MonitorsPublished on Jun 07, 2005
Energy News Monitor I Volume I, Issue 50
A Realistic Dream

The prospect of importing natural gas into India through a trans-national pipeline is, for the first time, a distinct possibility.  The Union Cabinet has recently authorized the Petroleum Minister to examine and carry out negotiations with regard to all potential natural gas import projects.  The credit for this goes to the Minister of Petroleum and Natural Gas, Mani Shanker Aiyer who within a few months of his assuming office, has managed to overcome decades of resistance by many who believe that any pipeline that passes through Pakistan would be fraught with great risk.  He has been able to work through a myriad pros and cons and has persuaded the Cabinet of the larger benefits that will accrue to the country in terms of enhanced regional cooperation and economic growth.

In practical terms, India is in urgent need of increased gas supplies and if the country is to sustain its targeted GDP growth, it needs to import large quantities of gas.  This is because our own record towards discovering fresh hydrocarbons has been poor.  Since the discovery of the giant Bombay High oil and gas field in early 1970s, there were no major discoveries till 2002 when Reliance Industries announced a large gas discovery in the Krishna Godavari basin.  The Hydrocarbon Vision 2025, published by the Government of India in 1999, stated, “given the significant decline in reserves over the last few years, it is clear that unless reserves in existing fields are significantly upgraded or new fields are discovered and brought on stream, gas production is set to decline from its current level.”  An optimistic scenario projects a supply of 70 million standard cubic meters per day (mmcmd) in 2002, going up to 84 mmcmd by 2020.  On the pessimistic side the nightmare scenario is a drastic decline to 28 mmcmd.  However, with Reliance Industries discoveries coming into production by 2007, the pessimistic scenario is no longer valid but there is enough cause for concern.  The demand for natural gas that currently stands at around 150 mmcmd is expected to rise to over 320 mmcmd by 2020 and it is imperative to meet this demand to meet the growth targets.

The Ministry has been in the forefront of efforts, spread over a number of years, aimed at identifying acceptable gas import options for India.  It has been in touch with the Government of Iran since the early 1990s and a joint commission set up between the two countries has been meeting at regular intervals to discuss the possibility of a natural gas pipeline from the giant South Pars field to India.  A number of techno economic feasibility studies have been carried out on this proposed pipeline, the latest being one by BHP of Australia.  Given the history of India-Pakistan relations, the Ministry was unable to promote a major project that would make India dependent on gas supplies from a pipeline passing through Pakistan.  India therefore explored other options and signed an agreement with the Government of Oman in 1994 for a sub sea pipeline from Oman to the Gujarat coast.  Uncertainty about the gas reserves in Oman, and doubts over the technology to transport large volumes of gas at a water depth of over 2500 meters led to the death of this project.  In 1998, Petronet India was formed to accelerate the import of LNG. Despite hiccups and overcoming numerous problems, particularly over pricing, Peronet has built the infrastructures to import 5 million tones of LNG from Qater.  Hopefully the success of Petronet will motivate other private players, who have so far adopted a wait and watch policy, to accelerate implementations of their plans for new LNG plants.

With regard the development of transnational pipelines, the Government has several options.  There are 2 proposals for developing a large pipeline bringing gas to North or the North West of India - the Iran-Pakistan-India (IPI) pipeline and the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline.  It is important to understand that the decision to accept a gas import pipeline project will not be a unilateral one of the Government of India.  Pakistan too will have to be closely involved in the evaluation of options.  While Pakistan has been self sufficient in gas for a number of years, supply and demand projections indicate that it will have to import substantial quantities of gas from 2010 onwards.  Realizing this, the Government of Pakistan has been quick out of the blocks.  An internal study undertaken in 2004 has highlighted the urgency of implementing a large gas import project and a techno-economic comparison is being done between the IPI, TAPI and also a sub sea pipeline from Qatar.  While the sub-sea pipeline may not be economically attractive, there appears little to choose between the IPI and TAPI in terms of economics.  Built to transport roughly 3.3. billion cubic feet of natural gas per day, each project is likely to cost $ 3-4 billion.   Concerns on the financial viability of either of these pipelines are mislaid because given the cost of production, the cost of project development and construction, transportation costs and transit fee, various studies of these projects estimate a rate of return at over 17%.  On the East, India has the option of importing gas from Bangladesh and Myanmar.  It has been reported that subsequent to Mr. Aiyer’s visit to Myanmar in January this year, a Memorandum of Understanding signed between the two countries provides for cooperation in the petroleum sector.  It has also been reported that Bangladesh is now more amenable to allow a gas pipeline from Myanmar to pass through its territory.  Mr. Aiyer has also been instrumental in the appointment of a seasoned officer of the Indian Foreign Service as Additional Secretary in the Ministry to be responsible for facilitating trans-national projects.

Despite the Ministry’s efforts to promote the IPI project, it has not been able to make much headway.  Distrust of Pakistan and the fear that Pakistan can “switch off the tap at will” ensured a lack of progress.  Pakistan too was hardly amenable to meaningful discussions on a cross-border pipeline project till a few years ago. In the mid 90s Pakistan denied requests from India to be permitted to survey Pakistan’s territorial waters for a potential pipeline.  Pakistan has, however, now realized the importance of India’s importance in a major trans-national gas transmission pipeline project to make such a project financially attractive and bankable.  It is heartening that President Musharraf has the confidence and the authority to prevail upon public opinion in Pakistan that, until a few years ago, would not have let such a “peace” pipeline materialize.  Mr. Aiyer has seized the opportunity and can now lead India to being an active player in any consortium that will be formed to develop the projects.  However, much work is yet to be done to slay India’s concerns.  Given that international funding will be required to develop the projects, Pakistan will have to give binding guarantees to India vis a vis any voluntary disruptions of supplies.  The supplies (Iran and/or Turkmenistan) too will have to guarantee that any unilateral stoppage of supply to India by Pakistan will mean suspension of sales to Pakistan also.  It could be decided that Pakistan will pay India the cost of gas that would have come to India but did not reach because of stoppages.  The incorporation of conditions that provide strong guarantees to both the seller and buyer are normal in the gas sale and purchase agreements that are signed for the contract.  Moreover, sabotage risks can be minimized through enhanced patrolling along the pipeline route.  India will need reassurance that Pakistan will take all possible steps to prevent acts of deliberate sabotage. A temporary stoppage to a natural gas pipeline will not, in any case, have catastrophic effects on the country’s economy as a whole since it would be meeting less than a tenth of the country’s energy demand.

A natural gas transmission pipeline will be a harbinger of improved relations and sustainable economic growth in the region. It can be extended to interconnect with other trans-national pipelines and India can think of a vast pipeline network connecting Iranian and Central Asian gas with indigenous gas and with gas flowing in from Myanmar and Bangladesh.  It is undeniable in the interest of all regional countries to implement such cross border projects.  The time is ripe for neighbors to pick up new threads of hope and usher in an era of prosperity for the region, leaving behind the scars of indifferent relations of the past.  To quote Jan Nisar Akhtar:  “apne tareekh makaano se to baahar jhaanko, zindagi shamma liye dar pe khadi hai yaaro”----Peep out of your pre historic homes, Holding a torch, a new life awaits you at your door.

The author, Najeeb Jung, is a former Civil Servant.  He is currently Advisor to the Observer Research Foundation and can be found at [email protected] <mailto:[email protected]>


Climate Change, CDM & Sustainable Power Development


Development, of all kinds, has been the buzz word in this millennium. With this is intensely linked how much less Carbon you generate to account for environmental care and tackle climate change. Energy use efficiency is the key here, only thing required is its proper manoeuvering. Expert perceptions reinforce the fact that while development, particularly in the Energy sector may have been influenced and perhaps at times driven by the influential multilateral forces, the evolution of the energy sector and the integration of sustainability in various countries have been largely shaped by domestic imperatives. Stakeholders subscribe to a sustainable energy future as one defined by strategies that address the goals of efficiency and cost competitiveness, universal access, energy security, and environmental accountability of energy systems. These strategies would also include greater role for decentralized energy systems based on renewable energy sources, generally improving energy efficiency with a focus on demand side management and the establishment of efficient structures by optimally using the natural resources.

The United Nations Framework Convention on Climate Change (UNFCCC) noted that the largest share of historical and current global emissions of Greenhouse Gases has originated in developed countries, that per capita emissions in developing countries are still relatively low and that the share of global emissions originating in developing countries will grow to meet their social and development needs. The power sector, transportation sector, and building sector are the major emitters of carbon dioxide in the atmosphere. Mitigation of climate change through various energy efficiency measures and using clean coal technologies are viable options to reduce emissions. However thermal power generation using fossil fuels has many environmental implications, such as increase in local pollution of NOx(nitrogen oxides), Sox(sulphur oxides) and SPM(suspended particulate matter). This has a considerable impact on the health of the people and on other resources. Similarly, this also increases global warming and has a global impact because of the long atmospheric lifetime of carbon dioxide. At present, the power sector has a very large share in the total energy consumption and has almost a 50 per cent contribution to the total carbon emissions. The results of studies have shown that emission reduction imposes costs in terms of lower GDP and higher poverty. Taking this into account, carbon-neutral technologies for generation of power using various renewable sources should be taken up. The need of the hour is to build effective partnership amongst all the stakeholders and their capacities without which nothing could be realized in the promotion of renewable energy usage to mitigate the climate change in support of sustainable power development. Let us maximally utilize the tools of Clean Development Mechanism (CDM) and Emission Trading as evolved from the Kyoto Protocol under the aegis of UNFCCC. And let us resolve to extract at least 10 per cent of the power from renewables.

The above observations would remain incomplete if I fail to cite here an interesting development that took place in this direction just this week in Fiji. It is reported that Pacific Hydro, through its Fijian joint venture Sustainable Energy Limited (SEL), has negotiated the world’s first bank-intermediated Carbon credit transaction involving the sale of CER (Certified Emission Reduction) credits. 6.5 MW Wainikasou hydro plant, and the 3 MW Vaturu project, being completed soon, have resulted in these CERs in Fiji for SEL (jointly owned by Pacific Hydro and the Fiji Electricity Authority). All the CERs will be sold to ABN AMRO over the next seven years. ABN AMRO has in turn contracted to sell all these CERs to a trading company. Although trading of Carbon credits have been seen on the European market since January this year, however, this transaction means the initiatives developed through the Kyoto Protocol are now a business reality, while serving the purpose of mitigating the climate change. Kyoto initiatives that were proposals and theories are now also commercial opportunities and economic realities.

Under the Kyoto Protocol, Carbon trading is permitted to enable industries in developed countries to off-set their emissions of Carbon dioxide by investing in alternative and cleaner energy projects, referred to as Clean Development Mechanism (CDM) projects, in developing countries. SEL is in the final stage of CDM registration for its two hydro projects, which is a condition for the sale of CERs. 

The burgeoning Carbon credit market has seen the yearly volume of transaction grow strongly since 2001, from nearly 13 million tonnes to more than 100 million tonnes of Carbon di-oxide equivalent by the end of 2004. Demand for Carbon trades is now likely to grow as more energy providers adopt CER trading as an integral part of their emission reduction compliance management. It is in this context that other developing countries like India should not lag behind in grabbing the opportunity and working within the scope of Climate Change, CDM & Sustainable Power Development as far as practicable. This will definitely ensure a healthy bottomline in our economy, while contributing to climate change mitigation both locally as well as globally.  

(K. K. Roy Chowdhury, Consultant -Energy, ORF. Views are personal)

India’s Reforms in the Hydrocarbon Sector


What Has Been Accomplished?

What Remains to be Done? -VII


……continued from issue 49


1991-1995: Reforms Gather Momentum




The era of economic reforms in the country began with the adoption of more liberal economic policies following a balance of payments crisis in 1991.  However for the upstream oil and gas sector in India, the process had begun in the 1970s although not in an orderly fashion. 


In 1974, the government offered 7 million acres of Bay of Bengal to Natamas Carlsburg Co. of USA for offshore exploration and production. A contract was entered into between the company and Oil and Natural Gas Commission (ONGC) for the same. Another contract between Readings and Bates, USA and ONGC for (Gujarat) was signed for the Kutch basin.


It was agreed that initially the foreign company would have 61 per cent share in the joint venture and the price of the crude if produced would be based on Indonesian and Persian Gulf crude. 40 per cent of the total crude was to go to the US Company as ‘Cost Oil’ towards recovery of their expenses. 65 per cent of the remaining crude would be ONGCs share and rest 35 per cent would go to the US Company. This agreement did not produce any successful results. 


From 1980, the government started to offer sedimentary basins in a systematic way through bidding rounds to foreign oil companies for exploration and production. The two rounds between 1980 and 1986 were not very successful.  In the second round 8 medium and 33 small fields were offered. 


The third round in 1986 contained more attractive terms such as exemption from royalty payment and minimum expenditure commitment. However ONGC & OIL were given the option to take 40 per cent stake in the joint venture, if the fields were found viable.  Some foreign companies participated in this round but there was no committed exploration or break through discovery. 


Till 1990, the government had invited four rounds of bidding for blocks.  One noticeable feature of the fourth round was that Indian private companies were allowed to participate along with foreign partners for the first time. However no major field was discovered by these partnerships.  It was a period of rising demand amidst falling crude prices and India increased its domestic crude production by over-exploiting producing fields.  While domestic crude production increased steeply from 10.51 MMTPA in 1980-81 to 34.00 MMTPA in 1989-90, over-exploitation led to production falling to 26.92 MMTPA in 1992-93.


From 1991, the process of opening up the oil & gas sector gathered momentum and was more stream-lined in approach.  ‘Structural Adjustment Process’ was how the policy makers preferred to call it but the general idea was to deregulate and de-license the petroleum sector with partial disinvestments of government equity in Public Sector Undertakings


In 1992, the Government offered a more attractive option to foreign and private companies.  However this culminated in generating controversy concerning the Production Sharing Agreements (PSAs) offered in 1994. In that year ONGC was re-organized as a limited Company under the Company's Act, 1956. From then on, Oil and Natural Gas Corporation Ltd (ONGCL), was governed by the Indian Company Act rather than Acts of the Parliament and operated with greater autonomy. 


As the government was set on a course to increase the involvement of the private sector, there was a need to establish an independent regulatory body that could effectively supervise the activities of all the companies - private and public. Thus the Directorate General of Hydrocarbon (DGH) was set up in April 1993. 


From 1991 to 1996, the government had held five rounds (fourth, fifth, sixth, seventh and eighths) of bidding for exploration acreages offering as many as 126 blocks, ranging in sizes from a few hundred square kilometres to over 50,000 sq kilometres. 11 contracts were awarded. Some of the important companies which have been either awarded contracts or participated in the exploration round were: Shell, Occidental, Amoco, and Enron. 




Till 1993 imports of LPG, Kerosene and LSHS were canalised and marketing of these products was done by the public sector oil marketing companies.  As a step towards liberalisation, the government de-canalised imports of LPG, Kerosene and LSHS in April 1993.  Further owing to the large gap between supply and demand, the government also allowed importing and marketing of LPG and Kerosene by interested parties under parallel marketing scheme by amending the relevant control orders in August/September 1993.  On the same lines, the government also allowed imports of LSHS by interested parties for captive consumption. 


Parallel marketing scheme of LPG and Kerosene witnessed the participation of multinational companies as well as domestic private sector companies.  Lubricants marketing which was completely deregulated by the government in 1993 also attracted the participation of leading multinationals.  Both these efforts resulted in the establishment of extensive infrastructure for the distribution of petroleum products. 


What was achieved?


From 1970’s the need for private sector involvement in the upstream sector to increase domestic reserves was felt and to that end some effort was made.  However, most of these efforts did not improve the crude and gas reserve status of India. In fact both reserves and production recorded a decline between 1990 and 1995.  However the policy shift towards increased private sector participation was commendable.


Though policy on this matter was consistent in direction it was not very consistent in approach.  The decision to involve the private sector in developing discovered fields was a good one but the contract terms signalled desperation on the part of the government and was well capitalised by the private sector. 


Contracts for 5 medium sized and 13 small- sized fields were awarded. Enron Oil and Gas Company, Reliance Industries Ltd, Command Petroleum, Videocon Petroleum Ltd, Ravva Oil Pte Ltd were among companies that participated.  ONGCL and OIL's share in those JVs were limited to 40 per cent. The estimated oil and gas production from these fields were 360 billion barrels and 50 billion cubic meters respectively.


The most promising fields of Panna, Mukta and Tapti which had been successfully explored earlier by ONGC were offered to Enron-Reliance consortium without reimbursing the past exploration expenses to ONGC. More over the government agreed to purchase the produced crude from the consortium at the international price plus a premium of $4 per barrel as the sulphur content was low.




Team Energy ORF

……to be continued


Kazakhstan Diversifies Oil Exports

(Gerai Dadashev - RIA Novosti)


Kazakhstan intends to join the widely advertised "oil pipeline of the century" project - Baku-Tbilisi-Ceyhan (a Turkish oil terminal in the Mediterranean). The relevant agreement was discussed during the third meeting of the Azeri-Kazakh intergovernmental commission on economic cooperation in Baku. The draft of the agreement is among the series of documents planned to be signed during the upcoming visit of Kazakh President Nursultan Nazarbayev to Azerbaijan on May 24.   "We have been working on the draft of the agreement for several days. It is basically ready and initialed. I believe its signing will be an event of historic importance," First Vice-Premier of the Azeri Cabinet Abbas Abbasov, who serves as co-chairman of the committee on the Azeri side.  He said, more than 3 million tons of Kazakh oil was exported through the Azeri territory in 2004. The expanding transport potential of the two countries will ensure the future increase in the volume of transported goods, including the transportation of Kazakh oil along the Aktau (an oil terminal on the east coast of the Caspian Sea) - Baku route.   In his turn, the co-chairman of the committee on the Kazakh side, Minister of Energy and Mineral Resources of Kazakhstan Vladimir Shkolnik announced "all technical issues of coordination regarding the joining of the above-mentioned transport corridor and the Kazakh sub-system Aktau-Baku had been almost solved." During the meeting, the participants also discussed the issues of the development of bilateral economic ties. In particular, Vladimir Shkolnik suggested that the Azeri side should participate in the joint monitoring of ecological and seismic situation in the Caspian Sea region, currently conducted by the Kazakh side. During the upcoming visit of Nazarbayev to Azerbaijan, the sides are expected to sign a series of documents on cooperation in the economic sphere and a political declaration of both presidents. The major problem facing the major opponent of the new oil pipeline project - the Oil Pipeline Consortium (OPC) where Russia plays the leading role - is the insufficient capacity of the existing pipeline. At present, the OPC transports about 28 million tons of oil to the Russian town of Novorossiisk on the Black Sea annually. However, the profitability of its pipeline under current tariffs ($27 per ton) is very low. While waiting for the expansion of the OPC pipeline capacity, the major OPC client, the American Tengizchevroil whose production volume is expected to increase drastically by 2006 (by 10-15 million tons annually) has practically re-oriented its future supplies on the Baku-Tbilisi-Ceyhan oil pipeline, which is almost ready to become operational (all works are completed by 95 per cent).

What You See Is Not All There Is


(Excerpts from the weekly Oil Market Report, DoE, USA)

Without a “Deep Throat” to guide them, oil market analysts focus on the limited information that is available. Chief among these sources are the weekly data on oil supply and demand for the United States, the world’s largest oil consumer, issued by the Energy Information Administration and the American Petroleum Institute. That information, along with weekly data on Japanese oil inventories, imports, exports, and refinery operations prepared by the Petroleum Association of Japan, provides invaluable insight into global oil markets, but it by no means provides a complete view of the overall story. Important data for other parts of the world are simply unavailable in a timely fashion. While many oil market analysts may have their own sources of additional fragmentary information, there is no overarching data source that can be regularly relied upon. What oil market analysts and the public are left with are analyses based on two-month-old or older data, plus anecdotal evidence gleaned from various reports. For a product like oil that is traded on a global basis and closely linked to world economic activity, the lack of timely data for much of the world makes it difficult to fully assess current market conditions.

There is much information that oil analysts and traders would like to have available on a timelier basis. How much oil is OPEC actually currently producing? How much oil did China consume last week? How much oil did Russia actually produce and export last month? What is current refinery utilization in Europe or Asia? These are examples of the important questions that can not be answered definitively with available data. Even U.S. refinery information is sometimes hard to gather. When a refinery or refinery unit is shut down, the refinery is often careful about the information it releases so as not to put their company at an economic disadvantage to their competitors. While electric utilities must fill out a federal form when they experience a power system incident or disturbance, U.S. refineries are only required to report their total refinery input and output on a weekly basis. Outages are heard about primarily via press reports. Information on OPEC production or current Chinese oil consumption is even less clear. Without information on China’s inventory behavior, estimates of current oil demand in China are, at best, educated guesses.

One cannot but wonder how much different oil markets and prices would be if weekly oil data were available from every part of the world.






The Aiyar formula of ‘TAPping’ global gas

June 07, 2005. Even before India joins the Turkmenistan-Afghanistan-Pakistan or the TAP pipeline project, petroleum minister Mani Shankar Aiyar has thought of making TAP a TAPI (by including India) and turning TAPI to UTAPI (by adding Uzbekistan). The minister does not want to stop here. He wants to make UTAPI a KUTAPI (by linking this with Khazakistan) and finally calling it RKUTAPI by including Russia also. Time alone will tell whether this can be done or not but with Pakistan inviting India to join the next steering committee meeting on TAP pipeline project, it certainly is being viewed as a step in the right direction.

Both Turkmenistan and Afghanistan have huge established gas reserves and the feasibility study on TAP proposes a 168 km long pipeline with a capacity of 90 million metric standard cubic meters per day (mmscmd) at an estimated cost of $3.3 billion. Considering the huge availability of gas in Central Asia, Uzbekistan being one such source, Mr Aiyar feels all these gas centers can be linked to Asia through a pipeline network. Uzbekistan has around 60 trillion cubic feet of gas reserves and occupies a 15th place in global gas reserves. Given the huge requirement of gas in India, both TAP as well as the $4 billion plus Iran-India-Pakistan gas pipeline project as also the Myanmar-Bangladesh project are being given top priority.

At present, India’s demand for gas is 170 mmscmd against availability, which even after including the present LNG imports at both Dahej and Hazira, of only 85 mmscmd, almost half the demand. On a 7.5-8% projected growth rate, it is expected that by 2025, India’s demand for natural gas would touch 400 mmscmd. Even after taking into account the world’s largest discovery of 2002, which was made by Reliance in the Bay of Bengal, India’s domestic production would still be much less at 200 mmscmd by 2025.

New Rajasthan wells uneconomic 

June 4, 2005. UK oil and gas exploration firm Cairn Energy said recent wells drilled in Rajasthan did not encounter commercial hydrocarbons, but added it remained “delighted” with its progress so far this year. Recent wells N-C-8, N-V-6 and N-V-7 have not encountered commercial hydrocarbons but provide useful low-cost information to delineate the extent of the play in the Northern Area. The firm added that production for the first five months of 2005 was 27,633 barrels of oil equivalent per day (boe/d) net to Cairn, compared to an average rate of 22,789 boe/d in 2004. In the latest Indian exploration licensing round, Cairn has submitted nine bids for onshore and offshore blocks including three in Rajasthan.

Videocon eyes oil fields in Sudan, Yemen

June 3, 2005. Videocon Industries is eyeing oil fields in Sudan and Yemen and is mulling investing in the development and exploration of oil in India and in the Middle East. Videocon is on the verge of closing talks with the Sudanese government on taking upto 74 per cent stake in an offshore oil block that may see an investment of US$100 mn (Rs 4.35 bn). The group is also closing in on an onland block in Yemen. In India, Videocon has bid for three out of the 20 blocks auctioned under fifth round of new exploration licensing policy (NELP).

Videocon has tied up with Perth-based Oilex and India Hydrocarbon to bid for one block each in Assam-Arakan, Bay of Bengal and Maharashtra. Oilex, listed on Australian bourses, has bid for the first time in an exploration round in India. Recently, Videocon had signed an MoU with the government of Khartoum province in Sudan for investing and developing oil projects there.

Aggressive bids by RIL, ONGC in NELP V

May 31, 2005. The auction of 20 blocks under the fifth round of new exploration licensing policy (NELP-V) has attracted bids from as many as 48 oil and gas companies, including 27 foreign majors like British Petroleum, Petronas and ENI of Italy. NTPC made its debut amongst Indian bidders which included Reliance Industries and ONGC. Reliance bid for a maximum number of 12 blocks, while ONGC put in bids for 10 blocks. In all, a record number of 69 bids were received. With this India has arrived on the hydrocarbon map with a bang. The average number of bids received per block was the highest at 3.45 in Nelp V. In the previous four rounds, it was 0.94 (Nelp I), 1.76 (Nelp II), 1.93 (Nelp III) and 1.83 (Nelp IV).

The largest number of foreign bidders in earlier rounds was under Nelp I at 10. Also 21 domestic companies in this round is a record, the previous figure being nine during Nelp I. 6 blocks received more than 5 bids each. NTPC is the new entrant among the regular PSUs. It has bid for two blocks in consortium with Geopetrol International Inc, Monaco and Canoro Resources Ltd of Canada. The government would announce the awards by July 31. The production sharing contracts with successful companies are expected to be signed by September 30.


Kerosene shortage in central India

June 2, 2005. Madhya Pradesh has become the first casualty of kerosene supply shortages under the public distribution system (PDS). If the government does not step in, the shortage could spill over to adjoining Maharashtra. The state had received complaints from many districts in the last fortnight that dealers of oil companies were not supplying kerosene stating that stocks were either exhausted or were not replenished in adequate quantities. The ministry had allocated 122,152 metric tonne of kerosene for PDS during the first quarter of this fiscal, of which nearly 60 per cent is supplied by dealers to the state government’s nominees every month. However, during May only 40 per cent of the monthly allocation of 52,320 kilolitres was supplied. With inadequate availability of kerosene from Reliance Industries and Mangalore Refinery, Indian Oil Corporation (IOC) has already sounded alarm bell in the petroleum ministry of the likely dry-outs at various locations. In yet another missive, IOC has cautioned that allocation of PDS kerosene for June will not be met if Reliance and MRPL were not instructed to produce sufficient quantities. According to IOC, both Reliance and MRPL were refusing to supply the “promised quantities” of kerosene for PDS sales. Reliance, however, expressed willingness to supply kerosene at “economic prices”. The Petroleum Planning and Analysis Cell was asked to quickly address the issue by discussing it with refiners and then asking them to produce at least 10 per cent more kerosene than last year. If no consensus emerges, the ministry will be left with little choice but initiate a legal action and issuing an ordinance under the Essential Commodities Act. The order will direct public and private refiners to produce sufficient quantities of kerosene to meet the PDS demand. Reduction in supplies has already forced IOC to undertake emergency imports at a much higher price. The requirement of kerosene for the current financial year is over 10 million tonnes. The corporation imported 85,000 metric tonne of kerosene during April and has lined up imports of 200,000 metric tonne during May to meet the domestic demand. As per a legal opinion, the government has the right to issue orders to both public as well as private companies compelling them to maintain a required level of production and supply of PDS kerosene.

Transportation / Trade

Shell arm for bigger trucks to transport fuel

June 07, 2005. Shell India Marketing, which runs the retail operations of Shell, has sought the central government’s permission to increase the carrying capacity of its trucks to economise the operating cost of running its petrol pumps. The company had asked the government for permission to transport petrol and diesel in trucks with a carrying capacity of 40 kilolitres, twice the size of the permissible capacity of 20 kilolitres. The company is awaiting the government’s response. Shell India Marketing faces a challenging situation in controlling operating costs because it transports petrol and diesel from Mangalore Refinery and Petrochemicals (MRPL) to Bangalore and Chennai by road to service its three retail outlets in India, two in Bangalore and one in Chennai. 

Shipping Corp bags IOC crude transport bid

June 6, 2005. The Shipping Corporation of India (SCI) has emerged as the successful bidder for transportation of 9 million tonne crude oil for Indian Oil Corporation (IOC). SCI emerged as the lowest bidder in the race in which there were two other participants — GE Shipping and Mercator Lines. IOC wants to transport 9 million tones of crude oil from the Persian Gulf to the Indian coast for a year starting July 2005. It had specified that it needed only very large crude carriers (VLCCs) which only these three companies own. SCI took delivery of a VLCC earlier this year and it was likely to receive another such vessel in August-end. At present, four Indian shipping companies own VLCCs. SCI, Essar Shipping and Mercator Lines acquired one VLCC each last year while GE Shipping owns two, one of which was acquired in 2003-04 and other during the 2004-05. IOC was recently granted the freedom to make its own shipping arrangements instead of going through Transchart, the shipping ministry’s chartering wing but the company was bound by the Directorate General of Shipping guidelines under which it would need to give preference to Indian vessels in any kind of competitive bidding. IOC was given permission on the condition that imports would be on free-on-board basis. This means that IOC cannot ask the exporter to make shipping arrangements. In case of a global tender, IOC is required to give a chance to the most competitive Indian bidder to match the price quoted by a foreign company quoting the lowest price.

Gail plans to expand pipeline network

June 6, 2005. With new independent power producers (IPPs) in a quandary over fuel supply linkages, Gail (India) Ltd has sewn up plans to expand its pipeline infrastructure to support gas-fired plants in Andhra Pradesh. There has been change in the Government policy in terms of gas supply to new projects. Earlier, supply to new IPPs meant that the gas should be supplied through a new pipeline. But with certain changes made lately, Gail can now offer them gas providing last mile linkages from existing pipeline. Though there would be pipeline, it does not mean that Gail would be able to meet the entire requirements of new power projects. These projects would be able to test run their plants and provided additional gas. They could get fuel from alternative sources. It is likely that these plants would be able to achieve commercial production by either December 2005 or early 2006. Gail expects to meet their entire requirements by middle of 2006 from new sources of ONGC and Ravva oil fields.

Till pipeline arrives, Iran gas to come as LNG 

June 4, 2005. India plans to commence import of 5 mn tonnes per annum (mtpa) of LNG from Iran from 2009. A sales and purchase agreement (SPA) for 5 mtpa LNG will be signed between India and Iran during the visit of Indian petroleum minister, Mani Shankar Aiyar to Tehran. Discussions will also take place on connecting the LNG purchase by India to the offering of exploration blocks by Iran. The 5mtpa of LNG imports is linked to India getting a 20 per cent participating interest in the Yadavaran field which has a estimated production profile of 60,000 barrels per day. The possibility of expanding the SPA for 5 mtpa to 7.5 mtpa will also be discussed between the two sides. This additional 2.5 mtpa LNG will be linked to India getting a 100 per cent operational interest in the Juffeyr oil field in Iran, which has a estimated output of 30,000 bpd. Indo-Iran joint working group will also discuss issues reviewing the progress on award of a block in South Pars field to IOC-Petropars, another block in South Pars to ONGC and IOC-EIL participation in the revamp of refineries in Tehran and Tabriz.

Policy / Performance

IOC way of sharing revenue loss

June 07, 2005. Indian Oil Corporation (IOC), country’s largest downstream player in the petroleum sector, has asked the government to direct upstream companies including ONGC to share 50 per cent of the revenue loss in the April-June quarter. Upstream companies had shared one-third of the revenue loss in 2004-05 (April-March). If revenue loss is not shared, IOC, Hindustan Petroleum Corporation and Bharat Petroleum Corporation will end first quarter with a net loss. Revenue loss has arisen as state-run oil marketing companies have been selling petrol, diesel, kerosene and cooking gas below international prices. 

Plan panel for oil price correction

June 7, 2005. The mid-term appraisal (MTA) of the Tenth Five-Year plan says the time is right for adjusting petrol and diesel prices because the overall price level is under control.  Liberal pricing for oil products was never really implemented and has come under strain with the hardening of international oil prices. On economic grounds, a significant adjustment in LPG prices and some adjustments in kerosene prices need to be done. The underpricing of these items is now very high.  It also makes a strong case for reviewing the current system of determining refinery gate prices. These prices include import parity prices plus various cost margins. The MTA, however, recommends freeing prices at the refinery gate and at the retail end.

After the administered price mechanism was dismantled, refineries began selling products at the import parity price. But, at the retail end, the government has not allowed public sector companies to revise the prices. This has resulted in a situation where marketing of products has become unattractive, and stand-alone marketing companies like IBP Ltd are incurring losses. The government is mulling over a proposal to introduce some form of export parity pricing, since it is lower than the import parity price because of duty drawbacks and other concessions available on exports.  For the upstream sector, the MTA says foreign companies should be allowed to bid for abandoned or marginal fields under production-sharing agreements similar to NELP. This will bring in cost-effective technologies not currently available in India.

Diesel cheap to Pakistan  

June 7, 2005. The Indian Oil Corporation (IOC) has offered to supply 3,25,000 tonne of diesel to Pakistan’s State Oil Company (PSO) at a rate which will be cheaper than imports from Kuwait. Pakistan, which imports 2.5 million tonne of diesel from Kuwait per annum, does not have any refinery in Lahore-Multan area A detailed presentation on diesel exports as also export of petrochemicals like purified terephthalic acid (PTA) used for polyester fiber and linear alkyl benzene (LAB) used for detergents. Sources said PSO had asked Indian Oil to submit a quote for diesel last December. Refusing to give details on the rate quoted by IOC, an official said India was willing to sell the product below the current landed price, irrespective of the production cost incurred by Indian refineries.

Indo-Pak joint group for pipeline project

June 7, 2005.In a significant development, India and Pakistan have decided to tie up the loose ends for the $4-billion plus Iran-Pakistan-India natural gas pipeline project by 2005. As a first step, the two countries have decided to set up a joint working group (JWG). The JWG is expected to meet next month to look into technical, commercial and legal aspects of the project. In a presentation on Pakistan’s gas economy, Sui Southern Gas Company said Pakistan’s unmet domestic demand of natural gas by 2025 would be more than India’s by 100 million metric standard cubic meters of gas per day (mmscmd). India is expecting a shortage of 200 mmscmd as against its requirement of 400 mmscmd.

GAIL for market determined rates

June 6, 2005. GAIL India has sought a market determined tariff fixation system for natural gas transmission through the grid pipelines. The recently announced gas pricing order, the Government has approved a market related pricing mechanism for gas sold to customers other than those in the power, fertilisers and transportation sectors, the Agra-Ferozabad and small consumers. The principle of adopting a market determined price of gas is a paradigm shift in the domestic gas industry. In line with this principle, it would be appropriate to consider adoption of a market determined transmission tariff methodology for transportation of gas also.

The statement points out that the tariff for the existing gas grid pipeline in the country has already been fixed by the Tariff commission. Taking the initiative to understand global practices in tariff fixation methodology, GAIL conducted a study of international practices adopted by developed gas economies such as the US and UK. The findings were shared with the Commission to aid in deciding and recommending a robust tariff methodology for grid pipelines in the country the statement points out. The practice followed by the Planning Commission has also been shared with the Tariff Commission.

Roadmap for Iran gas pipeline project 

June 6, 2005. India has proposed a detailed roadmap to Pakistan for executing the multi-billion dollar natural gas pipeline project from Iran to India via Pakistan. The roadmap envisages conducting a fresh detailed feasibility study, involving national oil companies of the three participating countries (Iran, Pakistan and India) along with one or two international companies (perhaps BHP Billton). The national oil company of Iran, NIGEC, will take the lead role in inviting companies to prepare the detailed feasibility report (DFR), which would make recommendations on the technical, financial/commercial and legal aspects of the project, including the likely cost of gas for Pakistan and India.

The DFR would cost roughly US$4-5 mn (Rs 174-218 mn) and would take anywhere between 6-18 months for completion. From the Indian side, Indian Oil and GAIL India Ltd will be nominated to join NIGEC for this DFR. This report will also establish the key commercial principles and framework for the project to address security of supply, price, end-consumers profile and transaction structure. If found feasible by the respective governments, the gas sales purchase agreement will be executed along with the transit agreement between the project company and the transit country. This will then be followed by the financial closure of the project.

Pipeline extension to China 

June 6, 2005. Petroleum minister Mani Shankar Aiyar will visit China in November and may discuss the possibility of extending the proposed Iran-Pakistan-India pipeline to south of China. In addition, India may also explore the option of buying natural gas from Qatar through the undersea pipeline enroute Pakistan. At present, India is importing 5 mtpa liquefied natural gas (LNG) from Qatar at Dahej through ships.

Talk with Azerbaijan on oil exploration 

June 4, 2005. Petroleum and natural gas minister Mani Shankar Aiyar will hold discussions on possible cooperation between India and Azerbaijan in oil exploration in both sea and land during his visit to the country next week. Azerbaijan’s ambassador to India Tamer Lan Karayev said his country was interested in seeking India’s cooperation in oil exploration. He said that Mr Aiyar will meet their energy minister to hold discussions on various oil exploration projects in their country.

ONGC to bear part burden

June 2, 2005. The government is planning a moderate hike of Rs 1-1.50 per litre in petrol and diesel prices under a new scheme in which ONGC will be asked to bear a part of the burden arising from increase in duties and spurt in global oil prices. Upstream firms like ONGC and Oil India Ltd, which till last fiscal were partly subsidising LPG and kerosene, would be asked to dole out an additional Rs 2,000 crore (Rs 20 bn) on subsidising petrol and diesel. ONGC in 2004-05 paid retailing firms IOC, BPCL and HPCL about Rs 4,100 crore (Rs 41 bn) to partly cover for the losses on LPG and kerosene sale. Gas firm Gail (India) Ltd shelved out Rs 1,138 crore (Rs 11.38 bn) but will not be asked to bear the subsidy on petrol and diesel. 

India-Russia-China pact to boost ties 

June 2, 2004. India, Russia and China decided to cooperate in combating terrorism and other new threats (like energy security) and agreed on the "objective requirement" for comprehensive UN reforms covering expansion of the Security Council. Experts and officials from the three countries would meet to examine concrete possibilities in transport, agriculture, energy, high technologies and other sectors and make specific recommendations. The ministers stressed on the important role of direct business-to-business contacts.

India to host oil sellers meet

June 1, 2005. In an effort to form an Asian oil community, India will host a buyer-seller meet where Central Asian oil producers and four largest Asian consumers will be present in October. Russia, Kazakhstan and Turkmenistan have agreed to attend the meeting. China, Japan and South Korea, apart from hosts India, will represent buyers at the meeting. In January, Petroleum Minister Mr Mani Shankar Aiyar had managed to get petroleum ministers from Saudi Arabia, Iran, Kuwait, the United Arab Emirates, Oman, Qatar, China, Japan and South Korea together to give shape to a new regional forum.

This forum aims at strengthening energy ties for ensuring stable energy supplies at reasonable prices. Now Aiyar wants the Caspian basin producers to come on board the pan-Asia community. The meeting will set the agenda for an Asian oil market by evolving a crude marker that is produced and traded in the region, instead of the current practice of oil being sold to Asians at a discount or premium at the benchmark price of North American or the European market. The October meeting will focus on building energy security through joint investments - consumers making upstream investments in producing countries and suppliers making downstream investments in refining gas in buyer nations.

Revival of southern gas grid 

May 31, 2005. Excise duty exemption to support tsunami relief works, interlinking of rivers, southern regional hydro power projects and a gas grid topped Tamil Nadu chief minister J Jayalalithaa’s agenda. Expressing happiness over the progress made in the past one year in reaching an agreement on implementing the Sivasamudram-Hogenekkal hydroelectric project in phase-I, she said, the concept of a southern gas grid should be revived and as Chennai is a centrally located region, a large LNG terminal should be planned at Ennore Port and this can be the hub of the southern gas grid.



Karnataka overdrawing from hydel stations

June 6, 2005. Faced with the increase in power demand and shortage of coal supplies, the State has begun overdrawing from its hydel generating stations. The State's hydel units were generating close to 35 million units per day. This was despite the fact that inflows into main hydel reservoirs, the Sharavathy Valley and the Supa dam, have reached critical storage levels. Reservoir levels in the Sharavathy Valley, the mainstay of Karnataka's hydel generation, were only 11 per cent of its gross capacity.  Currently the storage in the reservoir is 16,751 million cubic feet (mcft). Full storage capacity of the Sharavathy Valley is 1.51 lakh mcft (1,51,749 mcft). In fact, since the beginning of this month, the storage capacity was 14.8 per cent.

The major reasons for the over-drawal were shortfall in coal supplies to the 1,470-MW Raichur Thermal Power Station (RTPS). The daily coal linkage to RTPS is 25,300 tonnes. The actual stockyard level was equivalent to less than five days of generation at plant load factor of 80 per cent. Faced with this kind of a situation, the 210-MW unit seven of RTPS was shut down in a bid to conserve coal supplies. The resultant shortfall in power supply was partly substituted by increased generation from the hydel stations. This was based on the assumption that monsoons would replenish any depletion in reservoir levels.

NTPC in talks for hydel projects

June 6, 2005. National Thermal Power Corporation Ltd (NTPC) is diversifying into coal mining and consolidating its hydel power generation. It is holding parleys with several State Governments for new hydel projects. NTPC have taken a decision to address hydel power generation given the pressure on fossil fuels. The company expects to take up projects with total capacity of about 5,000 MW during the Tenth Plan period. Negotiations are on with Himachal Pradesh, Andhra Pradesh and Karnataka Governments.

Reliance Energy bags captive power

June 2, 2005. The Maharashtra Industrial Development Corporation (MIDC) has mandated Reliance Energy Ltd to set up a 100 MW group captive power plants in the industrial estates of Thane-Belapur and Butibori-Hingna to cater to units suffering from erratic and poor quality power supply. The projects would be operational by the second half of 2006. The two projects, with an aggregate cost outlay of Rs 700 crore (Rs 7 billion), are part of MIDC’S initiative to tide over frequent power cuts by the Maharashtra State Electricity Board (MSEB) in industrial areas. The provisions of the electricity act, 2003 allow industries to set up captive power plants for generating power for their own use. MIDC decided to take advantage of this provision by facilitating setting up gccps at estates in neighbouring Thane district and the other near Nagpur.

The plants would be run with active participation of the consumers and a special purpose vehicle would be floated for this. Consumers would hold 26 per cent equity while the balance would be held by Reliance Energy, which would be free to raise additional capital from the market. These gcpps would ensure stability of power and also reduce the load on MSEB’s supply grid. The Thane-Belapur plants would tap gas from the Dahej-Uran gas pipeline put up by GAIL (India) Ltd, while the Butibori plant would be a coal-based power plant. The contract would be for 30 years and the power tariff would remain stable over a mutually agreed timeframe, which would be reviewed later. MIDC is also planning to facilitate various other group captive plants in industrial areas such as Kagal, Badlapur, Ranjangaon, Tarapur, Hingawadi and Airoli in the near future. 

Transmission/ Distribution / Trade

TAPP synchronised to western grid

June 5, 2005. India's largest Pressurised Heavy Water nuclear power plant, the Unit 4 of  Tarapur Atomic Power Project (TAPP), has been synchronised to the western grid. Presently, the unit is in the process of conducting mandatory tests and during the testing period electricity termed as 'infirm power' would flow into the grid. Based on the results of these tests and after AERBs authorisation, the power of the unit will be increased in the Unit 4 to full power. In the course of performing these tests the power from the unit would need to be varied or the unit may even be required to be shut down. Once the station is declared commercial, it will produce electricity in a consistent manner and supply to the grid. Tarapur unit 4 is expected to start delivering electricity to the grid in a commercial manner from August 2005, eight months ahead of schedule. Tapp 4 is India's 15th nuclear power reactor and it has been designed and constructed by Nuclear Power Corporation of India Ltd, a public sector undertaking of Department of Atomic Energy. NPCIL is already operating 14 nuclear power plants aggregating 2770 MW. It is also constructing eight nuclear power plants in various states.

PTC inks power deal with MPEB

June 3, 2005. Power trading firm PTC India Ltd has signed a deal with Madhya Pradesh Electricity Board for sale of power from the first phase of 300 MW Lanco Amarkantak thermal plant. The 25-year Power Sale Agreement between PTC and MPEB is the first such agreement between a state power utility and an intermediary in the country. The agreement with MPEB covers back-to-back sale of the entire generation output from the 300 MW Phase-1 of the project. The project is located in Chhattisgarh. PTC is also considering signing similar agreements with other projects for a total capacity of nearly 14,000 MW out of which about 2500 MW would be signed in the near term. These agreements could be for full capacity or only part of the capacity, while leaving the remaining capacity to participate in the short-term market.

Policy / Performance

Doubts on MSEB absorbing Dhabol power

June 6, 2005. Even when plans are afoot to restart the Dabhol Power Project, doubts are being raised whether the state power utility, MSEB, alone can absorb 2,100 MW of power. The state government and the Centre have been working towards restarting the 2,100 MW Dabhol power plant at the earliest. To begin with, it aims to resume power generation from Phase I, which is about 728 MW. The work on the latter half would start subsequently. The power starved government is committed to buy all the DPC (Dabhol Power company) generated power. The government estimates, Phase I alone would impose an additional burden of Rs 116 crore (Rs 1.16 billion) a month on MSEB.

Direct approval for power projects

June 5, 2005. Power Ministry will soon approach the cabinet with a proposal that allows all projects below Rs 15 bn (US$ 344 mn) automatic approval. Under the new mechanism, an empowered committee would be set up once the cabinet gives its nod to the proposal. The committee, headed by the power secretary, would scrutinise all power projects with a cap of 15 bn and the final approval would be given by the Power Minister. At present, all projects have to get techno-economic clearances and environmental approvals after which they are recommended to Public Investment Board and then the cabinet. The whole process usually takes more than a year and adds to the cost and time over-runs. The executing agency starts the bidding process only after receiving all clearances. The need for such a mechanism arose after repeated requests from public sector companies, notably National Hydroelectric Power Corporation and Power Grid Corporation to grant early approvals. Once approved, the new system would help avoid time and cost over-runs in the crucial infrastructure sector as the projects will not need to approach the Public Investment Board and Cabinet for approval. As per the proposal, the committee would scrutinise all such proposals and approve them. The Empowered Committee would have representatives from Finance Ministry and Ministry of Environment and Forests and other concerned ministries. The committee of secretaries has already approved the proposal, sources said, adding more than 50 per cent of the projects would fall under the automatic route including generation, transmission and distribution projects.

Stanford Univ to study AP power sector

June 3, 2005. US-based Stanford University has shown interest in studying Andhra Pradesh’s power sector experience. Representatives from the state will attend a three-day international convention at the university on ‘Adopting latest technologies - experiences in power sector’. AP Transco managing director Rachel Chatterjee will make a detailed presentation on issues like reduction of transmission and distribution losses, waiver of Rs 1,254 crore (Rs 12.54 billion) electricity dues of farmers, adoption of high voltage distribution system to reduce losses and successful implementation of the scheme of free power to eligible farmers. Recently, the Planning Commission had also shown interest in studying the performance of the AP power sector, which achieved a CRISIL rating at the national level. The AP government has invested more than Rs 1,625 crore (Rs 16.25 billion) in the last financial year. 

Maharashtra for ‘carbon’ tax

June 3, 2005. The Forest Ministry of Maharashtra is considering the introduction of a tax on vehicles and industrial units, based on their carbon emissions. The money collected, thus, would be used for implementing afforestation projects in the State. Towards this, relevant changes could be made in Motor Vehicles Act and Environment Acts applicable to industries. The suggestion is still at a preliminary stage but it will be taken up before the State Cabinet. In countries like Australia, a vehicle owner, after plying his vehicle for 25,000 km, has to plant five trees or pay a tax equivalent to the money needed for the upkeep of five trees. I think, this idea needs to be given more thought. The idea to introduce tax on carbon emission is based on the guidelines of the Kyoto protocol to the United Nations Framework Convention on Climate Change of 1997. The State also wants to introduce the system of trading in carbon futures under the same protocol. It is well known that carbon emission causes environmental damage and climatic changes. Trees with large leaves are the best natural absorbers of carbon emission and Kyoto protocol aims to cash in on this process. The process of carbon credits is being introduced in Maharashtra soon, which will enhance forest cover in the State significantly. The process of claiming carbon credits has already started in Orissa and Karnataka. For every tonne of environmental carbon processed the tree owner could claim up to US$5 of carbon credit. Some overseas companies have offered to undertake afforestation programmes in the State, for which they will claim carbon credits. Maharashtra aims to increase its present forest cover of 21 per cent to 33 per cent by 2012. Maharashtra Tree Carbon Ltd, a public undertaking, will be established for implementing the system. Experts in this trade have been appointed for advising the State Government.

Competitive bidding for captive coal blocks likely 

June 2, 2005. The coal ministry has finalised a Cabinet note on allocating 15 captive coal blocks through competitive bidding besides incorporating adequate safeguards to ensure the interest of the end user. The move is aimed at encouraging the power and steel majors to bid for the blocks, which have proven coal reserves and extract coal to meet their requirements. Both the power and steel sectors have been voicing their grievances on shortage of coal and so they should utilise the opportunity to replenish their coal reserves. Besides, the note also contains policy directive on bidding along with clear-cut guidelines to prevent any confusion. The allottees would not be allowed to keep the blocks unutilised to gain advantage in case of price fluctuations. So far the CIL identified 143 coal blocks for captive mining. However, what was depressing was that while 50 such blocks have been allotted for captive mining purposes, production has begun only in five blocks. The ministry’s move could render coal costlier for captive mine owners, but if blocks were allocated through auction, none would blame the government for doing the same as the process would be regarded as a transparant one. Moreover, as the allottees would be required to furnish bank guarantees, which are to be encashed in the event of non-development of mines within a reasonable period of time, only serious players would expectedly participate in competitive bidding. It may be recalled that five years ago the government introduced the Coal Mines (Nationalisation) Amendment Bill to allow the private sector mine and market coal alongside public undertakings. But this could not be made into an Act in the face of opposition from trade unions. The coal ministry’s draft Coal Vision 2025 document for mitigation of the developing crisis says the country will require a minimum investment of Rs 2,85,000 crore (Rs 2.85 trillion) to lift Indian coal production from the present around 360 million tonne to 1,061 mt by 2025.

India for cheap nuclear energy

June 2, 2005. Grappling with a growing power deficit, India is looking at tapping cost-effective nuclear energy by commissioning nine nuclear reactors in what is being termed the world's largest such project. India has set a target of 20,000 MW nuclear power generation by 2020, as against the current capacity of 2,700 MW power from 14 nuclear power reactors. India is at present simultaneously working to set up nine nuclear power plants that will create 4,000 MW new capacity by 2007-08. We will be investing around Rs 200 billion (US$4.5 billion) in these projects. Against the average cost of Rs 2.30 per unit of power through other sources, nuclear power could cost as low as Rs 1 or Rs 2 with an upper end of Rs 2.60 in places like Rajasthan. Currently, the share of nuclear power in the total energy mix stands at only about three percent with thermal power accounting for the largest share in the total generation capacity of 116,245 MW.

Among the nine projects being commissioned simultaneously, two are coming up at Tarapur in Maharashtra, each with a 540 MW capacity. These two projects are expected to be up and running by the end of this fiscal.The remaining projects that are under way include three reactors in Tamil Nadu (two at Koodangulam and one at Kalpakkam), two in Rajasthan (at Rawatbhatta) and two more in Karnataka (at Kaiga). All plans are being implemented on commercial terms with 30 per cent equity from the government. The remaining 70 per cent is being raised from the market as borrowings and from internal resources. During the current fiscal, NPCIL is planning Rs 450 billion (US$10.31 billion) capital expenditure. While the government is contributing Rs 120 billion (US$ 2.75 billion) as equity, the rest of the money is being raised from internal resources and market borrowings. In the medium term, the company plans to invest another Rs.140 billion (US$3.2 billion) to reach a total generation capacity of 10,000 MW by 2012. By then, India's total electricity requirement is estimated to touch 200,000 MW.

India's power usage 1/3 of China

June 1, 2005. Despite growing demand for power in the country, the electricity consumption per capita of India stood at a low 490 Kwh as compared to 1,500 Kwh in China. According to a comparative study on the power sector of the two countries by J P Morgan, What immediately stands out is that the GDP per capita and consumption per capita of more progressive states of India is comparable to the lesser developed provinces of China. The two countries, however, had a similarity in that the progress in China and India had been unequal across states with some better off than others. One of the major reasons for India's low per capita power usage was the increasing share of the less energy intensive services sector in overall GDP and lesser consumption by the industrial sector as compared to China. The study said that the per capita electricity consumption is very different (in the two countries), primarily driven by the different demand structures.

While in India, the services sector currently contributed over 50 percent, in case of China it was only 35 per cent. In India, with services expected to contribute more and more in the GDP, being a less energy-intensive sector, we should see GDP growing as fast as consumption demand, it said. While the power consumption by the industry sector was markedly different, China's per capita residential demand for power was more in line with those in India, it said. Among the Indian states, the states with low GDP per capita and low power consumption per capita include Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh and the north eastern states. On the other hand, the higher GDP per capita states like Punjab, Haryana, the western and southern states had higher power consumption per capita, the study said.

Plan panel for power policy review

June 1, 2005. The power ministry should list the elements of the Electricity Act that are to be reviewed, says the mid-term appraisal of the Tenth Five-Year Plan, adding that this will help remove uncertainty among potential investors. These should address the concerns raised without undermining investor confidence or weakening the drive to create a competitive and efficient power sector, says the final version of the document. The Left parties had raised certain issues, pertaining to elimination of cross subsidies, unbundling of state electricity boards and differentiation between urban and rural areas, and called for a review of the Act. The appraisal also calls for a tariff policy, after full consultations with the Planning Commission and the finance ministry, by June 2005. After this, the Central Electricity Regulatory Commission should be asked to undertake a review of the tariff orders issued by various state electricity regulatory commissions (SERCs) to determine the extent to which they are in conformity with the tariff policy, it says. The tariff policy will establish the basic framework within which investors will work. Among other things, it will have to address critical issues such as the manner of setting the cross subsidy surcharge. 

The mid-term appraisal also says that the tariff policy should require SERCs to allow open access in a phased manner instead of waiting for the outer limit of January 2009 set for the entire country. Open access provision will enable bulk consumers to access power from generating companies on payment of a wheeling charge and cross subsidy surcharge to be set by the regulator. This is expected to encourage private investment in power generation. The Electricity Act requires open access to be introduced for all users of 1 MW and above, no later than January 2009. SERCs are required to issue regulations by June 2005. Drawing up a six-month plan for the power sector, the appraisal says that the situation in the sector is worrisome, primarily because of the very slow pace of progress in the distribution segment. Without effective reforms in this area, the sector will not be financially viable and will be unable to achieve the required levels of public investment or to attract private investment, it says. The Accelerated Power Development and Reform Programme should be restructured to link it to incentives for improving distribution, especially reduction in transmission and distribution losses, the appraisal says.

Pvt Miners can sell coal to Coal India

June 1, 2005. Private coal block owners will now be able to sell coal mined from captive blocks to Coal India Ltd (CIL), and the ministry of coal has recently formed a committee that would set the price for such sale. This will allow private parties to initiate mining activities on captive coal block even if projects for which these blocks were allotted did not come onstream. Ministry has recently formed a committee comprising of representatives from the industry as well as Coal India that would set the price of coal mined from captive blocks in conjunction with all concerned parties. The Committee’s primary task would be to determine the administered price of coal produced from captive mines on a case to case basis. Factors like grade of the coal mined as well as its price in the international market would be considered. This was worked out as a stop gap arrangement to meet demand for coal which has witnessed consumption far outpace domestic production in the last couple of years due to increased demand from the power sector, cement and steel.

National response plan for reducing energy intensity

June 1, 2005. The Minister for Petroleum and Natural Gas, Mr Mani Shankar Aiyar, has pledged to formulate a national response plan for reducing the unsustainably high energy intensity in the domestic economy and achieving energy-efficiency through a public-private-panchayat-partnership. The Minister said that environmental-friendly and energy-efficient technologies must be brought to the doorstep of the domestic farmers and micro units. There is no better institution in the country to deliver such technologies to the end-user than the three million elected representatives at the village, intermediate and district levels, he said. The Secretary, Ministry of Petroleum and Natural Gas, Mr S.C. Tripathi, stressed on the need to establish comprehensive technological base line data on specific energy consumption in each sector.

Bengal to bear power subsidy burden

June 1, 2005. West Bengal announced incentives for power-intensive industries in the State. Following a directive by the Electricity Regulatory Commission to the effect that State-owned power utilities cannot offer discounts to industrial units on power consumed by the latter, the Government has agreed to bear the burden of subsidies that had been promised to these industries. The Government has agreed to bear the burden of power subsidies and reimburse to the industries amounts due to them for the residual period that would otherwise have been applicable to them as per agreements made earlier. The Government's cumulative financial outflow on this score would be around Rs 50 crore (Rs 500 million). Besides, incentives of a maximum of 25 per cent of the net energy consumed would be made available for three years and five years to new power-intensive industries that are set up in Class B and Class C districts of the State, respectively.

Energy security vision for power sector 

June 1, 2005. The government will prepare an energy security vision document to address issues and challenges likely to be faced by India on energy front over the next 20 years, petroleum minister Mani Shankar Aiyar said. He said the Hydrocarbon vision 2025, a policy document forecasting issues till 2025, was also being updated to make it more tuned to changed scenario.

Power ministry to surpass 10th Plan target

May 31, 2005. Claiming an excellent performance in 2004-05, power minister PM Sayeed said 10th Plan targets in the power sector would be achieved. Private investment in the sector was at an all-time high during the year. We have performed more than 100 per cent of our targets in power generation along with 100 per cent realisation of bills by the central power utilities for the first time in 2004-05, he told. As many as 11 private power projects with 4,000 MW capacity have attained financial closure in 2004-05 with an investment of Rs 15,000 crore (Rs 150 billion), he said. Projects with capacity of 9,500 MW from private developers, including 3,000 MW project of Reliance Energy at Dadri, are most likely to attain financial closure this year, he said. Sayeed said the most worrisome issue of the "losses" of state electricity boards (SEBs) had been looked into systematically and these have been brought down by 30 per cent to Rs 21,000 crore (Rs 210 billion) in 2004-05, from Rs 30,000 crore (Rs 300 billion) in 2000-01. The NDA government had estimated the losses to be in the range of Rs 50,000 crore (Rs 500 billion).

MSEB unbundling: four firms formed 

May 31, 2005. The successor companies of Maharashtra State Electricity Board (MSEB) during its unbundling have been formed under the Company’s Act 1956. These companies are: MSEB Holding Company Ltd, Maharashtra State Power Generation Company Ltd, Maharashtra State Transmission Company Ltd and Maharashtra State Distribution Company Ltd. These companies, following the cabinet decision taken on May 20, would become functional before June 5. The state cabinet would approve minutes for the MSEB’s unbundling into four state-owned companies and also give its nod for the transfer scheme. The government would issue notification relating to the formation of a state transmission utility. Also the tariff hike is quite imminent after MSEB’s successor companies become functional. It would be done only after the Maharashtra Electricity Regulatory Commission gave its approval. Against MSEB’s proposal of 10 per cent tariff hike in 2003, MERC had granted a paltry hike of 1.10 per cent. The state would have a power deficit of 800 MW following the closure of power generation from Koyana hydro unit.

Maharashtra to have special police stations to check power theft

May 31, 2005. Maharashtra will soon have six exclusive police stations and two courts to control rampant power theft in the Stae. The police personnel will work in tandem with the Maharashtra State Electricity Board (MSEB). The modalities of establishing the police stations, expected to have zone-wise jurisdiction, are being worked out. These stations will be of the same size as the standard police stations in the State. At present, state’s transmission and distribution (T&D) losses are 35 per cent, of which 12 per cent are due to power thefts. Even if it manage to reduce these losses by one per cent, MSEB stands to gain Rs 160 crore (Rs 1.6 billion). The MSEB has been trying to control increasing incidence of power thefts.




Indonesia May output at 34-yr low 

June 07, 2005. Indonesia's crude oil production fell to the lowest level in 34 years in May to 9,36,000 barrels per day (bpd), from 9,53,000 bpd a month earlier, due to repairs on several wells. Indonesia, Asia Pacific's only Opec member, would find it difficult to add production and would not achieve the output targeted in its budget this year due to ageing fields.  It is predicted that no new fields would come onstream this year. Indonesia targeted crude oil and condensate production at 1.125 mn bpd in 2005. Indonesia may be able to increase production in June if the work on several wells is concluded. Crude production may stay at around 9,45,000 bpd this year. Indonesia's condensate output, exempted from Opec quotas, rose to 1,21,700 bpd last month from 1,10,000 bpd in April.

Oil sands production achievement

June 6, 2005. Shell Canada, the Athabasca Oil Sands Project achieved its first 100 mn barrels of bitumen production after just over two years of operations. The Athabasca Oil Sands Project has been in operation since April 2003 and reached cumulative production of 100 mn barrels on June 4, 2005. This first 100 mn barrels of production from the oil sands is very significant for Shell and the Athabasca Oil Sands Project . This has firmly established them as a proven oil sands operator, with the experience and confidence to grow this business to more than 500,000 barrels per day.

Indonesia’s output from new fields

June 5, 2005. Indonesia, OPEC's only Asian member, is confident it will reverse a gradual slide in oil output soon with a string of new fields delivering more than 350,000 barrels per day. Energy Minister Purnomo Yusgiantoro sketched out six major fields that are expected to help the country remain a net exporter of crude, although he gave no start-up dates. If these fields can meet their targets, Indonesia will increase its oil production in the near future. Indonesia, the second biggest oil producer in Asia, pumps less than 1 mn bpd of crude, about 3 percent of OPEC's total and well below the country's formal ceiling of 1.425 mn bpd. It is considering whether to end its membership in OPEC after it became a net importer of crude several months last year due falling domestic output and rising demand. The two biggest new fields are in East Java, including 170,000 bpd from the Cepu development and 50,000 bpd from the Jeruk discovery. The others were West Seno, with 27,000 bpd; Belanak at 50,000 bpd; an unnamed field run by PetroChina at 25,000 bpd; an unspecified field from state oil firm Pertamina at 31,000 bpd.

OPEC unable to increase output: Iran

June 2, 2005. Iran’s OPEC governor said that the Organization of Petroleum Exporting Countries (OPEC) is unable to increase supply of crude oil at present, stressing that increased supply would prove to be uneconomical for member-states. If OPEC increases supply, the price gap between its crude and other oil producing countries’ light crude would widen further. Iran believes that more care has to be exercised in increasing supply of crude by OPEC. An increase in supply would lead to a rise in heavy crude inventories and a decline in OPEC member-states’ oil revenues in the long-run.

Northern Sun hits discovery well

June 1, 2005. Northern Sun Exploration Company Inc discovered a new gas pool at the Company's property near Lavoy, Alberta. The Company's 100% working interest exploration test well was drilled to a depth of 650 meters encountering gas in six separate and distinct zones. The well was successfully completed and flow-tested for a seven day period, and results indicate that the well should initially produce at a combined rate of 2 mn cubic feet per day (333 barrels of oil equivalent per day). A pipeline tie-in to a third party facility is currently being surveyed and regulatory approvals should be in place for gas sales by the end of June 2005.

Indonesian firm eyes gas supply

June 1, 2005.Indonesia's gas distribution company, PT Perusahaan Gas Negara Tbk is seeking natural gas supply from U.S. firm Amerada Hess. It has a gas reserve of about 300 bn cubic feet and could supply PGN at between 80 to 100 mn cubic feet of gas per day for 10 years. The gas would be used to supply PGN customers in East Java. The gas will come from Ujung Pangkah field in offshore East Java. Amerada Hess would spend $500 mn to develop the Pangkah natural gas field in Indonesia.

Sinopec to buy Canada oil sands stake

May 31, 2005.Oil giant Sinopec Group has agreed to buy a 40 percent stake in an oil sands project in Canada for C$105 mn ($83 mn), the second such deal involving Chinese firms in just over a month. Sinopec is buying the interest in Canada's C$4.5 bn Northern Lights oil sands project from privately held Synenco Energy Inc. Last month, CNOOC Ltd., China's largest offshore oil producer, acquired an oil sands stake in Canada for $122 mn. State-run Chinese companies have spent bns of dollars on oil assets overseas to boost their businesses and secure supplies for a country that imports 40 percent of its needs. Northern Lights is an oil sands mining, bitumen extraction and upgrading project in northeastern Alberta, designed to produce more than 100,000 barrels a day. Calgary-based Synenco, owned by about 250 individual investors, hopes to file regulatory applications for the project in the next six to 12 months, with the aim of starting production by 2010.

Nigeria-Sao Tome award five offshore blocks

May 31, 2005. Sao Tome, Nigeria awarded five offshore oil exploration licences after a turbulent five-month delay plagued by disagreements between the countries and accusations of corruption. A consortium of ERHC Energy and Devon won a 65 percent stake and the operatorship of block two, while the operatorship of block four, the other most highly contested block, was won by a consortium of ERHC Energy and Noble.

Repsol’s global investment plan

May 31, 2005. Spanish-Argentine oil and energy company Repsol YPF will spend more than 21.1 bn euros ($26.1 bn) as part of a five-year global investment plan, with particular emphasis on exploration and production. The company said some 11.4 bn euros ($14.1 bn) will go specifically to exploration and production under its 2005-2009 strategic plan. It has also earmarked 5.7 bn euros ($7 bn) for refining and marketing, and 2.3 bn euros ($2.8 bn) for its natural gas operations. Repsol expects to reduce costs in the next five years by 1.2 bn euros ($1.48 bn). It also will divest more than 1.5 bn euros ($1.85 bn) in non-strategic assets. In all, Repsol expects its total oil and gas production to grow by 13.6 percent to 1.312 mn barrels a day by the end of 2009.


Mexico eyes new refinery

June 2, 2005.Mexico needs to spend $19 bn over eight years on a new oil refinery and infrastructure upgrades to stop the gap between refining capacity and gasoline demand widening further. State-owned Pemex which has to import a quarter of the nation's gasoline needs from the United States will build at least one new refinery to ramp up capacity as gasoline demand grows 3 percent a year on average. Gasoline demand so far in 2005 is up 5 percent from 2004. A new refinery could cost $2 bn to $3 bn, and the rest of the investment would go on refinery upgrades and upping quality. But even with this ambitious expansion plan, there is no date in sight for Mexico, the world's No.5 oil producer by volume, to be self-sufficient in gasoline or an exporter of fuel and distilled products. A new refinery, along with extra capacity being added to an existing refinery, could lift Mexico's gasoline output toward 700,000 bpd by 2013, but by then demand could have risen to 800,000 bpd, keeping the supply gap constant.

1.42mn ton fuel oil for Asia

June 2, 2005. About 1.42 mn tonnes of fuel oil cargoes from the West have been fixed to land in Asia in July and more are expected by the end of the fixing calendar for the month. The July total looks set to surpass June's volume of around 2.1 mn tonnes, already the highest level for the year. The East-West arbitrage window is open. Supplies in Europe are rising due to the traditional increase in flows from Russia during the summer months and with the refineries coming back full steam after their turnarounds. After the last three months of very tight supplies, it would actually be a relief to have ample barrels. Ending up with an oversupply situation very rapidly would very much depend on Chinese demand.

Transportation / Trade

Toho Gas to buy Sakhalin project LNG

June 7, 2005. Major gas utility Toho Gas Co. concluded an agreement to buy up to 500,000 tons of liquefied natural gas a year from the operator of the Sakhalin 2 gas and oil project. The deal covers 24 years beginning in 2009. Toho Gas struck the accord with Sakhalin Energy Investment Co., the operator of the project off the island of Sakhalin in the Russian Far East. Trading house Mitsui & Co. has a stake in the operator. Toho Gas wants to secure a stable LNG supply from the potentially large gas deposits in the offshore fields of Sakhalin. The contract with Sakhalin Energy Investment calls for annual purchases of 60,000 tons during the initial four-year period starting in April 2009 and goes up to 500,000 tons during the subsequent 20-year period.  Although the utility had struck a basic accord in March 2004 to start procuring LNG in April 2010, it has decided to bring forward the start of LNG imports by one year because of growing LNG demand in the Nagoya metropolitan area and surrounding districts.

U.S. needs LNG terminals

June 6, 2005. The United States will likely need just up to eight of the 54 LNG import terminals proposed to supply the world's biggest energy consumer. Most people recognise that the market could not and would not support them all. The United States will probably see six to eight terminals in total. Australian companies BHP Billiton Plc., the world's biggest miner, and Woodside Petroleum Ltd. each have proposals for liquefied natural gas (LNG) terminals to be built offshore California where Desmond said 40 percent of the state's energy mix came from natural gas. Australia was seeking to secure up to a third of the California gas market by 2025 by exporting to proposed offshore terminals in the United States and Mexico in gas sales potentially worth A$50 bn. Perth-based Woodside has agreed to jointly develop a LNG import terminal off the California coast, in which it would provide technical expertise, in exchange for preferential access rights to the terminal.

ConocoPhillips’ LNG exports drive

June 6, 2005. ConocoPhillips, the third-largest U.S. oil producer, plans further drilling this month in the Timor Sea to find more natural gas for processing through a $1 bn plant it's building in northern Australia. ConocoPhillips's liquefied natural gas plant at Darwin, Australia's second LNG project, will produce about 3.5 mn tons a year for delivery from March to Japanese buyers. The plant has a contract to supply LNG to Tokyo Electric Power Co. and Tokyo Gas Co., Japan's biggest power and gas utilities. ConocoPhillips may ship Timor Sea gas to an import terminal it plans to build with Mitsubishi Corp. in Long Beach, California, to meet rising U.S. demand. The Texas-based company said last month it aims to expand the Darwin plant by 2010 and is studying options to increase gas supply. The proposed $450 mn Long Beach project is one of more than a dozen LNG terminals proposed by companies seeking to profit from imported fuel as North American gas output fails to keep pace with consumption. The U.S. Energy Department estimates gas imports will quadruple by 2010 as domestic fuel output lags demand.

China opens up refined oil trade

June 3, 2005. As China's finished oil market, i.e., the market for refined oil products such as gasoline, kerosene and diesel fuel - opens up, an increasing number of domestic and foreign traders are expected to tap the lucrative trade, but players still remain cautious in making bold expansions. The companies' caution, say industry experts, comes from the uncertainty over which restrictions to the finished oil market the government will eliminate during the opening process. Complying with its WTO commitments, China loosened the certification restrictions for dealing in finished oil last November. In further efforts to introduce more market mechanisms to its oil sector, China will clear up additional limits on the wholesale market for gasoline, diesel and fuel oil by the end of 2006.

Pemex considers deal to import LNG

June 3, 2005.Mexican state oil monopoly Pemex is considering a plan with private investors to import and produce liquefied natural gas to make up for the country's shortage. The minister met with businessmen in the northern city of Monterrey to discuss a possible $5 bn plan to increase the supply of liquefied natural gas (LNG), which is increasingly being used to generate electricity. Mexico is a major petroleum exporter but lacks investment funds to exploit natural gas reserves fast enough to meet demand. Two LNG plants are already being built in Mexico, one by Shell in Altamira on the East coast and one by Sempra Energy at Ensenada on the Pacific coast. At least one other project is being considered. Companies in the northern region of Monterrey consume about 600 mn cubic feet of LNG a day. Rising prices for LNG have made industrial companies that depend on the fuel in Mexico less competitive.

Enbridge buys U.S. oil pipeline

June 1, 2005. Enbridge Inc. has acquired full control over a U.S. pipeline that will allow Canadian crude oil to reach refineries in Oklahoma, Kansas and Texas for the first time. Enbridge, best known as operator of the main pipeline for Canadian oil shipments to the U.S., paid BP Plc $12.4 mn for the 10 percent of the Spearhead line that it did not already own. It bought the majority stake in 2003 for $112 mn, with the aim of reversing the direction of the flow, allowing the crude to move 650 miles (1,046 km) to Cushing, Oklahoma, from its mainline in Chicago. Enbridge expects the reversal, which will add key new markets for burgeoning Canadian oil sands production, will be completed in the first quarter of next year. Initial capacity will be 125,000 barrels a day, and the line can be expanded to move 160,000 barrels a day

Santos’ deal with Indonesian utility

May 31, 2005. Australia's third largest oil and gas producer, Santos Ltd., has signed a $700 mn Australian dollar (US$529 mn; euro430 mn) deal to sell gas to an Indonesian natural gas utility. Santos will sell the entire reserves from the Maleo gas field in Indonesia to P.T. The field has about 240 bn cubic feet of gas reserves. The companies expect to start work shortly on the production facilities with a budget of about US$75 mn (euro61 mn). The Maleo field is located about 140 kilometers (87 miles) east of the East Java city of Surabaya. It was discovered in June 2002.

Policy / Performance

Iran pipeline viable and safe

June 07, 2005. BHP Billiton, the world's largest diversified resources company, has said that there are sufficient features in the pre-feasibility study of the $4.16-bn Iran-Pakistan-India natural gas pipeline to ensure safety. The BHP report, on the project here, states that the pipeline would be buried to a depth varying between 0.9 metres and 1.5 metres and would use fiber-optic cable sensing systems with a back-up satellite link for monitoring. Maintenance units will be located every 150 km with pipe sections ready to install if there is a disruption to the 2600-km pipeline, 760-km of which is to pass through Pakistan. Any disruption to the pipeline can be rectified within two to three days. The 'line pack' capacity will be about three days which can take care of disruptions as well as the wide fluctuations in Pakistan's gas demand. BHP has recommended that both India and Pakistan build gas storage facilities that could take care of a fortnight's demand. The 11 to 12 compressor stations will not be underground but would be manned full time. If one compressor station is disabled, it can be bypassed and supplies maintained at 80 per cent of capacity. The security of the pipeline and compressor stations will be the responsibility of the operator consortium. There is provision against Pakistan disrupting supplies to India.  The point on the pipeline from where Pakistan will offtake the gas will be only 60 km from the Indian border and there will be no valve further down the line till after it enters Indian territory. BHP Billiton considered India's request to examine the possibility of the pipeline running close to the coast through Pakistan but rejected it as the terrain is rocky, swampy and in a high seismic belt. Since every additional kilometre would increase the cost by $1 mn, the alignment was kept as straight as possible from start to finish, except in Pakistan where it deviates northwards to avoid a highly developed agricultural belt. The study has established that the project, through which India hopes to import up to 90 mn standard cubic meters gas per day, is technically and commercially viable. 

EU to urge OPEC to pump more

June 6, 2005. The European Union will urge the Organization of Petroleum Exporting Countries (OPEC) next week to boost production to prevent oil prices from doing more harm to Europe’s economy. The EU will also seek to help European energy companies such as London-based BP Plc raise investments in oil-producing nations when the 25-member bloc meets OPEC for the first time at a June 9 gathering in Brussels. It’s important OPEC is ready to increase their supply to the market and increase their production capacity and have reasonable spare capacity.

Europe wants to deepen ties with foreign suppliers after a price rise to more than $50 a barrel prompted economists to cut growth forecasts for the region. Western investment could help OPEC members, who supply about 40% of the world’s oil and are producing close to capacity. Imports account for about four-fifths of EU oil consumption. Crude-oil production by OPEC fell in May for the first time since January, a Bloomberg survey showed. Average daily output last month fell 10,000 barrels to 29.92m barrels, according to the survey of oil producers, companies and analysts.  OPEC ministers will gather in Vienna on June 15 to discuss output levels. In practice, most members except Saudi Arabia, the world’s biggest oil producer, are already pumping about as much as they can.

Rise in Oman petroleum products

June 6, 2005. Production of petroleum products in Oman registered a marginal increase of 1.3 percent in the first three months of 2005, with crude oil refined at Oman Refinery Company (ORC) touching 7.64 mn barrels compared to 7.53 mn barrels in the same period last year. Production of excellent grade petrol declined by 14.2 percent, totaling 963,000 barrels compared to 1.2 mn barrels during the same period last year while ordinary grade petrol increased by 18.35 per cent, totaling 3.4 mn barrels compared to 2.9 mn barrels. Jet fuel production witnessed a rise of 53.1 per cent from 3.04 mn barrels in 2004 to 4.66 mn barrels this year. Production of diesel marginally decreased by 0.9 percent, touching 1.69 mn barrels compared to 1.70 mn barrels last year

New natural gas fuel planned

June 6, 2005. In the often snow-covered landscape of northern Japan, French oil giant Total is working with a Japanese consortium with a goal of mass producing by 2010 a new eco-friendly fuel derived from natural gas. At Kushiro on Japan's northernmost island of Hokkaido, a factory is serving as a testbed for the production of the "clean" gas dimethylether, or DME. When it is at normal temperature and pressure, DME could pass for water, but vaporizes quickly. Spread on the ground, it evaporates within seconds.

But when it is set alight, the flame is blue and it becomes a gas one which emits no sulphur oxides. It is produced through renewable resources or fossil fuels, it releases little greenhouse gas and is easily transportable as a liquid.  Total's first ambition is to build a commercial factory that can produce 6,000 tonnes a day, expected to be in Qatar, by 2010. A minimum of 3,000 to 6,000 tonnes a day must be produced to make DME profitable. The liquefication of natural gas is an extremely capital-intensive activity which can only be justified for major fields.

Japanese firm awarded by Sudan

June 5, 2005. Sudan has awarded a Japanese company a US$100 mn (euro81 mn) contract to develop oil and gas fields, with the profits going toward humanitarian aid in Africa. Tokyo-based Systems International Group(SIG), will develop oil fields in a part of eastern Sudan believed to have large oil reserves. The contract is believed to be worth about US$100 mn (euro81 mn) over about 25 years. The company will invest about US$8 mn (euro6.5 mn) by August to set up a joint venture with a party in Sudan. It wasn't clear who the Sudanese partner would be. SIG was established in April by a Japanese nongovernment organization called Reliance, which has provided humanitarian support in Sudan since the 1990s. Profits from the oil venture will be used for humanitarian aid in Africa.

Russia plans risk-based taxes 

June 4, 2005. The gradual depletion of the country’s well-developed mineral and hydrocarbon deposits is a source of serious concern for the Russia authorities. No private oil companies want to finance survey work on new fields. So, in a bid to interest investors, the government has decided to make even the least profitable fields more attractive. A concept of differentiating the severance tax rates is now under consideration. The rate is currently the same for everyone, regardless of production costs and the quality of the raw materials, which means that the companies with the best fields have an obvious competitive advantage. On the contrary, those firms working on deposits where oil is difficult to extract have to cope with unequal conditions.

E.ON poised to enter Iran gas market

June 1, 2005.E.ON aims to be the first German energy company to enter the Iranian gas market. Iran is attractive both for pipeline gas and as a source of liquefied natural gas, adding that entry into Iran could make E.ON less dependent on Russian gas deliveries.



China pledges bns for nuclear power

June 7, 2005. China, the world's second largest energy consumer after the United States, will spend some 400 bn yuan (US$48.33 bn) on building new nuclear power plants by 2020. The energy-hungry country intends to increase the amount of installed nuclear power capacity from the current 16 gigawatts to 40 gigawatts, or 4 per cent of the total installed capacity within 15 years. Nuclear power generation is expected to triple to reach 60 gigawatts by that time, or 6 per cent of the country's total electricity output from the current 2.3 per cent. These greenhouse gas-free power plants will be focused in the populous south and east provinces such as Fujian and Zhejiang, which are short on the hydrocarbons that fuel power plants in the north and west. Nuclear power plant generation has so far reached 13 per cent of the total power generation mix in Zhejiang and Guangdong provinces. The country currently has 19 reactors in operation, under construction or with the central government's final approval.

World’s record dispatch

June 6, 2005. PJM Interconnection, the electricity grid operator for 51 mn people in 13 states and the District of Columbia, the first time anywhere in the world,  a centrally dispatched grid, had successfully met a demand for more than 100,000 MW of electricity. Usage on the PJM grid peaked at approximately 114,800 MW.

Power plants in operation in Wisconsin

June 6, 2005.Two power plants have begun operation in Wisconsin that will add a total of 855  MW of electrical power when fully operational. In the Green Bay area, the $240 mn, 305-MW initial phase of Calpine Corp.'s Fox Energy Center in Kaukauna is now in operation, while the 300 MW natural gas-fired plant owned by Wisconsin Power & Light started up last week in Sheyboygan Falls. Calpine Corp. is an energy merchant based in San Jose, Calif. The Kaukauna plant is providing about 150 MW of energy to Wisconsin Public Service Corp. The plant is being operated by Calpine under a 10-year purchased-power agreement with Wisconsin Public Service Corp., the regulated utility subsidiary of WPS Resources Corp., Green Bay. The remaining power is to be sold on the wholesale market. In addition, Calpine will provide another 235 MW to Wisconsin Public Service, a unit of WPS Resources Corp. beginning in June 2006.

Transmission / Distribution / Trade

Huaneng Power signs long-term coal supply

June 5, 2005. Huaneng Power International, Inc. signed a long-term coal supply agreement with Pingdingshan Coal (Group) Limited Liability Company ("Pingdingshan Coal Group") on June 3, 2005 in Beijing for a term from 2005 to 2009. Pursuant to the agreement, Pingdingshan Coal Group will supply the Company with thermal coal amounting to 0.5 mn tonnes, 2 mn tonnes and 2 mn tonnes, respectively for each of three years from 2005 to 2007.  After 2007, the supply shall, taking into account the then operation of the Company, increase so as to ensure to meet the need of the Company's power plants. After amicable discussion under the principle of taking up mutual responsibilities vis-à-vis market risks, both parties have agreed on the annual coal prices and the relevant price adjustment mechanisms thereof. The Company develops, constructs, operates and manages large power plants in China nationwide, with a total generation capacity of 21,418 MW on an equity basis.

LE 263 mn contracts for Cairo power plant

June 3, 2005. The Egyptian government and a Dutch firm signed a LE 263 mn contract for providing the Northern Cairo power plant with boilers. The annual output of the giant plant is 1,500 MW and it will be built and equipped at a total cost of LE 677 bn. The first phase of  the Northern Cairo power plant, which is steam-operated would be completed by the end of  this month.

Entergy to buy power from Calpine

June 2, 2005. Entergy Corp. agreed to buy up to 485 MW of electricity from Calpine Corp.'s Carville Energy Center in Louisiana for up to one year starting on July 1.  The Louisiana Public Service Commission must approve the power purchase agreement. New Orleans-based energy company Entergy will supply the power to its customers in the Gulf States region, including parishes in south Louisiana from Baton Rouge to Lake Charles. Prior to this agreement, Calpine's Calpine Energy Services LP trading and risk management subsidiary sold the power from Carville into the market. The 500 MW Carville power station is a natural gas-fired, combined cycle, cogeneration power plant. In addition to the electricity, it can export 750,000 pounds of steam per hour for industrial production. Calpine sells the majority of Carville's steam output to Cos-Mar Inc. under a long-term contract.

Policy / Performance

China’s plan to save energy

June 7, 2005. Energy-hungry Beijing has officially kicked off a conservation-minded programme to build a recycling economy. It will try and use the fewest possible resources to gain a sustainable development. The municipal government released a long-term guideline on energy conservation that runs up to 2010, which is the first of its kind in Beijing, a city where 94 per cent of energy is imported from other provinces and regions. To meet these goals, the city will not only work out relevant regulations and educate the public to save energy, but also set up special supervision institutions and subsidize the research and development of energy-saving devices and techniques.  The city would build three recycled water plants, four garbage disposal factories and four special power plants that use rubbish as fuel this year.

Energy cooperation pact

June 6, 2005. Brazil, Chile, Argentina and Uruguay are set to sign a memorandum of intent to study building a regional energy loop in which natural gas from Peru's large Camisea field would flow via pipelines to Chile and from there to neighboring countries. Chile's intention is that part of the gas coming from a new pipeline from Peru to northern Chile to be finished in 2007 would be channeled through already existing pipelines to Argentina, and from there to Brazil and Uruguay. Peru is still in negotiations with Chile over a possible pipeline from Camisea to northern Chile, but has promised to supply Chile with between 30 and 35 mn cubic meters of gas a day. That is a far greater volume of gas than had been mentioned so far in relation to current negotiations on a possible pipeline deal between Peru and Chile. Chile and Argentina insist on an involvement of Petrobras in the gas pipeline loop, and also wish the parliaments of all the involved countries to ratify a possible energy cooperation deal.

Asia to remain strong for power

June 5, 2005. French power major Alstom sees Asia as a strong market for power equipment, a position that will continue in the coming years. “Geographically, the market has moved to China with two strong years. Alstom expects Asia to represent 60-70 per cent of the market.  The company, which views India as a business hub, is open to supply large power plants to domestic utilities, both in the public and private sector. A global equipment manufacturer in the power and rail transport infrastructure, Alstom is already supplying 1,000 MW generation plants to utilities in China. Though Alstom makes turbines for nuclear power stations in several countries, including Finland and France, the company is yet to receive any orders from India for supply of equipment in this sector.

Alstom’s total turnover in India amounts to over 150 mn euros. Tracing its roots in the country back to 1910, the company has units in nine locations across India. In its global financial results for 2004-05 announced in Paris on 31 May, the company said it was on the road to recovery with its net losses cut in half to 0.86 mn euros from 1.84 bn euros in 2003-04 in spite of significant non-recurring charges.

Power plants for Toronto area

June 1, 2005. Ontario selected Eastern Power Ltd. to build two 280 MW natural gas-fired power plants in the greater Toronto area. Toronto-based Eastern Power will build the Greenfield North Power Project and Greenfield South Power Project in Mississauga about 15 miles southwest of Toronto along Lake Ontario. Eastern Power will sell the power generated at the plants into the province's wholesale power market operated by the Independent Electricity System Operator under a contract with the Ontario Power Authority. The two plants are in addition to the four projects the Ministry announced on April 13 as part of the government's request for proposals for 2,500 MW of new generation capacity and demand reduction projects. The new capacity will replace part of the province's 6,400 MW of coal-fired generation, which the government wants to retire by the end of 2007. The government expects to announce a timetable for the coal plant closures sometime this month.

Renewable Energy Trends


Reva-IOC H-cars

June 6, 2005. Reva Electric Car Company (RECC) and Indian Oil Corporation (IOC) have signed a statement of intent to develop two fuel cell hydrogen vehicles. This is part of a pilot project initiated by IOC towards development of hydrogen economy in India. The total cost of the project is around Rs 15 crore (Rs 150 million) and is jointly funded by RECC and IOC. The first prototype from Reva should be out in 6-8 months and the second one within the next 12-18 months. RECC will use its electric vehicle technology to develop fuel cell hydrogen cars with fuel cell stacks to be supplied by Hydrogenics Corporation of Canada. In the first phase, two fuel cell hydrogen-powered cars will be developed, after which a fleet of 10-20 cars will be rolled out at other heritage destinations. IOC will provide the infrastructure needed to supply and stock hydrogen as well as its vehicle testing facilities at its R&D centre in Faridabad. Fuel cell systems offer a promising technology of the future with advantages that include zero emissions, high efficiency and minimal noise. This prototype when rolled out will have a range of close to 150 km on a hydrogen fill of 1.2 kg. Reva has been using fuel cell hydrogen cells in its existing electric cars as range extenders and the move to develop hydrogen-powered vehicles will catapult Reva into the league of auto majors such as General Motors, Toyota and Mercedes Benz who have been developing similar prototypes. In addition to this project, Reva is looking at extending its electricity-powered platform to smaller buses and other vehicle models. The company also intends to close a US$15 million funding deal from a clutch of overseas financial and strategic investors for its future expansion plans.

US$69 mn for green energy project

June 3, 2005. An integrated renewable energy project worth Rs 300 crore (Rs 3 billion) to be set up with part German investment to provide electricity to over 3.5 lakh people of the Sunderbans region. The master plan is being drafted and will be completed within two months, with the government of India to pay Rs 150 crore (Rs 1.5 billion) and the other half to be borne jointly by the state government and with grants from Germany. WBREDA recently installed India’s first wind-diesel hybrid power plant at Sagar Island and also the country’s largest off-grid bio-mass gasifier power plant to electrify five villages in the Sunderbans region. According to plans, most of the Sunderbans would get electricity by 2012. By 2010, at least 10 per cent of Bengal’s power generation should come from renewable energy, with 2 million people being suitable for power from renewable energy projects. Renewable energy aided distributed generation and off-grid supply in remote rural areas where grid connection was expensive and time consuming. Without electricity, the information technology spurt in West Bengal would never realise its full potential. Besides solar energy and biomass, wind turbines could be used for small projects requiring low wind speeds specially in the coastal regions. Bangladesh had trained Gramin Bank employees to maintain solar units and micro credit organisations in Bengal could be used to help train and maintain small scale projects in rural areas. At least two or three German companies would invest in projects.

ADB assistance to take up CDM projects

June 3, 2005. The Asian Development Bank will help India to efficiently undertake clean development mechanism (CDM) projects to cut back on greenhouse gases (GHGs) emissions, through a technical assistance grant approved for US$700,000  (around Rs 30 million). The technical assistance, financed by the Government of Canada, and administered through ADB's Renewable Energy, Energy Efficiency and Climate Change Programme, will support various stakeholders in specific CDM sectors and selected areas to strengthen India's overall position as one of the key players in the evolving international carbon market, according to an official release. India has the potential to play a major role in the global CDM market, as significant potential for GHG reduction at relatively low marginal abatement costs is available across various sectors that are growing rapidly.

Support for bio-diesel plant

June 2, 2005. Chief Minister Y S Rajasekhara Reddy has assured all support and cooperation from the state government for establishing a 300 crore plant (Rs 3 billion) bio-diesel plant with an annual capacity of 300,000 tonne proposed to be set up in the state by Solarsa India Private Limited. Reddy suggested to the promoters to set up the plant in Nellore district since the company is scouting for a suitable port city for its operations. The first phase of the project would involve plantation of jatropha curcas in about 10,000 acres of wasteland.

Atul Auto’s another wind mill

June 2, 2005. Rajkot-based Atul Auto has drawn up plans to set up a wind mill at Lamba in Jamnagar district with an investment of Rs 3.40 crore (Rs 34billion). The plant will be used to meet the captive requirements of the company. Atul Auto forayed into power generation with the commissioning of a 1.25  MW wind mill at Jaisalmer in Rajasthan in December 2004.  Another sum of Rs 3.40 crore will be invested in this financial year to set up a wind farm at Lamba in Jamnagar district. It will be a 600 kilowatt wind mill meant for captive use, company said.

AP Govt mulls solar lighting for housing colonies

May 31, 2005. The State Government proposes to use solar lighting system in housing colonies under the Integrated Tribal Development Authority (ITDAs) and in remote areas. The Chief Minister, Dr Y.S. Rajasekhara Reddy, asked the Andhra Pradesh Housing Corporation to formulate proposals in consultation with Electronics Corporation of India Ltd (ECIL). The system can illuminate a 10ft x 12 ft room, sufficient for reading and writing. It supplies 12 hours lighting per single charge and works even under cloudy conditions. While the conventional bulb's life is 1000 hours, the low cost and solid state bulb's life under the solar system would be more than 1,00,000 hrs (20 years). It is also easy to install, virtually maintenance free, safe and environment friendly. The Ministry of Conventional Energy could provide up to 40 per cent subsidy of the cost.


Mohawk paper to use wind power

June 6, 2005. Mohawk Paper, a family-owned paper manufacturer, will begin using 45 mn kWh pollution-free wind power annually to run its two mills in New York, as well as a newly purchased facility in Ohio. With this recent contract agreement, Mohawk Paper will become one of the largest users of wind power for manufacture, second only to Johnson & Johnson.

Minnesota power wind power plans

June 2, 2005. Minnesota Power, a division of ALLETE, Inc. entered into a long-term agreement to purchase approximately 50 MW of wind power from a new wind generation project to be built in south central North Dakota by a wholly owned subsidiary of FPL Energy. The planned project will connect to the regional power grid near Center, ND. Florida-based FPL Energy is a subsidiary of FPL Group, Inc. and is the nation's leader in wind energy generation, producing approximately 40 percent of all of the wind-generated energy in the United States. FPL Energy said construction and commercial operation are both scheduled for 2006. FPL Energy said the project is subject to regulatory approvals and an extension of the federal wind energy production tax credit which is set to expire at the end of 2005.

Bio energy firm’s boom

June 1, 2005. D1 Oils, the biofuels specialist, raised another £24.3 mn via a share placing deals to develop biodiesel plantation sites in China and Saudi Arabia. The AIM-listed company is chaired by the former internet entrepreneur Karl Watkin and raised £11.5 mn when it floated in October - its stock has doubled since then.



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