Ultra Mega Power Projects: A Snapshot

s of March 2006, India’s installed power generation capacity was 124, 286 MW with thermal taking a share of 66 per cent, hydro 26 per cent, renewables 5 per cent and nuclear 3 per cent. The average plant load factor of thermal power stations followed an upward trend from 65 per cent in 1998-99 to 74 per cent in 2005-06.  Given the importance of thermal power, ultra mega power projects (UMPP) become important in the following context:

If large capacity additions that are planned over the next decade in 11^th plan and beyond are to materialize, the pace of thermal capacity additions needs to increase from 5, 000 MW per year to 10, 000 MW per year. 

Given the increasing significance of environmental considerations and efficiency of energy use, ultra-mega power projects would have advantages in terms of advanced proven technology with high efficiency for optimal use of resources, eco-friendly power generation, economy of scale and operational flexibility (faster start up, load cycling).

Award of projects to developers through tariff based competitive bidding is expected to ensure cheaper power.  There are seven pre-identified ultra mega projects each having a capacity of 4000 MW.  The Ministry of Power is the facilitator for coordination with concerned Ministries/Agencies and State governments for implementation of these projects. The projects are:

The first five projects are targeted to be finalised by end of the year 2006. Each project will have the units of size 600 MW & above and will use the Super Critical Technology (SCT). The SCT is widely established and accepted technology in more than 500 operating power units. The technology is used to enhance the efficiency of the thermal plant as it uses the higher cycle parameters like (Pressure: 246-250 kg/Sq cm, Temperature: 566 to 593 deg C). It also results in lower CO₂ emissions.  Among potential technology suppliers are: Aslom (France), Hitachi- Babcock (Japan) and Ansaldo (Italy). The pithead based projects would have coal blocks allocated with captive mining.

The implementation of UMPP has already begun with the completion of the site identification and selection process by Central Electricity Authority and the setting up of separate Special Purpose Vehicles (SPV) for each project.  Power Finance Corporation is the nodal agency for setting up shell companies, which will initially be wholly owned subsidiaries of PFC. The independence of the shell companies is expected to enable taking on key challenges such as securing reliable fuel supply, obtaining environmental clearances and completing power purchase agreements with payment security for achieving financial closure.  The shell companies will be responsible for preparation of reports, initial land acquisition, obtaining coal linkages or coal blocks allocations for pithead projects and allocation of water for pithead locations. The companies will have to appoint consultants for document preparation & evaluation of International Competitive Bidding (ICB). The shell companies will also be responsible for tie-up for off take / sale of power as per provision of section 63 of the Electricity Act 2003.  Initiation action for development of power evacuation systems will also be the responsibility of the shell companies.  The selection of the UMPP developer will be done through tariff based ICB.  After selection of the developer the shell companies will be transferred to the successful bidder for project execution.

So far, five shell companies have been formed by PFC: Sasan Power Limited, Coastal Gujarat Power Limited, Coastal Maharashtra Mega Power Limited, Coastal Karnataka Power Limited and Akaltara Power Limited. Expressions of Interest for Mundra, Sasan, Girye and Tadri have been issued and consultants for preparation of project report and for bidding process have also been appointed.  Power allocation/purchase agreements are in the process of finalisation. Nine states are expected to off-take power from Sasan project with Pujab as the largest offtaker after Madhya Pradesh.  Six states will take power from Mundra with Maharashtra as the largest off-taker after Gujarat.  Five states will draw power from Girye with Gujarat as the largest off-taker.  Five states will draw power from Tadri with Maharashtra & Tamil Nadu as the largest off-takers after Karnataka.

The Ministry of Power has requested State government to provide necessary support for these projects on land, water, environmental issues etc. Ministry of Coal has also agreed in principal to allocate coal blocks, for pithead stations. Since the UMPPs are of large size, it is desirable to have good and consistent coal quality for efficient working of the units in the projects. The pithead projects are based on domestic coal, which have to be washed before using in the units as domestic coal generally has high ash content and presence of extraneous matter.

Towards an Energy Sector Competition Policy in India:

Insights from International Practices (P - V)

Dr. Samir R. Pradhan®

he role of independent power producers (IPPs) has increased substantially with the privatisation and restructuring of energy markets underway in APEC economies. The IPPs in such countries as Indonesia, Malaysia, Pakistan, Philippines and Thailand operate in effective competition with the incumbent’s own generation facilities. Policy issues with a direct impact on IPPs are:

·          Vulnerability of long-term take-or-pay contracts for power purchases;

·          Limited financing of IPPs, due to the shallow domestic capital market;

·          Cautious approach to privatisation reform.

Engineering a successful privatisation and restructuring program requires the following aspects to be considered in separating out the generating segment of the monopoly provider:

·          The mode of privatisation;

·          Implications for ownership and firm structure;

·          Public service obligations carried on by traditional public utilities;

·          Sharing the benefits between investors and consumers;

·          Mechanisms for recovering fixed and sunk costs;

·          Pricing, including through the wholesale pool;

·          Transmission charges;

·          Procurement of ancillary services (spinning reserves, reactive power);

·          Demand-side bidding; and

·          Risk management through hedging

It has been observed that, unbundling of electricity generation from transmission, allowing third party access and promoting competition in the wholesale market are significant factors explaining the reduction in electricity prices in OECD countries. Moreover, hydroelectric power, where economically feasible, may be linked with lower electricity prices and has been empirically found to reduce price volatility compared to fossil fuel-based generation.

Electricity reform in Asia was hampered by the financial crisis of 1997, accompanied by the sharp fall in demand for power. In many cases, power purchase agreements concluded as part of the BOT contracts for electricity generation were dishonoured. Interest of the private sector in energy infrastructure diminished significantly, due to the increased market, currency and regulatory risk. Predictable and transparent regulatory structures are needed to revive investors’ confidence in competing with the incumbent, often in an environment with no independent regulator and no effective arbitration or enforcement mechanism. Policies aimed to increase competition in the energy market, including through the liberalisation of services trade, are the necessary condition to support economic growth in the region.

Despite comparative advantage in labour and fuel costs, Chinese residential electricity prices are 30% higher than those in the US, suggesting that significant efficiency improvements can be made, including through competition and a genuinely independent regulator. It has been found that the speed of implementation of the reforms in countries like India and china, especially in corporatisation of public assets, was very slow. However, some positive efficiency gains due to the reform have been found in both economies. In fact China is a success story in terms of electricity reforms and sectoral growth for all developing countries, (see box).

Source: IEA, “Case Studies in Sustainable Development in the Coal Industry”, 2006 and “Energy and Poverty”, in World Energy Outlook, 2002.

International Competition Regimes and Experiences

A brief review of features of a number of international agreements and experiences would provide possible lessons and implications in designing an appropriate energy sector competition policy for India.

EU

Markets in oil and petroleum products are generally competitive. In Europe, gas and electricity markets have recently been liberalized and sources of gas diversified. The coal sector however continues to receive large state subsidies.

The EU Directive on the internal electricity market (Electricity Directive 96/92/EC7) and on the gas market (Gas Directive 98/30/EC) became effective in February 1998. It established the following menu of options for rules on accessing the transmission network, based on Articles 16-18 of the Directive:

·          Negotiated third party access based on the agreement between eligible customer and the transmission system operator (TSO);

·          Regulated third party access – published and regulated network usage prices;

·          Single buyer procedure, where the TSO acting as an agent purchases all electricity for the entire network or its part, with remaining eligible consumers getting access on either a negotiated or regulated basis.

The Directive also includes important provisions on unbundling of the transmission network from generation and distribution; establishing a dispute settlement mechanism to control anticompetitive practices; regulation transparency; providing public service obligations; and encouraging electricity trade. However, the degree of progress on electricity reforms varies across EU members. Countries such as Finland, Sweden, England and Wales have among the lowest electricity tariffs in Europe and have unbundled ownership in their competitive electricity sectors. Other countries have not gone so far, with transmission networks having been separated from other components either in terms of organisational structures (as in Austria, Belgium, Italy and Spain) or operationally at management level (as in France, Germany and Greece).

The EU Gas Directive provided a framework for liberalizing the natural gas market. Not all member countries have passed the required domestic legislation to implement the Gas Directive, but the actual process of market opening has been encouraging, reaching around 80% of total EU gas demand in 2000. As with the electricity sector, the Gas Directive proposed a choice of third party access regimes to the natural monopoly segment of the sector (negotiated TPA, regulated access or a combination of both). The Madrid Forum of gas regulators plays a major role in promoting competition in the gas sector. The access regime applies to the large final customers and to gas-fired electricity generators. The degree of unbundling in the gas industry is less than in electricity, although most EU members pursue at least accounting separation of activities. Moreover, public service obligations differ across economies. The Gas Directive requires that any such obligations be transparent and non-discriminatory. Other aspects covered in the Directive include access to upstream pipeline networks, technical requirements (of importance mostly to the gas producing countries such as the UK, the Netherlands and Denmark), and access to storage capacity.

50 Years of India’s Energy Policy

(Summary of interactions with Shri K. C. Pant, former Defence Minister of India, on 14^th July 2006 at Observer Research Foundation, New Delhi.)

Q. Sir, you mentioned diesel generators. Do you foresee in the future the industry is switching over to captive power looking at the track record of power availability in the past?

Mr K.C. Pant:  Captive power generation is already there in many sectors. Sugar sector for instance, has captive power generation. Now the problem with that is the supply of power to the grid.  The fact that captive power in many cases is seasonal (i.e., it is not available around the year) complicates grid management.  Nevertheless, it has to be encouraged and I think now the bottlenecks have been removed. I think it’s a step in the right direction.

Mr D V Kapur: Sir, I will just supplement because he mentioned about large captive plants.  In my analysis, in the last ten years the manufacturing industry has been able to grow mainly because of captive power. The projections of power generation were low during the last ten years and achievement was even lower as Pantji explained. In the last Five Year Plan it was 50 percent and in fact, to be exact it was 52 percent, which is no different from this. It is the larger industries that use captive power.  Even though statistics are not maintained properly, estimates say that between 25-30,000 MW of capacity has come up in the captive stations.  Some people have concluded wrongly that industrial demand in power didn’t go up. It did go up but it was met in a very large scale by the captive stations and that’s how the industrial growth has been maintained.

Q. Sir, I would like you to comment on energy pricing policy. You would agree it is an integral part of energy policy and as you rightly mentioned demand management is going to be key in meeting the objective of country’s economic growth and energy growth. Giving the right signals is going to be very important to that extent.  Particularly in our agricultural sector providing free electricity has encouraged wastefulness. The fact is that we haven’t been able to deal with subsidies despite having dismantled APM. Could kindly comment on that?

Mr K.C. Pant: I spoke for a long time and deliberately avoided the price aspect and I did it because I thought that people like you understand it better. Now the whole problem is that it is politically sensitive. Obviously, no one should get free power and no one should give free power.

There are two aspects to it. There could be differential pricing of power but to give free power means that you encourage wastage. Secondly, there is nothing like free power in its totality, somebody else is paying for it. Therefore, it has to be very carefully thought out. If somebody gets subsidized power then you must see that it is targeted well.  In the farm sector a marginal farmer cannot do without subsidized power.  If he has an alternative to use diesel either through somebody else’s tractor or his own pump then the cost is very high.  So there could be a case for helping him with electricity but sometimes people forget that when power is not used and diesel is used then the cost is much more.

But as I said that it has become a political question.  In some states that introduced free power they found that they nevertheless lost elections.  There have been instances where states have increased power to the farmers and yet won the elections. This is one of those questions, which has got mixed up in politics.

On the larger question, there is no doubt in my mind that the health of the State Electricity Boards, which in turn affects the financial position of the states, is linked to the price of power.  Generally speaking, when one speaks of conservation then price is certainly one of the instruments for conservation but ultimately it is a political decision. I have been through this debate hundreds of times and perhaps, I feel that I am lucky enough not to take that decision.

Q.  To deal with supply side constraints of energy is concerned and supply scarcity we need to go for demand side management. Most of the developed countries are focusing on demand side management. Last year the Japanese and the Korean governments initiated the process of conserving energy in every day life.  Toyota employees were asked not to wear ties in the office and air conditioners were set at temperatures above 20 degrees centigrade.  In our country, is it not time to go for legislation or policy so that waste of electricity is made a punishable act rather than telling that putting on the curtains and put out the lights?

Mr K.C. Pant: You see the people who draw the curtains and put out the lights will have to draft the legislation. That is why the mindset becomes important.  I would agree with you that the time has come to examine the possibility of having legislation and it is necessary to take this whole question of demand management seriously in all sectors. I just mentioned it in passing but it is true of power, it is true of coal, it is true of oil and failure to do so ultimately means finding more money for generation. The two are interconnected apart from the environmental aspect. This is something, which is accepted, the steps are known and it is a question of getting it done.

The second side is the competition that has come in the retail sector from last year.  The private sector had gained about 15 percent market share in retailing of fuels MS, HSD but recently within a span of just four weeks it has come down to 1 percent.  This has large social implications. There are about 1500-2000 retail outlets, 20,000 youth were employed at those retail outlets. Pricing and taxation of petroleum products are challenges that must be placed within the context of public good. Nobody disagrees that there should be targeting of subsidies. Everybody would like to protect the vulnerable sections, but on a long-term basis what structural recommendations would you like the country to actually follow?

Q. My question is actually a corollary to the two questions asked before. You rightly emphasized the use of diesel in the industrial sector.  Oil prices have for the first time crossed $75, perhaps in absolute terms and not real terms, but it is still alarmingly high. We have seen the administered pricing mechanism has not transferred into market determined pricing mechanism at all as she mentioned. But what happens as a process it actually has two ramifications. One is on the efficiency of utilization. Last month the government announced oil bonds assistance to take care of the public sector oil companies’ under recoveries which were at that time about 73,000 crores.  When that is taken into account, we see that diesel gets subsidized to the extent of Rs 6 per litre. Now if an industrial unit finds it to be a very good substitute for getting power from coal based source we are actually subsidizing him to the extent of using that fuel not as efficiently as he would have if the cost would have been at Rs 6 per litre more.

Mr K C Pant: What would you suggest?

Mr Ashok Dhar: My suggestion would be that we target the weaker sections and administer subsidies in such a manner that there are no leakages.  We should look at consumption in terms of sectors and also in terms of markets. For instance, the diesel generators sector, which you rightly emphasized, does not need HSD that is used in the transportation sector. It can have a different taxation structure. We can have a policy of making a different product offerings meant for different industrial sectors. Railways consume 2 million KL of HSD and they can have different diesel for their application. The overall strategy would be to optimize policy so that rural and socially vulnerable sections are not overlooked. 

Mr D V Kapur: I could add to what Ashok has said.  As an individual I feel that the solution is only one. That is market pricing of hydrocarbons, diesel, petrol etc.  Political parties must not exploit in the name of common man. Sir, if my earning is limited and if the price of something which country doesn’t even produce has gone up somebody has to pay for it. If government has to pay okay, the government will have to reduce expenditure somewhere else.  That expenditure is also meant for common people.  That is the whole problem.

Mr K.C.Pant: I agree with the analysis of the problem, but you have to keep in mind the fact that whereas oil prices can spurt globally product prices cannot immediately reflect that.  If product prices are allowed to go up correspondingly, what will be the impact on the economy?

Take diesel, apart from differentiating the various uses of diesel one can observer that diesel goes either for transportation or for agriculture in a big way. In transportation if you suddenly raise the cost of diesel it increases the rate of inflation. Ultimately, it will increase the price of all goods and the common man you are speaking about is going to be hit. It is not as though he can escape the increase in price of the essential commodities.

The other side is the agricultural side.  You have a system in which you have a public distribution system where you give subsidized food grains you have a minimum support price. So, if agricultural production cost and prices go up because of diesel price, then somebody has to pay that increase in subsidy.  You have to balance the various subsidies. It is not a simple question. The impact on various sectors is there and in our system the poorer person has to be kept in mind while balancing all these subsidies. 

Nevertheless, the thrust of your question is right, I agree, but one has to keep all these factors in mind.

Mr Raghuraman, CII: The biggest challenge for the energy sector is how to get investments in the energy sector, especially the power sector.  It has been pointed out that only 50 percent of target capacity was achieved in the Ninth Plan.  If you look at the first four years of the Tenth Plan we added only 14,300 MW, in the last year we are hoping that 17,000 MW will be added. Now there is a big investment lag. The private sector investment will not come unless this sector is bankable, not only bankable but also gives me good returns compared to say, investment in telecom or civil aviation. We are not been able to create that situation.

Captive power has only created sub-optimal investments with inefficient systems.  The state electricity boards are seeing to it that good systems such as IPPs or large power stations do not come up by putting obstacles such as electricity duties and parallel operating charges.  How are we going to have a system where we are going to have efficient capacity additions?

The second thing is when we talk about demand side management we have to look at the entire set of possibilities including integrated resource planning.  Only then will we be able to really bring down the entire energy intensity in the economy.

All these are related to recovering rational user charges. On the question of oil pricing, suppose we are producing 70 percent of the oil and importing only 30 percent, the logic that we need not align our prices with global prices is all right.  But when we are importing 70 percent and producing only 30 percent how long can we go on subsiding?  Oil prices can go to $100 a barrel.  What are we going to do? Is our economy really capable of meeting such a situation? These are important points.  If we do not address them, we will not get investments.

We are lucky that we are not importing diesel and kerosene as well.  Prices of those products are around $90 barrel in the world markets. Because of our private sector refinery coming up we are now exporting products. In fact, last year the second largest foreign exchange earner was, petroleum products with $11.5 billion. This is mainly because we were able to add capacity not based on planning for our own requirements but because we were looking at the larger picture.

Now this all these observations come down to the main point.  How do we get good investments? We have to solve this problem creatively. Your comments on that Sir?

Mr K.C.Pant: I agree with you investments are needed. In the power sector, you said that SEBs are putting obstacles. If that is the case then the government must remove those obstacles and I believe that now the thinking is that anyone who generates power should have the freedom to use the grid and to put it into the grid. Now, questions like electricity tax etc are now being discussed by the industry with the government. All these issues that you have raised, are being discussed by industry organizations with the government and the answers will have to be found, but the basic point that without investments flowing and private investment flowing into the power sector there is every likelihood that this gap between demand and supply can grow.

Where I don’t really agree with you is that captive generation should not be looked down upon. I would not say that these are only inefficient captive generation plants. Some of them are quite efficient and the scope for captive generation is definitely large and once you give an incentive then many people will invest in generating surplus power and supplying it to the grid. This has to be worked out. I think there is scope to do that.

About petroleum prices rising, I fully understand what you said.  The public sector petroleum companies have been very hard hit and they are the ones who are putting in a lot of investment in various sectors including refineries. You mentioned only private sector. I wish you had said private sector and public sector because both have invested in refineries. There has been a deliberate policy to increase the refinery capacity beyond what is required in the country. As a result of that certainly it has paid dividends.

But having said that there is no escape from finding a way to the consequences of the spurt in oil prices. I warned therefore that countries that import oil, should now assume that oil prices would not come down. I give that warning deliberately because it would be illusionary if one plans on the basis of prices coming down.  

However you can’t make a very sudden change in your pricing system in such a way that it impacts on various other aspects.  The impact on other sectors cannot be ignored.  Even if you want to take steps, they would be politically very unpopular. We may say it is justified but the political parties won’t do it, the government won’t do it.

Therefore, if we have to be realistic we have to take all these factors into account and then make such suggestions as would lead you to the desired ends. The ends are desirable, but how to achieve them requires a consideration of the complications of working in a democratic system.

NEWS BRIEF

OIL & GAS

IDFC to invest $60 mn in KG Gas Network

August 4, 2006. IDFC Pvt Equity Co Ltd will pick up a 50 per cent stake in Krishna Godavari Gas Network Ltd investing an amount which "could be as much as" $60 million (Rs 275 crore). The funds would be invested out of the $440 million corpus of IDFC Pvt Equity-II. Krishna Godavari Gas Network Ltd is a joint venture of the Government of Andhra Pradesh, which owns most of the gas, and Gujarat State Petroleum Corporation, which holds Gujarat State Petronet Ltd, a company that has put up a gas pipeline network in Gujarat. Andhra Pradesh's stake is held by the state-owned Infrastructure Corporation of Andhra Pradesh (INCAP). IDFC Pvt Equity (IDFC PE) joins the company as the third partner.

Krishna Godavari Gas Network will put up a network of pipelines across Andhra Pradesh. The company will reach K-G gas to "every district in Andhra Pradesh", by 2008. It is learnt that the idea for setting up the company emanated from IDFC PE, which also holds a stake in Gujarat State Petronet Ltd.

GAIL offers to buy gas from ONGC

Aug 3, 2006. Even as Reliance Industries Ltd and Reliance Natural Resources Ltd (RNRL) are yet to sort out the gas price for the finds in the KG Basin, GAIL (India) Ltd has offered to buy the entire volume of gas finds from Oil & Natural Gas Corporation in the region at a market related price. GAIL has requested the ONGC to earmark maximum quantity of natural gas to it at market price, that is, the prevailing price at the time of delivery.  Currently, the market price for a long-term contract stands at $4.75 per million British thermal unit. The contract has been inked between GAIL and the joint venture partners of Panna, Mukta and Tapti fields. GAIL has said in a letter to ONGC that it was ready to purchase the entire volume of gas available from ONGC fields for supply to its consumers at a market related price through GAIL's gas distribution network. There is a large demand for gas by existing customers of GAIL, particularly along Dahej-Vijaipur pipeline and Hazira-Vijaipur-Jagdishpur pipeline.

ONGC defers petrol pump plan

August 8, 2006. Oil and Natural Gas Corp (ONGC), the country’s largest oil and gas producer, has deferred its plans to set up petrol pumps. The ministry said that compensation in the form of oil bonds for selling fuel below the cost of production was only available to public sector oil retailers like IOC, HPCL, BPCL and IBP, and “no such compensation mechanism is available to new players in this business, including ONGC. In view of this, ONGC has decided to defer its plan for the development of retail outlets. ONGC had been granted licence to sell petrol and diesel in accordance with the guidelines issued by the Central government. ONGC envisaged setting up 1,100 petrol pumps in the country to take benefit of complete value chain integration in line with such models followed by global oil majors.

Petrol blending: Decision on ethanol pricing by Aug

August 5, 2006. The Union Government is set to take a decision on the price of ethanol required for petrol blending by the end of August, even as the differences on ethanol pricing among the buyers and sellers remain unchanged. The joint meetings have been scheduled between the Ministry of Petroleum & Natural Gas, the Ministry of Agriculture, oil public sector companies and the associations of sugar manufactures to thrash out the price issue. The first of these will probably be held next week. October 1, 2006 is the deadline for implementing 5 per cent blended petrol across 10 States and four Union Territories. For supplying 5 per cent blended petrol in these areas, 3.77 lakh kilolitres of ethanol would be required by oil companies. For each region in the country, a major public sector oil company has assigned the task of sourcing ethanol through public tenders. Indian Oil Corporation is handling the sourcing of ethanol from North India, Hindustan Petroleum Corporation from Western India and Bharat Petroleum Corporation from South India. They have set Rs 18.75 per litre of ethanol as the benchmark price, around which the price negotiations will rally.

Indian Oil to pump in $2 bn in Nigeria refinery

August 2, 2006. Indian Oil Corporation (IOC) is readying an investment of $2 billion in Nigeria for setting up a 6 million tonne per annum refinery in the Edo state. In lieu of this commitment, the state-run oil refiner would negotiate a long-term crude oil supply contract with the Nigerian government, preferably for 12-15 years. IOC will also negotiate for equity stakes in producing oil properties in Nigeria. Nigeria is a major player in the global oil economy with 33 billion barrels of proven oil reserves and 4 trillion cubic feet of gas reserves. It also accounts for 8 per cent of total oil production of the Organistion of Oil Exporting Countries (OPEC). At present, IOC has a term contract with the Nigeria National Petroleum Corporation (NNPC) under which it is importing 2 million tonne per annum of crude oil. The Indian oil giant is keen to increase the crude oil quantities from Nigeria to at least 4-6 mtpa.

RasGas, Petro min to discuss LNG price for Dabhol

August 7, 2006. A high-level team of RasGas and the petroleum ministry will soon hold talks to arrive at a price at which 2.5 million tonne of liquefied natural gas (LNG) will be annually supplied to the now-closed Dabhol project. RasGas is prepared to supply LNG from December for at least two years for the project, which is possessed by Ratnagiri Gas and Power Pvt Ltd (RGPPL). However, in view of non-availability of pipelines, gas could be made available only from April next year. The negotiations with RasGas are on since last six months. The important issue is price. Currently, LNG is available anywhere between $9 and $12 per million British thermal units. The ensuing discussion will revolve around this issue. LNG from Qatar will be regassified at Petronet LNG Ltd’s Dahej plant in Gujarat, which has a surplus capacity to process about 2 million tonne of additional volumes over and above the current imports of 5 million tonne. The petroleum ministry hopes that it would be able to convince Shell for allowing its Hazira terminal in Gujarat.

Iran, India LNG deal faces a price block

August 5, 2006. The 5-m tonne LNG deal between India and Iran will soon have to be put in the cold storage. Iran, which had signed up the deal barely a year back to supply gas at $2.90 per mmbtu, is now demanding an escalated price of $5.10 per mmbtu making the whole contract unviable. The hiked gas price will end up putting an additional $12 bn tag to the deal which was estimated to be around $22bn in June ’05.

Iran and India had signed a $22-bn deal to import 5m tonne of LNG per annum for five years from Iran at 2.9 per mmbtu last year which would go up to $3.20 subsequently. However, Iran is now seeking a revision and demanding $5.10 per mmbtu which will hike India’s cost to $34bn, making the project unviable. Iran is demanding a price which is significantly higher than what India gets from Qatar. India imports LNG from Qatar at $2.53 per mmbtu, which would be revised to $3.50 per mmbtu in ’08. Iran’s insistence for a price revision is based on a clause in the agreement signed by the two parties in mid ’05, which requires it to be ratified by the supreme economic council of the Iranian government. New Delhi, however, maintained that the ratification by the council was a formality and it could not be the reason for revisiting a concluded transaction. 

Oil stocks flare up on free pricing move

August 8, 2006. An indication from the Union government that it may allow PSU refinery companies to adjust their prices in tune with the global oil prices helped the stocks of the state-owned refineries to flare up on the bourses. The PSU oil stocks gained as the government has given enough indication that it would allow the oil companies to tune their prices in accordance with the global market. India imports almost 60 per cent of its oil requirements. Another reason for the firming up of the oil stocks was marginal dip in the crude prices in the international market. The crude oil was quoted 33 cents lower at $ 76.65 in the global market. All the PSU stocks barring BPCL gained at the bourses.

`No change in petro product levies': Govt

August 8, 2006. The Government has no proposal under its consideration for a change in excise duty structure and rates of petroleum products. At present, there is no proposal under the consideration of the government to make change in excise duty structure and rates on petroleum products. The Ministry said on whether the Government has any plans to levy duties/taxes on specific duty structure to give some relief to consumers of petroleum products. Provisional data showed that excise duty collections from petroleum products during 2005-06 stood at Rs 51,750 crore. On the other hand, Customs duty collections on petroleum products imports in 2005-06 stood at Rs 11,394 crore.

ONGC okays development of C-series field at Mumbai offshore

August 8, 2006. The board of Oil and Natural Gas Corporation Ltd approved the development of C-series at the Mumbai offshore and Dahej petrochemicals complex. The C-series marginal field - located 60 km west of Daman in the Tapti Daman block of Mumbai offshore - will be developed with an investment of Rs 3,195 crore. The mega petrochemicals complex, with cracker of global capacity - the highest in the country so far, will involve an investment of about Rs 13,600 crore for its implementation, along with downstream polymer plants. The project would be commissioned mid-2010. The field, situated at water depths of 19-35 meters, is estimated to hold in-place reserves of 15.54 billion cubic meters of gas and 4.46 million cubic meters of condensate. The development will be completed by December 2008. Eight platforms and 17 wells will be drilled to develop the marginal field. The estimated gas production would be 3 million cubic meters per day. Though the field was discovered in the 1990s, it became viable recently due to the strong international prices of gas and crude.

Scottish oil, gas cos looking for joint ventures in India

August 8, 2006. Scottish oil and gas companies having expertise in deep-sea exploration and development of marginal oil fields are looking for joint venture opportunities in India. The Scottish Development International (SDI) an economic development agency for Scotland is facilitating interactions between the companies of the two countries. The SDI has began to identify opportunities in `deepwater exploration' where increasing number of Indian companies are venturing. Scottish companies can offer their expertise in sub-sea engineering. They can also help in developing marginal oil fields,

Given the current oil price, any oil field operator would like to maximise his returns from the oil fields. Maximise the life of the current infrastructure, reduce shutdown period and enhance environmental performance. In such areas Scottish companies can offer skills. India has a large and growing energy market and company would like to offer their expertise in supply chain management for upstream oil companies. India has its own oil infrastructure and R&D skills therefore company would like to add value only in niche areas.

Cabinet nod to OVL`s US firm buy

August 4, 2006. The government permitted ONGC Videsh Ltd, the overseas arm of the state-run ONGC, to acquire US oil firm Ominex De Columbia jointly with Chinese company China National Petroleum Corp (CNPC). OVL would fund the acquisition either from its own resources or with that of its parent company. However, OVL had submitted a joint winning bid with CNPC for Omimex de Columbia, which had onshore producing, as well as exploration blocks in Columbia, with net proven reserves of around 157 million barrels. 

Provide cheaper gas to fertilser industry: Panel

August 2, 2006. The parliamentary committee on chemicals and fertilisers has asked the government to ensure adequate gas supply at reasonable price to the fertiliser industry. The panel has also asked the government to initiate measures to set up a petroleum regulatory authority. The proposed regulator for petroleum was conceived to sort out gas supply and pricing issue for the power and fertiliser sector. Presently, a tariff commission fixes the gas price committed by ONGC and OIL. However, gas from private and joint ventures is to be obtained at market price.

The industry can afford gas price at $3 to 3.5 mmbtu, whereas JV and overseas gas was available in the range of $4 to 6 mmbtu which was adversely affecting the viability of fertiliser sector. The issue of determination of Petronet LNG Ltd (PLL)’s R-LNG is pending with the Inter-ministerial Group constituted under the chairmanship of finance minister to examine the issues related to supply of natural gas and LNG to fertiliser sector for a long time. It was entrusted to work out a framework ensuring preferential allocation to domestic natural gas, making available imported LNG, its pricing and related taxation issues to industry. For payment of concessions, the committee noted the procedure for certification, disbursement of due amount differ from state to state and some of the states are having problems in running the concession scheme for decontrolled fertilisers. The committee has asked the department of fertilisers devise an efficient and uniform system applicable to all states.

POWER

Torrent to power Bhiwandi now

August 7, 2006. Gujarat-based Torrent Power will take over the electricity management of Bhiwandi circle, which is notorious for power pilferage, within a month. The move, which is neither privatisation nor an outsourcing deal, is described as “power franchising”, where all segments of the power sector - supply, maintenance and recovery - can be opened to private entities. For 10 years from now, Bhiwandi will be fully run by Torrent Power. MahaVitaran will supply around 600MW of power at circle’s entry point from where it will be handled by Torrent. Improving distribution, attending to complaints and even bill recovery will now be Torrent’s responsibility.

Seven pvt players keen on MP mini hydel projects

August 3, 2006. To tap mini hydel power projects, the MP government decided to rope in private sector players. The state has a very thin contribution of 2.42 per cent to national mini hydel power generation of 1,693 MW. Further, projects of 5-25 MW will be considered mini hydel power projects. At present, only 3 MW power projects are considered mini hydel.  The government has mandatory ordered the completion of the projects in 30-40 months on a build-own-operate-and-transfer (BOOT) basis.  The state electricity board and its distribution and marketing companies will have the first right to refusal on tariffs set by the State Electricity Regulatory Commission. 

However, each power project will allow the state government to draw free power from at least 5 per cent to at most 10 per cent of the generation.  There are 6-7 private companies that have lined up for mini hydel power projects. All projects will have industry status and get commensurate facilities. Of the 15,000 MW potential in India, Madhya Pradesh has a potential of just 410 MW. There are 41 mini hydel power projects in Madhya Pradesh with a 1,693 MW installed capacity. 

Tata Power to generate additional 15,000 MW

August 2, 2006. Tata Power Company will expand its generating capacity by 15,000 MW by the end of this financial year. The expansion includes the company's bids for the two ultra mega power projects, Sasan and Mundhra, for which it has filed request for qualification (RFQ), two 1,000 MW imported coal-based coastal projects in Maharashtra and a 1,000 MW project in UP at Chola. The land acquisition was in progress for the three 1000 MW projects.  The company has begun work on the 250 MW (unit 8) coal-based plant at Trombay, to meet Mumbai's projected power needs.  The project is scheduled to be commissioned in 28 months. Work has also progressed on the short gestation 100 MW DG sets. During the quarter, order was also placed for a 50 MW wind Farm at Khandke, Ahmednagar.  During the quarter, work on another 120 MW unit (Unit 6) at Jamshedpur has begun, which is a captive plant for Tata Steel, based on utilising waste gases from steel making process. The project is expected to be commissioned in 26 months.  The company has also received the required coal linkages for 1,000 MW Maithon Right Bank Thermal Power Project, a joint venture with Damodar Valley Corporation (DVC). 

About 55 per cent of the land for the project has been acquired. The project is expected to be commissioned in 2010. Hundred per cent coal linkage for a 1,000 MW coal based power project at Chola (UP) has also been achieved.  The company also announced the setting up of a met coke oven gas-based 120 MW IPP at Haldia, West Bengal. The project is scheduled to be commissioned in 2009.  Ultra Mega Power Projects: Tata Power has entered into a Development Agreement with Siemens Project Ventures GmbH to jointly participate in tariff-based bidding for the Govt. of India initiated UMPPs based at Sasan and Mundra. 

Trading cos cannot buy power from other traders: CERC

August 8, 2006. The Central Electricity Regulatory Commission (CERC) restrained power trading companies from buying electricity from other traders and directed that they can buy electricity only from generating or distribution companies. CERC also terminated all other contracts of PTC with other electricity traders, saying these contracts were in contravention of its Inter-State Trading Regulations. In order to avoid any uncertainty or dislocation of the existing trading agreement, the Commission has ordered that the distribution utilities buying power from PTC India, sourced from Gridco or other such similar entity, should enter into agreements with them latest by August 22. In case the distribution utilities concerned exercise the above transfer option, the Regional Load Dispatch Centres would transfer the transmission corridors booked by PTC in the name of the distribution utilities concerned.

Delhi may buy power from Kawas, Gandhar

August 7, 2006. Delhi may buy around 300 MW of power generated from NTPC's Kawas and Gandhar plants at a price of Rs 3.30-4 per unit to partly take care of its power shortage. As the Kawas and Gandhar plants do not have gas supply based on the administered price mechanism (APM), they are running on costly liquefied natural gas (LNG) bought in the spot market.  The Kawas and Gandhar plants have an installed capacity of 645 MW and 648 MW, respectively and 300 MW is the ideal capacity of these plants. The power may be supplied to Delhi via the eastern region transmission system.  Despite such efforts, Delhi may still face a shortage of around 200 MW. To take care of this shortage, the power ministry has also asked the Northern Region Link Dispatch Centre to implement load shedding on a rotational basis so that no area is left without power supply for more than one hour. 

Biddings invited for ultra power project in AP

August 4, 2006. The Coastal Andhra Power Ltd, a subsidiary of Power Finance Corporation (PFC) has issued a request for qualification (RFQ) for the 4,000 MW imported coal based ultra mega power project in Andhra Pradesh. The proposed project is one of the six ultra mega power projects to be developed in Madhya Pradesh, Gujarat, Maharashtra, Karnataka and Orissa. The bidders are expected to submit the RFQ by August 30, the shortlisting based on responses to the RFQ and issuance of request for proposal (RFP) would be done on October 15. The qualified bidders are expected to submit technical and price bids in response to RFP on March 15, 2007. The letter of intent would be issued to the successful bidder on April 20 next year. Of the 4,000 MW, Andhra Pradesh is expected to get 1,600 MW while Karnataka, Tamil Nadu and Maharashtra would be able to draw 800 MW each. The objective of the bidding process was to identify bidders for supply of minimum 3,500 MW and maximum 3,800 MW of power for a period of 25 years at the generator switchyard and bus bar as may be defined in the RFP. The successful bidder would enter into a power purchase agreement with power purchasers.

‘Privatising distribution not satisfactory': Govt

August 3, 2006. The Government said privatising distribution of power in Orissa and Delhi has not been "completely satisfactory till date" but privatisation is one of the ways to achieve power sector reforms. It is a fact that the experience with privatising distribution in Orissa and Delhi has not been completely satisfactory to date. It is clear that privatisation is neither a necessary nor a sufficient condition in itself for power sector reforms. However, privatisation remains part of the solution to achieving these reforms. The minister said a Committee on Infrastructure has been set up under the Chairmanship of the Prime Minister to initiate policies that would ensure time bound creation of world class infrastructure and maximise the role of public private participation (PPPs). The COI has interalia mandated preparation of model concession agreement (MCA) in highways, ports and airport sectors to ensure efficient allocation of PPP contracts, adding that MCA for PPPs in highways sector has already been approved by the COI. 

BHEL bags NTPC's Dadri power project contract

August 2, 2006. State-run Bharat Heavy Electricals Limited (BHEL) has secured a major contract from NTPC Ltd for setting up the first unit of 490 MW at its National Capital Thermal Power Project Stage-II in Dadri, UttarPradesh. BHEL's scope of work in the contract envisages manufacture, supply, testing and commissioning of the main plant package for the 490 MW power project. The project is slated for commissioning in fiscal 2009-10. BHEL's Haridwar, Trichy, Ranipet, Hyderabad, Bangalore, Bhopal and Jhansi plants would supply the equipment, while the company's power sector, northern region, would undertake the commissioning of the equipment.

REC inks MoU with German lending agency

August 8, 2006. German lending agency KFW will provide an assistance of 70 million Euro (Rs 410 crore) to state-run Rural Electrification Corporation to boost its energy efficiency programme. The assistance is for conversion of Low Voltage Distribution System to High Voltage Distribution System. Initially, the assistance is being provided for Kadappa and Chittoor districts in Andhra Pradesh and would be expanded to other states later. The programme aims at reduction in Transmission and Distribution losses and providing reliable and quality power supply to agricultural consumers. The estimated saving in losses would be about 80 million units with an overall annual financial benefit of Rs 115 crore. The HDVS project would also help in reducing greenhouse gas emissions, providing an opportunity to project promoters to reap the benefits of additional revenues through sale of Carbon Emission Reductions (CERs) under the Clean Development Mechanism of Kyoto Protocol. KFW has also agreed to provide assistance for various capacity building measures including CDM.

Coal ministry to ease infrastructure muddle

August 7, 2006. The coal ministry has taken a slew of measures to overcome infrastructure constraints in the supply of coal to power, steel and cement sectors. The ministry will undertake increasing capacity of coal washeries, improve coal transport system and ensure transfer of excess coal with a utility to area of requirement. The state-run Coal India will develop new coal washeries at Dhori and Parej in Jharkhand, which will be commissioned by 2009 and 2010 respectively. Moreover, a coal washery at Kathara in Jharkhand will be taken up for renovation of primary crusher and railway tracks by June next year. Coal India has also proposed to undertake extension of loading bunkers at Sawant washery (Jharkhand) and renovation of railway tracks. Coal India expects to complete these works by March 2008. In a bid to improve recovery of fine coal, Coal India plans to install a column floatation circuit, with an investment of Rs 12.38 crore and to be completed by January 2009. To avoid coal supply shortages, the coal ministry will chalk out ways to transfer excess coal to the northern region where coal requirement is more. The all India coal stock at power stations has been estimated at 17.269 million tonne as on June 30, this year against the normative requirement of about 19 million tonne.

German firms keen on Govt plan for `green' SEZ

August 6, 2006. The Centre plans to set up a Special Economic Zone (SEZ) for the manufacture of equipment for non-conventional energy sources, with a focus on wind energy projects. The proposal has got a shot in the arm with German renewable energy firms, especially wind energy equipment manufacturers, evincing interest in the plan. The German industry is the global leader in non-conventional energy. The Government is exploring the possibility of joint R&D and joint manufacture of systems and components for wind turbine generators with the German players. A number of investment proposals in this regard are under consideration. They include plans by a special purpose vehicle (SPV) called Future Energy Zone India Ltd, promoted by Bangalore-based Malavalli Power Plant, for investing in such projects. The SEZ is expected to house industrial R&D units, testing units, vocational training centres and an area earmarked for vendors.

‘No extra sops for big power projects’: FinMin

August 4, 2006. The finance ministry has turned down the power ministry's request to consider additional sops for developers of ultra mega power projects.  Finance ministry has asked the power ministry to first test the market and get a valuation of the seven projects before seeking any sops.  The power ministry has forwarded a list of demands made by the developers and financial institutions even before any valuations of the ultra mega power projects is available. The list of demands included increasing the external commercial borrowings (ECBs) and floating infrastructure bonds to bridge the financial gap caused by the escalation in fuel costs for projects based on imported coal.  While the financial institutions had raised concerns about the size of these projects on account of the huge investments and likely problems in servicing their debt, the developers had raised issues regarding signing of the escrow account arrangement prior to the financial closure of the project, increasing the length of the bidding time line and confirmation of the relocation and rehabilitation package at the request for proposal (RFP) stage, among others.  It said the ultra mega power projects would introduce further distortions in the power sector. 

Allotment of 81 coal blocks for captive mining soon

August 3, 2006. The plan to allot around 81 coal blocks for captive mining by power developers is on the verge of being finalised. These blocks have an aggregate capacity of 20 billion tonnes.  The matter was discussed at a recent secretary-level meeting. It was decided to amend the Mines and Minerals (Development and Regulation) Act, 1957, to provide for competitive bids for all minerals including coal and lignite. The ministry of mines insisted that only coal and lignite be included, with all other minerals being considered separately after the report of the high-level committee on mineral policy is received. Accordingly, a revised formulation has been sent for the law ministry’s advice.  A proposal to impose a 3-5 per cent cess on domestic coal to fund infrastructure augmentation in the energy sector has been shelved. The committee of secretaries of the central government has decided not to pursue the plan for the cess. The ECC had asked the coal and power secretaries to prepare a detailed plan for levying the cess.

Agra power consumers to turn prepaid

August 3, 2006. Known to have adopted numerous approaches to cut power theft in a large area of Uttar Pradesh, stretching from Jhansi via Agra to the Kanpur zones, the UP power discom, Dakshinanchal Vidyut Vitran Nigam Ltd (DVVNL), has decided to do away with electricity billing for domestic and light commercial subscribers, turning these electricity connections from postpaid to prepaid.  For this, the corporation has tied up with Udaipur-based Secure Meters Ltd to provide special computerised prepaid meters.  The DVVNL has ordered 1,000 such meters for Rs 50 lakh to cover the commercial areas of Agra within this month and the remaining parts of the three distribution divisions will be targeted next. 

Power theft was a major problem in the state and to combat this, the DVVNL had decided to do away billing ordinary electricity customers, giving them an option to make their connections prepaid through the installation of special meters, to be put in place in a common meter-box with only the display and control-key unit accessible to the subscriber.  Once the purchased units are consumed, the meter will cut power supply to the subscriber, and the supply will resume after entering a 20-digit code into the meter.  To prevent any discomfort to the subscribers during holidays or nights, it has been ensured that power supply through the meter will not be interrupted during nights, gazetted holidays or Sundays, even if there is zero credit in the subscriber’s account.  The company intends to convert its domestic and light-commercial power connections into prepaid throughout the three zones controlled by the DVVNL, which is expected to raise the company’s revenue from its connections by at least Rs 13 crore a month through controlling power theft. 

HPCL 2020 plan calls for foray into power

August 2, 2006. The government may have directed oil majors to stick to their core business, but state-run Hindustan Petroleum Corporation Ltd (HPCL), which is currently into refining and marketing, has drawn up an ambitious diversification plan, which includes a foray into power. It wants to delve into offshore and onshore exploration, production of hydrocarbon in India and abroad including trading and transportation and set up power projects preferably where natural gas and liquefied natural gas (LNG) are available. HPCL plans to derive synergy from the joint venture companies (JVCs) to be formed for its energy-related business. It is expected that JVC investments will constitute 20 per cent of HPCL’s overall outlay, the remaining 80 per cent will be used to set up infrastructure.

OIL & GAS

Dubai to control its offshore oilfields

August 7, 2006. The Dubai government has created a new entity to take control of its offshore oil resources from Dubai Petroleum Company (DPC), which is wholly-owned by US oil giant ConocoPhillips. The government and DPC have signed a pact that will change the 45-year old operating agreements for Dubai offshore oilfields from April 2 next year. Dubai Petroleum Establishment (DPE), the new entity owned by the government of Dubai, will be responsible for operating the oilfields and for all future business related to oil and gas production in Dubai. Oil services firm Petrofac will take over responsibility for well and facilities management on behalf of DPE from April 2, 2007. Dubai oil will continue to be freely traded on the international oil market under contracts established by the government and DPE.

Gas and oil discovered in Myanmar

August 6, 2006. PTT Exploration & Production, Thailand's state-controlled oil and gas exploration company, has discovered a "significant amount" of natural gas and oil reserves in Myanmar. The discovery will secure a sufficient supply of natural gas and oil for Thailand in the future.  PTT Exploration, based in Bangkok, is 66 percent owned by state-controlled PTT. The company plans to spend 233 billion baht, or $6.16 billion, between now and 2010 to increase production of crude oil and natural gas at home and overseas. The company has contracts to explore and develop oil and gas fields in countries like Vietnam, Myanmar, Indonesia and Algeria.

Aspen Exploration discovers gas well in 2006

August 4, 2006. Aspen Exploration Corporation announced a new gas well in the Sacramento Valley gas province of northern California. The Alston #23-2 well, located in the Rice Creek Gas Field, Tehama County, California, was drilled to a depth of 5,700 feet and encountered approximately 50 feet of potential gross gas pay in several intervals in the Forbes formation. Production casing was run based on favorable mud log and electric log responses. This was the ninth successful gas well out of ten attempts by Aspen in this field. Aspen currently operates 55 gas wells and has non-operated interests in 20 additional wells in the Sacramento Valley of northern California.

Nexen discovered gas in Gulf of Mexico

August 3, 2006. Nexen announced drilling and logging operations on the Ringo prospect, located in Mississippi Canyon Block 546. The well encountered approximately 150 feet of net gas pay. The discovery well is located in 2,500 feet of water, approximately 120 miles northeast of Aspen field. The Ringo well commenced drilling on May 28, 2006 and was drilled by the Transocean Amirante semi submersible drilling rig to a total depth of 12,808 feet.

Two firms join race for stake in Indonesian oil driller

August 3, 2006. Mainland companies have made rival bids for Southeast Asia's biggest oil drilling company after India's Aban Loyd Chiles Offshore offered to buy a stake in Apexindo Pratama Duta valued at about US$170 million (HK$1.33 billion). Aban is in talks for a 32 percent stake in Apexindo from Medco Energi Internasional, Indonesia's largest publicly traded oil company, which controls the oil driller. China National Offshore Oil Corp and China Oilfield Services have joined a bid for Apexindo. Indian and mainland companies are competing to acquire oil exploration assets to meet rising demand at home as crude oil prices surge. China and India consume 11 percent of the world's oil, up from 9 percent in 2000.  Apexindo, partly owned by SeaDrill, an oil-rig owner controlled by Norwegian billionaire John Fredriksen, swung to a profit in the first half. Apexindo had net income of 191.5 billion rupiah (HK$172.35 million) in the first six months, from a loss of 72.5 billion rupiah a year earlier.

Venezuela, Trinidad work on natural gas unification

August 2, 2006. Trinidad and Venezuela met recently to hammer out the fine print on a natural gas "unitization agreement" that both countries hope to finalize before the end of the year. The unitization agreement applies to natural gas reservoirs that straddle the maritime border between Venezuela and Trinidad. Chevron Corp. The steering committee charged with delineating cross-border reserves will meet again in September. The two countries began unitization talks in 2004. The final treaty will determine how much of each natural gas reservoir belongs to each country. Venezuela has 150 trillion cubic feet of natural gas reserves, but has been slow in developing the gas industry. The country currently suffers from a natural gas deficit, which it expects to resolve by the end of 2008.

Aabar wins contract for Vietnam block

August 2, 2006. Aabar Petroleum Investments Company PJSC awarded the petroleum contract for a block in Vietnam. Pearl Energy, Serica Energy Corporation and Lundin Petroleum AB will each hold a 33.33 per cent interest in Block 06/94 located in the Nam Con Son Basin, off Vietnam's south coast. The block which covers an area of 4,148 square kilometres, will be operated by Pearl. Block 06/94 lies approximately 350 kilometres offshore and is the part of Block 06 which British Petroleum relinquished in 1994 after retaining the large Lan Tay and Lan Do gas fields for development. Lan Do commenced gas production in 2002 through a pipeline to Vung Tau, near Ho Chi Minh City.

PDVSA to build three new refineries in Venezuela

August 7, 2006. PDVSA, the state-owned oil company will build three new refineries in Venezuela known as the Cabruta, Caripito, and Santa Ines refineries. The construction of these plants is to begin simultaneously after PDVSA finishes with the concept engineering of each refinery for their startup in 2009 which will add a total of 500 thousand barrels of oil production per day to PDVSA's current production capacity. The construction of these new refineries is a part of Venezuela's new energy policy which was implemented by President in 2005, and consists of two stages: one from 2005 to 2012 and another from 2012 to 2030. This energy policy includes six major projects that will be performed in conjunction with Petrocaribe of Venezuela, which is a Caribbean oil alliance with Venezuela launched in 2005 to purchase their oil on conditions of preferential payment, and Petrosur, which is a Latin American oil alliance between Argentina, Brazil, and Venezuela. The Magna Reserve, the Orinoco Project, the Delta-Caribbean Project, the Refining Project, the Infrastructure Project, and the Integration Project are all the names for the six specific development projects included in the energy policy.

Pilipinas Shell to build CNG refilling facility

August 7, 2006. Pilipinas Shell Petroleum Corp. is in talks with some Malaysian and Thai contractors for possible deals over the construction of a mother-daughter refilling facility for CNG in Batangas province. The company will hold a bidding for local contractors, but admitted difficulty in tapping locals since they do not have much experience in building CNG facilities. The company intends to hold the bidding in the soonest possible time. The proposed mother CNG facility would be built near Pilipinas Shell’s refinery in Batangas. The oil refiner had committed to build the mother-daughter CNG stations as part of the National Gas Vehicle Program for Public Transport. Under the program, the government wants some 200 CNG-fed buses to ply major thoroughfares in Metro Manila and nearby provinces. Some CNG-fed buses are already operating, but the lack of refilling stations is making operations difficult. Most of these bus companies took out loans from banks to venture into CNG-fed transport, and so run the risk of defaulting on their obligations should the refilling stations fail to materialize.

Refineries in China to lift output

August 4, 2006. China's top dozen oil refineries will raise crude throughput this month to near-peak levels as major plants emerge from maintenance, ensuring sufficient local petrol supplies at the zenith of summer demand. The country's 12 major plants, mostly on the eastern seaboard and making up nearly 40 per cent of refining capacity, will process 2.329 million barrels of crude oil a day in August, up 7.4 per cent from July. The highest run level since February's 2.33 million bpd rate will bolster apparent fuel demand, which logged double-digit growth over the second quarter as the economy grew at its quickest pace in a decade. With Beijing's tight control over gasoline exports and higher runs, China looks set to avert a repeat of the fuel supply squeeze that struck last August.

Honeywell to supply Vietnamese oil refinery

August 2, 2006. The Phoenix-based operations of Honeywell International Inc. will supply process controls for Vietnam's first oil refinery. The contract to provide equipment for the Southeast Asian country's refinery is worth $17.5 million. PetroVietnam's refinery is scheduled to begin production in early 2009. This refinery will help Vietnam become a player in Asia's oil market. To compete in this market, the Dung Quat refinery will need state-of-the-art equipment. Phoenix-based Honeywell Process Solutions is a division of diversified manufacturer Honeywell International

Singapore plans LNG imports to meet demand

August 8, 2006. Singapore has decided to go ahead with LNG imports to meet future energy demand and ease its dependence on piped supplies from Indonesia and Malaysia. A study prepared by Tokyo Gas Engineering commissioned by the EMA has recommended building an LNG terminal to receive 3 million tonnes per year by 2012. The EMA sees the politically stable Australia as the preferred supplier. This would help to strengthen the hand of LNG marketers such as Australia's Woodside Petroleum and US major Chevron that have found it tougher to sell LNG to China and India due to higher prices. Other potential suppliers are Qatar and Iran.

The terminal is expected to cost about $500 million. The funding could partly come from the city's power plants that dominate Singapore's natural gas consumption and the overall project would cost more if investments in LNG tankers were taken into account. Singapore, whose economy is forecast to grow five to seven per cent this year, has long sought to diversify its gas supplies, all of which come via three pipelines from Indonesia and Malaysia to fuel 80 per cent of the island's power generation that is growing at more than four per cent a year.

Turkey - Greece natural gas pipeline

August 7, 2006. 119 kilometers of Turkey-Greece natural gas pipeline will be completed, between Bursa/Karacabey-Canakkale/Lapseki, by October 2006. 'The first part of the Turkey-Greece natural gas pipeline will be completed in two months, well before the date specified in the contract. The second portion of the pipeline will be laid by Oztas-Peker Consortium and will connect Canakkale/Lapseki-Gallipoli via an under water pipeline costing 55 million USD. The pipeline of 300 kilometers will help carry Caspian Sea natural gas to European markets. 209 kilometers of the pipeline will pass through Turkey. Turkey-Greece natural gas pipeline is expected to be fully functional as of the end of 2006.

India-China to buy U.S. oil firm

August 7, 2006. The Indian government has given the go ahead to state-run oil firm ONGC for the joint acquisition of a U.S. oil firm in Colombia along with China's largest oil company. Oil and Natural Gas Corporation's overseas acquisition arm, ONGC Videsh has been looking to acquire U.S. oil firm Ominex De Columbia jointly with the China National Petroleum Corporation (CNPC). OVL would fund the acquisition either from its own resources or with that of its parent company, ONGC. Omimex de Columbia has onshore producing and exploration blocks in Columbia, with net proven reserves of around 157 million barrels. OVL is seeking Omimex's onshore oil block which produces 20,000 bpd. Omimex de Colombia is fully owned by Omimex Resources, an American oil and gas exploration and production company.

Malaysia's Petronas wins Ethiopia's gas field tender

August 7, 2006. The Malaysian oil firm Petronas has won Ethiopia's ambitious Calub and Hilala gas field development tender. The ministry and Petronas will sign a development agreement to enable the firm to develop the gas fields that lie on 285 sq km of land. The gas reserve was discovered in 1972 by an American oil company, Tennaco. There are eight gas production wells in Calub. Petronas, Gail India Ltd and Dinder of Sudan participated in the tender put up by the ministry. Petronas has a plan to build a gas refinery plant at Calub and to construct a gas pipeline all the way to Djibouti that would enable it to export petroleum products. Studies indicate that LPG, petrol, diesel, jet fuel and kerosene can be produced from the gas reserve. Petronas has proposed to invest up to 1.9 billion U.S. dollars. The company also plans to drill exploration wells in the vicinity of Calub and Hilala.

Jordan ready to supply fuel to Lebanon

August 6, 2006. Jordan will supply Lebanon with 10,000 tonnes of gasoline as soon as roads are secured into the violence-wracked country. Jordan, which imports almost all its energy needs, will dip into its reserves of 80,000 tonnes to provide Lebanon with much-needed auto fuel. The gasoline will be transported by Lebanese tanker trucks at a rate of 150-200 tonnes a day. Jordan’s King has instructed officials to provide Lebanon with fuel to make up for huge shortages suffered as a result of an Israeli blockade and more than three weeks of daily bombardment. Unlike many other Arab nations, Lebanon has next to no fossil fuel deposits and has to rely on imports for over 95 percent of its energy.

Iran's oil finds ready buyers despite nuclear row

August 5, 2006. There is no shortage of buyers for Iranian oil despite a threat of sanctions against the Islamic Republic in the standoff with the West over its nuclear program. That is mainly because rising world demand and outages in some producers like Nigeria have added to a strain on supply. Big importers like Japan have trimmed purchases from Iran but other homes for the oil appear to have emerged.

Iran, the world's fourth largest oil exporter, sold millions of barrels of oil it had been storing at sea because of a lack of buyers. The customers were mainly India and oil giant Royal Dutch Shell. Iran's sales of stored crude come as oil is trading around $75 a barrel, near July's $78.40 record high, due to real and threatened supply disruptions. Violence and pipeline leaks in Africa's top exporter Nigeria have cut its supply by a quarter.Some importers, such as Japan, have bought less Iranian oil as Tehran's nuclear standoff with the West drags on. Japan is the world's third largest oil consumer.Japan slashed second-quarter Iranian crude imports by nearly 40 percent, or about 240,000 barrels per day, from the previous quarter to around 385,000 bpd.

Japan's top refiner Nippon Oil Corp. said in March it would trim Iranian crude purchases due to geopolitical risks, the first hint Tehran's nuclear dispute with the West may hinder its vital oil trade. But most other importers said they had no immediate plans to cut back on minimum imports of Iranian oil. A tight market and concern about cutting ties with a major exporter will limit buyers' options. Tehran has threatened to use its oil exports as a weapon to defend itself in the row, and officials have said sanctions will harm the West more than Iran by sending prices even higher. Crude supply from Iran, the second largest producer in the Organization of the Petroleum Exporting Countries, probably rose last month because of sales from storage. Iran is expected to pump 4 million bpd in July, 200,000 bpd higher than an initial estimate for June. Iran sold 12 million barrels of crude from its Sorush and Noruz fields in the past two months.

IPI to appoint gas adviser

August 5, 2006. India, Pakistan and Iran have agreed to appoint a consultant to advise the three governments on natural gas pricing and the overall implementation of the proposed gas pipeline project that would span the three nations. India and Pakistan have identified two candidates but there is yet an agreement on who would take up the job. But a decision is expected to be made very soon. The consultant will submit its report within one month. The decision to appoint a consultant was taken after the three countries couldn’t reach an agreement on pricing. India and Pakistan, who are jointly negotiating the gas price with Iran, had earlier rejected a pricing formula offered by Iran.

The formula offered by Tehran involves the price of natural gas delivered at the Iran-Pakistan border at 10 per cent of the Brent crude price plus $1.20 per million British thermal units. Going by this formula, the delivered price of Iranian gas would work out to $8.20/MBTU at the Iran-Pakistan border, assuming a 15-day average Brent crude price of $70 a barrel. New Delhi is seeking delivery of Iranian gas at the India-Pakistan border at $4.25/MBTU. Islamabad is also pursuing the pipeline with Tehran on a bilateral basis. Iran has already begun construction on the section of the pipeline inside its territory. The 2,600-kilometer pipeline, if built, is expected to handle 150 million cubic meters of gas a day and will cost around $8 billion to build.

The project was first proposed by Iran about a decade ago. Iran wants to develop outlets for its large proven natural gas reserves, estimated at 812 trillion cubic feet. If the project comes through, India could initially buy up to 60 million cubic meters of gas a day from Iran, while Pakistan could buy as much as 30 million cubic meters.

Myanmar gas pipeline to bypass B’desh

August 3, 2006. India will bypass Bangladesh while building a proposed gas pipeline from Myanmar after Dhaka set tough terms for the project to pass through its soil, tripling its estimated cost. The pipeline will now pass through India's northeastern states, inflating its estimated cost to $3 billion due to the longer distance. Indian state firms have begun survey work, although they have yet to secure a gas import deal with Myanmar, which is also considering sales to China and Thailand. Bangladesh wanted India to reduce the huge bilateral trade deficit, allow transit to Nepal and Bhutan and sale of electricity from those countries to Bangladesh through Indian Territory. India plans to import gas from two offshore blocks, with Indian state energy firms owning 30 percent in each block. The new pipeline route is expected to cover a distance of 1,400 km (870 miles). New Delhi, as a result, has been aggressively pursuing plans to build transactional gas pipelines and is also seeking foreign oil assets to feed demand.

India, Myanmar and Bangladesh signed a trilateral agreement early last year to build the 290 Km pipeline for New Delhi's first such international project. If the plan had gone ahead, Bangladesh had expected to get about $350 million in investment and to earn $100 million in annual transmission fees. Bangladesh also expected to get another $100 million as one-off right of way charges from the project and $25 million each year for sharing management.

TNK-BP plans to supply oil to China via Siberia terminal

August 2, 2006. TNK-BP, a Russian-British joint oil venture, it planned to supply oil to energy-hungry China via a terminal in south Siberia.  The project to build an oil terminal in the city of Barabinsk in the Novosibirsk Region was still at the designing stage, and the construction was expected to be completed in 2007. TNK-BP intended to use the terminal, capacity of 3 million metric tons, to supply light crude to China. TNK-BP was interested in oil deliveries via the Atasu-Alashankou pipeline in Kazakhstan.  Kazakhstan was using this pipeline for oil deliveries to China, and TNK-BP would also like to transport crude in this direction. But Considine said China was interested in the supply of light crude, which TNK-BP could not yet deliver via Kazakhstan. To solve the problem, the company is considering supplying lower-quality Russian oil for use in Kazakhstan, while Kazakh light oil will go to China. TNK-BP would like to supply light crude to China via the Kazakh pipeline when its volumes grew to sufficient amounts. The company has already filed an application on the delivery of oil via this pipeline. Deliveries could start already this year.

Tehran, Bangkok ink MOU on LNG export

August 2, 2006. The third round of talks on promoting cooperation between Iran and Thailand in the energy sector was held at the Oil Ministry in Tehran.  A MoU on the annual exportation of 30 million tons of LNG to Thailand was signed at the Thailand oil company. The negotiations very positive the previous round in Bangkok had placed emphasis on the transfer and sharing of CNG technology and collaboration to convert four-stroke gasoline engines to natural gas fuel engines. In view of the contract on joint petrochemical ventures signed earlier in Bangkok, hopefully Iran can attain an active presence in the Thai market and Bangkok’s investment in South Pars in return can pave the way for joint activities in other energy projects. Thailand’s PTTEP is currently involved in exploration and development of the Saveh oilfield, and Iran plans to build fuel conversion stations in the East Asian country. A PTTEP branch has already been established in Tehran to coordinate with the Iranian Oil Ministry on future projects.

Total buys Chevron stake in Brass LNG project

August 2, 2006. French oil major Total SA had acquired Chevron's 17 per cent interest in the Brass LNG project. The acquisition of the stake in the LNG was a further step in its strategy of growing and diversifying its production in the West African country, the world's eighth biggest oil exporter. The Brass LNG project will enable Total to step the monetisation of its Nigerian gas resources from onshore fields, offshore clusters under development and oil mining leases 112 and 117, in which the group recently acquired a 40 percent interest. A go-ahead for the first two trains of the project was expected by year-end, with production scheduled to start up in 2011. Initially two trains would be built, with a capacity of five million tonnes per year each, with most of the LNG destined for export to Europe and the U.S.

Chicago wins $1 bn LNG terminal contract

Aug 1, 2006. Chicago Bridge & Iron Co. N.V. was awarded a contract, valued at more than $1 billion, by Golden Pass LNG Terminal LLC for the construction of a liquefied natural gas import terminal near Sabine Pass, Texas. The terminal, which is expected to start up in 2009, will have import capacity to process 15.6 million tons of LNG per year.

Turkmenistan to meet Iran's gas shortage

August 7, 2006. Some plans have been considered by Turkmenistan to meet the shortage of gas in winter. It is estimated that 100 million cubic meters of gas per day will be needed to meet the needs of people during winter. 65 million cubic meters of this amount will be supplied by Parsian and South Pars refineries while the other 45 million cubic meters is expected to be procured by Turkmenistan. A MoU has been inked with Turkmenistan, under which that country has been obligated to provide Iran with required gas for the following two years. Some 20 million cubic meters of Iran's gas shortage will be met as the result of this contract. The rest of gas shortage will be provided by imports.

Japan to lodge protest with China over gas exploration

August 6, 2006. Japan plans to lodge a protest with Beijing after China's largest offshore oil development company said it has entered full production at a disputed undersea oil field in the East China Sea. Tokyo wants to resolve the dispute through diplomatic efforts, but is also readying the retaliatory step in case China refuses to halt the Chunxiao drilling. The dispute over the gas deposits came to the fore last year after Chinese crews began drilling at Chunxiao. Though the drill site is not in a disputed area, the field straddles the contested demarcation line and Japan worries that oil reserves in the area might be sucked dry. China has rejected Japan's proposal to jointly develop the fields. The two countries failed to make any progress in their latest talks in Beijing in July. Fearing that it may be left behind, Japan last year granted test drilling rights to Teikoku Oil to explore for undersea gas, but drilling has not begun. The undersea gas fields are one of numerous territorial disputes between Japan and China in the East China Sea, ranging from where to demarcate each country's exclusive economic zone to sovereignty over a small island chain.

S&P upgrades Asia’s energy sector

August 5, 2006. Standard & Poor’s Equity Research (S&P) has upgraded its recommendation on Asia’s energy sector to “overweight” from “market weight” following the increase in its 2006 and 2007 crude price forecasts to US$72 per barrel and US$76 respectively from US$68 and US$66. It also included an update from Global Sights, which revised expectations for crude prices to average US$80 this winter and not below US$70 until 2009. The valuations of companies with upstream assets, namely PetroChina, Sinopec and CNOOC appear to factor in a long-term average crude price of around US$40 per/bbl.

LUKoil, Algeria's Sonatrach sign memo to tap oil, gas

August 4, 2006. LUKoil and Algerian national petroleum company Sonatrach signed a memorandum on cooperation in oil and natural gas prospecting, recovery and processing. Cooperation between the long-time partners has been expanding since Russian President   visited Algiers last March, when about 15 Russian-Algerian contracts were signed, including on cooperation in tapping hydrocarbon reserves. Algeria has proven natural-gas reserves estimated at 4.55 trillion cubic meters, second only to Nigeria in Africa. It is also the continent's third largest producer of crude oil after Nigeria and Libya, with 111.02 billion bbl in proven reserves.

Gazprom to oppose Exxon gas pipe to China

August 3, 2006. Russian gas monopoly Gazprom will oppose a plan by U.S. oil major ExxonMobil to build a major gas pipeline from Russia's Pacific island of Sakhalin to China. Gazprom as saying Exxon's plan was directly competing with Gazprom's own project to build a bigger pipeline to China. Exxon's pipeline is not foreseen in the programme of development of Russia's Far East and East Siberia and does not meet the goal of a complex development of gas transportation system in the country's east. Gazprom wants to build two pipelines from Siberia to China, which would supply up to 80 billion cubic metres per year. Exxon is leading the development of the Sakhalin-1 oil and gas project and plans to produce 250,000 bpd of crude by the end of this year for export to Asian markets. But it has yet to find buyers for massive gas reserves, as customers in Japan and South Korea have said they prefer liquefied natural gas to pipeline gas shipments. Exxon and its partners, which include Russia's influential state oil firm Rosneft and Japanese group Sodeco, are in talks with Chinese state firm CNPC to build a $1 billion pipeline from Sakhalin and sell up to 8 billion cubic metres of gas a year.

Romania sees gas price hike this year

August 3, 2006. Romania will pay more than $300 for 1,000 cubic meters of gas from Gazprom. It currently pays $285 for 1,000 cubic meters. The predicted price hike was due to a rise in global oil prices. Natural gas prices are linked to the prices of other fuels. Traditionally gas prices are lower in the summer and higher in the winter. Romania is planning to expand its storage capacity to be able to buy large quantities when prices are lower. Domestic users pay much less than what Romania pays for imported gas because they use cheaper locally produced gas. Romania imports 40 percent of its gas from Russia through Ukraine with the rest produced locally. Gas is widely used in the nation of 22 million for heating and cooking. The country consumes 18 billion cubic feet a year, Seres said.

Russia limiting foreign energy investments

August 1, 2006. Russia will restrict foreign investment in Russia's oil and natural gas sectors.  However, the restrictions would not apply to development of medium-size and smaller deposits. The national oil and gas sector needs larger investments from abroad as Russian companies do not have enough cash to carry out all the projects on their own. Those projects include the development of offshore oil deposits, oil fields in the Far East and West Siberian fields.

Power

Chevron, Keenan building power plant

Aug. 7, 2006. Chevron Corp. and Keenan Development will build a $100 million central utility plant for Maryland's National Interagency Biodefense Campus. That campus is under construction at the United States Army's Fort Detrick in Frederick. The plant will be the first energy project established through the Department of Defense's enhanced-use leasing authority, which allows private companies to develop non-excess military property for mission enhancing and marketable long-term uses. Keenan Development is leasing the project land from Fort Detrick and will own the plant. Chevron Energy Solutions is designing and building the plant and will operate it. Completion is set for 2008.

China to invest in Kyrgyzstan's power sector

August 3, 2006. China's electricity monopoly is interested in building electric power stations in the Central Asian republic of Kyrgyzstan. Kyrgyzstan's Electric Stations Company issued the statement after jointly signing a letter of intent on long-term cooperation with the State Grid Corporation of China (SGCC). The letter was also signed by the National Electric Grid of Kyrgyzstan. A delegation of Chinese electricity operators visited Kyrgyzstan from July 27 through August 2 to study the prospects of boosting electricity supplies to energy-hungry China. The Chinese investors showed an interest in the Sarydzhaz and Kambarat hydropower stations, the construction of an electricity transmission line in Kashgar, coal-firing thermal power stations, and the modernization of the Uchkurgan hydropower plant and the Bishkek heat and power plant.

Russia to invest $6 bn in power sector in ‘07

August 1, 2006. Russia plans to invest 160 billion rubles (about $6 bn) in the development of the country's power sector in 2007. The ministry had forecast a 2.5 per cent increase in electricity consumption in the first half of the year, but it had grown more than 5 per cent in the reporting period. Strong economic growth and private investors' activities has led to growing electricity consumption and the necessity of a significant increase in investment in the energy sector. The government would discuss investment in the electric power sector at the next session, but that nuclear power would not be on the agenda, as the situation in the sector was quite different. Investment in the sector was planned at 18 billion rubles ($670 mn) for 2007 and 53 billion rubles ($2 b) for 2008.

Philippines to re-bid power plant

August 7, 2006. A state-owned coal-fired power plant will be auctioned off for a second time after the previous winner failed to make a $228 million down payment. A date for the new auction of the Masinloc 600MW power plant had not been set but expressed hopes this sale would be successful. YNN Pacific Consortium Inc submitted the highest bid of $561.74mn for Masinloc, northwest of Manila, at an auction in Dec 2004.

Georgia not buying Russian power

August 7, 2006. Georgia stopped buying Russian electricity and will halt imports of Russian gas starting at the end of the year as the country seeks to reduce its dependence on Russia amid worsening relations. Georgia will also stop buying Russian gas at the end of this year when a gas main on the Baku-Tbilisi-Ceyhan pipeline is completed.

Cleco to sell 6 mn shares to fund power plant

August 7, 2006. Cleco Corp a Louisiana energy services company, it plans to offer 6 million common shares, and use net proceeds to partially fund construction of a $1 billion power plant. The construction began on the solid-fuel power plant at Rodemacher Power Station in Boyce, Louisiana in the first quarter of 2006. Cleco, it may offer an additional 900,000 shares to meet demand.

PG&E signs power contracts

August 1, 2006. Pacific Gas and Electric Co. has signed two contracts to buy energy from Mirant Delta LLC, allowing the power giant to gain much-needed electricity at peak demand periods. PG&E has the exclusive rights to 1,985 MW from Mirant's Contra Costa and Pittsburg power plants in the Bay Area. The San Francisco-based utility company is seeking new sources of electricity to protect customers from blackouts during the hot summer days.

Daimler to set up co-op to source biodiesel

August 4, 2006. DaimlerChrysler India, the makers of Mercedes-Benz, is planning to set up a co-operative in Gujarat for the purpose of sourcing Jatropha-based bio-diesel from farmers in and around the town of Bhavnagar. The co-operative will be set up in a month.  DaimlerChrysler India has tied up with Central Salt and Marine Chemicals Research Institute (CSMCRI) and the University of Hohenheim for the programme. Bhavnagar-based CSMCRI is a division of the CSIR. The transfer of knowledge for right methods for selection of seeds, growing of the crop and extraction of oil will be passed on by DaimlerChrysler to the farmers.  Daimler aim is to develop 100 per cent pure bio-diesel without any blend of regular diesel. The quality of bio-diesel should match European specifications.

The pilot project will help DaimlerChrysler to produce bio-diesel to match with Indian environment and infrastructure needs.  The co-operative will run initially as part of a pilot project, which, if successful, would be converted into a full-fledged co-operative programme for the production of bio-diesel. Once the pilot project proves successful and fit for commercial production, it will be the responsibility of CSIR to pass on the technology for commercialisation to oil refining companies or other private parties.

Pvt sector investment in wind power looks up

August 4, 2006. With the West Bengal Electricity Regulatory Commissions (WBERC) new directive that at least 2 per cent of electricity generation by utilities has to come from renewable energy sources, the prospects of private sector investment in wind power are looking up. Already, 1000 hectares of land with moderate wind speed have been identified in East. In India, nearly 1700 MW of wind power capacity was added last year, representing the largest one-time increase. Investments so far in this sector have been to the tune of Rs 800 crore. Incidentally, tax benefits in wind power investment allow companies and individuals to avail of 80 per cent accelerated depreciation on their investment in the first year.

Rice husk fuel staves off power crisis in Ludhiana

August 2, 2006. With the power situation worsening in Punjab and affecting businesses, many industrial houses are setting up power plants and enjoying uninterrupted power supply without having to incur losses in production.  A majority of these power plants use rice husk as fuel, something that explains the rise in its price.  Last year, rice husk was available in the market at a price varying between Rs 230 and Rs 240 per quintal. But this year, its price has already crossed the Rs 280-per-quintal mark and is expected to reach Rs 350, even Rs 400 per quintal, this month.  Those in the business predict that by next year, the price of risk husk is expected to touch Rs 500 per quintal.  Those that have benefited the most due to this increase have been rice sheller owners (a sheller is a machine that polished rice grain), who have never had it so good. Farmers, being ignorant about the present development, have been unable to cash in on the situation. 

Cape Town signs wind power deal 

August 4, 2006. The city of Cape Town has signed a deal to buy wind-generated electricity, in what is set to be South Africa's first fully fledged wind power project. The 70mn rand ($10mn) deal will allow the building of a 13,200 MW pilot project at Darling, 50 Km north of the city. The project would help Cape Town to reach its target of sourcing 10 per cent of its overall energy requirements from sustainable sources by 2020. The initial phase of the project - 10 turbines - will produce about 0.2% of the city's electricity needs. Four turbines are to be built by November, and a further six next year.

U.S. Geothermal signs ten-year renewable credit deal

August 3, 2006. U.S. Geothermal Inc., a Boise, Idaho based renewable energy company developing power from geothermal resources, the signing of a $4.6 million renewable energy credit ("REC") purchase and sale agreement encompassing the first 10 years of Phase 1 of the Raft River project. Phase 1 is expected to produce a monthly average of 10 MW of electrical power to be delivered to Idaho Power Company under a 20-year power purchase agreement. Holy Cross Energy, a Colorado cooperative electric association, has agreed to purchase the RECs associated with Phase 1 power production from 2008 to 2017. U.S. Geothermal retains the RECs associated with power production from Phase 1 after 2017. Phase 1 is currently under construction and is expected to begin commercial power production in the fourth quarter of 2007.

Venezuela's PDVSA eyes biodiesel output in 3 years

August 2, 2006. Venezuela state oil company PDVSA is studying Brazilian biodiesel technology with an eye on possible own output three years from now. DVSA had already adopted technology to produce ethanol with output due to start next year. Venezuela has signed commitments to study Petrobras technology. Brazil's state-run oil company Petrobras is an active promoter of biodiesel, which is blended into regular diesel at a 2:98 ratio on voluntary basis. The 2 percent blend will become compulsory from 2008 or even next year. Brazil will then switch to a 5 percent compulsory blend, possibly as soon as 2010. As for ethanol, Venezuela has imported 150 million liters of the fuel sold by Petrobras this year. Venezuela plans to build 15 ethanol plants by 2010.

US energy dept. to spend $250 mn on fuel study

August 2, 2006. The federal government will spend $250 million to help create two research centers that will focus on finding more efficient ways to produce cellulosic ethanol and other biofuels. The two winning organizations each will receive $25 million per year for five years, beginning in the 2008 federal fiscal year, to develop and operate the research centers, which are expected to be fully operational by 2009. While corn and soybeans are widely used to produce ethanol and biodiesel for fuel, the new research centers will be charged with looking to efficiently break down other natural materials, or biomass - such as grasses, crop residue and animal byproducts - to help make fuel.

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