Oil Taxes versus Revenue: G7 and OPEC

onsider G7 countries (now G8 group) US, Canada, France, Germany, Italy, Japan and UK all are oil consuming and importing countries. Each country has a different level of tax structure for oil products (see Table 1). Thus it can be easily understood that the wide regional variations in pricing of oil products are not due to differences in crude oil prices but due to the varying level of taxation in these countries. Since Oraganisation of Petroleum Exporting Countries is the main crude exporters to these countries and is always tries to stabilise the crude prices in international oil market by increasing or decreasing its production quota. According to the estimates by OPEC, in G7 countries government earns more from taxation on oil products than what OPEC earns from selling oil. For a period of 2000-04, the estimated revenue of G7 countries by taxing oil products was $1600 billion while for the same period estimated oil revenue of OPEC by selling oil was $1300 bn (see figure 1).

Table: 1

International tax levels for petrol and diesel

(Tax as % of retail price in India)

Country	Petrol (%)	Diesel (%)
France	65	47
Germany	66	50
Italy	62	43
Spain	54	37
UK	68	60
Japan	45	34
Canada	33	25
USA	17	19
Pakistan	42	20
Nepal	31	22
Bangladesh	24	24
Sri Lanka	37	5
India	55	34

Source: Dr. C. Rangarajan Committee report on Pricing & Taxation of Petroleum Products

Figure: 1

Also there is a misconception that the global oil prices, which have risen sharply over last two years and now has gone below $60 per barrel from a mark of $72 in the month of August, are the main drivers of increase in the prices of petroleum products in the consuming countries, whether G7 or developing countries. But it is not true (as Figure 1 explains this). Therefore, it can be easily argued that the real burden on the consumer is not the oil price hike but the taxation on the oil products in the oil consuming countries.

 

 

Additional power availability schedule for Delhi

 

Month / Year	MW
March 2010	1990
June 2010	3480
September 2010	3970
Additional power availability to Delhi after September 2010
December 2010	4960
June 2011	5460
December 2011	5960
Current power supply	3500

 

Source: Business Standard, 9th October

 

Renewable Energy for India: A blueprint for the next decade

 

(C L Gupta, Professor of Applied Sciences, Sri Aurobindo International Centre of Education, Pondicherry, [email protected])

Introduction

fter fifty years of work in the field of solar energy – including thirty years of planned R&D (research and development) since 1975 – India is at the threshold of a major solar revolution. A widespread awareness, state-level delivery mechanisms, sound manufacturing base, and a district-level advisory mechanism for RE (renewable energy) are in place. We have to be focused to take the leap. In spite of exhortation from the President, India has already chosen nuclear energy as its newer energy route. Accepting that, we can still make an impact and achieve 10%–12% of energy budget by 2020 or even earlier, if we stop backtracking and getting confused about our strategies in relation to national energy projects.  Village electrification is a single large opportunity, if we can make it successful.  We must however freeze our technology options with reference to sites and go full steam ahead with full support from the Ministry of Power, Government of India. Village electrification can be extended to village energization, and biofuel can be made to power stationary engines.  This will not only generate livelihoods in rural areas but also avoid problems of biodiversity damage apart from providing piped water, creating sanitation facilities, and ensuring food security. 

What has been achieved so far? 

Many national programmes, relevant to societal needs and based on in-house R&D supported by the MNES (Ministry of Non-conventional Energy Sources), have been initiated during the last thirty years of planned work. Some examples are, biogas, cookstoves, domestic PV (photovoltaic) lighting systems, gasifier-based energization, solar cookers, solar PV pumps, and passively tampered energy-conscious buildings. The progress in these sectors is recorded annually in reports of the MNES. It would, however, be instructive to list matured technologies developed under the sponsorship of MNES.  Matured technologies are those, which have successfully gone through qualifying tests and field trials, and are ready for commercialization or have been commercialized already. 

Solar thermal

Solar water heating from 100 LPD (litres per day) to 100 000 LPD

Roof-integrated solar air-heating systems up to 400 m2  (square metres) for plantation crops, spices and pulses, and textile processing

Solar passive systems for space heating in cold climates P Solar cookers for domestic and community cooking for up to 10 000 persons/day

Solar distillation for laboratories, railways, petrol stations, primary health centres, and light houses

Solar photovoltaic 

Roof top lighting systems for homes and schools (up to 5 kW  [kilowatt]) 

Pumping systems for water supply for agriculture and community use from wells up to 100 m (metres) deep 

Solar power systems up to 100 kW peak with grid inter- phasing or stand alone with battery backup

Passive and low-energy architecture 

Roof top fabric cooling systems for multi-storeyed buildings such as offices, hotels, and hospitals 

Passive draft evaporative cooling systems for commercial buildings and laboratories 

Roof pond with moveable shades for houses for hot–dry and hot–humid climates 

Earth tunnels for agro buildings, libraries, zoos, and museums 

Low-energy building materials with embodied energy per unit floor area at one third of the existing norms without reduction in comfort

Wind power 

Multi-bladed wind pumps with rotor diameter of up to 7.5 m, and well depths of up to 100 m 

Wind chargers of up to 4 kW

Wind generators with considerable indigenization up to 1.65 MW for a single machine with a farm configuration of over 350 MW 

Wind generators up to 300 kW in a single machine of indigenous design

Small hydropower 

Micro hydro plants up to 1 MW with heads up to 100 m: lowest being 3 m and a few kW

Biomass 

Biogas plants of various capacities with wastes from animals, human beings, kitchen, vegetable markets, slaughter houses, and also mixed wastes including garbage 

Biogas plants up to 10 000 m3 per day from distillery spent ash and 135 m3 per day from sugar press mud 

Biomass gasifiers of up to 500 kW based on wood, woody wastes, and powdery biomass including sawdust, rice husk, and coffee grinds 

Refuse-derived fuel from solid municipal wastes up to 500 TPD  (tonnes per day) 

Micro power systems 

Thermal and power requirements for sugar-cum-distillery complexes and paper mills 

Complete power requirements for agro industries such as marigold flower processing, and starch making

Infrastructure 

Between 1975 and 1990, a fullfledged infrastructure has been installed, and a manufacturing base established for the above RE systems including balance of systems in the country 

Significant policy shifts

If one analyses the policy scenario for RE in India during the last 30 years, four phases can be discerned. 

Pre-1975: Concerted attempts were made primarily at NPL (National Physical Laboratory), New Delhi; CSMCRI (Central Salt and Marine Chemicals Research Institute), Bhavnagar; and CBRI  (Central Building Research Institute), Roorkee but without any coherent national vision

1975–90: Planned research was initiated as per the Energy Policy enunciated as part of National Committee on Science and Technology Exercises at the Department of Science and Technology in 1975. The guiding criteria were to satisfy minimum needs of rural areas for domestic and agricultural sectors. There was practically nothing for industry/urban areas, and the strategy was to concentrate on indigenous standalone thermal systems.  SPV (solar PV) was still very uneconomic, and work on biomass had not matured. 

1990–2003: In accordance with liberalization of economy, globalization, and market forces, the emphasis shifted from subsistence- level energy availability to energy quality and security for rural, industrial, and urban areas. After 1980s SPV came into picture and India graduated to a world leader in sub-megawatt biomass gasification.  In rural areas, the objective became income enhancement, and in urban areas energy quality and reliability.  Hybrid systems started being considered for economy and reliability.

2003 onwards: Taboo on imported systems was scrapped.  For the first time, it was officially recognized that 80 000 villages out of 700 000 could be handed over for RE applications.  Already 18 000 villages have been put under charge of MNES for electrification and energization. This is the golden hour for RE to make a decisive and visible impact; after all it is a national priority. 

Current scenario

Biofuels: For meeting CDM  (clean development mechanism) and pollution standards,  and in view of the rising costs  of petroleum products, a national  policy has been declared  on use of ethanol and development  of biofuels primarily for  transportation. The harm to biodiversity by large-scale monoculture of jatropha for big refineries is not discussed. Also possibility of employment generation in rural areas by using locally grown non-edible oilseeds for powering stationary engines to pump water and produce small power has not been articulated nationally. But it is funded internationally and demonstrated successfully in remote villages of Orissa.  There is a need for two parallel streams: one large scale for transport, and one small  scale for enterprise  development. 

Enterprise development: For creating employment- /incomegenerating enterprises by using  RE and training for RE technicians,  an example of six case  studies has been detailed in a  document submitted to ‘YES’  (youth employment summit). It is now understood, that YES, an ancillary associate of Johannesburg conference has started such a training course in Hyderabad in collaboration with an Indian agency. MNES may need to give attention to this aspect also. 

Chinese ETCs: The solar thermal scene has changed drastically with the emergence of Chinese evacuated-tube technology.  By mass production and elimination of heat-transfer circuit via heat pipes/ u-tubes with fins, etc., they have reduced the price by a factor of eight with no problem of scaling, corrosion, or leakage. 

As such, temperatures between 80 °C and 90 °C have become economically viable in solar thermal option. For water heating, the system option used is not optimum thermally, and has problems for large systems but it works excellently for domestic systems. In spite of repeated offers in early 1990s, this option is yet to take off in India. 

Growth of ESCOs (energy-supply companies): To act as intermediaries between government, banks, manufacturers, and users. They get all the loans from banks on behalf of users. They do installation and service maintenance warranty for users at minimal fees (five  per cent or less). This is useful to cut downtimes and field expenses for suppliers, provide locally accountable services for users, and for creating enterprises. 

It is already happening but rather slowly. The spate of Ashden awards to Indian NGOs  (non-governmental organizations) during the last three years underscores the potential for this approach for India. It should be the cutting edge of delivery systems, and vigorously promoted by MNES.

Fast track thrust areas for the next decade

These are detailed in the context of Indian needs but with due regard to global trends and what has already been done. 

Medium temperature (80– 150 °C)  • Use of CPC (compound parabolic collector) thermal systems; stationary PTCs  (parabolic trough collectors); and ETCs for hot water, hot air, desalination, detoxification, pasteurization, and absorption refrigeration systems  • Dish-type community solar cooking systems using Clique/Scheffler/Auroville bowl-type concentrators 

High-temperature thermal systems (250–600 °C)  • 25-kW distributed dish sterling systems for power  • Large-scale community systems generating steam for cooking/drying 

SPV systems  • Building-integrated SPVs for heat, light, and power for commercial/ public buildings  • Solar pumping  • Solar charkha for export quality khadi 

Biofuels: bio-diesel  • Large scale for urban transport  • Small scale (20-litre units) for distributed local rural power upto 5 kW for water/ sanitation and domestic lighting using locally grown non-edible seeds 

New technologies  • Hydrogen systems, hybrid green cars, fuel cells, and micro turbines using hydrogen or ultra pure producer gas/ biogas 

Remote area power  • Hybrid systems using renewables, for example, SPV and wind; solar thermal and biomass; hydro and biopower or renewables and diesel 

Design tools  • Economic/energy optima protocols for hybrid systems  • Application engineering data for mainstreaming design of energy-conscious buildings using amenable design programmes for small-scale offices requiring half day's data input 

BOS systems  • Intelligent and efficient power-conditioning units for small-scale power < 1 kW, and for wind machines up to 300 kW or more  • Metering systems for power supply and for hot water supply to multi-storeyed flats from roof-top solar systems owned by group housing cooperatives or for supply to individual hamlets from rural mini grid powered by 25-kW SPV power unit

Conclusion  

While the presented issues may not be exhaustive, an attempt has been made to draw the attention of all concerned players of the RE sector, including policy-makers, for overall development. It is hoped that these suggestions would help all concerned to focus on thrust areas into RFP (report for proposals) specifications for government–industry–academic partnership in a time-bound, focused programme for rural as well as urban/industry sectors.  Instead of doing every thing  lukewarmly, it is preferable at any  time to select critical thrust areas  for making pre-commercial impact  in a time span of five years/less,  and move on as industry and society  can take over the first set of the  Mark II technologies.  There is no mercy for somnambulists in a global world. 

NEWS BRIEF

OIL & GAS

ONGC Mittal wins Nigerian block

October 6, 2006. ONGC Mittal Energy Ltd, the joint venture company floated by ONGC and Mittal Steel, has won a highly prospective oil block in Nigeria. The JV company bid 100 million dollars for Nigeria's OPL-246 after South Atlantic Petroleum's (Sapetro) licence for the block was revoked. The joint venture outbid INC Natural Resources and BG-Sahara at an auction held on October 4 shortly after Sapetro lost a legal challenge against a government decision to revoke the licence.

Cairn increases oil output at Ravva field

October 5, 2006. Cairn Energy and its joint venture partners has started nine-month drilling campaign in Ravva field offshore Andhra Pradesh. The nine month-long programme would allow the Ravva oilfield to stay on plateau production of 50,000 barrels of oil per day until the end of 2007. Six infill wells and one firm exploration prospect would be drilled using the Hercules rig, which arrived in the region from Malaysia recently. In addition to these seven wells, there are options for this rig to drill further five wells. Ravva oil production levels, which were about 3,700 bopd before Cairn took over as operator of the block, were increased first to 35,000 bopd in the second quarter of 1997 and subsequently to the current plateau rate of 50,000 bopd in the first quarter of 1999.

MRPL offers 80,000T for mid-Nov parcel

October 9, 2006. Mangalore Refinery & Petrochemicals Ltd (MRPL) issued a tender offering 80,000 tonnes of mid-November fuel oil, just after selling a similar cargo at high prices last week. The 380-centistoke (cst) cargo, of 0.99 kg per cubic metre density and 3.5 per cent sulphur, is for November 14-16 loading from its New Mangalore refinery, on a free-on-board (FOB) basis. The refiner has also issued another tender offering 40,000 tonnes of vacuum gas oil (VGO) for November 6-10 loading from the same port. Both tenders close on October 11 and will remain valid till a day later. MRPL last sold a similar parcel to Japan's Mitsui Oil Asia at a discount of $9-$10 a tonne to Singapore spot quotes, FOB, the second-straight parcel it sold at similarly high levels.

REL bags Hyderabad airport fuel farm operations

October 6, 2006. Reliance Industries Ltd (RIL) would maintain and operate the first open access fuel storage and service facility in India at the upcoming GMR Hyderabad International Airport (GHIAL) at Shamshabad. The company has won the contract for the fuel farm operations, outbidding key players such as IOC, Sky Tanking, Swissport, BPCL and ONGC. The fuel farm would have three storage tanks with a total capacity of 13,500 kilo litres of ATF (aviation turbine fuel). The open access model would allow any ATF supplier to supply fuel to airlines according to their own agreements. The company was planning to set up 20-25 aviation fuel stations across the country by the end of the financial year.

ONGC pulls out of $1.96 bn project

October 4, 2006. Oil & Natural Gas Corporation’s refining subsidiary—Mangalore Refineries & Petrochemicals Ltd (MRPL)—has decided to exit from the Rs 9,000 crore ($1.96 bn) twin projects: the Kakinada SEZ and the 7.5 mtpa export-oriented refinery project in Andhra Pradesh. This is the second time ONGC has walked out of a refinery project within a month. Earlier, the company said it would not pursue the proposed 7.5 mtpa refinery at Barmer in Rajasthan.  The reasons for its exit relate mainly to a saturation of refining capacity on the east coast brought about by the ongoing and planned expansions of existing refineries by HPCL, Vizag, Cochin, Chennai and the upcoming refinery of IOC at Paradip. MRPL and its partners Kakinada Sea Ports, IL&FS and the Andhra Pradesh Industrial Infrastructure Corp had formed a special purpose vehicle (SPV), Kakinada Refinery and Petrochemicals Ltd (KRPL), to set up the refinery. MRPL had also picked up 26% in another SPV called Kakinada Special Economic Zone Ltd (KSEZ) where the refinery was to be located.

HPCL to sell 50 per cent Bhatinda stake to OIL

October 4, 2006. Hindustan Petroleum Corp Ltd is willing to offer a stake of up to 50 per cent in its proposed Bhatinda refinery to state-run Oil India Ltd. HPCL is setting up a 1,80,000 barrels a day refinery in Bhatinda in the northern state of Punjab. The refinery was expected to cost Rs 15,000 crore ($3.3 billion) and be ready by September 2010. HPCL was also looking at a partnership with Oil India to buy oil and gas assets abroad.

IOC-Petronas to pump in $87.5 mn for LNG terminal

October 4, 2006. Indian Oil Corp (IOC) and its partner, Malaysia’s Petronas, will invest about Rs 400 crore ($87.5 mn) to build an LPG import terminal at Ennore in Tamil Nadu. Indian Oil Petronas, the joint venture company floated by IOC and Petronas, will build a 600,000 tonnes a year LPG import terminal at Ennore. The joint venture, which currently operates a similar terminal at Haldia in West Bengal, would build two cryogenic storage tanks of 10,000 and 15,000 tonnes to store LPG at -42 degrees centigrade. 

In neighbouring Andhra Pradesh, state-run Hindustan Petroleum Corp Ltd (HPCL) has tied-up with Total of France and would be spending Rs 300 crore to set up an LPG import terminal and an underground storage facility at Visakhapatnam. While India is self-sufficient in other petroleum products, it has to import LPG to meet domestic requirements. 

It is expected that Indian Oil Petronas would begin construction of the Ennore terminal early next year and would commission the facility in first half of 2009. The joint venture has appointed Triune as the project management consultant. Petronas has committed to supply 300,000 tonnes of LPG to Ennore, reducing dependence on over-stretched Mangalore import terminal. Moving LPG from Karnataka to Tamil Nadu, which estimates say would be 450,000 tonnes per annum from 2009.

While LPG at Ennore would be stored in over-land tanks, HPCL is using natural rock caves 160-meter underground to store imported LPG at Visakhapatnam. HPCL, which currently moves LPG to Andhra Pradesh from Mangalore via a 900-km pipeline, plans to commission the Vizag facility by the second quarter of 2007. Both Ennore and Vizag can berth larger vessels as compared to Mangalore, which can only berth LPG carriers with a maximum 20,000-tonnes capacity. 

India's gas production to soar in next four year - DGH

October 8, 2006. India's natural gas production will increase significantly in the next three to four years.  India's total natural gas production will be minimum 100 to 120 million standard cubic feet in the next 3-4 years. With Reliance to Gujarat State Petroleum Corporation (GSPC) and others expected to start their production can expect that in next few years the production of natural gas will be good. It is expected that production at the Reliance Krishna Godavari (KG) basin block will start by June 2008 as work on the project was going on schedule. The Ministry has given clearance for production of 40 million standard cubic feet of natural gas from the Reliance block. However, the production can be higher than that as new submissions are being made.

 

KMG & OVL to finalise deal on Satpayev block

October 7, 2006. Kazakhstan's national oil and gas company, KazMunaiGaz (KMG), and ONGC Videsh Ltd (OVL), the overseas arm of ONGC, are likely to shortly finalise the deal for the Satpayev block in Caspian Sea. The two companies are also likely to work out a detailed timetable for entering into definitive agreements on the project. This will be India's first venture in Kazakhstan, which is one of Central Asia's largest producers of oil and gas. At a recent India-Kazakhstan joint working group (JWG) meeting on cooperation in the hydrocarbons sector, it was recommended that the two companies would expedite negotiation process on the project.

Following the decisions of the earlier JWG (2005), OVL and KMG had undertaken a joint study of two blocks of the Kazakhstan part of the Caspian Sea — Satpayev and Makhambet. Satpayev had emerged as the preferred block for joint development. Initially the Kazhaks had offered India 50 per cent stake in the Satpayev block on nomination basis, but indications are that KMG is now offering only a minority stake to the joint venture of ONGC and LN Mittal, ONGC Mittal Energy Ltd (OMEL). OVL had roped in Mittals, who have a big presence in that country, for buying stake in Satpayev block in Kazakhastan. The two countries, at the recent JWG meeting, also agreed upon enlarging cooperation between OVL and KMG. Besides, the Kazakh side also agreed to consider the possibility of Indian investments in the petrochemicals sector of that country. It was decided that the Kazakh side would present a master plan for the development of petrochemical industry to India for further discussions.

Govt mulls blending biogas with natural gas

October 5, 2006. The Centre is exploring the feasibility of blending biogas with liquefied natural gas and compressed natural gas supplies in order to increase the share of alternate fuel in the total energy mix. The Ministry of Non Conventional Energy Sources (MNES) has asked the private sector engaged in production of biogas to consider feeding biogas into the natural gas pipelines for the city gas projects being planned in different cities of the country. The success of this initiative could lead to alternative use of biogas, which at present is being used either as a cooking fuel or being considered for supply to consumers through cylinders. The renewable energy sector was not only supplying electricity produced from renewable and non-conventional sources but also helping in saving ecology by replacing firewood and fossil fuels. 19 billion units of electricity generated from renewable energy sources had been supplied during last year and that the total installed capacity of power from renewable energy sources had crossed 8,500 MW.

Delhi seeks PowerMin’s help in securing gas

October 5, 2006. The Delhi government has sought power ministry’s intervention for helping the state in its negotiating with ONGC and other gas producing companies for 10 million cubic meters per day (MMSCMD) of CNG and RLNG. The state needs gas for proposed power projects to tackle power shortage in the national Capital. The Delhi government, in a bid to overcome the rising power shortage, has planned a capacity addition of 2,150 mw, comprising Pragati II (350 mw), Bawana (1,000 mw) and 700 mw of gas-powered station, which will require 10 MMSCMD. The Delhi government had argued that the growing demand for gas is a cause of concern and is likely to vitiate the benefits of reforms. It would also make Delhi vulnerable to power outages at the time of the Commonwealth Games 2010. The demand for electricity is likely to grow from the current 4,100 mw to 5,630 mw in 2010. The Capital needs more than 50% generation in the load centre to avoid grid fluctuations. Of the projected demand of 5,630 mw in 2010, nearly 3,000 mw must be generated locally. The Delhi government noted that the city has been forced to buy short-term gas from GAIL India at exorbitant rate of $11 per MMSCMD recently.

Pvt cos may get nod to sell ATF

October 4, 2006. Aviation turbine fuel (ATF) prices could come down sharply in the country as the government is planning to provide infrastructure to private companies to sell it in domestic airports. Currently, public sector oil companies enjoy a virtual monopoly on selling ATF to airlines as only they have the right to set up oil dumps in airports. While Reliance is the only domestic private sector ATF marketing company, international firms will also get the permission to sell the fuel to airlines directly. The government will provide them with land and other infrastructure facilities to set up shop at airports. ATF prices in India are about 70% higher than international markets. The initiative will have a big impact on the bottomline of low-cost carriers, at present reeling under huge losses that have threatened the viability of many of them. Air Deccan’s losses in 15 months, for instance, have reached Rs 340 crore. At present, private companies are allowed to sell ATF in India, but do not have the requisite infrastructure at airports, which means that these firms cannot supply fuel to Indian carriers directly.

POWER

PowerMin for 71,000 MW addition in 11th Plan

October 10, 2006. The power ministry’s sub-group has projected the capacity addition required to meet the 11th Plan requirement will be about 71,000 MW, whereas the 12th Plan requirement will be about 66,000 MW. The sub-group will further consider load pattern and seasonally availability in the north-eastern region separately. The 71,000 MW capacity requirement for the 11th Plan will be categorised into load centre, pit head and coastal stations as well as the type of plant namely gas, coal, hydro and nuclear. Back up projects totaling about 14,313 MW have also been identified.

During the lean season, hydro generation is reduced considerably and the power is insufficient even to meet the off-peak demand. On the other hand, during the monsoon season NE region is surplus. Therefore, base load capacity needed in the region and allocation from existing central sector stations will be modified to maintain a balance between the hydro and thermal plants. According to the sub-group on demand projection and generation planning for the 11th Plan by and large gas-based projects have not been planned except those specific projects for which gas has already been tied up. Main reasons for delay in the project implementation are delay in getting environment clearance, water availability, acquisition of land and financial closure. The sub-group is of the view that the environmental clearance be granted in 90 days after submission of the EIA and other relevant documents after which deemed clearance should be assumed.

Jharkhand, TN join race for ultra mega power units

October 10, 2006. Tamil Nadu and Jharkhand are the latest in the long list of states that want to host a 4,000-MW ultra mega power project. The Central Electricity Authority (CEA), the body entrusted with planning for the power sector, is in the process of shortlisting possible sites for the plant. For the Centre, the desire for an ultra mega power project may just be the stick it was looking for to push power sector reforms at the state level. As a pre-condition for an ultra mega power, the ministry of power is restructuring the state electricity board (SEB) in Jharkhand. In Tamil Nadu the ministry of power has asked the state government to provide Rs 1.20 per unit of power supplied to agriculture. At present, Tamil Nadu pays a subsidy of Rs 0.20 per unit for the 12,000m units of power as free supply to agriculture. As the reality of increasing power shortage, rising demand and consumers unwilling to put up with extended power cuts sinks in, states have realised that there is no way out but to add power generation capacity. Given the fiscal health of states, ultra mega power projects become the financially viable route to capacity addition. For these 4,000MW projects, states don’t have to make any fiscal investment. Instead, they are supposed to help procure requisite clearances such as land acquisition and water linkage. The ultra mega power projects are to be awarded through tariff-based competitive bidding, that is to the developer with the lowest tariff. Power purchase agreements, or a commitment to buy a certain amount of power, are undertaken by distribution utilities. In the first two projects, which will go on the bidder’s block in November — Sasan (Madhya Pradesh) and Mundra (Gujarat) — host states have signed up for the largest share of the power. For fiscally-strapped state governments, ultra mega power projects offer a practical option to meet the rising demand for power. This would explain the large number of states — Orissa, Andhra Pradesh, Maharashtra, Karnataka — that have put in demands for an ultra mega power project since the concept was first floated.

The Centre, too, is aware of the predicament of states, and is using the opportunity to push states to speed up reforms in the sector. However, the ministry of power, too, is under pressure to add generation capacity — a target of an additional 60,000MW has been set between ’07 and ’12. It also has a target of power for all by ’12. In such a situation, the Centre too would not like to miss an opportunity to set up a 4,000MW capacity, and hence the CEA is undertaking the necessary groundwork. 

BALCO, Chhattisgarh sign MoU for 1200 MW power project

October 9, 2006. The Chhattisgarh government along with the Chhattisgarh State Electricity Board (CSEB) signed an MoU with Bharat Aluminium Company Ltd (BALCO), subsidiary of Sterlite Industries (India) Limited, for setting up a 1200 MW coal-based power project. This thermal project envisages an investment of Rs 5,000 crore. It is estimated to be completed in 40 months, once all the regulatory and statutory approvals are received. Chhattisgarh would assist BALCO for single window clearances and approvals. The government will also recommend and pursue the Centre for allocation of captive coal blocks for the project and suitable coal linkage in the intervening period. CSEB or the Chhattisgarh government nominated agency will purchase a portion of the power generated to meet the power requirements within the state, out of which 5 per cent will be purchased at the variable cost. Being a mega power project, the plant will also supply surplus power to other state distribution entities.

Power ministry may float equipment mfg firm

October 9, 2006. The power ministry is considering a proposal to set up an equipment manufacturing company on the lines of Bharat Heavy Electricals for faster capacity addition even as generation major NTPC has forayed into the manufacture of transformers and electrical works. The aim is to reduce the time of installing a project from 4-5 years at present to three years.

1,000 MW thermal plant may come up in UP

October 5, 2006. The UP government is contemplating setting up a 1,000-MW thermal power plant in the private sector, in Allahabad district.  The project is likely to be located on barren land at Shankargarh, which is known for its supply of ballast to the northern region, in view of the raging controversy over the acquisition of fertile land for SEZs in the country. The project will be awarded to the private sector in the same way the Anpara C project was, i.e. tariff-based bidding via a global tender. The UP Thermal Power Generation Corporation has prepared a preliminary report.   

The report is likely to be sent to the Cabinet soon for in-principle approval by the government for another thermal power plant in the private sector. A team of experts would soon visit Shankargarh for selecting land for the project. The team is likely to submit its report in a week. The new project, costing around Rs 5,000 crore, will be awarded to the private sector by floating global tender after the process of land acquisition is completed by the corporation. The preliminary estimates, the initial generation capacity of the proposed plant would be 1,000 MW, which could be increased to 3,000 MW later. 

Power transmission lures pvt cos

October 10, 2006. The power transmission sector in India, which has for long been the preserve of the state-owned transmission company PowerGrid, is now opening up to private players. As the segment loosens its rigidity, even foreign companies are showing interest. The Western Region System Strengthening Scheme is the acid test for the private sector companies, and the prospect of strengthening transmission lines in western India has seen nine private firms/consortia joining the fray. This is the first time that private players will venture into the transmission segment of the power sector, on their own. Till now, there has been some participation by the private sector in transmission which has been in the nature of joint ventures with PowerGrid.

The best known is the JV with Tata Power for the Tala transmission line. This year, PowerGrid signed five MoUs with private players for joint venture companies. The nine players which have qualified to bid for the Rs 19,000-crore project include seven consortia and two companies. GMR & KEC, Isolex & Elecnor, INABENSA & ABENGOA, Tata Power, L&T & L&T Infrastructure Development Projects are among those who have qualified, CLP & Gammon, CIMI & IVRCL, Lanco & Deepak Cables, Reliance Energy Transmission are among those who have qualified. The next round will be a techno-commercial bid, followed by a price bid. The project is likely to be awarded by the end of November. The lines under this scheme have been identified by the central electricity authority and approved by the central regulator. PowerGrid, which is the central transmission utility, is entrusted with awarding the projects. These lines have bearing 765kV and 440kV Quad D/C, are to be reserved exclusively for the private sector. 

22 discoms to buy power from mega projects

October 10, 2006. 22 distribution companies of nine states signed pacts to buy electricity amounting to 4,000 MW each from the Sasan and Mundra projects.  Utilities from Delhi, Gujarat, Maharashtra, Uttaranchal, Punjab, Madhya Pradesh, Haryana, Rajasthan and Uttar Pradesh inked the power purchase agreements with Sasan Power Ltd and Coastal Gujarat Power Ltd, the two special purpose vehicles set up by Power Finance Corporation for the two projects. 

The agreements are binding pacts and have in-built clauses for tariff escalation and dispute resolution. The Sasan and the Mundra projects are the first two of the nine such power plants that the power ministry has identified for development at an estimated cost of Rs 16,000 crore each.  The SPVs would arrange all necessary statutory clearances and would be transferred to the selected developers through a tariff-based competitive bidding by the end of this year.  More than a dozen companies including Tata Power, Reliance Energy, L&T, Essar, NTPC and GMR Energy are in the race for setting up these two projects.  Madhya Pradesh will get 1,500 MW from the Sasan project, Delhi and Haryana 450 MW each and Punjab 600 MW. From the Mundra project, Gujarat has agreed to buy 1,900 MW, while Maharashtra would get 800 MW.

6 foreign cos bid for AP power project

October 8, 2006. Japanese corporate giant Sumitomo Corp, Malaysia's YTL Corp Berhard and Israel Electric are among six foreign bidders eyeing the 4,000 MW Andhra Pradesh ultra mega power project, which is also eagerly sought by 11 others, including NTPC, Tatas and Reliance. Power Finance Corporation, the nodal agency that conducts the bidding of ultra mega projects, has received 17 requests, including from six foreign companies, including Sumitomo Corp, Khanjee Holdings, USA and China Light and Power, for qualification (RFQ) for the Krishnapatnam (Andhra Pradesh) project. The Krishnapatnam project is the third of the nine power plants the government has planned at an estimated cost of Rs 15,000-20,000 cr each. The deadline for submitting RfQs for the project, which would be operated with imported coal, was September 30. The project is expected to be transferred to the selected developer by April next year.

BHEL up on bagging reactor order

October 7, 2006. Bharat Heavy Electricals (BHEL) rose 1.10 per cent to close at Rs 2,337 on receiving order for a controlled shunt reactor, a device used for high voltage transmission.  The order is for supply, erection, testing and commissioning of an 80 MVAR, 400Kv controlled shunt reactor at Karad sub-station on the Karad-Lonikand line for Maharashtra State Electricity Transmission Co to be completed in 18 months.  The transformer will be manufactured at BHEL's Bhopal plant. The company recently bagged a Rs 1,224 crore contract from Uttar Pradesh Rajya Vidyut Utpadan Nigam to set up a 500 mw thermal power plant due for commissioning in FY10.  BHEL is a market leader in co-generation and captive power plants.

Delhi, M'shtra to buy power from MP, Gujarat

October 7, 2006. Delhi, Maharashtra, Uttar Pradesh and Punjab emerge as the big buyers of power from the ultra mega power projects at Sasan (Madhya Pradesh) and Mundra. For these two 4,000 MW projects, the host states are drawing the largest quantities of power. Power purchase agreements (PPAs) will be initiated by the states and shell companies. For Sasan project, the host state Madhya Pradesh has committed to an off take of 1,200 MW. Punjab will buy 600 MW while Delhi and Uttar Pradesh will off take 500 MW each.

In the case of the Mundra project, the host state Gujarat will buy 1,600 MW, followed by Maharashtra which has committed to buying 800 MW. Punjab will buy 500 MW while Uttar Pradesh will buy 300 MW. Power Finance Corporation, which is the nodal agency for the shell companies—Sasan Power and Coastal Gujarat Power believe that the “initialising of PPAs for 8,000 MW capacity addition through the tariff-based competitive bidding process marks the beginning of a new approach to capacity addition which will facilitate private investment at a faster pace and provide power at the most competitive rates.

The first units of the projects are expected to be commissioned by 2012. These projects comprise five 800 MW units. The government hopes that these projects will yield inexpensive power and are expecting a tariff of Rs 1.50 to Rs 1.60 per unit in the case of pit head plants like Sasan and under Rs 2 per unit for coastal plants which are dependent on imported coal like Mundra.

As per the schedule drawn up by the ministry of power, the two projects will be handed over to the successful bidder by December 31. Twelve bidder have qualified for the second round of bidding for the Sasan Project, while there are 13 for the Mundra project. The bidders include AES, Reliance Energy Generation, Tata Power, Jaiprakash, NTPC, CLP and Torrent Power

AP to buy additional 510 mu power

October 6, 2006. The Andhra Pradesh government is planning to purchase about 510 million units of additional power from outside the state to meet the ensuing Rabi demand.  The government decided to call for tenders to supply the required power to agriculture at competetive prices between January and April. The state-owned power distribution companies are expected to handle 51,000 mu of power during the current financial year of which 14,000 mu is allocated to the agriculture sector as per the power supply and tariff order issued by the Andhra Pradesh Electricity Regulatory Commission (APERC). With groundwater table following copious rains in the state, the government expects the power consumption under well irrigation to go beyond the actual allocation affecting the entire grid system. 

The government is hopeful of meeting the increased demand through additional power purchases and hydel power generation. Meanwhile, the state government gave a go-ahead for investment of another Rs 500 crore for high voltage distribution system (HVDS) during this year to bring more number of agriculture power connections under its ambit to eliminate the low voltage problem besides arresting the losses. 

BHEL wins power lines contract

October 5, 2006. Bharat Heavy Electricals Ltd had received an order from a state electricity unit to set up transmission lines in the western state of Maharashtra. The contract would be completed over 18 months.

WB to split SEB for transmission, distribution

October 4, 2006. West Bengal State Electricity Board (WBSEB) is being split into two entities — West Bengal Transmission (WBTC) and West Bengal Distribution (WBDC). The state cabinet is expected to give its clearance to the move on November 30, ’06. Both WBTC and WBDC will be 100 per cent controlled by the West Bengal government and 50 per cent of their respective boards are likely to have non-executive directors. West Bengal government also plans to hire professional independent directors on the twin boards. The complex registration process of the two new entities will start by late October.

NTPC seeks long-term coal linkage for Ennore project

October 10, 2006. The NTPC Tamil Nadu Energy Co Ltd, a joint venture of NTPC and TamilNadu Electricity Board (TNEB), has sought the power ministry’s help for taking up its demand with the coal ministry. The JV company had demanded expeditious long-term linkage of 4.7 million tonne per annum (mtpa) of washed coal for Ennore project. The project is expected to be commissioned in 2010-11. The feasibility study for the project has been completed and clearance from state pollution control board would be obtained soon. NTECL plans to place the award for the main plant by March 2007.

The company said there should be no uncertainty over the availability of the coal and, thus, has sought the power ministry’s intervention. Mahanadi Coalfields Limited (MCL) had earlier agreed in principle to supply 5 mtpa of coal for the project from Talcher/Ib valley coalfields, but the linkage has not been accorded so far. On the other hand, NTPC has also sought allotment of captive coal from Nuagaon-Talishahi block for the upcoming project. The company has said both the units of 500 MW are envisaged to be commissioned by 2010-11. So even if captive mine is allocated in the near future, it may be difficult to meet the coal requirement from these mines.

This is essentially because time is required for various pre-developmental activities like investigations, including environment impact assessment (EIA) studies, preparation of geological report, mining plan, environmental and forest clearances, and land acquisition. The JV company plans to take up the project with long-term coal linkage. This is because the distance of MCL coal fields, having washed coal with ash content less than 30 per cent, from Ennore TPS will be more than 1,000 km.

M’rashtra to draw Dabhol’s power at Rs 5.25

October 9, 2006. The Centre, the Maharashtra government and the Ratnagiri Gas and Power Pvt Ltd (RGGPL) finally arrived at an agreement to restart the troubled Dabhol project within three weeks. The state has agreed to buy the entire 740 MW power from Dabhol’s block II at Rs 5.25 a unit, including 25 paise towards incidental charges till March next year. The project, which was closed down from July 4 for want of naphtha and also in the absence of any buyer, will be recommissioned in the next three weeks.

Meanwhile, consumers in Maharashtra will have to sweat out during the October heat as the state will face a daily power deficit of 4,500 MW. RGPPL and Maharashtra State Electricity Distribution Company (MahaVitaran) would soon sign a formal agreement and seek the clearance from the Maharashtra Electricity Regulatory Commission. RGPPL had indicated LNG would be available after March, next year, and till that time it would be run on naphtha. The government and MahaVitaran had opposed to bear an incidental charges of 80 paise per unit as demanded by RGPPL. RGPPL had agreed to lower it to 36 paise. However, the government and MahaVitaran stuck to its guns and argued it would not be possible to bear more than 25 paise as incidental charges. The state government had appealed to the power ministry it would not bear the incidental cost of 80 paise alone.

Pacts for 8,000 MW power projects signed

October 9, 2006. In a moved aimed at kickstarting its ambitious ultra mega power projects proposal, the Ministry of Power announced the signing of the power purchase agreements (PPAs) for two of the proposed projects, each with a capacity of 4,000 MW and entailing investments of nearly Rs 20,000 crore. The PPAs were signed between two special purpose vehicles formed for the two projects — Sasan Power Ltd and Coastal Gujarat Power Ltd — and the representatives of 22 distribution utilities from the nine beneficiary States. Besides host State Madhya Pradesh, others that have been allocated power from the Sasan project are Delhi, Uttar Pradesh, Uttaranchal, Punjab, Rajasthan, Haryana and Chhattisgarh. While Madhya Pradesh will offtake 1,500 MW from the project, Punjab will draw 600 MW, Uttar Pradesh (500 MW), Delhi and Haryana (450 MW each), Rajasthan (400 MW) and Uttaranchal (100 MW). Similarly, host State Gujarat will draw 1,900 MW from the proposed Mundra project, besides Maharashtra (800 MW), Punjab (500 MW) and Rajasthan and Haryana (400 MW each).

Power sector should be opened up: PM

October 8, 2006. Prime Minister indicated that the power sector should be opened up for competition to provide more choice to consumers and to bring in efficiency and cost reduction. The government might look into allowing power producers to sell directly to bulk consumers. He said we must also open up the power sector to competition as that would not only provide choice to our consumers but also bring efficiency and cost reduction. Moreover, enabling power producers to sell directly to bulk consumers can help create a market that would accelerate investments in generation capacity. Lack of assured electricity supply, financial health of state electricity boards (SEBs) and transmission and distribution (T&D) losses, he said, “No civilised society nor a functioning commercial entity can sustain losses on such a scale. He urged states to take campaign–type urgent steps to reduce T&D losses in a time-bound manner and simultaneously take steps to increase generation capacity. He also urged states and private companies to intensify their efforts in this direction. He said that road, rail, air and water transport, electric power, telecommunications, water supply and irrigation need an investment of about Rs 1,450,000 cr ($320 billion) during the 11th Plan Period (2007-12). This would require substantial private sector participation.

Chhattisgarh asks Centre for 250MW

October 6, 2006. The Chhattisgarh State Electricity board has asked the Centre for supply of 250MW power from the unallocated quota to deal with the looming power crisis in the state.  The board has assured the Centre that it will return the power allotted to it from the unallocated quota to the Centre in December 2007.  The demand has been made on a pro tem condition that board will return the power allotted to it in December next year. Chhattisgarh will be the first state in the country to come up with such a proposal of returning power to the Centre that it will get from the unallocated quota. 

DVC comes under regulated power tariff regime

October 5, 2006. State-owned Damodar Valley Corporation (DVC), which so far had autonomy in fixing power tariffs, will now have to approach the State and central electricity regulators for the purpose. The Central Electricity Regulatory Commission (CERC) brought DVC under the ambit of regulated tariff mechanism as per the Electricity Act, 2003, and announced generation and transmission tariffs for 2004-09.  Prior to the Act, the Corporation had autonomy to determine its own rates for bulk supply as well as retail distribution under Section 20 of the DVC Act, 1948. With CERC's decision, state regulators would now be able to determine the retail distribution tariff for DVC's consumers falling within their respective jurisdiction.

NTPC out of Gujarat’s Pipavav project

October 5, 2006. The government of Gujarat has decided to develop the 1,000 MW Pipavav power project with a new strategic partner. The project was earlier planned for joint development by NTPC and state government-owned Gujarat Power Corporation Ltd (GPCL) on a 50:50 equity basis. A MoU was also signed in 2004 between NTPC and GPCL to execute this project jointly. Given the coastal location, the project was to use either gas or imported coal-based on the techno-economic considerations. Citing the progress on the project as “far from satisfactory” even after a lapse of two and a half years of signing the MoU, principal secretary of government of Gujarat has recently shot off a letter to NTPC CMD, expressing the state government's decision to drop NTPC and go ahead with another strategic partner for executing this power project.

Gulf Finance plans $2 bn energy city

October 5, 2006. The Maharashtra government signed a MoU with Gulf Finance House (GFH), a leading investment bank from the Gulf Corporation Countries (GCC), to create India’s first integrated energy business district Energy City India with an estimated development value of $2 billion. Energy City India will be developed on approximately 300 acre of land near Mumbai. Valuable Infrastructure Pvt Ltd is assisting GFH in final feasibility studies for Energy City India land requirement. The Energy City concept involves the master planning and construction of an integrated business centre that specialises in the provision of complete business infrastructure for the leading oil and gas producers, both local and international, downstream refiners and producers, support services, shipping and energy trading businesses.

An important component of the Energy City concept is the International Mercantile Exchange (IMEX), which will provide a platform for electronic trading of energy contracts and derivatives. The concept was developed by GFH and Gulf Energy, an international energy consulting firm. GFH’s decision to choose Maharashtra for this project is crucial, as the investment bank had unveiled in March this year, its intention to create a pan-Asian network of energy-focused business districts or centres with the investment of $2.6 billion Energy City Qatar. The prestigious Lusail area in Doha, Qatar, is the designated location for Energy City Qatar. GFH also plans to develop a further two such hubs in other Asian markets, details of which will be announced early next year.

'Rationalise power costs for energy efficiency'

October 5, 2006. Rationalising energy pricing is the best way to promote energy efficiency and conservation, deputy chairman of the Planning Commission, said. He suggested that households or domestic consumers should be charged at par with commercial establishments beyond a certain number of units which could be given for no charge. First, ‘X’ number of units of power can be given free to the households. Anything above that can be charged at par with the commercial establishments. These way households would pay an average rate per unit that would work out to be lower that commercial rate, if they managed to be efficient in their usage of paid units. He said that talking about energy efficiency without considering pricing of power is meaningless. The best example of this is agriculture, where for years there has been talk about using energy efficient pumps. The Integrated Energy Policy, which was brought out by the Planning Commission recently, is also silent on the issue. A large number of commercial establishments are being metered as household resulting in huge losses to power distributors. There is a significant difference between the electricity charges for households as compared to commercial establishments, which has resulted in such discrepancies.

`Coal-based power plants will not do for M’shtra'

October 4, 2006. Coal-based thermal plants are not the answer to Maharashtra's rising power demand, says Greenpeace India in its recently commissioned report on the upcoming 4,500-MW thermal power plants in the State. The new plants are likely to come by 2010. Unless energy conservation and reduction of greenhouse gas emission is not taken up on a war-footing, the climate would be irreversibly affected. Coal-based power plants emit greenhouse gases in large amounts. And the report's findings show that other non-polluting alternatives are available. The report targets reducing greenhouses gases by 2015. It said use of compact fluorescent lamps (CFL) will save power as they have a long life and use much less electricity, when compared to light bulbs. The report advises reduction of transmission and distribution (T&D) losses and judicious use of hydropower. This can make additional thermal capacity unnecessary. One of the report's main arguments is that thermal plants produce `base load' power. Base load power is the steady flow of power in a plant regardless of the total power demand of the grid. The power demand in the State peaks during morning and evening.

OIL & GAS

Chevron Corp to spend $6 bn in Indonesia

October 9, 2006. Chevron Corp, the second-largest US oil company, will invest $6 billion in an off-shore Indonesian gas project, replacing depleted fields that supply the world’s biggest gas export plant. Chevron will spend the money before 2012 to develop the Gehem and Gendalo fields off the coast of East Kalimantan in Borneo. The project may boost gas supplies to the Bontang liquefied natural gas plant, which hasn’t been able to meet commitments to its customers in Japan, South Korea and Taiwan in the last two years because of declining output at existing fields. The investment is only viable if the gas is sold outside Indonesia, which discounts the fuel for domestic customers.

OPEC back first supply cut in two years

October 9, 2006. OPEC oil ministers lined up to support the removal of 1 million barrels a day of crude from oversupplied world markets as swiftly as possible. Iran, OPEC's second biggest producer, and Algeria publicly backed the reduction, Opec's first since April 2004. The Organisation of the Petroleum Exporting Countries had reached a consensus to lower output. This would have a positive impact on the market. The Opec president, along with Opec's second biggest producer Iran, says the 11-member group would make the cuts from an official 28 million bpd ceiling - a move that could lead to tricky negotiations over a realignment of Opec quotas. Opec is due for a scheduled meeting on December 14 in Nigeria, but some members want to hold an emergency session before the end of this month. Opec members were still discussing the possibility of a gathering on October 18-19, supported by Algeria, Saudi Arabia, Libya and Venezuela. Opec countries could implement cuts next time they set their monthly sales volumes to their customers. Nigeria and Venezuela both announced unilateral reductions just over a week ago.

SBM to expand Malaysian oil and gas operations

October 8, 2006. SBM Malaysia Sdn Bhd, an oil and gas services company, plans to spend RM10mil over the next two to three years to step up operations at its Malaysian office, which will also serve as a regional hub for potentially expanding oil and gas services. A member of the Netherlands-based SBM Offshore Group, SBM Malaysia is a technology company that would execute turnkey contracts to build floating production storage and offloading (FPSO) or any other floating type equipment required in Asia. SBM Offshore Contractors is another company under the group. SBM Malaysia intends to provide support for the whole group, if their expertise in the engineering and procurement services are required elsewhere. SBM Malaysia to derive one-third of its revenue from the local market with the rest from Asia in the next two years.

With a market capitalisation of US$3.8bil (RM14bil), SBM Offshore is among the global leaders in the lease and operation of FPSO in the oil and gas services industry. Although the Malaysian outfit was only set up in June this year, SBM Offshore has been operating in the local market over the past two decades, focusing on exporting products or providing services. SBM Offshore's other main offices are in Monaco, Houston and Schiedam in the Netherlands.

LUKoil to boost oil and gas production

October 7, 2006. LUKoil is planning to raise its oil production by more than 50 percent to 150mn tonnes and gas production to 50bn cubic meters per year in the next ten years.  These parameters are included in the company's development program for the next ten years. Investment in the program will total $100bn. The program's implementation is to start soon.

Syria grants drilling rights to Shell

October 6, 2006. Syria has awarded Royal Dutch Shell oil and gas exploration rights in two blocs as part of efforts to reverse a decline in production that could squeeze the government financially. A 20-year agreement was signed the oil ministry granting Shell the right to explore and share production in the Amouria bloc near city of Deir Al Zour and in the Buthaina bloc south of the ancient city of Palmyra. Under the contracts Shell will spend $42 million, mainly to study the two fields and dig exploration wells. The government had already granted exploration and production rights for six blocs out of the 12 to which it hopes to attract international bidders. The production was averaging 400,000 barrels per day so far this year, compared with 414,000 bpd in 2005. Syria already imports around $1 billion a year worth of refined oil products, due to under-investment in its domestic refining capacity. Its crude oil production peaked at around 590,000 bpd in 1996. The main producer is Al Furat Oil Company, owned by Shell, Petro Canada and the Syrian government. The number of international companies operating in Syria has declined in recent years due to worsening relations with the West and what several companies saw as unattractive terms. The United States imposed sanctions on Syria in 2004 for allegedly supporting terrorism.

Kashagan will not pump oil before 2009 -Kazakhstan

October 4, 2006. Oil will not flow from the Kashagan oil field in the Caspian Sea, the world's biggest oil discovery in the last 30 years, until 2009 at the earliest. And AGIP KCO, the international consortium led by Italy's Eni that is developing the site, admitted for the first time that the first production from Kashagan could be delayed from its original 2008 start date. AGIP KCO has been building a series of offshore 'islands' to pump oil from the Caspian Sea bed only a few metres deep. The first two of the artificial islands were built using 4.5 million tonnes of rock. Kazakhstan has pinned its hopes of becoming one of the world's top 10 oil suppliers by 2015 on the complicated Kashagan field, where engineers have to cope with soaring summer temperatures and freezing winters.

Exxon Mobil plans to drill three wells in Indonesia

October 4, 2006. U.S.-based oil giant Exxon Mobil plans to drill three exploratory wells in an Indonesian offshore oil block over the next three years. Exxon Mobil signed an oil contract with the Indonesian government last month covering 5,339 sq km (2,062 sq mile) of the offshore Surumana block in the Makassar Straits. The government had said that in the case of Surumana, any oil find would be split 65:35 percent between government and contractor. Meanwhile, any gas find would be split 60:40 percent. Indonesia still has around 4.1 billion barrels of proven oil reserves and about 4.5 billion barrels in potential reserves. Indonesia, OPEC's second-smallest member in production terms, is struggling to maintain output as the country has failed to tap new oilfields fast enough.

Currently Exxon Mobil has several oil and gas working areas in Indonesia, including in Cepu block on Java Island. The Cepu block is Indonesia's biggest oil discovery in decades and should boost the country's output by a fifth once production begins in late 2008.   Last month, the Indonesian government said it may take over a huge natural gas field in the Natuna offshore area run by Exxon Mobil when its contract expires in January. The Natuna D-Alpha block contains around 222 trillion cubic feet (tcf) of gas, of which 46 tcf is thought to be commercially recoverable, but the field contains about 70 percent carbon dioxide, making it expensive to develop and difficult to sell. The gas in Natuna D-Alpha, about 1,100 km north of Jakarta and 200 km east of the West Natuna fields that are currently feeding gas to Singapore, accounts for about 25 percent of Indonesia's total gas reserves of 182 tcf.

Syria signs Oil & gas exploration contracts with Shell

October 4, 2006. Syria signed two 20-year contracts worth US$42 million (€33 million) with Shell for the exploration and exploitation of oil and gas in the northeast. Under the first contract Dutch Shell will conduct exploration and exploitation work in an area extending from southwest of Deir El-Zour 450 kilometers, northeast of Damascus, to the Iraqi border. The contract is worth US$20 million (€15.7 million). The second deal, valued at US$22 million (€138 million), focuses on an area just south of Palmyra, 256 kilometers (154 miles) north of Damascus. Under each, Syria receives 12.5 percent of oil produced and Shell trains employees of the state-owned the Syrian Oil Company.

Although Syria is the only significant producer of oil in the eastern Mediterranean, its production has declined over the past decade. In 1996, it peaked at 590,000 barrels per day, dropping to some 365,000 bpd of crude in 2005. In 1985, Shell participated in establishing the largest foreign oil producer operating in Syria, Al-Furat Petroleum Co., which is currently joint owned by Syria's Oil Ministry, Shell, an Indian company and a Chinese firm.

Uganda oil refinery works start 2007 in Hoima

October 10, 2006. HOIMA district has been chosen to host a crude petroleum refinery, firmly putting it at the centre of the country's emerging oil industry. Waraga-1 and Mputa-1, the two exploratory wells that have been confirmed to have commercial petroleum deposits are all located in Hoima. Initial speculation had held that a refinery was most likely to be constructed in Kampala or Jinja, the country's commercial hubs. The construction of the refinery would possibly begin in May next year to beat the target of completion time of 2009 when commercial production is anticipated to commence.

Pacific Ethanol to start production at California plan

October 9, 2006. Pacific Ethanol Inc. will start production at its first ethanol production facility at Madera, California on Oct. 17. The 35-million-gallons-per-year plant is expected to operate at its full capacity by mid November. The startup of the Madera Plant will contribute ethanol production revenues during the fourth-quarter of this yea. The company's second plant at Boardman, Oregon expected to be completed by the end of second quarter of 2007. Pacific Ethanol remains on schedule to develop 220 million gallons of production capacity by mid 2008 and 420 million gallons by the end of 2010.

Uganda to start petroleum production in ’09

October 9, 2006. Uganda is planning to begin petroleum production with a mini refinery as early as 2009, making its first step of shifting from a fuel importer to a self-reliant country.  Considering the acute power crisis, erratic water levels in Lake Victoria, the government has opted to pursue an early oil production scheme while more exploration takes place. The plan involves setting up a mini refinery to produce diesel, kerosene and heavy fuel oil to generate electricity at the unit cost of six U.S. cents, instead of 24 cents by using imported fuel. 

By the way, the target production of 6,000 to 10,000 barrels per day out of the 30 million barrels in Waraga alone can last up to 10 years.  The oil revenue is to be allocated to key sectors like education and health. The Australian Hardman Resources company which has been carrying out explorations has published its findings of promising oil resources from two oil fields near Lake Albert in western Uganda.      The company claimed that Uganda has 100 to 300 million barrels of fine quality oil with 30 million barrels ready for extraction.

 

New oil refinery opened in Iraqi city of Najaf

October 7, 2006. Iraq opened a new oil refinery in the southern city of Najaf designed to fill the needs of the city and surrounding area. The refinery, about 160 kilometers south of Baghdad, will produce 10,000 barrels of oil per day. The country's oil industry, already suffering during Saddam Hussein's regime from a lack of capital, has fallen even further downhill since the 2003 U.S.-led invasion. Parts of the oil infrastructure such as pipelines have often been shot at or blown up by insurgents. Iraq's three main oil refineries  - Dora, Beiji and Shuaiba are working at half capacity, processing a total of only 350,000 barrels a day, compared to about 700,000 barrels a day before the U.S.-led invasion in March 2003. The shortfall has forced Iraq to turn to imports of oil products such as gasoline and kerosene, including from its neighbor Iran. Work started on the Najaf refinery last December, and al-Shahristani pledged another would be opened between Najaf and Karbala, which is 80 kilometers south of Baghdad, by next year.

Venezuela to help build oil refinery in Vietnam

October 7, 2006. Venezuela plans to help build an oil refinery in Vietnam and could use funds earned in his government's recent sale of its share in a Texas refinery. Venezuela signed 13 accords with visiting officials from Vietnam to cooperate in areas from mining to electrical projects. Venezuela could use the proceeds from the August sale of its minority share in the Lyondell-Citgo refinery in Texas. The deal was valued at some US$2.1 billion, and Venezuela reported it earned about US$1.3 billion after debt payments and taxes. Among the deals signed by the two countries, Venezuela mentioned a plan to cooperate on building oil tankers. Vietnam also would help Venezuela in solar energy and would help set up a motorcycle factory in the South American country.

Praxair starts up hydrogen plant in Indiana

October 6, 2006. Praxair, Inc. has announced the startup of a new hydrogen plant in Whiting, Indiana. The new SMR (steam methane reformer), with a capacity of 20 million standard cubic feet per day, increases Praxair's existing hydrogen production capacity at Whiting and will supply hydrogen to BP and other customers in northern Indiana. BP will use the hydrogen in the production of ultra-low-sulfur gasoline and diesel fuels.
Praxair currently operates a hydrogen-production and pipeline-supply network in Whiting that serves a number of customers in northwest Indiana. As a leading supplier of hydrogen worldwide, Praxair offers a complete portfolio of large-volume industrial gases, cylinder gases and specialized services to refinery customers. The company operates 34 steam methane reformers and seven major hydrogen pipeline systems that deliver more than 850 million standard cubic feet per day (1,250,000 cubic meters per hour) of hydrogen.

KNPC set to invite tenders for refinery

October 5, 2006. Kuwait National Petroleum Company plans to award a tender to build a new $6 billion, 615,000 barrels per day refinery by year-end. Eleven companies are bidding for the new refinery, which is due to be completed by 2010.The deadline for the bids is October 29, after which a KNPC delegation will review the bids for one and a half months with project management consultant, Fluor in Houston, Texas. It expected the actual works on the refinery to start by mid-2007. The refinery will produce mainly low sulphur fuel oil to be used for Kuwait's power stations. The tender would require final approval by central tenders committee, the government body that has final say on the award of tenders.

Irving Oil plans to build second refinery

October 5, 2006. Irving Oil is planning to build a second refinery 300,000 bpd in Saint John, with potential to double its production of gasoline and hire hundreds of employees.

Kuwaiti firm to set up $1.5bn oil refinery

October 3, 2006. The government of Pakistan and Noor Financial Investment Company of Kuwait signed a MoU for setting up the proposed refinery project at Port Qasim. The setting up of oil refinery would be a milestone in brotherly relations of the two countries and added that the government had deregulated the petroleum sector and was offering attractive incentives to the prospective investors. There existed a lot of potential for the investors in oil and gas sector and privatisation process of state-owned units. Noor Company would also take part in the oil and gas units’ privatisation activities for the mutual advantage. Meanwhile, the petroleum minister also held a separate meeting with chief executives of the oil refineries operating in the country to review the updated performance in the refining sector particularly providing a cleaner fuel. The minister emphasised the need to improve the quality of the petroleum products in line with the international standards to reduce environmental pollution. The refineries should set up de-sulphurisation units so as to produce low sulphur HSD. The refineries had already been given target to produce Euro-II standard high speed diesel (HSD) by the year 2008 and the refineries should be equipped with modern facilities.

RAK Petroleum to buy into UK energy firm

October 4, 2006.  The newly formed Ras Al Khaimah Petroleum will invest Dh309.24 million in the shares and bonds of a UK energy firm. It has signed an MoU with Anzon Energy Limited (AEL), a London-listed company, to expand their current portfolios. AEL will immediately issue 3.8 million shares at a price of 120 pence per share to RAK Petroleum to raise a total of £4.56 million. With the MoU, RAK Petroleum will expand internationally while for Anzon it represents an expansion beyond its strong-holds of Australia and Indonesia. Initially the focus will be on the Middle East where the complementary skills provided by AEL will assist the rapid growth of oil and gas opportunities.

Ethiopia imported 256,000 MT of Petroleum

October 3, 2006. The Ethiopian Petroleum Enterprise said it has imported over 256,000 metric tones of petroleum valued at 168 million USD over the last two months. The Enterprise also plans to import 1.5 million metric tones of petroleum this fiscal year. A quarter of the 1.5 million metric tons, set to be imported during the reported period, has already been imported in July and August this year. Some 80 per cent of the imported petrol, comes from the Sudan, he said. The Enterprise imports gasoline, petrol diesel and kerosene, among others.

Output from Exxon Russia field to decline from ’08

October 9, 2006. Oil output from the Exxon Mobil-led Sakhalin-1 project will peak in 2007 and start to decline immediately afterwards partly because it failed to agree with Russia to extend the field's territory. The failure to agree the extension of licence territory would cut the projected output by around 10 percent. Exxon has repeatedly asked the government to extend the contract territory of the Sakhalin-1 production sharing project (PSA) after it discovered new adjacent deposits, but the government decided to put them up for auction.

Many analysts interpreted the stand-off as part of a broader Kremlin campaign to regain control and reduce foreign influence in the strategic energy sector. Exxon's position had looked much safer than that of the neighbouring Sakhalin-2 led by Royal Dutch Shell, which was threatened with withdrawal of ecological permits and pipeline re-routing after it said last year its costs would double to $20 billion. But Exxon has also come under pressure in the last month as the authorities said they would not allow the project to increase costs by 33 percent to $17 billion. The consortium, whose output is eagerly awaited by OPEC-dependent markets of southeast Asia, will produce 12.15 million tonnes or 250,000 barrels per day next year the biggest addition to regional oil production in several decades. But its production will decline to 11.29 million tonnes in 2008, 10.16 million tonnes in 2009 and 9.33 million tonnes in 2010. It may again rebound to 12 million tonnes by 2013 only to plunge to around 6 million tonnes 2020. A decline in output from the second year of a project's life is highly unusual, since normally such ventures take years for production to reach a plateau.

Iran denies agreement on gas supply to UAE

October 9, 2006. Iran strongly denied reports that it will start supplying gas to the UAE by the first quarter of 2007 under an agreement with Sharjah-based Crescent Petroleum Co. There has been no agreement regarding gas export to the UAE, and the Iranian side stands by its demand for a higher price. No new decision has been made on the relevant document which has been signed between Iran and Crescent Petroleum. The negotiations currently underway will help revise the price of export gas. Iran however was open to other options for exporting gas to the UAE. The Iranian gas will become vital in meeting the UAE's growing energy needs when a number of UAE's power and industrial projects are commissioned.

New oil law ensures adequate profit - Algeria

October 9, 2006. An Algerian law toughening energy investment terms guarantees adequate profits for foreign firms, many of which want to participate in the next licensing round. The foreign companies had not sent any signal that they were worried about the law, seen by critics as part of a resource-nationalism trend sweeping the energy sector. The next exploration and production bidding round for foreign investors, expected before the end of 2006. The oil and gas producer last month enacted a law giving state firm Sonatrach, Africa's biggest by revenue, a more central role and introducing a windfall tax on international oil firms. The move, a reversal of a legislation for planned energy liberalisation, is popular with a population suffering deep unemployment following years of political conflict and resentful of foreign participation in the Saharan oil and gas riches.

EU seeks global energy fund to boost investment in poor nations

October 6, 2006. The European Union proposed an energy fund for poor countries to help attract as much as 1 billion euros ($1.3 billion) for environmentally friendly projects. The European Commission recommended creating a 100 million-euro global risk-capital fund to boost energy efficiency and renewable energy sources in developing nations. The commission pledged to contribute four-fifths of the sum in the next four years.

It will contribute to bringing clean, secure and affordable energy supplies to the 1.6 billion people around the world who have no access to electricity. The EU aims to overcome investment barriers for clean-energy projects in places such as Africa by tackling the lack of risk capital, which provides collateral for lenders. Such projects help meet the bloc’s goal of fighting poverty and global air pollution. The fund will cover investments mainly below $10 million in Africa, the Caribbean, Latin America, Asia and non-EU eastern European countries. The commission plans to put 15 million euros into the fund next year and another 65 million euros in 2008-2010. The project is called the Global Energy Efficiency and Renewable Energy Fund.

World doesn’t need OPEC oil cut: US

October 6, 2006. With hefty winter demand for heating fuels just around the corner, the world still needs all the crude oil that Opec can pump and the cartel should not overreact to lower oil prices by cutting production. Opec, which pumps about a third of the world’s oil, will take 1 million barrels of oil a day off oversupplied world markets as soon as possible with its first output cut in more than two years. While US crude oil and heating oil inventories heading into the winter are well above normal levels, petroleum demand will still be strong in the cold months ahead and this is not the time for Opec to reduce available supplies. The current oil price of around $60 a barrel is still profitable for OPEC and there is no need for the cartel to reduce output.

Conoco, EnCana in oil sands, refineries venture

Oct 5, 2006. EnCana Corp. and ConocoPhillips they will create a partnership to combine two of EnCana's oil sands projects with two ConocoPhillips refineries. The companies plan to spend about $10.7 billion on the projects over the next decade to raise production at the oil sands fields and to expand capacity at the refineries. EnCana, Canada's biggest independent oil and gas producer is one of numerous developers of Canada's vast oil sands resources. The agreement with ConocoPhillips aligns about two-thirds of its oil sands projects with a major refiner. The deal would give 10 percent of its U.S. downstream business access to a stable, long-term supply of oil. The venture will be composed of two 50/50 operating partnerships, one Canadian upstream partnership and one U.S. downstream partnership.

The upstream partnership will consist of EnCana's Foster Creek and Christina Lake projects, both in the eastern flank of the Athabasca oil sands in Northeast Alberta. The companies said their goal is to increase production from these assets to 400,000 bpd by 2015 from their current level of 50,000 bpd. The downstream partnership will consist of ConocoPhillips's Wood River and Borger refineries, located in Roxana, Illinois, and Borger, Texas, respectively. By 2015, ConocoPhillips and EnCana plan to expand heavy-oil processing at the facilities to 550,000 bpd from 60,000 bpd. The transaction, which is subject to final, definitive agreements and regulatory approval, is expected to close Jan.  2007. Both companies' boards of directors have approved the transaction.

WB calls for reducing use of gas

October 5, 2006. The World Bank has criticised the government for creating over Rs23 billion circular public debts outside the federal budget as a result of erroneous oil pricing that include more than six ‘grey areas’, some of them to the disadvantage of consumers. At the conclusion of a 10-day visit on Sept 15, the World Bank mission on oil and gas noted with concern in its aide memoire that the government had developed an unbudgeted debt to the (oil) industry amounting to $400 million. These circular debts have been created because the impact of international price fluctuations was not passed on to the consumers. Such a debt could result in a chain default in payments by public and private sector oil companies and refineries at home and abroad.

After examination of all components of retail oil prices, the mission said the ocean losses and handling charges at 0.5 per cent were, therefore, on the high side. Similarly, the tariff plus petroleum development surcharge, commonly known as deemed duty at the rate of six to 10 per cent on four petroleum products was designed to unduly protect the rusted and outdated refineries at the expense of consumers. The bank also criticised an unbalanced fuel policy and said taking into account heating rates for gasoline, liquefied natural gas (LNG) and liquefied petroleum gas (LPG), compressed natural gas (CNG) was by far the cheapest. Had there been no taxation on gasoline, LPG would lose its competitive advantage. Given the cost of converting to LPG was also lower than that of converting to CNG, LPG use in vehicles had been expanding rapidly. The rapid expansion of LPG used would ‘exacerbate’ the problems of the refining industry in 2007, given that production of gasoline constrains the output of valuable diesel oil, which as a result is to be imported at a high cost. The bank argued that in all, given the price advantage of LPG and CNG, the market for gasoline is expected to continue to decline. It will result in a further erosion of the fiscal income arising from petroleum taxes. It said that to stop the bleeding of income, the only realistic solution was to introduce comparable taxation for the three products. In addition, the government should consider banning the use of LPG for automotives or tax it comparably to motor spirit so that more LPG becomes available to households.

The World Bank has also criticised the government for maintaining 29 oil depots for uniform prices and have supported oil industry’s demand for reducing their number to eight before completely eliminating them. It says the companies had to maintain a high fund to equalise prices at 29 wholesale depots and as a result, the consumers do not get the right signals about the scarcity value of the products. Also, the oil industry controls high balances which the government cannot easily check or control and tanker fleet operates at government sanctioned rates, well above the costs of services rendered. This has resulted in an oversized fleet and the creation of a strong industry lobby. The government has also been censured for still allowing the use of 10,000 ppm (parts per million or 1%) sulphur, notwithstanding the environmental consequence, and the low quality of air in cities such as Karachi and Lahore. The government recently asked the industry to switch to Euro II diesel (2,500ppm) by January 2008 but the industry believed it was not given enough time.

Russia's Gazprom, Italy's Enel discuss natural gas supplies

October 5, 2006. The heads of Gazprom and the world's third largest electricity supplier, Italy's Enel, have met in Moscow to discuss transport and delivery of natural gas. Both discussed future cooperation in the oil and gas sphere. In particular, they discussed the transport and delivery of Russian natural gas to Italy; both through existing transit routes, and in view of planned new transport capacity. Italy's natural gas market is the third largest in Europe after Germany and Great Britain, with total consumption of 84.28 billion cubic meters in 2005. The share of gas in the country's energy balance exceeds 30%. In 2005, around 86% of gas consumed in Italy was imported. During the year, Gazprom supplied 21.7 billion cubic meters to the country.

Gazprom and Dutch Gasunie sign gas MOU

October 5, 2006. Gazprom and Netherlands-based Gasunie have signed a MoU on European natural gas projects. The memorandum will secure Gasunie up to 9% of the stock in the North European Gas Pipeline project, which will see Russian gas pumped directly to Western Europe through a pipeline across the floor of the Baltic Sea. Gazprom owns 51% in the project operator, and German companies BASF and E. ON Ruhrgas, holding 24.5% each, will each sell the Dutch company a 4.5% stake in the project. Gazprom will obtain a stake in the Balgzand Bacton Line, linking the Netherlands and the United Kingdom, with the Dutch company holding at least 51% in the project. Dutch-based BBL Company, which is building and will run the project, is owned by Gasunie (60%), E.ON Ruhrgas (20%) and Belgian natural gas operator Fluxys (20%). The parties will consider opportunities for the Russian gas giant to use Gasunie's infrastructure, including underground storage facilities, and have agreed to hold talks on long-term contracts involving the Netherlands' gas transportation network. In June 2004, Gazprom and N.V. Nederlandse Gasunie signed a memorandum of understanding on their strategic partnership. Under the document, the companies agreed to work together to make natural gas deliveries to the European market more flexible, and to respond more effectively to the seasonal fluctuations of demand on the market of final consumers. The companies will also exchange experience in gas transportation network management and maintenance, and other areas.

Russia's Gazprom, Spain's Repsol mull oil and gas cooperation

October 5, 2006. Gazprom and Spanish multinational Repsol YPF have signed a MoU in oil and gas projects. Under the document signed by Gazprom and Repsol, the companies will investigate possibilities for cooperation in Europe, Latin America and Africa, and LNG production using Russia's resource base, including the Baltic LNG project. Repsol YPF, which operates in more than 30 countries, is one of the world's 10 largest private oil and gas companies, and is the biggest in Spain and Argentina. Gazprom and Repsol will form a coordination committee to see through the document's implementation. Gazprom plans to build an LNG plant on the Baltic Sea coast near St. Petersburg to produce 5 million tons of LNG a year by 2009, and it is looking for a partner with relevant expertise. Italy's Eni and Algeria's Sonatrach are also among Gazprom's possible choices.

UAE investors eye Pak energy firms

October 5, 2006. Leading UAE groups and Middle East investors have shown strong interest in energy sector of Pakistan despite recent rescheduling of privatisation plan. The PSO is the largest state-run oil company in the country as well as a listed entity on Pakistani bourses. The Federal Government holds approximately 54 per cent stake in PSO, including both direct holdings of the Federal Government and indirect holdings through GOP owned institutions. It is the second attempt of the government to sell a majority stake in the company after scrapping a plan to sell the company in 2003 following lack of interest shown by Kuwait Petroleum Corporation, one of the two bidders. The second bidder was Pakistan's Fauji Foundation. The UAE groups are among strong contenders for PSO and two state run gas companies  SNGPL and SSGC. However, investors from Saudi Arabia are also being considered as serious buyers for Pakistan's largest state-run oil firm and gas entities.

Iran 'can develop Azadegan without Inpex'

October 5, 2006. Iranian firms are capable of developing the giant Azadegan oil field if Japan's Inpex Holding Inc fails to fulfil its commitments. Inpex, in which the Japanese government is a major shareholder, has the rights to develop Azadegan, but talks have stalled since an initial deal was signed in 2004. Iran has in past threatened to offer the project to Russian, Chinese and Iranian firms as talks have dragged on. Some Iranian oil firms have shown their interest in developing the field and had submitted their plans to the oil ministry. The companies plan to develop the first phase of the field by using the country's dollar reserves. Meanwhile, Italian energy company ENI will continue to operate in Iran but would take any UN sanctions into account.

US ready to face full supply cut by Iran

October 5, 2006. US and world emergency crude reserves could replace a complete shut-off of Iranian oil exports for 18 months, avoiding an estimated $201 billion in damage to the American economy. There has been concern among energy traders that tough action by the US and other western countries against Iran's nuclear programme could cause Tehran to retaliate by cutting off the country's oil exports. Such a disruption would remove close to 1.5 billion barrels of crude from the market over an 18-month period. To avoid a huge price spike and ensure adequate supplies, the United States could coordinate with its fellow member countries in the International Energy Agency (IEA) to jointly release their emergency oil reserves to offset a disruption in Iranian crude shipments for 18 months. Iran is the world's fourth-biggest oil exporter, selling about 2.7 million barrels per day.

The United States does not directly import oil from Iran, but a shut-off of Iranian oil exports would force countries that do buy Iranian oil to compete with the United States for crude supplies from other producing nations. The United States holds about 688 million barrels of oil in the SPR. Other IEA member countries have about 2.7 billion barrels of public and industry reserves, with about 700 million barrels under government control for emergency purposes.

Kazakhs to press ahead with offshore projects

October 4, 2006. Kazakhstan wants to forge ahead with developing new oil and gas fields in its sector of the Caspian Sea and hopes to wrap up a string of deals with foreign partners by the end of next year. The deals, primarily based on production-sharing agreements (PSAs), mark a second stage of offshore development to follow major initial projects such as the giant Kashagan field, being developed by Italy's ENI-led consortium. The new projects should help boost Kazakhstan's offshore oil output to 89.2 million tonnes by 2015, from just 3 million tonnes last year.  Located in southern Caspian, reserves estimated at 637 million tonnes.

Yemen seeks buyer for gas reserves

October 4, 2006. Yemen is looking for guaranteed buyer for the 17 trillion cubic feet of proven natural gas reserves. Yemen offered tremendous potential in the areas of tea, coffee, rice, wheat, drugs and pharmaceuticals. After the unification in 1990, there was a significant improvement in economic and commercial activities.

Russia, Kazakh sign agreement on gas JV

October 3, 2006. Russia and Kazakhstan signed an agreement paving the way for the creation of a joint venture to process natural gas from the Central Asian state's giant Karachaganak field. They hoped to finalise the venture, based on Russia's Orenburg gas processing plant, by the year's end after the bilateral declaration was signed at talks between presidents in Uralsk, Kazakhstan. But loose ends remain to be tied up after more than a year of talks, with pricing terms for the processing of up to 15 billion cubic metres of sulphur-laden Karachaganak gas still to be agreed with Western energy majors. Kazakhstan and Russia will become 50-50 owners of the Orenburg plant, and will invest $1.5 billion in its expansion half of which will come from Kazakhstan.

Russia will be represented by gas monopoly Gazprom, while Kazakhstan's KazMunaiGas state energy firm will own the other half. Gazprom is keen to contract incremental supplies of gas from Central Asia to cover Russia's domestic needs, freeing up its own production to supply to lucrative European export markets. Karachaganak is co-led by Italy's ENI and Britain's BG which both hold 32.5 percent stakes, while U.S. Chevron owns 20 percent and Russia's LUKOIL has a 15 percent interest. 

The venture between Gazprom and KazMunaiGas would deliver some of the processed Karachaganak gas back to the Kazakh market. The Kazakh side proposes paying $54 per thousand cubic metres to the venture to supply 6 bcm of processed gas per year to Kazakhstan. But it remained unclear what the pricing terms would be for the remaining 9 bcm - enough to supply a country such as Austria for one year - that both sides have said they want to put through Orenburg.

Gazprom, the world's largest gas producer, supplies Europe with a quarter of its gas needs at average price of $230 per 1,000 cubic metres. Separately, Kazakhstan, neighbouring Uzbekistan and Russia continue to negotiate the terms of a swap deal under which Uzbekistan would supply gas consumers in southern Kazakhstan and Kazakhstan would in turn export gas to Russia. The three partners set up the deal to swap 3.5 bcm per year of gas in 2007-2009 by signing a memorandum of understanding in the Uzbek capital, Tashkent.

Power

EESTech and Chinese City of Fuxin plan to build power plant

October 5, 2006. Renewable energy and water purification specialist EESTech, Inc., has signed a letter of intent with Liaoning Fuxin Coal Group and the Fuxin City Government, Liaoning Province, China to build a 30 MW power plant. EESTech, Inc. is a network member of the Methane to Market initiative, a United States Environmental Protection Agency sponsored organization. The intention of Fuxin City and EESTech is to use the Australian developed HCGT technology to mitigate waste coal and methane in the production of electricity. The project is supported by the National Reform and Development Commission of China. When negotiations are completed EESTech, Inc. plans to build a HCGT power plant and sell the electricity to the Liaoning Fuxin Coal Group through a twenty year power purchase agreement. This agreement is expected to generate an estimated income of over $200 USD million for the contract period.

So Cal Ed seeks new power plants for California

October 4, 2006. Southern California Edison is soliciting contracts for up to 20 years and 500 MW of new power generation to serve its southern California service territory. Potential bidders have suggested that longer-term contracts might lower the future costs our customers pay for power from new plants resulting from this solicitation. The new offer of 500 MW needs Cal PUC approval. Plants built in California and those that ship power to California under terms of five years or more must meet strict emissions standards that rule out coal-fired plants.

Kenya power plants to cost Sh15 bn

October 4, 2006. Six power generation plants worth more than Sh15 billion will be constructed to increase the country's electricity supply. Some of them are expected to be operational in the next two years. The projects are Eburru Geothermal, Olkaria II Geothermal expansion project, Redevelopment of the Tana Power Station, Optimisation of Kiambere Power project, Kipevu Combined Cycle Power Project and Sondu Miriu Power Project. Once completed, the six projects will a revenue of Sh1.3 billion. The project proposals have already been approved by the World Bank's Project Idea Notes (PIN) review team under the Clean Development Mechanism (CDM).

The plants would be constructed, following the guidelines of the (CDM) which aims at conserving the environment. CDM is part of the Kyoto Protocol and targets the reduction of harmful carbon emissions in the atmosphere. Electricity generation is viewed as one of the major polluters of the environment. Under the mechanism, developed countries help in the financing of energy projects which are environment-friendly. The plants will help displace up to 2.4 million tonnes of carbon dioxide by 2012.

Olkaria II, will be completed in the next two years and generate an additional 35 mega watts of electricity. KenGen has already applied for carbon emission reduction credit facility managed by the World Bank. If approved, the World Bank will pay the power company for the use of efficient technology that reduces emission of harmful greenhouse gases which destroy the ozone layer. Olkaria II project would gain $4,756,400 between 2009 and 2012 under the CDM project, if the certified emission price was $7.5 per tonne of carbon dioxide emitted.

Yemen to use nuclear energy to generate power

October 4, 2006. Yemen will use nuclear energy to cover the shortage of electricity in Yemen in cooperation with the United States and Canada. In the first stage, it will generate 20,000 MW, and this is no longer election propaganda. The government would work on finding solutions for the scarcity of water in some Yemeni cities. Searches are underway and negotiations are going on with a number of friendly countries for desalination of sea water for drinking purposes, not for irrigation, to solve the water scarcity problem in Sanaa, Taiz and other cities.

Parand power plant in full operation by Feb. 2007

October 10, 2006. Parand Gas Turbine Power Plant, in southern Tehran Province will completely become operational by February 2007, it has six 159 MW units, and it is currently under construction. The power plant’s station to decrease pressure will come on stream in the near future. Four units of the power plant have thus far synchronized with the national power grid. Parand power plant is under construction in a land area as large as 100 hectares in 37 kilometer off Tehran-Saveh Freeway. Using gas as the main fuel, the power plant will also utilize diesel as the substitute fuel. For this purpose, two tankers with the capacity of 20,000 cu. m. a piece have been built to store diesel fuel. Over half of the equipment used to construct Parand power plant has been provided domestically.

`TNEB owes $23.6 mn to wind power units'

October 9, 2006. The Tamil Nadu Electricity Board (TNEB) owes wind power producers in the State over Rs 108 crore ($23.6 mn) for the power they have supplied to the State grid since April. The payment delay has affected the expansion plans and operations of the wind power producers. There are over 8,000 windmills in Coimbatore, Tirunelveli and Kayathar. They produce about 408 crore units of electricity annually and sell about 150 crore units to the TNEB, which buys the power at Rs 2.70 a unit. In the last five months over 300 windmill owners who sell power to the TNEB have been affected due to the delay in payment.

The association has urged the TNEB to expedite payment and release the dues by the second week of October as committed by it. Despite the peak wind season between May and October the windmills have not operated to full capacity because of inadequate infrastructure to evacuate the power. Over 25 per cent of production is affected. The association has suggested that the TNEB could sell power to neighbouring States where there is a shortage.

Oil cos turn to wind and sun

October 7, 2006. Oil majors, namely ONGC, BPCL and HPCL, are turning to renewable energy for captive power consumption. While refineries and artificial lifts will be powered by wind farms, retail outlets and storing terminals will be run on solar energy. BPCL is establishing a 5 MW wind energy farm in Karnataka to fuel its refinery located in the region and HPCL will be generating 100 MW of wind energy to feed its refineries in Karnataka and Maharashtra. The Center for Wind Energy Technology (C-WET) has already approved BPCL’s Rs 25-crore establishment. Tenders are being evaluated and management approval is awaited. HPCL’s venture, which would cost approximately Rs 500 crore, has also been approved. BPCL and HPCL projects are being executed on a turnkey basis.

ONGC will begin production of wind power by early 2007. To flag off, the fossil-fuel major is setting up two 50 MW wind power stations in the coastal belts of Gujarat and Karnataka, pumping in a capex of Rs 500 crore. Techno-commercial bids have already been received from two bidders, Suzlon Energy and Vestas, both of which are under evaluation.

B’lore & Pune are top solar power users

October 6, 2006. Bangalore and Pune top the list when it comes to using solar power for heating water. The two cities are the largest consumers of eco-friendly solar water heating (SWH) systems covering over 65 per cent of domestic households and industrial units. The ministry of non-conventional energy sources, state government policies in Maharashtra and Karnataka have been the catalysts in bringing this change. Every household with SWH systems gets a rebate of 50 paise per unit in these states. This is, however, not the sole reason why Bangalore and Pune lead in the consumption of SWH systems. There is tremendous consumption of hot water in Bangalore and Pune because of the climate peculiar to these regions and lifestyle. Most of the manufacturers of SWH systems are situated in Bangalore. As a result, companies like Bhel and Tata BP Solar have seen significant growth in sales of SWH systems.

Work starts on Europe's largest onshore wind farm

October 9, 2006. Construction work will start on Europe's biggest onshore wind farm, which will eventually provide enough electricity to power 200,000 homes. The £300 mn Whitelee site, south of Glasgow, will have 140 turbines. It would make a big contribution to energy supplies and tackling climate change. Scotland has long been the UK's powerhouse and is now establishing itself as the vanguard on renewables. Around 16% of Scotland's electricity already comes from these sources, compared to 4% for the UK as a whole.

Bio-fuel company seeks $5mn for pilot refinery

October 7, 2006. Technology company BioJoule is to plant a 6ha commercial nursery for its fuel crop salix following a two-year trial of seven species of the cane willow at sites around Lake Taupo. The company had selected the best variety to be propagated in the nursery in the Taupo area. Mass plantings will start in 2009, and Watson expects fuel from harvested salix to become commercially available from 2011. The company, a spinoff from Genesis Research, is seeking $5 million in private investment for a pilot refinery. The project is believed to be the first attempt in Australasia to grow the crop for biofuel.

The company has also developed patented processes to extract xylose, a non-diabetic sweetener, and lignin, a substitute for petrochemicals in the manufacture of plastics, resins and glues - two byproducts that make the crop even more lucrative. The country consumes 6.3 billion litres of petrol and diesel annually, at a cost of $4.5 billion - nearly a third of its annual current account deficit. The Government's proposed target of having renewable fuels comprise 0.25 per cent of total combined annual petrol and diesel sales in 2008, rising to 2.25 per cent by 2011.

China to raise investments in alternative energy projects 

October 4, 2006. China will step up investments in projects involving development of bio-energy and other alternative energies between 2006 and 2010 to ensure energy security and maintain its high economic growth. By increasing investments, the government hopes to ensure China’s energy security, as the country fears that the soaring world oil prices would have a negative impact on its economic growth. Data showed that China’s dependence on foreign oil reached 43 per cent last year. Departments concerned forecast that China’s oil consumption would hit 450 million tonnes in 2020, with 250 million tonnes to be imported from abroad.

The ministry, however, did not elaborate on the investment figures, saying only that it would earmark more funds for bio-energy, solar and wind energy projects, as well as for coal-to-liquid fuel projects over the next five years. The ministry has listed the development of renewable energy a top priority in the coming five years.

It would also encourage consumers to save energy and make efforts to build energy reserves. China has set a target of raising the proportion of wind and solar power in its total energy supply to 10 per cent by 2010 and to about 16 per cent by 2020. To achieve the goal, China will need a total investment of $101.1 billion by 2020, offering vast business opportunities for foreign investors.

China, the world’s second largest energy consumer after the United States, promulgated the law on renewable energy early this year, and put forward in its 11th Five-year Plan (2006-2010) the speedy development of renewable energy. Northwest China’s Ningxia Hui autonomous region plans to build nine new wind power plants with an investment of $2.2 billion by 2020.

The region is expected to become the country’s biggest wind power generator in 2020, when it will have the installed capacity of 2.15 million kw. The region’s installed capacity of wind power stood at 112,200 kw in 2005. By 2005, Ningxia ranked fourth in wind power capacity after inner Mongolia and Xinjiang Uygur autonomous regions, and Liaoning province.

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