MonitorsPublished on Mar 20, 2008
Energy News Monitor |Volume III, Issue 39
Regional Energy Infrastructure Proposals in the Asia-Pacific: Opportunities for Cooperation (Part – IV)

Efforts are underway to strengthen and increase the interconnections, and some of these efforts are more concrete than others.  The line between Turkmenistan and Herat was completed with Afghan government funds in May 2004.  This line is built at 220 kV, but is currently operated at 110 kV.  In addition, ADB will be financing the repair and reconstruction of the transmission line Termez (Uzbekistan) to Pul-i-Khumri (a 241-km long two parallel single-circuit lines) to be continued by a similar double-circuit line that will connect Pul-i-Khumri to the Kabul network, thus establishing an interconnected system for the east-central and northern part of Afghanistan. Due to deficit in local generation, Afghanistan imports electricity from neighboring Iran, Turkmenistan, Uzbekistan, and Tajikistan.

¨        Turkmenistan supplies northwestern and western Afghanistan, including Mazar-i-Sharif and Herat.  This arrangement was affirmed in a 10-year agreement signed in 2002 between the two governments. 

¨        Uzbekistan also supplies Mazar-i-Sharif and its surrounding area, in the northern region of the country, supplementing the small local gas-fired power plant.  The legal basis of the imports is a short “Protocol of Intentions” between SJSC “Uzbek Energo” and the (then) Ministry of Water and Power, signed in May 2003, which fixed price only for the first year of imports.

¨        In May 2003, Tajikistan resumed supplies of electricity to the northern Afghanistan province of Kunduz, although power supplies were somewhat erratic since 2003.  There are issues of payment by Afghanistan for its power imports – Uzbekistan is owed funds for past supplies.  Recently, the two countries signed a joint cooperative agreement in the power sector, which includes the following elements:

(i)                  Supply of up to 300 MW of electricity from Tajikistan during the spring and summer seasons, and within the limits of Tajikistan’s capabilities during the autumn and winter seasons;

(ii)                  Supply of electricity to the Afghanistan’s border towns of Khawan, Darwas, Shighnan, Ishkashim and Wakhan, subject to the availability of Tajikistan’s power;

(iii)               Construction of a double-circuit, 220-kV transmission line from the substation in Giran, Tajikistan, to Sherkhan Bandar in Afghanistan (financing yet to be arranged), and of a double-circuit 220-kV line from Sherkhan Bandar to Kunduz and then to Pul-i-Khumri with financial assistance from the Asian Development Bank;

(iv)                Plans for construction of a double-circuit, 220-kV transmission line from Lalazar to Kulab, one circuit of which will be available for extension to the city of Faizabad in the Province of Badakhshan, Afghanistan;

(v)                 Construction of a 110-kV substation at Kunduz, and upgrading the present 35-kV line from Sherkhan Bandar to Kunduz to a 110-kV transmission line;

(vi)                Cooperation in using water from the bordering river;

(vii)              Cooperation in enabling electricity transit from Tajikistan to Pakistan; and

(viii)            Participation of Tajik companies in the power sector reconstruction activities of Afghanistan, financed by international donors.

¨        Iran also supplies electricity to Afghanistan, in areas adjacent to the Afghan-Iranian border in Herat, Farah, and Nimroz provinces. Increases of power supplies from Iran to Afghanistan's Herat province from Khorasan are planned. In January 2003, a contract was signed between the two countries for electricity imports to Afghanistan, which includes:

(i)                  Imports from Zabol (Iran) to Zaranj (Afghani), over an existing single circuit 20-kV line;

(ii)                 Imports from Torbat-e-Jam (Iran) to Herat (Afghanistan), over a double circuit 132-kV line, of 150 km, which was to be completed by the end of 2004, together with the corresponding substation at Herat of 132/20 kV. These imports were contracted with a maximum capacity of 50 MW but with no limitation on the amount of energy to be imported at a price of US¢2.25/kWh and fixed to the end of 2006. An additional 20-kV, single-circuit line from Herat to Tayyebat, was under construction and is completed by now, financed by an Iranian grant, for imports of power of up to 6 MW in capacity and 45 GWh in energy.

The information on current electricity imports is summarized in Table 2.

Table 2:  Current Electricity Imports by Afghanistan

 

Iran

Tajikistan

Turkmenistan

Uzbekistan

Duration of Contract (years)

4

1

10

1

Maximum Capacity (MW)

2 MW (Nimroz);

2MW (Herat)

Winter - 5 MW;

Summer - Unlimited

2 MW (Herat);

6 MW  (Andkhoy)_

150

Maximum Energy (million kWh)

NA

NA

15 million kWh

NA

Price (US cents/kWh)

2.25

2

2

2

Source: Afghanistan Ministry of Water and Power

With regard to import of power, Afghanistan plans to undertake a two-pronged approach: one aimed at securing power for itself, and the other aimed at transiting Central Asian power through its territory to countries such as Pakistan and Iran:

¨        With regard to securing power for itself, the focus is to have some reliable imported power delivered to Kabul by 2008 and, in order to do so, continue developing the so called Northern Transmission System (NTS) as per current plans to import power from (in this order):

(a)                 Tajikistan;

(b)                 Uzbekistan; and

(c)                 Turkmenistan. This NTS now involves: the ADB-financed link to Uzbek (already contracted); some substations financed by KfW of Germany; a link Pul-i-Khumri to Kabul, financed by the Government of India (GoI); some missing links and other links to be financed by the World Bank's new project; and the link to Tajikistan to be financed by ADB.  All of these links are 220-kV links and the maximum capacity on them would be 300 MW;

¨        With regard to transiting power to Pakistan, the idea is that a new dedicated 500-kV transmission line (single or double circuit) is needed to deliver the power that Pakistan would import from Tajikistan (and possible elsewhere from Central Asia).  This line would perhaps deliver some power to the Kabul region, with the majority of the power going to Pakistan.  A detailed engineering and economic study will be needed to decide on optimal electricity transit options.

Supply Options from Central Asian Republics

The power systems in the Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan and south Kazakhstan were developed and optimized as an integrated grid during the Soviet era as the Central Asian Power System (CAPS) which even now operates as a synchronized grid. The installed capacity in the CARs is about 38,000 MW, comprising about 27,000 in thermal capacity and the remaining in hydro, mainly in Kyrgyz Republic and Tajikistan. Gross supply to the domestic market totalled 134,445 GWh, total sales in CAPS to domestic consumers only amounted to 97,984 GWh, implying an overall average total system loss level of 27%. 

The arithmetic sum of their peak demand amounted to 22,945 MW in 2002, implying the total installed capacity is 40% higher than the system peak. Also, from an export capacity perspective, peak consumption in CAPS is in the winter, whereas peak production capacity is in the summer, due to the availability of hydro.

This complements the peak consumption period in South Asia, which is in the summer – though it is recognized that, at least for Pakistan, the peak deficit period is the winter season, when the level of generation from its own hydropower plants is low.  In addition to existing capacity, the CARs have a number of partially completed assets, both hydro and thermal, all of which were begun during the Soviet times.

(To be continued)

Treethanol versus Ethanol

 

Could new techniques for producing ethanol make old-fashioned trees the biofuel of the future?

Mankind has used trees as a source of fuel for thousands of years. But now the notion of exploiting trees for fuel is being updated with a high-tech twist. The idea is to make ethanol, a biofuel that usually comes from maize (corn) or sugar cane, from trees instead. Politicians and environmentalists are embracing ethanol for a number of reasons. Unlike oil, ethanol is renewable: to make more of it, you grow more crops. And blending ethanol into ordinary petrol, or burning it directly in special “flex-fuel” engines, reduces greenhouse-gas emissions.

Why use trees, rather than maize or sugar cane, as a feedstock for ethanol? Because “treethanol” has the potential to be much more energy efficient. The ratio of the energy yielded by a given amount of ethanol to the energy needed to produce it is called the “energy balance”. The energy balance for ethanol made from maize is the subject of much controversy, but America's energy department puts it at 1.3; in other words, the ethanol yields 30% more energy than was needed to produce it. For ethanol made from sugar cane in Brazil, the energy balance is 8.3, according to the International Energy Agency.

But for ethanol made from trees, grasses and other types of biomass which contain a lot of cellulose, the energy balance can be as high as 16, at least in theory. In practice the problem is that producing such “cellulosic” ethanol is much more difficult and expensive than producing it from other crops. But the science, technology and economics of treethanol are changing fast. Researchers are racing to develop ways to chip, ferment, distil and refine wood quickly and cheaply.

Interest in cellulosic ethanol is growing as the drawbacks of making ethanol from maize and sugar become apparent. Both are important food crops, and as ethanol production is stepped up around the world, greater demand is driving up the prices of everything from animal feed to cola and biscuits. The price of a bushel of corn rose by 70% between September 2006 and January 2007 to reach its highest level in a decade. Mexico's president, Felipe Calderón, even capped the price of corn tortillas in January as America's fast-growing ethanol industry caused prices to rocket. There are clear signs of a backlash against ethanol made from food crops. Supply is struggling to keep up, and as more governments introduce schemes to promote biofuels and cut greenhouse-gas emissions, the tension between food and fuel will only intensify.

Growing maize requires a lot of land, water and agrichemicals, so environmental groups such as America's Natural Resources Defence Council argue that it is merely a short-term, first-generation approach to making ethanol. Most energy experts reckon that using maize-based ethanol as a substitute for petrol can reduce America's demand for petrol by 10-15% at best. As for sugar, its growing value as a biofuel feedstock means that in Brazil, which is now one of the world's largest producers and exporters of ethanol, there is pressure to flatten rainforests to make more room for sugar production. One green objective (reducing dependency on fossil fuels) thus conflicts with another (preserving the environment).

Trees to the rescue

Cellulosic ethanol would address many of these problems. Writing in the Wall Street Journal recently, Vinod Khosla—a Silicon Valley venture capitalist who has made a fortune by spotting opportunities in fields from biotechnology to software—argued that America needs “cellulosic biofuels to win the war on oil...we must encourage research on biomass feedstocks, tomorrow's energy crops.”

Trees are a particularly promising feedstock because they grow all year round, require vastly less fertiliser and water and contain far more carbohydrates (the chemical precursors of ethanol) than food crops do. Ethanol is the result of the fermentation of sugars, which is why it can be so simply and efficiently made from sugar cane. Making ethanol from maize is a bit more complicated: the kernels are ground into flour and mixed with water, and enzymes are added to break the carbohydrates from the maize down into sugars, which can then be fermented into ethanol. Making ethanol from cellulosic feedstocks is harder still, however, since it involves breaking down the tough, winding chains of cellulose and hemicellulose from the walls of plant cells to liberate the sugars. This can be done using a cocktail of five or six enzymes, says Edward Shonsey, the boss of Diversa, a biotech firm based in San Diego. The problem is that although such enzymes exist, they are expensive. It is no use being able to produce ethanol from trees if it costs $5 a gallon.

The lure of bio prospecting

So if cellulosic ethanol is to live up to its promise, researchers will have to find cheaper and more efficient enzymes. Grass, trees and other biomass feedstocks consist of a mixture of cellulose, hemicellulose and lignin, a tough material that helps plants keep their shape. Two large producers of industrial enzymes—Genencor, an American firm, and Novozymes, from Denmark—are working to reduce the cost of cellulase enzymes, which can break down cellulose, to below $0.10 per gallon of ethanol. For its part, Diversa is developing enzymes capable of breaking down hemicellulose. One approach, says Mr Shonsey, is to tweak the structure of existing enzymes to try to make them work better. Another approach is “bio-prospecting”—looking for natural enzymes in unusual places, such as in the stomachs of wood-eating termites.

Treethanol has particular appeal in countries that have a lot of trees and import a lot of fossil fuel. Top of the list is New Zealand: in 2005 the country exported lumber worth NZ$411m ($290m) and imported fossil fuel costing NZ$4.5 billion. In January two of New Zealand's Crown Research Institutes, Scion and AgResearch, announced a research partnership with Diversa. The aim is to investigate the feasibility of producing enough ethanol from trees to fuel all the vehicles on New Zealand's roads without fossil-fuel imports—in other words, to make the country self-sufficient in energy.

BioJoule, a start-up based in Auckland, New Zealand, is planning to build a pilot plant to produce ethanol from a type of willow. The idea is that farmers would grow coppiced willow trees which could be processed into wood chips and then transported to a conversion plant to be turned into ethanol.

The process would produce two useful by-products: unsulphonated lignin, a commercially valuable polymer, and xylose, a type of wood sugar used in dyeing and in foods for diabetics. Selling these by-products, means the plant should be able to produce ethanol for a direct cost of $1.13 per gallon, which compares favourably with ethanol from American maize ($1.44) and is not much more than Brazilian sugar-cane ($0.95).

Because willows are fast-growing and can thrive even on nutrient-poor soils, BioJoule's technology could also be used in other parts of the world where there is strong demand for energy, but the soil is not suitable for food crops like China and India.

Another country keen on cellulosic ethanol is Sweden, which is relying heavily upon wood-based solid and liquid biofuels as part of its plan to wean itself off oil by 2020. But where New Zealanders favour willows, the Swedes prefer poplars, since they are abundant and their biology is well understood.

Even if the right cocktails of enzymes can be found, sceptics say treethanol will still have several problems to overcome. In particular, trees take much longer to grow than grass or food crops—so it might make more sense to make cellulosic ethanol from fast-growing grasses, or the leftover biomass from food crops. Some environmentalists worry that having struggled for years to protect forests from overexploitation, demand for biofuels could undermine their efforts.

And now for Frankentreethanol

One idea is to create new, fast-growing trees to address this problem, either through careful breeding or genetic modification. A team led by Vincent Chiang, a biologist at North Carolina State University, is investigating the production of ethanol from genetically modified trees, with funding from America's Department of Agriculture. The team preliminary results clearly point out that transgenic wood can drastically improve ethanol-production economics.

A tree's rate of growth is limited by its lignin structure, which is what determines the tree's strength and form. Trees containing less lignin and more cellulose would both grow faster and also produce more ethanol. Some transgenic trees of this kind are being tested in America. The team is also looking at ways to modulate the genes that determine the structure of a tree's sugar-containing hemicelluloses in order to make the breakdown and fermentation processes more efficient.

But sceptics say that because of the great genetic variation in willows and poplars, genetic modification may not be necessary. By screening existing varieties it ought to be possible to identify those well suited to ethanol production. Conventional breeding and cloning are very efficient when there is such a variety of species and hybrids to choose from, and the tight regulation of genetically modified organisms makes using the technology expensive and time consuming.

Hundreds of thousands of years ago, when man first gained mastery over fire, wood was his primary fuel. In the past few centuries fossil fuels have risen to prominence, with calamitous consequences for the world's climate. A diversity of new fuels and energy sources seems the most likely future. It would be fitting if humanity's portfolio of new energy technologies had a place for wood, the oldest of them all.

Courtesy: The Economist (Technology Quarterly), March 2007

NEWS BRIEF

NATIONAL

OIL & GAS

Upstream

No equity stakes for foreign energy majors in gas fields: RIL

March 19, 2007. Reliance Industries Limited (RIL) will not offer equity stakes in any of its existing or future gas fields to foreign energy majors offering technologies to develop deepwater gas fields. Reliance has recently announced huge commercial discoveries of gas in the Krishna Godavari and Mahanadi basin blocks where recoverable gas reserves are estimated at close to 20 trillion cubic feet. In contrast, other Indian companies like ONGC and Gujarat State Petroleum Corp (GSPC), who have also announced significant gas discoveries on the east coast, are ready to offer stakes ranging between 10% and 30% in their recently discovered gas fields in the KG basin. Both of these companies are in talks with leading oil & gas compnaies like Exxon Mobil, ENI, BG, Shell and BP for technical knowhow for developing their gas fields, whereas Reliance is busy building its own in-house technical expertise to develop and produce gas from the highly technical intensive deepwater blocks. For this purpose it has already spent close to half a billion dollars to develop and produce gas from its D6 KG basin field on the east coast. The D6 block is all set to begin production of gas beginning June, 2008. Reliance has contracted Transocean to carry out the drilling of wells in its KG basin block. It has also hired the services of leading technology companies like Halliburton and Schlumburg, besides contracting third party experts to interpret the data and train its experts to develop and produce the gas on its own.

ONGC keen to support oil recovery projects

March 19, 2007. Encouraged by the progress in the experimental oil recovery project in the Masana area, North of Cambay on the West Coast, Oil and Natural Gas Corporation (ONGC) was keen to take it further in fresh wells in the area. The experiment, piloted by the Hyderabad-based National Geophysical Research Institute (NGRI), has shown higher oil recovery rates at 35-50 per cent, from just 10-12 per cent achieved in the Balol region. Under the Indo-Norwegian collaborative research programme, the two-year project was taken up in February 2005, with the focus of enhancing secondary oil recovery from wells across the country. ONGC, which has supported the pilot initiative, has expressed its readiness to provide NGRI with the data about oil fields in the Masana region to continue research and development work. There are giant oil fields in the Masana region. A combination of NGRI-developed Fractal monitoring (a mathematical approach, which helps to find out the location of oil in reservoirs) and the 4-D technique of Norway was being used to pinpoint places where water can be injected to create adequate pressure to push oil upwards in the well for easy recovery. Norway has provided funds worth 50 million Norwegian kroner (Rs 35 crore) over a five-year period. About 20 scientific projects are expected to be taken up under the Indo-Norwegian Projects on Institutional Cooperation.

Reliance to invest $9 bn in KG basin gas field

March 19, 2007. Reliance Industries, the country's largest private entity, will invest more than nine billion dollars in developing a gas field off the east coast of India and building pipelines to sell the fuel to consumers. The company will spend 5.2 billion dollars in bringing to production Dhirubhai-1 and Dhirubhai-3 fields in block KG-D6 in Krishna Godavari basin by June 2008. It will invest another 4 billion dollars in laying a 1,386-km pipeline from this city in Andhra Pradesh to Bharuch in Gujarat to transport the fuel. It will begin producing about 40 million standard cubic meters per day in June 2008 and raise it to peak output of 80 mmscmd in next five months. KG-D6, world's second largest deepwater find of the last decade, is being brought to production in less than six years of discovery at a cost of 2.8 dollars per barrel of oil equivalent (boe). Almost all of the country's natural gas deficit will be wiped out when KG-D6 field comes into production. The current availability of 91 mmscmd gas meets only half the demand in the country. If oil equivalent to the gas production from KG-D6 is imported, it will cost the country 120 billion dollars (current oil import bill is over 40 billion dollars).

RIL, OVL to bid jointly for oil blocks in Iraq

March 18, 2007. In a bid to leverage their oil exploration and production expertise, Reliance Industries (RIL) and ONGC Videsh (OVL), the overseas investment arm of Oil and Natural Gas Corporation (ONGC), are planning to jointly bid for oil and gas blocks in Iraq. The two companies are already renegotiating for a stake in the Tuba field and the Block-8 in western Iraq. Reliance is also seeking oil and gas blocks in Kurdistan. The company is likely to tie-up with OVL and Kurdistan’s national oil companies for stake in oil blocks in the region. In January 2005, Iraq opened its oil reserves to the world with the interim council of ministers inviting foreign oil companies to develop potential fields. Iraq, with proven oil reserves of 112 billion barrels, is the world’s second largest producer, behind Saudi Arabia.

Essar, Iran in talks for Azadegan oilfield

March 16, 2007. Essar Group is in talks with Iran to develop the giant Azadegan oilfield, where a deal with a Japanese firm ended last year, to ensure fuel for a planned refinery and steel plant in the Islamic nation. Azadegan is Iran's biggest oilfield with in-place reserves of 26 billion barrels. Japan's INPEX Holdings Inc. lost control of the field in 2006 but retains a 10 percent stake. Iran is drawing interest from Indian and Chinese firms, keen to help tap the world's second-largest reserves of oil and gas. Iranian authorities were willing to consider Essar's demand for development rights.

RIL to divest in oil and gas arm abroad

March 16, 2007. Reliance Industries Ltd (RIL) will induct a strategic partner in its overseas oil and gas projects which are being spun off into a new entity. RIL is to divest 20 to 25 per cent in the Dubai-based Reliance Exploration and Production DMCC, the holding company for RIL’s foreign oil and gas projects. Global energy major Chevron Corporation, which has equity interest in RIL’s subsidiary Reliance Petroleum, might be the preferred partner for Reliance Exploration. Reliance Exploration will house RIL’s interest in a discovered oil block in Yemen and an offshore exploration block in Oman and exploration projects in northern Iraq, East Timor and Columbia. RIL has had a track record of divesting stakes in its subsidiaries. For instance, Chevron Corporation acquired 5 per cent in Reliance Petroleum for $300 million last year, with the right to scale up its holding by another 24 per cent. The move to divest equity in Reliance Exploration is part of a restructuring exercise that began last year.

BP plans pact with ONGC for deepwater exploration

March 14, 2007. Aimed at increasing its upstream presence in India, UK-based energy major British Petroleum has proposed to enter into a comprehensive technical collaboration pact with the Oil and Natural Gas Corporation (ONGC) for deepwater exploration blocks held by the state-owned exploration major in the country. BP has also offered its expertise to ONGC for jointly undertaking the exploration and development of the coal bed methane (CBM) blocks held by ONGC. Under the broad pact, BP has proposed to help ONGC develop an understanding of the likely potential for exploring deepwater blocks by re-processing its seismic and well data. The technical agreement with ONGC would help in building technical capability in ONGC as BP would take ONGC’s experts on board of its exploration teams during the relevant exploration period and will ultimately transfer the technology for the same to ONGC. This agreement would provide the basis for ONGC and BP to share data and ideas regarding the prospectivity of ONGC-held deepwater blocks. To begin with, BP would like to review the Kutch basin through a joint study which would include BP acquiring new 2D seismic data at its own expense (up to $2 million). Following the joint study and subject to government approval, BP and ONGC will jointly develop and explore the GK-DW-1 block in the Kutch basin where the two have already chalked out a work programme. The GK-DW-1 block was awarded to ONGC on nomination basis and the exploration licence of this block is effective upto September 2009. While ONGC has agreed to take BP as its technical partner in this block, the government is yet to accord its approval for the same.

BPCL picks up 25 pc in 2 North Sea blocks

March 14, 2007. BPCL will join the operator, EnCore Petroleum and NWE Southern Cross Pty and Tata Petrodyne who hold 25% stake each. Bharat Petroleum Corp. Ltd. (BPCL) had signed a farm-in agreement for acquiring participating interest in two North Sea blocks 48/1b and 48/2c. After farm-in, Encore NNS Ltd. and Encore Petroleum Ltd. (the operator) will own 25%, NWE Southern Cross (UK) Pvt Ltd will hold 25%, Tata Petrodyne Ltd. 25% and BPCL 25%. The terms of the license require a well to be drilled before December 2008.

ONGC to develop 3 offshore marginal gas fields

March 14, 2007. ONGC is planning to develop its three B-series offshore marginal gas fields at an estimated cost of Rs 2,000 crore. Located closer to Mumbai High North oil field, the three reserves are expected to produce roughly 1.75 million standard cubic metre of natural gas a day. The company may seek board approval in this regard during the meet scheduled in April. The fields to be developed are B-48, 105 and 46. The project, was part of the company's plan to finalise development of 29 offshore marginal fields around Mumbai High with an estimated production capacity of 12-15 mmscmd and six million tonnes of oil during this fiscal. The estimated total investment is said to range between Rs 8,000 crore and Rs 10,000 crore. The projects are expected to be commissioned during the next three years. ONGC has a total of 89 proven marginal reserves, mostly offshore, with estimated reserves of 200 mt of oil and 120 billion cubic metres of gas.

Downstream

IOC to reconsider Panipat refinery expansion

March 20, 2007. Hindustan Petroleum Corporation’s upcoming Bathinda refinery in Punjab has forced the country’s largest refiner of crude oil, the Indian Oil Corporation (IOC), to reconsider its plans to expand its refinery at Panipat to 21 mtpa. The Bathinda refinery has a 9 million tonne a year (mtpa) capacity. Before finalising this plan the market impact of the Bathinda refinery have to be studied. The Panipat refinery, which is being expanded to 15 mtpa from 12 mtpa, caters to the demand for petroleum products from the north-western part of the country. The Bathinda refinery will also cater to the same market. Panipat is well placed to feed Pakistan because of its location. The Panipat refinery too feel that the Bathinda refinery may clutter the domestic market. All new refineries and capacity additions must be export-oriented, as the country is already a net exporter of petroleum products.   

BPCL to upgrade Mumbai refinery to Euro-IV norms

March 16, 2007. Bharat Petroleum Corporation (BPCL), the country’s third largest refiner, is planning to spend Rs 390 crore to upgrade its refinery at Mumbai to produce Euro-IV standard petrol and diesel. The upgradation of the 12 million tonne per annum refinery are on. Production of Euro–IV petrol and diesel from the Mumbai refinery is expected to begin by January 2010. The upgraded refinery will cater to Mumbai’s demand for high quality transportation fuels. If the fuel quality upgradation is not carried out, the petrol component would have to be downgraded to naphtha and diesel, to light diesel oil. This would result in loss of revenue. The upgradation project would be funded through a debt and equity ratio of 2:1. The company plans to spend Rs 59 crore in the first year of upgradation, that is the current financial year. The upgrading of petrol and diesel to Euro-IV quality is required in line with the auto fuels policy. About Rs 98 crore would be spent in the second year, Rs 176 crore in the third year and Rs 59 crore in the fourth year, that is 2009-10. BPCL would earn Rs 88.6 crore a year in revenues once the upgradation of the Mumbai refinery is complete.

Transportation / Trade

RIL keen on city gas distribution

March 20, 2007. While Reliance Industries Ltd readies itself to produce natural gas by June 2008 in what it calls the fastest discovery-to-production schedule in the world, a key concern for the company is whether the opportunity for city gas distribution will be available to it by that time. RIL, which discovered gas off the eastern coast in 2002, will start producing about 40 million standard cubic metres per day of gas by mid-2008. This output will be raised to 80 mscmd by the end of that year. The investment in discovery and development will be around Rs 23,400 crore. The RIL group (through Reliance Gas Transportation Infrastructure Ltd) will additionally invest nearly Rs 18,000 crore in laying a nearly 1,400-km pipeline from Kakinada, the onshore facility, which will receive gas from the offshore fields, to Gujarat, where it will link to the existing distribution pipelines in the area. Around 25 mcmd of RIL's production could be consumed in-house, for Reliance's own facilities. A substantial but unknown quantity will be fed to the pipeline that feeds the western, high-consumption region. But the rest of the production could take care of retail city distribution to about 20 million homes if regulations made this possible. Currently Mumbai and Delhi have exclusive domestic gas distributors. Mumbai is supplied by Mahanagar Gas Ltd and Delhi by Indraprastha Gas. State governments are ready to allow RIL city distribution. Gujarat, Tamil Nadu and a couple of others have given RIL approval for city gas distribution on a non-exclusive basis.

RIL, IOC to jointly execute gas distribution projects

March 19, 2007. Reliance Industries Limited (RIL) will shortly enter into a co-operation pact with the state-owned oil refining and marketing major, Indian Oil Corporation (IOC) for jointly executing CNG and piped gas distribution projects in various cities in the country. After RIL’s recent co-operation agreement with GAIL for building gas infrastructure and other allied areas, it will soon enter into a similar co-operation pact with IOC for city gas distribution projects. Reliance, which has the source of gas, would like to take advantage of IOC’s huge retail network in the country. IOC is the largest retailer of auto fuels in the country and Reliance plans to install CNG filling pumps at its own and IOC’s retail outlets. However, the terms and conditions of the working arrangement are being finalised between the two sides. RIL will be a majority partner in each such city gas distribution project.

RIL gas to flow in Gail pipes

March 16, 2007. In a strategic move, Reliance Industries has joined hands with Gail India, ensuring smooth evacuation and marketing of its natural gas from KG basin. The gas production is expected to be started by 2008. In return, Gail has got assured supply of gas and first right of refusal for RIL’s future E&P, CBM and city gas distribution projects. Gail and RIL have signed a memorandum of understanding (MoU) whereby Reliance can use 6,000-km gas pipeline infrastructure of Gail to reach to the end consumers. Gail would also help in marketing of the gas. In turn, Gail’s pipeline capacity will be 100% utilised. The 130 mmscmd transmission capacity of GAIL’s 5,800-km trunk pipeline network is being utilised only to the extent of 52-53% due to supply constraints. Gail, which has planned gas distribution in 28 cities, is likely to forge a JV with RIL for more cities falling along the pipelines. As per the MoU, Gail would have first right of refusal. RIL may have a majority stake in JVs planned for each city.

Policy / Performance

HPCL, OIL may ink pact for work in hydrocarbon chain

March 19, 2007.  State-owned Hindustan Petroleum Corporation Ltd (HPCL) and Oil India Ltd (OIL) are in the process of formalising areas of mutual interest for joint activities in both downstream and upstream segments of the hydrocarbon chain. The possible area of joint cooperation that the two State-owned companies are looking at includes participation in refinery projects as well as exploration and production activities. A draft memorandum of understanding has already been given to HPCL by OIL. As regards the equity structure for the projects where the two propose to jointly participate, it would be decided on a case-to-case basis and deliberated on at a later stage.

No talks with Chevron for partnership in D6: RIL

March 17, 2007. Reliance Industries, which recently demerged its overseas oil and gas projects, is debating hiving off its giant Krishna-Godavari gas field, but ruled out talks for inducting US energy major Chevron as equity partner. A potential hiving off a gas field will certainly unlock value for the shareholders, but at present the company was not immediately doing so. Reliance will give a stake in D6 provided it gets a commensurate stake in an overseas oil and gas field. RIL has already hived off its overseas oil and gas business into a separate entity - Reliance Exploration and Production DMCC in Dubai and is understood to be planning a tie-up with ONGC Videsh Ltd to bid for opportunities abroad.

IOC gives green signal for stake in TAPCO

March 16, 2007.  The board of directors of Indian Oil Company (IOC) has given its approval for the acquisition of a 12.5% stake in Turkey’s oil giant Trans Antolian Pipeline Co (TAPCO) which is laying a 342-mile pipeline to transport 1.5 million barrels of crude daily from the northern Black Sea city of Samsun to the Mediterranean port city of Ceyhan in Turkey. TAPCO’s total investment in this project is of the order of $1.5 billion. IOC’s board has also given its approval for the execution of the shares sale & purchase agreement (SSPA), conducting technical, commercial, financial and legal due diligence of TAPCO after execution of the SSPA and authorising director planning & business development (P&BD) to sign the SSPA on IOC’s behalf. Upon execution of the SSPA and the conclusion of due diligence of TAPCO, a separate proposal would be put up to the board seeking approval for the execution of a shareholders’ agreement and for payment of the consideration amount and achieving completion by fulfilling other requirements under conditions precedent. A separate proposal to the board would be put for approval after executing the SSPA and conducting technical, commercial, financial and legal due diligence. IOC has already signed pacts with the promoters of TAPCO for buying a stake in the proposed pipeline.

Oil firms ground govt plan to use bio-diesel blend

March 15, 2007.  The Centre’s much-touted policy to blend diesel with bio-diesel has hit a major roadblock as the petroleum ministry has argued that oil companies do not favour long-term support price for the same. However, oil companies have made a candid submission that they would be agreeable to blending only if it is commercially viable. According to the petroleum ministry, if the government desires to announce a minimum support price it would have to put in place an appropriate mechanism including budgetary support for the same purpose. Currently, 5% ethanol blending has been launched and the Centre proposes to increase it to 10% by November this year. But according to the oil companies, if the price paid by them on bio-diesel is higher than the cost of production/procurement of diesel, they would approach the government for financial support that may be given for a period of five years and after this period, mandatory blending may be considered.

Gas market to gain from pipeline tax breaks

March 15, 2007. A major bottleneck to the expansion of India's natural gas demand could be cleared as new tax concessions for pipeline operators are likely to lead to a wave of investment in distribution. Gas producers, importers, transporters and pipe makers will all benefit as reduced taxes spur infrastructure development needed to keep up with an expected doubling of Indian natural gas demand over the next five years. There is a huge upside for the gas transportation firms as it will lower their costs and increase profitability as volumes will gain. The 2007-08 budget granted a 10-year tax exemption for gas transmission pipelines completed from April 2007. Pipeline operators normally pay income tax, corporate tax, central and state sales taxes and other taxes. Lenders will also not pay tax on loans disbursed for pipeline projects. Those likely to benefit include top private firm Reliance Industries Ltd, transporters such as GAIL, Gujarat State Petronet Ltd, BG Group, Gujarat Gas Co. Ltd, Indraprastha Gas Ltd and liquefied natural gas importer Petronet LNG Ltd. State-run oil firms Indian Oil Corp Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd. also plan to start or expand gas distribution networks and the tax concession should help kickstart the projects.

New US bill aims to block India-Iran pipeline deal

March 15, 2007. A prominent American legislator, Congressman Tom Lantos, who is head of the House of Representatives’ committee on international relations, has introduced a bill in the House this week that, if passed, will ensure that India and Pakistan are not able to proceed with their gas pipeline with Iran. The legislation, the Iran Counter-Proliferation Act of 2007, seeks to target companies investing in Iran’s energy sector by ensuring that deals worth more than $20 million with Iran will bring the investors under US sanctions.

The new legislation is designed to further strengthen the Iran-Libya Sanctions Act by closing loopholes that energy companies had reportedly used to continue business with Iran. It is also to generate fresh pressure on the Bush administration to apply strict sanctions, with the IPI gas pipeline, currently under negotiation, expected to be a major casualty. The US has made it clear throughout that it is opposed to the IPI gas pipeline. The issue has acquired added urgency as the price negotiations are nearly over, and Iran, Pakistan and India are all set to move into the implementation stage of the project. Royal Dutch-Shell, Repsol, Statoil, Norsk Hydro ASA, Australia LNG and China’s National Offshore Oil Corporation are some of the co-mpanies that will be affected by the new legislation. Several companies had been in touch with the three governments for the IPI pipe-line, but will not remain as enthusiastic if the new US legislation comes into force.

Policy on minimum works for oil firms to be tougher

March 15, 2007. A new policy against non-completion of minimum work programmes (MWPs) for exploration blocks, allocated during the New Exploration and Licensing Policy and pre-New Exploration Licensing Policy (NELP) rounds, is on the anvil. The new policy is expected to lay down stringent guidelines to determine fines for non-completion of MWPs. The new policy is likely to calculate the penalties for unfinished MWPs at fully drilled well rate and not at dry or partially drilled well rates. The cost difference of the two rates is Rs 820 crore, including rigs rates. The rates may also be calculated at present costs, rather than what prevailed at the time of signing the production-sharing contracts with the government. So far, the government has signed 190 production sharing contracts (PSC) with oil and gas exploration companies. However, the Directorate General of Hydrocarbons (DGH) has used variable methods in calculating the penalties on unfinished MWPs. The initial fine that the Reliance Industries was asked to pay for the non-completion of MWPs in four exploration blocks was $96 million. However, after negotiations, the amount was brought down to $19.8 million. Similarly, the penalty imposed on the Oil and Natural Gas Corporation for six exploration blocks was brought down from $107 million to $24.5 million. In these cases, the DGH had taken into account dry well costs instead of well depth mentioned in respective PSCs. Several other criteria were also waived or altered during the calculation process. This brought forth the need for a uniform policy for non-completion of the MWPs.

LNG chamber turns hot as Tehran seeks pact with pvt cos

March 14, 2007. The $20-billion LNG deal with Iran, which is in a deadlock over pricing issues, has taken a new turn. Tehran has suggested it be allowed to reassign the 5-million-tonne-per-annum LNG contract to a private company instead of Gail-IOC-BPCL consortium, if no agreement is reached on pricing between the two governments. Prominent private entities in the LNG space are Shell, British Petroleum and the Adani group. Considering the relatively high spot price of LNG, even users like gas-starved Dabhol may want to consider the deal. Private companies are buying LNG at $8-11 per mmbtu at the spot price today. Iran has offered the government a revised price of $4.78 per mmbtu for the LNG supply. It is understood that New Delhi has turned down the Iranian proposal, terming it improper as the in-principle agreement had been reached after protracted discussions between the two governments. Iran wants to revise the agreed price of LNG from $3.21 per mmbtu to $4.78 per mmbtu in the light of global surge in international crude prices over the last two years. During renegotiations, India had told Iran it may consider paying around $4.45 per mmbtu for the LNG, but no agreement could be reached. India is considering two options if Tehran does not bring down the price of LNG and insists on negotiating with private companies: the government may invoke a legal clause in the contract to prevent Iran from doing so or decide to terminate the contract. Another possible option under consideration by India is to negotiate for additional 2.5-million-tonne LNG at around $4.5 per mmbtu. Any effort to revisit the 25-year contract would, however, require approval of the Cabinet. No final decision has been taken. PSU oil cos Gail, IOC and BPCL had signed an agreement with National Iranian Gas Export Co in June 2005 for import of 5 million tonnes of LNG. However, the agreement could not be ratified by Iranian Parliament, Majlis. The Iranian side has said LNG pricing is the main issue. The Indian side, however, insists that Iran must honour the contract signed on June 13, 2005.

BPCL spins off exploration to subsidiary

March 14, 2007. State-owned Bharat Petroleum Corporation Ltd (BPCL) has decided to separate the exploration business from its core activity of refining and marketing by transferring the participating interest in 14 oil and gas exploration blocks in India and abroad to a new company, Bharat PetroResources Ltd (BPRL). BPCL’s expenditure commitment in these 14 blocks stands at Rs 640 crore. BPCL currently holds equity in nine exploration blocks in India, where its participating interest varies between 10% and 40%. This includes three blocks in the Krishna-Godavari basin, Mahanadi deepwater blocks, the Assam-Arakan region, Cauvery onland blocks and in Rajasthan. It also holds 12.5% equity in Oman’s Block 56, 20% each in two exploration blocks in Australia, one in Timor, Australia (25%) and in the 48/1B and 2C blocks in the North Sea with a 25% interest. The main objective of BPRL, was to undertake exploration and production of oil and gas, besides other energy resources, in order to achieve reasonable supply security for BPCL’s refineries.

POWER

Generation

Maharastra gets entire Ratnagiri power

March 19, 2007. The power starved Maharashtra on March 19, scored a major victory as the Centre dropped its plan to privatise or sell 740 MW of the total 2,150 MW Ratnagiri power project. Lenders comprising IDBI and ICICI were pressing for sale of 740 MW to the highest bidder to be selected through a power trading company as Maharashtra was not in a position to pay more tariff. Lenders had also proposed to hive off LNG terminal to a private developer in a bid to reduce the project completion cost and also the per unit tariff. Maharashtra strongly opposed both these proposals and argued that the entire power be made available to the state. All three blocks of 740 MW will run on gas and the centre has taken a responsibility for organising the necessary gas.

Madhucon, Malaxmi Group to set up power plant

March 19, 2007. Hyderabad-based Madhucon Projects Limited is entering into the power sector in partnership with another Hyderabad-based company, Malaxmi Group, to set up a 540-MW thermal power project at the port town of Krishnapatnam. The Malaxmi group is promoted by Y Harish Chandra Prasad. Both the companies have formed a special purpose vehicle, Simhapuri Energy Private Limited, for the project, to be completed in two phases of 270 MW each, according to a press release. The power plant would run on coal imported from Indonesia. Madhucon is also in the process of investing in coal mine in that country. Madhucon and Malaxmi would hold 48 per cent and 26 per cent of the project's equity respectively while the strategic investors were expected to take the remaining stake. The project, to be funded in 20:80 debt equity ratio, is estimated to cost around Rs 2,600 crore.

Coal search under Damodar restarts

March 19, 2007. Exploitation of coking coal reserves located beneath the bed of the river Damodar would be revived. The Centre has given green signal to revive the 20-year-old Damodar river diversion project at Bokaro and Kargil area to exploit coking coal which was trapped over there. The area falls under the command area of the Central Coalfields Limited (CCL). According to CCL, over 70 million ton of coking coal was locked up in underground deposits beneath the bed of the river Damodar. The river would have to be diverted to raise the trapped coal. Besides CCL, establishments under the Indian Railway and Damodar Valley Corporation (DVC) would be involved in the proposed project. Two power plants owned by DVC and one major railway line were located in the area to be affected.

NTPC to foray into nuclear energy

March 17, 2007. NTPC’s Corporate Plan for the period 2002-17 envisages taking up 2000 MW of nuclear capacity in joint venture during the 12th Plan period. National Thermal Power Corp. Ltd. (NTPC) is planning to foray into nuclear power generation. The Government has also conveyed its approval to amend the object clause of the Memorandum of Association of NTPC for taking up nuclear power projects. At present, selection of optimal technology and identification of potential site(s) for setting up of nuclear project is in the process. NTPC proposes to expand the capacity of its existing Simhadri Thermal Power Project (Simhadri Thermal Power Project, 2x500 MW), by adding 1000 MW capacity in Stage-II. Feasibility report for Simhadri TPP, Stage-II (2x500 MW) has been finalized with an estimated cost of Rs48.44bn (At Q3 2006 price level). Various input tie-ups and approvals, including environment clearance from the Ministry of Environment & Forests are underway. Subject to timely clearances/approvals both 500 MW units of the project are envisaged for commissioning in 11th Plan period. Additional average daily power generation from Simhadri Stage-II (2x500 MW) after Commercial Operation Date (COD) will be 19.2 Mega Units (MUs) at 80% Plant Load Factor (PLF) and 21.6 MUs at 90% PLF.

JSW arm buys Indonesian coal mine rights

March 17, 2007. JSW Energy, the unlisted subsidiary of the Sajjan Jindal-led JSW Steel, has acquired exploration and mining rights of a coal mine in Jambi, Indonesia, which has reserves of 300 million tonnes. JSW Energy has joined hands with a local company that owns the mining licence and has the option to take a significant equity stake in the firm. JSW Energy will invest in developing the mines and can use the coal from the mine for its projects in India. Indonesian regulations stipulate that mining licences should remain with the local company. However, foreign companies are permitted to invest in the exploration and development of the mines. The mines that JSW Energy will develop are valued at $1.1 billion. Although market estimates put the value of the high-grade, low sulphur-content mines at about $1.1 billion, mining experts contend that JSW Energy will have to initially invest at least $200 million to develop the mines. The mines are spread over 5,500 hectares in the Jambi province. At present, 500 hectares are being developed and the company will be able to ship coal to India within two months. JSW Energy is investing about Rs 12,000 crore in building power projects across India.

NTPC plans Rs 990 bn power expansion

March 16, 2007. India's top state-run power producer, NTPC Ltd, will invest Rs 990 billion ($22.4 billion) to build 22,000 MW of power capacity over the next five years. Indian power sector achieved a growth of 7.5 percent this year, still far beyond 9 percent as expected. NTPC, which produces 27 per cent of India's total electricity generation, plans to spend nearly $3 billion in the coming fiscal year beginning April 1 to expand capacity, adding 70 per cent of this would be funded through debt. The company was in talks with the Asian Development Bank for loans. A deal is expected to be closed by August-September.

Govt to allocate 19 coal blocks soon

March 15, 2007. The government is likely to allocate 25 blocks for captive consumption, of which 19 blocks are of coal. Tata Steel, Jindal Steel, Hindalco, Bhushan Steel, Rungta Mines and JP Cement are some of the big companies likely to get coal blocks. Further, the screening committee is also on the verge of finalising the allocation of 10 more coal blocks to public sector power companies with a view to augment power generation capacity. NTPC, Damodar Valley Corporation and some state electricity corporation will be the beneficiaries. The government plans to allocate 15 blocks under captive mining to non-PSU power companies. Another 17 coal blocks will be allocated to non power sector PSU such as steel, cement etc. With all these allocations, the government aims to increase the number of players getting blocks for captive mining. Presently 100 companies have already been allocated coal blocks for captive purpose and the number is likely to increase by 50 to 75.

NTPC, Coal India tie-up for power plants

March 15, 2007. National Thermal Power Corporation Ltd (NTPC) has entered into an agreement with Coal India Ltd (CIL) to develop and run coal blocks and integrated coal based power plants. As per the MoU, both companies will leverage each other's experiences and expertise in the areas of coal mining and operation and maintenance of captive power plants using middlings of coal washeries and coal washeries rejects. The immediate projects undertaken as a 50:50 joint venture by the two state-owned companies will be the development of two coal blocks, Brahmini (1,900 MT) and Chichro Patsimal (356 MT) in Jharkhand.

Rajasthan nuclear power units get Centre’s approval

March 15, 2007. The union government has given an in-principle approval for setting up two 700 MW nuclear units at Rawatbhata in Rajasthan for two nuclear power units. Due to the power crisis in the state, Rajasthan government has chalked out plans to add over 1,500 MW power supply to its present capacity in the coming two years. Nine electricity-generating units are being raised under different power projects across the state that will increase the current capacity of 2,569 MW to 4,084 MW. Of the 1,525 MW planned, 450 MW power is expected to be added to the state's production by August 2007. In the annual plan for 2007-08, a total provision of over Rs 5,320 crore has been proposed for the power sector. A provision of Rs 2,741 crore has been proposed for power generation alone.

Transmission / Distribution / Trade

New Mangalore port handles record coal cargo

March 19. The New Mangalore Port has handled a record quantity of 22,117 tonnes of steam coal in vessel MV Spar Draco on March 17. The vessel carrying 51,908 tonnes of coal arrived at New Mangalore Port on March 16. Imported from Richards Bay Port in South Africa, the coal is for consumption for steel and power generating units located at Bellary, Hospet and Hassan regions in Karnataka. Agarwall Coal Corporation Pvt Ltd of Indore, one of the major coal traders in the country, imported the steam coal from South Africa. The trader, who was importing coal at Visakhapatnam and Chennai ports, diverted the cargo to New Mangalore last month. The trader has handled two shipments in New Mangalore.

A new market for power transmission

March 19, 2007. A new regulator for wholesale power transmission in the offing could spur huge private investments being lined up in the transmission sector. The proposed independent systems operator (ISO), as it was cleared by a committee of secretaries, will take over load dispatch functions from the PowerGrid Corporation of India (PGCIL), the central transmission utility, over the next two years or so. The idea is to take away the job of load dispatch from PGCIL, which performs it in addition to building transmission networks. Load dispatch will thus become an independently regulated activity. To begin with, ISO will be a wholly-owned subsidiary of PGCIL.

Gradually, PGCIL will bring down its stake in the arm and the equity will be distributed among all transmission licencees. The idea is that ISO should be capable of objective decision-making with no concentration of ownership in the hands of any operator. ISO is being planned to be an agency that will federally control transmission systems. PGCIL continues to be the dominant player in transmission, even through the sector has already been opened up for the private sector. All players in electricity, who have a transmission licence, would be eligible to pick up stakes in the ISO company. India has already built the infrastructure for a unified national load dispatch centre. There are five regional load dispatch centres, North, South, East, West and North-east.

Coal imports sought to be upped for coastal companies

March 16, 2007. Coastal Energy Pvt Ltd (CEPL), India’s second largest coal importer, has signed a memorandum of understanding for supply of coal to major power companies along the Indian coastline. This is likely to take its annual imports to 16 million tonnes from the current 6 million tonnes. CEPL, which expects to close the year with a revenue of Rs 1,800 crore, is part of the Dubai-based Coal and Oil Group. Close to 15,000 MW of power is expected to be generated by the power plants located in coastal areas. These plants, which are primarily dependent on coal, are expected to generate a demand of around 45 million tonnes a year over the next three to five years. The current imports stand at around 20 million tonnes. The company has signed agreements with state utilities like Tata Power, Maharashtra State Electricity Board and other state electricity boards. The need for coal imports is on the rise. Other than the power sector, which accounts for 60 per cent of coal imports into India, and the cement industry, the steel industry is emerging as a strong business potential.

Siemens-BHEL bags PowerGrid order

March 14, 2007. Siemens Power Transmission and Distribution (PTD) and its consortium partner BHEL have been awarded an order by the Power Grid Corporation of India to construct 2,500 MW High Voltage Direct Current (HVDC) terminal stations for a 780-km long HVDC transmission route between Uttar Pradesh and Rajasthan. The consortium order is valued at 235 (about Rs 1,400 crore). Siemens has the overall responsibility for the project, including the design of the complete HVDC transmission systems.

Policy / Performance

India not keen on binding global pact on emissions

March 20, 2007. India is not keen to sign any global agreement on limiting emissions, however, New Delhi is willing to take only voluntary steps in the area of energy efficiency and reduction of emissions. With increasing global concerns on climate change, the discussions on energy efficiency, reduction in emissions and the move to renewable forms of energy have become more intense. Instead of a binding international agreement on energy efficiency, India would like to propose consensus of greater global co-operation for the development of hydro potential and renewable sources such as solar photovoltaic. India’s current energy consumption by households is very low.

According to statistics published by the International Energy Agency, the average annual per capita consumption of electricity in India for 2004-05 was 612.5 kWh compared to Australia’s 11,126 kWh, the US 13,338 kWh and Brazil 1,955kWh. In such a situation when India is working at raising its standards to that of an acceptable world average, a binding agreement could derail India’s energy policy, which seeks to raise per capita consumption to at least 1,000 kWh.

South Asian nations inch closer to energy grid

March 20, 2007. Power-hungry South Asian nations may advance hopes to build a common energy grid this week, edging closer to overcoming the political obstacles that have left some with a power deficit and others with abundance. Nepal and Bhutan have substantial untapped hydroelectricity potential, while Bangladesh has large gas reserves that could be used domestically or exported to India, Pakistan and Sri Lanka, if only the infrastructure existed to carry it. India accounts for nearly four-fifths of the electricity generated in South Asia, yet struggles with the problem of peak shortages at 14.2% between April 2006 and February 2007. It already has some connections with neighbouring Nepal and Bhutan, and is studying the feasibility of linking with Sri Lanka and Bangladesh, issues that energy officials from South Asia are likely to discuss at their meeting in New Delhi later this week.

Power generation misses Plan target

March 19, 2007. Addition in the 10th Plan period will be just about half the targeted 41,000 MW. The power generation capacity has to grow by at least 10 per cent to sustain the current GDP growth of 9 per cent. Ideally, the ratio of energy generation and GDP growth should be 1:1. However, data collated by Business Standard for the last 16-17 years clearly show the deteriorating power situation with rising energy shortages. At 9.3 per cent energy shortage and 13.9 per cent of peak time shortage —the highest in the past nine years, there is obviously an urgent need for an aggressive and focused approach for capacity addition. The transmission segment too requires massive investment to boost capacity. The situation in the coming five years too looks grim, though the government has set a target of adding a record 76,000 MW of generation capacity in the 11th Plan.

Coal India plans to set up washeries in all new mines

March 18, 2007. In a move that may significantly increase the availability of coal having high utilisable heat value (UHV), Coal India Ltd (CIL) has decided to mandatorily set up a washery in all new mines that would be opened up from now. Currently, steel and cement manufacturers import the major chunk of their coal requirement because of the low heat content in coal supplied by Coal India. India has about 11 per cent of the world's coking coal deposits. However, because of the poor variety, Indian companies go for large-scale imports. Washing would significantly increase the UHV of Indian coal. CIL would be setting up these washeries with its own investment but their management would be given to private operators; regular inspection would be carried out by CIL's quality control department. The washeries would be set up over 2-4 years. CIL has already issued guidelines to subsidiaries that a mandatory provision of a coal washery with modern technology has to be incorporated while preparing project reports for all opencast mines with annual capacity of 2.5 million tonnes.

State seeks incentives for industry, power

March 17, 2007. The Assam Government has made a strong case in favour of a revamped North East Industrial Policy, which could transform the State into a prime industrial destination. The State Government is hopeful that the Union Government gives the nod to the policy with a range of incentives for industry and power. One of the major demands is removing the requirement of industry only to be located at specific areas in order to enjoy Government financial support. Any industry anywhere would be eligible for NEIP incentives, translating into spread of industrial and commercial activities into a wider area. The declaration of the entire North East region as a Tax Free Zone under 10 C of the Income Tax Act was another requirement that should be contained in the about to be announced policy. Significantly, even in an economic climate in which subsidies are getting slashed, it was mentioned that the NE Industrial policy should have an increase in the capital subsidy ceiling from the current amount of Rs 25 lakh to Rs 40 crore. It should be raised to 40 per cent of investment in plant and machinery in civil works. For the problem faced by local industries bringing in raw materials from outside, the Government of Assam had appealed for refund of MODVAT (CENVAT). Such a feature in the new policy would make those ailing industries competitive. The ambit of the policy should expand to include new activities in the service sector, and power so that more entrepreneurs could derive benefits.

Maharashtra mulls ways to ease power situation

March 15, 2007. Expressing concern over the deteriorating power situation in the Maharashtra, the state government has taken a time-bound programme to add 10,000 MW of generation capacity to mitigate the power shortage of nearly 5500 MW during peak hours. An additional power of 2300 MW is expected to be available during the forthcoming financial year from central and state sector sources. This will help reduce the gap between demand and supply considerably. The state is also expecting 2150 MW from the Dabhol power project of Ratnagiri Gas & Power Pvt. Ltd by the end of this calendar year as against only 350 MW. The 10,000 MW power generation include 1600 MW greenfiled project at Dhopave and 1040 MW capacity addition.

RGPPL, Maharashtra stalemate continues over Ratnagiri tariff

March 14, 2007. The board of directors of Ratnagiri Gas & Power Pvt Ltd (RGPPL), which posses the Ratnagiri project, previously Dabhol project since October 2005, is expected to take a decision on a power purchase agreement (PPA) with the Maharashtra State Power Distribution Company Ltd (MahaVitaran) soon. RGPPL board will also decide whether or not to agree MahaVitaran’s plea for not making changes in the fixed cost component of the tariff from 96 paise to Rs 1.07. The state government and MahaVitaran have made it clear that they would not be agreeable to the proposed changes as it goes against the provisions of common-term loan agreement.

The state government and MahaVitaran have already indicated that the MahaVitaran would draw entire 2,150 MW from the Ratnagiri project at Rs 3.10 per unit which comprises fixed cost component of 96 paise. The state government and MahaVitaran have argued that if financial institutions comprising IDBI, ICICI Bank are opposed to pump in more funds to make up rise in the fixed cost component as projected by RGPPL, then the matter should be left for the final decision by Empowered Group of Ministers (EGoM). The rise in fixed cost to Rs 1.07 was mainly due to increase in the interest during construction (IDC) and not availability of gas on a long-term basis.

INTERNATIONAL

OIL & GAS

Upstream

Oilexco makes oil discovery at Kildare

March 19, 2007. Oilexco has made an oil discovery in its 50% owned Kildare Prospect in Block 15/26b in the UK Central North Sea. Nexen Petroleum UK Ltd owns the remaining 50% interest in the block, which was awarded jointly to the two companies in the 23rd UK Offshore Licensing Round. The 15/26b-9 well was drilled to a total depth of 14,330 feet. A significant reservoir section was encountered in the Upper Jurassic sand at a depth of 13,705 feet. A total of 91 feet of net pay from a gross section of 132 feet from the Upper Jurassic sand was penetrated by this well. Both well logs and wireline pressure measurements indicated that the entire Upper Jurassic reservoir sand was oil-bearing. No oil-water contact was intersected by the well. Oil samples were also successfully extracted from the wireline downhole sampler. An Upper Jurassic sand interval of 125 feet was perforated and drill-stem tested. The test flowed oil at a rate of 4,216 Bbls/d and associated gas at a rate of 3.1 MMcf/d through a 64/64 inch choke with a flowing tubing pressure of 460 psia.

CNOOC makes another Bohai Bay discovery

March 19, 2007. CNOOC Limited has made a new independent discovery, Bozhong (BZ) 28-2E, indicating new progress in the Company's exploration in the Yellow River Mouth Sag of Bohai Bay. BZ28-2E is located between BZ 28-1 and BZ 28-2S oil fields in Bohai Bay. The discovery well BZ 28-2 E-1 is located in the south of Structure BZ 28- 2E in the Yellow River Mouth Sag. The well penetrated oil pay zones with total thickness of 35 meters and gas sections of 35 meters. The well was drilled to a total depth of 2,575 meters, with water depth of about 20 meters. During the drill stem test, the well was tested to flow at an average rate of 1,600 barrels of oil per day from the oil zones via 7.14mm and 14.29mm chokes, and approximately 10 million cubic feet of gas per day from the gas layer via 15.08 mm choke. Since 2006, CNOOC Ltd. has made 4 discoveries in the Yellow River Mouth Sag of Bohai Bay.

Maurel & Prom reports Colombia discovery

March 19, 2007. Maurel & Prom announced a new oil discovery through its 100% owned Colombian subsidiary, Hocol S.A., on the Guarrojo permit. The permit was signed in February 2006 with the National Hydrocarbon Agency of Colombia (ANH). The Ocelote-1 exploration well in the Llanos central region, 300 km east of Bogota, stopped at 4,816 ft and pumped out 600 b/d of an oil at 23.6 degrees API. Maurel & Prom considers the proven and probable reserves (P1+P2) after royalties should be 11.4 Mbbls at 100%, to be compared to a Maurel & Prom production of 5.2 Mbbls for 2006 in Colombia. Maurel & Prom holds 100% of this exploration permit; a sliding scale royalty, starting at 8%, is applicable on the oil production from the block. This percentage (before royalties) will remain unchanged during the development phase. The company is planning a 3D seismic survey and an extended test to appraise the Ocelote discovery of which 3P reserves are estimated at 35 Mbbls. A long period test will start and the production will be transferred by truck.

New oil discovery in Oklahoma

March 19, 2007. Lexaria Corp. Lexaria has announced that it has discovered, the Isbill #2-36 well in Owl Creek Prospect, McCain County, Oklahoma with natural gas and oil. Well logs and drill cuttings both are strongly indicative of potentially economic oil and gas shows. A drill stem test recovered gas at surface in 15 seconds, and oil at surface in 20 minutes from the pay zone which is at approximately 5,500 feet. The Bromide sand is providing between 8 and 10 feet of net pay with average porosities of 14%, and was encountered structurally high to the Powell #2-25 well. The Isbill #2 is a 40-acre offset to the productive Powell #2-25 well which continues to flow at approximately 120 bo/d some nine months after completion. The Powell #2-25 well, in which Lexaria does not have an interest, has produced over 33,000 barrels of oil and 9,000,000 cubic feet of gas since June 2006. Lexaria has a 7.5% gross interest in the Isbill #2-36 and of the remaining drilling prospects on the Owl Creek property.

Solana discovered Putumayo Basin

March 19, 2007. Solana Resources Limited has successfully drilled and logged a potential new field wildcat well, Juanambu-1, in the Guayuyaco Block, Putumayo Basin, in southern Colombia. Pursuant to a farm in agreement on the Guayuyaco Block Solana is required to pay 67% of the Juanambu-1 well costs to earn a 50% working interest. Ecopetrol, the Colombian State oil company, has a 30% interest back-in right on commercial discoveries and to the extent such right is exercised Solana's interest will be reduced to 35% in this block with Gran Tierra Energy, Inc. the operator, holding the other 35% interest. Gran Tierra is a public, oil and gas exploration and production company with properties in Argentina, Colombia and Peru.

Juanambu-1 reached a total measured depth of 2,790 meters (9,154 feet) on March 10, 2007. The well encountered reservoir quality sandstones with hydrocarbon shows in four zones. Initial log interpretations indicate potential oil pay in the T Sandstone Unit of the Villeta Formation and in the Caballos Formation. There is additional potential oil pay in the KG Sandstone Unit of the Rumiyaco Formation and in the U Sandstone Unit of the Villeta Formation, subject to confirmation by planned well testing. The four reservoirs encountered are proven producing reservoirs in the adjacent Santana Block operated by Gran Tierra

Chevron starts gas production from Bangladesh

March 18, 2007.  U.S. oil and gas explorer Chevron began commercial production at the Bibiyana gas field in northeast Bangladesh, boosting daily supply by around 250 million cubic feet. The production started at the country's second biggest gas field, with an estimated reserve of 5.5 trilion cubic feet (TCF) of gas and 30.7 million barrels of condensate. Bangladesh's biggest gas field Titas, east of the capital Dhaka, has 8.0 TCF estimated reserve. Chevron signed a gas purchase and sales agreement in November 2005 with Bangladesh's state energy agency Petrobangla to explore for gas at Bibiyana, filed in Block 12 in Habiganj district. It has an initial production capacity of 250 million cubic feet per day (mmcfd), increasing by 100 mmcfd each year until 2010.

Nigeria auctions 30 oil and gas blocs

March 18, 2007. Nigeria will announce a new round of exploration licenses for around 30 oil and gas blocs over the next two weeks. Those licenses will include both offshore and onshore blocks, including some in the Niger Delta. The bidding for the same will be carried out electronically. Meanwhile, an indigenous company, Eterna Oil and Gas Limited, has disclosed its intention to participate in the bid round.

Sinopec discovers major gas field in SW China

March 16, 2007. Oil giant Sinopec has discovered a huge gas field in southwest China's Sichuan province and the same is still under exploration, hence it did not revealed any estimates for the gas reserves. However, according to local media reports, the natural gas reserve of the field is very likely to exceed that of Puguang, a gas field also in Sichuan province with proven reserves expected to reach 500 billion cubic meters by 2008. Prior to the new gas field, China only had five natural gas fields with deposits exceeding 200 billion cubic meters.

NPCC wins major offshore oil deals in Qatar

March 16, 2007. The UAE-based National Petroleum Construction Company (NPCC) has again won an EPIC Offshore Contract from Maersk Oil Qatar AS, covering Packages 17 & 18 of the Block 5 Field Development Plan of Al Shaheen Field, Qatar. Block 5 is operated by Maersk Oil Qatar AS under a Production Sharing Agreement (PSA) with Qatar Petroleum. The present contract is the biggest in NPCC's history. Earlier in 2006 NPCC had won two more contracts from Maersk Oil Qatar under Block 5 Development Plan which are currently under execution stage. The scope of work under this EPIC contract includes design, engineering, procurement, fabrication, onshore commissioning, Load-out, Sea-fastening, Transportation to offshore location, Offshore Installation, Hook-up and Commissioning of facilities for 'G Location' and 'E Location' comprising of GA Wellhead Platform, GD Process Platform, GB Flare Platform, ED Process Platform, ED-EA Bridge, and Three Interconnecting Bridges. It also includes tie-in of the new facilities to the existing facilities. As per the contract programme, the overall completion of this contract is set for December 2009.

Eni eyes bid for gas E&P assets in Libya

March 15, 2007. Eni SpA is interested in bidding for gas exploration and production (E&P) assets in Libya, though the bid is not ready for the time being. Libyan state-owned oil company is ready to organize tender bids for gas E&P projects in the country. Eni owns the 520-km Greenstream gas pipeline linking Libya and Italy, which has a capacity of 8 billion cubic meters.

Black Sea gas discovered

March 15, 2007. Toreador Resources and TPAO each have reported Black Sea gas discoveries. Toreador Resources hit more gas in the Black Sea offshore Turkey with the Atwood Southern Cross rig. The Guluc-1 well flowed approximately 17 MMcf/d of gas. It was drilled in a fault-separated prospect along the same trend as the Akcakoca-3 and -4 wells in the deeper waters of the SASB project area. TPAO, the Turkish national oil company, reported tested 6.8 MMcf/d of gas at the Alapli-1 well northeast of the Akkaya field and adjacent to the SASB area . It was drilled with the Prometheus rig.

Petronas wins tender for oil drilling in Lampung

March 15, 2007. Petronas Carigali has won a tender for oil drilling in the Lampung II Block in the waters of Tulang Bawang district in Indonesia's Lampung Province. The company will invest US$30 million in the first phase of the project, including surveys and drilling. The company is currently operating five oil blocks in Indonesia, including those in Jambi, Central Java and East Java and was expected to embark on drilling activities in the next three years.

RAK to acquire Oman, UAE assets from Indago

March 14, 2007. Indago Petroleum Limited announced that the proposed disposal of 100 percent of its Production & Development Assets (principally consisting of Blocks 8 and 30, located off-shore and on-shore the Sultanate of Oman respectively) and the proposed disposal of approximately 50 percent of its exploration assets (consisting of Blocks 31, 43A and 47, located on-shore the Sultanate of Oman) to RAK Petroleum for a total consideration of £194,235,267 to be satisfied in cash on Completion.

Sinopec to restructure upstream ops

March 14, 2007. Sinopec Group, China's largest refiner, will restructure its upstream operations through 2010. The restructuring involves 16 operating units including listed firm's eight branches in north China, northeast China, southwest China, south China and east China. After the restructuring, the exploration unit will set up three regional arms in north China, south China and northwest China. Sinopec will develop three or more oil fields with 10 mln tons capacity through 2010. It will also seek to expand oil and gas exploration overseas in 2007. Sinopec Group produced 4.5 million tons of crude oil from overseas oil fields, accounting for 11 percent of the total.

Construction begins on New Zealand

March 14, 2007. Work has begun on preparing the Kupe gas project's onshore production station near Hawera and nearshore pipeline approach. Initial preparatory work had begun at and around the onshore production station including site clearing and road upgrades. Work is also now underway to build a rock mattress along the seabed on which the pipeline and umbilical from the platform will later lie. The rock mattress involves laying rocks along the seabed to smooth out the undulations caused by boulders in the area. The rocks are being taken from a quarry at Egmont Village and will be laid on the seabed floor using a special vessel, the Pompeii. The rocks will add stability to the two lines, particularly given Taranaki's strong weather and sea conditions. The two lines will enter two 2.2 km horizontally directionally drilled (HDD) tunnels under the south Taranaki cliffs and up to the production station site a few hundred meters back from the cliff top. Preparation work for the HDD drilling under the cliffs is underway. Gas from Kupe is planned to be on-line by mid-2009 and will provide New Zealand with approximately 254 petajoules of natural gas, 1.1 million tonnes of LPG and 14.7 million barrels of light oil.

Talisman makes gas discovery in British Columbia

March 13, 2007. Talisman Energy Inc. has drilled a successful natural gas well in the foothills of northeastern British Columbia. The well, which tested at restricted rates of 21 to 25 million cubic feet per day, is expected to commence production by November 2007.  The well was drilled in partnership with Husky Oil Operations Ltd. and is about 100 kilometres north of Talisman's Monkman area.

Stratic gas discovered in the Black Sea, Turkey

March 13, 2007. Stratic Energy Corporation and its joint venture partners TPAO (the Turkish national oil company) and Toreador Resources Corporation today announced two further gas discoveries in the South Akcakoca Sub-Basin in the Black Sea, offshore Turkey. The Guluc-1 exploration well, which was drilled using the "Atwood Southern Cross" semi-submersible was drilled on a separate structure (named Guluc) on the same geological trend as the existing Akcakoca and Akcakoca East discoveries recently announced. The Guluc-1 well discovery well encountered gas-bearing sands in six zones between 1,226 and 1,453 meters true vertical depth in the same Eocene-age Kusuri formation as in the other wells in the South Akcakoca Sub-Basin. The well was tested and flowed approximately 17 million cubic feet of gas per day through a 48/64-inch choke at a flowing pressure of approximately 1,180 psi from approximately 37 meters of perforations across all six zones.

Downstream

Brazil Petrobras, partners buy Ipiranga

March 19, 2007. Brazil's energy company Petrobras and two partners plan to buy rival Ipiranga in a deal worth about $4 billion that signals consolidation in the petrochemical sector. Petrobras will join with local petrochemical companies Braskem SA and Ultrapar Participacoes to buy Ipiranga. The agreement would also expand Petrobras' refining and fuels distribution business, reinforcing its leadership in the market. Ipiranga is Brazil's second-biggest fuel distributor, has a small refinery processing around 12,500 barrels of crude oil per day and works on some oil prospecting projects. Under the agreement, Ultrapar will act as the purchaser of Ipiranga in the name of the other partners. Petrobras will spend $1.3 billion on the deal, Braskem will come up with $1.1 billion and Ultra will issue stocks worth about $1.6 billion. After the transaction is completed, the partners will divide all Ipiranga assets so that Petrobras will own all Ipiranga gas stations in Brazil's north, while Ultrapar will own the stations in Brazil's south. Braskem will own 60 percent of the petrochemical assets and Petrobras the remaining 40 percent. The three partners will jointly own the oil refining assets, now listed as Refinaria de Petroleo.

South Koreans, Germans to upgrade Iran refinery

March 16, 2007. South Korea's Daelim Industrial Corp. with two German and three Iranian firms signed a contract worth about $1.72 billion to upgrade Isfahan Refinery in central Iran. With the goal of producing 12 million liters of gasoline per day, the contract includes detailed engineering, procurement, and site engineering. The project to upgrade the refinery was awarded to an international consortium consisting of Iranian companies Nargan, Namvaran and, Chagalesh, Germany's UHDE and Lurgi, as well as Daelim. France's Axens, British UOPL, Denmark's H. Topsoe, and Italy-based Technip KTI SpA will carry out basic engineering for the licensed units, with main consulting awarded to Technip Italy, another Italian-based branch of Technip. The client is the Oil Industries Engineering and Construction Company (OIEC), a subsidiary of National Iranian Oil Refining and Distribution Company (NIORDC). The project would take 48 months to complete.

Shaw group wins Marathon refinery contract

March 14, 2007. Engineering and construction company Shaw Group Inc. had won an engineering and procurement contract to expand Marathon Oil Corp.'s  Garyville, Louisiana, refinery. Shaw's Stone & Webster unit will work to add a 70,000-barrels-per-day heavy gas oil hydrocracker unit and 47,000 bpd kerosene hydrotreater unit to the plant. The plant's $3.2 billion expansion project, which will boost capacity to 425,000 bpd from the current 245,000 bpd. New crude, coking, reforming and hydrocracking units are expected to begin operation in the fourth quarter of 2009.

Transportation / Trade

NPCC wins contract from Saudi Aramco

March 19, 2007. Saudi Aramco has awarded a multi-million dollar contract for its tie-in platforms and scraper decks project to the UAE's National Petroleum Construction Company. The work includes fabrication, transportation and offshore installation of two tie-in platforms, including two bridges, pipe spools and other associated work, and three scraper decks, all in the Zuluf and Marjan fields, offshore Saudi Arabia. The work is expected to be completed by January 2009. Last week, NPCC won its biggest-ever contract in Qatar - a multi-billion dirham deal to increase the production capacity of the Al Shaheen field to 525,000 barrels per day of crude by 2009. Last year, NPCC won two more contracts from Maersk Oil Qatar under the Block 5 development plan.

BMG partners secure 15-year sales deal

March 19, 2007. Beach Petroleum Limited and its joint venturer in the Basker Manta Gunny (BMG), Anzon Australia Limited, have signed a 15-year gas sales agreement (GSA) with Alinta Limited to supply gas from the offshore Gippsland fields to Tasmania for power generation. The gas will be used by Alinta Limited to supply the first private sector power station, Tamar Valley Power Station, in Tasmania. The Tamar Valley Power Station will be a high-efficiency, gas-fired combined cycle power station using best-practice technologies. The initial contract, which is conditional and subject to a final investment decision (FID) by the joint venturers, is to supply 225 PJ of gas over a primary term of 15 years, commencing in 2009. It includes an option for additional gas supply, providing growth opportunities for all parties. The signing of the GSA provides for a further expansion in the development of the Basker Manta and Gummy fields which commenced less than two years ago. Beach Petroleum is the 50 percent owner of the Basker Manta and Gummy (BMG) fields with the remaining 50 per cent owned by the operator of the project Anzon Australia Ltd.

Chinese firm spreads wings with Libya and India projects

March 15, 2007. The pipeline unit of China's biggest state-owned oil company is expanding abroad with projects to build oil and gas pipelines in Libya and India. China National Petro-leum Corp's (CNPC) Pipe-line Bureau started construction of the 1,600-kilometre gas pipeline in India in January and has signed a contract for a 7.7-kilometre crude oil pipeline in Libya. Chinese oil companies are expanding their foreign presence as they try to secure new oil and gas resources for the country's booming economy. Chinese companies will receive tax breaks and other incentives for investing in Libya's oil and gas industry. The country was among nine petroleum-producing countries on a list targeted for Chinese investment.

Tesoro buys California gas stations

March 15, 2007. Five of 140 USA Petroleum Corp. gas stations, Tesoro Corp. has agreed to buy for $277 million are in Greater Sacramento. One station is on Main Street in Woodland, one is on Taylor Road in Loomis, two more are in Sacramento, at 2281 El Camino Ave. and 10051 Folsom Blvd., and a fifth is in North Highlands at 7550 Watt Ave. The deal is still on & the company are in the early stages of the acquisition. Tesoro also is buying a refinery north of Los Angeles from Shell Oil Products US and 250 Shell service stations in and around Los Angeles and San Diego for more than $1.6 billion, excluding fuel inventories. The transaction is expected to close in mid-year. The refinery has a crude throughput capacity of about 97,500 barrels per day. The retail sites to be sold to Tesoro will remain branded by the Shell name.

Russia, Greece, Bulgaria sign oil deal

March 15. 2007.  Russia, Greece and Bulgaria signed a deal to build a 175-mile pipeline to transport Russian oil to a port in northern Greece that the three governments hailed as helping to secure Western oil supplies. The pipeline from Bulgaria's Black Sea port of Burgas will transport crude to the port of Alexandroupolis. The project will improve networks in southeastern Europe that transport oil and gas from the Caspian Sea region to the European Union. The deal is under threat from Russian side due to economic disputes. Russia already provides other parts of Europe with a third of its oil and 40 percent of its natural gas, and the pipeline deal is likely to deepen that dependence on energy from Moscow, whose reliance as a supplier has been questioned. The $1.2 billion Burgas-Alexandroupolis pipeline will link the Black Sea to the Mediterranean, avoiding Turkey's crowded Bosphorus strait. Crude supplies, possibly also from Kazakhstan, will still be shipped from the Russian port of Novorossiysk to Burgas, and again out from Alexandroupolis to world markets. Russian firms will control a 51 percent stake in the venture, including infrastructure like pumping stations, storage facilities and loading docks, leaving EU members Bulgaria and Greece with 24.5 percent each. The project will compete with other pipelines including Baku-Ceyhan, which skirts Russian soil. The Russian consortium is made up of state oil company OAO Rosneft, pipeline monopoly Transneft, and a subsidiary of state-controlled gas giant OAO Gazprom.

Russia clinches Balkan oil deal

March 15, 2007. Russian President Vladimir Putin has signed a deal in Athens to ship Russian oil to the EU via a pipeline bypassing the busy Bosphorus. The 285km (178-mile) pipeline will go overland from Bulgaria's Black Sea port of Burgas to the northern Greek town of Alexandroupolis on the Aegean Sea. A Russian consortium will hold a 51% stake in the pipeline. It is expected to be ready in three years' time. The consortium brings together state oil firm Rosneft, pipeline monopoly Transneft and a subsidiary of gas giant Gazprom. Bulgaria and Greece will each have 24.5% stakes. The pipeline project's estimated cost is $1.2bn.

Total to keep up spending on refineries

March 15, 2007. Total will keep on investing in refining unlike some of its rivals, the head of the French group, reiterating a target to spend another 4 billion euros in the sector by 2010. Major oil companies have pursued different strategies with regard to refinery assets in the past year, with refiners such Royal Dutch Shell and Exxon Mobil selling or putting up for sale plants in Europe. At the same time, ConocoPhillips bought Wilhelmshaven refinery in Germany in November 2005, while BP was talking to Chevron about buying Chevron's 31 percent stake in the huge 400,000 bpd Nerefco refinery in the Netherlands. The different strategies come amid predictions that refinery profit margins have peaked, though views are mixed over the extent of any subsequent drop in profit levels.

Iran-Armenia gas route to be opened by late March

March 14, 2007. The Iran-Armenia gas route is to be opened late in March. The construction project is estimated to cost $120 million. The construction of the first 40km-long section of the pipeline started on November 30, 2004. The second section, which passes through the Armenian cities of Kajaran, Sisian, Jermuk and Ararat, is being constructed by the Iranian company Sanir. At the initial stage Armenia will receive 300-400 million cubic meters of gas from Iran annually, with the volume to be increased to 2.3 billion cubic meters. Under an Armenian-Iranian agreement, the former soviet republic is to receive a total of 36 billion cubic meters of natural gas in 20 years. The agreement may be extended, and the gas supply volume may be increased to 47 billion cubic meters.

Qatargas II LNG project start-up seen in Q2 2008

March 14, 2007. The start-up of the Qatargas II liquefied natural gas (LNG) project is expected in the second quarter of 2008. The Qatargas II project covers two LNG trains (Qatargas trains four and five) to supply 14 million tonnes to Britain. Qatar Petroleum has a 70 percent stake in the project while Exxon Mobil Corp has 30 percent.

China Gas forms joint venture with SK unit

March 14, 2007. Piped-gas distributor China Gas Holdings, will form a US$20 million, joint venture with South Korean energy company SK E&S to expand in the mainland. The venture will mainly develop piped gas and related downstream projects. SK E&S, a unit of South Korea's largest oil refiner SK Corp and China Gas will each take a 50 percent stake in the joint-venture company, China Gas-SK Energy, to develop its city gas business. The partnership will explore the mainland market, including exploitation, liquefaction, transportation and distribution of natural gas. This will be in addition to importing and exporting liquefied petroleum gas. The joint venture will also target energy related projects overseas at a later stage. US$20 million will be invested initially. Further investment will depend on progress made with projects.

Shell plans gas pipeline venture in Iraq

March 13, 2007. Royal Dutch Shell and a group of Turkish companies have joined forces to bid for a licence to produce natural gas in Iraq and pipe it to the Turkish Mediterranean oil port of Ceyhan. Shell’s partners are believed to include TPAO, the Turkish state oil company; Botas, Turkey’s pipeline operator, and Tekfen, a construction group. Since Iraq has huge unexploited gas reserves, estimated to total more than 3 trillion cubic metres, greater than those remaining in the North Sea, therefore a gas link-up between Iraq and Turkey could bring new supplies into Europe, reducing dependence on Russia. Shell’s move in Iraq follows the Iraqi Government’s recent approval of a draft oil and gas law, which settles the quarrel between the Kurdistan regional government and Baghdad over who can issue exploration licences.

Policy / Performance

Singaporean firms sign oil deal with Myanmar

March 19, 2007. Two Singaporean-registered companies, Silver WaveEnergy Pte Ltd and Silver Wave Sputnik Petroleum Pte Ltd, have signed a deal for offshore oil and gas exploration and production sharing in Myanmar. The deal had been signed with state-owned Myanmar Oil and Gas Enterprise (MOGE).

Previously Myanmar has signed oil and gas exploration contracts with France's Total SA, Unocal Corp. of the United States, Malaysia's Petronas, Thailand's PTT Exploration & Production PCL, Daewoo of South Korea and companies from Russia, India and Australia. The United States and the European Union have imposed economic sanctions on Myanmar in recent years as a result.

Russia seeks mining, energy ventures in southern Africa

March 19, 2007. Russia is expected to sign a package of energy deals with southern African states. Russia seeks to regain the pull it enjoyed in Africa in Soviet times when it spent billions to support governments friendly to the Kremlin, but as it stages a foray for its private capital, Moscow will have to compete with countries like China for lucrative opportunities.

The Russian company would start exploring for crude oil in Angola, where it hoped to sign an agreement on April 15. The company will make an initial investment of about $50 million [R373 million] for exploration or even more if required. The deal would involve exploration onshore in South Kwanza, North Kwanza, Etosha and Ojiba, and in Shelf Blocks 12 and 13 offshore. Angola is pumping more than 1 million barrels per day (bpd) of crude oil. Production is projected to reach at least 2 million bpd by next year as new fields come on stream.

Ukraine for boosting energy cooperation

March 16, 2007.  Ukraine has emphasised the need to boost cooperation in diversified economic areas including the hydrocarbon and minerals between the Pakistan & Ukraine. Ukraine had vast expertise in coal-based power plants and coal gasification and both countries could share each other’s experience in this field. These two nations  agreed that there existed a lot of potential for cooperation in oil, gas and mineral sector for the advantage. Pakistan had deposit of 175 billion tons of coal in Thar (Sindh) and sought Ukrainian cooperation for setting up gasification and coal-based power plants.

EU's Piebalgs wants global emissions deal in 2009

March 16, 2007. The international community should seek to reach a deal in 2009 on cutting greenhouse gas emissions by 30 percent. European Union leaders committed last week to a target of reducing EU greenhouse gas emissions by 20 percent by 2020 and offered to go to 30 percent if major nations such as the United States, Russia, China and India follow suit. Making a deal in 2009 would give time for ratification the following year and for such a new emissions scheme to enter force in 2012.

Kuwait in LNG talks with Shell, BG group

March 15, 2007. Kuwait has begun talks with international oil companies, including Royal Dutch Shell and BG Group, on developing its natural gas resources and on importing gas in liquefied form to meet soaring domestic demand. Kuwait was talking to the oil companies about building a receiving terminal for liquefied natural gas, or LNG, and jointly working on the upstream side. Opec oil ministers was against increasing crude production, despite concerns that expensive oil could be gnawing away at the global economy.

Libya to launch gas bidding round later in 2007

March 14, 2007. Libya is planning to hold a bidding round later this year to develop gas fields onshore and offshore. About 10 to 15 blocks, a mixture of offshore and onshore will be considered for the same. But investing in Libya isn't easy with talks often held up in internal squabbling by hardliners and reformists. Libya is estimated by the International Energy Agency to have more than 100 billion barrels of oil reserves and 40% of Africa's reserves. It has ambitious plans to nearly double its oil output within a decade to 3 million barrels a day, from 1.7 million barrels a day currently. Gas output is forecast by the IEA to more than quadruple from 12 billion cubic meters in 2010 to 57 billion cubic meters two decades later.

Iran, Japan firm discuss pricing oil in yen, euros

March 14, 2007.  Iran has been in talks with at least one Japanese refiner about changing the currency used to pay for crude oil to the yen or euro from the U.S. dollar as Tehran faces growing pressure from Washington over its nuclear programme. Currently, almost all international crude oil transactions, including all exports to Japan, are paid in dollars. Japan buys 486,000 barrels of crude oil per day out of Iran's production of about 3.8 million barrels per day. Washington has imposed sanctions on Iranian banks as part of its campaign to isolate Tehran for its nuclear programme.

Petroleum policy to offer incentives

March 14, 2007. The new petroleum policy in Pakistan, will entail lucrative incentives for prospective local and foreign investors in the onshore and offshore oil and gas exploration. Pakistan had a vast onshore and offshore sedimentary area of 827,000 square kilometres out of which around 25pc was under exploration. The government was taking concrete steps to exploit untapped hydrocarbon and coal reserves to meet the growing energy needs of the country. 17 new blocks in offshore and onshore areas would be opened shortly which would boost oil and gas exploration activities in the country.

Venezuela sees joint Orinoco companies by June 26

March 14, 2007. Venezuela expects foreign investors operating projects worth more than $30 billion in the Orinoco Belt to form by June 26 joint companies in which state oil firm PDVSA will take a majority. These heavy crude projects have a production capacity of about 6,00,000 barrels per day. The formulation of the joint companies will then be submitted to the National Assembly for approval. President Hugo Chavez originally had given the companies involved a May 1 deadline to surrender at least 60 percent of the projects to Venezuelan control. He then extended the deadline until almost the beginning of September. Companies whose investments are targeted for takeover include Chevron Corp, Exxon Mobil, Conoco Phillips, Statoil, BP Plc and Total.

Opec sees no need for output cut

March 13, 2007. The Opec oil cartel sees no need to cut output because the market is balanced. There is a balance between supply and demand and the price is good. The key issue was to prevent oil prices from fluctuating sharply, that would hurt both producers and consumers. Analysts expect Opec to maintain its official production quota of 25.8 million barrels per day. In December, Opec decided to cut production by 500,000 bpd from February 1, following a reduction of 1.2 million bpd in November. Opec’s move to slash production came after crude prices tumbled from record highs above $78 in mid-2006 to about $60.

Chevron drops proposed LNG project off Mexico

March 13, 2007. Chevron Corp. is dropping plans for a liquefied natural gas terminal off the Baja California coast of Mexico, near the U.S. border. The oil major canceled three permits with Mexican officials because the project no longer fits Chevron's business needs. The project was originally developed with the intent that (the terminal) could receive supply from Chevron's share of LNG from the proposed Gorgon project off Australia.

Power

Generation

Russia to build more nuclear reactors to supply power

March 16, 2007. Russia will build two nuclear reactors annually through 2015, and increase to four a year by 2020 in an effort to sharply increase atomic power generation so as to move apart from more dependency on dwindling oil, gas and other hydrocarbons. Russia has 31 reactors at 10 nuclear power plants, accounting for 16 percent to 17 percent of its electricity generation. Putin has called for raising the share of nuclear-generated power to at least 25 percent by 2030. Russia will launch two 1,000-MW nuclear reactors a year under a program for which the government has allocated $26 billion through 2015. Starting in 2016, Russia will be building three reactors a year and four annually beginning in 2020.

Missouri developing 2,900 MW of coal generation

March 15, 2007. Missouri utilities and universities are both looking at coal as the fuel of the future. Power generators are evaluating eight sites to install about 2,900 MW of electrical generation derived from coal.

Race to build coal-fired station in UK

March 13, 2007. Two firms viz., German firm Eon and RWE Npower are in a race to build the first new coal-fired power station in the UK for 20 years to replace an existing coal-fired facility. Npower is prepared to spend £1bn on the site, which would be operational by 2013. As per the Swindon-based firm, a new power plant would emit more than 20% less carbon than the one it would replace. The new building will be designed to include carbon capture technology, a newly emerging technique that captures harmful carbon dioxide emissions for storage in places such as old oil and gas fields rather than releasing it into the atmosphere. It would also be developed to be able to be fuelled by carbon-neutral animal and plant material known as biomass. Coal remains the most environmentally unfriendly option for energy firms building new power stations.

Mitsubishi wins $4-5 bn TXU reactor deal

March 14, 2007. Mitsubishi Heavy Industries Ltd. unexpectedly snatched up an order to build two nuclear reactors for U.S. power plant operator TXU Corp. in its first overseas reactor deal estimated to be worth as much as $5.2 billion. But the approval for the new reactor would not even come until 2011 so it's far too early to factor this into earnings. The deal comes after TXU last month agreed to be taken over in a $32 billion deal led by private equity firms and suspended plans to build eight coal-fired power units. It is expected the order be worth between $4.3 billion to $ 5.2 billion with a capacity of 1.7 million-kilowatt advanced pressurised water reactors. The reactors, which will be built at TXU's Comanche Peak nuclear power station near Dallas, would come on line some time around 2015.

Contract awarded for new Mohave County power plant

March 13, 2007. A $48 million contract to build a new power plant in Mojave County has been awarded to a Scottish firm named Wood Power Group Solutions Inc., the American subsidiary of Wood Group of Scotland. Unisource serves customers in Mohave and Santa Cruz Counties and currently buys electricity from Arizona Public Service under a contract set to expire next year. The new plant is part of the utility's efforts to develop its owns sources of electricity. The plant, however, is only designed to operate during peak demand periods. It will be operated remotely.

Transmission / Distribution / Trade

Merrill Lynch approved for Japan power market

March 18, 2007. Merrill Lynch received a license to trade wholesale electricity in Japan, becoming the first overseas trader in the country's $136 billion-a-year power market. The world's third-biggest securities company by market value will sign contracts to buy electricity from local suppliers by the end of this month, its Japanese unit. Merrill would enter Japan's power market as the government allows greater competition to lower prices. Increased participation by overseas rivals may help to break the dominance of the 10 regional utilities in the world's third-largest electricity market. This would be a blow to the regional utilities if Merrill acquires and offers sizable electricity supply from hydro and wind power plants, which can generate power at lower costs compared with oil- and gas-fired thermal plants. Merrill's entry would come seven year after the U.S.-based Enron, which collapsed in December 2001, failed in its plans to build a 2,000-MW power station in Aomori Prefecture in northern Japan and a transmission line to the Tokyo area. Surging oil prices have increased the cost of generating power, forcing some new entrants to consider pulling out of the retail market. Higher oil costs are less of a burden for the utilities because they can produce electricity at their nuclear and hydroelectric plants.

China power has Beijing green light to supply HK

March 17, 2007. China Power Investment Corp, the parent of China Power International Development (2380), has obtained approval from the central government to export power to Hong Kong. The group expects to start supplying electricity to Hong Kong in the short term after it receives approval from the SAR government. The privately-held Hong Kong- based company is a joint venture involving China Power Investment, which owns a 50 percent stake, China Southern Power Grid, which holds 35 percent, and Vertex Communications and Technology Group, a Growth Enterprise Market-listed media firm, with 15 percent. China Power's entry into the Hong Kong market would create competition for CLP Holdings, which supplies Kowloon and the New Territories, and Hongkong Electric, which serves Hong Kong Island.

Russia's TVEL corp. to ship nuclear fuel to Vietnam

March 16, 2007. TVEL, Russia's leading producer and supplier of nuclear fuel for power plants, will deliver fuel for a research reactor in Vietnam in September. A relevant contract was signed between TVEL, the U.S. Department of Energy and the Dalata Research Center, Vietnam on March 15. Under the contract, 36 rods of VVR-M2 LEU fuel (enriched to less than 20%) will be delivered to the Vietnamese research reactor in September to replace the highly enriched uranium (HEU) (enriched to 36%) fuel being used there. Earlier, nuclear fuel was exported under the REFTR program to research reactors at Czech Technical University and the Tajoura Nuclear Research Center in Libya (TREWDRC). The Novosibirsk Chemical Concentrate Plant, a subsidiary of TVEL, will produce VVR-M2 fuel for the Vietnamese research reactor.

Policy / Performance

Report sees need for more power generation in N.Y. by 2016

March 19, 2007. New York's power generation and distribution system should be "adequate through 2010," but deficiencies could become acute by 2016. The deficiency is the result of an increase in electricity demand, which is growing 2 percent a year, primarily in the lower Hudson Valley and New York City regions. The demand could be met by 250 MW of new resources in New York City or 500 MW of new power in the Hudson Valley. The report led the Independent Power Producers of New York Inc., the trade association that represents power generators, to issue a push for a power plant siting law. The previous power plant siting law, Article X, expired in 2002.

Iran ready to make power plants in Pakistan

March 16, 2007. Iran ready to make power plants in Pakistan as the former has gained profound experience in construction of thermal and hydroelectric power plants and is willing to transfer its know-how to Pakistan. Iran's industrial and technological achievements in power generation such as dam construction could be very helpful for Pakistan.

Senegal’s Wade hopes to build nuclear power plant 

March 14, 2007. Senegal has contacted foreign experts to advise on building a nuclear power plant, part of an ambitious programme to develop the country’s creaking infrastructure. Power shortages continue to hamper economic development across sub-Saharan Africa. In Senegal, one of the most stable countries in West Africa, regular blackouts - some of them lasting more than 10 hours, forced the government to requisition oil stocks late last year.

Russia to shift energy focus on nuclear power

March 16, 2007. The Russian government will review its energy strategy in April to increase the share of nuclear power, hydroelectric and coal industries in power generation. Russia is likely to experience an energy deficit in the future if it continues to rely on thermal power generation mainly based on non-renewable reserves of natural gas. Russia has 31 operating power reactors at 10 nuclear power plants (NPPs) with a total installed capacity of 23.2 MWe. The average current share of NPPs in electricity generation is 16.5 percent. Russia is planning to put in service three power reactors annually starting 2016, and in 2018-20 this number could increase to four. The State Duma, the lower house of Russia's parliament, passed in January a presidential bill to reform the country's nuclear power sector and to facilitate its development. Russia is going to establish a holding company, Atomenergoprom, which will assume control over the civilian nuclear power sector.

Renewable Energy Trends

National

The Indian experience, working on bio-diesel

March 18, 2007. A few Indian companies have attempted to process bio-diesel in a small way and use it in their vehicles. The most prominent among them being DaimlerChrysler India (subsidiary of the German company) and Mahindra & Mahindra. DaimlerChrysler AG and DaimlerChrysler India with their partners, Central Salt and Marine Chemicals Research Institute (CSMCRI) and the University of Hohenheim, have been working with bio-diesel processed from the seeds of the Jatropha plant. The project, which is in its second and final phase, has been partly financed by Deutsche Investitions and Entwicklungsgesellschaft (DEG). Recently, M&M also formally announced its emphasis on bio-diesel and unveiled the bio-diesel Scorpio and Bolero DI vehicles for 100 per cent real world usage trials. The Scorpio, with indigenously developed CRDE technology, is said to be the first Asian vehicle in its class to run on 100 per cent bio-diesel. M&M also unveiled a 5 per cent bio-diesel tractor along with its utility vehicles, another first in the country. Mahindra & Mahindra has organised two projects as part of its bio-diesel programme, one in conjunction with the Indian Institute of Technology, Kanpur, and the other with Indian Oil Corporation's R&D Centre and Lubrizol.

Forest land diverted for wind energy projects

March 18, 2007. Adivasis in Dhule district, Maharashtra, are protesting the diversion of forest land for wind power projects. About 340 hectares of forest land has been diverted for wind energy projects in Sakri taluka of Dhule district, promoted by Suzlon Energy Limited. With the passing of the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act 2006, adivasis in Dhule as in other parts of the country were hopeful that the land they were tilling for years would be regularised in their names. In 1982, the first petition on regularising forest land in the name of adivasis was filed from Dhule by Karan Singh Kokani in the Supreme Court. Today Karan Singh, secretary of the Satyashodhak Gramin Kashtakari Sabha, says instead of giving adivasis the land, the government has allotted it to a private company. In November 2005, the Maharashtra revenue and forests department had recommended the diversion of 127.94 hectares of forest land for the construction of wind power projects. This envisaged the installation of 100 wind turbines of 1.25 MW each in Dhule district. The government contended that there was availability of non-forest land for compensatory afforestation, and after the project was completed, about 6,000 skilled mandays and 28,000 unskilled mandays would be generated. The project would address the overall power shortage in the district. The land in question was also not part of any protected area. The State government also sought the approval of another 212.52 hectares of forest land for constructing a 225 MW wind power project in favour of Suzlon energy limited. The Union Ministry of Environment and Forests (MOEF) approved the diversion of forest land last year.

Need for legislation on renewable energy: MNRE

March 17, 2007. According to Ministry of New and Renewable Energy, the proposed legislation should be both developmental and regulatory in nature and should not concentrate only on regulatory aspects. There is a need and necessity for an enabling legislation to support development and utilisation of renewable energy in the country. He explained, the problems of global warming and climate change have brought the renewable energy at a center stage globally. Several countries have legal and policy frameworks for promotion of renewable energy. Renewable Energy Acts have been enacted in countries like Austria, Australia, Denmark, UK, and USA, CHINA during the last 6 years. In India, Ministry of New and Renewable Energy has been supporting the development and promotion of new and renewable energy.

Global

Texas power plant runs on biodiesel

March 19, 2007. Biofuels Power has opened up a 5 MW power plant that runs entirely on biodiesel and it plans to follow up with another facility that can produce twice as much power. The Oak Ridge North, Texas, plant runs its three diesel power generators entirely on biodiesel, a form of diesel made from vegetable oil or animal fat, agricultural byproducts that don't have a huge resale value. Other power plants buy biodiesel in limited quantities, but mix it with regular diesel. A second facility that will produce 10 megawatts of power is already on the drawing boards. Ten megawatts can provide power for about 3,000 homes. Although biodiesel mostly gets discussed as an alternative to regular diesel for running cars, the inherent properties of biodiesel made from animal fat fit better for power plants. Animal fat biodiesel doesn't function well in cold climates and needs to be kept somewhat warm.

Brazil calls for ethanol production by others

March 14, 2007. Brazil and the United States are the two largest producers of ethanol, accounting for about 70 percent of world output. Brazil has absolutely no interest in monopolising the production of ethanol. Brazil was prepared to share its experience and technology on ethanol built over the years with countries around the globe including in Africa and Asia. Brazil, a pioneer of sugarcane-based biofuels, exported 3.43 billion litres (3.4 million kl) of ethanol in 2006, up 350 percent from three years ago. Its exports in 2005 totalled 2.59 billion litres. A common standard for ethanol has to be established, if the renewable fuel is to become an international commodity. Brazil and the United States last week signed a broad agreement to work together to advance biofuels technology and set common standards for ethanol trade.

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