MonitorsPublished on Jun 28, 2005
Energy News Monitor I Volume II, Issue 1
Dabhol Revival: Good, Bad or Ugly?

Going by media reports and general perceptions, restarting Dabhol is a good thing.  The state of Maharashtra is reeling under a severe power crisis; billions worth of assets in Dabhol are rusting away and India’s image as an FDI destination in the power sector remains severely battered by the Enron experience.  Restarting Dabhol will provide power for the power less in Maharashtra, make Dabhol assets productive and more importantly repair the much maligned image of India in the eyes of foreign investors.  A win-win for all stake holders? The answer is not straightforward.

Not so much good from the past

India opened up the power sector in 1991 and invited offers for Independent Power Projects by Foreign Investors.  The response was way above expectations.  As a Business School case study on Dabhol put it, ‘internationally, India was in vogue for three reasons: the discovery of emerging markets by western financial institutions, economic reforms underway in the country, and a growing fear that China, the investor’s first choice, was spinning out of control. India appeared more lucrative as an investment opportunity due to many factors such as an instituted democracy, a manageable legal system and English was widely spoken’.  The reality was that the market for electricity demand was saturated in developed countries and international power companies were only too eager to exploit attractive offers from developing countries such as India, which was among few of the remaining growth markets for power demand.   It was a buyers market but wrongly assumed, by the host country, to be a sellers market. 

The initial euphoria generated 189 offers from IPPs amounting to 75,000 MW involving an investment of Rs 2760 billion. Out of the 185 offers, Memoranda of Understandings (MoU) were signed for 95 projects that would yield 48,137 MW.  There was international competitive bidding only for 32 projects.  Eight fast track projects were identified and supported with sovereign guarantee of 16 per cent Return on Equity (RoE).  Chief among these projects was the US$ 2.8 billion ‘Enron’ power plant in Dabhol with a capacity of 2184 MW.  The Enron project was seen as a litmus test for the government’s commitment to the reform process and future progress in the world arena. In addition, this was also the first Build-Own-Operate (BOO) project, first to propose the use of Combined Cycle Generation Technology using LNG to be undertaken in the country.  Dabhol was set up with Enron owning 65 per cent, GE and Bectel owning 10 per cent each and the Maharashtra State Electricity Board (MSEB) taking the remaining 15 per cent.  

The Power Purchase Agreement (PPA) signed in 1993 by the ruling Congress government was shrouded in secrecy and was subsequently cancelled by the BJP government which defeated the Congress on the Enron issue. Eventually the BJP government renegotiated the PPA and signed on to terms that were in essence worse than those of the first PPA.  Just when the project was approaching financial closure for Phase I in 1995, doubts began to surface on the rationale of the project. 

Dabhol appeared to be unwarranted as the technology was unproven, fuel wrong for an Indian base load plant, and capital cost much higher than that of comparable plants.  The entire project risk was borne by MSEB with most of the financial, political and legal provisions skewed against it.  Mandatory recourse to international arbitration, take or pay clause, excessively high contract termination fee backed by sovereign guarantees from the state and central government rendered the cost of exit so high that MSEB was literally trapped. 

In 1996 the second Phase of the project attained financial closure and construction resumed.  In 1999 the Phase I plant began operations and MSEB started purchasing power from Dabhol at more than twice the rates (Rs 4.5/kWh or $ 0.95/kWh) it paid to other suppliers.  Despite the revised PPA, MSEB’s financial status deteriorated fast once it started payments to Dabhol.  MSEB defaulted on payment of about $ 22 million to Dabhol in 2000 and subsequently sought cancellation of the PPA alleging failure on the part of Dabhol to abide by technical commitments. 

The dispute escalated and ended in closure of the plant along with the PPA being rescinded on the basis of mis-representation by Dabhol.  Within a few months the Enron scandal broke out in the US and the company eventually filed for bankruptcy proceedings.  In 2004 as part of Enron’s claimed equity in Dabhol, GE and Bechtel purchased 65 per cent of Enron’s equity in Dabhol for just $ 20 million.  

Plenty of Bad

While there is much said about unscrupulous multinational corporations’ such as Enron exploiting the weaknesses of developing countries there were innumerous signals that strongly indicated that the Dabhol concept was unsuitable for India and yet overlooked.

In 1993, before any contract was signed, Heinz Vergin, World Bank manager for India, rejected Enron's loan application for Dabhol, saying that the Dabhol plant is ‘not economically viable’. After the initial MoU and PPA, a committee chaired by the then Deputy Chief Minister of Maharashtra, Gopinath Munde undertook a comprehensive study of the project, reviewing thousands of pages of documents and interviewing representatives of numerous organizations concerned with the issue, including the company itself and concluded that ‘high cost power would in the immediate future, and in the long run, adversely affect Maharashtra and the rapid industrialization of the State and its competitiveness’ and recommended that Phase II of the Project be canceled and Phase I be repudiated.  Though the then Chief Minister Manohar Joshi acted on the recommendations this decision was soon reversed.

The Energy Review Committee headed by Madhav Godbole also found complete failure of governance of various governments at the state as well as the central government level in their dealings with DPC. In the report the committee found that the Enron power purchase agreement (PPA) had built in excessive payments to Enron from the Maharashtra State Electricity Board (MSEB) as a result of undue burden of the re-gasification facility, high recovery charges of shipping and harbour and O&M, and inflated claims of fuel consumption.   The report was very critical of the lack of transparency in negotiations on the PPAs which had a direct impact on the final consumers.  

More Ugly to Come?

Under the revival proposal for Dabhol which is being discussed by the Empowered Group of Ministers (EGoM), MSEB is to buy power from the project on a long-term basis at 80 per cent plant load factor for the entire 2184 megawatt capacity. The plant is expected to take around 18 months before it can be restarted.  Prior to the restructuring exercise, the government is planning to settle GE and Bechtel's claims of around Rs 1500 crore (Rs 15 billion). The plan envisages a tariff of Rs 2.20 per kilowatt hour and allow Indian lenders to take over the company's assets under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.  The tariff comprises a capacity and variable charge of Re 1 each per unit and an LNG re-gassification charge of Rs 0.20 a unit.

During the restructuring exercise, Indian lenders are to first form a financial Special Purpose Vehicle (SPV) to buy out the offshore lenders and OPIC (Overseas Private Investment Corporation of the USA which was a major lender to the project) by issuing government-guaranteed bonds of over Rs 3000 crore ($ 700 million). A project SPV would then buy out the financial SPV in an all cash deal before redeeming the government-guaranteed bonds. Lenders may take over the secured debt and either lease, assign or sell the assets to the Project SPV. 

According to the plan, 19 overseas lenders will get $230 million (at 20 per cent discount to their debt exposure); OPIC $225 million for general and political risk cover; export credit agencies $390 million, and GE and Bechtel $580 million which includes equity and cost of work done; $ 200 million towards restarting and completing the remaining work of Phase II; Indian debt of about $ 850 million.  A crude estimate suggests that the total costs – only those that have been revealed so far – comes to about Rs 10,000 crore (~ $ 2.5 billion).  Tax exemptions, import duty exemptions for equipment and LNG, loss of MSEB equity, loss of interest to Financial Institutions etc will add about Rs 1000 crore ( $ 1 billion) more to the cost. 

The question that needs to be asked, especially by consumers and tax payers who will ultimately bear the cost, is whether revival of Dabhol at this cost will deliver proportional value?  There are many issues behind that question.  SPV equity of around Rs 1500 crore ($ 375 million) would mean a debt component of about 9500 crore or a debt-equity ratio of about 6:1 which is far above the norm of 3:1 for power projects.  Another issue is the cost of delivered power.  The demand profile has hardly changed in Maharashtra.  MSEB the sole client of Dabhol was and continues to be non-creditworthy.  With fuel accounting for more than 60 per cent of the rate cost, it is not at all clear how the tariff can be fixed between Rs 2-3 per unit.  The fixed costs would be paid for fully but it is the the variable cost – fuel cost – that would determine the tariff and the volume purchased.  Only at LNG at about $ 4.2/mmbtu can the tariff remain at acceptable levels but on that no one can give a guarantee especially when oil prices are at $ 60 per barrel and moving up.  Yet another issue is the opportunity cost of reviving Dabhol.  Without the LNG terminal the revived project will cost about Rs 3.6 crore per MW as compared to Rs 3 crore per MW of a new gas based plant.  It may be argued that a greenfield plant will take at least 4 years to become operational while Dabhol can be restarted within a year but if we are looking at the long term – with hidden risks associated with Dabhol – a new plant may not be such a bad idea. 

As per the revival plan Dabhol will be a base load plant with 80 PLF.  Using high cost fuel it is again not clear how Dabhol will compete with cheaper base load plants especially when open access comes into force.  When buyers are free to choose expensive Dabhol power may become unviable. 

There is also the question of the government settling the deal as per the revival plan and then offering the cleaned up plant to the private sector at unbelievably low prices.  If one remembers Panna-Muktha & Raava oil fields which were sold off to the private sector without recovering even a small per centage of the cost incurred by ONGC in exploration and discovery of the fields this possibility does not seem to be so unlikely. The question of lack of transparency in negotiations is another serious issue.  MSEB the sole customer for Dabhol power will undertake a financial obligation that eventually will pass on to the consumers and the consumers have every right to know how tariffs were arrived upon. 

Politicians from ruling and opposition parties – both at the state and federal levels, past and present – were involved in Dabhol decision making right from Dabhol’s conception in 1991 – and they have an incentive in reviving the plant.  For them this is a short term issue that matters only as long as they are in power.  For consumers this is a long term issue and they better beware.  

 Team Energy ORF

(Views are personal)


India, China and Russia: The New Axis of Oil?


The possibility of co-operation between India, China and Russia in the development of their oil and gas resources has been under discussion at least since the second Trilateral Conference held in Beijing during November 2002. This event was a part of a still continuing series of annual conferences being held under the auspices of the Institute of Far Eastern Studies, Russian Academy of Sciences, Moscow; the China Institute of International Studies, Beijing; and the Institute of Chinese Studies, New Delhi. India and Russia of course have been cooperating in the development of oil and gas resources since the 1960s. Continuing interest in cooperation with regard to energy security was reiterated during the third such conference held in New Delhi during November 2003. Russian oil reserves are the 8th largest in the world, and natural gas reserves the largest in the world. In 2002 it had produced 369 million tons of oil and 595.3 billion liters of gas. In the same year 156.59 million tons of oil and 187.8 billion liters of natural gas had been exported from Russia, excluding the exports to Central Asia. These figures indicate that even if one excludes exports to Central Asia, China had still exported approximately 42% of its oil production and 33% of its natural gas production. Its annual production capacity in oil is expected to peak by 2020, and its natural gas production is expected to do so by 2030. India and China on the other hand fall far short of meeting their own requirements through domestic production. In 2003 China had imported 91 million tons of oil. By 2020 China is expected to import approximately 200-250 billion tons of oil. In 2003 India had imported approximately 44 million tons of oil.[1] Thus India, China and Russia could well complement each other in the oil and gas sector through Russia’s advantages in natural resources and production, and India’s and China’s market consumption capacity. One problem such cooperation would face however has to do with the transportation of resources. For example many of the schemes that have been proposed for the construction of pipelines to transport oil would have to go through some of the world’s highest mountain terrain such as the Karakoram Range. Building pipelines that avoid such high mountain ranges would involve traversing territory that is prone to political instability and violence in Central Asia, Afghanistan and Pakistan, as well as in India, China and Russia.[2] It should also be pointed out that Russia would stand in a pivotal position to both India and China at least as far as the supply-side in this sector is concerned. Both India and China competing to acquire assets in the controversial Russian firm Yukos could perhaps be taken at least as circumstantial evidence of the centrality of Russia in this triad. The relative sparseness of interaction in this sector between India and China should also be noted.  One set of reasons for this could be what has been perceived as an inevitable geopolitical/geostrategic rivalry between these two major Asian land powers, as well as competition for influence, status and leadership among developing countries, even as their own similar developmental requirements make them compete for attracting resources from the developed countries. Thus India’s currently improving relations with Myanmar’s military regime could make that country an arena for competition between India and China, as the latter has cultivated a very close relationship with that regime. For example China is in the midst of negotiations with Myanmar for continuing a 1250km long pipeline from the deepwater port of Sittwe in Myanmar on the Bay of Bengal coast to Kunming in Yunan Province, a project which would certainly attract a good deal of Indian scrutiny. Similarly the Gwadar deep-sea port in the Balochistan province of Pakistan, constructed in collaboration with China would be in competition with another such facility being constructed at Chabahar in Iran with Indian collaboration, as both ports are in proximity to the straitz of Hormuz, through which 40% of the world’s oil is transported.[3] Oil and Natural Gas Corporation Videsh Ltd (OVL) of India had lost out to China in acquiring oil and gas equity in one oil concern in Angola and five oil fields in Indonesia. Similarly OVL had also had to concede to China National Petroleum Corporation (CNPC) with regard to one other field in Sudan. Despite such instances of competitive interaction however, it is encouraging to note an evolving cooperative dynamic as well between India and China. For example the Gas Authority of India Ltd (GAIL) and China Gas Holdings, not only recently formalized a 10% equity acquisition by the former in the latter, but have also signed a heads of agreement (HoA) for jointly pursuing gas related business opportunities in China as well as in third countries. Furthermore both OVL and CNPC have acquired equity in the Greater Nile project in Sudan. Moreover India’s current petroleum and natural gas minister Manishanker Aiyer has also proposed the setting up of a joint task force to investigate possible areas of cooperation between India and China in this sector, and has also indicated India’s interest in being a part of a proposed pipeline between Kazakhstan and China.[4]  Yahavaran, Iran’s largest onshore oil field is also a Sino-Indian-Iranian collaboration, with each having a stake of 50%, 20% and 30% respectively.[5] If one were to recall the 2003 oil import figures by India and China however, 44 million and 91 million tons of oil respectively, it is evident that the import capacity of China’s market for oil during that year was more than double that of India. If this asymmetry in market capacity were to persist, and if their interaction in this sector were to take place within an isolated triadic or trilateral environment, the Russia-China dyad might end-up eclipsing in importance the Russia-India dyad. Hence it is certainly in India’s interest, but perhaps less in China’s given its demand capacity, and even less in Russia’s interest given its advantages on the supply-side, that their trilateral cooperation in this sector is not closed or exclusive, that it gives scope for other countries to join in their efforts. Moreover, their joint involvement in a Central Asian country such as Kazakhstan could be a possible avenue for India to pursue its interest in joining the Shanghai Cooperation Organization, which also includes Tajikistan, Kyrgystan and Uzbekistan. In early April 2005 the 4th Ministerial Meeting of the Asian Cooperation Dialogue was held in Islamabad. During the course of which the Chinese foreign minister Li Zhaoxing proposed to establish a Forum for Asian Energy Cooperation, which was adopted therein as the Qingdao Initiative. In order to facilitate this initiative China has declared its willingness to host a forthcoming conference of the Energy Safety Task Group of the ACD, during which ways to strengthen energy cooperation would also be discussed. It is perhaps evident from the preceding analysis that trilateral cooperation between India, China and Russia could also provide valuable impetus to this effort, as it would encompass much of Asia, from Iran in the west to Indonesia in the southeast.                       

Sithara Fernando, JNU (Views are personal)

Electrifying the Unelectrified India


(K K Roy Chowdhury, Consultant Energy, ORF)

1.0 The Problem

The rapid rate of urbanization, a distinct feature in our economic development, would be accompanied with changes in composition of the growing population and types of economic activities. The rapid growth rate is expected to overwhelm the availability of the public resources. This has inherently generated a pressure on us to increase the power availability as well as its quality. Simultaneously, there is also a need to check the exodus from our villages in search of better opportunities to facilitate a sustainable development process. Reforms taking place all over India in the power sector now are ultimately like light at the end of the tunnel to this effect. But how does it hold good yet? On one hand, we are yet to experience any success with our reforms initiatives, and on the other hand, we find that the ongoing reforms and restructuring of SEBs are not addressing the concerns of those not yet connected to the grid, who are relatively poorer than those connected.

The generation capacity inclusive of non-utilities has risen from 2300 MW in 1950 to 1,33,000 MW as of today. Again, the generation has increased from 6 billion units to more than 630 billion units as of now. With so much of generation, there are still people who are left with no power. As a result, they live in darkness or resort to unfair means of hooking, theft (estimated around four hundred US million dollars). As citizens of India, they have the right to power but the reforms and the Electricity Act 2003 has nowhere mentioned any definite process to electrify the unelectrified areas. With the tariff schedule increasing, it would be next to impossible for a poor man to pay for the charges required to electrify a non – electrified area.

Electricity Act 2003:

The act envisages and allows stand-alone systems for generation and distribution for rural and remote areas. Panchayats, user associations, co-operatives or franchises would also be permitted to manage distribution without requiring a licence in state government-notified areas. The central government is yet to bring out a policy on this.


India has shown significant growth in the power sector in terms of generation, transmission and distribution. As per statistics, nearly 80% of the villages have been electrified but how many of the villages receive a 24 hour supply is the question that needs to be answered. What is the value of such electrification when an average person doesn’t have access to power almost 6 to 12 hours a day? Power crisis and inaccess to electric power is also one of the factors of poor living conditions and hence poverty. Had this been taken into account to optimally design the village electrification programme to make it sustainable and raise the status of the poor and poorest who still account for the majority of the country’s population? Statistics again prove that nearly 1, 00,000 villages in India are today without electricity and add to it some of the under developed areas in urban circles. No plans even exist to connect more than 20,000 of those villages to a central electrical grid because they are too remote and inaccessible. Non–electrified areas in urban circles are sometimes inaccessible causing a greater hindrance to electrification.

Reforms in India and Recent Initiatives: Capacity addition & Rural Electrification Plan:

The Ministry of Power came out with an ambitious plan of adding 1, 00,000 MW during the 10th and 11th plans, during 2002 to 2012, to nearly double the installed capacity. Of this, the capacity addition for the 10th plan is about 45,000 MW. The Prime Minister launched the Hydro Power initiative in 2003 that envisaged a capacity addition of 50,000 MW during 2002 to 2012. As part of the rural electrification plan, the Government of India has set itself a goal of ‘Power to All by 2012’ under the Mission 2012, which implies electrification of all villages by 2007 and all households by 2012, to be supported by a massive central government subsidy. Three approaches are envisaged for this electrification: on-grid, off-grid, and hybrid systems. The central government has come up with a Rural Electrification Supply Technology Mission (REST), which was launched by the Prime Minister on August 15, 2002. REST envisages innovations in technology, financing and institutional arrangements to meet the goal of ‘Power for All’. Solar, biomass, minihydro, small generators and grid extension options are planned in this Rs. 6000 crore effort.


As a rising economy as we boast of, our plans and actions ought to have been driven towards complete eradication of poverty. That is not! We have actually failed to whole-heartedly address the various factors contributing to the poverty of the people, in doing so.

Electric power is one of them to enable people to come up. Otherwise, we contribute to deprive half the population of our country from having access to it. This does not help in achieving the country’s sustainable development either. We have to be also cautious in accepting the achievement figures declared by the government from time to time. For example, the village electrification figures may be misleading, because even those villages where even a single electric connection has been given is declared as electrified! This is ridiculous! This definition has now been changed and much more work is needed to electrify villages in the real sense to ensure that households also receive the benefit of electricity.

To ensure quality, reliability and continuity of electricity supply, investment would be necessary for adding new capacity and improvement in the supply system to eliminate wastage and misuse. It is however also necessary to create a mind set that the services provided have to be paid for at a reasonable price. Persons with low average income find it difficult to pay for the charges imposed on electrification and electricity consumption. This situation presents a special challenge to the government’s development agenda whose central objective is the improvement of the level of human welfare not only in urban areas but in all parts of the country.

Access to electricity, is a key element that cuts across all sectors in rural and urban living and development. Whether it is used to provide higher quality lighting for rural homes accustomed to kerosene lamps, power small vaccine refrigerators in clinics or pump water for irrigating small plots, the availability of even small amounts of electricity can make dramatic changes in the lives of people in remote rural areas. The key stumbling block in achieving this seems to be our political intervention in order to amass votes from the poor by delivering to them the message, “Electricity is a free of cost utility”; this blocks the mindset of the poor and hampers developmental work.                                                               


A Note on Electrification of Urban Poor:

Government of India’s policy for supplying electricity now to each household in the urban poor category under a franchisee scheme also stands to be myopic in nature since the following factors are not taken into consideration which has already been taken into account in many developing countries like Malaysia, Indonesia, even Bhutan to name a few:

Classification of household by gender, Size of the household, Source of income in the household, Frequency of cash flow, Type(s) of energy used by the household, Availability/proximity of the energy source, Modern energy possession(s), Energy initiative available, Expenditure on energy items, Expenditure on non–energy items. It has been estimated that the urban poor spend the maximum of their earnings on energy and in order to save money that they earn through hard work, they restore to unfair means like theft, etc. for getting supply of electricity. Moreover, it doesn’t take into consideration the facts that the patterns of energy use are influenced by income levels and types of economic activities. Again, among the relatively poor people, use of modern energy sources is not given priority. It is moreover pertinent to mention here that intended subsidies and preferential pricing doesn’t reach the poor and there stands a lack of payment flexibility for the urban poor leading to lack of faster development of the power infrastructure and thus increasing the energy poverty in a developing country like India.

2.0 The Possible Solutions

In off-grid areas, environmentally clean renewable energy technologies (RETs), such as solar photovoltaic (PV) and wind power, are becoming economically competitive with conventional, fossil-fuel based solutions. The potential applications include lighting for homes, schools and other public places; vaccine refrigeration for clinics; and water pumping for livestock, potable water supply and micro irrigation. These applications could be in stand-alone installations (such as solar home systems) or in minigrid configuration (such as a wind-diesel hybrid), depending on the density of user points. Renewable electricity from the sun, wind, water, ocean, geothermal and biological crop sources can be brought to nearly half the world’s population that today lives without power for just having no ground privileges the people of the civilized world enjoy, hence no sustainable earnings and therefore no voice to have an access to the miracles of science and technology to reform themselves even in this 21st century. As is evident from the monopoly structure of Power Industry in India, centralized power grids have not reached more than two billion people in developing countries, mostly in rural areas, because grid expansion costs too much, especially for capital-poor nations. Constructing giant electrical grids to bring power to rural areas costs too much and is an inefficient use of limited capital in developing countries. Governments and utilities do not have the resources they need to bring power to remote populations using traditional methods. Rural people as well as people in non–electrified areas even those with limited means, have demonstrated they are willing to pay for electricity if it is available.

Renewable energy systems are easily installed and maintained, and are available in varying sizes as per the requirement. They can supply power for households, villages, and regions at an one-time cost as low as Rs. 1000 per person. Reliable power sources, combined with access to credit, hold the key to economic growth and improved quality of life in rural, remote as well as unelectrified areas. Renewable energy offers a clean alternative to polluting fossil fuels, oil and coal. Rural areas of the developing world are prime markets for renewable energy technology and services. Key to success is building the capacity of local people and businesses to design systems and sell and service equipments. The Kyoto Protocol now in vogue extends its CDM(clean development mechanism) to help build this process which should be fully utilized by developing countries like India in developing sustainable electric power in their unelectrified parts. The poor and the people in the underprivileged areas should thus be enabled to raise their living standards and contribute to the economic growth of the country. This is the essence of any sustainable development policy. The power sector reforms however are devoid of a focus on this. The most imperative need of the hour is to tune our political will to build a consensus and create a positive mindset in our poor masses through a concerted effort in achieving these objectives.                                                            

 (Views are personal)                                             

….To be continued

India’s Reforms in the Hydrocarbon Sector

What Has Been Accomplished?

What Remains to be Done? - X


……continued from issue 52


Upstream Sector Continued: The First Two NELP Rounds


The first bidding round (NELP I) was launched in 1999 with 48 blocks on offer.  Deep water blocks were offered for the first time.  27 blocks on offer attracted 45 bids and Production Sharing Agreements (PSAs) were signed in April 2000 for 25 blocks of which 2 were onshore, 16 were shallow water offshore.  Compared to the 10 years preceding NELP during which period only 23 agreements were signed this was a substantial improvement in process efficiency. Time taken for bidding and signing contracts came down from 3 years to about 7 months. An investment of $250 million was committed by the awardees in the first phase of exploration and expectations of striking large oil and gas reserves were high, especially in the Krishna–Godavari basin.


Under the Union Budget 1997-98, the Exploration & Production Sector was given infrastructure status enabling tax holidays for 5 years from the date of commencement of production and 30 per cent concession in Income Tax payable in 5 years.  A separate petroleum tax code was to be put in place to facilitate investments.  A tax holiday for seven years was provided after commencement of commercial production from blocks situated in the North Eastern Region of the country.  In terms of price of crude & customs duty exemption level playing field was provided to the National Oil Companies and they were to be given international price of crude for production from areas obtained under NELP. Cess on crude oil produced from blocks under NELP was also abolished.


The second bidding round was launched in December 2000 in which 25 exploration blocks were offered. These included 8 deep-water blocks on the west coast, 8 shallow-water blocks both on the east and west coasts, and 9 on-land blocks. Blocks in Assam and Gujarat were offered for the first time.  To improve transparency in the bidding processes weightages were assigned to broad parameters used in the evaluation process were made public. 30 months were provided for appraisal of an oil discovery and 36 months for gas discovery. 


Expectations were high for NELP II as more than 215 companies and organizations had participated to view the data on blocks offered in ‘road-shows’ organised in London, Houston, Tokyo, and Singapore.  However, global oil majors, including British Gas, Royal Dutch Shell, and Exxon-Mobil stayed away from bidding.  Even companies such as BHP Petroleum, Pan Canadian, and Premier Oil which had bought data ultimately abstained from actual bidding.  However some of the smaller independents, either by themselves or in partnership with domestic players, showed substantial interest.  Hardy Oil bid jointly with Reliance for 15 of the 25 blocks. Cairn Energy bid for the Bombay offshore block.  For Cairn, this round coincided with its oil & gas discovery in Gauri, in the Cambay off-shore block in the west coast.  Petrom of Rumania bid for a singular block.  Canadian Niko Resources submitted bids for three blocks, and Heramec bid for one block in the Cambay basin jointly with Hindustan Oil. Joshi Technologies of the US also participated in the bidding process.  The domestic bidders were ONGC, OIL (Oil India Ltd), IOC (Indian Oil Corporation Ltd), GAIL (Gas Authority of India Limited), GSPCL (Gujarat State Petroleum Company Limited), Reliance, and HOEC (Hindustan Oil and Exploration Company). ONGC on its own and in consortium partners like IOC, GAIL, and HOEC bid for 18 blocks, while OIL bid for 3 blocks. Reliance bid for 15 blocks while the remaining companies bid for one to three blocks each. Among the domestic players, Reliance Industries and ONGC emerged as the most aggressive bidders. The Government signed PSAs for 23 Blocks in the second round of NELP in July 2001 of which 7 were onshore, eight were shallow water offshore and eight were deep water offshore. 


Of the four blocks which received the maximum bids, two were from the Cambay basin in Gujarat, while the other two were in the Bombay off-shore and the West Bengal offshore regions. Of the 25 blocks offered, bids came in for only 22 blocks and 11 of these blocks received only one bid while another eight blocs got two bids. Apart from falling oil prices, competing and probably geologically more attractive offers in the Atlantic basin, Middle-East, Caspian Sea and the Gulf of Mexico were cited as reasons for the lukewarm response. 

……to be continued

Pakistan says ‘no’ to Indian diesel, for now

June 22: Pakistan has refused to import diesel from India for the time being, either through land or sea route, owing mainly to its higher rates. The decision was conveyed to New Delhi during Indian oil minister Mani Shankar Aiyar’s visit to Islamabad early this month. “Although the import of diesel from India continues to be in the Commerce Ministry’s negative list, the price offered to Pakistan by India is much higher than the Middle Eastern rates.” Indian diesel was about $3-4 per ton costlier than that of Kuwait and other Arab countries. The question relating to removal of import of Indian diesel from the negative list may be taken up when the foreign secretaries of the two countries meet later this year as part of composite dialogue.

Even if India reduces its prices, the import of diesel from New Delhi through land route is not possible in the foreseeable future owing to Pakistan’s internal commitments. Explaining the reason for not using the land route for diesel import from India, the official said the federal government had given a throughput guarantee of 4.5 million tonnes per annum for the $780 million White Oil Pipeline Project (WOPP) from Port Qasim to Multan. In case high speed diesel is imported through land route, the government will have to pay throughput charge to the WOPP for the under-utilized capacity. In that case, any expected saving in transportation charges from diesel import from India through tankers or pipeline to Lahore would stand neutralized.

The Ministry of Foreign Affairs and security agencies had recently advised the government that a coordinated policy on import of petroleum products should be adopted keeping in view diplomatic, political and economic implications for overall progress of India-Pakistan relations. India had offered to supply diesel to Karachi by sea from Jamnagar and by tankers from Jalandhar to Lahore. The Indian Oil Corporation (IOC) had separately asked Pakistan State Oil (PSO) to include its name in the list of pre-qualified suppliers.





Reliance closing in on 16th gas find

June 28, 2005. Reliance Industries is on the verge of a 16th gas discovery in deep sea block D6 off the Andhra coast, and has made a sixth consecutive gas find in block NEC-25, off Orissa coast. Reliance plans to begin producing 40 million standard cubic metres per day of gas from Dhirubhai-1 and Dhirubhai-3, two of the many discoveries made in the block, from 2008. The company is looking forward to continued drilling success on block D6. Reliance has completed drilling the sixth exploration well at NEC-25, resulting in the sixth consecutive gas find within the 1800 sq-km 3D seismic area.

Biggest gas find in India

June 27, 2005. Gujarat State Petroleum Corporation Ltd (GSPCL) has made the country’s biggest gas discovery - 20 trillion cubic feet (tcf), worth US$50 billion - in the Krishna-Godavari (KG) basin in Andhra Pradesh. The find is a historical moment for the entire hydrocarbon sector in the country. The initial testing results indicate estimated reserves of 20 tcf of natural gas with a value of approximately Rs 2 trillion (US$50 billion). In 25 years, a 1,000 MW plant consumes one tcf of gas. The Gujarat government is also plannning to dilute up to 20 per cent stake in its wholly owned Gujarat State Petroleum Corporation (GSPC). GSPC started its drilling operations with first well KG-1 on July 31, 2004. Within a short span of 300 days, and after spending Rs 250 crore (Rs 2.5 bn), the first strike was made in KG-8 well. Now onwards, the project will be known as ‘Deen Dayal’ (saviour of the poor) project. Gujarat government has decided to invest additional Rs 1,500 crore (Rs 15 bn) for the further development of this field.

ONGC gas find off A.P. coast

June 25, 2005. The Oil and Natural Gas Corporation has discovered gas in shallow waters off Andhra Pradesh coast. The gas was discovered in the ninth well drilled in GS-15 prospect, 15 km off Amalapuram coast. The present discovery was made south-west of the Ravva gas field. The well `indicated a significant hydrocarbon column' between an interval of 1,684 metres and 1,760 metres. This hydrocarbon column was 45 metres tall. While most of it is gas, the lower level indicates an oil leg. Oil found just below gas was called oil leg. An estimate of the quantity and quality of both oil and gas would be available in about a fortnight.

EU green signal for Iran-India pipeline 

June 24, 2005. The European Union, which will soon kick-off an energy dialogue with India, has said it is not opposed to a US$4.16 billion pipeline project to pump gas from Iran to India through Pakistan. Energy dialogue is one of the key areas of India-European Union cooperation after the bilateral relationship was upgraded to “strategic partnership” level last year. The European Union, which has tremendous expertise on energy conservation, is scheduled to kick-off energy dialogue at the foreign secretary level now. The Indian delegation will be headed by foreign secretary Shyam Saran.


Kochi terminal estimate ups to US$460 mn

June 26, 2005. Petronet LNG Ltd (PLL) has revised upwards its estimate for the terminal in Kochi from Rs 1,600 to Rs 2,000 crore (Rs 16 to 20 bn) and hopes to award the contract in April. The plant was expected to become operational in 2009. The plant to come up on the Cochin Port Trust premises at Puthuvypu would have a capacity of 2.5 million metric tonnes per annum (mmtpa) and would be doubled very soon. An agreement for the supply of 5 mmtpa from Iran had been signed which would be sufficient to meet the additional capacity. PLL had decided to go ahead with the project irrespective of whether NTPC sourced LNG for its plant at Kayamkulam. NTPC had proposed expansion of its capacity from 350 MW to 2000 MW using LNG for which there was a proposal earlier to have its own terminal.

IOC plans over US$ 413 mn investment in Haldia refinery

June 23, 2005. As part of the investment, the country’s largest oil refining and marketing company is preparing a detailed project report to reconfigure the refinery capacity from 6 mt now to 7.5 mt by ’09. The hike in refinery capacity is particularly aimed at making full use of improved supplies of crude at Haldia post-’06. The company’s Rs 1,200 crore (Rs 12 bn) Haldia-Paradip pipeline project is scheduled to be completed by ’06 and this is likely to lead to a much higher availability of crude at Haldia. IOC’s investment in Haldia comes as part of a larger plan to raise existing refining capacity from 41 mt to 66 mt over the next five years. IOC is also expanding capacity at its Panipat refinery to 15 mt and from 8 mt to 11 mt at Mathura. Also on the cards, is a greenfield refinery at Paradip. Along with the hike in refining capacity, IOC has also decided to go ahead with its plan of setting up a hydrocracker unit at Haldia. The addition of the unit will help upgrade the quality of High Speed Diesel (HSD) that meet Euro III norms.

IOC to expand, upgrade regional sales network

June 23, 2005. Indian Oil Corporation Limited plans to 30 outlets to its network of 490 existing outlets in West Bengal. The number of Kisan Seva Kendras, or scaled-down petrol pumps for rural areas, will also witness a rise, with 50 more to be set up in West Bengal. As part of IOC's plans for the public distribution system in West Bengal, the existing kerosene dealer network of more than 200 will be utilised to step up the kerosene supply in association with the consumer goods department of the state government in the block levels. IOC would help kerosene dealers by providing tanks and dispensing pumps. IOC would upgrade petrol pumps on the highway under the Swagat brand to provide special facilities to travellers.

IOC for stake in Singapore petro firm (SPC)

June 22, 2005. Indian Oil Corporation is planning to take a stake in Singapore Petroleum Company (SPC) as part of its plans to become a diversified, transnational, integrated energy major. SPC, which has a market cap of about US$1.1 bn, has 50 per cent stake in Singapore Refinery Corporation's 273,000 barrels per day refinery and owns a 220,000 cubic meter capacity oil storage terminal in Singapore. It has 39 retail outlets in Singapore with a market share of around 18 per cent. With a strong foothold in aviation and bunkering business, SPC is a pioneer in aviation refueling business at Changi Airport, Singapore. In addition, the company has aviation facilities at Taipei, Hong Kong and Bangkok airports.

Transportation / Distribution / Trade

US$4.36 bn for new GAIL projects 

June 23, 2005. GAIL (India) Limited planning to invest about Rs 13,000 crore (Rs 130 bn) in four new pipeline projects. Another Rs 6,000 crore (Rs 60 bn) plus investments have been lined up for implementing various petrochemical projects. Gas sourcing has been identified as a major growth area by GAIL. Besides participation in the Ennore LNG terminal project, GAIL is sourcing part of LNG supplies for Dahej, Dabhol and Kochi (basically filling gap in regas capacity and supply tie ups besides expediting expansions). The company plans to lay a Rs 3,000 crore (Rs 30 bn) Jagdishpur-Haldia pipeline, Rs 3,000 crore (Rs 30 bn) Dadri-Nangal pipeline, Rs 2,000 crore (Rs 20 bn) Kochi-Coimbatore-Bangalore pipeline and Rs 5,000 crore (Rs 50 bn) Kakinada-Uran pipeline. While the first two pipelines will have a capacity of 12 million standard cubic meters per day each and will carry regassified-LNG from Dahej in Gujarat, the third pipeline would carry gas from the upcoming LNG import terminal of Petronet LNG Limited at Kochi in Kerala. The Kakinada-Uran pipeline is being planned to transport the government’s share of gas from the Krishna-Godavari basin in Bay of Bengal. GAIL’s estimate is that the profit gas from various blocks in the KG basin can sustain a pipeline of 12 million standard cubic meters per day. GAIL is looking at sourcing 2 mt of LNG for restarting the Dabhol power plant and an additional 3 mt for sale to other customers to make the LNG sourcing business economically viable. GAIL is talking to suppliers in Malaysia, Oman, Qatar, Yemen, Australia, Abu Dhabi and Nigeria for sourcing of LNG.

Policy / Performance

Iran regime change will not hit oil projects: Aiyar

June 27, 2005. Petroleum Minister Mani Shankar Aiyar said the change in regime in Iran would not have a negative impact on the proposals for import of natural gas and development of oilfields. The two countries recently concluded a $22-billion deal, entailing imports of 5 mt of liquefied natural gas from Iran for 25 years beginning 2009. In addition, a proposal for gas import through a pipeline passing through Pakistan is under negotiation.

CoPT hands over land to Petronet for LNG terminal 

June 27, 2005. The Cochin Port Trust (CoPT) has handed over 32 hectares of land at Puthuvypu, off Kochi for the setting up of the Rs 2,000-crore (Rs 20 bn) LNG terminal by Petronet. The port also decided to hand over land to Kochi Refineries Limited (KRL) which is to set up its single buoy moor at Puthuvypu.

No hike in gas price this year

June 23, 2005. The government has decided to cap the price of natural gas at US$3.86 per million British thermal unit for this year, providing relief to users who thought gas would become dearer. The Cabinet had last month decided that consumers, other than power and fertiliser companies, would have to pay market-determined prices for natural gas. The government has also issued instructions to Oil and Natural Gas Corporation (ONGC) and Gail India Ltd on the new pricing policy. Under the changed policy, ONGC will no longer have to subsidise natural gas bought from joint venture companies. Gail was making up for shortage of gas supplied under the government's administered price mechanism (APM) by buying the non-APM (joint venture) gas. This gas was being produced from fields given out to companies under the new exploration and licensing policy. Gail compensated for the higher price of non-APM gas by deducting the amount it paid to the ONGC. This practice had now been done away with.

Iran gas, Chhattisgarh coal to fuel Tata Steel plants 

June 22, 2005. While Tata Steel plants in Iran will use the abundantly available gas in that country as an energy source to produce 3 mt per annum (mtpa), its 5 mtpa facility in Chhattisgarh will use the huge source of non-coking coal deposits in that state in making steel. With its abundant natural gas resources the conditions in Iran logically suggest a gas-based route for steel-making. Likewise, the abundant non-coking coal deposits of Chhattisgarh suggest a primarily coal-based route to steel-making.

India's oil reserves to be reassessed

June 22, 2005. The directorate-general of hydrocarbons is planning to reassess India’s hydrocarbon potential. India has prognostic oil and gas reserves of about 30 bt but related studies were conducted about a decade ago. Today, only 25 per cent of these reserves had been discovered. It is thinking of the methodology and ways of integrating data from various companies. Most of these studies had been conducted by the Oil and Natural Gas Corporation and Oil India in the past. Only seven to eight basins out of 26 had been explored so far. Besides, many onland basins remain unexplored, and deepwater explorations were also fairly new to the country. The government offered 20 blocks for bidding under the fifth round of the new exploration and licensing policy. These blocks are in 12 sedimentary basins, covering an area of about 109,210 square metres.



NTPC to start power hub in Sri Lanka

June 28, 2005. State-run National Thermal Power Corporation (NTPC), plans to set up a 900 MW coal or LNG-based power plant in Sri Lanka. NTPC will submit a proposal to the Sri Lankan government to set up the project either on Build, Own, Operate (BOO) or on Build, Own, Operate and Transfer (BOOT) basis, the power major informed The Stock Exchange, Mumbai. The public sector generation monolith will also set up a joint venture company with Bihar State Electricity Board to operate the 220 MW Muzzaffarpur Thermal Power Station. The power major will sign an MoU with Bihar government and BSEB for transfer of the 2 X 110 MW plant at Kanti in Muzaffarpur to the new Joint Venture Company. The company has a total installed generation capacity of 23,435 MW and plans to become a 40,000 MW company by the end of the 11th plan period. NTPC plans to add 9,160 MW generation capacity during the 10th plan period and 17,333 MW in the 11th plan. 

NTPC TN project gets coal linkage 

June 26, 2005. The National Thermal Power Corporation (NTPC) has got the much-needed coal linkage for its proposed 1,000 MW power project NTPC Tamil Nadu Energy Company Ltd. NTPC was earlier toying with the idea of importing feedstock through Ennore Port for the proposed project. NTPC Tamil Nadu Energy Company Ltd is a 50:50 joint venture between the thermal power major and the Tamil Nadu State Electricity Board (TNEB). The NTPC Tamil Nadu Energy Company Ltd has got coal linkage from ministry of coal following a request by the Union power ministry. The power company would get five million tonne coal from Mahanadi Coal Fileds Ltd (MCL) per annum. The proposal for the linkage is recommended by the Union ministry of power and was considered by Standing Linkage Committee (Long Term).

Dabhol project to restart 

June 23, 2005. The US$2.9-bn Dabhol power project is all set to be restarted with GE, one of the major equity holders in the project, assuring to begin work on restarting the project by month-end. The estimates by NTPC for the project restart are between Rs 600-800 crore (Rs 6-8 bn). GE along with Bhel will begin the assesment study for restarting the project by month-end or latest by the first week of July. The study will be carried at a cost of US$1-2 mn and will be completed in 45 days. While GE will do a detailed assement of the generator, steam turbine and gas turbine, Bhel will do the Bechtel part of the job which involves assement of all other equipment such as switchyard, cooling water tank, naphtha tank etc.

J&K plans for 10 power projects

June 23, 2005. In a bid to exploit the vast potential for power generation, Jammu and Kashmir government plans to give out contract to private sector to construct 10 power projects in the state. As part of the Independent Power Producers (IPP) arrangement of the state hydro power policy, a private sector company has been given contract to first such power project over in south Kashmir.

The Ahrabal Power Project designed to generate 15 megawatt power would cost about Rs 105 cr (Rs 1.05 bn). Nine similar power projects would be taken up at at various places in the state including Brenwar, Athwatoo, Mandi, Tangmarg and Hirpora during current year. In addition, about 25 mini and micro hydel projects with a cumulative capacity of 2000 MW would be started in Jammu and Kashmir during the current year.

GVK bags 2 Uttaranchal power projects

June 23, 2005. Hyderabad-based GVK Industries Limited, an infrastructure major, has been awarded the 200 MW Mapang Bogudiar and the 170 MW Bogudiar Sirkari Bhyol Hydro Electric Projects by the Uttaranchal government. These two major projects are located on the Goriganga river in Pithoragarh district of Uttaranchal. GVK has bagged these projects amidst stiff competition through international competitive bidding route.

GVK will be executing the projects on a BOOT (build-own-operate-transfer) basis and expects to complete them before the scheduled time of 10 years through innovative methods of strategic alliances, project management expertise and competence in engineering and construction. Both Mapang Bogudiar and Bogudiar Sirkari Bhyol are challenging projects involving the construction of dams, tunnels, intakes, surge shafts, underground power houses, transmission lines, roads and other supporting infrastructure.

BHEL gets two AP power projects

June 22, 2005. Bharat Heavy Electricals Ltd will execute two 500 MW thermal projects at Bhoopalapally and Vijayawada in Andhra Pradesh. The Bhoopalapally project in Warangal district has received most of the statutory clearances, and coal and water linkages have also been firmed up. The Rural Electrification Corporation (REC) would contribute Rs 1,680 crore (Rs 16.80 bn) towards the Rs 2,200 crore (Rs 22 bn) project. This works out to about Rs 4.4 crore (Rs 44 mn) per MW. These projects would be commissioned during the first half of 2008. AP Genco is also directed to set up a 2x800 MW supercritical power project at Krishnapatnam in Nellore district. The thermal project located in a coastal area will have the advantage of a jetty facility. Being a mega project (above 1,000 MW), it can avail of customs duty exemption, which would make it cost effective. the project would be completed by 2009. 

Transmission/ Distribution / Trade

Kerala to have 400-KV Highway

June 24, 2005. With a view to meeting the ever-growing demand for electricity in Kerala in the coming years, several long-term measures have been initiated by the State Government. A 400-KV Power Highway, being built with assistance from the Central Power Grid Corporation, would ensure that the State received uninterrupted supply of electricity from the power stations under the Centre, in the event of a breakdown of the system in the state. The 400- KV Power Highway extending from Kozhikode to Thiruvananthapuram, has been designed to draw electricity from the power stations at Koodankulam of Tamil Nadu and Kayamkulam in Kerala and to transmit it to various parts of the State. There is a 400 KV-sub-station already functioning at Madakkathara of Thrissur district. The work of a sub-station of an even capacity was fast nearing completion at Pallippueram of Thiruvananthapuram district.

Policy / Performance

Jharkhand set to get US$ 6.67 bn investment

June 28, 2005. Jharkhand state was close to finalising investment worth Rs 29,000 crore (Rs 290 bn) in the steel and power sectors, which included the L N Mittal-promoted Mittal Steel. The state government had also signed an agreement with the Essar group for enabling the later to construct a power project at the cost of around Rs 10,000 crore (Rs 100 bn) in Jharkhand. It expects an investment of Rs 10,000 crore (Rs 100 bn) for the second stage of the National Thermal Power Corporation project in the state and are hopeful that Rs 10,000 crore (Rs 100 bn) would be invested by the private sector.

Free power sought for washermen

June 27, 2005. M. Anjaiah, chairman of Andhra Pradesh Washermen Cooperative Federation Limited, has suggested to the Government to provide free power to `dhobighats' as is being supplied to farmers. He said that as an alternative, Government order on supply of power to `dhobighats' at Rs. 250 a year (up to 5 hp) and Rs.400 (up to ten hp) should be implemented.

No increase in power tariff for now

June 27, 2005. With North Delhi Power Limited (NDPL) demanding stability or reduction in power tariff in view of "over-achievement" of its revenue targets, the Delhi Government is faced with a tough choice of deciding between going in for a power hike or opting for subsidy to small consumers and making the bigger consumer pay more. Although the Delhi Electricity Regulatory Commission (DERC) is ready with the tariff order, it is learnt that the Delhi Government has asked it to hold it back. It may be noted that the Delhi Government has all along maintained that DERC is an independent body and it has no control over its functioning. But it has managed to get the order on tariff held back for quite a few days now. Experts are of the view that if the Delhi Government is serious about the whole affair then it has the power to issue policy directions to DERC on an important matter, something that could help in putting the tariff order on the backburner. Reflecting a spirited performance, NDPL has come out openly against any power hike on the assurance that the present procurement rates should be allowed to stabilise. With the NDPL setting the tone for not disturbing the present tariff structure or seeking reduction, the job of the Delhi Government has been made all the more difficult due to the increasing pressure from consumers and the poor situation on the power front. Despite the performance of BSES Yamuna and BSES Rajdhani coming in for flak from various quarters, the Delhi Government has failed to act or file a formal complaint against it with the DERC.

Coal supply to hinge on use

June 27, 2005. The government is planning to tighten coal supply by asking coal users to furnish a letter of comfort certified by financial institutions while seeking a linkage. The government is insisting on a letter of comfort after finding that many companies are not using their linkages. The reasons for linkages lying idle ranges from a plant becoming sick or being unable to add more capacity to companies opting for better variety of imported coal. According to Ministry of Coal, companies will be asked to declare a time schedule by which they expect to achieve project milestones, failing which their linkages could be cancelled. The demand for coal linkages was not very high till two years back. The spurt in demand was owing to an increase in global coal consumption and companies relying more on domestic coal. The increase in thermal power generation also added to an increase in the demand for coal. The plant load factor (PLF) of power houses has gone up from 69 per cent in 2000-01 to 75.2 per cent in 2004-05. The increase in PLF has adversely affected coal supply to the non-core sector. This sector has about 2,800 linked consumers even after Coal India recorded its highest-ever production of 323.64 million tonnes. The Planning Commission has projected a demand-supply gap of 55 million tonnes for 2006-07 and 95 million tonnes for 2011-12. 

Coal prices to be regulated

June 27, 2005. The Government of India has agreed to put in place a mechanism to regulate coal pricing which has a huge bearing on the cost of generation of power. The Centre has decided to refer the coal pricing issue to the Tariff Commission at the national level which would harmonise the interests of consumers and producers and arrive at a proper pricing structure. This step is taken in the light of the Coal India Limited’s decision to increase coal prices by around 15 per cent with effect from June 2004.

US$79 for rural electrification in Kerala

June 26, 2005. The Kerala State Government had earmarked Rs. 343 crores (Rs 3.43 bn) for the Centre-sponsored Rajiv Gandhi Rural Electrification Scheme for providing power connection to 100,000 villages. The amount would be utilised for electrification of 2,573 villages in the State. A Rs.7.74-crore (Rs 77.4 mn) scheme would be implemented to end the low voltage problem in Taliparamba and nearby areas. Similar schemes would also be launched in Koothupramba and Mattannur. As many as 548,000 new connections had been provided in 2005 including 122,000 connections for families in the below poverty line category.

Power outages lowest in Kolkata

June 24, 2005. The Central Electricity Authority's (CEA) evaluation for March 2005 identified Kolkata as the city with the lowest number of trippings per feeder and Jabalpur as the one with the lowest outage duration per tripping. This was CEA’s third monthly report, which ranks power distribution systems in big cities on the basis of the number of trippings per feeder and the outage duration per tripping. Surat in Gujarat was second in terms of number of trippings, followed by Mumbai suburbs and Ahmedabad. Coimbatore in Tamil Nadu was second in terms of outage duration in March 2005, followed by Chennai in Tamil Nadu and Mulund in Maharashtra. The rating is based on the number of trippings and outage duration of 11 Kv feeders. At present, the evaluation is for towns with a population of more than 8 lakh. The top 22 discoms in the country were rated by the CEA. Their performance in March showed that discoms, which had a lower number of trippings per feeder, had relatively longer outage duration. 

AP to seek additional gas supply for IPPs

June 24, 2005. The Andhra Pradesh plans to seek the Centre's support for additional gas allocation for power projects. State would request the Prime Minister to initiate steps to ensure availability of natural gas as per agreements made with GAIL for all the four sanctioned independent power producers (IPPs) in the State. GVK, Konaseema, Vemagiri and Gauthami, with a total installed capacity of 1500 MW, need natural gas supply. Any failure to ensure gas supplies to these projects would mean an additional burden of Rs 1,000 crore (Rs 10 bn) per annum towards fixed charges, without a single unit of power being generated and supplied. As per the terms and conditions agreed to with these gas stations, the Government will have to shell out money even if they were idle.

NTPC asked to import 400,000 t of coal 

June 24, 2005. In order to tide over the existing fuel and gas shortages for power projects and meet its targets of 41,000 MW for the Tenth Plan, the ministry of power has asked the National Thermal Power Corporation (NTPC) to import 3.5-4 lakh tonnes of coal during the current fiscal through MMTC India limited. Gas shortages of around 20 mmscmd for the existing projects is also being tied up in co-ordination with the petroleum ministry. While 10,959 MW has already been implemented, 24,152 MW capacity is under execution and another 1,815 MW is under award. About 5,000 MW capacity requirement will be met from captive generation. This will ensure that targets for 10th plan are met.

Himachal tie-up with Canada for power 

June 24, 2005. Himachal Pradesh would explore the possibility of collaboration with Canada in hydro-power development in the state. Due to similar geo-physical conditions, there was vast scope for taking up power generation by Canada in the state.

India to build Afgan power project

June 24, 2005. In a major move to help war ravaged Afghanistan rebuild its infrastructure, India agreed to construct a 220 KV double circuit transmission line to start power supply from Uzbekistan to Kabul and a power sub-station in the Afghan capital at a total cost of Rs 478.72 crore (Rs 4.79 bn). The approval to the two projects was granted by the Union Cabinet. The transmission line from Pul-e-Khumri to Kabul would be implemented within a period of 42 months. The approved project is envisaged to supply power to Kabul from generating stations of its neighbouring Uzbekistan through the transmission line from Tirmiz via Pul-e-Khumir to Kabul.

KCCI calls for power import from Bhutan

June 23, 2005. Kanara Chamber of Commerce and Industry (KCCI) has said that India should import electricity from Bhutan. Bhutan, which is producing around 30,000 MW of hydro electricity every year, is interested in exporting a part of it to India. In Bhutan, hydro electricity is being produced at a cost of 80 paise a unit. However, the electricity supply companies in India have to write to the national grid to import power from Bhutan. Apart from electricity, there is a good scope for importing coal from Bhutan.

Coal linkages to 22 captive plants

June 23, 2005. The ministry of coal and mines approved long-term coal linkages of 4636 mt to 22 captive power plants. The Korba super thermal power station expansion stage II of NTPC has been sanctioned 2.233 mt of coal and the Mauda thermal power station, also under NTPC, has been given 5 mt per annum. The 22 captive power plants with a total capacity of 1,128.75 MW would benefit from the approvals granted. While the Korba unit of NTPC would get coal from the South Eastern Coalfields, the consent of the Railways to move coal from IB Valley of Mahanadi Coalfields has bailed out the Maunda unit with a 1,000 MW capacity. The other power plants granted linkages include Balco (540 MW), Hindalco (40 MW), Aarti Steels (80 MW), Shriram Fertilizers and Chemicals (40 MW) and Lafarge India (43 MW). The ministry has cancelled coal linkages to three power and 49 cement plants. The power plants include the 120-MW Bongaigaon Thermal Power Station (TPS), the 500-MW Dadri TPS and the 1,000-MW Chandil TPS. 

UP power tariffs to go up next month

June 23, 2005. Power tariffs are set to be hiked for the fifth time in a short span. A new tariff structure is likely to be announced by the UP State Electricity Regulatory Commission next month. The UP Power Corporation (UPPCL) in its Annual Revenue Requirement (ARR) for 2005-06, submitted to the commission in March, asked for a hike of 12–18 per cent for various categories of consumers. The UPPCL expects to mobilise Rs 600 crore (Rs 6 bn) more in 2005-06 through revisions of power tariffs. Power tariffs in UP are lower than in several neighbouring states and there is ample scope of further hike. The corporation is of the view the average cost of supply of power is Rs 4.05 per unit while the average selling cost is only Rs 2.81 per unit. Moreover, the cost of power procurement is likely to go up by 16.87 per cent in two years, while the average hike in power tariffs is just 3 per cent. Even after five years of reform in the power sector, the financial position of the UPPCL remains grim. In 2004-05 cash losses of the UPPCL were Rs 2,761 crore (Rs 27.61 bn), that too after it received a subsidy of Rs 1,002 crore (Rs 10.02 bn) from the state government. The UPPCL maintains there was a subsidy shortfall of Rs 500 crore (Rs 5 bn) because the power regulator had asked the state government to pay a subsidy tune of Rs 1,500 crore (Rs 15 bn).

NTPC to pay higher to GAIL than Reliance for LNG 

June 23, 2005. National Thermal Power Corporation (NTPC) has agreed to pay US$4.1 per million metric british thermal unit (mmbtu) to GAIL (India) for supply of Iranian LNG to its power project at Kayamkulam in Kerala. This is the second gas deal finalized by NTPC, the first being with Reliance for gas supplies to its power projects at Kawas and Gandhar at US$2.97 per mmbtu for 17 years. Under an agreement between NTPC and GAIL, ex-Kochi re-gassification terminal price will not exceed US$4.1 per mmbtu. PLL’s re-gassification cost has been assumed at somewhere between US$0.32-0.45 per mmbtu and is included in the price of US$4.1 per mmbtu. In addition, NTPC will also have to pay a transportation charge of around US$0.17 per mmbtu to GAIL, which is planning to lay a 93 km long offshore pipeline for supplying re-gassified LNG from Kochi to Kayamkulam. So, the Iranian LNG will land at the Kochi port, where it will be re-gassified at the terminal of Petronet LNG. Gas supplies to NTPC will be made by GAIL from its share of LNG from Iran.

World Bank to fund AP projects 

June 22, 2005. Diluting the free power policy has, at last, paid off. The World Bank has agreed to fund various projects in Andhra Pradesh. It had initiated discussions with the state government on free power and the recent steps taken by the government. Billing rich farmers and metering agriculture power are very positive steps, World Bank said. The Bank is keen to support the state government and work together in various development and poverty reduction projects. It is in process of clearing the US$230 mn urban infrastructure project proposed by the government.

Short circuit: Sayeed, PM differ on free power

June 22, 2005. Power minister PM Sayeed and Prime Minister Manmohan Singh don’t seem to be speaking the same language when it comes to power sector reforms, especially on the issue of providing free power. The power minister, P. M. Sayeed says that the Centre would not interfere with a state’s decision to provide free power. Mr Sayeed put the ball in state governments’ court, by saying that it was up to political parties in the states to decide whether or not to provide free electricity to certain sections of society. Sayeed rationale for putting the ball in the states’ court is simple. Electricity is a matter on the concurrent list and states had the freedom to make their own choices. He said that the Electricity Act, 2003 also provides (freedom to) state governments to give relief to any section of the society, provided they compensate for it. 

SPV for Dabhol in next 10 days 

June 22, 2005. A special purpose vehicle (SPV) for the restart of 740-MW phase I of Dabhol project would be set up in the next 10 days. Comprising National Thermal Power Corporation (NTPC), GAIL India and financial institutions (FIs), the SPV would be the joint owner of the project with an equity participation of Rs 1,500 crore (Rs 15 bn). This is an interim arrangement to ensure restructuring and completion of the phase-II (1,444 MW) which is almost 93 per cent complete. The Centre has already decided to provide guarantee of close to Rs 3,150 crore (Rs 31.50 bn) to the SPV. After completion and stabilisation of the project, it would be sold to a private operator. The lenders would move the Debt Recovery Tribunal for the transfer of Dabhol assets, free of encumbrances and charges. Financial institutions would exercise their enforcement rights as secured lenders to DPC to the project SPV. NTPC and GAIL would operate and manage the facility.

Plan panel revises down investment

June 22, 2005. Resource constraints has forced the planning commission to scale down investments by 12.5 per cent in crucial areas including agriculture, power and manufacturing. The sectors identified by national common minimum programme (CMP) as thrust areas for boosting economic growth and investments will now get only Rs 3,582.2 crore (Rs 35.82 bn) in the remaining two years of the tenth plan as against the original allocation of Rs 4,081.5 crore (Rs 40.82 bn). The mid-term appraisal (MTA) of the tenth plan has reduced the public investments by 19 per cent especially in agriculture, manufacturing, electricity, and public administration etc. It said that investments in manufacturing and power sectors were low, mainly due to the inability of PSUs concerned to generate requisite amount from internal resources, while in other areas it was the lack of sufficient budgetary resources. Investments in electricity, gas and water supply has almost been halved to Rs 174.5 crore (Rs 1.75 bn) from the tenth plan level of Rs 251.6 crore (Rs 2.52 bn).

CERS opposes higher power tariffs for schools

June 22, 2005. Ahmedabad-based Consumer Education and Research Society (CERS) has strongly opposed the state government's decision to charge commercial rates for electricity supplied to schools and other educational institutions.  In June 2004, the Gujarat Electricity Regulatory Commission (GERC) had created a special tariff, LDF-III, for educational institutions registered with the charity commissioner. The LDF-III tariff provides for fixed charges of Rs 26.25 per month and energy charges of Rs 3 per unit. Schools and educational institutions were earlier charged tariffs at par with residential areas and this change has been made for a year or so now.

Programme to improve power transmission in Kerala

June 22, 2005. Power transmission in Paravur township in Kerala is set to improve with the launching of the Accelerated Power Development and Reforms Programme at Paravur. The programme involves revamping the whole distribution system with the addition of extensive network. Thirty-three new distribution transformers and 175 capacitors will be installed to improve voltage and stability. All the existing distribution transformers at Paravur section will be renovated.




New gas field in Saudi Arabia

June 28, 2005. A new gas field, capable of pumping 40 million cubic feet of gas per day, has been discovered in an area about 95 km west of the eastern oil city of Dhahran.  The condensates at the Fazran 23 well had a density of 45 degrees API. It was discovered by the state-owned oil and gas giant Saudi Aramco on June 24. The Kingdom faces an increasing demand for natural gas from its rapidly growing population, expanding industrial sector and ambitious new petrochemical projects. Saudi Aramco announced it was in the process of floating four giant projects at Khorsaniya, Shayba, Kharees and Hawiya fields as parts of efforts to increase oil production. The new projects will be online between 2006 and 2008.

Aramco offers 4 petroleum projects

June 28, 2005. Aramco offered contractors during a meeting at the Eastern Chamber of Commerce four potentially giant projects to support its oil production in the Kharasaniya, Shaiba, Khorais and Hawiya fields. The projects are expected to be initiated in 2006 and 2008. They are divided into three groups: Giant projects with a cost of around $2 billion; medium projects between $3 million and $200 million and small projects for less than $3 million. Aramco also announced that it has completed the architectural design of a group of giant and medium projects and will send out invitations for bidding on them later.

Shell paves the way for future as natural gas giant

June 23, 2005. Shell will transform itself into a global gas major over the next ten years, producing more natural gas than crude oil, as the company steps up investment in ten multibillion-dollar projects, known as “elephants”. Shell expects that its production of hydrocarbons will rise from current levels of 3.5 million barrels per day (bpd) to 5 million bpd as the company raises its investment in research and new technology. The business would change, with unconventional oil, such as tar sands, heavy oil and gas-to-liquids technology, playing an important part in the growth. The growth would come from Shell’s vast oil sands deposits in Canada, as well as gas projects in Australia, Nigeria and Qatar. The group has invested $1 billion (£550 million) in renewables. Shell’s business would remain crude oil and gas as well as uncoventional fuels, while gas-to-liquids and coal gasification technology would become important. Hydrocarbons will have the lion’s share of energy supplies. Renewables are simply too expensive. Over the long term, technology may make them cheaper, but they will always be more expensive than barrels out of Saudi Arabia.

Petrobras increases target to 600,000 b/d

June 23, 2005.Brazil's state oil company, Petrobras, increased its international crude production target for 2010 by some 100,000 barrels per day to 600,000 bpd. The increase in production will largely come from the United States, Venezuela and Nigeria. The international plan's budget of $7.5 billion will also be increased. Most additional resources will be destined for joint exploration and production with Venezuela state oil company PDVSA under accords signed last year. Cervero was also enthusiastic about his company's work in Angola, where Petrobras plans to reverse a decline in its output and boost production levels from just 10,000 bpd. Petrobras was planning to take part in concession auctions and win rights for more oil areas in Angola, where total output is expected to double by 2008 to about 2 million bpd. Petrobras expects its output abroad to reach nearly 200,000 bpd this year, despite a 7.8 percent fall in May. Its domestic crude production is on the rise and reached 1.73 million bpd last month. Its total domestic and foreign output of oil and natural gas hit 2.28 million bpd in crude equivalent last month.

Oil to continue above $49: OPEC

June 22, 2005. OPEC, the producer of about 40% of the world’s oil, expects crude oil to trade above $49 barrel in New York until the end of the year. The Organization of Petroleum Exporting Countries (OPEC) may increase production capacity to 40 million barrels a day by 2010 from an estimated 33.1 million barrels a day by the end of this year. It is because of great demand from the US and China, and the declining growth in production from non-OPEC members. It is also because the additional capacity from new refineries cannot catch up with the growth in demand on oil products and because of some geo-political problems. OPEC on June 15 agreed to raise production quotas for a fifth time in a year, aiming to halt a rally in oil price, which may threaten global growth. The group is considering doubling the increase if prices stay above $50 a barrel for seven days. Since then, oil has risen as high as $59.52 a barrel.


Accel energy group JV with China

June 27, 2005. Accel Energy Group announced a joint venture with one of the largest refineries in central China for the implementation of crude oil refinery services and products. The refinery, located in Ningxia province, currently has more than 2,000 employees, sales of 83 million (USD) and fixed assets valued at 71 million (USD). It currently produces 1,100,000 tons of petroleum products, chemicals, asphalt and owns a gas station chain throughout the province, with plans to expand into the neighboring provinces. The prestigious refinery is considered one of the leading private companies in China and the Ningxia province. It is planning to become a major supplier of energy in China.

Sempra has plans to expand liquefied natural gas terminal in Baja 

June 25, 2005. Although construction of Sempra Energy's liquefied natural gas terminal in Baja California is in its earliest stages, the company says it eventually plans to expand from 1 billion cubic feet a day up to 2.5 billion cubic feet a day. The $800 million project on 400 acres of the Costa Azul plateau about 14 miles north of Ensenada will process liquefied natural gas from Indonesia in an agreement with BP and Tangguh LNG. The company also has signed a capacity sharing agreement with Shell and its partners to bring the liquified gas from Sakhalin Island off Russia's eastern coast.

Transcorp, Zenon sign mop to build refinery in Lagos

June 22, 2005. Transnational Corporation of Nigeria Plc, a newly mega company signed a MoU with Zenon Petroleum and Gas Limited to build a refinery in Lagos. For the effective execution of the proposed refinery, the first of its kind to be initiated by the private sector, Trans Corp will be raising N66 billion from the capital market by way of Initial Public Offer (IPO) in the first quarter of 2006.

Transportation / Trade

SSGC inks new gas sale agreement

June 25, 2005. A 30mmcfd supply of gas will be available to Sui Southern Gas Company following signing of a new "Term Sheet of Bhit Gas Sales Agreement (GSA)" at SSGC. The agreement was signed between SSGC and ENI Pakistan - the operators of Bhit and Badhra gas fields in Dadu district, on behalf of their joint venture partners Kirthar Pakistan BV - a Royal Dutch/ Shell company, Premier Kufpec Pakistan (PKP) and Oil and Gas Development Company Limited. The original Bhit GSA was signed in November 2000 under which 270mmcfd of gas is being supplied to SSGC. With the development of the Bhit / Badhra Gas fields, the total volume now available to SSGC for sale will increase from 270mmcfd to 300mmcfd by the summer of 2007.

Enterprise invests in natural gas plants

June 23, 2005. Enterprise Products Partners L.P. would pay $144 million to acquire seven natural gas liquids, or NGL, facilities from propane retailer Ferrellgas Partners LP, and pay $25 million to buy stakes in two pipelines from energy provider Williams Cos. to bolster its domestic NGL portfolio. Enterprise, which processes, transports and stores natural gas and crude oil, also said it would expand an existing natural gas pipeline from Skellytown, Texas to Conway, Kansas, the nation's second biggest NGL market. Construction of the 190-mile pipeline will begin mid-2006 and is expected to be in service in the first quarter of 2007.

Chevron Caspian pipe could pump 1.55 mln bpd by '09

June 22, 2005. A Chevron-led pipeline from Kazakhstan to Russia's Black Sea could be expanded to 1.55 million barrels per day or 15 percent more than planned if all its owners agree on expansion. By 2009 capacity will be a minimum of 67 million tonnes (a year), which can in fact be increased by 10 million tonnes by the use of flow improving chemicals if the demand supports it.  CPC's current shipments stand at 650,000 barrels per day or full capacity of its first phase. Its expansion to 67 million tonnes a year (1.35 million bpd) is blocked by Russia.

TNK-BP set to enter gas markets

June 22, 2005. TNK-BP is set to become one of the largest and most active participants of the gas market, supplies, trading and gas and gas condensate transportation, has stated at the 3rd Russian Oil and Gas Congress. TNK-BP has chosen to cooperate with Gazprom, and has already held rather many meetings. At present, the company does not possess any proven gas reserves, yet it annually produces some 4.5bn cubic meters of associated gas. It has worked out short- and long-term development variants for its gas business. In the long-term, the company proposes to develop the giant Kovykta field in Eastern Siberia with the reserves estimated at 2.13 trillion cubic meters of gas.

UK's BG signs LNG purchase pact with France

June 21, 2005. British oil and gas group BG Group had entered into an agreement with France's Gaz de France for the purchase of liquified natural gas. BG said the purchases, at the rate of approximately 2 cargoes per month, would start next month and run until the end of 2006. It is planned that the LNG cargoes will be delivered to BG Group's North American marketing business at Lake Charles and Elba Island, but there is also flexibility to deliver to other terminals.

Liberia signs offshore exploration deals

June 21, 2005. Liberia's government signed deals with one Liberian and two foreign oil companies to explore possible offshore oil deposits along the West African nation's Atlantic Ocean coast. Britain's Broadway Consolidated, Nigeria's Oranto Petroleum Ltd., and Regal Liberia Ltd. signed the deal with Liberia's state oil firm late last week, agreeing to underwrite the search for $34 million. Profits will be shared if oil is discovered. The money will cover equipment procurement, well drilling, and personnel costs. The contract was signed amid concerns over corruption in a country that's been hard-hit by civil war since 1989. Fighting ended in 2003 with a peace deal that put in place a transitional government and paved the way for presidential elections expected in October.

Policy / Performance

Kuwait oil co. to seek pre-qualify bids on refinery

June 26, 2005. State-run refiner Kuwait National Petroleum Co. will invite international companies to pre-qualify to bid to build a new refinery with a capacity of up to 630,000 barrels per day. A committee has already been formed to evaluate the pre-qualification applications by potential international bidders. The new refinery project is expected to be completed in 2010, the same year the aging 200,000-bpd Shuaiba refinery will be shut down. KNPC has appointed Fluor International, part of U.S.-based construction and engineering contractor Fluor Corp., as adviser for the bidding process. KNPC runs three refineries with a combined maximum processing capacity of 930,000 bpd. The new environmentally-friendly refinery will produce low-sulphur fuel oil for the country's water and electricity generating plants.

Russia to increase energy production and export

June 25, 2005. Russia will continue to increase oil and natural gas production and exports. Russia will further step up the extraction of oil and gas, increase energy exports and expand cooperation with the leading, including American, companies both on continental parts and on the Barents Sea shelf, on Sakhalin Island, and other territories.

China to fill petroleum reserve this year 

June 24, 2005. China will start filling its first strategic petroleum reserve this year, China amid efforts to ensure energy supplies for the country's booming economy. The first 16-tank facility to be filled is in the city of Zhenhai in the eastern province of Zhejiang, south of Shanghai. The reserve is meant to cushion China against possible interruptions of foreign supplies. Previous reports said Beijing plans to stockpile up to 100 million barrels of petroleum, or the equivalent of almost a month's national consumption. The United States operates a similar reserve. China's reserve is to be overseen by a government commission created this year to coordinate energy policy and supervise state-owned oil companies and other resources. China supplied its own energy needs for decades from domestic oil fields, but became a net petroleum importer in the 1990s. Driven by a booming economy, it has quickly risen to become the world's second-biggest oil importer, after Japan. Plans call for three other reserve facilities in Daishan in Zhejiang, Huangdao in Shandong province southeast of Beijing and in Xingang in Liaoning province in the northeast.

Gazprom plans major expansion into oil

June 24, 2005. Russian gas giant Gazprom is planning a major move into oil and wants to emulate BP, Exxon and Shell by getting half its income from oil, Gazprom is the world's biggest gas company, but many of its gas fields also have oil and in the first five months of this year it produced an average of 260,000 barrels per day of oil and gas condensate, almost all of which it sold within Russia. They are studying the possibility of new acquisitions in this sector in Russia and abroad. Oil output would soon rise because new fields would come on stream, such as the Kara Sea Prirazlomnoye or the Siberian Tazovskoye deposits. Gazprom will also recieve $7 billion from the sale of its treasury stock back to the state by the end of 2005 and its executives have said the firm might use the money to buy oil assets in Russia and abroad. The firm also plans to deepen its involvement in Russia's power sector. Through its Gazprombank arm, it already owns 25 percent of Moscow utility Mosenergo and 10 percent of national power monopoly RAO UES.

Iran duty-bound to address global crude demands

June 23, 2005. As a committed OPEC member and an oil producer, Iran feels itself duty-bound to address growing oil demand worldwide. The need for development of oil industry in Iran to meet international demands, there will be demand for 120 million bpd in the next 25 years which requires an investment of six trillion dollars in the oil industry. More investment is needed to be made by Iran to maintain its OPEC quota and address rising global demands. NIOC's activities should match global standards so that the Company would have a say on the scene of competition.

Conditions for India-Myanmar pipeline 

June 23, 2005. Bangladesh expressed its Opposition to India’s ambitious project to interlink rivers and put conditions for allowing a gas pipeline between India and Myanmar through its territory. On the proposal to construct an India-Myanmar gas pipeline passing through Bangladesh, Bangladesh was not averse to it but wanted India to “sort out certain things”. Three major issues which it wanted New Delhi to address — reduction of trade imbalance, providing corridor for Nepalese goods to Bangladeshi ports and access to hydro-electric potential in Bhutan.

Oil giant faces suit over flaring gas

June 22, 2005.  Shell and its partners found themselves facing a legal suit from local rural communities and western environmentalists over allegations of causing pollution and global warming by flaring gas in Nigeria. The case designed to highlight the issue ahead of next month's G-8 summit on Africa and climate change was lodged in the Federal High Court of Nigeria in Benin City by the Gbarain and other communities. Friends of the Earth, Greenpeace and the World Wildlife Fund are supporting the move which came with a new 35-page report: ``Gas flaring in Nigeria: a human rights, environmental and economic monstrosity.'' Although burning off excess hydrocarbons was officially banned there in 1984, oil companies have repeatedly asked for — and been granted — special concessions to continue. Friends of the Earth says 71 million cubic metres a day of gas is flared instead of harnessing it for energy, losing Nigeria $2.5 billion in potential revenues annually and producing about 70 million tonnes of carbon dioxide a year. Deadly substances have been emitted by flares for more than 40 years and the Government has promised to ensure it ends in 2008.

Shell readies proposal to join Gazprom’s $10 bn Arctic project 

June 22, 2005. Royal Dutch/Shell Group, Europe’s second-largest oil company, will send OAO Gazprom a proposal “very soon” for developing the Russian company’s $10 billion Shtokman gas-condensate project in the Arctic. Gazprom plans to liquefy Shtokman gas and send it to the US, the world’s largest energy consumer, where it has no business so far. It also wants to expand in the UK and mainland Europe, where it supplies about a quarter of the gas used. Gazprom will pick partners for the project by the end of the year. The company is considering assets swaps involving Shtokman with Norwegian companies Statoil ASA and Hydro Norsk ASA, and has mentioned US companies ConocoPhillips, Exxon Mobil Corp and Chevron Corp as other potential partners. The main criteria in selecting partners are expertise in offshore drilling and access to the US market. Shell and Gazprom are also in talks on swapping 25% of Shell’s Sakhalin-2 project off of Russia’s Pacific Coast for as much as 50% in Gazprom’s Zapolyarnoye gas field in Siberia. Statoil and Norsk Hydro signed a memorandum of understanding in Moscow on June 20 for the three companies to map out oil and gas resources in the Arctic region, which may contain about a quarter of the world’s undiscovered petroleum.

Chevron’s approval of major refining project

June 21, 2005. Chevron Global Refining plans to increase the capacity of the Pascagoula Refinery's Fluid Catalytic Cracking Unit (FCCU) by about 25 percent, from a current capacity of 63,000 barrels per day. This project will increase the Pascagoula Refinery's gasoline production by 500,000 gallons per day. With environmental permits in place, construction of the $150 million FCC Project is expected to begin next month and is expected to be complete in late 2006.

Newfield signs production agreement for oil fields

June 21, 2005. Newfield Exploration Co. is set to develop the East Belumut and Chermingat oil fields offshore Malaysia after signing a production sharing contract for the PM 323 blocks. The 335,000-acre block, in which the national oil company Petronas Carigali will have 40 percent stake, is in the Malay Basin, 185 miles off Kemaman, Terengganu. Newfield, a Houston-based independent oil and gas exploration and production company, has a 60 percent stake in the block and has committed $160 million of investment to develop the two fields, with first oil due in 2008. The company also plans to appraise five other existing discoveries in the block and shoot more 3D seismic surveys to find new reserves. Newfield hopes the East Belumut and Chermingat oil fields will produce around 15,000 barrels of oil per day in 2008. The company will also drill five more exploratory wells over the next three years.



Naturkraft builds Norway’s first gas power plant

June 24, 2005. The board of Naturkraft AS has decided to realize the construction of Norway's first commercial onshore gas-fired power plant at Karstoe in Rogaland, western Norway. Naturkraft is owned by Norwegian energy and aluminium group Norsk Hydro ASA and utility Statkraft AS, each holding a 50 percent stake. The gas power plant, based on the most advanced technology available, will be the first of its kind in Europe with a filtering system for nitrogen oxides (NOx) emissions. The plant will be constructed for possible later installation of a gas scrubbing facility for carbon dioxide (CO2) emissions, if such technology proves technically and economically feasible. Total investments for the project are estimated at just more than NOK 2 billion. The plant is expected to start electricity production in the fall of 2007.

Skanska & partners to build a power plant in Brazil

June 22, 2005. Skanska AB, the world's second- largest construction company, and it and partners in Brazil were awarded a power project in the South American country. The group, in which Skanska holds a 35 percent stake, will build two 60 megawatt power plants in Manaus in the state of Amazonas, and run them for 20 years. The project is worth 370 million kronor ($49 million) in annual revenue. Skanska's partners in the Breitner group are state-owned Elektrobras, Thermes, Orteng and Enerconsult. The generators will be built using existing equipment from a plant to be disassembled and Skanska's share of the investment is 150 million kronor.

Policy / Performance

Taiwan to switch from nuclear fuel to coal 

June 28, 2005. Taiwan plans to double its capacity to generate electricity from coal as it phases out nuclear power because of public opposition that may prevent a $7 billion plant with two reactors from ever operating. Taiwan generated 21 percent of its power from nuclear reactors last year. At a time when the United States and some European countries have indicated that they may build more reactors, Taiwan is ruling out nuclear power as a way to limit emissions of harmful gases. The decision frees Taiwan Power to embark on a $13 billion expansion of its coal-fired plants and may increase the island's coal imports from miners including Anglo American and BHP Billiton. Taiwan imported all of the 57.1 million metric tons of coal it used last year, with 75 percent of the fuel burned to generate electricity.

Japan is giving up on nuclear reactor bid

June 22, 2005. Japan has told the European Union it will give up on hosting a revolutionary nuclear energy reactor after securing large deals in turn for agreeing the project will be built in France. A meeting of the six partners in the International Thermonuclear Experimental Reactor (ITER) project will formally decide that the reactor will be built in the French town of Cadarache. The partners China, the European Union, Japan, Russia, South Korea and the United States are to meet in Moscow. Japan had hoped to bring the multibillion-dollar project to the northern village of Rokkasho-mura. Japan informed the Europeans of its decision after securing a deal to construct the project's main research facility in Japan and keep 20 percent of the jobs at the head office, including the top post of the ITER organization, for Japanese nationals.  Japan is also set to get 20 percent of the work to build the reactor although Japan's share of the cost for ITER is 10 percent, the daily said without citing sources. The United States and South Korea have supported Japan's bid for ITER, while China and Russia back the European Union's efforts to bring it to France.

EU wants 20 pct cut in energy use by 2020

Jun 22, 2005. Europe should reduce its energy consumption by 20 percent by 2020 through more efficient technology. 60 billion euros ($73.12 billion) a year could be saved in fuel costs in the 25-nation bloc. A household could save up to 1,000 euros a year in electricity and heating bills by using energy saving lightbulbs, getting rid of old fridges and replacing boilers. If making good progress on energy efficiency, decreasing dependency from oil prices and at same time creating jobs in the sectors related to energy efficiency.  The EU will be 90 percent reliant on imported oil and 80 percent dependent on gas imports by 2030. The Commission would present an action plan at the end of 2006 with concrete steps on energy efficiency.

Russia to launch energy dialogue with India, China

June 22, 2005. Russia hopes to launch energy dialogue with Asia's key oil consumers, including India and China, in the future. Russia is actively participating in the development of energy dialogue with the United States and hopes to start this dialogue with China, India, Japan and Korea in the future. Moscow sees broad possibilities for attracting foreign investment in sectors like construction and the modernization of energy facilities. The Russian Foreign Ministry has offered its broad support to attract foreign investors to the domestic market, protect their legitimate interests and contribute to the settlement of business conflicts. The ministry's interaction with the associations of Russia's business quarters, in particular, the Chamber of Industry and Commerce of Russia and the Union of Oil and Gas Industrialists, is a major advantage. Russia is providing them with consultations, information and analytical support. Russia intends to start an exchange of personnel on an expert basis with some of our partners.

Renewable Energy Trends


REL forays into renewables

June 24, 2005. Reliance Energy (REL) has tied up with General Electric of the US to develop wind power projects in the country. This also marks REL’s debut in the non-conventional energy sector. It plans to develop a 500 MW wind power project, which, apart from being the largest such project in the region, will also account for 15 per cent of the total installed wind power capacity in India. The total installed capacity of wind power projects in the country is around 3,595 MW. The project is expected to cost Rs 2,500 crore (Rs 25 bn), 75 per cent of which will be the cost of equipment to be supplied by GE. The MoU between REL and GE states that they will work jointly to develop wind power at the most competitive cost of energy. While REL will lead the project development activities and be responsible for land, infrastructure and obtaining approvals, GE will supply all relevant equipment for the project. They have mutually decided on a target schedule of 2007. While REL is one of the largest private sector power developers in the country, GE is the largest wind equipment manufacturer in the US and the fourth largest in the world.


IEA sees big prospects for biofuels

June 24, 2005. With oil prices at over $50 a barrel, biofuels have received renewed attention and have led to a surge in new bio-energy activity in industrialised and developing countries. A huge amount of investment is flowing into both production and development of biofuels technologies. The agency has shown interest in supporting cost-effective outcomes. In many southern countries, biofuel may be used for cooking and `agricultural needs. However, use of biofuels, such as ethanol and biodiesel, in the transport sector of all countries can help reduce dependence on petroleum. Many other factors are also seen driving greater biofuel production and use, including agriculture and trade reform, improving energy access to the rural poor, local and global environment challenges and new, more efficient conversion technologies. Flexible fuel vehicles that are now entering the market in Brazil, the US and other regions permit the use of any mixture of ethanol and gasoline, empowering consumers with competitive options and reducing both the demand for oil and the economic and security risks associated with it.

Wind farm project in the US

June 24, 2005. A Virginia company will spend between $250 million and $350 million to construct a wind farm near the town of Akron in rural Washington County, Colo. Colorado requires utilities to receive 10 percent of their electricity from renewable resources by 2015.



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[1] Xia Yishan (China Institute of International Studies), ‘Trilateral cooperation in the energy resources sector between China, India and Russia’, World Affairs, October-December 2004, Volume. 8, No. 4, pp. 70-71.

[2] Ibid., p. 74.

[3] Chietig Bajpaee, ‘India recovers lost ground in the international energy game’,, 16/03/05, p.2.

[4] ORF News Monitor, Vol. 1 issue 34, p. 10, and Vol. 1 issue 36, pp. 11-12.

[5] Bajpaee, op cit., p. 2.

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