MonitorsPublished on Dec 28, 2004
Energy News Monitor I Volume I, Issue 43
Biomass: From margins to mainstream

Biomass is broadly defined as any organic matter, which is available on a renewable or recurring basis, including trees, plants and associated residues, plant fiber, poultry litter and animal wastes, industrial and household waste. Combustion of biomass has been an important source of heat and light energy for all of civilisation for thousands of years. 


Even today the share of biomass in the primary energy basket of the poorest countries in the world is as high as 80 per cent.  Forecasts for energy see a rise in use of biomass at least in absolute terms in the next two to three decades.  The IEA predicts that the number of people who rely on biomass - wood, agricultural residue and dung - for cooking and heating will increase to 2.6 billion by 2030 from the current 2.4 billon.  Most of these people will be in sub Saharan Africa and South Asia. This traditional way of using bio mass is generally inefficient with consequent loss of heat and emission of green house gases.   In addition there is often no formal market for these fuels - making them expensive - in terms of man hours required for collecting these fuels from forests or in terms of buying the fuel from an informal wood collector/seller. 


However there is also growing interest in developed countries to use biomass fuels in much more efficient ways to produce electricity, liquid fuels or heat on a commercial scale.  Sweden, for example, derives nearly 18 per cent of its primary energy from biomass.


Biomass use in India


China and India are the largest consumers of biomass energy in absolute terms but as a percentage of primary consumption, India’s share is nearly twice that of China - 30 per cent compared to China's 15 per cent.   More than 90 per cent of rural households in India are said to depend on biomass for their heating and cooking needs.  To a lesser extent, biomass is also used in traditional industries and for religious rituals.         


Figures for biomass use vary because these are generally not market traded.  But it can be said that annually about 200-300 million tonnes of fuel wood, 80-100 million tonnes of animal waste and 100-120 million tonnes of crop residues are consumed in India. 


Traditional use of biomass involves direct combustion for cooking or heating in a stove.  In the most basic open or partially open form, these stoves convert less than 10 per cent of biomass into useful heat for cooking or space heating.  More than 90 per cent of wood used by the domestic sector is in the form of twigs or fallen branches which have no alternative use. 


Primary Energy Use



Per capita energy (GJ/year)


217 million tonnes



53.7 million tonnes


Natural gas

17.9 billion M3



77.8 * 109 units


Total commercial


Fuel wood

227-298 million tonnes


Crop residue

97-156 million tonnes


Cattle dung

37 - 114 million tonnes


Total biomass energy


Total energy




Source: Saxena, N C. 1997. The wood fuel scenario and policy issues in India


As of March 2004 almost 3.65 million Biogas plants were operational in India. Estimated potential for these plants in the country is 12 million. Urban and industrial wastes are also constituents of biomass with the potential of being turned into useful energy. Urban municipal waste generated is estimated to be 27 million tonne and sewage estimated at 4400 million cubic metres. In addition to this, considerable quantities of waste is produced by industries such as sugar mills, distilleries, pulp and paper mills, pharmaceutical industries, slaughter houses etc. Estimated electricity generation potential from waste is more than 2500 MW. 



Status of Projects based on Industrial and Urban Waste (as on Mar. 31, 2002)

Commissioned Project Name

Aggregate Installed Capacity (MW)

No. of Projects

Project under National Programme



Project under UNDP/GEF







India has in fact the 2nd largest Biogas and Improved cook stoves programmes.  Improved cook stoves were to be scientifically designed for efficient flow of heat and better fuel (wood) utilization, so that indoor air pollution is optimum.


The government estimates the potential for these cook stoves in the country to be about 120 million. Until March 2004 approximately 35 million cook stoves were said to be used in India.  The existing 3.65 million Biogas plants along with 35 million improved cook stoves translate into saving of 14.30 million fuel wood every year[1]. 


The government estimates that with an investment of Rs 2 million the power needs of 100 households of a village can be fully met through biomass[2]. Presently, the estimated potential for generation of electricity from Biomass in the country is 19500 MW (including 3500 MW from Biomass Cogeneration).


Commissioned Project Name

Aggregate Installed Capacity (MW)

No. of Projects

Biomass Power










By March 2004 generation capacity is said to have exceeded 613 MW (222 MW from Biomass Power and the rest from Cogeneration). More recently plant material has also been used in the production of what has come to kwon as ‘bio-diesel’. 


Why biomass?


Biomass energy provides critical economic, environmental and security benefits if used efficiently. The use of renewable biomass creates additional value for the agriculture and forestry industries and reduces waste streams. Biomass energy also reduces the emissions of greenhouse gases and other pollutants by displacing fossil fuel use when they are utilised in efficient conversion devices.  By creating greater energy diversity, from domestically available sources, biomass energy has the potential to reduce dependence on imported energy.


The Indian strategy


India has had long history of devising strategies for providing energy for the rural masses.  While programmes for efficient stoves and biogas plants were initiated in the 1940s focussed attention stared twenty years later. 


Success in these two areas has been mixed. According to the report on wood fuel scenario a programme to introduce efficient cook-stoves succeeded in increasing their number from 0.8 million in 1985 to about 12 million by 1992 but failed in sustaining their use.  The stoves were to provide a thermal efficiency of about 25-30 per cent as against 8-10 per cent for traditional stoves.  A survey quoted in the above report, showed that only 12 per cent of the working efficient stoves could claim a thermal efficiency of about 16 per cent while more than 50 per cent showed an efficiency of only about 10 per cent thus demonstrating no gain in efficiency compared to traditional stoves.  Design and construction of these stoves also did not prove to be robust.  One third of the stoves installed became non-functional within the first year of installation and about 15 per cent did not survive even the first three months of use. 


Among reasons sited were improper maintenance (cleaning of carbon soot from the chimneys), lack of financial stake of the beneficiary (government subsidised the cost of chimneys which was 5 times more than that of the traditional stove). Most beneficiaries are said to have found alternative uses for the metal chimney in irrigation channels or sale of chimney more attractive.


Animal dung is the most commonly used fuel for biogas plants in India.  Biogas is a combustible gaseous material mixture of methane (60 per cent) and carbon-di-oxide (40 per cent) which is produced in the process of anaerobic fermentation of cellulostic material in the dung (or even other digestible material). As per 1996 data 2.4 million family sized plants of 2 - 4 cubic meter per day capacity as well as  1623 community biogas plants have been added during the push for rural energy in the last two decades.  Even here failures and discounted use and below standard operation of these plants have been reported.  The penetration levels are only a small fraction of the potential and the overall impact of these technologies remains marginal.  However biogas programmes have had relatively better results that that of improved cook stoves partly because the technology was more robust and partly because of a financial stake for the beneficiary. A fundamental problem in Indian policy design needs to be addressed if efficient use of biomass is to be promoted.  Current policy is designed on the premise that biomass is and will remain a poor mans fuel available free of cost.  Consequently it overlooks the possibility of a market for biomass fuels.  All programmes in the area of biomass are designed as a form ‘aid’ to the poor that would essentially ensure that biomass remains a fuel for the marginalized. 


The Swedish example


Sweden's total energy supply has been relatively stable since 1970 with an annual supply of about 460 TWh. i.e. 52 MWh per capita and year. But there have been some significant changes in the composition of Sweden’s primary energy basket.    The amount of energy supplied by oil has fallen from 70 per cent to slightly more than 40 percent.  The share of electricity has increased from 10 per cent to 30 per cent.  Hydro power production has almost doubled most importantly the market share for bio fuels has increased from 9 per cent to 18 per cent and is continuing to expand. The growth rate of the market has been approximately 3 TWh/yr for the last ten years, primarily district heating plants and, to a much lesser extent, pulp and paper industries using it for heat production. The annual production of energy deriving from wood fuel exceeded 100 TWh during 2002.


The main reason for the rapid expansion over the last few years is the heavy taxes levied on non-renewable fuels, partly as a result of the Kyoto agreement. Sweden's long-term national energy policy states that the Swedish energy system, as far as possible, must be based on domestic and renewable energy sources with a minimum of detrimental impact on environment. Its basic overall strategy seeks to utilise the pricing system of the competitive market to realise this program and to allocate energy resources. One consequence of this policy is the internalisation of environmental costs in the pricing system. Another consequence is that within the Swedish electricity market many companies are using the "greenness" of their products as a sales argument in their marketing. The Swedish Energy Commission also recommends continued support for R&D programs and projects within the bio energy field. Policies of the Swedish government have also changed the price relationship between renewable wood fuels and solid fossil fuel coal to remove the competitive disadvantage of bio fuels vis-à-vis their non-domestic competitors.


For India the lesson from Sweden is very relevant if it has to bring the traditional and non-traditional ways of using biomass for energy production from the margins to the mainstream.  To a great extent, the Swedish energy market reform aimed at transferring market forces from the political to the private sphere and that is precisely what needs to be done in India.  The care of scarce and finite resources, the issue of recycling and circulation must come within the market domain.  Behaviour and preferences of the market players, users and other stake holders have to be turned in favour of bio and other renewable fuels through market incentives. This will have considerable importance in the future decision making of energy supplying companies which is sufficient catalyst for bringing bio fuels from the margins to the mainstream.


Newer power generation and cogeneration technologies using Biomass


Waste to energy technologies can help in reducing the total waste quantity from 50% to over 90%, which, in turn, can greatly reduce the demand for land, which is already scarce in cities and the cost of waste transportation to far away landfill sites. Even Globally, “Waste to Energy” is emerging as a high priority subject in the efforts for reducing Green House Gass Emissions and Climate Change related initiatives.


Gasification: Process in which biomass is converted into a gas (mixture of H2 + CO + CH4) in the presence of O2 and high temperature.


Biomass high temp Hot gas catalyst CH3OH (Methanol)


H2 + CO is called biosynthesis gas and can be used to make plastics and acids, photographic films etc. India is said to have largest gasifier systems in the world producing 34 MW of electricity. For this system, installation of 1 MW of electricity costs Rs 10 million in India[3].


Direct Combustion: 


Biomass Heat Steam -- Captured by Turbine -- Electricity.


Cogeneration: It is a simultaneous production of electricity by biomass, heating and cooling in the single process.


Anaerobic Digestion: Process in which biomass is decomposed by bacteria in the absence of O2


Biomass Hydrolysis (by Bacteria) Decomposed matter -- Organic acids -- CH4 Heating Electricity.


Landfill Gas Technology: Process of Extracting Methane gas from decaying waste in landfill sites.


Drilling pipes into wastes at Landfill Suction pump Collecting gas into wells Cleaning gas CH4 Heating Electricity. 


Pyrolysis: Process of converting biomass into liquid fuels in the absence of O2.


Biomass Heating Pyrolysis Oil Heating Electricity.


Pyrolysis Oil burns just like petroleum and can be converted into Phenol which can be used to make wood adhesives, moulded plastics, foam insulation etc.


Emerging technologies for biomass


Bio fuels (such as Ethanol, Bio diesel etc.) as potential fuel for running automobiles and other engines.


Ethanol: When mixed with Gasoline and Diesel enhance the combustion of the fuel, conserve fuel and improve air quality by reducing green house emission.


Bio-diesel: It is extracted by Trans-esterification of non-edible oils. e.g. Jatropha seed, Karanje, etc.


Spinach: A protein extracted from green leafy vegetable and then used as fuel by chips for generating Electricity (used only for small batteries).


Team Energy ORF(Views are personal)

The role of regulatory authorities in a deregulated economy


The transition of the Indian economy from being a regulated one to a deregulated one is a momentous step. But if a deregulated economy is not to lead to a cut-throat competition or predatory exploitation of the consumer, it does need some transparent, normative regulation. We already have regulatory authorities (RA) for the power, insurance and telecom sectors. But merely setting up RAs and sitting back is not a panacea or an automatic cure-all for all problems. The agitation by the leftist political parties against the decisions of the Andhra Pradesh Electricity Regulatory Commission (APERC) some time ago leading to a law and order problem resulting in a few deaths is an instance in point. In that case, the Leader of the Opposition in the Andhra Pradesh assembly not only alleged that the World Bank was dictating terms to the State Government and the APERC but went to the extent of suggesting that a telephone call from the Chief Minister to the Chairman, APERC was all that was necessary to roll back the hike in the rates! It is, therefore, necessary to be clear about the exact role of a RA in a deregulated economy.


Up to 1991, the concept of a regulatory authority had no relevance as the economy was a severely controlled one. Some of the instruments of control were: the licensing policy, import control (including import of technology), credit control, etc. Except in the case of the MRTP Act, control was exercised directly by the various Ministries and Departments. The economic strategy was one of State-led development, the role of the private sector being merely auxiliary. It was considered quite natural, if not inevitable, that the State agencies should occupy the commanding heights of the important sectors of the economy such as insurance, telecom, power, credit and even foreign trade through canalising agencies like the STC and MMTC. In many cases, these agencies were monopolies or quasi-monopolies.


The New Economic Policy of 1991 had as its main pillars deregulation,liberalisation, privatisation and globalisation. These implied the government backing off from direct economic entrepreneurship as well as activities largely driven by market forces. The government’s job became mainly one of creating and maintaining administrative, legal and social infrastructure and provision of pubic goods conducive to successful private entrepreneurship.   Even in a so-called free market, there is always some special legislative regulation in certain matters like safety, pollution, industrial relations, taxation, etc. But it is not this type of peripheral regulation that we have in mind when we talk about a regulatory authority (RA). A RA is meant to regulate the core activity of enterprises in a whole economic sector. Why do we need a RA in a liberalised economy?  Is there is a real social need, or is it just the manifestation of a lingering reluctance on the part of government to let go?


In respect of ordinary consumer goods and services for final consumption, a liberalised economy is expected to encourage the entry of a large number of private producers in each sector, none of them  in a position to dominate the sector by sheer size (unless it is through the sheer inimitable  excellence of their product or service). For example, we do not need a RA in the soaps and toiletry sector or in   other FMCG sectors. Consumers’ interests are taken care of by and large by competition and the threat of the consumer ‘voting with his feet’.  Aspects like quality and complaints are taken care of by institutions like the ISI, the consumer courts and the MRTP Commission. (A Competition Commission, indicating the shift in the government mindset from regulation to promotion of competition has since replaced the MRTP Commission).

But there are some sectors either currently dominated by government monopolies or which are likely to attract fly-by-night operators. Examples of the first kind are power and telecom and of the second kind are non-banking finance companies and airlines.  (Insurance would seem to fall under both categories). The former are considered natural monopolies where it is not possible to promote the type of intense and widespread competition as in common consumer goods. (The newer technologies such as the cell phone have now made it possible to widen and intensify competition in the telecom sector to a much larger extent than considered possible in the past). In such areas, because of the essential nature of these services, the consumer may be forced to put up with high tariffs and / or bad service without having  an effective  option of ‘voting with his feet ’ (i.e. choosing another supplier ). It is in such cases that, once the government withdraws control, there is need for a RA which is expected to exert a quasi-market influence on producers and make them behave as if there is genuine competition.


The government policy is to set up RAs as independent, quasi-judicial, statutory bodies, often with wide-ranging powers matching those of a high court. But issues and problems do not vanish with the mere setting up of such high-power bodies as could be seen from the incidents in A.P. referred to at the beginning of this article.  Moreover, the functioning of these bodies may itself lead to the following types of problems:

 The RA may routinely adopt the rules regulations followed earlier by the concerned government departments instead of reinventing them to suit its new role in the changed economic environment. Dealing with independent quasi-judicial high-power bodies with impersonal, rigid procedures as in a high court may sometimes be more frustrating for the stakeholders than their interaction with the bureaucracy or the political executive in the past. The danger is real because the RAs may sometimes be manned by people from the bureaucracy or from the very public sector organizations they are supposed to regulate and the earlier attitudes and mindsets are liable to be carried over to their new job in the RAs. This is exactly what happened to the ‘autonomous’ public sector enterprises when they were first set up with the noble intention of breaking away from the government mindset.

If, as happens in government often, the RAs are headed and manned by generalists lacking a deep understanding of the important sectoral issues, they will be unable to dynamise the sector or envision its future creatively. The technical experts of the regulatees may manage to stampede the RAs into partisan action.

Like any other institution created by government, the RAs my be ‘packed’ with politically pliant people and the government may succeed in doing backseat driving while maintaining a facade of deregulation and autonomy as happened with public enterprises.

The quasi-judicial status often conferred on RAs, while making them legally autonomous of the bureaucracy and the political executive, may also make them unduly legalistic, aloof and insensitive necessitating the  intermediation of an army of lawyers between the stakeholders and the RAs making interactions un-businesslike and dilatory .

When the regulatee is a public sector organization and the RA is headed and manned largely by people drawn from government, the RA may see its primary task as not one of promoting efficiency and protecting consumer interests but as one of bailing out the public sector regulatee (who is usually in a financial mess) and reducing the government’s budgetary burden and tolerate a cost-plus pricing formula.

Because of the high, statutory status given to the RAs, any appeal against their orders can only be to a high court and that too only on matters of law and not the facts or merits of the case which are un-appealable. As happened with many public enterprises, RAs may also remain headless for long periods (as happened in Tamil Nadu in the case of the Electricity Regulating Authority) due to government inertia or extraneous considerations making it frustrating for the stakeholders and allowing a vital economic sector to stagnate.

Even if everything else is perfect, there may be external compulsions making it difficult for the government and the RAs to be genuinely independent, as in the case of World Bank agreements whose stipulations have to be complied with however unpopular they may be.

Balancing the pros and cons, we may now try to indicate broadly how a RA should attempt to function if its avowed purpose is to be achieved:  ‘promoting the development of the regulated sector so as to satisfy consumer needs efficiently and profitably on a sustained basis’. The following suggestions are made:

Though the RAs are expected to take a holistic view of the development of the sector and the legitimate interests of all stakeholders, the key figure is surely the consumer. Unfortunately, statutes setting up RAs, though they do refer here and there to ‘consumers’ interests’ and ‘consultation with those affected’, have no overriding, clear customer-friendly focus or ring about them. There is no exclusive chapter on consumer rights or any mention of a consumer’s charter which is now an accepted component of citizens’ empowerment. The Statement of Objects & Reasons of one State legislation setting up an Electricity Regulating Authority (ERA) does not contain the word ‘consumer’ at all! The Acts are all couched in the usual long winding legalese leaving most things to the good sense and discretion of the RAs. It should be possible to redraft these in simpler, more operational and consumer-friendly language. As modern Acts are usually generally worded and the devil is in the regulations made there under, effective prior consultation with consumers is essential while framing them. Transparency and interactive accessibility should be the twin cornerstones of a RA’s rule-making.

The RAs have a genuine difficulty in regulating a sector dominated by public sector monopolies, such as power. Such monopolies   usually have a record of operational inefficiency,financial un-viability and political interference (which has caused the former). As soon as a RA is set up,   consumers may expect an immediate, dramatic improvement in operational efficiency and quality of service in such monopolies, and consequent benefits to consumers. For example, textile yarn exporters expected that the ERAs should enable them to get power at hts same rate as their foreign competitors which was one third of the existing Indian rate! There is no way any RA can perform such a miracle and if it attempts it, the entire supply system would collapse into bankruptcy. What is feasible is for the RAs, during the first two to three years, to protect these enterprises from political interference, unmistakably emphasise operational efficiency, stabilise their financial status and then gradually tighten the  pricing norms and pass on the benefits to consumers thereafter. It is this aspect which is likely to generate controversies and political agitations as in the A.P. case referred to earlier.

This calls for a high level of communication and stakeholder management capability on the part of a RA. Quasi-judicial bodies usually keep a low profile and, in order to avoid a perception of being amenable to pressures, communicate with stakeholders minimally and only in a formal, court-like mode. It is desirable that the Chairpersons of RAs frequently talk to stakeholder groups openly and frequently explaining not only their priorities but also their strategies and modalities  of functioning and be receptive to suggestions on all these. RAs would do well to engage work study experts and get their procedures and work methods streamlined and not adopt conventional government procedures of paper-work and processing.  RAs should have visible, effective mechanisms for interacting with consumers and not allow their quasi-judicial status to become a barrier of look-down condescension. An active, open and frequently-convened Advisory Council is a must. It is of the utmost importance that the RAs should convince all stakeholders that their objectives are to ensure the following:

Only serious, sound, long haul players are allowed to enter the sector; there is transparency in their working; no restrictive practices are resorted to; acceptable minimum standards of operational efficiency are adhered to in production and supply; prices charged are consistent with efficiency; equity and sustained healthy development of the sector. These will not happen automatically merely because high status RAs are set up as statutory bodies. The RAs have to be effectively managed as an innovative combination of not only authority, rationality and objectivity but also sensitivity, and statesmanship.

Stakeholders should not be driven to ask: who will regulate the regulator?

P K Doraiswamy, IAS (Retired)

(Views are personal)


Russia-west: confrontation over Ukrainian oil line


December 2004. Many businessmen look forward to Viktor Yushchenko winning presidency. That is not so surprising as it might seem. Those of the Russian business community who are siding with the Ukrainian opposition leader focus their interests on the domestic consumer, and so have no reason to clash with Russian entrepreneurial interests in Ukraine. If Viktor Yanukovich wins the upcoming revote, competition will come to an edge between Ukrainian financial-industrial groups friendly to him, and Russia's business. Take Rinat Akhmetov, boss of the most affluent and influential of Donetsk-based groups. Last summer, he bought up Ukraine's largest steelworks, Krivorozhstal, after he pushed aside Russia's Severstal-though that its auction bid surpassed his own 1.5-fold. The Kiev financial-industrial group, strong in Ukraine's petroleum procession, initially sided with Yanukovich.   Whoever wins the presidential race, his supporters in the business world will promptly and eagerly redistribute property and spheres of influence. That is beyond doubt.  Ukraine can't do without Russian capital investment, and has no alternative to it. It is not Westerners who rival Russians in Ukraine but local moneybags who have come to the corridors of power.   Certain hazards are, surely, in store for Russia with Yushchenko for Ukraine's President. Private projects run no risk at all, unlike government strategies. Here, fuel and energy exports are the most vulnerable. Running considerable danger is a blueprinted gas-piping consortium of Russia, Ukraine and Germany. As pessimists see the matter, Ukraine will certainly bid for its control block if Yushchenko wins. Russia will never put up with the prospect. But then, if Yanukovich takes the upper hand, he, too, will have opposition opinions to reckon with on such matters as that. Besides, there is a draft political reform to get through Ukraine's parliament. When passed, it will drastically reduce the President's part in settling economic issues. Russia will be much harder put negotiating with the diverse political forces that make a Ukrainian parliamentary majority, now that the reform promises them the right to form the Cabinet.   With all that, Moscow has no big reason to gamble on Yanukovich. If a Yushchenko-led Ukraine builds up its economic partnership with Russia, closer ties will sooner or later smooth out whatever political roughness there is.   Possibly, Ukraine's Odessa-Brody petroleum mainline has come to Russians as decisive argument in Yanukovich's favour. Laid by the Ukrtransnafta government company, the line was initially intended to pipe light oil from Azerbaijan and Kazakhstan to Europe, mainly Germany. If that became true, the arrangement would bury Russian oil transport monopoly in the entire post-Soviet area, just as Russia's hopes to make Ukraine's closest and most influential partner. That arrangement meets Europe's vital interests, as it is anxious to reduce its dependence on Russian petroleum. More than that, Moscow suspects the West of plotting a sanitary cordon of Russia's neighbour countries. Here, the European Union and the U.S. share strategic goals-suffice it to say that America's ChevronTexaco major is operator of several Caspian oilfields.   The Odessa-Brody line was commissioned, 2002, together with the Yuzhny sea terminal to serve it. The line stood idle for longer than a year-Caspian oil was not enough to fill it. Despite all that, the Chevron Texaco proposed, last fall, carrying petroleum from its fields in Kazakhstan to Europe through Odessa-Brody. Ukraine, however, found the terms unfavourable, so the deal flopped. The Russian-British TNK-BP (Tyumen Petroleum Company/British Petroleum) had better luck. It made a contract for a reverse use of the line to carry Russian oil to Odessa and from there, on to Europe by sea.   US energy strategies boil down to diversifying fuel transport routes-in particular, through undermining Russia's monopoly in the post-Soviet area. One of the key parts in the planned endeavours belongs to Ukraine. That is, to all appearances, where the economic reason lies for the current Russia-West confrontation over stormy Ukrainian developments.

(Courtesy RIA Novosti)









OVL eyes stake in Sibneft of Russia 


December 28, 2004. ONGC Videsh Ltd is eyeing equity in Russia’s fast growing oil firm Sibneft and has tied up with Russian Rosneft for the purpose.  OVL and Rosneft have entered into a confidentiality agreement to acquire Sibneft. The Russian government companies do not have the financial muscle to acquire these firms, thus foreign companies would be required to support the merged entity’s acquisition. OVL was also eyeing stake in Russia’s Vankor oil and gas field and is looking at two other exploration blocks of Russian oil firm Rosneft. OVL was also looking at partnering Rosneft in Sakhalin-3 oil and gas fields in Far East Russia. It expects 10-20% stake in the three fields forming Sakhalin-3 project.


CBM production by 2007


December 28, 2004. ONGC plans to start commercial production of coal-bed methane (CBM) in the Jharia block by March 2007, and is planning to outsource services from overseas firms for CBM production in six blocks located in the Bengal basin. The company, which has six CBM blocks in the Bengal basin, has also planned to give service contracts to overseas firms for production of CBM. The 30 wells were situated in six blocks - Raniganj (West Bengal), Bokaro, Jharia, North Karanpura, North Karanpura (West) and South Karanpura (all located in Jharkhand). The company also has three CBM blocks in Satpura (Madhya Pradesh), Barmer (Gujarat) and Vidarbha (Maharashtra). ONGC is also planning to start exploratory drilling at the off-shore block in the Sunderbans area in South 24 Paraganas district of West Bengal by March 2005 at a total cost of about Rs 500 crore (Rs 5 billion).


Joint ventures for methane exploration


December 27, 2004. UK companies specialising in coal bed methane (CBM) have evinced keen interest in participating in joint ventures for exploration and commercial exploitation of methane gas available in abandoned as well as active underground coal mines in Raniganj and Jharia coalfields in West Bengal and Jharkhand. Geologically, the most desirable CBM sites would have coal seams that are saturated with, or without, free gas and have moderate permeability. Factors that influenced the selection of well sites included geological features, gas content, environmental impact, water disposal options, access and market opportunities.


GSPC’s phase II exploration at Cambay 


December 24, 2004. Gujarat State Petroleum Corporation Ltd has firmed up plans to commence the phase II of onshore exploration activity at the Cambay basin in the west coast of Gujarat by the end of current fiscal. The company has submitted a notice to the Union government with regard to exercising the option of proceeding for the next phase of exploration activity at Dholka near Ahmedabad. GSPC is actively involved in E&P activities in the Cambay basin of Gujarat. The company has signed Production Sharing Contracts (PSC) with other members of the consortium, including major petroleum companies across the world. The contracts provide work commitments to be performed over three phases with specified 3D seismic and exploration drilling activities to be conducted during the period of contract. The company is required to fund its proportionate share of costs incurred in these activities. As far as the Cambay basin is concerned, the company is carrying out E&P activities at the Tarapur block, near Gulf of Cambay, having 42 square km area where the work of seismic data interpretation is over. The company has come out with results of seven wells with probable oil reserves.


Petronas urged to partner IOC in Iran, TN projects


December 23, 2004. India invited Malaysian company Petronas to partner Indian Oil Corporation in developing one of the phases of South Pars gas field in Iran and a liquefied natural gas import terminal at Ennore in Tamil Nadu. IOC had signed a memorandum of understanding with Iran’s Petropars for jointly developing a proposal for the field. India also sought joint operatorship of oil blocks 5A and 5B in Sudan where ONGC Videsh Ltd and Petronas are partners. Besides, it also wanted to accommodate the Indian company in another block there held by the Malaysian company. It also sought partnership with Malaysia in bidding for the Sakhlain-3 fields in Russia. India, which imported 2.28 million tonne of crude from Malaysia, also sought higher volumes from the South East Asian country.


L&T to acquire upstream business


December 23, 2004. Larsen & Toubro, one of Asia’s largest vertically integrated engineering and construction conglomerates, has entered into an agreement to acquire a 50 per cent stake in the carved out upstream engineering business related to oil and gas production and exploration of the Bangalore-based Valdel Engineers & Constructors.  Valdel Engineers, earlier part of the M S Ramaiah Group. The upstream engineering business will be named as L&T Valdel Engineering Pvt Ltd. The new JV will explore and expand prospects in detailed engineering for the upstream oil and gas segment and look for new opportunities. 


ONGC to take stake in Rajasthan fields


December 23, 2004. Oil and Natural Gas Corporation will take a 30 per cent stake in Cairn Energy's recent oil discoveries in Mangala and Aishwariya oil fields of Rajasthan. The government has decided to compensate ONGC for the statutory levies like royalty on behalf of the private sector partners in pre-NELP blocks like Cairn's RJ-ON-90/1 block in Rajasthan. The two fields are expected to produce between 80,000-100,000 b/d from end of 2007. Over the life of the field, ONGC would have paid over $1 billion in royalty - much more than what a 30 per cent share in oil production would have fetched it.


IOC wants to go solo on exploration


December 24, 2004. Indian Oil Corporation wants to break free of a collaborative approach in overseas exploration business and acquire a foreign exploration and production (E&P) company.  It has identified regions where the company and ONGC Videsh can independently pursue upstream projects abroad without competing with each other. While IOC wants that it should be allowed to pursue business in south and south-east countries, Middle East and Africa, for OVL it has identified the Far East, Central and Latin America, Europe, Russia, CIS countries, Sudan and Angola. The reason for this cited is that regions where IOC is better placed and would derive greater values from the upstream ventures should be allocated to it. IOC has said its E&P aspirations had not been fully met through collaborative approach under which it had tied up with Oil and Natural Gas Corporation/OVL, Oil India and GAIL India among others. 



IOC to give GAIL stake in Iran plant


December 28, 2004. Indian Oil Corp will give Gail a 10% stake in the liquefaction plant it plans to set up in Iran for export of LNG produced from the gigantic South Pars gas field. IOC, along with Iranian firm Petropars, will develop one of the 28 phases of the field, convert gas into liquid form at the liquefaction plant, and ship LNG to India and other countries. IOC will hold 40% stake in the development of the gas field with the remaining being with operator Petropars. In the liquefaction plant, IOC, which was to hold 60% stake, will now see its holding drop to 50% after divesting 10% in favour of Gail. Petropars is a subsidiary of NIOC, which owns the 500 sq mile South Pars field that is estimated to hold 436 trillion cubic feet of gas reserves.


Rain Calcining renews tie-up with US firm 


December 22, 2004. Rain Calcining Ltd, manufacturers of calcined petroleum coke, has renewed its association with US-based Oxbow Carbon & Minerals, LLC for marketing company’s products worldwide and for sourcing Green Petroleum Coke (GPC) from refineries across the world for the company’s plant in Visakhapatnam. Oxbow will market the expanded capacity of 4.8 lakh (480,000) tonne of CPC of Rain Calcining, which is expected to come online from April 1, 2005 and will also supply additional quantity of GPC required by the company consequent to the expansion.


Refiners unprepared to supply clean fuel


December 24, 2004. India may miss the April 1, 2005 target of conforming to Euro-III emission norms in metro cities and Euro-II norms in the rest of the country due to inability of refiners to supply the specified category of petrol and diesel. Except for refineries at Mangalore, Chennai and North- East, all other refineries would not be ready to start producing the fuels with ultra low sulphur and benzene content. IOC's Mathura, Panipat and Haldia refineries, which are supposed to supply Euro-III fuels to Delhi and Kolkata, would be ready for producing diesel with 0.035 per cent sulphur and cetane number 51 and petrol with 1 per cent benzene and octane number 91 only by March 2005. The Mumbai refineries of BPCL and HPCL would be ready by February 2005 and June-July 2005. The hi-tech Jamnagar refinery of Reliance Industries too may unable to produce the clean fuels before August 2005.


IOC seeks ally for LNG shipping venture


December 24, 2004. Indian Oil Corporation plans to enter the entire chain of natural gas business right from exploration to marketing. As part of this plan, it is scouting for a joint venture partner for floating a liquefied natural gas shipping company. IOC had signed a memorandum of understanding with Iran’s Petropars for jointly developing a proposal for the South Pars field. The gas could be received at the Ennore terminal which is expected to initially have a capacity of 2.5 million tonne per annum. 

Transportation / Trade


Gammon bags contract


December 28, 2004. Gamom India in joint venture with a Muscat-based company has been awarded a contract for executing on a turnkey basis a water transmission system consisting of pipelines/Reservoirs/Pumping Stations for the Independent Water and Power Project at Sohar, Oman by the Ministry of Housing, Electricity and Water, Oman.  The deal size is of Rs 6400 million (approximately) with completion period of 20 months.


GAIL to get stake in Tripura firm 


December 27, 2004. GAIL (India) Ltd will get a majority stake of 29% in Tripura National Gas Co Ltd, which will undertake retail gas distribution in Tripura. Tripura Industrial Development Corp and Assam Gas Co Ltd will hold 10% equity each while public, financial institutions and others would hold the remaining 51%. TNGCL would promote and expand its existing business of distribution and marketing of natural gas for consumers in domestic, commercial and industrial sectors including distribution and marketing of CNG for use by consumers in the automotive sector.


GAIL plans for marketing LPG 


December 22, 2004. Gail (India) Limited has earmarked an investment of Rs 1,500 crore  (Rs 15 billion) for setting up liquified petroleum gas (LPG) marketing network in three main segments namely domestic packed, commercial packed and industrial packed in semi urban and rural markets. The company has already received an approval from the ministry of petroleum and natural gas for marketing domestic LPG to increase its penetration from April 2006. The company is negotiating with reputed international consultants for developing a marketing strategy including branding of Gail’s LPG.


GAIL given deadline to sort out gas price issue


December 26, 2004. The government has given Gail (India) Ltd time until March 31, 2005, to make peace with British energy firm BG Group on pricing of natural gas produced from Tapti fields, after which BG and its partners, ONGC and Reliance Industries, will market the gas directly. BG-ONGC-RIL, the joint operators of Panna/Mukta and Tapti fields, currently sell natural gas produced from the field to Gail at $3.11 per million British thermal unit (mBtu) and have now sought increase in gas price to $5.57 per mBtu, saying the production sharing contract of the field provided for an increase after seven years of production.


GAIL in novel-tech talks for Assam cracker


December 22, 2004. GAIL is negotiating a breakthrough technology for Rs 6,000 crore (Rs 60 billion) Assam Gas Cracker Project (AGCP) that would give the gas to petrochemical major an annual savings of Rs 500 crore (Rs 5 billion). The company is planning to utilise lean gas (methane), which is generally used for power production and not petrochemicals, to produce propylene, thereby substituting costlier feedstock like naphtha.  GAIL earlier planned about 280,000 tonne per annum (TPA) petrochemical plant in Assam based on the gas to be supplied by Oil and Natural Gas Corporation and Oil India Ltd. With this methane to propylene (MTP) technology, the company is hoping to add another 220,000 TPA of polymer to take the installed capacity to 0.5 million TPA.  MTP technology is being used by number of Chinese companies and also National Petrochemical Company (NPC) of Iran. GAIL is in dialogue with a European consultant for the technology which is inexpensive. Experts pointed out the expanded capacity would give AGCP much needed economy of scale in operations. The savings on account of double use of natural gas instead of expensive naphtha would make it financially more attractive. Operationally, GAIL will be extracting the rich content from the natural gas supplied by OIL leaving out the lean gas which has very high methane content only suitable for power generation. 

Policy / Performance


Hydrocarbon exploration software 


December 27, 2004. Based on the needs of R&D for hydrocarbon exploration, Satyam Computers and National Geophysical Research Institute (NGRI) are working for advanced software exclusively for exploration activities. The software is expected to generate data which will be used for process and interpret the exploration processes. During the process, large volumes of data will be generated during exploration of gas hydrates and earlier, processing, which is too expensive, was mostly done outside the country by the oil companies. Moreover, the software will act as a facilitator to the oil companies to process the data in-house and speed-up the exploration activities.


Yantra Automation to install energy-efficient drives 


December 24, 2004. Oil majors in the country have a potential to save about 40% of their energy costs or Rs 2,000 crore (Rs 20 billion) at their refineries and the 15,000 kms of pipeline networks that are all driven by energy consuming pumps. Yantra Automation Pvt Ltd (YAPL) has for the first time in the country worked on a project to install energy efficient drives on the existing pipelines and refineries to reduce costs. Yantra has bagged a Rs 40 crore (Rs 400 million) order from HPCL and MRPL in association with Rockwell. Yantra will implement it through a combination of medium voltage drives, custom-designed software and controls for centralised monitoring and diagnostics.

PM approval for ONGC project in Mangalore 


December 27, 2004. Oil and Natural Gas Corporation’s ambitious $5 billion project in Karnataka, proposed in August 2004, and consequently shut down by Petroleum & Natural Gas minister Mani Shankar Aiyar, has now got the prime minister’s approval.  The $5 billion project in Mangalore’s Coastal Special Economic Zone (CSEZ) included the setting up of an LNG terminal and a 1,500 mw gas-based power plant. An MoU was signed in August 2004 between ONGC and the Karnataka government for the development of the CSEZ.


IOC-IBP merger swap ratio at 5:4


December 23, 2004. Indian Oil Corporation approved a share swap ratio of 5:4 for merging its subsidiary IBP Company Ltd with itself. It means 5 equity shares of IOC would be offered for every 4 equity shares of IBP. The amalgamation will increase IOC's share in the domestic market to 61 per cent and help save the company around Rs 45 crore (Rs 450 million) per annum in overhead expenses. The merger will now require the formal approval of the Government, the majority owner in IOC. The entire process is likely to be completed by March 2005. Post merger, Government shareholding in IOC will fall by 1.91 per cent to 80.12 per cent and IOC will retain the IBP brand.


LPG subsidy may be phased out gradually 


December 24, 2004. The finance ministry’s report on central government subsidies has suggested gradual increase in LPG prices, introduction of kerosene and food coupons for families below the poverty line (BPL), and abolition of fertiliser subsidy in its present form. Total subsidy as a percentage of GDP has been constantly growing since 1995-96, when it was 1.1%. It touched a peak of 1.8% in 2002-03 before sliding marginally to 1.7% in 2003-04. In the current year, the subsidy as a percentage of GDP is estimated to be 1.5%. In absolute terms, it works out to be Rs 45,780 crore (Rs 457.8 billion).  Referring to the petroleum sector, the report said, domestic LPG and PDS kerosene subsidies have remained ineffective in serving desired policy objectives. It suggests gradual reduction of subsidy on LPG. However, in the case of kerosene the report said that poor ration cardholders may be given coupons to buy kerosene from a retailer at the subsidised price. Such a method would also prevent diversion of subsidised kerosene to other sectors. All sales of kerosene should be from retail markets. Petroleum subsidy went up from Rs 5,225 crore (Rs 52.25 billion) in 2002-03 to Rs 6,573 crore (Rs 65.73 billion) in 2003-04. For the current year, it has been estimated at Rs 3,559 crore (Rs 35.59 billion).


India seeks partnership with Malaysia for Iran gas field 


December 22, 2004. India sought to forge closer partnership with Malaysia, inviting its national oil firm Petronas to join Indian Oil Corporation (IOC) in developing one of the phases of gigantic South Pars gas field in Iran and an LNG import terminal at Ennore in Tamil Nadu. It also sought partnership with Malaysia in bidding for the Sakhlain-3 oil and gas fields in Russia, while seeking to get on board in an oil block in Sudan.


“I have suggested that Indian and Malaysian companies can go together in the field of hydrocarbons in third countries,” petroleum minister Mani Shankar Aiyar told reporters after a meeting with visiting Malaysian Prime Minister Abdullah Ahmad Badawi here. He sought joint operatorship of oil blocks 5A and 5B in Sudan where ONGC Videsh Ltd and Petronas are partners and wanted the Indian company to be accommodated on Malaysian-company controlled block 8 in the same country.


“There are indications that block 12 in Sudan may be given to us. If a package of understanding is developed, we would like Petronas to join us in block 12,” Mr Aiyar said. In Iran, Mr Aiyar offered the Malaysian company to partner IOC for developing one of the phases of the gigantic South Pars gas field and producing LNG for export from it. IOC has already signed an MoU with Petropars of Iran for the project.






NLC power generation increases


December 27, 2004. Neyveli Lignite Corporation Ltd (NLC) posted a 9.4 per cent increase in power generation to 16388.98 million units in 2003-04 as against 14969.95 million units last fiscal. Lignite production also increased to 205.57 lakh (20.557 million) tonnes during the year as compared to 186.24 lakh (18.624 million) in 2002-03. Of the estimated 35,636 MT lignite reserves in the country, 4,150 MT is spread over the NLC fields in Cuddalore district, of which 2,360 MT has been proved.


Dalmia Cements to lease out thermal plant


December 27, 2004. Dalmia Cements Bharat Ltd plans to lease out a 29 MW thermal power plant that it is setting up at Dalmiapuram in Tamil Nadu. The company is setting up the thermal power plant for captive use at a cost of Rs 72 crore (Rs 720 million). The idea is to lease out the power plant to another company, which would operate and maintain the plant. However, the power generated by the plant would be used only by Dalmia Cements.


German loan for VTPS unit


December 26, 2004. The power sector in Andhra Pradesh has got a shot-in-the-arm with the German Government sanctioning a loan of Rs 1,600 crore (Rs 16 billion) to the State for constructing a 660 MW unit at Vijayawada Thermal Power Station State-IV (VTPS). A loan agreement was signed between Kreditanstalt fur Wiederaufbau (KfW) of Germany and the Union Government. With this VTPS capacity would increase to 1,920 MW in three years.   APGenco, lined up at least five projects for completion in the next three years. They are Rayalaseema Thermal Power Project (420 MW, July 2006), Vijayawada State IV (660 MW, March 2008), Bhoopalapalli (500 MW, June 2008), Jurala Hydro station (234 MW, March 2007) and Pochampad (9 MW, December 2006).


BHEL eyes projects in Oman, Bangla


December 24, 2004. Public sector equipment giant Bharat Heavy Electrical Ltd is eyeing a gas-based power project in Oman and two in Bangladesh. It has also bagged the order for a 280 MW gas based plant at Sylhet in Bangladesh. The Oman project would be set up in joint venture with Petro Development Corporation (PDC) of Oman, while three power projects in Bangladesh would be set up in conjunction with Bangladesh Electric Distribution Co (BEDC). BHEL would be bidding for the Oman project which would be a Rs 600 crore (Rs 6 billion), 180 MW gas based plant. Gas for the plant would be supplied by PDC. 


Nagarjuna to cut costs 


December 22, 2004. A 1,015 mw power plant in Mangalore appears to be making headway in Karnataka, albeit with some reservations and a possible Rs 500 crore (Rs 5 billion) cost cut. Power utility Karnataka Power Transmission Corp (KPTCL) has decided to firm up the power purchase agreement (PPA) with Nagarjuna Power Corporation (NPCL) for the coal-fired project and place the proposal before the state government and energy regulatory commission for their approval. While the promoters have pegged the project cost at Rs 4,429.99 crore (Rs 44.3 billion), KPTCL has voted for a revised investment of Rs 3,958.50 crore (Rs 39.6 billion) as “the most feasible and workable scenario” after benchmarking it with other projects and evaluating its cost structure. Since the plant is likely to use imported coal with lower ash content, the productivity will be higher, the size of machinery would be comparatively small and the expenses towards handling the ash would be considerably lower. While as a mega-power project, NPCL will be obliged to sell about 10% of the power it generates to Kerala, it will also be allowed duty free import of capital equipment, 10 year income tax holiday, and sales tax exemption from state government. The project, as envisaged by KPTCL, is structured with a 14% ROE (return on equity), a heat rate Kcal/kwh of 2400, a target PLF (plant load factor) of 85%, and tariff of Rs 2.21 a unit (including income tax and rebate). The NPCL project will also be the second IPP in the state after Tanirbavi Power plant in Mangalore to secure escrow cover from KPTCL, an LC (letter of credit) towards monthly tariff payments, and government guarantee from Karnataka.


34,000 mw power from rivers: experts


December 28, 2004. Inter-linking rivers could yield an additional 34,000 mw hydro power capacity and increase irrigation  substantially, besides creating 10 million  jobs in the country, said M Gopalkrishnan, secretary general , International Commission on Irrigation and Drainage, this week.


“These links would involve constructing canals of nearly 12,500 km and result in flood management and drought control,” he said. “The programme drafted by the  task force constituted last year by the national Democratic Alliance (NDA) government planned inter-linking 29 rivers across the country,  13 of which are Himalayan  links and sixteen peninsular links,” said Gopalakrishnan “The Himalayan links alone  have a potential  of 30,000 mw of hydro power addition,” he said.


Transmission/ Distribution / Trade


Reliance Energy gets licence for NDMC area


December 22, 2004. Under the newly enacted Electricity Act, 2003, the Delhi Electricity Regulatory Commission has allowed Reliance Energy, popularly known as BSES in the Capital, to distribute electricity in the New Delhi Municipal Council (NDMC) area.


Policy / Performance


Nine independent power projects up for review 


December 27, 2004. Nine power projects having combined generation capacity of over 9,000 mw will come up for review at the Inter Institutional Group’s (IIG) meet in Mumbai. These projects entail a total investment of over Rs 40,000 crore (Rs 400 billion) and their per unit tariff is estimated to be around Rs 2. The list of nine projects comprises Nagarjuna Power Corporation Ltd’s Mangalore project (1,015 mw), Jaypee Karcham Hydro Corporation’s Karcham Wangtoo hydro project (1,000 mw), TPC’s Vile coal based project (1,000 mw), Essar Power’s Hazira combined cycle (1,500 mw), Rajasthan Spinning & Weaving Mills’ Allain Duhangan hydro project (192 mw), Reliance Energy Ltd’s gas based project in Dadri, Uttar Pradesh (3,740 mw), China Light & Power India’s GPEC-II in Gujarat (1,050 mw) and Lanco Amarkantak in Chhattisgarh (300 mw). IIG will look into specific issues relating to fuel linkage and environmental clearance and try to help the promoters to complete the necessary formalities.


IIT in pact with Kanpur power firm


December 23, 2004. Kanpur Electricity Supply Company (Kesco) and the Indian Institute of Technology (Kanpur) have formed a joint working group to sort out the problems of the electricity sector. Both organisations will have five members on the group, headed IIT Deputy Director K Kripa Shanker. IIT scientists work on frontier areas of technology and Kesco in the field. The areas identified for consultation are the geographical information system, management information system, trouble call management, operations, etc. 


Bulk power buyers can choose supplier


December 23, 2004. Bulk electricity users may soon have the option of changing their power distribution company on payment of a surcharge. A proposal mooted by a group of state regulators wants a formula based on ‘avoided cost’ and suggests compensation be paid to a distribution company if a bulk consumer shifts to another company. The compensation would have to be paid by the Distribution Company or discom to which the consumer proposes to shift. The proposal mooted for public debate suggests that the difference between the average tariff of a category of consumers and the cost avoided by the discom by buying less power to supply will provide a measure of the surcharge. The move would enable open access in distribution for consumers who use 1 megawatt or more of electricity. The Electricity Act stipulates that a surcharge for the current level of cross-subsidy has to be specified by the state regulator and that consumers with a load of 1 Mw and above should have the option of moving to a supplier of their choice. The regulator will be required to estimate the projected capacity that is likely to move away due to open access. The migration will result in a discom having to purchase less power from marginal sources of supply. 


Duty cut sought on captive power plant equipment


December 23, 2004. The Associated Chambers of Commerce and Industry of India (Assocham) has asked the Union Finance Ministry to bring down the import duty on goods required for setting up of captive power plants by 50 per cent in the budget proposals for 2005-06 to give a boost to the captive power sector. The chamber has also demanded that the new duty structure should be within the range of 20 per cent instead of the prevailing duty structure of 40 per cent. At present, equipment required for captive power plants, the capacities of whose exceed 5 MW attract a basic custom duty of 20 per cent along with additional custom duty of 16 per cent. Thus, the total duty works out to about 40 per cent, which is on the high side, and, therefore, needs to be brought down.


ADB loan to upgrade power transmission grid


December 22, 2004. The Asian Development Bank (ADB) will finance the upgrading of the national power transmission grid through a loan of $400 million. The project will strengthen and expand the capacity of the national transmission grid, comprising 765 KV and 400 KV transmission lines as well as substations operated by Power Grid Corporation of India Ltd (Power Grid). The project aims to improve system reliability, facilitate inter-State power transfers by removing transmission bottlenecks, reduce transmission losses, facilitate efficient utilisation of existing and planned power plants, facilitate the development of a national power trading market, and promote increased private sector participation through open access to the national transmission grid. Power Grid's National Transmission Development Plan entails an investment of about $12.6 billion up to the year 2012.  Proceeds of the ADB loan will be used to finance sub-projects under PowerGrid's investment program. Core subprojects jointly identified include the construction of new extra high voltage transmission lines and substations covering Andhra Pradesh, Tamil Nadu, and Pondicherry. PowerGrid, which is both the borrower and the executing agency for the loan, will fund $168 million of the total project cost of $568 million. This is the third ADB loan to PowerGrid covering 70 per cent of the total project cost and comes from its ordinary capital resources, carrying a 20-year term, including a grace period of five years.


USAID to train staff in energy sector


December 24, 2004. The power ministry and United States Agency for International Development (USAID) have jointly launched a programme to train 25,000 personnel in the energy sector. The programme, to be implemented over the next few years, aims at building a capacity of utilities to reduce distribution losses and enhance quality and reliability of power supply. In the first phase of the capacity-building programme for structured distribution reforms, 25,000 utility managers, engineers and technicians from all over the country would be trained at ten Indian institutes. Training will focus on three functional areas technical, managerial and business, and supportive functions. A financial assistance of $20 million is expected as funding for the programme. The programme is part of USAID’s Distribution Reform, Upgrades and Management (DRUM) project. Ten institutions, including the National Power Training Institute, Administrative Staff College of India, Centre for Efficiency in Power Distribution at NDPL, Central Institute for Rural Electrification, National Productivity Council, The Energy Resources Institute, Indian Institute of Technology-Kanpur, the Reliance Management Institute and Power Management Institute are part of the programme, which begins in January, 2005. The overall goal is to put in place commercially viable electricity distribution systems that provide reliable power to consumers and to establish a commercial framework. CORE International, a US-based international management consulting firm, will spearhead the DRUM training programme by forging effective partnerships with Indian training institutions. 


Coal still the main fuel for power projects


December 23, 2004. The Central Electricity Authority under the union ministry of power has said that coal will continue to be the main raw material for setting up mega power plants till 2020. This comes even though Indian coal has high ash content, sometimes as high as 40% which brings down efficiency. The problem is further compounded by the shortage of natural gas in the country which could have come in as an alternative green fuel for the power sector. The estimates of non-renewable energy sources for power generation also tends to be exaggerated. CEA is of the view that the government cannot bank on these resources to meet the entire power shortage gap. 


UK aid to TERI for energy policy 


December 24, 2004. British Foreign and Commonwealth Office has provided a funding of about Rs 96 lakh (Rs 9.6 million) under the global opportunities fund to the Energy & Resources Institute (Teri) to contribute in preparing the structure of a model energy security policy for India. Energy security is intricately linked to human security today and for the generations to come. The objective of this project is to ensure sustainable development that would affect the global energy balance and environment.


Govt to allow FDI in power trading


December 21, 2004. The policy on allowing FDI in power trading is under consideration. BG Energy Holdings Ltd, UK, a subsidiary of British Gas Group Plc., has applied to Foreign Investment Promotion Board for foreign direct investment in power trading in India. Some Chinese companies had expressed willingness to work in power sector in the country. Russia had agreed to provide assistance for Kudankulam Atomic Power Project in terms of dollar denominated credit up to a maximum of 2.6 billion including 57 million dollar for preparation of detailed project report.








Discovery in Bohai Bay Basin


December 24, 2004. China has discovered a major oil reserve in the Bohai Bay Basin which may contain 20.5 billion tonnes of oil reserves, nine billion tonnes of which are already proven, the state media reported. The find indicates that total oil resources in place in the North China basin one of the country's major oil-producing centres could potentially sustain the Communist giant's energy needs for a considerably long time. 


BP's Russian crude could use Baku-Ceyhan


December 21, 2004.British oil major BP's Russian joint venture TNK-BP could begin shipping crude through the Baku-Ceyhan pipeline from 2006, the head of BP Azerbaijan told reporters. BP Azerbaijan head David Woodward said the two firms were in negotiations about shipping Russian crude via the pipeline, which is led by BP and runs from the Caspian Sea to the Turkish Mediterranean port of Ceyhan.


Due to load its first cargo in mid 2005, the Baku-Ceyhan pipeline (BTC) will mainly ship oil from the giant Azeri offshore Azeri-Chirag-Guneshli fields, which currently produce 130,000 b/d and export via the Georgian port of Supsa. Russia is already the world's No.2 crude exporter, but its pipelines are pumping at capacity and exports are stagnant despite rising production. Exxon and Devon decided not to buy a stake in Baku-Ceyhan. Exxon has decided to ship its share of output through Georgia's Batumi port until at least 2010.


Barracuda FPSO production


December 22, 2004. The P-43 floating, production, storage and offloading (FPSO) vessel in the deepwater Barracuda field of Brazil's Campos basin started production, federal energy company Petrobras and US engineering firm Halliburton said in separate statements. The 150,000 b/d FPSO will eventually be linked to 18 production and 14 injection wells. The well that started production was the BR-23, at a rate of 10,380b/d. The next well to be linked to the FPSO is the BR-51, for which expected production is 11,950b/d. The P-43 is part of the US$2.5bn Barracuda-Caratinga project for which Halliburton's subsidiary KBR was hired to build in 2001. Technical and contract problems delayed delivery beyond the original November 2003 target date.  The other part of the project is the P-48 FPSO, which left the BrasFels shipyard in Rio de Janeiro state on December 13 and is continuing sea trials and final inspection. It will moor in the Caratinga field, adjacent to Barracuda, and is expected to start production in mid January.  The total 300,000b/d output capacity is considered essential to help Brazil reach oil self-sufficiency, and the delay in the project will lead to Petrobras's first annual output decline in 10 years.


Gazprom, Conocophillips sign Barents field deal 


December 22, 2004. Russian gas monopoly OAO Gazprom said it has signed a memorandum of understanding with U.S. oil company ConocoPhillips on the development of a large Barents Sea natural gas field. Under the terms of the agreement, the two companies are to engage in preliminary appraisals of a project to produce and transport liquified natural gas from the Shtokman field. The U.S. and other countries on the Atlantic Ocean would be export targets, Gazprom said in a press release.  The agreement also calls for an analysis of possible avenues for Gazprom's participation in regasification, pipeline operation and marketing in North America. Gazprom has signed such agreements with numerous companies already, including Norsk Hydro ASA and Statoil ASA, both of Norway. In September, Gazprom and ChevronTexaco Corp., signed a memorandum of understanding to jointly undertake feasibility studies for potential oil and gas projects in Russia and the U.S.


Discovery in Algeria 


December 22, 2004. First Calgary Petroleums Ltd. announces production test results from LEW-1, an exploration well located approximately 7 km northwest of the MZLS-1 well on FCP's 100 per cent held Ledjmet Block 405b in Algeria. Production testing of the well has resulted in successful tests of oil and gas of 9,803 barrels of oil equivalent per day (boe/d), comprised of 7,536 b/d of 51 oAPI oil and 13.6 million cubic feet of gas per day (mmcf/d), normalized to a flowing bottom hole pressure of 2000 psi.


CNOOC purchased Australia's natural gas project 


December 22, 2004. China National Offshore Oil Corporation (CNOOC), a state-owned Chinese company, which is developing into an international first-class energy company, declared on December 18 that it had finished the purchase of Australia's natural gas project and signed a natural gas supply contract of 25 years. CNOOC will supply liquefied natural gas for Guangdong from 2006.  In the past year, in order to get this project, CNOOC set up a joint venture, whose 25% stock is owned by CNOOC. According to the agreement, CNOOC will have the production license, tenancy license and exploration license in this project. Fu Chengyu, chairman and CEO of CNOOC, said that the completion of this natural gas project is an important step for CNOOC's rapid development in Chinese natural gas supply market.


Saudi oil reserves may top 461 billion barrels


December 26, 2004. Saudi Arabia’s oil reserves, the world’s largest, could increase by almost 77 percent to top 461 billion barrels in a few years, the nation’s oil minister said. “There are big chances to increase the kingdom’s produceable oil reserves by 200 billion barrels,” Ali Naimi said. “This will come either through new discoveries or through increasing production from known deposits.” Saudi Arabia says its registered reserves amount to 261 billion barrels. The newly inaugurated Qatif Producing Plants, operated by the Saudi national oil giant Aramco, is believed to have a capacity of 800,000 b/d. The plants will also provide 370 million standard cubic feet (10 million cubic meters) of associated gas. The onshore part of the field has the capacity to provide 500,000 daily barrels of Arabian light crude, the statement said. The new offshore Abu-Sa’fah field contains an estimated 6.1 billion barrels of oil reserves and will produce 300,000 b/d of Arabian medium crude. Naimi has said the kingdom plans to increase its oil production capacity to 12.5 million b/d from the current 11 million over the next few years.


Castro announces crude oil discovery


December 25, 2004. President Fidel Castro said a crude oil deposit has been discovered off Cuba containing up to 100 million barrels, good news for a country that imports about half the petroleum it needs. "This is the first discovery since 1999," Castro said. Castro said the deposit was located off the coast of Santa Cruz del Norte, east of Havana, during an exploratory drilling. He said production at the site could begin during 2006. Cuba currently produces 75,000 barrels daily, about half of what it needs. It imports most of the rest, much of it on favourable terms from political ally Venezuela. Oil specialists believe Cuba's waters in the Gulf of Mexico could contain large quantities of crude, just as those of Mexico and the United States do.



Domestic gas to cost more in Bangladesh


December 23, 2004. The government has decided to increase the price of kerosene and diesel by Taka 3 per litre.  It has also decided to increase the price of gas for double burner gas-cooker by Taka 10 from Taka 390 to Taka 400 per month. Gas for a single burner will cost Taka 60 per month-a raise of Taka 20. The revised gas price will take effect from January 1, 2005. Petrol pumps and kerosene depots throughout the country were sealed soon after the Prime Minister approved the price hike. The rise in the gas price for domestic use might have an impact on the industrial tariff as well leading to higher cost for electricity.  They also apprehended that the bus commuters also might have to pay a toll as many buses in the transport sector are also run by diesel. The decision on price hike of diesel and kerosene was contrary to earlier speculation that the price of these two items would be exempted from the price hike of fuel.


Three foreign consortia bid for Iran refinery


December 26, 2004. Three consortia, including British, South Korean, Canadian and Spanish firms, have bid for the construction of Iran's Bidboland gas refinery, worth 1.5 billion dollars. According to the daily Iran, Britain's Foster Wheeler, South Korean Hyundai, Canadian SNS Lavalin, British Costian and Spanish Dragadous Group have formed partnerships with Iranian entities to carry out the project. Once operational, Bidboland II refinery is projected to process 830,000 tons of gas liquids as well as 1.48 million tons of methane and 1.52 million tons of liquefied gas per year. The project is expected to be submitted in the first quarter of the new Iranian year starting on March 20, 2005 by Iranian Petropars and carried out in 43 months.


China's largest paraxylene plant


December 27, 2004. China's top oil refinery, Zhenhai Refining & Chemical Co. Ltd., will start up the country's largest paraxylene (PX) plant early next month after an expansion prompted by a robust petrochemical market. Zhenhai, a unit of China's second-largest oil major Sinopec Corp., boosted the plant to 650,000 tonnes per year (tpy) from 450,000 tpy at a cost of 370 million yuan ($44.7 million). China, a key driver behind the global petrochemical boom, imports more than half its petrochemical consumption of about 15.4 million tonnes of ethylene equivalent. The price of PX, processed from the light refined oil product naphtha, has jumped more than 40 percent this year to around $1,200 a tonne in China, the Zhenhai official said.


South Pars Phase 4 refineries operational


December 28, 2004. Refining gas produced by phase 4 of South Pars product has been started. The sour gas produced by SPD5 platform of South Pars phase 4 was taken onshore and is being refined by units 1 and 2 of South Pars phase 4 and 5 refinery. At present, more than one billion cu. ft. sour gas is produced by South Pars phases 4 and 5 and 800 million cu. m. gas is injected into the cross-country pipeline.  The third unit of the said refinery is being made operational and the fourth unit will come on-stream before the year-end. Phases 4 and 5 of South Pars gas field are expected to meet increasing domestic demand and boost exports by producing 50 million cu. m. refined gas, 80,000 barrels gas condensate, and 40 tons sulphur per day as well as one million tons ethane and about one million tons liquefied petroleum gas (LPG) per year.


Transportation / Trade


Tecnimont to build LNG plant in Italy


Dec 21, 2004. A group of international investors led by Italian engineering company Tecnimont has won a contract to build a long-awaited liquefied natural gas (LNG) regasification terminal in Italy's port of Brindisi. Brindisi is a 50-50 joint venture between Britain's BG Group and Italy's Enel which will import the gas from Egypt, helping Italy meet rapidly growing gas demand. Brindisi LNG SpA said it had awarded the engineering, procurement and construction (EPC) contract to the Tecnimont-led consortium which is expected to start works some time in spring 2005. The EPC contract is worth a major part of 390 million euro ($5221 million) total capital expenditure in the project. The Brindisi terminal in southern Italy will have a capacity of eight billion cubic metres of regasified LNG a year and is expected to start operations in 2008.


Yukos set to export to China in January 2005


December 22, 2004. Yukos submitted a procurement request to Russian Railways for oil shipments to China in January 2005, Russian Railways vice president Salman Babayev said. According to him, the request is for the shipment of 240,000 metric tons through Naushki, a border crossing point. Mr. Babayev said Sibneft had also submitted a request to ship 30,000 metric tons of oil to China in January 2005. Russian Railways president Gennady Fadeyev said he hoped an agreement with LUKoil on the volume of oil to be transported to China for 2005 would be signed. According to Russian Railways, LUKoil shipped 240,000 metric tons to China in December.  Mr. Fadeyev said that there was an agreement with China for 10 million metric tons to be shipped in 2005. "China's railroad infrastructure is not prepared to receive large amounts," he said and added that it is planned to increase the oil supplies to China to 30 million metric tons in 2007-2008.


Shell cuts Nigerian oil exports


December 25, 2004. International oil giant Shell said it has been forced to suspend some exports of 110,000 b/d because of community unrest in the Niger River Delta in Nigeria. "We're suspending some of our operations following a disruption of production." said a Shell senior information officer. He said the disruption could continue until January and the company could end up unable to export more than 2 million barrels. Shell is Nigeria's largest oil multinational, exporting a little over a million barrels a day. Unrest in the volatile Niger Delta often causes disruption in oil production and export, leading to losses in the millions for the foreign multinationals. The Nigerian government reported that a blast at an oil production facility in Lagos damaged a pipeline. It said the blast was as at a Nigerian Pipeline Company facility, unrelated to Shell.


China’s gas pipeline to start commercial run 


 December 28, 2004. China's 4,000-kilometer-long natural gas pipeline, linking the gas-rich Xinjiang Uygur Autonomous Region in the northwest with east China's Shanghai Municipality, will officially start commercial operation. The East-west Natural Gas Transmission Project, a landmark in China's mammoth western development drive, has a designed capacity of 12 billion cubic meters, but Xu said the state would strive to lift the volume to 17 billion or 18 billion cubic meters as soon as possible.  A natural-gas-fired power plant has also been constructed to alleviate electricity shortages in east China. Xinjiang has substantial natural gas reserves. The Tarim Basin alone is estimated to hold 8.0 trillion cubic meters, enough to keep supplies stable for up to 30 years. China consumed less than 40 billion cubic meters of natural gas in 2004, accounting for less than 3 percent of China's primary energy consumption and far below the world average. Natural gas is a relatively clean fuel, with low sulphur and carbon monoxide emissions, and has high thermal efficiency.


Repsol YPF starts Margarita gas exports


December 27, 2004. The Bolivian unit of Spanish oil company Repsol YPF has started exporting natural gas from the Margarita field to Brazil, Repsol sources as saying. Exports were originally scheduled to start to in October. Dispatches are presently 600,000 cubic meters a day but will change according to Brazilian demand, the report said.  Margarita is in the Caipipendi block in Tarija department. Through its Maxus subsidiary Repsol YPF owns 37.5% and is the operator. The Bolivian unit of UK Company BG owns 37.5% and Argentine Company Pan American Energy owns 25%. Bolivia exports some 22mcm/d of gas to Brazil, and increased gas sales will be one of the main ways in which the country expects its total exports to rise to US$2.5bn in 2005. Hydrocarbons exports in the year through October increased 67.9% from the same period of 2003 to US$657mn, and will further rise from 2006 when the 20mcm/d Gasoducto Noreste Argentino (GNA) pipeline to Argentina starts operations, economic development minister Horst Grebe said.


Eastern Siberian oil pipeline - route fixed


December 28, 2004. Stanislav Naumov, press-secretary of the industry and energy minister, has said that the final version of the Eastern Siberian oil pipeline was handed over to the Russian government. The draft of state-owned Tatneft had been taken as the basis. In the first stages, a pipeline will be laid from Taishet, the biggest station on the Baikal-Amur railway, to the village of Skovorodino. Then, exported oil will be transported in rail tanks to the Perevoznaya Bay terminal in the port of Nakhodka. Feasibility studies for the project should be ready by about the middle of the next year. Then they will be vetted by state inter-departmental experts.


The pipeline will pass 150 kilometers north of Lake Baikal, mainly along the well-developed zone of the operating BAM railway. From Skovorodino, which is the nearest station on the route to China, it will be possible to build in the future a feeder towards the border. The time to construct the route to Skovorodino has been determined by the government at 3.5 years. The cost of the Taishet-Skovorodino section was earlier estimated at $6.5 billion.


Structures to be built here will include a filling trestle for rail tank cars. And until the entire line is completed, oil will be delivered to the Pacific by rail. Which will require laying second and even third tracks on BAM. Russian Railways has already agreed with Transneft the main aspects of future cooperation in the transportation of export oil. The overall length of the Eastern Siberian oil pipeline is 4,130 kilometers. It will be provided with 44 oil pumping stations, 14 tank farms with a capacity of up to 4.4 million tons, a terminal, and berths and coast facilities in Perevoznaya Bay. With construction completed, the pumping capacity of the pipeline must be 80 million tons. The total cost of the pipeline will be almost $11-12 billion.


As a resource base in the first stages the government selected the deposits in the Tomsk region, the Khanty-Mansi autonomous area in Western Siberia each with 24 million tons a year and later, following additional exploration and commissioning, the Leno-Tungusskaya, Khatanga-Vilyui oil and gas plantations in Eastern Siberia and the Republic of Sakha (Yakutia). As post-exploration advances the resource base of the pipeline route may include the Yurubchenko-Takhomskoye, Talakan, Chayandinsk, and Kovykta fields (Yakutia and Krasnoyarsk Territory).


The aggregate oil reserves of Eastern Siberia, Yakutia and the Far East - according to existing estimates - exceed 19 billion tons, of which 10 billion tons is accounted for by the Eastern Siberian deposits. This region is now producing less than 1 million tons a year. By 2010, oil output will reach 5-10 million tons, and 55 to 60 million tons not earlier than 2020. Alexander Safronov, director of the Yakutsk Institute of Oil and Gas, believes that the substantive part of this increase may be "eaten up" by domestic consumption in the region, which is to grow from 15 million tons in 2003 to 35-40 million tons in 2030.


Policy / Performance


Riyadh sees strong oil demand next year


December 21, 2004. Saudi Arabia expects a healthy global economy in 2005 to sustain demand for its oil and petrochemical exports through next year and beyond, a senior central bank official said. The world's biggest oil exporter unveiled an expansive 2005 budget this month after reaping the highest revenues for its crude since the oil boom more than two decades ago.  That oil income helped fuel Saudi growth of seven and five per cent in the last two years and officials say domestic reforms and the robust world economy could keep it powering ahead. "The global economy, which is significant for us, still looks to be performing well in 2005," Al-Jasser said. "China, Asia and the US are expected to continue to perform well and even Europe looks like it is going to continue to have decent growth". "So the demand for our products, be it oil or petrochemicals and others should continue. With the drive for more exports from our economy, we should be seeing a good year in 2005."  Government revenues this year of 393 billion riyals ($104.8 billion) -- mostly from oil sales-were no windfall, he said. "Windfall is something which happens when it was not supposed to.


Russia is ready to offer Belarus gas and oil


December 21, 2004. Russia is ready to offer 20.5 billion cubic meters of gas and 18 million metric tons of oil to Belarus for the year of 2005.  Head of OAO Gazprom Alexei Miller as a member of the Russian delegation is carrying to Minsk a ready for the signing contract, according to which the volumes of Russian gas will amount to 18.5 billion cubic meters on the part of Gazprom and 0.6 billion cubic meters on the part of the independent suppliers with a possibility of additionally supplying 1.4 billion cubic meters. The price of Russian gas is supposed to be $46.68 for 1,000 cubic meters. At the same time the Belarus side has proposed increasing the Russian gas supplies from 20.5 billion to 21.5 billion cubic meters at the price of $39.56 for 1,000 cubic meters.  The questions of oil supply would be discussed at the meeting of the Council of Ministers in Belarus.  The Russian side plans to supply 18 million metric tons of oil, while the Belarus side wants to increase the oil supplies.


China pursues oil reserves in Canada


December 26, 2004. China's thirst for oil has brought it to the doorstep of the United States. Chinese energy companies are on the verge of striking ambitious deals in Canada in efforts to win access to some of the most prized oil reserves in North America. The deals may create unease for the first time since the 1970s in the traditionally smooth energy relationship between the United States and Canada. Canada, the largest source of imported oil for the United States, has historically sent almost all its exports of oil south by pipeline to help quench America's thirst for energy. But that arrangement may be about to change as China, now the second-largest oil-consuming nation, flexes its muscle in attempts to secure oil, even in places such as the cold boreal forests of northern Alberta, where the oil has to be sucked out of the sticky, sandy soil. Smith said he estimated Canada could eventually export as many as 1 million barrels a day to China out of potential exports of more than 3 million barrels a day. “Our main link would still be with the U.S., but this would give us multiple markets and competition for a prized resource,” Smith said. Chinese companies are also said to be considering direct investments in the oil sands by buying into existing producers or acquiring companies with leases to produce oil in the region. In all, there are nearly half a dozen deals under consideration, initially valued at $2 billion and potentially much more, according to senior executives at energy companies here.


Energy co-op between Venezuela, China


December 26, 2004. Venezuelan President Hugo Rafael Chavez Frias said in Beijing that Venezuela and China will have a bright future for their energy cooperation as the two countries enjoy sound political relations and China's economy is developing rapidly. The two countries have made significant progress in energy cooperation since the two nations vowed to establish a bilateral strategic partnership of common development in 2001, Chavez said. The Venezuelan government will grant Chinese companies production permits to explore oil in Venezuela's oil-bearing blocks.  Chavez also pledged to support Chinese companies' involvement in the exploration of the off-shore natural gas fields in Venezuela. Noting Venezuela is planning to form a State-owned petrochemical corporation, Chavez said, "We welcome China to help build this plant."  Moreover, Venezuela welcomed China to join hands for the construction of an oil pipeline reaching ports along the Pacific, he said.


China keen to have long-term energy cooperation with Iran


December 28, 2004. The first meeting of the specialized panels of the Institute for International Energy Studies (IIES), dubbed “China and Energy Challenges” was held in Tehran. The Chinese advisor Lu Chang Jin said that the two countries have expanded ties in the past years and China is completely ready to have long-term cooperation with Iran in energy sector, as presently three great Chinese companies are active in Iran. Iran and China signed a memorandum of understanding (MOU) in late October to award the project to develop Yadavaran oilfield to China's Sinopec.


Under the MOU, Sinopec has agreed in return for Yadavaran project to purchase an annual of 10 million tons of Iranian liquefied natural gas (LNG) over a period of 25 years. Also, the NIOC has agreed to sell 150,000 b/d of crude oil to China at market prices over a period of 25 years once Yadavaran becomes fully operational. Jin said that China imports 300,000 b/d of crude oil from Iran, which shows a growth rate of 30 percent in China's energy demand. Energy-thirsty China is considered the world's second largest importer of petroleum. Some 3.4 million b/d of crude oil is produced in China given its huge demand in energy, added Chang Jin, saying that oil consumption in China is several fold higher than that of Iran's.


NIOC and China National Petroleum Company (CNPC) in late October signed another MOU to promote mutual cooperation in the oil sector. Under the MOU, the NIOC and CNPC agreed to expand cooperation in the oil and gas upstream sectors and exchange technical oil services. CNPC is already operating at the project to increase the production of Iran's Masjed Soleiman oilfield. The company has also bid for the development of Khorramabad and Kuhdasht oil blocks which Iran put on international tenders last February. Pointing out that the energy consumption has grown three times in his country he said that Iran’s oil export to China is 300,000 b/d, adding, his country has been self-sufficient in oil and gas in the past ten years, however, the country presently is not able to domestically provide the energy consumption due to speedy economic development as well as population growth. Speaking about the LNG exports and imports, the advisor said, “LNG has not yet been imported to China and no official contract has been made with Qatar. Presently, we have reached agreement only with Iran.”


Mexico seeks to reduce dependence on US gas


December 28, 2004. With the installation of at least four liquefied natural gas re-gasification plants, three operated by foreign companies and one owned by the state, the federal government hopes to reduce Mexico's dependence on the United States for its natural gas supply.  The plans of the Sempra, Shell and ChevronTexaco companies and the Federal Electricity Commission (CFE), by 2010 there will be an additional natural gas supply of between 1.6bn and 2bn cu.ft. a day to supply the two countries. The investments required for these projects could be as high as 2bn dollars in Mexico alone. The most developed plan is that of ChevronTexaco, which hopes to construct its terminal offshore, close to the Coronado Islands, in Baja California. The Investment Promotion Office of the Energy Secretariat (Sener) has pointed out that with the projects already approved, by about 2007 Mexico will import about 300m cu.ft. of LNG a day. This amount will remain the same until 2010 and in 2012 it will increase to 500m cu.ft. a day.


These plants allow fuel transported in liquid form to be reconverted into gas. Each project involves an investment of almost 4bn dollars, which covers everything from the plant that freezes the natural gas to make it liquid, to hiring the tanker ships that transport it and the re-gasification plants, plus the transport pipelines. The main market for LNG is in northern Mexico, because of the industrial growth and its greater demand for fuel. The region already had four projects that had the permits of the federal authorities and were to be operated by Sempra, Chevron, Shell and Marathon. But Marathon backed out of its plans, because the land that it was expecting to use was expropriated by the government of Tijuana for the construction of housing units.


Carlos Atalla, vice-president for Latin America at ChevronTexaco, said that the business that the company hopes to set up will serve to supply, from Mexico, the market in the southern United States and in northern Mexico, where there are no sources for supplying the fuel. This company's project alone would have the capacity to place about 700m cu.ft. a day in the region. The investment for this company's terminal is almost 600m dollars. The company had to get permits from more than 200 different institutions, such as the Environment Secretariat, the Energy Regulating Commission and the Communications and Transport Secretariat. There are more than 92 plans to set up re-gasification plants all along the west coast of the Americas. In the region of the North American Free Trade Agreement alone there are plans to build seven in Mexico, two in Canada and 39 in the United States, Atalla said. By June 2005, it is hoped that the first re-gasification plant will begin to operate in the port of Altamira, in Tamaulipas, with a capacity of 400m cu.ft. a day, mainly for the consumption of the CFE, which will use it as fuel to generate electricity at the Altamira and Tuxpan plants.






ENDESA to build two new CCGTS


December 21, 2004. ENDESA is to build two new CCGTS on the Islands of Gran Canaria and Mallorca ENDESA’s total investment in the new cycles, with installed capacity of 230 MW each, is Euro 400 million. The projects will enhance the service provided and help meet the growing demand for power on both islands. Work on the two generation facilities is scheduled to begin in early January 2005 and will be carried out in two stages, the start-up of the gas turbines in the spring of 2006 and completion of the combined-cycle facilities a year later when the steam turbines come on stream. Total investment in the two projects is Euro 400 million.  The Canary Islands combined-cycle plant will have installed capacity of 230 MW through two gas turbines and their corresponding waste-heat boilers and one steam turbine. This will be the Balearic Islands' second combined-cycle plant.


The steam turbine is slated to come on stream in June 2005, marking the completion of the Son Reus en Palma plant's second CCGT, which will have total capacity of 600 MW and together with the future plant will technically ensure power supply to the Mallorca-Menorca grid in the coming years.  The 230 MW unit to be installed on the Canary Islands comprises two gas turbines and their corresponding waste-heat boilers and one steam turbine. This will mark the second CCGT installed by ENDESA at the San Bartolome de Tirajana plant following the start-up earlier this month of the 1st CGGT, which has installed capacity of 220 MW and is the first of its kind to operate on the Canary Islands.  Work on the two generation facilities is scheduled to begin in early January 2005 and will be carried out in two stages, the start-up of the gas turbines in the spring of 2006, known as open or simple cycle, and the completion of the combined-cycle a year later when the steam turbines come on stream.


Poland to build nuclear power plant by 2023


December 21, 2004. Poland plans to build its first nuclear power station by the year 2023 in order to comply with requirements restricting greenhouse gas emissions, Deputy Economy Minister Jacek Piechota said. "Before 2023, we will have to have clean energy in the Polish electric power system," he told. "Round about 2023, we will no longer be able to respect very strict environmental norms, especially concerning greenhouse gases." "The priority for the next 15 years will be to develop renewable electrical energy resources; wind power, biomass and hydro-electric power. But these resources will not suffice," the official said.


Russia ready to build seven nuclear power plants in Iran


December 22, 2004. Despite U.S. opposition Russia over the weekend suggested it would not only maintain its nuclear ties with Iran but also expand them. Russia could build up to seven new nuclear power plants in Iran, announced the head of the Russian Nuclear Energy Agency, Alexander Rumyantsev, who added that the plants' cost could total $10 billion. Iran’s Economic Affairs and Finance Minister Safdar Hosseini confirmed that Iran was seeking Russian help to build a second nuclear reactor at Bushehr, the location of a power plant built with Russian aid. He said Tehran and Moscow had preliminarily agreed to build another reactor but did not say when work on the project would begin. Russia's $800 million contract to build a reactor at Bushehr is expected to be finished late next year.  Russia has also reiterated plans to boost natural gas and energy ties with Iran. Russia's cooperation with Iran in the sphere of natural gas is important in terms of developing traditional markets and also in terms of a joint search for new markets, Economy Minister Viktor Khristenko said.  South Pars, near the boundary between Qatari and Iranian waters in the Persian Gulf, is currently being exploited by Russian gas giant Gazprom together with French and Malaysian firms. The field is estimated to contain around 812 trillion cubic feet of gas, or 7 percent of the world's proven reserves.


New plant raises S. Korea's electric power


December 23, 2004. South Korea's electric power generation capacity has reached 60 million kilowatts with the opening of the Yeongheung Thermal Power Plant, the Ministry of Commerce, Industry and Energy said. The new plant consists of two generators for burning soft coal that can each produce 800,000 kilowatts of power, a 60-percent increase over conventional coal-burning generators with 500,000-kilowatt output.


Unit of Russian nuclear plant to be built in 2005


December 24, 2004. A unit of the Volgodonsk-2 nuclear power plant will be built in 2005, head of the Russian Federal Atomic Energy Agency Alexander Rumyantsev said. According to him, the federal agency is working on the project of the nuclear power plant with a VVER-1500 reactor. If this project is successfully implemented, from 2007 the agency plans to build units with 1,500 Megawatt capacities and more, Mr. Rumyantsev said.  The problem with the term of commissioning of power generating unit No. 1 of the Leningrad nuclear power plant and power generating unit No. 2 of the Kola nuclear power plant and the modernization of power generating unit No. 2 of the Kursk nuclear power plant has been solved. The nominal capacity of the former will be increased up to 1,000 Megawatt.


Pakistan seeks donors for power project


December 21, 2004. Pakistan has sought $800 million from international donors to help construct a massive Rs84.5 billion Neelum Jhelum hydroelectric project which after completion would generate 963 MW of electricity. The World Bank, Asian Development Bank and the Islamic Development Bank were expected to extend $800 million to complete the new hydroelectric project by June 2011.  The work on the project was commenced in July 2003 but due to non-availability of funds, so far there was only 0.003 per cent financial progress. And the issue has been raised with the donor agencies through their offices in Islamabad. The project is located in Muzaffarabad.  The project included construction of 140m long and 47m high concrete gravity dam to divert 280 "cumec flow" of Neelum River through trans-mountainous headache tunnels to generate 696 MW hydroelectric power.  Feasibility study, engineering design and technical tender documents have been completed. PC-1 of the project has also been approved by the executive committee of the National Economic Council (Ecnec). 


Five international firms - Central China Power Group (CCPG), China International Water & Electric Corp (CWE), Sinohydro-ACL Joint Venture, Oden Enterprises and Excellence Technology Group - have shown interest to implement the project on built operate own transfer (BOOT) and EPC basis. Wapda officials have informed the president's secretariat about the progress on other important hydropower projects. In this behalf, Wapda said that Allai Khwar hydropower project would be completed at a revised date of June 2007. The project would cost Rs8.5bn which is located at Kohistan district of NWFP.

Transmission / Distribution / Trade


Aquila to sell power supply contract


December 21, 2004. Aquila Inc. said it is removing itself from a power purchase and sale agreement in Batesville, Miss., netting the company $16.2 million. Currently, Aquila buys power from LSP Energy Partnership, owner of a Batesville power plant, and then sells it to the South Mississippi Electric Power Association. Under a series of agreements, Aquila will remove itself from the deal, assigning its purchasing obligation directly to the association. In return, the association will pay Aquila $16.2 million. Aquila, based in Kansas City, also said it has finished terminating a natural gas supply contract with the American Public Energy Agency, which sells the gas in Nebraska. Aquila said it already set aside $139 million to pay termination fees for the contract, one of four the company has terminated this year as it backs out of the merchant power business and concentrates on its utility business.


El Paso to sell power supply units


December 22, 2004. El Paso Corp., the natural gas pipeline giant, said it entered into an agreement to sell its interest in subsidiaries that supply power to Public Service Electric & Gas Co. to an affiliate of Bear Stearns Cos. in a $106 million deal. El Paso will sell its interests in two power supply units known as its Cedar Brakes I and Cedar Brakes II subsidiaries to Houston-based Arroyo Energy Investors LP. In addition, El Paso's marketing subsidiary agreed to transfer its obligations to supply power at the Cedar units to Constellation Energy Commodities Group Inc. That part of the deal will include terminating a group of offsetting trades set-up between El Paso Marketing and Constellation, which will increase El Paso cash outflow by about $240 million. The transaction is expected to close in the first quarter of 2005, and is subject to regulatory approval among other consents.


Ranhill hungry for more power plants


December 28 2004. Ranhill Bhd of Malaysia will acquire more power plants in its pursuit to raise its power generation capacity to 1,000 megawatts (MW) in the next three years. Ranhill president and chief executive Tan Sri Hamdan Mohamad said the company wants to be a major player in the power industry.  At present, it is exploring opportunities in Indonesia, India, Bangladesh, Pakistan, Tanzania and Saudi Arabia, he said. Hamdan said the group’s power generation capacity will increase to 190MW in mid-2006 from the current 120 MW. Ranhill Powertron Sdn Bhd, a subsidiary of Ranhill Power, has obtained approval from the Sabah State Government for the conversion of its 120MW open-cycle gas turbine in Teluk Salut in Sabah into a 190MW combined-cycle gas turbine plant.


Policy / Performance


China seals landmark coal-power price link 


December 22, 2004. China will allow coal prices to move in line with power prices in early 2005, spurring a long-awaited overhaul of an antiquated coal pricing system and easing the burden on electricity generators of high fuel costs. Inflexible coal pricing controls have squeezed margins at Huaneng Power, the largest generator, and rival Datang International. Beijing ordered that about 70% of coal price increases would translate into power tariff hikes, according to two industry sources who had read a final document handed down last week by the State Development and Reform Commission.  China, the world’s second-largest electricity consumer, raised power rates twice this year to help generators cope. But those moves were criticised as poorly timed and opaque, prompting calls for a formula to make future moves more predictable. China, the world’s second-largest exporter of coal, is expected to hoard more of the fuel in 2005 via cuts in rebates on export taxes for its own increasingly power-starved economy.

Rural gas & electricity plan in Argentina


December 28, 2004. Argentina's Entre Ríos provincial government plans to invest a total of 28mn pesos (US$9.4mn) in its gas and rural electrification development plan in 2005. Among other projects, the funds will be used to subsidize the installation of natural gas in industrial parks, double the number of beneficiaries of the social electric tariff and provide power to 70 rural schools. The province plans to invest 18mn pesos of the total in 14 gas infrastructure projects, governor Jorge Busti said. In addition, local gas distributor Gas Nea will start in March 2005 a plan for residential gas connections funded through a loan from a private bank and a provincial trust fund. "Gas Nea's objective is to reach 100,000 units connected before the end of 2007," Busti said, adding the project "will mean that a large part of the population and the productive industries of the province will have gas."


The province aims to invest another 10mn pesos in rural electrification projects "which will start to be tendered and which exceed the budgeted amount, meaning they will also require funds in 2006," Busti said.


Renewable Energy Trends




Billboards may go solar-powered soon 


December 24, 2004. It may no longer be possible to burn millions of watts to light up glitzy billboards in the country. Advertising hoardings that use conventional lights will soon have to go the solar energy way. Solar photo voltaic power will be replacing the traditional lighting. Renewable energy, particularly solar energy, is being looked at as a potential to replace conventional electricity used for advertising hoardings, street lights and water heating requirements in view of the power shortages in the country. Ministry of Non Conventional Energy Sources (MNES) is planning to set up advisory committees to push renewable energy across 600 districts in the country. MNES will also expand the network of ‘Aditya Solar Shops’ to cover all the districts of the country so that solar manufacturers can use this network to sell their products.  The ministry has circulated a model amendment to building bye-laws which when adopted by municipalities will make installation of solar water heaters mandatory in several categories of new buildings. The governments of Maharashtra, Tamil Nadu and Andhra Pradesh have already moved in this direction issuing orders to civic bodies and urban development authorities to install solar energy systems at municipal buildings, urban development authority buildings or any urban local body building. Clearance of plans for hospitals, hotels and multi-storeyed buildings are to be given only if there is provision for installing solar water heating system with open space on the roof top. Solar photo voltaic power is to replace conventional lights for hoardings in these states.


Maharashtra’s green fund


December 24, 2004. The Green Energy Fund created by Maharashtra raised Rs 100 crore (Rs 1 billion) last year. This fund is being transferred to the Maharashtra Energy Development Authority to be used for developing renewable energy in the state. This fund was created by charging 0.04 per unit green cess on the energy bills of commercial and industrial establishments. There are plans to collect on an average Rs 80 to Rs 90 crore (Rs 800-900 million) per year for 10 years to fund renewable energy in the state. MEDA is coordinating with MERC to fix the mandatory percentage of renewable power in the state.


Working group for promoting ethanol-blended petrol  


December 24, 2004. Ministry of petroleum has decided to set up a working group to implement the ethanol-blend petrol programme. The group will have representatives from agriculture, food, chemicals, petroleum and panchayati raj ministries. The group would examine operational, financial, availability and other related aspects of the programme.  The initiative forms a part of the programme to market 5% ethanol-blended petrol. It could not be fully implemented due to complex and differential tax structures of various states and inconsistent availability of ethanol in the country. The sugar industry has alleged that public sector OMCs are not serious on implementing the programme, whereas the industry is in a position to supply the required quantity. They attribute this to the higher cost of ethanol at Rs 22.80 per litre. With good sugar stock position of 120 lakh (12 million) tonne in the current fiscal, the industry can meet the ethanol demand. Moreover, ethanol is less costly than the international oil prices which have gone up by more than $22 a barrel this year. The sugar industry has put in over Rs 600 crore (Rs 6 billion) to set up ethanol production capacity and is capable of supplying 1,000 million litre ethanol which is more than sufficient to meet nearly 10% of the country’s ethanol need.


Gujarat scraps power project


December 25, 2004. The Gujarat government has decided to scrap the Rs 1,500 crore (Rs 15 billion) project for generating 100 MW electricity from cow dung. The project was proposed to be set up at Radhanpur in Sabarkantha district by little known Purcur Energy and Infrastructure Ltd. The MoU for the project was signed with the state government. The firm wanted the government to allocate nearly 2,500 acres of land free of cost for the plant besides the requirement of 30,000 tonnes of cow dung daily and other infrastructure facilities like water, roads and transportation. The power plant was to produce nearly 850 million units of electricity and 1.2 million cubic meters of cooking gas. This dung-fuel plant project was among the 21 odd ones wherein foreign direct investment was envisaged.


Germany in talks with India on wind energy


December 24, 2004. Expanding at the rate of over 30 per cent per annum, the wind energy sector in India promises to emerge as an economically viable option to meet the current power deficit of the country. Germany is in talks with India on possible bilateral ties in the area of wind energy and the two countries are moving very closely to strike a comprehensive understanding. Germany has already taken up the matter with the Indian government and the indications are positive. Germany is the global leader in the production of wind energy and would be able to lend technology support to India for producing this form of non-conventional energy. Though just two per cent of the total energy produced in India is from wind energy, estimates by the Ministry of Non-Conventional Energy Sources say the country can harness wind power up to 45,000 MW from the current 3000 MW provided it imports technology and equipment. Of the 40,000 MW wind energy produced globally, Germany alone contributes 16,000 MW. 


India to tap more wind energy


December 24, 2004. By September 2005, India will have one of the largest wind farms in the world at Sankaneri in Tamil Nadu, rivalling Asia's biggest wind park. It is an awe-inspiring sight to see 900 wind turbines spread across the 25-km barren Sahyadri range of hills at an altitude of 1,150 metres from mean sea level on this Ratnagiri-Satara plateau. Some of the newer models designed and indigenously manufactured by Pune-based Suzlon Energy Ltd., which has set up 566 out of the 900 turbines here, are capable of generating 1.25 MW power with their ability to pitch and catch wind in varying directions, while the average medium size machines generate 350 kilowatts. The wind park here also has turbines of other companies like Enercon, Vestas-RRB and Bharat Heavy Electricals Ltd (Bhel). Together all the 900 wind turbines that look like windmills, contribute 200 MW electricity to the state grid. At the new 4,000 hectares Sankaneri wind farm in Kanyakumari district of Tamil Nadu, Suzlon has installed its new 2MW turbines, the largest on-land turbine outside Europe.  This year India has witnessed one of the highest growths in capacity addition with 900 MW being added from January to take the total capacity in the country to 3,000 MW. The WEA expects the total capacity to reach over 3,200 MW by fiscal year end in March. Of the new capacity created this year, Suzlon has contributed 200 MW, taking its total installations to over 620 MW.


Sugar co-operatives get UK aid


December 22, 2004. The global opportunities fund (GOF) of the UK foreign and Commonwealth office (FCO) is funding a project aimed at harnessing renewable energy potential in the Indian sugar co-operative sector. The project is being implemented by Agrinergy Ltd, the UK based provider of services to the carbon and renewable energy markets. Electricity generation from sugarcane residues combats climate change, contributes to energy security and helps sugar mills diversify revenue. Many private companies in the sugarcane producing world are benefiting from this technology, with the help of clean development mechanism of the Kyoto Protocol. However, this success has not been replicated in the vast sugar co-operative sector, largely due to investment barriers. GOF funded programme will evaluate novel funding structures, including carbon finance, which can overcome this barrier. It is expected that the Agrinergy study will result in an actual investment at a sugar mill.  The project has carried out an overview of the co-operative sugar sector in Maharashtra and its performance in grid-based electricity generation from bagasse cogeneration. GOF is FCO’s newest programme budget. It has been created to fund projects around the world relating to FCO’s eight strategic international policy priorities. These projects are co-ordinated through six thematic programmes, including the climate change and energy programme.




Iran’s first solar power plant


December 27, 2004. Iran will launch its first solar-thermal power station in two years. Hamid Zargarpur, managing-director of MAPNA International, said that the project has been taken under way since six months. It is totally state-run and will be on a turnkey basis.  The power station is supposed to have two gas units and a solar section. It is to cost 126 million euros plus 696 billion rials.


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


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[1] Calculated on the basis of government estimates. 

[2] The Integrated Rural energy Program (IREP) aims at developing micro level plan for promotion of an optimum mix of both conventional and non conventional energy sources in selected blocks in the country. Currently there are 860 blocks.


[3] Calculated by using estimates from Ministry of Non Conventional Energy.

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