Towards an Energy Sector Competition Policy in India: Insights from International Practices (P - VIII) Dr. Samir R. Pradhan®

Interface between Regulation and Competition in India

Like any other country in the throes of liberalisation and open market, Indian scenario presents a dilemma between regulation and competition. Moreover, there is additional issue of going for sectoral regulation or competition policy for the whole economy. This section deals briefly with the issue of interface between competition and regulation and delineates some possible way for India.

Over the last two decades, not only the meaning of regulation but also the relations between regulation and competition have changed. It was only in the early 1970s that George Stigler could write with much conviction and force that “regulation and competition are rhetorical friends and deadly enemies: over the doorway of every regulatory agency… should be carved: Competition Not Admitted”. While this notion of the relations between regulation and competition is still part of public and political discourse, it hardly reflects any longer the relations between competition and regulation. Regulation and competition became aligned in a way that was inconceivable to Stigler, and is still difficult for many to appreciate.  The regulatory toolbox has expanded and, most importantly, contains new techniques of regulation-for-competition. These techniques refine the work of the regulators and thus represent a professional advance in regulatory techniques. With the help of new digital technology, these techniques facilitate much of the spread of free markets alongside the consolidation of regulatory regimes.  At a different level, they allow the regulators to align themselves with the neo-liberal agenda and to regain legitimacy in an environment of ‘regulatory flux’.

It might be useful to start with a clarification of five notions that are used in the literature to capture the relations between competition and regulation. Deregulation, re-regulation, regulation-of-competition, regulation-for-competition and meta-regulation convey different and sometimes conflicting dimensions of the much wider phenomenon of regulatory reform and liberalisation. Deregulation is the reduction of economic, political, and social restrictions on the behaviour of social actors (in our context, mainly business). In the early 1970s, when Stigler wrote about the clash between regulation and competition, he implied that the elimination of regulation (that is, deregulation) was a necessary condition for competition. The notion of re-regulation is often used to imply that regulatory reforms and liberalisation in general result in new settings of regulation rather than in deregulation. The notion of re-regulation is vague as to the nature and goals of the new regulation, and therefore has rather limited use in clarifying the relations between competition and regulation. The advantage of the notions of regulation-of-competition and regulation-for-competition over the notion of re-regulation is that they reflect ‘positive’ relations between regulation and competition and suggest that it may be possible to promote competition via administrative controls. The following table explains the above.

Table 1: Types of competition and types of regulation

Type of competition	Types of regulation	Regulatory authority	Examples
Deregulated	Self-regulating markets	No regulation (retreat of the state)	Moving from certification to liability laws in order to protect consumers
Regulated	Regulation-of- competition	National competition authorities	Prevention of concentration through the regulation of mergers, cross-ownership, etc.
Regulated	Regulation-for- competition	Sector-specific authorities & national competition authorities	Interconnection regimes in telecommunications, unbundling the network
Meta-regulated	Enforced self-regulation of competition rules	Sector-specific authorities & national competition authorities	Institutionalisation of internal mechanisms of self-regulation that correspond with the legal requirements of competition law in general and the regulatory regime in particular.

Regulation-of-competition and regulation-for-competition differ in the degree of intervention by state authorities and in the capacities of the state to monitor and enforce competition. While both require the establishment and the strengthening of governance capacities, regulation-for-competition requires far more intrusive capacities. This is best indicated by the contrast between economy-wide responsibilities of national competition authorities in the case of regulation-of-competition, and sector-specific responsibilities of regulatory authorities in the case of regulation-for-competition. The broader responsibilities of national competition authorities allow them less influence on market actors who know their industry well. These broader responsibilities also imply that competition authorities adopt a reactive approach to anti-competitive measures. In regulation-for-competition, the responsibilities of regulatory authorities are narrowly confined to a sector or industry, but they usually give those authorities much more influence over market actors. Unlike the reactive approach of competition authorities, these sector-specific authorities are today proactive and involved in market design and market control to an unprecedented extent.

Finally, meta-regulation of competition implies that in addition to the direct regulation of the actions of individuals and corporations, the process of regulation itself becomes regulated. In our context of the promotion of competition via political power, it means that the government monitors the self-monitoring of corporations and other organisations as to the compliance of their employees with the rules of competition. Direct intervention and enforcement are replaced here with allegedly lighter demands on economic actors to institutionalise processes of self-regulation. Yet if the intrusiveness of the state is to be judged by how far it can change social and corporate behaviour, this type of regulation should be considered as intrusive as regulation-for-competition.

While regulatory reforms certainly involve some aspects of deregulation, they also involve regulation-for-competition, regulation-of-competition, and meta-regulation. These last three forms of regulation allow the relatively harmonious growth of the Regulatory State in the context of pervasive regulation.

Conclusion

Thus competition and independent regulation should be viewed as instrument to foster sectoral efficiency and integrated development. The task of the regulator becomes crucial to infuse competition. Indian energy scenario presents a plethora of problems as well as opportunities for infusing competition through regulation. The issue seems to be a judicious balance between independent regulation and competition for the integrated development of the sector. First all energy sub-sectors in Indian need restructuring to facilitate competition in all possible segments of vertically integrated industry.

Selected References

1.        Ayres, Ian, and John Braithwaite (1992) Responsive Regulation: Transcending the Deregulation Debate. Oxford: Oxford University Press.

2.        Gilardi, Fabrizio (2002) "Policy Credibility and Delegation to Independent Regulatory Agencies: A Comparative Empirical Analysis", Journal of European Public Policy, 9 (6), 873-893.

3.        Jordana, Jacint and David Levi-Faur (2005) “The Politics of Regulation in the Age of Governance”.

4.        Kodwani, Devendra (2006) ‘Competition and Regulation in Energy Sector in India’ in Pradeep Mehta (ed.) “Towards a Functional Competition Policy in India”, New Delhi: Academic Foundation.

5.        Moran, Michael (2000) “From Command State to Regulatory State?”, Public Policy and Administration, 15,  4,  1-13.

6.        Sidorenko, Alexandra, et al, (2002) ‘Energy Sector Competition Policy: Australian and International Experiences in Market Policy Design with implications for the Asian Developing Countries’, Paper prepared for The Fourth Asia Development Forum, Seoul.

7.        TERI (2006), “Competition in India’s Energy Sector”, paper presented at the Competition Commission of India, New Delhi.

8.       Vogel, S. (1996). Freer Markets, More Rules; Regulatory Reform in Advanced Industrial Countries, Ithaca and London: Cornell University Press.

 

Underground movement emerges for sequestering CO2

(Darren Samuelsohn, Greenwire, Senior reporter)

(Continued from Issue – 9)

Space galore underground

Experts agree: There's a lot of room underground for CO2.

The Intergovernmental Panel on Climate Change (IPCC) estimated last year that there were 200 to 2,000 gigatons of CO2 storage capacity economically available worldwide for sequestration. James Dooley, a senior research scientist at Battelle, a research laboratory headquartered in Columbus, Ohio, counted as much as 11,000 gigatons of theoretical storage in an April report. He said the United States has room for more than 3,400 gigatons of CO2. What do all those numbers mean? Heleen de Coninck, a lead editor of the IPCC's September 2005 report, said room for 2,000 gigatons means there is space for CO2 from 5,000 coal-fired power plants that each produce 1,000 megawatts. To put it more plainly: Humans produce about 7 gigatons of greenhouse gas emissions every year. And that storage space is just what's under dry land.

Ocean sequestration opens up more room still. Academic researchers from Harvard, MIT and Columbia University published a study last week in The Proceedings of the National Academy of Sciences that said conditions are ripe for CO2 storage under the ocean floor at depths of 3,000 meters below the water's surface. But not every sandstone formation, oil well, coal bed or deep-sea chasm is going to be pumped with CO2. First of all, that would be too expensive.  The price depends on how CO2 will be captured and transported from a power plant and where it will be buried. Dooley figures 60 percent of the cost is for capture, when CO2 is separated from the flue or process stream.

Dooley's research predicts sequestration will be most economical where there are also oil-and-gas reservoirs to tap. DOE says U.S. oil reserves could be boosted four times by the CO2 sequestration technologies. And the IPCC said CO2 sequestration could generate a net profit of $10 to $16 for every ton of CO2 pumped underground. The dash to squeeze out oil and gas will spur sequestration in the saline reservoirs, which are about 10 times more prevalent globally than fossil-fuel fields. Rob Finley, director of the Illinois State Geologic Survey's Energy and Earth Resource Center, said the hunt for oil and gas will have a long-term benefit as it pays for the costly sequestration infrastructure.

Battelle's models show 95 percent of the 500 largest U.S. sources of CO2 are within 50 miles of a potential reservoir. That is significant because CO2 pipelines will cost about $1.2 million per mile, Battelle estimates, with costs going higher if the terrain is rough or requires lots of twists and turns. IPCC figures carbon capture and sequestration technologies are likely to be deployed by electric utilities when carbon costs hit $25 to $30 per ton. CO2 credits in the European system are currently selling for about €15.85 (euros), or about $21.

'Not under my backyard'

Scientists and policymakers say a considerable effort must be made to teach the public about sequestration to head off what sequestration enthusiasts call the "not under my backyard," or NUMBY, syndrome. They have good reason to be nervous. A CO2 sequestration project off Hawaii planned in the 1997 Kyoto talks was stalled by public opposition that drew out permitting until the effort was scrapped in 2002.

A key may be in having project developers talk to local groups before they learn about it in the national press. "There's nothing worse than outsiders coming in and doing something that local people hate," said Sue Havorka, a University of Texas professor and the point person on the Frio demonstration project. Havorka said such projects are safe if common-sense precautions are taken, such as not pumping CO2 near fault zones or near the ends of sandstone basins where it can slip to the surface. A proper sequestration site will send the CO2 into a permeable rock that is covered by an impermeable caprock, such as shale or clay. And the public must be assured, she said, that measuring, monitoring and verification will be done.

Regulation and litigation

Federal regulators currently have no plans to change regulations to make sure carbon injectors are careful. Existing regulations for underground injection that are already being used for oil and gas recovery, "may well be perfectly suited to do it on other substances." Sequestration projects are now regulated by U.S. EPA's underground injection control program under the Safe Drinking Water Act. The law requires EPA to establish minimum requirements to protect groundwater.

For greenhouse-gas sequestration, EPA may have to decide if CO2 qualifies as an industrial or waste product. EPA is expected to issue additional guidance next month that more fully explains its position on CO2 sequestration testing during the nonprofit Ground Water Protection Council's annual meeting in Miami Beach. Sequestration projects are expected to provide serious legal work.

Plans to bury CO2 at sea raise questions about international law. The IPCC report notes that the U.N. Convention on the Law of the Sea, the 1996 London Protocol, and other key ocean-related accords were drafted without giving specific consideration to CO2 sequestration. Also unsettled is who is liable if buried CO2 leaks. Texas legislators, trying to take advantage of this unresolved issue, adopted a law earlier this year that makes the state responsible if the planned FutureGen power plant releases CO2 into the atmosphere.

State officials pushing to win FutureGen for their state say the measure could help it to win the project over Illinois, which has not enacted a similar law. Expect debates about property rights, as well, especially if a global warming market emerges that pays for the rights to the underground space. And then there will be questions about who will oversee buried CO2. The IPCC and others have asked whether the same governments and private entities that inject greenhouse gases today will be around to monitor CO2 time capsules a century or more from now.

(Concluded)

 

Free energy technology or Pons-Fleischmann factor

August 25, 2006. Sean McCarthy and Richard Walshe are two men who making the claim that they are about to change the world - for ever. McCarthy, Walshe and two others set up Steorn as a technology and intellectual-property development company. These dynamic and personable businessmen from Dublin insist that they have found a way of producing free, clean and limitless energy out of thin air. And they are so confident that they have thrown down the gauntlet to the scientific community in a bid to prove that they have rewritten the laws of physics. Last week, frustrated that they couldn't persuade scientists to take their work seriously, McCarthy, Walshe and the other 28 shareholders of Steorn, a privately owned technology research company, took out a full-page advertisement in the Economist. In it, they called upon scientists to form a 12-member jury to decide whether their free-energy system is real, hoaxed, imagined or incorrectly well-intentioned.

In this wonder of science there is a test rig with wheels and cogs and four magnets meticulously aligned so as to create the maximum tension between their fields and one other magnet fixed to a point opposite. A motor rotates the wheel bearing the magnets and a computer takes 28,000 measurements a second. The magnets, naturally, act upon one another. And when it is all over, the computer showed almost three times the amount of energy has come out of the system as went in. In fact, this piece of equipment is 285 per cent efficient. That's a lot of "free energy" and, supposedly, a slap in the face for one of physics' most basic laws, the principle of conservation of energy: in an isolated system (the planet, say), energy can be neither created nor destroyed; it can only be converted from one form into another.

According to McCarthy the company has spent £2.7mn in developing the technology. Steorn has also gone into partnership with a European micro-generator company to develop prototypes. In Steorn's theory, fixed magnets could act upon a moving magnet in such a way as to make it a virtual perpetual motion generator. In an electrical appliance - a computer, kettle, mobile phone or toy - that would provide all the power for its lifetime. Of course, free-energy cars, power plants and water-pumping systems could follow. According to McCarthy and Walshe there have been no fewer than eight independent validations of their work conducted by electrical engineers and academics "with multiple PhDs" from world-class universities. But none of them will talk to me, even off the record. I am promised a diagram explaining how the system works, but then Steorn holds it back, saying its lawyers are concerned about intellectual property rights. And that European partner, the one with the moving, almost perpetual, prototypes? It won't talk to me either and Steorn has undertaken not to name it.

According to McCarthy it's the Pons-Fleischmann factor". Stanley Pons and Martin Fleischmann were the last experts to excite the scientific community with free-energy claims when, in 1989, they reported producing a nuclear-fusion reaction at room temperature - what happens in the sun at millions of degrees centigrade. The subsequent controversy resulted in the scientists being pilloried, even though the scientific community remains divided to this day over claims of "low-energy nuclear reactions".

Walshe says that if the technology is accepted it will be licensed to manufacturers, but given away to electrical and water projects in developing countries. And, until their claims have been assessed by the jury, McCarthy says they won't be accepting any investor offers.

Steorn says it has seven patents pending on its technology, though it is difficult to see what can be patented; magnets already exist and so do the 360 degrees of a circle. Yet it is the positioning of the magnets that seems to be at the heart of this "new" energy. And, as McCarthy points out, the Patent Office rejects inventions that fly in the face of such fundamental principles as, say, the conservation of energy. Almost 3,000 people claiming to be scientists had expressed an interest in sitting on the Steorn jury. The 12 best will be chosen at the end of the month and then testing will begin.

Comments by some experts:

Comment: The first law of Thermodynamics may not be broken by this device (if true). Physicists currently can't locate 90 per cent of the universe i.e the dark matter/energy. So it is entirely possible for such a device to be tapping into this dark energy and making it visible energy (heat/light via work). Thus the energy of the universe is preserved you have simply changed from one form to another. I fully sympathise with any inventor of a device that seems to break the laws of physics. You only have to read the blogs wrt Steorn to realise that nobody with a career in physics would admit to testing such a device.

Comment: Steorn's free energy - real. But it is a toy in comparison with microwave power... We hope, that after recognition Steorn, the scientific community will pay attention to microwave power creation process. New paradigm is well forgotten classical paradigm with Maxwell's radioether which has a huge stock of internal energy. This energy can be taken with the help of magnets, but with the help of microwave resonators it is better.

Comment: There are some aspects of physics that are never taught and therefore never considered. If you add the magnetic field (B) from a bar magnet to one from a current carrying coil wound on that bar (deltaB) the field everywhere is a the sum of two terms, B+deltaB. Energy density goes with the square of the field, so expanding the square of the sum we get B^2 +2BdeltaB + deltaB^2. B^2 is the original energy from the magnet. deltaB^2 is the energy from the coil. 2BdeltaB is excess energy gained from where? That is not a trivial amount of energy, and it can be shown that it comes from the quantum domain. It is ignored because over a full cycle it is generally not available to us. Can an electro-magnetic theory which ignores magnetic energy shuttling about within our machines be considered complete? Is it not possible that someone will eventually discover how to tap into that ignored energy flow? 

Comment: I knew Einstein, Maxwell, and all those other fools were wrong! I can't find out how it works, but I really believe this must be true and I know that they must be right. This must be a very well kept secret, because if it gets out, ...well it will wreck havoc on the world's economy. I'm wondering what the real impact of this great discovery will be as it will kill many, many industries. There goes the entire oil industry (thank god for the departure of Exxon!), the entire utility industry, Eveready, Duracell, and the like...gone! The wire and cable industry will also be hard hit as we will not longer need overhead or underground cables and wires. I'm now very worried about all the extra energy that will be polluting the earth. Think about it, if this discovery is more than 100 per cent efficient, you know what will happen, some people will abuse the process and generate more energy than they need and all this extra energy will be running around ruining the environment! Were going to have to pass more laws to prevent this. I'm going to start the new non-profit organization Citizen Revolt Against Pollution from Extra Energy.

NEWS BRIEF

OIL & GAS

Cairn explores options for Mangala oil

August 29, 2006. Cairn Energy is evaluating multiple options for evacuating crude oil from its Mangala field in Rajasthan even as negotiations on the price at which the “waxy” crude will be sold are on with its partner ONGC. One option is to lay a pipeline to the Adani group’s Mundra port in north Gujarat to transport crude to ONGC’s Mangalore Refineries and Petrochemicals Ltd or to HPCL’s Mumbai refinery.  Another option is to transport the crude to either Essar’s Vadinar refinery near Jamnagar or to RIL’s refinery near Jamnagar through a pipeline. HPCL’s proposed Bhatinda refinery could be another destination. 

ONGC, which holds 30 per cent in Cairn’s Rajasthan block, had announced plans to have a well-head 7.5 million tonnes refinery in Rajasthan. Though Cairn has an option of transporting crude to the neighbouring 33-MT Reliance Industries refinery or the 12.5-MT Essar refinery, which will be commissioned by April 2007, ONGC is unlikely to allow Cairn to take up these options.  Cairn may opt for piping crude to the Mundra oil terminal and shipping it to MRPL until the Rajasthan refinery is commissioned. 

BG in talks with govt to buy entire Ravva gas

August 28, 2006. British Gas India has written to the government that it would like to buy the entire gas output of around 4 million cubic meters (MCM) of gas per day from the Ravva field at market determined prices. State-owned GAIL (India) Ltd has been the sole offtaker of this gas, so far. BG’s offer to purchase the entire Ravva output is therefore significant, as it has offered to pay market prices for entire gas volumes. While for the current volumes, GAIL has recently agreed to pay $4.75 per mmbtu; it is still negotiating with the Ravva consortium for additional volumes. Industrial consumers are already purchasing gas at $6-7 per mmbtu. The consortium of ONGC, Cairn Energy and Videocon International jointly owns Ravva gas field.

GSPC discovery in KG Basin

August 2006. GSPC gas discovery in KG Basin is estimated to have gas reserve of 3.6 TCF by DGH. GSPC had claimed to have struck 20 TCF in the block. GSPC had invited EOI for stake in its gas find in KG Basin in order to develop offshore platform, pipelines and onshore production facility. 13 companies have expressed their interest in picking up 20 per cent stake on offer including BG, Shell, Exxon, Petrobras, Petronas, ENI, Statoil, etc.

Essar to set up $3.22bn refinery in Jamnagar

August 29, 2006. The Essar group has decided to set up Rs 15,000-crore, 16-20 million tonne greenfield refinery in its upcoming SEZ near Jamnagar. This will be in addition to Essar’s new 10.5-MT Vadinar refinery, which will go onstream in October this year. Jamnagar already boasts of the world’s largest grassroots refinery built by Reliance Industries (RIL). RIL is also setting up Rs 25,000-crore, 27-MT refinery in its SEZ in the district. Essar has set a target of touching a cumulative refining capacity of 32 MT by ’09-10. The capacity expansion will be carried out in a phased manner. While the refinery at Vadinar in Jamnagar is ready for commissioning, the new capacities will be a part of Essar’s 1,000-hectare SEZ in the same district. The conglomerate is planning to commission the Vadinar refinery in the first week of October as construction work on the Rs 16,000-crore refinery has been completed.

Essar has already got a formal approval for developing the 1,000-hectare SEZ, for which it would pump in an estimated Rs 15,000 crore most of which would be invested in constructing the new refinery. Essar Oil, the group company executing the refinery project, has already begun the groundwork for construction of the new refinery as well as other downstream petrochemicals units that would be set up in the SEZ.

BPCL plans $1bn investment in Kochi Refineries

August 25, 2006. Bharat Petroleum Corporation Ltd plans to invest Rs 5,000 crore at its newly merged Kochi Refineries Ltd. The proposals include setting up a new polypropylene plant, upgrading the quality of the bitumen plant, capacity addition from 7.5 to 10 million tonnes by 2009, and completion of the single buoy mooring facility (SBM) in 2007. As a Navratna company, BPCL has enhanced powers with regard to investment and other daily operations. The combined balance sheet of the merged entity will facilitate financing of expansion and modernisation projects at economic costs.

Kochi Refineries' current capacity of 7.5 million tonnes is higher than the State's existing demand, estimated at four million tonnes. However, with the merger, BPCL would be able to evacuate products from the refinery to a larger geographical area through an established network. The merged entity is expected to achieve greater efficiency through optimisation of product mix and rationalisation of logistics for product movementfrom the refinery at Kochi. BPCL currently has a 12-million tonnes refinery at Mumbai and a 3-million tonnes subsidiary at Numaligarh. The merger is of strategic importance to BPCL, as it provides the geographic spread for its three refineries located on the country's West, East and South. The proposed 6-million tonnes refinery at Bina in Madhya Pradesh will further provide BPCL with a total refining capacity of 30 million tonnes.

BPCL was selected by Cochin International Airport as equity partner and provides hydrant facilities for aircraft fuelling at the airport. BPCL was also selected by NTPC to supply a minimum guaranteed quantity of 4.5 lakh tonnes of naphtha to the first thermal power plant in Kerala. BPCL has laid 308 km of pipeline from Kochi to Karur via Coimbatore for evacuating about 3.3 million tonnes surplus from Kochi Refineries at an investment of about Rs 490 crore. BPCL as the equity partner in Petronet LNG is investing a huge capital for the first LNG import terminal at Kochi, thereby bringing the fuel to Kerala ahead of many other industrialised states.

CPCL plans $1bn refinery projects

August 25, 2006. Chennai Petroleum Corporation Ltd (CPCL), a group company of Indian Oil, has lined up plans for investments worth over Rs 5,000 crore on various projects in its refineries at Manali. It is exploring the possibility of setting up a 15-million tonne refinery-cum-petrochemical complex near Ennore. The new investment proposals include Rs 3,000 crore residue upgradation project, Rs 284 crore projects to expand refineries’ capacity by three million tonne to 11.2 mt, Rs 1,665 crore diesel and naphtha hydro treating units, and Rs 85 crore wind power programme.

The preliminary feasibility study on the petrochemical complex was under way. The high conversion residue upgradation unit would increase the distallate yield of the refinery and reduce production of low-value fuel oil. The preliminary feasibility report was prepared and the project was scheduled for completion in 2010. The capacity of refinery III at Manali was proposed to be increased to four million tonne from three million tonne at a cost of Rs 134 crore. Preparation of process package has been completed and the project was scheduled to be completed by September 2008. Process study for the expansion of refinery I at Manali to 3.5 mt from the present 2.8 mt was in progress. These two projects would raise CPCL’s refining capacity to 11.2 mt from 9.5 mt now.

Another major investment proposal was for setting up 1.5 mt diesel hydro treating unit and a naphtha hydro treating unit and isomerisation unit of 1.5 lakh tonne to meet the Euro IV standards of diesel and petrol. The projects would be completed by the end of 2009. CPCL has plan to set up a 17 mw wind farm at Shencottai or Palakkad pass investing Rs 85 crore to meet the power requirements of its desalination project. There was also proposal for the enhancement of the polypropylene plant at Manali to take up production of other propylene derivatives.

Petronet to bid for Dabhol's LNG terminal

August 28, 2006. Country’s largest liquefied natural gas importer Petronet LNG has expressed interest in taking up Dabhol’s five-million tonne LNG import terminal. The government is considering hiving off the LNG import terminal of the Dabhol power project as part of plans to check cost over-runs of switching on the generators. Petronet LNG, a company promoted by state-owned oil companies, has emerged as the favoured entity for taking over the terminal, followed by gas utility Gail. The due diligence will be done by Petronet LNG itself as the company had enough competence in LNG projects. The government had chosen Petronet LNG for the project as it was a specialist in LNG. The Dabhol complex is now with Ratnagiri Gas and Power, a special purpose vehicle floated by Gail and state-owned generation utility. The SPV had estimated an outgo of Rs 710 crore for completing 15 per cent work on the LNG terminal left incomplete by the original promoter, now defunct US major Enron. It is now estimated that the work will need an additional Rs 1,000 crore. Together with transfer cost of Rs 1,790 crore, the total cost of the LNG part of Dabhol is likely to cost Rs 3,500 crore.

BPCL seeks Oct-Nov sweet, sour

August 28, 2006. Bharat Petroleum Corp Ltd (BPCL) has issued a regular tender to buy crude oil for late-October and November loading. The company is seeking sweet grades including African and Asia Pacific, and sour crude such as Middle Eastern and Russian barrels. In the previous tender, BPCL bought 500,000 barrels of Yemeni Masila crude for end-September or October loading. It had also concluded a term agreement with US independent Occidental to lift 500,000 barrels a month of Masila crude. 

GAIL, Petronet, IOC may be in race Dabhol LNG

August 26, 2006. GAIL India Ltd, which has been looking for an LNG receiving and regasification facility for its ambitious plans to import floating cargoes from the spot market, is unlikely to leave any opportunity to acquire Dabhol LNG.  Petronet LNG, which is setting up its Kochi terminal in the next two years and increasing capacity of Dahej LNG terminal from the present 5 million tonnes per annum (mtpa) to 12.5 mtpa subsequently, has obvious synergy with Dabhol. 

Govt to sell Dabhol's LNG terminal

August 24, 2006. The Government is considering selling Dabhol Power Plant's LNG terminal after hiving it off from the electricity generating unit, due to delays in completion of unfinished part of the terminal and huge cost-overruns. Ratnagiri Gas and Power Pvt Ltd, the GAIL-NTPC joint venture which owns the Dabhol plant, had estimated at Rs 710 crore the cost for completing 15 per cent of the balance work on the 2.5 million tonnes LNG import and regassification terminal when they took over the Enron-owned plant last year.

Dolphin Offshore wins 2 contracts worth $5.64 mn

August 24, 2006. Oilfield services company, Dolphin Offshore Enterprises India Ltd has bagged $5.64 million contracts from two companies. The company bagged a $1.5 million contract from Iran-based Deep Offshore Technologies, for providing saturation diving services on board Pipe Laying Barge (PLB 132) of the south pars phase eight pipe-lay projects in the country. Dolphin Offshore has also bagged a $4.14 million contract from South East Asia Marine Engineering & Construction Ltd (SEAMEC) for providing diving services on SEAMEC 1 of ONGC.

IMG asks GAIL network on common carrier

August 2006. The Inter- Ministerial Group constituted to examine the availability of LNG and natural gas to the fertilizer industry has decided that GAIL’s entire existing pipeline infrastructure will be offered to suppliers and buyers of LNG and natural gas on the common carrier basis.  However, the directive is subject to availability of extra capacity within the network. It has also decided to ensure priority allocation of CBM gas to the fertilizer sector when commercial quantities are developed in the next 2-3 years. The IMG has directed the MoP&NG to co-ordinate with the Department of Fertilizer on modalities of such priority allocations. DoF is banking on the possibility of sourcing CBM to revive the closed urea plants at Sindri, Barauni, Durgapur and Gorakhpur.

Seven spot LNG cargoes received

August 2006. India has imported seven spot LNG cargoes since April 2006 reflecting buoyant demand of gas even at high prices. PLL brought two spot cargoes from Egypt at ex-regassification terminal price of $8.72 per MMBTU, GAIL brought one cargo from Algeria at $11.64 per MMBtu and Shell brought four cargoes from Oman and Abu Dhabi at around $8 per MMBtu. Shell received LNG cargo of 145000 SCM from Oman at $7.75 per MMBtu CIF.  This is reported to be at the lowest price for spot LNG paid in India.  Meanwhile HPCL is reported to have submitted a non-binding offer for a 26 per cent stake in the Shell Re-gassification terminal at Hazira.

GAIL’s pipeline projects

August 2006. Dahej-Uran pipeline – GAIL has committed under the MoU with MoP&NG to mechanically complete the 12 MMSCMD capacity pipeline project by 31^st December 2006. Commissioning is scheduled to be completed by February 2007. Meanwhile, PSL has agreed to take the order for full quantity of 164.5 km of line pipes for the project.

Vijaipur-Kota pipeline – Similarly GAIL has committed to mechanically complete the 3.5 MMSCMD pipeline project by 31^st October 2006. Commissioning is scheduled to be completed by February 2007

Jagoti-Pithampur pipeline – GAIL has committed to mechanically complete the 3 MMSCMD pipeline project by mid September 2006

Kelaras-Malanpur pipeline – GAIL has commissioned 2 MMSCMD 87 km long pipeline in MP. The project was completed in 18 months at an investment of Rs 70 crore. The pipeline will supply natural gas for the industrial units such as Godrej Consumers, Surya Roshni, Cadbury’s etc and for City Gas distribution in Gwalior

Dabhol-Panvel pipeline – Punj Lloyd has bagged an order worth Rs 164 crore from GAIL for the pipeline. The order is to be executed on EPC basis for the pipeline project. The project involving laying of 30” diameter 113 km long pipeline from Panvel to Dabhol terminal which would have to be completed within 10&1/2 months.

Govt may ease PSU oilcos’ crude buy norms

August 29, 2006. The government may liberalise norms to import crude oil by public sector oil companies to help them efficiently manage purchases at competitive rates. The plan may give more autonomy to PSU oil firms in on-spot purchase of crude through their respective trading desk. It is also proposed to relax the Central Vigilance Commission’s (CVC) guidelines for these oil companies in order to facilitate them for taking spot pricing decisions. Technology is available to record quotes and data to determine that a deal has been made in the best interest of the company. Even if an order is finalised over telephone, the entire conversation could be recorded to ensure transparency.

While private firms have been able to import crude oil at relatively cheap rates, oil PSUs have to pay a higher price due to cumbersome purchase policy. In ’05-06, while private companies imported crude at a low average rate of Rs 1,605.73 crore/MMT, public sector companies had to pay Rs 1,790.28 crore/MMT. The difference is significant as PSUs spent Rs 1,23,530 crore in ’05-06 on oil imports, while the private sector invested Rs 48,172 crore in the same period. The purchasing crude oil through modern trading desk approach could save oil PSUs about $0.2/barrel. Suffering from worst heavy losses, oil PSUs are looking for every opportunity to save their costs. PSU oil companies have also asked the government to increase the power of their boards while taking import decisions. They have demanded that their oil purchase strategy should be approved by their respective boards and the system of getting approval from the empowered standing committee (ESC) should be abolished.

DGH suggests linking gas prices to global indices

August 28, 2006. Director General of Hydrocarbons, the upstream regulator in the country, has proposed gas prices in the country to be linked to global indexes like Henry Hub in the US, LNG or naphtha The proposal calls for a floor price, linked to global prices like crude oil, for all new gas contracts which would have to be competitively bid. This proposal comes in the backdrop of the recent controversy between RIL and Reliance Natural Resources Ltd over their gas deal from the Krishna Godavari gas fields. At present gas prices in India sell at much lower prices than global markets. Linking domestic gas prices to global prices would translate to sharp increases by almost $5 to $ 6 per mmbtu. Although, crude oil has been linked to global prices and refineries have to buy oil at international prices, linking gas prices to global rates is only possible if the consumer industry can pass on the price to the end product. Power tariffs or fertilizer prices where the price of gas is an input cost is highly subsidized and controlled and any major shifts in the pri9cing of gas will impact these industries. To cite an example, the gas produced by ONGC which is sold as APM gas to the power and fertilizer industry is priced at around $3 per million metric British thermal unit (mmbtu). Private gas producers like the consortium British Gas, Reliance who have entered into independent gas contracts sell gas at prices between $ 4 to $5 per mmbtu. LNG players like Petronet LNG sell re-gasified LNG at a little over $ 4 per mmbtu. Henry Hub prices today are close to $ 10 per mmbtu. Henry Hub, which is taken as the natural gas index in the US is also the largest spot market for LNG.

The petroleum ministry has called for a meeting on the 30th of this month to discuss and set the pricing guidelines for blocks under the New Exploration Licensing Policy. The DGH’s recommendations come in the backdrop of this meeting. What remains to be seen is to how the new gas pricing guidelines are evolved as most of the companies who have struck gas have already entered into production sharing contracts with the government. The PSC has called for arms length contract and comparable contracts in the region. But mandatory competitive bidding and global indexing may be new elements which may require amendments to the PSCs. 

Govt to issue oil bonds for $3bn soon

August 25, 2006. The Government will issue the first tranche of oil bonds worth Rs 14,150 crore out of a total of Rs 28,300 crore to State-owned oil marketing companies by the month-end. The bonds are to compensate the companies for selling petroleum products below cost price. They are likely to carry a coupon rate of 7.5-8 per cent. The Ministry was open to the idea of the Rs 14,150-crore tranche being issued in two parts on a quarter-to-quarter basis. The Government had decided to issue oil bonds worth Rs 28,300 crore to oil marketing companies to partly compensate them for the losses on retail sales of petrol and diesel. IOC and its subsidiary, IBP, are expected to get nearly 50 per cent of the bonds, while BPCL and HPCL will equally share the rest.

MCA go-ahead for KRL-BPCL merger

August 24, 2006. The long-awaited merger of Kochi Refineries (KRL) with Mumbai-based Bharat Petroleum (BPCL) was sanctioned by the ministry of company affairs (MCA). The Post-merger the BPCL group’s refining capacity will go up to 22.5m tonnes per annum. The company is also likely to achieve a greater efficiency by way of optimisation of product mix and rationalisation of logistics for the movement of products from the refinery at Kochi. The merger will enable BPCL to evacuate products from the Kochi refinery to a larger geographical area since the local demand in Kerala is only about 4m tonnes. BPCL plans to invest about Rs 5,000 crore in various projects including enhancing KRL’s capacity to 10m tonnes. 

IMG accepts TC recommendations

August 2006. IMG has accepted the recommendations of Tariff Commission with regard to the issues of pricing and supply of natural gas to fertilizer sector. IMG has decided that shipping rate would be $0.2483 per MMBtu as against $0.2597stipulated in GSPA. Regassification charges of LNG be Rs 23.85 per MMBtu as against Rs 23.70 with 5 per cent escalation per annum. Transportation tariff charged by GAIL to be at a levelized uniform rate of Rs 831 per 1000 SCM for both HBJ and DVPL The Tariff Commission had also suggested a producer gas price of Rs 3450 per 1000 SCM for ONGC and Rs 4040 for Oil India in its draft report on producer price of gas for these companies. The price is at 10000 K cal per SCM. ONGC has expressed its displeasure to Tariff Commission stating that ONGC and OIL should be treated at par and price of gas should not be linked only to cost of production. Rather other parameters like alternative fuels price, market price etc should also be taken into account.

Qatar to pick stake in domestic majors

Qatar Investment Authority has planned to pick up 10 per cent stake in Petronet LNG Limited through $100 million foreign currency convertible bond. Due diligence has already started. NTPC has also decided to give Qatar 40 per cent stake in the proposed Rs 7500/- crore 2300 MW Kayamkulam power project.

POWER

BHEL to invest $3.44bn in power projects

August 29, 2006. To meet the challenge posed by the government plans to add 62,000MW of power generation capacity during the Eleventh Plan, power equipment major Bharat Heavy Electricals Ltd (BHEL) will expand its manufacturing capacity to 10,000MW annually, from its current capability of 6000MW. To this end, BHEL will make an investment of more than Rs 16,000 crore. Further, the company will enhance its capacity beyond 10,000 MW to the levels required to match the needs of the power sector. BHEL is investing more than Rs 1,600 crore to modernise and expand capacity of its facilities. The enhanced capacity would become available by 2007.  In the Tenth plan (2002-2007) nearly 34,000 MW of fresh generating capacity is expected to be added, of which BHEL's contribution would be about 19,500 MW, which is well within its present production capacity. The expansion programme will focus on adding facilities for various products in its manufacturing units and for construction tools and equipments for erection and commissioning services at customer project sites. This plan is in the nature of brownfield expansion and would add mainly work centre capacities. BHEL says that this approach has a strong economic rationale both in terms of time as well as cost-benefits.

Maharashtra plans two power SEZs

August 29, 2006. The Maharashtra government plans to set up the country’s first power SEZs with an installed capacity of around 1,250 MW electricity to meet the needs of the large number of industrial units being established in the state.  The state government had given its nod for two coal-based projects at Chandrapur and Raigad, which would be developed in the next five years.

The power SEZs are proposed to be set up by the Maharashtra Industrial Development Corporation. Private players might also be involved in these projects. Maharashtra, the country’s most industrialised state, faces power shortages of about 3,000-4,500 MW in peak days, forcing authorities to go for massive load shedding stretching to 12 hours a day.  The proposed power projects would primarily cater to the new industries coming up in various SEZs in the state.  Besides, the state has earmarked a capital expenditure of Rs 58,000 crore over the next five years to put up additional generation capacity and improve transmission and distribution network. 

Maharashtra is also in the race with four other states for setting up the country’s first renewable energy SEZ, which is likely to be finalised soon.  The project, to be set up over 1,000 hectares of land, will infuse an investment of Rs 1,000 crore and top global firms have already evinced interest in it. The SEZ for renewable energy is aimed at manufacturing renewable energy devices and systems.  Maharashtra Industrial Development Corporation, the nodal agency for the state’s ambitious SEZ programme, expects to boost industrial growth with around 35 planned SEZs and permission sought for another 20-25 projects. At present, it has received final approval for 11 SEZs and approval for four is likely to be received soon.  MIDC has 1,40,000 acres of land in its possession and is planning to acquire another 50,000 acres to meet space demands of around total of 50 SEZ’s which it expects to be cleared soon. 

Karnataka to augment power generation capacity

August 28, 2006. The Karnataka Government plans to augment the current power generation capacity by 1,500 MW in the next two years at a cost of Rs 5,000 crore. In addition to the near term proposals, Karnataka Power Corporation Ltd (KPCL) plans to add 4,000 MW in the next five years for which it proposes to invest Rs 17,000 crore. The new projects, most of them thermal-based, would come up in Gulbarga, Bijapur, Raichur and Mysore districts. The additional capacity of 1,500 MW would be implemented through various new projects, including the second phase of the Varahi hydel project, expansion of Bellary thermal power project and unit eight of the Raichur Thermal Power Station.

The unit eight of Raichur plant with a 230-MW capacity is estimated to cost Rs 230 crore while the second unit of Bellary project would be taken up at a cost of Rs 2,000 crore to build a 500-MW plant. KPCL had also planned to tap wind energy to produce 1,050 MW of power in Chitradurga district. The wind energy projects would be set up with private partnership. The Government had also taken initiative to improve the power distribution systems and KPTCL would spend Rs 1,750 crore.

Punjab to generate 3500 MW of power

August 24, 2006. The Punjab government would generate 3,500 MW through various projects and spend Rs 3,300 crore to buy additional power from other states to counter the acute power crisis in the state. At present, the state is witnessing a severe power crisis because of the shortage of 3,000 MW of power. To overcome this problem, the government has committed to bring in 3,500 MW of power from within the state projects as well as other state projects. The government has set up a power project of 500 MW at Lehra Mohabbat and 168 MW at Shapur Kandi in the state, which will function soon. The Centre has also given approval to allot a share of 1,500 MW to Punjab from 4,000 MW power project to be set up in Chhattisgarh. Moreover, Punjab would also spend Rs 3,300 crore to buy 600 MW, 500 MW and 400 MW from Madhya Pradesh, Gujarat and Orissa respectively. 

GMDC to set up power plant in Chhattisgarh

August 24, 2006. Gujarat Mineral Development Corporation Limited (GMDC) has decided to expand its reach beyond Gujarat.  The state-owned mining major has been allotted coal blocks in Chhattisgarh and Jharkhand and the company has decided to go for two pit-head coal–based power plants with total capacity of 1,250 MW in both the states. GMDC has been granted approximately 350 million tonne of mineable reserves in Morga-II block of Korba district in Chhattisgarh and another plot in Jainnagar, Hazaribag district in Jharkhand, with 100 million tonne mineable reserves. The power projects are expected to go on stream almost simultaneously with the coal production from the mines.  GMDC has interests in many other minerals like bauxite and manganese, has forayed into power generation also with its first 250 mw power station in Kutch, which will become fully operational by November 2006. 

Scramble for powergrid line, 28 submit bids

August 28, 2006. Twenty-eight power transmission companies, both domestic and foreign, have put in their bids to PowerGrid to establish transmission lines in western India. The projects will be implemented under Western Region System Strengthening Scheme II. The Spain-based Isolux, Elecnor, China Light and Power, Tata Power, Reliance Energy, Siemens and Essar Power are among those in the fray. The bids will be opened in late September and the corporation plans to award the project by mid-December. This will ensure that the deadline of 2008-09 is met.

These projects are expected to address the long–term transmission requirements of the western region. It will add to the inter-regional exchange. These projects are considered vital for the export of bulk power to and from the western region. In July last year, the Central Electricity Regulatory Authority had turned down Reliance Energy’s petition for a transmission licence for its proposed transmission projects in the western region. The regulator had then, in an attempt to ensure that work on establishing transmission lines in the region is not jeopardised and at the same time encourage private participation, decided to split the Western Region System Strengthening Scheme into two broad sets. The scheme was reorganised into four sets of lines. Two of these comprised 765kV and 440kV high voltage lines, these were to be developed by PowerGrid Corporation either on its own and through a joint venture. The second set was to be developed by private transmission companies on a build-own-operate-transfer (BOOT) basis. This set, Western Region System Strengthening Scheme II, comprises transmission lines for regional strengthening in southern Maharashtra and Gujarat.  

SC breather for TPC supply in Mumbai

August 29, 2006. The Supreme Court, in an interim order has permitted the Mumbai-based Tata Power Company (TPC) to continue supplying electricity to its existing retail consumers. In addition, TPC has been permitted to connect new consumers who had applied earlier. This supply will, however, be subject to the outcome of the final order. The next hearing of case is scheduled for November 7, ’06. In effect, the apex court has stayed the show-cause notice issued by Maharashtra Electricity Regulatory Commission (MERC) to Tata Power, based on the recent order by Appellate Tribunal for Electricity’s (ATE), barring the company from supplying electricity to retail customers in Reliance Energy’s (REL) distribution areas in Mumbai. MERC had issued the notice under Section 19 of the Electricity Act of 2003, asking TPC to explain its position in view of the ATE order that the company has no licence to distribute electricity to consumers other than REL and BEST.

12 year lock-in for ultra mega projects

August 28, 2006. The government has inserted “lock-in” clauses for promoters of the proposed ultra mega power projects.  Thus, a promoter will not be able to divest more than 49 per cent of the equity until two years after the project starts commercial production, and will have to retain at least 26 per cent for another 10 years. The restrictions have been incorporated in the proposal document for the 4,000-MW Sasan project in Madhya Pradesh, set to be the first of the ultra mega projects to get off the ground.  The aggregate equity shareholding of the selected bidder in the issued and paid-up equity share capital of Sasan Power shall be according to these conditions. These conditions would also become the norm for all other proposed ultra mega power projects. In the event of the selected bidder being a consortium, the conditions will apply to only its lead member, and not all the promoters or stakeholders in the project entity.  The lead member, or the bidding company will have the right to disinvest its entire equity after the 12-year period. At the same time, this will be applicable only as long as the members (including the lead member at all times) adhere to the minimum equity requirements and conditions. 

CII extends pact with Lanka Transformers

August 25, 2006. The Confederation of Indian Industry has extended an agreement with Lanka Transformers Ltd to promote energy efficiency in industries in Sri Lanka. The agreement originally signed in 2001 with Lanka Transformers, a subsidiary of the Government utility Ceylon Electricity Board, has been extended for three years. Under the agreement, CII has trained Lanka Transformers' engineers, done energy audits and held workshops. The partners have also carried out energy audits jointly in 20 industrial establishments in Sri Lanka. Energy savings through their joint efforts is estimated at about $1 million.

Coal linkages to fuel power projects

August 24, 2006. The power ministry has taken up coal linkages for the upcoming power projects with the coal ministry. The power ministry has suggested that the standing linkage committee would a hold meeting very soon to consider coal linkages for various projects. These projects include Lara Integrated Power Project (4000 mw), Simhadri expansion programme (2x660 mw) and Dadri Stage-II (2x490 mw) expansion programme of NTPC, Hissar Thermal Power Project (1000/1200 mw) and Yamunanagar Thermal Power Project (renamed as Deenbandhu Chhotu Ram Thermal power project) of Haryana Power Generation Corporation , Katwa thermal project, Bakreswar (expansion) and Sagardighi (expansion) of WBPDCL, Marwa of Chhattisgarh state electricity board, Koradi project of MahaGenco, Raichur power (expansion) and Bellary TPS (expansion) of Karnataka Power Corporation Ltd (KPCL) and Krishnapatnam thermal Power Project of APGenco.

The power ministry’s move comes at a time when the standing linkage committee enhanced the linkage to 29 NTPC thermal power stations on the basis of 95 per cent PLF. However, the committee did not consider certain thermal projects of NTPC and state power utilities on the ground that captive coal mines have already been allotted to them as it has been expected to meet their requirement from the allotted captive coal mines. However, the ministry argued that in most of the cases the captive coal mines would meet either the requirement of their existing thermal power projects or the ones that have been planned for but coal linkage was not sought. Dadri Stage-II expansion programme has been envisaged to meet the electricity requirement of the NCR Capital during forthcoming Common Wealth Games in 2010. Among the captive mines allotted to NTPC, Pakri-Barwadih is slated to start production from 2008 and will meet the requirement of a basket of existing thermal power plants.

SC okays new DERC power tariff plans

August 24, 2006. The Supreme Court has granted its approval to Delhi Electricity Regulatory Commission for announcing power tariff for this financial year. The depreciation value has been bone of contention between DERC and distribution companies NDPL and BSES. DERC had challenged an order of the tribunal, which has negated the commission's ruling permitting only 3.75 per cent depreciation to the distribution companies, as against their demand of 6.69 per cent. Distribution companies had argued that the depreciation of 6.69 per cent was granted for the period of five years from the year 2002 and any change in the fixed value would play havoc with their finances.

The court said the tribunal's order agreeing with the contentions of the distribution companies on the depreciation value appeared to be without any reasoning and hence a fresh adjudication of the matter is required. According to the DERC, the amount recoverable to from the consumers as a result of increasing the depreciation value from 3.75 per cent to 6.69 per cent would be to the tune of Rs 265 crores and to account for this, power tariff would have to be increased by 8 to 10 per cent. The respondents in the case are BSES Yamuna Power Ltd, BSES Rajdhani power Ltd, North Delh Power Ltd, Delhi Power Company Ltd and Tata Power Company Ltd.

NTPC signs MoU with Delhi Transco

August 24, 2006. State run National Thermal Power Corporation Ltd has signed a MoU with Delhi Transco Ltd for expanding its Badarpur Thermal Power Station in New Delhi. The MoU entails exploring possibility of expanding the company's Badarpur Thermal Power Station (BTPS) by adding 2 490 MW units subject to environmental and other clearances. The company has also signed an MoU with Haryana Power Generation Corporation Ltd and Indraprastha Power Generation Co Ltd to establish a 1500 MW Coal Based power plant in Haryana, subject to establishment of techno-commercial feasibility and necessary approvals. The Plant shall be set up by the company on concept to commissioning basis for the exclusive use of Haryana and Delhi on long-term management contract of at least 25 years on terms to be decided.

NTPC forms JV with Singareni Collieries

August 23, 2006. Power major NTPC and Singareni Collieries have joined hands to undertake various activities in coal and power sectors, including acquisition of coal blocks. The joint venture company will undertake jobs like acquisition of coal/lignite mining blocks for exploration, development, mini benefaction, processing, operation and maintenance and selling the coal/lignite produced thereof in India and abroad. The JV also envisages developing, operating and maintaining integrated coal based plants and sell the electricity generated. The company is also planning to get into consultancy services. NTPC and SCCL signed the MoU. NTPC has announced an ambitious growth plan of becoming a 51,000 MW plus company by 2012.

NTPC aims to become 75,000 MW co by ‘17

August 23, 2006. The state-run NTPC Ltd has revised upwards its capacity addition programme for the 12th Plan period to become a 75,000 MW company from the present 26,194 MW. The company, last month scaled up its capacity addition target for the 11th Plan period of 2007-12 to 21,941 MW from 17,333 MW. According to NTPC’s projections, its installed capacity will be more than 75,000 MW by 2017 instead of 66,000 MW fixed earlier. NTPC has started work on 23 power plants, with a total capacity of 21,941 MW. Of these, 12 are coal-fired projects with a total capacity of 18,940 MW. Besides, it is working on three gas-based projects with a capacity of 4,550 MW, three hydro projects with a capacity of 1,920 MW and five joint ventures with a capacity of 2,791 MW.

OIL & GAS

Swift Energy to buy 5 oil and gas fields for $175 mn

August 28, 2006. Swift Energy Co. has agreed to buy interests in five onshore oil and gas fields in Louisiana for $175 million from a unit of London-based BP Plc. The purchases, from BP America Production Co., are expected to raise Swift Energy's fourth-quarter introduction by 0.6 to 1.0 billion cubic feet equivalent (Bcfe), the Houston-based oil and gas explorer said in a statement. Swift Energy estimates the total reserves of these properties at about 58.2 Bcfe of proved reserves and 28.1 Bcfe of probable reserves. Production at these sites is about 75 percent natural gas. The company will acquire the majority working interest in BP's operated wells in the fields and varying levels of working interest in certain non-operated wells.

Swift Energy expects its 2007 budget to include $20 million to $25 million of capital expenditure in these five fields. The five properties are Bayou Sale, Horseshoe Bayou and Jeanerette Fields, all located in St. Mary Parish, High Island Field in Cameron Parish, and Bayou Penchant Field in Terrebonne Parish. The acquisitions are expected to close within the next 60 days.

Talisman to boost N.Sea output up to 50,000 boepd

August 23, 2006. Canadian independent Talisman Energy aims to boost its North Sea oil and gas output by up to 50,000 barrels of oil equivalent per day by 2008. Talisman's North Sea output should rise to 170,000-180,000 boepd, up from current output of 130,000 boepd. Part of the output boost will come from the purchase of the North Sea Fulmar and Auk fields which Talisman aims to complete in the next month. Talisman will buy stakes in the fields from Royal Dutch Shell and Exxon Mobil. It has been in exclusive talks with the two majors for the assets since February. Auk has produced nearly 5,000 bpd of crude in the past year, and Fulmar about 3,500 bpd. Shell and Exxon each have 50 percent stakes in Auk. Talisman already has 14 percent in Fulmar, while Shell and Exxon hold the rest. Talisman's output rise in the next two years will also come from nine different field developments it intends to bring online.

The largest of those is the Tweedsmuir development, which will add 45,000 boepd from the first quarter next year.  Talisman still sees opportunities to buy more North Sea assets even though record oil prices have driven up their value. As North Sea assets age and production declines, oil majors have looked to sell fields and concentrate their efforts on bigger production opportunities elsewhere. Smaller independent producers such as Talisman have bought the assets, overhauled the infrastructure and looked to boost output by developing satellite fields. Talisman has forecast ouptut worldwide of between 515,000 and 535,000 boepd this year.

Aramco to buy stake in Showa Shell

August 27, 2006. Saudi Aramco, the state-owned oil conglomerate, plans to buy up to 14.95 per cent in Japan's fifth-largest refiner Showa Shell Sekiyu K.K. The transfer of a 9.96 per cent stake in Showa Shell, a Royal Dutch Shell affiliate, would be completed in August, subject to regulatory approval. Under the agreement, Saudi Aramco will supply a minimum of 300,000 bpd of Arabian crude to Japan. Showa Shell has a crude oil processing capacity of 515,000 bpd. Japan cut crude imports from Iran more sharply than from other major suppliers in the second-quarter as Tehran's nuclear stand-off with the West dragged on.

Hungarian firm to drill more oil, gas wells

August 24, 2006. The Hungarian oil and gas company, MOL, has decided to expand its operations in Pakistan by drilling more exploratory wells during 2006. In addition, MOL is also working on a number of potential projects after having made significant hydrocarbon discoveries in Tal block of NWFP. The company has started supplying more than 50 million cubic feet of natural gas per day from its Manzali-1 (Gurguri) well to SNGPL at Kohat. It said it was also producing 500 barrels per day crude oil from Makori-1 besides, substantial quantity of gas. It has recently announced successful completion of tests for the third well called Manzali-2 in the block. MOL’s core activities are exploration and production of crude oil, natural gas and gas products, refining, transportation, storage, and distribution of crude oil products in retail and wholesale markets, as well as Import, transportation, storage, and wholesale trading of natural gas and other products.

The firm is working in Pakistan through its subsidiary MOL Pakistan Oil and Gas Co. B.V. since April 1999. The petroleum concession and exploration license was granted to MOL (TAL Block no. 3370-3) in NWFP with the joint venture partners--Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), Government Holdings (Pvt.) Limited (GHPL) and Pakistan Oilfields Limited (POL) for exploration of oil and gas. The MOL group has appointed Mr. Janos Laszlo Feher as the new general manager, MOL Pakistan.

BHP to take on oil giants with huge petroleum investment

August 24, 2006. BHP BILLITON, the world’s largest mining company, launched itself into competition with the oil and gas giants ExxonMobil, BP and Shell pledged to commit billions of dollars to the petroleum sector.  BHP, which announced record profits up 63 per cent to $10.5 billion (£5.6 billion), is planning to more than double its petroleum production within three years. By 2009 the Anglo-Australian miner will have oil production equivalent to almost one fifth of BP’s current daily output. Its gas production will be equivalent to almost a quarter of the output of BP. BHP is investing $5.2 billion to develop its petroleum division and bring on stream nine major projects in areas such as the Gulf of Mexico, the northwest coast of Australia, the Caribbean and Africa.

The company is also increasing its petroleum exploration budget by 12.5 per cent this year to $450 million. The petroleum exploration budget exceeded its mineral exploration budget for the first time last year. The company plans to spend about $350 million looking for new mineral deposits this year. BHP is spending so much to develop its petroleum business because it believes it is one of the few companies with the resources and expertise to challenge effectively in this capital-intensive sector. It also wants to diversify out of minerals as protection against the cyclical nature of the mining industry.

BHP’s petroleum business has struggled in recent years but a number of major projects are about to come on line, including Atlantis, Neptune and Shenzi in the Gulf of Mexico. These projects will boost its production from 318,000 barrels of oil a day to about 750,000 barrels compared with BP’s 4 million barrels a day at current output.

Aramco, Total in deal to build refinery

August 23, 2006. Saudi Arabian Oil Company and France's Total SA have signed a contract to build a 400,000 bpd oil refinery in the Saudi Arabian port city of Jubail. Slated for startup in 2011, the Jubail refinery will be designed to process Arabian heavy crude. The scope of the contract is to conduct front-end engineering and environmental assessment, prepare financing and marketing studies, capital operating cost estimates and bid packages, and provide procurement support. Technip Italy, a unit of France-based Technip SA, will help with detailed design and construction. The company also said it had signed deals with ConocoPhillips and Kellogg, Brown and Root, a unit of Halliburton Co., to start front-end engineering on a refinery in Yanbu. The Yanbu Export Refinery, scheduled for completion in 2011, will be designed to process 400,000 barrels per day of heavy crude and produce motor fuels and other refined products for U.S. and European markets. The combined output from the two new refineries will help meet increasing demand from the world's largest consuming countries.

Husky to expand pipeline for new oil sands output

August 28, 2006. Husky Energy Inc. will spend C$100 million ($90 million) expanding a pipeline in Alberta to accommodate production from its new oil sands development. Husky said construction of the 80 km (50 mile) expansion between Lloydminster and Hardisty, Alberta, will start next month and be completed in two phases. The company, Canada's third-largest oil producer and refiner, said last week it had wrapped up construction of its 30,000 barrel a day Tucker oil sands project near Cold Lake, Alberta. It was finished for less than C$500 million. The pipeline project's first phase involves adding two 20 km (12 mile) sections of 24 inch (60 cm) pipe and associated pumps, and is expected to be in service in the second quarter of next year. The second stage involves the installation another 40 km (25 miles) of 24 inch (60 cm) pipe and will be finished by the end of 2007.

Nippon Oil buys crude from Exxon Sakhalin project

August 23, 2006. Japan's top refiner Nippon Oil Corp. has made its first spot purchase of crude oil from the Exxon Mobil-led Sakhalin 1 project in Russia's Far East. The 700,000-barrel cargo of Sokol crude will be delivered to Nippon Oil's oil terminal in Kagoshima, southern Japan, cost and freight included, indicating that commercial exports from the giant project are now beginning after reported delays. The cargo was bought from Sakhalin Oil and Gas Development Co. a government-backed consortium of Japanese oil companies and trading firms, which hold about 30 percent of Sakhalin-1. It usually takes about three or four days to deliver crude from the DeKastri port in Sakhalin to Japan. Nippon Oil declined to comment on the price paid for the cargo or the benchmark for Sokol crude. Traders said Nippon Oil's barrels were the second export cargo from the project. Project operator Exxon will export the first crude oil cargo to Japan for September loading. The first export cargo is due to arrive at a refinery run by Japan's TonenGeneral Sekiyu KK, 50 percent owned by Exxon.

TAP gas pipeline deal in final stages

August 22, 2006. Turkmenistan, Afghanistan and Pakistan envisage development of complete energy corridor under multi- billion dollar TAP project including two parallel gas and crude oil pipelines, railway track, road and optic fibre system, but India is interested in a gas pipeline alone. The Asian Development Bank (ADB) was currently in the final stages of revising framework agreement and inter-state agreements to include India in the project before these are discussed and cleared by the technical groups and the steering committee for ratification.

New Delhi is seeking to incorporate in the agreement special clauses that could guarantee that gas volumes contracted to India would in no circumstances be disturbed at any stage if Pakistan required higher quantities than original contracts for Gwadar port. This would, however, not restrict Pakistan to have maximum supplies subject to pipeline capacity. The revisions in the framework agreement would allow the ADB to include extension of the TAP gas pipeline to India in the pre- feasibility study including routes, pipeline capacity, design and security aspects. The agreement would also define in clear terms the right of the participating states to inject or draw gas from the pipeline in case of additional gas quantities.

Pakistan is pursuing a two-pronged strategy on bilateral as well as trilateral basis. In order to facilitate discussion on gas pricing parameters, the three countries considered it appropriate to engage a mutually acceptable consultant to provide inputs with regard to such parameters. The project was a commercial deal and high-level discussions between Pakistan and Iran were meant to accelerate the progress. The discussions on financial, commercial, technical and legal aspects were being held in a parallel rather than a sequential manner.

S. Korea, China agree on cooperation in energy policies

August 29, 2006. South Korea and China agreed to step up cooperation in their energy policies to cope with high-flying crude oil prices. South Korea and Chinese discussed ways to boost exchanges in energy polices including development of alternative energy and exploration of energy sources.

Gaz de France to sign new deal with Gazprom

August 28, 2006. French utility company Gaz de France should soon announce a new supply agreement with Russian gas monopoly Gazprom. The contract would be for a long time. The current supply contract lasts until 2012 and signing of an important supply agreement that will guarantee us volumes of Russian gas for a very long time.

China to invest $5 bn in Venezuela energy

August 28, 2006. China will invest around $5 billion in energy projects in Venezuela by 2012 as part of a plan to boost Venezuela's oil output. Venezuela is seeking to become a "steady and stable" provider of oil to China, an effort that the United States has watched nervously as political relations between Caracas and Washington remain tense. Venezuela is currently providing 150,000 barrels per day of oil and products to China. The $5 billion from China included investment in a joint venture to operate the Zumano fields in eastern Venezuela and investment by China's CNPC in the Junin 4 block of the Orinoco heavy crude belt. Venezuelan state oil company PDVSA is planning total investment of $56 billion by 2012 as part of an expansion plan that includes increasing natural gas production, boosting refining capacity and launching a wide-scale development of the Orinoco heavy crude belt.

Chinese energy company Sinopec will participate in the development of an oil block in the Gulf of Paria in eastern Venezuela. Venezuela will work to revamp China's refining capacity so that it can process Venezuelan crude, which tends to be heavier and higher in sulfur content than crude from other countries.  China will also help Venezuela build 18 new oil tankers by 2012 to boost Venezuela's shipping capacity to carry crude oil to China.

LUKoil inks JV deal with Slovenia's Petrol

August 28, 2006.LUKoil signed a framework agreement with Slovenia's Petrol on establishing a joint venture to sell oil products in the Balkans. The joint venture will be managed on a parity basis, with Petrol holding 51 per cent and LUKoil 49 per cnet of shares in the new undertaking. The terms of a joint venture are mutually advantageous. The framework agreement was approved by the boards of LUKoil and Petrol. The companies intend to set up the JV by the end of 2006.

Qatar to finish study of giant field next year

August 26, 2006.Qatar expects to conclude a study into the state of its vast North gas field and take decisions on its future development next year.  Qatar has put new projects on hold at the field while it finishes the study. Energy experts believe the field is the largest single reservoir of unassociated gas in the world. Qatar has said it would only go ahead with a second phase of development at the North field when it was sure it could do so without damaging the reservoir by pumping too hard. Qatar aims to become the largest liquefied natural gas (LNG) exporter in the world, boosting shipments to 77 million tonnes a year in 2012 from around 25-26 million tonnes this year. Construction of the South Hook LNG terminal in the UK is on course for completion in the fourth quarter of 2007. The terminal will have capacity to import close to 16 million tonnes per year.

Total gets 20 exploration blocks in Gulf of Mexico

August 24, 2006. French energy group Total SA has obtained 20 deepwater exploration blocks in the western Gulf of Mexico. Total's E&P USA Inc. subsidiary will operate the blocks with a 100 percent working interest. Award of the blocks was subject to final approval by the Minerals Management Service. The acquisition of these blocks is in accordance with the company's strategy in the Gulf of Mexico of focusing exploration efforts on prospects with high long-term potential.

IEA looks to Opec to boost oil output if Iran turns 

August 23, 2006. The International Energy Agency would look to Iran’s fellow Opec states to boost their oil output if Tehran were to turn off the taps in its nuclear dispute with the west. The IEA, adviser to 26 industrialised nations, would prefer to see the Organization of Petroleum Exporting Countries exhaust its two million barrels per day of spare capacity rather than tap the world’s emergency inventories. Opec said this year that the group was unlikely to intervene if Iran Opec’s second largest producer cut its oil exports. The group did not want to get dragged into a political dispute. The IEA members also have access to another 2.5 billion barrels that could be used if necessary. That would leave the world with no oil stocks and no cushion to meet any further supply disruption.

UK's JKX signs Ukraine gas deal with Shell

August 22, 2006. British explorer JKX Oil & Gas Plc had agreed to sell at least 8.75 billion cubic feet of gas over 12 months to a Royal Dutch Shell Plc unit in Ukraine. The company, which also has assets in nearby Georgia and Russia and in Italy, said supplies would start this month following an intial delivery in August. JKX said that the gas sales pact had provisions to raise the amount of gas delivered and the time period allowed. The agreement was made between JKX's wholly owned Ukranian arm, Poltava Petroleum Company, and Shell Energy Ukraine.

Power

Kenya: state commissions new power plant

August 29, 2006. The Government has commissioned a Sh2.5 billion emergency electricity generation plant in Nairobi to avert a power crisis. The 100 MW/11kV temporary power station which will be run by an independent power producer, will increase the country's installed capacity and guarantee adequate energy to support industries. The plant in Embakasi was commissioned amid fears that electricity costs would continue to rise as the Government moves towards costly diesel generated power. Kenyans are expected to pay more for power due to oil adjustment costs that are directly passed to the consumer.

Malaysia may go for nuke energy

August 29, 2006. Malaysia may explore the use of nuclear technology for power if the oil price shoots up to US$100 (RM370) a barrel.  Malaysia wanted to know how Japan, where two major cities – Hiroshima and Nagasaki – were destroyed by atomic bombs during World War II, could convince its people to go along with the use of nuclear technology to generate power and how they build the plants.  Investors may run away because their products will become too expensive to be made in Malaysia if the cost to generate electricity increases, the Government wanted to be prepared for the situation in the future. Some European countries were already moving towards using nuclear technology with the latest being Britain. Vietnam also has plans to switch to nuclear technology to generate power. Malaysia has more than 60 nuclear scientists and it wants Japan to share with us their experience.

$500mn Thar coal firm planned

August 28, 2006. The Pak government has decided to set up a $500 million Thar Coal Mining Company (TCMC) run by the private sector to develop the country’s largest deposit after having failed to involve any major company for investment in coal mining and power generation. The plan, approved by the president and the prime minister, envisaged unbundling of the Thar Coal project into mining and power generation to bring down the size of investment in each block from $1.5 billion to $500 million. There are more than six major blocks identified so far in Thar.

The decision was taken after realising that mining and power generation needed to be developed independently. It was also felt that energy crisis had already hit the country and it might begin to affect the economy from next year and even the power produced from natural gas was now costing 5.9 cents per unit. It has also been decided to gear up Wapda to set up first coal-based thermal power plant at Thar if foreign or local investors continue to show indifference because dependence on imported fuels has to be checked. The ‘mining majors’ were not coming in for the Thar coal mining. Many companies showed keen interest in power generation at Thar coal but showed hesitation when the government asked them to also develop the mines themselves. An integrated project of mining and power generation required investment between $1 billion and 1.5 billion which was found to be difficult. Thar (coal) is not worth $1.5 billion investment for a foreign investor.

Doosan to build 2 reactors for Korea Hydro & Nuclear

August 28, 2006. South Korea's Doosan Heavy Industries and Construction Co. has clinched an order from Korea Hydro & Nuclear Power Co. to build two next-generation nuclear reactors for $1.18 billion. The deal calls for the two APR1400 reactors to be built by 2013 and 2014. They will be part of the New Gori power plant in the industrial city of Ulsan on the southeastern tip of the country.

Iran plans water nuclear reactor

August 26, 2006. Iran is planning to build a new light water nuclear reactor to produce electricity. Iran is working on a 360 MW light water reactor to produce electricity which will be completely indigenous reactor. Iran plans to build 20 nuclear power plants in the next 20 years to produce 20,000 MWof electricity.

Kazakh to supply uranium to Japan

August 28, 2006. Kazakhstan aims to dramatically increase uranium exports to Japan in the coming years, providing up to a quarter of the country's needs. Resource-poor Japan is active in nuclear power generation, and the country is keen to secure uranium deals with the ex-Soviet republic amid growing competition for its huge uranium resources, the world's second largest after Australia. KazAtomProm's annual uranium supplies to Japan may reach 2,000 metric tons, or 2,200 U.S. tons, within a few years. KazAtomProm, the world's third-largest uranium producer, currently supplies Japan with enough uranium to meet a small fraction of its demand. The main buyers of Kazakh uranium are China, Japan, the United States and South Korea. The company is planning to start production at 12 new uranium mines in the next few years, which would make it the world's leading uranium supplier with an annual output of 12,000 metric tons (13,200 short tons) by 2010.

In January, KazAtomProm signed a contract with Sumitomo Corp. and the Kansai Electric Power Co., Japan's second-largest electric utility, to set up a joint venture to operate a uranium mine in southern Kazakhstan. The stakes under the deal are 65 percent, 25 percent and 10 percent, respectively. The deal envisaged a $100 million initial investment. Tokyo also wants to boost its influence in the region, where China and Russia are trying to enhance their alliances through the Shanghai Cooperation Organization, a six-nation group.

ABB lands $62mn from Eskom to revamp power relays

August 25, 2006. ABB, the Swiss power and automation technology group, had received a $62 million (R440 million) order from Eskom to strengthen southern Africa's cross-border power transmission systems. As part of the contract, which would be completed in May 2008, ABB would refurbish the high-voltage direct current (HVDC) Apollo converter station near Johannesburg. This would improve the reliability of the converter station receiving electricity from Mozambique. The HVDC system helps to integrate hydropower produced at the Cahora Bassa dam in Mozambique with the grid in South Africa, where electricity is produced mainly by coal-burning thermal power plants.  The refurbished Apollo converter station, which was constructed in the 1970s, would boost the reliability of the substation and prepare for future upgrades.

New process to produce hydrogen from gas

August 27, 2006. FuelCell Energy, Inc., a leading manufacturer of ultra-clean electric power generation plants for commercial, industrial, and government customers, has announced development of a cost-efficient system to separate pure hydrogen from a gas mixture that then can be sold as fuel for hydrogen vehicles or industrial uses. The U.S. Department of Defense (DoD) has awarded FuelCell Energy $1.36 Million to advance this Electrochemical Hydrogen Separator (EHS) project for use with the company’s Direct FuelCell(R) (DFC(R)) power plants.

EHS is expected to save up to one-half of the energy required when compared to conventional compression based-methods of hydrogen separation. A subscale prototype EHS unit developed by FuelCell Energy is currently operating at the University of Connecticut Global Fuel Cell Center. This test was made possible through a $600,000 grant provided by the Connecticut Clean Energy Fund under its operational demonstration program.

FuelCell Energy’s EHS system is the most promising way of meeting the targets set by the U.S. Department of Energy (DOE) to lower the price of hydrogen to be competitive with the cost of gasoline. Currently hydrogen is three to four times as expensive to produce as gasoline according to the DOE’s Energy Efficiency and Renewable Energy statistics. Whether it be used for generating hydrogen for an energy station or for an industrial customer, being able to produce hydrogen onsite through EHS would eliminate the complex issues involved with transporting and storing hydrogen.

There is a significant market for industrial customers such as chemical and petrochemical manufacturers, heat treaters, pharmaceutical companies, glass manufacturers and refineries that would recognize the benefit of producing onsite power and hydrogen. FuelCell Energy develops and markets ultra-clean power plants that generate electricity with higher efficiency than distributed generation plants of similar size and with virtually no air pollution. Fuelcells produce base load electricity giving commercial and industrial customers greater control over their power generation economics, reliability and emissions.

China to curb investment in coal industry

August 26, 2006. China will soon issue new regulations to put the brakes on increasing investment in the coal-chemicals industry which has been attracting interest amid soaring oil prices. The upcoming policy aims to set the coal-chemicals industry on the right development track. The industry includes coal-liquefication technology which offers an alternative to crude and has attracted a surge in investment due to high global oil prices. The majority of the projects underway, with an annual capacity of more than 100,000 tons, do not have a viable technology and do not satisfy the government’s criteria.

China Resources Power plans to spend $9.5bn to expand capacity

August 23, 2006. China Resources Power Holdings, the third-largest Hong Kong- listed Chinese generator, plans to spend HK$9.5 billion in the next two years to add generating capacity as demand rises. China Resources Power will allocate HK$4.5 billion in 2007 and HK$5 billion in 2008 for capital expenditure. The company's spending for this year is HK$6 billion, unchanged from a year ago. The company, based in Hong Kong, is building plants and buying generation assets, increasing capacity at a time when China is unable to keep up with demand for power. China's economy grew 10.9 percent in the first half, the fastest pace in a decade, leading to a fourth straight year of power shortages.

China Resources Power's generating capacity will reach 8,000 MW by the end of this year. The utility plans to boost its capacity to 11,300 MW by the end of 2008. China Resources Power's profit rose 23 percent to HK$1 billion in the first half of this year. The utility increased electricity production 14 percent in the first seven months of this year, generating 30.7 million megawatt-hours of electricity during the period.

China, the world's second-biggest energy consumer, used 13 percent more electricity in the first half of 2006 compared with a year earlier. Power use reached 1.3 billion megawatt-hours. Total installed capacity was 508,410 MW at the end of last year, an increase of 66,000 MW from 2004, the National Development and Reform Commission, the nation's top economic planner.

China plans large investment in new energy

August 22, 2006. China, the world's second-biggest energy consumer, plans to spend 800 million yuan (US$100 million) over the next 10 years to study next-generation fuel, called natural gas hydrates, that could possibly ease the nation's increasing reliance on oil imports in the long run.  The country expects technology to be viable between 2010 and 2015 for the trial exploration of the new energy source, a crystalline compound of water and natural gas with methane as its major ingredient.

They believe that the world's gas hydrates reserves are equivalent to as much as twice the combined amount of coal, oil and natural gas, sufficient to meet global energy demands for a thousand years. China began preliminary research into gas hydrates in 1999, and plans to work with its German counterparts to sample the fuel in the northern part of the South China Sea within the year. China so far has discovered enormous reserves of gas hydrates in the offshore areas only those spotted in the northern part of the South China Sea are expected to amount to half the oil resources on the land. China had recoverable oil reserves of as much as 21.2 billion tons last September.

As oil prices are not expected to fall below US$50 per barrel, coal-converted fuels such as methanol and other oil products will be major alternatives to ease China's heavy reliance on oil. A growing number of energy firms have shown strong enthusiasm for coal-to-fuel projects in China to cash in on the government's willingness to boost the development of oil alternatives. The nation's biggest coal company China Shenhua Group has teamed up with global technology leaders such as Royal Dutch Shell and South Africa-based Sasol on the joint study of coal-to-liquids projects in China, which aims to convert coal into 30 million tons of oil by 2020.

Plan to increase renewable energy generation

August 29, 2006. The Ministry of Non-Conventional Energy Sources (MNES) is working towards stepping up the country's energy generation from renewable energy sources from the current 8,000 MW to around 17,000/18,000 MW during the 11th Plan period. Bulk of this additional capacity building would come from co-generation from sugar mills as the Ministry expects this capacity to rise from the present 900 MW to about 5,000 MW. Encouraged by the prospects of the projects under wastes to energy (WTE) programme implementation across the country, the Ministry is hoping to end the 10th Plan period with a cumulative generation capacity from non-conventional energy sources at around 10,000 MW.

Commissioning the country's first commercial model of grid-interfacing power plant based on poultry litter at Goundampalayam village, near here recently, MNES' twin strategy is to generate more power from renewable sources and to conserve more of non-renewable energy sources. The plant was developed by Subhashri Bio Energies Pvt Ltd, a local firm, at a cost of Rs 40 crore. Of the 8,300 MW capacity realised under the non-conventional energy route, Tamil Nadu has come on top among the States having built 3,000 MW renewable energy capacity.

The renewable energy sector in the country has also achieved significant milestone in terms of recording 19 billion units of power generation during last year. The power generation from the poultry litter through the biomethanisation process is free from any chemical. While the sale of power to the grid would fetch an income of Rs 11 crore, the organic manure recovered out of the spent litter would bring about an income of Rs 25 crore besides the likely earnings from the CER trading.

$2.14bn proposals for non-conventional energy

August 25, 2006. The Centre has said the non-conventional energy sources ministry has received investment proposals of Rs 10,000 crore from the US and Germany to manufacture devices and systems for harnessing non-conventional energy resources under the proposed Special Economic Zones (SEZ) Policy. The ministry has already received proposals from five states for setting up SEZs to manufacture equipment and systems for non-conventional energy. These states include Tamil Nadu, Maharasthra, Chhattisgarh, Andhra Pradesh and Karnataka. “The minimum area required for absorbing the US and Germany’s proposals would be 1000 hectare of land.

The ministery would finalise the locations for setting up SEZs for the Rs 10,000-crore investment proposal within a month’s time. As far as the proposals of the five states for SEZ in non-conventional energy area is concerned, the ministry would decide about locations in next 35-45 days time. In view of the importance being attached to the sources of non-conventional energy in the wake of shortage of fossil fuel, the ministry would set up series of SEZ to manufacture exclusively renewable energy systems and devices, for which encouraging responses were being received by the government. The present incentive scheme has certainly been a motivation to existing profit-making companies to invest in renewable energy. However, a different approach should be needed for motivating the independent power producers and investors to park their fund in the Indian renewable energy sector.

$8.6mn project to make power from poultry litter

August 24, 2006. A 3.50-MW capacity power project, which uses poultry droppings as fuel, will go on stream in the State's Tiruchengodu taluk. Developed as the demonstration category power project under the Ministry of Non-Conventional Energy Sources (MNES), the power project is being promoted by the Tiruchengodu-based Subhashri Bio Energies Pvt Ltd at a project cost of Rs 40 crore. Originally planned as a 2-MW power project, the generation capacity was enhanced to 3.5 MW. The plant is fed with 325 tonnes of poultry litters every day to generate power. The project is also equipped to produce 150 tonnes of manure as a bi-product daily from the slurry generated out of the plants digestors after generating power.

Steps to enhance bio-fuel yield

August 24, 2006. The agriculture ministry will launch a special mission to promote cultivation of oilseeds that can yield bio-fuel. The plants identified for this purpose include bushes and trees like jatropha and karanj and field crops like sugarcane, cassava, sweet sorghum, maize, sugar beat among others.  This mission will have representation from the state governments and 14 Union ministries involved in the promotion of bio-fuels. 

Vestas RRB to pump in $300mn for wind farms

August 23, 2006. Vestas RRB India, a joint venture between Danish company Vestas Wind System and RRB Engineers and Consultants is all set to invest Rs 1,400 crore to set up large wind farms in western India.  The company has acquired land in the Saurashtra and Kutch regions of Gujarat. The company is in an advanced stage of developing sites for the establishment of large wind farms in Gujarat.  An investment of over Rs 900 crore is envisaged during the period of two years in Gujarat.

Once the infrastructure is ready which includes the sub-stations, the company will start installing of machines January 2007 onwards. The company has also acquired over 1,200 acres of land in Dhule district, Maharashtra. The infrastructure development for more than 100 MW capacity installations will commence in the current fiscal. Besides, the company will also soon be commissioning a Wind Electric Generator (WEG) Blade Manufacturing Facility in Chennai.  In phase I, the outlay for establishing the Company’s facility will be Rs 35 crore. 

In the first year of WEG Blade production, the company plans to manufacture 350 sets of blades and during the second year, the Company plans to produce 700 sets of blades.  In Phase II, the company envisages to invest around Rs 65 crore for expansion of the facility to cater for production of higher capacity WEGs. The Company has already put up a 225 kW WEG at the site to provide captive power for the facility.  While the overall turnover of the company this fiscal is expected to be around Rs 1,500 crore, based on market projections the company’s turnover in the next financial year is expected to be around Rs 3,000 crore.

`Focus on renewable energy sources': DoE

August 29, 2006. The long term national energy policy should focus more on the generation of power from renewable energy sources such as solar, wind, bio-fuels and hydrogen instead of depending largely on coal. Although beneficiated clean coal can be used after separation of carbon from it. The capacity expansion of nuclear power was not advisable because it was costly and at the same time, the nuclear waste disposal was a hazardous job. Although nuclear power contributed to about 20 per cent of the total US' generation, top-level decision makers in America favoured the proposal of expanding the generation capacity from renewable energy sources. In fact, the US President has already decided to enhance spending on the expansion of capacity from solar and wind power. An amount of $3.4 billion had been earmarked for developing solar and wind energy sector. Moreover, bio-fuels were being developed to replace about 70 per cent import of oil by the US.

AES start of construction of 233 MW wind project

August 28, 2006. The AES Corporation has begun construction of a 233 MW wind generation project near Abilene, Texas, and has signed a 10-year power purchase agreement (PPA) to sell all of the electricity the project produces at fixed prices to Texas retail electric provider Direct Energy. The project, Buffalo Gap 2, is an expansion of the company's 121 MW Buffalo Gap wind farm which began operations near Abilene earlier this year. Once completed, the two projects will comprise one of the largest operating wind farms in the United States and will have the capacity to generate enough energy to power approximately 100,000 homes in Texas.

Wind power plants to cost double than hydel: Pak

August 24, 2006. The wind power projects to be set up in the Gharo and Keti Bandar corridor near Karachi would cost 9.5 US cents per unit levelised tariff to the consumers, compared with 4.7 cents per unit of hydel projects that currently face resistance. Under directives from the government, the National Electric Power Regulatory Authority has given a deadline of December 31, 2006 to give their acceptance for an upfront tariff after making interconnection arrangements with Wapda. The tariff is, however, subject to an aggregated ceiling of 300MW.

The wind power projects have been allowed a tariff of 11.75 cents (about Rs7.05 per unit), for the first 10 years and 3.7 cents (Rs2.2) per unit for the next 10 years. As such the levelised tariff for 20 years of the project life comes to 9.5 cents (Rs5.7) per unit. The tariff has been assumed 97 per cent plant availability, about 12 per cent interest rate and debt-to-equity ratio of 80:20 per cent. Interestingly, the government is promoting much costly thermal power stations instead of much cheaper hydel projects despite the fact that the country has about 28,000mw of non-dam hydro power generation capacity that could be developed as run-of-the-river basis or minor storages. If the power from mega dams is also included, the total hydro power capacity surpasses 40,000MW.

On the other hand, the average power tariff for gas-based projects have now been offered a tariff of more than eight cents, 13 cents for furnace oil based plants and 15 cents for diesel based projects. The government is now working out details to allow import of coal to generate up to 1200mw of electricity, although Pakistan has one of the World’s largest coal reserves in Thar where all efforts to generate electricity have not materialised as yet. The government announced the hydel power policy in 1998 and offered a tariff of 4.7 cents per unit to hydel power producers but later asked them to sign agreements at 3.3 cents per unit. This forced many investors to close their offices in the country. Resultantly, no hydel project could make reasonable progress till such time the country once again plunged into darkness this year. This forced the government to allow a number of thermal projects at a tariff as high as 15 cents per unit and once again invited hydel producers for a maximum tariff of 4.7 cents per unit. The hydel producers now claim that 4.7 cent tariff was not feasible and they could start projects at a tariff not less than 6.5 cents which was far below the thermal tariff of 14 cents since natural gas was not available.

Italy on track to hit 2010 renewable power target

August 23, 2006. Italy is on track to produce 22 per cent of its electricity from renewable energy sources in 2010 as new projects are coming on stream. Renewable energy’s share in total Italian electricity output stood at about 17 percent in 2005, little changed from 2004, but was set to grow in the next few years as the new governement has made energy policy one of its priorities. Italy’s target is in line with that of the European Union, as the bloc strives to combat climate change and find alternative energy sources. 879 plants with a total capacity of 6,984 MW were producing power from renewable sources in Italy at the end of June 2006, with hydro plants taking the biggest share 574 plants with a total capacity of just above 4,000 MW. The total of 393 projects in the pipeline would nearly double the capacity of renewable energy plants in Italy over the next few years, led by wind power projects which would add nearly 5,000 MW.

California law gives big boost to solar power

August 22, 2006. California Gov. signed into law a bill that aims to make the state one of the world's biggest producers of solar energy. The bill, which cleared the state Senate, calls for the installation of 1 million rooftop solar panels on homes, businesses, farms, schools and public buildings by 2018. The solar systems would generate 3,000 MW of power and reduce emissions of greenhouse gases by 3 million tons, equivalent to taking 1 million cars off the state's highways and making California the third biggest solar producer after Japan and Germany. The new law requires home builders to offer solar power to home buyers beginning in 2011 and allows utility customers who place panels on their homes or businesses to sell excess power back to their utility. The law also extends the solar program to municipally owned utilities, such as the Los Angeles Department of Water and Power, the largest publicly owned utility in the United States. The California Public Utilities Commission in January approved a $2.9 billion program to help pay for the solar program. The money will come from funds earmarked for solar energy and from gas and electric utility rates.

Dear Reader,   You may have received complimentary copies of the ORF Energy News Monitor. Our objective in bringing out the newsletter is to provide a platform for focused debate on India’s energy future. You could be a partner in this effort by becoming a subscriber. You could also contribute recommendations for India’s energy future in the form of brief insightful articles.   We look forward to receiving your patronage and support. ORF Centre for Resources Management

 

ORF ENERGY NEWS MONITOR   Subscription Form Please fill in BLOCK LETTERS

Subscriptions rate slabs for Commercial entities, Research Institutes, Academics and Individuals will be provided on request. The subscription can be made for soft copy or for hard copy or for both. Selected ORF publications as well as advertising space in one issue of the ORF Energy News Monitor are offered as introductory free gifts for Commercial subscribers only.

Yes! I/we would like to receive copies of the weekly ORF Energy News Monitor for a period of ______year(s).  I/we shall be entitled to one hard copy along with the option of soft copies to a list of e-mail addresses provided by me/us for the period of subscription.  I/we also note that I/we shall get select ORF publications brought out during the period of subscription free.    Name…………………………Address…………….………………………… Telephone……………………Fax………………….E-mail………………… Please find enclosed cheque/Bank Draft No.........................dated …………………drawn at New Delhi for Rs.........……….favouring ‘Observer Research Foundation’   Please fill in this form and mail it with your remittance to   ORF Centre for Resources Management OBSERVER RESEARCH FOUNDATION 20 Rouse Avenue New Delhi - 110 002 Phone +91.11.4352 0020 extn 2120 (Janardan Mistry) Fax: +91.11.4352 0003 E-mail: [email protected]

 

• Energy
• China
• India
• energy

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.