MonitorsPublished on Nov 12, 2006
Energy News Monitor |Volume III, Issue 25
Why Gundia Hydro Electric Project Is Not Needed: An analysis of its impact and benign alternatives for Karnataka (part – II) (By Shankar Sharma)

¨        The agricultural loads in the state, which are consuming about 40% of the total electrical energy of the state, are known to be wasting about 50% of this consumption which is techno-economically avoidable. Efficiency improvement in this sector alone can release about 20% of the total energy of the state for productive purposes, which is hidden in the system.

¨        It is also a well known fact that the potential for the saving in non- agricultural loads in the state is huge. As per the Planning Commission such savings can be more than 20% of the total energy being consumed in the country.  At the state level this comes to about 15 to 20 % of the total energy of the state.

¨        The potential available in the state for harnessing the new and renewable energy sources is immense. As per conservative estimates provided by the Ministry of new and renewable energy sources, more than 5,000 MW of production capacity is feasible from these sources.  The estimated potential of some of these measures are as in the table below.

¨        In summary, an objective analysis of the present scenario of the electricity industry in the state will reveal that the deficit that has been experienced in the state for many decades is just due to the gross inefficiency in the system, and generally not due to the shortage in generating capacity.

Additional power options available for Karnataka system


Basis of savings

Estimated Potential for savings

R, M & U of existing Hydro generating stations

5-8% of 2,300 MW of hydro capacity

160 MW / 800 MU

T&D loss reduction

Present loss level is about 30%; can be reduced to 10%; 20% of a base of 5,500 MW and 34,300 MU energy

1,100 MW / 7,000 MU

Utilisation loss réduction -

non agricultural

20% savings assumed feasible on a base of 5,500 MW and 21,600 MU (63% of energy demand met in 2005-06 i.e. 34,300 MU)

1,100 MW / 4,300 MU

Utilisation loss reduction -


40% energy consumption savings deemed feasible in each of the 50% of the IP sets; on energy base of 12,700 MU (37% of 34,300 MU)

Nil peak demand savings and 2,500 MU energy

Wind energy

600 MW from the potential of 1,180 MW assumed feasible; PLF of 40% Assumed

600 MW /2,100 MU


50% of estimated potential of 950 MW is assumed feasible at a PLF of 50%.

480 MW / 2,000 MU

Solar – Water heating

Assumed 75% of 14 lakh installations can be fed at average load of 2kW; at an average use of 1.5 hour a day assumed

2,100 MW during morning Peak and 1050 MW during

Evening peak / 1,100 MU

Solar–residential lighting

Assumed 25% of 81 lakh installations can be fed; average load of 160 Watts and average 5 hrs a day energy consumption

300 MW / 600 MU

Solar - water pumping for IP sets

Assumed 25% of 15 lakh installations can be fed; at 3 kW average load this comes to about 1199 MW; 25% of the total savings in demand assumed for evening peak hours;

1100 MW /

3,200 MU energy

Solar - Public and commercial


Assumed 40% of 11 lakh installations (with 1,600 MU annual consumption) can be fed; average load of 100-Watts Assumed.

40 MW / 640 MU

11.      Without objectively analyzing all these issues and taking the best course of action most suitable to our state, if the state encourages additional dam based stations it will not only lead to gross wastage of our resources, but will also lead to serious environmental and social issues.

12.     A simulation study of the projected load pattern and the generation available in the state along with the already committed generation schemes has revealed that there would be surplus base load generating capacity by 2015, and such a situation would lead to an average PLF of the thermal power stations of about 30%.

13.     The state is already having about 50% of the total power availability through hydro capacity. So even from the system operation point of view this additional hydro power station is not essential.

14.     All these issues clearly establish that the ideal solution to the artificial power deficit being faced by the state is not going to be the blind addition of dam-based power stations.

The best solution of relevance to our state is a good combination of measures like peak industry efficiency, optimal Demand Side Management, practical level of energy conservation, and maximum deployment of new and renewable energy technologies.  These measures, some of which are enumerated in the table in section 10 above, will ensure the electricity supply security on a sustainable basis at the least overall cost to the society.


Taking all these facts into consideration the energy experts of the state are of the view that such dam based power stations are not in the best interest of the state, and hence should be rejected.  The Western Ghats in the state, which are identified as 18 most important bio-diversity hotspots in the world by UN, have already been subjected to massive abuse in the name of various so called ‘developmental projects’.  Most of the hydro electric projects of the state (about 3,000 MW out of a total hydel capacity of about 3500 MW) are in Western Ghats. The destruction, submersion and fragmentation of the Western Ghats due to hydel projects alone have been so massive that its sensitive ecology has been irreversible damaged.

The Western Ghats in Karnataka are the source of about 30 small and major rivers including Cauvery, Tunga, Bhadra, Sharavaty, Netravthy, Hemavathy etc. and are the main sources of water in the plains, in addition to being the life line of people of the state.  In this scenario any more destruction, submersion and fragmentation of the Western Ghats will be suicidal, and hence the proposed Gundia hydro electric project is not in the best interest of the people of not only Karnataka but also of the entire South India.

Without optimally utilizing the existing generation and transmission capacity in the state, to pour money into such high impact projects at a time when there any number of expert reports providing early warning on Global Warming (recent ones are the ‘Economics of Climate Change’ by British Parliament, and an economic review of the same by Sir. Nicholas Stern) will be a disaster for our society.  Such unsubstantiated spending will be seen by many people as misuse of the public fund, especially when other priority sectors like poverty alleviation, health, education etc. are crying for more budgetary support.

The Integrated Energy Policy by the Planning Commission says: “From a longer term perspective we need to relentlessly pursue the energy efficiency and energy conservation as the most important virtual source of domestic energy”.  Energy efficiency is one of the EU’s answers to the double challenge of global warming and increasing energy dependency on oil and gas. As per World Watch Institute alternative ways of generating energy with little or no carbon emissions, improvements in energy efficiency and using less energy overall will all be needed on a massive scale.

There is a clear need for adopting a paradigm shift on our energy policy.  KPCL should consider investing judiciously in more advantageous and benign alternatives to meet the power/energy demand of the state.  It will be in the overall interest of the state and the region as a whole that such high impact project proposals such as hydel project across rivers Gundia, Bedthi, Aghanashini, Barapole etc. or coal fired power station proposals in Nandikur, Tadadi, Mysore, Hassan etc. are viewed objectively in this background, and discontinued with.

The all important and sensitive Western Ghats, pristine coastal Karnataka, and serene plains of Karnataka must be protected adequately for a sustainable living not only for the present generation but also for future generations.  The present generation has a vast responsibility in this regard.


(Shankar Sharma, Consultant to Electricity Industry, Mysore, E-mail: [email protected])


Can Coal be Clean?

TWO new coal-fired power plants will soon appear on the banks of the Ohio River if American Electric Power (AEP), a utility, gets its way. There is nothing unusual about that, of course: a rival firm, TXU, unveiled plans to build 11 new coal-fired plants in Texas earlier this year. All told, there are some 150 plants on drawing boards around America, which derives 56% of its power from coal. But AEP's two plants are different in one critical respect: their design would make it relatively easy to filter the carbon dioxide out of their emissions, should the company ever need to do so. America's first "capture-ready" power plants, to use the industry parlance, are nearing construction. 

Coal has several advantages as a fuel. It is abundant. It is widely distributed: countries that are short of other fossil fuels, such as Germany and South Africa, have mountains of it. As a result, it is cheap. Even though the price has risen in the past few years, it is still less expensive to run a power plant on coal than on almost anything else.  But coal is also dirty. It releases lots of soot and various noxious chemicals as it burns, and so has fallen out of favour in many Western countries. Worse, coal-fired plants produce roughly twice as much carbon dioxide per unit of electricity generated than those that run on natural gas. Power generation contributes more to global warming than any other industry, and coal is the dirtiest part of it. Coal-fired plants are responsible for perhaps 8 billion out of the 28 billion tonnes of man-made carbon dioxide released every year, and are thus a prime target for emissions cuts. If environmentalists had their way, there would be no coal-fired plants at all: protesters recently called for the closure of Drax, Britain's biggest coal-fired power station. 

Yet the number of coal-fired plants is growing. The International Energy Agency (IEA), a think-tank funded by power-hungry countries, estimates that consumption of coal will increase by 71% between 2004 and 2030. Developing countries, in particular, rely on it. Coal provides some three-quarters of the power in both India and China.  The obvious solution is to make coal-fired generation cleaner. And that's what utilities in Western countries have been doing for years, to comply with ever stiffer air-pollution standards. Many literally wash coal to remove some of the impurities before burning it. Other technologies concentrate on purifying the smoke created during combustion. Small particles of ash, for example, are normally removed by forcing the flue gases, as the fumes from the furnace are known in the trade, between electrically charged plates. (Ash particles have a small electric charge, and are then trapped on one of the plates.) Other filters and chemical "scrubbers" catch oxides of sulphur and nitrogen that would otherwise cause acid rain. 

Reducing emissions of carbon dioxide, however, is another matter. Most utilities tackle the problem indirectly, by attempting to improve the efficiency of their plants, and so to squeeze more electricity from each tonne of coal consumed or carbon dioxide produced. Most firms want to make such improvements anyway, since they cut costs and improve profits. In Britain, as in most rich countries, the average efficiency of coal-fired power stations is about 35%. But Mitsui Babcock, an engineering firm, says its most recent designs can achieve efficiencies as high as 46%. It reckons that switching from an old design to a new one can cut fuel consumption and emissions by 23%.  Most of the gains in efficiency come from increasing the heat and pressure of the steam used to turn a plant's turbines. The newest ones heat the steam to as much as 600°C--state physicists call "supercritical". But there is no reason to stop there. Engineers believe that hotter boilers would raise yields even more. Such "ultra-supercritical" boilers, they say, could achieve efficiencies of over 50%, reducing emissions still further.  Substituting biomass for some of the coal burned can also help.

Plants, after all, grow back after being harvested, so burning them does not add to overall levels of carbon dioxide in the atmosphere. By replacing 20% of their fuel with biomass, power stations can reduce their emissions by a further 20%. (Any more than that, says Lars Stromberg of Vattenfall, a European energy firm, and the ash from burning it would gum up the works of most furnaces.) Emissions also fall if biomass fuel is used to pre-heat the steam before it enters the boiler. All told, Mitsui Babcock calculates, these measures could cut emissions from coal-fired plants to the same level as those using natural gas.  The coal burnt in power plants can also be improved, mainly by drying. Less dense types, such as sub-bituminous and lignite coal, can contain up to 50% water. When burned, the water escapes as steam up the chimney, carrying valuable heat with it. Evergreen Energy, an American firm, is selling heat- and pressure-treated coal which, it claims, is as much as a third more efficient than ordinary coal.  Such techniques are particularly important in America, where power plants use a lot of sub-bituminous coal from the Powder River Basin in Wyoming and Montana. Coal from this region is low in sulphur, and so burns more cleanly, but has a relatively low energy density unless treated. Meanwhile, RWE, a German utility, is building a plant which will use the residual heat of its own flue gas to dry lignite before burning it. That increases the overall efficiency of the plant at little cost, since the coal can be treated without having to generate any extra heat. 

How to capture carbon

These methods can reduce the various emissions produced by coal-fired power stations, so that they are at least no worse than gas-fired stations. But technologies also exist to make coal cleaner still, by filtering out carbon dioxide from the flue gas and storing it somehow. This is theoretically possible, but expensive. Other pollutants, after all, are essentially impurities, which can be washed from the coal or filtered out of the flue gas. But carbon dioxide is not a contaminant--it is the inevitable by-product of carbon in the coal reacting with oxygen in the air. Along with nitrogen, the inert remainder of the air, carbon dioxide is the chief component of flue gas. Gases, of course, are bulky and difficult to store. Most plans for carbon-dioxide storage involve liquefying it and pumping it underground into former oilfields, gasfields or coal beds--an energy-intensive and thus expensive process. Separating the carbon dioxide from the nitrogen in the flue gas is also expensive, but necessary, since nitrogen turns liquid at a much lower temperature than carbon dioxide, and so requires even more energy to liquefy.  Moreover, unlike modifications that improve efficiency, there are no savings to be had by adding carbon-capture technology to a power plant. As a result, no such plants have been built. A few firms are building demonstration projects, while they wait to see whether governments impose long-term restrictions on carbon-dioxide emissions. Others, especially in Britain, which is blessed with natural storage tanks in the form of the declining oil- and gasfields of the North Sea, have announced feasibility studies for clean-coal plants. Some utilities, such as AEP, are planning commercial plants that will initially lack carbon-capture facilities, but are designed to allow the technology to be added fairly easily at a later date. All are looking for government hand-outs or regulatory incentives to pursue these experiments, in the absence of any more compelling commercial logic. 

How does carbon capture work? Most utilities are eyeing one of three basic designs. The simplest, and easiest to bolt on to existing plants, treats carbon dioxide like any other pollutant, and extracts it from the flue gas. As this gas passes through a solution of chemicals called amines, the carbon dioxide is absorbed but the nitrogen is not. The carbon dioxide can later be released, by heating the solution, for subsequent liquefaction and storage. Many firms already use this "amine scrubbing" approach to remove carbon dioxide from natural gas, for example. But it is not so practical for large-scale uses, since the amines are expensive, as is heating them to release the captured carbon dioxide. The extra energy required would reduce a state-of-the-art supercritical plant's overall efficiency by about 10%, according to the IEA.  "Oxy-fuel" plants sidestep the difficulties of separating oxygen and nitrogen in the flue gas by burning coal in pure oxygen rather than air. The resulting flue gas is almost pure carbon dioxide. But the energy used to separate oxygen from air before burning is almost as great as that needed to filter out nitrogen afterwards, leading to a similar loss of efficiency. Oxy-fuel enthusiasts claim that modern plants can be easily retro-fitted to operate as oxy-fuel plants.  The third approach, called "integrated gasification combined cycle" (IGCC), also requires oxygen, but for use in a chemical reaction rather than for burning. When heated in oxygen, coal reacts to form carbon dioxide and hydrogen. An amine solution then absorbs the carbon dioxide, while the hydrogen is burnt in a modified furnace. The amine scrubbing is cheaper than usual, since the reaction generates carbon dioxide in a more concentrated form. Engineers are also experimenting with membranes that would allow hydrogen to pass, but not carbon dioxide.   There are four IGCC demonstration plants operating in America and Europe, although none currently captures carbon dioxide permanently; instead, it is simply released into the atmosphere. AEP's planned new plants will follow a similar design. The attraction of IGCC plants, aside from their carbon-capture potential, is that they produce fewer traditional pollutants and also generate hydrogen, which can either be put to industrial uses or burnt. But most utilities doubt that IGCC plants are suitable for mainstream power generation, because of higher capital costs and frequent breakdowns. Proponents retort that teething problems are natural, since IGCC is a newer technology, which combines previously unrelated processes from different industries. 

George Bush is a believer, at any rate. In 2003 he unveiled a subsidised scheme to build a zero-emissions IGCC plant called "FutureGen" by 2013. The European Union, for its part, is giving money to utilities dabbling in oxy-fuel, among other schemes. Handouts from the taxpayer are needed, power firms argue, since the technology in question is still young. But it is hard to believe that it will ever grow up unless subsidies give way to stronger measures, such as long-term caps or taxes on carbon-dioxide emissions. The technology to eliminate such emissions from coal-fired plants exists, but it will not be adopted without regulatory incentives from governments. 

Courtesy: The Economist (Technology Quarterly), December 2-8, 2006





Mittal signs deals with Total, Lukoil

December 12, 2006. In the first signs of falling apart of the pact it had with ONGC, the world's largest steel producer Mittal Steel is believed to have entered into separate deals with Total of France and Lukoil of Russia for acquisition of oilfields in Africa and Central Asia. Mittal Steel, which had last year announced its entry into oil and gas business through two joint ventures with Oil and Natural Gas Corp (ONGC), has already on its own picked 3 per cent stake in Chevron's under-construction 6-billion USD Olokola Liquefied Natural Gas (OK-LNG) project in Nigeria. Mittal Steel, in June, had signed a pact with Total to jointly acquire oil and gas properties particularly in Africa and trade oil and gas produced from such fields. Last month, it signed with Lukoil for specific acquisitions in Central Asia, particularly Kazakhstan.

While the ONGC-Mittal Energy Ltd (OMEL) has landed itself three oil blocks in Nigeria, progress on OMESL had been slow due to ONGC's new management losing interest in the venture. While ONGC has not hidden its reservations on trading in oil and gas with Mittal, it has gone ahead and signed a deal with Hinduja Group for sourcing of LNG and is negotiating an OMEL type of agreement with the multi-billion dollar group. Mittal will get 4.5 million tons per annum of LNG from the OK-LNG venture and is looking at taking stake in big oil and gas projects in Africa and Central Asia.

Cairn India to invest $1.45 bn in exploration activities

December 12, 2006. Cairn India Limited will invest about Rs 6,500 crore ($1.45 bn) in India over the next three years to explore oil and natural gas reserves. The company has already spent Rs 5,000 crore in Andhra Pradesh, Gujarat and Rajasthan.  It plans to pump in more funds in Rajasthan and about Rs 450 crore in Ravva block in Andhra Pradesh. With the investments the production capacity of the company would increase from 90,000 barrels a day to 2 lakh barrels a day. As part of expansion to take up more drilling works in existing blocks, Cairn would bring four new drilling rigs to the country apart from the existing three rigs.  The company posted a higher revenue of Rs 545 crore during the first half of the current fiscal as against Rs 780 crore in the entire last fiscal owing to a hike in crude oil prices internationally.

Cairn plans $100 mn tender for onshore oil rigs

December 11, 2006. Cairn Energy plans to float a tender for three onshore drilling rigs for its oil fields in Rajasthan at $100 million, which is part of the $500-million investment that it has lined up for development and construction work for the next year at these fields.  While construction work is expected to begin early next year, Cairn expects the rigs to arrive later in the year.  The three rigs will initially be deployed for drilling 30 oil-producing wells at the Mangla field. In 2009, when production begins, another 115 wells will be drilled at Mangla. The total number of wells will go up to 160. If need arises, 65 more wells will be drilled. 

Peak production from the Mangla field alone is estimated to be 1,00,000 bpd, while that from the entire Barmer area is 1,50,000 bpd. The company already has two rigs working at the Rajasthan oil fields. Drilling on the Rajasthan fields will begin once the rigs arrive during the later half of 2007. Cairn’s total investment in the Rajasthan oil fields will be $1.5 billion over a three-year period. This includes $850 million that 14 international banks, including the International Finance Corporation, has extended for the oil fields. Cairn will pump in another $600 million from its initial public offer proceeds. 

ONGC to undertake exploratory work in Tripura

December 10, 2006. State-owned Oil and Natural Gas Corporation (ONGC) is to undertake massive exploration works in the northeastern state of Tripura to tap the around 40 bcm of gas reserves. The gas would be supplied to a proposed 740 MW capacity giant thermal power plant and cater to other industrial projects across the state. The corporation would undertake drilling 60 exploratory and 14 developmental wells for this. The 740 MW power plants is being set up at a cost of Rs 400 billion at Palatana in south Tripura to tap the gas potential in this logistically difficult state. Prime Minister Manmohan Singh had laid the foundation stone of the plant in October last year. ONGC's first-ever commercial power project, for which a Special Purpose Vehicle has been formed, would be commissioned by 2009 and supply gas to other northeastern and northern states of India. The joint venture project, incorporated around one-and-a-half years back as a partnership between the Tripura government, Infrastructure Leasing and Financial Services (ILFS) and ONGC, also involves laying of a 255 km-Tripura Gas Grid and laying of 640 km-transmission lines to connect the national power grid line at Bongaigaon in southern Assam.

GAIL buys 30 pc stake in Myanmar oil, gas block

December 8, 2006. Expanding its base in oil and gas exploration and production (E&P) activities, GAIL (India) Ltd has acquired stake in Block A-7 in Myanmar. GAIL, as consortium partner, along with Silver Wave Energy of Singapore, signed a production-sharing contract (PSC) with Myanmar Oil and Gas Enterprise on December 6 for the block located in Rakhine offshore area of Myanmar. GAIL would hold 30 per cent participating interest whereas the rest would be held by Silver Wave Energy. The block will be developed in phases. Under phase-1, the consortium is going to study the prospects of the block.

The company now holds a participating interest in 17 exploration blocks in the country and abroad, along with national and international consortium partners. Of these, seven are on-land blocks and 10 are offshore blocks. In India there are 13 blocks, which are in basins such as Mahanadi, Bengal, Gujarat - Saurashtra, Mumbai, Cambay, Assam-Akaran and Cauvery. GAIL has also got stake in the A-1 and A-3 blocks in Myanmar and Block No. 56 in Oman. As part of a consortium led by South Korea's Daewoo International Corporation, GAIL owns 10 per cent of Block A-1 in Myanmar, the biggest proven gas reserves in that country, which is also located off the Rakhine coast. GAIL had said that it estimated 5.7- trillion cubic feet (TCF) to 10 TCF of natural gas reserves in three discovered fields in two blocks in Myanmar. First commercial gas production is expected to commence in mid 2010.


Refining sector emerges as top merchandise exporter

December 12, 2006. Stating that the Government is maintaining a close watch on the volatile international oil prices the petroleum minister, informed the Parliamentary Consultative Committee that a refining capacity addition of about 16.5 million tonne has taken place in the country during the first eight months of the current fiscal year. Indian refining sector has emerged as the top merchandise exporter of the country ahead of gems and jewellery, with petroleum products exports of about Rs 38,300 crore in the first five months of the current fiscal. The addition in refining capacity has come in from 6 mt capacity expansion at Indian Oil Corporation Ltd's Panipat refinery and 10.5 MW new grassroot refinery commissioned in the private sector by ESSAR Oil at Vadinar. With this, the total petroleum products refinery capacity in the country has reached 148.97 million metric tonne per annum (MMTPA) up from 132.97 MMTPA as on April 1, 2006. The State-owned oil companies have planned capacity addition of 53 MMTPA by the end of the XI Five Year Plan, which comes to around 50 per cent of their present capacity. The refinery capacity in the country is expected to go up to about 241 MMTPA by adding about 92 MMTPA during XI Plan.

Three major grassroots refineries are at various stages of progress at Bhatinda in Punjab, Paradip in Orissa and Bina in Madhya Pradesh being developed by Hindustan Petroleum Corporation Ltd, Indian Oil Corporation Ltd and Bharat Petroleum Corporation Ltd, respectively, with an addition of 30 MMTPA by the end of 2010-11. Private sector is also planning new refineries with a capacity of 35 MMTPA. PSU refineries have also taken up modernisation projects. The demand for petroleum products is likely to increase to 116 MMTPA in 2007-08 from about 111.9 MMTPA in 2005-06 and reach 132 MMTPA in 2011-12 against the refining capacity of about 241 MMTPA.

IndianOil to pip RIL in refining margin stakes

December 7, 2006. Refining margins at Indian Oil Corporation’s (IOC) upcoming Paradip refinery in Orissa would be “the highest in the country at $11-12 a barrel at current prices. At present, Reliance Industries manages the highest margins in the country — about $9 a barrel last quarter — from its refinery in Jamnagar.  Though it is the largest refiner in the country, IOC has a mix of old-and-modern refineries. It has been facing pressure on refining margins, which have dipped to $4.2 a barrel from $6 a barrel a year ago.  The company today unveiled an upgraded fluid catalytic cracking (FCC) technology called Indmax — short for Indane maximisation — that will enable it to maximise the production of LPG, and net higher margins. 

The company is also in talks with Hindustan Petroleum for deploying the technology at its upcoming greenfield Bathinda refinery, while Mangalore Refinery and Petrochemicals has also shown interest in deploying the process. The process has been in use at the company’s Guwahati refinery since 2003. Bongaigaon Refinery is also using the technology.  FCC is a secondary refining process for conversion of low-value feedstock to high-value LPG, nahptha, petrol and diesel. At the Guwahati and Bongaigoan refineries the technology processes crude without leaving any waste residue. 

Transportation / Trade

India willing to pay more for Iran LNG

December 12, 2006. India, which had signed a five-million-tonne LNG deal with Iran last June at an attractive price of just $2.9 per million British thermal units (mmBtu) is now willing to pay more for buying the fuel at $4.5 per mmBtu. India is considering paying a higher price of up to $4.50 per million British thermal units (BTU) to buy LNG from Iran, to help tie up long-term supplies for the energy-hungry nation. Indian oil firms signed a 25-year deal with National Iranian Gas Export Co in June 2005 to buy five million tonnes of LNG a year at a price linked to $31 a barrel of crude oil, which translates to $2.9 per million BTU. But Tehran has not ratified the agreement because of a sharp rise in oil prices, and has been demanding India pay more.

India was looking to link the LNG price to $45-$50 a barrel of crude oil, which translates to up to $4.5 per million BTU. An increase in the price would need the approval of India's cabinet. India, which imports more than 70 per cent of the fuel it consumes, wants to ensure adequate supplies to sustain an economy growing at more than 8 per cent a year. High oil prices widen India's trade deficit and create inflation pressures.

GSPC in talks with Adani, Essar for LNG terminal JV

December 10, 2006. Soon after announcing a Rs 5,000 crore, 5-million tonne liquefied natural gas (LNG) import and re-gasification terminal in western Gujarat within the next five years, state-owned Gujarat State Petroleum Corporation (GSPC) is now in talks with corporates involved in port development for a joint venture for the project. GSPC is in talks with companies including Adani and Essar Group for a joint venture (JV). The company is likely to put up its LNG import terminal at Pipavav or at Mundra port in Gujarat. GSPC was at present verifying the maritime perspective and other feasibility reports from its consultants. Western Gujarat has a significant LNG market.

The five year tax holiday given to companies in the Kutch region ever since the devastating earthquake of 2001 has attracted a number of heavy industries including fertilizer, chemical and saw pipes firms, who are willing to buy re-gasified LNG at the current spot prices. Currently, India has a gas supply of 24.25 million metric tonne per annum (MMTPA), and an additional gas requirement of 32.5 MMTPA, which would go up to 56.75 MMTPA by 2010. The Kutch region also has two major SEZs, Kandla and Mundra, which will create further demand for LNG. GSPC planned to retain almost 26 per cent stake in the proposed LNG terminal and offer the rest to various investors in its project.

IOC acquires 12.5 pc stake in TAPCO

December 8, 2006. Indian Oil Corporation (IOC) has picked up a 12.5 per cent stake in the Trans-Anatolian Pipeline. The latter is involved in building a pipeline between the Black Sea Port of Samsun and Ceyhan in Turkey. IOC will “participate in the Samsun-Ceyhan crude oil pipeline project by acquiring 12.5 per cent of the shares of the Trans-Anatolian Pipeline Company (TAPCO). The company has not disclosed the price at which the acquisition is being made. TAPCO is currently owned by Eni of Italy and Calik Enerji of Turkey on a 50-50 basis. The entire deal package has been agreed in principle and will be submitted soon for the requisite corporate approvals of the respective companies.

The 550-kilometre pipeline requires an investment of $1.5 billion and will have a capacity to carry 1.5 million barrels of crude oil a day. The development of the project is already under way. IOC’s participation in the Eni/Calik joint venture is likely to consolidate this partnership, which aims at by-passing the Turkish Straits. Upon completion, the Samsun-Ceyhan pipeline will ensure expeditious, safe and economical export of crude oil from the Black Sea to the Mediterranean Sea in an environment friendly manner. 

LNG import to increase to 23.75 MT a year by 2012

December 8, 2006. India’s import of liquefied natural gas (LNG) is projected to increase to 23.75 million tonne per annum by the end of 11th Plan period (2012). LNG import is projected to increase to 23.75 million tonne per annum, equivalent to around 83 million standard cubic meters (mscmd) per day. India, Iran and Pakistan will be meeting next month in Tehran to deliberate on the issue of supply of natural gas through a pipeline and this is expected to take shape “very soon.” The government is serious about pursuing Iran-Pakistan-India gas pipeline project. A meeting of oil secretaries of the three countries took place recently. The ministers will be meeting next month. Very soon this proposal will take shape.

Policy / Performance

Motul plans JV, may directly operate in India

December 12, 2006. The ongoing automobile boom in India has inspired Motul, France, one of the largest independent lubricant brands in the world, to chalk out plans for directly operating in India and neighbouring markets by floating a joint venture in the New Year. Since April 2003. Motul is produced and marketed by Atlantic Lubricants and Specialities, part of Standard grease group, Mumbai. ALSL has a full-fledged high-tech facility in Silvassa, Mahararashtra. ALSL has a three-year technical licensing agreement with Motul to manufacture and market Motul products in India, Bangladesh, Sri Lanka, Nepal and Bhutan. It is learnt from industry circles that next year, Motul will consider strengthening its operations and brand reach in these markets through a joint venture with its financial participation. The Rs 6,000-crore lubricants market has over 30 players but dominated by public sector oil companies. Motul figures in the list of brands having 1% market share. Of the total production of 1.3 million tonnes, 20% is unbranded. But, expected the share of branded business to grow in the coming years. Motul is one of the oldest lubricant companies, established in 1853. The brand has a history of technical innovations and is present in more than 80 countries

ONGC may shell out $22 mn for unfinished work

December 12, 2006. ONGC may have to shell out close to Rs 100 crore ($22.3 mn) for default on commitments on oil and gas exploration blocks awarded under the New Exploration Licensing Policy. The Directorate General of Hydrocarbons (DGH) has come down heavily on the exploration and production companies like ONGC and Reliance Industries Ltd for not meeting the work commitments.

ONGC is in talks with the authorities concerned to resolve the issue for nine exploration blocks. As per initial estimates ONGC had to pay a fine of about Rs 400 crore for not meeting the work commitments for five deepwater blocks out of the total nine blocks in question. While ONGC has agreed to relinquish five deepwater blocks, it proposes to seek extension for two shallow water blocks and plans to finish the ongoing drilling activities in two other blocks before taking a final call.

Earlier, extension was given after giving a justification for not meeting the work commitment. However, now the companies have to give extension fees and cash payments as per estimated liquidity damage if they want to seek an extension. ONGC has paid statutory amount wherever it felt that the company needed extension. For unfinished volume, the DGH has worked out a formula for calculating the amount for unfinished work. As per the formula the water depth, casing cost, integrated service cost, etc. is not included while calculating the cost of drilling per metre. The cost recovery for incomplete work programme was calculated based on the cost given by the company and cost of similar activity in surrounding areas. The DGH had asked the E&P companies to give up the oil blocks and pay fine if the expected exploration work has not been done.

Petro Minister to attend oil meet in China

December 12, 2006. The Petroleum Minister is going to attend a meeting of the five energy-consuming nations - India, China, US, Korea and Japan - being hosted by China. The countries would deliberate upon the issues of energy security and strategic storage, alternate energy sources, investments, international cooperation and energy efficiency. He is likely to discuss the issue of volatility in international crude prices as well as challenges faced in promoting international cooperation at the meeting being held later this week. The five oil-importing countries are likely to issue a statement after the deliberations. The countries are likely to work out a better coordination between the global consumer nations to help rein oil prices. While the US is expected to talk on energy security and oil stocks, Korea will make presentations on diversification of energy mix and alternate sources of energy. Japan is likely to address the issue of investments in energy market. India will be discussing the issue of major challenges faced in the sector and promotion of international cooperation.

NELP in cold water over profit sharing

December 12, 2006. Winners of exploration blocks under the sixth round of New Exploration Licensing Policy (NELP-VI) may have to wait for some more time before the blocks are finally awarded. Objections have been raised in certain quarters over the issue of profit-sharing with the government in at least 19 bids, including seven deep-water blocks won by Reliance Industries (RIL) and six onshore blocks where Oil India (OIL) emerged as the first ranking bidder. The 19 blocks under question include bids awarded to Focus-Newbury and Petrogas-Gail-IOC consortia in the shallow-water blocks and an onland block awarded to the Naftogaz-RNRL-Geopetrol combine.

Although officials have maintained that there are no hurdles and the bids are “technically right” under the NELP guidelines, the final call will be taken by the petroleum minister himself. The objections to the share of profit petroleum, which is these cases have shown a lower stake for the government in the later years of production from these reservoirs was pointed out in the ECS meeting. But it was felt that since the bidding was through a transparent mechanism and bids had to conform to the rules to qualify it was perhaps not right to re-negotiate bids from winning companies. Also falling profit shares “may not be rejected outrightly” particularly if the net present value (NPV) offered by such bidders is the highest amongst all the bidders.

It has been argued by investors that it was perfectly right to bid on a sliding scale of profit petroleum for the government since the notice inviting offer (NIO) does not specify that the sliding scale should be with regard to investors alone. Petroleum ministry officials, however, claim that the profit share percentage to be shared between the contractor and the government should be on a rising scale in favour of the government, as has been the trend in all the 110 contracts signed under NELP, barring a few cases where contracted profit share has been static at higher tranches.

It has been found that in the 19 bids, the first rank bidders have offered “erratic” profit share percentage to the government, which would lead to a loss to the government. It is found that “in the erratic bid pattern, the highest level of profit share has been offered in the first tranche and tapers off subsequently.” It is learnt that negotiations to improve the profit share had also be undertaken in the past with the first rank bidders to improve profit share of the government. 

Govt against selling Tide Water stake to ONGC

December 9, 2006. The government has decided to call off the sale of its stake in auto lubricants maker Tide Water Oil to Oil and Natural Gas Corporation. ONGC had done due diligence for the company, which is a subsidiary of state-owned Andrew Yule, but its offer of Rs 50 crore was around half of what the government would get from the market. The sale of government equity in Tide Water is part of a plan to revive its parent company Andrew Yule. Apart from its lubricant business, Andrew Yule would also shed its electronic business.

Essar Oil may have struck reserve in Mehsana

December 7, 2006. Essar Oil may have struck a medium-sized oil and gas reserve in prospect B in CB-ON/3 pre-NELP block in Mehsana in Gujarat. Essar Oil holds 70 per cent operating interest in the 574-sq. km. onshore block in the Cambay basin. ONGC is a natural partner with 30 per cent stake. The company is expected to submit a detailed development plan of the reserve for approval of the Directorate-General of Hydrocarbons (DGH) shortly. Discussions are also under way for the crude offtake plan. The Management Committee - under the purview of the Union Ministry of Petroleum and Natural Gas - has approved the find as a `commercial discovery'. Apart from Essar Oil, the committee constituted representatives of ONGC and Directorate-General of Hydrocarbons (DGH). The company expects to start production of 50 barrels a day from the existing two wells (ESU1 and ESU2). The production is expected to increase with drilling of more production wells. While nature of crude at the particular prospect is not known, Mehsana crude is generally considered of a quality similar to Arab Light. Unlike the Assam-Arakan basin, crude is generally available in Cambay basin at a shallow depth and requires drilling of a larger number of production wells. Essar-ONGC consortium has signed the product-sharing contract (PSC) for the said block in July 1998. The first phase of exploration drilling was completed in June 2005 followed by appraisal drilling.



Coal India eyes mines in Africa, Indonesia

December 12, 2006. Coal India (CIL) has shortlisted Mozambique, Zimbabwe, Indonesia and Bangladesh for acquiring mines to fulfill the growing domestic demand of power plants. A total of 35 million tonne of coal was likely to be imported in the financial year ending March 2007. The country purchased about the same amount last year, while it produced 407 million tonne of coal in 2005-06.  Power companies account for 70 per cent of country’s total coal consumption. The mines would be acquired by CIL through its subsidiary Coal Videsh Ltd, which has been created for this purpose.  The draft Vision Coal-2025 said the country would require 1,267 million tonne of coal by 2025 to sustain an 8 per cent growth rate. Of this, the total domestic production will account for 1,061 million tonne.  The government expects the demand would increase at the rate of 10 per cent in 10 years. 

Surplus power dulls green sources

December 11, 2006. Bhapur in Nayagarh district of Orissa was one of the six sites selected by the Central government for the location of a nuclear power plant. That was in the 1980s. The project, however, never even got off the drawing broad. Almost 20 years later, a Spanish nuclear power plant developer has now approached the Orissa government with a proposal to set up a project in the state. In September 2006, in a letter to the state energy department, Cala Casa SL has said it was keen to establish a new generation nuclear power plant of a minimum of 2MW on build-own-operate. The capacity of the proposed plant was to be increased at a later stage to between 40 and 100MW. The company, which authorised Bhubaneswar-based Global Link to negotiate the deal on its behalf, said in its expression of interest that the minimum contract should be for 20-25 years. It would invest 80% in the project. The rest was expected to be borne by the state government, which is yet to respond to the proposal. Having abundant natural resources like thermal-grade coal and water, Orissa has not concentrated on renewable energy. With surplus power to the tune of 400MW, the state has a problem of plenty, unlike others. The state has, meanwhile, signed MoUs with as many as 13 power companies for a total capacity of 16,000 MW with an investment of about Rs 54,000 crore.

PFC gets 16 bids for ultra mega projects

December 7, 2006. Power Finance Corporation has received 16 bids, including from Tata Power and Reliance Energy, for the two 4,000 MW ultra mega power projects to be set up in Gujarat and Madhya Pradesh. While 10 Request for Proposals (RfPs) have been submitted for the pithead coal-fired Sasan project in Madhya Pradesh, 6 companies are in the fray for the Mundra power plant in Gujarat. Tata Power, Reliance Energy and Larsen & Toubro have bid for both the projects. State-run NTPC Ltd has submitted its bid only for the Sasan project, while Adani group has bid only for the Mundra project. Power Finance Corporation has postponed opening the price bids for the first two ultra mega power projects, to be set up in Madhya Pradesh and Gujarat, tentatively to December 18. Due to the absence of Punjab National Bank Chairman S C Gupta, who heads the apex committee that is evaluating the bids, the tariff-based bids are now likely to be opened on December 18, the deadline for awarding the projects by December 29 remained unchanged.

India’s nuclear capacity can go up to 30,000 MW: Montek

December 6, 2006.  The country’s nuclear power generation capacity can go up to 30,000 MW from about 3,000 MW now going by the research in fast breeder reactors. If the current research on the fast breeder reactor is anything to go by, the capacity can increase to 30,000 MW.  The country’s current nuclear power capacity was about 3,000 MW and based on domestic uranium this could increase to 10,000 MW in the near future. As of now, the government has set a target of 20,000 MW by 2020 from nuclear power.

Transmission / Distribution / Trade

AP to buy power from Central grid

December 12, 2006. The State govt has been spent Rs 408 crore for purchase of additional power from Central generating stations and other states to meet the demand supply mismatch. The Government expects to spend about Rs 600 crore for power purchase during the peak demand period of February, March and April, particularly to meet the demands of the farm sector during the rabi season to save the standing crop. The gas shortage has meant that four gas-based plants were working with truncated capacity leading to loss of about 2,742 million units. So the State was forced to purchase power to meet the demand. The State hydel generating plants have contributed significantly during the year bringing in savings of about Rs 235 crore. The utilities have sought the electricity regulator's consent to adjust this amount in the next financial year's balance sheet. Depending upon the decision of the regulator, the benefits could be passed on to the consumers. Meanwhile, the Andhra Pradesh Electricity Regulatory Commission has announced it has introduced the process of electronic filing of annual revenue returns (ARRs) or tariff applications for retail sale of electricity by the distribution licensees on a pilot basis for 2007-2008.

‘T&D losses cut crucial to funds’

December 10, 2006. The Centre is hoping to add a generation capacity of up to 70,000 MW in the 11th plan, while asking the states to bring down transmission and distribution losses to 15 per cent by 2010 from the current 40 per cent. The Approach Paper, which has been approved by the National Development Council, has asked states to give highest priority to reduce the T&D losses. Cutting down losses was critical, otherwise India would neither be able to finance capacity expansion nor attract private investments. The T&D losses are pegged at less than 10 per cent in better-managed power systems in developed countries. In the NDC meeting, Prime Minister Manmohan Singh had expressed concern on the persisting problems in power sector.

PowerGrid gears up for Lankan foray

December 8, 2006. After NTPC, it could soon be PowerGrid’s turn to venture into Sri Lanka. The power transmission major has already conducted a feasibility study on setting up an evacuation system that connects India with Sri Lanka. Further consultations for the Rs 1,500-2,000 crore project are under way between the two governments. With the pre-feasibility study already being completed by PowerGrid, a task force has been set up to take the plan forward. The task force will study the report keeping commercial interest in mind. The task force, comprising representatives of the ministry of power, Central Electricity Authority (CEA) and PowerGrid and Sri Lankan officials, will study the feasibility report prepared by PowerGrid and make recommendations to the steering committee regarding the inter-connection. It is likely that an agreement to set up a power transmission line between India and Sri Lanka will be finalised and signed early next year. The pre-feasibility report suggests linking Madurai in Tamil Nadu and Anuradhapura in the North Central province of Sri Lanka.

$16 mn for upgrading power network in Agra

December 7, 2006. Following the concerns expressed by government agencies and the Supreme Court on the poor state of the electrical supply network in Agra, the Uttar Pradesh Power Corporation Ltd (UPPCL) has been given an additional grant of Rs 71.56 crore ($16 mn) for the upgrade of power distribution under the Accelerated Power Development Reform Project (APDRP). Dakshinanchal Vidyut Vitran Nigam Ltd (DVVNL), with this additional funding from the power ministry, the total project budget had now been raised from Rs 85 crore to Rs 156.56 crore. This will include converting the city’s power transmission lines into an aerial bunch conductor based-system to prevent power theft and transmission losses. These losses, currently, amounted to almost 80 per cent of the electricity supplied by the company to Agra. 

Rajasthan gets priority in rural electrification

December 6, 2006. The Rajiv Gandhi Rural Electrification Yojna (RGREY) would be taken to all districts of Rajasthan so that villagers could have power for domestic and agricultural use. The RGREY, which was underway in a few districts now would be expanded in the state for betterment of the people. Hailing the state government's energy plants and generation, Rajasthan was among a few other states having a plant load factor upto 90 per cent from each generating unit.

Policy / Performance

MoC plans global sparkle for ‘black diamond’

December 11, 2006. More restructuring of the coal industry is on the cards to make it globally competitive. Coal secretary said an experts’ committee set up for the purpose had been asked to examine the restructuring issue in order to tackle the inadequate supply of coal mined domestically. Various committees had examined the issue on various occasions, but no clear road map had emerged. The government gave green signal to private mining of coal. The government decided to allocate coal blocks to private firms that had tied up with approved end-users. A new round of sector reforms is likely to help increase coal production, which could eventually help meet the country’s future energy demand to a big extent. Estimates by the Planning Commission reveal that the demand-supply gap of coal will still stand at a whopping 60 million tonne by 2011-2012.

According to projections made in the Vision Coal 2025, an additional Rs 95,000 crore for open-cast mining and Rs 23,000 crore for underground mining will be required to increase production to the desired level by 2025. Efforts to meet the shortfall are on across the industry. State-run Coal India Ltd said it was targeting to buy coal mines in Mozambique, Zimbabwe, Indonesia and Bangladesh to meet the growing domestic demand by power plants. A total of 35 million tonne of coal was likely to be imported in the financial year ending March 2007.

Tata panel recommends $40 bn projects for govt clearance

December 9, 2006. The Ratan Tata-headed Investment Commission has identified more than a dozen projects entailing a total investment of $40 billion, including an estimated $10 billion by the US chemical giant Dow. Other proposals include $2-3 billion as equity investment in the banking sector by Citigroup, Barclays and Royal Bank of Nova Scotia. The commission has identified a number of proposals which are awaiting action from different state governments, Indian partners or corporate bodies. While South Korean steel giant Posco has planned an investment of $10 billion, Reliance Energy has estimated an investment of $12 billion for setting up a 10,000 MW coal-fired power plant in Orissa.

Other proposals include AES group’s $400-500 million in the power sector to expand capacity of OPGC (Orissa Power Generation Corporation) by 500 MW, and around $1 billion for setting up a 1,000 MW project in Chhattisgarh. Besides, Space TV has planned an investment of about $650 million in the media sector. The commission has also identified $300 to $500 million equity investment projects by Trikona Capital and others in real estate, $200 million by Lafarge India in mining and $400 million by Metro Cash & Carry in trading. The recommendations of the commission, set up by Prime Minister Manmohan Singh, have been sent to the state governments for follow-up action. 

MoC decides to allot 10 blocks to govt undertakings

December 8, 2006. The government has surely given the central and state undertakings like State Trading Corporation and Mineral Development Corporation a reason to smile. For, the coal ministry has earmarked 10 coal blocks to be allocated to them. These blocks, with coal reserves of 6,072.15 million tones, are situated in north Karanpura, Rajmahal Gr, Ib Valley and Talcher coal fields. The coal ministry would allot these coal blocks through government dispensation route, provided the central and state undertakings or companies or corporation are authorised to undertake coal mining. They should be entitled for coal mining as per the provisions under their memorandum of articles of association. The allocation of these 10 blocks will be as per the relevant provisions of the Coal Mines (Nationalisation) Act, 1973.

Demand for non-coking coal, which accounts for more than 90 per cent of the total demand, is expected to increase at a compounded average growth rate of 8 per cent, driven by increasing consumption from cement sectors. The growth of the power sector, which accounts for 80% of total non-coking coal demand, would be aided by the aggressive capacity addition expected during the 11th Plan period. Demand for coal from the cement sector will be driven by capacity expansions and captive power plants. Demand for coking coal, mainly from large integrated steel players, is expected to double to 55.8 million tonnes in 2011-12.

Govt weighs alternate tech for 800-MW super critical power units

December 7, 2006. Power major NTPC and equipment manufacturing major Bharat Heavy Electricals (Bhel) have so far been unable to come to an agreement over the price at which possible contract to supply super critical units can be finalised. For the ministry of power, however, acquiring technology for manufacturing 800 MW super critical units is of crucial importance. While the ministry acknowledges that Bhel with its technology tie-up with Alstom and Siemens is in the best position to offer this, it is willing to look at other possibilities if that means a more competitive price for NTPC. Bhel has asked that 8-10 units of NTPC’s own projects which would use 800 MW super-critical technology be awarded to it, so that technology transfer from Alstom and Siemens can take place. This would allow it to internalise and develop indigenous capacities to manufacture units with super critical technology. The ministry of power acknowledges that only NTPC is in a position to place orders for as many as eight units simultaneously. The ministry of power had set up a committee headed by Central Electricity Authority (CEA) chairman, to look into the issue. The committee has recommended that the method by which price can be established should be price determined by international competitive bidding for super-critical systems.

Foreign coal powers its way into India

December 7, 2006. The Tamil Nadu Electricity Board’s (TNEB) Tuticorin thermal power station is going in for a capacity addition binge. The proposed plant would be fired mostly by Indonesian coal. Coal mines in Indonesia produce superior non-coking coal with just 3-12 per cent ash content. Imported coal, which is already being used by the power station, is more economically viable than domestic variants—Coal India’s best coal (18 per cent ash content) from Raniganj minefields, or the less expensive but much more impure (42 per cent ash) Mahanadi coal. Indonesian coal is not only cheaper, but also possesses higher calorific value, which makes it a more efficient fuel.  At current prices, cost of Indonesian coal to TNEB would be around Rs 2,900 a tonne, as against Rs 3,100 for the comparatively more ashy Raniganj coal. Right now, the ex-pithead price of Rani Ganj coal is around Rs 2,200 (cost of mining plus profit to the miner at Rs 1,600, on which various taxes—cess, royalty, sales tax etc—are added). The price escalates to Rs 3,100 as it reaches the user due to sea and rail freight and other expenses such as port handling charges.

As for the TNEB, Raniganj coal will have to be first taken to Haldia port by rail, and then by sea to Tuticorin, and again by rail to the thermal station. Take the case of Mahanadi coal. Its production cost, inclusive of taxes, is just Rs 600, but transportation and handling expenses to reach the Tuticorin power plant is over Rs 1,200.  Similar is the case of Gujarat SEB which fires its Sikka Power House using South African and Indonesian coal. As regards central power utility NTPC, the largest user of coal in the country, since most of its big plants (such as Korba, Kahalgaon, Talcher and Faraka) are located far off coastal lines, using CIL coal is still a preferred option.

However, production economics is not the only factor that drives power plants’ proclivity to import coal. Availability is a serious question too. CIL and its arms, who produce bulk of domestic coal (CIL and its arms and other PSUs posted an output of 343 million tonnes (mt) during 2005-06 out of the country’s total coal production of 397 mt) find it increasingly difficult to meet whole of the growing requirement of NTPC for thermal coal. CIL plans to augment its production to 1,000 mt by 2025. By then, the coal demand too must have grown manifold.

Bihar unveils new steps on power sector front

December 6, 2006. Deputy Chief Minister of Bihar has admitted that the State needed huge reforms in the power sector to attract investments. Bihar today produced just 30 MW of its own electricity and sourced as much as 1200 MW from central agencies and other sources. The State Government has planned to generate some 15,000 MW in the next 15 years or so, and plenty of new initiatives have been launched in this regard. The State Government has also legislated a Bihar Single Window Clearance Act to attract more investments. The Bihar State Financial Corporation was also being revived.  Two super thermal power plants have been planned at Kahalgaon and Baar, work on which was expected to start in the next two years. Some 3,000 MW is expected to generated from the proposed three power plants in Katihar, Bhagalpur and Nabinagar (all adjoining Jharkhand State), and investment proposals have been received from major industrial houses such as Tatas and Reliance.

NTPC to come out soon with nuclear power plant

December 6, 2006. Domestic power major NTPC Ltd will shortly come out with a roadmap for setting up of nuclear power plants in the country. The company, which plans to execute two nuclear power projects of 2,000 MW capacity each, has assured the power ministry that it would, during 2007-08, initiate the process of site selection and preparation of the site report for at least one site for a nuclear power plant. This assurance has been given by NTPC in the draft MoU, to be signed with the power ministry for 2007-08. The nuclear power capacities will be executed by NTPC in joint venture with a suitable technical partner. Currently, NTPC has engaged a consultant to prepare a report on geo-political, statutory and regulatory issues. Besides this, the consultant will also look into the technology options, issues related to fuel tie-ups, associated risks. etc.

Coal India may join hands with BHP Billiton

December 6, 2006. The country’s largest coal producer, Coal India Limited (CIL), is mulling a swap deal with the world’s biggest miner, BHP Billiton, wherein CIL will partner BHP in Australia and the latter would be the partner for CIL in India. The company is looking at overseas partners as it explores participation in the coal trade beyond the shores of India. This could take the form of equity stakes in coal blocks or in companies that already own and are prospecting in blocks.  The government-owned company has cash reserves of Rs 11,000 crore, more than sufficient to fund its buys overseas, and it will soon have the autonomy to independently take large investment decisions, having applied for the Navratna status. The firm may then look at floating an IPO, not for raising finances, but as a means of ensuring tighter corporate governance. CIL, through its subsidiaries, produced 353 million tonnes of coal last year and managed gross sales of almost Rs 34,000 crore. The company plans to invest Rs 15,000 crore over the next five years to increase coal production to 520 million tonnes.




Turkmenistan signs gas, oil agreement

December 11, 2006. Turkmen President has signed an order allowing a Turkish company to take part in the development of a newly discovered giant oil and gas field. The Chalyk Energy company plans to spend US$140 million (euro105 million) to drill 12 oil wells up to 3,600 meters (nearly 12,000 feet) deep in the southeastern town of Iolotan. The Iolotan fields contained an estimated 7 tcm of natural gas, adding to the Central Asian state's proven commercial reserves of 2.8 trillion cubic meters. Turkmenistan invited the China national Petroleum Corp. to participate in the development of the Iolotan fields. The CNPC plans to invest US$152 million (euro115 million) in tapping the fields. Turkmenistan possesses the second-biggest gas reserves among all ex-Soviet republics, after Russia, and its resources are playing an increasingly important role in regional geopolitics. In April, Turkmenistan concluded an agreement to build a gas pipeline to China. Currently Russia's state gas giant Gazprom controls the only transit route for Turkmen gas exports.

TransGlobe wins new block in Yemen

December 11, 2006. TransGlobe Energy Corp. has been awarded a new exploration block in the Republic of Yemen. Block 84, Yemen. The Ministry of Oil and Minerals has selected the joint venture group comprised of DNO ASA, TG Holdings Yemen Inc. and Ansan Wikfs (Hadramaut) Limited as the successful bidder for Block 84 in the Third International Bid Round for Exploration and Production of Hydrocarbons. TG Holdings Yemen Inc is a wholly owned subsidiary of TransGlobe Energy Corporation. The award is subject to government approval and ratification of a Production Sharing Agreement. Block 84 encompasses 731 square kilometers (approximately 183,000 acres) and is located in the Masila Basin adjacent to the Canadian Nexen Masila Block where more than one billion barrels of oil have been discovered. The Block 84 Joint Venture Group plans to carry out a 3-D seismic acquisition program and the drilling of four exploration wells during the first exploration period of 42 months.

Anadarko finds oil in deepwater Gulf of Mexico

December 11, 2006. Anadarko Petroleum Corp. discovered oil at its Mission Deep prospect on Green Canyon block 955 in the deepwater Gulf of Mexico. The discovery well encountered more than 250 feet of net oil pay in the primary middle Miocene objective. Mission Deep is the ninth discovery out of 12 tests so far this year in the deepwater Gulf of Mexico, following up on last year's deepwater exploration program in which five of nine were successful. Anadarko has a 50 percent working interest in Mission Deep and serves as operator. Devon Energy Corp. also has a 50 percent working interest.

Iran’s Marun field to produce 200mcf gas per day

December 11, 2006. Daily gas production from Khami layer of Marun field, southern Iran, may reach 200 million cubic feet once three more wells are added to the existing ones. Meeting the goal, gas condensate capacity is then expected to hit 34,000-bpd mark and considerable increase in oil production will be noted for rest of the year. Total of 593,000 bpd has far been registered for the first six months. Moreover, major improvement in the field has stopped 14 million cubic feet of gas going up in flares and innovative methods of maintenance have kept the length of repairs down to five days from the early 25. Khami is the country’s deepest hydrocarbon layer after Bangestan and Asmari, stretched along Zagros Mountains in southwestern region. It is 5,000 meters deep and is located 60 km southeast of provincial capital Ahvaz.

India, Singapore to explore gas in Myanmar

December 8, 2006. Indian and Singaporean companies will explore oil and natural gas in offshore area of Myanmar's western Rakhine state. According to a production sharing contract signed in the new capital of Nay Pyi Taw between Gas Authority of India Ltd (GAIL), Silver Wave Energy of Singapore and state-run Myanmar Oil and Gas Enterprise (MOGE), the consortium will conduct oil and gas exploration and production at Block A-7 in the Rakhine offshore area. There has been natural gas deposits found earlier at Block A-1 (Shwe field and the Shwephyu field) and Block A-3 (Mya field) in the same offshore area in January 2004 and April 2005 respectively, explored by another consortium of oil companies led by South Korea 's Daewoo International Corporation with 60-percent stake. Other companies go to South Korea Gas Corporation (10 percent), ONGC Videsh Ltd of India (20 percent) and GAIL (10 percent).

The Shwe field holds a gas reserve of 4 to 6 trillion cubic- feet (TCF) or 113.2 to 170 billion cubic meters (BCM), while the Shwephyu 5 TCF and Mya 2 TCF with the three fields estimated to yield up to 14 TCF of gas. Myanmar is planning to sell gas produced from the three gas fields to neighboring countries such as India and China through pipelines. The Essar Oil Ltd, has also reached a contract with Myanmar to undertake gas exploration activities at Block A-2 in the same Rakhine offshore area and Block-L in the coastal region of Sittway. Recent years have seen foreign oil companies increase engagement in oil and gas exploration in Myanmar.

Thailand's PTTEP, for example, has covered a number of blocks such as M-3, M-4, M-7, M-9 and M-11 under contracts, while another consortium made up of Chinese and Singaporean companies is also engaged in oil and gas exploration in some onshore and offshore areas. Myanmar has abundance of natural gas resources in the offshore areas. With three main large offshore oil and gas fields and 19 onshore ones, Myanmar has proven recoverable reserve of 18.012 TCF or 510 BCM out of 89.722 TCF or 2.54 TCM's estimated reserve of offshore and onshore gas. The country is also estimated to have 3.2 billion barrels of recoverable crude oil reserve, official statistics indicate. The Myanmar figures also show that in the fiscal year 2005-06 which ended in March, the country produced 7.962 million barrels of crude oil and 11.45 BCM of gas. Gas export during the year went to 9.138 BCM, earning over 1 billion US dollars.

AGL Resources plans gas storage facility

December 7, 2006. AGL Resources Inc. will construct a $180 million natural gas storage facility in the Spindletop salt dome in Beaumont, Texas. The new facility will provide 12 billion cubic feet of working gas capacity in its first phase with the potential to grow to 36 billion cubic feet, Atlanta-based AGL Resources. AGL Resources' Houston-based Pivotal Energy Development expects to get permits to begin construction in 2008. The first salt dome cavern will be ready in 2010, with a second 6 billion-cubic-foot cavern to begin commercial operations in 2012.

Total to expand in China, explore in North China

December 6, 2006. France's Total, the world's fourth largest oil company, is expanding its business in China's oil and gas exploration and production sector. The company plans to start exploring north China's Ordos Basin next year with its partner PetroChina. Total expects to invest US$60-80 million in China between 2007 and 2008, amounting to nearly six percent of its worldwide budget for exploration and production. Total and PetroChina signed a contract in March to develop natural gas in the Ordos Basin's south Sulige block, which has proven gas reserves of over 100 billion cubic meters. The Sulige project is Total's first exploration project in China for nearly 15 years. Total had returned to China because of improved investment conditions and the country's fast-growing oil and gas market. Total is acquiring data and evaluating these blocks. The French oil giant is also interested in deep water exploration and is looking into possible partnerships with Chinese companies.

Malaysia finds oil deposits in North West Natuna

December 6, 2006. A production sharing contractor, GENTING OIL & GAS PTE LTD., found oil deposits in North West Natuna block which has a production capacity of 1,210 barrels of oil per day. The deposit was found following drillings in Ande Ande Lumut (AAL-3X) well reaching a depth of 1,290 meters. Genting Oil & Gas will evaluate the AAL-3x well and propose a plan of its development if the well proves to be economical.

Husky and Norsk Hydro make Hydrocarbon discovery

December 6, 2006. Husky Energy Inc., and Norsk Hydro Canada Oil & Gas, announced the discovery of hydrocarbons during delineation drilling in the Jeanne d'Arc Basin, offshore Newfoundland and Labrador. The West Bonne Bay F-12 well is located in Significant Discovery License (SDL) 1040, approximately 320 kilometres southeast of St. John's, in close proximity to the Terra Nova oil field. Under a farm-in agreement with Norsk Hydro, operator of SDL 1040, Husky drilled the well using the jack-up drilling rig Rowan Gorilla VI. The F-12 well was drilled to a total depth of 4,666 metres. A side track well F-12Z was drilled to further delineate the structure and to gather additional reservoir information. In both wells hydrocarbons were encountered in the Upper Hibernia formation. Further analysis of core, fluid samples and wireline log data is continuing to estimate the resources in this pool.

ExxonMobil inks deepwater deal off the Philippine

December 5, 2006. ExxonMobil and Mitra Energy Limited (MEL) have entered into an agreement to explore for hydrocarbons in the deepwater Sandakan Basin southwest of the Philippine Islands. Under terms of the recently signed farm-in agreement, an ExxonMobil affiliate has acquired a 50 percent operating interest in Block SC 56. MEL retains a 50 percent equity interest in the block and will operate the 2D seismic acquisition phase of the exploration program. The oil exploration agreement covers approximately two million acres and is subject to approval by the Philippines Department of Energy.


Lukoil to buy gas stations from ConocoPhillips

December 11, 2006. Russia's top oil producer OAO Lukoil negotiating to acquire a chain of European filling stations from U.S. partner ConocoPhillips, even as ConocoPhillips attempts to sell nearly all of its company-owned retail stores at home. Lukoil is to buy the Jet network of about 380 filling stations that operates in Belgium, the Czech Republic, Slovakia, Poland, Hungary and Finland. The deal would boost Lukoil's international retail sales by roughly 20 percent. In 2006, Lukoil is forecast to sell 7.4 million tons of gasoline. Lukoil was also mulling the purchase of a major European oil refinery, as well as a possible stake in Czech refiner Unipetrol AS. Lukoil, which plans to spend $112 billion on its business over the coming 10 years, pumped an average of 1.92 million barrels per day in the second quarter of this year. Since 2000, Lukoil has acquired over 2,000 filling stations in the northeast U.S. and targeted the European refining and retail market.

Holly to spend $225 mn to upgrade refineries

December 11, 2006. Independent refiner Holly Corp. will spend $225 million to upgrade two of its refineries by adding two hydrocrackers of 15,000 barrels per day capacities each and a 28-million standard cubic feet hydrogen plant. The addition of a hydrocracker and hydrogen plant at the 75,000-bpd Navajo, New Mexico, refinery, for about $125 million, will enable it to meet the U.S. Environmental Protection Agency's low-sulfur gasoline specifications. They could be a part of a project that aims at 100,000 bpd capacity for the refinery, which could cost $250 million to $275 million, including the amount already approved. The expansion at the 26,000-bpd Woods Cross, Utah, refinery will cost about $100 million, and will hike the capacity to 31,000 bpd. In April, it estimated $300 million for increasing capacity at Navajo to 100,000 bpd and at Wood Cross to 30,000 bpd. Holly expects the projects to be completed during the third quarter of 2008.

Malaysia to buy Indian oil firms

December 7, 2006. Malaysian palm oil company IOI Corporation would acquire two oleochemical firms from Indian conglomerate Aditya Birla Group in a deal worth 423 million ringgit ($119.41 million). The purchase of Aditya Birla's Malaysian refinery and oleochemical businesses Pan-Century Edible Oils (PCEO) and Pan-Century Oleochemicals (PCOC) would be funded by existing cash reserves and borrowings.

LPG consumers to pay less in Pak

December 7, 2006. Distributors and marketing companies ruled out any big relief to consumers with regard to LPG prices after the government decision to abolish five per cent customs duty on liquefied gas import. They say that the consumers will see Rs1.8 to Rs2 per kg cut in gas rates at the retail stage, which cannot be termed as a real benefit to the consumers. Currently the demand of LPG has been slow due to ample supplies coupled with the late start of winter season. Production of LPG is currently 1,600 per tons daily. Out of this 40 per cent is consumed by rickshaws and taxis, while 60 per cent is used by consumers for burning purpose mainly in rural areas. The government had not considered the association’s demand of abolishing GST and income tax on import of LPG, which would have really provided a relief to the consumers. There is no comparison in prices between locally produced LPG and the imported gas. The locally produced gas was available at Rs28,847 per ton, while the landed price of imported LPG comes to over Rs40,000 per ton. Only Rs 1,700-1,800 per ton has been eroded in the shape of duty abolition.

CNPC, Rosneft to build oil refinery in China by 2010

December 6, 2006.China National Petroleum Corporation (CNPC) and Rosneft will build a joint oil refinery in China by 2010. The joint venture, one of two joint projects of the companies, will be located near Beijing and will refine crude, sell oil derivatives and operate a network of 300 gasoline stations around the refinery. The plant will refine about 10 million metric tons of oil, and will be completed by 2010. Russia supplied about 10 million metric tons of oil, worth more than $6 billion, to its East Asian neighbor's rapidly growing economy in 2006, and would further increase deliveries next year. Deliveries through the Kazakhstan-China pipeline from Atasu to Alashankou would be raised by one million metric tons, and that more oil would be pumped through the Sakhalin-I project in Russia's Far East.

Transportation / Trade

Woodside to spend on Pluto LNG project

December 8, 2006.Oil and gas explorer WOODSIDE PETROLEUM LTD, board has approved up to $A1.4 billion ($US1.1 billion) in funding commitments to be used to develop the Pluto liquefied natural gas project. The funding decision comes ahead of a final to decision on whether to invest in Pluto next year. The funding decision follows talks with the state government of Western Australia on how its domestic gas policy would apply to the offshore Pluto project. Woodside will begin preparing Pluto, which it wholly owns, next year following environmental approval from the Commonwealth government.

Policy / Performance

Turkey to share Caspian gas quota with Georgia, Azerbaijan

December 8, 2006. Turkey agreed to transfer part of its country's quota for natural gas produced in Azerbaijan's section of the Caspian to Georgia and Azerbaijan. The energy ministers of Georgia, Azerbaijan and Turkey met in Tbilisi to discuss a possible increase in gas supplies to Georgia through the South Caucasus Pipeline, passing from the Shah-Deniz gas and condensate field to Turkey via Georgia. During the negotiations, the sides agreed that part of Turkey's quota will be redistributed between Georgia and Azerbaijan. Georgia turned to its neighbors for additional gas supplies after Russia said it would double the current the gas price for Tbilisi to $230 per 1,000 cubic meters from 2007 amid worsening bilateral relations. The South Caucasus (Baku-Tblisi-Erzerum) Pipeline will start pumping gas from Shah-Deniz on December 15. The Turkish quota for 2007 was originally set at 2.8 bcm.

Saudi Arabia sees $60 oil as acceptable

December 7, 2006. Saudi Arabia sees $60 a barrel as an acceptable level for benchmark crude oil prices, and is opposed to any dramatic fluctuation in the price. Saudi policy had always emphasized the need for gradual price movements for the sake of producers and consumers. The kingdom is satisfied with oil around the current level of $60 a barrel. Saudi Arabia, the world's biggest oil exporter and the key member of OPEC, doesn't want to disrupt consumer economies. Saudi Arabia has taken the position that if there are to be price rises in the oil market, they should be reasonable and they should be affordable to consumers.

China to host energy moot

December 7, 2006. China will host a gathering on Dec. 16th of high-level officials from major energy-importing nations including the United States, Japan, India and South Korea. The topic of discussion during the meeting is to reduce energy consumption and raise efficiency and to ensure global energy security and stability. China imported 120.07m ton of crude oil in the first 10 months of the year, up 14.1pc on the same period last year, as its booming economy boosted demand.

Libya, Eni to renew energy partnership

December 7, 2006. Libya and Italian oil and gas major Eni are set to renew an energy partnership and have agreed to joint investments in oil and gas in Libya and other African countries. Italy is Libya's biggest business partner, and Eni, one of the major investors, has been present in Libya since 1959. Some kind of framework agreement may be reached before the end of this year. Libya and Eni have discussed renewal of the Italian company's concessions and its new investments in Libya's oil, gas and refining sector, including oil services and Eni's participation in building an 8-billion-cubic-metre liquefied natural gas plant.  Libya and Eni have also agreed on new joint ventures to invest in oil and gas sector in Libya and other African countries, the size of the investment was yet to be defined. Libya's National Oil Company would be Eni's partner in investments in the country's oil and gas sector. A new Libyan Oil Fund, whose shares will be traded on the domestic market, would back Eni in investments in oil services in Libya and energy investments in other African countries, including those in the sub-Sahara region.

Russia to increase oil and gas exports

December 7, 2006. Russia will be increasing its gas exports until 2050. The domestic demand for oil products and natural was growing, increasing by 7 percent over the past six months. Russia would also expand oil exports until 2020-2025, but the supplies would be reducing by about 1 percent a year after 2025 unless new reserves were discovered. The price of oil was expected to be between $45 and $55 per barrel in the medium term. The price was unlikely to fall below $45 or rise above $60 per barrel. If the price rises above $60, economic restrictions will come into effect. $60 to $70 per barrel would be an extreme price. Russia wants to use all of its resources to provide the world with energy. Earlier it is said that the price of natural gas on the domestic market would rise above $100 per 1,000 cubic meters by 2011. There will be no sharp price rises before the 2008 presidential elections, but industrial consumers will have to pay $90 per 1,000 cubic meters of gas in 2009.

China issues rules on opening of oil market

December 7, 2006.China will implement new rules governing wholesale trade in oil products and the sale of crude oil on January 1, as part of efforts to open the petroleum market. The new rules were issued as part of China's 2001 World Trade Organization accession commitment to open up its oil markets within five years of joining the global trading body. Currently, China operates a state monopoly over the petroleum industry with only China National Petroleum Corp and Sinopec Corp allowed to run oil products wholesale businesses.

Petrobras signs agreement offshore Tanzania

December 6, 2006. Petrobras signed the Shared Production Agreement for Block 6. The agreement was signed by Tanzania, and Americas, Africa and Eurasia. The term of the agreement for Block 6, which covers an area of 11,099 square kilometers and is located in deep waters (500 to 3,500 meters) in the Tanzanian sector of the Indian Ocean, will be for 11 years, divided into three periods. In the first period, of four years, Petrobras took-on the contractual commitment to undertake studies and survey geological, geochemical, and geophysical data, including 2,100 kilometers of 2D seismic data or 300 square kilometers of 3D data.

In the second and third periods, of four and three years, respectively, the commitment is to drill wells which, if successful, will allow the production period to be kicked off, the term of which is 25 years, renewable for an additional 20 years. The rights for Block 6 were obtained through an international bidding process TPDC held in 2005. Petrobras' interest in the Block resulted from its strategy of creating a wide-ranging exploratory investigation portfolio in frontier areas. The company's goal is to consolidate its position in a sedimentary basin with the potential of becoming a new oil province and maintain a long-term performance in this African country. Petrobras also hopes to use operational synergies, such as hiring geophysical data acquisition and processing services, among others, as required for the future exploratory drilling.

Block 6 is Petrobras' second agreement in Tanzania. The company has been operating in the country since 2004, when it signed the agreement for Block 5, also located in deep waters and where about 5,500 kilometers of new seismic data have already been surveyed. This study extends to Block 6 and gives continuity to the technical evaluation studies aimed at guiding exploratory drilling decision-making. Petrobras holds 100% of the rights for both agreements. The African continent is among the investment priorities set forth by Petrobras' Strategic Plan. The company already has oil exploration and production activities in Angola, Nigeria, Equatorial Guinea, Tanzania, Mozambique, and in Libya.

Zimbabwe Govt to establish petroleum body

December 6, 2006. Government will soon establish the Petroleum Regulatory Authority to govern operations of the industry and tame pricing distortions. It is hoped the PRA will provide lasting solutions to the current fuel pricing war between Government and independent fuel dealers, and at the same time unscrew the constant flow of the resource into the market. Key functions of the Authority would include ensuring the provision of sufficient petroleum products for domestic use, granting licences to operators in respect of retailing or production, procurement of petroleum products in Zimbabwe. PRA will also seek to attain pricing parity in the industry, currently marred by a dual pricing policy that has helped a great negative deal in fuelling inflation. The body will fix fuel prices after consultation with concerned stakeholders factoring in the landed costs of any petroleum product at the base price. Competition will be actively promoted as monopolies should also be closely monitored while the National Oil Company of Zimbabwe should be charged with the mandate of maintaining strategic reserves of fuel. It will also protect consumers against unfair pricing whilst a price stabilisation levy to cushion suppliers from regular fuel price fluctuations would also be set up.

Petrobras and Ecopetrol form partnership

December 5, 2006. Petrobras was signing an agreement with Ecopetrol, the Colombian national oil company, the development of the Tibu field, in Colombia, 500 kilometers north of Bogota, near the Venezuelan border. Petrobras will participate with 55% of the investments in the Development Plan, the third phase of the project, and will keep 40% of the field's total production. They will carry out in the Tibu field, Petrobras and Ecopetrol estimate there may be upwards of 100 million barrels of additional reserves at the field, which would boost the current production from 1,800 bpd to more than 15,000 bpd. Petrobras will be in charge of performing the project's activities aiming at generating additional production, while Ecopetrol will continue as the field's operator. The first phase of the project for the Tibu area's additional development is scheduled for January 2007, and will consist of an initial two and a half year stage. During this period, Petrobras is expected to invest $40 million in studies and work that will determine the field's actual potential, in addition to adding technology and experience to the project, reducing uncertainties and associated risks. The Tibu field went into production in 1944 and reached its production peak in 1955, at 26,000 barrels per day. Its accumulated production totals 247 million barrels of oil.



Consortium to build power plant in Oman

December 12, 2006. Oman has selected a consortium comprising Abu Dhabi's investment arm Mubadala Development Company, Suez Energy International and National Trading Company of Oman to build a new power and desalination plant to be established at Barka, as well as acquire Al Rusail Power Company, an existing power plant. The project, which is part of a comprehensive privatisation programme of the country's power sector, consists of the development, construction and operation of Barka Phase II, a 678 MW and 26.4 million imperial gallons per day (MIGD) independent power and water project (IWPP) to be located in the Sultanate of Oman, as well as for the acquisition of a 100 per cent participation interest in Al Rusail Power Company, a 665 MW power plant currently owned by the Government of Oman. The seawater desalination plant of Barka Phase II is based on reverse osmosis technology to be supplied by Degrémont, specialised in water treatment plants within Suez environment.

Nigeria opens new 150 MW gas power plant

December 7, 2006. Nigerian opened a 150 MW gas-powered plant in the volatile but oil rich Rivers State. The project valued at 60bn naira ($460mn) was built by the government to beef up power supply to Port Harcourt, the hub of Nigeria's oil and gas industry. Many oil firms have their operational base in the city, which has seen a resurgence of violence, kidnappings and killings of oil workers in recent months. The plant would be fed with gas from the Nigerian Gas Company as part of government's efforts to end gas flaring by 2010 in the oil rich country. Power generation, transmission and distribution capacities of the state-run Power Holding Company, formerly NEPA, were inadequate to meet the needs of Nigerians which the government has promised to increase from the current 3 000 MV to 10 000 MV by 2007.

Transmission / Distribution / Trade

Hitachi targets China sales of $12 bn by 2010/11

December 12, 2006. Hitachi Ltd., Japan's biggest electronic conglomerate aims for annual sales of $12 billion in China in the year ending March 2011 on demand for construction gear, energy equipment and other materials to support the booming economy. Sales are expected to rise 70 percent in four years from an expected $7 billion target for China for the current business year, a forecast Hitachi made in 2004.

Peabody unit inks 10-year coal supply deal

December 11, 2006. A Peabody Energy subsidiary inked a 10-year coal supply agreement with Tennessee Valley Authority (TVA). Coal sales under the first five years of the agreement are expected to be in excess of $1 billion. Peabody Energy's COALSALES LLC subsidiary agreed to supply Knoxville, Tenn.-based TVA with 6 million tons per year of Illinois Basin coal. The coal supplied under this agreement is expected to source from a combination of existing and future Illinois Basin mines. Peabody currently has a customer backlog of more than 1 billion tons through long-term coal supply contracts. Tennessee Valley Authority, the nation's largest public power company, was set up by the U.S. Congress in 1933. It provides power to large industries and 158 power distributors that serve about 8.7 million consumers in seven southeastern states.

USEC signs contract to supply enriched uranium

December 11, 2006. USEC Inc. signed a contract to sell its separative work units contained in enriched uranium fuel for more than $130 million to Nuclear Management Co. The new contract runs from 2007 to 2013.

Policy / Performance

GCC to develop civilian nuclear energy

December 11, 2006. The six-member Gulf Cooperation Council (GCC) announced plans to seek nuclear energy technology for peaceful purposes while repeating its demand to make the Middle East a zone free of weapons of mass destruction. GCC leaders had ordered a “GCC-wide study be conducted to formulate a joint program in the field of nuclear technology for peaceful purposes, in keeping with international standards and regulations.” The leaders of Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates called for a peaceful settlement of the conflict over Iran’s nuclear program, and demanded that Israel, the only country in the Middle East believed to have nuclear weapons, join the nuclear Non-Proliferation Treaty.

Congress OKs nuclear pact with India

December 9, 2006. Reversing three decades of U.S. policies intended to halt the spread of nuclear weapons, Congress early today approved a long-stalled agreement giving India access to American nuclear technology with limited safeguards to discourage possible proliferation. The pact would lift a U.S. moratorium on nuclear cooperation with a nation that has developed atomic weapons and has not signed the Nuclear Nonproliferation Treaty of 1970. But Bush and supporters of the agreement argue that it marks a crucial advance in restricting nuclear weapons because it permits international inspectors to examine most of India's civilian nuclear reactors for the first time.

In addition, they say that opening India's nuclear industry to $100 billion in potential sales from abroad will help cement a relationship with a developing economic power that may also serve as a hedge against the growing clout of China in Asia. Under the agreement passed by Congress, India would be allowed to expand its nuclear weapons arsenal, but for the first time it would allow international inspections of its civilian reactors. However, inspectors would have access only to 14 of 22 reactors. The others, at military installations, would remain off-limits. At the heart of the debate was the impact the deal would have on the nonproliferation treaty, a cornerstone of U.S. nuclear weapons policy since 1970. The treaty, aimed at preventing nonnuclear nations from acquiring atomic arms, has been signed by more than 180 countries. Critics of the U.S.-India deal said it would undermine the treaty, encourage violations and lead to the spread of nuclear weapons.

Rentech coal-to-fuel may expand

December 9, 2006. Rentech Inc. plans to build a $1 billion coal-to-liquid fuel plant in southern West Virginia to take advantage of the area's abundance of coal and mining infrastructure. Denver-based Rentech and the public Mingo County Redevelopment Authority announced a joint development agreement this week that aims to build a plant that would employ up to 400 full-time workers by 2012.

The proposed plant would convert synthesis gas, a combination of hydrogen and carbon monoxide produced from coal, into 3 million to 9 million barrels of clean-burning transportation fuel per year. Construction of the plant could take three to four years. Rentech and the redevelopment authority plan to cooperate in developing, financing, owning and operating the plant. Plant is designed to initially produce 10,000 barrels of fuel a day and then gradually move to 30,000 barrels.

Russia and Kazakhstan to dominate on nuclear technologies market

December 7, 2006. Russia and Kazakhstan are poised to work together to become leaders on the global nuclear technologies market. The two countries are currently establishing joint ventures in various spheres of the nuclear industry. The countries planned to set up a comprehensive program, which would incorporate the entire process, starting from uranium extraction to its enrichment and transportation.

Russia and Kazakhstan would export the end product of the nuclear fuel cycle. Kazakhstan possessed about a quarter of the world uranium deposits, while Russia had a great scientific and technical potential in the nuclear sphere. The governments would sign an accord in the near future on the launch of an international uranium enrichment center in Russia.

Renewable Energy Trends


SPML to invest $167 mn in renewable energy

December 12, 2006. SPML Group has announced it would invest Rs 750 crore ($167.4 mn) in renewable energy projects over five years as part of its growth strategy. It also plans to increase its headcount from 1,000 to 2,000 in the next 18 months and diversify into other infrastructure verticals as part of its expansion plans for 2006-07. The company's revenue last fiscal was Rs 400 crore and this is expected to double to Rs 800 crore during FY 2006-07. SPML specialises in engineering consultancy and services across water management; power generation, transmission and distribution; environmental engineering; and infrastructure development. Currently it is developing the Puducherry port in collaboration with Delhi-based Om Metals Infraprojects Ltd.

Science City to have renewable energy Education Park

December 12, 2006. Pushpa Gujral Science City in Kapurthala will soon have another feather in its cap as work on the renewable energy education park is under way, to be completed very soon.  The ministry of non-conventional resources had provided funds for the energy park and the Punjab Energy Development Agency the technical assistance.  The park is being set up at Rs 1.75 crore.  Gadgets are being installed to train students and the park will have a solar power plant of 20 KW, a solar water plant, solar street lights, a solar restaurant and a 60-feet-high windmill.  

Biomass, no longer agri-waste

December 11, 2006. Punjab has the potential to develop more than 1000MW of power from biomass, an alternative source of energy, as the state is abundant in agricultural residue and waste. In a recent proposal submitted to the state government, Punjab Energy Development Agency (Peda) observed that at present, most of the agriculture residue was being burnt in the fields, leading to environmental pollution. The generation of energy from agro-waste residue available in Punjab could prove to be a cost-effective option. It would positively impact energy conservation, social hygiene, employment generation and women’s health. Peda, a Punjab-government-run agency, has executed a waste-to-energy power project of 1MWcapacity, while private developers have set up four biomass and co-generation projects with a total capacity of 21.9MW. Under mini-and-micro power projects, the Peda has commissioned eight projects with a total generation capacity of 9.8MW, while private developers have set up ten projects with a total capacity of 13.65MW.

Another 57 biomass, co-generation and small hydro projects are under execution, with a projected total capacity of 187.25MW. Peda has sought soft-loan funding from the Japanese government through the department of economic affairs, ministry of finance. Under the soft-loan scheme of Japan Bank, the agency would set up ten biomass projects in the state at a cost of around Rs 450 crore. Of this, Rs 405 crore, (90 per cent), would come from Japan Bank and the Punjab government would share the remaining Rs 45 crore. These biomass projects will generate additional capacity of 100MW, which will be harnessed in the next five years—2007 to 2012.

Railways plans bio-fuel production

December 9, 2006. The railway ministry will shortly float Expression of Interests (EoI) to farmers, co-operative societies and others to bring 40,000 hectares of wasteland under the cultivation of fuel and oil plants for the production of bio-diesel. This would not only help in reducing cost of bio-diesel but also pollution levels. Besides a special public-private partnership cell the railway ministry will also create a special purpose vehicle for this purpose. It will provide farmers and growers of fuel & oil plants with several incentives for a better response as the Indian railways would be the largest buyer of bio-diesel. The Indian railways has already signed a memorandum of understanding with Indian Oil Corporation (IOC) offering it 500 hectares of land for cultivation of Jatropha Curcas which is considered to be the best source of bio-diesel. Of this around 81 hectares of land is under cultivation and a normal yield is expected from 2008 onwards. The railways will initially use 1-5 per cent of bio-diesel supplied by IOC, which will go up to 20 per cent depending on the field experience. At present nearly 2-billion litres of diesel are consumed by 4,000 freight and passenger locomotives in the Indian railways fleet annually. The expenditure on diesel fuel is approx. Rs 4,400 crore annually. Thus blending bio-diesel with petrol diesel can serve as an alternate fuel and this would help the railways save a good deal of fuel amount. 

Vestas India to focus on large turbines

December 9, 2006. Denmark-based Vestas Wind Systems, the world leader in wind energy, is repositioning itself in India and will concentrate only on larger size wind turbines. Vestas had acquired NEG Micon, another Denmark-based international player, in 2004, which had a 100% Indian subsidiary — NEG Micon (India). It will now operate in India through this company, which has been renamed Vestas Wind Technology India. Vestas is the largest wind energy company globally — with a market share of 36 per cent — and is the second-largest in India, with a 27 per cent market share.

`Use imports to meet biodiesel demand`

December 6, 2006. The recently formed Biodiesel Association of India wants the government to allow, at concessional import duty, the import of non-edible and industrial oils that can be used to produce biodiesel.  “Jatropha will only be available in quantities large enough to be used for biodiesel production in 5-7 years. The government must formulate policies to promote production of the alternative fuel, for which funds should be allocated under the Eleventh Five-Year Plan. Countries like Finland and Germany give many tax sops to producers of biodiesel. There are no such incentives in India. The association wants duty on import of non-edible oil to be similar to that of crude oil, which is 5 per cent. Non-edible oil imports attract 15 per cent Customs duty and 16 per cent countervailing duty. The association has made several representations to the government seeking a policy on biodiesel. The 11 million hectares of wasteland in India could be used to usher in large-scale use of biodiesel. The total investment in biodiesel will be around Rs 50,000 crore over a 3-year period. This includes Rs 28, 857 crore in planting of jatropha and Rs 18,000 in processing the feedstock. 

Tribal women to run mini-hydel plants

December 6, 2006. For the first time in the history of power sector in Andhra Pradesh, the tribal women today entered into a memorandum of understanding (MoU) with the state government to run four mini-hydel plants with a combined capacity of 6.6 MW being set up at an investment of Rs 31.72 crore. The newly formed Tribal Power Corporation (Tripco) by the state tribal welfare department has constituted project committees comprising representatives of women organisations from the village of the project site and also in the catchments areas for three projects of 1.2 MW capacity each in the Rampachodavaram Integrated Tribal Development Agency (ITDA) area and one project of 3 MW capacity under Bhadrachalam ITDA limits. 

It may be recalled that the state government in the past had issued orders to not only make local tribals the stakeholders in these projects but also let the entire profit from these units go to the local tribals for developing their areas.  Under the MoU, signed the discoms will purchase the power while various agencies, including APTransco, APGenco and Non Conventional Energy Corporation of Andhra Pradesh (Nedcap) will assist the project committees in the smooth running of the mini-hydel projects.  The Centre has provided a subsidy of Rs 13.30 crore to these four projects and the rest is being raised from banks. The state government agencies have concluded that there is a huge hydro power potential of up to 200 MW capacity available in the tribal areas. The state government has so far identified 79 potential locations with an estimated installed capacity of 142.8 MW. Of this, detailed project reports for 21 locations with a combined capacity of 26.21 MW at an outlay of Rs 139.23 crore have been sent to the ministry of non-conventional energy resources. 

TRAI proposes `carbon credits' for telcos

December 5, 2006. In a bid to promote environment-friendly telecom infrastructure, the Telecom Regulatory Authority of India has proposed to give carbon credits to operators for using eco-friendly fuels to power their exchanges and mobile base stations. TRAI has suggested giving financial incentives in terms of lower revenue share to operators deploying non-conventional sources of energy such as solar and wind energy wherever possible.

The operational cost becomes very high to provide backup power supply in case regular electric supply is erratic. Moreover, since the use of generator for long hours results in pollution, there is a need to encourage use of non-conventional sources of energy. The TRAI move comes at a time when cellular operators in the country are keenly looking to deploy eco-friendly fuels. Operators are looking at using bio-fuels and hydrogen cells to power their base stations spread across the country especially in rural and remote areas where transporting fossil fuels is major issue.

The Cellular Operators Association of India has engaged R&D firm Acme to conduct research and pilots on using hydrogen-based cells to power mobile base stations. On the other hand the GSM Association has embarked on a project with equipment vendors to use palm oil and oil from pumpkin seed as a source of fuel. Idea Cellular is working with Ericsson to launch one such project. Operators are also looking to deploy green shelters to house cellular equipment in an environment friendly way. At present operators are using diesel powered gensets to keep the base stations running. Bio-fuels have several advantages over conventional diesel as a power source for base stations. Bio-fuels can be produced locally, creating employment in rural areas, while reducing the need for transportation, related logistics and security. The cleaner burning fuel results in fewer site visits and also extends the life of the base station generator, reducing operators' costs.

IFC may invest $22 mn in Moser Baer project

December 6, 2006. The International Finance Corporation (IFC), the private equity arm of the World Bank, is considering investing $22 million (Rs 100 crore) in a project of Moser Baer India Ltd. The funding is for the $92-million (Rs 414 crore) Moser Baer Photo Voltaic Ltd project to set up an export-oriented solar photovoltaic (PV) cells and module — for generating electricity from sunlight — manufacturing facility with an installed capacity of 80 MW. The initial outlay will be around $58 million and IFC is considering an investment of $22.5 million `A' loan to support the project. The project is located in a special economic zone adjacent to Moser Baer's existing plant in the New Okhla Industrial Development Area industrial estate in Uttar Pradesh, 27 km from Delhi. The first phase of 40 MW is expected to go into trial production in the next couple of months. According to Moser Baer, the PV space is expected to grow five-fold to a global market size of Rs 135,000 crore ($30 billion) by 2010. In 2004, the global market for PV energy was 1,195 MW with Japan and Europe contributing to over 60 per cent of this, while grid-connected PV systems accounted for over 70 per cent of the total market. India also offers large potential demand for PV, expected to be in excess of 1,000 MW by year 2010. India, with over 5.5-6 hours of sunlight per day — amongst the highest in the world — should emerge as a key market for Moser Baer, offering potential for low-cost energy from PV systems.


510 mn ADB loan for renewable energy

December 7, 2006. The Asian Development Bank is lending Pakistan $510 million to develop renewable energy sources. Pakistan was highly dependent on oil imports and expected to tap coal, oil and gas to meet future needs with renewable energy accounting for only 180 MW of the country power output. It is the first loan of its kind to Pakistan and the first under the ADB's clean energy and efficiency initiative aimed at expanding more efficient energy operations in member countries.

E.ON will build U.K.'s biggest offshore wind farm

December 7, 2006. German power company E.ON AG will begin construction at the start of 2007 on Robin Rigg, the U.K.'s largest offshore wind farm, in a project worth about $665.3 million. E.On U.K. plans to build 63 MW turbines to be situated off the coast of Scotland. Robin Rigg is expected to enter service in early 2009 and will produce approximately 550 million kilowatt-hours of electricity per year, enough to meet the average annual electricity needs of about 150,000 homes. The wind farm will prevent about 230,000 metric tons of carbon dioxide emissions each year.

Biomass plant set to help hit green targets

December 6, 2006. A new £59 million biomass plant will create a "cleaner, greener" Scotland by producing a significant portion of the country's energy from renewable fuels. The Caledonian paper mill in Irvine uses 1 per cent of Scotland's energy producing glossy paper. Because of the huge costs in electricity, the factory faced an uncertain future. The generator will be fed by wood from Scotland's forests as well as waste from the paper factory. Because replacement trees are planted, the factory is almost carbon-neutral. Most plants waste 60 per cent of the electricity in lost heat, but the CHP plant will use the heat in the paper-making process. The factory would make up 5 per cent of Scotland's commitment to generate 18 per cent of Scotland's renewables by 2010. The new plant will cut emissions from 90,000 tonnes to around 15,000 tonnes. This new power plant will replace current coal-fired boiler and, most significantly, reduce emissions by 75,000 tonnes per annum.

GT solar signs contract for 30MW with Greek

December 6, 2006.GT Solar Incorporated, a global leader in photovoltaic (PV) technologies and equipment, signed of a contract with Solar Cells Hellas, S.A. of Patras, Greece for the sale of equipment and technology that will be used to produce 30MW annually of multi-crystalline solar wafers and cells.

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