Global Oil Trading: Mechanisms and Lessons for Risk Management Part – IV

(By Dr. Samir R. Pradhan*)

Oil Price Risk Management through Derivatives

Oil price risk is the exposure a company has to changes in the spot or forward price of a given oil product. For example, recent reports estimate that a US$1 per barrel change in the price of oil causes a US$55m change in annual net profit for Australian resource group BHP. Put simply, an unhedged oil producer benefits from rising prices and loses as market prices fall.

Prices of oil products are determined by the supply and demand relationship for a specific oil product, as well as the price and availability of substitutes. For example, fuel oil prices are affected not only by the demand for power and the capacity to generate it, but also by the price of alternative generating sources such as natural gas. Several factors can come into play for any particular oil product. Economic conditions, weather effects and the political stability of oil producing countries all form part of the equation when measuring oil price risk.

Diversification and insurance are the major tools for managing exploration risk and protecting firms from property loss and liability. Firms manage volume risk-not having adequate supplies-by maintaining inventories or acquiring productive assets. Derivatives are particularly appropriate for managing the price risk that arises as a result of highly volatile prices in the petroleum and natural gas industries. The typical price risks faced by market participants and the standard derivative contracts used to manage those risks are shown in table 1 below.

Price risk in the petroleum and natural gas market is naturally associated with each participant’s stage of operation. Some companies integrate their operations from exploration through final sales to eliminate the price risks that arise at the intermediate stages of processing.

Table 1: Petroleum and Natural Gas price Risks and Risk Management Strategies

Participants	Price Risks	Risk Management Strategies and Derivative Instruments Employed
Oil Producers	Low crude oil price	Sell crude oil future or buy put option
Petroleum Refiners	High crude oil price	Buy crude oil future or call option
	Low product price	Sell product future or swap contract, buy option
	Thin profit margin	Buy crack spread
Storage Operators	High purchase price or low sale price	Buy or sell calendar spread
Large Consumers
Local Distribution Companies (Natural gas)	Unstable prices, Wholesale prices higher than retail	Buy future or call option, buy basis contract
Power Plants (Natural gas)	Thin profit margin	Buy spark spread
Airlines and Shippers	High fuel price	Buy swap contract

Source: Energy Information Administration, EIA, (2002), “Derivatives and Risk Management in the petroleum, Natural gas, and Electricity Industries”, Washington, DC 20585: IEA.

For example, for an integrated producer, an increase in the cost of crude oil purchased at its refinery will be offset by revenue gains from its sales of crude oil. Other, smaller companies usually do not have integrated operations. Independent producers want protection from low crude oil prices and they sell to refiners who want protection from high prices. Refiners want protection from low product prices and they sell to storage facilities and customers who are concerned about high prices. At each stage, suppliers and purchasers can spilt the risk in order to ally their concerns. They typically supplement exchange-traded futures and options with over-the-counter (OTC) products to manage their price risk.

Risk managers in the petroleum and natural gas industries commonly use derivatives to achieve certainty about the prices they pay or receive. Depending on their circumstance, they may be concerned with the price per se, with price spreads (differences between prices) with ceilings and floors, and/or with price changes over time. In addition, volumetric production payment contracts-a variant of a standard swap-may be used to reduce uncertainty about cash flows and credit. However, the principal difficulty in using the exchange-traded products is that they often do not exactly correspond to what the trader is attempting to hedge or speculate in. for examples, price movements in premium gasoline are not identical to those in unleaded gasoline. The distinction between what exchange products can hedge and what the user wants to hedge is the source of basis risk. Nevertheless, the OTC markets exist to bridge the gap between exchange-traded products and the needs of individual traders so that the two markets in effect have a symbiotic relationship.

Before analyzing the various instruments used to manage risk in the petroleum and natural gas market, it would be useful to reflect upon the type of risks peculiar to the industry:

Basis Risk

Basis risk is the risk that the price difference between the exchange contract and the commodity being hedged will widen (or narrow) unexpectedly. The total risk is evaluated by netting out the long positions with the short positions of the respective forward periods. The netted out positions would have got locked and realized and not affected by the market prices. These net open positions on the derivatives are adjusted with the net open positions of the physical market. This puts the barrel at risk and also assesses the hedging effectiveness of the respective products by each port.

There would be some speculative positions also which would generally be treated separately. This should also be decomposed into trader wise for performance evaluation that would be apart of the compensation strategy for the traders. The company based on its forecast or budget period and for control purpose, must evaluate this risk for as many months in the future. Some traders hedging for purchases, say, going short, might at a later time when the deal starts losing money, reverse that deal to minimize the loss. This has to be evaluated as a part of decreasing their performance bonus in designing the corporate strategy.

Cash Flow Risk

For every adverse Market swing that takes the market-to-market beyond the dollar limit adjusted for initial margins and open credits as with each counter-party in the OTC markets, margin calls will have to be paid to them. This is a drain on the each flow, even if the deals make profits at the settlement date. Time value of money has to be paid for the line of credit with banks. This, to some extent, has to be planned for each forward period, index and ports, and this must be a limiting factor for in determining the quantity and forward periods in the risk management program. On the same account, the margin that needs to be paid for on the exchange deals must be a constraint.

 

The Political Economy of Power Sector Reforms:

Introduction to Issues and Expectations

(Part-V)

Motivations for reform

Through extensive interviews with experts on electricity systems as well as key players in each of the five countries (Brazil, China, India, Mexico and South Africa), reform analysts have identified five motivations that have been cited for reform. Each case study explores the particular motivations for reform, and here reform analysts outline some expectations of the character of the reforms that would follow from the different motivations.

1) Reform might be driven by the desire to improve the economic efficiency of the enterprise.

This is the standard reason cited in most literature on the economics of electric power markets. Given the hurdles to be cleared in restructuring the power system—and the interlocking functions of state-owned enterprises—reform analysts would expect that efficiency alone is not going to be a strong factor driving restructuring. In cases where there is strong evidence that the system is extremely inefficient—sometimes evident in high costs of electricity production—then the political coalition for reform may be strong enough to push for restructuring.

But many of the firms that are largest users of electricity are, themselves, state owned enterprises like steel plants, mining operations, and heavy manufacturing. In their world, the solution to high prices is to negotiate through the state system to lower the prices of their inputs through central command rather than to break up the entire system. Lower electricity prices would make it harder for electric power utilities to stay afloat, which in turn would create the need for additional transfers and other tate-based financing—the soft budget constraint.

2) Reform might be driven by a crisis in supply.

In state-centered systems, where prices are typically regulated, problems of poor supply are often reflected in blackouts and other quality failures rather than high prices. Where electricity quantities are inadequate, a useful barometer of political power is found by looking at who bears the brunt of blackouts. When the sate-centered system operates by plan, forecasts of inadequate supply—often created by economic growth that accelerates the demand for electricity—generate only additional state financing (with its attendant inflation or increased implicit taxes on household savings) through the soft budget system. New plants are built and the “problem” is said to be rectified. Reform analysts expect, however, that a breakdown in the state financing system would trigger crises in supply and thus motivate reform. What types of reform might follow a crisis in supply? One approach would be to restructure the entire industry.

Reform analysts expect, however, that the first attempts will focus on patching the holes rather than tearing down and rebuilding the whole system. Patching implies new financing arrangements. While the state-dominated system might reach for all these (and other) levers, the main observed responses to crises in supply are two. In one response, the state takes the lead and opens the market to independent power producers (IPPs). Many IPPs are discrete units that can be attractive to foreign and domestic investors who are formally outside the state-dominated electric power system. (Some IPPs are more like reshuffled state enterprises better able to tap or mobilize unconventional or innovative sources of public finance.)

In the other, major users of electricity take matters into their own hands and generate their own electricity—captive supply. Reform analysts expect that in cases where the state-centered system remains intact that the main response will be IPPs because the power system remains an integral unit and the state system predominantly favours large, central power stations and grid systems rather than small, often inefficient, decentralized stations beyond easy control.

3) Restructuring might be pursued as part of a broad-based restructuring of a nation’s economy.

Such restructuring efforts usually include attempts by the state to exit a wide array of industries such as heavy manufacturing, ports, airlines, communications and natural resources. Reform analysts expect that electricity would be among the last industries restructured as part of a comprehensive restructuring strategy simply because introducing market forces into electricity is among the most complicated tasks. The physics of AC electricity make it difficult to proceed with restructuring on a piecemeal basis, and often the sources of greatest dysfunction in the power system are those parts—transmission and distribution—that have natural monopoly elements.

Even telecommunications—another area of traditional state ownership with complicated and difficult tasks in transition to market-based institutions—is probably marked by an easier transition to markets. Rapid technological change, especially in wireless communications, and the ability to isolate highly competitive parts of the market (e.g., bulk users of wired services) from the elements that retain characteristics of monopoly, creates an opening for competition.

To some degree, restructuring of particular industries is likely to spillover into restructuring of their down or upstream neighbors. Attempts to restructure industries that supply primary fuels will achieve fuller results if those firms are able to sell to multiple buyers—rather than just one state-controlled entity—in the electric power sector and in other industries that use primary fuels.

However, reform analysts expect that attempts to restructure the financial sector—state banks, in particular, because they are typically the main source of soft budget financing for the electric power sector—are most likely to trigger reforms in the electric power sector. Such power reforms will appear to be motivated by a capacity shortfall, but their roots are in reform of financing.

4) Reform may be launched by political entrepreneurs in an attempt to re-allocate assets.

In a state-electricity system, talented and politically connected entrepreneurs will usually work within the state system to redirect rents. But for political forces that are outside the system—or if the system has ossified around a particular set of interests—restructuring may be viewed as the best strategy for shifting the ownership of firms to different state or private interest groups. Reform analysts would expect to view this as a driver for reform only in cases where there is a high degree of asymmetry between control over electric power assets and those who have the power to implement a full-scale reform.

5) Reform efforts may be launched because reform is a trend.

Perhaps, from the vantage point of the long history of social organization, markets for power are a fad. A whole sociology of development theory has arisen around the fact the developing nations tend to copy the formal symbols of modernity from airport designs to educational curricula to human rights treaties, regardless of their actual implementation, to register their membership as advancing societies.

As a practical matter, policy makers always face pressures and policy challenges, and their attempts to provide a remedy often entail reaching for tools that are readily available. The success, especially in the U.K., with market reform has created an industry of experts and consultants on electricity market reform—many inspired by the U.K. model. Transnational consulting companies appear to have been particularly active in writing reports on market restructuring, although it is unclear whether these follow or lead the herd—whether they reflect or shape the interests of their clients.

Reform analysts expect that the interlocking systems that maintain state owned enterprises are so strong that fads alone are unlikely to dislodge them. However, the availability of a ready model may explain the convergence to markets in at least two respects. First, when problems with the state-centered system arise—in particular, the analysts suggest that it is likely that the problems will be manifest in capacity shortages and difficulties in financing new capacity—a suite of market-centered solutions are the ones most readily available as the solution. Second, the rhetoric of reform is highly likely to reflect the doctrines of reform—even where the economic textbooks are not actually followed during reform—because that is today’s conventional wisdom about the best solution.

The five possible motivations for reform are a reflection of the reasons that have been cited for restructuring electric power systems. For each, reform analysts have indicated the ways that the nature of the state owned enterprises that are to be reformed may affect the types of reforms actually adopted, the pace and structure of reform, and the language used. Does economic growth spawn efforts at reform?

Low economic growth, reform analysts expect, will not directly spur efforts at reform—especially where the capacity built up in the state-dominated electric power system is adequate and thus capacity shortages do not loom on the horizon. Where low rates of growth do spur reform, the reforms will begin not with capacity shortages but with reform in the financial markets (and perhaps other factor markets), which, in turn, will potentially expose the electric power sector to the need for reforms in order to attract capital and skilled labour when demand picks up once more.

Rapid economic growth should induce direct efforts at reform insofar as rapid growth is likely to spawn shortages in capacity. But whether rapid growth actually creates the need for reform will depend on whether the soft financing, complementary macroeconomic policies and social capital of the state-centered system is able to hold together and grow at the same rate as the rising demand for electric power services.

Edited and adapted from a paper by Thomas C. Heller and David G. Victor

 

Rating of SEB’s 2004

 

 

Source: CEA

NEWS BRIEF

OIL & GAS

ONGC likely to invest in Himachal

December 12, 2005. ONGC is planning to invest over Rs 1,000 crore ($217 mn) for the exploration of oil and gas in the Himalayan foothills, supposed to contain one of the biggest reserves in the Asia-Pacific region. Two US and Norway consultants will provide the technical assistance for the oil major’s exploration in Paonta Saheb in Himachal Pradesh. ONGC had started feasibility study in this region in the 1960s but could not start drilling owing to lack of technical expertise. Eight years ago, it dropped the idea. With the acquisition of gravity and magnetic data, the exploration drive has been revived in Paonta Saheb. 

IOC makes $1.34-1.44 bn takeover bid

December 11, 2005. IOC has made a $1.34-1.44 bn (Rs 61.80-66.41 bn) bid to takeover Canadian oil firm Niko Resources' Indian assets that include a 10 per cent stake in Reliance Industries' gas-rich D6 block in Bay of Bengal. However, the Canadian firm wants a 20-30 per cent premium. IOC has appointed Citigroup as its financial advisor for the takeover bid and has code-named it as 'Project Pluto'. Niko has 10 per cent stake each in Reliance-operated Block D6, which has been certified to hold 9.7 trillion cubic feet (tcf) of gas reserves, and Block NEC-25 off the Orissa coast that holds 1.2 tcf of reserves. It also has 33.33 per cent stake in Hazira gas field which produces 150 million standard cubic feet per day of gas and 100 per cent interest in Surat gas field. The Canadian firm did not want to sell its Bangladesh assets that include the Feni oil and gas field, and a highly-prospective block in eastern offshore it won in the NELP-V round this year.

India-China combine faces tough competition

December 10, 2005. The combined negotiating skills of China National Petroleum Corp (CNPC) and ONGC - are being put to test for acquiring assets in Syria due to aggressive bidding by other players. The two entities, which have come together to bid for Petro-Canada's interest in a major Syrian oil and gas joint venture with Royal Dutch Shell, are positioned low in the bidding race as the bid is definitely not in first five. In September, Petro-Canada said that it might sell its stake of close to 38 per cent in the Shell-operated Al Furat venture in Syria, which translates into nearly 70,000 barrels of oil equivalent of the company's daily output. The venture produces as much as 50 per cent of Syria's production. It produces oil and gas from 36 fields with 220 wells in three concession areas.  India and China, with daily consumption of almost 2.2 million barrels and 6.4 million barrels respectively, are said to be among the five largest consumers of crude oil in the world. India's foreign exchange expenditure on import of crude oil and petroleum products in 2004-05 stood at $29,266 mn (Rs 1350 bn), up from $20,383 mn (Rs 940 bn) in 2003-04 and $17,581 mn (Rs 811 bn) in 2002-03. In view of the unfavourable demand-supply balance of hydrocarbons in the country, acquiring equity oil and gas assets overseas was one of the important components of enhancing energy security.

Oil cos to lose $7.7 bn in '05-'06

December 11, 2005. Indian oil refining and retailing firms expect a revenue loss of Rs 35,552 crore ($7.71 bn) in the year to March 2006. This includes Rs 20,652 crore ($4.48 bn) on account of subsidised kerosene and cooking gas and Rs 14,900 crore ($3.23 bn) because of government controls on petrol and diesel prices. The estimated revenue loss in 2005/06 is 76 per cent more than the previous fiscal year's $4.3 bn (Rs198 bn). India raised administered prices of petrol and diesel by 7 per cent in September, matching a similar increase in June. But oil retailing firms, including Indian Oil Corp., Bharat Petroleum Corp. Ltd. and Hindustan Petroleum Corp. Ltd., which all reported losses for April-June, said the rise was inadequate. The prices of cooking gas, consumed mostly by the middle class, and kerosene, used by the poor to light their homes, were left unchanged.

LPG may cost Rs 50 more

December 9, 2005. Petroleum Minister Mani Shankar Aiyar is expected to suggest a hike of up to Rs 50 per cylinder in domestic LPG price and two rates for kerosene from 2006 to cut losses the oil firms incur on selling the two fuels. Mr Aiyar is of the view that the over Rs 110 per cylinder loss on selling domestic LPG can be bridged by raising price by Rs 50 on January 1 and again on July 1 next year. Kerosene will also be priced differently for people living below the poverty line (BPL) and those above it.

IOC buys 4 mn Nigerian crude barrels

December 12, 2005. Indian Oil Corp. has bought around 4 mn barrels of Nigerian crude for lifting in February under a regular spot tender. IOC bought 2 mn barrels of Escravos from Chevron, as well as around 980,000 barrels of Bonny Light and 980,000 barrels of EA from Vitol. Escravos cargo was sold at a premium of 50 cents a barrel to dated Brent. IOC has an outstanding term tender, seeking up to one Very Large Crude Carrier (VLCC) of Bonny Light and Forcados grades monthly between March 2006 and Feb. 2007.

Maharashtra steps up efforts for gas grid

December 12, 2005. The Maharashtra government has stepped up efforts to set up a gas grid and enter into gas transmission and distribution to cater to increasing demand from various industrial units. The government hopes to organise gas transmission of 40-50 million cubic meters per day (mmscmd) to existing as well as new units from 226 industrial estates run by the state-run Maharashtra Industrial Development Corporation (MIDC). The idea is also to lay down pipeline from Uran to Pune, Nashik and the gas can be brought from Dabhol terminal. The pipeline between Tarapur and Talasari (situated in Thane district) can be laid down to cater increasing demand for gas from industrial units. The government is aware that Gail India is in a position to complete the Dahej-Uran pipeline by February 2007. Thus, before that the connecting pipelines can be completed. Besides, efforts will be to organise gas from other sources and supply it from the dedicated pipelines to be erected by MIDC for its industrial estates.

Oman LNG in pact with Ratnagiri Gas

December 12, 2005. The Oman LNG LLC has inked a confidentiality agreement with the Ratnagiri Gas & Power Pvt Ltd (RGGPL). The confidentiality agreement has been signed in a bid to explore options of how and when to supply liquefied natural gas to RGPPL for the revival the now closed Dabhol project. RGPPL would now enter into mass spot sales agreement with Oman LNG LLC under which the latter would be able to supply LNG from its reserved quota. The Dabhol project would need over 2.1 mt of LNG annually to run the 2,184 MW plant. Of which, the now defunct DPC had contracted 1.6 mt annually with Oman LNG LLC and AdGas.

India Inc for largest investment binge in corporate history

December 12, 2005. India Inc has lined up investments of Rs 320,000 crore ($69.57 bn) to be made over the next 12 to 18 months. Greenfield projects will account for roughly half of these investments. The top 300 companies of the country are busy giving final touches to their investment plans in consultation with their bankers. This is the largest investment pipeline ever seen in Indian corporate history. According to the corporate credit divisions of a few large banks, telecom and power account for 20 per cent each of the investment pipeline, followed by oil and gas (15 per cent) and metals other than steel (12 per cent). 

Petronet seeks fresh bids for LNG vessel contract

December 12, 2005. Following the government's decision to keep the existing LNG guidelines in abeyance, Petronet LNG Ltd (PLL) has asked the bidders to resubmit price bids contract worth Rs 3,200 crore ($696 mn) for chartering an LNG tanker for 25 years. Earlier, Varun Shipping along with its consortium partners – Exmar marine NV and Tecto NV of Belgium, Indian Oil Corporation – have been shortlisted for the Rs 3,200 crore contract. 

GSPC to set up PNG distribution network

December 12, 2005. Gujarat State Petroleum Corporation Limited (GSPCL) is in a process of setting up a Piped Natural Gas (PNG) distribution network for domestic consumption in Gandhinagar. The construction for the same will begin in January and the main pipeline will be laid down by March. The company, after setting up a proper distribution network in Gandhinagar, plans to replicate the same model in other districts. The company is investing Rs 1,200 crore ($261 mn) for the PNG project with around Rs 500 crore ($109 mn) in domestic distribution in other districts in Gujarat where the model will be later be replicated. The gas supply will be of around 7000- 10,000 cubic meter per day. GSPCL is pumping in Rs 100 crore ($21.74 mn) for gas grid in and around Gandhinagar. GSPCL is seriously looking at penetrating all 35,000 households through 150 km long pipeline that is to be laid. PNG is believed to be around 25 per cent cheaper than LPG, moreover its also claimed to be safer than LPG. Unlike LPG, the PNG users may not have to pay in advance but the payment will have to be made later according to the bill on the actual usage. 

UP firm ready to supply domestic gas

December 9, 2005. Central UP Gas Ltd (CUGL) plans to start supplying compressed natural gas to automobiles from the first quarter of next year. The company, which is working to establish a city gas distribution network in Kanpur, may have to face competition from the private sector. The UP State Industrial Development Corporation, the nodal agency for city gas distribution in the state, has invited expressions of interest for giving “no objection certificates” to bidders who want to establish city gas distribution networks. Some of the influential bidders have bid for the NoC for Kanpur as well. CUGL has invested or placed orders for work contracts worth Rs 19 crore ($4.12 mn).

Power regulator pulls up GAIL, ONGC

December 8, 2005. GAIL and ONGC were pulled up by the Andhra Pradesh Electricity Regulatory Commission (APERC) for not being able to fulfill their gas supply obligations as per the power purchase agreements with independent power producers (IPPs). These relate to GVK extension, Konaseema, Gouthami and Vemagiri projects with a combined installed capacity of 1499 MW. While all these projects are nearing completion, the two companies have pleaded that there was gas shortage. And if the IPPs opt for naphtha instead of natural gas, the power generation cost would be about Rs 5 per unit. If naphtha is used, the consumers would have to bear additional cost of Rs 1,020 crore ($221 mn) per year.

Gail MoC with Norwegian firm to develop gas hydrate

December 8, 2005. Gail India has signed a memorandum of co-operation (MoC) with Natural Gas Hydrate (NGH) AS of Norway to develop and commercialise synthetic natural gas hydrate storage and transportation technology. The scope of the MoC includes feasibility studies of natural gas hydrate transport as an alternative to conventional pipeline and LNG transport. There is also a possibility to set up a demonstration facility for the technology in India.

ONGC, OIL may have to share nominated acreages

December 12, 2005. To arrest the declining trend in the domestic crude oil and gas production, the petroleum ministry plans to convert the nomination acreages of ONGC and Oil India Limited to production sharing contracts (PSCs). However, this will not include the producing properties and will cover only the exploration acreages, currently not under production. ONGC has 114 exploration blocks under its fold, while OIL has 18 blocks, given to them by the government under nomination. The petroleum ministry has said to arrest the lower success ratio in nomination blocks, both ONGC and OIL should be encouraged to move from service contracts to strategic alliances based on risk-reward sharing.

The lower E&P success ratio of ONGC, as against private/ joint venture companies and other international companies working in India, is a major cause of concern for the government. Even the mid-year review of the government has noted that few discoveries by ONGC and OIL have partly led to the near stagnancy of crude oil production in the Tenth Plan. To curb this, the ministry has said ONGC and OIL should adopt cutting edge technologies and best management practices by entering into alliances with reputed international oil and gas firms. As per the ministry, ONGC’s oil production, which is 80 per cent of domestic oil production, would decline from 26.5 million tones in 2004-05 to 19.7 mt by 2010-11. The oil and oil equivalent gas reserve replenishment ratio (RRR) for ONGC is less that one while for OIL and private and joint venture companies is more than one in the 10th plan.

Govt seeks states’ view to cut subsidy on LPG

December 9, 2005. The Centre has sought the opinion of states to restrict the subsidy on cooking gas to people living below the poverty line. The subsidy burden last year was Rs 9,830 crore ($2.13 bn). The Centre was also examining the proposals given by ONGC and GAIL on marketing of LPG produced by their fractionators subject to certain terms and conditions. Part of the subsidy on LPG was borne by the government and part by the oil companies.

Iran-Pak-India pipeline project on track

December 8, 2005. Dispelling apprehensions about the proposed multi-billion Iran-Pakistan-India gas pipeline project, India said that the project is going on the right track. The three nations might reach an understanding on the project structure by February 2006. The first gas from the project is likely to start flowing from 2010. A technical, commercial, financial and legal framework, which would boost investor confidence in the project, is being formulated. Power, fertiliser and other projects worth over $20 bn (Rs 924 bn) are being planned to benefit from the project. With such investments at stake, it was felt that India should be involved with the building and operation of the project. Once the project structure is finalised, the three countries would get the respective political approvals for entering into a tripartite framework agreement. Then, a project consortium would be put in place for the operation of the project. The 56-inch pipeline will have a capacity to carry 150 million standard cubic meters of natural gas. While India will get two-thirds of the gas, Pakistan will get the remaining one-third.

OIL may lead downstream PSUs abroad: MoPNG

December 7, 2005. The petroleum ministry has proposed that Oil India Limited be the fulcrum for all downstream companies like BPCL, HPCL and GAIL besides IOC, keen on pursuing overseas upstream opportunities. In a note to a group of ministers (GoM) examining issues relating to greater investment decision-making powers for OIL-IOC while bidding for overseas exploration and production assets, the ministry has said a similar dispensation may be extended to BPCL, HPCL and GAIL in their overseas ventures with OIL. The GoM comprises ministers of finance, petroleum and heavy industries. This modification would enable other downstream companies to tap E&P opportunities abroad, in addition, OIL too will have a wider choice to seek a downstream partner. The investment abroad would be made by way of a project-specific special purpose vehicle with flexibility to each partner to take up a participating interest suited to its own business strategies. Earlier, the ministry had proposed a dedicated SPV of OIL with IOC. Under the new arrangement, OIL can enter into an investment deal with any interested downstream PSU and make investment as and when an opportunity comes up.

Investment in energy must be secured: Shell report

December 6, 2005. Security of investment will be a key feature of energy security in coming years, according to the Shell Global Scenarios 2025 report. While this issue is at present addressed through steps like bilateral tax and investment treaties, organisations like WTO and OECD need to play a stronger role. In fact, ambiguity will persist as to what the term ‘energy security’ covers: physical supplies can be threatened by rising international insecurity as well as by depletion of supply sources. Depending on the scenario, importing countries will worry more or less about a wide range of events: the relatively slow pace of investment in new infrastructure in the Middle East, intense competition among major importing countries for scarce resources and more. The report points out that they will put their trust in very different measures, from self-reliance policies to international dialogue on investments and opening markets to free trade. Three different scenarios, including low trust globalisation, open doors and Flags have been identified as the ways to pursue energy security.

POWER

L&T, Patel Engg to bid for small hydel projects

December 13, 2005. Larsen and Tourbo (L&T) and Patel Engineering (PEL) are in talks to form a joint venture to bid for small hydro power (SHP) projects in various states. The Union government had drawn up a massive plan to add 14,000 MW of hydel power at an estimated investment of Rs 70,000 crore ($15.20 bn) in the next five years. L&T is in advanced stake of negotiations with Patel Engineering to bid for hydel projects in Prabati in Himacal Pradesh. It has already bagged some hydel projects in Bhutan. While PEL has plans to enter the hydro-power generation sector as an independent power producer as the government is relaxing the norms.

Nagarjuna eyes partner for power project

December 12, 2005. The Nagarjuna group is in talks with foreign and local firms for a strategic partnership in its 1,115 MW Nagarjuna Thermal Power project. The chemical and fertiliser major has held discussions with corporates such as the Sun group from Russia promoted by the Khemka family, a consortium led by the Genting group from Malaysia, Torrent Power and Jindal Thermal Power (JTPC) of the JSW group. JTPC is believed to be close to finalising a deal with the Nagarjuna group, but the two are yet to come to an agreement on the quantum of stake. The Nagarjuna group is currently the sole sponsor of the power project. The Nagarjuna group intends to divest not more than 50 per cent to the strategic partner, while the Jindals are keen to buy them out entirely so that JTPC has a total say in the project execution. The power project will be located in the Udupi district of Karnataka and has received all the clearances from the Central Electricity Regulatory Commission (CERC). The power project is in an advanced stage of finalising power purchase agreement with Karnataka and Kerala. The project is planned to be commissioned in ‘08-09. The long-term coal supply lines have been firmed up with mines in Australia, Indonesia and South Africa. The project should be able to supply power at Rs 2.20 a unit. The package approved by CERC for the project is based on 7.5 per cent interest on loans to be provided by consortium of lenders led by the Power Finance Corp. The total cost of the project works out to Rs 4,299 crore ($935 mn).

Sikkim to have 2 hydel power plants

December 9, 2005. The Sikkim government has roped in Gammon India Ltd and Jalpahara Power Corporation Ltd for the construction of two hydel power projects over the Rangeet river at an estimated cost of Rs 800 crore ($173 mn). While Gammon India Limited will work on the 60 MW Rangeet stage II hydel project at an estimated cost of Rs 300 crore ($65 mn), Jalpahara Power Corporation Limited will construct the 120 MW Rangeet stage IV project at a cost of Rs 500 crore ($108 mn). The MoUs for the above projects had been already signed between the state government and the representatives of the above companies.

Rajasthan to set up 500 MW power plant

December 9, 2005. To meet the growing demand for electricity in the state, the Rajasthan government has decided to set up a 500 MW power plant in the Chowki Motipura area near Kota. The plant is expected to generate 4,500 MW of additional electricity by 2012. The thermal power plant would cost Rs 1,750 crore ($379 mn). The plant will have two units of 250 MW each, and is part of the Chhabra Super Thermal Power Project. It will be set up by the Rajasthan Rajya Vidyut Utpadan Nigam Ltd. Rajasthan government will fund 10 per cent of the total project cost, and the remaining amount will be raised from financial institutions in the form of loan. The first unit will be ready by September 2008, and the second unit in December 2008. Once completed, the power project is expected to contribute 12 million units of electricity a day to the state power grid.  The power unit will need 2.6 mt of coal and 800 million cubic feet of water a year in the first phase. The state government has initiated the process to meet the demand. Electricity from the power plant will be available at the rate of Rs 2.07 per unit in the first year of production. 

Captive power growth up in Punjab

December 9, 2005. Entrepreneurs of Punjab are getting into power generation projects. Khamanu-based Laxmi Overseas Ltd is putting up a 30 MW biomass-based (wheat straw and husk) power project in Khamanu. Husk as an input will come from the firm’s paddy-processing unit. The company processed close to 1 mt of paddy in 2004-05. It is investing Rs 120 crore (1 MW needs an investment of Rs 4 crore) in its state-of-the art power plant, for which turbines are being imported from Japan and electrical equipment from Siemens, Germany. The plant is scheduled to be commissioned by December next year.

The 4 MW would be for the firm’s consumption and the rest would be sold to the Punjab State Electricity Board (PSEB) at Rs 3.48 per unit. It will cost the company less than Rs 2 per unit whereas the company is buying power from the PSEB at Rs 4.50 per unit. The calorific value of husk is very high and 1 kg of husk can generate 1 unit of power. Lalru-based Agro Dutch Ltd is producing power for its own consumption from rice husk and has decided to add 1.2 MW plant to its plant of the same capacity next year. Barawala-based Trident group, which has a 9.4 MW co generation plant at Barwala in District Sangrur, is putting up two plants of 20 MW each, also in Barwala. Derabassi-based Winsom Group has earmarked Rs 40 crore ($8.67 mn) to start a hydro or agro-based plant at Sidwan near Ludhiana. 

REL, L&T, Torrent bid for hydel power plants in HP

December 8, 2005. Reliance Energy, L&T, Torrent Power and the Jaiprakash group are among the companies that have bid for setting up hydro power plants in Himachal Pradesh. The state electricity board of Himachal had invited bids from private companies to set up hydro power plants on build, own, operate and transfer (BOOT) basis. The tender was for 15 projects with a total capacity of 1,767 MW. Bids can be submitted till January 21, 2006, and the state government would allot the projects by the end of March 2006.

Kashmir valley facing acute power shortage

December 9, 2005. The recent power reforms undertaken in the state at a cost of Rs 66 crore ($14.31 mn) notwithstanding, the Kashmir valley is facing an acute shortage power, leading to heavy load shedding, leaving many homes cold and dark in the chilly weather. State Power department attribute the power crisis to the low discharge of water in rivers leading to a reduction in generation capacity of the power houses, which function on run-away water. There has also been a decrease in supply from Himachal Pradesh and Uttaranchal, forcing the power department to take resort to unscheduled power cuts. 

MESCom cuts distribution losses to 13 pc

December 8, 2005. The Mangalore Electricity Supply Company Ltd (MESCom) has cut distribution losses to 13 per cent and this year it is likely to earn a large profit. This is a clear indication that power reforms are beginning to generate return. MESCom's loss is among the lowest in the country and compares favourably with the Reliance-operated distribution network in Mumbai.

MahaDiscom draws power at Rs 7 to overcome deficit

December 6, 2005. In a bid to tackle the ever increasing power shortfall, the Maharashtra State Electricity Distribution Company (MahaDiscom) was forced to draw 400 MW of costly power at the per unit tariff of Rs 7. The Discom started purchase of naphtha-based power from NTPC Ltd’s Kawas project situated in Gujarat to tide over the situation. Currently, Maharashtra is facing a daily shortfall of over 4,000 MW which was largely due to increase in the demand of power due to rabi operations. The Discom has been also drawing over 1,100 MW power from the available sources at the per unit tariff ranging between Rs 3.75 and Rs 4.50. The Discom is purchasing power from traders which include PTC India, Adani Exports, NTPC Vidyut Vyapar Nigam, Tata Power.

Power deficit states want generation regulated

December 13, 2005. Distribution companies and utilities from power deficit states have sharpened their attack on power traders for overcharging. Distribution companies from Delhi, Maharashtra, Rajasthan and state electricity boards of Madhya Pradesh, Punjab, Chhattisgarh demanded that generation should also be regulated. They also demanded that regulators should stipulate the return on equity in generation projects on the lines of the existing 16 per cent and 14 per cent specified for distribution and transmission projects, respectively. Discoms are of the view that by regulating generation there will be little scope for utilities to charge more while selling to traders. This will also leave little room for traders to keep higher margins while selling power to deficit states. The discoms also passed a resolution that deficit states should not sell power received from the Centre’s unallocated quota to traders. Power from the allocated quota that states draw from NTPC and Nuclear Power Company should be sold to traders with a certain cap. This would restrain traders from overcharging. They claimed that CERC’s proposal to fix a cap on profit margins to reduce the cost of traded power had not helped reduce power cost.

NTPC gets 6 coal blks with 3,850 mt reserves

December 12, 2005. The coal ministry (MoC) has allocated NTPC six more coal blocks with proven coal reserves of 3,850 mt. These are Kerandari, with a proven reserve of more than 200 mt, in Jharkhand, Chattibariatu, also in Jharkhand with reserves of 250 mt, Chhattrasal in Madhya Pradesh (150 mt) Talaipali in Chattisgarh (1000mt) and Dulanga in Orissa (250mt) would be allocated to NTPC. The sixth, Brahmini mines, at the border of West Bengal and Bihar, with reserves of more than 2000 mt would be developed as a joint venture between NTPC and Eastern Coalfields. As for the North Karampura coal block in Jharkhand allocated to NTPC several months ago, the power major has already begun preliminary work. NTPC has committed itself to beginning production in late ‘07, and will produce 10 mt of coal annually.

Coal output to be hiked by 100 mt: Govt

December 12, 2005. The government has kicked off an emergency plan to step up output of coal, a key energy source. The government has cleared 16 proposals of Coal India and its arms, entailing an investment of over Rs 5,000 crore ($1.09 bn) during the last few days. The new projects would add another 100 mt to coal capacity in the country. At present, the total coal output is around 400 mt, which includes CIL’s 290 mt and about 100 mt produced by various industries for captive use. Private mining of coal for commercial purpose is not allowed. The projects cleared include doubling of the capacity of Bhubaneshwari open cast mine to 20 mt, addition of 10 mt to the 25 mt Gevra project and a fresh 12 mt project at Magadh. Additional capacities of 9 mt at Bharatpur mine, 7 mt at Khadia, 7.5 at Ashok, 6.5 at Kaniah and 5 mt at Kusmunda sites have also been approved. The government is also considering outsourcing of key mining activities under the emergency plan. Under this, the country would have surplus coal supply of 10 mt by 2011-12, as against a shortfall of about 60 mt now. About 30-35 mt of new capacity would be added in the next 2-3 years.

Mining, electricity must recover for robust growth: Mid Year Review

December 9, 2005. The move on a ‘vigorous’ growth path in the next four months of the current fiscal could be sustained only if there is a strong recovery in the mining and electricity sectors, according to the Mid-Year Review of the economy. As per the review, while the industry grew by a robost 9.9 per cent during the first half of 2005-06, the growth in electricity and mining sectors slowed down 1.3 per cent and 4.8 per cent respectively, dampening the overall ‘lustre’ of industrial growth. The slowdown in growth in electricity generation may have been partly because of the low demand for energising irrigation pumps-sets in a year of good monsoon and partly because of coal and gas. On the coal sector, the survey said there was an urgent need for reforms in terms of pricing and distribution, FDI policy, and opening of coal mining to the private sector without restriction of captive consumption. The six critical industrial sub-sectors of steel, coal, crude oil, refinery throughput, electricity generation and cement, which have important implications for all other sectors of the economy, registered moderate growth rate of 4.4 per cent during H1 of current fiscal. The review also expressed concern at the near stagnancy of overall crude oil production during 10th Plan. While oil production increased by mere 1.8 per cent in 2004-05, during the H1 this year crude oil production declined by 4.9 per cent to 16.2 mt.

MoC streamlines coal linkage for different sectors

December 9, 2005. The coal ministry, in view of increasing criticism for delays in the coal linkages for power, cement and sponge iron sectors, has streamlined the procedure. The ministry has introduced a single point entry whereby all applications for grant of coal linkages from captive power plants (CPPs) and independent power producers (IPPs), cement and sponge iron sectors would have to be submitted to additional secretary (coal) and chairman of standing linkage committee. So far long term coal linkages to the core sector consumers in the power and cement sectors are being issued through the standing linkage committee (long term) which is an inter ministerial body chaired by the additional secretary (coal). The coal linkage committee had already approved linkage of over 20 mt to power, cement and sponge iron units for October-December.

Maharashtra, Gujarat join hands for coal mine

December 8, 2005. Maharashtra and Gujarat are joining hands together for the development of captive coal mine -Macha Katta, Mahanadi in Orissa with an extractable coal of 528 mt. The proposal for the formation of a joint venture has been mooted by the union coal ministry. Maharashtra may get 60 per cent coal and the balance 40 per cent would go to Gujarat. Maharashtra can run a 1,000 MW power project by using 60 per cent of the coal from the proposed coal mine while Gujarat can use its share to operate 800 MW of plant for 30 years.

Centre for hi-tech initiative to stimulate power sector

December 8, 2005. Under the Centre's hi-tech initiative to galvanize the power sector the Power Ministry has operationalised a National Power Monitoring Centre for monitoring real-time data on the functioning of all power stations across the country as also the transmission systems. The Monitoring Centre, which has been developed as a single-point information source for the performance of the country's power facilities, also has provisions for the Ministry officials to establish video conferencing with key staff across utilities in case of a fault or any reported underperformance. The type of data generated at the Centre broadly comes under two categories — real-time information and offline data. While real-time operational data of generation and transmission system is being made available from all the five Regional Load Dispatch Centres (transmitted through VSAT communication to the Centre), offline data relating to the progress of generation capacity projects and the status of the implementation of various transmission and distribution projects can also be monitored. For instance, the system shows if power stations have been shut down and why — if it is on account of forced outages (due to a technical fault) or under-planned maintenance schedules. The set-up would enable officials to do round-the-clock monitoring of the power systems across the country. In case of projects that are not generating due to planned maintenance, the Ministry can monitor if the utility is sticking to the maintenance schedule. Besides the generating stations, the Centre enables round-the-clock monitoring of the National Grid and facilitates immediate action for disaster management. The project cost of Rs 4.7 crore ($1.02 mn) is being shared by all the Central power utilities. Officials from Power Grid Corporation of India Ltd (PGCIL) would man the system.

Maharashtra allotted coal block in Orissa

December 7, 2005. Maharashtra has been allotted a coal block by Coal India in Orissa to meet the state’s ever increasing demand. The contract for the block in the Mahanadi basin is expected to be signed soon. The block is estimated to have more than 560 mt of coal deposits. However, the benefits of the captive mine could be felt only in two years. MSEB plans to invite tenders for operating the mining. The state’s current demand for coal is around 6.9 mt per year and 20 per cent of it is met through imported coal. After taking stock of a state’s annual demand, coal ministry figures out how much coal can be supplied by domestic firms and remainder is imported. At present, the state power utility uses a 80:20 blend of Indian and imported coal. 

MP cuts power cess

December 7, 2005. The Madhya Pradesh government decided to cut the cess on captive power in state. It is likely to be reduced further and will cost the state exchequer Rs 30 crore ($6.5 mn). At present, the state government levies a cess at 20 paise per unit from old captive power plants and 10 paise from power plants set up after 2005 under the Vidyut Upkar Adhiniyam 2005. The step has been taken to provide relief to the industry. The state government is likely to review the captive power policy again. According to a business chamber, MP generates about 750 MW of captive power.

Karnataka to discontinue guarantees for power projects

December 6, 2005. The Karnataka Government has said that guarantees for power projects would be discontinued after privatisation of distribution circles. The condition has been included in the revised Power Purchase Agreement with Nagarjuna Power Corporation Ltd (NPCL). NPCL is developing a 1,015-MW thermal power project near Mangalore and is on the verge of full financial closure. The State Government's covenant implied that guarantees, as a payment security mechanism (PSM), would no longer be available once the process of distribution privatisation was completed. Karnataka is the first State to take this step. The move would result in reducing the burden of contingent liabilities on the State Government's finances in long run.

OIL & GAS

CNOOC & Husky join to explore South China Sea

December 12, 2005. CNOOC Ltd, its parent company, China National Offshore Oil Corp., plans to start deepwater oil and gas exploration in the South China Sea next year with Husky Energy Inc. of Calgary. China National Offshore Oil Corp. is restricted to pumping oil and gas offshore at no deeper than 350 m due to technology constraints. CNOOC had previously signed a production sharing agreement with Husky to jointly explore and develop two deepwater blocs in the South China Sea. The two explored a bloc in the western part of the South China Sea in 2004, but the reserves discovered were too small for commercial drilling. The bloc in the South China Sea is about 300 km south of Hong Kong, and if reserves are found, it will be China's first deepwater oil and gas field.

Petrobras may explore offshore Argentina

December 12, 2005. Petrobras may start exploration activities off the coast of Argentina in 2006. This would represent a significant advance in offshore Argentina's E&P activities, which to date are sparse. So far, there is almost no offshore production by oil companies in the country, with the exception of some gas production off the Southern Tierra del Fuego region by French company Total. Petrobras is currently in talks with Argentine state-run energy company Enarsa over where and under which terms Petrobras would start its offshore E&P activities in the country. Petrobras will be expected to handle investing activities on any project and will bring its expertise in deepwater E&P in exchange for guarantees of production rights. Petrobras' current Argentine production of less than 100,000 b/d comes mainly from onshore areas. This is contrasted with the company's daily offshore production in Brazil of over 1.7 mmbbl.

Petrolifera Petroleum Makes Fourth Discovery in Argentia

December 12, 2005. Petrolifera Petroleum discovered crude oil in the Neuquen Basin, Argentina. This is the fourth successive discovery and the third flowing oil well thus far in the program. On test through a restrictive one-quarter inch choke, crude oil from the Sierras Blancas Formation flowed at rates between 700 bbl/d - 725 bbl/d from the well with flowing tubing pressure of 580 psi.

Lukoil oil makes discovery in Iran

December 12, 2005. A major discovery was made on the Anaran exploration block in west Iran, which could become one of the most significant oil finds over the past several years. The Anaran field was discovered as result of testing of the exploration well drilled on the Azar structure, which produced commercial crude in July 2005. Exploration operations on the block are continuing with the Changuleh-West well currently in drilling. 

The contract covering the entry of LUKOIL Overseas into the Anaran project was signed on February 14, 2003 and entered into force on September 26, 2003 after NIOC sanction. The interest of LUKOIL Overseas in the contract is 25 per cent, with Norsk Hydro's stake at 75 per cent.

Imperial energy oil finds in Western Siberia

December 12, 2005. Imperial Energy says the Snezhnaya 137, the second of a series of a four appraisal/production wells on the Nord Imperial, Block 77 Snezhnaya oil field has been successfully drilled and cased, ahead of schedule. The well was deviated from the Snezhnaya 135 well site to intersect with the Upper Jurassic, Vasugan reservoir 1500m to the ENE. Wire line logging shows 17 meters of net oil pay, greater than was anticipated. The next well in the series, Snezhnaya 138 was spudded on December 11th.

When all four wells on Snezhnaya have been drilled they will be completed with stimulation by fraccing and then put on production during Spring 2006, forming part of Imperial's seven well early production scheme. Work has commenced on the early production facilities in Block 77 and is progressing very well. Block 77 covers some 1,000 sq km and is situated adjacent to Imperial's Sibinterneft Block 74 in Western Siberia.

Oil production starts from Yemen's block 9

December 12, 2005. Calvalley Petroleum Inc., Calgary, has started production from Hiswah oil field on Malik Block 9 in Yemen. The Hiswah-6 horizontal well went on stream Dec. 10. Initial production is constrained to 2,000 b/d by the capacity of a terminal to which the oil is being delivered by truck.

This bottleneck is expected to be relieved within 2 months, when Calvalley expects production of 10,000 bpd. Calvalley is designing and building a pipeline that it expects to be operational in the fourth quarter of 2006.

 

Samson & Noble sign deepwater agreement

December 12, 2005. Noble Energy Inc. and Samson Offshore Co., Tulsa, have signed an exploration agreement involving 37 deepwater leases in the Gulf of Mexico. Samson will acquire a 25 per cent working interest in the leases, a majority of which are held 100 per cent and operated by Noble Energy, and participate in at least four exploratory wells through the end of 2008. The first of the wells is to be spudded this month.

OPEC to maintain oil production 28mn bpd

December 12, 2005. The Organization of the Petroleum Exporting Countries has decided to maintain oil production quotas at 28 million barrels per day and not propose a possible production increase by two million barrels. In September, OPEC member-states promised to supply an extra two billion bpd to the world market given the sharp increase of oil prices after hurricanes in the Gulf of Mexico. The cartel had real potential for the immediate increase of oil production, but that is currently unnecessary. OPEC real oil production was 30 million bpd in October and 30.25 million in November. OPEC member-states agreed to hold the next ministerial conference in Vienna January 31 to analyze the situation on the world market and discuss a possible decline in the demand for oil.

BG Group signs EPSAs for areas in Libya

December 9, 2005. BG Group PLC has signed three exploration and production-sharing agreements (EPSAs) for onshore Libyan Blocks 123 (1) and 123 (2), in the Sirte basin and onshore Area 171 (Blocks 1, 2, 3, and 4), in the Kufra basin. BG owns 100 per cent of and will operate the EPSAs for Blocks 123 (1) and 123 (2), which cover a total 4,750 sq km, and hold a 50 per cent interest in the EPSA for Area 171, which covers 11,000 sq km, in partnership with Statoil ASA, the operator. The EPSA work obligation for the two blocks involves acquiring seismic data and drilling one exploration well on each block. The EPSA work obligation for Area 171 involves acquiring seismic data and drilling two exploration wells.

Venezuela, Iran sign deal to explore Orinoco oil reserves

December 8, 2005. Venezuela's state-owned oil company Petroleos de Venezuela SA (PDVSA) signed a deal with Iran's state company Petropars to explore the heavy oil deposits in Ayacucho Block 7, a 540 square km block in Venezuela's Orinoco River basin. The study will form the basis of a future joint venture to extract crude. The Venezuelan government would have a 51 per cent stake in any new joint venture that emerges from the study.

The Orinoco region has reserves of heavy oil and bitumen, tarry substances which can be used to make synthetic oil. Four heavy-crude upgrading projects in the area currently produce as much as 600,000 bpd of synthetic oil. The project is part of a larger plan to document Venezuela's proven oil reserves, to vastly increase the value of oil to the nation. Venezuela's proven oil reserves are around 81 bn barrels, but the government believes that some 235 bn barrels of deposits are lying, undocumented, in the Orinoco belt. The government has divided the Orinoco belt into 27 blocks, many of which will be explored in cooperation with foreign oil companies.

Goodrich discovers Texas well

December 8, 2005. Goodrich Petroleum Corp. discovered a new well and successful recompletions in two wells in the Cotton South field in Nacogdoches and Angelina Counties, Texas. The company has drilled and logged its Preston No. 2 well to a total depth of 13,328 feet and encountered approximately 520 feet of apparent gas-bearing Travis Peak sands. The Preston No. 2 is the first new well drilled in a multi-well drilling program currently planned for the Cotton South area. Goodrich has also recompleted two existing wells in the Cotton South field which were drilled prior to the company's acquisition of its 40 percent working interest.

Canada’s Nexen to spend $2.5 bn in 2006

December 6, 2005. Nexen Inc. Canada's No. 4 independent oil explorer, will boost spending nearly 4 per cent to C$2.9 billion ($2.5 billion) in 2006, with almost half the money earmarked for big-ticket oil sands, unconventional gas and offshore projects. The record company spending should result in production averaging 165,000 to 180,000 barrels of oil equivalent a day after royalties, and cash flow hitting C$2.6 billion next year. Buoyed by stubbornly high oil prices, major development projects will account for C$1.3 billion of the expenditures. That includes C$650 million for its Long Lake, Alberta, oil sands project, C$450 million for the Buzzard oil development in the North Sea, C$150 million for its Alberta coalbed methane venture and C$50 million for its share of the remainder of the Syncrude Stage Three expansion.

Devon, CNOOC sign production deal with China

December 6, 2005. Top U.S. independent oil producer Devon Energy Corp. signed a deal with China's CNOOC Ltd. to explore and potentially share production from a block in the South China Sea. Devon will operate the block with a 100 per cent working interest. If oil is discovered, however, CNOOC's parent, Chinese National Offshore Oil Corp., has the option to take a 51 per cent working interest in the block.

The block, known as 42/05, covers 2,700 square miles. The two companies worked together in the past developing commercial fields in Block 15/34, starting production in 2003. Earlier this year, CNOOC attempted to acquire U.S. oil producer Unocal Corp., which had already accepted a takeover offer from Chevron Corp.

Petrobras, PDVSA to build heavy-oil upgrader

December 12, 2005. Brazil's state-run Petroleo Brasileiro SA and Venezuela's Petroleos de Venezuela SA plan to jointly build a heavy-oil upgrading plant in Venezuela that would cost about $1 bn. The plant would convert heavy oil from Venezuela's Orinoco belt into crude that can be processed at a refinery to be built as another joint project in northeastern Brazil. The upgrader would treat production from a jointly operated field that is to start up at a rate of as much as 200,000 b/d in 2009.

Jordan picks Citigroup for oil refinery expansion

December 7, 2005. Jordan Petroleum Refinery Co (JPRC) has hired U.S. Citigroup as financial adviser for a planned expansion of its 100,000 barrels per day (bpd) refinery at Zarka. As of now Jordan produce about 10,000 tonnes per day and need to increase that to 17,500 tonnes per day. A study showed the expansion project was feasible, with a return on investment of 17.4-21.5 percent at a 30/70 debt equity ratio, the study was "very conservative" and was not based on exporting refined products. JPRC plans to export straight-run fuel oil, reversing its import status. The refiner has turned exporter due to excess supplies after Jordan converted to natural gas for power generation. A 50-year concession granted to JPRC will expire in early 2008. The sector will then be open for competition, which would help meet growing demand.

Russia starts building gas pipeline to Germany

December 9, 2005. Russian gas giant Gazprom started work on a new Baltic Sea pipeline to supply Siberian gas direct to Germany and reduce dependence on transit through ex-Soviet neighbours. Russia is keen to find new export routes to stop its neighbours holding sway over its main source of foreign trade income. Gazprom sees the new pipeline, which should have half of its 55 bcm capacity on stream in 2010, as a major strategic project which will help achieve that goal. The North European pipeline will significantly increase the reliability and flexibility of gas supplies from Russia. The northern route will help wean Russia off its reliance on Ukrainian transit pipes. Moscow and Kiev have a long history of disputes over gas transit, with about 80 percent of Gazprom's supplies to Europe passing through Ukraine. They are currently deadlocked in talks about next year's prices and transit fees. Ukraine depends heavily on Russian supplies for its key chemicals and steel industries, and it fears Moscow's leverage will increase with the new pipeline bypassing its territory. Poland and the three Baltic States of Latvia, Lithuania and Estonia are also worried about Russia having the power to bypass them entirely and deprive them of gas. The Baltic states have also raised questions about the environmental impact.

Shtokman gas to be supplied to Europe via Baltic pipeline

December 9, 2005. Natural gas from the giant Shtokman field on a Barents Sea shelf in Russia's north will be delivered to Europe via various routes, including through the 745-mile Baltic Sea natural gas pipeline. The pipeline will be built in the second phase of the Shtokman field development and natural gas will be pumped, including by the NEGP (North European Gas Pipeline). The Yuzhno-Russkoye deposit in northern Russia, which had been chosen as the main source of natural gas to be pumped by the NEGP, would provide the necessary amount of gas. The supplies material and equipment for natural gas and oil facilities under construction, two legs would be built to pump gas from Yuzhno-Russkoye to Vyborg on Russia's Baltic coast, where the Baltic pipeline will begin.  If a decision was made to pump natural gas via the NEGP from Shtokman, with estimated reserves of 3.2 tcm of gas and 31 million metric tons of gas condensate, two legs would connect the deposit to Vyborg. Production at Shtokman will begin in 2010 and achieve its full capacity in 2011-2012 and liquefied natural gas (25 per cent) will be delivered to the United States and Europe. The project is estimated at $10 billion.

Pak NGPL approved gas pipeline project

December 7, 2005. The Sui Northern Gas Pipeline Limited approved Hattar-Abbottabad pipeline project. The project, which has already been submitted to the Oil and Gas Regulatory Authority will cost over Rs701 mn. A 16-inch diameter pipeline will be laid between Hattar and Abbottabad (a distance of 62.5km).

Husky to deliver first crude oil to Irving

December 6, 2005. Husky Energy Inc.'s first shipment of crude oil from the White Rose field on Canada's east coast is going to be delivered to Irving Oil. A cargo of about 600,000 barrels of crude is being transported from White Rose, which started production in mid-November. Privately held Irving's Saint John, New Brunswick, refinery will process the crude for distribution through its regional retail network. White Rose is currently producing 75,000 bpd and is expected to reach peak production of 100,000 barrels per day in the first half of 2006.

Kuwait oil hope for foreign groups

December 13, 2005. Kuwait would not be able to meet its oil production goals without the help of international energy companies, raising the prospect that the oil majors could get access to its oilfields almost 30 years after the industry was nationalised. Project Kuwait is a $7 bn plan to boost the production and reserves of Kuwait's technically challenging northern oilfields with the help of international oil companies. It has already attracted interest from some of the largest energy groups, including the UK's BP and ExxonMobil and Chevron of the US. Kuwait has the world's fifth largest oil reserves. It needs to boost output to 4m b/d to meet growing world demand. The OPEC, of which Kuwait is decided to keep production at near 30-year highs but warned it would cut back if demand dropped early next year.

Kuwait's parliament set January 23 to vote on Project Kuwait. If it agrees to allow foreign oil companies to once again exploit Kuwait's oilfields, Saudi Arabia will be isolated as the region's only country to bar international oil companies from its fields. Mexico has also yet to invite foreign companies in, although technical challenges may force the country's next government to follow Kuwait's lead. Consumers and oil companies have had to wait nearly a decade for Kuwait to overcome the political obstacles to reopening the industry, which accounts for 95 per cent of its total export revenue. Not only have parliamentarians raised concerns but Kuwait and Iraq have had to begin addressing their dispute over the border on which the main oilfield lies.

US to invest in gas, refinery sectors in B’desh

December 12, 2005. WG Petroleum LLC, a US-based company, has showed keen interest in investing 2.50 billion US dollar in gas and refinery sectors of Bangladesh. The WG Petroleum signed a MoU with the local Madina Gas Company recently for investment in Sylhet and Chittagong. Considering bright prospects, TATA, Dhabi Group of UEA and other world's big entrepreneurs are coming to invest in Bangladesh.

South American energy sign gas pipeline study MoU

December 12, 2005. Energy ministers from Brazil, Venezuela and Argentina signed a MOU for a natural gas pipeline that would stretch from Venezuela to Buenos Aires. The MOU was signed at the Mercosur presidential summit in Uruguay's capital Montevideo. The agreement is limited to Venezuela, Brazil and Argentina, a spokesperson from Argentina's federal planning ministry told BNamericas, although the agreement stipulated that other Mercosur countries would be invited to participate. Hydrocarbon Exploration and Production length of the pipeline is put at anywhere between 6,000-10,000km, and depending on length, route and capacity, costs could reach as much as US$20 bn, with construction possibly a five-year prospect. At an estimated 100 tcf, Venezuela's gas reserves are the largest in the western hemisphere.

Gazprom to cut supplies of gas to Europe

December 12, 2005. Russia’s Gazprom threatened to reduce supplies to Europe next year unless Ukraine agrees to pay market prices for its gas. Ukraine takes some gas Russia exports via pipeline in lieu of transit payments. Gazprom said that “if no agreement was reached by the new year, Gazprom would limit the volume of gas crossing the Russia-Ukraine border from January 1 to the amount contracted by its other European customers and excluding any portion for Ukraine. If Ukraine maintains it has the right to continue taking a portion of the gas as payment for transit, Gazprom would regard that as unsanctioned removal of gas or, in other words, theft and Ukraine would be fully responsible for reduction of supplies to Europe.”

Russia has been demanding higher prices from most of its former satellites in eastern Europe but this dispute is more serious because Ukraine’s pipelines carry about 20 per cent of the European Union’s gas supply and about 80 per cent of Russia’s gas exports. A contract signed in 2003 gives Ukraine the right to take about 18 per cent of the Russian gas that transits through its pipelines. Russia wants a new agreement that would see Ukraine make cash payments at “European” prices, which would, in effect, lower transit costs. Ukraine says the contract cannot be changed without its consent but the threat of a cut-off could force it to reconsider. Ukraine gets about 30 per cent of its gas through the gas-for-transit barter deal and also imports another 45 per cent from Turkmenistan via Russia.

Pak companies to hike gas prices

December 11, 2005. Oil and gas companies have asked the government to raise gas production prices by 25 per cent to encourage them to produce higher quantities and reduce dependence on imported fuels. The demand comes at a time when the government estimates it will face major gas shortfalls by 2007-08 at the current rate of domestic production and plans to import gas from Iran, Qatar or Turkmenistan to meet energy shortages. The crux of the demand is that existing operators in Pakistan should be given maximum incentives as a priority to meet a looming energy crisis locally in view of its economic benefits and look for import options as a second preference because of its higher costs. This incentive package is currently under examination at the prime minister’s secretariat and the ministry of petroleum and oil and gas regulatory authority (Ogra). The government has been informed that the existing 26 petroleum companies in Pakistan are either not ready to make fresh investments or planning to sell their existing businesses owing to a cap on their selling price at $36 per barrel against a prevailing international price of $70 a barrel.

Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) - an umbrella organization of 26 oil and gas companies - has been in negotiations with the government for the last couple of months to revise domestic producer prices of oil and gas. The local industry is of the opinion that the government should announce a new incentive package for local operators to maximize their production as a priority instead of higher dependence on the import of fuel oil and proposed gas imports, which has a significantly higher economic cost. The petroleum exploration and development companies have also demanded that the volume of sales to local distribution companies should also be increased to 90-100 per cent of their production against an existing rate of 70-80 per cent for maximum utilization of their capacity that would reduce gas rates for the government and enhance profitability of producers.

Kuwait to pump $44bn into oil

December 10, 2005. The Gulf state of Kuwait has earmarked more than $44 bn over the next 15 years to upgrade its oil industry and boost output to four million barrels per day (bpd). The money will be spent on mega projects such as a large refinery and upstream projects to raise output, in addition to a number of large petrochemicals plants. Kuwait, which sits atop 10 per cent of the world’s proven reserves of around 100 billion barrels, has the fifth largest OPEC quota at 2.227 million bpd but its actual production is around 2.5 million bpd.

Boosting production capacity from the current 2.7 million bpd to four million bpd by 2020 will cost the OPEC member an estimated $20 billion on projects including upgrading production facilities, pipelines, gathering centers, booster stations and export terminals. This year, Kuwait Oil Co (KOC), which operates upstream activities in the Gulf emirate, awarded three major contracts worth $3.3 billion to two South Korean companies and a British-based firm. It ordered a 1.25-billion-dollar oil terminal from Hyundai Heavy Industries with oil storage tanks and offshore pipelines for Al Ahmadi Port, Kuwait’s main oil export terminal.

KOC also signed a 1.2-billion-dollar contract with South Korea’s SK Engineering for 10 oil gathering centers and a gas booster station. British-based oil services firm Petrofac won a 680-million-dollar contract to install hundreds of kilometers (miles) of pipelines above the ground to replace old underground pipelines in addition to 125-million-dollar maintenance deals. All these projects are due to be completed in 2008. And despite controversy, the emirate also appears to be forging ahead with Project Kuwait, an 8.5-billion-dollar investment to develop four oilfields in the north with the help of foreign oil majors. It aims at raising production of the fields from 530,000 bpd to 900,000 bpd over a 20-year period. The project, if approved, would be the largest foreign investment in the country’s upstream oil resources since nationalisation of the sector in the 1970s. A number of projects are also in the pipeline to raise production at oilfields in south and southeast Kuwait.

Almost two-thirds of Kuwait output at present comes from Greater Burgan oilfield, the world’s second largest after Saudi Ghawar, and the new projects aim at easing pressure on it. State-owned Kuwait Oil Tanker Company this year signed contracts to build seven oil tankers of different sizes to modernise its fleet at cost of more than 600 million dollars. The emirate is planning to build a new refinery with a capacity of up to 600,000 bpd at a cost of 6.3 billion dollars. It is scheduled to be on stream in 2010. It also plans to upgrade two of three existing refineries at a cost of between three to four billion dollars. The third refinery at Shuaiba will be closed down when the projects are completed in 2011.

That will boost Kuwait’s refinery capacity from 920,000 bpd now to 1.2 million bpd. A number of giant petrochemicals plants, at an estimated cost of around $10 billion, are under establishment with the help of foreign companies, led by the US Dow Chemical. Kuwait also signed a MoU with China to build a refining and petrochemicals complex in the Asian giant at a cost of five billion dollars. It will be completed in 2010. It has also offered to build a modern refinery in the United States at an estimated cost of around 10 billion dollars.

Brazil Petrobras to invest $17.76 bn in 2006

December 7, 2005. Brazil's state-run oil giant Petrobras invest 38.54 billion reais (US$17.76 billion) in 2006. Petroleo Brasileiro, as the company is formally known, also said 19 billion reais of that amount would go to production and exploration in Brazil. For 2005, Petrobras had forecast 29.9 billion reais in investments, though it had only spent 16.9 billion reais through September. Average production next year is expected to rise to 2.5 million bpd, counting Petrobras's operations at home and abroad. With four new oil platforms slated to come on line in 2006, daily capacity should increase by 360,000 bpd.

In Brazil alone, average production is expected to be 1.91 million bpd next year, helping the country achieve self-sufficiency in oil. Overseas, Petrobras expects daily output to rise 16 percent next year to 317,000 barrels. Besides Brazil, Petrobras produces crude oil or natural gas in Argentina, Angola, Bolivia, Colombia, Ecuador, Peru, Venezuela and the United States.

Bangladesh wants compensation from Niko Resources

December 7, 2005. Bangladesh has asked for nearly 2.50 billion taka ($38 million) from Canadian oil firm Niko Resources Ltd. as compensation for two blowouts at a gas field. The first blowout took place in January and the second in June this year while Niko was exploring the Tengratilla gas field in northeastern Sunamganj district, 400 km (250 miles) from the capital Dhaka. The ministry said probe reports confirmed that the two blowouts, which Niko says were accidental, had "damaged" 8.89 billion cubic feet (bcf) of natural gas at the field. Fire from the field also forced hundreds of families in nearby villages to flee their homes and caused 840 million taka worth of environmental damage.

Niko is joint operator of the Tengratilla gas field with Bangladesh's state-owned BAPEX, the exploration arm of the Ministry of Energy and Mineral Resources. Experts estimated the field still had at least 715 bcf of gas after the blowouts. The Tengratilla gas field was abandoned in 1982. But Niko and BAPEX resumed work at the site in December last year, believing it to contain substantial gas reserves. Niko has invested more than $15 million in the field. Bangladesh, which produces gas from 13 out of 23 discovered fields, has 15.33 tcf of proven and recoverable gas reserves based on current estimates.

Brazil Petrobras to sign new Bolivian oil pacts

December 6, 2005. Brazil state oil company Petrobras was willing to sign renegotiated contracts with Bolivia, but hopes their terms will be decided by consensus. Bolivia's Congress passed a new hydrocarbons law in May, raising taxes and requiring that companies renegotiate their contracts to reflect the government's stance that they are essentially operators in an energy sector run by state-owned Yacimientos Petroliferos Fiscales Bolivianos. The deadline for renegotiating contracts went unmet last month and Congress aims to modify the law before Bolivia's Dec. 18 general elections to set a new date.

In the meantime, more than 70 shared-risk contracts signed in the 1990s are in legal limbo. De Freitas said the contracts would remain in force until new ones are signed, adding that he expected talks to last until mid-2006. Many foreign companies - including Repsol YPF of Spain, BG Group Plc of Britain and Total of France - have rejected the contract renegotiations and sought refuge in bilateral investment protection treaties. International arbitration could be next. But Petrobras, which controls about 40 per cent of Bolivia's 52 tcf of natural gas reserves, has taken a more conciliatory approach. Petrobras has invested $1.5 billion in the Bolivian gas industry and its gas output represents an estimated 20 per cent of Bolivia's gross domestic product. The company will stick to limited investments of $204 million over the next five years.

Indonesian firm to sign gas deal with Amerada

December 6, 2005. Indonesian gas distributor PT Perusahaan Gas Negara Tbk  (PGN) plans to sign a natural gas supply contract with U.S. firm Amerada Hess this month. The gas will add supply to West Java area from Amerada gas field in South Sumatra. Under the expected deal, Amerada would supply between 50 to 120 million cubic feet per day of natural gas from early 2009.Demand for natural gas from industries in West Java is going higher and higher because of high oil price. Therefore, PGN needs more gas. PGN was also in talks with PT Medco Energi International Tbk for the supply of between 50 to 100 million cubic feet per day of natural gas from South Sumatra from 2008.

Iraq oil output to rise to 2.6mn bpd in '06

December 6, 2005. Iraq plans to boost its crude oil production by about a quarter to reach pre-war levels of 2.6 million bpd next year. Output will rise as Japan helps violence-torn Iraq improve its southern oil terminals, the main gateway for overseas shipments, boosting exports to 2 million bpd. Iraq's oil production has averaged about 2.1 million bpd this year and exports would also rise to 2 million bpd from the current 1.6 million-bpd level as the southern port infrastructure improved. Japan will help Iraq to rebuild and rehabilitate the southern oil terminals and Basra refining facilities. Iraq had asked the Japanese government to use 20-30 per cent of a promised $3.5 billion loan, agreed in 2003 but yet to be disbursed in the oil and gas industry. Efforts to raise oil production in the two and a half years since the U.S.-led invasion have been frustrated by repeated pipeline attacks in the north and a lack of fresh investment in its southern oifields and facilities. Iraq's oil exports in November fell to 1.2 million bpd, their lowest level in two years, as repeated bombings kept the northern pipeline shut and bad weather hampered southern exports. The country uses about 400,000-500,000 bpd of crude domestically. Japan, the world's third-largest oil consumer, imported about 90,000 bpd of Iraqi crude last year.

Power

KCP&L power plant start construction by ‘06

December 9, 2005. Kansas City Power & Light Co hired Burns & McDonnell to  design and manage construction of a new 850 MW coal-fired power plant near Weston, Mo. The Iatan 2 plant, adjacent to KCP&L's Iatan power plant, is expected to cost more than $1 billion. KCP&L is paying $776 million for ownership of 500 MW of the plant's 850 MW capacity. Construction of Iatan 2 will begin late next year, with completion scheduled for 2010. KCP&L, a subsidiary of Kansas City-based Great Plains Energy Inc. will use power produced by the plant to provide electricity to its 490,000 customers in the area.

AES sings Bulgarian coal power plant

December 7, 2005. The Bulgarian government and the US power company AES launched to build a 670 MW new thermal power plant at the Maritza East Complex in eastern Bulgaria that would help the Balkan state. In 2001, Bulgaria and AES signed commercial agreements for the construction of two new units at the Maritza power plant with a total capacity of 670 MW. But the 1.042-billion-euro (1.23-billion-dollar) project was mothballed for lack of funding. AES reopened it by signing a loan agreement for about 770 euros with a financing consortium comprising the European Bank for Construction and Development, and the commercial banks Calyon, BNP Paribas and ING Bank. AES also agreed to provide the remaining 30 percent of the funding to make up the necessary total. The construction will start early next spring, and the first unit is expected to be operational at the end of 2008, while the second unit will follow in another six months. Bulgaria is estimated to have exported about 7.0 billion kilowatt-hours of energy in 2005, which makes it the largest energy exporter in the region. But it risks losing this top position in 2007 after it closes down two of its Soviet-type reactors at the nuclear power plant at Kozloduy, to the north, in compliance with EU-required safety levels. Bulgaria signed in April an accession treaty with the European Union and is scheduled to join the bloc on January 1, 2007.

US in deal with $950 mn coal plant-DOE

December 6, 2005. An international consortium of utilities and coal companies will join with the U.S. government to build FutureGen, billed as the world's cleanest coal-burning power plant. The FutureGen Industrial Alliance, including big utilities like American Electric Power Co., Southern Co. and coal producers have signed a deal with the Energy Department to build the 275 MW plant, worth $950 million. The Bush administration refused several years ago to participate in the U.N.-backed Kyoto treaty to cut emissions linked to global warming. The U.S. government will foot $700 million of the bill for the new coal-fueled plant, with the rest split evenly among the consortium members. The group will choose a site for the plant in 2007, with initial operations by 2012. The project will cut emissions of heat-trapping greenhouse gases while capitalizing on the nation's plentiful coal supplies enough to last about 250 years. To produce electricity, FutureGen would burn coal as well as hydrogen, the energy source the Bush administration has chosen to power a new breed of clean-running automobiles. The project would also separate heat-trapping greenhouse gases out of the exhaust spewed by the plant and inject them into underground reservoirs to keep them from entering the atmosphere.

TransAlta inks $450 mn deal for Centralia plant

December 9, 2005. TransAlta Corporation announced its subsidiary TransAlta Energy Marketing (U.S.), Inc. has signed a multi-year agreement for its coal-fired Centralia, Washington power plant. The contract is for the delivery of electricity from Jan. 1, 2007 until Dec. 31, 2010 and has a value of approximately US$450 million. During the fourth quarter, TransAlta has signed contracts to sell an average of 375 MW of electricity for the period 2007 through 2010, which represent more than 25 per cent of Centralia's output. With these contracts, approximately 90 per cent and 85 per cent of the expected output from the Centralia plant is contracted for 2006 and 2007, respectively. Based on expected production, TransAlta's total portfolio is approximately 85 per cent contracted for 2006 and 2007.

AEP signs 18 power supply contracts

December 8, 2005. American Electric Power has signed 18 multi-year wholesale power supply agreements with municipal utilities in Ohio and Texas. In Ohio, AEP extended wholesale supply agreements with members of the Ohio Municipal Energy Group (OMEG), which includes 16 municipal utilities. In Texas, AEP signed contracts to provide wholesale power to the Cities of Weatherford and Seymour.The new contracts with OMEG members replace seven-year wholesale power agreements that expire Dec. 31. The sixteen agreements total 170 MW of load. The contract with the City of Seymour replaces a one-year agreement totaling 8 MW of load. The City of Weatherford signed a new contract for AEP to serve 80 MW of wholesale load after being served by another supplier for the last three years. All of the new contracts will begin Jan. 1, 2006. AEP was selected through competitive bid processes to serve all of the loads.

Nevada approved to build 514 MW power plant

December 12, 2005. Sierra Pacific Power Company, received approval from the Public Utilities Commission of Nevada (PUCN) to move forward on construction of a new 514 MW, combined cycle natural gas power plant at its Tracy Generating Station, 17 miles east of Reno, Nevada. The facility is expected to commence operations by June 2008. Estimated construction cost is approximately $420 mn.

China plans power plant in Kazakh

December 11, 2005. China and Kazakhstan are considering construction of the world's largest regional power station at the Ekibastuz coal field in Pavlodar region. China has proposed construction of an 8 thousand MW regional power station, which would be the world's largest plant in its class, as well as a high-capacity transmission line to China. A specially created working group has established that this project is viable. Necessary data is being gathered for a preliminary feasibility study after which a decision on "the project's expediency" will be taken. The Chinese is prepared to fully finance the construction of the station and the power transmission line, but now Kazakhstan is determining its share in this project. The construction will proceed from scratch and not on the basis of power stations already existing in Ekibastuz.

Iran helps Armenia to build power plant

December 10, 2005. Armenia and Iran have launched a project of building of the 5th block of Hrazdan Thermal Power Plant. Iran will invest $150 million into the project. Iran discussed three major projects - continuation of Iran-Armenia gas pipeline, building of high-voltage line between the two countries, as well as completion of the building of the 5th block of Hrazdan thermal power plant. All those projects will be implemented in next two years. The wind power plant of Armenia, built by a 3.5-million-dollar aid from Iran, was also inaugurated.

Australian power plant come soon

December 8, 2005. Scrambling to catch up on years of inadequate infrastructure planning, the NSW Government gave the go-ahead for the state's biggest privately funded power station. The 400 MW, $350 mn plant will be one of two gas-fired stations the Government will race to have built before a forecast energy crunch takes hold on the state. Work will start early next year on the first 400MW station, at Lake Tallawarra, south of Wollongong, to be run privately by TRU Energy. It will open in 2008. A second 300MW plant will be built by Delta Electricity, a state-owned generator, at Lake Munmorah, on the central coast. The Government has been caught in a pincer movement of infrastructure problems, because its failure to address water shortages has led it to commission a widely despised desalination plant for Sydney, which will consume up to 30MW of electricity.

Iran offers US share in N-power plants

December 12, 2005. Iran opened the door for US help in building a nuclear power plant - a move designed to ease American suspicions that Teheran is using its nuclear programme as a cover to build atomic weapons. The offer, which did not seem likely to win acceptance in Washington, was issued as Israel said it had not ruled out a military strike against Iranian nuclear facilities. America can take part in international bidding for the construction of Iran’s nuclear power plant if they observe the basic standards and quality. Iran was apparently talking about a 360 MW light water nuclear power plant would be constructed in southwestern Iran. Iran also wants to produce 2,000 MW of electricity by building nuclear power plants with foreign help in southern Iran.

WB to give $150 mn to B’desh for power plants

December 8, 2005. The World Bank agreed in principle to provide $150 million for setting up three power plants on condition that contractors would have to be appointed for operation and maintenance of the plants for six years. The committee agreed in principle to provide $150 for 150MW Shikalbaha power plant and two 120 MW units of Siddhirganj power plant. They, however, did not give any commitment for $100 million for setting up 10 small power plants of 10-30 MW each.

MahaGenco to make foray into wind power

December 13, 2005. The Maharashtra State Power Generation Company (MahaGenco) proposes to make foray into wind power generation. The company, which will soon engage consultant to draw a roadmap, plans to set up 250 MW of wind power project in the state. The company is entitled to get assistance under the centre’s plan to promote non-conventional energy in the country. Maharashtra has already developed an installed capacity of over 650 MW by wind power projects. The government has appointed Maharashtra Energy Development Authority as nodal agency for the additional capacity of 750 MW by wind projects. MahaGenco’s proposed move would expand its presence in the rapidly changing power sector. The company, whose operations are dominated in coal-based power generation, has already announced its plan to explore option of nuclear power generation. Mahagenco has roped in The Energy & Resources Institute to prepare report on carbon trading. The company wants to seek carbon credits from Japan, European Union and the World Bank.

CDM body clears TASMA wind energy project

December 11, 2005. The wind energy project presented by Tamil Nadu Spinning Mills Association (TASMA), seeking registration for carbon emission reduction (CER) certificates, has received the host country approval from the National CDM (clean development mechanism) Authority functioning under the Union Ministry of Environment and Forests. The project concept note and the project design document (PDD) for the bundled wind energy project prepared by the association in consultation with URs Productively, a professional PDD consultancy body, were screened and approved by the National CDM Authority. The design document approval is crucial stage for the cleaner energy project going through the process of securing registration for CER certification. The next stage will be the validation of the project by an external agency that will evaluate the project before it is filed for the registration with the executive board of the UNFCCC (United Nations Framework Convention on Climate Change).

Green power for the `city of Taj` soon

December 9, 2005. With a view to checking the growing pollution level in the city of Taj that could have harmful effects on the monument, the Uttar Pradesh government has embarked upon an ambitious plan of providing Agra with pollution-free green power. The plan envisaged by the Non-Conventional Energy Development Authority (Neda) is based on generating power through bio-mass for the historic city. The city has been declared as a no power cut zone but due to the shortfall of electricity it has become most difficult to provide uninterrupted and quality power to the city and only green power could be the most viable alternative under such circumstances. In the first phase, green power could be used for meeting the shortfall in power supply and later to contribute in the grid to ensure pollution free power for agra. According to estimates, with 110 sugar mills in the state, it has the potential of generating as such as 1000 MW electricity. But primarily due to lack of awareness and paper industry providing a lucrative market for sugarcane waste, only 150 MW power is being generated.

Now treadmill produces electricity

December 7, 2005. An exercise treadmill that produces enough electricity to power a television set, radio and telephone has been developed at Singapore's Ngee Ann Polytechnic. Instead of spending so much money to go to the gym, where you have to bring your own mini-disc player, or paying for electricity, you will generate electricity and burn calories. It took two months to adapt the treadmill to converting energy from the user's footsteps into electricity and store it in a battery. It takes about four hours of brisk walking to fully charge the 12-volt battery, which powers the radio and TV and charges the phone for about 12 hours 

Indian firm to draw Brazilian expertise in ethanol blending

December 6, 2005. Dollex Industries, one of the producers of extra neutral alcohol (ENA) and ethanol is in talks with a distillery major in Brazil for a strategic partnership to implement the supply-chain-management concept. The Brazilian company will provide technology and equipment for Ethanol blending as well as ENA production. This entire state-of-the-art technology will be given to the company against allotment of shares.

Largest hybrid solar-wind power plant in US

December 12, 2005. Atlantic County's wastewater treatment plant will be the first in the United States to be powered by a system that combines solar energy arrays with a wind farm. By capturing energy from the sun and the Atlantic Coast winds, rather than burning fossil fuels, the hybrid solar-wind power plant will produce enough energy to power the equivalent of approximately 3800 homes and displace the need for an estimated 24,000 barrels of oil per year. The new power plant, to be dedicated December 12th by the Atlantic County Utilities Authority (ACUA), is also one of the largest hybrid solar-wind power plants in the world. The 8 MW hybrid solar-wind power plant will generate an estimated 40,800,000 kilowatt hours of clean electricity annually. All of the electricity generated by the solar energy system will be supplied directly to ACUA's wastewater treatment facility and should provide between two and three percent of the energy required by the facility. The entire solar energy system will cost $3.25 million and is supported by a $1.9 million rebate from the New Jersey Board of Public Utilities Office of Clean Energy and a low-interest loan from the New Jersey Environmental Trust. The ACUA expects an average savings of $135,000 a year from the solar energy system, as a result of both reduced energy costs and the sale of Solar Renewable Energy Certificates (SRECs) generated by the system.

Kazakhstan develops alternative energies

December 12, 2005. Under the Program for the Development of the Electric Energy Industry in the Republic of Kazakhstan up to 2030, 5 MW wind power station will be constructed by 2010 at Dzungarian Gates, Kazakhstan - in Almaty Oblast at the Chinese border. For the realization of this project the Global Environmental Facility has provided US$ 2.5 mn and the government of Kazakhstan has allocated US$ 4 mn. UNDP (United Nations Development Programme) expressed interest in this program and it prepared a project intended to render technical aid to support development of wind power industry in Kazakhstan. Ministry of Energy and Mineral Resources of the Republic of Kazakhstan was appointed executor of the project. "Kazselenergoproekt", the Republic of Kazakhstan is the first in the world by its potential of wind energy resources per capita. This is related to Kazakhstan's unique geographical location in the wind belt of the Northern Hemisphere. In the research carried out by "Kazselenergoproekt", the fifteen most promising sites for construction of large wind power stations have been identified. The development of the alternative energies is the part of the diversification program established by the government of Kazakhstan. The country which has 3.3 per cent of all hydrocarbon resources in the world (39 600 million barrels of proved reserves in 2004). Kazakh wish to develop such as wind, solar, hydropower and biomass power industries.

Evergreen solar producing power for retail giant

December 8, 2005. BJ's Wholesale Club in Saratoga, NY is using energy from the sun to help power its store thanks to a cutting-edge solar energy system on its rooftop. The system, using solar panels manufactured by Evergreen Solar, Inc., is BJ's largest North American solar installation. The technology was unveiled to the public at a recent store event, where guests toured the system to learn how it uses the sun's power to save energy and help protect the environment. The 80,000 square-foot 100-kilowatt system, consisting of 912 photovoltaic (PV) panels covering nearly the entire roof of the building, has been running smoothly since starting operations last spring. Operating year-round, it should produce over 100,000 kilowatt-hours of electricity annually, enough to power 13 average homes. The installation is also expected to offset the release of more than 100,000 pounds of carbon dioxide - a leading cause of global warming - and other harmful greenhouse gas emissions into the atmosphere each year. A permanent in-store display allows shoppers to view information about the solar power system.

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