The Oil Threat is not Dead
Lydia Powell, Observer Research Foundation
|
T |
he threat of the world running out of oil may have been dethroned from its top position by technologies that have managed to extract unconventional oil and by other threats such as climate change which seem more immediate and less controllable, but this not mean that the oil threat is dead. In a paper published in 2012, the IMF analyses the implications of the potential downward shift in the growth rate of oil production on the world economy. Their baseline scenario assumes a 1% per year reduction in the trend growth rate in oil output and constant elasticity of substitution. Under these assumptions scarcity of oil neither becomes a serious constraint on global growth nor does it seriously worsen current account imbalances. If long run elasticities of oil demand are assumed to be increasing functions of oil price, then the impact of scarcity on global growth and current account imbalances are even smaller. As pointed out by the paper, the concern is the validity of these assumptions in the baseline scenario.
First, the decrease in the growth rate of world oil production could be much larger than the base line assumption on the basis of several recent studies. World oil production is seen to be on a ‘temporary and fluctuating’ plateau which implies a decline in growth rate of oil production of around 2% per year. If the assumption is altered to an annual decline of 3.8% in growth rate of oil production along with a 4% in annual per barrel oil extraction costs (against 2% in the baseline scenario), the long term output and current account impacts are approximately four times as large as the baseline. The impact on the current deterioration in the United States and EU averages 5% of GDP. India’s current account status is the worst among large oil importing countries/regions which means that the impact on India would be far more severe. Under this scenario, 200% increase in oil price will be required upon impact and an 800% increase over 20 years. This unprecedented increase in oil price and the consequent non-linear impact on GDP and related social factors can only be imagined as it is said to be beyond the capabilities of the model used by IMF.
The second assumption in the baseline scenario that substitution for oil would be straightforward may also be inaccurate on the basis of recent studies as the paper points out. Oil’s main uses today are as liquid fuel for transportation and as feedstock for the chemical industry. Substitutes for oil must meet standards set by oil in terms of storability, transportability and the ability to deliver concentrated energy. Even if transportation based on electricity and natural gas is possible, the time required to build the infrastructure required to support such a shift is found to be far too long (in adjusting to higher price of oil, not climate change). As a feedstock to the chemical industry, oil products are in almost everything that we consume directly or indirectly. Though coal and gas can substitute for oil in some applications, in many cases there is simply no substitute for oil derivatives. The notion that renewable energy forms such as wind and solar can substitute for oil is simply unrealistic.
Current electricity grids will collapse when supply cannot match demand within a range of 0.5% which means intermittent sources can only supply a small share of electricity even under the best of assumptions. Solar and wind cannot be produced and operated without oil based components (solar panels, wind turbines) and oil based transportation infrastructure. They also require expensive fossil fuel based backup systems which is one reason why their return on energy investment is much lower than that of oil. Renewables can support life as they have prior to the fossil fuel era but they cannot support a fossil fuel lifestyle.
The idea that fossil fuels such as coal and natural gas can substitute for oil indefinitely is questioned by the authors on the basis of several recent papers. The papers argue that coal reserves are overstated in many countries and that a coal peak is just 20 years away. As far natural gas, (including shale gas) the peak may be further away but the prospects are far from rosy. Some studies highlight the fact that ‘hydraulic fracturing’, the process used to extract shale gas is very energy intensive and costly as fields exhibit extremely fast decline rates and therefore require constant drilling to maintain production. Some studies have also exposed large overestimates of field reserves for financial reporting reasons. If this prognosis proves to be accurate then gas prices could increase which will make a switch to gas from coal or oil unattractive. The prospect of nuclear power shouldering the burden of oil scarcity is also dismissed as this is seen to be leading to a ‘peak uranium’ situation. While this conclusion is disputed, what comes out clearly is substitution away from oil (that will sustain current lifestyles) is hard at a fast rate. If the assumption substitution for oil is modified to reflect these observations, oil price increases by 300% over 20 years and GDP reduces by over 0.6% globally. Impact on India could be several times the global impact. But we need to pay attention to the warning in the paper that this could be an underestimation of the impact as the model used is not designed to simulate non-linear impacts.
Finally the underlying assumption in all economic models that oil’s contribution to the economy is limited to its cost share may also be inaccurate. Conventional production functions imply an equality of cost shares and output contributions of oil. For the USA, the cost share of oil is only 3.5% of GDP which implies that oil cannot account for a massive contraction even when elasticities of substitution between oil and other factors of production are low. But the availability of oil is a critical precondition for the continued viability of many technologies that contain materials or fuels derived from oil. This means that other factors of production (land, labour and capital) capture most of the value from oil rather than its producers. If alternative production functions based on concepts from engineering and thermodynamics is used to reflect this observation, oil’s contribution to the economy increases beyond its cost share. Specifically if oil’s contribution to output directly or as technology is assumed to be 25% in the tradable sector and 20% in the non-tradable sector rather than 5% and 2% as in the baseline, oil price increases by 400% over 20 years. There is a sizeable fall in economic growth with deterioration in oil importing countries GDP larger by a factor of 3 compared to the baseline.
While all of the above scenarios have simulated the impact of factors in isolation, they are likely to occur together in reality. In a scenario where the assumption on a significant fall in oil supply growth and the assumption on the importance of oil in economic output are taken together, then real oil price increase is 400% on impact and 1400% over 20 years. The effect this development will have on life on Earth is beyond imagination. The point here is not to question the validity of the assumptions but to keep in mind that if they prove to be correct the impact could be dramatic for India. Once again the solution is not to hunt for oil in African countries but to make the economy as resilient as possible to shifts in energy markets.
Views are those of the author
Author can be contacted at [email protected]
COAL
Coal “The Killer” or “The Saviour”?
Ashish Gupta, Observer Research Foundation
|
R |
ecently I came across a report published by Greenpeace titled “Coal Kills” in which they brought out the ill effects of coal mining. They also came out with an assessment of death and diseases caused by India’s dirtiest energy source which translates into 80, 000 – 1, 15, 000 premature deaths if India continues with coal mining. This is half the truth. There is no denying that social ills are attached with coal mining but simply advocating an embargo on coal mining as a solution is neither viable nor sustainable. India as a responsible country is committed to growth of its citizens and not designed to kill people or to pollute the environment by mining more coal and using it to generate electricity which sustains life in many cases. Coal is important because we do not have other comparable options (certainly social and environmental activists will disagree). The point here is if “Coal Kills” then we must also agree that “Coal Saves” too!
Economy & Energy Security
India is currently growing at 5.2% - 5.5%. To boost this growth electricity is an essential catalyst. Currently, India produces 66.7% of the total power generation through coal based power plants. So if coal production stops our economy will collapse which I think is not very difficult to comprehend for any person with reasonable mind. But surely our industries and labour will have lot of leisure time which they can deploy in other ‘unproductive’ work because there will be no production nationwide. What will the labour that is employed by industries do for a living is left out in the report. Therefore, simply pointing a finger at coal while using the benefits it brings is hypocrisy. If India stops using coal to save the world from climate change, will other countries meet its energy, economic and social needs. Today we are a ‘developing economy’; but if coal stops feeding our industries we will go back to being a third world ‘beggar economy’. Do we want that situation? Surely not! We need to counter the idea that “coal kills” with a more informed and informed debate.
Coal is not only critical for India but also for developing countries that have access to large coal reserves and facing growth and poverty challenge. Restricting coal mining means jeopardizing the India’s quest for energy security which is directly linked with coal. Apart from that without electricity poverty alleviation is not possible. India where 300 million people are outside the grid and another 300 million who are connected with grid yet have intermittent power supply need cheap power. How will we achieve our vision “Power for All”? Through the expensive renewable sources that we impose on rural class we restrict them to one bulb/ tube-light while the urban class enjoys the luxury of utility power that runs multiple devises. Needless to say, when half hearted approaches edges out foresight, when vested interest overtakes national interest and piecemeal approach overshadowing holistic approach, the country’s energy security and vision are bound to be endangered. The report has failed to address these issues. Ill effects of coal mining are real but this is a cost of lighting up millions of lives.
Unemployment
Currently Coal India Ltd. is providing employment to 367,000 people and roughly another half are engaged in contractual coal mining. But if one also includes the coal consuming sectors (especially power, cement and steel) the employment numbers will increase by many folds. And if coal mining stops the number of people who will become unemployed will be huge. The report fails to address where they will be absorbed. The major victims will be the mining labour class as others with skills could be absorbed elsewhere. Apart from that a major chunk of the poor is critically dependant on coal mining in the coal rich states for their daily bread. If that stops, will they not die due to starvation? All the welfare schemes do not reach the poor as intended. In this prevailing situation coal mining is helping them as option of the last resort. Therefore what is the advocacy for stopping coal mining all about? Do they want all the people to take arms and join the maoist/ naxalite movement? Moreover what about the infrastructure that these sectors have created? Will that be dumped for nothing? Here one must try to take a balanced approach where emotions and rationality cross-subsidise each other.
Health Security
There is no denying that there is a direct link with the pollution, emissions and its impact on the human health. But putting the entire blame on coal is not justified. The report studied the health impact of the population exposed to premature deaths in the regions of Delhi, Haryana, Maharashtra, Gujarat, Chhattisgarh, Gujarat, West Bengal, Jharkhand, Orissa, Bihar and Andhra Pradesh. But the report certainly failed to bring the fact about the number of hospitals functioning in these regions. Almost 99% of the hospitals operating in the regions are using thermal power. These hospitals not only cater to patients hospitalized due to ill effects of coal but patients of all kinds coming from the various parts of the country. If coal production and power availability stops then how would these hospitals operate or provide treatment? What about the big freezers used to preserve important medicines? How would the medical facilities/ equipment be used when there is no electricity? The number of deaths then may increase by many folds which is difficult to ascertain. Then who will get the blame? It is rather easy to criticize the dirtiest source but the social benefits that it brings to the society should also be acknowledged. The benefits are much larger overshadowing its negativity. Therefore the notion “Coal Kills” is only one side of the story as it also saves lives of millions.
Development
India is always downgraded by rating agencies and global developed economies due to slow infrastructure development along with other issues. In the midst of this, environmental activists want to put solar panels on the roofs of the houses but there will be no roofs to put it on if electricity is not available. Even solar panels cannot be manufactured. Cement will not be produced, steel will not be produced and bricks will not be made and the whole development agenda will come to a halt if coal miming stops. We want robust growth, connectivity, roads, railway traction program, bridges, but how will these be constructed without coal? The government has planned to build the 5, 846 km Golden quadrilateral and 7, 142 km dedicated corridors along the North-South and East-West. Both are facing problems due to environmental clearances and financial crunch. But these projects are not going to happen if the cement and steel industry is not provided with coal. This is bound to have devastating consequences for the nation. But criticism of coal mining is necessary as it can be done more efficiently and in a less polluting way but the fact that it helps in nation building must be acknowledged. The deeper dilemma of whether economic development is necessary is left for the intellectual minds. Coal may kill but it is also the backbone of the economic wealth which is critical to national interest. The dilemma will continue.
Views are those of the author
Author can be contacted at [email protected]
DATA INSIGHT
World Recoverable Gas Resources: Conventional & Unconventional
Akhilesh Sati, Observer Research Foundation
(Region-wise) Trillion Cubic Feet
|
Region |
Total Conventional gas |
Unconventional by type |
Total Unconventional gas |
||
|
Tight gas |
Shale gas |
CBM |
|||
|
Eastern Europe & Eurasia |
160 |
10 |
12 |
20 |
43 |
|
Middle East |
132 |
8 |
4 |
0 |
12 |
|
Asia Pacific |
44 |
20 |
57 |
16 |
93 |
|
OECD Americas |
81 |
16 |
57 |
10 |
82 |
|
Latin America (non-OECD) |
27 |
15 |
34 |
0 |
48 |
|
Africa |
41 |
8 |
30 |
0.1 |
38 |
|
OECD Europe |
35 |
4 |
17 |
2 |
22 |
|
World |
519 |
78 |
210 |
48 |
337 |
Share of Gas by Regions
Source: International Energy Agency.
NEWS BRIEF
NATIONAL
OIL & GAS
Upstream
ONGC hires drilling rig for ` 23.9 mn per day
June 18, 2013. Oil and Natural Gas Corp (ONGC) has signed a contract to hire a long-idled ultra- deepwater drillship of US-based Transocean for $ 412,000 (` 2.39 crore) per day. ONGC hired 'GSF Explorer' drilling rig for one year beginning July at a day rate of $ 412,000, the oil rig contractor said in its latest fleet update. GSF Explorer is capable of drilling up to 30,000 feet in water depths of up to 7,800 feet, Transocean said. According to Transocean, GSF Explorer was built in 1972 and upgraded in 1998. ONGC hired drillship GSF Explorer after recently cancelling a deal with a rival driller. A contract to hire the rig was signed ending months of re-tendering and negotiations between ONGC and Transocean. Transocean had emerged as the sole bidder in an initial tender floated by ONGC for hiring an ultra-deepwater rig last year. It offered a two-year contract at $ 601,000 per day, which ONGC felt was too high. ONGC re-floated the tender and ultimately selected Russian player Arktikmorneftegazrazvedka, the lowest bidder, which offered the drillship Deep Venture for two years at $ 399,000 per day. But the deal fell through because the Russian player did not submit performance bank guarantee and did not mobilise the rig on time. The Russian firm said it would make available the rig not before October as against ONGC's target of April-end. Arktikmorneftegazrazvedka said there were blowout preventer issues with the Deep Venture that needed to be rectified before mobilising. ONGC cancelled the contract and began negotiating with Transocean for the GSF Explorer. Transocean had quoted a dayrate of $ 512,000 in the re-tender but ONGC was able to beat the prices down since the rig had been moored in Singapore since September without a contract. ONGC plans to use the rig to appraise discoveries it had made in a Krishna Godavari basin block KG-DWN-98/2, which sits next to Reliance Industries' production KG-D6 gas blocks. The company has so far made 9 discoveries including the ultra-deep sea UD-1 find. Without including the UD-1 find, the block holds at least 4.85 trillion cubic feet of gas reserves that can produce a peak of 22 million standard cubic metres per day of production by 2016-17. ONGC has planned eight wells on the block this year. (economictimes.indiatimes.com)
Warburg Pincus, PEs pump in $600 mn into Delonex Energy
June 18, 2013. Marquee private equity (PE) firm Warburg Pincus and its partners will invest up to $600 million in Delonex Energy, a fledgling oil exploration and production firm set up by oil industry veteran and former boss of Cairn India, Rahul Dhir. Warburg and Delonex said that the investment in the Central and East Africa-focused oil and gas explorer would be done through an affiliate of Warburg Pincus. Dhir, who successfully transformed Cairn from a laggard to one of the industry's prized companies, before selling it off to Vedanta Resources, is leading other former Cairn executives in an exciting and bruising hunt for oil beneath the vast swathe of continental Africa stretching from the Ethiopian highlands to the lush green game forests at the edge of Lake Victoria. (economictimes.indiatimes.com)
Transportation / Trade
India cuts Iran oil imports 42 pc, takes Venezuelan, other crudes
June 17, 2013. India cut its Iranian oil imports by more than 40 percent in the first five months of the year, replacing the crude with shipments from Venezuela, Iraq and Oman, and pushing Iran down four places to seventh among its suppliers. Imports of Iranian oil for May dropped 12.2 percent from a year ago to 213,500 barrels per day (bpd). The cuts underline the effectiveness of U.S. and European sanctions aimed at Tehran over its suspected pursuit of nuclear weapons. Those measures reduced Iran's oil exports to the lowest in decades in May and have cost it billions of dollars in lost revenue per month since early 2012. (economictimes.indiatimes.com)
US Energy Secretary to visit India to discuss shale gas export
June 15, 2013. US Energy Secretary Ernest Moniz will be travelling to India in less than a fortnight, during which he is expected to discuss the issue of shale gas export with Indian counterparts. This would be Moniz's first trip to India in this capacity. An American nuclear physicist, Moniz was sworn in as the 13th Energy Secretary of the United States on May 21. Under current laws, shale gas can't be exported to countries with which the US does not have a free trade agreement (FTA). Recently the Department of Energy approved one license for export to shale gas to a non-FTA country. Exporting shale gas to a country like India is in the national security interest of the United States. The lawmaker said that LNG exports can sustain US's national security -- strengthen it by developing relationships with countries that are important to the US. (economictimes.indiatimes.com)
BG Group completes sale of 65.12 pc stake in Gujarat Gas to GSPC
June 12, 2013. London-based BG Group announced that it has completed the sale of its 65.12 per cent stake in India's largest private natural gas distributor Gujarat Gas Co Ltd (GGCL) for about ` 2,460 crore to GSPC. A binding agreement for the sale of the interest to a subsidiary of Gujarat State Petroleum Corporation (GSPC) was announced in October 2012. BG Group said sale of its interest in GGCL was part of a broader rationalisation programme, aimed at refocusing the Group's portfolio on its core strengths of exploration and production and liquefied natural gas. Originally, a consortia of GSPC, Oil and Natural Gas Corp (ONGC) and Bharat Petroleum Corp Ltd (BPCL) was to buy 65.12 per cent stake GGCL. BG Group too had shortlisted GSPC-ONGC-BPCL as a consortia for the stake sale. (economictimes.indiatimes.com)
Policy / Performance
GSPC hikes CNG prices by ` 2 per kg; piped cooking gas by ` 4 per PSCM
June 18, 2013. GSPC Gas Company (GGC) said it has hiked CNG prices by ` 2 per kg, and of piped cooking gas by ` 4 per standard cubic metre (PSCM) for first 30 SCM. For heavy users, the Piped Natural Gas (PNG) will cost ` 40 per standard cubic metre, beyond 40 PSCM. The hike comes into effect from June 19. GGC, a subsidiary of GSPC, has raised CNG prices from ` 60.15 per kg to ` 62.15 per kg, while piped cooking gas prices go up from ` 21.50 to ` 25.50 (up to first 30 SCM) PSCM, the company said. The Gujarat High Court in July 2012 had directed the Centre to allocate CNG to Ahmedabad city at the same price as it supplies to Delhi and Mumbai under the Administered Price Mechanism (APM). The company operates with a network of around 119 CNG stations in Gujarat. It supplies domestic cooking gas to around 3.9 lakh consumers in the state. The Gujarat government levies 15 per cent VAT on natural gas. GGC supplies gas to industry that is based largely in South Gujarat region comprising Valsad, Vapi, Umbergaon, Hazira and Halol. It also supplies gas in Gandhinagar, Nadiad, Morbi, Thangadh, Sunredranagar and Rajkot. (economictimes.indiatimes.com)
Govt eyes narrow political window for unpopular gas price hike
June 18, 2013. The government could take the unpopular measure of raising gas prices for the first time in three years as it pushes a package of reforms aimed at giving industry a boost, reviving a spluttering economy and boosting LNG imports. With local and national elections looming in the next 12 months, the coalition government is expected to try to minimise voter backlash by hiking gas prices sooner rather than later. Raising prices nearer to world levels could boost investment in the sector, increasing much needed supply in the world's fourth-largest energy user, and make liquefied natural gas (LNG) imports from major producers like Qatar more attractive. Finance Minister P Chidambaram has listed gas pricing as one of the issues he expects to resolve before the end of June, after ratings agency Fitch urged reforms. Oil Minister M Veerappa Moily has said. Moving now, the government could take advantage of what is shaping up to be a bountiful monsoon that will boost farm output and rural wages to soften the blow for the powerful agricultural lobby. It could package the gas price hike with other reforms and its plans for more cheap food would sweeten the pill. The existing contract which set $4.2 per mmBtu as a benchmark expires on April 1, 2014, with national elections due by May 2014. That formula was set for gas from Reliance Industries' KG basin field and other contracts were raised to match it in May 2010. The new formula, which is likely to use US export prices and Japan's import numbers, may boost prices at least 60% to $6.7 per mmBtu, according to the oil ministry's indicative calculation -- still only about half LNG import costs. (www.business-standard.com)
ONGC finds CCI nod inadequate
June 18, 2013. ONGC might soon approach the government to reduce the minimum work programme (MWP) for its KG-OSN-2009/4 block in the Krishna-Godavari Basin that was partially cleared by the Cabinet Committee on Investment (CCI) in March this year. Given that the block is in the KG Basin where RIL’s gas-rich D-6 field also lies, ONGC was hopeful of making large discoveries. If ONGC does go ahead and make the request for a pro rata reduction in MWP, it will be not be the first company to do so. Recently Cairn India, which similarly received a partial CCI clearance for its KG-OSN-2009/3 block, requested the oil ministry for a reduced MWP. RIL-BP, in whose block also just 30-35% of the area was able to be explored after the CCI clearance, has already offered to give it up. (www.financialexpress.com)
Power Ministry to approach CCI on additional gas, price pooling
June 17, 2013. The Power Ministry will approach the Cabinet Committee on Investment (CCI) seeking fuel meant for other sectors and approval for pooling price of domestic and imported gas. The Power Ministry is moving the newly constituted CCI to seek diversion of as much as 6 million standard cubic meters per day of gas currently consumed by non-core sectors like steel and petrochemicals, to power plants. Besides, it also wants 6.47 mmscmd of gas ONGC will produce from new fields as well as 5.24 mmscmd gas from Gujarat State Petroleum Corp's (GPSC) Deen Dayal West (DDW) gas field in KG basin. (economictimes.indiatimes.com)
Law Ministry for 5-year gas pricing regime
June 17, 2013. The Law and Justice Ministry has favoured a stable, five-year gas pricing formula, and also advocated a single price for all sources of gas. This would be put into effect from April 1, 2014, after approval of the Cabinet Committee on Economic Affairs (CCEA). Instead of a phased gas pricing regime, as suggested by the Planning Commission and the Petroleum Ministry, the Law Ministry has strongly pitched for a single pricing, five-year stable regime. This approval paves the way for bringing the gas pricing policy before the CCEA after completion of the inter-Ministerial consultations. These consultations are currently going on. The Petroleum and Natural Gas Ministry has informed the Law and Justice Ministry to shift to market-determined gas pricing regime by the end of the 12th Plan (2016-17). A CCEA note circulated to all Ministries stated that the objective is to frame guidelines for pricing of domestic natural gas based on the methodology suggested by the Rangarajan Committee. The guidelines will be applicable to all natural gas produced domestically, irrespective of the source, whether conventional, shale, CBM or any other, from April 1, 2014, with exemption in certain cases. (www.thehindu.com)
Tamil Nadu CM condemns petrol price hike
June 16, 2013. Tamil Nadu Chief Minister (CM) Jayalalithaa urged the Union government to withdraw petrol price hike immediately. Jayalalithaa said instead of taking any measure to control the rupee depreciation, the Union government was hiking the price of petrol and diesel twice in month. Condemning the Central government for the price hike, she also called it as anti-people. Referring to a statement of Union Petroleum Minister M. Veerappa Moily that a lobby threatened him not to reduce the crude oil import, she said the reported threat would endanger the security of the nation. (www.thehindu.com)
Salman Khurshid to visit Iraq to discuss oil imports
June 16, 2013. External Affairs Minister Salman Khurshid will embark on a two-day visit to Iraq on 19th June during which he will hold talks with top Iraqi leaders on issues of reciprocal interest including import of oil. Khurshid will meet his Iraqi counterpart Hoshiyar Zebari and discuss bilateral, regional and international issues of mutual interest. Khurshid is expected to discuss the issue of import of oil from Iraq, which has emerged as India’s second largest crude oil supplier, replacing sanctions hit Iran. In recent years, India’s import of oil from Iraq has seen a significant rise. Iraq has the world’s third largest proven oil reserves. Till recently, Iran was India’s second-biggest crude oil supplier after Saudi Arabia, meeting about 12 percent of the country’s needs. India has reduced its dependence on Iranian oil in the wake of US and EU sanctions on the import of oil from the Islamic Republic. India imported about 13.3 million tonnes of crude oil from Iran in 2012-13 fiscal, down from 18.1 million tonnes shipped in the previous financial year. (zeenews.india.com)
Petrol price hiked by ` 2 per litre due to weak rupee
June 15, 2013. Petrol price was hiked by a steep ` 2 a litre, the second increase in rates this month, as devaluation of rupee against US dollar made imports costlier. The hike is excluding local sales tax or VAT and actual increase for consumers will be higher. Petrol price in Delhi was hiked by ` 2.40 a litre to ` 66.39 from ` 63.99 previously. This is the second increase in rates this month. Oil firms had from June 1 hiked prices by 75 paisa, excluding VAT. However unlike last time, there will be no change in price of diesel. In Mumbai, petrol price has been increased by ` 2.52 to ` 74.60 while in Kolkata rates went up from ` 71.29 to ` 73.79 per litre. In Chennai, prices were hiked by ` 2.54 to ` 69.39. IOC said international petrol prices have also hardened during this period. The June 1 increase in petrol price was the first in three months. The previous hike was on March 1, which was followed by rates being cut four times on falling global oil prices. Diesel prices has been hiked on five occasions since January when the government authorised oil firms to increase prices by up to 50 paisa per litre every month till entire losses on the fuel are wiped out. Since diesel price was hiked by 50 paisa, excluding VAT, on June 1, the next increase will happen at the month end. IOC said the devaluation of rupee has led to widening of losses on diesel and cooking fuel. Losses on diesel has widened to ` 6.31 a litre from ` 4.87 at the beginning of the month. Besides, oil firms are also losing ` 27.75 per litre on kerosene and ` 335.14 on sale of every 14.2-kg domestic cooking gas (LPG) cylinder. The company said at current rate IOC would end the fiscal with a total revenue loss of about ` 60,000 crore while the industry (IOC plus other state-owned fuel marketing firms) would incur around ` 112,500 crore loss. (economictimes.indiatimes.com)
India's energy exploration suffering from bureaucratic obstructions: Oil Minister
June 14, 2013. Oil Minister Veerappa Moily has said India's energy exploration activities are suffering because of "bureaucratic obstructions" and ministers are "threatened" by the oil and gas import lobbies, which wants India to remain dependent on energy imports. Moily also rejected international tenders to supply 80 crore litres of ethanol for doping it with petrol bacause importers demanded exorbitant rates, which was more than double the domestic prices. Moily said Indian should make every effort to reduce its import dependence so that rapid outflow of valued foreign exchange is checked. Exploration will get boost only when energy firms get decent returns on their investments, but certain lobbies are obstructing the government's move to raise domestic gas prices because they do not want India to reduce its import dependence. (economictimes.indiatimes.com)
HC orders notice to authorities on PIL on GAIL project
June 14, 2013. Madras High Court ordered issue of notice to authorities including Petroleum Ministry and Transport Department secretaries and GAIL CMD on a petition seeking direction to Tamil Nadu government on taking steps for implementation of gas pipeline laying work in the state. Petitioner S Tamizharasan, President, Consumer Rights Protection Committee, said Petroleum and Natural Gas Regulatory Authority had given authorisation to Gas Authority of India Ltd for laying the network which would pave way for Southern Gas Grid and people of the state would be benefited in numerous ways including industrial development. He sought a direction to the state government to take necessary steps for implementation of Kochi-Kottanad-Bangalore -Mangalore gas pipeline laying work. Once the pipeline was laid all the public transport vehicles in the state would get converted to use green fuel. In cities like Delhi, the level of sulphur dioxide in the air had come down by 39 per cent and carbon monoxide by 32 per cent due to CNG vehicles. (economictimes.indiatimes.com)
‘Piped gas to Goa households in next two years’
June 14, 2013. The piped Liquefied Natural Gas (LNG) gas would be made available to the Goa households in next two years, as the supply to industries in the state has already begun, Chief Minister Manohar Parrikar said. The LNG, which is a raw material for power and fertiliser manufacture, has already been supplied to two industrial units - Reliance Infrastructure Ltd and Zuari Industries Ltd, by Gas Authority of India (GAIL). Goa government will form a gas corporation, a state-run body, which will sign a joint venture with GAIL to supply gas to industrial units and to the households, which will get it at much affordable rates, Parrikar said. The households which will get the gas connection "can do away with the LPG cylinders for domestic use", he said. The process will take at least two years as the pipeline has to be laid from point to point, connecting households to the main source, the chief minister said. The GAIL pipeline, which connects Dabhol (Maharashtra) to Bidadi (Karnataka), has been tapped at Gokak (Karnataka) to supply gas to Goa by travelling 175 kilometres. (economictimes.indiatimes.com)
Decision on natural gas prices important to revive investment: FM
June 13, 2013. Finance Minister (FM) P. Chidambaram said the government will take a decision on the issue keeping "larger interest" in mind. The Oil Ministry has proposed raising natural gas prices by at least 60 per cent, a move that will result in rise in urea as well as power costs. The Oil Ministry wants adoption of a pricing formula suggested by Prime Minister's economic advisor C Rangarajan with minor tweaking to raise domestic prices to $ 6.775 per million British thermal unit in the immediately from current $ 4.2. The Oil Ministry had in March moved a draft proposal for the consideration of an Empowered Group of Ministers (EGoM), for revising prices of gas produced by state-owned firms as well as private sector Reliance Industries as per the formula suggested by the Rangarajan Committee. The Cabinet Secretariat returned the proposal saying that the new pricing formula, which would have led to prices going up from current $ 4.2 per million British thermal unit to about $ 8.8, was not covered under the EGoM's terms of reference. The Ministry then moved the same proposal for the consideration of the Cabinet Committee on Economic Affairs (CCEA) with minor modifications. However, the Prime Minister's Office (PMO) sent back the note saying views of the ministries concerned on the changes made since circulation of the EGoM note, need to be sought. The Ministry had not sought comments from any of the ministries concerned on the CCEA note that had modified the earlier proposal so that the immediate gas price increase came to $ 6.775 per million British thermal unit. In the CCEA note it had attached the comments that ministries like Finance, Power and Fertiliser had given on the EGoM note. Fresh comments of ministries of Finance, Power, Fertiliser, Law, Heavy Industries, Steel and Department of Chemicals and Petrochemicals have been sought. The hike in natural gas price by $ 1 would result in ` 3,155 crore per annum hit on fertiliser plants for producing 23 million tonnes of urea this fiscal and ` 4,144 crore a year for 32 million tonnes of urea production from 2017-18. The impact of every dollar hike in gas price would be about ` 10,040 crore per annum on the power sector. (www.financialexpress.com)
Oil Ministry to ask ONGC to explain Videocon deal blunder
June 12, 2013. The government will ask ONGC to explain the circumstances surrounding the premature and incorrect announcement of a $2.5-billion deal with Videocon for a 10% stake in a Mozambique gas field, even as the state-owned company sheepishly wrote to the stock exchanges saying it had erroneously issued a 'draft press release.' ONGC said that its overseas arm, ONGC Videsh, and Oil India, had signed a definitive agreement with Videocon to buy 10% stake in a Mozambique gas field for $2.47 billion. But the company withdrew this statement two-and-a-half hours later, and said it had been 'inadvertently issued'. (economictimes.indiatimes.com)
POWER
Generation
BHEL wins ` 4.5 bn R&M contract from Mahagenco
June 18, 2013. BHEL bagged a renovation and modernisation contract worth ` 450 crore from Maharashtra State Power Generation Corp (Mahagenco). The World Bank-funded ` 450 crore contract has been placed on BHEL by the Maharashtra State Power Generation Corp Ltd. The order envisages design, supply and installation of the 210 MW Boiler, Turbine and Generator package at Koradi Thermal Power Station. Major equipment for the above contract will be manufactured and supplied by BHEL's plants at Trichy, Ranipet, Haridwar, Hyderabad and Bangalore. BHEL has established the capability to deliver power plant equipment of 20,000 MW per annum. (economictimes.indiatimes.com)
NTPC's proposed North Karanpura plant gets back coal linkage
June 17, 2013. Coal linkage to NTPC's proposed 1,980 MW North Karanpura power plant in Jharkhand has been restored but supply of the fuel will start in the next Plan period, Coal Ministry has informed dry fuel producer CIL. Government had decided against relocating the proposed project and had said that the plant would be provided necessary coal linkages. The Coal Ministry in 2008 had withdrawn fuel linkages to the NTPC plant following a tiff with the power ministry over the location of the project. NTPC plans to set up 1,980-MW power plant in the vicinity of Tandwa town in Chatra district of Jharkhand which would be its first project in the state. The Coal Ministry had contended that the area has six billion tonnes of coal reserves underneath. It had stated in a Cabinet note that executing a power plant over the proposed site would pose threat to the environment. (economictimes.indiatimes.com)
Gas-based power plants running at 24 pc capacity
June 13, 2013. Almost all the gas-based power projects in the country are functioning at an average capacity of just about 24 per cent due to massive gas shortage. There are 55 gas-based stations -- 14 in Andhra Pradesh, 12 (Gujarat), 6 (Tamil Nadu), 5 (Assam), 4 each in Delhi and Tripura, 3 each in Rajasthan and Maharashtra, 2 (Uttar Pradesh) and one each in Haryana and Puducherry. Their total capacity is 18,903.05 MW. NTPC's seven gas-based plants -- Anta (Rajasthan) 413 MW, Auraiya (Uttar Pradesh) 652 MW, Kawas (Gujarat) 645 MW, Dadri (Uttar Pradesh) 817 MW, Jhanor-Gandhar (Gujarat) 648 MW, Rajiv Gandhi CCPP Kayamkulam (Kerala) 350 MW, Faridabad (Haryana) 430 MW -- are running at about 50 per cent capacity. These plants mainly run on APM gas. However, the company sometimes faces electricity demand constraints from the states due to higher cost of power from plants with APM gas. Ratnagiri Gas and Power Pvt ltd (RGPPL) is stuck because of no supply from RIL's prolific KG basin. (economictimes.indiatimes.com)
Pacts allowing fuel costs pass through lowers risk for NTPC: Fitch
June 18, 2013. Country's largest electricity producer NTPC has lower off-take risks due to long-term power purchase pacts that allow for pass through of fuel costs, according to global rating agency Fitch. The ratings of NTPC benefit from its regulated business model that ensures stable operational cash flows, Fitch said. The agency has affirmed the company's Long Term Foreign Currency Issuer Default Rating at 'BBB-' with a stable outlook. 'BBB' indicates low credit risks. According to the agency, NTPC's returns are regulated based on invested capital and a rate of return as per a transparent regulatory model. NTPC is the country's power generator with an installed generation capacity of 41,184 MW. (economictimes.indiatimes.com)
Puducherry Power Corporation’s dividend handed to govt
June 18, 2013. Karaikal-based Puducherry Power Corporation, a government undertaking, has netted a profit of ` 6.36 crores in the fiscal 2011-12. Electricity Minister T. Thiagarajan handed a cheque for ` 3.18 crores marking dividend from the profit to Chief Minister N. Rangasamy. The Corporation generates power from out of the natural gas provided by the ONGC and is meeting part of the power requirements of Karaikal region. (economictimes.indiatimes.com)
CIL thrusts high-quality fuel on non-power cos
June 18, 2013. Coal India Ltd (CIL) has asked non-power and captive power consumers to compulsorily buy at least 25% higher grade coal if they want to renew their fuel supply agreement with the company. One tonne of higher grade coal will be counted as 1.5 tonne of lower grade and the contracted supply quantity will thus be reduced accordingly. Non-power consumers include cement, paper and all other manufacturers who do not produce thermal power for sale. Premium grade coal would have an energy content ranging between between 6,400 GCV (gross calorific value) and 7000 GCV. GCV is a measure of energy content in a kilogram of coal which gets released when burnt. Non premium includes anything less than 6,400 GCV. The move follows CIL's inability to find takers for this higher grade coal, the price of which is higher than its imported variety, and the company supplies a total 57 million tonnes to the non-power and captive consumers. (economictimes.indiatimes.com)
Coal Ministry issues show-cause notices to JSPL & TVNL
June 17, 2013. The Coal Ministry issued show-cause notices to two firms, Jindal Steel and Power Limited (JSPL) and Tenughat Vidyut Nigam Limited, for not developing coal blocks allocated to them within the stipulated time-frame. The notices were issued to the companies for not beginning production from RamChandi Promotional CTL Block and Badam coal blocks respectively, according to the Coal Ministry. The crackdown is part of the government's exercise to ensure that the allocated blocks do not remain unproductive. The development comes close on the heels of the Coal Ministry issuing show-cause notices to 23 firms, including SAIL, Monnet Ispat, NTPC and GVK Power earlier this month for not developing the mines alloted to them for captive use. (economictimes.indiatimes.com)
CERC to take up Reliance Power's tariff revision plea by July-end
June 16, 2013. The Central Electricity Regulatory Commission (CERC) will hear the petition filed by Reliance Power for revision of tariff from its Krishnapatnam project in Andhra Pradesh by July end. The CERC has directed Coastal Andhra Power Ltd (CAPL), a subsidiary of Reliance Power to develop the 4,000 MW ultra mega power project at Krishnapatnam in Andhra Pradesh, to list the petition in the last week of July, 2013. Reliance Power had petitioned CERC seeking revision in tariff of its 4,000 MW Krishnapatnam Project. (economictimes.indiatimes.com)
INTERNATIONAL
OIL & GAS
Upstream
Australia to boost offshore oil exploration
June 17, 2013. Australia has announced the grant of 13 new offshore petroleum exploration permits as part of round one of the 2012 Offshore Petroleum Exploration Acreage Release. The award of these permits will see an estimated 180 million AU dollars ($172.2 million) in new investment in waters off Western Australia and Tasmania over the next three years. 23 bids were received for 15 new release areas from a mix of international and Australian companies. This new exploration commitment has the potential to add to Australia's oil and gas reserves. (www.newkerala.com)
North Dakota oil, gas production hits all-time high in April
June 17, 2013. Oil and natural gas production from North Dakota's Bakken play reached new record highs in April. Oil production in April 2013 grew 1.3 percent to 793,249 barrels of oil per day (bopd) from 782,999 bopd in March. While the number of well completions dropped by 28 to 119, well completions remained above the threshold needed to maintain production; as a result, the oil production rate rose. At the end of April, approximately 490 wells were waiting on completion services, an increase of 50. Gas production rose 1.7 percent from 834,637 thousand cubic feet per day (Mcf/d) in March to 860,398 Mcf/d in April. The rise in gas production is consistent with a Bentek Energy study showing that gas to oil ratios increase as wells ago. However, North Dakota shallow gas exploration is not economic at near-term gas prices, and while U.S. gas storage is now 2.4 percent lower than the five-year average, lower prices are anticipated for the foreseeable future. (www.rigzone.com)
Caracal Energy, Glencore complete farm-in agreement for Badila, Mangara oil fields in Chad
June 17, 2013. Caracal Energy has completed a farm-in agreement with GlencoreXstrata for the development of the Badila and Mangara oil fields in Chad. Under the agreement, Glencore acquires 25% working interest in the Badila and Mangara Exclusive Exploitation Authorizations (EXAs), while Caracal Energy will retain 50% working interest. Glencore will fund up to $100 mn per year to develop the Badila and Mangara oil fields for Caracal Energy's working interest and will also fund the development costs for three years. (explorationanddevelopment.energy-business-review.com)
Shale drillers squeeze costs as era of exploration ends
June 14, 2013. The pioneers of America’s shale gas and oil revolution have done their work. Now it’s time for the factory crews to take over. After spending $53 billion on a land binge to find hydrocarbons, the petroleum industry is counting on technological innovations -- better imaging data, speedier and longer horizontal drilling, among them -- to ramp up the flow of oil and gas from U.S. shale fields where they’re drilling more than 10,000 wells a year. (www.bloomberg.com)
Brazil says Libra oil field can reach 1 million barrels a day
June 13, 2013. Brazil’s largest oil prospect can “easily” reach a million barrels a day, double the output of OPEC member Ecuador, as international companies prepare to compete in an October bidding round. Libra eventually will have 12 to 18 production vessels anchored across the reservoir in deep waters off the southern Atlantic. Each well will pump as much as 30,000 barrels a day, in line with the most productive in Brazil. (www.bloomberg.com)
Inpex to miss 2020 O&G production target
June 13, 2013. Inpex Corp, Japan’s biggest energy explorer, will miss its target of producing 1 million barrels of oil equivalent a day by the end of the decade, according to Sanford C. Bernstein & Co. Oil and gas output, which has been at about 400,000 barrels a day for the past seven years, will climb to 500,000 by 2017 and approach 740,000 by 2020 after Inpex starts producing condensates at Kashagan in Kazakhstan and the Ichthys and Prelude liquefied natural gas fields off Western Australia. The Abadi gas field between Australia and Indonesia will be approved too late to help Inpex meet its goal. (www.bloomberg.com)
Chevron CEO says industry must deal with fracking concern
June 12, 2013. Energy producers must deal with the “legitimate concerns” that gas development associated with hydraulic fracturing is unsafe by adopting tougher standards, Chevron Corp. Chief Executive Officer (CEO) John Watson said. BP Plc’s 2010 oil spill at its deepwater well in the Gulf of Mexico -- the worst in U.S. waters -- fueled public skepticism of the industry, Watson said. Fracking, a drilling technique that has increased production by extracting oil and gas trapped in shale rock, has drawn oil and gas companies to rural communities that aren’t familiar with the development. Recent developments add to public awareness of the risks of drilling, and the industry needs to do a better job in resolving the concerns, Watson said. (www.bloomberg.com)
Downstream
US-Europe diesel flow seen rising amid output at 23-year high
June 14, 2013. The number of diesel cargoes booked for export to Europe from the U.S. Gulf Coast is set to climb after output of refined oil products was the highest in at least 23 years. Traders will charter 12 Medium Range tankers for loading to June 26, the average of estimates from seven shipbrokers specializing in the trade showed. That’s three more vessels, each normally carrying 38,000 metric tons of the fuel, than in a corresponding survey. Production of distillate fuel oils on the Gulf Coast was the highest since at least January 1990 in the week of May 31. Refinery restarts in the Midwest will lift capacity by more than 300,000 barrels a day, boosting Gulf Coast distillate exports. (www.bloomberg.com)
Phillips 66 to sell Whitegate oil refinery in Ireland
June 13, 2013. US-based Phillips 66 has announced its intention to sell its only oil refinery Whitegate in Ireland. The Whitegate refinery located in Cork, Ireland has a crude oil processing capacity of 71,000 barrel per day. Phillips 66 said the company will retain Deutsche Bank to market the company's Ireland assets, including the oil refinery, its associated wholesale marketing business, and crude oil storage terminal and refined products in Bantry Bay. Majority of the company's refining capacity is in US and the firm is focused on increasing its returns in the country by accessing the increased crude oil production, which is much less expensive. (refiningandpetrochemicals.energy-business-review.com)
Transportation / Trade
Americans exporting more oil first time since ’70s
June 18, 2013. The U.S. oil boom is moving Congress closer than it has been in more than three decades to easing the ban on exporting crude imposed after the Arab embargo. Advances such as hydraulic fracturing are leading to record production that may outstrip refinery capacity within 18 months to three years. Net petroleum imports now account for about 40 percent of demand, down from 60 percent in 2005, according to the U.S. Energy Information Administration. Congress has limited oil exports since the 1973-74 Arab oil embargo triggered shortages that pushed up prices and led to long lines at gas stations. An increase in domestic production last year by a record 766,000 barrels a day is challenging a notion that Americans need foreign oil, while setting up a debate policy makers may be reluctant to begin. The U.S. sends about 120,000 barrels of crude a day to Canada under a Commerce Department license. Congress allows exports from Alaska’s Cook Inlet and for consumption in Canada, along with sales determined by the president to be in the national interest. (www.bloomberg.com)
Keystone XL pipeline shuns high-tech oil spill detectors
June 18, 2013. TransCanada Corp., which says Keystone XL will be the safest pipeline ever built, isn’t planning to use infrared sensors or fiber-optic cables to detect spills along the system’s 2,000-mile path to Texas refineries from fields in Alberta. Pipeline companies have been slow to adopt new leak detection technology, including infrared equipment on helicopters flying 80 miles an hour or acoustic sensors that can identify the sound of oil seeping from a pinhole-sized opening. Instead of tools that can find even the smallest leaks, TransCanada will search for spills using software-based methods and traditional flyovers and surveys. As pipelines multiply across North America to carry booming supplies of oil and natural gas, a series of recent spills and explosions are raising concerns about the safety of the conduits, including Keystone XL, which is awaiting U.S. government approval. Keystone XL is part of an additional 4.7 million barrels a day of new U.S. oil pipeline capacity expected to be built during the next two years. About 19.2 million barrels of crude are transported each day in the U.S. (www.bloomberg.com)
US, EU agree to start talks on free-trade agreement
June 17, 2013. The U.S. and the European Union said they would start talks to build a free-trade agreement to boost growth and create jobs across the Atlantic--a deal that officials hope will strengthen the world's biggest two-way economic relationship. The first round of talks will take place next month in Washington. U.S. and EU officials hope that by launching the talks, they will deliver a boost to confidence for businesses and workers that will help support what has been a disappointing recovery from the recession that followed the 2008 financial crisis. (www.downstreamtoday.com)
Nigeria’s MEND attacks two gasoline trucks, threatens industry
June 15, 2013. Nigeria’s Movement for the Emancipation of the Niger Delta (MEND) said it attacked two gasoline-laden trucks and threatened more action against the downstream petroleum industry of Africa’s largest oil producer. MEND, as the group is known, used military-grade timed magnetic explosives on the trucks that were queued outside a fuel depot operated by the Nigerian National Petroleum Corp. in Abaji, about 77 kilometers south of Abuja, the capital. Royal Dutch Shell Plc of the Netherlands, Irving, Texas-based Exxon Mobil Corp., Chevron Corp. of San Ramon, California, France’s Total SA and Italy’s Eni SpA run joint ventures with the state-owned oil company also known as NNPC that pump more than 90 percent of the nation’s oil. MEND said it is resuming assaults on the West African nation’s oil industry after its suspected leader. (www.bloomberg.com)
Swiss firm to enter LNG market in Japan
June 14, 2013. Swiss resources trader Glencore Xstrata Plc plans to start supplying liquefied natural gas (LNG) to Japanese utilities this year. The firm will use Morgan Stanley traders in London and Singapore to handle LNG purchases, and also assign personnel to Tokyo. The staff will be expanded if necessary. LNG is traded under either long-term contracts that can span more than two decades or short-term contracts of four years or less. Glencore will focus on short-term spot trading, which will allow it to flexibly switch customers based on prices and increase earnings. (www.downstreamtoday.com)
Sempra considers making bid for Mexican gas pipeline project
June 14, 2013. San-Diego-based Sempra Energy is looking at new projects in Mexico, including a possible bid on a 740-kilometer (460-mile) natural gas pipeline that oil company Petroleos Mexicanos, or Pemex, is putting on a fast track in order to get cheap gas from the southern U.S. to growing industries in central Mexico. The planned pipeline from the Agua Dulce gas hub in Texas to central Mexico is in three parts, and Pemex is currently seeking bids for the longest section, which runs from Los Ramones in the northern state of Nuevo Leon to Guanajuato and is expected to cost around $1.8 billion. (www.downstreamtoday.com)
Petronas plans $20 bn investment in Canadian LNG project
June 14, 2013. Malaysia-based oil and gas company Petroliam Nasional (Petronas) is planning to invest about $20 bn in its liquefied natural gas (LNG) export project in west Canada. The company is planning to invest in the project to meet growing demand for petroleum products in Asia. Petronas has acquired the export terminal in British Columbia, which will be built from scratch, as part of its acquisition of Canada-based Progress Energy Resources for $5.2 bn in December 2012. The project named as Pacific NorthWest LNG will include construction of two LNG trains with capacity to hold 6 million tons per year. Construction on the project is expected to be completed by the end of 2018 or 2019. The LNG plant will involve an investment of about $9 bn to $11 bn, while the remaining amount will be used to develop upstream gas reserves. (explorationanddevelopment.energy-business-review.com)
Shell, Guanghui Energy sign LOI to build LNG import terminal in China
June 14, 2013. The Royal Dutch Shell has signed a non-binding letter of intent (LOI) with a China-based energy company Guanghui Energy to construct a liquefied natural gas (LNG) import terminal in east China. Guanghui Energy has plans to construct LNG plants in Qidong, Jiangsu province. The plants are expected to be built with a storage capacity starting from 600,000 tons per annum (TPA) and transit plant to 1.5 million TPA LNG import facility under second phase and 3.5 million TPA import terminal in a third stage. Shell is interested to set up a joint venture with Guanghui Energy to jointly invest and operate the 1.5 million TPA facility from the second phase. China currently operates five terminals along its east coast to import the super-chilled natural gas and is planning to add new facilities to address the increasing fuel demand. (transportationandstorage.energy-business-review.com)
Options strangle is BNP’s lesser evil for trading stable crude
June 13, 2013. Selling crude options contracts to lock in prices above and below current cost are a “relatively safe bet,” as futures will probably remain bound in a $10-a-barrel range, BNP Paribas SA said. Less volatile prices of West Texas Intermediate will cap the value of both “call” options, used to lock in prices above the cost of futures, and “put” options, which secure prices below the cost of futures, BNP said. This creates an opportunity to profit by selling a “strangle,” composed of puts and calls, for front-month deliveries of crude, according to the bank. (www.bloomberg.com)
OPEC curbs shipments amid US output surge
June 13, 2013. The Organization of Petroleum Exporting Countries (OPEC) will reduce crude shipments this month as rising U.S. production dulls a seasonal increase in the nation’s imports, tanker tracker Oil Movements said. The group that supplies about 40 percent of the world’s oil will ship 23.88 million barrels a day in the four weeks to June 29, down 0.3 percent from 23.95 million in the previous period to June 1, the researcher said. The figures exclude two of OPEC’s 12 members, Angola and Ecuador. OPEC’s exports, which normally climb at this time with higher gasoline demand during the northern hemisphere summer, will recover next month. U.S. crude production rose to 7.3 million barrels a day in May, the highest level since 1992. While the nation’s imports from Saudi Arabia remain supported, the world’s biggest oil user is cutting back its intake from other OPEC members such as Nigeria and Algeria, which sell types of crude similar to those produced by the U.S. Middle Eastern shipments will slip by 0.7 percent to 17.56 million barrels a day, compared with 17.69 million in the month to June 1, according to Oil Movements. That figure includes non-OPEC nations Oman and Yemen. Crude on board tankers will fall 0.3 percent to 468.37 million barrels versus 469.92 million, data from Oil Movements show. The researcher calculates the volumes by tallying tanker bookings. Its figures exclude crude held on vessels for storage. (www.bloomberg.com)
Speedy US review of gas-export applications pledged by Moniz
June 13, 2013. U.S. Energy Secretary Ernest Moniz pledged to speed reviews of applications to export natural gas and told lawmakers he supported development of all types of power, including from alternate sources. Moniz said the department would expeditiously act on requests from producers to export natural gas. The department is reviewing about 20 applications from companies including Dominion Resources Inc. to sell liquefied natural gas to nations without free-trade agreements with the U.S., a reflection of how rising gas production from hydraulic fracturing, or fracking, has shifted the energy debate. (www.bloomberg.com)
South Korean crude oil-shipping rebate seen extended by IEA
June 12, 2013. South Korea, the world’s fifth-largest buyer of crude cargoes, extended a law that provides freight-cost rebates to companies importing non-Middle East oil, according to the International Energy Agency (IEA). The Asian country will rebate 90 percent of the freight cost to companies that purchase 2 million barrels or more of non-Middle East oil in a year. The rule previously applied when annual imports reached 7 million barrels. The law, designed to diversify where the country gets its oil from, took effect on June 1 and “supported” the price of North Sea crudes since then, the IEA said. South Korea will import 2.6 million barrels a day of crude by sea this year. (www.bloomberg.com)
Iran’s crude exports rise as China port blockages ease: IEA
June 12, 2013. Iran exported 66 percent more crude oil in May than in April, helped by an increase in purchases by China after congestion eased at the Asian nation’s ports, the International Energy Agency (IEA) said. Imports of Iranian crude reported by consumers rose to the “relatively high” level of 1.39 million barrels a day from 835,000 barrels a day in April, the IEA said. China imported 715,000 barrels a day of Iranian crude, almost double the 370,000 barrels it received in April when port congestion delayed deliveries and pushed off cargoes until May. China accounted for 51 percent of Iran’s exports in May. The U.S. and its allies are restricting Iran’s oil exports, the country’s largest revenue source, and targeting its financial industry to pressure the Islamic republic to stop enriching uranium. The curbs have cut Iran’s oil exports by more than half to an average of about 1 million barrels a day in the first five months of the year, according to the IEA. (www.bloomberg.com)
Occidental split foreshadows $100 bn breakup wave
June 12, 2013. Occidental Petroleum Corp.’s proposal to split its U.S. and foreign businesses is pressuring more oil companies to follow suit, as the allure of breakups to create more than $100 billion of market value entices investors. ConocoPhillips, Anadarko Petroleum Corp. and Talisman Energy Inc. are among those being asked whether the U.S. shale boom has made their global business model obsolete. Separating relatively low-cost investments in U.S. shale resources and foreign assets that carry higher political risks and bigger potential rewards could unlock a bounty for shareholders. Cabot Oil & Gas Corp., a producer mostly in Pennsylvania’s Marcellus shale, more than tripled in the past three years, the best stock performer among peers in the period. Occidental, with wells in Libya and Yemen plus commodities trading and pipelines, rose 7.3 percent. Large conglomerate structures can suppress the value of more profitable units that must support less lucrative parts of the company. (www.bloomberg.com)
Policy / Performance
Pena Nieto plans end to 75-year Pemex monopoly in crude oil
June 18, 2013. Mexican President Enrique Pena Nieto said he’s negotiating support to break the state monopoly over oil and gas exploration and production this year to accelerate economic growth. The peso pared its loss. In the model envisioned by Pena Nieto, Petroleos Mexicanos would develop certain fields, with others being tapped by foreign and private companies. He declined to discuss details of the proposal, or whether it would require a change in the constitution. Seven decades after his party seized fields from the predecessors to Exxon Mobil Corp. and Royal Dutch Shell Plc, Pena Nieto is preparing for the return of international oil companies to arrest eight years of decline in crude output. An opening would probably be broad, from offshore drilling to shale fields similar to those that have revived the U.S. petroleum industry, Pena Nieto said. (www.bloomberg.com)
Russia plans to ship 19 ESPO crude cargoes from Kozmino in July
June 13, 2013. Russia will ship in July 19 cargoes of East Siberia-Pacific Ocean, or ESPO, crude from the Pacific port of Kozmino, matching the record set in May. Kozmino will load 1.9 million metric tons, or about 450,000 barrels a day, of ESPO blend. Three of the shipments, which are in lots of 100,000 tons each, will be transported by rail from Skovorodino and the rest through the pipeline’s second phase. Russia’s most expensive infrastructure project, the ESPO pipeline, starts at fields in east Siberia. A second phase of the venture was completed in December that expanded the pipeline’s capacity and also extended the link to the Pacific coast, at Kozmino, lessening the need for rail shipments. The July program also includes a partial rail cargo of 82,000 tons that will be topped up at Kozmino in August. OAO Lukoil is slotted to ship its first cargo of ESPO crude ever from June 30 to July 1, pending inclusion on the Energy Ministry’s export schedule, according to the program. Seven of the July cargoes are from OAO Rosneft, six lots will be from OAO Surgutneftegas, OAO Gazprom Neft will get two, with the remaining three are earmarked for smaller producers. (www.bloomberg.com)
Ukraine seeks green light for Chevron shale deal
June 13, 2013. Ukraine's government has concluded negotiations with U.S. energy major Chevron on a second shale gas project and is lining up another energy deal with an ExxonMobil-led consortium, its energy minister Eduard Stavytsky said. Chevron has been in talks with Kiev for several months over exploration in the 5,260sq km Olesska field in western Ukraine, with the government keen for shale gas to ease Ukraine's dependence on costly natural gas supplies from Russia. Energy Minister Eduard Stavytsky said that a draft agreement with Chevron had been sent to local authorities for approval, which is required under Ukrainian law. (uk.reuters.com)
Russia’s LNG rush gives Japan strongest bargaining chip
Jun 13, 2013. Japan, the world’s top importer of liquefied natural gas (LNG), has its best opportunity to bargain for lower prices since it started buying the power-plant fuel 44 years ago. One reason is Russia. OAO Gazprom, OAO Rosneft and OAO Novatek plan to build more than 50 million metric tons of LNG capacity in the next decade. That’s 58 percent of the record 86.9 million tons Japan bought last fiscal year after the 2011 nuclear disaster in Fukushima idled all but two of its atomic reactors. Even if Russia doesn’t build all those plants, Japan will start LNG imports from Inpex Corp.’s $34 billion project in Australia in 2017 -- the same time as shipments may start from U.S. and Canadian shale gas. Cargoes from Mozambique will set sail in 2018. Japan, South Korea and China are the world’s top three importers of LNG. Global LNG capacity will jump to 450 million tons by 2025 from 296 million tons. The U.S. could offer as much as 50 million tons, or a third of that expansion. (www.bloomberg.com)
Norway ignores tariff pleas by gas pipeline investors
June 13, 2013. Norway’s oil minister said it would be difficult to abandon a plan to cut tariffs on its gas pipelines by as much as 90 percent, ignoring pleas from international investors to scale back the reductions from funds committing $5.6 billion to the network. Western Europe’s largest gas exporter will announce a final decision, Oil and Energy Minister Ola Borten Moe said. Norway in January announced plans to cut tariffs paid by producers by almost 90 percent to make more finds profitable and to boost exploration and recovery rates. Investors in the pipelines, which include Canadian pension funds, a UBS AG infrastructure fund and a unit of Abu Dhabi’s sovereign fund, estimate the cut would lower returns to about 4 percent, below the projected minimum of 7 percent. The lower returns for shipping gas through the 7,800-kilometer (4,850-mile) network will still be good enough for Norway to attract investment and develop oil and gas resources in the Barents Sea off its northern tip, Borten Moe said. (www.bloomberg.com)
IEA cuts demand forecast for OPEC crude as China cools
June 12, 2013. The International Energy Agency (IEA) trimmed demand forecasts for OPEC’s crude in the second half of the year amid signs of slowing growth in China as output from the producer group rose to a seven-month high. The Organization of Petroleum Exporting Countries (OPEC) will need to provide an average 29.8 million barrels a day in the second half, the IEA said in its monthly market report, lowering its assessment from the previous report by 200,000. That would require OPEC to cut output by 1.1 million barrels from the 30.9 million it pumped in May, according to the report. The agency kept its global oil demand estimates for this year unchanged. (www.bloomberg.com)
China leads non-OECD economies’ oil use to top OECD
June 12, 2013. Chinese and Brazilian oil demand climbed in April, helping push fuel use by emerging economies above the combined consumption from developed nations such as the U.S. and Japan for the first time, a U.S. report showed. Countries that aren’t members of the Organization for Economic Cooperation and Development (OECD) consumed 44.5 million barrels a day in April, exceeding the 44.3 million from the most industrialized nations, the Energy Information Administration (EIA) reported. The pattern held in May, when the emerging economies used 180,000 barrels a day more than the OECD. Global fuel-consumption growth will come from emerging economies as demand from industrialized nations slips amid increased fuel efficiency, forecasters including the EIA, OPEC and the International Energy Agency (IEA) have said. The IEA said that demand from emerging and developing economies would surpass the OECD this quarter. Fuel use grew by 0.7 percent in April in both China and Brazil, the EIA reported. Consumption dropped 1.1 percent in the U.S. that month and 11 percent in Japan. The U.S., China, Japan and Brazil were the world’s four largest oil-consuming countries in 2011, according to EIA data. OECD members will use 45.5 million barrels of oil this year, compared with 44.5 million from emerging markets, the EIA forecast. In 2014, demand from the developing economies will rise to 45.9 million barrels a day, while OECD consumption will drop to 45.3 million, according to the estimates from the EIA. China’s consumption will rise to 11.1 million barrels a day next year, up 4 percent from this year’s 10.7 million, the EIA said. India will use 3.67 million barrels a day, up 3.7 percent from this year’s 3.54 million. Brazilian consumption will jump 4.8 percent to 3.03 million in 2014, while Russian usage will gain 3.3 percent to 3.48 million. (www.bloomberg.com)
POWER
UK utility firm Rurelec secures $7.2 mn in funds for Peruvian hydro project
June 18, 2013. UK-based power producer Rurelec has secured credit facility of $7.2 mn from Inter-American Investment Corporation (IIC) to finance the construction of Canchayllo hydroelectric project in Peru. The 5.3 MW run of river power plant on the Pachacayo River in the Junin Province is owned by Rurelec's 70% owned Peruvian power generation company Cascade Hydro. IIC is a member of Inter-American Development Bank (IDB). Canchayllo is part of the company's plan to launch a hydro project portfolio comprising 40MW run of river plants in Peru through Cascade. The funds from IDB mark a significant step in company's efforts to boost power generation capacity of Peru. (hydro.energy-business-review.com)
PLN plans to generate 7 GW electricity in Indonesia
June 17, 2013. Indonesia-based power utility Perusahaan Listrik Negara (PLN) is looking for additional supply of 28 million metric tons of coal every year after it received an order from the government to construct coal-fired plants together producing 7,000 MW of electricity. The government has plans to develop a total of 15,000 MW of electricity through different sources such as coal, geothermal, and hydro. (fossilfuel.energy-business-review.com)
Siemens completes 430 MW Knapsack II combined cycle power plant in Germany
June 14, 2013. Siemens Energy has built and delivered the 430 MW Knapsack II combined cycle power plant, six weeks before the scheduled time. Knapsack II combined cycle power plant located in the Hürth near Cologne, Germany, has an efficiency of 59.2% and is a modern and environmentally compatible facility. The Knapsack II power plant is a single-shaft unit, in which the gas and steam turbines are arranged on one shaft and drive the same generator, resulting in economic advantages. Siemens Energy Gas Turbine Power Plant Solutions said that high efficiency of the plant results in lower emissions of carbon dioxide and nitrogen oxide in the atmosphere. (fossilfuel.energy-business-review.com)
Transmission / Distribution / Trade
Stromnetz Berlin tops out transformer station in Germany
June 17, 2013. Distribution network operator Stromnetz Berlin has topped out the new transformer station in Berlin-Britz, Germany. Upon completion, the new transformer station will supply electricity to about 25,000 domestic and 1,400 commercial customers. The station will feature Alstom's gas-insulated, high-voltage electrical substation, which switches the power at the 110,000 volt level. The transformer station is expected to be completed in October 2014. (utilitiesnetwork.energy-business-review.com)
Nuclear decommissioning surge is investor guessing game
June 17, 2013. Nuclear utilities thrust into the spotlight after the Fukushima meltdowns have ordered 20 reactors shut, the most in a three-year span since Chernobyl’s aftermath, saddling the industry with a possible $26 billion in costs. EON SE and RWE AG are leading the biggest decommissioning project by European utilities ever, an effort to tear down 12 reactors in Germany over two decades. Edison International said it will never restart its idled two-unit San Onofre Generating Station outside Los Angeles, bringing the number of U.S. reactors permanently closed in a year to a record four. The global utility industry faces its biggest test to prove enough money was saved for shutdowns, having undergone numerous cost-overruns building atomic plants. A cautionary tale can be seen with government-owned facilities. In Britain, where taxpayers are on the hook to retire the Sellafield complex’s seven reactors and fuel-reprocessing stations on the Irish Sea during the next 100 years, the U.K. government this year doubled its estimate for the work to 67.5 billion pounds ($106 billion). As China and India lead the world building reactors, with 35 under way, the West is ripping apart more than it’s erecting -- with just 11 reactors under construction in the Americas and Europe excluding Russia. (www.bloomberg.com)
Spain's power industry overhaul to hit cos, banks
June 17, 2013. Spain's latest overhaul of its dysfunctional energy sector, due this month, will inflict pain on renewable power companies and utilities and force losses on banks and investors. Reform of the power sector, the fifth in as many years, is intended to eliminate a gap between the cost of producing energy and what consumers pay for it, which has built up a debt of 26 billion euros (22.0 billion pounds) over 13 years. That debt, which sits on the books of private utilities who paid the bill but is backed by taxpayers, has come under European Union scrutiny as Spain battles to keep its budget deficit in check. (uk.reuters.com)
Construction of 1,068km Kenya-Ethiopia transmission line to begin in September
June 14, 2013. The construction work on the African Development Bank (AfDB) launched 1,068km long Kenya-Ethiopia transmission line project will begin in September 2013 at a cost of $1.26 bn. The AfDB funded Eastern Electricity Highway Project is expected to provide cheaper power to Kenya from Ethiopia's hydro-electricity dams. Kenya Electricity Transmission Company and Ethiopian Electric Power will implement the project, while German engineering firm Lahmeyer International will supervise the project. (utilitiesnetwork.energy-business-review.com)
Egypt’s Nile threats weaken to secure water, Shinn says
June 17, 2013. Egypt must drop its objection to an Ethiopian dam on the main tributary of the Nile River or it may struggle to ensure adequate supplies from the world’s longest waterway, former U.S. Ambassador to Ethiopia David Shinn said. A $4.3 billion, 6,000 MW hydropower plant, set to be Africa’s largest on completion in 2017, has raised concern in Egypt that it will cut supplies of water allocated by accords put in place more than five decades ago. (www.bloomberg.com)
Uganda secures $500 mn in funds from China for Karuma hydro project
June 17, 2013. The federal government of Uganda has secured a credit facility of $500 mn from China to finance its temporarily suspended Karuma hydroelectric project on River Nile. Funds allotted by China will be added to government's co-financing amount of $700 mn. The 600 MW project is estimated to cost nearly $2 bn. Nonetheless, Uganda is hopeful of obtaining remaining funds from other development companies. With additional funds in place, the developers are expected to commence the development of the facility before the end of 2013. Uganda, meanwhile, is anticipating a double digit growth in economy following the power production from the Karuma project and also the commencement of oil production in 2017. (hydro.energy-business-review.com)
Pakistan to develop new coal-fired plants to curb hike in electricity prices
June 14, 2013. The Pakistani government is planning to build two new coal-fired power plants and transform two furnace oil or gas-fired plants to coal-fired facilities in an attempt to control the rising prices of electricity in the country. According to the budget documents released for the fiscal year 2013-14, the total cost of the projects will be around PKR252.23bn ($2.53 bn). The two new coal-fired power plants will be built each with 660 MW capacity at a cost of PKR55.23bn ($559.9 mn). The Asian Development Bank (ADB) will support the new plants with a funding of PKR124.1bn ($1.2 bn). Pakistan will also transform furnace oil or gas-fired plants to coal-fired facilities for which ADB will provide a financial assistance of PKR77.6 ($786.8 mn). (fossilfuel.energy-business-review.com)
UK blackout risk prompts concern of Britons in survey
June 14, 2013. Almost two-thirds of U.K. citizens say they are worried about the risk of electricity blackouts because of the government’s “confused” energy policy, the Institution of Mechanical Engineers said. About 64 percent of more than 2,000 people polled for the London-based institution said they’re worried about the prospect of power cuts, and 93 percent said they’re concerned about higher gas and electricity bills. The government said that it’s “confident” the lights will stay on. The government is trying to pass a law to spur the 110 billion pounds ($172 billion) of spending it says is needed in generators and grid upgrades by 2020. Ministers have been in talks for months with Electricite de France SA over the price it may get for power from a proposed new nuclear plant and have stepped up barriers to the building of onshore wind farms. (www.bloomberg.com)
USDA announces $356 mn funds for rural electricity projects in 16 states
June 13, 2013. The US Department of Agriculture (USDA) has announced funds of over $356 mn to support rural electricity projects in 16 states. The projects aim at providing reliable and affordable electricity to rural residents, including improved services for Native Americans. USDA's latest announcement includes over $15 mn funding for smart grid and is expected to finance the construction of more than 2,400 miles of new or improved electric line. (utilitiesnetwork.energy-business-review.com)
Japan power industry bill gets first nod to break up monopolies
June 12, 2013. The first phase of a proposal to revamp Japan’s 16 trillion yen ($166 billion) electricity industry and spur competition by making utilities split power generation and distribution passed a lower house committee. The plan, which calls for the creation of a new body around 2015 to coordinate power supply and demand, was approved in a meeting of the lower house’s economy and industry committee broadcast on the Internet. The overhaul, which needs to pass the full lower house and then the upper house, aims to modernize Japan’s grid and follows a model in Europe introduced in 2009 when the European Parliament approved legislation to force utilities to open access to their transmission networks. In Germany, RWE AG, the country’s second-biggest utility, sold majority control in its grid company in 2011 to satisfy regulators. Since the Fukushima nuclear disaster in 2011, the public has demanded more independent oversight of the utilities as the disaster showed Tokyo Electric Power Co. ignored warnings of earthquake and tsunami risk. That followed revelations the power producers falsified maintenance reports for decades. Japan’s cabinet, led by Prime Minister Shinzo Abe, in April approved the reform plans. Parts two and three of the effort include fully liberalizing the nation’s electricity retail business by 2016 and spinning off utilities’ transmission and distribution operations between 2018 and 2020. (www.bloomberg.com)
Uranium bounce seen from seven-year low on Japan
June 12, 2013. Uranium is set to rebound from its worst slump in seven years as Japan, once the world’s third- biggest nuclear-power producer, starts reactors after safety requirements are put into effect next month. The atomic fuel may average $48 a pound in the third quarter after sliding to $39.75, the lowest since at least March 2006. Japan may resume operations at five plants this year. (bloomberg.finanza.repubblica.it)
RENEWABLE ENERGY / CLIMATE CHANGE TRENDS
National
Nalco commissions part of its second wind energy project
June 17, 2013. Nalco has commissioned a part of its ` 283 crore wind power project in Rajasthan, taking its total green energy capacity to 65 MW. The ` 283 crore project is being executed by Gamesa Wind Turbines and involves erection of 56 wind turbines, of 850 KW each. As part of diversification plan, Nalco has been foraying into other metals and energy sectors. It had commissioned its first wind power plant of 50.4 MW capacity at a cost of ` 274 crore in Kadapa district of Andhra Pradesh. The Rajasthan project, its second, is scheduled to be fully completed by August 2013. The company is also planning to set up its third wind power plant in its own mined out area of Panchpatmali bauxite deposit at Koraput in Odisha. (economictimes.indiatimes.com)
MNRE to launch mega-sized solar power projects
June 14, 2013. To give a boost to its efforts to bring down the cost of solar power in India, Ministry of New and Renewable Energy (MNRE) is planning to roll out large megawatt size solar power projects, in the order of 500 MW and above. Till yet MNRE has tendered projects of size 50 MW through National Solar Mission, though several states have either commissioned or executing solar power projects of larger size to meet their escalating demand of power. Maharashtra's state-owned generation company Mahagenco recently commissioned a 125-MW solar power photovoltaic project, the largest ever in India. Welspun Energy has recently established a 130-MW solar power plant under Madhya Pradesh's solar power programme. Cost of solar power dropped significantly during the first phase of the National Solar Mission. It saw bids as low as ` 6 per MW. In the upcoming phase, the ministry is hoping to bring the cost of solar power down to ` 5.50. (economictimes.indiatimes.com)
Godawari starts Asia’s biggest solar-thermal power plant
June 14, 2013. Godawari Power & Ispat Ltd started Asia’s biggest solar-thermal plant as India limps toward clean-energy targets with prices almost half the global average. The 50 MW plant in northwest Rajasthan state boasts 5,760 mirrors that concentrate the sun’s rays, generating steam to drive turbines. Output started a month behind schedule. India, beset by blackouts as coal-power stations are idled for lack of fuel, plans to install 20,000 MW of solar capacity by 2022, up from 1,700 MW now. The Godawari plant, postponed by slow U.S. supplies and desert dust clouds, is symptomatic of an industry where soaring costs and technical hurdles have set back all projects from an inaugural auction. (www.bloomberg.com)
Solairedirect says India solar is cheaper than expected
June 13, 2013. Solairedirect SA, a French developer that won an Indian solar project with a record-low bid, said India offers greater cost savings than expected for investors in sun-based power. The Paris-based company, which completed its first 5 MW plant in India in February, found that local suppliers of structural and engineering services were more competitive than expected, prompting it to consider ways to drive down costs in Europe as well. India is using competitive auctions to push down solar power rates to try to avoid the surging renewable subsidies burdening governments in Europe. Solairedirect won its project in a December 2011 auction after pledging to sell electricity from the facility at ` 7,490 ($129) a megawatt hour (MWh), about 30 percent cheaper than the world average at the time. (www.bloomberg.com)
Solairedirect Energy unveils 5.6 MW Solar park in Rajasthan
June 12, 2013. Solairedirect Energy, a unit of Paris-based Solairedirect Group, unveiled its Solar park at Phalodi in Rajasthan. Solairedirect Energy inaugurated its first project in India, a 5.6 MW solar park under the Jawaharlal Nehru National Solar Mission (JNNSM). The solar park was commissioned on February 24, 2013, in accordance with the schedules agreed with the Indian authorities and will generate 9,000 MWh per annum, enough to power 20,000 Indian households. Solairedirect has operations in France, India, South Africa, Chile, Thailand, China and the US. Meanwhile, Minister for New and Renewable Energy Farooq Abdullah said the second round of bids for the JNNSM will be invited in July for 750 MW of projects. Of the 750 MW projects, 75 per cent would be built with domestic equipment content and the remaining 25 per cent with imported equipment content. (economictimes.indiatimes.com)
Global
China emission trading experiment unlikely to ease cities’ smog
June 18, 2013. China’s plan to set up markets to trade emissions will make it second only to Europe in efforts to put a price on pumping carbon into the atmosphere. For cities choking on the nation’s smog, expect little relief. Seven pilot carbon-trading programs are scheduled to start this year, with the first opening in Shenzhen, followed by Beijing, Shanghai, Guangdong, Tianjin, Chongqing and Hubei. They are set to regulate 800 million to 1 billion tons of emissions by 2015 in the world’s biggest cap-and-trade program after Europe’s. China’s National Development and Reform Commission will oversee emission exchanges in a country that the World Bank says has 16 of the world’s most-polluted 20 cities. The commission is better known for setting prices than creating open markets. The seven pilots agreed to regulate emissions using a cap and trade system, with companies that produce more than their allocation buying permits from companies that emit less. Shenzhen’s trading will take place on a purpose-built exchange. (www.bloomberg.com)
Kazakhstan praised as green energy hub
June 18, 2013. While many associate Kazakhstan with the film “Borat,” the country’s government has been increasingly touting its green energy policies. The environmental group said President Nursultan Nazarbayev — who has been in power since 1990 — is getting Kazakhstan ready to reduce coal use from 80 percent of power generation to only 50 percent by 2030. Nazarbayev plans to replace coal power with green power from wind, solar and hydropower sources. Nazarbayev’s administration has been very active on the international scene promoting its green energy plans. (dailycaller.com)
Marubeni to set up floating wind turbine off Fukushima
June 18, 2013. A group led by Marubeni Corp. is setting up a floating wind turbine off the coast of Fukushima, aiming to commercializing the unproven technology and create an industry in the region ravaged by the earthquake in 2011. The 11-member group plans this month to tow a Hitachi Ltd.- made turbine mounted to a semi-submersible structure from a dock near Tokyo. The 2-MW turbine, funded by the Japanese government, is expected to start running in mid-October. (www.bloomberg.com)
UN carbon credit rescue fund needs $3.3 bn
June 17, 2013. A fund backed by nations would need at least 2.5 billion euros ($3.3 billion) to help protect the world’s biggest greenhouse gas offset market, where prices dropped to a record in April, according to Vivid Economics Ltd. The fund would pay more for credits from projects using certain technologies to mop up much of the oversupply in the United Nations-overseen Clean Development Mechanism for a lower cost. It would probably be backed by nations or sovereign-wealth funds. United Nations envoys met in Bonn as they sought to prepare a global climate agreement for 2015 that would begin in 2020. Benchmark Certified Emission Reductions from the CDM plunged 88 percent a metric ton in the past year as supply rose and emissions declined in the European Union’s carbon system, the biggest source of demand. (www.bloomberg.com)
UK moves toward bigger solar plants as costs drop
June 17, 2013. Solar-energy developers in the U.K. are installing bigger power plants after the cost of panels dropped quicker than the government reduced subsidies, the British Photovoltaic Association said. More than half of projects in development are sized 5 MW or bigger, up from about a third in the first quarter, when installations reached 520 MW. The plunge in prices for solar systems eclipsed the feed-in-tariff cuts of about 50 percent. (www.bloomberg.com)
Religions seen slow to go green; Pope has chance to inspire
June 17, 2013. Few religious communities have gone as far in fighting climate change as a church in Queensland, Australia, which has 24 solar panels bolted to the roof in the shape of a Christian cross. Many religions have been wary of moving to install renewable energy sources on their places of worship, from cathedrals to mosques - or of taking a strong stand on climate change in general - despite teachings that people should be custodians of nature. But slowly, that may be changing, thanks to new religious leaders including Pope Francis, the head of the Roman Catholic Church. (www.reuters.com)
Natural gas a Texas-sized boon for green energy?
June 16, 2013. Natural gas and renewable energy sources could work together to help Texas develop renewable energy, according to a new report. Texas has recently greatly increased their supplies of natural gas through the use of hydraulic fracturing techniques and the discovery of additional sources of shale. Supplies of natural gas in the state are currently estimated to last until at least 2030, if not 2050. These new resources have led some people in the Lone Star State to question whether the suddenly-inexpensive natural gas there will crowd-out renewable energy plants. A report prepared by the Brattle Group for the Texas Clean Energy Commission was released June 11 which examined the role that lower natural gas prices will have on the renewable energy market in Texas. (www.itechpost.com)
Goldman Sachs invests in Japanese green energy
June 16, 2013. Goldman Sachs announced in May, 2013 that they are investing $487 million dollars in renewable energy, mostly solar power plants, in Japan. Now, they are delving even deeper into the Japanese renewable energy market, targeting $3.19 billion dollars in total renewable energy production, including off-shore wind production in the waters off the island nation. Japan Renewable Energy Company was established in August 2012, by Goldman Sachs, with the goal of sparking investments in renewable energy in that Asian nation. The organization intends to develop and install a variety of green energy systems for Japan, including solar, wind, and biomass generation facilities. This small nation was once highly-dependent on nuclear power for its electrical generation, but since the disaster at Fukushima, Japan has scaled back to operating just two nuclear power plants. (www.itechpost.com)
UN progresses towards new climate change pact
June 15, 2013. The United Nations climate change body said it has made concrete progress towards a new universal agreement on climate change during its latest round of talks which wrapped up in Germany. During the two-week talks in Bonn, participants focused on how to transform the world's energy systems quickly enough towards low-carbon, including renewable energy, energy efficiency and the consideration of carbon capture and storage. With the longer-term goal of a universal UN treaty on climate change by 2015 which would enter force by 2020, this latest round of talks pave the way for ministerial-level UN Climate Change Conference (COP-19) in Warsaw, Poland, starting on 12 November. (www.newkerala.com)
Obama tells Keystone foes he will unveil climate measures
June 15, 2013. With his administration under pressure from environmentalists to reject the Keystone XL pipeline project, President Barack Obama plans to unveil a package of separate actions next month focused on curbing U.S. greenhouse gas emissions. At closed-door fundraisers held over the past few weeks, the president has been telling Democratic Party donors that he will unveil new climate proposals in July. Obama’s promise frequently comes in response to pleas from donors to reject TransCanada Corp.’s proposed Keystone XL project, a $5.3 billion pipeline that would carry tar-sands oil from Canada to U.S. refineries. Opponents of the pipeline say it would increase greenhouse-gas emissions by encouraging use of the tar sands. (www.bloomberg.com)
China to aid solar industry by easier financing
June 15, 2013. China will boost domestic demand for solar-generated electricity and provide easier financing to manufacturers as rising trade tensions slow exports. Grid companies should build networks that will be operational in sync with solar-generation projects and give priority access to their produced power, while lenders need to help panel makers raise capital, according to the central government. Authorities will also implement 10 steps to cut air pollution, including curbing dirty projects and making local governments more accountable for environmental management. (www.bloomberg.com)
OPIC approves $96 mn financing for Juwi’s Uruguay wind farm
June 14, 2013. Overseas Private Investment Corp. will loan renewable-energy developer Juwi AG as much as $96 million for a 50-MW wind farm in northeast Uruguay. The Melowind project in Cerro Largo department will cost about $128 million and use turbines produced by the U.S. unit of Germany’s Nordex SE. The project will help Uruguay reduce its dependence on power from hydroelectric plants and fossil fuels. OPIC approved $193 million of financing for Peru’s first large-scale wind project in March. (www.bloomberg.com)
UN global warming talks blocked by Russia set back six months
June 14, 2013. The United Nations global warming talks have been set back by six months after Russia and its allies blocked progress at a group charged with implementing decisions of the 190 nations involved in the discussions. The Subsidiary Body for Implementation at the UN talks failed to complete any work at two weeks of meetings in Bonn that finished because Russia, Ukraine and Belarus objected to the group’s agenda. The delay means envoys will have to redouble efforts when they meet in November in Warsaw, and some decisions may be delayed until 2014. The talks are aiming to adopt a treaty in 2015 that would limit fossil fuel emissions blamed for damaging the climate. (www.bloomberg.com)
Buffett’s MidAmerican plans $700 mn solar bond deal
June 14, 2013. Warren Buffett’s MidAmerican Energy Holdings Co. may complete a $700 million bond offering to finance its $2.74 billion Antelope Valley solar farm in Southern California. The company plans to issue Series A senior secured notes due in 2035. Barclays Plc, Citigroup Inc. and Royal Bank of Scotland Group Plc are leading the offering. This will be Buffett’s second utility-scale solar farm financed through a bond offering, as mainstream investors become more comfortable backing renewable-energy projects. (www.bloomberg.com)
Merkel vows to rein in renewable subsidies
June 12, 2013. German Chancellor Angela Merkel promised to scale back Germany's generous system of subsidies to the renewables sector if she is re-elected in September, a move that would reduce the costs of her green revolution on consumers. Merkel's policy to wean Europe's biggest power market off fossil fuels and to embrace renewables has led to a boom in green energy sources, but ballooning costs have led to calls for cuts to feed-in tariffs and for industry to pay more. (in.reuters.com)
Saudi Aramco to use Soitec’s solar systems in pilot project
June 12, 2013. Saudi Arabian Oil Co., the world’s largest crude exporter, will evaluate Soitec’s solar energy systems for possible utility-scale deployments. Saudi Aramco chose the company’s equipment in a competitive bidding process for a 1-MW pilot project that Belectric Holding GmbH will build in Saudi Arabia’s northwestern Tabuk region, Bernin, France-based Soitec said. Saudi Arabia’s government estimates that demand for electricity in the country may exceed 120 GW in 20 years, and the kingdom plans to introduce more renewable power to meet that need, including 41 GW of solar generating capacity by 2032, Soitec said. (www.bloomberg.com)
Exxaro, Tata secure $700 mn for two S. Africa wind farms
June 12, 2013. Exxaro Resources Ltd., a South African coal producer, said it had completed 7 billion rand ($700 million) of funding for two wind farms with Tata Power Co. in the continent’s biggest economy. Exxaro and Tata Power’s Cennergi (Pty) Ltd. clean-power joint venture got finance from Standard Bank Group Ltd., Nedbank Group Ltd.’s Nedbank Capital unit and the International Finance Corp. for the wind projects, Pretoria-based Exxaro said. It will fund the remaining 1.8 billion-rand equity portion with Tata Power, it said. South Africa, where utility Eskom Holdings SOC Ltd. is struggling to meet rising power demand with coal-fed plants, plans to add 3,725 MW from renewable sources by 2016 through a program of five tenders. Cennergi’s two projects, which will produce 229 MW, were awarded in the second round, where more than a third went to wind power. (www.bloomberg.com)
Renewable energy investments down, shift to developing nations
June 12, 2013. Renewable energy investments were down worldwide in 2012, but the money that was spent was primarily invested by developing nations. While Africa and the Middle East ramped up renewable energy production, the United States cut batch 34 percent, losing its first-place status in renewable energy investment to China. According to the United Nations Environment Programme (UNEP) and REN21, a renewable energy policy group in France, 2012 was the first time since 2009 that global investment in renewable energy sources declined. Worldwide, spending on renewable energy sources fell from $279 billion dollars in 2011 to $244 billion in 2012. Before 2009, financial expenditures had increased every year beginning in 2004. China alone is responsible for $67 billion dollars of the money spent on renewable energy sources last year. (www.itechpost.com)
Europe must act to make green desert project work
June 12, 2013. Europe needs to step up support for an ambitious plan to import cheap solar and wind power from African deserts or face a jump in power prices on the continent over the next few decades, the head of the Desertec project said. The Desertec Industrial Initiative (DII), a consortium set up in Germany in 2009, envisages Europe could import up to a fifth of its electricity from solar and wind parks in North Africa and the Middle East by 2050, thereby saving 33 billion euros ($43.8 billion) in costs per year. (www.bloomberg.com)
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
PREV
