MonitorsPublished on May 30, 2006
Energy News Monitor I Volume II, Issue 49
The Politics of Energy between the US and China

(By Steven Mufson, Washington Post Staff Writer)

Think the meeting between President Bush and China's President Hu Jintao as a summit of the planet's most voracious energy user and the planet's fastest-growing energy user. In a world of limited oil resources, that could strain U.S.-China relations as much as any issue.

China's oil industry has wooed countries that the United States has tried to isolate for political reasons -- such as Sudan, Iran and Burma -- potentially undermining the isolation efforts. Three of China's major oil companies have been aggressively pursuing long-term supply arrangements in such places as Venezuela, Nigeria, Gabon and Angola.

Even Saudi Arabia, despite its long-standing tight relationship with U.S. oil companies, is turning toward China and is today its largest oil supplier. In 2004, China Petroleum & Chemical Corp., also known as Sinopec, became one of just five companies to win the right to explore for natural gas in the uninviting desert known as the Empty Quarter, edging out U.S. companies interested in the area. The kingdom has invested in Chinese refinery projects, and in January, Saudi King Abdullah bin Abdul Aziz visited Hu in Beijing.

"Saudi Arabia is taking a Chinese wife," said Charles W. Freeman Jr., a former U.S. ambassador to Saudi Arabia who has extensive diplomatic experience in China. "The Saudis are not divorcing us. In Islam you can have more than one wife and they can manage that."

But can the United States? Many U.S. policymakers are nervous about China's quest for energy supplies around the world.

"I can tell you that nothing has really taken me aback more as secretary of state than the way that the politics of energy is -- I will use the word 'warping' -- diplomacy around the world," said Secretary of State Condoleezza Rice in testimony before the Senate Foreign Relations Committee on April 5. "It is sending some states that are growing very rapidly in an all-out search for energy -- states like China, states like India -- that is, really sending them into parts of the world where they've not been seen before, and challenging, I think, for our diplomacy."

And China is nervous about the United States, too. The vociferous opposition in Congress last summer to the China National Offshore Oil Co.'s bid to buy Unocal Corp. has left sore feelings in China, according to Xiao Lian, director of the Center for American Economic Studies at the Chinese Academy of Social Sciences. Xiao said Chinese military strategists also worry that the United States might try to block oil supplies in a dust-up over Taiwan, the self-governing island that Beijing claims is part of China.

According to Jiang Wenran, a professor at the University of Alberta, a popular Chinese online book, "The Battle in Protecting Key Oil Routes," imagines a sea engagement near the Strait of Malacca linking the Indian and Pacific oceans, in which the Chinese navy destroys an entire U.S. Pacific carrier group.

"The risk is that energy issues become not a source of constructive cooperation but rather a deepening source of competition, misperceptions and excuses for obstructing one another's interests," says a paper by Mikkal Herberg, an energy security expert at the National Bureau of Asian Research, and Kenneth Lieberthal, who served as the senior director for Asia on President Bill Clinton's National Security Council.

The meeting between Bush and Hu should provide an opportunity to see whether it will be cooperation or not when the two discuss Sudan and Iran. In conversations with the Chinese, Deputy Secretary of State Robert B. Zoellick has tried to use China's interest in energy to win its support for tougher action on Iran's nuclear program, according to a senior administration official. Zoellick has made the case to the Chinese that if Iran obtains a nuclear weapon, it would be destabilizing in the region that is the source of much of China's oil - and thus it was in their interest to prevent that from happening.

The dynamics are sobering. Over the next 15 years, the number of automobiles in China is expected to increase fivefold, helping to double China's overall demand for oil, which has already passed Japan's to become the second-largest in the world. By 2020, China is expected to import 70 percent of its oil needs, compared with 40 percent today.

Meanwhile, the growth in U.S. oil consumption, starting from a higher base, rivals China's growth when measured in barrels a day instead of percentages. From 1995 to 2004, U.S. oil imports grew by 3.9 million barrels a day while China's grew by 2.8 million barrels a day, thus "making the United States much more of a rogue element than China in the world oil market over the past decade," Herberg and Lieberthal wrote.

During 15 years, China's coal demand could also double. China, which has nine nuclear plants running now, will build more plants (30 according to Freeman) than any other nation over that time period. And it has drawn up plans for giant hydropower dams. "The trajectory they're on is not sustainable," said Herberg, former director of strategic planning at the Atlantic Richfield Co.

China has been taking several steps to bolster its energy security. It has imposed measures to dampen demand, including higher gasoline prices and surcharges on cars with big engines (which could hurt U.S. automakers with plants in China). It has established a state energy office, which reports to a new energy "leading group" headed by Premier Wen Jiabao and has set a goal of reducing the energy used per unit of GDP by 20 percent by 2010.

Leaders in Beijing also want to boost the country's strategic petroleum reserves, which would last just seven days, compared with the 90-day minimum for members of the International Energy Agency. If war, weather or terrorism disrupted supplies, China would soon be forced onto world oil markets. Herberg said that China bought extra oil before the Iraq war in anticipation of a supply disruption, thus contributing to the oil price spike at that time. Given current high prices, though, China is unlikely to step up purchases for its reserve at this time.

Xiao said that Beijing wants to diversify its sources by increasing imports from Russia, Central Asia and Latin America. China and Russia are in talks to build a $10 billion pipeline to deliver natural gas from Siberia to northern China.

China's major oil companies -- CNOOC, China National Petroleum Corp. and Sinopec -- have sought to lock in long-term supplies by buying stakes in operations abroad, which are still modest compared with major Western oil firms. CNPC, the largest state company that operates like a ministry, has a stake in Sudan's oil fields, giving it around 150,000 barrels a day in equity oil. It also has a 60 percent stake in a Kazakh oil firm that will deliver about 200,000 barrels a day to western China via a new pipeline. Sinopec landed a contract for the development of Iran's Yadavaran oil field, which may eventually produce 300,000 barrels per day. Sinopec has also acquired a 40 percent stake in Canada's Northern Lights oil sands project, which is expected to produce about 100,000 barrels a day by 2010.

China has also opened its doors to Middle East investment, broadening its relationship with that oil-rich region. A $3.5 billion refinery expansion underway in Fujian province, financed by Sinopec, Exxon Mobil Corp. and Saudi Arabian Oil Co. (Saudi Aramco), is seen as part of the effort to cement relations with Saudi Arabia. "What are the chances of cutting off oil to your own refinery?" Herberg said. "That's the nature of international oil security, not by going out and turning a country into your own private filling station."

While these moves make sense for China and help put more oil on world markets, they worry many diplomats and policymakers in Washington. Will China's oil relationship with Iran prevent it from joining other major powers at the United Nations in pressuring Iran to open up its nuclear plants to international inspection? Is China's willingness to buy oil from Sudan contributing to Khartoum's determination to resist U.S. and European pressure to stop raids on people living in the Darfur region? Will the dispute between China and Japan over rights to a large natural gas field in the East China Sea lead to wider conflict? (Lieberthal said both sides have been flying military planes over each other's claims -- perfectly legal, but worrisome.) And will China's growing presence in world oil markets drive up the price of crude oil?

Policy analysts have been recommending a variety of steps to ease U.S.-China tensions over energy: making it a partner, if not a member, of the IEA; creating a northeast Asia energy cooperation group to work out disputes and deals on natural gas reserves in Russia and the seas between China, South Korea and Japan; and inviting China to a Group of Eight meeting to discuss energy. Freeman warns against blaming China for rising oil prices. He notes that U.S. imports have increased more than China's in recent years. "It's a wonderful issue," he said. "We get to blame the Chinese, the enemy of choice at the Pentagon. And then we get to blame the Arabs, perfect villains upon whom to heap blame."



(Courtesy: The National Bureau of Energy Research)

India’s Hydrocarbon Scenario: A Journey from Protected Past to Competitive Future- Part VII

Dr. Samir Ranjan Pradhan®

Demand Projections

Oil Demand

Generally, demand projections are made in the short-term as well as long-term period, so that appropriate policies can be devised and implemented in time of need. The short-term and long-term outlooks for oil demand are essentially supply driven, with considering the trend in the domestic as well as world scenarios. And the trends in the present scenario are extrapolated to reach at possible scenarios in the near or distant future.

The demand for oil compared with other primary source i.e. coal in India is expected to grow vigorously in the coming decades resulting from economic growth, population changes, increases in disposable incomes of households, and changes in the capital intensity of the Indian economy and as environmental factors and the cost of rehabilitation of land in coal-mining areas add significantly to the cost of coal mining. In addition, given the fact that coal reserves are predominantly located in the eastern and south-eastern part of the country, transportation costs, particularly where new transport capacity additions are involved, would make the price of coal at consumption points in other parts of the country much higher than current levels.

As per one short-term estimate[1], the oil demand of 75 MMTS in 1995-96 is expected to reach 115 MMTS by the year 2001 and to 155 MMTS by the year 2006. This estimate is based on 6% GDP growth rate during the 19990s. Another estimate[2] projects the crude oil demand of 91 MMTS in 1999/2000 to reach 364 MMTS by the year 2024-25. The details of the estimate are given in table 3.8.

Table 3.8: Projections of Supply/Demand- Petroleum Products 1999/00-2024/2025, (MMTS)


Demand (without meeting gas deficit)

Demand (with meeting gas demand)

Estimated Refining Capacity

Estimated Crude Requirement


























Notes: * Assuming 15 MMTSPA of LNG import by 2007. ** Assuming that by 2012, adequate gas is available through imports and domestic sources.

Source: Hydrocarbon Vision 2025, MoPNG, 2000.

One set of forecasts made by the TEESE[3] (TERI energy economy simulation and evaluation) model shows an increase in demand for oil products from 119 MTS in 2001 to 157 MTS in 2011. However TERI has made another set of forecasts up to period 2047. The demand for oil in the base case scenario in the forecast, has been extrapolated from the present trends and practices, adds up to 667 MTS by 2047[4]. In this sectoral projection for oil has also been made, which shows that the transport sector continues to drive the demand for oil in the country. In addition, oil demand for non-energy uses, e.g. feedstock, industrial consumables (greases, waxes, lubricants, etc.), and bituminous carpeting, and by industries is also high. Table 3.9 shows the estimates.

Table 3.9: Sectoral Oil Demand (MTS) Projections: the base case scenario






1997-2047 (%)*









































Note: * Compound Annual Growth Rate.

Source: TERI, "TERI Directions, Innovations, and Strategies for harnessing action (DISHA)", TERI, 2001, p.280.

Supply Projections

Domestic crude production is expected to fall short of the targets. Though the Planning Commission has set a target of 180 MTS during the 9th Five-Year Plan period, it is estimated that actual production will be much lower, at about 162 MTS, according to the mid-term review of the Plan. Crude production in 2000/01 aggregated 32.7 MTS as against a refining throughput of 90.8 MTS. With an increase in domestic refining capacity, crude imports have increased considerably with imports in 2001/02 expected to be about 77 MTS. Thus as the trends show large imports of crude is inevitable, which is also strengthened from the fact that improved domestic refining activity will prompt more imports of crude to feed the refineries which will increase value-added in the economy. The long-term import requirement of India has been well summarized by TERI DISHA, as shown in Table 3.10. Map VI shows the existing and proposed crude pipelines in India.

Table 3.10: Projected demand and supply of crude oil: the base case scenario (MT)



Refinery throughput

Domestic production

















Note: Indicative refining throughput (assuming refinery fuel and loss at 5% and no product imports) is compared to domestic crude production to estimate import requirements.

Source: TERI, "TERI Directions, Innovations, and Strategies for harnessing action (DISHA)", TERI, 2001, p.280.

Figure 3.2 depicts petroleum (both Crude and NGLs) production outlook of India.


Source: EIA, DOE, 2003.

As evident, India is poised to depend on oil supplies from overseas to meet its surging demand in the future. As per the IEA, India’s external oil dependency will increase from the present level of around 65 percent (2002) to 77 percent by the year 2010 and to 86 percent by the year 2020 (see figure 3.3).

Figure 3.3

Source: IEA, March 2000.

Natural Gas Demand Projections

The short-term outlook for gas demand is essentially supply driven, with project expansions being linked to gas imports. LNG imports on the west coast are expected materialise by 2005. Additional gas from LNG terminals would cater to: (i) current deficits of existing gas consumers, i.e., the difference between gas allocated to them and actually supplies received and (ii) new gas based projects. In case of the power sector, current shortfalls add up to 10.3 MMSCMD. In addition, new gas based power projects would require about 20.6 MMSCMD of gas. Total additional short-term gas requirements are expected to be about 30.9 MMSCMD. With regards to gas demand for fertilizer production, the Planning Commission has estimated a demand-supply gap for urea of 3 MMTS by 2004[5]. For other sectors, new capacities/ projects have not been considered and the short-term outlook essentially reflects the difference between current allocation to various sectors and sales. Table 3.11 shows the short-term gas demand outlook[6].

Table 3.11: Short-term Gas Demand Outlook (MMSCMD)






















Note: * gas for captive use, LPG shrinkage and other non-energy uses.

Source: TERI/FACTS, "Gas Demand", TERI, 2003, unpublished internal paper.

The long-term gas demand forecast based on trend analysis in India is problematic due to various reasons, such as; trend extrapolation becomes difficult as restricted gas sales do not reflect actual demand and the administered prices for natural gas disassociate 'perceived' demand from inter-fuel economics. However, the best possible scenario for forecasting gas demand is that which is based on criteria such as population growth and more importantly the economic growth rate, which is called GDP indexed demand growth (GIDG)[7]. Table 3.12 summarizes the available forecast studies on gas demand in India, apart from the well-used TERI technique.

Table 3.12: Various Gas Demand Projections


Scenario I- Gas Master Plan (MMSCMD)






















Scenario II Hydrocarbon Vision 2025 (MMSCMD)







































































Notes: * short-term estimate (supply driven), ** gas for captive use, LPG shrinkage and other non-energy uses.

Source: TERI/FACTS Study, 2003.

Supply Projection

A subgroup on the development and utilization of natural gas under the Hydrocarbon Vision 2025 group offers different scenarios of the likely production of domestic gas by 2024/25. The analysis is based on the estimates provided under the 'given scenario' based on production profile of existing fields. The trends have been interpolated to assess the gas production in 2019 and extrapolated to estimate the same in 2047, as shown in table 3.13.

Table 3.13: Projected Domestic Gas Production (BCM)















Source: Hydrocarbon Vision 2025.

As shown in the table, domestic gas production is expected to be marginal by 2047. These are very conservative estimates based on the rate at which existing fields are being depleted and assume that no new discoveries are made. However, in the absence of any reliable estimates or targets for the future (unlike oil in the Hydrocarbon Vision), these figures have been adopted. This implies that projected import requirements will change as and when new gas fields are discovered and exploited.

(to be concluded)






ONGC set for methane trail in Jharkhand

May 30, 2006. Oil and Natural Gas Corporation is likely to invest Rs 1,000 crore ($217 mn) for commercial exploitation of Coal Bed Methane (CBM) in Jharkhand. The corporation has awarded the order for drilling to a US-based company. According to the company the commercial production of gas could be possible by the end of 2007. Gas extracted from the CBM would be useful as an alternative energy source for production of steel and power. The survey, which had been undertaken by ONGC, indicated the possibility of existence of large reserves of CBM in Jharkhand, particularly in the Dhanbad and Bokaro regions.

Prize set to develop 3 ONGC fields

May 29, 2006. Prize Petroleum, a Hindustan Petroleum subsidiary, has won development rights for 3 fields in Mumbai offshore, offered by the Oil and Natural Gas Corporation Ltd. The company expects an output of 20,000 barrels per day and plans to invest $150 mn (Rs 6.91 bn) on developing the field. Prize Petroleum had bid for the development contract together with a Malaysian conglomerate, M-3 Energy. Prize Petroleum is co-promoted by Hindustan Petroleum, ICICI Ltd, HDFC Ltd and ICICI Venture. While Hindustan Petroleum holds 50 per cent stake, the remaining is held by the financial institutions. Prize Petroleum has partnered M-3 Energy in some of overseas ventures also. It plans to bid for some blocks in Egypt with its Malaysian partner. 

ONGC may auction crude oil to PSUs

May 29, 2006. The government is likely to allow ONGC to auction its entire crude oil output from Mumbai High fields, India’s largest oilfield, to state-run refineries. The new mechanism is likely to be introduced over the next three months. At present, the 16 mt of Mumbai High crude is apportioned to Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum each year with the price tagged to the Nigerian bonny light but allowing discounts of $1.5 a barrel plus concessions on Customs duty, sales tax and sea freight.

OVL-Mittal sets sight on Kazakhstan

May 25, 2006. ONGC Videsh and steel baron L N Mittal are jointly planning to tap oil and gas assets in Kazakhstan. The Indian and Kazakhstan governments are considering a co-operation in hydrocarbon sector, which may land up in favour of the combine. The Kazakh petroleum department has written to its Indian counterpart to discuss the feasibility of an energy co-operation between the countries. Mittal Steel is planning to source natural gas from the country for its plant at Temirtau as feedstock. Mittal Steel has coal reserves amount to 1.5 billion tonne. The company operates a 435 MW thermal power station. The OVL-Mittal is eyeing for 40-60 per cent share in the unexplored asset of Caspian offshore controlled by Kazakhstan. OVL is lining up a billion-dollar infrastructure development projects for Kazakhstan to secure oilfields. The project includes road construction, power generation and water distribution. OVL had lined up similar 'oil for road and power' project for Nigeria also. At present, OVL is under taking exploration in two Kazakhstan oil blocks. However, both these assets are not yet proved worthy.

Focus Energy discovered gas in Rajasthan

May 25, 2006.  Focus Energy Ltd, formerly known as Phoenix Overseas Ltd, has recorded a significant gas discovery in its onshore Rajasthan Block RJ-ON/6 in well SGL-1. The block is a pre-New Exploration Licensing Policy block. The find is on the same stratigraphic trend as the fields in Pakistan producing multi-trillion cubic feet. This is the first major stratigraphic discovery made with excellent gas quality on the Indian side. Focus Energy is the operator of the block of the exploration block. The discovery is the first large onland gas discovery. The earlier large gas discoveries have been mostly in the offshore. The cost of the transportation of the gas to the market is expected to be less in this block. The well produces 15 million standard cubic feet per day of almost pure methane gas. The discovery of the gas has been confirmed through conventional open-hole drill stem test.

Crude oil production down in April

May 24, 2006. Crude oil production, during April 2006, fell by 1.9 per cent to 2.749 million metric tonne against 2.802 mmt for the same month last year. Production also fell short of the target of 2.789 mmt by 1.45 per cent. Oil and Natural Gas Corp fell short of its target of 2.130 mmt by 1.6 per cent. It suffered major production losses in its Assam, Tamil Nadu and Mumbai oil fields. Oil India Ltd also reported negative growth in crude production. Of the total production, onshore fields accounted for 0.998 million tonne while offshore fields produced 1.791 mt. Refinery production for April improved by 13.5 per cent to 10,918 tonne compared with April last year.

Repsol teams up with Norsk, ONGC for Cuban oil field

May 24, 2006. Spanish oil company Repsol YPF teamed up with Norway's Norsk Hydro and India's ONGC Videsh to explore 6 offshore blocks in Cuban waters where good-quality oil was found two years ago. The prospect of finding commercial quantities of oil in Cuban waters of the Gulf of Mexico at a time of soaring prices has set off a political debate over whether US companies, sidelined by American sanctions against Cuba, should be allowed to explore there. Under the deal signed with Cuba's state-owned Cuba Petroleo (Cupet), operator Repsol will have a 40 per cent share in the project, while Norsk Hydro and ONGC Videsh will each have 30 per cent. Drilling is not expected to begin until 2008. The US geological survey estimated last year that the North Cuba basin could contain some 4.6 billion barrels of oil, with a high-end potential of 9.3 billion barrels.

RIL bags oil-gas contracts in East Timor

May 23, 2006. East Timor had awarded offshore oil and gas contracts to India's Reliance Industries and Italy's Eni SpA through a tender. Eni was awarded 5 offshore exploration areas while Reliance Industries was awarded one. The winning companies must have to enter into a production-sharing contract with the ministry of natural resources, minerals and energy, by June 20, 2006. East Timor became the world's newest nation in May 2002 and less than two years later made its debut as a petroleum producer with its first production coming from the Bayu-Undan field, which is jointly managed with Australia.


IOC likely to enter S Africa

May 30, 2006. Indian Oil Corporation is planning to enter Indonesia, South Africa and Nigeria through floating marketing subsidiaries. IOC would shell out nearly $500 mn (nearly Rs 22.50 bn) for launching marketing operations in these countries. IOC has subsidiaries in Sri Lanka and Mauritius. Lanka Indian Oil Company (LIOC) is now under the subsidy burden of $73 mn (Rs 3.29 bn) and the Lankan government is looking for an option to pay it back. LIOC has 30 per cent marketshare. Indian Oil (Mauritius) Ltd, whose market share has been on the rise, is in an expansion mode.

IOC-IBP merger by Nov

May 29, 2006. The merger of IBP & Co Ltd with its parent Indian Oil Corporation Ltd (IOC), expected to take place by April-May 2006, will now materialise only in November. A merger with IOC was widely expected to pull IBP out of the red, but with that now put off to a later date, the stand alone oil marketer will continue to make losses on account of selling retail petroleum products below cost. The company had reported a 79 per cent decline in net profit for the year ended March 31, 2006 as compared with net profit in FY05.

IOC chalks out $15 bn plan

May 26, 2006. Indian Oil Corporation has worked out a whopping Rs 70,000-crore ($15.26 bn) capital expenditure plan for implementing various projects in the refining, marketing, petrochemicals and upstream sector by 2011-12. The state-owned giant aims to cross the $60-bn turnover mark by 2011-12 and $300 bn by 2030. The company is currently implementing projects worth Rs 25,330 crore ($5.52 bn) and has planned Rs 31,582-crore ($6.89 bn) expenditure for capacity augmentation and upgradation of its various refineries. For the current fiscal, IOC has earmarked a capital expenditure of Rs 8,325 crore ($1.81 bn) as against Rs 5,296 crore ($1.15 bn) during 2005-06. From the existing refining capacity of 41.5 million tonne per annum, the capacity of IOC's refineries will touch 67 mtpa by 2011-12.

HPCL to market LPG stoves

May 23, 2006. Hindustan Petroleum Corporation Ltd has tied up with Malbro Appliances for manufacture and supply of fuel efficient liquefied petroleum gas stoves that promises to save more than 60 percent of fuel consumption. The fuel marketing major has signed a MoU with Malbro Appliances to manufacture these fuel saving gas stoves under the 'Advanta' brand, to be sold through its cooking gas outlets. The Bureau of Indian Standards would be certifying the fuel-efficient stoves to instill safety confidence among the customers. The products will be available in variants of single burner to five burners in the price band of Rs.600-Rs.4,000 making it accessible for all strata of society.

Transportation / Distribution / Trade

GSPC to foray outside Gujarat

May 30, 2006. Gujarat State Petroleum Corporation is about to become the first state-owned gas distribution company to set up gas transmission and distribution network outside Gujarat. GSPC has received proposals from the Maharashtra and Andhra Pradesh governments for help in setting up pipeline network similar to the one it’s running successfully in Gujarat. Rajasthan is the third state where GSPC has taken an initiative and proposed to set up gas distribution and transmission network in association with Reliance. Interestingly, expansion of GSPC network outside Gujarat: in Maharashtra, AP and Rajasthan, amounts to challenging the monopoly of GAIL. While the Maharashtra government has engaged MIDC for detailed feasibility study of natural gas pipeline network project, the AP government has roped in IDF to study the project. The Rajasthan project is still in early stages but GSPC has conveyed its consent to the Rajasthan government to work with RIL. GSPC group company GSPL is operating over 800 km-long network of natural gas pipeline in Gujarat. GSPC is currently executing another 400 km of natural gas pipeline network in Gujarat which will increase the length of its network to over 1,200 km connecting most of the districts in the state.

Vizag set to become LPG transshipment hub

May 25, 2006. Visakhapatnam port is all set to become the transshipment hub for liquefied petroleum gas. The port authorities and Hindustan Petroleum Corporation Limited are jointly planning to develop the port as an LPG transshipment hub. Currently, HPCL uses Vizag port for import of LPG. The idea to create a facility for LPG transshipment comes in the wake of the Rs 280-crore ($61 mn) LPG cavern project (underground storage facility) being jointly developed by HPCL and France-based Totalfina near the port. The project, with a storage capacity of 60,000 tonnes, is expected to be ready within two years. During 2005-06, the port handled 0.35 million tonnes of LPG of which HPCL imports alone occupied more than 95 per cent. HPCL is planning to import about 1 million tonnes of LPG by 2008-09 through the port. 

Petronet LNG to supply gas to NTPC

May 23, 2006. Petronet LNG Ltd has agreed to supply 75 million standard cubic meters per day of re-gassified LNG to National Thermal Power Corporation from its Dahej terminal at an ex-shipment price of just $5 per mmbtu. Supply of RLNG at this price assumes significance as this comes at a time when GAIL (India) Ltd has shipped home the costliest LNG from Algeria at an ex-ship price of over $9 per mmbtu (which after taxes and duties will be close to $11 per mmbtu). Also, Shell Hazira is offering gas for the power sector at delivered price of $10.41 per mmbtu, including ex-ship price of around $8 per mmbtu. Although LNG supplies by PLL are under a short-term arrangement, which includes one mmscmd of gas per day for a period of 75 days, the delivered price of PLL's RLNG to NTPC (adjusted for calorific value), after adding all taxes and duties, will still be cheaper by $1.5 to $2 per mmbtu when compared to the prevailing market prices.

RLNG supplies from PLL will facilitate NTPC's existing power generation by close to 350 MW per day, a significant figure in the prevailing acute power shortages. Interestingly, PLL has not sourced any additional LNG for supplying gas to NTPC. It has decided to replace the LNG consumed by its ships for vessel propulsion by comparatively cheaper fuel oil (currently priced at one third of the LNG price). PLL gets 5 mt of LNG every year from Qatar in 80 cargoes (of 62,000 tonnes each), ferried by its two shipping vessels--Disha and Rahi. If PLL switches over its ships to fuel oil from LNG, it saves 0.75 per cent of this 5 mtpa of LNG, which amounts to little over one million standard cubic meters of LNG per day.

GSPL commissions 3 pipeline projects

May 23, 2006. Gujarat State Petronet Ltd has commissioned three pipeline projects, which will facilitate transportation of gas to NTPC (Kawas) as well as various customers in the Himatnagar region. It had commissioned the Kalol-Himatnagar Pipeline Project and the Spurline in Himatnagar on May 19. The Mora to NTPC (Kawas) spurline had been commissioned on May 18. Kawas is one of the gas power stations near Surat. 

Policy / Performance

Cars ready for ethanol, supply tight

May 27, 2006. Automakers in India will not need to make changes to the engines and fuel systems of cars and two-wheelers for fuel blended with up to 15 per cent ethanol, setting at rest fears of cost escalation of vehicles on account of the government’s decision to make 5 per cent ethanol blending mandatory with petrol in all states by the next sugar season. The only constraint to a shift to ethanol-blended fuel is likely to be supply of the spirit from sugar manufacturers who find ready takers for the produce among distillers. The country has a capacity to make 80 million litres of alcohol annually, expected to rise to 200 million next year. In contrast, at a 5 per cent blend mandated in petrol sales across the county, ethanol demand is expected to be 600 million litres. Ethanol is a purer form of alcohol created by dehydrating rectified spirit.

Most of the carmakers in India have experience running their vehicles on ethanol-blended petrol given that such blending has been the norm in several other markets like the US, Thailand and Brazil for some time now. In Brazil, for instance, two-fifths of vehicles run on 100 per cent ethanol while the rest use a 24 per cent blend. In 2003, the Centre had announced it was making the blending of 5 per cent ethanol with petrol mandatory in nine notified states and four notified union territories adjoining these states from January 1, 2004. The plan, however, didn’t take off since the industry wasn’t producing enough ethanol then, mainly due to 21 per cent drop in sugarcane production in between 2001-02 to 2004-05. Another stumbling block will be the price set by the government for ethanol offtake. At Rs 18.75 per litre, a 5 per cent ethanol blend would reduce the retail price of petrol by Re 1. But oil companies, already suffering from huge losses due to administered prices, are demanding a much lower price. The success of the programme depends on how the government is able to broker a deal between these two industries.


PetroMin not to advance LNG blk completion date

May 24, 2006. The petroleum and natural gas ministry (PetroMin) has turned down the power ministry’s suggestion to advance the deadline for completing first liquefied natural gas block at the now revived Dabhol project by November and also for the Dahej-Uran and Panvel-Dabhol pipelines carrying LNG. The ministry has projected that GAIL (India) Ltd will be able to complete both these pipelines by March next year, and has indicated that the LNG block will be made operational by early January. Ratnagiri Gas and Power Pvt Ltd (RGPPL) would have to operate the 740 MW block II on naphtha or make an attempt to source LNG from the spot market till GAIL completed the regasification facility at the plant site and also the two pipelines. Per unit tariff will remain Rs 4.25, but it may increase based on the naphtha prices. RGPPL had earlier planned to complete the regasification of the LNG facility by December. For the 2,150 MW capacity plant, nearly 2.1 million tonne per annum LNG would be needed.



NTPC to raise Barh plant capacity

May 29, 2006. NTPC Ltd would enhance the capacity of its Barh super thermal power project in Bihar. The company is considering enhancing capacity by adding either two units of 660 MW each (1320 MW) or two units of 800 MW each (1600 MW). These additions would be within the overall capacity additions. The company had earlier announced capacity enhancement for 2007-2012 from 11,558 MW to 17,333 MW and had indicated a tentative list of projects included in the revised capacity addition programme.

NLC plans power JV in Gujarat

May 26, 2006. Neyveli Lignite is planning to set up a 1,500-MW, mega lignite-based power project, estimated to cost over Rs 7,500 crore ($1.64 bn), in South Gujarat in association with Gujarat Industries Power Company (GIPCL) and other state government-owned entities. A draft memorandum of understanding has been prepared and is expected to be signed soon. NLC is going to be given a 70 per cent plus stake in the share capital of the proposed joint venture (JV). The funding for this project would be in a debt-to-equity ratio of 70:30 and would take four years to come up. The per MW cost for this project would be in excess of Rs 5 crore ($1.09 mn) and it would also include the expenditure towards developing new mines.

NLC currently has three opencast mines with an annual capacity of 24 mt of lignite and 3 pithead thermal power stations with 2490 MW capacity. It is in the process of setting up an additional 500 MW plant at Neyveli alongwith the mine capacity expansion by 4.5 mt at an estimated cost of Rs 4,000 crore ($872 mn). The government of India has a 93.56 per cent stake in the company. It is also setting up a 250 MW thermal power plant in Rajasthan with an investment of Rs 1,100 crore ($240 mn). This may be later expanded to 1000 MW. NLC is interested in setting up a 2,000 MW coal-based power plant at a cost of Rs 8,000 crore ($1.74 bn) in Orissa too, but it has yet to get the required clearances from the central government.

NTPC drafts overseas strategy

May 25, 2006. NTPC Ltd has charted an aggressive overseas growth strategy that includes plans to acquire coal mining blocks in Indonesia and Australia and gas blocks in Nigeria and West Asia. The power generation major is also in the process of shortlisting partners for NELP-VI for natural gas. It is also looking at overseas gas exploration opportunities, including Australia, Indonesia, Qatar and United Arab Emirates. It will soon sign a joint venture with Singareni Collieries Company Ltd for exploration of overseas coal mining opportunities. The company is targeting a production capacity of 15 mt of coal per year from its proposed coal blocks operations in Indonesia and Australia. NTPC plants required 108 mt of coal in 2005-06, of which 3.8 mt was imported. In another development, the company has drawn up an elaborate plan of receiving gas from Nigeria in exchange for strengthening the country’s power generation capaciy.

The proposal will be divided on three parameters — short-term, medium term and long term in lieu of gas supply. The plan will be sent to the Nigerian government for its consideration by next fortnight. The short-term plans include providing services for the management of Nigeria’s power stations, so that existing plants become operational. The medium-term plans include setting up a 700-MW gas-fuelled power station involving an investment of Rs 2,450 crore ($534 mn). The company may later go in for a joint venture arrangement for the same. The long-term plans propose, among others, setting up a 500 MW coal-based power station involving an investment of Rs 2,500 crore ($545 mn). 

Textile park to provide gas-based power

May 25, 2006. A cluster of yarn processors based in Surat, Sayan Textile Park, is planning to set up a textile park for 51 units on the outskirts of the city. This small private textile park will be established at Sayan at a cost of around Rs 80 crore ($17 mn). This park will have an advantage of gas-based power generation project which will provide power at lesser cost of Rs 2 per unit. The park is expected to be ready by 2008.

Bhoopalapally thermal power station by ’08

May 25, 2006. The 500 MW Bhoopalapally thermal power station would be commissioned by November 2008 in Chennai. The total expenditure for the station would be Rs 2077-crore ($453 mn). The state will also commission 2x25 MW Nagarjunasagar tail pond dam by 2008. The proposed project is expected to cost Rs 464 crore ($101 mn). It would be funded by the Power Finance Corporation. While the first unit of 25 MW would be commissioned by July 2008, the second unit of 25 MW would be commissioned by November.

Goa may get ultra mega power project

May 25, 2006. The list of states coming forward to get an ultra mega power project from the Centre is becoming longer, with Goa being the latest to approach Power Ministry in this regard. The power ministry has told the state government that its demand would be considered and the project would be given only if it meets all the parameters. The Goa project, if approved, would be operated on imported coal. 

L&T bags hydel project in Uttaranchal

May 25, 2006. Larsen & Toubro has bagged the development rights for a 60-MW Singoli Bhatwari hydroelectric power project from the government of Uttaranchal. The project is located in Rudraprayag district of Uttaranchal on Mandakini river, a tributary of the Ganga. Valued at around Rs 500 crore ($109 mn), the project will be executed by the company on a build, own, operate and transfer basis, whereby L&T will develop, finance, construct, commission and operate the power plant for a concession period of 45 years.

Transmission / Distribution / Trade

PowerGrid on hunt for foreign firm

May 29, 2006. PowerGrid Corporation is scouting overseas markets for a transmission company and is actively pursuing some opportunities. It is also planning to set up transmission lines for an upcoming power project in Indonesia. The public sector entity is raising loans of $700 mn (Rs 32.25 bn) in the current fiscal from multi-lateral lending agencies like the World Bank and the Asian Development Bank. The proposed transmission project in Indonesia would see the company enter into a joint venture agreement with the generation company and acquire a 26 per cent stake in the proposed entity. Indian public sector power entity — NTPC Ltd — is also working on setting up a 2,000-MW coal-based power generation plant in Indonesia. The Rs 9,000 crore ($1.95 bn) investment for the project would be made by a local consortium.

BSES' new system to cut power fault restoration time

May 27, 2006. The Relaince controlled BSES distribution company operationalising the `Supervisory Control And Data Acquisition' (SCADA) system in Delhi that would automatically inform control rooms about power outages and reduce restoration time by up to 60 per cent. By adopting this technology, Delhi has finally joined the league of global cities like Singapore and Hong Kong. The system has been built at an estimated cost of Rs 153 crore ($33.38 mn) and would benefit BSES' 2.3 million consumers in the city. Operations of all the 117 grid stations in BSES area would be monitored on one screen and remote-controlled through the SCADA control centre. The two distribution companies — BSES Yamuna Power and BSES Rajdhani Power Ltd — would now be able to monitor the entire power distribution system from the control rooms by just logging on to network computers.

REL set to pull out from Orissa

May 26, 2006. Reliance Energy Ltd appears set to abandon the management of the three power distribution companies in Orissa. With this may end the Orissa government’s experiment of privatising the power retail business in the state. Earlier, US utility giant AES Corporation had withdrawn from the management of the other distribution company, Cesco. Orissa and REL were at loggerheads over various issues for the last six years.

Goa seeks link with Kaiga plant

May 26, 2006. Goa has sought a link with the Kaiga nuclear power plant in Karnataka to get access to additional power. The state has also asked for allottment of additional 50 MW to Goa for peak hours to overcome the power crisis. The Union power ministry was keen to make Goa a model state as far as power is concerned given the state’s comfortable power situation when the rest of the country is facing immense shortage. 

PowerGrid to manage transco in Nigeria

May 25, 2006. After its involvement in Afghanistan, Nepal and Bhutan for building transmission networks, Power Grid Corporation has filed an expression of interest for managing the Transmission Company (transco) of Nigeria (TCN) Plc. The World Bank has made provisions within the National Energy Development Project to finance this management contract. The contract to operate the transmission company will be for a minimum period of three years. TCN incorporates the functions of transmission service provider, market operator and system operator. The company currently supplies 5,000 MW load with a potential demand of 8,000 MW. PGC already completed the transmission grid for carrying power of over 18,500 MW in India.

PTC India to purchase power from HP govt

May 25, 2006. Power transmission company PTC India Ltd would purchase surplus power from the Himachal Pradesh government and has signed an agreement with it in this regard for a period of three years. The surplus power would be purchased at a rate above Rs 5 per unit and generate a revenue of about Rs 1,000 crore ($218 mn) for the state government during the current financial year. At present Himachal had 1.2 billion units of surplus power which could rise with increase in discharge of water in hydropower based on snowfed rivers. PTC will also wheel the 12 per cent free power that belongs to the state from hydel projects like Nathpa Jhakri, NHPC power plants and HPSEB plants along with private plants. 

REC ropes in new partners for rural electrification

May 23, 2006. The Rural Electrification Corporation (REC) has roped in National Thermal Power Corporation, PowerGrid Corporation, National Hydro Electric Corporation and Damodar Valley Corporation in the implementation of rural electrification projects. NTPC has been entrusted with rural electrification work in around 40,000 villages spread over 30 districts across the country. NTPC’s arm, NTPC Electric Supply Company Ltd (NESCL), is assisting the Centre in the implementation of the much-touted Rajiv Gandhi Grameen Vidyutikaran Yojana. NTPC had also joined hands with state utilities and governments of West Bengal, Madhya Pradesh, Jharkhand, Orissa, Chhattisgarh and Uttaranchal for this purpose. Moreover, PowerGrid Corporation, National Hydro Electric Corporation and Damodar Valley Corporation will provide their services in the states of Assam, Bihar, Chhattisgarh, Gujarat, Jammu and Kashmir, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Tripura, Uttar Pradesh and West Bengal in the implementation of rural electrification projects. Agreements have also been inked with all the states for the partipation in the Rajiv Gandhi Grameen Vidyutikaran Yojana. The scheme aims at providing electricity to all households in five years. About 90 per cent capital is to be provided for overall cost of the projects under the scheme.

Policy / Performance

States plan on ultra mega lines

May 30, 2006. After the Centre’s ambitious ultra mega power projects, it may be the state governments’ turn to develop power generation projects through an exercise similar to that of the ultra mega power projects. In another development, Madhya Pradesh, Karnataka, Maharashtra and Uttar Pradesh have firmed up plans to invite bids for power projects through the competitive bidding route. The Madhya Pradesh government plans to invite bids for projects with a capacity of around 2,000 MW. Karnataka is inviting requests for qualification for setting up a 1,000 MW project in the state. The Uttar Pradesh government is also considering developing power generation projects at Annapara D and Sonbhadra through the competitive bidding route. The power ministry has advised the state governments to develop projects where the procurer specifies the location and fuel.

Energy efficiency labels: India joins 12-nation group

May 29, 2006. India has joined the select group of 12 countries with energy efficiency labels for refrigerators, which manufacturers must display on each unit on a voluntary basis. The standards and labelling scheme for frost-free refrigerators and tubular fluorescent lamps came into being from May 18 this year. Twenty other countries have this provision on a mandatory basis. The BEE has adopted the Australian/New Zealand standards for testing in the case of frost free refrigerators and Indian Standard 2418 for tubular fluorescent lamps. The Australian/New Zealand standards are available for $70 and the BEE (under the Ministry of Power, Government of India) needs to devise some way for getting these standards at affordable price. The average new refrigerator sold there today uses, per year, only a quarter of the electricity that would have been used by a refrigerator sold 30 years ago when standards and labels were first introduced. This is despite the new product's increased size and added features.

CIL arms to be merged with holding co

Text Box: • Coal India to be remodelled on lines of SAIL
• Aim is to give it the clout needed to place big bids
• Merger to give it access to funds for modernisation

May 29, 2006. The government is planning to re-model the organisational structure of Coal India Limited on the lines of the Steel Authority of India Limited (SAIL). The aim is to convert the coal major into a world-class company with enough financial muscle to outbid competition in case of overseas acquisitions. All eight subsidiaries of CIL are to be merged with the holding company. Of the various models for restructuring of CIL being considered, the SAIL model has found favour as it increases the size of the company and vests the power to develop the organisation with a single entity. The merger is expected to enable CIL to access requisite funds needed to carry out the much-needed modernisation programme. The coal ministry is also considering the option of providing the CIL arms functional autonomy and creating smaller units of excellence.

44,000 MW addition by ’07

May 29, 2006. Power consumers in India may get a much needed reprieve as the country moves to a total capacity addition of 44,000 MW against the targeted addition of 41,000 MW by the end of the 10th Plan. Of the 44,000 MW, nearly 21,230.16 MW would be generated by thermal plants. Nearly 10,174.10 MW and 2,620 MW by hydro and nuclear plants, respectively. The central public sector undertakings will alone contribute 17,225 MW, followed by state sector (11,900.66 MW) and the private sector (4,898.6 MW). Moreover, 5,000 MW each would be added by the captive power plants (CPPs) and non-conventional energy sources. The power ministry is of the view that the capacity addition of 3,500 MW would be achieved on “best effort basis.” The ministry also hoped for the 11th Plan, the Centre has projected a capacity addition of 62,000 MW and nearly 6,000 MW would be added by way of non-conventional energy sources. The Centre would launch a massive campaign for demand side management in order to save energy. The power ministry was contemplating saving at least 5 per cent energy so that effective consumption was achieved.

Hydro power to get pvt boost soon

May 29, 2006. To give a major fillip to hydro power generation, the government has finalised a new set of guidelines for development of projects over 100 MW by the private sector through competitive tariff-based bidding. Against India’s hydro power potential of 84,000 MW, just about 20 per cent has been exploited so far. According to the new policy, states with huge hydro potential would be asked to shortlist credible developers based on certain preset technical qualifying criteria.

The final developer would be selected on the basis of tariff-based financial bids. Competing bidders would be required to post a bid bond of Rs 5-10 lakh per mega watt and a performance bond of Rs 10-20 lakh per MW. Failure to take up the project within a pre-specified time after the award would lead to a call on the bid bond. The project would then be awarded to the next qualified bidder. The performance bond would be linked to achieving specific milestones in a pre-defined time frame. The project developer would be required to submit a detailed action plan within six months of allotment with clearly identifiable intermediate milestones.

The power ministry plans to offer a series of run-of-the-river projects for development by the private sector. The idea is to tap the surplus power of states with substantial hydro potential and wheel it to power-deficit states. The host state would, however, retain 12 per cent of the power generated free of cost. A special requirement of hydel projects is the availability of long-term funding at reasonable interest rates for back ending of tariffs. This ensures that the cost of power during the initial years is reasonable. Financial institutions, which fund almost 70 per cent of the project cost, would find these projects more attractive. Given the unique tariff structure of hydro stations (of high tariffs during the initial years which progressively decrease as debt gets repaid), the guidelines are aimed at providing cheaper power to state electricity boards and ultimately the retail users.

Coal ministry rapped for poor utilisation of funds

May 29, 2006. The parliamentary standing committee on coal and steel has rapped the coal ministry for failing to utilise 50 per cent of its budgetary funds and observed that the ministry has made a mockery of the budget mechanism by repeatedly under-utilising funds. In its report the committee pointed out that the trend of under-utilisation had been continuing for over a decade as during the Ninth Plan, the ministry had utilised Rs 13,120.84 crore ($2.85 bn) against the allocated funds of Rs 19,383.74 crore ($4.21 bn). In the Tenth Plan the ministry’s performance was even more unsatisfactory as so far Rs 6,961.52 crore ($1.51 bn) had been utilised, against the allocated funds of Rs 18,652.20 crore ($4.05 bn). The committee has directed the ministry to revamp and strengthen its Budget division to ensure realistic budgetary proposals are prepared and to set up a high-level monitoring committee to review the monthly progress on fund utilisation. The existing monitoring mechanism comprises a project monitoring wing to check the progress of various projects on a day-to-day basis as well as a regular review of projects worth Rs 100 crore ($21.71 mn) or more by the coal ministry. The committee expressed its disapproval with the present monitoring system.

Bihar signs MoUs for power reforms

May 29, 2006. The Bihar government signed two memoranda of understanding (MoU) with the National Thermal Power Corporation, Bharat Heavy Electricals Ltd and the Power Grid Corporation of India Ltd for the renovation and modernisation of the moribund thermal power stations at Muzaffarpur and Barauni, besides strengthening the power sub-transmission system. The MoUs are involving an estimated expenditure of Rs 506 crore ($110 mn) for the two stations. An MOU regarding the implementation of the plan for strengthening the power sub-transmission system (phase ii) is estimated to cost Rs 1,000 crore ($217 mn). The renovation cost for the two thermal power stations, each with two units of 110 MW, and the sub-transmission scheme, will be borne by the Rashtriya Samvikas Yojana.

Gas for power projects at market rates: PetroMin

Text Box: Petroleum ministry
• Gas prices to be market driven from April 1, 2008 
• Govt cannot regulate gas price as per PSC terms 
• Power sector to approach suppliers after April 1, 2008 
• Consumers to source gas at mkt rates in future
Power ministry
• Not ready to accept market driven price for the sector 
• Government can regulate gas prices from JV/NELP fields 
• Cabinet had earlier held there is need for price regulation 
• Government’s investment in NTPC will be at stake 

May 28, 2006. The ministry of petroleum and natural gas has told the power ministry that gas for the sector will have to be procured at market determined prices, beginning April 1, 2008. This will be a major setback for existing and future gas-based power capacities in the country. The petroleum ministry has also clarified that the government had no authority to direct upstream developers of a joint venture and NELP gas fields to determine the price of gas for a particular sector. The government will only approve the formula or the basis to determine prices. For future gas-based power generation, the petroleum ministry has clarified that by 2011-12, the quantum of APM gas will go down from the present level of about 55 mmscmd (million standard cubic metres of gas per day) to about 38 mmscmd, whereas the private and JV share will increase from 21 mmscmd to 65 mmscmd. Accordingly, it has clarified that consumers will have to source gas for existing plants as well as new projects from private or JV sources at market price. On the other hand, power ministry is of the view that with the petroleum ministry washing its hands off the issue, the government investments in NTPC are at stake. Even on the pricing of gas from the Panna-Mukta-Tapti joint venture over and above the existing 6 mmscmd, the petroleum ministry said that consumers are advised to directly approach the PMT JV for gas tie-ups from April 1, 2008, which will have to be at market prices prevailing then.

CCL targets 42 mt output for ’FY06

May 26, 2006. The Ranchi-based Central Coalfields Ltd (CCL) has set an annual production target of about 67 million tonnes (mt) of coal in the terminal year of the Eleventh Plan (2011-12) as against its actual production of about 40.5 mt in the year ended March 2006. The company has planned to achieve a production target of about 42 mt in the year 2006-07. Capital expenditure outlay of Rs 3,276 crore ($714 mn) is envisaged for the Eleventh Plan, of which about Rs 465 crore ($101 mn) will be spent during the current fiscal. In the terminal year of the Eleventh Plan, the production from new projects was expected to be about 35 mt.

Govt plans to allow captive coal mining by SSIs

May 26, 2006. The coal ministry is in the process of finalising a new captive coal mining policy for the small scale industry (SSI) units. According to the proposed policy, the ministry will allocate captive coal blocks through competitive bidding to the SSI units. The idea is that a group of SSI units will form a consortium and apply for coal blocks for joint operations and captive mining of coal in the area of approved end users. Further, the SSI units with small requirements could apply for small and isolated reserves, on a sub-lease basis for using coal mined from such reserve in their plants. The sub-lease will in this case be awarded by Coal India Limited. The policy for selection of applicants for small and isolated reserves is currently being formulated.

As per the existing legal framework, companies in the private sector engaged in iron and steel production, power generation and cement production can mine coal for captive use in the respective end-use projects. The SSI units engaged in any of these businesses can apply for the unallocated coal blocks identified for mining, under the new policy. The coal ministry will also constitute a standing advisory committee, which would have the representatives of various SSI associations as members. Direct linkages would be given to the SSI units in all such districts, which produce coal. According to the new policy it would be mandatory for any big private mine owner, who gets coal mine from the government, to ensure that priority must be fixed for SSI units. The coal companies have been advised to establish depots in each district for distribution and marketing of coal, either by themselves or through outsourcing with adequate accountability on the outsourced companies.

National power plan targets 67,000 MW

May 26, 2006. The National Electricity Plan, an integral part of the 11th Five-year Plan (2007-12), may target a generation capacity addition of 67,000 MW. The government also plans to add generation capacity of around 60,000 MW in the 12th Five-year Plan (2012-2017) and will make this part of the plan. The Central Electricity Authority is formulating the plan in consultation with the Planning Commission and ministries of coal, power, railways, non-conventional energy sources, petroleum and natural gas. The plan is likely to be finalised by June this year. Of the 67,000 MW planned capacity by 2012, 20,000 MW will come from hydro-generation, 40,000 MW from coal-based power generation, 3,000 MW from nuclear power generation and 4,000 MW from non-conventional energy sources. Around 50 per cent of the generation has been planned in the central sector, 30 per cent from the state sector and the rest from the private sector.

NCR board to form panel on power

May 25, 2006. The National Capital Region Planning Board (NCRPB) decided to constitute a high-powered committee to identify solutions for critical urban development issues such as power, water supply and pollution. Besides finding solutions to tackle these issues, the high-powered committee will also suggest ways to finance the same. The board can meet only once in six months. But the high-powered group will ensure that issues are dealt with and solutions are found much faster.

MoP asked to specify ECB limit for mega projects

May 24, 2006. The power ministry’s demand to raise the external commercial borrowing (ECB) limit for ultra mega-power projects from the current level of $500 mn (about Rs 22.50 bn) in a year has not found favour with the finance ministry. The high-level committee on ECB policy, which functions under the finance ministry, had observed that the limit of $500 mn under automatic route per project seemed to be sufficient. The committee has also asked the power ministry to quantify the amount needed over this limit for such projects. The projects will have an installed capacity of 4,000 MW and would require an estimated investment of Rs 16,000 crore ($3.5 bn). It would take four to five years to build these plants and a developer could raise $2-2.5 bn (Rs 92-115 bn) from ECBs during this period. The projects are to be implemented in a debt-equity ratio of 70:30, which means that each of these plants will require a debt of about $2.8 bn (Rs 128 bn). Moreover, such projects could also access ECB above this limit through approval route.





Libya to offer group of blocks in third round

May 30, 2006. Libya, a rare and keenly-contested global hot spot for oil firms to exploit major reserves, will open its third oil and gas licencing round since the US lifted its sanctions two years ago. NOC was also negotiating deals with foreign companies to develop and upgrade Libya's refineries and other upstream and downstream projects. Talks are continuing with several international oil firms on developing petrochemical plants and to spur the expansion of gas and oil exploration operations. Major oil companies from Europe, Asia and the US won several permits to explore for oil and gas in two licencing rounds held in January and October last year the first rounds since US lifted its sanctions on Libya in 2004. Libya is seeking foreign investment to help it increase its oil output to 3.0 million barrels (bpd) per day from 1.63 million bpd.

OPEC should consider oil production cut - Venezuela

May 30, 2006. Venezuela's oil minister called for the Organization of Petroleum Exporting Countries to consider cutting oil production, saying global markets are well supplied. There is a consensus that the market is well supplied, and the levels of oil inventory are above historic averages. High oil prices were largely due to the impasse over Iran's nuclear program and other geopolitical tensions, as well as other problems like a shortage of refining capacity. Current) prices are not responding to the fundamentals of the market.

Libya opens gas field

May 29, 2006. NICOSIA Libya has opened one of its largest natural gas fields and has said Europe will be a major customer. The field has a daily natural gas production capacity of seven mcm and 35,000 bpd of condensate. Libya seeks to increase exports through an underwater pipeline to Italy and by using liquefied natural gas tankers.

Azeri firms invited for oil, gas projects

May 27, 2006. Petroleum and Natural resources Ministry has invited Azeri companies for gas pipeline project, LNG, oil and gas exploration projects in Pakistan. Both the sides agreed that there existed a lot of potential and scope for future cooperation in diversified fields, particularly oil and gas. The government attached top priority to strengthening and expanding bilateral ties with Central Asian states and they could be benefited from each other’s experience in the vital energy sector. The Azerbaijan companies were willing to undertake joint venture with Pakistan oil and gas companies and underlined the need for exchange of expert level delegations.

Venezuela wants 60 pc of Orinoco projects

May 26, 2006. Venezuelan state oil company PDVSA wants a 60 per cent stake in the country's Orinoco heavy oil projects, as the government vies for a bigger share of the country's energy wealth. Venezuela's four Orinoco Belt projects are worth an estimated $33 billion and include massive investments by oil majors like US-based Chevron, ExxonMobil and ConocoPhillips, as well as France's Total.

PDVSA expects 3.4m bpd output

May 26, 2006.  Venezuela expects to increase oil production by about 100,000 barrels per day (bpd) to 3.4 million bpd by the end of 2006. While Venezuela's total oil production is only around 2.6 million bpd. Opec's most recently Monthly Market Report shows Venezuelan production at about 2.6 million barrels per day in March, some 400,000 barrels per day less than Opec reported in October of 2002. The company restored full production capacity, and has promised to boost production to 5 million bpd by 2012.

Opec offers membership to Sudan

May 26, 2006. Opec invited Sudan to become a full member of the global oil body. Sudan is a small oil producing country whose current output stands at around 500,000 barrels per day (bpd). The country has attended meetings of the 11-member body for more than five years as an observer and production is rising steadily.

New Vietnam oil field to produce crude in ’07

May 25, 2006. A joint venture between Petrovietnam, Canada's Talisman and Malaysia's Petronas plans to start commercial production of a new oil field off Vietnam's southern coast in late 2007. The investment in the field is estimated at around $100 million. Petrovietnam holds a 40 per cent interest in the venture while Talisman Energy Inc. of Canada has a 30 per cent share and Petronas of Malaysia holds 30 per cent.

Duncan Macneill set to exploit oil reserves

May 25, 2006. Mulready Consulting Services Pty, one of the leading geologist firms in Australia, has valued recoverable reserves in oil blocks of Austin Exploration (AEL) and DMS consortium at around 800 million barrels. With oil prices touching over $60 per barrel, this implies oil reserves of around $48 bn. Austin Exploration is a joint venture between Texas-based DMS Exploration and Duncan Macneill group, which is promoted by the Jaodia family. The consortium owns two oil blocks each in Australia and USA. These are Yorktown prospect, Tirrawarra prospect in South Australia and St Gabriel, Polecat in United States. The consortium would invest around $3.2 mn for exploration activities in PEL 73 (in Tirrawarra prospect), the largest of the four blocks and the activity was likely to start from December 2006. 

Japan wants to develop Iran oil project

May 25, 2006. Japan wants to develop a huge Iranian oil field as planned to help secure a stable oil supply, after a report that Tehran might scrap the deal when a contract expires in September. Despite objections from Washington, Japan sealed a deal with Iran two years ago on a billion-dollar project to develop Azadegan with Iran, its third-largest oil supplier. The Japanese government has a 36 per cent stake in INPEX Corp., Japan's biggest oil developer, which plans to develop the southern part of Azadegan, estimated to hold 26 billion barrels of oil.

Lukoil in new drive to boost output

May 25, 2006. Russia's top oil producer, Lukoil, plans to double hydrocarbon output over the next 10 years, mostly in natural gas, on a bet that rising domestic gas demand will force sharp price increases and open opportunities for independent producers. Output would rise from around 2 million barrels of oil equivalent per day to more than four million barrels per day in 10 years' time. Between a quarter and a third of total 2015 estimated output would be natural gas.

BHP signs WA offshore oil exploration deals

May 25, 2006. French oil group Total had signed two agreements covering its participation in four new deep-sea oil fields off the north-western coast of Australia. Under a deal with the Australian company BHP Billiton, Total will take a 25 per cent interest in one exploration site. The Chinese oil firm CNOOC will also have a 25 per cent stake, while BHP Billiton, will hold 50 per cent. Total also signed an agreement with BHP Billiton and US oil and gas group Kerr-McGee to acquire a 25 per cent interest in three other sites, in which the CNOOC will also have 25 per cent. The four sites are located 300 to 400 kilometres off the Australian coast at depths of between 1,000 and 3,000 metres. Exploration is expected to begin in 2007.

Venezuela to boost natural gas production

May 23, 2006. Venezuela is planning a $1 bn investment to boost natural gas production at home, where demand for gas has long outstripped supply, even as it seeks a role in Bolivia's natural gas sector. Venezuela's new investment to develop five inland gas fields, to boost production so that the country can meet domestic needs and eventually export as well. Venezuela's state oil company would help Bolivia explore for and extract gas after its nationalization of the sector earlier this month, and the two countries are set to sign a series of energy accords in Bolivia. PDVSA's new investments would boost output in its northeastern San Tome region from 150 million cubic feet (4.25 million cubic meters) a day to 1 billion cubic feet (30 million cubic meters) a day within five years. The fields in Anzoategui state hold approximately 6.3 trillion cubic feet (180 billion cubic meters). PDVSA would be operating the fields and did not plan to partner with other companies. Venezuela has the continent's largest proven natural gas reserves with 147.5 trillion cubic feet 4.18 tcm.


Qatar may build oil refinery in Lebanon

May 29, 2006. A study is under way to set up an oil refinery in Lebanon with a production capacity of 150,000 to 200,000 bpd. The two countries are eagerly waiting for the completion of the details of the study of the project which would be implemented by a French company. A MoU was signed recently with Lebanon.

Tokyo Electric to sell LPG to vie with gas utilities

May 25, 2006. Tokyo Electric Power Co, Asia’s biggest power generator, will sell liquefied petroleum gas in Japan to compete with gas utilities as a surge in oil prices drives up demand for alternative fuels.  The company has an option through 2019 to buy 700,000 tons of LPG a year from the United Arab Emirates and plans to resell as much as 400,000 metric tons a year, people involved in the plan said. That would be worth about 23 billion yen ($205 million), based on prices at the Japan LP Gas Association.

Tokyo Electric, which generates 72 per cent of its power from gas and nuclear plants, will sell LPG in the latest round of escalating competition between power and gas utilities as they enter each other’s markets. LPG is used by about half of Japan’s 48 million homes for cooking and heating. Japan opened about 60 per cent of its electricity market in April 2005 to new entrants such as Ennet Corp, which has Tokyo Gas Co and Osaka Gas Co as major shareholders. Tokyo-based Ennet aims to more than double the amount of electricity it sells by 2009 when its parent companies complete new generation plants. The market shrunk to 18.5 million tons in the year ended March 31, 2006.

Saudi refinery deals extend its oil power

May 24, 2006. Saudi Arabia, already top global crude oil exporter, also aims to take a leading role in supplying much-needed transport and heating fuels via $12 billion worth of refining deals with multinationals. The kingdom, by the end of the decade, plans to ship an extra 800,000 barrels bpd of refined oil products with the help of U.S. ConocoPhillips and France's Total.

State-owned Saudi Aramco signed a deal with ConocoPhillips for a new export refinery in Yanbu on the Red Sea coast. The cost of each 400,000 bpd project at $6 billion up from initial estimates of $4-$5 billion when plans were announced a year ago.

Petrobras to expand Texas refinery to 200,000 bpd

May 23, 2006. Petrobras plans to double the capacity at its refinery in Pasadena, Texas, to 200,000 barrels per day. The boost in capacity is expected to occur in four to five years. The company had said in March that capacity at the refinery, located in a Houston suburb, would be increased to 150,000 bpd from 100,000 bpd. Petrobras earlier agreed to buy a 50 per cent stake in Pasadena Refinery System Inc. from Astra Oil Trading NV for about $370 million. The refinery, formerly known as the Crown Refinery, will be operated jointly by Petrobras and Astra. The refinery is being upgraded to meet new U.S. clean air standards for gasoline. The refinery will be able to process heavy oil and feedstock, including output from Petrobras's Marlim oil field in Brazil.

China to invest $6bn to build oil refinery

May 23, 2006. China wants to invest $6bn to build a crude oil refinery and petrochemical plant in Manjung, Perak. The project, a joint venture between Malaysian China Petroleum Corp Sdn Bhd (MCPC) and a Chinese consortium comprising China International New Energy Petroleum Group Co Ltd (CINEP) and Empire Global Corp. The infrastructure includes a liquefied petroleum gas storage facility, a condensate refinery and an international standard jetty. The refinery would have a capacity of 75 million barrels of petroleum per year. The output would be exported to China, which was facing a shortage of petrol, diesel and petroleum-based by-products.

Transportation / Distribution / Trade

Gazprom eyes Black Sea pipe

May 30, 2006. Gazprom may build a second pipeline under the Black Sea to Turkey, alongside an existing line that has capacity of 16 bcm per year. Gazprom, Russia's biggest company built the 1,200-kilometer Blue Stream pipeline with Italy's Eni and Turkey's state pipeline monopoly Botas. Turkey wants to become a hub for distributing gas to Europe from the Middle East and the former Soviet Union. It is also set to become a major hub for oil from Central Asia through a new pipeline built by a BP-led group to the Mediterranean. Gazprom may direct future supplies to the United States or Asia if European leaders turn to competing suppliers.

Kazakh oil arrives in China

May 26 2006. The first oil from a new 970km pipeline from Kazakhstan arrived at the Chinese border town of Alashankou. It is the first step in a bold plan to build a system, triple that length, from the Caspian Sea fields to China.The pipeline, from Atasu in central Kazakhstan, is designed to eventually carry 20mn tonnes of oil – 15 per cent of China’s imported crude for 2005.It is the first time that oil has been directly pumped into China,. The new pipeline has provided a direct link between Kazakhstan’s rich oil resources and China’s robust oil consumer market.

Alaska natural gas pipeline proposed

May 25, 2006. Alaska has a deal with the state's top three North Slope energy companies for a proposed natural gas pipeline to the Lower 48. The revised accord will ensure state oil revenues for 30 years under a proposed contract to recover North Slope natural gas, the Fairbanks (Alaska). Under the accord, Exxon Mobil Alaska Production Inc., BP Exploration (Alaska Inc.) and ConocoPhillips Alaska would pay a 20 percent tax on their Alaska oil profits, and they also could subtract investment credits of 20 per cent. The deal, which requires state legislative approval, effectively freezes oil and gas taxes for up to 45 years. If lawmakers, who could take up the proposal as soon as next week, approve the initiative, it would result in shipment of about 4 billion cubic feet per day of natural gas to the Lower 48.

Azeri gas to reach Greece by end of year

May 25, 2006. A pipeline transporting Azeri natural gas through neighboring Turkey to Greece will be in operation by the end of 2006. The construction of the pipeline started last July in a ceremony held at the middle of the bridge over Evros River, the natural frontier between Greece and Turkey. Stretching over 300 kilometres (186 miles), 209 kilometres of which is on Turkish territory, the pipeline will transport gas from Azerbaijan and other Caucasus producers to European countries. Starting with a capacity of 3.5 bcm (122.5 bcf) per year, the pipeline will eventually be able to handle an annual 11.5 bcm. The cost for the Greek part has been estimated at between 30 and 40 million euros, and for the Turkish part at 250 million euros. Turkey aims to become a regional energy hub between Europe and the natural gas and oil producers of the Caspian Sea and the Middle East. Another major project, the Baku-Tblisi-Ceyhan (BTC) pipeline, which will carry Azeri oil through Georgia to the Turkish Mediterranean port of Ceyhan and from there to world markets, is expected to be inaugurated in July.

Gazprom eyes BG, Sempra for Shtokman gas marketing

May 24, 2006. Russia's gas monopoly Gazprom signaled it may snub U.S. oil giants and choose other partners to help it market gas in the United States amid increasingly chilly ties between Moscow and Washington. The world's largest gas producer said it had intensified talks with Britain's BG and U.S. Sempra on marketing in the United States of liquefied gas (LNG) from its giant Shtokman Arctic gas field.

Murphy oil to supply gas to Petronas

May 23, 2006. Murphy Oil Corp. has agreed to supply natural gas to Malaysia-based Petronas Carigali Sdn under a 15-year contract. Under the supply agreement, Murphy will initially provide between 250 million and 300 million cubic feet of natural gas per day from offshore fields near the Malaysian city of Bintulu. Gas deliveries to Petronas' liquid natural gas facilities are slated to begin in 2008.

France buys 3.6 mn tons of gas annually

May 23, 2006. France is keen to diversify sources of natural gas supplies, within the context of the European Union's policy on providing stable sources. Gas De France contributes to the liquefaction plant by 5 per cent and contracted to buy 3.6 mn tons for 20 years making up about 10 per cent of France's total gas needs. The compound's economic strategic importance which proves that Egypt is capable of attracting foreign investments, and international companies and finance institutions' trust in the Egyptian oil sector. Idko Natural Gas Liquefaction Compound contains two plants with a capacity of 7.2 mn tons a year to export its product to France, other European countries and US.

Policy / Performance

China, India, Brazil could slash energy use

May 30, 2006. China, India and Brazil could reduce energy use by a quarter with simple efficiency schemes but banks have been sluggish to lend to such projects. The three-nation report, led by the World Bank and the U.N. Environment Programme, said many banks had overlooked chances to boost their profits by lending to help businesses cut energy waste while oil prices hover at around $70 a barrel. Cost-effective retrofits in buildings and factories could reduce energy use by at least 25 per cent in China, India and Brazil, it said of the four-year study. The conclusions were likely also to be true of other developing nations. Cutting energy waste would save hundreds of millions of dollars, cut noxious air pollution and reduce emissions of greenhouse gases released by burning fossil fuels such as oil, coal and natural gas. China, India and Brazil are home to almost 2.6 billion people, about 40 per cent of the world's population. Their energy use and emissions from fossil fuels, widely blamed for global warming, are set to double by 2030.

In India, five major banks were now lending to help stop energy waste. Projects in China sometimes faced hurdles because of the state grip on the banking sector while in Brazil, high interest rates had discouraged lending. Greater energy efficiency will improve businesses' profits and so make them more solvent clients for the banks.

GUAM as an energy alternative to Russia

May 30, 2006. The regional association of Georgia, Ukraine, Azerbaijan and Moldova (GUAM) has been redefined this week at its summit in Kiev the Organization for Democracy and Economic Development – GUAM. The word “democracy” ties it to a similar project, the Democratic Choice Community, although GUAM incorporates Azerbaijan that is not a member of the Community and is not seen in the West as a beacon of democracy in the post-Soviet space. However, oil consumers appear to be extremely tolerant to oil producing countries on serious matters. The democratic identity of the new association looks like a questionable declaration designed for Western partners, but the economic aspect appears to be much more interesting. GUAM members intend to create an energy alternative to Russia. But will it be viable. GUAM states constituted “a natural corridor between Asia and Europe, between the Caspian basin and Europe. The creation of an efficient transport infrastructure would guarantee the successful economic development of the organization for years ahead. But real politics takes into account not only strategic plans but also immediate future, which is fraught with problems.

Yushchenko plans to deliver Ukrainian energy “to and across the Caucasus. But in this case his country will have to compete with Russia, which is located closer to clients and can offer better terms. So, Yushchenko’s plans look very much like the ideas of Yuliya Tymoshenko, the former premier of Ukraine who suggested joining forces with Gaz de France to build a gas pipeline from Iran as an alternative to Russian gas supplies to Europe. New oil projects involving Azerbaijan and Ukraine are unlikely now. Last year, the Baku-Tbilisi-Ceyhan pipeline was commissioned, with Georgia acting as the transit country for a fee. But even before that experts pointed out that Azerbaijani oil reserves would not suffice for the ambitious project. Oil has been produced in that South Caucasus republic since before the 1917 revolution, and the once rich oilfields have become depleted. This project can be profitable only if Kazakhstan joins it, which Americans encourage by insisting on the construction of the trans-Caspian pipeline.

Ukraine’s main energy resource is gas, but it was not discussed in relation to Kiev-Baku cooperation at the summit. It had seemed a serious issue for discussion, as gas deliveries to Europe from the Azerbaijani Shakh-Deniz field by the Baku-Tbilisi-Erzurum pipeline are expected to start next year.

China hikes fuel price to support refineries

May 29, 2006. China has increased fuel prices for the second time this year to support domestic refineries and Beijing has given the nod to establish a new bank in the country. The Chinese government hiked fuel prices by more than 10 per cent. It was the second increase this year as Beijing tries to narrow the gap between domestic and global fuel prices. Chinese oil product prices remain more than 20 per cent below international levels. The move is intended to stem losses of China's two massive oil refiners, Sinopec and PetroChina.

France to keep gas, power prices regulated

May 29, 2006. The French government is planning to keep gas and electricity tariffs regulated beyond July 1, 2007 when the country's utility markets are to be completely liberalized. France has allowed companies to choose their suppliers but residential consumers have to wait until July 1, 2007. The country has also maintained a regulated tariffs system for some retail and enterprise consumers which allows them to get prices at below open-market levels. The French regulator, the CRE, has allowed this system to be phased out. The French government was also planning to introduce a "social gas tariff" for certain users. The government was also considering requiring that the distribution networks of power groups Electricite de France and Gaz de France be regrouped in separate divisions if they supplied more than 100,000 customers.

China’s oil supply is facing risks: expert

May 28, 2006. China’s oil supply is facing risks and the situation needs to be solved mainly through domestic efforts, including establishing a strategic oil reserve and an early warning system. It is not oil shortage but an uneven distribution of oil resources that caused instability in the world oil market. Rapid growth of world economy has led to a sharp rise of oil consumption in recent years. Conflicts, financial speculations and depreciation of US dollar have further driven oil prices to soar.

Venezuela sees natural gas shortage ending in ’09

May 25, 2006. Venezuela, which has South America's largest natural-gas reserves, expects a domestic shortage of the fuel to end in 2009. The current shortage is between 800 mcf a day to 1 bcf a day. Output is now 6.3 bcf a day, much of which is reinjected into oil fields to push crude to the surface. The current natural-gas shortage has resulted in cutbacks in oil and petrochemical production. The country has the world's eighth-largest natural gas reserves at about 150 tcf. Petróleos de Venezuela, the state oil company, is also in talks with private oil companies to take shares in their natural gas operations to expand output. The Caracas-based company has reached agreements to take shares in natural-gas operations run by Repsol YPF SA and Canada's Petrofalcon Corp.

PetroChina, Sinopec to face $ 2.84 bn tax on oil

May 25, 2006. PetroChina Co, China Petroleum & Chemical Corp and China National Off-shore Oil Company Ltd (CNOOC) may pay a combined 26.4 billion yuan ($3.3 billion) this year to cover a tax the nation has imposed on locally produced crude oil sold for more than $40 a barrel. China Petroleum, known as Sinopec, and CNOOC may face relatively larger drops in per-share earnings because of the tax than their bigger rival. China, the world’s second-largest oil consumer, is diverting revenue from sales of crude oil to industries that are bearing the higher costs of fuels and chemicals. Profit at the nation’s three biggest oil companies rose 28 per cent to $25 billion last year as energy prices climbed to records. PetroChina may pay 17.91 billion yuan toward the tax, Sinopec 4.84 billion yuan and CNOOC 3.66 billion yuan, Ma estimated. PetroChina’s realised oil price this year may rise 14 per cent to $55 a barrel, Sinopec may sell its oil for an average of 13 per cent more at $52 a barrel and CNOOC’s oil price may increase 23 per cent to $58 a barrel.The planning commission announced the tax in a March 24 statement. The rate increases gradually from 20 per cent to a ceiling of 40 per cent once oil prices exceed $60 a barrel. The fee rises in bands of five percentage points for each $5 gain in the price of an oil barrel.  The tax may make China become more reliant on crude imports because it would boost the cost of buying locally-produced oil, Ma said.

China’s decision to increase fuel prices for the second time this year may allow Sinopec to break even in its refining business for the second quarter.  Sinopec had a 7.88 billion yuan operating loss from refining in the first quarter because of government price controls, designed to shield consumers and companies from rising energy costs. Retail gasoline prices in China have gained 18 per cent this year, lagging behind the 40 per cent advance in Singapore.  The government increased the price of gasoline by 10.6 per cent, diesel by 12.3 per cent and jet fuel by 10.3 per cent. China increased prices for gasoline, diesel and jet fuel by 500 yuan a metric. The faster pace at which the government is adjusting fuel prices suggests China is accelerating moves to change its fuel pricing policy. The price increase is aimed at guaranteeing supply of refined oil products in the domestic market.  China’s oil refining industry reported a loss of 9.8 billion yuan in the first quarter.

Qatar to become energy powerhouse

May 24, 2006. Qatar is set to become an energy superpower second only to Saudi Arabia in the Gulf. A string of mega-projects to produce clean, liquid fuels from Qatar's gas reserves the world's third largest and increased crude oil output will put the small country in the big league of energy exporters by the end of the decade. The country's combined liquid gas and oil output was on track to be over six million barrels per day by 2010. There was strong global demand for liquefied natural gas (LNG), with markets ranging from Europe, and the United States, to Indonesia and China.

Qatar hoped to be able to indicate in a year or two how and when further gas projects can proceed, once a study has been completed on the impact of rising gas output on the field's reservoir. The next month Qatar will inaugurate the $1 billion Oryx gas-to-liquids (GTL) plant at Ras Laffan in the world's first commercial scale use of GTL technology to produce clean fuels. The project is a joint venture between Qatar Petroleum and South African's Sasol.

IEA sees shortfall of gas supply from Russia

May 23, 2006. Russia will be unable to meet its Western clients' gas needs by the end of the decade unless it invests more and reforms its energy market. IEA had urged the G8 nations to discuss the creation of an independent Russian energy regulator at their summit in St Petersburg in July. This would help avoid an impending shortfall in gas supplies by countering the power of state-controlled gas export monopoly Gazprom, activities of which were hindering investment.

Asian countries set to boost energy ties

May 23, 2006. Officials from 28 Asian countries meeting in Qatar will discuss boosting energy cooperation and hear a call for oil producers to invest their petrodollars in the economies of the Asian consumers. Foreign ministers gathering for the fifth ministerial meeting of the Asia Cooperation Dialogue (ACD) will examine a recommendation to invest profits from oil exports in Asia rather than in the West, said the meeting’s Thai coordinator. The idea is part of a proposal hammered out by six members of the ACD, a grouping born in Thailand in 2002 and which now includes such major oil producers as Russia, Saudi Arabia and Iran alongside energy-thirsty giants like China, India and Japan. Under the proposal, an ACD Energy Forum, which already met in Indonesia last September and will re1onvene in Pakistan in November, would be endorsed as ‘the sole platform for energy cooperation in the ACD framework’. The forum would ‘advance cooperation in four areas’, including research and assessment, investment in energy infrastructure development and contingency plans for the security of energy supplies. It would also ‘encourage’ producers to invest the profits gained from the oil trade which they (now) put in the European and American markets.



India's nuclear power plans $1.2 bn spending on uranium mine

May 30, 2006. India's nuclear power company plans to spend $1.2 bn on a stake in a uranium mine to support an expanded atomic power program, entering international bidding for the reactor fuel by nations including China and Japan. Nuclear Power Corp. of India approached Australian and Canadian companies on a possible joint venture in uranium mining. India may compete with China for deposits of the metal. The uranium is needed to run about 28 reactors that India plans to build after the U.S. and other countries end an international embargo on the sale of atomic technology to the world's second-fastest-growing major economy. India has doubled its nuclear power generation target to 40,000 MW by 2020. Prices for uranium, used to generate about 16 per cent of the world's electricity, have gained about 80 per cent in the past year as demand from utilities rises faster than output. Uranium for immediate delivery was last priced at $43 a pound on May 26. Higher oil, gas, and coal prices and new controls on emissions have prompted utilities to build nuclear reactors. More than $200 billion may be spent on the plants worldwide by 2030. India is planning to spend as much as $40 billion over the next 16 years to buy nuclear reactors from suppliers such as France's Areva SA, Electricite de France and U.S.-based General Electric Co. and Westinghouse Electric Co.

Private sector to set up power plant in Iran

May 25, 2006. The private sector will be setting up a power plant in Khorasan Razavi Province. Three trillion rials has been allocated to build the 1000 MW power plant. The plant will be located southwest of the Tus Power Plant of Mashhad and will cover an area of 33 hectares. The first phase of the power plant will have six units, and the first unit will become operational in January 2007, with others being brought on stream 45 to 60 days later.

Policy / Performance

China is expected to 2.8 bn tons of coal and 600 mn tons of crude oil ‘20

May 30, 2006. China's present phase of economic and industrial development requires higher energy consumption per unit compared with developed nations. China's energy sector has enormous potential, especially the coal, petroleum and natural gas industries, yet China is currently a net importer of oil, and imports are expected to increase to more than 900 million barrels in 2006, against a total demand of 1.993 billion barrels per year. China is looking to expand its production of coal, natural gas, and renewable energy sources such as nuclear, solar and hydroelectric power to meet the enormous appetite for energy spawned by its massive industrial complex and consumer sectors.

It is estimated that in 2020, China will need 2.8 billion tons of coal and 600 million tons of crude oil, two and a half times more than in 2000. Given this scenario, China will need to import 250 million tons of petroleum, about 70 per cent, from foreign sources. What's more, its carbon emissions will reach 1.94 billion tons, and China will likely overtake the US as the nation with the highest greenhouse gas emissions. To deal with this situation, the Chinese government will need to optimize the country's potential for energy conservation. At present, China's energy utilization efficiency is only 33.4%, nearly 10% lower than the advanced international level, and the unit energy consumption of major products for China's main industries is much higher than the international level. The government needs to implement policies to boost energy conservation, especially in the transportation, architecture and industrial fields.

In recent years, China has allowed market forces to play a larger role in its economy. Foreign investors are being encouraged by the government to participate in exploitation of the country's natural gas resources, energy infrastructure construction, sales of natural gas, coal mining, gas-fired power generation and the production of petrochemical products. Shell, Exxon Mobil and BP are jostling for a slice of China's gas market, where demand is expected to quadruple to account for 8 percent of China's total energy supply by 2010. In order to tap China's growing energy market foreign companies are making heavy investments. China will inevitably have a profound impact on future global energy markets, energy security, and environmental quality. A clearer understanding of what is happening in Chinese energy markets is essential, and this report explores the new energy-economic relationship that will influence both the international community and China.

Kyoto states to discuss post-2012 cuts

May 26, 2006. Countries that are signed up to the Kyoto Protocol reaffirmed plans to set new, tougher caps on greenhouse gas emissions after 2012, despite spreading scepticism about the environmental pact. Some 160 countries in Bonn set no timetable for agreeing on the goals, which would only apply to rich nations, but the talks would take at least two years. The world’s biggest polluter, the United States, was absent, having pulled out of Kyoto in 2001. The group has agreed an ambitious agenda to deliver new emission reductions. It was the first meeting of a group set up by Kyoto countries last December to work out a roadmap for emissions cuts beyond 2012. Kyoto obliges 35 rich nations to cut emissions by at least 5.2 per cent below 1990 levels by 2008-12. Burning fossil fuels powers the world’s energy needs but also pumps out gases such as carbon dioxide that are largely blamed for global warming of nearly 1 degree Celsius (1.8 degrees Fahrenheit) in the past century.

EU, US sign nuclear-fusion reactor pact

May 24, 2006. The European Union, the United States, and five other nations signed an agreement to build the first nuclear- fusion reactor. The aim of the International Thermonuclear Experimental Reactor, ITER, is to provide a new, safe energy source that will cut oil demand and curb greenhouse-gas emissions. Costing an estimated 4.57 billion Euros ($5.9 billion), the project will be the world's biggest scientific collaboration of its kind and represent over half the world's population. Japan, China, Russia, South Korea and India are also part of the agreement which now gives the go-ahead for practical work on the project to start.

The ITER project will reproduce the physical reaction - fusion - that occurs in the sun and stars. Fusion has several attractions as a large-scale energy source: its basic fuels are abundant and available everywhere; no greenhouse gas emissions; no transportation of radio-active materials; no possibility of "meltdown" or "runaway reactions"; no long-lasting radioactive waste to be passed on to future generations. Since the decision last June to locate the project at Cadarache in southern France, the 7 ITER Parties have been working together in a spirit of mutual confidence and co-operation, and have made remarkable progress towards the common objective of making ITER a reality as the next step in the path to developing fusion as an attractive, long-term option for supplying the energy needs of the world. The initialing of the agreements brings to an end a long and complex negotiation process. Now each partner will confirm the adoption of the agreement according to their national laws and practice. It is hoped that all parties will have completed the process by the end of 2006, which, in tandem with the completion of the process of gaining all necessary construction permits at the site, will mean actual construction can start in 2007.

Renewable Energy Trends


M’shtra trust to fund alternative energy projects

May 28, 2006. The Maharashtra government, in order to finance non-conventional energy projects in the state, would soon set up an “Urjankur Fund.” The state-run Maharashtra Energy Development Agency (Meda) is currently in the midst of completing the necessary formalities relating to the registration of “Urjankur Trust” at the level of the Securities & Exchange Board of India. The state government will provide an initial seed fund of Rs 218 crore ($47.57 mn) from the government’s green energy fund. Meda has already selected Infrastructure Leasing & Finance Services (IL&FS) as fund manager, which will bring in additional Rs 200 crore ($43.64 mn) from various banks and financial institutions in the fund. This will leverage Rs 2,800 crore ($611 mn) from the market for commercially viable renewable energy projects. Thus, the private promoters will have readily available easy finance on commercial terms. The finances required by the promoters of renewable energy for equity contribution would be organised from the Urjankur Fund. Meda has projected a capacity addition of 1,000 MW in the next three years. Of the 1,000 MW, nearly 750 MW would be added through bagasse-based projects by sugar co-operatives, 150 MW by mini hydro projects and 100 MW by biomass. In addition, Meda would make a formal proposal with the regulators for additional capacity of 1,000 MW in the next three years through wind power.

Reliance eyes cane processing for ethanol

May 24, 2006. Reliance Industries Limited is planning to set up three units, each with capacity to crush over 10,000 tonnes of cane per day (tcd), in Maharashtra. Unlike normal sugar factories, these would convert the entire sugarcane juice to ethanol. The Government's `gasohol programme' mandates oil-marketing companies to dope 5 per cent of their petrol with ethanol. The ethanol from the proposed units would basically meet Reliance's captive requirements. The first plant is to come up at Kurkumbh in Daund taluka of Pune. The other two units are in Kolhapur and Osmanabad districts, for which sites are apparently under finalisation. It seems that Reliance plans to have the sugarcane processing plant in the MEG facility for meeting its captive ethanol needs. RIL's proposal involves direct processing of cane for ethanol — which has never been attempted in the country.


Enel, Fenosa to invest $1.1bn on renewable in Spain

May 29, 2006. Enel Union Fenosa Renovables SA, a joint venture between Enel SpA and Union Fenosa SA, plans to invest as much as 850 million euros ($1.1 billion) to build renewable power plants in southern Spain, boosting production. As much as 650 MW of generation capacity will be built in the South-Western region of Extremadura, including solar and biomass plants and wind parks. Enel Union Fenosa Renovables has 900 MW of power plants in Spain and aims to reach 1,600 MW by 2010. Enel, based in Rome, is spending 2.3 billion euros to expand its renewable-energy production by 2010 as soaring oil and gas prices worldwide along with subsidies from governments from the U.S. to China encourage investment.

GE, China Sign Agreement on Clean Energy Technology

May 29, 2006. General Electric Co., the world's biggest maker of power-plant turbines, signed a memorandum of understanding with China on the development of clean-energy technologies. The agreement covers coal gasification, wind energy, jet engines that have lower-emissions and use less fuel, power- efficient railway locomotives and water desalination. GE is seeking to tap demand for cleaner energy in China, the world's fastest-growing major economy, as the country steps up efforts to cut pollution and curb its reliance on crude oil. China will spend 1.5 trillion yuan ($186 billion) in the next 15 years to boost renewable energy use to 15 percent of total supply.

PPM to build 100 MW wind project

May 24, 2006. PM Energy, ScottishPower, announced the construction of the Leaning Juniper Wind Project near Arlington, Ore. Leaning Juniper is expected to be commercially operational later this year. Leaning Juniper is expected to generate 100 MW of electricity. Typically, a 100 MW wind farm can provide clean, renewable electricity to more than 30,000 homes. The Leaning Juniper project will use 67 1.5 MW GE turbines. Wind power can serve as a hedge against volatile fossil fuel prices and has proven to be a reliable, low-cost source of energy.

BP taps into Asian demand for solar energy

May 23, 2006. BP, one of the largest makers of solar cells, expects Asian sales to accelerate as 1 billion people seek access to electricity and developed nations like Japan reduce fuel imports. Sales in the Asian market could grow 50 per cent a year by 2016, from a maximum of 30 per cent now, driven by increased demand in China, South Korea and Japan. BP expects global solar manufacturing revenue to double by 2008 from almost $500 million in 2005. Asia is poised to overtake Germany as the industry's main source of growth as rising prices for oil, natural gas and coal drive demand for renewable energy. The trend has prompted the emergence of specialized solar companies like the Chinese Suntech Power Holdings and the German Q-Cells and Conergy. BP in December formed a joint venture in China with China Xinjiang SunOasis, China's largest electrical transformer company, with the aim of tapping a market that is set to multiply 50-fold in the next 15 years.China's solar market is currently about 20 MW a year, and the country is targeting growth of about 1,000 MW a year by 2020.



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[1] See Oil Asia, January-March 1999, p.16.

[2] MoPNG, Hydrocarbon Vision 2025, 2000.

[3] As cited in MoPNG, "Restructuring Group Report 1996", MoPNG, 1997, p.5.

[4] TERI, TERI Directions, Innovations, and Strategies for harnessing action (DISHA), TERI, 2001.

[5] Planning Commission, Ninth Five Year Plan Documents, GOI, 1998.

[6] TERI/FACTS, "Gas Demand", TERI, 2003, unpublished internal paper.

[7] The GIDG parameter is the innovation of TERI.

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