Public’s Opposition to Electricity Tariff Increase
Shankar Sharma
Introduction: As per the Karnataka Electricity Reforms Act (KER) 1999 the electricity supply companies in Karnataka are required to get approval of their Annual Revenue Requirement each year, and may require a Tariff review process if a change in tariff is sought. This format called Expected Revenue from Charges (ERC) is expected to provide its revenues, expenses and the reasons for seeking the changes to the existing tariff. Consequent to such application by Electricity Supply Companies (ESCOMs) a public hearing process is undertaken by Karnataka Electricity Regulatory Commission (KERC), wherein different stakeholders of electricity supply in Karnataka will put forth their written/oral submission as to why tariff may/may not be altered.
This year ESCOMs asked for a flat increase of 40 Paise per unit for most categories of consumers across the state. The public participation in this hearing was good with all-round opposition to any increase at all because of the poor performance by ESCOMs. This article contains the salient features of such a submission to KERC by the author.
Part I- Admissibility of tariff application and objections:
KER Act 1999
The Act stipulates that the Commission shall be guided by the following factors:
Section 27(1) (c): “That the tariff progressively reflects the cost of supply of electricity at an adequate and improving level of efficiency”.
· The ESCOMs have not arrived at the actual cost of supply to each category of consumers on a scientific basis.
· This is indicated by, among other things, the fact that each of the ESCOMs has sought an increase of 40 Paise per unit of energy for all categories of customers.
Section 27(1) (d): The factors which would encourage efficiency, economical use of the resources, good performance and optimum investments and other matters which the Commission considers appropriate for the purpose of this Act;
· The efficiency of the performance of the ESCOMs is so bad that AT&C losses in the state is reported to be about 35%, against international standards of less than 10%. If the 4.5% transmission loss attributable to KPTCL is taken out of this equation, one cannot but help to state that the public’s trust has been very much undermined by the attitude and performance of ESCOMs.
· This gross inefficiency since independence has resulted in utter waste of our natural resources, inadequate development of the society, and denial of electricity to many section of our society.
· To quote the honorable Prime Minister: “No civilised society nor a functioning commercial entity can sustain losses on such a scale.”
· The inefficiency of ESCOMs has resulted in the State’s inability to allocate adequate funds to other priority sectors like poverty alleviation, health, education etc.
· Such inefficiencies have also resulted in environmental degradation, and decay of public’s confidence in the state’s agencies.
Section 27(1) (e): The interests of the consumers are safeguarded and at the same time, the consumers pay for the use of electricity in a reasonable manner based on the average cost of supply of energy;
· Interest of none of the categories of consumers has been safeguarded.
· The interest of even the Irrigation Pump set owners, who are paying either very small or nil charges for getting the supply connection, is not safeguarded because they are not getting un-interrupted quality supply when they badly need it.
· So are the domestic consumers, especially in rural areas, who may get poor voltages whenever they get supply.
· Industrial and Commercial consumers, who are massively cross-subsidising other categories of consumers, would have been expected to get much better service in a rational sense, but ESCOMs are failing them too.
· ESCOMS have consistently failed to collect the charges fully even for the poor quality supply, as indicated by the huge amount pending as bills.
Section 27(1) (f): The electricity generation, transmission, distribution and supply are conducted on commercial principles.
· The distribution and supply responsibilities of ESCOMs have never been conducted on sound commercial principles.
· This is evident from the sustained losses they are incurring, the ever needed subsidy from the state govt. and repeated tariff revision sought, without showing any commensurate improvements.
· Banks and other financial institutions are known to be reluctant to provide finance to ESCOMs.
Section 27(5) (b): Any tariff implemented under this Act shall be just and reasonable and be such as to promote economic efficiency in the supply and consumption of electricity;
· As compared to the average cost of supply, whereas a high tariff imposed on the industrial and commercial consumers is said to be leading to the non-viability of many enterprises, the unrealistically low tariff for residential and IP set consumers is leading to unsustainable level of exploitation of the natural resources like water and coal.
· Whereas about 45% of the total energy available for sale in the state goes to IP sets, only a tiny percentage of revenue comes from this sector.
· In general the IP sets in the country are known to consume 40 to 50% more energy than required to do the desired job.
· If we consider the fact that the overall efficiency of bringing the coal based electricity to remote IP sets is estimated to be only about 10% of the mined coal energy, the gravity of the situation comes to the fore.
· With more than 60% of the annual energy sales in the state coming from coal fired stations, the exploitation of our natural resources like land, water and coal should give raise to a lot of concern.
· On any count, it cannot be said that the tariff at present is just and reasonable and is such as to promote economic efficiency in the supply and consumption.
IE Act 2003
Section 55(1): No licensee shall supply electricity, after the expiry of two years from the appointed date, except through the installation of a correct meter ….”
· While most of the IP sets are known to be supplied electricity without any meters, a considerable percentage of consumers in domestic, street light and commercial categories are also known to have no or incorrect metering systems.
· Without accurately measuring the energy supplied, how do the ESCOMs ensure that the subsidy provided to agricultural sector is clearly targeted (for the most needy farmers), and is not being misused or does not lead to inefficiency/waste?
· Such a scenario can only termed as abetting a crime under the IE Act 2003.
In addition, certain provisions of KERC (Tariff) Regulations 2000 are relevant to this submission.
KERC (Tariff) Regulations 2000
Chapter – II, Section 4 (5) (VI): The licensee's application for amendment of tariff shall contain a statement of any proposed cross subsidy including the amount of such subsidy to the affected consumer category and the source of offset of this subsidy, (e.g. other consumer category/categories).
· No statement of this kind is provided by ESCOMs.
Chapter – II, Section 4 (5) (IX): A statement of any subsidy committed by the Govt. of Karnataka, the consumers to whom it is directed, and the way in which such subsidy is proposed to be reflected in the proposed tariffs applicable to these consumers.
· No statement of this kind is provided by ESCOMs.
Inferences:
· All the issues discussed above indicate that ESCOMs have repeatedly failed to comply with important provisions of the relevant Acts.
· There has been a cumulative increase in average tariff since year 2000 to the extent of more than 41%. What benefits have been accrued to the public as compared to the situation in year 2000, to deserve further increase of about 8% in the tariff?
· There is no discernible improvement, whether it is improvement in supply voltage or reliability statistics or service standards.
· As per the report on Progress in Power sector reforms in Karnataka, out of 23 directives by KERC it is found that 15 are non-conformities.
· It should be emphasised here that there is really no need for ESCOMs to ask for the upward revision of tariff at this point in time, if they were to show the commitment to improve the operational efficiencies: i.e bringing down the AT&C loss to international standards; ensure accurate metering of all the connected installations; improve the revenue collection efficiency to 100%; adopt international bench marking and best work practices.
· The increase in revenue that can be forthcoming because of the efficiency improvement measures is expected to more than off set the additional expenses.
· From the assumed sale of about 26,000 MU approved by the Commission for 2006, at an average selling rate of Rs. 3.56 per units as approved by the Commission, savings of each percentage of technical loss can result in additional revenue of about Rs.100 crores, in addition to many other benefits to the society.
· Total A&G expenses and employee cost of the five ESCOMs have gone up by 230% and 78% respectively since 2003. This indicates very poor management of its costs.
· The response provided to various objections and suggestions by the objectors is so poor that one wonders whether these companies are serious in their roles.
All these inferences point towards the lack of professionalism, accountability and sensitivity towards the paying public. Hence there is no ground at all for considering the tariff increase. Until all these issues are satisfactorily resolved by the ESCOMs and the necessary commitments are provided by them, the application by ESCOMs for the upward revision of tariff should be summarily rejected. Correct signals should also be sent to indicate that the public will expect the ESCOMs to work towards the improvement in operational matters by a huge margin.
Part II - Suggestions for the improvement of ESCOMs:
There are number of ways in which the above listed problem can be redressed:
As per section 64(3) of IE Act 2003, “The Appropriate Commission shall within 120 days……...and after considering all suggestions and objections received from the public, issue a tariff order ….”. In this background the following suggestions are made for the improvement in performance of ESCOMs.
For 58 years since independence, the stake holders have given ample opportunities for the ESCOMs and their predecessors to improve their performance to make them efficient, transparent and commercially viable enterprises. But there has been continuous disappointment for the public, reduced development of the economy, and huge financial burden for the state. There cannot be any alternative for the ESCOMs but to review the failed old policies, and adopt paradigm shift in the very conviction and attitude.
· The major reason for the tariff increase application has been that there would be gap between the costs and revenue next year. The difference between costs and revenue can be bridged, not by increasing the tariff alone, but must be first attempted by reducing the costs.
· Honest implementation of various improvement measures in all operational matters will certainly help to reduce the costs. ESCOMs should review and ensure that their processes of planning, design, construction, specification, procurement, testing, commissioning, operation, maintenance, fault investigation, repair procedures, safety aspects, cost control, records; and the performance / service standards are comparable to the industry best practices, and they are being subjected to regular peer review.
· A major exercise that can help in achieving the turn around of ESCOMs will be the drastic reduction of AT&C losses, and effective and innovative Demand Side Management (DSM).
· The avenues for reducing the AT&C losses are well known, and only require the necessary political will and honest implementation.
· As examples, NDPL, Delhi has reduced its total losses by 25% in 4 years. Reliance Energy-owned BSES Yamuna and BSES Rajdhani, and Tata Power-owned NDPL have projected a net revenue surplus for the current fiscal at last year's tariff levels.
Demand Side Management (DSM) and energy conservation
· It is not clear to the public as to why ESCOMs (and the country as a whole), have not embarked on a major drive in DSM. Since supply side management is not entirely in their control and is getting very complex, each ESCOM must put maximum emphasis on DSM.
· There is a huge potential in this sector, which should be seen as a virtual addition of generating capacity, and not the curtailment of the energy use.
· Time-of-day metering and appropriate tariff slabs can reduce the morning and evening demand considerably. This should be considered not only for all HT industries but for all consumers above a certain connected load, say 25 kW in the first stage.
· Staggering of working hours between different regions of the state or within a city like Bangalore should be seriously considered.
· As per Bureau of Energy Efficiency, at the prevailing cost of additional energy generation, it costs a unit of energy about one fourth the cost to save than to produce it with new capacity. Hence any amount of rational investment will provide huge returns not just to ESCOMs but to the whole society, in the form of careful usage of natural resources.
Views are personal
(T o be continued)
Can Nuclear Power Solve the Global Warming Problem?
By Brice Smith
Climate change is by far the most serious vulnerability associated with the world’s current energy system. While there are significant uncertainties, the possible outcomes of global warming are so varied and potentially so severe in their ecological and human impacts that immediate precautionary action is called for. Compared to fossil fuels, nuclear power emits far lower levels of greenhouse gases even when mining, enrichment, and fuel fabrication are taken into consideration. As a result, some have come to believe that nuclear power should play a role in reducing greenhouse gas emissions. The most important practical consideration, rarely addressed in the debate, is this: how many nuclear power plants will it take to significantly impact future carbon dioxide emissions from fossil fuel power plants? We have considered in detail two representative scenarios for the future expansion of nuclear power. The assumed worldwide growth rate of electricity is the same for both, 2.1 percent per year, comparable to values assumed in most conventional studies of the electricity sector.
Nuclear Growth Scenarios
The first scenario was taken from a 2003 study from the Massachusetts Institute of Technology. In this report, the authors envisioned a “global growth scenario” with a base case of 1,000 gigawatts (GW) of nuclear capacity installed around the world by 2050. Since all of the reactors in operation today would be shutdown by mid-century, this would represent a net increase of roughly a factor of three over today’s effective capacity. To give a sense of scale, this proposal would require one new reactor to come online somewhere in the world every 15 days on average between 2010 and 2050. Despite the increase in nuclear power envisioned under the global growth scenario, the proportion of electricity supplied by nuclear power plants would increase only slightly, from about 16 percent to about 20 percent. As a result, fossil fuel-fired generation would also grow and the emissions of carbon dioxide, the most important greenhouse gas, from the electricity sector would continue to increase. In order to consider a more serious effort to limit carbon emissions through the use of nuclear power, we developed the “steady-state growth scenario.” Using the same electricity demand growth assumed in the MIT report, we calculated the number of nuclear reactors that would be required to simply maintain global carbon dioxide emissions at their year 2000 levels. Considering a range of assumptions about the future contribution of renewables and natural gas fired plants, we found that between 1,900 and 3,300 GW of nuclear capacity would be required to hold emissions constant. For simplicity we used 2,500 GW as the alternative case study. This scenario is roughly equivalent to assuming that nuclear plays about the same role in the global electricity sector in the year 2050 as coal does today in the United States. In order to significantly reduce carbon dioxide emissions, nuclear power plant construction would have to be more rapid than one a week. We have not considered such scenarios, since the dangers of using nuclear energy to address greenhouse gas emissions are amply clear in the two scenarios discussed here.
Evaluating the Scenarios
Given that both time and resources are limited, a choice must be made as to which sources of electricity should be pursued aggressively and which should not. The best mix of alternatives will vary according to local, regional, and country-wide resources and needs. In making a choice, the following should serve to help guide the selection:
1. The options must be capable of making a significant contribution to a reduction in greenhouse gas emissions, with a preference given to those that achieve more rapid reductions;
2. The options should be economically competitive to facilitate their rapid entry into the market; and,
3. The options should minimize other environmental and security impacts and should be compatible with a longer term vision for creating an equitable and sustainable global energy system.
It is within this context that the future of nuclear power must be judged.
Security
The largest vulnerability associated with a large expansion of nuclear power is likely to be its connection to the potential proliferation of nuclear weapons. In order to fuel the global or steady-state growth scenarios, the world’s uranium enrichment capacity would have to increase by approximately two and half to six times.
Just one percent of the enrichment capacity required by the global growth scenario would be enough to supply the highly-enriched uranium for nearly 210 nuclear weapons every year. Reprocessing the spent fuel would add significantly to these security risks. Proposals to reduce the risks of nuclear weapons proliferation are unlikely to be successful in a world where the five acknowledged nuclear weapons states seek to retain their arsenals indefinitely. The institutionalization of a system in which some states are allowed to possess nuclear weapons while dictating intrusive inspections and restricting what activities other states may pursue is not likely to be sustainable. As summarized by Mohamed ElBaradei, director general of the International Atomic Energy Agency: We must abandon the unworkable notion that it is morally reprehensible for some countries to pursue weapons of mass destruction yet morally acceptable for others to rely on them for security — indeed to continue to refine their capacities and postulate plans for their use. Without a concrete, verifiable program to irreversibly eliminate the tens of thousands of existing nuclear weapons, no nonproliferation strategy is likely to be successful no matter how strong.
Safety
The potential for a catastrophic reactor accident or well-coordinated terrorist attack to release a large amount of radiation is another unique danger of nuclear power. Such a release could have extremely severe consequences for human health and the environment. The so-called CRAC-2 study conducted by Sandia National Laboratories estimated that a worst case accident at an existing nuclear plant in the United States could, for some sites, result in tens of thousands of prompt and long-term deaths and cause hundreds of billions of dollars in damages. Even if a reactor’s secondary containment was not breached, a serious accident would still cost a great deal. Despite the importance of reactor safety, the probabilistic risk assessments used to estimate the likelihood of accidents have numerous methodological weaknesses that limit their usefulness. First, the questions of completeness and how to incorporate design defects are particularly difficult to handle. Second, concerns arise due to the fact that nuclear power demands an extremely high level of competence at all times from the regulators and managers all the way through to the operators and maintenance crews. Finally, the increased use of computers and digital systems create important safety tradeoffs, with improvements possible during normal operation, but with the potential for unexpected problems to arise during accidents.
In the nearly 3,000 reactor-years of experience at power plants in the United States, there has been one partial core meltdown and a number of near misses and close calls. From this, the probability of such an accident occurring is estimated to be between 1 in 8,440 and 1 in 630 per year. Using the median accident probability of 1 in 1,800 per year, and retaining the assumption from the MIT report that future plants will be ten times safer than those in operation today, we find that the probability of at least one accident occurring somewhere in the world by 2050 would be greater than 75 percent for the global growth scenario, and over 90 percent for the steady-state growth scenario.
The possibility that public opinion could turn sharply against the widespread use of nuclear power following an accident is a significant vulnerability. If nuclear power was in the process of being expanded, public pressure following an accident would leave open few options. On the other hand, if long-term plans to phase out nuclear power were already being carried out, there would be far more options available and those options could be accelerated with less disruption to the overall economy.
Spent fuel
There is also the difficulty of managing radioactive waste. The existence of weapons-usable plutonium in the waste complicates the problem. While the management of low-level waste will continue to pose a challenge, by far the largest concern is how to handle spent nuclear fuel. Complicating this task are the long half-lives of some of the radio nuclides present in the waste (for example: plutonium- 239, half-life 24,000 years; technetium-99, half-life 212,000 years; and iodine-129, half-life 15.7 million years). Through 2050, the global growth scenario would lead to nearly a doubling of the average rate at which spent fuel is generated, with proportionally larger increases under the steady-state growth scenario. Assuming a constant rate of growth, a repository with the capacity of Yucca Mountain (70,000 metric tons) would have to come online somewhere in the world every five and a half years in order to handle the waste that would be generated under the global growth scenario. For the steady-state growth scenario, a new repository would be needed every three years on average.
The characterization and siting of repositories rapidly enough to handle this waste would be a very serious challenge. Yucca Mountain has been studied for more than two decades, and it has been the sole focus of the U.S. Department of Energy (DOE) repository program since 1987. Despite this effort, and nearly $9 billion in expenditures, to date no license application has yet been filed. In fact, in February 2006, Secretary of Energy Samuel Bodman admitted that the DOE can no longer make an official estimate for when Yucca Mountain might open due to ongoing difficulties faced by the project.
Internationally, no country plans to have a repository in operation before 2020, at the earliest, and all repository programs have encountered problems during development. Even if the capacity per repository is increased, deep geologic disposal will remain a major vulnerability of a much-expanded nuclear power system. Alternatives to repository disposal are unlikely to overcome the challenges posed by the amount of waste that would be generated under the global or steady-state growth scenarios.
(To be continued)
Courtesy: Science for Democratic Action (Volume 14, Number 2), published by Institute for Energy and Environmental Research.
NEWS BRIEF
NATIONAL
OIL & GAS
Upstream
ONGC seeks to maximise marginal oilfields
October 13, 2006. `Marginal oilfields are no longer marginal' — this is the new mantra for energy major Oil and Natural Gas Corporation Ltd (ONGC). It plans to develop 153 onshore and offshore marginal fields in the near future. Development of marginal fields is one of ONGC's strategic business pursuits to increase production by unlocking small pools of hydrocarbon reserves. It has already monetised 38 fields and 94 fields are under monetisation. Marginal fields were allocated to ONGC before the New Exploration Licensing Policy and they have the capacity to produce less than 10,000 barrels of crude oil per day. Many of these are located far from the major oil-producing fields on the western seaboard of India and remote locations in Assam. ONGC's 96 marginal fields hold 200 million tonnes of oil and 120 billion cubic metres of gas. Marginal fields have low oil and gas reserves, which are economically viable when produced with low capital cost and overheads. The company plans to spend Rs 1,000 crore per field for development; however, this will vary according to the size of the field. Some of the offshore marginal fields would be developed by ONGC as it already has the infrastructure. Onshore fields could be sublet to other oil companies.
ONGC’s KG basin plans may go away
October 12, 2006. In a major setback to ONGC’s plans to develop three deepwater blocks in the KG basin with British Gas as its strategic partner, the Directorate General of Hydrocarbons (DGH) has recommended that ONGC be asked to surrender these blocks to the government. These may then be offered in the next NELP round. The DGH has proposed the same for ONGC’s Kutch offshore block, which was to be jointly developed with British Petroleum. In a recent letter to the petroleum ministry, the DGH has also recommended against acceding to ONGC’s request to extend the petroleum exploration licences (PEL) for these four blocks. The current PEL for the three KG blocks expires between January and May next year. The PEL for the Kutch block expires in August 2008. The DGH decision is in line with the petroleum ministry’s earlier decision to oppose any further extension of the PEL. However, subsequent to the ministry’s rejection on extending the PEL, ONGC re-submitted a proposal for a strategic alliance with BG and BP along with comprehensive details of the work programme. The ministry had referred it to the DGH for its opinion.
ONGC plans $1.3 bn for seven western fields
October 11, 2006. Indian exploration and production major, Oil and Natural Gas Corporation, plans to invest Rs 6000 crore ($1.3 bn) to develop seven marginal fields on the western off-shore. The off-shore, which has eight marginal fields, of which one, cluster 7, was outsourced to a consortium led by HPCL late last month. This cluster is expected to produce around 18,000 to 20,000 barrels a day at an operating cost of $12 barrels per day. Originally, the company had planned to outsource production on 18 onshore fields and 34 offshore fields, including the seven clusters. Marginal fields typically have low oil and gas reserves, which are economically viable only when produced with low capital cost and overheads. Most of these fields were allocated to ONGC before the New Exploration Licensing Policy came into force and are estimated to have a capacity for producing less than 10,000 barrels a day. Also, many of them are located far from the company’s major oil producing fields on the western sea board and remote locations in Assam.
The ONGC executive also indicated that the company was actively considering outsourcing production on onshore marginal fields in Assam. In 2002, the oil major had offered to outsource the development of onshore marginal 18 fields in phases. In 2004, another eight fields were awarded for development to Prize Petroleum, Gujarat State Petroleum Corporation Limited and Assam Petroleum Company.
Downstream oil, gas regulator by Nov-end
October 17, 2006. A regulator for the downstream oil and gas sector is expected to be in place by the end of November. The Ministry of Petroleum and Natural Gas said the government had invited applications for the regulator’s post and the selection process would be complete by the third week of November. The regulatory board would start functioning by the end of November or early December. The Petroleum and Natural Gas Regulatory Bill passed in the monsoon session of Parliament provides for a panel with five members. The panel will be appointed by a committee headed by Planning Commission member Dr Kirit Parikh and will have petroleum, finance, law and justice and commerce secretaries as members. The downstream regulator will cover refining, processing, storage, transportation, distribution, marketing and sale of petroleum products, with the aim of ensuring transparency and fair play in the market and protecting the interests of consumers. The regulatory board is expected to ensure uninterrupted and adequate supply of petroleum products and natural gas and promote competitive markets. The idea of one regulator for upstream, midstream and downstream activities was mooted four years ago. However, the Director General of Hydrocarbons was appointed as the upstream regulator just over a month ago. Several industry studies had also emphasised the need for a regulatory framework to ensure transparency, especially in the natural gas sector.
IOC to pump $1 bn into Panipat refinery
October 11, 2006. Indian Oil Corporation is planning to invest Rs 5,000 crore to expand the capacity of its 12 million tonne (mt) Panipat refinery to 15 mt. The expansion, which has already been approved by the IOC board, will be completed in three years. The 2 mt naphtha cracker plant is also expected to be complete by the same time. The total value of the petrochemicals project in Panipat is estimated at Rs 11,900 crore, significantly higher than the previous estimate of Rs 6,300 crore. The naphtha plant will have a capacity to manufacture 8 lakh tonne per annum (tpa) of ethylene, 5.75 lakh tpa of propylene, 3.5 lakh tpa of linear low-density polyethylene, 3 lakh tpa of high-density polyethylene, 2 x 3,00,000 tonne of polypropylene and 2.5 lakh tonne of monoethylene glycol.
Transportation / Distribution / Trade
October 17, 2006. The Centre expects an investment of around Rs 10,000 crore during the 11th Plan period for supply of piped gas to 2 crore households in 25-30 cities by 2012. The policy, aimed at open access for all players and promoting competition, would focus on benefiting customers.
RIL seeks Dabhol LNG facility in lieu of gas sale
October 16, 2006. Reliance Industries (RIL), which had recently approached the Centre to sell gas to Ratnagiri Gas and Power’s (RGPPL) Dabhol power plant, wants the exclusive use of the plant’s under-construction LNG facility in return for the gas. RIL has offered gas at $ 5 per million metric British thermal unit (MMBTU). This is a couple of dollars less than the current spot price of gas. While the ministry could find the price attractive as gas prices are expected to remain firm over the next couple of years, it is not happy with RIL’s pitch for the LNG facility. Currently, the government is discussing the modalities of hiving off Dabhol’s LNG facility to a private investor, with Petronet LNG leading the race for the acquisition.
October 14, 2006. LNG may not fire the Dabhol power plant after all. The cabinet secretary has asked the petroleum ministry to explore the possibility of long-term fuel supplies by domestic companies such as Reliance Industries (RIL), ONGC, British Gas to make power generated by the Dabhol power plant affordable. The government is now veering around to the view that the plant cannot be sustained on LNG as it would tend to be both a volatile and expensive fuel. Domestic gas on the other hand would be both cheaper and stable in supplies.
With RIL set to begin gas production from the KG basin in ’08, the government has now asked RIL to see if gas can be fed to the Dabhol power plant as well. This is for the first time that the government is now talking of natural gas as a fuel instead of LNG. LNG can, however, be taken as a back up fuel in the short term. Both the power ministry and Ratnagiri Gas and Power (RGPPL), the owner of erstwhile Dhabol Power Plant, are willing to offer up to 40% stake to any domestic oil firm along with Petronet LNG (PLL) in hived-off LNG terminal to ensure long-term fuel supply. They believe that 40% equity stake in the terminal is enough to incentivise the fuel supplier for a long-term commitment.
RGPPL has said that the LNG terminal is one of the important parts of the power project. It will help the company to generate additional revenue as additional capacity of the terminal could be used for merchandising. Currently, the LNG terminal has a merchandising capacity of 2.9 MT which can be extended by another 3 MT. The power plant is likely to be completed by ’07. The empowered group of ministers (EGoM), which had taken a stock of the development regarding RGPPL, has been informed that one block of 740 MW power generation capacity would be able to function from November ’06. The plant will use naphtha as fuel. Two other blocks of similar capacities are expected to be completed by mid-’07 and end-’07. The short-term import of gas for the power plant is also expected to start from mid-’07 through the pipeline connecting PLL’s Dahej terminal to Dabhol. The pipeline will be completed by March ’07.
Zenith Birla eyes gas pipeline
October 12, 2006. Zenith Birla (India) Limited is eyeing the oil and gas pipeline market in the US and West Asia. Yash Birla group, said the difference in the cost of production of pipes for oil and gas in India and the US will help the Birla group fare well overseas. Zenith has a production capacity of 120,000 MT of pipe, of which 25,000 MT is being converted into oil and gas pipeline. The company has licence to manufacture grade pipes of 8” diametre approved by the American Petroleum Institute (API). Zenith Birla will manufacture Electric Resistance Welded (ERW) pipes for the gas and oil industry in the US and West Asia. The group plans to set up a manufacturing facility for mechanical tubes which is used mainly in automobile industry.
GSPC to set up LNG import terminal in Guj
October 12, 2006. Gujarat State Petroleum Corporation plans to set up a Liquefied Natural Gas (LNG) import terminal in Gujarat by 2010-11. GSPC is planning for an LNG import and regasification terminal of 5 million tonnes capacity. GSPC was talking to several Indian and foreign companies for a partnership in the LNG terminal.
October 11, 2006. The state-owned Hindustan Petroleum Corporation (HPCL) is in advanced stage of discussions to acquire the ailing Greater Calcutta Gas Supply Corporation (GCGSC), a government of West Bengal undertaking. HPCL’s move is aimed at entering the natural gas business in the eastern part of the country. Even the state-owned utility gas carrier Gail is said to be in the race to acquire GCGSC and had completed due diligence for the same.
GCGSC boasts of a distribution network of 700 km in Kolkata and Howrah, two gas holders with compressor house and a nitrogen plant. At present, GCGSC supplies coal gas produced at Dankuni complex of Coal India (CIL) and Durgapur Projects (DPL) through its distribution network in Kolkata and Howrah to the domestic, commercial and industrial consumers. The company supplies gas to over 6,000 domestic consumers and over 500 industrial units.
Cochin port to convert oil terminal for import of LNG
October 11, 2006. The Cochin Port Trust (CPT) plans to convert the existing oil terminal to import liquefied natural gas (LNG). Indian Oil Corporation has already approached the port trust with a proposal to provide them with an exclusive terminal to handle imported LNG. After the commissioning of SPM, oil terminals of CPT will remain idle and hence the plan to convert one of the terminals to an exclusive LNG inlet. IOC can take imported bulk LNG to its bottling unit at Irimpanam from the port, near here and can be sent for distribution. At present, the company is importing LNG through the Mangalore port for distribution in southern states.
Policy / Performance
Oil cos split over marketing exclusivity
October 17, 2006. Mukesh Ambani’s Reliance Industries Ltd, ADAG, Indian Oil Corporation (IOC) and GSPC stuck to their guns and opposed the marketing exclusivity in the city gas distribution on the grounds that it was against concept of allowing competition and unfair to other entities having plans to market gas in the same city. On the other hand, Shell, British Gas, BP, GAIL India and ONGC supported the marketing exclusivity and said not providing marketing exclusivity would make it difficult for entities to upfront plan for an efficient network. The Centre in next week would come out with a comprehensive policy to encourage investment in building up infrastructure to provide piped natural gas to two crore urban households in cities and towns and to protect interests of the piped natural gas consumers within next three years. Similarly, the empowered committee on gas pricing would release its recommendations on October 31.
ONGC demands changes in royalty payment criteria
October 17, 2006. Oil and Natural Gas Corporation has demanded that royalty on crude oil be levied on the price it realises from refiners. At present, the levy is calculated on pre-discount rates, which has led to an excess payout of Rs 1,106 crore in the last three fiscals. ONGC has to pay a 10 per cent royalty on the price realised from rates at which crude oil from onland fields is sold. Since ’03-04, ONGC has been asked to make up for one-third of the revenue loss on selling domestic LPG and kerosene below the cost by way of discounts on crude oil it sells to refiners IOC, BPCL and HPCL. This year, ONGC extended a discount of $26.5 a barrel in April-June quarter but royalty is being levied at the pre-discount price of about $72 per barrel. Similarly, in the second quarter this fiscal, a discount of $26.1 a barrel is being extended.
Petrol, diesel retail pricing policy overhaul proposed
October 17, 2006. The petroleum ministry’s sub-group on marketing of petroleum products has proposed a complete overhaul of the current pricing policy for retailing petrol and diesel in the country. The sub-group’s report, submitted to petroleum secretary has recommended the policy should be reviewed to provide a level-playing field between public sector oil marketing firms and new players, including those in the private sector. The current pricing policy, where PSU oil firms sell petrol and diesel below the market price and in turn get partly compensated for their under-realisations through an ad hoc mechanism, is not working well with the new players. The report will become an important input for the working group for formulation of the 11th Five-Year Plan (2007-2012) for the petroleum and natural gas sector. The sub-group has further pointed out in its report that any new player willing to market transportation fuels in India is either required to invest at least Rs 2,000 crore in the hydrocarbon sector including exploration and production, pipelines and terminals, or should produce 3 million tonne of crude to market the fuel.
GAIL to spend $248 mn on CBM blocks
October 16, 2007. State-owned gas transmission company GAIL (India) Ltd is likely to invest about Rs 1,125 crore ($248 mn) to develop the three coal-bed methane (CBM) blocks that it has won along with its international consortium in the recently concluded third round of CBM bidding. The consortium of Arrow Energy (India) Pty Ltd, GAIL and EIG Energy Infrastructure Group A.B. Ltd have been awarded three blocks with Tata Power Company being consortium partner in two of the three blocks. The total expected capital expenditure for the entire project, with the project duration assumption of 20 years, would be to the tune of Rs 2,250 crore to Rs 2,700 crore, of which GAIL's share would be between Rs 900 crore and Rs 1,125 crore. The estimated expenditure for the first phase of exploration of the three blocks is to the tune of Rs 72 crore, of which GAIL's share would be about Rs 27 crore. The company expects the formalities pertaining to the awarding of the blocks to be completed by next month and exploration activities to start early 2007. Production from the blocks is expected to start in 2011. Out of the three blocks, one block is in Rajmahal coalfield, Jharkhand, and the other two blocks are in Mandraigarh and Tata Pani Ramkola coalfield in Chhattisgarh. As per the Directorate General of Hydrocarbons (DGH), the resource potential of the Rajmahal blocks is 5.5 TCF (trillion cubic feet) and for the Mandraigarh and Tata Pani Ramkola coalfields is 4.2 TCF and 1.9 TCF, respectively. Currently, Arrow is the operator for all the three blocks, but GAIL expects the operatorship to be transferred to it in the long run.
BPCL, HPCL seek charter ships for oil imports
October 15, 2006. BPCL and HPCL have approached the Petroleum Ministry to allow them to charter ships for oil imports directly instead of going through Transchart, on the lines of similar dispensation given to IOC. Based on the experience of IOC chartering ships directly since June 2005, both BPCL and HPCL have applied to the Ministry since the flexibility of chartering their own vessels would bring benefits in terms of cost and time. In April 2005, the Cabinet had granted permission to IOC to make shipping arrangements for importing crude on its own without going through Transchart; a final decision in case of BPCL and HPCL would also require Cabinet approval.
ONGC set to unveil new exploration strategy
October 15, 2006. Oil and Natural Gas Corp (ONGC), the country's largest oil producer, which has been facing flak for decline in its exploration and production (E&P) activities, is expected to unveil its revamped exploration strategy. Under the new structure, each acreage of the company would be considered as a discreet virtual company or a strategic business unit. Elaborating on the concept, the top management of the company felt that grass-root level awareness needs to be strengthened in the new structure and even executives down the line need to be empowered to take decisions. Once the new structure is implemented, each acreage manager will work as a CEO of the E&P block with financial and administrative powers. Each acreage manager will have two to four exploration personnel working with him. The acreage manager and his team would be answerable to a block manager, who would be responsible for monitoring the number of acreages decided by the Director (Exploration) of ONGC.
The block manager would do the data integration and would be reporting to a basin manager, who would be responsible for the entire basin, allocate budget for development work, monitor the acreage, and also coordinate with the corporate head office. The basin manager would be answerable to the Director (Exploration). By adopting this new structure, the company hopes to have a more transparent and result-oriented E&P set up. The Petroleum Ministry has, time and again, voiced concern on ONGC's E&P activities, which is the core business of the company. The Ministry at the company's business plan review meeting had asked ONGC to focus more on its core competency. The company has over 150 exploration acreages under it in the country's all seven producing basins.
Min targets 26 pc increase in crude output
October 12, 2006. The Ministry for Petroleum and Natural Gas has projected a 26 per cent increase in domestic crude oil production and a 41 per cent increase in natural gas production in the XI Plan period. Crude oil and natural gas production in the country over the last four years of the current Five Year Plan has been almost stagnant as there had been few major oil and gas discoveries by state-owned E&P companies. Some of the other reasons cited for the stagnant production include the natural decline in the ageing fields. The Minister informed the Committee that the targets and strategy for XI Plan relating to oil and gas sector were being finalised. It is proposed to target an increase of 26 per cent in domestic production of crude oil to 211.64 million metric tonnes (MMT) over the X Plan achievements, which is likely to be 167.74 MMT. Similarly, the production of natural gas is projected to increase by 41 per cent in XI Plan period to 224.56 billion cubic meters (BCM) over X Plan estimated production of 158.79 BCM.
Besides, the first Coal Bed Methane (CBM) gas production is slated to begin in 2007-08, the first year of XI Plan. During the XI Plan period CBM production is projected at 3.78 BCM. The country was likely to witness gas production from another alternative source — Underground Coal Specification (UCS) — towards the end of XI the Plan. The Committee was also informed that overseas production of oil and gas during XI Plan was projected to increase to about 45 million metric tonnes of oil equivalent (MMTOE) comprising about 35 MMT of crude oil and about 10 BCM of gas. This would be more than double of X Plan period production of 22.24 MMTOE (16.83 MMT of crude oil and 5.41 BCM of gas). The Ministry also proposes to bring 65 per cent of India's sedimentary basins under exploration by the end of XI Plan.
Oil and gas production in India stagnant for 4 years
October 11, 2006. Crude oil and natural gas production in the country over the last four years of the current Five-Year Plan has been almost stagnant. The crude oil production during the period stood at around 33 million metric tonne, while gas production was about 31-32 billion cubic meters (bcm). Presenting by Parliament Consultative Committee of the ministry of petroleum and natural gas. There had been a few major oil and gas discoveries by state-owned exploration and production firms, ONGC and Oil India Ltd (OIL). The agenda of this meeting was exploration and production sector in India. Some of the reasons for the stagnant oil and gas production include the natural decline in the ageing fields producing the fuels. Also, it will take about seven to eight years to develop the oil and gas discoveries announced by private and joint venture companies in the last two to three years. On the status of major oil and gas development projects, Cairn Energy, which had discovered huge oil and gas reserves in Rajasthan, would be producing 6 million metric tonne of crude oil per annum from 2007-08 onwards, through development efforts of oil discoveries in Rajasthan.
An increase of 1.7 million standard cubic meters of gas production is likely to take place in the current year itself from the Tapti gas field of the joint venture consortium comprising ONGC, Reliance and British Gas. Another 2.5 mmscmd increase in gas production is slated in 2007-08. Besides the Tapti field, an additional 1.3 mmscmd of natural gas is expected to be produced from the PY-1 field of the Hindustan Oil Exploration Company (HOEC) from 2007-08 onwards, following completion of scheduled development plan. On gas production from Reliance Industries Limited's (RIL’s) KG offshore field, the minister said an additional 40 mmscmd of natural gas was likely to be produced from 2008-09 onwards. The five discoveries announced by ONGC are, together, expected to yield about 15 mmscmd of gas in 2009-10, going up to 33 mmscmd in 2011-12. However, this increase in production will be offset by decline in gas production from the western offshore area.
October 11, 2006. The six-nation Gulf Cooperation Council (GCC) has asked India to push through financial sector reforms and in return offered its huge oil and gas reserves to meet the country’s energy needs. The six GCC countries—UAE, Oman, Qatar, Bahrain, Saudi Arabia and Kuwait—were keen to invest long-term funds in the infrastructure sector. Non-oil trade between India and the GCC could see an exponential growth from the meagre $16 billion in 2005 to $120-125 billion over the next five years. Opening up the pension fund business would help India attract long-term funds for the infrastructure sector. The six Gulf countries account for 45 per cent of the world’s oil reserves and 24 per cent of gas reserves. India, which imports around 70 per cent of its oil requirements, is also desperately looking for funds of up to a whopping $320 billion over the next five to seven years to help bankroll improvements in its physical infrastructure. India and the GCC are also negotiating a comprehensive economic cooperation agreement that would cover trade, investment and services. The two countries expect to sign the pact by 2007. Predicting that international oil prices would not fall significantly in the next few years, asked to India to meet its energy needs by importing oil and gas from the GCC. Currently, around 78 per cent of GCC’s total exports, worth $368 billion, comprise oil and oil products.
Reliance Petro to borrow $2 bn for expansion
POWER
Generation
October 17, 2006. Brakel, a Dutch company, Reliance Energy, and DS Constructions are some of the notable power brands in line for the proposed three-hydel projects in Himachal Pradesh. The state government said it had received a good response to the global tenders floated for setting up the three proposed projects in the hill state. Brakel was the highest bidder, offering upfront money of Rs 36 lakh per MW for the 480-MW Jhangi-Thopan and 480-MW Thopan-Powari hydel projects, to be built in the tribal Kinnaur valley. DS Constructions had offered the highest upfront money of Rs 52 lakh per MW for the 260 MW Kuther project in Chamba valley. Reliance Energy had offered Rs 30 lakh and Rs 20 lakh, respectively, for the two projects in Kinnuar, which was far less than the highest bid. The successful bidders will have to deposit half the upfront money after they receive the allotment letters. Interestingly, even before power generation starts on these three projects the state government is expecting to receive almost Rs 500 crore.
October 14, 2006. National Thermal Power Corporation Ltd plans to produce around 50 million tonnes of coal by the year 2017 to meet close to 25 per cent of its total coal requirement from its captive mines. NTPC, which has been allotted eight mining blocks, had recently bagged the Coal Ministry's approval for its production plan of 15 million tonnes per annum from its first block — the Pakri Barwadih captive mine. The mining plan capacity from the block is the largest-ever approved by the Centre till date for the first phase of mining. Besides the Pakri Barwadih block, the company has bagged seven blocks, including two to be operated through a 50:50 joint venture with state-owned Coal India Ltd.
NHPC eyes hydro capacity of 10,000 MW
October 13, 2006. The state-run National Hydroelectric Power Corporation (NHPC) has projected that its a total generation capacity would reach to 10,000 MW by 2012 from the present level of 3,755 MW. NHPC has projected the capacity addition of 5,837 MW with an investment of Rs 35,000 crore in 11th Plan. The Corporation proposes to 5,350 MW of capacity during 12th plan (20012-17). The Corporation has already tied up Rs 9,000 crore from LIC and another $100 million would come from French agency Coface. All these projects will be implemented on 70:30 debt ration. The Corporation has been also holding discussions with the World Bank and Japan Bank For International Cooperation (JBIC) for financial asssitance.
REL plans nuclear power foray
October 13, 2006. The Anil Ambani group flagship company, Reliance Energy, is negotiating with GE, Westinghouse and Areva to partner its foray into nuclear power generation. REL is looking at setting up two 1000 MW nuclear power plants in the country once the fuel availability is assured. The company, which has set up a separate nuclear power initiative to spearhead the move, is said to be waiting for the final nod from the US for the Indo-US nuclear deal before inking the final agreement with these partners.
All the three companies - Westinghouse, GE and Areva - have technologies for setting up large scale nuclear power plants of over 600 MW. Indian indigenous technology stretches to a maximum of 500 MW. The nuclear power initiative is expected to be spun off into a separate company at a later date. REL is already putting together a team of 200 engineers for the nuclear foray. The company is also talking to the Nuclear Power Corporation of India (NPCIL) for a possible joint venture. India generates 3,900 MW of nuclear power, which constitutes 3 per cent of the total power generated in India. The country is expected to have 20,000 MW of nuclear power by 2015 and 40,000 MW by 2020.
BHEL bags $208 mn order in M.P.
October 12, 2006. Bharat Heavy Electricals Ltd (BHEL) has bagged Rs 950-crore ($208 mn) order to set up a 99-MW captive power plant for Bharat Oman Refinery Ltd (BORL) in Madhya Pradesh. The project, which would be executed on a turnkey basis, is the highest-value single order for a captive power plant received by BHEL so far. The plant would be part of BORL's refinery at Bina in Madhya Pradesh. While the first unit is slated for commissioning in 26 months, the project will be completed within 30 months. BHEL's scope of work in the project envisages design, engineering, manufacture, supply and commissioning of the power plant. The equipment would be supplied by BHEL's Hyderabad, Trichy, Ranipet, Bhopal, Jhansi and Bangalore plants.
October 12, 2006. Power generation was up 11.3 per cent in September this year at 54.193 billion units, compared to 48.694 billion units recorded during the corresponding month last year. During April-September 2006, the actual generation of energy was 325.182 billion units, registering a growth of 6.6 per cent over 304.925 billion units in the corresponding period of last year. The overall Plant Load Factor of thermal power stations during the period was recorded at 73.3 per cent compared to 70.5 per cent last year. With gas supplies continuing to be a major constraint, a generation loss of about 15.04 billion units was recorded during April-September.
BHEL, Russian to jointly upgrade UP power station
October 12, 2006. Bharat Heavy Electricals Ltd (BHEL) has tied up with Russia's Power Machines to upgrade and modernise five generating units of the Obra Thermal Power Station in Uttar Pradesh. The tie-up could be extended to other units in the country. Equipment supplies under the contract, signed last month, are scheduled to commence from late-2007 and is expected to be completed by mid-2008. Most of the units in the station use power equipment produced by BHEL based on the design by the Russian firm Leningrad Metal Works, which is operated by Power Machines.
Transmission / Distribution / Trade
PowerGrid seeks $3.2 bn from WB, ADB
October 14, 2006. The state-run PowerGrid Corporation has approached the World Bank and the Asian Development Bank (ADB) for a total loan of $3.2 billion to finance the ambitious Rs 70,000 crore national grid project. Of the $3.2 billion, the Corporation has sought $600 million each from both these banks while $2 billion more was being discussed to finance the laying of the transmission network for transfer of power from the North-East to the rest of the country. Of the Rs 70,000 crore investment, the Corporation will invest and raise, from sources like WB and ADB, as much as Rs 50,000 crore. The balance Rs 20,000 crore will come from the private sector or through the joint venture route. PowerGrid Corporation said of the Rs 50,000 crore, nearly 30% would come from internal resources, while it would borrow 70%. The Corporation is expected to spend nearly Rs 5,700 crore against its budgeted allocation of Rs 5,100 crore for various transmission projects during the current fiscal. The Corporation has completed the inter-regional transmission of 11,000 MW so far and by the end of the 10th Plan, the capacity will increase to over 18,000 MW.
Qatar body may buy into NTPC project
October 11, 2006. NTPC has offered the Qatar Investment Board a 40 per cent stake in the gas-fired Kayamkulam power project in Kerala. The MoU has been sent to Qatar and that they were expecting a response by Ramadan-end. The Kayamkulam project has a current installed generation capacity of 350 MW and the company is expanding the plant by another 1,950 MW at an estimated investment of Rs 6,000 crore. NTPC’s offer to the Qatar Investment Board is part of the ministry of power’s directive to state-owned power sector companies to identify projects for attracting investment from West Asian countries. The power generation major has been facing difficulties in arranging gas for the project. Qatar is already supplying 5m tonne of liquefied natural gas to Petronet LNG and will increase it by another 2.5m tonne from ’09.
Karnataka consumers spared power tariff hike
October 17, 2006. With most of the reservoirs in the state nearly full, the Karnataka Electricity Regulatory Commission (KERC) has ruled out a hike in power tariff. All the five electricity supply companies (Escoms) - Bangalore, Gulbarga, Hubli-Dharwad, Mangalore and Chamundeshwari (Mysore) had sought a hike of 40 paise per unit. The Escoms had sought the hike to take up modernisation of power transmission and distribution. The tariff order will come into effect on November 1 to coincide with the Karnataka Rajyothsava. In a bid to encourage metering of irrigation pumpsets, the KERC has ordered the reduction in fixed charges. Hereafter, any farmer seeking to install meters on the pumpsets, will have to pay Rs 30 as fixed charges instead of the earlier Rs 40.
Sasol to debut in India with Assam coal blocks
October 16, 2006. The entry into the country of South African petrochemicals major Sasol is becoming smooth with the coal ministry actively considering allotting two coal blocks in upper Assam for a proposed coal liquefaction project. Sasol had approached the coal ministry with a proposal to invest $6 billion (Rs 27,000 crore) in a project for converting coal directly to petroleum products, using its proprietary technology. This will mark the largest foreign direct investment in a single project in India till date. The ministry had identified two blocks in upper Assam, which together have reserves of over 1 billion tonne of high calorific coal. Sasol has the technology to convert coal directly to petroleum products such as diesel, naphtha and other liquid fuels. The project, however, will have a long gestation period even after the coal block allotment. Sasol will undertake testing to verify the quality and viability of the petroleum products from the Assam coal. The testing could cost up to $300 million. It is only the after the initial testing that the company is expected to make a firm offer. The Assam coal is considered the best for coal liquefaction as 90 per cent of the coal can be converted directly to fuel. But mining coal in that state could be a difficult task given the heavily forested terrain and the security situation in the state. The coal ministry is also seeking the opinion of Coal India in the matter. Liquid fuels from coal are cheaper than crude oil, as the production cost is cheaper by around $20 a barrel of crude oil. Also, the calorific value of the fuel is, thus, produced much higher.
PM seeks EU’s support for nuclear energy
October 13, 2006. Prime Minister sought support from the 25-nation European Union for India’s quest for nuclear energy for peaceful purposes and asserted New Delhi did not want “further erosion” of the non-proliferation regime. The 45-member Nuclear Suppliers Group (NSG) had given India an opportunity to reiterate its firm commitment to non-proliferation objectives while working with like-minded countries in expanding cooperation in peaceful uses of nuclear energy. It is hope the EU would be in a position to support forward-looking approaches to enhance international cooperation in the peaceful uses of nuclear energy. This would enable countries like India to expand the share of nuclear energy in their national energy baskets. The project is aimed at tapping fusion to produce energy. India was accepted as a full partner in the ITER project in December, last year. The other partners in the project are the US, the EU, China, Japan, South Korea and Russia.
IFC may scoop up stake in mega power projects
October 13, 2006. International Finance Corporation (IFC), the private equity arm of World Bank, is in talks with power companies to pick stakes in the ultra mega power projects. It also said it was open to finance special economic zones (SEZ) in India. The organisation, which had a portfolio of $1.26bn in India as of July ’06, could also consider investing “much more than $500mn in the country, over the next one year. The organisation had set a target of investing $500mn in Indian companies in July ’06, but the fresh assessment takes into account the rapid growth trajectory of the economy. It has already invested more than $130mn in Indian companies over the past three months. The private lending arm of World Bank is considering investing $45mn for a stake in Cairn India. Cairn India, the Indian arm of Cairn Energy, UK, will go in for an IPO of 30.5 per cent equity shares in December.
PowerMin toys with graded approach to stem losses
October 13, 2006. With the aggregate technical and commercial (AT&C) losses in the power sector exceeding 40 per cent on an average, the ministry of power is considering a system of graded AT&C loss-reduction targets for distribution utilities. The system has been proposed by the Abraham committee, which was reviewing the Accelerated Power Developments and Reforms Programme (APDRP).
Orissa for cess on exported power
October 12, 2006. The Orissa government has demanded a cess of 6 paise per unit on power generated in the state but sold outside it. In what seems to be the first instance of such a demand, the state government wants the cess as compensation for environmental losses due to generation and allied activities. The proposal has foxed the Central Electricity Authority and the state’s power generation companies. Orissa has a total installed power generation capacity of 7,000 MW. Of this, the state’s power generation utilities contribute 2,320 MW and the central public sector unit National Thermal Power Corporation’s power plant at Talcher contributes 3,000 MW.
K`taka to spend $6.58 to improve power supply
October 12, 2006. Karnataka has proposed to spend more than Rs 30,000 crore ($6.58) over the next five years to improve power scenario, both production and distribution, by raising loans. The State energy minister said all government-owned companies engaged in power generation, transmission and distribution, have submitted separate plans to improve power supply in the state. The state has cleared all these proposals. It will be the responsibility of each entity to raise funds and implement the proposals. The Karnataka Power Corporation Ltd (KPCL) has proposed to add 4,000 MW to the state grid at an estimated investment of Rs 15,000 crore. The KPCL has proposed several thermal and hydel power projects. It will add 1,500 MW to the state grid over the next 36 months with an investment of Rs 5,000 crore. Work on some of the projects has already commenced. The Karnataka Electricity Regulatory Commission (KERC) has approved the Karnataka Power Transmission Corporation Ltd (KPTCL) proposal to improve system (power lines and upgrading of feeder stations) at an estimated cost of Rs 3,000 crore. The KPTCL's overall spending on system improvement is estimated at Rs 5,000 crore.
Power ministry steps in for NTPC
October 12, 2006. The power ministry, in a bid to give a major thrust to the delivery of first lot of 10 upcoming power projects of 800 MW capacity, has sought the active cooperation of the ministry of heavy industries & public enterprises. The power ministry, however, emphasised the principles of price benchmarking in this regard.
Based on the recommendations of the expert committee, the power ministry has decided that a negotiated route and not the international competitive bidding (ICB) mechanism would be followed by NTPC in particular, to place awards for such units with the Bharat Heavy Electricals Limited (BHEL). The ministry has intervened after NTPC brought to its notice that unless BHEL consortium confirms acceptance of the pricing approach, NTPC would not be in a position to take a decision on any exemption or relaxation they need. If the negotiation route is adopted, NTPC may lose benefits under the mega power project policy. NTPC would have to incur the extra costs. NTPC alone is setting up eight units with 800 MW of capacity each at Darli Palli (Orissa) and Lara (Chhatisgarh).
INTERNATIONAL
OIL & GAS
Upstream
Dune Energy to buy gas fields for $32.8 mn
October 13, 2006. Dune Energy Inc. agreed to buy gas fields in Texas with proven reserves of 29.9 bcf equivalent from Voyager Partners Ltd. for $32.8 million. Dune purchased a part of the properties on Oct. 10 for $7 million, and will acquire the rest by Jan. 19, 2007.
Petrobras rigs ready to go onstream by end '06
October 13, 2006. Brazil's state oil company Petrobras two new rigs with a total capacity of 160,000 barrels per day were ready to go onstream before year-end, one of them ahead of schedule. The 100,000 bpd ship-based rig, or floating production, storage and offloading unit (FPSO), is on its way from Singapore and will be installed on the Espadarte field by December. It had earlier planned to install and start operating the Espadarte rig toward the second half of next year. Another FPSO, the P-34, with a capacity to pump 60,000 bpd, will start operating on the Jubarte field in November. Its launch has been delayed several times since January. Both fields are in the Campos basin, which accounts for most of Brazil's oil output. In April, Petrobras installed a 180,000 bpd P-50 rig on the Albacora Leste field in the same basin, which allowed it to meet Brazil's oil needs with its own production. Another 100,000 bpd rig has been working since May on the light oil Golfinho field in the Espirito Santo basin. Petrobras, which accounts for nearly all crude production and refining in Latin America's largest country, is producing around 1.8 million bpd in Brazil. Last year, it boosted domestic oil output by about 13 percent and it hopes for a similar rise this year to 1.88 million bpd. Petrobras also said its Manati natural gas field off the coast of the northeastern Bahia state should start producing in mid-November. Production will start at some 3 million cubic meters per day and should double by May 2007.
60-day strategic oil reserves envisaged
October 13, 2006. Pakistan has decided to increase its strategic oil reserves to cover up from 21 to 60 days of consumption to ward off security, commercial and economic concerns in case of unforeseen supply disruptions. The government has, however, not yet made up its mind how it would increase strategic crude oil and petroleum products’ stocks. A number of issues had emerged during initial discussions over the subject among the stakeholders, ranging from imposition of a tax to generate funds for the storage capacity and the stockpile build-up, operations of these stocks, whether the stocks be maintained by oil companies or by the government or by a new strategic stocks entity and how the entire operation be regulated. As a result, the government has sought the World Bank’s assistance to engage a professional consultant to conduct a comprehensive study on the subject and analyse from all aspects the cost-benefit-ratio of raising stocks level to 45 days or 60 days. The Bank has prepared terms of reference of the study.
PPL to invest $7.7mn for exploration in Indus block
October 13, 2006. The Pak government awarded an exploration licence to Government Holdings (Pvt) Limited (GHPL) and signed petroleum production sharing agreement with GHPL and Pakistan Petroleum Limited (PPL) for eastern offshore Indus-C block, covering an area of 2,494 sq kms.
This block is located in the Arabian Sea, approximately 150 kms off the coast of Karachi. The PPL will invest US$7.7 million during the first three years of the initial term of the licence. This new production sharing agreement is part of the government’s drive to attract investment into the oil and gas sector and boost
S. Korea signs Angola on oil, gas development
October 12, 2006. South Korea and Angola signed an agreement that will allow local companies to take part in gas and oil development projects in the African country. The MOU signed in Seoul opens the door for South Korean companies to win exploration and development rights for both land and offshore oil and gas fields.
Downstream
Cameroon's SONARA refinery plans $383 mn upgrade
October 13, 2006. Cameroon's national oil refinery SONARA will spend 200 billion CFA francs ($383 million) to raise capacity and refine more of the central African country's heavy crude. The upgrade, due to be completed in 2010, aims to boost the refinery's capacity from a current 42,000 barrels per day (bpd) and increase exports of oil products to surrounding countries.
Praxair to build hydrogen facility at Chevron refinery
October 11, 2006. Praxair Inc. will build a hydrogen facility at Chevron Corp.'s Richmond refinery in Contra Costa County, California, that is expected to be completed in 2008. The new facility, which will have a capacity of 260 million cubic feet of hydrogen per day, will supply hydrogen to Chevron's refinery over a 15-year period. Praxair will also construct a pipeline network to supply hydrogen to other refineries in the northern California area.
Transportation / Distribution / Trade
UK, Norway open biggest underwater gas pipeline
October 16, 2006. The biggest underwater gas pipeline in the world, transporting gas from Norway 1,200 kilometres under the North Sea to Britain, was opened by the prime ministers of both countries. The Langeled pipeline is expected to supply one-fifth of Britain’s total gas requirements in the coming decades. Construction of the pipeline by Norwegian firm Hydro began in 2004.
Iraq oil company starts crude exports to Turkey
October 15, 2006. Iraq has resumed exports of crude oil to the Turkish port of Ceyhan after an interruption for several months. The interruption, stemmed from continuous attacks on the pipelines, problems with the storage facilities in Ceyhan and general deterioration of the pipelines due to age. In June, the NOC also announced a resumption of exports to Turkey following a four-month hiatus, but the resulting flow was still sporadic. The company managed to get a consistent flow going and now the pipeline is carrying 250,000-350,000 barrels per day. Most of Iraq's oil production, some 2m bpd, comes from the south, although international experts agree that the northern fields are under-developed. Iraq suffers from a chronic shortage of petrol, kerosene and other fuel products resulting in endless lines at the petrol stations. When the Baiji refinery is working, Iraq produces 10m litres of petrol domestically, barely half of the 22m litres daily demand.
Pak will issue tender for LNG terminal
October 14, 2006. Pakistan next week will invite international firms to bid for a project to build the country's first plant to import liquefied natural gas (LNG), part of a plan to boost supplies to meet demand in one of the world's fast growing economies. Pakistan wanted to appoint a project developer in the first quarter of 2007. SSGC, which is majority owned by the government, would take an equity stake in the project.
Current plans envisage the plant starting up in 2010-11. The plant is expected to have an initial import capacity of 3.5 million tons a year of LNG. It will turn the frozen LNG back into normal gas for piping to consumers. The project would cost $300-$400 million. Pakistan, which has its own gas fields, expects to have a supply deficit as soon as 2008. Plans to import LNG and pipeline gas from Iran and Turkmenistan are based on projected gas demand growth of about 6.5 per cent a year.
El Paso seeks Elba Island LNG expansion
October 12, 2006. Natural gas producer and pipeline company El Paso Corp. has asked federal regulators to approve an expansion of its Elba Island liquefied natural gas terminal and a new pipeline. The projects, if approved by the Federal Energy Regulatory Commission, would cost $930 million. The proposed 190 mile (306 km) Elba Express pipeline, with a capacity of 1.2 bcf per day, would transport natural gas from the Elba Island terminal near Savannah, Georgia, to markets in Georgia and South Carolina by mid-2010. The expansion of the LNG terminal, where super-cooled LNG is unloaded from ships and returned to its gaseous state, will add 8.4 bcf of LNG storage to bring the facility's total to 15.7 bcf.
Nexen UK Buzzard oilfield to ship first oil in Nov
October 11, 2006. Canadian oil producer Nexen will soon start pumping from its North Sea Buzzard oilfield, slowing rapid decline in UK output. The 210,000 bpd Buzzard field will ship its first cargoes of crude oil in November. UK oil and gas output was forecast to rise in 2007 for the first time since 1999 due to the boost from Buzzard, the industry group UK Offshore Operators Association (UKOOA) said earlier this year. UKOOA forecast UK output would rise 300,000 barrels of oil equivalent per day (boepd) in 2007 to 3.3 million boepd. Output peaked in 1999 and has declined every year since as ageing fields run dry. Traders said that at least two cargoes of 600,000 barrels of oil from Buzzard were scheduled for export in November, indicating initial production of at least 40,000 bpd.
Gazprom gas to go to Europe
October 11, 2006. Gazprom's decision to send the bulk of output from its new gas field in the Barents Sea to Western Europe has been welcomed by Germany's largest gas firm. It planned to ship the gas from the Shtokman field to the US. The Shtokman field is a $20bn project. Norway's Statoil and Hydro, US firms Conoco Phillips and Chevron, and France's Total had all hoped to be involved in the giant $20bn (£10.7bn) project. The gas from Shtokman will be sent to Germany via a planned gas pipeline under the Baltic Sea called the Nord Stream. With most of northern Europe's existing gas supplies coming from current Russian fields and Norway. Germany currently imports 55 bcm of gas from Russia every year. Gazprom envisages producing 45 bcm of gas annually from Shtokman.
Russia to boost German gas supply
October 10, 2006. Russia plans to double exports of natural gas to Germany, making it the major European distribution hub. Moscow wants to divert up to 55 bcm of natural gas to Germany each year on top of the 40 bcm it already exports there. The gas will come from Russia's huge reserves under the Barents Sea. Russia's move was seen as a snub to the US, French and Norwegian firms that had been short-listed to assist Gazprom. Germany is already Russia's largest energy customer in Europe.
Policy / Performance
Indonesia seeks quota-based cutbacks
October 17, 2006. Indonesia, the second-smallest member of OPEC, wants the group to allocate a production cut based on its formal quotas, not on actual output levels, as most members seem to prefer. Although Indonesia has limited policy power within the group as it pumps about a third less than its formal quota, its stance highlights the difficulty facing OPEC when it meets to discuss how to share a 1 million barrel per day (bpd) cut. Opec's first plan to cut production since April 2004 was mooted more than a week ago, but ministers have been debating whether to cut from actual output of roughly 27.5 million bpd or from the group's notional 28 million-bpd ceiling. Most member producers have been pumping at - if not well beyond - their individual OPEC quotas. But Indonesia and Venezuela have fallen well below theirs and Iran has had difficulty matching its limit, making them reluctant to cede market share to their peers.
Korea, Azerbaijan to boost energy ties
October 16, 2006. The industry and energy ministers of Korea and the Republic of Azerbaijan will hold a joint economic conference in Seoul to discuss ways to boost economic cooperation. In May, the Korea National Oil Corp. and Azerbaijan's state-run SOCAR, signed a memorandum of understanding to conduct a joint petroleum development project in the Caspian Sea. This has enabled Seoul to take the first step to jointly develop an oil field in the Inam block. U.K.-based BP and U.S-Based Shell control a combined 50 percent stake in the Inam oil field. Seoul hopes to have access to the remaining 50 percent controlled by SOCAR. Korea is the world's fifth-largest oil importer. A trade mission from the petroleum-rich country has also accompanied Aliyev for a six-day joint economic convention.
Exxon Mobil signs agreement on Qatar facility
October 15, 2006. ExxonMobil Chemical Qatar Ltd., a unit of Exxon Mobil Corp. signed an agreement with Qatar Petroleum to continue studies for a proposed $3 billion petrochemical facility in Qatar. The start-up for the proposed facility, which would include a world-scale steam cracker and polyethylene and ethylene glycol units, is estimated in 2012.
OGDCL plans first overseas venture
October 14, 2006. Pakistan's Oil and Gas Development (OGDCL) hopes to enter its first overseas exploration venture next year. OGDCL, Pakistan's largest listed firm, plans to invest about $2 billion over the next three years on exploration and production activities, including a target to drill 41 new wells in 2006-07. The overseas ventures would be economically viable with attractive returns, and will help the company generate more revenues. State-run OGDCL, which produces 59 percent of Pakistan's oil and 25 percent of its gas, earned a net profit 45.8 billion rupees ($755.65 million) in the year that ended on June 30.
Uzbekistan to double gas export price
October 13, 2006. Uzbekistan warned Russia and its Central Asian neighbours will double its gas export price at the start of next year, putting price pressure on a supply chain that stretches to Europe. Russia imports 9 billion cubic metres of Uzbek gas a year, enough to supply a country the size of Austria. Russia's Gazprom, the main buyer of Uzbek gas, has said price rises from Central Asia do not affect its business, as it transfers gas from the region to other markets, including Ukraine. Buying gas through pipelines controlled by Gazprom allows Russia to reap profits from high-price western European markets that cannot negotiate directly with Central Asian producers. The West is closely watching Gazprom's dealings with Uzbekistan and other ex-Soviet countries after Russia briefly disrupted gas supplies to Ukraine, the main transit route to Europe, earlier this year in a row over gas prices.
Venezuela includes private firms in oil cut
October 13, 2006. Venezuela included private firms and Orinoco extra-heavy crude projects in its Oct. 1 voluntary oil output cut of 50,000 barrels per day. Oil analysts are sometimes skeptical about Venezuela's pronouncements on output, exports and cut-backs. The inclusion of private firms in trimming supply is a sign Caracas is earnest about arresting a sharp fall in crude prices. The Orinoco Belt has been producing about 620,000 barrels per day of heavy crude that has to be upgraded to synthetic oil.
Azerbaijan to stop Russian gas imports if price too high
October 12, 2006. Azerbaijan may stop imports of Russian natural gas in 2007 and seek alternatives if prices offered at upcoming talks are unacceptably high. Since last year, Russian energy giant Gazprom has been pushing for 'market prices' on the gas it sells to its ex-Soviet neighbors, which had previously been sold gas at preferential rates - in some cases, several times lower than the European level. Under an agreement signed in December 2003, Gazprom is to supply Azerbaijan with 4.5-5.5 bcm of natural gas annually until the end of 2008. In 2006, Azerbaijan will receive 4.5 bcm of gas at a price of $110 per 1,000 cu m. The average price for EU countries is $240 per 1,000 cu m. The next round of talks between Azerbaijan and Gazexport, the Russian gas monopoly's export arm, on setting the volume and price for Russian gas supplies to the Caspian country in 2007 is scheduled for November. Hydrocarbon-rich Azerbaijan could import gas from Iran and also increase domestic production significantly once its Shakh-Deniz field in the Caspian Sea, with estimated reserves of around 1,000 bcm, comes on stream in December. Azerbaijan's annual domestic gas consumption totals 15-16 bcm. The country currently produces around 6.5 bcm of natural gas per year. Iran has proven natural gas reserves of around 28 tcm, the world's second largest reserves behind Russia. In 2005, gas production in the country totaled 86.6 bcm.
Chevron enters Pakistan energy market
October 11, 2006. Global energy giant Chevron has made its entry into Pakistan’s petroleum market. Chevron is one of the biggest energy companies in the world, operating in 180 countries. Pakistan now has three of the world’s top companies operating in the petroleum sector. The other two are Shell and Total. This move by Chevron should signal the government of confidence of international companies taking interest in Pakistan’s economic growth. The government can attract huge investment by these foreign investors by pursuing policies that will keep such international giants tied into Pakistan’s petroleum sector.
Indonesia terminates Exxon Mobil's Natuna contract
October 10, 2006. Indonesia has terminated a contract held by Exxon Mobil Corp. on the huge Natuna offshore gas field, amid high extraction costs and a lack of buyers for the gas. Despite the difficulties developing the field, the move to end Exxon's contract may cause concern among foreign investors about uncertainties of doing business in Indonesia, compounding worries over the legal system, labour and corruption. The Natuna D-Alpha block contains around 222 tcf of gas, of which 46 tcf is thought to be commercially recoverable, but the field contains about 70 percent carbon dioxide, making it expensive to develop and difficult to sell. But Exxon Mobil said it had fulfilled its obligations under the production sharing contract. Exxon Mobil is committed to continue implementing the Natuna PSC with the objective of commencing development activities as soon as prudent to do so. The contract allows for two more years for Exxon Mobil and Indonesian state energy firm Pertamina to satisfy conditions or proceed with development even if the conditions for development of the field are not met by Jan. 8, 2007.
Power
Northland to build 236 MW power plant
October 16, 2006. Northland Power Inc. has signed a long-term contract with the Ontario Power Authority to supply electricity to Ontario consumers from a new combined heat and power plant to be built at the Abitibi-Consolidated Company of Canada recycled newsprint mill in Thorold, Ontario. Under the contract, the plant will supply an annual average capacity of 236 MW of electric power to the OPA. The contract was awarded following Northland's successful bid under the Request for Proposals issued by the OPA in April 2006. Construction of the facility is scheduled to begin in the first quarter of 2007, following the completion of all permitting and financing, and full commercial operations and supply of electricity is expected to commence June 2009. The plant will be a gas-fired co-generation facility producing both electricity and steam. A 170 MW industrial gas turbine and associated 95 MW steam turbine will generate enough electricity to provide power to the equivalent of 100,000 homes in Ontario. The plant will result in an investment of over $400 million in the Thorold region.
Austin Energy unveils novel power plant
October 16, 2006. The 4.3 MW onsite power plant, built and owned by the city-owned utility for the massive redevelopment project at the former Mueller airport, can generate 100 percent of the electricity, cooling, and heating required by the new Dell Children's Medical Center and other Mueller facilities if the normal electric grid goes dead. Austin Energy says the center uses the most efficient energy generation technology available. In addition to generating electricity, the hot exhaust gases from the natural gas-fueled generator are recycled to produce steam. The steam provides heat for the hospital and then can be used to chill water for air conditioning. The plant will use about 20 percent less fuel than equivalent but separate electric, heating, and cooling operations. Its carbon emissions will be about 40 percent lower than power from the electric grid.
$160 mn power plant to be built behind Ford power station
October 16, 2006. A $160 million power generation plant to be built behind the Ford of Canada power plant on Wyandotte Street East. The Ontario Power Authority has given Pristine Power Inc. of Calgary permission to build an 84 MW, natural gas fired cogeneration plant it will operate on the Ford site. The East Windsor Cogeneration plant will be the fifth privately-owned power plant in Windsor when it begins producing electrical power in time to keep hydro bills down for the summer of 2009. The power and steam plant will be “small and quiet,” said Myers, a native of Chatham. The new plant will also supply steam heat to Ford’s Windsor Engine Plant. Although built on Ford land, the Pristine plant will continue to produce power for at least 20 years no matter what happens to Ford’s Windsor operations.
Alstom wins Poland power plant contract
October 16, 2006. Alstom SA won a contract worth more than €900 million (US$1.1 billion) to build Poland's largest coal-fired power station. The new power plant will be built in Belchatow, central Poland, for utility BOT Elektrownia Belchatow SA. It is due to enter service in 2010. Paris-based Alstom will build the plant's main boiler, steam turbine, turbo generator and control system. Using so-called "clean coal" technology, which produces lower greenhouse gas emissions, the new plant will generate 10 percent less carbon dioxide per unit of electrical energy produced than other coal-fired plants in the region.
October 13, 2006. Three consortiums have submitted bids to build a new Mexican hydroelectric dam called La Yesca, one of the largest projects launched during outgoing President Vicente Fox's six-year term. The bids range from Impregilo's $805 million to Sinohydro's $1.25 billion estimate. The dam, one of the largest among dozens of hydroelectric projects in Mexico, will be built where the western coastal states of Nayarit and Jalisco meet and have a generating capacity of 750 MW.
The commission is due to rule on which bid it will accept on October 27. Building is expected to create 10,000 jobs and is due to be completed in 2011. Situated on the Santiago river, the dam will have a basin of 12 million cubic meters (424 million cubic feet). That is about 20 percent bigger than the El Cajon dam which is close to completion on the same river system, some 40 miles (65 km) upstream of the La Yesca site. The CFE is holding tenders for around half a dozen power generation projects this year.
BP to build new steam power unit at Texas City
October 11, 2006. BP today broke ground on a new, 250 MW steam turbine power generating plant at its Texas City refinery site that will reduce emissions and improve both energy and operational efficiency. The $100 million unit will be located next to the existing South Houston Green Power L.P. cogeneration facility and will boost the total electricity generating capacity located at the Texas City refinery site to 1,000 MW. The project builds upon BP's expertise in refining, cogeneration, energy efficiency and energy trading. The new unit will result in reduced emissions and noise from steam venting activity. Power not required for refining operations will be sold into the local markets, thereby further enhancing electrical supply availability in the region. The new plant is expected to come on stream in the second quarter of 2008. BP is one of the world's largest oil and gas companies, serving about 13 million customers every day in more than 100 countries across six continents. BP's business segments are Exploration and Production; Refining and Marketing; and Gas, Power and Renewables, which includes its Alternative Energy business. Through these business segments, BP provides fuel for transportation, energy for heat and light, retail services, and petrochemicals products.
CMS, Peabody to build new power plant
October 11, 2006. Utility CMS Energy and coal producer Peabody Energy would develop a new coal-fired power plant and coal mine for about $2.5 billion in southern Illinois. The Prairie State project, to be developed by CMS unit CMS Enterprises, includes a 1,600 MW plant to be build near Lively Grove, Illinois, about 40 miles southeast of St. Louis. CMS and Peabody will each own 15 percent of the project, with the remainder expected to be owned by a number of Midwest utilities and cooperatives that have already made ownership commitments.
New Zealand power plant work begins
October 13, 2006. Mighty River Power has started work on the construction of a $275 million geothermal power plant in Kawerau, following final consent approval from the Environment Court. The company also disclosed a fall in annual net profit from $121.2 million to $100.8 million following higher depreciation charges.
Russia, Kazakh to set up three nuclear JV
October 12, 2006. Russia and Kazakhstan have signed agreements to set up three joint ventures to mine uranium in Kazakhstan, enrich it in Russia and design a new type of a low-or medium-power reactor in order to try to sell it to third countries.
USEC wins $200M contract with Taiwan Power
October 11, 2006. USEC has signed a contract valued at more than $200 million with Taiwan Power to supply enriched uranium fuel to the utility's eight nuclear power reactors. Bethesda-based energy company USEC says the new contract to supply Taipei-based Taiwan Power with enrinched uranium fuel runs from 2009 through 2013. This new contract enhances USEC's longstanding relationship with Taiwan Power and underscores our commitment to provide utilities with a reliable, competitive source of enriched uranium fuel for years to come. USEC is in the process of demonstrating and deploying the American Centrifuge, which will replace its existing gaseous diffusion technology and is expected to be a much more efficient uranium enrichment technology. The American Centrifuge Plant will use modular architecture that allows capacity to be added, enabling USEC to meet the growing demand for nuclear fuel. USEC is a supplier of enriched uranium fuel for commercial nuclear power plants.
Exxaro to produce 70m tons of coal in ’12
October 10, 2006. Exxaro Resources, the new diversified mining company to be formed in November, planned to increase its annual coal production to 70 million tons by 2012. This compares with the 42 million tons of coal produced last year by Kumba Resources and Eyesizwe Coal, whose coal assets are being merged in Exxaro. The mining assets of Exxaro, which will list on the JSE on November 27, include coal, mineral sands, zinc, ferrosilicon and dolomite as well as ferroalloys. The company will have a 20 percent stake in Sishen Iron Ore, which now holds Kumba Resources' iron ore mining interests. It has a 90-day option after it lists to buy Anglo American's mineral sands mine, Namakwa Sands, on South Africa's west coast for R2 billion, as well as options to buy 26 percent stakes in the Black Mountain zinc mine and the Gamsberg zinc project in the Northern Cape for R180 million. Exxaro will be South Africa's fourth-largest coal mining company as well as the largest supplier of coal to Eskom for power generation. It will be the country's top producer of metallurgical coals.
Transmission /Distribution / Trade
October 17, 2006. Japan’s Marubeni Corp. had won a $2.3 billion contract to build a natural gas power plant in Qatar that can generate 2,000 MW, big enough to power 600,000 homes. Japan’s top trading companies, including Japan’s No.5 Marubeni, are racing to win overseas power generation contracts as the sector generates a steady cash flow, offsetting the highly cyclical resources industry in which they have made substantial investments. Marubeni said it; Qatar Petroleum and Qatar Electricity and Water Co. will build the power plant in Mesaieed, Qatar, with the Japanese trading company investing 17 billion yen ($142 million) to take a 40 per cent stake in the project. The remaining 85 per cent of the required funds will be acquired through project financing. Completion of the plant is scheduled for April 2010. The plant’s capacity is nearly double the biggest nuclear power plant in Japan owned by Tokyo Electric Power Co.
Constellation Energy to sell six power plants
October 16, 2006. Constellation Energy Group agreed to sell six natural gas-fired power plants to Tenaska Power Fund L.P. for $1.635 billion. The deal is expected to close before the end of 2006 or in early 2007. The agreement also provides for termination rights on behalf of both parties and under specified circumstances Tenaska may be required to pay Constellation a termination fee of $81.75 million. Constellation initially announced the sale last month as part of a move to focus its power fleet on coal-fired and nuclear plants. It said it expected the deal to yield net cash proceeds of $1.5 billion and it anticipated a one-time, pretax gain of $245 million on the sale.
Oman Oil buys stake in Pakistan's Orient Power
October 11, 2006. Oman Oil Company (OOC) has acquired a 49 per cent stake in Orient Power Company (OPC) Ltd, which is building a 450-MW independent power project at Balloki, near Lahore in Pakistan. This project represents a ground-breaking investment by OOC in Pakistan, especially when it meets our international investment guidelines. Fifty-one per cent stake of OPC is held by Pakistan-based National Group of Industries and DEG, a part of the KfW group owned by the German government. The power project will be set up in two phases, each with a generating capacity of 225 MW. The first phase is expected to cost $181 million and is designed as a combined cycle gas fired project. The plant is scheduled to be completed in two years and is expected to be operational in late 2008.
AEP looking to buy distressed peaking plants
October 10, 2006. U.S. utility American Electric Power Co. Inc. is looking to buy distressed power plants to meet spikes in demand in both the east and west regions of its service area. Spending for the power plants, known in the industry as peaking plants, is already built into the company's 2006 and 2007 capital spending budgets.
AEP plans to form Texas transmission JV
October 10, 2006. American Electric Power will form a joint venture company to fund and own new electric transmission assets in Texas. The joint venture company, when created, would include AEP and an outside company, adding talks are ongoing with potential partners. AEP expects the transmission joint venture will be active in early 2007.
Policy / Performance
Pak Govt pursuing plan to meet energy needs
October 16, 2006. The Pak President said, the government was pursuing an extensive programme to meet the country’s growing energy needs to sustain high economic growth and fast-paced industrialization. He said the rapid economic growth and industrialization had increased energy demand manifold and the government had made short, medium and long term plans to meet the future requirements. He referred to various projects to generate energy through hydel, gas, coal and alternative sources to meet rising industrial demand that in turn would help reduce poverty through more job creation. Optimum utilization of energy resources was important to achieve the goal of supplying electricity all over the country.
France, Germany urge Russia to ratify energy charter
October 12, 2006. France and Germany again urged Russia to ratify an international energy charter giving the European Union greater security for its energy supplies. In order to build a stable and balanced EU-Russia energy partnership, France and Germany consider that Russia should rapidly and effectively apply the contents of the energy charter. The charter, drafted in 1991 by the EU’s executive commission, aims to improve energy cooperation between the EU and Eastern Europe and the former Soviet Union. Moscow has signed the text but has yet to ratify it. Russia the world’s second-biggest oil producer after Saudi Arabia is balking at the idea of opening its domestic market, dominated by state-controlled Gazprom, to foreign investment.
Russia joins China in big energy plan
October 12, 2006. Chinese and Russian companies plan to invest $10 billion in new power plants to supply northeastern China's growing energy needs. The plants are to be built along China's northeastern border with Russia over the next five years and fueled with coal imported from Siberia. China is building dozens of power plants to cope with rising energy demand. Areas throughout the country have suffered power failures over the past four years as factories, homes and shopping centers compete for supply.
The partners in the project are State Grid, China's biggest power company, and the Russian power monopoly Unified Energy System. The project will have a total annual generating capacity of 60 billion kilowatt-hours, twice the current power output of the Russian Far East. State Grid also plans to import power from generating stations that it will build in Mongolia and Kazakhstan.
Siemens granted $1 bn power project in Argentina
October 10, 2006. The Argentine government awarded German engineering conglomerate Siemens a contract to build two thermoelectric plants in Argentina at a cost of about $1 billion. The plants should be finished by April 2009, although some power will be produced in 2008, helping to boost electricity supplies in Argentina's tight market.
Demand for energy has surged along with economic growth, but investment lags due in part to near-frozen tariffs. The plants will have a capacity of 800 MW each. One will be built in Santa Fe province at a cost of $548 million, plus $21.5 million in secondary costs, while $511 million is needed for a plant in Buenos Aires province, with another $16.5 million estimated for complementary projects.
Brazil utilities pay $12.87 bn in energy auction
October 10, 2006. Brazilian electricity distributors at an auction agreed to pay 27.7 billion reais ($12.87 billion) for energy that will go to market in 2011, helping power generators secure financing for projects. Distributors such as Eletropaulo and Copel and Light agreed to pay an average 120.86 reais per megawatt/hour (MWh) for electricity from hydroelectric plants, 3.3 percent lower than a government set ceiling of 125 reais.
Companies agreed to pay an average 137.44 reais/MWh for electricity from thermoelectric plants, 1.8 percent lower than the ceiling. The majority of the energy sold is from producers using crushed sugar cane and other renewable sources. The contracts sold in the auction is for energy that goes to market in January 2011 and lasts for 30 years for hydroelectric plants and 15 years for thermoelectric plants.
Renewable Energy Trends
National
M’shtra energy agency plans big on wind power
October 17, 2006. The Maharashtra Energy Development Agency (MEDA) is planning to set up 28 wind power generation projects across the state by December 2007, with a capacity to generate 1,000 MW power. Of the proposed 28 projects, two will be commissioned at Aundewadi (Dindori) and Gaulwadi (Sinnar) in Nashik district.
The state is rich in renewable energy resources, namely wind, biomass, solar energy and urban and industrial wastes. With such abundance resources, there is a wide scope for investment up to Rs 28,000 core in the field of renewable energy in the state. Maha is also looking for a suitable location to set up 40 biomass power projects across the state with each having a capacity to generate around 5-15 MW power.
Of the 16,156.73 MW installed power capacity of the state, 85 per cent power comes from hydel and thermal projects. While the industry sector consumes 38 per cent power, agriculture and domestic sectors consume 20 per cent and 24 per cent respectively. Commercial establishments consume 10 per cent, railway 3 per cent, streetlights one per cent and others 4 per cent.
Treble green power by ’09 with $220 mn
October 16, 2006. West Bengal expects to get investment worth Rs 1,000 crore ($220 mn) in the renewable energy sector for generating 156 MW of green power by 2009. At present, the state generates 46 MW of green energy, in addition to the 8,463 MW from conventional sources. Green power has around 1,00,000 consumers in areas where the grid power either does not reach yet, or is difficult to provide. Another 110 MW will be added to the present capacity with private players generating 100 MW and the government sector organisations generating 10 MW.
Although rice husk has been the main source of non-conventional energy in the state, with Bardhaman, Birbhum and West Midnapore taking the lead, fresh investment would mainly focus on small hydro projects and power from wind energy. The West Bengal State Electricity Regulatory Commission (WBERC), following the guidelines of the Central Electricity Regulatory Commission, has made it mandatory for at least 3% of the state’s total power purchase to come from non-conventional sources by 2012.
K’taka Grameena bank plans to finance solar units
October 15, 2006. The Dharwad-based Karnataka Vikas Grameena Bank - a regional rural bank sponsored by Syndicate Bank - is planning to finance around 10,000 solar power units by January 2007. They signed a MoU in Dharwad. According to the MoU, all cases of purchase financed by the bank will get a discount of 10 per cent.
If the bank succeeds in meeting its targeted level, there will be a saving of around Rs 25 lakh in electricity bills and 2,500 kilowatt of electricity per day to the nation. The company will provide a five-year warranty on solar panels, three-year warranty on batteries and one-year warranty on the entire solar unit. Insurance cover will also be available for the entire solar unit. The company will provide free service up to one year.
Suzlon bags $283 mn Brazilian wind farm deal
October 14, 2006. Suzlon Energy has bagged $283 million (Rs 1,300 crore) deal to install six wind farms in Brazil. The company will install 225 MW wind power generation capacity in Brazil. Suzlon already has orders from the US, Australia, China and Europe. The Brazilian order was bagged by Suzlon’s Denmark subsidiary, Suzlon Energy A/S. The company’s order book stood at Rs 7,080 crore with full capacity utilisation till the first half of FY08. The company’s quarter-on-quarter earning for the quarter ended September is expected to go up 127 per cent.
By 2010, only 25 per cent of the company’s business would come from India, with 25 per cent each coming from the US, China and the Asia-Pacific and Europe and Latin America. Part of the international orders would be met by the 1,500 MW factory coming up at Udipi in Karnataka. The plant will be operational by 2008. The company also plans 600 MW projects in the US and China. Both these plants are expected to commence production from December this year.
GOCL plans bio-diesel plant in Chhattisgarh
October 12, 2006. Gujarat Oleo Chemicals Ltd (GOCL), a major producer of bio-diesel in India, has chalked out plans to set up a bio-diesel production unit at Chhattisgarh with a production capacity of 50 tonne per day. The company was in advanced stage of talks with the Chhatisgarh government to acquire land for setting up the bio-diesel plant. With the production facility at Chhatisgarh, the company will be able to cater Jharkhand, Madhya Pradesh and Bihar markets along with Chhatisgarh. The company expects that the consumption of bio-diesel will increase in these states due to rising oil prices. GOCL has also asked the state government to encourage farmers in the state to undertake jatropha cultivation in order to get abundant supply of raw material for the production of bio-diesel. The company wants to enter into contract farming for jatropha in Chhattisgarh by bringing the Panchayat and farmers together.
Global
Evergreen Solar signs $100 mn contract
October 16, 2006. The company entered into a four-year supply contract with Mainstream Energy LLC, to ship about $100 million of photovoltaic modules. The modules will be manufactured at Evergreen's plant in Massachusetts and at EverQ's German factory. EverQ is a strategic partnership between Evergreen Solar, Q-Cells AG of Germany and Renewable Energy Corp. of Norway.
The maker of solar power products said the agreement with Mainstream is its sixth major contract in the past 12 months and the value of these contracts totals more than $700 million over the next five years. Evergreen had total revenue of about $44 million for 2005. Mainstream Energy, through its subsidiaries, sells, distributes and installs solar electric systems.
October 13, 2006. Developed nations are coming alive to the real prospect that countries like India and China, with their booming growth and energy needs, look set to chart the global energy course of the next quarter century. And sustainable energy has now become a key concern at the highest levels. The European Commission (EC) is planning a new venture capital fund, with an initial contribution of E80m over the next four years, which will focus on providing risk capital to investments below E10m as these are mostly ignored by commercial investors and international finance institutions. Corporate finance will be offered to support small and medium-sized enterprises as well as project finance.
The Global Energy Efficiency and Renewable Energy Fund (GEEREF) will work through sub-funds for ‘economies in transition’, across Asia, Africa, Latin America and the Caribbean and Pacific region. The Commission expects total initial funding from public and commercial sources of E100m, and this is expected to mobilise additional risk capital of at least E300m and possibly up to E1bn in the longer term. This means that it will contribute to the financing of investment projects of a value up to E1bn.
The Commission has appointed Triodos International Fund Management b.v. in conjunction with E+Co, to facilitate the implementation of the GEEREF in close co-operation with the European Investment Bank and the European Bank for Reconstruction and Development among others. The fund plans to invest in a broad mix of energy efficiency and renewable energy technologies, with priority on environmentally sound technologies with a proven technical track record.
The idea is to mobilise private investment in energy efficiency and renewable energy projects in developing countries and economies in transition. GEEREF will be a fund of funds, and stimulate the creation of regional sub-funds tailored to regional needs & conditions, rather than investing in projects directly. It will contribute to bringing clean, secure & affordable energy supplies to the 1.6bn people around the world who have no access to electricity.
No subsidies for Britain nuclear
October 11, 2006. The government will not provide subsidies, either directly or indirectly, to encourage Britain's energy companies to invest in a new generation of nuclear power stations. The operators of any new nuclear plant would also have to pay a "full share" of the costs of disposing of radioactive waste. The government's energy review had concluded nuclear could be an important part of Britain's future energy mix but said the government would not try to tell the industry how many nuclear reactors should be built.
The nuclear was viable without a higher price for carbon. Under the European Union's emissions trading scheme, big emitters of carbon dioxide, including power generators, are given allocations for the amount of carbon dioxide they can generate. They can sell any unused part of their allocation or buy extra allowances from others if they over-pollute. At the end of the last trading year on the scheme many producers fell short of their full allocation, sending the price of carbon crashing.
Wisconsin Public Power to add wind energy
October 10, 2006. Wisconsin Public Power Inc. has agreed to buy 50 MW of power from a 7,000 acre wind farm being developed in Iowa. It has entered into a 20-year purchased power agreement with Northern Iowa Windpower II L.L.C., a subsidiary of the wind farm's developer Midwest Renewable Energy Projects L.L.C., Joice, Iowa. The project, called Top of Iowa Phase II, is in Joice in north central Iowa, approximately six miles east of the existing Top of Iowa wind farm commissioned in late 2001. The Top of Iowa Phase II facility is expected to consist of up to 67 wind turbines and is planned to be in service by Dec. 31, 2007.
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