Energy News Monitor I Volume VIII, Issue 34

Pooling Gas Prices: Equalizing the Unequal?

 

 

NEWS BRIEF

OIL & GAS

February 6, 2012. European gas and electricity major GDF Suez is keen to join the race for UK-based energy major BG's 65% stake in the Gujarat Gas Co, revving up competition for a significant chunk of the India's high-growth energy market that continues to lure big international firms. The Indian market has already attracted global energy major BP, which has acquired 30% stake in Reliance Industries oil and gas blocks for $7.2 billion, and set up an equal joint venture with RIL for gas marketing. Also, London-listed Vedanta has taken control of Cairn India in $8.5-billion deal.

February 3, 2012. Reliance Industries expects to produce up to 3.5 million standard cubic metres a day (mscmd) of gas by the second half of 2014 from two coal-bed-methane (CBM) blocks in central India, the company said. The energy conglomerate invited bids for selling the gas for five years from its blocks at Shahdol and Annupur in the state of Madhya Pradesh. The fields are likely to start production by July 2014 and the price reached through the bidding will need to be approved by the government, the company said.

Bidders for the CBM gas will have to pay a marketing margin of $0.15 per million British thermal units, transportation tariff, and any taxes or levies on the sale, in addition to the gas price, the company said. The deadline for the bids is Feb. 17. Reliance, holds another CBM block in the neighbouring Chhattisgarh state.

The company, India's biggest company by market value, has been under pressure from the government and investors because of falling output from its Krishna Godavari D6 gas fields off India's east coast. It currently produces less than 40 mscmd of gas from the field, half of its expected production. This has resulted in a sharp decline in India's domestic output of gas and forced the country to hunt for expensive liquefied natural gas overseas to meet the growing demands of an expanding economy. India holds 10 percent of the world's coal reserves, which are likely to hold about 92 trillion cubic feet of coal bed methane, the country's oil minister said.

February 3, 2012. Reliance Industries' officials, including executive director PMS Prasad, are expected to appear before the Public Accounts Committee (PAC) of Parliament to give oral evidence on alleged irregularities in managing India's biggest gas field, D6 in the Krishna-Godavari block, government officials said. This is for the first time RIL officials will face the parliamentary committee, which is examining issues raised by the Comptroller & Auditor General (CAG) in its recent report.

PAC is expected to ask questions about fast declining gas output from Reliance-operated D6 block and reasons for non-compliance with the approved development plan, officials in the oil ministry said. Reliance says output has fallen due to geological complexities that could not be anticipated. The directorate general of hydrocarbons has said the company's output has fallen as it has not drilled the approved number of wells, while the company says output would not rise by simply drilling more wells.

February 1, 2012. Oil and Natural Gas Corp (ONGC) said it will invest ` 164,000 crore on oil and gas exploration in the 12th Five-Year Plan (2012-17). Almost 97 per cent of the planned capital expenditure in the five-year period will be on exploration and production. The company is targeting production of 149 million tonnes of crude oil production in the 12th Five-Year period, almost 20 per cent higher than the current Plan.

After accounting for natural gas production, ONGC's output in 2012-17 would be 277 million tonnes of oil and oil-equivalent gas, nearly 40 million tonnes more than in the 11th Five-Year Plan. The subsidy bills for ONGC are left to the whims of the government. The situation has accentuated even more since the government opted to give only cash subsidies. The government plans to sell a 5 per cent stake in ONGC, or 427.77 million shares, through a follow-on public offer.

February 1, 2012. Mangalore Refinery and Petrochemicals (MRPL) bought its first cargo of Libyan Mellitah condensate in a tender as it seeks to diversify oil sources to feed its growing refining capacity. MRPL bought 650,000 barrels of the super light oil from European trader Totsa at a premium of $1 a barrel to dated Brent for March. MRPL's refinery has a capacity of 236,400 barrels per day which could be raised by 27 percent to 300,000 bpd by March and to 360,000 bpd by 2015/16. The refiner had said it may buy less oil from Iran in 2011/12, citing shutdowns, but crude processing data showed the cutback may reflect payment problems with sanctions-hit Tehran.

February 2, 2012. The government has ordered a probe into Petronet LNG's imports of liquefied natural gas following allegations that the company has quietly switched to buying lean gas, which can only be used as fuel, instead of rich gas that can also produce petrochemicals and cooking gas. The long-term deal to import LNG was negotiated 13 years ago and Petronet opted for rich gas keeping in mind feedstock requirement of proposed petrochemical plants, including $4-billion ONGC Petro additions Ltd (OPaL) project and Gail India.

The oil ministry is concerned about the matter as it controls both ONGC and Gail, which are also among the promoters of Petronet, which is technically a private company as state-run firms own 50% of its equity, just below the threshold for government control and scrutiny by the Comptroller and Auditor General (CAG) and the Central Vigilance Commission (CVC). But the petroleum secretary is the chairman of the company, giving the government a handle to investigate its affairs. Gail, ONGC, BPCL and IOC hold 12.5% each in the firm. European LNG importer GDF Suez holds 10% stake in the firm, another 5.2% is held by the Asian Development Bank and the public holds the rest.

February 2, 2012. State-owned oil companies have resumed jet fuel supplies to Air India after the national carrier promised to pay ` 268 crore in dues. Oil company officials said the supplies are being resumed after Air India promised to clear dues. All the three oil companies - Indian Oil, Bharat Petroleum and Hindustan Petroleum - had jointly stopped Air Turbine fuel (ATF) supplies to Air India at Delhi, Mumbai, Kolkata, Chennai, Trivandrum and Kochi.

The carrier had failed to honour payments even after 90-day credit period. Civil Aviation Secretary Nasim Zaidi said that he had asked the petroleum secretary to not stop the jet fuel supply to the carrier. Zaidi said the cash-strapped carrier had just paid ` 180 crore, and ` 40 crore would be released and another ` 40 crore soon. Senior Air India officials have claimed that the airline owed ` 260 crore to the oil companies for the credit period and "we are well within the credit limit."

Overall, Air India owes over ` 4,170 crore to public sector oil companies in unpaid jet fuel bills. The oil companies decided to stop ATF supplies saying Air India had not honoured its commitment to make payments for jet fuel it bought from the oil companies even after expiry of 90 day credit period.

February 1, 2012. State-run Indian Oil Corporation (IOC) plans to invest ` 7,700 crore by 2015 to expand its pipeline network, which has emerged as a highly profitable business, generating revenue of ` 4,200 crore in the previous fiscal year with a net profit of ` 3,000 crore. IOC plans to lay more than 20 new pipelines to expand its network from 10,900 km to 15,000 km by 2015. IOC uses its pipelines to transport crude oil from the coast to its refineries and distribute refined products across the country. Transportation through pipeline costs one-third of railways and one-fifth of roadways.

The company is undertaking several projects such as integrated offshore crude oil handling facilities at Paradip, de-bottlenecking of Salaya-Mathura-Pipeline, Paradip-Raipur-Ranchi product pipeline, Paradip-Haldia-Budge-Budge-Durgapur LPG pipeline, Viramgam-Kandla pipeline, construction of additional crude oil storage tanks at Vadinar, Patna-Raxual-Baitalpur pipeline and dedicated ATF pipelines connecting Kolkata, Guwahati and Delhi (T-3) airports. IOC also transports liquefied natural gas and natural gas through pipelines.

February 7, 2012. An oil and gas operators' body, that boasts of who's who of industry from Reliance Industries to ONGC, has demanded that price of domestically produced natural gas should be indexed to rate at which LNG is imported in the country. The Association of Oil and Gas Operators (AOGO), whose members also includes BP plc of UK, GAIL, Cairn, BG Group and BHP Billiton, in a 20-page response to the Saumitra Chaudhuri Committee report on gas price pooling, said LNG import price was a natural benchmark for market driven gas price. Domestically produced gas is currently priced at $4.2 to $5.73 per million British thermal unit, less than half the rate at which the fuel is imported in ships in its liquid form (liquefied natural gas or LNG). Both RIL and Oil and Natural Gas Corp (ONGC) want higher price to make newer fields commercially viable. AOGO said market pricing of domestic gas would increase government take by way of higher royalty, taxes and share of profit petroleum, besides promoting inflow of large private investments in domestic exploration. Also, various gas fields that are currently marginal or sub-economical, would come into production, it said adding increased domestic production would lead to lesser import of costlier LNG and saving in foreign exchange. AOGO said the incremental revenues the government gets from market priced gas can be used to provide direct subsidy to priority sectors like fertiliser. The Committee in its report does not suggest averaging or pooling of prices of domestic gas and imported LNG but has advocated consumers being forced to buy a portion of their requirement from LNG importers. AOGO said this recommendation was beyond the scope of the Committee and would lead to distortions in the market.

February 7, 2012. The government has rejected Reliance Industries' demand for a revision in the KG-D6 gas price, saying the$ 4.2 per mmBtu rate for five years was not only agreed to by RIL but also upheld by the Supreme Court. The Ministry on January 30 wrote to RIL quoting from the May 7, 2010, Supreme Court judgement in the gas row between the company and RNRL to assert that "any price revision proposal will be examined by the government after expiry of five years from commencement of supply." While RIL had in its submission to the Supreme Court in the gas supply row with RNRL stated that it was merely a contractor who is bound by government decision on price and sale of gas, the company on January 6 wrote to the Ministry seeking revision of "discriminatory" and "sub-market" price. The Ministry, however, rebutted RIL charge saying the company had vide letter dated October 24, 2007 confirmed acceptance to gas pricing formula and its tenure as had been approved by the Empowered Group of Ministers (EGoM). The EGoM, headed by the then External Affairs Minister Pranab Mukherjee, had on September 12, 2007 approved a price of $ 4.205 per million British thermal unit for gas produced from KG-D6 block for a period of five years. RIL started gas production from the block in April 2009 and thus price revision was due only in 2014. The Supreme Court, the ministry, said noted that the EGoM had already set the price of gas and parties must abide by this and other conditions placed by the government policy. Stating that the current price of gas was no longer viable, RIL had in the January 6 given the government 90 days to reach an "amicable settlement" over the pricing of gas. Under the dispute resolution process detailed in the Production Sharing Contract, parties are required to try for reconciliation of differences for three months before heading for arbitration. RIL may be thinking of arbitration on the issue. GAIL and Petronet are importing gas liquefied natural gas (LNG) for up to $14 per mmBtu, it said adding the consequences of sub-market price of $ 4.2 per mmBtu for KG-D6 gas are damaging to both contractors and the government. The letter also stated that the current pricing formula for gas is no longer viable given the changed circumstances and is also contrary to the principles of the New Exploration and Licensing Policy and "is harmful to the development of the nation's energy supply."

February 7, 2012. In a strategic move to force India's hands, Iran has set a month's deadline for a consortium of Indian state-run oil companies to sign the contract for bringing to production a gas field discovered in the Persian Gulf in 2006. The consortium of ONGC Videsh, the overseas investment arm of ONGC, northeast explorer Oil India Ltd and refiner-marketer IndianOil Corporation had in 2010 told Teheran it planned to develop the Farsi offshore block by pumping $5 billion over seven-eight years. But it did not sign a contract for fear of being blacklisted by the US under the 1996 Iran-Libya Sanctions Act of the US that barred any entity to pump more than 20 million in any 12-month period. US blacklisting would have made difficult for the Indian oil companies in the consortium to source funds, technology and other oilfield services. The latest round of embargo against Iran by the US and the EU has added to India's problems, making it difficult to buy Iranian crude - accounting for 12% of total imports - and pay for it. Now, India is routing oil payments through a Turkish bank, at best seen as a temporary measure. The latest deadline on the gas field puts India in a Catch-22 situation. If it signs on the dotted lines, it could upset the Western powers who can make things difficult for the Indian firms. If New Delhi refuses to sign on the dotted lines, it may lose a field with estimated reserves of 21 tcf (trillion cubic feet), or twice the size of India's biggest gas field. This is considered a costly proposition for an energy-deficit economy whose hunger for fuel is growing at a robust rate since oil and gas fields are not easy to come by, and China is always breathing down India's neck in so far as acquisition of global oil assets are concerned. Finance minister Pranab Mukherjee made it clear during his two-day visit to the US that India would not cut Iranian oil imports. While there is still an outer chance that the West may take a lenient view on oil imports, it may not be the same in case of the gas field contract. Perhaps, the best option available for India is to seek more time and keep Iran engaged in discussion simultaneously. But whether Teheran will play ball this time is anybody's guess. Indeed, Iran had threatened to scrap the block's award earlier too, but did not carry out the threat.

February 6, 2012. The government has asked upstream oil firms like Oil and Natural Gas Corp (ONGC) to give about ` 36,900 crore in fuel subsidy during April to December 2011. Fuel retailers Indian Oil Corp (IOC), Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) lost ` 97,300 crore in revenue on selling diesel, LPG and kerosene at government controlled rates during the first nine months of current fiscal. The government regulates rates of diesel, domestic LPG and kerosene to keep inflation under check. The revenue loss incurred by retailers on selling fuel below cost is split between the government and the oil companies. The government has so far provided ` 30,000 crore in cash subsidy to make up for more than half of the revenues that IOC, BPCL and HPCL lost on fuel sales during first half. Upstream firms made good one-third of the revenue loss. While the government has not yet provided subsidy for the third quarter, upstream firms are to consider their third quarter numbers. ONGC, Oil India and GAIL India had in first six months paid fuel subsidy at the rate of 33.33 per cent of the revenue loss on fuel sales. And so, they will pay extra in the third quarter to average the payout at 37.91 per cent for the April-December period. ONGC will pay ` 30,296 crore in the nine month period, up 42.3 per cent over ` 21,291 crore payout in the same period a year ago. The company had in the first six months shelled out ` 17,760 crore and so it will provide an additional ` 12,536 crore in the third quarter when it considers Q3 earnings. OIL will pay ` 4,478 crore in fuel subsidy in the April-December period as opposed to ` 1,596.68 crore payout in the corresponding period of last year. It had in first half paid ` 2,625.09 crore in fuel subsidy and would give a further ` 1,852.91 crore in the third quarter when it considers financial results. GAIL's share has been fixed at ` 2,120 crore for the first nine months of current fiscal. While the government had in June 2010 freed pricing of petrol from its control, it continues to regulate retail rates of diesel, domestic LPG and kerosene.

February 6, 2012. The Indian government has asked upstream oil companies to compensate state-run oil refiners for 37.91 percent of revenue losses on fuel sales during April to December 2011. For the first two quarters of the current fiscal year, upstream companies had compensated 33.33 percent of the losses due to state-set fuel prices. India's federal government fixes the retail prices of liquefied petroleum gas, kerosene and diesel to protect the poor, leading to revenue losses at Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp.

February 6, 2012. While the government has sent RIL's $0.135 marketing margin on the sale of KG-D6 gas to the oil regulator for approval, RIL has proposed to charge a $0.15 levy in lieu of marketing costs on the sale of gas produced from coal seams. Calling for bids to purchase 3.5 million cubic metres a day of coal-bed methane (CBM) it plans to produce from its Sohagpur block in Madhya Pradesh by 2014-end, RIL said it will charge $0.15 per million British thermal units as a marketing margin over-and-above the gas sale price. The Oil Ministry had referred the $0.135 per mmBtu marketing margin RIL charges over-and-above the KG-D6 gas sale price of USD 4.205 per mmBtu to the Petroleum and Natural Gas Regulatory Board after the levy was questioned by users like the fertiliser industry. RIL had originally proposed a $0.15 per mmBtu marketing margin for KG-D6 gas to cover risks like seller liabilities in case of non-supply, customers drawing less than their quota, non-payment of dues and settlement of disputes, but later agreed to a charge of $ 0.135 per mmBtu.

February 6, 2012. The government may auction 5 per cent stake in Oil and Natural Gas Corp, the nation's biggest energy explorer, to raise about ` 12,000 crore. A Group of Ministers (GoM) is likely to meet later this month to take a final call on the issue. The government had put on hold a proposal to sell 5 per cent of its stake in ONGC through a public offering. Capital market regulator Securities and Exchange Board of India announced rules for the sale of shares through auctions to institutional investors. The government owns 74.14 per cent stake in ONGC and plans to sell 427.77 million shares, which will trim its holding to 69.14 per cent.

February 3, 2012. Reliance Industries, pulled up by the CAG for alleged contract violations of a gas block, told a Parliamentary panel that it was not given a "fair" opportunity to be heard and the observations by the government auditor were on technical issues and not accounting. Top company officials, who deposed before Public Accounts Committee (PAC), also claimed that the draft report submitted by the Audit in June 2011 "purported" to be a performance audit which as "not provided for" in the production-sharing contract (PSC). RIL said under the PSC, the government is entitled to direct and audit the contractor's books and record in accordance with provisions of the accounting procedure.

February 1, 2012. An Indian court has ruled that the country's biggest refiner, Indian Oil Corp, must pay entry tax on the crude it supplies to a plant in a northern state. IOC said the order could have "financial implications". It did not say when the Allahabad High Court in the northern state of Uttar Pradesh, where the refinery is based, gave the verdict. IOC then appealed against the order in Supreme Court which stayed it on Jan. 17 on the condition that IOC deposit 50 percent of the taxes sought from it and furnish bank guarantees for the balance amount. IOC's Mathura refineRy in Uttar Pradesh has a processing capacity of 160,000 barrels per day, accounting for about 12 percent of its overall capacity.

February 1, 2012. Oil and Natural Gas Corp plans to spend ` 1.64 trillion ($33 billion) on capital expenditure in the five years starting April 2012. Almost 97 percent of the capex will be spent on exploration and production. The company plans to produce 277 million tonnes of oil and oil equivalent gas, nearly 40 million tonnes more than the previous five years. ONGC, which has been investing heavily to maintain output from its old fields, has said it aims to raise its crude oil production by 15 percent by March 2014.

POWER

February 5, 2012. NTPC is expected to follow the rehabilitation package offered by West Bengal Power Development Corporation for land acquisition for the proposed 1,600-MW Katwa thermal power project in the state. NTPC had decided to go ahead with land acquisition directly from land owners, after the state government said it will not acquire any land for any commercial project. NTPC has deployed four-five company officials to make a survey for additional 500-600 acres contiguous to the 480 acres of land already acquired by WBPDCL. The project was initiated by WBPDCL but was transferred to NTPC after it failed to acquire land during the Left Front regime. NTPC has decided to go ahead with the power project with 1,000-1,100 acres, down from the earlier proposed 1,625 acres from 16 mouzas (districts). Though it would take at least 3-4 months for a detailed survey, the initial feedback from the land owners is favourable, NTPC said. There had been reports that land brokers were trying to buy land from the owners in disguise of NTPC. Katwa block, with 32 villages, is largely dependent on agriculture and allied activities.

February 5, 2012. Diversified group GVK is mulling the acquisition of two under-construction thermal power plants in Andhra Pradesh as the private developers executing these projects are facing a resource crunch and have offered to quit. GVK Power, which aims to become a 5,000-MW company in the next five years, is presently engaged in the construction of four projects, including hydro and thermal projects. The company's under-construction projects include the 330-MW Alaknanda hydro project in Uttarakhand. Eighty per cent of construction work on the project is complete and the company has invested ` 3,000 crore on the project so far. It is likely to be commissioned in 2013. GVK Power is also executing a 850-MW hydro power project in Jammu, which will be commissioned in the next five years. Another under-construction project is the 370-MW Goriganga hydro project in Pittorgarh, Uttarakhand. The project is likely to commence power generation by 2013. The company is also executing the 540-MW Goindwal Sahib thermal power project at Tarn Taran, in Punjab. To fulfill the coal requirement of the Goindwal Sahib power plant and other future projects in northern India, GVK has ventured into captive coal mining. The Tokisud mining block, near Ranchi, in Jharkhand, is being developed into a captive coal mine. The coal for the Punjab plant will be drawn from this mine. GVK Power operates three power projects with a cumulative capacity of 900 MW in Andhra Pradesh at present.

February 6, 2012. BHEL said it has commissioned the country's first 1200 kV ultra high voltage transformer at Bina in Madhya Pradesh. The development of the 1200 kV UHVAC system will go a long way in enhancing the transmission efficiency from power hubs to distant load centers. This transformer has been developed, manufactured and tested by BHEL. The transformer has been manufactured under a controlled environment using the contemporary, manufacturing and testing facilities at the company's Bhopal plant. BHEL had signed an MoU with PowerGrid Corp for development of this transformer which is also the largest equipment used in a substation. A large network comprising 1200 kV transmission superhighways is being planned as part of the National Transmission Network. For the transmission sector, BHEL has developed various systems and products which include Power Transformers, Instrument Transformers and Disc Insulators suitable for UHVAC systems of 765 kV and 1200 kV. BHEL manufactures transformers, shunt reactors, instrument transformers, capacitors, extra high voltage circuit breakers and medium voltage switchgear at its facilities located at Bhopal, Hyderabad and Jhansi, besides providing total systems solution for HVDC, Extra High Voltage Alternating Current (EHVAC) and UHVAC Systems.

February 3, 2012. The Bihar Electricity Regulatory Commission (BERC) pitched for establishment of a smart card grid for power transmission to regulate supply to consumers and prevent theft of the commodity. Electricity transmission through a smart card grid should be considered by the Central Electricity Regulatory Commission (CERC) and other stakeholders so as to regulate consumption of the commodity and prevent its theft. Electricity supply through a smard card grid should be give due consideration as the mechanism was bound to improve utilisation of the commodity and prevent its pilferage and theft under the present transmission sytem. Bihar has been receiving inadequate electricity from the central quota, so much so that the state was able to meet only 40 per cent of the demand for the commodity. The state government was working hard to meet domestic demand for electricity by purchasing it from power power producers and distributors, but the gap between demand and supply continued to be a problem. Efforts were being made to generate power from renewable sources like solar and biogas to meet the growing demand for electricity in Bihar. With the state government having to make do with purchase of electricity from producers and distributors at a generally high rate to meet domestic demand.

February 1, 2012. The power utilities in Andhra Pradesh are planning to invest ` 14,000 crore over the next four years to strengthen transmission and distribution network in the state. In the wake of rising demand for power, AP power utilities would strengthen Transmission and Distribution (T&D) network by investing ` 14,000 crore in the coming four years. The state experienced a record consumption of 288 Million Units (MU) during Khariff season as against 277 MU in rabi. Besides, the power generating company APGENCO is planning to achieve additional capacity of 3210 MW during the same period and transmission and distribution companies (APTRANSCO and APDISCOMs) are implementing various innovative schemes to reduce technical and commercial losses which would help in providing better services to the consumers.

February 7, 2012. India’s largest gas-based power plant, the ` 10,000 crore Samalkot 2,400 MW project, located close to India’s east coast in Andhra Pradesh, is ready for commissioning in a record time of 15 months, Reliance Power said. The Samalkot plant would alone add over 15 percent to power generation capacity in Andhra Pradesh, contributing to making the vast state self-sufficient in power capacity. The plant would also add about 6 percent to the southern region grid, besides contributing significantly to the 11^th Plan capacity addition target. It may be recalled that the Ministry of Power has recommended gas allocation of 9.6 MMSCMD (million metric standard cubic metre per day) for the Samalkot project.

February 6, 2012. Power Finance Corporation (PFC) said it would raise ` 40,000 crore in the next financial year (2012-13). The company, which provides financing to the power sector, had set a target of raising ` 30,000 crore for this fiscal. It has has raised ` 28,000 crore this fiscal so far. PFC has set a target of disbursing ` 35,000 crore during 2011-12 of which ` 25,400 crore has been doled out. It plans to up the disbursal target to ` 40,000 crore in 2012-13. PFC would disburse the ` 10,000 crore loan signed with NTPC by the end of this fiscal. This loan agreement was signed in the year 2008-09. It has so far disbursed ` 8,000 crore.

February 6, 2012. India urgently needs to undertake reforms in the power sector in 2012 else the sector will plunge deeper into a crisis, Fitch Ratings' Asia-Pacific energy and utilities ratings team said. The poor financial health of state electricity distribution companies (discoms) has spiraled into a bigger problem as delayed payments from these agencies has hurt the entire value chain in the power sector. Low recoveries, primarily from agricultural sector, has dried liquidity of these discoms which have been forced to resort to short term loans and overdrafts to stay afloat. But the mounting debt of these loss making discoms has made financial lenders jittery about extending more loans.

February 5, 2012. The Kashmir Chamber of Commerce and Industry (KCCI) said the modalities with regard to taking back power projects operated by NHPC in the state will be announced soon. KCCI said various issues, particularly of return of power projects from the NHPC, were discussed with the Chief Minister. The KCCI also urged the Chief Minister to take up with the Centre the issue of releasing ` 100 crore for sick units, which have already been sanctioned on recommendations of the Prime Minister's Task Force.

February 5, 2012. Public sector Central Bank of India may go in for restructuring of some of its loans to the electricity companies in the current quarter. Of late banks have been concerned about their advances to the SEBs (state electricity boards) of Tamil Nadu, Bihar, Rajasthan, UP, Haryana, MP and Punjab, which according to the rating agency Crisil, are the most vulnerable ones. A recent Crisil report said losses of discoms rose 24 per cent to ` 27,500 crore between 2006-07 and 2009-10, which may rise to ` 35,000-40,000 crore in 2010-11, mainly because of the problems the utilities are facing like no rise in tariffs for longer period by states and non-recovery of dues.

February 3, 2012. Warning that the levy of customs duty on imported power equipment will increase the cost of power generation and delay capacity addition, private power companies have requested the government to keep any proposed move in this regard in abeyance for the time being. The Association of Power Producers (APP), a body representing private power companies in the country said, any step at this stage which increases the cost of power generation and leads to delays in capacity addition would be very detrimental to the sector. Sharp depreciation of the rupee against the Chinese yuan in the past one year has already made imports costlier. Imposition of further import duties would only increase the capital costs, which would have to be passed on through tariffs to the already overburdened State Electricity Boards (SEBs). One of the commonly mentioned reasons for India not meeting its generation capacity addition addition targets has been the failure of the domestic equipment manufacturing industry to fulfill orders within the required timelines. APP is of the view that there is a strong need for removal of barriers to entry at all stages and an optimal pricing and tax strategy to be in place so that the resource allocation takes place based on operating market forces under a credible regulatory regime. Planning Commission Member Arun Maira in a report submitted in February, 2010, had recommended the imposition of 14 per cent duty on imported power equipment.

February 3, 2012. From February to April, you will pay 5% more for electricity, as discoms pass on the increasing cost of fuel required for power generation. The Delhi Electricity Regulatory Commission announced that the first fuel price adjustment (FPA) of 5% would kick in across the city from February 1 to April 30, 2012, after which the formula would change all over again.

Added to the power tariff increase in September last year, consumers will now be paying 27% more. A long-standing demand of discoms, FPA was one of the main components of the tariff announcement of 2011-12, and will be a regular feature in electricity bills now. DERC will review the increase in power purchase costs borne by discoms as per fuel prices in the international market and allow discoms to recover them from consumers on a quarterly basis. Following the 5% surcharge, a domestic consumer will be charged ` 3.15 per unit for first 200 units of power instead of current ` 3. For usage between 200 and 400 units, the rate per unit will be ` 5.04 against the current ` 4.80; above 400 units, each power unit will cost ` 6 instead of ` 5.70.

While Delhiites may groan, DERC said FPA was preferable to consumers paying carrying cost (interest). Discoms had, in a proposal made earlier this year, argued that they had to pay power suppliers such as NTPC and Indraprastha Gas on a monthly basis and that it took them at least two years to recover their expenses. Power officials say coal and gas account for up to 80% of power procurement costs and this also pushes up merchant power costs (power bought on short notice).

February 2, 2012. NTPC Ltd, India's top power producer, is in favour of imposing penalty on Coal India Ltd for not meeting supply commitments. NTPC would also like the government to set up a coal regulator to ensure the world's top coal producer is meeting its supply commitments. Coal accounts for more than half of power generation in the country. Despite India having 10 percent of the world's coal reserves, Coal India, which has a near monopoly in coal mining, is struggling to meet its production target.

February 2, 2012. India may need to import less high-quality coal as the government changes pricing to encourage Coal India, the world's biggest coal miner, to produce more of the grades needed to keep powering Asia's third largest economy. India's state utilities are struggling to keep their turbines running as domestic coal supply has fallen short of targets and poor infrastructure hinders the transport of imported coal.

India has 10 percent of the world's coal reserves, but it imports a little over 100 million tonnes annually at a cost of some $10 billion. Up to 70 percent of those imports are higher grades used by the power, cement and steel industries. Now, a new policy that links pricing to quality could encourage Coal India, which accounts for about 80 percent of national coal output, to boost the production of superior grades. International coal prices are up to 40 percent higher than domestic rates.

Coal accounts for more than half of India's power generation and will be required for about 85 percent of the 75,000 MW of new capacity that is due to come online in 2017. India's peak-hour power deficit is about 12 percent, a shortage which many analysts say drags down economic growth.

Under the earlier pricing formula, coal prices were divided into seven very broad categories, with the calorific value -- the gauge for quality -- ranging from 600 kilocalorie per kg to 1,100 kilocalorie per kg. That gave less incentive to produce better grades because whatever the quality within that range, the earnings were the same. That has now changed as the new formula has 17 categories.

Most of India's coal is from open cast mines, making it difficult for miners to keep quality consistent. Stagnant coal production, coupled with lower-than-expected natural gas output, high fuel import costs and hefty subsidies on power tariffs, have hampered the expansion of the power industry. But analysts say raising coal prices will not solve India's coal, and power, shortages any time soon.

February 2, 2012. NTPC said it is in talks with GAIL for signing a long-term term pact for sourcing imported gas for its plants. The company is in initial talks with GAIL for sourcing gas, provided it finds buyers for the electricity produced from those plants.

February 2, 2012. The committee of secretaries, led by the prime minister's principal secretary Pulok Chatterji, is understood to have recommended that Coal India should step up supplies and face penalties if it fails to provide 80% of coal allocated to a power plant.

Prime Minister Manmohan Singh had set up the committee after leading industrialists, including Ratan Tata and Anil Ambani, sought his intervention to help the power sector. Power producers are facing several problems such as an acute fuel shortage, delays in environmental clearances, inefficient state utilities and reluctance of banks to lend to the sector. The committee wants to give incentives to Coal India to provide 90% of coal, it had agreed to supply power producers. Industry officials say that Coal India has been supplying much lower quantity of coal, leading to lower generation and prompting banks to hold back funds until Coal India signs a formal fuel supply agreement (FSA).

The committee wants Coal India to sign FSAs with power plants that have been commissioned till December last year. Coal India officials say several of their mining projects have been held up because of delays in environmental clearance for new mines, but industry officials say the state-run giant can boost supplies by being more efficient.

February 2, 2012. Reliance group has urged the government not to review the decision to allow the use of surplus coal from mines attached to its Sasan project for other plants and said it was "deeply concerned" that the CAG had not consulted Reliance Power but reportedly made adverse comments about it. An Empowered Group of Ministers (EGoM), three years ago, had allowed the company to fire its proposed Chitrani plant using surplus coal from the 4,000 MW Sasan Ultra Mega Power Project (UMPP) but recently, the power ministry had asked for a review of this step.

The EGoM, which referred the matter to the attorney general, is scheduled to meet this month. Ahead of the meeting, the group has written letters to Power Minister Sushilkumar Shinde, Law Minister Salman Khurshid and Coal Minister Shriprakash Jaiswal, saying the government should be consistent in its policies and stand by the existing decision. The group has strongly objected to reported observations by the Comptroller and Auditor General (CAG) that Reliance Power had not met its contractual obligations for UMPPs. Industry officials said that that delays in building projects were primarily because procurers, or state government, who would buy power, had not met their own obligations such as providing land. It said there were no windfall gains for Reliance Power due to the permission to use incremental coal for power projects, which was a policy decision of the EGoM in line with identical decision taken by the government for other developers.

OIL & GAS

February 6, 2012. Noble Energy, Inc. announced a natural gas discovery at the Tanin prospect offshore Israel. The discovery well was drilled to a depth of 18,212 feet and encountered approximately 130 feet of gross natural gas pay in high-quality lower Miocene sands.

The Tanin well is located in the Alon A license, approximately 13 miles northwest of the Tamar field, and in 5,100 feet of water. Discovered gross resources are estimated to range between 0.9 and 1.4 trillion cubic feet (Tcf) with a gross mean of 1.2 Tcf. This discovery de-risks other prospects located in the vicinity of Tanin.

February 3, 2012. Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, said that it had discovered a new accumulation of oil and natural gas in a remote region of the Amazon rainforest. Petrobras said it made the discovery in the Solimoes Basin, about 25 kilometers from the Urucu field that has been producing for 25 years. Testing showed the well, dubbed Igarape Chibata East, was capable of producing 1,400 barrels of light oil and 45,000 cubic meters of natural gas per day.

February 2, 2012. PetroChina Co. has signed binding agreements to buy a stake in a Royal Dutch Shell PLC shale gas asset in Canada, marking the latest move by Chinese state-owned companies to expand their Canadian footprint and increase their ability to tap unconventional fossil fuels.

Beijing-based PetroChina said it has completed the acquisition of a 20% stake in Shell's 100%-owned land and assets in Groundbirch, in northeastern British Columbia. The acquisition could be worth slightly more than $1 billion. PetroChina, China Petroleum & Chemical Corp., known as Sinopec, and Cnooc Ltd. have all invested heavily in Canada's oil and gas patch in the past two years, typically but not always buying minority stakes.

February 1, 2012. The United Steelworkers union and Royal Dutch Shell Plc averted a potential strike that would have idled as many as 69 refineries by tentatively agreeing to a new three-year contract. The proposal includes pay increases of 2.5 percent in the first year and 3 percent in the second and third years, along with some of the improvements in safety language sought by the union, according to three labor representatives with direct knowledge of the negotiations. No details of the agreement were provided in separate statements from the Steelworkers and Shell, which represented industry in the talks. The proposal is subject to a vote of the union members. Talks started Jan. 14 in Austin, Texas, between the union representing 30,000 workers and Shell. The old contract expired at midnight Houston time. Other companies involved include Valero Energy Corp., Exxon Mobil Corp., BP Plc, ConocoPhillips, Chevron Corp., Marathon Oil Corp., Sunoco Inc., Tesoro Corp. and PBF Energy Inc. The proposal also includes the provision of a full-time employee for overseeing safety standards for each bargaining unit representing more than 150 people at a plant, according to one of the union representatives.

February 5, 2012. The Movement for the Emancipation of the Niger Delta (MEND), the main armed group in Nigeria’s oil-rich southern region, attacked and damaged a pipeline belonging to a unit of Italy’s Eni SpA. The pipeline carries crude to an export terminal in the coastal town of Brass, about 250 kilometers (155 miles) southwest of the oil-industry hub of Port Harcourt. Eni lost “around 4,000” barrels per day of “equity production” from the incident. MEND will also attack the Nigerian investments of South African companies including MTN Group Ltd. and SacOil Holding Ltd., Gbomo said, accusing South African President Jacob Zuma of interfering “in the legitimate fight for justice” in the Niger River delta region. Attacks by MEND and other militant groups in the delta, home to Nigeria’s oil industry, cut the nation’s crude output by more than 28 percent from 2006 to 2009. Disruptions eased after thousands of fighters, seeking a greater share of oil revenue for the region’s inhabitants, dropped their weapons and accepted an official amnesty. MEND refuses to disarm, saying the government hasn’t met its demands for control of the delta’s oil.

February 3, 2012. Kinder Morgan Inc., which this year will become the largest U.S. pipeline company after its $20.7 billion purchase of El Paso Corp., aims to extend its lead over competitors in transporting oil across Canada for export to higher-paying markets in Asia. Kinder is pressing forward with plans to expand its Trans Mountain pipeline, the only conduit connecting Canada’s oil- sands region to the Pacific Coast, to take advantage of regulatory setbacks that stalled competing projects at TransCanada Corp. and Enbridge Inc., both of Calgary. Kinder, whose Houston-based pipeline partnership, Kinder Morgan Energy Partners LP, has jumped 13 percent since the end of October, is seeking commitments from Canadian oil drillers so it can double the line’s capacity to 600,000 barrels a day. The Trans Mountain line is expected to produce $169.4 million in distributable cash flow, or the money it has available for payments to its unitholders, in 2012, up 15 percent from 2009, Kinder Morgan said. TransCanada, meanwhile, is readying a new plan to ship Canadian oil south across the U.S. after its Keystone XL line was rejected by President Barack Obama’s administration over environmental concerns. A third proposal by Enbridge called Northern Gateway that would extend west from the oil sands to Kitimat, British Columbia, is facing opposition from aboriginal groups and a regulatory decision has been delayed until 2013. Canada’s oil exports rose 8.7 percent to 2.1 million barrels a day. About 99 percent of those exports went to the U.S. via pipelines, trucks and rail cars. Only about 10,000 barrels of crude a day went to Asia on the Kinder line.

February 7, 2012. The U.S. is the closest it has been in almost 20 years to achieving energy self-sufficiency, a goal the nation has been pursuing since the 1973 Arab oil embargo triggered a recession and led to lines at gasoline stations. Domestic oil output is the highest in eight years. The U.S. is producing so much natural gas that, where the government warned four years ago of a critical need to boost imports, it now may approve an export terminal. Methanex Corp., the world’s biggest methanol maker, said it will dismantle a factory in Chile and reassemble it in Louisiana to take advantage of low natural gas prices. And higher mileage standards and federally mandated ethanol use, along with slow economic growth, have curbed demand.

February 6, 2012. A U.S. proposal to sanction Iran’s state-owned oil company and its main tanker fleet may ensnare any person or business in the world involved in purchasing or shipping Iranian oil. Tensions over Iran’s nuclear program have risen sharply in the last week, with U.S. officials such as Defense Secretary Leon Panetta expressing concern about a potential Israeli military attack by mid-year. As a result, pressure is mounting for additional steps against Iran’s economy to force Iranian Supreme Leader Ali Khamenei to halt his country’s suspected pursuit of nuclear-weapons capability.

February 6, 2012. The governments of Canada and Canadian province Alberta unveiled a plan to increase air, water, land and biodiversity monitoring of Canada's oil sands. The Joint Canada-Alberta Implementation Plan for Oil Sands Monitoring is designed to provide an improved understanding of the long-term cumulative effects of oil sands development.

The three-year implementation plan will begin this spring with increased sampling frequency, parameters and locations. It will also integrate relevant parts of existing monitoring efforts and will give the government and industry the scientific foundation necessary to continue to promote the environmentally sustainable development of oil sands. Canadian Environment Minister Peter Kent said the program would be one of the most transparent and accountable oil sands monitoring system in the world. The Canadian and Alberta governments will jointly manage the program. Annual progress reports on implementation will be prepared for the first three years, with an external scientific peer review of the program and the end of the third year. Beyond that, a full external, scientific review of the new program will be conducted every five years. Both governments are already committing significant resources to environmental monitoring. The energy industry is expected to provide increased funding that is needed to implement the new program, Environment Canada said.

February 5, 2012. Saudi Arabian Oil Co., the world’s largest crude exporter, raised differentials used in determining its official selling prices for all grades to customers in Northwest Europe and the Mediterranean for shipments in March. The state-owned producer, known as Saudi Aramco, increased the premium for Arab Super Light crude to Asia by 10 cents a barrel to $4.20 above the average of Oman and Dubai grades, the Gulf benchmarks used by traders in Asia, while cutting Asian differentials for four other grades. Aramco reduced all premiums and discounts for U.S. buyers. Persian Gulf oil producers such as Saudi Arabia sell most of their crude under long-term contracts to refiners. Most of the region’s state oil companies price their crude at a premium or discount to a benchmark.

February 6, 2012. President Goodluck Jonathan said the Federal Government was willing to give licences to those interested in setting up refineries in the country. The move, he said, is part of the overall efforts by government to raise the nation's petroleum refining capacity and reduce the importation of refined products. The President lamented that despite having four refineries, the country is still importing refined petroleum products because of their inability to meet domestic demands for the products.

February 2, 2012. Royal Dutch Shell PLC is actively looking at ways to improve the profits it gets from U.S. natural gas, including seeking land for potential liquefaction and export terminals. The Anglo-Dutch energy giant has invested heavily in U.S. shale gas assets, but depressed local gas prices risk driving up the costs of its projects there.

February 2, 2012. More North Sea oil is being shipped to Asia than at any time in the past eight years as prices fall to their cheapest levels in 15 months compared with Middle East alternatives. Brent traded at $2.41 a barrel more than Dubai crude on Jan. 13, the smallest difference since October 2010, PVM Oil Associates Ltd. data show. Companies led by BP Plc and Vitol Group have sent at least 8 million barrels of North Sea oil to Asian ports since mid-December, equivalent to six days of U.K. production, according to ship-tracking data from AISLive Ltd. That’s the most for any month since 2004, data from Galbraith’s Ltd., a London-based shipbroker, show. Rising production in Libya, refinery closures from the U.K. to Switzerland and a drop in U.S. gasoline demand have created a surplus that’s weighing on the price of low-sulfur, or sweet, crude produced in the North Sea and West Africa. That’s making it profitable for companies to transport the raw material more than 16,000 miles (25,700 kilometers) to Asia, where demand is outpacing the rest of the world.

POWER

February 7, 2012. State-run power company PT PLN announced that it had started the commercial operation of the Tanjung Jati B Expansion coal-fired power plant of Unit 4 in Jepara, Central Java, with a total capacity of 660 megawatts (MW).

The company also announced the operation of Unit 3 with the same capacity. With the additional two units, the Tanjung Jati B power plant currently has a total capacity of 2,640 MW from the four units installed.

February 6, 2012. The Masvingo Rural District Council has approved a US$13 million mini-hydro power project at Lake Mutirikwi Great Zimbabwe Hydro-Power Company had applied for the establishment of the mini-hydro power plant. The company is jointly owned by a Zimbabwean company, ZOL and its South African partner, New Planet. The company applied for five hectares of land to build amini-hydro power plant, commencing work in September this year. The mini-hydro power plant is expected to produce five megawatts of electricity that will be fed into the national grid upon completion of the project in March 2014.

February 6, 2012. Beacon Power Corp., the power-storage developer that filed for bankruptcy after winning a U.S. loan guarantee, agreed to sell its only plant to Rockland Capital for $30.5 million in cash and a promissory note, plus additional obligations. Rockland will continue operating the 20-megawatt plant in Stephentown, New York, and help develop a second facility in Pennsylvania. Rockland also will assume Beacon’s funding obligations to the U.S. Energy Department of $6.6 million.

February 3, 2012. Spain’s Iberdrola SA was picked to build a 400-megawatt heat and power plant for Poland’s Elektrocieplownia Stalowa Wola SA, a unit of Polskie Gornictwo Naftowe i Gazownictwo SA and Tauron Polska Energia SA. Iberdrola placed the lowest bid of 1.6 billion zloty ($504 million) to build the facility.

February 6, 2012. Investments of about 210 billion euros ($274 billion) in gas and power grid upgrades are required if the European Union wants to become a single energy market by 2014, EC energy chief Guenther Oettinger said. Europe needs to invest in new electricity and gas grids in the next 10 to 15 years to give all EU member-states access to a pan-European market, the European Commission’s Oettinger said. Germany, Europe’s biggest energy market, lacks a coherent strategy to expand its power network and countries including some Baltic states and Bulgaria are too dependent on Russia’s state-controlled energy giant OAO Gazprom, Oettinger said. Europe wants to reduce greenhouse-gas emissions, increase the share of renewables and raise energy efficiency through 2020 in a bid to promote climate protection. Its 20 percent higher efficiency target has suffered setbacks as leaders struggle to generate growth amid debt issues and competition from such markets as China. Germany, the continent’s largest economy, needs to come up with a “constructive” position toward EU proposals to reduce energy consumption, Oettinger said. He also urged greater financial backing from lawmakers to modernize buildings and support for projects to capture CO₂ emissions and store them underground.

February 7, 2012. The government-owned energy investment firm Oman Oil Company has secured a mandate to develop an Independent Power Project (IPP) in Musandam Governorate. The gas-fired project, initially sized at around 120 megawatts (MW) of power generation capacity, will be implemented in parallel with the $600 million Musandam Gas Plant (MGP) project currently under development by its upstream subsidiary, Oman Oil Company Exploration and Production (OOCEP).

February 2, 2012. Uganda’s 250-megawatt Bujagali hydropower project started supplying electricity to the national grid and may reach 50 megawatts, Energy Minister Irene Muloni said. Supply to the national grid will gradually rise with commissioning of the entire capacity expected in July, Muloni said.

February 1, 2012. The U.S. will need more than a year to create an organization that will oversee federal nuclear- waste policies, according to a co-chairman of the panel that studied the issue for President Barack Obama. Lawmakers are studying a recommendation by the commission to create a government-chartered corporation to oversee nuclear- waste management, taking over from the Energy Department.

The corporation would license, build and operate storage and disposal sites, according to the Jan. 26 report. Obama two years ago set up the commission to study options after canceling funding for the government’s proposed repository at Nevada’s Yucca Mountain, about 100 miles (161 kilometers) northwest of Las Vegas. Senate Majority Leader Harry Reid, a Nevada Democrat, led opposition to the project. The Energy Department can negotiate with utilities to revamp the fee structure of the Nuclear Waste Fund to ensure money is used for waste management, according to the report. The department also can begin design studies for a possible temporary storage site, which the commission supports, it said.

February 7, 2012. Power Finance Corp., India’s largest state-run lender to electricity utilities, plans to more than double lending for renewable energy projects within a year as coal-fired plants become riskier investments. The company’s approved loans to projects, particularly solar and wind plants, will increase to 15 billion rupees ($305 million), or 4 percent of the total in the next financial year, from ` 6.75 billion, or just 1.2 percent in the year ending in March. The company does not plan to increase its total loan outlays of 450 billion rupees in 2013. Prime Minister Manmohan Singh plans to spend more than $300 billion to expand India’s electricity systems in an attempt to spur 9 percent economic growth by 2017. An increasing share of that may be directed toward clean energy projects as lenders shun new conventional power projects that are facing risks such as rising fuel costs.

February 3, 2012. India vowed to press richer nations to shoulder the burden of protecting the environment at a meeting in Brazil, where leaders are due to gather in June for the 20-year anniversary of an historic development summit. India has battled efforts by the U.S. and Europe to impose legally binding emission-reduction targets on fast-growing polluters like itself and China, arguing they shouldn’t be subject to the same measures as developed nations historically responsible for the problem. Environment Minister Jayanthi Natarajan said India will extend that position to environmental negotiations, including Rio de Janeiro at the United Nations Conference on Sustainable Development, known as Rio+20 in policy circles. The first Rio conference in 1992, known as the Earth Summit, drew 108 heads of state and set up the UN Framework Convention on Climate Change to stabilize the rise of greenhouse gas emissions.

February 3, 2012. Rajasthan Renewable Energy Corp. has invited applications to set up 50 solar photovoltaic plants of one megawatt each in the state. The bids have to be submitted by March 19.

February 2, 2012. Investment in clean-energy projects grew faster in India than in any other major economy last year, rising 52 percent to $10.3 billion. The largest increase came from the solar industry with $4.2 billion of funding for sun-powered plants connected to the grid, a seven-fold increase from 2010 and about par with the $4.6 billion that went to wind projects. Asset financing accounted for $9.5 billion of the total, while private equity and venture capital firms invested $425 million. In 2011, India added 2,827 megawatts of new wind capacity, making it the third-biggest market after China and the U.S. Its solar capacity rose to an estimated 277 megawatts from 18 megawatts in 2010 and could surge this year to more than 1,000 megawatts.

February 2, 2012. India may investigate if Lanco Infratech Ltd. (LANCI), the nation’s second-largest non-state power utility, and Moser Baer India Ltd. broke rules to win more capacity than allowed in the country’s first solar auction. Lanco broke the rules in the country’s first solar auction by creating front companies to win more than the 105 megawatt capacity allowed, the Centre for Science and Environment said. If there’s an investigation, it may be widened to include Moser Baer India. Lanco and companies it set up won contracts to develop 235 megawatts of solar capacity, about 40 percent of the total awarded in December 2010, CSE said. Lanco denied breaking the rules, saying it reported its holdings in the other companies to the government agency charged with running the auction, NTPC Vidyut Vyapar Nigam Ltd., known as NVVN.

February 1, 2012. As many as 836 million Indians still rely on traditional biomass for energy, a report has said, even as the US claimed that India along with China would account for half of global energy consumption by 2035. Between 1990 and 2008, close to 2 billion people worldwide gained access to electricity. But the International Energy Agency (IEA) estimates that more than 1.3 billion people still lack access to electricity, while the UN says that another 1 billion have unreliable access. The report said at least 2.7 billion people, and possibly more than 3 billion, lack access to modern fuels for cooking and heating. They rely instead on traditional biomass sources, such as firewood, charcoal, manure, and crop residues, that can emit harmful indoor air pollutants when burned. These pollutants cause nearly 2 million premature deaths worldwide each year, an estimated 44 per cent of them in children. Among adult deaths, 60 per cent are women. Traditional energy usage also contributes to environmental impacts including forest and woodland degradation, soil erosion, and black carbon emissions that contribute to global climate change. Meanwhile, a senior Obama Administration official said India and China would account for more than half of the increased energy consumption in the world by 2035.

February 6, 2012. A report that concluded a tariff on importing Chinese solar panels into the U.S. would threaten more than 60,000 jobs is “nonsense,” a researcher said. It’s impossible to accurately estimate the number of jobs that would be lost either directly, through closed factories, or indirectly, when people spend less on goods and services, said Russ Roberts, a professor of economics at George Mason University. Tariffs of 100 percent on solar cells and panels would eliminate almost 50,000 net jobs, and 10,000 more would be jeopardized if China retaliated, according to the Brattle Group, a Washington-based consulting firm that prepared the Jan. 30 report for U.S. companies that oppose a trade case filed in October. SolarWorld AG’s U.S. unit asked the U.S. International Trade Commission and the Commerce Department to impose tariffs on Chinese solar products from companies such as Suntech Power Holdings Co. and Trina Solar Ltd. SolarWorld Industries America Inc., acting on behalf of U.S. solar manufacturers, said it was harmed because China’s government uses cash grants, discounts on raw materials, preferential loans and tax incentives to boost exports of solar cells. The Commerce Department is scheduled to make a preliminary finding March 2.

February 6, 2012. Spain may need to buy at least 355 million euros ($466 million) of carbon emissions permits to meet its obligations under the Kyoto Protocol, Agriculture Minister Miguel Arias-Canete said. The country will need at least 67 million metric tons of emissions permits to cover greenhouse gas emissions that exceed the volume allowed under the 1997 Kyoto agreement. Under the Kyoto Protocol, developed nations can meet their goals by buying so-called Assigned Amount Units from other countries with surplus permits, or by investing in emissions reductions in developing countries in exchange for carbon offsets. Spain has already spent about 750 million euros over the past five years accumulating emission permits and offsets after the economic boom that followed the Kyoto negotiations saw Spanish emissions overshoot. Spain’s 2010 greenhouse gas emissions are about 22 percent higher than they were in 1990 compared with a Kyoto-mandated ceiling of a 15 percent rise over 1990 levels by 2012, Arias-Canete said.

The volume of carbon dioxide emitted by the country’s factories, power plants and transport system in 2006 was 50 percent higher than their 1990 level, Arias-Canete said. While two recessions since then have reduced emissions, those reductions have fallen more at the factories and power plants covered by the European Emissions Trading System compared with the transport system and waste management industry which are the responsibility of the government. The European Commission has set Spain a target of reducing its budget deficit to 4.4 percent of gross domestic product this year from about 8 percent in 2011. The International Monetary Fund forecast last month the deficit will be 6.8 percent as declining output crimps tax receipts and pushes up unemployment claims. Economy Minister Luis de Guindos said the economy may shrink by 1.5 percent this year.

February 4, 2012. Solar Millennium AG, a German renewable energy developer that filed for insolvency Dec. 21, sold its 2.25 gigawatts of U.S. projects in development to Solarhybrid AG. Solar Millennium sold two project holding companies, including a 70 percent stake in its U.S. unit Solar Trust of America LLC, the Erlangen-based developer said. The price wasn’t disclosed. Payment is linked to achieving certain milestones, such as signing power-purchase contracts for the projects.

February 3, 2012. The U.K. faces an additional burden in energy costs from plans to switch to electricity in home heating from natural gas. The government, chasing a target to cut carbon emissions to 80 percent below 1990 levels by 2050, may push to heat almost all U.K. homes using electricity by that date. Currently, about 80 percent of the country’s homes are heated by gas.

The move, which is still under consideration, would require the U.K. to triple the capacity of its power grid. The strain on the electricity grid will probably increase as the nation raises power generation from wind farms that only generate in blustery conditions and so also require back up supplies. Electricity can be less harmful to the climate than gas if sourced from generation such as nuclear or renewables. Burning gas produces about half the heat-trapping emissions as coal, while renewables and nuclear produce almost no CO₂.

The U.K. government plans to publish its heat strategy this year. Various methods, including electric heating and using biomethane in gas pipelines, will be included as means of cutting emissions. Heat pumps use electricity to transfer thermal energy from the ground, air or water to provide warmth. Such pumps are used in the Nordic region, where the cold climate boosts the incentive to spend on a system to keep energy consumption low.

February 3, 2012. The U.S. Interior Department plans to auction this year leases for sites where developers can build wind farms in the waters off four eastern states after completing environmental reviews of the region. This eliminates work for developers proposing offshore wind farms. There are no turbines in U.S. waters, something President Barack Obama is seeking to change with the “all-out, all-of-the-above” energy strategy he described in his State of the Union address Jan. 24. Offshore wind power has taken off in other regions, especially Europe, and the Interior Department’s efforts will help its adoption in the U.S. Global offshore wind capacity is expected to reach 20 gigawatts in 2015, with 658 megawatts in the U.S.

February 3, 2012. Panasonic Corp. is focusing on making products to manage renewable power in the home as the Fukushima nuclear disaster spurs generation from wind and solar.

Panasonic, which began selling lamp sockets in 1918 and now offers products from semiconductors to self-cleaning toilets, plans to raise the energy-management operations’ share of sales to 30 percent of its world revenue by 2018.

Panasonic posted global sales of 8.7 trillion yen ($114 billion). The company has been spurred on by the nuclear meltdown at the Fukushima Dai-Ichi plant last year that prompted Germany to abandon its atomic development plans.

Panasonic, which began accepting orders for batteries to store renewable energy in homes and workplaces from August in Japan, will need to contend with rivals such as Sony Corp., ABB Ltd. and Siemens AG.

Companies are entering the market as energy generation from solar and wind varies depending on the weather, unlike production from nuclear or fossil fuel-fired plants. The company is taking orders in Japan for a 0.96 kilowatt- hour battery for its home solar generator and may expand abroad.

Panasonic, also talking to European utilities on using its power management systems, hopes to sign deals in 2012. Panasonic sells solar panels and so-called air-source heat pumps in Europe, and operates a fuel-cell research center in Germany to extend technology used in Japan to the continent. The company plans to begin sales of a light-emitting diode lamp in Europe from April that matches the output of a traditional 40- watt incandescent device with only 7 watts of power use. It will open the eco-house concept in Fujisawa, Japan, in 2013, with homes that produce, store and manage their own power.

February 3, 2012. German Environment Minister Norbert Roettgen and Economy Minister Philipp Roesler, who disagreed on solar-power subsidies, are in talks to draw up a joint policy as payments may be cut as early as April.

The ministers in Chancellor Angela Merkel’s government met on Feb. 1, are in “intensive” discussions and plan to table a combined proposal to adjust solar power subsidies “as quickly as possible”.

Germany may cut the state’s support as early as April to contain an expected rush in installations in the first half. The ministers disagreed after Germany, Europe’s biggest renewables market, installed a record 7.5 gigawatts of solar panels, more than double the government’s target.

February 3, 2012. Fuhrlander AG, a German wind-turbine maker, expects to sign about 900 million reais ($524 million) worth of sales contracts in Brazil this month as it seeks to meet the country’s increasing demand for renewable energy. Turbines with 400 megawatts of total capacity will be supplied to three developers from a factory Fuhrlander is building in northeast Brazil.

Fuhrlander, based in Waigandshain, Germany, is building a manufacturing base in Brazil to supply the growing number of developers that have signed contracts to sell wind power in government-organized auctions.

The company will begin construction in March on a 20 million-real factory in the city of Pecem that initially will be able to produce 20 turbines a month. The first ones should be complete in February 2013.

The developers are Fuhrlander’s first customers in Brazil. They are among the companies that won contracts to sell power in a December auction. The wind farms must be complete by 2016. Fuhrlander plans to sign contracts for an additional 400 megawatts of turbines this year and may build another factory to meet future demand.

February 3, 2012. European Union Climate Commissioner Connie Hedegaard said countries meeting at a conference in June should pledge to double the share of renewable energy they use by 2030 and give all citizens access to sustainable power.

The nations also need to double the world’s energy efficiency. World leaders will gather in Rio de Janeiro in June for the United Nations Conference on Sustainable Development, known as Rio+20 in policy circles. The first conference in Rio in 1992, known as the Earth Summit, drew 108 heads of state and set up the UN Framework Convention on Climate Change to stabilize increasing greenhouse gas emissions.

China and India have clashed with richer nations that are seeking to make the commitments at the conference enforceable. India’s Environment Minister Jayanthi Natarajan said it will press richer nations to shoulder a larger burden so poorer countries that weren’t responsible for emissions in the past aren’t saddled with measures to combat climate change.

February 2, 2012. Sumco Corp., a Japanese silicon wafer maker, said it will cut about 1,300 jobs amounting to 15 percent of its workforce as it withdraws from supplying solar panel makers following a plunge in prices for the raw materials.

Sumco forecast a full-year loss of 85 billion yen ($1.1 billion) and asked Sumitomo Metal Industries Ltd. (5405), which owns a 28 percent stake, to buy preferred shares. The company took a charge of 58.2 billion yen for the restructuring.

The Tokyo-based company will dissolve and liquidate its subsidiaries, Sumco Solar Corp. and Minamata Denshi Co. Sumco Solar makes solar wafer, and Minamata Denshi processes raw materials for the solar business.

Sumco said the job cuts would be made by the end of January 2014. Under Sumco’s business plan, the company will close the Imari solar plant in Saga prefecture and the Ikuno plant in Hyogo prefecture.

February 2, 2012. European Union policies to promote the use of biofuels for transportation will cost consumers as much as 126 billion euros ($166 billion) between now and 2020, two environmental groups said. The fuels, derived from plants and a substitute for gasoline, probably won’t help cut emissions of greenhouse gases because forests are destroyed to make way for biofuel plantations, Friends of the Earth and ActionAid said.

The EU aims to get 10 percent of its transport energy from biofuels, hydrogen and renewable power by 2020. The target is meant to help reduce the bloc’s total greenhouse gas emissions 20 percent from 1990 levels. The lobby groups said those goals will add a cumulative 94 billion euros to 126 billion euros to fuel costs by 2020.

The EU has said its guidelines prevent the use of deforested land and that biofuels have little to do with rising food prices. The EU in June 2010 set up controls to prevent biofuels from damaging forests, wetlands and nature reserves.

An independent consultant, Malcolm Fergusson, carried out the cost analysis for Friends of the Earth and ActionAid. He extrapolated analysis relating to the costs in the U.K. and Germany across the EU. Fergusson was previously head of climate change policy at the U.K. government’s environment agency.

February 2, 2012. Ormat Technologies Inc., a U.S. developer of geothermal energy, was given approval by the New Zealand government to buy land in the nation’s North Island for a NZ$200 million ($167 million) power plant. Ormat was granted consent by the Overseas Investment Office, which assesses bids for sensitive land.

The company was awarded the project by New Zealand Maori land trusts after a bidding process. Ormat, a unit of Yavne, Israel-based Ormat Industries Ltd., is one of the biggest foreign developers of geothermal plants in New Zealand, with interests in 12 other projects, according to the June statement. The new plant will be located on 902 hectares (2,229 acres) of land near Rotorua, an area of high geothermal activity.

February 2, 2012. China cut subsidies for demonstration solar-power projects approved in 2011 and this year as the cost of components decline. The government reduced the subsidy for projects approved last year by more than 11 percent to 8 yuan ($1.3) a watt, the Ministry of Finance said. It will offer a subsidy of 7 yuan a watt for those that are eligible for the assistance this year. The subsidy applies only to projects developed by owners who will consume the power for their own use.

February 2, 2012. Cnooc Ltd.’s battery unit invested $300 million in a venture with Spanish solar power company Isofoton SA to develop photovoltaic plants across Asia. Cnooc, China’s biggest offshore energy explorer, will take a 51 percent stake in the Tianjin, China-based joint venture company through its Tianjin Lishen Battery Co. The entity will set up a 150-megawatt manufacturing plant and build power plants. Isofoton will own 49 percent and supply the technology.

Isofoton, which furnished solar panels for the Spanish prime minister’s official residence in 2007, is building a business developing plants and shifting its manufacturing to China after government subsidy cuts in 2009 gutted sales of its panel unit in Spain. Photovoltaic equipment makers are pinning their hopes on orders from China as Germany, the biggest market, reins in support for the industry.

February 2, 2012. Brazil, which has only one utility- scale solar project, may auction off next year contracts to sell at least 100 megawatts of electricity produced from sunlight. The auction, which has not been formally announced, may be the first of many. Brazil has organized similar auctions for wind power that attracted developers and equipment producers to the country and drove down prices. A solar auction would have a similar effect.

An auction for wind energy in 2009 prompted turbine makers including General Electric Co. and Gamesa Corp. Tecnologica SA to establish factories in Brazil and made equipment less expensive in the region. Developers offered to buy electricity for an average of 102.18 reais ($59) a megawatt-hour in the last auction. That’s 31 percent lower than the 148.39- real average in the 2009 auction. The Ministry of Mines and Energy, which has organized renewable energy auctions for wind power. Brazil’s only utility-scale photovoltaic project, in Taua, has 1 megawatt of capacity and is owned by Rio de Janeiro-based MPX Energia SA.

February 1, 2012. Fears Germany will cap or cut green energy subsidies is boosting demand for solar panels, and uncertainty about the shape of the measures could give the country's battered solar sector an advantage against Chinese rivals. Installations of solar panels have boomed in Germany over the last two years due to feed-in tariffs, lavish subsidies utilities are forced to pay by the government to those who generate their own solar power. Ultimately power companies pass on the costs to their customers. But as the burden on energy consumers soars, Berlin now wants to tighten its grip on the market and is scrambling for ideas over how best to curtail demand. Proposals range from monthly cuts in feed-in tariffs to an outright cap on subsidies.

February 1, 2012. The biggest oil companies in the world have calculated that few, if any, of drivers will see electric cars outnumber gasoline and diesel models in their lifetimes. While politicians and green lobby groups insist the future of transport is electric, in the past two months BP and Exxon have released data which points to electric cars making up only 4-5 percent of all cars globally in 20-30 years. Meanwhile some governments are targeting as much as a 60 percent market share for electric vehicles over a similar period. The oil company forecasts may appear self-serving, but if they are widely accepted could provoke a policy shift that offers greater incentives for electric cars to end our addiction to oil. And unlike more optimistic predictions from consultants like McKinsey, these forecast are backed by cash. They guide tens of billions of dollars in long-term investment in oil production and refining and it is oil that stands to lose if they get it wrong. They don't, of course, take into account a major breakthrough in battery technology that could give electric cars a cost and performance edge over the internal combustion engine. In its Energy Outlook for 2030, BP predicted that electric vehicles and plug-in hybrids, will make up only 4 percent of the global fleet of 1.6 billion commercial and passenger vehicles in 2030. The balance is seen coming from biofuels, natural gas and electricity. Plug-in hybrids can be powered from the mains and only rely on their small gasoline engines when the battery dies. Standard hybrids are principally driven by an internal combustion engine whose efficiency is boosted by the recycling of energy generated from braking. Exxon Mobil, the biggest oil and gas company in the world, says the continued high cost of electric vehicles compared to petroleum cars, means take-up won't even increase much during the 2030s. In its 2040 Energy Outlook, the Texas-based company said electric vehicles, plug-in hybrids and vehicles that run on natural gas would make up only 5 percent of the fleet by 2040. Peter Voser, Chief Executive of Royal Dutch Shell, the industry number two, sees a rosier future for electric vehicles. He predicts they will account for up to 40 percent of the worldwide car fleet, although only by 2050.

February 1, 2012. The U.K. government will announce as early as next week plans to reduce subsidies for solar energy at routine intervals as part of an effort to curb a boom in installations. The plan will include a deployment trigger mechanism that automatically cuts above-market rates paid for power from solar cells once installations reach a predetermined level. The government will propose a cost-control mechanism for solar power by Feb. 9. The proposals aim to keep a lid on subsidies while giving developers more clarity about the support they can depend on and when the government will make changes. Ministers twice cut rates in 2011 after installations increased 10-fold. The government lost a legal challenge from Solarcentury Holdings Ltd. and Homesun Ltd. who disputed the timing of the reduction. Britain’s proposal is similar to the system in Germany, the world’s largest solar market, which reevaluates support every six months. German Environment Minister Norbert Roettgen wants those cuts to come more frequently and is seeking to phase out subsidies by 2017.

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