MonitorsPublished on Feb 14, 2007
Energy News Monitor |Volume III, Issue 35
Nuclear Energy for India: Enlightened Self Interest?

The euphoria over the Hyde Act passed by the US Congress in December 2006 to enable nuclear commerce with India has died down.  Stories analysing granular details of the Act to determine whether or not the Act impinges on India’s defence related nuclear programme have moved out of the mainstream media.  But one question remains unanswered:  Why is the United States going out of its way to meet India’s future energy needs?

The United Sates was the pioneer of nuclear power development.  In 1960, Westinghouse commissioned the first fully commercial pressurised water reactor and General Electric commissioned the first boiling water reactor and the industry grew until 1079 when it suffered a major setback following the Three Mile Island accident.  Many orders and projects were cancelled or suspended, and the US nuclear power industry went into the terminal decline.  

The resurrection of the US Nuclear Power industry began with the passage of the Energy Policy Act in 1992 by the first Bush Administration, which offered significant perks to the industry. Changes accelerated after 1998, including mergers and acquisitions affecting the ownership and management of nuclear power plants.  

In 1997 nuclear fission R&D was $ 37 million, lower than in France, South Korea, or Canada, only 2 percent of total energy R&D, budget of US which compared pathetically with 68 percent  ($ 2537 million) of a much larger budget of Japan.  The US altered this situation with various programs including the flagship Nuclear Energy Research Initiative (NERI). The first 45 NERI grants were awarded in 1999, signalling a reinvigoration of the federal role in nuclear research, following successful conclusion of the advanced reactor program in 1998.

The final thrust for the US nuclear power industry came through the Energy Policy Act 2005 (EPA 2005) passed by the second Bush administration.  The credits and subsidies it offered to the nuclear power industry were substantial: 

Ø  Production tax credit of 1.8 c/kWh from the first 6000 MWe of new nuclear plants in their first 8 years of operation

Ø  Federal risk insurance of $2 billion to cover regulatory delays in full-power operation of the first six advanced new plants

Ø  Rationalised tax on decommissioning funds

Ø  Federal loan guarantees for advanced nuclear reactors or other emission-free technologies up to 80 percent of the project cost.

Ø  Extension of Price Anderson Act for nuclear liability protection for 20 years.

Ø  $1.25 billion for advanced high-temperature reactor (Next Generation Nuclear Plant) at the Idaho National Laboratory, capable of co generating hydrogen.

Overall more than $2 billion was provided for hydrogen demonstration projects. In 2006 it was spelt out that the 6000 MWe eligible for production tax credits would be divided pro-rata among applications received by the end of 2008, to commence construction of advanced plants by 2014, and which enter service by 2021. The Act also addressed climate change, requiring action on a national strategy to address the issue by 2007.

As per the Nuclear Energy Institute, the industry’s chief lobbying arm, a dozen firms had sought licenses for as many as 31 new nuclear power reactors in the United States after the passing of EPA 2005. The nuclear lobby credits improvements in plant design and efficiency and the ability to operate without carbon emissions as primary reasons for the resurgence.  But critics of nuclear energy have argued that the real catalyst was the well-funded lobbying by the industry.  According to the critics, the government would not be offering subsidies to giant corporations to build reactors if they were economically viable.

Regardless of which side is eventually proved correct, the mere discussion of building new reactors is a turnaround for an industry that was written off in the US, ten years ago. Forty-eight US commercial reactors have renewed their licenses.   Well-known environmentalists have emerged as supporters of nuclear technology. A new uranium enrichment plant has been commissioned in New Mexico.  And finally the US administration is proposing to light up the developing world, most notably India, with electricity from nuclear energy.

Yet many within the US remain sceptical on whether  ‘letters of intent’ signed for the construction of new plants would really materialise within the US.  They point out that waste disposal, safety and security remain unresolved issues.  Though key committee chairmanships in the US remain in the hands of strong pro-nuclear lawmakers, the retaking of Congress by the Democrats could also present some roadblocks, especially on the central issue of waste. The chief architect of the renaissance of the US nuclear power industry is Pete V Domenici, the Republican Senator from New Mexico.  The veteran senator was well acquainted with nuclear issues by virtue of representing New Mexico, the birthplace of nuclear weapons and the home of two of the nation’s nuclear laboratories. In a 1997 speech at Harvard, Domenici praised nuclear technology, including reprocessing spent fuel, and vowed to lead the charge for a resurgence of the US nuclear power industry. Urged on by a number of true believers in nuclear energy that included Alex Flint, now the industry’s chief lobbyist, and Pete Lyons, now a Nuclear Regulatory Commission member, Domenici urged US policy-makers to undo bad decisions of the past and harness the full potential of the nucleus.

A 1998 forum that gathered 60 participants from industry, government and academia to draft a plan to put nuclear power back on the nation’s energy agenda followed up the Domenici Harvard speech. The industry saw its best opening in years in the 2000 Presidential election and backed the Bush-Cheney plank with nearly $270,000 in contributions, according to the Center for Responsive Politics. The victorious Republicans welcomed industry representatives to their energy transition team and later private discussions by Vice President Dick Cheney’s task force on energy. Most of the members in the 1998 forum were included in the energy transition team. 

Cheney also had close ties to players with stakes in the nuclear sector. When the Vice President was CEO of Halliburton, the company’s portfolio included Nuclear Utility Services. His close friend, former Texas Rep. Tom Loeffler, another big Republican fund-raiser, worked as a lobbyist on nuclear issues. And Cheney’s wife, Lynne, had served on the board of directors of Lockheed Martin, which earned millions from the federal government managing the Sandia Nuclear Laboratory in New Mexico.  Once in office, Cheney’s energy task force worked quickly and behind closed doors to produce the Energy Policy Document in 2001, which served as the basis for Energy Policy Act 2005. 

At a press conference in the spring of 2001 to herald the administration’s energy plan, Domenici congratulated Bush and Cheney for being courageous and realistic on the nuclear front and embarked on a four-year effort to turn the plan into law. Many groups condemned Cheney’s conduct of the task force sessions in secret but they were largely unsuccessful in forcing the release of records they sought. Six months after unveiling its energy plan, the administration forged ahead with the Nuclear Power 2010 program, which the Department of Energy described as a cost-sharing demonstration project by government and industry to get a new generation of nuclear reactors up and running by early in the next decade.  EPA 2005 languished until Republicans regained control of the Senate in 2003, giving Domenici the Chairmanship of the Senate Energy Committee. He hired back Flint, his former aide, from the nuclear lobbying ranks to direct the committee’s work and after 2 years of horse-trading, parliamentary manoeuvring and secret conference committee meetings, the bill finally became law in August 2005. Flint has since returned to work for the industry as its chief lobbyist. Domenici, meanwhile, led the fight to build a new uranium enrichment plant in his state to help fuel the presumed nuclear resurgence. On June 23, 2006, it became the first nuclear facility to win a new NRC license in 30 years.

The senator also has become a strong supporter of the Bush administration’s Global Nuclear Energy Partnership, a futuristic and controversial plan for the United States and other nuclear haves to supply technology to have-nots. The plan envisions the reprocessing of spent fuel, banned for decades by previous administrations because it they feared that it could lead to the spread of nuclear weapons. At least another half-dozen of their industry colleagues also were involved.

With the legislative mechanism in place, the industry’s only challenge now is that the nuclear industry has to prove its economic argument. The only way to do that is, by demonstrating that the resurgence will result in the construction of more than a small number of reactors, exactly the number that receive subsidies under the Energy Policy Act.  This is probably where India comes in.   India proved to be valuable testing ground for Multinational Pharmaceutical Companies in their pursuit of FDA approvals.  The winning combination of an educated work force to conduct the tests and a poor population on whom to conduct tests at unbelievably low prices proved to be extremely attractive for the giant corporations.  

India could work similar magic for the US nuclear power industry.  Half of India’s population does not have electricity and India requires heavy investment in power generation to sustain its growth momentum.  Nuclear power would not only add to India’s generation capacity but also do it with less carbon emissions.  India’s muddled strategic pursuits and its abundant supply of unscrupulous politicians could be combined and leveraged for attractive deals for nuclear reactor supplies.  Once that is done the US nuclear power industry would be in a position to rest the economic case for nuclear power holding up India along with its shiny new nuclear plants. 

ORF Energy Team

Sources: Nuclear Power: Wave or just a Ripple? MSNBC, Australian Uranium Association Ltd, DoE, USA

Small Hydro Policy in Uttaranchal

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

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

Incentive available for SHP development

The Indian government has given numerous preferential policies and measures to encourage SHP development. These include soft loans and grants, the promotion of private firms to invest in SHP stations, and policies to protect supply areas and private property. MoP (Ministry of Power) in the Government of India is responsible for the development of large hydro power projects in India. The MNRE has been responsible for small and mini hydro projects up to 3-MW station capacity since 1989. The subject of small hydro between 3 MW and 25 MW has been assigned to MNRE w.e.f. 29 November 1999.

Development/up-gradation of water mills

The ministry has announced a promotional incentive scheme for development/ up-gradation of watermills popularly known as gharat. As per the scheme, the ministry is providing financial support of Rs 30 000 or 75% of actual cost, in mechanical mode and Rs 60 000 or 75% of actual cost in electro-mechanical mode. The scheme is being operated through local organizations such as the watermills associations, cooperative societies, registered NGOs, local bodies, and state nodal agencies. Under the UNDP-GEF Hilly Hydro Project implemented by the ministry two types of improved watermills, one for mechanical output and the other for mechanical plus electrical outputs have been designed and developed by the Alternate Hydro Energy Centre, IIT Roorkee.

Commercial SHP projects

State governments

Several states in India namely, Andhra Pradesh, Haryana, Himachal Pradesh, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, Uttaranchal, and West Bengal, have announced policies for setting up commercial SHP projects through private sector participation. The facilities available in the states include wheeling of power produced, banking, attractive buy-back rate, and facility for third party sale.

Scope for SHP development in Uttaranchal

Uttaranchal has an overall hydro power potential of the order of 20 236 MW out of which the SHP potential is 1478 MW. As of now, a total of 408 MW of SHP potential could be harnessed till June 2006. The Government of Uttaranchal has decided to encourage generation of power through SHP, and has framed a policy so that the development of this sector serves as an engine to achieve the objective of promoting the all-round development of the region.

Participation and pre-qualification

Uttaranchal invites any non-governmental agency to bid for identified projects for the development of this sector. These will be termed as IPPs (independent power producers). There shall be a pre-qualification by the Uttaranchal government of the bidders for the projects in the state. The guidelines for evaluation and the passing score on attributes/ in aggregate required for pre-qualification shall be specified in the bid documents inviting bids for pre-qualification. 

Process of allotment

1.        The projects shall be advertised in order to seek bids

2.        All bidders will be subject to pre-qualification as provided

3.        Bids shall be invited for premium payable upfront to the Government of Uttaranchal per megawatt

4.        Projects will be allotted to the bidders making the highest bids

Challenges

The main challenge to the development of SHP is reconciling economy and ecology. It is, therefore, necessary to develop equipment, methods, and mitigation measures that simultaneously satisfy the criteria of easy environmental integration, simplicity, efficiency, and reliability so as to lower the break even point, through better use of available resources, and the decrease of construction, operation, and maintenance costs. Public funding is needed to support industry in its efforts to bring about a breakthrough in favour of this environmentally friendly technology for the following reasons.

1.        Hydro R&D is very expensive, especially in hydraulic turbine laboratory development, and the construction of civil-engineering scaled physical models for testing the performances of the hydraulic structures

2.        Small hydro development requires multidisciplinary R&D involving technological know-how that is widely dispersed in Europe

3.        Small hydro R&D is consistent with the Commission’s objectives for the rational use of energy, improvement of energy security, and reduction in the emission of carbon dioxide and other pollutants, and increase in industrial competitiveness.

It is, therefore, essential to co-ordinate small hydro R&D, and to move over from a situation where knowhow and results are dispersed, and necessarily incomplete, to one where work is systematic and coordinated, within the framework of true research programmes.

Prospects of SHP markets: Current scenario

In the developing countries it is economic growth and the increase in energy needs that is driving the increasing demand for electrification from SHP. Asia (especially China and India) is affirming itself as the leading continent in developing hydro power. The prospects are good in Africa as well, where only 5% of hydro power potential has been tapped to date. The EU (European Union) has explored the possibility of SHP development outside the EU based on three selection criteria important for exporters: (i) funding (project finance packages, export credit guarantees), (ii) host government situations (stability, regulatory framework), (iii) future market (hydro resource, local competition). They have found the South and South East Asian SHP market to be most promising.

Asian market

The greatest impetus for SHP development is in Asia, especially China and India. This region has the best hydraulic resources, a major need for power, and is the recipient of large amounts of financial support for rural electrification, also backed by government initiatives.

Export potential

The most favourable regions for export potential will certainly be in Asia. However, prospects in Africa may be increasing due to the attention being given to SHP in this continent by agencies such as the UNDP and UNIDO, the encouragement by the EU and the US to African economic growth (which will require electrification), the current high price of electricity from imported oil and gas, and an increased environmental awareness from within African nations that the traditional large dams will not be the appropriate way of developing their hydraulic resources.

Indian SHP market

India has an estimated SHP potential of about 15 000 MW. From 566 SHP projects, an aggregate installed capacity of 1860 MW has been installed to date. Besides these, 195 SHP projects with an installed capacity of 434 MW are under implementation. A database has been created for most potential sites by collecting information from various sources and the state governments. The database for SHP projects created by the MNRE now includes 4233 potential sites with an aggregate capacity of 10 324 MW. India has exploited 30% of its low-head SHP but the remote and mountainous areas are still less developed. Overall, the share of hydro in the Indian electricity grid mix has dropped from 50% to 25% in the last few decades. Yet hydro power is highlighted as playing a key role in expanding the current power capacity, which is 20%–30% below demand.

SHP industry in India

In comparison to China, much of the demand for equipment cannot be met locally, so there are opportunities for export of systems, or JV manufacture under license. There is a lack of major SHP players in India and relatively inexperienced first-generation entrepreneurs are coming forward for setting up projects. Thus, there is scope for selling SHP expertise and services. Certain European manufacturers already have JVs in place. Norway has a bilateral agreement to supply turbines, and US and China are both strongly promoting their technology.

Conclusion

SHP has already proved itself as a major contributor to electrification in developing countries with over 50 million households and 60 000 small enterprises served by small hydro at the village level as well as projects feeding useful amounts of power into grid networks. Apart from China, India and Brazil have been major players in SHP and many Asian countries now have many plants installed. The countries that still remain the most favourable for investors will certainly be in Asia, especially China and India, and now Sri Lanka. Overall it can be easily interpreted that SHP projects in India are attracting large number of investors, and it is time to harness this resource to the maximum possible. The time has come to reframe our renewable energy policy at the national as well as the state level to make the projects more viable and for the optimum utilization of resources available.

In a nutshell the policy on renewable energy sources should consider the following.

1.        Establish binding, significant, and growing renewable energy targets and other market development mechanisms. An effective legal structure is required to deliver investor certainty, underpinning the significant investment that will be required to grow the renewable energy industry.

2.        Incorporate a carbon price signal into the energy market. The investment, purchasing, and operating decisions made of energy consumers mean that the environmental cost of using fossil fuels must be factored into real energy prices.

3.        Ensure open and equitable market access: It is essential that access to markets and electricity grids by both renewable energy generators and consumers is guaranteed at all levels.

4.        Build community commitment and support for renewable energy: Citizens and consumers need to be made aware of (i) adverse environmental impacts of the continued use of fossil fuels and (ii) environmental and social benefits that renewable energy can provide.

(Concluded)

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

NEWS BRIEF

NATIONAL

OIL & GAS

Upstream

RIL, Chevron may jointly bid for Yukos assets

February 20, 2007. In a move that will reinforce US oil major Chevron’s ties with domestic oil and gas biggie Reliance Industries Ltd, the two may jointly bid for the upcoming auction of Russia’s bankrupt oil company, Yukos. RIL has for long been strategising an entry into oil- and gas-rich Russia. Yukos’ assets, including fields with a total production capacity of 4.7-lakh barrels of oil per day and two oil refineries, will be liquidated over the next few months through a series of auctions. The final valuation of assets is due to be completed by February end, after which bidding will formally begin.

Reliance and Chevron agreed earlier to jointly undertake exploration and production, and refining projects in third countries. The agreement envisages picking up stakes in their existing global ventures and exploring new business opportunities. Apart from Yukos assets, the two companies may jointly bid for blocks to be offered under Nelp-VII. A cooperation pact for application of Chevron’s technology on a proprietary basis in deepwater blocks (to develop Reliance’s D-6 oil and gas block in the KG basin), besides collaboration in new technologies such as hydrogen fuel cells and bio-fuels, may also be signed. Reliance has already announced its D6 discovery of oil and gas reserves as commercial.

RIL discovers natural gas resource in K-G basin

February 20, 2007. Reliance Industries Ltd has struck new gas reserves in its D6 block in the Krishna -Godavari basin, off the east coast. RIL’s minority partner Niko Resources, which holds 10% stake in the block said, The deepwater frontier drilling rig has now completed drilling of an exploratory well, AA-1, which has resulted in a new high-potential natural gas zone. Reliance has, to date, made over a dozen gas discoveries and two oil finds on the block KG-DWN-98/3, also known as D6. The AA-1 well is located in the new 3D seismic area, southeast of the previous gas finds. The drilling rig has commenced drilling of the Q1 exploratory well. The Q1 well is approximately 15-km south-west of AA-1 and 8 km north-west of the P1 natural gas discovery.

All of D6 is now covered with 3D seismic. Processing and integration of the surveys are expected to be completed by the year-end. Reliance had found oil reserves in MA-1 and MA-2 wells on the D6 block with total reserves being put at 140-million barrels. It will invest $1.43-billion to produce 40,000-50,000 barrels per day of oil from the finds by first quarter of 2008. Gas production from the block will begin in mid-2008 and the company is investing $5.2-billion in bringing to production Dhirubhai-1 and 3 discoveries, first two of the over dozen gas finds. The approved field development plan of Dhirubhai-1 and 3 provides flexibility in the critical portions of the facilities to facilitate gas production of up to 4.2 billion cubic feet per day, the design and installation of the production facilities for the Dhirubhai-1 and 3 gas fields was underway. Major tender packages have been issued and the civil construction of the natural gas plant site is substantially complete. Development drilling commenced in December 2006 and will continue in 2007. Deepwater Frontier rig had completed drilling on three of the 50 development wells planned on the two gas fields. For the oil finds, application was made for the commerciality of the MA field and government approval was granted with production beginning by March 2008.

OVL, Rosneft to bid for stake in Sakhalin-III

February 19, 2007. ONGC Videsh (OVL), the overseas arm of the state-owned ONGC, is set to bid for up to a 49 per cent stake in Russia’s Sakhalin-III oil and gas development project along with Russian giant Rosneft. OVL already partners Rosneft in the Sakhalin-I project where it holds 20 per cent participating interest in the $17-billion oil and gas development project led by Exxon Mobil and Rosneft. OVL’s equity participation in Sakhalin-I is aimed at bringing 2.4-million tonnes of crude per annum to India. Sakhalin-III provides for developing Kirinskoe, Veninskoe, Vostochno-Odoptinskoe and Ayashskoe hydrocarbon fields in the Sea of Okhotsk with the aggregate oil reserves estimated at above 800 million tonnes and gas reserves in excess 900 billion cubic meters. OVL has a long-term target of acquiring 60 MMTPA of equity oil and gas overseas by 2025, and is working towards a goal of 20 MMTPA by 2010. OVL’s chances of getting a stake in the ambitious project has brightened following the recent visit of Russian president and the assurances given by him to boost Indo-Russian energy ventures. The government recently approved the proposed capital expenditure plan of Rs 51,000 crore for OVL for the 2007-2012 period, thus giving OVL financial muscle for bidding for large project overseas to secure oil equity for India, which imports over 70% of its oil and gas requirements. 

DGH disallows ONGC's gas discovery in KG basin

February 19, 2007.  Oil and Natural Gas Corporation's recent gas discovery in the Krishna-Godavari Basin has been disallowed by the Directorate General of Hydrocarbons. ONGC's exploration team had last year struck natural gas in ultra-deepwater well UD1 in the Krishna-Godavari block KG-DWN-98/2. The company carries out its activities in the New Exploration Licensing Policy (NELP) blocks as per laid down PSC norms. In adherence to the norms, in the well UD-1, block KG-DWN-98/2, ONGC notified DGH regarding modular dynamic test (MDT) in the interval 5,243.5 - 5,304 m, which was conducted in the presence of DGH representative during December 7-15, 2006. The interpreted presence of hydrocarbon was validated through this test. After further completion of further tests the discovery of Non-Associated Natural Gas (NANG) was brought to the notice of DGH on December 23. ONGC, in consultation with its partner Cairn Energy India Ltd, submitted its potential commercial interest, meriting appraisal, in the prescribed format to the DGH. The hydrocarbon in-place estimated as per standard practice is in a range of 2.09 TCF-14.76 TCF. The aerial extent of the prospect — 55 km off the Andhra Pradesh coast on the eastern shoreline — is 600 sq. km at basement level.

ONGC eyes Bihar for oil exploration

February 15, 2007. Bihar is now poised to emerge as one of India’s next major destinations for oil and natural gas reserves. After British exploration giant Cairn Energy Search Ltd (CESL), it is now the turn of the Oil and Natural Gas Corporation (ONGC) to start exploration for crude reserves in the economically backward state.  ONGC would shortly seek a no-objection-certificate (NOC) for exploration of crude oil reserves in the Purnia basin. Two months back, the Edinburgh-based Cairn Energy was commissioned for the first phase of exploration of a 15,500 sq km area in Bihar's Ganga basin. Cairn Energy has been granted a seven-year licence for the Purnia basin comprising 13 districts.  The company's proposal, submitted two years back, was delayed due to various technical reasons. Reserves in the Purnia basin may well be about 465 million tonnes of crude and natural gas. 

Questar to spend less on gas E&P in 2007

February 14, 2007. Questar Corp. would spend less on gas exploration and production in 2007 due to higher drilling costs and low prevailing natural gas prices. The natural gas company set a 2007 capital expenditure budget of $700 million for its subsidiary Market Resources, and that is 7 percent lower than 2006 budget of $753 million.  The company increased its pipeline capex for 2007 to $319 million compared with $76 million in 2006, as its unit, Questar Pipeline, will be completing a pipeline expansion project in the western segment of Rockies Express pipeline.

Downstream

Mittal buys 49pc in HPCL refinery

February 20, 2007. LN Mittal as the king of steel rapidly turning into an oilman as well. Having entered oil exploration market, he's now buying 49 per cent stake in Guru Gobind Singh Refineries as an equal partner with state-owned Hindustan Petroleum Corporation to revive the Rs 16,000 crore refinery-cum-petrochem project at Bhatinda in Punjab. The steel magnate will invest over Rs 3,000 crore as foreign direct investment through his Luxembourg-based group holding company Mittal Investments Sarl. Mittal will also be a partner in the 1,100-km pipeline being laid by Hindustan Petroleum to transport crude from Mundra port in Gujarat to the refinery. The HPCL board cleared the proposal but is yet to decide on the banks and financial institutions that would hold the remaining 2% stake. An agreement is expected to be signed next week. The project which has moved in fits and starts for the last eight-odd years, will have a nine million tonne refining capacity and will be complete with a polypropylene plant.

Shell to open 75 more fuel stations

February 20, 2007. Oil giant Shell, the only global petroleum major to have a retail presence in the country, plans to open 75 more fuel stations in the country by the year-end, taking the total number to 100.  The company had bagged a licence for 2,000 fuel stations in India, but would like to move cautiously. Shell Global Solutions recently signed an agreement with the central government for increasing efficiency of four refineries of IOC, Chennai Petroleum Corporation Ltd, HPCL and BPCL.

Reliance's Yemen venture to come up in 3 years

February 15, 2007. The joint venture oil refinery project being undertaken with the Reliance group in Yemen would be completed within three years. The 50,000-barrels a day, $552-million refinery project was being undertaken through a joint venture with the Reliance group with investments from International Finance Corporation and some other investors.

Transportation / Trade

GAIL launches e-tendering service

February 15, 2007. State-owned gas major, GAIL (India) Ltd has launched ‘e-tendering’, in line with the ministry of finance directive that all government departments should switch over to e-tendering from July 1, 2007. The e-tendering tool meets the objective of public procurement process to be transparent, fair and equitable. With e-tendering tool efficiency would increase, as it aids faster decision-making and reduces the cost of transaction. This platform provides for digitally signed tender and bid documents for user authentication and has facility for vendors to upload queries.

Policy / Performance

W. Australia invites investments in energy sector

February 19, 2007.  The Government of Western Australia, which is keen on `widening and deepening' trade ties with India, welcomes investments in the energy sector. Western Australia's LNG output is expected to increase in the coming years unlike the output in most other countries that have LNG. China and India, as the largest growing economies in the region, are a target market. Companies there have tied up with China for long-term supplies and shipments have commenced. It also exports energy to Japan and South Korea. Western Australia hopes to promote such ties with India.

RIL to tie up with Italy’s ENI

February 20, 2007. India’s quest for overseas energy continues as Reliance Industries Limited (RIL) beginning to look at strategic partnership with European companies. In fact, a strategic cooperation agreement is under way between Italy’s oil and gas major ENI and India’s Reliance Industries Limited (RIL). ENI holds vast oil and gas reserves in Africa, the North Sea, the Gulf of Mexico, Caspian Sea, Australia, West Asia, Far East and India. ENI is very strong in North Africa and the Caspian Sea and is investing substantially in India and East Timor.

Govt to enforce rights to K-G basin pact

February 19, 2007. The govt is considering exercising its rights under gas production-sharing contracts.  Faced with a 40 per cent shortfall in its 2007 power generation targets, the government may soon enforce its rights under the gas production-sharing contracts for supply of gas from Reliance Industries’ Krishna-Godavari fields. Aimed at ensuring uninterrupted and adequate supply of feedstock for the new gas-based power projects (of about 10,000 MW capacity) to be set up in the next three years, these measures are being taken to prevent Reliance from diverting its gas supplies to other customers during the contract period. This will be achieved by capping the gas seller’s contractual liabilities after a discussion with gas suppliers and the lenders to the power projects. 

The second proposal is to strengthen the sellers’ covenants regarding maintenance of sufficient reserves during the contract period. This will ensure that the gas reserves based on which the supply contracts have been concluded are maintained and preserved to ensure uninterrupted supply. Another proposal is to have a definitive contract period (that matches the life of the power project for which supplies have been committed) and a fixed annual contracted quantity, instead of the current variable supply provisions. Inadequate and irregular supply of gas (mainly because of the rising demand from other sectors) has created a major problem for almost all the existing and proposed gas-based power projects in the country. Over 10 per cent of the total installed power generation capacity of 1,28,400 MW uses gas as the primary feedstock. 

Another reason for the government to consider these measures is its realisation that it will fall short by over 40 per cent of its target to create 41,000-MW additional power capacity in the Tenth Five-Year Plan,(ending March 2007). A major reason cited for this failure is the absence of assured gas supplies for power projects. In order to make good the shortfall it suffered in the Tenth Plan, the government now plans to complete gas-based power projects of about 10,000 MW in the next three years (gas-based projects have the least gestation period and hence are the preferred option in such situations) Almost all the new capacity will be based on gas from the Krishna Godavari basin.   

The government also believes that gas supply terms, acceptable to lenders of power projects, is the only critical issue that remains in the way of work commencing at NTPC’s power projects in Gujarat (of 2600 MW capacity) and Reliance-Anil Dhirubhai Ambani Group’s projects in Uttar Pradesh and Maharashtra (of 7,000 MW). The proposed 10,000 MW addition implies a more than 50 per cent addition over the capacity added during the last four years of the 10th Plan period.  The process would incur an investment of over Rs 50,000 crore in generation, transmission and gas pipelines. Domestic equipment suppliers like Bhel are expected to get orders of about Rs 30,000 crore from these projects. The projects will use domestic fuel, resulting in annual forex savings of about Rs 10,000 crore. 

Reliance to mop up $1.5 bn overseas

February 16, 2007. Reliance Industries is likely to raise around $1.5 billion (Rs 6,750 crore) from overseas markets for financing new projects. The company would mobilise the funds to meet capital requirements for oil and gas production, setting up special economic zones and expanding its retail business. Reliance had convened a board meeting on February 24 to decide the instruments as well as the quantum of the fund to be mobilised.  The board will also review its earlier decision to raise $2 billion (Rs 9,000 crore) to finance capital expenditure in the oil and gas production. The board had passed the decision on November 4. The oil and gas business is expected to generate one-fifth revenue by 2010. Now, its share in the total business is insignificant.  The majority of the proposed fund would be meant for the retail business, being run by Reliance Retail. The company plans to invest Rs 25,000 crore in the retail business. This comprises equity worth Rs 10,000 crore and debt worth Rs 15,000 crore.   Reliance Retail is rolling out its business all over the country as well as buying existing chains. It may meet its internal target of setting up 100 stores by March. With domestic interest rates going up, it made sense for the company to raise funds from the overseas markets. The high ratings of Reliance Retail’s parent company Reliance Industries would help access funds at lower rates. 

Petrol, diesel to cost less

February 15, 2007.  For the second time in three months, the UPA Government has announced a reduction in the retail selling prices of petrol and diesel by Rs 2 per litre and Re 1 per litre, respectively. Terming it as a move to check soaring inflation. The Government had announced identical price reduction in November last year. The burden of this price reduction will be met partly by revenue (in terms of duty restructuring) and partly through oil bonds already approved by the Government. The Finance Ministry is expected to announce duty adjustments such as cut excise duties in the course of the Budget presentation later this month. With this reduction, the retail-selling price at Delhi for petrol will be Rs 42.85 per litre and Rs 30.25 per litre on diesel. The prices have been reduced taking the average of the Indian crude basket for the first fortnight of February at $56.12 per barrel.

IOC in talks with venture partners

February 14, 2007. A solution to the commercial difference between the Government nominee, Indian Oil Corporation Ltd (IOC), and the joint venture partners in the Panna, Mukta and Tapti oil and gas fields may be round the corner. This is even as one of the joint venture partners ONGC is trying to persuade the other two partners - Reliance Industries Ltd and British Gas - to consider selling the produce from these fields to its subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL) instead of IOC.

On the issue of higher price offered by MRPL for the produce IOC, are paying the international price. The crude is benchmarked with Brent. 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 annually. If the joint venture partners agree, they would approach the Government to withdraw IndianOil as Government nominee for sale of oil from the fields. 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. 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.

POWER

Generation

J’khand signs pacts to generate 13,000 MW

February 16, 2007. Adhunik Thermal Energy Ltd (ATEL) on Thursday laid the foundation stone of a 270 MW thermal power generation station in the Seraikela-Kharswan district. Laying the foundation stone, Jharkhand chief minister said the state had signed up memoranda of understanding with different investors in the power sector for building power generating capacity up to 13,000 MW, most of which were big projects, viable only at coal pit-heads. The company plans to reach 1,000 MW generation capacity in three stages. While the first two stages of 270 MW each are to come up at the present site in Seraikela-Kharswan district, a third, to be a pit-head plant, is planned at North Karimpura. The first-phase power plant, coming up as an independent power producer (IPP), is to cost the company around Rs 1,200 crore. ATEL would require 24 months from the date land acquistion to start power generation. It has also entered into a power purchase agreement with Power Trading Corporation (PTC). Earlier this month, it had applied to Power Grid Corporation of India for evacuating/wheeling power from the generating station.

Gujarat may get more N-plants to generate power

February 15, 2007. With the Centre keen to increase its nuclear power generation capacity, it is likely that Gujarat may get few more nuclear reactors. At present, the state has two units generating 220 MW of power, at Kakrapar Atomic Power Station (KAPS) near Surat. France had expressed willingness to set up six plants in India, and there is a fair chance that some of them may come up in Gujarat. Apart from this, six other plants are also under construction in different parts of India. The government and site selection committee would finally decide on these matters. From the current 3,700 MW capacity, India is likely to touch 8,000 MW in the near future. Also, based on the progress visualised during the next two decades, by 2020, the target was to produce 20,000 MW of power. However, with Indian President suggesting that nuclear power plants should have a target of producing 50,000 MW of power, more large reactors are going to be introduced. The increasing cost of fuel sources like coal and oil from fossil materials had prompted many groups to consider alternatives, and nuclear energy was going to be a long-term solution till solar energy was made available on large scale. At present, there are four plants already in operation in Rajasthan and two more are under construction. Also, two plants of 1,000 MW capacity each were functioning at Kudankulam in Tamil Nadu. In Kaiga in Karnataka, apart from two nuclear power stations producing 220 MW each of power, two additional ones are being lined up.

Dabhol plant to go full steam soon

February 15, 2007. The Ratnagiri Gas & Power Pvt. Ltd.’s Dabhol plant will start generating power at full steam and Maharashtra will start getting around 2100 MW of power by November.  Dabhol working at full blast will give some respite to Maharashtra, which is facing power shortage of around 5700 MW.  One unit of 350 MW Dabhol plant, which is under repair, will get synchronised by the end of March, and Maharashtra will start getting complete 700 MW from the second block of Dabhol. Though requirement of gas for the Dabhol plant is around 2.1 million tonne, PetroNet Limited has assured of supplying 1.2 million tonne. However, the decision on whether to continue to run the block 2 on naphtha or go for spot buying of gas will be taken at a later stage. 

Kaiga to begin generating power by month end

February 15, 2007. The third unit of the Kaiga nuclear plant in Karnataka is expected to begin generating energy by the end of February but supply of power from it will be delayed. The 220MW reactor the 17th one in the country will be "made critical" by the end of February but its "commercialisation" may be delayed by over a month due to the non-arrival of critical turbine components from Ukraine. Though 99.9 per cent of the required components had arrived. The Shipping Corporation of India is trying its best to move the consignment to India as soon as possible but there was some logistic problem as the port in Ukraine is not visited directly by its ships, and SCI would have to depend on other liners. The turbine components have been loaded but it is a matter of time and SCI is trying their best to get them to us as soon as possible. Ukraine's industry was selected by NPCIL for supplying the critical equipment through a global tender. The process of rehabilitating unit one of the Narora atomic power plant was complete and that this was the first time that laser cutting and remote control devices were used to replace the coolant channel and feeder pipes. 

Korba coal attracts 10,000 MW addition

February 13, 2007.  Chhattisgarh is waking up to the potential of coal-based power, with a host of new projects and expansion projects centered around Korba industrial town, which sits on a coal belt. The Chhattisgarh State Electricity Board has not seen any addition to its capacity of 1300 MW during the last 15 years. Nor had the NTPC plant of 2100 MW. Balco, in which the government retains a stake after its privatisation, had enough power to meet its own needs but can help the state's grid.  With one of the lowest per capita consumption, Chhattisgarh is now adding 10,000 MW in stages and will soon be surplus in power. Work on the Korba east power plant is progress fast, after languishing under the earlier government, which took three years to clear the site. The present government has removed all obstacles in the way of an early commissioning.

Transmission / Distribution / Trade

Captive power plants want transmission networks

February 18, 2007. The Confederation of Captive Power Plants (CCPP) has urged upon the Orissa Electricity Regulatory Commission (OERC) to scrutinise transmission networks, which are often not available for open access to wheel power by captive generators to sell to highest bidders. The CCPP wants to sell power to consumers both within and outside the state as per market rates and demand. Often non-availability of corridors and transmission constraints are put forth to deny access to wheel power by the captive generating plants to consumers outside the state. In a regulated regime with market economy, it is important that power should be sold at the best price possible and must reach the most needy states. Even after four years of the enactment envisaging free flow of power from the surplus states to the power deficit states, it is a sad that not even 1 per cent of the power generated in Orissa is being allowed to be sold outside the state. The OPTCL, Gridco and SLDC should all gear up to play the role of nodal agency for short term open access customers and be technically prepared for the monthly state energy account and un-scheduled inter change account.

Policy / Performance

Access to nuclear fuel from Russian unit likely

February 20, 2007. India could get access to nuclear fuel supplies from the proposed Angarsk International Uranium Enrichment Centre being set up by Russia for supply of uranium to countries with nuclear energy programmes under the International Atomic Energy Agency (IAEA) safeguards. While Russia's Federal Atomic Energy Agency (RosAtom) representatives have indicated at the possibility of India being included in the project during bilateral meetings held earlier this year, Moscow has clearly linked India's participation in the project to the lifting of Nuclear Suppliers Group (NSG) restrictions in the wake of Indo-US nuclear deal. Fuel supplies from the facility could be considered for units being set up through Russian assistance in the country, once international clearances are in place. At present, Russia is building two power units in India with 1,000-MW light water reactors at Koodankulam and collaborations on about 10 new units are under way in the wake of the pact reached between India and Russia in January. Four of these would be additional units at Koodankulam station itself.

Indian power cos flock to Africa, Middle East

February 20, 2007. Indian power transmission companies are gearing up to go on an African safari. With Africa poised to make significant investments in power projects in the next four years, the Indian companies are increasingly flocking to the continent to win multi-million dollar transmission contracts. Apart from Africa, the Middle East has emerged as yet another destination for bagging transmission contracts. Both the regions could be spending about $ 20 billion in next four years on power transmission and distribution infrastructure. In the current fiscal, three to four major Indian players in this segment alone have bagged orders worth over $ 400 million from the two regions. Overall, the value of orders received by Indian companies would be much more.

Kalpataru Power Transmission Ltd has already executed contracts worth $ 50 million in Qatar, Algeria and Zambia and another $ 100 million worth contracts are under execution. The company expects to bag another major contract of $ 35 million from a Northeast African country. One of the oldest transmission companies in India, KEC International Ltd today has an order book of $ 665 million of which $ 530 million worth orders are from Africa, Middle East and Central Asia. About 80 per cent of its orders are from overseas market and only 20 per cent from India. It has presence in Algeria, Tunisia, Libya, Kenya, Zambia, Nigeria, Ethiopia and Ghana in the African continent and Oman, Kuwait and United Arab Emirates in the Middle East.

Accelerated power plan recast likely in Budget

February 20, 2007. The Centre is likely to announce a recast of its key reform tool in the power sector — the Accelerated Power Development and Reforms Programme (APDRP) — to provide a fresh impetus to the ongoing efforts to incentives States to turn around the power distribution sector. In the coming Budget, an announcement on the fine-tuning of some provisions of the Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY) is also likely. An announcement on increased focus on execution of projects in the power generation and transmission sectors on the basis of competitive bidding, as is being done in case of the Ultra Mega Power projects, is also expected.

The recast APDRP would focus entirely on the power distribution system and funds under the programme would be extended directly to distribution utilities, instead of the current system of routing it through state governments. This comes in the wake of instances of several states delaying transfer of APDRP funds to concerned distribution utilities. Private distribution utilities, which are currently not part of the scheme, are also likely to be made eligible for funds under the scheme from the next fiscal, they said. Performance milestones are likely to be made stricter and funds would be linked to clearly defined milestones and would be made project-specific.

Funds under APDRP, meant essentially for up gradation and modernisation of the distribution system, would be handed out to distribution utilities only on issuance of utilisation certificates for money cleared in the previous rounds. States are currently extended funds in the form of grants and loans in the ratio of 25:75 under the scheme. The RGGVY would also be continued during the Eleventh Plan and some restructuring of the provisions of the scheme is expected.

NTPC plans to raise $25.5 bn in debt

February 18, 2007. India's largest power producer plans to raise a whopping Rs 1,12,000 crore ($25.5 bn) in debt to finance its capacity expansion projects envisaged over the next 10 years. The state-owned company has charted a plan to raise its generation capacity from 27,000 MW to 75,000 MW by 2017 for which it plans to raise money from the financial markets including from foreign shores. The company, which currently accounts for 20 per cent of the country's power generation, has already started work on capacity expansion. It started work on the expansion of its Dadri thermal power plant. It is expanding its generation capacity by adding 2x490 MW from the present 4x210 MW. It also produces 817 MW power from gas at Dadri. This apart, NTPC is undertaking a 1,000-MW expansion project at Simhadri Power Plant near Visakhapatnam and is also setting up a 1,000 MW power plant at Ennore before March 2007.

Indian cos keen to tap Nepal's hydel potential

February 18, 2007. Nepal has an estimated hydropower potential of 1,00,000 MW but practically nothing is harnessed. The sector remains untapped, as the Nepalese Government has limited resources. Recently, the sector was opened to private participation and a number of Indian companies have also shown keen interest in developing the hydropower sector. The bids for Upper Karnali, Arun-III and Budhi Gandaki projects have already been called. The bids would be opened in a few weeks. Companies like Reliance, GMR Group, Tata, L&T and the J P Group have shown interest in developing these projects, which have the capacity to generate 300 to 600 MW.

Coal Min wants Rlys to bear losses in moving coal

February 18, 2007. The Coal Ministry wants the Railways to bear losses in transit of coal to power stations in excess of a specified percentage. The Ministry is proposing the insertion of such a clause in the tripartite agreement that is being hammered out among the three public sector units involved in coal-based power generation in the country.  According to a draft circulated by the Ministry of Coal, it has been proposed that if transit loss exceeds 0.5 per cent, it has to be borne by the Railways. The draft has also suggested that transit loss for this purpose should be worked out rake-wise, based on the readings of the weighbridges of coal companies and also power plants. For this, the Railways would have to allow weighing of rakes at both the loading and unloading ends.

The loss percentage now being proposed by the Coal Ministry is also in line with the norms set by the Central Electricity Regulatory Commission (CERC) for transit losses in the context of fixing tariff for power generated by utilities. Losses in transit of coal beyond this that are not made good by the transporter result in under-recovery of cost by the power utility. The draft tripartite agreement is aimed at ensuring regularity and committed quantities of coal supplies to the power plants run by NTPC. The draft that is under preparation seeks to spell out the responsibilities of the Railways in clear terms. The agreement would involve the purchaser, NTPC, the supplier, Coal India Ltd, and the transporting agency, the Railways.

The agreement aims to fix responsibility on the issues of quantity and quality of coal and timely delivery. As per current practice, the Railways is completely absolved of any responsibility of ensuring 100 per cent delivery of the booked amount. There have been many instances of rakes being diverted from one power plant to another. The power plants have complained on various occasions that the coal they have received is often 3-5 per cent less that what had been loaded by the coal companies.

Andhra likely to join leaders in nuclear fuel

February 16, 2007. Post the Indo-US nuclear agreement and on proposed uranium mining taking off, Andhra Pradesh may emerge among the top few states in the country, which would meet the increased requirement of nuclear fissile material for atomic energy development programmes.  Uranium Corporation of India Limited (UCIL) has zeroed in on two locations for uranium reserves in Nalgonda and Kadapa districts with a proposed investment of Rs 1,587 crore. These reserves were discovered in 1990 and 1991.   

In the case of Lambapur-Peddagattu project in Nalgonda, most of the pre-mining formalities including the in-principle clearance from the Union ministry of forests and environment are already in place. In the backdrop of initial hiccups involving apprehensions over the possible impact on environment and health due to mining of the radio active material, both the Centre and the state governments are moving gingerly yet firmly on the issue while trying to address the concerns of the local people.   The proposed mining of new uranium reserves in the state and elsewhere keeping in view the country's ambitious nuclear energy development programmes proposed for the Eleventh Five Year Plan.  From the national perspective, the proposed Andhra operations in uranium mining assume greater importance given the size of reserves and the availability of nuclear fuel here. 

 About 411 tonne of uranium is expected to be produced annually from the uranium ore extracted from the two locations, which would be enough to generate thousands of mega watts of power. This would be a substantial addition when compared with the existing production of uranium in India.  The reserves in these two locations can last up to 30 years at the projected rate of mining. UCIL is planning to produce 1,250 tonne and 3,000 tonne of uranium ore a day from Nalgonda and Kadapa mines respectively.   

A kilogram of coal or oil can generate 3-5 KwH (units) of power whereas about 60,000 units of power can be generated from the same quantity of uranium through fission technology.  The proposed availability of uranium from Andhra mines can support an additional installed capacity of over 3,000 MW, compared with the country’s present installed capacity of over 3,500 MW in the nuclear sector. The country’s energy planners propose to increase the nuclear energy capacity to 20,000 MW by the year 2020.   

MERC seeks explanation from MSEDCL on AP power purchase

February 16, 2007. The state power regulator sought an explanation from Maharashtra Electricity Distribution Company Ltd (MSEDCL) on its decision to purchase power from Andhra Pradesh instead of opting for the proposal submitted by the National Thermal Power Corporation (NTPC). The Maharashtra Energy Regulatory Commission has received a letter from NTPC stating that MSEDCL has chosen not to take gas from the company’s Kawas power project.

It has proposed to increase the load-shedding by one hour in urban and industrial zones and by two hours in agriculture dominated and other regions. MSEDCL has introduced an additional staggering day for industrial users. MSEDCL maintained that the NTPC project was not feasible since the power would be available only at night.  The Kawas project based on gas could only go up to a frequency of 49.4 MW and this was not good for the system. The demand had increased; the availability had not increased in the same ratio. The total shortfall in the state currently stood at 5,600 MW. The Parli and Paras units projects that would have generated around 500 MW have been delayed. The total expected generation from RGPPL was 1,440 MW. However, the company commissioned a single block of 770 MW and generation was limited to 330 MW. The Tata Power project was not functioning currently. The high growth in demand in the last two years in all categories and non-availability of power had resulted in overdrawal from the grid.

NTPC, Bharat Earth movers sign JV MoU

February 15, 2007. NTPC Ltd had signed a memorandum of understanding with Bharat Earth Movers Ltd for a joint venture company to collaborate on coal mining and production. BEML's equipment will be used in mining and developing coal blocks that NTPC owns.

Captive plants can power industries during crisis: Maha

February 15, 2007. The Maharashtra government failed to provide any major relief for over 2.50 lakh industrial units which have been asked to close down twice-a-week for want of power. The government asked industries to draw about 450 MW from captive power projects and nearly 600 MW from various other sources if not keep their units closed for two days. Industries have feared that the decision would lead to an annual loss of Rs 5,000-Rs 7,000 crore. Besides, several existing units may prefer to shift their operations to the adjoining states. Industries representatives argued that the severe power shortage might not only force the investors to rethink about setting up their projects in Maharashtra, but could set off a spree of exodus of the existing units to other more hospitable states.

Duty cut on import of capital goods for captive power plants likely

February 14, 2007. The Budget for 2006-07 may bring cheer to many standalone companies and corporate groups who are contemplating setting up captive power plants to meet their requirements instead of depending on uncertain supplies from the State\electricity boards or through the national grid. In order to encourage industrial units achieve self-sufficiency with respect of their power requirements, the Government is examining the option of reducing customs tariff for captive power plants and their spare parts from the existing 12.5 per cent to 5 per cent. As of now, import of all capital goods required for setting up small and medium power project attracts a 12.5 per cent duty. However, taking into account a 16.32 per cent countervailing duty and an additional 4 per cent special countervailing duty, the net effect comes to 36.73 per cent. The proposal under examination is to bring down import duty on all capital goods imports for setting up small and medium captive power plants. However, the plan does not include similar exemption for non-captive units even though they might qualify to be small and medium sized units.

The Finance Ministry has begun the exercise following recommendations from the Ministry of Chemicals and Petrochemicals. The move is likely to help chemical manufacturers in particular as the chemical industry is a heavy user of power, which is required to catalyse their various processes. Moreover, since the industry has a very large number of units spread across the country, off late many of them have expressed plans to set up captive power plants because of the uncertainties in supplies leading to production breaks.

Sasan stake sale being examined by PFC

February 14, 2007. The fate of the Sasan ultra mega power project hangs in fire as Power Finance Corporation, the nodal agency for UMPPs, is examining the change in ownership of Globeleq Singapore after it was acquired by Lanco and JSPL. Globeleq has announced that it has sold its entire 70 per cent stake in the Sasan project to Lanco Infratech and Jindal Steel and Power Ltd (JSPL). Even a change in ownership of Globeleq Singapore does not impact Sasan as long as the company is involved in the project. There is a problem only if Globeleq is totally out of the project. The UK-based power investment firm had partnered Lanco Infratech in the Sasan project through its holding company Globeleq Singapore Pte Limited. Prince Stone Investments Limited is the holding company of Lanco Infratech Limited. Globeleq's selling of its equity holding in Sasan has raised questions on the validity of the award of the ultra mega power project to Lanco-Globeleq. More PTI SRS KM 02141506 DEL It remains to be seen whether the government will accept the change in ownership of the lead developer of the project at this stage. PFC had earlier said that the terms and conditions for the project are applicable only if they (Lanco and Globeleq) are together. The project is awarded to a consortium and in case Globeleq dilutes its stake below 51 per cent then they are out and the project will go to L2.

According to the new ownership structure, Lanco would have a total stake of 72 per cent in the Sasan project while Jindal would initially hold 28 per cent with the option to raise it to 49 per cent later. Globeleq along with its Indian partner Lanco Infratech had recently won the 4,000 MW Sasan ultra mega power project quoting a tariff rate of Rs 1.196 per unit.

Mahavitaran gets $0.3 bn for drawal of costly power

February 13, 2007. The crisis-ridden Maharashtra cabinet cleared Rs 1,365-crore ($0.3 bn) aid to the Maharashtra State Electricity Distribution Company (MahaVitaran) to tackle power deficit by purchasing costly power from various sources. The fund would be released to only after the clearance from the state election commission as the code of conduct is in place for the elections of 27 zilla parishads and 310 panchayat samitis slated for March 11. The drawal of costly power at Rs 8.38 per unit from Andhra Pradesh would alone Rs 300 crore each for next four months months. In addition to this, the power would also be purchased from the Ratnagiri Gas & Power Pvt Ltd, Lanco Infratech and NTPC. The power drawal from these companies would range between Rs 6.50 and Rs 8 per unit.

INTERNATIONAL

OIL & GAS

Upstream

S. Korea aims to secure 17 bn barrels of gas, oil by year's end

February 20, 2007. South Korea plans to secure 17 billion barrels of overseas gas and oil reserves by the end of the year as part of efforts to ensure stable energy supplies. The government is seeking to expand holdings in gas and oil fields that it controls by 3 billion barrels during the year.

Dana gas to drill 15 new wells in 2007

February 20, 2007. Dana Gas, the Middle East’s first regional private-sector natural gas company, has announced an active drilling program for 15 wells in Egypt in 2007 by its exploration and production subsidiary, Centurion Energy. Ten exploration and five development wells are planned, with target depths ranging from 1,000m to 4,000m. The company is currently the sixth highest gas producer in Egypt, and among the nine highest producing companies by production of barrels of oil equivalent (boe), out of the 64 companies that are active in Egypt’s oil & gas sector.

Chevron awarded new acreage offshore Australia

February 19, 2007. Chevron Corporation announced that its subsidiary Chevron Australia Pty Ltd has been awarded the exploration rights to acreage in the highly prospective Greater Gorgon Area located off the northwest coast of Australia. Chevron Australia will be the operator of the block and will hold a 50 percent interest; the Australian subsidiaries of ExxonMobil and Shell will each hold a 25 percent interest. The W06-12 permit area in the Carnarvon Basin covers an area of approximately 1,150 square miles and lies approximately 60 miles northwest of the Australian coastline. The Carnarvon Basin, Australia's premier petroleum basin includes both the North West Shelf and Greater Gorgon Area resources. The three-year work program for the permit area includes geotechnical studies, approximately 110 miles of 2-D seismic reprocessing, 650 square miles of 3-D seismic survey acquisition and the drilling of an exploration well. Seismic work will begin this year. There is potential for a further three-year work program.

PetroVietnam signs offshore exploration deal

February 15, 2007. Exploration for oil and gas will be growing with an agreement between the Vietnam Oil and Gas Group (PetroVietnam), Pearl Oil (Taconite) Limited, Serica Energy Corporation and Lundin New Ventures B.V to explore and develop Block 06/94 offshore Vietnam. The companies signed the production sharing contract in Hanoi. The block covers over 4,100 square kilometers and lies in the Nam Con Son Basin to the south of Vietnam's continental shelf. The partners intend to invest US$49.3 million in evaluating seismic data. Three exploratory wells may be drilled during the first three years of the project.

Total awarded three North Sea exploration licenses

February 15, 2007. Total has been awarded the three production licenses it applied for under the 24th Oil and Gas Licensing Round of the United Kingdom's Department of Trade and Industry. Total will have a 36 per cent interest in Blocks 206/3 and 206/4. Located 80 kilometers west of the Shetland Islands, the two blocks enhance the gas potential of the area near the Laggan prospect. Total was also awarded a 100 per cent stake in Block 3/8F in the Alwyn Area, approximately 420 kilometers North-East of Aberdeen. The award of these blocks reflects Total's commitment to actively pursuing exploration on the U.K. Continental Shelf and contributing to the development of the North Sea's oil and gas resources.

NISOC planning to develop southern gas reserves

February 15, 2007. The National Iranian South Oil Company (NISOC) is planning to develop gas reserves of the country’s southern regions, with the aim of increasing natural gas and gas condensate production. NISOC is pursuing a plan to complete the development of gas reserves at the company’s operation areas, the southern regions of Iran. The plan would cause an increase in natural gas extraction by 1000 million cubic feet per day and a rise in gas condensate production by 100,000 bpd. Under the plan, Marun, Paznan, Karanj, Aghajari, Milatun, Rag-Sefid, Bibi-Hakimeh, and Qale-Naar are to be developed. Scheduled to finish within four years, the plan is estimated to cost $1.195 bn. The drilling of 31 wells, the construction of four to five gas and liquid gas plants, the establishment of two plants to reduce ethane, and the establishment of gas conveyance pipelines are required for the development of the reserves.

L&M to drill up to six Southland wells this year

February 14, 2007.  Christchurch-based petroleum explorer L&M Petroleum Ltd, listed last month on the New Zealand and Australian stock exchange, is planning to drill as many as six wells this year in the Western Southland Basin at the south of the South Island. The first well in the program would be Eastern Bush-1 in the 1123 sq km Waiau Basin PEP 38226 north of Tuatapere. The well was expected to spud in early April and will be drilled to a total depth of about 2500m. Eastern Bush-1 will be targeting a feature on the Tuatapere anticline, which is closed over 4.9 sq km with a 550m vertical closure at the top of the late Eocene Beaumont Formation. The report by Sydney-based independent geologist Global Capital Resources, estimates potential recoverable resources of 127 mmbbls oil in the Eastern Bush structure.

Under a farm out agreement, North Island energy company Mighty River Power has agreed to fund the drilling of the Eastern Bush well and in return will earn 50% of any discovery. It will also earn an option to drill a second well within the PEP 38226 area for which Mighty River would earn a 50% interest in the well discovery. After Eastern Bush-1 the company also plans to drill a gas prospect Dean-1 in the north-western part of the permit. The Dean prospect has a potential recoverable resource of 100 bcf in the Miocene turbidities, which have developed in the Bellmount fault system. Further seismic is being carried out to identify the best location to site the Dean-1 well.  After Dean-1, a well would be drilled at Merton Creek-1, just north of Eastern Bush-1. It would target not only the Beaumont Formation but also the early Miocene Clifden limestone as a secondary target. Merton Creek-1 has an estimated potential recoverable resource of 7mm bbls of oil.

A second well at Sharpridge Creek is also planned in the second quarter of 2007 using the Washington Exploration rig that was used to drill the Sharpridge Creek-1 well. L&M recovered small quantities of gas and traces of oil at Sharpridge Creek-1 last year. Dip meter data indicated the first well was drilled on the flank of the structure. The shallow Sharpridge Creek prospect in the Beaumont formation has the resource potential in the order of 2-3 mmbbls of oil. More seismic is also being carried out by L&M over this prospect to define the crest of the structure. Eastern extension well, is currently being evaluated for possible drilling in the second half of 2007. In addition to the new seismic data at Sharpridge Creek and Dean, L&M is also considering acquiring a program of new seismic over the wider Waiau Basin. In 2008 the company also expects to drill a number of other prospects in PEP 38226. In L&M Petroleum's Te Anau Basin permit (PEP 38230) the company is currently interpreting the seismic data acquired earlier in 2006 and hopes to drill it's first well later in 2007.

Russians interested in exploring Guyana's oil sector

February 14, 2007. Russian companies are interested in exploring for oil in Guyana. The companies will meet with the Guyana geology and mines commission to see which blocks are available. Meeting dates were not provided. Guyana has a few onshore and offshore blocks available, although a significant part of the offshore areas already have been awarded. Companies that hold exploratory licenses are ExxonMobil, Repsol YPF, Century Guyana and CGX Energy. Exploratory work is pending the resolution of a border dispute with Suriname.

Hydrocarbon discovery in Nicaragua

February 14, 2007. Norwood Resources Ltd. has discovered gas, condensate and light oil in eight separate zones in its exploration well, the San Bartolo Rodriguez Cano #1, on its Nicaraguan onshore concession. The discovery was made below 6,000 ft in various turbidite sands of the Paleocene Brito formation and achieved a total drilled depth of 8,790 ft with a bottom hole deviation of 11.5 degrees. The company has logged the well and independent petrophysical analysis combined with core analysis has assigned a combined 532 ft of pay, including 232 ft of conventional pay and another 300 ft of naturally fractured low permeability sands in eight separate zones. Completion planning, testing and stimulation design will take several weeks due to the number and variability of pay zones. The San Bartolo #1 has been cased and cemented to 8764' with 7" casing. As this is the first exploration well in Nicaragua in over 35 years and the first onshore to this depth, drilling took 47 days. The rig is now moving the 11 Kms to the Company's original #1 location, the Las Mesas structure, which is up dip from the San Bartolo structure. Amplitude and velocity seismic sections indicate similar but shallower Paleocene Brito sands at this location.

CNOOC begins production from China

February 13, 2007. China National Offshore Oil Corporation (CNOOC) has begun producing oil at the smallest offshore oilfield China has discovered. China has edged to the forefront of the globe in cost-effective offshore oil exploration technology. It is widely considered that the smaller an oilfield is, the more difficult it   is to explore it. Industry experts believe that if an offshore oilfield has a workable reserve of less than 3 million cubic meters, it is too costly to be explored. Dubbed Bozhong 34-5, the small oilfield has a workable reserve of only 1.8 million cubic meters. Founded in 1982, CNOOC has developed 51 oilfields and gas fields and has been listed on the Hong Kong and New York stock exchanges. Last year, the CNOOC produced 40.33 million tons of oil equivalent compared with 90,000 tons in 1982. Its annual sales income reached 120.8 billion yuan (15.7 billion U.S. dollars), as against 394 million yuan (51.2 million U.S. dollars) 25 years ago.  CNOOC's output is expected to reach 100 million tons of oil equivalent by 2010.

Downstream

Indonesia mulling construction of refinery fed by Iranian crude

February 19, 2007. Indonesia is mulling over setting up a home refinery, which is planned to be fed by Iran’s southern Sorush and Noruz crude oil. The refinery would have a capacity of 300,000 barrels per day, and would be fed by the crude oil produced from Iranian Sorush and Noruz oilfields.

China's CNPC wins approval for $2bn refinery project

February 17, 2007. China National Petroleum Corp the nation's largest oil producer has won the official green light to build a refinery for 15.2 billion yuan ($2 bn). The refinery, to be located at Qinzhou city in the Guangxi Zhuang region, will have an annual processing capacity of 10 million tons, the largest in southwest China. It is expected to come on stream before 2008 and play a crucial role in the country's new energy grid. Sinopec, the country's biggest refiner and a major rival of CNPC, admitted the refinery may impose some competition as it will reduce CNPC fuel transport costs to the region and make retail prices more flexible. Sinopec planned to build an eight-million-ton refinery in the same region but failed to obtain approval from the commission. The refinery, which will mainly be supplied by crude oil pumped out of the company's overseas fields, will be targeting primarily the southwestern market.

Abu Dhabi to set up $5bn oil refinery in Pak

February 15, 2007. Abu Dhabi will establish a $5 billion crude oil refinery in Pakistan, having a refining capacity of over 100 million barrels per year. The Abu Dhabi IPCI agreed to set up Khalifa Coastal Refinery in Hub, Balochistan. The refinery will have a capacity to refine 102.7 million barrels of crude oil per annum. The IPIC will hold 74 per cent while the Pakistan government will own 26 per cent stake in the project. The ground-breaking ceremony of the project will take place next month. The refinery would substantially boost Pakistan’s capacity to refine crude and also create job opportunities for thousands of skilled and unskilled people in the country. The economic growth in Pakistan has created vast opportunities for oil refining companies to make money as energy demand is rising sharply. It is not only the oil and gas but the power sector has also great potential to yield huge profits for investors.

Transportation / Trade

Kazakh government sees new tender for oil block N

February 16, 2007. Kazakhstan's the Central Asian state will hold another tender for a Caspian oil development that ConocoPhillips (COP) and Royal Dutch Shell PLC (RDSA) bid for as its reserves are likely to be revised upwards. Shell and ConoccoPhillips, as well as other oil companies, still seem to be interested in participating in a new tender for the block.  The Project N holds about 637 million metric tons of oil equivalent. The development is located in the southern part of Kazakhstan's section of the Caspian sea, about 15 kilometers from shore.

Myanmar keen on longer route for gas pipeline

February 16, 2007. Myanmar is eager to have the natural gas pipeline to India laid along the longer route through north-east India bypassing Bangladesh, so that Yangon can forge closer economic and defence ties with Delhi. Although Bangladesh is talking of reviving the stalled tri-nation gas pipeline project by diluting India’s status to a buyer from that of a strategic partner, Yangon wants India to go forward with the alternative route as it would get a $20 million soft loan and a power station.

Dhaka recently said it must be allowed to import electricity from Nepal and Bhutan through India, and India must allow it to correct the trade imbalance if the pipeline is to pass across Bangladesh. Following this, India backed out of the $1 billion plus project, saying that bilateral issues should not be part of a trilateral agreement. India, Bangladesh and Myanmar had signed the agreement in February 2005.

In 2006, GAIL India Ltd said it had completed a feasibility study for laying a 1,400 km pipeline at a cost of $3 billion from Sittwe in Myanmar to Gaya in Bihar via Mizoram, Assam and West Bengal. The pipeline would be constructed along the banks of Myanmar’s Kaladan river, an area with a population of over 1 million in which 98% do not have access to electricity. In case India agrees to this pipeline, its Exim bank would extend Yangon a soft credit of $20 million and set up a power plant there.

Honeywell wins $13.5 mn gas contract

February 15, 2007. Diversified manufacturer Honeywell International Inc. has been awarded a $13.5 million contract to help manage a natural gas production system and pipeline in the Middle East. The natural gas project is owned and operated by Dolphin Energy, a state-owned company in the United Arab Emirates. The company also lists Total SA of France and Occidental Petroleum as minority shareholders. It will help Dolphin streamline its data management by reducing the manual entry of data and ensuring that information is transmitted efficiently. It will also help Dolphin better manage its supply chain and production. Dolphin's natural gas project includes two offshore oil platforms near Qatar, onshore processing facilities and an undersea pipeline to customers in the United Arab Emirates.

US FERC OKs 2 LNG terminal projects in Mississippi

February 15, 2007. The Federal Energy Regulatory Commission gave final approval to two liquefied natural gas import terminals along the Mississippi coast. The LNG Clean Energy Project, located in the Port of Pascagoula, will be able to send out up to 1.5 billion cubic feet of gas a day. The $450 million terminal, which will be owned by the Houston-based private investor group Gulf LNG Energy LLC, will be able to handle 150 LNG tankers a year. Separately, Chevron Corp's Casotte Landing LNG project will be located next to the company's Pascagoula refinery and will process imported LNG for distribution to industrial, commercial and residential customers in Mississippi and the Southeast region, including the growing Florida market. The terminal will be able to send out 1.6 billion cubic feet of LNG a day. Both LNG terminals are expected to be in service in 2009.

Brazil Petrobras plans to bring 2 new platforms on stream in May

 February 14, 2007. Brazilian state-run oil company Petroleo Brasileiro SA (PBR), or Petrobras, plans to bring two new oil platforms on stream along with two other large platforms.  The four platforms will have a combined output capacity of 480,000 barrels of oil a day. Petrobras has also scheduled to bring a small platform on stream that is slated to produce 20,000 b/d from the Piranema field off the coast of northeastern Sergipe state. Petrobras had originally planned to bring the Piranema platform on stream. The company also plans to start production at its FPSO Cidade de Vitoria platform that is slated to add another 100,000 b/d to output from the Golfinho light oil field.

The most massive ramp-up is planned, when Petrobras wants to bring two new platforms on stream - the P-52 and the P-54 - that will each have a capacity to pump 180,000 b/d from the Roncador field. Production at the P-50 rig which Petrobras took on stream last April now has reached 170,000 b/d, he said. Spanish-Argentine energy company Repsol-YPF (REP) has a 10% stake in production from the P-50. Petrobras expects to produce an average of 1.919 million b/d of oil from its Brazilian fields in 2007, up from an average output of 1.778 million b/d in 2006. Petrobras now is producing 30,000 b/d at its FPSO Capixaba unit, which it took on stream at the Golfinho field off the coast of Espirito Santo State in May 2006. That unit is expected to pump 60,000 b/d by June.

Petrobras currently produces 12,000 b/d at its FPSO Rio de Janeiro, which it took on stream at the Espardarte field in January, half a year ahead of its original schedule. The rig is expected to produce 80,000 b/d by August and has an output capacity of 100,000 b/d. Petrobras now produces about 20,000 b/d at its P-34 platform, which is expected to reach its output peak of 60,000 b/d in June. The company had started production at the P-34 in December.

British firm signs gas supply deal with Nigeria

February 14, 2007. British firm BG Group has signed a sale and purchase agreement to buy 2.5 million metric tones of liquefied natural gas from Nigeria. Under the deal, BG Group will acquire the gas for 20 years from the seventh production line of Nigeria Liquefied Natural Gas (NLNG) in Finima, Bonny Island, Rivers State. Cargoes will be delivered to BG's North American marketing business at Lake Charles, Louisiana, in the United States. This agreement with NLNG adds to their existing supply arrangements through trans 4 and 5, which came into effect last year. It enhances the profitable long-term growth of BG's LNG supply portfolio and reflects the strength of BG's competitive position in the Atlantic Basin. The multi-billion-dollar NLNG, which is co-owned by the state-run oil operator NNPC, Anglo-Dutch group Royal Dutch/Shell, Italy's Agip and France's Totalfina Elf, started operations in October 1999. The massive LNG taps Nigeria's massive gas reserves and aims to reduce the wastage of gas associated with the country's major oil industry. It has buyers in Europe and the US.

Iran, China seek gas deal

February 14, 2007. It will take a year to finalize a $20 billion deal to develop Iran's northern Pars gas field with China National Offshore Oil Corp (CNOOC). Pars Oil and Gas Company (POGC), is a unit of state-owned National Iranian Oil Company. Previous reports have valued the deal at $16 billion. Completing development of the northern Pars gas field would take eight years.  CNOOC, which leads China's fledgling LNG industry and is the parent of Hong Kong and New York-listed CNOOC, will own 50 percent of the LNG produced in this field. China's Sinopec Group, parent of Sinopec, is meanwhile negotiating a deal to develop Iran's Yadavaran field and to buy 10 million tons of LNG per year for 25 years.

Turkey keen on cooperation with Iran on energy

February 14, 2007.  Turkey gave importance to cooperation with Iran on energy. The cooperation of the two states on the transit of energy is promising. The most important plans is the participation of Iran in NABACO Plan by which Iranian natural gas and that of the Central Asian states will be transported to European countries via Turkey.

Refinery for Eastern Siberia pipeline to cost $5-7 bn

February 14, 2007. A refinery to be built at the terminus of the Eastern Siberia-Pacific Ocean oil pipeline will cost an estimated $5-7 billion. The refinery will have a capacity of 20 million metric tons of oil a year. The same can be build in two stages, each with a capacity of 10 million metric tons a year. The Eastern Siberia-Pacific pipeline is slated to pump up to 1.6 million barrels per day of crude from Siberia to Russia's Far East, which will then be sent on to China and the Asia-Pacific region. The company was considering acquiring oil-refining assets in Russia and abroad to bring the volume of refining to 50% of crude output.

The first leg of the Eastern Siberia-Pacific project, operated by Russian state-owned oil pipeline monopoly Transneft, is expected to be completed in the second half of 2008. It will link Taishet, in the Eastern Siberian region of Irkutsk, to Skovorodino, in the Amur region, in Russia's Far East. The Kozmino terminal and the Taishet-Skovorodino pipeline, with an annual pumping capacity of 220.5 million barrels, constitute the first leg of the project. The second leg will involve the construction of a Skovorodino-Kozmino pipeline, to pump 367.5 million barrels per year, and the increase of the Taishet-Skovorodino pipeline's capacity to 588 million barrels.

Total, Nigeria LNG sign sale and purchase deal

February 13, 2007. Total’s wholly owned gas and power trading and marketing company Total Gas & Power Limited (TGPL) and Nigeria LNG Ltd (NLNG) has signed a Sale and Purchase Agreement (SPA) for 1.375 million tonnes per annum (MTPA) of liquefied natural gas to be produced by NLNG train 7 for a period of 20 years. The LNG is expected to be delivered to the United States and Mexico to meet the increasing demand for natural gas in those countries, and in particular to Total's regasification capacity at the Sabine Pass and Altamira LNG terminals. With five trains already in operation and Train 6 expected to commence operations at the end of 2007, NLNG is a market leader in the LNG industry. The Train 7 expansion project, with an 8.4 MTPA capacity, will bring the capacity of the Bonny LNG plant to nearly 30 MTPA. Total holds a 15% stake in NLNG. With the signing of this agreement, long-term purchases of LNG contracted by Total are expected to grow to over 10 MTPA.

A trailblazer in the LNG industry since 1964, Total has interests in six of the world's largest liquefaction plants. The total capacity of these six plants represents around 40% of global LNG production capacity. Approximately 30% of the gas produced by Total in 2006 was dedicated to the LNG industry. Total is strengthening its position across the LNG chain, to acquire a stake in Brass LNG in Nigeria, in the Ichthys LNG project in Australia and in the Qatargas 2 project in Qatar. After entry into the South Hook terminal, Total also holds now interests in five regasification terminal projects to ensure additional markets for products from the Middle East, the Gulf of Guinea and, in the near future, Northern Europe.

Russia seeks new export routes for its oil

February 13, 2007. Russia served notice to former satellites Belarus and Lithuania of its determination to bypass them in bringing its oil to European customers. The world's number two oil exporter is speeding plans to build an export pipeline to the Baltic port of Primorsk. The new route would avoid Belarus, which incensed the Kremlin last month by imposing a transit duty on Russian crude in retaliation for Moscow's decision to end fuel subsidies. The dispute halted Russian oil supply to Europe through Russia's main export artery, the Druzhba pipeline.

Policy / Performance

OPEC can avoid further oil output cuts: CGES

February 20, 2007. The Organization of the Petroleum Exporting Countries does not need to make any further output cuts to support oil prices, the Center for Global Energy Studies said in a report published. This is because lower output, recent cold weather across much of North America and slower than expected non-OPEC output growth has reduced supplies. The report comes after Iran’s oil minister had predicted that OPEC would not need to make a further reduction at the cartel’s next meeting on March 15, as long as the price of crude remains around current levels. Oil prices have been trading in a range between $55 and $60 during recent weeks. In December, OPEC decided to cut production by 500,000 barrels per day (bpd) from Feb. 1, following a reduction of 1.2 million bpd in November. The moves were aimed at propping up prices, which had tumbled from record highs above $78 per barrel in the middle of last year.

 

Russia forecasts oil, gas exports growth by 2010

February 19, 2007. Russia's economics ministry forecasts growth in oil exports to 273 million metric tons (some 2 billion barrels) and natural gas exports to 221.6 billion cubic meters. In 2006, Russia's oil exports totaled 249.9 million tons (1.8 billion barrels) and natural gas exports 201.1 bcm. The gas exports forecast is based on "the demand of the European market, the beginning of LNG exports under the Sakhalin II project and Gazprom's data. Sakhalin II oil and gas project in Russia's Far East, which was formerly led by Shell and was recently subjected to months of intense pressure from Russian authorities, has estimated reserves of 150 million metric tons (1.1 billion barrels) of oil and 500 bcm of natural gas.

In December 2006, Russian energy giant Gazprom acquired a 50% plus one share in the Sakhalin II liquefied natural gas project for $7.45 billion. Oil exports could increase to 260 million metric tons (1.9 billion barrels) in 2007 due to the growing demand on the European market and additional exports to the energy-hungry Asia-Pacific region via the Eastern Siberia-Pacific pipeline. The pipeline is slated to pump up to 1.6 million barrels per day of crude from Siberia to Russia's Far East, which will then be sent on to China and the Asia-Pacific region. The first leg of the project, operated by Russian state-owned oil pipeline monopoly Transneft, is to be completed in the second half of 2008. The ministry also said exports of oil products are expected to stabilize at the level of 104 million tons in 2007-2009 and to reach 106 million tons by 2010.

Iran in talks with Caspian Sea neighbors on gas swap to Europe

February 19, 2007. Iran is negotiating with its Caspian Sea neighbors over swapping gas to Europe. Iran is in talks with Caspian Sea littoral states such as Turkmenistan to use them as its routes for exporting gas to Europe. Iran would export gas in the form of liquefied natural gas (LNG). The volume of gas exports by Iran would increase in 2012. The Oil Ministry has achieved to attract more foreign investment in the second half of the current Iranian year than the first half of the year.

Venezuela, Trinidad agree on gas field split

February 17, 2007. Venezuela and Trinidad and Tobago have agreed that nearly 75 percent of the natural gas in the Loran field straddling their maritime border belongs to Venezuela. The two countries agreed in 2003 to negotiate the carving up of offshore gas reserves to avoid conflicts over how much belonged to each side, a process known as "unification" of reserves. A bi-national committee determined the Loran field, part of an area called the Deltana Platform, has about 10 trillion cubic feet of natural gas, some 7.3 trillion of which belong to the South American country. The committee also determined that the Dragon gas field in Caribbean waters north of Venezuela was not linked to adjacent gas fields in Trinidadian waters and therefore will not be subject to a unification proceeding. Venezuela's government is seeking to expand its natural gas operations after years of relying mostly on its oil industry, which provides around 11 percent of U.S. crude imports.

Bankers see busy oil and gas deal outlook for '07

February 16, 2007. Investment bankers expect brisk deal activity in the energy sector in 2007, as high oil prices stir stiff competition for production reserves and as capital from private equity and hedge funds freely flows into the group. Last year was a record year for the global utility and energy sector, as the value of deals soared more than 80 percent over 2005 to more than $357 billion. Looking ahead in the oil and gas sector, analysts and investment bankers see potential for continued private equity interest in pipeline companies and assets that independent producers are selling, a leveraged buyout in the oil services sector and hostile takeovers. Also, high energy prices have spurred governments in other countries like Ecuador and Russia to take a harder line on production contracts.  

Kazakhstan says planned Kashagan start is 2010

February 16, 2007. Kazakhstan did not expect delays in the startup of the huge Eni-led Kashagan oilfield to extend beyond 2010, following reports that the $15 billion project could be pushed back to 2011-12. The delay was mainly down to the complex geology of the high-pressure reservoirs and the dangers posed by the high concentrations of deadly hydrogen sulfide gas they contain. Kashagan, the world's biggest oil discovery in 30 years, is crucial to Kazakhstan's goal to become a top 10 producer by 2015 but has been beset by higher material costs and delays due to complicated engineering work. The launch of production has been repeatedly put back by Agip KCO, from 2005 to 2008, then 2009, while Kazakh officials have recently been talking of 2009-10. The price tag has soared to around $15 billion compared to original projections of $10 billion for Kashagan, which lies in a shallow part of the Caspian Sea where temperatures drop to minus 40 degrees Celsius in winter.

OPEC maintains oil demand growth for 2007

February 16, 2007. The Organisation of Petroleum Exporting Countries (Opec) maintained its estimate for the growth of oil demand in 2007 at 1.5 percent, in line with its previous monthly report. It expected world oil demand to grow by 1.2 million barrels per day or 1.5 percent in 2007, after unusually warm temperatures in the northern hemisphere winter dropped recently. It expected demand for OPEC crude to average about 30.25 million bpd, down 150 000 bpd from its 2006 estimate. The price of the OPEC reference basket of eleven crudes fell by 12 percent to an average $50.73 per barrel in January, its lowest level since May 2005. Opec estimated growth in developing countries, not including China, to grow by 5.7 percent in 2007 from 6.3 percent in 2006. The non-Opec oil supplies averaged 49.5 million bpd in 2006, up 500 000 bpd from 2005 but down 78 000 bpd from its January estimate. For 2007, Opec predicted 50.7 million bpd, revising its previous figure down by 173 000 bpd

Bolivia, Brazil agree to hike in gas prices

February 15, 2007. Brazil will pay as much as 11 percent more for natural gas from Bolivia under a deal their presidents signed that could resolve a year of strife between the South American neighbors. Brazilians will pay more for electricity, automobile fuel and cooking gas as a result of the accord reached by President and Bolivian President. Both leaders declared the impasse over and said their nations' often-tense relations will improve though top ministers from each country gave differing estimates on how much prices would rise. Under a complicated formula, Bolivia will get about $144 million more per year from Brazil for the gas. Brazil paid Bolivia nearly $1.3 billion for the fuel last year.

Turkey warns Cyprus to cancel exploration tender

February 15, 2007. Turkey warned Cyprus to cancel tender for oil exploration and drilling rights off the coast of the divided island that it shares with a breakaway Turkish Cypriot community. Continuation of the tender process will adversely affect peace and stability on the island of Cyprus and the Eastern Mediterranean. Turkey also urged companies interested in oil and gas exploration in the region to act with common sense and not to damage prospects of peace on the island. Cyprus is offering licenses for an area of about 70,000 square kilometres (28,000 square miles) off the coast of the island and estimated oil deposits are put at around eight to 10 billion barrels.

Cyprus said earlier that five international companies have already contacted the government to express interest in exploring the deposits below the seabed. It has also already signed gas and oil exploration and exploitation deals with Cairo and Beirut, triggering strong objections from Ankara. Turkey argues that the deals infringe on the rights of the self-proclaimed Turkish Cypriot statelet in northern Cyprus, which is recognized only by Ankara. Turkey has also warned that it, too, has rights in the region and is determined to protect them. Cyprus, an EU member state, has been divided since 1974 when Turkey seized its northern third in response to an Athens-engineered coup in Nicosia seeking to unite the island with Greece.

Focus is on oil, gas, Exxon Mobil says

February 14, 2007. ExxonMobil, the world's largest publicly traded petroleum company is not in any hurry to find alternatives to oil and gas. Rather it is meant to keep up with rising global demand for fossil fuels. The company is spending the bulk of its record profits on finding and producing new supplies of crude oil and natural gas.ExxonMobil has invested $82 billion on six continents in the past five years to search for new supplies of hydrocarbons, expand refining capacity and introduce environmentally advanced technologies.

Power

Generation

Gulf to get first solar-power plant

February 18, 2007. Abu Dhabi, which holds more than 90 per cent of the oil reserves of the United Arab Emirates, is to build a $350m solar power plant, the first of its kind in the Gulf. The 500 MW plant, expected to be complete by 2009, is part of Abu Dhabi's drive to reduce dependence on hydrocarbon power. Future Energy, a subsidiary of government-owned Mubadala Development Company, and the Abu Dhabi Water & Electricity Authority will fund the plant with other investors. The emirate eventually hopes to provide solar-powered electricity to 10,000 homes and is setting up a special economic zone for the alternative-energy industry.

KESC to set up new power unit

February 16, 2007. Karachi Electric Supply Corporation Limited (KESC) was building a new power plant and two foreign companies had shown interest in setting up 2,000 MW coal-based plants. ADB would provide $3 billion for rehabilitation and augmentation of the country's outdated power supply system. The bank was also interested in the rehabilitation of KESC's system. KESC system has surplus energy, but its transmission system has become overloaded by 80 per cent to 100 per cent. So in order to overhaul the system the government has allocated Rs4.5 billion.

R100 bn plan to power SA with nuclear plants

February 15, 2007. The Nuclear Energy Corporation of SA (Necsa) expects electricity generated from nuclear energy to increase by 25 000 MW by 2030, which could cost as much as R100 billion. To achieve this, the government would have to build about 24 pebble bed modular nuclear reactors as well as 12 conventional nuclear power stations. The major shift to increased reliance on nuclear power is aimed at reducing South Africa's dependence on coal-fired power stations, which emit greenhouse gases. Eskom is spending R97 billion to meet growing demand for energy.

The government was looking to produce 4 000 MW to 5 000 MW of power from pebble bed reactors, which equates to between 20 and 30 modular reactors of 165 MW each. The government is planning to spend R9 billion, up from the original budget of R2 billion, in developing this technology. Its business plan was based on the assumption that the country would need a minimum of 24 plants. The cost of commercial pebble bed plants would be less than the technology development costs, estimated at R14.5 billion. PBMR plans to start building a demonstration plant next year, with full operation by 2012. The planned nuclear power could translate to about 30 percent of South Africa's energy mix in 2030. It would be more than two-thirds of the 36 000 MW currently generated by Eskom, which includes 1 800 MW from the Koeberg nuclear plant in Cape Town. The Ministry of Minerals & Energy Department would finalise its nuclear technology strategy for presentation to cabinet in the next few weeks.

Zachry venture picked to build $1.8 bn Oklahoma power plant

February 15, 2007. Three Oklahoma power companies signed a contract with Red Rock Power Partners to begin engineering and design for a new 950 MW power plant. Red Rock Power Partners is a joint venture made up of San Antonio-based Zachry Construction Corp.; Overland Contracting Inc. in Overland Park, Kan.; and The Industrial Co. in Steamboat Springs, Colo. Overland Contracting is a wholly owned subsidiary of industrial design firm Black and Veatch Inc.  The initial phase of the power plant development includes project planning and engineering at the site near Red Rock, Okla. Zachry would build the plant once all the approvals are in place. The three utility partners developing the Red Rock plant are OG&E Electric Services, Public Service Company of Oklahoma and the Oklahoma Municipal Power Authority. Public Service will own 50 percent of the plant, OG&E will operate the facility and own 42 percent of the plant, and the municipal power authority will own the remaining 8 percent of the plant. The planned $1.8 billion, coal-fired plant still needs regulatory approval.

Kenya to build power plant in Kwale

February 15, 2007. Mining firm Tiomin Kenya Limited will build a power plant of 16 MW in Kwale district subject to grant of a licence by Electricity Regulatory Board (ERB). The power plant will be located 18 kilometres  south of Ukunda along the A14 road on Likoni-Lunga Lunga highway and 8 kilometres inland. Tiomin will on March 12, 2007 submit to the Electricity Regulatory Board (ERB) an application for a power generating licence for electricity to be used in mining project. Copies of the draft licence to be applied for by Tiomin and other details required can be inspected by members of the public at ERB's offices along Valley Road in Nairobi.

The 16 MW power plant is expected to operate at 12 MW as demand for electricity will average 10 MW, and will be built and operated according to World Bank guidelines. Any public or local authority, company, person or group wishing to make any representations on the application for the grant of the licence must write to the Energy minister Kiraitu Murungi within 60 days. A copy of the representation marked "Electric Power Act" must also to be forwarded to Tiomin Kenya before the expiry of 60 days from January 29.

Suez wants to build nuclear plant in France

February 14, 2007. French utility Suez has sought permission to build a nuclear electricity plant in France, Les Echos. Suez was looking to build a next generation EPR reactor, developed by Areva and Siemens, near Tricastin in the country's Drome region. Suez - which is in merger discussions with state-controlled Gaz de France, currently has no nuclear reactors in France but has experience in operating them in neighbouring Belgium through its Electrabel subsidiary.

Transmission / Distribution / Trade

France's Areva wins $5 bn China nuclear deal

February 13, 2007. French state-run company Areva has unexpectedly agreed a $5 billion deal to build two nuclear power plants in China weeks after a U.S. rival appeared to have won a competition that dragged on for more than two years. Beijing's surprise expansion of the tender to six plants from an original four underlined both the country's voracious appetite for power and its diplomatic skill in satisfying rival suitors for its tempting markets. The agreement covers a total of 3.2 gigawatts of generating capacity in southern Guangdong province, an official at the government-backed China Nuclear Society. Final commercial details have yet to be hammered out, but the two reactors are slated for completion around 2013.

China coal producers cut exports

February 14, 2007. Chinese producers have cut thermal coal shipments to South Korean and Japanese power utilities on tight supply and high domestic prices, a move likely to spur price gains in an already tight Asian market. The news follows data showing Chinese coal exports fell by nearly half in January from the previous month, raising fears the country's voracious appetite for energy will turn it into a net coal importer this year. Record prices at home and the ending of an 8 percent export tax rebate have led China - the world's top coal producer and consumer - to keep more for the domestic market and raise export prices to about US$67 (HK$522.60) a tonne, from US$54 in the fourth quarter.

Three Chinese coal producers including China Coal Energy (1898) and Shanxi Coal Import and Export Group have cut spot coal exports to Japanese buyers by up to two-thirds since December, according to a Japanese buyer. The export volume for the company in 2007 is expected to be lower than 2006 as domestic coal prices are likely to rise further. China Coal has also cut its long-term supply of Yanzhou coal to 16 Japanese utilities and traders, buyers said, one adding the term cut was across the board between 10 to 30 percent from contracted volumes for the year ending next month.

Policy / Performance

India, Pak to sign nuclear-risk reduction treaty

February 18, 2007.  In a major confidence-building measure, India and Pakistan will sign an agreement to reduce the risk from accidental use of nuclear weapons, when the foreign ministers of the two countries meet here. The two sides will ink an agreement on, Reducing the Risk from Accidents relating to Nuclear Weapons after the talks, a major confidence-building measure after the ceasefire on Line of Control (LoC) since November 2003.

Indonesia calls for nuclear cooperation with Iran

February 17, 2007. Indonesia called for expansion of nuclear cooperation with the Islamic Republic of Iran within the framework of International Atomic Energy Agency (IAEA) regulations. The former called for settlement of ongoing dispute over Iran’s nuclear program through diplomatic channels & expressed his country's willingness to benefit from Iran's experience in application of nuclear technology for peaceful uses.

Power plant seals £100m CO2 deal

February 15, 2007. The UK's biggest coal-fired power station has signed a £100m deal to upgrade its turbines and cut carbon dioxide pollution by up to 5 per cent. The huge Drax station at Selby, North Yorkshire, is revamping the steam turbines in a four-year project. The deal has been signed with Siemens Power Generation and the work is expected to last the next four years. The revamp will result in a saving of one million tonnes of carbon dioxide each year - the equivalent of taking 275,000 cars off the road. The move will also reduce the amount of coal it burns by 500,000 tonnes each year. About 600 people are employed at the plant, which was first opened in 1974. It produces 7 per cent of England's electricity needs and was responsible for 21 million tonnes of CO2 emissions in 2005.

Renewable Energy Trends

Global

LA plans to buy wind power to serve 39,000 homes

February 16, 2007. Los Angeles has signed a 20-year agreement to purchase enough wind energy to power 39,000 homes. The 185 MW of wind energy will come from a new facility under development in Utah and is expected to be ready by the end of 2008. This will help meet a goal of using 20 percent renewable energy by 2010.

Infinity spends $41 mn on Brazil ethanol expansion

February 16, 2007. Infinity Bio-Energy group will invest 85 million reais (US$41 million) to raise ethanol output at its Alcana distillery in Nuanuque, Minas Gerais state, to 84 million liters in 2009. It also planned to nearly triple its sugar cane crush to 1.5 million tonnes a year. It will raise sugar output to 1.75 million 50-kg bags and produce 10 MWh a year of electricity from cane waste. The aim was to create a new sugar and ethanol frontier in the Mucuri valley which stretches across northern Espirito Santo into southern Bahia. It is considering the construction of two new factories in the Mucuri valley and expanding the Cridasa mill in Espirito Santo. It has a joint partnership with the Itauna distillery which is building a factory in Montanha, Espirito Santo state, and plans to build a mill in Bahia. At the end of 2006, Infinity announced plans to crush 15 to 20 million tonnes of cane annually within two years and invest $300 million to $500 million in the next 18 months.

GE invests in US, European wind farms

February 15, 2007. General Electric Co. has reached the halfway point of its goal to have a $3 billion renewable energy portfolio, with a pair of wind farm deals in the United States and Europe. The world's second-largest-company by market capitalization sees India as a likely next target for investment. GE Energy Financial Services has agreed to invest $270 million in six wind farms across the United States. It would buy about 70 percent of the Class A shares of the facilities, which are capable of generating about 410 MW of electricity enough to power about 100,000 homes and are located in California, Illinois, New Mexico and Pennsylvania. GE's renewable portfolio, about 60 to 70 percent of which is in the United States, also includes solar energy farms and projects to generate electricity through water power and geothermal energy.

ADM to open Brazil, Indonesia biodiesel plants-WSJ

February 15, 2007. Archer Daniels Midland Co. the largest U.S. ethanol producer is planning to open a biodiesel plant in Indonesia with Wilmar International Ltd. this year and a wholly owned biodiesel plant in Brazil before July. Biodiesel is a renewable fuel for diesel engines made from natural oils like soybean or palm oils. By contrast, ethanol is used for motors that run on gasoline. Worldwide, the company projects a fourfold rise in biodiesel production over the next five years.

Colorado bill would double renewable energy supply

February 14, 2007. A bill to double renewable energy supplies in Colorado was approved in a legislative committee and is headed for a vote in the state House next week. The measure would require investor-owned utilities to double their amount of renewable energy such as wind, solar, and geothermal power to 20 percent by 2020 and would also affect rural electric cooperatives and municipal utilities. More than 20 states have adopted similar standards for future renewable power supplies to cut dependence on fossil fuels, produce cleaner energy, and respond to consumer pressure to reduce greenhouse gas emissions. The Colorado bill (House Bill 1281) was passed unanimously in the House Transportation and Energy Committee and was sent to the Appropriations Committee.

The bill will affect Xcel Energy Inc’s Public Service Co of Colorado subsidiary, which is developing solar and wind power projects in the state and supports the measure. The utility, the largest in Colorado with 1.3 million electric and 1.2 million gas customers, has 283 MW of wind power in the state and plans to add 775 more MW. The company will have 8 MW of solar power in service by the end of this year and will meet the 10 percent renewables target for 2015 by the end of 2007. Coal is the principal fuel for power generation in Colorado, followed by natural gas.

First Solar to supply modules for 40 MW solar plant

February 14, 2007. First Solar, Inc. will supply solar modules for a 40 MW solar power plant that will be constructed in the Saxon region of Germany in the municipality of Brandis by Juwi solar GmbH. Upon completion, the project will be one of the largest photovoltaic projects ever constructed. Project construction is scheduled to begin in the second quarter of 2007 and is expected to complete within 30 months. The project represents an investment of 130 million EURO and will be financed by Saxon LB. Upon completion, the project will utilize approximately 550,000 solar modules and produce around 40 million kilowatt hours of clean power annually, preventing an estimated 25,000 metric tons of greenhouse gas emissions from being released into the environment.

 

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