Towards an Energy Sector Competition Policy in India: Insights from International Practices Dr. Samir R. Pradhan

Introduction

nergy forms the core of economic activities and is therefore considered to be key factor for a country’s competitiveness and economic development. Since provision of energy supplies is critical to sustain the development path, it is strategic in nature, more so when supplies are sourced through imports. Therefore energy security is intertwined with national security. This combined with the structural externalities such as public good nature; existence of monopolies and other socio-economic considerations, makes government intervention in energy sector a necessity.

However, as witnessed over the past decades, the energy sector has undergone substantial changes and transformation in the ambit of liberalisation and privatization in almost all parts of the world, though albeit slowly in developing and emerging economies. The main features of changes are competition accompanied by liberalisation of sources of supply as well as price deregulation, restructuring and privatization. However, this process is asymmetrical in nature, i.e. while the industrialized countries are much ahead with reforms and liberalisation; the developing countries (like India) are at a very critical stage of reforms, which is generally referred to the stage of ‘identity crisis’. Moreover, developing countries like India often fail to expedite the process of liberalisation and thereby cannot address the sectoral bottlenecks in a proper manner. At this stage of reforms and liberalisation, the necessity of competition policy becomes urgent.

On the one hand, strategic importance of the sector, questions of sovereignty and control over natural resources, particularly as this impacts the security of supply, as well as “natural” monopolistic structure of network industries have impeded implementation of market – mechanisms in the energy sector as well as free play of market forces within the country and also regional or international trade. The sector has been protected, suffered from state interventions and price distortions that gave to the consumers misleading signals. On the other hand, energy, which is the sector, that has an international character either by virtue of participants or by the location of the resources being exploited. International energy co-operation is a necessity, since it is the only way to tackle environmental problems, ensure security of supplies, stability and growth of markets. No country has been able to achieve, or can logically expect to achieve, energy self- sufficiency in isolation from world markets. Therefore, there is a necessity for energy trade. In order to enable trade, the potentially competitive part sector has to be liberalized for which transparent, non-discriminatory and enforceable trade rules are required. If competition is to be introduced, the “monopolistic” part has to be regulated.

The main objective of the paper is to reflect upon the urgent necessity of an energy sector competition policy in India. The main focus of the paper will be on some existing international best experiences and the insights for future course of action in India.

Competition Policy

Competition policy is an economics term referring to the body of laws of a state which govern the extent, and ability, to which bodies can economically compete. They hence attempt to restrict practices which remove competition from the market such as monopoly and cartel. Most nations have their own competition laws, and there is a general agreement on what is and what is not acceptable behaviour. The degree to which countries enforce their competition policy does vary substantially, with the United States and lesser extent the EU are generally regarded as having the most strict competition laws and enforcement.

In the broadest sense, competition policy determines the institutional mix of competition and cooperation that gives rise to the market system. While competition is familiar to most, few reflect deeply on cooperation. Almost all market competitors are firms- business organizations (social groupings), that are, for the most part, internally cooperative, not competitive. Firms are the principal suppliers and buyers of most products and services, while consumers generally buy only final goods which are assembled from materials and components bought and sold many time by firms, through a lone series of exchanges and intra-firm transactions. Typical market transactions involve market competition by firms. Many of these firms, include subtypes such as labour unions, can legally own and exchange property and differentiate and isolate their legal liability as a group from the liability of their members.

Thus the market system is socially populated, socially rooted, socially conditioned, and socially constructed. It is far from the chaotically competitive law of the jungle that is sometimes confused with. This competitive-cooperative market system is governed by formal social regulations called ‘competition policy’, which make the market to work better. It regulated the intensity of competition and the scope of cooperation and defines the legal boundaries of both. Examples of impermissible competition and impermissible cooperation, respectively, are predation (equivalent to the premeditated murder of market competitor) and coercive collusion (one firm being forced to join a group of others).

Competition and Regulation

Competition and regulation are like conjoined twins. Both address the concern to limit the exercise of market power and to facilitate the efficient allocation of resources. Many industries, particularly natural monopoly industries or those said to be “clothed in the public interest” such as water, energy, fixed-line local telecommunications, and transport, need to be regulated to ensure the benefits of economies of scale while protecting consumers from high prices or abuse of dominant positions. Regulation is understood to be appropriate, either as a substitute for competition, or as a short to medium term strategy until competition can be introduced to the market. However, in developed economies such as the US, difficulties over assessing what is a ‘fair’ rate-of-return within regulation have also raised concern that the process itself reflects a complex mixture of political and economic considerations, where the consumer interest may well be subsumed by politically organized groups that can more effectively negotiate a higher rate of return. Therefore framing a competition policy is a challenging task on the part of policy makers.

A competition regulator is a government agency, typically a statutory authority, which regulates competition laws, and may sometimes also regulate consumer protection laws. In addition to such agencies there is often another body responsible for formulating competition policy. In India, there is a body called Competition Commission of India as per The Competition Act of 2001.

 

Russia and the Master Plan

(By Vasily Osmakov, adviser, Economic Analysis and Planning Department, Ministry of Industry and Energy of the Russian Federation)

ussia’s easternmost region, Sakhalin, is perhaps one of the most attractive parts of the country for investment. It is richly endowed with natural resources such as timber, oil, natural gas, coal and fisheries. It also has great recreational potential. Its resources attract vast foreign investment (the region is second after Moscow in this respect), but 80% of the money goes mainly into projects to develop the Sakhalin shelf. Currently, the two biggest projects operating under production sharing agreements are Sakhalin-1 and Sakhalin-2 (run by Exxon Neftegaz Limited and Shell). Apart from the project operators, there are also developers from Japan and India, and Russian oil companies.

The Sakhalin region is one of the most developed oil and gas producing areas of the Far Eastern economic district and among the oldest in Russia. All in all, the region has 69 known hydrocarbon fields, including 11 that produce oil, 17 gas, 6 gas condensate, 14 gas and oil, 9 oil and gas, and 12 oil and gas condensate.

On the Sakhalin shelf, oil and gas resources will last for many years. Whereas its discovered reserves total 400 million tonnes of oil and condensate, and 1 trillion cubic metres of gas, its prospective and undiscovered potential resources are estimated at 1.9 billion tonnes of oil and 4.3 trillion cubic metres of gas. As for Sakhalin-3 and Sakhalin-5, their potential resources are far superior to those of Sakhalin-1 and Sakhalin-2. They may contain some 300 million tonnes of oil and 1 trillion cubic metres of gas.

In terms of recoverable oil reserves and in-place gas reserves, 80% of the onshore deposits are small and only 20% average-sized. By early 2000, their aggregate residual recoverable reserves amounted to about 36.5 million tonnes of oil, 56.6 billion cubic metres of gas and 1.6 million tonnes of gas condensate.

The undistributed state-owned stock of onshore subsoil parcels consists of 20 deposits. Out of the total residual recoverable reserves, the state accounts for 1 million tonnes of oil and about 5 billion cubic metres of gas. Regarding the recoverable oil reserves and in-place gas reserves on the shelf, 50% of the deposits are large, 25% average-sized, and 25% small. By early 2000 the aggregate recoverable reserves of the deposits averaged 153 million tonnes of oil, 598 billion cubic metres of gas, and 45 million tonnes of gas condensate. The undistributed state-owned stock of shelf subsoil parcels consists of 3 deposits. Of the total recoverable reserves, the state accounts for 20.061 billion cubic metres of gas.

It is therefore quite realistic to establish an oil and gas development complex capable of producing 50 million to 70 million tonnes of oil and 100 billion to 125 billion cubic metres of gas — enough to meet both local needs and the requirements of neighbouring countries.

However, despite the very large resources available, the island is poorly developed industrially. The emphasis on exports of unprocessed raw materials and the resultant low economic efficiency of the region are a source of worry for Russian authorities. On the federal level this problem is addressed in the Programme for the Development of Gas Resources in East Siberia and the Far East, now being drawn up jointly by the Ministry of Industry and Energy and Gazprom and which aims to create new industrial centres to use the region’s oil and gas reserves. On the regional level the issue of diversifying the economy was raised in real earnest two years ago. 

In 2004, the Sakhalin administration decided to work to achieve maximum local processing of all natural resources produced in the region to increase budget revenues. Regional executive bodies therefore prioritised the attraction of investment to Sakhalin to set up gas processing plants, the conversion of energy and housing facilities to gas, and the development of supporting economic activities and infrastructure. Apart from reaping financial benefits, Sakhalin also hopes to resolve some of its ecological issues.

In August of the same year, the administration asked for suggestions from all companies, including foreign ones, involved in the Sakhalin projects. The most interesting ideas came from Mitsui, Mitsubishi, Tokyo Gas, and Tokyo Electric, which, supported by the Japanese Bank for International Cooperation, proposed that a Master Plan be put together for the effective utilization of natural gas on Sakhalin. As in many other world regions where it is well-positioned, Japanese business got ahead of its rivals.

A series of discussions between the island’s administration, the Russian companies concerned, and the Japanese side yielded a draft of the Master Plan. And on June 5 of this year a delegation from Mitsui, Mitsubishi, Tokyo Gas, Tokyo Electric, and the Japanese Bank for International Cooperation presented this document to Oleg Bocharov, vice-governor and chairman of the economics committee of the Sakhalin region. At the same time, it was submitted to Russian ministries and government departments, and to Gazprom as development coordinator for the Far East’s oil and gas resources.

The Master Plan includes proposals in four areas: converting Sakhalin’s energy facilities from coal to gas, using gas to simultaneously generate heat and electricity, establishing an industry for converting gas to chemicals, and promoting the export of coal mined on the island.

Surprisingly enough, the island’s economy is coal-driven despite its enormous gas reserves. In addition to the low technological and economic effectiveness of the system (given how old coal-burning technologies are), a serious problem is ecology. In terms of exploitation, the conversion to gas will make fuel delivery, transportation and burning simpler. An environmental benefit will be the absence of soot discharges and oxides from sulphur and other pollutants. “The introduction of a co-generating gas-fueled system will increase production of electricity and reduce pollutant emissions,” say Japanese experts in their report.

The decision to convert the island’s electric power industry to gas is long overdue, and Japanese interest in coal supplies from the island and the success of the Sakhalin-1 and Sakhalin-2 projects have given the decisive impulse to the effort.

According to specialists, Sakhalin is well positioned to produce bituminous coal. Total conversion of Sakhalin’s principal heat and power plant and municipal boiler houses to gas will free its coal resources for the Japanese market. On the other hand, implementation of the project is hampered by Sakhalin’s poorly developed transport infrastructure.

The island is short of ports with sufficient cargo-handling capacity, and in winter time most ships simply cannot enter Sakhalin ports. At the same time coal is mainly loaded at offshore terminals (which makes the operation less effective and vulnerable to the weather). Access to the ports is restricted, and only Russian ships may enter. The limited number of ports with customs clearance facilities is another administrative barrier.  All this taken together and the lack of onshore infrastructure are holding back the development of the coal industry on the island. With a limit on the licenses issued to develop existing fields, little progress is being made in exploring for new coal deposits. But possible access to the Japanese market and steady rates of growth in the coal industry throughout Russia may stimulate this industry on the island.

The chief problem of the Russian coal sector is high transport costs and heavy competition with gas on the domestic market. Sakhalin, however, is an ideal place for export: it has promising markets nearby and low coal production and transportation costs. The Master Plan suggests the infrastructure problem should be solved by upgrading the existing coal-handling port in the west of Sakhalin.

Good prospects also exist in the gas-chemical sector. The natural gas produced on the island contains a large proportion of methanol, helping to set up appropriate production units. As part of the Master Plan, Japanese experts made preliminary feasibility studies for a new gas-chemical project based on C1 (methanol/ammonia). Perhaps the most striking element of the Master Plan so far is the exploration of the possible application of the Kyoto mechanism for emission quotas trading. The Japanese side is working on this idea but has not yet come up with any specific proposals.

Although the Master Plan consists of several bulky volumes with diagrammes, feasibility studies, and other information, it is far from complete. In principle, the projects proposed by the Japanese side are interesting. Russian authorities have long been aware of the importance of many of them. However, most of the documents are of a preliminary nature, have not been checked against Gazprom’s programme for the development of the Far East and Eastern Siberia and, most importantly, are not quite clear on the financial aspects of the plan.

According to representatives of the Japanese companies, tax breaks are the main instrument for encouraging industrial projects. But tax incentives and the awarding of contracts are a matter for the Japanese and Russian sides to discuss in the future. Gazprom, as the development coordinator of the region’s oil and gas resources and a driving force on the Russian energy market, is going to play the main role in this process.

 

 

World Refinery Capacity by Region, 2000-2004

 

(‘000 barrels per Calendar day)

 

 

 

NEWS BRIEF

OIL & GAS

DGH tightens PSC norms for ONGC discoveries

July 11, 2006. The spat between the Director General of Hydrocarbons (DGH) and Oil and Natural Gas Corporation (ONGC) continues unabated. DGH has introduced strict product sharing contract (PSC) norms and has asked ONGC to follow them in true letter and spirit. DGH’s move aims to have a realistic assessment of the discovery made in the exploration blocks and to translate discovery into terminal production in the shortest possible time frame and in an optimal manner. These norms deal with discovery, development & production of non associated natural gas and crude oil.

According to DGH, henceforth the government nominee would have to be present during initial testing. ONGC would have to fix a time frame for various activities from discovery to production to declaration of commerciality. The PSC norms envisage that the government through DGH would have access to information related to the type, nature of the discovery, and estimation of in-place reserves. Furthermore, government and DGH would also have access to relevant technical and economical data including sustainable production levels, estimated development and production expenditures.

OVL plans $1 bn bid for Gabon blocks

July 11, 2006. ONGC Videsh is now eyeing an oil property in the sub-Saharan land of Gabon. OVL is in discussions with its investment bankers and is expected to put in a bid by the end of this month. The oil property comprising around three producing blocks in Gabon is held by a listed Canadian oil firm. Negotiations are currently on with several key players, including oil companies from China. OVL has appointed J P Morgan as the investment banker and the documents are being given the final touch. The bid size could be well in the region of $1bn given that the properties are producing oil blocks. Major exploration players in Gabon include Shell, Total, Vaalco and Marathon, among others. OVL, which has expanded its portfolio significantly in the last year, has eight overseas assets and is seeking more opportunities across the world. With a long-term target of acquiring 60 MTPA (million tonnes per annum) of oil and gas equity overseas by ’25, OVL is currently working towards a goal of 20 MTPA by ’10.

Gabon had proven oil reserves of 2.5 bn barrels as of January ’05. Gabon is sub-Saharan Africa’s fifth largest producer of crude oil behind Nigeria, Angola, Sudan and Equatorial Guinea at approximately 233,000 barrels per day. Contrasted with Gabon’s 1997 peak of 371,000 barrels/day, 2005 oil production has declined 37%. Gabon’s forecasted oil consumption in 2005 is 10,700 barrels per day, with net oil exports of approximately 222,300 barrels. Gabon is also the fifth largest exporter of crude oil behind the four countries listed above, with over half of crude oil exports (126,000 barrels/day) going to the United States. The remaining exports go to Western Europe and Asia.

ONGC expects marginal rise in onshore crude output

July 10, 2006. ONGC is expecting a marginal increase in on-shore crude oil production, from 8.1 million tonnes in 2005-06 to 8.33 million tonnes in 2006-07. On shore natural gas production is expected to remain same at 5.5 billion cubic metres.  As part of its bid to increase productivity of the Assam asset and improve recovery at the ageing Mehsana field, ONGC recently awarded a Rs 135-crore contract to Well Flow Drilling Services, US. Of the total amount, Rs 80 crore will be spent in Assam to drill 15 ultra-short drill-hole wells. The balance Rs 55 crore will be spent on the Improved Oil Recovery (IOR) project in Mehsana. In Tripura, where ONGC has taken up a 740 MW mega watt gas-based power project to utilise the idle gas reserves there, production will be stepped up by 2.8 million standard cubic metres per day (MMSCMD) in 2008-09. The company has already commissioned projects to increase capacity of the gas collection centres (GCC) at Baramura and Agartala Dome. A new GCC will be set up at Sonamura. Studies for setting up pipeline network connecting different fields have already been completed. And to drill new development wells at Tripura, the company has already ordered re-deployment of one rig from Assam. Preparation is underway to procure two more onshore rigs. While the company has already been allocated land for the power project, the acquisition of lands will be completed this month. ONGC recently sought the co-operation of the Nagaland Government to resume oil exploration in the State.

ONGC's field in Sudan starts production

July 5, 2006. State-owned Oil and Natural Gas Corp's (ONGC) second oilfield in Sudan has began crude oil production with output expected to reach 50,000 barrels per day by year end. Sudan's Block 5A, where ONGC's overseas arm ONGC Videsh Ltd has 24.125 per cent stake, began oil production on June. Currently, Thar Jath field in Block 5A is producing 38,000 barrels per day (bdp) but hope to stabilize production to 40,000 bpd very soon. Mala field in the same block would come to production in 2007 with an output of 10,000 bpd, which would rise to 20,000 bpd by 2008.

GSPC drills second well in Ahmedabad

July 5, 2006. Gujarat State Petroleum Corporation Ltd (GSPC) started drilling a second well in the vicinity of the first well (SE-1) near Sanand town to ascertain the exact potential of hydrocarbons in this block, as the blue-chip company's geologists predicted a "realistic" stock of 10 billion cubic feet (BCF). The average reserves (P-50) of oil and gas in the Sanand-Bopal block of Ahmedabad are estimated to be in the range of 20 million barrels (oil-in-place) and 21 bcf, respectively. The maximum oil reserve could be 40.5 million barrels and the maximum gas 21.9 bcf. Of this, only 20 per cent of the reserves are "recoverable"— that is, 15,000 standard cubic metres of gas and 60 barrels of oil per day.

LPG storage project by ’07

July 11, 2006. The country’s first liquefied petroleum gas underground storage cavern project, being set up at Visakhapatnam at an investment of Rs 300 crore, would be ready by June 2007. State-owned Hindustan Petroleum Corporation Limited (HPCL) and France-based Total Fina had jointly formed a company called South Asia LPG Company Private Limited to set up the LPG storage facility. The project, which was scheduled to be completed by June 2006, has been delayed by about a year due to technical snags and the country’s lack of experience in setting up such projects. The company is providing a 60,000-tonne LPG storage facility at below 200 metres from the ground level. This facility would increase HPCL’s LPG handling facility through the Vizag port by about 1.2 million tonnes a year.  Apart from unloading LPG from ships, the South Asia LPG Company is providing LPG loading facility to ships with high pressure from underground reserves. Gas Authority of India Limited (GAIL) has already laid an LPG pipeline from Visakhapatnam to Hyderabad to transport the LPG reserves from this facility.

Reliance, Essar may set up CNG plant in HP

July 11, 2006. In order to control pollution in Shimla, the Himachal Pradesh transport department is planning to hire the services of Reliance and Essar for setting up a compressed natural gas (CNG) plant. These two companies, Reliance and Essar, will submit a feasibility report to the state transport department and either of the two private companies could set up a CNG plant here. The state transport department had, last year, contacted Indian Oil for setting up a CNG plant but Indian Oil said a CNG plant in Shimla would not be profitable because the town had relatively low traffic. Therefore, the state transport wing has now decided to hire private companies to prepare a feasibility report.

Saudi Aramco backs out of Paradip refinery

July 10, 2006. The world’s largest oil producing company Saudi Aramco has decided to back out of the 15 million tonnes a year grassroots refinery and petrochemical complex being set up at Paradip, Orissa by India’s largest oil refiner Indian Oil Corporation (IOC). This would mean that IOC would now go solo in building the Rs 25,000 crore refinery which would include facilities for production of front-end petrochemicals, like paraxylene, polypropylene and styrene. IOC has now offered Kuwait Petroleum Corporation (KPC) a stake in the Paradip refinery. IOC had signed an MoU with KPC to jointly consider setting up exploration and refining ventures in India, Kuwait, and other countries in March this year.

Lanka threatens to take over IOC arm`s outlets

July 10, 2006. The Sri Lankan government has warned the local arm of Indian Oil Corporation that it will take over all its fuel outlets if the company does not resume sales within 30 days. The petrol stations of the Lanka-Indian Oil Company (LIOC) had gone dry after it stopped, imports following a dispute with the government over $71 million in payments to cover subsidies.  Sri Lanka had decided to take over all fuel retail outlets unless sales were restored within the 30-day deadline.

Sasol may bring in $6 bn investment to India

July 9, 2006. South African company Sasol, pioneers in converting coal and gas to diesel, may foray into India with a $6 billion investment for manufacturing the alternative fuel in the country. The Investment Commission led by Ratan Tata has identified South Africa-based Sasol as a potential investor and this was indicated by Finance Minister P Chidambaram. The technology has already been proven in South Africa and is now being deployed in China. This could turnout to be a boon to the country which imports 70 per cent of its crude oil requirement. Also India is endowed with one of the largest coal reserves to the tune of 253 billion tonnes. Sasol wants to invest in India initially perhaps with $1 billion investment. Sasol has developed technology for the conversion of low grade coal into value-added synfuels and chemicals.

ONGC decides to shelve refinery plans in Rajasthan

July 8, 2006. Oil and Natural Gas Corporation (ONGC) has decided to put on hold its plans to set up a 7.5 million tonnes per annum wellhead refinery in Barmer region and is trying to work out a sales and long-term crude supply agreement between Mangalore Refinery Petrochemicals Ltd (MRPL) and Cairn Energy for Rajasthan crude oil. ONGC, on behalf of its subsidiary MRPL, has sought certain concessions including a discount of $4-5 a barrel on Cairn's Rajasthan crude oil. The oil major has argued that without concessions it was uneconomical to transport oil from Rajasthan to MRPL's refinery.

Indications are that Cairn has sought an international price for the 1.5-lakh barrels per day expected from end of 2008. ONGC, on the other hand, is stating that the Rs 2,000 crore, which the company would be putting in to build a pipeline for crude transportation, needs to be compensated through discounts. These issues need to be sorted out before the company takes forward its plans to put up a refinery. Cairn's crude from Rajasthan, is heavy crude with high wax content and requires specialised pipelines to transport it from Barmer to Mundra port in Gujarat for further shipment to MRPL's refinery for processing. Putting up a refinery in that region might not be viable considering the huge investments involved. Besides, the availability of Rajasthan crude oil will be for a limited period, and import of crude oil for an inland refinery would prove to be cost prohibitive as it would not be competitive compared to coastal refineries. ONGC has a 30 per cent stake in an oil and gas block in Rajasthan, where the British energy major Cairn Energy holds the remaining stake and operatorship.

GE to supply equipment to RIL refinery

July 7, 2006. GE's oil and gas business will supply compression technology to Reliance Petroleum Ltd (RPL) for the 29 million tonne greenfield petroleum refinery and polypropylene plant in Jamnagar.  GE will supply three reciprocating compressors, two screw compressors and spare parts for the project.  The reciprocating compressors will be manufactured at GE's oil and gas facilities in Florence, Italy, while the screw compressors will be supplied from GE's plant in Oshkosh, Wisconsin.

The equipment will be shipped during the first and second quarters of 2008. The Jamnagar Export Refinery is located in a special economic zone adjacent to an existing refinery owned by Reliance Industries Ltd (RIL). The Rs 27,000 crore refinery project is expected to help transform India from a net importer to a net exporter of petroleum products, with target export markets including Europe, the United States and the far East. After the new 5,80,000 barrel-a-day refinery project is completed by December 2008, the total capacity for the RIL-RPL Jamnagar site will be more than 1.2 million barrels per day making the complex biggest in the world. The configuration of the proposed refinery is expected to provide RPL with the ability to optimise crude oil input, product slate and quality.

IBP gets nod for merger with IOC

July 5, 2006. Oil marketing firm IBP Company Ltd has got shareholders' approval for its merger with parent company Indian Oil Corporation (IOC). Earlier, the company said that the merger of IBP with its parent IOC would be completed by December this year and would be effective from April 1, 2004. Post-merger, the government holding in IOC would come down from 82.03 per cent to 80.35 per cent, while the capital base of the company would rise from Rs 1,168 crore to Rs 1,192 crore. IBP would continue to function as a division of Indian Oil Corporation.

LNG likely from Algeria for Dabhol power plant

July 10, 2006. $3 billion dollar Dabhol power plant, which is currently generating expensive electricity using naphtha, is likely to get liquefied natural gas (LNG) from Algeria from mid-2009. GAIL India, the 50 per cent owner of the Dabhol power plant, is in talks with an Algerian firm for sourcing long-term LNG to fire the 2,184 MW power plant.

The Algerian company has indicated the possibility of supplying of 1.2 million tonnes per annum LNG for 25 years starting from mid-2009.  An additional 1.2 million tonne LNG could also be made available. GAIL, which was mandated by the central government to meet the LNG requirement of the plant, is currently negotiating supply terms and pricing and a term sheet was expected to be signed soon. Ratnagiri Gas and Power, a joint venture of GAIL and National Thermal Power Corp (NTPC), restarted Block-II on May 1, 2006 using stored naphtha. Block-II can generate 740 MW (17 million units of electricity per day) but was only generating about 5 million units per day using naphtha as feedstock. It is yet to begun full commercial sale due to feedstock constraints and supplies power to Maharashtra State Electricty Board (MSEB) at Rs 4.25 per unit.

Shell imports largest LNG cargo from Oman

July 7, 2006. Shell India has imported its largest ever LNG cargo, having a capacity of 1,45,000 cubic metres, from Oman. The LNG cargo, which landed at Hazira on July 4, is the third cargo that Shell imported from Oman and its fourth this year. Shell India also imported a cargo from Abu Dhabi to cater to the increasing demand for gas in the domestic market. Shell imported LNG at $8 per mmBtu (million metric British thermal unit), ex-ship Oman. When delivered, the latest cargo will cost $9.07 per mmBtu to the end consumer.  Once the Hazira terminal is connected with national gas grid of GAIL through the pipeline connecting Dahej-Uran pipeline of GAIL, Shell would be in a position to import and supply more LNG to India. 

ONGC, GAIL sign gas supply agreement

July 7, 2006. Oil and Natural Gas Corporation Ltd (ONGC) and GAIL (India) Ltd have signed a gas supply agreement (GSA) for the gas supplies from ONGC oil and gas fields. Prior to the execution of this GSA, sale and purchase of gas between the two companies was pursuant to a memorandum of understanding executed in 1990 and extended further in 1999. The GSA signed has a tenure of 15 years and the price of gas will determined by the Government gas pricing order. The gas produced by ONGC from its fields in western offshore, K-G Basin (Andhra Pradesh), Cauvery Basin (Tamil Nadu), Tripura, Gujarat, and Assam will be sold to GAIL under this agreement. GAIL would then market this gas to downstream customers connected to its pipeline network, predominantly to power and fertiliser customers. In the current financial year to March 2007, ONGC will sell GAIL 50 million cubic meters of gas a day. Signing of the GSA between the companies further strengthens the relationship between these two Navratna companies on a long-term basis with due recognition of market forces and supply security, a statement issued by the two entities said.

MoPNG plans tax incentives to promote bio-diesel

July 11, 2006. The government is considering a host of tax incentives to promote the use of bio-diesel. The Petroleum ministry has approached the finance ministry with a proposal seeking waiver of excise duties on the product. The ministry’s proposal also includes exemption of VAT (sales tax) to make the green fuel commercially viable. The market price of bio-diesel ranges between Rs 35 per litre and Rs 52 per litre which is higher than the price of regular diesel. The petroleum ministry has sought tax waivers to bring down the retail price and make it affordable. The bio-diesel purchase policy enforced by the government in October ’05, the delivered price of bio-diesel at 20 identified locations in the country was to be Rs 25 per litre inclusive of taxes and duties. This target has not been achieved. Oil Marketing Companies have recorded insignificant bio-diesel produce because of low production of non-edible oil seeds like Jathropa and Karanja and due to the unavailability of bio-diesel at any of the identified locations. As a result of this, processors who are setting up production facilities of small, medium or large scale are seeking higher prices of the fuel. The government fears that exemption of taxes may not be the sole solution to meet the proposed price. Since the plantations of non edible seeds on a large scale have been taken up only very recently, more effort is required to increase the produce. Due to failure of the policy and inadequacy of bio-fuel production, the petroleum ministry has suggested that the Planning Commission and ministries of finance, rural development, non renewable energy sources, petroleum and natural gas, work collectively to achieve greater use of the eco-friendly fuel.

‘Ethanol-blended petrol sale subject to availability’: Govt.

July 10, 2006. Sale of ethanol-blended petrol will become mandatory for oil marketing companies only if there is sufficient availability of this alternative fuel at an acceptable price. The Government had earlier wanted to mandate OMCs to sell ethanol-blended petrol in all States - except those in the northeastern region from October 1 this year. The Government is in talks with ethanol manufacturers and a decision on this matter will be taken in the next 30 days when OMCs will contract for the commodity. Once availability is ensured at a price acceptable to both ethanol manufacturers and oil marketing companies, ethanol-blended petrol can be made mandatory. There is a three-stage process drawn up by the Government leading to a final 10 per cent ethanol-blended petrol. This starts with a 5 per cent blend in nine States, moves to a 5 per cent blend in all States and settles at a 10 per cent blend in all States.

At the first stage, the requirement would be 0.4 million kilolitres, at the second 0.6 million kilolitres and finally 1.1 million kilolitres. Unless the Government is satisfied that this is going to be available and gets an assurance on this from the manufacturers, ethanol-blended petrol cannot be made mandatory. Ethanol price shot above the price of gasoline in some markets of the world recently. Sugar mills (producers of ethanol) and oil marketing companies have their differences on pricing. OMCs have indicated that unless ethanol is significantly cheaper than petrol, they will not easily submit to mandatory blending.

Qatar pitching for investment in India

July 7, 2006. The Qatar Investment Authority (QIA), an investment arm of Qatar government are currently weighing various investment opportunities in Indian gas sector. The authority exploring an option to participate in the Ratnagiri Gas and Power company (RGPPL), which took over the assets of Dabhol project last year. RGGPL has yet to organise 2.1 million tonne LNG supply for the project. With the total capacity of 2,184 MW while the company would be in a position market about 4/5 million tonne per annum in Maharastra. Authority's participation would provide the much needed comforts to RGPPL as the entire restructuring of the Dabhol project was done while considering LNG as the prime fuel. The authority is looking into its involvement with the state-run NTPC Ltd in the gas-based Kayamkulam situated in Kerala. If NTPC's Kayamkulam project, whose capacity is expected to be increased to 2,300 MW from 350 MW, the authority can become one of the investors with NTPC. Petronet LNG has been discussing sourcing of additional LNG from RasGas, in consideration of which the company has offered the right of first refusal to Qatar for $100 million FCCB. PLL has already invited the interest of the authority for this investment. PLL is expanding its Dahej terminal from the existing 5.0 mmt to 12.5 mmt, and is also setting up a new terminal of 5 mmt in Kochi. PLL is therefore pursuing sourcing additional LNG of at least 7.5 mmt for Dahej and Kochi.

India, China may jointly bid for energy assets

July 7, 2006. India and China may soon discuss opportunities to submit joint bids for acquiring overseas oil and gas assets, particularly in Latin America, Central Asia and Africa. The objectives listed in the memorandum of understanding signed between the two countries for jointly securing global energy assets. India and China have to formulate a strategy for joint acquisition of overseas oil and gas assets. Following competition amongst the two Asian tigers, oil and gas properties are being valued much above their actual cost, a trend that is helping neither India or China. The two have to join hands for acquiring assets that are priced reasonably. China consumes 6.5 million barrels of oil every day, or 8 per cent of world consumption. It is forced to import more than 40 per cent and as a result, it has been moving global demand together with the US for the past few years. India consumes 2.5 million barrels of oil a day, of which almost 70 per cent is imported.

‘Oils PSUs must be encouraged to develop blocks abroad’

July 6, 2006. The Indian national committee of the World Mining Congress has suggested that the pending Bill (2000) in Parliament, which recommends amendment of Coal Mines Nationalisation Act (2000), be passed early to enable participation of private sector in exploration and mining of coal on the lines of oil/gas sector. This apart, the committee feels that oil PSUs should also be encouraged to develop coal blocks abroad in order to transform them as "energy company" as has been done by British Petroleum. Coal-bearing States should play an increasing role in coal mining either directly or as joint venture partner. The Union Ministry of Coal, on the other hand, should set up a Task Force to draw a blueprint for underground mining development with specific objective and formulate a policy framework for international bidding of coal blocks by coal PSUs or PSUs with joint venture with foreign partners.

The Government must decide to offer 40 to 50 large coal blocks to experienced foreign parties or Indian parties in joint venture with foreign companies to develop underground (UG) mines of 2 to 5 million tonnes production per annum. In return for the risks taken, the government should remove the bondage of captive allotment and give them right to market coal freely through 100 per cent e-auction.

As detailed exploration is time-consuming and costly, private sector participation may also be encouraged with government funding in addition to work by Central Mines Planning & Design Institute (CMPDI). It is thus suggested that captive operators willing to accept only regionally explored coal blocks and undertake detailed exploration themselves at their cost and risk under CMPDI, should be encouraged.

With the withdrawal of the administered pricing mechanism, Coal India is now a virtual monopoly. It was important to set up a Coal Regulatory Commission to protect the interest of coal consumers, to review the price structure and productivity. The quality of coal also needs to be monitored. The coal prices should be linked to international prices of coal and oil. Rail freight, which is an important constituent of cost of the delivered coal, must also to be regulated by a Railway Regulatory Commission to avoid distortion in rail freight due to passenger subsidy.

POWER

Tata Power to set up 2,744 MW power plants

July 10, 2006. Tata Power plans to set up three power plants with a total capacity of 2,744 MW in Chhattisgarh, Orissa and Jharkhand with an investment of around Rs 11,000 crore to meet the energy needs of Tata Steel's expansion plans. The company is in talks with Tata Steel and will enter into power purchase agreement with the latter for the sale of power from these units once Tata Steel firms up its plans. Tata Power proposes to set up a 744 MW project in Chhattisgarh while two 1,000 MW project each in Jharkhand and Orissa. In Orissa, Tata Steel plans to set up 6 mn tonne plant with an investment of Rs 15,400 crore, while in Chhattisgarh it will set up five million tonne by investing Rs 12,000 crore and in Jharkhand it will set up 12 million tonne by investing Rs 40,000 crore.

K.K. Birla group to invest in new power plants

July 7, 2006. As part of its total expansion plan across the board, the K.K. Birla Group of sugar companies is investing heavily in new power plants under clean development mechanism to generate a sizeable amount of carbon credit. Two out of the three sugar companies would be setting up four new bagasse co-generation units with a total capacity of 53 MW. All these plants would be ready either by the end of this year or next year. The group is investing approximately Rs 203 crore just for these four power plants and it would be generating around 2.80 lakh CERs (certified emission reduction) every year. Three out of the four units are already registered with the necessary authorities.

Sugar companies, Upper Ganges Sugar & Industries Ltd and The Oudh Sugar Mills Ltd would set up the power plants. For the third company - Govind Sugar Mills Ltd - the group is currently chalking out a plan for increasing its crushing capacity, which is now 7,500 tonnes crushed per day to 10,000 tonnes crushed per day. A 30MW power plant is also being considered.

Assam plans power plants to end shortage

July 7, 2006. The Assam government "has taken a determination" to free the state from power crisis within a decade. For that three thermal power projects are in the pipeline, which when commissioned, will substantially improve the power situation in Assam. National Thermal Power Corporation (NTPC) will have a 750 MW thermal power project in Bongaigaon, with two units producing 375 MW each.  Clearance to this project will be given by the end of this July and three years would be required for the completion for the project.  Out of total output of 750 MW, the state's share will be 500 MW. Apart from the NTPC project, the state will also have two other thermal power projects on public private partnership (PPP) at Borgulai, in Tinsukia district, and Badarpur, in Barak Valley, with 150 MW and 180 MW production capacity respectively.

CCEA approves 1,000 MW Tehri plant

July 6, 2006. The Cabinet Committee on Economic Affairs has approved the 1,000 MW Tehri Pumped Storage power plant in Uttaranchal to be built at an estimated cost of Rs 1,657.60 crore. The approved cost includes interest of Rs 81.64 crore during construction. The project is being executed by Tehri Hydro Development Corporation with a debt-equity ratio of 70:30. The power plant would help in reducing the shortage of electricity in the northern region and also improve the hydro-thermal mix in the country. THDC is a joint venture of the Government of India and Government of Uttar Pradesh. 

CESC to add 2750 MW

July 6, 2006. Encouraged by a substantial jump in export of power during 2005-06, the private power utility CESC limited has chalked up ambitious plan for adding 2750 MW to its installed capacity by setting up two greenfield projects and expanding one of its existing power plant. The RPG Group company has already received the crucial environmental clearance from the centre for an additional 250 MW unit at its existing 500 MW Budge Budge power plant and the work on the project is expected to start within this year. The company has also shortlisted two companies for this purpose and final decision would be taken very soon.

Apart from that the company has also announced its plan for setting up a Greenfield power project at the port town of Haldia the total capacity of the same has now been hiked to 1500 MW from the originally announced 1000 MW.   CESC has also signed an MoU with the coal-rich Jharkhand state for setting up another 1000 MW power plant there to add a total of 2750 MW additional capacity to existing 975 MW capacity from Budge Budge and three smaller ones.  The plan for adding substantial capacity was apparently prompted by a more than two and half times jump in export of power by the company during the fiscal ended March 2006.  The company exported a total of 418 million units during 2005-06 as compared to 160 million units during the previous year.

Nagaland power plant handed over to NEC energy

July 5, 2006. A 24 MW hydro-electric power plant set up by Nagaland government, has been handed over to Gurgaon-based NEC energy Pvt Ltd for operation and maintenance, after the plant went out of running immediately after commissioning. The plant set up at Likimro in Phek district was formally handed over on lease to the private company recently. At present one unit of the 8x3 MW plant was generating electricity and the power department hoped two units would be operational soon, resulting in improvement of power supply in the state, which heavily depends on electricity import.

Vedanta invites bids for 2,400 MW nuclear plant

July 5, 2006. London-based metals and mining group Vedanta Resources Plc invited preliminary bids for setting up a 2,400 MW nuclear power plant in India. This comes even as the Indian government is working on a policy to allow private sector companies venture into production of nuclear power. Private sector firms - Tata Power and Reliance Energy and government-owned NTPC have already evinced interest in entering the sector. NTPC plans to set up a nuclear power plant by 2017 and has appointed consultants to advise it on the foray.  Vedanta, which has operations in India, Australia, and Zambia, with extensive interests in aluminium, copper, zinc, and lead, said it plans to award the contract for the 2,400 MWnuclear power station on a build, operate and maintain basis. The group is the largest producer of captive power in India, with existing and gross-generation-under-implementation capacity of over 3000 MW. The company has invited expressions of interest from global firms with experience in building and maintaining nuclear power plants of a size similar to the proposed one.

Jindal to sign JV with PowerGrid

July 10, 2006. PowerGrid Corporation will shortly sign a joint venture agreement with Jindal Power for a transmission line project.  The line will evacuate power from Jindal’s proposed 1000-MW coal-based thermal power plant in Raigarh district of Chhattisgarh. The agreements include deals with Oil and Natural Gas Corporation, Essar Power, Torrent Power, Jaiprakash Group and Teesta Urja Ltd.  The transmission project needed an investment of Rs 250 crore. PowerGrid would hold a minority stake of 26 per cent in the joint venture.  The Jindal power plant is one of the fast track power projects, being monitored by the power ministry and the Prime Minister’s Office.  The project cost for the first phase is estimated to be Rs 2,142 crore. Power from this project will be available at an all-inclusive and non-increasing tariff of around Rs 2 per Kwh. 

Delhi to get 500 MW more by next week

July 9, 2006. The Centre and the Delhi Government jointly finalised an action plan to get an extra 500 MW for the Capital and another 1,450 MW for the northern region by next week. The Capital will get about 500 MW from NTPC's Kawas gas-fired plant in Gujarat, while another 1,450 MW would be added for the Northern region. Since the Northern grid does not have a direct link with the Western region, the Kawas power would flow via the Eastern grid. Some units such as NTPC's Anta and Auraiya in Uttar Pradesh, which were shut for maintenance, will resume generation within three days. Besides, the Tehri hydel project in Uttaranchal will start generation from July 12. While 150 MW would flow in from Tehri, 125 MW would come from NTPC's Dadri plant in Uttar Pradesh, 200 MW from Vishnuprayag plant in Uttaranchal, and 125 MW from Anta.

Power scenario to brighten in Northern India

July 7, 2006. Power shortage in northern India is set to decline in a couple of weeks, with the Power Grid Corporation of India giving the finishing touches to the 1,200-km line linking the western, eastern and the north eastern regions with the northern region.  This will help in evacuation of around 2,000 MW of surplus power from the eastern and the north eastern regions to the power deficient northern region grid, which will improve the situation in the long run.  The north eastern region and the eastern region have surplus power of around 600 MW each and this will ease the power situation in the northern region. The northern region has a deficit of around 8,000 MW and with this line, 1,200 MW may be immediately met. An investment of Rs 2,500 crore has been made for constructing this transmission line.   

The line to link the northern region starts from Tala (Bhutan) and connects Mandola (near Delhi) through Siliguri (West Bengal), Purnea (Bihar), Muzaffarpur (Bihar), Gorakhpur (Uttar Pradesh), Lucknow (Uttar Pradesh) and Bareli (Uttar Pradesh).  There are five regional grids in the country — northern, southern, eastern, north eastern and western, out of which the western, eastern and north eastern grids are already in synchronous operations.  Once the northern grid gets interconnected with the rest in synchronous operations, the 2,000 MW power that can be evacuated will comprise around 20 per cent of the present capacity evacuation of 9,500 MW.

Ministry split on PTC role in power trade with Nepal

July 7, 2006. The power ministry’s decision to identify PTC India as the nodal agency to deal with matters relating to exchange of power between India and Nepal has met with some opposition from within.  Certain power ministry officials are against the move as they feel that since PTC India is no longer a wholly-owned government company, nodal activities should now be carried out by NTPC’s power trading subsidiary. The power ministry had earlier proposed to assign the trading of power from Tala to PTC India but this decision has met with internal resistance. There is a view that the NTPC Power Trading Company should be the nodal agency for trading of power. After its IPO in April 2004, the general public owns 39 percent of the company’s issued share capital. The share of the promoter companies — Power Grid Corporation, NTPC Ltd, Power Finance Corporation and National Hydroelectric Power Corporation — is limited to 32 per cent of the issued share capital of the company and the balance 68 per cent is owned by financial institutions, large utilities and the public. While Power Grid is expecting to wheel 170 Mw of power from Tala project (1,020 Mw) in July, PTC India has already initiated discussions with Nepal for enhancing power exchange between the two countries.

REC to boost Punjab, Haryana power sector

July 11, 2006. The power sector in Haryana and Punjab is all set to get a big boost with the Rural Electrification Corporation (REC) planning to provide funds to the tune of Rs 10,000 crore over the next three years for upcoming projects in the generation, transmission, upgradation, and improvement of power infrastructure in the twin states. REC was also ready to provide funds to the states for toning up of their distribution network by providing both technology and funds, which will help both the states to reduce their transmission and distribution (T&D) losses that are about 35 per cent in Haryana and 22 per cent in Punjab. As for the neighboring Himachal Pradesh, some projects had been discussed and REC would be providing funds to the state for upgradation of its distribution infrastructure.

For Haryana, REC would be funding a 1,000 MW thermal power plant in Hisar, requiring an investment of about Rs 4,000 crore. Another Rs 1,400 crore would be provided over the next two years for creation and strengthening of transmission network. Introduction of high voltage distribution system (HVDS), as also separation of rural feeders for domestic and agricultural consumers are other areas where funds would be sourced from REC. The four power utilities of the state, UHBVNL, HVPNL, HPGCL, DHBVNL, had already met and discussed upcoming projects and investments to be taken up over the next five years in the state. There are plans to spend Rs 18,000 to Rs 20,000 crore for the creation, upgradation and improvement of infrastructure for which, the power utilities would shortly be signing an MOU with REC for sourcing of funds.

NTPC lamps to light up rural India

July 10, 2006. NTPC Ltd plans to manufacture light emitting diode (LED) lamps through a joint venture.  The move was prompted by the need to reduce demands on rural electricity and the power ministry’s belief that LED lamps should be promoted in rural areas as they are energy efficient.  The proposed venture would have a debt equity ratio of 30:70 and NTPC would have the majority stake in the proposed venture.  The company is firming up plans to foray into manufacturing of LED lamps with a private foreign technical collaborator.  A feasibility study and detailed project report (DPR) were made to calculate the cost and other logistics issues. The DPR is expected to be submitted shortly to the board for approval, after which it will be sent to the power ministry for its approval. Under the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), the power ministry plans to electrify 40,000 more villages during 2006-07, as compared to 10,000 villages in 2005-06.  A target of electrification of around 120 odd villages has been fixed under this programme for 2006-07. The total outlay under RGGVY has been fixed at Rs 3,000 crore in 2006-07, up from Rs 1,100 crore in 2005-06.

Energy-rich states may benefit from projects

July 8, 2006. Planning Commission member Kirit Parikh's report on integrated energy policy has recommended that states from which resources like coal is extracted for any energy enterprise be given a share of the profits from the projects. Among other recommendations, it has also suggested providing an opportunity to states or its residents to invest in such projects on equal terms and appropriately revise the royalty rates. The policy will be submitted to Prime Minister by this week for his approval.

 The proposal to give states where energy sources such as coal are located a better deal has been suggested in the backdrop of demands by states for higher share of benefits from the domestic energy resources.  This solution has been suggested for removing hurdles in exploiting domestic sources of primary energy. The policy has recommended that the National Development Council must take up this issue immediately in respect of coal and hydro resources.

The policy has also recommended that a national policy on domestic natural resources be formulated and enacted in Parliament.  Ensuring adequate supply of coal with consistent quality along with sufficient gas supply, power sector reforms, using energy abroad and increasing the role of nuclear and hydroelectric power generation are among the major recommendations.  The policy has also recommended stepping up domestic coal production by allotting coal blocks to the central and state public sector units and captive mines of notified end users. 

Coal blocks held by Coal India Ltd that can not be brought into production by 2016-17, either directly or through joint ventures, should be made available to other eligible candidates for development and for bringing into production by 2011-12. The policy also says infrastructure must be created to facilitate thermal coal imports to facilitate coastal power generation capacity based on imported thermal coal. The current system of coal linkages should be replaced by long-term coal supply agreements with strict penalties for not meeting contracted supplies, quality and offtake commitments, the policy suggests.  Throwing light on the coal regulator, the policy says coal must be brought under independent regulation.

NTPC, Coal India plan JV for coal mine block development

July 7, 2006. The state-run NTPC Ltd would soon enter into a joint venture agreement with Coal India ltd for the development of coal mining blocks in Jharkhand and Orissa. NTPC and Coal India would have an equity contribution of 50 per cent each for the development and coal production at Brahmini (Jharkhand) and Palma (Orissa) coal mining blocks with the capacity of 10 million tonne each. These blocks had been recently cleared by the Centre. NTPC’s board of directors had already given its clearance for the proposed JV. NTPC is currently involved in the development of Pakri Parwari mining block in Jharkhand.

Uranium not a problem -NPCIL

July 7, 2006. Nuclear Power Corporation of India Ltd has asserted that increasing capacity to 20,000 MW by 2020 will be possible in view of sufficient availability of uranium in the country. It says the availability of domestic uranium is expected to double in five years, after the identification of new reserves in Meghalaya and Andhra Pradesh. The NPCIL has said it will, for a while, have to import uranium to meet likely shortfall in the domestic availability of the fuel required to support its ambitious capacity-addition programme. Although the NPCIL has developed state-of-the-art technology for design, construction, operation and maintenance of nuclear reactors, unavailability of uranium is a major constraint. The quantity of the fuel available from the already known reserves in the country is limited, and just enough to generate about 10,000 MW. The department of atomic energy has envisaged a nuclear power capacity of about 20,000 MW by 2020. The installed nuclear capacity is expected to increase to 4,120 MW by the end of the 10th Plan and 10,280 MW by the 11th Plan. Earlier, commissioning of nuclear power units used to take around 10 years. Now, it takes less than five years, which is the international standard. The availability factor of nuclear units used to be 50-60 per cent, which has now gone up to about 95 per cent- the level achieved by the best nuclear units in the world. The Centre has sanctioned four sites - two new ones at Koodankulam (Tamil Nadu) and Jaidapur (Maharashtra) for the new capacity, and two existing ones at Kakrapara and Rajasthan, for extension of existing capacity - to NPCIL for nuclear power stations. The NPCIL is also planning to establish a 700 MW unit of a new design at the Rajasthan atomic power station, against 540 MW, the highest capacity of a nuclear unit in India.

Ratnagiri Gas gets heavy-duty boost

July 6, 2006.  Ratnagiri Gas and Power Pvt Ltd (RGPPL), which has revived the 740 MW block II of Dabhol project in Maharashtra, has received a major respite as the finance ministry has accepted power ministry's plea to exempt customs duty on imported naphtha for the plant. The finance ministry's decision is also crucial as it would give the much-needed reprieve to electricity-deficient Maharashtra, which would be able to draw power at rate of around Rs 5.25 per unit from the project which started generation in May last after remaining idle for almost five years. Had the finance ministry shot down the duty exemption proposal, Maharashtra State Electricity Distribution Company (MahaVitaran), the sole buyer of the RGPPL power, would have been compelled to draw power at a higher tariff of Rs 7.50 per unit.

NPCIL to have more powers

July 6, 2006. Close on the heels of the US Senate Foreign Relation Committee’s nod for a legislation to facilitate nuclear energy cooperation with India, the Centre is in the midst of delegation of additional powers to the Nuclear Power Corporation of India Ltd (NPCIL) to expedite its capacity addition programme and acquire assets in and outside India. The Department of Atomic Energy (DoAE) has initiated a proposal to provide additional powers to NPCIL’s board of directors to approve project investment upto Rs 1,000 crore through a joint venture (JV) route and upto Rs 500 crore for its independent power projects. This would enable NPCIL to expedite its capacity addition programme without any financial constraints. This apart, DoAE also plans to seek delegated authority for NPCIL’s board of directors to approve management’s decisions on acquisition of power assets in India and abroad to help it implement its growth plan in the area of nuclear generation, besides diversifying into business of power transmission and distribution.

The ceilings proposed in this regard would be the same as applicable to those relating to the utility’s investments through a JV route. In addition, NPCIL would be mandated to keep the Cabinet informed of overseas investments that it might make. Furthermore, DoAE proposes to seek the Union Cabinet’s approval to authorise NPCIL’s board for approving capital investment for financing the corporation’s programmes for repair and modernisation of its installed power plants without being subjected to any ceiling. DoAE has also recommended empowering the nuclear generation utility to forge strategic tie-ups for technology collaboration at its own level.

The department has made a strong case for exempting NPCIL from the existing stipulation on payment of 20% of its annual after-tax profits as equity dividend to the government for next 15 years. It has proposed that the Center should allow NPCIL to use the profits as internal surplus for financing its power projects.

Chhattisgarh will be India's power hub by ’11

July 5, 2006. Chhattisgarh will become India's power hub by 2011 with an additional power generation of 12,000 MW. The state has the potential to meet India's growing energy demands for the next 100 years with the total power generation capacity of up to 100,000 MW. The state has Rs.440-billion investment in the offing in both public and private sectors and the work for power generation will begin by 2011. The world's sixth largest power generator, National Thermal Power Corp (NTPC), is expected to start 2,980 MW power generation by December 2009 at its plant at Sipat, near Bilaspur, with an investment of Rs 130 billion. NTPC already has a 2,100 MW power plant in the Korba region. The Sipat first phase will see power generation of 1,980 MW (660MW x 3) and the second phase 1,000 MW (500x2).

The central government will set up a Rs 160-billion ultra mega integrated power project of 4,000 MW at Lara in Raigarh district. Public sector major Indian Farmers Fertiliser Cooperative Ltd (IFFCO) is also building a 1,000-MW plant in a joint venture with the Chhattisgarh State Electricity Board (CSEB) in Surguja district. The equity holding ratio between the two parties will be 74:26 with an investment of Rs.45 billion. IFFCO inked the deal in June 2005. Jindal Steel and Power Limited (JSPL) too has announced an investment of Rs 160 billion for 1,000 MW (250x4) power generation before March 2008 from its units that are under construction at Tamnar near Raigarh. Essar Steel will bring in an investment of Rs 40 billion for a 1,000-MW power plant to be installed in the same region by 2010. Dozens of major private players are lining up with proposals, but only those having plans to set up production units over 1,000 MW will be entertained.

Haryana priority to set up nuke plant

July 5, 2006. Haryana chief minister has urged the Centre to accord priority to plans for setting up a nuclear power plant in the Fatehabad district. The scheme of interest subsidy for power generation should be extended even under 11th Five Year Plan as units VII and VIII of Panipat Thermal and the 2x300 MW Yamunanagar Thermal had been started during the 10th plan. Adequate allocations of LNG or CNG at reasonable rates are have to be ensured to facilitate setting up of more power plants in the region.  The second phase of NTPC’s gas-based 432 MW plant at Faridabad should be included in the 11th Plan. Allocation from the central projects and from central unallocated pool should be allotted on the basis of load growth of states. If a state with low load began selling this power at exorbitant, the share of that state should be reduced. In infrastructure, construction of 600 MW Yamuna Nagar Thermal Power Project had started.

Jharkhand reiterates demand to set up nuke power reactor

June 5, 2006. Uranium rich Jharkhand has renewed its demand to set up a nuclear power reactor in the state. The state government has once again taken up the issue with the central government and the Department of Atomic Energy (DAE). The DAE and the Jharkhand government are on the board of directors of Uranium Corporation of India Limited in Jadugoda in East Singhbhum district. Uranium from Jadugoda is supplied to nuclear power reactors and plants in other parts of the country. Nnuclear power reactor plants were set up in places, which do not have proper uranium resources. And since Jharkhand produces uranium it should be allowed to set up a nuclear power reactor.

Last year, the central government had approved the setting up of a nuclear power plant. A three-member state government team had selected three places in East Singhbhum. The proposed site was referred to the Nuclear Power Corporation of India, which is yet to fix a place.

OIL & GAS

CITIC eyes aid on Kazakh oil

July 11, 2006. China's CITIC Group is considering bringing in an Indian partner that would help operate Nations Energy assets as CITIC seeks to overcome opposition to its US$2 billion (HK$15.6 billion) bid for the Kazakh producer. China International Trust and Investment Corp has held talks to form such a partnership with ONGC Mittal Energy, a venture between state-run Indian giant Oil and Natural Gas Corp and Mittal Steel. CITIC, a sprawling and diversified Chinese investment company with tiny oil interests in China and abroad, wants ONGC's operating expertise and Mittal Steel's relationship with the Kazakh government to help seal the takeover deal. The Kazakh government is worried about rapidly rising Chinese investment in its oil industry and that is a factor behind the delay in the CITIC takeover. ONGC, which has lost a string of international auctions of oil assets to Chinese companies in the past two years, was not competing for Nations Energy partly because it believes the CITIC bid has fully valued the target. CITIC is the top bidder for Canadian-based firm Nations Energy, and its cash bid of about US$2 billion is fully funded by a Chinese state bank. Nations Energy, whose main asset is a large heavy oil field in Kazakhstan, wants to take CITIC's offer. Nations Energy produces about 50,000 barrels per day, mostly from the Karazhanbas field in Kazakhstan. The field has proven reserves of more than 400 million barrels.

CNOOC made a new discovery LD6-2

July 10, 2006. CNOOC’s wildcat Luda (LD) 6-2-1 drilled independently in Bohai Bay hit a new discovery LD 6-2. LD 6-2-1 is located in the Liaodong Bay, with a water depth of about 30 meters. The well was drilled to a total depth of 2,395 meters. The well was tested to flow about 620 barrels of oil and 240,000 cubic feet of gas per day via 7.14mm choke during the drill stem test.

Saudi may boost heavy-oil reserves

July 10, 2006.  Chevron Corp. and Saudi oil say initial results from a pilot project to tap heavy crude reserves by injecting steam are promising and could boost the kingdom's estimated reserves by "tens of billions" of barrels. Earlier this year, Chevron began injecting steam in a neutral zone between Saudi Arabia and Kuwait to loosen sludge-like heavy oil that was previously deemed unrecoverable. The effort to tap the heavy crude could significantly increase Saudi Arabia's oil reserves over the next several years and ease tight energy markets. The world's biggest oil producer claims about 260 billion barrels of reserves, nearly a quarter of the world's total. Chevron has used steam injection for decades to boost output from heavy-oil fields in California and Indonesia. The Saudis and Chevron want to see if the technique will work in the more porous rock formations common in Middle East.

China, Japan to set up expert gps to solve gas-field row

July 10, 2006. China and Japan decided to set up two expert groups to help settle a dispute over gas exploration rights in the East China Sea. The two nations’ technical and legal experts will discuss issues including the development of gas and oil. The argument over rights to resources in the waters between the two countries is not the only issue that has strained ties between Asia’s two biggest economies and energy users. Japan has asked China to stop the development of four gas fields, saying it would siphon underground gas from Japanese territory. Japan and China dispute each other’s drilling rights in the area because they disagree on their sea border. China claims its territory extends to the end of the continental shelf, while Japan says the border is the median line, or halfway between the countries’ shores. China rejected an October proposal by Japan for joint development of the Tianwaitian, Chunxiao, Duanqiao and Longjing natural gas and oil fields in the East China Sea.

Iran’s gas production to be boosted by 36 mcm

July 8, 2006. Iran’s total gas production will be boosted by 36 million cubic meters from late September with the start of production at the Shanol, Homa, and Varavi fields.  The production at the Tabnak gas field, with a daily capacity of 45 mcm, began during the previous Iranian calendar year but the other three will start production of 36 mcm per day in late September. The 21 wells of the Aghar and Dalan gas fields in the Zagros region produce a total of 42 million cu. m of gas per day, the gas produced at these fields is sent to a nearby refinery with a capacity of 41 million cu. m per day.

The gas produced at Aghar is sour and is sent to the Marun oil and gas field for injection, but the gas of Dalan is sweet and is injected into the national gas network for domestic consumption during the four-month peak consumption period. The South Zagros Oil and Gas Producing Company plans to boost production at the Aghar and Dalan gas fields during the next Iranian calendar year, and toward this end, simulation studies have been conducted and two production wells will be drilled by March 2007. The company also manages operations at the Sarkhun-Qeshm and Bandar Abbas gas fields, which have a total production capacity of 15.5 million cu. m per day that is to be increased to 16.5 million cu. m per day by drilling a new well, Oji added.

Exxon, BP and Shell eye India's gas reserves

July 7, 2006. At least 13 oil companies, including ExxonMobil, Royal Dutch Shell, BP, BG Group and Total have submitted a preliminary offer to buy a stake in one of India's biggest gas field. State-run exploration firm Gujarat State Petroleum Corp struck gas off India's southeast coast in June last year and said the field was likely to hold up to 20 trillion cubic feet of gas. Other companies in the fray are: Brazil's Petrobras, Malaysia's Petronas, Italy's ENI, Norway's Statoil, Spain's Repsol YPF, US-based Anadarko Petroleum Corp, Canada's Husky Energy and UAE-based Crescent Petroleum.

Aspen discovers gas well in California

July 6, 2006. Aspen discovered a new gas well in the Sacramento Valley gas province of northern California. The Patterson #27-1 well, located in the Rice Creek Gas Field, Tehama County, California, was drilled to a depth of 5,250 feet and encountered over 100 feet of potential gross gas pay in several intervals in the Forbes formation. Production casing was run based on favorable mud log and electric log responses. This was the eighth successful gas well out of nine attempts by Aspen in this field. Aspen plans to drill one more well in this field this year and has a 23.33 per cent operated working interest in this field.

ConocoPhillips to develop Indonesia's gas block

July 5, 2006. U.S. oil firm ConocoPhillips plans to develop natural gas from its working area of block - A in Indonesia's Aceh province. Last year, Jakarta urged ConocoPhillips, the third largest oil firm in the United States, to sell its stake if it was not able to move faster in developing the area, gas from which was urgently needed by local fertiliser firms in Aceh. Conoco is the operator of the block with a 50 percent stake. The other partner is a consortium comprising Japan Petroleum Exploration Co., Indonesia's PT Medco Energi International Tbk and Britain's Premier Oil Plc. Gas reserves in the block A are estimated at about 500 bcf but the gas contains carbon dioxide, which makes it costly to develop. Indonesia, Asia Pacific's sole OPEC member, which has far more gas than oil, is trying to phase out costly oil-fired power generation and use more of its cheaper, cleaner natural gas domestically, but faces limited supplies due to long-term LNG export commitments, which it is reviewing.

Rosneft wins oil and gas tender for $175 mn

July 5, 2006. Rosneft had won a tender to develop a promising oil and gas site in northwestern Siberia offering 4.73 billion rubles ($175 million). Bidding in and winning the tender is part of the company's consistent strategy to increase oil and gas production opportunities via comprehensive development of West Siberian deposits, which will become the main source of reserves to fill a strategic oil pipeline from East Siberia to the Pacific Ocean.  The pipeline is slated to become a highly important way for Russia to transport crude to energy-hungry China and the rapidly developing Asia-Pacific Rim. The reserves at the Severo-Charsky site are estimated at 35 million metric tons of oil (257.25 million bbl) and 20 billion cubic meters of natural gas. Rosneft also won tenders earlier this year to prospect and develop oil and gas deposits in western and central Siberia, where projected reserves total 50 million tons of oil (about 366 million bbl).

CNPC willing to buy $3b Rosneft stake

July 5, 2006. China National Petroleum Corp (CNPC) has expressed interest in spending up to $3 billion to buy into the IPO of Rosneft to deepen ties with the Russian oil giant, but wants better Chinese access to Russian oil in return. CNPC, parent of New York and Hong Kong-listed PetroChina, would invest a maximum of $3 billion and a minimum of $500 million for a stake in a company that hopes the IPO will value it at as much as $80 billion, depending on demand for Rosneft's IPO. CNPC expressed the interest on condition Rosneft pursues further co-operation with the Chinese side. Rosneft has approached several parties in Asia and Europe to support its IPO, which would value it at $60 billion to $80 billion.

New gas field discovered

July 5, 2006. The discovery of a gas field in the eastern region capable of producing 20 million cubic feet of gas per day. The field is also expected to yield 1,400 barrels a day of condensates. The new field called Zamlah 1, which was tested by Saudi Aramco, lies 50 kilometers to the south of the Al-Ghawar field and 250 kilometers to the southeast of Riyadh. The Kingdom has natural gas reserves of 238 tcf and has been producing about 2.12 tcf a year since 2003. While its current oil output is around 9.6 million barrels per day, the Kingdom is working to boost its capacity to 12.5 million bpd by 2009.

LUKoil to build refinery project in Turkey

July 10, 2006. LUKoil, Russia's no.1 crude producer is planning to invest $2-2.5 billion in the construction of an oil refinery in Turkey. The construction of an oil refinery with annual production capacity of 8-10 million tons (73.5 million bbl) in the Black Sea province of Zonguldak. The Russian company was planning to create a joint venture with Turkish and Kazakh companies to refine crude produced in Russia and Kazakhstan. The Russian company also plans to obtain a license to operate a network of gasoline stations in the country.

Petroplus to buy Exxon's German refinery

July 6, 2006. Dutch oil refiner Petroplus International B.V. would buy Exxon Mobil Corp.'s Ingolstadt refinery in Germany and related businesses in the region, boosting its refining capacity by almost a third. The Petroplus deal is expected to close early next year, subject to review and approval from antitrust authorities. The deal allows Petroplus to enter a high-demand market in southern Germany and surrounding regions. The Ingolstadt refinery, which processes 110,000 barrels per day, will push up its refining capacity by 30 percent. Exxon will operate the Ingolstadt refinery and the related marketing businesses until the deal is completed. Under the terms of the deal, Petroplus will enter into a supply agreement with Exxon to supply the Esso retail chain in Bavaria.

Iran’s Arak refinery to produce over 10 mn lit. of gasoline in 3 years

July 5, 2006. Implementation of a plan to boost gasoline production at Arak refinery will increase fuel output of the plant from the current figure of 4.6 million liters per day to about 15 million liters per day.  The goal of the plan is to boost crude oil refining capacity of the refinery from 150,000 barrels per day at present, to 250,000 barrels per day. The plan will decrease fuel oil production from 37,720 barrels per day to about 15,000 barrels per day.

Saudis adopt production and refining strategy

July 5, 2006. Saudi Arabia expressed readiness to increase its oil production capacity gradually to cope with international demand and emphasised the increase in its refining capacity in and outside the Kingdom to meet the growing demand for refined products. It also revealed a plan to set up new refineries to refine heavy crude, production of which is increasing worldwide.

Anadarko to sell Canada gas project for $125 mn

July 10, 2006. Anadarko Petroleum Corp. will sell its Bear Head LNG Corp. subsidiary which is developing a liquefied natural gas receiving terminal at Point Tupper, Nova Scotia, for $125 million. Under the deal with private equity firm U.S. Venture Energy, Anadarko will have an 18-month option to secure up to 350 million cubic feet per day of throughput capacity at competitive rates.  The transaction is expected to close within a few weeks, and proceeds will be used to repay debt relating to the pending acquisitions of Kerr-McGee Corp. and Western Gas Resources Inc.

Chiyoda award of gas processing plant in Qatar

July 10, 2006. Chiyoda Corporation has signed a contract for the engineering, procurement and construction (EPC) of Al Khaleej Gas Phase 2 Project (AKG-2) with RasGas Company Limited, which is acting on behalf of and as agent for ExxonMobil Middle East Gas Marketing Limited. This contract for the gas processing train, with capacity to support gas sales of 1,250 MSCFD of natural gas, was awarded on an exclusive negotiation basis and will be executed by a joint venture led by Chiyoda Corporation with Technip France (CTJV). The Front End Engineering and Design (FEED) work for the AKG-2 Project was also performed by Chiyoda. After its completion in 2009, AKG-2 Project will produce sales gas to satisfy the increasing domestic gas demand in Qatar and eventually contribute to the further development of the infrastructure for Qatari industry. The AKG-2 train will also have the capability for ethane recovery. The value of the contract exceeds US $1.6 billion.

Skanska to build gas pipeline in Brazil

July 10, 2006. Skanska received a contract to build a gas pipeline in Brazil. The total contract value amounts to $206 mn. The state-owned Brazilian oil company that is one of Skanska's repeat customers in the energy sector in Latin America. The contract relates to a section of a new pipeline between the oil and gas fields in Urucu in Northern Brazil and Manaus. Skanska will build the 186-kilometer section between Anama and Manaus. The gas pipeline will have a diameter of 50 cm (20 inches). The project will start immediately and be completed in 21 months for the start of operation in early 2008. Skanska and the Brazilian construction company Camargo Correa, which specializes in pipeline construction, will conduct the project through the joint venture Gasoduto Amazonia Consortium.

Venezuela, Colombia, start building gas pipeline

July 8, 2006. Venezuela and Colombia began construction of a gas pipeline linking the two countries. Venezuela, the world's No. 5 oil exporter, is seeking to reduce dependence on U.S. energy markets as part of a self-styled socialist revolution that promises to end poverty and unite Latin American nations. The first pipe of a 225 kilometer (140 mile) gas pipeline, projected to cost $335 million, linking Venezuela with Colombian gas fields. The pipeline, expected to be completed by next March, will send around 150 million cubic feet per day of gas from the Punta Ballenas fields in Colombia to the chronically gas-deficient areas of western Venezuela. Within an estimated four to seven years, when Colombia's fields dry up and Venezuela's gas transport systems have been expanded, the pipeline will reverse flow to send around 200 million cubic feet per day of gas to Colombia.

Enbridge mulls $3.6 bn Alberta to Texas pipeline

July 6, 2006. Enbridge Inc is in early discussions with Canadian oil producers about building a $3.6 billion oil pipeline from Alberta to the refineries of the U.S. Gulf Coast, which would carry 400,000 barrels a day of oil sands oil 2,000 miles (3,200 kilometers) from near Edmonton, Alberta to Texas. The line would run through refining centers like Billings, Montana, Denver, Colorado, and Cushing, Oklahoma before reaching the Gulf refineries.  If producers sign on to the project, the line could be built by 2011. Production from the oil-rich region of northern Alberta is expected to triple to 3 million barrels a day by 2015, requiring new pipelines and markets.

BASF, Sinopec agree $500 mn Nanjing expansion

July 10, 2006. German chemicals group BASF and Chinese partner Sinopec have agreed to expand their Nanjing petrochemicals complex with an investment of $500 million. The expansion will involve an increase in cracker capacity of 25 percent and an expansion of downstream capacities.  Expanded production will start in 2009. The new funding underlines BASF's strong push into Asia, particularly China, as it seeks growth from emerging markets for its wide range of chemicals. The company aims to generate 10 percent of its global sales and earnings at its chemicals business in China by 2010. The steam cracker at the site will be expanded to 750,000 tonnes of ethylene per year from 600,000 currently, while capacity for other products will also be expanded.

Eni says no guarantees on gas from Gazprom 

July 8, 2006. Eni, Europe’s fourth-biggest oil company says there were “no guarantees” Russia’s Gazprom or Algeria’s Sonatrach would continue to sell natural gas to Italy. Italy, a net importer of the fuel, is at risk because suppliers may “aim to conquer markets where the outlook for growth is better”.  Eni, last month offered to help Russian companies, including Gazprom, expand their share of the Italian market in return for access to production and exploration resources in Russia.

Gazprom, based in Moscow, has exported gas to Italy through Eni since 1974. In 2004, the group supplied 21,6-bcm of gas to Italy, making it Gazprom’s second-largest export market after Germany. Europe’s gas shortage would be as much as 220 bcm by 2012. In Italy, demand for gas would be 15-bcm higher in 2012 than today. The Algerian government, which controls oil company Sonatrach, wants to force foreign companies drilling for oil to hand over to the state a stake in any fields discovered. Algeria is already entitled to take a stake of 30 per cent in oil or natural gas discoveries through partnerships with companies including Eni. Algeria, the ninth-largest producer in the Organisation of Petroleum Exporting Countries, plans to increase output to 2-million barrels a day in 2010, from 1,4-million, and increase gas exports from 85 bcm from 65-billion cubic meters. The forced sale of Eni’s stake in Snam Rete Gas, which owns the country’s gas pipeline network, would not cut gas prices. Eni must cut its holding to less than 20 per cent by 2008 from 50 per cent.

Gazprom, Brazil's Petrobras to sign cooperation deal soon

July 6, 2006. Gazprom and Brazil's state-run oil and gas producer Petrobras intend to draft and sign a framework cooperation agreement soon. The parties reached this understanding at a meeting where they discussed bilateral energy cooperation and expressed mutual interest in joint work, including projects in third countries. The parties paid particular attention to the possibility of joint participation in projects to create new international gas transportation systems in Latin America and explore and develop marine deposits.

Nigeria sees $12 bn annual income from gas by '09

July 5, 2006. Nigeria could earn about $12 billion annually from natural gas exports by 2009 when projects designed to end the burning of gas associated with oil extraction come on stream. Nigeria, Africa's biggest oil producer, has been keen to promote gas projects like new power and liquefied natural gas (LNG) plants as part of a strategy to end gas flaring by 2008. The OPEC member, which hopes to eventually earn as much from gas as it does from oil, has set itself a target to become the world's biggest exporter of LNG in the next three years.

The world's eighth biggest oil exporter has proven gas reserves estimated at 158 trillion cubic feet (4.474 trillion cubic meters), representing one third of Africa's total gas stock. Due to a lack of infrastructure to use or export gas, Nigeria flares, or burns off, about 2.7 million cubic feet daily, or about 40 percent of gas output. Many flares burn around the clock in the Niger Delta, close to impoverished villages with no electricity. Nigeria urged lawmakers to speedily pass bills pending in the National Assembly to establish a functional framework for the development of Nigeria's natural gas reserves.

Power

China to build nuke power plant

July 5, 2006. China's biggest nuclear power plant builder will construct a homemade 600 MW reactor in the central province of Hunan, the nation's first inland atomic energy plant. The China National Nuclear Corp hopes to begin building the plant in Taohuajiang, about 100 kilometers from the provincial capital of Changsha, within three to five years. The homegrown plant will cost less per unit of capacity than a modern 1,000 MW plant built with foreign technology. China's existing nuclear power plants are located in its coastal provinces but plans are under way to build more in inland areas such as the provinces of Hebei, Sichuan and Hubei.

Power-hungry China is trying to diversify its energy mix away from dirty and polluting coal and is pushing the use of nuclear and renewable energy sources, such as wind and solar power. The nation has an ambitious plan to increase its combined nuclear power capacity to 40,000 MW by 2020, a plan that will require about two 1,000 MW nuclear power plants to be built annually for the next 15 years.

China currently produces about 7,000 MW of nuclear power, while two 1,000 MW Russian-built reactors are nearing completion in Jiangsu province and are expected to be generating electricity in the coming months. The central government has approved a series of new power plants but only a few have been put up for overseas tenders. Two new plants worth up to US$7 billion (HK$54.6 billion), one to be built in Sanmen in the eastern province of Zhejiang and the other in Yangjiang in Guangdong province in the south, are among the projects inviting overseas participation. The China National Nuclear Corp is expected to announce the winner of the bidding during the first half of the year, with Westinghouse of the United States and Areva of France seen as the front-runners.

Progress unit agrees to buy power from Southern

July 6, 2006. Southern Co. agreed to sell about 621 MW of wholesale electricity to Progress Energy Inc.'s Progress Ventures subsidiary from 2009 through 2015. Southern, of Atlanta, will generate the power at a new combined-cycle generating plant at the 1,139 MW Plant Franklin in Smiths, Alabama, about 75 miles east of the Alabama state capital, Montgomery. Plant Franklin currently consists of two natural gas-fired combined-cycle generating units. Southern expects the third unit at Plant Franklin to be available by the fourth quarter of 2008. Southern's Southern Power subsidiary, which operates the company's competitive generation assets, owns Plant Franklin.

Peabody Energy to buy Australia's Excel coal

July 5, 2006. Peabody Energy Corp. struck a deal to buy Australian coal producer Excel Coal Ltd. for a$1.83 billion ($1.34 billion), the latest in a series of global mining takeover moves. The deal is expected to add to earnings per share and cash flows in 2007 and be significantly accretive after that as new capacity comes online. Under the terms of the agreement, Peabody will pay a$8.50 per share in cash for all outstanding shares, representing a price of $1.34 billion, plus assumed debt of about $190 million.

PPL inks NorthWestern power supply deal

July 5, 2006. Energy company PPL Corp. has inked a seven-year agreement to supply wholesale electricity to NorthWestern Corp. The agreement could be worth about $675 million. The agreement will take effect after the companies' current power supply deal expires June 30, 2007.  Under the new deal, NorthWestern will buy a total of 13.7 million MW hours, with deliveries declining as the agreement matures. NorthWestern delivers electricity to 628,500 customers in Montana, South Dakota and Nebraska. The agreement's terms are in line with the assumptions in its long-term earnings outlook of $3.50 per share in 2010. Its PPL Montana unit, which operates coal-fired and hydroelectric plants, will supply the power.

US 'to make Russia nuclear offer'

July 11, 2006. The US is expected to make significant concessions to Russia over the storage of nuclear fuel in order to win backing for foreign policy. US is keen to get Russia's support as it tackles concerns including Iran and North Korea. As well as lifting a ban on storing spent nuclear fuel, the US was also offering to back Russia's membership of the World Trade Organisation and give Russian companies freer access to US markets.

Int’l agency urges China to revamp power industry

July 10, 2006. The International Energy Agency called for China to revamp its electric power industry, noting that waste and inefficiency contributed to China's adding new, mostly coal-fired capacity every two years equivalent to the entire electricity output of France or Canada. The agency was especially critical of China's decision to limit increases in electricity prices, saying that this encourages Chinese consumers and industries to use more energy than they need. Faced with an overheating economy in 2004, the Chinese government decided to allow few tariff increases for power companies even though global energy prices were rising. Beijing officials have largely followed that policy ever since even as world oil prices have soared past $70 a barrel and coal and natural gas prices have climbed swiftly.

The report also urged China to set minimum efficiency standards for coal-fired power plants and to enforce air pollution standards more rigorously for these power plants. Coal fuels two- thirds of China's electricity production, and China is now the world's second- largest electricity consumer, after the United States. China's heavy reliance on coal has prompted particular concern because the burning of coal releases more carbon dioxide, relative to the electricity produced, than oil, natural gas, nuclear power or renewable energy sources like wind power.

Many experts have concluded that carbon dioxide is the most important gas causing global warming. Improving efficiency and reducing waste will allow China to slow somewhat its growth in emissions of carbon dioxide and toxic air pollution, by making it possible for China to burn less coal, said Jonathan Sinton, the energy agency's senior China specialist. Chinese power companies are looking for ways to improve efficiency while reducing pollution, said Liu Deyou, chief engineer at the Beijing SPC Environment Protection Tech Engineering, the sulfur-filter manufacturing arm of one of the five big, state- owned electric utilities.

PPIB asked to import coal plants

July 10, 2006. Pak Govt directed the Private Power Infrastructure Board (PPIB) to invite expressions of interest for the import of coal plants through open advertisement. The government was investing a lot in the energy sector and was fast-tracking procedures in order to meet the short- and medium-term energy needs of the country. The government was providing attractive facilities to both local and foreign investors in order to increase employment opportunities and allowing the private sector to play its role in the economic development. The energy requirements of the country were increasing and the government was exploring all available sources of energy including thermal, nuclear, hydel, and alternative energy to meet its growing energy needs. The government was fully cognisant of the vital role played by the various sources of energy in the development and growth of a country and was doing necessary planning to ensure energy security in the years and decades to come. The government was encouraging thermal power plants, which run on furnace oil, coal, natural gas and LNG. It welcomed both the imported and local coal-based power generation projects because they were cost-effective and enhance energy security.

NASA to power Russian ISS segment with solar energy

July 6, 2006. NASA will provide the Russian segment of the International Space Station with energy generated by American solar generators. Russia cannot deliver its own energy module to the orbital station due to a significant reduction in the number of U.S. space shuttle flights. The module was originally intended to be delivered to the ISS by an American spacecraft. The Russian segment will receive energy from the American solar generators to compensate the modification of the Russian program. NASA would pay for the delivery of a U.S. astronaut to the ISS by a Russian spacecraft in fall 2006. All preliminary contracts on the delivery of space tourists to the ISS remained in force. Russia had signed contracts with Japanese businessman Daisuke Enomoto, who will fly to the ISS with the next crew in the fall of 2006, and with former Microsoft developer Charles Simonyi, who will fly in the spring of 2007. Russia has also agreed to fly the first South Korean astronaut to the ISS in the spring of 2008.

Reliant Energy to spend $625 mn to cut emissions

July 5, 2006. Reliant Energy would spend $625 million to reduce emissions at its 37 power plants. It has committed $350 million for environmental upgrades at its Cheswick Generating Station in Springdale, Pa., and at its portion of the scrubber installation at the Keystone Generating Station near Indiana, Pa. It estimates spending of up to $625 million through 2011 on sulfur dioxide, nitrogen oxide and mercury controls at its power plants. A majority of these capital expenditures will be incurred from 2007 to 2009.

Gamuda to finalise Laos power deal soon

July 6, 2006. Gamuda Bhd expects to finalise in August talks with Electricity Generating Authority of Thailand on the tariff rates for the hydro-power project in Laos. Gamuda had agreements with the Laos and Thai governments to build a RM 2bn hydro-power plant to supply electricity to Thailand. The company had, in the second half of 2005, secured the New Doha International Airport and Dukhan Highway projects in Qatar.

Solar power for 35 villages in UP

July 5, 2006. As many as 35 villages across four districts of UP, including in the naxal-infested Sonebhadra, Mirzapur and Chandauli, would soon be powered by solar energy. The Non-Conventional Energy Development Agency (NEDA) proposes to set up solar street lights and provide power to individual consumers. NEDA will cover areas where it is not possible to provide power through conventional sources. The government was providing subsidy for developing non-conventional sources of power.

Rlys reworking norms for commercial jatropha

July 5, 2006. With an aim to attract private sector for jatropha curcas plantation, the Indian Railways is likely to ease the revenue sharing norms of the present commercial plantation policy. It has engaged a consultant that would develop a `market-friendly' agreement framework for joint ventures in commercial plantation of jatropha. 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.  As per the present commercial plantation policy, the Railways enters into a joint venture agreement with the private player, wherein it provides land on lease for 15 years and the private player invests in jatropha saplings and maintains the plantation.

The joint venture is based on a 50:50 revenue share basis, subject to a commitment of minimum level of payment to the Railways from the private player for the entire period. However, the present policy conditions have been perceived to be quite stringent. The Railways is trying to work upon a "market-friendly" agreement for commercial plantation, for developing which a Delhi-based consultant, Grow Diesel Ventures, is providing advisory services.

The new policy is likely to bring down the floor level of revenue sharing considerably. At present, there are four sites where the Railways has initiated jatropha plantation based on joint venture — three under the North Eastern Railways and one under Southern Railway. The Railways has set a target of planting 72 lakh jatropha saplings in 2006-07, up from 61 lakh in the previous fiscal. 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.

Since the plantation sites are under various zonal Railways, the Ministry is trying to develop a common standardised agreement based on which zonal Railways can enter into joint ventures with the private sector. The Railways is working on a plan to utilise 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 Southern and Northern Railways have already run trains on bio-diesel blended fuel.

Ramsarup to set up bio-root generation plant in Gujarat

July 5, 2006. Ramsarup Industries Limited, the country’s second largest player in steel wire market after TISCO, has finalised plans to set up a bio-root power generation plant in Gujarat. The company with Rs 1020 crore turnover, is carrying out techno feasibility study to identify a suitable location for its upcoming bio-root power generation plant in the state. The bio-root power plant will generate electricity from vegetables and municipal wastes and the remains of the utilized wastes products can be used as bio-fertiliser after the production of power.  

Scottish to build wind farm

July 6, 2006. The government paved the way for the eventual development of the world's largest offshore wind farm, 20 miles off the Scottish coast. Given green light to plans to build two giant wind turbines in the Beatrice Field in the Moray Firth in the first stage of an ambitious deepwater wind-farm project. The £24 million project, a joint venture between Talisman Energy and Scottish and Southern Energy, will use two of the largest turbines in the world to test the technical and economic feasibility of deepwater wind farms. The project could lead to the construction of the world's largest offshore wind farm of up to 200 turbines in the Moray Firth - capable of generating enough electricity to power the city of Aberdeen.

Zorlu Energy to build a wind power plant in Pak

July 5, 2006. Turkey's Zorlu Energy Group will build a wind power plant in Pakistan. The Group a letter of intent was signed with the Pakistani party for construction of the plant. In accordance with the letter of intent signed in Islamabad by the Zorlu Energy Group and the Pakistani Alternative Energy Development Board (AEDB), the plant will be built within the Gharo-Keti Bandar power complex. The Zorlu Group will also generate electricity at the plant for the next two decades. The first phase of the project is 50 MW, but it will have an expansion option up to 300 MW. The project is expected to cost about 80-100 million USD.

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