MonitorsPublished on Sep 20, 2005
Energy News Monitor I Volume II, Issue 13
Draft Integrated Energy Policy: The External Dimension

(By Dr. Samir Ranjan Pradhan§)


Text Box: §	External dimension becomes crucial in the scenario of heavy dependence on energy imports, therefore, it should be carefully incorporated in any integrated strategy
§	There are not only economic imperatives of analyzing the external dimension to make necessary policy decisions, but also strategic stakes involved.
§	The internal policy deliberations and exercises should be calibrated by incorporating the various economic, political and strategic variables influencing and determining not only the internal dimension, but also the external dimension of energy security.
§	The policy making should be expedited in a consensual manner to send positive and confident signals outside to be reckoned as a power in the global energy horizon.
§	The need is to have a re-look at our current strategies and devise renewed policy vigour in order to absorb the cataclysmic effects of the emerging challenges and march towards the long term goal of becoming a major power at the regional and global level.

t is affirmed that energy security holds the key to India’ goose-step towards becoming world’s economic powerhouse. It is aptly reflected in the Presidential address as well as PM’s Independence Day speech. The policy deliberations in recent years also cater to address these vital concerns in a coherent manner. The first visible policy planning is perhaps the drafting of an integrated energy policy for India. Though the contents of the draft policy is yet to be finalized and placed in the public domain for consensus building, there is debate and discussion in the media. Conventionally, an energy deficient country’s strategy can be analyzed from two dimensions such as the domestic or internal and the foreign or external. It is always emphasized that before delving into overseas markets, you should have adequate policy parameters at home.

Moreover, the external dimension becomes as important as the internal or domestic dimension, when a deficient country overwhelmingly depends upon imported energy resources. This has become more relevant in the present phase of interdependent globalised world energy regime. This can be gauged from America’s current foreign policy constraints primarily obfuscated on account of its overwhelming dependence on imported energy sources. Thus, in the energy security parlance, both the internal as well as the external dimension are complementary and supplementary to each other. Though it is yet to be confirmed that the external dimension has been adequately incorporated in India’s draft integrated energy policy or not, an attempt to assess its strategic relevance is nevertheless worth undertaking.

There are some pressing cardinals for incorporating and analyzing the external dimension comprehensively to make the impending energy policy integrated in true sense.

First, as per the available current and future trends, we are going to depend overwhelmingly on imports for our energy needs especially that of oil, gas, coal and electricity. Then the issue becomes what are the sources available to us or we should tie to? This raises the concerns regarding the security of the sources of our imports. Obviously diversification of import sources is one of the prime deterrent, but in what way we will achieve that?

Second, the next issue is whether our domestic policies are conducive for successful foray into the overseas for meeting our energy needs. This aspect needs to be analyzed from the perspective of internal reforms and institutional as well as administrative policy reorganization with respect to our equity oil ventures.

Third, what strategies are to be adopted while pursuing our overseas energy interests? Is energy diplomacy or any other means like economic diplomacy (using our bilateral trade on the basis of comparative advantage) a lever to further our energy interests? Or there are some other conventional means to reach the energy end or it would be pragmatic to make best use of the opportunities emerged out of the asymmetric interdependencies of globalization?

Fourth, whether as an emerging major player we will be obviously integrated into the established world energy regime or we have to carve out a place on our own. This highlights the dilemma of depending on market or geopolitics.

Fifth, whether our foreign energy strategy is compatible with our other domestic policies as well as with our foreign partners and with other potential competitors.

Sixth, whether we would be able to attract the much-needed investment into our domestic energy sector from outside especially from our source of imports in managing any particular strategy in the external dimension.

Lastly, there are already indications of India’s dependence on some countries in its immediate and extended neighbourhood as well as on other regions for its energy requirements. The necessary policy approach should be calibrated by including the emerging risks and other possible eventualities in the integrated energy policy. In this respect it is worthwhile to highlight the China-India perspective in clinching equity oil deals in Central Asia, Sudan, Angola, etc. Though India is pursuing a course of cooperative competition rather than head-on-collision and China on the other hand, is conspicuously in favour of cooperation, yet it is a fact that China will cooperate till its strategic interests are not harmed. So the need is to have a re-look at our own external energy strategy. This signifies the proper and timely use of astute diplomacy, economic strength and other strategic policy decisions.

These are some moot questions that emerge in the external dimension, which need elaborate assessment in the aegis of the impending integrated energy policy. This also makes a case for minutely examining each and every strategic, economic and political variable that have a bearing on the country’s energy security strategy. This in another way calls for synergizing the policies and activities of various administrative organs and including the inputs thereof in the overall policy designing. An integrated energy strategy requires system and process of coordinated decision making and actions that bring the activities and decisions and consequent policy parameters of all participants into a common framework.

To put it systematically, a coordinated exercise of deliberation is needed among the participants such as the Planning Commission, concerned ministries of the energy sub sectors, and also the Ministry of Commerce, Ministry of External Affairs, the Ministry of Finance, the PMO and various sub-committees such as the committee on Oil Diplomacy for energy security, etc. The thrust should be on consensus building as there are instances of incompatibility between the Ministry of External Affairs and the Ministry of Petroleum and Natural gas in the recent past. The continued failure of India to clinch equity oil deals amidst intense competition from China is often cited as the byproduct of policy deficiency at home, i.e., the incompatibility between/among the ministries concerned.

This points to a calibrated policy approach at home to send strong, confident signals to the international community that India is also in the global energy horizon. This becomes imperative in the avowed aspirations of becoming a major player at the regional as well as at the global level. Therefore the policy makers and participants have to bear in mind that, “this is not the time for ideological histrionics rather pragmatic, hard-nosed commercial decision making that holds the key to survival and sustenance in the globalised energy regime”.





- Concluded-

Three Oil Majors and Putin

(Peter Lavelle, RIA Novosti political commentator)


uring Putin’s visit to New York to mark the 60th anniversary of the establishment of the United Nations recently, President Vladimir Putin is expected to be lobbied by some of America's largest energy companies looking to invest and partner in Russia's vast oil and gas sectors. To invest in these sectors, foreign companies must directly negotiate with the Kremlin. World leaders meeting in New York for the UN's 60th jubilee are slated to discuss and sign agreements covering a wide array of issues from the Iranian and North Korean nuclear programs, to efforts against international terrorism, UN re-organization, the Greater Middle East conflict, and much more. For Putin, however, his meetings and working sessions will also include representing Russia's largest energy company, Gazprom. Three American oil majors - ChevronTexaco, ConocoPhillips, and ExxonMobil - are very keen to bend Putin's ear after he meets with his U.S. counterpart George W. Bush. Gazprom is looking for foreign partners, and one of the three companies stands a good chance of being selected to participate in the Russian natural gas giant's expansion plans. It is no coincidence that Putin is meeting executives from America's oil majors. A Gazprom press release said that the company would announce a shortlist of candidates to take part in its Shtokman project on the shelf of the Barents Sea. The Shtokman shelf holds an estimated 3.2 trillion cubic meters in proven gas, and 31 million tons in gas condensate reserves. Due to its location, the shelf's reserves could deliver significant volumes of liquefied natural gas (LNG) to the United States for a period of up to 50 years. There are eleven foreign companies interested in the project: ChevronTexaco, ConocoPhillips, ExxonMobil and Sempra Energy, Norway's Hydro and Statoil, Japan's Mitsui, Sumitomo and Mitsubishi, Anglo-Dutch RoyalDutch/Shell, and France's Total. Of these, five are believed to have been given a preliminary nod. Due to the technological requirements and expertise involved in developing projects such as Shtokman, there is a strong chance that one of the Norwegian companies will be picked by Gazprom as its major partner. The American companies, however, seem to be more interested in becoming Gazprom's primary partner for the distribution of Shtokman LNG to the American market. Of the three American companies, ConocoPhillips has the most successful track record in Russia. Having already acquired a 10 percent stake in the largest Russian producer Lukoil, ConocoPhillips plans to increase that stake to 20% next year, and to participate in a joint project with the Kremlin-friendly company in Russia's north. ExxonMobil's current focus in Russia is on the development of the Sakhalin-1 oil field off Russia's Far Eastern coast, near Japan. The $10-billion-plus project is expected to start production next month and achieve a peak output of 250,000 barrels per day in late 2006. ExxonMobil and ConocoPhillips lost their 2003 bid to purchase a significant stake in Yukos after Mikhail Khodorkovsky and his oil giant ran afoul of the authorities. Putin's meeting with American oil executives is very telling of recent changes in Russia's oil patch. Two years ago, American oil companies tried to enter Russia's oil sector in a big way by teaming up with privately owned Yukos. They failed, and so did Yukos, including its core shareholders. Today, the same companies are just as interested in investing in Russia, and see the Kremlin as their most reliable partner.

(Views are personal)

Metro Prices of ATF: Domestic (Rs/LTR)






























































































Metro Prices of ATF: International (USC/G)

Source: IOC

India’s Reforms in the Hydrocarbon Sector


What Has Been Accomplished?

What Remains to be Done? - XVIII


……continued from Volume 2 Issue 11            

Taxes and Duties on Petroleum Products


axes and duties are a key source of revenue for the central and state governments.  Central duties consist of customs and excise.  Customs duty in turn consists of basic customs duty and additional duty known as Countervailing Duty (CVD), which is equivalent to excise duty on the same product produced domestically. 

Basic customs duty was nil on all petroleum products except naptha, lubricating oil and LPG until March 1994.  The 1994-95 budget introduced basic customs duty on all products except kerosene while reducing the duties on lubricating oil and LPG.  By 2001-02 customs duty on petrol and diesel was 20 per cent which was subsequently reduced to 15 per cent in August 2004 and 10 per cent in March 2005. 

Customs Duty Rates in per cent





























































Source: Pricing of Petroleum products, Sixth Report, August 2005


Excise duties on petroleum products were specific until March 1994 after which it was converted into ad-valorem duty at the rate of 20 per cent for petrol and 10 per cent for all other products.  Since then the rates have slowly moved upwards.  While basic duty has remained unchanged at 16 per cent since 2000 there were a number of additional duties imposed particularly on petrol.  In June 1998, additional excise duty was imposed on petrol and extended to diesel in 1999 to fund road construction. A special excise duty was imposed on petrol in 1999 and then another ‘special additional excise duty’ was imposed on petrol in 2002 to fund the National Highways Project. From July 2004 an additional levy of education cess at 2 per cent was imposed on the aggregate of all excise and customs duties. Budget 2005-06 revised excise duty to a specific ad-velorem mix of 8 per cent + Rs 13/litre and that on diesel to 8 per cent + Rs 3.25/litre.  In addition an additional excise duty of Rs 0.50/litre was imposed as road cess.


Excise Duty on Major Petroleum Products
























































































1.         A National Calamity Contingent Duty (NCCD) at Rs 50/mt was imposed on imported crude from March 2003.

2.         An additional levy of education cess at 2 percent was imposed from July 2004.

3.         Customs duty on naphtha for the manufacture of polymers was reduced to 5 percent from October 2004.

4.         For naphtha, FO & LSHS the duty rates are applicable for general trade. 

Source: Pricing of Petroleum products, Sixth Report, August 2005


The state component consists primarily of sales tax which can be anywhere between 34 per cent and 20 per cent for petrol, 25 per cent to 8 per cent for diesel, 0 per cent to 12.5 per cent for Kerosene and 8 to 14 per cent for LPG among various states.  A few states charge additional cess or surcharge between Rs 0.50 to Rs 1.5 per litre of petrol/diesel. 


Share of duties and taxes in the retail selling prices of petrol and diesel in Delhi as on July 2005




Product price



Customs duty

1.65 (4%)


Excise duty

14.7 (36%)


Sales tax

6.75 (17%)


Total Tax

23.14 (57%)


Retail selling price



Source: Pricing of Petroleum products, Sixth Report, August 2005

The non fuel cost component in the retail selling price of petrol and diesel are substantial and form a significant part of central and state revenue. 

Rationalising the tax structure has been under consideration for some years but so far there has been no substantial change.  As per the mid term appraisal of the tenth plan ‘tax and duty structure is characterised by: a differential custom duty on import of crude oil and petroleum products; differential excise duties and cess on various petroleum products; differential sales taxes and state levies.  It then goes on to say that the current tax and duty structure leads to indirect subsidies to the refining and marketing companies; irrational fuel choices; opportunities for adulteration and diversion of products from intended uses; and practice of invoicing sales in states with low taxes’.    As per a recent paper from the Planning Commission on the ‘Challenges and Opportunities of the Energy Sector’, the Indian consumer pays one of the highest tariffs in the world for its energy supplies/services on Purchasing Power Parity basis. The paper is also critical of the fact that petroleum products are priced at international parity without any competition among incumbents and then loaded with taxes and levies.

(Views are personal)

(…To be continued)


A Wide range of companies, private and public sector, and NGOs are interested biofuel related projects particularly, Jatropha cultivation. Here are some companies that have evinced interested in biofuls.




D1 Mohan Bio Oil Ltd


Southern Online Biotechnologies


Team Sustain


Naturol BioEnergy Ltd.


Emami Group


Indian Oil Corporation






Reliance Industries Ltd.


Indian Railways




Bannari Amman Sugars


Gujarat Oleo Chem Ltd.


Praj Industries

Source: The Hindu Business Line






Estimates of RIL Orissa gas find doubled

September 14, 2005. RIL holds 2.3 tcf gas reserves in the field off the Orissa coast - more than double the earlier estimates. Gas reserve certifier Gaffney, Cline and Associates (GCA) put the original gas for the six discoveries in RIL's NEC-25 block off east coast at 2.3 TCF. Niko Resources, RIL's block partner, had hired GCA to complete the review of the NEC-25 discoveries and potential resources associated with undrilled seismic leads.

Great Eastern strikes CBM in W. Bengal

September 14, 2005. Great Eastern Energy Corporation (GEECL) has struck a significant quantity of coal bed methane gas at Raniganj in West Bengal. The gas find, which has been certified by the DGH is estimated to have a reserve of 1.385 trillion cubic feet (tcf). This comes close on the heels of CBM finds by Reliance and ONGC. The company, which proposes to pump in Rs 600 crore (Rs 6 bn) in the first phase of the project is planning to fund the entire cost through equity. The company plans to drill 100 wells in the first phase and is expected to start producing commercial gas by January ’07. The company hope to sell the gas either to the two steel companies — IISCO and Durgapur Steel Plant, or set up a captive gas-based power plant at the pit-head. Discussions are also on with Gail and a final decision on the marketing would be taken soon. The gas reserve of 1.385 tcf would yield a little more than 4m metric standard cubic metres per day of gas for 20 years.

HOEC finds oil and gas in Assam

September 13, 2005. Hindustan Oil Exploration Co has found oil and gas in Assam. Testing of the Lakkhi-1 exploration well, showed "several potential hydrocarbon bearing zones" in the Barail formation in line with the pre-drill prognosis. HOEC along with its partners Premier Oil of UK, IOC and OIL have decided to carry out further evaluation. Premier Oil is the operator of the block with 36 per cent participating interest and partners are IOC with 27 per cent, HOEC with 25 per cent and OIL with 10 per cent stake.


Essar Oil curbs supply by one-forth

September 19, 2005. Weighed down by the surge in international crude oil prices, Essar Oil has curtailed supply by 25 per cent to its dealers across the country and has deferred the commissioning of its 12 mt Jamnagar refinery to September or October next year. The refinery was scheduled to be commissioned during the first or second quarter of 2006. At present, Essar has a total of 514 oil pumps. Of these, 225 are in Gujarat and Maharashtra and the rest in the northern states. It is setting up 300 pumps at various places and plans to have a chain of 2500 pumps across the country. Essar purchases its petrol and diesel from the Numaligadh refinery, the Kochi Refinery and the Mangalore refinery. It also imports a few parcels of diesel once in a while, mainly from Enoc in the UAE and other suppliers in West Asia. Essar supplies 240,000 kilolitre of petrol and around 180,000 kilolitre per month to its dealers across the country.

HPCL off to Africa for retail binge

September 19, 2005. Hindustan Petroleum Corporation is looking for retail opportunities in the African countries. It would also be setting up a liquefied petroleum gas plant in Bangladesh shortly. The company is in talks with a number of petroleum giants such as the US-based Chevron, Saudi Aramco, UK-based British Petroleum and France-based Total for forming joint ventures in the refining sector. The refining sector with import parity pricing and high margins is an attractive proposition for these companies. HPCL had earlier announced its intention to take foreign petroleum majors along for its Rs 17,000 crore (Rs 170 bn) refinery and petrochemicals complex at Bhatinda and another refinery in Vishakapatnam. The company had conducted studies in 20 countries for opportunities in the petroleum sector, particularly for marketing. In the case of upstream sector, HPCL is pursuing opportunities through its subsidiary Prize Petroleum, in which it plans to pump more funds.

RIL bullish on petroleum retailing

September 16, 2005. Reliance Industries has identified retailing petroleum for long-distance truckers as an important part of the company’s growth strategy. The new fleet management programme called Trans-connect and A-one plazas providing food and other requirements at their retail outlets were the focus areas of Reliance Industries’ retail strategy. Reliance Industries would create India’s first hand-held computer terminals. This will help control and command the demand and supply requirements at its retail outlets.

India to pay less for PDS & LPG than SAARC

September 14, 2005. The last week’s rise in petrol and diesel prices was not steep. There’s room for more hikes — if crude does not cool in international market — as Indian consumers are still paying much less than their SAARC counterparts and other Asian powerhouses such as China, Malaysia and Thailand besides the Philippines. For example prices of petrol and diesel in India have gone up only 7 per cent and 8 per cent, respectively, between the December’04-August’05 period. In Pakistan, prices have risen 24 per cent and 22 per cent, respectively, while China has raised prices of the fuels by 17 per cent in the same period. In case of diesel, the rise is much sharper in Thailand and Malaysia at 54 per cent and 58 per cent, respectively. For petrol, Thailand has jacked up prices by 37 per cent and China 17 per cent. In Philippines, diesel prices have risen 30 per cent, while petrol has appreciated by 16 per cent. In Malaysia diesel has shot up by 54 per cent but petrol has gone up only 14 per cent. In kerosene and cooking gas, Indian consumers fare better than their SAARC counterparts. After adjusting the rupee exchange rate, each cylinder of cooking gas sells for Rs 333.65 in Islamabad, Rs 342.05 in Dhaka, Rs 388.16 in Colombo and Rs 563.64 in Kathmandu. These figures are much higher than the Rs 294.75 paid by consumers in Delhi. In kerosene, each litre sells for Rs 21.55 in Islamabad, Rs 21.29 in Kathmandu. In contrast, the poor man’s fuel costs only Rs 9.05 a litre in Delhi. Indian consumers are paying much higher taxes on their fuels than in all these countries. In Delhi, for every rupee one pays for petrol, 57 paisa goes into government’s kitty.

No cess on petro exports: CBEC

September 14, 2005. In a move that would come as a relief to Reliance Industries and state-owned oil companies, the Central Board of Excise & Customs (CBEC) has clarified that there would be no cess on export of petroleum products. All duties and levies including the cess on petrol and diesel are waived for exports, it clarified. Reliance Industries, which exports 30 per cent of the products from its 33 million tonne (mt) Jamnagar refinery, would be the biggest beneficiary of the CBEC initiative.

Transportation / Distribution / Trade

Seven bid for GAIL pipeline project

September 17, 2005. GAIL (India) Ltd has received seven bids for the Rs 973-crore (Rs 9.73 bn) Dahej-Uran pipeline (DUPL) project. Three foreign and four Indian manufacturers/vendors have applied for the bid. The Indian companies are Jindal Saw Ltd, Welspun Gujarat Stahl Rohren Ltd, Man Industries Ltd and PSL Ltd. The foreign companies are Leman Commodities S.A. of Switzerland, Sumitomo of Japan and Liaoyang Steel Company Ltd of China. 

IOC, OIL, OVL to bid for Libyan blocks

September 16, 2005. Indian Oil Corp, Oil India Ltd combine and ONGC Videsh Ltd, will take part in the second round of oil and gas blocks bidding in Libya. Libya has offered 44 blocks in the second round of bidding under the Exploration and Production Sharing Agreement. Libya has proven crude oil reserves of 39 billion barrels and the country believes potential reserves may be triple that amount. Currently, only a quarter of its territory is covered by agreements with oil companies. In the first round of bidding in Libya, IOC-OIL consortium won Block 86. OIL is the operator of the block. In the current round of bidding, Libya has offered 10 blocks in offshore areas; 8 blocks each in Cyrenaica, Murzuq and Kufra basins; 6 in Sirt Basin; and 4 in Ghadames Basin. The Sirt Basin has 80 per cent of Libya’s oil reserves and 90 per cent of its production. The region is also expected to be the focus of most exploration companies.

BG sole bidder for ONGC blocks

September 15, 2005. Britain's BG Group Plc is close to buying 50 per cent stakes in three of ONGC’s deepwater exploration blocks off India's east coast, subject to government permission. ONGC has received bids only from BG. In January, state-run ONGC offered 50 per cent equity in five deepwater blocks to international oil companies, seeking their expertise in deepwater exploration. BG wants to partner ONGC for KG-OS-DW, KG-OS-DW extension and KG-OS-DW-III in the prolific Krishna Godavari (KG) basin. ONGC's other two blocks off India's west coast did not attract any bids. BG has a considerable experience in deepwater exploration offshore Egypt and Brazil. BG and ONGC are joint operators in India's Panna, Mukta and Tapti oil and gas fields off the west coast.

Ravva field gas may be costlier: ONGC

September 15, 2005. Natural gas from the Ravva field may now become dearer for its users with the government set to allow the joint venture operating the field to increase its price by about 10-15 per cent. ONGC, which holds 40 per cent share in the field, has refused to bear the burden of any increase in the gas price. The joint venture has proposed that the gas price be revised by 16.6 per cent to $3.30 (Rs 145) per mBtu from April 2002 onwards and by 10 per cent to $3.50 (Rs 153) per mBtu, if it is from prospective effect. ONGC has been subsidising purchase of gas from private joint ventures, which is sold at a price higher than the administered price. Cairn Energy holds 22.5 per cent share in the Ravva fields in Andhra Pradesh. The other partners are the Videocon group-owned Petrocon, which holds 25 per cent, and Ravva Oil (Singapore) Pte, a subsidiary of Marubeni of Japan, which holds the remaining 12.5 per cent.

ONGC subsidised purchase of gas from the joint venture fields to the extent of Rs 5,200 crore (Rs 52 bn) since October 1997 to June 2005. But, when the gas price was revised on July 1, the Centre had also decided that ONGC would no longer subsidise the higher priced joint venture gas. Under the earlier mechanism, GAIL India bought gas from privately-operated fields to overcome shortage of gas from nominated fields, but to the end consumer it charged the administered price. The resulting loss to GAIL was made up by contribution from ONGC. Ravva has two fields - Ravva main and Ravva satellite - producing 1.2 mscmd of gas.

Policy / Performance

GAIL to advise Bangla on CNG conversion

September 20, 2005. Gas Authority of India will offer consultancy services to the state-owned hydrocarbon company in Bangladesh, Petrobangla (Bangladesh Oil, Gas and Minerals Corporation), for conversion of existing diesel-driven vehicles in Bangladesh to compressed natural gas (CNG). GAIL also proposes to set up at least 30 to 50 CNG stations in major cities and along three main highways in the country - Dhaka-Sylhet, Dhaka-Chittagong and Dhaka-Bodra highways. Further, the company has evinced interest in equity participation in the proposed CNG stations in Bangladesh. GAIL has already signed a memorandum of understanding (MoU) with a private sector company in Bangladesh, Business Development Corporation, which will be one of the partners in CNG joint agreement or joint participation in the development of CNG facilities in Bangladesh. 

GAIL has its share of experience in the use of CNG in railway locomotives in India. It has set up running projects of CNG in Mumbai and Delhi, and is also currently implementing projects in Kanpur, Lucknow, Agra, Bareilly and in cities in Andhra Pradesh and Tripura. It plans to set up city gas projects in 28 cities in India under the project Blye Sky. Besides, it has presence in Egypt through equity participation in FayumGas, Shell CNG and Natgas. Through this venture, it is also eyeing presence in China. 

Govt to regulate domestic LPG supply

September 19, 2005. The government has issued orders regulating supply of LPG to check diversion of hugely subsidised cooking fuel for commercial use. LPG for commercial use priced at market rates, which are at least Rs 100 per cylinder more than the retail price of domestic LPG. The ministry has taken a conscious decision to restrict the number of refills available with the LPG distributor to the customer base in his area. The deliberate restriction is to ensure demand of genuine domestic consumers is met and pilferage checked. Ceiling of LPG connection based on the customer database has been set for every distributor and new connections are issued only if the present customer base was lower than the ceiling, he said.

Nelp-VI to kick off in January

September 19, 2005. The ministry of petroleum and natural gas will launch the sixth round of bidding under the new exploration and licensing policy (Nelp-VI) in January 2006. A detailed paper on improving the existing exploration and production policy was prepared by the Petroleum Federation of India along with Pricewaterhouse Coopers (PWC). Suggesting a transition to the open acreage licensing system, the paper proposed inviting inputs from companies on a quarterly basis for identification of blocks. The paper also stressed on the need for a data repository to attract investors. This it felt could be a step in the direction of introducing an open acreage policy. The paper suggested that there should be different award terms and production sharing terms for different types of blocks-on-land, frontier, deepwater, ultra-deepwater, shallow water and poorly explored.

ONGC hunt oil in Russia with Khemkas

September 16, 2005. In its quest to gain energy security for India, ONGC is exploring alliances with domestic and international players with a regional clout. Delhi-based Khemkas of the Sun Group are on ONGC’s radar for a possible joint venture to secure oil equity in Russia and the CIS markets. ONGC opened the door for such relationships by tying up with the London-based steel tycoon LN Mittal this year The Khemkas have been known for their strong links with Russian and CIS establishments, both commercial and political, given their five decade-old business relationship with the former Soviet Union. Sun Group, through the Khemka family successfully participated in 27 disinvestment programmes of the Russian government, in the process, gaining minority or controlling interests in a host of businesses. In fact, the Khemkas have floated a general purpose fund to make investments in India and abroad in several boom sectors including energy. In the past, the Sun Group has also teamed up with a consortium of Russian companies including Gazprom and Tyuman Oil to bid for a stake in IBP. On the energy front, speculation is rife that the Khemkas may even be looking to buy out or co-invest in a hydrocarbon reserve or field in the Russian belt.

Transporters want Bengal to cut taxes on fuel

September 15, 2005. The Calcutta Goods Transport Association (CGTA) would like the West Bengal government to reduce sales tax and cess imposed on petroleum products to bring down their prices in the state. The Centre's decision to raise diesel prices by Rs 2 for a second time in 2005 will affect the transport sector adversely. It said that instead of linking the prices of petrol and diesel with international crude oil prices, government should also try to rationalise the tax structure on petroleum products. The central government should reduce excise duty on petroleum products and control non-plan expenditure by proper downsizing, it added. CGTA pointed out that though diesel prices had gone up by nearly 45 per cent in the last five years, increase in freight charges for the same period had been only around 6 per cent. 

OVL seeks RBI nod to hedge future oil prices

September 15, 2005. OVL has sought the Centre’s nod to hedge its underlying exposure in crude and gas prices while acquiring oil and gas properties abroad. Present regulations of the Reserve Bank of India do not allow hedging against future production. OVL has, however, sought a suitable policy dispensation to hedge future crude and gas price risks given the importance attached by the government to enhance oil security by pursuing upstream hydrocarbon activities overseas. To protect itself from downside risk (if crude prices plummet), OVL has also proposed locking in its exposure through hedge instruments. This will assure the company of a crude price at which the investment evaluation was made. The empowered committee of secretaries too had specified that OVL obtain suitable hedging against adverse movement in oil prices, while clearing OVL’s investment in PetroKazakhstan.

OVL seeks time for Iran oil pact

September 15, 2005. OVL has sought time until June 2006 to sign the definitive agreement for the Jufeyr oil field in Iran. The pact for the field, which was given to OVL as part of India's deal to buy 5 mt of LNG per annum from Iran beginning 2010, was to be signed by end of this year failing which OVL will loose its right to develop the field. ONGC said that since the Iranian side provided data on the field in phases, the time period for signing of the deal is sought to be extended to June 30, 2006.

DGH gets a final say in oil, gas finds

September 15, 2005. Securities and Exchange Board of India said the Directorate-General of Hydrocarbons would soon issue guidelines on the timing of announcements of oil and gas finds and projected reserves by oil exploration companies. This is significant as Director-General of Hydrocarbons has alleged that Oil and Natural Gas Corporation has been playing the markets by announcing oil finds at random. The Sebi also said the regulator had extended the maximum time span between two board meetings of a company to four months from three months. However, there will not be any change in the stipulation of holding a minimum of four board meetings a year. 

ONGC opts out of EnCana asset bid 

September 13, 2005. ONGC has withdrawn from the race to acquire Canadian gas major EnCana Corp’s oil and pipeline assets in Ecuador (Latin America). China National Petroleum Corporation has bagged the assets for $1.42 bn. ONGC decided to pull out following Encana's refusal to give them risk protection cover against any future dispute arising over one of its oil property-Block 15.



MP cleared Khandwa power project

September 15, 2005. The Madhya Pradesh government has given clearance for the proposed 1000 MW coal- based power project in Khandwa district. The proposed project would be taken up by the Madhya Pradesh Power Generating Company and efforts would be made to secure a loan from the Power Finance Corporation to cover 80 per cent of the project cost. The Company would be meeting the remaining cost of the project by securing loans from other financial institutions as well as through its own resources. The State Government would also come forward and extend financial help if there was any gap in meeting the cost of the project. Efforts would also be made to give the mega-power project status to the proposed project. The work on the project was likely to begin during the current financial year itself.

REL bid for captive power plants in Maharashtra

September 14, 2005. Maharashtra government has finalised bids by Reliance Energy for group captive power plants at Butibori and at Thane-Belapur to overcome power crisis in these two industrial areas. Reliance will generate 110 MW at Butibori and 100 MW at Belapur to be exclusively used by the consumers of these two industrial areas. The Power Purchase Agreement (PPA) will be between individual customer industrial units and the Reliance energy and rate of electricity purchase will be between Rs 2.80 and Rs 3.10 per unit approximately. Four companies including Tatas and L&T had also shown interest in setting up the plants. 

Transmission/ Distribution / Trade

KSEB supplies hydel power to NTPC Vidyut

September 19, 2005. The Kerala State Elelctricity Board in order to utilise its water resources productively during the copious monsoon season has started supplying hydel power to the NTPC Vidyut Vyapar Nigam Ltd (NVVN) for distribution in north India. Though the KSEB had agreed to supply 150 MW of power daily to the company, due to the congestion in Northern and Western corridors, the Board could not supply the power in full quantity. The Board started supplying power from last August at Rs 2.67 a unit.

Dabhol power to cost more

September 19, 2005. Electricity from Dabhol power project in Maharashtra, which is likely to restart from July 2006, will cost Rs 2.50 to Rs 2.75 a unit, 20 per cent more than previous estimates as natural gas prices have firmed up. GAIL, which has been tasked with sourcing of fuel to fire the plant, anticipates the price of liquefied natural gas for the project to be in the range of $4.5 to 5 (Rs 197 to 219) per million British thermal unit, implying a tariff in the range of Rs 2.50 per kWh to 2.75 per kWh.

JV for efficient energy supply in rural areas

September 15, 2005. Titan Energy Systems Ltd. has tied up with EN-o-DE (Energy on Demand) and Blitzstrom to form a joint venture — AGIRE (Austrian German Indian Renewable Energy) — that would provide cost-efficient solution to energy supply in rural areas and improve energy supply in grid connected applications in India. The product "BE-Titan" would be manufactured at Hyderabad to provide stored electrical energy from renewable sources like solar, wind, biomass and hydro.

PowerGrid to invite bids for two projects

September 15, 2005. Power Grid Corporation of India Ltd will invite bids from private companies for two projects involving the strengthening of transmission network in parts of the western region within a month's time. The projects will entail an investment of around Rs 2,500 crore (Rs 25 bn). These projects, involving the augmentation of transmission networks in Gujarat and South Maharashtra, will be completed by 2009. The projects are part of a four-project scheme, under which PGCIL will execute two projects on its own.

TAPP-4 begins commercial operation

September 14, 2005. The country's largest power plant, Unit-4 of Tarapur Atomic Power Plant (TAPP-4) went into commercial operation seven months ahead of schedule. The 540-MW unit, the country's largest nuclear reactor, achieved criticality on March 6 and was connected to the grid in June 2005. TAPP-3 will follow suit about nine months later. Tarapur 3&4 project will generate 1,080 MW of electricity, which would be distributed to Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Goa and the Union Territories of Daman, Diu etc. The Government would decide the share of electricity for different States. Power from Tarapur 3&4 would be supplied at a rate of Rs 2.65 per kWh. The cost at which power would be supplied could culminate in a tariff of Rs 2.81 per kWh. This rate would still be more competitive than power from thermal plants of the same period of commissioning. With the addition of TAPP-4, NPCIL now operates 15 reactors in the country with a total capacity of 3,310 MW.

Policy / Performance

Srei keen to develop carbon trading biz

September 19, 2005. Srei Infrastructure Finance Ltd, the first Indian NBFC listed in London Stock Exchange, is gearing up to become first company from its segment to engage in carbon trading. Srei, the renewable energy unit of SIFL will spearhead the carbon trading initiative of the group. The company is planning to take advantage of the immense potential exists in the renewable energy sector including carbon trading and clean development mechanism. The company estimated that the total market size emission reductions on a very conservative basis would be around $ 10-20 bn (Rs 439-877 bn) per year during the commitment period of 2008 to 2012. This is based on an assumption of a price band of $20-40 per ton of carbon emissions. The company expected the price of carbon point to move upwards further after 2007, the deadline for implementation of Kyoto Protocol. Srei recently completed solar lighting projects in Sunderbans, Ladakh, Punjab and Haryana. 

REL seeks coal linkage for two projects

September 19, 2005. Reliance Energy Limited has applied to the government for a coal linkage of 30 mt for its thermal power projects of 12,000 MW at Hirma in Orissa and 1,000 MW at Akaltara in Chattisgarh. The long term coal supply linkages have been sought by REL for a period of 30 years — 6 million tonnes per annum (mtpa) supplies for Akaltara project and 24 mtpa for its Hirma power project. Both the projects are to be executed in the 11th plan. In the first phase, Reliance has decided to develop 4,000 MW capacity at Hirma, which it says will be taken up to 12,000 MW subsequently.

India to forge energy alliances across S. Asia

September 19, 2005. India is looking at the possibility of emerging as a regional energy hub in South Asia. It has plans to set up bilateral grids with some of the neighbouring countries and forge sectoral alliances with others. While a strengthening of the existing grids with Nepal and Bhutan is being planned, bilateral electricity interconnections with Myanmar for exchange of power is high up on the agenda. The proposal for a bilateral grid with Myanmar and the issue of strengthening of transmission links with Nepal and Bhutan are to be taken up at the next Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) meeting. NTPC has also initiated talks with Government authorities in Myanmar to explore the possibilities of setting up a gas-based power plant in the country and wheeling the power into India. Plans are afoot to bring in gas from Bangladesh to run thermal stations in the eastern parts of the country. The possibility of setting up a power station in Bangladesh by an Indian utility, using Bangladeshi gas as fuel is being looked at. The power generated will be transmitted back to India. Tata Power is already in the process of setting up a 1,000 MW gas based power plant in Bangladesh. Work on the 1,020 MW Tala Power project in Bhutan is also under way and the agreement between the Centre and the Government of Bhutan provides for the surplus power from the project to be purchased by India at mutually agreed rates. Generation from the project is likely to commence from March 2006, with the output earmarked for West Bengal, Bihar, Jharkhand and Sikkim. Indian utilities are also creating their imprint across the South Asian regions. NTPC is preparing for a Sri Lanka foray, while Power Grid Corporation of India Ltd is already working on augmenting a crucial transmission link in Afghanistan.

Jharkhand wants investments in power

September 19, 2005. Jharkhand is planning to invite Reliance Energy to invest in the state’s power sector. The RPG power group signed an agreement with the state government last week to set up a 1,000 MW power plant. The RPG group plans to invest Rs 40 bn in the plant. The three-phase project will include two units of 250 MW each and a third of 500 MW. All three units are expected to be operational by 2011. The state needs large-scale investments to bridge its energy deficit. Its consumption is more than 600 MW, while its production is only 240 MW. The shortfall is met by purchases from the Damodar Valley Corporation (DVC) and the National Thermal Power Corporation (NTPC). The state, however, suffers losses in the process. While power is purchased at Rs.2.60 per unit, it is sold to domestic consumers at Rs.1.31 per unit. The state also has a long way to go in rural electrification as only 7,000 of its 32,000 villages have access to electricity.

SAIL plans to develop coalmine with BCCL

September 18, 2005. To ensure supply of coking coal for its plants, Steel Authority of India Ltd has initiated dialogue with Bharat Coking Coal Ltd (BCCL), a Coal India subsidiary, for setting up a joint venture company for developing coking coalmines. The company would be interested in mining at least 1 mt of coking coal annually from it. But it was still in a nascent stage.

IFC to invest in power sector 

September 18, 2005. International Finance Corporation (IFC) has launched a comprehensive strategy to position itself as an active player in the Indian power sector. It proposes to increase presence through equity acquisition in the upcoming power projects and also by way of loans. It is eyeing pit-head-based thermal power projects, mini and medium-hydro, wind power, transmission and distribution and, most importantly, coal mining. It has also launched a distributed power project under rural electrification in Rajasthan. IFC, which is already associated with the Tala Transmission Project, has shortlisted some projects in the transmission segment. This apart, IFC has shortlisted the wind power segment in Maharashtra, which has an installed capacity of over 450 MW alone by way of wind power projects. IFC plans to invest nearly $1.5 billion in the next three years ($450 million for every year) in India’s infrastructure, a large chunk of which is expected to be allotted to the power sector.

Take green building tech to villagers: Kalam

September 18, 2005. The green building movement in India is slowly picking up. There are 30 such green buildings in the country identified yet. Increasingly India is being recognised as one of the countries leading in the adaptation of green building concepts. India can boast of three LEED (Leadership in Energy and Environmental Design) rated Platinum buildings, the first being the CII-Godrej GBC Building in Hyderabad. Green buildings worth Rs 1,800 crore (Rs 18 bn) are expected to come up by 2010. At state levels, urban development authorities should come out with prescriptive green measures for different varieties of buildings like - commercial, residential and individual houses. Earlier, President A P J Kalam called for taking the green building technology to people. He said the green technology movement would become sustainable only if it reaches the rural population. He said that by saving energy through green buildings India will not only make the air purer to breathe in but will also save 30-40 per cent energy consumption.

Rajasthan to augment power capacity

September 17, 2005. The Rajasthan government has chalked out an ambitious power generation plan involving 4,500 MW in the next 3-4 years. With a strong focus on wind and lignite-based generation, the state is waiting for the outcome of the multi- billion dollar Iran-Pakistan-India gas pipeline project, which will pass through Rajasthan to fuel various industries including power. Gas capacities will be accordingly planned after modalities of implementing the pipeline project are over. Plans have been chalked out to generate as much as 2,000 MW from wind energy as also another 1,000 MW from lignite generation. Also, as part of its reform process, the state government has decided to allot Rs 5,000 crore (Rs 50 bn) for renovation of feeders.

TPGL seeks Shell’s LNG supply

September 16, 2005. Torrent Power Gas Ltd (TPGL) is negotiating prices with Shell India Limited to supply LNG to Torrent’s 1,100 MW SUGEN project being set up at a cost of Rs 3,096 crore (Rs 31 bn). TPGL requires over 53 trillion BTU per annum of LNG on net heating value basis. While the international majors like Total, British Gas and Petronas along with domestic majors like ONGC, IOCL, Gail, Petronet LNG Limited (PLL) and GSPC were also in the race to supply gas but none is in a position to make LNG available when the project commences commercial production by the first quarter of 2008. No company other than Shell has any LNG available at present or even till 2009, as no contract is in place to import any LNG other than the existing one with Qatar and the proposed LNG imports from Iran which too will commence in 2009.

MoP for Franchisee model

September 16, 2005. The power ministry (MoP), in order to increase revenue sustainability, has introduced a franchisee model in the implementation of rural electrification programme for covering 66 million households in next five years. According to the recent decision, all distribution transformers, feeders and substations would be franchised through appropriate contractual arrangements. Franchisees, to be selected through a transparent process, would be accountable for receiving power at distribution transformers, each of them metered. They would also be accountable for billing and collection. Franchisees would be allowed an appropriate technical loss and they would be paid suitable commission. It seems all states have agreed for the revenue sustainability condition and the introduction of franchisee model.

West Bengal has already launched the franchisee model through the involvement of self-help groups, while Karnataka would carry it out through panchayats, which are registered legal entities. Uttar Pradesh has initiated tendering for the selection of franchisees. Franchisees would have to show a deposit or a bank guarantee equal to three months of billing to ensure that there is no default in payment. If there is default, it will be adjusted against the bank guarantee of one month and they will be issued notice for termination. Thereafter, the concerned franchisee will be replaced by others. It would be the responsibility of franchisees to see that quality of power is maintained. In this regard, panchayats would also have a definite role to oversee the implementation of rural electrification in general. This apart, the state-run National Thermal Power Corporation, National Hydro-electric Power Corporation, PowerGrid Corporation, Damodar Valley Corporation and Rural Electrification Corporation would assist states in the timely implementation of rural electrification by states.

APGenco to import coal

September 16, 2005. State-owned Andhra Pradesh Power Generation Corporation (APGenco) is planning to import 200,000 tonnes of coal during the current financial year owing to the Government of India's directions to power utilities on account of acute coal shortage being faced by the country. APGenco’s decision is viewed more as a symbol of compliance with the broad guidelines issued by the Central Electricity Authority (CEA) as its total annual coal requirement is 16 mt. The power utility has a 2,972-MW installed capacity in thermal power generation. The import volume for the year has been determined on the basis of internal assessment of supply-demand gap. With Singareni Collieries being controlled by the Andhra Pradesh government, most of its production is utilised in the state, especially in the power generation. Moreover, coal consumption by APGenco is expected to come down this year as its thermal generation is expected to decrease by 2000-3000 million units on account of additional hydro power generation.

CERC to cap margins on traded electricity

September 16, 2005. The Central Electricity Regulatory Commission has suggested capping the margin on traded electricity at Re 0.02 per kWh including all charges except charges for scheduled energy and open access. Charges for open access include only transmission charge, operating charge and application fee. At present, given the power shortage in the market, it is a sellers market with margins on traded electricity at around Re 0.05 per kWh, but going as high as Re 0.30 per kWh in certain cases. The CERC has the freedom to fix trading margins, if necessary.

 APSRTC may switch over to bio-diesel 

Text Box: §	Bio-diesel run bus had negligible hydrocarbon emissions.
§	Saving is put at 10 paise per kilometre 
§	Bus was run between Dilsukhnagar and Sanatnagar in Hyderabad 

September 15, 2005. The Andhra Pradesh State Road Transport Corporation (APSRTC) may pitch in for cheaper and environment friendly fuel for more of its fleet in the coming days, depending on production and pricing. A three-month long study by APSRTC showed that bio-diesel run bus had negligible hydrocarbons and 14 per cent lower carbon monoxide content in its emissions compared to a diesel bus. The saving was put at 10 paise per kilometre of bio-diesel, though the mileage of bio-diesel bus was a shade lesser at 4.54 km per litre against the diesel's 4.60 km. The saving could be sizable given the fact that the diesel prices have been shooting up.

Aim at conserving at least 10-15 pc energy: Kalam

September 15, 2005. The President, Mr A.P.J. Abdul Kalam, said India, with its current power generation of one trillion units a year, should aim at conserving at least 10-15 per cent energy. He suggested that energy independence rested on two principles — to use less energy to provide services and cutting down energy losses. He insisted that simultaneously India should access technologies to provide a diverse supply of reliable, affordable, renewable and environmentally sustainable energy. He said that in a growing economy when country’s population is expected to grow approximately at 1.3 per cent, the energy consumption rate is expected to grow at 4.3 per cent per annum. This trend would strain the energy sector to a large extent.

1 pc cut in AT&C can fetch $21 mn discoms: DERC

September 15, 2005. Even a 1 per cent reduction in aggregate tariff and commercial (AT&C) losses in the Delhi power sector is expected to result in a surplus revenue of $21 mn (Rs 900 mn) by this fiscal-end, according to the Delhi Electricity Regulatory Commission (DERC). For fiscal 2004-05, AT&C reduction has crossed 0.5 per cent, leading to a reduction of around Rs 30 crore (Rs 300 mn) of revenue requirement, and this portion is completely passed on to the consumer. In case of over-achievement higher than 0.5 per cent, the incentive will be shared between the discoms (distribution companies) and consumers, which will again effectively lead to a reduction in average revenue requirement (ARR) of the discoms. However in 2005-06 and 2006-07, the entire benefit of over-achievement would be shared between the discoms and consumers.

MoP for 36,955 MW capacity addition

September 15, 2005. The power ministry (MoP) has initiated plans at multiple levels to achieve the power capacity addition of 36,955 MW in the Tenth Plan (2002-07). According to the ministry, these plans will enable the people to enjoy the quality electric power at affordable rates by 2012.




Norsk Hydro to buy U.S. Spinnaker Co.

September 19, 2005. Norwegian energy and aluminium group Norsk Hydro has agreed to buy U.S. oil and gas producer Spinnaker Exploration Co. for $2.45 billion in cash to expand output and add potential for new discoveries. It will pay $2.45 billion in cash for the shares and assume $110 million in debt. Spinnaker produces 23,000 barrels of oil equivalent per day, which is due roughly to double to 50,000 boed by 2008. Hydro's current total output is around 575,000 boed, most of it from off Norway and a tenth from international fields.

Swift Energy to buy Louisiana field

September 19, 2005. Swift Energy Co. agreed to acquire interests in South Bearhead Creek Field in Beauregard Parish, Louisiana, for $24.5 million. The acquisition, effective Aug. 1, 2005, is expected to close within the next 45 days. Swift Energy estimates total proved reserves of the purchased properties to be about 3.6 million barrels of oil equivalent. It said it would fund the purchase with current cash flow. The company said it plans to start an exploitation program in the first-half of 2006 to drill proved undeveloped and probable locations, fracture stimulate several wells, enhance facilities and improve per unit operating costs.

Russia to produce 120 mt of oil in Q4

September 19, 2005. Oil production in the fourth quarter of this year is expected to be 120 million tons of oil and unstable gas condensate. A decree on the transportation of crude oil, oil products and gas to Russian consumers and abroad was signed by industry and energy ministry.  Under the document, Russia plans to export 44.9 million tons of oil to foreign countries except the CIS, through the Transneft pipeline system. 4.8 million tons will be supplied to Belarus, 4.3 million tons – to Ukraine, and 1 million tons – to Kazakhstan. Production of oil with gas condensate from January to August 2005 reached 310.426 million tons, 2.5 percent more than in the same period last year. Russia’s oil exports dropped 0.7 percent to 168.369 million tons. 57.3 million tons of oil will be delivered to oil refineries in the fourth quarter. Domestic demand for automobile gasoline is projected to be 7.2 million tons, for diesel fuel – 7.9 million tons and for fuel oil – 8.3 million ton.

PDVSA & CNPC to produce 350k b/d crude oil

September 19, 2005. Venezuela's state oil firm PDVSA in partnership with Chinese oil company CNPC could be producing an average 350,000 barrels a day (b/d) of crude from two oil fields in Venezuela in the mid term. The Zumano field near the city of San Tomé in Anzoateguí state will produce 50,000b/d and drilling operations will be accelerated in early 2006 to reach this goal "in the mid term. PDVSA and CNPC are also expected to produce 300,000b/d of heavy crude on the 640 sq km Junin 4 block of the Orinoco oil belt during the next two decades.

China sets up new Oil Company

September 17, 2005.  Moving to meet soaring domestic demand, China has set up a new oil company licensed to handle exploration, development and refining. Merging 21 exploration and development companies and three refineries formed state-owned Shaanxi Yanchang Petroleum Group Co. With demand for crude oil soaring as China's economy roars ahead at a growth rate of more than 9 percent annually, China has stepped up efforts to locate and tap its domestic reserves.

Norway, Japan & U. S race for Russian gas field

September 15, 2005. Russia's Gazprom will seek the help of oil majors from Norway, the United States and Japan to launch a huge offshore field and to supply US markets with gas for half a century. Gazprom is due to reveal a shortlist of five potential partners to help it develop the field, the Shtokman deposit in the Arctic Barents Sea. Shtokman's challenges pumping gas in icy waters 550 km north of Norway, building a gas liquefaction plant in Russia's far north, supplying the North American market for 50 years are matched by the size of the prize: gas reserves of 3.2 trillion cubic metres, more than annual global consumption. At least 10 firms are hoping for a slice of the business, but the names on the shortlist remain a closely guarded secret.

EnCana’s oil discovery in offshore Brazil

September 14, 2005. EnCanBrasil, a subsidiary of EnCana Corporation has made a promising oil discovery in the Campos Basin, about 75 kilometers offshore Brazil. During a recent three-day production test, the 3-ENC-3-RJS exploration well flowed at rates up to 1,800 barrels per day of crude oil (14 API), a rate that was limited by the capacity of the test equipment. Encountering about 34 meters of net pay, this third EnCana well into the BM-C-7 prospect is located about four kilometers from the first well drilled in April 2004. A fourth well is planned to further delineate the newly named Chinook field immediately following completion of current well operations. 

Peru sees energy exploration deal with China

September 13, 2005. Peru hopes to sign a deal within weeks for China to explore for oil and gas in the southeastern Madre de Dios region. Negotiations are focusing on a 3.7 million acre (1.5 million hectare) site. Peru is home to the vast Camisea natural gas field, also in the southeastern jungle, which Peru says will turn it into an energy exporter from 2009. Exploration efforts in and around Camisea to boost reserves had spurred the Chinese interest. Brazil's Petrobras and Spain's Repsol-YPF are also exploring in southeastern Peru.


Refineries open to JV investment

September 20, 2005. Foreign companies still have opportunities to invest in China's refinery business, even though the government adopts a policy restricting foreign cash flow into the sector. Many projects (of joint-venture refinery construction) are under discussion between the Chinese and foreign oil companies. But the MOFCOM official did not elaborate on the companies involved. Currently, the government policy regulates that foreign investors shall not take a controlling stake in China's refineries. Although only a small number of refineries in China are partly controlled by foreign firms, due to government policy, there are still opportunities for foreign investors to cash in on the country's refinery business, because "China still lacks large-scale refineries with high quality, good management. Since China's entry to the World Trade Organization in 2001, many foreign companies such as Total, ExxonMobil and BP have started talks with the Chinese Government to build refineries across the nation, especially along the coastal regions for easier access to crude imports. But only a few of these foreign oil companies got government approval to build refineries by setting up joint-ventures with the domestic oil majors such as Sinopec and PetroChina.

Qatar plans new oil refinery

September 18, 2005. Qatar plans a new 200,000 barrels per day oil refinery to run on Al-Shaheen crude to be running by 2010. Construction of the 140,000 barrels per day Ras Laffan refinery, to run on condensates, is underway and should be finished by 2008. The Al-Shaheen plant is completely owned by Qatar Petroleum, which will own an 80 percent stake in Ras Laffan. ExxonMobil and Total each have a 10 percent stake in the latter plant.

Saudi, Shell mull Texas refinery expansion

September 14, 2005. With gasoline prices surging and refineries straining to meet demand, Saudi Arabia and oil giant Shell are mulling a plan to expand their joint venture refinery in Port Arthur, Texas. The joint venture company, Motiva Enterprises, planned to more than double the Port Arthur refinery's capacity to 600,000 bpd at a cost of $3.2 billion. Such an expansion would make the refinery the largest in the United States. New facilities will include a coker and desulphurisation unit, making it capable of handling the medium and heavy sour crudes Saudi Arabia can produce in abundance. Most of the output would be gasoline, diesel, heating oil and jet fuel.

Virgin Group wants to build oil refinery

September 13, 2005. Britain Virgin Group was interested in building an oil refinery in an attempt to cut airline fuel prices. Virgin Atlantic Airways raised fuel surcharges for the second time in four months to make up for rising oil prices. Virgin is actively looking at building a refinery. If Virgin doesn't start now to get more refineries built, then fuel prices could literally rocket to $100-$200 (per barrel of oil) and the world economy would come to a grinding halt. Virgin not gave any specifics of a project, which has been the subject of speculation in Europe for some time. They hope that three or four years from now will have contributed to at least getting one refinery built. But actually the world needs 10-12 new refineries to be built as soon as possible.

Transportation / Trade

Shell, ConocoPhillips to sell LNG to India

September 19, 2005. Global oil and gas majors Shell and ConocoPhillips have offered to sell Australian liquefied natural gas to India to meet its growing energy needs. ConocoPhillips is selling LNG to South East Asia at a price that is not significantly higher than the price at which India has contracted LNG from Iran. India has contracted 5 mt per annum of LNG from Iran for 25 years at a delivered price of $ 4.10 (Rs 180) per million British thermal unit (mBtu). Both Shell and ConocoPhillips have LNG production facilities in Australia and are looking for markets. India, which has an unmet demand of 50 million standard cubic meters per day (mscmd) of natural gas (about 13 million tonnes of LNG), offered a viable market. Australia has offered 29 offshore blocks for bidding for international oil firms to attract investment in exploration. Indian firms have been exhorted to participate in the bidding round.

Rosneft to bid for oil and gas project

September 15, 2005. Russian state oil company OAO Rosneft intends to bid for Far East oil and gas project that was once the domain of Exxon Mobil Corp. and Chevron Corp. Rosneft is interested in all three sectors of the offshore Sakhalin-3 project, as well as in blocks off the coast near the city of Magadan. A consortium comprising Exxon Mobil, Chevron and Rosneft won a tender to develop Sakhalin-3 in 1993. However, the right to develop the reserves was revoked years later after new Russian laws made a license agreement under the original terms impossible.

UAE's oil exports to Thailand will top $4 bn

September 15, 2005. Thailand's imports of crude oil from the UAE will exceed $4 billion this year. The UAE is the biggest supplier of oil to Thailand. The value of oil imports totaled $3.8 billion in 2004. But in the first half of this year, imports have increased hugely and they will go over $4 billion. Thailand also imports oil from other Gulf countries such as Saudi Arabia and Oman, but the UAE is the biggest supplier. Thailand's exports to the UAE, which surpassed $1 billion in 2004, are poised to jump by at least 30 to 40 per cent this year. Last year, exports to the UAE crossed the $1 billion figure, which was 30 per cent higher than 2003. This year exports have increased by a record 20 per cent in the first half and we expect at least 30 to 40 per cent growth for the full year.

RasGas-II signs LNG deal with Taiwan

September 15, 2005. Qatar will supply Taiwan with three million tonnes of liquefied natural gas per year starting from 2008. Ras Laffan Liquefied Natural Gas Company Limited (RasGas-II) and the Chinese Petroleum Corporation (CPC) signed a long-term sales and purchase agreement for the supply of approximately three million tones per annum of LNG starting in 2008. The 25-year agreement is to meet the expanding energy needs of Taiwan and the Ta-Tan power plant. In a statement issued after the signing, Qatar's LNG production would range between 20 and 21 million tonnes in 2006 and increase to 77 million tonnes by 2012. Investment is expected to ultimately reach about $14 billion. RasGas-II, which opened its third 4.7 million tonne-a-year LNG train last year, expects to bring its fourth and fifth LNG trains on stream in 2005 and 2007, respectively. Gas supply under this agreement will come from Qatar's giant North Field, which has recoverable reserves of more than 900 trillion cubic feet, the world's largest non-associated natural gas field.

Petro-Canada plans to sell stake in Syrian oil

September 14, 2005. Petro-Canada, the third-biggest oil company in Canada, is planning to sell its stake in a joint venture with Royal Dutch Shell Plc that produces oil and natural gas in Syria. The company will meet with prospective buyers in London beginning this week to discuss the sale of the 36 percent stake in Al Furat Petroleum Co. The venture, which produces the equivalent of about 70,000 barrels of oil a day, is operated by Shell.

Alaska plans to invest $4 bn in gas line

September 14, 2005. Flush with revenue from high oil prices, Alaska should invest about $4 billion in a huge pipeline to ship natural gas from its North Slope to domestic markets. Alaska is seeking a state equity share in the long-desired gas project worth about a fifth of its estimated $20 billion cost. The investment could include $1 billion in cash and $3 billion in debt. If a deal is struck between administration and the oil producers, the state legislature would need to approve it, to call lawmakers into a special session late this year to consider a gas pipeline contract. Alaska's North Slope oil fields hold an estimated 35 trillion cubic feet of known conventional natural gas, and state and federal officials say there could be twice that much or more. But the known natural gas has languished on the North Slope because, to date, major oil producers have not deemed it economical to send the resource to markets.

US govt sells one-third of emergency oil offered

September 14, 2005. The U.S. Energy Department accepted bids from energy companies to buy 11 million barrels of crude oil, about one-third of the amount offered for sale from the government's emergency stockpile, to help replace supplies cut by Hurricane Katrina. To rein in runaway oil prices after the Aug. 29 hurricane, the Bush administration offered to sell 30 million barrels of crude from the emergency stockpile, known as the Strategic Petroleum Reserve. Katrina's 140 mph winds and flooding initially shut most crude production and several refineries along the Gulf Coast, the heart of the U.S. oil patch. The fact that only 11 million of the 30 million barrels offered were sold indicated that the U.S. market has enough supply. The 11 million barrels sold is roughly equal to the amount of crude the United States imports in one day, so the market impact may be limited. The United States consumes almost 21 million barrels of oil a day, one-fourth of global demand.

Japan refiners to ship gasoline to US

September 14, 2005. Four Japanese refiners will jointly export 25,000 kilolitres (157,000 barrels) of gasoline to the United States as part of a global bid to ease a supply crunch after Hurricane Katrina. The gasoline will be shipped from Nippon Oil's 145,000 barrel-per-day (bpd) Sendai plant in northern Japan this week or next and reach its destination in first-half October. Nippon Oil will supply 10,000 kl, with Idemitsu Kosan Co., Cosmo Oil Co. and Japan Energy Corp. each sending 5,000 kl. The move brings Japan's planned gasoline exports to the United States under the global scheme to 307,000 barrels so far, after Showa Shell Sekiyu K.K. It would ship 150,000 barrels later in September. ExxonMobil's Japanese unit has also said it would export about 140,000 barrels of the gasoline blendstock, alkylate, to the United States and 630,000 barrels of gas oil to Europe in September or October. Europe needs gas oil imports as it has a shortage of middle-distillate refining capacity and growing diesel demand. Altogether, Japan has committed about 1.08 million barrels of oil exports in the first week of the International Energy Agency's (IEA) 30-day emergency oil release.

PetroChina to expand pipeline network

September 14, 2005. China's largest oil and gas company, PetroChina, says it plans to spend up to 100 billion yuan ($12.3 billion) to expand its network of oil and gas pipelines over the next five years to meet soaring demand. Much of the 9,400 miles of new pipelines will be located in the southwest, northwest and northeast, part of an effort to reach more end users and beef up PetroChina Co.'s refining business. The company is positioning itself to fight off growing competition in the refined oil products retailing market and to meet surging demand for oil and gas in major industrial regions such as the northeast. The plan includes a cross-border pipeline to transport crude oil to PetroChina refineries from PetroKazakhstan, which was recently acquired by CNPC for $4.2 billion. Of the new pipelines, 5,000 miles will be for natural gas, 1,900 miles is for crude oil, and 2,500 miles for refined oil. Some 2,500 miles of oil and gas pipelines already under construction in China's oil-rich remote western regions are due to begin operations by next August.

Policy / Performance

US approved emergency oil loan for Total

September 19, 2005. The U.S. Department of Energy approved a loan to Total Petrochemicals for 600,000 barrels of crude oil from the government's Strategic Petroleum Reserve to replace oil supplies disrupted by Hurricane Katrina. Total Petrochemicals USA, Inc. is the American entity of Total Petrochemicals. This is the seventh emergency loan approved by the government, with refining companies borrowing some 13.2 million barrels so far.

Saudi Arabia ready to boost output

September 16, 2005. Top oil exporter Saudi Arabia has again moved to reassure markets it stands ready to boost its output to fill any crude supply gap or increase in demand. OPEC has already raised output by more than 4 million barrels per day over the past 3 years and is operating close to full capacity. Only Saudi Arabia has any significant capacity but its crude is not suitable for refiners to process into transport fuels and the closure of US refineries by Hurricane Katrina means OPEC is struggling to find buyers for more supplies on world markets. Riyadh has said it can boost its output to 11 million bpd if needed. The OPEC giant has been pumping around 9.5 million bpd since May. OPEC has struggled to tame the price rally and the group blames much of it on the world’s shortage of sophisticated refineries. Saudi Arabia and oil giant Shell are considering a plan to expand there joint venture refinery in Port Arthur, Texas. The kingdom also plans to build an export-oriented refinery at home.

OPEC trims oil demand forecast

September 15, 2005. OPEC cut its forecast for 2005 world oil demand, saying record fuel prices at the pump were partly to blame. Some Asian economies were already feeling the pinch even before Hurricane Katrina battered the U.S. Gulf refining sector and swept gasoline prices above $3 a gallon. The cartel trimmed its demand growth forecast for 2005 to 1.4 million barrels per day (bpd) and also revised down slightly its projection for 2006 growth to 1.5 million bpd.

Oman to cut term crude sales to Asia

September 15, 2005. Oman will cut term crude oil exports by 20 percent next year as it starts supplying a new domestic refinery, lending fresh support to the Middle East benchmark grade. Lifters in Asia were notified overnight that Oman would cut its term supply volumes by 20 percent from next January, which would be equivalent to around 85,000 barrels per day (bpd), provided that exports next year remain constant from this year. Oman, a non-OPEC producer whose crude is one of the two Middle East sour benchmarks used in Asia, had been expected to cut its crude exports as it shifted supplies to a new 75,000-bpd refinery set to start operations by mid-2006. Oman is building the new refinery in the northeast port city of Sohar and is upgrading its existing 85,000-bpd plant, which would likely cut the country's total crude exports by about a tenth. Oman exported 129.59 million barrels of crude oil in the first half of 2005 (about 720,000 bpd), down 1.1 percent year-on-year. The new refinery should allow Oman to add to its sporadic exports of refined products such as fuel oil and diesel, which will be marketed by a joint venture of state-owned Oman Oil Co. (OOC) and European energy trader Vitol.

Asia’s diesel may ease as traders ship to Europe

September 15, 2005. Asia’s diesel glut, caused by falling demand in countries including China and Thailand, may ease as traders such as BP Plc and Morgan Stanley ship the fuel to Europe to ease shortages. European supplies are being drained to meet demand in the U.S. after Hurricane Katrina shut refineries. About 867,000 metric tons of diesel, enough to fill 15 million Toyota Camrys, is being exported this month to Europe, mainly from Singapore and South Korea. Growth in Asian diesel consumption is slowing because of higher prices. In Thailand, the government removed diesel subsidies on July 13, boosting prices by 63 percent this year. In China, suppliers reduced imports because domestic prices controlled by the government aren’t high enough to cover costs.

5-day week proposed to reduce oil consume - Pak

September 15, 2005. The Pak government has directed the ministry of petroleum and the Central Board of Revenue (CBR) to examine the impact of a proposal to observe two holidays a week to reduce oil consumption. Other proposals to be considered include a reduction in margin of oil marketing companies and dealers, conversion of buses and trucks to CNG and efficient running of thermal power plants. The CBR and petroleum ministry were asked to jointly formulate recommendations after analyzing the impact of each option. The oil marketing companies and dealers could be involved in a dialogue to reduce their margins for an interim period given the extraordinary situation arising out of volatile oil market.

Indonesia may hike fuel prices by 50 pc

September 14, 2005. Indonesia’s government may raise fuel prices by at least 50 per cent in October as soaring subsidies threaten plans to cut the budget deficit. The government is weighing the size of the increase and how to minimize the effect on the poor while capping the deficit at 1 per cent of gross domestic product. Indonesia needs to raise fuel prices that are less than half the import cost to reassure investors who sold the nation’s currency and stocks last month as subsidies rose. Indonesia faces opposition from consumers after promising that an average 29 per cent jump in fuel prices in March would be the last this year.

EnerGulf signs MOU on oil block with Congo

September 14, 2005. EnerGulf Resources Inc. has entered into a Memorandum of Understanding (MOU) with the Democratic Republic of Congo (DRC) Negotiating the final terms of a Hydrocarbon Exploration and Production Concession covering all or significant parts of the onshore area, Les Zones du Bassin Cotier (ZBC). The ZBC is located in the onshore coastal Congo Salt Basin of Western DRC. The approximate size of the area is 4,916 square kilometers (1.2 million acres). The ZBC is adjacent to the highly prospective Cabinda area of Angola. The offshore blocks of Cabinda closest to the ZBC contain the giant (greater than 500 million barrels recoverable reserves) Malongo and Takula field complexes operated by Chevron. Onshore oil production from the Perenco fields is about 9,000 barrels of oil per day. Offshore production from Perenco and Chevron in DRC waters account for about 18,000 barrels of oil per day.

Indonesia's Pertamina and Exxon to sign deal

September 14, 2005. Indonesian state oil firm Pertamina and U.S. oil giant Exxon Mobil Corp plans to sign a long-awaited deal on developing the Cepu oil block this week. The government had said it wanted to seal the $2 billion deal by September 25, closing a four-year saga that has clouded the future of the project which has up to half a billion barrels of reserves that could add 180,000 barrels per day (bpd) to Indonesia's declining output. The contract will be for 30 years to exploit oil in Cepu. Pertamina and Exxon will share the block 45 percent each and 10 percent are planned for the regional government. To accommodate the deal with Exxon Mobil, Indonesia has revised its upstream oil and gas regulations, under which the government could give exemptions on rules governing the state's participating interest, investment recovery and contract period.

Indonesia to compensate for higher fuel prices

September 14, 2005.  Indonesia will pay a subsidy of 100,000 rupiah (9.94 dollars) to millions of poor households to help compensate them for a fuel price increase. The scheme was aimed at cushioning the impact of an impending fuel price increase on 60 million Indonesians living in 15.5 million households considered as poor. Payment was expected to be made starting this month, for an initial three-month period, but the government had not set a date for a fuel price increase. The direct cash scheme will be reviewed after three months and could be the forerunner for a social security system in Indonesia. The payments would not meet all the poor’s needs but would help offset the higher cost of fuel, which they mainly use in the form of kerosene for cooking.

Australia's AGL enters coal-seam gas joint venture

September 14, 2005. The Australian Gas Light Co. the country's biggest power retailer has entered a joint venture arrangement with Sydney Gas Ltd. to develop coal seam gas assets. The equal partnership will be based on the current production assets and exploration permits of Sydney Gas, a coal seam specialist, and will initially cost AGL A$42.25 million ($32.5 million). AGL will pay an additional A$51 million by December 2008 if additional reserves are proven at the Camden Gas Project, south of Sydney. AGL's decision reflects increased interest in coal seam gas as mature gas reserves such as the Cooper Basin decline, fuel prices skyrocket and government provides incentives for using cleaner fuels in power generation. AGL, which has also signed a 10-year gas purchase contract with Sydney Gas worth up to a $600 million.

Russia to adjust oil export tariffs to curb inflation

September 14, 2005.  The Russian government is planning to adjust export tariffs on oil and oil products to contain inflation. Proposals are being prepared on adjusting export tariffs and a task force has been set up to work on the matter, after parliamentary hearings on the 2006 draft budget.

Does not need to borrow more govt oil - Exxon

September 13, 2005. The giant Exxon Mobil oil refinery in Baton Rouge, which borrowed 6 million barrels of crude from the U.S. government's emergency stockpile after Hurricane Katrina, does not need to borrow any more. The 494,000-barrel per day (bpd) refinery, located on the Mississippi River, had to borrow the oil earlier this month after its crude oil supply was cut off by the hurricane. The loan from the Strategic Petroleum Reserve must be repaid with interest at a future date. Earlier this month, the Energy Department loaned a total of 12.6 million barrels of crude from the stockpile to Exxon, Valero Energy, Placid Refining, Total Petroleum, BP, and Marathon Oil.

China to build 30 LNG tankers by 2015

September 13, 2005. China will build at least 30 tankers over the next decade to ship liquefied natural gas (LNG) from abroad to feed its voracious energy appetite. Although China's first-ever LNG tanker will not be delivered until the end of 2007, its shipyards will be able to build more than 10 tankers annually by 2015. Each tanker will cost about $160 million. The government has decided to allow three domestic oil majors, CNOOC, PetroChina and Sinopec to build 10 or 11 LNG terminals along the coast, with total capacity of around 30 million tonnes by 2010. The first terminal for the super-cooled, compressed natural gas will start operation in the middle of next year in the southern manufacturing heartland of Guangdong. British oil major BP holds a 30-percent stake in the terminal, which has an initial capacity of 3.7 million tonnes a year. Before the first China-made LNG ship is in use, Australia LNG Pty. Ltd., the gas provider to the Guangdong terminal, would offer tankers to meet requirements until 2007.



Huaneng inks Tibet hydropower deal

September 20, 2005. China Huaneng Group, the nation's biggest power producer, plans to build a hydropower plant in Tibet to meet rising demand for electricity. China Huaneng signed an initial agreement with the Tibet local government for the project and is holding environment and technological studies. The company is planning the size of the plant and investments. Huaneng Group, which owns about 9 percent of China's power generation capacity, plans to expand its capacity by 46 percent by 2010 and then double that by 2020.

New coal power plant will be ready in ‘09

September 19. 2005. A new coal power plant being constructed by Houston-based EnviroPower will provide energy to the Southwestern Electric Cooperative for 30 years beginning in 2009. Wholesale power rates will increase two percent each year. The cooperative plans to sell excess power to offset or negate the increases to its 20,300 members. The plant will use new technology to control pollution emissions. The co-op provides power to parts of 10 counties: Madison, Bond, Fayette, St. Clair, Macoupin, Marion, Montgomery, Shelby, Clinton and Effingham.

MAPNA builds 31,000 MW of power plants

September 18, 2005. Iran Power Plant Projects Management Company (MAPNA) has taken part in building 31,000 MW of power plants. The power plants are worth over 13 billion dollars of which 9,500 MW has been built thus far and 13,700 MW would be made operational in the near future. The MAPNA is also working as implementer and contractor for 7,524 MW of power plant capacity. MAPNA was established in 1992 and has thus far carried out many activities including engineering and procurement, procurement of accessory parts, as well as major procurement operations to supply turbines and generators.

Japan's Ennet double power capacity by ‘09

September 15, 2005. Ennet Corp., a Japanese power retailer, will more than double the amount of electricity available for sale by 2009 when its parent companies complete their generation plants. Tokyo Gas Co. and Osaka Gas Co., two of Ennet's major shareholders and the nation's largest natural gas distributors, are building plants, which are expected to begin operating in 2008 and 2009. Ennet will sell the electricity generated from the power stations, enabling it to compete better with Japan's biggest power companies. Tokyo Gas and Nippon Oil Corp., Japan's largest refiner, plan to generate electricity from a 800-megawatt power plant in Kawasaki city, west of Tokyo, in 2008. Tokyo Gas, Royal Dutch Shell Plc's unit and Showa Shell Sekiyu K.K. are building a 1,200 MW plant in Yokohama city, south of Tokyo. The plant may begin operations in 2009. Osaka Gas plans to generate power from a gas-fired plant in Osaka Bay in April 2009.

Ontario will build new nuclear plants

September 14, 2005. Billions of dollars will be spent to build new nuclear plants in Ontario if a review of the province's tight energy supply concludes they're necessary. In providing his strongest indication yet that he might look to nuclear energy to meet Ontario's long-term electricity supply concerns, prepared to agree on construction of multibillion-dollar nuclear plants if that's what it takes to quench the province's increasing thirst for energy.

Transmission / Distribution / Trade

Baltimore Energy Co. to market nuclear reactors

September 16, 2005. Constellation Energy Group has joined forces with a French company to design, develop and market nuclear power plants in the United States. The Baltimore-based company, which owns nuclear power plants at Calvert Cliffs and Scriba, N.Y. It will market a new line of reactors based on Areva's European Pressurized Reactor design.

That reactor is the basis for a plant under construction in Finland and under development in France. No nuclear power plant has been licensed in the United States since the Three Mile Island accident in 1979 and the new company will compete with General Electric Co. and British Nuclear Fuels PLC to develop the first new reactors in the U.S. since the accident. Areva said it expects to be in position to take orders for new reactors in the United States by 2008, with construction beginning by 2010 and operations starting by 2015.

Nigeria Agip adds 180 MW to power supply

September 16, 2005. Nigeria Agip Oil Company (NAOC) will add an additional 180 MW of electricity to the national gird next month. The plant which was commissioned in the 1st of April this year in Okpai, Delta state, initially added 360 MW to the national grid, and has future possibility of expansion to 960 MW by doubling the gas turbine units and stem turbine blocks.

Policy / Performance

Coal output set to increase

September 20, 2005. Prices for thermal coal, the second- biggest energy source used in power plants after oil, will decline next year from a record high as producers such as BHP Billiton, Anglo American and Xstrata expand production. Supply contracts will average US$49.50 (HK$386.10) a tonne next year, according to the median forecast of six analysts in a survey, compared with a record US$53 a tonne in 2005. Coal output will grow 2.3 percent to 4.7 billion tonnes, JPMorgan Chase estimated in a September 7 report from London. BHP, Anglo and Xstrata, are digging new mines and upgrading ports and railroads to increase coal supplies. Australia and Indonesia, the world's two biggest coal exporters, are among nations that will expand their production next year. Xstrata, the world's largest exporter of thermal coal, is developing new mines such as the A$521 million (HK$3.1 billion) Rolleston open-pit mine in Queensland, Australia, which is scheduled to start production in the fourth quarter. The mine will produce eight million tonnes a year. London-based Anglo American, the world's No2 miner, opened its five million tonne Isibonelo mine in South Africa in July.

BHP Billiton buys emission to boost coal sales

September 19, 2005. BHP Billiton, the world's biggest mining company, is buying emission credits linked to European coal sales contracts to boost the appeal of the fuel as regulators try to halt greenhouse-gas production. Coal emits more than twice as much carbon dioxide as natural gas for each unit of power produced. Utilities that burn coal need more emission allowances. BHP has been buying emission certificates from projects that cut greenhouse-gas output in developing nations, as well as European Union carbon allowances, ``to staple with coal sales imported into Europe’’.Certified emission reductions, which are known as CERs and require approvals from a United Nations board and other regulators, were trading last month at about 8 euros ($10) a metric ton, compared with 21.60 euros a ton today for 2005 EU allowances. The CERs are created under the Kyoto Protocol, an international agreement to cut greenhouse gases, when poor nations build energy projects such wind farms and power units that burn manure.

Japanese set to direct 'sun-power' nuclear reactor in France

September 17, 2005. Japan has been asked to nominate the chief of an international project to build a multi-billion-dollar nuclear fusion reactor in southern France. Negotiators from the European Union, the United States, Russia, Japan, South Korea and China, the proposed site for the International Thermonuclear Experimental Reactor (ITER), that they also wanted construction to start as soon as possible. After years of wrangling, Cadarache was chosen over Japan's Rokkasho-mura on June 28 as the site for the reactor, designed to emulate the power of the sun, after Tokyo withdrew its bid to host the 10-billion-euro (12-billion-dollar), 30-year project.

Pak seeks nuclear reactors from US

September 14, 2005. Pakistan will soon start formal negotiations with the United States for acquiring nuclear power reactors to meet its energy needs for the next 25 years. The nuclear regulatory authorities of the two countries have already held exploratory talks on civilian nuclear cooperation. Pakistan is currently building its third nuclear power station with the assistance of China and plans to set up 13 more such stations to generate 8,800 MW of electricity by the year 2030. Although the anti-proliferation lobby in the United States is opposed to selling nuclear reactors to non-recognized nuclear weapons states, the agreement concluded by the Bush administration with India last July to sell that country civil nuclear technology opens the doors for other countries to seek the same cooperation.

Renewable Energy Trends


India rated third in wind energy potential

September 20, 2005. India’s energy potential is rated the third largest in the world, with annual installations of 875 MW, only after Europe and US, exceeding forecasts of 500 MW, according to analysis by Danish consultants BTM Consult. This accounts for 10.7 per cent of the total MW of capacity added globally. India’s cumulative wind energy capacity is currently 3,000 MW, only behind Denmark, which has a installed capacity of 3,083 MW. Europe and US have an installed capacity of 34,725 MW and 6,750 MW respectively in 2004. It is expected that India’s installed capacity would touch 8,300 MW by 2009. Currently, only one per cent of India’s electricity is generated through wind turbines. A number of corporates including Bajaj Auto, Godrej Industries, and Ramco Industries, have recently decided to set up wind energy plants, to meet their electricity requirements. Seven states in India, namely, Tamil Nadu, Karnataka, Andhra Pradesh, Rajasthan, Maharashtra, Gujarat and Madhya Pradesh account for over 99 per cent of the wind power installations in the country. As of the last fiscal, Tamil Nadu accounts for the highest share at 56.7 per cent of the cumulative capacity, followed by Maharashtra which accounts for 12.7 per cent. India and China together have seen a 25 per cent rise in capacity growth over the last few years, second to Australia. However, globally the demand for electricity currently exceeds the supply by 7.3 per cent, with a peak shortage of 11.7 per cent. The per capita electricity consumption in India is also abysmal at 335 kilowatt-hour (kWh), compared with 877 kWh in China, and 1878 kWh in Brazil. The global wind energy industry is worth $11.3 bn (Rs 496 bn), as of end-2004.

Mercedes steps on biodiesel

September 19, 2005. DaimlerChrysler India (DCIL) took two C class vehicles — Mercedes Benz and Viano, the Mercedes van — topped them up with biodiesel from the jatropha plant for a 1,920-km drive from Chandigarh to Leh. In the project with DCIL are the Central Salt and Marine Chemicals Research Institute (CSMCRI) and the University of Hohenheim. In the first phase of the project, Mercedes vehicles were driven for over 6,000 km in the humid climate of the South and across the hot desert of the North. After that trial runs continued in Pune. The idea is to clear 30,000 km by the end of 2005 so as to get clear definitions and standards for biodiesel. To make this project viable, the three partners have brought under jatropha about 30 acres in Gujarat and 20 acres in Orissa. DCIL is also looking to set up farmer co-operative societies in these areas to cover some 500 hectares with jatropha, with CSMCRI providing the farming techniques, and DCIL putting up the processing plant and machinery.

Tapping plant power: Bio-fuel

September 19, 2005. With crude oil prices soaring and the movement for cleaner environment gathering pace, the world is looking at renewable sources of energy more seriously than ever before. Economies are now keen to secure energy independence by reducing carbon emissions from fossil fuels, while optimising the use of renewable, plant/crop-based sources of energy. Recent developments in biofuel are helping change the global energy scenario, albeit slowly. Bio-ethanol and bio-diesel have emerged as two common biofuels. While bio-ethanol is a petrol additive, bio-diesel is a diesel alternative. Policies encouraging the use of biofuels made from grain, vegetable oil or biomass to replace part of the fossil fuels used in the transport sector are gaining importance. The initiatives generally target at least three goals: (1) to prevent environmental degradation by using cleaner fuel; (2) to reduce dependence on imported, finite fossil fuel supplies, by partially replacing them with renewable, possibly domestic, sources; and (3) to provide demand for crops to support producer incomes and rural economies. Larger supplies of domestic fuels may also improve some countries' balance of payments situation. Amid the current climate of concern over terrorism and the uncertainty over the stability of some oil-producing regions, the biofuel discussion has taken a national security dimension for some countries.

Governments have chosen to encourage bio-fuel production through various mechanisms. These include direct subsidies, excise tax exemptions, automobile emission and fuel standards (regulations) and government purchasing requirements. Increase in biofuel production will have an impact on commodity markets. For example, wider ethanol use to replace petrol may generate greater demand for cereals or other crops, while substitution of diesel by bio-diesel will likely raise the demand for vegetable oils. For instance, the world consumes every day an estimated 82-83 million barrels of crude mineral oil and about 2.5 million barrels of vegetable oil. A 3 per cent blend can completely absorb all the world's vegetable oil. Converting grain into ethanol also yields by-products that can substitute for feed inputs, that is, for feed-grains or oilseed meals. Plants such as jatropha and pongamia (Pongamia pinnata) have a gestation period of three to five years to start yielding fruits or seeds from which oil can be extracted. In sugarcane, there is a cyclical pattern (two-three years of high output followed by one-two years of decline) in cane production. This has to be broken, and assured production is necessary. More important, serious policy initiatives are necessary to promote cultivation (protection of growers' interest), processing (protection of investment in processing facilities), marketing (petroleum companies and petrol pumps must fall in line), and consumption (quality standardisation, pricing). While the Centre has to decide on subsidies and operationalise contract farming, the State governments must go all out to support the venture. The Indian Railways owns large tracts of land across the country. These can be exploited by cultivating plants such as jatropha and pongamia, and even castor-seed. Castor oil can be used for the production of biodiesel after appropriate processing (transesterification). Currently, we export about two lakh tonnes of castor oil.

In India, policymakers have been discussing the promotion of biofuels. Until two years ago, the move to use ethanol from molasses or sugarcane juice occupied the Government's attention. However, not much headway was made in commercialising the idea. There were gaps in cooperation among cane crushers, petroleum companies, petrol pumps and consumers. While the technical feasibility was established, no one was sure about consumer response. Also, the question of subsidy — quantum, beneficiaries and relative share — was unresolved. Issues such as non-uniform sales tax among States came in the way. In 2003, sugarcane output in the country declined drastically due to weather aberrations in the major producing regions of Maharashtra and Uttar Pradesh. The story was repeated in 2004. From being an exporter of surplus sugar, Indian ran into a deficit and became an importer of raw sugar. Enthusiasm to promote bio-ethanol all but evaporated. The Government has also been talking about promoting jatropha (Jatropha curcas, or Ratanjyot, in local parlance) a hardy plant that grows in the semi-arid tropics. The plant produces oil-bearing seeds from which 25-30 per cent oil can be extracted. Jatropha oil can be blended with diesel to make bio-diesel. The cultivation of this plant can be taken up on a large scale in several parts of the country. Contract farming is the ideal method to promote this renewable source of oil. 

Kerala to set up wind farms in private lands

September 18, 2005. In a bid to tap non-conventional energy sources, Agency for Non-Conventional Energy and Rural Technology (ANERT) is in the process of setting up wind farms in private lands in various parts of the State to generate a total of 600 MW of power. It had identified 16 sites having wind characteristics suitable for economic exploitation to set up wind farms for the development of wind power in the State through private developers. To begin with, ANERT, the nodal agency will set up a demonstration project to generate 2 MW of power at Ramakkalmedu in Idukki district (with an estimated potential of generating 80 MW of power, is identified as one of the best sites available in the country for developing wind power) at an estimated investment of Rs 21 crore (Rs 210 mn) in association with the Kerala State Electricity Board for the purpose. Palakkad and Thiruvananthapuram districts are identified for setting up other wind farms in the State. ANERT and KSEB are jointly setting up the project. Feasibility studies on the project are over and the project would be commissioned by next year. Of the total 6095 MW power potential in the state, the contribution from the non-conventional sources was only 5.5 per cent.

Ethanol demand to shoot up 

September 18, 2005. India’s demand of alcohol (ethanol) for blending and other purposes is expected to reach 2300 million litres by 2009-10 at 5 per cent blending level. According to CRIS INFAC, the demand for petrol is expected to grow at a CAGR of 11.8 per cent from 9.9 mt in 2005-06 to 15.5 mt by 2009-10. To blend petrol with 5 per cent ethanol in nine states and four Union Territories, around 490 million litres of ethanol will be needed in 2005-06. By 2009-10, the quantum of ethanol required for blending will shoot up to over 750 million litres. At a 10 per cent blending level, the demand for ethanol for blending will be double this quantity. If the blending programme is extended to the entire country, the demand for ethanol for blending will be around 43 per cent higher than the projections made above. Industrial alcohol-based chemical manufacturers and potable alcohol manufacturers also use the alcohol/ethanol made by sugar mills as raw material. The demand for ethanol for these and other uses is expected to be around 1450 million litres in 2005-06. By 2009-10, this demand is likely to increase to about 1570 million litres. If 10 per cent ethanol blending becomes mandatory, around 3100 million litres of alcohol/ethanol will be required to satisfy demand. Even if the entire molasses produced is processed into alcohol, the quantity of molasses required to meet the projected demand from all segments by 2009-10 will be 10.4 mt (12 billion litres) at 5 per cent blending and 13.8 mt (16 billion litres) at 10 per cent blending level. Given that the highest ever production of molasses has been 8.9 mt (in the 2002-03 season), even in a reasonably optimistic scenario, the research agency believes that sugarcane production and molasses production will not be sufficient to meet the nation-wide demand for alcohol/ethanol for blending and other uses.

Suzlon Energy to invest overseas

September 16, 2005. Suzlon Energy Limited is set to register its presence in the overseas by opening manufacturing centres in the US and China at an investment of Rs 320 crore (Rs 3.2 bn). It will mainly manufacture blades for wind turbine generator in these two facilities, which are expected to be operational by September next year. Primarily excessive logistics cost and low manufacturing cost in the US prompted the company to open manufacturing facilities in the US. In case of neighbouring China, there is a readymade market. Suzlon has no manufacturing facility in the overseas at the moment, though it has its presence in Germany, Denmark, The Netherlands, US, Australia and China through exports. It has research and development facilities in Germany and The Netherlands. 

Big push to promote non-conventional energy plan

September 15, 2005. The Ministry of Non-conventional Energy Sources (MNES) will adopt a mission-based approach in tapping and popularising non-conventional energy in India. In a bid to popularise and extend the use of renewable energy, the Ministry has expanded the stakeholder base by incorporating District Advisory Committees across the country. These committees oversee improvements in renewable energy activities and suggest requirements suited to individual districts. It has also promoted day-to-day business interaction among the Advisory Committees and urged them to meet on a regular basis. The Ministry also meets a portion of the Committee's fund requirements.

IFC, Rabo bank agree to fund SBT expansions

September 14, 2005. Two of the leading international funding agencies - International Finance Corporation  and Rabo Bank - have agreed to fund the future expansions of Southern Online Bio Technologies Ltd (SBT), the Hyderabad-based company that is currently setting up a bio-diesel project partly with grants from the German Government. The Rs 17.1-crore (Rs 171 mn) project for producing 30 tonnes of bio-diesel per day is coming up in Nalgonda district of Andhra Pradesh in alliance with the German major Lurgi Life Science. The company proposes to focus more on large fleet operators for bulk sale of bio-diesel. It has already received letters of intent from the Indian Railways and Vizag Municipal Corporation and expects to enter into an agreement shortly with the Andhra Pradesh State Road Transport Corporation (APSRTC). Further, the company also plans to open few retail outlets for sale of bio-diesel. The company proposes to keep the price of bio-diesel lower at least by Re 1 per litre initially. The project requires around 10,000 tonnes of seeds of pongamia and jatropha per annum.


Lafarge cements move to wind power

September 18, 2005. The world's first cement plant to be powered by wind energy has been built by Lafarge in Morocco. The plant at Tetouan, costing about €10m ($12.2m) to build, has 12 wind turbines delivering more than 10MW of electricity, about half of the cement plant's requirements.

Oil price spike leads to palm oil as alternative

September 15, 2005. The oil price spikes are leading various nations to seriously look at alternative fuels. In India while Jatropha as bio-diesel and ethnol as a blend with petrol are gaining momentums, palm oil; India’s largest consumed imported oil is finding its demand gallop as an alternative fuel globally. This fuel is mostly used for generating electricity in power plants rather than in automobiles or trucks. Palm oil is increasingly used as a fuel, especially in the European Union. It has become the second largest importer of palm oil last year just behind China, almost exclusively on the basis of its use as a fuel. Industrial use of palm oil in the European Union for 2004/2005 is estimated at 1.3 million tons, with about 1 million of that for fuel. Given its price advantage relative to other vegetable oils, palm oil will likely receive increasing attention as an alternative fuel. Such attention is driven by high petroleum prices and efforts to reduce dependence on fossil fuels.

CLP to lift capacity for renewable energy

September 15, 2005. Hong-Kong based CLP Holdings plans to increase its renewable power generating capacity in Asia to 5 percent of its overall portfolio from 1 percent. It was looking at Greenfield projects from Thailand to Australia, with the likely investment estimated at over US$700 million (HK$5.46 billion) given average development costs. CLP Holdings has a generating capacity of 18,000 MW, with 59 percent coming from coal plants, 30 percent from gas, 7 percent from nuclear power and 2 percent from oil- burning plants. Hydropower and renewables contributed 1 percent each, with the company operating wind plants in China. Asian countries are trying to reduce dependence on expensive oil imports, while analysts say regional companies can capitalize on demand from Europe and Japan for carbon credits from emission-cutting projects under the UN Kyoto Protocol.

Siemens to build 600 MW of wind turbines

September 14, 2005. German industrial conglomerate Siemens will build wind turbines with a capacity of up to 600 MW for FPL Energy, the wholesale unit of FPL Group, for an undisclosed sum. Siemens, which entered the fast-growing wind-power market by buying Denmark's Bonus Energy last year, it would build the turbines in Denmark and begin delivering them for installation around the United States next year. This agreement with FPL Energy is important because it is the first wind-power contract for our growing wind-power business in the Americas region since Siemens acquired Bonus Energy last December.

Bio-Solutions in motion with Biodiesel

September 13, 2005. Bio-Solutions Franchise Corp. (BSFC), the exclusive marketing company for Bio-Solutions Manufacturing, Inc. a publicly traded company, has received its first four (4) units required to collect fats, oil and grease (FOGs) needed to create biodiesel. Each unit is capable of extracting the FOGs and biodegrading the remaining organic waste in cooking establishment grease traps or municipal lift stations on a continuing basis. Biodiesel is defined as the mono-alkyl ester of fatty acids derived from vegetable oils or animal fats. In simple terms, biodiesel is the product you get when a vegetable oil or animal fat chemically reacts with an alcohol to produce a new compound that is known as a fatty acid alkyl ester. A catalyst such as sodium hydroxide or potassium hydroxide is required. Glycerol is produced as a byproduct. Bio-Solutions can make biodiesel from the following feed stocks: yellow and brown grease that are extracted from waste products including trapped grease, (from cooking establishment grease traps), and floating grease (from wastewater treatment plants).



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