MonitorsPublished on Sep 19, 2007
Energy News Monitor |Volume III, Issue 13
India Looks West; the GCC Looks East

Mark Thirlwell and Anthony Bubalo



n the first three months of this year, India has already received visits by some eight prime ministers or heads of state, among them US President George Bush and his French counterpart Jacques Chirac. In this respect, the visit of King Abdullah to India in January, the first visit by a Saudi monarch to India in more than half a century, was a further sign of the world’s awakening to India’s rise as a global economic power. But it was also a powerful symbol of the growing web of ties between New Delhi and the Gulf Cooperation Council (GCC) countries.


From an Indian perspective, the visit marks a new phase in India’s foreign economic policy. Since 1992, a key element of Indian diplomacy has been the ‘Look East’ policy. Now, this urge to look East is increasingly being accompanied by an renewed focus on West Asia, as India seeks to deepen its ties with the economies of the Arabian Gulf countries. According to Indian Prime Minister Manmohan Singh, the Gulf region is now part of India’s “natural economic hinterland”. The fundamental driver of this relationship is energy. After decades of economic underperformance – the result of an economy stifled by the bureaucracy of the ‘License Raj’ and held back by a deep suspicion of international economic engagement – India has become one of the fastest growing economies in the world. Sustaining this pace, especially in a context of population growth and increasing urbanization, requires increasing energy.

Source: BP Statistical Review of World Energy 2005

Already the world’s sixth largest primary energy consumer, on current trends, India is on track to move into fourth place by the end of the current decade. At present, consumption is dominated by coal, which meets more than half of the economy’s energy needs. But oil is the next most important energy source, accounting for roughly one-third share of consumption, and its importance in recent years has been gradually increasing. According to projections by the International Energy Agency (IEA), India’s demand for oil is set to rise from 2.5 million barrels per day in 2003 to 5.2 million barrels per day by 2030.

 Source: Adapted from Table 2.2 in World Energy Outlook 2005, IEA

India is already heavily dependent on imports to meet its current oil demand, and since domestic oil production is forecast to fall from 0.9 million barrels per day in 2010 to 0.6 million by 2030, that dependence is set to grow. Most of the demand is being met by Gulf producers and this is only likely to increase. Saudi Arabia alone is estimated to supply about one-quarter of India’s import demand for oil, while Gulf countries overall probably account for between 60-70 percent of Indian oil imports.


….and hunger for trade and investment


Energy is at the heart of the economic relationship, but it is not the sum of it. Non-energy bilateral trade between India and the GCC countries is also on the rise. High oil pries and soaring revenues have boosted growth in the GCC economies, and this in turn has fed into a growing demand for imports, creating an increasingly attractive market for Indian businesses. The GCC region as a whole accounted for around 12 percent of Indian exports in 2004-05, making it India’s second largest export market. In recent month, Kuwait, Abu Dhabi and Qatar have all said they intend to channel more of their investment into the Asian region, with a focus on India and China.


Strategic imperatives……..


Developing the GCC-India economic ties neatly dovetail with growing political and strategic ties. From an Indian perspective, the imperatives are obvious. The strategic dimensions of India’s quest for energy security is a key area of mutual interest for both GCC and India. Meanwhile, India’s long time strategic rival, China, is also deepening its ties to the region; something that will impel New Delhi to do likewise. Within the Gulf, Riyadh will be keen to balance India’s growing energy relationship with Iran, perhaps fearful that it may develop strategic dimensions. In this regard, Riyadh would have quietly welcomed India’s domestically controversial decision to vote on the International Atomic Energy Agency (IAEA) board in favor of referring Iran to the Security Council over the nuclear question.


….and policy dilemmas


But if there are great opportunities for the development of strategic ties between the GCC countries and India, there are also policy dilemmas - mainly for New Delhi. India will be keen to avoid having to choose between its increasingly important energy ties with countries in the region and its rapid developing strategic relationship with the United States. But this won’t always prove easy, illustrated by the IAEA vote on Iran. In this respect, India’s ties with Saudi Arabia might prove much less difficult to reconcile with the imperatives of developing Indo-US ties.


Nonetheless, even here, there are potentially some longer term dilemmas; not least because Saudi Arabia’s engagement to China and India poses some interesting questions about its relationship with the United States. Is Saudi Arabia beginning to look Eastward because it is turning away from its increasingly problematic ties with the West? Both countries offer great opportunities for commercial cooperation without the political baggage that accompanies the relationship with the United States or even Europe; neither China nor India, for example, would ever press Saudi Arabia on the pace of its internal political reform. And while neither India nor China offer a short or even medium term strategic alternative to Saudi Arabia’s relationship with the United States, a deepening of these ties may well be intended as a signal to Washington that it should not take its strategic partnership with Riyadh for granted.


Edited and adapted for India from an article by Mark Thirlwell, Program Director, International Economy and Anthony Bubalo, Research Fellow at the Lowy Institute for International Policy in Sydney, Australia.


Courtesy: GCC - India, Issue No.2- June 2006  (Research Bulletin)


European Gas Scare Not Unreasonable

Igor TOMBERG, Strategic Culture Foundation



aradoxically, it seems that an important development meant to improve the system of gas supplies to Europe triggered a quiet but active panic in the European power industry. On August 29, Gazprom, E.ON, and BASF penned the final deal on the draft of the North European gas pipeline, which specifies the legal and financial framework of the project. 


Although the official release on the occasion said that a final legal document specifying the legal and financial framework of the project was endorsed, the part concerning the financial side of the matter does not appear particularly specific. The financial obligations of the participants are not defined – that is, the partners still fail to agree on the financial parameters of the project. It is obvious that the price parameters of the project, the offshore section of which was initially estimated at €4 bln, started to "drift". In any case, the feasibility study is still incomplete. Analysts opine that the North European gas pipeline project ended up in a "politically frozen" state.  


Perhaps the North European gas pipeline was Europe's only real chance to boost its gas supplies. The pipeline project capacity amounts to the additional delivery of 55 bln cubic meters. The construction of the gas pipeline offshore section is due in 2008, and the gas deliveries are to begin in 2011. Unless the partners reach a deal shortly, the construction may be postponed. However, in any case Gazprom has to supply the amounts already contracted (13 bln cubic meters annually for 25 years). If the pipe is not phased in by 2011, the gas will have to be transported via the available routes, and this will inevitably entail shortages in overall deliveries to Europe.


BASF and E.ON, Gazprom's German partners in the North European gas pipeline project, were the first to realize that this risk exists. E.ON/Ruhrgaz concluded a long-term deal to buy 400 bln cubic meters of gas from Russia by 2036. Wintershall (a subsidiary of BASF) signed an agreement with Gazprom to buy 90 bln cubic meters of gas in 2014-2030 for Ferbundents Gas already in July (in addition to its own 2004 long-term gas contract).  


E.ON/Ruhrgaz considers natural gas supply interruptions in Western Europe possible during the next two winters. The company believes that gas will be in short supply. The German gas industry sees the potential for improving the market situation in pursuing joint infrastructural projects with Russia and Norway – the North European gas pipeline, a new pipe from Norway to Great Britain, and the phasing in of new liquefied natural gas plants.   None the less, in the long run the European gas supply situation will remain complicated. After 2015, a decrease in the domestic gas production in the EU (in the Netherlands, Great Britain, Denmark, and Germany) will result in the reduction of the reserves for supplying gas to European countries. The problem is also aggravated by a rapid growth of the demand for this type of fuel. 


The risk of the North European gas pipeline project failure stimulates European energy companies to prolong long-term deals with Gazprom. This is a natural outcome given the skyrocketing gas consumption in the EU. In Great Britain alone, the country which is Europe's largest gas consumer (94 bln cubic meters in 2005), the gas consumption by households doubled over three years and continues to grow despite the prices' getting higher. Last winter the wholesale gas price went beyond $1,200 for 1,000 cubic meters (whereas Gazprom sold gas at  $250-$270 in accord with its long-term contracts).  


Europe's domestic gas production declines. Norway shows a decent production growth (10% annually) but this cannot offset the production drop in the British sector of the North Sea and its gradual fall in the Netherlands. Last year the output in the two countries was 14 bln cubic meters less than in 2004. At the same time the domestic gas production in Great Britain decreased 20% and will continue to shrink eventually making the country a net importer.   


The harsh Brussels-Moscow energy stand-off goes on. Russia covers a quarter of Europe's gas demand and provides for 50% of its import. European politicians are extremely worried about this situation. So far their attempts to find reliable alternative suppliers are far from  being successful. Traditionally this role has been played by Norway and Algeria, but lately Algeria started to align itself with Russia on the gas issue.


Though the recent Russia-Algeria cooperation memorandum signed by Gazprom and Sonotrach is not a document of direct action, this very fact echoed with yet another wave of "Gazpromophobia" in the European mass media and political circles.


At the same time, the reaction of those who practically do the work of supplying energy to Europe was of the opposite kind. Despite Brussels' policy of eradicating long-term gas deals, the European companies started to compete in prolonging these very contracts. France, Italy, and other European countries follow Germany in attempting to secure their gas future. 


Shortly, Gaz de France SA is to announce a new contract with Gazprom. In his interview for the French press, GdF Chairman and CEO Jean-Francois Cirelli said that the new gas contract is to replace the current one which expires in 2012. He said he believes that the company will soon be able to report an important supplies deal which will guarantee the availability of Russian gas in the long range (but did not explain why a new contact is needed while the old one is to remain in effect for five years to come).  


On August 28, Americo Amori, a co-owner of Galp Energia, Portugal's major energy company, said that he intends to offer a part of his shares package to Gazprom in return for the stability of supplies in the future. This development might become the first major breakthrough in Gazprom's aspiration to the ownership of European gas distribution and pipeline assets.  


The risk of gas supply shortages seems to make Europeans look more realistically at the continent's energy supplies situation and the role played in it by Russia and its gas monopoly. Russia, habitually seen as a donor of natural resources, begins to evolve into a desirable partner for Europe. European companies compete in offering Gazprom shares in their national energy infrastructures (which are worth nothing without the Russian gas).


More than any talks, the phantom of the central heat deficiency makes Brussels acknowledge the demands of Russia and other suppliers concerning such issues as, for example, the equal responsibility of gas suppliers and consumers. The contours of a gas cartel loom ahead.


Now that the weakness of the European solidarity in the situation of shrinking gas supplies has become obvious, the risk of the emergence of a formal union of gas-producing countries will certainly make Brussels bargain. Notably,  the conditions will be getting tougher every day. In any case there is no doubt that the gas prices will grow next winter. As for the stubborn policy of the Brussels Eurobureaucrats to expand the gas contracts spot market, it will inevitably contribute to this growth.



Courtesy: RIA Novosti












Essar bags 14 oil rigs


September 19, 2006. Essar Oil Fields Services, a subsidiary of Essar Global, is back into the oil rig business and has already acquired 14 rigs in a major buy out spree. Offshore oil rigs today command a lease rent of $2,00,000 (Rs 9.2 mn) a day, which has doubled within the last two years. Essar plans to roll out its rig service business shortly and is targeting a total strength of 25 rigs. Essar Oil Field Services, has already built a fleet of 14 onshore drilling rigs some of which are second hand rigs. While two of them come from China and are brand new ready to be rolled out, the balance are from countries like Indonesia, Mexico and Kuwait. While the current fleet of rigs are primarily onshore rigs, the company will now be sourcing offshore jack up rigs as well. Essar is re-entering this business after a gap of three years and considers this an opportune time as the drilling business is seeing good times and rates are attractive. The contract drilling rates have nearly doubled in the last three years.


ONGC in exploration pact with Petrobras


September 14, 2006. ONGC Videsh Ltd, the overseas arm of ONGC, signed a memorandum of understanding (MoU) with Brazilian Petrobras. OVL and Petrobras would jointly pursue exploration and production opportunities around the world. The MoU encompasses strategic cooperation and participation in the exploration and production of hydrocarbon resources, on land as well as in shallow and deepwater areas. In April, OVL acquired 15 per cent equity in Block BC-10, located on the prolific Campos basin in Brazil’s deepwaters for $410 mn (Rs 18.9 bn). Shell is the block operator, holding a 50 per cent participating interest, while Petrobras holds the remaining 35 per cent stake. The block is currently under development and the production is scheduled to commence in the last quarter of 2009, with OVL’s equity share at peak production expected to reach about 1 million tonne per annum. According to OVL the MoU is the first step in a strategic collaboration that will play an important role in other South American, Indian and third country opportunities, providing a technology transfer etc.


$89 mn investment in PY-3 oil field in Bay of Bengal


September 13, 2006. An investment of $89 mn (Rs 400 crore) has been proposed for the further development of the PY-3 oil field in the Bay of Bengal, off Pondicherry coast. Four oil companies are partners in the PY-3 field — Hardy Oil of UK (18 per cent), Hindustan Oil Exploration Company (21 per cent), Tata Petrodyne (21 per cent) and ONGC (40 per cent). Hardy Oil is responsible for operating the field. The field produces 6,000 barrels of oil a day through three wells. The investment is for drilling two more wells in the oil field and another $100 mn (Rs 450 crore) would be invested later.


About 22 km from PY-3 lies the PY-1 gas field. Hindustan Oil Exploration Company has the licence for the field, which is yet to be developed. HOEC expects to lay a pipeline between PY-1 and the shore by the first half of 2008. Hardy Oil, has a 8.5 per cent stake in HOEC. Once the PY-1 field is developed, a pipeline would be built connecting PY-3 with it. When this happens, the gas that is today produced and burnt off at the PY-3 field would be put to commercial use. The $89 mn expansion project, that will take about two years to complete, will raise production from the field from 6,000 barrels a day to 8,000 a day. So far, 19 million barrels (2.3 mt) of oil has been taken out of the field. Another 30 million barrels (4 mt) could be pumped out, before the field dies.



OPEC eyeing refining in India


September 14, 2006. The Organisation of Petroleum Exporting Countries (OPEC) is keen to invest in refining business in India, with its member countries evincing interest in the upcoming projects.  As 100 per cent FDI is allowed in India, the government is promoting India as a refinery hub to cater to the export market, given that there is pressure in the global market for refined petroleum products. Petro Kuwait is looking at brown-field expansion in India, including retail marketing linked to refining. IOC is reported to have teamed up with Kuwait Foreign Petroleum Exploration Company, a subsidiary of Kuwait Petro, for NELP-VI blocks. This is in line with its memorandum of understanding (MoU) with Petro Kuwait in March 2006 for cooperation in the hydrocarbon trade and upstream oil and gas projects. IOC has also invited Petro Kuwait to participate in the Panipat naphtha cracker and downstream polymer complex. OPEC oil majors are also eyeing Hindustan Petroleum’s Bhatinda refinery. Oman already has a presence in Bharat Petroleum’s upcoming refinery at Bina, and wants to enhance its stake beyond the present 5 per cent.


HPCL to put in $4 bn in Vizag


September 14, 2006. State-owned Hindustan Petroleum Corporation Limited (HPCL) is planning over Rs 20,000 crore ($4.35 bn) investment in Visakhapatnam over the next four to five years. HPCL has proposed to set up a petrochemical complex at the Andhra Pradesh Special Economic Zone, which is coming up on more than 9,000 acres near Visakhapatnam. Of the proposed investment, the corporation is planning to spend nearly Rs 10,000 crore ($2.17 bn) on its petrochemical project and Rs 9,000-10,000 crore ($1.96-2.17 bn) on expansion of Visakha refinery capacity to 15 million tones. A single point mooring facility with crude oil terminal is also being set up at an estimated cost of Rs 600 crore ($130 mn). In addition to this, HPCL is setting up a mounded bullet storage facility for liquefied petroleum gas (LPG) at an investment of about Rs 125 crore ($27 mn). The company has appointed PDIL as the consultant to implement this project. After completion of work on this, LPG storage capacity at Visakha refinery would go up to 7,500 tonnes. During 2005-06, Visakha refinery processed 7.57 million tonnes of crude oil as against the original capacity of 7.5 million tonnes. 


GE Energy to retrofit GAIL’s project


September 13, 2006. State-owned GAIL India’s LPG processing plant in Vijaypur in MP will be the first-ever gas plant in the country to use Integrated Turbine Compressor Control (ITCC) technology. The gas PSU has awarded GE Energy’s optimisation and control business to provide it with Mark VI control systems, which offers ITCC technology, for its retrofit project in MP. The new technology would be used to replace control systems currently operating on GE Frame 3 gas turbine, which is driving lean gas compressors at the plant. The system incorporates triple modular redundancy and patented advanced control algorithms that provide better protection against su-rge, allowing critical compressor trains to boost operational margins while enhancing process reliability.

Transportation / Distribution / Trade


GAIL favours market rates for gas pricing


September 17, 2006. GAIL (India) Ltd is of the view that gas should be available for sale on equitable and non-discriminate basis to any buyer who is ready to pay market price. The company has submitted its comments to a high-level panel constituted by the Petroleum Ministry to work out a gas pricing formula, which is to be adopted in the absence of arm's-length transaction between seller and buyer. GAIL has also said that in the absence of a transparent mechanism, the gas prices should be linked to alternative fuels available in that area, after normalising the price by taking into account various elements of delivered price of alternative fuels in such situations. The Ministry set up the panel to examine alternatives for approving the price formula under product sharing contract in situations where open competitive bidding process to discover the end price of gas has not been adopted by the seller. The panel (constituted in August), which has been given two months, has sought comments of all the industry players before firming up its view.


GAIL is of the opinion that such linkages (gas price to alternative fuels) would help the Government realise its right opportunity cost of the gas under product sharing contract in the form of royalty and profit petroleum. However, it is also necessary to allow some rebate or reduction from alternative fuel prices besides other normalisation, as the supply of gas through pipeline is relatively rigid in comparison to flexibility available with alternative fuel prices, GAIL said. The company has also said that it is necessary to have ceiling price to take care of the maximum affordability of large consumer base in that area, and there should also be a floor price to take care of cost plus price of the gas under product sharing contract. GAIL has also said that even in case where price discovery is through arm's-length transactions, it should be through open bidding process by the seller and the price so discovered should be the reference price for the purpose of royalty and profit petroleum recovery. Where the price discovery is not through such a mechanism, the price for payment of royalty and profit petroleum should be as per the methodology of linking it to alternative fuels available in that area or actual price, whichever is higher, it added.


BPCL, HPCL offers 0.1 mt of fuel oil for Sept-Oct


September 13, 2006. Two Indian refiners have offered a total of 100,000 tonnes of September-October loading fuel oil via tenders as the market recovers from its worst-ever slump. Bharat Petroleum Corp Ltd (BPCL) offered two prompt-loading parcels of 380-centistoke (cst) fuel oil, of 4.5-per cent sulphur and 0.995 kg per cubic metre density, on a free-on-board (FOB) basis. The first parcel, totalling 25,000 tonnes, is for September 26-30 loading from Kochi while the second lot, totalling 45,000 tonnes, is for September 23-27 lifting from Mumbai. Hindustan Petroleum Corp Ltd (HPCL) has offered a 30,000-tonne parcel of 380-cst fuel oil, of 4.5 per cent sulphur content and 0.998 kg per cubic metre density, for October 23-25 loading from Vizag, FOB. Including the latest tenders, Indian refiners have sold or offered 315,000 tonnes for September, about four times the volume of September 2005, and 140,000 tonnes for October. 

Policy / Performance


ONGC may bag 17 deepwater blocks


September 19, 2006. Oil and Natural Gas Corporation is expected to win 17 deepwater blocks offered under NELP-VI, while the Reliance Industries Ltd is expected to get two. A total of 24 blocks were offered, out of which two blocks in the Kerala Konkan Basin and one in the Andaman Nicobar basin did not attract any bids. Four of the deepwater blocks received one bid, and that too, only through the ONGC-led consortium. In case of onland blocks, Oil India Ltd (OIL) is expected to get six out of seven blocks where it is the operator. OIL participated in total 14 blocks. As for shallow water blocks, one each is expected to go to RIL, ONGC, Focus, Petrogas, Gujarat State Petrochemicals Corporation (GSPC) and Cairn. Cairn and ONGC were the solo bidders in their respective blocks. None of the major foreign companies, except BP, BG, ENI and Santos, are expected to get any blocks. A total of 35 foreign companies and 31 domestic companies participated in this round.


Government-owned oil companies are expected to walk away with the largest chunk of the 55 oil and gas prospecting licences put up for auction in NELP-VI. ONGC could bag 18-24 blocks, followed by Oil India with 7-10 blocks. Private sector refining and petrochemicals major Reliance Industries is likely to get 5-6 blocks while Essar Oil could end up with 2-3 blocks. Reliance Natural Resources, Focus, Petrogas GSPC, Prize Petroleum and Cairn are expected to get one block each. Australia's Santos is also said to be leading in one of the blocks.


ONGC, OIL may get tax sop in joint blocks


September 19, 2006. Oil majors ONGC and OIL may soon be relieved of the cess and royalty burden that they pay on behalf of their private sector partners in some of the jointly operated blocks. The PSU oil companies were required till now to pay up all such levies for blocks given on a nomination basis before the new exploration licensing policy. These include levies paid on Panna Mukta Tapti blocks where ONGC pays up for its partners Reliance and British Gas or the Rajasthan blocks in Barmer where ONGC would have to pay on behalf of Cairn if the new norms do not kick in. It is estimated that ONGC would have to cough up over $1 bn (Rs 46 bn) in royalty and cess over the life of the Rajasthan fields where it farmed in after Cairn made a discovery. The amount would be more than ONGC’s 30 per cent share in the oil production from the field. The government may reimburse the statutory levies paid by national oil companies (NOCs) on behalf of their consortia partners of the pre-NELP era. The NELP regime started in 1991. Private parties involved in 17 production sharing contracts (PSCs) included Cairn Energy, Phoenix Overseas, Reliance Industries and Essar Oil. The reimbursement will, however, be not made in cash. The amount will be adjusted against the profit petroleum payments being made by the two companies. The final nod of the Cabinet is expected soon. The government has received a significant amount from ONGC and IOC as statutory levies.


According to an estimate, the government received Rs 14,603 crore ($ 3.17 bn) royalty from offshore areas alone in the three financial years between ’03 and ’06. Similarly, total cess (from onshore and offshore areas) received by the public exchequer in the same period was worth Rs 16,119 crore ($ 3.5 bn). It is said that only a part of this amount is paid by OIL and ONGC as statutory levies on behalf of their consortia partners. During the same period, the government received Rs 7,962-crore ($ 1.73 bn) profit petroleum from both offshore and onshore areas. Royalties from onshore areas flow to the respective state governments and for offshore areas to the Centre, whereas cess from both onshore and offshore areas goes to the Centre. Under the agreements in the pre-NELP phase, national oil companies were offered 10 per cent participating interest with the private companies while signing PSCs and they could also claim 30 per cent interest in case of a discovery. They also paid on behalf of private parties to the PSCs, which were completely exempted from paying any of these liabilities. In the pre-NELP regime, the government had signed 17 PSCs, under which ONGC and OIL were liable to pay all statutory levies, including royalty and cess, on behalf of the other private partners in the consortia. 


Expert panel to decide on CBM blocks


September 17, 2006. A decision on the award of 10 coal bed methane (CBM) blocks may be round the corner, with the Empowered Committee of Secretaries (ECOS) expected to decide on the issue. The Reliance Natural Resources Ltd (RNRL), which had bid for all the 10 blocks, along with an international consortium, had raised objections over the methodology of selecting the winners. Indications are that the fresh ECOS meeting is likely to be convened by the Cabinet Secretary. The ECOS consists of the secretaries of the petroleum, coal, finance and law Ministries.



Oil giants line up for NELP-VI in India


September 16, 2006. The world’s largest oil multinationals, including BP, Shell and ExxonMobil, are among a throng of investors seeking rights to explore for oil and gas on India’s continental shelf. Bids were already submitted from more than 60 companies, including 34 foreign firms, for 55 exploration blocks covering a total area of 30,000 square kilometres, the largest auction of oil and gas acreage (NELP-VI) to be held in India. Interest in the licensing has been high after recent finds in the sub-continent, notably Cairn Energy’s billion-barrel Mangala discovery. Fifteen bids were submitted for one deep-water block in the Krishna Godavari basin off India’s east coast. Bidders will be judged on their technical skills, the scale of the proposed work programme and the profit share they seek from the state. Results of the auction will be announced by the Indian Government at the start of next year. The Government hopes to generate about $7 bn (Rs 322 bn) from the exploration phase but the real benefits will come if any of these territories yield oil or gas. Substantial gas reserves have already been found in the Krishna Godavari basin, and Chevron, Exxon and BP are thought to have been pushing aggressively for the right to explore in these areas. India’s oil import bill, currently $45 billion (Rs 2 trillion), is ballooning and adding to the financial burden of supporting fuel subsidies to the nation’s rural poor. Subsidies of as much as a third for kerosene and liquefied petroleum gas, used for cooking and lighting in rural areas, costs the Government $15 billion (Rs 689 bn), according to the petroleum ministry. More than two third’s of India’s oil is imported and India’s leading oil companies, including the state-owned ONGC, are in head-to-head competition with Chinese oil companies in the quest for foreign sources of fuel.


Qatar keen to invest in energy in India


September 16, 2006. Indian Prime Minister Manmohan Singh met with Qatar Crown Prince Tamim bin Hamad bin Khalifa al-Thani on the sidelines of the NAM summit in Havana and discussed with him the possibilities of Qatari investment in India, in infrastructure, energy sector and other areas. This is the first meeting that the 27-year-old crown prince had with the 74-year-old Indian leader. Qatar possesses the world's third largest natural gas reserves and has one of the highest per capita incomes of any country.


Gujarat to invite bids for stake in gas field


September 15, 2006. India's Gujarat State Petroleum Corp Ltd (GSPC) will invite final bids by mid-October from four foreign firms to buy up to 30 per cent in its Deen Dayal gas field off the country's east coast. The state-run exploration firm has short listed oil majors Chevron Corp, BG Group (BG, BP) and Italy's ENI from about 13 oil firms that had expressed interest in picking up a stake in GSPC's gas discovery in the Krishna Godavari (KG) basin, off southern India. According to GSPC financial capability will be the key selection criteria for the final bids. The final bidder will pay $2 bn (Rs 92 bn) up-front to GSPC for up to 30 per cent stake, besides investing $2-5 bn (Rs 92-230 bn) for development of the basin. Gas reserves in Deen Dayal block are estimated at $50 bn (Rs 2.3 trillion) as per Jul 2005 gas price. GSPC which is GSPC is the operator for KG-OSN-2001/3 offshore exploration block, plans commercial production from the field in first quarter of 2008. Firms that lost the race include ExxonMobil, Royal Dutch/Shell and France's Total. The field is estimated to have reserves of about 20 trillion cubic feet (tcf) of gas. Gas discoveries in the KG basin, where Reliance Industries Ltd found an estimated 35 tcf, have encouraged global oil majors to consider projects in India, where they have so far refrained from committing large investments. Oil firms are eyeing new markets as most energy-rich regions, such as the Middle East and Russia, are increasingly off-limits and easy discoveries in the traditional exploration hot spots such as Gulf of Mexico are a thing of the past. India produces about 75 million cubic metres of gas per day, barely half of its consumption. At the 1850-sq km KG-OSN-2001/3 block, GSPC is operator with 80 per cent stake with GeoGlobal Resources (10 per cent) and Jubilant Enpro (10 per cent) as partners.


RIL may tie up with PSUs for NELP-VI


September 14, 2006. RIL’s list of partners for NELP-VI may not only include existing downstream partners like Chevron, but for the first time, RIL is likely to take on board two Indian state-controlled oil and gas companies. Its existing partners, Hardy Oil and Niko, may also partner it in some blocks. Another US oil giant, besides Chevron, is in the fray as well. At stake are the lucrative sedimentary blocks in the Krishna Godavari region and other exploratory blocks spread across the country. RIL’s final decision on the partner will depend on the operational terms between the two companies. Major global oil companies normally insist on operatorship of the block, as was seen in the Panna Mukta Tapti case where British Gas resisted the move by partners — ONGC and RIL — to take up operatorship on a rotation basis.


Deora seeks more crude, LNG from Nigeria, Qatar


September 13, 2006. Petroleum minister Murli Deora, during his recent visit to Vienna for 3rd OPEC international seminar, made a strong pitch to his counterparts from Nigeria and Qatar for getting more crude oil on a term-contract basis and additional liquefied natural gas. He also assured India’s participation in Iraq’s downstream oil sector and said state-owned ONGC Videsh Ltd had started working on the exploration block 8 in war-torn Iraq.

Deora, in his meeting with Nigerian minister of state for petroleum resources Edmund Daukoru, emphasised on the need for a increased oil import volume from Nigeria by IOC on term-contract basis. In his reply, the Nigerian minister indicated that Nigerian crude oil production was increasing and agreed to favourably consider India’s offer, only when additional volume was available. Daukoru also sought Indian investment in the downstream oil sector in Nigeria. Apart from this, Deora suggested the proposed memorandum of understanding between IOC and Edo state of Nigeria for setting up of refinery be put on fast-track. In his meeting with Qatar deputy prime minister and energy minister Hamad Al Attiyah, he urged for additional LNG to meet increasing demand. Deora also sought Qatar’s active participation in Indian hydrocarbon and petrochemical sector through investments. 




PFC to invite ‘bidders’ for Girye ultra project soon


September 19, 2006. The Power Finance Corporation (PFC) will soon invite request for qualification (RFQ) for a 4,000 -MW ultra -mega power project at Girye in Maharashtra. The sale of documents is expected to start by the month -end. The power ministry has directed that the technical consultant start conducting studies at the site immediately. The project was facing protests from locals who feared that the proposed plant might pollute crops grown in the area. The Konkan Agricultural University had been roped in to conduct a study on the possible effects of the super thermal power plant on crops. More than 22 agencies -both Indian and foreign-had submitted expressions of interest (EoIs). Domestic companies, which submitted EoIs, included NTPC, Reliance Energy, Aditya Birla Power Corporation, Ashok Leyland and Videocon Industries, while the foreign entities comprised Energy Infrastructure Group, Sweden, and Itochu Corporation of Japan. The Girye project will be operated with imported coal. The thermal station will be made up of five units of 800 MW each.


DPSC to invest $238 mn in power


September 15, 2006. DPSC Ltd (formerly Dishergarh Power), one of the oldest power utilities in the country and located in the Asansol-Ranigauj coal and industrial belt, is planning to invest Rs 1,100 crore ($238 mn) to step up its generating capacity. The company has already appointed Power Finance Corporation to tie up funds for the project. The company is planning to fund the new project through a combination of debt and equity. The company would soon apply to the West Bengal Electricity Regulatory Commission (WBERC) for setting up three units of 80 MW each near its existing facility at Dishergarh in Bardhaman district. The company wants to be self-sufficient in generation.


Jindal, Birlas plan to set up power plants in Jharkhand


September 14, 2006. JINDAL South West Energy (JSWEL) and Aditya Birla Power Company (ABPCL) have decided to set up two thermal power projects of a combined capacity of 3,000-3,200 MW in Jharkhand. The total investment in both the projects is estimated to be over Rs 12,000 crore ($2.6 bn). JSWEL would pump in Rs 8,000 crore ($1.73 bn) for a 2,000-MW plant, while ABPCL would set apart Rs 4,200 crore ($0.91 bn) for a 1,000-1,200 MW. JSWEL is the JSW group’s investment arm in the power sector. Both companies have entered an MoU with the state government in Jharkhand to set up a 2,000-MW power plant. It will be a merchant plant & they hope to sell the power generated to the grid. Both the companies would commission their first phase within 36 months of allotment of coal mines, land and other facilities.


Anpara C lands in Lanco`s lap


September 13, 2006. With its ratification by the Energy Task Force (ETF), the decks have been cleared for the award of the 1,000-MW Anpara C thermal power project contract to Hyderabad-based Lanco Kundapalli. The ETF endorsed the recommendations of the UP thermal Power Generation Corporation. It also endorsed the proposal for the construction of the 1,000 MW Anpara D thermal power project by a public sector corporation. The UP government will soon approach the Power Finance Corporation for funding. The ETF would soon submit its recommendations to the state cabinet. As soon as the proposal is endorsed by the cabinet then the `Letter of Acceptance'', will be issued shortly to the Lanco Kundapalli. This process is likely to be completed within this month. 


TPC invites bids for Maha thermal project


September 13, 2006. The Tata Power Company (TPC) has floated an international bid for the supply of equipment and execution of the plant for its proposed 2,400 MW imported coal-based thermal power project in Dehrand/Shahpur in Raigad district, Maharashtra. Total investment is estimated to be around Rs 9,600 crore ($2.08 bn). The company had dropped its original plan to set up a 1,000 MW imported coal-based power project at Vile in Raigad due to some infrastructure constraints. The company, with overall generation capacity of 2,300 MW plans to set up an imported coal-based thermal power station with a total capacity of 2,000 MW to 2,400 MW. A minimum of three and maximum of four units of identical capacity will be installed at the station. Tata Power may commission the last unit within 12 months.


Omkareshwar project may cost $11 bn more


September 13, 2006. The Jaiprakash-Voith Siemense consortium, which is completing the 520 MW Omkareshwar power project on a turnkey basis, has asked for higher compensation for completing the project in Khandwa district before schedule. The Narmada Hydroelectric Development Corporation (NHDC), a joint venture of the Madhya Pradesh government and NHPC, which has awarded the contract to the firm, is planning to work out a formula to complete the power project within the 10th Five Year Plan, which expires in March next year, to bring down power tariff from an estimated Rs 3.44 per unit to Rs 2.50 per unit. According to the agreement between NHDC and the Jaiprakash-led consortium, the latter has to complete the project by October next year. The commission of power-generating units, eight in number, is expected to begin before March next year, and the consortium has to add more technical and human resources. Bharat Heavy Electicals Limited (BHEL) is supplying turbines to the project.  To ensure power from Omkareshwar project the state government will have to speed up the rehabilitation. The project cost has reached Rs 2252 crore ($487 mn) in which Central Government and Madhya Pradesh government have equity partnership of Rs 312 crore ($67.5 mn) and 300 crore ($64.9 mn) respectively. 

Transmission / Distribution / Trade


Torrent Power eyes distribution in MP, Bihar


September 19, 2006. Close on the heels of acquiring a 10-year distribution franchise for the Bhiwandi circle in Maharashtra, Torrent Power is eyeing distribution businesses in other parts of the country, notably Madhya Pradesh and Bihar. In Madhya Pradesh, the private power major has submitted a letter of intent for Ujjain, Burhanpur and Dewas. The MP government plans to privatise distribution in the three centres and has invited participation. Torrent also plans to bid for distribution opportunities in Patna. The Maharashtra State Electricity Distribution Company (MSEDCL) is also planning to give out distribution licences in parts of the state. The Bhiwandi model had been recommended by the power ministry to SEBs for reducing their transmission and distribution (T&D) losses and boosting profitability. Torrent has promised to cut T&D losses in the circle from 45 per cent to 14 per cent and increase collection from the current 62 per cent to 98 per cent. It expects to generate additional revenues of Rs 150-180 crore ($32.5-39 mn) in the first year itself. 


NTPC to buy spot mkt LNG for power plants


September 15, 2006. State-run NTPC Ltd, country's largest power generating company, will buy 2.5 mmscmd of liquefied natural gas from spot markets over the next three months to meet short-term requirements at its power projects. The company is also looking to acquire coal mines abroad and is scouting for locations in various states, including Tamil Nadu, to set up its maiden nuclear power project. The LNG would be utilised at five of the company's plants at Anta, Auraiya, Kawas, Gandhar and Dadri but Dabhol and Kayamkulam plants were not included in the arrangement. Besides buying LNG from spot markets, the company has forayed into exploration and production of natural gas and is looking to tie-up long-term agreements as well to meet fuel requirements at its gas-fired projects.


Dabhol power to cost more


September 15, 2006. The cost of power generated by Dabhol power project in Maharashtra will sour to Rs 6.25 per unit as against Rs 4.25 earlier (when the plant was operated on domestic naphtha during May-June this year). Ratnagiri Gas and Power Pvt Ltd (RGPPL), owner of the Dabhol power project, will restart generation in October after a three-month gap. The 740 MW block-II of the plant would again be operated on naphtha as natural gas supplies were expected to be firmed up only in March next year. RGPPL would import naphtha for resuming generation through Indian oil corporation (IOC). RGPPL had already approached power regulator CERC for tariff approval. The company has also decided to delay the commissioning of two units–block-I and block-III–with a total capacity of 1,400 MW from the earlier schedule of December this year to March 2007 to match the arrival of liquefied natural gas. The government has also granted a customs duty waiver to both LNG and naphtha imports for the Dabhol power plant.


NHPC to start inter-state power trading


September 14, 2006. National Hydroelectric Power Corporation, country's second largest power generating firm, plans to foray in coal-fired projects and begin inter-state trading of electricity as it plans to become a 10,000 MW company by 2012 from about 3,750 MW now. The public sector company has also revived plans to set up a 500 MW Upper Karnali project in Nepal and will take up two projects in Bhutan with a total capacity of 1,600 MW as part of its overseas expansion. The company is looking to set up a 2,000 MW coal-based power plant in Madhya Pradesh as a diversification excercise and have approached the state government for a coal mine, but nothing has been decided as yet. NHPC's thermal plans to follow the hydro foray by NTPC Ltd. NHPC had started negotiations on the Nepal project about three years ago in joint venture with Nepal Electricity Authority. In Bhutan, where it had earlier built the 60 MW Kuricchu project on a turnkey basis, NHPC would establish the Mangdechu and Punatsangchhu projects with a combined capacity of 1,600 MW. The company is adding about 2480 MW capacity in the 10th plan and would add about 6,300 MW capacity in the 11th plan period (2007-12) to become a 10,000 MW firm.


Reliance Power Fund buys 23 pc in EMI


September 14, 2006. Reliance India Power Fund, a 50:50 JV between Anil Dhirubhai Ambani Group and Singapore-based Temasek Holdings, has picked up 23 per cent in Mumbai-based EMI Transmission, an unlisted power equipment company, for Rs 50 crore ($10.83 mn). The company is a supplier to power transmission line companies. Investment banks anticipate energy and power sector to constitute a significant chunk of the domestic private equity deals over the next couple of years, given the government’s major investment plans in the sector. The size of these deals may be large, as the sector is capital-intensive and Indian power companies are cash-strapped.

NHPC had started negotiations on the Nepal project about three years ago in joint venture with Nepal Electricity Authority. In Bhutan, where it had earlier built the 60 MW Kuricchu project on a turnkey basis, NHPC would establish the Mangdechu and Punatsangchhu projects with a combined capacity of 1,600 MW. The company is adding about 2480 MW capacity in the 10th plan and would add about 6,300 MW capacity in the 11th plan period (2007-12) to become a 10,000 MW firm.

Policy / Performance


NTPC plans 75,000 MW by ’17


September 19, 2006. NTPC Ltd plans to triple its power generation capacity to 75,000 MW by 2017, while intensifying its focus on newly diversified areas including hydroelectric projects, coal mining and nuclear energy. The company plans to add about 21,941 MW generation capacity during the Eleventh Plan period (2007-12) at an estimated expenditure of Rs 1,60,000 crore ($34.69 bn). NTPC would have an installed capacity of about 51,000 MW by 2012 and over 75,000 MW at the end of Twelfth Plan from a generation capacity of 26,194 MW at present. NTPC was currently working on plants with a total capacity of more than 11,000 MW. The company has also taken up three integrated coal mining and power projects with a capacity of 10,400 MW. NTPC's generation mix would have, by 2017, a total of 9,000 MW of hydro capacity. The company will start coal production from one of the eight mines allocated to it by December 2007. NTPC was also looking to acquire coalmines abroad as part of efforts to ensure fuel security. The company is buying natural gas from the spot markets as a short-term measure to run its gas-fired plants. In the long term, the firm was exploring opportunities for participation in the gas value chain including exploration and production.


PM puts premium on power


September 14, 2006. Prime Minister Manmohan Singh has finally intervened to bring power sector projects on the fast track. Concerned over the poor performance of the sector during the Tenth Plan period, Mr Singh has directed his economic advisory council chairman C Rangarajan to monitor achievements against targets and resolve problems in the sector without delays. The directive follows severe shortages expected in planned capacity additions during the Plan period. According to the mid-term appraisal of the 10th Plan period, against a target of 41,110 MW of capacity addition, the likely capacity addition will be 26,997 MW, a shortfall of at least 34.4 per cent. It is expected that the Eleventh Plan target would be fixed at 60,000 MW, double of what was achieved during the entire Tenth Plan period. The plan panel has said this was also essential if the economy was to grow at 8-9 per cent per annum. In all the four years of the current Plan period, capacity addition has missed the targets. In the first year of the Plan period (’02-03), only 2,872 MW of capacity was added. This rose to 4,086 MW in the next year. During ’04-05 against a target of 5,245.52 MW, only 3,948.92 MW was generated. In ’05-06, the target is 6,934.52 mw, which sources said is unlikely to be achieved. The current problem being faced by the sector is nothing new as the ministry of power has failed to achieve targets even in the past.


Orissa government usurps GMR project site


September 13, 2006. The Orissa government has usurped the site where GMR Energy Ltd had planned to set up a 1000 MW power plant for Rs 4,200 crore ($0.91 bn). GMR had completed the survey of the land and prepared the map of the site. Soon after the signing of the MoU with the state government, it submitted the formal application for the land to the IPICOL for recommendation to the IDCO, the government concern dealing with industrial infrastructure. However, the Orissa government has asked GMR to look for an alternative site, as the state government owned Orissa Hydro Power Corporation (OHPC) has set its eyes on the location for a 2000 MW thermal power project with an investment of Rs 8000 crore ($1.73 bn). Located close to the Talcher coalfield, the project site in Meramundali in Dhenkanal district is considered to be one of the best few sites in the country for thermal power project by the Central Electricity Authoriy.


World Bank arm keen to fund big power projects


September 13, 2006. International Finance Corporation, the World Bank’s private investment arm, is keen on putting their money in the 4,000-MW projects. IFC has approached the government for funding the projects, each of which may need Rs 12,000-13,000 crore ($2.6-2.8 bn). The Asian Development Bank is also keen to fund the projects. Each project is estimated to cost Rs 20,000 crore ($4.33 bn). According to the terms and conditions of the bids, the developers will have to bring in equity of 51 per cent in the first two years, and will be allowed to dilute it up to 26 per cent over the first ten years. However, the Planning Commission has objected to the financial structuring of the projects. It questioned the capacity of the special purpose vehicles, or shell companies floated by the government to pilot the projects and get the required clearances and approvals, to “deliver all that has been promised.” 


Haryana plans to add 2,000 MW


September 13, 2006. Haryana, one of the states which has been forced to resort to power cuts and restricted use for industries in the last few months, plans to add 2,000 MW capacity through two projects entailing an overall investment of Rs 9,000 crore ($1.95 bn). One of the projects will be a 1,000 MW coal-based power generation plant at Hissar, which will be owned by the Haryana Power Generation Corporation Ltd. Reliance Energy Ltd (REL), Korea’s Doosan Heavy Industries and Construction, NTPC Ltd and China’s Dongfang are in the fray for being the turnkey contractors for the Rs 4,500-crore ($0.97 bn) project. A final decision is expected by November. The other project is a 1,000 MW coal-based plant at Jhajjar. To be developed by the private sector — MMTC, REL, Adani and Tata Power are among eight companies in the race — it will also sell power outside the state.  The developer for the project is likely to be selected by December, this year. The cost of generation from the proposed projects is expected to be around Rs 2.75 per unit. The plant is expected to start generating power by 2009-end or early 2010.






Mammoth Energy Group completed 60 barrel a day well


September 19, 2006. Mammoth Energy Group, Inc.’s wholly owned subsidiary, ProTerra Oil and Gas, Inc., has drilled and completed its first well in Ellis County, Kansas. The well was drilled in late July and completed in late August. The No. 1 Fredd Haas, drilled to the Arbuckle formation, has steadily pumped 60 barrels a day since its completion. A second offset well- the No. 1Theckla Haas- has also encountered commercial pay in the Arbuckle formation. The No. 1 Theckla Haas is also completed and awaiting further testing and engineering. From drill stem tests, ProTerra expects this well to produce between 20-40 barrels a day. ProTerra has a 45 per cent working interest in both wells.


Masjed Soleiman Co. produces 20 mbbl of crude


September 19, 2006. Masjed Soleiman Oil and Gas Production Co. produced 20 million barrels (mbbl) of crude oil from its fields during the first five months of the current Iranian year. The company’s average daily production currently stands at 112,000 barrels per day (bpd). Also during the period around 30 billion cubic feet of sour gas produced from the five wells of the Jurassic Gas Wells - located in the region - has been transferred to the petrochemical plants in Bandar Mahshahr. The gas from the wells is said to be the world’s sourest gas and contains 35 percent hydrogen sulfurs and carbon dioxide. It is mainly used as the feedstock for domestic petrochemical plants.


Abu Dhabi to increase gas production levels


September 19, 2006. Abu Dhabi will increase its gas production capacity by a third to 6 billion cubic feet per day within two years as demand in the country is growing over 10 per cent annually. Abu Dhabi had initiated steps to tap its rich sour gas resources and will shortly invite interested companies. Currently, Abu Dhabi produces 4.5 billion cubic feet per day (cfpd) of gas. Demand for oil is growing worldwide at 2 per cent and for gas at at 6 to 7 per cent annually. But in Abu Dhabi it is higher at about 10 per cent. Abu Dhabi's gas reserves are estimated at some 200 trillion cubic feet. Abu Dhabi's oil output capacity is currently 2.9-3 million barrels per day (bpd) and plans are on tap to lift that to 4 million bpd in the short-term.


New oil pool discovery


September 13, 2006. Calvalley Petroleum Inc., an international junior oil and gas company based in Calgary, Alberta, has discovered a new oil pool south of the existing Hiswah field. The exploration well, "South Hiswah 1" encountered 32 meters of oil bearing reservoir in the Saar-Naifa formation and was verified by an independent petrophysical analysis. Upon completion, the well will be tested and put on production to nearby Hiswah facility. The well represents the first of a serious of exploration locations that will be drilled throughout the remainder of 2006 and into 2007 by the Block 9 Joint Venture.



Iran, Venezuela plan Syrian refinery


September 19, 2006. Venezuela and Iran are planning to construct a petroleum refinery in Syria capable of processing 150,000 barrels a day, Venezuela's oil minister has said. Venezuela's relations with Iran and Syria have strengthened under Hugo Chavez, it President, who views the Middle Eastern nations as important allies in his efforts to build what he calls "multi-polar world" no longer dominated by the United States. Iranian-Venezuelan ties have previously focused cooperation as major oil exporters, but the leaders emphasized their new bond in standing up to America.


Indian Oil aims to set up blending facility in Dubai


September 19, 2006. Indian Oil Corp Ltd, India's largest commercial enterprise, which opened its regional subsidiary in Jebel Ali Free Zone in Dubai earlier this year, plans to set up its own blending plant here. The move reflects the company's strong commitment to the region's growing downstream market. The company, which is currently finalising the distributorship of its Servo branded lubricants in the UAE, Oman and Bahrain, will process and blend some of its 400 graded lubricants in Jebel Ali.


Indian Oil's countrywide network of over 22,000 sales points is backed by its extensive, well spread out marketing infrastructure comprising 167 bulk storage terminals, installations and depots, 94 aviation fuelling stations and 87 LPG bottling plants. Its subsidiary, IBP Co Ltd, is a stand-alone marketing company with a nationwide network of over 3,000 retail sales points.

Opec refineries could keep customers hooked


September 16, 2006. Opec has pledged to invest billions in upgrading refining capacity if it helps the consumer, but the move is also in the group's best interest as it could guarantee demand for its oil in fast-growing Asian markets. Departing from its prime role as a producer of unrefined crude, Opec has ambitions to invest in refining, notably in China and India. Soaring development costs, driven by increased demand and high commodity prices, could hold back some of the projects, but there are clear incentives to overcoming any obstacles. It should ward off competition from rival technologies, such as biofuels, as well as from growing non-Opec sources of supply. Kuwait is studying plans to build a multi-billion-dollar refinery and a petrochemical plant in Guangdong, southern China. The biggest Opec producer, Saudi Arabia, also has its sights set on China, the world's second biggest energy consumer. Its projects include buying into a planned Chinese refinery.


D1 Oil expanding with second refinery site


September 15, 2006. Green fuel producer D1 Oils is set to be the number one biodiesel maker in the UK within two years after buying a refinery site on Merseyside which will double its production capacity. The Middlesbrough-based company is acquiring a 47-acre site on the banks of the River Mersey in Bromborough which it will transform into a second major biodiesel production, storage and distribution centre. Once operational, the new site is expected to have an initial production capacity of 100,000 tonnes by next year, with a further 100,000 tonnes of planned refinery capacity to be added in 2008. D1 aims to increase production at its Middlesbrough site from the current 32,000 tonnes to 220,000 by the end of 2007, giving the company a potential 420,000 tonne capacity within two years. D1 plans to convert the existing site facilities to refine vegetable oil into biodiesel, enabling it to get up to 100,000 tonnes of production capacity within a year. It will then bring in its own refineries to add a further 100,000 tonnes of capacity.


EnCana looks South for refinery


September 14, 2006. EnCana Corp. is set to acquire an interest in a Chicago-area refinery to process its oilsands crude, part of an effort by a host of companies with planned expansions to find the most profitable way to market the sludge-like crude produced in northeastern Alberta. The deal would see the independent producer acquire a major interest in a refiner, thought to be British-based BP PLC, in exchange for a stake in its oilsands operations. Oilsands crude is a thick substance that has to be upgraded to more closely resemble conventional, lighter oil before it can be refined. EnCana forecasts that production from its oilsands properties will climb to 500,000 barrels per day by 2015. But the company currently has no upgrading or refining capacity.

Transportation / Distribution / Trade


Crude Prices fall


September 19, 2006. Oil prices slipped after briefly rising above $64 a barrel following news that output at a mammoth BP PLC platform in the Gulf of Mexico won't be restored before mid-2008. Oil traders were cautious after Iran's latest threat to halt nuclear inspections if the United Nations goes ahead with sanctions over its enrichment program. Light, sweet crude for October delivery on the New York Mercantile Exchange fell 25 cents to $63.55 a barrel by midday in Europe. Prices for the October contract peaked earlier in the day at $64.12. Brent crude fell 10 cents to $63.95 a barrel on London's ICE Futures Exchange. In other Nymex prices, heating oil gained slightly to $1.7278 a gallon, unleaded gasoline was flat at $1.5795 a gallon, and natural gas rose 16.3 cents at $5.105 per 1,000 cubic feet. Energy futures have declined sharply in recent weeks due to a combination of soaring global inventories, a weakening U.S. economy and a perception of reduced geopolitical and hurricane threats.


Pipeline meeting this year: Kasuri


September 18, 2006. Leaders of Pakistan, Iran and India will meet in Tehran later this year to firm up the gas pipeline project and resolve the pricing issue, Foreign Minister Khurshid Kasuri said. Pakistan, Iran and India had already appointed a consortium of international consultants to resolve a dispute over the price of gas that Iran wants. Leaders from the three countries might meet after the consultants proposed benchmarks on pricing. The consultants were expected to submit a report in this regard in November. Indian Prime Minister, Manmohan Singh, is of the view that India will rework on the India-Pakistan-Iran gas pipeline once the report of experts on the feasibility of the project is available.


Gas purchase, sales agreement signed


September 18, 2006. The government of Pakistan and Sui Northern Gas Pipeline Limited signed a gas sales and purchase agreement with a joint venture comprising Tullow Pakistan (Developments) Limited and Government Holdings (Private) Limited (GHPL). Under the agreement the joint venture would supply 30 million cubic feet per day (mmcfd) from Chachar gas field located in Jacobabad district of Sindh to SNGPL by December 2006. SNGPL will supply this gas to Wapda’s Guddu Thermal Power Station, easing off pressure on imported oil. Tullow is the operator of this gas field and holds 75 per cent working interest in Chachar gas field, while the remaining 25 per cent is held by GHPL. The joint venture has invested over $6.5 mn in exploratory efforts and is implementing a development plan of an estimated cost of $25 mn.


Iran, France to sign $2.7 bn gas deal


September 18, 2006.  Despite the U.S. sanctions and business restriction on Iran, the inking of a finance agreement between National Iranian Oil Company (NIOC) and French Societe General Bank for development plans in oil- and gas-rich southern Iran will come soon. The $2.7 bn figure is going to finance the development projects at phases 17 and 18 of the South Pars Oil and Gas Field and the capital return will be satisfied by the revenues coming from gas and condensate sales. Two drilling platforms equipped with water treatment units will bore 22 offshore development wells and two 32-inch pipelines are going to transfer the gas to onshore installations for refining and processing. Phases 17 and 18 are anticipated to offer 56 million cubic meters of gas, 400 tons of sulfur and 80,000 barrels of condensates per day while the ethane and liquid gas production should hit one mln tons each per annum.


Gazprom boosts gas supply to Turkey


September 15, 2006. Russia's gas monopoly Gazprom has increased gas supplies to Turkey, which asked for more volumes due to a halt of a pipeline from Iran. The Russian company had increased supplies via a pipeline under the Black Sea, known as the Blue Stream, to 30 million cubic metres a day (MCMD) from the previous 15 MCMD. Gazprom increased supplies to Turkey by 24 per cent in 2005 to 18 billion cubic metres, of which around 14 bcm were supplies via the territories of Romania and Bulgaria, while the rest was shipped via the Blue Stream. The Blue Stream was built in 2001 and its capacity of around 16 bcm a year has been severely underused since then as Gazprom said Turkey had overestimated its gas demand growth. The current flows of 30 million cubic metres a day means the Blue Stream reached around three quarters of its capacity for the first time.


Gazprom considers role in Panama, S. America pipeline


September 14, 2006.  Russia's Gazprom is considering taking part in the construction of a natural gas pipeline linking Panama with South America. Gazprom's participation in the project is considered for construction of the infrastructure for the pipeline's maintenance. Panama, a tourist center, lacks its own hydrocarbon resources. Imported oil accounts for 25 per cent of its electricity output, with the rest being generated by hydropower plants and alternative energy sources. Panama has a developed oil infrastructure, which includes a pipeline that crosses the country from Columbia, and its storage facilities can accommodate a total of 16.9 million barrels.


The country is also considering building a refinery to receive Mexican crude. The gas pipeline from Venezuela and across Columbia will eventually be extended to reach terminals in Panama, whose canal connects the Atlantic and Pacific oceans. While working to boost its presence in Europe, Gazprom is also increasingly looking to Latin American markets. The focus is on cooperation talks with Brazil, Argentina and Venezuela, who plan to build a transcontinental pipeline, which will also cross Bolivia. They are therefore interested in Gazprom's valuable expertise in laying long-distance pipelines. Venezuela and Brazil have made unofficial overtures to Gazprom, which in turn has suggested carrying out feasibility studies for the multinational project.


Gazprom, BP sign Atlantic LNG deal


September 13, 2006. Gazprom and BP have signed a contract to supply liquefied natural gas to the Atlantic region. BP, one the of the world's biggest independent oil and gas producers, will supply LNG provided by Gazprom Marketing & Trading Ltd, Gazprom's subsidiary operating in the United Kingdom, in 2006 and early 2007. The Russian subsidiary will determine delivery points depending on market demand. The first batch of 135,000 cubic meters of LNG was loaded recently onto a BP tanker in Point Fortin port in Trinidad and Tobago for delivery to the United States terminal in Cove Point, Maryland. In August 2005, Gazprom Marketing signed deals with Shell Western BV and the UK-based energy producer and distributor BG Group on LNG supplies to the U.S. market.


The first tanker under the contract arrived in Cove Point in September the same year. In November 2005, the company signed similar contracts with Gaz de France, MED LNG & GAS, a joint venture between Gaz de France and Algeria's state-owned Sonatrach, and Shell. A consignment of LNG was sold to Shell Western LNG and supplied to Cove Point for re-gasification in early December 2005. The Gazprom subsidiary sold its first consignment of about 140,000 cubic meters of liquefied gas (about 85 million cubic meters of natural gas) it had acquired from Gaz de France to BP in April 2006, delivering it to the Isle of Grain terminal in the UK.

Liquefied natural gas is becoming increasingly important for Gazprom, and the share of LNG in the energy giant's operations is increasing as production at natural gas deposits stagnates. In Russia, Gazprom plans to build an LNG plant on the Baltic Sea coast near St. Petersburg to produce 5 million tons of LNG a year by 2009, and it is looking for a partner with relevant expertise. Italy's Eni and Algeria's Sonatrach are among Gazprom's possible choices.

Gazprom also controls a project to develop the giant Shtokman field, which holds an estimated 3.2 trillion cubic meters of natural gas and 31 million metric tons of gas condensate in the Barents Sea, and to build an LNG plant there. The concern has yet to finalize its choice of partners. The company is also reportedly looking to gain at least 25 per cent of shares in the Sakhalin II project in Russia's Far East, which is run by a consortium of foreign companies, in return for a stake in the massive West Siberian Zapolyarnoye-Neocomian project.

Policy / Performance


Russia cancels Shell's gas field permit


September 19, 2006. Russia has put the world's largest oil and gas venture in doubt by canceling an environmental permit for the energy giant Royal Dutch Shell. A Shell-led consortium is developing a massive oil and gas field under the ocean off Russia's far eastern coast. Based near the island of Sakhalin, it is estimated to have reserves of 1 billion barrels of oil. It began operating seven years ago but the $25 bn project is far from complete and work has now come to a standstill. Russia's Resources Ministry has withdrawn its ecological approvals for the site. Analysts say the move is part of a campaign by the Kremlin to gain more control over Russia's energy resources.


WB told to stop energy financing efforts


September 18 2006. According to South Korea the World Bank should stop exploring options for financing the development of clean energy because it does not have enough strength in the field. British finance minister Gordon Brown first raised the idea of fresh cash for cleaner energy in April, calling for a seed fund of $20 bn for alternative energy. The World Bank has since prepared a draft of two proposed funds: the Clean Energy Financing Vehicle consists of low-interest loans; the Clean Energy Support Fund would be based on grants. Both ideas endorse low-carbon technologies and carbon emission reductions.

Russia to drastically raise oil exports to Asia-Pacific: Putin


September 18, 2006. President Vladimir Putin said that Russian oil supplies to the Asia-Pacific region would account for at least 30 per cent (currently at 3 per cent) of overall exports in 10 years’ time. The president echoed the forecasts earlier made by the Industry and Energy Ministry. Industry and Energy Minister Andrei Dementyev said that the share of Asia-Pacific countries receiving Russian oil exports is forecast to increase from the current 3 per cent to 30 per cent in 2020 (up to 100 mln metric tons), and natural gas export from 5 per cent to at least 25 per cent (up to 65 bln cu m). He said the figures could be reached if eastern energy projects were implemented and energy production developed on Sakhalin off the country’s Pacific Coast. He also said a program for the development of natural gas resources in East Siberia and the Far East would be submitted to the Russian government in 2006. A single system of gas production, transportation and supplies will be created in the region, with account for exports to the markets of China, the world’s second largest energy consumer, and other Asia-Pacific countries. The construction of the East Siberia-Pacific Ocean (ESPO) oil pipeline was another important project to increase supplies to the region. The pipeline is expected to pump 80 million metric tons of oil per year, including 30 million tons to energy-hungry China via an offshoot whose construction is about to start. This year, oil supplies to the Asian giant has reached 8.347 million metric tons (up 41.9 per cent against the previous year), according to Economic Development and Trade Ministry.


Nigeria will lead in world's LNG output: Obasanjo


September 18, 2006. President Olusegun Obasanjo said that Nigeria would become a world leader in the supply of Liquified Natural Gas (LNG) within the next five years. According to the president Nigeria was more of a gas nation than an oil nation. He said that the federal government had embarked on an ambitious plan to tap the country's huge LNG potentials, adding that there were already three key gas production plants in Bonny, Brass and Oke. He said all of them would be expanded to make the country the highest producer of LNG.


Rosneft will go fully pvt in next 3-10 yrs: Kremlin


September 17, 2006. Kremlin is of the view that Russia's oil company Rosneft will go fully private in the next three to 10 years. It is of the view that the company's major investors would only have stakes not exceeding 10 per cent each. Rosneft held an initial public offering this summer in Moscow and London, the biggest in Russia's corporate history and the world's fifth largest, raising $10.4 billion.


Opec cuts demand forecast


September 17, 2006. The Organisation of the Petroleum Exporting Countries lowered a forecast for demand for its oil next year, when supply from rival producers is expected to surge. Demand for Opec crude in 2007 will average 28.1 million bpd, 200,000 bpd less than forecast in August. The outlook follows Opec's decision to keep its oil output near a 25-year high despite a roughly $15 drop in prices since mid-July. But the group left the door open to a supply cut before the end of the year. According to Opec non-Opec supply in 2007 would rise at the fastest rate in more than two decades. Opec pumps more than a third of the world's oil. Average demand for Opec's oil next year will be 800,000 bpd less than the 28.9 million bpd expected in 2006. While Opec expects supply from outside producers to rise by 1.8 million bpd next year, analysts said that the chance it may under perform could increase the burden on Opec. Opec also trimmed a forecast for growth in world oil demand in 2006 by 100,000 bpd to 1.2 million bpd, citing weaker-than-expected summer gasoline demand in top oil consumer the US.


Petrol-hungry Iran still eyeing rationing


September 16, 2006. Major crude producer Iran is still aiming to enforce petrol rationing to curb crippling domestic fuel consumption, as long as it wins parliamentary approval, its oil minister, Kazem Vaziri Hamaneh, said. The ministry had announced in June that Iran would stop importing petrol and introduce petrol rationing from September 23. However it later said imports would continue as MPs argued the move was not feasible. Iran is the OPEC oil cartel's second largest producer, but a lack of refineries means it still has to import 30 million liters of petrol a day to meet the rising demands for heavily subsidised petrol. Petrol is sold at the pumps for a mere 800 rials per liter (9 US cents) -- 2.5 times cheaper than a liter of mineral water. The government is now seeking approval for parliament for an additional 3.5-billion-dollar budget for petrol imports for the remaining Iranian year to March to cover a daily consumption demand of 70 million liters.


‘Foreign investment for oil and gas rising in poorest countries’: UN


September 16, 2006. Foreign investors are pouring record sums into the world's poorest countries, with most of the money used to exploit oil and other natural resources, the United Nations says. Foreign direct investment to least-developed countries reached US$11-billion -- an all-time high -- in 2004, the latest year for which figures are available, says a UN report. It says while multinational companies have long been the dominant investors in the poorest countries, emerging powerhouses such as China, India, Malaysia and South Africa have contributed increasing amounts in their search for natural resources, particularly in oil and gas. Foreign investors focus mainly on extracting natural resources in poor African nations, while in Asia there are growing inflows into telecommunications and electrical services in poor countries.


SCO PMs' meeting highlights energy cooperation


September 16, 2006. The heads of government from the six member states of the Shanghai Cooperation Organization (SCO) gathered in Tajikistan's capital to discuss and delineate their economic and energy cooperation. The six heads of government are Kazakh Prime Minister Daniyal Akhmetov, Chinese Premier Wen Jiabao, Kyrgyz Prime Minister FeliksKulov, Russian Prime Minister Mikhail Fradkov, Tajik Prime Minister Akil Akilov and Ukzbek Deputy Prime Minister Rustam Azimov. To address the energy concerns, the member states have agreed to launch an energy working group. The working group, along with SCO's Secretariat, was ordered to study the possibility of establishing an SCO energy club. Kazakhstan and Russia will table their proposal to hold a meeting of the heads of energy departments from SCO members in 2007.


Gas price rise spiral 'set to end'


September 16, 2006. The rise in gas bills may finally be over - and prices are set to drop over the next two years in UK. That's the message coming out of the gas markets, where the "forward" price has been coming down rapidly. It has fallen 20 per cent since April and prices are now at almost the same level as this time last year. The chief energy regulator warned the gas companies to pass on the price cuts as soon as possible. New pipelines from Norway and continental Europe have helped ease concerns over winter supplies, as have a drop in oil prices. The forward delivery wholesale price is key because the price paid now for gas bought on long-term contracts greatly influences prices paid by consumers. Since January 2004, average household energy bills have risen by 69 per cent or £407. The average joint bill for gas and electricity now stands at just under £1,000 a year per household. Gas bills alone have risen by 85 per cent. Electricity-only customers have seen 50 per cent rises. Wholesale price falls tend to take at least six to nine months to feed through to consumer bills.


US presses China on energy prices


September 15, 2006. The United States pressed China to ease price caps on oil and power in talks aimed at bridging differences between the world's two largest energy users. China's restless efforts to secure oil and gas across the globe, including from Iran, Sudan and other countries under U.S. pressure, have stirred predictions of volatile energy friction between Washington and Beijing. China restricts domestic gasoline and diesel prices to among the lowest in the world to shield consumers and stifle inflation but international companies say these caps scare off investment. Price concerns and market access were a main hurdle slowing down U.S. firm ExxonMobil from finalizing a refinery deal with China's Sinopec Corp. after years of negotiations. China's first emergency tanks totaling 33 million barrels would be ready for use next month, part of its plan to set up a strategic petroleum reserve that last a month's use but uncertainties about the purpose of the reserve and when it will be filled have ruffled international markets. Washington taps its reserves only to cope with severe supply disruptions, not to correct price fluctuations. But China has yet to decide when it would draw on its reserves.


‘World has tapped 18 pc of oil supply’: Aramco


September 15, 2006. The world has tapped only 18 per cent of the total global supply of crude, Abdullah S. Jum'ah, president and CEO of the state-owned Aramco, challenging the notion that supplies are petering out. He said the world has the potential of 4.5 trillion barrels in reserves enough to power the globe at current levels of consumption for another 140 years. He challenged oil ministers and petroleum executives at an Opec conference in Vienna to step up exploration and leave the minimum amount of oil in the ground. Many experts estimate that Earth's recoverable oil resource is at least 3 trillion barrels and potentially more than 4 trillion barrels. If global consumption rises about 2 per cent a year from today's levels of about 85 million barrels a day, they say, the low end of that range would only be enough to last until roughly 2070. Jum'ah also challenged explorationists to find enough new oil resources to add one trillion barrels to world reserves over the next 25 years.


EU-Ukraine pact on oil, gas meters


September 14, 2006. The European Union and Ukraine signed a deal paving the way for European financing of oil and gas meters on pipelines across Ukraine's borders. This is a very concrete cooperation scheme to increase transparency, reliability and safety of supplies to Ukraine, but also transit to the European Union. The flow of Russian gas through Ukraine to Western Europe was disrupted when Moscow cut off supplies to the former Soviet republic in a dispute over pricing. Russia blamed Ukraine for the incident.


New group formed to explore oil off Argentina coast


September 13, 2006. A unit of Brazil's state energy company Petrobras will team up with Repsol unit YPF and Argentina's state-run Enarsa to expand oil exploration off Argentina's Atlantic coast. The newly-formed consortium will search for hydrocarbons in the waters about 250 km (155 miles) from Mar del Plata, a city located about five hours south of Buenos Aires by land. Petrobras will be the operator and Enarsa will have a 35 percent stake in the group. YPF's stake will be 30 percent. Petrobras and YPF will finance exploration efforts, which are estimated at about $50 million. Enarsa has jurisdiction over underwater energy resources in Argentina but analysts say it has almost no assets and limited operating capacity, forcing it to rely on partnerships with private operators to finance projects. Enarsa has been seeking exploration partners to compensate for low investment in the energy sector -- a trend which has led some analysts to predict the nation will become a net importer of crude oil within a few years.




AES sells UK power plant for $60 mn


September 19, 2006. The AES Corporation is closed on the sale of its AES Indian Queens Power Limited subsidiary, a 140 MW open cycle peaking power plant located in Cornwall, UK, to International Power IQ Limited, a wholly owned subsidiary of International Power Limited, for approximately $60 mn. AES is one of the world's largest global power companies. With operations in 26 countries on five continents, AES's generation and distribution facilities have the capacity to serve 100 million people worldwide.


ENDESA buys two combined cycle plants in Italy


September 18, 2006. ENDESA has acquired 50.1 per cent of Centro Energia Teverola and Centro Energia Ferrara, owners of the CCGT plants. The plants each have capacity of 150MW and annual output of around 2,000GWh. Through these acquisitions, ENDESA will have installed capacity of 7,000 MW in Italy, making it the third largest operator in that country. This acquisition also puts its total combined cycle capacity in Italy at 2,700MW. These operations reinforce ENDESA's presence in the European market, where it is leveraging profitable growth opportunities in energy generation and trading. They are also a step further in its European strategy. Centro Energetico Teverola has a combined cycle plant located in the Emilia Romana region in the north of Italy and Centro Energetico Ferrara has a plant in Campania, in the south of the country. In addition, the acquisition of these two plants is a huge step forward in ENDESA's European strategy and falls within the framework of its Business Plan, which envisages the installation of almost 1,100 MW in Italy through to 2009. The acquisition of this new capacity is also part of ENDESA's strategic plan.


ENDESA's controlling stake in Endesa Italia, the third largest generator in that country with installed capacity of 6,590 MW, will be reinforced by the 300 MW of capacity now acquired, giving the group a significant position in one of the most attractive and strategically important markets in Europe. Its generation assets include several thermal plants: Tavazzano (1,840 MW), Monfalcone (976 MW), Ostiglia (1,530 MW), Fiume Santo (1,040 MW) and Trapani (170 MW); the Terni (530 MW), Cotronei (369 MW) and Catanzaro (115 MW) hydroelectric plants and the Florinas (20 MW) and Lardino (14 MW) wind farms. These plants achieved a net output of 23,362GWh in 2005, with the company posting sales of 30,911GWh. Also in Italy, ENDESA Europa and ASM Brescia have initiated the Scandale plant project for the construction of two 400MW CCGT plants producing electricity and heat. The plant is scheduled to come on-stream in 2008.


BG North America purchases Dighton power plant


September 13, 2006. BG North America, a wholly owned subsidiary of BG Group plc, purchased 100 percent interest in the 170MW, gas-fired, Dighton Power Plant located in Bristol County, Massachusetts from Calpine Corporation. BG will pay $90.2 million for the assets of Dighton Power Associates and fund the acquisition through internal sources. The purchase has been approved by the bankruptcy court with closing expected to occur shortly after receiving Federal Energy Regulatory Commission (FERC) and Hart-Scott Rodino approvals. The plant supplies power into the ISO New England, a well established, mature and liquid power market. The acquisition is an important milestone for BG as it establishes its position in one of the world's largest power markets. Dighton provides BG with a platform to leverage its significant LNG position in the United States. BG is already a gas supplier to the northeast U.S. and this acquisition will now allow it to add power as part of our portfolio of energy services.

Transmission / Distribution / Trade


Portlands Energy Centre signs accelerated clean energy supply contract


September 18, 2006. Portlands Energy Centre L.P. has signed a 20 year Accelerated Clean Energy Supply (ACES) contract with the Ontario Power Authority for Portlands Energy Centre (PEC), a 550 MW high-efficiency, combined cycle natural gas generation plant to be constructed in downtown Toronto. PEC is a limited partnership of Ontario Power Generation and TransCanada Energy Ltd., a wholly owned subsidiary of TransCanada Corporation. PEC received Environmental Approval from the Ontario Ministry of Environment in April 2005 following two years of extensive studies, expert reviews, applications and public consultation. The capital cost of PEC is estimated to be approximately $730 million. PEC is expected to be operational in simple cycle mode and delivering 340 MW of electricity to the City of Toronto to meet peak summer demand. When completed in the second quarter of 2009, the plant will provide up to 550 MW of power under the ACES contract - 25 per cent of central Toronto's needs. TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure. TransCanada's network of more than 41,000 kilometres (25,600 miles) of pipeline transports the majority of Western Canada's natural gas production to key Canadian and U.S. markets. A growing independent power producer, TransCanada owns, or has interests in, approximately 7,000 megawatts of power generation in Canada and the United States.


Strategic Energy expands electricity services to upstate New York


September 18, 2006. Strategic Energy, a national provider of retail electricity to commercial and industrial customers, is offering electricity services to businesses in upstate New York facing new utility rate changes. Between now and January 1, 2007, all major electric utilities in upstate New York will begin transitioning their larger commercial and industrial customers to hourly market-based pricing, exposing all businesses in the region to fluctuating rates and price uncertainty. In the National Grid service territory, where the new changes took effect September 1, even mid-size electricity customers have been transitioned to mandatory hourly pricing. Strategic Energy offers pricing strategies that give businesses many options to meet business objectives amid changing energy market conditions. Customers can choose fixed pricing, delivering predictable budgeting as an alternative to the utility's hourly rates; market-based "index" pricing, affording opportunities to benefit from dips in the market; or its unique portfolio products, giving businesses the ability to customize energy purchases through a combination of fixed and floating energy prices with the help of a dedicated portfolio strategist. Depending on the utility, customers can also benefit from shopping incentives including a switching credit of up to 0.4 cents per kilowatt-hour for small customers and 0.2 cents per kilowatt-hour for larger customers. All customers who choose competitive supply in New York will benefit from the elimination of state and local sales taxes on the distribution portion of the bill.


Avista offers energy incentive for Washington customers


September 15, 2006. Avista Utilities' residential and small business customers in Washington who produce electricity with qualifying renewable energy systems are eligible to receive an annual bill credit under a new Avista program. The Renewable Generation Incentive (RGI) program provides incentives to participating Avista Utilities customers who generate their own electricity using wind, solar or an anaerobic digester. The incentive level varies based upon the type of renewable energy system used and if the system components are manufactured in Washington. The RGI program incentive will help offset the typically high upfront cost of a renewable energy system. Avista's new RGI program is an outgrowth from the recently implemented Washington State law to provide incentives for the manufacture and installation of renewable energy systems. Avista’s 57 percent of electric generation capacity coming from renewable hydropower, wood waste and wind power. In order to qualify for the RGI program, a customer must have an interconnection agreement in place with Avista.


BPL Global unveils new applications for smart grid


September 14, 2006. BPL Global, Ltd., an international leader in Smart Grid technologies, announced a new line of Smart Grid applications. Together with BPL Global's powerful systems platform, these applications provide significant opportunity for utilities to achieve a more powerful, reliable grid. BPL Global is developing a message-based systems platform and unique software applications to enable monitoring and control of distribution grid assets and broadband networks that reside on the grid. All of these will lead to significant improvements in the reduction of outages from extreme load conditions; the ability to more quickly respond to customer needs; and the capability to meet energy efficiency goals where it has been difficult or uneconomical to improve before.

Policy / Performance


ConsumerPowerline and DemandDirect LLC enter strategic partnership


September 18, 2006. To help the state maintain a reliable, cost efficient electricity supply despite growing demand and to "keep the lights on" for consumers during emergencies, ConsumerPowerline, a leading energy asset management firm, and DemandDirect, a leading provider of demand response services in Connecticut, announced a partnership to offer expanded "demand response" opportunities for commercial and industrial energy users to help avoid blackouts -- by "giving back" a small portion of their electric power to the grid during a power-grid crisis. In exchange for this contribution to the state's needs, energy users will be paid for their participation. Users will also benefit by receiving real- time data on electricity use and pricing, thereby enabling them to "buy and sell smart" in the volatile energy sector. This demand response initiative -- where energy users shed non-essential electricity in an emergency -- answers the state's call for programs to meet Connecticut's electricity supply challenges head-on.


Connecticut's Department of Public Utility Control (DPUC) has already called for immediate measures to reduce the long-term risk of costly blackouts or brownouts in the state, and to reduce the short-term risk of federally mandated rate hikes. ConsumerPowerline has a nationwide track record. The firm has paid end- users more than 18 million dollars just for their commitments over the past few years, to shed a small percentage of their load in order to enhance the reliability of their local electricity grid. This partnership comes on the heels of a just released report by the Federal Regulatory Commission (FERC) which recommends that demand response become an integral component of the nation's energy policy, and that states work cooperatively in finding demand response solutions to provide relief from an overloaded electricity transmission system.


Superconductivity project addresses urban power challenges


September 18, 2006. A new technology that holds promise to transform the global transmission and distribution of electric power was formally energized near Columbus, Ohio. The $9 mn project uses a second-generation High Temperature Superconducting (HTS) cable system to efficiently deliver electric power to approximately 8,600 homes and businesses in suburban Columbus. The Columbus project is the first demonstration of the new Triax HTS cable design, which dramatically reduces the cost of superconducting systems and brings the technology one step closer to commercial viability. The system was developed by Southwire Company and its partners, American Electric Power, Praxair, American Superconductor and the U.S. Department of Energy's Oak Ridge National Laboratory (ORNL). Superconducting cables, operating at extremely low temperatures, eliminate virtually all resistance to the flow of electric current. One Triax HTS cable can carry as much current as 18 large copper cables, with much less energy loss. The project demonstrates the potential role for superconductivity in modernizing electricity system. This new development allows power lines to increase capacity in congested urban areas while using less space. With their higher capacity, superconducting cables have the potential to multiply the supply of electricity to an area using the existing infrastructure footprint. Despite these advantages, high temperature superconducting cable systems are still expensive. The U.S. Department of Energy provided partial funding through its Superconductivity Partnership with Industry program to help make the Columbus project possible.


Thorium Power for possible nuclear energy joint efforts with Poland


September 18, 2006. Thorium Power, Inc. joined a delegation of some of the world's leading developers and providers of nuclear fuels and nuclear power plants on a fact finding mission to Poland. The delegation, which included Westinghouse Electric Company and the Pebble Bed Modular Reactor Company (PBMR), had been invited to tour the Polish nuclear institute at Swierk and hold meetings with senior government officials. The meetings with officials, key scientists, and business leaders in the energy field focused on how cutting edge nuclear technologies can address several of Poland's critical needs, including power generation and the liquefaction and gasification of stony coal. Thorium Power is the leading proliferation resistant nuclear fuel designer in the world. It is a privately-held nuclear technology development company.


Vietnamese power sector looking at the opportunities


September 13, 2006. The last decade has seen economic and industrial growth in several Asian countries. One such country is Vietnam, where GDP growth has been hovering around an impressive 8 per cent in past few years. The industrial sector in the country is displaying a double digit growth which has fueled growth in demand for power by about 15 per cent per year. This increase in power demand makes the Vietnamese market an attractive prospect for global banks and other investors. Vietnam presently has 28 operational power stations able to generate 8,741 MW. Vietnam's electric power industry supplied 53 billion kWh (53 billion units) in 2005 and predicts to almost double to reach approximately 100 billion units in 2010.Power sector needs in Vietnam have been primarily funded by the public sector. In order to address rapidly escalating needs, Vietnam will have to rely more on private participation. To facilitate this, the Government of Vietnam has decided to open the electric power generation and distribution sectors to call for investment from other domestic and foreign investors under various forms, including Independent Power Producers (IPP), Build-Operate- Transfer (BOT), Build-Transfer (BT), Build-Transfer-Operate (BTO), Joint Ventures (JVs), and Joint Stock firms. The World Bank has backed government pleas for private investors to participate in power generation projects in anticipation of energy shortfalls that could curtail the nation's economic growth.


ENDESA to buy 2.7 mt of CO2 Emission Rights in China


September 13, 2006. ENDESA will buy from the Chinese companies Huaneng and Jiuquan Sanyuan Hydro Power 100 per cent of their certified reductions in greenhouse gases in three wind farms and a hydro plant in China in 2006 - 2012, which could reach a total of 2.7 million tonnes (mt) of CO2. The Environment Ministry has approved the deal, which was the final requirement needed following the agreement reached with the Chinese authorities. The agreement covers CDM projects at three wind farms (Changdao, Qidong and Weihai) which belong to the Huaneng company and which have a combined capacity of 188 MW and one at the Gansu hydro plant which is owned by Jiuquan Sanyuan Hydro Power Development and has 26.55 MW capacity. The agreement includes the purchase of all emission rights at these four sites from 2006 to 2012. This operation reinforces ENDESA's position as one of the leading private carbon credit purchasers via the Endesa Climate Initiative, a pioneering initiative for purchasing carbon credits. The target is to purchase 15 mt CO2 emissions rights through to 2012 via the mechanisms provided for in the Joint Application Clean Development Mechanisms contained in the Kyoto Treaty. ENDESA's Spanish facilities slashed their CO2 emissions by 27.5 per cent between 1990 and 2004, while doubling their output during the same period. ENDESA expects to reduce its CO2 emissions by 35 per cent in 2007 compared to 1990.

Renewable Energy Trends



Suzlon's subsidiary ties up with US firm


September 18, 2006. Suzlon energy Ltd’s subsidiary, Suzlon wind energy corporation, has signed an agreement with US-based John Deere wind energy for supply of 247 MW wind turbines. The US-based Suzlon wind energy corporation is the wholly owned subsidiary of Suzlon's international business arm Denmark-based Suzlon energy a/s. Suzlon wind energy corporation finalised the agreement with John Deere to supply wind turbines of the capacity of 247 MW and their delivery would take place in phased manner throughout 2007.


Hotels may find star power in energy


September 18, 2006. Use of renewable sources of energy in hotels may soon be a criterion for the star classification. The ministry of non-conventional sources of energy (MNES) has urged the tourism ministry to give weightage to renewable technologies while awarding star status to hotels. To devise the required methodology, the ministry has suggested availing the expertise of the bureau of energy efficiency. It has pointed out that current use of solar thermal, photovoltaic technologies and bio-gas generation in hotels can be taken as a model for implementing the proposal. In an attempt to encourage use of renewable sources of energy in urban areas, the government has already offered fiscal incentives. Hotels, being one of the largest consumers of energy, is now the focus of the ministry. Renewable technologies meet energy requirements for cooking, air-heating, drying, water-heating, steam and electricity production. Solar photovoltaic systems can be used in hotels for a variety of purposes like street, garden and corridor lights, hoarding and power packs for critical and emergency requirements. Also feasible for electricity generation, biogas can be produced from food leftovers and kitchen wastes. Bhabha Atomic Research Centre has already had designs for such decentralised biogas plants that can be installed in hotels. MNES has already approached hotel management institutes regarding deployment of these technologies.


Essar group forays into wind energy


September 16, 2006. The Essar group is foraying into the fast-growing wind energy segment. Essar Wind Power, the new entity formed for the wind power venture. It will produce electricity and equipment for wind farms in tie-up with German firm RE power Systems. The group's umbrella company, Essar Global, signed a licensing agreement with the German firm for designing and manufacturing 1.5 MW and 2 MW turbines. The company has identified Hazira and Bhuj in Gujarat as two possible locations for the manufacturing facility. The company expects to start commercial production by the middle of next year. Initially, the company will invest about Rs 50 crore ($10.88 mn) to set up the manufacturing base and produce 200 MW power.


To start with, Essar will make the 1.5 MW turbines, the most popular machines in India at present. Once the market expands, the company will move to higher capacity turbines of 2 MW and above for which it has signed an agreement with REpower, one of the leading manufacturers of onshore and offshore wind turbines. High power turbines of 3-5 MW are most likely to be used for offshore installations by firms like ONGC. Initially, Essar has identified India and South East Asian markets for its wind energy foray. REpower's 1.5 MW turbine installations in Germany operate with an average availability of 99 per cent.


In India, similar efficiency is shown by machines made by Suzlon. Currently, India has about 5,300 MW installed wind power capacity with additional capacity of 1700-1800 MW likely to be added in 2006-07. The Indian market for wind energy is the largest in Asia and the fourth largest in the world. According to estimates, India has wind resources to harvest around 45,000 MW of power. The group, which has been in power generation business for one decade, currently operates four power plants with a capacity of over 1,000 MW.


Auto majors team up for fuel tech


September 14, 2006. Five automobile majors — Bajaj Auto, Ashok Leyland, Tata Motors, Mahindra and Eicher Motors — have come together to develop hydrogen-blended compressed natural gas (HCNG)-run vehicles. This is a part of a roadmap to develop alternate and less polluting fuel sources by Siam and the government. The roadmap envisages development of hydrogen as neat fuel and run 100, 000 vehicles on it by 2010. These companies are expected to bring out different HCNG-compliant vehicles in phases. The government’s overall initiative on hydrogen fuel envisages an investment of Rs 24,000 crore ($5.22 bn), a major part of which will be invested in production, storage and dispensation of hydrogen in the country. The first batch of HCNG vehicles are expected to hit roads in next year and fuel infrastructure will be put in place to run 1,000 vehicles operating on 100 per cent hydrogen by 2008. A pilot project will be launched with Siam as the nodal agency for field trials and ministry of non-conventional energy will spearhead this from the government’s side. A memorandum of understanding is expected shortly to fix the timeframe. 

The second stage will be creation of naturally renewable hydrogen fuel infrastructure in the country and make it commercially viable under the hydrogen roadmap developed under the aegis of Ratan Tata, chairman of Tata Motors. The existing facility of Indian Oil Corporation, at Faridabad in Haryana, which has all necessary infrastructure to develop Hydrogen as automotive fuel, will be utilised for the pilot study. Starting with the initial blending of 10-30 per cent hydrogen, which will later be altered to suit performance characteristic of different vehicles. Industry sources also said that to meet the demand, Indian Oil Corporation’s (IOC) is expected to set up a second unit for Hydrogen blending in Delhi next year. And later all the existing 135-CNG stations in the Capital will be made HCNG compliant.


APM to offer renewable energy services


September 15, 2006. ACES Power Marketing (APM), a nationally recognized wholesale energy risk management and transaction execution service company, now has the ability to offer its owners and customers a suite of renewable energy services. These services will be provided through a strategic alliance that APM has formed with leading renewable energy consulting and asset management firm Element Markets LLC. Renewable markets are expanding at a rapid pace due to renewable portfolio standards, voluntary markets, global warming, and energy independence driving the demand for renewable energy and Renewable Energy Credits. The markets are opaque, but with Element Markets LLC’s vast commercial experience and research staff, it can offer a lot of valuable service to APM owners and customers to mitigate risk and maximize value for their REC portfolios.


The services offered through the alliance include due diligence assessments of Renewable Portfolio Standard (RPS) legislation, evaluation of current Renewable Energy Credit (REC) assets, assistance in developing new renewable resources, development and implementation of renewable energy management strategies, identifying potential markets for RECs, providing middle and back office support for REC transactions, and management of RECs, including appropriate trading controls. ACES Power Marketing, headquartered in Carmel, Indiana, is owned by fifteen power supply cooperatives. It also provides services to over thirty additional customers including cooperatives, municipals, financial institutions, independent power producers and energy marketers.


APM's business strategy is unique in the energy marketing and trading industry. It operates as an energy risk management and hedge manager, developing strategies, implementing trading controls, and managing transaction execution for multiple entities as their legal agent. APM's business process allows its customers to actively participate in the hedging strategy by collectively utilizing APM's infrastructure and resources to assess risks and execute specific, customized portfolio strategies.


Biomass ethanol to fuel Honda


September 14, 2006. Honda Motor has co-developed the world's first practical process for producing ethanol out of cellulosic biomass in what would be a big step toward using non-edible plant materials as fuel. Ethanol is a major source of motor fuel in Brazil and is gaining popularity in the United States, but the renewable fuel is produced mainly from sugar cane and corn, raising the issue of balancing supply against the use of the crops as food.

Honda and partner Research Institute of Innovative Technology for the Earth, or RITE, a nonprofit entity set up by the Japanese government and private enterprises, said the new method allows large volumes of ethanol to be produced from widely available waste wood, leaves and other so-called soft biomass. Current technology for converting cellulosic biomass yielded impractically low levels of ethanol due to the interference of fermentation inhibitors with the function of microorganisms that convert sugar into alcohol.

The fermentation inhibitors are formed primarily during the process of separating cellulose and hemicellulose from soft biomass. The new process uses a microorganism developed by RITE that helps reduce such interference, enabling far more efficient ethanol production. Honda's research unit, Honda R&D, aims to set up a pilot plant, in 2008, to test the technology for practical application.

Commercial application has not yet been discussed. Bio-ethanol is also carbon-neutral since carbon dioxide released by the combustion of the fuel is offset by the CO2 captured by plants through photosynthesis. Japan hopes to replace about 500,000 kiloliters (3 million barrels) of transportation fuels with bio-ethanol a year by 2010. The United States has called for improving technologies in order to reduce U.S. oil imports from the Middle East by three-fourths by 2025.

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