Towards an Energy Sector Competition Policy in India: Insights from International Practices (P - VII) Dr. Samir R. Pradhan®

Implementation of Competition Policies in Gas and Electricity Sectors: Some Insights from Australian Experience

Australia has a comprehensive national competition policy based on the Trade Practices Act 1974. Its main objectives are to:

·          Prevent anti-competitive conduct through competition law; and

·          Assure fair trade practices, including consumer protection.

The present Australian competition policy owes its origin to The Hilmer Committee established by the Council of Australian Governments (COAG), which developed a general approach to competition policy (Report by the Independent Committee of Inquiry on National Competition Policy, 1993). A national competition policy framework was created, covering both public and private companies alike (Competition Policy Reform Act 1995).

Australia’s experience is particularly relevant for countries like India with federal government structure having multiple tiers of government. The main recommendations of the Hilmer Report were:

·          Prohibition of anti-competitive conduct that is against the public interest;

·          Uniform application of universal competitive conduct rules to all market participants, regardless of the form of business ownership; competitive practices conducted in the public interest to be assessed by an appropriate transparent process, taking into account the full public costs and benefits, and providing for a review mechanism;

·          Changes to competition policy to be aimed at developing open domestic markets for goods and services through the removal of unnecessary impediments to trade and competition; and to reduce complexity and to eliminate administrative duplication, in recognition of the increasingly national scope of markets.

The Commonwealth and State Governments signed three intergovernmental agreements on competition policy reforms in 1995. These specified prices oversight; structural reform of government monopolies; review of legislation and regulations to remove anti-competitive restrictions not in the public interest; access to services provided by essential facilities; and the elimination of any net competitive advantages by government due to public ownership.

The Competition Policy Reform Act 1995 brought State and local government businesses and corporations under the umbrella of Part IV TPA 1974; amended Price Surveillance Act 1983 to extend price surveillance on government businesses; and created the Australian Competition and Consumer Commission (ACCC) in 1995 and the National Competition Council (NCC). The ACCC focused on abuse of market power; pricing and consumer protection; and monitoring of price performance of organisations and services which have been “declared” as worthy of that attention by the relevant Minister, usually The Treasurer.

The NCC advises the designated minister by providing recommendations on applications to have particular services so “declared”. It also regulates third party access to essential infrastructure; recommends price surveillance of state government businesses; assesses government progress in implementing competition policy reform; and administers the additional Commonwealth government funding granted to the states that successfully meet their COAG commitments. The quasi-judicial Australian Competition Tribunal (ACT) was created to review appeals from the ACCC and designated Ministers on anti-competitive conduct, mergers and third party infrastructure access. The ACT decisions may be appealed to the Federal Court and the High Court. Moreover, The Productivity Commission, formed in 1998, reviews aspects of the competition policy and investigates competitive neutrality complaints against state-owned businesses. The following chart shows the structure of competition policy institutions in Australia.

 

 

 

 

 

 

 

 

 

 

 

Source: Sidorenko, et al, 2002.

Competition Policy-Related Reforms in Energy and their Effects

In 1993, the Commonwealth and States of New South Wales, Victoria, Queensland, South Australia and the ACT agreed to form a national electricity market. Deregulation of the gas industry followed a 1994 COAG initiative to provide free trade in gas between the States.

Competition principles are most advanced in electricity, followed by natural gas. Electricity and gas reforms were key components of larger infrastructure reforms designed to implement the National Competition Policy program. The cumulative effects from NCP reform in Australia are estimated at 2.5% of GDP. Electricity and gas reform alone increased real consumption by an estimated 1%. Other non-energy infrastructure reforms included in the NCP program that delivered substantial economic benefits were rail and road transport, telecommunications, water, and elimination of anticompetitive statutory marketing arrangements for agricultural commodities.

The ACCC has played an important role in these reforms. Its responsibilities in the energy sector include:

·          Regulating gas transmission pipelines declared by the NCC and the Minister (conditions for access, arbitration of disputes, overseeing the competitive tendering for new infrastructure projects);

·          Regulating the electricity transmission grid and the access conditions in the NEM, usingCPI-X price caps;

·          Assessing access undertakings pursuant to Part IIIA of the Trade Practices Act 1974;

·          Authorising gas marketing arrangements (joint ventures in exploration and development, and long-term marketing contracts may be authorised by ACCC if the public benefits exceed the costs of subdued competition);

·          Authorising changes to the Electricity Code and of anti-competitive practices where public benefits exceed anti-competitive costs;

·          Assessing the impact of mergers on competition, and assuring compliance with the competitive practices stipulated in the Trade Practices Act 1974.

The effects of competition policy can be analysed as follows:

·          Wholesale electricity market: Reforms have benefited the economy through more efficient pricing, improved quality of services and higher investment.

·          Upstream gas market: Reforms in the gas sector have benefited the economy in transforming the vertically integrated monopoly to a more competitive structure.

Overall, the Australian experience of regulatory reform is a positive one. Significant benefits are apparent, not only in terms of the efficiency of each sector but also the contribution to environmental policy objectives, and to regional development.

Competition Policy in India: An Overview

In line with the international trend and to cope with changing realities, India has reviewed the Monopolies and Restrictive Trade Practices Act, 1969 and has enacted the Competition Act, 2002 (the Act) with many innovative features w.e.f 14.1.03. The Act seeks to repeal the M.R.T.P. Act and to dissolve the M.R.T.P. Commission from the date it is notified as such by the Central Govt.  Such a notification is yet to be issued by the Central Govt.

In exercise of the power conferred upon it, the Central Govt. has since established the Competition Commission of India (the Commission) having its head office at New Delhi with effect from 14.10.2003.  The Commission is a body corporate having perpetual succession and a common seal. It may establish offices at other places in India.  The Commission shall consist of a Chairperson and not less than two and not more than 10 other members to be appointed by the Central Govt.

The Act through the instrumentality of the Competition Commission of India seeks to

·          Prohibit “Anti-Competitive Agreement”, “Abuse of Dominant position by an Enterprise” and,

·          Regulate certain “Combinations” which include acquisition of shares, acquiring of control and mergers/amalgamation between and amongst enterprises.

On a reference from a statutory authority, the Commission is mandated to express and deliver judicial opinion on a competition issue arising during the course of proceedings pending in the Statutory Authority which can pass order only after having received the opinion of the Commission. The Central Govt. may also make a reference and seek opinion of the Commission on the possible effect on competition emanating from its policy, statute, rules, regulations framed, adopted or contemplated by it.

 

 

Underground movement emerges for sequestering CO2

(Darren Samuelsohn, Greenwire senior reporter)

Optimists believe there's a way for coal-fired economies to curb catastrophic global warming and still keep the wheels of commerce churning: Pump greenhouse gas emissions into the ground instead of the air. A growing number of people are placing bets on "carbon capture and sequestration." Its proponents include geologists, environmentalists, industry leaders and federal policymakers. Sounds simple, but carbon sequestration is far from a proven technology. No one has ever tried to inject carbon dioxide on such a massive scale -- hundreds of millions of tons -- into saline reservoirs, oil and gas fields and coal mines. Many questions must be answered: What if the gas travels sideways and contaminates underground drinking water supplies or adds pressure to plates? What if the gas escapes and leaks into the atmosphere?

And what if people who live above or near proposed carbon sinks rise up to block the projects? Public opposition killed a carbon-injection research project off Hawaii in 2002. Many skeptics see sequestration as a fancy way of sweeping an environmental mess under a geologic rug. They would prefer to see a long-term shift away from coal and other fossil fuels and toward renewables and energy efficiency. A prominent critic is Jeremy Rifkin, an author and lecturer on environment and energy and president of the Foundation on Economic Trends. He leads a coalition of sequestration opponents, including Friends of the Earth and Greenpeace. He said it defies reality that CO2 can be sent safely underground and kept there forever. "There's no such thing as a leak-free environment," Rifkin said. "What goes down can go up. It's as simple as that." But sequestration foes face an uphill battle against a technology with backers at the highest levels of government and industry. Bush's top environmental adviser, for example, Council on Environmental Quality Chairman Jim Connaughton, defends sequestration as a critical option in curbing greenhouse gas emissions. "We don't need to let the perfect be the enemy of the extremely good," he said in an interview last month.

Three commercial projects under way in the North Sea, North Dakota and Algeria are already putting sequestration technology to the test. Others are on the way, including the federal government's planned $1 billion FutureGen power plant and a pair of carbon-capturing BP refineries in Scotland and Carson, Calif. Geologists at the University of Texas next month will begin their second test in three years at the Frio Brine Pilot Experiment about 30 miles northeast of Houston. They plan to inject 2,000 tons of CO2 that normally would be used at a Budweiser brewery. And the Energy Department is sponsoring 25 more injections across North America over the coming three years, from oil wells in Kentucky to sandstone layers south of Sacramento. Scientists say the goal of such projects is to learn how carbon reacts far below the Earth's crust. They want proof that sequestration can be trusted for centuries and even millennium.

The bandwagon

Burying carbon dioxide beneath the Earth's crust emerged in the early 1970s as a way to maximize the petroleum production in hard-to-reach underground pockets. But its emergence as a possible curb for greenhouse gas is fairly new. In 1996 - a year before the writing of the United Nations-sponsored Kyoto Protocol -- the world's first large-scale industrial CO2 injection project began pumping the gas into saline aquifers in the North Sea.

The Sleipner project, a partnership between Norway-based Statoil and the Netherlands government, now pumps about 1 million tons of CO2 per year. The estimated project capacity is 20 million tons. Two other projects have since gone into commercial development. The Great Plains Synfuels natural gas power plant in Beulah, N.D., has captured about 1 million tons of CO2 every year since 1999 and sent it through a 200-mile pipeline to help spur oil production in the Weyburn field in Saskatchewan. And in Algeria, state energy company Sonatrach has partnered with Statoil and BP to reinject 17 million tons of CO2 extracted from a natural gas field. Sequestration gained a fast foothold in the global warming debate because renewables and energy efficiency have not developed quickly enough, researchers say. Natural gas prices have also forced energy suppliers to give coal another look.

The Kyoto Protocol has helped to spur at least 10 commercial sequestration proposals across Europe, de Coninck said. More will come once the European Trading System early in the next decade adds the technology to its list of compliance options. Most environmental groups have jumped on the sequestration bandwagon. NRDC plans to oppose plans for new power plants that do not have capabilities for capturing and storing CO2. The advocacy group has filed lawsuits against the Bush administration for not factoring sequestration technologies into Clean Air Act permitting of new plants. Frank O'Donnell, head of the advocacy group Clean Air Watch, said sequestration is the most reliable option for controlling emissions in an economy that relies heavily on coal.

NEWS BRIEF

OIL & GAS

OVL to buy all Sakhalin-I gas

August 22, 2006. ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp (ONGC), has proposed to buy the entire gas production from Sakhalin-I field in Russia and import the same in the form of LNG to India. The gas production potential of Sakhalin-I is 8 billion cubic meters per annum. Exploitation of gas reserves from Sakhalin-I field, where OVL has 20 per cent stake, is planned in phase-II development, which is likely to commence in 2013. The operator has initiated negotiation with the prospective buyers. OVL has expressed its desire to buy the entire Sakhalin-I gas production and import the same in form of LNG to India.

With the installation of interim production facility in Sakhalin-I project, the development of which is in progress, production of crude oil and natural gas has started on a limited scale from October 2005, for sale to domestic buyers. Full production is expected to commence in early 2007. While, OVL was planning to bring the first two cargoes of crude oil each having a capacity of approx 7,00,000 barrels from Sakhalin-I project in Russia into India in October and December, 2006. OVL has 20 per cent stake in the Exxonmobil-operated Sakhalin-I project in far east Russia. The company would auction the crude to Indian refiners.

Crude oil production up 4.1 pc in July

August 22, 2006. The country's crude oil production rose 4.1 per cent in July to 2.87 million tonne (mt) from 2.75 mt during the corresponding month last year. The country's natural gas output rose 2.4 per cent to 2.76 billion cubic meters (bcm) in the month under review from 2.69 bcm during the same period last year. Production from the Mumbai High fields, operated by Oil and Natural Gas Corporation, rose 3.6 per cent to 1.49 mt last month. Crude oil production by non State-owned explorers such as Cairn Energy Plc rose 13 per cent to 4,15,000 tonne up from 3,69,000 tonne during the same period last year.  The crude throughput of refineries — Indian Oil (Guwahati, Koyali and Haldia), Bharat Petroleum Corp (Mumbai), Hindustan Petroleum Corp (Mumbai and Visakhapatnam), KRL (Kochi), BRPL (Assam), NRL, MRPL, ONGC (Tatipaka) and Reliance (Jamnagar) - have exceeded their planned target during the month under review. However, the crude throughput in Indian Oil's Barauni, Mathura, Digboi and Panipat, and CPCL's Manali refineries was less than the target. Some of the reasons for shortfall in throughput were refinery shutdown, restricted crude processing due to less product evacuation, and advancement of planned shutdown in some cases.

OVL Mittal lines up $2 bn for Nigerian oil blocks

August 18, 2006. Company has paid around $125 mn as a signature bonus for the two Nigerian blocks.  OVL Mittal Energy Ltd may invest between $1.5 billion and $2 billion in the development of two off-shore deep-water blocks that it had bagged in Nigeria this May.  The company plans to start production by 2010, and is currently working on an exploration plan for prospecting the blocks. The blocks are estimated to yield 6.5 lakh barrels of crude oil per day.  The company had paid around $125 million as a signature bonus for the two blocks in Nigeria.  Once oil is discovered, the joint venture will have to enter into a production-sharing contract with the Nigerian government.  OVL Mittal is also setting up a 15-million-tonne (MT) refinery on a build-operate-transfer basis in Nigeria.  In the event of the blocks not yielding any oil, the Nigerian government will supply crude oil to the refinery at prevailing international prices.  OVL Mittal Energy Ltd is a joint venture between ONGC Videsh Ltd and the Mittal group, which was formed in 2005. 

OVL eyes 3 more Myanmar blocks

August 18, 2006. ONGC Videsh Ltd plans to bid for three more gas blocks in Myanmar for which bids may be called within a month. The company will be bidding for the blocks located in the south-western part of the country.  OVL is looking for other blocks like AD-6 in Myanmar’s deep waters to increase our participation. The other block the company may bid for is A-5.  Myanmar has emerged as a lucrative market for gas majors with 14 basins. Of these only three have been explored.  GAIL had recently announced that it has estimated reserves of 5.7 tcf to 10 tcf of natural gas in the three discovered gas fields of Shwe and Shwe Phyu in Block A-1, and Mya field in Block A-3 in Myanmar.  OVL is a part of the consortium of GAIL, Daewoo International Corporation and KOGAS that is carrying out exploration activities in Block A-1 and A-3 in Myanmar. 

Fresh lease of life for ONGC’s SBM project

August 21, 2006. Oil and gas major ONGC is planning to revive its long-abandoned plan of setting up its own single buoy mooring (SBM) facility off the Hazira coast, near Surat. The move, which comes 13 years after the SBM project was shelved, is being seen as ONGC’s preparation for building the sea infrastructure for its proposed 7.5m tonne refinery at Barmer in Rajasthan. ONGC expects this SBM to be commissioned by 2009.ONGC has already begun the groundwork for reviving this project and has been asked to study a few locations near Hazira.

The SBM facility could also be used by the company for importing crude for the Barmer refinery as well as exporting the finished products. MRPL, the 100 per cent subsidiary of ONGC, is also considering a port infrastructure in the Gulf of Kutch — either at Adani’s Mundra port or developing satellite port at Tuna near Kandla. ONGC had conceived this SBM jointly with Indian Oil, way back in ’85. At present, ONGC depends on Reliance Industries SBM at Hazira, mainly for exporting naphtha. The company is also expecting a considerable increase in its naphtha exports too, during the current financial year and later too. It is expecting 18-20 vessels each of at least 35,000 DWT for exporting naphtha between July ’06 to March ’07.

Punj Lloyd bags mega order from Libyan firm

August 22, 2006. Engineering and construction company Punj Lloyd Ltd has bagged an order worth over Rs 1,347 crore ($290 million) from Libya’s Sirte Oil Company for pipeline projects.  The first contract, worth over Rs 692 crore ($149 million) involves the construction of the main 34 inch diameter, 98.4 km pipeline from Tripoli to Melita. It also entails the construction of a 24 inch diameter, 21 km branch pipeline to the Zawia power plant. The work, scheduled to be completed in 22 months, involves the construction of gas pressure reducing and metering stations and a compressor station at Melita.  Under the second contract worth over Rs 655 crore ($141 million) the company would complete a 34 inch diameter, 157 km El Khoms-Tripoii pipeline.  It would also undertake civil, mechanical, electrical and instrumentation work on the gas pressure reducing, metering and compressor stations at Sidra and Wachkah. This project is scheduled to be completed in 18 months. 

IOC, GAIL to share pre-project spend on IPI gas pipeline

August 21, 2006. Despite uncertainty over the implementation of Iran-Pakistan-India (IPI) gas pipeline in view of burgeoning terrorism, GAIL India and Indian Oil Corporation (IOC) have halted backroom activities for the same. In a recent communication to the petroleum ministry, the two have expressed their desire to share all the pre-project expenditure incurred by both the companies in connection with the project. GAIL and IOC have proposed to share the cost in the ratio of quantity of natural gas that will be contracted in the Gas Sale Purchase Agreement for import through the IPI project. Accordingly, in future if there is a need to involve any other player in the project, the pre-project expenditure will also be shared by such company in the ratio of its import’s share.

The government to government level talks on the project among India, Iran and Pakistan, national oil and gas companies from the three countries would be involved with an understanding that commercial agreements for sale and purchase of natural gas while implementing the project would eventually be executed among such companies. From Indian side, IOC and GAIL have been involved along with the petroleum ministry in all such meetings and discussions. IOC has already roped in Ernst and Young as its financial advisor, while GAIL has appointed ILF Technology, UK, as its technical advisor. Both the companies had to incur certain expenditure on this account, in addition to the administrative expenses incurred while organising bilateral and tripartite meeting among the three countries. These companies had sought ministry’s intervention to lay down principle for sharing this expenditure.

RasGas to supply gas to Dabhol power plant

August 19, 2006. Dabhol power plant has finally managed to secure gas supply. Qatar's RasGas has agreed to supply gas to the plant from April 2007. However, the price at which GAIL has contracted to buy the gas is not known.  The power plant will resume operations from October 2006 on imported naphtha on which the government recently gave Ratnagiri Gas and Power (RGPPL), the current owner of Dabhol, a 100 per cent duty waiver.  The new tariff for power generated by the plant will be decided by the Maharashtra Electricity Regulatory Commission by the middle of September.  Earlier, RasGas had refused to sell gas to RGPPL saying that as the erstwhile Dabhol Power Company (DPC) had reneged on its contracts with "sister company" Oman Gas, it would not be in a position to supply gas to Dabhol. 

Oil import from Sakhalin-I by Oct

August 18, 2006. Oil and Natural Gas Corp. Ltd. plans to import the first two cargoes of crude oil, with capacity of about 700,000 barrels each, from Sakhalin-I project in Russia in Oct-Dec. ONGC Videsh Ltd, the overseas investment arm of ONGC, has 20 per cent stake in the ExxonMobil-operated Sakhalin-I project in far-east Russia. ONGC would auction the crude to Indian refiners.  Sakhalin-I comprises three fields—Chayvo, Odoptu, and Arkutun Dagi—to be brought into production in phases.  The other equity holders in Sakhalin-I are Exxon Neftegas Ltd (30 per cent), Sakhalin Oil and Gas Development Ltd. of Japan (30 per cent), SMNG-S (11.5 per cent), and RN Astra (8.5 per cent).  OVL has a 25 per cent stake in Greater Nile Oil Project in Sudan. Other stakeholders in the Sudan asset are China National Petroleum Corp. (40 per cent), Petronas Carigali Overseas Sdn BHD (30 per cent), and Sudan National Oil Company SUDAPET (5 per cent).  ONGC Videsh shipped 333,000 tn of crude from Sudan to India in 2004-05, and 818,000 tonne in 2003-04. 

Poor mkt sees 2 fuel oil tenders scrapped

August 18, 2006. Hindustan Petroleum Corp Ltd (HPCL) and Indian Oil Corp (IOC) cancelled export tenders for September-loading fuel oil due to low price bids in a bulging Singapore market. The move came on the back of two other Indian tenders to sell high-density, high viscosity cargoes, which were called off earlier this week as Singapore stocks stayed at near-capacity levels of 15 million barrels for a third-straight week. HPCL had offered a 40,000-tonne cargo of 380-centistoke (cst) cargo, with a 4.5 per cent sulphur content and 0.998 kg per cubic metre density, for Sept. 5-9 loading from Mumbai. This is the second time that a tender for this cargo has been called off. IOC offered a 30,000-tonne parcel of 380-cst, with a 4.5 per cent sulphur content and and 0.995 kg per cubic metre density, for Sept. 6-10 loading from Chennai.

Tie-ups with Mittal on track: ONGC

August 22, 2006. Oil and Natural Gas Corporation (ONGC) has no plan to scuttle ventures with the LN Mittal group which were finalised during the days when Subir Raha was the chairman.  The oil and gas major is currently talking with the partner group to fine-tune the strategy for trading crude oil and petro products of ONGC-Mittal Energy Services (OMES).  He, however, conceded that there has been some delay in registration of the companies for the trading business to take off. In order to start operations, OMES has to register with oil marketing companies such as Indian Oil Corporation, HPCL, BPCL and Oil India.   The other venture, OVL Mittal Energy, may invest between $1.5-2 billion in the development of two off-shore deep-water blocks that it had bagged in Nigeria in May.  The company plans to start production by 2010 and is currently working on an exploration plan for prospecting the blocks.  The development plans for the Nigerian blocks are being prepared along with OVL Mittal.

Demand-supply mismatch in gas will continue

August 22, 2006. The domestic demand for gas in India is expected to exceed the supplies despite a hefty increase in supply from private and joint venture (JV) owned field. The total deficit is estimated to be around 20.3 metric million standard cubic metres per day (mmscmd) in 2011-11. On the other hand, demand is likely to grow at 14.7 per cent annually to 206.8 mmscmd while the supply will increase from the present level of 93.7 mmscmd to 186.5 mmscmd, a growth of 14.8 per cent by 2010-11. LNG will contribute nearly 30% of the total gas demand in the country by 2010-11.

According to research done by Crisil, the power sector would continue to dominate the scene with a hefty 45.7 per cent contribution to the total demand, compared with 35.4 per cent in 2005-06. The “other” industries (excluding power, fertiliser, sponge iron and petrochemicals) and city gas distribution projects will contribute significantly to the demand growth by 2010-11. This segment categorised as “others” is likely to grow at 18 per cent every year to touch 46.4 per cent mmscmd.

The gas demand for power remains unaffected only upto the delivered gas price of $5 per mmbtu (million British thermal unit). Beyond this level, the gas demand for power will drop drastically and will be used only to meet the peaking demand. Crisil research has projected that LNG would not meet the power sector demand and it might only be used to fulfil the peaking demand of power. However, considering the growing domestic gas supply from the Krishna Godavari basin, a large chunk of domestically produced gas will find takers in the power sector.

India will face increasing competition from Japan and China within the region for sourcing of gas. The cost of LNG imports at the Indian shore will range between $5 and $5.5 mmbtu. This translates into a delivered cost of $6.5-7 per mmbtu to Indian domestic consumers, after including the cost of regasification, transportation, taxes and marketing margin. In the light of increasing tightness in the LNG market, India will have to scout aggressively for meeting its LNG needs. Nearly 71 million tonne per annum (mtpa) of spare quantities was still available from Qatar 33 mtpa, Algeria 14 mtpa and Sakhalin 21 mtpa.

ONGC to invest $2.15bn in Mangalore SEZ

August 21, 2006. Public sector giant ONGC will pump in about Rs 10,000 crore in the Mangalore Special Economic Zone (SEZ), which has been approved recently by the Board of Approvals for SEZs. The Mangalore multi-product SEZ is expected to start operations in the next two years. ONGC, which is the main promoter of Mangalore SEZ, is working out detailed plans for investing at least Rs 10,000 crore in the facility. It is estimated that Rs 1,050 crore would be pumped in initially to develop infrastructure at the SEZ. This will include cost of land and the investment needed for key infrastructure like ports, airports, roads, drainage and water supply. The special purpose vehicle (SPV) floated for the SEZ will have an equity capital of Rs 300 crore, while Rs 600 crore would be raised in the form of term loans and Rs 150 crore would be brought in from internal sources. The SEZ, proposed to be spread over 1,320 hectares, will have a processing area of 700 hectares. Once the process of acquiring land is complete, Mangalore SEZ plans to raise foreign equity for its project. Exports from the SEZ in the initial three-four years have been estimated at Rs 5,000 crore per year which are subsequently expected to increase to Rs 8,000-10,000 crore per annum upon achieving optimum capacity utilisation.

RCF plans to set up gassification unit in Orissa

August 21, 2006. Rashtriya Chemicals and Fertilizers (RCF), the largest public sector player in the domestic fertiliser sector and chemicals space, is planning to partner with Gas Authority of India (GAIL) to set up a surface coal gassification plant at Talchar in Orissa.  The project, which is estimated to cost Rs 2,500 crore, also includes a fertiliser complex in the state. The company is currently in the final stages of talks with GAIL on this project and the Centre’s approval for the investment is awaited.

The joint venture coal gassification plant will be the gas-sourcing base for RCF’s proposed Ammonia plant in the new fertiliser complex. The Ammonia plant would have “substantial” capacity and the entire gas produced in the joint venture plant is expected to be utilised for captive consumption.  The implementation of the project is likely to be started by the end of this year. GAIL had been actively pursuing surface coal gassification opportunities in Orissa as part of a comprehensive “Energy Cooperation Agreement” signed with Orissa government. For this, GAIL had identified Talcher as a suitable location in the state.  RCF, which has embarked on a high-growth trajectory, had already invested more than Rs 350 crore in upgrading and expansion.  The company has also planned more projects to be implemented in the next two to three years. It has planned a total investment of about Rs 600 crore in these proposed projects. 

Govt to review petroleum product prices on Sept 1

August 19, 2006. The government will review retail prices of petroleum products on September 1. The decision on granting pricing autonomy on oil products will be conveyed to the oil marketing companies within two to three days. As and when the oil marketing companies feel the need to review prices, they will be free to consider the issue and take a decision collectively. The ministry said it was better to take a consolidated look at prices every one to two months, instead of reviewing the prices every fortnight. The ministry also plans to announce the gas pipeline policy by September 1. A lot of companies have evinced interest for setting up gas pipeline networks in cities. C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, suggested that oil prices should move away from the existing import parity pricing model and settle at the export parity price level. 

ONGC in race with ten cos for Abu Dabhi gas

August 19, 2006. State-owned Oil and Natural Gas Corp (ONGC) is in race with ten companies including global giants ExxonMobil, BP, Chevron and Chinese majors to secure projects to develop gas reserves in Abu Dhabi. ONGC is in competition with ExxonMobil, BP, Shell, Chevron, Total of France, Occidental of US, Enio of Italy, Russia’s Lukoil and China’s Sinopec and China National Petroleum Corp (CNPC) for partnering Abu Dhabi National Oil Co (ADNOC) in developing sour gas reserves. ADNOC, which had last month invited international firms to partner it in developing sour gas reserves, aims at setting up a new operating company in partnership to extract, process and supply about 3 billion cubic feet per day of sour gas to domestic markets. Abu Dhabi has 213 trillion cubic feet of mostly sour gas reserves both onshore and offshore. Project developments will involve the installation of sweetening plants and related facilities. ADNOC plans to issue a tender next month for the development of offshore sour gas reserves, with technical and financial proposals due to be submitted in late December. An award is due in early 2007.

Govt says no to pvt oil cos’ bailout demand

August 19, 2006. Private oil companies will have to look for some innovative ways to stay afloat as the government has refused to offer any bailout package. Companies like Reliance Industries, which are taking the brunt of the losses in the private sector, will have to depend upon its gains from petrochem and refining to net out the losses of marketing. Continued losses in oil marketing could start eroding the net worth of the company as disadvantages will set in other sectors. 

‘Need to find apt model for pricing petro products’

August 18, 2006. Dr C Rangarajan, chairman, Economic Advisory Council to the Prime Minister, has said that there is an urgent need to find an appropriate model for pricing petroleum products in the country. While the oil industry continues to be dominated by the PSUs, lack of an appropriate fuel pricing mechanism is affecting the growth of private sector. Private sector players expressed their frustrations on several key issues including the absence of a level playing field for the private sector, poor infrastructure, delays in approvals costs resulting into heavy losses for the industry. Besides, it was also pointed out that the procedures for exports are cumbersome, with anomalies in customs and taxes. He said the biggest challenge facing the industry is how to control market prices so that while offering the right stimulus to the industry for growth, the comman man is not affected. The prices should logically settle at the export parity price level.

Speculation over Tata`s tie-up with Cairn

August 17, 2006. In a bid to scale up its oil exploration business, the Tata group is in talks with Cairn Energy of the United Kingdom for the upcoming new exploration licensing policy VI (NELP VI).  The tie up was likely to be between Tata Petrodyne, a wholly-owned subsidiary of Tata Sons, and Cairn Energy. At present, Tata Petrodyne and Cairn work together in an offshore block in the Cambay region. The Tatas are keen on 3 blocks on offer in NELP VI. The two companies could also rope in other partners to form a consortium. The quantum of investments would depend on the number of blocks awarded. The money could come from internal accruals of Tata Petrodyne or from Tata Sons itself. 

India, China in race for Myanmar gas

August 16, 2006. India and China are racing to secure a lock on a newly discovered offshore natural gas field in Myanmar, believed to be one of the largest such finds in Southeast Asia. The Arakan field, close to India and Bangladesh and estimated to contain trillions of cubic feet (tens of trillions of cubic liters), was discovered this year by a joint venture involving South Korea’s Daewoo, an Indian firm and state-run Myanmar Oil and Gas Enterprises. The foreign correspondents association here that the rapidly growing economies of its two giant neighbours, New Delhi and Beijing, are eyeing the field to fuel growth in India’s planned eastern industrial centre.  The Arakan field could also supports a plan by the Association of Southeast Asian Nations (ASEAN) to build an ASEAN-wide natural gas pipeline.  

POWER

Bhoruka lines up $127.7mn expansion plan

August 22, 2006. The Bangalore-based independent power producer, Bhoruka Power Corporation which specialists in mini hydel and wind power projects, is planning to invest around Rs 580 crore by 2009 on new projects. It plans to set up power projects with a combined capacity of 110 MW in both – hydel and wind energy sector – in Karnataka and Haryana.  Of the proposed Rs 580 crore investment, 70 per cent will be financed by a consortium of banks and financial institutions. Of the remaining 30 per cent  the company will contribute Rs 70 crore through internal accruals while the balance Rs 100 crore will be either raised through a public issue or from private equity funds.  The company, so far, has commissioned various projects to generate 90 MW. The proposed investment of Rs 580 crore will be used to set up mini hydel projects (60 MW) and wind farms (50 MW). 

Centre eyes 34,000-MW punch

August 22, 2006. The Centre has taken a slew of initiatives to set up new power projects in generation, transmission and distribution. It has also taken adequate steps to resolve and revive languishing projects to improve performance parameters in generating stations to reduce technical losses, and curb theft and pilferage. The Centre has also undertaken the much-touted drive for augmentation of rural electricity infrastructure. The 1 lakh MW required to be added during the 10th and 11th Plan, the capacity addition of 34,000 MW would be done in the 10th Plan period. The state-run NTPC Ltd, the only Navratna company operating under the power ministry, alone has firmed up the capacity addition of more than 21,000 MW in 11th Plan period. NTPC will set up super critical units of sizes of 660 MW and will shortly take up 800 MW units.

DVC to light up Delhi with 2,500 MW surge

August 21, 2006. Coming to the rescue of the Delhi government after its recent fallout with Chattisgarh for executing an agreement of a 2,000-MW power project, the ministry of power has offered the national capital 2,500 MW of power from various projects of the Damodar Valley Corporation (DVC). The Delhi government had proposed signing an agreement with Chattisgarh for a 2,000 MW coal- based plant in Chattisgarh and source the entire power to Delhi. However, insistence by Chattisgarh for a 5 per cent free power to the state led to collapse of talks between the two sides.  The power ministry offered that the DVC would be able to sign a power purchase agreement with Delhi to supply 500 MW of power from its expansion projects, under construction at Mejia (West Bengal) and Chandanpur. This power will be available in 2007-08 itself. Alongside, it has also been proposed that DVC would also be able to give 1,000 MW of power to Delhi from its proposed expansion project at Mejia by adding two units of 500 MW each. Another 1,000 MW power can be made available to Delhi by DVC from its prosposed power station at Koderma in Jharkhand.

Three new power stations by 2010 - min

August 17, 2006.  Delhi Power Minister dedicated 490 MW power plant would be set up at the Badarpur Power Station and will be functional by the 2010. The government will install two coal-based units of 490 MW each at Dadri in collaboration with NTPC. The two units, which is expected to cost around Rs 4,000 crore, will sufficiently cater to the power demand in the Capital. Bhutan to supply 200 mw power to Delhi routed through northern Bihar and Uttar Pradesh and a transmission trial is on. There is also a plan to ask for electricity from the Damodar Valley Corporation.

NTPC aims to put nuclear plant 5 yrs ahead of plans

August 17, 2006. NTPC Ltd has stepped up its plans to set up a nuclear power plant. The company hopes the 2000-MW plant, to be set up in South India, will be up and running by 2012, ahead of the projected 2017. Two locations have already been shortlisted.  NTPC could be looking at Tamil Nadu as a possible location. There is an existing nuclear power generation facility at Kalpakkam near Chennai.  At present, nuclear power plants are set up only by NPCIL, a PSU under the Department of Atomic Energy

GE plans to build N-plants, supply fuel

August 17, 2006. After discussions with Nuclear Power Corporation of India (NPCIL), GE now intends to supply advanced boiling water reactor (ABWR) and economic simplified boiling water reactor (ESBWR) technologies to India. GE has two technologies that would be a great fit for the Indian market. The first is the ABWR. This is the only Generation-III reactor technology that has been developed, approved, built and operated in the world. GE holds technology for ESBWR. This is based on the ABWR technology platform with some key evolution that will improve operational efficiency, safety and economics. It entails lower construction and operational costs. The design is currently undergoing review by the Nuclear Regulatory Commission in the US. Final Design Approval is expected by ’08, but the design is already being developed for two US utilities. GE Nuclear is primarily looking at four principal areas of opportunities in India, including building reactors. It’s keen on supplying fuel for these reactors, along with parts and services, to maintain and improve plant performance.

KEC bags $32mn transmission order

August 22, 2006. KEC International Ltd has bagged three orders worth Rs 150 crore from international and domestic markets. GRTE, the power transmission division of Algerian utility company Sonelgaz has placed a Rs 70 crore order (11.5 million euros) for supply and construction of 400 KV single circuit transmission line over 52 kms from Ain Sefra to Mougrar. The West Bengal State Electricity Board has placed a Rs 58.3 crore order for supply and construction of three lines of 132 KV D/C each around Haldia. The company has also bagged a Rs 22 crore contract in Abudhabi for a 220 KV transmission line of 12 kms from Mirfa to Ruwaison on turnkey basis. The company is one of the leading power transmission, engineering and construction company with presence in more than 15 countries. KEC is currently engaged in executing orders in various countries such as Abu Dhabi, Ethiopia, Libya, Kuwait, Algeria, Iraq, Afghanistan, Zambia, Oman and Nigeria. In the domestic market the company is executing various orders for Power Grid Corporation of India Ltd (PGCIL), West Bengal State Electricity Board (WBSEB) and Uttar Pradesh Power Corporation Limited (UPPCL) etc.

Northern Grid to be synchronised in Sept

August 21, 2006. The stage is set for the synchronisation of the country's largest and most power-deficit grid — the Northern Grid — with the Eastern, North-Eastern and Western Grids from September. The attempt to synchronise operations in four of the country's five regional grids was prompted by a need to ramp up the interconnection between the Northern and Eastern Grids for transferring up to 1,000 MW surplus power from the eastern region to the energy-deficit northern region, mainly with the Tala project, beginning to flow in from Bhutan to northern States through the Eastern Grid. Also the transfer of electricity from the first stage of NTPC Ltd's Kahalgaon-2 station, located in the eastern region, but whose power has been allocated to the northern region, would be possible with the synchronisation of operations. However, with the prospect of the four regions operating together in synchronisation, apprehensions of any potential grid indiscipline endangering the grid security in all the four regions have prompted the grid managers to stipulate measures such as a blanket ban on bypassing of under frequency relays (UFRs) in the regions. Concerns regarding possible overdrawal of power by the electricity-deficit Northern and Western Grid constituents have also prompted preventive measures such as raising UFR settings in both the regions from the permissible lower limit of 49 hertz to 48.8 hertz to delay tripping. A differential setting between the eastern region and the northern region has also been mooted to avoid overloading of lines in case of generation loss in the northern region.

Punj Lloyd bags $177mn order in Rajasthan

August 18, 2006. Engineering construction major, the Punj Lloyd Ltd, has bagged an order worth Rs 823 crore from the Rajasthan Vidyut Utapadan Nigam Ltd for setting up a 500 Mw power plant in the state.  The company would build two units of 250 MW power plant, Chabbra Thermal Power Station, as per the secured order, which is to be executed on the engineering procurement and construction basis.  Punj Lloyd would be responsible for building up the complete power station with the exception of main plant equipment. 

PowerGrid firms up $8.6bn investment for 11th Plan

August 17, 2006. PowerGrid Corporation has firmed up an investment of Rs 40,000 crore in augmenting transmission network during the 11th Plan period. The corporation will also incur an expenditure of Rs 9,000 crore to lay 800 KV (plus, minus) high voltage direct current (HVDC) transmission line. This will help transmission of nearly 50,000MW hydro power from north eastern region to other parts of the country. The corporation would be able to install the national grid with carrying capacity of over 37,150 MW by 2012. The corporation, which has so far completed national grid of 9,000 MW, will be able to increase the transmission capacity to 18,000 MW by March 2007.

NTPC revives Jharkhand power unit plan

August 22, 2006. The National Thermal Power Corporation (NTPC) has decided to revive its seven-year-old plan to build a 1980 MW power project in Jharkhand.  Construction work would begin by this year end.  NTPC had laid the foundation of the proposed 1980MW thermal project at Tandwa in Chhatra district of Jharkhand. The power project would be the first Central's sponsored power project in Jharkhand after it was constituted by bifurcating undivided Bihar in 2000. There was inordinate delay in starting the construction work of the NTPC power plant in Jharkhand because of funding issues. The Central Mine Planning & Design Institute Ltd (CMPDI), a subsidiary of Coal India Ltd. (CIL), had prepared the detailed project report (DPR) for the power plant. 

SC asks Delhi for power status

August 22, 2006. The Supreme Court gave the Delhi government two weeks to state the status of the Tata Power’s proposed 1,000 MW gas-based project, which has been pending since 2003.  The court also asked the government to detail the short-term steps it proposed to take to meet the power crisis in the national capital.  The government has admitted in its affidavit that Delhi would continue to experience power problems till 2011. This means that unless there was a short-term plan for power generation, there would not be sufficient power even during the Commonwealth Games scheduled for 2010. 

Orissa for levying duty on power generation by IPPs

August 22, 2006. Orissa chief minister has written to the Planning Commission and the PMO for levying duty on power generation by independent power producers (IPPs). At present, under entry 53 of the state List, state governments can only levy duty on consumption and sale of electricity and there’s no duty on power generation either by the Centre or states. The Orrisa govt has argued that duty on power generation should be levied so that there’s an equitable share between power consuming states and generating states. The state where the power plants are located faces environmental degradation due to residue handling. Power plants, also provides only limited job creation so they should be able to get revenue by way of a duty.  Orrisa government is yet to accord final clearance to about 20,000 MW power projects planned by IPPs and wants the matter to be resolved at the earliest by the Centre. The Union List does not specify any duty on power generation, entry 97 empowers the Centre to levy any tax which is not specified elsewhere. The Centre could through this provision levy a tax on power generation.

NTPC struck short-term deals to overcome gas shortages

August 22, 2006. The state-run NTPC Ltd, which is forced to run its gas-based power plants below capacity for want of adequate gas, has stepped up its efforts to mitigate shortfall in gas supply for its plants. The PSU is exploring various options of entering into tie-ups and short-term contracts to meet up with its requirement of 17.35 Metric Million Standard Cubic Metres per day (mmscmd). The company uses gas as fuel to run its six combined cycle gas-based power plants (CCGPPs) — Anta, Auraiya, Faridabad, Dadri, Kawas and Jhanor-Gandhar. The total quantity of gas required for these plants, based on 90 per cnet plant load factor (PLF), is 17.35 (mmscmd). However, NTPC has been given a gas linkage, under Administered Pricing Mechanism (APM), for 13.74 mmscmd only. Out of this, contracted quantity with GAIL India is 12.93 mmscmd. In a bid to partly overcome the shortage, the power PSU, on its part, has made additional gas tie-ups. These gas contracts include Panna-Mukta-Tapti (PMT) gas and Regasified Liquefied Natural Gas (RLNG) from GAIL India, gas from Gujarat State Petroleum Corporation (GSPC) and RLNG from Indian Oil Corporation Limited (IOCL) & Bharat Petroleum Corporation Limited (BPCL). Out of these additional gas tie-ups of 4.2 mmscmd, the additional quantity of gas received during 2005-06 was 1.3 mmscmd and between April and July 2006 is 0.74 MMSCMD. Moreover, the PSU has recently entered into short-duration contracts to procure spot RLNG from GAIL India, BPCL, IOCL & Hazira LNG Pvt Ltd.

Singareni Collieries, NTPC to form joint venture

August 22, 2006. The State-owned Singareni Collieries Company Ltd (SCCL) and NTPC Ltd are set to sign a joint venture agreement to promote one or more companies to take up coal mining and coal-based power projects. A MoU will be signed between the SCCL and NTPC. The MoU is aimed at synergising the business operations between two large undertakings that could potentially mean better economies of scale in power generation and coal mining leveraging joint capabilities. As per the terms of the MoU, NTPC & SCCL will have equal equity holding in the joint ventures they plan to create with a debt and equity ratio of 70:30 respectively. The MoU will be valid for five years initially. In line with the Government policy for "Power for all by 2012," NTPC has drawn an ambitious programme for capacity addition to become a 66,000 MW Company by 2017. Major portion of this capacity addition would be coal based.

Maharashtra gets approval to set up 2 power SEZs

August 22, 2006. After bagging the most number of special economic zones (SEZs), Maharashtra is set to break new ground. It has received an in-principle approval from the ministry of commerce for two power SEZs. The state’s industry development agency, Maharashtra Industrial Development Corporation (MIDC), is looking at setting up a 1,000-MW power plant in Chandrapur and a 250-MW plant in Raigad. The economic plans about the SEZs will be finalised in six months.  MIDC also has two gas-based power plants, one at Navi Mumbai and another at Butibori. The plants will be run by Reliance. The idea of a power SEZ was emanated from the need for units located in an SEZ to be cost competitive. Since power is a significant part of input costs for all sectors, from IT to manufacturing, these power SEZs will help keep power costs down. Being SEZs, the power plants will be able to import fuel without paying customs or excise duties. The will help keep generation costs low. MIDC will appoint consultants who are expected to submit their report by January ’07 on the detailed economic plans for these SEZs.  MIDC already holds 240 acres in Raigad and will need to acquire another 10 acres for the proposed 250-MW power plant.

Pre-qualified bidders for Sasan, Mundra projects seek clarification

August 21, 2006. Pre-qualified bidders for Sasan and Mundra projects have sought clarifications from power ministry on various issues ranging from the condition relating to achievement of financial closure, dilution of payment security mechanism and provision of buy out in case of default. Tata Power Company (TPC), Essar Power, GMR-CLP Power India and nine others have, in their separate communications have argued that the time stipulated for achieving financial closure, nine months from the date of signing of project agreements, was not sufficient for the lenders to complete their due diligence and accord final sanctions to the project(s). The absence of final clearance from ministry of environment and forest (MoEF) and lack of clarity on the various fuel and relief and rehabilitation related issues may prove to be deterrents in early financial closure of the project. These bidders have also raised serious concerns over the dilution of payment security mechanism. They have opposed provision of escrow account on incremental revenue.

IPPs seek power ministry’s help for coal linkage

August 21, 2006. Independent Power Producers (IPPs) have sought the power ministry’s intervention for an early decision on long term coal linkages to their upcoming projects. IPPs, who have planned their investments in various states, argued a delayed decision would stall the financial closure and in turn delay the project development. Sterlite, Essar Power, Tata Power Company are some of the IPPs who have made a strong plea to the centre in this regard. Sterlite Industries, which is setting up 2400 MW project at Jharsuguda in Orissa, has argued that the long term coal linkage has been deferred even though the project had made substantial progress and moreover, the coal availability has been confirmed by Mahanadi Coal Fields Ltd/Coal India Limited. Apart from the 13.25 million tonne coal linkage required for the 2400 MW project, Sterlite has also requested for 3.88 million tonne of coal linkage for 675 MW captive power project, and 7.50 million tonne coal linkage for 1200 MW project. The company admitted that it has made representation to the ministry in this regard, but preferred not to make any comment at this point in time.

Distribution firms to score over power producers on coal blocks

August 21, 2006. Under a new policy proposed by the ministry of power, captive coal blocks will be awarded to distribution companies rather than power plant developers. Discoms, which are mandated to procure power only through tariff-based competitive bidding, will transfer the coal block to the generator that provides the lowest tariff for electricity for the period of the contract. This proposed policy will reverse the current practice of allowing independent power producers (IPP) to apply for captive coal allocations. By allocating the coal block to the discom for transfer to the successful bidder, the government is ensuring a level playing field. No bidding IPP will have an unfair price advantage over another. Those plants with coal linkages are at a disadvantage vis-a-vis those with captive coal blocks as the former have to pay market rates for their coal.

The proposed change in the policy for allocating coal blocks to power plants needs to be seen in the context of the Electricity Act ’03, which promotes competition, as well as the National Electricity Tariff Policy and the competitive bidding guidelines for procurement of power framed under the Act. Both the policy and the guidelines require all distribution companies to buy power through tariff-based competitive bidding. The tariff policy notified in January makes it clear that all future generation projects in the private sector will have to be competitively bid.

The decision will also help stem the practice of setting up of power generation plants by the MoU route, besides creating a level playing field. It is felt that the smaller private power producers will now have a reasonable chance of success at bids called by the discoms. However, there are other concerns being raised. The tariff policy exempts the government owned or controlled plants from the competitive bidding regime. This could mean that state-owned power companies could pick and choose the projects they would like to develop for themselves and thereby edging the IPPs out from lucrative projects. The tariff policy doesn’t prevent state-owned power enterprises from participating in bids called by the discoms for buying power, this too could result in an unfair advantage for the state sector plants. 

NTPC to pump $2.15bn in coal production

August 21, 2006. NTPC Ltd plans to invest around Rs 10,000 crore for the production of 50 million tonnes of coal by 2013. The company will kick-start its coal production from the Pakhri Barwadih mine in Jharkhand by December 2007.  For production of every 10 million tonnes of coal, it takes an investment of around Rs 2,000 crore. The government has allocated seven captive coal blocks to NTPC for coal production. It has been allotted the coal blocks of Kerandari (228 mt), Chatti Bariatu (243 mt), Chattrasal (150 mt), Dulanga (260 mt), Talaipalli (965 mt), Brahmini (1,900 mt) and Chichro Patsimal (356 mt). The seven coal blocks have a combined capacity of 4,102 mt. 

Ministry wants investment cap waiver for NTPC

August 19, 2006. The ministry of power has moved the Cabinet to waive the ceiling of Rs 1,000 crore for equity investments by domestic power major, NTPC, so that it could participate in the development of ultra mega power projects. The ceiling applies to investment in joint ventures and wholly owned subsidiaries in India and abroad.  A 4,000-MW ultra mega project would cost around Rs 19,000 crore on current cost basis and Rs 22,000 crore on completed cost basis. Development of associated coal mines (20 million tonne per annum) would require an additional capital of around Rs 4,000 to 5,000 crore, taking the total cost of setting up one such project to Rs 23,000 to Rs 27,000 crore.  NTPC has identified BHEL as its joint venture partner for ultra mega projects and will also rope in a global company as its mining partner. Under the existing delegation of powers to navratna companies, NTPC is authorised to invest only upto Rs 1,000 crore in a single joint venture project.

The equity required in a 4,000-MW ultra mega project, in 70:30 debt equity ratios, would be around Rs 6,000 crores. As NTPC plans to retain around 74 per cent to 89 per cent of equity, its proposed equity investment in the joint venture project would exceed the limit of Rs 1,000 crore stipulated under DPE guidelines. In order to allow NTPC to participate in the bidding of ultra mega power projects, it is essential to empower NTPC's board to approve equity investments for establishing JVs with central and global mining operators.

While seeking the waiver of this Rs 1,000 crore celing, the power ministry has, however, assured that the ceiling of 15 per cent of the net worth of NTPC in one project will not be breached. As on March 31, 2006, 15 per cent of NTPC's net worth works out to Rs 6,744 crore.  Also, the other requirement that the overall ceiling on such investments in all projects put together will not exceed 30 per cent of NTPC's net worth will also remain. NTPC along with its joint venture partner can invest a maximum of around Rs 13,500 crore in ultra mega power projects. This also means that NTPC and its JV partner can execute a maximum of two ultra mega power projects.

Haryana seeks 26 per cent in power project

August 19, 2006. The Haryana government has decided to have not less than 26 per cent equity in the 1500 MW thermal power plant to be set up in the state, the proposal for which has been given by the Union power ministry and the Delhi government.  It was decided that a suitable site for this project would be identified shortly in the state. NTPC would set up this project at a cost of Rs 6,000 crore and also manage it.  While 80 per cent of the expenditure would be met through loan and the remaining 20 per cent would be borne by the partners with equity stake in the project. If Haryana's 26 per cent equity is agreed to, the state would have to bear about Rs 300 crore as part of the construction cost.  It was informed that a MoU would be signed soon by the Haryana Power Generation Corporation Ltd, NTPC and Delhi government to set up this project, which would be commissioned by 2009.

‘Powerless’ India eyes energy booster from neighbours

August 16, 2006. The Centre has stepped up efforts to implement its bilateral co-operation deals with Bhutan, Nepal and Sri Lanka in order to overcome power shortages across the country. Bhutan, which has potential of 30,000 MW of hydropower generation, has inked protocol to the agreement on Tala hydro project recently with India, whereby the tariff the project will be Rs 1.80 a unit. The tariff of Tala hydro project will be increased by 10 per cent every five years till the loan is repaid and thereafter at 5 per cent every five years.

Bhutan exported power close to 1,748 million units in 2003, 1,735 million units in 2004 and 1,764 million units in 2005 from Chukha and Kurichhu projects.  Central government said as far as Nepal is concerned, it has hydro potential of 83,000 MW, of which 568 MW capacity is operational. Three major multi-purpose projects in Nepal— Karnali, Pancheshwar and Saptakosi— are at present under discussions at various levels as mutual benefits projects.  In Sri Lanka, NTPC is in the midst of finalisation of its MoU with Sri Lankan authorities for setting up of 500 MW project based on imported coal.

USAID has taken up a feasibility study for India’s electrical grid interconnections with Bangladesh and Sri Lanka. India has agreed to this study, which is being taken up by PowerGrid Corporation in view of the consent of both Bangladesh and Sri Lanka for the same. In case of cooperation with Myanmar, the state-run National Hydro-electric Power Corporation will soon sign MoU with Myanmar government for the preparation of detailed project report for Tamanthi hydro project. India has assisted Myanmar by way of setting up a demonstration bio-mass gassifier plant.

Global power majors drop plans of going it alone

August 16, 2006. Several foreign players have revised their plans of going it alone in the Indian power sector, particularly with regard to the ultra mega power projects.  While some players like South Korean power major Doosan (with Tata Power), the Hong Kong-based China Light Power (GMR group), and the Canadian SNC Lavlin have announced tie-ups with Indian players, others are said to be scouting for suitable partners.  Global power majors had initially expressed an interest in the ultra mega power projects, but doubts about their financial viability might hold up their participation in these projects.  According to sources close to the development, several of these foreign players might now back out, or bid only in collaboration with an Indian partner to reduce their own exposure to risk. At least two of these companies confirmed to Business Standard that they were dropping plans to go it alone in India.  Others that continue to be in the fray are said to be considering a power purchase agreement (PPA) that includes a clause for revising tariffs at shorter intervals.

Among the 22 companies and consortia that have been short-listed for request for qualification so far, there are global giants like Hong Kong-based China Light and Power (CLP), US-based AES and Khanji, Japan’s Sumitomo, and Singapore-based Globeq. Others in the fray include SNC Lavlin, GMH, TXU and Suez Energy.  At the stage of expression of interest, there were AES and Khanjee Holdings from the US; Sumitomo, Itochu, and Mitsui from Japan; Korea Electric Power Co (South Korea); China Line Power (China); Tronoh Alco Combine from Malaysia; Duncan Machneil (UK); and Electricte De France (France). 

When the ultra mega power projects were announced in October 2005, it was expected that their sheer scale (4000 MW scaleable to 8000 Mw) would attract major global players.  While a virtual who’s who of the global power industry turned up at the road shows organised by the government in the US, Europe and Hong Kong, and also at the individual project bidders’ conferences, doubts about the projects’ viability have been creeping in since that time. The biggest hurdle continues to be the government’s refusal to provide a sovereign guarantee. The government has categorically refused to provide a sovereign guarantee, suggesting instead that an escrow facility, where the SEBs deposit the payable amount, be used.  The government has also ruled out a tripartite agreement structure involving the RBI, as in the case of NTPC’s agreements with the SEBs, where the money devolves directly from the RBI to NTPC in case of a default. 

Many of the foreign players feel that a single mega project like Sasan should be broken up into 1000 Mw units, with different developers being allowed to develop the units, so as to spread out the risk. These factors are expected to push up the bidders tariff from an expected Rs 1.80 per unit to above Rs 2 per unit, making the power from these projects expensive compared to other generating units like Simhadri in AP, which has been taken as a benchmark for pricing coal-based power (Simhadri supplies power at Rs 1.60 per unit).    The projects, which are expected to cost around Rs 15,000 crore, will have a 26 per cent (Rs 3,000 crore) equity component, which cannot be forex-linked. The ministry is yet to clarify on issues such as fuel indexation, coal prices, and forex linkages. 

OIL & GAS

Harvest signs MoU for three new Venezuela fields

August 21, 2006. Harvest Vinccler, has signed a MoU with Venezuela to add three oil fields to an existing joint venture. Harvest Vinccler this year became a 40-percent partner with state oil company PDVSA in the Petrodelta joint venture to operate a group of fields known as the "South Monagas Unit" that currently produce 19,000 barrels of oil per day. The Temblador field is currently producing around 1,000 barrels per day, while the Isleno field is expected to be in production within three years. The El Salto field was previously under production but is currently dormant. The plan being developed with PDVSA subsidiary CVP projects an "annual growth rate in excess of 20 percent to approximately 75,000 barrels of oil equivalent per day by 2011.This would leave Harvest with a net production of 27,000 barrels per day in 2011.

Sinopec's Iran oil block fails to yield enough reserves

August 21, 2006. China's fourth oil exploration well in the Zavareh-Kashan area has failed to find sufficient reserves to declare the field economically viable. It is unlikely that the contractor will declare the area as commercially viable based on the results from its fourth drill, Hossein Roshandel. China Petrochemical, known as Sinopec, won exploration rights for the concession in 2001. Only its first well produced satisfactory results. Iran, holder of the world's second- largest oil and gas reserves, is struggling to compensate through new discoveries for the depletion of its older oil fields. Iran needs to add between 300,000 barrels and 400,000 barrels of new daily oil output each year. Oil output currently stands at 3.8 million barrels a day, or 7.5 percent below its 4.11 million quota within the Organization of Petroleum Exporting Countries. Sinopec signed another contract worth US$19.6 million in June with Iran's state-owned National Iranian Oil to explore and develop an oil concession area in Semnan province, east of Teheran. Sinopec has also been negotiating to buy a 51 percent stake in a project to expand the Yadavaran oilfield in southwestern Iran.

Opec cuts demand growth forecast

August 17, 2006. World oil demand will rise more slowly than previously expected in 2006, partly because of record high oil prices. Oil demand this year will rise by 1.3 million barrels per day, 80,000 bpd less than expected a month ago, the producer group said in a monthly report. Growth next year was left unchanged at 1.3 million bpd. As a result of the unexpected decline in oil demand in the OECD countries in the second quarter of the year, world oil demand growth was revised down. 

Indonesia opens bids for oil, gas areas

August 16, 2006. Indonesia, Southeast Asia's largest oil producer, invited bids for 41 oil and gas areas to raise the country's dwindling petroleum reserves and production. The country, after delaying the bidding round at least three times, wants companies to bid for exploration rights in 20 areas and plans to award 21 areas through so-called direct offerings. ConocoPhilips, the third-largest US oil company, will be among the bidders. Indonesia is seeking new oil and gas reserves to replace aging fields and reverse a decade-long trend of declining production. Most of the country's untapped hydrocarbon basins are in eastern areas, where a lack of power supply, roads and communication links has hampered development.

Areas to be offered include offshore oil and gas blocks in the Natuna Sea, Makassar Straits, and offshore and onshore areas in Java. The government will get between 60 and 80 percent of oil revenue from the blocks. That is lower than the 85 percent of oil revenue that the state usually gets. Prospective bidders can get bidding documents and direct proposals from August 28. The deadline for submission of direct-offering documents is October 11 and December 26 for the regular tender.

Iraq to build more refineries

August 22, 2006. Iraq plans to build several new oil refineries and upgrade existing ones to start exporting petrol and other byproducts by 2010, but acknowledged that insurgent attacks on pipelines remain a serious problem. Iraq also plans to increase the production of crude oil from about 2 million barrels per day to the prewar level of 3 million barrels per day by the end of the year. The largest of the new refineries – to be located in central Iraq – will be completed by 2009 or 2010. Although Iraq is believed to hold the third largest crude oil reserves, it is facing a severe shortage of fuel including petrol, diesel and cooking gas because of the dilapidated state of its refineries. The shortage of fuel has sent the black market price of petrol soaring to as much as $4 a US gallon (1 euro per litre). The official price is $1 a gallon. Also, the pipelines supplying crude to the refineries are often attacked by insurgents who have been fighting US forces and the new Iraqi government since the fall of Saddam Hussein.

Phase II of Parsian Refinery due for Sept. 2006

August 21, 2006. Phase II of Parsian Gas Refinery in Fars Province, southern Iran, will come on stream in late September 2006. The phase will boost the daily refining capacity to 40 million cubic meters of gas fed through Shanol, Varavi and Homa gas fields. A total of 31 wells were completed at these fields in 18 months of drilling operations, and thereafter, wellhead equipment plus manifolds induction were followed. Moreover, 183 km of six and eight-inch pipelines to conduct the gas to collection units and 191 km of 16-, 24- and 36-inch gas transfer lines have been laid up to now. Phase I, is 86 percent complete and production capacity is set at seven million cubic meters per day which is expected to reach 10 million cubic meters after the completion of the second phase.

Kingdom, Indonesia begin work on refinery project

August 18, 2006. In a major move to boost cooperation in energy sector, Saudi Arabia and Indonesia have started working on a proposal to set up a joint refinery project in Indonesia. Jakarta was preparing the project proposal for a new Saudi-Indonesian refinery, which would be submitted to Saudi Aramco soon. Saudi Aramco was awaiting the project proposal from Indonesian oil company, while the Indonesian side is still preparing the proposal. The only Asian member of the Organization of Petroleum Exporting Countries, Indonesia has been a net importer of crude oil. Pertamina, a wholly state-owned enterprise with 14 subsidiaries including Pertamina Energy Trading Ltd., is working on the project from Indonesian side.

Kazmunaigaz wants to build refinery in Turkey

August 16, 2006. Kazakh Oil and Gas Company (KazMunaiGaz) is carrying out feasibility studies to build a refinery in Black Sea. KazMunaiGaz wants to build the refinery to transfer Kazakh oil to Mediterranean. The company, even if it cannot build a refinery, is positive towards a consortium with Russian Lukoil which formally applied to EPDK (Turkish Energy Market Regulatory Authority) to build a refinery in Turkish northern city of Zonguldak. After collapse of Soviet Union, Kazakhstan has become one of the 20 countries that export most oil in the world. Recently, Petrol Ofisi as well as Calik Energy and Indian Oil Corp. applied to EPDK to build refinery in Ceyhan.

Praxair starts up first LNG plant in Brazil

August 21, 2006. White Martins, a subsidiary of Praxair, Inc. has started up the first natural gas liquefaction plant in Brazil. It is also the first LNG plant to be built and operated by the company worldwide. The plant will supply LNG to a joint venture, named GasLocal, between White Martins and Petrobras, Brazil's state-owned oil company. Located in Paulinia, in the State of Sao Paulo, the plant produces 14.5 million cubic feet per day of LNG which is being distributed by truck to supply regions of Brazil not serviced by natural gas pipelines. Liquefaction and distribution of natural gas is similar to processes used with other gases, such as oxygen and nitrogen, which are already supplied by White Martins.

Dubai companies to set up $1bn LNG storage facility

August 22, 2006. Two Dubai-government backed companies and a Canadian LNG marketing firm plans to build a $1 billion LNG storage facility, aiming to turn the booming emirate into a LNG trading hub. They would develop the one-of-a-kind LNG storage facility at Techno Park in the Jebel Ali Free Zone. The facility will give customers the ability to store, trade and plan supplies of LNG and its capacity could range from 40 billion to 65 billion cubic feet. The storage hub will enable LNG suppliers and buyers to store and trade across different months owing to substantial seasonal price variations in LNG pricing. It will also allow a multiplicity of buyers, sellers and traders to arbitrage across several regions, and support derivatives trading as a spot market emerges around the storage facility.

Australia's Woodside files for Calif. LNG project

August 18, 2006. Woodside Petroleum Ltd. of Australia has filed for permits to build an offshore LNG terminal and dual undersea pipelines to bring the natural gas to shore near the Los Angeles International Airport. If the terminal is approved, it will import LNG from deepwater fields off Australia's northwest coast and could open as early as 2010 or 2011 and import up to 1.2 bcf per day, on an average annualized basis. Woodside plans to place two underwater buoys and about 28 miles of underwater pipeline to come ashore near LAX.Woodside will construct two regasification LNG carriers which will meet LNG tankers after they have crossed the Pacific Ocean. The Woodside tankers will convert the supercooled LNG to natural gas and put the gas in the pipeline, which will hook up to the Southern California Gas pipeline.

Iran will pump gas to Europe via Turkey

August 20, 2006. Iran and Turkey have agreed on a joint scheme to export Iran's natural gas to Europe via Turkish pipelines. Iran, with the world's second largest gas reserves after Russia, has been considering Ukraine and Turkey as possible routes to Europe and in July 2005 it announced a preliminary agreement with Ukraine to use its pipelines.

PNG pipeline setback no risk to Australia exports

August 19, 2006. Australia's western gas fields are destined to supply world markets even if a plan to bring supplies for the country's own use by pipeline from Papua New Guinea founders. A shortfall of gas buyers for the planned $3.5 billion PNG pipeline show that Australian demand though forecast to double in the east by 2025 is not strong enough to threaten exports to a world hungry for the clean fuel and more willing to pay up. The domestic coal and methane producers would have to fill the demand gap if the PNG pipeline is not built, because bringing gas from the offshore western fields to Australia's populated east would be even more costly.

Japan's foray into Central Asia

August 21, 2006. Energy resource-poor Japan is revving up its diplomatic drive to strengthen relations with the oil- and gas-rich countries of Central Asia in a bid to ensure its energy security amid stubbornly high oil prices. Japan invited foreign ministers of Central Asian nations to talks in early June. And in a more significant move that highlights how passionately Japan is wooing the Central Asian nations. Japan's energized diplomatic drive in Central Asia comes at a time when Tokyo is implementing its new energy strategy aimed at ensuring stable oil, gas and other resource supplies in the long term to feed the world's second-largest economy.

The Ministry of Economy, Trade and Industry released its new national energy strategy at the end of May. It calls for, among other things, strengthening ties with resource-rich countries through such measures as free-trade agreements (FTAs), promoting nuclear energy, and securing energy resources abroad through the fostering of more powerful energy companies. The new strategy specifically calls for increasing the ratio of "Hinomaru oil," or oil developed and imported through domestic producers, from the current 15 per cent to 40 per cent by 2030. Japan has also decided recently to utilize aid to strengthen ties with resource-rich countries.

Japan imports almost all of its crude oil, nearly 90 per cent of which comes from the Middle East. To ensure its energy security, Tokyo is desperate to diversify its hydrocarbon sources in order to reduce its heavy reliance on the Middle East for crude-oil imports. As such, an obvious choice for the country is to turn to the Central Asian and Caucasian nations, which became independent with the 1991 demise of the Soviet Union.

Oil and gas are not the only resources that whet Japan's appetite. Japan is also stepping up its drive to secure uranium abroad as global demand for nuclear power rises amid spikes in oil and gas prices and growing environmental concerns. Kazakhstan has the world's second-largest uranium resources.

Tokyo aims to build roads and pipelines from Central Asia to the Indian Ocean via Afghanistan to carry oil and natural gas for imports into Japan. That's why Tokyo invited Afghanistan to the talks. The action plan adopted their calls for enhanced cooperation, including Japan's support for road construction to ensure a smooth route from Central Asia to the Indian Ocean. The Central Asia Plus Japan dialogue, which also involves Turkmenistan, was launched at Tokyo's initiative in August 2004.

Among projects in the region, Japan's Itochu Oil Exploration and Inpex Corp have a 3.92% and 10% interest, respectively, in a production-sharing agreement for three fields in the southern Caspian Sea. The Azeri-Chirag-Guneshli fields are about 120 kilometers southeast of Baku, Azerbaijan. The Japanese government-backed Inpex also has an 8.33 per cent interest in the Kashagan oilfield in Kazakhstan. Itochu Oil Exploration and Inpex also participated in the consortium that built the Baku-Tbilisi-Ceyhan pipeline, with interests of 3.4 per cent and 2.5 per cent, respectively.

The Japanese government-affiliated Japan Bank for International Cooperation (JBIC) also signed a loan agreement of up to $580 million for the link in early 2004. The BTC connects Azerbaijan's vast Caspian Sea oilfields to the Turkish Mediterranean port of Ceyhan via Tbilisi, Georgia. It has further been suggested that oil from Kazakhstan could also be transported through the pipe. The U.S. strongly supported the project, seeing it as a way to loosen Russia's energy grip on the South Caucasus.

Japan's new diplomatic focus on Central Asia comes at a time when the United States, Russia and China are all flexing their political muscles in the resource-rich but volatile region, competing in an attempt to secure energy. Japan apparently has a desire to play a greater geopolitical role, not only in Central Asia but also in Eurasia as a whole, while countering the growing influence of Russia and China in the region. In a development that raised eyebrows in the U.S., Japan's most important ally, China, Russia and four Central Asian countries issued a joint statement at a summit of the Shanghai Cooperation Organization (SCO) a year ago calling for an early withdrawal of U.S. forces from Central Asia. There is now only one U.S. base in Central Asia — in Kyrgyzstan. The SCO has received wide attention as an emergent "anti-U.S. league."

Meanwhile, Japan's ties with both Russia and China are far from easy over a variety of issues, including nasty territorial rows. Japan has frequently locked horns with China over natural-gas reserves in the East China Sea. China became a net importer of crude oil in 1993, and in 2003 overtook Japan as the world's second-largest oil consumer — with the U.S. secure in the top spot. China now depends on imports for more than 40 per cent of its oil. China is aggressively making inroads into Central Asia. China National Petroleum took over for $4.2 billion last year the Canada-based oil firm PetroKazakhstan, which operates solely in Kazakhstan.

China and Kazakhstan also inaugurated a 1,000-kilometer oil pipeline last December to send oil to western China, the first major export pipeline from the landlocked Central Asian republic that does not cross Russia. Eventually another pipeline will link up with this one from the Caspian region in western Kazakhstan, where the huge new Kashagan oilfield is being developed. Unlike China, Japan, the self-proclaimed champion of democracy in Asia, cannot turn a blind eye to poor records on democracy and human rights in many countries in Africa and elsewhere. Japan has applied strict criteria for aid provision to developing countries in Asia, Africa and elsewhere in the world, with democracy and human-rights protection as basic conditions.

Nepal govt revokes fuel price rises

August 20, 2006. Nepal’s government cancelled price rises for gasoline and other fuel after two days of widespread protests crippled the capital. The cabinet meeting decided to roll back the price to the previous rate after days of protests by people and MPs’ criticism. The government has formed a three-member committee which will submit its report within a month in order to hike the price of petroleum products. The committee will recommend to the government how to adjust the petroleum prices as per the international market and suggest reforms needed in the management of the Nepal Oil Corp before announcing the price hike next time.

The government raised the price of petrol, diesel, kerosene and cooking gas by as much as 25 per cent to offset the impact of soaring global oil prices on the Nepal Oil Corp, which sells fuel at subsidised prices in the impoverished kingdom. The minister earlier said that the corporation, a monopoly importer and distributor of petroleum products, owes 161.16 million dollars to financial institutions — including 121.12 million dollars to its sole supplier Indian Oil Corp.

1800 Chinese workers to get visa for RIL project

August 20, 2006. The ministry is in the process of clearing the way for issuing visa to 1,800 Chinese workers, to be brought in by China Petroleum International, for laying part of Mukesh Ambani-controlled Reliance Industries' gas pipeline. Reliance is laying a 1,400-km pipeline grid linking West Bengal with Kakinada in Andhra Pradesh to ferry gas from its huge find in the Krishna-Godavari basin.

The Chinese firm won the contract through a global tender floated for the project, estimated to cost around Rs 17,500 crore. The exploration regulator's recommendation is in line with government policy that envisages mandatory security clearance for Chinese and Pakistani nationals if they are to work on offshore projects. Since laying a pipeline entails no offshore work, expert workers and experts do not require any security clearance.

Venezuela to raise taxes on oil companies in Orinoco

August 20, 2006. Venezuelan cabinet has given initial approval to a tax hike on heavy-crude operations in the Orinoco River basin. Under the proposed reform, companies extracting heavy crude would no longer enjoy a special 34-per-cent tax rate and would now be required to pay 50 per cent like other oil operations. That benefit will be eliminated, so that all oil companies should pay 50 per cent of their annual earnings. Most oil companies operating in Venezuela already pay the higher rate but tax law also spelled out a discounted 34-per-cent rate on heavy crude extraction in eastern Venezuela's Orinoco basin, as well as oil-processing and transport concerns.

Norway's Statoil ASA, France's Total SA, BP PLC and U.S.-based Exxon Mobil Corp., ConocoPhillips Co. and Chevron Corp. are among the companies involved in heavy-crude projects in the region. Together, the Orinoco projects produce heavy oil that is upgraded into some 600,000 barrels a day of lighter, more marketable crude. The proposal will now be sent to the National Assembly for approval.

Associated gas recovery to gross Iran $62mn

August 20, 2006. Associated gas recovery from Bangestan and Lab-Sefid oil and gas fields, southwest Iran, and its injection into oil wells could save the nation over $62mn in foreign exchange. Currently Lab-Sefid produces 18,000 bpd of oil with 19 million cubic meters of associated gas yet to be recovered, projecting that collection and injection process from both fields may offer 1,400 barrels of condensate per day at the annual value of $9.5 million. Moreover, a project of this nature could increase oil production capacity by 6,000 bpd which may easily amount to $50 million per year. The value of 19 million cubic meters gas burned into the air is over $3.5 million per annum at current rate. The initial evaluation sets the cost of this project at Rls.570 billion ($64mn) to be completed by early March 2009.

China to invest in energy sector

August 19, 2006. Chinese private companies will soon finalise deals with their Pakistani partners to make investment in the petroleum and natural resources sector. The CCPI will send a delegation to Pakistan later this year to finalise their ongoing negotiations in the energy sector. The Chinese companies were encouraged by economic and investment policies of the present government in Pakistan and prepared to undertake joint ventures in the oil and coalmine sectors. Nearly 30 initial agreements were signed by China's private oil companies and their Pakistani counterparts during a forum held in Islamabad in April this year. These agreements cover investment in oilfields, oil refineries, coal-fired power plants and hydropower projects.

The two sides also discussed a possible oil pipeline from Gwadar Port to China's Xinjiang and building up oil storage and refining facilities at the port. The oil pipeline proposal was made in a general cooperation agreement reached by the two governments. The two countries have also proposed at the forum to establish an international joint fund to support the development of energy projects by Chinese private oil companies in Pakistan. The Chinese petroleum industry had indicated an interest in shifting its excess capacity to Gwadar. The CCPI and the All China Federation of Industry and Commerce (ACFIC) conveyed to Pakistani authorities during a recent visit that the Chinese petroleum industry was keen to invest in Pakistan's energy sector.

The ACFIC and the CCPI indicated that both the public and private sectors were willing to cooperate in energy projects in Pakistan. This cooperation will not be restricted to building an oil pipeline to set up an energy corridor to Gwadar, but also in shifting energy related industry to Pakistan. The government will need to provide strong support to lay down a framework for a safe financial, investment and security environment in Balochistan to attract this investment.

The Chinese petroleum industry sees four potentially fruitful projects. Firstly, an oil pipeline linking Gwadar to Xinjiang in China to set up an energy corridor. The economic viability of such a project is yet to be worked out. Secondly, the development of Gwadar Port Energy Zone, where the Chinese could set up an oil refinery with a capacity of 21 million tons. Thirdly, the Gwadar energy zone could accommodate other energy sector industries. Fourthly, the Chinese petroleum industry also indicated an interest in oil and gas exploration projects in Pakistan. The Chinese business groups had proposed that a Pakistan-China energy and trade cooperation promotion association be established for such projects.

The association would include members from the oil and gas sector and other industries in the power sector. They had also suggested that a Pakistan-China joint investment company be set up to finance these projects.

KBR venture signs on for Shell GTL project

August 18, 2006. KBR, the engineering and construction arm of oilfield services company Halliburton Co. its joint venture with Japanese energy contractor JGC Corp. had signed a contract to help develop a gas-to-liquids plant in Qatar. The plant, the Pearl GTL complex in Ras Laffan operated by Royal Dutch Shell Plc affiliate Qatar Shell GTL Ltd., will produce 140,000 barrels per day of gas-to-liquids products and about 120,000 barrels of oil equivalent of natural gas liquids, making it the largest GTL complex in the world.

Venezuela to increase oil sales to China

August 16, 2006. Venezuela plans to increase oil its sales to China by 50,000 barrels a day by the end of the year. Venezuela's state oil company, Petroleos de Venezuela SA, will increase sales to China to 200,000 barrels a day from the current 150,000 barrels per day. The shipments include crude and other products, such as fuel oil. Though the United States remains the No. 1 buyer of Venezuelan crude, Chavez's government has sought to sell increasing amounts to a variety of other countries in recent years. As recently as 2004, the South American country exported only 12,300 barrels a day to China. It also plans to seal an agreement during a visit to Beijing this month to buy 12 Chinese-made oil drills and to have an additional 12 drills assembled in Venezuela at a new joint factory.

Power

New thermal power plants announced in Pak

August 22, 2006. Wapda announced installation of new thermal plants for increasing the power-generation capacity by 1,350MW by December 2007. The authority was working for enhancing the power-generation capacity on war footings to save the consumers from inconvenience caused by loadshedding. For the purpose, it was not only installing new thermal power plants in the country but also making efforts for increasing the capacity of the existing ones.

The authority was importing two container-mounted generators having 250MW total capacity on rental basis, which would start production by December this year. Three power plants with a total capacity of 600MW (200MW each) were being installed outside Lahore, Gujranwala and Faisalabad, which would be completed by December 2007. Meanwhile, a 500MW combined cycle power plant was also being constructed in Chichokimallian. Wapda was committed to fulfilling the government’s pledge to electrify every village with more than 10 houses by December 2007. The power tariff for the local industrial consumers was less than what was being charged from the industry in the neighbouring countries. Wapda was also providing a subsidy of Rs.46 billion to consumers.

New natural gas powerplant in E Hungary

August 21, 2006. With backing from a consortium of Hungarian and other European banks, Karpat-Energo Kft is poised to kick off a Ft 30 billion project that will create a 230 MW natural gas fired combined cycle power plant in Vasarosnameny, eastern Hungary. The Hungarian Energy Office (MEH) approved the plan in December; the investor is hoping to get the go-ahead from environmental authorities by the end of August and start construction in the fall with general contractor EGI Zrt. The power station will become fully operational in January 2009.

Argentina takes bids on power generator project

August 18, 2006. Argentina’s four companies bid on a $2.5 billion pesos ($808 million) project to build two 800MW generators in the energy-hungry country. Germany's Siemens, France's Alstom, Japan's Mitsubishi and U.S. firm General Electric all submitted offers. The project, to be partially financed by the Argentine government, will mark Argentina's biggest electrical generation investment since the country's 2001-2002 economic crisis and aims to meet a sharp increase in energy demand in South America's third-largest economy. The government is seeking to sign the project's contracts in October, with operations slated to begin in 2008. Argentina has averaged sizzling annual growth of 9 percent since 2003, which has significantly boosted energy demand. But supplies are limited due to reduced investment in the sector after tariffs were frozen following the country's 2002 currency devaluation. Hoping to shore up natural gas supplies, Argentina agreed in June to pay 50 percent more for imports from neighboring Bolivia, a key supplier.

PPL signs long-term contract for eastern coal supply

August 16, 2006. PPL has signed a long- term agreement with one of the country's largest coal producers, CONSOL Energy of Pittsburgh. This agreement provides greater certainty in coal supply outlook for our Pennsylvania power plants. PPL is taking to enter into energy sales contracts for 2010, 2011 and 2012 at current forward prices, along with these types of longer-term fuel supply arrangements, are expected to result in margins that are at or above the assumptions included in PPL's long-term outlook. The contract will provide more than one-third of PPL's projected coal needs for its Pennsylvania power plants for 2008 through 2018. CONSOL's large mines in northern West Virginia and southwestern Pennsylvania will provide the coal. Receiving a significant portion of the coal supply for its Pennsylvania power plants from this region will enable PPL to make even more cost-effective use of its fleet of 1,250 rail hopper cars. Coal supplied under this contract will fuel PPL's Montour power plant in north central Pennsylvania and Brunner Island power plant near York, Pa. Environmental controls under construction at these plants are expected to remove nearly all of the sulfur dioxide from emissions and provide the additional benefit of reduced mercury emissions. The scrubbers at Montour are expected to be in service in 2008, and the scrubbers at Brunner Island are expected to be in service in 2008 and 2009.

Sasol plans gas-to-liquid plant in Iran

August 21, 2006.  Sasol, the world's biggest producer of motor fuel from coal, is in talks with Iran's government over the construction of a gas-to-liquid fuel plant. Negotiations between Sasol, PetroSA and the Iranian government for a gas-to-liquid plant in Iran are far in advance. Sasol is taking advantage of increased interest in its technology to turn coal and natural gas into motor fuel as the price of crude oil trades near a record. Sasol is considering building two coal-to-fuel plants in China at a cost of $5 billion each. It may expand its coal and gas-to-fuel production in South Africa by 20 percent over the next 10 years and plans to complete a gas-to-fuel plant in Nigeria and expand one in Qatar. Sasol also plans to expand its Mozambican gas production unit.

Balochistan reduces royalty on coal

August 21, 2006. The Balochistan government has reduced royalty on coal from Rs100 to Rs60 per ton and decided to review royalty and taxes on various minerals for the development of resources of the province. The meeting discussed in detail the issue of royalty on coal and other minerals and approved the reduction in royalty on coal and asked the mineral department to prepare recommendation for reducing royalty on other minerals. The cabinet also discussed the proposed privatisation of Pakistan Petroleum and agreed that in case it was privatised, the Balochistan government which held 50 per cent shares of the Balochistan Mining Enterprisers, a subsidiary of the PPL would continue its partnership with new owners instead of purchasing its remaining 50 per cent shares in, the larger interest of the province.

US investors to explore energy sector

August 20, 2006. A 48-member delegation of US investors will visit Pakistan next month to look for investment opportunities in the energy sector. The Pakistani delegation emphasised the need for shifting from thermal to hydel energy for power generation and said that Pakistan could not continue to depend on an expensive commodity like oil for producing electricity. From October 2005 to June 2006, Pakistan spent more than Rs68 billion on power subsidies, and cannot afford to continue like this for long. India has built windmills in Rajasthan with the help of USAID, and Pakistan is also seeking similar assistance in Sindh.

Iran says nuclear freeze not on agenda as deadline nears

August 20, 2006. Iran has said the suspension of uranium enrichment was not on the agenda, just two days before it is to respond to an offer by world powers aiming at securing a freeze of the nuclear work. The issue of suspension means returning to the past. It is not on the agenda of the Islamic republic of Iran. The UN Security Council has given Iran until August 31 to halt enrichment and reprocessing activities or face possible sanctions, amid Western fears its nuclear programme is a cover for efforts to build an atomic bomb. Tehran, an OPEC member and one of the world's top oil producers, has repeatedly insisted its nuclear programme is for peaceful purposes only and that it has the right to enrich uranium as a signatory to the nuclear Non-Proliferation Treaty.

Xcel facility would convert coal to gas

August 16, 2006. Xcel Energy is proposing to build the nation's first clean- coal power plant in Colorado that will capture carbon emissions - a move hailed as a breakthrough with major national implications. Xcel is committing $3.5 million for preliminary development of a new breed of power plant that would convert coal to gas for its fuel, delivering far fewer pollutants into the air and reducing greenhouse-gas emissions.

If approved by state regulators, the power plant - costing at least $500 million and possibly up to $1 billion - would put Xcel on the map as a national leader in reducing utility pollution that many scientists believe contributes to global warming. The plant would use a system known as integrated gasification combined cycle, or IGCC, in which coal is baked under high pressure and temperature to produce a gas that burns more cleanly and efficiently than raw coal.

Biogas plants for Tuticorin district

August 22, 2006. Tuticorin district will have 96 biogas plants to augment usage of renewable energy resources. To be established during the current fiscal, the move while helping to provide fuel for cooking purposes, will reduce the pressure on forests and accentuate social benefits.

AP to set up bio-diesel plantations in 13 districts

August 20, 2006. The Andhra Pradesh Government plans to take up cultivation of bio-diesel plants in 13 districts under the National Rural Employment Guarantee Programme (NREGP). The State Government also plans to financially support, to the tune of Rs 3,500 per acre, farmers interested in bio-diesel plantation.

The Government proposes to go in for plantation of Pongamia and Jatropa on at least 1 lakh acre of land in each of the 13 districts under the NREGP programme during this year. The Government also plans to create marketing facilities for bio-diesel produced under the scheme. The Government proposes to support more schemes aimed at promoting bio-diesel cultivation on a large scale. The Government also plans to introduce energy related curriculum.

Iran aims to boost renewable energy

August 21, 2006. Oil-rich Iran aims to generate more of its electricity from renewable energy as it joins global efforts to fight climate change. Iran's separate plans to develop nuclear energy, seen by many environmentalists as a clean source of power, have caused a row with the West, as it stands accused of wanting the technology for weaponry. Iran now makes less than one percent of its electricity from renewable sources, not including hydro plants, but aims to increase that to 1.5 percent by 2009. Production capacity is expected to rise to 750 MW from 110 MW.

Iran wants to be in line with the world efforts to curb the world environmental problems. The several projects in wind, solar and photovoltaic energy were in the pipeline and the total investment needed to boost the production capacity was about $750 million. Half of that would be covered by the government and the rest should come from private investors. As in other countries, Iran has been working on reducing costs of generating energy from renewable sources. They may become competitive with fossil fuel in the next five years, especially if oil prices remain as high as the current $70 a barrel. Iran produces 75 percent of its electricity from gas-fired plants, 10 percent on hydro plants, less than one percent from renewable sources and the rest from oil-fired plants.  Total power generating capacity is about 44,000 MW.

Wind farms to increase in Australia

August 20, 2006. Australia has approved the construction of a wind farm in the southwest Mount Gellibrand area. The $228.9 million project involves building 116 giant turbines and will produce enough power for 133,000 homes. The project will generate more power than any other in the state. This is great for the environment and great for the economy. The government of Victoria is on track to meet renewable energy targets. That means "ensuring that 10 percent of electricity, 10 percent of power is generated from renewable energy over the next 10 years and we believe that will mean about AUD 2 billion ($1.5 billion) worth of investment.

Japan sees biodiesel boost with new fuel standards

August 17, 2006. Japan, the world's third-largest oil consumer, will set out nationwide biodiesel standards this year in an effort to kick-start demand, but will not force refiners to sell it. Lagging international moves to use more biofuel to battle soaring crude oil prices and help ease global warming, Japan hopes the law allowing about 5 percent of fatty acid-derived fuel in diesel will spur more sales of green fuels made from renewable sources such as soybeans and sugar.

The legislation is expected to be passed by the end of this year, and the law will become effective by the end of this fiscal year. Japan now allows oil companies to blend about 3 percent of ethanol, another biofuel produced from crops such as sugar or corn, into gasoline, the motor fuel of choice for most drivers. It does not have rules to regulate biodiesel quality, deterring potential retailers from offering it and limiting its use to voluntary efforts by some local municipalities using waste vegetable oil for public transport.

Tokyo will not require retailers or refiners to blend a minimum percentage of pure biodiesel into their motor fuel, as some nations and governments have done. But it may consider tax incentives in future to encourage consumers to use biofuels. The government will also offer financial support for companies that are developing ethanol blending technologies. Faced with opposition from its powerful refiners and limited domestic crops, Japan has been slow to join the biofuel demand boom, which got a boost this year when U.S. President George W. Bush made it a cornerstone of his energy policy.

Oil prices that stay stubbornly above $70 a barrel have also made alternatives more economic, while a global push for cleaner fuels has aided momentum toward the cleaner fuel. But for the moment, no bio-transportation fuel - diesel or gasoline is sold at pumps at Japanese gas stations at all.

Siemens to build wind turbine blade factory in USA

August 17, 2006. Germany's Siemens plans to set up a wind turbine blade factory in Iowa, its first U.S. factory since it entered the wind power business two years ago, to take advantage of growing demand for clean energy there. The industrial conglomerate said on Thursday it would modernise and equip an existing 20,000 square metre (200,000 square feet) site at Fort Madison, where it expects to employ 250 people and start production in the first half of next year.

NZ plans geothermal power station

August 17, 2006. A company planning to build a $350 million geothermal power station near Taupo. The project would take two years to develop, so could be ready for commission in November 2008. Geotherm's plant was designed to reinject thermal fluid at depth to maintain a renewable geothermal resource indefinitely.

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