MonitorsPublished on Jun 20, 2006
Energy News Monitor I Volume II, Issue 52
India’s Slippery Oil Diplomacy

he most significant fallout from India’s galloping economic growth is its increasing dependency on imports to meet its hydro-carbon demands. Unlike China, it is yet to emerge as a major player in the global energy market. But three developments are bound to alter this situation for ever: India’s growing demands for hydrocarbon; its dwindling domestic supplies; and the increasing globalization of Indian oil companies. These will shape and influence how India views its energy security and guide its long-term desire of stable sources of energy supplies.

The petroleum bill constitutes the bulk of India’s total imports and accounts for most of its trade deficit with the Middle East and elsewhere. For example, last year India's trade deficit stood at about US$29 billion, while its oil bill alone was over US$34 billion. Economists have universally agreed that by 2020, nearly 80 per cent of India’s hydrocarbon needs would have to be met by imports.

In the 1990s, India imported large quantities of refined products but the entry of private sector into the market has drastically increased India’s refining capacity. As a result, since 2001, India has emerged a net exporter of petroleum products. This will further increase demands for oil and gas resources.

Even without the current high oil prices, securing stable supplies at affordable prices has been high on the Indian agenda. The economic reforms and the bourgeoning financial resources of the state-owned oil companies have led India to pursue an aggressive oil policy.

This policy operates at two levels. In the first place, India is slowly moving away from its erstwhile practice of spot purchases and short-term contracts. These measures were unavoidable in the past, but stable and assured sources of supplies are essential if India is to push forward its economic growth. Moreover, some of the massive petrochemical plants in the country could not depend upon such ad hoc arrangements.

One such successful arrangement was the supply of 7.5 million metric tonnes (mmt) of liquefied natural gas (LNG) annually from Qatar. Under this arrangement, the Gulf state agreed to supply India with LNG for 25 years, with the first shipment delivered in March 2004. A similar arrangement with Iran for the supply for five million metric tonnes of gas through pipelines has hit a few rough spots largely due to the ongoing tensions between the US and Iran over Tehran’s suspected nuclear ambitions.

The second strategy has been in the realm of upstream markets whereby Indian companies invest in the exploration, production, and export of oil and gas in foreign fields. During the past few years, Indian companies have been actively involved in a host of countries. The OVL, the overseas arm of the state-owned Oil and Natural Gas Corporation, alone plans to acquire overseas oil and gas equity of 20 million tonnes by 2010. The company is active in 14 countries and has acquired 23 projects. Among others, it is operating in Vietnam, Russia, Sudan, Iraq, Iran, Libya, Syria, Myanmar, Australia, and the Ivory Coast and is exploring avenues in Algeria, Indonesia, Nepal, Iran, Russia, the United Arab Emirates, and Venezuela. In January 2005, the Indian company Reliance secured exploration rights in Oman. The largest Indian activity is in the Sakhalin oil fields in the Russia, where India has invested a whopping US$ 1.7 billion.

Such a strategy underscores India's determination to aggressively pursue an energy security policy and to minimize if not escape from disruption or fluctuation of supplies due to conflicts, natural calamities, or other unforeseen developments.

This strategy, however, comes with a price tag. Because India is new to this highly charged and competitive market, it faces a number of difficulties.

Questionable markets

In some cases, India entered into the oil market in countries at the receiving end of international criticism and sometimes even isolation. Sudan is a classic example of one such country that has become a major market for Indian investment and exploration. India already has invested over US$700 million in the GNOP oil fields in Sudan, and is currently working on a major pipeline project there. But India's entry into Sudan coincided with the civil war there and the departure of Western oil companies.

The same is true of Burma (Myanmar). In addition to its reservations about the policies of the military junta, Indian nationalists have had close ties with the father of the country's imprisoned pro-democracy leader, Aung San Suu Kyi. Its eagerness to explore Burma's energy potentials, as well as its desire to minimize Chinese influence there compelled India to sidestep the democracy issue.

India's problem with Bangladesh is somewhat different. Though geographically closer, gas supplies have been bogged down by periodic tensions and differences between the two. Despite its mounting trade deficit of over US$1 billion, Dhaka has been reluctant to contemplate gas exports to India, and the question has become a politically sensitive one in Bangladesh. As a result, bilateral differences over trade concessions prevented Dhaka from participating in the Indo-Burma gas pipeline, which would have benefited Bangladesh.

There are also cases in which Indian interests have come into direct conflict with the policies of the US. During much of the 1980s, Iraq not only supplied large quantities of oil but also provided political support to India on key issues such as disputed Kashmir. As such, Iraq could have been the ideal candidate for India’s oil diplomacy. But with the Kuwait crisis of 1990 and the subsequent UN sanctions, Iraq was rendered off limits to India. The post-Saddam Hussein political reality in Iraq is too fragile and unstable for India to consider any long-term investment in the oil sector. Similarly, the US-led oil embargo against Libya following the Lockerbie bombing affected Indian interests.

In recent years, Washington's policy vis-à-vis Iran over the nuclear question and its opposition to the construction of a pipeline between Iran and India via Pakistan practically stalled the estimated US$4 billion gas deal. In the end, India's desire for a civilian nuclear energy deal with Washington dictated strategy.

The Iran-Libya Sanctions Act (ILSA) passed by US Congress in 1995 explicitly called for sanctions against any oil major that made an “investment” of more than US$20 million in one year in Iran. While India has so far avoided any oil-related sanctions, it remains vulnerable to US pressures. A recent report for the Congress suggested that while the overall India-Iran gas deal “would not appear to constitute an ‘investment’ in Iran’s energy sector, as defined by ILSA,” it hinted that that construction of LNG pipeline would be problematic.

The proposed Iranian pipeline as well as the extension of Turkmenistan-Afghanistan-Pakistan pipeline to India also have security dimension. For long, Indian security establishments have expressed reservations about having its strategic energy supplies pass through Pakistani territory. Furthermore, in recent years, pipelines in the Pakistani province of Balochistan have often been sabotaged, thereby raising pipeline safety concerns.

Syria is another country where India is actively pursuing the oil exploration – a fact that pits New Delhi against Washington, which considers Damascus part of the "axis of evil". The same is true of the Indian interests in Venezuela, whose President Hugo Chavez portrays himself as the new crusader against US imperialism.

This energy drive has resulted in India evolving a mixed policy vis-à-vis China. At one level, geo-strategic realities compel New Delhi to seek friendlier ties with Beijing. Wherever possible it takes that extra step to ward off any impression that New Delhi has been working in tandem with Washington in containing Beijing. At the same time, however, their growing energy needs intensifies Sino-Indian competitions in third countries. Last year, India lost energy deals in Kazakhstan and Nigeria to Chinese oil companies. Indian officials cried foul when China eventually won the Kazak deal. Similarly, belated Indian interests and involvement in Burmese oil fields were partly spurred by its concerns over China and its strategic presence in that country.

At the same time, the Sino-Indian energy search is not always competitive. Wherever a country in question has controversial relations vis-à-vis Washington, China finds India to be a useful partner. Both are cooperating in the development of the Yadavaran oil fields in Iran, and under the preliminary agreement negotiated in October 2004, the state-owned Chinese oil giant SINOPEC would obtain a 51 per cent stake in Yadavaran, while the ONCG would get a 20 per cent stake. Likewise, Chinese and Indian state-owned oil companies have been collaborating in Sudan and Syria.

Macro energy picture bleak

The macro energy picture, however, is rather bleak, as India’s dependency on imports for its hydrocarbon needs would only increase as its economy grows. Indeed, domestic supplies account for just 30 per cent of India’s crude oil demands, and the government admits that “India’s oil import dependency is likely to grow beyond the current level of 70 per cent.”

The entry of India signals a departure from the past, and its oil companies are willing and able to actively pursue the overseas oil market, including exploration and production. At the same time, as new comers, they are yet to appreciate the competitive nature of the market or the high political cost involved in oil deals. Some of India’s foreign policy choices often impinge upon its energy requirements and vice versa. Oil diplomacy will thus be a slow but slippery learning curve for India.

(Courtesy: ISN Security Watch,

CDM Potential in Oil and Gas Industry (part – I)

1.        BACKGROUND

Oil, gas, hydroelectricity, nuclear power and coal are the 5 major sources wherefrom constituent of conventional primary energy is generated.  The Indian oil and gas sector constitutes 38% total conventional primary energy consumption, which is lower than world average of 67%.

 Source: Moore, S. et al. June 1998

The Indian oil and natural gas emission constitutes 3% of the total India’s CO2 equivalent emission. The two primary types of emissions from natural gas systems are CO2 and CH4. Nitrous oxide is released to a much lesser extent, through combustion, however because it is negligible compared with emissions of CO2 and CH4 it will not be addressed in this study. Figure 1 illustrates sources of CH4 emissions in the oil and natural gas system. It is important to remember that while this figure highlights the importance of compressors, fugitive emissions (venting and distribution leaks), and flaring (associated gas) as significant contributors to CH4 emissions, many of these sources also contribute to CO2 emissions. For example, compressors are a significant source of emissions for both pipelines and LNG trains, while the flaring of associated gas releases both CO2 and CH4.

The relative importance of emissions from the various sub-sectors: exploration; production; processing; transmission; storage and distribution differ among countries. Table 1 illustrates the general sources of emissions from the various sub-sectors.

Table 1: Sources of Emissions from various sub-sectors in oil and gas industry


Production & Processing

Transmission & Storage




Well Tests




Gas Plants





Venting & Flaring


Fugitive Emissions







Fugitive Emissions



Pipelines & meters


Pneumatic devices




Fugitive Emissions



Source: Moore, S. et al. 1998.

A study undertaken by IEA GHG determined that it would be technically possible to prevent over 70 per cent of present day emissions from the oil and gas industry. If one considers only currently available technologies, this figure could rise to 80 per cent by 2010. However, a full discussion must not only consider technical potential, but economic potential as well. Table 2 illustrates both the technical and economic potential of realizing CH4 emissions reductions.

Table 2: Technical and Economic Potential for Emissions Reductions in Selected Technologies

Industry Activity

Technical Potential

(% Reduction)

Economic Potential        (% Reduction)




Associated Gas



Process Vents & Flares

70 (vents)





Electricity and Fuel Use






Pneumatic devices



System Upsets



Fugitive Emissions



Source: IEAGHG Program

There are various options available for CDM projects through out the Oil and Gas industry in “Hydrocarbon value chain” from the following:

i.      Exploration and production of Oil and Gas to till it reaches the end user:

ii.      By increasing in the over all efficiency in different process unit like FCC,    hydrocraking, utility boiler and furnace, Cogeneration of power and steam, advance method like trigeneration and Integrated Gasification Combined Cycle (IGCC) can be effectively utilized for reduction of CO2 emissions and thus offers scope for CDM project activity.

iii.      In the transportation of Natural Gas, the methane leak form the pipe line and gate stations and compressor can be reduced through efficient device, retrofitting of devices, increasing the efficiency of the compressor.


In case of Oil and Gas industry, the CDM project activity can be broadly fall into following project categories.

(i)            Gas Flaring Reduction

(ii)           Energy Efficiency

(iii)         Fuel Switching

(iv)          Cogeneration

Below is the discussion on various emission reduction and baseline potential for projects associated with reduction of GHG emission from above mentioned project categories.


The category of fugitive emissions is rather broad, and can include emissions vented or otherwise leaked during normal operations in the system or during maintenance procedures. Venting and/or leakage occur in all of the sub-sectors listed above. In general, gas is normally vented to prevent a dangerous build up of pressure in the system, or to release gas in order to undertake maintenance on a section of the system.

Leakage occurs throughout the chain of activities, resulting from leaky seals or joints in pneumatic devices and compressors, or resulting from flaws or cracks in elements designed to hold or convey natural gas. Leaks from compressors are a large single point emissions source. Pneumatic devices are also significant sources of leakage, accounting for approximately 14 per cent of CH4 emissions (Figure 1).

The reduction of the flaring/venting of gas associated with the extraction of crude oil minimizes the wastes of a resource and contributes to reducing anthropogenic GHG emissions. When crude oil is brought to the surface, it releases gas components of different hydrocarbons, which is known as associated gas. This gas could be used/sold for energy purposes or be re-injected into the reservoir. Another way to dispose this excess associated gas is by flaring or venting it.

Flare refers to “ arrangement of piping and a burner to dispose of surplus combustible vapours...” (Tver and Berry, 1980). It is most commonly situated around a gasoline plant, refinery, or production well, where elevated flares are present as tall, chimney-like structures with visible flames at the top. Basically, flaring means the burning of associated gas, while venting is the release of associated gas into the atmosphere. Gas flaring and venting occurs during the drilling and testing of oil and gas wells, and from natural gas pipelines during emergencies, equipment failures and maintenance shutdowns.

The amount of GHG emission from gas flaring and venting depend on gas production, its composition, and the flare efficiency. Flaring releases hazardous chemicals such carcinogens and heavy metals. In addition, its emission of carbon dioxide (CO2) and methane (CH4) is a factor of global warming and climate change. The huge amount of the gas being flared could be used for other more productive purposes, such as for power generation. In addition, the gas utilization in international and domestic markets, site use and re-injection can also decrease the amount gas flaring.

(To be concluded)

(Courtesy: University of Petroleum and Energy Studies)


Allotment of Coal reserves

(In million tonnes)


Coal reserves allocated

Location of coal block







Tamil Nadu















M. Pradesh


Madhya Pradesh



M Pradesh & Maharashtra



Madhya Pradesh

Orissa & AP



West Bengal


West Bengal




Source: The Hindu Business line





Shipping cos set course for rigs

June 18, 2006. With the demand for rigs and other offshore assets set to soar following the surge in exploration and production activities, shipping companies are looking to invest in drill-ships and jack-up rigs, which can command high day-rate charges.  Shipping companies have found an alternative course to beat the bearish sentiment sweeping the global freight market. With the global and Indian offshore rig market facing a surge in demand in the wake of increased offshore oil exploration activities, shipping companies are diverting their investments from ships to rigs.

The companies are also putting their monies on acquiring other offshore assets, such as drill ships and supply vessels. The offshore rig fleet in India at present consists of 27 jack-up rigs, five drill ships and one semi-sub, all of which are working to their full capacities. The demand for jack-up rigs in the Indian offshore market is likely to increase to 36 by mid-2006 and that the exploration companies could face a deficit of at least four rigs towards the end of the year.

In India, the demand for rigs and other offshore assets is set to soar following the surge in exploration activities. With offshore fields accounting for almost 55 per cent of the Indian sedimentary basin, exploration and production activity offshore is promising.

Aban Loyd buys Norway's Sinvest for $446m

June 17, 2006. Oil drilling major Aban Loyd has acquired a 33.76 per cent stake in Norwegian drilling company Sinvest for $446m. Sinvest has two operational oil drilling rigs and six more under construction. The acquisition will place Aban Loyd among the top offshore rig operators globally. Aban Loyd is also in the race for acquiring an Indonesia-based drilling company.

The purchase was carried out by Aban Loyd’s Singapore-based subsidiary. Aban Singapore, a wholly-owned arm of the Chennai-based Aban Loyd Chiles Offshore, purchased 20.49 mn shares of Sinvest from the Skeie Group, the promoter, at a price of Norwegian Kroner 135/share, which puts the size of the deal at $446m.

ONGC, GAIL discovers gas field off Myanmar

June 16, 2006. Oil and Natural Gas Corp and state gas utility GAIL (India) Ltd has found a huge gas field in Block A-3, offshore Myanmar.  The Mya-1 discovery in Block A-3, where ONGC's overseas arm, ONGC Videsh Ltd, has 20 per cent stake and GAIL 10 per cent interest, flowed about 57.6 million cubic feet of gas per day during testing.  South Korea's Daewoo International is the operator of Block A-3, which lies adjacent to Block A-1 where 4 to 6 tcf of gas reserves were previously found. OVL and GAIL together hold 30 per cent interest in A-1.

GAIL eyes E&P blocks in Madagascar

June 16, 2006. GAIL (India) Ltd, which plans to invest approximately Rs 800 crore ($ 174 million) in exploration and production (E&P) activities over the next three years, is looking at oil and gas fields in Madagascar, Africa.  The company plans to adopt a consortium approach for bidding in Madagascar. Currently, the company is involved in exploration activities over acreage of more than 83,600 sq km. GAIL also plans to submit by September its bid for exploration and development of Calub and Hilala gas field in Ogaden onland basin in Ethiopia. In April, GAIL was short listed by the Ministry of Mines and Energy, Government of Ethiopia to participate in the bidding process for exploration and development of the two gas fields in Ethiopia.

BP may invest in oil, gas blocks in South East Asia

June 14, 2006. India's third biggest state-owned refiner Bharat Petroleum may invest in oil and gas blocks in South East Asia as it expands it production assets, especially in view of soaring demand for fuel.  Several Indian oil companies have been looking at opportunities in oil and gas fields overseas as domestic production showed signs of stagnation and fuel demand soared. Meanwhile, the US based oil firm Murphy Oil Corp has said it was in negotiations with Malaysia's petroleum giant Petronas for the sale of gas from its fields offshore Sarawak. It would be from seven gas fields discovered and developed offshore Sarawak by his company.

RIL, Niko expand development plan for D-6 block 

June 13, 2006. Reliance Industries Ltd (RIL) and Niko Resources Ltd are expanding the development plan for a huge natural gas field off India’s coast after wells pumped at rates well above expectations.  The D-6 block, in the Krishna-Godavari basin off the Andhra Pradesh coast, site of one of the world's largest recent discoveries, could also harbour more gas than today's estimated reserves of 11.9 tcf. The current plan calls for more than $3 billion in spending, an amount expected to jump with the new data. One year ago, the wells on D-6 were slated to produce 100 mcf a day each. Now they are expected to pump up to 350 mcf a day.  The partners have drilled 18 wells on the block, where they discovered the gas in 2002. Niko has a 10 per cent stake in D-6 and Reliance has the remainder.


IOC expects double digit growth in aviation fuel biz

June 19, 2006. Flying high on the country's aviation industry boom, Indian Oil Corp, India's largest refiner, expects to continue its double digit growth in the aviation fuel business despite the entry of Oil and Natural Gas Corp into the segment.  ATF consumption in the country has gone up from 3.6 million kilo litre (mkl) in 2004-05 to 3.8 mkl in 2005-06 and the domestic aviation industry is poised for a take off with a number of new budget airlines taking to the skies in recent months.

Kirloskar Oil to expand Nashik, Pune facilities

June 19, 2006. Kirloskar Oil Engines Ltd (KOEL) has registered 25 per cent sales growth in 2005-06. The company expects to maintain the tempo in the current financial year too.  Meanwhile, it is planning to expand its Nashik, Pune and Ahmednagar facilities.  The company manufactures a wide range of diesel engines. It has facilities at Nashik, Pune, Ahmednagar and Solapur.  In 2005-06, KOEL’s sales stood at Rs 1,400 crore ($304 million) compared with Rs 1,100 crore ($239 million) the previous year.  The company’s exports grew 46 per cent in 2005-06 to Rs 132 crore ($29 million), compared with the previous year’s Rs 90 crore ($19.5 million). It has set Rs 240 crore ($52 million) as export target for this year. 

BPCL sells 100,000 tonnes for July-Sept

June 16, 2006. Bharat Petroleum Corp Ltd (BPCL) has sold 100,000 tonnes of fuel oil for July-September lifting at deeper discounts via tender.  The refiner sold four 180-centistoke (cst) parcels, of 25,000 tonnes each, to Vitol Asia and Japan's Mitsui Oil Asia at discounts of $22-$25 a tonne to Singapore spot quotes a free-on-board (FOB) basis.  The parcels, of maximum 3.5 per cent sulphur and 0.991 kg per cubic metre density, are for loading from the refiner's Kochi terminal, with the first one, for July 1-5 lifting, being sold to Vitol.

A second parcel, for July 17-21 loading, was sold to an undisclosed buyer. The remaining two, for lifting on unspecified dates in August and September, were sold to Mitsui.  BPCL last sold a similar 30,000-tonne parcel for June 17-21 lifting, to Vitol Asia at a discount of $6-$7 a tonne to Middle East spot 180-cst quotes, on an FOB basis.  Indian refiners have sold unusually high volumes, totalling 1.81 million tonnes this year, just shy of last year's entire total of 1.83 million tonnes. Indian refineries, which have been running flat out with crude runs up 9.4 per cent in March year-on-year, will have to seek alternative outlets, probably the domestic market. However, exports are expected to shrink from July onwards as the benchmark Singapore market had weakened substantially since the start of the month.

Transportation / Distribution / Trade

BG Energy plans $420 mn gas grid in India

June 19, 2006. UK-based energy major BG Energy Holdings plans to set up a natural gas transmission and distribution network in India on its own, involving an investment of $270-420 million, through three fully owned ventures.  Of the envisaged investment, it is committing $120 million as equity. For the new network, BG Energy Holdings will set up subsidiaries in the south Indian states of Andhra Pradesh, Karnataka and Tamil Nadu.  The company has already invested $800 million in India through its two gas joint ventures, the Panna-Mukta-Tapti exploration venture, and a wholly owned subsidiary. 

Of the two gas joint ventures, the first is the Gujarat Gas Company, in which BG Energy holds 65.12 per cent equity, for the natural gas distribution business in Gujarat. The remaining equity in this venture is held by financial institutions.  The company also has 49.75 per cent holding in Mahanagar Gas — a joint venture with Gail (India) and the Maharashtra government for gas distribution in Mumbai and Greater Mumbai. In Mahanagar Gas, Gail holds 49.75 per cent equity, while the Maharashtra government has 0.5 per cent equity.  As per its latest project proposal, BG Energy Holdings will set up fully owned subsidiaries, which will develop a gas distribution and transmission network to supply natural gas to domestic, commercial and industrial customers.  It will also distribute compressed natural gas for automobiles. 

In case of its venture in Andhra Pradesh, BG Energy Holdings will source natural gas from gas fields on the east coast of India or from liquefied natural gas terminals planned across the west and east coast of the country.  Present government policy permits 100 per cent foreign direct investment (FDI) in the oil and natural gas sector.  In case of the oil and natural gas trading and marketing business, companies have to divest up to 26 per cent to Indian partners or the public within five years.  BG Energy Holdings also has a 30 per cent stake in the Panna-Mukta-Tapti exploration and production project.  The UK-based energy major further has a 100-per-cent-owned subsidiary in India called British Gas India Private Limited to oversee its business in the country.

ADAG co seeks nod for $3.5 billion pipeline

June 16, 2006. Anil Ambani Group firm Reliance Natural Resources (RNRL) has approached the government seeking permission to lay a Rs 16,000 crore ($3.5 billion) pipeline to take natural gas from Reliance Industries-operated field off the Andhra coast to its power plant at Dadri in Uttar Pradesh. The pipeline from Kakinada, the landfall point of the gas from KG-D6 block of RIL in Krishna Godavari basin, will pass through Hyderabad and onwards to Nagpur, Bhopal, Delhi and finally reach Dadri, where an Anil Ambani group firm is setting up a 5,600 MW power project.  The group had last year approached state-owned gas utility Gail (India) for transporting gas to its power plant.  Gail had offered to transport gas from KG basin to Dadri by using a part of the existing Hazira-Vijaipur-Jagdishpur (HVJ) network. Gail’s proposed pipeline from Kakinada was to connect to HVJ pipeline system at Vijaipur in MP.

Under the new scheme, the Anil Ambani group — which is to get at least 28 mn standard cubic meters per day of gas from RIL field for its power plant — is also planning to set up city gas distribution (CGD) network in cities falling on the pipeline route, especially Delhi, to supply gas for domestic and commercial use and to automobiles (CNG).  The gas would also be used for additional power plants. RNRL would lay the pipeline in two years from the date of receiving permission.

MRPL to supply petro products to Mauritius

June 16, 2006. Mangalore Refine and Petrochemicals Ltd will supply 1.03 million tonnes of petroleum products to Mauritius. MRPL signed an agreement with State Trading Corporation of Mauritius for supply of 1.03 million tonnes petroleum products in the year 2006-07 commencing from August 2006. The products to be supplied are Gas Oil (350 000 tonnes), Jet A1 (260 000 tonnes); Mogas (90 000 tonnes); Fuel Oil 180 CST/380 CST (3,30,000 tonnes) and represent full one year requirement of Mauritius.

ONGC to supply gas to Torrent Power

June 16, 2006. Oil and Natural Gas Corp (ONGC) will supply 0.9 million standard cubic meters per day (mmscmd) of natural gas to Gujarat-based Torrent Power Generation Ltd. The natural has would come from ONGC's share of gas produced from the Panna-Mukta and Tapti fields in Mumbai offshore. A gas sales agreement was signed between ONGC and Torrent at ONGC. The supply would commence around August 2007, when the 1100 MW Combined Cycle Power Plant of Torrent in Surat, SUGEN CCPP, would go full stream.  The sales agreement is valid for 12 years. The pricing of the gas would be considered for revision every 3 years. The current price is $4.75 per million British Thermal unit (mBtu)

IOC issues oil tender to Kandla

June 15, 2006. Indian Oil Corp has issued a rare import tender for 500 parts per million, or 0.05 per cent sulphur, gas oil for delivery to India's west coast. In the tender, which is scheduled to close on June 20, IOC seeks 30,000 tonnes of low-sulphur material to be delivered into the northwestern port of Kandla during July 5-15.  Traders said it was unusual for India's largest state-run refiner to buy west coast delivery gas oil cargoes, although they had been buying supplies for the eastern part of the country. 

Qatar co may take stake in MRPL’s LNG project

June 15, 2006. ONGC is in talks with the Qatar Investment Authority (QIA), the apex investment institution of Qatar, for an equity participation in the Mangalore LNG project to be developed by its subsidiary MRPL. Qatar has recently agreed to supply 1 mt LNG for MRPL’s LNG plant. Qatar has evinced interest in India’s infrastructure sector and is willing to pump in almost $5 bn for projects. While NTPC is in talks for the KayamKulam power project, ONGC is now hoping to take on board QIA as an equity partner in the LNG project. ONGC has a tie-up with the Hindujas for their LNG operations. They could play a crucial role in souring higher quantities of LNG from Qatar. Deliberations were currently on to see if QIA could take an equity in the LNG terminal project at Mangalore as this would ensure higher quantities of LNG for MRPL. The Mangalore LNG project, which appears to be the only making headway among the other projects, is only feasible if the required amount of LNG is available.

ONGC is hoping that the dual strategy of government to government deliberations and the advantages of partnering Hindujas, a strong corporate group in this region, could help in clinching the deal. ONGC had taken a board decision to enter into an MoU with Ashok Leyland Project Services (ALPS) a company of the Hinduja group. ONGC and ALPS are planning to float a joint venture with 50 per cent equity stake each for taking up projects in the LNG and power sector. The two companies plan to jointly promote develop and invest in LNG terminals with associated power, petrochemicals, gas pipeline grid projects and related opportunities in southern India. ONGC has recently acquired a government approval to set up an LNG-cum petrochemical complex in Mangalore, Karnataka. The company is also planning to develop a coastal SEZ much on the lines of other big corporate houses like RIL, Wipro, Nokia among others. 


India needs more LNG terminals in 5 yrs’: Govt

June 15, 2006. The draft approach paper to the 11th Plan (2007-12) has recommended that India construct at least two more liquefied natural gas terminals over the next five years. The government has projected that imports of natural gas will amount to 20 million tonne of oil equivalent of gas by 2011. This is because the Planning Commission does not expect transnational pipeline projects like the Iran-India-Pakistan pipeline and the Turkmenistan-Afghanistan-Pakistan-India pipeline to materialise during the period. At present, India has two functional liquefied natural gas (LNG) terminals, operated by Petronet and Shell at Dahej (5 million tonne per annum capacity) and Hazira (2.5 mmtpa), respectively. In addition, the Ratnagiri LNG terminal is expected to go on-stream by March 2007. Petronet has come out with tenders for chartering LNG carriers for its Kochi terminal with an installed capacity of 5 million tonne per annum. The draft approach paper said the expansion of Petronet’s existing terminals might also be required. While Petronet had provisioned for expanding its Dahej terminal by another 5 mmtpa, the terminal was operating at half its present capacity. Even Shell proposes to double its capacity at Hazira, provided demand picks up. 

Spot cargos spark LNG price war

June 14, 2006. The rush for cargos from global spot markets has sparked a rate war in the Indian LNG market and put pressure on transportation infrastructure. Shell is the first supplier to feel the pricing heat, while stateowned GAIL is facing twin pressures to lower its price and pump more gas through its arterial supply line. Gujarat’s biggest gas supplier GSPL is putting pressure on Shell to match the price of Petronet LNG, a firm promoted by government-run oil majors. GSPL is one of Shell’s major customers and is delaying taking deliveries from the multinational’s Hazira terminal.

Petronet LNG has triggered the market dynamics by securing a shipload of LNG from Egypt at $7.6 per mBtu (million British thermal unit, ex-ship). Shell has been bringing in cargos from its overseas facilities at $8 mBtu and last month GAIL brought in a shipload from Algeria’s Sonatrach at $9.28 mBtu. The rate war could impact financials of Shell’s Hazira terminal. The MNC charges $0.67 per mBtu for turning LNG back into gas against Petronet’s $0.56. Shell has floated separate companies for hauling LNG (offshore) and regassifying (onshore) and any rate war may also affect the onshore service firm as the company looks to shave costs.

Shell’s difficulty could be an indication for GAIL too. The company may not find it easy to repeat its success of selling future spot cargos as customers look at a cheaper benchmark. Simultaneously, it is also going to face pressure as customers and suppliers alike, including NTPC and Shell, respectively, vie for its pipeline space. Unlike crude, LNG works in a chain. Gas is liquefied for loading in cryogenic ships in supplier country. This has to be stored after unloading for regassification and pumped to consuming industries who cannot store it and must use up the supplies. This means if the cycle of shipments is to be maintained, GAIL has to keep evacuating gas from the import terminal at full capacity.

Policy / Performance

Refining constraints may continue for 3-4 years

June 16, 2006. The latest BP Statistical Review of World Energy — a benchmark publication for energy statistics has shown once again that the world is most unlikely to run out of oil anytime soon, and those painting a gloomy picture lack a solid argument for their view. World proved oil reserves grew year-on-year in 2005 indicating that the industry has been able to replace the oil it has produced with new reserves. Availability of resources is unlikely to act as a constraint for future supplies; yet, there could be other factors operating to stymie the ability of the industry to bring those resources to fruition. The global refining utilisation rate has reached 86.3 per cent in 2006, up from 85.9 per cent in 2005.

Oil consumption growth of one million barrels per day (bpd) outstripped capacity additions to the refining system of just 6.79 lakh bpd. Importantly, most of the spare capacity is straight runs capacity, while upgrading units, which provide refiners with ability to respond to demand for light products such as gasoline and diesel, are estimated to have been operating flat out in 2005.  Such constraints in the refining system are likely to remain in place in 2006 playing a key role behind the strength of high quality crude prices as well as light product crack spreads.

BP's annual review confirms that the refining capacity continues to grow far more slowly than the demand for oil products. The Asia Pacific region was the only one of the main consuming regions to register significant growth in oil refining capacity. However, the 2.9 lakh bpd increase in atmospheric distillation capacity failed to match the 3.7 lakh bpd rise in regional consumption. As a result, the capacity at 22.69 million bpd has fallen further behind the demand of almost 24 million bdp, the expert pointed out. In other regions, developments are not exactly encouraging. Trends in North America are contributing to an even tighter balance between refining capacity and demand, with last year's modest 2.2-lakh bpd increase in refining capacity only serving to marginally narrow the gap with demand that currently stands at over 4 million bdp. In Eurasia, refining capacity actually shrunk slightly. Although the region has a theoretical surplus of refining capacity over regional oil product demand, most of the spare capacity is straight run capacity, while upgrading units have been operating flat out in 2005.

KRL gets productivity award

June 16, 2006. Kochi Refineries Ltd (KRL) has received the FACT-MKK Nayar Memorial Productivity Award instituted by the Kerala State Productivity Council. The award is for the best productivity performance during 2004-05 in large industries category. The year 2004-05 was an excellent one in KRL's history both in operational and financial parameters. It achieved record crude throughput of 7.924 million tonnes per annum with a capacity utilisation of 105.65 per cent. The profit after tax of Rs 842.1 crore ($183 mn) achieved during the year was also a record. KRL also received the enterprise excellence award instituted by the Indian Institution of Industrial Engineering, Mumbai recently for financial and operational strength.

Oil majors go slow on retail outlet expansion

June 15, 2006. Although the government has given market authorisation permit to half a dozen oil companies to set up over 11,500 retail fuel outlets across the country ever since the deregulation of the petro-marketing business on April 1, 2002, only 1,855 have been come up, representing just 17 per cent of the total.

Of the 1,855 outlets, 1,266 have been set up by private sector Reliance Industries Limited (RIL) as compared to marketing rights for 5,849 petrol stations. Its rival Essar Oil Limited, on the other hand, has set up 518 against marketing rights of 2,000 ROs. Shell India Private Ltd, with marketing rights of 2,000, has only 12 pumps. State-run ONGC, with license of setting up 1,100 ROs, has not set up any retail outlets. Similarly, its subsidiary MRPL has no ROs to its credit. However, Numaligarh Refinery Ltd (NRL), a subsidiary of BPCL, has 59 operational retail outlets as compared to its license for setting up 510 stations. Apart from RIL and EOL, companies like Shell, ONGC, MRPL, NRL are yet to make an impact on the retail fuel market. The high crude oil prices have taken its toll on the retail expansion plan of these companies, including the private sector majors like RIL and EOL.

UP refuses to slash sales tax on petrol and diesel

June 15, 2006. Uttar Pradesh government ruled out slashing sales tax on petrol and diesel as has been done by some other states to partly offset increase in petroleum prices. UP imposes one of the lowest sales taxes on petrol and diesel compared to other states. The state levies 25 per cent sales tax on petrol and 20 per cent on diesel.

$3.3 bn lined up for Haldia petrochem park

June 15, 2006. The West Bengal government has sought Rs 15,000 crore ($3.3 billion) investment in phases from Indian Oil Corporation for the proposed Petroleum Chemical and Petrochemical Investment Region (PCPIR) in Haldia.  IOC has already been agreed to act as an anchor investor in the chemical special economic zone now termed as PCPIR.  The state government has requested IOC and the petroleum ministry that IOC should be a leader in downstream activities in the chemical SEZ along with its ongoing capacity addition in Haldia refinery.  IOC has already decided to increase the refining capacity at Haldia to 7.5 million ton from the current level of 6 million ton. 

Maharashtra too cuts petrol, diesel prices

June 14, 2006. Marginal relief from the recent fuel price hike came for consumers from Maharashtra as petrol and diesel were made cheaper by 80 paise and 30 paise respectively, in the state. The state cabinet gave its nod for the reduction in Vat on petrol to 28 per cent and a rupee from the 30 per cent and a rupee. In case of diesel, Vat has been reduced to 33 per cent and a rupee from 34 per cent and a rupee for Mumbai, Navi Mumbai and Thane. For the rest of the state, Vat on petrol has been reduced from 29 per cent and a rupee to 27 per cent and a rupee and for diesel, from 31 per cent and a rupee to 30 per cent and a rupee.  The government had decided to forgo revenue of Rs 350 crore which it could have earned if it had continued with the hiked prices of fuel.

Himachal cuts fuel prices

June 14, 2006. The price of petrol and diesel will be cheaper by Re 1 and 28 paise respectively in Himachal Pradesh decision was taken by the state cabinet. Petrol in Shimla will now cost Rs 48.6 per litre and diesel will be available for Rs 33.05 per litre. While in Dharamsala they will cost Rs 48.44 and Rs 33.03 respectively.  The government decided not to levy Value Added Tax (VAT) on the component of the recently raised prices of petrol and diesel of Rs 4 and Rs 2 per litre.  The government will have to bear a loss of Rs 16.88 crore due to this decision.



Chhattisgarh to invest in power sector

June 19, 2006. The Chhattisgarh government is expecting to generate 10,000 MW of additional power with an investment of a whopping Rs 40,000 crore ($8.71 bn) in the next four years. The additional power would be added from the units of Chhattisgarh State Electricity Board (CSEB), National Thermal Power Corporation (NTPC) and other public and private power companies of the country, who are setting up their plants in the state.  The state government has also laid the foundation stone for a 10 MW plant to produce power from rice husk in Sarguja district.

Nava Bharat to set up 64 MW power plant

June 19, 2006. Nava Bharat Ferro Alloys Ltd has got its board approval setting up a 64 megawatt, coal-based, power plant in Orissa. The plant will be set up in the eastern state next to its 30 megawatt project over the next two years.

Global power giants vie for mega projects

June 19, 2006. Leading global power majors are eyeing the country’s ultra-mega projects (UMP). Leading the brigade are Hong Kong-based China Light and Power (CLP), US-based AES and Khanji, Japan’s Sumitomo and the Singapore-based Globeq besides SNC Lavlin, GMH, TXU and Suez Energy. Of the 22 companies and consortiums shortlisted for request for qualification (RFQ) to bid for two mega-power projects — Sasan in Madhya Pradesh and Mundra in Gujarat — seven are global giants. The government has already completed the shortlisting process. The final bidding process is likely to be completed by October.

CLP and AES have been shortlisted for both the Sasan pit-head project and Mundra imported coal-based project while Sumitomo has been shortlisted for Mundra alone. The Khanji-GMH-TXU consortium has also been shortlisted for Mundra. CLP has a tie-up with the Bangalore-based GMR group for the Sasan project and is going alone for the Mundra coastal power project. Indian companies shortlisted for the RFQs for both projects include Tata Power, Reliance Energy, Sterlite, Essar, L&T, EIC Energy Infrastructure, Lanco and Torrent. Of these, Lanco has a tie-up with SNC Lavlin for Mundra and Globeq for Sasan, while Tata Power has tied up with Siemens and Doosan of South Korea for all the UMPs. Torrent Power’s wholly owned subsidiary, Ahmedabad Electricity Company, has been shortlisted for Mundra, while the parent company has been shortlisted for Sasan.   

VA Tech high on hydel power

June 19, 2006. Global power equipment major VA Tech is eyeing contracts worth Rs 4,210.8 crore ($917 mn) for hydel power generation equipment in India. The company may soon sign Rs 200-crore ($43.57 mn) contract with Karnataka Power Corporation for the Varahi (230 MW) project in Karnataka.  The work on the project is slated to be completed within two-and-a-half years after signing the contract. The company plans to capture 30 per cent share of the total generation capacity of around 14,036 MW expected to come up for development by 2009. In order to achieve this the company will have to slug it out with players such as BHEL, Alstom and Siemens. National Hydroelectric Power Corporation, NTPC, Himachal Pradesh State Electricity Board, Lanco, Tehri Hydro Power Corporation and North Eastern Electric Power Corporation are some of the the other agencies placing contracts. While projects having a combined capacity of 5,564 MW are expected to be awarded in 2006-07, a bulk of contracts for projects totaling a generation capacity of 8,472 MW are expected to come up in 2007-08 and 2008-09. 

PHL takes up small hydro projects in HP

June 15, 2006. Power Himalayas Ltd is taking up micro hydel projects in Himachal Pradesh. The company proposes to put up three projects in Solang Valley, district Kullu in Himachal. Once the project is allotted it will take six years to complete. The first micro hydel project of the company was commissioned in 2002-03. It was acclaimed the best project by the UNDP (United Nations Development Programme). It is a one MW project, used for the firm’s in-house operations. Two more projects of 2.25 MW and 2.5 MW would be set up by the company in Solang district of Kullu. The construction of 2.25 MW project is on and that of the other will commence in six months. The company would sell the surplus power to the State Electricity Board at a rate of Rs 2.50 per unit. The company has entered into an agreement for 40 years with the state government for the purchase of power. The company is also exploring the possibilities of putting up similar projects in Uttaranchal. An investment of about Rs 6 crore ($1.31 mn) is required for a micro hydel project. The operation and maintenance cost is about 3-6 per cent of the capital cost, which depends on the size and location of the plant. 

Apar Urja, MEDA test tidal power plant

June 15, 2006. The Maharashtra Energy Development Authority and Sangli-based Apar Urja successfully carried out test for producing power, using tidal waves, at Budhgaon in Guhagar tehsil of Ratnagiri district. The approval for research plant is given by the MEDA governing board. The capacity of new plant will be between 100 KVA to 250 KVA, depending on the requirements of the adjoining villages. The MEDA and the Apar Urja aim to take care of power requirement of four to five villages with this research plant. The cost of constructing 1 MW plant based on tidal waves is around Rs 10 crore ($2.18 mn). The per mega watt cost for the coal works out to around Rs 4 to 4.5 crore ($0.87 to 0.98 mn). But it is not very high when one takes into consideration the cost of a wind-mill plant of similar size, which is in the range of Rs 5.5 to Rs 7 crore ($1.2 to 1.53 mn). The plant load factor (PLF-measure to gauge plant's efficiency) for tidal plant is only around 20 to 25 per cent and in these plants, a PLF of around 80 per cent can be easily achieved. It is expected that the plant will start producing power by this year end. Maharashtra has 720 km long sea-coast and according to MEDA's estimate the state has potential to produce around 1,000 MW from sea waves. 

Orissa bags power investments of $3 bn

June 14, 2006. Orissa government signed MoU with three private companies to set up as many thermal power projects to produce a total 3,070 MW of electricity with an estimated overall investment of Rs 13,402 crore ($2.92 bn). As per the MoUs, Navabharat Power Private Limited intends to set up 1,040 MW coal fired thermal power project at Nua-Hata in Angul district in two phases with an estimated investment of Rs 4,675 crore ($1.02 bn). The Hyderabad-based Malaxmi NBFA Ventures Private Limited, Mahanadi Aban Power Company Ltd would set up 1,030 MW pit head coal based power project at Mangalpur in Dhenkanal district with an investment of Rs 4,527 crore ($986 mn). The GMR group's GMR Energy Group proposed to set up a 1,000 MW pit head thermal power project in Dhenkanal district with an investment of Rs 4,200 crore ($915 mn) in two phases. The state had abundant coal resources which could sustain thermal generation of about 100 GW for a period of 100 years. 

Transmission / Distribution / Trade

RNRL gas retailing through gas procured from RIL

June 18, 2006. Reliance Fuel Resources Ltd's proposed Rs 1,200 crore ($263 mn) entry into retailing of gas to households and automobiles may raise heckles from its supplier Reliance Industries Ltd. as the gas agreement between the two sides does not provide for use of gas other than for power generation. As per the proposal by Reliance Fuel Resources Ltd for city gas distribution, the domestic and auto supply in Delhi and Mumbai would be sourced from KG basin fields of RIL and other producers in the region. However, the supporting document including Gas Supply Master Agreement (between ADAG's Reliance Natural Resources Ltd and Reliance Industries Ltd), stipulate that gas procured from RIL could only be used in power plants REL. RFRL was laying a pipeline from Kakinada to Dadri via Vijaypur to transport gas from RIL's KG-D6 field to ADAG's 5600 MW Dadri power project, near Delhi. It projected a demand for gas (both CNG and piped natural gas to households and industries) in Mumbai at 2-2.5 mmscmd and 2.2-2.75 mmscmd in Delhi. 

BHEL eyes $1.73 bn contract in B'desh

June 17, 2006. India's largest engineering and manufacturing firm Bharat Heavy Electricals Limited is eyeing a Rs 79 bn ($1.7 bn) contract in Bangladesh for supplying power generation equipment for three gas-based and thermal plants with a combined capacity of 2,050 MW. The engineering major is also open to the idea of a consortium with the world's sixth largest thermal power generator, state-owned National Thermal Power Corp. Of the three gas-based power projects two projects are of 500 MW each while the third is a 450 MW project. It also has plans for setting up a 100 MW Asia Development Bank (ADB)-funded gas-turbine based plant at Sidhirganj in Bangladesh involving an investment of Rs 5 bn ($109 mn). The company also bagged Rs 1 bn ($22 mn) order to construct a captive power plant at Essar Steel's plant in Gujarat. BHEL has emerged as the market leader in co-generation and captive power plants, offering units from 10 MW onwards for both steam turbine-based and gas-based combined cycle power projects for total power and process steam requirements of various industries. 

PGCIL's transmission corridor gets Govt nod

June 16, 2006. The government cleared the Rs 804 crore ($175 mn) plan of Power Grid Corporation of India to strengthen East-West Transmission Corridor. The trasmission project will provide high capacity interconnection between Eastern and Western region, which would help in maintaining security and stability of interconnected grid under various operating conditions. The East-West Transmission Corridor Strengthening Scheme of PGCIL would be commissioned within 36 months from the date of investment proposal.

India may import up to 76 mt of coal by 2011-12

June 16, 2006. India, world's third largest coal producers, may have to import about 76 million tonnes of the fuel by 2011-12 to meet domestic requirement as total demand is estimated to nearly double to 710 million tonnes. The country may need to import 30-40 million tonnes of superior grade thermal coal and an additional 36 million tonnes of coking coal by 2011-12 to meet shortages, the Planning Commission has projected in its approach paper for the 11th plan (2007-12). These huge imports would be required despite the efforts of state-run Coal India Ltd, which has embarked on an emergency expansion plan as part of efforts to increase production by more than 60 per cent during the 11th plan. The plan panel observed that this "unprecedented" level of increase in output along with creation of necessary rail infrastructure for transportation of coal would be difficult to achieve and the country would have to increase imports. Power sector alone would require about 503 million tonnes by 2011-12, when total installed electricity generation capacity is projected to increase to about 200,000 MW from 1,25,000 MW at present. India has one of the largest reserves of coal and is the world's top coal producers after the US and China. Proven coal reserves stand at around 92 billion tonnes, while total reserves are estimated at more than 240 billion tonnes. According to government estimates, coal imports are expected to increase about 11.87 per cent this fiscal to 46.62 million tonne as against 41.67 million tonne in 2005-06. Of the total coal imports, about 24.19 million tonne of coking coal and 22.43 million tonne of non-coking coal are projected to be imported in 2006-07 as against 23.89 mt and 17.78 mt in 2005-06, respectively. Power utilities alone imported about 14 mt of superior coal to meet shortages of 21 mt in 2005-06. Coal imports by electricity companies are estimated to rise to about 20 mt this fiscal as shortages increase to 30 mt. 

Torrent joins hands with PowerGrid

June 16, 2006. Torrent Power signed joint venture agreement with Power Grid Corporation of India (PGCIL) in Delhi, for setting up transmission system for power evacuation from Torrent Power Generation (TPGL)’s 1100 MW SUGEN gas based mega power project at Akhakhol, near Surat and Dehgam in Gujarat. The estimated cost of the project is Rs 3 billion ($65.32 mn). The execution of the project will commence very soon. The 400 kv double circuit line would cover a distance of approximate 250 km. The company is also connecting Akhakhol and Surat for evacuating power for distribution in Surat. 

PowerGrid, REC to tie up for distribution

June 14, 2006. In a significant move to augment power distribution in the country, the Rural Electrification Corporation and the PowerGrid Corporation will shortly sign an agreement for setting up a joint venture company. The company, a 50:50 partnership, will undertake power distribution projects in the country. The new company will be formed keeping in view the fact that states, which are highly deficient in rural electrification, are also those that may be unable to implement the Accelerated Power Development Reforms Programme and the Rajiv Gandhi Grameen Vidyutikaran Yojana on their own in the given time-frame. States like Uttar Pradesh, Bihar, Jharkhand, Orissa, West Bengal and Assam, where household electricity is as low as 5-10 per cent, need sustainable support from central organisations. PowerGrid, NTPC Ltd, National Hydroelectric Power Corporation and Damodar Valley Corporation assist these states in developing electrification infrastructure in rural areas. 

Dabhol project may switch to LNG by March

June 14, 2006. In order to tide over the shortage of naptha for the Dabhol power project, project developer Ratnagiri Gas and Power Ltd is engaged in talks with the Indian Oil Corporation. The plant might also switch to liquefied natural gas by March next year. The project consumes around 30,000 tonnes of naphtha per month to generate electricity. The National Thermal Power Corporation Ltd had asked the power ministry to intervene for the purpose of lowering the cost of naptha by shifting its pricing from an import parity basis to export parity one. This demand was made by the power generation major so that generation costs of liquid fuel-fired stations became viable. 

Policy / Performance

Coal sector needs to be privatised: PC

June 19, 2006. The Planning Commission has stressed on the need for privatising the coal sector to boost investment in the area. Taking a long-term view of energy production there is a strong case for de-nationalising coal so that private sector investment can come into this crucial area. If petroleum, which is much scarcer than coal is open to private sector, there is no reason why coal should also not be opened up.  It said the total coal demand would shoot upto 670 million tonnes in 2011-12 from the current 432 MT while the power sector would require around 500 MT by 2011-12. Coal India Limited is curently aiming to increasing production to an unprecedented 60 per cent during the 11th plan period inclusive of the recently approved emergency coal production plan.

However, pending a consensus on the issue of de-nationalising the coal sector, every effort should be made to expand coal production through the route of captive mines and large coal users, especially in the power sector, can be given been available proven coal blocks for developing captive mines. Preliminary estimates suggest that in addition to coking coal the country may need to import 40 to 50 million tonnes of superior grade thermal coal by the end of the 11th Plan.  Coal-fired plants in Southern and Western coasts can be competitive using imported coal and the nation's electricity requirements justified such imports. However, this would require necessary port handling capacity and coast-based power generation capacity of around 12,000 to 15,000 MW to absorb the thermal coal imports.  Coal pricing and marketing also needs to be modernised. The e-auction route, which has been opened recently has worked well and has helped to nudge consumers towards more rational pricing.


Centre okays N-power station in WB

June 19, 2006. The Centre has approved the setting up of a nuclear power station at Egra in West Bengal's East Midnapore distric. It will be set up in the Egra area but site selection was yet to be made and it would be done in accordance with the feasibility report of the project.  The approval of a nuclear power station in West Bengal came nearly a decade after the Centre refused to okay a state government plan for one in the Sunderbans primarily because of strategic problems. A few years ago, a nuclear power station was commissioned at Nagoma in Japan with the consultancy of the CES.

Energy policy calls for national R&D fund

June 19, 2006. The framing of the integrated energy policy is nearing completion and it will be submitted to Prime Minister Manmohan Singh by the end of this month. Its major recommendations include setting up of a national energy fund, with an initial corpus of Rs 1,000 crore ($218 mn), for research and development in the sector. An expert committee, headed by Planning Commission member Kirit Parikh, has recommended setting up of an independent board to govern the fund, with representation from the department of science and technology, the Planning Commission and the ministries of coal, power and petroleum. Individuals, academic institutions and consulting firms will compete for this fund. The fund will support all stages of R&D, from basic research to diffusion with appropriate policies, resources and institutions. The policy also said that firms might be encouraged to enhance their research and development (R&D) expenditure through tax incentives. The total expenditure on research and development in 2004-05 was Rs 870 crore ($190 mn) for atomic energy and Rs 70 crore ($15.25 mn) for the ministries of power, coal and non-conventional energy sources. The policy also talks about setting up a virtual network of energy research institutions, research labs and private companies to assist in pooling of resources and exploiting synergies through joint research projects. 

States told to plug power losses, carry out reforms

June 16, 2006. The draft approach paper to the Eleventh Plan wants the guaranteed rate of returns for central power sector undertakings to be lowered to reduce the cost of power and augment the resources of state utilities. It also seeks to bring down aggregate technical and commercial (AT&C) losses from the present 40 per cent to at least 20 per cent and upgrade thermal and hydel power stations to augment generating capacity. The greatest weakness in the power sector is on the distribution side, which is entirely the domain of states. AT&C losses of most state electricity boards remain high and have made SEBs financially sick and unable to invest adequately in generating capacity. The apex panel believes this is the reason behind the SEBs’ limited success in attracting private investors to set up power plants. The panel believes that the ambitious target of bringing the AT&C losses to 20 per cent by 2012 is only possible if the SEBs’ management is professionalised and they are given autonomy devoid of political interference. 

Power-starved state gets NPC lifeline

June 16, 2006. Nuclear Power Corporation is in process of synchronising its 540MW, unit-3 of Tarapur Atomic Power Project to the western grid. The 540 MW, unit-3 of Tarapur Atomic Power Project (TAPP-3) has already achieved criticality. For unit-3, the time taken between criticality and synchronisation is about one-fourth of that taken for its predecessor, unit-4. At present the TAPP-3 is in the process of conducting mandatory tests. Once the station is declared commercial, there will be a consistent supply to the grid and in other words to Maharashtra.

NLC’s plant in Rajasthan cleared

June 15, 2006. The Union government has approved Neyveli Lignite Corporation’s lignite-mine-cum-power project in Barsingsar in the Bikaner district of Rajasthan. The Rs 1,368-crore ($298 mn) project includes setting up two units of 125 MW each and a mine with a capacity of 210 tonnes per annum. The power project of 250 MW is expected to ease the power crisis in the desert state. The development activities in western Rajasthan are expected to be accelerated with the setting up of a lignite-based thermal power project. It will also pave the way for exploitation of vast lignite reserves in Bamer, Bikaner and Nagaur districts, which have potential for setting up of lignite based power project of about 2500 MW. Exploitation of vast untapped lignite resource would enable the state to become self sufficient in its requirement and this would accelerate economic growth of the state. 

NTPC, Bhel may tie up for ultra mega projects

June 15, 2006. The NTPC Ltd may form a consortium with Bharat Heavy Electricals Ltd for developing the proposed 4,000-MW ultra mega power projects. Bhel is open to the idea of a consortium and may participate by either taking some equity in the projects or by undertaking the engineering, procurement and construction work for the projects. 

NHPC signs pact for power projects in Uttaranchal

June 14, 2006. National Hydroelectric Power Corporation Ltd has signed implementation agreements with Uttaranchal government for three hydroelectric projects having a total installed capacity of 1,045 MW. The agreements envisages the implementation of Kotli Bhel-IA (195 MW), Kotli Bhel-IB (320 MW) and Kotli Bhel-II (530 MW). NHPC is also involved in developing hydro power potential in Uttaranchal with its 120 MW Tankapur Power Station and 280 MW Dhauliganga Power Station supplying electricity to the northern grid.

October deadline for power plan

June 14, 2006. The Union ministry of power is hoping to finalise the roadmap for power generation during the forthcoming 11th five year plan by October 2007. It has already constituted a task force for drawing up this roadmap. The task force is divided into 7 sub groups with each group has a separate responsibility like manpower planning, transmission, distribution and generation. The ministry has targeted a net addition of 75, 000 MW during 2007-2012. According to ministry, the Central Electricity Authority and the power ministry have worked out 62,000 MW from conventional sources and 6,000 MW from non conventional sources. Besides, the ministry is expecting 7,000 MW from captive generation. Out of 62,000 MW, around 17,000 MW was likely to be hydel and the rest was thermal. The government will give special thrust on non-conventional energy sources like nuclear power. 

MoP to recharge cells of weak power plants

June 14, 2006. The power ministry (MoP) will begin afresh its ambitious project to work out the residual life of 96 power plants in India, after the first attempt in 2002 fizzled out in the absence of a clear procedure. A residual life assessment helps pinpoint a plant’s operational deficiencies so that it could be renovated. However, the ministry had been able to carry out such assessments at only 9 units adding up to 800 MW during the four years of the 10th five-year plan since 2002. The ministry is now extending the programme into the 11th plan, but with a better and proper road map. Around 40 plants are operating below the national average for PLF of 75 per cent, while 36 are operating at a PLF of 80 per cent and 26 plants accounting for 10,000MW are running at a PLF below 60per cent.




Sinopec to sign Garmsar contract with Iran

June 20, 2006. Chinese oil giant Sinopec will sign a deal to explore Iran's onshore Garmsar block for oil and gas. Iran tendered 16 blocks for exploration in 2004 but international companies complained Tehran was experimenting with a new contract type outside of the oil heartlands. In 2005, China imported 300,000 barrels per day of Iranian crude. It is looking to take delivery of Iranian liquefied natural gas (LNG) due to hit markets in 2009. Since 2001 Sinopec has built a huge oil terminal at the Caspian Sea port of Neka and has upgraded Iranian refineries at Tehran, Rey and Tabriz. China opposes United Nations economic sanctions on Iran over fears Tehran could be seeking nuclear warheads. Tehran denies the charge.

Kish Gas Field production exceeds $30 bn

June 20, 2006. The value of natural gas and gas liquid products of Kish gas field, which has been discovered recently, stands at more than 30 billion dollars. If every cubic meter of gas is valued at 2.5 cents and every barrel of gas liquids of the field is worth over 30 dollars, then total products of the field are estimated to be worth over 30 billion dollars. The recovery factor of Kish field stands at 75 per cent and exploitable gas of the field has been estimated at 36 tcf (1,020 billion cubic meters).

Aspen discovers gas well

June 19, 2006. Aspen Exploration Corporation discovered a new gas well in the Sacramento Valley gas province of northern California. The WGU #14-8 well, located in the West Grimes Gas Field, Colusa County, California, was drilled to an undisclosed depth and encountered approximately 100 feet of potential gas. Production casing was run based on favorable mud log and electric log responses. Aspen plans to drill several more wells in this field this year.

China's first strategic oil reserve facility to be ready in August

June 17, 2006. China will complete construction of its first strategic oil reserve facility in August. The plant, which will have the capacity to hold 5.2 mcm (32.7 million barrels) of crude oil is located in the coastal city of Zhenhai in China's eastern province of Zhejiang. There will be a second plant built in Zhejiang and one each in the eastern provinces of Liaoning and Shandong.

BP plans $37 bn energy investment in US

June 15, 2006. Oil giant BP Plc plans to invest about $37 billion in the United States, the world's biggest energy consumer, to explore, produce and process more oil and natural gas. BP will spend $16 billion over the next decade on oil and natural gas exploration and production in U.S. deep waters in the Gulf of Mexico. The company also plans to spend $17 billion over the same time frame on U.S. onshore oil and gas development in the Rockies and elsewhere.

Heavy oil, a sludgy grade of crude that is more difficult to refine, is becoming more common in U.S. crude markets as Canada produce more of it. BP will spend $3 billion in refinery upgrades to process more heavy oil from the North. BP would spend up to $1 billion in U.S. terminals of liquefied natural gas, if approvals are given. The Federal Energy Regulatory Commission approved BP's Crown Landing LNG terminal in Logan Township, New Jersey, on the Delaware River. The terminal would be able to store up to 9.2 billion cubic feet of natural gas and send out up to 1.2 billion cubic feet of gas a day. BP is also working to open LNG terminals along U.S. Gulf Coast.  BP remained committed to a $25 billion pipeline project that would ship natural gas from Alaska to the lower 48 states. The final terms for the project, which BP would carry out with two other oil majors, can be worked out with the state of Alaska.

Turkmenistan and China to form oil and gas venture

June 15, 2006. China National Petroleum Corp. and Turkmenistan plan to set up a joint venture to explore and develop oil and gas fields in the Central Asian state. Gas produced there will likely be used to fill a new pipeline, which China and Turkmenistan have agreed to build by 2009. The Central Asian state has agreed to provide 30 bcm of gas annually to China for 30 years. China is increasingly turning abroad to fuel its growing economy. In Central Asia, CNPC has taken over PetroKazakhstan in Kazakhstan for $4.2 billion and is also looking to explore oil fields in Uzbekistan.

S.Korea's SK Corp to develop Madagascar oil block

June 15, 2006. SK Corp. South Korea's top oil refiner had acquired a 20 per cent interest in a deep-water exploration block in Madagascar, as it seeks to diversify its energy sources. SK, which controls nearly a third of South Korea's oil market, said in a filing to the stock exchange the exploration will be conducted in partnership with ExxonMobil  and BG International. The Majunga block, which covers an area of approximately 15,840 square km (6,116 sq mile), is located in deep water in northwestern Madagascar, the world's fourth-largest island.

The acquisition in the Majunga Offshore Profond exploration block is under a farm-out agreement with Vanco Madagascar Limited, a unit of Vanco Energy, a U.S.-based oil exploration firm. It said the drilling of an exploration well was planned for early 2007.  The exploration will be conducted in a 50 per cent partnership with ExxonMobil, the world's largest publicly traded Oil Company, and a 30-per cent partnership with BG, in which ExxonMobil is the operator. South Korea, which imports all of its oil and is the world's fourth-biggest crude oil buyer, is trying to secure energy sources to fuel its export-driven economy.

Including the Madagascar deal, SK has exploration and development operations in 13 countries in Africa, Asia and the Americas. Madagascar has become an exploration hot spot in recent years as several oil majors have either acquired or are negotiating concessions, mostly in offshore blocks off its northwestern coast.

Norway's Statoil says finds oil in North Sea

June 15, 2006. Norwegian energy company Statoil it had found oil at the Valemon discovery in the North Sea. The well 34/11-5 S was drilled from the Kvitebjoern platform in 190 metres of water to a total vertical depth of 4,370 metres below the sea surface. The well was completed in rocks from the Middle Jurassic Age. The total length of the well is 7,380 metres. The licensees in this production license are Statoil (43.6 percent), Petoro (30 percent), Norsk Hydro (15 percent), Enterprise oil (6.45 percent) and Total (5 percent).

EPL discovered well in Gulf of Mexico

June 15, 2006. Energy Partners, Ltd. discovered second deepwater well in the Gulf of Mexico. The well, Mississippi Canyon Block 248 #1, located in 3,400 feet of water, was drilled to a total measured depth of 20,106 feet. While it is premature to estimate resources, the well encountered 90 feet of pay over three objectives. Raton has been temporarily abandoned pending further delineation drilling, scheduled to begin in the fourth quarter of this year. The results of the appraisal work in the Raton and Redrock discovery areas, located only five miles apart, will be used to create a combined development plan. Noble Energy, Inc.

Husky makes gas find off China

June 14, 2006. Husky Energy Inc. has made a natural gas discovery in the South China Sea; it could contain four trillion to six trillion cubic feet of recoverable resource. The well, located on Block 29/26, 250 km (155 miles) south of Hong Kong, is the first deep-water discovery off China's coast. Using 2-D seismic data, the Canadian oil company drilled the well, called Liwan 3-1-1, to a total depth of 3,843 metres (12,610 feet), encountering 56 metres (184 feet) of net gas pay. Husky, which is controlled by Hong Kong billionaire Li Ka-shing, plans to conduct a 3-D seismic survey to determine where to drill next. The company's partner is China National Offshore Oil Corp. CNOOC has the right to participate in developing the discovery for up to 51 percent working interest.

Gaz de France eyes Iranian investment

June 14, 2006. Gaz de France SA aims to invest as much as $300 million for a piece of Iran's offshore South Pars natural gas production and liquid natural gas venture. The company would like an 8-10 per cent stake in South Pars Block 11, in which Total SA has 80 per cent and Malaysia's Petronas 20 per cent. Under a proposal being considered, GDF's share would come from Total's share. Total also would sell as much as 5 per cent of its stake in the planned LNG plant to GDF. Currently, National Iranian Oil Co. has 50 per cent of the plant, Total 40 per cent and Petronas 10 per cent.

Petronas to drill 10 more deepwater wells

June 14, 2006. Petroliam Nasional Bhd (Petronas) will intensify its deepwater exploration activity following the signing of new production sharing contracts (PSCs) as well as the extension of existing PSCs. Petronas planned to drill 10 deepwater wells this year, up from nine last year.  Nine of them are located offshore Sabah and one offshore Sarawak.  Another 10 wells are planned next year, increasing to 11 annually over the next three years.  Malaysia has a total of 570,000 sq km exploration acreage with 60 operational PSCs.

Petronas would focus on deepwater drilling through at least 2010, targeting discoveries from an estimated 8 billion barrels of oil equivalent of undiscovered reserves.  The national oil company would also look at new projects and enhance oil recovery programmes to maintain its output, which currently stands at about 600,000 barrels of oil per year.  Kikeh field offshore Sabah was the first deepwater development in Malaysia with discoveries so far of about 1.3 billion barrels of oil and 7.4 trillion cu ft of gas. 

Delta Oil & Gas discovers new oil pool in Canada

June 14, 2006. Delta Oil and Gas discovered a Alida oil pool at East Wordsworth, Saskatchewan, producing the equivalent of 456 barrels of oil per day. The well reached total horizontal depth of 2033 meters encountering approximately 300 meters of potential oil pay in the horizontal section. 

Spain's Repsol to boost oil production in Libya

June 13, 2006. Spanish major oil company Repsol YPF will nearly double oil production in Libya over the next five years to about 450,000 bpd.  It expected to be producing around 400,000 bpd by 2010. The company cut its global proven reserves by 25 percent earlier this year. Repsol is currently producing 252,000 bpd in Libya, around 15 of the country's total production. Repsol has stepped up its exploration in the North African country and will sink 22 exploration wells this year after only 11 last year and many more" next year. The company has a very high success rate with an exploration success ratio of around 50 per cent. Repsol made $1 billion in operating profit in Libya and around $550 million to $600 million in net profit last year. The boost to activity in Repsol's Libyan activities reflects a change in emphasis in the company in its upstream (exploration and production) activities away from its roots in Latin America. Repsol has 140,000 square kilometres of concessions in Libya, an area equivalent to one-third of the area of Spain. Brufau described its position in the country as a "tremendous" asset. Libya is planning a third international licensing round later this year. Repsol would be present in the bidding while noting that the company had not been successful last time.


Iran’s Lavan refinery to produce 180,000 tons of liquid gas per day

June 20, 2006. Implementation of liquid gas plan at Lavan refinery will lead to daily production of 180 tons of liquid gas. Liquid gas production plan of Lavan refinery has been launched a while ago in cooperation with Chegalesh, Tarh Andishan and Pars Eskeleh companies and it is projected to be finished in 1.5 years. Implementation of the plan has started in March 2005. The produced liquid gas will be stored at spherical tanks up to the next 1.5 years. Then it will be carried by ship through a dock which is being constructed to be used at regional ports. The cost of building the dock has been estimated at 430 billion rials.

The main goals of producing natural gas include recycling liquid gas, reducing environmental pollution, reducing wastes, preventing wastage of resources, and improving performance indexes both from operational and economic viewpoints. The plan will earn the country 23 million dollars.  The oil dock of the island will be used for loading liquid gas, gasoline and diesel needed by adjacent islands, importing chemicals such as MTBE which will be used to raise octane number of gasoline, supplying needed cool water to the refinery and increasing resilience of refinery operations in Lavan.  Lavan refinery is not currently producing liquid gas. After implementation of the major development plan and liquid gas production project, it will produce 2,400 barrels of liquid gas per day.

Kuwait to set up refinery at Port Qasim

June 19, 2006. Pakistan and Kuwait signed several agreements and memoranda of understanding to enhance economic relations, including an MoU for setting up an oil refinery at Port Qasim.  The oil refinery will draw Kuwaiti investment to the tune of $1.2 billion. Its capacity will be 100,000 barrels per day. Under one agreement, the two countries will augment technical and economic cooperation. One of the MoUs envisages development of small and medium enterprises.

Nigeria: Total Plans N780 bn refinery

June 16, 2006. FEDERAL Government's drive for foreign direct investment in local petroleum refinery may attract one of the biggest refineries worth N780 billion from Total Nigeria Plc. Besides, the company which is currently celebrating its Golden Jubilee anniversary in the country would be investing some $20 million or N2.6 billion annually in its operations.  Total was exploring investment options in petroleum refining to service its Nigerian operations and the export market.  The feasibility studies have been commissioned on the plan, which, was still being critically evaluated by the company.  If the plan pulls through, Total will build a high capacity refinery in Nigeria given the synergy provided by its upstream company, Elf Petroleum Nigeria Limited.

Pertamina pumping US$11 bn into refineries

June 14, 2006.  PT Pertamina, Indonesia's state oil company, plans to spend as much as US$11 bn building and expanding refineries in the next five years to increase fuel output and reduce imports. The company wanted to raise refining capacity by 50 per cent to 1.5 million bpd by 2011. Indonesia imports about a third of its oil products, because its daily refining capacity is insufficient to meet domestic consumption. Rising crude oil prices and the weakening of the rupiah against the US dollar have increased the country's fuel import bill. Indonesia bought about 450,000 barrels of fuel products a day last year and will import 375,000 barrels a day this year, as demand falls after the government more than doubled domestic fuel prices in October last year. Pertamina would invite partners to participate in the new refineries as well as revamping existing ones. Pertamina, an Indonesian investor, and Kuwait Petroleum Corp would build a 250,000 bpd refinery on Selayar island in South Sulawesi. Another project is planned in Tuban in East Java province, with a capacity to process 250,000 bpd. The state oil company plans to modify its refineries to process so-called heavy crude, which is cheaper than sweet crude produced in Indonesian fields.

Rosneft oil co. to invest $3 bn in refining

June 13, 2006. Rosneft plans to invest almost $3 billion annually to develop its refining capacity. It plans to invest $2.7 bn in the next few years to develop our oil refining.  The company plans to triple the capacity of its Tuapse refinery on the Black Sea, and to build a refinery at the Far East port of Nakhodka at the terminus of the East Siberia-Pacific Ocean pipeline. Rosneft exports around 80 per cent of its crude, and will continue to do so in the medium term.  The policy of the company is to reduce the volume of crude exports and to increase the volume of oil product exports with high added value.

Transportation / Distribution / Trade

Iran to export $100 bn of LNG to China in 30 years

June 19, 2006. Iran is planning to export 100 billion dollars worth of LNG to China over the next 30 years.  The two countries are considering two LNG export contracts; Chinese were willing to set the level of contracts at 5 million tons and 10 million tons of LNG. Chinese companies also participate in developing gas fields of Iran and noted that they can take part in tender bids that will be held for developing Iran’s gas reservoirs.  The contracts will lead to annual investment of 10 billion dollars in the Iranian oil industry, a Chinese company has indicated its willingness to invest 10 billion dollars in Iran and China is willing for Iran to be its first and foremost oil supplier.

Gazprom signs first contract with Denmark

June 19, 2006. Gazprom has signed its first contract to supply Russian natural gas to Denmark.  They signed the first agreement on Russian gas supplies to Denmark. Under the contract, gas shipments to Denmark will begin in 2011 via the multibillion-dollar North European Gas Pipeline (NEGP), being built by Gazprom and Germany's BASF AG and E.ON AG under a joint venture in which Gazprom holds a 51 per cent stake and the German companies 24.5 per cent each. DONG Energy will buy 1 billion cubic meters of gas a year for a period of 20 years.  The NEGP is important for Russia, as the pipeline will pump gas from the giant Shtokman gas condensate deposit in the Barents Sea and possibly from other gas deposits in the north, making them attractive for investment. The first leg of the pipeline is set to come on-stream in 2010.

Statoil wins right to expand US gas import capacity

June 16, 2006. Washington has given Norway's Statoil approval to quadruple its capacity to import gas into the United States, a decision that could help win the company a coveted role in Russia's giant Shtokman project. It had gained a green light for expanding U.S. energy group Dominion's Cove Point gas import terminal and this was a step forward in its strategy to become a trans-Atlantic supplier. The U.S. Federal Energy Regulatory Commission (FERC) had approved the plan to enlarge its capacity at the Cove Point liquefied natural gas (LNG) terminal to 10 billion cubic metres a year from 2.4 billion. The added capacity could be used partly for imports of Russian gas, which would aid its case for helping to develop the Shtokman field in the Arctic, a project intended to supply the U.S. market. The expanded capacity is expected to be available from the second half of 2008.

Gazprom ready to join Iran-India gas line: Putin

June 15, 2006. Russia's gas monopoly Gazprom is prepared to take part in a pipeline project to link Iran's reserves to the growing Indian market. State-controlled Gazprom's role could include attracting finance for the gas pipeline, which would pass through Pakistan. The project has been under discussion for over a decade but progress has been slow.

Petronas to decide on Iranian LNG project

June 15, 2006. Malaysia's national oil company Petronas expects to decide by the third quarter this year whether to proceed with a $2 billion (euro1.7 billion) joint venture in Iran to develop the world's largest offshore gas field. Petronas has a 20 per cent stake in the South Pars liquefied natural gas, or LNG, project in Iran. France's Total SA has a 30 per cent stake, while the National Iranian Gas Export Company holds the remaining 50 per cent.

Indonesia to cut Bontang’s LNG shipments by 15 per cent

June 13, 2006. Indonesia, the world’s largest exporter of liquefied natural gas, may cut shipments of the fuel from its biggest plant next year because of lower gas production. Indonesia’s LNG exports from PT Badak NGL’s plant in Bontang on Borneo Island may be 15 per cent less than the volumes promised to buyers. Producers won’t be able to increase gas supply to the plant next year. Indonesia has cut LNG shipments 10 per cent during the past two years because Chevron Corp, and a venture owned by BP Plc and Eni SpA have failed to meet production targets on Borneo Island. Shipments from Bontang, the world’s largest LNG plant, have been cut to 322 cargoes of gas this year from the 370 cargoes committed to buyers in Japan, Taiwan, and South Korea.

The buyers have agreed not to ask for compensation this year. Japanese buyers may get as many as four cargoes from Qatar to make up for the lower shipments from Bontang in an arrangement negotiated by Pertamina.  PT Arun NGL in Aceh, the older and smaller of Indonesia’s two LNG plants, will export 62 cargoes this year, nine fewer that its commitment, as gas production from fields operated by Exxon Mobil Corp declines and the government diverts gas to the domestic market.

Policy / Performance

Gazprom, Shell have $7 bn plan

June 20, 2006. Gazprom and Royal Dutch/Shell are thinking about building a gas-to-liquids plant in Western Siberia in a project potentially worth $7 billion to $8 billion. Shell is in discussion with Gazprom over a preliminary feasibility study for a gas-to-liquids project in Russia. The estimate Ryazanov gave for investment in the project, Russia's first GTL plant, would put it on a a par with Shell's proposed investment in the world's biggest GTL plant in Qatar.  The cost of the Pearl project in Qatar could hit $8 billion, up from a 2003 Shell estimate of $5 billion.  GTL technology processes natural gas into clean oil products such as low-sulfur diesel, which is increasingly in demand to meet tightening restrictions.  Gazprom said a move into GTL would make sense, as the cost of pumping gas from some fields was rising as output from those fields declines.

ADB loans Bangladesh $230m for gas supply

June 19, 2006. Bangladesh and the Asian Development Bank (ADB) signed a $230 million loan package to improve the country’s natural gas infrastructure and delivery system. Norway is providing $5 million in a grant for capacity building component of the project. The project will construct four gas transmission pipelines totaling 353 KM (221 miles) to transport about 360 mcf of natural gas a day to the less developed western region of the country. About 320 KM of gas distribution pipelines will also be constructed to create a new distribution network in the Rajshahi area in western Bangladesh. Based on an ADB-financed study, Petrobangla, the Bangladesh Oil, Gas and Minerals Corporation, has formulated an investment plan for the period 2002-2020 that envisages $3 billion in investment for the gas sector to meet the country’s increasing gas requirements. Bangladesh received $815.81 million in foreign aid between July and March of fiscal 2005/06, down from $1.08 billion in the same period a year earlier.

Russian oil giant seeks to win over wary investors

June 18, 2006. The Rosneft oil refinery plant in Gubkinsky in west Siberia. Rosneft, the second-biggest Russian oil producer, is mounting a lavish public relations campaign to win over wary foreign investors before planned flotation on the London and Moscow stock exchanges next month.

Malaysia may raise natural gas prices

June 18, 2006. Malaysia will consider raising the price of subsidised natural gas to relieve some of the pressure on state-owned firm Petronas. Petronas was supplying gas at 6.40 ringgit (1.76 dollars) per million British thermal units (mbtu), well below the market price of 14 to 18 ringgit per mbtu. The government will also take into account what impact a price hike would have on consumers. Petronas introduced a controversial natural gas price hike in December, but after public protests, the government asked Petronas to reverse the move. The request from Petronas for a gas price hike would only be considered after talks between the government and power producers are completed. There is no set timeframe for the talks. The government is trying to re-negotiate power purchasing agreements between Tenaga and power producers to counter the increasing costs of oil and gas.

S. Korea, France to expand energy cooperation

June 16, 2006. South Korea and France have agreed to increase cooperation in the energy sector in a bid to better cope with rising global oil prices. From the two countries agreed that they need to make concerted efforts to better develop overseas energy resources, including oil and gas fields.

Ukraine seeking to keep current price for Russian gas until 2011

June 15, 2006.  Ukraine will seek to maintain the current rate it pays for Russian natural gas until 2011. Ukraine and Russia were involved in a bitter pricing spat at the start of the year, which was only resolved when the two countries' leading energy companies came to an agreement that also involved little-known trader Rosukrenergo.  On February it had formed a joint Russian-Ukrainian natural gas distribution venture on a parity basis with Naftogaz - Ukrgazenergo - which had received a license to supply 5.04 billion cu m of gas per year to Ukraine at $95 per 1,000 cu m for a period of five years.

Iraq requires $10 bn to revive oil industry

June 15, 2006. Rebuilding the infrastructure of Iraq's oilfields will need a total of $10 billion. These investments are essential if Iraq wants to boost its production capacity to 3.5 million barrels annually and then to 6 million barrels daily instead of 2.650 million, from the northern and southern oil fields. The oil industry needs investments to purchase special equipment to separate water from oil in producing oil fields, new digging equipment and new machines and vehicles. 40 oil wells had been repaired and 10 oil wells dug in 2005, and 200 oil wells in the Rumaila oil fields and West of Qurna needed urgent maintenance. The investments allocated by the Iraqi Government were insufficient to cover all the requirements of the Iraqi oil sector, adding that the government allocated $3 billion last year which was not enough. Iraq also needed $5 billion annually for the development of newly discovered oil fields, and exporting terminals, especially those in Basra, need to have their storage capacity increased.

Georgia interested in energy cooperation with Iran

June 15, 2006. Gerogia was seeking to diversify energy supplies and looks to Iran as a potential source of energy during the January energy crisis, Georgia for the first time received gas supplies from Iran. Iran supplied Georgia with natural gas for over a month after two explosions on January 22 severed gas and electricity supplies from Russia, the country's sole natural gas supplier.

IEA: World, OPEC oil supplies rise

June 14, 2006. World oil supplies rose by 445,000 bpd in May to 85.0 million barrels, with OPEC pumping half the increase, but demand remains firmly steady even though high prices are weighing on consumption. The International Energy Agency drew a broad picture in its monthly report of strongly growing demand for oil products in developing countries in contrast to flat or declining demand in advanced industrialised countries in the OECD. Real spare production capacity by the Organisation of Petroleum Exporting Countries remained below 2.0 million barrels per day as security problems and pipeline "outages" affected 800,000 barrels per day of output by Iraq and Nigeria.  World demand growth for oil products this year was "broadly unchanged" at 1.24 million barrels per day. This reflected a marginal downward revision from 1.25 million bpd.  The agency commented in its monthly report: "Recent strength in China and the US is partly offset by weakness in OECD Europe and Asia, but still results in a 160,000 barrels-per-day upward revision to second-quarter demand growth.

Demand from developing countries outside the OECD clearly dominates the picture. Although demand from these countries accounted for only 41.0 per cent of world demand, it represented nearly 85.0 per cent of global demand growth in 2005-2006.  Apparent demand in China had surged unexpectedly bu 9.6 per cent in April. Meanwhile demand from advanced industrialised countries was expected to have declined in the second quarter of this year. Of the world increase of 445,000 barrels a day of oil supply in May, supplies from OPEC accounted for an increase of 215,000 barrels per day from the April figure to 29.8 million bpd.  The IEA revised upwards its estimate of overall demand for oil and stock from OPEC by 0.3 million bpd to 28.43 million barrels in the second quarter of 2006, rising to 29.5 million bpd by the end of the year.  The IEA is the energy market monitoring agency of the Organisation for Economic Cooperation and Development. It said that OECD stocks of crude oil in May had risen to the highest point for 20 years, although this reflected the effect of seasonal maintenance on facilities in reducing the amount of oil that was drawn through refineries.

Overall in April, total OECD stocks of oil cover in relation to demand was steady at 54 days in view of seasonally rising crude and product demand.  Stocks held by industry in the OECD area of 30 countries had risen by 17.0 million barrels from the March figure and by 58 million barrels from the figure in April 205 to 2,631 million barrels.  In a breakdown of demand trends that demand from the OECD area was expected to show a decline of 50,000 barrels per day on a 12-month basis in the second quarter. The agency revised upwards its estimate of demand in the United States in the second quarter by 170,000 barrels per day but in all, projected US demand growth remains broadly unchanged at 0.9 percent (in 2006). The report concluded that Chinese apparent demand of refinery production plus net imports of products grew by an unexpectedly robust 9.6 percent year-on-year in April.



Ranhill to invest in Philippine power plant

June 20, 2006. Malaysian engineering firm Ranhill Bhd. will pay US$227.5 million (euro180.7 million) to purchase a Philippine power plant's assets.  It had agreed to buy the plant's holding company, YNN Pacific Consortium Inc., for a separate US$8 million (euro5.6 million) on June 14, as well as subscribe for new YNN shares.  YNN currently has the right to buy the assets of a 600 MWcoal-fired thermal power plant in Masinloc, Zambales in the Philippines. The total bid price for that purchase is US$561.7 million (euro446 million), of which Ranhill will contribute 40 per cent, or US$227.5 million (euro180.7 million), which must paid by June 30. The plant will bring Ranhill's total capacity to 720 MW, in line with its aim of raising capacity to 1,000 MW by 2009.

Hydel power stations on canals

June 18, 2006. Pak’s Punjab Govt. is finalising a programme to establish hydropower stations over its canals and 48 points have already been identified for the purpose.  The State government would encourage private sector and foreign investors for the establishment of these projects. Relations between Pakistan and Hungary were based on strong footings and there were ample chances of cooperation between them in hydel power generation projects and other sectors. The government had adopted a comprehensive policy for management of water resources and for taking full advantage of them. Foreign investors were taking keen interest in establishment of power stations over provincial canals.

Rs. 300 million-hydropower project had been started in Mandi Bahauddin as a pilot project. The station would generate 3.7 MW electricity and in case of its successful operation many such power stations would be established at other places in the province. The agreement between Hungary’s Ganz company and HMC regarding manufacturing of turbines as a welcome step, saying this would facilitate establishment of power plants over the provincial canals. Transfer of world standard technology would prove beneficial for the country’s economy and power production here. The agreement would leave a positive impact on trade and commerce relations of both the countries. The Hungarian company had an excellent technical capability to produce turbines whose production would help the provincial government easily set up its power stations.

Centrica to build $741 mn power plant

June 16, 2006.  Centrica Plc, the U.K.'s largest energy supplier, proposed building a 400 million-pound ($741 million) natural-gas-fired power plant that would start in 2008, to help meet rising demand as older generators close.  The company, based in Windsor, England, will build the 885 MW station at Langage in the southwest of the country to provide enough power for about 1 million homes. The new plant, which has planning consent, will be built as the nation's generation reserve margin, the difference between peak power demand and supply. 

Iran’s Bushehr nuclear plant to be launched in ’07

June 16, 2006. Iran's Bushehr nuclear power plant will be put into operation in 2007. The construction of the plant is proceeding on schedule and, barring problems; fuel will be delivered to the plant in 2007.

Transmission / Distribution / Trade

Alstom wins power plant order from TRUenergy

June 19, 2006. French engineering firm Alstom it had won contracts worth 250 million euros ($316.6 million) from TRUenergy Ltd, a unit of CLP Australia Holdings, to supply and service a gas-fired power plant. The 400 MW gas-fired combined cycle power plant would be built at Lake Illawara near Sydney and was expected to start commercial operation in autumn 2008.

PA to import power from Egypt, bypass Israeli grid

June 19, 2006. The Palestinian government plans to build an electrical facility in Egypt that will allow it to take power from Egypt, weaning itself off more expensive Israeli electricity. The Rafah border crossing in northern Egypt that authorities in Cairo had approved the project, which would cost $15 million and cut the Gaza Strip's electricity bill by 44 per cent.  The Kuwait Development Fund would bear the costs of the plant, which would be built five km (three miles) into Egypt from the Egypt-Gaza border. 

Policy / Performance

Russia's power sector needs $27.5 bn in investment by 2010

June 19, 2006. Russia's electric power sector needs 745 billion rubles (about $27.5 bln) in investment and the oil and gas sectors need up to $440 bn before 2010. The fuel and energy sector needed about $260-300 billion in investment, the gas sector $170-200 billion and the oil industry $230-240 billion by 2010, and that Russia had created an investment-friendly environment. The electric power sector needed to raise about 100 billion rubles (about $3.7 billion) on capital markets before 2010 to boost investment. The power generating companies could invest about 260 billion rubles (about $9.6 billion) of their own funds into development by 2010, and additional share issues could bring in about 327 billion rubles (about $12.1 billion), while the ministry's investment guarantee mechanism is expected to yield another 58 billion rubles (about $2.1 billion).

The government intended to invest about $10 billion in the aircraft-making industry before 2010 in partnership with private business. Russia's electricity UES welcome foreign investment in two or three power plants of the 20 generating companies that resulted from energy-sector reform. Investment was planned to total about $85 billion up to 2010, and that the sector needed to raise about $7 billion in investment in 2006. In 2006 the electricity giant would focus on additional issues of shares in generating companies, and that the initial sale of shares in thermal power plants could take place in 2007.

Iran offers energy cooperation

June 17, 2006. Iran offered energy cooperation to oil-thirsty China and other countries, seeking to win friends but avoiding direct mention of Iran’s nuclear standoff with the West.  Iran, the world’s fourth-largest oil producer, was ready to host a meeting of energy ministers from member countries to look at cooperation in exploration, exploitation and transportation. Iran is China’s third-biggest supplier of crude oil imports. The organisation was born out of the “Shanghai Five”, which was founded in 1996 to demilitarise the border between China and the former Soviet Union. China now sees it as a way to protect development in the largely Muslim region to its west, arguing that it serves as a bulwark against terrorist activities and religious extremism.

Renewable Energy Trends


IREDA to sanction loans for new sources of energy

June 16, 2006. The government has set a target for Indian Renewable Energy Development Agency to sanction loans worth Rs 626 crore ($136 mn) during 2006-07 for new and renewable sources of energy projects. The target is part of the MoU signed between Ministry of Non-Conventional Energy Sources (MNES) and IREDA. The MoU also sets the target for loan disbursements at Rs 400 crore ($87 mn) for 2006-07. Similarly, the MoU provided that IREDA funded renewable energy projects of 104 MW capacity would be commissioned in the country. As per the MoU, the Ministry would provide necessary assistance to IREDA for accessing soft financial resources to making its lending competitive. During 2005-06, IREDA sanctioned loans worth Rs 510 crore ($111 mn) as against a target of Rs 540 crore ($118 mn). IREDA funded projects with a capacity of 117 MW were commissioned which exceeded the MoU target of 100 MW for 2005-06.

ONGC diversifying into wind power

June 16, 2006. State-owned Oil and Natural Gas Corporation (ONGC) is diversifying into windpower generation with the decision to set up of two windmills having a capacity of 25 MW each in Karnataka and Gujarat. The company has lined up an investment of Rs 40 crore ($8.6 million) for putting up the two windmills in Gujarat and Karnataka. ONGC has entered the power generating business with the company setting up a gas-based power plant in Tripura jointly with the state government and IL&FS. Turning to the offshore exploration, sources said that the company has temporarily suspended drilling at Sunderbans in West Bengal due to problems of soft soil. The rig engaged for the drilling, was shifted to the Mahanadi well. ONGC has drilled one well at Sunderbans offshore.

Jadavpur quality centre developing jute-based fuel

June 15, 2006. The Centre for Quality Management System (CQMS)-Jadavpur University (JU) and National Institute for Research on Jute Allied Fibres Technology (NIRJAFT) is working together to find an alternative use of jute waste and jute caddies as fuel. There were around 40-45 jute mills in Kolkata and Howrah belt producing 400 tonnes of jute caddies and waste, which could be used as an alternative fuel. Both CQMS and NIRJAFT are developing the technology by which the jute caddies could be converted into a usable shape and form under pressure, and will be made cylindrical in shape. The final product will have very low ash content. A jute mill with production capacity of 100 tonnes per day produced around six tonne of jute caddies and waste. The alternative fuel would be meant primarily for boilers and associated furnaces. This was possible as the heat value of jute caddies were as high as 65-70 per cent of the heat value of coal. It will also be economically viable as it would be cheaper fuel for industry. The cost of production of this alternative fuel form will be around Rs 3-3.50 per kilogram, nearly 50 per cent cheaper than the price of coal. Owing to the low ash content of jute, the fuel will produce very little solid waste, thereby addressing the issue of pollution. The 400 tonne of alternative fuel form would be substantial to replace nearly 250 tonne of coal. The machine is currently in fabrication stage and the design is likely to be finalised within the next six months.


Australia Govt plans 10 oil mallee plants for renewable energy

June 17, 2006. The State Government says it wants to build up to 10 oil mallee processing plants in regional Western Australia to create a source of renewable energy. In March, Western Power threatened to scrap funding for trials at a processing plant in Narrogin.  The plants would be the first of their kind in the world.

Quebec tables greenhouse gas plan

June 15, 2006. A six-year plan, costing $1.2 billion, to reduce emissions of greenhouse gases in the province below the 6 per-cent reduction called for in the Kyoto agreement announced by Quebec. The 24-point plan, stressing energy efficiency in the home and on the road, will be financed by a $200-million carbon tax, levied on oil and natural gas companies selling their products in the province. The oil companies, initially cool to the idea, would not pass the carbon tax along to consumers. The federal government to contribute an additional $328 million over the six years, just as it promised money to Ontario to fight climate change.

Note: Mega sized coal fired power projects in West Coast (Part – II)


India’s Hydrocarbon Scenario: A Journey from Protected Past to Competitive Future – Part X

Will be continued in the next Issue




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