MonitorsPublished on Jun 21, 2005
Energy News Monitor I Volume I, Issue 52
Russian oil to go South


redictably, BP Azerbaijan has said that it does not want to export oil produced in the Azerbaijani sector of the Caspian Sea via the Baku-Novorossiisk pipeline. This means that Russia, which is already losing its influence on the Caucasus, will suffer serious economic losses. Baku explains its decision in terms of economic expediency. BP Azerbaijan pays $4-5 per barrel if it exports Caspian oil by rail via Georgia, whereas the Baku-Novorossiisk route costs three times more. Economics is not the only thing that matters. The Baku-Tbilisi-Ceyhan pipeline, the main rival of the Russian route, will start operating this fall.


This allegedly unprofitable and controversial project was launched in 1998 in Ankara when the presidents of Turkey, Uzbekistan, Azerbaijan, Kazakhstan and Georgia, plus then U.S. Energy Secretary William Richardson, signed a declaration committing themselves to facilitate the construction of the pipeline. However, the consortium's Western members were in no hurry to finance the project. In May 2001, David Woodward, the then Azerbaijani International Operating Company (AIOC) president, said he doubted whether most Caspian oil would be pumped along this route. To be cost-effective, the Baku-Tbilisi-Ceyhan oil pipeline would have had to pump 50 million metric tons of oil annually for the next 40 years. But the Caspian region apparently does not contain enough oil. The September 11, 2001 terrorist attacks in the United States and rocketing global oil prices increased U.S. and EU demand for oil sources alternative to the Middle East.


The United States, Israel and Turkey, all greatly interested in this route, pressured hesitant and shortsighted businessmen. Political pressure and rising fuel and energy prices made the project more attractive, and much more profitable. It is hardly surprising that BP Azerbaijan President David Woodward called the Caspian region a new promising energy source independent of the Middle East and Russia. The Kremlin naturally wanted to pump Caspian oil via Russian territory. Russia's LUKoil even sold its 10% stake in the Azeri-Chirag-Gunashli deposit, which gave it priority rights to implement the Baku-Tbilisi-Ceyhan project. Moreover, LUKoil wanted to sell its stake in the Shah Deniz gas-condensate deposit and to leave the Caspian region. Besides, the Caspian Sea's uncertain legal status played into Russia's hands, questioning the legality of oil production in the "Azerbaijani sector" being disputed by Iran and Turkmenistan. However, the more powerful global players - the U.S. and the European Union -- won this game, taking advantage of Kazakhstan's desire to create alternative oil-export routes. The new pipeline would then be filled to capacity. President Nursultan Nazarbayev of Kazakhstan, who spoke at the pipeline opening ceremony, suggested that the Caspian port of Aktau in Kazakhstan be included in the pipeline's name, thereby hinting that Astana wanted to export its oil via the new pipeline. Kazakhstan will no longer have to pump its oil to Europe along the Russian route alone. In this way Russia lost a serious lever of pressure on its ally. Russia's regional influence will be impaired, because the West now considers Azerbaijan as the main Caspian-oil supplier along this strategic route. Georgia's importance as the transit territory will also grow.


Moreover, permanent U.S. military bases may soon appear to guard Caspian deposits and the pipeline itself against possible terrorist attacks. Russia is facing another negative consequence of a new political-energy situation. As is known, the new Ukrainian leadership is trying to reduce its energy dependence on Russia and to enhance its own role as a transit territory for oil exports to Europe. Prime Minister Yulia Timoshenko wants to handle Central Asian and Caspian hydrocarbons via the Caucasus and the Black Sea to Ukraine and further to Europe. This idea is unlikely to materialize in the next few years, due to a lack of resources. However, later, as these resources will grow, part of them may be exported to Europe via railroad and Georgia's Black Sea ports and Ukraine. Thus the southern hydrocarbon-export route will serve as a full-fledged alternative to Russian pipelines and deprive Russia of money and additional leverage to influence its European partners and CIS neighbors. As for Baku-Novorossiisk pipe, it is likely to be transferred to the reverse regime within a year to boost the export potential of the new BTC pipeline. The other day, representatives of BP, one of the two major players in Russia's TNK-BP, said that they plan to export all Russian-produced oil along the new BTC pipeline, using the Novorossiisk-Baku pipe for the purpose.


Gas based installed power stations by NTPC

Gas based


Commissioned Capacity (MW)





Uttar Pradesh






Uttar Pradesh














Source: NTPC

Power Sector Reforms: Digging Worries, no Solutions? - II

….continued from issue 51



eforms were initiated in the Indian power sector in the early 1990s to mobilize investment in power generation to bridge the growing gap between power supply and demand. However, it was soon realized that the sector was beset with financial, operational and organizational inadequacies, which needed to be addressed as part of the reform process. However, unless the transitional aspects of reforms are managed effectively, the reform process and its sole motivation of mobilizing private investment would fail. Handling the transition is therefore very important both for the success of reforms as well as for creating an environment conducive to reforms. The electricity reform strategy currently being pursued in the seven states of Orissa, Haryana, Andhra Pradesh, Uttar Pradesh, Karnataka, Rajasthan and Delhi is not in the right direction. It is neither perceived as people-friendly nor is it likely to attract the much-needed investments in the power sector. The reform process seems to be working as a sedative that suppresses symptomatic pain without addressing the disease. Worse is the situation in the remaining states where reforms are yet to be initiated. For the most part, the debate on reforms is inadequate, and lacks clarity on the issues involved, leave aside the possible resolution. Amidst all these, on the news are:

I.  SEBs' unbundling deadline extended 

The Centre has decided to extend by six months, the June 9, 2005 deadline for unbundling of State Electricity Boards (SEBs), as mandated by the Electricity Act 2003. The Left parties had called for a review of several provisions in the Electricity Act 2003, including the deadline for unbundling of all the SEBs and the issue of elimination of cross-subsidy across consumer tariffs in states.

II. Plan panel for power policy review

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.


The structure of the electricity industry in independent India was laid down by the Electricity (Supply) Act, 1948 that created the SEBs. In their initial years, the SEBs performed yeomen service in carrying electric power far and wide, but over the years they have become unsustainable, thanks to their mismanagement and politicization coupled with the economic and technological developments of the past decade. It is high time that the electricity industry is denationalized, and restructured on commercial principles. Though the legal framework was amended in 1991 and 1998 to facilitate private investment in generation and transmission respectively, it enabled private entities to sell or transmit power only through long-term contracts with state-owned entities. Such contract-driven privatization through state-owned monopolies can have little chance of enduring success. Similarly, the setting up of regulatory commissions under the 1998 Act, though a welcome move, can only have a limited impact on the state-owned monopolies. It should surprise no one that these piecemeal changes in the name of reform have not been able to arrest the deterioration of this industry. The argument in favour of unbundling was the processing need for creation of viable commercial facilities that would lend themselves to efficiency improvements and privatization as in the West. The similarity of Orissa model and the others that followed the suit with the restructuring undertaken in other countries virtually ends with the unbundling of SEBs. Unlike the West where competition in generation and supply is the engine for efficiency gains and tariff reduction, the Orissa model, the so-called Single Buyer Model, relies on an interconnected chain of monopolies where competition is conspicuous by its absence. In effect, it has only tinkered with the structure without incorporating any sound economics of regulation, thus leading to comparatively high tariffs. We invested regulators with autonomy and independence and gave them the magic wand of tariff fixation. But right from day one, we bound the regulators’ hand and feet and told them to perform. In many countries, subsidies have failed to meet the objective of providing services to those who are not connected and making it affordable to the poorest. A World Bank study suggests that “in general, demand side subsidies work better than fuel or supply side subsidies because they have better targeting properties and provide stronger incentives for expanding coverage and sustaining services.” The ongoing reforms and restructuring of SEBs is not addressing the concerns of those not yet connected to the grid, who are relatively poorer than those connected. Finally, privatization is not the only solution and has to be done selectively wherever we can show good results. On the other hand, take Delhi or Mumbai, the privatization of distribution is incomplete, because there is no real competition. The Electricity Act 2003 was hailed as a pathbreaker, yet little has changed on the ground. Does longer political reform hold the key?                       - Concluded

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


Coal based installed power stations by NTPC

Coal based



Capacity (MW)


Uttar Pradesh






Andhra Pradesh



West Bengal



Madhya Pradesh



Uttar Pradesh






Uttar Pradesh


Talcher Kaniha




Uttar Pradesh


Talcher Thermal




Andhra Pradesh



Uttar Pradesh





@Capacity presently under implementation                           Source: NTPC

United States Trade and Environment Policy-Its Evolution



resently, all trade agreements involving the United States contain separate chapters on the environment that include the possible use of trade measures for the “failure to effectively enforce” environmental measures that influence trade. Conducting an environmental review (ER) of all proposed trade agreements are required by US law,  and many US trading partners now conduct their own version of an ER before the agreement is finalized. The US now links technical assistance and capacity-building to all of its trade agreements involving developing countries.  The standard for environment in trade policy is no doubt more ambitious now. But any improvements in environmental quality will greatly depend on two things:


i.      Will the US fulfill its commitments to provide trading partners with technical assistance and capacity-building resources?

ii.    Will developing countries take advantage of this opportunity to secure targeted technical assistance by integrating environment into their overall negotiating objectives?

The fact goes like this. Ten short yeas ago, the North American Free Trade Agreement (NAFTA) broke new ground by including language designed to address environmental issues. For many of its critics, NAFTA’s environmental provisions were little more than “green window dressing,” with no real environmental protection. For developing country governments, the provisions represented yet another attempt by the United States to either protect domestic producers from international competition, or to unilaterally impose US environmental priorities on the rest of the world.

The New Blueprint

In 2002, when the US Congress granted the Bush Administration Trade Promotion Authority (TPA), it also gave the administration binding negotiating objectives for the environment. The TPA states: US negotiators must ensure that “a party to a trade agreement with the United States does not fail to effectively enforce its environmental or labour laws, through a sustained or recurring course of action or inaction, in a manner affecting trade….” Beyond this specific instruction regarding investment, the Congress instructs US negotiators to:

·          Strengthen the capacity of  US trading partners to protect the environment;

·          Promote the sale of  green products and services;

·          Reduce or eliminate government practices or policies that unduly threaten sustainable development;

·          Establish consultative mechanisms to strengthen the capacity of US trading partners to develop and implement environment and human  protection standard;

·          Conduct environmental reviews  of trade agreement;

·          Respect the Doha Declaration on Trade-related aspects, Intellectual Property Rights clarifying a developing  county’s right to break patents during a public health crisis, and;

·          Promote consideration of multilateral environmental agreements(MEAs) in negotiations on the relationship between MEAs and trade rules, especially as they are related to GATT Article XX.

It is hard to underestimate the impact of TPA’s environmental provisions. They have become the standard by which all US environmental provisions in trade agreements are judged by the Congress. While not all instructions from the Congress have been followed to the letter, every US trade agreement since TPA now contains specific environment language in the text, parallel commitments to address environment–related technical assistance and capacity issues, and involves  conducting an environmental review of US trade policy.

The Evolution and Continuity

There are a number of forces likely to continue shaping the US policy on trade and environment. Non-governmental organizations are dissatisfied with the changes made to US investment objectives, and continue to push for greater protections for environmental policy from pressures arising from investment. Perhaps of greater importance to agricultural exporting countries is the growing trend towards considering the environmental implications of expanded trade in agricultural products, and as political resistance to using trade policy as a more active instrument to promote environmental protection remains strong.

The greatest potential for positive impact on the quality of the environment lies in full implementation of the US commitment to link technical assistance and capacity building to trade liberalization. Establishing this linkage is just as important an element of a developing country’s proposals for trade and environment as they are for the US. The US interagency  responsible for developing these linkages will continue their “learning by doing” approach to negotiations, hampered by the executive branch’s inability to make commitments that involve allocating federal dollars without prior approval from the United States Congress. To assist them in this effort, and help avoid potentially unhelpful proposals from the US, developing countries would be wise to prepare and present their proposals in a fittingly strong manner, for environment and trade, early in the negotiations. While it may be difficult for developing country officials to accept, providing US negotiators with this kind of guidance, it helps them negotiate an agreement that meets the conditions outlined in TPF.

Views are personal l K K Roy Chowdhury, Consultant ORF - Energy

Crude Summer

(Condensed from ‘This Week in Petroleum’ from the DoE, USA)


n 1984, the pop music group Bananarama had a hit with a song called “Cruel Summer,” and the pop group Ace of Base had an even bigger hit with it in 1998. But with crude oil seemingly the key to gasoline markets this summer, it looks like it will be a “crude summer” for motorists in the USA. In the US, crude oil costs make up about half of the cost of a gallon of gasoline at the pump.  Thus, crude oil prices are always a key factor in determining the future of gasoline prices. But with gasoline inventories relatively comfortable on an absolute basis compared to historical data (although much less so on a days of supply basis which also takes account of demand growth), the path crude oil prices take for the remainder of the summer will likely have a large impact on the direction of gasoline prices.

Even as OPEC met in Vienna and agreed to increase their production ceiling by a total of 0.5 million barrels to 28 million barrels per day, there are a lot of uncertainties surrounding the near-term path of crude oil prices. Some analysts look at U.S. crude oil inventories, which have been above the average range for several weeks now, and see a market with plenty of crude oil available. These analysts see speculation and a shortage of global refinery capacity as the main culprits behind the high prices seen this year. This camp would see prices declining significantly later this year after the peak refining season ends, especially if the “speculation bubble” bursts. Concerns about supplies being extremely tight this upcoming winter are unfounded to these analysts, as they expect non-OPEC production to increase significantly between now and the end of the year, adding enough supply to meet the expected increase in demand without much additional oil needed from OPEC countries. These analysts also look for high prices to ultimately slow demand growth; putting downward pressure on prices. Should these analysts be correct, U.S. retail gasoline prices could fall along with any significant decline in crude oil prices?

However, there are other analysts who do not envision a substantial increase in non-OPEC supplies or a dramatic slowdown in global oil demand growth in 2005 or even 2006. Without significant increases in non-OPEC production or a slowdown in demand growth, these analysts forecast that when product demand peaks during the winter, the currently tight oil market will get even tighter and crude oil prices may once again test historical highs (in nominal terms). Concerns about weather, both on the supply side from the possible impact of hurricanes later this summer, to cold weather this winter increasing demand, also are key factors to these analysts. In fact, the first storm of the season, Tropical Storm Arlene, was fairly mild and did not impact oil and natural gas production significantly in the Gulf of Mexico, yet was one of the factors that caused prices to rise over the last few days. With markets as tight globally as they currently are, even a relatively mild tropical storm can have an impact on prices. Analysts with this view of the market see relatively low inventories in Asia counterbalancing ample crude oil inventories in the United States, and wonder what another storm like last year’s Hurricane Ivan might do to prices this year, should one of that magnitude and location occur again. If these analysts are correct about the near-term path of crude oil prices, this summer may turn into a cruel one for U.S. consumers after all. Which path crude oil prices take over the next several weeks will have a large influence on gasoline prices for the remainder of the summer.


Russia approves gas giant's participation in Sakhalin 2 project  


June - Gazprom and Shell have agreed on major terms for the Russian gas giant's participation in the Sakhalin 2 project. The parties had yet to agree on some technical conditions, but expressed hope that this could be done very soon. As a result of this exchange, Gazprom will appear in the Sakhalin 2 project as a shareholder of Sakhalin Energy, while Shell will participate in developing the Neocomian reserves of the Zapolyarnoye gas field. The Sakhalin 2 project will develop two fields: Piltun-Astokhskoye, an oil field with associated gas, and Lunskoye, a gas field with associated gas condensate and oil fringe. The fields are situated on the northeastern shelf of Sakhalin and their hydrocarbon reserves are estimated at over 1 bln barrels (150 mln tons) of oil and over 500 bln cu m (18 trln cu ft) of natural gas. Gazprom does not rule out a possibility of joining efforts with LUKoil at a Sakhalin 3 auction. If the project is auctioned and the terms are acceptable, the gas giant will participate. Sakhalin 3 includes three licensed blocks - Vostochno-Odoptinsky, Ayashsky, Veninsky and Yuzhno-Kirinsky, with estimated resources of over 600 mln tons of hydrocarbon. Sakhalin 1 envisages developments of the Chaivo, Odoptu and Arkutun-Dagi fields with recoverable reserves of 2.3 bln barrels (307 mln tons) of oil and 17.1 trln cu ft (485 bln cu m) of gas. In 2005 Gazprom projects foreign currency revenues from gas exports to countries outside the CIS at $25 bln against $18.3 bln last year.   In 2004, it exported 140.5 bln cu m of gas to Central and West Europe. This year intend to increase the volumes to 145 bln cu m.  Gazprom exports gas to 21 countries, its main importers being Germany, Italy and Turkey. In 2004 it supplied 36.1 bln cu m to Germany, 21.6 bln cu m to Italy and 14.5 bln cu m to Turkey.

                                                            (Courtesy RIA Novosti)


India’s Reforms in the Hydrocarbon Sector

What Has Been Accomplished?

What Remains to be Done? - IX


……continued from issue 51


1995-2005: Accelerating Reforms 



n 1995, the Ministry of Petroleum & Natural Gas appointed a Strategic Planning Group to recommend policy interventions necessary to restructure the oil industry.  This group which came to be known as the R Group recommended the gradual phasing out of Administered Pricing Mechanism (APM) and the gradual replacement of it with the free market mechanism.  This was primarily because the Oil Pool Account which was part of the APM was beginning to show huge deficits in an environment of increasing oil prices.  


Oil Pool Account


The Oil Pool Account (OPA) was maintained to provide uniform and stable prices by balancing high and low input costs. It essentially made up the difference between market and administered price of petroleum products.  The pool account was meant to be self-providing over a period of time. Using this account, the government administered the prices of petroleum products according to ‘socio-economic’ requirements. Either when international price of crude hardened, or when consumption of subsidized petroleum products increased the deficit in the Oil Pool Account increased.  Thus the efficiency of the APM depended entirely on the ability of the system to keep the OPA in balance. Until the late eighties, the account was in surplus. However, the nineties saw a growing deficit, and by 1997, the oil pool account recorded a deficit of $5 billion, thereby leaving no other option for the Government of India but to issue oil pool bonds. But, with international crude prices falling as low as $11 per barrel in early 1999, the OPA showed a minor surplus and this resulted in the oil pool bonds being redeemed. However, the situation soon reversed and stayed that way as crude prices went only one way which was ‘up’ since 1999.  


The R Group recommended the sequencing of deregulation in the following order

·         Refining sector

·         Upstream sector

·         Marketing sector


With regard to de-regulation of marketing, the R Group recommended a cautious approach as it felt that ‘de-control of marketing and distribution activities would be complex exercise as a number of complex factors influenced the existing pricing mechanism’.  The group also felt that sudden deregulation and freeing the market would have the potential of destabilising the supply / distribution plans and push up all costs. 


Upstream Sector


Opening up of the upstream sector began in the 1970s and 80s and gathered momentum in the early 1990s.  As mentioned earlier in the series, the early 90s decision to invite private sector players to develop fields such as Panna-Mukta and Raava (discovered by ONGC) under production-sharing contracts ended in controversy.  Apart from an investigation by the Central Bureau of Investigation (CBI) following a public interest petition filed in the Delhi High Court, the Comptroller and Auditor-General (CAG) also observed in 1996 that the terms of the joint venture between the ONGC and the consortium did not compensate the ONGC for the costs (nearly Rs. 700 crores) that it had incurred in prospecting.   This probably pushed the government towards a complete review of its upstream deregulation policy. 


By 1997, the Government announced the New Exploration Licensing Policy (NELP) with the objective of accelerating exploration activities in the country. The policy aimed for substantial investment in this high-risk, capital intensive area from the private entrepreneurs, particularly foreign companies. The NELP was based on two cardinal principles: (i) attractive terms of offer comparable to the best in the world (ii) offer level playing field for public and private sector players.  The salient features of the fiscal and contractual terms under NELP were:


·         Award of licenses through open international competitive bidding system

·         No distinction between National oil companies and private companies in licensing rounds

·         Model Production Sharing Contract and a Petroleum Tax Code (PTC)

·         Additional incentive for deep-water areas.

·         Infrastructure status for exploration projects enabling availability of tax holidays

·         Royalty rate at 12.5 per cent of international market value for crude for onshore area and 10 per cent of offshore area and for gas at 10 per cent


……to be continued


Gazprom and Iranian Gas Company expand cooperation  

June - The Russian gas giant Gazprom and the National Gas Company of Iran have agreed upon the broadening of cooperation. Gazprom and Iranian talked the outlook for gas cooperation and agreed to expand it in a range of directions. Among them are search for geological structures and creation of underground gas storages in Iran; development of a general gas supply scheme and a gas transport system of Iran, possibility of Gazprom's participation in realizing pipeline projects in its territory; transfer of Gazprom experience in organizing work of control services; use of gas as motor fuel. A protocol was signed on results of the meeting. It particularly intends the setting up of joint expert groups for directions of cooperation. The proved reserves of natural gas in Iran constitute about 27 tcm. The production of gas is increasing by 10 percent annually and, on the 2004 results, exceeded 140 billion cubic meters. Almost all of the gas is consumed domestically: about 100 bcm goes to commercial consumers (including 35 bn to the power stations), 40 bcm is pumped into oil-bearing beds to maintain well yields. The total length of the Iranian trunk gas pipelines is over 22,000 KM. Iran's only gas producer is the National Oil Company, passing all of its gas produced to the NGCI.   The NGCI handles all the post-production gas-related operations - preparation for and transportation, processing and sale. The NGCI has eight gas-purification and -dehydration plants with a total capacity of over 380 mcm day.                                                                 

Design capacity of the North European Gas Pipeline is 55 billion cubic meters annually 

June - The design capacity of the North European Gas Pipeline (NEG) is determined at 55 bcm annually. The resource base for the pipeline would be the Yuzhno-Russkoye gas field (the Tyumen region, Siberia). Exploration and drilling work is currently underway at the field.  The gas pipeline will run along the bottom of the Baltic Sea from Vyborg (Russia's north-west) to the coast of Germany. The construction of marine gas pipeline sections to deliver gas to consumers in Finland, Sweden, Britain and other countries is planned under the project. The total projected length of the pipeline is 3,000 KM. The construction cost is estimated at about $5.7 bn. The Shtokman gas condensate field (the Barents Sea shelf, Russia's north), d Gazprom's partners in the project would be determined by the end of the year.  The gas reserves at the Shtokman gas condensate field are estimated at about 3.2 tcm. Gazprom experts have prepared a feasibility study of the project.  The Gazprom data indicates the gas supplies to the U.S. market will have competitive prices.   At the end of June, the European Union had been studying the prospects of its participation in the development of the Shtokman gas field and must finish its own technical and economic assessment of the project in June.   According to the project, the production of gas at the Shtokman gas field might start in 2010.                                   

 (Courtesy RIA Novosti)





Assam Co files bids under NELP-V

 June 21, 2005. Kolkata's Assam Company Ltd, the oldest tea company in the country, has formed a consortium with Gammon India for oil blocks in Rajasthan and Gujarat under New Exploration Licensing Policy (NELP)-V. The company had bid for two oil blocks. The Union petroleum ministry would take a final call on NELP-V blocks on July 31. The consortium of Gammon India and Assam Company had been shortlisted by the petroleum ministry for Rajasthan basin and Cambay basin in Gujarat. The Rajasthan basin is one of the largest oil blocks with 13,915 square KM area. The Cambay basin is around 448 sq KM. If they get this then this will be a big boost to their oil business. There are both onshore and offshore assignments under NELP-V. The company already has an existing relationship with Canoro Resources of Canada for Assam and Nagaland blocks (Assam-Arakan) basin. Assam Company, which was increasing its exposure in the oil and gas business, was looking for overseas joint venture partners for participation in the domestic and overseas operations. Assam Company got the blocks in Assam and Nagaland in pre-NELP bids. Assam Company was at present operating in three oil fields in Laxmijan, Bihubar and Barsilla field in Assam which it got from ONGC. 

India, US to enhance HC trade

June 17, 2005. The US Ambassador to India, Mr David C. Mulford, and the Minister for Petroleum and Natural Gas, Mr Mani Shankar Aiyar had discussed areas of enhancing bilateral trade in the hydrocarbons sector. They talked about common energy problems. The visiting US Assistant Secretary of State in charge of arms control, Mr Stephan Rademaker, had expressed the view that going ahead with the pipeline with Iran would be a mistake. However, US Embassy officials later put across the point that this was not yet the official view of the US Government. India has been in dialogue with Pakistan and Iran to draw up a framework for the proposed US$4.16-billion pipeline. The US has reportedly warned Pakistan of imposing sanctions if it went ahead with the project. The pipeline is expected to meet the growing energy needs of both Pakistan and India. Stating that US wants to be constructive, Mr Mulford said that the proposed pipeline was not an impediment to Indo-US co-operation in the energy sector.


IOC’s investment plans

June 20, 2005. State-owned Indian Oil Corp (IOC) plans to invest more than Rs 23,000 crore (Rs 230 bn) over the next five years in adding new capacities at the existing refineries and building a new refinery at Paradip in Orissa. IOC, which currently has seven refineries with combined installed capacity of 41.35 million tonnes per annum, would have an installed capacity of 66.85 million tonnes per annum after the investment. The company will have a combined refining capacity of 47.35 million tonnes after Panipat refinery expansion from 6 to 12 million tonnes is completed this fiscal. IOC is India's largest refining firm. Plans have been drawn for further expansion of the Panipat refinery from 12 to 15 million tonnes, Haldia refinery from 6 to 7.5 million tonnes and installation of a grassroots refinery with petrochemicals complex at Paradip. While doubling of Panipat refinery capacity entailed an investment of Rs 4,165 crore (Rs 41.65 bn), an additional Rs 1,011 crore (Rs 10.11 bn) would be required for raising its capacity further to 15 million tonnes. The expansion would be completed in 33 months. Another Rs 1,600 crore (Rs 16 bn) would be invested in Haldia refinery expansion by March 2009 and IOC had commissioned Engineers India Ltd and Shell Global for preparation of a detailed feasibility report of Rs 20,700 crore (Rs 207 bn) Paradip refinery. A potential for expansion exists at Mathura refinery from 8 to 11 million tonnes, at Gujarat from 13.7 to 18 million tonnes and at Panipat from 15 to 21 million tonnes. These plans will be firmed up after detailed study considering projection of domestic demand growth.

ONGC aims at No 2 spot in refining 

June 20, 2005. Oil and Natural Gas Corporation has chalked out plans to set up two new grassroot refineries of 5 million tonne per annum capacity each at Barmer in Rajasthan and Kakinada in Andhra Pradesh. In addition, the company has decided to increase the capacity of its Mangalore Refinery from 9.69 mtpa to 30 mtpa. After completing these projects, ONGC would emerge as India’s second largest refiner after Indian Oil Corp (IOC) with a capacity of 40 million tonne. Its Kakinada refinery is likely to end up as a very large export oriented refinery since it will be located at the coast. The capacity of its Barmer refinery, based on crude oil found by Cairn Energy in the region, may be scaled up to 7.5 mtpa.

Petro price hike to avert IOC losses 

June 20, 2005. The increase in the prices of petrol and diesel has averted country’s largest refiner, Indian Oil Corporation’s (IOC’s) first-ever loss in the quarter ending June, 2005. In the event of no price hike, the oil marketing companies (OMCs) were being forced to absorb the rise in global crude oil prices. While for the fourth quarter ending March 31, 2004, IOC profit fell 52 per cent at Rs 893 crore (Rs 8.93 bn), the company was heading for a net loss in the first quarter of 2005. The freeze had led to the oil marketing companies (OMCs) losing as much as Rs 20,000 crore (Rs 200 bn) in revenue during 2004-05. Together the OMCs — Indian Oil, Bharat Petroleum, Hindustan Petroleum and IBP — were losing Rs 72 crore (Rs 720 mn) per day due to non-revision in petrol, diesel, LPG and kerosene prices. During March and April 2005, the OMCs made a cash loss of Rs 1,424 crore (Rs 14.24 bn). The hike in excise duty on petrol and diesel and increase in road cess necessitated a Rs 2.20 per litre hike in petrol and Rs 1.06 a litre in diesel prices. Additionally, the cost of supplying cleaner fuel from April 1 came to Rs 0.30 per litre for petrol and Rs 0.24 a litre for diesel. High crude prices warranted an additional Rs 2 per litre hike in petrol and more than Rs 3.5 per litre increase in diesel prices.

Essar Oil hikes petro prices

June 18, 2005. Essar Oil has decided to increase its retail prices of diesel and petrol by Rs 3.60 a litre. The oil marketing company, which buys petrol and diesel from Numaligarh and Mangalore refineries, is staring at a loss of over Rs 60-crore (Rs 600 mn) during the quarter ending June 30. The company was already incurring a loss of around Rs 5.75 a litre in petrol and Rs 6.50 a litre in diesel when the two refineries raised their prices by Rs 1.04 a litre for petrol and Rs 0.93 a litre for diesel excluding duty and taxes, thereby further increasing the company’s losses. 

Shell`s Hazira receives 2nd cargo

June 18, 2005. Royal Dutch Shell's Hazira LNG Pvt Ltd has received its second LNG consignment and will sell it to Gujarat State Petrochemical Corporation (GSPC). It has received second LNG consignment of 150,000 cubic metre from Oman. The cargo was transported on cost-insurance-freight basis and would be discharged in 24 hours. The first phase investments for Hazira Port Pvt Ltd and Hazira LNG Pvt Ltd were Rs 3,000 crore (Rs 30 bn).

Total eyes Indian refining capacity 

June 16, 2005. TotalFinaElf India is considering investing in refinery projects and entering the oil retail sector in the country. The company will prefer joint ventures even in the case of a greenfield refinery projects in the country. Investment in India will help TotalFinaElf foray into fuel retailing by setting up petrol pumps. The Indian government stipulates an investment of around US$450 million to set up retail outlets to sell fuels. TotalFinaElf has till date invested over US$200 million in LNG, LPG and lubricants in various projects in India. This includes a joint venture with HPCL for construction of LPG import and an underground storage terminal at Vishakhapatnam. Total and Shell recently announced the commissioning of the Hazira LNG Terminal & Port. Total, Europe’s largest oil refiner-marketer, holds interests in 28 refineries and 16,000 service stations all over the world. The investment in refineries in India looks a difficult proposition as the Indian government has decided against disinvestment of state-owned oil companies.

BPCL launches `Hi-Speed Diesel'

June 16, 2005. The Bharat Petroleum Corporation Limited launched the sale of `Hi-Speed Diesel' in an outlet at Vannarpettai in Palayamkottai. Hi-Speed Diesel is a blend of diesel and multi-functional additive sourced from Afton Chemicals (formerly Ethyl Asia Pacific Company). The additive, using `Greenburn Combustion Technology', "enables the high performance vehicles to deliver their designed outputs by removing harmful deposits from all fuel metering systems and components". The fuel technology is able to reduce particle content by 14 per cent and black smoke by 22 per cent. The cost of this "premium quality diesel" is 60 paise costlier than the normal diesel.

Oil refinery in Amethi

June 15, 2005. With Bharat Petrochemicals Ltd (BPCL) being asked to prepare the blueprint for setting up an oil refinery in Amethi, a preliminary survey report has already been submitted to the petroleum ministry. A large chunk of land has been identified in Kathaura village. Since 70 per cent of India's oil requirement comes from other countries by sea, oil refineries have been more suited in coastal areas. But, Amethi is ideally suited for another reason - the proximity to large parts of eastern Uttar Pradesh and Bihar would facilitate cheaper transportation costs to these areas.

Transportation / Distribution / Trade

Delay in Paradip-Haldia pipeline

June 14, 2005. The crude lighterage operation at the Sandheads which is to be closed down from January 2006, may continue till March and beyond. The 330-km-long Paradip-Haldia crude pipeline, being constructed at an estimated cost of more than Rs 700 crore (Rs 7 bn), will not be ready for operation before the first quarter of next fiscal (2006-07). Thus, Kolkata Port Trust has got some reprieve as the commissioning of the Paradip-Haldia crude pipeline is to entail suspension of the lighterage operation, depriving the port of a sizeable crude traffic and substantial revenue. In 2004-05, the crude throughput in lighterage operation was 4.56 million tones (mt), compared with 4.22 mt in 2003-04. The commissioning of the Paradip-Haldia crude pipeline, however, will cause flight of a much larger volume of traffic, an estimated 10 mt comprising the volume handled under the lighterage operation as also direct imports to Haldia/Paradip port, resulting in a revenue loss of more than Rs 100 crore (Rs 1 bn) annually for Kolkata port. The essence of the lighterage operation is this: huge crude carriers, including ultra-large crude carriers, with full load arrive at the Sandheads and discharge the load into several smaller crude tankers for a second round of discharge at Haldia and other ports, including Visakhapatnam and Chennai. No other port in the country can handle these huge crude carriers because no other port has the kind of draft that is required to handle these vessels. The draft problem is particularly critical at Kolkata port, including Haldia, which being a riverine port, is especially hit by the poor navigability of the river. However, there is no such problem at the Sandheads, which being the mouth of the river has virtually an unlimited draft. Kolkata port started crude lighterage operations in in September 1997 at Sagar Island where the draft is about 10 metres. The operation shifted to Sandheads in November 1998. Normally, the operation is undertaken from the middle of October to the middle of March every year. The year 2001-02 recorded the lowest throughput so far at 1.6 mt.

Policy / Performance

Ministry wants OID funding for crude storage 

June 20, 2005. The ministry of petroleum and natural gas has proposed funding the 5 million-tonne strategic crude oil storage project out of the cess collected by the government under the Oil Industry Development (OID) Act 1974. The estimated cost of constructing storages and filling the caverns with imported crude oil is around Rs 8,200 crore (Rs 82 bn), which is likely to go up further with the increase in international crude oil prices. The expenditure finance committee, the petroleum ministry has also proposed taking over of the wholly-owned special purpose vehicle (SPV) under the IOC, set up for establishing and managing the crude oil reserves, by the Oil Industry and Development Board (OIDB). The one-time capital cost of Rs 2,300 crore (Rs 23 bn), required for building the storages at Mangalore, Vizag and Padur, be funded as grant from OIDB to the SPV out of its existing resources. The expenditure on purchase of crude (of about Rs 57 bn) along with the operation and maintenance cost of Rs 115 cr (Rs 1.15 bn) per annum be met from allocations to the SPV by the ministry of finance through OIDB, out of the OID cess collected by the government. For purchase of crude oil, the ministry say that instead of a one time allocation for purchasing crude, an yearly allocation of Rs 2,015 crore (Rs 20.15 bn) be made for three years after the strategic storage facility has been developed from the OID cess. This will be part of the Budget proposal which the petroleum ministry annually proposes to the finance ministry. The government levies cess at the rate of Rs 1,800 (Rs 18 bn) per tonne on the crude oil produced in the country and is presently collecting around Rs 5,000 crore (Rs 50 bn) as the OID cess every year. Interestingly, while the central government has already collected about Rs 51,007.6 crore (Rs 510.08 bn) as cess under the OID Act since 1974, it has allocated only Rs 902.4 crore (Rs 9.02 bn) to the OIDB till March 2004. This has drawn a strong reaction from the Parliamentary Standing Committee, which while examining the demand for grants to ministry for 2004-05 had noted that there is no justification in levying the cess if the amount generated from it is not being utilised for the development of the oil sector.

Govt to compensate oil firms

June 16, 2005. The government may issue the last tranche of oil bonds worth Rs 4,000 crore (Rs 40 bn) to state-run oil companies. The government owes this money to state-run oil companies from oil pool account that was discontinued along with dismantling of administered pricing mechanism in April 2002. As per the estimate made in 2001-02 (April-March), the government owes state-run oil companies over Rs 13,000 crore (Rs 130 bn) from oil pool account. The government had issued oil bonds worth around Rs 9,000 crore (Rs 90 bn) in 2002 while the balance has not been paid. There is no word from the government but the balance could be paid now in a bid to compensate oil companies (revenue) loss due to high global crude oil prices. If the bonds are issued, it will obviate the need to go in for a large hike in petrol and diesel prices. Instead, the payment of last tranche of oil bonds could accompany a smaller Rs 2-2.50 hike in petrol and diesel prices. In April-May alone, the industry's revenue loss on petrol, diesel, cooking gas, and kerosene is pegged at Rs 6,770 crore (Rs 67.70 bn), which includes Rs 2,850 crore (Rs 28.50 bn) on diesel and Rs 2,265 crore (Rs 22.65 bn) on cooking gas. Despite dismantling of the administered price mechanism since April 2002, the government still controls the pricing of these oil products.

Permission to join Qatar-Pak gas pipeline 

June 16, 2005. India has made a formal proposal to Qatar for joining the proposed Gulf South Asia (GUSA) natural gas pipeline which passes through shallow waters, land and the deep sea before it reaches the Pakistani coast. Petroleum minister, Mr Mani Shankar Aiyar, who has just completed a successful visit to Pakistan, Azerbaijan and Iran, has already held discussions on India’s participation in this project with his Pakistani counterpart Amanullah Khan Jadoon and President Pervez Musharraf. The proposed Qatar-Pakistan pipeline is expected to cross into Pakistan through the shallow waters, UAE territory and then across the Gulf to Pakistan at a point near Gwadar. Around 100 km of this pipeline would be passing through deep sea. Mr Aiyar said that however, given India’s energy security interests, we would be happy to associate ourselves with this project and to examine with Qatari and Pakistani authorities, the technical and commercial feasibility of the proposal.

Petrol, diesel to become dearer

June 19, 2005. Oil PSUs will raise petrol price by Rs 2.50 a litre and diesel by Rs 2 from tonight, even as kerosene and LPG prices remain unchanged. The Cabinet has agreed to raise petrol prices by Rs 2.50 and diesel by Rs 2 per litre. The Petroleum Minister, Mr Mani Shankar Aiyar said the Cabinet decision was based on the principle of equitable burden sharing by the Goverment, consumers and oil companies. Diesel prices were needed to be raised by Rs 5.13 per litre and petrol by Rs 4.68 a litre due to surge in world oil prices and tax changes announced in the budget.

Petroleum ministry raps ONGC Mangalore project 

June 17, 2005. Petroleum ministry has chided Oil and Natural Gas Corp’s Rs 25,000 crore (Rs 250 bn) project for LNG, power and petrochemicals at Mangalore, saying the investment plan was made without the approval of the government and company board. The ministry wants ONGC to focus on finding oil and gas while leaving the implementation of the Mangalore project to other state-run oil firms. ONGC’s MoU with Karnataka government for the Mangalore project was signed not only without approval of the government/board but also against the specific advice of the ministry. The ministry wants ONGC’s subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL) to take lead role in setting up of the liquefied natural gas import and regasification plant and petrochemical complex while leaving the power plant for implementation by central power utility. The advantage of executing downstream projects with MRPL is that these can be off the balance sheet of ONGC and non-recourse borrowings can be resorted to in financing these projects. At Mangalore, ONGC plans to set up a Rs 5,000 crore (Rs 50 bn) LNG jetty and re-gasification terminal of 10 million tonne capacity, a Rs 1,100 crore (Rs 11 bn) C2-C3 recovery plant, Rs 9,000 crore (Rs 90 bn) basic petrochemical complex, a Rs 4,624 crore (Rs 46.24 bn) 1,445 MW power plant and Rs 2,000 crore (Rs 20 bn) in laying pipelines for transporting gas.



Tehri Dam power next year

June 20, 2005. The controversial Tehri Dam is expected to begin generating 1000 MW of power from March 2006. Its first unit will become operational by March next. The water level in the reservoir is expected to reach an optimum level by October 15 and the T-4 tunnel will be closed after that. Work on the rest of the project envisaging a total of 2400 MW of power was also progressing well and will be completed soon.

Shot in arm for KPCL`s plant

June 20, 2005. The Karnataka Power Corporation Ltd (KPCL) wants to build a 1,400 MW gas-based combined cycle power plant in Bidadi. Among three technically qualified potential suppliers of natural gas for the plant was Reliance Energy with its Krishna Godavari basin gas find. The other two bidders were public sector ONGC and IOC. The project had hit a snag with all three bidders failing to come in with price bids despite an extension of the deadline till December last year. KPCL and Reliance may now get another shot at agreeing on a price, a key issue in the bids not coming through earlier. KPCL’s US$3 per mmbtu (million British Thermal Units) was well below the market linked price that large importers such as the US would pay. Alternative routes for the project are few, including KPCL building its own facility at Mangalore and importing directly from suppliers in West Asia. 

Tatas’ Bawana plant stuck

June 18, 2005. The North Dellhi Power Ltd (NDPL), the discom, is of the view that setting up a power plant at the heart of the city would provide relief to Delhites, the government does not seem to subscribe to the view. NDPL, which had submitted a proposal to the government to set up a 1,000 MW capacity power plant at Bawana about two years ago, had not been allocated land till now. Frequency variation in the northern grid was the main reason for all power cuts happening in Delhi and this problem could be solved only when the generation capacity is in the heart of the city. Delhi government, however, said that an isolated power generation facility for the capital would not be of much help and Delhi would have to continue with its dependence on the northern grid even after addition in the generation capacity. Delhi, at present, has an average daily demand of 3,500 MW, which is estimated to touch 7,000 MW by 2010. The Capital produces only 17-18 per cent of its energy requirement and the rest is drawn from NTPC’s Badarpur plant and the Northern Grid. One of the issues of concern in Delhi is the wide variance between the peak and the off-peak demands, leading to load-shedding. The off-peak demand is about 50 per cent of the peak demand during winter and 60-70 per cent in the summer. The situation would improve after the proposed Pragati II with a capacity of 330 MW takes off. The Indraprastha power station would also be made a gas-based plant having a capacity of 700-1,000 MW. The Delhi government was also looking at setting up a 1,000 MW power generation facility at Bawana through the private sector. The state government would work out certain modalities so that the project would go to the most suitable private bidder.

Himachal begins work on major hydel project

June 19, 2005. The Himachal Pradesh laid the foundation stone for the 110 MW Sawra-Kuddu hydro electric project on the Pabbar river. The project would be executed by the Pabbar Valley Power Corporation, a subsidiary of Himachal Pradesh State Electricity Board. Besides Sawra-Kuddu, another 46 MW Chirgaon-Majhgon and 70 MW DhaMWari-Sunda projects are also under active consideration and will be allotted to the State Electricity Board. The Sawra-Kuddu project would be completed in the next five years at a cost of Rs 648 crores (Rs 6.48 bn). Of the 84,000 MW hydel potential of the country, the State has about 22,000 MW, which was being exploited with the environmental safeguards to the optimum. He said that 6060 MW hydel potential had so far been harnessed while work on various projects having generation capacity of 4380 MW was in progress. The State Government had targeted harnessing of over 8000 MW hydel power in the next three-four years. The Sawara-Kuddu project was one of the ambitious projects being executed by the State Electricity Board. The State Government had decided to allocate mini and micro Hydel projects of 1 MW to 5 MW capacities to the small entrepreneurs, so that they could also participate in the hydel potential exploitation process. The State would ensure environmental safeguards while generating hydro power.

SAIL units look for more power

June 16, 2005. The power companies that serve SAIL’s integrated plants are busy augmenting capacity and reducing dependence on the national grid. SAIL’s units may be in a position to sell more than 400 MW surplus power to other steel units and even to the states. At present, 30-35 per cent of the integrated plants’ power needs is met by external utilities while captive plants generate 60-65 per cent of the requirement. All four integrated steel plants under the Navratna —- Bhilai Steel Plant (BSP) in Chhattisgarh, Durgapur Steel Plant (DSP) in West Bengal, Rourkela Steel Plant (RSP) in Orissa and Bokaro Steel Plant (BSL) in Jharkhand — are firming up plans to augment power supply. The requirement of these plants may increase from 800 MW now to 13,000 MW by ’12. All the steel units run captive power generation plants and also produce power through JVs with NTPC and the Damodar Valley Corporation (DVC). The Bhilai Electric Supply Company (BESCL), a 50:50 JV between BSP and NTPC, has taken the lead and awarded a Rs 2000 crore (Rs 20 bn) contract to BHEL for setting up two units of 250 MW each by 2007. The 500 MW power generated by the BESCL would be in addition to the 74 MW already being generated by Bhilai power plant II. The government of Goa, Daman and Diu has already sent out feelers to BSP asking for any surplus power generated. Similarly, RSP and DSP propose a 60 MW plant each under the aegis of the NTPC SAIL Power Company, another 50:50 joint venture between SAIL and the NTPC, which operates and manages the captive power plants-II at Durgapur and Rourkela, which now have a combined capacity of 240 MW. Surplus power, if any, is proposed to be supplied to the Salem Steel Plant in Tamil Nadu. The Bokaro Power Supply Company, a 50:50 JV between BSL and Damodar Valley Corporation, which manages the 302 MW power generation and 1880 tonnes per hour steam generation facilities at BSL, is also looking at setting up two units of 250 MW each. Initial assessment has revealed that the units may have to be installed outside the plant in the Bokaro Steel City.

Transmission/ Distribution / Trade

A setback for power privatisation in U.P.

June 17, 2005.The power privatisation process in Uttar Pradesh has received a setback as the State Government had to postpone the visit of the four private power companies to the Anpara power project for an on-the-spot enquiry. The U.P. Power Corporation Ltd (UPPCL) said the cancellation of the visit of the private power companies representatives would certainly have an impact on the power privatisation process in the State. Unconditional support by the State Government employees and teachers to the UPPCL unions opposing privatisation of the Anpara C power project was also one of the reasons for the government to scuttle the process for the time being. The government was trying to hand over the Anpara C unit to the Reliance Energy. Four private power companies -- Reliance Energy Generation Ltd, Mumbai, Lanco Kondapalli Power Pvt Company, Hyderabad, AEC & Torrent Power Ltd, Ahmedabad and Essar Power Limited, Mumbai -- have bid for the Rs 1,000-crore (Rs 10 bn) Anpara `C' Thermal power station to generate 1,000 MW of power. India's eight private power companies have submitted their Request For Qualification (RFQ) for the project which were being scrutinised by the consultancy firms. Later, four companies went for the Requestion for Proposal (RFP) for the mega power project. Anpara C is the third phase of the Anpara Thermal Power Project in Sonebhadra with Anpara A having a generation capacity of 3x210 MW and Anpara B 2x500 MW. The Anpara C project has already generated political heat in the state. The proposed project is pending for over a decade now. Anpara A and B were commissioned in the early 1990s.

APTransco may buy power from other states

June 17, 2005. Andhra Pradesh has experienced a loss of about 1,000 MW power generation necessitating rotational load relief in various parts of the state. To overcome the situation, APTransco is making efforts to buy power from other states. Discoms have been directed to constitute special section-wise teams for identification and rectification of these problems. 

J&K to get grid stations soon

June 16, 2005. The Jammu and Kashmir government will set-up two grid stations, one each at Chandak and Draba in Poonch district at an estimated cost of over Rs 84 crore (Rs 840 mn). These grid stations would provide a 132kv line to the border district and improve power supply. The objective of the government is to making the state self-sufficient in power production by harnessing the vast hydro-power potential. A Rs 1.50 crore (Rs 15 mn) receiving station would be set up at Loran in near future, similarly a Rs 1.50 crore (Rs 15 mn) receiving station has also been finalized for Sabjian-Gagrian area in the district. During last year, seven new sub-stations were opened in the state with nine small transformers installed and nine additional snow-affected villages provided electricity.

Power co gets office

June 21, 2005. The newly created Chamundeswari Electricity Supply Company (Chescom) has started functioning from its own office. The fifth electricity supply company in Karnataka, Chescom has its office in Kuvempunagar. It covers five districts including Mysore district. The four other districts coming under its jurisdiction are Mandya, Hassan, Chamarajanagar and Madikeri. The four other electricity supply companies are Bangalore Electricity Supply Company (Bescom), Hubli Electricity Supply Company (Hescom), Gulbarga Electricity Supply Company (Gescom) and Mangalore Electricity Supply Company (Mescom). 

Policy / Performance

No free power: Haryana

June 20, 2005. The decision of the Haryana State Government to waive off arrears of electricity bills of rural domestic consumers and tubewells amounting to Rs. 1,600 crores (Rs 16 bn) did not mean supplying power free of cost. The waiver was conditional and depended on whether the rural consumers paid their current bills or not. There would not be any additional burden on State exchequer with this historic decision and in case even 75 per cent of the consumers followed the scheme in its true spirit, the power tariff might be reduced after 20 months. The amount of arrears was merely 10 per cent of the total budget of the State and the burden was not even 0.5 per cent of the concessions given. While the Government would contribute Rs. 20 crores (Rs 200 mn) per month, the power utilities would also make a contribution of Rs. 10 crores (Rs 100 mn) per month. The state had Rs. 400 crores (Rs 4 bn) which could be spent for any project in the power sector.  And state government could pay this amount even for State equity for any project and this had been made possible as a result of efficient financial management. At present, Haryana was among the best financially managed States in the country.

Power tariff hike in Bangalore

June 20, 2005. There may be 10 per cent hike in electricity bills of citizens of Bangalore within the next three months. However, this is no guarantee of an improvement in service. All the electricity supply companies (Escoms) in Karnataka have applied for a 5-21 per cent hike across a range of consumers and a decision is expected by August this year.  Karnataka Electricity Regulatory Commission and the government are expected to allow an average of 10 per cent hike as against an average of around 14 per cent sought. They also indicate that this might ease the deficit burden for the Escoms. But no end is in sight to the frequent power cuts the state is having to bear. One reason is the high demand from the commercial sector, which the state is unable to cater to as the hydel resources are not able to generate enough supply. In addition to this, Bescom (Bangalore Electricity Supply Company) needs to improve its distribution system quickly, which is not happening. Work on new sub-stations and underground cabling, essential for efficient supply, is progressing slowly. Almost the entire hydel generation in the state has dried up and with Maharashtra increasingly unable to supply power to Karnataka due to its own shortage, we are witnessing these frequent shutdowns. Bangalore on a average requires 23-24 million units every day but the supply is 18-20 million units. In addition to these owes, the deficit burden on the government which is currently at Rs 2,200 crore (Rs 22 bn), is expected to grow. Seventy per cent of Karnataka’s energy needs are met internally, of which nearly 33 per cent comes from hydel. With this dwindling, the state is forced to turn towards Andhra Pradesh, Goa and Neyveli, besides Maharashtra, in addition to sanctions from the Central Grid. 

35 per cent power by pvt sector

June 20, 2005. Over 35 per cent of India's energy generation target of 41,110 MW by 2007 is set to be contributed by the private sector, despite power reforms moving at a slow pace. Power Minister P.M. Sayeed said the main reason for a turnaround in the energy scenario compared with the Ninth Five Year Plan (1997-2002) was improved transmission and distribution, better collection and better finances of state-run utilities. The enactment of the Electricity Act of 2003 and the notification of the new electricity policy in February have also helped to make the Indian power sector more attractive for investors. Private sector energy generation companies will generate 15,000 MW additional power during the Tenth Five Year Plan that concludes in 2007. There is a revival in investors' confidence. It is not just the government but also the private sector which is coming forward to invest large sums.  11 projects, with a total capacity of 4,000 MW, had already achieved financial closure involving an investment of Rs.150 billion (US$3.4 billion). In addition three projects with a total capacity of 2,200 MW had received approval from financial institutions (FIs) and eight others with a total capacity of 9,500 MW were close to financial closure. With these 22 projects, private sector expect to see investments of Rs.600 billion (US$13.6 billion) flowing into the power sector with the participation of even foreign investors, either directly or indirectly. This is the highest private investment seen in the Indian power sector so far. Inquiries from foreign investors are also pouring in.

India will be able to meet its target of creating 41,110 MW of additional capacity during the current plan as part of the effort to double the generation capacity by 2012. India's installed capacity stood at 100,000 MW at the start of the Tenth Plan. Now, 10,959 MW capacity addition projects have been completed, 24,152 MW projects are under execution and contracts are being awarded for another 1,815 MW. India will also have another 5,000 MW capacity through captive power units.

Under the new policy, the government can draw excess or unutilised capacity with captive power plants for feeding the national power grid. The government is also trying to meet the target of additional 60,000 MW during the Eleventh Plan (2007-12) to help energy-starved India and bridge the peak shortage of about 12 per cent. The central government remains committed to creating at least 50 per cent of the total new capacity and fanning out the rest to the states and private sector.

US$69 mn for J&K power

June 18, 2005. The Jammu and Kashmir government released over Rs 300 crore (Rs 3 bn) for purchasing necessary material to aid the modernisation of power sector in the state. Out of the total amount, Rs 150 crore (Rs 1.5 bn) comes under the Prime Minister's reconstruction plan, Rs 114 crore (Rs 1.14 bn) under accelerated power development reforms programme, Rs 20 crore (Rs 200 mn) under rural electrification and Rs 23 crore (Rs 230 mn) under normal plan. The government has also devised a project to strengthen infrastructure and streamline power distribution in Kupwara, under the prime minister's reconstruction plan for the state. Rs 400 crore (Rs 4 bn) had been realised as power tariff during the last financial year, which indicated an increase of Rs 48 crore (Rs 480 mn), against last year's revenue of Rs 342 crore (Rs 3.42 bn). 

Maharashtra nod for DPC power 

June 17, 2005. In a major breakthrough, the Maharashtra Cabinet gave its nod to the drawal of 2,184 MW of power from the now closed Dabhol project at Rs 2.30 per unit at 80 per cent plant load factor (PLF). Of this, as much as Rs 1.20-1.30 would be for variable charge, essentially fuel cost, while Re 1 would be towards fixed charge. The recently unbundled Maharashtra State Electricity Board through Maharashtra Power Development Corporation (MPDCL) holds 15 per cent stake in the beleaguered Dabhol Power Company (DPC). MPDCL would pick up 15 per cent equity in the SPV as per cabinet decision. The cabinet has taken a decision to set up a committee chaired by the chief secretary with the finance secretary and power secretary as its members to negotiate with the GoI and lenders during the ongoing settlement process. The committee has been given a mandate to protect Maharashtra’s interest while striking a deal on the troubled Dabhol project. Also Maharashtra Government has agreed to forgo equity investment of Rs 977 cr (Rs 9.77 bn) in DPC.

MERC relief to industries

June 17, 2005. Even as the state grapples with a power shortage, the MERC has linked load shedding to power theft and billing efficiency. The new order sets load-shedding rules approximately in the ratio of 1:2:5. What it means is that, an one hour of load shedding in rural areas will give load relief equal to that achieved by five hours of load shedding in major urban areas and two hours of load shedding in other urban areas. The issue of load shedding in the state had generated much heat especially after the power utility decided to impose nine hours of load shedding in rural areas while the cities were to face only four hours. Thus, there would be less planned load shedding in Divisions with lower Distribution losses and a higher recovery percentage. At a time of scarcity, areas where electricity is not being efficiently utilised or paid for should rank lower in the rationing order. The MERC while ranking the different divisions, gave greater weightage (70:30) to the distribution loss criterion. An adjustment of 3 per cent has been made in favour of rural areas because technical distribution losses there will generally be higher than in urban areas. Thus the divisions have accordingly been ranked on the basis of the weighted average loss and collection efficiency levels and at the same time the regulator has warned that the concerned officials shall be held responsible if these levels do not go down considerably in a stipulated time. Equally, the officials where the performance improves would be rewarded. The new system offers relief to industrial areas as it exempts other industries and MIDC areas with separate feeders.


REC to extend assistance to Andhra

June 17, 2005. The Rural Electrification Corporation (REC) has agreed to provide financial assistance to the tune of Rs 1,040 crore (Rs 10.40 bn) to Andhra Pradesh for the year 2005-06. The REC has also provisionally accepted to give Rs 400 crore (Rs 4 bn) for electrification of 1,000,000 rural households, augmentation of backbone network and other works for the current fiscal. The Rs 1,040-crore (Rs 10.40 bn) assistance from REC would be for improvement works in substations, to provide power for agriculture pumpsets and implementation of HVDS in seven districts. During fiscal 2004-05, the REC had released Rs 773.04 crore (Rs 7.73 bn) to APTransco and the distributions companies (Discoms). It also sanctioned Rs 15 crore (Rs 150 mn) as grant for electrification of 100,000 BPL (below poverty line) rural house holds. AP stood first in the country in terms of investments made for rural electrification works and achievements during fiscal 2004-05.

PowerGrid to enhance capacity

June 17, 2005. State-owned transmission utility Power Grid Corporation of India Ltd plans to enhance its grid infrastructure capacity to allow inter-regional transfers of around 12,000 MW by the end of this year, enabling additional regional transfers of around 2,500 MW. At present, it has an inter-regional capacity of 9,500 MW and by December or so it would have a capacity of 12,000 MW. The central transmission utility aims to take the inter-regional electricity transfer capacity to 30,000 MW by the end of the 11th Plan in 2012. The task of setting up this country-wide electricity grid, termed the National Grid project, will require an investment of nearly Rs 70,000 crore (Rs 700 bn). PowerGrid will chip in with Rs 50,000 crore (Rs 500 bn), while the rest is expected to come from private players. The 30,000-MW National Grid would help save about Rs 52,000 crore (Rs 520 bn) which is necessary to add about 13,000 MW of generation capacity. To strengthen its transmission network, PowerGrid is also modernising its load dispatch centres.

Ministry to bring DVC under CERC

June 17, 2005. The Union Power Ministry is exploring opportunities for bringing Damodar Valley Corporation (DVC) under the purview of Central Electricity Regulatory Commission (CERC) for fixing power tariffs. Being governed by the DVC Act, 1948 the corporation does not come under the purview of the Electricity Regulatory Commission Act, 1998. The move is expected to benefit DVC, which is jointly governed by the State Governments of West Bengal and Bihar, and the Government of India, and levies a comparatively low tariff for its power generation. This is despite the fact that the bulk of the power is generated from new thermal units. The corporation manages five thermal power stations, three hydel stations, and one small gas-based generation unit. While hydel capacity is limited to 144 MW, four of the five thermal stations are almost five decades old and either generate power at a low PLF or are out of operation. The Mejia thermal power station (4 X 210 MW), set up in the 1990s, alone contributes 70 per cent of DVC's total generation distributed in its command area. The Ministry is believed to have proposed that while fixing tariff for DVC, the regulatory authority should take care of the social responsibilities discharged by the corporation.

Electricity grid code draft ready

June 16, 2005. The Central Electricity Regulatory Commission (CERC) released the draft Indian Electricity Grid Code. The code has been revised in the light of various provisions of the Electricity Act 2003 and the operational experience gained since February 2000, when the grid code was first implemented by CERC for inter-state transmission. The State Electricity Regulatory Commission will be required to issue state codes consistent with those specified by the CERC, as per the requirement of the Electricity Act, 2003. The revised Code has a new chapter on inter-regional energy exchanges which aims to enhance grid security and energy balancing among the five electrical regions in the country. A timetable for the implementation of the free governor mode of operation of generating units by end 2005-06 has been set. 

Water may tide over power crisis 

June 15, 2005. Facing coal and gas shortage, the government is now focusing on hydro-electricity for generating sustainable power to tide over electricity shortage in the country. Power Minister, PM Sayeed, said there is vast hydel potential which needed to be exploited for electrifying all village households by 2012 as coal and gas supplies were dependent on international market situations unlike hydro power. Mr sayeed said the current shortage of fuel has adversely affected the productivity of thermal plants and had the potential to hamper the economic boom that the country was witnessing. He said that the agreement in the GoM over doing away with multi-layered scrutiny system will help us expedite the process without waiting for Planning Commission approval and procedures that led to delay and long time cycle for execution of projects. The GoM recommended that any project of Rs 500 crore (Rs 5 bn) or less, after due examination, can be sent directly by the ministry to the CCEA, rendering pre-PIB and PIB clearance irrelevant. The GoM also agreed that 41 hydel projects ranging from 50 MW to 300 MW and 25 transmission projects of up to Rs 1,500 crore (Rs 15 bn) will also have fast track dispensation in eight weeks as against 24 weeks in larger projects, making hydel projects more time-efficient and helping cut the demand-supply gap in the country. He said these measures would take care of most of the projects going towards the 60,000 MW capacity addition programme in the 11th Plan period.

Dual coal pricing may hit captive power units 

June 15, 2005. India Inc has raised objection against government move to introduce dual pricing mechanism for coal supplies fearing that it would adversely impact sectors that are heavily dependent on captive power plants for meeting their requirements. The coal ministry has proposed introduction of dual pricing mechanism for coal supplies, one for power utilities and other for the captive power plants (CPP) set up cement, aluminium and papar industries. If introduced, it would mean substantial rise in power cost for these industries as they will now have to purchase coal through open bidding process and auction instead of through quotas under the core sector grants. The dual pricing mechanism would hit aluminium companies such as Nalco, Indalco, Balco and Malco  with their costs increasing by over 30  per cent.

Power tariff hike a blow to Punjab

June 15, 2005. The power tariff hike of more than 10 per cent in Punjab has come as a rude shock to the state's steel industry which has urged the electricity board to take steps for containing transmission and distribution losses rather than putting additional burden on consumers. Since power constitutes two-thirds of the total cost of production in induction furnace units, the increase in tariff has led to a jump in the prices of steel by Rs 500 per million tonne, which will also hit the steel consumers of Punjab. Frequent power cuts have already played havoc with the state's steel industry, which produces three million tones per annum, and now the power tariff hike has put another question mark over the viability of the sector in Punjab.

Clean coal output target fixed 

June 15, 2005. With the domestic coal demand estimated to touch 1,200 million tonnes by 2025, the government is contemplating supplementing the demand for coal with as much “clean” alternative fuel as possible. Although the nation has 250 billion tonnes of coal reserves, the government has, in its Vision Coal 2025 policy document, envisaged producing at least 25 million tonnes of coal equivalent from coal bed methane (CBM) and underground coal gasification (UCG) — which are considered as clean fuel sources. The government is keen on investing in these frontier areas as part of strengthening energy security of the country. Companies would be encouraged to harness methane gas (which contains energy equivalent to coal) embedded in coal seams (CMBs), which would provide a clean source of energy. 19 CBM blocks have already been allocated with CBM reserves of 825 billion cubic meters...The consortium of Coal India Ltd and ONGC has been allocated two blocks in Jharia and Raniganj coal fields” for tapping coal equivalents — fuels which produce the same heat produced by conventional coal. India has about three trillion cubic meters of CBM reserves. CIL board had approved an agreement it (CIL) had entered into with ONGC for pursuing underground coal gasification on a 50:50 cost sharing basis. Neyveli Lignite Corporation (NLC) and GAIL India Ltd are also taking up UCG projects, noting that while NLC would take up a Rs 11.25 crore  (Rs 112.5 mn) pilot project in Rajasthan, GAIL would tie up with the Rajasthan government for a similar pilot project in that state. The Planning Commission had forecast the demand-supply-gap of 55 million tonness in 2006-07 and 95 mt on 2011-12. The ministry was making concerted efforts to bring down the gap by taking up new coal projects, advancing production targets and increasing production from existing mines.

ECL's Rajmahal mine nearing completion

June 15, 2005. The capacity expansion programme of Eastern Coalfields Ltd's Rajmahal opencast project is almost through. This could mean that National Thermal Power Corporation may get an additional quantity of coal from this mine in a year or two. The Rs 664-crore (Rs 6.64 bn) expansion plan is targeted at augmenting the mine's production capacity from 10.5 million tonnes to 17 mt per annum. The Inter-Ministerial Group (IMG) is understood to have cleared the project, which is now awaiting clearance from the Union Cabinet Committee of Economic Affairs. Rajmahal is a linked mine for NTPC's two super thermal power projects, one at Farakka in West Bengal and the other at Kahalgaon in Bihar. The combined coal requirement of these projects has been estimated as 15.8 mt in 2006-07, and about 19.8 mt during 2008-09 with an ultimate requirement of about 23.4 mt by 2010-11. The enhanced coal requirement of these power plants is because of their future expansion plan. Despite the Rajmahal expansion plan, the fact remains that NTPC may have to arrange for more than 6 mt of coal by 2010-11 from other sources for sustained generation from Farakka and Kahalgaon.




Shell-Oman venture boosts oil reserves, slows decline 

June 20, 2005. Royal Dutch/Shell Group, Europe’s second-largest oil company, last year boosted reserves from its joint venture in Oman and slowed the rate of decline at maturing fields. The field development plans for Lekhwair and Nimr yielded increases in reserves that more than offset the decreases in the reserves of six other fields. The company didn’t provide a total figure for the increase. PDO, in which Shell has a 34 percent stake, slowed the decline in production by drilling more wells and managing pressure in its reservoirs. Oil production last year fell to a 10-year low of 710,000 barrels of oil a day.

Shell, based in London and The Hague, is seeking new fields after disclosing in January 2004 that it overstated oil and gas reserves for years, which led to the departure of three senior executives, more than a dozen investor lawsuits and a U.S. Justice Department criminal probe. Last month, Shell lost a $2 billion oil field project to Occidental Petroleum Corp. and its partner, Abu Dhabi’s Liwa Energy Ltd., because of disagreement with the Oman government over how best to tap the oil.

Venezuela natural gas discovery in Plataforma Deltana

June 20, 2005. Chevron Corporation's Venezuela a significant natural gas discovery at the offshore Macuira 1X exploration well, advancing the company's plans to evaluate Venezuela's first liquefied natural gas project. The Macuira 1X well encountered six gas intervals with total gross thickness of 456 feet (140 meters). The well tested at a rate of 51 million standard cubic feet per day of natural gas from two of the six intervals.

Both tests were equipment-restricted. Macuira 1X is Chevron's first well in Block 3, one of five offshore blocks in Plataforma Deltana, northeast of Venezuela. It is located relatively close to, and on trend with, the Loran gas field in Block 2, where the company drilled successful exploration wells in 2004. The Macuira 1X exploration well was drilled in 382 feet (116 meters) of water, approximately 15 miles (24 kilometers) southeast of the Block 2 field and approximately 75 miles (121 kilometers) offshore.

Ivanhoe energy finds new gas field

June 16, 2005. Canadian oil and gas exploration company Ivanhoe Energy Inc. discovered a new natural gas field in California. The company said that it drilled a 2,500-foot exploratory well at a site about 45 miles west of Bakersfield near the Cymric Oil Field in Kern County and discovered a natural gas field.

With multiple oil and gas bearing horizons, Ivanhoe estimates the well has more than 250 feet of oil and gas bearing formations that are capable of production. This exploration is consistent with strategy of exploring for oil and gas in low risk areas where production can be achieved quickly.

US oil firm gets offshore Malaysia block

June 15, 2005. U.S. energy firm Newfield Exploration Co. has been awarded an exploration deal off Malaysia's east coast, its fourth in the country. Under the terms of a production sharing contract, Newfield will operate the block with a 60 percent interest and Petronas's exploration arm, Petronas Carigali, will hold the rest. The total minimum financial commitment for exploration of the block and development of fields within the block is $160.5 million. The block was the fourth production sharing contract awarded to Newfield. The U.S. firm is also engaged in finding oil off Malaysia's eastern Sarawak state on Borneo Island. The block, covering an area of 1,369 square km, is located in water depths of about 70 metres (77 yards) in the Malay Basin, about 300 km (186 miles) off the eastern state of Terengganu.


China to expand refinery

June 21, 2005. China, the world's second biggest oil consumer, plans to spend US$3bil on refinery units able to process cheaper, lower-quality Middle East crude oil to cut the country's annual import bill by as much as 20%. The investments over the next two years will boost the profit on each barrel processed by China Petroleum & Chemical Corp, Asia's biggest refiner, and PetroChina Co. The expansion may help ease a global shortage of capacity to handle oil from Saudi Arabia, the world's No. 1 exporter, and other producers of so-called heavy, sour oil that's high in sulfur. China's oil import costs rose 86% to US$4.66bil in May because of higher prices and increased purchases to meet soaring fuel demand. Saudi Oil Minister Ali al-Naimi last week said prices may stay high until consuming countries build more refineries to absorb the kingdom's surplus oil. China's oil demand last year grew six times faster than in the United States, and a lack of refining units to increase the yield of cleaner-burning fuels from processing high-sulfur, crude oil helped to push prices to records.

Build more refineries:Saudi Arabia

June 15, 2005. Saudi Arabia urged consumer countries to build more refineries amid warnings that OPEC could do little to stem high oil prices or a shortage of finished petroleum products. The supply is here, inventories are building, there is certainly no shortage of supply, so build, build refineries. Industrialised countries have been pressing members of the cartel to raise their production ceiling for crude oil by half a million barrels per day (BPD) to 28 million bpd. But real crude output is already far higher and in some instance running at full capacity, according to ministers and analysts. OPEC ministers arriving in the Austrian capital have cautioned that while they are broadly ready to raise their collective production quota for crude, it would have little effect on prices. The cartel, Kuwait and counterparts from Algeria, Libya and Nigeria signalled they were ready to support the move championed by Saudi Arabia, the world’s largest oil producer and widely regarded as the most influential member of the cartel. They are already producing that actually, now we are over 28 (million bpd) but at least this will give a good signal to the market.

Transportation / Trade

Iran exports 60 per cent of oil to E. Asia

June 18, 2005. The country is presently exporting 60 percent of its oil products to the East Asian countries. With regard to the increasing consumption of the crude oil by the East Asian countries, particularly China, as well as increase of demand for the WTI light oil by the European countries, Iran has changed policies on oil export. Currently, 60 per cent of the country’s oil is exported to the eastern Asia, and the rest is exported to the Mediterranean, northern Europe, and southern Africa. The European states have moved toward importing the crude oil without sulfur - the light oil - therefore, demands of these countries for the crude oil produced by the Persian Gulf states has decreased. The European countries are predicted to hold low shares of the heavy and sour crude oils in their energy stock by 2020. Thus, with regard to the current conditions, the oil suppliers such as Iran have to change the policies of their markets unless the European states embark on setting up refineries for refining the heavy crude oil.

BG Group buys Italy LNG venture

June 17, 2005. Britain's BG Group has agreed to take full ownership of the Brindisi liquefied natural gas import terminal in Italy's south, buying Enel's stake in a project that has faced strong local opposition. Oil and gas group BG would buy the 50 percent share in the project held by Italian utility Enel for 17 million euros ($20.6 million) in cash and a deferred, contingent sum of about 27 million euros. The transfer is expected to be completed by the end of June.

TransCanada wins bid for Mexican pipeline project

June 17, 2005. TransCanada Co won a contract to build and operate a $181 million gas pipeline in Mexico, its first major project in the country since selling its stakes there five years ago. Canada's biggest pipeline company said the 170 million cubic feet a day line will extend 125 km (78 miles) to a power station near Tamazunchale, San Luis Potosi, from Pemex Gas facilities close to Naranjos, Veracruz.

Statoil awards $21 mln job to Halliburton

June 15, 2005. Norwegian energy group Statoil has awarded a contract worth 140 million crowns ($21.46 million) to U.S. oilfield services group Halliburton for work on a gas pipeline to the UK. The contract is for work to prepare the 1,200-km (746-mile) Langeled pipeline from the big Ormen Lange gas field off Norway to Britain, Statoil said in a statement. Halliburton will be responsible for flooding, cleaning and gauging in the pipeline before subsea tie-in operations begin. Next Halliburton would pressure-test the pipeline, remove water, dry and prepare the completed system for gas filling. Pipelaying work began in April and is due to be completed next year. Langeled will run from Nyhamna on Norway's west coast via the Sleipner riser platform to Easington in eastern England.  Ormen Lange will come on stream in October 2007 and reach plateau export production of around 21 billion cubic metres per year through the Langeled pipeline, satisfying up to a fifth of the UK's gas need. The field and pipeline are Norway's biggest current offshore development with a total costs estimated at 66 billion crowns.

Colorado Interstate plans $61M gas pipeline expansion

June 14, 2005. Pipeline operator Colorado Interstate Gas (CIG), a subsidiary of El Paso Corp. has started construction on a 102-mile, $61 million expansion of a natural gas pipeline from the Raton Basin in south-central Colorado to the panhandle of Oklahoma. CIG is based in Colorado Springs. El Paso is based in Houston. The expansion will add 104,600 dekatherms of per day capacity to the existing pipeline. The construction includes installation of new 16-inch, 20-inch and 24-inch pipe, 1,770 horsepower of additional compression and new meter facilities. The Federal Energy Regulatory Commission, which regulates pipeline operations, authorized construction in early June, and the company expects to have the project in service on Oct. 1.

Policy / Performance

Venezuela Govt seeks regional gas company

June 21, 2005. South America's largest natural gas reserves Venezuela, urged the continent's energy producers to create a regional gas company to help fund social development. The proposed company, Gas del Sur, would serve as an alternative to major energy companies that "would take natural gas to markets where they could sell it for the highest price." Venezuela, which holds 150 trillion cubic feet of gas, has repeatedly called on oil companies in the region to band together to foster regional development by using the continent's natural resources. The Gas del Sur proposal mirrors a similar Venezuelan proposal to create PetroSur, a regional oil company. Venezuela’s first exploratory wells had found large reserves of natural gas and they were interested in spending between $5 billion and $6 billion on a natural gas liquefaction plant. Chevron Corp. is developing two blocks in the Deltana Platform field, which straddles Venezuela's offshore border with Trinidad and Tobago. Chevron Latin American Exploration and Development Chief said in a March 9 interview that the company has found 5 trillion to 7 trillion cubic feet of natural gas in its Deltana Platform blocks. Chevron is seeking to develop the fields and export liquefied natural gas to the U.S. While private companies wouldn't be excluded from development of the Deltana Platform, Chavez said state oil companies from India and OPEC would be invited to join. Venezuela's gas reserves in the Caribbean could be tapped and shipped to markets in South America.

Oman oil production down, gas production up

June 20, 2005. The Sultanate of Oman's crude oil exports stood at 86,856,5 million barrels during the first four months of 2005, compared to 86,926,5 million barrels during the same period in 2004, reflecting a 0.1% drop. The monthly statistical bulletin issued by the National Economy Ministry stated that the Sultanate crude oil and oil condensates production was 92, 712, 9 million barrels at the end of April 2005, compared to 95,48 million barrels in 2004, a 2.5% drop. The average daily production was 772,6 thousand barrels during the first four months of 2005, against 785,5 barrels in 2004, a 1.6% decline. The average price of Oman oil rose by 43.7% at the end of April 2005 to $44.23 per barrel, compared to $30,78 in 2004. China topped the countries importing Omani oil as it imported 31,953,5 million barrels during the first four months in 2005, against 38,237,9 million barrels during the same period in 2004, constituting a 16,4 drop. Oman's natural gas production rose by 2.1% during the first four months of 2005, to 252,691 billion cubic feet, compared to 247,499 billion cubic feet during the corresponding period in 2004. Gas consumption also rose by 2.1% at the end of April 2005 to 252,691 billion cubic feet, compared to 247,499 billion cubic feet at the end of April 2005.

Bahrain new natural gas policy launched

June 20, 2005. Bahrain has launched a new policy that aims to ensure an adequate storage of natural gas and a steady supply for gas-based energy and will use various sources in neighboring countries to import the needed quantity. The policy also seeks to achieve favorable negotiation deals for the price of imported gas and more professional purchasing rapports between consumers and suppliers based on market criteria. The committee hopes that the new policy will stimulate investments and motivate investors in the Kingdom by defining and regulating the roles of all parties in the gas sector and by ensuring clear guidelines that will boost their confidence in commercial and industrial activities. The technical, legal, regulatory, commercial and administrative aspects of the policy as well as the practical steps were reviewed at the meeting. Bahrain has natural gas reserves of about 3.25 trillion cubic feet (tcf), much of it associated gas from the Awali oil field. It produced 327 billion cubic feet (bcf) of natural gas in 2002, all of which was consumed locally. The largest domestic consumer was Aluminium Bahrain (Alba), which uses it in its power plant. In January 2002, Qatar and Bahrain signed a Memorandum of Agreement indicating Bahrain's intentions to purchase natural gas from Qatar's North Field Enhanced Gas Utilisation Project. The accord was part of a proposed Qatar-Kuwait pipeline project that failed to progress because of differences between Saudi Arabia and Qatar. The blocked $2 billion pipeline was supposed to head north from Qatar to Bahrain and then through Saudi waters to Kuwait.

Norway, eyeing Arctic gas, signs Russia energy deal

June 20, 2005. Russia and Norway signed an energy partnership agreement and a trade deal, bringing the two energy-rich nations closer ahead of a decision on whether Norwegian firms can join a huge Russian gas project. Norway's Statoil and Hydro are among a crowd of foreign oil firms hoping to join Russian gas monopoly Gazprom in developing the massive Shtokman field in the Barents Sea, a project that is likely to run for 50 years. With reserves estimated at 3.2 trillion cubic metres, Shtokman is one of the world's biggest gas fields and two and a half times as big as Norway's Troll field. It lies under iceberg-strewn seas around 550 km (340 miles) offshore, north of the Norwegian-Russian border. Russia and Norway also signed an agreement on terms for Russia's entry into the World Trade Organisation. Russia is the only big economy that has yet to join the trading body, and must first agree terms with each trading partner individually. It hopes that its entry will be approved later this year and it will join next year, but it has not yet come to an agreement with the United States, which raised objections in many areas.

Iran, India to consolidate mutual ties in energy sector

June 19, 2005. The agreement on annual sale of five million tons of Iran's liquefied natural gas (LNG) worth 22 billion dollars to India signed between the two states last week helps consolidate mutual relations in the energy sector. Iran's approach toward India as a consumer market with a high demand for energy, India's interest in Iran's remarkable petroleum and gas reserves and the background of bilateral ties have made the two sides more determined to expand cooperation in various fields. The two mutually signed documents on gas and steel have prepared the grounds for consolidating ties in various economic domains. India imports 70 percent of its energy demand and the inked LNG document will only supply part of the Indian market demand for gas. On the other hand, by signing its first agreement on sale of LNG to India, Iran has not only gained a share of the lucrative LNG market, but has guaranteed the partial sale of the South Pars Gas Field's gas output. Phases 11, 12 and 13 of the development project of South Pars Gas Field have been allocated to production and sale of LNG. The negotiations between the two sides on LNG date back to two years ago, when the first memorandum of understanding (MOU) on sale of five million tons of LNG to India over 25 years with expected revenue of 20 billion dollars was mutually signed.

20 refineries to spend $1 billion on cutting pollution

June 16, 2005. Valero Energy Corp., Tesoro Corp. and Sunoco Inc. will install nearly $1 billion in new pollution controls at 20 oil refineries, including one in New Jersey, and pay fines totaling $8.5 million in settlements with the government and seven states over alleged violations of clean air laws. Valero and Tesoro, each based in San Antonio, will install $700 million in controls to clean up 14 refineries in six states. Once the work is completed, their emissions of smog-forming nitrogen oxides are expected to drop by 4,400 tons a year and acid rain-causing sulfur dioxide by 16,000 tons. Sunoco, based in Philadelphia, will install $285 million in new controls to clean up four refineries in four states to cut their annual emissions of nitrogen oxides by 4,400 tons and sulfur dioxide by 19,500 tons. Both pollutants also cause serious respiratory ailments and worsen cases of childhood asthma. Valero also will pay a $5.5 million civil penalty and spend an added $5.5 million on environmental projects. Sunoco will pay a $3 million civil penalty and spend $3.9 million on projects.

UK plans to beat global warming 

June 15, 2005. Britain is to study whether global warming can be curbed by ‘capturing’ carbon dioxode from power stations and storing it underground in old oil and gas fields. The government has committed 40 million pounds for research on the technology, known as carbon sequestration, or carbon capture. The method should be operational within a decade and could eventually prove a major export earner for Britain as other countries begin to adopt climate change-reducing techniques. The theory is that fossil fuel power stations, oil rigs and other energy burners would hold on to waste gases such as carbon dioxode and methane, rather than releasing them into the atmosphere. Carbon dioxode and methane are among what are known as greenhouse gases, increased concentrations of which in the Earth’s atmosphere have been blamed by scientists for global warming. Under the plan, gases would be pumped underground into spent oil and gas fields.

BP: energy consumption likely to be lower

June 14, 2005. Energy consumption is likely to be lower this year as global economic growth slows, oil company BP PLC giving the industry a breather from the rapid spike in demand that pushed prices higher in 2004. The events that created exceptional energy growth last year - rapid consumption increases in China and smaller, but still strong, rises in demand almost everywhere else - were unlikely to continue into 2005. BP said world energy consumption grew by 4.3 percent in 2004, the largest-ever annual increase in global energy consumption in volume terms and the highest percentage growth since 1984. China was the powerhouse behind much of the demand, recording its third consecutive year of energy consumption growth in excess of 15 percent. Over those three years, China's energy consumption has increased by 65 percent, generating more than half the world's energy consumption growth. Oil consumption in 2004 was up 3.4 percent, or 2.5 million barrels per day, showing its fastest growth rate since 1978, with Chinese demand again underpinning the rise, this time accounting for a third of the increase. BP calculated that production in Iraq grew by around 670,000 barrels per day to around 2 million barrels per day as the security situation remained uncertain.

US needs 10 new gas terminals by 2025

June 14, 2005. The United States needs 10 new liquefied natural gas terminal projects to come online by 2025 to meet its increasing domestic demand. Based on current projections, liquefied natural gas, or LNG, imports in 2025 will reach 6.4 trillion cubic feet but that is still only about 25 per cent of total gas demand. The proposals for 22 projects have been submitted to the Federal Energy Regulatory Commission for approval, adding that five others - four onshore and one offshore - have been approved. The US needs 10 such projects to be built and in operation by 2025 to meet rising local demand. In the first quarter this year, the US imported 157,253 million cubic feet of LNG, up 3.9 per cent from the same period last year. In 2004, LNG imports reached 652,015 million cubic feet, representing 15 per cent of total gas imports. 



Barapukuria power plant goes into production next year


June 18, 2005. The 250-MW coal based Barapukuria thermal Power Plant under Parbatipur Upazila in the district of Bangladesh will go into operation in January next. Works on the infrastructure of the plant including residential compounds, have been completed. The total project will cost Taka 1663 crore with a foreign exchange component of Taka 941 crore.

Transmission/ Distribution / Trade

El Paso selling stakes in four Chinese power plants

June 21, 2005. U.S. natural gas producer and pipeline company El Paso Corp. is selling interests in four power plants in China to GP China Limited for about $71 million. The sales will help El Paso's long-term goal of trimming its mountain of debt, net of cash, to about $15 billion by the end of 2005. Since a mid-March update on its debt reduction plan, El Paso has announced or closed $600 million in asset sales. El Paso has targeted asset disposals worth between $1.2 billion and $1.6 billion. The stakes El Paso is selling are a 26-percent indirect interest in the Meizhou Wan power plant, an 80-percent indirect stake in the Nanjing power plant, a 60-percent indirect interest in the Suzhou power plant, and a 60-percent indirect stake in the Wuxi power plant.

Calpine to sell four plants for $357M


June 14, 2005. Struggling energy merchant Calpine Corp. identified four of the power plants it expects to sell as part of a turnaround plan outlined last month. The San Jose-based company said it will raise $357 million by selling three Pennsylvania plants and another in Illinois. Final details of all four separately negotiated deals still have to be completed, and government regulators also must approve the sales. The Tenaska Power Fund has agreed to buy the three Pennsylvania power plants located in the Ontelaunee Township and Philadelphia for a total of $275 million. The plants have combined capacity of 782 megawatts enough electricity to power about 586,000 homes. Calpine also plans to sell a 156-megawatt plant in Morris, Ill., to Diamond Generating Corp. for $82 million. The company has more than 80 other power plants. The sale proceeds will be used to reduce Calpine's outstanding debt of $18.1 billion, which it has pledged to reduce by $3 billion before 2006.

Policy / Performance

No deal in power sector without Kashmir solution

June 19, 2005. Pakistan has ruled out the possibility of cooperation with India in the power sector in divided Kashmir till the resolution of Jammu and Kashmir dispute. The two countries first need to resolve the Kashmir issue and water disputes before even considering such collaboration. Although there has been no formal proposal from the Indian government, hints about exploring possibilities of joint ventures in the power sector have been dropped through the media. A recent report suggested that the Indian prime minister’s office had asked experts to look into this possibility. Last month, Indian-held Kashmir’s Chief Minister Mufti Sayyed also said that India and Pakistan should jointly undertake hydro-power projects in Jammu and Kashmir. The calls for cooperation in the power sector come at a time when Pakistan and India have serious differences over three water projects in Occupied Kashmir. These include the under-construction Baglihar dam, and proposed Kishanganga dam and Wullar Barrage.

Pak invites bids for power projects


June 16, 2005. The Private Power Infrastructure Board has called for international competitive bidding for generation of 1,300 megawatts electricity in three locations in the country, which will cost $1.2 billion. Seven hydle projects for generating 1,800 megawatts electricity and unsolicited new site power projects for 4,000 megawatts are also under review. All these $7.5 billion projects are expected to be implemented in next five years. Plants and machinery worth $13 billion imported during the last five years, which is in the process of installation; it will generate thousands of new employment opportunities and will add to the manufacturing growth. Housing and construction sector is attracting the attention of the UAE, Saudi Arabia, Malaysian and Singapore investors.

Renewable Energy Trends


Draft biodiesel policy:AP 


June 20, 2005. The Andhra Pradesh government has introduced a draft biodiesel policy to facilitate both investors and farmers to plant oil-bearing trees in 1,500,000 acre in the next four years. Also, a risk fund of Rs 200 crore (Rs 2 bn) is expected to be created, through Nabard as loan to the state government, to support small and marginal farmers with maximum five acre land holding. There is also a proposal for constituting a biodiesel board, which would be an autonomous board for integrated development of jatropha cultivation and bio-diesel oil in the state. The proposed board, having legal authority, will monitor the tripartitie agreement signed between the stake holders, besides assisting, encouraging, and promoting jatropha cultivation. With a proposal to guarantee an income of Rs 24,000 per annum to a farmer, the total cost of cultivation for the farmer for the first two years comes to about Rs 12,375. At a realisation of Rs 6 per kg of seeds sold as a projected price, a farmer is assured of an income of Rs 4,800 per acre per year. However, the proposal is to guarantee income only to the farmers taking the plantations up to a maximum of five acre of land. Following the constitution of policy, the government is determined to promote contract farming for buyback of jatropha seeds. The minimum buy-back price will be fixed considering the different variables including the quality and quantity of the produce. A special department called the Rain Shadow Area Department has been created as a special purpose vehicle for planning, coordination, monitoring and implementation of the biodiesel programme. Meanwhile, the state government proposes to encourage jatropha plantations in seven districts viz Ananthapur, Kurnool, Kadappa, Chitoor, Mehboobnagar, Nalgonda and Ranga Reddy districts. The state-level taskforce includes the principal secretaries of agriculture, rural development, finance, rain shadow department, a Icrisat nominee, a Crida nominee and the vice-chancellor of the agricultural university. The projected sale by the year 2009-10 is about 4.6 metric million tones (MMT) with a net seed production required to produce about 3 MMT with 30% oil content in 1 MMT of biodiesel. Further, expression of interests for setting up new biodiesel plants will be evaluated by the state-level task force.


Subsidy for renewable energy sector 


June 16, 2005. The government, in a move to attract investment in the renewable energy sector, announced 50 per cent subsidy on energy projects based on urban wastes. The subsidy will be rendered immediately after disbursement of the first loan installment as contribution towards equity in the project. The national hydrogen energy board will soon submit a roadmap on energy use based on hydrogen.

Commercialisation of renewable energy

June 16, 2005. Andhra Pradesh Industrial Technical Consultancy Organisation (APITCO), Winrock International India and Rural Economic and Educational Development Society [REEDS] have signed a memorandum of understanding for setting up Commercialisation of Renewable Energy in India [CREI] project. The objective of CREI is to facilitate informed decision-making through updated information on renewable energy technologies. Winrock International India will extend think tank support to CREI; APITCO will extend need-based support and REEDS will focus on projects relating to literacy, livelihood promotion, health and leadership development.

Tap renewable energy sources:  Panchayats

June 16, 2005. The tapping of renewable energy sources such as solar energy, wind energy and biomass for operating power pumps for supply of drinking water and energising the street lights would go a long way in cutting the power bills of panchayats. Inaugurating an awareness seminar on `Renewable Energy Sources and Revival of Drinking Water Aquifers' organised by TEDA. The recent hike in the electricity tariff from Rs.1.20 to Rs.3.40 per unit had accentuated the financial crunch the panchayats were facing. Out of the 3,800 MW of solar energy generated in India, Tamil Nadu contributed 2,040 MW, while more than 55 per cent of the wind energy production of the country was accounted for by Tamil Nadu. Solar street lights have been installed in 507 out of the 12,600 panchayats in the state. One panchayat had totally replaced use of electricity from TNEB by the use of solar and wind energy. The use of biomass gasifiers and production of biomass from the night soil in the Integrated Women's Sanitary Complexes have been tried successfully in many panchayats. The electricity bills of the panchayats ran to a whopping Rs.20 crores (Rs 200 mn) per month, and they had to borrow money from financial agencies in order to repay the bill. The State Government was forced to provide a special fund of Rs.198 crores (Rs 1.98 bn) to enable the panchayats to repay the power bill. With a view to tackling this chronic problem, the government took serious steps to persuade the panchayats to tap the non-conventional energy sources to meet its energy needs. The power bill of several panchayats was reduced by 50 per cent after the use of solar energy for energising street lights.

Subsidy for renewable energy sector 

June 16, 2005. The government, in a move to attract investment in the renewable energy sector, announced 50 per cent subsidy on energy projects based on urban wastes. The subsidy will be rendered immediately after disbursement of the first loan installment as contribution towards equity in the project. The national hydrogen energy board will soon submit a roadmap on energy use based on hydrogen.

Indian model for solar energy promotion hailed

June 15, 2005. The South-South Redco (Rural Energy Delivery Companies) Exchange Programme began at Dharmasthala village in Dakshina Kannada district with the international delegates favouring the Indian model, where financial institutions are involved in popularising solar energy concept in rural areas. Mr Richard Hansen of Dominican Republic, one of the delegates at the South-South Redco Exchange Programme, said that the involvement of financial institutions has evoked a good response in India in popularising the solar energy concept in rural areas. He said this model can be adopted in other developing countries also. He said there is a need to explore the services of micro financial institutions to popularise this concept in other developing countries.  Dr Harish Hande, Managing Director of SELCO (India) Pvt Ltd, said around 1.6 billion people in the southern hemisphere are in need of power, and the first South-South Redco Exchange Programme will come out with suggestions to popularise this non-conventional energy concept. Instead of giving capital subsidy to solar light programme, the Government should extend interest subsidy. This will help a large section of rural poor, as the same amount will be distributed among many people. The Government is spending millions of rupees in the distribution of conventional electricity and losing millions of rupees in loss of electricity while on transit. There will be a permanent solution to the power problems, if a part of this money is spent on the installation of solar units. The solar programme became successful in rural areas of Dakshina Kannada and Udupi districts due to the micro finance movement of SKDRDP. More than 28,000 families have installed solar systems in both these districts. The value of electricity generated in these houses amounts to Rs 6.7 crore per annum. 


Pak spend $1.9bn in solar, wind power


June 19, 2005. Pakistan government would encourage foreign investment in alternative energy sector to meet the power requirements.  Investment of $1 billion in wind energy and $9 million in solar energy was expected in the country. Besides this, several national and foreign companies were evincing keen interest to invest in various fields. Realizing the importance of renewable energy, the government had approved the establishment of the Alternative Energy Development Board (AEDB) to identify projects to meet the power shortage. Due to government policies, the country’s growth rate has increased to 8.4 per cent this year, now Pakistan is being considered one of the fastest growing economies in Asia.


Enel to invest US$ 2bn in renewable energy


June 16, 2005. Italian utility Enel plans to invest 1.7 billion euros ($2 billion) in renewable energy from this year through 2009 but may shift its investment focus abroad. Enel is one of the world's top producers of energy from renewable sources, with installed capacity of 17,000 megawatts, which the former monopoly aims to expand further. Over the past three years, Italy's biggest utility has invested 600 million euros in renewable energy projects at home.


Wind farm opens in South Australia


June 16, 2005. The nation's largest wind farm, with the capacity to power 52,000 homes, has been opened on South Australia's Yorke Peninsula. The $165-million, 55-turbine Wattle Point Wind Farm has been built near Edithburgh. Developed by Southern Hydro, it can generate 91 megawatts of electricity. The opening of this wind farm is yet another step forward in this state's commitment to have a least 15 per cent of power generated by sustainable energy by the year 2014.



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