MonitorsPublished on Nov 21, 2006
Energy News Monitor I Volume III, Issue 22
The Petroleum Sector in Sri Lanka and Its Quest for Off-Shore Oil Deposits (Sithara Fernando, Research Scholar, JNU)


mported petroleum, accounting for about 45% of Sri Lanka’s primary energy supply, plays a major role in the country’s energy supply. In 1961 the government established the state owned Ceylon Petroleum Corporation (CPC) and took over the entire operation of petroleum supply previously handled by private companies, except bunkering to ships, aviation fuel supply, and the China Bay oil tank farm near Trincomalee on the Eastern coast. In August 1963 the Ceylon Petroleum Act was amended to vest the CPC with monopoly rights to explore, refine and process petroleum, in addition to the import and distribution of petroleum products. In 1964 the China Bay installation was also nationalized. A lubricating oil-blending plant was established at Kolonnawa in 1969. In 1971 the bunkering facility and then in 1972 the aviation fuel supply at all airports, too were taken over by the CPC. This completed the nationalization process of the entire petroleum industry in Sri Lanka.

The CPC became responsible for all aspects of petroleum supply, with the exception of retail marketing of Liquid Petroleum Gas (LPG), which was the responsibility of another state agency, the Colombo Gas and Water Company (CGWC). In 1969 the CPC started operating the 38,000 barrels-per-day refinery at Sapugaskanda. In 1979 it increased its refining capacity to 50,000 barrels-per-day to meet increase in demand. In 1986, in order to reduce freight costs of crude oil, the CPC installed a Single Point Buoy Mooring facility about 10 km off-shore, which then allowed direct discharge from very large crude carrier tankers through a 36-inch underwater pipeline to a receiving facility at Orugodawatta.

In 1993 the lubricating oil blending plant, in 1994 the CGWC and in 2002 the Lanka Marine Services (LMS), which handled the bunker fuel supply for ships, were all privatized. LPG imports also came to be handled by two private companies, Shell Gas Lanka Ltd. and Laugfs Lanka Gas Ltd., Lanka Indian Oil Corporation (LIOC) has started operating 100 filling stations as well as the storage facilities at China Bay in Trincomalee.

Most of the country’s petroleum product requirement is imported as crude oil, which is then processed at the CPC refinery at Sapugaskanda. The imported crude oil mainly consists of Iranian Light, Arab Light and Upper Zakum crude from West Asia and Miri Light from Malaysia. The Sapugaskanda refinery boasts of 540,000 MT crude oil tanks of about 60 medium-sized product storage tanks. The crude oil storage tank farm at Orugodawatta consists of four 40,000 MT tanks to receive crude from oil tankers. Petroleum import expenses are a heavy burden on Sri Lanka’s overall export earnings. Following the oil crisis in the late 1970s it spent nearly half of its export earnings on petroleum imports, while in 2003 it spent 16% of export earnings on the same.

Oil exploration in Sri Lanka started in 1967 along the island’s Northwestern coastline. In 1977 the concerned area was divided into eleven blocks. From 1974 to 1981 eight exploratory wells were drilled, four on-shore in Mannar Island and four off-shore, all of which were found to be dry. However in 2002 a fresh effort was initiated for oil and gas exploration.

As a result of this effort the government disclosed in November 2005 that a large oil deposit has been detected along the coastline, from Puttalam in the Northwest to Hambantota in the South. According to London based explorer Dharmasiri Weerasinghe, the initial prediction is that there are recoverable reserves of up to 5-6 billion barrels in the deep-sea section in Mannar and the shallow areas of the shore off Jaffna. However Dr. N.P. Wijayananda, another expert in Sri Lanka, has cautioned that it is premature to make predictions on oil reserves in Sri Lanka until further studies are carried out. He is of the view that there could be oil reserves in the deep-sea off Trincomalee.

Meanwhile in April 2006 TGS-Norpec, a Norwegian company contracted by the CPC to conduct a 2D seismic survey claimed that Sri Lanka has contractual obligations to handover exclusive rights over geophysical exploration in Sri Lanka. According to Mr. Weerasinghe, this had been disclosed by a TGS-Norpec representative at a meeting held to discuss the findings of a seismic survey project named SL05 carried out in February 2005. This entailed that the Sri Lankan government or Petroleum and Petroleum Resources Development Ministry cannot conduct any further seismic surveys without obtaining prior permission from TGS-Norpec.

Mr. Weerasighe has pointed out that while it is common practice in the industry to get a geophysical exploration contractor like TGS-Norpec to carry out seismic surveys, in return for which they are normally offered the consent for trading the data and sharing the proceeds with the government concerned, this does not mean that the contractor has exclusive rights to carry out further surveys on behalf of the government, which retained the ownership of the field. He was of the view even if the CPC had erroneously entered in to any such agreement it should be declared null and void since the CPC had no authority to do so.

According to the Hon. A.H.M Fowzie, the Minister for Petroleum and Petroleum Resources Development, the CPC had already paid US$ 5 million to TGS-Norpec to conduct two seismic surveys, and further seismic surveys were due to be conducted by them off Hambantota on the Southern coast and off the Northern coast. The minister has also stated that the company is demanding a further US$ 10 million if it is to provide the reports of the surveys and abrogate the alleged previous agreement with the CPC and relinquish its purported exclusive rights over geophysical exploration in Sri Lanka.

Nevertheless in July 2006 the government decided to entrust India and China with two out of the six blocks earmarked for exploration in the Northwestern sea belt. The bidding process for the four remaining blocks will be open till December 2006. The bids will be evaluated in January 2007 and the successful bidder will be announced by March. The first phase of oil exploration expected to commence in August 2007 is scheduled to be carried out in the Gulf of Mannar.

Several countries involved in the world oil industry, including petroleum giants such as Iran and Saudi Arabia have been made aware of the opportunities in Sri Lanka and some of them have offered technological assistance and expertise for local oil exploration. The management and overseeing of the oil exploration process will be vested in two companies fully owned by the Sri Lankan government. One of them will supervise the oil drilling while the other will be responsible for the venture’s management.

Sources: Jayawardhana, W., and Harischandra Gunaratna, ‘Norwegian Company Blocking Oil Exploration in Sri Lanka’, The Island (Colombo), 27/04/2006

Manatunga, R., ‘India, China for Oil Exploration’, Daily News (Colombo), 08/07/2006

Siyambalapitiya, T., ‘Sri Lanka Energy Sector Development’, in Proceedings of Sri Lanka Energy Day, Ministry of Power and Energy: Colombo, 2005.

(Views are personal)

Power Sector Reforms: Political Compulsions and Economic Imperatives

(By Ranjit Bhushan)


n meetings between Prime Minister’s Office’s Energy Coordination Committee and the Planning Commission since the United Progressive Alliance (UPA) government came to power, the role of private players in the power sector has increasingly come into focus. One of the commission’s key conclusions conveyed to the PMO has been that the privatisation exercise — whereby generation and distribution have been thrown open to entrepreneurs — taken by some state electricity boards (SEBs), has been a failure. In a presentation made before PMO’s Infrastructure Committee, the commission has said that the “Delhi and Orissa privatisation models are not replicable.” Instead, it has suggested setting up “a task force to develop alternative models for privatising distribution.” The commission has suggested that the government spearhead a, policy “that would limit Central Public Sector Undertakings (CPSUs) role primarily to inter-state transmission (national grid), Regional Load Despatch Centre (RLDCs) and National Load Despatch Centre (NLDC), rural electrification, distribution reforms and facilitating public-private partnership (PPP) and conservation.” The presentation said it was important to “make all Central assistance to the sector contingent on reform and compliance with the Electricity Act, 2003.” It also called to “eliminate uncertainty about the validity of the Electricity Act by inviting a review as there was no need to be on the defensive.”

The government’s ambitious Electricity Act of 2003, now currently under review, is said to be the motor driving reforms in the sector. Notified in June 2003, it contains enabling provisions for the development of a competitive and efficient power sector, but the Act has not yet been operationalised due to delays in finalising policies and implementing regulations required under the Act.

The government admits that private sector participation has been less than enthusiastic. In a 10-year period, from 1994-1995 to 2003-2004, the private sector has generated a measly 6,397 MW of power. The contrasting positions of both parties concerned, the government and the private sector, appear to have led to a stalemate. While the rules-regulation Raj and the multi-clearances required for any power project to get off the ground has stifled dynamism and creativity, the high costs involved as well as the penchant of private power producers to seek immediate returns in an industry where gestation period ranges from anywhere between five and 10 years, has led to slackening of enthusiasm for any private sector participation. Clearly, reforms in the power sector have not quite taken off.   What is driving private capital away? Take the case of the UK. “British investment in India’s power sector is not likely for another few years till the reforms process under way starts showing results,” says energy expert Gordon Roberts, chairman of British Power International. The current rate of transmission and distribution losses in the Indian power sector, which is around 50 per cent in some regions, is a major deterrent for private and overseas investments, according to Roberts. The way ahead is strewn with difficulties.

Lack of reforms may not be the only thing. The UPA government has met with opposition to private sector participation in power from expected quarters — trade unions. But coupled with the onslaught on the issue that the government is facing from its Left alliance partner, the Manmohan Singh government has a tough task on hand. An eight-member delegation representing various trade unions in the power sector detailed before Prime Minister Manmohan Singh how privatisation of the power sector has only brought ‘disastrous’ consequences for the nation.

The most critical indictment of power reforms and privatisation has come from the Tenth Plan Mid-term Appraisal of the energy sector. The appraisal admits that the power sector reforms, which were started about a decade ago in the country, have been half-hearted. The sector continues to be dominated by financially weak SEBs, especially in the distribution segment. Capacity addition during the Tenth Five Year Plan was 23.9 per cent lower than the set target. Further, SEBs remain financially sick as losses on sale of electricity have kept on rising as usual. Cost of power generation remains high as compared with other countries due to widespread AT&C losses, exceeding 40 per cent. This, in turn, makes the Indian industry non-competitive. The appraisal says that reported peaking and energy shortages are seven per cent and 11 per cent, respectively, but they do not reflect the actual shortages, as actual demand and scheduled load shedding are not accounted for.

On the ambitious Accelerated Power Development and Reform Programme (APDRP) projects, the appraisal notes that they have failed to meet expectations. The total investment in APDRP projects, in other words privatization, during the last three years has been a measly Rs 4,820 crore. Actual investments in the distribution sector and utilisation of funds allocated under APDRP schemes remain low. As against the originally envisaged Tenth Plan target of 41,110 MW of capacity addition, the likely capacity addition will at most be 31,290 MW thus registering a shortfall of at least 23.9 per cent. The likely capacity addition includes, 4293 MW of capacity that was not part of the original Tenth Plan targets. If the unplanned capacity is excluded, the shortfall would rise to 34.4 per cent. Distribution reform and reduction of distribution losses is critical for achieving sustainability of the sector. Privatising distribution is a potential answer to tackling this issue. However, experience so far in the states of Orissa (six years) and Delhi (three years) suggests that privatisation is not a guaranteed solution. In Orissa AT&C losses remain over 45 per cent. In Delhi, even though the contracted loss reduction has been achieved, loss levels remain at an unsustainable level of 40 per cent plus. It would be naive to believe that private generation of power and distribution will speed up in the absence of real reforms at the state level. The pace of privatisation has been slow precisely because SEBs have not been able to pick up the tab for power from private power companies.

The government’s contention that review of the Electricity Act does not mean abandoning of power reform does not sound convincing enough. Rather than putting the entire Electricity Act on hold, at least, that is what a review implies, the government should have, instead, identified specific areas of review. That would have set to rest misgivings about the government’s agenda on power reforms. Right now there is reason to believe that the UPA government is holding back the Electricity Act to placate its key alliance partners. In Andhra Pradesh, run by the Congress, free power to farmers will cost the exchequer Rs 350 crore. Tamil Nadu, ruled by the Dravida Munnetra Kazhagam (DMK)-led coalition government, too, has followed suit and announced a free electricity package. If other states emulate the two southern states, it would ring the death knell for power reforms.

It is important to remember that the standards that people come to expect from the private sector are different from those they accept from the government, especially when there are visible performance benchmarks. No one complained all these years when transmission and distribution losses in Delhi’s power system, as a public sector monopoly, climbed to as high as 63 per cent in some parts of the city.  That’s because the losses were being paid by a state subsidy, which gets hidden in the budget and people don’s realise they are paying anyway.  Today, that 63 per cent has come down to 50 per cent in three years, but people are angry because in other parts of the city it is either 41 per cent (down from 52 per cent) or 33 per cent. Suddenly, everyone is conscious of these numbers. Clearly, for public policy, there is a case for greater privatization in the infrastructure sector. First, privatisation frees the government from making promises that it cannot deliver. Instead, the politician can join the citizen and point their finger at the private sector provider and, unbelievably, demand performance! This automatically pushes the system towards greater efficiency.

Ranjit Bhushan is a freelance journalist and Consulting Editor,

Courtesy: Hardnews, Vol 3, No. 12, November 2006





GSPC to raise $2bn to develop KG block

November 18, 2006. Gujarat State Petroleum Corporation (GSPC) is planning to raise more than $2 bn (nearly Rs 9,000 crore) for developing the Deendayal block in the gas-rich Krishna-Godavari (KG) basin. Initially, the company will raise $1bn by selling up to 30 per cent in the Deendayal block to an international partner. Another $1bn will be raised through its maiden public offering. GSPC discovered 20 trillion cubic feet (TCF) of gas in the Deendayal block in ’05. The company has sortlisted four global players — BP, the BG Group, Chevron and ENI of Italy — as potential partners on technical parameters. From this list, GSPC will select its partner on the basis of financial parameters by January end. GSPC has 80 per cent stake in the Deendayal block, while the remaining 10 per cent is shared by India’s diversified group Jubilant Enpro and Geo Global Resources of Canada.

New gas estimate to take India to global top league

November 18, 2006. Reliance Industries (RIL) has informed the government that the D-6 block in the Krishna-Godavari (KG) basin has the potential to have gas reserves of up to 50 trillion cubic feet (TCF). In its revised development plan to the Directorate General of Hydrocarbons (DGH), Reliance has said that the current estimates for the block as a whole (all drilled prospects and identified prospects yet to be drilled) could be around 50 TCF. Currently, the D-6 block has proven reserves of 14 TCF with a huge upside potential. A lot of exploratory work has been done in the D-6 block to access the hydrocarbon potential and the recoverable reserves in these fields since November ’04, when the initial development plan was approved. This includes acquisition of additional 3D seismic data, drilling of additional exploratory wells, resulting in 13 discoveries, and extensive coring of two development wells.

The KG basin, off India’s eastern seaboard, was a relatively unexplored territory till the last years of the 20th century. It is now proving to be India’s equivalent of North Sea or Gulf of Mexico. Gujarat State Petroleum Corporation (GSPC) has already announced a potential discovery of 20 trillion cubic feet of gas in the Deendayal block. If RIL’s new estimates and GSPC’s earlier estimates are verified, India could end up with reserves of 109 TCF, making it among the top 10 gas producing countries. It would overtake Kuwait, Canada, Netherlands, Egypt, Kazakhstan, Uzbekistan, Turkmenistan and Malaysia. If RIL and GSPC are able to tap this huge reserves and bring it into commercial production, India’s production of natural gas would more than double to 200 mmscmd (million metric standard cubic metres per day) from the current level of 84 mmscmd, enough to cater to the existing gas demands in the country and India may not rely on importing gas from overseas.

Besides, Reliance production rate of 80 mmscmd by June ’08 is equivalent to 450,000 barrels of oil equivalent per day (BOPD), which is about 25 per cent of the oil import of the country. This enhanced gas reserves would substantially improve the balance of payment situation that is worsening on account of oil imports. 

BP signs production sharing deal for coal bed methane block

November 17, 2006. BP Exploration (Alpha) Ltd has signed the production sharing contract (PSC) for the 10th block awarded under the third round of coal bed methane policy (CBM-III) with the Government. BP inked the PSC for the block BB-CBM-2005/III located in the Birbhum district of West Bengal. With this, the PSCs for all the 10 blocks offered under CBM-III have been signed. The awarded block covers an area of 248 sq. km. with the prognosticated natural gas resources of 50 bcm. The contracts for other nine blocks were signed on November 7 with the other winning companies/consortia, including an Anil Ambani group company. CBM is an alternative source of hydrocarbons, which is extracted from the coal seams from the coal bearing areas. With huge coal reserves in the country, the CBM extraction would supplement the conventional sources of natural gas to help in bridging the big gap between demand and supply of natural gas. It will also make coal mining safer since the absence of methane would reduce chances of fire accidents in coal mines.

Valdel takes consortium route to bid for NELP-VI

November 15, 2006. Bangalore-based Valdel Corporation has formed a consortium with Ukrainian giant Naftogaz and Malaysian conglomerate Suiwah Group to bid for oil and gas exploration rights in the sixth round of New Exploration Licensing Policy (NELP). Valdel, with diversified interests in engineering, retail and real estate, has bid for one onshore block in the NELP VI round. If successful, the bid placed through Valdel Oil & Gas, would be the group’s foray into the exploration business. Valdel’s interest in the exploration business comes against the backdrop of its engineering operations. The group has an equal JV with L&T for providing engineering services to upstream projects in the oil and gas industry, while its 55:45 JV with S&B of US provides services is for the downstream projects in the sector. Directorate general of hydrocarbons (DGH) is expected to announce the bid results in about a month’s time. Earlier reports suggest that 165 bids were filed for 55 exploration and production blocks in the current round of NELP.

Transportation / Trade

North-East pitch for Myanmar gas pipeline

November 21, 2006. The North-Eastern States have asked the Petroleum Ministry to route the proposed gas pipeline from Myanmar to India through the region. Facing tough competition from China for gas from Myanmar, India has suggested alternative routes including one through the North-East that excluded Bangladesh. GAIL (India) Ltd, which is the preferred buyer of gas from Block A-1 in Myanmar, has also favoured routing the pipeline through Mizoram, Assam, Bihar and West Bengal. The trunk pipeline for importing gas from Myanmar will be connected to the proposed Jagdishpur-Haldia gas pipeline at Gaya in Bihar after passing through Aizwal, Guwahati, Jalpaiguri and Siliguri. The pipeline will also have the provision to transport gas from developing gas fields in Tripura and Assam. The proposed pipeline will traverse a length of 1,400 km if it bypasses Bangladesh and 900 km if it goes through that country. ONGC Videsh Ltd and GAIL collectively hold a 30 per cent stake in the A-1 and A-3 gas blocks in Myanmar. Daewoo International Corporation with 60 per cent stake is the operator of both the blocks. South Korea's Korea Gas Corporation holds the remaining 10 per cent stake. The in-place reserves from the A-1 block have been assessed by Houston-based consulting firm Ryder Scott at 2.88 trillion cubic feet to 3.56 trillion cubic feet. Commercial production from the field is expected to commence by 2009.

RIL to tie up with GAIL, IOC

November 20, 2006.  Reliance Industries Ltd (RIL) will shortly take to its board the proposal to form a 50:50 joint venture (JV) with Indian Oil Corporation (IOC) for city gas distribution projects in the country. RIL is also talking to GAIL India Ltd for forming city gas distribution and gas pipeline joint ventures. To avoid overlapping, RIL will also identify cities for undertaking industrial and household gas distribution projects with IOC and GAIL. The IOC board had earlier rejected a proposal to form a JV company with IOC as a minority stakeholder and RIL holding 51 per cent equity. This was proposed, as RIL is the owner of gas, which can be sold as CNG and city gas distribution network of IOC. However, after a series of detailed negotiations between the two sides, RIL is understood to have agreed in principle for a 50:50 JV with IOC.

A final decision will be conveyed to IOC only after the final approval of the RIL board. On its part, GAIL had recently approached RIL on pooling of each other's resources, including joint execution of gas pipeline projects. The two sides are currently working out modalities as RIL has agreed to jointly execute gas pipeline projects with GAIL including the Kakinada-West Bengal section as also in the state of Bihar. GAIL has sent a similar proposal to GSPC of Gujarat. The idea is to pool resources of all gas companies.

Cairn firms up pipeline plan for Mangala oilfield

November 20, 2006. Cairn India Ltd (CIL), a subsidiary of the UK-based Cairn Energy Plc, which is into upstream oil & gas exploration and production in India, has firmed up its plans for a midstream foray. The company is planning to lay oil pipelines from its Mangala oil field in Rajasthan to Gujarat, to evacuate crude to the nearest refinery from the oilfield. CIL is looking at three potential pipeline options, one stretching from Mangala to Mundra in Gujarat, and two others from Mangala to Salaya and Viramgam in Gujarat. According to a study conducted by the company, the pipeline from Mangala to Mundra will stretch 471 km, Mangala to Salaya, 531 km and Mangala to Viramgam, 340 km. As per an earlier agreement between Cairn and the government of India, Mangalore Refinery & Petrochemicals (MRPL) was to lay the pipeline to evacuate oil from Mangala oil field. However, MRPL and its parent firm ONGC are yet to give any firm indication of the status of the pipelines. At present, the refineries near Mangala oil field are at Mathura, Panipat (both IOC's) and Bhatinda (HPCL) refineries in the northern part of the country, while in Gujarat, Reliance and Essar have refineries in Jamnagar and Vadinar, respectively. The pipelines will not only help the company to evacuate crude from the Mangala oilfield, but can also be shared with a third-party on a commercial basis.

IndianOil in talks to take part in Turkey pipeline project

November 16, 2006. Indian Oil Ltd is negotiating with global crude oil trading lobby to firm up throughput commitment for its proposed participation in the Trans Anatolian Pipeline Project (TAPP) in Turkey promoted by ENI of Italy and Calik Energy of Turkey. The $1.5-billion oil pipeline from Northern Black Sea city Samsun to the Mediterranean port city Ceyhan will ensure smooth transportation of 1.5 million barrels of crude, primarily from Kazakhstan, every day. According to an agreement signed between IOC and ENI-Calik combine on November 2, the Indian oil major may be allowed to pick up stake in the project subject to firm throughput commitment. While the throughput commitment would have a direct bearing on the quantum of equity stake, IOC had already expressed its intention of picking up a significant stake. Apart from IOC, Royal Dutch Shell has also entered into similar agreement with ENI-Calik combine. It may be mentioned that IOC is also competing with Kazakh oil company, KazmunayGas, and Turkish Petrol Office for setting up a 15-million-tonne grassroot refinery at Ceyhan at an estimated cost of $6 billion. While the refining project — if approved by the Energy Market Regulatory Authority of Turkey — would ensure partial end use of the crude transported through TAPP, IOC said that participation in the pipeline would not be feasible without firm supply tie-up with the traders.

Petronet may source 1.25 mt LNG from Qatar

November 15, 2006. Petronet LNG Ltd (PLL) is likely to source 1.25 million tonnes of liquefied natural gas from Qatar.  Petronet would receive the 1.25 mt of LNG at its Dahej terminal. India currently has a contract to buy 7.5 mt of LNG a year from Qatar. However, the current supply from Qatar is only five mt. Petronet has a 25-year contract to buy LNG from Ras Laffan Liquefied Natural Gas Co Ltd II (RasGas II), a joint venture between the state-run Qatar Petroleum and Exxon Mobil. Through this contract, Petronet currently imports five mt at its Dahej terminal in Gujarat and would start importing 2.5 mt more from 2009.

Policy / Performance

India, China must jointly bid for oil, gas assets: Deora

November 21, 2006. The Petroleum Minister said that India and China should jointly bid to acquire overseas oil and gas assets.  Joint participation would also help reduce acquisition costs as both are big importers of oil. Recently, ONGC Videsh Ltd (OVL) and a unit of China's Sinopec International Petroleum Exploration and Production Corp have jointly acquired Omimex de Colombia Ltd. OVL and China National Petroleum Corp also hold stakes in Sudan's Greater Nile Oil Project.

On the domestic front, Indian Ministry was working towards formulating a suitable gas pipeline policy and laying down guidelines for gas pricing. According to industry grapevine, a high-level panel constituted by the Ministry to suggest guidelines for approving gas price/formula under production sharing contract has suggested that all gas sale will have to be done through competitive bidding route, which would be subject to review every five years. In circumstances where price determination was not possible through competitive bidding route, valuation would be done by the Government or Directorate General of Hydrocarbons based on the most recent price determine competitively and indexed to the current levels.

Reliance, Videocon sign separate pacts in Timor

November 17, 2006. Reliance Industries Ltd and Videocon Industries have signed separate production sharing contracts (PSCs) in the Democratic Republic of Timor. The consortium has agreed to complete a guaranteed work programme of acquiring 1,006 line km of 2D seismic and 1,020 sq km of 3D seismic and drill four wells in the first phase of three years. The risked reserves in the block are estimated at 47 million barrels of oil/ oil equivalent. Reliance signed a separate PSC for the offshore contract area K in Dili, capital of Timor Leste. The area of the awarded block spreads over 2,384 sq km. The company has E&P blocks in Yemen, Oman and Colombia.

It was in January 2006 that the Government of Timor Leste invited bids for 11 offshore exploration blocks in shallow to ultra deep waters in that country. The acreage offered lies in petroleum province of Australian North West Shelf and is adjacent to the Timor Sea, which is a joint petroleum development area between Timor Leste and Australia. The region contains major discoveries like Bayu-Undan and Greater Sunrise. The Government of Timor Leste announced the awards in May this year. Of the 11 blocks under the licensing round, six have been awarded, including the one awarded to Reliance.



REL, BHEL bid for power project in Haryana

November 20, 2006.  The public sector undertakings Bharat Heavy Electricals Limited (BHEL) and Reliance Energy Limited (REL) submitted bids for the 1,000/1,200 MW coal-based project proposed at Hisar. While BHEL was a new entrant for the project, REL submitted a revised bid for the project whose estimated cost is expected to surpass Rs 4,000 crore. REL was the sole bidder for the project before the state government decided to extend the date of submission and relaxed commissioning schedule of bids. The power generating capacity of the plant, expected to be between 1,000 and 1,200 MW would be decided as per the proposal of the successful bidder.

SJVNL plans to invest $400 mn in Uttaranchal

November 20, 2006. Satluj Jal Vidyut Nigam Ltd (SJVNL) will invest Rs 1,800 crore ($400 mn) for setting up three hydel projects in Uttaranchal. The Uttaranchal government has awarded the 300-MW Devsari hydel project, 33-MW Jhakol-Sankari project and 33-MW Natwar Mori hydel project to SJVNL. SJVNL had started initial survey work in the three projects, which would be completed soon. In this regard, the Union Ministry of Forest and Environment had also given its clearance for these projects. SJVNL for the past two years is successfully running the county’s largest hydel project Nathpa Jhakri project in Himachal Pradesh, which is producing 1,500 MW of electricity. The company has earned a net profit of Rs 498 crore in the last financial year. In Himachal Pradesh also, SJVNL is working on three hydel projects the 412-MW Rampur project, 700-MW Luhari hydel project and 1,020-MW Khab project. 

GMDC, KSK Energy in pact for 1000 MW project

November 17, 2006. Gujarat Mineral Development Corporation (GMDC) has signed an agreement with KSK Energy under which GMDC will supply KSK coal on a take or pay basis for its proposed 1,000 MW power project planned in Chhattisgarh.  GMDC is also considering taking an equity in the power project as the mining company has been given an option of equity investment upto 26 per cent in the project against which it will be supplied 26 per cent share in 1,000 MW power generated by KSK Energy.  GMDC was allotted two coal blocks in Chhattisgarh and Jharkhand by the ministry of coal, government of India. The Morga-II block in Korba district of Chhattisgarh has 350m tonnes of mineable reserves and it can fuel a 1,000MW power plant.  The other one in Jainnagar at Hazaribaug district in Jharkhand has 100m tonnes of mineable reserves which can support a 250MW power plant. 

Sterlite to set up 2,400 MW power project

November 16, 2006. Sterlite Industries India Ltd is expanding its business canvas from metals and mining to the power sector. The company will be foraying into commercial energy business by setting up a 2,400 MW green field power plant in Jharsuguda, Orissa, involving an investment of $1.9 billion. The power business will be operated through Sterlite Energy Ltd, a wholly owned subsidiary of Sterlite Industries India Ltd, belonging to Vedanta Resources. The company's board has also proposed to raise Rs 12,500 crore in one or more tranches. Sterlite proposes to set up a 4 x 600 MW coal-based thermal power plant, which will be the first phase of the total power project. The second phase of the project, which has not yet been approved by the Board, involves setting up of another 1,200 MW plant (2 x 600 MW).

Transmission / Distribution / Trade

REL bags first private transmission project

November 21, 2006. The Anil Ambani-controlled Reliance Energy Ltd (REL) has outbid eight others, including Tata Power Company (TPC) and GMR, to bag India’s first fully independent private power transmission project at a cost of Rs 1,800-2,000 crore. State-run PowerGrid Corporation had shortlisted the nine companies on October 9. The REL-floated Reliance Energy Transmission Company (RET) was the lowest bidder for the two tenders invited by PowerGrid Corp for the construction of grid lines linked with the western region strengthening scheme in Gujarat and Maharashtra. Others in the race were GMR-KEC, L&T-L&T Infrastructure Development Project, TPC, Spanish firms Isolux and Elecnor, Spanish consortium Inabensa-Abengoa, China Light & Power-Gammon, Lanco Group-Deepak Cables and Cymi (Spain)-IVRCL. The two projects are part of PowerGrid’s Rs 5,000-crore western grid scheme, which ran into a dispute last year when REL approached the Central Electricity Regulatory Commission for a licence to set up the lines on its own.

Policy / Performance

No premium on `exported` power

November 21, 2006. In a judgement that will bring relief to power deficit states, the Appellate Tribunal for Electricity has disallowed power surplus states like Orissa from charging a premium on exported power.  The tribunal was hearing an appeal against Orissa’s “deemed power trader” Grid Corporation of Orissa (Gridco), which buys power from generators in the state at an average cost of Rs 1.10 per kwh and sells the surplus power to power trader PTC at Rs 4.61-4.81 per kwh.  This sale was outside the regulatory ambit since it was masked as an intra-state sale. PTC then “exports” power from the state at a capped margin of 4 paise per kwh.   

Setting aside the earlier order of the Central Electricity Regulatory Commission, Gridco was entitled to charge only the trading margin (of 4 paise) over the average cost of procurement of electricity for the surplus power sold to PTC. Electricity traders cannot be allowed to exploit the shortage of electricity in the country. In its judgement delivered it has asked the Central Electricity Regulatory Commission to work out a mechanism to refund the excess amount charged by Gridco to consumers. Selling electricity at high rates outside the state is neither in the interests of the residents of the state nor in the interests of the consumers of the rest of the country.  Planning Commission member Gajendra Haldea was the appellant, in his personal capacity, and was supported by aggrieved parties Uttar Pradesh Power Corporation and Maharashtra State Electricity Distribution Company.   

Coal to stay key source for nation's energy needs

November 21, 2006. Available reports suggest that although the number of mines in CIL will remain almost the same, the average mine size in terms of coal production will increase three-fold.  Energy security has become a growing concern for India because its energy needs are growing rapidly with rising income levels and a growing population. The threat to energy security arises not just from the uncertainty of availability and price of imported energy, but from the possible disruption or shortfalls in domestic production. In fact, India's dependence on imported energy has increased from a level of 18 per cent of the total Primary Commercial Energy Supply (TPCES) in 1991 to 30 per cent in 2003.

However, the Draft Integrated Energy Policy by Planning Commission is quite hopeful that the country may be able to exploit by 2030-31 its hydel potential to the tune of 1,50,000 MW, nuclear power to the extent of 59,000 MW and additional power through wind source to the tune of 14,000 MW. Although the share of coal is expected to decline from 85 per cent to 78 per cent, that of gas-based energy is set to increase from 20 per cent in 2003-04 to 30 per cent in 2031-32. Energy experts anticipate that long-term demand projection of coal could become a complex issue owing to rapid changes in the relative availability and price in the fuel sector, coupled with technical innovations and new policies in the end-use sectors. The fact remains that coal will remain the key contributor to the Indian energy because there are vast proven reserves, with low-calorie and high-ash content but with low sulphur content, and remains regionally concentrated. It is feared that the extractable reserves based on current extraction technology remain limited.

The potential coal-bearing area of the country is about 24,400 sq km, of which about 45 per cent (10,200 km) has been covered by regional exploration as on January 2002. Out of this, about 50 per cent has been covered by detailed exploration. The coal inventory, assessed by Geological Survey of India (GSI) till January 2005, stands at about 248 billion tonnes (Bt), out of which 93 Bt (about 37 per cent) is in proved category. The remaining 155 Bt (about 67 per cent) is in indicated and inferred categories, which need to be brought under proved category for any feasibility study of economic mining. It is pointed out that the coal resources within the depth range of 300 m stand at 152 Bt, of which about 47 per cent (71 Bt) are in proved category and 53 per cent in indicated/inferred categories. The existing coal production strategy from opencast mines is based on assessment of the geological inventory of the country. Assessment of the existing mines has shown that the opencast mineable/extractable reserves vary from 80 per cent to 30 per cent of the net geological (proved) inventory.

Under the administrative control of Coal India Ltd (CIL), there are about 160 opencast mines that produced 260 million tonnes (mt) of coal in 2003-04. The production from opencast mines is expected to increase to the level of 715 mt by 2025. Available reports suggest that although the number of mines in CIL will remain almost the same, the average mine size in terms of coal production will increase threefold. Therefore, the contribution of production from mines producing less than one mt will reduce from 16 per cent to two per cent, from mines producing 1.5 mt will decrease from 35 per cent to 26 per cent, and from mines producing 5.10 mt will increase from 31 per cent to 44 per cent. And contribution from mines over 10 mt per annum will increase from 18 per cent to 28 per cent by 2025.

These mines removed about 500 million cubic m (Mcum) of overburden (OB) to produce 260 mt of coal in 2003-04 at an average stripping ratio of 1.92 cu m of OB against per tonne of coal production. It is estimated that about 715 mt of coal will be produced in CIL by opencast method in 2025 requiring about 2,000 Mcum of overburden removal at an average stripping ratio of around 2.75-3 cu m of OB against per tonne of coal. Moreover, with increasing haul distances and depths, and the growing need to conserve diesel, in-pit crushing and conveying technology using mobile/semi mobile-crushers will be introduced as an alternative to dumper transport where large volumes of coal need to be handled.

Reliance keen to take over Dabhol power plant

November 20, 2006. Reliance Industries Ltd, India's largest private firm, is keen to take over the Dabhol power plant to fulfill its long planned ambition of having an LNG import facility on the west coast. The government is presently trying to revive the 2,184 MW Dabhol power plant and the adjacent LNG terminal through NTPC and GAIL. But if attempts to source fuel for the power plant on a long-term basis fail, it may consider either hiving-off the LNG terminal and selling it to a company capable of sourcing fuel or selling off the entire plant itself.

RIL had originally planned to construct a liquefied natural gas (LNG) import facility at Jamnagar in Gujarat. But after BP Plc of UK walked out of the project and our company finding huge gas reserves in Krishna Godavari basin off east coast, the plans were put on hold. The Dabhol terminal would offer an opportunity to balance the gas source on the east coast. Reliance feels its exploration blocks in Yemen and Oman can yield gas which would be converted into LNG and shipped to Dabhol. Similarly, its partner Chevron can also bring LNG from its project in Australia.

Power theft and its solutions

November 20, 2006.  Around 30-50% of the power generated in India is lost during distribution totaling to 30,000 MW and amounting to about Rs 30 thousand crore. Power theft accounts for bulk of these distribution losses. Now the government of India and the state electricity boards have been working with a few private players to step up investments in automation and information and put a check on these thefts. KLG Systel, an IT company with turnover of around Rs 50 crore, has come up with its power system solution called Vidushi, which incorporates remote controller and communication hardware using GPRS/CDMA, theft prevention hardware, and automatic meter reading system all put on to a broadband backbone to monitor and prevent these distribution losses.

There are around 13 crore consumers of distributed electricity, growing at around 9% annually but the network management is inefficient and metering inadequate. Also the tariff structures ,which subsidizes agriculture sector at the cost of commercial and industrial sector has led to thefts mostly by small and medium commercial enterprises and even unauthorized households. The Vidushi solution works in two parallel ways. Firstly, a one time consumer indexing is done though an exhaustive GIS mapping. This is followed by retrofitting of distribution system using existing meters, network cables, transformers and substations and reinstallation of meters with digital connection management modules for getting the entire system ready to be monitored online.

On activation the system captures data like individual power consumption, real time reconciliation of distribution transformer pole wise, consumer wise, power input and power metered. It will also automatically switch off power in case of theft, meter tampering and in some cases overload. The switching off can be controlled at individual consumer level even and restoration would happen only through automated computer systems. Apart from checking power theft, Vidushi can achieve reduction in billing cycle, demand side management and load forecasting and reduction of technical loss through optimal network deployment.

HCL Infosystem is another player which has developed a solution to prevent power theft and distribution losses. As is evident, this sector provides immense opportunity for private players to deploy IT solutions first on cost plus basis and then with successful results on commission basis. The SEB’s also would only be too happy to share a chunk of expenses they are unable to recover at present.

New developments in power sector

November 20, 2006. Among the developments taking place in the power sector, one important development is the advent of new technology for power generation, called supercritical technology. The technology enables higher efficiency in power generation leading to lower coal usage and hence lower emissions and other environmental effects. The technology is based on super-critical property of water. At a pressure beyond 225 bar (unit of pressure) in a boiler, water transforms into steam instantaneously. This superheated steam is fed to turbine to generate power. The process differs from the conventional one, in which steam and moisture co-exist as a mixture in the boiler. The boilers in subcritical system are equipped with an additional drum to separate steam, which is then superheated before being fed to turbine. Another important feature of this technology is that unit size is much larger in this case as compared to sub-critical plants. While maximum size of conventional plant is 500 MW, super critical equipment come in the range of 660 MW to 800 MW and can go up to 1,000 MW.

Further, these plants require much lesser time for start-up or shut down, unlike conventional thermal plants. This is because of the elimination of the separator drum, which acts as a buffer, and has to be filled before the plant can start generating power. The flexibility helps reduce drawback of thermal plant as being suitable for base load only. The first supercritical plant was built in US in the 50s but initial plants faced problems of metal failure and breakdowns. While the technology is well established now, cost is still quite prohibitive. Most plants based on this technology are located in Japan and Europe. China is constructing its first such plant of 4,000 MW of total capacity with each unit size of 1,000 MW, expected to be commissioned in 2007-08. In India, it is beginning to be accepted now with two such projects being developed by NTPC.

Proposed 4,000 MW ultra mega projects will be based using this technology, where each project would require 5-6 units. Apart from that, NTPC plans eight to ten more such units, while Andhra-Pradesh state utility also plans to build one. Conventional plants have thermal efficiency (energy produced per unit of energy input) in the range of 30-35% only, with most Indian plants operating in 30-32% range. The efficiency of power plants using super-critical technology can go up to 45%. The higher efficiency is achieved by complex thermodynamic phenomenon whereby if energy input to the boiler-turbine system is kept constant, power produced can be increased by operating the system at higher pressures and temperatures.

The higher efficiency substantially reduces the fuel cost, as it reduces coal consumption by about 25% to 30%. Further, all the energy that is not useful goes into atmosphere in some form or other and adds to global warming. As per estimates, 1% increase in efficiency reduces emissions by upto 2%. An interesting aspect to note is that there is not much difference in the construction technology or component required, for the two types. However, since temperature and pressure are significantly higher, construction materials used are of much higher strength and hence costly. Most of current research is centered on bringing down the equipment cost. The technology could not become popular despite being so useful for the above-mentioned reason.

Power firms begin to dream big

November 17, 2006. Public and private sector power generation companies believe that the passage of the Bill will help achieve a nuclear capacity addition of around 50,000 MW by 2032. State-run NTPC Ltd plans a nuclear power capacity of 4,000 MW by 2013 with an investment of over Rs 24,000 crore. NTPC has recently received a report from its consultants on entering nuclear power. Tata Power Company (TPC) and Reliance Energy Ltd (REL) claimed this development would help speed up the implementation of their plans for the nuclear sector. The Centre’s Integrated Energy Policy and the National Electricity Policy have projected that nuclear power would play a major role in India’s capacity addition. By 2032, nearly 7% of the total capacity is expected to come from nuclear fuel. TPC reiterated that it would like to participate in alternative forms of power generation – nuclear, wind and hydel. Tata Consulting Engineers, with its alliances, has the expertise in designing nuclear reactors.

NTPC to invest $0.76 bn in power project

November 17, 2006. National Thermal Power Corporation Ltd will invest up to Rs 3425.03 crore ($0.76 bn) in Tapovan Vishnugad Hydro Electric Power Project. The board of directors at its meeting approved the investment of Rs 3425.03 crore for the Tapovan Vishnugad Hydro Electric Power Project (4 X 130 MW) as a merchant power plant.

TNEB seeks allocation of captive coal blocks

November 16, 2006. The State Government has sought the Centre's permission to plan its own schedule for reforms at the Tamil Nadu Electricity Board (TNEB). In a speech delivered by the Electricity Minister asked for allocation of captive coal blocks to the TNEB. The Minister also sought clarification on entering into agreement with private players to procure and sell power and the Centre's assistance to evacuate the power to States that need it. On power reforms, the State Government has sought the continuance of the TNEB in its present form for another year.

Under the Electricity Act 2003, the State Electricity Boards have to separate their transmission functions and the State Load Despatch Centre functions by forming separate companies. But clubbing the boards that are performing well with the poor performers is not the right approach. Individual electricity boards should be permitted to plan their schedule of reforms without any deadline or methodology prescribed. Tamil Nadu is one of the few States self-sufficient in power and the TNEB, with its integrated power generation, transmission and distribution, is one of the best performing electricity boards in the country. Tamil Nadu's total generating capacity is 10,098 MW with an additional 6,641 MW proposed under the 11th Plan. Private investors have evinced interest in developing over 30,000 MW of coastal thermal power plants. The TNEB needs about 15 million tonnes of coal annually to fuel its four thermal power stations. But Coal India supplies about 13 mt and the board imports the balance. TNEB needs to acquire a captive coal mine as a long-term solution and to meet its growing needs. The State Government asked for allocation of a mine block at Nuagaon, in Talcher, Orissa. This would help economical transportation of coal from Paradip Port. However, the Union Government has allocated a block in Chhattisgarh to be jointly explored by the TNEB and the Maharashtra State Mining Corporation Ltd. This would cause logistics problem.

Hirapur likely to declare as preferred site for NPCIL

November 16, 2006. Hirapur in the East Midnapore district may soon be declared the preferred site for Nuclear Power Corp (NPCIL) proposed greenfield station in West Bengal. Hirapur was found suitable for setting up a light water reactor (LWR) and a power plant on the basis of tests and technical data including soil test, availability of water, flood data, and geomorphological data provided by various organisations. The site selection committee under the Department of Atomic Energy (DAE) which recommends locations for setting up nuclear plants to the Centre is slated to visit Hirapur for inspection.

The state government was in charge of conducting the tests for finding suitability of locations in West Bengal. WBPDCL acted as the facilitating agency and conducted the tests on behalf of NPCIL. It was also in charge of collecting technical data from various agencies including GSI for the selected locations. At Hirapur, NPCIL may set up a 2,000 mwe (2 x 1000 mwe) nuclear power plant. Investment is likely to be between Rs 9,000 and Rs 10,000 crore. The plant may be categorised 'Civilian' and made available for International Atomic Energy Agency's inspection. At present, two units at NPCIL's Tarapore facility are light water reactors while most others are pressurised water reactors.

NTPC likely to spin off mining biz into separate entity

November 15, 2006. National Thermal Power Corporation (NTPC) is weighing the options of hiving off its coal mining operations into a separate company. The move comes close on the heels of its decision to mine 60m tonnes of coal over the next 7-8 years. The power major’s foray into coal-mining is aimed at ensuring timely availability of fuel for its stations and controlling fuel costs, which accounts for nearly 50 per cent of its per unit generation cost. The company consumes some 104m tonnes of coal annually, of which nearly 100m tonnes are sourced from Coal India, while the rest is imported. Currently, the company is in the process of seeking multiple central clearances in this regard. Mining is likely to commence at our Pakri Barwadih block in the North Karanpura coalfields in Bihar by December ’07.




Mitsui buys 15 pc of Namibia oil blocks from BHP

November 20, 2006. Mitsui & Co. Japan's second-biggest trading company had acquired a 15 percent interest in oil and gas exploration blocks in Namibia from BHP Billiton for an undisclosed sum. The acquired interest is for the Northern block and Southern block, located 220 km (137 miles) southwest off the coast of Namibia. Decisions for test drillings and further explorations will be made after analysis. Mitsui will garner nearly 60 percent of its expected net profit from its oil, gas, metal and mining sectors in the year to March 2007. It is boosting oil production volume due in part to the start in July of operations at the Enfield oil project offshore Western Australia, a project owned jointly with Australia's Woodside Petroleum Ltd. Mitsui has partnered with BHP Billiton in the liquefied natural gas project in North West Shelf in Australia.

S. Korea begins gas production in Vietnamese oil filed

November 17, 2006. South Korea's state-run Korea National Oil Corp. commenced commercial production at its latest gas field in southern Vietnam. Earlier in the day, the company held a ceremony in Hanoi to mark the start of its gas production at the Rong Doi oil field 280 kilometers off the coast of the Vung Tau region of the Southeast Asian country.

Marathon, Andersons to begin building ethanol plant

November 16, 2006. Marathon Oil Corp. and Andersons Inc. they will immediately begin construction of an ethanol plant in Greenville, Ohio. The facility will be the first constructed by Andersons Marathon Ethanol LLC, a joint venture between the two companies. The venture closed the purchase of the Ohio property in September. The facility will have annual capacity of 110 million gallons of ethanol and 350,000 tons of distillers dried grain, an animal feed ingredient, and could be operational as soon as the first quarter of 2008.


Contract to boost gasoline production at Bandar Abbas Refinery signed

November 21, 2006. A contract to increase gasoline production at Bandar Abbas Refinery, southern Iran, was signed. Being worth €400 million, the contract was signed between Iran Oil Engineering and Construction Company (IOEC) and an Iranian consortium comprising of Petrochemical Industries Design & Engineering Co. (PIDEC), Erection and Construction Company (ECC) in cooperation with the German ABB Lummus. The project to increase gasoline production at Bandar Abbas Refinery is the second stage of a plan to develop and upgrade the refinery. It will increase gasoline production from Bandar Abbas Refinery to 13 million liters per day.

The project constitutes the establishment of light naphtha, heavy naphtha, changing catalyst, gas oil treatment, sulfur, amine, and sour water units plus building storage tanks with a capacity of 2.8 million barrels. Also boosting the production capacity of water, electricity, and steam, the project is expected to finish within three years. The first stage of the plan to develop Bandar Abbas Refinery is underway with 72 percent of physical progress, which will increase the production capacity at the refinery to 320,000 barrels per day (bpd) from the current amount of 232,000 bpd. The contract on increasing gasoline production at Bandar Abbas Refinery is the fifth contract of Iran’s plans for developing and upgrading refineries.

LUKoil plans to refine Venezuelan crude in Canada

November 17, 2006. LUKoil, Russia's largest oil company, is working on a project to refine crude from Venezuela in Canada. The company plans to invest about $100 billion in oil and gas production over the next decade. LUKoil plans to boost liquid hydrocarbon output to 50 million tons per year, and natural gas production to 50 billion cubic meters. The company might consider expanding its oil refinery in Bulgaria instead of building a new refinery in Turkey. LUKoil is currently developing 26 projects in 13 countries. The company plans to produce about 11 billion cubic meters of natural gas per year by 2011-2012 at the Kandym-Khauzak-Shady deposit in the Central Asian republic of Uzbekistan, and to invest $2 billion in developing the deposit.

In another ex-Soviet republic, Azerbaijan, the company plans to start extracting gas at the Shah Deniz deposit by the end of 2006. LUKoil has also signed a consortium agreement to develop the Zhambai oil field on Kazakhstan's Caspian Sea shelf, and is also planning to prospect for oil in Iran. The company is cooperating with Norway's Norsk Hydro on three oil prospecting sites at the Anaran deposit in Iran, under an agreement signed in February 2003, and is considering a resumption of talks with Iraq on developing the country's West Qurna-2 deposit. However, sanctions imposed on Iraq following the Gulf War blocked Russian companies from Iraqi oil projects.

Transportation / Trade

Qatar to double LNG exports to Japan

November 21, 2006. Qatar plans to boost its exports of liquefied natural gas to Japan to more than 11 million tons a year in 2010 from the current 6 million tons. Qatar plans to expand global LNG shipments to 35 million tons a year in 2007 from the current 29 million tons, making it the world's biggest LNG producer. Qatar's global LNG shipments will steadily grow to 77 million tons per year in 2010. Along with Japan, Qatar plans to increase LNG exports to South Korea by 2 million tons next year to 7 million tons a year and to India by 2.5 million tons in 2009 to 7.5 million tons. Qatar will also start shipping LNG to Taiwan in 2008.

Boardwalk to build Gulf Crossing U.S. natgas line

November 20, 2006. Boardwalk Pipeline Partners LP to build the Gulf Crossing pipeline that will ship natural gas from supply basins in Texas and Oklahoma to key markets in the U.S. Southeast. The company also began a binding open season for the remaining capacity on the planned line, which will cost $1.1 billion and have the capacity to ship up to 1.65 billion cubic feet per day of gas from the Barnett shale formations in southeast Oklahoma and northeast Texas. The open season will run through Dec. 15.

The Gulf Crossing pipeline, a 355 mile, 42-inch interstate natural gas line, currently has 1 bcf per day of binding agreements with its foundation shippers. Subject to regulatory approvals, the pipeline is expected to be in service during the fourth quarter of 2008. Gulf Crossing will transport gas from the Sherman, Texas; Bennington, Oklahoma; and Paris, Texas, supply areas to the Perryville, Louisiana hub. Plans also call for Gulf Crossing to lease capacity on Boardwalk subsidiary Gulf South Pipeline to make deliveries from Perryville to Williams' Transco Station 85 in Choctaw County, Alabama.

India-Iran hopeful over natural gas pipeline deal

November 18, 2006. India and Iran optimistic that two multi-billion-dollar deals for the supply of Iranian natural gas and the construction of a pipeline would be finalised soon. Negotiations over the two agreements had been stalled over price differences, but New Delhi and Tehran said they were willing to renegotiate.

India is supposed to get five million tonnes of liquefied natural gas annually over a 25-year period from 2009 under a $22 billion agreement signed in Tehran in June last year. But the deal has since hit a snag over pricing. The project would get the green light if New Delhi agreed to the fresh offer. A $7bn proposal to supply Iranian gas to India through a 2,600km pipeline via Pakistan has also hit an obstacle, with Tehran saying New Delhi and Islamabad were unwilling to pay the asking price.

In August, India, Iran and Pakistan agreed to appoint a consultant to resolve the row over the pipeline. Three countries are waiting for the final report of the consultants and will continue our negotiations both bilateral and trilateral to reach a common ground and implement the huge project. The top oil officials from the three countries will meet within a month in Tehran to review proposed prices. India needs gas for industry, vehicles and cooking fuel. Demand is estimated at 170 million cubic metres daily and is expected to rise to 400m cubic metres a day by 2025 as India's economy expands. Domestic gas supply is currently 85m cubic metres a day and imports are expected to make up the bulk of demand in the future. India imports 70 per cent of its energy needs.

Policy / Performance

Australia seeks Indian investments in energy

November 21, 2006. Australia invited Indian companies to take part in exploration of natural gas but expressed inability to supply LNG to India in the short term. They discussed about areas of cooperation in energy sector and had proposed a MoU between the two countries. India's Petronet LNG Ltd is negotiating a deal to import at least 2.5 million tonnes of liquefied natural gas from Australia. India had sought more LNG but they have expressed inability to supply additional volumes in the short term. Australia, which is also the world's leading producer of minerals such as coal and iron ore, would also encourage Indian investments in mining and would strengthen its presence in the minerals exploration industry here.

EU calls for energy contracts with Russia to secure supply

November 21, 2006. The EU urged Russia and other neighbours to commit to long-term energy contracts that would guarantee them customers and investments while securing affordable oil and natural gas supplies for the EU. The appeal underscored western Europe's desire to make energy a priority at a time when its demand is growing, its supplies are dwindling and world prices are high.

The EU argues that producer nations must commit to fair trade in energy production and transit to secure investor confidence and guarantee environmentally safe, predictable, long-term deliveries. Facing the prospect of importing 70 percent of its energy over the next 15 years, the EU wants to shore up relations with reliable energy exporters while looking for new partners and routes. Russia now supplies a quarter of Europe's oil and more than two-fifths of its gas. But EU-Russia relations are troubled by EU human rights complaints and Moscow's efforts to secure access to Russian oil and gas primarily for Russian companies.

NIOC, Chinese firms to sign oil & gas contracts soon

November 20, 2006. The National Iranian Oil Company (NIOC) is preparing the contract on the project to develop Yadavaran Oilfield to be signed with China’s Sinopec. The negotiations are still underway to select the company to implement mine-sweeping operations at the field. As for the North Pars gas field development project, a MOU has been previously signed with China National Offshore Oil Company (CNOOC). Officials of the company will come to Iran in the near future to discus the issue. Kish gas field development project in the Persian Gulf, no discussions have been held with foreign firms on the development of the field. The field will be developed by Iranian contractors, and is due to be financed by the NIOC. NIOC plans to launch an initial production from Azadegan field, which will be at 20,000 to 25,000 bpd of crude scheduled for 6 to 8 months.

Rosneft, China's Sinopec sign deal to buy Russian oil co.

November 17, 2006. Russia's state-controlled Rosneft has signed a deal with China's No.2 oil company Sinopec to acquire a 51 per cent stake in Russian crude producer Udmurtneft. The signing of the agreement to buy the company, based in European Russia to the west of the Urals, testifies to "the successful development of cooperation between the leading national oil companies of Russia and China”. State-controlled Sinopec, which is Asia's largest oil refiner, had already won a tender to buy a 96.7 per cent stake in Udmurtneft from Russian-British TNK-BP for a reported $3.5 billion in June 2006, with a prior condition that it was to sell 51 per cent of its stake to Rosneft. The deal makes Sinopec the first company from energy-hungry China to gain access to oil assets in Russia, and comes amidst a tightening pressure by Russia's authorities on Western oil majors operating in the country. Udmurtneft accounts for more than 60 per cent of oil production in the Russian republic of Udmurtia. 

JBIC, Qatar Petroleum ink deal on partnership

November 16, 2006. The Japan Bank for International Cooperation signed a business partnership agreement with Qatar Petroleum aimed at developing a more favorable environment for Japanese companies hoping to get involved in energy resource development projects in Qatar. The bank's officials will meet regularly with those of the state-run oil company to gather information about oil and natural gas development projects, or projects associated with them, such as port and pipeline construction. The bank will extend loans for those projects on condition that Japanese oil developers are allowed to participate in the projects. It is the first time the JBIC has signed a partnership agreement with a state-run petroleum company from an oil-producing Middle Eastern nation. The bank will also seek contracts with other countries in the region, including Saudi Arabia. Japan imported 10.9 percent of its liquefied natural gas from Qatar in 2005. Qatar currently ranks fourth in the world in LNG production, though some experts forecast that the country will become the No. 1 producer by 2011 with its increasing capacity. As global demand for natural gas continues to rise, especially from developing countries like China, it is seen as vital that Japan strengthen ties with Qatar. The government had already agreed with Qatar earlier this month to create a joint working group to discuss measures to bolster the bilateral relationship in the energy sector.

Gazprom and Lukoil to form acquisition venture

November 16, 2006. State-controlled Gazprom and Lukoil, the biggest Russian natural gas and oil companies, will form a venture to acquire assets in Russia and abroad as the government uses energy riches to project its political and economic profile abroad. The arrangement comes as President Vladimir Putin's government cracks down on projects led by BP, Royal Dutch Shell and Total, which analysts say is an attempt to seek a greater share of the nation's energy wealth to win global political and economic power. Gazprom and the state oil company Rosneft also would form a strategic partnership to develop oil projects.

Lukoil is the most internationally diversified oil company with assets and potential projects in politically interesting areas like Iraq and Venezuela. Gazprom would benefit from Lukoil's relations abroad and lend Lukoil the political backing to get some of these projects off the ground. Singapore and Thailand face showdown over Temasek deal Gazprom's support will help Lukoil with its plans to expand natural gas to 33 percent of output from 6 percent. Russia, which has the world's largest natural gas reserves, faces a deficit of the fuel as Gazprom focuses on more lucrative export sales.

Lukoil will spend $27 billion in the next decade to increase overseas oil and gas output sevenfold to the equivalent of 800,000 barrels a day. The company pumps about 110,000 barrels a day outside Russia. During the next five years, Lukoil will spend $2 billion to develop the Kandym-Khauzak-Shady natural gas project in Uzbekistan. In the Middle East, Lukoil expects to renew negotiations on the stalled West Qurna project next year. The company is in "constant contact" with the Iraqi authorities. Drilling in Saudi Arabia has been "promising" and the company plans to announce the results by the end of the year. In Iran, Lukoil will decide on developing two possible fields by August next year. Lukoil also has projects in Colombia, Venezuela, the Ivory Coast, Egypt and Azerbaijan, and has been expanding in the United States and is eager to expand in Europe.

Germany and Algeria to build cooperation in energy sector

November 16, 2006. Germany and Algeria both countries are to increase bilateral cooperation in the energy sector and particularly in the field of natural gas production and supply, it was agreed, with German utility Eon signing a declaration of intent with Algerian state energy company Sonatrach on long-term provision of liquid natural gas (LNG). The "first important steps" between the Germany energy giant and Sonatrach, which currently supplies 26 billion cubic metres of gas annually with a target of 85 billion cubic metres per year by 2020. Germany currently sources its entire supply of natural gas via pipeline connections and is seeking to secure more supplies of LNG. German firms are meanwhile hoping to secure contracts under planned Algerian infrastructure projects estimated to be worth around 80 billion dollars until 2009. Algeria is a major energy supplier to Europe and is also the world's 11th largest oil producer and fourth largest natural gas producer. The revenue from those energy sales - estimated at more than 50 billion dollars for 2006 - has allowed Algeria to settle its debt with a number of creditors. Germany is the country's fourth- largest creditor.

OPEC needs $50 bn for sustainable energy supply

November 15, 2006. OPEC president Edmund Daukoru says 50 billion dollars investment is required by the turn of the decade in OPEC countries if the world energy demand is to be met. The investment will increase to 240 billion dollars by 2020.

BP and Gazprom form Russian natural gas venture

November 15, 2006. The Russian unit of BP agreed to form a joint venture with Gazprom, the world's biggest natural gas producer, as it sought better government relations amid a crackdown on foreign energy companies. TNK-BP and the Gazprom petrochemical unit Sibur Holding signed an agreement to refine so-called associated gas, which is extracted along with crude oil. The Russian state-controlled company that opposes TNK-BP's single- handed development of the $18 billion Kovykta gas field in eastern Siberia.

Gazprom will contribute two refineries with a combined capacity to process 12 billion cubic meters, or 424 billion cubic feet, a year. TNK-BP will provide the natural gas. The agreement will guarantee deliveries at stable prices for future growth. The two companies may together invest as much as $500 million in the project over the next five years. Russia is using noncompliance with license agreements and environmental legislation to raise pressure on projects led by BP, of Britain; Royal Dutch Shell, based in The Hague; and Total, of France, as the Kremlin seeks to turn state-run companies like Gazprom and Rosneft into global champions. TNK-BP is seeking an agreement with Gazprom to sell gas from Kovykta. Gazprom opposes TNK-BP's plan to break its export monopoly by shipping the fuel directly to China or South Korea. Threats to revoke the Kovykta license on environmental grounds are reminiscent of government warnings to Shell's Sakhalin-2 project, in which Gazprom is also seeking a stake.

Suncor to boost capital spending to C$5.3 bn

November 14, 2006. Suncor Energy Inc. it will boost capital spending next year by more than half, budgeting C$5.3 billion ($4.7 billion) as it moves to double output from its Canadian oil sands operations by 2012. Suncor, which runs Canada's second-largest oil sands project is ramping up spending from C$3.5 billion this year, with C$4.4 billion of its 2007 budget going to expand production from its northern Alberta operations. The company plans to boost output from its oil sands project to 500,000 barrels a day within six years, up from current production of about 260,000 barrels daily.

The C$2.5 billion of its 2007 investment would go to projects supporting that long-term production goal, on top of C$1 billion to boost output to 350,000 barrels per day in 2008 and C$900 million to sustain existing operations, and relocate mining and extraction facilities. Other plans for 2007 include spending some C$350 million to maintain Suncor's natural gas business and expand output by 3 percent to 5 percent a year. Suncor will spend C$300 million to modify its refinery in Sarnia, Ontario, to allow it to process up to 40,000 barrels a day of oilsands sour crude blends. It also plans to invest in renewable energy, including windpower and biofuels.

Venezuela joint oil project with Brazil to cost US$9 bn

November 14, 2006. Venezuela's state oil company said it could cost about US$9 billion (€7 billion) to develop newly established heavy crude deposits in its Orinoco River region. Petroleos de Venezuela SA, and Brazil's Petrobras have been working to quantify tar-like crude deposits in the Orinoco, and Venezuela that the Carabobo I block has successfully been certified as holding 45.5 billion barrels of oil. The results have been audited by U.S.-based oil consultancy Ryder Scott Company. PDVSA believes about 7.6 billion barrels of that can be extracted profitably and refined into lighter, more marketable crudes as it is doing at four other heavy crude upgrading projects in the Orinoco. PDVSA and Petrobras have yet to agree on a plan to develop the Carabobo I block, but the Venezuelan company estimates that it would cost about US$9 billion (€7.02 billion) to build an upgrading plant in the block and a conventional refinery in northern Brazil. Japan tops growth forecastsVenezuela has also invited state oil firms from countries such as China, Iran, India, Argentina and Belarus to help certify other blocks in the Orinoco. Petrobras was the first to announce results.



Ghana to spend $470 mn on power

November 17, 2006. Ghana would pump $470 million (R3.4 billion) into power generation over the next three years after widespread power cuts slowed output at mining firms in the country. Two new power plants will be operational by August 2007, with a 300 MW thermal plant to be installed in 2009, while another 80MW plant will be operational by April 2007.

TransCanada to build gas-fired Ontario power plant

November 16, 2006. TransCanada Corp. that it has been awarded a 20-year contract by the Ontario Power Authority to build, own and operate a 683 MW, natural gas-fired power plant near Halton Hills, Ontario. TransCanada, Canada's biggest pipeline firm, will invest about C$670 million ($588 million) in the Halton Hills Generating Station, which is expected to be in service in the second quarter of 2010. The station, which will create up to 300 construction jobs and use low-emissions technology, will provide power for the western Greater Toronto area.

AES Corp to invest $1.4 bn in Vietnam power plant

November 16, 2006. AES Transpower, a unit of AES Corp of the United States, has signed a contract to invest $1.4 billion in a coal-fired power plant in northern Vietnam. The 1,000 MW plant, to be constructed under build-operate-transfer (BOT) terms, would be located in Mong Duong, Quang Ninh province, home to Vietnam's largest coal mine. The duration of the BOT contract, signed between AES Transpower and state-run dominant coal producer Vinacomin, was not immediately known. Power demand, triggered by fast economic expansion, is forecast to grow up to 17 percent per year, driving the government to plan 60 additional plants by 2010.

AES bids to build coal, biomass plant in New York

November 15, 2006. Global power company AES Corp. submitted two bids to construct a coal and biomass power plant in upstate New York. In response to a request by the New York Power Authority, AES submitted a proposal to build a 500 MW generation plant at its Jennison site in Bainbridge, New York, or a 700 MW facility at its Somerset plant in Barker, New York.

Each proposed facility would meet criteria set by the Governor's Advanced Clean Coal Power Plant Initiative. The plants would include advanced boiler designs and the latest emission control equipment. The plants would also be designed so that carbon dioxide controls could be added when the technology becomes available. Such technology could enable the plants to capture 90 percent of carbon dioxide emissions, according to AES. AES has interests in 122 generation facilities in 26 countries in the Americas, Europe, Asia, Africa and the Caribbean.

Transmission / Distribution / Trade

Meralco, Napocor sign power-supply contract

November 18, 2006. MANILA Electric Co. (Meralco) and state-owned National Power Corp. (Napocor) have signed a four-year power supply agreement, breaking an impasse that has stymied government efforts to sell its power generation assets. The two firms signed the transition supply contract for about 6,600 gigawatt-hours a year. The contract will provide a total of 33,188 gigawatt-hours of electricity from 2007 to 2011 representing 26 percent of the projected total energy requirements of Meralco, which is the country’s biggest electricity distributor. Napocor and Meralco last signed a supply contract in November 1994.

NRG reaches 260 MW California supply deal

November 16, 2006. NRG Energy, Inc. reached a 10-year power purchase deal with Southern California Edison Co. to provide 260 MW of new generating capacity, in what it said was a critical reliability area. NRG, which owns and operates power-generating facilities, said the new gas-fueled capacity is expected to be online at NRG's Long Beach Generating Station by Aug. 1, 2007, in time to support the expected summer peak.

ABB wins $200 mn power contract in Canada

November 15, 2006. ABB, the leading power and automation technology group has received a $200 million CAD order from Hydro-Québec to strengthen the electrical transmission grid between Quebec and Ontario. ABB will deliver a high-voltage direct current (HVDC) converter station that will add 1,250 MW of transmission capacity between Quebec and Ontario by Spring 2009. In addition to improving grid reliability in both provinces, Ontario will benefit by having substantially more access to emission-free hydroelectric power from Quebec.

Hydro-Québec is one of the largest producers of hydroelectric power in the world, and operates the largest power transmission system in North America. The new converter station in southern Quebec will create a new interconnection between the 315 kilovolt (kV) grid in Quebec and the 230 kV grid in Ontario. ABB's scope of supply includes design and manufacture of equipment, installation, commissioning and civil works, using the latest developments in power semiconductor valves and advanced control systems.

Policy / Performance

Korea, Vietnam sign agreements on atomic energy development

November 20, 2006. South Korea and Vietnam signed accords on the improvement of the latter's atomic energy technology and the construction of a Korean industrial facility there. In two memorandums of understanding (MOUs), South Korea said it would help Vietnam develop its own atomic energy technology. South Korea hopes to take part in the construction of atomic power plants in Vietnam. In a separate deal, the two countries signed an MOU on the construction of a Korean industrial complex north of Hanoi.

Peabody Energy eyes Mongolia coal investment

November 16, 2006. Peabody Energy Corp., the world's largest coal miner, has enlisted Washington's support as competition heats up for the right to develop a six billion tonne coal deposit in Mongolia's Gobi desert. The company was interested in investing in the Tavan Tolgoi coal deposit, which lies just north of Mongolia's border with China.

Chinese coal prices have doubled over the last three years as its economy has grown by 10 percent annually. That has fed a wave of interest in Mongolia's untapped deposits from miners in China, Russia, Canada and elsewhere. Small scale mining at Tavan Tolgoi is under way by the local Mongolian companies which hold the license to the deposit. BHP Billiton, the world's largest miner, held the rights to Tavan Tolgoi between 1998 and 1999. It relinquished them after studies showed Chinese coal prices at the time would not justify initial development costs totalling over $1.5 billion.

Renewable Energy Trends


Jatropha plantation: `Rlys must lower extent of revenue-sharing'

November 21, 2006. Railways may ease revenue-sharing norms for undertaking jatropha plantation on a public private partnership (PPP) basis in a big way. The extent of revenue-sharing should be lowered considerably from the present level of 50 per cent to make the private sector interested in jatropha plantation projects on Railway-owned land, Grow Diesel Ventures.

Jatropha is an environment-friendly oilseed plant, which is used to produce bio-diesel. The Railways has successfully experimented running locomotives using jatropha-oil blended diesel. The study has suggested that the extent of sharing be lowered to "as less as a 20 per cent range. According to the present norms, the party undertaking commercial jatropha plantation on land owned by Railways is required to part with 50 per cent of its revenues to the Indian Railways. The policy envisages Railways providing land on lease for 15 years, while the private player invests in jatropha saplings and maintains the plantation. However, with these conditions, the private sector was not forthcoming to undertake jatropha plantation.

The Railways has a target to plant 72 lakh jatropha saplings on its land in the current fiscal as against 61 lakh saplings in 2005-06. The Southern and Northern Railways have already run trains on bio-diesel blended fuel. The Railways plans to use the arid and semi-arid surplus land belonging to the organisation outside the station areas for planting jatropha trees for generating bio-diesel for captive consumption. The Railways had initiated jatropha plantation at four sites based on joint venture— three under the North Eastern Railways and one under Southern Railway. Apart from commercial plantation through joint ventures, the Railways also plants jatropha through departmental plantations. In departmental plantations, the Railways usually pays contractors to plant jatropha saplings and maintain them for two-three years.

AP demands national policy on bio fuels

November 19, 2006. Andhra Pradesh has asked the Union Government to come out with a national policy on bio fuels. It also wants the Government to announce tax sops in order to encourage bio diesel plantations. In this regard, the State would ask the Centre to increase the minimum support price for maize. It would also suggest that the ethanol blend norm should be increased to 10 per cent from the 5 per cent. The State Government had included bio diesel plantation in the National Rural Employment Guarantee Scheme.

Suzlon to invest $191.9 mn on expansion

November 17, 2006. Leading wind power company, Suzlon Ltd will invest Rs 860.73 crore (150 mn euros) to increase the capacity of its Belgian wind gear box facility from 3200 MW to 5800 MW. The company is planning to raise the amount through internal accruals and local bank finance and the expansion would be complete by December 2007. The company which draws 60 per cent of its revenue from its domestic market aims to draw a similar percentage of its revenue from the global market in the next fiscal. It also hopes to maintain its operating margin at 22 per cent in the remaining quarter of the current fiscal.

The company which is looking at expanding its operations in China, is planning to induct three partners in three Chinese provinces, where it will undertake development supply, project construction and services of the entire wind power generation system. Suzlon after suitably strengthening its presence in many European countries will now look at new markets in Greece, UK, Taiwan and Philippines.

Green energy policy in the offing

November 16, 2006. To overcome its handicap of limited resources for power generation in the state, Punjab government would come out with a comprehensive policy for generation of power from renewable sources of energy. The much-awaited policy aims to lure private players to set up power projects based on renewable resources of energy and achieve a target of 1000 MW by 2020. Among other provisions, the policy has proposed to allow differential slab depending on the resources used for power generation, making production of renewable energy more lucrative for private players. Unlike the earlier provision that allowed a single slab of Rs 3.49 per unit, the new policy has proposed rates varying from Rs 3.49 to Rs 7, with provisions for increasing it by 3% annually for the next five years.

The policy is being seen as a means to achieve the target set under the 2001 policy. It offers exemption from charges levied for change of land use to slash project costs. In a move that would provide the much-needed impetus to state government's efforts, Japan Bank for International Cooperation has offered a loan of Rs 700 crore for renewable energy projects in Punjab. It would fund 51 MW small and micro-hydel projects and 100 MW biomass based projects.

IndianOil forms group for implementing biofuel projects

November 15, 2006. Indian Oil Corporation Ltd has constituted an internal group on bio-fuels to look at commercialisation of various projects on bio-diesel. The group is currently in talks with five States to implement the project on a large scale. The five States where the project is underway are Chhattisgarh, Andhra Pradesh, Rajasthan, Uttaranchal, and Tamil Nadu. Subsequently, the project is likely to be extended to Orissa and Maharashtra.

IndianOil has entered into projects for promoting five per cent and 10 per cent bio-diesel blend with Indian Railways, Escorts Tractors, Tata Motors, and Haryana Roadways. Areas identified by IndianOil for giving the programme further boost includes need for development of high yielding variety of Jatropha, systematic study on plantation and seed yield, exploring the cost effectiveness of production technologies, development of antioxidants or additives to improve shelf life of bio-diesel blend, study of compatibility of bio-diesel in different engines, and emission analysis of bio-diesel blends in different vehicles.

The Petroleum Ministry had announced a bio-diesel purchase policy, which came into effect from January 1, 2006. The policy prescribed for the State-owned oil marketing companies to purchase the product of prescribed BIS specification from registered authorised suppliers through 20 purchase centres at a uniform delivered price of Rs 25 per litre (inclusive of all taxes). The purchase price was to be reviewed every six months considering the market conditions. Accordingly, the price was revised to Rs 26.50 per litre till December 2006. However, so far, no bio diesel has been offered for purchase under the policy, according to sources in the Ministry.

Vegetable oil produced from different sources all over the world such as rapeseed oil (Europe), palm oil (Malaysia), sunflower oil (Italy and Southern France), soyabean oil (US and Brazil), linseed and olive oil (Spain), cottonseed oil (Greece), and jatropha and karanjia oil (India) has been used as a fuel in diesel engines. IndianOil's research and development centre has successfully optimised the process for production of bio-diesel. The process has been scaled-up in a pilot plant at R&D centre and number of 60 kg batches of bio-diesel have been produced utilising various vegetable oils. The technology for production of bio-diesel through trans-esterification of non-edible oil with alcohol has been licensed for commercial production of bio-diesel.

National body for bio-diesel producers

November 15, 2006. With the main objective of encouraging bio-fuels, especially bio-diesel, and assuring sustainable agricultural growth, rural development, energy security and equal opportunity for the masses with overall environmental protection, a Biodiesel Association of India (BDAI) has been formed. A comprehensive bio-fuels policy that judiciously balances the interests of primary producers, processors and consumers can help boost out bio-energy output, meet rising energy demand, help raise rural incomes and sustain the ecology, through green fuels, BDAI has asserted. The association has proposed to hold national convention on bio-fuels including bio-diesel based on jatropha and other non-edible oils early next year. Several corporates including those in already in the energy sector as well as aspiring new entrepreneurs and service providers are already members of the association.

Carbon credits fuel small power plants

November 15, 2006. The promoter of a tiny power plant with poultry waste as fuel, which is due to commence commercial operations in February next year, will be able to achieve 16 per cent return on his investment even though the bulk purchase tariff determined by APTransco is not expected to yield more than 12 per cent.  The value addition in terms of return comes to him in the form of carbon credits as the plant has become eligible to generate carbon credits besides power.  This is just one example of the growing awareness among new entrepreneurs in Andhra about the clean development mechanism (CDM). They can thus register themselves with the United Nation’s body on carbon credits, which are traded globally. Andhra has a great potential for carbon credits provided the companies in cement, power, distilleries and other sectors opt for CDM.  While 14 projects in Andhra have already got registered under the United Nation’s Framework Convention on Climate Change (UNFCCC), the state has a potential for generating 5.14 lakh carbon credits which can bring in a revenue of over Rs 70 crore. A 3.5-MW plant being developed by SLT Power is shown as an example where carbon credits help a non-conventional energy project sustain in the face of an adverse low power tariff.  The plant, which consumes about 100 tonnes of poultry waste along with 25 percent biomass, is not a very viable proposition even as the APTransco has agreed to enhance the bulk power tariff to Rs 2.99 per unit after a month-long hard bargaining by the promoters' lobby in the non conventional sector.  Similarly, PSR Green Power Projects Private Limited is setting up a 7.5-MW project in the neighbouring Mahaboobnagar with CDM, which helps cut emissions.


£24 mn biomass plant to be build in UK

November 16, 2006. The facility, planned by Balcas, a Northern Irish company, will include a combined heat and power (CHP) plant generating green energy for the national grid. It will be one of the largest biomass plants in the UK and will reduce carbon emissions by 170,000 tonnes a year, while helping the Scottish Executive's target to have 18 per cent of energy from renewable sources by 2010. The plant will also make high-energy wood fuel pellets which can be used to generate power. The project, which has received a £5.5 million grant from Highlands and Islands Enterprise (HIE), was announced as the Executive opened its £7.5 million biomass support scheme. Wood used in the plant will include local lodgepole pine, planted in the 1960s, 70s and 80s, which will be burned in the plant with steam condensed to drive an electrical generator. This will feed 5MW of power to the grid - enough to supply 8,000 homes - and 3MW to make wood fuel pellets, which could supply at least 25,000 homes.


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