Towards an Energy Sector Competition Policy in India: Insights from International Practices (P - VI)
Dr. Samir R. Pradhan®
Energy Charter Treaty
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he Energy Charter is an inter-governmental organisation comprising 51 states (all of the European countries, Russia and other CIS states, Australia, Japan and Mongolia). Created to promote cooperation on energy issues, the Charter is based on the principles of openness, transparency and non-discrimination. The Energy Charter Treaty (ECT), signed in Lisbon in December 1994, is the main legal instrument, complemented with the Energy Charter Protocol on Energy Efficiency and Related Environmental Aspects. The ECT was amended in April 1998 with Amendment to the Trade-Related Provisions of the Energy Charter Treaty.
The ECT has legally binding rules on cooperation in investment protection; trade in energy materials and products; transit and dispute settlement. Australia, Belarus, Iceland, Norway and the Russian Federation have not yet ratified the ECT. Rules on foreign investment are based on the more favourable of either the most favoured nation principle or the treatment accorded to domestic investors (Article 10). WTO rules are applied to trade in energy materials and products between all Contracting Parties, even if a non-WTO member. If a dispute arises between individual foreign investors and the state, the investor may use international arbitration procedures. An arbitration mechanism can be used to settle disputes between states, if usual diplomatic channels cannot resolve it. Arbitration results are binding.
ECT signatories are to facilitate transit of energy materials and products without distinguishing between the origin, destination or ownership of such products or price discriminating on the basis of such distinctions. Any unreasonable delays, restrictions or charges should be avoided. Energy materials and products in transit are to be treated no less favourably than domestic materials, unless an international agreement provides otherwise. In case of transit disputes, no interruption or reduction in the flow of energy materials and products should occur prior to the dispute resolution procedure. ECT signatories are required to alleviate market distortions and barriers to competition in energy activities, and to improve legislative framework to address anti-competitive conduct in the energy sector. Other major principles upon which the ECT is based are transparency (establishing enquiry points on laws, regulations, judicial decisions and administrative rulings); sovereignty over members’ energy resources and management; and environmental soundness. The ECT incorporates the “polluter pays” principle to ensure that social costs of pollution are fully reflected in the product’s market price.
NAFTA
The North American Free Trade Agreement (NAFTA) covers measures related to trade in energy goods, investment and cross-border trade of services (Chapter Six on “Energy and Basic Petrochemicals”). Article 603 on Import and Export Restrictions recognises the provisions of the General Agreement on Tariffs and Trade (GATT) on prohibitions or restrictions on trade in energy and basic petrochemical goods. Article 604 on Export Taxes prohibits any tax, duty, or charge on the export of any energy product, unless such a measure is also applied on such products for domestic consumption. Article 606(a), Energy Regulatory Measures, stipulates national treatment, and prescribes that energy regulatory bodies should perform their functions without disrupting contractual relationships. Services associated with energy and basic petrochemical goods are excluded from the scope of NAFTA Chapter Twelve on Cross-Border Trade in Services (Article 1201(2) (b)).
NAFTA (Chapter Fifteen on Competition Policy, Monopolies and State Enterprises) requires countries to preclude anti-competitive business conduct, and to cooperate on issues of competition law enforcement, including mutual legal assistance, notification, consultation and exchange of information. Dispute settlement bodies cannot consider competition issue (Article 1501). Designated monopolies, regulated transparently to prevent exercise of monopoly power, are allowed provided they grant non-discriminatory treatment to investors, goods and service providers of other parties.
APEC
APEC initiatives on energy occur within the Energy Working Group. Areas of cooperation include power infrastructure, natural gas, interconnection, energy standards and efficiency. The Energy Regulator’s Forum (ERF) was established in 1996 to assist the Group in summarising and reviewing regulatory experiences and developing best practice regulatory approaches to facilitate efficient energy markets. The ERF is currently focused on assessment of the regulatory component of reports prepared by other groups within APEC; advising on the Group’s activities in the regulatory area; and reporting to the Group on regulatory aspects of electricity and gas developments in APEC economies.
Energy ministers agreed in 1996 to fourteen non-binding energy policy principles, including opening of the energy markets (Principle 3) and the progressive reduction in energy subsidies and implementation of pricing practices which reflect the economic cost of supplying and using energy across the full energy cycle, having regard to environmental costs (Principle 5). APEC’s Natural Gas Initiative aims at promoting investment in natural gas infrastructure and trading networks across the region, through identifying best practices for minimising investor risk.
The Manual of Best Practice Principles for IPPs emphasised transparency, predictability, reduced risk and encouraging competition as crucial factors for successfully operating independent power producers (IPPs). Best practices in institutional and regulatory structures, tender/bid process, power purchase agreements and tariff structures, and financing were assessed.
The APEC Group on Services identified the following steps in designing deregulation/
Privatization programs:
· Assessment of the costs and benefits of regulation
· As the costs of regulation may exceed the benefits, new and changed regulatory measures should be assessed through a “regulatory impact analysis”.
Creation of a competitive market
· Deregulation/privatization should be accompanied by competition, maintained through effective competition policies and laws.
Transparency
· The regulatory reform process should be transparency
Sequencing of reforms
· The correct sequencing of economic and regulatory reforms should reflect each given situation and desired objective.
· Sequencing of reforms can crucially determine their success.
· Privatising activities before deregulating the sector risks establishing powerful private lobbies against future deregulation.
The optimal sequence for deregulating the energy sector is, according to a World Bank study of developing and transition economies:
(i) Introduce privatisation/liberalisation campaign;
(ii) Enact electricity law to permit unbundling and divestiture
(iii) Establish an independent regulatory authority;
(iv) Approve new market structure;
(v) Unbundle the power utility;
(vi) Privatise or grant concession on private distribution;
(vii) Privatise generators.
In this approach, independent power producers (IPPs) may enter throughout the reform process. Based on this framework, the Study ranked countries on a scale from 0 (perfect sequencing) to 100 (reverse order sequencing). India (Orissa) project scored 2, compared to the score of 39 for Thailand, and 75 for Kazakhstan. The APEC Energy Working Group has also agreed that privatisation should come last following the establishment of a legal framework and the institutions needed for a properly functioning market.
(To be continued)
Is Oil A Fossil Fuel?
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group of Russian scientists at the oil and gas research institute of the Russian Academy of Sciences, led by Azary Barenbaum, have come up with a new explanation of the nature of oil and gas formation. They argue that huge reserves of hydrocarbons may take only decades to be formed, not millions of years, as earlier believed. Researchers have registered an increase in oil reserves in oil-rich provinces where deposits were explored and have been developed for many years and where oil consumption is comparatively high. Those oil-rich areas include the Russian province of Tatarstan, Ukraine, Azerbaijan, Texas and Oklahoma in the U.S., and Mexico. Depletion of reserves is possible only in the oil and gas exploration areas where consumption levels are low, holds Professor Barenbaum. He insists that formation of oil and gas is not so geological as climatic by nature, related to the water cycle and circulation of carbon on our planet.
The decisive role in that process belongs to carbon infiltrating the earth's surface with rains in the course of their incessant circulation. Carbons entering the surface — chiefly in the form of hydrogen carbonate — along with rain waters transform into hydrocarbons, which create the basis for accumulation of oil and gas in geologic traps. Conclusions drawn by the specialists of the oil and gas research institute have been confirmed in the course of exploratory drilling in the Moscow Region. The researchers have concluded that up to 90 percent of all oil and gas reserves on the planet are formed at the depth of 1 to 10 km and only 10 percent are formed out of organic waste. Hence, the entire process of formation takes decades, not millions of years, Russian scientists say.
This is not the first time the scientists have challenged the traditional theory of oil and gas formation, which says that oil and gas deposits are the remains of plant and animal life that died millions of years ago and were compressed by heat and pressure over millions of years. Back in the 1950s Russian and Ukrainian geologists came up with a theory that formation of oil deposits requires the high pressures only found in the deep mantle and that the hydrocarbon contents in sediments do not exhibit sufficient organic material to supply the enormous amounts of petroleum found in supergiant oil fields.
According to their theory oil is not a fossil fuel at all, but was formed deep in the Earth's crust from inorganic materials. Based on the theory, successful exploratory drilling has been undertaken in the Caspian Sea region, Western Siberia, and the Dneiper-Donets Basin. The abyssal, abiotic theory of oil formation has received more attention in the West recently because of the work of retired Cornell astronomy professor Thomas Gold, who is known for the development of several theories that were initially dismissed, but eventually proven true. However, Gold has also been wrong. He was a proponent of the "steady state" theory of the universe, which has since been discarded for the "Big Bang" theory. Gold's theory of oil formation, which he expounded in a book entitled "The Deep Hot Biosphere", is that hydrogen and carbon, under high temperatures and pressures found in the mantle during the formation of the Earth, form hydrocarbon molecules which have gradually leaked up to the surface through cracks in rocks. The organic materials which are found in petroleum deposits are easily explained by the metabolism of bacteria which have been found in extreme environments similar to the Earth's mantle. These hyperthermophiles, or bacteria which thrive in extreme environments, have been found in hydrothermal vents, at the bottom of volcanoes, and in places where scientists formerly believed life was not possible. Gold argues that the mantle contains vast numbers of these bacteria. The abiogenic origin of petroleum deposits would explain some phenomena that are not currently understood, such as why petroleum deposits almost always contain biologically inert helium. Based on his theory, Gold persuaded the Swedish State Power Board to drill for oil in a rock that had been fractured by an ancient meteorite. It was a good test of his theory because the rock was not sedimentary and would not contain remains of plant or marine life. The drilling was successful, although not enough oil was found to make the field commercially viable. The abiotic theory, if true, could affect estimates of how much oil remains in the Earth's crust.
The abiogenic origin theory of oil formation is rejected by most geologists who argue that the composition of hydrocarbons found in commercial oil fields have a low content of 13C isotopes, similar to that found in marine and terrestrial plants; whereas hydrocarbons from abiotic origins such as methane have a higher content of 13C isotopes. In an April 2002 letter published in the science journal Nature, some researchers from the Stable Isotope Lab at the University of Toronto reported their analysis of the Kidd Creek mine in Ontario. An unusual ratio of 13C isotopes and the presence of helium provided evidence of hydrocarbons with abiotic origins, but they argued that commercial gas reservoirs do not contain large amounts of hydrocarbons with a similar signature. Gold and other geologists who argue that there are significant amounts of oil from abiotic origins maintain that as oil seeps up through the layers of Earth closer to the surface, it mixes with oil from biological origins, and takes on its characteristics.
Courtesy: MosNews
NEWS BRIEF
NATIONAL
OIL & GAS
Upstream
August 15, 2006. GAIL (India) Ltd has estimated reserves of 5.7 tcf to 10 tcf of natural gas in the three Myanmar discovered gas fields of Shwe and Shwe Phyu in Block A-1, and Mya field in Block A-3. The total estimated gas initially in place has been certified by Gaffney Cline and Associates (GCA). GAIL along with consortium partners, Daewoo International Corporation, ONGC Videsh Limited (OVL) and KOGAS are carrying out exploration activities in Block A-1 and A-3 in Myanmar. The recently concluded feasibility study for field development has forecast that the three fields from A-1 and A-3 can produce about 16 million cubic meter of gas per day for 20 to 25 years. The first commercial gas production is expected to commence in mid 2010.
GAIL holds participation interest in 12 exploration blocks, including two NELP-I blocks, six NELP-II blocks, two NELP-IV blocks and two 'Farm-in Blocks'. GAIL acquired farm in block A-1, Myanmar offshore, which has area of 3,885 square kilomitres with water depth between 50 metres to 200 metres. GAIL holds 10 per cent participating interest in the block, while 10 per cent is held by KOGAS, 20 per cent is held by OVL. South Korea based Daewoo International Corporation, the operator of the block, has 60 per cent participating interest.
3 firms in race for advisor's job for strategic oil reserves
August 13, 2006. The government is inching towards building strategic oil reserves in the country. Taking one such step, Engineers India Ltd (EIL), which is the advisor for Indian Strategic Petroleum Reserves Ltd (ISPRL), has received response from global consultancy firms for the project. Three consultancy firms - one each from the US, France and Sweden - have been shortlisted. EIL had invited bids for a back-up consultant to oversee the setting up of three tanks to store emergency crude oil stocks of five million metric tonnes per annum (MMTPA). The Government has identified two port cities to build the three tanks.
GSPC shortlists five oil cos to pump out KG gas find
August 11, 2006. Gujarat State Petroleum Corporation (GSPC) has short listed five multinational gas majors from among the dozen which bid for a stake in the company’s KG basin block where it claimed to have struck a huge gas reserve last year. The gas reserve in the block is estimated at 20 tcf and valued at over $50 billion. Five companies -Chevron, British Gas, ENI, British Petroleum and Royal Dutch Shell have been shortlisted by GSPC from among 14 companies for partnering in KG-OSN-2001/3 block.
Cairn Energy eyeing more assets in India
August 10, 2006. UK's Cairn Energy Plc is looking for more assets in India, where it has struck huge oil reserves and expects to submit development plans for two fields. Cairn tied up funds totalling $1 billion for exploration in its block in India's northwestern state of Rajasthan. The block is estimated to hold more than 3.5 billion barrels of oil. The company aimed to submit development plans for its Bhagyam and Shakti fields in the block by August 2007.
Cairn has already received government approval to develop its Mangala, Aishwariya, Saraswati and Raageshwari fields in Rajasthan. At currently projected output, Cairn's Rajasthan project would represent about a quarter of India's domestic production when it comes onstream in 2008, and 8 per cent of its oil imports from 2004 levels. About 90 per cent of Cairn's market value of 3.3 billion pounds ($6.3 billion) is derived from the potential of its Indian operations. Cairn was also testing the potential of the natural gas discovered in the block, which would be consumed internally when production starts in 2008.
Downstream
August 11, 2006. Indian Oil Corp (IOC) plans to offer Kuwait Petroleum Corp (KPC) a stake in an upcoming refinery at Paradip in Orissa and a naphtha cracker unit at Panipat, Haryana. IOC has indicated its willingness for participation of KPC in its grassroot integrated (15 million tonnes) refinery- cum-petrochemical complex at Paradip as well as in naphtha cracker and downstream polymer complex at Panipat.
KPC's equity participation would minimise IOC's risk involved in the project, as the Kuwaiti firms' international experience in pursuing such mega projects would benefit the Indian company. IOC had executed a memorandum of understanding with KPC in March 2006 for cooperation in trade of hydrocarbons, upstream oil and gas projects, downstream oil projects, research and development and training in India, Kuwait and in any other third country.
HPCL acquiring land for Vizag unit expansion
August 11, 2006. HPCL is actively taking steps to acquire necessary land for capacity expansion of its refinery here from 7.5 million tonnes per annum (mtpa) to 15 mtpa. It is acquiring the land from the Visakhapatnam Port Trust. The expansion project entails an outlay of Rs 8,300 crore and is to be executed in a span of 3-4 years. The will be completed by 2010.
RIL asks state oil firms to fuel its outlets
August 10, 2006. Reliance Industries Ltd has asked the petroleum ministry to direct state-owned oil companies to supply fuel to its 1,250 retail oil outlets at prices applicable to PSU dealers. It had earlier too sought a compensation from the government for losses on fuel sales, but the demand was rejected by the ministry. In a letter to the ministry, Reliance said such an arrangement would not have a financial impact on the government and prevent closure of its outlets. Reliance, which has invested Rs 5,500 crore in its oil retail foray, said a denial of the support would only shift volumes from its outlets to those of oil PSUs, which anyway receive a subsidy by the government.
After its May fuel price, Reliance’s diesel sales plummeted to 0.4 million tonne per annum from 5 mtpa. Similarly, petrol sales dipped to 0.26 mtpa from 0.6 mtpa. Currently, Reliance loses about Rs 4 a litre on petrol and Rs 6 a litre on diesel despite pricing the two about Rs 2.50 a litre higher than state-owned oil marketing companies (OMCs). The OMCs are compensated for losses due to under-pricing of the two fuels through a combination of oil bonds issued by the government and discounts from upstream companies like ONGC and OIL. The company wanted the support only as an interim arrangement. Oil PSUs give Railways a discount of Rs 1.20 a litre on diesel sales. Reliance does not want a sales discount. It was only asking for a discount on margins. Oil PSUs sell 2.1 mtpa of diesel to Railways.
Transportation / Distribution / Trade
NTPC ties up gas from spot market
August 16, 2006. NTPC Ltd is in the process of sourcing gas in the spot market to increase generation at its gas-based stations. The company has tied-up supply of 5 million metric standard cubic metres per day of LNG from Shell, GAIL India Ltd and Gujarat State Petronet Ltd (GSPL) through spot purchase. This follows a recent tie-up with Petronet LNG for 1 mmscmd of gas for a period of 70 days. With no end to its ongoing gas-supply dispute with Reliance Industries Ltd row in sight, the company is planning to stay active in the spot market to purchase gas.
The Shell gas supply is lower than GAIL price, with the variable charges for Anta, Auraiya and Dadri pegged at Rs 4.07, Rs 4.16 and Rs 4.11 per kWh respectively for Shell gas and Rs 4.50, Rs 4.73 and Rs 4.17 per kWh respectively for GAIL gas. NTPC has been facing a critical situation due to low availability of natural gas for its gas-based plants. The demand supply gap of natural gas for NTPC's gas-based power stations at Anta, Auraiya, Dadri, Faridabad, Kawas and Jhanor-Gandhar has been on the rise. As against NTPC's requirement of around 15.4 mmscmd at 90 per cent PLF, the supplies from all sources were only of the order of 10.91 mmscmd last year, reducing the PLF level to around 60 per cent.
The lower PLF has been affecting the tariff competitiveness of NTPC's plants since under the current regulations, the utility is required to demonstrate a minimum availability level of 80 per cent to achieve full fixed charges. The additional availability of gas is expected to bring down generation cost for the utility since it is currently `mixed-firing' its gas-based stations using expensive naptha and high speed diesel for operations alternatively with gas. Due to the high cost of generation on naphtha and HSD, beneficiary States in the northern region have been mounting pressure on the utility to increase its natural gas-based generation and minimise usage of naptha and HSD as fuel.
Commissioning of LNG terminal at Ratnagiri delayed
August 10, 2006. The Government said that the commissioning of the LNG receiving terminal at Ratnagiri has been delayed and that long-term LNG supplies for this terminal are in the process of being tied up by GAIL (India) Ltd. GAIL is laying the Dahej-Uran pipeline (DUPL) and Dabhol-Panvel pipeline (DPPL) with a view to supplying natural gas to Ratnagiri power project from the Dahej LNG terminal. The DUPL and DPPL projects are expected to be commissioned on March 31, 2007 at an estimated cost of Rs 1,830 crore and Rs 1,326 crore respectively. Petronet LNG Ltd, which owns the Dahej LNG Terminal, is in the process of tying up short-term LNG supplies for the project from Qatar.
It is envisaged that once the Ratnagiri LNG terminal is commissioned - with all associated facilities and supplies for the terminal tied up - gas supplies to the power project could be received directly through Dahej terminal.
August 10, 2006. The piped domestic gas project in Agra is suffering because of the civic authorities in the town dragging their feet over it. The project has been developed by Green Gas Ltd, a joint venture company of Indian Oil and GAIL. Originally slated to be completed by the end of this year, the deadline for the completion of the project is now March 2007. Green Gas Ltd is to set up a CNG station in the Tajnagri Phase II area of Agra, where it has to supply gas to 20 hotels.
After this, the pipeline is to be extended along side the river Yamuna, towards the heart of the city, where initially, 1,000 domestic cooking gas connections were to be allotted through the pipeline, bringing them the gas at significantly cheaper rates. But as the civic authorities have not given the necessary clearances for digging the roads for laying the pipeline, and as a result the project is yet to begin, even after a delay of almost three months.
Keeping the delay in mind, Green Gas Ltd has now decided to extend the project deadline up to March, while the process of allotting gas connections will be completed by June. Besides domestic cooking gas, the company has also begun preparations to provide automobile CNG to vehicles in Firozabad & Mathura, besides Kosi (about 25 km from Agra), where one CNG station will be opened in the initial stages and the number of stations could be raised on demand.
August 10, 2006. Petronet LNG Ltd, the country's first liquid gas importer, will offer up to 10 per cent stake in the company to a strategic investor who is willing to supply LNG to it. Petronet is scouting for more LNG to meet energy needs of the country. It plans to allot a 100 million dollar foreign currency convertible bonds (FCCBs) issue on a preferential basis to any company willing to sign with Petronet on a long-term LNG supply contract.
Petronet may allot the FCCB to Qatar, which has signed up with the company to supply 7.5 million tonne per annum of LNG. RasGas of Qatar is already supplying 5 mtpa of LNG and another 2.5 mtpa would be added to the supply from July-September of 2009. Petronet plans to issue foreign currently convertible bonds this quarter and bond holder would have the option to convert it into equity within the first five years. Qatar would decide between RasGas, which supplied LNG to Petronet at almost $2 per million British thermal unit (mbtu) discount for the first five years, Qatar Gas and Qatar Petroleum for the allotment of FCCBs.
Petronet plans to invest Rs 4,000 crore to expand capacities of its Dahej import terminal to 12.5 mtpa from existing 5 mtpa and build a new 2.5 mtpa plant at Kochi in Kerala. Of the total capex, almost Rs 1,200 crore would come in as equity under a 70:30 debt equity ration. While most of it would be generated from internal resources, there would be a gap of about Rs 450 crore.
CPCL to pick up stake in SPV for Chennai-Bangalore pipeline project
August 9, 2006. The Chennai Petroleum Corporation Ltd (CPCL) will pick up a stake in the company that would put up the Chennai-Bangalore pipeline project. The 290-km-long pipeline, to carry petrol, diesel and kerosene from CPCL's refinery in Chennai to "Bangalore-fed areas", will be put up by a special purpose vehicle created by CPCL's parent company, Indian Oil Corporation. CPCL will invest up to Rs 50 crore in the project.
The Chennai-Bangalore pipeline is the second of two pipelines to evacuate the products of the refiner. The other one is the 683-km Chennai-Tiruchi-Madurai pipeline, which became operational in June. CPCL is on a mini-expansion project under which its capacity will increase by 1.7 million tonnes from the present 9.5 MT. The Rs 330-crore project consists of two parts - de-bottlenecking of the Unit-III at a cost of Rs 130 crore, which will add 1 MT, and revamping of the old Unit-I at a cost of Rs 200 crore, which will raise capacity by another 0.7 MT.
Once the expansion project is through the need for easy evacuation of the products will be more acutely felt. The Chennai-Bangalore pipeline will help reach the products to consumption points.
Policy / Performance
August 15, 2006. The government has given the green signal to Oil and Natural Gas Corporation’s (ONGC) petrochemical plans but has discouraged India’s largest oil and gas producer from foraying into fuel retailing. The ministry said the company had been permitted to set up units to manufacture petrochemicals from residue from its refineries and by using natural gas. The Rs 4,900 crore aromatic complex and oilfield complex that ONGC planned to set up adjacent to its subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL), and the Dahej petrochemical complex in Gujarat were natural extensions to getting the maximum value out of refinery produce and natural gas respectively.
Selling of petrol and diesel was a losing proposition and compensation in the form of oil bonds for selling fuel below the cost of production was only available to public sector oil retailers - IOC, HPCL, BPCL and IBP. No such compensation mechanism is available to new players in this business, including ONGC. ONGC had been granted the licence to sell petrol and diesel and the company had envisaged setting up 1,100 petrol pumps but now the government was keen that it focus on exploration and production and not enter into a losing business. ONGC had one petrol pump in Mangalore and had identified 45 locations from Dehradun to Ahmedabad for retail outlets.
ONGC and its subsidiary, Mangalore Refinery and Petrochemicals Ltd (MRPL), had plans set up petrol pumps as part of its plans to diversify into downstream fuel retailing, petrochemicals and liquefied natural gas imports to become an integrated oil and gas company with a turnover of $50 billion within the next few years.
August 15, 2006. The government has refused to step in to resolve private sector oil companies’ woes on fuel retail losses. RIL and Essar Oil sell petrol and diesel in their retail outlets at a price higher compared with state-owned companies like Indian Oil, HPCL and BPC L. Ministry said private oil firms were at liberty to decide the price as well as quantity of all products, including petrol and diesel sold through their retail dealers. Accordingly, they make profit or loss. While the government - through the navratana oil PSUs - ensures availability of petroleum products at affordable prices across the country, it has no control on pricing of petroleum products by the private sector.
Seeking a level-playing field, private sector oil firms had proposed various options to the government like including them in the subsidy share scheme. Under the subsidy share scheme, upstream oil PSUs ONGC, GAIL and OIL, partially make good the losses incurred by state-owned OMCs for selling petrol, diesel, LPG and kerosene at less-than market-determined prices. Other options were to issue bonds to private sector oil companies and even asking oil PSUs to supply fuel at their outlets at a discount. Reliance had recently said the ministry can direct oil PSUs, in an interim measure, to supply fuel at its retail outlets.
While PSU oil firms provided subsidy on kerosene and LPG, of which a large part is borne by them, the private sector was under no such obligation. In fact, full price is paid by oil PSU firms for these products to the private sector at refinery gate.
Truckers ask TN Govt to retain power to fix oil prices
August 13, 2006. The goods transport industry in the State has expressed apprehension that any authority given to the oil companies to revise the fuel prices every month would deal a body blow not only to the transport industry but also to the agriculture and fisheries sectors. The industry wants the Government to retain the authority to fix the fuel prices so as to save the transport sector.
The truck operators had already been hit by the increase in diesel cost and any power given to the oil companies to decide the fuel prices would aggravate the situation further. The oil companies would base their decisions on "profit motive" and would not consider the impact of fuel price hike and this would ultimately affect the operators. The goods transport sector was already reeling under the impact of a host of adverse factors including increase in the prices of diesel, tyre and insurance premium.
`Crude prices to persist at current levels till ‘07'
August 12, 2006. PFC Energy, a global oil and gas consultancy firm, expects slight softening of crude oil prices next year. The forecast, however, may not hold good if geo-political tensions witness any major escalation. Based on current consumption patterns and global economic forecasts, expect oil to remain near current levels through 2007. In fact, signs that the US economy is already beginning to slow down may lead to a slight softening of oil prices next year.
The recent anomaly in Brent-WTI differential, arising due to sudden spurt in Brent to over and above WTI prices, is expected to be a "temporary phenomenon", related to maintenance taking place in the North Sea. As Nigerian crude is the easiest substitute for Brent in European refineries, the outrages in Nigeria have amplified the impact of seasonal maintenance schedules, causing Brent prices to rise above those of WTI.
August 9, 2006. Oil companies may have to fork a whopping Rs 1000 crore as excise dues on LPG and Kerosene for the period between April ’02 and March ’06 if the finance ministry’s claims go through. Oil companies which are reeling under huge losses on the sale of these fuels are resisting the government’s move. The Central Board of Excise and Customs (CBEC) has set up a committee with representatives of ministry of petroleum and natural gas to look into the issue of valuation of LPG and kerosene. The committee is likely to submit the report by mid-September.
Details have been sought from the companies about the practices followed by the oilcos to ascertain the total incidence of duty. The whole issue revolves around the discrepancy in the pricing structure of some of the petroleum products. LPG and kerosene are highly subsidised products and there is a huge difference between the refinery gate price and the retail price of the cooking fuel.
Oil marketing companies have resisted paying excise on the refinery gate price as they sell the fuel at a much lower price. The finance ministry calculate the tax incidence on the refinery gate price which has been at import parity levels. LPG today sells at a price which is lower by almost Rs 124 per cylinder than the refinery gate price. The removal of excise levies on both the products has also put an end to the tax levy differences. The issue belonging to the administered price regime owes its genesis to the new section 4 of Central Excise Act, beginning July, ’00. With the advent of the new section, oilcos had to pay taxes based on the transaction value of the product.
Fuel bill may not go up just yet - Min
August 9, 2006. The petroleum ministry has sought an excise cut of Rs 1 per litre on petrol and diesel to avoid the fuel price hike. Prices of petrol and diesel will have to be hiked by Rs 5.50 and Rs 6.00 a litre, respectively, to bring them to trade parity levels. The petroleum ministry has thus put the ball in the finance ministry’s court and has saved itself and the oil companies from taking the unpalatable decision of a price hike.
Global crude oil prices have crossed the $76 mark and has been holding steady at this level for some time now. Oil companies, who had pegged the retail prices at a crude price of $63 per barrel, are incurring huge losses on petrol and diesel sales. The petroleum minister has written to the finance minister seeking a Re 1 cut in specific duties on the two products.
While the specific excise duty on petrol is Rs 13 a litre, it is Rs 3.20 a litre on diesel. The finance ministry is considering the proposal. Although oil companies could go ahead and increase prices, it would be very difficult to hike retail fuel prices yet again. Special measures have to be taken to cushion the impact on consumers. The duty cut, if accepted, would result in a revenue loss of around Rs 5,000 crore to the finance ministry. The finance minister had gone in for a duty rejig in Budget ’06-07, which was largely revenue neutral.
It is argued that high crude oil prices would have yielded high revenues on the customs side and some part of the losses can be set off against this. Oil companies have been making a case for price revision given the huge toll it is having on their balance sheets. At least two of the three major oil retailers - HPCL and BPCL - have reported losses in the first quarter. Market leader IOC managed to avoid losses only due to a stake sale in ONGC. On an average, oil marketing companies are clocking losses of Rs 100 crore a day.
POWER
Generation
August 15, 2006. NTPC Simhadri thermal plant has generated 2,663.42 million units till now during the current financial year at a plant load factor of 90.96 per cent. NTPC was contributing 27.68 per cent of the power generated in the country through its 14 coal-based plants, seven gas-based ones and three joint venture projects. It had the installed capacity of 25,454 MW, which would rise to 66,000 MW by 2017.
August 14, 2006. NTPC Ltd is on the verge of signing it’s biggest power generation project, Rs 20,000-crore hydel project at Italin 4,000 MW in Arunachal Pradesh. The state government has agreed to sign an agreement with the company to set up another 500 MW of hydel generation capacity at another location. The MoU with the state government and NTPC expected to be signed shortly. This is the second major boost for developing hydropower in the state after Arunachal Pradesh’s arrangement with National Hydroelectric Power Corporation for setting up 10,500 MW of hydropower capacity.
NTPC currently has a hydel project that is under construction at Koldam 800 MW in Himachal Pradesh, which is expected to completed by 2008. The single largest project NTPC has executed is the thermal-based Talcher 3,000 MW project in Orissa. In a separate development, the Arunachal Pradesh government has also agreed to enter into an agreement with North Eastern Electric Power Corporation for setting up 1,000 MW of hydropower capacity in the state with an estimated investment of around Rs 5,000 crore.
NTPC, NPCIL join forces for 2000 MW nuclear power station
August 14, 2006. The country’s largest power generation company has just decided to promote a 2,000MW nuclear power station in partnership with Nuclear Power Corporation of India (NPCIL). The project is proposed to be executed during the 12th Plan period. NTPC has roped in nuclear experts from the Bhabha Atomic Research Centre (BARC) and Atomic Energy Commission (AEC) as consultants for its high-stakes nuclear foray. The AEC is under the Department of Atomic Energy (DAE). The consultants are scheduled to submit their report soon.
August 11, 2006. After the National Thermal Power Corporation (NTPC)-Steel Authority of India Ltd (SAIL) joint venture power outfit, it is now the turn of the Damodar Valley Corporation (DVC)-SAIL joint venture company to increase 500 MW capacity through a greenfield project. The board of directors of Bokaro Power Supply Company Pvt Ltd, the 50:50 joint venture between SAIL and DVC, has already approved the project.
The proposal would now be placed before the respective boards of the two joint venture partners for formal clearance. This is expected by the end of this month. The Bokaro Power Supply Company was formed in January 2002 and it is now managing a 302-MW generation unit and 1880 tonnes per hour steam co-generation facilities of Bokaro Steel Plant. The proposed new power plant would have two units of 250 MW capacity each and would be catering mostly to the power demands of Bokaro Steel Plant, Durgapur Steel Plant and IISCO plant. The greenfield project would be spread over 750 acres and would be set up in Jharkhand. The total cost would approximately be Rs 2,200 crore and would be funded through debt and equity.
August 9, 2006. NTPC inaugurated 1,000 MW Stage II of the Rihand Super Thermal Power Project in Uttar Pradesh. With this, the overall capacity of the Rihand station has reached 2,000 MW. The new power generation facility will bolster the availability in the Northern Grid, with Uttar Pradesh, Haryana, Punjab, Rajasthan, Jammu and Kashmir, Uttaranchal, Himachal Pradesh, Delhi and Chandigarh slated to benefit from the project.
Transmission / Distribution / Trade
Areva T&D bags $5.4mn deal
August 15, 2006. The Chennai-based Areva T&D has been awarded the contract to build the prestigious national load dispatch centre (NLDC) by the Power Grid Corporation of India (PGCIL). The Rs 25 crore project, which will form the apex of the country’s power grid system, is expected to be completed by June 2008. The other tiers, regional and state level load management systems are already in place. The western region load management centre, which is the largest, was inaugurated in early April. While Areva will execute the work on the main the load dispatch centre, the communication links between the five regional centres and national level load management centre will be handled by the respective companies handling the communication networks.
The project includes the planning, design, engineering and supply of state-of-the-art hardware and software for implementation of the NLDC. The NLDC will schedule and dispatch electricity to five Regional Load Dispatch Centres. The NLDC project is in line with the ministry of power’s decision to move towards a full-fledged integrated National Power Grid in the country, to enable optimum scheduling and dispatch of electricity among all the five Regional Load Dispatch Centres, as per the Electricity Act, 2003.
NLDC’s functions include supervision of the five RLDCs, inter-regional links to ensure stability and efficiency of the national grid, scheduling and dispatch of electricity over inter-regional links and coordination with RLDCs for achieving maximum economy. The NLDC system platform will be integrated at AREVA T&D’s automation business unit in Noida, New Delhi.
India gets power from Bhutan's Tala project
August 15, 2006. Power from the 170 MW first generating unit of the Rs 4,124-crore Tala project in Bhutan has started flowing into India from the beginning of the month with the remaining five units of the 1,020-MW project slated for commissioning shortly. The beneficiaries include northern region States of Uttar Pradesh, Delhi, Punjab and Jammu and Kashmir, according to allocation from the project finalised by the Centre.
The project on the Wangchu river in Bhutan, downstream of the operational Chukha Hydroelectric project, is funded entirely by the Union Government with 60 per cent of the cost as grant and 40 per cent as loan at 9 per cent. The loan would be repayable in 12 equal annual instalments, the first payment starting July 31, 2006 - the date of the commencement of the project's commercial operation. The total energy output is pegged at 4,865 million units in an average year. The project includes a 92-metre-high concrete dam, a 22.2-km-long head race tunnel, and an underground power house with six generating units of 170 MW each, and three 440 kV single-circuit transmission lines to the India-Bhutan border.
The original commissioning schedule of September 2005 was later set to June 2006, mainly on account of delay in the excavation of the head race tunnel, which took about 20 months to construct instead of the original estimate of two months due to adverse geological conditions.
A bilateral agreement for the execution of the project was signed in mid-1996. Bhutan currently supplies 270 MW from its Chukha Project (336 MW) and 40-45 MW from Kurichhu Hydro Project (60 MW) to the eastern region States. Power trading firm PTC Ltd is involved in getting power from the projects, including the Tala project.
Essel may buy coal mine in Indonesia
August 15, 2006. Essel Mining & Industries Ltd, a subsidiary of the $6.5 billion Aditya Birla Group, is looking to acquire wholly or partially a coal mine in Indonesia and has shortlisted about a dozen mines in the South East Asian country, for which it is willing to spend $80-150 million. The company has shortlisted about 2-3 investment banks to advise it in the the acquisition process and will choose its partner in the next couple of weeks. The Aditya Birla group is actively seeking to acquire a coal mine in Indonesia and will appoint an investment bank to advise us in the acquisition in the next couple of weeks. The Aditya Birla Group already has five entities in Indonesia that are primarily involved in the production of yarns, viscose staple fibres and carbon disulphide. The mining company, which has operations around Barbil in the Keonjhar and Sundergarh districts of Orissa, will produce about seven million tonnes of iron ore with an Fe content in the range of 63-65 per cent in this financial year
Govt may sell 24 percent in Power Grid, other cos
August 14, 2006. The government will reduce its 24 per cent stake in some key public sector power companies through initial public offers. The move will help power companies to raise nearly Rs 3,800 crore through IPOs, expected to hit the market this fiscal. The Common Minimum Programme says that PSUs will be allowed to raise capital from the market. When the capital that is issued is bought by the investing public, that brings down the government’s stake, naturally. In recent years, investors have shown a good appetite for power sector stocks.
Therefore, the power ministry has sought the Cabinet Committee on Economic Affairs’ (CCEA) approval for diluting 24 per cent government’s equity in Power Grid Corporation of India (PGCIL), National Hydroelectric Power Corporation (NHPC) and Rural Electrification Corporation (REC). It has also sought to offload 10 per cent promoter equity in North-Eastern Electrification Power Corporation (NEEPCO).
PowerGrid, NHPC and REC are aiming to mop up Rs 870 crore, Rs 2,500 crore and Rs 156 crore, respectively through the proposed IPOs. NEEPCO, however, plans to raise Rs 225 crore through its offer. Government sources have confirmed that the IPOs of power PSUs are being processed for approval. The IPOs are likely to hit the market in the last quarter of this fiscal.
The money generated through the IPOs will help the companies to fund their much-needed infrastructure expansion. Unlike in disinvestment, IPO-raised funds could be used by the companies as per the direction of their boards.
NTPC's 6 gas stations hit by supply disruption
August 9, 2006. NTPC Ltd's six gas-fired power stations in the North and the West are facing fuel supply disruptions following the flooding at ONGC's Hazira gas complex. The company is exploring the possibility of using liquid fuel (naphtha) to counter the gas shortage if the situation persisted. The projects affected are the 645-MW Kawas and the 648-MW Jhanor-Gandhar projects in Gujarat, the 652-MW Auraiya and 817-MW Dadri projects in Uttar Pradesh, the 413-MW Anta project in Rajasthan and the 430-MW Faridabad station in Haryana. The plants are running at around 40 per cent capacity in light of the fuel supply disruptions.
India for JVs in coal projects, seeks tech transfer
August 15, 2006. In a bid to overcome its coal crisis, India has sought technology transfer on extraction of steep seam coal from coal rich nations, besides proposing joint ventures in coal drying and fine coal beneficiation to the coal mining task force (CMTF). A total of 16 projects including seven from India have been finalised for action in the draft action plan, at the end of the two-day meeting of the CMTF here recently. Coal shortage in India has been plaguing the power and coal sectors. Domestic shortfall of coal for 2004-05 was estimated at over 30 million mt. Clearly, production has not been able to keep pace with growing demand, not only from power plants, but also from other sectors like sponge iron, following the upturn in the steel industry.
The coal stock of power plants, which was at 14.8 million mt in 2001-02, stood depleted by 47 per cent to just around 8 million mt in September 2004. These 16 projects included economic modelling of coal beneficiation, information sharing on coal processing, coal drying, waste coal (reject) management, thick seam mining, steep seam mining and underground coal gasification. The CMTF has been constituted by the policy and implementation committee (PIC) of the Asia-Pacific Partnership on Clean Development and Climate comprising nations like USA, India, Australia, China, Japan and South Korea.
Once approved by the PIC in its meeting in South Korea in October next, projects proposed by India and other nations would be ready for implementation. The Indian coal industry is likely to benefit immensely through these projects. The draft action plan by CMTF also finalised recommendations on increasing efficacy of workforce planning, health and safety, practices on sustainable coal development, dousing coalfield fires, reclamation of legacy mines, increasing recovery and use of coal bed methane. With a view to promoting Underground Coal Gasification (UCG) in India, the task force pointed out that the UCG “promises a viable alternative to harness vast energy potential from deep seated coal reserves in an environment friendly manner in future.
The country has sought technology transfer and information sharing on “overburden slope stability” and “extraction of steep seam coal” and proposed at the CMTF meeting that it would try and explore the possibility of joint ventures in projects like coal preparation technology, mining techniques, fine coal beneficiation and waste coal management.
`BHEL has potential in clean coal tech'
August 14, 2006. Bharat Heavy Electricals Ltd (BHEL) has the potential to become a world leader and a technology provider in the field of clean coal technology. BHEL could also become the nucleus of coal technology research and shape the future of coal technology worldwide. BHEL's growth in the future would be technology-driven. On the strength of its many decades of coal technology research and expertise across the entire spectrum of Indian coals, BHEL could easily emerge as a technology provider in this field by adopting a more proactive approach and by focusing its engineering and R and D efforts towards the development of new product designs and product variants.
11th Plan power capacity may constrain growth
August 14, 2006. PM's energy panel says 62,000 MW will not sustain 8-9% GDP growth. The Prime Minister’s Energy Coordination Committee (ECC) has questioned the 11th Five-Year Plan projection of 62,000 MW capacity addition in the power sector. The committee has pointed out that sustaining an 8-9 per cent economic growth would require a capacity addition of 75,000 MW if the backlog in the 10th Plan (2002-07) is taken into account. This is 13,000 MW more than the 62,000 MW projection made for the next Plan period. The power projects under construction, expected to come on stream during the first four years of the 11th Plan, may add up to around 25,000 MW of capacity. In this scenario, for 50,000 MW capacity the work on these projects must be started by 2007. The apex committee is also of the opinion that the 11th Plan will need around Rs 2,50,000 crore investment in transmission and distribution if the additional power generated is to be absorbed.
German agency to assist REC in energy projects
August 10, 2006. The Ministry of Power, the Rural Electrification Co-operation (REC) and Germany's KfW Entwicklungsbank (Development Bank) have signed an agreement to execute Rs 421 crore energy efficiency projects in the rural areas. REC will use the loan for implementing high voltage distribution system in place of conventional low voltage distribution system. This will reduce technical losses and power theft. Farmers are likely to benefit from reliable power supply by reduced voltage fluctuations and transformer failures. Further, the move will have a positive environment impact by reducing carbon dioxide emissions by atleast 65,000 tonne per annum.
The two governments had launched an Indo-German Energy Forum in April this year to promote co-operation in the energy sector. This loan is the first to be signed by KfW's 'Special Facility for Renewable Energies and Energy Efficiency', on behalf of the German government. The facility was announced by the German government in 2004 to provide up to Rs 2,950 crore to spread the use of renewable energy and improve energy efficiency world-wide.
August 9, 2006. Essar has sought the status of a SEZ for its proposed 1,500-MW gas-based power plant project in south Gujarat. This proposed power SEZ, to sprawl over 180 hectares, would meet the power requirements of Essar’s steel SEZ coming up near Hazira. The power plant was to be a part of the steel SEZ at Hazira and the company had identified two locations in its original application. But as per the rules for a sector-specific SEZ, the developer can cite only one location and the land must be contiguous.
The status of this power SEZ would be clear only after it is discussed at the meeting of board of approvals, ministry of commerce, scheduled on August 8, ’06. The power plant would require Essar to invest close to Rs 4,000 crore. The steel SEZ at Hazira would house the Rs 6,500 crore steel unit for long and flat products and Rs 2,000 crore plate mill project. Both these projects are under the aegis of Essar Global. The company had imported the steel plant from I&I Steel, Korea.
Essar’s multi-product zone proposed to be set up over an area of 2,470 hectares near Jamnagar also figures in the list of eight SEZ proposals to be discussed for formal approval in the meeting. Besides, Essar’s two proposals, Gujarat’s industry department officials are likely to discuss SEZ plans of five other companies. These include Suzlon’s hi-tech engineering SEZ near Vadodara, Sterling Group’s multi-product zone at Jambusar, Jubilant Organosys’s chemicals zone near Bharuch and GIDC’s ceramic zone at Jhagadiya near Bharuch. A proposal each for a multiproduct zone and steel products in Kutch is also likely to be discussed.
August 9, 2006. The state-run NTPC Ltd has projected that funds would not be a constraint to add 21,941 mw in 11th Plan and 24,208 MW in 12th Plan. With the proposed additions, the company will have a total installed capacity of 66,000 MW by 2017. NTPC’s total investment is expected to a whopping Rs 2,45,897 crore in capacity addition and also in coal mining/gas souring, joint ventures, renovation and modernisation and other related activities. The company may go in for domestic borrowings of over Rs 45,000 crore in 11th Plan and around Rs 23,000 crore in 12th Plan. NTPC’s internal committee has suggested that the company should discuss with financial institutions and examine the feasibility of adopting debt equity ratio of 75:25 or 80:20 for its future projects. At present the company is carrying out project developments on 70:30 debt equity ratio.
As against NTPC’s 10th Plan capacity addition target of 9160 MW actual achievement is likely to be 7610 MW. For 11th Plan, NTPC had earlier envisaged capacity addition of 17052 MW, which was later revised to 17042 MW.
INTERNATIONAL
OIL & GAS
Upstream
Sinopec & ONGC buy into Colombia's Omimex
August 15, 2006. Chinese and Indian state oil firms have teamed up to invest $800 million in a 50 per cent stake in Omimex de Colombia. The two Asian heavyweights have been discussing cooperation on global energy deals as their oil import bills expand, and at the start of the year signed five memorandums of understanding. Both OVL and Sinopec are expected to shell out $400 million for picking up 25 per cent each in Omimex. Colombia’s national oil firm Ecopetrol will hold the balance 50 per cent.This is the second successful deal Indian and Chinese companies bid together for. The flagship petroleum companies of India and China, ONGC and CNPC, had earlier bagged a $573-million deal for Petro-Canada’s stake in the Shell-operated Al Furat oilfields in Syria.
Omimex de Colombia produces around 19,800 billion barrels a day - a majority being heavy crude oil. The remaining discovered oil in place is estimated to be over 3 billion barrels and the net proven reserves are pegged at 157 million barrels. OVL and Ecopetrol have recently finalised a memorandum of understanding that sets a general framework of cooperation between the two companies in the Colombian exploration and production sector, and other third countries.
Indonesia to offer new oil exploration areas
August 15, 2006. Indonesia will offer 33 new exploration areas to global and local energy firms in an effort to boost the country's flagging oil production. Bidding will begin on Aug. 28 for the blocks that include five offshore blocks off Natuna Island, seven off Sulawesi and five onshore fields in Sumatra and four in East Kalimantan. The government will close the offers for 21 blocks being offered under direct proposals on Oct. 11 while the deadline for rest being offered by regular tenders is Dec. 26. Indonesia, Asia Pacific's only OPEC member, has been offering new exploration rights and financial incentives for oilfields in a bid to stem a steady decline in production as the country has failed to tap new oilfields fast enough to meet domestic demand. Several global energy firms such as Chevron Corp. and Exxon Mobil Corp. are interested in the new oil exploration areas. There was no estimate of the reserves in the new blocks being offered. Chevron, Exxon Mobil and ConocoPhillips already operate several oil blocks in Indonesia. Indonesia had 8.6 billion barrels of proven oil reserves and about 182 trillion cubic feet of natural gas reserves. Indonesia's crude oil output fell to 887,000 bpd in July a 35-year low and down from 900,000 bpd in June, hit by production problems in several oilfields and maintenance,
Shell’s first gas flows at New Zealand field
August 15, 2006. Royal Dutch Shell Plc, first gas had started to flow from its Pohokura project in New Zealand, which at its peak is expected to produce around 40,000 barrels of oil equivalent per day. This is a significant step in the journey to deliver gas to meet New Zealand's energy needs. Austrian oil company OMV has a 26 percent stake in the field.
Petrobras boosts stakes in two U.S. Gulf blocks
August 15, 2006. Brazil's state oil company Petrobras boosted its stakes and gained operating rights in two fields with oil discoveries in the U.S. part of the Gulf of Mexico. Petrobras America Inc acquired a 26.67 percent stake from BHP Billiton Ltd/Plc in the Chinook field and a 15 percent stake from Hess Corp., thus hiking its participation to 71.67 percent. It also doubled its stake in the Cascade field to 50 percent by buying out 25 percent ownership from BHP Billiton. Devon Energy Corp, which owns the remaining stake in Cascade, also increased its stake.
Total owns the rest of Chinook. Future plans for Cascade include drilling a fourth well. Production from two wells is expected in late 2009. New evaluation wells are planned for Chinook in the near future. Petrobras plans to phase in production systems on the two fields to get the first oil in 2009. Petrobras also was planning to start production from a natural gas field called Cottonwood in early 2007. Petrobras owns 80 percent of the project.
LN Mittal may help OVL’s Kazakh plan sail through
August 14, 2006. ONGC Videsh Limited may use LN Mittal's clout in Kazakhstan to negotiate terms with the Kazakh's national oil company - KazMunaiGaz for a 50 per cent equity stake in the Stapayev oil block in the Caspian Sea. Satpayev is partly discovered oil field, owned by Kazakh's national oil company KazMunaiGaz. The government of Kazkhstan had offered two blocks to OVL last year including Makhambet and Satpayev as part of the bilateral discussions between India and Kazakhstan. Following a detailed due diligence, ONGC evinced interest in Satpayev.
However, the discussions between OVL and KMG did not move ahead as OVL was asked to pay a fee for 'further talks' with KMG on joint exploration and development of the Satpayev block. Besides, KMG was also asking OVL to pay an additional bonus at the exploration stage. OVL was willing to pay a signature bonus after the participating interest was assigned to it but was not ready to shell out any additional bonus at the exploration stage as it has already agreed to meet the entire exploration expenditure. Following the differences between the two sides, OVL was going slow in persuing this opportunity.
Natural gas running low in Indonesia
August 10, 2006. Indonesia is in danger of losing its dominance of the world's market for liquefied natural gas as its fields are running out of gas faster than expected and local politics are deterring new producers from investing in the country. Chevron, the American oil company, supplies gas to the world's largest liquefaction plant, located on the Indonesian part of Borneo Island. The company told the Indonesian government last month that there was not enough gas to meet commitments to customers in Japan, South Korea and Taiwan. Indonesian sales are expected to fall 19 percent this year. Indonesia has been the world's top supplier of liquefied natural gas for three decades. But it has failed to find new supplies of gas just as prices and demand for the cleaner-burning fuel have surged to records. Some buyers are looking elsewhere, like Qatar, cutting revenue and hurting the government's efforts to lower its budget deficit.
Indonesia started exporting liquefied natural gas in 1977. It shipped 23 million tons in 2005, topping Malaysia's 20.8 million and Qatar's 19.8 million. But Indonesia will probably fall to third place next year based on its plans to cut cargoes. Liquefied natural gas is natural gas that has been cooled to liquid form for transportation by ship to markets beyond the reach of pipelines. Import terminals gasify the fuel so that it can be sent through pipelines to customers like factories, power stations and households.
Utilities in Japan, the largest Asian economy, are turning to other markets. Tokyo Electric Power and Tokyo Gas, the largest Japanese power and gas suppliers, have signed up with Royal Dutch Shell's Sakhalin project in Russia to diversify supplies. Osaka Gas is in talks with Inpex, an oil and gas producer based in Tokyo, about joining a $6 billion liquefied natural gas project in Australia. Japan buys 40 percent of the world's liquefied natural gas and depends on Indonesia for a quarter of its imports of the fuel. The gas is part of a strategy to reduce the country's reliance on Middle East oil.
All export contracts from the Borneo plant at Bontang, known as Badak NGL, are up for renewal between 2009 and 2011. Chevron acquired 7 billion cubic meters, or 247 billion cubic feet, of gas in Indonesia, or 1.2 percent of its global gas reserves, when it paid $17.8 billion for Unocal, its rival U.S. producer, last year. The Borneo plant is also supplied by fields operated by Total, based in Paris, and Vico Indonesia, a joint venture between BP and Eni of Italy. Chevron and Vico have both failed to meet production targets over the past two years.
August 2006. Sakhalin Shelf Services has bought the northern Sakhalin port of Moskalvo, which is vital for an ambitious energy project in Russia's Far East. The company had bought port's premises and onshore facilities from regional administration's property management department and would modernize the port. Given further development of Sakhalin-V project, Sakhalin Shelf Services will gradually modernize the port to create a modern cargo terminal in northern Sakhalin to provide supplies for oil and gas production facilities and northern regions of Sakhalin Island. Moskalvo, which is only accessible from early June to early November, takes equipment supplied by Elvari Neftegaz to explore deposits as part of Sakhalin-V. Elvari Neftegaz, set up by project operators Rosneft, Russia's state-owned oil company, and British major BP, will drill at the Kaigansky-Vasyukansky deposit.
Sakhalin-V covers the Kaigansky-Vasyukansky deposit, whose recoverable oil reserves are estimated by Rosneft at 1.2 billion tons (8.6 bln barrels), and Vostochno-Shmidtovsky deposit with estimated recoverable reserves of 411 mn tons of oil and 255 bn cubic meters of gas. Production was launched late last year at 2,200 barrels of oil per day.
Downstream
Alternative energy sources to build ethanol plant in Iowa
August 15, 2006. Alternative Energy Sources Inc. plans to build a 110-million-gallon ethanol plant in Boone County, Iowa, between Ogden and Beaver in the central part of the state. The permitting process will begin with the Iowa Department of Natural Resources, and the company has secured options to buy 625 acres from five landowners. It is expected to start construction in six to nine months and the plant in operation by fall 2008. The company also plans to build additional plants in the Midwest with each plant expected to produce nearly 100 carloads of ethanol per week.
Arab refinery output rises by 600,000 bpd
August 15, 2006. Production from the Arab world's refineries has grown by over 600,000 barrels per day over the past five years, and capacity is set to surge by over 2 million bpd when new projects are completed. The Organisation of Arab Petroleum Exporting Countries' (Oapec) latest report says most of the increase between 2001 and 2005 came from expansion in refineries in Saudi Arabia, Qatar and Kuwait as production in other Arab countries have remained almost unchanged in the absence of new major projects.Saudi Arabia, the world's dominant oil supplier, accounted for the bulk of that increase as its refining output swelled from around 1.79 million bpd in 2001 to nearly 2.12 million bpd at the end of 2005. Kuwait's refinery production surged from 655,000 bpd in 2001 to 930,000 bpd at the end of 2005 while Qatar's refining output rose from 120,000 to 137,000 bpd. The increase pushed the Arab world's total refining capacity from around 6.86 million bpd in 2001 to 7.48 million bpd at the end of 2005.
They include two new major refineries in Saudi Arabia with a combined output capacity of 800,000 bpd. The kingdom also has plans to expand its existing refineries within the country and some of those which it partly owns as joint ventures abroad. The projects will push its total refining output to nearly 3.3 million bpd. Kuwait is also planning to build one of the largest refining projects in the world, with an initial capacity of nearly 600,000 bpd, while the UAE is considering building a third refinery in Abu Dhabi with a capacity of 500,000 bpd.
Qatar is also involved in expansion while Oman has just completed a major refining project in Sohar that will add nearly 115,000 bpd to its refining output. The investments will add around 7.2 million bpd to the existing refining capacity in the Mena region to push the total refining production to nearly 16 million bpd by 2030.
Iran, Indonesia to build JV refinery, petrochemical plant
August 13, 2006. Iran and Indonesia both sides discussed the development of joint economic cooperation particularly, in the energy sector. The Indonesian delegation is interested in cooperation in the petrochemical, oil and gas exploration sectors as well as taking part in the National Iranian Oil Company IT projects. The Indonesians are interested in investing in the energy zone to produce their required fertilizers there and then deliver it to their country. Iran will invest in building of a heavy crude oil refinery in Indonesia. Indonesian oil officials have also expressed their interest for the establishment of a gas condensates refinery in Iran. The two sides also emphasized the joint investment of Iran, Indonesia and Singapore in setting up a petrochemical plant in Iran.
S. Korea Inchon to build $2.1 bn upgrading unit
August 12, 2006. South Korean refiner SK Inchon Oil Ltd. was considering the investment of 1.97 trillion won ($2.1 billion) in new facilities to produce 55,000 bpd of light fuels. The project by SK Inchon Oil, taken over by industry leader SK Corp. this year, was the latest in a range of projects that would add 390,000 bpd to refining capacity in the country by 2010. Five local refiners plan to upgrade their facilities to add 390,000 bpd by 2010. GS Caltex Corp. South Korea's No.2 refiner would spend 1.47 trillion won on upgrading.
Adnoc and CPC to invest $1bn in facility
August 11, 2006. Chinese Petroleum and Abu Dhabi National Oil Company (Adnoc) are planning to jointly invest $1 billion in a downstream petrochemical facility in Abu Dhabi. The plan fits the UAE's strategy of building a local petrochemical production base and is in line with CPC's goal of expanding production outside the fuel-oil segment to increase profitability. The two companies held talks on a potential $6 billion joint investment in Abu Dhabi including a refinery, a cracker and downstream facilities.
Transportation / Distribution / Trade
Russia may supply gas to Singapore
August 15, 2006. Singapore authorities have not ruled out the possibility that Russia will become responsible for gas supplies to their country and to other Asian states as well, Singapore's Minister having signed a cooperation pact on special economic zones with Russia that Asia's demand for energy was growing, and hoped that Singapore would serve as a good base for Russian oil and gas companies to reach Asian markets.
Singapore had launched the construction of a liquefied gas terminal to be completed by 2012. The terminal will help the country diversify gas supplies. As for gas projects of mutual interest two liquefied gas plants underway in Sakhalin and on the Shtokman gas field, both within reach by transport from Singapore.
August 15, 2006. Fuel-hungry Iran has bought several cargoes of gasoline for delivery in September, which oil traders say may mean Tehran is still financing imports, despite a threat to stop and impose politically risky fuel rationing. Iran's reliance on imported gasoline could be a weak point were it subject to international sanctions in a dispute with the West over its nuclear programme. Even without sanctions, the rising cost of the fuel drains away the OPEC nation's oil wealth.
LUKoil to build oil pipeline in Turkey
August 14, 2006. LUKoil is planning to build an oil pipeline in Turkey to supply Europe with refined oil. The president of Russia, discussed the construction an oil refinery in Turkey's Black Sea province of Zonguldak this month said $3 billion could be invested in the facility, which will have planned refining capacity of 60-70 million barrels. A global oil giant, Russia's LUKoil, is planning to supply oil refined at the facility in Zonguldak via an oil pipeline to Izmit bypassing the Bosporus Strait that oil would be transported by tankers to major European and global markets.
Turkey sees the Samsun-Ceyhan oil pipeline as an alternative to oil transit through the Bosporus and Dardanelles straits and a means to avoid a potential environmental disaster from over-use of the shipping channels. Oil transit via the Bosphorus, which divides east and west Turkey, and the Dardanelles in the country's northwest reached 150 mn tons in 2004, up from 65 mn tons in 1996. LUKoil would open its first filling stations in Turkey in September. In Russia, the company owns four refineries and about 1,500 filling stations.
August 10, 2006. Several oil majors and western traders are looking to charter large tankers from South Korea to the US West Coast, apparently to lift crude oil from storage tanks. Although no firm bookings have been made, the volume of inquiries in the market on this route had been growing. BP on Sunday began shutting down its 400,000 barrel-per-day Prudhoe Bay oilfield in Alaska, prompting oil traders to scour the globe for prompt tankers to move oil to the US West Coast, where refiners risk running short of sour crude. South Korea, which produces no crude of its own, has joint oil stockpile deals with Algeria, Kuwait and Norway's Statoil, leasing out its storage tanks in exchange for pre-emptive rights to tap those supplies in emergencies.
Policy / Performance
Oil companies OK Ukraine gas price cap
August 14, 2006. Ukraine's oil businesses have agreed to temporarily cap gasoline prices, amid a dramatic spike in prices that has alarmed consumers and prompted calls for the government to intervene. Retail prices for both gas and diesel fuel have climbed about 10 percent in the past three weeks in Ukraine, reflecting record high world oil prices and increased tariffs from Russia - a major source of Ukraine's fuel. The oil companies representing about 60 percent of Ukraine's fuel market agreed to cap retail gas prices at 4.7 hryvna a liter (93 cents) and diesel prices at 4.1 hryvna a liter (82 cents). The government set the caps, taking into account world oil prices and tariffs, as well as consumers' interests. If fuel stations did not respect the agreement, they would be barred from receiving shipments from refineries.
Sinopec looks to home for gas
August 10, 2006. China's biggest oil refiner, state-controlled Sinopec, is increasing its investment in exploration and production of natural gas at home in an effort to reduce business risks brought about by the rising price of imported oil. Sinopec's oil-refinery business now suffers huge losses as international oil prices steadily increase while the National Development and Reform Commission, China's top economic planning body, which also regulates gasoline prices in the domestic market, is slow to let prices of oil products rise.
Sinopec now aims to exploit up to three medium-sized or large natural-gas finds with reserves of 60 billion cubic meters in northeastern China by 2008. The new gas finds will be south of China's biggest oilfield, Daqing in the Songliao Basin. The new discoveries, if successful, would significantly increase Sinopec's gas reserves and help the country ease its heavy reliance on imports for the cleaner fuel. As of the end of last year, Sinopec had proven natural-gas reserves amounting to 83.6 billion cubic meters. The company found a site in the region in June that could produce 205,000 cubic meters of natural gas per day. The new find followed announcements from both Sinopec and PetroChina of major gas discoveries in northeastern and southwestern China.
Sinopec has budgeted 29.8 billion yuan (US$3.7 billion) for oil and gas exploration this year, an increase of 29.6 per cent from last year. Sinopec now plans to build a 1,700-kilometer pipeline to carry the gas from the Puguang gas field to the northern coastal province of Shandong, where the need is great. With the production of the Puguang gas field, Sinopec could further enhance its position in the Shandong market, where an escalating war for market share has been taking place between Sinopec and PetroChina. The field's proven recoverable gas reserves total 251 bcm, of which 18.8 billion could be readily exploited. In Xuanhan county alone, where the Puguang field is located, natural-gas reserves are forecast to surpass 1.5 trillion cubic meters, of which no less than 1 trillion cubic meters is recoverable.
The first phase of Puguang gas field is scheduled to go into operation at the end of 2007 and to produce 1.9 billion cubic meters of purified natural gas. This represents a rise of 30 per cent over its 2005 production. After the operation of the second phase, the field should be able to offer 6 billion cubic meters of natural gas in 2008 and 8 billion in 2010. To achieve this, Sinopec plans to invest as much as 40 billion yuan. Gas demand in Shandong is expected to reach 8 billion to 10 billion cubic meters a year before 2020. The huge market potential has not only caught the eyes of domestic oil giants such as Sinopec and PetroChina but also foreign oil majors such as Shell.
Sinopec, Asia's largest refiner, produced 6.28 billion cubic meters of natural gas last year, and its newly added recoverable gas reserves amounted to 3.98 billion cubic meters for the same period. China will be able to produce up to 150 billion cubic meter of natural gas by 2020, and imports could reach about 90 billion cubic meters by then to meet surging demand, said Zhai Guangming, a senior expert with PetroChina.
Iran gas to match global prices - Iran
August 10, 2006. The cost of natural gas Iran is offering to Pakistan and India "cannot be very far away from international prices. Iran had a lot of offers for its gas from Europe "with very high prices. Nevertheless, Iran would like this pipeline to be constructed and stretch between Iran, Pakistan and India. Iran wants this pipeline to be the pipeline of brotherhood and peace. But, the National Iran Oil Company (NIOC) would work out an agreement with economics in mind and it would want to sell the natural gas at the best possible price.
August 9, 2006. Japan will support its private energy firms to secure more resources abroad but not use its political muscle to help win overseas deals, despite the risk of being shut out by competitors from China and India. Japan stands ready to back loans to commercially viable projects, but has no intention of intervening in such deals in order to achieve its bold target to meet 40 percent of its domestic needs from equity fields. In March, a government council recommended in a draft report on a new long-term energy policy that Japan should boost the ratio of crude imports from fields developed by Japanese companies to 40 percent by 2030 from 15 per cent now. Japan is the world’s third largest energy consumer, but relies on imports for almost all of its oil and gas needs. Analysts say it lags behind energy-hungry China and India over intensifying competition to secure upstream resources. China’s majority state-owned oil companies are getting a foothold in Africa thanks to cheap government-backed loans and investments in infrastructure there.
China oil demand could climb to 320mn tonnes
August 9, 2006. China's oil demand is forecast to rise by more than 5 per cent this year to 320 million tonnes as the world's second-largest user boosts imports and cuts exports. The ministry said that domestic oil supplies were constrained and prices would stay high as international markets were unlikely to retreat significantly. The demand forecast, based on a survey of distribution and production firms across the country, is in line with the 6 per cent growth put out by international analysts.
China's robust economic growth at 10.9 per cent in the first half of 2006 has seen its apparent fuel demand galloping at a double-digit rate through the second quarter. Apparent fuel demand takes in domestic production plus net imports, but excludes changes in inventories, which China does not publish. The 72 per cent of those surveyed anticipated domestic fuel prices would increase, while 27 per cent expected prices to hold steady. China's demand for coal, which fuels more than 70 per cent of the country's energy needs, would see slower growth of less than 10 per cent this year. Coal demand this year was estimated to top 2.1 billion tones.
Moscow court declares Yukos bankrupt
August 2006. The court ruling upholds a vote by Yukos creditors on July 25 to recognize the company bankrupt and start liquidation procedures. A lawyer for the battered oil company said at the close of the hearing that Yukos intended to appeal to a higher court against the ruling, which called a death sentence for the company. The parties in the case have, in accordance with the Russian law, 30 days to appeal the verdict. Earlier the company had filed a lawsuit to the arbitration court against the creditors' vote to declare bankruptcy.
The liquidation would end years of legal proceedings against Yukos that have saddled the company with billions of U.S. dollars in back taxes. The Yukos creditors had voted against placing the debtor under external administration, and against the company management's financial restructuring plan. The Yukos manager and now the court-appointed receiver, said cash raised from the sale of Yukos assets would not cover the crude producer's court-recognized debts. The company's financial restructuring is impossible, and therefore recommends the company to initiate liquidation procedures. The company's property and assets at 581.33 billion rubles (about $21.5 billion) but the company's proceeds would total 417.15 billion rubles (about $15.4 billion) after the assets sale and tax payments. The company's liabilities recognized by the court total 491.58 billion rubles (about $18.2 billion).
August 2006. Russian minister said that independent natural gas producers should be granted access to foreign markets. State-controlled Gazprom retains a monopoly on the export of Russian gas. On the one hand, a concept of a single export channel of Russian gas, given the strategic importance of this resource for Russia, will allow the scheme and schedule of gas supplies to be coordinated, avoid competition from Russian producers abroad, and accordingly, ensure the commercial interests of Russian suppliers and the fiscal interests of the state.
On the other hand Russia in favor of opening access to export markets for all Russian gas market participants. Monopoly over Russian gas exports is not beneficial given the lack of a development mechanism for the export infrastructure, and the necessity of boosting investments in the gas sphere. A number of strategic products, including weapons, military hardware, and some types of equipment and technologies, already had single export channels. The new law on natural gas exports adopted in July made gas a product of strategic importance that "should be exported via a single channel to ensure reliable gas supplies, the implementation of Russia's international obligations, and observance of the country's security interests.
Power
Generation
UK offered to help NZ build nuclear plant
August 12, 2006. The British Government offered to help New Zealand build a small nuclear reactor. New Zealand began exploring the possibility of building a small graphite pile reactor in the mid 1940s, as one of a series of nuclear plants being built by Commonwealth countries. Canada and Australia were considering large-scale plants for energy generation, but New Zealand was more interested in a smaller facility to generate isotopes for medical, industrial and scientific purposes. New Zealand was considered to have largely untapped sources of hydro-electricity, which would render a nuclear power plant unnecessary for at least 20 years. Because of the short half-life of many useful radioactive isotopes they could not be shipped to New Zealand, hence having a small reactor in the country was considered desirable.
SWEPCO plans coal-powered plant in Fulton
August 10, 2006. Southwestern Electric Power Co. a coal-fueled, 600MW power plant will be built on a site near Fulton in southwest Arkansas. The $1.3 billion plant announced by SWEPCO is part of a plan that includes gas-powered plants at Tontitown in northwestern Arkansas and at Shreveport, La. The plant near Fulton, in Hempstead County, would run on coal mined in Wyoming. Plant costs are to be spread among SWEPCO customers in Arkansas, Louisiana and Texas. The plant is expected to begin producing power in 2011. Construction will begin once necessary regulatory approvals are obtained in Arkansas, Louisiana and Texas. SWEPCO already holds an option to purchase the land where the plant will be built.
Transmission / Distribution / Trade
Russia makes new bid for Bulgarian NPP construction
August 15, 2006. Atomstroiexport, Russia's nuclear power equipment and service export monopoly has prepared a modified bid for a tender to build a nuclear power plant in Bulgaria. The Balkan state wants to build a second nuclear power plant in Belene, 250 kilometers (about 150 miles) from the capital, Sofia, and to modernize the Kozloduy NPP in the north of the country. Atomstroiexport and the Czech Republic's Skoda are bidding for the construction project.
In the new bid, the company has put forward two proposals on construction of the plant in a shorter period and with lower costs. Two power units will be commissioned as part of the existing project by 2013 under the first proposal. The second proposal would see the plant constructed from scratch and the first power unit commissioned within seven years after the start of construction.
Atomstroiexport is a leading Russian organization implementing intergovernmental agreements to build nuclear facilities abroad. It is the world's only company simultaneously building five nuclear power units in China, India and Iran.
Policy / Performance
TVA considering for building power plants
August 15, 2006. With power demand growing in the Tennessee Valley, TVA are looking at adding nuclear reactors in both Tennessee and Alabama and possibly buying some distressed natural gas plants from other producers in the South. But TVA leaders insist that in adding new power generation sources they won't repeat the utility's costly mistakes of the past. A generation ago, TVA launched the nation's biggest nuclear plant construction program with plans for 17 reactors. Only five of those units ever were completed, and the last one ended up taking 22 years to finish and cost more than five times its original projection.
TVA completed America's last new commercial nuclear reactor in 1996 when the Unit 1 reactor at the Watts Bar Nuclear Plant near Spring City, Tenn., was activated. In the next year, TVA plans to spend $20 million for an engineering study to determine the feasibility of finishing the second reactor at Watts Bar by 2014. The utility also has entered into an agreement with the Southern Co. to pursue building two next-generation nuclear reactors at the site of the abandoned Bellefonte plant in Hollywood, Ala., perhaps as soon as 2015.
In the meantime, TVA may use the $90 million budgeted next year in a new generation fund to buy a natural gas plant. Although the fuel costs for such plants sometimes are above TVA's rates, gas plants can be used to meet peak demands and some of the facilities now are in financial trouble and may be bought at deep discounts.
Sasol gives rural communities an energy boost
August 10, 2006. Sasol is increasing its investment in community energy centres by R8 million, bringing the total to R23 million. Sasol, in partnership with the minerals and energy department, had already launched three centres, and two more would now follow in Mafikeng and Qunu. The project aimed to provide a range of services in areas identified as poverty nodes - where the need for development was greatest. The programme linked the provision of wider energy choices with other infrastructure and development initiatives, such as water supply and new schools and clinics. Built on a community co-operative model, integrated energy centres provided a sales outlet for energy products, such as paraffin, gas, petrol, diesel and energy efficient appliances.
August 10, 2006. To cater to energy needs of India, UAE-based $400 million integrated energy solutions major Coal & Oil company (C&O) has drawn up plans for the country to streamline coal logistics. C&O group is the leading supplier of imported coal to larger industrial consumers in India. C&O’s share accounts for 30 per cent of India’s total coal imports and has a market share of 500 million tonne globally. As a part of boosting coal logistics chain, this company had carries out India-centric operations, and is planning to acquire four bulk carriers to import coal.
The company is currently importing 6 million tonne of cargo and has plans to take it to 7 million tonne in this year. It is planning to handle 12 million tonne of cargo by 2009 and need to invest for logistics infrastructure now. It is also looking out acquiring three to four coal mines in Indonesia and India. The size of coal mines will be at the size of $40 million.
Renewable Energy Trends
Global
August 15, 2006. Chena Power and United Technologies have announced the successful commissioning and startup of the 200KV, first geothermal power plant in Alaska. This project represents a major milestone in the utilization of low temperature geothermal resources. Chena is the first geothermal distributed generation project, allowing the resort to meet its power needs without relying on a utility grid, and is expected to open the door for similar projects at spas, greenhouses and other geothermal sites around the world.
Illinois gives $25 mn for five biofuel plants
August 15, 2006. Illinois is giving $25 mn in grants and other aid to companies building five ethanol and biodiesel plants in the state. The plants will spur about $334 million in private investment, produce 225 million gallons of biofuels each year using corn and soybeans. Illinois is one of the top U.S. states for both corn and soybean production. Central Illinois Energy LLC in Fulton County has received $6.35 million to build a $100 million ethanol plant near Canton with an integrated coal-fired combined heat and power plant. The plant will use 13.1 million bushels of corn a year to produce 37 million gallons of ethanol and 111,000 tonnes of distillers dried grains (DDGs) for livestock feed.
Illinois River Energy LLC in Ogle County has received a $5.5 million grant to build an $80 million plant near Rochelle. The 50-million gallon plant will use 18 million bushels of corn and produce 160,000 tonnes of DDGs a year. Center Ethanol Co. LLC in St. Clair County is receiving $5.7 million in grants and tax credits to build a $100 million ethanol plant near Sauget. It will use 19 million bushels of corn a year to produce 54 million gallons of ethanol and 160,000 tonnes of DDGs.
Biofuels Company of America, LLC in Vermilion County is receiving $4.8 million in grants to construct a $30 million biodiesel plant near Danville. The plant will produce 45 million gallons of biodiesel a year. A division of Bunge Ltd. is a major investor and has a soybean crushing plant nearby. The plant will turn soyoil into biodiesel fuel. Stepan Company in Will County is receiving $3 million for a $24 million expansion of its existing biodiesel plant near Elwood. The expansion will boost capacity to 49 million gallons a year, from the current 10 million gallons. The plant will use about 35 million bushels of soybeans a year.
BP buys U.S. wind firm Greenlight Energy
August 15, 2006. Oil major BP Plc had bought U.S. wind energy firm Greenlight Energy Inc. for around $98 million to boost its wind power business in North America. Virginia-based Greenlight Energy owns the rights to develop 39 wind farms in the United States which, BP said, if fully developed have a potential to produce a combined power generation of 6.5 gigawatts. This purchase gives BP Alternative Energy immediate access to a large number of high-quality wind development projects across the country.
U.S. wind energy installations reach 10,000 mw
August 15, 2006. American Wind Energy Association (AWEA) has reported that the total U.S. wind energy installations have exceeded 10,000 MW in wind generating capacity, with over 3,000 MW of additional new capacity expected by the end of 2006. The 2006 capacity forecast represents more than $3.5 billion in new wind generating equipment. The new installed capacity expected for 2006 is forecast to increase by more than 20 per cent over 2005 levels, to include more than 2,000 large wind tower support structures, with commercial wind turbine installations in 30 states. AWEA expects the U.S to pass 15,000 MW of installation by the end of 2007 and expects to see have 25,000 MW installed across the nation by 2010 assuming no change in government policy.
At this growth rate, the U.S could have 100,000 MW installed by 2020. More than $50 billion of wind equipment is now in place worldwide, with another $8-10 billion added annually. This record growth in wind power is driven by increasing demand for energy, the economics of global energy, concerns over fuel price volatility and supply and increasing sensitivities to environmental effects of energy production.
Sunflower seeking wind energy
August 14, 2006. Because a previous wind development agreement was not completed, Sunflower Electric Power Corporation issued a new Request for Proposals (RFP) to wind energy developers on August 11. The request calls for a developer to deliver 50 MW of wind-generated energy, beginning no later than October 1, 2007, through a 20-year power purchase agreement. The previous agreement in Wichita County would have been 30 MW.
Midwest energy and sunflower sign power agreement
August 11, 2006. Midwest Energy, Inc. recently signed a Letter of Intent (LOI) to purchase 75 MW from the new Holcomb East unit that will be built at Sunflower Electric's Holcomb Station. The LOI will result in a power purchase agreement providing Midwest Energy capacity in the new plant, scheduled for construction in 2007, for a period of 30 years. The Holcomb East unit is expected to be in commercial service in 2011.
The expansion at Holcomb will include the construction of three 700 MW coal-based power plants. Beginning in mid-2007, the construction phase of the project is expected to last 66 months and cost $3.6 billion. Each plant will be equipped with the best available emission control technology and will be among the cleanest coal-based plants in the nation when completed. The agreement will allow Midwest Energy to join with several other electric cooperatives in the Holcomb Expansion project.
Tri-State Generation and Transmission Association in Westminster, Colorado, and Golden Spread Electric Cooperative, Amarillo, Texas previously signed agreements with Sunflower for equity investments in the expansion project.
PG&E to buy solar energy beginning in 2010
August 10, 2006. PG&E Corp. its Pacific Gas and Electric Co. unit plans to buy 500 MW of solar energy from Luz II LLC starting in the spring of 2010.The energy would be produced using Luz's proprietary hybrid solar-gas technology, which meets the requirements of the California Renewables Portfolio Standard Program. The site for the solar-gas plants has not been determined, but the power generated would be available in the San Francisco Bay Area.
Marubeni and DG energy renewable energy joint venture
August 10, 2006. Marubeni Corporation and DG Energy announced the formation of a joint venture to own and operate renewable energy and cogeneration facilities throughout North America. The new joint venture, DG Investors LLC, includes 45 MW of generation located in California, New York, New Jersey, Rhode Island, Pennsylvania and Oregon.
The new alliance creates a global force in the renewable and distributed energy business. Marubeni, with world-wide revenues of $28 billion in fiscal 2005, is the first Japanese company to enter the renewable energy and cogeneration business with distributed generation facilities. Marubeni owns a 900 MW renewable energy portfolio as part of its total power generation assets of 8,000 MW. Marubeni believes its experience and expertise in global power business enables it, together with DG Energy, to achieve significant growth over the next several years.
Marubeni has established a New Technology & Renewable Energy Department to pursue energy efficiency and renewable energy business opportunities worldwide. It recognizes the DG Investors joint venture with DG Energy as an important opportunity to expand its business in the US and North America. Through this investment with DG Energy, Marubeni plans to promote energy services to large North American commercial, institutional and industrial energy users.
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