MonitorsPublished on Mar 27, 2007
Energy News Monitor I Volume III, Issue 40
Regional Energy Infrastructure Proposals in the Asia-Pacific: Opportunities for Cooperation (Part – V)

Tajikistan currently has the ability to export electricity in the summer, and with the completion of hydroelectric plants that were begun during the Soviet times, the export capacity can be increased over the medium term.

¨        Current Surpluses. The Vaksh cascade in Tajikistan has an installed capacity of about 4,000 MW. However, the main storage on the cascade, the Nurek reservoir at the head of the cascade, can only store 10.5 billion cubic meters (BCM), with a live storage of only 6 BCM, compared to the annual average flow of 20 BCM (much of it in the summer) in the Vaksh river.  Therefore, much of this water is spilled, for lack of demand in the summer.  About 3000 GWh could be available for export in the 7-8 months between mid March to mid November.

¨        Sangtuda I Hydropower Project is located downstream of the existing Nurek hydropower cascade on the Vaksh river.  The construction of this project also commenced during the Soviet era and was suspended in 1992 for want of funds after completion of a sizeable amount of work.  The planned installed capacity on this run-of-the-river scheme is 670 MW and expected annual electricity generation would be about 2,700 GWh.  About 60% of the generation would be in the summer months (April to September) and the remainder during the winter months.  Construction has re-commenced on this project under a joint venture between Russia’s RAO UES (75%) and GoTJ (25%).  The expected commissioning date is 2009.

¨        Sangtuda II Hydropower Project is located downstream of Sangtuda I and is a greenfield development.  The planned installed capacity is 220 MW on this run-of-the-river scheme and the expected annual generation is 1000 GWh, closely following the Sangtuda I pattern.  A joint venture has been established between Governments of Iran and Tajikistan for the construction of this project, whereby the revenues/profits from the scheme would accrue to Iran for the first 12 years after which the plant would revert wholly to Tajikistan.

¨        The Rogun Hydropower Project is located upstream of the existing Nurek hydropower cascade on the Vaksh river.  The project was planned to be constructed in two phases with an ultimate installed capacity of 3,600 MW.  The dam to be built will be one of the highest earthfill dams in the world with a height of 335 meters. 

The construction of the project commenced during the Soviet era when all the construction machinery was assembled, construction colony was established, and diversion tunnels and most of the excavation needed for the project were completed.  The completion is contemplated in two phases.  In Phase I, the remaining works would involve the construction of the dam to two-thirds of its final height, repairing two existing tunnels; building a third new tunnel; creating the regulating reservoir and installing two generation units which would operate with a capacity of 800 MW. 

The electricity output of this Phase I would be about 4,300 GWh, and it would also enable the generation of an additional 400 GWh at Nurek.  Phase II involves completion of the dam to its full height of 335 meters and installation of additional power capacities of 2,800 MW.  After completion of Phase II, the whole Rogun scheme would generate roughly 13,000 GWh and the additional generation at Nurek would increase to 1,300 GWh.  Six to seven years may be needed to complete Phase I and 10 years for the whole scheme.  RUSAL, the Russian aluminum conglomerate is keen to develop this project on a public-private partnership basis and is talking to investment partners and IFIs in this regard.

Kyrgyz Republic also has the ability to export electricity, almost immediately, in the summer months, as well as develop specific schemes for export as detailed below.

¨        Currently available summer surplus. An additional electricity of upto 3000 GWh could be available for export from the Naryn Cascade in the Kyrgyz Republic.  The installed capacity is 2,750 MW but with a storage reservoir of 19 BCM of which about 12 to 13 BCM could be released annually (matching the average annual inflow into the reservoir), including about 7 to 8 BCM in the summer months.  Kyrgyz Republic is actively looking for long-term export markets for surplus electricity produced in the summer, since the IGIA arrangements have ended.

¨        Kambarata I Hydroelectric Project is a 1,900 MW storage hydroelectric facility, identified and designed during the Soviet era, located in the middle part of the Naryn river upstream of the Toktogul reservoir.  As proposed, it would be a 275 meter high dam and the reservoir would have a live storage of about 3.4 BCM and would provide seasonal storage.  The annual energy generation would be about 5,000 GWh with a plant use factor of about 30%.  Since it is located upstream of Toktogul reservoir (which has a much larger live storage of 14 BCM), water could be released from Kambarata I to generate almost all of its annual power output in the winter, thus avoiding the release of water from Toktogul in the winter.  Enabling additional generation of electricity during winter without releasing water from Toktogul would be the most significant contribution of this project.  It is anticipated that it would take 8 years to prepare the project and 9 years to construct it, and that power would be available starting in 2017, though the full output could be realized only in 2020.

¨        Kambarata II would be a run-of-the river hydro project downstream of Kambarata I but upstream of Toktogul.  The installed capacity would be 360 MW if Kambarata I is developed, or 240 MW if it is a stand-alone scheme.  As proposed, it would be a 62 meter high dam, and the average energy production would amount to about 1,100 GWh at 240 MW and 1260 GWh at 360 MW. Almost all the generation, when built as a stand alone project, would be in the summer.  About 20% of the project had already been completed.

There are also opportunities for developing coal-based thermal capacities in Kazakhstan that could be competitive in an export context.  These are the Ekibastuz I and II coal fired thermal power plants. Ekibastuz I is owned by AES and the facility is designed for 4,000 MW of which only 2,000 MW are installed.  Ekibastuz II is a power plant in which 50% of the equity is held by RAO UES of Russia, the other 50% being held by the Kazakh state.  This power station consists of two coal-fired units of 500 MW each, located in a site which has all the infrastructure and site facilities to accommodate easily two more units of 500 MW each.  In summary, for exporting electricity to South Asia, significant capacity is currently available; and additional capacity can be developed relatively quickly and such capacity may be competitive in South Asian markets, especially Pakistan.

(to be continued)


Power Sector Reforms: Are They Headed in a Right Direction?


Sridhar Kundu, Associate Fellow, Observer Research Foundation

Power remains a predominant factor in fuelling economic growth of a country. The volume of consumption of power in every sector of the economy and by all section of population of the society shows the sign of development of the State. Indian Economy is growing cyclically after independence but growth has got a pace of acceleration since the period of liberalisation. The generation of electricity has ascended manifold in this time period. Pertaining to the rising generation capacity of the country, the country has been experiencing speedy development in electricity consumption. But some faults in ground level electricity distribution network deters a huge chunk of population and some needy sectors to access well-timed electricity supply, which imparts a bad signal to the overall development of Power Sector of the economy.

During late 80's and early 90's, State Electricity Boards (SEBs) were having significant Transmission and Distribution (T&D) losses and were facing revenue crunch, which made it difficult for them to invest in the capacity additions to meet the increasing demand supply gap. Moreover, Governments, both at Centre and State level, were also facing serious financial crisis. This was mainly responsible for bringing Reforms in Power Sector by opening door for Private Sector participation to a large extent, though the Private Sector was present since independence – but the same was to a very limited extent in the form of licensees only, i.e., BSES (now REL), TPC, CESC, AEC etc. Prior to the Enactment of Electricity Act 2003, the electricity supply in the country was governed by three enactments only, the Indian Electricity Act 1910, the Electricity (Supply) Act 1948 and the Electricity Regulatory Commission Act 1998.  While the Indian Electricity Act 1910 envisaged the growth of the electricity industry through private licensees for supplying electricity in specified areas, the Electricity (Supply) Act 1948 mandated the creation of SEBs for supplying of electricity in the State. The installed generation capacity grew from 1362 MW at the time of Independence to over 66,086 MW in 1990-91. However the power situation lacked in quality, security and reliability. Available generation capacity was inadequate to meet the demand. As a first step for reforming Power Sector, by carrying out amendment in the Electricity (Supply) Act, 1948 the Government provided legal framework for the entry of Private Sector into the Generation and Distribution Sector as well in 1991.

Subsequently the Government of India also put a definite tariff framework in place. As a result 250 MoUs were signed between SEBs and the private developers, which include Dabhol, AES, Cogentrix etc. for a capacity addition of over 78,000 MW, which was more than national installed capacity by that time. But the overall performance remained quite dismal as most of the private players slowly withdrew from the power sector by mid-90s. Installed generation capacity by the Private Sector increased from 2916 MW in 1991-92 to 6256 MW in 1997-98. Some of the reasons for failure of reforms were, financially weak SEBs, subsidized tariffs to certain consumer categories along with substantial cross-subsidies, politicized tariff setting, inadequate off take and payment guarantee mechanisms. The Government also implemented various policies like Liquid Fuel Policy, Hydro Power Policy, Policy of Renovation & Modernisation and Mega Power Policy to encourage participation of Private Sector. But the outcome of these policies was not as expected.

Through the experience gained, the Government realized that unless comprehensive reforms measures were taken in the regulation of the industry, the Electricity Boards were made more accountable and cross subsidies were reduced, it would be difficult to attract private investments. The second phase of reforms ushered in with the setting up of Central Electricity Regulatory Commission and constitution of similar independent regulatory commissions in the States in order to rationalize the tariffs, regulate investments and standards of supply. However, for these regulatory bodies to be credible and effective in fulfilling their responsibilities, it was necessary to ensure that they have the requisite autonomy, accountability and expertise. Consequently a step further was taken in this direction and the SEBs were unbundled and distribution was also privatized. Orissa is the first state to privatize the Distribution sector to four companies CESCO, NESCO, WESCO and SOUTHCO in 1998. Following the Power Sector reforms in Orissa, the T&D loss has been brought down from 50.67 per cent in 1995-96 to about 41.4 per cent in 2004-05 and power deficit scenario has been transformed to power surplus. Consequently Delhi traced the beaten path and distribution became privatized in 2002.

Three Companies BSES Rajdhani (for south and south west Delhi), BSES Yamuna (East and Central) and North Delhi Power Limited (North and North West) took over the charge of Power Distribution. There has been considerable improvement in the power supply position like reduction of Aggregate Technical and Commercial (AT&C) losses and decline of load shedding from 558  million unit (MU) in 2001-02 to 176 MU in the year 2004-05. Though the Private Sector in distribution has shed these benefits, but it is not as much desired as by the DISCOMs. Privatisation of distribution has given rise to private monopolies. Lack of competition in this sector pulled the customers for a Hobson’s choice of selecting a distributor for connecting Electricity. It has been alleged that electronic meters introduced by the DISCOMs are faulty leading to inflated bills of consumers. As Electricity is a flow concept, The Government’s plan to add around 1, 00,000 MW of additional generation capacity set our attention towards huge investment in Transmission Sector. The Government of India issued guidelines for Private Sector participation in Transmission Sector through Joint Venture (JV) route and Independent Private Transmission Company (IPTC) route in January 2000. As a pilot project on JV route, Tata Power has been selected by POWERGRID as its JV partner for execution of specific transmission lines associated with Tala Hydro Electric Project and East –North interconnector and Northern Region Transmission System. 

From the above analysis it is concluded that we are headed in a good sequence of reform in Power Sector but some in built structural problems stall the process. Poor financial health of SEBs and dominance of political factor in setting power tariff remains a major drawback. Even today, lenders are hesitant to provide funds to IPP Projects because the SEBs – the main buyers of electricity- are not deemed creditworthy and their ability to support 20-30 year PPAs is considered doubtful. Agriculture Sector continues to get free power or is highly subsidized and this has resulted in a lot of wastage and misuse of electricity. T&D losses account for 40 per cent of the total supply and out of the rest 60 per cent; some 20 per cent go to the subsidized consumers. So, only 40 per cent of the consumers pay for the entire electricity and upward revision of tariff only affect this section. Because of this, most of big Industrial and Commercial consumers beginning to set up their own captive power plants, for which, today in the country, there is 100,000 MW of power plant capacity in the utilities sector and 25,000 MW with captive power plants. Rationalisation of tariff structure is quite important in this context. Also creation of a conducive and competitive atmosphere in the Power Sector is needed with the removal of undue political and bureaucratic interference. Hence more need to be done in our strategy of Reforms, to fulfill Government’s objective of ensuring reliable and quality power to all by 2012, making the growth in the Power Infrastructure self-sustainable and attaining the accelerated growth and development of the country.

(Views are personal)





Cairn to start oil production in Rajasthan in 2009

March 27, 2007. Cairn India, a subsidiary of British oil explorer Cairn Energy, is set to begin oil production in 2009. Just over three years ago Cairn had discovered Mangala oil field in the state. The Mangala field will be the first to go on production and the Bhagyam and Aishwariya fields will follow. The targeted gross production from these three fields is 150,000 barrels of oil per day (bopd). Laboratory studies have indicated that early application of enhanced oil recovery (EOR) techniques on the Mangala and Bhagyam fields is expected to extend significantly the production plateau and ultimate reserves for these fields. Current estimates for the proven and probable (2P) hydrocarbons in place for the six fields of Mangala, Bhagyam, Aishwariya, Saraswati, Raageshwari Oil and Raageshwari Deep Gas total 2.2 billion boe (barrel of oil equivalent) and the associated 2P reserves plus contingent resources are 864 million boe. Work is also on to establish optimal enhanced oil recovery (EOR) techniques in the Rajasthan block to extend plateau production and maximise recovery factors. Laboratory work is currently underway to establish the potential of these technologies, particularly in relation to how they can be used in Mangala and Bhagyam, the largest of the Rajasthan fields. The first phase of development drilling on the Saraswati has been completed and development drilling is now underway on the Raageshwari. Development drilling on Mangala is scheduled to commence in 2008.

RIL loses exploration rig to ONGC

March 26, 2007. State-run oil major ONGC has pipped Reliance Industries (RIL) to the post to contract a rig for exploration. RIL may have to pay a heavy cost for losing out on the deal. This may lead to delays in project implementation at the coal bed methane blocks in Rajasthan. Consequently, RIL has requested the government for a six-month extension to exploration work in the CBM block, BS (I)-CBM-2003/II. In a letter to the government, RIL has said that drilling operations in the block could not take place in time due to delay in getting a rig. Drilling in the CBM block requires a special type of rig. ONGC snapped up the rig, while RIL was still negotiating for it. RIL requested the government to extend the phase-I for a minimum six months from April 1, 2007. Under the second round of bidding (CBM-II), RIL has been awarded the block, BS (I)-CBM-2003/II in Rajasthan. The contract was signed on February 6, 2004 and the petroleum exploration licence was issued with effect from April 1, 2005. RIL, which holds 100 per cent participating interest in the block, started exploration work in the block in August 2005.

ONGC ready for conventional testing in KG Basin

March 23, 2007. With the Directorate-General of Hydrocarbons (DGH) accepting ONGC's biggest gas discovery in Krishna Godavari Basin off the Andhra Coast, the oil exploration major has requested the regulator to review its decision in case of ultra deep water well (UD1 well), which was discounted earlier. ONGC has now expressed its willingness to consider conventional testing method in one of the appraisal wells in order to satisfy the regulator. The DGH had disallowed ONGC's find in UD1 well in KG-DW-98/2 block on the grounds that conventional testing methods were not adopted by the company, and that the well was abandoned. Subsequently, the DGH had said that if ONGC makes a re-entry into the well and carries out the required tests, discovery/potential commerciality could be accepted. The company would like to make a detailed presentation on UD1 finds as well as two other hydrocarbon finds in the same block. Besides, ONGC has requested the DGH to consider two other finds in the same block as discoveries. ONGC holds 90 per cent interest in KG-DWN-98/2 block, with rest being held by Cairn. Of the six discoveries made last year by ONGC, the DGH has accepted three.

ONGC to start lignite gassification project in Surat

March 23, 2007.  Oil and Natural Gas Corp Ltd (ONGC) is expected to start its pilot project for underground gasification of lignite near Vasthan area 20 kms away from Surat in Gujarat within a year. Not only that, the company has also identified three other sites in Bhavnagar district of Saurashtra for similar projects. The Company will start the lignite gasification project at Vasthan near Surat within a year. ONGC had entered into a MoU with the Gujarat government owned Gujarat Mineral Development Corp (GMDC) for underground gasification of lignite near Surat. The pilot project is expected to kick off within a period of one year. ONGC has also identified three sites in Bhavnagar for studying the possibility for undertaking similar projects. Bhavnagar has a sizeable amount of lignite reserves and after the pilot project, the company will look at the three sites in Bhavnagar district for undertaking commercial production of natural gas through the gasification of lignite. ONGC had identified around 20 odd coal mines for underground gasification of coal.

IOC fails to acquire Congo assets

March 23, 2007. Indian Oil Corp, the nation's largest refiner, has lost out in the race for acquiring French company Maurel & Prom's stake in oilfields in Congo. Burren Energy of UK, which was supposed to exercise its pre-emption rights to stop sale of M&P's stake in Congo fields to Italy's Eni Spa and instead get IOC in the French company's shoes, has dumped the Indian firm to reach an agreement with Eni. Eni will sell 5.5 per cent out of the 48.6 per cent M&P stake it is acquiring in 56,000 barrels per day M'Boundi oil field and two per cent out of the 50 per cent M&P interest it is taking over in the surrounding Kouilou exploration license for 154 million dollars. Originally, Burren Energy, which had 31.5 per cent stake in M'Boundi field and 35 per cent interest in Kouilou, was opposed to M&P selling its stake to Eni. Burren wanted operatorship of the fields and was in advanced stage of talks to rope in IOC and its partner Oil India Ltd after it stops the sale by exercising pre-emption rights. IOC-OIL combine had no problems with Burren taking over operatorship and they had even agreed to assign a portion of M&P stake to the UK firm.

RIL eyes partnership with Chevron

March 21, 2007. Reliance Industries (RIL) is planning to rope in US giant Chevron, the world’s fourth largest publicly-traded oil company by revenue, for a partnership that will bid for exploration blocks under the National Exploration and Licensing Policy (NELP) programme. The seventh round of NELP bidding is likely to be announced in a month’s time and is expected to offer the highest number of blocks between 70 and 100. If a deal happens, it would be the first time when a US oil giant is showing interest in India’s oil and gas sector. It would also be the first time that RIL would be tying up with an overseas giant in order to scout for oil and gas in the country. Chevron is already partnering RIL for jointly promoting the greenfield 27 mtpa (million tonnes per annum) export-oriented refinery in the Jamnagar SEZ. Last year, RIL also signed a couple of memorandums of understanding (MoUs) with Chevron, which envisages intent of both companies to collaborate in areas of energy value chain. The US oil giant is keen on expanding its operations in this part of the world to reduce its dependence on politically unstable regions such as Russia. Chevron’s focus on Asian markets is aimed at achieving its target of producing more than one million oil-equivalent barrels per day by 2011. These additional volumes are expected to result in an average annual production growth of at least 3% through 2010. Chevron is also believed to have picked up equity stake in RIL’s KG D-6 block, which has in-place reserves of 14 trillion cubic feet (TCF) and also partner RIL for gas marketing in India.


Govt accords EOU status for Reliance’s Jamnagar refinery

March 27, 2007. Reliance Industries (RIL) has got the government approval for converting its existing 33 mtpa (million tonnes per annum) refinery in Jamnagar into an export oriented unit (EOU). Now, the company will be entitled to export its entire products to overseas markets and will also enjoy an income tax holiday till March 2009 and duty free import of crude oil. Reliance had earlier paid income tax at the rate of 14.7% for 2005-06 and 16.4% for 2004-5. In case of 100% tax holiday, RIL will be entitled to pay only minimum alternate tax (MAT) at 11.33% for the next two fiscals.  Regarding import at $60 a barrel, the company will have to pay $12,960 million annually for importing crude oil. RIL will save approximately $650 million per annum as it will not have to pay 5% duty on crude oil. While the company can import crude oil duty free to the extent of its exports, the EOU status will improve its cash flow position. RIL have already been exporting about 70% of our products. Getting an EOU status will minimise bottlenecks to claim refunds for indirect taxes paid. RIL has witnessed a decline in fuel sales in the past one year, mainly because of selling its products above the PSU price. Its diesel sales dropped 10% in January, even while the public sector firms recorded a robust growth. Even as the company plans to export most of its products overseas, it is lobbying with the petroleum ministry to allow it to source petroleum products from PSU oil companies for domestic sales.

IOC chalks out plans for expansion in Turkey, Africa

March 27, 2007. Indian Oil Corporation Ltd (IOC) has chalked out ambitious plans for expanding business in Turkey, Africa, West Asia and Commonwealth of Independent States. The company has earmarked a capital expenditure of Rs 43,000 crore over the next five years, for undertaking various projects including plans to set up a 15-million-tonne refinery at an estimated cost of $6 billion at Ceyhan in Turkey. IOC plan to acquire 51 per cent stake in the refinery at Ceyhan. It will export petroleum products to Europe and the US, apart from meeting the domestic requirement of Turkey. The refinery is expected to be completed by 2012. The refinery will also have Calik Energi of Turkey as a partner. Turkey invited bids for a majority stake in chemicals maker Petkim worth at least $500 million on March 16. Apart from this, IOC is acquiring 12.5 per cent stake in the $2-billion Samsun-Ceyhan pipeline. Currently, ENI, the Italian petroleum major, IOC and Calik Energi are partners in the projects and more players are expected to join hands for the project that extends from the Black Sea to Mediterranean Sea. A team to conduct due diligence on the pipeline project will be visiting Turkey soon. The company is looking at Turkey and African countries for business opportunities in retailing.

Mittal's Bhatinda stake violates ONGC pact

March 26, 2007. Steel tycoon Lakshmi N Mittal’s acquisition of 49 per cent stake in Hindustan Petroleum’s $3 billion Bathinda refinery has violated his pact with Oil and Natural Gas Corporation to pursue hydrocarbon opportunities exclusively with the flagship Indian firm. Though Mittal signed a joint venture agreement in July 2005 with the state-run firm to form ONGC-Mittal Energy for acquisition of oil and gas fields, refinery business and LNG projects, the steel czar recently decided to go it alone in investing Rs 3,300 crore in the Bathinda refinery. Besides, Mittal has on his own bought 50 per cent stake in a Kazakhstan oil firm from Russia’s Lukoil for $980 million and acquired 3 per cent stake in the $6 billion Chevron-operated Olokola LNG (OK-LNG) project in Nigeria. The July 24, 2005, agreement had earmarked 27 countries for exclusive pursuit of hydrocarbon opportunities by OMEL. For the rest of the world, it clearly stated that Mittal shall offer ONGC Videsh a partnership in any venture or business opportunity it wishes to undertake in the hydrocarbon sphere. But there was no such restriction placed on ONGC. The agreement had classified target countries into Schedule-I and II. Mittal and ONGC had agreed to participate on an exclusive basis through OMEL in the Schedule-I countries of Angola, Azerbaijan, Congo Brazzaville, Democratic Republic of Congo, Indonesia, Kazakhstan, Romania, Trinidad and Tobago, Turkmenistan and Uzbekistan. In the Schedule-II countries of Bosnia, Canada, China, Czech Republic, France, Germany, Kyrgyzstan, Liberia, Macedonia, Mexico, Nigeria, Poland, Sao Tome and Principe, South Africa, Sudan, United Kingdom and the US, the two agreed to bid jointly on a case-to-case basis. For Schedule-I countries, the agreement provided that OVL could bid alone for any project if it could not reach an agreement on the terms of a joint bid with Mittal. 

IOC plans 12 more LPG outlets

March 26, 2007. Indian Oil Corporation (IOC) plans to open 12 more auto LPG dispensing outlets in the city. Across the country, the oil marketing company would be adding 100 more outlets to its 120 in 42 cities. Auto LPG has registered an 80 per cent growth in business for the company. He, however, did not give the value of the turnover. IOC also hoped to commission its new generation aviation fuel hub at the new Bangalore International Airport in Devanahalli by April 2008.

Transportation / Trade

India to go ahead with Iran pipeline project

March 27, 2007. India will go ahead with the $7 billion Iran-Pakistan-India gas pipeline project despite objections raised by the US. However, at almost $8 per million British thermal unit, the cost of the gas is worrying the government and industry officials alike. The government has asked Pakistan to waive the transportation tariff and the transit fee that India will have to pay for the gas when the pipeline passes through Pakistan. Negotiations regarding this are still on. The $8 per million British thermal unit needs to be taken care of.

Petronet ties up supplies for Ratnagiri Gas project

March 26, 2007. Petronet LNG Ltd (PLL), the biggest liquefied natural gas (LNG) importer of the country, has successfully tied-up gas for Ratnagiri Gas and Power Project Ltd (RGPPL), the erstwhile Dabhol project. The gas is likely to be available to the company at a price of $5.83 per million British thermal unit (mmBtu,) whereas the current spot rates for LNG are between $8 and $9 per mmBtu. Petronet had last month firmed up short and medium-term contracts from four sources, Africa and West Asia, to meet the requirements of Ratnagiri Gas. Petronet has tied up supplies from Algeria, Oman, Qatar and Egypt for the purpose. The company would be sourcing in the range of 1.5 million tonne (mt) of 24 cargoes from these four suppliers, which in aggregate would be adequate in meeting the demand of Ratnagiri Gas. The requirement for the power plant at Ratnagiri, which is currently run on naphtha, would be 2.1 mtpa. Petronet was eyeing over 2.25 mt of LNG for delivery starting April-May to supply to Ratnagiri Gas. The total length of the pipeline is 474 km with the capacity of transporting12 mmscmd of gas. Meanwhile, Petronet is also on the verge of firming up a tie-up with Shell for using its Hazira LNG facility.

Kazakh want to join TAPI pipeline project

March 26, 2007. Kazakhstan has evinced interest in joining the proposed Turkemistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. Kazakhstan is looking at multiple ways for transportation (of energy resources) across the world. The TAPI project, currently under feasibility study, is seen as crucial for meeting India’s growing energy needs. Kazakhstan is one of the richest country in the world in terms of hydrocarbon resources, processing more than 35 billion barrels of oil and three trillion cubic meters of gas every year. 

Piped gas distribution to extend to 28 cities

March 26, 2007. The city gas distribution system in India would require an investment of Rs 10,000 crore to Rs 12,000 crore through public-private partnerships over the next two years. A phased roll-out of the system will increase the distribution of piped natural gas (PNG) from Mumbai and New Delhi to 28 cities — including Kolkata, Chennai, Bangalore and Hyderabad — identified by GAIL India Limited in the first phase. The other prominent cities to be covered under the project are Agra, Kanpur, Lucknow, Pune, Ahmedabad, Vijaywada, Navi Mumbai, Allahabad, Indore, Vadodara and the national capital region. Eight joint ventures have already been formed for this purpose. These companies would be 50:50 JVs and would operate like private companies and not public sector units. GAIL would have 22.5 per cent stake in the companies and respective state governments would have five per cent stake. During later phases, 200 cities would be covered by the city gas distribution network in 15 states. This would mean an increase in pipeline coverage from 6,300 kms to 8,400 kms. The city gas distribution would develop along the upcoming pipelines joining Dadri-Nangal, Chainsa-Hissar, Vijaipur-Haldia, Kakinada-Haldia, Dabhol-Bangalore and Kochi-Mangalore. The roll-out of the system will, however, be dependent on the production of natural gas in the country which is expected to increase towards the middle of 2008. An extra 10 million metric standard cubic metre per day of compressed gas for vehicles would be needed by the end of the 11th Plan. PNG, which is cheaper than liquid petroleum gas by up to 35 per cent in Mumbai, serves three lakh households in the city. This has made 25 lakh LPG cylinders available for circulation elsewhere. By the time it reaches to two crore subscribers, PNG is expected to free up 160 million LPG cylinders in circulation. Once these cylinders are free, it can  be deployed in rural areas .

Transnational pipelines face uncertain future

March 24, 2007. The big-ticket transnational gas pipelines that India was planning seem to be in trouble. Although the government maintains that the three pipelines, one from Myanmar, another from Iran and the third from Turkmenistan, are still in the reckoning, officials in the petroleum ministry have started raising doubts on the pipelines. With Myanmar deciding to sell the gas from its fields to China, the proposed Mynamar-India pipeline makes little economic sense.  Even bringing India’s share of gas from Myanmar would not make economic sense. The cost would be too high for such a small quantity of gas. India had the option of either bringing its share of the gas from Myanmar or selling it to other countries and using the foreign exchange earned to buy gas elsewhere.  ONGC Videsh (OVL), holds 20 per cent stake in two gas blocks in Myanmar, while GAIL India owns 10 per cent in the blocks. Recently, GAIL also acquired another stake in a third block in the country. The gas reserves in the two blocks were estimated at 4 trillion cubic feet (tcf) before. But according to Myanmar,  the reserves are much lesser than that, moreover Myanmar wants over almost 3 trillion cubic feet for its own consumption. Myanmar told GAIL and OVL, that China was offering a better price for the gas that it planned to export. There are also problems with the pipeline route itself. However, the country is still hopeful of additional exploration work being carried out in Myanmar. The gas from OVL’s Sakhalin-I field and Kazakhsthan will most likely be sent to China because of its proximity. Indai is thinking in terms of converting that gas into LNG and shipping it to India. OVL is already in talks with Shell for liquefying its gas in its plant in Russia. As for the Iran-Pakistan-India (IPI) pipeline, the issues are political and commercial, there is political pressure from US against the pipeline and the economics of the gas are also not too alluring. Further, the domestic production of gas is expected to increase sharply in the next two years as gas finds in the Krishna-Godavari basin are commercialised. According to projections shared by Reliance, the gap between demand and supply of gas would be wiped out by 2009-2010, when the total supply is seen at 243 mcmd (including LNG imports) while the demand is projected at 221 mcmd. It seems that India may just end up doing without piped gas across its borders. 

Myanmar says no to gas exports to India

March 22, 2007. In a major blow to India's quest for energy security, Myanmar has refused to export gas to the energy-hungry nation and instead wants to lay a pipeline to china to sell natural gas found in its offshore area. Myanmar wants to export gas from discoveries made in offshore block A-1 and potential reserves in block A-3 block to China. ONGC Videsh and Gail (India) have 30% stake in blocks A-1 and A-3 blocks, where South Korea’s Daewoo is the operator with 60 per cent interest. The remaining 10 per cent is with Kogas of South Korea. India has been seeking import of natural gas from Myanmar, Iran and Turkmenistan to supplement falling domestic production, which barely meets half the current demand. Gail last year proposed a 1,573-km pipeline from Myanmar through the north-eastern states of Mizoram and Assam to West Bengal and to Gaya in bihar to transport gas from A-1 and A-3. China and Thailand had submitted competing pipeline proposals. 

Maharashtra diffuses GAIL move on Ratnagiri

March 21, 2007. Maharashtra, which is facing an acute shortage of power, spiked GAIL India’s plan to gain control over the LNG terminal with a capacity of 5 million tonnes per annum (MMPTA), at the Ratnagiri power project site (previously Dabhol project). GAIL India, which holds 28.3% stakes in the Ratnagiri Gas & Power Pvt Ltd (RGPPL), at the meeting of empowered group of ministers (eGoM) held on March 20, suggested that it would pump in Rs 500 crore necessary for the completion of the LNG terminal and later would have control over its operations. After using 2.1 MMTPA for the power generation, GAIL India argued that it could transport the remaining 2.9 MMTPA through Dabhol-Bangalore pipeline to meet the gas demand of customers en route. However, Maharashtra strongly opposed the move and suggested that the state and NTPC can contribute Rs 500 crore to complete the LNG terminal. Subsequently, the GoM asked Maharashtra, NTPC and GAIL India to come out with their proposals within 10 days relating to the completion of LNG terminal and its financial impact.

Policy / Performance

Kirloskar signs MoU to set up unit at Kagal

March 27, 2007. Kirloskar Oil Engines (KOEL) signed an MoU with the state government for setting up a facility to manufacture oil engines and diesel-based generator sets (DG sets) at Kagal five-star industrial estate of MIDC in Kolhapur district. The facility would be spread over 160 to 200 acres of land of which 150 acres has already been handed over to the company by MIDC. KOEL will invest Rs 550 crore into the plant. The Kirloskar Group already has one manufacturing facility at Pune. The Kagal facility will be 100% export-oriented and is expected to double the company’s exports within five years. KOEL would raise Rs 350 crore through debt, while the rest would be raised through internal accrual. Manufacturing of DG sets would start from September this year and oil engines from April 2008. The facility will have a capacity to manufacture one lakh engines per annum which would be scaled up gradually. KOEL’s Pune facility has the capacity to produce 80,000 engines.

Petroleum ministry to clip DGH’s wings

March 26, 2007.  The petroleum ministry proposes to ease out the directorate general of hydrocarbons (DGH) from its discretionary powers for determining the unfinished minimum work programme (MWP) costs by contractors like Oil & Natural Gas Corporation (ONGC) and Reliance Industries (RIL). The trigger was the revision in MWP costs made by DGH in case of ONGC and RIL. The ministry’s move comes after it has recently snubbed the DGH for its actions against ONGC and OIL on the issue of under-recovery. In case of RIL, the initial amount calculated by DGH and the contractors have reduced significantly. For RIL, the initial amount calculated by DGH and notified to the contractor was about $96 million as recoverable in respect of four exploration blocks, but this was revised to $26.5 million. Subsequently, it was further lowered to $19.8 million. Similarly, in case of ONGC, the DGH had initially calculated $97 million for six blocks and after discussions it was revised to $106 million. Later it was reduced to $24.5 million. This move is largely because of large variation in the calculation for the unfinished minimum work programme. The ministry is contemplating a slew of measures in terms of transparent guidelines for the profit sharing contract (PSC) provisions to calculate the amount due to the government for the unfinished MWP.

Mahanagar Gas to invest $277 mn in five years

March 26, 2007. The Mahanagar Gas Ltd, a joint venture between Indian gas utility major, GAIL India, British Gas (UK) and the Maharashtra government has lined up an investment of Rs 1,200 crore ($277 mn) over the next five years to reach out to approximately nine lakh households across Mumbai and its adjoining expansion areas under the city gas distribution network. The investment would be through internal accruals. MGL has already spent upwards of Rs 250 crore, providing piped natural gas to nearly three lakh households in Mumbai. The company has recently rolled out piped natural gas (PNG) in south Mumbai. PNG pipelines will soon be reaching homes in the central suburbs of Thane, Vashi, Belapur, Dombivili and the western suburb of Mira Road, Bhayandar. Places in Navi Mumbai will also be covered under the project. In three years, MGL expects to double its subscriber base from 2.88 lakh to six lakh in Mumbai and treble it in five years, increasing supply of PNG from 1.4 million metric standard cubic metre per day (MMSCMD) to 4.5 MMSCMD in five years. For this, MGL will have to partly depend on the increase of natural gas production, expected towards the middle of 2008.  Land issues would not pose a problem for laying the PNG network across the state. In south Mumbai, 20,000 households have already been covered by PNG pipeline, while supply till date has been provided to 16,000 households. In the long run, 2.88 lakh households in the area would be covered.

No petroleum regulator yet for downstream sector

March 26, 2007. Almost a year after the Parliament approved the PNGRB Act which mandates the board to regulate refining, processing, storage, transportation, distribution, marketing and sale of petroleum production and natural gas (in short, the downstream activities), the ministry of petroleum and natural gas is yet to appoint chairperson and members of the board. Some people who were considered for the job opted out, reinforcing the perception that PNGRB is viewed as a watchdog without any bite. So far, India has had a regulator for only the upstream business in the oil and gas sector known as the Directorate General of Hydrocarbons (DGH). But DGH is not a regulatory agency formed by an act of Parliament. Rather, it reports to the petroleum ministry and follows the fiat of the government. Recently, the petroleum ministry clipped the wings of DGH by directing it to limit its role to providing technical inputs and desisting from approving financial matters.

GSPC mulls blending hydrogen with CNG

March 23, 2007. State owned Gujarat State Petroleum Corporation Ltd (GSPC) is toeing with the idea of blending hydrogen with Compressed Natural Gas (CNG) so as to reduce carbon emissions. The company, initially market hydrogen blended CNG though its CNG retail outlets on an experimental basis. On a pilot basis GSPC is pioneering to blend hydrogen with CNG. The blended CNG would be marketed through company’s CNG outlets on an experimental basis. The blended fuel would have 80% CNG and 20% hydrogen, which is considered to be a clean fuel, because hydrogen helps reduce carbon emission. Currently, California is using hydrogen blended CNG. Vadilal Chemicals Ltd, which supplies hydrogen, will hold talks with GSPC.

IOC, petrobras tie-up likely

March 22, 2007. The Indian Oil Corporation (IOC), the largest marketer of petroleum products in the country, may tie up with Brazilian oil major Petrobras to collaborate on ethanol projects, including ethanol import. Another government-owned refiner and marketer, Bharat Petroleum Corporation Ltd, had also been asked to explore opportunities in Brazil for setting up distilleries. 

Oil ministry for ethanol, biofuel imports

March 22, 2007. In a bid to arm-twist the suppliers of ethanol, the petroleum ministry is pushing for allowing import of ethanol for blending with petrol, reversing the earlier policy of relying on local production. It is also in favour of allowing import of bio-diesel. Imports may be allowed in the consumer interest to ensure that sufficient quantities are procured at economic rates, and prices of petrol and diesel do not become captive to domestic price spikes in respect of ethanol and bio-diesel. The ethanol-blending programme, which was to be rolled out in the country from November 2006, has been a non-starter, with just about 10 states freezing contracts with ethanol suppliers. The main issue of contention is the price. This is despite the fact that at a time consensus on the price of ethanol seemed to be emerging between oil firms and the Indian Sugar Mills Association. The ethanol suppliers now are asking for Rs 26-27 per litre of ethanol, while the oil companies are working on an all-India reference price of Rs 21.50 a litre. Imports of bio-fuels would dilute the bargaining power of the local units, besides ensuring supply. There have been instances in the past when domestic ethanol suppliers have diverted supply to other users when prices of ethanol had increased. According to industry estimates, India currently has about 120 ethanol-producing distilleries, which can manufacture 1.2 billion litres of ethanol every year. The Indian Oil Corporation (IOC), the largest marketer of petroleum products in the country, may tie up with Brazilian oil major Petrobras to collaborate on ethanol projects, including ethanol import.



Lanco’s Uttar Pradesh project on schedule

March 27, 2007. Lanco’s 1,000 MW Anpara thermal power project is chugging along on schedule, with financial closure expected in October 2007. Lanco had invited tenders to select engineering, procurement and construction (EPC) partner for the project. Lanco Anpara Power Pvt Ltd, the implementing company, has also set up the team for execution of the project, besides opening a full fledged office in Lucknow. Anpara was the first power project to be awarded to the private sector on a competitive bidding basis. The power purchase agreement for the project in UP, set to be commissioned by July 2010, was signed on November 12 last year between Lanco Anpara and the UP Thermal Power Generation Corporation. Lanco has committed to supply power at Rs 1.91 per unit. The company has obtained environment clearance, and has also got approval to transfer 9 hectares of forest land for the power project. The land transfer would be taken up soon after the completion of Assembly election process on May 12.

Balco setting up 1200 MW plant in Korba

March 26, 2007. Bharat Aluminium Co Ltd (Balco) will install a 1200 MW power plant here at a cost of Rs 4,800 crore, taking up an important role in making Chhattisgarh a power hub. The state had surplus power when it was created, but faces a shortage now with the rapid growth of heavy industry. The Chattisgarh State Electricity Board (CSEB) as well as many private companies are setting up projects. The chief minister has signed an agreement with Vedanta, the parent of Balco, for a 1200mw plant. The new power plant of Balco will be set up at the vacant land owned by Balco. Balco has drawn up the outline of the project and completed all formalities related to the construction of the plant. The planning is in the last phase and permission is awaited. The new power plant will use the latest in environment conservation and pollution control. Coal will come mainly from South Eastern Coalfields Ltd. The water required, around 3,400cum, would come from the Hasdeo river. Balco has applied for coal as well as water. The project is to come up on 430 acres, with the main plant requiring 200 acres. There will be 30-acre green belt around the project area.

1,421 applications for 38 coal blocks

March 22, 2007. Steel and power sector companies appear to be in a rush to seek allocation of captive coal blocks. In response to its advertisement for the allocation of 38 blocks with total reserves of 6,113.711 million tonne, the coal ministry has received as many as 748 applications from the power sector, 142 from the steel sector and 531 from various other sectors. Of the 38 blocks, the coal ministry has earmarked 15 blocks for the power sector and the remaining 23 for the steel and other sectors. These blocks are situated in Chhattisgarh, Jharkhand, West Bengal, Maharashtra and Madhya Pradesh. Priority would be accorded to projects with a capacity of 500 megawatt or more in the power sector. Power companies that have applied for the blocks include Tata Steel, Reliance Energy, GMR, AES, Jindal Steel & Power, IFFCO, Bharat Aluminium, Ispat Industries, Hindusthan Zinc, Hindalco, Bhushan Power & Steel, Lanco Group, Torrent Power, Chhattisgarh State Electricity Board and West Bengal Generation Company. Of the remaining 531, large firms lining up for coal blocks include ACC, Lafarge India and Gujarat Ambuja.

Bengal to keep shortage at bay

March 21, 2007. With the commissioning of Purulia Pump Storage project and Sagardighi Thermal Power Project, which would together generate 1,500 MW, West Bengal would not face any power shortage from August. The first unit of the project, having a capacity of 225 mw, would be commissioned on April 15 while three other with the same capacity would become operational by December this year. The Sagardighi project, would have two units each with 300 mw capacity. The first unit would be commissioned by June and the second from July. The work for the Katwa thermal power plant was on and the government had moved the Centre and Union coal ministry for coal block allocation to run the plant. Railway lines were being upgraded from Burdwan to Katwa-Kalna for the project at an expenditure of Rs 204 crore. The State Power Development Corporation would provide Rs 102 crore and the Railways Rs 102 crore. The power minister also said all households in the state would get electricity connection by 2010.

ONGC to pick 50 pc in SPV to execute Tripura Power

March 21, 2007. The Oil and Natural Gas Corporation has reworked the project structure of ONGC Tripura Power Corporation, its proposed gas-based power project in the state. The Rs 4,000-crore project, consisting of a power unit and a gas transmission network, will be taken up under a single special purpose vehicle (SPV), in which ONGC will pick up a 50% stake. Significantly, ONGC has invited global bids for the engineering procurement & construction (EPC) contract for the project to be commissioned at Palatana, some 60 km from Agartala. At the initial meeting of bidders held in Agartala between February 22-23, Alstom, Siemens, Essar Power and L&T were among the participants. The bids are likely to be opened towards end-April, while the project completion schedule is 27 months. The Tripura government will pick up a 0.5% stake while IL&FS will have a 26% stake in the SPV. IL&FS will play the role of project facilitator while the rest 23.5% will be offered to prospective investors. Earlier, ONGC had decided to take up the 740 mw combined cycle power generation company at Palatana under its own balance sheet. A separate SPV was planned for a 640-km gas pipeline between Palatana and Bongaigaon in which ONGC had decided to pick up 15%. Under the original structure, ONGC was to take up the generation project on its own balance-sheet and was planning to hold up to 26% stake in the SPV slated to create the 630 km of 400 kv transmission facilities from Palatana in Tripura to Bongaigaon in Assam. A break up of the project cost includes Rs 2,200-crore for the power plant and Rs 1,600-crore for a 640-km gas pipeline between Palatana and Bongaigaon.

GAIL seeks coal linkage for pilot project in Orissa

March 21, 2007. Gail India proceeds with a pilot coal gasification project at Talcher, Orissa. Gail India has appealed to the Union coal ministry to provide a long-term coal linkage for the upcoming project with an investment of Rs 2,430 crore. Gail India proposed to implement the project based on shell technology, and has projected a coal feed of 5,200 tonnes per day and a dolomite feed of 546 tonnes per day. The company has already completed the detailed feasibility report. Talcher has been evaluated as most suitable location for setting up the coal gasification plant. Gail India has already initiated the process to sign a memorandum of cooperation with Coal India Ltd for jointly evaluating the project. Gail India is in talks with the Rashtriya Chemicals & Fertilisers and Deepak Fertilisers regarding a customer tieup for the use of synthesis gas. The Talcher site has the capacity of 7.56 Million metric standard cubic metres per day (MMSCMD) of synthesis gas. According to the feasibility report, the end use of the synthesis gas can be done as feed stock for ammonia through the same, is suitable for power generation and production of methanol and other liquids like diesel. The company has argued that the project implementation could be done after obtaining coal linkage.

TN signs pact with Irish company for power plant

March 21, 2007. The Tamil Nadu Government and the Ireland-based McNamara International Pvt Ltd have entered into an agreement that provides for McNamara International to set up a 2,000-MW power plant and a coal-handling port in Nagapattinam district. McNamara International, an infrastructure company, will set up the coal-based merchant power plant at a cost of Rs 10,000 crore near Thirukuvalai. To handle the imported coal, the company will also set up a Rs 750-crore port facility at a place called Vettaikaran Irupu in Nagapattinam. The Tamil Nadu Maritime Board has given in principle approval to McNamara International to set up the port facility, which will have facilities to handle 20-40 million tonnes of coal and directly transfer the coal to the power plant. The project will generate 2,000 jobs directly and 5,000 indirectly, and support industrial development in the area.

Transmission / Distribution / Trade

AP power reforms paying off at all distribution levels

March 26, 2007. If power consumption in agriculture is restricted at the present levels, two distribution companies out of four in the state can report profits for fiscal 2007-08, says the Andhra Pradesh Electricity Regulatory Commission (APERC). As per the tariff order, the Central Power Distribution Company may report a surplus of Rs 280 crore and the Eastern Power Distribution Company a surplus of Rs 110 crore. The remaining two, Southern and Northern Power Distribution—are expected to report deficits of Rs 422 crore and Rs 626 crore, respectively, an improvement over last year. The tariff order has not increased charges for all categories for the period 2007-08. It has clarified that the estimated deficit of Rs 1,845 crore would be met through direct subsidy of Rs 1,047 crore and the remaining through cross-subsidy. The distribution system has substantially strengthened since the reform process began. While metered billing was just about Rs 5,000 crore during 1999, it grew to Rs 10,500 crore by 2006. Power consumption, too, increased marginally from 44,000 mu to 54,000 mu. This signifies that the reforms have paid and can further continue. However, Andhra is still reluctant to privatise distribution, fearing a public outcry. Besides, it is not in a mood to loosen its grip on the energy sector. The state had gone for power reforms in 1999 with support from World Bank.

Policy / Performance

NTPC inks $100 mn loan pact with KfW

March 27, 2007.  NTPC has signed an agreement with German lending agency KfW for a term loan of $100 million (nearly Rs 440 crore) to part-finance renovation and modernisation of its power plants. The loan is an unsecured facility without sovereign guarantee bearing variable interest linked to LIBOR with door-to-door maturity of 10 years. This would be the first loan that extended directly by KfW to NTPC and, that KfW had earlier routed funding for projects through the Government. The company had earlier announced plans to invest Rs 1,365 crore for renovation of three power plants - Singrauli, Rihand and Vindhyachal - with a total capacity of over 6,500 MW to enhance their lifespan by up to 25 years.

GAIL, NTPC to form JV for Dabhol terminal

March 27, 2007. GAIL India Ltd and NTPC are likely to form a joint venture company to pitch for the liquefied natural gas (LNG) receiving and regasification terminal at the Dabhol power plant in Maharashtra. GAIL and NTPC hold 28.33 per cent each in Ratnagiri Gas and Power Pvt Ltd (RGPPL), the company implementing the power project. The Maharashtra State Electricity Board (MSEB) owns 15 per cent and the rest of the stake is held by the lender banks. GAIL should have the first right of refusal for hiving off the LNG terminal, since its claim is stronger than NTPC as NTPC does not have any experience in handling gas. According to RGPPL, if the reconstruction committee approves of its sale, the terminal should be sold only through a bidding process. Reliance Industries is also interested in bidding for the terminal as it falls near the route of the $4 billion gas pipeline the company is planning to lay from Kakinada in Andhra Pradesh to Bharuch in Gujarat.

Lanco not willing to yield on Sasan

March 26, 2007. Lanco Infratech is bracing for a fight for control of the Sasan ultra mega power project. A day after an evaluation committee decided to ease out the Lanco-Jindal combine from the Rs 16,000 crore project, executives of the Hyderabad-based company were talking tough. According to Lanco’s Chairman, there is no basis for its disqualification. Lanco won the bid to build the 4,000 MW pithead coal-based project in partnership with Globeleq-Singapore, a company that was subsequently bought over by Lanco and Jindal. Incidentally, Jindal happens to be one of the eight unsuccessful bidders in the race for Sasan. There are two issues with the Lanco bid that could trigger a disqualification, i.e., alleged misrepresentation of facts and change of ownership midway from Lanco-Globeleq to Lanco-Jindal. But again according to the Chairman there was no misrepresentation of any sort financial or otherwise. And the the change of ownership was permitted under the procedures laid down. And to prove its claim Lanco is seeking legal opinion, which has been sent to the power ministry and the Power Finance Corporation.

State must put power reforms on track to fuel economic growth: Maha Govt

March 26, 2007. The recent Economic Survey has warned that the state cannot sustain the ongoing economic growth unless it improves its pathetic power sector. The report also highlights rising transmission and distribution (T&D) losses questioning the efficacy of various measures being under taken by the state to bring it down. Besieged by an unprecedented power crisis, with the shortfall rising to 5,700 MW, the Congress-NCP government has been making tall claims about the capacity addition. A couple of months ago, the energy ministry released details of various plants that were to start power generation in the year 2006. The survey, however, not only exposes the state’s all claims about capacity addition but also highlights the fact that its power generation has actually gone down instead. Maharashtra’s total generation as on December 31, 2006 was 49,352 million KWH which is less by 2.2% than that in the corresponding period of the previous year. More serious, however, is warning about the worsening power situation in the state. The aggravating gap between demand and supply raises questions concerning the sustainability of economic growth in future for the state. As the state is power deficit, the load shedding has become a regular feature. According to the survey, the MoUs have been signed but the implementation has been slow.

NTPC signs MoU with Power Ministry

March 25, 2007. NTPC Ltd has singed a memorandum of understanding (MoU) with the Ministry of Power. The MoU includes targets of important milestones related to ongoing projects of NTPC Ltd namely Sipat-I (3X660 MW), Sipat-II (2X500 MW), Barh (3X660 MW), Korba (1X500 MW), Dadri-II (2X490 MW), Farakka- III (1X500 MW), Koldam Hydro Electric Power Project (4X200 MW), Loharinag Pala Hydro Electric Power Project (4X150 MW), Tapovan-Vishnugad Hydro Electric Power Project (4X130 MW) and targets for coal mining activities. Targets relating to total quality management, human resource development, business development activities (including activities of gas exploration, distributed generation, R&R, ERP and subsidiaries of NTPC such as NTPC Vidyut Vyapar Nigam Ltd, NTPC Electric Supply Company Ltd and NTPC Hydro Ltd), R&D and Energy Technology, project management certification, ash utilisation and environment measures are also part of the MoU.

REpower in licence agreement with Essar for entry in to India

March 23, 2007. Suzlon Energy finally acquires REpower Systems AG, the wind turbines manufacturer, India figures high on the radar of REpower Systems AG. At its recent annual corporate presentation in Germany, the company’s top management has announced that REpower has started operations in India and China. For its entry into India, REpower has got into a licence agreement with the Essar Group. The German company has plans to upgrade this to a joint venture (JV) in India with the Essar Group. India and China were presented as part of REpower’s growth plan to focus on the top 10 markets in the world. The company has forecast revenues of 900 million Euro in 2008 but has not included sales for India and China in this forecast. REpower signed a licensing agreement with Essar Global’s Power business in September 2006 for the design and manufacture of 1.5 mw and 2 mw wind turbines in India and marketing in South East Asia. The two corporations had then agreed to set up a JV in the near future which would allow access to 3 mw and 5 mw turbines as well other future developments and wider market reach. Essar had plans to set up the manufacturing plant in a port-based location with initial investments of Rs 50 crore.

Uttarakhand govt to favour small hydel projects

March 23, 2007. The new Uttarakhand government is likely to give preference to small dams over big ones like Tehri in its new policy guidelines for the power sector. This could mean the death-knell for the 6,480 MW Pancheswhar project. The Centre will seek approval from the Uttarakhand government to build the 6,480 MW Pancheshwar hydel project, thrice the size of Tehri dam, on the Kali river in Pithoragarh and Champawat districts of the state but as per the officials, a nod for this was unlikely because the new dam would create much bigger problems. Various environmental groups have already opposed the Pancheshwar dam, threatening to launch an agitation on the lines of that against the Sardar Sarovar dam. The height of the Pancheshwar dam has been increased from 238 metres to 315 metres which would make it the highest and biggest dam in India. A 12,100 km-long reservoir is being built for the Pancheshwar dam, which would submerge nearly 146 villages.

Power shortage to choke growth: PM

March 23, 2007. Prime Minister Manmohan Singh has rapped the power ministry for missing the generation targets by nearly 50%. Fearing that shortage of power will adversely affect economic growth, the prime minister called on those involved in the planning and execution of the power sector to introspect on what has gone wrong. At present, the country faces shortages of around 12% during peak season. The power generation must increase if it is to meet the needs of industry and agriculture to sustain the current growth rate. The prime minister asked all power utilities to maximise capacities through adoption of best practices and regular maintenance of generating units. There was also a scope of an improvement in the productivity of hydel power generation. This would require to be accompanied by an efficient transmission system, and a viable distribution system.

Coal India keen on Mining & Allied revival

March 22, 2007. Coal India Ltd (CIL) signing a memorandum of understanding (MoU) with National Thermal Power Corporation (NTPC) to set up a 50:50 joint venture company for the development of new coal mining projects to cater to NTPC's existing and future power projects, CIL has evinced interest in reviving the closed Mining and Allied Machinery Corporation (MAMC) at Durgapur in West Bengal. CIL plans to set up a joint venture with a reputed foreign underground mining equipment and machinery manufacturer. The two objectives are to produce equipment and machinery at lesser cost compared to the imported ones, and also to ensure easy availability of machinery and spares for CIL's underground mines. CIL have initiated the process of selecting the overseas partner for the joint venture. MAMC, originally a part of the Ranchi-based sick PSU Heavy Engineering Corporation (HEC), once had the capacity to produce machinery and equipment for underground coal mines. Set up nearly three decades ago with the support of Russian technology, MAMC did well in the initial years owing to favourable domestic consumption of underground mining equipment. The situation gradually became worse for MAMC with restricted investment by CIL on modernisation and expansion of its underground mines.

Coal sector to get annual road map

March 22, 2007.  The Prime Minister’s Office (PMO) has directed the coal ministry to furnish an annual road map for meeting production targets laid in the Eleventh Five-Year Plan. The road map would identify sources, which would help producers to increase production. Besides, the road map will also lay down other steps required to be undertaken for realising targets. The projected demand for coal is expected to reach 730.10 million tonnes by 2011-12, the last year of the Eleventh Five-Year Plan. However, the production is likely to fall short of the demand at 680 million tonnes (mt), registering a compound annual growth of 9.47%. The incremental production of coal during this period is estimated to be 247.5 mt, against 104.70 mt in the Tenth Five-Year Plan. Coal India Ltd (CIL) is likely to produce 520.50 mt, while Singareni Collieries Company Ltd (SCCL) would produce 40 mt and others, including private sector, 118.70 mt during 2011-2012 period. The shortage of 51.10 mt will comprise 40.85 mt of coking coal and 10.25 mt of thermal coal. The coal ministry hopes to meet the gap through imports. In addition, the data suggests that production from captive blocks is likely to reach 104 mt, a quantum jump from the present level of 18 mt, primarily on account of the progress of 60 blocks. The mining plan for these has already been approved.

Govt keen on energy-efficient projects: Shinde

March 21, 2007. The Government is laying special emphasis on energy-efficient projects that could lead to savings of 73 per cent of energy consumption, according to the Union Power Ministery. The Bureau of Energy Efficiency, had initiated several steps in the area of energy conservation for the industry, domestic sector, commercial establishments and agriculture. This will lead to creation of opportunities for organisations which could conceptualise energy efficiency projects and implement them. Already, manufacturers of a number of energy efficiency equipment and appliances have started expanding their capacity. The Government's latest initiative in generation to secure low-cost power through economies of scale and a competitive environment has met with considerable success. The award of two ultra mega power projects to private developers has set a new benchmark for electricity pricing in the country. These projects will meet the power needs of a number of States through transmission of power on regional and national basis.

Decks cleared for new Dabhol PPA

March 21, 2007. The power-starved Maharashtra has got a reprieve, with a central panel agreeing to its demand to sell it the entire 2,150 MW electricity produced by the controversial Dabhol power project. The empowered group of ministers on Dabhol has put its stamp of approval on the demand of the state and cleared the way for signing a fresh power purchase agreement with Maharashtra. All the shareholders of the Ratnagiri Gas and Power (RGPPL), the new owner of the Dabhol project, have agreed to share the Rs 1,300-crore maintenance cost of the plant which is in disrepair. All the three units of the Dabhol project will run on gas, thereby reducing the cost of power to the state. Maharashtra faces a 5,000-MW shortage in power supply and hopes that it could get 2150-MW power from the Dabhol project by December this year. Currently, the state receives 340-MW power from Dabhol and hopes to get an additional 340 MW by next month. A second 700-MW unit is expected to supply electricity by May-end, while the power from the third unit will be available by December. The laying of gas pipelines to supply fuel for the power plants was almost complete. RGPPL, the new owner of the 2,150-MW project, had restarted one unit of 740 MW in May last year on naphtha after a five-year gap. All the three units were to be switched to gas earlier this year, but the plan had to be postponed due to non-availability of gas. Besides the existing unit, another unit of equal capacity would be utilised for generating power as Maharashtra is facing acute shortages of up to 5,000 MW in peak hours.




Gazprom signs PSA for Libyan offshore hydrocarbon block

March 26, 2007. Russian natural gas giant OAO Gazprom has signed an agreement to explore and develop Libya's offshore hydrocarbon block No. 19. Gazprom will explore the 10,288 square-kilometer block, located in the Libyan section of the Mediterranean sea, under a production sharing agreement signed with Libya's National Oil Co. Gazprom and Libya's National Oil Co. also discussed ways the two companies could cooperate in the future, including possible joint ventures for oil and gas production in Libya and for marketing liquefied natural gas. Libya has offered up 41 onshore and offshore energy fields to energy companies in the country's third bidding round since U.S. sanctions were lifted in 2004. Gazprom did not give any estimate of the resources of block No. 19, but estimated that, about $200 million would be invested in the project.

Indonesia to tender CBM areas

March 26, 2007. Indonesia's upstream regulator, the Indonesian government plans to tender six coal bed methane (CBM) areas in April or May. The six areas are in South Sumatra and East Kalimantan, which hold subtantial coal reserves. The six areas include those part of coal mine concessions, oil and gas, and areas that have not been awarded yet. The government will give the first priority to companies that operate the coal concession or oil and gas areas which will be tendered out. If they are not interested in the area, the government will hold an open tender. Split for gas is 70 percent for the government and 30 percent for the company. The potential of the fuel in Indonesia is estimated at 453.3 trillion cubic feet (TCF).

OMV makes gas discovery in Pakistan

March 23, 2007. OMV has successfully tested gas in its Latif 1 exploration well in the Latif Exploration Block in Northern Sindh province/Pakistan. This is an additional discovery in an area where OMV has discovered two major gas fields before, Miano and Sawan, which were brought on stream in 2001 and 2003. The recent discovery, which is operated by OMV (Pakistan) Exploration GmbH, a 100% subsidiary of OMV, opens the potential for further discoveries in the vicinity. The exploration well reached a total depth of 3,520 m and encountered a total of 18.7 m net gas/condensate pay in three layers at depths of 3,200 to 3,450 m. Further appraisal activities for the area like the acquisition of additional 3D seismic and drilling of wells are envisaged. Preliminary results show that the well is capable of flowing over 1,700 boe/d (10 mn scf/d) from the tested zones. However, the actual flow potential and size of the field would be determined after a long term test and appraisal of the field. The drilling rig has moved off and preparations for further production testing and evaluations are under way. Further 3D seismic and appraisal drilling are planned. OMV and its joint venture partners Eni AEP Limited (Eni) and Pakistan Petroleum Ltd (PPL) hold about one third of the Latif Exploration License. The new discovery and the existing infrastructure of the Sawan and Miano fields are located directly between the markets of the two Pakistani gas suppliers, Sui Northern Gas Pipelines and Sui Southern Gas Company, which enables OMV to deliver to both networks. In adding new reserves through exploration activities in this area OMV strengthens its position as strategic hub. OMV is the biggest international natural gas producer in terms of operated volumes in Pakistan.

BP files $2.3 bn plan for N. Sea

March 22, 2007. Britain's BP has filed a plan for further development of the Valhall oilfield off Norway, including planned investments of 14 billion Norwegian crowns ($2.28 billion). The Valhall field in the Norwegian sector of the North Sea has been in operation since 1982 and produces around 70,000 barrels of oil per day. Now BP plans to build a new platform to replace three old platforms. The current platforms were designed for a lifetime of 25 years, while installing the new platform will extend the life of the field to 2049. The new platform was needed also because the seabed in the area is sinking. Investments in the project are estimated at around 14 billion crowns. The planned production start-up for the new platform is in 2010. The new platform will receive its power supply by cable from land, which will mean that carbon dioxide (CO2) emissions from production at the field will be practically eliminated. BP is operator of Valhall with a 28 percent stake. Its partners in the field, which lies 290 km offshore in the southern part of the North Sea, are Anglo-Dutch Shell, France's Total and U.S. producer Hess.

Anadarko plans to drill six exploration wells in Brazil

March 21, 2007. US oil company Anadarko plans to drill six exploration wells on its Brazilian exploration blocks in 2007-08. The company plans to acquire 3D seismic data and drill one well in 2007 southwest of the existing Peregrino field it is developing with Norsk Hydro in the Campos basin. Anadarko could drill a second well in 2007 on one of the three exploration blocks in the Espirito Santo basin. Anadarko in 2008 plans to drill another two wells in the Campos basin and two in Espirito Santo. Anadarko assumed control of US oil company Kerr McGee's  Brazilian exploration acreage after acquiring control in 2006. In addition to the 50% working interest in the BM-C-7 block where Peregrino is located, Anadarko has interests in three other blocks in Campos and three in Espirito Santo. Norsk Hydro has the other 50% of BM-C-7 and the Peregrino field. The partners have submitted to ANP the field's development plan and have agreed to lease a 100,000b/d floating production, storage and offloading vessel to operate on the field from 2010.

EnerGulf awarded offshore Namibia contracts

March 21, 2007. EnerGulf Resources Inc. issued an operational update on Block 1711, located offshore Republic of Namibia. The Block 1711 Joint Operating Committee, comprised of Sintezneftegaz of Moscow; PetroSA, the national petroleum company of South Africa, NAMCOR, the national petroleum company of Namibia, and EnerGulf, has held regular meetings in both Windhoek, Namibia, and Moscow and has established procedures for the awarding of the various contracts required for the ongoing work program. Under the criteria established by the Joint Operating Committee, three contracts have been awarded to date from bids made by multiple qualified companies. The contract for the reprocessing and reinterpretation of 2D and 3D seismic data to further confirm the optimal drilling location on the prospect for the Kunene #1 identified by 3D data, as required by the Production Sharing Contract (PSC) with the Government of Namibia, has been awarded to WesternGeco (Schlumberger). The contract for developing the Drilling Program and engineering monitoring for the Kunene #1 exploratory well construction has been awarded to Halliburton. Drilling is scheduled to commence by March 2008. The contract for the Environmental Impact Assessment for scheduled drilling operations on Block 1711 required by the PSC has been awarded to Risk-Based Solutions of Namibia. Block 1711 is situated in the Namibe basin off the northern coast of Namibia along the international boundary with Angola.

First offshore gas flows from Pohokura

March 21, 2007. According to the joint venture owners of the Pohokura gas field development Shell, Todd Energy and OMV offshore "first gas" flowing from the Pohokura field in Taranaki. Gas and condensate flowed from the first offshore well through the subsea pipeline to the processing production station at Motunui, near New Plymouth. Five further offshore wells are expected to be drilled over the coming year. Three onshore wells were commissioned in September 2006, along with commercial gas to market. Natural gas from the Pohokura field is fed into the North Island gas network and the condensate piped to storage tanks at Omata near New Plymouth for shipping to refineries. Shell (48%), Todd Energy (26%) and OMV (26%) jointly own the field while Shell Exploration NZ Limited (SENZL) operates it.

Indonesia signs exploration rights on energy blocks

March 21, 2007. Indonesia's President signed nine oil and gas contracts in an effort to draw more foreign investment to the sector and increase the country's energy output. Indonesia, the Asia Pacific's only OPEC member, has been offering new exploration rights in a bid to stem a steady decline in production which has made it a net crude oil importer in many months of recent years. Major international oil and gas companies such as France's Total SA, Canada's Talisman Energy Inc, U.S. firm Exxon Mobil, and British oil explorer Premier Oil Plc were among those signing the contracts. Also on the list is a consortium that comprises Indonesia's state oil and gas company PT Pertamina and Norway's Statoil ASA. Total won the Southeast Mahakam block in East Kalimantan, Talisman the offshore Sageri block in South Sulawesi, and the offshore Mandar block in west Sulawesi went to Esso Indonesia, a local arm of Exxon Mobil. The Karama block was awarded to a joint venture between Pertamina and Statoil, while the Tuna block near the Natuna island area in the South China Sea has been awarded to Premier Oil. The contractor will get 20 percent of oil output and 30 percent of gas output from Mahakam if oil and gas are found, while for the Sageri block the contractor will get 35 percent of oil and 40 percent of gas. In Mandar and Karama, the contractor will get 35 percent of oil and 40 percent of gas output while in the Tuna block it will get 25 percent of oil production and 40 percent of gas.

Statoil plans Libya seismic surveys from April

March 21, 2007. Norway's oil group Statoil would start seismic surveys next month at its two land-based prospects in Libya. Statoil has 100 percent of the Cyrenaica 94 licence and is a 50-50 partner with Britain's BG in the Kufra 171 licence. In Kufra, located in the desert in southeast Libya near the Egyptian border, Statoil and BG have committed to gather 2,000 km of two-dimensional seismic data and drill two exploration wells. Statoil plans to gather 3,000 km of 2D seismic data and drill one exploration well in the Cyrenaica licence. During the second half of 2008, Statoil will drill the first exploration wells in Libya.

Brinx discovers oil and gas in Oklahoma

March 20, 2007. Brinx Resources Ltd. announced that oil and gas was discovered in the drilling of the Isbill #2 at the Owl Creek Prospect in McCain County, Oklahoma. The well logs and drill cuttings are strongly indicative of potentially economic oil and gas shows. A drill stem test recovered gas at surface in 15 seconds, and oil at surface in 20 minutes from the pay zone which is at approximately 5,500 feet. The Bromide sand is providing between 8 and 10 feet of net pay with average porosities of 14%, and was encountered structurally high to the Powell #2 well. In addition to the 1st Bromide zone a second prospective zone, the upper Viola, was also identified in the well logs. This zone appears to be 15 feet thick and lies at a depth of approximately 5,200 feet. The Powell #2 well, also at the Owl Creek Prospect in McCain County, Oklahoma, has been flowing naturally under its own pressure for nine months. The well is still flowing at a rate of 120 barrels of oil and 40 mcf of gas per day. The well is showing very little decline or depletion indicating that the producing reservoir and the associate field is larger than earlier believed. The successful drilling and testing of the Isbill #2 has now further confirmed this supposition. Completed over nine months ago, the Powell #2 has produced over 33,000 barrels of oil and 9 million cubic feet of gas.

Petrobras inks deal with Jogmec of Japan

March 20, 2007. Petrobras signed a principle of understanding with the Japan, Oil, Gas, and Metals National Corporation. The agreement foresees exploration and production opportunity evaluation in South America and Southeast Asia, over and beyond joint studies on heavy oil and natural gas. Special emphasis will be given to deepwater projects. Petrobras and Jogmec agreed to hold annual meetings to exchange relevant information and identify international projects of mutual interest. One of Jogmec's main activities is providing assistance to Japanese oil companies in international business development. The Leopoldo Americo Miguez de Mello Research & Development Center (Cenpes) already has a memorandum of understanding with this Japanese state-owned company, signed in 2005, to develop joint studies.

Major oil reserves discovered in China's Bohai Bay

March 20, 2007. China's top oil producing and offshore oil companies simultaneously unveiled major discoveries. PetroChina Company Limited, discovered a very rich oil field at Bohai Bay, the biggest in China in the past decade, while China National Offshore Oil Corporation (CNOOC) also had an exciting find. The PetroChina discovery, along with a new huge gas field the company discovered recently in Sichuan Province, will significantly improve the capacity of the country's biggest oil producer. With an initial daily output of 500 tons (3,700 barrels), the Bohai Bay field is the largest find in China in 10 years. No details for total reserves of the Bohai oil field was elaborated but the gas field in Sichuan has been tested to have a daily capacity of 1 million cubic meters. PetroChina has currently six domestic oil and gas fields, with each one's annual output breaking through 10 million tons of oil equivalent. According to CNOOC the Bohai Bay discovery involved a test output of 1,600 barrels of oil and approximately 10 million cubic feet of gas per day.


Aramco, Sinopec and Exxon to sign deal

March 27, 2007. Saudi state oil giant Aramco, US major ExxonMobil and China's Sinopec will sign a deal for a multi-billion dollar joint-venture in China's Fujian province. The deal have been finalised to triple the capacity of the Fujian oil refinery in February, pending government approval in both Saudi Arabia and China. When it was agreed in 2005, the project had a price tag of $3.5 billion. Saudi Arabia is the main supplier of crude to China, the world's second largest energy consumer. The deal gives Aramco and Exxon a foothold in China's sector, dominated by state giants Sinopec and PetroChina. It would triple Fujian refinery's capacity to 240,0000 barrels per day (bpd). The expanded refinery will start up in early 2009.

State oil firms to build gas plant in Kenya

March 27, 2007. The Government has approved a bulk gas storage facility to be built by the Kenya Petroleum Refineries Limited and Kenya Pipeline Company in Mombasa at the Coast. Government had given Kenya Petroleum Refineries Limited and Kenya Pipeline Company (KPC) approval to jointly build the gas storage facility with capacity of 6,000 tonnes at a cost of Sh3.5 billion. The storage facility to be built this year in Mombasa will facilitate importation of larger shipments of gas, thus lowering supply costs and enhancing the availability of the commodity. A joint venture company will be registered by KPRL and KKPC to manage the facility, which will also have a cylinder filling plant. KPRL produces about 30,000 metric tonnes of gas, and production is projected to go up to 115,000 tonnes after the modernisation of the refinery.

Kuwait to decide on retendering new refinery

March 24, 2007.  Kuwait National Petroleum Co. (KNPC) is considering different options for reintroducing the tender for a planned 615,000 barrels per day al-Zour refinery and will decide in May. The options under consideration include reintroducing the tender on a cost-plus basis that would include a profit margin. The new refinery and upgrade work on the country's two other refineries would increase Kuwait's total downstream capacity to 1.2m bpd.

Malaysian refinery offers Iran stake in $2bn project

March 23, 2007. Iran's state oil company has been invited to take a stake in a Malaysian refinery. Small Malaysian firm SKS Development, whose parent company recently won a $16 billion gas-development deal with Tehran, has offered National Iranian Oil Company (NIOC) a minority stake in the $2.2 billion project. The Malaysian firm will still own the majority stake, adding that the 200,000 barrels per day (bpd) refinery would process Iranian crude. The project got government clearance last year but only came to light this week. SKS Development wanted NIOC as a partner. It plans to start building the refinery in July in northern Kedah state.

Shell Canada eyes Ontario village for new refinery

March 22, 2007. Shell Canada Ltd. has settled on a location in southern Ontario for its planned heavy-oil refinery, and the details for the new facility are being worked out. The new operation is likely to be built near the small community of Sombra, which has a population of about 280. Sombra is south of Sarnia, the center of Ontario's petrochemical industry. The new plant will process between 150,000 and 250,000 barrels a day of heavy oil from Shell Canada's oil sands operations in Alberta but other details, including cost, configuration and a potential tie to the company's nearby 72,000 barrel a day refinery in Sarnia, are still sketchy. Though a final decision on going ahead with the plant may not be made until 2010, the facility is one of three new refineries being touted in Canada. The new refinery would primarily serve the Ontario market.

Shell sells some European LPG businesses

March 21, 2007. Shell had signed a deal to sell its liquified petroleum gas (LPG) businesses in Bulgaria, the Czech Republic, Germany, Romania, Spain, and Switzerland to France's Rubis. The sale is part of the Anglo-Dutch oil major's strategy to streamline its downstream activities. The deal in Romania is subject to approval of Shell's existing partners in the country.

LUKoil to invest in its refineries

March 20, 2007. LUKoil plans to invest $6.2bn in modernization and development of its refining capacities till 2017 and some $2.2bn in 2007. LUKoil was planning to purchase and install new equipment at various refineries in Russia before 2012.

Transportation / Trade

Work on Bolivia-Argentina pipeline to start in Oct

March 26, 2007. According to the Bolivian government construction of a $1.9 billion pipeline will quadruple its natural gas exports to neighboring Argentina will begin in October. Bolivia agreed late last year to increase natural gas exports to Argentina from the current maximum of 7.7 million cubic meters a day over a 20-year period starting in 2010. Hopefully the 940-mile (1,500 km) pipeline will start operation before the end of 2009. According to the time frame agreed between the two countries, engineering work would be finished in May, and the bidding process would take place in June so that construction work can start in October. Bolivia has 47 trillion cubic feet of proven and probable natural gas reserves, the second-largest deposits of the fossil fuel in South America after Venezuela.

US-Azerbaijan sign deal on gas pipelines

March 24, 2007. US inked a strategic alliance with Azerbaijan to promote gas pipelines that aim to stimulate competition against Russia's grip on the energy market. Of particular focus will be realisation of the Turkey-Greece-Italy gas pipeline, and potentially the Nabucco and other pipelines, with Azerbaijani gas, to help Europe bolster its energy security by diversifying its natural gas supplies. The Nabucco pipeline project aims to diversify central Europe's sources of gas supplies by linking eastern Turkey with Austria.

Venezuela in oil export deals with China

March 24, 2007. Venezuela was working on a raft of oil deals with China, to break his country’s dependence on oil exports to the United States. The China National Petroleum Corp. will look to develop heavy crude oil production in the Orinoco Belt and cooperate with Venezuela in building three refineries in China and a super-fleet of crude tankers. China's economic expansion has turned it into the world’s second-biggest oil consumer. Opec member Venezuela was the fifth-biggest oil exporter to the United States in January as it pumps about 2.7 million barrels per day. CNPC would in the coming days sign a preliminary deal to take a 40 per cent stake in a Venezuelan heavy crude project. Venezuela is seeking to do more business with China, Russia and Iran, part of forming what he describes as a multipolar alliance against the United States.

Firm seeks to build Richmond hydrogen plants

March 24, 2007. An international atmospheric gas company, Praxair Inc. wants to build two hydrogen plants in Richmond and a 22-mile underground pipeline to deliver the gas to Martinez. If the project is approved, Praxair would construct the hydrogen plants at the Chevron Richmond refinery and an underground delivery system to the Shell refinery in Martinez and possibly the ConocoPhillips refinery in Rodeo. The 12-inch, carbon steel pipeline would run through unincorporated areas of west Contra Costa and East Bay Regional parklands and near the cities of Pinole and Hercules. Below cities, suburbs and rural areas lies an intricate network of pipes that carry gasoline, crude oil and natural gas.

Indonesia may boost fuel oil imports

March 23, 2007. Indonesia may boost fuel oil imports to generate power in coming years as it converts diesel-fired turbines in areas where gas-or coal-fired plants are not feasible. Most of this additional capacity will be generated by new coal plants that Indonesia is building throughout the country. But there will be some instances where it will be difficult to build small-capacity plants in some remote areas. In such cases, it will try to convert the diesel-burning plants there into using the cheaper fuel oil instead. It is also replacing diesel plants with fuel oil where possible as an interim, while the coal plants are being built. The utility, which supplies most of the country's estimated 26,000 (MW) of installed capacity, is also looking at buying fuel oil blended with palm oil for power generation this year as it moves to add 10,000 (MW) by 2009. Of that total, about 40 per cent is to replace oil-fired plants and the rest is to meet new demand, estimated to be growing at 7.1 per cent annually through 2026.

Shell oil gets Pentagon deals worth up to $1.2 bn

March 22, 2007. Shell Oil Products, a unit of Shell Oil Company, is being awarded two U.S. Defense Logistics Agency contracts totaling up to $1.2 billion for aviation turbine fuel. Work under the contracts is to wrap up on April 30, 2008. Valero Marketing and Supply Co., San Antonio, Texas, is being awarded a deal valued at up to $499.4 million for fuel, and Shell Chemical Yabucoa, Inc., Yabucoa, Puerto Rico, has won one valued at up to $143 million for naval distillate fuel.

China's CNOOC aims 60 mn tones LNG imports in 15 yrs

March 22, 2007. China's offshore oil and gas specialist China National Offshore Oil Corp. (CNOOC) plans to boost its imports of liquefied natural gas (LNG) to 60 million tonnes a year in 15 years. The plan to raise imports of cleaner LNG would help reduce reliance on dirty coal-based energy and meet growing demand in coastal regions. China depends on coal for more than 70 percent of its energy needs. CNOOC started up China's first LNG terminal in southern Guangdong province last June that is fed with Australian gas, with annual receiving capacity of 3.7 million tonnes in its first phase. It is building a second import facility in Fujian province and a third in financial hub Shanghai, which would import LNG from Indonesia and Malaysia respectively. CNOOC also plans to build another two facilities in Ningbo in Zhejiang province and Zhuhai, near Macau, by around 2010.

Aker yards to build PSVs for gulf offshore

March 22, 2007. Aker Yards has entered into a contract with Gulf Offshore NS. Ltd. for building of two Platform Supply Vessels based of the Aker design PSV 09 CD. The total value of the contract is approximately NOK 530 million. Delivery is scheduled in 4Q 2009 and 2Q 2010. The vessels will be equipped with dynamic positioning, diesel electric propulsion and will have the class notation Clean Design. The vessels are designed for good sea keeping performance, low fuel consumption and environmental friendly operations. In the past Gulf Offshore has been involved in more than 30 contracts with Aker Yards. With this contract, four of the vessels in order by Gulf Offshore are of Aker Yards design. The hulls for the vessels will be built at Aker Yards in Romania and outfitted at Aker Yards in Norway.

Petrobras seeking bids for gulf of mexico FPSO

March 21, 2007. SBM Offshore NV, a Dutch offshore technology provider to the oil and gas industry, will tender for the construction of a floating production, storage and offloading vessel, for Brazilian oil company Petroleo Brasileiro SA (PBR). The contract has a value of around $600 million. Japanese company Modec Inc. will also tender for the contract along with SBM Offshore and Modec. Other interested companies could be Dutch independent company Bluewater and Norwegian firms Prosafe ASA and Seadrill Ltd. The interested companies will submit their bids before mid-April 2007.

GCC eyes pipelines plan

March 21, 2007. GCC countries are still considering plans to build oil pipelines which would enable them to avoid using the Strait of Hormuz between Oman and Iran. Around 40% of the world's oil supply is shipped through the strait and Iran has previously threatened to disrupt supplies if it comes under attack for its nuclear policy. The GCC is considering two pipelines which could pump 6.5m barrels per day.

Persian gulf govt plan oil pipelines

March 20, 2007. Gulf governments are planning oil pipelines that would bypass the world's most vulnerable energy choke point, the Strait of Hormuz, aiming to avoid possible Iranian threats to global oil shipments. If built, two pipelines could ferry as much as 6.5 million barrels of oil a day around the strait, an amount equal to nearly 40 percent of the daily exports currently shipped through the narrow channel at the entrance of the Gulf. Construction of the first, smaller line is forecast to begin this year. A second, more ambitious line carrying some 5 million barrels a day is still under discussion and could take a decade to build. Bypassing the Strait of Hormuz also could lead to a drop in the price of crude. Currently, oil from the region is loaded onto tankers in the Gulf and shipped through the strait. The pipeline plans aim to take the oil by land from Arab countries to just outside Hormuz for loading. The first, 224-mile pipeline would carry only oil from the United Arab Emirates, extending from the country's Habshan oil field, across a mountain range, to the emirate of Fujairah, located outside the strait on the Gulf of Oman.

Policy / Performance

Venezuela, China create $6bn energy fund

March 27, 2007. Venezuela and China created a US$6 billion (euro4.5 billion) fund to boost energy cooperation and finance joint development projects between the two countries. The fund, aimed at increasing Venezuelan oil exports to China from 150,000 to 800,000 barrels a day. Venezuela will invest US$2 billion (euro1.5 billion) in the fund, which will also be used to build railroads, telecommunications networks and shipyards in the South American country, while China will allocate US$4 billion (euro3 billion) for the fund. Under Chavez, Venezuela, one of the world's largest oil exporters, has fostered increasingly close ties with China as it seeks new markets for its petroleum beyond the United States, its top buyer. China is the world's second-largest consumer of oil and third-biggest importer. Venezuela's state oil company Petroleos de Venezuela SA, or PDVSA, plans to spend US$2.2 billion (euro1.66 billion) to more than triple its fleet of tankers by 2012 to reach remote Asian markets. Venezuela exports about 15 percent of its crude and other oil products to Asia but seeks to raise that to 45 percent, approximately 1 million barrels a day, within five years. Venezuela produces about 3.3 million barrels a day, but many outside sources, including the International Energy Agency, the Organization of Petroleum Exporting Countries, and the U.S. Energy Information Agency, put actual production closer to about 2.5 million barrels a day. 



Russia to spend $5.8 bn on nuclear energy in 2009-2010

March 27, 2007. More than $5.75 billion will be appropriated for the implementation of a new nuclear energy program in Russia from the draft federal budget for 2008-2010. Expenditure on nuclear energy in 2008 will be triple the amount in 2007, and more than $5.75 billion will be spent on the nuclear energy program in 2009-2010. In addition, the three-year budget envisages financing electric power grid networks in Russia and reducing cross subsidizing in the power sector. To illustrate this idea, 10,000 kilometers (6,000 miles) of motor roads would be built and more than 50,000 kilometers (30,000 miles) of roads modernized in 2008-2009. In January, the lower house of Russia's parliament passed a presidential bill to reform the country's nuclear power sector and to facilitate its development. Russian government would review its energy strategy in April to increase the share of nuclear power, hydroelectric and coal industries in power generation. Russia has 31 operating power reactors at 10 nuclear power plants (NPPs) with a total installed capacity of 23.2 MWe. The average current share of NPPs in electricity generation is 16.5 percent. A new state-owned holding company, Atomenergoprom, would be set up to handle activities ranging from uranium extraction, fuel fabrication and electric power generation, to the construction of nuclear power plants, both domestically and abroad.

UAE, 60 pc electricity lift

March 25, 2007. According to a Global Investment House report, the boom in the UAE's real estate sector, coupled with the industrial sector's growth and population increases, will see the country's electricity production capacity lift by 60% over the next three years. Current capacity is 16,700 MW per annum but this will reach 26,000 MW by 2010. The Abu Dhabi Water and Electricity Authority generates 53% of capacity.

EnerNOC awarded 40 MW agreement with California

March 20, 2007. EnerNOC, Inc., a leading developer and provider of clean and intelligent power solutions, has entered into a 40 MW Negawatt Network(TM) agreement with Southern California Edison (SCE). EnerNOC was the sole recipient of an agreement resulting from SCE's recent Request for Offers for demand response resources. Today's announcement follows new contracts with Pacific Gas and Electric (PG&E) and Public Service Company of New Mexico (PNM) that EnerNOC secured earlier this year. EnerNOC's Negawatt Network will help SCE alleviate grid constraints and mitigate blackout risk. Under the agreement, EnerNOC will aggregate load curtailment from commercial, institutional and industrial customer sites. SCE will signal EnerNOC to provide demand response capacity to its service territory, and EnerNOC will remotely curtail participating customers' electricity consumption within 30 minutes. EnerNOC will monitor and control demand response resources from its award-winning 24/7/365 Network Operations Center. EnerNOC's Negawatt Network agreements with SCE, PG&E and PNM complement its expansion in California and the Western United States. The SCE agreement is subject to approval by the California Public Utilities Commission.

Transmission / Distribution / Trade

PPL Montana signs Colstrip plant coal supply deal

March 26, 2007. PPL Corp.'s PPL Montana and Puget Sound Energy Monday signed a long-term agreement with Westmoreland Coal Co.'s Western Energy Co. to supply coal from the Rosebud Mine to the 307 MW Units 1 and 2 at the Colstrip power plant. Under the contract, which will begin in 2010 when the current coal supply contract expires, WECO will supply 100 percent of the coal requirements for the two units, about 3 million tons per year, subject to certain conditions. Current mining projections indicate that this agreement will cover coal supply through at least 2019. Depending on future mining cost and quality, the total coal reserve at the Rosebud Mine could allow the agreement to extend as long as 2028. The current contract with WECO for coal supply for Units 1 and 2, which began in the mid-1970s with the initial operation of the units, will expire Dec. 31, 2009. The Colstrip plant is located in Colstrip in Rosebud County about 120 miles east of Billings, Montana. There are four units at the station including the two 307 MW Units 1 and 2, and the two 740 MW Units 3 and 4. PPL Montana, which owns half of Units 1 and 2 and a portion of Units 3 and 4, operates the plant for its owners, including Puget Energy Inc.'s Puget Sound Energy, Portland General Electric Co., Avista Corp., MidAmerican Energy Holdings Co.'s Pacificorp and NorthWestern Corp. PPL, of Allentown, Pennsylvania, owns and operates about 11,500 MW of generating capacity in the United States, markets energy commodities, and transmits and distributes electricity to nearly 5 million customers in Pennsylvania, the United Kingdom and Latin America.

Policy / Performance

German Greens fight coal-fired power station plan

March 23, 2007. Efforts by the German Chancellor, Angela Merkel, to put Europe at the forefront of cuts to greenhouse gases are being threatened by her own government's plan to build 26 coal-fired power stations. A €30bn (£20bn) scheme for the construction of 26 new coal-fired power stations by 2020 has been approved by Ms Merkel's grand coalition, as the country moves to abandon nuclear power. Some of the power stations, which aim to use cheap Polish and South African coal and highly polluting German lignite coal, have already been built and others are at an advanced planning stage. Thirteen of the new stations alone have been earmarked for Germany's most populous state of North Rhine Westphalia. The project has infuriated environmentalists, who are already angered by Ms Merkel's lobbying to ensure tough new curbs on CO2 emissions are not imposed on European car makers.

BD plans to set up hydro power plants in Myanmar

March 23, 2007. The government of Bangladesh is planning to carry out a feasibility study on setting up of one or more hydropower plants in Myanmar for bringing electricity from the next-door neighbour. Experts believe that Myanmar has a number of potential spots where hydroelectricity can be generated. The ministry of power of the government of Bangladesh asked the country’s Economic Relations Division last week to manage funds for the study from the country’s development partners, including the Japan International Cooperation Agency. Top officials of the Power Division, Power Development Board, and Power Grid Company of Bangladesh are likely to visit Myanmar soon to discuss about installation of the plants. The Myanmar government in December and January last invited Bangladesh to invest in hydroelectric plants in that country after the Power Division had planned such an investment during the fag end of the BNP-led alliance government. According to Myanmar Ministry of Electric Power, there are more than 200 potential hydropower sites across the country, with an estimated capacity of generating 38,000MW power. Over 37 per cent of about 1,200MW power generated in Myanmar is hydropower. Thailand has already started investing in hydroelectric projects in Myanmar. Bangladesh has only one 230MW hydroelectricity plant that uses the water of Kaptai Lake. The country currently suffers from a power shortage to the tune of 1500 to 2000MW during summer and is looking forward to get the comparatively cheaper hydropower from Nepal, Bhutan, and Myanmar.

Russia, Kazakh to sign deal on uranium enrichment center

March 21, 2007. Russia and Kazakhstan will sign an interstate agreement on an international uranium enrichment center in East Siberia in the near future. A delegation from the International Atomic Energy Agency (IAEA) is visiting the Angarsk chemical plant, the site of a uranium enrichment center. Last October, Russia and Kazakhstan, which holds 15% of the world's uranium reserves, opened their first joint venture to enrich uranium in Angarsk, East Siberia. The venture, which was part of Moscow's non-proliferation initiative to create a network of enrichment centers under the UN nuclear watchdog's supervision, will also be responsible for the disposal of nuclear waste. The principal condition for enriched uranium deliveries is strict observance of all international non-proliferation rules. The center will offer uranium enrichment services to countries interested in developing nuclear energy for civilian purposes.

Renewable Energy Trends


Greens get more fuel for policy

March 27, 2007. While the National Policy on Biofuels is waiting in the wings, there is another proposal to promote green fuel. The ministry of rural development has sought the approval of the Cabinet Committee on Economic Affairs (CCEA) for a national mission on bio-diesel to promote cultivation of jatropha and other plants from which bio-diesel can be produced. The rural development ministry submitted its proposal to CCEA early this month for the demonstration phase of the national mission. The National Policy on Biofuels, proposed by the ministry of new and renewable energy, was expected to get CCEA nod in the first week of this month, but has been referred to a group of ministers. The proposed policy provides for incentives for the biofuel and bio-diesel industry and lays down standards for doping regular fuel with biofuel. The National Mission on Bio-diesel was given in-principle approval by the Planning Commission in 2005. The mission, which aims at creating national infrastructure for plantations and processing of the fuel, is proposed to be implemented in two phases. The first phase will involve a demonstration stage for plantation of jatropha and pongamia on five lakh hectares of waste land. Of this, four lakh hectares would be exclusively for jatropha. The first phase also includes associated research activities for establishing commercial viability of the fuel. While the plantations will be implemented by the states on the basis of 100% central assistance, R&D will be coordinated by the ministry of rural development. Phase two will involve self-sustaining expansion of the bio-diesel programme to 11.2 lakh hectares for production of enough bio-diesel to achieve 20% blending with petroleum-diesel. The ministry has asked for a budgetary allocation of Rs 1,304 crore for implementing the two phases over five years.

Biodiesel imports in the offing

March 23, 2007. If biodiesel manufacturers are deeply disappointed with the Union Budget 2007-2008 for the absence of any policy support, the worst is yet to come. With the peak rate of customs duty reduced to 10 per cent, India as a market is open to imported biodiesel. If the buzz doing the rounds of the industry is any indication, a well-known industrial conglomerate, with energy interests, would soon start importing biodiesel for domestic distribution. Palm oil-based biodiesel is currently on offer at about $750 a tonne cost and freight India. Together with 10 per cent customs duty, the landed cost would be less than Rs 36,500 a tonne. The cost may turn lower if the rupee continues to strengthen and/or overseas prices turn softer. Biodiesel manufacturers who have already tied up funds for setting up processing facilities are a worried lot. Contrary to initial enthusiasm and expectation, policy support for the sector has not been forthcoming. While some entrepreneurs have put their investment decision on hold, many others are waiting for the haze to clear. Currently, the easiest source of feedstock is imported crude palm oil and downstream products such as fatty acid distillate. In the absence of an official policy for the domestic market, processors are scouting for export orders, mostly from European countries. Given the poor state of infrastructure in the country, logistics costs would be the crucial determinant of profitability. More important, as and when overseas processing facilities, Malaysia, Singapore, Indonesia, come on stream, India as a processing centre for supply to European market would lose its importance. South East Asian processors would service European customers directly.

36-MW photovoltaic production line opened

March 23, 2007.  With the inauguration of a 36-MW solar photovoltaic production line, the cell manufacturing capacity of Tata BP Solar has increased to 52 MW a year. The inauguration of the production line was a step towards realising the designed potential of setting up a 300-MW plant. Company plan to add a cell-manufacturing unit of 128-MW capacity in this financial year. The 36-MW production line was set up at a cost of $20 million. The investment over the past 15 years was around $25 million. Tata Solar and BP Solar would also be investing $100 million to create a mega solar plant in Bangalore to meet the demands of the Indian and global solar photovoltaic markets. State-of-the-art technology, developed by BP Solar and manufactured by Tata BP Solar, would deliver products and solutions that served both the Indian and global markets, earning substantial foreign exchange for India while also increasing product supply locally. A solar lantern and a uniquely designed solar water heater were launched on the occasion. The solar water heater has high quality tubes made of borosilicate glass coated with layers of copper, stainless steel and aluminium nitride, which helps reduce heat loss.

German state for renewable energy ties with India

March 23, 2007. The German state of North Rhine-Westphalia is ready to provide clean technology to India and forge long-term ties in the field of renewable energy. It is looking forward to a closer tie in the renewable energy sector. Biogas, recycling of sugarcane waste and many such fields would be of interest to the former and the power-intensive steel industry and the cement industry could use their technologies to curb carbon emission and pollution. Within next six months some concrete projects will materialise. About 100 Indian companies have their base in North Rhine-Westphalia. India and North Rhine-Westphalia had a trade worth over two billion euros in 2006.

India looks big on alternative energy

March 22, 2007. States like Karnataka and West Bengal ahead in the use of alternative energy. A lot is happening in Maharashtra and Tamil Nadu too, and Gujarat is coming up well. In Himachal Pradesh, there is micro-hydro and in Uttarakhand there is work going on over the restoration of traditional watermills for power and grain-grinding. One could run a computer on a solar energy backup, for five hours a day, at an installation expenditure of $250. While India is seeing a very large production of solar panels with a capacity of 100 MW per year, most of this is exported to Europe, the US and Japan. Subsidy is largely responsible for the lack of growth. There are both state and central subsidies. The collapse of gobar gas plants in India was largely due to the huge subsidies involved. What is needed really is micro-finance.

Railways may earn carbon credits from bio-diesel project

March 22, 2007. The International Union of Railways (UIC), a body that promotes rail transportation, has selected a UK-based consulting firm to help the bio-diesel project of Indian Railways earn carbon credits. If successful, this may end up becoming the first project from the railway sector to be registered as a clean development mechanism project at the UN. UIC has tied up with Eco Securities to conduct a study for the Indian Railways' jatropha plantation and bio-diesel project. To be able to earn carbon credits, Indian Railways needs to prove to the UN that its bio-diesel project has resulted in reduction of green house gas emissions. If proven, it can earn carbon credits and Railways can sell these carbon credits to companies from developed countries that have to meet green house gas emission reduction norms. Indian Railways has been planting jatropha on its vacant land, with an aim to use jatropha to produce biodiesel and use it for hauling trains. In 2006-07, the Railways had set a target of planting 72 lakh jatropha saplings. The Railways has also been using bio-diesel to run trains on a pilot basis in two of its zones, Northern Railways and Southern Railways.

RIL’s jatropha plant to create 12,000 jobs

March 21, 2007. Reliance Industries has proposed to set up a Rs 500-crore bio-diesel (jatropha) plant in Madhya Pradesh. The company is preparing a blue-print for the project and may enter into a pact with farmers for japtropha (locally known as Ratanjot) cultivation. The company has planned to set up the plant and has asked for a wasteland area of 50,000 hectares. Jatropha, a perennial indigenous oilseed tree, has the same characteristics as diesel, and can be used on its own or be mixed with conventional diesel. Teri has reportedly developed a method called the mycorrhizal application, which speeds up the yield. The input cost for 1 litre of bio-diesel from Jatropha stands at Rs 20-22. Nitrogen-rich de-oiled cakes prepared out of jatropha make for better organic manure. It has been reported that raising Jatropha plantation over 1 hectare of land generates 300 mandays. The company has proposed to generate 12,000 jobs. The state government last year launched its wasteland land policy.  The state has more than 1 million hectares of wasteland. 


Basic Petroleum to venture into ethanol

March 27, 2007. Basic Petroleum Corp. is set to acquire a local greenfield company engaged in the plantation of sugar cane for ethanol production. In line with Basic Petroleum’s thrust to diversify into renewable and alternative energies, It’s board recently approved the buy out of Zambo Norte BioEnergy Corp. (ZNBC), a subsidiary of ZN Biofuels Partners, Inc. ZNBC operates a 9,000 hectare sugar cane farm in Zamboanga del Norte, dedicated solely to ethanol production. Its facility has a planned fully integrated ethanol plant capable of producing 200,000 liters of ethanol per day. The transaction is worth P120 million, and will partly be funded through cash and a share swap with Basic Petroleum, priced at P0.44 per share. Shares that will be allotted to the buy out of ZNBC will be taken from 248,126,093 unsubscribed and unissued shares of the publicly-listed company’s capital stock amounting to P109.175 million. The remaining balance of about P10.8 million will be paid in cash. Basic Petroluem’s proposed buy out of ZNBC is its first biofuel project after committing to pursue initiatives in renewable and alternative energies, such as geothermal, wind, and solar.

Japanese cos invest in wind power

March 26, 2007. A Japanese energy consortium of Mitsui and J. Power will invest E70 million in a 24-turbine, 90MW wind farm in Kobylnica in the Pomorskie province - the biggest project to date by a Japanese investor in the region. The farm is expected to become fully operational by the middle of next year

Plastic bag ban just part of S.F. green wave

March 24, 2007. San Francisco could become the nation’s first city to ban the use of plastic checkout bags by large grocery stores and chain stores with pharmacies, in the latest of several recent City Hall moves aimed at protecting the environment. The proposed legislation that would ban plastic checkout bags comes among a host of other initiatives, including an easier permitting process to install solar panels, a proposed ban on toxic children’s toys, and a ban on Styrofoam and other polystyrene foam. The plastic bag ban, which saw some amendments finalized by the City Operations and Neighborhood Services Committee on March 22, would require. The City’s estimated 54 large grocery stores to use only recyclable paper or compostable plastic bags within six months of the legislation’s adoption. Retail stores with pharmacies that have at least five locations in The City would have one year to comply. Plastic bags clutter landfills, litter city streets and contaminate The City’s recycling programs, environmentalists and supporters of the legislation say.

Huge wind power project near Ferndale pitched

March 20, 2007. Shell Wind Energy has applied to Humboldt County to build a major wind power project on ridgeline ranch lands about six miles south of Ferndale. The Bear River Wind Power Project would consist of 30 to 35 turbines generating 60 to 70 megawatts of power, enough to supply 60,000 to 70,000 homes with electricity. It would be the first major wind power project in the county. The 256-foot-tall turbines would run along Bear River Ridge with cables laid underground to a new substation about seven miles south of Rio Dell. The substation would transmit power through above-ground power lines 7.3 miles to the PG&E regional transmission system in Rio Dell. The project still requires an environmental review through the California Environmental Quality Act, as well as public hearings.

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