MonitorsPublished on Jan 23, 2007
Energy News Monitor I Volume III, Issue 31
Sustainable Development through Responsible Management of Electricity Industry- Part III

7.                   Energy Security and Integrated resource Management



ffectively implemented Integrated Resource Management is essential for ensuring energy security on a sustainable basis. What the society needs is a good combination of reliable and affordable sources of energy for meeting the demands of lighting, heating and motive power etc. As far as end consumers are concerned it does not matter as to what the source is; or whether it is electricity from fossil fuel power stations or hydel power stations; whether they are from distributed sources or from electricity grid, as long as they can provide the energy on a sustainable basis.  Hence the responsibility of the concerned authorities is to find an optimal mix of various alternatives acceptable to different sections of our society. A quick look at the table 5 below indicates that all the additional electricity demand in the state can be met comfortably by responsible use of various avenues readily available to us.


This table provides only a conservative estimate of the potential available for Karnataka for improvements in the existing facilities, and by deploying the benign and renewable energy sources of wind, biomass and solar power.  The potential for solar energy use is immense and most of the smaller additional loads can be fed by solar energy. With the continuous improvements in the efficiency of the solar energy conversion more number of applications is coming under the solar energy’s purview, and hence there is potential for further reductions in the growth rate of the grid demand. Karnataka, which has a considerable coast line, also has great potential for wave energy which is not quantified in the table. This table shows that there is huge potential in Karnataka to become energy efficient, energy secure and socially responsible.


Integrated Resource Management plan looks at all the alternatives available to our society to meet the legitimate requirements of annual energy / peak hour demand at the lowest overall societal cost on a sustainable basis.  It basically attempts to optimize the utilization of all the avenues available to the society, including the efficiency improvement in the existing infrastructure.  Such an approach will lead to the sustainable harnessing of our natural resources for the benefit of all sections.


Table 5: Efficiency improvement measures for Karnataka system



Basis of savings

Estimated Potential for  savings

R, M & U

5-8% of 2,300 MW of hydro capacity

160 MW / 800  MU

T&D loss reduction

Present loss level is about 30%; can be reduced to 10%; 20% of a base of  5,500 MW and 34,300 MU energy

1,100 MW /  7,000 MU

Utilisation loss reduction -


20% savings assumed feasible on a base of 5,500 MW and 21,600 MU (63% of 34,300 MU)

1,100 MW / 4,300 MU

Utilisation loss reduction  -


40% energy consumption savings assumed feasible in each of the 50% of the IP sets; savings during peak demand assumed negligible; energy base of 12,700 MU (37% of 34,300  MU)

Nil peak demand savings

and 2,500 MU energy

Wind energy

600 MW from the potential of 1,200 MW assumed feasible; PLF of 30% assumed

600 MW /2,100 MU


50% of estimated potential of 950 MW is assumed feasible at a PLF of 50%.

480 MW / 2,000 MU

Solar – Water heating

Assumed 75% of 14 lakh installations can be fed at average load of 2kW; at an average use of 1.5 hour a day assumed

2,100MW during morning  Peak & 1,050 MW during Evening peak/1,100  MU

Solar –residential lighting

Assumed 25% of 81 lakh installations can be fed; average load of 160 Watts and  average 5 hrs a day energy consumption

300 MW / 600 MU

Solar - water pumping for  IP sets

Assumed 25% of 15 lakh installations can be fed; at 3 kW average load this comes to about 1199 MW; 25% of the total  savings in demand assumed for evening  peak hours;

1100 MW /

3,200 MU energy

Solar - Public and

commercial  lighting

Assumed 40% of 11 lakh installations (with 1,600 MU annual consumption) can be fed; average load of 100 Watts assumed.

40 MW / 640 MU


8. Integrated Resource Management Model

Annexure below provides a model of how the additional demand for electricity in the state can be met by a combination of various techno-economically viable alternatives to fossil fuel based or dam based HP stations.

8.1. This model indicates how a combination of various alternatives available to us can be deployed to achieve the self sufficiency in meeting our energy requirements on a sustainable basis.  The peak hour and annual energy demand for the state has been projected upto year 2016 at Annual Compounded Growth Rate (ACGR) of 7%.  The estimated potential as mentioned in table 5 above is assumed to be realized over a period of 10 years for the sake of the availability of needed funds. The renewable energy sources in this model are all assumed to be distributed energy sources, and hence the corresponding benefits are viewed as reducing the net demand on the electricity grid.

8.2. This model indicates that the peak hour demand of the Karnataka Electricity Grid can be reduced from the projected level of about 12,300 MW in the year 2016 to less than 6,300 MW by effectively deploying various alternatives indicated in Table 5.  Similarly, the annual energy requirement can be reduced from the projected level of about 67,500 MU in the year 2016 to less than 44,000 MU.  What this model indicates is that without having to invest a lot additionally in fossil fuel or dam based power stations, the projected demand of the state by 2016 can be met comfortably. This basically establishes that huge benefits can accrue to the society by adopting such Integrated Resources Management approach to meet our energy needs.

8.3. It should also be noted that this model has not taken into account the additional generation capacity that will be available to Karnataka from the ongoing and/or committed power stations like Bellary TPS (2*500 MW), Raichur TPS (unit 8, 9 &10), Bidadi GTP (1,400 MW), Karnataka’s share in central sector projects like Kaiga Nuclear project (Unit 3 & 4), Kundankulam Nuclear project (2 * 1000 MW) etc.  Taking all these into account Karnataka can be hugely surplus both in peaking power capacity and annual energy capacity.  This situation may even provide us the luxury of planning for the decommissioning of older coal fired generating units and the Kaiga nuclear power station.

8.4 Though the huge reduction shown for grid demand may appear to be unrealistic, it is real and techno-economically feasible.  The figures indicated in the model have been arrived at on a conservative basis, but no claim is made on a high degree of accuracy. This model was presented in AER2006, IIT Bombay, on December 4-5, 2006. The objective of this exercise is to demonstrate the benefits of the order of magnitude, and slightly different figures may be used by different people while using this model.  Only a fraction of the potential benefits have been used in the model, and even 50% of the indicated benefits can help us to overcome the chronic power shortages we are facing every-year.

8.5 The inference that can be drawn from the Integrated Resource Management Model is that there will be no need for planning additional generating capacity based on conventional technologies like fossil fuel based or large dam based power stations for the next 10 years.

9.       Conclusions

Far reaching conclusions can be drawn by these discussions.

·          Ever increasing population base, huge inefficiency in the industry, fast depleting fossil fuels - pose grave threat to the energy security;

·          We have no shortage of generation capacity; but only inefficient usage;

·          Large size generation projects come at huge environmental and social costs; they are not necessarily in the overall interest of the society;

·          In future the large size generation projects cannot be panacea for energy problems on a sustainable basis;

·          Techno-economically viable alternatives, which are available, can provide additional electricity at much lower societal cost; shorter gestation periods; there will be no need to submerge any forest or agricultural land; they are environment friendly; no displacement of project affected families;

·          Electricity industry as a whole has the potential to be the biggest polluter of our fragile environment, if not managed responsibly;

·          Whereas the deficit that is being experienced is largely during peak load hours, the base load stations (like coal fired power stations) are planned to be built; this will lead to excess base load capacity;

·          New and renewable energy sources, efficiency in the industry and energy conservation only can provide lasting solutions;

·          Proposed large size projects are not in the overall interest of the society;

·          Review of present policies of relying on large projects is essential.


Karnataka Electricity Industry - Integrated Resource Management Model

PART I: High level calculations of benefits: forecast for peak demand power (MW)


Year 2007 onwards







Load forecast @7% growth from 6,200 MW base (peak hour demand)







Demand reduction feasible through existing system improvements







B1. Generation improvement through R, M & U







B2. Transmission & Distribution loss reduction







B3. Non-agricultural use







B4. Agricultural use (the reduction during peak hours assumed negligible)







Aggregate reduction feasible from efficiency measures







Demand reduction feasible through solar technology







C1. AEH Installations (50% reduction during evening hrs assumed)







C2. Residential installations







C3. IP sets (25% of total savings during evening hrs assumed)







C4. Public & commercial lighting







Aggregate reduction possible through solar technology







Demand reduction feasible through wind energy







Demand reduction feasible through biomass







Aggregate demand reduction through NCE sources







Net power demand forecast on the grid (= A-(B+F))






PART II: High level calculations of benefits: forecast for annual energy requirement (MU)


Load forecast @7% growth from 34,300 MU base (annual energy demand)






Energy reduction feasible through existing system improvements






I1. Generation improvement through R, M & U






I2. Transmission & Distribution loss reduction






I3. Non-agricultural use






I4. Agricultural use






Aggregate reduction feasible from efficiency measures






Energy reduction feasible through solar technology






G1. AEH Installations






G2. Residential installations






G3. IP sets






G4. Public & commercial lighting






Aggregate reduction feasible through solar technology






Energy reduction feasible through wind energy






Energy reduction feasible through biomass






Aggregate energy reduction feasible through NCE sources






Net energy demand forecast on the grid (= H-(I+M))






Note: In this model the projections are shown for alternative years only to make the table compact; 7% CAGR is considered taking into account the actual demand growth in the state during last few years; NCE sources refer  to non-conventional energy sources, which are basically renewable sources; 6,200 MW base and 34,300 MU base mentioned in the table refers to the actual data for Karnataka during 2005-06.


We should rededicate ourselves for the protection of flora, fauna, environment and the underprivileged through responsible management of the electricity industry, for which we need a paradigm shift.

Concluded                                                       Views are personal

Author can be contacted at  [email protected]

Peak Oil to Peak Gas is a Short Ride- Part II

Andrew McKillop, Director, Xtran



Blurring Divisions and Diminishing Prospects



orldwide, the division between associated and unassociated is in fact blurred, because virtually all (at least 90%) of major 'stranded' gas reserves are in oil producing areas. The pressing problem for world gas supplies is to increase recovery of currently flared or vented 'associated' gas, rather than develop LNG-based production from 'stranded' gas. The reasons are triple: quantities of 'associated' gas currently thrown away, and time and cost constraints. In addition, oil production needs to be maintained, and this is more and more difficult.


Gas is still under priced but gas production, especially in 'mature' gas producing regions – notably Russia and USA – is increasingly expensive. In a pricing context where gas prices remain volatile and low, unlike oil prices that are volatile and high, the 'smart' money does not spontaneously roll towards expanding gas production or developing new supply through costly gas gathering installations. The same applies, but more so, to much more expensive LNG capacity growth.


Along with the increased costs for expanding gas supplies to meet world demand, which is growing at well above 5% pa (compared to about 2.25% pa for oil), new developments take more time to add net supply capacity.


The total of 'associated' natural gas currently flared worldwide, estimated by the World Bank at about 150 Billion cubic metres/year (around 30% of Europe's total gas consumption or more than enough to supply all electric power production in Black Africa) is an attractive target for recovery, and a reassuringly large quantity.


This again is in theory: the gas is there, or rather thrown away and 'used' to change world climate, but gathering it, and using it for energy supply poses immense problems of cost and time to develop infrastructures.


At a smaller scale, but not so much because Russia currently produces about 22% of world gas supply, and is claimed to hold 30% of the world's remaining gas reserves ('associated' plus 'stranded'), this cost-and-time problem is now acute for the 'clay-footed giant' of world gas, the Russian Federation.


Immediately in turn, this will soon pose major gas supply and cost problems for dependent European Union gas consumer countries – most of which are planning, and building new gas-fired electric power capacity at 'Belle Epoque' rates, in part to comply with Kyoto Treaty obligations, and on the fond belief that Russia's gas, like Saudi Arabian oil of the 1980-2000 period, is “limitless”.


There are increasingly sure signs that Russia's Gazprom will not be able to meet its self-assigned, and massive gas production targets.


The increasing vindictiveness of relations between Russian oil and gas corporations, all closely controlled by Putin's Kremlin, and foreign 'partners' such as BP, Total and Shell, are in large part due to new gas reserves not being as big as hoped, and cost plus time constraints for bringing these reserves into the Gazprom gas gathering and transport network, serving Europe, that are always increasing.


Deliberately underestimating costs before project starts, then raising them almost by the week as development grinds slowly along, is a sure way to brew conflict between project partners.


Plenty of observers surmise, Gazprom boasts of 'almost unlimited' gas reserves, are no more than boasts, and identical to oil reserve bragging by OPEC countries – designed to suck in capital and bolster investor confidence.


In the real world, the diminishing but critical gas reserves of the three-biggest west Siberian gas fields (all of them 'associated') are unable to meet even short-term gas demand of Russia's domestic, CIS, and EU consumers. Only massive capital spending, and immense luck would make it possible for Russia to meet projected gas export demand in the 2009-2015 period. Put another way, Peak Gas, for Gazprom and its down-the-gasline consumer customers, is likely to arrive quite early, about 2009.


Rather like the erudite calculations of Marx and Engels (based on 19th C thermodynamics principles related to the inverse square law) advanced to support their idea that imperial powers would expand ever outward but meet vastly increasing logistics problems, due to distance from the Mother Country, the logistics of gas gathering spirals up in cost and time as more, smaller and further gas fields need to be tapped, to maintain production.


The key word is: maintain. Increasing total production will soon be a forgotten promise, and lure for incoming partners, a hangover from the 1995-2000 period, certainly for Russian gas.


Knock-on and Downstream Effects


It is important to understand that average members of the consumer masses, or decision making masses have no conception of Peak Gas being imminent. While Peak Oil is grudgingly accepted, at least to the extent that 'After Oil' is a buzzword in corporate planning and political policymaking circles – where it can turn a profit or deliver votes – Peak Gas is an entirely unheard of and unwelcome spectre.


Almost by definition, for consumers of cheap energy, gas is the “replacement fuel”, with many advantages: these include the belief that gas, because of its 'near limitless abundance' can only be cheap, is an 'environment friendly' energy source, and is available from non-OPEC and non-Arab or non-Muslim countries. This latter belief is immediately contradicted by reality. Apart from Russia – already at the edge of Peak Gas – the world's biggest remaining gas reserves are in Iraq, Iran, UAE, Qatar, Turkmenistan, Nigeria and Venezuela.


The claimed 'environment friendly' nature of natural gas, especially in relation to climate change, is contradicted by the huge loss rate relative to delivered and burned gas: at least 9% of world gas goes straight into the sky, unburned, where it acts as a very powerful GHG. This loss rate will very surely increase faster than production, notably because of increasing transport distances, smaller gas fields exploited, and increased attempts at gas storage, to cover sharply increasing seasonal variation of gas demand.


This last point brings us onto yet another tell-tale sign of approaching Peak Oil and Peak Gas: increasing seasonality of demand. Major reasons for this include price – as price increases, so do just-in-time buying habits – but there are also long-term factors driving this trend.


These notably climate change, resulting in increased summer peaks of electric power demand (needing more gas, and sometimes oil, for generation), and summer peaks of car fuel and airplane fuel demand in the largely de-industrialised 'postindustrial' consumer societies, wallowing in a riot of industrial goods consumption.


Consuming now, not investing for a future they don’t believe in, is a real world habit of the consumer society, which translates to 'new techniques' for oil and gas storage: that is trading gas and oil in transit, that may or may not arrive, or even be there in first instance. This game began with electricity and was typified by the Enron debacle; it is now in full flood with oil and gas, and will produce the same end results.


For the analysts and policymakers there is the comfortable (to them) and brutal solution of 'demand destruction'. When prices get high enough, or supplies are not there, demand will surely drop, to the floor or further. Yet this has not happened in the real world and with oil, or gas, or electricity. As supply tightens, and prices become more volatile, then higher, world energy demand goes on growing because energy consumption shifts to consumers who can use it, and do need it – as any economist, even of the New Economics variety, will accept.


In the case of world traded oil and gas, this signals a shift from the old world and de-industrialising OECD North, to the emerging industrial South, led by the two supergiant economies of China and India. Here, potential demand is simply 'unlimited', much like demand potential in Europe and Japan during the 'postwar economic miracle' of the 1950-1975 period.


Nice Theories and the Real World


Coming to grips with, even accepting the idea of Peak Oil has taken at least 10 years, like the acceptance of climate change and the need to do something about it – which has taken about 15 years. How long will it take for Peak Gas to be accepted as fundamentally linked and related to Peak Oil? The jury is out for deliberation on this one, and nobody knows when it will be 'politically credible' to advance the idea that world gas supplies are even today unassured, and sure to decline, tomorrow. What is important is the triad oil-gas-electricity, which unlike coal are all highly interdependent. If one part of this three-leg stool falls away, the stool falls.


Demand projections for world electricity – growth is running at 9% pa – all assume, either explicitly or implicitly, that 'abundant and cheap', as well as 'environment friendly' natural gas will take the strain. This is for the real world, outside the cosy images of wind farms, and nuclear power stations that will not be built. Removing cheap gas from the picture will very surely trouble the reassuring but impossible concept that after Peak Oil we will have a 'Gas Bridge' for decades, even for 50 years as some die-hard dreamers like to proclaim.


Gas prices will soon firmly link to oil prices, that is expensive oil will drag up gas prices rather than underpriced gas dragging down oil prices – this being what most consumer country deciders like to believe, surely hope, and inscribe into white papers and green books as a surrogate for reality. This oil-gas price linkage will start soon, at latest by 2007-2008.


The excesses of downward price speculation in 2006 (gas prices falling to an equivalent of about 17 USD/barrel), so attractive to consumers and political leaders of the consumer countries, will soon be a thing of the past, no doubt mirrored by upward price speculation of the same 'imaginative' virility and excess. The main problem – exactly as for oil – will be that fast-rising gas prices will do little or nothing for increased supply and supply capacity. This is yet another tell-tale sign of the fundamental linkage between Peak Oil and Peak Gas.


On the positive side, high and firm energy prices will finally allow and enable energy transition. This has been described many times, and will need to feature organised, planned and automatically funded effort, worldwide, to rationalise oil and gas utilisation, sharply reduce oil and gas intensity (average per capita demand) in the OECD countries, and rapidly develop renewable energy on a coherent international base.


Time is ticking away, the countdown to Peak Gas is now as easy to guesstimate as the Peak Oil countdown, but as ever the absence of coordinated and international response is a tribute to, or proof of the incoherence of so-called New Economics and its defenders.


In the effective real world, as we know, the Gazprom crisis – and likely future debacle – has translated to grotesque cold war atavism, with sharp rising tension between Putin's Russia and its European clients and customers, encouraged and intensified by the USA.


Conflict and rivalry for Turkmenistan's gas reserves is linked to the Afghan war. Iran's 'immense and unlimited' gas reserves – exaggerated in the same way as Russian reserves – are treated by some as a raison de guerre, that is booty for the victors in the case of 'Iran regime change'.


Gas rivalry and conflict also now affects relations between Argentina, Brazil and their new supplier, Bolivia. Little or nothing, conversely, is being done to raise gas recovery in Nigeria, with the highest ratio worldwide of flared gas to produced oil, despite World Bank hand wringing on the subject. The list is long, and time and money are short.


Peak Gas will surely arrive while the jury is still out, debating whether Peak Gas exists!



Courtesy: Energy Pulse, Weekly, a service of Energy Central





Putin visit: India hopes for share in Sakhalin-III

January 23, 2007. Russian President Vladimir Putin’s visit as chief guest at the Republic Day celebrations will see the Indian side trying to pitch for partnership with the Russians in oil and gas exploration projects. The Russians are flush with cash due to the recent peaking of oil and gas prices. They need to make a strategic decision on who they want as partner for exploration in the Sakhalin-III block. ONGC Videsh Ltd, the overseas arm of Oil and Natural Gas Corporation (ONGC), owns a 20 per cent stake in Sakhalin-1. India has invited Russia to participate in its downstream sector, especially in refineries. It would like the names of Russian companies on the list of global companies interested in its downstream sector. Russian state-owned Gazprom has shown interest in the Iran-Pakistan-India pipeline. The pipeline project, delayed due to geopolitical tangles and gas pricing issues with Iran, is expected to move ahead when senior officials from the petroleum ministry visit Iran in the next couple of months. Apart from oil and gas, the two sides will sign agreements on joint production of defence equipment like multi-role transport aircraft and fifth generation fighter aircraft. Exploratory talks on a comprehensive economic cooperation agreement (CECA) will also be held. Also on the agenda will be tying up of loose ends on a youth satellite that the two countries plan to develop jointly. 

Canada’s GeoGlobal likely to go on sale

January 23, 2007. Canada-based GeoGlobal Resources (GGR) a publicly-traded oil and gas company is likely to be on the block soon. The company is engaged in the exploration and development of oil and gas in India, with primary assets in the Krishna Godavari (KG) basin and Cambay basin. GeoGlobal has a 5 percent interest in the exploration block KG-OSN 2001/3, where GSPC (the operator of the block) has discovered 20 TCF in 2005. The gas block is valued at over $50 billion. GGR has a market capitalisation of over $520 million and the stocks of the company are traded on the American Stock Exchange (Amex). Meanwhile, international majors like BP, BG Group, Chevron, ENI of Italy and Petrobras have envisaged interest in picking up stake in the KG basin discovered blocks and are in the race to acquire up to 20-30 percent of GSPC’s interest in the same block (KG-OSN 2001/3). Analysts believe that companies like GeoGlobal, Jubliant Empro and Niko Resources, who have minority stakes in the discovered KG basin blocks are soft targets for global majors like BP, BG Group, Chevron, ENI and may exit if they get better valuation for their stakes. BP and BG are considering buying into opportunities in the KG basin blocks and have had discussions with Reliance Industries to pick up a stake in its KG-D-6 block. GGR has a participatory interest in six exploration blocks in India. Besides, the KG basin block, four onshore blocks are located in the Cambay Basin (with 10 percent participating interest in each), and the remaining one is located onshore in the Deccan Syneclise Basin (with 20 percent participating interest), in the north of Maharashtra. 

Chevron to acquire stake in RIL’s new oil & gas co

January 22, 2007. Reliance Industries (RIL) is looking to hive off its oil & gas assets in the Krishna-Godavari basin into a separate company and offer a stake to a foreign partner. US oil major Chevron, which already has a stake in Reliance Petroleum, is considered the frontrunner. Chevron has a MoU in place to further collaborate in upstream and downstream sector. RIL had earlier held discussions with BP and BG Group for diluting stake in the block, but the talks fell through due to disagreements over the valuation. The move is hugely significant, as it would mean that RIL would become like a holding company for its most important upstream assets and focus on petroleum refining and petrochemicals. The new company will control all RIL’s oil and gas blocks in the KG basin, including the famous KG D6 where India’s largest gas discovery was made in 2002. It would also own any oil or gas-producing block held by RIL now. RIL has already made a company called Reliance Exploration and Production DMCC its subsidiary in the third quarter. It is not known if this will be the vehicle for the upstream assets, but the fact that this development has happened now is significant. RIL’s board of directors in November approved a proposal to raise $2 billion for the oil & gas exploration and production (E&P) business. The company has already invested a substantial amount for developing the block and would raise more funds by diluting stake to the international partner and the Indian public.

Reliance KG Basin to deliver oil first

January 22, 2007. Reliance Industries Ltd (RIL) plans to first bring oil from its oil and gas fields in the Krishna Godavari (KG) basin. The company will start production from the KG-D6 block in 2008 and is targeting to produce an estimated 40,000 to 50,000 barrels of oil in the first half.  As per reports, Reliance was looking to spin off its fields in the KG basin into a separate unit and offer strategic stake to a foreign partner such as Chevron Corp to get technical expertise, secure additional funding as exploration costs are on a rise and also extract a value from the assets. Reliance owns 80 per cent in a block in the KG-D6 in KG basin. The block is estimated to produce up to 80 million standard cubic metres of gas a day at its peak, or more than half of India's demand for natural gas.

Petrobras, ONGC to partner for exploration activities

January 19, 2007. Brazil's Petrobras and State-owned ONGC would partner in offshore exploration and production activities in India and Brazil. Both the companies will jointly bid for offshore exploration blocks in the forthcoming New Exploration Licensing Policy (NELP) rounds in India and Brazil's ninth round of bidding slated to be held in the second half of 2007. Petrobras produces roughly two million barrels of oil - bulk of which is produced in Brazil - and is a major player in deep and ultra-deepwater exploration segment. The company has already paved way for ONGC Videsh Ltd, the overseas arm of ONGC, to acquire stake in BC-10 discovered oilfield in Campos Basin of Brazil.

ONGC signs MoU with Russian co

January 19, 2007. Oil and Natural Gas Corporation (ONGC) has inked a memorandum of understanding with Tatarska Geophysica Technologies (TGT) of Russia for increasing production of matured fields. TGT is a Russian service provider in well and reservoir management operating in many countries in the Asian region. The objective of the MoU is to put the ageing fields back on production and also arrest decline from matured fields with TGT's latest technology. The MoU was signed on the sidelines of the Petrotech-2007. The average recovery rate from ONGC's oilfields is between 28 per cent and 30 per cent, which is even lower in the old fields.

Lanka offers oil block to India

January 18, 2007. Sri Lanka has offered an oil exploration block to India in Mannar near Cauvery basin. Out of eight exploration blocks identified, it has given one block to the Indian Government on nomination basis and another to Chinese Government. The balance will be given through bidding process in three months time. Sri Lanka was planning to double the capacity of its existing 50,000 barrels per day (bpd) refinery and has been given the go ahead to a UAE company to set up another 100,000 bpd. This is even while the country was firming plans for oil and gas exploration. As regards the delay in awarding the exploration blocks, it was said to be because of the fact that Sri Lanka had changed the exploration policy and the consultants TGS-NOPEC Geophysical Company ASA (TGS). In addition, there was lack of infrastructure and trained manpower. All these things were taking time.

ONGC confirms oil finds in KG and Mahanadi basins

January 18, 2007. The exploration and production major, Oil and Natural Gas Corp (ONGC) has confirmed striking natural gas in Krishna Godavari basin off the Andhra Pradesh coast and Mahanadi basin off Orissa coast. The KG well in water depth of 2,840 metres was still to reach its target depth but initial testing in the presence of Directorate General of Hydrocarbons (DGH) officials has confirmed the presence of natural gas. The well has reached a depth of 6,600 metres and the target depth of 7,000 metres would be reached in the next two weeks. ONGC will drill four-five more appraisal wells before it can announce the size of the discovery and the reserves it holds. The discovery in KG basin posts technological challenges for which the company was looking for a strategic partner.

Saudi Arabia ready to increase crude supply to meet India’s energy needs

January 18, 2007. Saudi Arabia, world's largest oil producer, said it would boost oil production capacity to meet the rising global demand. The country also said it was committed to increasing crude supplies for meeting India's future incremental energy needs. Saudi Arabia is committed to increasing the availability of energy to global markets. These are no hollow words but are backed up by concrete plans and actions and commitment of more than $80-billion for capital projects aimed at increasing the supply of energy to world markets and alleviating infrastructure bottlenecks. Saudi Arabia is supplying about 500,000 barrels per day of oil to India. Saudi Arabia is also interested in various types of joint venture partnerships with Indian firms, either in the kingdom or in India, and inviting Indian engineering and construction firms to bid for new projects available in petrol, natural gas, petrochemicals and mineral sectors. The country would like to see more of the manufactured products and equipment used in our projects sourced from India. Saudi Arabia was looking beyond “short-term aberrations” in markets by carrying through an $80 billion programme to boost output and meet global demand. Oil prices have slid 16 percent this year and now ruling at a little over $52 a barrel. Saudi Arabia, which is Opec's biggest producer, rejected calls by fellow members like Venezuela and Algeria for an emergency meeting to discuss a further lowering in output targets to stem price decline. The kingdom has a significant stake in ensuring stable markets for the long-term, the country was doing all it can to boost oil production capacity and oil and gas reserves are adequate to meet rising demand. On the production front, Saudi Arabia planned to expand capacity to 12.5 million barrels a day by 2009 from the current 10.8 million barrels per day. The kingdom might start additional projects to expand output capacity after 2009, subject to global demand. Refining capacity in the country will be doubled to more than six million barrels a day over the next five years.

ONGC in talks with foreign firms for KG Basin

January 17, 2007. ONGC is in talks with a number of global players, including Brazil’s Petrobras, Italy’s ENI, and Norway’s Norsk Hydro, to develop its gas rich block in Krishna Godavari Basin. A number of international majors have shown interest in participating in the block, and it is primarily in talks with Norsk Hydro, ENI and Petrobras. An agreement was likely to be firmed up with a global player in a few months. 


IOC ready to set up plant in Yemen, but wants gas field in return

January 19, 2007. Domestic oil refining and marketing major Indian Oil Corporation (IOC) on Thursday said it would consider setting up a petrochemical plant in Yemen provided it was allocated a gas field. Yemen’s oil minister Khalid Mahfoudh Dahah, who is in India to attend the five-day international oil and conference Petrotech 2007, has invited Indian oil and gas companies to come and invest in Yemen particularly in the field of refining and petrochemicals. A proposal for setting up a refinery has also been extended to ONGC, which too has sought an oil field in return from the Yemen government. The current 17 trillion cubic feet gas reserves were all committed to domestic and long term consumers overseas.

HPCL may ally with Total, Kuwait Petro

January 19, 2007. HPCL is in talks with Total of France and Kuwait Petroleum to take them on as partners in the Vizag refinery in Andhra Pradesh. Total may pick up a stake in the expansion of the refining capacity of Vizag plant, adjacent to the existing refinery. The existing refinery with installed capacity of 7.5 million tonnes per year, is being expanded by another 9 million tonnes per year.

The expansion is being done separately in the same complex. The proposed expansion will need an investment of Rs 12,000 crore, which includes a petrochemical plant. It is likely that Total may partner with a firm in Kuwait to jointly pick-up the stake. Even in this case, out shareholding will be equal to the joint shareholdings of the two (foreign) firms in the refinery. HPCL is negotiating with Total, but no agreement in this regard has been signed. The deal is likely to be formalised in 2-3 months time. After Total (along with its partner) picks up the stake, the company may explore a possibility for launching an initial public offering.

Petroleos Venezuela may buy big stake in MRPL refinery

January 19, 2007. Petroleos De Venezuela SA (PDVSA), the state-owned company of the Republic of Venezuela and the fifth-largest oil producer in the world, is seeking to pick up a sizable equity stake in MRPL’s existing refinery as well as the 15-MMTPA refinery proposed to be set up in the Mangalore SEZ. That apart, the company is seeking to pick up stakes in the discovered and producing assets of ONGC in India and abroad. In MRPL, ONGC holds a majority stake of 71.62 percent, while 16.97 percent is owned by HPCL. Interestingly, HPCL is also seeking to enhance its stake in MRPL to over 26 percent. The final decision would rest on government level negotiations.

Yemen invites ONGC to build $1-bn refinery

January 18, 2007. Yemen has invited ONGC to build a 1,00,000 barrels-per-day refinery on its Arabian Sea coast. But the state-run company has asked for an allotment of an oilfield in return for participation in the $1-billion project. Yemen plans to build 1,00,000 barrels per day refineries at Hardamout and southeastern region of Al-Mukalla and have invited ONGC to participate in one of them. The projects will typically involve an investment of $1 billion each and can be wholly-owned by foreign companies. The projects discussions with prospective investors will be concluded by 2008 and construction will take another 3 years. 

Deora meets Saudi oil minister, offers stake in three refineries

January 17, 2007. India offered Saudi Arabian national oil firm Saudi Aramco, a stake in its three upcoming refinery projects and conveyed its interest in investing in oil fields and refinery projects in the oil-rich Gulf nation. Bharat Petroleum Corp Ltd (BPCL) is building a 6 million tonne a year refinery at Bina, Indian Oil Corp is constructing a 9 million tonnes refinery at Paradip while Hindustan Petroleum Corp is setting up a similar capacity refinery at Bhatinda.

Transportation / Trade

Myanmar to decide on gas exports to India by May

January 19, 2007. Myanmar will decide on exporting gas to India by May, after it gets the reserves in its offshore areas certified. The current estimate of gas reserves would not support export of gas to India either through a pipeline or in the form of LNG. Independent certifiers have certified 4.8 trillion cubic feet gas reserves in offshore block A-1, while in the adjacent block A-3 the reserves will be established after the current appraisal drilling is completed in May.

IOC to transport petro products on East, West coasts

January 18, 2007. Indian Oil Corporation (IOC) has informed various shipping companies about its plan to transport petroleum products, both clean and dirty types, on the East and West coasts over a period of one year beginning April 1. According to indications available, an estimated 20 to 22 vessels of various types might be required for the proposed transportation, it is learnt. The vessels will be acquired on time charter by the public sector oil giant. It might be noted that the present contract, which was for two years, is to expire on March 31. Under the contract, a total of 19 vessels, offered by several shipping lines, were acquired on time charter. Meanwhile, Shipping Corporation of India (SCI) has renewed its contract of affreightment (CoA) with Bharat Petroleum Corporation for transportation of crude, for imports and coastal movement, for a period of two years ending September 2008, with provision for an extension of one more year. The agreement covers an estimated volume of 8.5 million tonnes annually, of which import will be about six million tonnes.

Policy / Performance

Indian oil cos willing to invest in Yemen: Bahah

January 22, 2007. Terming his participation in the 7th International Oil and Natural Gas Conference (IONGC) held in New Delhi as "extremely successful", Yemeni Minister for Oil and Minerals Khalid Bahah said, Indian oil companies are willing to invest in his country. On the sidelines of the conference, he met his Indian counterpart Murli Deora, and discussed with him the bilateral cooperation aspects in the economic field, specially oil. The minister also invited Deora to visit Yemen next month for talks over a number of joint petroleum projects such as establishing refineries, new station for liquid gas, petrochemical industries and other strategic projects.

Price control in gas sector may be back

January 18, 2007. It’s the return of the controlled pricing regime in the gas sector. Reliance, British Gas, ONGC and other natural gas producers may not be allowed to sell gas at market prices after all. The government is considering a proposal to control the rate of return a gas producer should earn by selling his gas. Put simply, this would mean the re-introduction of the cost-plus approach, which had been done away with, under the New Exploration Licensing Policy (NELP).

Not only new production sharing contracts (PSCs), but all existing ones as well, would have to be modified to include the new provision if the proposal goes through. This could lead to litigations as it would tend to violate the commitments under NELP, whereby a company can sell gas at market determined prices. The move is likely to have a significant impact on the bottomlines of ONGC, GSPC and Reliance, which have discovered huge gas resources recently in KG and Mahanadi basins and hope to rake in huge upsides, given the high gas prices and the shortage in the domestic market. It is suggested that all PSCs in future must have a clause to reflect the role of the regulator in determining prices of domestically produced gas. Price should be fixed on the basis of ‘production cost plus reasonable rate of return.’ The proposal stresses on giving ‘real autonomy’ to the DGH and strengthen the body with financial and technical staff to discharge its role effectively and independently.

The consequence of the proposal to do away with a market-clearing price would not be limited to depressing the bottomlines of the companies that have struck gas. When price is kept artificially repressed, demand would exceed supply and discretion would have to step in to determine allocation of gas among the numerous claimants. Going forward, artificially low prices could dampen commercial enthusiasm for exploration and production, leading to further shortage of gas and greater dependence on imports.

The committee of secretaries is currently examining a proposal which would empower upstream regulator (directorate general of hydrocarbon) for fixing prices of gas at well-head to ensure availability of the fuel at a reasonable rate to gas-based power plants. Sources in the petroleum ministry has, however, expressed hope that this demand and supply mismatch would be bridged by the end of the Eleventh Five-Year Plan. The projected demand of natural in 2007-08 is around 179 MMSCMD, which is likely to go up to 281 MMSCMD by 2011-12. With gas discoveries of RIL and GSPC, the supply is likely to go up from about 100 MMSCMD (including imported LNG) in 2007-08 to 275 MMCMD by the end of the terminal year of the Eleventh Plan. It is expected that ONGC’s recent gas discovery in the KG basin would soon be notified, that may bridge the gap completely, he added. The power ministry has demanded the government to ensure a regular and adequate supply of fuel to gas-based generation units. It argued that the government’s share of indigenously produced gas (profit gas) should be supplied to the user industries at a reasonable price.  The PSCs provide for profit gas, either in cash or in kind. Suitable amendments in the PSC should be made so that the government has the preference of taking the profit gas in kind as first option, it said in a proposal. APM gas is the one produced from pre-NELP blocks given to E&P companies on nomination basis. In such cases prices are determined by the government and not by the market force.

Govt allows Petronet LNG to raise prices

January 18, 2007. The government panel allowed leading gas firm Petronet LNG Ltd to raise liquefied natural gas prices for its customers from May 2007. Petronet LNG has been allowed to increase prices for all its existing customers and the Dabhol power plant. Petronet LNG will revise the prices as and when it gets new term contracts to buy LNG.  A new pricing formula has been worked out according to which the revised price will be $5.84 per mBtu.. Petronet sells LNG now at around $4.4 per mBtu. The firm sources five million tonnes a year of LNG from Qatar and has tied up 1.5 million tonnes from various sources for the 740-megawatt Dabhol power plant in the western state of Maharashtra. 

Deora: Let Budget fund LPG, kerosene subsidy

January 17, 2007. The petroleum ministry has prepared a Cabinet note seeking extension of the subsidy scheme on domestic LPG (cooking gas) and PDS kerosene until March 31, 2010. The current subsidy scheme expires on March 31, 2007 and in the absence of an extension, the prices of kerosene and LPG will have to be raised sharply. What is significant is that the ministry wants the Budget to meet the full subsidy on these two products from next fiscal, against the existing norm of providing it on a flat-rate basis. Assuming crude oil prices at this year’s level, the finance ministry would have to set aside about Rs 28,600 crore ($ 6.4 bn) as subsidy on LPG and kerosene alone in Budget 2007-08. This will immediately impact the deficit targets under the Fiscal Responsibility & Budget Management Act. At present, the government issues bonds to oil companies to partly offset their losses on the sale of petroleum products – petrol, diesel, kerosene and LPG – at administered prices.

Chavan for dual-pricing of cooking gas

January 17, 2007. The Prime Minister’s Office called for a shift to a transparent oil-pricing system where the regulator fixes cross subsidies on petroleum products. Minister of state in the PMO, Prithviraj Chavan, stressed the need for a dual-pricing system of domestic cooking gas. Addressing a special session on “The Challenges in Retail” at the Petrotech-2007, jointly organised by the ministry of petroleum & natural gas and Ficci, Chavan said the pricing of petroleum products should cease to be a political decision and the regulator should step in to fix cross subsidies in a transparent way. The minister also announced that the government had accorded the highest priority to energy conservation and efficiency and was seriously considering the merger of the Petroleum Conservation & Research Association (PCRA) and the Bureau of Energy Efficiency (BEE) to optimise the potential in this area. A distortion-free pricing regime would enable the oil companies to remain healthy. Subsidies were necessary and a compassionate policy instrument, and called for effective targeting to the intended beneficiaries.

Deora spikes ONGC-British Gas proposal

January 17, 2007. A proposed strategic alliance between energy major British Gas and state-owned ONGC for jointly exploring three deepwater blocks in the prospective Krishna-Godavari basin has been rejected. ONGC had agreed to offer BG 50 percent equity in these blocks. This comes at a time when the UK government is lobbying hard with the Centre for British firms. Giving its final verdict, the petroleum ministry has now decided to offer these blocks for open bidding in the future round of the New Exploration and Licensing Policy (NELP-7). These blocks are KG-OS-DW-III, KG-OS-DW and KG-OS-DW-extn. The petroleum exploration licences for these blocks end in May 2007. The decision has been taken despite British Prime Minister Tony Blair's letter to his Indian counterpart Manmohan Singh, urging him to look into the proposal favourably.




Travancore Chemicals plans to have captive hydel plant

January 19, 2007. The power intensive Travancore Cochin Chemicals Ltd (TCCL) - which is manufacturing caustic soda, chlorine etc - has started exploring the possibilities for setting up a captive hydel project in the State. Preliminary studies are going on. Power being the major component of its raw material, low-cost electricity could improve its financial performance. Another area identified for improving its revenue is chlorine. The demand for this product has not been picking up, as downstream projects that use chlorine are capital intensive. Production of chlorinated latex could be a potential area, which could increase the demand for chlorine. In the ports chlorinated rubber paint is used extensively because of the corrosive atmosphere. Since Kerala is the major producer of latex, TCCL is thinking of setting up a latex chlorination unit. The company is currently on the lookout for a suitable technology and once it becomes a reality that could improve chlorine utilisation. The company's turnover during April-December 2006 stood at Rs 104 crore ($ 23 mn) and it is expected to make an all time high turnover of Rs 145 crore as on March 31, 2007, compared with Rs 126 crore ($ 28 mn) posted during the previous fiscal. As on December 31 it has made profit before tax of Rs 5.84 crore ($ 1.32 mn). It does not have to pay tax because of its accumulated losses. The capacity utilisation was over 100 per cent and the production during April-December stood at 42,800 tonnes and it is estimated to cross 58,000 tonnes during the current fiscal. As part of its cost reduction measures, TCCL is planning to transport the raw material salt from the Cochin port by barges to the unit located at Eloor near here. Similarly, it has plans to supply its products to the major users such as the Kerala Minerals and Metals Ltd at Chavara in Kollam through barge. The country has 34 chlor-alkali units like the TCCL manufacturing caustic soda and chlorine with a total annual capacity of 21 lakh (2.1 mn) tonnes. The total investment in this sector is estimated at Rs 9,000 crore ($ 2.03 bn) and the total turnover is Rs 4,600 crore ($1.0 bn). The national level capacity utilisation is 83 per cent.

Lanco signs up for 1200 MW power plant in MP

January 19, 2007. Lanco Infratech Ltd has announced it has signed a memorandum of understanding with the Madhya Pradesh Government for setting up of 1200 MW coal-based power plant in the State, with an option to hike it by 20 per cent. The Energy Department, Government of Madhya Pradesh will facilitate the project development activities by extending all possible cooperation to Lanco. Madhya Pradesh or its nominated agency has the first right of purchase up to 30 per cent of the power generated. The balance power can be sold to any other State through competitive bidding process. The MoU has been signed by Mr K. Raja Gopal on behalf of Lanco Infratech Ltd and Mr Sanjay Bandhopadya, Principal Secretary, Energy Department on behalf of Government of Madhya Pradesh in the presence of the Chief Minister of Madhya Pradesh, Mr Shivraj Singh Chouhan.

French co Suez to invest in 4 local power projects

January 18, 2007. French utilities group Suez will soon invest in four different power generation projects in India. The announcement was made after a French business delegation met the minister of state for commerce and industry Ashwani Kumar recently. Suez India’s Marc Phillipe was part of the 25-member business delegation that met Mr Kumar to discuss investment opportunities in the country. Suez’s plans would entail mega investments in the power sector but the minister did not divulge the amount of investment that the company proposes to make in India. The locations of the proposed projects were also withheld. French companies were keenly looking at investment opportunities in the country’s power and hydro power sector.

CESC may buy mines abroad

January 17, 2007. The RPG group power utility CESC is contemplating to acquire low ash high quality overseas coal mines for its proposed giant power projects at Haldia in West Bengal, and yet to be fixed locations in Jharkhand and Orissa. It was exploring the opportunities in Indonesia for acquiring coal blocks as well. The RPG group flagship might induct a foreign strategic partner for the overseas venture. The group’s foray into overseas mines was likely to be spearheaded by the group mining outfit, Integrated Coal Mines Ltd (ICML). Besides overseas coal blocks, ICML of the RPG group has submitted bids for three coal blocks at the second round of bidding that concluded on January 12. The Union coal ministry has offered 81 blocks with a combined reserve of 81 billion tonne in this round. The RPG group also submitted bids in the first round through ICML but was yet to get any blocks. ICML, an associate company of CESC, was at present the owner of a coal block at Sharsatali near Asansol in West Bengal.

Transmission / Distribution / Trade

Areva T&D tech for NTPC project

January 22, 2007. Areva T&D has announced the implementation of a 765 kV ultra mega switchyard technology at NTPC's Sipat project. The two companies have partnered to implement the technology at the power station located in Chhattisgarh. Power generated at this plant will be evacuated at 765 kV level through two single circuit transmission lines, for the first time in the country such technologies are being deployed. The project is completed two months ahead of its schedule.

PowerGrid to wheel power from N-E

January 22, 2007. The public sector Power Grid Corporation of India Ltd (PGCIL) has initiated work for evacuating power from the North Eastern region. This will involve an investment of Rs 10,000 crore ($ 2.26 bn). The project involved setting up High Voltage Direct Current (HVDC) stations for wheeling electricity from two hydro electric power stations - Subanshree (2,000 MW) and Kempa (600 MW) being implemented by National Hydro Power Corporation Ltd. The project would involve a cable network of over a distance of 3,000 km. The first station, as part of this project, would be set up in Agra for meeting the requirements of the Western region. The second station would be for transmitting power to the Southern region, though the location was yet to be decided. Both the World Bank and the Asian Development Bank had offered to meet the funding of project. At present, the inter-regional power transfer capacity is 11,500 MW after the commissioning of the Tala Transmission system. The commissioning of this project has allowed four regional grids - North, West, East and North Eastern grids to work as one synchronous unit. The combined transmission capacity in these four regions is 90,000 MW. Inter-regional power transmission grid capacities would be stepped up to 18,000 MW by end 2010 and stepped up to 39,000 MW by 2012.

Policy / Performance

Rlys plan energy overhaul to put spends on track

January 22, 2007. After scripting a turnaround, the railways are now looking to achieve a similar breakthrough in its energy management policy by cutting down on its energy bill. The issue gains importance as the railways spend about Rs 6,400 crore ($ 1.4 bn) annually on its energy requirements, of which about Rs 5,500 crore ($1.24 bn) is spent on electricity alone. Setting up a captive power plant at Nabinagar in Bihar was top of the railways’ agenda. The Rs 5,000-crore (1.1 bn) plant will be set up as a joint venture with National Thermal Power Corporation (NTPC)—the railways will have 26 percent equity.

Centre to encourage small hydropower projects in Northeast

January 22, 2007. The Government plans to promote the setting up of Small Hydro Power (SHP) projects in the North Eastern States through grant of subsidies and involvement of the private sector. There is a need for a clear, coherent and consistent policy in respect of the power sector in the region, especially as the power sector constitutes the most important resource of the region and holds the highest potential to propel the region to the front rank of development in the country. The existing structure of SHP was proving inadequate for accelerated implementation in the North-Eastern Region. Though as many as 492 SHP projects have been identified in Arunachal Pradesh, only 64 have been implemented, 48 were under construction and the remaining were still a long way from being brought under implementation. There was a need for restructuring SHP so that the level of subsidies ensure accelerated implementation of all identified SHP projects in the region.

India Power Fund likely by March

January 20, 2007. India Power Fund, a venture capital fund of Power Finance Corporation, will be operational before the end of the current fiscal year. The fund has been in the pipeline since 2004. The power sector will need an investment of more than $100 billion to add 68,000 MW of additional generation capacity, besides transmission and distribution network by 2012. India Power Fund will be operationalised this fiscal. The power ministry has sought an income-tax exemption of 20 percent of the total contribution for five years to the fund. The ministry feels tax break will help mop up resources. It will also help kick-start the India Power Fund, which has been in the making since February 2004. The Reserve Bank of India had raised the risk weightage requirement, forcing possible investors in the fund to back off. PFC has been in talks with LIC and banks for contributions to the fund. Earlier, PFC had considered starting the fund on its own in case LIC and banks declined to contribute to the fund. India Power Fund was announced in February 2004 by the NDA government to meet the shortfall in equity needs for the power sector. 

Law ministry supports plan to offload 5 pc stake in power PSUs

January 19, 2007. The D word is back in vogue. The government is considering a proposal to divest 5 percent stake in each of the three state-owned power sector companies — Power Grid Corporation (PGCIL), National Hydroelectric Power Corporation and Rural Electrification Corporation — that will raise capital from the market via initial public offers. The disinvestment will piggy-back the IPOs. The Cabinet had approved the proposal for an initial public offering for PGCIL and Rural Electrification Corporation (REC) in November, while the proposal for an IPO for National Hydroelectric Power Corporation (NHPC) was approved by the Cabinet in December.

Power tariff in M’shtra may go up from March

January 19, 2007. Power tariff in Maharashtra is set to go up from March this year with the state power utility seeking the regulator’s nod for its tri-ennial tariff revision. MSEDCL, the state power utility’s distribution arm, wants to raise the tariff by 35.29 percent across the board. However, it’s unlikely to get a go-ahead from the Maharashtra Electricity Regulatory Commission (MERC). The current tariff regime ends in March ’07.

Authorise PFC to fund rural power projects: ministry

January 18, 2007. State-run Power Finance Corporation (PFC), which proposes to increase its disbursement to over $6 billion annually from 2012, may be authorised to finance power projects in rural areas. At present, only Rural Electricity Corporation (REC) is authorised to finance rural electrification projects. The power ministry has urged the finance ministry that PFC bonds should also be included in the definition of long-term specified asset and notified for the purpose under section 54 EC. Power ministry sources told FE that the ministry had emphasised the need for this relief at a time when the Centre has launched an ambitious rural electrification programme. So far, only REC was authorised to finance power projects in rural areas. However, in view of funds requirement for such projects, both PFC and REC need to be authorised to finance. Moreover, the ministry has suggested that PFC and REC may be permitted to issue tax-free bonds to raise capital to fund decentralised distributed generation projects for supply of electricity in rural areas.

Power sector needs $100 bn to add 68,000 MW in 11th Plan

January 18, 2007. The power sector will need an investment to the tune of $100 billion if it goes in for a capacity addition of 68,000 MW during the Eleventh Plan period. Of the total amount, $50 billion would alone be needed for raising the generation capacity while the balance would be needed for transmission, distribution and related activities, said power secretary RV Shahi on Thursday at a road show organised by state-run Power Finance Corporation for its proposed IPO, to be opened from January 31. Shahi said the proposed capacity addition of 68,000 MW included 10,000 MW by non-conventional sources and 6,000 to 7,000 MW by captive power plants. He added that of the 68,000 MW, coal-based power projects would have a major share while the capacity addition of 18,000 MW would be possible through hydro-power projects. Shahi said that funding for the upcoming capacity addition would not be a problem as in case of proposed seven ultra-mega power projects with the capacity of 4,000 MW, lenders have come forward to fund these projects with an investment of Rs 20,000 crore ($ 4.5 bn).

Include coal washeries, mining & LNG regasification in core sector: ministry

January 17, 2007. The power ministry, in a serious bid to give boost to the sector, has sought a number of sops from the finance ministry in the 2007-08 Budget. The ministry has pressed for the inclusion of coal washeries, coal-mining and independent regasification plant for LNG in the infrastructure sector, exemption of profits under 80 IA up to 2015 from 2010 to give benefit to ultra-mega power projects planned for the Eleventh Five Year Plan. Besides, the ministry has urged that excise duty for power sector be reduced to a moderate level of 8 percent from the current 16 percent and countervailing duty be accordingly aligned. The ministry has emphasised on the need for the rationalisation of customs duty and suggested that there should be only two sets of duties—concessional zero customs duty as exists for mega power project imports and another uniform set of duty for imports for other than mega power projects for goods/project import at customs duty of 5 percent and CVD of 8 percent. After the overwhelming response for bids for Sasan and Mundra ultra-mega power projects, the ministry has identified 14 ultra mega transmission projects. In order boost these projects and also the ongoing national transmission grid project, the ministry wants that transmission projects, associated with mega power project, should get the same benefit of zero duty and project imports for transmission projects associated with other mega power project should attract the uniform customs duty of 5 percent and CVD of 8 percent.

Uncertainity over gas prices may hit capacity addition: Shahi

January 17, 2007. The uncertainty over availability of gas and unpredictable nature of gas pricing are expected to hamper the generation capacity addition through gas-based projects during the Eleventh Plan period, power secretary RV Shahi said. Shahi said although there were a lot of gas discoveries in India, it was not yet known how much gas and at what price it would be available. At present, gas-based projects, with a capacity of over 13,000 MW are running below their generation capacity for want of assured gas supply. Gas-based projects will come only when there is gas availability for 25 years and price predictability. Till that time, coal-based power projects will dominate the Indian power sector. Shahi indicated that the capacity addition through gas based projects during the Eleventh Plan period would be minimal.




Total to invest $6 bn in Indonesia oil and gas

January 23, 2007. French oil giant Total plans to invest another $6 billion in Indonesia (Kalimantan) over the next five yearsTotal had already doubled its investment to $1 billion in the past three years. The $6 billion would be used to increase capacity at Total's Mahakam Delta oil and gas block in East Kalimantan, on Borneo Island, and to search for new oil and gas reserves. The Mahakam Delta block already employed some 20,000 people. The company was negotiating with state oil and gas firm Pertamina to raise its gas output to meet domestic and exports demands. Indonesia has also asked ExxonMobil to submit better terms for the extension of its contract for the Natuna D Alhpa oil block. President Susilo Bambang Yudhoyono has recently promised to offer tax incentives and review regulations in an effort to attract more foreign investment to develop Indonesia's gas reserves. Rising oil prices have seen Indonesia focus on gas production for domestic needs, rather than for export. This has worried overseas customers and discouraged foreign investment in the sector, amid confusion over how much gas companies would have to sell at lower prices for the local market, rather than to meet more profitable export demands.

BP signs gas sharing deal with Oman

January 23, 2007. BP signed a deal giving it access to a pair of Middle East fields that could yield 20-30 trillion cubic feet of natural gas. The petrochemical giant is working with the government of Oman to access the fields in the country's central region. It will give the company access to an area of more than 2,800 sq km, including the Khazzan and Makarem gas fields which were discovered in 1993. They have remained undeveloped because of access problems where the rock layers are very dense and the gas does not flow easily. BP is confident its technology and expertise will allow it to unlock the reserves.

Pak granted  licences for petroleum exploration

January 22, 2007. The government of Pakistan granted two petroleum exploration licences to the joint venture of the Orient Petroleum International Inc. (OPII) and the Zaver Petroleum Corporation Limited (ZPCL).  The licences would give the right of exploration to the joint venture over Marwat Block No 3170-2 and Maharvi Block No 2972-3, covering an area of 1792.87 square kilometres and 2359.85 square kilometres, respectively. The Marwat Block (zone-I) lies in Laki Marwat, Tank, D.I. Khan and South Waziristan in the NWFP, and Maharvi Block (zone-II) lies in Bahawalpur, Bahawalnagar and Vehari in the Punjab.

Pertamina, ExxonMobil to spend $279 mn for Exploration in Cepu

January 19, 2007. Indonesian state-owned oil and gas company PT Pertamina and Mobil Cepu Limited (MCL) will spend around US$279 million for the drilling of 12 explorations wells in the Banyuurip field of the Cepu Block, East Java. The Upstream Oil and Gas Regulatory Body BP Migas has approved the budget to be evenly split by Pertamin and MCL, the subsidiary of ExxonMobil Oil.

Pertamina and MCL, which have a 45-percent stake each in the Cepu Block, will split the cost equally. The Cepu Block is expected to start production with a daily output of 25,000 barrels in early 2009, but the daily output will be increased to a peak of 165,000 barrels when it has been fully operational. The government would like for operations in the block to begin sooner, but a number of factors including land clearing hamper efforts to speed up development.

Iran discovers new onshore oil field

January 18, 2007. Iran has discovered a new onshore oil field with an estimated reserve of 2 billion barrels. The discovery was made at the Bangestan layer of the Ab-Teymour oil field, in the oil-rich province of Khuzestan. The National Iranian Southern Oil Fields Co. is affiliated with the National Iranian Oil Co. The newly discovered oil is in a layer around 15 square miles wide. Iran -- the second-largest producer in the Organization of the Petroleum Exporting Countries, or OPEC, and the fourth largest in the world -- possesses 12 percent of the world's crude, with an estimated 130 billion barrels of recoverable oil.

Pertamina wants to double stake in Natuna block

January 18, 2007. Indonesia's PT Pertamina is seeking to double its stake in the Natuna D-Alpha block to 50 per cent as the government is set to renegotiate the whole contact with Exxon Mobil Corp., which controls a 76 per cent stake. Pertamina currently holds a 24 per cent stake in the gas block, lying in the East Natuna Sea, which is estimated to contain 46 trillion cubic feet of recoverable gas reserves. The government declared unilaterally late last year that the contract on the block expired in 2005, saying Exxon Mobil failed to develop it over the past 20 years. Exxon Mobil argued that the current contract remains valid until January 2009, but has said it is willing to renegotiate the contract. The government is demanding that several contents of the contract be revised, including the production sharing split and Pertamina's stake if Exxon Mobil wants to keep the block.

S. Korean Co. develops Argentine oil field

January 18, 2007. The Golden Oil Corp. of South Korea has succeeded in developing an oil field in northern Argentina that holds a 4.6-million-barrel reserve. The venture company completed drilling and finished oil production tests for the field in El Vinalar block, located in the Noreste basin of northern Argentina. According to the ministry, the El Vinalar block has a 46-million-barrel recoverable reserve, which is a reserve of oil that is commercially viable. Golden Oil owns 50 per cent of the Argentine block, while Canada's oil and gas developer Gran Tierra Energy Inc. owns the rest. In addition to El Vinalar, Golden Oil is exploring two other Argentine blocks.

China's Sinopec pumps 2.3 pc more oil in ’06

January 18, 2007. Top Asian refiner Sinopec Corp. pumped 2.3 per cent more oil in 2006 and refined 4.6 per cent more crude, despite expected multi-billion yuan losses at its refining arms. That beat its own target of 1.4 percent growth in oil production and a 4.3 percent rise in crude throughput. For 2007, analysts expect the state-run oil titan to process more crude as oil prices retreat, but oil production may slow as it could shut production facilities at some costly fields. The country's largest oil producer after PetroChina Co. Ltd. said that its natural gas production rose 15.6 percent in 2006, beating its target for a rise of about 11 percent. Sinopec, which supplies about three quarters of oil products sold in China, posted a 4.2 percent fall in kerosene output and a mere 0.1 percent rise in gasoline output.

Exxon sees Sakhalin reaching full capcity in a month

January 17, 2007. Exxon Mobil Corp. expects production at its Sakhalin-1 project in Russia to reach its current full capacity of 250,000 barrels of oil equivalent per day within a month.  Sakhalin-1 was producing over 200,000 barrels of oil equivalent per day (boepd) at year-end and continues to ramp up. Sakhalin-1, which is also owned by Rosneft, ONGC, and a Japanese consortium, is being closely watched after Gazprom took the majority stake in Sakhalin-2 from Royal Dutch Shell in a move that many analysts say amounts to a renationalization.


Shell shelves Philippine refinery expansion

January 21, 2007. Pilipinas Shell Petroleum Corp., a unit of the Royal/Dutch Shell group has shelved plans to expand its 110,000-barrel per day refinery in the Philippines due to increased costs. Shell has decided to stop studying an expansion to its refinery in Tabangao, Batangas near Manila. Last year, Shell executives had initially estimated the cost of the expansion at between $1 billion and $1.5 billion. Shell put its refinery business in the Philippines under review after rival Caltex (Philippines) Inc. closed its 72,000- bpd refinery in the country in late 2003 and converted the facility into a storage depot for petroleum products. Caltex, which is owned by Chevron Corp., said its 49-year old refinery was too small to compete in the Asian market and too outdated to produce cleaner fuels required under the Philippines' environmental laws. Shell reviewed oil demand projections in the Philippines up to 2010 and also the competitiveness of its refinery compared to other refiners in Asia when it looked at expanding its Philippine operations.

Bandar Abbas Refinery capacity to hit 0.32 mn bpd

January 21, 2007. Bandar Abbas Refinery’s (in Iran) capacity is to be increased to 320,000 barrels per day (bpd) in the near future, director for operations at the refinery said. The refinery’s capacity currently stands at 232,000 bpd. The refinery is fed by the crude oil sent from Kharg Island. The crude is conveyed to the refinery by the use of two ships. Refining crude oil produced from Sorush and Noruz oilfields is among the most important projects underway in the refinery. Sorush and Noruz crude is of heavy type. Two contracts have been signed in recent months to increase gasoline production at the Bandar Abbas Refinery.

Bid-Boland 2 Refinery project begins in Iran

January 19, 2007. The building of Bid-Boland 2 Refinery kicked off through an amending contract signed with two Iranian consortiums. Iranian Gas Engineering and Development Company inked the contract worth $2.2 billion with two domestic consortiums on the EPC (Engineering, Procurement, and Construction) scheme. Under the contract, Sazeh Consulting and Jahan Pars Co. consortium will build the part ‘A’ of the project. Termed as part ‘B’ of the project, the pipelines and storage facilities in Mahshar, Khuzestan Province will be built by another consortium, Tehran Jonub in collaboration with the British company, Castian. The refinery will have a refining capacity of around 57 million cubic meters of natural gas per day. The inputs are received from the NGL 900, 1000, 1200, and 1300 plants. Parts of the gas will be injected to the entire grid, while the rest is to be injected into oilfields or sent to petrochemical units for ethane production. Bid-Boland 2 Refinery will be set up 15 kilometer southwest of Behbahan, in the southern province of Khuzestan, near Bid-Boland 1 Refinery.

Transportation / Trade

Santos signs gas deal with Newmont

January 23, 2007. Oil and gas giant Santos has signed a three-year, $90 million contract to supply gas to the gold producer, Newmont Australia. Under the deal, gas will be pumped 1,000 kilometres from an offshore field in Western Australia's north west to the Jundee gold mine near Wiluna, then a further 500 kilometres to Kalgoorlie's Parkeston power station.

Russia begins ecological assessment of China pipeline

January 20, 2007. Russia has launched an ecological assessment of the construction of a section of the Siberia-Pacific oil pipeline, which will run to neighboring China. China so far receives Russian oil by rail only. The energy-hungry economy will be able to import more crude from Russia when state oil pipeline monopoly Transneft completes its ambitious ESPO pipeline project. The pipeline is slated to pump up to 1.6 million barrels per day of crude from Siberia to Russia's Far East, of which about 605,000 bbl/d will then be sent on to China and the Asia-Pacific region via the offshoot. The construction of the pipeline's end terminal in Kozmino Bay on Russia's Pacific coast, near the port of Nakhodka, will begin in April, with the first oil deliveries expected 11 months later. The terminal will include two pumping stations and special port facilities. The first stage of the ESPO was launched last April and was initially scheduled for completion in the second half of 2008. It will link Taishet, in the Eastern Siberian region of Irkutsk, to Skovorodino, in the Amur Region. The second stage will involve the construction of a Skovorodino-Kozmino pipeline, to pump 367.5 million barrels per year, and an increase in the Taishet-Skovorodino pipeline's capacity to 588 million barrels annually. The entire project's cost was initially estimated at $11.5 billion, but needs to be revised as the pipeline's path was rerouted for ecological reasons about 400 kilometers (250 miles) away from Lake Baikal, the world's largest freshwater body, and divided into three segments following a series of discussions and a presidential order. Russian oil firm Rosneft outlined plans for construction of a new two-billion-dollar (1.5-billion-euro) refinery, the first such facility to be built in Russia for 25 years. It is the only refinery on the shores of the Black Sea, which gives it a competitive advantage.

Russia is the world's second-biggest oil producer but has an underdeveloped refining industry, with many facilities dating back to the Soviet era, and no new large refineries built since 1982. The Tuapse refinery, which will have capacity of 12 million tons per year, is expected to export around 80 percent of its production. Construction is expected to start this year and be completed by 2010. The refinery will be located in southwest Russia on the shores of the Black Sea next to a seaport and a Rosneft terminal that exports around 10 million tons of oil per year. Bulgaria, Georgia, Romania, Russia, Turkey, Ukraine are on the Black Sea.

Policy / Performance

Gazprom, Rosneft to split Russian offshore fields

January 22, 2007. Russia will equally split all new offshore oil and gas fields between state firms Rosneft and Gazprom further limiting foreign and private access to its energy. The decision was taken at a meeting of President Vladimir Putin and government officials. Russian officials had decided that all undistributed offshore fields would be offered only at closed auctions, which reduce chances of collecting maximum money to state coffers but guarantee no surprise winner.

Analysts are of the view that the move was was a part of a wider Kremlin drive to increase control over natural resources, which started with the demise of oil firm YUKOS and a virtual re-nationalisation of a third of Russian oil production. State officials have repeatedly favoured state firms for offshore fields, which are due to replace West and East Siberia in the second half of this century to support Russian oil and gas output growth. Russia has also been seeking to regain control over existing offshore projects, such as Sakhalin-2, with Gazprom buying half of it from Royal Dutch/Shell and its Japanese partners for $7.45 billion after months of pressure from state ecological officials.

First pipeline from Amazon to Manaus is finally being built

January 21, 2007. Brazil needs more sources of energy to keep its economy humming, and huge reserves of gas and oil are in the Amazon jungle. Over the years, Petrobras, Brazil's state-controlled oil company, has invested more than $7 billion in Amazon exploration and development, and in 1986 it made a major find there. But only now — after a seemingly endless sequence of geographic, logistical, environmental and political challenges were overcome — is the first in what is intended as a series of pipelines finally being constructed, this one to carry gas to 640 kilometers, or 400 miles, from Amazon to Manaus, a city of 1.5 million at the junction of the region's two biggest rivers that is emerging as an important industrial center. But oil pipeline leaks and the collapse of an offshore drilling platform in other parts of the country have damaged Petrobras's reputation, and there was initially strong resistance to the pipeline from local people, environmental and indigenous groups, and archaeologists. Some of them preferred that the gas be transported to Manaus by tankers from a terminal north of here, already connected by a pipeline, while others argued that it would be cheaper and safer to buy the excess electricity generated by the Guri Dam in Venezuela.

Ethiopia Ministry, Petronas to sign gas development agreement

January 20, 2007. The Ministry of Mines and Energy (MME), disclosed its plan to sign Petroleum Development Agreement (PDA) with the Malaysian oil and gas company, Petronas, in March this year after a series of negotiations that began in July 2006. Petronas has won the Calub and Hilala gasfields development tender put up by the Ministry. The company proposed to transport the gas to a sea port and to export it by ship. Petroleum Development Agreement (PDA) and Production Sharing Agreement (PSA), gas transport, and gas processing are the three major components of the project proposal. Petronas has presented a draft agreement document and memorandum of understanding on the three components of the project proposal.

EU urged to cut reliance on Russian oil and gas

January 20, 2007. Traian Basescu, the Romanian president is of the view that the European Union must reduce its dependence on Russian oil and gas by cutting energy consumption and developing alternative sources of supply. He said that the EU must take action to make itself less vulnerable to Russian political pressure or to events such as Moscow's decision to cut gas supplies last year in a dispute with Ukraine and its move to interrupt oil shipments this year in a row with Belarus. He suggested that in the long run having a single energy supplier is against the European concept of market economy and even if this requires expensive investment, it needs to create conditions for competition because it is not only increasing competition but creating freedom for its decisions. The president expressed strong support for the planned Nabucco pipeline for bringing gas from the Caspian Sea to central Europe via Turkey, Bulgaria, Romania, Hungary and Austria. He also called for a common energy policy.

Poland seeks Algerian gas

January 19, 2007. Poland, increasingly jittery about its reliance on Russian energy, plans talks with Algeria that could lead to a natural gas supply deal. Algeria is a major, reliable supplier of liquefied natural gas. Russian imports account for around 42 percent of Poland's natural gas needs, and Warsaw is seeking to diversify its suppliers. Besides holding discussions with Algeria, Warsaw is also seeking to revive a gas deal with Norway that ended after Poland's previous government pulled out. PGNiG recently announced that it would begin building a gas terminal at the Baltic Sea port of Swinoujscie, near the border with Germany. The new terminal, which is set to be operational by 2011 and could eventually handle 7.5 billion cubic metres of gas, is seen as crucial if Poland is able to receive imports from new sources. Russia has been involved in a string of rows with countries that depend on it for gas and oil or which are key transit routes for the energy Russia sells to European Union nations. Relations between PGNiG and Russian gas giant Gazprom are currently at a low ebb and deadlocked. Gazprom had demanded more say in pipeline transit operations through Poland and taken issue with Poland's transit fees.

Massachusetts signs first multistate greenhouse gas initiative

January 18, 2007. Governor Deval Patrick, making good on a campaign pledge, signed an agreement committing Massachusetts to the nation's (US) first multistate program to reduce emissions of greenhouse gases that contribute to global warming. Patrick also announced a new program intended to create energy savings for households and industry by auctioning off so-called “emission allowances” that electricity generators will need for each ton of carbon dioxide they emit under the pact. The Regional Greenhouse Gas Initiative is designed to curb carbon dioxide emissions from power plants by 10 percent by 2019. It has already been signed by governors from Connecticut, Delaware, Maine, New Hampshire, New Jersey, New York and Vermont. Joining the pact could drive up electricity bills by $3 to $16 on the average household with an annual energy bill of $950.

Philippines, Brunei to explore oil, gas in Timor-leste     

January 18, 2007. The Philippines and Brunei will jointly develop oil and gas resources in Timor-Leste. Philippine National Oil Company (PNOC-Exploration Corp.), the government's oil and gas exploration arm, and the Department of Energy, will work out the details of the agreement, including the extent of the country's participation in the joint project. The Phippippines expressed confidence that the project would help boost the country's energy supply, noting that Timor- Leste has one of the richest deposits of oil and gas in the region. If the agreement pushes through, it would be the Philippines' first energy project with the Timor-Leste, which achieved independence in 2002 from Indonesia.

Russia will remain reliable energy supplier: Putin

January 18, 2007. Russia has been and will remain a reliable supplier of energy, President Vladimir Putin said a statement that closely follows a bitter oil dispute with Belarus that interrupted supplies to Europe.  Russia shut off oil supplies to the ex-Soviet neighbour for three days last week in a dispute over customs duties and transit fees, disrupting supplies to Germany, Poland and other European nations. The spat ended recently with an agreement envisaging that Russia will get a lion's share of profits from refined oil products Belarus makes using Russian oil and then sells to Europe. Putin is of the view that energy security can only be achieved through a shared responsibility of all participants in the energy chain. The oil dispute between Russia and Belarus added to European fears about Moscow's reliability as an energy supplier a reputation that had already been damaged by last year's price dispute with Ukraine and temporary shortages of Russian gas to European customers. Both disputes and energy price hikes for other ex-Soviet nations have drawn criticism of Russia from Western nations, which have accused Moscow of using its vast mineral wealth as a political weapon.

Alaska governor pledges new strategy for gas line

January 17, 2007. Alaska's new governor, Sarah Palin,will be in a process to introduce legislation to give any interested energy company or consortium the opportunity to compete openly for the right to build a massive natural gas pipeline from the state's North Slope region. The pipeline, a mega-project long proposed by Alaska officials, would provide a method of delivering the North Slope's proven reserves of about 35 trillion cubic feet of natural gas. Plans for a gas pipeline date back to the early 1970s, before the existing trans-Alaska oil pipeline was built, but the gas project has been stymied for decades by high costs and poor economics. Her legislation will establish financial inducements -- including an unspecified but "substantial" state investment -- available to all qualifying sponsors. There will also be core requirements that must be met by any gas pipeline sponsor.



Doosan Heavy wins bid to build power plant in Thailand

January 23, 2007. Doosan Heavy Industries & Construction Co., South Korea's largest manufacturer of power generators, has received a US$170 million order to build a 115-MW-generating power plant in Thailand. The order from Glow Energy Public Co. in Thailand calls for Doosan Heavy to carry out all stages of implementation, including engineering, procurement and construction.

Russians to build power stations in Zimbabwe

January 21, 2007. A Russian business delegation is due in Zimbabwe on Sunday to sign a deal worth $150-million for the construction of mini hydro-power stations. The delegation, from Russia's Turbo Engineering, was expected to sign the deal this week for the construction of 17 power stations on small dams around the Southern African country, reported the official Sunday Mail newspaper. Zimbabwe badly needs any help it can get to boost power supply. The country has been facing acute shortages of power due to sub-economic tariffs, vandalism of equipment and shortages of coal. There were warnings last week that a new round of power cuts -- some of them lasting for up to 10 hours -- was imminent.  Under the agreement Turbo Engineering will manufacture and install turbines and other equipment. Zimbabwe's central bank will foot the bill. The power project will yield more than 120 megawatts of power and will be done over four phases. Zimbabwe has a power deficit of more than 700 megawatts.

Ipsa to fire up Newcastle power plant

January 19, 2007. Ipsa, the South African power developer, says it will start providing steam and power from its Newcastle gas-fired power plant from February 23, subject to the receipt of its generating licence. The plant will be Ipsa's first as well as South Africa's first independent gas-fired power plant. Ipsa was created in 2005 to develop, own and manage power plants in Southern Africa. Ipsa says the Newcastle station is one of the country's most environmentally friendly plants, and that it intends to apply to the Department of Minerals and Energy (DME) to be considered eligible for carbon credits. In October last year, the company took up a secondary listing on AltX, raising R30,9-million in a simultaneous share issue. The company is also busy negotiating a $540-$640-million Coega power project with Eskom, which will see it having 1 MW of capacity by the first quarter of 2008 if all regulatory hurdles are achieved on schedule.

Transmission / Distribution / Trade

Eskom brings power grid to full strength after outages

January 22, 2007. Power utility Eskom now had enough electricity to meet the full national demand, said spokesman Fani Zulu yesterday after days of power shortages saw rolling blackouts across SA. Zulu said that although the probability of similar outages today was “very low”, Eskom was requesting the public to use electricity efficiently and switch off nonessential appliances. The four power plants that were returned to service on Friday were Matimba, Kriel, Camden and Majuba — all in Mpumalanga. Eskom’s MD for transmission, Jacob Maroga, said this week that the cause of the widespread blackouts was the higher-than-expected demand for electricity this summer. The electricity demand is 1000MW higher than planned. The situation was made worse by an automatic shutdown of one of the two units at the Koeberg nuclear power station in Cape Town. The cause of the turbine trip was being investigated. Maroga said Eskom was experiencing unplanned outages of 4600MW due to technical generating-plant problems. Last week’s blackouts affected hotels, mining houses, banks and most industries across the country. Banking group First National Bank (FNB) said last week that it would spend R50m this year to buy back-up generators and uninterrupted power supply (UPS) units in a bid to avert similar power outages. These emergency power facilities would be installed in all FNB branches across the country.  UPS units enable a branch to shut down its information technology system without losing any data in the event of a power outage. Whereas a standby generator switches on a few seconds after a power failure, a UPS system kicks in immediately.  About R15,5 m had already been spent to install the back-up system at 63 FNB branches nationwide, said head of banking infrastructure Kabelo Monchusi. Half of all the branches with generators were based in Western Cape due to the province’s intermittent power outages. 

ITC buys transmissions from Wisconsin utility

January 19, 2007. ITC Holdings Corp. has agreed to acquire the transmission assets of Interstate Power and Light Co. for about $750 million in cash, equity and debt financing. The Novi-based transmission company made the agreement through its ITC Midwest LLC unit. Interstate Power and Light, a unit of Alliant Energy Corp., owns about 6,800 miles of 34.5kV transmission lines and about 170 substations primarily in Iowa, as well as Minnesota and Illinois. Alliant Energy is a Madison, WI-based utility. The acquisition of IP&L’s transmission assets supports ITC Holdings’ continued mission to rebuild and invest in the electric transmission infrastructure for the benefit of customers through improved reliability and enhanced access to the competitive energy marketplace.

Policy / Performance

GE to invest in coal gasification

January 22, 2007. GE's energy finance unit will take a 20 percent stake in a power plant project using coal gasification, a sign that the cleaner-burning technology is attracting the attention of investors with deep pockets. The 630-MW Cash Creek project in Henderson County, Ky., will be one of the largest and most advanced clean coal projects of its kind in the country to use Integrated Gasification Combined Cycle technology, or IGCC, when completed.  Energy Financial Services is based in Houston. Terms of the transaction, which is expected to be announced, were not provided. Gasification technology has been around for many years, particularly in the chemical industry. Coal gasification power plants are essentially natural-gas-fired turbines with a chemical plant on the front end producing the fuel. The coal is turned into a synthetic gas, a combination of hydrogen and carbon monoxide. When the synthetic gas is cooled and treated, particulate matter, mercury and sulfur are removed, creating a fuel that can run through natural gas turbines. While there are still a number of technological hurdles, power plants using coal gasification technology can emit as much as 33 percent less nitrogen oxide, 75 percent less sulfur dioxide and 40 percent less particulate matter than plants using pulverized coal, according to GE. The results can vary based on the kind of coal used, however, and other factors. Coal gasification technology is just now beginning to be used in major projects capable of providing large amounts of power reliably. A pulverized coal plant emits about 1,800 pounds of CO2 per MW-hour, versus 1,600 pounds of CO2 per MW-hour from a coal gasification run plant. The gasification technology has been attracting greater interest in Texas, and it is figuring in the debate over TXU Power's plans to build as many as 11 new plants fired by pulverized coal in the state. This plan has drawn the ire of a number of municipal leaders and environmentalists. Some have pointed to coal gasification technology as a viable alternative for the new plants, but TXU officials respond that the technology is not developing quickly enough to meet the state's power needs in the next few years. Houston-based Tondu Corp. has proposed a 600-MW plant using coal gasification for the Corpus Christi area, while two other sites in Texas are on the shortlist for the FutureGen project, a joint government/private sector effort to build a coal plant that captures all of its CO2 output. Complete environmental impact assessments on the FutureGen sites, including two in Illinois, will be filed in July and a final location picked by year's end, with construction planned to begin in 2009.

MENA region to invest $57b in power generation by 2013

January 21, 2007. British energy expert Neil Walker has said that the power and water infrastructure projects in the GCC countries have witnessed a boom, as these countries have demonstrated sufficient level of stability that developers are now willing to risk capital. MENA (Middle East and North Africa) region will invest $57 billion over the next six years to install new generation capacity. Walker said that there are great privileges in involving both the private and the public sectors in energy generation industry in the states of the region. He pointed out that in order to keep pace with this high demand, massive investment is required to build and upgrade power plants. He expected that the total investment needed in the sector for the region will be around $200 billion over the next 15 years. Over the next six years, Middle East and North Africa is predicted to spend $57 billion on the installation of new capacity alone, he said. He pointed out that there is an increase in demand for energy in the UAE and in the future it will need to diversify means of power generation to include the renewable resources. He affirmed that there are a number of pioneering research projects for renewable energy, mentioning the decisions in early December by the high committee of the Gulf Co-operation Council ordering a study into the creation of a joint programme of nuclear technology for peaceful purposes.

Whittier Energy to merge with U.K. firm

January 19, 2007. Sterling Energy plc intends to acquire Whittier Energy Corp. in a deal valued at about $188 million. Sterling, based in the U.K., will purchase all outstanding shares of Houston-based Whittier for $11 a share in cash, or about $145 million. Sterling will also assume approximately $43 million of Whittier's net liabilities. The boards of directors of both companies have approved the transaction. In addition, Whittier Ventures LLC, holder of approximately 14 percent of the outstanding shares of the independent oil and gas E&P company, has agreed to vote in favor of the transaction, expected to be completed in the first quarter of 2007. This transaction allows Whittier Energy stockholders to realize substantial value at an attractive premium. Ferris, Baker Watts Inc. is acting as lead financial advisor to Whittier. Sterling is a five-year-old publicly traded E&P company with production assets in the Gulf of Mexico and offshore West Africa, with an active exploration program focused predominantly on Africa.

Renewable Energy Trends


Two wind power plants initiated in Pakistan

January 23, 2007. The ground breaking ceremony of first two wind power plants of the country was held at Jhampir in Thatta some 110 kilometres off Hyderabad. The plants costing Rs12 billion will be producing 50 MW of electricity each and start functioning by the end of 2007. The federal water and power minister termed the ground breaking ceremonies as milestone in the history of country that according to him would significantly help in meeting power shortfall. A Turkish company Zorlu Enerji invested in first 50 MW wind power generation project while Masters Foam is making the second 50 MW wind power plant under the government Alternative Energy Development Board (AEDB) program. The Federal Water and Power Minister Liaquat Ali Jatoi along with representatives of both investors and chairman of AEDB Air Marshal (Retd) Shahid Hamid performed groundbreaking ceremonies.

U.S. urged to ramp up geothermal power

January 22, 2007. Mining heat stored in rocks in the Earth's crust could meet a growing portion of U.S. electricity demand, replacing aging nuclear and coal plants with an environmentally friendly alternative. A Massachusetts Institute of Technology study said the mining of thermal energy could be done on a far larger scale than conventionally known, reducing spiraling oil import bills and strengthening U.S. energy security. Geothermal power -- generated from drilling wells that allow hot water or steam to power turbines -- is already on the rise globally as expensive oil and gas make it increasingly competitive despite high capital costs. Top energy consumer the United States is leading the way, with 61 projects in the works to double its geothermal capacity to more than 5,000 MW, according to the Geothermal Energy Association, a trade group. MIT's study, described by the researchers as the most far-reaching on the subject in 30 years, said the United States as a first step could achieve capacity of 100,000 MW - enough to supply about 25 million homes -- in 50 years at an eventual cost of just $40 million a year. That would represent about 6 percent of the current U.S. electricity supply. Coal is now the leading source of U.S. electric power, supplying 49.7 percent. "It wouldn't take a lot of money. It's not like this requires billions of dollars to accomplish," said Tester, who helped develop thermal energy technology in the 1970s.The proposed program would require a combined public and private investment of $800 million to $1 billion in the first 15 years -- about the same money needed to build one new clean-coal power plant, the study said.

Plant to turn brown coal blacker, greener

January 21, 2007. The Economy, Trade and Industry Ministry and Kobe Steel Ltd. will in March start construction in Indonesia of the world's first plant capable of turning low-grade coal into high-grade coal. According to sources in the ministry and the company, the plant will be built to test the commercial potential of a method in which low-grade coal, such as brown coal, is coated with asphalt before being fried in light oil. Because low-grade coal contains a lot of water and discharges fewer calories than high-grade coal, it is rarely used in Japan. The plant aims to turn low-grade coal into high-grade coal with a high energy output, but with low pollutant emissions. It will be the first plant of its kind in the world to be built as a large-scale commercial facility, the ministry and the company said. The ministry will contribute 4 billion yen for the construction of the plant via Japan Coal Energy Center, an affiliate of the Natural Resources and Energy Agency. Kobe Steel will contribute a further 4 billion yen. The plant will be built in southeastern Kalimantan, where there are many coal mines, and is scheduled to start operations in spring 2008. It is expected to be capable of processing 600 tons of low-grade coal per day. Most of the processed coal will be exported to Japan.

The ministry and Kobe Steel aim to start supplying processed coal to Japanese power plants by fiscal 2010. Low-grade coal is porous inside and contains a lot of water, so burning it provides only 70 percent of the energy obtained from high-grade coal. But studies conducted by Kobe Steel found the same calorific output can be gained from low-grade coal as from high-grade coal by using the new method. Under the method, low-grade coal is crushed, coated with liquid asphalt to prevent water from seeping inside, and fried in light oil to dehydrate it. The coal is then shaped into briquettes. The company said the amounts of sulfur, ash and other pollutants normally discharged when burning high-grade coal is reduced to about one-third by using the new process. The light oil used for frying can be reused.

Largest onshore wind farm given the green light

January 20, 2007. Scottish & Southern unveiled plans yesterday to build the UK's largest onshore wind farm - capable of powering a quarter of all homes in Scotland - in the Shetland Islands. The project, which is still subject to planning permission from the Scottish Executive, will be run in conjunction with the Shetland Islands' council, who will own a 50 per cent stake in the site through their subsidiary Viking Energy. The council will plough all profits from the venture back into the local community. The farm will have approximately 300 wind turbines, covering 90 square kilometres of landand producing around 600 MW of power. The plan is to connect the farm to the Scottish mainland using a cable which will run underneath the sea. With the backing of the Shetland Islands' council already sown up, the project has a good chance of receiving the green light from the Scottish Parliament. SSE has a long-established track record in renewable energy and ambitious plans for the future. This agreement helps pave the way for a renewable energy project which can be a world leader in terms of scale, the richness of the natural resources being harnessed and the involvement of the local community.Scottish & Southern also received planning permission for another smaller wind farm yesterday, at Toddleburn on the Scottish borders. The farm will comprise just 12 turbines, generating some 36 MW of electricity, and will cost £40m to build. When the Toddleburn site is completed, the company will have more than 230 MW of power generated through its wind farms.

Govt taps Japan aid to convert small island power facilities

January 20, 2007. The Department of Energy plans to tap Japanese aid to shift the country’s small power utilities group to cleaner and cheaper sources of energy. It is looking at the hydropower and uses this for the tourism areas in the small islands all over the country. The Japanese government earlier committed to provide $2 billion over the next three years to help East Asian countries attain universal access to energy through rural electrification and the improvement of infrastructure. Training, promotion of biomass energy and clean use of coal are also among the activities that Japan would fund. Most of the islands used for tourism are heavily dependent on either bunker or diesel generators—so it will be shifted if there are available hydro resources or even smaller coal fired power plants. This would bring down the cost of electricity in these islands, citing the case of Masbate where Napocor already bid out the construction of a coal-fired baseload power plant with a backup diesel power plant. The plant would only be selling power for P7 a kilowatt-hour, lower than Napocor’s P12 to P14 rate. The Philippines has been trying to cut its dependence on imported crude, especially after the commodity’s price shot up to record highs of $70 a barrel in the world market. Under the Philippines’ Energy Development Plan, the country aims to increase the generation mix of new and renewable sources, including hydro, natural gas, and solar energy. Congress recently passed a law meant to give birth to a biofuel industry in the country. The new law requires the introduction of biofuel blends and reduce the use of imported fuel. The country’s initiatives is shared by other members of the Association of Southeast Asian Nations, which recently agreed to promote the use of such alternative fuels across the region.

Green energy investors entering China market

January 19, 2007. In the vanguard of venture capital, the buzzwords of late have been "alternative energy" and "China." Are the two worlds about to collide? Seed investors are financing, or considering financing, start-ups in China that are developing equipment for wind and solar power; clean water and food alternatives; and technology to promote energy efficiency. While this may seem an arbitrary combination of two of the hottest trends in venture capital — sort of like the first time someone mixed peanut butter and chocolate — there is a growing number of investors who say the potential reward in China is worth the tremendous risk. China has voracious energy needs and "the most serious environmental problem in the world, there is a huge demand for investment" in alternative solutions. A joint venture beginning this month between Tsinghua University in Beijing and the Cleantech Venture Network, a blossoming North American trade and research group for venture capitalists investing in alternative energy technology. While independent hard data on alternative energy investments in China are hard to come by, Li's joint venture, aimed at marrying overseas investors and Chinese entrepreneurs, testifies to the emerging trend. From June 2005 to June 2006, American venture capitalists put $100 million into China-based start-ups focused on alternative energy, double the investment in the period a year earlier. China has a hard-driving, fossil-fuel- centered economy that has so far done little to diminish its reliance on those fuels. And venture capitalists have still not entirely figured out how to manage investments from such a distance, and across cultures, and, pointedly, how to get their money out once they have built the start-ups into viable companies. China was already beginning to look more intensely at renewable sources like wind, hydroelectric and solar power, and it's going to create a lot of opportunities. China had a chance to define itself early as promoting alternatives to oil.

Harper pledges $1.5 billion for green energy

January 19, 2007. The federal government made another “green” announcement Friday, this one promising more than $1.5 billion for a new ecoENERGY Renewable Initiative to strengthen Canada’s renewable energy sources.It will help make renewable sources of heat and electricity a more affordable and realistic choice for more Canadians. It is expected to add enough clean renewable electricity to power about one million homes. The overall program aims to develop a capacity of 4,000 MW of new renewable energy capacity for the country. The plan has two components — the first is called the ecoENERGY for Renewable Power and will invest $1.48 billion to boost Canada’s supply of wind, biomass, small hydro and ocean energy sources. A 10-year incentive program will be developed to fund eligible projects that will be constructed in the next four years. The second part of the new program is ecoENERGY for Renewable Heat and provides $35 million in industry support “to increase the adoption of clean renewable thermal technologies for water and space heating in buildings such as solar air and hot water heating,” the government said. It will also fund projects for heating homes with solar technology. The government’s renewable energy initiative is similar to the 2005 Liberal budget's commitment of $920 million over 15 years for wind power. But the Tory government is saying its initiative is different because it puts more emphasis on other forms of energy generation, like solar and tidal power technology. The second “green” initiative introduced by the government this week. The government said it is investing $230 million over four years into research on clean technologies. The research dollars will focus on using science and technology to clean up conventional energy sources, develop renewable energy sources and to improve energy efficiency. The government is expected to deliver its own version of the EnerGuide program’s house retrofit incentive initiative, a program that the new Conservative government pulled the plug on in May. It allowed homeowners to have their homes evaluated before renovations and then provided a rebate for retrofitting their homes in energy efficient ways. The Forest Products Association of Canada (FPAC) said the EcoENERGY Renewable Initiative would help it implement technologies to reduce its greenhouse gas emissions. The government program would help the forest industry switch from fossil fuels to biomass energy sources that are derived from byproducts such as bark and wood shavings. The Canadian Wind Energy Association, representing more than 280 companies involved in Canada's wind energy industry, was also pleased with the new program announced today.

ADB offers $670 million for energy projects

January 17, 2007. The Asian Development Bank has offered $670 million in new assistance for overcoming partly the worsening energy crisis in the country by developing its renewable energy resources. The amount would meet about 80 per cent of the over Rs4 billion, five-year renewable energy development programme in Punjab. Five hydropower projects have just been identified under the programme. The main objective of the ADB assistance is to provide adequate facilities for generation, transmission and distribution of electrical energy keeping in view the future requirements for industrial, agricultural and economic development. The government’s policy for power generation projects allows provinces to develop power up to 50MW installed capacity. The ADB technical experts had approved the power potential of about 50MW capacity available in Punjab on the sustainable basis to provide cheaper, renewable, environmental-friendly and most needed power. Feasibility studies of five sites which included Marala, Chianwali and Deg Outfall along UCC off-taking from the Marala barrage on the Chanab river, Okara, along LBDC off-taking from the Balloki barrage on the Ravi river and Pakpattan, along the Pakpattan canal off-taking from the Suliemani barrage on the Sutlaj River, have been updated by the M/s Integration Environment and Energy Ltd in association with ENTEC AG under Technical Assistance from the ADB for the Punjab Irrigation and Power Department. The renewable energy plan would help save foreign exchange by not importing fuel that was used in thermal projects. It would also help save firewood, hence increase in tree and reduction in soil erosion and degradation and increase in house conditions. The energy generated through the sites will also provide adequate supply to poor and vulnerable consumers and hospitals, schools and other social utilities. The construction of hydropower projects was a specialized job which involved several experts of various engineering disciplines and technologies, hydro-turbines, which would have to be imported for such projects.

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