MonitorsPublished on Feb 06, 2007
Energy News Monitor |Volume III, Issue 33
Twenty in Ten: Will it Strengthen America's Energy Security?

(Compiled from the State of the Union address by President George W. Bush)

During his state of the union address, President Bush asked congress and America’s scientists, farmers, industry leaders, and entrepreneurs to join him in pursuing the goal of reducing US gasoline usage by 20 percent in the next ten years – twenty in ten. He said that US had been dependent on oil for too long and that America's dependence had left the ‘US more vulnerable to hostile regimes, and to terrorists – who could cause huge disruptions of oil shipments, raise the price of oil, and harm the US economy’.

America hopes to move towards the President’s twenty in ten goal with the following strategies:

Ø  Increasing the supply of renewable and alternative fuels by setting a mandatory fuels standard to require 35 billion gallons of renewable and alternative fuels in 2017 – nearly five times the 2012 target now in law.  In 2017, this is expected to displace 15 percent of projected annual gasoline use.

Ø  Reforming and modernizing corporate average fuel economy (CAFE) standards for cars and extending the current light truck rule. By 2017, this is expected to reduce projected annual gasoline use by up to 8.5 billion gallons, a further 5 percent reduction or 2 million barrels per day that, in combination with increasing the supply of renewable and alternative fuels, is expected to bring the total reduction in projected annual gasoline use to 20 percent. The plan is also expected to help confront climate change by stopping the projected growth of carbon dioxide emissions from cars, light trucks, and SUVs within 10 years.

The fuel efficiency standard is expected to have even larger benefits later, when consumers replace even more of the auto fleet with purchases of the more efficient new vehicles. These amounts are based on an assumption that on an average, fuel efficiency standards for both light trucks and passenger cars are increased 4 percent per year, beginning in model year 2010 for cars and model year 2012 for light trucks. Given the changing nature of the marketplace for both cars and light trucks, the secretary of transportation is expected to determine the actual standard and fuel savings in a flexible rulemaking process.

The administration has twice increased CAFE standards for light trucks using an attribute-based method. An attribute-based system (for example, a size-based system) is expected to reduce the risk that vehicle safety is compromised, help preserve consumer choice, and spread the burden of compliance across all product lines and manufacturers.

The plan seeks congressional support for not legislating a particular numeric fuel economy standard.  It suggests that the secretary of transportation should be given the authority to set the fuel standard, based on cost/benefit analysis, using sound science, and without impacting safety. The plan is expected to enable auto companies to increase fuel economy at the lowest possible cost to consumers by building flexibility into the CAFE standard for both cars and light trucks, such as giving companies the opportunity to buy and sell CAFE credits

The plan calls for facilitating the growth of renewable and alternative fuel sources by increasing the size and expanding the scope of the current renewable fuel standard (RFS).  The RFS, established by the President and Congress in the Energy Policy Act of 2005, is said to have contributed to the rapid acceleration of the development and use of renewable fuels. Under current law, fuel blenders must use 7.5 billion gallons of renewable fuels in 2012. The proposal is expected to increase the scope of the current RFS, expanding it to an alternative fuel standard (AFS).

The alternative fuel standard is expected to include sources such as corn ethanol, cellulosic ethanol, biodiesel, methanol, butanol and hydrogen. The increased standard is expected to contain multiple "safety valves."   The Energy Policy Act (EPA) administrator and the secretaries of agriculture and energy are expected to have authority to waive or modify the standard if they deem it necessary, and the new fuel standard is expected to include an automatic "safety valve" to protect against unforeseen increases in the prices of alternative fuels or their feedstocks.

Advances in many fields are also expected to play an important role, such as continued improvement in crop yields, optimization of crops and cellulosic materials as fuel feedstock, and cost reduction in the production of cellulosic ethanol and other alternative fuels.  The increased and expanded fuel standard is expected to provide ‘a tremendous incentive for research, development, and private investment into alternatives to oil’. Most of the expanded fuel standard is to be met with domestically produced alternative fuels.  However, importing alternative fuels is not ruled out, as it would ‘increase the diversity of fuel sources, which would in turn increase US energy security’.

The new plan calls for the US department of transportation (DoT) to work with states and cities to explore ways to reduce traffic congestion, help save fuel, and reduce commute times. In 2003, drivers in America’s 85 most congested urban areas experienced 3.7 billion hours of travel delay and wasted 2.3 billion gallons of fuel, costing a total of $63 billion. The new budget proposal redirects DoT funds to a new $175 million highway congestion initiative for state and local governments to demonstrate innovative ideas for curbing congestion. These ideas include congestion pricing, commuter transit services, commitments from employers to expand work schedule flexibility, and faster deployment of real-time traffic information. In one year, this wasted fuel accounts for more than 20 million metric tons of carbon dioxide emissions.

Improving technology for hybrid vehicles, expanding use of high efficiency clean diesel vehicles and bio-diesel have also been included in the plan. The renewable fuel and fuel efficiency components of the plan are expected to cut annual emissions from cars and light trucks by as much as 10 percent, about 175 million metric tons – equal to zeroing out the annual emissions of 26 million automobiles. The plan could cumulatively prevent the build up of more than 600 million metric tons of carbon dioxide emissions.

The supply side is also not left out. The plan envisages that  

Ø  Stepping up domestic oil production in environmentally sensitive ways

Ø  Doubling the current capacity of the strategic petroleum reserve (SPR) to 1.5 billion barrels by 2027.

The plan calls for congressional action to authorize environmentally responsible oil and gas exploration in a small area of the Arctic National Wildlife Refuge located in northern Alaska, which is projected to produce as much as 1 million barrels of oil per day (Congress reserved this small area after the late 1970s oil shocks to help prevent future ones).  The plan also called for continued work within congress to develop legislation to encourage investments in refinery capacity and resolution of remaining issues regarding the Alaska natural gas pipeline.

As an emergency inventory of oil the SPR is expected to act as an insurance policy in the event of a severe supply disruption, such as from a natural disaster or a terrorist attack in the energy supply chain. Doubling the SPR is expected to provide approximately 97 days of net oil import protection, enhancing America’s ability to respond to potential oil disruptions.  The SPR is currently at 691 million barrels and, due to increased consumption; this represents only 55 days of net oil imports. In 1985, the SPR with 493 million barrels of oil, represented 118 days of net oil imports.

The president signed the Gulf of Mexico Energy Security Act to increase domestic oil and gas production by allowing access to key portions of America’s Outer Continental Shelf. This allows access to areas with potential resources of more than 1 billion additional barrels of oil and nearly 6 trillion cubic feet of natural gas.

The 2008 budget continues robust funding for advanced energy technologies. It includes nearly $2.7 billion for the advanced energy initiative, an increase of 26 percent above the 2007 request and 53 percent above 2006 budget. The 2008 budget provides $179 million for the bio fuels initiative, an increase of $29 million (19 percent) compared to the 2007 budget. The bio fuels initiative aims to accelerate cost reduction and commercial development of cellulosic ethanol, which can be made from biomass materials, including agricultural waste and forest residues, and from dedicated energy crops such as switchgrass. The farm bill proposal is expected to include more than $1.6 billion of additional new funding over ten years for energy innovation, including bio-energy research, energy efficiency grants, and $2 billion in loans for cellulosic ethanol plants.

Small Hydro Policy in Uttaranchal

S K Rastogi (GM-SHP, Uttaranchal Jal Vidyut Nigam Ltd)

Himanshu Tiwari (AE- MDO, Uttaranchal Jal Vidyut Nigam Ltd)


Access to electricity is one of the key factors in the development of a country. The growing consumption of energy has resulted in the country becoming increasingly dependent on fossil fuels such as coal, and oil and gas. Rising prices of oil and gas and potential shortages in future lead to concerns about the security of energy supply, which is needed to sustain our economic growth. Increased use of fossil fuels also causes environmental problems both at the local and global levels. There is thus, an urgent need for the country to follow a sustainable path of energy development. Promotion of energy conservation and increased use of renewable energy sources are the twin planks of sustainable energy.

Renewable-energy-based power generation capacity presently constitutes 5% of the total installed capacity in the country for power generation from all sources. The country is aiming to achieve up to 10% of additional installed capacity to be set up till 2012 to come from renewable energy sources.

Central policy for renewable energy development

The spread of various renewable energy technologies has been aided by a variety of policy and support measures by the Government of India. Some major policy initiatives taken to encourage private/ FDI (foreign direct investment) to tap energy from renewable energy sources include provision of fiscal and financial incentives under a wide range of programmes being implemented by the MNRE and simplification of procedures for private investment, including FDI, in renewable energy projects. The policy is clearly directed towards a greater thrust on the overall development and promotion of renewable energy technologies and applications. The recent policy measures provide excellent opportunities for increased investment in this sector, technology up-gradation, induction of new technologies, market development, and export promotion.

Industrial policy for renewable energy development in India

The government is promoting medium, small, mini, and micro enterprises for manufacturing and servicing of various types of renewable energy systems and devices. The industrial policy measures include the following.

      i.    Industrial clearance is not required for setting up of renewable energy industry

     ii.    No clearance is required from the Central Electricity Authority for power generation projects up to Rs 100 crore

    iii.    A five-year tax holiday allowed for renewable energy power generation projects

    iv.    Soft loan is being made available through IREDA (Indian Renewable Energy Development Agency) for renewable energy equipment manufacturing

     v.    Facilities for promotion of exportoriented units are available for renewable energy industry also

    vi.    Financial support is available to renewable energy industries for taking up R&D projects in association with technology institutions

   vii.    Power project import allowed

  viii.    Private sector companies can set up enterprises to operate as licensee or generating companies

    ix.    Customs duty concession is available for renewable energy parts/equipment, including for machinery required for renovation and modernization of power plants

     x.    Excise duty on a number of capital goods and instruments in the renewable energy sector has been reduced/exempted.

State government’s policy for renewable energy

For encouraging investment by the private and public sector companies in power generation through renewable energy, a number of states have announced policy packages including wheeling, banking, third party sale, and buyback. In addition to this, some states are providing concession/ exemption in state sales tax and Octroi etc.

Courtesy: Akshay Urja Newsletter (Volume 2, Issue 6) from Ministry of New and Renewable Energy.





ONGC to sell oil from Panna-Mukta fields to MRPL

February 6, 2007.  ONGC is using its persuasive skills to convince its other joint venture partners in the Panna, Mukta and Tapti (PMT) oil and gas fields to consider switching the sale of produce from these fields to Mangalore Refinery and Petrochemicals Ltd (MRPL), instead of Indian Oil Corporation Ltd (IndianOil). The joint venture partners — BG, ONGC and Reliance Industries Ltd — are trying to resolve certain outstanding issues with the Government nominee, IndianOil, which have led to loss of revenue for them. While response for IndianOil is still awaited, ONGC has been actively pursuing with the other joint venture partners to mull over the higher commercial proposal offered by MRPL and consider selling the produce to it.

BG-ONGC-RIL produces 40,000 barrels of crude oil per day from Panna-Mukta fields and 5.5 million standard cubic metres per day (MMSCMD) of gas. The earnings from crude oil alone are $650-$700 million. If the joint venture partners agree, they would approach the Government to withdraw IndianOil as Government nominee for sale of oil from the fields.

Further, if the Petroleum Ministry agrees to the demands, then the joint venture partners would be free to sell their share of crude oil from the fields to anyone they wish to. The three partners would be entitled to crude oil proportionate to their shareholding — ONGC has 40 per cent interest in the joint venture while BG and RIL have 30 per cent each. If MRPL sources crude oil domestically from Panna-Mukta field the company could save on customs duty expenses vis-à-vis imported crude. Panna-Mukta field is projected to continue producing crude oil till 2019.

BPCL signs pact for Australian block

February 5, 2007. Bharat Petroleum Corporation Ltd has signed a farm-in agreement for acquiring 20 per cent participating interest in an Australian block AC/P32 in the Timor Sea area. BPCL would be paying $1.42 million in a fortnight for acquiring the interest in the block. At present, the consortium is in the fourth year of operation, with the exploration licence being for six years.


IOC plans to retain IBP brand post-merger

February 5, 2007.  IOC will continue with the IBP fuel retail brand even after IBP Co Ltd ceases to exist post-merger with the parent. IOC, which is expecting to complete the merger of IBP with itself at the earliest, has already kicked off the synchronisation of operations between the two through sharing of infrastructure logistics. It had acquired another 20 per cent through an open offer to make the standalone marketing company its subsidiary. The Government sold its residual 26 per cent in IBP through a public offer. IBP, with about 10 per cent share in diesel and a little over eight per cent share in petrol sales in the total sales in the country, is the smallest PSU in the oil retail business. IOC, with 36.88 per cent and 33.84 per cent share in diesel and petrol sales respectively, is the largest. The number of fuel retail outlets operational under the IBP brand name stands at 3,500. IBP and IOC together operate close to 16,000 retail outlets. IBP, which was hit the most by the fluctuations in crude prices, posted Rs 107-crore profit for the first nine months of the current fiscal, compared to a loss of Rs 521 crore during the corresponding previous period.

Transportation / Trade

GAIL, ONGC to invest $0.68 bn for building pipeline 

February 2, 2007.  State-run GAIL (India) Ltd and Oil and Natural Gas Corp (ONGC) will invest about Rs 3,000 crore ($0.68 bn) for laying a pipeline from Kakinada in Andhra Pradesh to Haldia in West Bengal to transport natural gas discovered by ONGC in the Bay of Bengal. GAIL and ONGC have signed a preliminary agreement to form a Special Purpose Vehicle for laying the 1,000-km pipeline. The pipeline passes through Peddapuram to Srikakulam (in Andhra Pradesh), Ganjam, Khorda, Bhubaneshwar, Cuttack, Jaipur, Balasore, Bhadrak (in Orissa), Kharagpur, Medinipore, Hugli and Naida to Pandua near Kolkata (in West Bengal). The pipeline is likely to be completed by 2011-12. ONGC has discovered huge gas reserves in deep-sea block KG-DWN-98/2 off the Andhra coast.

GAIL, China gas to float new JV 

February 1, 2007. State-owned gas major GAIL (India) Ltd and China Gas Holdings have decided to float a new 50:50 joint venture to undertake CNG, city gas distribution, long-distance pipeline and gas-based petrochemical projects in both India and China. This will mark the first ever investment by a Chinese company in India’s oil and gas sector. The GAIL board cleared the proposal to sign an agreement to float the joint venture company. The JV, likely to be called Zhongyin Energy Company Ltd, will be registered in Bermuda, a tax haven. Zhongyin means Sino-Indian. GAIL, it might be noted, had picked up 10% in China Gas in 2005 for Rs 137 crore.

The JV will focus largely on the CNG business, including setting up city gas distribution projects in both countries. It will also explore opportunities in China’s downstream sector and will be involved in the purchase, import and marketing of LPG, LNG, CNG and other energy fuels. The company will undertake exploration and production projects, including coal bed methane (CBM) in China, India and other countries. The JV will invest and participate in the existing and future projects of China Gas on operation and maintenance of city gas networks, besides construction and operation of long-distance natural gas pipeline projects.

Morvi gas project commissioned

January 31, 2007. Gujarat State Petronet Limited (GSPL) will expand its gas grid network across the Saurashtra-Kutch region providing gas supplies to Rajkot, Jafrabad, Pipavav, Bhavnagar, Okha, Mundra and Gandhidham. Following this, the ceramic players across the triangular zone of Morvi, Dhuva, Wankaner and Thangadh have heaved a sigh of relief as natural gas would be made available to the industry. Consumption of LPG had drastically reduced to 700-850 metric tonnes per month from 7,000-8,500 metric tonnes per month due to rising prices of LPG. 

LNG to have uniform pricing pattern

January 31, 2007. There would be a uniform average pricing pattern for liquefied natural gas (LNG) across the country as per the pricing policy of the Union government. Gas would be delivered at an average price of $ 5.75 per MMBTU as per the current pricing strategy of the company.  There will be price equalisation for the customers of north and south India. The price will also be extremely competitive. The proposed LNG terminal would require five million tonne gas since there is good demand in south India, especially in Kerala and Tamil Nadu. The Kayamkulam unit of NTPC will have a yearly requirement of 2.1 million tonne.   As various clearances have been obtained, PLL will speed up the construction of the new terminal at Puthuvype near Kochi. The equipment procurement and construction (EPC) bid would be awarded by March and bidding was in the final stage now. There are three bidders for the Rs 3,000-crore project. PLL plans to complete the first phase of the project by 2010 and the basic facilities would be put in place in order to meet the future expansion plans also.

Policy / Performance

India, Yemen ink bilateral oil and gas cooperation

February 5, 2007. India and Yemen signed a protocol of bilateral co-operation in the field of oil and gas. The protocol provides for the two petroleum ministries to become members of the Yemeni Indian Ministerial Committee for activating investment of Indian companies in a wide range to cover petroleum industries. It also states that both governments will encourage investment in the entire chain of the hydrocarbon sector, including exploration and production, refining and petrochemical industries, etc., besides extending support in training and carrying forward co-operation in scientific areas.

The protocol also provides for the setting up of Specialized Working Joint Committees under the Ministerial Committee for continuity in the efforts of mutual co-operation. India is prepared to provide all assistance to Yemen in standardizing its bidding system for exploration blocks. India has been able to award blocks in a time-bound manner as our awarding procedures and systems have evolved over last 10 years. India has already signed 110 production sharing contracts and has evaluated 52 more blocks for award very soon.

The public sector ONGC is prepared to extend assistance in carrying out extensive surveys and other investigations for locating potential hydrocarbon bearing areas. It would help Yemen, like India, to also embark on accelerating the efforts for exploration and production in its 80 percent unexplored sedimentary areas. It was also pointed out that ONGC could join Yemeni companies to develop the discovered fields in which they have rich experience.

The Yemen invited Indian companies to participate in the fourth round which Yemen would be announcing in the second half of 2007 and also invited Indian investment in other areas of oil and gas sector. The Yemeni side exhibited keen interest in the Indian proposal to develop City Gas Distribution projects in Yemen on the pattern of the highly successful projects implemented by Indian PSU, GAIL in Delhi and Mumbai.

A team from Yemen would be visiting India to study the Indian projects. The Indian delegation also sought positive consideration of the Indian Oil's proposal for selling one million tones of Masila crude oil to IOC on term contract basis. The Yemeni side assured that it would examine this issue at an early date after they finalize the official selling price mechanism, which is under review. The Indian side also informed that IOC would be sending a team of technical experts to study the revamping of the Aden refinery once Yemen finalizes the schedule in this regard. The Aden refinery has a capacity of 120,000 barrels per day.

Upstream firms merit tax breaks: Oilmin

February 5, 2007. The Ministry of Petroleum and Natural Gas has recommended to the finance ministry that the 20 per cent income tax protection on funds, parked in the site restoration account by exploration companies, be scrapped.  There is also a proposal to extend the seven-year income tax holiday on profits earned from oil and gas production to 10 years as the profits are spent on recovering the huge investments made during exploration.  The oil ministry also wants the minimum alternative tax (MAT) on profits from oil and gas fields to be done away with.   

Under the production-sharing contract signed by exploration companies with the government, every year the companies deposit a certain amount of money in a site restoration account maintained with the State Bank of India.  The funds from this account are used to restore the exploration site and its surrounding areas to their original state at the end of the contract period. Under the Income Tax Act, exploration companies are given 20 per cent protection on the taxable income on funds parked in the restoration account. The ministry wants the entire deposit in the account to be exempt from income tax. The oil ministry has also proposed that income tax holiday on profits earned from hydrocarbon production be extended to 10 years

$0.2 bn fund to aim for energy security

February 5, 2007. In the push towards achieving energy security for the country, the government is likely to set up an autonomous national energy fund with a corpus of Rs 1,000 crore ($0.2 bn).  The fund, which will exclude the atomic energy segment, is proposed to be raised with the help of country’s energy companies. For that, a 0.2 per cent cess will be levied on them. The fund is being aimed at providing investment to research and development projects in the energy sector. Some of the projects that may benefit from the energy fund, once it comes through, will be gas hydrate and coal gassification programmes.  

The lack of gas availability was also a cause of worry for the committee, which recommended that new power plants be given the go-ahead only when long-term gas supply contracts were firmed. The “give or pay” and “take or pay” contracts have been recommended, where the buyer and seller of gas agree to trade a contracted amount of gas. But if either party does not supply or buy the contracted amount, they still pay the other party the money for the entire contracted amount. The committee headed by the prime minister has said that gas prices need to be regulated and administered priced gas (APM gas) needs to be allocated to priority sectors such as fertiliser plants, existing power plants and liquid natural gas. 



SIMA plans SPV to set up 500 MW power project

February 6, 2007. The Southern India Mills Association (SIMA) plans a captive group power plant to find a permanent solution to the ``unscheduled power trippings and excessive power tariff in Tamil Nadu ''. It will be floating a special purpose vehicle to set up a 500 MW imported coal-based power project in the port town of Tuticorin. It is estimated to cost Rs 2250 crore. The power cost per unit would be around Rs 2.40. The proposal is to have a `group power plant' in which SIMA will have 51% equity. There are enough takers for the balance equity. Banks and financial institutions are very keen on extending term loans as the producer is also the consumer. The textile industry consumes over 1300 MW now. For the short-term and as an immediate solution to the power trippings, SIMA wants the government to facilitate operation of the furnace-oil fired generators at economic cost by waiving the notional income of power generation tax, sales tax on fuel oil and the maximum demand charges it gets from the idle sets.

Bihar, NTPC to set up new thermal power project

February 6, 2007. The State Government has agreed in principle to set up a 1320 MW mega thermal power project in joint collaboration with the National Thermal Power Corporation (NTPC). This will be in addition to the 1000 MW thermal power plant the NTPC proposes to set up in collaboration with the Railways. A 660 MW x 2 unit mega power project would be set up at Nabinagar on a 50-50 equity sharing basis between the State Government and the NTPC. The State will get 75 per cent share of the total power generated from here while 10 per cent will go out of the State through the central power pool and 15 per cent will be reserved for unallocated share under control of the Union Power Ministry. The NTPC had also agreed to take up distribution franchisee in Patna, Bhagalpur and Muzaffarpur.

Tata, Kalpataru in race for Globeleq

February 6, 2007. Tata Power and the Kalpataru Group have joined the race for British power major Globeleq’s assets. The Anil Ambani group and Lanco, Globeleq’s Indian partner, have already shown interest in Globeleq’s generating assets of 4500 MW in Asia and Africa with a ticket size of $2 billion. Kalpataru, the Mumbai-based real estate and power transmission group, has a strong presence in North Africa with its transmission business and is said to be also in the race for the African assets.  Anil Ambani’s Reliance Energy has also indicated its interest in Globeleq’s assets. Sources in the Ambani group, however, indicated that the group was yet to assess the valuation of the assets. 

BHEL, Hardwar target: 600-800 MW generators

February 6, 2007. Bharat Heavy Electricals Ltd in Hardwar will invest Rs 1,600 crore in the next five years to enhance its capacity and deliver 600-800 MW generators and steam turbines.  Currently, BHEL’s Heavy Electrical Equipment Plant (HEEP) at Ranipur in Hardwar manufactures 200-500 MW range generators and steam turbines for thermal plants. The public sector undertaking will start manufacturing of 600-800 MW generators and steam turbines by 2008-09. BHEL’s enhancement endeavours come at a time when the government has planned a capacity addition of 70,000 MW in the Eleventh Plan. 

The government’s plan has also resulted in lot of activity in power generation business and hence, demand for power equipment has increased. The onset of 4,000 Mw ultra mega power projects (UMPP) is yet another reason for rise in demand for power equipment in the range of 600 Mw and 800 Mw. BHEL share is 70 per cent in whole installed capacity in India, of which BHEL Hardwar’s share is 45 per cent. The unit also has the capability to put up equipment of upto 1000 Mw capacity, suitable for thermal power generation, gas based and combined cycle power generation at HEEP. The total headcount in Hardwar is 6,300 and now company is on a hiring spree because of a heavy order book. The BHEL-Hardwar contributes to 15-20 per cent of total turnover of BHEL. In 2005-06 BHEL Hardwar reported a turonover of Rs 1,638 crore and this year, the target is to touch Rs 2,105 crore. 

Himachal hydel water to reach Delhi by 2010

February 5, 2007. The Himachal Pradesh hydel project, whose waters are expected to reach Delhi by 2010, will begin work soon. The project is being financed almost entirely by the Delhi government. The execution work of the 40 MW Renuka hydel project was allotted to a newly formed state-run power company - the Pabbar Valley Power Corporation (PVPC). Work will commence on the Rs.29-billion project, including the piping of the water to Delhi, which is 400 km away, from the next financial year. The project would be financed almost entirely by the Delhi government, as it would receive 23 cusecs (cubic metre per second) water for nine months in a year. A timely completion of the project will help Delhi as the Commonwealth Games are set to take place in 2010.

Sintex starts 18.9 MW power plant at Kalol

February 5, 2007. PLASTIC product and textile manufacturer, Sintex Industries has commissioned a 18.9 MW captive power plant at its Kalol manufacturing facility. The power plant will cater to the complete power requirements of both the company's textile and plastic facilities at Kalol.  The commissioning of the plant would save the company Rs 14.4 crore per annum, while the setting up of the plant entailed an investment of Rs 45 crore. Sintex manufactures 43,600 tonnes of plastic products that comprises pre-fabricated structures, custom moulded offerings for auto components, power ancillary industries and water tanks. While in the textile segment, the company has a 18 million metre textile manufacturing and 21 million metre processing facilities that would be expanded to 24 and 29 million metres respectively.

NTPC pumps in $0.3 bn to upgrade three facilities

February 2, 2007. State-run power major NTPC plans to invest Rs 1,365 crore ($0.3 bn) to renovate three power plants with a total capacity of more than 6,500 MW to enhance their lifespan by up to 25 years. The three projects – the 2,000 MW Singrauli, 2,760 MW Vindhyachal and 2,000 MW Rihand – in the coal belt of eastern Uttar Pradesh and Madhya Pradesh are among the company’s largest power generating stations. The renovation plan will also help save a substantial amount as setting up greenfield projects of similar capacity will cost over Rs 25,000 crore.   

The Singrauli plant, which will be celebrating its 25th anniversary later this month, has already begun renovation and will be completing the first phase by March at a cost of Rs 50 crore.  The second phase, costing Rs 135 crore, has around 56 processes, of which 15 have been completed. Around 26 more will be finished by March 2008 and the rest by 2009.  These schemes would extend the power plant’s life by 10-15 years.

The company is also planning a mega renovation scheme. It has estimated a budget of Rs 1,000 crore and sought clearance from Central Electricity Authority and Central Electricity Regulatory Commission.  The other two stations – 2,760 MW Vindhyachal and 2,000 MW Rihand – are also completing renovation of first stage. The company would renovate first six units of 210 MW each in Vindhyachal at a cost of Rs 80 crore. Rihand is also upgrading its first two units at an investment of Rs 100 crore to be completed by 2009. 

REL joins Tata Power in hunt for Indonesian coal

February 2, 2007. Anil Ambani's Reliance Energy Ltd (REL) and Tata Power are going to slug it out to acquire a 30 percent stake in Bumi Resources, Indonesia's largest coal producer and exporter. And, they have to face competition from international players, including Mitsubishi Corporation, South Korean power company Kepco and a Glencore subsidiary.

The five players have been shortlisted for the final round of bidding where the reserve price has been fixed at close to $1 billion. REL decided to join the fray to fire its coal-powered electricity generation units. At present, Reliance Energy Ltd imports around 1 million tonnes of coal for its 500 MW power plant at Dahanu in Maharashtra. Besides, it needs the fuel for its 4,000 MW Shahpur project, which is a multi-fuel unit. But given problems with gas supply, it is looking at starting with a 2,000 MW coal plant.

In addition, like Tata Power, REL too aspires to get into the business of setting up 4,000 MW ultra-mega power plants and has lined up thermal projects in Uttar Pradesh and Orissa. REL was looking at tying up supplies of 20 million tonnes of coal to meet its ambitions. Tata Power, which won the 4,000 MW Mundra project, is exploring the possibility of buying coal mines overseas.

The company would need to import around 12 million tonnes of coal annually starting 2012 for the project. Acquiring coal mines would help the companies in assured fuel supplies. Moreover, Indonesian coal has lower ash content and higher calorific value than Indian coal, resulting in higher power generation with less fuel.

West Bengal to invest $4.5 bn on power

January 31, 2007. The West Bengal government has earmarked Rs 20,000 crore ($4.5 bn) for the power sector during the 11th plan. This would lead to a capacity addition of 3,550 MW.  Besides, it is spending Rs 8,000 crore in three ongoing projects that would lead to an additional capacity of 1,500 MW. The installed capacity under WBSEB, West Bengal Power Development Corporation (WBPDCL) and Durgapur Projects (DPL) is currently 7616 MW.  The first phase of the 900 MW Purulia pump storage project would be commissioned in March.  The next three stages would be completed by December 2007. 

Transmission / Distribution / Trade

30 cos in fray for 2 transmission projects in Eastern India

February 2, 2007. Global power majors led by AES Corporation, China Light and Power, Spanish firm Isolux Corsan and Canadian firm SNC Lavalin are among the 30 companies that have expressed interest in building two power transmission projects in the eastern region of the country. The two projects are being implemented through a tariff-based bidding process and could entail a cumulative investment of around Rs 6,000 crore. Besides seven international firms, domestic majors led by Tata Power, Reliance Energy Ltd, Essar Power, Torrent Power, GMR Group, L&T and RPG Transmission are in the fray, an official with the Power Finance Corporation (PFC), which is overseeing the bidding process for the projects. Expressions of interest for the two projects closed and PFC is set to invite tariff-based bids for the two projects shortly.

The two projects are part of the 14 transmission links identified by the Centre to be set up by developers selected through a tariff-based competitive bidding model, on the same lines as in the case of the Ultra Mega power projects. The two projects — the Rs 4,200-crore Maithon-Bokaro system and the Rs 1,800-crore Eastern-Northern interconnection system — are to be implemented between 2009-11. The first project is aimed at setting up an evacuation system for wheeling power from the 1,000 MW Maithon, 1,000 MW Kodarma, 1,000 MW Mejia and 500 MW Bokaro power plants in Jharkhand and West Bengal. The total length of the grid lines is expected to be around 1,500 circuit-kilometres. The second project involves putting up interconnection links for enabling import of surplus power from the North-Eastern and Eastern region to the Northern region. The total length of the grid lines to be built is around 500 circuit-kilometres.

Policy / Performance

MERC okays two power projects with 2,640 MW in Maharashtra

February 6, 2007. Maharashtra, which is reeling under acute power crunch with a daily peaking deficit of 4,500 MW received a major relief as the Maharashtra Electricity Regulatory Commission (MERC) approved the development of two mini-ultra mega power projects with the total capacity of 2,640 MW through a competitive bidding route. These projects entail investment of the order of over Rs 11,000 crore. The Commission has given in-principle clearance for the 1,600 MW imported coal-based project in Dhopawe, Ratnagiri district and 1,040 MW gas-based project at Uran. Both the projects would be developed through the competitive bidding route.

The Maharashtra State Electricity Distribution Company (MahaVitaran) has appointed the Maharashtra State Power Generation Company (MahaGenco) as project management consultant for these projects. MahaGenco would form two separate shell companies for Dhopawe and Uran projects on the lines of shell companies formed by the state-run Power Finance Corporation for the development of Sasan and Mundra ultra mega power projects (UMPPs). The MahaGenco is expected to invite bids for the Dhopawe project within a month. However, MahaGenco would need at least three months to float bids for the Uran project as it would be done only after addressing the issue of gas availability for the project.

Tata Steel set to use TRT method to produce power

February 6, 2007. Tata Steel is set to introduce for the first time in the country the 'top gas recovery turbine' (TRT) method of generating power, from two of its blast furnaces including the under-construction 'H'. The method involves recovery of gases from the top of a blast furnace so that the kinetic energy of the gases is used to turn turbines to generate power. While its existing 'G' blast furnace will be capable of generating 7 mw of power, the 3,800 cubic meter capacity 'H' furnace will generate another 17 mw through the TRT method.

The steel major has already been utilising the gases of its blast furnaces, LD shops, coke ovens, etc, for different purposes, including power generation. Three of its power plants inside its works here (plants 3, 4 & 5), which use some amount of the surplus gases generated elsewhere, remain significantly coal-based.  The company, in order to make the steel city more environment-friendly by bringing down emission levels, intends to make the plants more gas-based in the next couple of years, while at the same time increase their combined generation from 100 mw to around 130 mw.

Coal, petroleum ministries’ talks on coal, CBM exploitation soon

February 6, 2007. The ministries of coal and petroleum would soon hold meeting to deliberate on exploitation of coal and coal bed methane (CBM) in cases where the area of CBM and coal blocks overlap. They will also initiate the process of developing a road map for harmonious operations of coal and CBM in the area. The meeting is a crucial one as various players in this field have argued that simultaneous extraction of methane and coal through underground mining were fraught with danger and also such recovery in multi-seam scenario has not been practicised in the country so far. The barrier between CBM and coal mining workings would be uncertain and due to overlaps, inrush of water or gas may result in serious consequences.

The exploitation in and around the coal seam, CBM mining company would take all safety endangering factors into the mine while staying away on the surface. Sources said that some of the players were of the view that the coal blocks should be excluded from the CBM blocks. Estimated resource of the category-I basins in Damodar Valley is 350-400 CBM and appears to be promising sites for CBM production.

While the coal ministry has already identified 145 coal blocks with reserves of over 4,500 million tonnes for the captive purpose.  Moreover, there was an overwhelming response to the CBM-III round of bidding. For the first time global E&P majors participated in the third round. A total of 54 bids for all the 10 blocks were received from 26 companies including 8 foreign and 18 Indian companies. The Directorate General of Hydrocarbon has already tried to alay fears and communicated to various players that simultaneous mining of coal and extraction of methane seams were being practiced in many countries.

Maha Power consumers urged to help decide on tariff

February 6, 2007. Prayas, the Pune-based think tank working in the field of energy-related issues, has appealed to consumers and consumer right organisations to participate in the process initiated by the Maharashtra Electricity Regulation Commission (MERC) for fixing tariffs of various power utilities in view of the introduction of Multi Year Tariff (MYT), which is going to become much more complex and will have a long term impact.   Now instead of deciding the tariff structure for one year from the financial year 2007-08, MERC will fix a tariff structure for all financial years until 2010. The state government-owned power utility, the Maharashtra State Electricity, has sought a tariff hike of Rs 3,943 crore for the financial year 2007-08 alone.  The MERC has already initiated the process of scrutinising the MYT applications of three state-owned power utilities — MSEDCL, Mahagenco and Mahatransco — and completed technical validation sessions for all the three utilities. 

Bidding criteria for power projects may change

February 5, 2007. The criteria for the next round of bidding for ultra mega power projects may see some changes. The future bidders may have to meet more stringent technical conditions and only then will the financial bids be taken up.  A team from the Power Finance Corporation, the nodal agency for the projects, was still working on the proposed changes. So far, the bids have been based on a single criterion — per unit price of electricity.  The question of partnerships would also be looked at more closely in the future. Among the other changes being considered is a shortened time frame for financial closure of the projects. Currently, the time frame is 12 months from date of receiving the letter of intent.  However, there are no changes in the bid documents released a few days ago for the third ultra mega power project at Krishnapatnam in Andhra Pradesh. The several of the prospective bidders have raised concerns over the structuring of the coal indexation mechanism and freight handling charges for imported coal based projects. The power ministry has already indicated that successful bidders will not be allowed to bid for a second until after the first project takes off. 

NTPC not to regulate Orissa supply

February 2, 2007. The central-sector power utility, NTPC, has dropped its threat to regulate power supply to Orissa from February 15, 2007. Following intervention from the Union power ministry, NTPC has reportedly agreed not to resort to power regulations. NTPC has been demanding redemption of bonds worth Rs 400 crore pledged with it by the Orissa government-owned Gridco. The bonds were issued in 2000 by three power distribution companies, NESCO, WESCO and SOUTHCO, owned by Reliance Energy Ltd, to settle the bulk supply tariff bill dues. The companies were unable to pay the Rs 120-crore due by October 2006 towards interest and installments. Earlier, as the distcos had failed to serve the bonds, the Gridco dished out Rs 273 crore to NTPC.

A tripartite meeting of NTPC, REL and the Orissa government would be held soon to resolve the issue. The meeting is expected to find out a mechanism for redemption of the bonds. Meanwhile, the Orissa government has decided to invite NTPC to take the management control of the CESU, one of the four distribution companies in the state. NTPC will initially manage the distco on a five-year management contract basis. After that it may finally take over the company. CESU, the erstwhile CESCO, was been under the management control of the US Company, AES CORP.

Railways ropes in NTPC to set up JV

February 2, 2007. The railway ministry will soon be able to drastically cut its annual electricity bill of Rs 4,300 crore, with the Union Cabinet giving approval for setting up the Nabinagar thermal power project.  The Cabinet gave a green signal for establishing a joint venture company, to be called Bhartiya Rail Bijlee Co (BRBCL), between Indian Railways and National Thermal Power Corporation (NTPC). With this, the railway ministry’s long pending demand of having its own captive thermal power plant will be finally fulfiled.  NTPC will have 74 per cent stake in the joint venture, while the Railways will hold 26 per cent.  Since the project capacity will be 1,000 MW and power will be supplied to other parts of eastern India, the project will receive financial concessions given to mega projects by way of customs and excise duty exemptions. The first unit is expected in the next three years. The plant will have four units of 250 MW each. 

The proposed 1,000 MW plant will fulfill the ministry’s power supply demand for the east and west regions. Significantly, it will fulfil railway ministry’s demand for cost-effective power supply to a great extent. The Railways’ annual power requirement is 2,000 MW, of which it buys 100 MW from NTPC at Rs 2.94 per unit. The rest it buys from various state electricity boards at an exorbitant rate of Rs 4.25 per unit, a rate at which various industries buy power. An investment of Rs 5,352.50 crore including interest cost during construction of Rs 624.60 crore and working capital margin of Rs 103.10 crore on mega basis will be required for setting up the plant. 

SPV planned for coal mines abroad

February 2, 2007. In an extension of the country’s policy of securing its energy needs from overseas sources, the government is finalising a plan to set up a “special purpose vehicle” (SPV) to acquire coal mines abroad. The entity will be set up jointly by five public sector companies – the largest producers in their respective industries -power producer National Thermal Power Corporation (NTPC), steel-maker Steel Authority of India Ltd (SAIL), Rashtriya Ispat Nigam Ltd, Coal India Ltd and the National Mineral Development Corporation. Private participation may be considered.  The SPV is likely to be granted “navratna” status, which would entitle it to greater autonomy in decision-making. The proposal, which is being anchored by the steel ministry, has been broadly approved by the boards of the participating companies and will shortly be put up for the Cabinet’s approval.  The SPV proposal comes even as Coal India’s plan to set up an overseas subsidiary –Coal Videsh – is awaiting government approval.   

The funding pattern and other details of the SPV are being worked out, but the company is expected to have sufficient paid-up equity capital to allow it to raise debt while retaining the option of further equity infusion in the future.  The coal hunt will mirror the ongoing global hunt for oil being conducted by ONGC Videsh Ltd , the overseas arm of ONGC, and other national oil companies.  Over Rs 20,000 crore has been spent across 14 countries, including Russia, Sudan and Nigeria, on oil and gas equity assets. 

President outlines roadmap for energy independence

February 1, 2007. Outlining a roadmap for achieving energy independence, President APJ Abdul Kalam suggested fine-tuning research to harness non-conventional energy sources and increase the capacity of nuclear power generation. The energy independence has got to be achieved through three different sources-hydel, nuclear and non-conventional energy primarily through solar and wind energy apart from the use of thermal power through clean coal technology. Based on the progress visualised for the nation, the power generating capacity has to increase to 400,000 mw by 2030 from the existing 130,000 MW, called for massive encouragement to production of bio-diesel, which could transform the oil sector.

Coal India to develop underground mines

January 31, 2007. Confronted with the hurdle of an acute land shortage for mining and optimal utilisation of the country's huge coal reserves the Union Coal Ministry is now embarking on an Integrated Coal Policy (ICP) for the country's 350 odd fledgling underground (UG) mines.  This is against the common practice of Open Cast Mining (OCP), which currently continues to be the mainstay for the country's mining.   

The shift from OCP again to UG mines after a gap of around 21 years is a significant development as the government still continues to reel under the problem of unremunerative UG mines.  Coal India Limited (CIL) has been asked to work out the ICP. The coal behemoth has thereby asked its eight-odd subsidiaries to find out ways in setting up new UG mines with capacities of 2 - 5 million tonnes at initial investments of around Rs 300 crore for every mine. 

The government currently has rivetted its attention on the setting up of new UG mines.  Government figures suggest that 85-90 per cent of the UG mines are unremunerative with virtual no rate of return (RoR). The government has many a times initiated steps in privatising these low RoR mines but is yet to find a buyer to invest. Loans from the World Bank and other global and Indian funding agencies for a rejuvenation of the UG mines have also fallen flat.  Currently, out of the 363 million tonne of country's coal production, OCP mines contribute 318 million tonnes with a meagre 45 million tonne production from UG mines. Despite such low yield from UG mines, it is a matter of conjecture as to why the government is currently keen on an ICP for new and old UG mines. 

West Bengal enters phase II power reforms

January 30, 2007. The West Bengal government has begun the work of distributing and re-aligning the assets of the West Bengal State Electricity Board (WBSEB) between the transmission and distribution companies that are to be incorporated on April 1, in line with a Cabinet decision on January 24. The exercise was likely to be completed by March-end to pave the way for the formation of the West Bengal state electricity transmission company (WBSETC) and the West Bengal state electricity distribution company (WBSEDC).

While Pricewaterhouse Coopers (PwC) has guided the rejig so far, the government would issue fresh tenders for a consultant to steer the second phase. This consultant would have to chalk out a capacity-building plan. The government would create an equity base for both the companies by expanding WBSEB’s equity from Rs 1,400 crore to Rs 2,700 crore by the fiscal-end, by converting part of its loans into equity. The equity base of WBSEDC and WBSETC would be Rs 2,000 crore and Rs 700 crore, respectively. The WBSEB has outstanding loans adding up to Rs 13,000 crore, of which it owes the government Rs 11,000 crore, the rest being market borrowings. The state has announced it would write off loans adding up to Rs 5,600 crore and convert Rs 1,400 crore worth to equity. The new outfits would have to begin with a combined debt of Rs 6,000 crore, of which it would owe the government Rs 4,000 crore and the market Rs 2,000 crore at 9% per annum.




BP investing $30 mn in Liberty oil project

February 6, 2007. Oil major BP Plc will invest $30 million in its long-delayed Liberty oil field in Alaska this year ahead of a final investment decision on the $1 billion project due by 2008. Liberty, which lies four miles off Alaska's north coast in the Beaufort Sea, was discovered in 1997 but was not put into production after oil prices slumped in 1998. Changes to development plans, which originally called for the construction of an artificial island for Liberty's production facilities, further delayed development. BP now plans to develop the field by drilling ultra-long horizontal wells from an existing artificial production island at the nearby Endicott field.

If approved by BP's board, the company will begin construction work in 2008 and expects oil to flow from the field by 2011. Peak production is expected to be 40,000 barrels per day. BP plans to develop the 100 million barrel field using extended reach wells from an existing artificial island at the Endicott field. Drilling the wells, which will extend up to 45,000 feet from the production island to tap Liberty's reserves, will require a more sophisticated drilling rig than is currently available in Alaska. BP is the sole owner of Liberty. The development would be the first major new oil field put into production in Alaska by the major since its Northstar project began operations in the late 1990s.

Petroleum development Oman discovers oil fields

February 6, 2007. Petroleum Development Oman (PDO) announces the discovery of three oil fields. One field, named Budour Northeast, is located in the Birba area of south Oman. The other two discoveries are extensions of the Ufuq and Dafiq fields, whose discovery was originally announced last year. The Budour NE field will be appraised this year on the basis of a long-term production test of the discovery well and the drilling of two or three additional wells.

But initial indications are that the field contains a significant quantity of good-quality oil. The discovery well revealed that the field, at a depth of about three kilometers, contained oil along a vertical distance of 67 meters. And a preliminary test showed that it could produce at a stable rate of 8000 barrels per day.

The other two discoveries – in the north of the country lying at depths of about 1500 meters – are hooked up for long-term production testing with a view to developing them as part of the plans being drawn up for the earlier Ufuq and Dafiq discoveries.

Petrobras begins producing from US Gulf

February 6, 2007. Petrobras reports that the first well of the new Cottonwood field has been brought online, through its wholly owned subsidiary Petrobras America Inc., initial output is 1.1 million cubic meters of gas and 4,000 barrels of light oil (condensate) per day. A second well will also start production by the end of February, boosting gas production to 2 million cubic meters per day. Together, the two wells will take the field production to 20,000 barrels of oil equivalent per day. As a result, Cottonwood will be the biggest Petrobras America field in production, leading the subsidiary's production to surpass 25,000 barrels of oil equivalent per day (boed) already this month, up from the current 5,500 boed. This is the first deepwater field Petrobras has developed and put into production abroad as an operator.

Pearl energy awarded block G11/48 in the Gulf of Thailand

February 5, 2007. Pearl Energy together with its partners, Horizon Oil Ltd and Tana Resources (Thailand) Ltd, has been conditionally awarded the petroleum contract for Block G11/48 in the Gulf of Thailand. Pearl Thailand will hold 50% interest in Block G11/48 and will be the operator. The remaining 50% interest will be shared equally between Horizon and Tana. Block G11/48 is located in the southern Gulf of Thailand, to the south of Pearl's Chang Daeng (Block B11/38) and Bussabong (Block B12/32) production areas. The block covers an area of 13,600 sq. km and is adjacent to the western boundary of the Malaysia-Thai Joint Development Area, where several large gas condensate fields have been discovered.

GP Energy discovered gas field

February 5, 2007. Gold Point Energy Corp. reported a second gas field discovery in the South Cedar Creek project with the successful drilling of the Spyglass State #4-35 well. The Shannon sand pay zone found in the State #4-35 well is similar to that found in the State #3-30 well, four miles west, and comparable to that found at a field located an additional twelve miles to the west which has had cumulative production of 23 BCF of gas.

Norwest wins new UK offshore block

February 5, 2007. Norwest Energy said that its wholly owned subsidiary, NWE Southern Cross (UK) Pty Ltd, has been awarded a new license in the UK offshore by the UK Department of Trade and Industry. The license is located in the Southern Gas Basin adjacent to an existing License in which Norwest has a 50% interest. Both blocks are on trend with, and updip of the Amethyst Gas Field which has reserves of 735 billion cubic feet and has been in production since 1991. Block 47/7 lies between the Easington and Dimlington gas terminals onshore Yorkshire and the Rough gas field now used for gas storage. As a result, up to six pipeline delivery routes cross 47/7.

Iran predicts $260 bn investment in gas industry

February 5, 2007. $260 billion investment has been predicted in the gas industry in the 20-Year Development Vision Plan in Iran. The figure includes $120 billion investment in downstream industries and a $140 billion in upstream industries. Currently 24,000 kilometers high-pressure pipelines distribute gas across the country. It has been planned to invest 5.8 billion dollars in gas industry for the next Iranian year. Use of natural gas would have economic and environmental advantages and expressed hope the move would be materialized based on the government's policies and the 20-Year Development Vision Plan.

17 blocks to be opened for oil, gas exploration in Pak

February 2, 2007. The Pak government is opening 17 new blocks for oil and gas exploration in onshore and offshore areas. The Pakistan minister said in Canada, there was a lot of potential for foreign investors in the upstream and downstream petroleum sector and invited the Rally Energy to participate in the biddings for promoting friendly relations between the two countries. The minister said that the government was formulating a new petroleum policy containing attractive incentives for the prospective investors in the onshore and offshore oil and gas exploration being announced shortly. Canadian minister said that the Rally Energy had working interest in Safed Koh Block in Dera Ghazi Khan where the joint venture had made successful discovery of gas reserves.

Exco to buy gas fields for $860 mn

February 2, 2007. EXCO Resources Inc. has agreed to buy oil and natural gas properties in Texas and Oklahoma from Anadarko Petroleum Corp. for $860 million in cash. This properties produced about 103 million cubic feet per day equivalent of natural gas and oil at the end of 2006. Exco, a Dallas-based oil and natural gas acquisition and development company, has identified proved reserves from the fields of more than 400 billion cubic feet equivalent and are 72 percent proved developed and 87 percent natural gas. The company also has identified about 200 proved undeveloped drilling opportunities on the properties. The deal is expected to close in April.


Pakistan’s ANP demands refinery in Karak

February 5, 2007. The Awami National Party (ANP) has demanded of the government to establish an oil refinery and provide gas supply and jobs to the people of Karak district from where oil and gas reservoirs have recently been explored.

Russians buy Bosnian refineries

February 2, 2007. Russia's Zarubezneft signed an agreement to acquire two state-owned Bosnian Serb refineries for 110 million euros (142 million dollars). The Russian company is to invest another 849 million euros (1.1 billion dollars) in the project and Zarubezneft said it would also build new facilities and reconstruct existing and run-down refineries. In December, the Bosnian Serb parliament approved the sale of the government's majority stakes in a petroleum refinery in the northern town of Bosanski Brod and an oil refinery in northeastern Modrica.

The government's stakes in the Bosanski Brod and Modrica refineries amounted to 65 percent and 62.3 percent respectively.Bosnia was split into two entities the Serbs' Republika Srpska and the Muslim-Croat Federation under the Dayton peace accords that ended the country's brutal 1992-1995 war. The Bosanski Brod refinery's maximum capacity is up to 1.5 million tonnes of crude oil per year.

Transportation / Trade

Iran, Pakistan agree on Peace Pipeline gas price

February 6, 2007. Iran and Pakistan reached agreement on the final sale price of the gas to be transferred through Peace Pipeline. The trilateral talks on the gas price and pricing formula proposed by the consulting company in charge were held recently in Tehran with participation of deputy ministers of oil and energy from India and Pakistan respectively as well as representative of Iran's Oil Ministry. India has agreed with the suggested formula, but asked for a month-long time to declare country's final decision.

Libya, Yemen keen on city gas distribution by Indian firms

February 6, 2007. Indian Petroleum minister said that GAIL India would develop city gas distribution projects in the Libyan cities like Tripoli and also in Yemen, The minister, who had been to Libya and Yemen on a five-day visit, said the two countries were keen on the development of city gas distribution by Indian companies. Both countries had also assured to provide necessary assistance to Indian public sector undertakings, including Oil & Natural Gas Corporation (ONGC) and Oil-IOC consortium, so as to involve them in the discovery of blocks and enter into joint ventures with Libyan state owned oil companies. A team from Libya and Yemen would soon visit India to study the CNG/PNG projects in Delhi and Mumbai. India and Libya will pursue various proposals for cooperation on a regular basis.

Acergy wins $140 mn EPIC contract in Norway

February 5, 2007. Acergy S.A. had been awarded a contract by Marathon Petroleum Company for pipelay and construction work on the Volund field offshore Norway. The $140 million contract is for the engineering, procurement, installation, tie-in and pre-commissioning of some 30 kilometers of production, gas lift and water injection pipelines, a control umbilical, a 160 tonne production manifold and a choke and metering structure in addition to the installation, hookup and commissioning of a subsea control system. Work commences immediately on this project which is scheduled for final completion in first quarter of 2009. 

Greece and Italy push gas pipeline

February 4, 2007. Greece and Italy gave a political push to a gas pipeline project that will bring gas from Central Asia to the heel of Italy. An agreement to speed up work on a sub-sea gas inter connector in the Adriatic was signed in Athens by Italy and Greek counterpart. Italy hopes that the 212 kilometre link from Otranto to Stavrolimenas in Greece will connect Italian gas consumers via a long-distance pipe to a Turkish gas terminal in Ezurum, strategically positioned for gas imports from Azerbaijan, Iran and Iraq. The Italy-Greece pipeline deal is being pushed as anxiety mounts over strategic talks between Russia and Algeria. The Turkey-Greece-Italy link, known as the Southern European Gas Ring, expected to cost $1 billion, is a spur to an even larger project, Nabucco, which hopes to lay a pipe linking Turkey to Austria, via Greece, Bulgaria, Romania and Hungary.

Pipeline project unveiled

February 1, 2007. Colorado's largest utility and the natural gas pipeline company plan to build 164 miles of new pipelines and a storage facility capable of holding about 7 billion cubic feet of natural gas. The two companies are equal partners in WYCO Development LLC, which will develop the pipeline and storage facility. The project cost is estimated at $290 million, with Xcel paying half that or $145 million. It expects to file applications with the Federal Energy Regulatory Commission in the spring and fall of 2007.The pipeline will be capable of carrying about 874 million cubic feet of natural gas per day. If all goes well with regulatory approvals and construction, the system could be operational in late 2008.

El Paso, Xcel in joint venture pipeline

January 31, 2007. Colorado Interstate Gas, a subsidiary of El Paso Corp., will develop and lease new natural gas transportation and storage facilities in Colorado as part of a joint venture with Xcel Energy Inc. The WYCO Development LLC joint venture will include about 164 miles of natural gas pipeline and natural gas storage facilities with a working capacity of roughly 7 billion cubic feet. The Federal Energy Regulatory Commission would regulate the facilities, while Colorado Interstate would lease and operate the facilities. Houston-based El Paso and Minneapolis-based Xcel are equal partners in the WYCO joint venture, formed in 1999 to develop and lease gas pipeline and compression facilities.

Policy / Performance

Saudi Aramco signs Manifa contract

February 5, 2007. Saudi Aramco has signed a contract with Belgium dredging contractor Jan De Nul to help develop the 900,000 bpd Manifa offshore oil field. Scheduled for completion in 2009, Jan De Nul will carry out dredging works in the Arabian Gulf before building several drilling islands and a 41-km causeway that will provide Saudi Aramco with a direct link from the coast to shallow-water offshore man-made drilling islands. It aims to add 900,000 bpd of Arabian Heavy crude production by 2011.

The Manifa crude oil field is a grassroots development that will be developed all at once from scratch. The central processing facility will be constructed on a site where there is nothing now but desert, beach and one small communications building. Crude oil will be separated there from associated gasses, water and other liquids and will be shipped by pipeline to Ju'aymah. In addition to the 900,000 bpd of crude oil, the central processing facility also will handle 120 million standard cubic feet per day of sour gas, 50,000 bpd of condensate and 950,000 bpd of produced water. The associated natural gas liquids (NGL) will be piped to the Khursaniyah Gas Plant, which is still under construction. The Manifa gasses will be mixed with gas from the Khursaniyah field and all of it sent to Ju'aymah Gas Plant. There it will become part of the sales gas for the Kingdom

Rosneft seeks new ties with South Korea's KNOC

February 5, 2007. Rosneft hopes to do a deal with KNOC (Korean National Oil Company) to gain access to South Korea's refining sector, in exchange for giving KNOC a stake in Russia's vast Sakhalin-3 oil and gas project. Rosneft, which is controlled by the Russian state, "is interested in access to oil refining and in diversifying routes for delivering oil and oil products. Experts suggest that in return KNOC will ask for a chance to increase its influence in Sakhalin. Rosneft have expressed a willingness to allocate KNOC a 25-pct stake in the Sakhalin-3 project off Russia's Pacific coast, which is currently held by the government-owned Sakhalin Oil Company.

Rosneft has a 49.8% stake in Sakhalin-3, which is still in its early stages, while China's Sinopec and the Sakhalin Oil Company each have stakes of 25.1%. Rosneft and KNOC are already cooperating in developing a section of the West Kamchatka shelf in the Sea of Okhotsk, with the Korean company holding a 40% stake in the development and Rosneft 60%.

Pakistan focusing on increasing indigenous production of oil and gas

February 5, 2007. Prime Minister said there is surge in the energy demand as a result of the high growth, achieved by the country during the last few years and the government is focusing both on increasing indigenous production and import of gas to bridge the gap between demand and supply. The government is weighing various options to meet the energy needs of the country in an optimum manner. It is said that in view of the high growth projections for the future, in all sectors of economy, the energy requirements are expected to rise further and the government is making focused and concerted effort to increase our capacity in the energy sector to maintain the momentum of growth. In the gas sector, the government is taking measures to use all options including pipeline gas, LNG, LPG to provide gas to domestic and commercial consumers in a cost effective manner. The govt. instructed the Ministry to take further steps to increase exploration and drilling activities.

KFUPM to set up energy recycling centers

February 5, 2007. With the support of the Ministry of Higher Education, the King Fahd University for Petroleum and Minerals (KFUPM) in Dhahran decided to set up two research centers. The centers will be in the fields of petrochemicals and petroleum refining and energy recycling. The center will focus more on developing clean fuel, reduction of wastes, recycling of petroleum, and developing catalysts for various technologies.

The other center will focus its attention on energy recycling by research into hydrogen, methanol and sources of alternate energy such as solar energy and wind energy. The center will also conduct research studies on the advanced systems of preserving energy, control and infrastructure of electric power and the economics of recycling energy. The center will strive to increase public awareness on the importance of recycled fuels.

The Ministry of Higher Education was keen on promoting scientific research so that the Kingdom’s developmental requirements could be supplied from within the country. The centers will also promote the bonds of cooperation between scientists, government departments and private companies.

Russia-EU pact to cover energy: minister

February 5, 2007. The sensitive issue of energy supplies is to feature in a renewed pact between Moscow and the European Union. The 27-nation EU relies on Russia for about a quarter of its energy supplies, with much of the oil and gas passing through Ukraine and Belarus. Disputes between Moscow and these two post-Soviet states have caused supplies to EU countries to be temporarily interrupted over the past year, prompting concern over Russia's reliability as a key supplier.

Germany, which currently holds the rotating presidency of the EU, is aiming to have an agreement on energy cooperation enshrined in the charter of relations between the bloc and Russia when it is renewed in November. In dialogue with the EU and the United States, was engaged in "the preparation of real conditions for energy security on the basis of equal rights and duties of suppliers, consumers and countries of transit."

Brazil to double ethanol exports

February 4, 2007. Brazil hopes to double its ethanol exports by 2010 to meet growing demand for the alternative fuel, largely from Japan and Sweden. Brazil also urged Britain to use more ethanol as part of the fight against global warming. Brazil aimed to increase its ethanol exports to $1.3 billion in 2010 from $600 million in 2005, largely due to agreements signed with Tokyo and Stockholm. Brazil, the world's biggest ethanol exporter, started to develop ethanol production from sugar cane in the 1970s. Brazil was set to experience an economic growth rate of between 4.5 percent and 5 percent in the coming years.

US, Seoul 'mulling energy aid for N.Korea'

February 4, 2006. South Korea and the U.S. have reportedly agreed to discuss providing heavy fuel oil to North Korea if the North undertakes to start dismantling its nuclear program under a statement of principles singed in September 2005. The two did not discuss provision of heavy oil ahead of the next round of six-party nuclear talks with North Korea which opens in Beijing on Feb. 8. Supply of heavy oil could resume in two or three months if the five countries - South Korea, the U.S., Japan, China and Russia agree. The issue will be who shoulders the burden of paying for it. The U.S. supplied 500,000 tons of heavy oil a year to North Korea until the second nuclear crisis in 2002, which the South Korean government estimates cost US$150 million.

EU to boost funding on China energy

February 2, 2007. The European Union plans to provide another 40 million euro ($52 million) of funds to expand cooperation and research with China in energy and the environment. The funding will go mainly into projects that focus on climate change and the environment. The EU and China are already working on a 20 million euro energy and environment project. China, the world’s biggest energy user after the US, wants to revise energy pricing policy to ensure consumption costs are high enough to encourage conservation and deter waste.

China aims to cut the amount of fuel used to produce each unit of gross domestic product by 20% in five years. It failed to meet the target set for last year. The projects “will touch on the three elements of technology transfer, people awareness and good regulations.’’ 

Storing carbon dioxide in liquid form in underground tanks, as is done in the US and Europe, would earn Chinese power producers carbon credits that can be traded. The plan may help cut pollution prompted by the jump in oil and coal use that has accompanied China’s economic expansion. Work on the project started in November and will run for three years.

Ukraine and Kazakh to form working group on energy

February 2, 2007. Ukraine and Kazakhstan have agreed to create a bilateral working group on energy cooperation. In the first quarter of 2007 expert commissions from the two countries will start working to modify cooperation in the energy industry. The sides have agreed that a special working group will attempt to develop the capacity of the energy transport corridor, including the Odessa-Brody-Gdansk oil pipeline project. They also signed a Ukraine-Kazakhstan action plan for 2007-2008.



Skanska to build thermoelectric power plant in Brazil

February 6, 2007. Skanska has been awarded a contract to build a thermoelectric power plant in Cubatao, 60 km from Sao Paulo, Brazil. The contract relates to the construction of a co-generation power plant of 220 MW and comprises detailed engineering, procurement, construction and assembly, commissioning and start up assistance of the plant. The project will start immediately and be mechanically completed in 30 months to start operation around mid 2009. The partner in the Skanska-led consortium will be the Brazilian construction company Camargo Correa. Skanska is one of the world's leading construction groups with expertise in construction, development of commercial and residential projects and public-private partnerships.

GE to participate in Baltic nuclear project -paper

February 5, 2007. General Electric plans to participate in a multi-billion-dollar Baltic joint venture project to develop a nuclear power station in Lithuania. Last year Poland agreed to join the Baltic countries in a project to build a nuclear power plant at Ignalina, Lithuania, which will have a capacity of up to 3,200 MW when it is completed in 2015. Lithuania, Latvia and Estonia agreed in October to pool resources to build the plant to replace Chernobyl-type reactors in Ignalina due to be closed in 2009 because of safety concerns highlighted by the European Commission. French power giant EDF and French nuclear state-owned nuclear energy group Areva have also been mentioned by Lithuanian officials as potential suppliers for reactors for the plant, which would cost from 2.5 billion euros ($3.26 billion) to 4 billion euros.

Doosan Heavy wins $150 mn order to build power plant in Pakistan

February 5, 2007. Doosan Heavy Industries & Construction Co., South Korea's largest manufacturer of power generators has received a $150 mn order to build a 175 MW generating power plant in Pakistan. The order from Foundation Power Co. Ltd. in Pakistan calls for Doosan Heavy to carry out all stages of implementation, including engineering, procurement and construction.

First private power plant launched in Iran

February 4, 2007. Iran’s President inaugurated the Chehelsotun Power Plant in Isfahan Province. Chehelsotun is the first power plant being built by the private sector in the country. The plant was built in a three-year period at a cost of 320 million euros. It is located 70 kilometers southwest of the provincial capital Isfahan. TAVANIR, an Energy Ministry affiliate, signed the deal for building the plant as an ECA (Energy Conversion Agreement) last month with MAPNA International, an Iranian company registered in the United Arab Emirates, and a German company. MAPNA International and the German company have 80 and 20 percent share in the project, respectively. Iran’s Bank Saderat, London’s PLC, Standard Chartered Bank of Dubai, and a second Dubai-based bank provided 70 percent of the fund for the project. The rest was funded by the investors.

Transmission / Distribution / Trade

CMS, ABB sell $1.39 bn power assets to Abu Dhabi

February 6, 2007. U.S. utility CMS Energy Corp. and Swiss engineering and technology group ABB have agreed to sell power assets worth $1.39 billion to state-controlled Abu Dhabi National Oil Co. It would sell its stakes in businesses in the Middle East, Africa and India to United Arab Emirates-based Taqa for $900 million to focus on investments in its Michigan utility. ABB said it would to sell its stakes in a power project in Morocco and another in India for $490 million as it pushes ahead with the divestment of its non-core businesses. ABB and CMS are partners in the two plants, said Taqa, the largest utility in the UAE by market value.

Czech Energo-Pro buys six power plants in Georgia

February 5, 2007. Czech hydropower producer Energo-Pro has purchased six power plants and three regional power distribution companies in Georgia for a total of $427 million. Under an agreement signed with the Georgian Fuel and Energy Ministry, Energo-Pro has also undertaken to build a 10 MW hydropower plant in eastern Georgia. Energo-Pro owns power generation assets in the Czech Republic, Bulgaria, and other east European countries.

EU urges transmission network investment

January 30, 2007. Unless power grid operators are forced to invest more in transmission networks, Europeans can expect a repeat of the Nov. 4 blackout that left millions of people in six nations without power. The EU cannot mandate such investments, but national energy regulators can and must do so to ensure that power companies keep their grids in good shape and provide for additional capacity. The European Commission plans to help boost security of national networks by drafting "binding procedural rules for all 37 transmission system operators in the European union." E.On was not alone in causing the power cut. It said its failings were just one of three main reasons cited in a report published Tuesday by a power grid operators' group, the Union for the Coordination of Transmission of Electricity.

Entergy acquires Dynegy power plant

February 1, 2007. Dynegy Inc. has inked an agreement to sell a 322 MW power generating plant in Louisiana to a unit of Entergy Corp. for $57 million in cash. Entergy Gulf States Inc., a subsidiary of New Orleans-based utility Entergy will buy the Calcasieu Power Generation Facility, a natural gas-fired peaking plant in Sulphur, La. in a transaction expected to close in early 2008. The sale of the Calcasieu facility is consistent with the company's previously announced plans to focus its generation portfolio on regions and markets in which the company will have a significant asset position. Entergy plans to invest about $6 million in the plant.

Entergy unit buys plant for $57 mn

February 1, 2007. Entergy Corp. subsidiary Entergy Gulf States Inc. is acquiring Calcasieu Generating Facility from Dynegy Inc. for about $57 million. EGS plans to invest about $6 million in upgrades to the plant which is located near the city of Sulphur in southwestern Louisiana. The plant is a nominal 322 MW Siemens simple-cycle gas-fired generating facility consisting of two units that entered commercial service in 2000 and 2001.

Policy / Performance

RWE plans billions of euros of investment in gas and wind power

February 6, 2007. RWE, Germany's second-biggest power supplier would invest billions of euros in major gas and wind power projects, including a brand new gas power station in Britain and a gas pipeline between the Czech Republic and Belgium. The German giant was planning a gas pipeline between the Czech Republic and Belgium. It would invest 800 million pounds (1.2 billion euros, 1.6 billion dollars) in a state-of-the-art combined cycle gas turbine power plant, either in Staythorpe, Nottinghamshire, or in Pembroke, Wales. The 2,000 MW plant, to be built by French giant Alstom, would go into operation in 2009. RWE planned to invest an additional 100 million pounds (150 million euros) in new wind farm developments in Kent and Yorkshire in England.

US president requests $863 mn for fossil energy programs

February 5, 2007. President Bush's FY2008 budget seeks a 33 percent increase for the Office of Fossil Energy over last year's request to support improved energy security and rapid development of climate-oriented technology. It totals $863 million and completes a promise to invest $2 billion in coal technologies three years early. One of the President's largest Fossil Energy budgets, the new proposal emphasizes early initiation of an expansion of the Strategic Petroleum Reserve; accelerating the development of technologies to manage and virtually eliminate emissions of the greenhouse gas carbon dioxide from fossil fuel use in power generation and other industrial activity; and moving forward with the design and early work on the FutureGen project to combine in one plant the production of electric power and hydrogen fuel from coal with near-zero atmospheric emissions. Fossil Energy's programs support the President's top initiatives for energy security, clean air, climate change and coal research. Fossil Energy also supports the Department of Energy's strategic goal of protecting national and economic security by promoting a diverse supply and delivery of reliable, affordable, and environmentally-sound energy.

German utility launches retail unit

February 1, 2007. German utility E.On AG launched a budget electricity and natural gas retail unit, promising to undercut prices charged by regional suppliers and boost competition in the German power market. The new unit dubbed "E Wie Einfach" is aimed at private households and small businesses. The company said electricity customers would get power at prices one euro cent per kilowatt hour below those of existing local suppliers, while gas prices would be two cents per cubic meter below those of competitors. The new retail unit will reach profitability in three years at the latest.

Renewable Energy Trends


Food processing firm to set up power plant

February 6, 2007. Rasoya Proteins Ltd, the Nagpur-based Rs 100 crore food processing group, is planning to set up a 3 MW greenfield captive power plant at its existing unit at Yeotmal at an expenditure of Rs 50 crore. The plant is expected to go commercial by March '08.  The company, a producer of soya oil brand 'Rasoya' is planning to expand its refining capacity to 200 tonnes from 45 tonnes at present.

The expansion is set to entail an investment of Rs 20 crore which would also help to strengthen value-added soya-based food products i.e. Lecithin.  This brownfield expansion is proposed to commence in October this year with plants and machinery to imported from Germany by June-end. Rasoya has further lined up an investment of Rs 100 crore for diversification into spinning mill along with other infrastructure development next year.   

Approximately 60 per cent power generated by the company is proposed to be used for captive consumption while 40 per cent would be sold to the government resulting into a saving of about two-third of the present cost of power at Rs 4.80 per unit. The spinning mill being proposed would be of 20,000 spindles in the first phase. The company is likely to increase the capacity in Power generation up to 100 MW in stages with captive coal mining and the spinning mill capacity may be increased up to 1,00,000 spindles during a period of 5 to 7 years. 

Renewable energy generation plan

February 6, 2007. Concerned over the rising petroleum import Bill, which takes away 10 per cent of the country’s GDP, the Centre has chalked out an ambitious plan for generating additional one lakh megawatts of renewable energy from a mix of wind, small hydro, biomass and bagasse by 2031-32. The renewable energy ministry has sought a budgetary support of Rs 11,084 crore for research, development and deployment of renewable energy during the 11th Plan beginning from 1 April 2007. For the current year, the ministry has sought an allocation of Rs 1,500 crore. A draft “Renewable Energy Policy” prepared by ministry was being modified and will be given a final shape by the end of the year. As per official assessments, to maintain the present growth rate of nine per cent in the next decade and to achieve projected double-digit growth for becoming global economic entity, the country has to produce additional power of 1.5 lakh MW. The government is of the view that “rural energy security” has to be provided to cater to villages without electricity on a priority basis. And for that, alternative sources to the conventional ones such as coal, petroleum and natural energy have to be developed.


Marubeni, Ukrainian firm to generate power to get emission credits

February 2, 2007. Marubeni Corp. said the Japanese trading house and Ukrainian coal mining firm A. F. Zasyadko have agreed to jointly implement a project to generate power by burning methane gas from the Ukraine firm's underground mines in order to gain greenhouse-gas emission credits. A.F. Zasyadko earlier got approval to conduct the project from the Ukrainian Ministry for the Protection of the Environment, which is a national authority designated by the Ukrainian government to supervise businesses related to emission credits-related trading.

Under the project, methane gas will be collected from underground coal mines. Methane gas has repeatedly caused accidents by inducing explosions at Ukrainian mines, where coal facilities have become old. The project, which calls for generating power with a total of 24 electricity-generation engines by 2008 by burning methane gas, will improve the working environment for Ukrainian miners, thus helping boost coal output.

The Joint Implementation Supervisory Committee, a U.N. agency to verify the feasibility of projects to cut greenhouse-gas emissions to gain emission credits, will shortly start examining the project's ability to cut emissions, now that Marubeni got the Japanese government's approval to take part in the Ukrainian project. The project is expected to annually generate 2 million tons worth of emission credits during the 2008-2012 first commitment period of the Kyoto Protocol. If Marubeni starts annually purchasing 2 million tons worth of credits, it would signify the biggest emission credits-related transaction in which a Japanese firm takes part.

Xcel Energy plans 100 MW wind project

February 1, 2007. Xcel Energy Inc. announced plans to build a $210 mn wind power facility in Minnesota. The plant would generate up to 100 MW and be in service by 2009. Also, Xcel planned to partner on a $290 million natural gas project in Colorado. The company, which is the largest utility in that state, will pay about $145 million to complete the High Plains Pipeline Project, which includes 64 miles of new pipelines and a storage facility capable of holding about 7 billion cubic feet of natural gas.


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