC members are already pumping way over limits. A survey estimated OPEC production in June, excluding Iraq, at 27.2m b/d, 3.7m b/d above the then output ceiling of 23.5m b/d. OPEC had earlier denied a report from the Qatari news agency that the meeting would be postponed. OPEC's next scheduled meeting is in September. 


Nigeria extends invitation to Algeria on Oil and Gas


July 18, 2004. Nigeria has invited Algeria to participate in the ongoing privatisation of the downstream oil and gas industry in the country as well as the next upstream acreage bidding slated for the first quarter of 2005. The invitation to Algeria came at the end of two-day deliberations between Nigeria and Algeria in Abuja where it was also agreed that to continue the exchange of information on the oil and gas value chain and the international markets to maximise the value of their hydrocarbon resources.


CNOOC/Kerr-McGee Bohai field starts production


July 19, 2004. CNOOC Ltd , China's dominant offshore oil producer, said that one of its fields in Bohai Bay had started production and was expected to pump 15,000-20,000 barrels of oil per day in the next few months. The oilfield, called Caofeidian 11-1/11-2, would produce as much as 40,000-45,000 barrels per day (bpd) by the middle of next year, the state-controlled company said in a statement. CNOOC owns a 51 percent stake in the Caofeidian field, which is 20 metres (66 ft) in water and located in the western part of Bohai Bay in northern China, it said. Oklahoma-based exploration and production company Kerr-McGee Corp. is the operator of the asset with 40 percent interest. Sino-American Energy Corp., a subsidiary of U.S. oil producer Ultra Petroleum owns the remaining 9 percent. CNOOC, which had net proved reserves of 2.1 billion barrels of oil equivalent (BOE) at the end of 2003, produced 362,672 BOE per day in the first quarter of 2004.


Husky proceeds with Alberta oil sands project


July 19, 2004. Husky Energy Inc. will go ahead with a C$500-million ($380 million) Alberta oil sands project, its first such development in one of the biggest oil reservoirs left on the continent.  Husky, Canada's No. 5 oil producer and refiner, said it had won approval from Alberta's energy regulator for the Tucker project, expected to pump up to 35,000 barrels a day starting in 2006. Tucker is located 30 km (19 miles) northwest of Cold Lake, Alberta. Husky plans to recover about 350 million barrels of tar-like bitumen there over 35 years. Construction is slated to start next year, said the company, which is controlled by Hong Kong billionaire Li Ka-shing. Husky will use steam-assisted gravity drainage to extract the oil sands instead of mining the resource, as is done at Syncrude Canada Ltd. and other major developments. The burgeoning technology involves pumping steam into the earth to loosen the bitumen deep underground so it can be pumped to the surface in wells.



Pakistan refinery suffers loss during trial run    


July 16, 2004. Bosicor Pakistan Limited, a company engaged in refining and selling of petroleum products, has recorded net sales of Rs 506.609 million during the trial period started from November last year to March 31,2004.  The cost of sales also amounted to Rs 509.246 million due to which company suffered gross loss of Rs 2.637 million during the trial production period. However, after adding administrative and general expenses of Rs 14.067 million the operating loss surged to Rs 16.70 million during the period under review. The financial charges remained firm at Rs 12.213 million while loss before taxation stood at Rs 28.917 million. Overall trial run loss amounted to Rs 31.83 million during the quarter ended March 31st this year.


Contract on ethanol-diesel signed with Saudi Arabia


July 13, 2004. O2Diesel Corporation a leading provider of ethanol-diesel technologies, announced that it has entered into a supply agreement with Al-Obayya Corp., a commercial entity owned by HRH Prince Turki Bin Abdullah Bin Abdul Aziz Al Saud, a prominent member of the Royal family of Saudi Arabia. Under terms of the agreement, O2Diesel will deliver between 10,000 to 20,000 metric tonnes (m/t) of its proprietary fuel technology that will enable the blending and use of O2Diesel(TM), the company's clean burning ethanol-blended diesel fuel, throughout Saudi Arabia and other Middle Eastern states.  Al-Obayya Corp. will work closely with O2Diesel and clients such as Saudi Aramco, the world leader in crude oil production, to distribute and market O2Diesel's cleaner-burning diesel fuel in Saudi Arabia and throughout the Middle East.


Statoil launches cogeneration, methanol expansion projects 


July 13, 2004.  A group led by Statoil ASA plans to build a cogeneration plant at the Mongstad refinery near Bergen, and a gas-fired unit at Tjeldbergodden in mid-Norway, along with an associated increase in methanol capacity. The group's overall investment requirement is 8.5 billion kroner, with Statoil shouldering 4 billion kroner. Statoil recently concluded a cooperation agreement with Elsam A/S, Denmark's largest electricity and heat producer, which would construct the Mongstad cogeneration plant and become a part owner. Statoil also is negotiating with other companies about equity participation in the power station at Tjeldbergodden. 


Transportation / Trade


Iran-Pakistan-India Gas Pipeline Vital


July 20, 2004.  Pleading for Iran-Pakistan-India gas pipeline, Union Petroleum Minister Mani Shankar Aiyar has written to Prime Minister Dr Manmohan Singh suggesting "conversation without commitment" among the Petroleum Ministers of the three countries.  In his letter written to the Prime Minister, Aiyar said that with respect to the Iran-Pakistan-India pipeline, the Iranian Oil Minister had conveyed to him, through his Ambassador, an informal suggestion for 'conversation without commitment' between the Petroleum Ministers of these three countries. He had discussed this with the External Affairs Minister, K. Natwar Singh, who is himself favorably inclined but asked Mr Aiyer to first take this up with the Prime Minister.   Backing up his proposal with an overview of the energy situation to show just how pressing the need for radical solutions is, Aiyar pointed out that while India's crude oil production will rise no more than 50 million tons over the next two years, its requirement could touch 300 million tons if it is to sustain a 7-8 per cent growth in GDP. The answer, he argued, would be to access gas wherever possible.


Indonesia asks buyers to allow delay of LNG cargoes


July 14, 2004. Indonesia is in talks with its liquefied natural gas (LNG) buyers, including Korea Gas Corp (KOGAS), to delay the supply of six term cargoes, an official of BP Migas, the government oil and gas watchdog, said. The official said the request for a delay, which was also made to Japanese utility Tohoku Electric Power Co Inc was to meet demand for gas from Indonesian fertiliser firms. KOGAS, the sole importer and wholesaler of LNG in energy-deficient South Korea, imports 5.3 million tonnes every year under three long-term contracts from Indonesia. Tohoku Electric buys three million tonnes of LNG from Indonesia a year under a long-term agreement. Indonesia is seeking to extend its LNG contracts with KOGAS for 2.3 million tonnes under a 1986-2007 deal with the Arun LNG plant. Indonesia has said it planned to export 25 million tonnes of LNG this year to Japan, South Korea and Taiwan.  Indonesia plans to deliver 355 standard LNG cargoes from Bontang and 110 cargoes from Arun in 2004, BP Migas marketing chief Djoko Harsono said in January.


South Korean refiner eyes LNG imports after 2008


July 14, 2004. LG-Caltex Oil Corp., South Korea's second-biggest oil refiner, is seeking government approval to start importing liquefied natural gas (LNG), a company spokesman said.  If it gets the go ahead, the Korean refiner would become the third private company to import LNG directly instead of purchasing through the country's gas monopoly, Korea Gas Corp (KOGAS). LG-Caltex might import some 1.5 million tonnes of the super-cooled natural gas annually after 2008 for its own requirements and its two unlisted power generating affiliates, LG Energy and LG Power. The South Korean government has allowed private companies to directly import LNG provided they use their own importing facilities and use the fuel at their own power plants. POSCO Co. the world's fourth-largest steel maker, and top local oil refiner SK Corp. will import a combined 1.15 million tonnes of LNG per year from Indonesia under separate long-term supply contracts from 2005 or 2006. 


Indonesia's PGN may buy ConocoPhillips Sumatra gas


July 16, 2004. U.S. oil firm ConocoPhillips may sell natural gas from its South Sumatra field to Indonesia gas distribution firm PT Perusahaan Gas Negara (PGN) instead of PT Perusahaan Listrik Negara (PLN), Indonesia oil and gas watchdog BP Migas said. PLN has put on hold a deal to buy gas from ConocoPhillips due to unresolved issues, including the payment process. It is said that ConocoPhillips and PLN had agreed on an average price of $2.69 per million British Thermal Units, adding that the agreement would be signed in May. The natural gas was to be delivered via a pipeline that would be built by PGN in 2006. The gas will supply PLN generators in West Java.


Policy / Performance


ADB to help develop Bangladesh's natural gas sector


July 19, 2004. ADB is helping to prepare a natural gas sector development project to promote Bangladesh's economic growth and improve the environment, through a technical assistance (TA) grant approved for US$480,000. The TA will analyze opportunities for the sector's growth and review sector development plans prepared by the Government and other development partners. It will review existing policies and prepare reform measures to promote development and investment in the sector. The TA will also review infrastructure development proposals and identify priority investments, as well as assess institutional development requirements for concerned Government agencies. "An improved gas sector has a large potential contribution to the development of the country's economy," says Piya Abeygunawardena, an ADB Principal Project Economist. "But it would have to be effectively managed to maximize its role in poverty reduction and ensure an equitable distribution of benefits." The natural gas sector consists of the Bangladesh Oil, Gas and Mineral Corporation (Petrobangla), and its 11 subsidiary operating companies. Petrobangla is mandated to carry out oil and natural gas exploration, and the production and marketing of gas. Natural gas accounts for almost 70% of Bangladesh's commercial energy and provides the basis for about 90% of electricity generation. It will provide most of the country's current and future energy requirements, and the gas market needs to be expanded to optimize the use of natural gas resources and to support economic development.  Although Bangladesh has been producing natural gas for more than three decades, all its major fields are underdeveloped and have not been properly delineated. Substantial natural gas reserves also remain underdeveloped or undiscovered


Pakistan Petroleum IPO expected to be over-subscribed   


July 14, 2004. Owing to encouraging response from public and aspiring investors' approach indicate that the Pakistan Petroleum Limited (PPL) shares' Initial Public Offer (IPO) will be heavily over subscribed.  The initial subscription will boost the market capitalisation by $1.25b while the govt would generate revenue worth Rs 5.67 billion through divestment of 15 per cent shares of the PPL. Currently, the market has capitalisation of around $ 25 billion that would cross $26 billion mark after the subscription of 10 per cent (68.58 million) PPL shares with a green shoe option of additional five per cent shares, in case of over subscription.  It is expected that the PPL with comparatively low weight ranging from five to 10 per cent in the index would become one of the highly traded stocks in the stock markets of the country.


Pakistan invites bids for exploration rights


July 14, 2004.  The Ministry of Petroleum and Natural Resources (MPNR) has sought bids to grant petroleum exploration rights of five blocks in offshore Indus in Sindh. The ministry has floated an international tender recently to seek interest from parties for carrying out exploration activities in offshore Indus-J, K, L, M and N. The technical identification of the area is block No 2266-4, 2266-5, 2265-2, 2366-4 and 2366-5 in Zone-0 of Sindh province. The parties will submit their bids to the ministry on August 12 after which it would be examined whose offer is the best. The applicant will be selected in accordance with the provisions of the Pakistan Offshore Petroleum (Exploration and Production) Rules 2003, Petroleum Exploration and Production Policy 2001 and bid documents. The ministry will sign a Petroleum Exploration and Concession Agreement with the successful party. The party will then carry out surveys including seismic 2-D and 3-D to assess the presence of hydrocarbon contents in the blocks. The party will also drill an exploratory well during the initial period of three years.


Privatisation of Pakistan State Oil Company in 8 months


July 15, 2004. Major public companies like Pakistan Telecommunication Company Limited (PTCL), Pakistan State Oil (PSO), Karachi Electric Supply Corporation, Faisalabad Electric Supply Corporation and National Investment Trust are likely to be privatised within six to eights months, Privatisation Minster Dr Abdul Hafiz Sheikh said. The minister said that 141 of around 250 public institutions have been privatised so far and now the major public companies would be privatised. He hoped that the Privatisation Commission would be able to privatise these major companies within the scheduled timeframe. Mr Sheikh also called for the privatisation of the Water and Development Authority, Pakistan Television and Pakistan Railways.


Security for oil companies in Pakistan


July 16, 2004. The government had decided to expedite the establishment of cantonments at Kohlu, Dera Bugti and Gwadar and had asked petroleum companies in these areas to contribute Rs 600 million over a period of two years to help establish the cantonments.  Petroleum companies would pay Rs 200 million and the Finance Division in Islamabad Rs 100 million in a day or two. The federal government had planned to complete the cantonments in Kohlu, Dear Bugti and Gwadar in the next two years to secure the oil and gas fields that frequently came under attack from terrorists.  The government had started moving a battalion of the army to each of the three sites for the cantonments, which would be made completely secure by the end of July. The decision to deploy additional forces would be taken from time to time by the GHQ if necessary.


Pakistan plans for self-sufficiency in gas   


July 17, 2004.  An integrated plan is being evolved soon to make the country self support and self sufficient in the natural gas production and to meet the gas need of the people of the rest parts of the country, official sources said. The government has chalked out a comprehensive policy to extend the natural gas facility to maximum population across the country.. The government has already launched the projects to extend the gas facilities through pipelines as well as through cylinders to even the remote areas of the country aimed at to save the national wealth of timber wood from wastage. They said that the gas is the cheapest and inexpensive source for utilisation for domestic, industrial and commercial purposes.


World Bank approves $90 million for Brazil's Comgas


July 14, 2004. The World Bank's private sector arm approved $90 million in financing to help Brazil's Comgas expand its distribution of natural gas. The International Finance Corporation (IFC) said the loan will support the company's plans to expand and upgrade its network to 70,000 new customers in the next five years and 200,000 within 10 years. Comgas is Brazil's biggest gas distributor and a unit of BG Group Plc. It currently has around 420,000 residential, commercial and industrial customers.  Some $45 million of the loan is from IFC money and the rest from private commercial lenders. Roberto Lage, Comgas's finance director, said the company's expansion plans will extend its distribution network to 18 new cities in the state of Sao Paulo.  Currently, Comgas ferries natural gas to 45 municipalities in the region of Sao Paolo, Paraiba Valley and the Companies.


Air Products plans hydrogen plant


July 16, 2004. Air Products and Chemicals Inc. is planning to build a hydrogen plant at Shell Oil Co.'s  225,000 barrel per day (b/d) joint-venture refinery in Convent, Louisiana, according to the companies. Beyond confirming the $60 million project, spokesmen for Air Products, a supplier of industrial and medical gases, and Motiva Enterprises LLC, a joint venture between Shell and Saudi Refining Inc., declined to provide further information. The project, first reported by the Baton Rouge Advocate, will provide hydrogen, which will be used to reduce sulfur content in gasoline and diesel. No date for the start of construction on the hydrogen plant has been announced.






UK power plants on sale


July 12, 2004. American Electric Power Co (AEP), which has put on block its two generating facilities in UK, has received strong interest from Britain's Barclays Capital and Swiss commodity trader Glencore. The sale of the Fiddler’s Ferry and Ferrybridge power plants is part of AES’s efforts to withdraw from the European markets and focus on the US. AES had brought the plants in 2001 for $1.21 billion but has already written down the book value of the plants on account of the weak power prices in UK, since it brought the plants. The sale is expected to be completed by year end.


US nuclear reactors update


July 14, 2004. Public Service Enterprise Group Inc (PSEG) has reported that its 1,150 MW unit 2 at the Salem generating station in New Jersey had automatically tripped due to low steam generator water level. The company is investigating the cause for the low water levels and the reactor is likely to be backing service in a week’s time.  In another unscheduled reported outage the Pinnacle West operated Unit 2 at the Palo Verde nuclear station has also unexpectedly shut down. Company officials remain clueless as to the reason for the shutdown even as investigators begin the search for the cause that led to the outage. The Palo Verde is part of the largest US nuclear power plant and it is still not clear when the plant will return to service.


ENDESA to build 18 wind farms


July 14, 2004. ENDESA through its subsidiary Proyectos Eolicos Valencianos is planning to build 18 wind farms in Valencia aggregating 500 MW of installed capacity for approximately Euro 450 million. The investment is part of the Renewable Energy Plan of the Valencia government to increase wind power generation capacity from the current 21 MW to 2,300 MW. ENDESA has won the tender for 3 of the 15 sites the government has set aside for wind power development.


New York Mayor opposes power plant


July 17, 2004. New York Mayor Michael Bloomberg has remained firm in his opposition to the proposed 1,100 MW power plant in Brooklyn on account of environmental concerns.  The proposed $1.5 billion station had been presented a 2nd time as an underground facility by TransGas Energy Systems but local residents and the city mayor remain opposed to the station fearing the adverse affect on real estate development on the Brooklyn waterfront.


Transmission / Trade


Merrill Lynch eyes energy trading again


July 13, 2004. Merrill Lynch & Co. despite the adverse fallout of its initial foray into the energy sector is once again eying the lucrative power trading business. The company had been fined $80 million in 2003 over two year 1999 transactions with failed utility Enron Corp. Merrill had sold its energy trading company to Maryland-based Allegheny Energy Inc for $490 million in 2001 but the transaction is still being disputed in court. However, now with its rivals raking in profits in the energy trading business the company is once again evaluating the energy trading market according to Merrill finance chief Ahmass Fakahany.


Policy / Performance


China’s Nuclear station gets security approval


July 18, 2004. Unit 1&2 of the Ling'ao nuclear power plant in Guangdong Province of China have cleared the government security checks after a year and a half in operation. The Ling'ao Nuclear Power Plant, situated in Shenzhen ,is the 2nd nuclear power generating station set up by the Guangdong Nuclear Power Group in Guangdong. The plant is eventually slated to have 4 units of 1000 MW each  with a designed life span of 40 years. Units 1&2 were commissioned in May 2002 and Jan 2003 respectively and have produced 6.157 billion kWh of power during the 1st half of this year.


US generators targeted for environmental violations


July 12, 2004. The U.S. Environmental Protection Agency (EPA), has short listed 4 generating station sin the US all belonging to the American Electric Power (AEP), for alleged clean air violations.  The plants include the Muskingum River Power Plant in Waterford, the Conesville station in Conesville and the Cardinal plant in Brilliant, Ohio in addition to the Tanners Creek Power Plant in Lawrenceburg, Indiana. The EPA has alleged that AEP had modified the plants without getting an emission control permit resulting in massive amounts of SOX, NOX and soot release into the environment. 


Iran tops Middle East in power generation


July 16, 2004. Iran’s energy minister Habibollah Bitaraf inaugurating the country’s first simultaneous power plant producing both electricity and heating at Kish noted that Iran stood first in terms of power generation in the entire Middle East. The minister also stressed on the need for efficiency improvements in all sectors in the country. He pointed out that household consumption constituted 35% of the total energy consumption followed by industry and mining with 27% and the transport sector with another 27%. The minister urged for efficiency improvements in all sectors on account of rising global energy prices and increasing global concerns on fossil fuel emissions.

Growth of global green power slows in last decade

July 14, 2004. Global consumption of non-hydro green power increased 629% between 1982 and 2002, but only 175% between 1992 and 2002. Net consumption of power from wind, solar, geothermal, wood and waste facilities was 274 billion kilowatt-hours in 2002, according to the latest ‘International Energy Annual’ from the U.S. Department of Energy. The annual summary tracks world energy production and consumption, as well as CO2 emissions, for most countries. In 1992, the global consumption was 156 b-kWh and 44 b-kWh in 1982. The United States was the top consumer in 2002, at 89 b-kWh, an increase of 1,730% during the previous two decades. When combined with Canada’s consumption of 7.3 and Mexico’s 5.6 b-kWh, the total of 102 b-kWh was ahead of the 96.8 b-kWh in all of western Europe. Germany was the lead country in Europe and the second-largest green power consumer in the world, with a 2002 consumption of 26.9 b-kWh. Japan was in third spot, with 21.1 b-kWh, followed by Brazil at 14.5 b-kWh. The balance of the global top ten consumers were Spain (11.5), Philippines (10.1), Finland (9.9), Italy (9.3) Canada (7.3) and Denmark (7.0 b-kWh). On continental totals, following North America and Western Europe, Asia & Oceania was in third spot with 48.4 b-kWh in 2002, Central & South America with 21.4 b-kWh, and 4.8 b-kWh for Eastern Europe and the former USSR.


Being registered as a Newspaper in India


Compiled & edited by the ORF Centre for Resources Management.  The centre is involved in policy-oriented research on energy, water and metals.


Disclaimer: Information in this newsletter is for educational purposes only and has been compiled, adapted and edited from reliable sources.  ORF does not accept any liability for errors therein.  News material belongs to respective owners and is provided here for wider dissemination only. 


Annual subscription

Invitation price: Rs 15,000/$750

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.