Energy News Monitor I Volume VI, Issue 22

The Irresistible Temptation to Predict Oil Prices

o energy commodity has attracted more attention and generated more inaccurate price forecasts during the last four decades of the twentieth century than crude oil. After the oil shocks of the 1970s, expectations of future large oil price increases were nearly universal. This in turn led the Western world to believe that fabulously wealthy Arab oil sheiks would take over the world’s fungible wealth. The prediction proved to be false when oil price fell below $ 10/bbl in the 1980s as supply exceeded demand. This great oil price counter-shock of 1986 meant that inflation adjusted price of crude oil returned to almost where it was in 1973.

Every subsequent dip in crude prices was followed by a relatively large but short lived rebound. The Iraqi invasion of Kuwait in 1990 took prices briefly above $33/bbl but it fell below $ 10/bbl with a few days. The next deep trough came in 1994 when crude prices dipped below $ 13/bbl followed by a peak ob $23/bbl in 1996. This was followed by a steady slide as revived production from Iraq coincided with the Asian economic downturn.

As prices continued to fall, The Economist forecast in February 1999 that oil prices would ‘slide to $ 5/bbl’ but by the end of the year, a cold Northern winter, stronger demand and low oil stocks began pushing prices sharply higher and crude price went to five times what The Economist predicted. In inflation adjusted terms, crude price in the mid 1990s was about as low as in the 1920s and although it rose above $20/bbl in 2000 and shortly above $ 30/bbl, it still remained far below median forecast levels.

None of the nine oil price projections for the year 2000 averaging about $ 18.42 (1994 dollars) proved to be correct. That year’s average was $25.77 (1994 dollars), 40 percent higher than the mean of the predictions. Not surprisingly during the early months of 2001 predictions were for skyrocketing prices later in the year but by July, in a sudden reversal of price trend, OPEC ministers were considering yet another production cut as price settled below $ 20/bbl.

Even the most conservative predictions by the participants of the International Energy Workshop of 1983 for oil prices in 1990 and 2000 turned out to be excessive. Two of the common errors of long term forecasting: tenor of the time and herd instinct strongly influenced the forecasters as the frequency distribution of forecasts reveals [Figure].

If we assume that there is no such thing as supply cuts in OPEC or demand increases in China or dwindling supplies of cheap oil, the price of crude oil can be seen as a numerical time series data on which statistical prediction methods can be used. Based on the values of standard deviation for historical oil prices, the price of oil in 2012 could be anywhere between about $21/bbl to $ 350/bbl. The forecasts deteriorate the further we try to peer into the future. As this prediction is based on current oil price, the implicit conclusion is that current oil prices are the best predictor of future oil prices. Nothing could be further from the truth.

Theories on ‘returns to storage’ have been proved to be inadequate in predicting future prices. Even the price of oil in ‘futures’ contracts have been proved to be ineffective predictors of future prices. In practice, even though one may find that futures price and spot prices differ, the difference is usually small. When new information causes spot prices to move, futures prices move in the same direction for every time horizon. This leads to the redundant conclusion that the present price is the best predictor of future price.

Despite the dismal record of crude price forecasts, the temptation to forecast has remained strong through 2000s even among those who should have known better. The price spike between 2002 and 2008 which took oil price to $147/bbl high constituted an increase of over 500 percent, far greater than any of the past price spikes which was not ‘predicted’ by most of the professional oil price forecasters. However ‘tenor of the time’ and herd instinct predictions that prices would hit $ 200/bbl or $ 300/bbl backed by complex mathematical models started pouring in and the blame was conveniently laid on the ‘insatiable appetite’ for oil in China and India. Few foresaw the collapse of oil prices in late 2008 and early 2009.

Figure

Institutional investors who suffered as a result of the severe equity bear market of 2000-2002 looked to the commodity futures market as a new ‘asset class’ offering huge returns. Standard market micro-structure theory predicts that a large volume of purchases may well cause the price to increase, at least temporarily and that self-fulfilling bubble paths could be indexed by the residual quantity of oil that never gets produced. Over the last five years demand from China increased from over 1.88 billion barrels to 2.8 billion barrels, an increase of 920 million barrels but in the same period index speculators demand for petroleum futures increased by 848 million barrels.

It is clear now that this process could not have gone on forever as demand could not remain completely price inelastic at all prices. Decisions of real producers and consumers have come to dominate the market. The speculative bubble could not be sustained as it was not ratified by continuous inventory accumulation or cuts in production. Both are unsustainable in the long term.

It is generally understood that if we really understand something we should be able to predict what will happen next. But oil prices are an interesting example of an economic variable which if we really understand it we should be completely unable to predict.

Concluded

Views are those of the author

You can reach the author at [email protected]

New Section: ‘From Information to Insight’

Oil & Gas Discovery & Production in India: Historical Milestones

Akhilesh Sati, Observer Research Foundation

1825: Lieut R. Wilcox of the 46^th Regiment Native Infantry who with his small survey party was on a military mission to maintain law and order saw the oil seepages in north-eastern corner of Assam in September 1825.
1867: H. B. Medicott of the Geological Survey of India (GSI) first started oil exploration in India in 1865 in the Makum area in Assam. The most astounding Indian oil history was made on 26^th March 1867 by Mr. Goodenough of Calcutta based Mckillop, Stewart & Co. by striking oil at 118 feet at Makum (with total production 300 gallons). It was Asia’s first mechanically drilled well. Before that discovery, three wells were drilled in Jaipur (in Assam) which encountered some gas and little oil.
1889: Another discovery of oil was made at 178 ft., on 19th October 1889 in Digboi by Assam Railways & Trading Company Ltd., a registered company of London in 1881. The completion of Digboi well no. 1 (with initial production 200 gallons per day or 0.8 kilolitres per day) marked the birth of Indian petroleum industry in November 1890. The Digboi field is now the world’s oldest oil producing field as it continues to operate.
1901: A small oil refinery was set up in Margherita in 1893 to process Digboi crude and closed by 1902. However, the Assam Oil Company (formed by AR&TC to take over the petroleum interests including the Digboi and Makum concessions) commissioned India’s first oil refinery (0.5 mt) at Digboi in December 1901. The refinery is the world’s oldest operating refinery producing in excess of its original capacity (present capacity 0.65 mt). It was taken over by IOC in 1981 & upgraded in July 1996.
1915: The Burmah Oil Company of U.K., after acquiring the oil interests of the Budderpore Oil Company Ltd. (formed by a Syndicate of Budderpore Tea Garden during 1911-13) in 1915 started exploration/development of Badarpur structure in Surma Valley (Upper Assam).
1917: The oil production from Assam, mainly from the Digboi, was 43 barrels of oil per day in 1901, trebled to 120 bpod in 1902, 247 bpod in 1911 and then increased to 435 bpod in 1917 and 5500 to 7000 bpod during war years (i.e. first half of 1940’s).
1921: By 1921 BOC took over the control of AOC in a phased manner.
1923: In 1923 Digboi refinery was entirely rebuilt and the capacity increased. By 1926 two product pipelines were laid from Digboi to Tinsukia in Assam.
1930: Tata Engineering Co. drilled several wells at Jagatia, Gujarat and produced small amount of gas during 1930’s. A shallow well dug in September 1921 for water in Dewan Sahib’s compound yielded gas at 0.1 million cubic feet (mcf) per day and declining to 50,000 cf per day.
1931: In 1931 a well of BOC at Masimpur (near Badarpur) encountered high-pressure gas sand capable of yielding 3 million cubic feet of gas per day.

to be continued…

Comments may be mailed to [email protected]

Future Electricity Supply Options for India (part –II)

Shankar Sharma, Consultant to Electricity Industry

Continued from Volume VI, Issue No. 21…

hough there have been deficits in electricity supply both during peak demand hours and in annual energy requirement, the problem generally has been acute in meeting the peak hour demand. Between 1996 and 2009 the peak power deficit has touched a maximum of 18% and annual energy deficit has gone upto 11.5%. Power supply position as indicated in the table below for the period 1996-2009 can be viewed as typical for the entire country during last two decades.

All the five regions and almost all the states have been experiencing power cuts. Though power deficits were recorded for every year during 1996-2009, the total installed capacity and per capita consumption has been increasing continuously. The urban areas have recorded nearly 100% electrification, and the per capita consumption of a small section of urban elites has reached the level of that in the developed countries. Between 1996 and 2009 the energy availability in the country went up by nearly 90%; and between 1992 and 2006 the country recorded an increase of 52% in average per capita electricity consumption, but the 40% of the population remained without access to electricity.

Table 3: Power Supply Position in India (Year 1996 to 2009)

	Annual Energy Demand (MU)				Annual Peak Demand (MW)
1996-97	4,13,490	3,65,900	11.5%	63,853		52,376	18.0%
1997-98	4,24,505	3,90,330	8.1%	65,435		58,042	11.3%
1998-99	4,46,584	4,20,235	5.9%	67,905		58,445	13.9%
1999-00	4,80,430	4,50,594	6.2%	72,669		63,691	12.4%
2000-01	5,07,216	4,67,400	7.8%	78,872		65,628	12.3%
2001-02	5,22,537	4,83,350	7.5%	78,441		69,189	11.8%
2002-03	5,45,983	4,97,890	8.8%	81,492		71,547	12.2%
2003-04	5,59,264	5,19,398	7.1%	84,574		75,066	11.2%
2004-05	5,91,373	5,48,115	7.3%	87,906		77,652	11.7%
2005-06	6,31,554	5,78,819	8.4%	93,255		81,792	12.3%
2006-07	6,90,587	6,24,495	9.6%	100,715		86,818	13.8%
2007-08	7,37,052	6,64,660	9.8%	108,866		90,793	16.6%
2008-09	7,77,039	6,91,038	11.1%	109,809		96,785	11.9%

Source: Union Power Ministry

The deficits experienced during the last two decades can be attributed to two main reasons. One reason is the huge growth in demand for electricity, mostly from industries and agriculture. Urban residential load also has seen considerable growth largely because of the penchant for energy guzzling gadgets like air conditioners, refrigerators, water heaters, computers and many types of entertainment tools. The other reason is the unbelievable level of inefficiencies at all stages between electricity generation and its end use. India has been known to be exhibiting one of the lowest levels of efficiency in the overall management of a vital resource like electricity. The average Plant Load Factor (PLF) of the coal power stations is reported to be about 63% as against best figure of more than 90% in the best run plants of NTPC. With a total coal power capacity of about 80,000 MW, improved PLF of 85% national average would have provided additionally about 17,600 MW for usage with the same installed generating capacity. This is in stark comparison of about 18,000 MW peak deficit recorded between 1996 and 2009. There have not been serious efforts to improve the efficiency levels to the international best practice levels, which alone would have eliminated the deficits completely.

Table 4: Power Sector Efficiency in India

Power Sector Area	Prevailing level of efficiency / loss in India	International best practice
Generating capacity utilisation	50 - 60%	More than 85%
Aggregate Technical & Commercial losses (AT&C)	35 – 40 %	Less than 5%
End use efficiency in agriculture	45 – 50 %	More than 80%
End use efficiency in industries and commerce	50 – 60 %	More than 80%
End use efficiency in other areas (domestic, street lights and others)	20 – 30 %	More than 80%
Demand Side Management	Potential to reduce the effective demand by more than 20%

Source: Integrated Energy Policy, Planning Commission and other sources

The other blunders of the industry are: the unscientifically targeted subsidies which have become unsustainable; huge losses incurred by the electricity supply companies, which alone is reported to be about Rs. 25,000 crores a year; corrupt political interference in the affairs of these companies; lack of social and environmental responsibility for these companies; and poor work practices in these companies. Such deficiencies for decades have resulted in serious problems for the society as a whole.

As per the Integrated Energy Policy of the Planning Commission “by 2031-32 the power generation capacity must increase to nearly 800,000 MW from the current capacity of about 160,000 MW inclusive of all captive power plants.” Such a large scale addition of conventional power capacity in a short period will have profound impact on social, environmental and economic aspects of our society. It is pertinent to note here that the Integrated Energy Policy has also contended that despite the increase of the electricity generation capacity /supply by 5 to 6 times by 2031-32 the energy security cannot be assured at least until 2050. This indicates the inadequacy / failure of the grid based centralized electricity supply system to meet the energy demand of a huge population of a diverse country.

Table 5: Major issues for the society with conventional technology power sources

Fossil Fuels (coal, gas, diesel)

Dam Based Hydro

Nuclear Power

Economic

Issues

Unsustainable pressure on

natural resources such as land,

water and minerals; reduced

agricultural production

Demands large tracts of forests

and fertile land; water logging;

affects the economy of the down

stream population; deposition of silt

Demands large tracts of forests and

fertile land; huge Capital costs; long

term waste management costs;

serious shortages of nuclear fuels

Social

Issues

Peoples’ displacement and health

Peoples’ displacement and Health

Peoples’ displacement and health

Environmental

Issues

Global Warming; pollution of Land

and water and air; acid rains

Methane emission, submersion

and fragmentation of forests;

loss of bio-diversity; downstream

areas get deprived of fertile silt

Mining related pollution; radiation

emission during operations and from

nuclear wastes for centuries

Future Supply Scenario – towards a sustainable supply option

Inherent with a grid based centralized generation system are the need for long lengths of transmission lines, complex network of distribution systems, and the associated equipment such as transformers. Each of these add to the complexity, reduced reliability and increased capital & operational costs. Such centralized generation systems also need huge organizational structure with large manpower leading to human resource issues, including the human induced errors. These centralized generation systems also are found to be economical only with large size power plants and concentrated loads. But Indian villages are wide spread and cannot provide any substantial loads individually as in the case of towns and cities. Because of these reasons the rural India, with more than 70% population, is getting poor electricity supply; villages are the last to get supply but the first to be disconnected in case of shortages.

The total installed generating capacity in the country has gone up from 58,012 MW in 1989 to 1,52,148 MW in 2009, a whopping 162% increase.

Total monthly generation from conventional sources has increased from 43,596 MU in March 2000 to 65,057 MU in March 2008, an increase of about 50%.

National per capita electricity consumption has gone up from 283 kWH in 1992-93 to 429 in 2005-06, an increase of 52%.

But 40% of the households, mostly in rural areas, have no access to electricity even in 2009.

{Source: as per Central Statistical Organisation (CSO) & Press Information Bureau, Govt. of India}

Urgent measures such as improving the generating plant performance; reducing the T&D losses; minimizing the wastage in end usage; optimize the demand side management (DSM); and maximising energy conservation will be able not only to eliminate the existing deficits, but also will be able to meet a good portion of the future electricity demand.

The deficiencies, complexities and societal costs inherent in the grid based centralized generation system in India cannot provide any assurance that the rural-urban divide will be eliminated soon and that the electricity supply at the national level will be satisfactory in the near future. There is clearly an urgent need for a paradigm shift in our energy policy: instead of blindly adding millions of MW of additional capacity based on conventional power sources and centralized power supply system, we need to adopt an ‘integrated energy resource management’ approach which will have renewable energy sources and decentralized supply systems at its core.

There is growing conviction that in view of the huge societal costs associated with economic, social and environmental aspects of grid based centralized generation system of conventional power sources, the decentralized electric supply systems based on renewable energy sources are hugely economical in the long run. They are found to be the best option for the accelerated electrification of smaller loads and rural house holds. Many recent initiatives in the private sector to provide electricity to un-electrified villages through stand alone community based renewable energy power plants fed by bio-mass OR wind OR solar OR micro-hydel power have established that they are the appropriate solution to the energy requirements of most sections of the country. The major advantages which are associated with these alternatives are the shorter gestation periods, low societal impacts, and their immense suitability to rural needs. India has huge potential in renewable energy sources, and a combination of two or more such sources (Hybrid systems) have huge potential to be used in urban areas also, and are already being used in various combinations.

to be continued…

Views are those of the author

Author can be contacted at [email protected]

Note: Part VI of the article on Climate and the Clash between the Diversely Developed and part VIII of the article on Energy in India’s Future: Insights will be published in Volume VI, Issue 23

Gas in India – Issues, Opportunities and Challenges (part –XII)

Continued from Volume VI, Issue No. 19…

Natural Gas Pricing & Utilization Policy

he honourable Prime Minister made the following statement while reviewing the draft integrated energy policy: ‘Energy pricing is a key component of energy policy. Appropriate energy pricing must provide incentives needed for efficient use of energy and also offer incentives for investment in expanding supplies’. Do natural gas pricing and utilization policies meet the criteria articulated by the honourable Prime Minister?

Historically, gas prices in the country have been fixed taking into the consideration social and core sector objectives. More recently, minimizing subsidies has been added as one of the criteria in formulating pricing and allocation policies. As a result natural gas has been supplied not to sectors that could afford a higher price to use natural gas but to sectors which had constraints in affordability. If the ‘market’ mechanism was in place, it would have allocated to sectors where gas replaces liquid fuels attracting the higher prices. ‘Market’ prices need not necessarily be higher than prices that are determined by Government policy. ‘Market’ prices are essentially user determined and in cases where replaces alternative fuels, market price is replacement cost from the users’ perspective. In the current environment, replacement of liquid petroleum fuels with gas would generate the maximum price as users of liquid fuels have the highest paying capabilities.

Past Pricing Trends

Historically the price of natural gas has been linked to liquid fuels. In the 1960s, when ONGC first started producing natural gas, it demanded Rs 80 for 1000 M³ of natural gas. The Government of Gujarat was willing to pay Rs 20 per 1000 M³. The final price was settled at Rs 50 per 1000 M³, the average of two plus royalty. This price was about 75 percent of fuel oil prices at that time. The Sankar Committee report on the natural gas pricing which was accepted by the Government in 1997 also recommended indexation of gas prices to the price of fuel oil. It was to be set of 50 percent of fuel oil prices initially to increase in phased manner to 75 percent parity with fuel oil by March 2000, provided a ceiling price of Rs 2850 per 1000 M³. It has further recommended that full price parity between natural gas and fuel oil be achieved in the following two years.

The ceiling price was reached in 1999 and from then on instead of moving with oil prices, natural gas prices remained fixed until 2005. Sometime in the middle of 2005, the Government revised the price of APM gas to Rs 3200 per 1000 M³ delinking it with fuel oil prices. The price for Rava and PMT were indexed to the fuel oil price with the floor and ceiling prices continued to be linked with fuel oil. Since the base price of oil was around $ 15/bbl, the floor and ceiling were quite low. The price of RLNG as well as that of Iran gas prices was also indexed to oil (Table 2).

TABLE 2: GAS PRICE LINKAGE WITH PETROLEUM PRODUCTS IN INDIA

Domestic Gas (Gas pricing 1997)	LSFO
JV – PSC for development of discovered fields
Ravva	HSFO
PMT	LSFO
RLNG – PLL	JCC
Iran LNG	Brent

Present & Future Trends

Currently, there are many prices operating simultaneously in the country. Even prices under the Administered Price Mechanism (APM) have different categories. The APM price for the core sector (power & fertilizer) is around $2.1/mmbtu. For small consumers and the transportation segment it is around $2.5/mmbtu and for large non APM consumers, the price is about $4.75/mmbtu.The domestic price for non-APM varies from $3.5/mmbtu for Raava (revised in December 2008) to $5.7/mmbtu for Tapti. In 2008, ONGC signed an agreement with MSEB for supply of 1 mmscm/d of gas at $11/mmbtu. LNG under pool system is priced at around $ 5.7/mmbtu and spot prices touched $ 25/mmbtu in the last quarter of 2008. The price fixed for KG D 6 gas is $4.2/mmbtu which is lower than the price paid by bulk Non APM consumers outside the fertilizer segment for APM gas¹(Table 3).

TABLE 3: GAS PRICES IN 2008

	US $ / mmbtu
APM Core Sector*	2.11
APM Small consumer & Transport sector*	2.53
APM rate for non core sector APM consumers*	4.75
* Under revision

Lakshmi	4.75
Panna Mukta	5.73
Tapti	5.57
Ravva^#	3.50
Ravva Satelite^#	4.30
ONGC_MSEB^#	11.00
^# Prices due for Revision in December 08

RLNG-Pooled Price	5.69
Spot Gas NCV	24.48
KG D 6 Price	4.20

APM Price	2.11 – 4.75
Non APM Price	3.5 - 11
RLNG Price	5.69 – 24.48

The short term price for LNG purchased by PLL in 2008 was $ 10.7/mmbtu and the long-term price was $4.16/mmbtu. The pooled price works out to be $ 5.7/mmbtu for consumers in the fertilizer and power sectors. But since the long term contract price for LNG was to be revised from January 2009, this price may be increased to about $7.5/mmbtu depending upon volume of supplies to Dhabol. By the end of 2008, pooled price could be about $8.5/mmbtu or even $ 9.3/mmbtu if all units of Dhabol are supplied with gas (Table 4).

TABLE 4: LIKELY LNG POOLED PRICES IN INDIA

Ex Terminal Price in $/mmbtu

	Long Term LNG Price	Short Term LNG Price	Pooled Price*	Pooled Price**
Current	4.16	10.76	5.69	NA
Jan 2009	4.89	16.00	7.46	8.29
December 2009	6.38	16.00	8.53	9.26

¼ By end 2009 consumers are likely to pay pooled price of > 8.5/mmbtu

¼ Spot RLNG likely to cost > $ 16/mmbtu

Assuming spot price of US $ 16/mmbtu & JCC at US $ 100 beyond July 2008

(*) Pooled price considering short term LNG for two units of RGPPL

(**) Pooled price considering short term LNG for Three units of RGPP

Pooling is not a new concept. In 2008, China bought long term LNG at a price of $3.1/mmbtu and made purchases in the spot market at about $9.2/mmbtu (table 5).

TABLE 5: POOLING OF LNG PRICES CHINA 2008 in $/mmbtu

Particulars	July	Jan-July
Term Supply
Australia	3.10	3.14
Spot Supply
Algeria	15.51	15.51
Egypt	15.37	14.30
Eq Guinea	-	13.98
Nigeria	15.46	14.37
Average	9.21	6.01
Last year average	3.95	3.59

Affordability: Fertilizer Segment

In August 2008, one Indian fertilizer company purchased spot LNG at $ 27/mmbtu in the first fortnight and at $30/mmbtu in the second fortnight. Fertilizer companies informed the Government that they had saved Rs 15 crore through gas purchase at that price as they would have had to purchase Naphtha at a higher price if gas was not available (Table 6).

TABLE 6: AFFORDABILITY – FERTILIZER SEGMENT

Period	Quantity	Price of Gas US $ /mmbtu		Total Cost of Gas/Day	Price of Naptha	Total Cost of Naptha	Saving
August 2008	mmscmd	GCV	NCV	(000 Rs)	US $/mmbtu	(000 Rs)	Cost per Day (Rs/Lakh)	Cost over supply period
Ist to 15	0.75	24.02	26.66	30366	31.50	35884	55	8.28
16^th to 30	0.75	26.28	29.18	32847	33.42	37621	48	7.16

The Government has come out with a new urea pricing policy according to which existing policy will apply to capacities below the 110 percent nominated capacity (Table 7). But for additional fertilizer production from revamping or expansion would be indexed to import parity price of urea. A floor price of $250/mt and a ceiling of $425/mt have been fixed for these categories. Urea Price of US $ 250/MT will need gas prices of $ 4.88/Mmbtu and Urea Price of US $ 425/MT, will need a gas price of $ 13.21/Mmbtu for the same IRR. The ceiling price of urea at $ 425/MT, with gas price remaining unchanged increases the IRR from 12 percent to 27 percent. Essentially what this policy says is that Fertilizer companies can produce urea at a price of $ 250/ mt using KG basin gas and produce urea at a price of $ 425/mt with spot natural gas at $ 13.2/ mmbtu. The new urea pricing policy thus enhances the affordability of fertilizer sector and offers a favourable environment for investment.

TABLE 7: NEW UREA PRICING POLICY

Existing Units up to 110% of capacity to be covered by existing policy

Production though revamping

Production through Expansion

Production through revival of closed units /Brownfield

Production through Greenfield project

85% of Import Parity Price (IPP)

90% of IPP

95% of IPP

Through bidding discount over IPP

Current price mechanism

Floor US $ 250 PMT

Ceiling US $ 425 PMT

To be decided at the time of bidding

Source: Department of Fertilizer

Affordability: Power Sector

In the power sector, 50 percent of the primary energy gets converted to power, further transmission & distribution (T&D) losses are in the range of 35 percent. Therefore, net primary energy utilization is only about 32 percent. Given that these standard losses have become ‘affordable’ to the power sector, natural gas affordability will always by in question. T & D losses are in single digits in countries like Japan, China and South Korea and accordingly find higher priced of gas as affordable. If the concept of distributed generation is adopted, it will not only result in investment in megawatts but also avoid ‘negawatts’ (avoided losses in transmission and distribution). New generators with lower heat rate will further improve efficiency. However, gas based power generation with current T&D loss levels would not be among the cheaper options given that natural gas prices are unlikely to be lower than $ 9/mmbtu for imported gas and $ 6/mmbtu for domestic NELP gas. However, in general, coal is likely to drive growth in thermal power generation. Gas based capacity for power generation will require strategic considerations of fuel mix (on account of energy security and climate change) as well as efficiency criteria in the power sector. In the absence of these criteria, gas is unlikely to be a replacement for coal purely on a commercial basis (Table 8).

TABLE 8: GAS BASED ELECTRICTY GENERATION: ENERGY UTILIZATION CONCERNS

	Centralized Generation	Distributed Generation
Availability of primary energy	100%	100%
CCPP efficiency 50 %	50%	50%
Transmission loss of power	35%	Almost Nill
Energy used	100%-50%-35% of 50% = 32.5%	100%-50% = 50%

Power sector has also been using spot RLNG at $ 16-18/mmbtu for optimization of existing capacity. NTPC has been looking for RLNG for their Kayamkulam plant for some time. The source of the LNG is said to be Gorgon (Australia) for Kochy to have a total capacity of the LNG re-gasification terminal as 2.5 mmtpa. The LNG requirement of the NTPC Kayamkulam plant which plans to expand capacity from 350 MW to 1500 MW is about 2.1 mmtpa. As reported in the media, the delivered price of LNG to the Kayamkulam plant is said to be $21.1/MMBtu on the basis of 16 percent indexation to the JCC plus a premium of $ 1.2/mmbtu given that Asian LNG buyers pay a premium of $3 - $ 5/mmbtu over US and European buyers. Many industrial sectors in India are buying spot LNG irrespective of the high prices. Consumption of spot RLNG in power and fertilizer sector put India along with Japan as main drivers of spot/short term trading in region in 2007 (Figure 7).

FIGURE 7: SPOT VOLUME DELIVERED TO ASIA IN 2005-07

Imputed Value Based Pricing

A Committee of the Planning Commission under the Chairmanship of Dr. Varadharajan (1988-89) recommended that gas allocation priority should be determined through imputed values. Imputed value is the economic cost equivalent to the alternative option. In other words, it is the price of gas at which the cost of generation/production in a gas based plant equals the cost of generation/producing using an alternative fuel. On the basis of imputed value, the end-use which has the higher economic value is to get priority allocation. Table 9 gives the basis for calculating imputed value of gas. In the current environment, natural gas utilization as replacement of liquid fuel in industrial / automotive sector have higher imputed value and would therefore unlock maximum value of gas.

TABLE 9: CALCULATION OF IMPUTED VALUE

Cost of generation/production	Gas based	Competing technology
Capital cost	a	c
Operation and maintenance cost	b	d
Fuel cost	x (unknown)	e
Total cost (f)		=c+d+e
Imputed value of gas (x)		=f-a-b

The guidelines for natural gas utilization say that higher fractions should be stripped for higher value applications to ensure maximization of value addition. The guidelines also say that marketing priorities will have to be determined by the Government and that the formulae for determination of price should be approved by the Government. The document also specifies that there would be no ‘reservations’ in the sense that, if a particular priority customer is unable to absorb the capacity allocated, gas would go to the next priority customer. These guidelines are to be reviewed after a period of five years.

It is no longer true that natural gas at prices higher than $4-5/MMBtu is unviable to customers in India and China. Purchases of RLNG on short term and spot basis at very high prices in 2008 indicate a change in attitude. Demand and price are no longer problem issues. There is realization among consumers that the global market could be tight in the future. There have been few gas tie ups for LNG expansion terminals and new terminals. Suppliers are creating additional LNG storage capacity to accommodate more spot cargoes but securing new supplies is proving to be more difficult than it used to be in the past. In this light, core sector customers need to revisit the issue of affordability and availability to secure sustained supply of gas and decision makers should realign pricing and utilization policies in the light of the efficiency and investment criteria articulated by the Prime Minister.

¹Notes:

The gas prices quoted in this section are supported by letter No L-12015/1/05-GP from the Government of India to GAIL (India) Ltd dated 19 April 2006: “In view of the above, market price of APM gas being supplied to non APM consumers, be considered as $4.75/mmbtu w.e.f. 1.4.2006. This may be suitably informed to all concerned and necessary action may be taken accordingly.”

It is also supported by slide (1) shown below from presentation by the Ministry of Petroleum & Natural Gas before the Standing Committee on Petroleum & Natural Gas as well as slide (2) from the presentation to the Cabinet Secretary during the price discovery process of KG D6.

Slide 1

	Rs/MSCM	$/mmbtu
APM	3520 / 7917	2.16 / 4.75
PMT	9194	5.65
RAVVA	5695	3.50
RAVVA Satellite	7167	4.30
Pooled RLNG Price	8317	4.99
RIL (ex Kakinada)	6986	4.2
Spot Min-Max	6100 – 32153	10.0 – 20.0

Prices are exclusive to tpt, margin, taxes, duties and @CV of 10,000 Kcal/SCM.

APM price includes royalty. Exchange rate is taken @41.

Slide 2

	Important Aspects	Gas Price (USD/mmbtu)
APM pricing Mechanism w.e.f. 01.07.05	APM gas price was revised by pricing order dated 20.06.05 to Rs 3200/MSCM for Power, Fertilizer, Consumers covered under court orders and Consumers having allocation less than 0.05MMSCMD.	1.97
APM pricing Mechanism w.e.f. 01.07.05	Natural gas pricing for CNG and other small consumers revised w.e.f 06.06.2006 to Rs 3840/MSCM. Pricing for these sectors would be increased in the next three to five years to the level of market price.	2.36
Pricing of Gas under Pre-NELP Production Sharing Contracts – PMT	Price linked to a basket of international average preceding 12 months fuel oil prices (with a floor of $ 2.11/mmbtu and ceiling of $3.11/mmbtu).	2.11 – 3.11
	The ceiling price were to be revised to 135% (150% of 90%) fuel oil basket (average of preceding 18 months) after 7 years of commencement of supply. It was revised in 2005-06 to $3.86/mmbtu and further to $4.75/mmbtu w.e.f 01.04.2006.	3.86 4.75

to be continued…

Summary of proceedings at the 7^th Petro India Conference on ‘Gas in India – Issues, Opportunities and Challenges’ organized by the Observer Research Foundation (ORF) and the India Energy Forum (IEF) on 25th & 26th September 2008, New Delhi.

NEWS BRIEF

NATIONAL

OIL & GAS

Upstream

Domestic crude oil production falls 1.2 pc in H1 FY 10: CMIE

November 17, 2009. Domestic crude oil production in the country declined by 1.2 per cent in HI FY 10 as against the corresponding period a year ago on account of a fall in output by oil exploration and production major, ONGC, an economic think-tank said in its report. Domestic crude oil production fell by 1.2 per cent to 166 lakh tonnes in the first half of 2009-10 as compared to a year ago. A fall in oil output by ONGC dragged down the production," Centre for Monitoring India Economy (CMIE) said in its latest report on the state of Indian economy. State-run ONGC accounts for two-thirds of domestic oil production. The report, however, sounded optimistic for the remaining part of the current fiscal and forecast an upward trend in the oil output on the back of production from Cairn India's Mangala oilfields. Oil production from Rajasthan's Mangala field, which promises to provide almost 25 per cent of India's domestic crude production, has already touched the 20,000 barrels per day mark.

Suntera to exit O&G blocks in India

November 17, 2009. Cyprus-based Suntera Resources Limited has decided to exit all six oil and gas exploration blocks in India, where it had jointly picked up equity stakes ranging from 10 to 40 percent along with state-owned companies Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL). Suntera Resources is a joint venture company of Russia's largest gas company ITERA and the $1.5 billion plus Sun Group promoted by Shiv Khemka. While confirming the move, the top brass of ONGC and OIL cited "funds crunch due to economic recession" as the reason for Suntera's exit from these oil and gas exploration blocks. Suntera holds a 35 percent stake with OIL and Indian Oil Corporation (IOC) in OPL 205 oil producing block in Nigeria. It also has a 60 percent stake in a gas producing block, OPL 905 in Nigeria.

Cairn India completes gas drilling at Barmer

November 16, 2009. Cairn India has successfully drilled and completed its first horizontal well at Rajasthan’s Barmer field that will add 11,000 barrels of oil per day (bopd) to the earlier reported production volume of 5,991 bopd. The field continues to ramp up production. Confirming the development, a Cairn India official claimed it is a record oil production rate for any onshore oil wells in India. Horizontal oil and gas well drilling has become one of the most valuable technologies ever introduced in the business. This technique is used to expose more surface area of oil bearing rock, so that the overall production of wells rise. These are an enhanced oil recovery (EOR), or gas recovery method, that is becoming more and more popular, as the price per barrel of oil gets higher. It requires extensive planning in order to achieve proper well placement and production. Globally, such wells have become a preferred method of recovering oil and gas because they offer greater contact area with the productive layer than vertical wells.

ONGC refuses to pay Rs 1.9 bn fine to DGHC

November 16, 2009. ONGC has just refused to shell out the Rs 1.9 bn penalty slapped by the DGHC for its failure to drill the requisite number of wells in the Sunderbans in West Bengal. Though ONGC has relinquished rights over Block WB-OSN-2000/1 in the Sunderbans zone, it is unwilling to fork out any penalty as it claims it faced innumerable hurdles that hindered its drilling operations in the concerned block. Be that as it may, the ONGC management has communicated to the DGHC that a key problem, among several, was the supremely vulnerable soil conditions that rendered 9 out of 10 locations unsuitable for jack-up rigs due to the poor load-bearing capacity of the sea bed. It has also claimed that drilling operations were hindered at two priority locations as they overlapped with merchant shipping channels of Kolkata Port Trust.

ONGC stumbles upon uranium in Assam

November 14, 2009. Oil exploration firm Oil and Natural Gas Corp (ONGC) said that it has stumbled upon a reserve of uranium while carrying out exploration work in an oilfield in Assam. According to a senior ONGC official, traces of uranium were detected during exploration work at the Borholla oilfield in Jorhat district, about 360 km east of Guwahati. There are more than 20 wells in the Borholla oilfield, apart from several abandoned wells. With an estimated Rs 5 billion being sanctioned to carry out research and development and pilots for renewable and alternate energy, the two state-run firms have begun examining logs of over 900 oil and gas wells, mainly in Assam, to look for uranium reserves. This is the first time that uranium traces have been found in an Assam oilfield although other north-eastern states like Meghalaya have rich reserves. Surveys conducted by the atomic energy department indicate there could be up to 10,000 tonnes of uranium in and around Domiasiat, about 150 km west of Meghalaya state capital Shillong, the area considered to have the largest sandstone-type deposits in the country. Meghalaya's uranium ore reserves are spread over a mountainous terrain in deposits varying from eight to 47 metres underground.

OVL gets nod to invest $70 mn in Brazil block

November 13, 2009. The Cabinet Committee on Economic Affairs (CCEA) approved additional investment by ONGC Videsh Limited (OVL), a wholly owned subsidiary of Oil & Natural Gas Corporation, for its offshore oilfield in Brazil.

ONGC Videsh owns a 15% stake in the BC-10 block in Campos basin in the Latin American country. ONGC has also been authorised to invest another $17.5 million, if needed, after an approval from an empowered committee of secretaries. The additional investment is expected to give OVL an opportunity to expedite monetisation of earlier investments in BC-10. The investment in overseas oil assets is aimed at enhancing security of the country.

With cyclone in Arabian Sea, ONGC suspends drilling as precaution

November 12, 2009. India's state-run Oil and Natural Gas Corporation suspended drilling operations in the western offshore while other oil firms took steps to protect their installations from a tropical cyclone in the Arabian Sea. However, crude oil and natural gas production from fields in the western offshore and operations at refineries and liquefied natural gas (LNG) import terminals on the west coast remained unaffected by the cyclone.

The western offshore is the home to the nation's largest oil and gas fields of the Mumbai High and Bassein. The fields produce 320,000 barrels per day, or about half of the nation's total crude output. Besides, over 45 million standard cubic meters of natural gas is produced from Mumbai High, Heera and Bassein.

ONGC-Mittal merge trading JV with exploration

November 12, 2009. Oil and Natural Gas Corp said that its energy trading joint venture with steel tycoon Lakhsmi Mittal will be merged with their exploration tie-up, but did not tell why it failed to make equity contribution in the venture. ONGC had in 2005 formed two joint ventures with Mittal -- ONGC Mittal Energy Ltd for acquisition of oil properties and ONGC Mittal Energy Services Ltd for trading and shipping of oil and gas, including liquefied natural gas. It said OMESL was to trade and ship oil and gas, primarily those produced from properties owned by OMEL. ONGC, however, did not say it had not contributed its share of $5 million towards equity of OMESL and the company had survived till now only on Mittal's equity share. Also it did not say that Mittal had in August 2006 written to the government against ONGC's attempts to derail the venture.

Reliance may sell stake in foreign blocks

November 11, 2009. Indian energy major Reliance Industries may sell stakes in some of its overseas exploration blocks. Reliance has 14 blocks in its international exploration and production portfolio, including three each in Peru and Yemen, two each in Oman, Kurdistan and Colombia, and one each in East Timor and Australia.

RIL strikes Oil in Cambay

November 11, 2009. Reliance Industries, the nation's biggest which did not bid for exploratory blocks this year in India, announced the first discovery of oil in the Cambay basin, which if proven will add significantly to its hydrocorbon reserves. This discovery is RIL's second major oil find after the offshore MA field in the Krishna Godavari (KG) basin off India's east coast, where it is producing around 11,000 barrels of oil per day.

RIL's gas reserve is estimated around 11 trillion cubic feet which translates into daily production of 550,000 barrels of oil and its equivalent a day at peak production. Although analysts say it may be a significant discovery, it may be too early to think of upgrading earnings based on the available data. RIL has christened the discovery as 'Dhirubhai 43' after the name of its founder late Dhirubhai Ambani and because it is the 43rd oil discovery by the firm in India. The company has notified the discovery to the Indian government and the Directorate General of Hydrocarbons, the deemed upstream regulator.

Adani Welspun may divest O&G equity

November 11, 2009. After power, oil & gas exploration is the next big thing on the radar of the diversified Adani Group. The group’s joint venture with Goenka-promoted Welspun, Adani Welspun Exploration (AWEL), is exploring possibilities to divest equity from its oil and gas assets while assessing opportunities to pick up stake in new resources. A relatively small entity, AWEL’s portfolio includes eight assets including five in India, two in Thailand and one in Egypt. Currently, Adani Group has undertaken a major drive to consolidate its holdings in the group companies. Recently, the promoters’ holding in Mundra Port and SEZ was merged into flagship Adani Enterprise.

Downstream

RIL to join hunt for shale gas

November 16, 2009. Reliance Industries (RIL), which has executed the world’s single largest refinery complex at one place, and one of the most complex gas projects in the depth of the Bay of Bengal on the East coast of India, may join global oil majors in search of shale gas. RIL has been studying the breakthroughs and the new technologies that are being used in producing shale gas that is now a huge rage in the US. Shale gas is natural gas produced from shale — a fine grained sedimentary rock composed of flakes of clay and minerals like quartz and calcite. RIL, which has used advanced technology in its exploration projects in the Krishna-Godavari basin, is betting on its expertise in technology to tap unconventional energy sources in the energy value chain. The company has been eyeing unconventional energy sources, such as solar, for some time now. But industry analysts are of the view that a fuel like shale gas is perhaps the best bet as it has already been proved as a commercial proposition.

Oman Oil to boost investment in India refinery

November 16, 2009. India's state-run Bharat Petroleum Corp. said that Oman Oil Co. will invest an additional INR12.20 billion ($265 million) in a joint-venture refinery at Bina in the central Indian state of Madhya Pradesh, adding to its earlier investment of INR755 million. The refinery, with a nameplate capacity of 120,000 barrels a day is being built at a total estimated cost of INR113.97 billion, BPCL said. Bharat Oman Refineries Ltd. began as an equal JV between BPCL and Oman Oil, it will be 49%-owned by BPCL and 26%-owned by Oman Oil on completion. Around 24% of the company will eventually be sold through an initial public offering or to private equity investors. The state government will hold the remainder. The project is expected to be completed early next year, and production will likely start in the second quarter of 2010.

MoU a guidance tool & not binding on RIL

November 12, 2009. Reliance Industries (RIL) told the Supreme Court that the memorandum of understanding (MoU) signed between Ambanis in 2005 was a ‘guidance tool’ to arrive at a scheme of arrangement and not binding on the company. Neither Anil Ambani nor Reliance Natural Resources (RNRL) could seek enforcement of such private agreement for supply of gas from Krishna-Godavari basin at $2.34 per unit from RIL, which was not aware of such an MoU, it said. RNRL counsel Ram Jethmalani on the other hand, termed the ‘acknowledgement’ of family MoU by RIL as a ‘great progress’ from its earlier position of terming it a ‘scrap of paper’ to a ‘valuable guiding tool’. Mr Jethmalani was referring to the earlier statement of RIL counsel Harish Salve which had said that the family MoU was not worth the scrap of paper on which it was written.

Transportation / Trade

PSU oil firms hike ATF prices by 2.4 pc

November 15, 2009. For the second time this month, state-owned oil firms hiked jet fuel prices, this time by 2.4 per cent following a spurt in international oil rates. Aviation Turbine Fuel prices in Delhi will be increased by Rs 948 per kilolitre to Rs 40,423 per kl effective midnight tonight, an official of the Indian Oil Corp (IOC), the nation's largest oil firm, said. This comes on back of over nine per cent hike in jet fuel prices on November 1. ATF rates in Mumbai, the home to nation's busiest airport, will go up by Rs 988 to Rs 41,710 per kl. IOC, Bharat Petroleum and Hindustan Petroleum had for three consecutive fortnights reduced ATF rates mostly because international oil prices had eased and rupee strengthened against the US dollar. In three cuts, jet fuel prices in Delhi came down to Rs 36,188.27 per kl from Rs 39,188 at the beginning of September.

RIL offers to withdraw directors' affidavits on MoU

November 14, 2009. Reliance Industries (RIL offered to withdraw affidavits filed by seven of its directors, claiming they were unaware of the contents of the memorandum of understanding (MoU) signed between members of the Ambani family in 2005 for supply of gas from the Krishna-Godavari basin, only if Reliance Natural Resources (RNRL) agreed to withdraw an assertion in its affidavit that the RIL board had seen and approved the MoU. Both the affidavits filed by the RIL directors and the assertion in RNRL’s affidavit were not presented before the Bombay HC. Consequently Ram Jethmalani, the lawyer for RNRL, had wanted to cross-examine the RIL directors. Mr Salve then said he would withdraw the affidavits if RNRL dropped its assertion. It was not clear at the end of the day’s proceedings if in fact the RIL directors would withdraw their affidavits.

Policy / Performance

GAIL, RIL to swap gas for optimum use

November 17, 2009. GAIL and RIL is to enter into a swap arrangement to facilitate optimum use of available natural gas in the country. An oil ministry statement said since gas from the latter's Andhra offshore field cannot be used for making petrochemicals, the state utility will exchange suitable gas with the Mukesh Ambani-led firm's petrohem units that have been allocated nearly 2 mcmd (million cubic metres per day) from India's biggest gas field. According to the statement, the ministerial panel for distributing has said GAIL will supply adequate quantities to its exisitng consumers to make up for any ‘‘shrinkage'' in supply of rich gas. Gas swap is not uncommon in industry as using ‘rich' gas, from which petrochem can be extracted and costs more, for firing industrial burners entails loss of value-adition. The panel had on October 27 identified consumers for incremental increase in production from Andhra offhsore field.

RIL gets 'Best Project of the Year Award'

November 16, 2009. Reliance Industries Ltd (RIL) was awarded the 'Best Project of the Year Award 2009' by the Project Management Institute (PMI), for successfully implementing high technology in KG-D6 Deepwater Gas Field Development Project in Krishna-Godavari basin. According to PMI, the multi-billion dollar investment project by RIL was executed despite constraints like tight market conditions, scarcity of rigs, installation vessels and skilled manpower in addition to complex logistics.

Make ethanol blending mandatory for OMCs

November 16, 2009. The Union government’s cabinet committee on economic affairs asked the petroleum ministry to ensure that oil marketing companies sell petrol doped with 5% ethanol. But licensed ethanol producers in Maharashtra are not satisfied with the decision and want the Union government to make ethanol blending mandatory on oil marketing companies (OMCs), such as Indian Oil, Bharat Petroleum, and Hindustan Petroleum. A mandatory doping of 5% ethanol and optional blending of another 5% would not only make petrol cheaper and environment-friendly, but also help the state sugar co-operatives to become viable business ventures, ethanol producers say. The issue, sources from the state’s robust sugar industry and political parties said, has also got political connotations as the Union ministries for agriculture and food, both headed by Sharad Pawar, are keen on the ethanol-blended petrol programme, against the Murli Deora-headed petroleum ministry’s reluctance. The government did make 5% doping mandatory in 2006 and another 5% optional. But the ground reality is that mandatory blending has remained only on paper.

Central panel wants study on KG Basin land subsidence threat

November 15, 2009. A Central committee has asked the Environment Ministry to take into consideration likely threat of land subsidence in Krishna-Godavari Basin in Andhra Pradesh while giving clearance to any underground oil or gas exploration project in future. Though it said it did not find any direct evidence to indicate any land subsidence in the gas field or the adjoining areas in the KG Basin, there is a need to conduct an extensive study by institutes like Indian School of Mines on present state and likelihood of such a situation in the region. The five-member team headed by R K Garg, a scientist of Bhabha Atomic Research Centre (BARC), was set up by the Environment Ministry following an Andhra Pradesh High Court order in June to conduct field inspection to find whether there is any possibility of land subsidence due to exploration of natural gas in the basin.

Petro min seeks 33 pc hike in OIL, ONGC gas price

November 14, 2009. The Petroleum Ministry has proposed a 33% hike in the price of natural gas produced by ONGC and Oil India and gradually increase it to $4.20 per mmBtu set for gas from Reliance Industries’ KG-D6 fields. The Ministry has circulated a Cabinet note for raising price of gas under administered pricing mechanism (APM) from Rs 3,200 per thousand cubic meters ($1.8 per mmBtu) to Rs 4,250 per thousand cubic meters ($2.4 per mmBtu). Price of APM, or the gas produced from fields given to ONGC and OIL on nomination basis, is proposed to be raised in stages to Rs 7,500 per thousand cubic meters or $4.2 per million British thermal unit by 2013. The price set for RIL’s eastern offshore KG D-6 gas ($4.2 per mmBtu) is being considered as the benchmark for market price of indigenously produced gas in the country. Producer price for ONGC is proposed at Rs 3,870 per thousand cubic meters from Rs 3,200 per thousand cubic metre. The consumer price would be 10 per cent higher than this. For OIL, the producer price has been proposed at Rs 4,310 per thousand cubic metres.

RNRL's price to cause $12 bn loss for govt: RIL

November 14, 2009. RIL told the Supreme Court that if RNRL’s claim for gas sale price of $2.34 per unit was accepted, it would cause a loss of around $12 billion to the government and down its own profits by over $5 billion. RIL’s counsel senior advocate Harish Salve argued before a Bench comprising Chief Justice K G Balakrishnan and Justices B Sudershan Reddy and P Sathasivam that the gas price was fixed as per the terms and conditions of the production sharing contract, the gas utilisation policy and the decisions of the empowered group of ministers. There could not be a situation where RIL would be supplying gas at $2.34 to RNRL for the latter to indulge in its trading while the government, which is the owner of the gas, and the company which extracts the gas, were to suffer losses. Presenting a comparative chart taking the unit selling price of gas at $4.2 and $2.34, Salve said at the higher price, the total cash flow to the government would be $15.29 billion and to RIL $7.95 billion. However, if the sale price was $2.34 per unit, then the total cash flow to the government gets drastically reduced to $3.84 billion and that to RIL gets curtailed to $2.43 billion, he said.

Blended fuel: Oil cos, sugar industry told to resolve issues

November 13, 2009. The public sector oil marketing companies (OMCs) – Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation – and the sugar industry have been asked to resolve the issues affecting implementation of five per cent ethanol blended petrol (EBP) programme. At a meeting convened by the Petroleum Minister, Mr Murli Deora, of fuel marketing companies and sugar millers to review the implementation of the EBP programme, it was submitted that the OMCs have got a poor response to the tender for sourcing ethanol for five per cent mandatory blending with petrol. The companies were able to source only 40 per cent of the ethanol they tendered for earlier this fiscal. The players concerned were asked to resolve the issues and if need be approach the Committee of Secretaries (CoS) looking into the issue.

Reports of my quitting incorrect: ASG Parasaran to OilMin

November 12, 2009. Mohan Parasaran, the government's counsel in the Ambani brothers gas dispute, has said that he had never threatened to withdraw from the case on the issue of inclusion of more lawyers in the team. Additional Solicitor General Parasaran wrote to Petroleum Secretary RS Pandey saying he had never threatened to withdraw from the case or resign as ASG on talks on including more lawyers in the government team, official sources said. The government had in consultation with Parasaran last month expanded its legal team by including ASG Vivek Tankha.

GSPC may go for 5 pc private placement to raise Rs 10 bn

November 11, 2009. Having received the formal approval for its KG basin gas field development plan from the Ministry of Petroleum and Natural Gas on November 8, the Gujarat State Petroleum Corporation may soon go ahead for fresh issue of five per cent shares for private placement to Gujarat PSUs, banks and FIs. The company expects to raise about Rs 10 bn through the private placement to meet the immediate fund requirements for $1.7 billion (about Rs 85 bn). The bulk of the fund requirement for the project, however, may be met through a proposed 10 per cent fresh issue of shares for the initial public offer (IPO) by the end of this fiscal. The Gujarat Government controlled integrated energy company has indicated its plan to raise $1-1.5 billion (Rs 50-75 bn) through private placement and IPO. GSPC aims to produce 5.7-8.6 million standard cubic metres of natural gas a day (mscmd) from 15 production wells in the western part of the Deendayal field.

Gas row: RIL says RNRL can't trade in gas

November 11, 2009. RIL told the Supreme Court that the demerger scheme worked out with his brother Anil Ambani was categorical that the gas supplies from the KG Basin to his group was not for trading and meant for promoting power generation plant.

POWER

Generation

Bharat Forge to invest Rs 500 bn in power sector

November 17, 2009. The Kalyani Group's flagship company Bharat Forge is planning to make a big foray into the power sector with an investment of up to Rs 500 bn and a targeted generation capacity of up to 10,000 MW, over the next 10 years. According to industry sources, the company plans to set up power plants in Gujarat, Maharashtra, coastal Andhra Pradesh and Tamil Nadu. The group plans to diversify into other capital goods segment to de-risk itself from relying only on the auto components business. It has identified power sector as a priority area and is looking at generating 10,000 MW of power in the next 10 years. With each megawatt requiring an investment of about Rs 50 mn, Bharat Forge's plans could entail an investment of Rs 500 bn.

GMR Energy eyeing select ultra mega projects

November 17, 2009. GMR Energy, a unit of GMR Infrastructure, plans to bid for select ultra mega power projects and is scouting for more projects on the lines of its Emco Energy acquisition. Power Finance Corporation will soon initiate the pre-qualification process for three UMPPs, to be set up in the states of Orissa, Chhattisgarh and Tamil Nadu. GMR group would require investments of around Rs300 bn for its power projects in the next four to five year. GMR Energy participates in various bids to supply power to utilities on a long term basis and has emerged as the lowest bidder to supply 200 MW power in one recent bid. The construction work at 800 MW Vemagiri Expansion project has already began and the turnkey construction contract is given to Larsen and Toubro, while other power equipments will be sourced from GE, USA and Alstom, Germany.

No nuclear power plant at Haripur as locals oppose

November 16, 2009. If stakeholders including residents in East Midnapur's Haripur, where a 6,000 mw nuclear park has been recently sanctioned, decide against nuclear power plants, the project will be moved elsewhere, said Atomic Energy Commission (AEC) chairman and department of atomic energy (DAE) secretary Anil Kakodkar. People tend to believe that a nuclear power plant harms the environment or leads to loss of livelihood among a section of the local population. "Before taking up any large project, environmental impact assessment study is a must but that is not enough. One also needs to quantify the socio-economic impact of such projects," he said. The Haripur project faced resistance from the local population who believed that a nuclear plant can harm livelihood. Bulk of the population there depend on fishing and agriculture. The site selection committee for nuclear plants has recently declared Haripur suitable for a nuclear park where six units of 1000 mw can come up to begin with. If allowed, plans include setting up the first two units with imported Russian technology. Work is expected to begin by 2012-13 and be commissioned by 2017-18.

BHEL, MP firm plan 1,600 Mw plant in Khandwa

November 15, 2009. Bharat Heavy Electricals Ltd (BHEL) and Madhya Pradesh Power Generating Company Ltd (MPPGCL) are close to inking a memorandum of understanding for a joint venture to set up a 1,600 mw thermal power station in Khandwa district. The two companies are close to ink an MoU to commission a thermal station under a JV. Under the plan, two units of 800 mw each will come up in Khandwa. This is going to be the first time that such a big project will come up in Madhya Pradesh. The project is likely to cost around Rs 80 bn.

RAPS-5 likely to be commissioned soon

November 15, 2009. The newly constructed Rajasthan Atomic Power Station's unit 5 (RAPS-5) of 220 MW located at Rawatbhata, which has come under the fold of international safeguards, is likely to be commissioned soon. The imported Uranium fuel from Russia has already been loaded on it under the supervision of IAEA inspectors, Atomic energy department sources said. Following the notification of the Separation Plan of the International Atomic Energy Agency (IAEA) last month under which 14 nuclear plants will be under the umbrella of India Specific Safeguards Agreement (ISSA) of international atomic watchdog, RAPS-5 is the first indigenously built unit that has come under international safeguards.

Transmission / Distribution / Trade

Reliance Energy to provide 26,250 new electric connections in Mumbai

November 17, 2009. Reliance Energy, a part of the Anil Dhirubhai Ambani Group launched a pilot project which would provide up to 26,250 new and upgraded electricity connections for residents of Shivajinagar in Mumbai. The company plans to connect about 8,000-12,000 new connections and 5,000 upgraded connections during the first phase work.

The first phase work is expected to be completed within 18-months. The project is a collaborative effort between the International Copper Promotion Council India, the US Agency for International Development (USAID), the World Bank-administered Global Partnership for Output-Based Aid (GPOBA) and Reliance Infrastructure Limited. The project benefits from $1.65-million grant from the Global Partnership for Output-Based Aid towards wiring costs faced by slum dwellers. The objectives of the project are to develop, test and evaluate customised approaches to improve electricity access, reduce losses and normalise services in slum areas for wide-scale implementation.

L&T quotes lowest price bid for Rajpura thermal project

November 16, 2009. Larsen & Toubro Power Development is likely to bag the Rs 60 bn Rajpura thermal power project in Punjab as it has turned out to be the lowest bidder among others during the price bid opening. L&T quoted Rs 2.89 per unit as levelised tariff for the project.

Welspun Urja India Ltd remained second as it quoted a price bid of Rs 2.94 per unit as levelised tariff, which is little higher than L&T's price. The letter of intent will be given to L&T next week after getting approval from the board of the PSEB.

Having invited bid for the second time, PSEB received technical and price bids from seven companies - Larsen & Toubro Power Development, GMR Urja Limited, Adani Power Ltd, Welspun Urja India Limited, Lanco Infratech Power Project Ltd, Allinace Hydro Power and JSW Urja Ltd.

Orissa govt seeks package for improvement of power distribution

November 12, 2009. In a desperate bid to revitalize the fledgling power sector, Orissa government has sought a special package of around Rs 9.25 bn from the 13th Finance Commission of which Rs 6 bn is for improvement of the power distribution infrastructure, which currently is the "weakest link" in the entire power value chain.

The state, which pioneered reforms in power sector, has been badly hurt by the union government’s decision to deny private electricity distribution companies in Orissa access to the Rs 515.77 bn earmarked for the Restructured Accelerated Power Development and Reforms Programme (RAPDRP) assistance during the 11th Plan.

The state government and Gridco, which have earned for themselves Rs 70 bn from reform benefits and Rs 50 bn profits from trading, can pump in the funds without much hassles. But whether the three Reliance managed private distribution companies in its current state, can arrange for 1.57 bn as its contribution is a conundrum.

Policy / Performance

Power ministry to seek service tax waiver

November 17, 2009. Power secretary HS Brahma said the ministry would soon approach the finance ministry for abolition of service tax on power transmission that could benefit end consumers by way of lower tariff.

In a meeting with the state power secretaries, five states, including Andhra Pradesh, had asked power minister Sushil Kumar Shinde to approach the finance ministry for abolishing the service tax on power transmission. At present, a service tax of 12.36% is charged from power transmission companies. The states, however, have been demanding total abolition of the tax.

Kakodkar confident of meeting 2020 target of nuclear power generation

November 17, 2009. With the setting up of nuclear power parks and plants with international civil nuclear co-operation, the country will be able to achieve the 2020 target set by it for energy generation from nuclear sources, Chairman of the Atomic Energy Commission and Secretary of the Department of Atomic Energy (DAE) Anil Kakodkar said. With international civil nuclear cooperation, 10 units would come up by the year 2015 or 2016. Two units, in collaboration with Russia, were planned in Koodankulam, two with French collaboration at Jaitapur and similarly in Haripur, Gujarat and Orissa. Construction was on at about 24 places and new projects would begin at nearly eight sites. The DEA needed to focus on safety in three main domains — nuclear reactors and waste, industrial safety and environmental safety, he said.

NALCO shelves project in South Africa, to go ahead in Iran

November 17, 2009. State-run National Aluminium Co (NALCO) has decided not to pursue its planned aluminium smelter and power plant in South Africa as it could not get coal linkage, but will push a similar project in Iran, a senior company official said. NALCO - Asia's largest integrated aluminium producer was exploring possibilities of setting up a half-million tonne aluminium smelter plant and a 1,250-MW power plant in South Africa on an investment of about Rs.170 billion / $3.68 billion.

Rajasthan to tap solar energy to power Discom

November 16, 2009. Rajasthan government has decided to tap solar energy to electrify offices of its power company. The state-owned company has ordered for the installation of 8 solar panels of 200 KW capacity after getting the clearance from the energy audit team. The solar plant is likely to cut down power cost by more than 70 per cent. The government is also seeking permission for the energy audit of other government buildings.

As per an estimate, the power consumption of government buildings is worth Rs 85 mn per year. If solar plants are installed on these buildings, the cost may come down to around Rs 20 mn per month.

The state government is also planning to make it mandatory for all buildings spread over 500 square metres to have rainwater harvesting facilities, solar panels and green cover with plants and trees for promoting the green building concept.

Power plant efficiency can reduce coal’s eco impact

November 14, 2009. Technology such as carbon capturing and storage (CCS) or combine heat and power should be extensively used in manufacturing processes if the environmental impact of coal-based generation has to be minimised in India, according to Dr Kirit Parikh, Member of Planning Commission and a former member of the Prime Minister’s Economic Advisory Council. “In India, our power plants run with efficiency of around 30 per cent, while in Germany, plants with super-critical boilers easily achieve around 46 per cent efficiency.

Higher efficiency reduces the use of coal. If our plants are also equipped with such boilers, they can also operate with higher efficiency, at least 40 per cent, despite the fact that India is hotter than Germany. If the plants are equipped with ultra super critical boilers, the efficiency can be raised to 50 per cent,” he said.

Govt eyes Rs 81 bn from NTPC stake sale

November 14, 2009. The government sent fresh signals about it commitment to disinvestment, saying preparations for stake sales in a number of companies are underway after it announced an ambitious agenda to sell shares in dozens of profitable firms owned by it. Electricity producer NTPC, in which a 5% stake is expected to be sold, is expected to fetch the government over Rs 80 bn. Consultations have begun for share sales in Coal India, BSNL and SAIL. When the government diluted its stake in NTPC five years ago, it got Rs 27 bn and now it is expected to fetch at least three times the amount. The new norms will allow the government to sell stakes to retail investors at a lower price while ensuring better value by auctioning shares to institutional investors. The government’s renewed commitment to disinvestment is a far cry from its position just over four months ago. In the July 2009 Budget, disinvestment did not even find a mention and the government had budgeted a meagre Rs 11.20 bn for the fiscal through sale of equity in state-run companies.

Govt to unveil 20k Mw solar power plan

November 13, 2009. India will soon launch an ambitious plan to boost its solar power generation from 3 MW to 20,000 MW by 2022, the minister for new and renewable energy said. The policy framework, known in official circles as "the National Solar Mission," will address the high cost of manufacturing solar panels as well as the high price of solar power, Abdullah said. A rough rule of thumb is that one megawatt of coal generating capacity costs about $1 million to build, while solar capacity costs roughly double that. India struggles with a severe shortage of electricity, with peak power falling about 12 per cent below demand. Rolling blackouts are common and businesses rely heavily on backup generators. The country has set a target to build 78,700 megawatts of new power capacity in the five years ending in 2012, but top officials have said India will fall short of that target.

West Bengal mulls power plant at Tata’s Singur land

November 12, 2009. A year after Tata Motors exited its Nano car project from Singur in West Bengal, the state government has taken the initiative to set up a power plant there and asked Bharat Heavy Electricals Ltd (BHEL) to make a feasibility study for the same. BHEL sources said that "a proposal for a power plant was sent by state-owned PSU West Bengal Power Development Corporation Ltd (WBPDCL) about two months ago." The project was kept under wraps in the government and even WBPDCL directors did not know about it.

INTERNATIONAL

OIL & GAS

Upstream

Petroceltic, Sonatrach test positive at Algeria's Isarene block

November 17, 2009. Petroceltic, in association with its partner Sonatrach, the Algerian National Oil & Gas Company, announced that well testing of the Objective Devonian F2 formation at well INE-2 has been successful, with a gas well test rate of 4 million standard cubic feet per day ("MMscf/d") (4,720 cubic metres/hour) with a flowing wellhead pressure of 180 PSI on a 1' choke setting. This flow rate was achieved without the benefit of fracture stimulation which proved successful in testing on the AT-1 well.

Petrobras Oct oil output stable at 2 mn bpd

November 17, 2009. Brazilian state-run oil company Petrobras said that domestic oil output in October stood at 2 million barrels per day, virtually unchanged from the record output of September. Production remained at record levels in October after the company brought two platforms back online, increased output at the Marlim Sul and Caratinga fields and began production at its Piranema field off the coast of northern Brazil. Output outside Brazil rose to 153,400 bpd in October from 149,300 bpd the month earlier, taking the company's total production, including natural gas liquids, to 2.154 million bpd, up slightly from 2.153 million bpd in September. Brazil's Congress is currently discussing legislation that would make Petrobras the sole operator of new projects in the vast offshore subsalt province with a minimum 30 percent stake in those operations.

Sinopec's overseas equity oil output tops 10 mn tons this year

November 17, 2009. The Sinopec Group, parent of Sinopec Corp., will see its overseas equity oil output top 10 million tons this year. The group said that it owns stake in 47 overseas projects in 18 countries, and anticipates its equity oil output this year to be around 50 times that of 2004's. The firm predicts that its overseas oil equity output in 2010 will continue to rise, thanks to its August acquisition of the Addax Petroleum Corporation, offering 537 million barrels of 2P (proved+probable) equity crude reserves and 738 million barrels of 3P (proved+probable+possible) equity crude reserves. The Sinopec Group's overseas oil equity in 2008 was 9.01 million tons.

Petrobras makes light oil discovery in Brazilian shallow waters

November 16, 2009. Petrobras has completed the drilling of exploratory extension well 3-MA-32A, located in shallow waters in a new producing area that extends to the north of the Marimbá field in the Campos Basin (post-salt). It was detected the presence of light oil (29-degrees API) in 30-meter thick reservoirs of good porosity and permeability. The recoverable oil volume has been estimated at 25 million barrels. This new discovery will increase Marimbá field's recoverable volume by 27%.

CNPC's Peruvian oil fields maintain 4000bbl/d of crude oil output

November 16, 2009. China National Petroleum Corporation (CNPC), China's largest oil and gas producer, has maintained 4000 bb l/d production of its Peruvian marginal oil fields in Block 6 and Block 7 for 30 days, the highest level in the past 10 years for these blocks. CNPC, also China's leading onshore oil and gas exploration and development expert, is contracted to develop Peru's marginal oil fields, mostly in Block 6 and Block 7. The achievement is a proof that through its superb technology, CNPC is capable of conducting E&D operation in these marginal oil fields , or so-called aging oil fields.

OPTI Canada updates on Long Lake bitumen production

November 16, 2009. Currently, steam injection at the Long Lake Project is approximately 75,000 bbl/d and, while early in the ramp-up process, bitumen production now exceeds pre-turnaround levels and is approximately 15,000 bbl/d with 47 well pairs on production, as of November 14, 2009. With the first sustaining well pad successfully tied into the main SAGD facilities, a total of 91 well pairs are now available for steam allowing for increased operational flexibility in the optimization of bitumen production. The Upgrader is in operation and the solvent deasphalting and thermal cracking units have also been restarted post-turnaround.

OGX estimates up to 500 mn barrels in new discovery well

November 16, 2009. Brazilian oil and gas company OGX Petroleo e Gas Participacoes SA's well 1-OGX-2A-RJS could hold between 400 million and 500 million barrels of recoverable oil, OGX. The well is located in the BM-C-41 block, where OGX holds a 100% working interest, in the shallow waters of the Campos Basin, off the coast of Rio de Janeiro State.

Statoil strikes additional hydrocarbons in Sleipner area

November 16, 2009. Statoil Petroleum AS, operator of the Sleipner West field in production licenses 029 and 046, has concluded the drilling of a development well (Beta West prospect) with an exploration target. Well 15/9-B-1 was drilled about 1.5 km west of the Sleipner West field and 4 km from the Sleipner B platform in the central part of the North Sea. The objective of the well was to prove petroleum in Middle Jurassic reservoir rocks (the Hugin formation), as well as to place relevant volumes in production via the production facility on the Sleipner B platform.

Bengal Energy positions itself for Growth in India, Australia

November 16, 2009. Bengal Energy has announced its financial and operating results for the three and six months ended September 30, 2009. Bengal continues to set the stage for material growth through exploration and exploitation opportunities on large-scale, high-impact plays in India and Australia. In October 2009, Bengal was provisionally awarded a 100% working interest in a 340,000-acre offshore block in the Cauvery Basin of India in what is the third large exploration block awarded to the Company in a proven, producing basin in the last 12 months.

BP confirms Western extension of Kaskida field in GOM

November 16, 2009. BP confirmed that an appraisal well to test a western extension of the Kaskida field has confirmed oil in Lower Tertiary reservoirs five miles to the west of the Kaskida discovery well. The well, drilled to a total depth of 32,500 feet by the West Sirius semisub, is located in Keathley Canyon block 291 in 5,675 feet of water and 250 miles southwest of New Orleans.

Repsol to invest $12 bn in Brazil by 2020

November 14, 2009. Spanish oil group Repsol expects to invest $12 billion in oil exploration activities in Brazil in the next 10 years, including in newly discovered "subsalt" areas, its president said. Repsol is a partner in the Guara and Carioca subsalt fields, both operated by Petrobras. Brufau said Repsol's 2010 Brazil investment would be between $380-400 million, and the company might take part in auctions for other subsalt fields. President Luiz Inacio Lula da Silva in late August proposed a legislative framework to develop huge reserves under a deep layer of ocean salt that could transform Brazil into one of the world's leading petroleum exporters. The bills, which would make Petrobras the sole operator of new subsalt oil fields, are making their way through Congress.

Fourth well confirms Tupi's potential of 5-8 bn barrels

November 13, 2009. Tupi Wells in BM-S-11Petrobras completed the drilling of the fourth well in the Tupi Assessment Plan area and the results reinforce the estimations of the potential of 5 to 8 billion barrels of recoverable light oil and natural gas in the pre-salt reservoirs of that area, located in ultra-deep Santos Basin waters.

Tethys gears up for testing at onshore Omani oil discoveries

November 13, 2009. Tethys and partner CCED (Oman) Ltd (operator) have contracted MB Petroleum LLC to provide the MB 49 workover rig to conduct testing operations on Blocks 3 and 4 onshore Oman. The 450 hp rig is currently being mobilized on Block 3 and testing operations will begin in the next couple of days. The Barik sandstone, which displayed excellent oil shows whilst drilling, was not fully evaluated at the time and will now be tested.

Dana announces discovery near Jotun

November 12, 2009. Dana and its co-ventures have discovered oil in the Jetta sidetrack well (25/8-17 A) offshore Norway. ExxonMobil Exploration & Production Norway AS (ExxonMobil), operator of production license 027 D, is currently concluding the drilling operations on the Jetta wildcat well 25/8-17 and its sidetrack appraisal well 25/8-17 A.

PetroChina's Daqing liquefied soda project starts up

November 12, 2009. PetroChina's Daqing oilfield has put its liquefied soda project with production capacity of 300,000 tons/year into operation. The liquefied soda is a substance required by Daqing Oilfield's tertiary oil recovery, a technique for producing more oil from the aging oil wells. Earlier, Daqing oilfield had to purchase the costly liquefied soda from market, greatly increasing its development cost. Daqing Oilfield, China's largest oilfield, has suffered from sluggish oil output growth in recent years. Its target is to maintain the annual crude oil and gas output at 50 million tons of oil and gas equivalent.

Sinopec to increase Saudi crude imports by nearly one-third

November 12, 2009. Sinopec Corp. will increase crude oil imports from Saudi Arabia by about 30 percent next year. Sinopec would import about 50 million tons of crude oil from Saudi Arabia, equivalent to 1 million barrels/day, which is about 30 percent more than the daily imports in the first three quarters of this year. Imports would be mainly processed by its new refineries like the 12-million-tons/year Fujian refinery and 10-million-tons/year Qingdao refinery. Besides import from Saudi Arabia, Sinopec will also import 20 million tons of crude oil from Iran.

Repsol plans four appraisal wells in US, Brazil next year

November 12, 2009. Spanish oil firm Repsol YPF SA said it plans to drill four appraisal wells in the U.S. and Brazil in 2010 The company plans to drill an appraisal well at the Buckskin prospect in the U.S. Gulf of Mexico, and appraisal wells at the Carioca North, Panoramix and Piracuca finds in the promising Santos Basin off Brazil's coast, Repsol said In February, Repsol said it made a large light oil discovery in ultra-deep waters of the Gulf of Mexico, which it called Buckskin.

MMS: More than 30 pc of Gulf oil production still shut-in

November 11, 2009. Offshore oil and gas operators in the Gulf of Mexico are reboarding platforms and rigs and restoring production following Tropical Storm Ida. The Minerals Management Service's Continuity of Operations Plan team is monitoring the operators’ activities. This team will be activated until operations return to normal. Based on data from offshore operator reports submitted personnel have been evacuated from a total of 17 production platforms, equivalent to 2.45% of the 694 manned platforms in the Gulf of Mexico. Production platforms are the structures located offshore from which oil and natural gas are produced. These structures remain in the same location throughout a project’s duration unlike drilling rigs which typically move from location to location.

Downstream

CB&I wins refinery project in Colombia

November 17, 2009. CB&I has been awarded a project valued in excess of US$1.4 billion by Refineria de Cartagena S.A. for the engineering, procurement services and construction of a new refinery, with processing capacity of 165,000 barrels per day, adjacent to REFICAR's refinery in Cartagena, Colombia. CB&I's scope also includes revamping the existing 80,000 barrel per day refinery. The overall project will relieve regional refining constraints and will enable REFICAR to produce clean, ultra-low sulfur gasoline and diesel from heavy crude.

Petrobras, BG plan pre-salt NGL project

November 17, 2009. Petrobras announced that it has formalized the incorporation of a joint venture with BG Group to develop the FEED (front end engineering and design) aiming to build an onboard natural gas liquefaction unit (ONGU). The plant is expected to operate in the Santos Basin's Pre-Salt Complex, located 300 km off the coast. The ONGU unit is one of the technological transportation solutions that can be used to transport the natural gas produced in the pre-salt layers. Natural gas is traditionally liquefied in onshore units. Because of the distance between the coast and the areas where the Santos Basin's Pre-Salt Complex blocks are located, Petrobras decided to assess the possibility of installing an ONGU unit to transport natural gas production from these areas. In 2011, based on the technical and economic feasibility analysis of the FEEDs and of other alternative solutions, such as installing submarine gas pipelines, a decision will be made regarding the best option to transport the gas from the Santos Basin's Pre-Salt Complex.

N. America, Europe refiners could shut 19 pc capacity by 2020

November 17, 2009. Weaker demand and surging costs could force refiners in North America and Europe to shut down nearly 19% of their total expected capacity by 2020, Vienna-based consultancy JBC Energy said. The consultancy estimates that 4.4 million barrels a day, or about 19%, of expected refining capacity in North America are vulnerable to shutdowns by 2020, assuming refinery throughput rates average between 81% and 84%. In Europe, 3.4 million barrels a day, or 18%, of the region's refining capacity is threatened by closure through 2020. While entire refineries are likely to be shut down, larger refineries could also opt to close down parts of their facilities, JBC added. Refiners' profits in the two regions have been squeezed in recent months by a sharp slowdown in demand, rising crude oil prices and new capacity coming online in Asia and the Middle East.

Five global firms seek to build oil refineries in S. Iraq

November 16, 2009. The Thi-Qar, Iraq investment commission said it would set up an investment oil refinery after five global firms offered requests in this respect, according to the commission's chief. Five international corporations have offered to build two types of oil refineries at capacities of 300,000 barrels per day and 250,000 bpd in a bid to cover the provinces needs within a short time frame.

Foster Wheeler-WorleyParsons JV wins Pluto LNG contract

November 16, 2009. Foster Wheeler AG announced that a joint venture of its Global Engineering and Construction Group, with partner WorleyParsons Services Pty Ltd., has been awarded a front-end engineering design (FEED) contract by Woodside for Train 2 and Train 3 of the Pluto liquefied natural gas (LNG) Project in Australia. The contract also includes an option for early EPCm services. The contract value for this award was not disclosed. Foster Wheeler's portion of the contract value will be included in the company's fourth-quarter 2009 bookings. The FEED is expected to be completed in the second half of 2010.

Utah refinery to suspend ops following CSB request

November 16, 2009. A federal agency has asked Silver Eagle refinery officials to shut down operations until the "integrity and fitness" of company equipment can be verified and documented. The U.S. Chemical Safety Board said refinery officials have agreed to that request, which could take days or even weeks to complete. It is the first time the federal agency -- which began in 1998 -- has asked a company to stand down from operations. The CSB team has been investigating a hydrogen gas explosion that occurred Nov. 4 and produced damage claims from more than 100 nearby homes.

Exxon eyes Singapore clean diesel project

November 13, 2009. U.S. energy major ExxonMobil is evaluating investments in its Singapore refinery to produce clean diesel to meet the region's growing demand for cleaner fuel products. The company is expanding its integrated refinery and petrochemical complex in the city state, which will become its largest downstream facility in the world.

China's fuel retail market sees promotional sales

November 12, 2009. China's fuel retail market has seen a flurry of promotional sales after the Chinese government raised the ceiling retail prices of both gasoline and diesel by 480 yuan/tonne. It reflects a sluggish downstream market, which led retailers to launch promotional sales. Furthermore, the profit margin of Chinese oil firms has been sufficiently secured after the price hike. On the Beijing market, almost all private-run gas stations, most of which are in suburbs, have lowered their retail price of RON 93 gasoline by 0.1 to 0.5 yuan/liter. In a gas station named "Haohanlong", the retail price tag on RON 93 gasoline is 6.16 yuan/liter, 0.12 yuan less even than the ceiling retail price before the price rise.

Saudi Aramco resumes talks for purchasing Sinopec refinery stake

November 12, 2009. Saudi Aramco has recently resumed negotiations with China Petroleum and Chemical Corp., also known as Sinopec, over investing in one of the latter's refineries located in the coastal city of Qingdao, according to the China Ministry of Commerce. The Sinopec Qingdao refinery has a refining capacity of 200,000 barrels per day (bpd). Negotiations between the two parties actually began before the Qingdao refinery even entered into production last May. However, the negotiations stalled midway, supposedly because Saudi Aramco worried that the Chinese government's product oil price controls would harm the refinery's profits.

Refiners Rally against higher ethanol blend

November 11, 2009. Several U.S. oil refiners may have stepped up their investments in ethanol production this year to meet regulatory requirements, but at the same time the refining industry is waging a battle against a waiver that would allow more of the biofuel to be blended into gasoline. The U.S. Environmental Protection Agency is considering a waiver that would allow the percentage of ethanol that could be blended into gasoline for conventional vehicles and power equipment to rise to 15% from 10%. The EPA has a Dec. 1 deadline on whether to grant this request, which was submitted in March by Growth Energy, a pro-ethanol industry group representing 54 producers that is headed by retired U.S. Army General Wesley Clark. Among the companies backing the organization are POET LLC, ICM Inc., Western Plains Energy LLC and Green Plains Renewable Energy (GPRE).

Transportation / Trade

Telvent upgrades one of Australia's longest gas pipelines

November 17, 2009. Telvent will install its OASyS DNA 7.5 supervisory control and data acquisition (SCADA) system and enterprise Gas Measurement and Analysis System (GMAS) into the Master Station of the Dampier to Bunbury Natural Gas Pipeline (DBNGP), the largest natural gas transmission pipeline in Western Australia. The new Telvent distributed system will deliver best-of-breed real-time technology and provide robust data gathering, a greatly enhanced security model, greater capacity in both real-time data gathering and historical retention, and facilitated potential integration with existing corporate applications such as Maximo.

Gazprom's gas exports to fall by 10.5 pc

November 17, 2009. Russian energy giant Gazprom's gas exports would fall by 10.5 percent to 142 billion cubic meters this year, with a record gas consumption fall in Europe. The forecast of profits this year will amount to 42.5 billion U.S. dollars. Russia supplies a quarter of Europe's gas consumption, which would fall 5 to 7 percent this year, "a record decline earlier observed only in separate countries." It is reported that Singapore had suggested Gazprom become its sole supplier of liquefied natural gas. However, the proposal cannot be put into practice until the current 20-year contract between Singapore and British Gas expires. Russia would have to win a new contract via open bidding with Qatar and Australia as potential competitors,.

Linc announces Ultra-Clean diesel deal with BP Australia

November 16, 2009. Linc Energy Limited announced that it has extended its Memorandum of Understanding (MOU) with BP Australia Pty Ltd. This MOU allows for BP Australia to be the first customer to purchase a minimum of 14,000 barrels per day of Ultra-Clean diesel to be produced at Linc Energy's first production plant to be commissioned in South Australia. The Memorandum of Understanding between BP Australia and Linc Energy is one of only a limited number offered in the market and provides BP with the opportunity to purchase up to 70 percent of the initial 20,000 barrels of ultra-clean diesel and other clean fuels to be produced at the plant in a take or pay agreement.

CNOOC to buy more LNG from Qatar

November 16, 2009. China National Offshore Oil Corp. (CNOOC), the country's leading offshore oil producer, has signed an agreement with Qatargas to buy more liquefied natural gas (LNG) from the latter to meet the growing domestic demand. The two parties signed a memorandum of understanding (MOU) on under which Qatargas will supply an additional 3 million tonnes of LNG annually. CNOOC is also planning to buy another 2 million tonnes of LNG from Qatargas each year, to further increase the state-owned firm's purchase from the gas-rich country to 7 million tonnes annually. The two firms signed a long-term supply agreement last June, under which Qatar would supply 2 million tonnes of LNG per annum for 25 years.

Bulgaria to form natural gas supplies JV with Azerbaijan

November 13, 2009. Nabucco Pipeline ProjectBulgaria's state-owned gas operator Bulgartransgaz, a subsidiary of Bulgargaz, and the Azerbaijan state gas company, SOCAR, are going to set up a joint venture, according to Bulgaria's Minister of Economy, Energy and Tourism, Traicho Traikov. The Bulgaria-Azerbaijan joint company is going to explore the possibilities for the delivery of natural gas from Azerbaijan to Bulgaria, including as both finding supplies for the quota of natural gas that Bulgaria will be entitled to receive through the Nabucco gas transit pipeline, and for the transit of compressed natural gas with tankers through the Black Sea. If the project is realized, Bulgaria will not have to participate in the construction of a liquefied natural gas terminal.

Kinder Morgan, Copano to build Eagle Ford pipeline

November 13, 2009. Kinder Morgan Energy Partners, L.P. and Copano Energy, L.L.C. announced they have entered into a letter of intent for a 50/50 joint venture to provide gathering, transportation and processing services to natural gas producers in the Eagle Ford Shale resource play in south Texas. The joint venture will construct, as a first phase, an approximately 22-mile, 24-inch natural gas gathering pipeline and will enter into new commercial arrangements with Kinder Morgan and Copano Energy. The natural gas pipeline will originate in LaSalle County, Texas, and terminate in Duval County, Texas, and will have an initial capacity of 350 million cubic feet per day. The pipeline is expected to be completed in mid-year 2010.

SES launches licensing business with GTI

November 12, 2009. Synthesis Energy Systems, Inc. (SES), a global energy and gasification technology company, has executed a revised license agreement with the Gas Technology Institute (GTI) for its U-GAS technology rights. Under the revised agreement, SES maintains its exclusive world-wide rights to the U-GAS technology for all types of coals and coal/biomass mixtures with coal content exceeding 60%, and non-exclusive rights to biomass and coal/biomass blends exceeding 40% biomass. The revised agreement expands the rights and further defines the terms for SES to sub-license U-GAS to third parties for coal, coal and biomass mixtures, or 100% biomass projects.

CNPC to build phase II central Asia-China gas pipeline

November 12, 2009. CNPC, the parent company of PetroChina is conducting the preparatory work to build the second phase of the Central Asia-China natural gas pipeline from Kazakhstan's Beyneu to Shymmkent, said an official with the Planning and Engineering Institute of PetroChina. Phase II of the natural gas pipeline will extend 1,480 kilometers and run in the north of the Aral Sea. It will be 1,016 mm in diameter and have a capacity of 5 to 10 billion cubic meters. Two parallel 1,792-km gas pipelines from Turkmenistan to China's border port Horgos has just come on stream in early November. The second pipeline is scheduled to come into operation at the end of 2010. The first phase of Central Asia-China natural gas pipeline is planned to increase its imports to China to 4.5 to 10 billion cubic meters by 2010, 17 billion cubic meters by 2011 and 30 billion cubic meters by 2012.

Time is right for more market-based NG prices in China

November 12, 2009. It is the favorable time to introduce pricing reform in China's natural resources industries, said Chinese economists in Beijing, noting that the macro-economy has bottomed out the effect of the global financial crisis while CPI and PPI still remain low, exerting no real inflation pressure. The Chinese government has long been determined to introduce market forces into the country's economy; however, it wants to put a strict control over the process of reforms, especially those that impact ordinary people's lives. High inflation has been a big obstacle to the introduction of market-oriented reforms, because a sudden price hike, which could be unavoidable under unrestricted market forces, would be great burden for average people, especially the needy.

ShawCor to provide coating services for QSN3 gas pipeline project

November 11, 2009. ShawCor Ltd. announced its pipecoating division, Bredero Shaw, has received a contract with a value in excess of US$40 million from Marubeni-Itochu to provide pipeline coatings for Epic Energy's QSN3 Pipeline Project. The QSN3 Project incorporates the looping construction of the South West Queensland Pipeline, SWQP and the QSN Link Pipeline. QSN3 will be installed from Wallumbilla in South East Queensland to Moomba in South Australia. The contract has been awarded to Bredero Shaw (Australia). The QSN3 project will be executed at the Bredero Shaw pipecoating facilities in Kembla Grange, Australia and in Kuantan, Malaysia.

TransCanada leases office space in Anchorage

November 11, 2009. TransCanada Corp. said it has signed a lease for office space in the Calais 1 building in Midtown Anchorage. The Calgary-based company is the state's licensee for developing a multibillion-dollar gas pipeline from the North Slope to a major energy hub in Alberta. About 50 TransCanada employees and 50 Exxon Mobil employees are working on the pipeline project. BP and Conoco Phillips are working on a competing proposal to build a North Slope pipeline, called Denali. The Denali staff are headquartered at 188 W. Northern Lights Blvd., a recently built office tower also located in Midtown. Both TransCanada and Denali plan to hold so-called open seasons next year, when they will advertise their shipping rates and try to get gas producers to commit to using a pipeline.

Policy / Performance

Russia, Slovakia mull establishing joint gas venture

November 17, 2009. Russia and Slovakia plan to establish a joint venture which will distribute Russian gas in Slovak. The Slovak prime minister later met with Alexei Miller, chief of Russia's state gas monopoly Gazprom. They agreed to launch talks on forming the joint venture as soon as possible. Gazprom pumped 6.2 billion cubic meters of natural gas to Slovakia last year. About 50 billion cubic meters of Russian gas are delivered to Europe through Slovakia annually.

Iran to step up daily gasoline production

November 17, 2009. Iran's daily gasoline production capacity will rise to 74 million liters by 2014 once new gasoline production units become operational and Persian Gulf Star Refinery comes on stream. There are plans not to sell unprocessed oil derivatives and turn the country into exporter of oil products.

New oil sands production technology may reduce costs per barrel

November 17, 2009. A recent report from Advanced Clean Technologies may actually alter the overall economics of tar sands oil production, in particular throughout Canada and Utah. One of the largest obstacles to industry economics is the high cost of tar sands production and the low percentage rates of extraction. If ACTH can actually produce 99% oil extraction rates as reported last week, while lowering the energy consumption needed for production and minimizing environmental damage, this is a game changer for the industry. Tests, which utilized ACTH’s patented, chemical reagents in an ambient temperature environment, showed its ability to successfully extract and separate over 99% of the oil residue present in both the Alberta and Utah oil sands samples.

China to build CBM pipeline in Shaanxi

November 16, 2009. China's Shaanxi provinces will start the building of an 84-km coalbed methane (CBM) pipeline from Hancheng to Chengcheng within 2009. The preliminary plan for the pipeline has been approved with a designed capacity of 450 million cubic meters and maximum handing capacity of 750 million cubic meters.

Hancheng is expected to be one of China's major CBM production bases, with its 58 billion cubic meters of recoverable reserves and 408 billion cubic meters of proven reserve. China's oil and gas giant PetroChina has drilled scores of vertical CBM wells in this area, recording 7,000 cubic meters of output for one well each day.

Russia, Slovenia sign agreement on South Stream project

November 16, 2009. Russia has signed agreements on the South Stream gas pipeline with all partners after reaching an agreement with Slovenia, Prime Minister Vladimir Putin said. Earlier Energy Minister Sergei Shmatko and Slovenian Economy Minister Matej Lahovnik signed an agreement on the passage of the South Stream gas pipeline across Slovenian territory.

The South Stream gas pipeline, scheduled to be finished by 2015, is part of Russian efforts to reduce reliance on transit nations. It is a rival project to the European Union-backed Nabucco. The pipeline will run through several European countries as well as through the Black and Adriatic seas, bypassing Ukraine, which has frequent disputes with Russia over gas supplies and transits.

The massive project aims to annually pump 31 billion cubic meters of Central Asian and Russian gas to the Balkans and on to other European countries. The pipeline's capacity was expected to be eventually raised to 63 billion cubic meters.

UAE to build refinery on Pakistan Coast

November 16, 2009. The United Arab Emirates (UAE) has decided to go ahead with the construction of a 5-billion-dollar oil refinery in Pakistan's southwestern Balochistan province. The refinery with an output capacity of 250,000 barrels per day was postponed in January, due to the global recession and a row over management issues with Islamabad. The Khalifa Coastal Refinery project is a joint venture between the Abu Dhabi state-owned International Petroleum Investment Company (IPIC) and the Pak-Arab Refinery Limited (PARCO), which is jointly owned by Pakistan and Abu Dhabi.

Iran seeks $1 bn ‘advance’ for LNG supplies

November 16, 2009. Iran has sought at least USD one billion as advance from India for supplying five million tonnes of liquefied natural gas (LNG) a year from 2012, but the demand may not be entertained by the buyers. Iran LNG Co, a subsidiary of state-run National Iranian Oil Company, has asked Oil and Natural Gas Corp (ONGC) and its partner Hinduja Group to pay the advance so that it can complete a USD-4.35 billion plant that will liquefy the natural gas produced from fields in the Persian Gulf, a source in know of the development said.

The demand for advance money came when ONGC-Hinduja were negotiating for a stake in the development of the Phase-12 of the giant South Pars field. South Pars Phase-12 is to feed gas to the LNG plant being built by Iran LNG at Tombak Port by 2011. The joint venture is yet to formally say no to the proposal but will in due course convey the same, he said. The joint venture of ONGC Videsh - the overseas arm of state-run ONGC, and Hinduja Group firm Ashok Leyland Project Services Ltd was formed to acquire rights for developing the South Azadegan oil field in Iran and South Pars Phase-12.

Bangladesh to resume gas pipeline talks with Burma, India

November 16, 2009. Dhaka is planning to resume talks with New Delhi and Yangon on a tri-nation gas pipeline from Myanmar [Burma] to India through Bangladesh but Delhi has reportedly scrapped its plan to take Myanmar gas as the Myanmar military junta has decided to sell to China most of the gas discovered near Bangladesh. Energy officials said the prime minister, Sheikh Hasina, has given permission to resume the negotiation with Delhi and Yangon on the pipeline to carry gas to India from Myanmar and the energy division had requested the foreign ministry to take necessary steps. Although the proposed pipeline was shelved about three years ago after BNP-led government had tagged some conditions, Delhi and Yangon have not approached Dhaka about the project in two to three years.

Argentina begins work on straits of Magellan gas pipeline

November 16, 2009. Companies in Argentina have started building a key natural gas pipeline to connect two areas near the Straits of Magellan in southern Argentina, the gas regulator, Enargas. The project will link Cabo Espiritu Santo in Tierra del Fuego Province and Cabo Virgenes in Santa Cruz Province with a 37.7 kilometer, 24-inch pipeline. The pipeline will be able to transport as much as 24 million cubic meters of gas per day, according to Enargas.

Gas producers favor state oversight of 'fracking'

November 16, 2009. States do a fine job of regulating the drilling process of "fracking," and transferring that regulatory authority to the federal government is not necessary, according, to West Virginia oil and natural gas industry executives.

Identical bills were introduced into the U.S. House of Representatives and Senate this summer to repeal a portion of the Safe Drinking Water Act that exempts hydraulic fracturing operations from that act. Fracking, as it is known in the drilling industry, is a process that injects treated water deep into the productive zone of natural gas and oil wells to fracture the rock and stimulate more production of gas or oil.

The procedure has been a common practice in the industry since the 1940s and is used to enhance production from new and older wells. In effect, the bill would transfer regulatory responsibility from state agencies to the U.S. Environmental Protection Agency. The legislation also would require companies to disclose the chemicals they use in hydraulic fracturing operations.

China hopes for cooperation with Qatar on oil, gas

November 13, 2009. Chinese Vice Premier Wang Qishan said that China is hoping to further enhance cooperation with Qatar on oil and natural gas fields. The cooperation between China and Qatar in fields like energy and trade has made great progress in recent years, said Wang.

The two countries enjoy potentials for further energy cooperation as China is in need of energy with its development of industrialization and urbanization while Qatar has rich natural gas reserves, said Wang. Wang said China hoped the two countries could advance cooperation on natural gas, oil and energy transportation to achieve win-win results.

Pennsylvania to lease forest land for gas drilling

November 12, 2009. Pennsylvania's Department of Conservation and Natural Resources will lease 31,967 acres of state forest land for deep gas well drilling, an amount that could meet a legislative mandate to raise $60 million from the sale of such leases in the 2009-10 budget year. The six tracts proposed for leasing are located in the Elk, Moshannon, Sproul, Susquehannock and Tioga state forests in Cameron, Clearfield, Clinton, Potter and Tioga counties.

Tiny Bahrain seeks big increase in oil output

November 12, 2009. Bahrain is seeking to increase its oil production to 250,000 barrels per day over the next seven years, the Gulf nation's oil and gas minister Abdul Hussein Mirza said. Bahrain currently pumps 33,000 barrels a day of oil from its own field, and plans to raise that to 100,000 barrels a day in seven years after an agreement last month with U.S. oil firm Occidental Petroleum Corp and Abu Dhabi's Mubadala Development Co, Mirza said. In addition, Bahrain produces 150,000 barrels a day from an offshore field it shares with Saudi Arabia. Bahrain has invited foreign investors and international oil companies to bid for exploration in offshore blocs and deep-layer exploration, Mirza said.

China set to enter rapid growth period for CBM production

November 12, 2009. China will produce 30 billion cubic meters of coalbed methane (CBM) by 2020 and the emerging industry will enter a period of rapid growth from 2010. China would build 10 to 15 production bases for CBM with 1 trillion cubic meters of proven recoverable CBM reserves by 2020. By 2030, China will produce 50 billion cubic meters of CBM each year, will have discovered 2 trillion cubic meters of proven recoverable reserves and have 20 to 30 production bases. China has 37 trillion cubic meters of geological CBM resources at a depth of less than 2,000 meters, including 11 trillion cubic meters of recoverable reserves at a depth of less than 1,500 meters. However, China's CBM wells generated only about 600 million cubic meters of CBM in 2008, held back by the controversial exploration and development licensing system, inadequate incentive measures, and the lack of investment and up-to-date production technology.

OPEC's Oct oil output rises - Survey

November 12, 2009. The Organization of the Petroleum Exporting Countries (OPEC) crude oil production averaged 28.89 million barrels per day (b/d) in October, up 60,000 b/d from September's 28.83 million b/d, a Platts survey of OPEC and oil industry sources and analysts showed. Excluding Iraq, which does not participate in OPEC output agreements, production from the 11 members bound by quotas (OPEC-11) rose by 70,000 b/d to 26.4 million b/d in October from 26.33 million b/d in September. Increases totalling 90,000 b/d from Angola, Nigeria, Saudi Arabia and the United Arab Emirates (UAE) were partly offset by decreases from Iran, Libya and Iraq of 30,000 b/d. The latest estimates leave the OPEC-11 overproducing their 24.845 million b/d output target by nearly 1.56 million b/d.

OPEC cautious on 2010 world oil demand

November 11, 2009. The Organization of Petroleum Exporting Countries said it was cautious about world oil demand next year in the latest indication the cartel will probably keep its formal production target steady well into 2010. "Although most of the signs are pointing toward higher oil demand, the downside risk factors are weighing on the [2010] forecast," the 12-nation producer said in its monthly oil market report. The prospect of a weak economic recovery and the negative impact of higher crude prices on demand are the two main factors concerning OPEC, it said. The group slightly raised its 2010 world crude demand forecast by 100,000 barrels a day from October and said total consumption was now seen rising about 750,000 barrels a day versus 2009 to 85.1 million barrels a day following a steep contraction in demand this year.

POWER

Generation

OLG claims power plant massively mismanaged

November 17, 2009. According to a lawsuit filed by the OLG, the troubled Windsor Energy Centre is too small to properly house equipment, has power generators that have never worked, must be rebuilt, and as a result of design flaws will never operate “in an efficient, cost-effective manner.” The Ontario Lottery and Gaming Corporation filed a $60-million counter-claim Nov. 10 against the Buttcon Group — which designed, built and until August operated the power plant in the parking garage of Caesars Windsor — alleging massive mismanagement of the facility.

U.S. coal industry stakes survival on carbon capture

November 17, 2009. A looming government clampdown on CO2 emissions is about to confront an already embattled U.S. coal power industry with two stark options: capture carbon or die. Legislation from Congress or tough new regulatory demands could make it costly to spew greenhouse gases, posing a serious threat to the nation's coal-fired power plants. With coal the single biggest source of carbon emissions, industry backers are pinning their hopes on technology to trap and store these emissions blamed for heating up the planet. Carbon capture technology is far from a done deal, however. Unproven on a commercial scale, the process is extremely expensive and there are a multitude of safety concerns. The stakes in this technology are also high for American consumers, who rely on abundant domestic coal for around half of the country's electricity generation. On the global stage, leaders from around the world will meet next month in Copenhagen to try to agree on binding international targets for reducing greenhouse gas emissions. With coal the source of 40 percent of global carbon emissions, talks on funding for carbon capture will also likely be a key part of these negotiations.

Energy Dept. walks the walk with smart building

November 17, 2009. Homes and office buildings consume three-quarters of U.S. electricity, and the National Renewable Energy Laboratory wants to lower that figure by erecting what it believes will be the largest "net-zero" energy building in the world - one that produces as much power onsite as it uses. The Department of Energy, which runs the Golden-based lab nestled in the foothills west of Denver, and its contractors hope the $64 million structure will provide a national blueprint for making buildings greener and cutting energy use.

Primoris Services Corporation announces new $20 mn power plant contract

November 17, 2009. Primoris Services Corporation one of the largest specialty contractors and engineering companies in the United States, today announced that its wholly-owned subsidiary, ARB, Inc., has signed a contract with the City of Riverside, California for the construction of a new simple-cycle combustion turbine generator power plant that will expand the existing capacity of the Riverside Energy Resource Center ("RERC") to provide peak power demand to the City of Riverside's public utilities customers. The project is expected to generate revenues of approximately $20.0 million to Primoris over an 11-month period beginning December 2009 and ending October 2010.

Carbon Energy to produce first UCG power

November 16, 2009. Energy company Carbon Energy will move a step closer to producing its first electricity from coal without having to dig it up. rbon Energy is developing a 5MW power station at Bloodwood Creek in Queensland's Surat Basin using underground coal gasification (UCG) technology. CG is the process of extracting coal from the ground through its transformation into a combustible gas for power generation. he technology avoids the need to dig up coal, produces fewer emissions and has a much smaller footprint than a conventional coal-fired power station.

Ethiopia opens 300 Mw dam, starts producing 80 Mw

November 14 2009. Ethiopia opened a dam that it says will produce 300 MW of hydropower as part of efforts to overcome chronic energy shortages and become one of Africa's only power exporters. Power shortages are common in Africa and have hindered investment, even though the continent has abundant potential resources of solar, hydro, oil, gas, coal and geothermal power.

Centrica to become nuclear power player

November 13, 2009. British utility Centrica's planned move into atomic energy by buying a 20 percent stake in British Energy is to go ahead, placing it at the forefront of Britain's nuclear new-build plan. Centrica's plan hinged on selling its 51 percent stake in Belgian utility SPE to British Energy's owner, French utility EDF, a deal that was cleared by European Union regulators. Centrica has no experience in nuclear power generation but hopes teaming up with EDF, the world's biggest nuclear player, will give it a piece of a sector set to grow because of concerns over carbon emissions from coal and gas fired power plants.

Transmission / Distribution / Trade

Intl power generation conference in Pakistan

November 17, 2009. The 3^rd international power generation conference & exhibition POWERGEN PAK 2009 will be held on December 10, with a theme "Power Efficiency; Up-gradation & Self-Reliance" at a local hotel at Lahore. ENERGY UPDATE is organizing the event which will offer an interactive conference and exhibition; enabling local and international producers, suppliers, distributors, marketers and users to talk on latest advancements being adopted and utilized worldwide especially in Asia Pacific Region. POWERGEN PAK 2009 is supported by Ministry of Water & Power - Govt. of Pakistan, Ministry of Environment - Govt. of Pakistan, Private Power Infrastructure Board (PPIB), Alternate Energy Development Board (AEDB), Enercon & Federation of Pakistan Chambers of Commerce & Industry (FPCCI).

CKI, HK Electric to boost stake in British gas supplier

November 16, 2009. Cheung Kong Infrastructure (CKI) and Hongkong Electric said that they will spend 76 million pounds ($127 million) to increase their stakes in British gas distributor Northern Gas Networks. The companies would buy the stakes from United Utilities Group, the companies said.

Brazil Agency says power grid vulnerable to outages

November 12, 2009. Brazil’s integrated electricity grid leaves it vulnerable to the types of outages that occurred recently, when 40 percent of the country was plunged into darkness, according to a government energy research agency. Brazil has the largest integrated power grid in the world; it facilitates electricity transmission between regions, but the domino effect that happens when we have a problem is a major inconvenience,” said the president of Brazil’s Energy Research Agency. Wind, rain and lightning strikes on transmission lines connected to the 14,000- megawatt Itaipu hydroelectric dam probably caused the failure, which affected 18 of 26 states for as long as 3 1/2 hours. Companies including Vale SA, Gerdau SA and Petroleo Brasileiro SA reduced output because of the lack of electricity.

Policy / Performance

Bangla Power secy to visit India for energy talks

November 17, 2009. A top energy ministry bureaucrat from Bangladesh will visit New Delhi for preparatory energy cooperation talks ahead of Prime Minister Sheikh Hasina's India visit next month when the two countries are expected to ink a deal on power sharing. The Bangladesh delegation would discuss the modus-operandi of importing at least 100 MW power from India as offered during the September visit of foreign minister Dipu Moni to the Indian capital. They would also discuss future cooperation for human resources and technical development between the Bangladesh Power Development Board and its Indian counterpart state-run power producer NTPC.

Power prices weak due to coal, gas, not oil: E.ON

November 17, 2009. Power prices in northwestern Europe have remained weak, despite a recent oil market rally, due to low prices for fuels such as coal and gas. During that period, German baseload power for 2010 delivery -- a market benchmark -- has been flat at about 47 euros per megawatt-hour. Coal is said to have decoupled a little bit from oil, and also gas has uncoupled somewhat from oil. Once those recouple, then the power price will recover. Signs of economic recovery in Germany, France and Britain could help drive power prices.

Emulate South Korea's move in gaining support for nuclear power: Malaysia

November 16, 2009. The government will need to launch a massive awareness campaign to correct the people's perception on power generation using nuclear power and in particular waste management, according to the Ministry Of Energy, Green Technology And Water. Its Deputy Secretary-General (Energy), Loo Took Gee said Malaysia could emulate South Korea's move in winning over the public in the quest to develop a successful nuclear power programme. Based on the country's present demand and supply forecast, Peninsular Malaysia would need an average additional capacity of at least 500MW annually to meet an increasing demand from 2015 onwards. However, the amount required in 2016 is even higher due to the retirement of gas fired plants of the first generation of independent power producers (IPPs). The conservative estimate has also taken into account the power supply from the Bakun Dam which is expected to be channeled to the Peninsula in 2015.

Iran's Bushehr nuclear power plant launch delayed: Russia

November 16, 2009. The launch of the controversial Bushehr nuclear power plant, which is Iran's first major civilian nuclear project built by Russia, has been delayed and will not be launched this year as expected, according to a top Russian minister. Earlier this year Shmatko had said the power plant, Iran's first major civilian nuclear project, would be commissioned in 2009. Russia has pressed ahead with the Bushehr project despite Western concerns about Iran's nuclear energy programme, which the United States and its allies fear is aimed at acquiring an atomic bomb.

$ 80 bn needed for electricity by 2020 in Saudi Arabia

November 15, 2009. Saudi Arabia said it would need to invest SR300 billion ($80 billion) in electricity generation and distribution over the next ten years to cater for domestic demand that is growing by 8 percent a year. By 2015, the Kingdom will add 5,200 megawatts in new capacity of which 3,200 megawatts will be operational in 2013, the minister said while opening a workshop of electricity investment organized by his ministry in cooperation with World Bank. The current investment program includes three projects: The Rabigh plant to produce 1,200 megawatts in 2013; the 11th Riyadh plant to operate in 2013 with a capacity of 2,000 megawatts; and the Qarya plant to produce 2,000 megawatts by 2015.

Iran has in effect rejected nuclear deal: French FM

November 15, 2009. Iran has in effect rejected a UN-brokered deal aimed at preventing Tehran from acquiring nuclear weapons, French Foreign Minister Bernard Kouchner said. The comments came as both the United States and Russia expressed frustration at Iran’s failure to give an answer three weeks after it received the offer in high-level talks to defuse the stand-off. Kouchner said so far attempts to reach a deal with Iran had not gone well.

Russian deputy PM visits Kudankulam plant

November 12, 2009. Russia is ready to invest in more nuclear reactors in India and discussions to this effect were on with the Indian government, said the Russian Federation's deputy prime minister SS Sobyanin in Kudankulam, a sleepy seaside hamlet in Tirunelveli district in south Tamil Nadu, which houses the 2000-MW nuclear power project coming up with Russian collaboration. Sobyanin, who led a ten-member Russian delegation to the Kudankulam nuclear power project, told reporters after inspecting the plant, that the civil work on the first and second reactors was nearing completion and that the first reactor would be ready for power generation next year.

Renewable Energy / Climate Change Trends

National

Cooperate on climate change, PM tells Saran, Ramesh

November 17, 2009. Prime Minister Manmohan Singh has instructed Minister of State for Environment and Forests Jairam Ramesh and the PM's special envoy on climate change Shyam Saran to sit together and formulate a "joint statement" on India's approach to the Copenhagen Climate Summit scheduled for December 7 to 18. Alarmed by the confusion created by the public expression of divergent opinions by his key advisors on climate change, the prime minister summoned Saran and Ramesh and asked them to put their heads together and come forward with an agreed text that would reflect both their concerns, a senior government official confirmed. Ramesh and Saran have been at odds over the issue of climate change for the past few months. For instance, less than a month ago the environment minister had to face embarrassment when a section of the media published a letter he had written to the prime minister. The letter suggested that India jettison the Kyoto protocol and delink itself from the G-77 (a block of developing nations) and take on greenhouse gas emission commitments besides permitting the external scrutiny of the measures it takes at its own cost. This could have weakened India’s position in the G-77 and also weakened the G-77 as a whole as India and China have been the leading voices there.

RIL to focus on renewable energy: Mukesh

November 17, 2009. Oil and gas behemoth, Reliance Industries will focus on growth in its renewable energy segment and plans to pilot projects in biofuels, solar energy and fuel cells, its Chairman Mukesh Ambani said. "Research and proof of concept project in biofuel, solar energy and fuel cells, to understand and enable scale-up, would characterise this effort. Our efforts would be to grow the conventional energy and material platform through greater global scale and competitiveness," he said.

India will face the brunt of climate change

November 17, 2009. The Fourth Assessment Report of the Inter-governmental Panel on Climate Change (IPCC) warned that climate change would lead to an unprecedented crisis of shortage of fresh water availability, increase in hunger, extreme weather conditions, droughts, heat wave, cylcones and mortality due to diarrhoea, said Prof Dennis Rumley, Chairperson, Indian Ocean Research Group (IORG). Prof Dennis Rumley said that climate change is projected to impinge on the sustainable development of the environment associated with rapid urbanisation, industrialisation and economic development. Island states of the Indian Ocean, especially small island States remain vulnerable to effects of climate change. Dennis Rumley said that the growing trend of environmental migrants are clashing with widespread antimigrant sentiment in both developed and developing countries around the world. Some countries are perceiving migration, particularly unauthorised international migration, as a security threat.

Theni major source of wind power generation

November 16, 2009. Theni is emerging a major source of electricity generation through wind power with the district identified as having potential to generate over 500 MW in the next few years. A few private companies have already installed windmills in Kandamanur, Kamatchipuram and Andipatti in the district. The present power generation is around 100 MW, sources in the Wind Energy Development Cell (Non-conventional Energy Sources department) of Tamil Nadu Electricity Board (TNEB). Power generation through the windmills in this southern district would increase by at least another 150 MW within the next year, sources said. With around 4,000 MW of installed capacity, wind power meets a huge portion of the State’s total demand of nearly 10,000 MW between May and September.

Pachauri rubbishes govt-backed report on melting of glaciers

November 15, 2009. Rubbishing the claim by a government-backed study that melting of glaciers was not due to climate change, leading environmentalist R K Pachauri today dubbed it as "totally unsubstantiated scientific opinion" and flayed environment minister Jairam Ramesh for endorsing it. Pachauri, the head of Nobel prize winner Inter-governmental Panel on Climate Change (IPCC), said it was universally acknowledged that glaciers were melting because of climate change and the same applied to Indian glaciers.

India, US to collaborate in solar energy space

November 15, 2009. India and the US have agreed to collaborate in encouraging investments and research and development in the solar energy space. Both countries will tap into the large potential of solar energy in India, which is starting the ambitious solar development plan. According to an official release, Mr Steven Chu, Secretary, US Department of Energy, met the Union Minister for New and Renewable Energy, Dr Farooq Abdullah and discussed various areas of cooperation in the field of renewable energy.

The two sides have agreed to take forward joint research and deployment of distributed generation with focus on storage, the statement said. It was also agreed that the biomass gassifier technology offers enormous potential to meet the energy requirement in rural areas. The two sides agreed to step up their research and development collaboration to develop small biomass gassifier that can be made available for rapid deployment to meet the power needs in rural India and the US.

Titan Energy’s solar power plant in Bengal joins grid

November 14, 2009. The country’s first megawatt-scale solar electric power plant has been commissioned in Jamuria, West Bengal, and connected to the grid by Titan Energy Systems. The renewable energy plant is expected to power over 500 homes and a few coal mines in the Asansol district. Electricity from the unit is being fed into the power grid of utility provider DPSC Ltd, Seebpore, Asansol. Hyderabad-based Titan Energy designed and built the power plant for the West Bengal Energy Development Corporation Ltd (WBEDCL). The capital cost of the plant works out to Rs 180 mn per MW as of July 2008 rates. On the other hand, the cost of generating electricity is Rs 15 per kWh. In comparison, the price for other sources of electricity paid by the utility in West Bengal ranges between Rs 3 and Rs 4.50 per unit.

IEA warns of upward trend in energy use

November 13, 2009. The International Energy Agency (IEA) sounded caution for countries dependent on imported oil with fragile energy security to be prepared to “make the hard choices needed to combat climate change and enhance global energy security”. In its latest flagship publication on World Energy Outlook, the Paris-based inter-governmental think-tank of rich industrial countries said that even as one of the welcome results of the world financial crisis the global energy use is set to fall this year, it will not be long before it resumes its upward trend if government policies do not change in the interregnum. Stating that in its reference scenario demand increases by 40 per cent between now and 2030 reaching 16.8 billion tonnes of oil equivalent, IEA warns that fossil fuels continue to dominate the energy mix, accounting for more than three-quarters of the incremental demand.

Sops likely to cut solar power equipment costs

November 13, 2009. The National Solar Mission, which plans to add about 20,000 MW by 2022, would be announced shortly said Dr Farooq Abdullah, Union Minister for New and Renewable Energy. Dr Abdullah said that to generate solar power, the Centre was looking at public-private partnership models. It is also looking at ways to bring down the manufacturing cost for solar power equipment. The Mission would consider offering various sops such as concession in import duties on equipment and providing subsidy on power generated from solar sources so that it becomes economically viable for the producers, he said.

Maharishi Solar in talks with German firm for technology

November 12, 2009. Maharishi Solar Technology Ltd, part of the diversified Maharishi Group that has interests ranging from education to renewable energies and animation industry, plans to invest Rs 3 bn in India in the next two or three years to get new technologies and set up plants that will provide alternative energies at cheaper prices.

The company is in the process of tying up with established foreign companies in the field of solar technologies, as part of its India plans. The 3 MW plant, which will be a kind of pilot plant, will come up in two years and will cost 20-25 per cent cheaper than the existing solar-based plants.

The company has recently tied up with US-based Abengoa for producing solar steam for industrial applications. It will set up a pilot plant that will provide the client industry solar steam at the rate of 350 kg per hour — this is expected to commence operations from January next year. He said the company was also in talks for a tie-up with a US-based company that was engaged in producing photo-voltaic plates.

Dow Corning sees India solar energy market glowing

November 12, 2009. Silicones manufacturer Dow Corning is seeking a long-term engagement with the Indian solar energy market. The Michigan, US-based company, which has a manufacturing unit in Pune and about 300 employees, intends to increase the headcount in India. The company will focus on research, education and work or collaborations. Dow Corning has invested $5 billion over the last five years in strengthening its capabilities as a lead player in key materials to the global solar industry. The company recently launched the solar cell encapsulation technology (to assemble PV modules) and a range of materials that help improve cell efficiencies and cost savings to manufacturers.

Solar city among 5 major projects coming up in Guntur

November 12, 2009. Five major industries are coming up in Guntur district, including a solar city near Gurazala, according to Mr. K. Lakshminarayana, Minister for Major Industries, who hails from the district. Of the five projects, the solar city project would require 4,000 acres, the food park 150 acres and the proposed IT park 50 acres.

Applied Solar sees more potential in rural electrification

November 12, 2009. Applied Solar, part of the diversified Applied Materials group, sees a major opportunity unfolding in the country’s rural electrification which has the potential to rapidly empower those dependent on diesel gen-sets. With thousands of villages short of power, solar units could be deployed faster as they do not require grid support.

Apart from rural electrification, opportunities abound in the solar power generation in India with most of the power utilities diversifying into this or considering entry. Applied is associated with several companies in India as a consultant and also as a supplier.

Common standards soon for photovoltaic units

November 11, 2009. SEMI, the global industry body for semiconductor and photovoltaic industry, and its Indian chapter are in the process of evolving common standards aimed at helping in reducing the cost of implementation of photovoltaic cells for power generation.

Semiconductor Equipment and Materials International (SEMI), based in the US, has over 1900 members globally. Potentially, some of the targets set by countries such as China and India could also well be surpassed.

NTPC likely to invest Rs 81 bn for renewable energy projects

November 11, 2009. State-run NTPC is likely to invest about Rs 81 bn for setting up over 1,000 MW renewable energy projects in the country by 2017. The company has set a target of adding at least 1,000 MW of power through renewable energy sources by the end of the next plan period (2012-17). This capacity addition is likely to consist of wind energy projects (650 MW), hydro energy from units of smaller than 25 MW (350 MW) and solar energy projects (50 MW). On an average, generating one MW hydro power costs Rs 70 mn, wind power Rs 80 mn and solar Rs 100 mn. The first 100 MW renewable plant based on wind energy is likely to be commissioned by the end of 2010 and the company has signed an agreement with Karnataka Power Corp for setting up wind energy projects aggregating to 500 MW capacity.

Global

Tree growth spurt 'is climate change smoking gun'

November 17, 2009. Temperature rises after 1950 are thought to be responsible for the unprecedented growth of bristlecone pines on High Mountain slopes in the western US. Bristlecones are the longest living trees in the world, the record being held by one pine in California's White Mountains that is almost 5,000 years old. Their enormous lifespans, combined with well-preserved trunks from even older dead trees, make them ideal for investigating regional climate change over long periods. Trees preserve the story of environmental change in their growth rings, the concentric dark and light bands that appear in the face of cut trunk. Wider rings indicate episodes of time when growth was unusually fast. US scientists studying the bristlecones looked at the average width of growth rings for 50-year blocks of time as recent as 1951 to 2000 and traced back as far as 2,650 BC.

Brazilian Airline joins biofuel development effort

November 17, 2009. GOL Linhas Aereas Inteligentes S.A., the largest low-cost and low-fare airline in Latin America, has joined the Sustainable Aviation Fuel Users Group (SAFUG), which unites airlines and technology providers in a joint drive to accelerate the development of new, sustainable aviation fuels for commercial use. Initially, the group is working on two preliminary sustainability research projects, one of which involves a comprehensive investigation into Jatropha curcas as a sustainable fuel source, including its life cycle, CO2 emissions and the potential social or economic impact on growers in developing countries. The second project is taking an in-depth look at algae and the associated fuel production processes, to ensure they are in line with strict sustainability guidelines. Both Jatropha curcas and algae have the potential to become viable biomass aviation fuel sources. The group plans additional studies on other possible fuel sources in the future.

A-Power, US REG to build US wind turbine factory

November 17, 2009. Chinese wind-turbine maker A-Power Energy Generation Systems, Ltd. and the U.S. Renewable Energy Group (US-REG) have signed a cooperation agreement for the development and construction of a new production and assembly plant in the United States.

The facility is expected to be 320,000 square feet and produce 1,100 megawatts (MW) of wind energy turbines annually. Upon completion, the facility is expected to employ approximately 1,000 workers and will create additional jobs during the construction process. In addition to production and assembly at the new plant, the plan calls for many of the key wind turbine components to be sourced from U.S. manufacturers.

Brazil not happy with US-China climate change stance

November 17, 2009. Brazilian President Luiz Inacio Lula da Silva mentioned on that he was clearly “disappointed” after US President Barack Obama and Chinese President Hu Jintao decided not to set any specific targets for reducing the emissions of greenhouse gases, which are triggering climate change.

The US and China, which are the largest of the polluters, have given a strong blow to the climate conference with this deal. The nations have informed the Danish government that no deal would be achieved at the summit.

Lula emphasized that he will go to Copenhagen regardless to defend Brazil's climate proposals. Lula along with French President Nicolas Sarkozy had arrived on a consensus regarding the reduction on greenhouse gas emissions to a minimum of 50% by 2050.

S. Korea sets carbon emissions reduction target

November 17, 2009. South Korea has for the first time set a target for the reduction of its greenhouse gas emissions in the run up to the UN climate conference in Copenhagen, the government said.

The fourth-largest economy in Asia plans to reduce its emissions by 30 percent from the predicted level of 2020. The president said South Korea's commitment in the fight against climate change would involve a "short-term burden" but would later bring greater advantages. South Korea is among the 10 countries with the largest carbon dioxide emissions. The country is not obliged to reduce its emissions according to current UN climate protection agreements.

Vestas sees big wind turbine orders in Asia

November 17, 2009. Vestas Wind Systems said it plans to announce significant orders for its wind turbines in the next five months, citing a pick-up in demand for wind power in Asia as more funding for projects becomes available. Like most in the sector, Vestas' sales growth slowed during the financial crisis as funding for projects collapsed. But the Danish wind turbine maker is banking on a rebound in clean energy to bolster order flows for 2010.

Vestas' Asia unit, which counts Hong Kong power firm CLP Holdings and Australia's Roaring 40s Renewable Energy Pty among its clients, sees potential wind demand of 3,000 megawatts (MW) in the region. As of June, the unit has cumulative installed capacity of 4,189 megawatts, with more than half situated in India.

Food security warning over climate change

November 17, 2009. Global warming is "inextricably linked" to food security, Seychelles President James Michel said, lamenting reports that no binding agreement is expected at the UN climate change talks in Copenhagen next month. Without "solutions to address the real cause of climate change and food insecurity, we will be increasing the number of people who are hungry," Michel added at the headquarters of the Food and Agriculture Organisation. He said the prospect of no binding agreement being reached in Copenhagen was "a bit shocking and in a way very irresponsible."

Cow dung to power more Dutch homes

November 16, 2009. A plant that converts cow dung into energy for homes opened in the Netherlands. Manure from cows at a nearby dairy farm will be fermented along with grass and food industry residues, and the biogas released during the process will be used as fuel for the thermal plant's gas turbines. The heat generated will be distributed to around 1,100 homes in the area around Leeuwarden in the north of the Netherlands, the plant's operator Essent said in a statement.

Firms in Europe and elsewhere have been investing in biogas plants and this is the second of its scale running on cow manure in the Netherlands. It follows another plant that Essent opened in January.

NZ Govt vows to pass climate change bill

November 16, 2009. The New Zealand Government says it is committed to passing crucial climate change legislation despite a deadlocked select committee report and opposition complaints that taxpayers will carry a $100 billion burden. And it is working through a deal with the Maori Party which is expected to secure enough support to get the bill through Parliament.

Test flights on green fuel by global airlines

November 11, 2009. With global aviation bodies like International Air Transport Association pressing for reduction of carbon emissions in the sector, some major airlines have carried out test flights using biofuel and alternative fuel, which are cleaner. Though the civil aviation sector accounts for only two per cent of the global carbon emission, the industry has conducted sufficient research on the usage of alternative fuels, from the prospective of both environment and cost. Qatar Airways, Virgin Atlantic, Continental Airlines, Air New Zealand and Japan Airlines are some of the global carriers which have carried out experiments to fly their aircraft using a blend of alternative fuel and aviation turbine fuel.

Areva says to form nuclear engineering JV in China

November 11, 2009. French nuclear group Areva will form a nuclear engineering and design joint venture with a Chinese counterpart before the end of this year, a company executive said. Areva has been trying to build their business in China after losing out to Toshiba Corp's Westinghouse Electric in the bid to supply the country's first third generation nuclear power plant. Westinghouse's AP1000 technology will form the basis of China's own third generation reactor after the two sides signed a technology transfer agreement, and Avera's designs were rejected after it refused to transfer the technology. Areva has since signed a deal to build two of its proprietory EPRs at the Taishan site in southern Guangdong province.

Key Dems see no more CO₂ bill action this year

November 11, 2009. Key U.S. Senate Democrats said it is unlikely there will be any more major committee action on climate-change legislation this year, the strongest indication yet that a comprehensive bill to cut greenhouse-gas emissions won't be voted on until at least next year.

Although the Senate Environment Committee approved a version of the bill, the proposal will face strong revisions from moderate Democrats, particularly from Senators on the Finance and Agriculture committees.

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