Open Letter to Prime Minister Dr. Manmohan Singh
Dear Sir
I admired your comprehensive and matter of fact address from the ramparts of the Red Fort on India’s 60th Independence day and heaved a sigh of relief to read your statement in Lok Sabha on 23 August that the Indo-US deal would remain within the templates of the July 18 agreement and India shall retain the “sovereign right” to decide whether or not to carry out any atomic tests in the future.
Dr. Homi Bhabha was the pioneer who first formulated the India’s nuclear program and decided its priorities and direction with full support of Prime Minister Jawaharlal Nehru. He was impressed by the article I had once written for The Hindu, on the valuable thorium deposits in monazite sands on the beaches of the State of Travancore when my father was building a ceramic factory at Kundara. My respect for Bhabha grew over the years as he frequently came to Rome and often invited me to ‘Alfredo’, his favourite Italian restaurant, introducing me to such eminent scientists as Enrico Fermi. Later, in the early sixties during my posting in Stockholm, he recommended my name to the IAEA Director-General Dr. Eklund, for appointment with this International organization.
The last time I met with Homi Bhabha was at the Ashoka Hotel in New Delhi on January 24 1966. He was on his way to attend the Geneva Disarmament Conference at which the nonproliferation treaty (NPT) was being drafted. As he was telling me how strongly he opposed India signing the NPT, the telephone rang. The call was from Indira Gandhi who had been sworn in as the Prime Minister on the previous day to succeed Shastri. “I know why she wants to see me. The government is under great pressure by the Western countries to sign NTP, but I shall advise her not to do so”, he said rushing out of the room in a hurry. I felt an unbearable pain in my heart to hear next morning the horrifying news that the Air India aircraft in which he was traveling had crashed in Switzerland. Suspicion persists that perhaps Homi Bhabha’s death was the handiwork of American secret service as also the mysterious circumstances in which his successor Vikram Sarabhai died a few years later. The American were dead against India possessing nuclear weapons as they perceived our country as more friendly to the Soviet Union during the ‘cold war’.
This hangover of United States policy towards India is evident from the manner in which American lawmakers have been shifting the so called goal posts of your July 18 agreement with President Bush and insisting on the separation of military from civilian use of nuclear technology. It clearly shows that US government has no intention of admitting India or considering our country to be at par with the exclusive club of the five nuclear weapon states. On the other hand, agreements that allow US agencies and companies to sell India nuclear fuel and outdated technology perfectly suites their commercial interest. Should you not ask President Bush why nobody in the United States has built a nuclear power plant in more than three decades and why all those reactors ordered after 1973 were cancelled. Even at present with all the incentives which US administration is offering, the majority of senior utility executives in the United States do not want to take the risk of Chernobyl-type accidents, nor to build new nuclear plants unless the government guaranties full subsidy with assurance that radioactive contamination will be prevented by opening several nuclear waste repositories. (International Herald Tribune dated 22 August 2006). French government with its large number of nuclear power reactors is already in a quandary, offering large sums of money for storage of its radioactive waste which no country is willing to accept.
Surely our Government do not have the resources to spare that kind of money to subsidize new nuclear reactors and build radioactive nuclear waste repositories at the expense of the urgently needed programs for the benefit of the common man which you enumerated in your address at the Red Fort.
Now I am firmly of the view that by the end of the century solar energy economy shall prevail when fossil fuels would have exhausted and nuclear power entrepreneurs find it impossible to store mountains of radioactive waste. The monograph, Renewable Energy of the Sun that I compiled for the UNESO World Solar Program (1996–2005), provides some information on the subject that was later elaborated in my book, The Timeless Energy of the Sun, published on the occasion of the International Conference of Heads of States and Governments on solar energy, in September 1996, at Harare, Zimbabwe.
In this connection, I had traveled worldwide attending a large number of meetings of experts organized by UNESCO and also visited several major solar energy projects in the remote and poorer regions of Africa, Australia, the Americas and Asia. An unforgettable experience was my visit to Inner Mongolia where driving mile after mile along the road in this vast, treeless landmass, I was amazed to see hundreds of small hybrid solar-energy systems – comprising a small wind turbine with a photovoltaic panel – installed on the roofs of houses and even on the top of yurts which the nomads move seasonally with their animals. There I witnessed the ‘human face’ of solar energy, integrated with the environment, culture and traditions of the people. In India, camels are often used to carry photovoltaic panels to remote and depressed areas in Rajasthan desert, such as Megh-wallon-ki-dhani, a village inhabited by marginalized people belonging to the schedule castes.
It was as a result of your recommendation to the former Chief Minister of Madhya Pradesh, Digvijay Singh, that Sumitra Foundation had installed a number of photovoltaic solar systems to provide electricity for the 40 health and education centres in the remote tribal region of Bastar (now Chhatisgarh).
The spin-off benefits of renewable energies are also of the greatest importance. Small and dispersed solar-energy projects in rural areas, including individual photovoltaic plants, biomass and small hydro facilities, have a cardinal role to play in halting the increasing rush to the cities by peasants living in the poorest regions. Such projects, by virtue of their local and participatory nature, are also more ‘democratic’, tending to create new cooperative structures that resist the concentration of power in a few authoritarian hands as in the management of nuclear power plants. By promoting sustainable development based on partnership with nature, they protect the environment and favour the emergence of a culture of peace, which is inseparable from democracy and grassroots development.
Above all the future of solar energy economy depends on the development of fuel-cell technology, a remarkable demonstration of which I saw in Germany at the biogas-fuel-cell project of the waste water plant on the banks of the river Rhine at cologne-Rodenkirchen. Here the city’s refuse is collected, converted into digester gas containing 62% methane and from which hydrogen is produced to run a small fuel-cell facility. This Europe’s first regenerating fuel-cell plant not only serves to electrify Rodenkirchen but also prevents polluting the River Rhine in which the city refuse was previously dumped (please see enclosures).
Earlier, I had attended an exclusive meeting in Cambridge, UK, representing motorcar manufacturers working on the development of fuel-cell technology at the invitation of my friend Dr. Stan Ovshinsky, Director, Energy Conversion Devices, Inc., Troy, Michigan, USA. In his keynote address, Dr. Ovshinsky visualized that after fuel-cell engines have been sufficiently miniaturized for use in small vehicles, they could also be connected to generate electricity for the residences, thus dispensing with grids for electricity. In fact the scientists at this meeting from Japan, Germany and the United States, were all secretly working day and night, each probing to find out what others were doing without revealing the progress of their own research.
The first step on the road to a hydrogen-based economy was taken in 1998 at the Daimler-Benz plant in Germany where a prototype station wagon ‘Necar II’ run on hydrogen energy was launched — please see pages 178-183 of the chapter on Cosmic Energy of Hydrogen in my book, The Timeless Energy of the Sun. Fuel-cell technology has since come a long way as published in a recent article in The Guardian Weekly (28 August 2006), describing the commercial use of hydrogen–based engines by three red London buses plying between the Tower of London and Covent Garden. ‘London is not alone. Hydrogen-powered bus projects are being prepared all over the world. From Cambridge to California, Norway to Nagoya, Perth to Porto, pilot schemes are being readied. This month Shell announced a partnership with the Dutch bus manufacturer MAN that will see 20 hydro-buses on the streets of Rotterdam by 2009’.
It is high time that India, too, should pay more attention to renewable solar energy, and catch up with the worldwide research in hydrogen-based fuel-cell technology by increasing government investments instead of going on wild goose chase after some outdated American nuclear equipment. This letter of mine may well turn out to be as ‘prophetic’ (to quote Khushwant Singh’s comment in The Hindustan Times) as the one I had written to Sonia ji on 1st April 1999, in which I took the liberty of suggesting your name as Prime Minister, almost five years before you were sworn in because you are ‘an experienced, non-controversial technocrat with an impeccably clean image’. Stan Ovshisky rightly pointed out that like individuals, solar energy could also be characterized as ‘clean’ while fossil and nuclear energies are ‘corrupt’.
Yours sincerely (Madanjeet Singh)
Beaulieu-sur-Mer: 29 August 2006
Dr. Manmohan Singh
Prime Minister of India
7 Race Course Road
New Delhi 110 011, INDIA
Dawn of Indian Nuclear Era and Vision for Today
(Maniyar Brijesh P. internship ORF, Ahmedabad Chapter)
BARC, the mother institute from where the entire program of nuclear science and technology has grown, was established in 1957 as a small R & D center. In 1960 the chairman of BARC Dr. H. Bhabha met with US military engineer Major General Kenneth D. Nichols to discuss plans to build India's first nuclear power reactor. Dr. Bhabha asked the United States to provide favorable terms of finance. The terms he requested included an Export-Import Bank loan and a deferred payment plan, to be repaid in rupees, for the reactor fuel that India would import from the United States. In August 1960 the Prime Minister Nehru announced in the Lok Sabha that India would construct its first nuclear power station at Tarapur and would follow through on proposed plans to build a plutonium separation facility at Trombay. With research reactors already in operation, India expressed interest in making contracts with foreign firms for the construction of India's first nuclear power plant. It was February 18 when a US team visited India to evaluate the possibility of supplying India with technology for its nuclear power program. Following the possible contract for the US construction of two light water nuclear power reactors at Tarapur India received seven tenders for the proposed nuclear power station; of these, the Department of Atomic Energy (DAE) found the proposal from the International General Electric Company of the United States most suitable. India submitted a "qualified" letter of intent to the company and began negotiations on the issues related to "financing, fuel supply, safeguards, and allied matters."
According to the Department of Atomic Energy (DAE), the proposed nuclear power plant at Tarapur (Maharashtra) would comprise two boiling water reactors and would have a net capacity of 380 MWe. The capital outlay for the station, including costs of site development, housing, taxes, and escalation, was estimated at Rs 48.35 crore, of which Rs 32.35 crore would be spent in the form of foreign exchange. The cost of power was estimated at Rs 3.25 per KWH, which according to the DAE could be compared favorably with the cost of generating conventional thermal power in the Indian states of Gujarat and Maharashtra. India had applied for a loan to the US Agency of International Development to finance the foreign exchange component of the Tarapur reactor project. The Agreement for Cooperation between the government of the United States and the government of India concerning the civil uses of atomic energy was signed in Washington. According to the terms of the agreement, the United States would supply two 200 MWe reactors, to be housed in a building at Tarapur, India. In exchange, India agreed to only use enriched uranium fuel provided by the United States and had allowed the International Atomic Energy Agency (IAEA) to verify that the fuel at the facility was not diverted from peaceful uses. The agreement clearly spelt out that any material received by India must not be used "for atomic weapons or for research on or development of atomic weapons or for any other military purpose." To finance the project, the United States offered $80 million credit at 0.75 percent interest over 40 years. Representatives from the Department of Atomic Energy (DAE) and General Electric concluded a draft contract on the construction of the Tarapur nuclear power station. According to the plans, the end of 1967 would complete construction of the facility and the reactors would attain full power by the mid-1968. DAE speculated on the possibility of adding additional capacity to the Tarapur plant in the future. At last in 1969, India’s first nuclear power program took a commercial leap when two reactors started generating electricity at Tarapur. The two Boiling Water Reactors called TAPS 1 and TAPS 2 were built by the General Electric of the U.S. and have a capacity of 160 MWe each.
Today the history is being rewritten at Tarapur. The largest indigenous reactor built there, the 4th unit of the TAPP attained criticality on March 6, 2005 and the 3rd unit called TAPP reached criticality in May 2006 and it was synchronised to the power grid on June 15. These two 540 MWe plants at Tarapur were built at a cost of Rs. 6,100 Crore. Both units 3 & 4 are built by the NPCIL. They are expected to generate 540 MWe each. Unit 3 & 4 both are called Pressurized Heavy Water Reactors (PHWRs) and they use natural uranium as fuel and heavy water as both coolant & moderator. They are the largest PHWRs to be indigenously built. In TAPP 3 & 4 many new systems have been added, they have undergone extensive tests. They include the integrated emergency core-cooling test, the emergency power supply test and the reactor regulation and protection system test. For unit 1 & 2 the engineers of TAPS began the work concentrating on three aspects; reviewing the operation safety of the two units, reviewing their ageing management and conducting a safety analysis based on the station’s design. NPCIL now operates 15 reactors in the country having an aggregate capacity of 3310 MWe. It is also constructing reactors with aggregate capacity of 3420 MWe. The DAE plans to have an installed nuclear generation capacity of 20,000 MWe in the country by the year 2020. This will consist of a mix Pressurized Heavy Water Reactors, Fast Breeder Reactors and Advanced Light Water Reactors. Although the Indian government is very enthusiastic over the current Indo-US nuclear deal which is still a work in progress, there have been no concrete reports on how much nuclear fuel India will get if the deal is finalised. Though it is almost four decades since India started generating electricity from nuclear fuel, it has achieved only around 3000 MWe by 2006. Thus the optimistic vision of DAE to generate 20,000 MWe by 2020 i.e. almost 17,000 MWe in less than 15 years from now is difficult to swallow. It may however be possible to improve chances of meeting the target of 17,000 MWe by including domestic power generating utilities like NTPC, REL etc. who have expressed interest in nuclear generation. But it is again dependent upon the access to nuclear fuel and international concern over the safety & proliferation aspects and how domestic private players vying for the nuclear generation will react to those concerns.
(Views are personal)
Micro-hydroelectric Power from Fog Fences
(Harry Valentine, Commentator/Energy Researcher)
Fog fences have been used for decades to collect the water droplets from dew and fog after which the moisture is sent to storage systems via piping systems. These fences are typically located at higher elevations near coastal regions where moisture is carried in by winds that blow over a cold ocean current during the early morning hours. The circulation of air from sea to land results from a landmass warming at a faster rate after sunrise than seawater in an adjacent ocean. The result is that moisture laden cool air will slowly blow across the cooler sea to the land after sunrise each day. There are locations where high mountains are located right next to an ocean coast. Some of these locations include the West Coasts of Chile and Peru, the South Island of New Zealand and the southern tip of Africa. Dr Theodore Schumann who was South Africa's chief meteorologist after World War 2 proposed that an electrified fog fence built to a height of 150-feet be installed on top of Table Mountain that is located next to the City of Cape Town. He suggested that fence carry up to 50-KVA of power at low amperage. His research indicated that some 30,000,000-gallons of fresh water per day (2890-lb/sec) could have been obtained from moisture laden winds that blew over the cold South Atlantic Ocean and over Table Mountain (elev: 2500-ft to 3400-ft). Modern technology could greatly increase the overall height of electrified fog fences. The higher fences could be supplied with some 50-KVA at 10-amperes (500-Kw) of electric power generated by a large windmill or by hydroelectric power. A flow rate of 2890-lb/sec of water and a vertical height of 1000-ft would calculate to 3100-Kw of power at a conversion efficiency of 80%. The net output for a fog fence of 150-feet in height will be over 2800-Kw of power. Net output could be increased to over 8600-Kw for a fog fence of 600-feet in height. Schumann's concept of using an electrified fence to obtain water (and electric power) from fog that drifts over a high mountain could be modified for use elsewhere around the world. It may become possible for researchers to modify fog fence technology for use in locations where winds blow over warm expanses of water then carry moisture laden winds over land. Such is the case in the Eastern USA where summer winds blow over the Gulf of Mexico and carry moisture laden air into the Eastern and Northeastern USA that is synonymous with high summer humidity. Some of this intensely humid air blows directly over both the Appalachian Mountains and also the Allegheny mountains in the Eastern USA. It may be possible to install a series of specially modified electrified fog fences at numerous locations in both these mountain ranges to collect water early every morning and enable micro-hydroelectric power to be generated at numerous locations. Up to 70,000-gallons of fresh water per minute could be collected each summer morning by electrified fog fences. The water and power may serve the needs of nearby local communities. It may be possible for the fog fences to reduce the intense humidity in the summer air that would subsequently drift toward large population centers such as Washington, Baltimore, Philadelphia, New York and Boston. A reduction in summer humidity in these centers could enable a segment of the local populations to experience less discomfort during hot summer weather. This segment may subsequently have less need for air conditioning in their homes during part of the hot summer. Their collective choice may subsequently help conserve energy during times of peak power demand. Some innovative modifications may need to be incorporated into electrified fog fence technology to enable it to function in the kind of hot and humid weather that exists in America's Appalachian mountain range during the summer months. The technology would also need to be designed to withstand the kinds of severe winter blizzard and ice conditions that are common in the Northeastern America winters. The effectiveness of the technology at removing large amounts of moisture from intensely humid summer air during early morning hours would be high priority. That effectiveness would determine the long-term value of the technology to the regions near to their point of installation.
Fog fence technology is well proven along the West Coast of Latin America where it is used to collect water from moisture-laden winds that blow inland from the cool South Pacific Ocean. There is also a high amount of summer rainfall that occurs in the mountains of southern Mexico and of Central America as well as over the Guiana Highlands of Venezuela suggests. The moisture-laden summer winds that prevail over these aforementioned highland areas first blew over warm water in the Gulf of Mexico where they collected the moisture. That precipitation occurred in these regions indicates that electrified fog fences may actually work as intended in the Appalachian Mountains.
Courtesy: Energy Pulse Weekly, a service of Energy Central
NEWS BRIEF
NATIONAL
OIL & GAS
Upstream
Reliance deploys two more rigs on gas field
October 2, 2006. Reliance Industries will deploy two deep-water drilling rigs on its gas rich Block D6 off the Andhra coast this year as it chases more oil and gas reserves and first output by June 2008. Reliance, which is targeting June 2008 for first gas from its Dhirubhai-1 and 3 discoveries in the block, has contracted Transocean drillship Deepwater Frontier and Deepwater Expedition for bringing the discoveries to production. The gas discoveries were made by Transocean deepsea drillship Discoverer 534. While Deepwater Frontier arrived in July, Deepwater Expedition is expected by the year-end. Deepwater Expedition and Deepwater Frontier will drill 14 development wells by June 2008 on discoveries Dhirubhai-1 and 3. The development of the two finds would cost Reliance Industries and its 10 per cent partner Niko Resources of Canada around 2.3 billion dollars. Reliance plans a total of 34 development wells in two phases, the first phase comprising of 14 wells. The company expects an initial production of 40 million standard cubic meters per day, which would double eventually. Reliance has already spud two development wells on its discovery block D-6 in Krishna Godavari basin. Transocean drillship, Discoverer 534, drilled the first well to being the Dhirubhai-1 and 3 gas discoveries to production in November 2005. On July 2, Transocean deepwater drillship Deepwater Frontier spud anther development well on this block - many days ahead of schedule.
Cabinet nod to four gas blocks for ADAG
September 30, 2006. The Cabinet Committee on Economic Affairs cleared award of four Coal Bed Methane (CBM) blocks to an Anil Dhirubhai Ambani Group-led consortium and three blocks to a consortium led by Australia’s Arrow Energy. One block was awarded to British Petroleum and two to Coalgas. The ADAG-led consortium includes REL-RNRL-GeoPetrol, while the Arrow Energy-led consortium comprises Arrow-GAIL-EIG. CCEA went with the Cabinet Secretary-led panel’s rejection of Anil Ambani Group’s contention of “unfair” evaluation in awarding coal bed methane (CBM) blocks. The CCEA had on August 31 asked the Empowered Committee of Secretaries (ECS) to re-examine the technical evaluation of bids received for 10 CBM blocks after Anil Ambani Group alleged discrimination in award of marks in two blocks. The evaluation of the two blocks in contention was upheld in to by an independent expert group appointed by the Cabinet Secretary-led panel, based on which the ECS had recommended to the CCEA rejection of Anil Ambani Group’s contention. In case of block MR-CBM-2005/III, DGH had given 1.5 out of two marks for Technical Assessment to the consortium of REL-RNRL-GeoPetrol but the expert group on revised evaluation gave only one mark in the category.
GAIL looking at E&P blocks in Africa
September 29, 2006. Pursuing its hunt for oil and gas blocks overseas, GAIL (India) Ltd is talks with TGS-NOPEC, the authorised promoter of the Madagascar (Africa) bidding round, on the technical prospects of the blocks. The company plans to adopt a consortium approach for bidding in Madagascar. While declining to disclose the name of possible partners, the company was in discussions with a couple of companies for possible joint participation in the bidding round. Under the Madagascar bidding round, 122 offshore blocks are on offer covering 200,000 sq.km.
An announcement for the blocks was made by the Office des Mines Nationales et des Industries Strategiques in Madagascar (OMNIS) on the opening of a new Licence Round over the Morondava Basin, offshore West Madagascar in October 2005. OMNIS has scheduled the closing date for applications as November 15. It is expected that licences will be granted soon thereafter. GAIL plans to invest approximately Rs 800 crore in exploration and production (E&P) activities over the next three years. Currently, the company is involved in exploration activities over acreage of more than 91,000 sq.km. During the recently held domestic E&P rounds, which witnessed a new trend of multiple tie-ups among the bidders, GAIL had tied up with as many as 16 domestic and foreign firms.
HPCL awarded ONGC contract
September 28, 2006. Hindustan Petroleum Corp Ltd and its partners have been awarded a contract for the development of fields off Mumbai (known as Cluster 7) by the Oil and Natural Gas Corp. The partners in the consortium are M3nergy Berhad of Malaysia, Prize Petroleum Company Ltd and HPCL. HPCL holds 60 per cent interest in the consortium that would develop Cluster 7 fields, holding 38 million barrels of recoverable oil and with a producing life of 12-15 years, of which 10 years would see “peak production”. Prize has 10 per cent stake and M3nergy the remaining 30 per cent. M3nergy would be the executor of the project. Prize Petroleum is an upstream company, promoted by HPCL along with ICICI Venture Capital Ltd and HDFC Ltd to carry out exploration and production of oil and gas.
ONGC & Petrobras in Cuban, Vietnamese blocks
September 28, 2006. ONGC is in talks with Petrobras of Brazil to rope in them as partners in its Cuban and Vietnam oilfields. ONGC has offered equity in the producing blocks to the national oil company of Brazil. The two oil majors had earlier this month signed an agreement to work together on exploration and production projects. ONGC has offered to offload a part of its equity in the blocks in Cuba and Brazil. The Brazilian company had divested stake in favour of ONGC in the Campos basin, where the Indian oil major had bought out a part of the ExxonMobil stake for $410m. In a quid proco deal, ONGC has now offered 15-20 per cent stake in the producing fields in Cuba and Vietnam.
The first move would be to explore whether such partnerships can be done in some of the existing projects. The two have already jointly bid for the deepwater blocks in India and Petrobras may partner ONGC in other domestic oil blocks too. OVL has acquired eight blocks in Cuba in the last few years. While in the first block of six fields OVL has a 30 per cent stake, Repsol holds 40 per cent and the balance is held by Norsehydro. In the two other Cuban blocks- 34 and 35 acquired recently, OVL has a 100 per cent holding. In the Vietnam blocks — 127 and 128 — OVL has offered about a 20 per cent stake to Petrobras.
HPCL consortium bags ONGC blocks
September 27, 2006. Oil & Natural Gas Corporation (ONGC) is set to sign field development agreements with oil majors such as Prize Petroleum and Hindustan Petroleum Corporation (HPCL) for additional production from its marginal fields. After evaluating the bids, a cluster has been awarded to the consortium of Prize Petroleum, HPCL and Trenergy of Malaysia. The consortium plans to invest about $479mn in the project. A total of 13 wells are to be drilled from two platforms in three years. The envisaged peak oil production is fixed at 18,865 bopd and that of gas at 0.887 Mmm3/day, with a cumulative oil production of 46.42 MMbbl and 2.7 BCM of gas. The estimated NPV of revenue (with 10 per cent discount) for ONGC is Rs 732 crore at the ceiling oil price of $35/barrel.
The company, which offered 19 offshore fields in nine clusters, has received bids for two. The bid for one of the nine clusters has been withdrawn as ONGC would develop this field through in-house effort. Out of the nine, eight are oil blocks, the last one being a gas cluster. All of them taken together have a reserve of around 59 MMt of initial in-place oil and 29 BCM of gas, according to company sources. Documents for this round were purchased by 16 companies, including 10 foreign firms. Meanwhile, ONGC has invited bids for another round of outsourcing of 17 onshore marginal fields.
ONGC Videsh to pump $500 mn in Colombia
September 27, 2006. ONGC Videsh, the overseas arm of the state- owned Oil and Natural Gas Corporation will pump a further $500 million into the Colombian oil fields it acquired jointly with Sinopec last week. OVL and Sinopec acquired Omimex de Colombia, for $850 million. Omimex has since been rechristened Mansarovar Colombia in which both Sinopec and OVL have 50 per cent stake. The company plans to ramp up production at the Colombian oil fields from the current 20,000 bpd to 80,000 bpd over the next 12 months. Omimex has onshore production as well as exploration blocks in Colombia with the known reserves of 157 million barrels. The company would use the revenue generated from the oil fields to ramp up production with no fresh Indian investment from India slotted for the project. At the time of acquisition, OVL had said that production could be ramped up to 1,00,000 barrels per day, half of which would be OVL’s share. OVL had calculated at the time of concluding the deal that the revenues from the oil fields would amount to $1 billion.
ONGC not to sell Sakhalin stake
September 27, 2006. Oil and Natural Corporation is not planning to sell its stake in the Sakhalin 1 oil field to the Russian gas company Gazprom. Instead, the company is in negotiations with Gazprom to sell its share of gas from the fields. ONGC’s investment in Sakhalin 1 has run into trouble with the Russian government seeking revised terms on account of delays and cost overruns. The first installment of oil 70,000 barrels of oil from the fields is expected to reach Indian shores by November. ONGC’s overseas arm ONGC Videsh has 20 per cent stake in Sakhalin-I which is operated by ExxonMobil. Gazprom has been seeking a foothold on Sakhalin with a swap deal with Shell, which is the lead operator on the neighbouring Sakhalin-II project.
GAIL, EIL to explore in Turkmenistan
September 27, 2006. GAIL India and Engineering India Ltd (EIL) have expressed their desire to explore business opportunities in Turkmenistan. GAIL is in talks with TurkMenGaz for participation in exploration and production (E&P), pipeline and city gas distribution projects, while EIL’s interest is in upgradation of Chardzou refinery at Seidi and setting up of a new refinery. Turkmenistan is a world leader in recoverable gas reserves and production. It produced 60 billion cubic meters of gas in 2004, and is increasing production of LNG. About 70 per cent of its territory could produce gas. It offers opportunity for Indian companies to pursue their business interests. GAIL has shown its interest to participate in extended Turkmenistan-Afganistan-Pakistan (TAP) project and its resources supplementation which has become TAPI after the inclusion of India. EIL has prepared its internal plan to tap opportunities in Turkmenistan.
Downstream
Petromin to launch kerosene dyeing
October 3, 2006. Petroleum ministry will launch a massive programme of dyeing kerosene with an imported, unremovable marker to deter use of the fuel as an adulterant in petrol and diesel. Ministry would launch the new marker (dye) system to detect adulteration in auto fuel at Indian Oil Corp’s Bijwasan terminal. Dyeing of kerosene will help detect adulteration of kerosene in auto fuels and ensure PDS kerosene reaches the targeted group. In September 2005, an NCAER study concluded that 38.6% of PDS kerosene was being diverted for adulteration in petrol and diesel. While a litre of kerosene costs just over Rs 9, an equal volume of petrol in Delhi is priced at Rs 47.50 and diesel at Rs 32.40. The marker once induced in the adulterant (kerosene) cannot be removed/tampered. The marker would be imported from authentix of UK.
UK-based co plans refinery in Chennai
October 3, 2006. The UK-based green fuel company D1 Oil is planning to set up a refinery in Chennai for processing crude bio-diesel. The company, producing bio-diesel from renewable energy crops, has decided to cultivate jatropha in 20,000 hectares of land in the north-eastern region. The cost of the refinery will be dependent on the site. If the refinery is established on an existing petrochemical site with tanks and power and other facilities, the cost will be lower compared to a green-field project. The company plans to commence commercial sale of bio-diesel by ’07 end, when the first lot of fruit is ready. It would be done through the proposed Chennai refinery. The company may also invest in more than one refinery at a later stage. Before the refinery is set up, D1 may start procuring oil seeds and establish a rapport with farmers.
Nagarjuna refinery to tie up funds soon
September 28, 2006. The six million tonne refinery at Cuddalore in Tamil Nadu, promoted by the Nagarjuna group and the Tamil Nadu government is expected to complete financial closure by the end of the year. Most of the debt for the Rs 4,750-crore project was already tied up and that the group was in talks with several small foreign oil companies, including Russia’s Itera group, for equity placements. Tata Sons has already picked up a 26-per cent stake at Rs 400 crore in the project and is expected to hike it to 40 per cent at a later stage. This will be Tata group’s first foray into the down-stream refining sector. Indian refining major, Indian Oil Corporation has also picked up a 10-per cent stake in the project through its subsidiary, Indian Oil Corporation Tankers.
IOC may invest $3.26 bn in chemical hub
September 28, 2006. Indian Oil Corporation is likely to invest Rs 15,000 crore in the next five to eight years as an anchor investor in the proposed chemical hub at Haldia. IOC signed a memorandum of agreement for the chemical hub under the petroleum, chemicals and petrochemicals (PCPIR) investment region with the West Bengal government. Bulk of IOC’s investment at Haldia would be on the 15 million tonne refinery estimated to cost close to Rs 10,000 crore. IOC would also help the state government to bring global chemical giants at the PCPIR. A core team would chalk out a roadmap for the chemical hub over the next six months. IOC is currently expanding the capacity of its refinery at Haldia to 7 million ton. West Bengal has already proposed a deep sea port near Sagar Island. According to Behuria, after completing the detailed project report (DPR), IOC would hunt for global partners. The proposed PCPIR would be called Acharya Prafulla Chandra Roy Nagar and spread over a 250 square kilometres. It would encompass the chemical hub, multiproduct SEZ, pharma SEZ and residential complex.
Transportation / Distribution / Trade
Five-year exclusivity in city-gas projects
October 2, 2006. The petroleum ministry has proposed a five-year marketing exclusivity for developing a city-gas distribution (CGD) network in its new gas pipeline policy. The policy has been finalised and is currently awaiting the approval of petroleum ministry. As the gas market in India will take some time to develop, allowing free competition at this stage may create more problems than meeting its true purpose. Even in the power sector, the government had allowed open access in distribution after a period of five years.
ICSA, Oil India form JV
September 28, 2006. ICSA (India) Limited and state-owned Oil India Limited (OIL) have announced a strategic joint venture to procure, market and undertake projects in India and abroad in the field of engineering, for pipeline intelligent Cathodic Protection (iCAP) technology and related projects. The iCAP is a wireless embedded real time system developed for pipeline applications to monitor, analyse and display in real time the data of cathodic protection parameters for all types of existing and new cross country pipelines. Under the terms of the deal, the two companies have agreed to incorporate a new company within 12 months of the execution of the signed agreement. ICSA (India) Limited, an embedded solutions provider for the energy sector, is a Hyderabad-based public limited company listed on the Mumbai and Hyderabad stock exchanges.
PSL plans pipeline JV in US
September 28, 2006. Leading pipe manufacturer PSL Holdings (PSL) is planning to have a manufacturing base in the US. The company is in talks with a US company to set up an equal joint venture for manufacturing high grade pipes, which finds application in the field of oil and gas. However, in the long run, one has to have a manufacturing presence there to penetrate the North American market. The joint venture will have to spend more than Rs 500 crore for setting up the facility. Of the $52 billion global market for oil & gas (O&G) pipeline projects, North American firms corner projects worth $15 billion. PSL is currently participating in various onshore pipeline tenders in the US. Welspun Gujarat Stahl Rohren (Welspun), Man Industries, and Jindal Saw are some of the local competitors of PSL. Jindal Saw is the only company having a manufacturing base in the US. Welspun and Jindal Saw recently secured pipeline contracts in the US. Welspun, which got a Rs 450 crore contract this month from a US-based oil & gas major, will be shipping the entire LSAW and spiral pipes to US from India.
Policy / Performance
RIL disagrees with Indian Oil on JV proposal
October 3, 2006. The proposed joint venture (JV) between Reliance Industries Ltd (RIL) and Indian Oil Corporation (IOC) for setting up city gas distribution projects in the country may fizzle out as Reliance disagrees with IOC’s new proposal for a 50:50 JV. On September 21, IOC had placed a proposal of forming a JV company with Reliance for city gas projects before its board. Reliance and IOC were to hold 51:49 stake in the new company. However, this was turned down by IOC’s board, which did not favour minority participation by the state-owned refining and marketing major.
Oil cos swing to global trend, cut ATF prices
October 1, 2006. With the softening crude oil prices in the international markets, state-owned oil companies have cut aviation turbine fuel (ATF) prices by around 8 per cent. The prices of jet fuel have been ruling at an all-time high since the past eight months and were adding to the losses of ailing airline companies. However, airlines said they are unlikely to pass on the benefit of lower fuel rates to consumers immediately. Most domestic carriers are charging a fuel surcharge of between Rs 350 to Rs 650 on every air-ticket. The surcharge for international tickets is much higher, depending on the distance travelled. ATF constitutes 45 per cent of the operating cost for the low cost carriers and around 35 per cent for the full service carriers.
Unlike other transportation fuels, the prices of ATF are free and are fixed by the companies every month, based on the average international prices in the preceding one month period. The price including the sales tax for domestic airlines is now Rs 40,304 per kilo litre (KL) in Delhi, Rs 45,838 in Kolkata, Rs 41,704 in Mumbai and Rs 43,928 in Chennai with effect from October 1. The current price of ATF in Delhi is Rs 43,900 per KL in Delhi, Rs 49,610 in Kolkata, Rs 45,530 in Mumbai and Rs 47,821 in Chennai.
The average reduction in the ATF prices is by around Rs 3,700 per KL. The differences in prices in different metros are because of the different tax levied by the state governments. Sales tax on ATF ranges from 8 per cent to 24 per cent across different states. The rates are different for international airlines, since they do not have to pay sales tax on the product. Foreign carriers will able to lift ATF at $ 675 per KL in Delhi, $704 in Kolkata, $670 in Mumbai and $662 in Chennai with effect from October 1. The average reduction in ATF prices for the international carriers is almost by $52 per KL.
Over 18,000 quit PSU oilcos since 1999
September 30, 2006. Over 18,000 employees have quit public sector oil companies since 1999. Most have found opportunities in the private sector. A large majority of them are from the exploration and production (E&P) part of the business. So far, over 15,000 have left from the E&P sector. The number of employees in the state-owned companies used to be 56,477 in 1990, which fell to 41,415 in ’05. The detailed break up: about 10,000 people have left from the refining sector and over 750 employees left R&D jobs since 1999. In the past four years since marketing by non-PSU companies has begun, over 1,200 have quit from marketing jobs.
India’s largest PSU, ONGC, lost over 10,000 staff since 1990. Of these, around 5,000 have left in the last five years. ONGC had 46,956 people on its rolls in 1990, which was reduced to 41,040 in 1999 and further down to 36,186 in ’05. Most of these cadre who left, joined the private sector, while some opted for VRS schemes. A significant percentage also retired or resigned. Hindustan Petroleum Corp (HPCL)’s employee strength was reduced to 10,778 till March ’06 from 11,357 in March ’02. This decline is despite recruiting 416 people in the last four years. Another alarming factor is that over 50% of HPCL’s employees of the total 10,778 are between the age group of 41 and 50. Only 6% of HPCL’s employees are below the age of 30.
IndianOil Corp (IOC) has lost most of its employees in refining and marketing, and is left with about 30,000 people as on March 31, ‘06. Even as oil companies have suffered attrition in sectors like E&P, refining, marketing and R&D, the headcount in the pipeline division of these companies has more than doubled. PSU oil companies employed 3,189 people for pipeline’s division in 1990 and the number shot up to 7,318 in ’05.
IOC keeps ONGC-Mittal venture at bay
September 30, 2006. Steel tycoon L N Mittal's foray into oil and gas trading business through a joint venture with ONGC is facing fresh opposition from refiner Indian Oil Corp, which feels the JV is ineligible to bid for its tenders. IOC has shot-off a letter to the Oil Ministry, saying it cannot put ONGC-Mittal Energy Services Ltd on its mailing list for participation in its tenders for import of crude oil/LPG and export of petroleum products as the JV did not have the requisite 3-year experience. For becoming eligible for participation in public sector oil company tenders, a firm needs to have at least three years of international trading business experience and should have handled a thrusthold volume. OMESL — set up to provide trading, shipping and terminalling services — had taken birth earlier this year.
Besides experience, the trading firm should also have parent company guarantees, which could be invoked in case of payment defaults. But in case of OMESL, the two promoters have agreed to provide only 'comfort letters', which has been rejected by IOC. Hinduja Group is also keen on re-entering the oil tranding business. Previously, Hindujas- promoted Gulf Oil had a subsidiary Gopoco for the same business but was barred by public sector firms around 1992. Mittal had last month written to the Petroleum Ministry over delays in getting OMESL registered with refiners. The ONGC board on September 6 decided to make application for registration of OMESL only with public sector refiners on the basis of a parent company 'comfort letter'.
Shell offers business model on profit-sharing to ONGC
September 28, 2006. In order to overcome any bottlenecks on their joint co-operation in exploration and production (E&P) activities Royal/Dutch Shell has offered ONGC a business model of profit sharing for any enhancement in productivity. ONGC is considering Shell's proposal based on a framework outlined by the latter. The two companies have been holding high-level discussions on the issue. Indications are that ONGC was not open to going beyond Government prescribed norms on making joint investments and giving operatorship of the fields. However, ONGC has said that it was ready to share any enhancement made on planned profile of a field with Shell.
The steering committee set up by the two entities to manage co-operation between the two companies, following a memorandum of understanding inked between the oil sector behemoths, is looking into these aspects. Opening the doors for a possible participation in overseas projects as well as domestic ventures, earlier this year ONGC and Shell Exploration Company B.V. had inked an understanding to examine significant opportunities for future co-operation both in India and other countries. The MoU covered wide areas of cooperation across the full range of upstream and downstream activities, including exploration and production, coal gasification, natural gas, oil products, refining and petrochemicals.
September 27, 2006. The project to supply natural gas for industrial and household consumption through pipeline in Rajkot and Morbi towns of Saurashtra may come a cropper, as the prices of gas has increased rapidly during the last year. The project, which was initiated by Gujarat government and was being implemented by the Gujarat State Petronet Limited (GSPL), is in its last phase of completion. With a view to make ceramic industry of Morbi more competitive in the international market, by improving the quality of products and reducing production costs, the state government had specifically designed the project to provide cheaper energy sources to industry. Ceramic industry of Morbi contributes nearly 70 per cent of the total production in country. Government had also included domestic supply in its project, which was assigned to GSPL. The government had invited applications from the industrial and domestic users.
POWER
Generation
October 3, 2006. The National Hydroelectric Power Corporation (NHPC) is working to generate 6,040 MW through its 14 projects in Jammu and Kashmir. Of these 14 projects, two have an electricity generation capacity of 1,170 MW, and have already been commissioned. Work on other projects is in different stages of completion.
The corporation, with an authorised share capital of Rs 15,000 crore and an investment base of Rs 22,200 cr, was among the top 10 investment companies in the country. The NHPC had signed power purchase agreements for the Kishenganga, Nimoo Bazgo, Chutak, Uri-II and Dulhasti Hydroelectric projects in Jammu and Kashmir. The company’s power stations in the region achieved the highest ever generation of 12,567 million units (MU) in 2005-06, against the generation of 11,286.47 MU in 2004-05. The 480 MW Uri- Hydel Power project over the Jhelum in Baramulla (Kashmir) and the 690 MW Salal Hydel project over the Chenab near Reasi in Udhampur district were already operational. Work on the 390 MW Dul Hasti hydel project in Doda was nearing completion. This project was expected to be commissioned next month.
Work on the 240 MW Uri-II hydel project over the Jhelum, the 330 MW Kishenganga power project in the valley, the 120 MW Sewa –II hydel project in Kathua, the 45 MW Nimmo Bazgo and the 44 MW Chutak hydel projects in Ladakh, the 1,000 MW Pakal Dul and the 1,020 MW Bersar project over Chenab in Doda are in different stages of completion. While the Chutak project would be located on the river Suru, a tributary of the Indus in Kargil district, and consists of four units of 11 MW each, the Nimmo-Bazgo hydel project will be near the Alchi village on the river Indus in Leh district. It will have three units of 15 MW capacity each and the estimated cost of these projects would be Rs 1,290 crore
NPCIL to tap hydel power, ties up with NHPC, THDC
September 29, 2006. Orissa is once again on a MoU signing spree. After signing over 55 MoUs for steel, alumina and aluminium plants in the last couple of years, the state government signed MoUs with 10 independent power producers (IPPs) to generate 10,290 MW at an estimated cost of Rs 45,000 crore in the first phase. All these power projects will be pit-head and coal-based thermal units located in Anugul, Cuttack and Dhenkanal districts.
16,000 MW allocation reworked
September 28, 2006. The allocation of 16,000 MW power from four ultra mega power projects at Tadri (Karnataka), Sasan (Madhya Pradesh), Mundra (Gujarat) and Girye (Maharashtra) has been reworked on account of delays in clearances for setting up the projects at Girye (Maharashtra) and Tadri (Karnataka). Allocation of 16,000 MW has now been firmed up from the projects at Sasan, Mundra, Krishnapattnam (Andhra Pradesh) and the Orissa plant.
Under the new grant, the maximum allocation of power has been made to Gujarat (1,900 MW). Andhra Pradesh, Punjab, Maharashtra and Madhya Pradesh have been allotted 1,600 MW each. While there are environmental issues in way of the projects at Tadri and Girye, the progress on the Akaltara mega power project in Chhattisgarh has been slow because the state government wants to pay only the variable cost for the power allocated from it.
The projects at Akaltara, Girye and Tadri are facing problems. If the state government needs power, it will have to give ample support to the agencies involved in setting up the project either at the selected location or at a new site. In the earlier allocation of power, Maharashtra had received the maximum 3,800 MW followed by Rajasthan and Gujarat with 1,600 MW each. Most of the states have paid the advance of Rs one crore for every 100 MW of power allocated to them.
Maithon project to go onstream by '10
September 28, 2006. The Maithon Right Bank Mega Power Project, a 74:26 joint venture between Tata Power and Damodar Valley Corporation (DVC), will be commissioned during 2009-10. The 1,000 MW plant, with two generation units, will export power to the northern and western states. The Rs 3,800 crore project will be funded through 70:30 debt-to-equity ratio. Tata Power will be contributing close to Rs 840 crore to the equity corpus with DVC adding another Rs 300 crore to it. The financial closure is likely to be achieved by mid-2007.
DVC itself needed power, as it had a large command area and lakhs of consumers of its own. Most of the clearances, including those from pollution control board and environment and forest ministries, have already been received. Long-term coal linkage from Bharat Coking Coal Ltd (BCCL) and water allocation from the adjacent DVC Maithon reservoir have also been tied up. The company expected to go in for more such joint initiatives in the sector. The Maithon project is a greenfield coal-based generation unit, located about 250 KM each from Jamshedpur and Ranchi and 25 KM from Asansol in West Bengal, and is connected to National Highway 2 and to the Howrah-Mugal Sarai line of Eastern Railways.
Visa Group to light up Orissa
September 27, 2006. Kolkata-based Visa Group is setting up its maiden 1,000-MW coal-fired mega power station in Orissa with an investment of Rs 4,000 crore. It will ink an MoU with the Orissa government to this effect. Visa Power, the special purpose vehicle (SPV) formed for the project, is scheduled to sign a power purchase agreement (PPA) with Grid Corporation of Orissa (Gridco). Visa Power has shortlisted two locations for its Orissa power venture Choudwar near Cuttack and Bajrakot in Angul district. A final decision on the location will be taken soon and the company plans to acquire some 1,500 acres of land for the purpose. Land acquisition is likely to be over by June ’07, following which the project work will start.
The decision to set up a power plant in Orissa was based on availability of coal reserves and abundance of water supply. Visa Power will set up the proposed plant in two stages. There will be two units of 250-MW capacity in each phase. The first is slated for power generation by March ’11, while the second will start off by March ’12. Visa Power’s promoters have floated the SPV with an initial equity base of Rs 10 crore. The first phase of the project is expected to cost about Rs 2,000 crore. Equity for the first phase will be brought in from Visa International and through foreign direct investment from Visa Minmetal.
Tata Power to set up 2,000-MW project in Orissa
September 27, 2006. Tata Power Company (TPC) will set up a coal-based 2,000 MW power project at Naraj Marthapur in Cuttack, Orissa at an investment of Rs 9,000 crore. The company has signed a MoU with the state government for the first phase (1,000 MW) of the project, which may cost Rs 4,300 crore. As per the agreement, the Orissa government will assist TPC to get single window clearances and approvals. The project will have a captive coal mining facility. For the immediate allocation of captive coal blocks, the state government will take up the issue with the Centre. If necessary, the government will ensure coal linkages for the project. A government-nominated agency will purchase a portion of the power generated, for which a power purchase agreement will be signed later. From this project, TPC will sell power to distribution entities from the other states. The company will also cater to Tata Steel’s proposed steel plant in the state as well as certain large industrial units in Orissa.
Transmission / Distribution / Trade
17 bidders for Krishnapatnam project
October 3, 2006. In all, 17 bidders including six from abroad have submitted their request for qualification (RFQ) to the Power Finance Corporation (PFC) for the 4,000 MW Krishnapatnam Ultra Mega Power Project in Andhra Pradesh. The list of bidders, include AES India, CLP Power India-GMRrr Energy Power India consortium, DS Construction-IEC (Israel), Essar Power, Green Infrastructure, Ittina Energy, JR Power Systems, Khanjee Holdings, GMH and TXU Energy (US), Lanco Infratech-Globeleg (Singapore), Larsen & Toubro, NTPC Ltd, Reliance Energy Generation Ltd, Sterlite Industries, Sumitomo Corporation (Japan), Tata Power Company, Torrent Power AEC Ltd and YTL Power International Berhad (Malaysia). PFC received these RFQs on September 30. Andhra Pradesh has assured the off take of 1,600 MW from the upcoming Krishnapatnam project while neighbouring states like Maharashtra, Karnataka and Tamil Nadu would procure 800 MW each. The power will be drawn by competiting bidding basis.
Power-surplus Bengal lukewarm to central aid
September 30, 2006. The West Bengal government is not quite warm to the idea of an ultra mega power project coming up in the state. This, despite the central power ministry’s indication of announcing one in Bengal, provided the state government is interested therein. Bengal is not presently contemplating approaching the central power ministry for a ultra mega power project for the state. Union power minister had recently said his ministry may sanction a 4,000-MW scheme in West Bengal if the local government requests the Centre for the same.
The state has lined up about 6,000 MW of thermal power generation capacity addition programme for the 10th and the 11th five-year plans. These include two 500-MW units each at Sagardighi and Katwa. The state is surplus in power generation and the proposed capacity additions are more than enough to meet the projected demand for power over the next few years. As the state is already geared to meet projected demand and even generate surplus power in the 10th and the 11th Plan, there are no proposals to approach the Centre for any such power projects. State-owned West Bengal Power Development Corporation, Durgapur Projects and Purulia Pumped Storage Project have lined up capacity expansions of 1,270 MW, 300 MW and 900 MW, respectively, for the 10th Plan. And for the 11th Plan, efforts are under way to add another 3,550 MW, including two 1,000-MW (500 MW x 2) plants at Sagardighi, Katwa and Bakreswar. The state will come up with another 350 MW plant at Santaldihi.
Dabhol gets new energy
September 29, 2006. Dabhol power plant has got a fresh lease of life. The top brass of Ratnagiri Gas and Power (RGPPL), the owner of the plant, and Mahavitaran, the distribution arm of the erstwhile Maharashtra State Electricity Board, are meeting to draw up a plan to restart the plant by December. Central Electricity Regulatory Commission (CERC), which heard a petition filed by both the parties, has advised them to submit a joint petition. Moreover, financial institutions are also putting pressure on RGPPL to reopen the plant as they fear the commercial viability of the plant would be at stake with the project costs mounting. CERC advised RGPPL and Mahavitaran to reach a mutually-acceptable and reasonable tariff rate considering energy charges, incidental charges and operating schedule.
September 29, 2006. In an effort to assuage the inflamed passions of the Uttar Pradesh power employees over the privatisation of the 1,000 MW Anpara C thermal power project, Lanco Kundapalli, the Hyderabad-based firm, has said it has no intention of acquiring the existing thermal units A and B at Anpara. The state cabinet on September 24 had cleared the award of the contract for Anpara C to Lanco Kundapalli
September 29, 2006. GMR Energy signed an agreement with Grid Corporation of Orissa (GRIDCO) for setting up a 1,000 MW coal-based thermal power plant at Dhenkanal district in Orissa. The project, GMR’s fifth, is expected to entail an investment of Rs 4,200 crore. GMR is expected to go in for the classic 70 per cent debt and 30 per cent equity model for this project. It has already identified the land and is in the advanced stage of project development. GMR intends to wheel the 75 per cent of the sellable power to the power deficit states in south India. The remaining 25 per cent at 80 per cent plant load will be supplied to GRIDCO for a period of 25 years. The power purchase agreement has been signed to this effect. The first phase of the plant is scheduled to be commissioned by the end of 2010 and the second phase by the middle of 2011.
PTC signs pact for Tala project
September 29, 2006. PTC India has signed one of the big-ticket cross-border power purchase agreements (PPA) for 1,020-MW Tala hydro project. Located in the Wangchu basin in Bhutan, the project has been set up with financial support from India and would be the single-biggest revenue earner for the government of Bhutan. The power generated would benefit states connected to India’s eastern and northern grid. As per the PPA that runs for a 35-year period, the initial tariff for power supply has been fixed at Rs 1.8 per unit. PTC India has already started wheeling power from the project into the country. The project has been put up at a cost of over Rs 4,000 crore. Funding for the project was provided by the government of India through 60:40 combination by way of grant and loan. On full commissioning, the project will bring in an output of over 4,000m units of electricity into India every year.
NTPC wants to go solo on 1000-MW Nabinagar project
September 28, 2006. In a new turn of events, state-owned NTPC Ltd has proposed to implement the 1,000-MW Nabinagar power project on its own. This may come as a big jolt to the railways, which were the sole beneficiary of this project. The Rs 4,000-crore plus project was conceived as a joint venture of the railways and NTPC in 2002 for meeting the former’s captive power needs. However, the project work has been languishing for over four years now following serious differences between the railways and the power ministry over its implementation. The issues pertained to the administrative ministry of the joint venture company of NTPC and railways, transmission and distribution of power from the project to the load centres of the railways.
M`shtra asks SEZs for power needs
September 28, 2006. The Maharashtra government’s energy department has asked all SEZ developers in the state to submit the details of their power requirements and from where they are going to get it. The Centre has approved more than 40 SEZ proposals from the state and the state government expects that the increase in the economic activity through SEZ is going to generate tremendous demand for power. In such a situation, the state would not be able to meet the electricity needs of SEZs.
Maharashtra was expecting an additional supply of 11,000 MW power by the end of 2010, which includes 3,000 MW from the state-owned Mahagenco, 3,000 MW from independent power producers, 3,000 MW from central power utilities like NTPC, and NPCI, and 2,200 MW from Dabhol plant of Ratnagiri Gas and Power Pvt Ltd (RGPPL). However, SEZs, malls, multiplexes and large residential colonies in urban areas which are also high power consumers may send the government's planning for a toss and that’s why they were being extra cautious. The ministry is also asking its officials to ensure that a developer leaves enough space for installation of a sub-station or transformer on the property he is developing as per development control rules (DCR).
September 28, 2006. The State Government proposes to come out with a comprehensive micro hydel power policy. The State had the potential to host at least 130 small hydel projects, 12 of which had already been started. The Government also planned to raise generation capacity by 1,000 MW during a five-year period from 2006. The new projects sanctioned by the Kerala State Electricity Board (KSEB) would entail an investment of Rs 1,446.74 crore, the required capital for which would be raised from financial institutions. Projects which have been started would be completed in a time-bound manner.
The State Government has also decided to permit private investors to set up hydel projects in the State. While stating that Electricity Regulatory Commission had the right to decide on private participation in any sector, there was no plan to open up the distribution sector to the private sector. The State and the Central Governments have jointly drawn up plans to generate power from various non-conventional sources. A survey conducted by the Centre for Wind Energy Technology under the Union Ministry of Non-Conventional Energy Sources had found that 16 sites in the State held potential for wind power generation. Plans have been drawn up for generating at least 40 MW from the non-conventional sources, out of which 35 MW would be allocated to be produced in the private sector.
PSUs, pvt firms to be allotted 18 coal blocks
September 28, 2006. A government committee has recommended the allocation of 18 coal blocks with total geological reserves of nearly 2 billion tonnes to private and government sector companies including the likes of Hindalco Corporation, Tata Power, Jindal Steel and Power, Essar Power, Steel Authority of India as well as the state governments of Jharkhand and Andhra Pradesh among others. The screening committee, headed by coal secretary and comprising officials from the power, railway and industries ministries and the concerned state governments, has put up the names for approval of the ministry.
As per the recommendations made by the screening committee, the Tubed block is expected to be allotted to two separate companies — Hindalco and Tata Power. The Jitpur block has been recommended to Jindal Steel and Power Ltd, while the Chakla block is expected to be allocated to Essar Power. The Andhra Pradesh Power Generation Corporation is expected to get the Penagadapar-I block while the Andhra Pradesh state government may be allotted the Anisettispalli and Purukul Chilka blocks. Announcements for the 18 coal block allotments are expected to be made within the next 10 days.
Petronet seeks SBI Caps' due diligence for Dabhol terminal
September 27, 2006. Petronet LNG Ltd (PLL) has asked SBI Caps to undertake commercial and financial due diligence of the five-million-tonne LNG import terminal at Ratnagiri Gas and Power Pvt Ltd (RGPPL), formerly known as Dabhol Power Corp Ltd, before the company firms up its views on participating in the project. An internal team of the company along with its strategic partner, Gaz de France, is doing the technical due diligence of the terminal. RGPPL is run by gas transmission firm GAIL (India) Ltd and NTPC. The capacity of the LNG terminal is five MMTPA, of which 2.1 MMTPA would be required for the power plant.
Following an initiative mooted by the lenders of the Dabhol project, led by ICICI Bank, SBI and IDBI, to bring in new partners for the terminal, PLL was approached. Since it was a commercial decision, the Petroleum Ministry had left it to the Petronet board to take a call on the issue. The lenders want new partners with appropriate core competency. Before any decision is taken, there is a need to understand what is in the offing.
INTERNATIONAL
OIL & GAS
Upstream
Token OPEC output cuts may be a sign of things to come
October 3, 2006. Nigeria and Venezuela’s cuts to their oil output have succeeded in lifting crude back above $60 and have the unspoken support of other Opec countries that are silently taking similar action. By cutting output by 5% from October 1 Opec president Nigeria is sending a message that a bigger reduction could be on the way when ministers meet in December. By also trimming its output, Venezuela is reinforcing the message. It is a sensitive time to be cutting production with oil prices still at historically high levels — oil has trebled since the start of ’02 — and evidence is mounting that demand growth is slowing in top consumer the US. Most Opec producers, notably those in the Gulf, have long established strategic relationships with Washington.
Output starts at Petro-Canada's Dutch oil field
October 2, 2006. Petro-Canada has started pumping oil at its De Ruyter field in the Dutch North Sea, a development that will eventually add 10,000 barrels a day to the company's output. Overall production at the field is expected to average 18,500 barrels of oil equivalent a day in 2007 and 2008. Ninety percent of the production is crude oil and the rest is natural gas. De Ruyter is one of a trio of oil field start-ups for the company in the last part of 2006. The Buzzard field in the British North Sea, in which it owns 29.9 percent, is slated to begin operations and it is also targeting production from Block L5b-C in the Netherlands.
Statoil revises its production target for oil and gas
September 30, 2006. Norwegian energy company Statoil cut its oil and gas production targets by 3 per cent for both this year and next due to capacity constraints, sending its shares lower. Statoil's output in 2006 is now expected to be 1.14 million barrels of oil equivalent per day (boed), based on an oil price of $60 per barrel. In 2007 Statoil plans to produce 1.3 million boed, split between roughly 1,060,000 boed from the Norwegian continental shelf and 240,000 boed internationally. The revised forecasts do not represent any change in Statoil's oil and gas reserves but entails postponed production. Tightness in the oil services market including difficulties in securing drilling rigs has forced a number of oil companies to warn that projects may be delayed and targets postponed. Analysts brushed off Statoil's scaling back of its 2006 target when it reported second quarter results in July, largely because the 2007 target was affirmed, so the latest statement could prompt investors to wonder if it hints at a longer term problem. Statoil was maintaining its target for oil and gas production growth of 2-4 per cent per year in 2007-2010.
Statoil sign $1.25bn to build offshore oil rig
September 29, 2006. Norway's state-owned Statoil ASA and engineering contractor Aker Kvaerner ASA agreed to collaborate on an 8 billion kroner (US$1.25 billion) oil platform project. The companies expect to sign a final contract in October for the construction of the semi-submersible oil platform for Statoil's Gjoea oil and natural gas field off Norway. Aker Kvaerner will handle the engineering and design of the platform, but Statoil will award a separate contract for the construction of the hull itself. The 110-meter (360 foot) long platform will be completed in 2010. The Gjoea field, discovered in 1989 off Norway's west coast, has estimated reserves of 82 million barrels of oil and 40 bcm (1.4 tcf) of natural gas.
OPEC members to cut exports
September 29, 2006. Some members of the OPEC oil cartel have decided to reduce their crude exports in line with a slow down in demand after prices fell sharply from record highs. The world's eighth-largest exporter, Nigeria, will cut supplies by 5 per cent from October 1. Some other countries in the exporters' club already have trimmed sales. Nigeria, Saudi Arabia and Kuwait are involved in an informal OPEC arrangement to cut supplies and stem the price drop. Many members of the Organisation of the Petroleum Exporting Countries (OPEC) have been pumping near full tilt most of this year, ignoring quotas, as prices soared to record levels.
Gazprom unit shows interest in Russian TNK-BP stake
September 28, 2006. Russian gas monopoly Gazprom's oil unit would be interested in buying shares in Anglo-Russian oil venture TNK-BP if its Russian owners decide to sell. The unit’s healthy cashflows and the help of the parent company could easily allow it to raise up to $25 billion to become an equal partner of oil major BP Plc in Russia’s second largest oil producer. TNK-BP has a market capitalisation of $40 billion. UK-based BP paid $7 billion to buy a 50 per cent stake back in 2003. The Russian partners are Mikhail Fridman's Alfa Group and Access-Renova, a partnership between Viktor Vekselberg and Len Blavatnik. Gazprom Neft posted first-half net profit of $1.8 billion, up from $1.42 billion a year earlier, and is on track to double that figure for the full year.
$13.8 mn bid for oil leases in Alaska reserve
September 27, 2006. Four companies submitted $13.8 million (€10.9 million) in bids for rights to develop oil, and lease tracts, in part of the National Petroleum Reserve-Alaska. The bids would allow the companies to develop 81 tracts on about 940,000 acres (376,000 hectares) in the reserve. Submitting the bids were Anadarko Petroleum Corp., ConocoPhillips Alaska Inc., FEX LP, and Petro-Canada (Alaska) Inc. The Bureau of Land Management has 90 days to evaluate the bids before officially awarding them.
Downstream
Abu Dhabi crude sees little interest from Asian refiners
September 30, 2006. Refiners in Asia have requested very little additional Abu Dhabi crude oil for November as demand in the region has faltered as plants cut runs on slumping refining margins. Incremental volumes of Abu Dhabi crude to Asia are unlikely to top one million barrels for November, and could be even lower than 500,000 barrels, a survey of lifters showed. Up to 1.5 million barrels of additional Abu Dhabi crude for October loading was booked last month. Middle East producers, Asia's main source of oil, have been regularly supplying extra crude to Asia on top of term contract volumes, filling refiners's requests when profit margins ballooned last year. But full term volumes may be more than enough now that refining margins have fallen sharply.
Simple refining margins for Dubai, the Middle East crude benchmark, in Singapore have been negative for the past two months, while complex margins have fallen below $5 a barrel over the same period. Oil and product prices have taken a beating, prompting refiners to cut runs, and the Organisation of Petroleum Exporting Countries (Opec) to look at export cuts. Nigeria will cut crude supplies by 5 per cent from October 1, while some other Opec countries have already trimmed crude sales. But the refiners have themselves dropped requests for additional crude over the past two months, as they cut runs in an attempt to bring support to product prices and turn around slumping refining margins.
Tehran’s Khangiran gas refinery produces 2,300 bpd of condensates
September 28, 2006. Daily gas condensates production from Shahid Hasheminejad (Khangiran) Gas Refinery stands at 2,300 barrels of solvents such as thinner, naphtha, kerosene and diesel fuel. Around 14 tanker trucks full of gas condensates daily produced at Shahid Hasheminejad (Khangiran) Gas Refinery is distributed and used in the three Khorasan provinces. The refinery also produces and exports some 750 tons of sulfur for industrial uses per day. The Oil Ministry and the provincial officials are studying a plan aimed at turning the natural gas abundant in the nation into gasoline. If approved, the project to turn the flared gas and acid gas of the refinery into gasoline would call for $300 million in investment and a two-year timetable. Located 160 kilometers northeast of Mashhad – capital city of Iran’s northeastern province of Khorasan Razavi - Khangiran Gas Refinery supplies the cooking gas and industrial gas required by the provinces of Khorasan Razavi, North Khorasan, South Khorasan, Semnan, Mazandaran and Golestan.
Transportation / Distribution / Trade
Australia's Santos starts gas supply in Indonesia
October 2, 2006. Australian oil and gas producer Santos Ltd. has started supplying industrial customers in Indonesia's East Java province with natural gas from its Madura block via a pipeline. The gas is being distributed by PT Perusahaan Gas Negara. In 2005, Santos signed a deal with PGN, worth $550 million, to supply gas from the Maleo offshore field in Madura block in Indonesia's East Java region for a period of eight to 12 years. Santos has said it planned to supply gas at a peak rate up to 110 million cubic feet per day for at least six years. The contract with Santos could save Indonesia from burning 6 million kilolitre (38 million barrels) of diesel over a period of up to 12 years. With new gas supply from Santos, PGN will expand its market to new customers in East Java. This is will give more revenue to the company. Santos has 67.5 percent of the stake in Madura block and other partner are Malaysia's Petronas with a 22.5 percent stake and regional local firm with 10 percent.
Jordan to resume importing cheap oil from Iraq
October 2, 2006. Jordan plans to resume importing cheap oil from Iraq, bringing a three-year hiatus to an end under a deal that envisions setting up a pipeline between the neighbours. Jordan is one of a few Arab countries that does not have significant oil reserves. It hiked fuel prices three times in the past year the last time in April, almost doubling fuel costs for consumers. An additional increase is expected next March. The oil would be bought at 'international market price, minus an unspecified number' referring to a preferential price, which economic analysts believe may be as much as $10 lower than on the international market. Jordan will import 10,000 bpd about one-tenth of its daily requirements. Before the 2003 US-led invasion of Iraq, Jordan received all of its oil from its neighbour at highly preferential prices under Saddam Hussain's regime. Iraq will give Jordan a discount because of their close ties and its history of providing its neighbour with inexpensive oil. The oil would come from the northern Iraqi refinery of Kirkuk and that it will be trucked overland across the desert into the kingdom by a joint Jordanian-Iraqi firm.
Balochistan and IPI gas pipeline
October 2, 2006. Islamabad and Tehran have agreed to conclude quickly the talks on the $4.5 billion Iran-Pakistan-India (IPI) gas pipeline project. In the trilateral scheme of gas pipeline project, Iran would be the supplier, India recipient and Pakistan transit facilitator as well as buyer of Iranian gas. The security situation however needs to be improved in Balochistan across which the strategic pipeline will pass. Pakistan is expected to get $200-$500 million annually in transit fees alone. Some MPAs in the Balochistan assembly have recently demanded a higher royalty as the greater part of the IPI gas pipeline passing through their province. The house later unanimously admitted a motion that seeks to debate the issue.
Some assembly members believe that the success of the IPI project is linked to accommodation of Balochistan’s demands. Their concern revolves round two main issues: Balochistan needs to be assured of a royalty that will satisfy the people of the province and the locals must be ensured maximum employment in the project. The proposed Iran-Pakistan gas pipeline project conceived in 1993 was later proposed to be extended to India. The pipeline would carry 1.1- 3.4 billion cubic feet per day (BCFD) gas from Iranian Pars field to Pakistan. A 2670-km pipeline of 32 to 44 inch diameter would be laid from Iran to India, 707 km of which would traverse Pakistani territory, a greater part of which will pass through Balochistan.
Under the plan, Iran would build the pipelines from its Pars gas field to Jiwani in Balochistan (near Pakistan’s border), while Pakistan would lay the pipelines from its side up to Jiwani. This would greatly save the cost of the proposed Iran-Pakistan gas pipeline project by $1 billion. The gauge of the pipeline would be increased from 36 inches to 40 inches if India shows interest in the Iran gas pipeline project. The inter-state gas distribution company (SSGC) puts the cost of the Iran pipeline project at $2.1 billion. The length of pipeline has been calculated as 2106 km.
India’s oil minister recently called the proposed gas pipeline from Iran across Pakistan ‘a risky venture’ that would be difficult to finance. He viewed that security for any pipeline was a concern because it would run across volatile areas of Pakistan where other pipelines have been attacked in the past. The proposed plan for laying Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline could not be materialised due to the prevailing political instability and uncertain security situation in Afghanistan.
Islamabad has however repeatedly been rejecting the India’s concern contending that it can effectively handle the security of the proposed IPI gas pipeline. Petroleum and Natural Resources Minister recently claimed the government had been looking after the 6,000-kilometer-long domestic pipeline network that provided gas countrywide. But the recent incidents of targeting gas installations and blowing up of gas pipelines have become a routine in the province.
The acts of sabotage have several times forced the gas company to shut off the main compressor plant, thus suspending gas supply to parts of Balochistan, Sindh and Punjab. A decline in production has reduced the province’s share in gas royalty to Rs1.5 billion in. The transportation of hydrocarbons from energy-rich Central Asia and Iran to energy-starved South Asia is a complicated business involving strategic interests of big powers and corporate interests of global energy giants. The proposal of laying gas pipelines from Daulatabad fields in Turkmenistan or South Pars fields in Iran to Gwadar in Balochistan has triggered a cold war between pro-project and anti-project actors in the regional geopolitics. The US opposes the IPI pipeline project but supports the TAP pipeline project. On the other hand, the Russia supports the IPI pipeline project and opposes TAP pipeline project. While India’s position in the game is that of running with the hare and hunting with the hound.
World's longest gas pipeline to go on stream
October 1, 2006. The world's longest underwater gas pipeline between Norway and Britain is due to go on stream. The 1,200-km Langeled pipeline stretching from Ormen Lange, the largest gas field under development on the Norwegian continental shelf in Easington in northeast England, is designed to partly ease concerns about Britain's dwindling energy supplies. A further northern part of the U.S.D 9.6-billion project, once completed in October next year, is hoped to carry more than 70 million cubic meters per day to Britain's grid network and to supply up to 20 percent of Britain's energy needs at a time when oil and gas resources in the UK sector of the North Sea is in steep decline.
Sea NGC Corp to build world's first CNG ship
October 1, 2006. Sea NG Corporation has received approval from the American Bureau of Shipping for 1onstruction of its Coselle compressed natural gas (CNG) ship. This is the first ship and cargo system in the world for the transport of CNG to be so approved by ABS or any other international marine classification society. The Coselle is a unique, patented system, invented in Canada, for storing high-pressure gas in a coil of small diameter pipe. Numerous Coselles are contained within the specially-designed ship. This storage system has significant safety and cost advantages over conventional large diameter pressure cylinders. The Coselle CNG System has been in development for a decade by a team of experienced gas and marine engineers. A major advantage of the Coselle CNG System is that it requires minimal on-shore facilities. Gas can be loaded and discharged at simple port-side pipeline facilities, which greatly reduces environmental, land-use and financial concerns.
German gas market limps into new access regime
September 30, 2006. Germany's gas market is nowhere near the free playing field desired by regulators when a new access regime to its pipelines starts today. The rules, aimed at helping new traders offer users a choice of supplier, have met with resistance from key players in the 1,000 terawatt hours market, where prices remain among the highest in Europe. E.ON Ruhrgas has more than 60 per cent market share in the sector, where foreign shippers such as BP or Gaz de France and domestic traders seek to sell more gas. Only half of the 730 gas pipeline operators have managed to sign up to changed access modalities to their networks for the new gas delivery year although they had promised the energy regulator Bundesnetzagentur progress as of October. One is a change from distance-based prices charged for gas transport by pipeline owners to an entry-exit model, which ideally would apply in a single national gas trading zone.
Used in Britain, this model allows traders without networks to reach customers as real transport costs become transparent. But the pipeline owners reserved the option to maintain the old practice of booking shipments on behalf of third parties on a point-to-point basis, while also preserving 19 delivery zones. German gas consumers pay exaggerated prices because they are linked to those of oil, and because the regulator is slow to cut gas transmission fees.
Bundesnetzagentur has not yet published any significant decisions on proposed gas transmission fees, as it struggles to deliver decisions on power transmmission charges first. A dozen or so big pipeline companies had filed applications to be exempted from having to even file their proposals, which delayed implementation. Retail prices are meanwhile going up from October as suppliers apply contractual clauses allowing them to pass on higher gas import costs, which follow oil with a time lag.
CNOOC to build LNG terminal in China
September 29, 2006. China National Offshore Oil Corp. plans work to build a liquified natural gas terminal that will operate by 2010 in the southern city of Zhuhai. It will build the terminal with a Chinese partner, Guangdong Yue Dian Corp., a power generator. Both firms are state owned. The recent drop in crude oil prices to the low-US$60 range this month from US$78 in July won't affect operations. The company had planned its operations based on a US$45 oil price.
Greece mulling contracts for Russian gas post ’12
September 28, 2006. Greece is interested in signing long-term contracts on Russian supplies of natural gas after 2012. Russia supplied 1.4 bcm of gas to Greece in January-July 2006 and 2.4 billion cu m in 2005. The ministry hoped that an intergovernmental agreement on the construction of the Burgas-Alexandroupolis pipeline would be signed by the end of 2006. The leaders of Russia, Bulgaria and Greece adopted in Athens September 4 a joint declaration on energy cooperation under which they agreed to sign an intergovernmental deal on the construction of an oil pipeline in the Balkans by the end of 2006.
The $1-billion project, which will run 280 kilometers (175 miles) from the Bulgarian Black Sea port of Burgas to Greece's Alexandroupolis, on the Aegean, will allow Russia to export oil through the Black Sea, bypassing the often crowded Bosporus Strait in Turkey. The Russian, Bulgarian and Greek governments signed a memorandum on the pipeline's construction in April 2005. Gazprom was considering building a second branch of its Blue Stream natural gas pipeline southward to transit gas through Turkey toward Greece, Italy and, possibly, Israel. The Blue Stream pipeline is the largest Russian-Turkish joint energy project to date, which carries Russian natural gas to Turkey. The $3.2 billion pipeline transported 5 bcm of natural gas in 2005, and is expected to carry 16 billion cubic meters annually by 2010.
Petronas unit gets Indon oil & gas contract
September 27, 2006. Petronas, through its wholly owned subsidiary PC (Lampung II) Ltd, has been awarded a new offshore block in Indonesia, bringing its upstream interest in Indonesia to nine blocks. The contract would boost Petronas’ efforts to build its oil and gas business portfolio in that country. The Production Sharing Contract (PSC) for the latest block, the Lampung II, was signed in Jakarta. The Lampung II Block, measuring about 4,168 square kilometres, is located about 150 kilometre east of the south-eastern coast of Sumatra. Under the PSC terms, PC Lampung II would acquire, process and interpret 250 sq km of 3D seismic data, drill two exploration wells and undertake geological and geophysical studies over the acreage.
The signing of the Lampung II PSC marked another milestone in the company’ quest and commitment to be a long-term industry player in Indonesia. Petronas has interests in eight other blocks in Indonesia, two of which are already producing. The company also has interests in a gas transmission pipeline network, petroleum products marketing and retail service station business in Indonesia.
Shell interested in trans-Turkey pipeline
Policy / Performance
Pak’s new formula to fix gas tariff
October 2, 2006. The federal government has decided in principle to replace the existing formula to compute natural gas tariff with the market-based Karachi Inter Bank Offer Rate (Kibor). While the current pricing formula is based on the cost of service, under the new mechanism, the gas utilities would be given a variable return on their investments on the basis of six-monthly Kibor plus eight per cent, instead of a guaranteed 17 to 17.5 per cent return on assets. It will increase prescribed gas prices by about 1.5 per cent in case Kibor rates go up by one per cent, from 10 per cent to 11. The changes were envisaged on the recommendations of the Oil and Gas Regulatory Authority (Ogra) and were expected to be approved by the federal cabinet soon for implementation at the time of next gas tariff review in December 2006. The existing tariff methodology was being changed on the basis of a uniform system of accounts for gas utilities under which the Ogra wanted to allocate separate costs to transmission and distribution activities in the overall tariff setting. Simultaneously, the depreciation cost of these transmission and distribution assets would be calculated at the rate of four and five per cent respectively. The government and the Ogra had been under criticism at almost all forums, particularly at public hearings, on the grounds that fixed return on assets under the World Bank covenants was not resulting in any incentive to the gas utilities to control their losses and non-development expenditures. It’s because they were getting a guaranteed rate of profit through gas tariff. Currently the tariffs are being computed in an all-inclusive manner. With both Sui Northern and Sui Southern utilities buying and reselling gas exclusivity in their regional markets, prices can be segregated at most at the injection point in the transportation system. This means that an implicit transmission-distribution tariff could be calculated by subtracting the average price from the prescribed tariff to the consumer.
October 2, 2006. Tokyo will not extend credit to develop Iran's Azadegan oil field, to which Japan has majority rights, if the U.N. Security Council goes ahead with sanctions against Tehran. Tokyo's decision was welcomed by Washington, which has been pushing for sanctions against Iran and wants Tokyo to step up the pressure, too. The Japanese government-funded oil company INPEX Corp. holds 75 percent of the rights to the oil field, and is in negotiations with the National Iranian Oil Co. to develop it. But suspected Iranian nuclear development, which has been criticized by the United States and other Western nations, has held up the project. A developed Azadegan oil field could cover up to about 6 percent of Japan's annual crude oil imports. Because developing an oil field requires huge investment and a good deal of risk, Tokyo's support - granting credits, guaranteeing debts or providing government-sponsored trade insurance - is considered important to the future of the project. Japanese government did not intend to extend support for the Azadegan project if a UNSC resolution is passed.
Bolivia needs $800mn to meet gas contract
October 1, 2006. Bolivian state-owned energy company YPFB has the capacity to honor existing natural gas export contracts, but it needs investments worth $800 million in three years to fulfill new export deals. YPFB has the capacity to carry out shipments of up to 30 million cubic meters of natural gas a day until 2019, as agreed in a contract signed in 1999. The country needs large investments to meet new deals such as one to increase natural gas exports to Argentina to 27.7 million cubic meters a day in three years, from a current maximum level of 7.7 million cubic meters.As part of the nationalization, Bolivia also wants Brazil to pay up to 75 percent more than the $4 per million British thermal units it currently pays for Bolivian gas. Brazil has a contract to buy 30 million cubic meters a day of natural from Bolivia, but it imports some 26 million cubic meters a day. Argentina demands an average of 5 million cubic meters a day from an agreed maximum of 7.7 million cubic meters a day. The end of 2006, Bolivia will have exported more natural gas than ever to its biggest customers, Argentina and Brazil, while output for the domestic market will also be higher than in previous years.
Gazprom, Iran envoy discuss oil and gas cooperation
September 30, 2006. The chief executive of Gazprom and Iran's ambassador to Russia met to discuss oil and gas cooperation. They discussed bilateral cooperation in the oil and gas sphere, in particular the South Pars deposit. Iran has proven natural gas reserves of around 28 trillion cubic meters, the world's second largest reserves behind Russia. In 2005, gas production in the country totaled 86.6 bcm. South Pars holds 60% of Iran's reserves, and 10% of known world reserves of natural gas. The deposit is a part of the North Dome deposit, the largest non-associated gas field in the world, situated in Qatar and Iran.
Iraq and China try to revive Saddam-era deal
September 29, 2006. Iraq could hand China the first foreign contract to develop its vast oil resources if Beijing agrees to put into effect a deal originally signed with Saddam Hussain. While US oil majors, excluded from Iraq before the US invasion in 2003, wait for Iraq to pass new laws on the sector before investing, Oil Minister will visit China, Japan and Australia shortly to discuss projects and developing exports. The minister will discuss with Chinese companies fulfilling previous contracts signed with the former regime. Iraqi oil officials have previously said they believe China will agree to develop the 90,000 bpd Ahdab field in south central Iraq as the first project since the war. The field, with an estimated development cost of $700 million, was awarded to China National Petroleum Corp and Chinese state arms manufacturer Norinco by Saddam.
The deal, like others signed by Saddam, was effectively frozen by international sanctions and then Saddam's overthrow. Several wells are already delineated, however, although there is no production from Ahdab at present. A second field, East Baghdad, is also slated for priority development. The four-month-old government has given priority to Ahdab because of its proximity to new power stations and refineries.
The ministry has previously said it expects output to increase from 30,000 bpd to a full capacity of 90,000 over two years. Iraqi ministers have said they hope to see legislation by the end of the year setting down the terms on which foreign companies can invest in hydrocarbon resources to help Iraq develop its war- and sanctions-ravaged oil industry.
Natural gas price for Ukraine to remain at $95 end of ‘06
September 28, 2006. The price Ukraine pays for a mixture of Russian and Central Asian natural gas will remain unchanged at $95 per 1,000 cubic meters until the end of 2006. Ukraine currently imports a mixture of Russian and Turkmen gas. The price formula is based on a European rate of $230 for Russian gas and $60 for the Central Asian republic's gas. Earlier in September, Gazprom agreed to a 50% price rise, to $100 per 1,000 cubic meters, for its supplies from Turkmenistan. At the talks with Ukraine, the sides agreed on an annual volume of 55 bcm in 2007-2009, which Gazprom considers to be sufficient for the country's needs. Russia, which holds the world's largest reserves of natural gas, is Ukraine's main gas supplier. The issue of gas deliveries has become vital this year, following a price row in January, when Gazprom raised gas prices to world market levels and cut off supplies to its ex-Soviet neighbor. It later accused Ukraine of siphoning off Europe-bound transit gas.
Italy's Eni seeks $830 mn from Venezuela
September 27, 2006. Venezuela Italian oil company Eni SpA is seeking at least €654 million (US$830 million) from Venezuela for the seizure of its Dacion oil field earlier this year. Eni believes it has the right to be entitled to a compensation proportioned to the fair value of the relevant assets as consequence of the expropriation. Eni lost the Dacion field after refusing to agree to a contract renegotiation with state oil company Petroleos de Venezuela SA. PDVSA forced the operators of 32 oil fields to accept minority stakes in new state-controlled joint ventures. PDVSA compensated these firms for their lost value with credits toward future investments here, but not cash. Oil companies including San Ramon, Calif.-based Chevron Corp. and Brazil's Petrobras agreed to Venezuela's terms. Apart from Eni, the only other firm to resist and have its assets seized was Total SA of France. Dacion output averaged 60,000 barrels a day during the first quarter of 2006, and has 175 million barrels of proven reserves.
Power
Generation
Progress Energy finishes meter installation
September 28, 2006. Progress Energy Florida has completed the installation of 1.5 million digital meters for its residential customers in Florida. The company began installing the meters in July 2005 and finished this month, three months ahead of schedule. The technology provides a less-intrusive meter-reading process for Progress Energy customers and accurate, real-time information on energy usage.
Policy / Performance
October 2, 2006. Montana Gov. Brian Schweitzer and a consortium of energy and technology companies announced the state will be home to one of the nation's first coal-to-liquids energy plants. The $1 billion Bull Mountain Coal-to-Liquids Plant is slated to begin producing 22,000 barrels per day of diesel fuel and 300 MW of electricity - enough to power 240,000 homes - in six years. About two-thirds of crude run through U.S. refineries is imported. While the United States has limited oil and gas reserves, it has enough coal to last more than 200 years; that compares to just 10 years of natural gas reserves. In the two-step process at the Montana plant, coal will be converted to synthetic gas, or syngas, through technology provided by General Electric. Then the syngas will be converted to liquids.
Newfoundland power investing $62 mn in 2007
October 2, 2006. Newfoundland Power Inc. has received approval of its 2007 Capital Budget from the Newfoundland and Labrador Board of Commissioners of Public Utilities. The Company will invest approximately $62 million next year to strengthen its electricity system and enhance reliability for customers. Approximately $18.8 million of the 2007 Capital Budget will be used to refurbish the Rattling Brook hydroelectric plant in Central Newfoundland. The plant, which began operation in 1958, now requires extensive upgrading. The improvements to the Rattling Brook hydroelectric plant will provide additional clean energy that will displace approximately 10,500 barrels of oil on an annual basis. Other highlights of the 2007 Capital Budget include rebuilds of major transmission lines on the Bonavista Peninsula, Bay de Verde Peninsula and Southern Shore.
The Company has an asset base of approximately $1.1 billion that is geographically dispersed throughout the Island and includes: 23 hydroelectric plants; 6 thermal plants; 130 substations; approximately 270,000 distribution and 27,000 transmission poles; and 10,000 km of distribution and transmission lines.
The Company continues to work hard to improve the performance of these assets to provide reliable service in one of the harshest environments in the country. Approval of the 2007 Capital Budget allows the Company to immediately begin detailed construction planning and ordering of materials so that work can commence as early as weather permits in the new year.
Xcel gets OK to expand nuclear storage
September 29, 2006. State regulators granted Xcel Energy Inc. permission to expand storage of nuclear waste at its Monticello plant. The state Public Utilities Commission (PUC) voted 4-0 to approve Xcel's request to store the waste in above-ground containers. If state legislators do not overturn the PUC's decision before June 1, construction of the containers could begin this summer. Xcel is looking to build the containers at Monticello while it waits for a new permanent storage facility to open in Nevada. The company went through a similar yet much more controversial process in 2003, when it sought to expand storage at its nuclear plant in Prairie Island.
Climate demands rapid energy conversion
September 29, 2006. A panel of energy experts called on industry and the U.S. government to rapidly embrace technologies that reduce greenhouse gas emissions, including renewable energy, energy efficiency and carbon sequestration. Growing energy demand, notably from developing nations such as India and China, coupled with climate change caused by global warming, have created a situation that requires both technology and new government policies. All panelists called on the federal government to establish policies to curb greenhouse gas emissions. These would take the shape of a carbon tax, or a cap and trade system of buying carbon credits, and need to be implemented in conjunction with other large emitters.
Mechel launches new $100 million coal mine
September 29, 2006. Mechel a leading producer of special steel and alloys, has started operation of a new coal mine, which cost $100 million to build. It said the Olzherasskaya mine, in southwestern Siberia, will increase the company's coal output by 1.8 million tons in 2007. The new mine has a design capacity of 3 million tons of coal a year, which will be reached by 2010. Coal from the new mine will be exported mainly to Asia and Western Europe, as well as supplied to the domestic market.
BC Hydro agreement approved by the British
September 29, 2006. British Columbia Utilities Commission has formally approved Compliance's BC Hydro Electricity Purchase Agreement with the Company's subsidiary Compliance Power Corporation. Compliance has proposed to build a 56 MW power plant that will provide 421,000 MW hours of firm energy into British Columbia's transmission system for 30 years, sufficient electricity for over 42,000 homes. The Power Project, which will utilize wood waste from the forestry industry and coal from the Company's Basin Coal Mine, will be located near Princeton, BC. The project site has extensive existing infrastructure including: one large building that will be modified to house the boiler, steam turbine and generator; a 138 KV power line that extends onto the site that will significantly reduce interconnection costs; and the water supply facilities necessary for development. In addition, the Company is looking at ancillary businesses to utilize waste heat. The project will be funded through a combination of debt and equity. This $200 million project will create over 200 man-years of employment during the construction period and 30-40 full time jobs on an ongoing basis. It will generate approximately $40 - $55 million annually in revenue and it represents one of the larger contracts awarded under BC Hydro's 2006.
China claims success in test of fusion reactor
September 28, 2006. BEIJING Scientists carried out China's first successful test of an experimental fusion reactor, powered by the process that fuels the sun. China, the United States and other governments are pursuing fusion research in hopes that it could become a clean, potentially limitless energy source. Fusion produces little radioactive waste, unlike fission, which powers conventional nuclear reactors. Beijing is eager for advances, both for national prestige and to reduce its soaring consumption of imported oil and dirty coal. The test by the government's Institute of Plasma Physics was carried out on a Tokamak fusion device in the eastern city of Hefei. The Chinese facility is similar to the International Thermonuclear Experimental Reactor, or ITER, being built by a seven-nation consortium in Cadarache in southern France. That reactor is due to be completed in 2015. China is a partner in the ITER reactor, along with the European Union, the United States, Japan, Russia, India and South Korea.
Renewable Energy Trends
National
Chennai port to set up wind farm
October 3, 2006. The Chennai Port Trust plans to set up a wind farm in southern Tamil Nadu at a cost of Rs 75 crore. The port trust will issue a tender shortly for the project, which would be the first of its kind. The port's annual power requirement is around 30 million units and it spends about Rs 30 crore on power. Through the wind farm, the port trust would be able to save nearly 50 per cent on power cost. It plans to lease or purchase windmills in Tirunelveli or Coimbatore. In the first phase, the port trust plans to have 7.5 MW windmills and the capacity would be doubled later. The port trust would supply power from its windmills to the State electricity grid and later draw power from the grid whenever required. The Tamil Nadu Electricity Board purchases power generated from wind mills at Rs 2.70 per unit and allows wheeling and banking for captive power use by investors at a concessional rate of 5 per cent each.
HPCL wind power debut soon
October 2, 2006. Lines up an ambitious Rs 500 crore project to hike capacity to 100 MW. In another six months, oil marketing-cum-refining company Hindustan Petroleum Corporation (HPCL) will stage its debut in wind power sector. The company will start generating 25 MW power from wind farms coming up in Karnataka and Maharashtra, which form part of an ambitious Rs 500 crore project to take the capacity to 100 MW. The foray will yield carbon credits, tax breaks and depreciation benefits for the company and likely revenue of Rs 3-4 per unit. HPCL will target the rural sector and rural population which now bank on kerosene for lighting purpose. For the company, this will help in reducing the subsidy burden that has fallen on it on account of kerosene. HPCL will shortly choose the turbine manufacturer for the 25 MW pilot project for which tenders have already been floated. The company is looking at a turbine size of around 1 MW. HPCL is also setting up a 10 MW wind farm in association with the Maharashtra Energy Development Agency at an investment of Rs 50 crore.
IKF Tech ties up with Indian Oil Corp
September 29, 2006. IKF Technologies Ltd, a Kolkata-based company in the field of bio-fuel and ITES/BPO, has entered into an agreement with Indian Oil Corporation Ltd (IOCL) for technology transfer for the production of bio-diesel. This is the first company, in the global market, which has started the commercial production of bio-diesel with the help of IOCL.
The company has started plantation work in Meghalaya and Rajasthan, and is planning to complete the plantation, spread over 2 lakh hectares, by 2008 end. The company has installed a refinery plant in Udaipur for the purchase of bio-diesel extracted from Jatropha oil. The company is entering into international market for which it has submitted proposals to various countries viz South Africa, Mozambique and Swaziland for acquiring 10,000 hectares land in each, for the production of bio-diesel. The company is also planning to set up a refinery in Gujarat with a capacity of 300 tonnes per day, which will be funded through foreign currency convertible bonds / global depository receipts / American depository receipts.
Global
Bunge plans two biodiesel plants in Spain
October 2, 2006. Oilseed processor Bunge Ltd. plans to build two biodiesel plants in Spain through a joint venture with construction and energy conglomerate Acciona. The plants will be located next to its newly constructed oilseed processing plants and vegetable oil refineries in Bilbao and Cartagena. Bunge will supply the biodiesel plants with soyoil from its nearby facilities, and Acciona will manage biodiesel production.
The biodiesel plant in Bilbao is expected to have a yearly capacity of 200,000 tonnes. The oilseed processing plant and refinery in Cartagena is expected to be fully operational in early 2007. Repsol YPF, a large refiner of petroleum in Spain, will purchase the end product from the biodiesel plants. In March, Acciona and Repsol reached an agreement to develop new plants near Repsol's crude oil facilities, including those in Bilbao and Cartagena. Biodiesel can be made from a variety of oilseeds including soybeans, canola and rapeseed. Governments around the world are mandating the use of renewable fuels such as biodiesel to reduce dependence on petroleum and to help the environment.
Texas tilts $10 bn toward wind power
October 2, 2006. Texas Gov. Rick Perry unveiled a partnership with the private sector that will invest more than $10 billion in new wind power, deepening the oil-producing state's commitment to diversifying its energy. Private companies have agreed to invest the required capital, while the state's Public Utility Commission "directs" the building of extra transmission lines. Every 1,000 MW of wind power will help Texas, which also plans a host of coal-fired generators, cut carbon dioxide pollution by 6 million tons over the next 20 years. Environmentalists have attacked Texas's ambitious plans, saying that locating the huge turbines along the state's coast will wreck the landscape's beauty and kill too many migrating birds. Texas's cumulative total of wind power was 2,370 MW enough power for more than 600,000 homes. Nearly two years ago, Texas set out to try to produce 10 percent of the power it needs from renewable sources by 2025, including wind.
Jakarta to finance biofuels
October 2, 2006. Indonesia plans to seek as much as $2.5 billion, to kick-start its nationwide program to produce, distribute and export fuels made from crops like oil palms and sugarcane. The government will put up 2 trillion rupiah in capital for a company that will finance biofuel projects. The country needs to raise 200 trillion rupiah over five years to promote biofuels. Rising crude oil prices, which have tripled since 2002, are spurring greater government and investor interest in biofuels worldwide.
The team is seeking funds from agencies like the Asian Development Bank and private investors. The government will set up a company, Lembaga Pembiayaan Bahan Bakar Nabati, to use the funds as venture capital and finance 70 percent of projects. The government plans to scrap value-added taxes for biofuel products to cut costs and raise the competitiveness of biofuels produced in Indonesia. It also wants to waive or lower taxes on capital gains from trading stocks and on income from bonds issued by companies involved in biofuels.
PPL signs agreement to purchase wind power
September 27, 2006. PPL Corporation has signed a power purchase agreement for wind power that will add more renewable energy to the company's diverse generation portfolio. PPL EnergyPlus has signed the agreement with Locust Ridge Wind Farm, LLC. The agreement calls for PPL EnergyPlus to purchase energy, capacity and renewable attributes from the Locust Ridge Wind Farm Project for 20 years once the project achieves commercial operation, which is expected to occur in the first quarter of 2007.
Locust Ridge will be located in Mahanoy City, Schuylkill County, Pa., and is expected to have a capability, when running to maximum capacity, to produce 26 MWs of electricity, which is enough electricity to power about 20,000 homes. The project is being developed by Community Energy, Inc., which is owned by IBERDROLA, of Spain. Gamesa Corp., also of Spain, is the manufacturer of the turbines for the project. Gamesa has a manufacturing plant in western Pennsylvania.
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