Durban: ‘Can Kicked further Down the Road’
Lydia Powell, Observer Research Foundation
he declaration of victory in climate negotiations in Durban dominated the energy and environmental news flow last week. As many had already predicted ‘the can was kicked further down the road’ as the celebrated ‘agreement’ proved to be little more than an understanding among countries that they will come to an agreement later. A nation being legally bound to come to an agreement at a later period in time to unspecified terms and conditions is not easy to interpret legally. Given that international law is notoriously weak even when the terms and conditions are clearly specified, the probability of an agreement later in the future is very low. Yet diplomatic spin doctors must claim progress and achievement even if only to justify the fact that each of the Durban participants emitted twice the annual average global per capita carbon emissions in just one trip to Durban!
The fault lines in the climate negotiating framework of ‘capping’ and ‘trading’ Green House Gas (GHG) mitigation were evident right from the start at Kyoto. The ‘great divergence’ in income per capita along with the momentous transformation in the distribution of world population in the last two hundred years has created a divided world with a small but homogeneous and advanced industrialised group and a large, heterogeneous and ‘yet to industrialise’ group. Chronic inequalities between the two groups mean that GHG mitigation is valued more by rich countries than by poor countries. GHG mitigation is a public good with built-in ‘free rider’ (non-cooperative) incentives and consequently poorer countries prefer that richer countries do more. GHG mitigation is also non-rivalrous in the sense that one country’s mitigation action can benefit the whole world and no one country can be excluded from appropriating the benefits.
Game theoretic models see the current ‘cap’ and ‘trade’ framework in climate negotiations as a ‘public-goods’ game in which incentives for cooperation are lower than that of other well known games such as the prisoners’ dilemma. What is labelled as a non-cooperative stand by India by the western media is in fact a perfectly rational strategy of exploiting ‘free rider’ incentives to maximise benefits and minimise costs partly because India ‘can’ under the current negotiating framework but also because India ‘must’, given its limitations such as size and poverty levels.
In a world with identical countries (say in terms of size and wealth), the ‘cap’ and ‘trade’ mechanism provides little or no incentive for free-riding but problems arise when countries differ. Polarisation between countries begins with differences such as size and wealth (geographic conditions, habits, resource endowments, governance structures etc could be other differences not accounted for in models). As per game theoretical models, if size is the only difference between countries then large countries will place a higher value on mitigation while smaller countries will place a proportionally lower value. If wealth is the major difference, then poor countries will place a much lower value on mitigation compared to rich countries and will tend to free ride. The current global climate negotiating framework assumes that all countries will assign the same value on mitigation efforts and that the differences between countries, if any, can be addressed through an appeal to scientific projections and moral sentiments. Negotiating outcomes from Kyoto to Cancun have clearly demonstrated that the pursuit of ‘national-interest’ which in reality is nothing more than a respectable term for ‘free-riding’ will not falter under moral and scientific ammunition.
India which is curious combination of large size (population numbers) and relative poverty (low per capita incomes) stands testimony to outcomes of game theoretical models. As a poor country India evidently has low incentives for mitigation action but as a large country it has relatively greater incentives for mitigation action (more victims of climate change and consequently more gain from mitigation action). However the incentives to ‘free-ride’ as a poor country far outweigh the incentive to seek greater mitigation as a large country because its current domestic ‘logic’ is consistent with the former rather than the latter position.
The argument from rich countries that India should stop playing the victim card as it is now a member of the rich club is not accurate. For the first time in nearly two centuries, major ‘emerging powers’ such as India are actually very poor. The so-called ‘economic power’ of India is driven by quantitative factors (size measured in terms of population numbers) rather than qualitative factors such as economic efficiency and productivity. India’s per capita income of $1340 at market exchange rates ($3560 at PPP) is comparable to that of Sudan at $ 1270 which when qualified by a population of over 1.2 billion grows into an aggregate GDP of roughly $ 3 trillion (at market exchange rates) and puts India somewhere between France and Germany in terms of GDP and secures G 20 membership. Comparing qualitative attributes of western nations to quantitative attributes of India is not rational. Until quantity gains quality, celebrations of India’s evolution as climate apostle from climate victim in climate negotiations must also ‘be kicked down the road’!
The Jigsaw puzzle of Power Sector Reform: Missing Pieces
Ashish Gupta, Observer Research Foundation
ower cuts are not new in India but the fact that they are persisting despite the implementation of the Electricity Act 2003 is surprising. The news coming in last week predicts that it may get worse for industries and individual consumers. Power & Fertilizer companies which are dependant on natural gas have to pay extra ` 10 Cr a day for as producing electricity and urea as government has priced the natural gas in US Dollars which has appreciated sharply against Indian rupee. The pinch of power prices and power cuts is not only menacing industries but general public face the same issues. We have mentioned in our last issue that NTPC has served notices to BRPL & BYPL for clearing their dues and they have been cautioned that their supply will be suspended from the month of December, 2011. This situation is replicated all over the country. Power distribution companies are said to be resorting to load shedding rather than procuring fuel – be it natural gas or imported coal – at prices they cannot pass on to the consumers. Their balance sheets are in fragile states with losses of over ` 120,000 crores. What is conveyed to the public as a shortage of power is in reality a shortage in revenue collection. The problem becomes more acute when the fuel is imported and priced in dollars. The fact that tariffs are significantly below the cost of supply results in sharp jump in losses. The sharp rise in power purchase and other operational cost for utilities, the gap between cost and revenue per unit is increasing. Industry participants and regulators given the poor financial condition of discoms have little inclination to buy expensive power, hence reducing off-take from stations based on expensive fuels or most specifically the imported coal. Since Industrial consumers are already paying higher tariffs and there is also a finite limit of increasing tariffs as states also compete with each other for attracting investments. Most states in India heavily subsidize the power for agriculture use by charging higher rates from Industry. On average, 31% of the energy sold is used by agriculture sector and 36% by industry. However, the revenue realization from agriculture consumers is only 8% of the total revenue whereas the industrial consumers contribute 46% of the total revenue. The obvious solution to the financial woes of the power utilities is to increase the tariffs but since elections are round the corner no state Government has the appetite to increase tariffs. As the honorable Secretary, MoPNG put it aptly in the conference organized by the Observer Research Foundation and the India Energy Forum, what is economically necessary but politically unacceptable will never be done!
Hydropower in North-East: Talking Big Numbers and Small Impacts
Sonali Mittra, Observer Research Foundation
ith the 11th Plan (2007-12) nearing its end, private sector, state and central government are actively discussing the hydroelectric projects proposed for the 12th plan. Interestingly, the announcements making headlines have dwelled into the cumulative numbers of economics than the real issue. With the striking number of ‘91’ hydro-electric projects, Arunachal Pradesh government have allotted project above 25 MW capacity to the state, central and private sector. These calculate down to a cumulative capacity of 35987 MW, out of which private sector has got a lion’s share of 31,588 MW capacity; 4400 MW is given to the central government agencies and rest lies with the state government. These projects are planned to be constructed by 2017 (end of the 12th Five year Plan).
On one side, where the government of Arunachal Pradesh is discussing their stake in the hydropower projects, on the other side, neighbouring states are showing concerns over the downstream impact in their respective states. State government of Assam has proposed setting up of a North East Water Resource (NEWRA) for all mega-hydel projects in the upper reaches of Arunachal Pradesh to be brought under an authority. The idea is to protect the downstream areas of Assam along with sharing the benefits of the project in a unified manner or at least fairly. This development can be seen as a crucial step towards the integrated basin management approach and more holistic planning for mega-hydro projects. The ambitions of government of Arunachal Pradesh are quite stringent when it comes to developing their Hydro potential or at least its being popularly perceived this way. This is further supported by the fact that state government is discussing their stake in the projects in terms of equity ownership or putting their own money in the central sector projects. Of course, the underlying profit motive is clear.
Viewing Arunachal Pradesh as a state with the highest hydroelectric power potential has always been a contested view on the grounds of the environmental and social devastation that might be caused due to the giant number of project proposed. Already, fiercely opposing the 2000 MW Subhansiri Lower Project (NHPC), are 27 organizations which are constantly worried about the adverse social and environmental impacts, besides those who will be affected. What remains surprising is the low response to the social and environmental protests that are increasing in number in the state. If careful responses are not immediately formulated by the state, then the functionality of these ambitious hydroelectric projects may not hit the ground. 2014-2017 will see transitions in Arunachal Pradesh with the commissioning, construction and operation of the proposed huge number of dams, if however, that is possible.
China’s Anxiety over Myanmar Deepens
R.S. KALHA*
ecretary of State Hillary Clinton’s recent two day visit to Myanmar is causing immense anxiety to the Chinese leadership. This is the first visit by a senior US official after almost fifty years. Secretary Clinton’s visit was preceded by important concessions granted by the Myanmar government in that they took the hitherto unprecedented step of releasing some political prisoners and generally easing the political situation leading to the decision of well known dissident Aung San Suu Kyi to participate in forthcoming bye- elections to the National Assembly.
Earlier Chinese anxiety had increased when Myanmar decided to order the halt the construction of the Chinese funded and built US $ 3.6 billion Myitsone hydro –power project. The Chinese media speculated that it was the US that was behind this move. The decision of the ASEAN countries to pass on the Chairmanship of ASEAN to Myanmar in 2014 was also seen in the same light.
The reason why China has a cause for worry is that it has enormous stakes in Myanmar. China this year alone invested US $ 8 billion in Myanmar and China is Myanmar’s second largest trading partner with Sino-Myanmar trade standing at US $ 4.4 billion this year. China’s south-west –provinces having a population of about 200 million people directly depend upon Myanmar for their access to the sea, as otherwise the alternative route would mean increasing the distance by at least 3000 kilometres. In addition the South-East Asia Pipeline Co., an affiliate of the China National Petroleum Co.[CNPC], signed a deal with the Myanmar National Oil and Gas Co. to build two pipelines [Oil and Gas] from the Myanmar port of Kyaukpyu situated on the west coast of Myanmar to Ruili in Yunan Province of China. From there the pipelines can be extended to feed besides Yunan, the other southern Chinese provinces of Guangdung, Guangxi and Hunan. The two pipelines are 1100 kilometres in length and are expected to carry 22 m/t per year of crude oil and 12 bcm of gas on an annual basis and are expected to be completed by 2013. Along with the oil and gas pipelines, China has also undertaken to build a rail link from the west coast of Myanmar to the Yunan province of China. It is said that the alignment of this railway line will be the same as of the oil pipeline. With such measures China hopes to minimize the economic impact of disruptions that can occur to its sea-borne energy flows. And yet China continues to worry about its vulnerability because of the situation prevailing near the Malacca Straits.
The Malacca Straits are a shallow and a narrow waterway linking the Indian Ocean with the South China Sea. At some points it is only 23 metres deep. At its narrowest point the navigable channel is about 1.5 to 2 kilometres wide and yet it is one of the busiest waterways in the world. Nearly 60,000 ships, including huge oil tankers carrying oil from West Asia to the major oil consuming nations of China, Japan and South Korea, navigate through the Straits on an annual basis. Nearly 80% of China’s oil imports pass through this route. China relies heavily on imported oil, gas and other natural resource commodities to feed its growing economy and these are mainly transported by sea. It is expected that China’s imports of crude oil may exceed 300m tons by 2012 and by 2030 nearly 75% of its oil consumption would be based on imported oil. Today China is the world’s second largest importer of oil after the US and it has even overtaken Japan. Nearly 10% of China’s total energy consumption is based on imported oil.
Even in the past, the Chinese have always considered Myanmar to be an important country that was very strategically located for China. Former PM Zhou Enlai visited Myanmar at least nine times and former Myanmar President Ne Win visited China eleven times. It is not surprising therefore that China has always considered Myanmar as a ‘pivot’ country.
In the present times, when the Myanmar Army Chief visited China the Chinese took the unusual step of inviting him to hold talks with the Chinese Vice-President Xi JInping. Xi Jinping is no ordinary Vice-President, for he is also the Vice-Chairman of the Central Military Committee where the most important political decisions are taken. In addition, Xi Jinping is expected to succeed the present Chinese President and Chairman of the Central Military Committee, Hu Jintao who is expected to retire from his post shortly. Therefore the talks between Xi Jinping and the Myanmar Army Chief were of a crucial nature. At the end of the talks the Chinese media announced that the ‘two military forces agreed to enhance exchange and deepen co-operation’. It seemed that such a statement was necessary to reassure the Chinese public that all was well with the relationship.
Secretary of State Clinton herself confirmed in Myanmar that her visit was not undertaken on the basis of a sudden change in policy, but as a result of deliberate soundings taken over a period of two years. The US announced a token grant of US $ 1.2 million for health care initiatives and for the care of land-mine victims. Clinton also announced that the US wishes to be a ‘partner with Burma [Myanmar]’ and that the US would like it to take its ‘rightful place in the world’. As for the lifting of sanctions Clinton promised that ‘if there is enough progress than obviously we will be considering lifting sanctions’. Nevertheless as a sop to the Chinese Clinton publicly confirmed that ‘we regularly consult China about our engagements in the Asia-Pacific region, including how we see events unfolding here’.
None of the above developments have found any resonance with China, but on the contrary have only fuelled her suspicion that the US was trying to supplant her influence in Myanmar as the US once again engages with Asia. For the moment the Chinese are playing a watchful game. They realize that it will not be easy to hinder China’s position built up so assiduously over the last decade or so. Nevertheless, China continues to show anxiety and as a Chinese commentator remarked in the official People’s Daily, China would see to it that its interests were not ‘stamped on’.
Concluded
Views are those of the author
* The author is a former Secretary, Ministry of External Affairs.
Note: Inertia of Petroleum Product Prices: Cost and Consequences (Part III), Security of Global Oil Flows: Risk Assessment for India (part IV) will be continued in next issue.
Petroleum Product Pipelines Under Operation
Akhilesh Sati, Observer Research Foundation
|
S. No.
|
Name of Pipeline
|
Capacity
(MMTPA)
|
|
Indian Oil
|
|
1
|
Guwahati-Siliguri Pipeline
|
1.4
|
|
2
|
Koyali-Ahmedabad Pipeline
|
1.1
|
|
3
|
Koyali-Navagam Pipeline
|
1.8
|
|
4
|
Koyali-Dahej Pipeline
|
2.6
|
|
5
|
Koyali-Sanganer Pipeline
|
4.1
|
|
6
|
Barauni-Kanpur Pipeline
|
3.5
|
|
7
|
Haldia-Mourigram Rajbandh Pipeline
|
1.35
|
|
8
|
Haldia-Barauni Rajbandh Pipeline
|
1.25
|
|
9
|
Mathura-Jalandhar Pipeline
|
3.7
|
|
10
|
Mathura-Tundla Pipeline
|
1.2
|
|
11
|
Panipat Rewari Pipeline
|
1.5
|
|
12
|
Panipat Bhatinda Pipeline
|
1.5
|
|
13
|
Digboi-Tinsukia Pipeline
|
1
|
|
14
|
Chennai-Trichy-Madurai Pipeline
|
1.8
|
|
15
|
Koyali-Ratlam Pipeline
|
2
|
|
16
|
ATF Pipeline to AFS Chennai
|
2.18
|
|
17
|
ATF Pipeline to AFS BIAL
|
1.56
|
|
18
|
Chennai-Bangalore Pipeline
|
1.45
|
|
19
|
Mathura-Bharatpur Spur Pipeline
|
1.2
|
|
20
|
Branch Pipeline to Hazira from Amod
|
0.85
|
|
21
|
Bijwasan-Panipat Naphtha Pipeline
|
0.8
|
|
|
Sub Total
|
37.84
|
|
HPCL
|
|
22
|
Mumbai-Pune-Solapur Pipeline
|
3.67
|
|
23
|
Visakh-Vijaywada-Secundrabad Pipeline
|
5.38
|
|
24
|
Mundra-Delhi Pipeline
|
5
|
|
|
Sub Total
|
14.05
|
|
BPCL
|
|
25
|
Mumbai-Manmad-Mangalya Bijwasan Pipeline
|
6
|
|
Petronet
|
|
26
|
Mangalore-Hassan-Bangalore Pipeline
|
5.6
|
|
27
|
Cochin-Coimbatore-Karur Pipeline
|
3.3
|
|
|
Sub Total
|
8.9
|
|
Oil India Ltd.
|
|
28
|
Numaligarh-Siliguri Pipeline
|
1.72
|
|
|
Grand Total
|
68.51
|
MMTPA: Million Metric Tonnes per Annum
Source: Ministry of Petroleum & Natural Gas, GoI
NEWS BRIEF
OIL & GAS
DGH disallowing RIL's $ 1.2 bn investment in KG-D6
December 13, 2011. DGH has suggested $1.235 billion investment of Reliance Industries being disallowed over the RIL's failure to adhere to prestated drilling and gas production targets, but the Oil Ministry is yet to agree on the numbers. The Directorate General of Hydrocarbons (DGH) in its recommendation to the Oil Ministry has suggested $457 million of the 'profit petroleum' accruing to RIL in 2011-12 should be disallowed and another $778 million in 2012-13. The ministry and DGH discussed the numbers at a meeting but there was no unanimity. As per the 2006 field development plan, where capital expenditure in Dhirubhai-1 and 3 fields was hiked to $8.8 billion from $2.47 billion previously, RIL was to produce 61.88 million standard cubic meters per day of gas from 22 wells by April this year and 80 mmscmd from 31 wells by 2012. But the RIL drilled only 20 wells till now, of which it has not put two of the wells on production yet. D1 and D3 fields are currently producing just over 40 mmscmd.
Reliance Industries' KG-D6 gas output dips to 40 mmBtu
December 12, 2011. Reliance Industries' eastern offshore KG-D6 gas fields have seen output dipping to around 40 million standard cubic metres per day, which is the same level as 2009 when the company had started production. Dhirubhai-1 and 3 (D1 and D3), the first two of the 18 gas discoveries in the Krishna Godavari basin KG-DWN-98/3 or KG-D6 block in the Bay of Bengal that have been put on production, and MA oilfield in the same area produced 40.35 mmscmd, according to the status report filed by the company with the oil ministry. The output in the week ending November 27 comprised 33.47 mmscmd from D1&D3 gas fields and 6.88 mmscmd from MA oil field. The KG-D6 production is lower than 61.5 mmscmd rate achieved in March 2010 as drop in pressure in the wells and an increased water ingress lead to lower per-well gas out. The report said of the 18 wells drilled, completed and put on production on D1&D3, four wells -- A2, B1, B2 and B13 -- had to be shut or closed due to high water cut/sanding issues. The output from KG-D6 is short of the 70.39 mmscmd (61.88 mmcmd from D1&D3 and 8.5 mmcmd from MA field) level envisaged by now as per the field development plan approved in 2006.
Reliance Industries eyes energy targets in Americas
December 12, 2011. Reliance Industries is scouting for oil investments in the Americas as it looks to increase the stake of crude production it owns to feed its refinery. The company is also looking to invest more in the United States shale gas sector. Reliance has outlined plans to spend $4 billion to $4.5 billion by 2014 on three U.S. shale gas joint ventures it entered into last year. This year, Reliance brought in the expertise of BP to help it on the offshore D6 block, where output is lagging targets, and the British company has said production from the field off India's east coast could rise from 2014.
Cairn's Raj oil block has potential to produce 300,000 bpd
December 9, 2011. Cairn India's prolific Rajasthan oil block has potential to produce 300,000 barrels per day (bpd), a quarter more than the previously projected peak output. Mangala and other oilfields in the block can produce 300,000 bpd, subject to regulatory and partner approval. Mangala, the biggest of the 18 discoveries that Cairn has made in Rajasthan block, can produce 150,000 bpd against current output of 125,000 bpd. Bhagyam, the second biggest field in the Rajasthan block, can produce 60,000 bpd as opposed to current approved peak output of 40,000 bpd, while Aishwariya can contribute 25,000 bpd compared to 10,000 bpd previously stated. Other fields can produce 65,000 bpd. Bhagyam field is ready to start production, while Aishwariya would begin output in 2012. Bhagyam start-up as well as the new production targets are contingent upon oil regulator DGH and the oil ministry approvals. At present, the approved peak output from Rajasthan is just 175,000 bpd -- made up of 125,000 bpd from Mangala, 40,000 bpd from Bhagyam and 10,000 bpd from Aishwariya. For the new peak, the government needs to approve field development and investment plans along with extension of the exploration over the rest of the block. Cairn India holds 70 per cent interest in the block and ONGC the remaining 30 per cent.
Indian firms keen to buy stakes in Africa's energy assets
December 9, 2011. Indian Oil Corporation, Gas Authority of India Ltd and Petronet LNG are looking at buying equity stakes in energy firms and projects in Africa. Indian companies were interested in buying equity stakes in oil and gas assets in Africa and other parts of the world in a bid to enhance the country's energy security. Indian firms were keen to enter partnerships and form joint ventures for enhancing oil and gas exploration activities in African countries. India's oil companies are present in around 24 countries, including Egypt, Kenya, Uganda, Tanzania and Mauritius. The total overseas investment by India's public sector oil firms is around $13 billion, which includes two pipeline projects in Sudan and Myanmar. Indian firms like Gas Authority of India Ltd (GAIL) and Indian Oil Corporation were interested in sourcing oil and liquefied natural gas on long-term basis from Africa.
Vedanta Resources plans to double crude output from Rajasthan block
December 9, 2011. Vedanta Resources plans to quickly double crude oil output from Cairn India's Rajasthan block in partnership with the government. It will also expand operations globally to boost India's energy security, after completing the $8.67-billion acquisition of Cairn's Indian unit.
Downstream
BPCL to invest up to ` 200 bn on petrochem plant, expansion
December 10, 2011. Bharat Petroleum Corp Ltd (BPCL), India's second-largest public sector refinery, is planning ` 18,000 crore to ` 20,000 crore investment over the next five years for setting up a petrochemical plant and expansion of the Kochi refinery. The company is looking at diversification into petrochemicals by building a niche speciality chemical project at a cost of ` 5,000-6,000 crore at Kochi, and plans to rope in a multinational partner for the project. From the expansion, BPCL is looking at manufacturing some propylene derivatives, which are currently imported and not manufactured in the country. The petrochemical project would use feedstock from the expanded refinery and the projects are likely to be completed in the next five years. Besides the Kochi refinery expansion, BPCL plans to add capacity at the new joint venture grassroots refinery it commissioned this year in Bina in Madhya Pradesh and also add capacity at its Mumbai refinery. The Bina refinery is proposed to be expanded by 3 million tonne, to 9 million tonne a year. BPCL's 12 million tonne Mumbai refinery would add 2-3 million tonne per annum through yield optimisation and operational efficiencies. Bina refinery, which was inaugurated in May, is expected to stabilise by year-end. Besides Mumbai, Kochi and Bina refinery, BPCL also operates 3 million tonne Numaligarh Refinery in Assam.
Reliance selling 2-3 mt per year fuel to Africa
December 10, 2011. Reliance Industries is selling 2-3 million tonnes of fuel a year to Africa. Reliance, the owner of the world's biggest refining complex in the western state of Gujarat, operates two refineries with a combined capacity to process 1.24 million bpd oil. Reliance Industries is currently operating 600 out of its 1400 retail outlets in India. Reliance, the owner of the world's biggest refining complex in the western state of Gujarat, operates two refineries with a combined capacity to process 1.24 million bpd oil.
Essar Oil commissions isomerization unit at Vadinar refinery
December 9, 2011. Essar Oil Ltd, a subsidiary of Essar Energy, announced the successful commissioning of a new isomerisation unit at its Vadinar refinery. The isomerisation unit will help the refinery produce Euro IV grade petrol. The 0.7 million metric tonnes per annum (MMTPA) Isom unit is a key component of the Phase I expansion of the company's Vadinar refinery that will increase its capacity to 18 MMTPA (375,000 barrels per day).
Reliance Industries surging fuel exports to Bahamas raise eyebrows
December 13, 2011. Reliance Industries has significantly stepped up gasoline sales to North and South Americas and routed shipments via giant fuel tanks at Bahamas, contributing to the sudden and dramatic rise in India's exports to the Caribbean nation that has baffled government authorities. The value of Reliance's fuel shipments to Bahamas would rise 50% to $3.2 billion in 2011-12 if it keeps exporting fuel at the current rate - $1.9 billion in the first seven months of the fiscal year. Surging exports to Bahamas have raised eyebrows as the value of shipments to the country, which is smaller than the Jamnagar district where Reliance's refinery is located, jumped to $2.2 billion in 2010-11 from negligible levels two years ago.
GAIL inks 20-year LNG import deal with US firm Sabine Pass Liquefaction
December 12, 2011. State-run Gail has signed a 20-year deal with Sabine Pass Liquefaction to import liquefied natural gas from the US from 2017 to secure longterm supplies at prices linked to the US benchmark Henry Hub. At current price of gas in the US and prevailing liquefaction and transportation rates, the price would be $10-11 per unit in India, about $5-6 cheaper than the recent LNG contract with an Australia firm.
'Scrupulous' action against RIL based on SGI opinion: Oil Ministry
December 11, 2011. With KG-D6 gas output lagging target by over 30 per cent, the Oil Ministry is taking "scrupulous" action against Reliance Industries based on the advise of the Solicitor General of India. RIL was to drill 22 wells on the Dhirubhai-1 and 3 gas fields in KG-D6 block by March 31, 2011 and 31 wells by March 31, 2012, as per the 2006 field development plan. But the RIL drilled only 20 wells till now, of which it has not put two of the wells on production yet. Failure of RIL to comply with its commitments made the oil ministry seek legal opinion. RIL has built facilities at KG-D6 to handle 80 million standard cubic meters per day of gas output which was expected by April 2012 but production currently is just 40.6 mmsmcd.
Rich should stop buying subsidised LPG voluntarily: R.P.N Singh
December 12, 2011. In a bold suggestion, Minister of State for Petroleum R.P.N Singh said affluent people should voluntarily stop buying subsidised LPG and said he will be the first person to pay market price for the fuel, which is ` 287 per cylinder more than the current rate. Speaking at the 10th Petro India conference jointly organised by Observer Research Foundation and India Energy Forum, Singh said subsidised domestic LPG was meant only for the poor and the needy and the rich "should take the initiative voluntarily to give up subsidised LPG." A 14.2-kg bottle or cylinder of LPG costs ` 399.26 in Delhi and ` 398.45 in Mumbai for both people below the poverty line and the super-rich. State-owned oil firms lose about ` 75 crore per day on selling the fuel below its market price of ` 686.26 per cylinder. The idea is to replicate what happened some years back, when people who could afford it stopped buying foodgrains from PDS shops despite having ration cards. Singh's idea is to first have ministers, MPs, bureaucrats and the senior management of public sector companies give up subsidised LPG voluntarily. Taking the cue, other sections like corporate honchos and businessmen who can afford market price would also give up subsidised LPG, he said. The minister said modalities of how his suggestion can be implemented would be discussed within the ministry and with stakeholders before it is implemented. One way could be that affluent continue buying subsidised LPG and pay the difference between the market price to the oil companies directly through cheques. The other way would be that these classes start buying the blue-coloured 19-kg cylinders that are currently being sold at market price. Singh said the fuel subsidy bill for 2011-12 fiscal is projected at a whopping ` 132,000 crore and such bold moves are needed to cut this down. Besides LPG, diesel is currently sold at discounted rates, with the difference between the retail price and the market price being ` 13.53 per litre, while kerosene is sold at a discount of ` 29.99 a litre. The government had in June last year deregulated pricing of petrol, but the same is not being contemplated in diesel as it would have a cascading effect on general prices, he said.
'Fall in rupee hikes fuel subsidy by ` 500 bn'
December 12, 2011. Weakening of rupee against the US dollar has added a mind-boggling ` 50,000 crore to the fuel subsidy as the nation paid more for its oil imports, Oil Secretary G C Chaturvedi said. Every time the rupee depreciates by Re one against the US dollar, ` 8,000 crore is added to the fuel subsidy bill... the rupee has depreciated from ` 46 to a US dollar to roughly ` 52 per US dollar, thereby adding ` 50,000 crore (to the subsidy), he said at the 10th Petro India conference jointly organised by Observer Research Foundation and India Energy Forum. State fuel retailers are projected to lose a record ` 137,605 crore this fiscal on selling diesel, domestic LPG and kerosene at government controlled rates which way below the cost. Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum currently lose a record ` 13.53 on selling every litre of diesel, ` 29.99 per litre on kerosene and ` 287 per 14.2-kg domestic LPG cylinder. Chaturvedi said the government had in June last year freed pricing of petrol but the same on diesel is not on cards as of now. He also ruled out dual pricing of diesel under which users like mobile telephone towers and electricity generators would had to shell out rates higher than the current subsidised rate for the fuel, saying the proposal is not practical to implement. Diesel is the most consumed fuel in the country but is sold at a discount to the cost of production. The subsidised diesel is the preferred fuel for the transport sector (both trucks and passenger buses) and is also used in irrigation pumps and other agriculture equipment. Luxury cars and SUVs too run on diesel and so do power generators at malls and telecom towers.
Govt to free diesel, LPG prices after weighing impact
December 12, 2011. The government would deregulate diesel and liquefied petroleum gas (LPG) prices only after considering their impact on the weaker sections of the society, Minister of State for Petroleum and Natural Gas R.P.N. Singh said. We as policy makers and politicians have to mediate between the social, economic and environmental attributes of energy. We have to move cautiously to ensure that our decisions are equitable and lead to balanced growth, said Singh, addressing the 10th Petro India conference jointly organised by Observer Research Foundation and India Energy Forum. While the government had in June last year decontrolled petrol prices, it continues to dictate retail rates of diesel, cooking gas (LPG) sold to households and kerosene sold through the public distribution system (PDS). The minister said that while the government was protecting consumers, it had to shield the state-run oil and gas marketing companies from the impact of selling subsidised products. Singh said there was a need to target subsidies directly to the weaker sections of the society in the case of cooking gas.
Three LPG gas stations coming up for autorikshaws in J-K
December 11, 2011. Three LPG gas stations are coming up in Jammu and Kashmir specially for use by autorikshaws. This was announced by Minister for Transport Qamar Ali Akhoon. Of these, one new station is ready for commissioning at Nagrota in the outskirts of Jammu city. The other two at Bijbehara in Anantnag distict of South Kashmir and in Srinagar city are being completed soon, he said. This will ease the rush on petrol pumps also, he said. There are over 4,000 autos operating in various districts of Jammu and Kashmir.
IOC, GAIL looking at equity stake in Africa LNG projects
December 9, 2011. State-owned Indian Oil Corp and GAIL Ltd are looking at picking up an equity stake in LNG projects in Africa to meet growing energy needs of the country. Hydrocarbon-rich Africa supplies 35.31 million tonnes, or 21.5 per cent, of the nation's crude oil requirement. With natural gas demand projected to double in five years, India is looking to tie-up long-term supplies of liquefied natural gas from Africa. India is keen to participate in exploration and production opportunities in Angola, Ghana, Sudan, Algeria, Congo, Nigeria, Uganda, Cote D'Ivoire, Mozambique, Chad, Gabon and Tanzania. India is the world's fourth-largest oil importer after the USA, China and Japan. Presently, natural gas accounts for around 10 per cent of India's primary energy basket, as against the world average of 24 per cent. India is increasing its LNG regasification capacity from the current 13 million tonnes per annum to 30 million tonnes by 2015. To carry gas across the length and breadth of India, 8,000 km of gas pipelines are being laid, while another 5,000 km are in the bidding stage. The nation's oil refining capacity will rise from 194 million tonnes per annum currently to 238 million tonnes per annum by 2013.
Oil payment row with Iran settled, supply not hit: Jaipal Reddy
December 9, 2011. India has amicably settled the oil payment row with Iran and there is no disruption in supply, Petroleum and Natural Gas Minister S. Jaipal Reddy said. Reddy said there is no disruption in supply of oil from Iran and all the committed contracts are on schedule. Iran is the second largest oil supplier to India after Saudi Arabia; India imports an average 400,000 barrels per day of oil from Iran that accounts for almost 12 percent of country's total import. India and Iran have been struggling to find a permanent solution to settle their bilateral trade bill for the last one year. The Reserve Bank of India last year scrapped a clearing house mechanism with Iran, resulting in payment impasse.
HPCL in talks to buy Syrian crude
December 9, 2011. India's HPCL is in talks to buy crude oil from Syria. There are no disruptions in supplies from Iran. Sanctions aimed at crude oil exports have warded off normal buyers of Syrian crude, which mainly flowed to Europe, causing storage tanks to brim and forcing cuts. Syria produced around 350,000 barrels per day (bpd) before the unrest of which about a third was exported. HPCL expects to process 16 million tonnes of crude in the current fiscal year ending in March 2012 and the state-run refiner plans to invest 450 billion rupees ($8.69 billion) until 2016/2017 in strengthening refining capacities. HPCL operates a 130,000 bareels per day (bpd) refinery at Mumbai on the west coast and a 166,000 bpd at Visakhapatnam on the east coast.
ONGC considers importing Syrian crude
December 8, 2011. India's ONGC Videsh Ltd, the overseas investment arm of state-run explorer Oil and Natural Gas Corp, is considering importing crude oil from Syria, where it has equity oil. The European Union and the United States have imposed wide-reaching sanctions against Syria, including an embargo on crude imports, to put economic pressure on President Bashar al-Assad in the hope of ending months of violence against anti-government demonstrations. ONGC Videsh Ltd (OVL) is talking to Indian refiners about the feasibility of lifting Syrian crude.
Essar Energy hopes to double revenue in FY12
December 7, 2011. Essar Energy hopes to nearly double its revenue to $20 billion in the current fiscal year and join the Fortune-500 list as it sees substantial gains from the expansion of UK operations, especially acquisition of Stanlow refinery. The company is implementing a turnaround plan for the refinery, Britain's second largest, which Essar recently acquired in a $350-million deal from Shell.
POWER
Madhucon projects to build thermal power plant at Indonesia
December 13, 2011. A consortium led by Madhucon Projects, part of the Hyderabad-based Madhucon Group, with interests in infrastructure, has received a letter of intent for setting up a coal-fired power project at South Sumatra. The group will set up two units of 150 MW each near an existing mine run by PT Madhucon Indonesia at Dawas. To execute the project a special purpose vehicle will be set up in which Madhucon Projects will hold 65% stake. The remaining 35% stake will be owned by Madhucon group companies. The SPV will enter into a 25-year power purchase agreement with PT PLN Perseo, an Indonesian government company.
Tata Power, SN Power scout for hydro projects in India, Nepal
December 11, 2011. Tata Power, along with its Norwegian partner SN Power, is scouting for hydroelectric projects in India and Nepal. The company in partnership with SN Power already has two hydro projects in its kitty, including the 880 MW project coming at Tamakoshi in Nepal. Earlier this year, they had bagged the 240 MW Dugar hydroelectric project in Chenab Valley in Himachal Pradesh. Tata Power has an installed capacity of 3,648 MW, out of which 500 MW is from hydro projects. It is also in a joint venture with the Bhutan government. The company is implementing a 114 MW from Dagachhu hydro project with Druk Green Power Company.
Transmission / Distribution / Trade
GMR signs agreement with BSEB to supply power
December 13, 2011. GMR Kamalanga Energy Limited (GKEL), a group company of GMR Group has entered into an agreement with Bihar State Electricity Board (BSEB) under Case I bidding, to supply 260 MW power, the company said. GKEL said with this agreement, GKEL has tied up 85 per cent of its power sale under tariff policy. GKEL, promoted by the GMR Group, is presently executing the 1050 MW (3x350 MW) coal-based thermal power project at Kamalanga in Orissa's Dhenkanal District. Besides BSEB, GKEL has executed power purchase agreements with Grid Corporation of Orissa, Haryana Power Generation Corporation and Power Trading Corporation. GKEL will start power supply from its first unit in mid-2012.
GMR Group synchronises 1st unit of new Vemagiri plant to state grid
December 13, 2011. GMR Group said the first unit of subsidiary GMR Rajahmundry Energy Limited's combined cycle power plant at Vemagiri, in Andhra Pradesh, was synchronised to the state's power grid on December 9, adding 384 MW of electricity generation capacity to the grid. The GMR Group is setting up the 2x384-MW combined cycle power plant adjacent to its existing plant at Vemagiri. The first unit has been commissioned in a record time of 24 months. The second unit is expected to be commissioned by February, 2012. This GMR project was identified as a XI Plan project and accordingly, was shortlisted for gas allocation by the government of India. It is expected that gas will be made available to this project shortly. In another development, GMR Kamalanga Energy Limited (GKEL), another GMR Group company, has executed an agreement for supply of 260 MW of power to Bihar State Electricity Board (BSEB) under Case I bidding. GKEL said with this agreement, the company has tied up buyers for 85 per cent of its power capacity under the tariff policy. GKEL is presently executing a 1,050 MW (3x350 MW) coal-based thermal power project at Kamalanga, in Orissa's Dhenkanal District. Besides BSEB, GKEL has executed power purchase agreements with Grid Corporation of Orissa, Haryana Power Generation Corporation and Power Trading Corporation. GKEL is expected to commence power supply from its first unit in mid-2012.
Power trading triples in 3 yrs: K C Venugopal
December 12, 2011. Volume of power trading in the country tripled to 10.25 billion units during 2008-09 and 2010-11. About 3.31 billion units of electricity was traded during 2008-09, minister of state for power K C Venugopal said. Power trading in the country is undertaken through traders, power exchanges and directly between distribution companies. Central Electricity Regulatory Commission has granted licenses to 44 entities and permitted power exchanges for trading in electricity. Traders had started operations in 2004-05. Power exchanges India Energy Exchange commenced operations in June 2008 and Power Exchange of India began trading in October, 2008. He said even open access consumers were accessing short-term trading market to procure power.
Policy / Performance
Cheap Chinese funding will hurt local power equipment makers: Govt
December 13, 2011. The government said that availability of cheap Chinese financing to domestic power producers would result in "unfair" advantage to China's equipment makers over Indian manufacturers. It would certainly make Chinese equipment cheaper as the interest rate is low compared to the normal availability of finance. Domestic power-equipment maker Bharat Heavy Electricals Ltd (BHEL) has raised concerns in this regard. The government had constituted a committee to suggest options and modalities to take care of the disadvantages suffered by the domestic power sector. The panel had recommended measures including imposition of duty on import of power equipment. Recently, the Power Ministry has circulated a draft Cabinet note for inter-ministerial consultations on altering the duty structure on imported power plant equipment. Domestic power equipment makers like BHEL and L&T have been demanding levy of 14 per cent duty on imported electrical equipment, mainly from China, in order to provide them a cushion against local taxes.
NTPC to offer maintenance services in Bangladesh
December 13, 2011. NTPC Ltd signed an agreement with Electricity Generation Company of Bangladesh Ltd for providing operation and maintenance services for 240-mw gas based Siddhirganj power plant near Dhaka. NTPC would offer services like operation and maintenance, recruitment and training, quality and environment management to EGCB for a period of six years. NTPC Ltd is the third largest power generator in Asia with 35,354 MW installed capacity.
US presses India for nuclear level playing field
December 13, 2011. Stressing on the implementation of the nuclear deal, the US said Deputy Secretary of State William Burns has conveyed to India the need for "a level playing field" for foreign and domestic companies in the Indian nuclear market. In his meetings, the deputy secretary and his Indian interlocutors reaffirmed the importance of the US-India partnership, the embassy said. The two sides welcomed the growth in bilateral trade and expressed their support for continued efforts to deepen defense and economic cooperation, which remain essential to the strategic partnership, the embassy said.
Tata Power ready with effluent treatment plant
December 12, 2011. Tata Power, India's largest integrated private power company, commissioned its effluent treatment plant in Jamshedpur. The effluent treatment plant has a capacity of 100 Cu M/Hr and is based on the proven solid-liquid separation technology, using which the water quality generated from the treatment plant meets with the industry's specifications. The state-of-the-art equipment included flash mixer, flocculator, tube settler, RCC clarified water storage tank and dual media filter, all of which come with the assurance of quality. The technology allows the plant to have low operations and maintenance cost while maintaining excellent product quality. It is expected that the installation of this plant will result in huge savings of raw water due to the recycling and reuse of waste water.
Govt confident of generating surplus power for export
December 12, 2011. With half a dozen power equipment firms slated to set up units in India, the government expressed confidence of meeting the domestic power demand and generating surplus for export. Pointing out that the government has kept a huge target of adding power generation capacity of 78,777 mega watt(MW) for the 11th Five Year Plan (2007-12). In the 10th Five Year Plan, the country was able to produce 22,000 MW, though the target was 42,000 MW. The country's total power generation is about 1.85 lakh MW, of which 1.08 lakh MW goes for consumption. On Rajiv Grameen Vidyutikaran Yojana (RGGVY), Minister of State for Power K C Venugopal said that 1.1 lakh villages have been electrified under the scheme and as many as 1.76 crore families living below poverty line (BPL) also been covered. Replying to supplementaries, the minister said that the government is also concentrating on electrifying villages affected with naxal problems and areas of scheduled tribes. However, the minister said that the situation now is improving in the state.
CIL board meet may discuss overseas buyout plans
December 11, 2011. The board of Coal India may fast-track decision on overseas acquisitions in its meeting, in the wake of the Finance Ministry giving approval to go ahead with buyout of unlisted firms. The PSU has put together a war-chest of ` 6,000 crore for acquisition of mines. The Finance Ministry gave permission to the company to go ahead with its plans of acquisition of unlisted companies. On CIL's request for relaxation in PSU guidelines stipulating a minimum 12 per cent internal rate of return (IRR) on investments, the Finance Ministry said the company can proceed with such proposals if they pertain to strategic nature, but will be cleared by them. The world's largest coal miner has zeroed in on two unlisted overseas coal assets, including one in Australia, for acquisition. It had sought clarifications from the Finance Ministry before entering into serious dialogues with them. It had received proposals offering IRR between 9 per cent and 12 per cent. CIL had approached the Finance Ministry for relaxation of PSU guidelines stipulating a minimum 12 per cent IRR on investments. It had also sought to sidestep the rule that only the mines of listed companies should be acquired. CIL accounts for about 81 per cent of the domestic coal production.
PowerMin for 14 pc import duty on power equipment
December 11, 2011. The government has circulated a draft Cabinet note proposing imposition of 14 per cent duty on imports of power equipment, a proposal aimed at providing a level-playing field to domestic manufacturers like BHEL and Larsen & Toubro. Domestic power equipment makers like BHEL and L&T have been demanding levy of 14 per cent duty on imported electrical equipment, mainly arising from China, in order to provide them a cushion against local taxes. In a meeting convened by Minister for Heavy Industries and Public Enterprises Praful Patel, consensus emerged on the point that domestic manufacturers like BHEL should be given a level-playing field with Chinese imports. The Maira Committee headed by Planning Commission Member Arun Maira had also suggested imposition of 10 per cent customs duty and 4 per cent special additional duty. In one of the meetings of the Committee of Secretaries (CoS), it had been decided to impose 5 per cent customs duty, 10 per cent countervailing duty and 4 per cent special additional duty on import of power equipment for mega (of 1,000 MW and above) and ultra mega power projects (of minimum 4,000 MW capacity). Currently, projects with less than 1,000 MW generation capacity attract 5 per cent import duty while the rest enjoy duty-free import of equipment. Meanwhile, Association of Power Producers, a body of private power generation companies feel that this move would lead to increase in power rates. Ahead of the 2012-13 Union budget, electrical equipment industry body IEEMA (Indian Electrical and Electronics Manufacturers' Association) has demanded extension of service tax exemption to all power projects, including generation, transmission and distribution. The government should provide a level playing field to domestic manufacturers as per recommendations of the Arun Maira Committee, by levying customs duty at 10 percent and special additional duty (SAD) at four percent and waiving countervailing duty (CVD) on all categories of power projects. Currently, all imports are exempted from levy of central sales tax (CST) or value added tax, while all domestic supplies attract CST at two percent and VAT from 5-14.5 percent though the state governments have been advised to exempt supplies to mega power projects from sales tax and other local levies.
2nd bidding round for Orissa UMPP not likely this fiscal: Power Ministry
December 9, 2011. The Power Ministry may not invite a second round of bids for the 4,000-MW Bedabahal ultra-mega power project in Orissa in the current financial year as it is in the process of making changes to the standard bidding documents for UMPPs. The changes to the bid document for UMPPs could be aimed at accommodating future increases in international coal prices. The developers of the already awarded imported coal-based Mundra (Gujarat) and Krishnapatnam (Andhra Pradesh) UMPPs have requested the Power Ministry to permit them to increase the tariffs for electricity from these generation plants as global coal prices have risen significantly in comparison to the prevailing rates at the time bids were submitted. However, the Power Ministry is believed to have advised the respective developers to sort out the issue bilaterally with the procurers of power from these projects. Initial bids for the 4,000-MW UMPP at Bedabahal, in Orissa, were invited by Power Finance Corporation -- the nodal agency for UMPPs - in June this year. As many as 20 companies participated in the tender, out of which all are believed to have qualified for the second round of bidding. For the second round of bidding, these companies will have to provide technical as well as financial bids. Meanwhile, the last date for submission of preliminary bids for the Sarguja UMPP in Chhattisgarh has been extended to March 5, 2012.
GAIL asks merchant power plants to pay higher for fuel
December 9, 2011. The government's desire to be on the right side of its top auditor by increasing fuel prices for merchant power plants is likely to worsen the crisis in the sector reeling under high input costs and low tariffs. GAIL (India) Ltd, the country's state-owned gas marketing arm, has told some merchant power plants that they will have to pay higher prices for gas supplied to them.
OIL & GAS
U.S. green groups challenge offshore oil lease sale
December 13, 2011. U.S. environmental groups filed a lawsuit challenging the Interior Department's first offshore lease sale since last year's Gulf of Mexico oil spill, saying the department has done too little to prevent another disaster. The department has received bids to develop more than a million acres offered in the western Gulf lease sale, but the groups said the offshore regulator has yet to apply lessons from the nation's largest offshore oil spill. The sale covers more than 21 million acres (8.5 million hectares) in the Gulf of Mexico that are currently not leased. According to the lawsuit, the department has not incorporated a new understanding of risks posed by offshore drilling and continues to rely on assumptions that failed in the case of Gulf spill.
Saudi Arabia crude production rises to highest in three decades
December 7, 2011. Saudi Arabia, the world’s biggest crude exporter, boosted output to the most in more than three decades to meet customer demand. Saudi Arabia, the largest and most influential member of the Organization of Petroleum Exporting Countries, will meet with other members of the group in Vienna to set output targets for early 2012. The kingdom raised supply to make up for halted production in Libya and help prevent oil prices from surging. Saudi Arabia produced 9.45 million barrels of oil a day in October, 9.4 million in September, and 9.8 million in August, according to the Paris-based International Energy Agency, which has not yet released its estimate for November. The kingdom pumped 9.4 million barrels a day in November, unchanged from October and September levels. OPEC will use its 2012 oil-demand forecast as a basis for discussion on the group’s production ceiling at the meeting. OPEC forecast demand for its crude would reach 30 million barrels a day, minus production from Iraq, which has no quota. Its December forecast is scheduled for release Dec. 13, the day before the Vienna meeting. OPEC has kept the combined quota for 11 of its 12 members at 24.845 million barrels a day since December 2008 even as most countries pump more than their allocations. The 11 members with quotas produced 27.65 million barrels a day in November, with Iraq pumping 2.705 million barrels a day.
Sinopec to spend $1 bn to increase Australian LNG stake
December 12, 2011. China Petrochemical Corp., Asia’s biggest refiner, agreed to invest an estimated $1 billion to increase its stake in an Australian liquefied natural gas project led by ConocoPhillips (COP) and Origin (ORG) Energy Ltd. Sinopec Group, as the company is called, signed an initial accord to buy a further 10 percent of the venture. Sinopec Group, which agreed to pay $1.5 billion for 15 percent of the project in April, will also purchase an extra 3.3 million metric tons of LNG a year through 2035, clearing the way for an investment decision on the second phase of the $20 billion Queensland state venture. China, the world’s largest energy consumer, plans to more than double natural gas consumption to cut its reliance on coal and oil. The country needs to increase LNG imports as it develops unconventional sources such as shale gas.
Tesoro to add capacity at Utah refinery
December 8, 2011. Tesoro Corp. said it plans to invest $180 million to expand crude oil processing at its Salt Lake City refinery. The San Antonio, Texas-based refiner said the investment is expected to increase processing capacity at its 58,000 barrel-per-day Utah facility by 7 percent, or an additional 4,000 barrels per day. The company employs about 250 at its Utah refinery. Tesoro's expansion project will be undertaken in two stages that are scheduled for completion in 2013 and 2014.
Toyota Tsusho signs a CBM sales agreement
December 13, 2011. Toyota Tsusho Corporation signed the CBM Sales Agreement with Walloons Coal Seam Gas Company Pty Ltd, a subsidiary of BG Group, the ultimate owner of the Queensland Curtis LNG Project. TTC will supply CBM over 20 years from ATP651P block, which can serve as feed gas for QC LNG. QC LNG is the world’s first CBM based LNG Project and this is the first CBM long-term sales agreement for a Japanese company. TTC also made the decision to engage in this CBM development program at ATP651P with about AU$ 300 Mil investment including the acquisition price. QC LNG is expected to begin LNG production in 2014 and had signed LNG long-term sales agreements with a Japanese power company and a gas company. TTC believes, by developing ATP651P, this CBM Sales Agreement could contribute to the procurement of a stable and flexible LNG supply for Japan.
World fuel’s shares seen riding shipping bankruptcies to 12 pc gain
December 13, 2011. At a time when the biggest-ever fleet of merchant vessels means losses and bankruptcy for ship owners, the company providing about 12 percent of their fuel is poised to make record profit. The combined carrying capacity of oil tankers, dry-bulk carriers and container ships more than doubled over the past 15 years to 1.3 billion deadweight tons. While that caused charter rates to collapse below breakeven for most vessels this year as supply outpaced cargoes, it also drove annual fuel sales to a record $130 billion. Other providers of so-called bunkers tend to be smaller, regional companies or state-owned entities, and oil companies also sell directly to ship owners. The fuel is usually not traded by investors.
GE O&G renews gas turbine packaging agreement in China
December 12, 2011. Oil & Gas has renewed an agreement with China Aviation Gas Turbine Ltd. to continue supplying GE10-1 gas turbine engines and control panels for use in power generation in oil and gas plants and coke oven gas applications in China and abroad through customers whose headquarters are in mainland China. The original agreement between GE and CAGT was signed in 2002 and renewed in 2007. The new agreement covers the next five years, with a possible option to extend it for another three years, and also includes a services section. Since 2002, GE has sold a significant number of these units to CAGT that now account for nearly one third of the global installed fleet of GE10-1 gas turbines.
Republicans link payroll tax cut to oil pipeline
December 9, 2011. House Republican leaders linked speeded-up approval of a controversial oil pipeline to extending a payroll tax cut and unemployment benefits, picking a fight with President Barack Obama with just three weeks remaining for Congress to renew the expiring aid. House Speaker John Boehner, an Ohio Republican, said that he is attaching a provision for the approval of the Keystone oil pipeline between Canada and the U.S. to his bill to extend both the payroll tax cut and jobless benefits. The Obama administration has delayed a decision on the pipeline until 2013, after the next presidential election.
IEA says more sanctions on Iran may push crude prices higher
December 13, 2011. Tougher international sanctions on Iran may lead to higher global crude prices and a decrease in output capacity for OPEC’s second-largest oil producer, the International Energy Agency said. A proposed European Union ban on purchases of almost 600,000 barrels a day of Iranian crude would “likely” force refiners in the Mediterranean region to pay more for oil from other suppliers. Iran’s production capacity will decline by 890,000 barrels a day to less than 3 million barrels a day by 2016 if the EU also blocks sales, as it is considering, of oil-related equipment and services to the Persian state, the IEA said. Iran’s Oil Minister Rostam Qasemi said some members of the Organization of Petroleum Exporting Countries should reduce output to accommodate the return of shipments from Libya and increased Iraqi exports. Eleven of OPEC’s 12 members, all except Iraq, have formal production targets. Libya pumped 500,000 barrels a day in November, from a low of 45,000 barrels in the midst of the rebellion against former leader Muammar Qaddafi. Iraq’s daily output last month reached 2.7 million barrels. Saudi Arabia, the world’s biggest state-owned exporter, will supply full volumes of crude under term contracts to buyers in Asia and Europe next month.
Nigeria's $130 bn plan includes refineries, petchem plant, pipelines
December 7, 2011. The Federal Government unveiled a massive $130 billion investment plan for sustainable growth and development in the Nigeria's oil and gas sector within the next five years. Also, plans are on top gear for the construction of additional 2,000km of oil and gas pipelines across the country in line with government's agenda to fast-track Nigeria's industrial rebirth through a gas revolution programme that would boost domestic gas supply.
Shale-gas drilling to add 870,000 jobs by 2015
December 7, 2011. Producing natural gas from shale will support 870,000 U.S. jobs and add $118 billion to economic growth in the next four years. Gas from shale, which accounts for 34 percent of U.S. output, also will contribute $57 billion in federal, state and local taxes by 2035, or $933 billion in the next 25 years. Shale gas is extracted using hydraulic fracturing, a process in which millions of gallons of chemically treated water and sand is forced underground, breaking up the rock to free trapped gas. Industry expansion is adding jobs in an otherwise disappointing economy.
POWER
Generation
Rurelec to build $200 mn of Peru hydroelectric plants
December 13, 2011. Rurelec Plc, a U.K. energy developer that lost its stake in a power company that was nationalized in Bolivia, is planning $200 million of hydroelectric plants in Peru. The company agreed to buy with other investors a 50 percent stake in the Peruvian developer Cascade Hydro Ltd. and the option to acquire power plants with capacity of 32 megawatts that it may build with Cascade. Rurelec expects to have a total of 100 megawatts of hydroelectric plants in operation by 2016 on Peru’s Pachacayo river. The Bolivian government expropriated in May 2010 Rurelec’s controlling stake of Santa Cruz, Bolivia-based Empresa Electrica Guaracachi SA, prompting the company to look at other Latin American markets. Rurelec also operates a thermoelectric plant in Argentina. Peru’s steep mountains make it one of the few places on Earth suitable for run-of-river hydroelectric plants. Other locations include Bolivia and Nepal.
Egypt's OCI says wins $100 mn in power plant work
December 12, 2011. Egypt's Orascom Construction (OCI) said it won civil work worth $100 million at an electricity plant under construction in southern Egypt. The work was part of a $300 million civil works package awarded to OCI, France's Vinci and Egypt's Arab Contractors. The 32 megawatt hydropower plant, alongside the Nile in Asyut, is scheduled for completion in 2017. The package was awarded by Egypt's Water Resources and Irrigation Ministry.
Gazprom said to stall on RWE talks as German power falters
December 8, 2011. OAO Gazprom, the world’s biggest natural-gas exporter, is stalling on talks to create a European power-plant venture with RWE AG because of deteriorating profits in Germany. Gazprom and RWE agreed to keep talks going for several more months in a second extension since July. The companies haven’t yet agreed on the assets and need more time to monitor demand and margins in Germany. Gazprom supplies about a quarter of Europe’s gas and the company announced plans to negotiate its first generation venture in western Europe with RWE in July, including coal- and gas-fired plants in Germany, the U.K., Belgium and the Netherlands. RWE is looking at ways to mitigate the costs of Germany’s decision to close all its nuclear reactors by 2022 and has pledged to sell 11 billion euros ($15 billion) of assets.
New hydroelectric power plant for Mozambique
December 7, 2011. Mozambique’s Manica province, in the central region of the country, is to have a new hydroelectric power plant in 2014 with sufficient capacity to also provide power to the neighbouring province of Sofala. The facility was already under construction on the Nhancangare River, in the Barué district of the province. It was expected to cost $60 million. With the construction of the Nhancangare dam, Manica province will have three facilities of this kind ‒ the Chicamba and Mavuzi hydroelectric projects are already operating on the Revué River. The location of most of the rivers in southern Africa gives Mozambique an enormous potential for generating hydroelectricity, as is the case with the Cahora Bassa hydroelectric dam, which is one of the largest in the world.
Policy / Performance
France’s biggest nuclear breach raises alarm as support for reactors wanes
December 13, 2011. On Dec. 5, under cover of darkness, nine Greenpeace activists cut through a fence at the Nogent-sur-Seine atomic plant 95 kilometers (59 miles) southeast of Paris and headed for a domed reactor building. They scaled the roof and unfurled a “Safe Nuclear Doesn’t Exist” banner before attracting the attention of security guards. Two remained at large for four hours. On the same day, two more campaigners breached the perimeter of the Cruas-Meysse plant on the Rhone, escaping detection for more than 14 hours while posting videos of their sit-in on the Internet. The security lapses, described as irresponsible acts by President Nicolas Sarkozy, come at a time when debate has intensified on France’s reliance on atomic power for three- quarters of its energy needs in the run-up to next year’s presidential elections. They also pre-empt next month’s release of the results of safety checks at France’s 58 reactors, commissioned in the aftermath of the Fukushima tragedy. Greenpeace said its activists exposed the biggest security lapse to date at the reactors that are operated by Electricite de France SA, since it was the first time the environmental group was able to target more than one site at the same time.
Power managers fail to increase fuel efficiency of KESC
December 13, 2011. Power managers failed to increase the fuel efficiency of Karachi Electric Supply Company’s (KESC) thermal power plants, that have the accumulated power generation capacity of 9,905.02 gigawatt hour (GWh), which is approximately 3,490 times higher than the demand and supply gap of electricity in the country. KESC claims that the energy crisis is because of reduction in gas supply as alternative fuel of furnace oil for thermal power generation, while a big shot of State-Owned Entity (SOE), Sui Southern Gas Company (SSGC) has been supplying only 200 MMCFD daily as against the quota of 276 MMCFD. The National Electric Power Regulatory Authority (NEPRA) nor the Ministry of Water and Power asked KESC to increase fuel efficiency of its thermal power plants. Papers revealed that if KESC benchmarks its fuel efficiency with other thermal power station in operation in country, the company could be able to generate 9905.02 GWh as against current generation of only 4,664 GWh with the quantity of gas being supplied. The KESC is also reluctant to run power plants on furnace oil and persists in its demand for higher gas allocation, when the country is already facing gas shortfall.
Australia govt eyes fresh power privatization round
December 13, 2011. Australia's government will lead a renewed push for the privatization of state electricity assets after warning the country urgently needed energy market reform and huge investment to meet power demand at home and abroad. Energy Minister Martin Ferguson, unveiling a draft energy paper, said the government would also focus on developing the country's vast energy resources -- particularly gas -- and speeding clean energy projects after the recent passage of the largest carbon price scheme outside Europe.
Renewable Energy / Climate Change Trends
India has commissioned 186 MW solar projects
December 13, 2011. India has so far commissioned solar projects with capacity of about 186 megawatt, of which 40 MW worth of off-grid projects were commissioned in 2011. India plans to build an initial capacity of 1 GW of solar power by 2013, enough to power close to 1 million homes. It would then add 3-10 GW by 2017, and hopes to grow that to 20 GW by 2022. Coal currently accounts for 55 percent of India's power generation capacity of 182,344 MW.
Solar power tariff touches new low as competition rises
December 13, 2011. Solar power tariff is witnessing decline as investors are bidding aggressively and project cost is getting cheaper. It is evident from the proposed revised tariff for solar power by the Gujarat Electricity Regulatory Commission (GERC) and now outcome of reverse bidding for Batch II for first phase of Jawaharlal Nehru National Solar Mission (JNNSM). Industry sources believe that new benchmarks in solar tariff will make market more competitive and boost the renewable energy market.
Tata Power secures finance for Gujarat solar project
December 13, 2011. Tata Power said it has tied up finance for its ` 365 crore solar photovoltaic power project at Mithapur in Gujarat. The company's subsidiary Tata Power Renewable Energy Ltd has secured the entire debt requirement for the project through a consortium of domestic lenders, namely State Bank of India and Export Import Bank of India with SBI Capital Markets Ltd acting as sole financial advisor and arranger. The 25 MW project is being funded through a debt equity mix of 70:30. The project financing comprises of equity of ` 110 crore and rupee term loans of ` 255 crore. The company has signed a power purchase agreement for the project with Gujarat state distribution company. This plant, bagged under the state's solar power policy 2009, would be ready by end-December 2011.
Indarya Green Power proposes integrated energy park in Gujarat
December 13, 2011. Indarya Green Power is planning to commission integrated renewable energy park in 2000 acre in Gujarat. Proposed park will house 300 MW solar power generation capacity and 25 MW wind-mill project in the first phase. The company is claiming have chalked out an investment plan to the tune of Rs 4,500 crore, which includes manufacturing facilities of solar photovoltaic panels with capacity to produce 500 MW SPV panels per year. This park will also house research and development facility for renewable energy.
Suntech, Canadian Solar to supply Tata Power’s India Plant
December 13, 2011. Tata Power Co., one of India’s biggest non-state generators, will order equipment for a 3.65 billion-rupee ($68 million) solar project from panel suppliers including Suntech Power Holdings Co. Suntech, the world’s biggest panel maker, Canadian Solar Inc. and Tata BP Solar Ltd. will supply the 25-megawatt plant in western Gujarat state with crystalline silicon-based modules. The project in Mithapur has received financing from local banks led by State Bank of India and Export-Import Bank of India. The banks will fund 70 percent of the project with rupee term loans, Tata Power said.
Suzlon to supply wind turbines for project in South Africa
December 7, 2011. Suzlon Energy said it has received approval from the South African government to supply wind turbines for the upcoming Cookhouse Wind Energy Facility at Eastern Cape. It is one of the leading renewable energy projects in that country. South Africa's Minister for Energy, Dipuo Peters has announced her Department's approval of the facility, which will utilise Suzlon's 2.1 MW turbines.
Moser Baer to spend $1 bn on solar plants
December 7, 2011. Moser Baer Clean Energy, the renewable energy vertical of Moser Baer India, said it is investing $1 billion (` 5,100 crore) for setting up solar projects with a cumulative capacity of 300 MW in the country and abroad in the next nine months. These projects would be set up in Gujarat, Orissa, West Bengal and Rajasthan in India, as well as abroad in countries like Germany, Italy, the UK. The company also has ambitious plans for augmenting its solar power generation capacity to 1 GW, or 1,000 MW, by 2015. The company recently commissioned a 23.8-MW solar farm at Lauta, in Germany. The project has been constructed with long-term debt funding from DKB Bank, Germany, which has also financed its Thuringen and Meissens projects. Moser Baer Clean Energy also commissioned a 30-MW solar farm, developed at an approximate investment of ` 465 crore, in Banaskantha district of Gujarat in October this year. The solar farm, spread over 305 acres of land, is likely to generate about 52 million Kwh of energy, which would provide electricity to nearly 50,000 homes everyday and save about 50,000 tonnes in carbon emissions annually.
Solar, thermal power to cost same in 5 yrs
December 7, 2011. India has advanced the target date for selling solar power at the same rate as conventional electricity by five years to 2017 as tariffs have fallen significantly in the latest projects on offer and the trend is likely to continue. Companies have bid tariffs as low at ` 7.49 per unit for solar plants this year, encouraging the renewable energy ministry to say that target of achieving "grid parity", or selling solar electricity at the same rate as power from other sources, would be achieved much faster than earlier envisaged. Tariff from existing coal projects is around ` 5.50/unit to ` 6/unit, propped up by the shortage of domestic supply of coal and greater dependence on costly imports. The average tariff offered in the current round of bidding under the National Solar Mission was ` 8.78 per unit. The lowest bid was ` 7.49 per unit for a 5 MW project. For the current round, the maximum capacity was set as 50 MW per bidding company with 3 projects allotted to each. Among the 28 provisionally sanctioned projects, 8 are of 20 MW, another 10 are of 10 MW. Four projects are of 15 MW and 6 projects of 5 MW. Even the foreign players are encouraged by steps taken by India in the solar energy domain. The Central electricity regulation committee (CERC) reduced the capital costs on solar cells, which is the major reason for falling tariffs. The cost of setting up a solar power plant per megawatt is set to fall from current ` 14 crore to 10 crore in 2012-13.
FuelCell surges on plans to supply Abengoa’s biogas plants
December 13, 2011. FuelCell Energy Inc., a U.S. maker of fuel-cell power plants, jumped the most in three months on an agreement to supply equipment to Spain’s Abengoa SA for biogas projects. FuelCell climbed 15 percent to $1.09 at the close in New York, the most since Sept. 7. The Danbury, Connecticut-based company, which initially sold shares in June 1992 at $9 each, had declined 53 percent this year. Abengoa plans to use FuelCell’s products at projects it will develop in Europe and Latin America that will convert biogas into electricity. The Spanish company will initially install a 300- kilowatt fuel-cell plant at its headquarters in Seville.
Global biofuels output slows on less Brazilian ethanol
December 13, 2011. World production of biofuels will increase at a slower pace than previously forecast in the next five years as Brazil’s ethanol output declines and the U.S. market becomes saturated. Global growth is estimated at 400,000 barrels a day from 2010 until 2016, compared with the earlier forecast of 500,0000 barrels a day. Brazilian ethanol production in 2011 is set to drop by 75,000 barrels a day to 375,000 barrels a day on a “poor sugar cane harvest and high sugar prices” and will reach 530,000 barrels a day in 2016. In the U.S., the expiry of a 45 cent-per-gallon blenders’ tax credit at year-end is expected to sap distillery investment as the market gets more saturated.
Russian, hydro emission offsets face EU ban
December 13, 2011. Some emission offsets from Russia, as well as those from large hydropower and coal projects, may be banned by regulators of the European Union carbon market. Certain projects approved by nations including Russia and Ukraine under the Joint Implementation program of the Kyoto Protocol may be sanctioned by the EU under proposals made as soon as early next year. Other projects under the Clean Development Mechanism may also face bans.
UN climate deal should boost confidence in CO2 cuts
December 13, 2011. The climate package approved by more than 190 countries should boost investor confidence in the governments’ determination to cut greenhouse gases. Negotiators at the United Nations climate summit in Durban, South Africa, agreed that nations will adopt by 2015 a pollution-curbing deal with a legal force to be enacted by 2020. The new framework will include both industrialized and poor countries, ending the current legal construction that imposed mandatory goals on rich nations and allowed voluntary targets for developing ones.
The prices of European Union carbon allowances and UN offsets are “unlikely to be strongly affected” as the package adopted in Durban may not be enough for the EU to tighten its 2020 emission-reduction target and stimulate demand for emission credits, according to the lobby group. The 27-nation bloc is on track to meet its internal goal of lowering greenhouse gases by 20 percent below 1990 levels by 2020 and has said it may move to 30 percent if other countries follow suit. The EU vowed after the conclusion of the UN climate summit to extend its international commitments under the Kyoto Protocol after the current ones expire next year. The deadline for submitting new Kyoto goals is May 1, 2012.
UniCredit funded $2 bn for clean energy
December 13, 2011. UniCredit Leasing, a unit of Italy’s largest bank, provided a record 1.5 billion euros ($2 billion) in funding for wind and solar projects, mainly in Italy and eastern Europe. Renewable energy funding from the UniCredit SpA leasing arm rose 50 percent compared with a year earlier, driven by solar deals in Italy. That may drop to about 1 billion euros during 2012 as government cuts in feed-in tariffs amid the debt crisis dries up funding. A boom in solar installations in Italy, now the world’s second-largest market, led to the introduction of a cap in subsidy spending in March. Like most European countries, Italy also cut feed-in tariffs, or guaranteed premiums for clean power. The Czech Republic and Slovakia halted all support except for residential solar. In contrast, Romania, Bulgaria and Turkey approved new bills with tariffs that aim to boost clean energy investment.
Second Kyoto commitment period should be eight yrs
December 13, 2011. The second period for developed nations to commit to curbing emissions under the Kyoto Protocol should run from 2013 to 2020. The EU already has an internal target to reduce emissions by 20 percent in 2020 compared with 1990 levels. UN envoys at the Durban talks agreed that the end-date for the so-called Kyoto second commitment period will be decided next year. During the talks, negotiators considered two options: 2017 and 2020. As Britain seeks to meet European Union-set climate goals, carbon capture and storage technology that traps and buries power-generation emissions will be “strategically important” for U.K. energy security.
Three Gorges to invest $269 mn in China Power for renewables
December 12, 2011. China Three Gorges Corp., operator of the nation’s biggest dam, agreed to pay HK$2.1 billion ($269 million) for a 29.1 percent stake in renewable energy producer China Power New Energy Development Co. China Power New Energy will issue 3.2 billion new shares at HK$0.65 each to China Three Gorges. China Power New Energy said it will use the proceeds to fund power generation projects. China is pushing its companies to increase power generation from alternative sources including wind and hydro as it seeks to cut reliance on coal and oil to reduce pollution. China Three Gorges, which operates the world’s largest hydro power dam, will become the biggest shareholder in China Power New Energy.
American Vanadium seeks partners to build batteries for renewables
December 12, 2011. American Vanadium Corp., building the only vanadium mine in the U.S., has held talks with Sumitomo Corp. and United Technologies Corp. about using the metal for batteries used to store renewable energy. Sumitomo and United Technologies both already have capabilities in storage batteries. Vanadium, a mineral traditionally used to strengthen steel, is also used for rechargeable flow batteries that can store wind and solar energy. The energy storage industry may grow to $35 billion by 2020, from $1.5 billion in 2010. American Vanadium’s Gibellini deposit, which has a mine life of 10 years, is scheduled to begin production in 2013 and may need as much as $135 million of funding. China “will start securing, globally, lithium, vanadium and phosphate deposits” to meet its energy targets by 2020. American Vanadium will focus on the U.S. market.
Carbon loses gains as Europe debt crisis outweighs Durban deal
December 12, 2011. Carbon prices gave up gains on speculation Europe’s debt crisis will depress demand even as the world’s largest polluters back away from positions that have stymied global climate talks. China, the world’s biggest emitter, and India agreed at the climate summit that ended in Durban, South Africa, to take part in talks starting next year that would bind them for the first time to emission reductions. The U.S., the second- biggest emitter, also signed on to plan led by Europe to reach a global agreement by 2015 to restrict greenhouse gases linked to climate change by 2020.
Water wranglers gush with new oilfield work to help fend off EPA
December 12, 2011. As local and federal regulators raise questions about potential pollution from drilling operations, U.S. oil and gas producers are turning to companies like GreenHunter to improve their handling of the millions of gallons of fluids involved in an average well. An investigation by the U.S. Environmental Protection Agency found evidence of chemicals used in hydraulic fracturing, or fracking, in a drinking-water aquifer in Wyoming. Water-service companies help manage the chemical-tainted water that’s a byproduct of drilling and production, cleaning and recycling it for re-use, and hauling it away for disposal. Landowner groups in states including Pennsylvania and New York say they are concerned that contaminated water can leak from wells that have been fracked, a method of cracking rock with high-pressure injections of water, chemicals and sand to release oil and gas.
Obama winning climate debate as China opens to legal accord
December 12, 2011. The U.S., long accused of blocking progress in international climate talks, is winning a two-decade old debate about how to curtail global warming. The decision by China and India to move toward an agreement with the “legal force” to limit their fossil fuel emissions marked the first step toward treating developing nations the same as industrial ones when it comes to reducing pollution.
BMW says it’s talking with GM on fuel-cell vehicle technology
December 12, 2011. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, says it’s in talks with General Motors Co. about cooperating on fuel-cell technology. Fuel cells generate electricity in the chemical reaction that combines hydrogen and oxygen to create water. BMW has largely ignored the technology in the past, focusing research on burning liquid hydrogen in a combustion engine. Daimler AG, the world’s third-biggest luxury-vehicle manufacturer, plans to introduce a fuel-cell-powered version of the Mercedes-Benz B- Class compact by 2014.
Carbon markets still on life support after climate deal
December 12, 2011. Carbon markets are still on life support after a U.N. climate deal agreed in South Africa on Sunday put off some big decisions until next year and failed to deliver any hope for a needed boost in carbon permit demand. A package of accords agreed after marathon U.N. talks in Durban extended the 1997 Kyoto Protocol, the only global pact enforcing carbon cuts, allowing five more years to finalize a wider deal which has so far eluded negotiators. Kyoto's first phase, which is due to expire at the end of next year but now will extend until 2017, imposed limits only on developed countries, not emerging giants like China and India. The United States never ratified it. Many traders and analysts said the agreement will do little for carbon prices which are at record lows, as the two main European Union and U.N.-backed markets are stricken by flagging investments, an oversupply of emissions permits and worries about an economic slowdown.
Looking for gold in water investments
December 12, 2011. Water may be the most essential of all commodities because without it none of us would be alive. But as an investment, water has had neither the glitter of gold nor the allure of oil. Summit, which has about $500 million in assets under management, is one of a handful of U.S. funds that specialize in investing almost solely in stocks of water companies, reservoirs, land sitting atop aquifers and pipelines. It is a niche corner of the investment world with about $6 billion in assets. There are fewer than a dozen of pure-play water-investment funds globally, a drop in the bucket compared with other commodity-based funds. But the sector is one that some see as an opportunity to make money as fresh water becomes scarcer in parts of the globe due to population growth, farming and industry. They say water funds are poised to reap the rewards of the need to replace aging and crumbling water and sewer systems. Infrastructure needs in the United States alone will require at least $500 billion over the next 20 years. But skeptics say water investing carries a good deal of risk and the market's small size is an indication that many money managers are not sold on the growth potential. Others note pure-play water funds are often heavily invested in illiquid assets -- like water rights -- which can be hard to value or trade.
Durban deal may do little to cool heating planet
December 12, 2011. The world is forecast to grow hotter, sea levels to rise, intense weather to wreak even more destruction and the new deal struck by governments in Durban to cut greenhouse gas emissions will do little to lessen that damage. Climate data from U.N. agencies indicates that the accumulation of heat-trapping gases will rise to such levels over the next eight years - before the newly agreed regime of cuts in emissions is supposed to be in place - that the planet is on a collision course with permanent environmental change. Critics said the plan was too timid to slow global warming. For a reduction plan to have a major impact, analysts say, the world's largest emitter, China, needs to be weaned from coal-intensive power sources that are choking the planet with carbon dioxide (CO2) and developed countries must spend heavily to change the mix of sources from which they draw their energy. But they see little political will to implement these costly plans and argue that the U.N. process showed, in two weeks of talks in the South African city of Durban, that it is bloated, broken and largely incapable of effecting sweeping change. Domestic political constraints make it unlikely that pledges in Durban for more green projects in the developed world and stepped up aid for developing countries will come to fruition given problems for government funding in Europe, the United States and Japan.
Private sector finance eyed for U.N. forest projects
December 11, 2011. Private investors may be allowed to earn carbon credits by paying poor countries to halt the destruction of tropical forests, but a U.N. climate summit failed to agree the details needed to get the ambitious program off the ground. The felling of trees that capture the heat-trapping gases responsible for global warming accounts for about 20 percent of the planet's greenhouse gas emissions, and studies show an acre (0.4 hectare) of forest is lost every second around the globe. Rich nations believe paying developing countries to stop the destruction of rainforests is an effective way to fight climate change, yet the Reduced Emissions from Deforestation and Degradation (REDD) has advanced little since it was first discussed in 2007. Rich states such as Norway, the United States and Australia have pledged nearly $4 billion to help spur pilot projects in Indonesia, Brazil, the Democratic Republic of Congo and others to strengthen the way their forests are managed. The decision adopted in Durban after day of wrangling said private and public finance, as well as market mechanisms, would be considered for REDD schemes, opening the door to billions of dollars of private sector investments. The text was light on detail and further talks will take place next year to agree on the specific rules that will govern such schemes. Most of the difficult decisions were put off until next year's climate summit and few observers expect to see a REDD market emerge this side of 2020.
Shanghai Electric, Siemens invest $226 mn in wind ventures
December 9, 2011. Shanghai Electric Group Co. and Siemens AG will invest 169.1 million euros ($226 million) to form two wind-power equipment joint ventures that will include all of the Chinese company’s business in the industry. Shanghai Electric will invest 31 million euros for a 51 percent stake in Siemens Wind Power Turbines Shanghai, which designs and makes turbine components and will be renamed SmartPower Wind Turbines Shanghai Co. It will also invest 53 million euros for 51 percent of a new venture, Shanghai Electric Wind Energy Co., which will sell wind equipment. Siemens will invest 85.1 million euros and will own 49 percent stakes of each company. Under the terms of agreed by the companies, Shanghai Electric will transfer all of its wind-power business to the two joint ventures. The assets to be transferred will include wind-power projects funded by 563 million yuan ($89 million) of proceeds from a private share sale.
Baywa, Wirsol spend $200 mn on Spain’s biggest solar plant
December 8, 2011. BayWa AG, a German agricultural products and building-materials maker, and developer Wirsol Solar AG are investing 150 million euros ($200 million) in what would become Spain’s biggest solar park. The companies will start building the 70-megawatt photovoltaic facility near Alicante, in eastern Spain, in April. Yingli Green Energy Holding Co. will likely supply the modules for the plant that secured a feed-in-tariff of 11.71 euro cents per kilowatt-hour. The plant will be connected to the grid in sections starting in June. Spain, which installed more than 2,500 megawatts in solar capacity in 2008, capped its yearly market to about 500 megawatts starting in 2009. The project developed by Baywa and Wirsol underpins the interest of investors for a share of that market even if rates were sharply reduced as of the second quarter of this year. The Alicante plant would be 10 megawatts larger than Spain’s biggest solar park at Olmedilla de Alarcon and is likely to be one of the 10 largest in Europe when completed in January 2013.
EU climate road map lures support from 120 nations at UN meeting
December 8, 2011. The European Union said it has the support of at least 120 nations for its “road map” proposal at United Nations global warming talks, suggesting it may be able to break a deadlock on how to fight climate change. The shift “has the potential to be a game-changer in the sense that it’s the first time that developed and developing nations stand together,” said Martin Lidegaard, the Danish climate and energy minister whose nation takes over the EU’s rotating presidency in 2012. Lidegaard said 48 of the world’s least developed nations along with 42 small island states and the African group of countries have joined the 27 members of the bloc to support the proposal.
China, Arab group seek ban on climate-related trade measures
December 8, 2011. China, India and Arab nations are among those seeking a decision from the United Nations to stop developed countries introducing measures to limit trade because of climate protection. Climate envoys entered the final two days of UN talks this week in Durban, South Africa. The European Union said in 2008 it may force importers to buy emission allowances to protect its industries from nations with no greenhouse gas limits.
South Africa selects 28 projects for green power drive
December 7, 2011. South Africa has chosen 28 renewable energy projects as part of its drive cut its reliance on coal fired plants, and bidders have until June to prove the projects are financially viable, the energy ministry said. The selected bidders were announced on the sidelines of a global climate summit in Durban where delegates from more than 190 nations are hoping to agree to a new deal to tackle greenhouse gas emissions, blamed by scientists for rising sea levels, intense storms and crop failures. Africa's largest economy depends on coal for 85 percent of its electricity supply of around 41,000 MW. In a bid to reduce its carbon footprint it launched a bidding process to eventually add up to 3,725 MW of green energy to the national grid by 2016. A total of 53 bids were received by the November 4 closing date. The 28 selected projects, mostly wind and solar plants, could supply 1,416 MW, the ministry said.
America is losing the green energy race
December 7, 2011. The race to renewable energy is on, and despite heavy marketing campaigns on the part of the federal government and corporations, the United States continues to fall behind. China has rapidly increased its investment in solar and wind power, becoming a leading player in the green energy space. China accounted for at least half of the world’s solar cell production in 2010. In wind power, China squeezed past America in November 2011 to become the top wind-power producer, with an installed capacity of 45 gigawatts, compared with the United States’ 44 gigawatts. Meanwhile, most American companies prefer going overseas when it comes to manufacturing renewable energy technologies, exporting desperately-needed jobs and intellectual property. The United States cannot reap the full benefits from its own innovation unless companies are incentivized to manufacture this technology locally. But smart meters, which communicate energy data over long distances, represent a rare exception where American companies lead the world in green technology. The communication technology underpinning these meters has been mastered by fewer than a dozen firms worldwide, with American ones predominating. Since 2009, more than 10 million smart electricity meters have been installed in the United States, funded mostly through funds from the American Recovery and Reinvestment Act of 2009.
U.N. climate conference close to deal on Green Fund
December 7, 2011. Negotiators are close to agreeing the shape of a Green Climate Fund, which is designed to help poor nations tackle global warming and nudge them towards a new global effort to fight climate change. Rich countries have pledged up to $100 billion a year by 2020 to aid poor states most directly affected by rising global temperatures to adapt their economies and protect themselves from adverse weather.
Nunavut region to boost renewable power to offset climate change
December 7, 2011. Nunavut, Canada’s northernmost territory, is studying ways to boost its use of hydroelectric, wind and solar power to reduce its dependence on fossil fuels and mitigate climate change. The territory, about the same size as neighboring Greenland, has “abundant” renewable resources, including summer days with 24 hours of sunlight. The government may consider feed-in tariffs and other mechanisms to promote the use of alternative energies. Nunavut, with a population of 33,000, is one of the world’s most thinly populated regions and relies primarily on diesel fuel to run generators and heat homes. Using renewable energy sources would reduce the need for fossil fuel shipments that must come from southern Canada by plane or boat because there are no roads or rail links to the region.
Senate bill would shield U.S. airlines from EU law
December 7, 2011. A Republican senator introduced legislation to shield U.S. airlines from a law set to take effect in Europe that would charge carriers globally for aircraft emissions. The bill was proposed by John Thune, but lacks a Democratic co-sponsor that airlines were hoping would give the proposal more weight in the Democrat-controlled Senate. A similar bill was approved by the House of Representatives in October with bi-partisan support. The Obama administration opposes the European law, due to take effect in January. The law would require airlines to join the European Union's Emissions Trading Scheme and buy permits to offset greenhouse emissions from jetliners operating in, or to, and from, Europe. Airlines globally say compliance would hurt them financially. The change is estimated to cost U.S. airlines $3.1 billion between 2012 and year-end 2020. China, India and two dozen other nations also object and a United Nations' body that oversees civil aviation is accelerating its efforts to try to craft a compromise.
UK wind costs rise as turbines move into deep sea
December 7, 2011. UK offshore wind energy development costs are rising as sites move into deeper waters with bigger turbines, those in the industry say. The average offshore wind farm cost was up from around 1.4 million pounds per megawatt hour (MWh) in 2005 to almost 3 million pounds in 2010.
European banks fail to back enough green projects
December 7, 2011. European banks must do more to support renewable energy projects if a target set by the European Union is to be met. The European Union aims to get 20 percent of its energy requirement from renewable sources by 2020, a goal that member states must each contribute to. The U.K. proposed a cut of as much as 55 percent in the price for solar power in October, while both France and Italy have scaled back their so-called feed-in tariffs for solar energy producers this year.
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