MonitorsPublished on Nov 26, 2006
Energy News Monitor |Volume III, Issue 27
Is Nuclear Fusion Possible? (By Ken Silverstein, Editor-in-Chief EnergyBiz Inside,)

It's not a function of science. It's a matter of whether the richest countries are willing to pay for it. That's what believers in nuclear fusion are saying and it's behind the signing of an agreement by 31 countries to build the most advanced nuclear reactor.  

Representatives of nations that are kicking in $12.8 billion to build a nuclear fusion reactor commemorated the start of the so-called International Thermonuclear Experimental Reactor (ITER) in France to be erected near the southern city of Marseille. French President Jacques Chirac hosted the event in late November, which involved representatives from other European nations as well as Japan, China, India, South Korea, Russia and the United States. The reactor will get built in eight years, although a demonstration project is unlikely before 2040.

Global energy consumption is expected to rise by 60 percent over the next two decades-- a product of industrialization and population growth, particularly in China and India. The issue is compounded as more than three-fourths of the world's energy is produced by burning fossil fuels. As a greater emphasis is placed on limiting greenhouse gases associated with such combustion, there's now a need to come up with environmentally benign technologies.

Enter nuclear power and specifically nuclear fusion. Fusion is responsible for powering the sun and stars. So, the goal is to imitate that process on earth, although it is extremely difficult and expected to take as much as 50 years to do.

Today's nuclear reactors use fission that produces energy when atoms are split apart. In contrast, fusion releases energy as atoms are combined -- a process that thus far consumes more energy than it generates. The aim is to heat hydrogen gas to more than 100 million degrees Celsius so that the atoms will fuse together instead of bouncing off one another. The end result of that fusion process is the production of 10 million times more power than a typical chemical reaction, such as the burning of fossil fuel.

That's why the consortium of 31 nations has come together, all to try and get over the hurdles. The costs will be split among the participants, with the United States expected to ante up about 10 percent, or $1.2 billion. Existing experiments have shown it is possible to replicate the suns energy here on earth, the participants emphasized.

According to Kaname Ikeda, ITER's director-general, there is no possibility of a runaway reaction and because the gas will be so dilute, there is not enough energy inside the plant to drive a major accident and not much fuel would be available to be released to the environment if an accident did occur.

No Guarantees

Without a doubt, success is anything but certain. Because hydrogen plasma is heated to 100 million degrees Celsius, it will damage the vessel that contains the substance. Those are expensive parts that would often have to be replaced.

An article in the journal Science argues that scientists can spend more time and money trying to solve that plasma problem and other engineering issues. But, the reality is that nuclear fusion will never come to pass. That's despite four decades of research and $20 billion already spent. Beyond that, fusion power may be 50 years off and the energy landscape could look drastically different by then.

Proponents of nuclear fusion beg to differ with that viewpoint. They say that the current global energy market is now valued at $3 trillion a year -- an amount that will expand proportionately as developing nations modernize their economies. Much of that consumption is fossil fuel-fired and any energy source that can displace that value would help better the human condition and the environment, they say. At the same time, those advocates go on to say that efficiency efforts and renewable energy -- while essential -- will not diminish in a major way the world's reliance on coal, natural gas and oil. A large scale nuclear project with an eye toward the future is therefore necessary and practical.

Nuclear energy currently comprises 16 percent of the global energy mix. But the International Atomic Energy Agency says that environmental concerns over fossil fuels and the fact that they are a depleting resource mean the use of reactors that use nuclear fission will grow. It predicts such power will generate 27 percent of all worldwide energy by 2030, although most of the growth will occur in Asia where 22 of the last 31 plants have been built.

In the coming decades, scientists and other researchers are designing fission reactors that are expected to be increasingly sophisticated. Longer term, however, many of those experts have their eye on nuclear fusion -- a technology that they argue is critical not just to nuclear development but to all of power generation.

Courtesy: EnergyBiz Insider, a e-newsletter from Energy Central.

Renewable Energy Potential of India: An Overview

Peter Meisen, President, GENI

c.       Distribution of the different kinds of plants and lines of transportation

India relies principally on coal for 57 per cent of total energy consumption. Coal production is extensive and is located in central and north-eastern parts of the country. Hydro power plants are distributed along the west coast from the southern tip to about three-fourth the way up the coast, in the extreme north, and some in the east from rivers flowing from the Himalayas. Except for the fact that the gas and products line don’t extend, the country has the largest railway network in Asia and the second largest in the world under a single management. Roads are taking developmental changes to the most remote corners of the country.

d.       India Energy grid

Transmission of electricity is defined as bulk transfer of power over a long distance at a high voltage, generally of 132 kV and above. In India bulk transmission has increased from 3708 ckm in 1950 to more than 265,000 ckm today. The entire country has been divided into five regions for transmission systems, namely, Northern Region, North Eastern Region, Eastern Region, Southern Region and Western Region. The interconnected transmission system within each region is also called the regional grid.

Nearly 85 per cent of the villages have been electrified, and there is a nationwide grid for the transmission and distribution of power. The electric network is extensive throughout India with 440 kW or 750 kW power lines. The main power grid is still concentrated in the north on a north-west/south-east axis, from Afghanistan to the Bay of Bengal and on a second axis from Bombay on the central west coast to the north-east of India, through Bhutan. New 440kW power lines have been approved or proposed to expand the network further and will be located mainly on the east coast.

The total installed generating capacity in the country in year March 2004 was 112, 058 MW and the total number of consumers was over 130 million. Apart from an extensive transmission system network at 400 kV, 220 kV, 132kV and 66 kV which has developed to transmit the power from the generating stations to the grid substations, a vast network of sub transmission and distribution system has also come up for the utilization of the power by the ultimate consumers.

II) Sources of renewable energy available in India: What renewable energies are in the Indian market?

Renewable energies – hydro, solar, wind and biomass: Where are they  found? 

a) Hydro power

The hydroelectric power refers to the energy produced from water (rainfall flowing into rivers, etc). Consequently, rainfall can be a good indicator to investors looking for a location to implement or build a new hydroelectric power plant in India.

Presently, in India, hydropower plants are situated in regions of the major rainfall. The dominant annual rainfall is located on the north/eastern part of India: Arunachal Pradesh, Assam, Nagaland, Manipur and Mizoram, and also on the west coast between Mumbai (Bombay) and Mahe.  

India utilizes twelve primary hydroelectric power plants: Bihar (3), Punjab, Uttaranchal, Karnataka, Uttar Pradesh, Sikkim, Jammu & Kashmir, Gujarat, and Andhra Pradesh (2).

In India most of the rainfall occurs from June to September, therefore, hydro energy could be harnessed during that period. Good water management and storage allows for continuous electrical generation throughout the year. 

Advantages of Hydro power

In India, small hydro is the most utilized renewable energy source for energy production. Some key figures concerning small hydro in India:

• Less than 25 MW is in the “small hydro” designation

• There is a potential of 15,000 MW

• Installed is 1,850 MW to date

• 4,096 potential sites have been identified

• Technology is mature and reliable

• Two types of technology are used:

o High-head systems

o Low-head systems

• Ministry of Non-conventional Energy Sources is focused on:

 Nation-wide resource assessment

 Setting up of commercial projects

 Renovation and modernization

 Development and up-gradation of water mills

 Industry based research and development

b) Solar Energy  

Because of its location between the Tropic of Cancer and the Equator, India has an average annual temperature that ranges from 25°C – 27.5 °C. This means that India has huge solar potential. The sunniest parts are situated in the south/east coast, from Calcutta to Madras. Solar energy has several applications: photovoltaic (PV) cells are placed on the roof top of houses or commercial buildings, and collectors such as mirrors or parabolic dishes that can move and track the sun throughout the day are also used. This mechanism is being used for concentrated lighting in buildings. Photovoltaic (PV) cells have a low efficiency factor, yet power generation systems using photovoltaic materials have the advantage of having no moving parts. PV cells find applications in individual home rooftop systems, community street lights, community water pumping, and areas where the terrain makes it difficult to access the power grid. The efficiency of solar photovoltaic cells with single crystal silicon is about 13 % - 17%. High efficiency cells with concentrators are being manufactured which can operate with low sunlight intensities.  India has an expanding solar energy sector: 9 solar cell manufactures, 22 PV module manufactures, and 50 PV systems manufacturers. Therefore, technology resources exist in country and a growing market would lead to job growth in country.

c) Wind Energy

India is surpassed only by Germany as one of the world's fastest growing markets for wind energy. By the mid 1990s, the subcontinent was installing more wind generating capacity than North America, Denmark, Britain, and the Netherlands. The ten machines near Okha in the province of Gujarat were some of the first wind turbines installed in India. These 15-meter Vestas wind turbines overlook the Arabian Sea. Now, to the date, there is an wind power installed capacity of more than 6,000 MW; however, seven times that potential, or 46,092 MW, exists. 

Advantages of Wind Power:

• It is one of the most environment friendly, clean and safe energy resources.

• It has the lowest gestation period as compared to conventional energy.

• Equipment erection and commissioning involve only a few months.

• There is no fuel consumption, hence low operating costs.

• Maintenance costs are low.

• The capital cost is comparable with conventional power plants. For a wind farm, the capital cost ranges between 4.5 crores to 5.5 crores, depending on the site and the wind electric generator (WEG) selected for installation.  

Estimated Wind Power Potential in India


Gross Potential (MW)























Total No. of Stations in operation at the end of February 2006


Total No. of Stations closed down in March 2006


Total No. of Stations Commissioned in March 2006


Total No. of stations in operation as on 31st March 2006




Comparison between Fossil Fuels and Wind




Fossil Fuel


Usable as it exists


Have to be procured and made usable through laborious and environmentally damaging processes.

Limitation on



Inexhaustible resource

Limited in reserves, expected to be completely exhausted in the coming 60 years




Used where it is available or transported where needed

Has to be transported from its source site for further processing, exposing the environment to pollution from accidents

Environmental effect of use


Zero emission

Used in producing electricity, releasing green house gasses





Reduces our reliance on oil, safeguarding national security.

Allows for self-sufficiency.

There is no adverse effect on global environment. The whole system is pollution free and environment friendly.

Over-reliance on oil as a resource has undermined India’s energy security, e.g. OPEC crises of 1973, Gulf War of 1991 and the Iraq War of 2003.

The pollution saving from a WEG

With an average output of 4,000 kWh per year, savings have been estimated as follows:

• Sulphur - dioxide (SO2): 2 to 3.2 tonnes

• Nitrogen - oxide (NO): 1.2 to 2.4 tonnes

• Carbon - dioxide (CO2): 300 to 500 tonnes

• Particulates: 150 to 280 kg.

The essential requirements for a Wind farm

An area where a number of wind electric generators are installed is known as a wind farm. The essential requirements for establishment of a wind farm for optimal exploitation of the wind are the following:

• High wind resource at particular site.

• Adequate land availability

• Suitable terrain and good soil condition

• Maintenance access to site

• Suitable power grid nearby

• Techno-economic selection of specific turbines

• Scientifically prepared layout

Wind energy generation has limitations which will influence the extent and type of role it will ultimately play in overall generation of electricity in India.

Limitation of a Wind farm

• Wind machines must be located where strong, dependable winds are available most of the time.

• Because winds do not blow strongly enough to produce power all the time. Energy from wind machines is considered "intermittent," that is, it comes and goes. Therefore, electricity from wind farms must have a back-up supply from another source.

• As wind power is "intermittent," utility companies can use it for only part of their total energy needs.

• Wind towers and turbine blades are subject to damage from high winds and lighting. Rotating parts, which are located high off the ground can be difficult and expensive to repair.

• Electricity produced by wind power sometimes fluctuates in voltage and power factor, which can cause difficulties in linking its power to a utility system.

• The noise made by rotating wind machine blades can be annoying to nearby neighbours.

• Some environmental groups have complained about aesthetics and avian mortality from wind machines

(to be continued)

Courtesy: Global Energy Network Institute.





RIL, ONGC may get $4.50 per mBtu for KG gas

December 26, 2006. Natural gas from the D6 block of Reliance Industries and the adjoining field of ONGC in Krishna Godavari (KG) basin may fetch a minimum price of $4.50 a million British thermal unit (mBtu). The oil ministry-appointed committee for formulation of transparent guidelines for natural gas pricing has recommended, “valuation of natural gas be done based on most recent competitively determined price in the region.” For the gas from Reliance’s KG-DWN-98/3 and ONGC’s KG-DWN/98/2, $4.50 a mBtu price currently charged for gas from Cairn India-operated Ravva Satellite field in the KG basin may become the benchmark, official sources said. The $4.50 a mBtu price is 92% higher than $2.34 a mBtu price proposed by Reliance to sell gas to state-run NTPC and an Anil Ambani Group firm through separate contracts. The ministry for lack of transparency rejected the price for Reliance Natural Resources, an Anil Ambani Group firm, while the NTPC price is yet to reach the ministry for approval.

IOC, OIL pick up stake in Nigeria block

December 25, 2006. The country’s largest crude oil refiner and marketer Indian Oil Corporation (IOC) is stepping up its presence in the upstream segment overseas.  IOC and its government-nominated exploration partner Oil India Ltd (OIL) have jointly picked up equity stakes in oil blocks in Nigeria and Gabon.  In Nigeria, the two companies will buy into an oil block by picking up a stake in Suntera Nigeria, which is the Nigerian subsidiary of Russian oil and gas firm Suntera Resources Ltd.  The strategic deal will enable the two Indian companies to own 17.5 per cent each in the block. Each company will have to shell out about $11 million for the stake. Nigerian company Summit Oil is the licensor for the block.  In Gabon, IOC and OIL have picked up 45 per cent stake each in an onshore oil block from Singapore company Marvis. Each partner will put in $36.5 million for the stake.  Marvis had signed a production-sharing contract for the Shakti block - which has estimated oil reserves of 588 million barrels - with the government of Gabon last November. The total exploration and development investment 3,700 sq km block is estimated at be close to $1.3 billion. 

Canadian firm to hunt for oil in Nagaland

December 22, 2006. A Canadian firm will collaborate with Nagaland to explore for crude oil in the mountainous region, ravaged by decades of insurgency. The Nagaland government and Canoro Resources Ltd have signed a joint cooperation agreement to explore crude oil and develop hydrocarbon industry. A state of two million people bordering Myanmar, Nagaland has the potential to yield about 600 million tonnes of crude. Canoro is engaged in exploration work in the oil-rich northeastern part of India over a decade. The Canadian firm is now part of the producing Kharshing oilfield in Arunachal Pradesh that they began exploring in 1995 and in Assam's Amguri oilfield in Sibsagar district. The joint cooperation agreement contains a provision for the promotion of bilateral cooperation for the development of upstream activities in areas of foreign direct investment and technology.

Essar Oilfields buys rig for $220 mn

December 21, 2006. Essar Oilfields Services Ltd (EOSL), a subsidiary of Essar Shipping & Logistics, Cyprus, had taken delivery of a semi-submersible rig. This acquisition cost the company $220 million. The buy is in line with the company's plans to gain a significant presence in the contract drilling sector. It has drawn up plans to invest over $400 million for acquisition of a diversified fleet of on-land and offshore drilling rigs.

Cairn India eyes more finds in Ravva offshore

December 20, 2006. Cairn India plans to explore new oil and gas reserves under the existing reserves in the Ravva offshore oilfield in the Krishna-Godavari basin. The plan follows encouraging results thrown up by seismic surveys in the block and the slew of major strikes by GSPC, Reliance and ONGC in the same basin. A shallow-water offshore block, Ravva currently produces about 50,000 barrels of oil a day and one million metric standard cubic metre (mmscmd) of natural gas per day from wells located 1,500-2,000 metres under the seabed. They are now planning to explore new pay zones at a targeted depth of 3,000 to 3,500 metres.  The company now plans to launch the latest 4-D (four dimension) seismic data acquisition programme in the field by the next fiscal. The project is expected to cost approximately $15 million. The joint venture has already conducted a 3-D seismic survey in the block and the pre-feasibility study for launching the 4-D data acquisition programme. The detailed programme, however, will be finalised in consultation with the joint venture partners.

Depending on the results of the data acquisition programme, the joint venture may go in for exploration drilling at the targeted depths. Cairn holds 22.5 per cent operating interest in the joint venture. The other partners are ONGC (40 per cent), Videocon (25 per cent) and Ravva Oil (12.5 per cent). The later is a wholly owned subsidiary of Marubeni Corporation.  The joint venture has already launched a $90-million programme to expand the size of the existing reserve and maintain plateau production rate beyond 2007. The programme includes drilling five in-fill wells, one exploration well and one appraisal well.

BPCL plans $1.34 E&P play

December 21, 2006. Bharat Petroleum Corporation plans to invest Rs 6,000 crore ($1.34 bn) in the exploration and production (E&P) business to transform itself into a fully-integrated oil company. The oil major already has assets in high-potential East Timor, Australia and Oman in the Gulf regions, besides three assets in the Krishna-Godavari (KG) basin and will use these as the platform, on which to build up its E&P play. Underscoring its intentions to become a major E&P player, BPCL has set up a separate company, Bharat Petroresources, with an authorised capital of Rs 1,000 crore. The company, which is in the gas exploration business with ONGC in KG basin, is targeting a sale of five-million tonnes of natural gas in the next five-year period, once the gas-finds get commercialised. In east timor, BPCL’s partners are Oilex of Australia, HPCL and Videocon. 


Oil refining sees two-way growth opportunity

December 26, 2006. As Indian companies pump in big money into oil refining, aiming to increase the refining capacity by 62 per cent to 241 mtpa by 2012, overseas oil majors are keen to be part of the growth game being played in this centre of the Asia-Pacific consumption hub.  The investment flow, though, is likely to be two-way, as Indian refiners also look at exposure to the refining sector overseas to gain a strategic advantage.   India (along with China and West Asia) is set to be among the major refining hubs of the world, thanks to its location. In fact, India is already a net exporter of petroleum products though it imports as much as 72 per cent of its crude oil.  Some high profile investors who have recently shown interest in the Indian refining sector include steel magnate Lakshmi Niwas Mittal, who is reportedly keen on partnering with Hindustan Petroleum Corporation Ltd (HPCL) for developing its 9-million-tonne capacity Bathinda refinery, which would involve an overall investment of Rs 12,000 crore. 

Also, the Bharat Petroleum Corporation’s 120,000 barrel-per-day Bina refinery is being set up through a joint venture with Oman Oil.  Reliance’s 29 million tonnes per annum (mtpa) second refinery at Jamnagar had attracted major energy players such as Chevron, Exxon and China National Petroleum Corporation, though none of them managed to clinch a deal.  The Indian Oil Corporation (IOC) too had offered Kuwait Petroleum a stake in its Paradip refinery and Panipat petrochemicals project.  The government too is promoting the sector through various initiatives like the proposed SEZ-type scheme for the sector dubbed as Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR).  While refining capacity is projected at 241 mtpa by 2012, the consumption in that year is seen at 132 mtpa. With refining capacities growing faster than domestic demand, the country will only strengthen its present status as a net exporter of petroleum products.

Industry watchers say that the current global refining capacity is not adequate to meet the demand. Fuel specification norms too have become much more stringent, forcing old refineries to either shut down or revamp themselves. The IOC has reportedly been eyeing refinery stakes in China, Nigeria and West Asia for quite some time now, besides looking at setting up greenfield refineries. Reliance also proposes to set up a refinery in Russia in exchange for equity oil from that country’s rich oil fields.  The industry, however, is not too worried about the lack of Indian refineries globally. The opportunities lie within the country. Oil companies can better market petroleum products from India, when they are only exporting the specific product to countries which need that product.

Iran invites RIL to set up refinery, gas project

December 23, 2006. Iran is planning a massive expansion of its refining infrastructure and has called on India’s No 1 private sector company Reliance Industries (RIL) to set up a greenfield refinery complex and a gas-to-liquid (GTL) plant in the country. The move is aimed at increasing production of refined products, especially gasoline, because despite being the world’s No 4 oil producer, Iran is the second largest importer of gasoline (over 40% of its total consumption) due to refining capacity constraints. The new refinery, coming up as an SEZ project, is expected to commence production by the end of 2008. Analysts believe RIL is the preferred choice for Iran because of its timely execution of mega projects like building complex refineries capable of processing various kinds of crude. Iran is looking on the gas to liquid technologies because it is the second largest gas producer in the world after Russia with 26 trillion cubic metres (TCM) of proven gas reserves. Gas derived liquids being free from sulphur, aromatics and metals will help the refineries in meeting new guidelines for cleaner fuels and environmental standards.

Mittal may buy stake in HPCL's Bhatinda refinery

December 20, 2006. NRI steel tycoon Lakshmi N Mittal may partner Hindustan Petroleum Corp Ltd (HPCL) in the state-run firm's under-construction three billion dollar refinery at Bhatinda in Punjab. Mittal Investments and HPCL are close to signing a joint venture agreement for jointly building the 9 million tonnes a year Bhatinda refinery. As per the broad understanding reached between the two firms during preliminary talks, HPCL and Mittal Investments may hold 49 per cent stake each in the Guru Gobind Singh Refinery Ltd, the company implementing the project. The remaining two per cent stake would be offered to financial institutions. In the likelihood of state-run exploration firm Oil India Ltd (OIL), with whom HPCL had been for some months discussing partnership for the refinery project, joining in the shareholding may be 26:26:26. The balance would bee offered in an initial public offering (IPO) closer to commissioning of the refinery in 2010-11.

Mittal Investments is wholly owned by the Mittal family and is registered in Luxembourg. It hold 38 per cent in Mittal Steel Company, the Netherlands-based flagship company of the LN Mittal Group. The Mittals may extend the partnership with HPCL to also include participation in the expansion of 7.5 million tonnes a year Vizag refinery and joint pursuit of oil assets abroad. Mittal is the latest of a series of joint venture partners HPCL has had for the Bhatinda refinery. BP Plc of UK walked out of the project in March this year. Earlier, Saudi Aramco of Saudi Arabia had exited the project in 1998.

Shell to help lift Indian refineries’ efficiency

December 19, 2006. Shell Global Solutions has inked a three-year integrated business improvement programme (BIP) contract with India's Centre for High Technology (CHT). The deal is meant to increase the efficiency and competitiveness of four major Indian public sector refineries. The four refineries - Indian Oil Corp Ltd, Chennai Petroleum Corp Ltd, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd - supply about 25% of refined petroleum products to the Indian market. The BIP contract was performance-based and that the target for Shell Global Solutions was to help the refineries achieve a production cost not exceeding 50 US cents per barrel.  Most of the BIP work for CHT, a registered society under India's Ministry of Petroleum and Natural Gas Government of India, would be carried out by Shell Global Solutions' hub in Malaysia while certain technical support would be sourced from Europe. Shell Global Solutions is a network of independent technology companies under the Shell Group. 

Transportation / Trade

Gas distribution monopoly to end

December 20, 2006. Companies setting up city gas distribution projects will enjoy monopoly for selling gas for a limited period. The “limited exclusivity,” varying between 3 to 5 years, will be city specific and will depend on various factors such as geographical location and density of population. The policy is prepared in accordance with the provisions of the Petroleum & Natural Gas Regulator Board Act, 2006. It provides the broad framework for the development of natural gas pipelines and city and local gas distribution network. The detailed contours for the same would be laid down in the regulations that are being framed, petroleum minister said while announcing `the policy for development of natural gas pipelines and city or local natural gas distribution networks.’

The exclusive marketing rights would be given to a company for a specific city so that the company may be able to recover its investments in the infrastructure development. The city-specific time-frame would be determined by the regulator, who is likely to be in place by the end of January 2007. The pipeline policy that provides for operators to build a minimum of 33% extra capacity for leasing to third parties on the basis of common carrier principle. The policy allows open access for all players to the pipeline network on a non-discriminatory basis and promotes competition among entities. This would avoid abuse of the dominant position by any entity.

“Any entity desirous of applying to building, operating or expanding common or contract carrier gas pipelines will have to unbundle its transportation and marketing business. Laying of pipelines and setting up of city gas distribution (CGD) networks would be regulated by the Petroleum and Natural Gas Regulatory Board, which will be set up by January next. The regulator will also look into such cases where gas pipeline projects have been awarded by states without Centre’s approval. Commenting on the case of Uttar Pradesh government authorising Adani’s gas pipeline project, petroleum secretary said; “the regulator will definitely have the legal position (the Supreme Court’s decision in March 2004) in its side to tackle the issue.”

Essar Oil begins export of vacuum gas oil

December 20, 2006. Essar Oil (EOL), part of the diversified Essar group, exported its first consignment of 35,000 tonnes vacuum gas oil (VGO) from its refinery at Vadinar to British Petroleum. The company is now preparing to export second consignment of 30,000 tonnes of naphtha to Glencore. The company has also outlined an additional investment of Rs 2,500 to Rs 3,000 crore over the next two years for expanding the capacity of the refinery to 16 million tonnes per annum (MTPA). EOL also has plans to set up 2,500 retail outlets, which will be largely served by the company’s refinery. The company is also formalising plans to make investments in setting up two new single buoy moorings (SBM) and new jetties including an LPG jetty and a few product jetties. The cost incurred would be in the range of Rs 1,000 crore. The company has targeted a gross refining margin of $5.8 per barrel at a complexity of 5.8. However, with an increase in refining capacity and commissioning of more units such as VGH Hydrotreator and FCC, the complexity is likely to go up to over 8. 

GAIL bids for LNG imports from Myanmar

December 20, 2006. GAIL (India) Ltd. has submitted a bid for importing 3.5 mn tonne liquefied natural gas per year from Myanmar, which is mulling to sell its offshore natural gas in LNG form.  While exploring other options of selling the gas, the ministry of energy, Myanmar, asked for a bid for 3.5 mn tonne per annum of LNG. GAIL has submitted its bid to Myanmar in response to the same. GAIL had previously submitted its bid to Myanmar's energy ministry in September for purchase of natural gas from Shwe and Shwe Phyu fields in A-1 block and Mya field in A-3 block in offshore Myanmar.  South Korea's Daewoo International holds a 60 per cent operating interest in the two blocks off the west coast of Myanmar, while Korea Gas Corp. owns 10 per cent. GAIL holds 10 per cent in both the blocks while ONGC Videsh Ltd. has a 20 per cent stake. 

Policy / Performance

Govt unveils natural gas pipeline policy

December 20, 2006. The government announced the natural gas pipeline policy and framework for setting up of city gas distribution network. No gas pipeline or local gas distribution network will be laid, built, operated or expanded without the authorisation of the sector regulator. The policy provides that pipelines will have at least 33 per cent capacity more than what is required by the operator. The extra capacity will be available for use on common carrier basis by any third party. The entity authorised to lay, build, operate or expand a city gas distribution network will get a five year period of exclusivity, but will have to fulfill marketing service obligations. 

India to invite bids for new oil, gas blocks by April

December 19, 2006. The Indian government will invite bids around 55 blocks from domestic and overseas companies by April 2007 to commercially develop new oil and natural gas exploration blocks.  These will be located both offshore and onshore. The government will finalize by February the exact number of blocks for which bids will be invited. The government will invite bids for the exploration blocks under the seventh round of the country's New Exploration Licensing Policy. In NELP's sixth round, the Indian government received 165 bids from domestic and foreign companies in September for 52 oil and gas exploration blocks. So far, India has awarded 110 exploration blocks to bidders under five NELP rounds to shore up domestic oil and gas production. The blocks were awarded through an international competitive bidding process. India currently imports 76% of the crude oil it processes, with domestic crude production stagnating at around 33 million metric tons a year. Natural gas available commercially in the country is at present about 90 million cubic meters a day, which is only sufficient to meet 60% of domestic demand.



Coal-rejects can generate 7,000 MW power by ’16

December 26, 2006. The power ministry, state governments, coal companies and washeries are planning to use coal-rejects as an option to generate more electricity. The ministry and states across India have estimated that with an investment of Rs 29,500 crore over the next 10 years, coal-rejects could be used to generate 5,000 MW-7,000 MW of electricity. Coal-reject projects, they have studied, could be developed with the generation capacity of each ranging between 50 MW and 150 MW. As a beginning, Maharashtra, Chhattisgarh, Jharkhand and Madhya Pradesh have already started exploring the possibility of setting up such projects either with the involvement of state electricity boards, unbundled entities or coal washeries. In Maharashtra, Gupta Coal, a washery with a washing capacity of 23 million tonne of coal annually, is already setting up a 120-MW power project based on coal rejects in the coal-rich Chandrapur district of the Vidarbha region. This project calls for an investment of around Rs 504 crore. Another coal washery — Aryan — has also launched plans to set up a power plant of 30 MW based on coal rejects in Chhattisgah. All power-generating companies have been asked to go in for washed coal so as to reduce ash content and thereby increase generation. Power can be generated from coal rejects, which also have some useful heat value. Power can be generated through circulating fluidised bed boilers and it can be environment-friendly. The ministry is in favour of encouraging such projects.

Two more NPCIL reactors at Kudankulam

December 26, 2006. Nuclear Power Corporation of India (NPCIL) is planning to build two more reactors at Kudankulam near Kanyakumari where the country’s first lightwater reactor power plant is coming up.  The first of the two under-construction 1000 MW reactor is expected to be ready by December 2007, with the plant expected to start producing electricity by March 2008. Most of the critical reactor components such as the pressure vessel, reactor coolant pipelines, reactor coolant pumps casings for Unit 1, have all been delivered to the site. The second phase of the project will be ready a year later. The Rs 13,000 crore project is a 50 per cent joint venture with Russia’s Atomstroyexport Russian Representation. Atomstroy has supplied the design and equipment for the project. It will also supply the enriched uranium fuel for the plant. Lightwater technology, unlike the heavywater technology which uses natural uranium, uses enriched uranium as fuel. Enriched uranium has 4 per cent fissile material compared to the 0.7 per cent in natural uranium and such is considered a more efficient fuel. Russia has also sold two 1,000 MW VVER (lightwater) reactors to China. These are coming up at Tianwan. 

5 power plants to get 23 mt of coal annually

December 22, 2006. The government will allocate over 23 million tonnes of coal per year for five thermal power stations (TPS). The Dadri TPS Stage-II, Badarpur TPS Stage-II both of NTPC, Jhajjar TPS (a joint venture of NTPC Delhi and Haryana) and the Damodar Valley Corporation-owned Koderma and Bokaro TPSs, will increase power generation capacity to the tune of 4960 MW before the Games. The capacity of Dadri TPS is proposed to be increased by 2x490 MW, Badarpur TPS by 2X490 MW, Jhajjar TPS by 3X500 MW, Koderma TPS by 2X500 MW and Bokaro TPS by 1X500 MW.

The Long Term Linkage Committee of the coal ministry has suggested allocation of 54 mt of coal per year for thermal power projects including those linked to the Commonwealth Games. The other thermal power stations to get long-term linkages include the 1000 MW power plant-which is a joint venture between Neyveli Lignite Corporation and Northern Coalfields Limited at Sasan in Madhya Pradesh, Krishnaptnam TPS (2x800 MW) in Andhra Pradesh and Bongaigaon Stage-III (250 MW) in Assam. Besides, other power plants like the Yamunanagar TPS Expansion in Haryana (100 MW), Mettur (500 MW), North Chennai (500 MW), both of Tamil Nadu Electricity Board (TNEB) and Ennore TPS (a joint venture of TNEB and NTPC 500 MW), Hissar TPS (1000 MW) and Simhadri of NTPC (1000 MW) in Andhra Pradesh would also enjoy long-term linkage. The highest priority is being accorded for coal supplies to the power sector. The 53 coal blocks with total reserves of 15 billion tonnes have already been allotted to public and private sector power companies and another 41 coal blocks with total reserves of 16 billion tonnes have recently been offered for allocation to these companies and ultra-mega power projects.

Generate power on your own: Ministry to states

December 21, 2006. The power ministry has asked states not to solely rely on the Centre to meet increasing power deficit. It has, instead, asked states to take up power generation projects on their own during the 11th Plan Period. Against the initial projection of capacity addition of 20,000-MW, states have indicated that they would add around 30,000 generation capacity during the 11th Plan Period. This will be in addition to what they have agreed to develop mini UMPPs of 10,000-15,000 MW capacity. States that have worked out capacity addition programme include, Harayana (2,650 MW), Delhi (2,000 MW), Uttar Pradesh (3,000 MW), Maharashtra (4,000 MW), Rajasthan (2,680 MW), Tamil Nadu (4,500 MW), Andhra Pradesh (3,500 MW) and Karnataka (2,000 MW). The ministry has projected the total capacity addition of 66,463 MW during the 11th Plan Period for all states. Power secretary said the idea is that states should set much larger target for capacity addition in the 11th Plan Period. States should fix target keeping in view the power deficit and the likely growth of power requirement in 4-5 years. The Centre will provide necessary assistance to states to carry out their capacity addition plans.

Foundation laid for GVK power project

December 20, 2006. The Prime Minister laid the foundation stone for the 600 MW Goindwal Sahib power project being set up by GVK Power (Goindwal Sahib) Ltd in the Taran Taran district of Punjab. The two units of 300 MW each will be fired by coal from GVK's captive mines at Tokisud North sub-block in Jharkhand. The Prime Minister said, "If Punjab has to grow rapidly, we need to pay greater attention to its industrialisation and electricity is crucial for this to happen. This is a major thermal power project in Punjab after a long gap."

Transmission / Distribution / Trade

Power link to Sri Lanka in 40 months: PowerGrid

December 23, 2006. State-owned transmission major Power Grid Corporation of India Ltd (PGCIL) estimates that it can set up a $450-million mega transmission power line being mulled between India and Sri Lanka in around 40 months time. According to a feasibility report prepared by PGCIL following consultations between the two Governments earlier on the project, the transmission utility expects the link being proposed between Madurai in Tamil Nadu and Anuradhapura in Sri Lanka to come up in around three years time once all clearances are in place.

The link, aimed at supplying up to 1,000 MW of power to the island nation, has been under discussion as part of the BIMSTEC energy co-operation proposals. Both Governments have set up high-level steering committees, co-chaired by Secretary-level officers on either side, to kick-start the project. Sri Lanka's Cabinet of Ministers had recently granted the go-ahead to its Energy Ministry to work on the project and the United States Agency for International Development is extending technical assistance to the Sri Lanka's Energy Ministry to carry out the feasibility study.

Government officials indicated at the possibility of an agreement on the proposed link to be finalised and signed by the middle of next year. The whole concept of grid connectivity was mooted way back in the 1970s, with Sri Lanka looking at sources of alternative stable power supply. While Sri Lanka's electricity demand has been growing by around 10 per cent annually, the country's installed capacity has failed to keep pace. Sri Lanka's Central Bank has warned of an impending power crisis since there are no major power generation projects to come on board in 2007. Indian players could capitalise on the opportunity in commercial terms due to the prospect of getting higher tariffs from electricity supplies to the country. Sri Lanka uses diesel for nearly 65 per cent of its power generation — one of the most expensive power generating resource — resulting in comparatively higher tariffs. The cost of generation and supply in the country is around Sri Lankan Rupees 12-15 per unit (about Indian Rs 5-6.21 per unit).

Torrent to distribute power in Bhiwandi from Jan

December 22, 2006. TORRENT Power is set to begin distribution of electricity to 1.6 lakh consumers in Bhiwandi circle from January 15, 2007. The Maharashtra State Electricity Distribution (MSEDCL) and the Ahmedabad-based power utility signed a distribution franchisee agreement for the circle, to bring private electricity to Bhiwandi. Torrent Power has already begun the groundwork for taking over the operations in Bhiwandi. It will purchase electricity from MSEDCL, the distribution arm of the erstwhile Maharashtra State Electricity Board (MSEB), which supplies electricity in most parts of Maharashtra. BEST, Reliance Energy and Tata Power Company (TPC) are distributing electricity in Mumbai city and its suburbs. Torrent Power, which currently distributes 7 billion units power to over 1.8 million customers in the cities of Ahmedabad, Gandhinagar and Surat in Gujarat, claims to have one of the lowest transmission and distribution (T&D) losses in the country at 9.7% and one of the highest power reliability at 99.9%. Torrent Power is currently implementing a 1,100 mw gas-based greenfield generation project near Surat, which is expected to be commissioned by the third quarter of 2007.

Tenders for coal-based power plants soon

December 20, 2006. The Governments of Haryana, Rajasthan, Uttar Pradesh, Punjab, and Maharashtra will issue tenders in a few weeks' time to select potential project developers for coal-based power plants with capacities of between 1,000 MW and 1,500 MW. The tenders will be awarded on the basis of competitive bidding on tariff. The Power Ministry will facilitate coal linkages and environmental clearances for all these power plants. The project cost for these plants would be more than Rs 4,000 crore each.

NTPC-SAIL to sell 50MW to Chhattisgarh SEB

December 20, 2006. The Chhattisgarh State Electricity Board and the NTPC-SAIL Power Company Pvt Ltd. (NSPCL)—a joint venture of Steel Authority of India Limited (SAIL) and National Thermal Power Corporation (NTPC)-- have reached a long-term power purchase agreement, under which the state would get 50MW of power.   Under the agreement, the NSPCL would give 50 MW power to the state from its under construction 500 MW thermal power plant that would come up in Bhilai, about 40 km west of the state capital.  NSPCL is the joint venture formed by the National Thermal Power Corporation Limited (NTPC), the leading power generation utility of India, and Steel Authority of India Ltd. (SAIL), in March 2001 with 50 per cent equity from each.  This company took over captive power plants at Durgapur Steel Plant (DSP) and Rourkela Steel Plant (RSP). 

NTPC and SAIL formed another joint venture company called Bhilai Electric Supply Company Private Limited (BESCL) in March 2002 each having 50 per cent equity.  This company now owns, operates and manages the captive power plant–II at the Bhilai Steel Plant (BSP).  Of the 500MW power generated from the plant, scheduled to start production from April 2007, BSP would get 280MW and CSEB 50MW.  The company then issued bids in the open market and received proposal from the Union territory of Dadra and Nagar-Haveli to purchase rest of the 170MW power.  The company was now bound to sell power to Dadra and Nagar-Haveli as it had signed an agreement.  The 280MW power to be supplied to BSP would benefit the SAIL plant at Bhilai for its expansion project.  With BSP moving ahead to increase its production from 4.5mtpa to 7mtpa, the power consumption of the plant was expected to increase from 250MW to 350MW. 

Transmission projects to have tariff bidding: MoP

December 20, 2006. After the encouraging response to the first two ultra mega power projects, the power ministry has decided to hold aggressive competitive bidding for transmission projects.  The ministry plans to put up 18 transmission projects for tariff-based competitive bidding from national and international developers. The bidding process will be managed by Rural Electricity Corporation for some projects, while the others will be handled by Power Finance Corporation (PFC).  In fact, expressions of interest (EoI) have already been invited for two projects — on a build-own-operate (BOO) basis — which would involve an investment of Rs 6,000 crore, for which the PFC has been identified as the bid process coordinator.  The route followed will be the same as that for the ultra mega power plants — shell companies or special purpose vehicles (SPVs) will be incorporated as subsidiaries of the PFC, and these will undertake the initial preparatory work for the projects, including obtaining of regulatory clearances.  One project is for an evacuation system for Maithon (1,000 MW), Kodarma (1,000 MW) and Bokaro (500 MW), with an estimated cost of Rs 4,200 crore, while the other involves setting up of infrastructure for enabling import of surplus power into the northern region at an estimated investment of Rs 1,800 crore.  The last date for submission of EoI is January 31, 2007. 

Policy / Performance

Orissa demands 33 pc power from IPPs and UMPP

December 26, 2006. Shifting from its earlier stand, the Orissa government has demanded at least one-third power from the ultra mega power project (UMPP) and the independent power projects (IPPs) to be developed by central public sector undertakings (CPSUs) in the state. The state has suggested that the power from CPSUs and UMPP be allocated to the state at the bidding tariff rates. The Centre has allotted a coal-pit head ultra mega power project of 4,000 MW to the state. The promoter for the same will be decided through bidding routes. Meanwhile, the National Thermal Power Corporation (NTPC) has sought the state's permission to set up a 2,400-MW project in Sundergarh district. Another CPSU, Neyvelli Lignitie Corporation (NLC) is also proposing to set up a 2,000 MW project at Jharsuguda.

Introducing a power policy for the IPPs, the state has signed MoUs with at least 13 power companies which are proposing to set up IPPs in the state. As per the policy, IPPs have to allot 25% of their total generation to the state at a price fixed by the Orissa Electricity Regulatory Commission. On the top of it, IPPs have to pay six paise per unit to environment kitty of the state. Orissa has been insisting that the policy would also be applicable to CPSUs and the UMPP. But CPSUs like NTPC and the NLC were strongly opposing it.

Bhel in talks with US, Europe nuclear firms

December 26, 2006. Within days of the US clearing the way for supply of nuclear equipment to India, state-run Bharat Heavy Electricals Ltd (Bhel) is in talks with global players such as GE and Siemens and may invest up to Rs 500 crore to expand its nuclear production capacities.  Bhel is in the market for acquiring European and US companies to strengthen its technology base as part of its endeavour to go global and has estimated that it may require a total of 8,000-10,000 crore investment in the next few years.  Bhel, India’s largest power equipment supplier, has set up about 80 per cent of the country’s installed nuclear power generation capacity of about 3,300 MW. The company is now focusing on 700 MW and higher rating nuclear units.  The company is currently supplying equipment of up to 540 MW capacity to Nuclear Power Corporation of India (NPCIL) for its projects. The company has already begun enhancement of some of its existing manufacturing facilities in Trichi, Hardwar and Bhopal for gearing up to participate in the process of developing nuclear projects.   

Currently, state-run Nuclear Power Corporation of India Limited (NPCIL) is the only nuclear power generator in the country and the demand for nuclear equipments was poised to rise in a big way with the government likely to open up the sector for private sector participation.  Various power generation companies such as state-run National Thermal Power Corporation (NTPC), and private sector giants Tata Power and Reliance Energy have already evinced interest for venturing into nuclear power.  In the wake of the Indo-US nuclear deal, NPCIL estimates the country could add 20,000-40,000 MW of nuclear power generation capacity over the next decade if several more players, including private companies, enter the sector.  The country’s nuclear generation capacity, currently at 3,310 MW, forms less than three per cent of the total capacity of about 1,25,000 MW. 

REL win 10 appeals in power tribunal

December 25, 2006. In a bonanza for Reliance Energy Ltd, the Appellate Tribunal for Electricity has ruled in its favour in as many as ten appeals filed by the company and its three power distribution companies in Orissa. The Tribunal clubbed the ten appeals by REL, and the discoms - Western Electricity Co of Orissa Ltd (WESCO), North Eastern Electricity Supply Co (NESCO) and Southern Electricity Co (SOUTHCO) - in four judgements and set aside the orders of Orissa Electricity Regulatory Commission in all the cases.

In the first case, the Tribunal revoked the orders for appointing Special Officers to oversee the operations of three distribution companies in the state and asked them to hand back the charge to the discoms, in which the Anil Ambani group firm has management control with 51 per cent stake. Further, the Tribunal allowed the appeals of the three discoms challenging OERC's decision to fix transmission tariff to be paid by them to state-owned utility Orissa Power Transmission Corporation Ltd for 2006-07. The ATE also asked OERC to re-determine the transmission tariff, and said till that time the discoms would pay tariff as already determined by the regulator but subject to ultimate orders and adjustment of payments. The three utilities had contended that OERC fixed "exorbitant" tariff which they need to pay OPTCL, and it should be reduced in the interest of discoms and consumers.

NTPC moots central PSUs as power exchange promoters

December 25, 2006. The Rs 27,000-crore NTPC Ltd has proposed the establishment of a nation-wide power exchange (PX) as a separate company with power sector CPSEs as the initial promoters, and an authorised capital of around Rs 50 crore. Based on the final report by its consultants — Norway's NordPool Consulting AS and Crisil Advisory Services — the power major has sounded out the Central Electricity Regulatory Commission (CERC) on the broad contours of the exchange being planned by it, including the governing body structure and modalities of executing transactions. Besides NTPC, commodity bourses such as NCDEX and MCX have evinced interest in establishing and operating an Exchange. The CERC, which plans to come out with guidelines for the project within a month, would invite interested parties for setting up the PX once the guidelines are the place. According to NTPC's proposal, the initial promoters — including state-owned power firms such as transmission major Power Grid Corporation of India Ltd (PGCIL) and power trading firm PTC India Ltd, besides NTPC — can chip in with about 50 per cent of the authorised capital in equal proportion.

The balance 50 per cent can be issued subsequently to state power utility, financial institutions and banks, and the proposed company could have board level representations from CERC and the Government to ensure a more diversified ownership structure, according to the NTPC proposal. NTPC has favoured the CERC staff paper on the establishment of a power exchange on parameters such as it being operated on the day-ahead basis and with trading blocks having hourly intervals. A power exchange would basically function on the lines of commodity exchanges and provide a platform for buyers, sellers and traders of electricity to enter into spot and forward contracts. Currently, inter-regional power transfer capacity of around 6,000 MW is available in the country, which is expected to increase further to about 9,500 MW in the coming few years. With transmission capacity being put in place for large size inter-State projects, the inter-regional transfer capacity is likely to get further enhanced. Nord Pool, the world's only multinational exchange for trading power and one of the most efficient pooling mechanisms, is owned by the national grid companies of Norway and Sweden.

CIL regulates coal supply to SEBs

December 24, 2006. In view of non-payment of dues amounting to a whopping Rs 3,489 crores, Coal India Limited has begun regulating coal supply to various state electricity boards and other power utilities and asked them to furnish Letter of Credit (LC) to ensure uninterrupted supply. After failing to secure the dues, Eastern Coalfields Ltd has started regulating coal supply to the Bihar Electricity Board while the Central Coalfields Ltd is rationing supplies to the Jharkhand Electricity Board and the Tenughat Vidyut Nigam Ltd. The Southeastern Coalfields Limited is also regulating supply to the Rajasthan Vidyut Nigam Ltd. ECL, CCL and SECL function under the aegis of the CIL. In a note, the CIL informed the government that the supply has been regulated to these boards as per a provision under the securitisation scheme.

The public sector behemoth has also begun seeking irrevocable LC from SEBs to ensure uninterrupted availability of coal supply. It said while some Boards have opened LC, others were being pursued to do so. The scheme has provision of payment of interest at the rate of 15 per cent on the due amount if payments were not made within the stipulated period. Of the total outstanding dues, Rs 1,596.81 was disputed by the SEBs. CIL argued that dues increased due to financial crunch of the SEBs and other power utilities and considerable time consumed by the government appointed umpires in settling payment disputes. CIL cited that the National Thermal Power Corporation's Badarpur power station was yet to pay dues worth Rs 428.82 crores despite the umpire's ruling to this effect.

Besides payment dispute exist between ECL, NCL and the Badarpur Power Station and between the coal companies and Punjab and Gujarat electricity boards. After bifurcation of Madhya Pradesh Electricity Boards and the Chhattisgarh Electricity Board, the former is yet to pay as their liability amounting to Rs 354.16 crores has not yet been finalised, the note said. Similarly after bifurcation of Bihar and Jharkhand electricity boards, the non-reconciliation of dues amount to Rs 184.78 crores. The Committee on Public Undertakings in its report too observed that there was no effective mechanism available with the coal companies for recovery of their outstanding dues from these boards and constitution of an effective mechanism involving ministries of coal and power and the states to look into the issue. It also suggested that it should be made madatory for all SEBs to open LC for availing supply of coal from the PSUs. 

Ultra mega power project coming up at Dhopawe soon

December 24, 2006. Maharashtra, which may face a daily peaking power shortage of 7,855 MW by 2010, has planned the development of a 1,600 MW mini ultra mega power project (UMPP) on competitive bidding tariff basis involving independent power producers. The Rs 8,000 crore imported coal-based project would come up at Dhopawe, Ratnagiri district, which also houses the much debated 2,184 MW Dabhol power project. The Dhopawe project would be super-critical in nature, having two units of 800 MW each. It would need imported coal of 10 million tonne annually.

The Maharashtra government, at a meeting convened by power secretary last week, assured him that the project would be developed on the lines of the UMPP by the Centre. The Maharashtra State Electricity Distribution Company (MahaVitaran) would soon appoint the Maharashtra State Power Generation Company (MahaGenco) as project management consultant (PMC) for this project. Within a month, MahaGenco would form a shell company for the Dhopawe project on the lines of shell companies formed by state-run Power Finance Corporation for the development of Sasan and Mundra UMPPs. The State sources told FE that the shell company would carry out land acquisition (over 100 hectares), seek environment clearance besides necessary pre-development works and add these costs in the total project cost. The shell company is expected to complete the process of inviting request for qualification, request for proposal and awarding the contract to the lowest bidder by May 1, 2007, which is Maharashtra Day. The first unit of 800 MW can be commissioned in less than 40 months.

UTs will  have joint power regulators: Cabinet

December 21, 2006. The Cabinet cleared a proposal to set up a joint power regulator for all Union Territories, barring the National Capital Territory, to determine electricity tariffs and carry out other regulatory functions. Currently, the regulator is Central Electricity Regulatory Commission (CERC). There are state-level regulators as well. Only Delhi, among the UTs, has an entity called the Delhi Electricity Regulatory Commission. The other UTs are Dadra & Nagar Haveli, Chandigarh, Daman & Diu, Puducherry (formerly Pondicherry), the Andaman and Nicobar Islands and Lakshwadeep.

In a decision that would benefit special category states like those in the Northeast, and Jammu & Kashmir, the Cabinet Committee on Economic Affairs (CCEA), which also met Prime Minister at the helm, decided to provide 90% external assistance to them in a grant-loan ration of 90:10. The move will help bring down the debt liabilities of the special category states.

This is opposed to the release of such assistance on a back-to-back basis— that is, on similar terms and conditions as the Centre gets it—as recommended by the 12th Finance Commission with retrospective effect from April 1, 2005. Himachal Pradesh, a special category state, would benefit because a loan of Rs 22.15 crore it had received during 2005-06 would be converted to 90:10 ratio. The Cabinet also cleared a Rs 77-crore package for flood-hit textile units, particularly the Surat-based ones.

Powermin explores blended coal option for new projects

December 20, 2006. Buoyed by the success in the selection of developers for the 4,000 MW Sasan and Mundra ultra mega power projects, the power ministry is currently in the midst of weighing the option of use of blended coal for the upcoming ultra mega power project at Krishnapatnam in Andhra Pradesh. The ministry has already set the March 2007 deadline for awarding contract for the lowest bidder to set up 4,000 MW project in Krishnapatnam. The ministry had asked the state-run Bharat Heavy Electricals Ltd (BHEL) to carry out a study to look into the possibility of use of blended coal for the upcoming Krishnapatnam project. According to the BHEL study, 20% of imported coal can be blended with 80% indigenous coal. Subsequently, BHEL also carried out tests at its fuel evaluation test facility and field trials on an existing boiler at Raichur. BHEL communicated to the ministry that it would be possible to blend 20% imported coal with indigenous coal. It must be mentioned here that the ministry has initially planned the Krishnapatnam project on 100% imported coal based.

New norms for private players in hydel projects mooted

December 20, 2006. The ministry of power has finalised a new set of policy guidelines for allocation and development of hydel projects by the private sector. This it has done after being concerned over hasty procedures being adopted by states in giving private developers hydel projects to develop. The new norms will have states following the same system for private players as the one they adhere to for the public sector. As a result, private developers executing hydel projects will also be extended a special dispensation of five years for tariff scrutiny by the central power regulator. Currently, public sector undertakings enjoy this dispensation and only after January 2011 would the PSUs get their tariff determined on the basis of competitive bidding. The new guidelines will also require state governments to award projects to private companies based on their promoters’ financial capability.

The projects are being allocated by states in lieu of the huge benefits offered by private developers, such as higher free power to home states (over and above 12%), free equity to host states, upfront premium and higher returns. Under the new dispensation proposed by the power ministry, the initiative for allocating a project will remain with a state government. But scrutiny by the regulator and the central electricity authority will ensure that projects are designed and built in the most optimal and economic manner, and that consumer interests are adequately protected. Uttranchal, Himachal Pradesh, Sikkim and Arunachal Pradesh, had already allocated 35 projects of a total 10,000 MW to the private sector in this manner and another 35 for a total 3,000 MW were in the process of being allotted by Himachal Pradesh. These states had not taken responsibility for the purchase of power from the projects and the developers were expected to market power on their own, availing open access to transmission or running the projects as merchant plants.

NTPC scouts for coal blocks in Indonesia, Australia, S. Africa

December 20, 2006. NTPC Ltd is scouting for coal blocks in Indonesia, Australia and South Africa. The company is deputing high-level teams to these countries, with the first team already having been sent to Indonesia, to search for the possibility of bagging a coal mine abroad. The teams are expected to submit their report on the feasibility of tying up coalmines abroad by March-April 2007. The power generation major — the biggest user of coal in the country — plans to take up the coal mining ventures abroad through a joint venture with South Eastern Coalfields Ltd (SECL) — the largest coal-producing subsidiary of Coal India Ltd.

NTPC has been resorting to importing coal from countries such as Australia to tide over fuel shortages experienced at its coal-based stations during much of the last fiscal. The company, which has already begun aggressively pitching for coal blocks in the country, is now looking at bagging blocks abroad to diversify supply risks and also since foreign coal mines produce superior coking coal with higher calorific value and lower ash content compared to the coal produced here. The proposed overseas foray for coal blocks is part of NTPC's overall strategy to produce around 50 million tonnes of coal by the year 2017 with the aim of meeting close to 25 per cent of its total coal requirement solely from its captive mines. On the domestic front, NTPC has lined up investments to the tune of around Rs 6,000 crore for developing its 15-million-tonnes per annum Pakri Barwadih captive mine — the first of a series of eight mining blocks allotted to power major. The company is hopeful of starting coal production from the mine by around May 2008. Besides this, the company has bagged seven blocks, including two to be operated through a 50:50 joint venture with Coal India Ltd.

Tata Power to challenge the ATE order

December 20, 2006. Tata Power Company is likely to challenge the order by Appellate Tribunal for Electricity (ATE), which directed the Mumbai-based power utility to refund Rs 354 crore that Reliance Energy (REL) had paid it earlier as stand-by charges for electricity supply in Mumbai city and suburbs. The company is considering to go in for an appeal against the order in supreme court. MERC in its earlier or-der dated May 31, 2004, had permitted appropriations to the tune of Rs 365 crore out of the statutory reserves of Tata Power towards standby charges. The issue relates to sharing of standby charges of Rs 33 crore per month payable to Maharashtra State Electricity Board (MSEB).

The ATE has ruled that for the 6-year period starting from financial year ’99 to financial year ’04, TPC is required to refund REL Rs 354 crore within a pe-riod of 30 days. ATE in its order has decided the share of Tata Power to be about 77% and of REL to be about 23% of the total standby charge. The apex court, which is currently closed for winter vacations, is already hearing two appeals by Tata Power against the decisions of ATE, which ruled in favour of REL.




Sinopec adds more crude reserves, less gas in 2006

December 26, 2006. Sinopec Group has found an estimated 30 percent more recoverable crude oil reserves this year than it did last year, but additions of recoverable natural gas reserves are estimated to have fallen by more than 40 percent. The company will have found 45 million tons of recoverable oil reserves and 73.9 bcm of natural gas reserves by the end of 2006. The new crude oil reserves would represent a 30.5 percent increase from last year's 34.47 million tons, while the new gas reserves would be 42.6 percent lower than last year's findings of 128.7 bcm.

The paper also forecast that Sinopec's crude output this year would exceed 40 million tons (800,000 barrels per day), up 1.9 percent from 2005, and that gas output would be 7 billion cubic meters, up 11 percent. Sinopec Group is also expected to reap 4.5 million tons of equity oil production from its overseas operations, an increase of 120 percent from last year, although it gave no details on those operations. The firm has small production operations in Kazakhstan and Africa, but made its biggest foreign acquisition earlier this year of a medium-sized Russian oilfield, the 120,000 barrel-per-day Udmurtneft.

Exxon, ONGC and Inpex win Libya oil blocs

December 24, 2006. Three blocs that drew only single bidders in Libya's latest oil exploration round were awarded to Exxon, ONGC and Inpex. Exxon Mobil Corp. was awarded a 22.3 percent share in four wells, India's Oil & Natural Gas Corp. a 28 percent share in one well and Japan's Inpex Holdings Inc. 12.9 percent of three wells. Russia's Gazprom and Tatneft won the bulk of licences in the round last week. Libya wants to attract foreign investment to help it hike its oil output capacity to more than 3.0 million barrels bpd per day by 2010/12 from about 1.6 million bpd at present.

Venezuela to build offshore platforms with Iran firm

December 22, 2006. State-run Petroleos de Venezuela S.A. is teaming up with an Iranian shipbuilding firm to make offshore platforms. PdVSA signed the initial paperwork to form a jointly-owned company with Sadra America Latina, a division of Sadra, an Iranian marine construction firm that has been expanding into the offshore oil and natural gas business. The new venture, Venezirian Oil Company, will give Venezuela access to new offshore technology. Venezuela is struggling to develop offshore natural gas fields to plug a domestic gas deficit and begin exporting the fuel. Venezuela also uses offshore platforms in the shallower waters of Lake Maracaibo, one of the country's largest oil-producing regions. Venezirian will initially build semi-submersible and jack-up platforms in Iran and ship them to Venezuela, and then begin constructing the platforms in Venezuela later on.

Statoil awards drilling contract for Gjoa

December 22, 2006. As development operator, Statoil has signed an agreement with Transocean for drilling of production wells at the North Sea's Gjoa field. Valid for three years, the contract is worth around US $427 million. The deal covers drilling of 13 wells, with options for a further three. The Transocean Searcher rig will drill the wells. First drilling is planned to start in October 2008. Earlier this autumn Statoil signed an agreement for the construction of the platform deck and supply of subsea installations to Gjoa. The next big contract will be the building of the platform jacket for the semi-submersible production platform. Plans call for the Gjoa field to produce oil and gas from 2010. Total investment is estimated at around NOK 27 billion in 2006 money. Gjoa was proven in 1989. The field lies in blocks 35/9 and 36/7, around 70 kilometers north of the Troll field and 45 kilometers off the coast of western Norway. Reserves are estimated at around 40 billion cubic meters of gas and around 83 million barrels of oil and condensate.

Lukoil and PDVSA begin junin-3 exploration

December 21, 2006. The first stratigraphic well has been spudded on the Junin-3 prospective hydrocarbon block in Venezuela. This event launches the second stage of the reserves estimation and certification program being carried out on one of the most promising oil blocks in Latin America. The work is being carried out under the agreement between LUKOIL Overseas and CVP (a subdivision of PDVSA, the national oil and gas company) signed on October 12, 2005. The size of the Junin-3 block, located in the Orinoco extra heavy oil belt in Eastern Venezuela, is 640 square kilometers. The stratigraphic well with designed depth of 1,370 meters is the first of 17 to be drilled on the block. The purpose of drilling is to confirm the optimistic conclusions made by the joint group of specialists from LUKOIL Overseas and PDVSA during the first stage of the estimation and certification work. Work on the Junin-3 block is part of the Magna Reserva strategic program being undertaken by PDVSA jointly with a number of foreign partners aimed at increasing Venezuela 's proven oil reserves by 235 billion barrels

Emerald Wins Ombu E&P Contract in Colombia

December 21, 2006. Emerald Energy Plc has been awarded a new exploration & production contract in Colombia. The Ombu Contract, in which Emerald has a 100% working interest, covers an area of 300 sq. km and is located in the Caguan Basin, to the southwest of the Llanos Basin, in Colombia. The initial phase of the exploration period is 11 months and the minimum work program comprises the acquisition of 61 km of new 2D seismic data and the re-processing of 60 km of existing 2D seismic data. If Emerald elects to enter the second phase, the minimum work program includes the drilling of 1 well to an estimated depth of 5,000 ft.

Total's Indonesian unit to invest $8 bn in gas

December 20, 2006. PT Total E&P Indonesie, a unit of France's Total, is planning to invest around US$8 billion from 2007 to 2015 in order to maintain current levels of gas output from the Mahakam Block in East Kalimantan. The company will focus on developing three fields in Mahakam Block -- Tunu, Peciko and Sisinubi blocks. The US$8 billion investment, Total may earmark US$1.6 billion for capital expenditure next year in order to keep output at the present level of 2.6 billion cubic feet a day through next year. All the natural gas from Total's fields is supplied to the nearby liquefied natural gas (LNG) processing plant in Bontang. The Bontang LNG plant is 50 percent owned by state oil and gas firm PT Pertamina. A consortium comprising Total and Chevron with 35 percent, and Japan Indonesia LNG with 15 percent holds the remaining 50 percent.

Venezuela offers Malaysia oil exploration stake

December 19, 2006. Venezuela is ready to jointly explore for oil with Malaysia and help it boost its reserves. Venezuela has already invited Malaysia's state oil and gas company Petroliam Nasional Bhd. to participate in oil projects in Venezuela - home to the largest crude reserves outside of the Middle East. Venezuela could help Malaysia look for new crude reserves and receive assistance in developing palm oil, which can be used as a biofuel. Venezuela is aggressively seeking to develop vast deposits of heavy oil in its Orinoco River region. The dark, tar-like crude was once considered too costly and difficult to produce.

However, new technologies to upgrade it into lighter, more marketable products, combined with higher oil prices, have made it increasingly attractive. Venezuela believes that once it quantifies and certifies the Orinoco's heavy oil deposits, it could become home to the largest crude reserves in the world. State oil company Petroleos de Venezuela SA is working with counterparts from friendly allies, such as Iran, Russia, China and India in the certification process. Venezuela has invited Malaysia to join those companies.  The two governments are expected to sign a series of oil and other cooperative accords later, including one to study the possibility of jointly building a refinery in Malaysia.

Fugro wins offshore China gas hydrate contract

December 19, 2006. Fugro has won two new contracts for offshore investigations in China and Brazil. Fugro Hong Kong has been awarded a contract by the Guangzhou Marine Geological Survey (GMGS) of the Ministry of Land and Resources, Peoples Republic of China, to provide drilling and sampling services for the gas hydrate research being conducted by the Ministry. The total contract value is estimated to be between USD 9 million (EUR 7 million) and USD 14 million (EUR 11 million). The work will be conducted in the second quarter of 2007.

GMGS is expecting the South China Sea to contain gas hydrates, a potential new source of energy. In order to assess the presence of gas hydrates, GMGS requires data on the nature of subseafloor geology. Fugro will use its geotechnical investigation vessel M/V Bavenit for this contract. The Bavenit is equipped with a dynamic positioning system for work in deep water. Fugro OceansatPEG SA, Brazil, has been awarded a three-year plus three year option contract by Petrobras Geodesia for a ROV (Remotely Operated Vehicle) to perform survey acquisition works using a wide range of acoustic measurement equipment. In addition the project requires a full array of seabed transponders in water depths up to 3,000 m. The mobilization date is May 2007 and the approximate value of the contract is equivalent to USD 17 million (EUR 13 million) for the first three years.


TEPPCO to build tank farm at Motiva Texas refinery

December 19, 2006. Oil logistics group TEPPCO Partners LP had agreed to build a 5.4 million barrel refined products tank farm to support the proposed expansion of Motiva's Port Arthur, Texas, refinery. TEPPCO will also construct an 11 mile pipeline to connect the new storage facilities with its refined products terminal in Beaumont, Texas, which has connections to the Colonial, Magtex and Explorer refined products pipelines.

The cost of the new terminal and pipeline, which is due to be completed by mid-2009. Motiva, a joint venture between Royal Dutch Shell Plc and Saudi Aramco, the state oil company of Saudi Arabia, is in the final stages of drawing up plans to expand its 275,000 barrels per day Port Arthur refinery by 325,000 bpd by 2010, which would make it one of the largest in the United States. Motiva expects to make a final decision on the proposed $5 billion expansion in mid-2007, but the company has already placed some orders for long-lead-time equipment. Bechtel Corp. and Jacobs Engineering Group have been hired to provide engineering, procurement and construction services for the project.

Transportation / Trade

TransCanada to buy El Paso pipelines for $3.39 bn

December 22, 2006. El Paso Corp. will sell its second-largest pipeline system, a storage business, and a stake in another pipeline system to TransCanada Corp. and TC PipeLines LP for $3.39 billion. TransCanada, already Canada's biggest pipeline company, bulks up its gas-transmission business with the purchase, adding 10,500 miles (17,000 kilometers) of new pipe, a 40 percent increase. The Canadian firm will also assume $744 million of debt. The sale of a core pipeline asset is a departure for El Paso, but the company, which has been in the midst of a massive restructuring, said the deal will allow it to clean up its balance sheet immediately.

Venezuela to buy 4 oil tankers from Iran

December 22, 2006. Venezuela's state oil company will buy four oil tankers from Iran. Petroleos de Venezuela SA’s shipping subsidiary, PDV Marina, had signed a contract to buy the tankers from the Iran Marine Industrial Company. Venezuela is the world's fifth largest oil exporter. Although the U.S. remains its top buyer of oil, Chavez has sought to diversify the country's clientele.

North west shelf partners sign three LNG supply deals

December 21, 2006. The North West Shelf Venture participants have signed three heads-of agreement for the ongoing supply of liquefied natural gas from Australia's largest resources project. The deals are with Tokyo Electric Power Co., Osaka Gas Co., Ltd., and Tokyo Gas. The eight-year deal with Tokyo Electric Power Company, one of the North West Shelf Venture's original Japanese LNG customers, is a renewal of that company's long-term LNG supply requirements. The venture will supply Tokyo Electric with five cargoes of LNG a year--about 0.3 million tonnes a year--on an ex-ship basis. The agreement goes into effect in April 2009.

Osaka Gas Co., Ltd. is another of the North West Shelf's original Japanese LNG customers to renew its long-term LNG supply requirements this year. The deal is for the supply of approximately 0.5 million tonnes a year for six years, to be delivered in Japan by the North West Shelf participants. It will commence in April 2009. In a deal commencing in April 2009, the North West Shelf participants will supply around 0.53 million tonnes a year of additional LNG for eight years to Tokyo Gas on a delivered Japan basis. The Tokyo Electric Power Company is the largest power utility and largest consumer of LNG in Japan, serving more than 27 million customers in and around the Tokyo area. It is a long-standing customer of the North West Shelf Venture, having signed a contract in 1985 that ends in March 2009.

PetroChina to buy Iran LNG

December 21, 2006. PetroChina, the nation's largest oil company, has signed an initial agreement to buy three million tons of liquefied natural gas a year from Iran to supply terminals it plans to build on China's northern coast. PetroChina signed the 25-year agreement with National Iranian Gas Export the gas deliveries will start in 2011. The company is expanding gas production and sales as demand for cleaner-burning fuels increases in the world's fastest-growing major economy. PetroChina plans to build three LNG receiving terminals in Rudong in Jiangsu province, Dalian in Liaoning and Tangshan in Hebei. The first phase of the terminals will be completed by 2010. PetroChina targets 26 million tons of LNG receiving capacity for the three terminals, more than double the combined 10.5 million tons. China Petrochemical Corp, the nation's second-largest oil company, is in negotiations with Iran for an agreement estimated to be worth as much as US$100 billion (HK$780 billion), involving crude oil and LNG purchases. Under an initial agreement signed by Sinopec in 2004, China would pay Iran as much as US$100 billion over 25 years for the oil and gas purchases and for a 51 percent stake in the Yadavaran oil field, in Khuzestan province near the border with Iraq. The deal would allow China to buy 150,000 barrels of Iranian crude a day at market rates for 25 years as well as 250 million tons of LNG.

Gazprom signs memo on building gas pipeline via Serbia

December 20, 2006. Gazprom has signed a memorandum on mutual understanding with Serbia, expressing the sides' interest in the construction of a new natural gas pipeline through the Balkan country's territory. The implementation of these agreements provides an opportunity to build alternative gas transportation facilities to ensure stable and reliable gas supplies to European countries, and gives Serbia the status of a transit country.

Gaz de France and Gazprom extend supply deals to 2030

December 19, 2006. Gazprom and Gaz de France signed an agreement at Gazprom's corporate headquarters for the renewal of their natural gas supply contracts. Gaz de France and Gazprom are extending their existing natural gas supply contracts, currently representing a total of approximately 12 billion cubic meters per year, until 2030. From the end of 2010, Gaz de France will receive additional volumes of 2.5 billion cubic meters of natural gas per year, which will be carried though the Nord Stream. Furthermore, Gazprom intends to supply Russian gas directly to end customers as of July 1, 2007. These volumes could amount to a total of 1.5 billion cubic meters per year. Both companies have also agreed to increase their ongoing cooperation related to supplying liquefied natural gas (LNG), training and environmental protection.

Policy / Performance

Turkmen gas price to Ukraine to be unchanged in 2007

December 26, 2006. Deliveries of gas from Turkmenistan to Ukraine will remain unchanged in 2007.Ukraine currently imports a mixture of Russian and cheaper Turkmen natural gas at $95 per 1,000 cubic meters. Before Niyazov's death, Ukraine agreed on a gas price of $130 per 1,000 cubic meters, to be supplied from Turkmenistan through Russia in 2007. Ukraine will receive 38 billion cubic meters of gas in 2007 and the price will remain unchanged $100, plus transportation costs. As a result, Ukraine will import gas at $130 per 1,000 cubic meters at the border.

Turkey, Georgia in gas-sharing agreement

December 24, 2006. Turkey has agreed to give up some of its share of a giant Caspian gas field to Georgia, allowing the small Caucasus nation to reduce its need for expensive Russian gas. Turkey had agreed to transfer to Georgia next year 800 million cubic meters of natural gas it was entitled to from the giant Shah Deniz field off Azerbaijan's Caspian coast. The price remained to be fixed. Georgia has faced a doubling of the price it pays for Russian natural gas and is seeking alternative sources of supply. Georgia had agreed to buy 1.1 billion cubic meters of gas next year at $235 per 1,000 cubic meters - an amount that falls short about 700 million cubic meters short the country's expected demand for 2007. Georgia now pays $110 for its Russian gas.

Iran confirms gas deal with China

December 24, 2006.The Iranian oil ministry confirmed signing a memorandum of understanding on a $16 bn gas deal with China. According to the deal, the North Pars gas field, located 85 kilometres north of the giant South Pars gas field in the Persian Gulf, is to be developed by China within eight years and four phases. The gas from the field is to be converted to liquefied natural gas and shared equally between Iran and China. The South Pars gas field has an estimated 80 trillion cubic feet of natural gas.

Saudi king cancels planned gasoline price rise

December 23, 2006. Saudi Arabia cancelled a planned 25 percent rise in regular gasoline prices on King Abdullah's orders, a move seen as aimed at alleviating the impact of rising inflation and following a stock market crash. In April, the king also issued a decree slashing gasoline and diesel prices by around 30 percent in the world's largest oil exporter. The move came during the stock market crash which wiped out more than half the value of the biggest Arab bourse and hit large numbers of small investors. SPA said the price of 95-octane gasoline would remain at 0.60 riyal ($0.16) per litre, and would not be raised to 0.75 riyal as earlier announced by state oil company Aramco which planned to introduce the increase on Jan. 1. The new 91-octane gasoline would be sold at 0.45 riyal per litre, instead of the earlier announced 0.60 riyal.

Turkey and Israel agree on implementing energy corridor

December 23, 2006. Turkey and Israel agreed on implementing the "energy corridor" project which will carry Baku oil to Israel via Ceyhan. The project also foresees the construction of pipelines to transport water and natural gas and an electricity power line between the two countries. The two ministers expressed their consensus on the immediate start of the project and they agreed on initiating private companies` preliminary feasibility works for preparation of the project. Feasibility works of the project are expected to last about six months. The project foresees the transfer of water, natural gas and crude oil through pipelines and electricity through power lines to Israel. Oil will be transported to India, China, Japan and other Far East countries from Israel with oil tankers. Turkey and Israel will later sign an agreement regarding the project.

Petrobras to invest $724 mn to up onshore output

December 22, 2006. Brazil's state-run oil company Petrobras will invest $724 mn to boost output from mature onshore oil fields in the country's northeast to 70,000 barrels per day from 48,000 bpd now. Petrobras will pour $410 million into the Canto do Amaro field in Rio Grande do Norte state and $314 million in the Carmopolis field in Sergipe. The fields, which reached production peaks in 1989 producing 40,000 bpd and 27,000 bpd respectively, should have sustainable high return rates with minimum risks. Carmopolis, discovered in 1963, is Petrobras' biggest onshore field and has been producing 21 to 23 API grade crude. Canto do Amaro has been pumping 28 to 40 API grade oil. Most of Petrobras total output of around 1.8 million bpd comes from offshore fields, with the bulk of producing fields concentrated in the Campos basin.

Philippines Launches 2006 energy contracting round

December 22, 2006. The Department of Energy launched the fourth annual Philippine Energy Contracting Round, under which local and international energy companies can bid to explore for oil, gas, coal and goethermal resources in the country. The government is hoping to help boost foreign investment in the country's energy sector through contracting efforts. The energy department is offering nine oil and gas areas totaling 71,357 square kilometers, 14 coal prospects with combined estimated reserves of 421 million metric tons, and geothermal resources equivalent to about 100 megawatts of electricity. The nine oil and gas areas being offered are located offshore in Palawan province and Mindoro province, among others. During last year's contracting round, four oil and gas areas were offered and awarded to various groups. Meanwhile, the energy department has identified 14 areas for coal exploration and development, with estimated reserves of 421 million metric tons, located in the provinces of Quezon, Negros Occidential, Cebu, Surigao, Agusan del Sur, Davao Oriental and Zamboanga.

Gazprom sets gas price for Georgia at $235 per 1,000 cu. m

December 21, 2006. Russia's energy giant Gazprom has set the price of natural gas for Georgia at $235 per 1,000 cubic meters. Gazprom asked Georgia to stipulate the amount of gas it needs, and to then sign a corresponding contract, adding that otherwise gas that could have been bought by Georgia would be sold elsewhere. Gazprom wants to know exactly how much gas Georgia will need to buy in light of recent statements that it intends to buy gas in Iran, Azerbaijan, Turkey and other countries rather than in Russia. Tbilisi previously bought gas from Iran under a temporary agreement following explosions in January 2006 on trunk pipelines in Georgia, which caused a suspension in gas deliveries from the country's sole supplier, Russia. Georgian energy security was dealt a further blow earlier in November when Russia said it might cut off gas supplies to its South Caucasus neighbor if it fails to agree to a substantial price rise for 2007.

Iran, CNOOC sign $16 bn gas deal

December 20, 2006. Iran and China's CNOOC have signed a $16 billion deal to develop Iran's northern Pars gas field and build plants to produce liqefied natural gas (LNG). The agreement to develop the northern Pars gas field was signed with Chinese firm CNOOC, this contract includes $16 billion investment. The $5 billion would be spent on upstream development and $11 billion on the LNG facilities. The CNOOC would have a 50 percent share of the produced LNG. The northern Pars gas field contains 80 tcf of gas and can produce 431 million cubic feet per day.

Kazakhstan, China sign energy deals

December 20, 2006. Kazakhstan has reached a series of deals with neighbour China to smooth cross-border energy trade and cooperation. Strategic and economic cooperation deals signed  by Kazakhstan and China included exploitation of Kazakhstan's rich oil and gas resources. Trade between Kazakhstan and China has grown following the collapse of the Soviet Union. Bilateral trade, estimated at $8 billion in 2006, is expected to reach $10 billion in 2010 and $15 billion in 2015. But Kazakhstan remains wary of becoming merely a raw materials supplier to its giant neighbour. It recently blocked Chinese investment firm CITIC's $1.9bn takeover of Nations Energy, a Canadian firm with assets in Kazakhstan.



Construction begins on Vietnam power plant

December 25, 2006. Workers in Vietnam have begun building the Vung Ang I thermal power plant, which is planned to be the largest plant of its type in the country. The $1.25 billion project is being built near the Vung Ang deep sea port. The first group of 600 MW turbines is scheduled for completion in 2011, with the second group expected to follow in 2012. Each of the groups is designed to create 7.2 billion kilowatt hours per year.   The project will eventually produce 10 percent of the country's electricity.

Five dams to be completed by 2016: PM

December 24, 2006. The Pakistan Prime Minister said that the construction of Kalabagh and four other dams would be completed by 2016 with consensus to meet the water reservoirs and electricity needs of the country. The government was also working to get electricity from natural gas, furnace oil, coal, nuclear energy, bio mass, windmills, solar energy and other sources. Because of the arrival of foreign investors the country’s electricity demand was increasing by up to 12 per cent annually and the new projects are part of the efforts to meet the requirement. A target of electrification of 560 villages in Mianwali district had been set, of which 530 were getting electricity supply and the remaining would get it before the end of the year.

PSC wants to make nuclear plant building cheaper

December 20, 2006. On the heels of Progress Energy's plans to build a nuclear power plant in Levy County, members of the Florida Public Service Commission are proposing rules that would lessen the "sticker shock" of building more nuclear power plants in the future. The proposed rules would permit investor-owned electric utilities to request partial recovery of the planning and construction costs of a nuclear power plant prior to commercial operation of the plant.

Transmission / Distribution / Trade

Progress energy signed power purchase agreement

December 20, 2006. Progress Energy Florida has signed a long-term, wholesale agreement to buy power from Shady Hills Power Company LLC. Under the agreement, Shady Hills will provide Progress Energy Florida 500 MW of capacity and associated energy for 10 years, extending an existing agreement that will expire in 2014. The Shady Hills plant, in Pasco County, is owned by Mirant and fueled by three natural gas turbine units. The entire output of the facility will be used to supply a portion of Progress Energy Florida's growing capacity needs through 2024.

AES to invest in N. American transmission projects

December 20, 2006. AES Corp. acquired the trade name Trans-Elect LLC as part of a plan to expand into the North American power delivery business. Arlington, Virginia-based AES, which owns power generation facilities in 26 countries, also entered into an agreement with former managers of Trans-Elect to jointly develop projects to improve the nation's high-voltage electric grid. U.S. transmission investment has risen to $5.5 billion in 2005 from $2.5 billion in 1998 and could rise to $10 billion by 2010.

FPL Group to buy Wisconsin nuclear plant

December 20, 2006. FPL Group, owner of Florida's biggest utility, agreed to buy the Point Beach nuclear power plant in Wisconsin from Wisconsin Energy Corp. for about $998 million to almost double its generating capacity in the Midwest. Wisconsin Energy will buy all of the output from the plant, located about 30 miles southeast of Green Bay, through at least 2030 under a long-term agreement.

The plant's two reactors can generate 1,033 MW, enough to supply about 826,000 average U.S. homes. The per-kilowatt cost of buying power from FPL will be lower than if its Wisconsin Electric Power Co. utility continued to own and operate the plant, its only nuclear station. FPL has been expanding its wholesale power generation business outside Florida, buying nuclear plants and building wind-powered generators. FPL has 660 MW of generating capacity from wind turbines in Wisconsin and five other Midwest states and it bought a majority stake in Iowa's Duane Arnold nuclear plant last year.

Policy / Performance

Agreement signed for power plant

December 21, 2006. The Halmore Power Generation Company (Pvt) Ltd (HPGCL) on signed its implementation agreement with the Private Power and Infrastructure Board (PPIB). The HPGCL is a UK-based business concern, which is bringing in direct foreign investment into Pakistan, to set up a 225 MW thermal power plant to be situated at Bhikki in Punjab. Earlier a power purchase agreement was initialled between the company and NTDC, while the gas supply agreement has already been initialled with the Sui Northern Gas Co, Ltd. Targeted to start its commercial operations in 2008, the power plant is estimated to be established at a cost of $185 mn. The power plant is based on combined cycle/gas turbine technology, and is capable of operating on fuel, it will use gas as the primary fuel.

Renewable Energy Trends


Rice straw-based power project to launch in Punjab

December 22, 2006. Minister of state for new and renewable energy to unveil the rice straw-based commercial power project in Punjab. The project with the generation capacity of 12 MW, probably first in the world and first out of nine similar projects, would use the agro wastes as fuel-locally available rice straw and sugar cane trash. The plant will become operational in two years followed by other similar units, which would come up within four years, generating a total of 108-MW. Each plant costing Rs 55-60 crore would become operational within 18 months of the commencement of the project.

These unique ‘farmer to farmer’ projects are expected to provide valuable extra power to farmers, besides providing valuable additional income to some 10,000 to 15,000 farmers located around each project area from the sale of agricultural wastes. The project would be major milestone in the area of environment protection in three ways. Firstly, it would convert agriculture waste to valuable energy. Secondly, it would reduce the release of smoke and other pollutants caused by the burning of over 100,000 million tons of these wastes into the atmosphere, contributing to the green house effect and global garming.

Chhattisgarh village chooses bio-fuel

December 22, 2006. Tucked away unobtrusively at the heart of tribal land, Bairakh village in Chhattisgarh will soon shine brighter across the country as it is all set to become the first village in India to get power through bio-fuel.  The Bangalore-based Winrock International India, a Non-Government Organisation (NGO) Bangalore, started working on the project after getting sanction from the Ministry for Renewable Energy in 2004.  The survey was conducted in two months to draw the plan, which was completed successfully within 2 years.  About 60,000 saplings of jatropha were given to the villagers to plant on the peripherals of agriculture land.  The plants started bearing bio-fuel seeds.  The seeds were taken from the villagers on the condition of providing power to them. 

Soyaoil usage in biodiesel dipping in US

December 20, 2006. Even as producers of palm and other vegetable oils give out optimistic forecasts of rising vegetable oil use for biodiesel production, the US' soyabean oil usage in biodiesel production is on the decline. Quoting from an analysis of Census Bureau data, the American Soyabean Association in its latest report said that biodiesel production declined in September and declined further in October. While soyaoil usage for biodiesel in August was 211 million, it fell to 201 million in September, and further down to 143 million the following month.

The erosion in biodiesel margins appear to have discouraged biodiesel production just as biodiesel production capacity has increased from around 500 million gallons a few months ago to 700 million gallons currently. It is also believed that the recent behaviour of crude prices — hovering in the low $60s a barrel for weeks — has made investors turn wary. Europe seems to be concerned about rising share of palm oil. It should surprise none if environmental concerns relating to palm oil come to the fore again. Benign weather conditions so far in South America are also contributing to the current softening tendency in global vegoil prices. Soyabean crop conditions in major origins such as Brazil, Argentina and Paraguay are reported to be satisfactory.


ConocoPhillips begins producing renewable fuel

December 22, 2006. ConocoPhillips has started commercial production of renewable diesel fuel at the company's refinery in Cork, Ireland. The refinery is currently producing 1,000 barrels of the renewable fuel, which includes soybean and vegetable oils among its ingredients. The fuel is produced using existing equipment at the refinery and is blended and transported with petroleum-based diesel, unlike biodiesel fuel. The process can also be used to convert animal fats and oils to renewable diesel fuel.

Direct Energy signs power purchase agreement

December 20, 2006. Direct Energy has signed a 15-year power purchase agreement with Horizon Wind Energy's Lone Star Wind Farm. Horizon is a Houston-based subsidiary of Goldman Sachs Group Inc. and develops and operates wind farms across the country. Direct Energy, a power retailer also based in Houston, will purchase all energy output and Renewable Energy Credits from Horizon's new 200 MW Lone Star Wind project under construction 15 miles northeast of Abilene.

The wind farm is scheduled to be complete and operational in the spring of 2007. The agreement is Direct Energy's fourth wind power contract in Texas, making the company one of the largest renewable energy suppliers in the state. Direct Energy sources its energy requirements in Texas from a portfolio of its own generation, contracts and traded market purchases.

Constellation inks wind power deal with water utility

December 20, 2006. Constellation Energy Group Inc. it signed a deal to provide wind-generated electricity to the utility that provides water and sewer service to Montgomery and Prince George's counties. The 10-year contract with the Laurel-based Washington Suburban Sanitary Commission is estimated to save the utility $20 million over 10 years. It will also fulfill the agency's goal of using wind power for about one-third of its electric supply. Starting in 2008, wind power for the water and sewer agency will be generated in turbines being built in Somerset County, Pa. Baltimore-based Constellation has bought the right to sell power from those wind turbines for 10 years. The project would make it the largest local government user of renewable electricity in the country.

ConocoPhillips starts renewable diesel production in Ireland

December 19, 2006. ConocoPhillips it began commercial production of renewable diesel fuel using soybean and other vegetable oils at its Whitegate Refinery in Cork, Ireland. The refinery is producing 1,000 barrels per day of renewable diesel fuel for sale in the Irish market.

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