MonitorsPublished on Apr 12, 2006
Energy News Monitor I Volume II, Issue 43
Energy Security: Yours, Mine or Ours?


‘Energy security’ is a difficult phrase to interpret because it is not clear to many what the phrase really means.  What does the term energy mean?   Whose security are we referring to when we talk about energy security? 


Energy by itself is a difficult enough term and very often we end up discussing fuels such as oil, gas and coal and not energy which by definition come in the form of heat, light, motion and so on.  When we add ‘security’ to the term ‘energy’, the phrase becomes broad enough for it to be interpreted in a number of ways depending on prevailing priorities of the concerned nation.    


The original version 1970 of energy security was about oil and about political turmoil in the oil producing regions in the Gulf region.  That interpretation reined for over two decades as oil and geo-politics of the Gulf region continued to generate oil insecurity.  Nations pursued strategies of fuel autonomy, fuel efficiency, fuel diversity and sea lane security for oil supply in order to achieve what was then understood as ‘energy security’.  Later the interpretation of energy security expanded geographically to include turmoil in other oil producing nations such as Venezuela and Nigeria. 


Electricity was brought within the purview of energy security following the power blackouts in North America.  Gas followed with perceived insecurity in depending on supplies from Russia. Hurricanes and natural disasters were added to terrorism and turmoil as causes of energy insecurity given their proven ability to destroy vital energy infrastructure.   


That however is not the happy end to the process of interpreting ‘energy security’ as there is an emerging interpretation which treats ‘demand’ for energy from developing countries as a threat to energy security of developed countries.   Developing countries in general and India and China in particular are seen, at least by some, as countries making undue claims on the world’s energy resources. 


That Indians do not deserve to consume food, leave alone energy is not a new idea.   In 1961, India was on the brink of mass famine or food insecurity as we may prefer to call it today.  India was dependent on shipment of food aid from America.  Some in America were arguing that ‘India had too many people’ who were probably ‘not worth saving’.  It was only the passionate efforts of M S Swaminathan, advisor to the then Indian Minister for Agriculture, and Norman Borlaug, an expert on high yield grain varieties that put India on the path towards food self-sufficiency and restored India’s dignity. 


Self sufficiency however is not a viable policy as far as energy is concerned.  Not every region in the world has the luxury of being resource rich.   Providence has ruled that resources for energy, particularly oil & gas is found in developing countries with a tendency towards political instability while capital and technology to extract, produce, transport and transform energy is found in richer western countries.  As long as richer countries contributed to a major share of demand this was not a problem.   There was a happy co-existence with capital and technology flowing to regions with energy resources and energy flowing the other way.  Richer nations were willing to pay the price that the market demanded as long as they got all the energy they needed.   There was little or no concern for environmental externalities that were a consequence of their energy consumption.  Energy at whatever cost was the driving theme. 


Now that demand has started moving towards developing countries such as India and China whose endowments of energy resources, capital and technology cannot as yet compare with resource rich countries or capital rich countries, energy consumption itself has become a security issue.  Some are worried that the ‘insatiable appetite’ for energy of the average Indian who consumes less than one fifteenth of the energy that an average American consumes is going to deplete oil reserves and destroy the environment.    Some are worried that Chinese companies will prop up repressive regimes in their pursuit of oil or that they will take over International Oil Companies and impose communism on the rest of the world. 


India and China may be wrong in their mercantilist strategies for energy security but that does not mean that they do not deserve to demand energy.   Unlike food security, energy security requires that we seek mutual benefit and not self sufficiency.   The ‘us’ against ‘them’ perspective, though now only appearing from the extreme fringe of the western world must be challenged before it finds its way into the mainstream.




Views are personal

ORF energy team




Integrated Energy Policy

(Comments by Shankar Sharma on Planning Commission’s Draft Report)


A (i). Energy conservation as a way of life


1.  There can be no arguments about the strong relationship between the availability of secure energy and the all round development of our country.  But the issues are: how of much of energy, when and at what cost.  Though it is easy to say “as much energy as possible to get”, our burgeoning population can never hope to reach the level of energy profligacy as we see in developed countries.  As to when it is needed, one can certainly say that it is needed by all as early as possible and for all times to come. ‘Energy at what cost’ is a complex question to answer satisfactorily: shall it be at any cost for those who can afford OR at the cost of the underprivileged sections of the society OR at the cost of the right of flora and fauna to exist OR at the cost of future generations?  The Committee has the onerous task of addressing such a complex issue.


2. The report has painstakingly recorded the limitations of the conventional energy sources available to us, and the difficulties associated with meeting our projected energy demand during the next 25 years.  For those who have been associated with the energy sector it is not difficult to appreciate the seriousness of these issues.  For a growing population like ours, which is projected to reach 1.5 Billion in few decades, even all the global sources of fossil fuels at our disposal cannot last for long if all of our wants are to be met; let alone saving some for the future generations.  In the background of the projections that the domestic sources of fossil fuels identified can last not more than few decades, we should seriously look at energy scenario not just for next 25-30 years, but for our future generations also. 


3. ‘Energy at any cost for those who can afford’ seem to be the conviction of many of the developed countries, and unfortunately, for many in our own country.  The sad part of such a belief is that we seem to be forgetting that it was only because of the austerity in life style and the respect for the nature as practiced by our ancestors, which has preserved for us what we have today.  Even if a small percentage of our ancestors were to be as energy hungry as we are today, we would probably have living (?) amongst more of Thar, Sahara, and Gobi deserts, and no snow clad Himalayas or evergreen Western Ghats or Ganga & Cauvery. As a civilized society we should demonstrate adequate farsightedness by constantly reminding ourselves of the obligations to our future generations.  As Mahatma Gandhi said, we should consider ourselves the Trustees of the nature, which we inherited from our ancestors, to hand over the same to the future generations in as pristine a condition as humanly possible. The noble intentions of our ancient sages should always be at the back of our mind, because of which they were using only the dry twigs for fire and fallen fruits for food.  Such a way of life is unimaginable for the present and future generations, but such an ideology will help us in saving a part of the proven reserve of fossil fuels for the next four to five generations at the least. It may be safe to assert that the present day crises of meeting the basic needs, including energy, is because the State has assumed the responsibility of supplying basic needs to every one, as compared to early centuries when the onus of arranging energy and the basic needs was with individual, which naturally lead to efficiency and high level of conservation.  As a society we must examine carefully the wisdom behind the past scenario, and debate whether the State can revert back to this system as best as possible within the constraints of present day life.


4. While it is unimaginable to go back to the life style of our ancestors, an earnest attempt to reverse the present trend of energy profligacy should be a fundamental principle of our society for the sake of long term energy security.  Without such a goal, we can never hope to ensure the security of even the life line energy for all those who cannot afford to pay the real cost of energy.  We do not have to go too far to learn from the example of wrong energy policy.


USA, with a small percentage of world population, has been a user of a major portion of global energy, just because they can ‘afford’ it.  How long will this continue, and what impact it has on others is a mute question. As a civilized society, those who can afford to pay must be able to distinguish between our needs, wants and wishes as far as energy, among others, is concerned; and shall be able to restrict, as far as possible, our energy use to needs only so that everyone gets access to a minimum quantum. A considerable percentage of our decision making population seem to confuse our energy needs with energy wishes. Though in a democratic society it is unacceptable to stipulate what the needs are against wishes, an honest introspection at the national level is certainly feasible and essential to enable us in this regard. 


A (ii). Large projects and the issues


5. A sizeable percentage of developers and decision making people seem to be married to the idea that “larger and bigger the better”.  Many governments also seem to be convinced that large projects are the panacea for our energy/water problems. Considering large dam based hydro electric projects or large coal based projects as essential means of long term energy security is fraught with dangers.  Whereas the forest cover (not the tree cover) of our land has progressively reduced from about 40% at the time of independence to about 20% now, our forest policy is to reach 33% forest cover.  How are we going to achieve this if we continue to submerge rich forests by damming the rivers, while continuing to destroy forests for other ‘developmental’ works like coal extraction?  On one hand our goal is to increase the percentage of land under agriculture, but on the other hand our project developers offer a feeble reason of ‘societal development’ for dam submergence of large tracts of fertile agricultural land which have been used for centuries to feed our growing population.  While the Ministry of social welfare talk about the development of the poor, the Ministry of coal does not seem to hesitate the initiation of displacement of natives in the garb of coal mines without providing comprehensive rehabilitation.  The socio-economic-environmental issues associated with such large projects have the ability to threaten the very objective, which is the sustainable development of all sections of our society.


6. Draft report’s assumption of hydro potential of 150,000 MW in the country by 2031-32 seems unrealistic [Section 2.2.9, Table 2.6 (page42)].  With only 32,135 MW of total installed hydro capacity by the end of 2005, the country has seen so much opposition and hurdles for additional hydro capacity, that it is difficult to imagine the addition of another 120,000 MW in next 25 years.  As the Ministry of Environment and Forests would confirm, the opposition to Silent Valley, Narmada Sagar, Tehri, few projects in Karnataka, and the hurdles to Lower Subansiri etc. can be clear indication of things to come.


With more and more reports pouring in regarding the large scale socio-economical-environmental impacts of large dams, it seems highly unlikely that many more large dam based projects would be able to be commissioned, at the least, outside North-east region.  The reports of World Commission on Dams 2000 and the report by ICOLD have not been in blind support of large dams.  Our own past history in demonstrating adequate responsibility in correct planning, execution, rehabilitation, reporting etc. has left a lot of protagonists waging battles against any future dams.  The honourable judiciary also has been found to be taking keen interest in upholding the popular opposition to any projects which will dwindle our forest cover further.


(to be concluded)


Views are personal





India’s Energy Security: Major Challenges (Part – IX)

(Brainstorming Session)


Chair: If you go in for NELP type of arrangement then foreign companies, the good ones, will come especially if this 20%, 30% sale can be allowed.

Comment: In the power sector, every state government has wasted a lot of money - in the form of corruption- in procurement of power and distribution equipment.   

They are very reluctant to give it up.  They want to keep it as long that continues.  The only safeguard is that if you encourage captive power and make available funds which are not at all difficult to get, power sector will improve.   We have projected NTPC as an example of mega power plants. The FM has written in support of that. 

Comment: Actually, the entire issue is around creating an enabling environment.  Last year we put up 1100-megawatt of wind power - how? All players are from the private sector.  Why not we look at the way to create that environment. It is very well that the Finance Minister writes giving assurances but you don’t know whether they are followed through.

Comment: See we have asked the CEA to procure permissions from the state governments.

Chair: But the first response will be that they want more manpower.

Comment: Sir, If I may just say something on topics of CBM and coal gasification, I think one reason we have made this much of progress is because CBM is under the Ministry of Petroleum. The Ministry of Petroleum and the Ministry of Power are very progressive ministries and they really encourage pilot projects and they tend to get involved in formulating policies.  Coal gasification is under the Ministry of Coal and I think if you want to see any progress on that project it must be under the ministry of petroleum. I do know how it be done because in the case of CBM there was a very ingenious legal opinion that was obtained within the government.

The Ministry of Petroleum put forward the idea that when you are extracting CBM you are not destroying coal belts. You are merely drilling a well for letting the gas out. On this basis CBM was handed over to the Ministry of Petroleum and you can see the progress in the last few years is incomparable. If you want the progress on UGC you will have to bring it under petroleum.


(to be concluded)





REL may hunt for gas with NTPC


April 17, 2006. Reliance Energy is in talks with National Thermal Power Corporation to jointly bid for oil and gas blocks under the new exploration and licensing policy (NELP)-VI. The requirements of both Reliance Energy and NTPC were the same — natural gas. So the companies were according priority to bidding for gas-rich blocks like the Krishna Godavari basin. Reliance Industries is also in the fray for gas-rich blocks. REL was also having discussions with a few other companies. NTPC has a stake in one block, which it won in the last NELP bid. Both of them do not have the experience to be an operator. So the Reliance Energy-NTPC combine will rope in a third company that will be an operator. This operator will pick up a minimum stake in the block. The combine was planning to bid for coal-bed methane (CBM) blocks too. CBM is considered to be economical fuel for power plants. The companies are looking to bid for CBM blocks in Uttaranchal, Bihar and Tamil Nadu.


RPL plans E&P in India, overseas


April 15, 2006. Reliance Petroleum Ltd, the wholly-owned subsidiary of Reliance Industries Ltd set up to implement RIL's Jamnagar Export Refinery Project (JERP) in the downstream sector, will actively pursue exploration and production (E&P) activities in the upstream sector in the coming years. RPL, over a period of time, will take up the core hydrocarbon businesses of RIL, including E&P, refining and marketing, while the parent would concentrate wholly on new business avenues like retail, agriculture etc. One of the objects, as contained in RPL’s Memorandum of Association (MoA), is to take on lease, purchase or acquire, wells, oil fields, gas wells and gas fields both onshore and offshore, riverbeds, ocean and seabeds. The MoA has also said that the exploration activity could be carried out solely or through collaborations and partnerships.


RPL may partner with Chevron Corp, which recently picked up 5 per cent equity stake in the company with the option to acquire an additional 24 per cent of its equity stake, for E&P foray. US-based Chevron is the world's fourth largest oil company, and produces 2.7 million barrels of oil per day. Reliance had already signed two MoUs with Chevron that include collaborating in other areas of the energy value chain apart from optimising crude supply, product offtake and marketing of products from the RPL refinery.


GAIL to explore gas in Ethiopia


April 14, 2006. GAIL India Ltd has been shortlisted by ministry of mines and energy, Ethiopia, to participate in the bidding process for exploration and development of Calub and Hilala gas field in Ogaden onland basin in the African nation. The gas transporter major had submitted its ‘expression of interest’ along with with Gujarat State Petroleum Corporation Ltd (GSPC). The two gas fields are remotely located and therefore commercial exploitation of gas reserves would need setting up of gas processing facilities and a long distance gas pipeline to reach the potential markets. Both the fields may require more exploration resulting in further enhancement in gas and condensate reserves.


ONGC interested in Kazakh oil block


April 13, 2006. ONGC Videsh Ltd has indicated to the petroleum ministry its interest in acquiring 50 percent stake in Kazakhstan's Satpayev exploration block in the Caspian Sea. In April last year, the Kazakhstan government had given OVL the option of taking 50 per cent stake in either of two offshore blocks, Satpayev or Makhambet, owned by Kazakh national oil and gas company KazMunaiGaz. They had given a deadline of December. It is likely to go for the Satpayev block as according to its data analyses it holds better potential. The decision has been reached following visits of commercial and technical teams to Kazakhstan to study the preliminary data and gauge the estimated reserves in the two blocks. The petroleum ministry is still awaiting formal expression of interest from OVL for submission to the Kazakh government.


GAIL ties up with Arrow for CBM exploration


April 13, 2006. GAIL India Ltd has tied up with Arrow Energy, Australia and Energy Infrastructure Group, Sweden for cooperation in Coal Bed Methane projects in India, Australia and other countries of mutual interest. GAIL plans to participate in CBM blocks of Arrow in Eastern Australia, which are in different stages of exploration, appraisal and development and may set a special purpose vehicle for this. GAIL has already received an offer from Arrow for participation in the Australian project, which is being examined. GAIL has also shown interest in working with Arrow across the entire chain from source to market, covering exploration and production, processing and transmission and marketing of CBM, to make it an integrated and sizable project. Australia holds around 9 per cent of the world’s proven coal reserves and accounts for 7 per cent of the world’s coal production. 


ONGC plans Pemex pact for Mexican blocks 


April 12, 2006. ONGC, through OVL, is in talks with Mexican state-owned oil and gas company Pemex to pick up an equity stake in oil and gas blocks in the South American country for joint development. Mexico’s total oil reserves are pegged between 10.2 to 22.4 billion barrels while the country possesses 39.5 to 59.2 trillion cubic feet (TCF) of gas. With the move, OVL is likely to add another overseas asset to its kitty. At present, the company holds stake in 13 properties spread across a dozen countries, including Russia, Sudan and Myanmar. A 2006-2020 forecast shows that 60 per cent of Mexican production of hydrocarbons is expected to come from shallow and deepwater, with deepwater increasing its share in the years to come.


OIL, IOC to bid for Egyptian oil, gas blks


April 12, 2006. The special purpose vehicle (SPV), formed by Oil India and Indian Oil Corporation for the acquisition of hydrocarbon assets abroad, is bidding for two oil and gas blocks in Egypt. This was the first venture of the recently formed SPV. The SPV have shortlisted a few assets in South-East Asia, US, West Asia and North-South Sub Sahara. The Egyptian blocks have a potential to produce over 500 million barrels of crude. Most of the global oil majors are vying for the assets in Egypt because of its richness.


Other Indian companies are also in the hunt for oil and gas in this region. Last year ONGC Videsh. OVL, with its consortium partner IPR Energy Red Sea, had bagged block number six in the North Ramadan area. Egyptian General Petroleum Corporation (EGPC) had awarded the block during the first round of international bidding. The block has potential oil of more than 600 million barrels, needing total investments of $20mn. OVL has a 70 per cent participating interest during the development phase here. GAIL, HPCL and BPCL are also planning to venture out with OIL for acquiring exploration and production assets. 


Deora expects over $7 bn investment in NELP VI 


April 11, 2006. Petroleum minister Murli Deora expects over $7 bn (Rs313 bn) of actual investment in the first phase of oil and gas exploration through the auction of 55 blocks. Alongside, he hopes the country to produce 20 million standard cubic metres of gas from coal seams from next year. The total investment for NELP-V was $1.7-2 bn (Rs 76-89 bn). The total estimated reserves established in the country in the last five years is around 650 million tonne of oil and oil equivalent gas (O and OEG). Even if 50 per cent of this is recoverable, this amounts to 320 million tonne of oil and OEG, which is substantial at today’s price.


Jamnagar unit may supply to domestic mkt


April 18, 2006. Reliance Petroleum may have to provide for domestic markets if there is a supply gap. The company was developing the refinery to target the export market. The refinery is expected to go on stream in 2008. At present, India is self-sufficient in kerosene but imports LPG. About 30 per cent of the total LPG requirement is being imported. Being a refinery in a special economic zone makes Reliance Petroleum eligible for benefits like exemption from Customs duty on imports, service tax and sales tax. However, if it sells products in the domestic territory from the special economic zone, it will have to pay the excise duty on it. Not just Reliance, even the Mangalore refinery of Oil and Natural Gas Corporation in the special economic zone will have to sell in the domestic tariff area, if needed. 


ONGC plans $17 bn investment in refining


Text Box: • ONGC, which has a 13 mtpa of refining capacity, plans to scale it up to 45.5 mtpa by 2009-10
• All the greenfield refining projects will be executed by new companies that will subsequently be listed
• Plans include a 15 mtpa integrated refinery-cum petrochem project at Mangalore SEZ.

April 17, 2006. Oil and Natural Gas Corporation announced a mega plan of investing close to Rs 75,000 crore ($16.62 bn) in the refining business over the next 4-5 years. ONGC, which currently has a 13 million tonne per annum (mtpa) of refining capacity, plans to scale it up to 45.5 mtpa by 2009-10. All the new greenfield refining projects will be executed by forming new companies. The plans include a new 15 mtpa integrated refinery (export oriented) cum  petrochemicals project at Mangalore SEZ at a cost of Rs 30,000 crore (Rs 15,000 crore for the refinery and Rs 15,000 crore for the petrochemicals complex). In addition, ONGC would execute two greenfield refineries of 7.5 mtpa capacity each at Barmer (Rajasthan) and Kakinada (Andhra Pradesh) at Rs 20,000 crore (Rs 9,000 crore for Kakinada and close to Rs 10,000 crore for Barmer). ONGC would spend another Rs 8,000 crore in scaling up the capacity of its existing Mangalore Refinery and Petrochemicals Ltd (MRPL) from 12.69 mtpa to 15 mtpa and Rs 4,000 crore will be spend in building a aromatic complex at Mangalore. Another Rs 12,000 crore has been planned for an Olefins complex at Mangalore.


Petrol, diesel price hike likely


April 17, 2006. Petrol and diesel prices are likely to be hiked by Rs 1-2 a litre, effective June 1, 2006. However, following a substantial reduction in the international LPG prices, the government may spare consumers from an immediate hike in the domestic cooking gas, LPG, prices. For kerosene, the government is all set to introduce the dual pricing mechanism suggested by the Rangarajan committee. As a result, subsidy on kerosene will be targeted specifically at poor consumers (BPL category) only. The ministries of petroleum and finance are discussing implementation of the Dr Rangarajan panel recommendation on increasing oil cess by another Rs 3,000 a tonne. Although the upstream companies are ready to pay a higher cess, they want an assurance from the finance ministry that no other subsidy contributions, either by way of a interim dividend or direct subsidies, will then be sought from them. A consensus also seems to be emerging on shifting to a trade parity regime for calculating the refinery gate and retail prices for petro products.


IOC gears up to fuel retail fire in Indonesia


April 15, 2006. Indian Oil Corp is gearing up to enter new retail turf in Indonesia. The company that has been planning to expand its retail and refinery business in growing markets is looking at Indonesia as a possible Asian destination, given the high growth rate of the petro market. It is hoping to partner a local company while entering the retail market. As of now, the petro retail market is singularly held by the national oil company Pertamin. IOC was examining a proposal to take over a petrochemicals plant in the country. The deregulation of the petro retail market in the country has seen the entry of over 60 new players in the last few years. The players include both local and foreign investors engaged in varied activities such as retailing, bulk marketing and distribution of fuels and LPG, as well as operation of depots and storage facilities. The companies include local firms such as Unioil, Flying V, Seaoil, Pryce Gases, Eastern Petroleum and Nation. Foreign-owned firms include PTT of Thailand, Petronas of Malaysia, Liquigaz of the Netherlands, Total of France and Coastal of the US. 


IOC-Haryana MoU for $5.52 bn hub


April 15, 2006. Indian Oil Corporation and Haryana State Industrial Development Corporation signed an MoU for developing a petrochemical hub with an investment of Rs 25,000 crore ($5.52 bn) in Panipat. The two parties will jointly setup a special purpose vehicle (SPV) for the purpose. The SPV will have equity from IOC, HSIDC and private developers. IOC’s petrochem project will use naphtha as feedstock and would comprise associated units and downstream polymer/chemical units at an estimated investment of Rs 11,000 crore ($2.43 bn).


IOC plans 1st commercial coal-to-liquid project


Text Box: • Project will produce 4-mt of synthetic crude oil
• Crude price from it will be around $50 a barrel
• Govt favours coal liquefaction JV involving OIL, CIL 

April 14, 2006. Indian Oil Corporation is planning to set up the first ever commercial coal-to-liquid (CTL) project in the country under a technical tie-up with South African firm Sasol. It will produce 4 mt of synthetic crude oil using 120-130 mt of domestic and imported coal. The price of crude produced from this project will be around $50 a barrel. This crude will be processed at IOC's refineries to produce premium fuels like the high quality gasoil (diesel), LPG and naphtha (with high paraffinic qualities) that is best suited as a superior feedstock for crackers/naphtha based petrochemical projects. Considering the huge crude oil imports undertaken by the country every year, with the current crude oil price hovering at over $65 a barrel (for Indian basket), the project is considered economically viable as it can produce crude at $50 a barrel. A typical minimum economic size capacity CTL plant would generate 2 mtpa of gas-oil and 0.5 mtpa of naphtha, which can be used as a supplement feedstock for liquid crackers in India.


Oil companies` sops bill mounts to $444 mn


April 13, 2006. Even as international crude oil prices have touched $70 a barrel, the price of Indian basket of crude has rocketed to $66 a barrel. Oil marketing companies expect under-recovery of Rs 2,000 crore ($444 mn) in the first fortnight of the current year itself. Indian Oil, with nearly half the market share, is expected to record nearly Rs 1,000 crore ($222 mn) under-recovery. However, the petroleum ministry has still not been able to take a call on removal of subsidy on cooking gas as recommended by the Rangarajan Committee. 

Gulf Oil plans crude, base oil refinery


April 12, 2006. Hinduja group-owned Gulf Oil Corporation is planning to set-up crude and base oil refinery in the country. The company is keen to foray into the crude oil segment, which is supportive for the base oil refinery. Internal discussions are started for setting up a base oil refinery with an investment of Rs 800-1,000 crore ($177 mn-$222 mn). The company was considering an option to attach the proposed base oil refinery to ONGC’s Mangalore Refinery and Petrochemicals (MRPL) but that agreement might not be for a long term. The company is planning a base oil refinery of 0.3 mtpa capacity and special distribution points.


Dutch firm Shell roped in to help refineries


April 12, 2006. The government has roped in Dutch company Shell Global Solutions International for improving the margins of public sector refineries like Mangalore Refinery and Hindustan Petroleum Corporation Ltd. The aim is to save the refineries as much as $360 mn (Rs 16.23 bn) in costs and bring these refineries on a par with their Asia-Pacific counterparts. The programme would seek to improve the bottom line of refineries by $0.50 per barrel through focus on operational excellence. The total cost of the “integrated gap reduction programme”, which aims at bridging efficiency gaps, would be shared between the beneficiary refineries. Refineries can also take a loan from Oil Industry Development Board and Centre for High Technology for this purpose. Three refineries have been identified for the first phase of the programme—Chennai Petroleum Corporation Ltd’s refinery in Manali, Kochi Refinery Ltd and Visakhapatnam refinery of Hindustan Petroleum Corporation. In the second phase, four more refineries—Bharat Petroleum (Mumbai), Hindustan Petroleum (Mumbai), Indian Oil (Mathura) and Mangalore Refinery —are proposed to be taken up. 

Transportation / Trade

Households in Agra, Lucknow to get CNG


April 18, 2006. The joint venture company of Indian Oil and GAIL, Green Gas Ltd, is preparing to provide piped CNG to households in Agra and Lucknow from October. Six localities of Agra had been selected for providing piped CNG, in which the company would provide 1,000 connections in the first phase. Later, more areas will get connections, according to the feasibility situation in a particular locality. Booking for the connections would begin in May and the pipelines would be laid later, with the company installing its gas meters inside the houses at its own cost. The piped CNG was similar to LPG in every aspect and only a slight modification would be needed in the gas-stoves to adapt them for using CNG as a fuel instead of LPG. The initial cost of piped gas shall be dependent on the number of households in a single building which implied that the cost of connection for multi-storied buildings shall be cheaper than single households, though still, the cost of the gas shall be cheaper than LPG which was yet to be finalized by the company. 


ONGC gas for fertiliser units


April 15, 2006. As part of its efforts to deal with the short supply of natural gas to gas-based fertiliser units, the government has decided that ONGC's coal bed methane blocks will be connected to fertiliser units located near these natural gas-producing locations. It has also decided to promote efforts to make gas available from new discoveries, including Reliance Industries' KG Basin blocks, for the fertiliser industry. The short supply of natural gas has affected urea production, which is crucial to agricultural production. Fertiliser units have also been asked to explore the possibility of entering into joint venture agreements for procuring natural gas. The petroleum ministry estimates that the expected gas availability by 2011-12 would be around 150 million standard cubic metre per day (MMSCMD), including gas from import sources.


Gail India signs GTA with RRVUNL


April 13, 2006. Gail India Ltd has signed a Gas Transmission Agreement with Rajasthan Rajya Vidhyut Utpadan Nigam Ltd for its 330 MW gas based power plant at Dholpur. As per the agreement, 1.5 million standard cubic metre per day of gas would be transmitted to RRVUNL's Dholpur plant. The company would be laying a new 30-km line to connect Dholpur power plant from the tap-off point at Ibrahimpur on the Hazira-Vijaipur-Jagdishpur pipeline of the company. The company has already been initiated to undertake project related activities of the Ibrahimpur-Dholpur pipeline on fast track basis.

Policy / Performance

Exclude ONGC, RIL from NELP-VI: Oil MNCs


April 18, 2006. Oil giants Shell, Exxon and BP have sought a ban on bidding by India’s ONGC and Reliance Industries for fresh oil and gas blocks put on tender in the sixth round of the New Exploration Licensing Policy. The multinationals is of the view that since ONGC and private sector RIL already had too many exploration blocks with them, they must be kept out of the new round. Most of the global oil giants have stayed away from the previous five auctions due to aggressive bidding by the domestic majors. However, NELP-VI has evoked considerable interest after major gas strikes by Reliance and ONGC-Cairn Energy in Bay of Bengal and big oil finds by Cairn Energy in Rajasthan. The MNCs also suggested a “holiday” from bidding for fresh exploration blocks would also ensure that ONGC and RIL concentrate on drilling their current blocks rather than seek time extensions due to paucity of equipment and manpower. The MNCs felt threatened by the aggressive fiscal terms offered by ONGC and Reliance and thus the demand for their exclusion.


PetroMin seeks Cabinet nod to tap TAP


April 18, 2006. The petroleum ministry has moved a Cabinet note on India joining as a fourth partner in the $3.3 bn (Rs 149 bn) Turkmenistan-Afghanistan-Pakistan (TAP) natural gas pipeline project so that it can import gas from the Dauletabad gas fields in Turkmenistan. The Cabinet note also mentions that most of the critical issues relating to the availability of adequate gas reserves in Turkmenistan, third party certification of reserves, project structure/security and gas pricing are yet to be resolved. As per De Golyer & McNaughton report, the Dauletabad field is currently producing about 27 bcm per year with possible reserves of 1.427 trillion cubic metres (tcm). The report further indicated that based on the results from the reservoir model, the Dauletabad gas field can provide approximately 40 bcm per year (about 110 mmscmd) of gas from 2007 to 2014. Turkmenistan has also said that as a result of increased drilling activities at Dauletabad, the estimated potential gas reserves have increased to 4.5 tcm. On gas offtake volume, while Pakistan would require 30 mmscmd of gas by 2011, 60 mmscmd by 2014 and 90 mmscmd by 2016, India has said that the exact volume could be confirmed only after it becomes a partner in the project. However, India has indicated that it could take around 70 mmscmd of gas.


Two alternative routes are under consideration for the pipeline passing through Afghanistan and Pakistan. This includes the northern route which moves from the Dauletabad field in Turkmenistan eastwards into Afghanistan, dips southwards to Kabul and then enters Pakistan through the Khyber Pass and after crossing the North-West Frontier Province, reaches Islamabad. It then moves southwards to Lahore and reaches the Indian border near Amritsar. In contrast, the southern route moves southwards from Dauletabad and crosses the Afghan provinces of Herat, Helmand and Kandahar, before entering Pakistan through northern Baluchistan. It moves eastwards to Multan and reaches the Indian border at Fazilka. Petroleum ministry said that in the northern route the pipeline passes through formidable terrain, both in Afghanistan and Pakistan. In the southern route, though the pipeline passes through an attractive terrain, the security situation in the region remains uncertain.


Govt likely to benchmark fuel prices


April 17, 2006. Indian refiners, who have been selling fuel at globally benchmarked prices since April ’02 when the APM was formally dismantled, may have to start looking at operation costs as a criteria for fixing fuel prices. The finance ministry is preparing a Cabinet note to look into a new pricing structure that could be a shift from the current regime where the refining company sells fuel at the global benchmarked price. The new proposal, which is sure to face stiff opposition from the oil industry, proposes to take into account the costs of operating refineries and the margins earned on the products based on current pricing regime. Oilcos used to sell fuel at cost-plus prices during the APM days when the returns to the oilcos was fixed at 12 per cent post-tax.


India Inc beckons China for ‘third country investments’


April 17, 2006. The Federation of Indian Chambers of Commerce & Industry (Ficci) has entered into MoUs with Chinese government with a view to enhancing the CEO-level interaction between the Indian industry and the Chinese private sector. The aim is not only to explore joint investment opportunities between the private corporations of the two countries for third country markets but also to enhance India-China trade from $15 bn (Rs 677 bn) at present to $50 bn (Rs 2.26 trillion) in the next few years. India-China trade would overtake US-India trade ($27 billion at present) sooner than anticipated. The areas identified for special thrust in this collaborative model are energy, chemicals and minerals.


DGH may have to wait to become upstream regulator


April 14, 2006. The Directorate General of Hydrocarbons (DGH) may have to wait a while long before it gets empowered as an upstream regulator. The Petroleum Ministry, which has been taking a fresh look at the role of the DGH as a regulatory body, has been holding the view that the role of DGH should be different from other regulatory bodies. The role of DGH is envisaged as that of one which would regulate the technical aspects of the exploration and production (E&P) companies. This in effect would mean that it would have access to all data of E&P companies. However, some of the oil companies had feared that this might result in competitors gaining access to such information. The DGH currently enjoys power under the Petroleum & Natural Gas Rules to ensure that the E&P companies follow the best practices by spending minimally and by creating a level-playing field under a product-sharing contract. The Petroleum Ministry proposes to create a separate cadre for DGH.


India needs $550 bn in 5 yrs: Investment panel


April 14, 2006. The high-profile Investment Commission, headed by Ratan Tata, has said that India needs to attract investments of up to $550 bn in the next five years if it wants to become an economic powerhouse. Tata had presented the report to Prime Minister Manmohan Singh last month. The prime minister has now asked nine central ministries, including petroleum, power, civil aviation etc for inputs within a month on what they intend to do about this. The ministries would have to suggest measures to overcome impediments like poor infrastructure and labour inflexibility among others.


Once this exercise is over, the Prime Minister’s Office will finalise the investment road map. The report says that the power sector needs investments of $140 bn (Rs 6.31 trillion) in five years to generate 90,000 MW of electricity. At present, investment in this sector stands at $54 bn (Rs 2.43 trillion). According to the report the coal sector needs investments of around $30-40 bn (Rs 1.35-1.80 trillion) over the next decade to double production from 240 mt at present.


Petroleum regulator to be in place by September


April 11, 2006. With President Dr A.P.J. Abdul Kalam giving his approval to the Petroleum and Natural Gas Regulatory Board Bill, 2006, the Petroleum and Natural Gas Board is likely to be established by September this year. Mr Murli Deora, Minister for Petroleum and Natural Gas said that in the next four-five months the regulatory body for the petroleum and gas sector should be functional. The downstream regulator would have the task of monitoring petroleum and gas activities right from refining, processing, storage, transportation, distribution, marketing and sale with the aim of ensuring transparency and fair play in the market while protecting the interests of consumers. Further, the establishment of the regulator is expected to ensure uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country and to promote competitive markets. The establishment of the Board for the petroleum and gas sectors has generated greater confidence among global energy majors about the investment potential of India.



Bidding for 3rd ultra power project soon


April 17, 2006. Bidding for the third of the seven ultra mega power projects will get under way in Mumbai, with the who's who of the power sector descending on the city to bid for the 4000 MW plant to come up in Sindhudurg in Maharashtra. Prior to this two such projects -- at Sasan in Madhya Pradesh and Mudra in Gujarat -- have been opened for such bidding, the results of which are awaited.


The other four projects -- of similar size -- are to come up in Karnataka, Chhattisgarh, Orissa and Andhra Pradesh. The power ministry intends to complete the entire process of awarding these contracts to the bidders by the end of this calendar year. The who's who of the power sector, from India and abroad, comprising Tata Power Company (TPC), Reliance Energy Ltd (REL), Essar, Ispat, GVK, GMR, RPG Group, AES, GE, Alstom, Siemens, China Light and Power are expected to turn up for bidding.


Dabhol to generate only 60 MW initially


April 17, 2006. Despite the tall claims of availability of 740 MW of Dabhol power from April 25 to power-starved Maharashtra, Ratnagiri Gas & Power Pvt Ltd (RGPPL) has projected it would be able to initially supply a mere 60 MW. This is because RGPPL would need more time to install software and hardware for the setting up of control rooms for the smooth operations of its gas and steam turbines. RGPPL had already imported the necessary software and hardware through a local vendor from the US at Rs 2.20 crore ($0.49 mn).


Haryana seeks EoI for power projects


April 14, 2006. The Haryana Power Generation Corporation has invited Expression of Interest from prospective bidders for setting up of hydro power sites in Himachal Pradesh. Bidders would submit their expression of interest in this regard to the Chief Engineer Thermal Design. The EOIs should contain details of financial status, relevant background, experience of company as well as the Directors of company and any groundwork they might have already done for the project. 


DLF to set up captive power plant for township


April 14, 2006. In the first instance of a real estate developer going in for a captive power generation facility for its township, DLF will set up a 100 MW plant in the country’s BPO capital Gurgaon. The gas-fired plant is expected to cost around Rs 400 crore ($88.71 mn) and will generate power at around Rs 4 a unit. The company is awaiting a licence to distribute power in the area. It has already applied to the Haryana Electricity Regulatory Commission for permission to distribute power to its commercial and residential users. A pilot plant of 10 MW capacity is already operational and supplies electricity to DLF’s Cyber City. However, since it is located within the premises, it does not need a distribution licence for being a captive power plant. The DLF power plant is likely to have 4 units to be run on gas supplied by the Gas Authority of India Ltd. The plant will require 40,000-50,000 cubic metres of gas a day. The company plans to import the power generation equipment from the US. 


BHEL to start making 800 MW thermal sets


April 13, 2006. Bharat Heavy Electricals Ltd (BHEL), through the efforts of its corporate research and development division in Hyderabad, is now equipped to manufacture 800 MW super-critical thermal power sets in the country. Much sought-after by several players in power generation, including APGenco, for its fuel efficiency, the super-critical technology has been till now viewed as the sole domain of developed world. Part of the technology had been sourced from Siemens and Alstom under technology transfer agreements. Under the new tariff regime, the overall efficiency of thermal power plants would play a very crucial role necessitating constant technological improvements.


Monnet Ispat to set up power plant in Orissa


April 13, 2006. Monnet Ispat and Energy Ltd has firmed up plans to set up a 600 MW pithead coal-based power plant in Orissa. The company wants to set up two units of 300 MW each at a total investment of Rs 2,400 crore ($533 mn). The plant will source coal from the Utkal B2 captive coal block in the Talcher coalfields that was recently awarded to the company. It plans to start work on the plant by July this year and expects the first 300 MW unit to be commissioned by 2008.


The first year generation cost per unit will be around 80 paise. Over a period of ten years, the generation cost per unit will be as low as 35 paise. Transportation costs would be low as the plant would be just 4 km away from the mine. The company is in discussions with Power Trading Corporation, Adani Exports and the Orissa State Electricity Board to sell power and plans to price it at around Rs 2.20 per unit. 


Transmission/ Distribution / Trade

Punjab may draw power from Dadri


April 18, 2006. Punjab government would soon approach Reliance Energy, to buy power from his 3,000 MW power project, being installed at Gaziabad in Utter Pradesh. REL had agreed to supply 1,000 MW to UP, and 500 MW to Haryana and Punjab would request him to give 1,000 MW out of this project to meet the ever-increasing demand of power in view of new mega projects coming in the state. The Punjab government was making efforts to augment the power supply and it had spent 24 per cent of last year’s budget and now planned to spend 25 per cent of the annual budget of 2006-07 on power generation. The state government would also purchase electricity from Bhutan.


MahaVitaran power purchase cost may touch $3.65 bn


April 17, 2006. The Maharashtra State Electricity Distribution Company (MahaVitaran), which is struggling to meet rising power demand, has proposed huge expenses of Rs 16,451 crore ($3.65 bn) for power purchase of 78,453 million units (mu) during 2006-07. MahaVitaran, in its annual revenue requirement (ARR) and tariff petition filed at the Maharashtra Electricity Regulatory Commission (Merc), has estimated an average tariff of Rs 2.1 for the proposed power purchase. The company has projected an increase in million units as well as power purchase cost compared with expenses of Rs 12,994 crore ($2.88 bn) incurred on the purchase of 69,731 mu at the average tariff of Rs 1.84 in 2005-06. In 2004-05, MahaVitaran had spent Rs 10,750 crore ($2.38 bn) for drawal of 67,154 mu at the average tariff of Rs 1.6.


Of the Rs 16,451 crore, MahaVitaran would buy 47,798 mu worth Rs 8,614 crore from the Maharashtra State Power Generation Company Ltd (MahaGenco) at Rs 1.8, 14,923 mu from the central sector worth Rs 2,679 crore (at Rs 1.8), 530 mu worth Rs 221 crore from Sardar Sarovar Project (at Rs 4.18), 3,504 mu worth Rs 1,402 crore from various trading companies (at Rs 4). Currently, the company is forced to draw over 400 MW of power at Rs 7.60 from NTPC’s naphtha-based Kawas and Gandhar projects. The company has projected purchase of 9,509 mu worth Rs 2,469 crore at the average tariff of Rs 2.6 from the Ratnagiri Gas & Power Pvt Ltd (RGPPL) after the revival of the now closed Dabhol project. It has estimated purchase of 1,289 mu worth Rs 433 crore (at Rs 3.36) from other sources and would draw 900 mu at Rs 283 crore under the unscheduled interchange from the grid (at Rs 3.14).


Orissa seeks $58 mn for power reforms


April 15, 2006. Orissa has requested the Centre to release Rs 265 crore ($58.5 mn) towards incentive grant claims by the state government under the accelerated power development reforms programme (APDRP). The grant was due to the state for loss reduction achieved in power distribution. The grant might be given to Gridco, a state-owned utility. Orissa had been the pioneer among states in implementing power sector reforms and was the only one to have fully implemented the legal requirements of electricity act, 2004 in terms of corporatisation, unbundling of generation, transmission and distribution of power and privatisation.


NDPL plan to raise $300 mn


April 14, 2006.  North Delhi Power Limited, a 51:49 joint venture company between Tata Power Company Ltd and Delhi government, is planning capital expenditure of Rs 1,350 crore ($300 mn) over the next three years. The utility, supplying 2350 MW power to 4.5 million consumers of North and North West Delhi, was also all set to tap multilateral agency funds to part finance its modernisation and expansion of distribution system. NDPL has sought a Rupee loan of $100 mn (Rs 4.5 bn approx) from International Finance Corporation. The investment would be targeted at reducing aggregate technical and commercial losses, improvising system reliably and enhancing administrative and civil infrastructure. NDPL also intended to utilise the resources to refinance its existing long-term debt with new loans to reduce interest cost. The modernisation could help the company to review its raising of carbon credits, environmental and social policies. NDPL has posted a net profit of Rs 56.76 crore ($12.7 mn) for 2004-05. 


MERC ruling on power use takes effect


April 12, 2006. Industrial areas in and around Mumbai have taken measures to reduce power consumption in the wake of the Maharashtra Electricity Regulatory Commission (MERC) dictate on reducing power consumption by 20 per cent. At the same time, relief on the power front may come from the commissioning of new units such as Dabhol, Parli and Paras. At present, industrial belts are forced to have staggered holiday for one day per week due to loadshedding, which is used for carrying out maintenance and repairs by the Maharashtra State Electricity Distribution Co Ltd (MSEDCL). MERC had asked for a 20 per cent cut in power consumption. Failing which, units may face penalty in terms of higher tariffs or increase in the number of staggered holidays to two per week. To avoid such penalties, TMA has instituted an internal audit system for industries in the area. 

Policy / Performance

No tariff-based bidding for pvt power cos


April 18, 2006. Private power developers have been given a break from tariff-based competitive bidding by the government. The ministry of power has exempted all private developers who have submitted a project proposal to financial institution before January 6, 2006 from tariff-based competitive bidding norms as outlined in the national tariff policy. The exemption will be applied to those projects which submit a power purchase agreement to the regulatory commission before September ‘06. Such a move will exempt more than 10-15 projects across the country which faced uncertainty as many of these projects have signed power purchase agreements (PPAs) and some have achieved financial closure. Such a move could be a response to the need to increase power generation capacity in the country as well as encourage private developers to invest in the sector.


In February, the central power regulator, Central Electricity Regulatory Commission (CERC), had suggested four conditions for determining future of these projects. The regulator is of the view that in projects where the PPA has been signed and has been approved by the regulatory commission, or is pending before the commission the competitive bidding norms should not apply. Projects, which have been given an in-principle clearance of cost and financing plan by the central regulator. And projects, which have achieved financial closure, should be exempted. If a project fulfilled at least one of these conditions on January 6, the date on which the tariff policy was notified, then the project would be allowed to go ahead as per the agreed terms. The tariff policy, notified on January 6, says, “All future requirement of power should be procured competitively by distribution licensees, except in cases of expansion of existing projects or where there is a State-controlled/owned company as an identified developer and where regulators will need to resort to tariff determination based on norms provided that expansion of generating capacity by private developer for this purpose would be restricted to one-time addition of not more than 50 per cent of the existing capacity.” 


CIL’s hunt for overseas mine to end in Australia


April 18, 2006. Coal India Limited’s long-drawn quest for an overseas coal mine may ultimately end with the support of an Indian company. CIL has initiated preliminary discussions with Gujarat-based metallurgical coke and steel company Gujarat NRE Coke Ltd (GNCL) to acquire a minority stake in the latter’s coal mines in Australia. GNCL has acquired two coal mines in Australia’s New South Wales region, one of which started commercial production in September last with an annual production of 1 mt. The production is slated to increase to 2 mt by the year-end. CIL was looking at picking up about 20 per cent - 30 per cent stake in GNCL’s operative mine in Australia. If the deal goes through smoothly, this will be the first success for CIL in getting an overseas coal mine. CIL’s earlier attempts to find prospective coking coal properties in Australia, Zimbabwe and Mozambique did not bring about the desired results. It is believed that the ministry of coal may give a go-ahead to the deal, if required, even before the formal incorporation of CIL’s overseas arm Coal Videsh Limited (CVL). The ministry plans to send a note on CVL formation to the Cabinet soon. The ministry has mandated CIL to scout for sources of good quality coal, particularly coking coal, to meet the shortfall in domestic production. At present, most of the coking coal requirement by steel-makers is met through imports.


Under the scheme prepared for the CVL, it will contribute 10 mt of coal by 2010 and 50 mt by 2020. Besides, CVL will prioritise its operations at two levels. At the first level, it will look for coking coal properties in Australia, Zimbabwe and Mozambique, and thermal coal properties in Indonesia and South Africa. At the second level, CVL will look at equity participation as well as import of coking coal from Russia, Kazakhstan, Canada, Venezuela and Poland. CIL also plans to rope in Steel Authority of India Ltd (SAIL) as a partner in the projects of CVL. GNCL is the largest metallurgical non-captive coke manufacturer in India with a production capacity of about 1.4 mt. Besides the purchase of coal mines in Australia, it has also acquired 5 per cent strategic interest in Australian coal producer Resource Pacific Holdings Limited.


Lower cap for power projects rejected


April 18, 2006. The finance ministry has shot down a power ministry proposal that sought to lower the qualifying capacity for power projects to be set up in Jammu and Kashmir, Sikkim and the seven north-eastern states. The proposal meant to accord even 700-MW projects the status of mega power projects, allowing them to tap the various benefits available under this category. A mega power project has to otherwise have 1,000-MW generation capacity. The finance ministry has said any equipment imported before a project was notified as a mega power project would be liable to the duty that was applicable to non-mega power projects. The power ministry had proposed that for thermal power projects located in these states, the qualifying criteria be reduced from 1,000 MW to 700 MW. It had asked for lowering the criterion for hydel power generation plants, too, from 500 MW to 350 MW. The decision is currently awaiting approval of the Cabinet Committee on Economic Affairs.


Govt to conduct consumer study on power supply


April 17, 2006. The Union Power Ministry and the Confederation of Indian Industry have jointly launched the second Consumer Attitude Study on Electricity Supply (CASES) to assess consumers' perception on issues related to power supply. The study plans to cover a sample of 68,320 consumers spread across domestic, commercial, industrial and agriculture segments from all the distribution companies across the country. The study aims at developing Discom-specific and segment-specific Power Supply Index based on the goals of Availability, Accessibility, Reliability, Quality and Affordability (AARQA). It would also have a separate Web response feature, which would entail consumers' response to a survey questionnaire. The study analysis is expected to assist the Central and State Governments, utilities and regulators in identifying weak areas and plan steps to improve upon them. The first such study was conducted in 2002 by ORG-MARG, which surveyed 3,272 consumers of different segments in four selected regions on Availability, Accessibility and Affordability (AAA) goals. The all-India Quality of Power Supply Index was measured at 0.44 with regional indices for North, East, West and South stood at 0.38, 0.34, 0.42 and 0.52 respectively.


Singareni Collieries, ONGC sign MoU


April 17, 2006. Singareni Collieries Company Limited and the ONGC signed an MoU to jointly undertake underground coal gasification, surface coal gasification and coal bed methane projects in Singareni coalfields. Under the agreement, a pilot project would be taken up in a couple of locations in Khamman and Adilabad districts to ascertain the commercial viability of the three coal uses under equal cost-sharing basis. ONGC has partnered with Shell and a Russian research centre for technical support for the project. The MoU also covers the areas of separation of fuel gases generated from various methods into various fuels and exploration of surface coal gasification and coal bed methane projects in the immediate future. About Rs 100 crore ($22.16 mn) investment is required to take up the pilot project of underground coal gasification extended to a period of five years. The amount would be contributed equally by the ONGC and the SCCL. ONGC has already entered into MoUs for similar projects with Coal India, Nyveli Lignite Corporation, Gujarat Mineral Development Corporation among others in the country.

Ensure franchisee models work for rural electrification: Centre


April 16, 2006. The Government, which is betting heavily on the franchisee model for executing rural electrification projects across the country, has sought prior commitments from States on ensuring commercial viability of the franchisees at the time of determination of their bulk supply tariffs. The Centre has also asked State Governments to provide requisite revenue subsidy to the States utilities under provisions of the Electricity Act 2003 to ensure viability of the franchisees. A capital subsidy proposed by the Centre for the eligible schemes would be given through the State-owned Rural Electrification Corporation, which has already circulated draft guidelines for franchisee development to all States enlisting the various models proposed under the scheme. The system of franchisees is to be implemented across States in a phased manner with the aim of reducing commercial losses, improving revenue collection efficiency and also to provide "doorstep services" to rural consumers.


In the direction of implementing the franchisee scheme, the Centre has already zeroed in on five variants of the franchisee model for executing rural electrification projects and the models are being put to test currently in hamlets in Orissa, Assam, Karnataka, West Bengal and Nagaland. The model, where local bodies such as co-operatives, individual entrepreneurs and panchayats are involved in the execution or management of rural electrification projects for a fee, has kicked off work on `site-specific' models.


Ultra mega power projects can raise int’l debt


April 15, 2006. Developers of ultra-mega power projects will be allowed to raise additional foreign debt beyond the current ceiling of $500 mn (Rs 22.24 bn) under the external commercial borrowings (ECB) guidelines, only on a case to case basis. The power ministry had lobbied for higher ECB limits for the ultra-mega power projects given their size and fund requirement. Normally a 4,000 MW project would involve a cost of around Rs 16,000 crore ($3.6 bn). Power projects are developed on a debt equity ratio of 70:30.


Aperc`s bid to move towards time-of-day power tariff


April 15, 2006. Having addressed basic issues arising out of power reforms under the new electricity Act, such as open access and separation of activities of generation, transmission and distribution, the Andhra Pradesh Electricity Regulatory Commission has now started focusing on the issues related to retail tariffs. The effort to move towards the time-of-day tariffs is one of the significant future initiatives that has found a mention in the commission's retail tariff order for the current financial year. The concept of time-of-day tariffs will have built-in incentives for off-peak consumption of power by various categories of consumers. This differential tariffs depending on the peak and off-peak time-of-day are expected to alleviate peaking problems faced by Discoms to a certain extent as the new method encourages consumers to restructure their consumption pattern to benefit out of off-peak tariffs.


Power exchange to usher in competitive pricing


April 14, 2006. The Central Electricity Regulatory Authority is planning to set up a power trading exchange. The regulator will soon start public consultations to give final shape to the plan, which is expected to lead to more competitive prices for power as it will pool energy from various sources. The exchange would be managed by an impartial team and would free buyers and sellers of power from entering into long-term exclusive contracts. The power regulator believes that this step will bring the country’s power sector closer to the efficiencies that are witnessed globally. While a bulk of the country’s power is locked up in long-term contracts, the exchange will give new projects the option to keep some generation out of lock-in agreements. Buyers and sellers will both put in their bids, which will be evaluated by the exchange. The pricing will not be totally free-market driven, as is the case in exchanges in the West, as India is still a power-deficit country. There exists an inter-regional power transfer capacity of around 6,000 MW in the country, which is expected to increase further to about 9,500 MW in the next few years.


Pvt power projects norms firmed up


April 13, 2006. Policy guidelines for private players setting up transmission projects have been firmed up. An empowered committee headed by a Central Electricity Regulatory Commission official will identify projects, invite bids, select developers and facilitate the finalisation and signing of transmission service agreements between the developer and the power utilities. Of the investment of Rs 71,000 crore ($15.76 bn) needed for reaching the power transfer capacity of 30,000 MW by 2012, Rs 21,000 crore ($4.66 bn) is expected through private sector participation. The guidelines are aimed to facilitate the same. The empowered committee constituted by the ministry of power will have representatives from the power ministry, Central Electricity Regulatory Commission, Planning Commission, Central Electricity Authority and two experts from the power sector. The developers will be selected through tariff-based bidding according to guidelines of the Electricity Act, 2003. Central transmission utilities and joint venture companies are also eligible to bid in order to maintain sufficient competition.


Independent regulatory body mooted for coal pricing


April 11, 2006. Coal pricing in the country may soon come under the purview of an independent regulatory body if the government accepts the recommendations of the Expert Committee on Coal Sector Reforms. The committee, which submitted Part A of its report to the coal ministry recently, has favoured a regulatory mechanism for coal pricing, especially for the power sector that consumes about 80 per cent of total coal produced in the country. The ministry was evaluating the recommendations of the committee and may take a policy decision after its entire report is submitted. Coal pricing, at present, is fixed by the coal ministry in consultation with coal PSUs Coal India Limited and Singareni Collieries Company Ltd. The prices are determined on the basis of costs incurred in coal production from different mines in a coal company plus a reasonable amount of profit.


On price determination, the committee considered three options before arriving at the conclusion that current market realities favour regulation of coal price only for the power sector. For others (cement, steel, brick kiln etc), it has suggested that 60 per cent of the requirements of consumers with a minimum annual demand of 0.1 mt can be given under a fuel supply and transport agreement (FSTA) involving the coal supplier, coal consumer and the transporter at a price indexed to the e-auction price. For other consumers, the committee has suggested that their coal needs may be met through traders or imports or e-auction. For the sake of evolving a pricing mechanism, the committee has divided the consumers into two categories - Class A and Class B - with the former being the power sector consumers and latter being other coal consumers.


Interestingly, while the committee has favoured 60 per cent linkage for Class B consumers, the Planning Commission in its earlier report has favoured 80 per cent linkage for them. The committee also considered two other pricing options - a complete deregulation of coal prices and import parity pricing. However, these did not find favour under the current market situation. For the success of its pricing formula, the committee has also suggested an increase in coal allocation under e-auction route. It has said that 10 per cent of total domestic coal production should be brought under e-auction in the first year, 20 per cent in the third year and a further increase to 25-30 per cent in the long run. It has also suggested that power utilities should be asked to set up coastal generating stations along western coast and south Tamil Nadu on imported coal, to prevent e-auction from creating constraints on domestic supplies.




Over 20 bcf of gas recovered by Amak Project


April 18, 2006. The Amak Project - aimed at treatment and collection of the oil accompanying gas in the Ahvaz 1,2, 3 and Mansuri oil fields - has recovered over 20 billion cubic feet of natural gas in Iran. Upon completion of three other related plants – located at the Kupal, Ab-Teimur, and Marun oilfields - the figure is expected to increase by far. In addition to the new projects that are scheduled to come on stream by July, an acidic gas treatment plant that is included in the Amak Project is planned to become operational by September this year. An increase of about 16,000 barrels per day (bpd) of oil to the current production level is among other advantages of the Amak Project development. The project aims at collecting 241 million cubic feet of the oil accompanying gas in seven oilfields of Bangestan oil and gas reserve.


Drilling of new well at Koilashtila gas field begins


April 17, 2006. Bangladesh Petroleum Exploration and Production Company (Bapex) started drilling a new production well and conducting work over programme at another well at Koilashtila gas field to increase production from the field. The Sylhet Gas Fields Limited, a subsidiary of Petrobangla, owns the field. Around 25 mmcf of gas per day would be produced from the new well and another 25 mmcfd would be added to the national grid from the existing well by July.


The total production at Koilashtila is around 55 mmcf per day at present. Around 140 million cubic feet of gas per day will be added to the national grid by July as Titas and Bangura gas field would also produce around 90 mmcfd gas pushing the total production up to 1650 mmcfd. The demand of gas and production would match by July as the current demand of gas is around 1650 mmcf against the production of around 1525mmcf per day. Country will have additional gas than demand when gas production from Bibiyana gas field, operated by the US oil company, Chevron goes into production by the end of this year. Chevron is expected to produce around 200 mmcf of gas per day from Bibiyana.

Chevron to take 30-40 pc in RIL gas field


April 14, 2006. US major Chevron will take 30 per cent to 40 per cent equity in Reliance Industries Ltd's Krishna-Godavari deepsea gasfield and form a joint venture for marketing/importing gas/LNG and bid in the sixth round of government's ongoing auction of exploration blocks with India's biggest private refiner. Krishna-Godavari field scheduled to start pumping gas from June 2008. This relationship could also be expanded to acreages that RIL has won in the previous rounds. The two companies will form a joint bidding group for participating in the sixth round of the government's ongoing auction of 55 exploration blocks and coalbed methane acreage. The two companies also have plans to explore formation of a joint venture for marketing gas from acreages won jointly or which has not been committed to buyers from RIL's acreages. This joint venture will eventually also get into importing LNG from ventures where both or one of the companies is a partner. The pipelines business also comes under the ambit of this joint venture.


BHP Billiton acquires E&P rights offshore Colombia


April 13, 2006. BHP Billiton has acquired E&P rights offshore Colombia, South America. The company signed contracts with the national hydrocarbon agency of Colombia, Agencia Nacional de Hidrocarburos (ANH), which allow for oil and gas E&P from two offshore blocks in Colombia's Caribbean sector. BHP Billiton holds a 75 per cent interest in each block and is the designated operator. Colombia's state-owned oil company, Ecopetrol, holds the remaining 25 per cent interest. The two contracts, Fuerte Norte and Fuerte Sur, each cover approximately 1.2 million acres and are located in water depths ranging from 50 to 2,700 m.


Royale energy completes a gas well in Sacramento basin


April 12, 2006. Royale Energy Inc is a leading independent producer of domestic oil and natural gas and recognized as one of the top 20 fastest growing producers in the United States. It has completed and tested the Elliott #1 well for 850,000 cubic ft. per day on 12/64 choke with flowing tubing pressure over 1,000 psig from a new Nortonville zone. Two remaining natural gas filled zones remain behind pipe for future completion. The Elliott #1 is an offset to the Royale Energy Andrus Island West discovery in the Nortonville, which began production in 2005. The Company plans to drill the Elliott #2 well later this year. The Company is focused on development, acquisition, exploration, and production of natural gas and oil in California, Texas and the Rocky Mountains.


Gazprom interested in giant Iranian gas field


April 12, 2006. Russian Gazprom has expressed interest in participating in the development of the world's largest offshore gas field in Iran. Russian gas behemoth discussed with Iranian authorities a planned pipeline linking Iran, Pakistan and India and in the South Pars field. Iran sits on the world's second largest proven gas reserves after Russia. South Pars, which is believed to be the world's largest gas field, is shared by Iran and Qatar. It is estimated to hold 7 percent of the world's total gas and 38 per cent of Iran's reserves.


Parsian Gas Refinery produces 18,000 bpd gas liquids


April 17, 2006. Parsian Gas Refinery produces about 18,000 barrels per day (bpd) of gas liquids. The refinery in the past year received something between 25 to 27 million cubic meters of natural gas input. With the development plan of the refinery scheduled to be completed by the end of the year the input gas capacity of the plant is expected to hit 48 million cubic meters per day. All the gas produced at Tabnak natural gas field will be used as the feedstock for the refinery.


$2 bn oil refinery to be launched in Pak


April 16, 2006.  Pakistan's Economic Coordination Committee of the Cabinet (ECC) has allowed the setting up a $2 bn mega oil refinery at Khalifa Point in the district hub of Balochistan. The refinery would be commissioned by 2010 and would have a maximum refining capacity of 13 million tonnes of petroleum products which would be higher than the country's total existing capacity of 12.8 million tonnes. The project will be awarded through international competitive bidding on build on and operate (BOO) basis. Pakistan currently consumes 16 million tonnes of petroleum products, of which, 82 per cent requirement is met through imports. Total refining capacity in Pakistan currently stands at 12.8 million tonnes. The ECC allowed extension in the lease period of mining, production and development of three major fields of Pakistan Petroleum Limited for their full life to get better price during the sale of 51 per cent of its shares. The ECC also approved about 67 per cent increase in the power tariff for import of 30-MW of electricity from Iran for border areas of Taftan and Mashakhail. The Wapda had been importing this electricity at three cents per unit under a three years contract which has now been increased to five cents per unit. The ECC rejected a proposal of the petroleum ministry for providing industry status to the CNG sector on the ground that petroleum sector was already under a deregulated regime. The ECC, however, approved a policy for the import of Liquefied Natural Gas. The government has already issued a no-objection certificate to Associated Group to start LNG imports.


FuelNation establishes joint venture with Niko-Oil ltd.


April 11, 2006. FuelNation has established a joint venture with Niko-Oil Ltd. in the Russian Federation and maintains a controlling interest of the joint venture. Both parties agreed to increase the $50 mn credit facility to $100 mn on a revolving basis in order to finance two months of purchasing for Russian Crude Oil from Surgutneftegas and refine into a finished product for export. The company is ahead of schedule and is focused on closing transactions that produce immediate revenue and profits for the company. The joint venture with Niko-Oil Ltd. will give FuelNation the management and contracts it has desired in the Russian Federation. Currently FuelNation has identified several major assets and opportunities for participation and is conducting extensive due-diligence to establish additional projects in the Caribbean, Africa and the Middle East.

Transportation / Trade

Brazil, China sign gas pipeline deal


April 18, 2006. Brazil's state-run oil company Petroleo Brasileiro SA, or Petrobras, and China's Petroleum & Chemical Corp., or Sinopec, signed a contract to build part of a natural gas pipeline between southeastern and northeastern Brazil. The $239 mn (euro197.62 mn) Engineering, Procurement and Construction contract calls for the construction of a stretch from the nation's oil and gas center of Macae in Rio de Janeiro state to Vitoria. From Vitoria, the pipeline is slated to continue north and pass by a gas treatment unit in Cacimbas in Espirito Santo, and from there to Catu, near Salvador, capital of the northeastern state of Bahia. The entire pipeline is 1,365-kilometer-long (846-mile-long).


Gazprom needs larger capitalization for gas projects


April 17, 2006. Russian natural gas giant Gazprom needs to raise its capitalization to develop gas infrastructure in regions. The growth of the company's capitalization would help Gazprom channel some of its revenues into efforts to create a network of gas pipelines, especially in rural areas. The larger the capitalization of Gazprom, the broader possibilities the company have to develop the country's gas infrastructure. The development of the country's gas infrastructure would benefit 11-12 million people living in 53 regions of Russia. The company is of the view that gas is a new quality of life for rural dwellers enabling them to run their farms, produce agricultural products and simply to live normally. In four or five years Gazprom’s capitalization is increased from cost $10 bn to $230 bn.


NIGC to construct gas pipelines within 4th Plan


April 17, 2006. National Iranian Gas Company will construct over 5,000 kilometers of gas pipelines by the end of the 4th Socio-economic and Cultural Development Plan (2005-2010) to supply 85 new towns, 9,000 rural areas, 132 industrial parks and eight new power stations with natural gas across Iran. Making use of Ilam Refinery plus Phase 2 of Parsian is also within the projected plans for next year. Construction of Bidboland 2 Refinery is also on the agenda and financing would come from National Iranian Oil Company (NIOC). These projects would require $16 bn worth of investment. It should be noted that completion of Tehran-Khorasan Gas Transfer Pipeline will have this northeastern province not to rely on the gas import from Turkmenistan any longer, freeing part of the domestic contractors forces to embark on other ongoing projects such as the export line to Yerevan to be finished by 2007.

Russia may halt gas supplies to Ukraine


April 14, 2006. Ukraine's national oil and gas joint stock company, has failed to pay approximately $700m that it owed RosUkrEnergo for gas supplied in February and March 2006. This includes $200m payable for February, and about $500m for March. The Russian side has warned its Ukrainian partners it might halt gas supplies if such practice persisted.


Russian firms to take part in Pak cross-border pipeline projects


April 14, 2006. Five major companies comprising a Russian Consortium have reached an understanding with Pakistan to take part in cross-border pipeline projects and invest in import of Liquefied Natural Gas and other major projects. A 5-member delegation from Russian Consortium of oil & gas companies came to Pakistan to discuss with the Federal Minister for Petroleum & Natural Resources, Amanullah Khan Jadoon, investment prospects in Pakistan's oil and gas sector.


Enterprise's Constitution oil and gas pipelines receive initial flows


April 13, 2006. Enterprise Products Partners LP has received initial flows of crude oil and natural gas into its Constitution oil and natural gas pipelines from Kerr -McGee's 100 per cent - owned Constitution field and Kerr - McGee's and Noble Energy's 50 per cent each-owned Ticonderoga field in the south Green Canyon area of the Gulf of Mexico. Current production into the pipelines from two Ticonderoga wells and one Constitution well is approximately 32,000 b/d of oil and 30MMcf/d of natural gas, with five additional wells expected to begin flow from Constitution in 2006. Construction of the wholly owned pipelines was completed in late 2005, and Enterprise received initial production from the two fields in first quarter 2006.


The Constitution oil and natural gas pipelines are located in approximately 5,000 ft of water in the central GoM and are designed to provide gathering services for the Constitution and Ticonderoga fields, as well as other undeveloped blocks in the south Green Canyon area. The 32-mi, 16-in. natural gas pipeline has the capacity to transport up to 200 MMcf/d by connecting the fields to Enterprise's existing Anaconda gathering system which gathers gas production from the Marco Polo area. The crude oil export pipeline is a 70-mi, 16-in. line with a capacity of approximately 100,000 b/d that connects the fields with the Cameron Highway oil pipeline and Poseidon oil pipeline systems.


NGPL seeks interest in gas line expansions


April 13, 2006.  Kinder Morgan Inc. subsidiary Natural Gas Pipeline Co. of America (NGPL) is seeking shipper interest for a proposed expansion of capacity of its Gulf Coast and Louisiana natural gas pipelines by a combined 200,000 dekatherms/day. Subject to shipper support and regulatory approvals, the expanded capacity is expected to be available in January 2008. The project would increase horsepower at existing compressor stations, loop pipelines, and add metering equipment. The Gulf Coast mainline carries gas from South Texas to Chicago. The Louisiana line runs from the Gulf Coast line at Montgomery County, Tex., to connections with other systems to the east.


CPC line capacity to be doubled


April 13, 2006.   Kazakh and Russia will increase capacity of the Caspian Pipeline Consortium (CPC) pipeline from 28 million tonnes/year of crude oil to 67 million tonnes/year. Kazakhstan is aiming to raise its production of crude oil to 3 million b/d from 1.3 million b/d by 2015 and is seeking additional export routes. Last December, Kazakhstan inaugurated the 614-mile, 32-in. Atsau-Alaskhankou crude oil pipeline to China, its first bypassing Russia. Kazakhstan also is being urged to speed up talks on joining the Baku-Tbilisi-Ceyhan (BTC) pipeline project. Kazakh could ship up to 30 million tonnes/year of crude oil through the BTC line. CPC's 1,500-km Tengiz-Novorossiisk pipeline carries crude oil from fields in western Kazakhstan to Russia's Black Sea coast for onward transport by ship and pipeline. In 2005, the CPC increased oil exports by 35.5 per cent to more than 30 million tonnes. The proposed expansion project involves construction of 10 pumping stations, increased storage capacity for an additional 480,000 tonnes of crude oil, and additional port infrastructure on the Black Sea. CPC stakeholders include Russia, 24 per cent; Kazakhstan, 19 per cent; Oman, 7 per cent; Chevron Caspian Pipeline Consortium Co., 15 per cent; LUKArco BV, 12.5 per cent; Rosneft/Shell Caspian Ventures Ltd., 7.5 per cent; Mobil Caspian Pipeline Co., 7.5 per cent; Agip International (NA) NV, 2 per cent; BG Overseas Holding Ltd., 2 per cent; Kazakhstan Pipeline Ventures LLC, 1.75 per cent; and Oryx Caspian Pipeline LLC 1.75 per cent.


Kinder Morgan inks deal to expand Midwest gas line


April 12, 2006. Kinder Morgan Inc. entered into a long-term, firm transportation agreement with Peoples Energy unit Peoples Gas Light and Coke Co. that will support construction of a $13 mn natural gas line that will serve the Chicago, Illinois market. Peoples contracted for all of the 360 million cubic feet per day of capacity on the proposed 28-mile Kinder Morgan Illinois Pipeline. The project combines construction of the new pipeline and a long-term capacity lease on Kinder Morgan's Natural Gas Pipeline Co. of America (NGPL). Pending regulatory approval, the line is expected to begin service in year 2007. The company said the project is one of several pipeline and storage expansion initiatives under way, which represent an ongoing capital investment of approximately $148 mn. Kinder Morgan Inc. is one of the largest energy transportation, storage and distribution companies in North America.


Venezuela sets oil export deal with India


April 11, 2006. Venezuela's state oil giant PDVSA has agreed on a deal with India to deliver 2 million barrels of crude oil a month as part of a government policy to diversify its oil trade. The agreement between the government of India and the state company follows the delivery of one million barrels of oil on February 1 and 1.3 million on April 5. The deal will allow the distribution of excess production in the east of the country. The accord is the latest in which Venezuela has sought to reduce the country's dependence on oil exports to the United States by securing other export markets.

Policy / Performance

Govt urged to subsidize diesel fuel


April 18, 2006. Industries in Philippine are asking the government to offset the effects of unstable oil prices by using its dividends in Petron Corp. and subsidize the prices of diesel among public utility vehicles. The Consumer and Oil Price Watch (COPW) will meet with Petron and the Philippine National Oil Co. (PNOC), the government agency that owns 40 per cent of the oil company, for a possible arrangement that would allow special rates in diesel products for PUVs.


Under such scheme, the government will use PNOC’s dividends in Petron to subsidize diesel rates in the hope of preventing a new round of fare increase. Petron for its part, is giving discounts on diesel but only on selected branches.  If Petron and PNOC agrees to the deal, Concepcion is confident that it would help offset the effects of the rising diesel prices since Petron is the leader in the domestic market accounting for 38 per cent of the retail market as of end-2005.


WB advised Pak to strengthen petroleum sector


April 17, 2006. Pakistan government has been advised by the World Bank to immediately improve legal, regulatory and institutional framework of the ministry of petroleum and natural resources as the issue is blocking sizable foreign investment in the country's mineral sector. The World Bank also wanted the government to ensure uniformity of procedures, mineral concession rules & regulations and incorporation of social and environmental aspects in manners satisfactory to the foreign investors. The government has been proposed to urgently go for "institutional strengthening" of the ministry of petroleum to lure foreign investors to invest in the mineral sector of the country.


Penn West, Petrofund create $11 bn energy trust


April 17, 2006. Penn West Energy Trust and Petrofund Energy Trust have entered an agreement to merge and create an oil and gas trust with a combined value of more than $11 bn. Under the terms of the arrangement, each Petrofund unit will be exchanged for 0.6 of a Penn West unit on a tax-deferred basis in Canada. U.S. The combined trust will operate under the Penn West name and will be led by the Penn West.


Bolivia set to nationalize natural gas


April 14, 2006. Bolivia intends to announce the nationalization of the huge natural gas resources. But it was not immediately clear how that would affect the companies which help produce and sell the gas, mainly Spain's Repsol YPF and Brazil's Petrobras. The nationalization of resources would not involve the confiscation or expropriation of oil companies' assets. Bolivia has and estimated 54 trillion cubic feet of natural gas reserves, according to official data.


Japan eyes coal-to-liquid scheme for China


April 13, 2006.  Japan plans to help Chinese companies liquefy coal in an effort to satisfy the soaring demand for energy in China. Japan's New Energy and Industrial Technology Development Organization (NEITDO) is of the view that it is more economical to try the technology in China than in Japan, which has fewer available mines. Liquefaction experiments will start in Beijing this year. Chinese companies will eventually build plants near mines to turn coal into liquid fuels.


Under the scheme, a Chinese power company will start operating a liquefaction plant in 2010 to process 3,000 tons/day of coal mined in the Inner Mongolia Autonomous Region. Also in 2010, a Chinese coal company will develop a mine in the Uighur autonomous region of Xinjiang and start testing a plant to process 2,500-3,000 tons/day of coal. The project aims at meeting the demand for energy in China's inland areas that are suffering shortages.


PG&E Corp. contributes $0.5 mn to Energy Efficiency Center


 April 12, 2006. PG&E Corporation will give $0.5 mn in shareholder-funded contributions to support various programs and projects aimed at applied research and commercial development of energy efficient technologies through a newly created Energy Efficiency Center at the University of California at Davis. Plans for the establishment of the center were unveiled in June 2005 by the California Clean Energy Fund (CalCEF), which then solicited proposals from universities in Northern California to create the world's leading university-based center to advance the efficient use of energy. PG&E expects to provide more than $1 bn of funding for various energy efficiency programs and customer demand reduction programs that will eliminate the need for construction of more than 1,000 MW of new generation facilities.


Over the past 30 years, PG&E's energy efficiency programs have helped keep California's per capita energy usage essentially flat, compared with an increase of about 50 percent in the rest of the United States. This success has enabled the state to avoid the construction of 25 or more new power plants that would have been necessary over the past three decades, and it has prevented the emission of millions of tons of pollutants, including more than 60 million tons of carbon dioxide.


Opec needs to pump more oil in ’06: IEA


April 12, 2006. Opec will need to pump more oil than previously expected to meet rising world demand and cover a shortfall from other producers such as Russia, the International Energy Agency said. The agency, an adviser to 26 industrialized countries, also expected no early resolution to concerns over Iranian supply and lost output in Nigeria that have helped push crude prices toward record highs.


Most members of the Organisation of Petroleum Exporting Countries are already pumping crude close to full capacity. Higher than expected use in the Middle East and Asia Pacific prompted the IEA to raise its estimate for world demand this year to 85.1 million barrels a day in 2006, up 300,000 bpd from a previous estimate. The IEA said that the adjustment has not come from China but the other key growth areas in that year: the Middle East and Asian Pacific countries.



Yellow river's biggest hydro-power station


April 16, 2006. Construction began on the biggest hydro-electric station on the Yellow River, China's second longest waterway. Located in northwestern Qinghai Province, Laxiwa Hydroelectric Station will have a capacity of 4,200 MW and annual average generation of 10.223 billion units. The station will be the second tiered hydropower plant between Longyang Gorge and Qingtong Gorge on the river's upper reaches. Laxiwa is listed as one of the key state projects to be completed during the 11th five-year-program period (2006-2010) with a budget of 14.5 bn yuan ($1.79 bn). The station is expected to be complete by the year 2010, with its first generating unit to begin operating in 2008.





RWE plans to build $1.8 bn power plant


April 13, 2006. German electricity producer RWE AG plans to build a new euro1.5 billion ($1.8 bn) power plant in the Netherlands, with construction set to start in 2008. The combined hard coal and biomass-fired plant is to be built either at Maasvlakte or Eemshaven, and could start producing electricity in 2012 or 2013. It would satisfy the power demands of up some 3.4 million households. RWE supplies power, gas and water in Europe and the U.S., but plans to sharpen its focus on European gas and electricity markets.

Policy / Performance


China, Korea cos eye India power pie


April 18, 2006. Power companies from China, Hong Kong and South Korea have expressed their desire to participate in the competitive bidding for the seven mega projects with a capacity of 4,000 MW each in India. The Shanghai Electric, the China Power and Light Company, the Korean Electric Company and the Overseas Investment Company of China have agreed to take part in the bidding process for the proposed projects. These companies are bullish over the payment security mechanism (PSM) offered by the state-run Power Finance Corporation (PFC) for these projects.


Text Box: • The Shanghai Electric, the Korean Electric Company have agreed to take part in the bidding process 
• The PSM comprises letter of credit, escrow account 
• The companies have welcomed the power ministry’s move to do away with the concept of state govt guarantee and the counter guarantee by the GoI

The PSM comprises letter of credit, escrow account and in the wake of default in the payment, the developer will be allowed to sell power to high tension consumers directly through open access. These companies have welcomed the power ministry’s move to do away with the concept of state government guarantee and the counter guarantee by the Government of India. The Shanghai Electric Power Company is the largest power producer in Shanghai with the total installed capacity of 3409.2 MW in which the capacity in terms of percentage of equity is 2809.2 MW and wholly-owned capacity is 1609.2 MW. The annual generation in 2003 was 17.86 billion kW per hour. The China Light Power (CLP) has the total generation capacity of over 17,000 MW. The Korean Electric Power Corporation (Kepco) is an integrated electric utility and is engaged in transmission and distribution in Korea. The company and its generation subsidiaries owned 89.9 per cent of the total electricity generation capacity in Korea. Of the 342 billion kilowatt hours of electricity it generated or purchased during the year ended December 2004, 39.1 per cent was generated by nuclear and hydroelectric power generation subsidiary.


Pak may seek more N-power plants from China


April 17, 2006. The Pakistan would seek four to six more nuclear power plants, costing about $6.5 bn, from China in addition to the two, worth $1.2 bn, it agreed in principle to supply earlier this year. Together, these plants would help Pakistan meet its pressing need of 8,800 MW of electricity by 2030.


U.K lawmakers favour gas over nuclear power


April 17, 2006. Britain, Europe's biggest natural-gas consumer, should meet its electricity needs by relying on gas-fired plants and renewable energy sources in the next decade rather than nuclear power, the House of Commons Environmental Audit Committee, a group of lawmakers said. Nuclear power plants would take too long to build, would need subsidies and may cut carbon emissions less than expected, the group said. Under current plans, 18 of Britain's 23 nuclear reactors, some dating to the 1960s, will be shut by 2015. Even if demand does not increase, a quarter of British electricity generation capacity will have to be replaced over the next nine years, including gas- and coal-fired plants. Nuclear and coal power plants now supply about 60 per cent of Britain's electricity. The government, which has acknowledged it is likely to miss its own goal of cutting carbon dioxide emissions by 20 percent by 2010, is halfway through a six-month review of the country's future energy needs and how to meet them. The environmental committee raised other concerns about nuclear power, including the diminishing availability of uranium supplies needed to run the plants and the risk of terrorism.


Korea poised to emerge as nuclear energy powerhouse


April 14, 2006. Korea is fast becoming a new nuclear powerhouse, re-exporting nuclear technologies to advanced countries such as the United States and France. According to the ministry's review on its 10-year-long nuclear energy development project, the country has invested around 1.27 trillion won between 1997 and 2006. This investment helped put the nation on a par with nuclear powerhouses in terms of nuclear technologies. Nuclear power is back in the limelight amid soaring oil prices and increasing public concern about global warming. Korea is the sixth-largest nuclear power generator in the world in terms of both equipment and capacity. One notable achievement is that Korea Hydro & Nuclear Power Co. developed the first 1-million-kilowatt homegrown nuclear power plant, dubbed the Korea Standard Nuclear Power Plant, which was built in Ulchin, North Gyeongsang Province, in 1998. The company also developed the 1.4-million-kilowatt light-water Advanced Power Reactor 1400, for building the Kori Unit 3 and the Kori Unit 4 in South Gyeongsang Province, each scheduled to be completed by 2012 and 2013. Also, Korea Nuclear Fuel Co. developed the first Korean-made nuclear fuel, dubbed PLUS7, which helped realize the country's self-reliant equipment and nuclear power generating process.


BPU approves renewable energy regulations


April 12, 2006. The New Jersey's Board of Public Utilities directed that 20 per cent of the electricity used in the state by 2020 would have to come from renewable sources such as wind or solar power. The board is also of the view that in addition to making the state less dependent on foreign oil, the renewable sources would also reduce emissions from traditional energy sources, such as coal. It mentioned that natural gas prices could fall as more renewable energy is utilized and solar energy relieves price pressure on traditional sources during the hot months of peak demand. The new requirement is in addition to the current renewable standard, which requires that 4 percent of the state's electricity come from renewable sources by 2008. Energy suppliers can meet the standard by producing renewable energy, such as by building a wind farm, or by purchasing it from suppliers who use renewable sources. If an electric supplier does not meet the 20 percent requirement, it would make a payment to the state.


Renewable Energy Trends


India ranks fourth in wind energy in the world


April 15, 2006. The World Wind Energy Association is of the view that India continues to be the leader among Asian countries in the area of generating wind power. India now ranks fourth in the world in wind power, both in terms of overall capacity (4,430 MW) and additions (1,430 MW). Among Asian countries, China graduated from 10th position in 2004 (764 MW) to 8th in 2005 (1,260 MW), while in terms of installations, it has already reached the sixth position worldwide. The Chinese Government adopted a renewable energy law in early 2005 with the objective of strengthening its manufacturing industry so that it can produce an increased number of turbines to meet its future requirement. In Pakistan, the first major wind farm can be expected in 2006 with several hundreds MW of power to be installed in the coming years. The wind energy boom now covers more countries, with 59,982 MW installed capacity worldwide as on December 31, 2005. The association expects 120,000 MW to be installed worldwide by 2010. Today, wind energy delivers worldwide around 1 per cent of the global electricity generation, with some countries and regions reaching 20 per cent and more.


Jatropha cultivation set to boom in Barddhaman


April 13, 2006. Jatropha cultivation in Barddhaman district of Kolkata was set to boom, with the Emami group joining hands with Eastern Coalfields Limited to take up its cultivation over an area of 10,000 hectares of wasteland along the Ajay and Damodar rivers. The group was planning an extraction plant in Haldia using Australian technology. In an acre of wasteland, 1000 plants can be cultivated, with each plant producing 3 kilograms of seeds from the third year. Thus, in a year, an acre of jatropha plantation can yield 3000 tonnes of bio-diesel. However, an investment of roughly Rs 10,000 ($222) was needed as initial investment per acre. All the land to be used for jatropha plantation would be government vested land. The farmers of the area stood to gain from jatropha plantation as the land preparation needed is minimum. Water from the monsoon rains was also sufficient for the plants. The life of the plants was between 30 to 40 years. Currently the Indian Institute of Technology (IIT) was developing a cheap technology for oil extraction. The highest price for bio-diesel had been tentatively fixed at Rs 25 per litre, while diesel prices have risen to Rs 32 per litre. Since 66 per cent of power tillers and generators in the district were run on diesel, the bio-diesel had immense potential to capture the market. 


Bio-diesel plant in Rajasthan starts production


April 13, 2006. The first commercial bio-diesel refinery of Rajasthan, set up by Indian Krishi Fuel (IKF) in the Kaladavas area of the Udaipur district, has started production. The refinery was now producing 3,000 litres per day of bio diesel and targets 100,000 tonnes of bio-diesel soon. The refinery is producing bio diesel matching the standards fixed by Bureau of Indian Standards. As per its bio-diesel policy the state government had earlier planned to start the commercial of bio diesel by 2006. Consumption of 20 per cent blended bio diesel (80 per cent normal diesel and 20 per cent bio-diesel) is also expected to start in entire country by the year 2011-12. Consumption of bio diesel is expected to save Rs 20,000 crore ($4.44 bn) for the government and will also provide employment to about 175 million people.


Pacific Gas delivers Wind Energy to California


April 13, 2006.  Pacific Gas and Electric Company began delivering 75 MW of clean, renewable wind energy resources to electricity customers from PPM Energy's Shiloh I Wind Project, LLC. The Shiloh project, located in Solano County, is the first newly constructed renewable energy facility to begin delivering electricity to PG&E customers under California's Renewables Portfolio Standards (RPS) Program. PG&E has a long history of developing, generating, and purchasing renewable power. The utility currently supplies 30 per cent of its customer load from renewable resources: 18 per cent from its large hydroelectric facilities and 12 per cent from small hydro and other renewable resources that qualify under California's Renewables Portfolio Standards (RPS) Program. Including Diablo Canyon Power Plant, about 50 per cent of PG&E's retail load is served from generating resources that have no CO2 emissions that contribute to global warming.


To continue to increase its renewable energy portfolio, PG&E plans to issue its fourth competitive solicitation seeking renewable power. In this upcoming solicitation for additional renewable resources, the company is seeking to procure an additional 1-2 per cent of its customers' electricity needs through qualified renewable sources. Since PG&E began its RPS Program, it has entered into contracts for 563 MW of renewable energy -- wind, geothermal, biomass and hydro resources -- enough power to serve about 425,000 customers. California's RPS Program requires each investor-owned utility to increase its procurement of eligible renewable generating resources by 1 per cent of load per year to achieve a 20 per cent renewables goal.


UL Certifies Capstone MicroTurbines for Renewable Energy Generation

April 13, 2006. The world's leading manufacturer of microturbine energy systems, Capstone Turbine’s 30- and 65-kilowatt renewable energy systems are the first generators to be classified by Underwriters Laboratories to the UL2200 standards for Stationary Engine Generators, under the new category of Engine Generators Fueled by Biogas or Raw Natural Gas. This certification, President Bush's new initiative for grid-interconnected renewable resources. The new certification will encourage operators of landfills, oilfields and wastewater treatment plants to reduce their flaring of these gases into the atmosphere. Instead, those operators can now burn these 'waste' gases in renewable energy generating Capstone MicroTurbines, the first flare-gas-fueled generators that currently meet UL standards. The new UL generator category underscores the importance of ensuring public and environmental safety in the use of biogas and raw natural gas renewable fuels that have non-methane content.


BioEnergy to Acquire Val-E Ethanol


April 12, 2006. US BioEnergy Corporation has entered into a letter of intent with the minority owners of Val-E Ethanol, LLC to acquire the remaining ownership interest of the company. Val-E was formed to develop a 45 million gallon per year (mgy) ethanol plant located near Ord, Nebraska. Val-E Ethanol is currently under construction with an expected completion in year 2007. US BioEnergy currently has two ethanol plants under construction, US Bio Albert City, a 100 mgy plant in Iowa and US Bio Woodbury, a 45 mgy plant in Michigan. In addition, US Bio Janesville, a 100 mgy plant in Minnesota and US Bio Hankinson, a 100 mgy plant in North Dakota are under development. Additional acquisitions are pending or under consideration.


EPOD to build 5 MW solar panel factory


April 12, 2006. EPOD International Inc. is in intention to construct a five megawatt solar panel manufacturing facility in Kelowna, British Columbia. An estimated two megawatts of production capacity is anticipated to be available within six months, with the annual capacity of the plant projected to be five megawatts upon completion. The addition of solar panel manufacturing capacity will allow EPOD to further vertically integrate its solar power operations, and substantially increase the Company's solar panel output. This manufacturing capacity and increased solar panel output will also enable EPOD to maximize its solar power system sales and integration in the Province of Ontario, where the Ontario Power Authority and the Ontario Energy Board recently announced the creation of the Standard Offer Program, a renewable energy feed-in tariff initiative. The Standard Offer Program will pay EPOD and other solar power generators CAD$0.42 per kilowatt-hour (approximately $0.37), under what is anticipated to be a 20-year power purchase agreement. Given the Ontario government's increased support of solar energy through the Standard Offer Program, EPOD intends to aggressively pursue solar system sales in the Ontario market effective immediately.




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