MonitorsPublished on May 16, 2006
Energy News Monitor I Volume II, Issue 47
India’s Hydrocarbon Scenario: A Journey from Protected Past to Competitive Future –Part V

Dr. Samir Ranjan Pradhan®


hus a process of transition of the Indian oil-gas sector has started since mid-90s from its protective past into a competitive future. The oil-gas sector is also gearing up to suitably transform into a competitively responsive industry. The causes and contents of the forces driving the need of transformation are arising from the ground realities of the various sub-sectors of the oil-gas sector such as the upstream and downstream sectors. A detailed analysis of the sectors will reveal the basic realities/ fundamentals of oil-gas sector in India. The organization of the Indian energy sector is depicted in chart 1.

Upstream Sector

A. Resources and Reserves

Total hydrocarbon resources, inclusive of deep waters, are estimated at around 28 billion tonnes oil and oil-equivalent of gas (O+OEG). As on 01.04.2004, initial in-place oil of 7.89 billion tonnes and ultimate reserves of 2.94 billion tonnes have been established. The resources estimated by DGH for its ‘internal use’, for the country, are 32 billion tonnes (O+OEG). Table 1 shows basin wise hydrocarbon resources of India.

B. Seismic Surveys

During the year 2003-04, 2-D seismic data acquisition comprised 6,797.81 LKM onland and 27,509.35 LKM offshore data. In respect of 3-D seismic data, 1,988.20 Sq. Km onland and 27,615.09 Sq.Km offshore data were acquired. A total of 27 2D seismic parties and 21 3D seismic parties were deployed in onland areas. 16 seismic vessels were engaged to carryout 2D and 3D seismic surveys in offshore areas.

C. Drilling

Of the total of 404 wells drilled, 179 were exploratory and 225 development wells. As in the previous year, the national oil companies contributed to the bulk of the drilling with a total of 933,240 meters drilled, of which, 458,150 meters exploratory and 475,090 meters development.


D. Production

Total oil production during the year was over 33.37 MMT and that of gas 31.64 BCM. The contribution of Pvt / Joint Venture companies was about 17% of the total Oil & OEG production.

E. Privatization Efforts by Pvt / JV companies in E&P Sector

Directorate General of Hydrocarbons (DGH) has decided to publish every quarter, performance of E&P Companies operating in India under New Exploration Licensing Policy (NELP) and Pre-NELP regime. In recent times several news regarding new discoveries as well as hydrocarbon reserves by some E&P companies have been published in National Dailies, which were premature declarations and were speculative in nature. Details regarding performance of various E&P companies are being given in table 2.

Recent Significant Discoveries

National Oil Companies

In the last 4 years, the NOCs viz. ONGC and OIL, made 25 significant hydrocarbon discoveries of which 10 are in offshore and 15 onland. Out of 10 offshore discoveries, 6 were made in Kutch & Mumbai Basins, Western Offshore and 4 in K-G Basin, Eastern offshore. All these Offshore discoveries were made by ONGC. The Western Offshore discoveries were GK-39-1 (Gas) in Kutch offshore; WO-24-1 (Gas), B-14-2 (Gas), Vasai West (Oil & Gas), Vasai East (Oil) and NMT-2 (Gas) in Mumbai offshore. The Vasai East and Vasai West discoveries are considered to be the major discoveries in Western Offshore. The Eastern Offshore discoveries were KD-1-1 (Gas), GS-KW-1 (Oil & Gas), GS-49-2 (Gas) in K-G shallow waters and G-4-2 (Gas) in K-G deep waters. The significance of GS-KW-1 and GS-49-2 discoveries are that these have highlighted the prospectivity of land-sea transition zones.

Out of the 15 Onland discoveries, 5 discoveries were made by OIL in Upper Assam Shelf and 10 discoveries were made by ONGC in Rajasthan, Cambay, Cauvery, K-G and in Assam Arakan Basins. The discoveries made by OIL were Chandmari-1 (Oil & Gas), Matimekhana-2 (Oil), Baghjan-1 (Oil & Gas), Chabua-6 (Oil) and North Chandmari-1 (Oil & Gas). The discoveries made by ONGC were Chinnewala Tibba-1 (Gas) in Rajasthan Basin, Katpur-1 (Gas) in Cambay; PBS-1-1 (Gas) in Cauvery; SU-1 (Oil), GM-1 (Oil), AK-1 (Gas) and Endumuru-9 (Gas) in K-G; Sonamura (Gas) in Assam-Arakan Fold Belt and Banamali (Oil & Gas), Liapling Gaon-1 (Oil), in Upper Assam Shelf.



Chart I: Organization of Indian Energy Sector


















Table 1: Basin-Wise Hydrocarbon Resources (Mmt)






Mumbai (Mum)




Assam-Arakan Fold Belt (Aafb)




Cambay (Cby)




Upper Assam (UA)




Krishna-Godavari (K-G)




Cauvery (Cy)




Rajasthan (Raj)




Kutch (Kut)




Andaman-Nicobar (AN)




Kerala-Konkan (K-K)




Saurashtra Offshore (Sau)




Ganga Valley (GV)




Bengal (Ben)




Himalayan Foreland (HF)




Mahanadi (MN)





* HC resources in Deep water off East Coast likely to increase further by about 4,000 MMT as per interpretation results of reconnaissance surveys carried out by DGH.   Source: DGH                                                                                (to be continued)


Bio-Energy from Margins to Mainstream


iorenergy is believed to hold the key for sustainable long term investment following a low-C path. Biomass resources being dispersed and generally in the hands of predominantly small and medium land holdings farmers, it requires ingenious approaches to aggregating them into viable and economic energy producing systems.  Many efforts have been taken up in the past to convert marginal lands into energy (wood) plantations and more recently efforts are underway to make them biofuel plantations.  In much a similar manner, efforts are underway even in India to convert some of these lands to ‘methane farms’ that generate the highest level of energy per unit area.  As most often such soft and woody biomass residues are linked to agriculture and livelihoods in rural areas it has been the fear of development economists that complete conversion of agricultural lands into energy plantations is neither feasible nor sustainable in the long run. 

Today woody biomass has acquired cash value even at the farm level and is often consigned to dispersed biomass power plants in rural India.  Soft biomass is more difficult to transport but is available in much larger quantities compared to hard woody biomass residues.  Bioenergy plans for the future need to target the use of these without clashing with fodder uses.  Their commercialization should therefore revolve around decentralized extraction of their energy carrier (without loss of land productivity) for collection, storage, conversion to other products in a dispersed manner.  This avoids being tethered by constraints that envelope conversion to electricity which in today’s trend is both uneconomic and unviable.  It is important to note that it is possible to emulate the milk revolution and carry out the much needed methane revolution in India. 

Recommendations being suggest include addressing the larger energy issue and not shackled by constraints of electricity as the carrier.  There is a need to gather a large number of required technologies in one-basket and franchise parts of these depending upon local requirements and feasibility.  There is a need to move out of the current mode of artisanal training to a more sustainable micro-enterprise approach using bundled technology and market elements.

(Views are personal)

(Dr H N Chanakya - Principal Research Scientist, IIS, Bangalore)



Integrated Energy Policy (part V)

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

37. Non-conventional energy sources in the form of distributed generation sources are best suited for providing electrification of new villages and hamlets.  The economical and technical issues to deal with in the case of electrification of the new villages and hamlets are very many, and compare poorly with that of distributed generation sources.  The high distribution losses in our system are largely due to low concentration of loads in rural areas, and long length of LT lines.  Spending a lot of money to connect very lightly loaded villages to the grid is techno-economically not viable.  At a time when the country should b seriously working to reduce the AT&C losses, the rural electrification programme, which is very laudable, should not add to the existing level of losses. Even if the rural electrification programme through distributed generation sources may appear to be costlier than through the grid connection, due to the reasons discussed above careful decision have to be made. The distributed generation means no recurring costs of losses and energy supplied from some far off sources.   The success of rural electrification programme would largely depend on this consideration.

A (vii) Other issues

38.  The earlier we stop comparing the per capita electricity consumption of our country with that of OECD countries like USA and Japan, it may better for us to focus on issues specific to our society.  Due to much colder climate those countries require more energy for house heating alone. In contrast the home heating in India is rare, and may be largely restricted to Himalayan region. The energy consumption in the so called developed countries is high also because of non-essential or luxurious usage like night time sports, heating swimming pools, winter sports etc. Will not such comparision distract us from the real issue, which is supplying adequate energy for everyone for basic needs like lighting, water heating, cooking, agriculture, industry etc?  Can any one provide an assurance that even by increasing our Per capita electricity consumption from the present level of about 500 kWH per annum to 1,000 kWH, whether every one in the remote areas will have access to affordable electricity; whereas I can clearly see the devastating effects of huge additional power capacity on the environment and the future generations?  Perhaps a new way of defining Per capita energy consumption may be required. The real Per capita energy consumption should take into account only the households, schools, street lights and other essential and lighter loads. etc.  Such a definition may give a real picture of our development, and desist us from moving towards ill conceived projects.

39.  At a time when other primary sectors of our economy like poverty alleviation, health and education are starving of funds shall we continue to pour thousands of crores of precious resources in adding new generating capacity through conventional technology only to end up with productive and economic usage of about 20%, without first exploring cheaper alternatives? Shall we not consider the techno-economically viable alternatives first, which are generally associated with smaller gestation period, much lower costs, minimum or nil environmental impacts, and the absence of public opposition?  If not, our future generations are likely to term such expenditures as criminal public waste, and a breach of public trust.

40.  Energy auditing is another essential tool to bring about the energy efficiency. It should be effectively implemented in all premises of connected load more than 10 kW.

Action plan

1. The requirement to develop an integrated energy policy is a golden opportunity for the Planning Commission to set right the wrong priorities practiced so far during the post independent years. The recommendations should include specific action plans with stiff targets and clear accountabilities.  For example, it could say that the national average of electricity transmission loss should come down below 3 % by 2010, and that board of directors of each transmission authority is directly responsible as in the case of the financial disclosure; OR that the AT&C loss should not exceed 10 % by 2015 without which a financial penalty of some sort will be imposed; Or that the efficiency of the coal fired stations should not be below 42% from a cut off date of 1.1.2015, without which the licence will be withdrawn etc.

2. ‘Polluter pays principle’ is novel idea practiced with desired effects in many parts of the world, and it is best applied at the stage of mining and generating itself.  A suitably designed pollution cess or tax should be applied to each tonne of coal/gas, litres of diesel, mega litres of water or kWHR of energy produced/consumed/generated.

3. Suitable incentive also should be admissible for exceeding the targets of reduction in pollution, and efficiency in generation.

4. As one of the first steps towards the efficiency and security in energy sector the statistics regarding the world best practices in all work processes, including project management, in each sector of the energy along with the corresponding benefits, should be given wide publicity to persuade organizations/individuals to start thinking about the same.

5. Making compulsory the study in schools on the subjects of energy, environment and their importance to our long time survival should be a very important step in this regard.

6. With the help of thorough study and consultation with the industry experts the efficiency measures, target levels, time frame, and accountability should be set for each sector of energy industry.

7. It will be highly advisable that the Planning Commission initiates the necessary actions to commission expert but independent study on each of the large dam based projects which are already commissioned to assess the actual costs and benefits of each of them, whether they have delivered the desired benefits, and the socio-economic-environmental impact on the local community; publish each of these reports, and compile the results of all such projects to come to a conclusion whether large dam based projects are in the interest of the society, so that concerns in this regard are satisfactorily addressed.  Such studies will help to reassure the govt. and the public regarding the necessity or otherwise of large dam based projects.  Such pro-active action will reduce the chances of public opposition to approved projects, and corresponding project completion delays.

8. Initiate action plan to mandate effective public consultation at the stage of application registration stage itself on all large projects.  All the concerned stake holders should participate in such consultation, and arrive at the correct decision regarding the benefits of the project and agreed process of comprehensive rehabilitation.  All the concerned stake holders like locals and credible NGO groups, should be involved from the initial stages of project conceptualization. Such pro-active action will reduce the chances of public opposition to approved projects, and corresponding project completion delays.

9.  All feasible options available to increase the capacity or to improve the efficiency of each of the existing generating stations should be explored and implemented.  CEA should be asked to look at each of the stations state by state, consult the original equipment manufacturers or such experts to determine the opportunity available.  In such situations the actual cost of such improvement process, however high, will turn out to be better than building new power station.  But the contractor should provide specific guarantee and the results should be measurable.  PFC could be asked to finance the costs, and NHPC/NTPC should manage the project

10. Concerted efforts along with specific action plan should be initiated immediately to gradually improve the efficiency level in usage to the international level by year 2012.

11. All feasible options available to flatten the demand curve in each state should be deployed, and the difference between max. demand and the average demand should be reduced to say 10% by 2012 in each state.

12. A detailed study should be undertaken to look at each of the alternatives for non-conventional energy sources in each state, action plans drawn up, stiff targets be set, adequate resources be made available to implement the same, all the technical help needed should be provided, and diligent monitoring of the same should be employed; the target should be 25% of the state’s installed capacity by 2012.  A suitable central agency like IREDA should be entrusted with the responsibility of project management.

13. The direct and indirect benefits to the society of these alternatives be clearly identified, evaluated and quantified for each of the states to enable suitable decision making both at the centre and the state.  Such a report should be given wide publicity, including Planning Commission’s own website. Only through such detailed study reports will our political masters realize the need for paradigm shift.

14. Undertake comparative studies in detail of the electricity industry performance in our country with those in developed countries, publish the Key Performance Indicators (like SAIDI, SAIFI, CAIDI, personnel per MW handled, efficiency, project implementation time, etc) in those countries, and set realistic but stiff annual targets for our own industry to be achieved gradually till we attain the same level of efficiency.

15. Identify the world best practices in each segment of the industry, and stipulate the same for adoption in our country by 2010.

16. Develop (if necessary, borrow the ideas already developed in advanced countries) and implement the concept of peer review of all the projects and work processes in each of the state owned electricity undertakings.

17. Initiate the process to make an effective public consultation a mandatory part of project application registration process to avoid delays in execution of the approved project due to public opposition.

18. Make energy metering compulsory for each consumer by 2008; there shall be no supply to new connections without accurate metering.

19. AT&C losses should be brought out to less than 10% by 2012.  APDRP funds should be dedicated to this task, and should be increased correspondingly.

20. Central generating agencies should be asked to invest 30% of their annual budget in reducing the AT&C losses in each state till it reaches the international best practice level.

21. The Central generating agencies should be asked to invest 30% of their annual budget in modernizing the transmission and distribution system in each state.

22. A national fund should invest adequately to reduce the agricultural pump set losses from the present level of about 50 % to 10 % by 2016.

23. The efficiency of each of the electrical appliances in the Indian market should be studied, and a benchmark should be set to be achieved by 2012.

24. Maximum Distribution Transformer losses and failure rate should be specified after consultation with the experts, industry and implemented w.e.f  2007.

25. The PLF of all the thermal generating units should be brought above 75% by 2012. Other wise they should stop functioning after that date. Erring units should be taken over by NTPC.

26. Adequate investment should be invested in R&D activities to optimize the demand side management.  TOD metering should become compulsory for all loads above, say 10 kW.  There should be an incentive to bring the lower capacity consumers into this regime.

27. The tariff regime suitable for TOD metering should be implemented w.e.f 1.4.2007.

28. There should be concerted efforts to reduce the reactive power flow in the network.  Distribution supply companies should be charged appropriately to discourage MVAR drawal from the grid.

29. Massive investment in R&D should be made associated with making non-conventional energy sources to become very attractive distributed generation sources for individual uses.  Govt. subsidy upto 10% of the cost of installation of these at customer’s premises should be announced till 2010.  ESCOMS could offer a discount of upto 25% of the actual energy bill, if solar water heaters are used.

30. Time bound action plan to bring the legislation for two or three time zones of the country should be initiated.

31. ESCOMS should have a target to persuade 50% of domestic consumers, and 75% of AEH consumers to install solar panels, by 2012.

32. The subsidized electricity by a state govt. to any category of consumers should be by advance payment of one year’s subsidy amount. To be fully implemented by 1.4.2007.

33. Suitable tariff should be in place by 1.4.2007 to discourage wastage of electricity, or for non-productive use like decorative and sports purpose.

34. 50% of all govt. schools, and 75% of all street lights should be powered by non-conventional energy sources by 2010.

35. Energy auditing should be implemented in all premises of connected load more than 10 kW.

To be concluded





Shell eyes stake in OIL, ONGC blocks

May 16, 2006. Shell India, the subsidiary of Royal Dutch Shell, is eyeing a stake in OIL and Natural Gas Corporation’s onshore oil and gas blocks at the west coast of India. Both the companies are in talks for a tie-up in exploration and production. Earlier, ONGC had signed a MoU with Shell Exploration Company for wide ranging co-operation in hydrocarbons value chain. Shell was looking for a product sharing agreement with ONGC. ONGC and Shell are looking for a collaboration in overseas exploration and production ventures also. The companies are also considering joint development of coal bed methane gas, export of petroleum products from the ONGC subsidiary— Mangalore Refinery and Petrochemicals (MRPL), and manufacture of high grade bitumen. The Dutch company is keen to participate in MRPL’s 15 million tonne new refinery and petrochemicals projects. ONGC Videsh had bought 15 per cent stake in a Brazilian offshore oil field for about $170 mn ($7.7 bn) from Shell. The Brazilian acquisition would leave Shell with 50 per cent stake in the oil field and Brazil’s state-run oil firm Petrobras with 35 per cent stake. 

Mercator plans to enter into E&P segment

May 16, 2006. Shipping company Mercator Lines is chalking out plans to foray into the upstream oil segment, including exploration and production. The company is eyeing drilling, seismic surveys, floating production storage and offloading (FPSO) and floating storage offloading (FSO). The company is finalising project details and the investment decisions are expected shortly. The company would enter into exploration and production in various phases. The company has earmarked Rs 3,000 crore ($663 mn) as the initial investment in the first phase including acquiring offshore jack up rig and other shipping assets. Out of the total capex, the company will invest Rs 675 crore ($149 mn) to acquire tankers and dry bulk vessels. 

Assam Co picks 50 pc stake in Aussie firm

May 15, 2006. The Assam Company Ltd has acquired a 50 per cent stake in the Adelaide-based oil & gas exploration Austin Exploration Ltd. Assam Co is engaged in tea business and has recently ventured into oil and gas exploration in Assam. Through Austin Exploration the company would start exploration in Australia and the US. Austin Exploration holds exploration licence for four blocks, two each in the US and Australia.

‘Indian cos to play big role in acquiring global oil assets’: PFC

May 14, 2006. PFC Energy, a leading strategic advisory firm in global energy, expects the NELP-VI to be a major draw for the global exploration and production companies. The consultancy firm is also hopeful of India-based upstream oil and gas companies, led by ONGC and Reliance Industries Ltd, to increasingly play a prominent role in the acquisition of global E&P assets. The PFC Energy is of the view that the oil price boom has resulted in global oil and gas companies enjoying their highest cash reverses in the last 15 years and thus these companies are in a position to pay top dollars for E&P assets. According to the firm, irrespective of some problems, India is considered to be on the way of opening up its oil and gas sector. Recent developments like passing of the Petroleum and Natural Gas Regulatory Board Bill, 2005 and the move towards creation of required policy framework for sustainable long-term growth of this sector, have attributed positive ratings to the investment outlook of the country. The consultancy firm with client list including major energy companies, financial institutions and governments also rates the countries worldwide on a scale of 27 parameters.

OVL wants to bid $4 bn for TNK-BP stake

May 14, 2006. ONGC Videsh Limited, which recently submitted a bid to buy TNK-BP’s interests in its subsidiary OAO Udmurtneft in Russia, has now sought the government’s approval to hike its offer to $4 bn  (Rs 180 bn) and beyond. OAO Udmurtneft has 26 fields under licence and the average daily production was 115,000 barrels in 2005. OVL had earlier submitted a joint bid with Russian oil company Itera Oil and Gas for $3.01 bn (Rs 135 bn). In contrast, the highest bid price submitted for the same property was understood to be around $3.5 bn (Rs 157 bn). The empowered committee said OVL may submit the revised bit with the approval of its board. Final offer would be, however, subject to the government’s approval. OVL has proposed to fund the acquisition through equity to the extent of 25 per cent and the rest through non-recourse finance.

RIL lines up $7 bn for KG basin operations

May 13, 2006. Reliance Industries will be investing up to $6-7 bn (Rs 269-314 bn) for its KG basin operations and evacuation network, which include 1,400 km east-west trunk line proposed to be laid from Kakinada to Ahmedabad, in the next 2-3 years. According to RIL the KG basin can become the energy hub of India, and the investment-friendly environment alone would hold the key for the development of the basin. RIL is of the view that 40 mmscmd of gas to be produced in the KG Basin fields by the company in the initial period would be easily absorbed as there was a demand-supply gap of 40-50 mmscmd in the country. In KG D6 block, the Reliance Industries has so far drilled 15 wells, of which gas has been discovered in 14. This accounts for just 20 per cent of the total exploratory area of the block. 

OVL begins drilling in Iran

May 12, 2006. ONGC Videsh Ltd has begun drilling for oil in Farshi offshore block of Iran. Well bb-4 was spud by rig Kedarnath. The rig was provided by ONGC from its fleet of offshore rigs to enable OVL to fulfill its work commitment in the Farsi block, as OVL was unable to get rig in the international market due to right market conditions. Farsi block is first OVL operated project in the Persian Gulf. The offshore exploration block is situated in the Iranian part of Persian Gulf. OVL plans to drill a total of four wells, of which three are expected to be oil bearing with relatively shallow target depths of about 2,300 metres and simple well profile, while the fourth well is likely to be with high pressure and would target deeper target of about 3,400 metres. OVL holds 40 per cent interest in Farsi block. Indian Oil Corp (IOC) has 40 per cent and the remaining 20 per cent is with Oil India Ltd. The block was awarded to the consortium in 2002.

Premier Oil may bid in NELP

May 12, 2006. British exploration company Premier Oil plans to bid in the sixth round of the National Exploration Licensing Policy. It is in talks with various companies, including Oil and Natural Gas Corporation, Bharat Petroleum Corporation Ltd, Oil India Ltd and Hindustan Oil Exploration Company, for participation in the round. Premier Oil, which already has a block along with Indian Oil in Calcher in Assam, was mainly interested in the Mumbai High basin, Cambay Basin, Cauvery basin and Mizoram. The company would soon start drilling a well in the Assam block and had contracted the oil rigs.

Over 6.2 tcf gas found by oil corps

May 11, 2006. Oil and Natural Gas Corporation, Reliance Industries and Great Eastern Energy Corp (GEECL) have found over 6.2 trillion cubic feet of gas reserves below the coal seams, more than half of which was discovered by Reliance. Reliance has established 1.69 tcf of CBM reserves in Sohagpur (East) block in Madhya Pradesh and 1.96 tcf in Sohagpur (West). ONGC has found 1.2 tcf reserves below coal seams in Bokaro while GEECL has struck 1.385 tcf reserves in Raniganj (South) in West Bengal.

OVL, Angolan firm may tie up for exploration

May 11, 2006. India has proposed a joint venture between ONGC Videsh Ltd and Angola National Oil Company, Sonangol, for exploration ventures in Angola. Angola would offer opportunities in the country in return for investment in infrastructure. India has already invested close to $40 mn (Rs 1.79 bn). The Indian Railways subsidiary Rites is involved in rehabilitation of Angola’s railway network. OVL’s chances of winning a deep-sea block in Angola seem bleak. While the highest bid for the block has been about $1.1 bn (Rs 49 bn), OVL has bid just $310 mn ($13.9 bn). The company recently lost one of the blocks to ENI of Italy. 

ONGC, Halliburton to enhance oil production

May 10, 2006. Oil and Natural Gas Corp has signed an agreement with US energy major Halliburton to jointly raise oil and gas production within the country, initially in Assam. Under the new agreement, the two companies have identified raising production from ONGC fields as a key area of focus. To begin with, the effort would be to improve recovery and production optimisation of three ONGC fields in Assam - Lakwa, Lakhmani and Geleki. More fields may be added for improved recovery in the future. Halliburton will also work with ONGC's Institute of Drilling Technologies to provide technical knowhow on advance drilling and other related technologies.

ONGC’s CBM project to MEC consortium

May 10, 2006. ONGC has awarded a Rs 950-crore ($212 mn) integrated contract for exploration and development of coal bed methane in six blocks in Jharkhand and West Bengal to a consortium of Mineral Exploration Corporation Ltd, Shivani Oil and Gas Exploration Services Ltd, and Express Drilling Services. The project is slated to begin in three months. The project targets a peak production of 0.75 million cubic metre CBM a day. Half of the production capacity is scheduled to be commissioned in the central Parbatpur area of Jharia block as early as June 2007. A nomination block, Jharia, is held jointly by ONGC (74 per cent) and Coal India Ltd (26 per cent). The other blocks included in the latest contract are nomination block Raniganj (ONGC 90 per cent, CIL 10 per cent) in West Bengal; CBM Policy-I blocks Bokaro (ONGC 80 per cent, IOC 20 per cent) and North Karanpura (ONGC 80 per cent, IOC 20 per cent), and CBM Policy-II blocks South Karanpura (ONGC 100 per cent) and North Karanpura-West (ONGC 100 per cent) in Jharkhand. Apart from Jharia, ONGC has identified proven reserves in Bokaro block. Three other CBM blocks controlled by the company at Barmer-Sanchor in Gujarat, Satpura in Madhya Pradesh, and Wardha in Maharashtra, are excluded from the scope of the latest project.


Global Union eyes domestic energy sector

May 15, 2006. The Istanbul-based Global Union Ventures, an investment advisory firm specialising in energy sector, is all set to enter India. The firm recently concluded a $5 bn (Rs 227 bn) deal between Indonesia and Iran for building a greenfield refinery. The only venture capitalist firm specialising in downstream and midstream sectors, is looking at opportunities in arranging finance for projects such as Bhatinda refinery of Hindustan Petroleum Corporation and Bina refinery of Bharat Petroleum Ltd. The firm is of the view that opportunities were immense in India, with four oil majors, including Indian Oil and Oil and Natural Gas Corporation, coming up with greenfield refineries. In addition, India is also funds for proposed LNG terminals that have not taken off.

RIL to hike petrol price by Rs 2 per litre

May 12, 2006. Reliance Industries will increase the price of petrol by Rs 2 a litre. The new price comes into effect at over 1,200 retail outlets of RIL across the country. While adding the local tax of different states, the price increase would be Rs 2.52- 2.92 per litre. The company has spared diesel from the increase. RIL sells about 2.5 times more fuel per outlet than its public sector competitors. Along with the price hike, the company has upgraded the quality of motor spirit also with a few additives. It will give better mileage and performance to the vehicle. RIL is coming out with premium quality petrol for the first time. 

Recently, the public sector oil marketing majors— Indian Oil Corporation, Bharath Petroleum Corporation and Hindustan Petroleum Corporation— in the country had requested to the central government to increase the price of fuels. Rangarajan committee had also recommended the government to reduce the subsidy to save oil companies from loss. But the government has not taken any decision. Retail losses of RIL was less in the past because it had only a minimal retail presence. Now, the company has approvals for setting up 5,849 outlets outlets.

IOC, BPCL, HPCL to lose $1.67 bn

May 11, 2006. Even as the Centre is mulling over a petroleum product price hike or an alternative mechanism to provide relief to the oil marketing companies from the brunt of high crude prices, the three oil PSUs put together will be recording under-recoveries to the tune of Rs 7,500 crore ($1.67 bn) in the first 45 days of this fiscal. Leading the pack is the country's largest refiner, IOC, with roughly Rs 4,000 crore ($892 mn) of under-recovery on account of sale of auto-fuel, kerosene and LPG. BPCL and HPCL are currently losing at the rate of over Rs 500 crore ($112 mn) a fortnight. Together the two companies would post under-recoveries of close to Rs 3,500 crore ($781 mn) till May 15.

RIL may pick stake in Saudi project

May 11, 2006. Reliance Industries may pick up a stake in the $9.8-bn (Rs 439 bn) Saudi Aramco petrochemical project, the largest integrated refining and petrochemical complex in the Red Sea town of Rabigh, in Saudi Arabia. ExxonMobil and Dow Chemicals are also believed to be in the race for a stake in the project which will be completed by the end of 2008. The overall cost of the petrochemical project has risen to $9.8 bn (Rs 439 bn) from the originally estimated $8.5 bn (Rs 381 bn). The shareholders of the company are investing $4 bn (Rs 179 bn), while the rest will come from loans, mainly from the Japan Bank of International Cooperation, a public investment fund, Islamic banks and local financial intermediaries. The complex is expected to produce 2.4 mt of petrochemical solids and liquids per year and big quantities of gasoline and other refined products.

Saudi Aramco owns and operates a topping refinery at Rabigh with a crude distillation capacity of 400,000 barrels per day (bpd). It also has two joint venture partners in Saudi-based refinery operations. The 320,000 bpd Sasref refinery at Jubail is operated with Royal Dutch Shell, while ExxonMobil is the partner in the Samref refining complex at Yanbu. RIL has exploration rights to one of the large deepwater blocks in the Sultanate of Oman. In addition, it has a 25 per cent stake in an exploration block in Yemen, which has struck oil. 

Oil PSUs eye big bang tech upgrade

May 10, 2006. In an ambitious move to enhance their profit margins, public sector oil refiners are looking at spending about Rs 14,000 crore ($3.12 bn) over the next two years on new technology and infrastructure that will enable them to use cheaper crude to get quality refined products. Currently, public sector refiners such as IOC, HPCL and BPCL do not have the right technology configuration to use the cheaper, sour crude, as done by Reliance Petroleum. By doing so, IOC can increase its profit margin to over $10 per barrel. Currently, the margins enjoyed by PSU refiners are about $6 a barrel whereas Reliance is enjoying a margin of $10 a barrel. The petroleum ministry will shortly approach the Cabinet with a proposal to spend Rs 14,000 crore ($3.12 bn) on technology upgradation and creation of storage facilities for sour crude, which is relatively cheaper. The PSUs have enough reserves for such additional capex, even though their current profits may be down because of massive under recoveries. Essentially, refinery margins depend on three factors — the ability to process a wide spectrum of crude, whether or not it is capable to produce a variety of products depending on the changing needs of the market, and finally, the quality of the products produced. Public sector refining companies such as HPCL and BPCL are operating refineries that are more than 30 years old. As a result, these refineries lack the flexibility to process various types of crude as well as the ability to produce a variety of products, say industry sources. There are different grades of crude oil and margins depend on the ability to process the cheapest crude available. The `sour’ crude (high sulphur content), though difficult to process is cheaply available and once used to produce refined products fetches the same price for refiners as do products that are produced using the more expensive `sweet’ crude. 

Oil Cos to expand gasohol supply across TN

May 10, 2006. Oil companies are set to expand marketing of ethanol-doped petrol, gasohol, across Tamil Nadu and are exploring opportunities for sourcing ethanol in the state for supply to Kerala. The proposed expansion is in line with the Petroleum Ministry's decision setting them a July deadline to expand gasohol supplies. The move is a significant development for the sugar mills in Tamil Nadu, which produce ethanol at their distilleries. For now, five sugar mills with distilleries are supplying 18.5 million litres of anhydrous ethanol to the three oil companies. For the oil companies to supply gasohol to the entire State, an additional 40 million litres ethanol would be needed. According to some estimates with sugarcane production of about 20 million tonnes, over 0.9 million tonnes of molasses would be generated which translates to 210 million litres ethanol. With gasohol supplies stabilising in the existing markets in Maharashtra, Uttar Pradesh, Punjab and Haryana, they are looking at expanding to the East.

Transportation / Distribution / Trade

Myanmar to sell gas to India

May 14, 2006. The Myanmar has announced that a part of gas produced in the country would be sold to India. The bilateral trade between the two countries, which stood at $557 mn (Rs 25 bn) in 2005, would reach $1 bn (Rs 45 bn) by the end of 2006.

AP to invite private investments in gas grid

May 12, 2006. The Andhra Pradesh Government is in the process of finalising plans to woo private sector to harness the potential of the huge gas find in the Krishna-Godavari basin. The State was faced with a piquant situation, where it has to pay a fixed cost of about Rs 1,000 crore ($223 mn) to independent power producers (IPPs), even though they are not generating at full capacity due to inadequate gas supplies from GAIL. The Gujarat State petroleum Corporation has struck gas in the KG basin and the reserves are estimated at 20 trillion cubic feet (TCF) worth about $50 bn (Rs 2.24 trillion). The State is in the process of finalising plans to partner with GSFC and other stakeholders for a pipeline to evacuate and supply gas. The infrastructure for the gas grid could be created through private participation.

L&T in talks with Shell, Chevron

May 11, 2006. The engineering and construction major Larsen & Toubro is in talks with international oil majors Shell and Chevron for supplying petroleum dispensing pumps on a global basis. The electrical & electronics division of L&T now supplies petrol dispensing pumps to PSU petroleum retailers in the country, including HPCL, BPCL and IOC. Global oil majors like Shell and Chevron at present get their supplies of these pumps from integrated retail fuel majors like Gilbarco Veeder-Root of the US, part of the Washington-based Danaher Group. L&T designs and manufactures its pumps indigenously at its site in Powai, Mumbai. The company is eyeing the growing hydrocarbon business in the Middle East, especially Saudi Arabia, where it has entered into a joint venture (JV) with the Kanoo group to manufacture and market high-end electrical systems.

IOC plans to import 40.9 mt crude oil

May 11, 2006. Indian Oil Corp plans to import 40.9 mt of crude oil in 2006-07 for its refineries and for its subsidiaries. The present refining capacity of IOC is 41.35 mtpa, which would go up to 47.35 mtpa after commissioning of 6 mtpa at Panipat refinery expansion project during Q1 of 2006-07. IOC propose to process 10.642 mt indigenous crude and 31.708 mt imported crude during the year 2006-07 in its refineries. Export of petroleum products has increased — from Rs 16,781 crore ($3.74 bn) in 2003-04 to Rs 46,785 crore ($10.43 bn) in 2005-06.

Oil import bill up 52 pc to $44.64 bn

May 11, 2006. The government’s oil import bill has risen 52 per cent to $44.64 bn (Rs 2 trillion) in 2005-06 due to high global oil prices. The country imported 99.4 mt of crude oil for $38.77 bn (Rs 1.72 trillion) and 11.67 mt of petroleum products for $5.86 bn (Rs 256 bn) in 2005-06. In 2004-05, India spent $25.98 bn (Rs 1.17 trillion) on import of 95.86 mt of crude oil and $3.28 bn (Rs 149 bn) on import of 10.47 mt of petroleum products. The country exported 21.50 mt of petroleum products for $10.54 bn (Rs 468 bn) in 2005-06 as against oil product exports of 17.57 mt worth $6.33 bn (Rs 285 bn) a year ago. India’s net oil import bill (total imports minus exports) stood at $34.09 bn (Rs 1.5 trillion) in 2005-06 as opposed to a net oil import bill of $22.94 bn (Rs 1.03 trillion) in the previous fiscal. While imports rose, domestic consumption remained almost flat at 111.92 mt.

BPCL buys 2.2 mn barrels for June

May 10, 2006. Bharat Petroleum Corp has bought 2.2 million barrels of crude for June and July. BPCL bought 600,000 barrels of Yemeni Marib Light, 500,000 barrels of Dubai and 500,000 barrels of Malaysian Miri crude, all for June loading. The refiner also bought 600,000 barrels of Qatar's al Shaheen crude for July loading.

India Inc pays international rates for gas

May 10, 2006. Indian gas consumers have begun paying international prices for the commodity. Shell Hazira has been able to sell most of the liquefied natural gas from a spot cargo at a price ranging between $9 to $10 per million metric British thermal units, a price comparable to the price of gas at the ‘Henry hub’, the US benchmark gas price. Gail (India) bought a spot cargo of 135,000 standard cubic meter (scm) from Algeria that it hopes to sell at similar realisations. This cargo will arrive at Dahej by the end of this month, Gail is in the process of finalising another such cargo in June. Among the buyers for the Shell gas was the Essar group, which purchased about 20 per cent of the cargo at $9.07/mmbtu. The gas will be used in the group’s steel and power production plants. However, gas industry analysts say the spot prices are not a true reflection of the trend because long-term contracts are being signed at a lower price. Oil and gas producer ONGC recently signed a term contract with the Torrent group at $4.7/mmbtu. The agreement was for gas from the Panna, Mukta and Tapti fields. Natural gas is still being sold at (subsidised) administered price of $1.6/mmbtu to power and fertiliser consumers.

MRPL to export Mauritius’ full petroleum requirement

May 10, 2006. Mangalore Refinery and Petrochemicals Limited, a subsidiary of the Oil and Natural Gas Corporation, will supply the entire petroleum requirement of Mauritius — approximately one million metric tonne of gasoline, diesel, jet fuel, and furnace oil — for a period of one year. State Trading Corporation of Mauritius has finalised import petroleum products from India for the first time. The supply will commence starting from August 2006.

Policy / Performance

Strategic reserve plan stalled

May 16, 2006. The Indian strategic oil reserve, a project conceived in 1998, and formally announced in 2003, is facing hurdles on account of non-availability of land. The Government has identified two port cities to build three tanks to store emergency crude oil stocks of five million tonnes per annum (mtpa). The selected sites are at Mangalore for 1.5 mtpa, Visakhapatnam for one mtpa, and another location near Mangalore for 2.5 mtpa. The Mangalore site was considered most suitable and a couple of years ago, the process for acquiring 87 acres was begun. However, the plan is stuck as this piece of land forms part of the 550 acres under acquisition for the ONGC-Mangalore Refinery and Petrochemicals Ltd (MRPL) expansion plan. Faced with this piquant situation, the petroleum ministry is now examining the possibility of locating the facility within the proposed special economic zone being planned by ONGC-MRPL at Mangalore. Engineers India Ltd is now working on submitting a detailed report on whether this strategy is feasible. The Karnataka government is keen on both the reserves coming up in the state and may table an alternative location for the Indian Strategic Petroleum Reserves Ltd (ISPRL) to consider. 

‘Make use of technology’: MoPNG

May 12, 2006. To beat competition and curb adulteration, the Petroleum Ministry has asked the state-owned oil marketing companies (OMCs)- Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp- to make use of technology for automation of retail stations, similar to the private sector oil companies. This would not Text Box: •	Install GPS equipment for monitoring movement of tank trucks by March next year. 
•	Finish marking of potential adulterants - kerosene, naphtha and solvents, both indigenously produced and imported, by July this year.
•	Get third-party certification for all retail outlets selling more than 100 kl of products a month. 

only help in strengthening their institutional mechanism, but also check adulteration. The OMCs were advised by the Ministry to complete the automation of their retail outlets (ROs) selling more than 200 kl per month by March 2007. Adulteration of petrol and diesel on transport fuel has been a serious cause of concern. The Petroleum Ministry has been maintaining that the possibility of adulteration of these two products cannot be ruled out due to huge price difference between petrol/diesel and various adulterants available in the market and the easy miscibility of these products. MoPNG is of the view that while the companies have expanded their RO network, adequate attention has not been paid to improving the institutional and technological mechanisms. This, according to the Ministry, has resulted in not only reduction in their average throughput per RO but also complaints of malpractices. The Ministry has also asked them to install global positioning system (GPS) equipment for monitoring the movement of tank trucks by March next year. The Ministry also told the OMCs to finish the marking of potential adulterants - kerosene, naphtha and solvents, both indigenously produced and imported, by July this year. Besides, the OMCs have been asked to have third-party certification of all the retail outlets selling more than 100 kl per month of the products.

Govt may change gas blk bidding policy

May 11, 2006. The government is working towards doing away with the annual bidding event for oil and gas exploration blocks and replace it with a round the year bidding process. This would mean an end for National Exploration Licensing Policy, which was started by the government of India in 1998. Directorate General of Hydrocarbon is in the process of creating the data repository of all the prospective blocks which will be up for bidding at any time of the year. The data collection process for any oil and gas block involves demarcation of basin area and basin type, procuring 2-D, 3-D seismic database, conducting geological and gravity magnetic surveys.

Govt completes transfer of ISPRL to OIDB

May 11, 2006. The process of transfer of equity shares of IOC in Indian Strategic Petroleum Reserves Ltd (ISPRL), a special purpose vehicle, to the Oil Industry Development Board (OIDB) was recently completed. A roadmap has been laid for fixing targets for the projects, including setting a timeframe for completing the survey and acquiring land for building the storages. The Government has identified two port cities to build three tanks to store emergency crude oil stocks of 5 million tonnes per annum (mtpa). While the actual cost of filling up the strategic crude oil storage would be based on the then prevailing international prices of crude, estimates are that setting up a five-mtpa reserve will cost around Rs 11,267 crore (Rs 2.51 bn) over nine years (including the cost of imported crude). The operational cost will be around Rs 90 crore (Rs 20 mn) annually. ISPRL's board members will include seven nominees of the OIDB, among others. The company's letter of association provides for 12 directors. An inter-Ministerial committee, headed by the Secretary in the Petroleum Ministry, will monitor the release or sale of strategic crude oil reserves.

Petrol prices may be hiked

May 11, 2006. The Petroleum Ministry made out a strong case for increasing the fuel prices by upto Rs 10.43 a litre in petrol and Rs 114.45 per cylinder of cooking gas to save oil companies from a massive financial loss. The oil ministry said prices of petrol need to raised by Rs 9.33 per litre, diesel by Rs 10.43 per litre, kerosene by Rs 17.16 per litre and LPG by Rs 114.45 per cylinder if prices are to be brought in parity with imported costs. The Oil ministry said without the price hike, oil companies would suffer a revenue loss of Rs 73,512 crore ($16.39 bn) in 2006-07 fiscal.

As against a crude price of $51 per barrel taken at the time of last price hike, the Indian basket of crude was currently ruling at $70.92 per barrel. Instead, the Left parties asked the Government to cut import duty on crude and products, levy specific excise duties instead of present system of a mix of advalorem and specific rates and increase Budgetary subsidy support. They also asked Finance Ministry to part with the Rs 60,000 crore ($13.38 bn) collected from levy of a cess on domestically produced crude oil. They also sought change in the present pricing mechanism by replacing the imported cost of products with that of crude in arriving at the retail price.



MP set to add 2,000 MW power by `07

May 16, 2006. The state is all set to add 2,000 MW of power by 2007 and has plans to add another 8,000 MW in the next four years. Indrasagar and Omkareshwar power projects have already been commissioned with capacities of 1,000 MW and 400 MW respectively, while two other projects – Maheshwar and Baansagar – that will collectively generate around 900 MW are expected to be commissioned by June next year. Of 2,000 MW, 900 MW will be hydel and the rest 1,100 MW will be thermal. The reliability factor in case of thermal plant is 80 per cent, and in case of hydel it is 40 per cent. At present, the state requires 5,900 MW of power but is getting only 4,600 MW. Reliance was also planning to set up a power plant in the state. 

Haryana to set up power plant

May 16, 2006. Haryana Power Generation Corporation Ltd will set up a 1,000 MW coal based plant at Matanhail near Jhajjar for increasing the state’s power supply. The state will invite competitive bids for setting up the plant for which land, water and rail linkage would be facilitated. Haryana is making serious efforts to augment its power position. With the commissioning of Tala hydro project, the available capacity for transfer of surplus power of Eastern Region to Northern Region will increase substantially, enabling Haryana to get extra power.

Tata Power plans $4 bn investment

May 11, 2006. Tata Power Company plans to set up a 300 MW green field power project in South Africa and ramp up generation capacity within India by 4,500 MW in the next few years, at a total estimated investment of over Rs 19,200 crore ($4.28 bn). The investment in the South African project would be about Rs 1,200 crore ($268 mn). The plant proposed to be set up as a joint venture with an international partner and the company would shortly submit its bid to South African authorities. In India TPC was planning a 1,000 MW power plant at an investment of Rs 4,000 crore ($892 mn) in the northern region to meet the requirements of Delhi and neighbouring states. Besides, the company was setting up two plants of 1,000 MW each in Maharashtra, a 500 MW near Trombay in the same state and another plant in Jamshedpur and also a captive power plant for Tata Steel in the east. If the South Africa plan materialises, this would be the group's second overseas power venture after Bangladesh.

MIDC plans captive power in Maharashtra

May 11, 2006. The Maharashtra Industrial Development Corporation is planning to set up 4 captive power plants in the State and is likely to initiate pre-qualification process. All the 4 plants, referred to as Group Captive Power Plants (GCPP), would be gas-based and having 100 MW capacity each. The gas would be sourced from the up coming gas grid in the State. The plants would be set up in the MIDC industrial estates at Ranjangaon and Hinjewadi in Pune district and Ambernath and Tarapur in Thane district. They would primarily cater to the industrial consumers. At present, Maharashtra faced a 4500 MW load shedding per day. The four projects would be for a minimum period of 20 years from the date of commissioning and solely for the benefit of user industries, who choose to participate in this project and off-take power from this project as a captive source. In April 2006, MIDC had signed its first Memorandum of Understanding (MoU) with the Reliance Energy Ltd for setting up two GCPP in the State. The project developer will have to create a special purpose vehicle or a project company together with the local industries association for implementing the project. The developer would be responsible for acquiring permits and clearances for the project, which would include clearances from the Maharashtra Electricity Regulatory Commission and central authorities. The developer will have to ensure that the project reaches financial closure and the construction activity commences with six months of signing of the MoU.

NHPC to tap S. Asia power potential

May 11, 2006. The National Hydroelectric Corporation plans to make a big splash in the country’s neighbourhood through projects in Myanmar, Bhutan and Nepal. It wants to set up projects with a combined capacity of around 3,400 MW that may need an investment of around Rs 17,000 crore ($3.79 bn). It may set up these projects on a stand-alone basis or through a joint venture with the governments of these countries. If it does enter into a joint venture agreement it plans to have a minimum 51 per cent stake. The company is interested in the 1,200 MW Tamanti project in Myanmar, the 672-MW Mangnichu project and stage-I and stage-II of the 1,000-MW Phunasachu project in Bhutan. NHPC is also eyeing the 480-MW Upper Karnali project in Nepal.  The company is looking for overseas opportunities, as it believes this will help it become a 10,000-MW company by 2012 and benefit neighbouring countries in the process.

BHEL to upgrade UP power plant

May 11, 2006. The UP government has decided to rope in BHEL for refurbishing five old and worn-out thermal power units of the Obra thermal power station. The capacity of each unit is 200 MW. The cost of the refurbishing is Rs 1,000 crore ($223 mn) and an electrostatic precipitator at Rs 117 crore ($26 mn) is to be installed in each unit for containing air pollution. Power Finance Corporation has extended a loan for the project, which would meet 70 per cent of the cost while the rest will be contributed by the state government. The project is scheduled to be completed in 30 months. The proposed refurnishing would increase the plant load factor (PLF), and reduce coal consumption at these thermal units by 30 per cent. In another major decision, the state government decided to make NGOs franchisees, cooperative societies and panchayati raj institutions in the rural areas for the recovery of the power bills. These franchisees would distribute the power bills in rural areas.

NPCIL seeks clearance for Russian plants

May 10, 2006. The Nuclear Power Corporation of India Limited is going ahead with work required for environmental clearance for two more Russian nuclear power plants at Kudankulam in Tamil Nadu. Following the Indian government’s site clearance for units 3 and 4 of the 1,000-MW Russian VVER-1000 plants at Kudankulam and two plants of 1000-MW each at Jaitapur in Maharashtra a few months back, NPCIL had started preparation for obtaining clearances from Pollution Control Boards of Tamil Nadu and Maharashtra. NPCIL is also working on the pre-environment clearance requirements for four indigenous pressurised heavy water reactors of 700-MW each — two units at Kakrapar in Gujarat and two in Rajasthan. 

DVC lines up power projects for Jharkhand

May 10, 2006. Damodar Valley Corporation (DVC) was keen to install a 1,000MW coal-based power project at Maithon in Jharkhand with Tata Power. DVC's Chandrapura Thermal Power Plant would start generation of additional 500 MW of power shortly. DVC would also set up two more power plants at Ramgarh and Koderma in Jharkhand having 1,000 MW capacity each. Tata Power and DVC had formed a joint venture called the Maithon Power Company, with the former holding a stake of 74 per cent and the latter 26 per cent of the equity. The cost of the proposed power project was estimated to be over Rs 4,000 crore ($892 mn).

Ghatghar Hydroelectric Project by ’07

May 10, 2006. The country's first Roller Compacted Concrete dam, the Ghatghar Hydroelectric Project, which began in 2001, has taken five years for completion against 10 years it would have taken using the traditional concrete. An investment of Rs 1,200 crore ($268 mn) has been utilised for the project. While Rs 400 crore ($89 mn) has come in from Japanese Bank of India Co-operation (formerly known as the Overseas Economic Co-operation of Japan), another Rs 400 crore from the Power Finance Corporation, and the remaining from the Government of Maharashtra. The Ghatghar project would have the installed generation cpacity of 250-MW. About 450 million units of power would be generated from the project every year, which would be transferred to the grid. The commercial operations would begin in January 2007.

Transmission / Distribution / Trade

PFC shell firm for transmission projects

May 15, 2006. After making Power Finance Corporation the nodal agency for ultra mega power plants, the government has now mandated the state-run lending agency to form a shell company for transmission projects. The proposed shell company would be on the lines of the five shell companies formed by PFC for the coal-fired power generation projects that were 4,000 MW each. Earlier this year the PFC had formed five special purpose vehicles for the bidding process and get necessary statutory clearances for the ultra mega projects, which would later be given to developers.

While in the case of ultra mega projects PFC has set up project-specific companies, for transmission there would be only one shell company for all transmission projects identified for development through competitive bidding route. The projects the proposed company would take up may or may not relate to the transmission network of ultra mega power projects. The power ministry and Power Grid Corporation of India, the central transmission utility, have already started preliminary work on the transmission requirement for evacuating electricity from the ultra mega projects. 

National grid plan may get derailed

May 14, 2006. States of the northern region that have been rampantly overdrawing power from the regional grid could be playing spoilsport in the Government's national grid project. According to the Government's latest grid frequency profile data, the northern grid's average frequency fell below the stipulated limits into the crisis zone — a whopping 27 per cent of the total time between April and January 2005-06. In comparison, the other four regional power transmission grids — Western, Southern, Eastern and North East — have flouted the prescribed grid frequency limits less than four per cent of the total time during the period. Any deviation in the grid frequency position beyond prescribed levels magnifies the chances of a grid collapse. With five distinct grid systems in the country at present, flouting of grid frequency norms by States threatens only a particular region. But as the Government progressively enhances inter-regional grid linkages to form the national grid, lack of discipline among the northern grid constituents could plunge the entire country into a blackout. Rampant violations of the grid frequency limits by northern States also raise question marks on the effectiveness of the existing norms in subverting grid indiscipline. The northern grid has witnessed rampant overdrawal by States such as Uttar Pradesh, Rajasthan and Haryana.

The grid frequency is a real-time measure of how well the member States are adhering to their respective allocations for drawing power from generating stations within the region. The grid frequency should be between 49.0 hertz and 50.5 hertz at all times, but if some of the constituents draw electricity beyond their quota, grid frequency could dip below 49 hertz and lead to a collapse. Also, if constituents are drawing power below their allocations, grid frequency could shoot up beyond the upper limit of 50.5 hertz and threaten grid stability. However, since it is inevitable that some States draw more than their schedule in real-time operations, the Central Electricity Regulatory Commission has put in place a tariff regime under which penalties are levied in the form of unscheduled interchange charges. However, with nearly all constituents of the northern region overdrawing at the same time during the last few months, leading to grid frequency dipping regularly below the lower limit of 49 hertz, it seems the unscheduled interchange mechanism is not proving to be much of a deterrent.

Goa seeks 7.5 MW from Maharashtra

May 11, 2006. The Goa government has sought 7.5 MW of power from Maharashtra's proposed Tillari hydro-electric project for the benefit of farmers in north Goa. The Maharashtra government plans to set up a hydro-power generating unit at Tillari with the capacity to generate 10 MW electricity. Goa has asked for 7.5 MW power as 75 per cent financial contribution for the Tillari project has been from the Goa government. The Tillari irrigation Project on the Goa-Maharashtra border will benefit both the states especially farmers in north Goa.

NDPL brings down losses to 28 pc

May 10, 2006. The North Delhi Power Limited has managed to over-achieve its aggregate tariff and commercial losses for the second year in a row. The losses for the year 2005-06 in the NDPL area has been brought down to 28 per cent against the target of 35.35 per cent set by the Delhi Electricity Regulatory Commission. As per the privatization agreement the company was to reduce its losses by 17 per cent in five years time, which it has achieved in less than four years. The company has reduced its losses to 28 per cent in 2005-06 from 53 per cent at the time of takeover in July 2002. Revenues of the company had grown at a compounded growth rate of 19 per cent to Rs 1,842 crore ($411 mn) in 2005-06. The Delhi government had also saved Rs 1,500 crore ($334 mn) due to reduced transmission and distribution losses. NDPL, in which Tata power has 51 per cent stake, also planned to set up generation capacity within Delhi or in the northern region to meet the requirements of the national capital.

Policy / Performance

Pvt power cos spared from bidding

Text Box: • The developers who have approached the regulatory commission for approval of power purchase agreement of their projects or those whose PPA have been cleared by the regulator before Jan 6, 2006
• Any project which has gone to financial institutions for appraisal before January 6 and the developer is able to achieve financial closure and approach the regulator for PPA approval before September 30 this year  

 May 15, 2006. The power ministry has clarified that those power developers who have approached the regulatory commission concerned for approval of power purchase agreement (PPA) of their projects or those whose PPA have been cleared by the regulator before Jan 6, 2006, would not have to go through the tariff based competitive bidding process. Moreover, any project which has gone to financial institutions for appraisal before January 6 and the developer is able to achieve financial closure and approach the regulator concerned for PPA approval before September 30, 2006, the firm would be exempted. The ministry had notified the national tariff policy on January 6 this year, according to which all distribution companies and state electricity boards would have to buy power for future requirements through tariff-based bidding. However, this condition had put about 10-12 projects that were being set up on MoU basis, in jeopardy as these were in various stages of development but were yet to start power generation. The regulator had also suggested exempting projects that have been given “in principle” clearance by the regulator and where financial closure has been achieved.

WB to spruce up coal power plants in India

May 15, 2006. The World Bank may take up coal-based power generation plants totalling around 1,000 MW for retrofitting from amongst the plants identified by the Central Electricity Authority. Retrofitting is a process that helps a power generation plant improve its fuel and energy efficiency. The Bank has firmed up plans to support a pilot programme and look for a global environment facility (GEF) grant of between $30 mn to $60 mn (Rs 1.36-2.72 bn). It also plans to supplement the grant with a loan of $150 mn (Rs 6.8 bn) from the International Bank for Reconstruction and Development at around 4 per cent blended rate of interest. The Central Electricity Authority has identified around 30,000 MW of coal-based power generation plants to be retrofitted. The pilot programme will be a demonstration programme and can be scaled across plants in India. GEF helps member countries to conserve and use their biological diversity, reduce greenhouse gas emissions, manage shared water bodies and reduce the emission of ozone-depleting substances. The Bank is in the process of forming investment plans of $1.3 bn (Rs 58 bn) for five hydel power generation projects to be taken up by three public sector units. It will also provide a $400-mn (Rs 18.16 bn) loan to the Power Grid Corporation of India Ltd for the Power System Development Project III (PSDP-III) scheduled to be completed by July 31, 2011. Another of the World Bank’s investments is the $80 mn (Rs 3.6 bn) it plans to put in power distribution in Uttaranchal. It is in talks with state governments of West Bengal, Rajasthan and Maharashtra for providing assistance in transmission and distribution services.

‘No more guarantees to pvt power generators’: MoP

May 14, 2006. The Power Ministry has said that the Centre will not give any counter-guarantee for upcoming ultra mega power projects or other ventures in the power generation sector. However, the Centre would provide all necessary assistance to developers. It has also asked the developers to develop these projects with public partnership. It indicated that the Centre would take further decisions to make the developers investment hassle-free wherein they would not have to consume much time in seeking various clearances.

Govt may allow regulators to fix open access surcharge

May 11, 2006. Government is likely to amend the National Tariff Policy to allow state power regulators to fix the open access surcharge, a move that will enable high-end consumers to select their electricity suppliers. The policy, announced by the power ministry in January, fixed a uniform formula for all state regulators to calculate cross-subsidy surcharge for open access in distribution. Surcharge has to be paid by consumers to compensate for the revenue loss to their existing electricity suppliers for moving away to another discom. However, regulators had said a single uniform formula was difficult to apply in different states and wanted flexibility in fixing the surcharge.

CCEA approves 3 coal projects

May 10, 2006. The Cabinet Committee on Economic Affairs approved three coal projects involving a total capital outlay of over Rs 2400 crore ($535 mn). The CCEA sanctioned the Amlohri (Madhya Pradesh) open cast expansion project of Northern Coalfields Ltd in Madhya Pradesh from 4 mt per year to 10 mt at an investment of Rs 1352 crore ($301 mn). It also cleared NCL's Krishnashila (Uttar Pradesh) open cast project of 4 mt per year at an investment of Rs 790 crore ($176 mn). The CCEA also approved revised cost estimate of Madhuband Washery project of Bharat Coking Coal Ltd for a capital investment of Rs 271 crore ($60 mn). The Amlohri and Krishnashila projects have also been given the flexibility at the implementation stage within the cost to respond to improvements in technology and equipments. The Madhuband project is located in Jharia coalfields and would produce 1.13 mt clean coal every year.

REL pact with Bajaj for CFL bulbs

May 10, 2006. Reliance Energy has entered into exclusive tieup with Bajaj Electricals to distribute compact flourosent light bulbs to its 2.5 million customers in Mumbai and adjoining areas, which will reduce consumption of power in REL distribution area by at least 0.25 million units per month. There is a demand and supply gap of around 250 MW every day. Maharashtra Electricity Regulatory Commission has asked Mumbai consumers to reduce their, consumption by 20 per cent and even ordererd to stop power supply to illuminated hoardings and bus stops etc. in the evening. Taking cue from these development REL has decided to distribute three CFL lamps to their every customer, which save nearly 75 per cent energy compared to traditional lamps but almost 10 times costly of the traditional lamp. However in terms of durability also, CFL bulbs scores over, traditional lamps as they last 6 to 8 time more than traditional lamp and make economical sense to use them. REL is providing its customer with three coupons which can be exchanged for Bajaj CFL bulbs. The price of the CFL bulb under this scheme is Rs 82. In reality, a customer will have to pay even less as every month Rs 7 will be added to a customer's electricity bill for every bulb and if nine instalments are paid on time, last three instalments will be waived. In effect, a customer would pay only Rs 63.

Simlarly MSEDCL has chalked out a plan to distribute 30 million CFL bulbs across the state to save energy which is facing grappling power shortage to the tune of 4,500 MW to 4,800 MW. The success of a pilot scheme at Nashik has emboldened the company to go for this. MSEDCL had distributed close to 0.4 million bulbs at Nashik. Now, it plans to save about 900 MW during the morning and evening peak hours by large scale use of the energy-efficient CFL bulbs. Under an MSEDCL scheme, all energy customers who are regular in payment of bills will be provided with CFL bulbs at Rs 100, at a massive discount to their market price of Rs 140-150. What's more, they would not have to pay upfront for this as the money will be recovered from the customers through 10 instalments.





Petrobras signed oil exploration with Peru

May 16, 2006. Brazilian state oil giant Petrobras signed an oil exploration contract with the Peruvian government and said it does not fear Peru will follow its neighbor Bolivia, which recently nationalized its energy sector. The contract allows Petrobras to explore for petroleum and natural gas in the Loreto block in Peru's northern jungle near the border with Ecuador and Colombia, with an investment of at least $35 million. On May 1, Bolivian President announced the nationalization of his country's energy sector, where Petrobras is the biggest foreign investor with natural gas fields, pipelines and two refineries. The nationalization puts Bolivia's government in control of Petrobras' operations there, widens the state share of profit from natural gas and will increase the prices that Brazilian clients pay for Bolivia's natural gas. Petrobras produces oil in Peru on the northern Pacific coast and is exploring in three other fields in the north and south of the country.

LUKOIL to boost output at Marathon's Russian fields

May 16, 2006. Russian oil firm LUKOIL unveiled plans for a big oil production rise and cost savings of over $100 million at Siberian fields that it has agreed to buy from U.S. oil firm Marathon. It would gradually raise oil output 2.5 times from today's 26,000 barrels per day at nine oilfields, which it agreed this week to buy from Marathon for $787 million. Marathon bought the Siberian assets three years ago for $275 million and has managed to almost double production. That prompted some analysts, including Russian brokerage Aton, to suggest that the fields have already reached peak production. The fields are all located in West Siberia and LUKOIL’s total recoverable reserves are 257 million tonnes in ABC1+C2 Russian categories, or around 1.88 billion barrels. The figure is much bigger than Marathon's own estimates. It has said that under international standards the assets have around 250 million barrels in proved and probable reserves.

Oil discovery by Big Sky Energy in Kazakh

May 15, 2006. Big Sky Energy Corporation has discovered an oil pool located across a ceiling fault immediately north of its producing pool in the Morskoe Field, on the north-eastern shore of the Caspian Sea in Western Kazakhstan. Based on seismic and petrophysical analysis, the Company believes that the Morskoe B pool is a faulted anticline which was penetrated by Well Morskoe No. 1. This well was drilled by the Soviets in 1965 to a total depth of 2,150m. The Company re-entered this well to confirm oil pay it identified on well logs but was not able to perforate all perspective intervals due to the deterioration of well-bore integrity. Based on the above, the Company believes that the Morskoe B pool is similar in a real extent that of its Morskoe A pool, and plans to drill approximately 3 to 5 wells to define and exploit this reservoir. The Company intends to investigate additional sands not only in the Cretaceous Formation, but also in the Jurassic, and Triassic Formations it identified on Morskoe No. 1 well logs, and to drill these wells to an average depth of 1,800m.

BG signs Alaska exploration deal with Anadarko

May 15, 2006. British oil and gas producer BG Group Plc signed an exploration deal with Anadarko Petroleum Corp. to buy a 40 per cent stake in land along Alaska's Eastern North Slope. The acreage is located on the coastal plain near the oil-rich Prudhoe Bay field.

Petrobras may invest more in gas reserves

May 15, 2006. State-run oil company Petroleo Brasileiro SA may increase investment in Brazil's natural gas reserves depending on talks with Bolivia over that country's nationalization of its hydrocarbons sector. Petrobras currently plans to invest some US$16 billion (euro12.5 billion) to develop about 70 million cubic meters of natural gas reserves in Brazil between 2006 and 2010. That investment would likely increase if Brazil and Bolivia failed to reach an acceptable deal. Brazil has substantial natural gas reserves in its offshore fields but has so far done little to exploit them, relying instead on natural gas piped in from Bolivia.

Rosneft proven reserves are 18.9 bn bbl

May 15, 2006. Rosneft proven reserves as of December 31, 2005, were 18.9 bn barrels of oil equivalent, including 14.9 bn barrels of crude and 691 bcm of natural gas. It is estimated the state oil company's likely and possible reserves at 10.9 bn and 9.8 bn barrels of oil equivalent, respectively. This includes 8.3 billion barrels of oil and 15.7 tcf of natural gas. It is also estimated the company's reserves given contingency on the success of geological exploration in a number of upcoming projects, including the Sakhalin shelf, the western Kamchatka shelf, the Vankor oil-and-gas fields, and fields in Krasnoyarsk Territory in central Siberia.  Factoring in the probability of successful geological exploration, forecast resources were put at 7.7 bn barrels of oil equivalent, including 7.2 bn barrels of crude and 2.8 tcf of natural gas. Rosneft hoped forecast resources would be eventually upgraded to proven, likely and probable reserves as a result of successful exploration and development of these projects.

Tullow to start gas production from Bangora

May 13, 2006. Tullow Oil Plc announced that natural gas production from the Bangora-1 well in Block 9, the company's first production in Bangladesh, commenced on May 9. It has reached a gross stabilised flow rate of 50 mmscfd (million standard cubic feet per day). The gas being delivered into the Ashuganj-Bakhrabad pipeline will supply much needed gas into the local market. Production data from the Bangora well will be combined with new 3D seismic data, acquired in February this year, and the results from the appraisal wells.

Gazprom to boost explored gas reserves 6 tcm by ‘30

May 13, 2006. Russian energy giant Gazprom is planning to expand proven gas reserves in Russia's eastern regions by 6 trillion cubic meters. Krasnoyarsk Territory alone proven gas reserves could grow by 2.9 tcm. Gazprom was planning next year to quadruple funding for geologic exploration in Krasnoyarsk Territory, to about $140 million as compared with $33 million in 2005. Gazprom holds three licenses in Krasnoyarsk Territory, two for geologic exploration and one for natural gas production. Gazprom was planning to drill six exploration holes in the Beryambinsk sector, 12 in Omorinsk and 11 in Sobinsk sectors.  This will enable Gazprom to begin large-scale gas production in Krasnoyarsk Territory.

Rosneft to invest $1bn in Siberia's Vankor deposit in ‘06

May 12, 2006. Rosneft plans to invest $1 billion to develop the Vankor oil and gas field in Siberia this year, and launch production in fall 2008. The Oil from the Vankor deposits will be pumped to the East Siberia-Pacific Ocean pipeline, an ambitious multibillion-dollar project to send Russian hydrocarbons to energy-hungry Asia-Pacific region countries that will come online in 2008. Under the current plans the deposit, in Krasnoyarsk Territory, is expected to yield around 19 million metric tons annually (382,000 bbl/d), but that the 13 licensed sites surrounding the deposit could bring total production up to 50 million tons (1 mln bbl/d). The state-owned oil company has been working at the field for more than two years, investing 2 billion rubles ($74 million) in 2004 and roughly 6 billion rubles ($222 million) in 2005.  The company's next project will be the East-Sugdinsk deposit in the Katangsk district of the Irkutsk Region, for which Rosneft acquired the subsoil license in mid-December 2005 for 7.47 bln rubles ($276 mln). East Siberia and the Far East are currently Russia's most promising regions for hydrocarbon production.

Titan inks oil & gas deal for new field in South Texas

May 11, 2006. Titan Oil and Gas Inc. signed a letter of intent with M.S. Klotzman Exploration Co. that calls for developing at least two re-entry, re-working wells in South Texas. The two companies have agreed to keep specific details of the deal confidential for 60 days. The companies are not releasing the locations of these wells. The company had been eying prospects at this oil and gas field for some time and will release new details as developments occur. San Antonio-based Titan is an energy company engaged in oil-and-gas development, drilling and production. Titan focuses on redeveloping oil and gas fields with a history of production.

Sinopec, Sonangol in $2.4bn oil bid

May 11, 2006. China's state-run Sinopec, in a joint venture with Angola's Sonangol, made an initial bid of $2.4 billion (R15 billion) for a greater stake in Angola's offshore oil fields. The joint venture hopes to capture a maximum 50 per cent stake in both blocks. Angola is sub-Saharan Africa's second-largest crude producer after Nigeria, pumping 1.4 mn bpd and is on course to ratchet up production to 2 mn bpd by the end of 2007. On Tuesday it was announced that Sinopec-Sonangol had been beaten by Italian energy company ENI for the operating stake in offshore Block 15. ENI was awarded a 35 percent operating stake in a relinquished part of Block 15 for a combined investment of more than $1.2 billion. The offer trumped that of Sonangol-Sinopec, whose proposal of $982 million garnered a modest 20 percent stake. The huge signature bonuses being offered will boost government coffers already bolstered by record oil prices. Oil accounts for 80 percent of fiscal receipts and is fuelling a nationwide reconstruction boom after a 27-year civil war ended in 2002.

Endeavour makes Cygnus gas discovery

May 10, 2006. Endeavour International Corporation announced that the Cygnus 44/12-2 well located in the Southern Gas Basin in the United Kingdom of the North Sea has successfully tested as a gas discovery with significant potential upside.The well was drilled to 11,870 feet measured depth and encountered a number of gas bearing zones in the Rotliegendes and Carboniferous intervals. It is expected that most of the key pre-development studies needed to facilitate a commerciality decision will be completed by the end of this year. It is anticipated that production could be initiated by the middle of 2008. The accumulation is located within close proximity to several potential transportation routes.


Indonesia gets OPEC help with refineries

May 11, 2006. Indonesia's state-run oil and gas company plans to build two refineries and upgrade several others with support from members of the world oil cartel.      Saudi Arabia will help PT Pertamina by supplying crude to a refinery to be built in East Java. Production would be for domestic consumption, though some may be exported. Kuwait will assist Pertamina build in an as-yet undisclosed location, while the United Arab Emirates agreed to help Pertamina boost capacity of existing refineries in Cilacap, Cirebon, and East Kalimantan. Indonesia used to be a member of the Organization of Petroleum Exporting Countries until its crude oil output fell to the point where it became an importer of the commodity.

Iraq tenders to build three oil refineries

May 11, 2006. Iraq intends to build three new oil refineries at a cost of some $6 billion as it seeks to combat petrol shortages and a thriving black market. A tender for plants in Nasiriya, Kurdistan and central Iraq had gone out. The capacity of each will be between 250,000 to 300,000 barrels a day and the cost for each will be between $1 billion to $2 billion. Iraq has the world's third largest known reserves of oil but decades of war, sanctions, under-investment and now widespread violence and sabotage have left it critically short of fuel. It has to import nearly half of its gasoline. Iraq's eight refineries are now operating at only between 50 to 75 per cent of capacity, forcing the country to import most of its refined products. The three largest refineries are Baiji, Basra and Doura plants.

Kenya: Iran keen on new oil refinery in Mombasa

May 11, 2006. Iran is willing to engage the Kenya Government in plans to construct a new petroleum refinery. The Iranians were also willing to engage the Government on capacity building in as far as energy matters were concerned. The Iranians invited their Kenyans counterparts to visit their country to have first hand experience on how they deal with energy matters. The committee agreed to visit Iran in August this year.

Iran, Indonesia signed $5 bn oil refinery deal

May 11, 2006. Indonesia and Iran signed a deal to develop an oil refinery in Java worth up to $5 billion to be fed largely by Iranian crude and targeting China and other Asian markets.  The proposed 300,000-barrel-per-day refinery would be located in Java and start production in 2010 with the intent that 70 per cent of its output would go to China or other Asian markets. Under the deal, a minimum of 100,000 b/d of crude would be provided by Iran for the project for 20 years.

Transportation / Distribution / Trade

Chile to begin LNG plant construction by ‘06

May 16, 2006. Chile will begin construction on a regasification plant for liquid natural gas (LNG) at the end of this year to help alleviate its current deficit, and the plant should start producing by late 2008. Chile has been operating with only half of the natural gas it requires due to cuts in shipments from Argentina, its sole supplier of the fuel. The plant is part of a big push that Chile is making to diversify its supplies of energy as power demand grows by about 7 percent a year. The plant will require an investment of some $400 million dollars and is part of a complex that includes a loading dock and storage tanks. UK gas and oil firm BG Group, which won the bidding to build the plant, natural gas would be shipped in from the western African countries of Nigeria or Guinea, where it also has operations.

Emera to build C$350 mn LNG pipeline

May 16, 2006. Canadian energy firm Emera Inc. will invest around C$350 million to build a pipeline linking the planned Canaport liquified natural gas import terminal near Saint John, New Brunswick to markets in Canada and the U.S. Northeast. The 145-kilometre long Brunswick Pipeline will travel through southwest New Brunswick and connect with the U.S. portion of the Maritimes & Northeast Pipeline at the U.S.-Canada border near Baileyville, Maine. The pipeline will have a capacity of about 850 million cubic feet per day of re-gasified LNG. The Canaport LNG terminal is a partnership between Spanish oil giant Repsol YPF and privately-held Canadian Irving Oil Ltd. Construction of the pipeline is expected to begin in 2007 and it should be completed by late 2008.

Abu Dhabi to be world's largest LNG exporter

May 16, 2006. Abu Dhabi will become one of the largest, if not the largest, LNG exporters in the world. The total production from the onshore facilities will be doubled, and that Adnoc is seriously evaluating the development of sour gas reserves in Abu Dhabi. The studies are in progress to select the optimum development schemes to leverage applicable technology as well as operating procedures and practices in order to minimise cost and improve overall quality. Oil and service companies are allocating significant budgets to develop new technologies and techniques to solve technical issues. The technology and techniques must be shared and deployed where applicable and hence the importance of conferences and exhibitions as these represent platforms to leverage developed technology and techniques. The two-day conference is discussing the outlook for new proposed pipeline projects and developments in the GCC, as well as technology reviews to assess pipeline defects and the challenge of repairing ageing pipelines.

Bolivia: No gas pipeline with Brazil's Petrobras

May 13, 2006. A refusal by Bolivian government to build a 20 billion dollar gas pipeline with Petrobras has drawn rebukes from Brazil. Bolivia wants to build the pipeline exclusively with other state-owned energy companies to serve South America. If Petrobras does not participate in the Southern Gas Pipeline, there will be no pipeline. Bolivia's gas exports now go to Brazil and Argentina. Bolivia recently seized foreign gas and oil installations, while telling foreign companies that Bolivian would not nationalize their investments and gave them 180 days to negotiate new contracts with YPFB, Bolivia's state-owned energy company.

Gazprom to extend gas supplies with Romania

May 12, 2006. Gazexport, the export arm of Russian energy giant Gazprom and Conef SA, a Romanian gas supplier, have signed a preliminary agreement on a long-term contract for supplies of natural gas to Romania. Russia has been exporting natural gas to Romania since 1979. In 2005, Gazexport supplied 4.5 billion cubic meters of gas to the country.

Policy / Performance

Ecuador no plans to nationalize oil

May 16, 2006. Ecuador ruled out nationalizing the state's energy sector. The government has no plans to nationalize its energy sector such as Bolivia did earlier this month in a move that follows attempts by Venezuela's President to tighten state control over his own oil sector. Ecuador, South America's fifth largest oil producer, terminated its contract with U.S.-based Occidental over accusations that the company illegally transferred part of an oil block without government authorization. Occidental is the country's largest investor and extracts 100,000 barrel of oil per day.

U.S. asks Pak to abandon gas project with Iran

May 16, 2006. The U.S. has asked Pakistan to abandon the seven-billion-dollar gas pipeline planned to Pakistan and India ahead of next week's visit by a high-level Iranian delegation. Iran and Pakistan have said the project would forge ahead despite U.S. reservations. Pakistan said the project is vital to meet the country's growing energy needs. The joint working group of Iran, Pakistan and India was also scheduled to meet in the Pakistani capital from May 22 to 24 for technical discussions on the proposed 2,670 km pipeline from Iran's southern Pars field. Those discussions are to be followed by ministerial-level talks next month in Tehran. The project should take three to four years to complete after the three countries strike a final deal.

IEA cuts 2006 oil demand forecast

May 12, 2006. The International Energy Agency (IEA) for  26 oil-consuming nations, cut its estimate for global demand in 2006 for the third time in four months because of lower- than-expected consumption in the US and Russia. World oil demand was lowered by 200,000 barrels a day to an average of 84.83 million barrels a day. Expected growth in demand for the year was reduced to 1.25 million barrels a day from 1.47 million. Oil has rallied to records since August, boosted initially by hurricane damage to US rigs and refineries and bolstered this year by tensions surrounding Iran’s nuclear program and disruptions to Nigerian exports because of rebel activity. New York-traded crude oil futures are up 19 percent this year at $72.72 a barrel, having reached a record $75.35 on April 21. Contributing to the annual revision in world demand were cuts of 400,000 barrels a day each to the first and second quarters of 2006, and a 100,000 barrel-a-day cut to third-quarter demand.

In the US, while the economy grew at its fastest pace in 2 1/2 years during the first quarter, ‘‘this was not reflected in oil product demand growth,’’ which fell 1.4 per cent versus the year-earlier quarter in the US. That’s because of ‘‘extraordinarily mild temperatures, especially in January,’’ and high oil-product prices, ‘‘giving users the incentive to return to natural gas.’’ Estimates for oil demand in Russia and other former Soviet states was also cut as larger-than-expected exports suggested less was being consumed at home. Demand growth worldwide this year is now pegged at 1.5 per cent, down from 1.8 per cent in last month’s report. Oil consumption rose 1.3 per cent in 2005, 4 per cent in 2004 and 2 per cent in 2003.

China’s oil import drop

May 12, 2006. China’s imports of crude oil slipped for the first time this year in April, with a 1.8 percent fall from a year earlier that may dent hopes of firmer demand growth. Refinery losses and anticipation of government economic tightening were likely partly responsible for the turnaround, but imports in April 2005 hit a then-record near 3.0 million barrels per day (bpd), giving a high base for comparison. In April 2006 China received 12.03 million tonnes of crude, or 2.93 million bpd. This was slightly below 3.0 million bpd hit in March, but above February levels. It did not give a percentage change for the month alone, which was calculated from the accumulated figures. Beijing keeps tight control over prices of gasoline and diesel, worried that costlier fuel could spark inflation or unrest.



Jubail to have a giant water and power plant

May 15, 2006. A giant dual-purpose Independent Water and Power Plant (IWPP) will be established in Jubail at a cost of SR11 billion. Marafiq has received offers from major national and international companies to carry out the project. The new IWPP, to be established in Jubail Industrial City by 2009, will supply 2,700 MW electricity and 800,000 cubic meters of desalinated water daily. Shuaiba-3 would supply 194 million gallons of water daily as well as 900MW electricity. The first unit of Shuaiba-3 will begin production on Oct. 13, 2008. It is estimated the total cost of the four projects at SR30 billion. The private sector will contribute 60 percent of their cost while the state-owned Public Investment Fund (PIF) will have 32 per cent stake and Saudi Electricity Company (SEC) 8 percent. The combined production capacity of the four projects will reach 492 million gallons daily and 4,500MW.

Joint venture to start uranium production in ’06

May 15, 2006. A joint venture between Russia, Kyrgyzstan and Kazakhstan will start producing uranium at the end of 2006. Techsnabexport, Russia's state-controlled uranium supplier and provider of uranium enrichment services, has a 49.33 per cent stake in a joint venture set up in 2004 in the south of mineral-rich Kazakhstan. It is exploring a uranium ore deposit with estimated reserves of 19,000 metric tons of uranium in Zarechnoye near the border with Central-Asian neighbors Uzbekistan and Kyrgyzstan. Techsnabexport provides about 35 per cent of global uranium supplies and plans to expand its operations in Central Asia and the Asia-Pacific region.

Russia to construct nuke power plant in Turkey

May 15, 2006. Russia is interested in building a nuclear power plants in Turkey, the state-run company that builds the facilities overseas. The decision had been made at a Moscow meeting of a Russian-Turkish working group on energy held on May 11-12. Turkey announced in April that it would start building three nuclear power plants on its Black Sea coast in 2007 in a bid to diversify its energy sources. It had announced auctions for the construction of an NPP several times in the past but the last project was abandoned in 2000 due to lack of financing. The Turkish authorities stepped up work on the NPP program after a sharp fall in imports of natural gas from neighboring Iran was registered in January. Atomstroiexport is Russia's leading company implementing intergovernmental agreements on building nuclear facilities overseas. It is the world's only company building five power units for nuclear power plants in China, India and Iran.

Indonesia to have nuclear plant by ’15

May 14: Indonesia will have its first nuclear power plant on densely-populated Java Island by 2015. The power plant, to be built in East Java, will have the capacity of 1,000 MW in the first phase, with the cost estimated at eight billion dollars. The capacity will later be increased to 4,000 MW.

$460 mn emissions project planned at power plant

May 12, 2006. A $460 million project is planned at a southern Indiana coal-burning power plant to install equipment aimed at removing most of its sulfur dioxide emissions. Construction of the scrubber system at the Clifty Creek plant, owned by Indiana-Kentucky Electric Corp., is expected to start during the summer of 2007 and be completed by the end of 2009.

Russia to build power plant for Serbs

May 11, 2006. Russian state-owned company Technopromexport will build a thermal power plant in Serbia within three years. The company signed a contract with Serbia and Switzerland's Mentor Energy. The construction of the plant, with two 450 MW blocks, is estimated to cost $877 mn. Technopromexport, a leading electricity exporter and builder of energy facilities, has a number of projects in foreign countries, including India, where it is participating in the construction of a thermal power plant and the upgrading of the Obra power plant. The company also plans to win a $500 million tender for the construction of a 1,900 MW power plant in India's North Karanpura.

Russia to build nuke plants in Iran

May 11, 2006. Russia has expressed readiness to build two 1,000 MW light water nuclear power plants in Iran. The talks between the Iranian delegation and Russian atomic energy agency and other Russian officials would focus on the current situation of the Bushehr nuclear power plant, the exact date that it will come on stream, and plans to provide nuclear fuel. Iran plans to produce 20,000 MW of nuclear electricity during the next 20 years and the Bushehr nuclear power plant, as one of the power plants to produce part of this electricity, is 92 per cent completed. It will on stream next year.

Salt River to build new coal power unit in Arizona

May 11, 2006. Public power utility Salt River Project will spend about $600 mn to $650 mn to build a fourth coal-fired unit at the 800 MW Springerville power station in Arizona. The new 400 MW Unit 4 will stand alongside the 400 MW Unit 3, which is under construction and expected to enter service during the third quarter of this year. Tri-State Generation and Transmission Association, a cooperative, will control the output of Unit 3. Phoenix-based Salt River Project will own Unit 4 and control its output. The company expects Unit 4 to enter service in late 2009.

Transmission / Distribution / Trade

Pak okays US project to buy 4000 MW power

May 10, 2006. Pakistan has agreed to a $600 mn project backed by the United States to buy upto 4,000 MW of electricity from Tajikistan and Kyrgyzstan with transmission lines laid through Afghanistan. A meeting of Pakistan, Afghanistan, Tajikistan and Kyrgyzstan agreed to form a working group to supply 1000 MW electricity from Tajikistan to Pakistan through private sector as a beginning, while the potential was pegged at around 4000 MW.

Policy / Performance

Pacific Ethanol to build Oregon fuel plant

May 11, 2006. Pacific Ethanol Inc.has received permits to build an ethanol plant in Oregon to produce 35 million gallons a year of the corn-based fuel. The plant, to be built on the Columbia River near the city of Boardman, would be the second for Pacific Ethanol.  California, expected to begin ethanol production in the fourth quarter of this year. Construction of the Oregon plant is expected to begin within the next 30 days and take about 12 months. It will supply the gasoline market in the Pacific Northwest. The company plans to build five ethanol plants by the end of 2008 to serve Western states. A second Oregon ethanol plant is to be built by Cascade Grain Products LLC with help from a $20 million loan from the Oregon Department of Energy and a $77 million equity investment by international investment firm Berggruen Holdings Inc. The plant is to be completed in 2008 and produce 113 million gallons of ethanol a year.

China will loan $2.3bn to Maputo for power

May 11, 2006. China's Export-Import Bank (Eximbank) would invest $2.3 billion (R14 billion) in the construction of a new hydroelectric power plant in Mozambique, crucial to the southern African country's plans to exploit its mineral resources. The Mepanda Nkua Dam and hydroelectric plant on the Zambezi River will be built at a cost of $2.3 billion. The government has signed a MoU with Eximbank on the financing arrangements. Mepanda Nkua power plant was expected to produce 1 300 MW and would come on stream in 2010 or 2011. The facility is 70km south of Mozambique's main Cahorra Bassa power plant, in which Portugal is preparing to hand over its 85 per cent stake to the Mozambique government. China is pouring billions of dollars into Africa for investment in infrastructure and commodities. This year the Eximbank extended loans to Angola to $3 billion from $2 billion for the rehabilitation of infrastructure ruined by three decades of civil war that ended in 2002.

Poor countries get $2.7 bn under Kyoto treaty

May 10, 2006. Rich nations’ funding of clean energy projects in developing countries reached $2.7 bn in 2005, through deals allowed under the global Kyoto treaty to tackle climate change. The Kyoto Protocol allows companies and investors in richer countries to invest in and profit from cuts in emissions in poorer nations of heat-trapping carbon dioxide (CO2). Developing country investment was part of a global carbon market which grew ten-fold to $11 bn in 2005, the World Bank’s third annual report on the global carbon market, showed. The global carbon market is based on the fact that some companies can cut pollution more cheaply than others, allowing them to sell that pollution reduction in units called carbon credits. Investors in rich countries can profit by playing differences in these carbon credit prices around the world.  

ADM to build 275 mn gallon ethanol facility

May 10, 2006. Agribusiness company Archer Daniels Midland Co. will build an ethanol plant with 275 mn gallon annual capacity in Cedar Rapids, Iowa as it looks to expand production of the alternative fuel. ADM plans to complete construction of the Cedar Rapids plant in the second half of 2008.

Renewable Energy Trends


MERC approach paper on renewable energy

May 14, 2006. In a significant move, the Maharashtra Electricity Regulatory Commission has prepared an approach paper for tapping 7,000 MW through development of renewable energy. Currently, the capacity of 1,002.96 MW, comprising wind (703 MW), small hydro (206.33 MW), co-generation (73.5 MW), biomass (14 MW) and industrial waste (6.13 MW) has been developed in the state. MERC’s move comes at a time when Maharashtra is facing a daily power shorfall of 4,500 MW, which is expected to touch over 10,000 MW in 2012. MERC has proposed renewable purchase specification (RPS) for minimum percentage for power procurement from renewable energy sources. This was necessitated as per of the Electricity Act 2003, National Electricity Policy and National Tariff Policy. RPS would be applicable to all distribution licensees and open access consumers, referred to as “eligible persons,” with effect from 2006-07 and for the period up to 2009-10. The RPS percentage specification includes 3 per cent for 2006-07, 4 per cent for 2007-08, 5 per cent for 2008-09 and 6 per cent for 2009-10. This percentage denotes minimum quantum of purchase from co-generation and generation of electricity from renewable energy sources. The target of renewable energy procurement of 8,615 million units under RPS policy, over the policy tenure, translates to percentage specification of 9.17 per cent, based on projected energy input procurement by all licensees for 2006-07 at 93,925 mu. The existing renewable purchase obligation (RPO) operating framework would continue to be operational and can address requirements of the RPS regime. MERC has asked Maharashtra Energy Development Agency, the nodal agency for renewable energy, to devise, modify, coordinate and administer proposed RPS operating mechanism. It has fixed a per unit tariff for drawal of wind power at Rs 3.50 for 2006-07, Rs 2.84 for small hydro project, Rs 3.05 for co-generation and Rs 3.04 for biomass.

Essar, German firm may tie up for wind turbine

May 13, 2006. Essar Power is in talks with a number of European wind turbine manufacturing firms, including Germany’s RE Power, to set up a joint venture partnership for manufacturing wind turbine sets. The company may initially invest Rs 100 crore ($22.3 mn) and later scale up investments to around Rs 500 crore ($111 mn) for the venture. RE Power manufactures one of the largest wind turbines in the world of 5 MW capacity. It takes an investment of around Rs 5 crore ($1.11 mn) for setting up 1 MW of wind energy. The company may also set up large wind farms with 5-MW wind turbine capacity. Wind power generation capacity in the country is 5,300 MW. India is the fourth largest market for wind energy in the world. The annual market for wind power in India is around Rs 7,000 crore ($1.56 bn) with a 40 per cent growth rate.

Oil-rich type of Jatropha identified

May 11, 2006. The Indian Council of Agricultural Research (ICAR) had identified the country’s first improved and oil-rich variety of jatropha for commercial cultivation. Oil from the jatropha plant, locally known as Ratanjot, can be used as a substitute for diesel or converted into bio-petrol. Named SDAUJ I (Chatrapati), the new variety is fit for commercial cultivation in the arid belt of Rajasthan and Gujarat. Its seeds contain as much as 49.2 per cent oil, while the seed cake left after oil extraction contains 47.8 per cent non-edible protein. The productivity of this variety has been is higher than that of other jatropha varieties being grown on a large scale in upcoming bio-fuel plantations. The average seed-yield of this variety is estimated to be 1,000-1,100 kg per hectare without any irrigation. The plant grows up to about 8 feet and is immune to attack by all major pests.


S. Korea to develop renewable energy sources

May 16, 2006. More and more South Korean companies are considering the development of reusable sources of energy as oil prices are expected to remain high in the coming months. They are now seeking to use renewable energy or develop alternative sources of energy, rather than reducing traditional sources - petroleum, gas and coal.

Green Star to construct bio-refineries

May 15, 2006. Green Star Products, Inc. plans to construct total Bio-Refinery Complexes for production of both biodiesel and biomass ethanol at each facility. The first Bio-Refinery is planned to be in North Carolina and the location of the second facility is to be announced soon in the northwestern sector of the United States. Each GSPI-designed Bio-Refinery will have a start-up production of between 10 or 20 million gallons per year with quick expansion capabilities. The facility infrastructure will be capable of expanding to 60 million gallons per year

Chevron buys into biodiesel

May 12, 2006. Chevron Corp. has taken a 22 per cent stake in Texas-based Galveston Bay Biodiesel, which is building a large-scale plant on the north side of Galveston Island, across from Pelican Island. Biodiesel is a clean-burning fuel derived from fats such as vegetable oil. The $15 million production and distribution facility is scheduled for completion by year-end and would have an annual capacity of 100 million gallons of biodiesel, although it will start with initial production of 20 million gallons.



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