Brazil: Energy Independence through Ethanol

razil encompasses almost one half of the South American continent and is home to the world’s eighth largest population.   Brazil is now the world’s largest sugar producer and exporter. It produces around 30 million tons of the commodity a year, almost two-thirds of which is exported. And with global sugar demand having risen by an average of around 2.4 percent a year over the past ten years, the industry represents a thriving business for the country.

However, as is the case with many products traded on world markets today, there is more to sugar cane than just satisfying a global sweet tooth. And it was one of those attributes that the Brazilian authorities had the foresight to seize upon many years ago. It entailed a simple, yet effective process whereby the raw sugar cane was stripped of its leaves and pulverized into a watery paste. The resulting product ethanol is now a multibillion-dollar complementary energy source worldwide. But nowhere has more progress been made in this bio fuel sector than in Brazil.

Today, after three decades of seeking efficient sources of ‘other’ energy, filling stations all over Brazil are kitted out with pumps that offer three alternatives to traditional gasoline — pure ethanol, a blend of gasoline and ethanol, called gasohol, or compressed natural gas. This early vision of the use of alternative fuels has transformed Brazil into a global leader in ethanol. In fact, it shares the number one spot for production with the US, but is clearly the top ethanol exporter.

A closer look shows that Brazil heads the rankings for ethanol made from sugar cane, while the US is the world’s largest producer of corn-based ethanol. But Brazil still has the advantage — its sugar cane ethanol is far more energy-efficient and cheaper to produce.

Brazil embarked on its ethanol programme in 1975 in response to high crude oil prices. At that time, the country was importing some 90 percent of its oil needs, which meant that any substantial rise in the price of crude was potentially damaging for its economy. The development of innovative fuels, such as ethanol, was an obvious choice, given the huge expanse of arable land the country possessed, coupled with the favourable climate.

Obviously, as with any fledgling industry, there were teething problems and the first automobiles to use the fuel did not perform very well. But as the quality of the product improved with the introduction of more advanced technology, and car engines were better adapted to its use, the industry took off. The mills that produced the fuel were also set up in such a way that the production process could be quickly switched from sugar to ethanol, which proved ideal in satisfying fluctuating demand for the two products, a win-win situation that continues today.

Government figures show that by 2002, ethanol powered cars in Brazil had secured three percent of the domestic market. However, the following year, automakers, in wanting to exploit the potential good fortune this alternative fuel offered, began to produce cars that were fuel flexible, meaning that they could run off ethanol, gasoline, or a mixture of the two. It proved to be a landmark year for the industry.

Today, the so-called flex-fuel vehicles account for 75 percent of all new car sales in the country, while ethanol makes up about half of all fuel used by passenger vehicles. As for the product itself, pure ethanol is cheaper than gasohol, yet not as efficient in the distance one can achieve with one litre of standard fuel. It means that as prices fluctuate, drivers in Brazil fill their tanks accordingly with one or other of the products. It has proved to be a beneficial and economical system. Today, drivers in Brazil can fill up with ethanol at 29,000 filling stations across the country. This is indeed impressive when one considers that in the United States only around 600 gas stations currently sell a blend of ethanol and gasoline.

With demand for ethanol remaining strong, Brazilian producers have to perform a balancing act right now in satisfying domestic needs and the growing export market, which is obviously very lucrative. And with demand forecast to rise by half as much again over the next five years, the government has said that it is imperative that the country’s production capability be expanded as quickly as possible.

According to the Renewable Fuels Association, Brazil produced just under 16 billion litres of ethanol last year, and almost 15 percent of that was exported. However, the government is confident that the additional sugar cane mills earmarked will satisfy the growing export demand. Already in the country, an area covering more than 13 million acres is dedicated to growing sugar cane, but obviously there is plenty of scope for expansion. One problem facing the government is the effect on the environment as new areas are exploited. The Amazon forest is very attractive to the producers because its warm climate enables two growing cycles to be accommodated every year — meaning twice the harvest.

Countries with Ethanol-Gasoline blend programme

And as the industry’s output capability grows, then so does the share of exports. The US, India, South Korea, Japan and neighbouring Venezuela all receive ethanol supplies from Brazil. A further major expansion of its ethanol trade involves Japan, which is due to decide soon on whether to make domestic gasoline with an ethanol mix mandatory. If that transpires, global demand for the product would jump by over 30 percent.

Brazil’s state oil firm Petrobras, which handles all overseas ethanol exports, has estimated that Japan could import between 1.8 billion and 6bn litres of ethanol, depending on whether the government mandates a three percent or 10 percent mix of ethanol in its gasoline. In 2005, Japan bought just over 300 million litres of Brazilian ethanol, according to Brazil’s Agricultural Ministry.

A MoU was recently signed between Petrobras and Japan’s Mitsui over future ethanol studies, while in March this year, the state firm set up a joint venture with Nippon Alcohol Hanbai covering additional exports of ethanol to Japan. Brazil’s 2.5bn litres export of ethanol last year was more than ten times the figure seen in 2000. This growth meant that the country accounted for over half of global ethanol trade. Europe is a long way second with a market share of 12 percent.

An important export market for Brazil is the US. American interest in ethanol has increased following moves by the US Administration to phase out the use of the fuel additive MTBE in refining oil products. Ethanol is the obvious substitute, but that means greater reliability on imported supplies, which translates into more good news for Brazil, if it can develop the export potential. In addition, heightened interest in ethanol was sparked in July last year when US Congress, in its overall bid to reduce dependence on imported crude oil, passed an energy bill requiring the US to use over 28bn litres of renewable fuels by 2012. In 2005, the US produced 16bn of the 16.35bn litres of ethanol it needed, thus importing 350m litres primarily from South America. However, ethanol producers currently have the capacity to produce about 16.3bn litres of the fuel. Signs are that the US will need increasing supplies of ethanol in future years. In fact, US State Senators, concerned that the country could suffer an acute ethanol shortage, recently visited Brazil for talks on a possible increase in ethanol imports.

High-growth China, which is demanding more and more sources of energy to fuel its burgeoning economy, also wants to get on the ethanol bandwagon. With the price of crude oil pushing upwards, the country is keen to find and develop complementary fuel sources. Brazil’s experience with ethanol is attracting serious attention in Beijing. With future prospects for ethanol looking increasingly rosy, more high-tech mills that produce the fuel in Brazil are set to sprout up as the government pursues its ambitious goal to boost production. Brazilian firms have earmarked some $9bn in investment for the provision of additional facilities that will take output to new heights and enable exports to be doubled by 2010.

However, future thinking is that if ethanol is to have a major influence on world fuel supplies, its primary source will not be corn or sugar cane, but the more abundant feedstocks, such as agricultural and forest residue, switchgrass, and woodchip. Already, a great deal of research is being conducted into the possible base feedstocks one could utilize to produce commercially viable quantities of ethanol. Agricultural residue, such as corn or rice stalks, or wheat straw are normally ploughed back into the field, or burned. Studies show that collecting just one third of this residue for biofuel production could yield over 50bn litres of ethanol.

* January - November 2004

The scope appears endless. Still, this is all speculation, and with world energy demand set to rise considerably in the years ahead, biofuels such as ethanol will meet only a fraction of the fuel needs, unless substantial improvements in vehicle fuel economy and biomass conversion technologies are made. These technologies are fast becoming available, but are still very expensive to introduce. Developing the infrastructure.  It is therefore clear that even though great strides have already been made in the biofuel industry, it will still take some years to develop a fully integrated ethanol market. Still, everything is on track for that to happen.

Brazil today has the physical capacity to export over 7.5bn litres of ethanol annually; some three times more than the current level. But the means for transporting the fuel to the ports for export at a competitive price is still in its infancy. Currently, tanker trucks are used for this purpose, but if an extensive pipeline network was established, it would make the whole operation much more cost-effective. With the provision of new mills mushrooming, Petrobras is already involved in a study for a proposed pipeline that could transport up to 3.8bn litres of ethanol annually from the production centres to the coast for export. Brazilian ethanol producers are also interested in establishing more partnerships to form a stronger base for the industry. They have entered into talks with US firms over the possibility of forming joint-venture operations.

They also want to promote ethanol use in other countries and are particularly interested in using the vast expertise they have acquired to help countries, particularly in the developing would, that already have sugar cane operations, to set up their own ethanol industries. For these partnerships to materialize, obviously considerable foreign investment would be required, but with the Brazilian economy performing above expectations, that would apparently present no obstacle.

According to the latest figures from the Ministry of Development, Industry and Foreign Trade, surging exports pushed Brazil’s trade surplus up to $3.68bn in March this year. That was 30 percent more than the previous month. March exports soared to $11.37bn, from $8.75bn in February, while imports expanded to $7.69bn from $5.93bn. The accumulated surplus for the year so far has risen to $9.35bn, 12.5 percent more than in the same period of 2005. Brazil posted a record surplus of $44.7bn in 2005 when exports increased by almost 23 percent to a value of $21.8bn.

On a separate, yet equally as impressive note, this year Brazil will achieve energy independence. Petrobras, which claims to have the fastest-growing oil industry in the world, has announced that national oil production will average 1.9 million barrels/day in 2006, more than average consumption of 1.85m b/d. And as more offshore rigs come online, Petrobras expects to join the world’s net oil exporters — with production exceeding demand by nearly 300,000 b/d in 2010. That’s quite some change to the 1970s, when Brazil imported 90 percent of the oil it consumed. What with the country trailblazing on both the crude oil and ethanol fronts, the future indeed looks very promising for Brazil.

In the production process, raw sugar cane is pulverized into a watery paste, which is then converted into ethanol. Facilities at the processing mills have a dual function, whereby they can quickly switch from the production of sugar to ethanol as demand dictates. A Brazilian car, the Obvio! 828, is being designed and produced for export. The three-passenger microcar is equipped with a four cylinder, 1.6-l, 170-hp engine that can go from zero to 60 miles/hr (100 kph) in just 5.2 seconds, and can run on either gasoline or ethanol. Three-quarters of he cars now being produced in Brazil have ‘flex-fuel’ engines, capable of running on either ethanol or petrol, or any mixture of the two.

Towards an Energy Sector Competition Policy in India:

Insights from International Practices (P - IV)

Dr. Samir R. Pradhan®

here has been a sustained attempt at designing appropriate policies to create competitive markets in the power sector. One of such attempt is ‘The Electricity Act 2003’ which contains certain key provisions promoting competition. These are:

·          Power generation is free from licensing and there is greater flexibility for captive generation.

·          There is an independent system operation by load dispatch centres for power transmission.

·          There is provision of multiple distribution licensees in supply area.

·          Sectoral cross-subsidies have been progressively eliminated.

·          Unbundling of distribution and retail supply.

·          Open access to transmission (immediate) and to distribution network (phased)

·          Trading recognized as an independent activity

·          Establishment of independent regulatory mandatory

However, the complexity as well as political significance of the sector has deterred the emergence of a competitive market in the electricity sector. Public sector dominance is clearly visible in the electricity supply chain and also there is strong resistance to unbundling. The irrational end-user tariffs, availability and pricing of transmission capacity, non-discriminatory access to network are some other competition issues in the sector. There is also an urgent need to enhance regulatory capacity to handle competition issues in the sector.

The current state of things in the Indian oil and gas sector commends devising suitable competition policy. The complete supply chain is dominated by PSUs, not to say of the monopoly of the PSU in the gas transmission segment. Moreover the policies in the sector are adhocist and truly deter competition:

·          Minimum investment of Rs.2000 crores required to enter marketing of transportation fuels

·          Price distortion and government control

·          Retail pricing of petrol, diesel, kerosene and LPG are way below IPP pricing

·          Huge subsidies and under-recoveries, especially from LPG and kerosene

The most significant aspect of the pricing distortions in the petroleum sector has resulted in erosion of competitiveness, under recoveries, lack of enthusiasm from the private sector, irrational refinery margins (quite above the global and regional margin), huge profits of upstream companies and lopsided development of the sector.

Since in the downstream supply chain, only transportation pipelines for oil and gas will exhibit natural monopoly characteristics, they need to be regulated for access and price. Other segments need to be free of pricing regulation for true competition and integrated development of the sector. However, competition concerns, including the abuse of market power and other anti-competitive practices require monitoring and pro-active regulation. The provisions of the proposed PNGRB Bill need to be expeditiously implemented to infuse competition. The sectoral regulator needs to be set in place quickly to protect the interests of all stake holders by fostering fair trade practices and enabling environment of competition among all entities.

Benefits of Competition in the Energy Sector

Generally, competitive markets for goods and services induce firms to improve productivity and thereby lowers consumer prices and results in an expanded variety of goods and services. Pressures on firms to minimise production costs to remain competitive encourage technological and managerial innovations that contribute to productivity growth. Such growth improves the economy’s overall efficiency.

A flexible and competitive domestic economy integrated into the international economy is better situated to handle the negative effects of any external shocks. Domestic competition requires liberalised markets that enable enhanced access, reduced barriers to entry by foreign suppliers, and a regulatory framework based on competitive provision of goods and services by entities with different ownership structures, aimed at competitive neutrality.

Developing countries are increasingly recognising the importance of competition policies. While the same general principles apply, national differences may need to be taken into account in designing a reform program tailored to individual conditions. Regulatory reform to increase competition should precede or coincide with marketing opening measures to allow the benefits of improved resource allocation and expanded consumption possibilities to be maximised. There is a concrete relationship between competition, innovation and productivity growth.

Recent energy sector reforms have concentrated on four main areas: privatisation (changing public for private ownership), liberalisation (choice of supplier), price deregulation and competition through unbundling of transmission service and introducing wholesale markets. Expected benefits from deregulation in terms of increased management and regulatory efficiency (hence, lower cost) and competitive pressures from other suppliers include lower prices, at least for large industrial consumers, and elimination of cross-subsidisation. However, electricity prices in the long run might not go down, and price cap regulation may be necessary even in a “competitive” market. Strategic profit-maximising behaviour may make it rational for a firm to enter strategic alliances in order to achieve economies of scale, and to absorb smaller competitive Independent Power Producers.

Electricity and Gas Sector Competition Model

This section briefly reflects on the competition model in the electricity and gas sector. This is an abridged version of a study by ADB (2002). Introducing competition in these markets firstly requires preventing the incumbent vertically integrated utility from exercising its dominant position in transmission. This is usually achieved by separating transmission into an independent entity (a transmission system operator or TSO), and allowing independent generators to enter the electricity supply market, to access the grid operated by the TSO, and to sell electricity to the wholesale market (pool). Large electricity users, such as industrial enterprises, and public utilities (responsible for distribution of energy to retail clients) can then purchase electricity at wholesale prices, using the same grid. Allowing choice of supplier injects competition into the market, subject to a sufficient number of independent generators supplying electricity to the grid. Another essential component of a competitive market is establishing rules and the terms for accessing the transmission network. Electricity tariffs can be transaction-based (i.e. a bilateral contract between a specific seller and a specific buyer, such as point-to-point tariffs and distance-related pricing), or of a point-of-connection nature (depending on the characteristics of a specific seller/buyer connected to the same part of the network). Energy losses and network congestion require path-dependent pricing schedules; zonal pricing or counter trading can handle network congestion. The EU uses zonal pricing by segmenting the market into zones with distinct prices. England and Wales use a counter-trade system, where the TSO purchases excess electricity supplied by a trader. (Transmission pricing is discussed in greater detail in the section on the Australian experience in electricity deregulation and competition reform).

(Views are personal)

 

 

Crude oil Prices (Nominal US $ per Barrel) at beginning of the year

 

 

Source: EIA

 

 

 

NEWS BRIEF

OIL & GAS

GSPC looks for KG basin partner

August 1, 2006. State-owned Gujarat State Petroleum Corporation (GSPC) will shortlist firms for the final bidding to develop its deepwater Deen Dayal gas field in the Krishna-Godavari basin by September. In June, GSPC had invited preliminary bids for the development of offshore platform, pipelines and onshore production facility at Deen Dayal gas field in the KG basin.  Exxon Mobil, Shell, British Petroleum, and British Gas had submitted preliminary bids for Deen Dayal gas field on July 5, the last day of submission. GSPC had received expression of interest from 11 global companies. The list includes Brazil’s Petrobras, Italy’s ENI, Norway’s Statoil, Spain’s Repsol YPF, US-based Anadarko Petroleum and Sharjah-based Crescent Petroleum. GSPC expects commercial production from the field in first quarter of 2008. GSPC is the operator in this offshore shallow water block where well No. 3 has been found with the potential reserves at the depth of 5,000 metres. 

Indian Oil may float SPV for retail foray

August 1, 2006. Soon after its rival Reliance Industries Ltd announced a Rs 10,000 crore ($2.15 bn) foray into the retail sector, India’s largest oil retailing firm, Indian Oil Corporation may float a special purpose vehicle (SPV) in collaboration with a leading retailer to mark its entry into the sector. IOC recently informed its board of the plans to set up petrol pumps at select retail hubs like malls, multiplexes and hypermarkets. Developed markets, it told the board, had seen a significant shift from petrol outlets at various locations to those at retail hubs.

Reliance Industries’ retail arm Reliance Retail plans to set up a 100 million square feet retail space comprising 10,000 stores by 2010. It has planned a network of hypermarkets, supermarkets, convenience stores, specialty stores and B2B stores across 1,500 locations in India. Among domestic majors, The Future Group is planning to expand its floor area to 30 million square feet by 2010, while the Piramid Group plans to double its floor area to 8 lakh square feet by March 2007.

Essar Oil to start refinery from Oct

July 31, 2006. Country's Essar Oil Ltd has delayed the start of its new refinery to October from a previous August-September deadline. The refinery will process 150,000 bpd when it begins operations. The capacity of the refinery, at Vadinar in the western state of Gujarat, will be ramped up to process 210,000-bpd by March 2007 in the second phase.

Railway use CNG diesel mix fuel

July 29, 2006. Following the successful run on short routes in Delhi, the Railways and its CNG supplier, Indraprastha Gas, are now considering longer routes for the conversion.  The Railways has sanctioned 20 CNG-based trains for the year 2007 and by end of this year it plans to ply seven trains on shorter routes. Currently, the CNG-diesel loco is running on the Delhi-Rohtak-Shyamli route. Besides Indraprastha Gas, GAIL also supplies CNG to the Railways.  It is expected that Rajdhani and August Kranti trains of the Indian Railways will be run on locomotives using CNG-diesel mix as fuel. 

BPCL to set up trading arm in S’pore

July 27, 2006. Bharat Petroleum Corporation Ltd (BPCL) has decided to set up a wholly- owned subsidiary in Singapore for trading and procurement of crude oil and petroleum products, shipping and derivatives. The move will make the state-owned giant the country's first oil refining and marketing company to have its own overseas trading arm for crude oil and petroleum products in Singapore - the world's largest trading, refining and bunkering centre housing over 200 oil companies besides major traders and brokers. All major global oil companies, including NIOC, Aramco, KPC, ENOC, PetroChina, Sinopec, Petrobras and Petronas have their own trading arms.

BPCL, will give it the freedom to enter deals like selling of cargoes, set prices and pricing terms and enter into transactions without tendering. It will also give it immediate credibility in the international oil community since BPCL will no longer be seen as just a buyer of crude and seller of products. The setting up of an independent trading house will also be a strategic move, particularly aimed at capturing the emerging business opportunity for exports from Indian refineries. The oil PSU has recently signed an MoU with India's trading arm, MMTC Ltd, which will facilitate setting up of BPCL's Singapore subsidiary. MMTC's independent subsidiary in Singapore - MTPL Ltd - has been in existence since 1994. MTPL will help BPCL in identifying customers.

Ministry turns down REL gas demand

July 29, 2006. The petroleum and natural gas ministry has rejected a request by Reliance Energy Ltd for firm allocation of 0.36 million standard cubic metres per day of natural gas for its 220 MW project at Samalkot, Andhra Pradesh.  The ministry had asked its power counterpart to submit its opinion on REL’s request to convert its ‘fall back’ allocation of gas into a ‘firm’ allocation.   

The petroleum ministry is of the opinion that an increase in supply to the Samalkot combined cycle power station will result in pro-rata reduction in supply of gas to other power plants.  The company's Samalkot plant requires a supply of 0.94 MSCMD of gas to operate at a plant load factor of 85 per cent, whereas it received a supply of only 0.59 MSCMD of gas in 2005-06, resulting in a plant load factor of around 45 per cent.  The average gas supply that the plant has received since June 2006 is 0.52 MSCMD, resulting in a plant load factor of around 42 per cent.  As per the fall back allocation, spare gas production is made available only after the firm allocation requirements of consumers are met.  Due to the gas shortage in the Krishna Godavari Basin, supplies to power plants are being made on pro-rata basis on the basis of a firm allocation. 

ONGC gets ‘green’ signal for $107 mn methane plant

July 28, 2006. The ministry of environment and forests has given environmental clearance to ONGC's Rs 500-crore ($107 mn) methane-propane (C2-C3) recovery plant in Dahej, Gujarat. The C2+ extraction project would extract methane and propane from LNG sourced from Petronet LNG's Dahej terminal, located in the vicinity. Toyo Engineering has been awarded the EPC contract for the project which is scheduled for completion by mid-2008.

ONGC is setting up a plant to extract ethane propane (C2 C3) from liquified natural gas (LNG) at Dahej with an investment of Rs 500 crore ($107 mn) which is scheduled to commence production shortly. This will be one of the biggest plants ONGC will be setting up after Uran and Hazira plants which were commissioned more than 15 years back. C2 and C3 are petrochemical feedstock. These would be utilised by ONGC's petrochemicals complex at Dahej. This C2 C3 complex and petrochemicals facility are being set up in a special economic zone.

In a related development, the state-owned oil explorer has set up a dedicated group, which will operate from Bokaro, to expedite the implementation of the company's projects in the exploration and development of coal bed methane (CBM) in six blocks in Jharkhand and West Bengal. The projected schedule for production is June 2007. An estimated peak production of 7.84 lakh cubic metres of gas per day is being targeted from the proposed development wells. Of the projected expenditure, Rs 557 crore ($119 mn) has been earmarked for the development of early CBM production in central Parbatpur area of Jharia block. An expenditure of Rs 392 crore ($84 mn) has been approved for drilling, completion and testing of 22 pilot wells in Jharia, Bokaro and North Karanpura CBM blocks, with completion schedule of 31 months.

Finmin asked to issue oil bonds for $1.5 bn to OMCs

July 27, 2006. The petroleum ministry has asked the finance ministry to issue oil bonds for Rs 7,075 crore ($1.5 bn) to the oil marketing firms — IOC and IBP, HPCL and BPCL. This is being done to partly compensate OMCs for the losses incurred by them on sale of sensitive petroleum products in the first quarter (April-June) of the current fiscal. Petroleum secretary has asked his finance ministry counterpart, to immediately issue oil bonds for Rs 3,990 crore to IOC and IBP, Rs 1,627 to BPCL and Rs 1,458 crore to HPCL. The first quarter under-recoveries of OMCs stand at Rs 17,398 crore, which include Rs 9,811 crore in case of IOC and IBP, followed by Rs 1,627 crore for BPCL and Rs 1,458 crore for HPCL. The government has already committed to provide Rs 28,300 crore to the OMCs as oil bonds during 2006-07 to compensate them for their estimated losses of over Rs 74,000 crore on sale of sensitive petroleum p roducts.

Oil PSUs find no takers for$2.46 bn special bonds

July 26, 2006. Oil marketing companies are stuck with Rs 11,500 crore ($2.46 bn) worth special bonds issued by the government with virtually no takers for them in the secondary market. The bonds were issued to Indian Oil, HPCL and BPCL to compensate them for the losses in retailing LPG and kerosene in the domestic market at subsidised rates. The country’s largest oil refining and marketing firm, Indian Oil Corporation, has written to the petroleum ministry that it was not able to liquidate these bonds to meet its fund requirement. The ministry has, in turn, asked the finance ministry to make these bonds attractive enough for subscription by banks,FIs and provident fund trustees.

According to IOC, the investor appetite for these bonds is very low and despite consistent efforts investors are not quoting “at all” for these bonds. Pending liquidation of these bonds, it has had to resort to borrowings at higher cost, impinging on its bottomline. Banks and FIs cannot consider investment in oil bonds as part of their statutory liquidity requirement (SLR). Further, these bonds do not qualify for refinance from the Reserve Bank of India under the liquidity adjustment facility too, making them very unattractive as an instrument. The 50-bps hike in short-term interest rate during the last two months has further led to a wide gap between the yield on oil bonds and present yield on government securities.  IOC said the demand for its 7.61 per cent special bonds 2015 was very low, and at a huge discount. For its three-year 7.33 per cent bonds, it was better, but still at a discount.

POWER

Tata Power to set up 1,000-MW project in UP

August 1, 2006. Tata Power Company Ltd plans to set up a 1,000 MW coal-fired power plant in Chola in the northern Indian state of Uttar Pradesh. Power from this proposed project will be supplied to Tata Power's distribution arm in New Delhi.

NHDC to enter thermal power sector

August 1, 2006. Narmada Hydroelectric Development Corporation, a joint venture of the Madhya Pradesh government and the National Hydroelectric Power Corporation is planning to enter the thermal power sector.  Apart from the 250 MW Pench thermal power project, which Chief Minister is keen on handing over to the firm, the NHDC is eyeing bigger power projects. 

The company is looking for a pithead thermal power plant in Shadol or Singrauli where coal reserves are in abundance.  Union ministry of power is interested in diversifying the activities of NHPC and talks are on with the state government. But it will take two-three months to come on some conclusion about any thermal power project in the state. The project is expected to be completed before July 2007. The company is also in process of finalising detailed project reports of three small hydel power project of combined capacity of 160 MW on Narmada river at Handia, Boras and Hoshangabad. 

Arunachal, NHPC to tie up for 10,500 MW project

July 31, 2006. The Arunachal Pradesh government has, in-principle, agreed to ink an agreement with the National Hydroelectric Power Corporation for setting up 10,500 MW of hydropower capacity with an investment of around Rs 52,500 crore.  The MoU with the state government is expected to be signed by the end of this financial year. Among the projects that will be developed by the power major are Tawang I and II, total capacity of 1500 MW, Dibang 3000 MW, Subansiri upper and middle, total capacity of 2600 MW among others. The Dibang project will be developed through a joint venture with the state government in which NHPC will have a majority stake. 

In another development, NTPC Ltd and North Eastern Electric Power Corporation may also develop around 4,500 MW and 1000 MW of power respectively in the state.  Only 2 per cent of the total hydro power potential of 58,971 MW have been tapped in the north-eastern states. Of the region’s total hydro power potential, Arunachal Pradesh alone has a potential of around 50,000 MW.  While the maximum potential of 50,000 MW has been assessed in Arunachal Pradesh, Himachal Pradesh has emerged as the top state for hydel power development, with 2,545.57 MW being developed. 

ONGC Tripura power project

July 30, 2006. Oil and Natural Gas Corporation Ltd will implement the 750 MW power generation and transmission project at Palatana in Tripura and commission it in 36 months.

Tehri hydro plant fist unit commissioned

July 28, 2006. After nearly three decades since the commencement of construction, Tehri hydel project began commercial generation of its first unit of 250 MW, which had already been synchronised with the northern grid, on July 30. The Tehri Hydro Power Complex, which will eventually have a capacity of 2,400 MW, comprises the 1,000 MW Tehri Dam and Hydro Power Plant, the 1,000 MW Tehri Pump Storage Plant and the 400 MW Koteshwar Dam and Power Plant. Located on the confluence of Bhagirathi and Bhilangana rivers in Uttaranchal, the power complex will also help irrigate agricultural land and supply drinking water to Delhi and other northern states.

Construction of the project, which was conceived in early-1970s, began in 1978. The project, however, had to be shelved in the mid-1980s following protests from locals and environmentalists. The project was subsequently handed over to Tehri Hydro Development Corpo ration in 1988, which revived the construction soon after.

BHEL commissions 500 MW thermal station

July 27, 2006. State-owned Bharat Heavy Electricals Ltd has commissioned the first unit of 500 MW unit at NTPC's Vindhyachal Super Thermal Power Station Stage III in Madhya Pradesh. The new generation facility would add 12 million units of electricity to the grid of the power deficit state per day. With the commissioning of the unit, the cummulative generating capacity of the power station would be 2760 MW. NTPC had awarded BHEL a contract for constructing two 500 MW power plants for the Vindhyachal Super Thermal Power Station Stage III at a total cost of Rs 2125 crore. The second set is also targeted for commissioning in the fiscal 2006-07. On completion of Stage 101, the generating capacity of Vindhyachal STPS would be enhanced to 3260 MW.

Tata, REL to set up N-power projects

July 27, 2006. Private sector firms, Tata Power and Reliance Energy Ltd, have expressed interest in setting up nuclear power projects and several foreign firms are also engaged in talks on the matter. However, no decision has been taken with regard to amending the Atomic Energy Act, 1962, which only allows nuclear power stations be set up by government firms.

RIL’s $0.54 bn gas plan to fuel four Bengal cities

July 28, 2006. Reliance Industries Limited (RIL) has chalked out a Rs 2,500-crore ($0.54 bn) investment plan for supplying gas to four cities and towns in West Bengal. To be developed jointly with the West Bengal Industrial Development Corporation, this will be the first city gas distribution project in the state. The plan has been submitted to the petroleum ministry. RIL has estimated the gas requirement for supply to the industrial, commercial, domestic and the automotive sectors in these four areas at 4 million metric standard cubic meters a day.

Gas for the project will come from RIL’s NEC-25 block in the Mahanadi basin, off the Orissa coast. It has estimated gas reserves of 8.2 trillion cubic feet. Development of natural gas fields from this block will commence in 2008-09, with commercial delivery to the Kolkata natural gas market expected to begin early 2009. The West Bengal plan is RIL’s second such city gas distribution project. The company had earlier proposed supplying gas to six cities and towns in Andhra Pradesh from its KG basin block at a cost of Rs 5,000 crore. To evacuate gas from the NEC-25 block, RIL has proposed laying a pipeline from the landfall point of NEC-25 block at Basudebpur in Orissa to Howrah/ Haldia in West Bengal. The pipeline, to be laid by Reliance Gas Pipeline Infrastructure Limited, a wholly owned subsidiary of RIL, will provide connectivity to city gas stations in West Bengal. Besides supplying gas to the four areas, the pipeline will also cater for core sector consumers’ requirements en route.

Coal linkage deals to relieve UP power crisis

July 28, 2006. In a major breakthrough for power-starved Uttar Pradesh, two central coal PSUs have signed coal linkage agreements with the UP Thermal Power Generation Corporation, for the supply of fuel for four new units of 250 MW each to be set up at thermal power plants in Parichha and Harduaganj, thus adding a fresh generation capacity of 1,000 MW.  According to the agreement, Bharat Coking Coal Ltd will supply 1.98 million tonnes of coal for a unit of 250 x 2 MW capacity at Pariccha in Jhansi. Central Coalfields Ltd will supply the same quantity to the new unit of 250 x 2 MW, at the Harduaganj plant in Aligarh. 

All the remaining formalities for the four new units are expected to be completed by October and construction is likely to commence soon after that.  The power generation at the 250 x 2 units at Pariccha unit is likely to commence within 35 months and at Harduaganj in the next 39 months, from the date of commencement of the construction work. All the four units are targeted to be commissioned in 2008-09. 

In December 2005, the state government had approved a proposal for the expansion of the power generation capacity of the existing thermal power plants in view of the mounting power crisis. According to the proposal, a total of fresh capacity of 1,550 MW was proposed to be added by installing new units at Panki, Obra, Pariccha and Harduaganj. Of the four plants, the expansion of the Panki unit was gas-based and has been deferred due to the non-availability of gas. 

The Power Finance Corporation of India has already agreed to fund the expansion project of the Pariccha and Harduaganj thermal power stations.  The PFC has communicated its consent to the UP Thermal Power Generation Corporation to fund the expansion project to the tune of Rs 2,660 crore. The rest of the cost would be met from budgetary support by the UP government. 

MMTC coal for domestic users

August 1, 2006. Claiming likelihood of getting allocation of coal block in Jharkhand, MMTC - the largest international trading company of India - said it would be making its maiden entry into coal mining to supply coal to domestic users. MMTC has also set out plans to promote many new projects with total capital outlays of about Rs 20,000 crores. With investment of about Rs 70 crore in wind energy farm during the current year, to be set up in Karnataka, MMTC said, it will be enlarging its activities in the power sector. MMTC promoted NINL plant, which is already supplying power surplus to its captive demand to the national grid. Long term contracts with Japan and South Korea signed recently, the company would increase its exports activities in coming quarters. MMTC has exported sugar to Pakistan and is exploring more opportunities to add new products.

Reliance takes a Kyoto call at IPCL

July 31, 2006. Reliance Industries is working towards receiving benefits of the clean development mechanism (CDM) under Article 12 of Kyoto Protocol. After two of the company’s projects involving reduction in carbon dioxide emission were registered by the United Nations body on climate change (UNFCCC), the company has applied for registration of one more CDM project at one of its group companies — Indian Petrochemicals Corporation (IPCL). The project, currently under consideration with the UNFCCC, is based on the energy saving and reduction measures by IPCL at its Gandhar complex in Gujarat. The expected total reduction in carbon dioxide equivalent for the project is 105727.80 tonne in 10 years. The average annual reduction is pegged at 10,572 tonne. Together with the two registered projects of energy efficiency at Reliance Hazira complex the annual reduction carbon dioxide equivalent or total carbon credit produced will be of the order of 50,000 units which could fetch an additional revenue of anywhere over Rs 3 crore. 

APERC notifies despatch guidelines

July 30, 2006. The Andhra Pradesh Electricity Regulatory Commission (APERC) notified guidelines for State Load Despatch Centre (SLDC) charges that would be effective for 2006-2007. As per its regulations, every generating company intending to get connected to the intra-state transmission network will be required to register its generating stations with the SLDC irrespective of the installed capacity. The existing generating companies, distribution and trading licensees connected to or intending to connect to the State Grid will also register themselves with SLDC by filing an applications, along with a fee of Rs 10,000 within a month of the regulation.

NTPC may get waiver on joint venture financial cap

July 30, 2006. NTPC is likely to get special exemption from the financial limit of Rs 1,000 crore applicable on `navratna' companies for establishment of joint venture companies. The exemption is specifically aimed at the joint ventures that NTPC is planning for the proposed 4,000 MW ultra mega projects, each of which could entail investments of over Rs 16,000 crore. The Power Ministry is in the process of moving a proposal on the issue for Cabinet approval. The Rs 26,000-crore NTPC, which is participating in the bidding process for the proposed ultra mega projects, is actively exploring the option of bidding through the consortium route and is in the process of firming up coal mining and equipment supply partners.

The company is actively looking at a number of options, with BHEL being the most likely equipment supplier partner. The Cabinet had, in August last year, pegged the ceiling on investments by `navratna' companies for establishing joint ventures or subsidiaries for a particular project at 15 per cent of the enterprise's net worth, limited by a financial cap of Rs 1,000 crore. This financial limit could emerge as a stumbling block in light of the massive fund requirement envisaged for each of the proposed ultra mega projects.  According to plans firmed up by the Government, the proposed ultra mega power projects are to be set up at five sites in Madhya Pradesh, Gujarat, Maharashtra, Karnataka and Chhattisgarh. Two more sites have also been identified in Orissa and Andhra Pradesh. Commissioning of these projects is slated for the 11th Plan period.

NTPC has already submitted EoIs for the four projects where Power Finance Corporation (PFC) has initiated pre-bid activity and the company is likely to bid for a majority of the projects on offer.  The projects, each with an initial capacity of at least 4,000 MW, would have scope for expansion in future as well.  The Centre would provide the site, fuel linkage in captive mining blocks and water, and obtain environment and forests clearance for each of the project through special purpose vehicles (SPVs) formed by PFC. The SPVs would also be responsible for tying up necessary inputs from the likely buyers of power and to facilitate tying up of power offtake from these projects and the necessary payment security mechanism. These SPVs will ultimately be taken over by the companies that win the bid to construct and operate the projects through the tariff-based competitive bidding route.

Kalpataru Power looks at buyouts

July 29, 2006. Kalpataru Power Transmission, a unit of Kalpataru group, is planning a strategic acquisition in India in a bid to increase its presence in the growing domestic power transmission sector. The board of Kalpataru Power recently approved a GDR (global depository receipt) issue of $75mn (about Rs 345 crore) for qualified institutional buyers (QIBs), which would be used to fund the company’s future programmes. Kalpataru Power had last year bought 40.5 pre cent in Ahmedabad-based JMC Projects and has recently increased its stake to 49.9 per cent. JMC Projects is a civil contracting company involved in building factories, buildings, roads and bridges. Kalpataru Power will be spending about Rs 35 crore in the current fiscal as capital expenditure to buy specialised equipment for use in its latest pipeline project. Kalpataru, along with its international consortium partner, has also secured its first partial EPC contract for Gail’s Panvel-Dabhol pipeline, worth Rs 180 crore. The pipeline is scheduled to be commissioned by March ’07. The company has also got a rural electrification contract from the Maharashtra State Electricity Distribution Company worth Rs 380 crore.

NTPC may get RIL gas at discount

July 29, 2006. A breakthrough in the NTPC-RIL gas contract appears to be in the making. The government is planning to invoke a clause in the production-sharing contract by which gas can be sold at a concessional rate to the power company. The petroleum ministry, which approves the valuation of gas, is likely to consider the NTPC case as distinct from the RIL-RNRL agreement. This would come as a relief to the power-deficit states of Uttar Pradesh and Delhi, which would benefit with additional power from the Kawas and Gandhar power plants of NTPC, which are supposed to run on RIL gas. Cheaper gas for these power plants would also ensure cheap power for consumers in this region.

The success of this endeavour to save the NTPC deal will depend on whether RIL and NTPC can reach a settlement on the liability clause and conclude a gas sale agreement. Although RIL can opt to pay demurrages and walk out of the deal, there may be ‘political pressure’ on the company to honour its commitments to a PSU company. There is mounting pressure from several quarters, including the Cabinet secretariat, to revive the NTPC deal as it would bring an additional 1,300 MW capacity to the northern grid. RIL had bagged the NTPC gas contract by offering $2.97 per MBtu (million British thermal units) through an international competitive bidding in ’04. However, the two parties were unable to convert the bid into a gas contract in the two years that went by. Differences between the two over the liability clause in the gas contract have led to litigation and the case is now subjudice.

NLC inks pact with Gujarat for mine, power project

July 28, 2006. Neyveli Lignite Corporation signed an agreement with the Gujarat Government for setting up a 12-million tonne a year lignite mine and a 1,500 MW power project. NLC's stake in the joint venture with the Gujarat Government or any of its designated entities will be between 74 per cent and 89 per cent, and the Gujarat Government the balance. The exact shareholding pattern will be worked out shortly.

NLC has estimated the total cost of the project at Rs 7,500 crore and it would be executed in a debt equity ratio of 70:30. The project will be implemented in five years from the day of signing a MoU. Power from the project will be supplied to Gujarat and other States in the western region on an agreed upon formula.  The first phase of the project will have a mine of 8 million tonnes a year and a 1,000 MW power plant. The project is expected to be commissioned by July 2011.

NLC had started construction of a 250 MW lignite-based power plant at Barsingar in Rajasthan while work on a mine there would start shortly. NLC would expand its power generating capacity to 1,000 MW in Rajasthan with another 250 MW at Barsingar and 500 MW at Riri.  The Gujarat Government was planning another 2,250 MW of lignite-based power plants in the State. The State's power generating capacity now was 9,300 MW and peak demand estimated at 14,000 MW by 2012, the power sector offered enormous scope for investment.

MahaVitaran’s power purchase plea opposed

July 28, 2006. Various consumer organisations strongly opposed the Maharashtra State Electricity Distribution Company’s (MahaVitaran) proposal for long term power purchase through competitive bidding process. At the public hearing convened by the Maharashtra Electricity Regulatory Commission (MERC) on MahaVitaran’s proposal in this regard, these organisations argued that MahaVitaran has not submitted its plan for capacity addition and it has not adopted a policy of rationalised plan. MahaVitaran, in its proposal, has stipulated the conditions that the bidder must be located in Maharashtra and it must have minimum capacity of 500 MW. The project must be active within a time-frame of 42 months. However, consumer organisations wanted to know why these restrictions were laid down for such a project with huge investment.

India, Bhutan to promote hydel project

July 28, 2006. India and Bhutan executed two long-term co-operation agreements to promote development and construction of hydel power projects with associated transmission systems. India has agreed to a minimum import of 5,000 MW electricity from Bhutan by 2020. The two agreements, signed included a long-term cooperation agreement in the field of hydropower besides the protocol to the agreement on purchase of power and tariff of the 1,020 MW Tala Hydroelectric Project (1020 MW) in Bhutan.

The umbrella agreement will remain valid for 60 years and its validity will be extended by two governments with mutual consent. Through the Protocol to the pact on purchase of power and tariff of the Tala Project, which is valid for 35 years, it has been agreed that the first year tariff from the Tala project will be Rs 1.80 per unit.

The two countries have also agreed on a mechanism for review of the tariff. The first unit of Tala project is expected to be commissioned very soon. Through these agreements, both countries have agreed to facilitate, encourage and promote the development and construction of hydro power projects and associated transmission systems as well as trade in electricity between the two countries, through public and private sector participation. It has also been agreed that for projects to be implemented jointly, a joint group will be set up to facilitate identification of projects, preparation of DPRs and selection of agencies for speedy implementation.

Powermin tells BHEL to honour contracts

July 27, 2006. The power ministry has taken up the case of various power generating companies with state-run Bharat Heavy Electricals Ltd (BHEL) honouring its contract to deliver key equipment for their projects. The ministry has estimated that projects with a generation capacity of over 20,000 MW would be ready by the end of 2006-07 while the total capacity addition for the 10th Plan period is expected to be over 36,000 MW. The companies fear that in view of delays in the supply of key equipments there was every possibility of major slippage in scheduled commissioning of the projects. The power generating companies had brought to the ministry’s notice, that BHEL was taking up supply contracts much beyond its delivering capacity. They argued that despite the ministry urging BHEL to expedite its work it was failing to meet the deadlines.

The Karnataka Power Corporation Limited (KPCL) is pursuing the expeditious delivery of key equipment for its 500 MW Bellary thermal project with BHEL in order to complete the project as per schedule. BHEL was also behind schedule regarding Madhya Pradesh Power Generation Corporation Limited’s 210 MW Amarkantak power project and 500 MW Sanjay Gandhi brownfield project at Birsinghpur.

M’tra ready to pay Rs 5.50 for Dabhol power

July 27,2006. The Maharashtra Government is willing to buy power at Rs 5.50 per unit from Ratnagiri Gas and Power Pvt Ltd's Dabhol power plant. The price and the quantum of power to be bought will have to get regulatory approval. The plant is likely to restart production by mid-September. It will be able to supply 700 MW of power and will run on naphtha. The power would be Rs 1.25 higher per unit than the previously paid price of Rs 4.25 per unit. The power will, be bought by the Maharashtra State Electricity Board.

Ratnagiri Gas will have to get approval from the Central Electricity Regulatory Commission for approval of the tariff. It will also have to get approval from the Maharashtra Electricity Regulatory Commission for the quantum of power to be bought.  The company could afford to sell power at Rs 5.50 per unit, as it has got major tax breaks in terms of reduction of customs duty. Without these breaks, the price per unit would have jumped to Rs 8. The 700 MW of powerwill provide relief to Maharashtra where demand is set to rise in October which usually sees high heat conditions across the State.

Rally opposes NPCL's thermal power plant

July 27, 2006. Terming the coal-based thermal power plant of Nagarjuna Power Corporation Limited (NPCL) as "totally harmful" to the eco-system, political parties here jointly organised a huge rally to oppose the project. Cutting across party lines, leaders of all political parties demanded that state government withdraw all clearances given to the NPCL's project saying it was harmful to the "ecologically-sensitive" coastal region of Karnataka. They warned that the people would not allow NPCL to set up its plant at Nadikur, near Padubidri in Udupi district. The rally later in a resolution said the project was being forced on the people, who were fighting against polluting industries for the last 20 years. The state government, which had assured the people not to permit any mega industries in the district before conducting a capacity study, had thrown all its assurances to favour NPCL. Though public hearings were mandatory before setting up any project, NPCL had not held even a single such meeting, they alleged.

Mahavitaran to engage consultants for expansion plan

July 27, 2006. Mahavitaran, the Maharashtra State Electricity Distribution Company, has decided to hire the services of project management consultants for speedy implementation of its ambitious infrastructure development plan entailing an investment of Rs 14,314.8 crore. The firms that have been engaged are Louis Berger Group, Feedback Ventures, Consulting Engineering Services, KR Bedmutha and Techno Associates in joint venture with Unison Project Management. These entities will help the MahaVitaran to complete its development plan efficiently.

The MahaVitaran has prepared a comprehensive five year plan outlining its tasks clearly. The work proposed in the first phase is of a massive scale both in terms of physical quantities and in terms of financial outlay that will be undertaken for completion on turnkey basis as a part of the implementation strategy. It will also help about over all rise in the company’s revenue with transmission and distribution losses coming down significantly. The distribution losses last year were 31.4 per cent, which have come down to 28 per cent in the year ‘05-06. This has helped MahaVitaran mop up more revenue.

Power utilities pitch for reform in coal, gas, rail

July 27, 2006. Council of Power Utilities (CPU), an apex body of power utilities in India, have made a strong case for reforms in coal, gas and railways sector. CPU emphasised the need for setting up an independent regulatory framework to look into the efficiency of operation of the coal sector and fixing of price including captive mining. It has appealed to the coal ministry to ensure speedy clearances to utilities seeking coal blocks in a specified time-frame and argued the utilities be given choice to select coal blocks. For the gas sector, the council suggested that a regulatory framework was the need of the hour to ensure non-discriminatory access to gas sources and pipelines for power and other sectors. The regulatory framework is also crucial to promote market forces.

So far as coal sector was concerned, the council, in its recent presentation to the Centre, suggested that a transparent competitive process be introduced if more number of aspirants have expressed their desire for the same coal block. Power utilities, which relies heavily on Coal India and its subsidiaries for coal linkages, have argued that power sector should be accorded the “most favoured customer status” of the railways. These utilities have strongly favoured rationalisation of railway tariff to make the pricing non-discriminatory. Further, it suggested the Centre to form a hydrocarbon highway with oil companies to ensure right of use of gas pipeline on the lines of open access in the power sector. The council has called for the establishment of National Energy Council for taking up current issues faced by public utilities and provide solutions.

GMR rules out setting up power plant in UP

July 27, 2006. GMR Infrastructure Ltd, the holding company of the GMR Group, was interested in the power distribution sector in Uttar Pradesh but did not intend to put up a power plant in the state.  The GMR Group would certainly consider power distribution in the state, once the Centre makes the policy transparent for the private sector. The core activities of GMR include road projects, airports and power. 

PM urges pricing review to meet energy needs

July 26, 2006. The Prime Minister, Dr Manmohan Singh, called for a review of the pricing policy in the energy sector in view of the country's long-term energy security.  The extreme volatility that we have seen in international oil markets, coupled with similar magnitudes of price increases in natural gas and imported coal, has put enormous pressure on domestic prices. We need to factor in the economic cost and the environment cost of alternative sources of energy while setting our prices. Only then will we be able to ensure that the energy security we desire gets translated into reality. He said that the pricing policies played an important role in consumers' selection of energy sources.

He also said there was need for examining the relevance of existing taxes and subsidies in the energy sector. He also expressed concern over the mounting losses in the power sector and called for a new management strategy. There are transmission and distribution losses as high as 40-50 per cent in several parts of the country and the new management system will have to deal with this harsh reality. Looking at the country's energy requirement in the next 25 years, he said the power sector alone would need Rs 60 lakh crore and such a magnitude of investment would come only when proper returns are assured.  The figures for future requirements are gigantic. Electricity generation capacity would need to go up from our current installed capacity of around 1.31 lakh MW to 8 lakh-9.5 lakh MW. This would imply huge annual imports of oil — anywhere from 300 to 400 million tonnes and coal imports that could touch 800 million tonnes annually.

He said that the country was short on modern energy resources such as oil, gas and uranium and even coal is not as abundant as generally believed. Thus we must use our energy resources optimally and efficiently. The exploration, production of fuels, electricity generation, T&D of power and setting up of a gas grid require large investment and this would happen only if the sectoral policies are consistent and there are reasonable returns on the investments. Both the public and private sectors have to play important roles here, we need to develop public-private partnerships in ways that attract the needed investment and provide energy services to the consumers at least cost.

He also called for developing all resources — coal, gas, oil, hydro and nuclear along with renewable sources such as wind and solar. On nuclear energy development, he said, the speed with which we can develop nuclear power is constrained by the availability of uranium. The civil nuclear agreement we have entered into with the United States, and our discussions with the Nuclear Suppliers' Group should help in accelerating the development of nuclear energy.

OIL & GAS

Shell, Exxon may drill off NZ in high waves

August 1, 2006.  Energy prices have risen so high that New Zealand is inviting Royal Dutch Shell Plc, Exxon Mobil Corp and other natural gas producers to send rigs to one of the most inhospitable seas on Earth. New Zealand’s government sought bids to explore in the Great South Basin, off the nation’s southern coast. The area was last explored during the oil shocks of the 1970s, when drillers found the cost of battling 15-metre waves too high to merit exploiting the area’s gas fields. Now, as record oil prices push countries to use more gas, explorers such as Shell are venturing into deeper waters and more remote locations to find new supplies. At stake below the seas south of New Zealand are fields that may contain as much as 7 trillion cubic feet of gas. That’s enough to supply the UK for two years. Oil companies are being offered the chance to explore 1.4 lakh square miles of ocean off New Zealand’s South Island, in the so-called ‘‘Furious 50s’’ and ‘‘Screaming 60s.’’ Those latitudes are renowned among sailors for the prevailing westerly winds that circle the globe. Winds in the region peak at more than 150 km an hour and exceed 36 km about 40% of the time. In some areas, production vessels may spend as much as 30% of a year idle.

Eight exploration wells were drilled in the basin between 1976 and 1985, at water depths of 60 meter to 880 metre. Three showed gas and light oil. Prices then were too low to warrant development. New Zealand’s Crown Minerals department is offering 40 permits covering 9,000 square km each. Some lie as far as 500 km from the South Island.

Asia needs oil reserves – IAE

July 31, 2006. Asia should push ahead with costly emergency oil stockpiles even though the West’s huge government reserves have been unable to quell market fears of a shortage. The world’s number two consumer China said this week oil was too expensive to start filling its first strategic storage tanks while South Korea proposed joint stockpiling to the Association of South East Nations (Asean) in the Laotian capital. Developing nations will struggle to afford such stockpiles, given it would cost over $100 a barrel to store oil at today’s prices including investment costs. It would have been more feasible early this decade, when Opec producers were aiming for prices in the $20-$30 range. Releasing oil from the 4 billion barrels of commercial and government stocks in IEA member countries was a possibility if there were more supply disruptions from Nigeria only if producers could not fill the gap. Saudi Arabia is the only Opec producer with significant spare capacity. Oil prices have rallied from $20 a barrel in 2002 to a record over $78 this month on worries of supply disruptions against a backdrop of growing demand. The IEA organised a co-ordinated stock release last September after hurricanes battered US Gulf oil output, dampening then reecord prices, but they have surged again this year on fears tension in the Middle East could affect exports.

Brazil's Petrobras to lease six new drilling rigs

July 28, 2006. Brazil's state-owned oil giant Petrobras had reached a 10.5 billion reais ($4.83 billion) agreement to lease six new drilling rigs. The deal, which will be finalized, was reached with four Brazilian companies: Construtora Norberto Odebrecht, Petroserv, Queiroz Galvao Perfuracoes and Schahin Enhenharia. Petrobras, short for Petroleo Brasileiro, is a world leader in drilling for oil in deep waters.

Asean mulls joint oil stockpile

July 28, 2006. Asean countries are considering strategic oil storage after a proposal for joint stockpiling from South Korea, which hopes to pass on technical expertise. A few countries from Asean have shown interest, though no specific studies are on now. The proposed stockpiles would be in Southeast Asian countries and could use crude from the region’s producers, such as Indonesia and Malaysia, or from Middle East producers. South Korea already has strategic oil storage, both on its own and as part of agreements with major producing nations and oil firms, to bolster its energy security. Tokyo and Seoul, both required to hold reserves as members of the International Energy Agency (IEA), have been pushing others in Asia to build up government reserves, sharing the burden of keeping stocks in case of sudden outages.

The IEA has only co-ordinated an emergency global stockpile release twice, the second time last year after Hurricane Katrina ripped through US Gulf Coast oilfields and refineries. An emergency supply buffer was a good idea, but saw little interest from poorer Southeast Asian nations. Thailand has considered building stocks in the past, but has not raised the issue since oil prices embarked on a four-year rally.

GE moving more production offshore

July 27, 2006. Most of General Electric Co.'s production will be outside the United States by 2010. GE is moving production to low-cost, fast-growing developing markets such as China and India to help lift earnings by at least 10 percent every year. GE cited the lack of engineers in the United States as a reason for shifting production offshore. GE, which has 160,000 on its U.S. payroll, currently makes about 41 per cent of its products outside the United States.

CICSCO to build oil refinery in Iraq

July 31, 2006. CICSCO Inc. a Denver engineering and construction firm is the odds-on-favorite to win a $750 million contract to build a new 70,000 bpd oil refinery in the Kurdish region of Iraq. Designated the Koia Refinery in Koysonjac, Iraq, it will be located about 60 miles from Kirkuk, the center of the northern oil fields of the country. Iraq depends on crude oil revenues to support its economy, but is spending over $200 million a month to import refined oil products to fuel its own domestic and industrial needs. Iraq has total refining capacity of 700,000 barrels-per-day but about half of it is not producing. The new refinery will add about 20 percent to the existing 350,000 bpd production, and is scheduled to be completed in September 2009, 36 months after the contract is awarded. Approval from Iraq is expected within days. Despite the turmoil of war and assassinations that have plagued Iraq, a dedicated group of Iraqi petroleum engineers within the Oil Ministry have had the persistence and vision to proceed with a new paradigm that allows creative firms like CICSCO, Inc. to compete with the world's major engineering companies.

Iran, China sign €2.17bn refinery contract

July 31, 2006. The National Iranian Oil Refining and Distribution Company (NIORDC) handed over the project for increasing the capacity of Shazand Refinery of Arak, Markazi Province, to a consortium of China’s Sinopec and the National Iranian Oil Company (NIOC). This will give boost to the refinery’s capacity from 150,000 barrels per day to 250,000 bpd. The €2.17 billion contract is the largest engineering project to be implemented by Iran and China. China’s Sinopec which has grown to be one of Iran’s best partners is also expected to increase the refinery’s production rate of gasoline from 70,000 bpd to 100,000 bpd. The contract was signed in the form of EPC. The first phase of the project will take 39 months to complete.

Eni planning to bid for Chevron refinery

July 31, 2006. ROME Eni, the Italian oil company, planned to bid for a European oil refinery and gas stations being sold by Chevron. Chevron, the No.2 U.S. oil company behind Exxon Mobil, is considering offers for its 31 per cent stake in the Nerefco refinery in the Netherlands, and gas stations in Belgium.

Chevron to sell Dutch refinery, fuel stations

July 28, 2006. Chevron Corp. has offered to sell its 31-per cent stake in the Dutch-based Nerefco oil refinery and its fuel stations in the Benelux region.  The company is looking to sell the Nerefco stake and the marketing operations in the Benelux region. Chevron started preparations for the sale of its stake in Nerefco about three months ago. The 400,000-barrels-per-day Nerefco refinery at the port of Rotterdam one of Europe's biggest is a joint-venture between Chevron and BP, which owns the remaining 69 percent. Chevron owns about 290 gasoline stations in the Netherlands, Belgium and Luxemburg and operates another 500 stations under its brand name.

Kuwaitis get nod on giant refinery

July 28, 2006. China has approved a US$5 billion (HK$39 billion) oil refinery joint venture with Kuwait for Guangdong. The project, between Sinopec and Kuwait Petroleum, will become the biggest Sino-foreign joint venture in the petrochemical industry. The giant operation will be located near Nansha in the province, where long lines at gas stations symbolize the nation's insatiable thirst for oil. China, the world's second-biggest oil consumer after the United States, used about 318 million tonnes of oil last year, of which 40 percent was imported. The facility, scheduled for completion in 2010, will include an oil refinery with a 15-million-tonne annual capacity and a plant capable of producing one million tonnes of ethylene a year.

New petrochem plant in Singapore

July 27, 2006. Royal Shell Dutch Plc, Europe’s second-largest oil company, will spend ‘‘several billion’’ US dollars building a new petrochemical plant in Singapore. The Shell Eastern Petrochemicals Complex will produce 8 lakh tonne a year of ethylene and other chemicals. Construction will begin late this year and be completed in 2009. The plant will include a mono-ethylene glycol plant, used in plastic bottles and synthetic textiles. Ethylene is the building block for most plastics.

Chevron appeals blocking of $10 bn LNG project

August 1, 2006. Chevron Corp and 10 other parties made submissions over the blocking on environmental grounds of the US company’s $10.4 billion Gorgon liquefied natural gas venture in Western Australia, its largest project worldwide. The Conservation Council of Western Australia, which opposes Chevron’s plan to build an LNG plant on Barrow Island, a nature reserve off the western coast, was among those that lodged submissions. Chevron is appealing a recommendation on June 6 by Western Australia’s Environmental Protection Agency that the Gorgon project should not proceed, in particular because of potential harm to a species of turtle. The agency also raised concerns about the introduction of non-indigenous species on the island and proposed dredging to create an LNG loading wharf.

Chevron owns 50 per cent of Gorgon and is the operator, while Exxon Mobil Corp and Royal Dutch Shell Plc each own 25 per cent. Chevron is counting on Gorgon to help propel it into the world’s fifth-biggest LNG producer by 2015.  The government has already said it backs the project even after the Environmental Protection Agency’s ruling. The 10 million-tonne-a-year Gorgon project, involving a plant proposed to be built on the Barrow Island nature reserve, has accords to supply customers in Japan, North America and India. It is likely to miss its scheduled 2010 startup date because of planning and approval delays.

Chinese petroleum buys 75,000 MT of naphtha

July 30, 2006. Chinese Petroleum Corp., Taiwan's state oil refiner, bought 75,000 metric tons of so-called full-range naphtha for delivery in September at a discount of about U.S.$7 a metric ton below benchmark prices. The cargo will be delivered to Kaohsiung port in southern Taiwan between Sept. 16 and Sept. 30. The cargo was bought cost- and-freight, requiring the seller to pay for the shipping costs, and priced against Japan quotes for the fuel by oil-pricing service Platts.

The Taipei-based company last bought a 75,000 ton cargo of full-range naphtha at a premium of about U.S.$2 a ton above the benchmark prices for delivery to Kaohsiung between Aug. 16 and Aug. 31.Chinese Petroleum, which can process 720,000 barrels of crude oil a day, also operates three naphtha processing units, or crackers, with a combined capacity to produce 1.1 million tons of ethylene a year. Ethylene is the building block of plastics used in the manufacture of electronics, auto parts, and soft drink bottles. Naphtha, distilled from crude oil, is a raw material for chemicals and gasoline. Full-range naphtha is preferred by chemical makers because of the fuel's high ethylene yield.

China's CNOOC sees wave of new LNG deals by ’08

July 28, 2006. China National Offshore Oil Company (CNOOC), leading the country's move into the liquefied natural gas market, hopes to soon announce its first new LNG supply deal in four years, signalling its readiness to pay higher prices. The deal will be the first in CNOOC's renewed drive to secure supplies for five planned import terminals by the end of next year. The comments are among the first to suggest that Beijing is willing to face the market reality that global gas prices have raced sharply higher since China's first deal with Australia in 2002, and that its ambitious goal of boosting use of the green fuel may flop if it further stalls on supply talks.

CNOOC, which started up the country's first LNG terminal in southern Guangdong province last month, has plans to build another four projects in Fujian, Shanghai, Ningbo and Zhuhai, all on the east and southeastern coast, by around 2010. A second phase of its Guangdong terminal will raise capacity by 6.2 million tonnes per year (tpy), while the other four projects would need 3 million tpy each from around 2010. In total, CNOOC could need to buy as much as 18 million tpy of LNG, near the imports into South Korea, the world's second-largest buyer of the super-cooled gas. The fuel is crucial if China hopes to achieve its goal to more than doubling the share of gas in its energy mix by 2010, despite a pair of massive domestic natural gas finds this year. Already faster-than-expected demand growth from urban users and industries in the booming coastal belt has led to supply shortages due to unprepared infrastructure and low prices.

The market dilemma CNOOC faces is shared by its domestic rivals Sinopec Corp. and PetroChina both of which have planned a combined half dozen terminals along the northern coast in a race to kick-start the nascent LNG sector. But with most LNG supplies through 2012 pre-sold to Japanese or Western buyers from new projects in exporters such as Australia and Qatar, China may have to seek less established suppliers with short-term availability, industry experts say, settling for five-to-10 year contracts instead of the usual 25.

China looking at 25-year LNG deal with Petronas

July 28, 2006. China’s top economic planning agency is considering the approval of a 25-year supply agreement for LNG with Petroliam Nasional Bhd (Petronas). A framework agreement for Petronas to supply LNG to a Shanghai terminal had been reached but a final deal can only be realised after a price for the gas is agreed upon. The National Development and Reform Commission was considering approval of the contract but the final price would be a key factor. The Shanghai terminal, currently under construction, is being built in two phases with the first slated to go into operation in 2008 with capacity to process three million tonnes of LNG annually. Phase two of the project will increase capacity to six million tonnes. The Shenergy Group, a state-owned energy company based in Shanghai, holds a 55 per cent stake in the project, while China National Overseas Oil Corp, China’s largest offshore oil company, holds the other 45 per cent.

Russia's Gazprom to help Venezuela develop gas sector

July 30, 2006. Russian gas giant Gazprom has signed a contract with Venezuela to help plan development of the South American country's natural gas sector. Gazprom will develop "a general scheme for development of the gas industry" in Venezuela over the medium and long-term. Gazprom, a state-controlled firm, signed the contract with state-owned Petroleos de Venezuela. The Gazprom plan will include an assessment of reserves, an estimate of gas demand and help in planning extraction, transport, storage and treatment of natural gas in Venezuela. Venezuela is the world's ninth biggest producer of oil, according to 2004 figures from the US department of energy, and is a major supplier to the United States.

But Venezuela's extensive gas reserves are believed to be underdeveloped. Venezuela had proven gas reserves of 4.1 tcm, putting the country in second place in the western hemisphere after the United States. All of the 30 bcm that Venezuela produces every year are used domestically. Russia is the second biggest oil producer in the world and controls a quarter of global reserves of natural gas.

U.S. market expects to see more oil and gas IPOs

July 28, 2006. Record high energy prices have generated big demand for initial public offerings of oil and gas companies and even if some of these deals tank, analysts say the deals are likely to keep coming. So far, 11 oil and gas companies have made their debut in 2006, compared with seven at this time in 2005, five in 2004 and zero in 2003.

Caspian pipeline handed tax bill

July 27, 2006. A pipeline company that sends oil from Kazakhstan to the Black Sea has been slapped with a large bill for back taxes. The Caspian Pipeline Consortium, in which Chevron is one of the largest shareholders, said the company's accounts had not been frozen contrary to a report in Kommersant but confirmed that federal tax authorities had presented it with a large bill. The claims totaled 4.7 billion rubles ($175 million) in unpaid taxes from 2002 to 2003.

Power

TVA to buy uranium from Southwest source

August 1, 2006. The Tennessee Valley Authority, which tried unsuccessfully three years ago to pitch an abandoned nuclear plant site for a new uranium enrichment plant, will buy nuclear fuel from a start-up company even though it is locating in New Mexico instead of Tennessee. TVA agreed to pay the newly created Louisiana Energy Services LLC $197 million to enrich uranium to help fuel the utility's three nuclear plants, starting in 2012. TVA approved the eight-year contract even before Louisiana Energy has broken ground on its controversial $1.5 billion plant planned near Eunice, N.M. U.S. Enrichment produced 12 percent of the U.S. supply of enriched uranium in 2005, although as a federal corporation TVA had to buy all of its nuclear fuel from a domestic supplier. U.S. utilities nationwide bought 16 percent of their enriched fuel from Urenco in Europe and 55 percent from Russian suppliers.

China to help Pak build 6 nuclear power stations

July 29, 2006. Pakistan’s ‘China card’ with regard to cooperation in nuclear energy worked almost at the same time as the India-US civil nuclear deal was being cleared by the House of Representatives. China announced that it would help Pakistan build six 300MW nuclear power stations. This is a part of ongoing co-operation between the two countries to develop their energy resources. China now has 11 nuclear power stations with a total capacity of 8,700MW. According to a national plan provided in ’04, China will build 40 more nuclear power units by ’20 to meet its growing energy requirements.

CR Power to buy key stakes in two plants

July 29, 2006. China Resources Power Holdings plans to buy controlling stakes in two power plants from its parent company for HK$555.7 million, including its first hydro-power project. CR Power, the mainland's third largest Hong Kong-listed power generator, said it will also pay HK$119.2 million to acquire a 65 per cent stake in the Yunpeng hydro-power plant in southern Yunnan province. Both deals require shareholders' approval and will be funded by internal resources.

The Fuyang plant has two 640 MW coal-fired generation units which commenced commercial operation earlier this year. As at the end of 2005, Fuyang had net assets totaling HK$776.5 million. The Yunpeng plant has three 70 MW hydro generation units which are expected to start commercial operation in the fourth quarter this year. Yunpeng's net asset value as at the end of 2005 was HK$142.5 million. After the acquisitions, CR Power's generating capacity would increase about 12 percent, while its earnings would be enhanced by 3 percent for 2006 and 5 percent for 2007.

Innergex II wins a hydroelectric project agreement

July 28, 2006. Innergex II Income Fund, a private open-ended trust, is a successful proponent of BC Hydro's 2006 Call for Tenders for the 49.9-MW Kwoeik Creek hydroelectric project. Kwoeik Creek hydroelectric project is a run-of-the river facility located on Kwoeik Creek, near Lytton, within the traditional territory of the Kanaka Bar Indian Band in British Columbia. Innergex II is in partnership with Kanaka Bar Indian Band to achieve this project representing an investment of more than $100 million. The project comprises two turbines of a total installed capacity of 49.9 MW and will produce 147,450 MW-hr of firm energy annually, beginning in November 2010. The construction is expected to begin in December 2007, after obtaining all permits and approvals.

Asia goes nuclear to meet rising energy demands

August 1, 2006. Asia's energy needs are soaring, and the region is increasingly turning to nuclear technology to meet the rising demand. Many governments see nuclear power as a way to cut air pollution and ease the need for imported oil. In the face of rising oil prices and chronic air pollution, Asian nations are looking to nuclear power to solve their energy problems. Reactors are being built across the region. Japan and South Korea have the most developed nuclear industries, but China and India are leading the charge with new projects.

China alone plans to build 30 reactors by 2020, up from nine now. Eight of those are under construction, with two nearing completion. The reactors are part of an ambitious government effort to rapidly expand electricity output to keep up with its booming manufacturing industry. China has been moving to alternative energy sources such as wind, hydroelectric and nuclear in an effort to cut its use of coal. Pollution from coal burning plants blankets most Chinese cities. And moving coal from the mines in the north and west to the industrialized east is straining the transportation system.

India has 15 reactors operating, and nine are under construction. Although nuclear power provides only about three percent of India's electricity, the World Nuclear Association estimates that could increase to 25 percent by mid-century. Unlike China and India, which only recently began rushing to build reactors, Japan and South Korea have long relied on nuclear technology to reduce their need for foreign fuels. Japan depends on imported oil, gas and coal for about 80 percent of its energy needs, which leaves its highly industrialized economy vulnerable to market fluctuations. Nuclear reactors account for about a third of Japan's energy production, and the government says it plans to increase that to more than 40 percent by 2014, after adding more than 10 new reactors.

South Korea is even more dependent than Japan on imported fuel - as much as 97 percent of its fossil fuel supply is imported. South Korean government reports show 20 reactors provide 40 percent of electricity production, and at least eight new reactors are planned. There are concerns, however, about this rush to go nuclear. Reactors present the risk of a radiation accident that could kill or sicken thousands of people. They also are expensive to build.

As the economies of Asia continue to grow, so will the energy needs. The Asia Development Bank says that from 1973 to 2003 Asia's energy consumption grew by 230 percent, compared with an average worldwide increase of 75 percent. With much of Asia seeing economic growth rates above six percent over the past few years, electricity needs are likely to continue expanding rapidly. That means despite concerns over safety and cost, some of the region's smaller economies, including Indonesia, Thailand and Vietnam, are looking to nuclear power to fuel their futures.

 

Mirant secures power contract with PG&E

August 1, 2006. Mirant Corporation has signed two contracts with Pacific Gas and Electric Company (PG&E) to provide electricity from its natural gas-fired Pittsburg and Contra Costa power plants located near San Francisco, California. PG&E has contracted for approximately 2,000 MW of capacity for varying terms ranging from one year up to about four years beginning in 2007. The longer-term transaction will be submitted to the California Public Utilities Commission (CPUC) for its review and approval. With continuing strong growth in electric demand and the possibility of additional heat waves, these contracts provide an important reliable electric supply for California consumers.

PPL to expand production power plant

July 31, 2006. To meet rising demand for electricity, PPL Corp. plans to expand the production capability of its Susquehanna nuclear power plant near Berwick and possibly its Holtwood Dam hydro-electric plant on the Susquehanna River in Lancaster County. Talks are under way with the Federal Energy Regulatory Commission to more than double the hydro-electric generating capacity at Holtwood Dam from 109 MW to 234 MW. PPL has applied to the Nuclear Regulatory Commission for permission to expand the power-production capability by 100 MW for each nuclear reactor at the Susquehanna plant. The two reactors generate a total of 2,360 MW of electricity now. Work on one unit will be done in late 2007, and the other in 2008. The cost of that project is projected at $230 million.

Qatar Petroleum & Shell GTL project may cost $18bn

July 28, 2006. Qatar Petroleum and Royal Dutch Shell would proceed with the Pearl gas-to-liquids (GTL) project, an integrated development, transport and processing hub for Qatar North Field gas resources. The Pearl GTL project may cost as much as $18 billion, triple earlier estimates, based on company-supplied figures. The gas will cost $4-to-$6 per barrel of oil equivalent to produce. Pearl GTL will extract natural gas liquids and ethane, and convert remaining gas into liquid hydrocarbon products through the construction of gas-to-liquids complex in Ras Laffan Industrial City. Upstream, 1.6 billion cubic feet per day of wellhead gas will be produced from the North Field and transported and processed to produce approximately 120,000 barrels of oil equivalent per day of condensate, liquefied petroleum gas and ethane. It is estimated the North Field holds recoverable resources in excess of 900 tcf. Over its lifetime the project will produce upstream resources of approximately 3 billion barrels of oil equivalent.

Downstream, dry gas will be used as feedstock for a new onshore, integrated GTL complex, which will manufacture an additional 140,000 barrels per day of liquid hydrocarbon products. The Pearl GTL complex will consist of two 70,000 b/d GTL trains and associated facilities. The plant will produce liquid products and fuels comprising naphtha, GTL fuel, normal paraffins, kerosene and lubricant base oils.

Shell's oil and gas reserves at current production levels will run out in about nine years, the lowest level among its peers. Last year, Shell replaced 67 percent of its output, compared with 95 percent for BP Plc, using U.S. accounting rules. Shell is betting on rising demand for cleaner-burning car fuels, into which GTL can be blended to lower sulfur content.

Russia, EU talks on energy transit suffer setback

July 28, 2006. Talks between Russia and the European Union over a pact on energy transit have hit a setback, casting doubt on EU hopes Moscow would eventually ratify an Energy Charter Treaty. The EU, which relies on Russia for about 25 per cent of its gas, has pressed Moscow to ratify the charter, which governs energy activity across the Eurasian continent. But Russia has resisted, citing several problems including the separate “Transit Protocol” to the charter, which would effectively require Russia to allow third party access to gas monopoly Gazprom’s jealously-guarded export pipeline network. Russia has said previously it would not ratify the charter without a satisfactory agreement on the transit protocol.

At this month’s meeting of Group of Eight leaders in St.Petersburg, Russia supported a list of energy principles like market transparency that are largely contained in the charter, a step many in Europe hoped would lead to future ratification. But Russia’s ambassador to the EU, said negotiations on the Transit Protocol had stalled recently after officials from the bloc’s executive European Commission stepped back from earlier progress.

The talks on the issue were of an informal nature and that no specific agreements had been reached. The protocol sets out rules for transit of energy including tariffs and certain obligations for countries where resources like oil or gas must pass en route to customer nations. Transit countries are required to provide maintenance of infrastructure and make pipelines and electricity wires available.

UES, Siemens sign $100 mn information system deal

July 27, 2006. Unified Energy System will obtain a new information system under a $100-mn contract inked with German industrial giant Siemens. Under the deal, Siemens will install a SCADA/EMS supervisory power control and data acquisition system, designed for real-time control over power supplies, at the offices of System Operator Central Control Directorate (SO-CDA). The system is set to be operational in 2008. The system would contribute to the integration of Russian and European electricity networks, and the company planned to complete assessment of the unification in 2007. The deal was financed through a loan from the European Bank for Reconstruction and Development (EBRD). Established in 2002 as part of power industry reforms, SO-CDA carries out supervisory control of UES' power supplies.

Korea to replace natural gas to diesel fuel

July 26, 2006. Amid rising diesel fuel prices and deepening environmental concerns, the government has reinforced its plans to popularize the use of vehicles running on natural gas. Efforts to make natural forms of gas - compressed natural gas (CNG) and liquefied natural gas (LNG) - a mass commodity have been dubbed the "Blue Corridor Project." This called for the completion in June of new technologies aimed at enhancing CNG-based and LNG-based public transportation.

With 766 billion won ($814 million) invested in the 13-year initiative, beginning in 2000, the government said it will replace 23,000 buses operating in major cities with CNG engines. It expects to cut as much as 2 trillion won annually in public costs stemming from diesel engines. Fossil fuel emissions are believed by many scientists to increase atmospheric carbon dioxide, thereby causing the greenhouse effect. Higher concentration of CO2 in the atmosphere traps more of the sun's heat, which is possibly causing global warming, experts say.

Korea has been ranked among the world's top 10 industrialized countries which contribute to heat-trapping gases in the atmosphere. With the cooperation of the Environment Ministry and the state-run Korea Gas Corp., the government aims to switch diesel engines and diesel fuel used in freight trucks and passenger vehicles to LPG. Expressway buses and city buses now running on diesel will be expected to change to LNG and CNG, respectively.

The Environment Ministry and Korea Gas will be responsible for expanding the number of LNG-based vehicles between 2008 and 2015 to 23,000 in the Seoul metropolitan area. Another goal will be to increase the number of LNG stations to 100. Such aims are in step with the government's goal of raising greater public awareness over environmental issues. Such a vision is also reflected through state efforts to establish a first-class infrastructure for supplying LNG.

Seoul has ratified the Kyoto Protocol, a global treaty on global warming. Developed countries agreed under the 1997 protocol to reduce their aggregate emissions of greenhouse gases, believed to be causing global warming, by at least 5 percent from 1990 levels during the period 2008-2012.

Russia, Kazakhstan sign nuke deal

July 26, 2006. Russia and Kazakhstan signed on three joint ventures in the nuclear sector, with a focus on uranium mining and enrichment and on the development of new atomic reactors. The deal marks a compromise between the two sides, lending Russian high-tech know-how to Kazakhstan's nuclear-energy ambitions in return for plugging the deficit in Moscow's uranium needs. Under the newly signed venture memorandums, state nuclear fuel trader Tenex will work with Kazhakstan's state-controlled Kazatomprom to mine the Budyonovskoye uranium deposit. A second joint venture would then process the mined ore, which in enriched form is used as fuel for nuclear reactors.

Kazakhstan has 17 per cent of the world's uranium reserves, with Kazatomprom holding the world's second-largest reserves. Russia currently mines just 35 per cent of its uranium needs. This year mining will also begin at Kazakhstan's Zarechnoye deposit, in which Russia has a 49 percent stake and a $1 billion contract to receive 1,000 tons of uranium per year. The third of the newly created joint ventures will develop a reactor along the lines of the small BVER-300 fast-neutron reactor.

Vestas RRB charts out $21.5 mn plans

August 1, 2006. Vestas RRB India Ltd has chalked out an investment of Rs 100 crore ($21.5 mn) to set up a new manufacturing facility and expand its existing facility in Chennai. In the first phase, a wind electric generator blades manufacturing facility would be set up in Chennai at an outlay of Rs 35 crore.  The facility will start with the production of 23-metre-long blades using advanced pre-preg technology.  Production is likely to commence by April 2007. In the first year, the company plans to manufacture 350 sets of blades and ramp it up to 700 sets of blades in the second year. Vestas RRB expects to invest Rs 65 crore in the expansion of its facility in Chennai for the manufacture of higher capacity wind electric generators. 

Suzlon to invest Rs 1400 in India

August 1, 2006. Suzlon Energy plans to invest Rs 1,400 crore in 2006-07 across three plants in India. The company plans to raise its wind turbine manufacturing capacity to 4200 MW from the current 3300 MW this fiscal.  Suzlon will invest Rs 750 crore in a new integrated turbine manufacturing facility near Mangalore, which will increase the company's turbine capacity by 1500 MW.  The plant, which is coming up in the special economic zone will be an export-oriented unit and will aid the company's proposed forays into the US, China, Australia and Europe. The plant is expected to become operational from June 2007. 

Suzlon has 600 MW plants in the US, China and Australia. It recently acquired Europe's largest turbine gearbox manufacturer, the Belgium-based Hansen, through its holding company Eve Holding for 465 million euros.  The company is also planning to raise the capacity of its Belgian acquisition from 3300 MW to 4500 MW in tune with its Indian capex plans.  Suzlon is also setting up two foundry forging and machining plants at Vadodara in Gujarat and Coimbatore Tamil Nadu with Rs 750 crore investment.  Both plants are expected to be up and running by September 2007. 

AP panel to fix tariff for renewable power

July 28, 2006. The Andhra Pradesh Government has decided to constitute a committee to fix power purchase tariff for renewable energy based power projects. It would constitute from Finance Ministry, A.P. Transmission Corporation and The Non-Conventional Energy Development Corporation of Andhra Pradesh (NEDCAP). The NEDCAP also to take up focused programmes on popularising energy saving devices in a big way. Reviewing the progress of NEDCAP and Andhra Pradesh Power Generation Corporation Ltd (APGenco), the latter had generated 9137 MU of energy during this financial year so far.

Minister's fiat to ANERT

July 28, 2006. The Agency for Non-conventional Energy and Rural Development (ANERT) has been asked to find new sources of renewable energy to solve the problems Kerala is facing on the power front. ANERT should complete the projects in hand in a time-bound manner to meet the growing demand for power in the State. The State should generate at least 1,500 MW of additional power to meet the requirements of the future development projects. Out of this, 850 MW could be produced from the non-conventional sources as per studies and ANERT should take the lead in this respect, the Minister said. During the current year, ANERT has taken up projects worth Rs 47.76 crore.

Greenline Industries to build biodiesel plant in Romania

July 26, 2006. Greenline Industries signed a contract with S.C. ULEROM, the Romanian food giant to deliver a 7 million gallons a year biodiesel facility. The project was formed with the cooperation of J. Westcott Associates Ltd. of Stevensville, MI. The company's waterless continuous flow processor was designed from the ground up to eliminate pollutants, increase production and maximize fuel quality and shelf life. The new facility will be installed in Vaslui province and use ULEROM's recently upgraded rapeseed, sunflower and soy oil production facility. The company processes about 12,000 tons of seeds a month. The fully automated facility which is scheduled to begin production in January 2007 following assembly, testing and pre-production evaluation trials, will run on a continuous basis and require a staff of three to monitor the various processes.  Biodiesel is a fuel produced by the transesterification of vegetable oils and can be used without engine modifications in any diesel power plant. In concentrations as low as 2 per cent, biodiesel will dramatically decrease pollutant outputs, increase engine longevity and decreases reliance on petroleum products.

Texas tops in wind energy production

July 26, 2006. Long known as a top oil- and natural gas-producing state, Texas has gained new energy acclaim by becoming the nation's top producer of wind energy. Texas capacity stands at 2,370 MW, enough to power 600,000 average-sized homes a year. That puts Texas slightly ahead of California, the nation's leader since 1981. California has 2,323 MW of capacity. The total U.S. capacity is 9,971 MW.

This year, Texas has added 375 MW, or 46% of the total 822 megawatts brought online nationwide. Last year, wind energy generation grew 35% nationwide, adding 2,431 megawatts, but that fell short of the projected 2,500. The wind association believes it can add 3,000 megawatts nationwide this year, even if that means another 2,178 megawatts by year's end. Next, Texas wants to be home to more than just the place with the most wind energy generation capacity, said Jerry Patterson, the state's land commissioner.

China pact to develop biodiesel

July 25, 2006. China's third largest oil company China National Offshore Oil Corp inked a MoU with a Malaysian firm to develop palm oil-based biodiesel in a shift towards renewable energy sources. The pact was signed between its subsidiary, CNOOC Oil Base Group Ltd, with Bio Sweet Sdn Bhd, which specialises in biotech and palm diesel research and development. Under the MoU, CNOOC will build a plant in Hainan Island in 12 months with a capacity of 120,000 tonnes. It will also set up a joint venture called CNOOC (M) Biofuel Sdn Bhd with a view of a listing in Malaysia eventually.

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