MonitorsPublished on Apr 12, 2005
Energy News Monitor I Volume I, Issue 42
Natural Gas in India: Prisoner’s Dilemma for Producers, Consumers & Regulators

Global outlook for gas

The World Energy Outlook 2004 expects consumption of natural gas worldwide to almost double by 2030.  Growing at an annual average rate of 2.3 per cent it expects global consumption of natural gas to increase more in absolute terms than that of any primary energy source, almost doubling to 4900 billion cubic meters (bcm) in 2030.  Demand is expected to grow most rapidly in Africa, Latin America and Developing Asia.  The use of gas in India and China is expected to grow by more than 5 per cent per annum with coal losing market share to gas.  In volume terms, developing Asia is expected to account for most of the increase in demand with its share of world demand increasing from 8 per cent to 14 per cent by 2030.  The report expects the power sector’s share of the world gas market to rise from 36 per cent in 2002 to 47 per cent in 2030.  The power sector is expected to be the main driver of demand in all regions but more so in developing countries such as India where electricity demand is expected to grow rapidly. 


Natural Gas Primary Demand in bcm













Transition Economies


















Developing Countries












Source: World Energy Outlook 2004

Consumption of natural gas is expected to grow faster in developing Asia than in any other major region.  Primary demand is projected to expand more than threefold from 208 bcm in 2002 to 322 bcm in 202o and 672 bcm in 2003.  Power generation is expected to account for over 50 per cent of incremental demand.  While Esat Asia is expected to remain the main market, the report highlights the importance of China & India in the world gas market. 

The Indian Scenario

Gas has only played a marginal role in India’s energy basket till very recently.  Much of the available gas at Bombay High was flared but the construction of the HBJ pipeline has altered the situation and the  market for gas is growing.  Currently 60 percent of natural gas produced in India is associated gas.  Power and fertilizer sectors are the primary consumers of natural gas with power accounting for 40 per cent and fertilizer taking 25 per cent. Residential supply (cooking gas), industries such as cement, glass and ceramics take up the rest of the supply.  About 54 million cubic meters of gas (mcm/d) is produced in India by the public sector companies ONGC and OIL and sold through the public sector pipeline company GAIL.  About 14 mcm/d is produced by the private sector in joint venture partnerships with public sector companies or on contract with the Government.   The World Energy Outlook 2004 expects India’s output to grow from 27 bcm in 2003[1] to 66 bcm in 2030 but it says by that time demand would have far outstripped supply.  The report says that ‘industrial and power sectors’ would push primary gas consumption up from 28 bcm in 2003 to 45 bcm in 2010 and 110 bcm in 2030.  

Supply Options


Though India’s gas demand has grown substantially in the last few years it still forms only a small part of overall energy demand. However forecasts suggest that demand will grow substantially and with it the demand-supply gap estimated by Hydrocarbon Vision 2025 to be in the range of 238-355 mcm/d.   The gap may be lower than estimated as substantial domestic gas discoveries have been since the forecast but that notwithstanding, it is certain that India would need imported gas.  As shown in the table below the IEA’s World Energy Outlook 2004 estimates India’s gas import dependency to grow from ‘0’ today to 40 per cent of primary gas supply amounting to 44 billion cubic meters by 2030. 

Gas-Import Dependence












OECD North America







OECD Europe




























* Net imports                   ** Per cent of primary gas supply

Source: World Energy Outlook 2004

Gas imports from Iran, Turkmenistan, Qatar, Oman or Bangladesh & Myanmar via pipelines and/or as LNG from Middle East, Far Eastern and other sources have been considered to close the demand supply gap.   The World Energy Outlook expects gas consumption growth in India to be fuelled by LNG imports.  It is not optimistic about the proposed Iran-India pipeline project proceeding before 2030 though it expects the 290 Km line from Myanmar to India with an initial capacity of about 5 bcm to be built after 2010. Out of more than 10 proposed LNG projects, two on the west coast are complete but only one is operational.  One more, again in the west coast is nearing completion. Petronets’s 5 million tonnes per year (mt/y) Dahej Gujarat project which sources LNG from Qatar is the first operational terminal in India. Though the Dabhol LNG re-gasification terminal was completed before the Dahej terminal, contractual disputes are delaying the commissioning of the project.  Shell’s LNG terminal in Hazira of capacity 5 mt/y is nearing completion.  These projects are scalable to provide 20 mt/y of gas eventaually.  This would amount to about 27.6 bcm/y or 75.6 mcm/d of supply.  India’s share in equity gas from Sakhalin I, Vietnam and Myanmar is expected to be 5.6 mcm/d in 2007. 

Pricing of Gas

Both market mechanism as well as administered pricing for gas operates in parallel in India. Price of gas sold by public sector units ONGC/OIL through GAIL is fixed by the government and is currently about $ 1.6/mmbtu. Though the price of $ 1.6/mmbtu is a very attractive option for consumers that price is not sustainable in the long run.  Low administered prices will deter investment in developing gas assets and very high prices would deter migration from liquid fuels/coal to gas.  It will also inhibit further investment in fertilizer plants, gas based power plants and domestic use of gas. The Shankar Committee report had recommended that the price of gas be raised gradually between 1997-2002 to reach the level of a basket of fuel oils. With international oil prices at historic highs that does not seem to be a near term possibility. For production from NELP (New Exploration & Licensing Policy) contracts, pricing of gas is market determined and around $3-3.2/mmbtu.  For LNG too there is no cap on pricing.  The Indian market does not have sufficient depth or liquidity for real price discovery.

User segments

As for the power sector, merit order dispatch of power from generators based on variable cost (fuel cost) pushes gas lower down the order LNG at a price of more than $3.4/mmbtu, will not be able to compete against pit-head power plants supplying power to western India. However gas could compare favourably with coal in other parts of the country especially if environmental advantages are factored in. For the fertiliser sector, even LNG at $ 5.56/mmbtu is competitive relative to Naptha at a crude price of $ 24/barrel.  35 per cent of the Urea produced in the country is based on liquid fuel and in case of migration to gas, additional demand of 11 mcm/d will be released.  Urea units using gas currently face a shortfall of 30mcm/d. With declining supplies from Public Sector Units which supply gas at about half the market determined price, fertilizer manufacturers would have to shift to costlier LNG.  If they do, they would absorb about 50 per cent of the LNG capacity.  The fertilizer sector however is regulated and not competitive vis-à-vis imported fertilizer because feedstock has to be imported at high cost.  The policy of maintaining self-sufficiency in fertilizers along with the difficulty of increasing farm gate price of fertilizers (particularly Urea) it is unlikely that the cost plus regime of the fertilizer sector would change in the near term. However there is a possibility of gradual improvement in energy consumption norms after 2006.  Migration from liquid fuels to gas by the fertilizer segment will result in the reduction of subsidy burden for the government.  Other potential gas user segments such as residential, transportation and industrial segments will have an incentive to switch to gas if the price of gas is indexed to the liquid fuel that has to be backed out on an energy equivalent basis. 

Infrastructure & Regulation

Apart from the HBJ pipeline system that connects the Bombay High to the North Indian hinterland and smaller regional pipelines, there is no gas transmission grid in India.  GAIL the Public Sector monopoly that controls the pipeline segment is currently expanding the network through the Dahej Vijaipur line and the Dahej-Uran pipelines.  Potential private sector players are watching & waiting.  Regulation of gas is still in its infancy in India.  The Supreme Court has ruled that gas being a subject of the central list the task of regulatory structure depends on the central government.  The Ministry of Petroleum & Natural Gas has drafted a bill to introduce a petroleum regulator and has also prepared a draft pipeline policy.  The draft pipeline policy provides for differentiation in definition of transmission systems, spur lines and city gas distribution systems based upon pressure.  The draft also recommends the application of non-discriminatory common carrier, open access principle; however it leaves the construction of a pipeline as well as transmission tariff subject to approval of the regulatory authority.

Prisoners Dilemma

Despite the growth of natural gas in India in the last few years, growth of investment, infrastructure and consuming segments are much lower than what they could have been if the right environment existed. Uncertainty in future regulatory environment, pricing and infrastructure development has led to a stagnation trap which is typical of the Prisoners’ Dilemma situation in game theory.  The dilemma resides in the fact that each prisoner (in this case each player in the industry) has a choice between only two options, but cannot make a good decision without knowing what the other one will do.  Suppliers (natural gas/LNG) know that they cannot make a good decision unless they know the regulatory (pricing & transmission policies) regime.  Pipeline players are hesitant to move again partly due to regulatory uncertainty and partly due to uncertainty of market development. Laying pipelines involves large upfront costs.  Pipelines are also specific assets with no alternative use.  Potential markets such as the power and the fertilizer industry also involve high degree of uncertainty.  The state which plays a big role in all of the above has the least to lose in making a move that reduces uncertainty. 

Team Energy ORF, Views are personal

Non-Conventional Energy & Sustainable Development


K K Roy Chowdhury - Energy & Environment Expert

This article is intended to impress upon the urgent need for recognizing the use of non-conventional energy in a massive way, with a focus on Renewable energy, in the backdrop of an ever depleting conventional energy (fossil fuels) resources.

Fossil fuel status

Fossil fuels are rapidly approaching its final exploitation, as can be seen since 1990, their consumption has been higher than discovery of new products. World oil consumption today is nearly 4 billion tonnes annually, whereas the reserves of conventional fuel stand at 120-160 billion tonnes. Peak production of oil in the world is expected to reach in 2010-2012. Due to limited availability, the present use of fossil and nuclear energy resources are unable to offer long-term and sustainable perspectives of future development to either industrialized or unserved regions and nations. Due to their concentration in just a few areas, fossil energy resources are imported by societies that make them extremely vulnerable. The dependence on these few energy producing regions not only advanced a global process of concentration of the energy economy, but also led to the constantly rising costs of the energy infrastructure and increasing trade imbalances. The economies of numerous countries are dependent on oil exports, thus becoming economically, socially and politically unstable. Secondly, the use of these conventional energy resources has a huge impact on the eco-system. Massive use of nuclear and fossil energy resources has endangered the basic existence of human beings. Many people suffer from direct health damages. Climate change is now posing even bigger danger.

Finally, an inequitable regional concentration of fossil and nuclear energy resources has left a large share of the world population with no direct access to the benefits of contemporary energy supply. Two billion people on earth live their lives without access to electricity; they are denied the opportunity to attain the same standards of living that one enjoy in the industrialized world. Population of the poor countries predominantly suffer the most today due to this non-sustainable resource use. These are the primary causes of numerous political tensions and are the roots of most present military conflicts.

Renewable energy

Merits: In contrast, Renewable energies create the opportunity for peaceful development and greater global security by utilizing local and decentralized energy forms. Their natural and technical potential is sufficient to satisfy all energy needs of the world population. The natural potential of renewable energy that is available on earth every day is 20,000 times larger than the daily consumption of conventional energies. Being relatively young still, renewable energy technologies have enormous potential for further improvement and new applications. They also make viable offers for countries to claim Carbon credit and comply with Kyoto Protocol, the recent international negotiations calling for carbon emission reduction through Clean Development Mechanism, and also entitle developed countries to Carbon trading, thereby contributing to the mitigation of climate change.

Barriers: However, there are barriers to the successful implementation of renewable energy technologies. Conventional energy is still receiving ten times more public support for research & development than renewables. Industrialised countries provide for 7 per cent of research funding for renewables compared to 70 per cent for nuclear. Direct and indirect subsidy schemes for the conventional energy industry that add up to 300 billion US dollars a year prevent renewable energy application from fair competition in the international energy market. Knowledge of renewable energy potential, technical opportunities and economic benefits are not well disseminated very often, and there is even an information deficit amongst politicians. The companies, various interest groups and political decision makers involved in the conventional energy system often block changes in the structure and support the further use of nuclear and fossil energy sources that are centralized, in industrialized countries. Further, countries with an inefficient energy supply very often try to follow the energy supply model of industrialized countries. This actually denies them sustainable energy supply and negates economic development opportunities. Lack of recognition of renewable energy thus stems from their competitive disadvantage arising out of their high initial costs in a highly competitive conventional energy-driven market though their lifecycle costs may be lower.


Considering the decentralized nature of renewable energy resources, their availability and applications, and other inherent cost benefits to promise a sustainable energy supply and also promote sustainable development on a long-term basis, it is imperative to tune our policies towards reducing the use of conventional energy resources and encouraging the use of decentralized renewable energy and other non-conventional energy forms to ensure a more secured future world.

(Views are personal)

Global Warming Not a Disaster


(Yury Izrael for RIA Novosti)


A special intergovernmental expert group comprising more than 1,000 scientists from different countries estimates that global temperatures rose by 0.6 degrees centigrade during the last 100 years. I serve as deputy chairman of this group that compiles detailed climate-change reports every five years.   One should say that 0.6 degrees centigrade is not very impressive. The planet has experienced ice ages and warming periods alike. In other words, the global climatic system can hardly be called stable. Instead of discussing global-warming trends of the last 25-30 years, we should try to find out why scientists have failed so far in explaining this process. Are natural factors or man's impact responsible for this? Is the global-warming process influenced by both factors? Or is man's impact on his environment the main culprit? This is the main problem.   All serious climate-related decisions, be it the 1992 UN Climate Change Convention or the Kyoto Protocol, cannot be called scientifically sound.   As I see it, the concerned parties should have answered some questions, before adopting specific decisions. For example, what damage can climatic changes inflict? Second, what maximum permissible carbon-dioxide concentrations will not seriously harm human health? It goes without saying that correct treatment depends on a correct diagnosis. And the implementation of various decisions sometimes requires tremendous appropriations. On the contrary, the European Union believes that global temperatures should not increase by more than two degrees. Some European politicians alone are writing that atmospheric carbon-dioxide concentrations should not exceed 400 ppmv. Current concentrations total 379 ppmv. These people claim that disaster is just round the corner. Still, no one has proved yet that 400 ppmv is tantamount to disaster.   It will cost $20 trillion to implement a set of tough measures that would ensure carbon-dioxide concentrations to the tune of 400 ppmv. At the same time, if one sets maximum permissible carbon-dioxide concentrations at 750 ppmv, then it would cost just $2 trillion to ensure such concentrations. I personally believe that 700-750-ppmv concentrations are fine. In my opinion, global temperatures can soar by 4-4.5 degrees. The group's forecast estimates that global temperatures will rise by 1.5-5.5 degrees within the next 100 years.   But what about those various theoretical global warming risks? Glaciers and the Greenland ice shield can melt away, causing the ocean waters to rise by 5-10 centimetres. The ocean level would rise by 1-2 meters, if Greenland loses its glaciers completely. However, this could only happen several thousand, rather than several hundred, years from now. Therefore, I think it would be ridiculous to talk about an impending disaster that would be caused by global warming ten years from now. In my mind, scientists should continue their research, answering vitally important questions in the area of climate change. These projects are mostly implemented at the insistence of Russian scientists, who have tried to launch an international discussion of two concepts: maximum permissible air-temperature increases and maximum permissible carbon-dioxide concentrations in the atmosphere during the past ten years. However, the international expert group for climate changes has turned down these proposals on a regular basis. That expert group did not establish a working group for conducting preliminary studies of climate-change specifics that would help assess maximum possible influences on the global climate before 2001.   The enactment of the Kyoto Protocol is something positive. Although the protocol will only be partly effective, it will nonetheless help stabilize and normalize the climatic system. As I have already said, the Kyoto Accords virtually lack any scientific substantiation. Only 25% of all countries will cut backon carbon-dioxide emissions, but it is clear that this problem must be tackled by the entire world.  Yury Izrael is the director of the Global Climate and Ecology Institute of the Russian Hydrometeorological Committee and the Russian Academy of Sciences.

(Courtesy RIA Novosti)


Sakhalin Energy Accused of Violating Environmental-Safety Standards    


(RIA Novosti's Pyotr Tsyrendorzhiyev)


Russian authorities have launched an official investigation into illegal earth dumps in Aniwa bay (south Sakhalin). This was disclosed to RIA Novosti here at the regional department of the Federal Environmental Safety Service (Rosprirodnadzor).   The regional administration's appeal served as legal ground for launching this investigation. The administration believes that the Sakhalin Energy company dumped fresh earth on the bottom of Aniwa bay, after launching construction of its liquefied-gas factory. The appeal comes complete with video footage that was filmed by members of the Sakhalin Diving club.   A commission, which has been established in Yuzhno-Sakhalinsk, will investigate this incident because earth dumps are located at a depth of 20 meters, covering crab, sea-urchin and scallop spawning areas. The commission involves independent Sakhalin environmentalist organizations, which are suggesting that state watchdog agencies either confirm or refute the destruction of marine life in Aniwa bay. They believe that any subsequent investigation will depend on this.   

(Courtesy RIA Nosoti)

Is the Sky Falling?


(Excepts from This Week in Petroleum, EIA, April 20, 2005)

With the near-month futures price of light, sweet crude oil dropping by about $5 per barrel in recent days, those interested in seeing high oil prices might be quoting that famed childhood philosopher, Chicken Little, in worrying that the sky is falling. This perspective may seem strange to most consumers, who are more focused on rising gasoline prices. Like some other industry analysts, the Energy Information Administration (EIA) believes that both crude oil and gasoline prices are likely to remain at historically high levels in nominal terms. EIA's latest forecast projects crude oil prices above $50 per barrel for the rest of 2005 and 2006, as reported in the April Short-Term Energy Outlook.

During the first quarter of 2005, West Texas Intermediate (WTI) crude oil near-month contract futures prices averaged $49.77 per barrel, with the near-month futures price nearly $14 per barrel over this average as of April 1. Higher crude oil prices over this period reflected, in part, market expectations of robust world demand, limited increases in non-Organization of Petroleum Exporting Countries (OPEC) production, and uncertainty about crude oil supplies from continuing volatile situations in Iraq, Nigeria, and Venezuela. Traders and oil market analysts seemed focused on the latter part of 2005, projecting continued strong demand growth with very little spare production capacity available. Nevertheless, since their April 1st peak, crude oil prices have tumbled more than 9 percent to $51.86 per barrel by April 12, 2005.

The close of the heating season, following a period of colder-than-normal March weather throughout the Northern Hemisphere, has shifted the focus of market attention from distillate fuel stocks, which face significant challenges this summer if they are to rebuild to normal levels ahead of next winter, to U.S. gasoline markets. Recent EIA weekly data ( Weekly Petroleum Status Report) show ample gasoline inventories and strong gasoline production as refineries emerge from turnarounds. In addition, petroleum markets have begun to focus on high and still rising U.S. crude oil stocks, which along with comfortable levels in Europe, provide evidence of high production by OPEC members. If OPEC producers continue to expand production in line with their stated intent, U.S. crude oil imports could remain high enough to minimize summer crude draws, as refineries increase throughputs and maximize gasoline production. Although the evidence is sketchy at best, Asian oil demand showed some signs of weakening in the first quarter of 2005, which if continued, could relieve some of the market pressure anticipated later this year. A scenario of this type may have motivated a reported increase in selling activity by both commercial (those in the oil industry) and non-commercial (typically hedge funds, pension funds, investment banks and other parties not directly related to the oil industry) traders of crude oil futures contracts on the New York Mercantile Exchange (NYMEX), which itself may have added to recent downward pressure to oil prices.

Notwithstanding recent price developments, EIA’s assessment of the outlook through the balance of 2005 expects markets to remain relatively tight. Particularly for gasoline supplies, refiners will need to be adept in matching expected strong demand through increased production, larger import volumes, and/or drawing upon inventories. For example, if refiners produce less gasoline in the near-term and rely more on inventories and imports to meet potentially robust gasoline demand, the stage could be set for a second wave of higher gasoline and crude oil prices later this summer. Conversely, if petroleum markets remain relatively balanced through the summer driving season, prices could remain relatively stable. Regardless, as of now, EIA does not foresee a sustained crude oil price below $50 per barrel in the near future.

Russia to Bring LNG to US & Asian Markets


April 12, 2005. Russia is interested in producing liquefied natural gas (LNG) domestically, Andrei Sharonov, deputy economic development and trade minister, said.   Sharonov stressed that LNG was "a new product featuring a high added value."   In his opinion, LNG production promises Russia a breakthrough to the US and Asian markets.   "This has an indirect impact on resolving our problems of building continental pipelines. I mean technical and political problems," Sharonov said. Sharonov also called for liberalizing LNG pricing. "This sphere should be liberalized, and there are all necessary preconditions for this," he said. "Those consumers who will still enjoy regulated prices will have to pay more for LNG anyway, so regulating will be futile anyway."   According to Sharonov, the situation "breaks up the LNG market, in fact." "The global LNG market is not big but it is growing," US deputy Secretary of Energy John Broadman noted. According to him, LNG exports have grown by 35% over the past five years, and "availability of numerous consumers facilitates diversification of the LNG market."   Broadman also stated that the bulk of natural gas reserves were far away from consumers, which was to boost the trade in LNG. According to him, three quarters of the world's natural gas reserves are situated in the Middle East and the former Soviet Union.   Russia, Iran and Qatar hold 60% of the natural gas reserves, Broadman said.

(Courtesy RIA Novosti)





ONGC negotiates with Pogo for Thai assets

April 12, 2005. State-owned Oil and Natural Gas Corp is negotiating to buy out US oil and gas producer Pogo Producing Co's stake in an offshore Thailand field. ONGC's foreign arm, ONGC Videsh Ltd is talking to Pogo to buy its 46.34 per cent stake in Block B8/32, which is valued at $600-$700 million. Pogo has appointed Goldman Sachs for the sale. ChevronTexaco owns 51.66 per cent stake in the gas and oil fields known as block b8/32 in the Gulf of Thailand. Thaipo, a subsidiary of Pogo Producing Company, holds 46.34 per cent, and Palang Sophon, owned by Thailand’s Sophonpanich family, holds the remaining 2 per cent. Block b8/32 produces oil and natural gas from three fields: Tantawan, Maliwan and Benchamas. Net daily production in 2003 from the fields was 104 million cubic feet of natural gas and 24,600 barrels of crude oil. A Chinese company, among others, is also in the fray for Pogo stake.

RIL plans KG basin development in ‘06

April 11, 2005. Reliance Industries Ltd is likely to start drilling development wells in the Krishna-Godavari (KG) basin in January-April next year. Commercial output is likely to begin by end 2007. The Directorate General of Hydrocarbon (DGH) had in October-end approved the $2.49-billion development plan for the Krishna-Godavari block, off the east coast. DGH has approved the development plan of Reliance for drilling of 35 wells in deep-sea block KG-DWN-98/3. Reliance Industries will produce 40 million standard cubic meter a day of gas from the Dhirubhai-1 and Dhirubhai-3 fields from end 2007 or early 2008. Reliance has so far drilled 14 exploratory wells in the Krishna-Godavari basin off Andhra Pradesh coast—of which only the first three—at Dhirubhai 1, 2 and 3—have been declared commercial. Reliance holds 90 per cent stake in the gas block, while Niko Resources of Canada owns the remaining 10 per cent. 

ONGC proposes joint gas exploration in Bangladesh

April 11, 2005. Oil and Natural Gas Corporation Ltd has proposed joint gas exploration in the unexplored blocks in Bangladesh. ONGC is interested in working with State-run Petrobangla on unexplored oil blocks. Bangladesh was divided into 23 blocks, including seven offshore ones, for hydrocarbon exploration in 1993. ONGC is the latest to show interest in such exploration after China, Thailand and Malaysia. 


Reliance faces LPG stockpiling

April 07, 2005. Reliance Industries is facing a problem of stockpiling of LPG at its Jamnagar oil refinery and has asked the Government for permission to export the fuel. The situation has developed following State-run Indian Oil Corp refusing to lift petroleum products from Jamnagar, unless the private sector refiner, which does not have a LPG retail chain of its own, offers discounts. The company asked for permission to export 200,000 tonnes of LPG immediately and 225,000 tons per month till August. IOC wants Reliance to share at least one-third of the Rs 82 per cylinder loss the company is making on LPG sales due to Government freeze on raising retail prices, despite surge in cost of raw material (crude oil).  Reliance has facility to store 25,000 tonnes of LPG at its refinery complex in Gujarat. This storage is adequate for stocking only four days of LPG production. IOC, which bought 1.8 million tonnes LPG from Reliance in 2004-05, is currently buying only a small quantity of LPG to meet local requirement in Gujarat. This has created huge inventories of LPG and the refinery is now facing storage problem.

Oil marketing companies lose money 

April 07, 2005. Oil marketing companies claim they will lose Rs 810 crore (Rs 8.10 billion) in the first fortnight of April if the Government does not permit an increase in petrol and diesel retail prices. Government-owned oil companies will also bear additional losses of more than Rs 600 crore (Rs 6 billion) on account of duty adjustments on cooking gas and kerosene prices, announced in the Budget. Thus, cumulative losses may go up to Rs 2,300 crore (Rs 23 billion) by April-end if the Government does not allow a hike on April 15. Indian Oil, which controls more than 50 per cent of the country's oil retail market, will lose Rs 300 crore (Rs 3 billion) on petrol and diesel under recoveries and Rs 352 crore (Rs 3.52 billion) on cooking gas and kerosene sales, till April 15. The oil companies have been asking for a price hike of at least Rs 4 per litre for petrol and Rs 3.50 per litre for diesel. They will also have to pay more for importing Euro III petrol and diesel for supplies to select cities, beginning this month, to abide by Supreme Court guidelines. With duties on LPG and kerosene revised in the Union Budget, the companies have seen their losses on retail sales of both these products rise.

IOC, Aramco plan merchant storage oil terminal

April 07, 2005. Indian Oil Corporation and Saudi Aramco, the world's largest oil company, have dropped the idea of building strategic crude storage facility for India. But with climbing crude prices the two companies may put up a merchant crude storage terminal at an Indian port, that will allow access to Indian and foreign oil companies. The two companies have not yet decided the cost or size of the commercial venture. The idea of a merchant crude storage terminal is relatively new with only one other similar storage along the Korean coastline. IOC proposes to provide land and port for setting up the terminal while Saudi Aramco, which controls more than one-fourth the world's proved oil reserves, will bring in inventories. Indian Oil had earlier announced plans to float a special purpose vehicle for setting up underground oil storage facilities. The capital cost for the storage was envisaged at Rs 1,650 crore (Rs 16.50 billion), for storing a 15-day crude inventory worth roughly Rs 5,000 crore (Rs 50 billion). Currently, the total crude oil storage capacity can meet the country's oil requirement for 19 days.

Transportation / Trade

IOC is No. 1 oil trading major in Asia Pacific 

April 08, 2005. Indian Oil Corporation has been ranked as the number one oil trading company amongst national oil companies in the Asia pacific region. This is the second year in succession that IOC has topped the list. The survey covered 79 major petroleum trading companies in the Asia pacific region. In 2004-05, IOC imported almost 32 million tonne of crude oil and over 3 million tonne of petroleum products while exporting over one million tonne of products. For the year 2005-06, IOC plans to import around 40 million tonne of crude oil.

IOC breaks Transchart monopoly

April 08, 2005. Indian Oil Corporation can now directly charter ships for oil imports instead of going through the ministry of shipping's agency Transchart. The cabinet approved the decision after the committee of secretaries recommended the amendment in the existing policy on charter of ships for imports by PSUs. Other oil PSUs like HPCL, BPCL and MRPL will continue to depend on Transchart and Shipping Corporation of India for meeting their charter requirements for the time being. Their cases for hiring charter ships would be reviewed after one year based on the experience of IOC. The proposed amendment in the existing policy is in line with the deregulation of the petroleum sector, and would enable a level playing field for private and public sector oil companies. IOC wanted to make its own shipping arrangement to reduce its freight bill and improve refinery margins as competitive bidding and negotiations help reduce the freight which accounts for about 10 per cent of the value of imported crude. IOC imported 25.87 million tonne of crude oil worth Rs 27,461 crore (Rs 274.61 billion) in 2002-03, of which the freight component was about Rs 1,200 crore (Rs 12 billion).

L&T consortium bags ONGC order

April 6, 2005. A consortium formed by Larsen & Toubro and Global Industries Offshore, a leading U.S.-based provider of offshore construction services, has won a Rs. 1,864 crore (Rs 18.64 billion) order from Oil and Natural Gas Corporation for the replacement of pipelines and modification of platforms at Bombay High.

Kalpataru plans to lay oil, gas pipelines

April 10, 2005. Power transmission equipment company Kalpataru Power Transmission Ltd (KPTL) plans to enter the business of laying oil and gas pipelines. The Rs 362-crore (Rs 3.62 billion) company is part of the Kalpataru Group that has interests in the construction business. KPTL produces close to 48,000 tonnes of steel towers used for power transmission at its Gandhinagar unit. However, the company does not plan to produce pipes for oil pipeline projects.  While KPTL has completed a number of projects abroad, in India, it has worked on transmission projects commissioned by the Power Grid Corporation. This includes the 1,350-km 400 kilovolt HVDC Rihand-Tala-Siliguri line. KPTL has bid for two oil and gas pipeline contracts. The company has hired a team, which is experienced in the business, and will be investing Rs 25 crore (Rs 250 million) on equipment before September 2005. India has oil and gas pipelines covering 15,000 km. This network is expected to spread with oil companies announcing plans to lay more product pipelines.

Policy / Performance

Aiyar brings China into pipeline loop

April 11, 2005. Oil minister Mani Shankar Aiyar sought to lubricate the wheels of diplomacy between New Delhi and Beijing by proposing to extend the proposed $4.16 billion gas pipeline from Iran up to China’s southern region via Myanmar. Aiyar’s vision is to take the pipeline across the heart of India to Myanmar via Bangladesh and then enter China, establishing part of his proposed ‘Asian energy grid’. Aiyar feels linking up with China will stop Pakistan from wilfully closing the tap on India ever as any disruption will also hit the Chinese hard.

Additional Qatar gas to India

April 11, 2005. The country is receiving natural gas from Qatar roughly every fourth day at a price which is cheaper than its own. LNG from Qatar after regasification costs $3.37 million British thermal unit (mbtu) which is about 17 per cent cheaper than gas being sold by the consortium operating in the Panna, Mukta and Tapti fields. India started importing Qatari gas last year, but it had clinched the price with state-owned Rasgas in 1999. The first foreign gas which was available to India was from Qatar at PLL’s Dahej terminal. The company will be expanding capacity at Dahej to 10 million tonnes from the present 5 mt. It is in the process of setting up another terminal at Kochi with a capacity of 2.5 mt. Qatar is expanding its liquefication capacity and is yet to finalise contracts with countries it has signed agreements with.  PLL hopes that the additional quantity of 7.5 mt can be shipped to India by 2009, by which time it will be in position to handle the additional gas. 

NTPC plans gas procurement, re-gassification facilities 

April 08, 2005. National Thermal Power Corporation has decided to participate in the entire LNG value chain involving procurement of gas, setting up liquifaction and re-gassification facilities and transporting gas to its power projects. Interested in procuring substantial quantities of gas, the state-owned power utility is looking at a delivered gas price of less than $3 per mmbtu. NTPC has identified potential countries for sourcing LNG at this price. Countries identified are Nigeria, Yemen, Oman, Australia, Qatar, Egypt, Malaysia, Iran and Abu Dhabi. In addition to this, NTPC was also looking at participation in the fifth round of NELP. It plans to submit bids along with ONGC.

India & China aim to work together 

April 11, 2005. India and China, given their super growth rates, are oil growing oil consumers.  For the two countries, oil consumption is expected to grow at roughly at 8 per cent a year. In fact, they account for a significant part of the total Asia-Pacific energy demand estimated at about a third of the total world demand in 2005. In this backdrop, it makes immense sense for the two countries to work closely in evolving an effective energy security strategy. Indian and Chinese companies are now exploring the possibility of investing in each other’s countries.  For instance, while ONGC Videsh Limited partners Chinese firms in Sudan and in Ivory coast, it is pitted against them for equity stake in Yugansk oil field in Russia. A co-operation agreement in the energy sector is also likely to be signed between the two countries soon. Oil companies from China and India can jointly pursue exploration and production acquisition strategies in international oil and gas prospects. Indian Oil Corporation (IOC) is already exploring if it can export bulk bitumen to China. It has also sent a draft MoU for cooperation in upstream and downstream sectors to Petro-China.  The structure of Chinese petroleum sector is such that the state council and the state planning commission have direct control over the operations of companies. All the three companies from China-CNPC, CNOOC and SINOPEC that have international oil and gas assets do not compete with each other. While bidding for acquisitions, only one of the company enters the foray. In reality, the Chinese attempt on acquisitions of overseas projects is supported by the government of China. India and China imported nearly the same quantity of crude oil in 2003, however, for 2004, Chinese have increasingly imported crude oil as their requirements have increased. Although the exact data is not available, it is expected that China will be importing close to 120 mmt of crude oil in 2004.  The growth in China’s crude oil demand implies a huge need for refining capacity. As per available data, China’s refinery investment needs through 2020 would be of the order of $13 billion to $36 billion if a quarter of the growth in transport fuel demand were met by direct product imports. It would be between $9 billion and $24 billion if half the growth is met through product imports and $4 billion to $12 billion if three quarters of the growth is met through product imports. In 2003, China was the world’s largest consumer of petroleum products (10 per cent of world consumption) surpassing Japan for the first time.  With total demand of 5.56 million barrels per day, its projected demand growth is 3.0-4.9 per cent a year in oil and 5.5-11.6 per cent a year in gas. Currently, China is a net importer of oil and is the source of around 40 per cent of the world oil demand growth over the past four years. Indian companies feel there is potential for petroleum product exports to China as well as to join hands with China National Petroleum Corporation (CNPC) for ventures in other countries to enhance oil security.

Energy Efficiency: must for India

April 11, 2005. India needs to take a cue from the International Energy Association’s (IEA) recent warning to industrialised countries to undertake ‘demand restraint’ measures in the wake of high global crude prices. India’s per capita consumption of oil is not as high as that in developed countries. However, given that oil constitutes 33 per cent of primary energy consumption and 70 per cent of our needs are met through imports, it is imperative that India contains demand. The best way to do this is to allow market forces of demand and supply to operate in the market for oil, as in any other market. A rise in prices would then automatically translate into a cutback in demand, though the extent of reduction would depend on the price-elasticity of the demand for oil. Unfortunately over 70 per cent of petro-products are sold at subsidized rates. Consequently, the moderating influence of higher prices on demand is completely missing. Petrol and diesel, which account for 50 per cent of petro-product consumption are priced anything between Rs 5-6 per litre below global market prices. Domestic prices, fixed on the basis of a global price of $39 per barrel, are meaningless when the price has moved to well over $50 a barrel. Besides blunting price signals, subsidies breed adulteration and misuse. Consumer subsidy in the case of LPG is as high as 20 per cent of the market price. While in the case of kerosene, which accounts for another 10 per cent of petro-sales in the country, the subsidy is a whopping 50 per cent of the market price.

Diesel price hike likely

April 10, 2005. Petroleum minister Mani Shankar Aiyar has indicated an imminent hike in petrol and diesel prices in view of crude prices touching historic highs. Public sector oil firms had sought a Rs 4.69 per litre hike in petrol and Rs 5.18 a litre increase in diesel prices due to hardening of crude oil prices, increase in excise duty, levy of additional road cess and additional cost incurred in supplying ultra-low sulphur fuel from April 1.  Aiyar, however, did not say when the hike would take place. "The government has put minimum burden on consumers. The maximum burden is being borne by oil marketing companies (who are selling products below cost),"he said. Dismissing any fears of shortage of petroleum products, the petroleum minister said India had enough foreign exchange reserves to buy its crude oil requirement.

Bangladesh wants assurances on Myanmar pipeline

April 06, 2005. Bangladesh wants several assurances from India before it can let the proposed Indo-Myanmar gas pipeline pass through its territory. This development is forcing India to look at other options of bringing in natural gas from Myanmar. Bangladesh wanted an assurance from India on trade, transit of goods and power supply from Nepal and Bhutan to be included in a trilateral memorandum of understanding (MoU) between India, Myanmar and Bangladesh.  The ministry of petroleum and natural gas, which is spearheading the diplomatic dialogue on the pipeline question, may not be able to make any commitment to Bangladesh as the issues of transit, trade and power are not within its purview. India has the option of getting the gas from Myanmar directly to West Bengal by routing the pipeline through Tripura. It can enter West Bengal through Siliguri. But the pipeline length would more than double, to about 1,500 km. The other option was to convert the gas into liquid and receive it at Paradeep. The deep-sea option was not considered very feasible as there was a turf in the Bay of Bengal sea bed which required the pipeline to be circuited around it.  The three bilateral issues were identified by a committee of nine secretaries set up by the Bangladesh government for examining the India-Bangladesh-Myanmar pipeline. India allows Nepal-bound Bangladesh traffic for a few hours. But there was not enough traffic to justify increasing the number of hours. The Indian government also cannot do much about the favourable trade balance it enjoys with Bangladesh since it is not willing to sell natural gas to India, which may help in tackling the issue to a large extent. An assurance on power supply from Bhutan and Nepal to Bangladesh could not be made part of the trilateral MoU since it concerned two other countries which were not party to the document. 

India, Japan set to exploit natural gas off Andamans

April 07, 2005. India and Japan are expected to work out a framework for jointly exploiting natural gas off the Andaman Islands in the Bay of Bengal. An agreement to this effect was reached during Prime Minister Manmohan Singh’s recent talks with acting secretary general of Japan’s ruling Liberal Democratic Party, Shinzo Abe. Japan plans to start exploring for natural gas on its own in the area possibly between June-August and embark as early as next year on a private sector-led joint exploitation of natural gas. And soon, the Japanese government will start selecting private contractors for drilling and development of natural gas in the area. Natural gas from the field will be supplied to India through a pipeline and be exported to Japan, as well. Japan wants to diversify its sources of natural gas as it currently relies on imports for 97 per cent of its needs, with Indonesia, Malaysia and Australia being the major suppliers. The natural gas deal is also aimed at strengthening bilateral ties because Japan’s ruling party hopes to use its strong partnership with India to keep a check on China’s increasing presence in western Asia.

India, Uzbekistan sign agreements  

April 06, 2005. India and Uzbekistan signed four pacts with a view to stepping up co-operation in defence, education, culture and small and private entrepreneurship. There was an offer for ONGC and GAIL to explore the possibility in gas exploration.

India likely to sign Energy Charter Treaty

April 06, 2005. India is considering signing the Energy Charter Treaty that may obviate the need for separate multilateral agreements for various projects to import gas through pipelines from Iran, Turkmenistan and Myanmar. Iran, from where India plans to import gas through a pipeline passing through Pakistan as also LNG by ships, is an observer in the Energy Charter Conference and is also keen to become a full member. Pakistan has also expressed interest in joining the Treaty. The Treaty will obviate the need for separate inter- governmental, bilateral and multilateral agreements, which are inescapable in the proposed pipeline projects like Iran- Pakistan-India, Turkmenistan-Afghanistan-Pakistan-India and Myanmar-Bangladesh-India. Energy Charter Treaty, to which 54 countries and European community are signatories, provides an appropriate framework for energy sector cooperation between participating nations. The fundamental aim of the energy Charter Treaty is to strengthen the Rule of Law on energy issues, by creating a level playing field of rules to be observed by all participating governments, thus minimizing the risks associated with energy-related investments and trade. 

Canada sees investment opportunity in energy

April 06, 2005. Canada sought to enhance economic and trade ties with India. Five areas had been identified for higher investment and collaboration, namely, infrastructure including ports, energy, information and communications technology, agriculture, and financial services. Canada, which was a world leader in the offshore oil and gas exploration and drilling, was keenly interested in equipment manufacturing and the services sector, especially after the recent visit of the Petroleum Minister, Mani Shankar Aiyar, to Calgary. Niko Resources of Calgary in collaboration with Reliance Industries was already involved in a major gas discovery in the Bay of Bengal.



BG eyes stake in Paguthan power plant

April 08, 2005. The UK-based BG group is eyeing a stake in the Hong Kong-based CLP Power Asia's power plant at Paguthan in Gujarat which is expected to expand capacity from 655 mw to 1,000 Mw. Besides, the company is also looking at setting up two smaller power plants, each having a capacity of not more than 100 Mw. These small plants are being set up for supply of electricity to industrial hubs in the state. The BG group intends to double the current investment level of $500 million over the coming years. The BG group would source gas from the Panna-Mukta-Tapti region for the Paguthan plant through its transmission and distribution company GGCL. The Hong-Kong based CLP Power Asia acquired a majority stake in GPEC in February 2002 through an 80:20 joint venture with PowerGen UK Plc. After PowerGen pulled out of the country, GPEC is now 100 per cent owned by CLP Power Asia. 

NTPC not to pay revised PMT prices

April 10, 2005. National Thermal Power Corporation, the largest consumer of gas along the GAIL (India) Ltd's Hazira-Vijapur-Jagdishpur (HVJ) pipeline, has refused to shell out higher gas prices from the Panna-Mukta-Tapti (PMT) of the British Gas-led joint venture consortium. The BG-led consortium had, from April 1, hiked PMT gas prices for customers, which, besides NTPC, also includes several fertiliser plants. GAIL is scouting for other consumers for the gas, including power plants, in the eventuality that NTPC does not fall in line with the revised prices over the next couple of months. Under the new arrangement, the PMT joint venture has agreed to offer 6 mmscmd out of 11.75 mmscmd of gas to GAIL at a basic price of $3.866 per mmbtu for supplies to its existing power and fertiliser consumers along the HVJ line. The balance quantity of gas will be marketed directly by the PMT joint venture. Significantly, the agreement with GAIL for the 6 mmscmd gas is only for one year, as the PMT joint venture has made it clear that “after one year, consumers will have to make their own arrangements for their gas requirements.” NTPC's argument for not paying the jacked up rates is that its gas-based power stations were accorded fuel by the Gas Linkages Committee in 1990 based on availability of gas from ONGC production, much before the PMT operations started. Following the April 1 price hike, the HVJ gas is now the highest priced in the country at $5.15 per mtu (million thermal unit). This price is even higher than the imported R-LNG price from Dahej terminal by about 15 cents.

Alstom gets NHPC order

April 06, 2005. The Alstom Company announced that it has received an order from National Hydroelectric Power Corporation (NHPC) for the supply of electro-mechanical equipment for the 2000 mw Subansiri Lower Hydro Electric Project. The total contract is valued at Rs 1,550 crore (Rs 15.50 billion) and the share of Alstom Projects will be Rs 745 crore (Rs 7.45 billion).

Management of power plants to be outsourced

April 06, 2005. In a radical move, the power ministry has proposed outsourcing of the management of power stations with a plant load factor (PLF) of less than 60 per cent to National Thermal Power Corporation (NTPC) or private sector players like Tata Power. The move could bring an additional 5,000 mw to the grid, according to the ministry’s estimates. The ministry has identified about 16 Central and state power projects in Bihar, Jharkhand, Gujarat, West Bengal, Uttar Pradesh, Andhra Pradesh and Tamil Nadu which have a PLF of less than 60 per cent against a national average of 74 per cent. The PLF of under-performing stations can be significantly improved by outsourcing management, implementing life extension plan, renovating and modernising and proper overhauling. This apart, the ministry has also suggested that thermal units over 25 years of age and with a heat rate of more than 3,500 kcal/Kwh and specific oil consumption of over 5 ml/Kwh may be closed down. NTPC and the Central Electricity Authority (CEA) have been asked to provide necessary help to these stations. CEA has also set up a roving team comprising NTPC, Bharat Heavy Electricals Ltd (Bhel), Maharashtra State Electricity Board (MSEB) and a CEA representative to suggest ways and means to improve the overall performance and availability of such power stations. 

Transmission/ Distribution / Trade

PTC to raise funds for new power projects 

April 08, 2005. PTC India proposes to raise Rs 1,000 crore (Rs 10 billion) exclusively to pick up equity in upcoming power projects across the country in the next three years. The company has already identified 25 such projects with total generation capacity of 12,825 mw. PTC has acquired 11 per cent equity worth Rs 27.72 crore (Rs 277 million) in the 300 mw Lanco Amarkantak project. The company has estimated that in case of thermal projects, a normative capital cost would be Rs 40 million per megawatt whereas in case of gas-based and hydro projects, a capital cost of Rs 35 million per MW and Rs 55 million per MW, respectively, for the computation of the capital cost.  The list of some of the projects for equity investments include : GEPC phase-II (1,050 mw) (Rs 110.25 crore), Vemagiri phase-II (740 mw) (Rs 77.7 crore), Budhil hydro (70 mw) (11.55 per cent), Karcham Wangtoo (1,000 mw) (Rs 165 crore), ONGC gas project (750 mw to 1,000 mw) (Rs 78.75 crore), Ranugunj thermal (100 mw) (Rs 12.6 crore), Vembar gas (1,873 mw) (Rs 196.665 crore) and Teesta stage III hydro (1,200 mw) (Rs 198 crore).

Haryana to upgrade power distribution system

April 07, 2005. With a view to further improve the power distribution system; the Uttar Haryana Bijli Vitran Nigam would segregate rural and urban feeders in its command area. The Nigam has also decided to segregate rural agricultural and rural domestic feeders in 100 villages in the first phase. With the segregation of feeders, the domestic consumers of villages would get more electricity as compared to the tubewell consumers.

Mumbai, Kolkata have best distribution systems 

April 08, 2005. Greater Mumbai and Kolkata have the best power distribution systems in India, according to a ranking by distribution companies, based on the number of trippings per feeder and period of feeder outages. The ranking was done by the central electricity authority (CEA). Despite the power shortage in Maharashtra, four circles in Mumbai were in the top 10 discoms in terms of performance. Four Tamil Nadu circles were in the top 20, along with BSES Rajdhani, which supplies power to south-west Delhi. In a rating of discoms in the country, the CEA has placed Thiruvananthapuram and Thane next on the list. The discoms have been rated by the CEA under its monthly evaluation of the power distribution system. The rating is based on the number of trippings and outage duration of 11 Kv feeders.  At present only towns with a population exceeding 8 lakh are being evaluated. Gradually all towns in the country will be rated by the CEA which proposes to work out the reliability evaluation indices in line with international practice, said a CEA release. Thirteen states did not furnish the information required for rating, namely Assam, Bihar, Chhattisgarh, Jammu and Kashmir, Jharkhand, Karnataka, Rajasthan and Uttar Pradesh. In Delhi, North Delhi Power Ltd did not submit the data. 

APTransco delays PPAs with wind units 

April 12, 2005. Wind power units in the state are suffering as APTransco, the nodal power purchaser, is keeping away from signing power purchase agreements (PPAs). According to highly-placed official sources, APTransco has yet to enter into PPAs with 60 mw and odd wind power units. The power utility (APERC) is suggesting them to opt for a third party sale. While, APERC had issued orders in 2000 disallowing third party sale. Though, the new Electricity Act 2003 had provisions for the power producer to directly sell power to third party and access to the transmission lines by paying wheeling charges. Interestingly, APERC is yet to announce open access charges as per the new Act. It also has to take required measures for providing connectivity with the grid and sale of power to any person duly indicating a percentage of total consumption. Though Maharashtra, Karnataka, and Rajasthan have announced long-term tariff policy with 13, 10 and 20 years respectively, Andhra Pradesh’s policy was fixed only for a five-year period. With these bottlenecks, the nodal agency for non-conventional energy, Non-conventional Energy Development Corporation of AP (NEDCAP) has approached the government for a clear direction to APTransco to enter into PPAs as per the existing policy of APERC. The state has identified a potential of 745 mw from wind power covering four districts - Anantapur, Chittoor, Kurnool and Cuddapah - in the Rayalaseema region.  Though about 247 mw capacity projects have been sanctioned, only about 100 mw was actually commissioned. APERC had, after a review in 2004, announced a tariff policy fixing a price of Rs 3.37 per unit, effective April 2004. The regulator had also froze the review period for next five years and said that it applied both for existing and new projects.

Areva to buy Alstom's T&D business in India

April 07, 2005. The French nuclear energy major, Areva, will acquire its compatriot Alstom's transmission and distribution business in India for Rs. 80.60 crores (Rs 806 million) and has also made an open offer for buying 20 per cent stake from Alstom's shareholders at Rs. 75.03 per share.

PTC signs PPA with Kanoria

April 09, 2005. Kanoria Chemicals & Industries Ltd has signed a power purchase agreement with Power Trading Corporation (PTC) to sell 10 MW surplus power to PTC from the company's captive thermal power plant located at its integrated chlor-alkali manufacturing facility in Renukoot in Uttar Pradesh. As per the agreement, the company will sell its surplus power to PTC, which in turn, will evacuate the power to deficient but revenue yielding locations. This arrangement will not only result in efficient utilisation of surplus power generated but will also add a new revenue stream for the company.

Policy / Performance

Power sector discontent with tariff policy

 April 12, 2005. Power sector majors are unhappy with certain aspects of the tariff policy proposed by the power ministry. What have raised their hackles are the guidelines on transmission pricing, regulation of interest rates for project-lending and the uncertainty over whether the regulation will be applicable to new plants.  On transmission pricing, the draft tariff policy says that a national tariff framework, sensitive to distance, direction and related to the quantum of power flow (as instructed by the National Electricity Policy), be developed by the Central Electricity Regulatory Commission(CERC) and implemented before April 2006. The policy is, however, based on a more rational transmission pricing system. While tariffs would have to be adjusted, the changes would not be very sweeping. States would be consulted and informed about the extent to which their tariffs would change before they could be expected to view the matter.  In an attempt to decrease project costs and share benefits with consumers, the draft also suggested that it was desired that the agreement with lenders have a provision for re-fixing interest rates after every three years. This would reduce the interest rate risk on project developers. The policy says that the CERC may determine a suitable ceiling on allowable interest rates, considering the type of project, market conditions and credit worthiness of the borrower. Return-on-equity in generation and transmission projects shall conform to the overall risk assessment and cost of capital. If a company invests premium raised while issuing share capital or internal resources from the free reserves in capital expenditure, it shall be included while calculating return on equity.

CCEA clears funds for Dabhol SPV 

April 08, 2005. The central government would have to provide a total guarantee of Rs 3,150 crore (Rs 31.50 billion) to the special purpose vehicle (SPV) for the buyout of offshore debt to the now closed Dabhol project. Of the Rs 31.50 billion, the IDBI-led lenders to the beleagured Dabhol project had requested Rs 950 crore (Rs 9.50 billion) of backup guarantee for repayment of the principal and interest of the financial instruments floated by SPV. IDBI-led lenders have projected that there is a possibility that the external commercial agencies (ECA) may also recall their loans in the future. Since the Indian lenders have guaranteed repayment of interest and principal, the ECA may invoke these guarantees. The Indian lenders have proposed that in the event of invoking of these guarantees, the debt which is around Rs 2,200 crore (Rs 22.50 billion) should also be borne by the SPV which may raise funds by similar financial arrangements. The IDBI-led lenders have an exposure of over Rs 6,200 crore (Rs 62 billion) in DPC. The Indian and offshore lenders have already arrived at an agreement to buy out debt at $230 million.

US for serious energy dialogue with India 

April 08, 2005. The US is strongly committed to a “serious energy dialogue” with India, including on civilian use of nuclear energy. The issue is slated to be top on the agenda of petroleum and natural gas minister Mani Shankar Aiyer’s ensuing visit to the US shortly. “India and US are both energy deficit countries and a close cooperation in this field is viewed by US as mutually advantageous.

Coal India targets 343 mt for '05-06

April 09, 2005. Coal India Ltd (CIL) has signed an MoU with the Union Ministry of Coal, accepting a production target of 343 million tonnes (mt) and a despatch target of 344 mt for the 2005-06 fiscal. The production target is about 30 mt more compared to that in 2004-05. Of the total despatch target for the current fiscal, 261 mt will go to the thermal power sector, while the remaining 83 mt will cater to the cement, steel and fertilisers and other non-core industries. CIL has been advised to gear up its production subsidiaries to achieve the production target, to ease the rising demand and supply of coal. The demand for non-coking coal is steadily increasing with improved plant load factor in all thermal power stations in the country, which are either managed and controlled by State electricity boards or by National Thermal Power Corporation and Damodar Valley Corporation.

Task force on tour to select ideal model for power sector

April 10, 2005. A nation-wide wholesale market for electricity, benchmarked to the best in the world, could soon be in the offing. As a first step towards having an efficient power exchange in the country, a high-powered Task Force comprising officials from Power Trading Corporation (PTC), National Thermal Power Corporation (NTPC), Power Grid Corporation of India Ltd (PGCIL), Central Electricity Authority (CEA) and the Ministry of Power are away on a visit to the US, Norway, Canada, Australia and the UK to study the power markets in these countries and zero in on the ideal model for India. NTPC, PTC and PGCIL have already decided to jointly work for establishing the country's first power exchange and the three companies may also initially acquire some equity in the project. The companies plan to approach the Central Electricity Regulatory Commission for getting permission to set up an exchange subsequently. NTPC has already appointed Nord Pool and Crisil as consultants to look into various aspects of setting up the exchange. A power exchange would basically function on the lines of commodity exchanges like NCDEX or MCX and will provide a platform for buyers, sellers and traders of electricity to enter into contracts. Nord Pool runs the world's oldest and one of the most efficient exchanges across the four Scandinavian countries.

Power plants erred in key areas: CAG

April 07, 2005. Demolishing the Delhi Government's claims about improvement in power generation, the latest report of the Comptroller and Auditor-General (CAG) has found the three plants of the Indraprastha Power Generation Company erring in several key technical areas of power generation, causing monetary losses worth crores to the exchequer. The report states that there was a generation loss of a staggering Rs.802.73 crores (Rs 8.03 billion) due to lower thermal efficiency while generation losses in the gas turbine plant could have been easily avoided had the requirement of gas been properly and timely assessed. Similarly excess consumption of coal due to its low calorific value resulted in an additional expenditure of Rs.55.51 crores (Rs 555 million), while the company suffered Rs.18.55 crores (Rs 185.5 million) losses due to more consumption of secondary oil (light diesel oil) required to ignite boilers and for flame stabilisation. Stating that the main reason behind the losses was the inefficient working of power generating plants besides failure of power officials to address the lacunae highlighted in the previous CAG reports, it also highlights wasteful expenditure of Rs.4, 840,000 incurred due to improper shunting and tripling of operations while failure to maintain proper records and coordination with other departments and agencies resulted in a loss of Rs.24.37 crores (Rs 244 million). 

National electricity policy by June

April 06, 2005. The Central Electricity Authority (CEA) has advanced the deadline to June from August for the release of National Electricity Plan (NEP). CEA in its draft NEP has set the target of capacity addition of 60,769 mw during 11th Plan (2007-12). According to the draft NEP, of the 60,769 mw, 18,502 mw would be added from northern region, 17,619 mw from eastern, 11,810 mw from western, 6843 mw from southern and 5,995 mw from north eastern. Of the total 60,769 mw, as many as 34,970 mw would come from thermal power projects, 20,859 mw from hydro projects and 4,940 mw from nuclear. CEA and the ministry have projected the capacity addition of 41,110 mw during the 10th Plan. The NEP would include locations for capacity addition in generation and transmission considering economics, losses, load centre requirements, grid stability, security of supply and environmental considerations.

ADB asks India to lift oil sops 

April 06, 2005. State subsidies on oil products are doing great harm in India, Indonesia, Malaysia and Thailand, the Asian Development Bank (ADB) said. ADB urged its four member-countries to scale back subsidies and align prices with the market. "Current market conditions should be taken as a reason to push through with reform, as the fiscal costs rise and the escalation in the oil price may be more than just transitory," it said in its annual publication Asian Development Outlook. The report acknowledged that "public resistance to removing subsidies can be very strong, particularly during times of volatile oil prices." It also took note of the fact that these countries have taken steps to reduce subsidies as the fiscal strain began to show. India and Thailand resort to “off-budget” subsidies to specific products like diesel, kerosene and liquefied petroleum gas (LPG) but this "may incur fiscal liabilities in principle," it said. The scheme "would ultimately create a fiscal liability once the state-owned oil-marketing companies no longer prove viable." "Government intervention for redistributional and environmental reasons is justifiable only when the social gain or the environmental improvement exceeds the economic cost," the report said. "The existing practices in these four countries appear ineffective since the subsidies are poorly targeted and often distort resource allocation"

Kerala to meet electrification target in two years 

April 06, 2005. Given the number of households left without electricity, Kerala expects to clock Rajiv Gandhi Grameen Vidyuti-karan Yojana (RGGVY) target in half the time set by Centre. Only about 1,000,000 Kerala rural households lack electricity connection now. Just two more years would be enough for state to wrap up RGGV target. RGGV provides for as much as five years to do this. Kerala had achieved 100 per cent electrification of its 879 revenue villages but 35 per cent of households in rural hamlets had been in darkness. According to 2001-statistics, out of 4,940,000 rural households, only 3,238,000 households had electricity. By official records, this leaves 1,610,000 more to be covered. The Centre has extended its in-principle approval to a Rs 337-crore (Rs 3.37 billion) project for electrification of 879 villages in Kerala.

Absence of contracts lead to coal shortage at power plants

April 06, 2005. The critically low coal reserves faced by a large number of thermal power plants in the country is a result of these plants' reluctance to sign a formal Fuel Supply Agreement (FSA) with Coal India Ltd (CIL) that the latter had been insisting upon for more than two years. The FSA, which is valid for periods ranging between three years and 20 years, assures the coal consumer of guaranteed supply from various CIL mines. The annual amount is fixed and the consumer is allowed the flexibility to spread it over the 12-month period as per requirement. Till date only 15 thermal plants, out of the 72 in the country, had entered into fuel supply agreement with CIL and out of this one has already expired. As of now, the 14 thermal plants are given assured supplies from various coal producing subsidiaries of CIL based on their geographical locations.

SECL to sell coal through e-auctions

April 05, 2005. Following in the footsteps of Bharat Coking Coal Ltd, South Eastern Coalfields Ltd (SECL), the largest subsidiary of Coal India Ltd (CIL), has begun to sell coal through the ‘e-auction' route on a trial basis. The company will now organise buyers' conferences at various coal consuming centres and cities to familarise prospective buyers/bidders with the new system of sale. Currently, SECL sells coal to core and non-core sector consumers against a linkage granted by the Union Ministry of Coal and CIL.




Canada's OGI says wins Iraq oil field deal

April 5, 2005.A Canadian company said it had won a contract to develop the Himrin oil field in northern Iraq, three months after the deal appeared to have slipped through its fingers. Iraq's oil ministry awarded the engineering and supply tender for the 100,000 barrel a day field to OGI Group, a privately held exploration, development and oil field services company, the firm said. The interim cabinet also approved OGI's bid, oil ministry spokesman Assem Jihad said. The deal is expected to become binding once the new government is formed, Iraqi officials said. Shi'ite and Kurdish blocs that dominated the Jan. 30 elections have failed so far to form a cabinet but may agree on one soon.

Pioneer awarded interest in deepwater Nigeria

April 5, 2005. Pioneer Natural Resources Company announced that a subsidiary of the Company has joined Oranto Petroleum and Orandi Petroleum in an existing production sharing contract on Block 320 in deepwater Nigeria gaining exploration rights from the Nigerian National Petroleum Corporation. The 442,000 acre (1,790 square km) block is located about 90 miles (150 km) southeast of Lagos in water depths ranging between 6,900 to 8,900 feet (2,100 to 2,700 m). Pioneer's subsidiary is the technical operator of the block with a 51 per cent working interest. Oranto Petroleum and Orandi Petroleum Limited, Nigerian corporations, hold 32 per cent and 17 per cent, respectively. Under terms of an existing Production Sharing Contract, Pioneer and the other participants will carry out a work program that includes acquiring a minimum of 1,790 square kilometres of 3-D seismic data and drilling at least one exploration well by February of 2007.

Nippon Oil buys stakes in Gulf of Mexico

April 7, 2005. Japan's top refiner, Nippon Oil Corp. said it had bought stakes in gas and oil blocks in the U.S. Gulf of Mexico from leading U.S. independent oil and gas producer Devon Energy Corp. Nippon Oil bought from 12.5 to 100 percent of 67 offshore blocks, including 27 fields that are currently producing gas and oil, the company said in a statement. Of the producing fields, Nippon Oil will operate 17 fields. The purchase would increase Nippon Oil's gas and oil production by 13,000 barrels of oil equivalent (boe) per day to 168,000 boe/d, Nippon Oil said. Nippon Oil has stakes in energy projects in such areas as Indonesia and Vietnam. In March, Nippon Oil said it would invest 200 billion yen ($1.84 billion) in gas and oil projects to boost its upstream production to 180,000 boe/d by March 2008. Devon Energy said this week it had reached agreements to sell almost all the U.S. oil and gas properties it had previously put on the block for about $1.2 billion or about $915 million after taxes.

Venezuela may open Tomoporo field to oil companies

April 6, 2005. Venezuela is considering opening the Tomoporo field, one of its largest oil prospects, to foreign investment, a member of state energy firm PDVSA's board of directors said. PDVSA originally planned to develop Tomoporo with international partners. But in November 2003 PDVSA announced it would go it alone in the field, which contains about 1 billion barrels of recoverable light crude reserves. PDVSA announced in March of this year that it had brought two new wells online to increase Tomoporo's production by 15,500 b/d. The field had been pumping about 100,000 b/d before that hike. Venezuela, the world's No. 5 oil exporter, plans to raise Tomoporo's production to 250,000 b/d by 2008 as part of a bid to hike output to 5 million b/d by 2009.

Apache makes two natural gas discoveries in Egypt

April 6, 2005. U.S. independent oil and gas firm Apache Corp. said it has made two natural gas discoveries in Egypt, adding to its large operations in the Arab country. The Syrah 1X Wildcat discovery on the Khalda concession in Egypt's Western Desert tested 46.5 million cubic feet of natural gas per day, Apache said. Apache owns 100 percent contractor interest in the Khalda concession. The Tanzanite 1X discovery, onshore on Apache's West Mediterranean concession, tested 7.4 million cubic feet per day, the company said.

Cambodia awards exploration rights

April 6, 2005. The X-Change Corporation announced that it has been awarded oil and gas research and exploration rights to offshore Cambodia Block B and onshore Cambodia Block A by the Royal Government of Cambodia. The offshore Block is contiguous to Block A, operated by Chevron Overseas Petroleum (Cambodia) Limited (COPCL), a subsidiary of ChevronTexaco. COPCL and its partners have discovered oil in each of the four exploration wells in offshore Cambodia Block A, in which they have drilled to date. The X-Change Corporation offshore block encompasses approximately 6,500 square kilometers and is located roughly 200 kilometers offshore. The onshore block covers approximately 1,500 square kilometers in the northwest corner of Tonle Sap Basin.

ChevronTexaco awards Nigeria plant

April 8, 2005. ChevronTexaco Corp. has awarded a $1.7 billion contract to build Nigeria's third natural gas-to-liquids plant to a consortium including Halliburton Co. subsidiary KBR, the company said. The project is expected to produce 34,000 b/d of diesel, naphtha and a small amount of liquefied petroleum gas, the company said. The consortium JKS including JGC Corp. of Japan, American KBR and Snamprogretti of Italy will construct the plant using technology developed by ChevronTexaco and Sasol Ltd. of South Africa, it said. The plant will be located near ChevronTexaco's other liquefied plant at its Escravos oil export terminal, on the Atlantic shore about 60 miles east of Lagos, the economic capital. Nigeria is Africa's leading oil exporter and the fifth largest source of U.S. oil imports. More than 70 percent of the natural gas that occurs in the course of oil production in Nigeria is currently burned away. ExxonMobil Corp. and Agip also have plans to build two gas-to-liquids plants. Investigators in the United States, France and Nigeria are looking into charges the consortium paid more than $180 million in bribes to Nigerian officials to secure the contract, now worth more than $10 billion.

Indian firm seeks joint gas exploration in Bangladesh

April 10, 2005. The state-run Indian Oil and Natural Gas Corporation have proposed to Bangladesh a joint search for gas in areas which have remained unexplored. ONGC Director Dr AK Balyan, in a letter to the state minister for energy and mineral resources AKM Mosharraf Hossain on April 4, said that the corporation was interested in joint exploration with Petrobangla. He said they came to know that the Bangladesh government was preparing for production sharing contracts for the areas that had remained untapped. The corporation was interested in this regard, he added. The state minister for energy and mineral resources said that the ONGC's proposal was the newest in a series of offers made by companies from different countries.

Saudis promise to boost oil output

April 7, 2005. The recent run-up in the price of crude oil has lasted long enough and gone high enough to prompt Saudi Arabia to vow a matching rise in its output. As the world's largest oil exporter the kingdom's decision to supply its crude oil customers with all the oil they want is calculated to limit damage to the world economy and pre-empt a backlash of energy saving measures from the developed world that could cut long-term demand for oil. Besides the promise to boost crude oil output, Saudi Arabia is cutting prices.

BHP, Australian explorers shift to gas

April 11, 2005. BHP Billiton and BP Plc are among petroleum companies that may commit this year to spend more than A$5 billion ($3.9 billion) in Australia, mostly to produce natural gas as oilfield discoveries decline. BHP, BP and Royal Dutch/Shell Group are among investors in the North West Shelf venture, which may decide this year to spend a$2 billion to expand liquefied natural gas output. BHP may also approve more than a$1 billion of investment to extract about 200 million barrels from two of the nation's last undeveloped oilfields, off the coast of Western Australia.  Australian oil output may rise next year for the first time in five years as new projects start up, according to a government forecast. Two years later, production is set to resume the decline as explorers failed to find significant new deposits, discouraging spending on wells in previously unexplored areas. Oil and gas are among the commodities that may help Australia, the fifth-biggest economy in the Asia-Pacific region, to expand 3 percent in the year ending June 30, according to a government forecast.

Kappa announces joint venture on Colombian contract

April 11, 2005. Kappa Resources Colombia Ltd. ("Kappa"), a privately held oil and gas exploration and production company announced that it has entered into a farmout agreement (the "Farmout Agreement"), effective April 1st, 2005, with Loon Energy Inc. ("Loon") a publicly traded internationally focused company headquartered in Calgary, Alberta, Canada. The Farmout Agreement provides Loon the opportunity to participate in, and earn a significant interest in Kappa's 200,000 acre Abanico Association Contract located in the prolific Upper Magdalena Valley of Colombia.


Saudi plans to build export refinery

April 5, 2005. Middle East oil giant Saudi Aramco plans to build a multi-billion dollar export-oriented refinery with a 400,000 b/d capacity in the Red Sea city of Yanbu, a senior company official said. Investment for the plant will run to $4-$5 billion, Khalid al-Buainain, vice president of refining at the state oil company said. Saudi Aramco wanted to form a joint-venture with one or more international partners for the facility, he said. A lack of global refining capacity to meet growing fuel demand in the United States and Asia has helped push oil prices to record highs this year. India's Hindustan Petroleum Corp Ltd (HPCL) has held "preliminary talks" for a stake the new Yanbu refinery, HPCL Chairman M.B. Lal said. HPCL has also offered Saudi Aramco a stake in its Visakhapatnam refinery which will double capacity to 300,000 b/d in three years, Lal said. Lal visited Saudi Arabia with India's oil minister late last month. Aramco has two joint-venture partners in the kingdom's refining sector. It operates the 320,000-bpd Sasref refinery at Jubail in the Middle East Gulf with Royal Dutch Shell and the 400,000-bpd Samref refining complex at Yanbu with Exxon Mobil Corp.

Marathon mulls new heavy crude refining units

April 7, 2005. Marathon Oil Corp. is mulling the addition of new units at its Kentucky and Detroit refineries to boost their capacity to process heavier crude oil supplies, the head of its refinery operations said. The possible additions of the Coker units at the Catlettsburg and Detroit refineries would raise the heavy oil throughput at the plants by 130,000 and 65,000 b/d, respectively, Gary Heminger, president of Marathon Ashland Petroleum said. If approved by the Marathon board, the upgrades would be on line by the end of the decade. The company has already included the capital expenditures for the two projects in its future spending plans. U.S. refiners are increasingly adding Coker capacity to their refineries to take advantage of the lower commodity costs for heavy crudes, which are trading at a significant discount to the lighter crude oil grades that are more easily refined into gasoline and diesel.

US oil group ChevronTexaco to build refinery in Nigeria

April 8, 2005. US oil giant ChevronTexaco is to build an oil refinery at its Escravos facility in Nigeria's oil-rich Niger delta, the boss of state-run Nigerian National Petroleum Corporation (NNPC) said. The government has already approved the 30,000 b/d project to be located at ChevronTexaco's oil terminal at the mouth of the Escravos River in Delta State. No date has been fixed for the signing of the project expected to be completed within one year after the signing ceremony, he said. He said the project will be jointly financed by NNPC and ChevronTexaco under a joint venture partnership. Nigeria currently has four oil refineries, but depends on massive imports to meet local demands for fuel, diesel and kerosene. Regular hikes in prices of fuel have triggered labour unrest in the West African country in recent times.

Biggest gas terminal in Quetta planned

April 06, 2005. The biggest gas terminal of the country is being established in Quetta for supplying liquefied petroleum gas (LPG) to the rest of the country after finalizing a gas import project with Turkmenistan. Balochistan Chief Minister Jam Mir Mohammad Yousuf disclosed this during a meeting with the director general, National Logistic Cell (NLC), Major Gen Khalid Zaheer Akhtar, here. He said that with the establishment of a gas terminal in Quetta over 1,500 local people would get jobs while LPG would be sent all over the country through NLC tankers. He said that the NLC would also launch container service for sending goods from Gwadar port to the Central Asian States.

Transportation / Trade

BOC to supply hydrogen in Lima, Ohio

April 5, 2005. BOC a leading supplier of hydrogen and other gases to the global refining industry, has signed a letter of intent to supply hydrogen to The Premcor Refining Group Inc., oil refinery in Lima, Ohio. BOC is investing approximately $40 million in equipment and pipelines in order to supply hydrogen to Premcor's 170,000 b/d refinery and to other Lima area customers. BOC expects to begin construction on the plant in the second quarter of 2005 and to start supplying hydrogen in the second quarter of 2006. BOC's partner for the project is Linde BOC Process Plants of Tulsa, Oklahoma.

Shell seeks share in Venezuela LNG

April 7, 2005. Anglo-Dutch oil major Royal Dutch/Shell is still interested in investing in Venezuela's Mariscal Sucre liquefied natural gas (LNG) project after the government scrapped its original development plan with the company, a Shell official said. Venezuela had been negotiating with Shell for years to develop natural gas fields in waters off the eastern Paria peninsula and construct an LNG exporter terminal. But the government this year announced the project, Mariscal Sucre, would be divided into at least two separate exploration and production blocks for auction. The LNG project would also be developed separately. The terminal will gather natural gas for export from the Mariscal Sucre fields, as well as from the offshore Deltana area on the maritime border with Trinidad and Tobago, which is being explored by international energy companies. The government says it plans to start the tender process later this year, and foreign energy companies hope to begin exports of LNG by 2009 or 2010.

Brunei Shell supplies crude oil to S. Korea's Hyundai

April 10, 2005.Brunei Shell Petroleum Co. said it had agreed to supply 4,400 b/d of crude oil to South Korean refiner Hyundai Oilbank Corp. for nine months from April 1. The deal marks a 13 percent increase in the volume of crude oil exports by Brunei Shell to South Korea, Brunei Shell said.  Hyundai Oilbank refines heavy grades from the Middle East as the main feed into their 390,000 b/d capacity refinery located at the southwestern city of Daesan.

Shell secures $10 bln LNG deal to North America

April 10, 2005. Royal Dutch/Shell will supply up to 2.5 million tonnes a year of liquefied natural gas (LNG) from Australia's Gorgon gas fields to the U.S. West Coast in a deal worth more than $10 billion, a Shell official said. The deal, which will mark the first delivery of Australian gas to the west coast of North America under a long term contract, will span 20-25 years from 2010 and commits all of Shell's share of gas from the A$11 billion ($8.47 billion) Gorgon development. This deal is worth at least $10 billion and it is the first supply deal to be finalised for the Gorgon project. The first delivery of Gorgon gas would be delayed at least a year to 2010 because of ongoing discussions with CNOOC, parent of New York and Hong Kong-listed CNOOC Ltd. Shell's LNG will be delivered to the Energia Costa Azul terminal on shore in northern Mexico, which is being built by Sempra and is due to receive its first gas in 2008. Gorgon gas would supply markets in Mexico and the U.S. West Coast.  The development path for Greater Gorgon was simplified last week after the three joint venture partners agreed to integrate their stakes in the various leases that make up the project, giving ChevronTexaco a uniform 50 per cent interest and operatorship, and leaving Shell and Exxon Mobil with 25 per cent each. The deal provides the basis for development of the project area, which contains an estimated 40 trillion cubic feet of recoverable natural gas. The joint venture plans to build two five billion tonnes per annum LNG trains on Barrow Island using gas sources from Greater Gorgon. A final investment decision is likely in mid-2006.

Greeks, Bulgarians hail pipeline deal

April 11, 2005. The presidents of Greece and Bulgaria praised an oil pipeline deal as a key step toward stability in the Balkans. "This gave a new and dynamic push to the already good relations," Greece's Karolos Papoulias said. In Sofia the governments of Greece, Russia and Bulgaria are to sign a long-awaited euro522 million (US$677 million) agreement for the construction of the trans-Balkan pipeline. The 285-kilometer-long (177-mile-long) pipeline linking Bulgaria's port of Burgas to Greece's Alexandroupolis on the Aegean Sea will allow Russia to export oil through the Black Sea, bypassing the busy Bosporus Strait in Turkey. The pipeline is to have an annual capacity of around 15 million metric tons (16.5 U.S. tons). BP PLC's Russian joint venture, TNK-BP, is heading the project.

USEC gets $200 million contract

April 11, 2005. Uranium processor USEC Inc. said it received a $200 million contract from Constellation Generation Group, a unit of Constellation Energy Group Inc., to supply separate work units to fuel the utility's five nuclear power reactors. SWU is the standard unit of measurement for uranium enrichment. Under the contract, USEC will continue to supply the Baltimore-based utility with fuel from recycled Russian warhead uranium through the U.S.-Russian Megatons to Megawatts program. Recycling of the warhead material takes place in Russia before shipment to the United States. As the U.S. government's executive agent, USEC purchases the warhead-derived fuel from Russia for use by utility customers. USEC has been a fuel supplier to Constellation for more than 10 years. The new contract will cover deliveries from 2007 to 2012.

Policy / Performance

ExxonMobil signs agreement for Australian gas resources

April 5, 2005. Exxon Mobil Corporation announced that it’s wholly owned subsidiaries, Mobil Exploration and Producing Australia Pty Ltd and Mobil Australia Resources Company Pty Limited, have signed a Framework Agreement with ChevronTexaco and Shell subsidiaries resulting in a new ownership structure for the Gorgon project and the Greater Gorgon gas resource offshore Western Australia. This agreement will provide access to 11 gas fields in the Greater Gorgon area, including Gorgon and Jansz, containing estimated total recoverable resources in excess of 40 trillion cubic feet (tcf) of natural gas. These resources will supply the Gorgon project and will help ensure that these fields can be developed in the most technically and economically efficient manner. It will also increase the marketability of the Gorgon project due to the availability of increased gas resources. Under the Framework Agreement, the new ownership structure of the Gorgon project will be: ChevronTexaco (operator) 50 percent, ExxonMobil 25 percent and Shell 25 percent.

ChevronTexaco to invest in Crude Project

April 5, 2005. Oil giant ChevronTexaco Corp. is looking to invest between $5 billion and $6 billion in a heavy crude project in Venezuela's Orinoco tar belt this year, a company official said. We're hoping to start basic investment in late 2005," Ali Moshimi, president of the company's Latin America upstream projects, said. Spain's Repsol YPF and Chevron announced last week plans for a joint project to refine extra-heavy crude from the tar belt in eastern Venezuela into synthetic crude. The fuel would then be transported through a new regional pipeline. Chevron currently holds a 30 percent stake in a project in the Orinoco, but the upcoming project will be the first heavy oil venture for Repsol in Venezuela.

Islamic Bank to provide $600m for oil imports

April 5, 2005.  The Islamic Development Bank (IDB) will provide $600 million to Pakistan for importing crude oil during 2004-05. This was stated by Vice-President of IDB Dato Dr Syed Jaffar Aznan in a meeting with Dr Salman Shah, adviser to the prime minister on finance and revenue. According to the details, the IDB has extended a syndicated facility of $100 million to Pakistan for the import of crude oil and petroleum products and $500 million for financing of crude oil imports during the current financial year. The syndicated Murabaha financing has been arranged from international market for Pakistan with the participation of 14 international banks from Europe, Middle East and Far East. Pakistan will be the beneficiary of the arrangements while PARCO is the executing agency for the imports.

BASF, Gazprom to sign Siberia gas field deal

April 10, 2005. Russian gas group Gazprom and the energy unit of Germany's BASF AG will announce an agreement to develop a major gas field in western Siberia, Handelsblatt said. Quoting German government sources, said BASF's Wintershall unit would cooperate with Gazprom to develop the vast Yuzhno-Russkoye field and both companies would take a stake in a gas pipeline through the Baltic. BASF Wintershall and Gazprom will hold a joint news conference as part of a German-Russian business meeting in Hanover to be attended by German Chancellor Gerhard Schroeder and Russian President Vladimir Putin. The Yuzhno-Russkoye field, estimated to cost around 1 billion euros ($1.28 billion) to develop, is expected to start production in 2007.

Syria, Egypt talks on gas cooperation project

April 9, 2005. Egypt's Minister of petroleum and Mineral Resources Sameh Fahmi conferred with his Syrian counterpart Ibrahim Hadad currently visiting Egypt on the executive programs of an Arab gas pipeline venture, whose second stage is implemented by the Egyptian oil sector companies. The second 300-million dollar stage involving exportation of gas to Jordan is expected to end by December. The two sides also discussed means of speeding up the implementation of the project. Fahmi said the Arab gas pipeline is a distinguished model for further strategic Arab cooperation. The project is an economic artery that would serve Egypt, Jordan, Syria and Lebanon as well as Turkey and Europe at a later stage.

Pak efforts on to develop oil, gas sector

April 8, 2005. Minister of State for Petroleum and Natural Resources, Mir Mohammad Naseer Mengal said that government would consider the hydrocarbon experts’ recommendations for providing more incentives to the protective investors. Mengal said that the government was making all out efforts for the speedy development of oil and gas sector in order to put the country on the road to self-reliant. He urged upon the geo-scientists to acquire modern techniques and know-how prerequisite for development of oil and gas sector. The minister said that the country would face shortfall in energy after year 2010. To bridge the supply and demand gap, geo-scientists would have to play a meaningful role for exploring indigenous energy resources reducing the impact on economy.

Endesa, Metrogas to buy gas from Enap LNG project

April 7, 2005. Chilean generator Endesa Chile and natural gas distributor Metrogas have signed an agreement with state oil company Enap to be offtakers for the latter's proposed liquefied natural gas (LNG) re-gasification project. Enap plans to build an LNG re-gasification terminal at the port of Quintero in central Chile's Region V to reduce dependence on Argentine gas imports. Gas imports have been drastically reduced in the last few months as Argentina's government has ordered gas producers to re-direct natural gas away from exports to meet domestic demand in that country. The agreement with Endesa and Metrogas is "essential" to the implementation of the LNG project because it guarantees offtakers for the gas.

France, Brazil offer cooperation in oil, gas sector

April 7, 2005. The ambassadors of Brazil Fausto M Godoy and France Pirree Charrasse separately called on the Federal Minister for Petroleum and Natural Resources Amanullah Khan Jadoon. They discussed with the Minister matters pertaining to promoting bilateral cooperation in the oil and gas sector. The Brazilian envoy the Minister said the President Musharraf’s recent visit to Brazil has opened up new avenues of interaction between the two countries in diversified fields including the oil and gas. He said both countries could learn a lot from each other’s experiences in the oil and gas through mutual exchange of experts. He also briefed the envoy about the oil and gas development activities including the proposed cross border gas pipeline projects. While talking to French envoy the Minister said that both countries enjoy excellent relations in various fields including the oil and gas and underlined the need to expand and promote it for the mutual benefit of the two countries.

PDVSA confirms eastern gas project split

April 11, 2005. Venezuela's state oil firm PDVSA has confirmed the reorganization of three high profile natural gas projects off the coast of eastern Venezuela into upstream and downstream projects, company president and energy and oil minister Rafael Ramírez announced. The Mariscal Sucre gas project will be integrated with the offshore Deltana platform and Gulf of Paria projects. All three projects are located in a gas-rich area off the northeastern coast of Venezuela near Trinidadian waters. The resulting integrated project will then be split along business lines: upstream, including exploration and production in natural gas and crude; and downstream, including processing, commercialization and the construction of Venezuela's first natural gas liquefaction plant facility. Most of the gas produced from the Deltana, Paria and Mariscal Sucre fields will be piped to the mainland to meet the growing domestic demand for natural gas. The rest will be liquefied for export at the Cigma industrial complex at Guiria in the northeastern tip of Venezuela pending an export permit from the energy and mines ministry.



Emerson awarded ultra-supercritical power plant contract

April 5, 2005. Emerson Process Management, a business of Emerson announced that it has won a $7 million contract to automate China's coal-fired Huaneng Yuhuan Power Plant as the country expands its generation capacity to meet the growing demand for power. Owned by Huaneng Power International Inc, the project will be China's first 1,000-megawatt-per-unit power plant, and the country's first to use ultra-supercritical technologies. Ultra-supercritical plants use new advanced clean coal technology that allows operation at elevated steam temperatures and pressures. 

Middle East’s largest power plant nearing completion

April 6, 2005. The last unit of ten gas turbines of Damavand power plant, the largest one in the Middle East, was put into operation and was synchronized with the network. The said steam unit became operational with the nominal capacity of generating power as much as 159 MW. The gas sector of Damavand power plant is being set up in two phases with the total nominal capacity of 1908 MW. With implementing the operation of the steam sector, the total nominal capacity of the power plant will hit 2800 MW.

PDVSA, to build 300MW thermo plant

April 5, 2005. Venezuela's state oil firm PDVSA and state-owned transmission and distribution firm Cadafe will jointly build a new 300MW thermoelectric plant to supply PDVSA's refining facilities in the western state of Falcón, PDVSA president and energy and oil minister Rafael Ramírez told. Investment in the project will be some US$500mn, he said, without giving details about when it would start construction.

FPL sees 2 big power plants in service for summer

April 8, 2005. Florida Power and Light Co. expects two big power plants in Florida to enter service this summer to help meet the utility's skyrocketing demand for energy. With 100,000 new customers demanding electricity each year, the company has to add about 600 megawatts a year to keep up with the demand. The Manatee addition is a $600 million natural gas-fired 1,100 MW combined cycle plant built at the existing 1,628 MW Manatee station, which already contains two 814 MW oil/gas-fired units 1 and 2. The Manatee station is located near Parrish in Manatee County about 25 miles southeast of St. Petersburg, Florida.

US power giant eyes Thar plant

April 10, 2005. A US-based company AES has planned to invest $1 billion for producing 1,000 megawatts electricity at Thar Coal Power Plant, Federal Minister for Water and Power Liaquat Ali Jatoi said. Five power plants were offered during the road shows including two of Thar Coal Power Project, two of Sunda Power Project and one of Lakhra Coal Power Project.

Pakistan to build more N-power plants

April 9, 2005.  Dr Ishfaque Ahmed, special adviser to the prime minister on strategic programme, said Pakistan would build more nuclear power plants after the Chashma Nuclear Power Plant Unit-2 (CHASNUPP-2) to achieve its target of generating 8,800mw by 2020. He was speaking at the ground breaking ceremony of the Chashma-2project, which will be completed by 2011 at a cost of Rs51 billion.  The project, with a gross production capacity of 340mw, will be jointly built by the China National Nuclear Corporation (CNNC) and the Pakistan Atomic Energy Commission (PAEC) under the monitoring of the International Atomic Energy Agency (IAEA). The plant using enriched uranium and light water will be the country's third nuclear power plant after the 137mw Karachi Nuclear Power Plant (Kanupp) and the 325mw Chashma Nuclear Power Plant (CHASNUPP), phase-I. He said CHASNUPP-2 was a major milestone in the country's history. It will use pressurized water reactor technology and with the experience of CHASNUPP-I and improved design it will address the Pakistan Nuclear Regulatory Authority (PNRA) regulations based on IAEA's safety requirements.

Japanese firms to build power plant in Malaysia

April 9 2005. Jimah Energy has picked a group of Japanese firms led by Sumitomo Corp to build a coal-fired power plant for some RM5 billion. The group, which includes Ishikawajima-Harima Heavy Industries Co Ltd and Toshiba Corp, has started preliminary works for the 1,400-megawatt (MW) power plant, to be located in Negri Sembilan, whose royal family owns power firm Jimah Energy. The plant is scheduled to come on line in January 2009. It agreed to sell electricity to state-owned Tenaga Nasional Bhd in August last year. The deal is expected to pave the way for Jimah Energy to sell more than RM5 billion of Islamic bonds to fund the project, which will cost a total of about RM6 billion.

China plans 40 new nuclear reactors

April 7, 2005. China plans to build 40 nuclear reactors within the next 15 years to achieve a new, increased target for generating capacity. From now until 2020, two to three 1,000 megawatt reactors will be put into commission every year, the China Daily said, citing the Commission of Science, Technology and Industry for National Defense. "We are speeding up development of nuclear power because it is clean and green energy," said Zhang Fubao, deputy department director of China Atomic Energy Authority. The goal is to boost combined capacity from the current 8,700 megawatts to 40,000 megawatts by the year 2020, the paper said, up from a previously announced 2020 target of 36,000 megawatts. Zhang said China plans to increase the proportion of its electricity generated by nuclear power from the current 2.4 percent to four percent in 15 years' time, according to the paper.

20 micro-power plants to be built in Bangladesh

April 12, 2005. A high powered committee headed by Principal Secretary to the Prime Minister decided to develop some 20 small and medium size power plants across the country on a fast-track basis to overcome the present power crisis. The decision was taken as the country kept experiencing between 500 and 700 mw of power shortage against a demand for 3800 mw.  Highly informed sources close to the committee said the proposed power plants would have the capacity between 10 mw and 50 mw. They said private sector entrepreneurs, particularly Bangladeshi enterprises, would be given the responsibility for setting up the plants on Build-Own-Operate (BOO) basis.

Africa to spend on power plants

April 11, 2005. The Federal Government is to spend about $1,780,536,836 on the construction of seven power plants, gas facilities and transmission and distribution infrastructure over the next three years. Accrued monies from excess crude oil sales and foreign reserve are being considered as options for funding the projects. The seven power plants, which will be run solely on gas will add an additional 1,720 megawatts of electricity to the national grid and will be located in Omoku (Rivers, 100MW), Gbarain/Ubie (Bayelsa, 300MW), Sapele (Delta, 300MW), Ikot Abasi (Akwa Ibom, 270MW), Eyaen (Edo, 250MW), Egbema (Imo, 250MW) and Calabar (Cross River, 250MW). The power stations are to utilize gas from sources nearest to them. The Federal Government and relevant Joint Venture Partners (JV) are to split the expenses on gas source development.

China's biggest stalk power plant to be built in Xi'an

April 11, 2005. China's biggest stalk power plant is to be built in Xi'an, capital of west China's Shaanxi province. Invested by a Canadian company, the stalk plant will help boost the region's power supply, provide a clean and more efficient method of electricity generation, and help reduce poverty. Costing about 57 million US dollars, the power project is designed produce 250 million kilowatt-hours of electricity annually. Local farmers can earn extra income totalling 3.6 million US dollars annually by selling stalks to the power plant. Crop stalks, abundant in Shaanxi, one of China's major farming provinces, have been burnt in the fields after harvest for hundreds of years, creating numerous environmental problems. Statistics from the International Energy Agency show that two tons of stalks can produce the same amount of electricity as one ton of coal.

Transmission / Distribution / Trade

California needs federal muscle for major power line

April 11, 2005. Construction of a 1,300 mile, high voltage transmission line from the Rockies to bail out power-short California will require federal legislation to coordinate the multi-state project.  The $3.3 billion project to transmit wind and coal-generated power, which was proposed recently by four western state governors, would benefit Californians to the tune of $325 million to $400 million a year, just part of the annual benefits to the overall region of $1 billion to $1.7 billion, according to one study.

Constellation energy to sell Florida plant

April 11, 2005. Constellation Energy Group Inc. said that it agreed to sell one of its power plants in Florida to units of power utility Southern Co. for $206 million, subject to closing adjustments. The wholesale energy provider said it expects the sale of its Cocoa, Fla.-based Oleander Power Plant to units of Southern Power, which is owned by Southern Co., to close during the second quarter. The sale is subject to regulatory approval. The 680-megawatt plant will continue to sell power under contracts with both Seminole Electric Cooperative and Florida Power and Light.

Policy / Performance

LoIs for power projects issued in Pakistan

April 9, 2005. The federal government has issued letters of interest to investors desiring to set up thermal, hydel and coal based power projects worth $8 billion as they have completed feasibility studies under the Power Policy 2002. Zafar Ali Khan informed that negotiations with foreign investors had already been completed, leading to the issuance of letters of interest for installing power plants worth $8 billion. He said that the power projects would be completed in six years. "I am really hopeful that these power projects will be ready by the end of 2011," he said and added, "work on the first project will start in 2008."

Bulgaria approves nuclear plant 

April 7, 2005. The Bulgarian government has approved the construction of the country's second nuclear power plant at Belene on the shore of the river Danube. Two of the Kozloduy nuclear plant's six reactors have already shut down and two more will do so before Bulgaria joins the EU in 2007. Two 1,000-megawatt reactors are planned for Belene. The project was begun in the 1980s but mothballed 12 years ago. The government has estimated the extra costs to be 2.5bn euros (£1.7bn). The decision was announced by Energy Minister Miroslav Sevlievski.

Renewable Energy Trends


SBI, Chennai signs MoU for jatropha cultivation

April 11, 2005. The State Bank of India (Chennai, local headoffice) has signed a memorandum of understanding with D1 Mohan Bio, to finance an estimated Rs 130 crore (Rs 1.30 billion) for jatropha cultivation in Tamil Nadu (excluding Nilgiris) by farmers through contract farming of nearly 1 lakh acres in the first year.  The farmers will be jointly identified by SBI and D1 Mohan Bio – a joint venture of Chennai-based Mohan Breweries and UK-based D1 Oils. Small farmers and landless labourers will benefit by this project. They shall find a ready market for their produce from D1 Mohan Bio. The loans will be realised from the sale of the crop. The D1 Mohan Bio company also plans to set up a jatropha processing facility near Chennai that will convert the crop into bio-diesel. The pilot plant will have a 8,000-tonne capacity a year and is estimated to cost Rs 15 crore (Rs 150 million). If it turns out to be successful, D1 Mohan Bio plans to set up a 1 lakh-tonne per year capacity plants in all districts with an investment of Rs 100 crore (Rs 1 billion) in the near future. 

India scores in emission norms 

April 11, 2005. India and China may be growing leaps and strides in the automobile sector, but are also home to eight of the world’s ten most polluted cities. There is a strong correlation between the growth of the auto sector and the rising pollution levels. The fact that seven out of world’s ten most polluted cities are in China takes away some of the sheen of the 12 per cent a year growth shown by the Chinese automotive industry. Such correlation can also be found in India. Delhi, which joins the Chinese cities in the top 10, accounts for around 17 per cent of the annual motor vehicle sales in India, more than the other three metros put together. 

Carbon dioxide emissions from consumption of petroleum in million metric tonnes of carbon equivalent have shown a growth of 63 per cent for China in the last decade. India follows closely behind with 56 per cent. This is in contrast to Japan (-3.6 per cent) and the US (2.9 per cent), both having larger vehicle populations. This seemingly paradoxical situation is because of old manufacturing technology, long duration of vehicle use, less stringent emission control laws, serious traffic congestion and bad maintenance of automobiles.

Maharashtra will promote green energy 

April 11, 2005. Against the potential 6,481 mw power from renewable sources, Maharashtra, anticipating a record peaking shortfall of 7,700 mw by 2010, has achieved a paltry capacity addition of 663.061 mw so far. The state has wind power generation capacity of 411.355 mw (against a potential 3,650 mw), small hydro: 207.08 mw (600 mw), bagasse cogeneration: 32.50 mw (1,000 mw), biomass: 6 mw (781 mw), municipal solid waste: 0 mw (100 mw) and industrial waste: 6.13 mw (350 mw). Its failure to exploit available potential is largely due to the Maharashtra’s over emphasis on capacity addition through conventional sources, mainly coal. However, the state has recently taken a conscious decision to promote green power through a series of policy initiatives.

Orissa to be role model for renewable energy

April 11, 2005. After its pioneering reforms in the power sector, Orissa is looking at renewable energy. The state has huge potential for thermal and hydel power generation, and renewable energy has been the least priority with the exception of biogas. Priority is now being given on generating more environment-friendly power at least cost. The state’s renewable energy policy has already been vetted by the Orissa Electricity Regulatory Commission. The Department for International Development (DFID), UK, has roped in Ernst & Young for this. Over the last 20 years, the state has installed 996,000 biomass plants across the state. However, given the fact that the state has the potential for generating 350 mw through biomass, Orissa has to go a long way in this sector. In spite of a bitter experience with mini-hydel stations earlier, the state has identified 118 sites for small hydro units (up to 25 mw). Even though a pilot project at Puri failed, windmills at six sites with a gross potential of 1,700 mw will be installed. Despite a substantive potential of 20 mw per sq km, solar energy has been left alone, given its steep price. It will be tapped now for electrifying remote un-electrified villages (RUV), and 6,474 RUVs have been identified. The Orissa Renewable Energy Development Authority (Oreda) has prepared a proposal for electrifying 364 villages at an estimated cost of Rs 51.12 crore (Rs 511.2 million).

Kalam’s 8-point plan includes bio-fuel generation

April 06, 2005. President APJ Abdul Kalam listed out eight schemes that could generate about 56 million jobs in the next five years. Among the eight schemes outlined by President Kalam was bio-fuel generation. The country’s abundant wasteland can be used to grow bio-fuel plants, which have a life of 50 years. “11 million hectares can yield a revenue of about Rs 20,000 crore (Rs 200 billion) a year and provide employment to over 12 million people for plantation and extraction”, President said.


FPL Group plans to build wind farm in Texas

April 5, 2005. FPL Group Inc. said it plans to build a 220.5 megawatt wind farm in Taylor County, Texas. FPL is the biggest producer of wind power in the United States. The company said the wind farm will be comprised of 147 1.5-megawatt wind turbines spread over a 22,500 acre site.

More investors eye alternative energy -California

April 5, 2005. As oil and gas prices soar, investor interest in alternative energy start-ups is rising for the first time in four years. Venture-capital firms pumped $520 million into energy technology start-ups last year, up from $509 million in 2003. While that 2 per cent gain was small, it was the first annual increase since 2000, says a new study by Nth Power, a San Francisco VC firm focused on energy. More growth is expected this year, Nth Power says. California, often at the forefront of energy trends, has launched a Clean Energy Fund with $30 million. The non-profit fund last month hired Nth Power and two other venture-capital firms hunting for promising start-ups, such as that developing solar power tech.

Plea to convert sugar plant into biofuel refinery in Ireland

April 6, 2005. The Carlow sugar factory could be converted into a biofuels refinery to help cut carbon emissions and benefit the local economy. Biofuels researcher Bernard Rice said that the Carlow sugar processing plant could be used to refine sugar beet into ethanol. Mr Rice said the early stages of production, such as the weighing, sampling and washing out of the sugar could all be done in the existing factory. An extra unit would have to be built to ferment and distil the raw sugar solution into biofuel ethanol. Mr Rice, a researcher for Teagasc, believes biofuels have a role to play in cutting fossil fuel consumption. He said: "First of all they are more or less carbon neutral.  Mr Rice said that using biofuels would mean there was some sort of native fuel production, reducing Ireland's reliance on oil from unstable countries.

Record crude oil prices force G7 to develop alternative energy sources 

 April 07, 2005. The Group of Seven (G7) economies will call for the development of alternative energy sources in the face of record high crude oil prices when they meet next week in Washington. Kyodo said it would be the first time that the seven industrialised nations —Britain, Canada, France, Germany, Italy, Japan and the United States - have referred to use of alternative energy sources in their statement. The G7 is considering calling for use of "alternative sources," possibly natural gas and renewable energy, while repeating calls for oil-consuming nations, such as the United States and China to promote energy efficiency and for producing countries to ensure stable supply, Kyodo said.


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[1] Production was about 31.6 bcm in the financial year 2003-2004 according to data from the Directorate of Hydrocarbons (DGH). 

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