MonitorsPublished on Nov 13, 2007
Energy News Monitor |Volume IV, Issue 21
Natural Gas Regulation in Mexico

(Pricing of Natural Gas: Lessons from History IX)

The use of netback pricing in Mexico linked to Houston gas prices was the second best option in the absence of competition in production.  Though this introduced competition and liquidity in the Mexican market it unduly transferred the volatility in US gas prices to the Mexican market.  Consumers in Mexico were often panelised during periods of cold weather in the United States when demand for gas and gas prices increased.  Studies have found that the use of netback prices based on Houston prices offered incentives to increase the price of domestic natural gas by diverting production from the regulated market: at the arbitrage point the marginal cost of imported gas was equal to the marginal cost of domestic gas. 

Comparison of Pricing Options

Pricing method



Cost based

*    Reflects costs

*    Prices are related to costs at the wellhead in most countries with competitive natural gas market

*    No marginal cost of extracting Mexican gas because it is a by-product of oil

*    Does not reflect the opportunity cost of selling Mexican natural gas in the North American Market

Inter-fuel competition

*    Reflects prices in international markets

*    Prices of substitutes are economically related

*    There are price series data

*    Potential prices of substitutes are subsidised in non-explicit ways

*    International markets of substitutes have different dynamics of natural gas market 

*    Accounts for opportunity cost of other markets not the natural gas market


*    Considers the opportunity cost of Mexican natural gas in the North American market

*    The relevant bench mark, the Houston Ship Channel is a liquid market, it has an associated hedging market, it is physically close to the Pemex pipeline system

*    Methodology is similar to historical pricing method in Mexico

*    At the arbitrage point, marginal cost of imported gas and domestic gas are equal 

*    Imports disturbances from US weather into the Mexican market

Source: Regulatory Reform in Mexico’s Natural Gas Industry, World Bank Working Paper

Pemex could sell gas to its own subsidiaries or simply reduce its production in order to bring the arbitrage point south and increase the price of domestic natural gas two times more than the value of marginal cost of transportation.  Reducing import tariffs was found to have no impact on the price. Additionally, developing new gas production sources closest to the arbitrage point rather than to load centers was found to be socially optimal.

Regulating the downstream

With no means to unseat state owned Pemex from the position of dominant player in all segments of the value chain, regulators in Mexico set about reforming the transportation and distribution segments so as to increase competition. As with any nascent network industry, the challenges before Mexican regulators involved two opposing elements: providing incentives to rapidly develop infrastructure while at the same time putting downward pressure on prices to consumers to maximise social welfare. The characteristics of the Mexican gas industry also imposed constraints.  Market power remained with production and there was a dominant incumbent in transportation.  There were almost no distribution systems. The development of infrastructure involved policy measures regarding exclusivity and vertical integration, both of which are relevant for India.  Mexican regulators prohibited vertical integration between transportation and distribution by restricting Pemex to transport and encouraged entry of new participants in distribution. Vertical integration between transportation and distribution was authorized only when a transportation permit was necessary for a distribution project or a distribution permit was necessary for a transportation project. If a company wanted to establish a distribution network in an isolated area where there were no transportation pipelines and no other party interested in constructing them, the distributor could construct and own the transportation system. Distribution permits were granted for geographic zones defined by the regulatory authority through a public tender. Definitions of zones considered the feasibility of projects and the characteristics of the area such as population density, consumption patterns, and the like. The first distribution permit granted 12-year exclusivity in gas distribution but not in gas marketing.   

Producers, transporters, distributors, and operators of storage facilities could buy and sell gas. But they had to un-bundle their services and also have separate accounting systems for their commercial and service activities in order to prevent cross-subsidies. In order to limit market power and create competitive conditions, open access in transportation and distribution was provided to consumers.  This was intended to allow consumers to bypass the local distribution company and buy gas directly from producers and transport it through the pipelines, paying the transport and distribution charges. This way, the regulators restricted the market power of both transporters and distributors in their gas marketing activities. Without open access provisions, such a system would not have been feasible.  In the event of pre-existing contracted capacity and real-time congestion, the pipeline operator was required to provide open access when there was enough available capacity and in a ‘not-unduly discriminatory manner’.

The Mexican Energy Regulatory Board had the authority to ensure compliance with regulations. It could seek the presentation of any relevant information, take a company to court, and revoke a permit for violations of regulations. Sanctions and penalties were made public and the defaulting party was required to take appropriate measures within a specific time period. Likewise, affected parties were able to use public resolutions to take legal measures against violators. The Ministry of Finance, through its local representatives, usually collected monetary penalties. Technical and financial audits were performed based on Official Mexican Standards.  CRE, the Mexican regulator and the international standards verification units approved by the Energy Ministry carried out such audits. As per a World Bank study, decisions on how to regulate distribution tariffs were influenced by the Greenfield nature of natural gas distribution in Mexico.  The available options included cost-of-service regulation, price caps to regulate price level, tariff basket and average revenue. In the cost of service option which is followed in the United States, price would be set equal to average cost and price setting would be the result of equating total revenues with total cost.  It would impose a limit on rate of return on capital and prices would remain fixed until one of the parties involved seeks modification.  Each set of tariffs would be established according to a prediction of revenues and costs consistent with the regulated rate of return. The advantage of the cost of service method was that it would provide investors with certainty and would make long run commitment of the governing authority credible.  Reduced risk level could reduce cost of capital for investors.  If regulators monitored and constrained subsidies, opportunities for manipulation were likely to be small. On the other hand cost of service method would offer no incentives for investors to reduce costs and operate efficiently and instead provide a perverse incentive to over invest in capital. Determination of ‘fair-rate of return’ was also very subjective and rate of return often exceeded cost of capital.  Under this mechanism the firm would produce more than an unregulated monopoly but with inefficient input-output combinations.  It was also administratively demanding. 

In the price cap method, authority would set ceiling prices incorporating for inflation and efficiency.  This mechanism provided incentives for cost reduction and efficiency and it was more forward looking than the cost of service method.  Under this system investors faced greater risk which could increase cost of capital.  A monopoly player has the potential to earn a high return at the expense of the consumer if rates are set very high.                                                                         to be continued

Lydia Powell

Visiting Fellow


Two Paths for the Planet: Clean or Dirty Energy?

Ross Gelbspan

Humanity is standing at a crossroads between a more just, peaceful world and an increasingly chaotic, turbulent, and authoritarian future driven by a succession of climate-driven emergencies. We could find ourselves struggling to survive a desolate era of climate hell marked not only by a degraded and fractured society but also by more authoritarian governments.

But the good news is that the bad news is at last being taken seriously. With the latest report of the Intergovernmental Panel on Climate Change synthesizing the work of some 2,500 scientists, there are no longer serious deniers. An alternative path could lead not just to a pullback from climate disaster, but to a more peaceful and cooperative world. Why? Because the private, corporate forces that have produced the climate emergency are powerless to cure it. As even many in the private sector now admit, the necessary solutions will require new feats of cooperation among governments, new collaborative regulation of energy and the environment, as well as new social investments in renewable technology and a global system to distribute them.

The challenge has been taken very seriously in Europe, where leaders want much stricter goals for the next phase of the Kyoto Protocol beginning in 2012. In May, German Chancellor Angela Merkel sought agreement by industrial nations to cut emissions 50 percent by 2050 at the June G-8 summit. But U.S. negotiators accused the Chancellor of ignoring their concerns. Prior to the summit, Bush seemed to undermine the G-8 by calling on the U.S., India, China, Mexico and Australia, and 10 other major polluters to craft a new carbon-cutting framework by 2008. James Connaughton, senior U.S. climate advisor, kicked off the summit by declaring the United States would not accept the EU goals. In the end, the U.S. agreed only "to seriously consider" the non-binding vows by the EU, Japan, and Canada to halve emissions by 2050. Bush's plan for the 15 large polluters could allow his successor to work more closely with the EU on the next phase of Kyoto. But, despite bravely optimistic words by Merkel and Tony Blair, Bush undermined the EU push to substantially slow the pace of climate change. His promise to "seriously consider" greater future cuts fell far short of the commitments the EU had wanted.

Ultimately, the challenge is as simple as it is overwhelming: Humanity must cut its use of coal and oil worldwide by about 80 percent in a very short time by shifting to clean energy. The predominant view of that gargantuan challenge casts it as mainly technical: that energy systems will remain centralized; that private market forces will make that energy transition; and that our current form of social and economic organization will remain fundamentally unchanged.

But that picture has it backwards. The technical remedies favored by the big energy companies are mostly the wrong ones, such as "clean coal" and mechanical carbon sequestration. Their purpose is often to serve the interests of big oil and big coal, not to produce the most efficient or cleanest technologies, much less socially effective applications of their use.

What's required is significant government action, and on a global scale. In that respect, the carbon crisis could be a profoundly transformative opportunity to begin to reverse the growing and unsustainable gap between the world's rich and poor, to rescue the democratic process from the growing reality of corporate domination, and to launch a coordinated global transition that could fundamentally alter historical power relationships.

Outside the United States, the transition is beginning in earnest. The Netherlands, Germany, France, and the U.K. have already vowed to cut their carbon emissions by 50 to 80 percent over the next 45 years. The EU has just agreed in principle to cut carbon levels 20 percent below 1990 levels by 2020.

European cities, regions, nations, and the EU are also leading the world in developing more energy-efficient systems of transportation and construction, and in helping private industry develop new forms of renewable energy technology. This effort did not occur spontaneously because the oil companies or public utilities or private developers saw the light, or because market forces saw profit opportunities. Europe's renewable energy path happened as a result of careful public policies, informed by public planning, including taxes on carbon energy use, subsidies for development and use of clean energy, regulations on building standards and public utility purchases, and leadership on the Kyoto Protocol process.

Europe's new willingness to press Washington harder on this issue did not begin with this year's G-8 meeting. In fact, several governments contemplated legal action against the United States as early as the summer of 2001. At that time, representatives of the French, Swiss, and Canadian governments said in background conversations with me that they were planning to bring the United States to court under the World Trade Organization. Their argument was that the WTO prohibits governments from subsidizing their products. And if their countries were drawing down their emissions according to the Kyoto schedule and the United States was not, they were planning to petition the WTO to level stiff taxes on American exports on the ground that the United States was "carbon-subsidizing" its exports. That initiative was aborted, months later, by the terrorist attacks on the World Trade Center and the Pentagon. But it resurfaced last November when then-French Prime Minister Dominique de Villepin proposed taxes on imports from countries that refused to sign the Kyoto Protocol.

The United States, as the world's most disproportionate energy consumer, is in a position either to lead an energy transition, or to thwart it. A pro-active U.S. role has been blocked by both the Bush administration and big oil and coal. Beginning in the early 1990s, the coal industry mounted an extensive campaign of deception and disinformation, covertly paying a tiny handful of "greenhouse skeptics" several million dollars and buying them a great deal of air time to persuade the public and policy-makers that climate change was either nonexistent, negligible, or due to natural causes.

As recently as October 2006, President Bush tapped Lee Raymond, the recently retired chief executive of ExxonMobil, to help chart America's energy future. Despite Bush's belated admission in his 2007 State of the Union address that climate change is real, Bush's policies are essentially unchanged and the White House has become the East Coast branch office of ExxonMobil and Peabody coal. The Democrats are only marginally better. Climate change has become the preeminent case study of the contamination of our political system by money.

EVEN BEFORE BUSH LEAVES OFFICE, THAT POLITICAL paralysis may now be changing, as growing segments of the business and finance communities are beginning to sense the enormous losses that will result from an increasingly inflamed climate. One hopeful fact is that the oil industry is far from monolithic. While ExxonMobil, for example, has poured millions into disinformation about the true state of climate change, BP has re-branded itself as "Beyond Petroleum" and Shell has spent $1 billion on developing clean energy subsidiaries.

BP Solar created the country's largest fully integrated solar power plant in Maryland and recently the company committed an additional $70 million to expand the facility. Two years ago the chairman of Shell, Ron Oxburgh, shocked the industry when he acknowledged that the threat of climate change makes him "really very worried for the planet." In early March 2007, both Shell and BP announced major investments in wind energy in the United States.

But privately many oil company chiefs say they are torn between the realities of an increasingly turbulent climate and the competitive dynamics of their own industry. In background discussions with me several years ago, the top executives of six major oil companies all acknowledged the dangers of climate change. None denied the kind of massive and abrupt changes we may soon be encountering (although few were willing to acknowledge the likelihood of what scientists label a "worst-case scenario").

To a person, each of these top oil executives said essentially the same thing. They are aware of the problem, but they are unable to act unilaterally. One executive summed it up by saying: "If I put lots of money into solar, my company will be undercut by ExxonMobil. My company will lose market share. Its stock price will drop. And I'll be out of a job." (Because all these conversations were conducted on an off-the-record basis, the executives insisted on anonymity both for themselves and their companies).

to be continued


Courtesy: The American Prospect Vol 18, July 2007





RIL bags deepwater oil and gas block in Oman

November 12, 2007. Reliance Industries Ltd has won a deepwater oil and gas block in Oman. Reliance Exploration and Production DMCC, a wholly-owned subsidiary of RIL, has signed contract for Block 41. The block lies adjacent to Block 18 in Gulf of Oman, which the Government of Sultanate of Oman awarded to RIL in 2005. Block 18 is situated in the offshore Gulf of Oman between Block 41 and the border with the Fujuriah offshore block. The two blocks comprises approximately 21,000 sq km of area each.

IVRCL Infra acquires Alkor Petroo

November 12, 2007. IVRCL Infrastructures & Projects has signed a share purchase agreement to acquire 100 per cent stake in Hyderabad based Alkor Petroo, an unlisted oil and gas E&P company. Alkor has five exploration blocks in Yemen and Egypt, along with Gujarat State Petroleum Corporation and others. The three blocks in Yemen are Block No. 19, 57 and 28 in Marib Shabwah Basin, Rub Al Khali Basin and Balhaf Basin, respectively. Block 19 has an estimated resource potential of about 143 mn bblls of oil and 17 bcf gas, as evaluated by an international agency. Alkor has 25 per cent participating interest in each of the three blocks. The two blocks in Egypt are Block 6 in the Nile Basin, and Block 8 in the Western Desert. Block 6 has a best estimate resource potential of 143 mn bblls oil and 6.494 tcf gas identified from direct hydrocarbon indicators from seismic sections.

RIL to explore oil and gas in Kurdistan

November 9, 2007. Reliance Industries (RIL) said it has entered into two PSCs with the Kurdistan Regional Government (KRG) to explore oil and gas in the Kurdistan region of Iraq. RIL has committed about Rs 15 mn in exploring the region, in blocks measuring an area of 450-500 square kilometres in the Rovi and Sarta blocks in the Kurdistan. It was the first time an Indian oil and exploration company was entering into war-ravaged Kurdistan and RIL was among the seven explorers in the region. Under the terms of the contract, Reliance Exploration and Production DMCC, a wholly-owned subsidiary of RIL, would serve as the operator.

Subsidies limit ONGC’s valuations

November 8, 2007. ONGC currently has stakes in 43 oil blocks in 15 countries through its subsidiary ONGC Videsh. It is aiming to increase the reserves under its belt to 12 billion tonnes (bt) of oil equivalent from the current 8 bt by 2020, by when it is also planning to source from its properties 20 mtoe per year. The company, however, continues to be undervalued compared with its peers due to subsidy payouts. ONGC continues to feel the pressure of sharing in the subsidy of the oil marketing companies. The subsidy payout is resulting in the company being under-valued. The enterprise value is about $9 per barrel of oil and oil-equivalent gas, as against Cairn India's $13-14 per barrel. The global average for a company similarly sized as ONGC is $15-16. It is constraining the growth potential of the company. Enterprise value is equal to the market capitalisation, about $70 bn for ONGC, divided by proven reserves, 8 bn barrels of oil and oil-equivalent of gas.

Reliance finds more gas in K-G basin

November 7, 2007. Reliance Industries has found more gas in one of its offshore blocks in the Krishna Godavari basin, off the east coast. The well (KGIII5-P1) is the second gas discovery in the Miocene clastics reservoir in the Krishna basin. The shallow water block was awarded to Reliance in under the New Exploration Licensing Policy (NELP III). Reliance holds 100 per cent interest in the block. The well was bored at a water depth of 151 metres and was drilled to the target depth of 3,500 metres. The firm has informed the upstream regulator about the gas discovery and is evaluating the commerciality of the discovery. In July, Reliance found oil and gas in a block in the nearby Cauvery basin and said it had a flow rate of 1,000 barrel per day (bpd) of oil and 30 mcf of gas. 

ONGC picks stakes in two more Sudan blocks

November 7, 2007. Indian oil major ONGC has decided to pick up sizeable stakes in two more blocks in Sudan from foreign oil majors. This will extend ONGC’s stakes to five operating blocks in Sudan. Last fortnight, Darfur rebels attacked the Defra oilfield in Block 4. Blocks 1, 2 and 4 are a Chinese-led concession called the Greater Nile Petroleum Operating Company (GNPOC), which also includes India’s ONGC and Malaysia’s Petronas as partners. Sudan has been an unstable country. Most international oil majors are moving out. It’s risky investing in Sudan at this point of time. Recently, Chinese installations were also attacked by militants, while China is Sudan’s largest foreign investor. India imports one mtpa of crude from Sudan.


IndianOil planning petrochem unit in Haldia

November 12, 2007. IndianOil is planning the third petrochemicals complex at Haldia. The company is considering setting up a parazylene plant in the existing refinery complex beginning 2012. The cost and capacity estimates of the project are yet to be finalised. Parazylene is a petrochemical product and is used as a feedstock in the neighbouring MCC PTA India Corporation Pvt Ltd, a subsidiary of Tokyo-based Mitsubishi Chemical Corporation for producing purified terephthalic acid (PTA). The parazylene plant coupled with the virtually finalised plan to set up a Rs 350-crore ($88.9mn) delayed coker unit in the refinery may, however, reduce the availability of naphtha for Haldia Petrochemicals Ltd (HPL). The delayed coker project will be finalised as soon as the company is given possession of an additional 86 acre land next to its refinery. The Union Shipping Ministry has already approved the allotment of land currently under the possession of the closed Hindustan Fertiliser Corporation (HFC) facility at Haldia and the physical handover is expected to take place shortly. Delayed coker will replace roughly 50 per cent production of black oil (including naphtha) by petroleum coke and improve the distillate yield to over 70 per cent from the existing 65 per cent. The company will use a part of the reduced naphtha production for production of parazylene and the rest is likely to make its way to HPL, also located in Haldia. Haldia Refinery currently processes 6 mt of crude.

Mittal eyes 50pc stake in HPCL subsidiary

November 9, 2007. Steel baron Lakshmi N Mittal is in talks with financial institutions to buy out 50 per cent in Hindustan Petroleum Corp’s exploration arm Prize Petroleum. The size of the deal is said to be about Rs 200 crore ($51mn). Mittal has made rapid advances in the oil business in India this year first with a 49 per cent stake in HPCL's Bhatinda refinery and then partnering the state-run firm for another refinery on the east coast. Besides Mittal, Essar Oil, Jaiprakash Associates and L&T are other firms interested in buying a 50 per cent stake in Prize Petroleum. Prize operates the Cluster-7 field of Oil and Natural Gas Corp (ONGC) and won two exploration blocks in the fourth and sixth auctions under the New Exploration Licensing Policy (NELP). The company plans to produce about 50,000 barrels of oil per day from Cluster-7 fields.

IOC eyes stake buys in Africa

November 8, 2007. Indian Oil Corporation (IOC), the country’s largest crude oil refiner and marketer of petroleum products, is in talks with various African countries for buying stake in discovered oil and gas blocks. The Fortune 500 Company is also keen on buying into existing refineries and helping in their upgradation and maintenance. IOC are in talks with Nigeria and some other African countries for exploration and production blocks. The company has also decided to increase its crude oil imports from Nigeria from 2 mtpa to 3 mtpa. The company was not keen on exploration blocks, but rather wanted to buy stake in discovered fields, a strategy that is an accepted one around the world. 

Transportation / Trade

LPG backlog in Kerala to be cleared

November 13, 2007. The backlog in the supply of LPG cylinders in Kerala will be cleared soon. According to the Food and Civil Supplies Minister, LPG consumers, who had completed the normal waiting period of 21 days, would be given the cylinders within the next ten days. Indian Oil Corporation (IOC) has the maximum backlog of cylinders in the State, followed by Hindustan Petroleum Corporation and Bharat Petroleum Corporation. The companies have been asked to clear the backlog between five and ten days.

Cairn laying two pipelines between Rajasthan, Gujarat

November 9, 2007.  Cairn India is laying two pipelines, alongside each other, from its oil fields in Rajasthan to coastal Gujarat. One pipeline will carry the crude oil and the other will carry gas to heat the waxy crude oil so that it can flow through the pipeline. This heated dual pipeline system, a first of its kind, will be underground and will cover 585 kilometres. About 30 (gas-fired) gensets of one megawatt each would be used at 30 power stations to generate power for heating the crude pipeline. The crude from Rajasthan is heavy with wax and has lower sulphur content. Therefore, it is necessary to have a heating system in place to help the crude flow smoothly through the pipeline. The state governments of Rajasthan and Gujarat had appointed empowered officers to start acquisition of land for the pipeline. Cairn Energy and its partner, Oil and Natural Gas Corporation (ONGC), have completed route surveys and have submitted the details to the Central and state authorities. A few months ago, the government had granted right of use permission to Cairn India and ONGC to acquire land for laying the pipeline, paving the way for the project. The $700 mn pipeline is expected to be ready by the time production starts in 2009. While Cairn will invest 70 per cent of the costs of the pipeline, its partner ONGC will put in the remaining 30 per cent. The pipeline, which will have a 24-inch diameter, is expected to carry about 150,000 barrels of crude a day, once it becomes fully functional.

RIL, Essar Oil vie for pipeline co

November 7, 2007. Reliance Industries (RIL) and Essar Oil are locked in a race to take management control of Petronet VK (PVKL), the company that controls the pipeline infrastructure to evacuate petroleum products from RIL’s Jamnagar refinery and Essar’s Vadinar refinery in Gujarat. Both partners are eyeing Petronet India’s (PIL) 26% equity stake in the company, which is on the block. PIL, one of the promoters of PVKL, has decided to sell its 26% equity stake through a free bidding process. RIL and Essar Oil are PVKL’s shareholders interested in picking up the stake on sale. At present, both RIL and Essar Oil hold 13% stake each in PVKL. The other shareholders are IOC (26%), IL&FS (5%), Kandla Port Trust (5%), SBI (5%), Gujarat Industrial Investment (5%) and Canara Bank (2%).

Policy / Performance

Crude dent core sector growth in September

November 13, 2007. In line with the disappointing industrial growth numbers, the infrastructure sector has posted a lacklustre performance in September, with crude oil production and refining among the key dampeners, according to latest Government data. The six core industries registered a six per cent growth in September 2007, as against a 10.6 per cent growth posted during the same month a year ago. The growth for the April-September period of 2007-08 also dropped to 6.6 per cent, down from the 8.7 per cent in the comparable period of the previous year. Among the six key infrastructure industries, which have a combined weight of 26.7 per cent in the Index of Industrial Production (IIP), crude petroleum production put up the worst performance with a negative growth of 0.7 per cent during the month, as against a positive 9.4 per cent growth in the same period a year ago. The petroleum refinery output was up by 6.9 per cent in September, about half the last year’s growth of 13.4 per cent. Electricity generation was also down, registering a growth of 4.3 per cent against last year’s 11.5 per cent, while cement production was up five per cent during the month, compared to an impressive 16.5 per cent growth last year. However, the coal sector bucked the downturn by registering a 6.2 per cent growth in output during the latest reported month, as against from a negative 0.8 per cent, while finished steel retained the double digit figure of 10.3 per cent. Cumulatively, for the April-September period this fiscal, crude petroleum production was up just 0.7 per cent in comparison to a 4.1 per cent registered a year ago. Refinery products fared better to register a growth of 9.8 per cent in the first half of this year, against a 12.3 per cent last year. Buoyed by a good showing during the pervious months of the current fiscal, electricity generation grew by 7.6 per cent for the six-month period, as against 6.7 per cent during the same period during the pervious fiscal, despite the lacklustre performance in September 2007. The performance of the finished steel sector was restricted to 6.6 per cent for the first half of the current fiscal as against 12.2 per cent in the same period last year.

India, Pak need to meet on gas pipeline project

November 13, 2007. According to a the Minister for Petroleum and Natural Gas, Mr. Murli Deora, bilateral meeting between India and Pakistan is necessary to decide on the transportation tariff, transit fee and a common stand on the price clause proposed by Iran, before the trans-national pipeline project that also involves Iran can take shape. Tehran is hopeful of the project coming through by 2013.  Senior Ministry officials indicated that there was a possibility of Indian and Pakistani officials meeting on the sidelines of the Steering Committee Meeting of Turkmenistan, Afghanistan, Pakistan and India pipeline project. The two-day meeting of the steering committee is to begin in Islamabad on November 29 and the Indian delegation is likely to be led by the Minister for Petroleum and Natural Gas.

Excise revision to cool oil prices

November 13, 2007.  The oil ministry has proposed that the ad valorem duty be replaced by a larger specific duty. The government is considering an excise duty rejig to minimise the impact of soaring crude oil pirces on both consumers and oil companies. At present, the excise duty on petrol and diesel has two components viz., a 6% ad valorem duty that varies with the basic price and another duty specified per litre. The oil ministry has proposed that the ad valorem duty be replaced by a larger specific duty. It has also proposed that the new specific duty rate should be lower than the combined duty by Rs 2 per litre. Currently, the excise duty is 6% plus Rs 13 per litre for petrol and 6% plus 3.25 per litre for diesel. This is inclusive of the road cess but excludes the 3% education cess. The petroleum ministry has been pressing for an excise duty restructuring to provide immediate relief to public sector oil marketing companies (OMCs) that are losing over Rs 240 crore ($60.9mn) everyday on the sale of petroleum products. The ministry has argued that the move could also provide a cushion against international crude oil price volatility. Global crude prices are nearing $100 per barrel. Oil has already touched a record $98.62 per barrel-mark in the US. The Standing Committee of Parliament on petroleum has also recommended the removal of the ad valorem component of the excise duty on petroleum products. Advocates for an excise duty rejig also cite the Rangarajan Committee report on pricing and taxation of petroleum products, which states that imposing ad valorem duties during a time of persistent price increase is debatable. Not only do ad valorem levies exacerbate the burden on the consumer, but they also result in the government willy nilly benefiting through higher tax yields, making it vulnerable to the criticism of profit at the expense of consumers. There is, therefore, need for both softening and smoothing the impact on the consumers of international price variations and for the government sacrificing windfall gains in revenue. The Centre's total revenue earning in 2006-07 stood around Rs 93,800 crore ($23.8bn) from petroleum, of which over 55% Rs 51,920 crore ($13bn) was excise duty mop up. As per an estimate, the current incidence of excise duty on petrol is about Rs 15 per litre and is Rs 5 per litre on diesel. Officials supporting the move argued that the high excise duties on fuel were inconsistent with the current scheme where the government, on the one hand, was providing compensation to oil marketing companies and on the other, levying high excise duty on petrol and diesel.

ONGC, Rajasthan spar over royalty from Barmer field

November 13, 2007.  After the disagreement over setting up a refinery in the state, the Rajasthan government and ONGC are at loggerheads over the quantum of royalty from the gigantic oil field in Barmer. The Rajasthan government is opposing a move to almost halve the royalty payable to it by the Cairn-ONGC consortium, which owns the field. The central government wants to reduce the royalty to 12.5 per cent from 20 per cent. Under the production-sharing contract, ONGC has to pay 20 per cent revenue from the sale of crude oil as royalty. At 20 per cent, the state government would earn around $1 mn (around Rs 4 crore) per day. This would make the refinery one of its main revenue source. The field, in which Cairn India found India’s largest crude oil reserves after ONGC’s Bombay High discovery in 1972, was awarded to Cairn before the government introduced auction of oil blocks in 1999 under the New Exploration and Licensing Policy (NELP). Before NELP, ONGC had the luxury of picking up stakes in the blocks, with the condition that it would accept the full royalty liability. So ONGC picked up a 30 per cent stake in the Rajasthan block. It has, however, raised a hue and cry over paying the full royalty, and wants to pay only 12.5 per cent, which is the norm for onland blocks auctioned under NELP. The petroleum ministry has since issued a notification that royalty payable from pre-NELP blocks will come down from 20 per cent to 12.5 per cent over the next five years. The quantum of royalty for onland blocks allotted under NELP is 12.5 per cent. As per the oil ministry official, the Rajasthan government was unlikely to accept ONGC’s demand.

Oil PSUs board rickshaws to keep losses under check

November 12, 2007. This could turn out to be a unique protest against government’s populist decision to keep retail prices of petrol and diesel insulated from global crude prices, forcing public sector oil companies to sell at a loss. Soon you will find oil marketing companies (OMCs) like IOC, BPCL and HPCL promoting cycle rickshaws in the busy streets of Delhi, Faridabad, Gurgaon, Noida and other north Indian cities. OMCs lose about Rs 4 on the sale of every litre of petrol and over Rs 6 on every litre of diesel. Public sector oilcos are losing about Rs 240 crore ($61mn) everyday. In such a situation, saving of every drop will count. Promoting cycle rickshaws means less consumption of auto fuel that would lead to a proportional decline in losses suffered by OMCs. Even as the administered price mechanism (APM) for fuel retailing in the country has been dismantled, the government regulates pricing of petroleum products sold by PSUs. Private retailers like Reliance and Essar, who are free to charge market price from customers, are forced to shut down pumps due to predatory pricing by public sector OMCs. According to the companies, rickshaw is a non-polluting, clean and sustainable mode of transport; it gives employment to million of people and there is nothing wrong in encouraging such transport system for shorter distances. It is learnt that petroleum ministry has forwarded the project proposal to oil companies.. It proposes to re-design and standardise rickshaws with proper dress code for rickshaw pullers. The project would also provide social security scheme, involving insurance, saving account, health check-up and night shelter to rickshaw pullers free of cost. The project would be funded through the advertisement revenue generated by selling ad space to oil companies on cycle rickshaws, pullers’ dress, rickshaw stands and public conveniences. The model proposes scientific management of rickshaws. It plans to provide biocryptic licensing for pullers and licence plates to rickshaws. The plan also contains a proposal to introduce battery-operated rickshaws. 

Indian Oil's Sri Lankan subsidiary losing $6 mn per month

November 11, 2007. The Sri Lankan subsidiary of Indian Oil Corporation (IOC) is incurring a loss of nearly $6 mn a month due to the steep rise in global crude oil prices and has sought an increase in petroleum prices. The losses of the Lanka IOC (LIOC), as a result of the crude oil prices hovering around the $100-a-barrel mark, are likely to rise further due to the Sri Lankan government’s reluctance to raise petroleum prices before the end of this year. A price rise was not likely before the year-end.  Lanka LIOC, is a subsidiary of Indian Oil Corp in Sri Lanka, which is the only public sector oil firm other than the state-owned Ceylon Petroleum Corporation that operates retail petrol stations in the island country. It has been incorporated to carry out retail marketing of petroleum products, bulk supply to industrial consumers, building and operating storage facilities at the Trincomalee Tank farm, among other things. 

Branded petrol, diesel may cost more

November 9, 2007. Branded petrol and diesel like Speed, Turbo Jet, Xtra Mile, Power and others may soon cost more following a draft circular issued by the Central Board of Excise and Customs (CBEC). As per the circular, mixing additives in normal motor spirit (petrol and diesel) results in the creation of a new product. Accordingly, the CBEC proposes to treat such branded fuel as manufactured products. This implies that the oil marketing companies will have to pay excise duty on the value added over and above what they pay on normal petrol. These branded fuels are not priced on a fixed price formula like regular petrol and diesel. The pricing is within a band that can vary by Rs 2 for petrol and by about 60 paise for diesel, depending on the market. The additional duty is likely to be passed on to consumers, especially as oil marketing companies are already reeling under high under-recoveries on sales to the tune of Rs 240 crore ($61mn) every day. Branded petrol accounts for 30 per cent of overall petrol sales. Branded diesel accounts for 15 per cent of overall diesel sales.  

Government may issue fresh oil bonds

November 8, 2007. As supply concerns and a weakening dollar push international crude oil prices towards the psychologically important $100 per barrel mark, the government is likely to issue additional oil bonds worth roughly Rs 7,000 crore ($1.8bn) to help the three oil marketing companies tide over under-recoveries owing to the differential between consumer prices and input costs. The value of the bonds is likely to go up to Rs 30,000 crore ($7.6bn) for the financial year as the under-recoveries for the year at current crude oil prices are seen at around Rs 70,000 crore ($17.8bn). Under-recoveries for the full year for Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd were previously seen at around Rs 55,000 crore ($14bn). The Indian basket of crude which comprises Oman-Dubai sour grade crude oil and Brent dated crude oil in a 59.8:40.2 ratio also touched a new high of $89.36 per barrel. Though officials reiterated that there was no price hike in the offing, industry officials said that the government may have no choice in the matter.  Oil marketing companies are suffering heavy revenue losses to the tune of Rs 240 crore ($61mn) per day selling petrol, diesel, LPG and kerosene at subsidised prices. The government has been unable to raise retail prices of automobile fuels with elections in Gujarat and Himchal Pradesh coming up in end-November and December.  The government’s relief package so far Rs 23,458 crore ($6bn) of oil bonds committed for the full financial year and discounts by oil producers will no longer be enough as oil prices have beaten all forecasts.

India voices concern over spiralling global oil prices

November 7, 2007. India voiced concern over the rising international oil prices saying the surge posed danger of economic dislocation to developing countries. This (rise in oil prices) is a matter of grave concern to all developing countries due to the imminent danger of economic dislocation and its cascading effect on both oil producing and consuming countries.  India, which imports 73 per cent of its oil needs, has been hit by the surge in international crude oil prices that touched $96 a barrel last week. State-run fuel retailers Indian Oil, Bharat Petroleum and Hindustan Petroleum are currently losing Rs 240 crore ($61mn) per day on selling petrol, diesel, domestic LPG and public distribution system (PDS) kerosene as the government has not allowed them to raise retail prices in line with the surge in cost.



NHPC plans to add 25,000 MW capacity in 20 years

November 13, 2007. The National Hydroelectric Power Corporation (NHPC), which has managed to produce just 4,145 MW from 11 projects since it was set up in 1975, is planning to add over 25,000 MW of hydro generation capacity over the next 20 years. The company has lined up aggressive plans to harness the hydro potential of north and north-eastern states such as West Bengal, Arunachal Pradesh, Jammu & Kashmir, Manipur, Sikkim and Uttarakhand. NHPC is currently in the process of constructing 13 projects which will add about 5,652 MW. Of this, most projects are likely to be commissioned during 2007-12, the 11th Plan period.

13 power majors eye Tilaiya project

November 13, 2007. Thirteen companies, almost all major power sector players in the country, have shown interest in bidding for the 4,000 MW Tilaiya ultra mega power project (UMPP) in Jharkhand.  This is the fourth UMPP, conceived to fast-track capacity addition through public private partnerships, to go under the hammer. Larsen & Toubro (L&T), Lanco Infratech, Reliance Power, Sterlite, Tata Power, AES, Dian Wijaya (Malaysia), Torrent Power, Essar, GVK, Citra, NTPC Ltd and Jindal Steel and Power Ltd (JSPL) submitted the requests for qualification (RFQs) to the Power Finance Corporation (PFC), the nodal agency for implementing ultra mega power projects. There are three overseas firms in the list of interested parties viz., AES (US), Dian Wijaya (a subsidiary of Tanjong, Malaysia) and the Genting group of Malaysia, in partnership with Lanco. Incidentally, the tally of 13 in this round betters that of 10 companies that had been qualified a few months ago for the same project. However, companies like Reliance Power (Sasan and Krishnapatnam) and Tata Power (Mundra), which have got UMPPs under their belt, are also in the race for this pit-head coal project which, compared to imported coal-based projects, entails less risks. Spread over around 4,000 acres, the Tilaiya project is similar to the Sasan project in that both are based on pithead coal. Reliance Power won the Sasan project by putting the lowest bid of Rs 1.196 per unit. The shell company Jharkhand Integrated Power Limited set up to pilot the project and get clearances from the state government has already got water and land clearances.

Suryachakra, CGC in pact for power project

November 13, 2007.  Suryachakra Power Corporation will develop a 1,200 MW coal-based power project along with the Chinese firm, China Guodian Corporation (CGC). SPCL would initially set up four 300 MW coal-based power plants in Orissa or Chhattisgarh and has signed a MoU on October 24 to that effect. CGC, a power generation group of China, has power plants in every state of China and has controllable installed capacity of 44,450 MW. The company has also entered into a sales and purchase agreement with Indonesia-based coal mining and power plant company Central Korporindo International for coal commodity trading. SPCL has also got a no-objection certificate for setting up a power generation project of 2x35 MW at Chhattisgarh, from the state renewable energy development agency on November 2.

India mulls limits on ultra mega power project bidders

November 12, 2007. India could consider limiting the number of its so-called ultra mega power projects to two per bidder to prevent risks to their execution being concentrated with a single party. The Indian government is promoting the ultra mega power projects, each with a capacity of 4,000 MW, as a way to ease the country's chronic power shortage that is widely viewed as a serious threat to its fast-growing economy. More than 412 mn people in its billion-plus population have no access to electricity. Those who have electricity experience major power cuts. The government typically identifies the site for these ultra-mega power projects, obtains land, environmental clearances and water for the project, which is then put up for open bidding by private and foreign groups. Bidding has been intensive, mostly by Indian private sector groups. The government has so far awarded two such projects and is close to announcing the winner of the third.

World Bank, ADB in race for funding Himachal Hydro Projects

November 10, 2007. A six member team of World Bank executives showed renewed interest in funding hydro projects in Himachal, even as agreements for funding the 412 MW Rampur project by Satluj Jal Vidyut Nigam, a Himachal government and India government joint venture company, have just firmed up. The team members included Judith Plummer, Darwil Field, Assendro (Dam Safety Expert), UB Reddy, Tapas Paul and Rohit Mittal. Having failed to secure state equity in the 2100 MW Parbati projects and the 800 MW Kol Dam project being executed by National Hydroelectric Power Corp (NHPC) and National Thermal Power Corp (NTPC), the state has floated its own entity Himachal Power Corporation and have been allotted the 402 MW Shong-Tong Karchham, 243 MW Kashang and the 100 MW Sainj projects for execution. On recommendation of the union ministry of power, the Asian Development Bank has already agreed to fund the three projects. Government sources revealed the World Bank has put a competitive financing offer to fund the same projects.

Coal blocks to power Andhra firms

November 9, 2007. The latest allotment of coal blocks by the coal ministry provides a further boost to Andhra companies, which have been eyeing a pan-India presence in the power sector. Of the 31 companies that were issued letters of allotment, four are from the state viz., GVK, GMR Energy, Lanco and Navabharat Power. Together, they gave proposed to develop a 3,540 MW capacity based on the present allotment of coal, in the next 3-4 years. GVK (Goindwal Sahib) Limited, which has been given the Seregarh coal block in Jharkhand on a shared basis along with Mittal Steel Limited, has proposed to set up a 540 MW plant, while the other three have been allotted Rampia and Dipside of Rampia coal block in Orissa to set up a 1,000 MW plant each. The investment by these companies is expected to be around Rs 4.5 crore ($1.1mn) per MW.

Reliance Power bags Andhra mega project

November 9, 2007. This is the second ultra mega power project of 4,000 MW for company.  Reliance Power has bagged the Krishnapatnam ultra mega power project (UMPP) by bidding to supply power at an average of Rs 2.33 per unit.  Krishnapatnam, in Andhra Pradesh, is the third in the line of nine such 4,000 MW projects conceived by the government to fast-track power capacity addition.  This was much lower than the other two bids received, from Larsen & Toubro (which bid Rs 2.68 per unit) and Sterlite (which bid Rs 4.18 per unit). This is the second ultra mega power project of 4,000 MW for Reliance Power, an Anil Dhirubhai Ambani group company, which is also constructing the Sasan ultra mega power plant in Madhya Pradesh. While Krishnapatnam is based on imported coal, Sasan is a pithead coal project. The other imported coal based ultra mega project located at Mundra in Gujarat is being built by Tata Power. The unit price quoted by Reliance for the Rs 16,000 crore ($4bn) project is only marginally higher than Tata's winning bid of Rs 2.26 per unit for the Mundra project last year, though international coal prices have gone up over 60 per cent during the period.

Uttarakhand hydel project commissioning delayed

November 8, 2007. The commissioning of the 304 MW Maneri Bhali phase-II hydel project in Uttarkashi district, being constructed by state-run Uttarkhand Jal Vidyut Nigam Ltd (UJVNL), has been delayed for a few more days. The run-of-the-river project, scheduled to be completed before November 9, is now expected to be commissioned by the month end. Being built on the river Bhagirathi, the project, which was revived in 2002, was scheduled to be commissioned in three years time. But it mired into controversies like alleged financial irregularities thus delaying the commissioning further. For the construction of the project, UJVNL took a loan of Rs 1,200 crores ($305mn) from the Power Finance Commission (PFC). The project, which has four units of 76 MW each, will have 16-km-long diversion tunnel for which a barrage has also been built. The civil work of the project is being carried out by the state irrigation department. The project ran into fresh controversy lately when it was found that it would submerge vast areas of Joshiyara and Gyansu.

All units of Omkareshwar starts production

November 7, 2007. The last unit of Omkareshwar Project has been successfully synchronised with the grid on November 5. Construction of this project was started in October 2003 and has been completed within a record period of four years creating history in Hydropower sector. This unit shall be declared for commercial generation of power, shortly. The first unit of Omkareshwar Project was synchronised on July 21, 2007 and still date the Omkareshwar Project has produced 251 mn units of power. The power generated from Omkareshwar Project is being supplied to the state if Madhya Pradesh.

Group captive power plants find takers

November 8, 2007. Two years after the policy for group captive power plants came into being, some action has started with companies like Wartsila and KSK Energy setting up plants for a group of industrial consumers. Industrial consumer segment is growing at a fast pace, which does not want to depend on state electricity utilities for its power needs because they are expensive and unreliable. Hyderabad-based KSK Energy, which already has 58 MW and 135 MW group captive plants in Tamil Nadu and Rajasthan respectively, is also setting up a coal-based 450 MW group captive plant at Wardha in Maharashtra. For this purpose, KSK has set up a special purpose vehicle (SPV), Wardha Power Company Pvt Ltd (WPCPL). The power produced would be consumed by companies like Chemplast, Brakes India and Laxmi Mills, among others.

Railways partner NTPC for captive power plant

November 7, 2007. Indian Railways entered into a joint venture agreement with the National Thermal Power Corporation (NTPC) for setting up a 1,000 MW captive power plant at Nabinagar in Bihar, a move that can help the railways save Rs 400-600 crore ($102-153mn) annually on power purchase from state electricity boards. The joint venture was signed in the presence of Railway Minister Lalu Prasad and Power Minister Sushil Kumar Shinde at Rail Bhawan. The railway minister assured that the company would provide 10 per cent of the power generated from it to the state. Named as Bharatiya Rail Bijlee Company (BRBC) Ltd, the power plant is estimated to cost Rs 1,605 crore ($408.5mn). The NTPC will have an equity of Rs 1,188 crore ($302mn) (74 per cent) and the railways will contribute the balance Rs 417 crore ($106mn) (26 per cent) in the project. The average cost of power generation from this plant will be Rs 2.13 per unit. After paying wheeling and transmission charges the railways would save between Rs 400-600 crores ($102-153mn) every year. The electricity from this plant will be utilised for 164 traction sub-stations located in eastern and western region of Indian Railways.

PTC to secure 15 MT coal per annum

November 7, 2007. Power Trading Corporation (PTC) has plans to source around 15 mtpa from Australia, Indonesia as well as Africa. The company is also in the process of finalising a deal to float a financial arm for itself. The proposed company will be a non-banking finance company, for which the license from RBI has already been received. The company would invest Rs 300 crore ($76.4mn) for its 60% stake, while the two partners would hold 20% share each in the to-be-formed venture.

Sterlite Industries to enter power generation business

November 7, 2007. Sterlite Industries Ltd intends to participate in coal-based power generation projects and other ancillary activities through its subsidiary, Sterlite Energy Ltd. These projects may include ultra-mega power projects announced by federal and state governments or state-run utilities, and projects independently developed by Sterlite Energy with a capacity of 10,000 MW. The company is looking at financing options through equity and debt for these projects, majority of which, if awarded, are expected to be commissioned over the next five years.

Transmission / Distribution / Trade

REL lines up $1bn capex in Orissa

November 13, 2007. The three Reliance Energy (REL) controlled power distribution companies (distcos) in Orissa have proposed to spend Rs 4,065.65 crore ($1.03bn) in the next five years, according to their business plans submitted to the Orissa Electricity Regulatory Commission (OERC) recently. The three distribution companies are Wesco, Nesco and Southco, whose nomenclature is based on their areas of operation such as western, northern and southern parts of the state. Of the total outlay, Wesco plans to spend Rs 1,282.05 crore ($325mn), while the expenses proposed by Nesco and Southco are pegged at Rs 1,509.54 and 1,274.06 crore  ($383 -323mn) respectively.

The money will mainly meet the load growth across consumer categories, so as to reduce the losses, increase efficiency and productivity, augment /replace /retrofit old/obsolete/under-rated equipment, meet environmental, safety, regulatory and other statutory requirements, purchase routine tools and equipment and other miscellaneous expenditure of capital nature. The infrastructure upgradation includes increasing the 33 kV and 11 kV lines to bring down LT/HT line ratio and implementation of HVDS, increasing 33 kV substations to improve voltage levels and extend reach areas, installation of breaker on 33 KV and 11 KV side, DTR metering and consumer indexing to support energy audit, rural electrification works under Rajiv Gandhi Gramin Vidyut Yojana (RGGVY) and automation of processes by IT intervention in technical and commercial areas.

Power Grid readies $1.5bn tender for transmission

November 12, 2007. India’s plans of building a transmission capacity that can move power from the North-Eastern part of the country and Bhutan to other parts where it is needed are set to take off with Power Grid Corp. of India Ltd (PGCIL) getting ready to place its first order for the project. Power Grid, the state-owned transmission utility, is preparing to float Rs 6,000 crore ($1.5bn) tender for high-voltage direct current lines, in the first phase. The project, when complete, will move 46,000 MW of power, it will require an investment of Rs 46,000 crore. The project will move power or evacuate it as this is called from the National Hydroelectric Power Corp. Ltd’s project at Subansiri on the Assam-Arunachal Pradesh border. The North-East and Bhutan have the potential to generate a significant amount of power through hydroelectric projects.

Areva to invest $25mn in Chennai unit

November 07, 2007. Areva T&D, a power transmission and distribution (T&D) company, will invest Rs100 crore ($25.5mn) in setting up a manufacturing unit for high voltage products at Padappai near Chennai. The expansion comes close on the heels of addressing the need in the extra high voltage transmission network of 765 kv and growing demand for gas insulated switchgears (GIS) and disconnectors, according to Rathin Basu, country president, Areva T&D India.

The new unit, which will manufacture high voltage circuit breakers up to 765 kv and later 1,200 kv, GIS products and disconnectors, is expected to become operational by January 2009. This strategic move highlights Areva’s T&D technical competence and market consolidation plans in the high voltage product line.

Policy / Performance

States told to manage rural power distribution through franchisees

November 13, 2007. To make its rural electrification programme viable, the Central Government has made it mandatory for states to manage rural distribution through franchisees. The proposal for rural franchisees, involving locals, has been mooted due to the stress in collecting money from rural consumers. The scheme has been initiated under the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), the government’s flagship rural electrification programme. Franchisees, which could be non-governmental organisations, user associations, co-operatives, individual entrepreneurs or panchayats, would be involved in meter-reading, preparation and distribution of bills, and collections.

Franchisees are not licencees but have a legal contract with the utility. The scheme would bring down not only power theft but also material theft, which would lower transmission and distribution losses. If states are able to increase their rural collections from 20-30 per cent at present to 50 per cent by giving 10 per cent commission to franchisees, there is no reason for them to find the scheme unattractive. Under the plan, once the scheme gains traction, franchisees would evolve into power distributors they would be given measured power by state utilities for distribution to consumers at a fixed rate. The franchisees, in return, will pay a commission to the utility. The fracnhisee system had been finalised to ensure that the huge money invested through the RGGVY did not go waste.

Orissa poised to be country’s powerhouse

November 10, 2007. Orissa, expected to manufacture 70 mtpa of the projected 124.6 mtpa of steel by 2011-12, is also poised to become the country’s power house in the next few years. Orissa had already signed MoUs with 13 power utilities including Tata Power, Visa Power, CESC, Essar Power for generation of 11,000 MW of power.

Nearly Rs 60,000 crore would be invested in the 13 projects. According to the minister, besides the 13 companies, NTPC had also planned to set up two ultra mega power stations in the state which would generate 4,000 MW of power each. NTPC had also plans to set up another unit which would generate 3,200 MW through coalfiring.  The government is interested to set up more and more mini and small hydel power units as they are considered clean energy. The minister, however, admitted that though Orissa was projected as a power surplus state in terms of generation it faced peak deficit of 2.1 per cent from April to August, 2007. 

Cabinet likely to consider SPV for stake in foreign mines

November 8, 2007. The Union Cabinet is likely to consider a special purpose vehicle (SPV) proposed by leading public sector utilities in the country to acquire stake in overseas coal mines for meeting the growing production needs. The Union Cabinet is likely to deliberate on the SPV formed by CIL, NTPC, RINL, SAIL and NMDC. The proposed SPV will have an initial capital base of Rs 3,500 crore which will eventually go up to Rs 10,000 crore. Steel Authority of India Ltd (SAIL), Rashtriya Ispat Nigam Ltd (RINL), Coal India Ltd (CIL), NMDC Ltd and NTPC Ltd have joined hands to source coal from abroad, especially Australia and Canada, to increase their output. SAIL and CIL have decided to pump in Rs 1,000 crore each for the proposed SPV, while NTPC, RINL and NMDC will invest Rs 500 crore each. Initially the SPV would function as an unincorporated company and after short listing coal properties abroad, they would jointly launch a formal company. The SPV will have a three-tier decision making body. It will have an apex committee comprising the chiefs of the participating companies besides a steering committee formed of functional directors of these companies. In the proposed SPV there will be a joint business development group comprising handpicked officers who would carry out due diligence on investment opportunities in overseas coal mines. The SPV would explore the possibilities of full acquisition of coal mines and buying out stake in existing coal mines, besides exploring joint ventures with smaller companies who have mining leases but are unable to mine due to lack of technical expertise. The SPV could explore the possibility of raising resources in through debt and equity (2:1).

‘60 mn Indians still without power by 2030’: IEA

November 7, 2007. According to IEA, by 2030 around 60 million Indians could still be without power as the nation's electrification drive lags its economic development. India needed to invest $1.25 trillion in energy infrastructure by 2030 and that more than three quarters of this investment should be in power infrastructure. Attracting investment in a timely manner will be essential if economic growth is to be sustained. To date some 412 mn people have no access to electricity in India. By 2030, that should fall to nearly 60 mn as the electrification rate rises to 96 percent from 62 percent in 2005, according to the IEA's reference scenario, or most likely energy forecast. Only in its high growth scenario would all households have access to electricity. According to its reference scenario, total electricity generation in India reached 699 terawatt hours in 2005 and rises to 2,774 terawatt hours in 2030. Per capita electricity generation at 639 kilowatt hours in 2005 was more than four times lower than the world average and comparable with that of Vietnam and Mozambique. Coal, which produces high volumes of carbon emissions, is the dominant fuel in India's electricity generation, accounting for more than two thirds of total electricity produced and heavy dependence is forecast to continue. To make matters worse, India's coal-fired plants are among the least efficient in the world, although efficiency rates are expected to improve and India has joined international efforts to speed up the development of carbon capture and storage techologies. It is also seeking to develop nuclear generation, which does not result in any carbon emissions, and has an ambitious target of raising nuclear generation capacity to 20 gigawatts by 2020 and 40 gigawatts by 2030. Earlier targets for nuclear generation have not been met.

Regulator proposes penalty for power overdrawal

November 12, 2007. The Central Electricity Regulatory Commission (CERC) has proposed a congestion charge on states of the northern region resorting to overdrawing power from the newly interconnected central grid. Instances of overdrawing of power, beyond allocated share of respective states, from the grid are reported to be highest among constituents of the northern grid. The congestion charge would be 300 paise per unit for overdrawal, underdrawal as well as over or under injection for all grid constituents of the northern region. This would be added to the notified frequency-linked unscheduled interchange rate prevailing from time to time. The order would be effective November 19, and would remain in force for three months.

Exclusive police stations for power thieves

November 09, 2007.  The Assam government will set up 20 police stations across the state by January next year to check rampant power theft even as the administration is determined to introduce digital meters which had evoked protests earlier. The new police stations would only monitor and stop power theft, which led to an overall loss of Rs 55 crore to the Assam State Electricity Board. The Cabinet had already approved setting up of the new police stations.  The introduction of the new digital meters has evoked protests from power consumers, consumer fora and some political parties claiming they were faulty. However, according to ASEB the new meters were tamper- proof and accurate. Unlike the existing electro-magnetic meters, digital meters are very sensitive and can record from very low to very high consumption accurately. To emphasise the credibility of digital meters both domestic and commercial meters carried BIS (Bureau of Indian Standards) certification.

Mahavitaran detects power theft at ADAG

November 8, 2007. Mahavitaran, the Maharashtra government-owned power distribution company, has detected power theft amounting to Rs 41.29 lakh at the Anil Dhirubhai Ambani Group’s headquarters at the Dhirubhai Ambani Knowledge City (DAKC). Mahavitaran has registered a first information report (FIR) against three electrical contractors for the power theft at a police station in Kalyan which has been created exclusively for dealing with power thefts.  Mahavitaran’s official found that power is being drawn in the DAKC from an unauthorised underground cable from the 320 KVA sub-station of the Mahavitaran in the Mhape industrial area. Mahavitaran later has served a bill of Rs 41.29 lakh on Reliance Infocom Infrastructure Pvt. Ltd for the periodbetween May 15 to November 6,   2007.  The company has also been slapped with a Rs 50 lakh fine.




Oil's big 5 spending less on exploration

November 13, 2007. The Big 5 of the oil business are spending less on exploration despite being flush with cash, a new study has found. The five ExxonMobil, Royal Dutch Shell, BP, Chevron and ConocoPhillips spent less in real terms on exploration compared to the early 1990s, despite a four-fold increase in operating cash flows. The trend puts the companies' long-term oil reserves at risk. Interestingly, the study based on an analysis of the Big 5, the next 20 largest US oil firms and the state-owned national oil companies (NOCs), found that second-tier oil companies are spending more on exploration, auguring well for their future oil reserves. According to the study, the Big 5 spent 56 per cent of their cash flow on share repurchases and dividends, a move that will help investors in the short term but could impact their future reserves. State-owned monopolies, or the national oil companies, represent the top 10 oil reserve holders internationally. By comparison, ExxonMobil, BP, Chevron and Royal Dutch Shell are ranked 14th, 17th, 19th and 25th, respectively. The Big 5 are still among the largest oil and gas producers globally and have achieved a much higher return on capital than national oil companies of similar size.

Deevelopment in Pakistan’s Sawan gas field

November 13, 2007. A compressor station is scheduled to be commissioned in first-quarter 2010 at the Sawan gas field in Sindh Province, in the central Indus basin 500km from Karachi. OMV (Pakistan) Exploration GMBH has awarded a US$100mn contract to ABB Process Solutions & Services SPA to install the compression facility. The compressor station is scheduled to be commissioned in first-quarter 2010. Sawan field partners are OMV 19.74%, Pakistan Petroleum Ltd. 26.18%, Eni AEP Ltd. 23.68%, Government Holdings Private Ltd. 22.5%, and Moravske Naftove Doly AS 7.9%.

PDVSA, CNPC joint venture to develop Sumano oil field

November 13, 2007. According to China National Petroleum Corp (CNPC), the government of Venezuela has granted oil exploration rights in the Sumano field to its joint venture with state-owned Petroleos de Venezuela SA (PDVSA). CNPC will take a 40% interest in any commercial production in the oil block. CNPC and PDVSA will also set up a joint venture soon to develop two oil blocks in Venezuela's Orinoco oil field.

In August last year, China and Venezuela signed a series of oil development deals during Venezuelan President Hugo Chavez's visit to China. One of the agreements was for CNPC to team up with PDVSA to set up a joint venture to develop a bloc in the Junin area of the Venezuelan Orinoco oil field. According to the other agreement, the two companies will jointly explore an oil field in Venezuela's Sumano region. Venezuela exported 150,000 barrels a day to China in 2006.

PetroChina reports oil find in Qaidam Basin

November 13, 2007. PetroChina Co Ltd, the country's top oil and gas producer, has reported an oil find in the Qaidam Basin in northwestern China. The Qie-6 Well has a daily oil flow of 386,000 cubic meters at a depth of 2,134 meters. Earlier, state media reported that PetroChina plans to invest 240 mn yuan in exploration technology in a bid to boost oil and gas output from the Basin. The project aims to boost annual crude oil output to over 2 mn tons and natural gas output of 7 bcm in the coming years. PetroChina's Qinghai oil field, the main field in the Qaidam Basin, is expected to have natural gas output of 3.77 bln cubic meters this year, up from 2.53 bcm a year earlier. 

OPEC Pumps 31.11 mbpd in October

November 13, 2007.  As per the Platts survey, in November 13, the 12 members of the Organization of Petroleum Exporting Countries (OPEC) pumped an average 31.11 million barrels per day (b/d) of crude oil in October, or a 350,000 b/d increase from September, largely on higher volumes from Saudi Arabia and Iraq. Output from the ten members which participate in production pacts rose by 210,000 b/d to 27.08 million b/d, to within 173,000 b/d of the new 27.253 million b/d official target which became effective at the beginning of November. The biggest increases came from Saudi Arabia and Iraq, where output rose 100,000 b/d to 8.8 million b/d and by 110,000 b/d to 2.28 million b/d, respectively. The latter production up tick was largely due to higher exports from the Turkish Mediterranean port Ceyhan. Angolan output continued its steady climb towards the 2.0 million b/d it is targeting by the end of this year as new production came on stream. Nigerian volumes, still constrained by the ongoing strife in the key Niger Delta producing region, edged up slightly to 2.19 million b/d. Neither Angola, which joined OPEC in January 2007, nor Iraq participates in OPEC output agreements, though Angola is expected to join the quota system at the beginning of 2008. US light crude futures traded at a record $98.62/barrel on November 7 and top oil consuming countries have been calling for more oil from OPEC, which continues to insist that there is no shortage of crude oil in world markets and that the high oil prices are being driven by factors beyond supply and demand.

Petrobras sees Tupi peak production in 10-15 years

November 12, 2007.  Brazil's state-run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, anticipates that the hydrocarbon production at its key Tupi oilfield will peak in 10-15 years. Peak production at Tupi will very likely be over 200,000 barrels of oil equivalent a day at that point. Petrobras estimates the recoverable volume of oil and gas at the ultra-deep Santos Basin Tupi field at between 5 bn and 8 bn BOE. Petrobras is Tupi's leading field operator with a 65% stake, and U.K. energy company BG Group PLC holds another 25% of the field. The remaining 10% stake is controlled by Portugal's Galp Energia SGPS SA. Petrobras also expects to get indications on the size of possible reserves in blocks BM-S-9 and BM-S-10 in waters close to Tupi over the next few months. The size of Tupi's reserves surprised analysts, as it doubles earlier estimates. Last week, Petrobras said it's targeting a daily production of 100,000 BOE at Tupi, in a so-called pilot platform, by 2010-2011.

Kurdistan signs five more petroleum contracts

November 12, 2007.  Following the unanimous decisions of the Regional Oil and Gas Council of the Kurdistan Regional Government (KRG) at its second and third meetings, the KRG Minister for Natural Resources, announced that the five production sharing contracts (PSCs) previously approved by the Council have been signed by the KRG with TNK-BP affiliate Norbest Limited, with a Korean consortium headed by Korean state-owned oil company KNOC, with Hillwood International Energy company HKN Energy, and with subsidiaries of UK-listed Sterling Energy LLC and Denver-based Aspect Energy LLC. These five PSCs are yet another clear expression of confidence in the strength and stability of the Kurdistan Region and they produce very comprehensive returns for the people of Iraq. The Council had approved these contracts at its earlier meetings.

Shell announces Brunei offshore gas find

November 12, 2007. Brunei Shell Petroleum Company Sdn Bhd (BSP) announced the discovery of gas in the Bubut structure. The Bubut structure is located just 7 kilometers from the shoreline and only 15 kilometers from the Brunei LNG (BLNG) plant. According to BSP, well logs that were run and hydrocarbon samples taken have confirmed the latest gas findings. The exploration well was drilled by the Deep Driller 2 jackup in deep, high-pressure sand reservoirs. The additional appraisal work will be conducted in both fields to define the full potential. A development team has been put in-place to prepare an integrated field development proposal for early production directly into the BLNG plant.

Pryme discovers oil in saline point project

November 9, 2007. Pryme Oil and Gas says that the second test in the Saline Point oil exploration project reached its target depth of 5,100 feet overnight resulting in the discovery of our primary oil objective in the Middle-Wilcox sequence. Core samples were taken and analyzed to confirm the well log reading and presence of commercial quantities of oil between shale with no water contact evident, several other oil shows were present, and will require additional drilling to test. The election was made to run production casing and complete the well, which will begin immediately with first oil expected to be sold by year's end. This project is located in the southern portion of Catahoula Lake in LaSalle Parish, Louisiana. The project is targeting in excess of 2 mn barrels of oil from the upper sands of the Wilcox formation and is located near Catahoula Lake and South Catahoula Lake fields, which are prolific, oil producing regions. Pryme has a 26.96% working interest (20.22% net revenue interest) in this project. Drilling of the first group of Frio objective wells in the Turner Bayou 3D seismic project and second Raven project well is expected to begin later this month as planned and outlined in the drilling timetable enclosed in this announcement.

CNOOC aims to double output from Bohai field

November 8, 2007. Cnooc Ltd. aims to double oil and gas output from its largest field shortly after 2010 due to continuous discoveries of rich reserves. Output from the Bohai field, located in northern China's Bohai Bay, will likely reach 30 mcm of oil equivalent after 2010, compared with 15.6 mcm 2006, China National Offshore Oil Corp. Cnooc this year discovered geological oil and gas reserves of 220 mcm of oil equivalent in Bohai Bay, stable compared with its finds of 200 mcm of oil and 1.5 bcm of natural gas reserves in 2005. Cnooc expects to continue discovering reserves of 150 mcm to 200 mcm of oil equivalent each year through 2010. Cnooc will mainly rely on its own exploration capacity to reach the target. Its exploration technology is maturing following the discovery of rich oil blocks in the region, including Jinzhou 25-1, Bozhong 26-3, Bozhong 28-2 and Kenli 20-1 so far this year.

Knight energy begins gas production at Jackson Property

November 8, 2007. Knight Energy has commenced production on its Jackson Property natural gas well located on its 160-acre property in Stephens County, Texas. The Jackson #1 Well has been producing high quality natural gas for the last week and has been averaging in excess of 300 mcf of gas per day. Knight Energy plans to drill additional wells on this property in the near future. Knight Energy is also drilling additional wells on some of its other properties, and it expects to announce the results of these efforts in the near future. Knight Energy Corp. was formed in March 2006 for the purpose of operating and developing energy related businesses and assets. Shortly thereafter, Knight acquired an independent oil and gas services company, Charles Hill Drilling, Inc., which owned a 100% working interest in a 160-acre oil and gas lease in Stephens County, Texas, a drilling rig and other oil and gas equipment. The Company has leased an additional 400 acres that run contiguous to its 160-acre lease, and it has the right of first refusal on approximately 3,100 more acres in the same area.


Pakistan, UAE sign oil refinery deal

November 13, 2007. Pakistan and the United Arab Emirates signed a US$5 bn agreement to build an oil refinery near the port city of Karachi. The memorandum of understanding signalled Pakistan's biggest-ever foreign investment. The oil refinery is to be built at Khalifa Point in southern Baluchistan province, near Karachi. It would handle 200,000 to 300,000 barrels a day under a joint arrangement between Abu Dhabi's state-managed International Petroleum Investment Company (IPIC) and Pakistan's Pak Arab Refinery Limited (PARC). The Khalifa refinery would meet domestic demand and cater to the international market, while its construction and operation, including allied infrastructure projects, would create thousands of jobs. Under the agreement, IPIC would take a 74 percent stake in the refinery, with Pakistan's PARC holding the remaining 26 percent. The signing took place in the midst of a political crisis in Pakistan after President Pervez Musharraf declared a state of emergency.

Petrobras moves into Asia with Japan refinery acquisition

November 12, 2007.   Petrobras signed the purchase document (share sale and purchase agreement) to acquire an 87.5% interest in the Japanese company Nansei Sekiyu Kabushiki Kaisha (NSS) for approximately US$50 mn from TonenGeneral Sekiyu Kabushiki Kaisha (TGSK), which is a subsidiary of ExxonMobil. In addition to TonenGeneral, Sumitomo is an NSS shareholder and will retain its 12.5% stake. The acquisition includes a refinery with a 100,000-bpd capacity. The facility processes light crude oil and high-quality products and includes a crude oil and products terminal with a storage capacity of 9.6 mn barrels, three piers with capacity to receive product vessels of up to 97,000 deadweight tonnage (dwt), and a mono buoy for very large crude vessels (VLCC) of up to 280,000 dwt. It is planned the use of terminal capacity in order to boost the commercialization of biofuels in Japan and other Asian markets and complement current trading of crude oil and products into Asian market of approximately 100,000 bpd.

Kuwait to receive bids for new refinery in December

November 12, 2007. Kuwait, the fourth largest oil producer in the Middle East, will receive bids from contractors in December to build a new refinery. Companies have time until December 16 to submit their proposals for the 615,000-barrel-a-day refinery to be located at Al-Zour. KNPC recently held a contractors' meeting in Houston to present potential bidders with contractual details and to stress the need to stick with the project's schedule. The refinery, Kuwait's fourth, is due to start operating in 2011. Al-Zour is planned to produce low-sulfur fuel oil for the country's power plants. The country's existing three refineries have capacity to process about 900,000 b/d of crude oil.

Abu Dhabi plans $5bn refinery in Pakistan

November 12, 2007. Abu Dhabi government will set up a $5 bn Khalifa Coastal Refinery (KCR) in Pakistan, the largest single foreign direct investment (FDI) ever made in Pakistan. A delegation from the Abu Dhabi International Petroleum Investment Company (IPIC), led by UAE Minister of Energy, will sign an agreement in Islamabad with the Ministry of Petroleum and Energy Resources.. Last year, FDI from the UAE into Pakistan stood at $800 mn out of a total $8 bn received worldwide. This is also the largest investment in the oil and gas sector in Pakistan. The UAE was also the single largest contributor of FDI in 2005-06, with total investments standing at $1.6 bn. The IPIC will hold a 76% stake in the project, while the Pak-Arab Refinery Company will have 24% in the crude oil refinery company Khalifa Coastal Refinery (KCR). IPIC is the Abu Dhabi government’s enterprise responsible for foreign investments in the oil and chemical industries. The KCR will be built at a strategic location along the coast of the Arabian Sea near Hub in Balochistan province of Pakistan. Construction of the mammoth project is expected to start in January next year. Production is slated to start in December 2012. The refinery will have the capacity to produce around 100,000 barrels of diesel per day and around 35 to 45 mn barrels a year.

CNPC to acquire stake in Malaysia refinery

November 9, 2007. China National Petroleum Corp, will acquire a stake in a new Malaysian oil refinery in the northern state of Kedah. The purchase should boost the viability of the project taken by a little-known company, Merapoh Resources Sdn Bhd. There were no details given on the size of the stake CNPC will buy and for how much. Merapoh, which is building the 200,000-barrels-per-day refinery, provisionally agreed last month to sell its entire production to CNPC under a 20-year agreement from 2013. Merapoh will sign an agreement on November 22 with CNPC in Beijing to form a joint venture and secure the supply deal.

Group seeks Nigerian liquefaction plant projects

November 8, 2007. British Gas subsidiary Centrica PLC, Windsor, UK; StatoilHydro ASA, Stavanger, Norway; and Consolidated Contractors Co. (CCC), Riyadh, Saudi Arabia, signed a memorandum of understanding November 7 agreeing to spend $10 mn to investigate building liquefaction plants in Nigeria. Over the next 18 months, the partners will examine possible LNG plant locations, including feed gas potential, the existence of local support facilities, and end markets. The MOU allows the group to extend the period if they wish. StatoilHydro and Centrica each will take a 37.5% interest in the consortium, with CCC holding 25%. Centrica will drill exploratory wells in its offshore-onshore Block 276 in 2008. It has two exploration licenses in Nigeria, and it is looking for new sources of gas for its British Gas, European, and North American customers. StatoilHydro operates two deepwater licenses off Nigeria viz., OML 128 and 129, where the Nnwa gas discovery lies. It also is partner in five other deepwater licenses, including Agbami oil field.

China orders state refiners to produce more fuel

November 7, 2007. China continues to show growing signs of stress from oil's seemingly unstoppable surge toward $100, with the government ordering oil companies in recent days to make more fuel following last week's rare increase in fuel prices. The November 1 price hike, the first in 17 months, raised China's state-set fuel prices nearly 10%. The surprise move was designed to ease shortages that resulted from slowing production by Chinese oil refiners, who purchase oil at global prices but must sell it at the pump at the much lower state-set prices. In the wake of the hike, the National Development and Reform Commission, China's top economic policy maker, told the two main state-owned refiners earlier this week to take several additional measures, from refining more fuel to delaying maintenance or increasing fuel imports. While the government's moves appear to have had some impact - some gas station managers say they're starting to see more supply, and no longer need to ration, the steady march of global oil prices is already fueling pressure on Beijing to raise prices again. China's booming demand for oil, as well as that of other increasingly rich Asian countries like India, is a key factor underpinning oil's rising price. Sinopec is especially vulnerable to the effects of China's price controls because its buys most of the oil it refines from other companies. For the past two years, the government has given the company end-of-year subsidies to make up for the losses Sinopec incurs. China's biggest oil and gas producer and No. 2 refiner, China National Petroleum Corp, parent of listed PetroChina Corp, produces most of its own crude, but it has also felt the squeeze. Not only does the government tightly control pump prices, but it has so far severely restricted companies' ability to hedge market risk by buying oil futures.

Rising costs delaying new refinery projects

November 7, 2007. Energy companies are delaying new refinery and petrochemcial projects due to sharply increasing costs for key supplies, according to CERA report. The report also pointed to sharp increases in costs related to oil and gas exploration and production. As global energy markets focus on the increasing likelihood that oil will breach $100 a barrel, analysts have spotlighted rising capital costs as a constraint on the global energy industry's ability to approve and construct projects to boost supply. According to CERA, in its report on refining and petrochemicals, lead times for more sophisticated equipment have increased up to 50% in the last 6-12 months. Overall, the analysis shows that a piece of refining equipment that would have cost $100 in 2000 would cost $166 today. Energy companies have announced preliminary plans to build an additional 4% in annual new refining capacity. But CERA currently estimates the industry will add an average of only 1.7% annually in new refining capacity over the next five years, a level that Forrest described as the most optimistic case, given the trends in operating costs.

Shell to design Mariisky refinery upgrades

November 7, 2007. Under a two-phase, $1.3 bn investment program, Mariisky NPZ LLC, Mari El, Russia, will upgrade its Mariisky refinery with the support of Shell Global Solutions International BV to increase refining capacity and meet stricter European specifications. The 1.3 mtpa Mariisky refinery produces naphtha, vacuum gas oil, diesel fuels, and kerosine from crude delivered via the strategic Surgut-Polozk pipeline, which is 150 m from the refinery. The refinery's capacity will be increased to more than 4 mtpa following the expansion. Under the Phase 1 expansion, expected to cost about $ 1bn, Mariisky plans to expand crude distillation capacity by adding a crude distillation unit (CDU), a high vacuum unit (HVU), a solvent deasphalting unit (SDA), and a hydrocracker (HCU), which will maximize kerosene and diesel production. The parties agreed that Shell will supply the basic design packages and licenses for the CDU, HVU, and HCU units. Design work is expected to be finished in September 2008.

Transportation / Trade

Williams Completes Mid-Atlantic Expansion

November 13, 2007. Williams has placed an expansion of its Transco natural gas pipeline system into service, increasing firm transportation capacity into the greater Washington, D.C. and Baltimore, Md., metropolitan areas by 165,000 dekatherms per day. The expansion required adding approximately 16.5 miles of 42-inch pipe in Pittsylvania and Campbell counties, Va. In addition, the company replaced approximately 3.5 miles of pipe in Fairfax County, Va. The Transco pipeline is a 10,500-mile pipeline system that transports natural gas to markets throughout the northeastern and southeastern United States. This expansion increases the total system capacity of the Transco pipeline to approximately 8.3 bcf per day.

Cheniere holds open season on proposed La. Natural Gas Header

November 12, 2007. Cheniere Energy Partners, L.P. is holding a non-binding open season for a proposed new natural gas transportation project called the Louisiana Natural Gas Header. The project would link growing demand markets in the Southeast with new incremental natural gas supplies sourced from multiple LNG import terminals existing and under construction in and around Louisiana. The Louisiana Natural Gas Header would also be able to interconnect with existing pipeline infrastructure, providing shippers with access to wellhead natural gas supply sources, including offshore, onshore conventional and recently developed unconventional resources. The pipeline would involve the construction of approximately 330 miles of up to 42-inch diameter pipeline commencing at a point in Beauregard Parish near Dequincy, La., to a point of interconnect with the Florida Gas Transmission pipeline near its Station 11 in Mobile County, Ala. Cheniere anticipates that the project could be placed into service as early as mid-2010. By 2010, nearly 10 Bcf/d of LNG regasification capacity will be placed into service in Southwest Louisiana and neighboring Southeast Texas. Combining new incremental supply with traditional production area access, the Louisiana Natural Gas Header will offer shippers supply diversity unlike any other greenfield project opportunity.

UAE energy company invites tender for gas pipeline

November 12, 2007. Dolphin Energy of the United Arab Emirates (UAE) has issued an invitation to tender for the design and construction of a gas pipeline project in the Mideast country. According to the report, the pipeline will link Dolphin Energy's gas receiving facilities on the coast of Abu Dhabi, the UAE's largest emirate, with a power and water desalination plant in Fujairah, an emirate on the eastern coast of the country. With a length of more than 240 km, the pipeline will be one of the longest and largest overland pipelines in the UAE. Bids for the pipeline project will be due by Jan. 31, 2008. The award is likely to be made during the summer of 2008, with site work expected to begin in the third quarter of 2008. Established in March 1999, Dolphin Energy is owned 51 percent by Mubadala Development Company on behalf of the government of Abu Dhabi, and 24.5 percent each by Total of France and Occidental Petroleum of the United States.

Iran, Pakistan finalize gas export contract

November 12, 2007. Iran and Pakistan have finalized a contract for a multi-billion-dollar gas export deal scheduled to be signed within a month. The content of the Peace Pipeline contract has been finalized and all the points prepared by the two sides' legal experts have been re-read and agreed by the two sides. Tehran and Islamabad have neared a conclusion to the contract in the absence of India, a potential party to the deal. Talks on the US$7.4 bn project to supply gas to India through a 2,600-kilometer (1,615-mile) pipeline began in 1994 but were stalled by tensions between India and Pakistan. The pricing formula, pushed by Iran, will be flexible based on the international market situation. India has come under US pressure to pull out of the project, as part of Washington's drive to sanction Iran for its refusal to bow to international demands to suspend its nuclear program. Iran is determined to push ahead with the plan to pipe gas to India via Pakistan but that a major sticking point has been over how much New Delhi should pay Pakistan in transit fees. Tehran vowed to quote India the same fees as those it offered Pakistan. The project is slated to be commissioned by the end of 2013. India, which imports more than 70 percent of its energy needs, has been racing to secure new supplies of oil and gas besides ramping up production from domestic sources to sustain economic growth. If India joins the project, Pakistan, with a growing energy consumption market, will both receive gas and be paid by India for the transportation and transit fees.

National fuel proposes $700mn gas pipeline

November 12, 2007. National Fuel Gas Co., seeking to capitalize on the growing demand for natural gas along the East Coast, is proposing to build a roughly $700 mn pipeline that would stretch for 324 miles from southeastern Ohio to Corning, N.Y. The pipeline project, which would be the biggest in National Fuel's history, would carry natural gas produced in the Western United States that was shipped eastward through the Rockies Express pipeline that is expected to end in Clarington, Ohio, southwest of Pittsburgh. The proposed National Fuel pipeline, which the company is calling the West to East Project, would then link with the Rockies Express pipeline and carry gas farther east to link up with the Millennium Pipeline in Corning. The National Fuel proposal is one of about six pipeline projects that are on the drawing board to link up with the Rockies Express pipeline in Ohio and then carry natural gas to other Eastern markets.

Russia, Bulgaria sign declaration to build gas pipeline

November 8, 2007. Bulgaria's Economy and Energy Minister Petar Dimitrov signed a joint declaration with his Russian counterpart Viktor Hristenko to build a new transit gas pipeline through Bulgaria. Russia's gas giant Gazprom and Italy's ENI signed in June a deal to build the 900km (560m) gas pipeline from Russia to Italy. It will first cross the Black Sea into Bulgaria and then split in two arms, one going northwest to Austria and the other south to Greece and then west to southern Italy. The pipeline will have a capacity of 30 bcm and Dimitrov pointed out the necessity of guarantees that it will work at full capacity.

China, Kazakhstan proposed gas pipeline

November 8, 2007.   China and Kazakhstan signed an agreement in Astana outlining the principles for building and operating the China-Kazakhstan natural gas pipeline. The China National Petroleum Cooperation and the Kazakhstan National Petroleum and Natural Gas Co. signed the contract. Prior to the signing ceremony, the two sides held talks on efforts to promote bilateral cooperation in various fields, including politics, economy and trade, investment, energy, telecommunications, transportation, finance, science-technology, humanism and security.

Iraq, Iran agree to build two oil pipelines

November 8, 2007. As per Iraqi oil ministry, Iraq and Iran signed an agreement Wednesday to build two pipelines, one to export Iraq's crude oil to Iran and the other to pump oil products from Iran to Iraq. Iraqi State Company for Oil Projects signed the agreement with Iran's National Company for Construction and Development. The agreement calls for constructing an export system (pipeline) that extends from Basra oil fields in southern Iraq to Iran's Abadan (refinery). It also calls for setting up another system (pipeline) to transfer oil products from Iran to Basra. The statement did not spell out costs of the two planned pipelines, which would be between 50 kilometers to 75 kilometers length each. However, the two would be financed by a $1 bn loan granted by Tehran to Baghdad earlier this year.

Gasunie joins Nord Stream and BBL consortiums

November 7, 2007. JSC Gazprom has formally accepted NV Nederlandse Gasunie into the consortium that plans to build the 27.5 bcm per year Nord Stream pipeline to deliver Russian gas to Europe starting in 2010. Gasunie will also join the partners that developed the Dutch Balgzand Bacton Line (BBL), which started operations last year and sends gas from the Netherlands to the UK. The deal builds on a memorandum of understanding signed last October in which Gasunie expressed an interest in cooperating on Nord Stream and BBL. Under an umbrella agreement signed November 6 by both companies, Gasunie will acquire a 9% share in Nord Stream AG, with consortium members Wintershall AG and E.On Ruhrgas AG reducing their interests by 4.5% each. Gazprom also will have an option to acquire a 9% interest in BBL Co. When the deal is executed, shareholdings in Nord Stream will be Gazprom with 51% share, Wintershall and E.On Ruhrgas with 20% each, and Gasunie 9%.

Policy / Performance

Japan, China to hold gas field dispute talks

November 9, 2007. Japan and China have agreed to hold the next senior working-level talks aimed at resolving a dispute over gas exploration rights in the East China Sea. But with the two nations remaining apart on how jointly to develop the area, according to the Japanese government the agreed goal of compiling a detailed plan by the end of autumn may be postponed and replaced instead by an interim report. It will be the eleventh time the two countries have held formal discussions on the matter in the past three years. They have agreed in principle on a joint development of the disputed gas fields, but have yet to concur with each other on how and the last meeting held in October in Beijing ended without any breakthrough.

Energy secretary defends filling petroleum reserve

November 9, 2007. Oil prices are approaching what U.S. Energy Secretary Samuel Bodman calls the once-unimaginable $100 level. Gas prices are hovering above $3 a gallon on average nationwide, and the United States is calling on the OPEC countries to crank up production because of tight supplies. But conditions have not prompted the Bush administration to rethink its strategy of squirreling away oil in the nation's Strategic Petroleum Reserve. The Energy Department has signed contracts with Shell Trading Co., Sunoco Logistics and BP North America to deliver 12.3 million barrels of oil over a six-month period to the nation's emergency stockpile. The Strategic Petroleum Reserve currently contains about 695 mn barrels of oil enough crude to keep the U.S. economy running for 56 days if imports were suddenly cut off. Congress authorized the administration in 2005 to expand the reserve to 1 billion barrels. Currently, oil companies are providing about 50,000 barrels a day to the reserve, under a plan to expand the reserve by a total 8.6 mn barrels by the end of January.

‘Oil price not key to strategic tank fill’: China

November 9, 2007. According to China, Oil prices are not China's main consideration when deciding whether to pump oil into strategic reserve tanks even as crude markets restarted a drive towards the $100 watershed. Oil prices are one of the factors it considers, but they are not the key factor. International organisations have called on China to be more open with data about energy consumption and strategic reserves, to try to ward off volatility caused by speculation on the country's demand growth. Beijing only began filling the tanks last year but already has some 3 mt of crude in storage. But leaders are also nervous about a growing dependence on foreign oil, which already meets nearly half national needs, and the first fill of the tanks came around a time of then-record prices, hinting at a strong sense of urgency.

China and India urged to cut energy growth

November 7, 2007. China's and India's surging fuel consumption poses a growing challenge to the world's energy systems and, unless curbed, will strain global oil trade, push up prices and lead to substantially higher carbon dioxide emissions in coming decades, according to a report by an influential energy. The International Energy Agency, which provides policy advice to industrial nations, urged advanced economies to work with China and India to cut overall growth in energy consumption. Otherwise, runaway demand in those countries will put heavy pressure on supplies and make it impossible to achieve meaningful reductions in carbon dioxide emissions, the main culprit in global warming. Bolstered by speedy economic development and industrialization, energy demand from Asia has been one of the main contributors to higher oil prices. In the last two years, China and India accounted for about 70 percent of the increase in energy demand. Strong demand has helped push oil prices to a series of records in recent weeks. Prices are closing in on a record level, adjusted for inflation, of $101.70 a barrel in April 1980. The energy agency sees the next decade as crucial for the stability of the global energy system. Decisions made today in China and India, for example, whether to continue investment in coal-fired power plants or to adopt policies to tackle global warming will have worldwide consequences for decades. China's and India's energy use is projected to double from 2005 to 2030. By 2030, the two countries will account for nearly half the increase in global demand. Worldwide, energy consumption is to rise by about 55 percent. China and India argue that it is unfair to blame them for rising energy prices, and they have resisted calls to limit carbon emissions when their economies are trying to catch up with development levels in the West. Energy use per person in those countries remains much lower than in the industrial nations. In its report, the energy agency recognized the legitimate aspirations of China and India to improve the lives of their people. Moreover, that solving energy problem is a global responsibility that demands action by all countries. China's and India's energy challenges are the world's energy challenges, which call for collective responses. China is expected to overtake the United States and become the largest energy consumer soon after 2010, according to the report's forecasts. In India, where more than 400 million people have no access to electricity, energy demand is expected to more than double by 2030. One consequence of that steep growth will be higher carbon dioxide emissions, expected to increase 57 percent over the next 25 years. China will overtake the United States to become the world's biggest carbon emitter this year, while India becomes the third-biggest emitter around 2015, according to a preview copy of the report, which this year focuses on those two nations.

Timan Oil & Gas signs Memorandum of Cooperation with Gazprom subsidiary

November 8, 2007. Timan signed a strategic Memorandum of Cooperation with Zapsibgazprom OAO, a subsidiary of Gazprom OAO, the purpose been, the principles of strategic cooperation between Timan and Zapsibgazprom for the development of Timan’s oil assets. In the Russian Federation such agreements are commonly the first step in agreeing binding commitments at a future date. It is envisaged that, within two months of signing the MOC, working teams and committees will be set up with the objective of developing specific areas for cooperation. The main principles set out in the MOC for future discussion are the participation by Zapsibgazprom in the exploration and development of Timan’s oil and gas portfolio.

Rising oil prices squeeze US household budgets

November 8, 2007. As crude oil futures hover just a few dollars shy of $100 a barrel, heating oil prices have set records almost daily during the past week. Heating oil futures prices in New York, an indication of wholesale prices, climbed to a record over $ 2.62 a gallon this week, up 50% from a year ago. The speed of the increase has taken many people by surprise. Only 7% of US households use heating oil, also known as red diesel, to heat their homes, but in the cold Northeastern states about 32% of households do. Maine has the highest usage with about 80%. Increasingly, new homes in the region use natural gas, but older homes still have heating oil delivered to home fuel tanks, a system devised before natural gas was available in the Northeast. According to the US Energy Information Administration, households in the Northeast will pay a record $ 3.06 per gallon for heating oil this winter, 66 cents more than last year. It will cost an average of $ 1,879 to heat a Northeast home for the season, compared with $ 1,201 for natural gas.



Sites to be named for Coal-fired power plant

November 10, 2007. The FutureGen Alliance is on track to name a site for its $1.5 billion, clean coal-fired power plant next month, after getting clearance from the US Department of Energy. All four finalist sites, two in Texas and two in Illinois were cleared to move forward in a final environmental impact statement from the DOE. The public-private venture is working to design and test technology required to turn coal into a gas that can be stripped of harmful emissions, then burned to produce electricity and hydrogen. It will also capture carbon dioxide, widely blamed for global warming and store it underground permanently. The plant is expected to be online in 2012.

UNEP launched electricity projects

November 9, 2007. The United Nations Environment Programme (UNEP) has launched two projects to help the tea and sugar industries generate electricity. The Small Hydro for Greening Tea Industry in East Africa project will see the tea sector produce 10 MW from small-scale hydro projects. This would later increase to 82 MW. And through the co-generation for Africa project, sugar factories are expected to initially generate 60 MW. Production would then be upgraded to generate 200 MW. Small hydro-electricity generation will reduce the tea industries’ energy cost, enhance global competitiveness and increased revenues. The rising cost of oil in the world market is a threat, not only to tea and sugar business, but also to the economies of the region. Apart from raising production costs, this increase translates into lower income for farmers. Six sugar factories have indicated willingness to venture into co-generation for their own use and export to national grid. Global Environmental Facility is financing the projects through the African Development Bank and other partners, including East African Tea Trade Association and Energy, Environment and Development Network for Africa.

Transmission / Distribution / Trade

10,000 homes without electricity in Canada

November 12, 2007. More than 10,000 homes across the Lower Mainland lost electricity November 11,  night as a storm downed trees and power lines in Canada. Officials issued rain and wind warnings as expected precipitation topped 30 mm, and wind gusted at speeds of 80 km/h. Environment Canada forecast that the wind would worsen today, with gusts as high as 90 km/h. B.C. Hydro has devoted $250 mn over the next five years to harden wiring and prune trees so B.C.'s power lines are less vulnerable to wind. Most of the power outages were in Maple Ridge and Langley. In Vancouver some 300 people living near Larch St and 49 Avenue were without power when a tree fell, knocking down power lines and blocking the road.

$600 mn power lines upgrade planned in NewZealand

November 9, 2007. State-owned enterprise Transpower is set to release plans for a $600 mn line upgrade. The upgrade is designed to bolster the main transmission line between Benmore and Wellington and meet demands created by new electricity generation in the South Island. Details of the plan will be released at the end of the month. At the same time, Transpower is keeping a close watch on the demands, and possible constraints, on local transmission lines within Otago and Southland if the Project Hayes and Mahinerangi wind farms are built. This follows arguments between South Island generators over Transpower's ability to transmit the extra electricity.

Policy / Performance

Waste disposal problem forces Japan power company to shut down nuclear reactor

November 11, 2007. A Japanese power company is investigating a waste disposal problem that forced it to shut down a reactor at a nuclear power plant in northeastern Japan. The 825,000-kW reactor was to be closed indefinitely while Tohoku Electric Power Co. officials completed their investigation. The plant's No. 1 reactor was operating normally, but the No. 2 reactor has been closed since mid-October for regular inspections. Japan relies heavily on its nuclear power program, which supplies about 30 percent of its electricity. The country's largest nuclear power plant was shut down in July for repairs and tests after an earthquake led to a raft of radioactive leaks and malfunctions.

Utility, fuel pricing regime may be changed in Pakistan

November 10, 2007. The government is reviewing utility and fuel pricing regimes to comprehensively restructure the energy sector. There were two major forms of cross-subsidisation in energy sector which were affecting domestic business. The first is cross-subsidisation in electricity and natural gas pricing, with commercial and industrial sectors subsidising households. The purpose behind cross-subsidisation is to make essential infrastructure and services available to all sections of society. Official planners have told the government that subsidies in energy sector can have distorting effect on consumption, leading to wastage in sectors where costs are kept low and a decrease of competitiveness in sectors where energy is priced at higher rates. The second cross-subsidisation in the energy sector relates to cross-subsidisation in pricing of fuels, with diesel being priced below gasoline to facilitate freight transportation. The subsidy on diesel ensures that road freight transport charges in Pakistan are amongst the lowest in the world. While retailers and wholesalers on the whole benefit from this strategy, there are dual effects for the transport sector. On the one hand, possibilities for expansion of the sector are considerable as economy grows, but on the other hand, the sector generates relatively low profits on a per unit basis.

Nigeria needs 60,000 MW of Electricity

November 8, 2007. According to Former Minister of Petroleum Resources, Nigeria requires at least 60,000 MW of electric power to strengthen its economic drive. There is urgent need for the federal government to invest in the necessary transmission and distribution systems in the country.

Sustainable Management of the Environment, An Agenda for Nigeria in the next two decades, presented at a conference organized by the Nigerian Mining and Geo Sciences Society, explained that the current power generation capacity is not enough to transform the nation's materials and minerals into valuable goods for the local markets and exports with the 60,000 MW of electricity, at least 80 percent of electricity generation would be thermal-based through the use of natural gas. According to him, the rest may utilize coal or lignite, hydro, and renewable energy resources. The nation's power generation capacity currently hovers between 2500 MW and 3000 MW.

Eskom wants to increase electricity tariffs in SA

November 10, 2007. Eskom is looking at the possibility of increasing electricity tariffs by 18%. The cost of building power stations at R1, 13-trillion over the next 20 years and the rise in coal prices are to blame for the possible increase. The reserve margin is not going to improve in the next five to seven years which means if the demand for electricity continues to increase, there will not be a supply.

An increase in electricity tariffs would further increase the inflation rate, but the parastatal maintained that the increase is unavoidable and that it will not negatively affect free basic electricity subsidised by the National Treasury. The National Energy Regulator of South Africa will make a decision on the matter in December.

Chinese firm offered solid waste contract in Karachi

November 11, 2007. The City District Government Karachi (CDGK) signed an agreement with a Chinese firm for the solid waste management in the metropolis. Under the 20-year-agreement, the city government would pay $20 per ton to the firm as charges for the lifting, safe disposal and other services concerning solid waste management. It also envisages upgrading of the existing landfill sites, construction of eight garbage transfer stations and developing another landfill site in the city. The lifting and transportation of solid waste would be carried out during daytime for which covered vehicles would be used. The firm will also ensure bringing about an improvement in the overall environment at and around all garbage dumping station. Around 8,000 tons of solid waste is generated every day and the estimated amount to be paid to the Chinese firm for its disposal will come up to around Rs3.4 bn per annum.

Renewable Energy Trends


High soybean oil prices halt Biodiesel plant construction

November 13, 2007. High soybean oil prices have halted construction of the North Prairie Productions biodiesel plant in Evansville, Wis., making the end product too expensive compared with the pump price for regular diesel. The going rate for soybean oil, the raw material for biodiesel, is about 45 cents a pound or $3.60 a gallon, more than double the price when the plant was proposed.

Biodiesel would have to sell for $4.50 a gallon to justify the current price of soybean oil. A gallon of soybean oil makes a gallon of biodiesel. The $42 mn plant would have been the largest in the state, producing an estimated 45 mn gallons of biodiesel a year. Biodiesel is a substitute for diesel fuel used by farm tractors and some trucks and cars. If soybean oil prices go down or diesel fuel prices look like they're going up for an extended period, construction could resume, possibly as early as next spring.

TN Industrial policy priorities agriculture

November 10, 2007. This is with reference to the Tamil Nadu Government’s New Industrial Policy, a 33-page booklet released by the Chief Minister, Mr M. Karunanidhi, on November 5, 2007. The new policy says that 50 per cent subsidy will be granted to farmers for purchase of Jatropha seedlings. Micro-irrigation facilities are also available to farmers who can group themselves as clusters of 25-hectare areas for plantation of Jatropha.

Jatropha seeds are not taxed and there is also no VAT for Jatropha oil mills for a period of 10 years right from the date of commencing production. And if read with the Finance Ministers Budget proposals, there is also no Central excise duty for the bio-diesel produced from Jatropha or any vegetable non-edible oils to produce bio-diesel. This is the first time agriculture has been given the top importance that it deserves, and the industrial policy has apparently been drawn up after a lot of good home-work by those behind it. All that remains now is the implementation.

Hansen will power Suzlon ambition 

November 10, 2007. Hansen Transmissions, the Belgian wind turbine gear box maker and the wholly owned subsidiary of Suzlon Energy, is quadrupling its capacity in a bid to move in line with its Indian parent's expansion plans, which will increase its appetite for the critical component for wind turbine makers. Hansen, which is slated to approach the markets soon with an initial public offering (IPO) and a listing on the London Stock Exchange, is planning to increase its gearbox manufacturing capability from 3,800 MW a year to 14,300 MW, over the next five years. Hansen will expand capacity in its main manufacturing base in Lommel, Belgium, in addition to building plants in Coimbatore, India, and in China.

VRL Logistics to demerge wind power business

November 8, 2007. VRL Logistics Ltd, the Hubli-based Rs 450-crore transport company, is demerging its wind power business to focus on its core activity, goods and passenger transport. The company is in the process of setting up a separate company for managing the windmill business. The company forayed into the wind energy business last year and has set up a 42 MW windmill at an investment of Rs 250 crore, about 80 km from Hubli in North Karnataka.  At present, there are 200 fans running at the mill and the power is supplied to the state power grid. However, after the demerger, VRL aims to grow the business further with an addition of new fans every year.

Maharashtra sugar mills plan bio-CNG from cane biomass

November 7, 2007. Three cooperative sugar factories from Maharashtra have decided to produce Bio-CNG from sugarcane biomass. The projects would be set up with German finance and technological know-how. The bio-CNG would be produced at Rs 22-24 per kg and can be used as a transportation fuel like the regular CNG. Press mud and spent wash, by-products of sugarcane processing, would be used for producing biogas. The biogas would be further treated to produce bio-CNG. In the first phase, Warna sugar factory at Kolhapur, Jaywantrao Patil sugar factory at Nanded and Kisan Veer sugar factory at Satara would absorb the technology. About Rs 40 crore would be required for commissioning the conversion systems at the three sugar factories. The German Investment and Development Company (DEG) has earmarked €15 mn for lending to the factories as debt for converting press mud and spent wash into bio-CNG.


Changhua County to harness wind power

November 13, 2007. Changhua County plans to have 244 wind turbines built in its Changbin Industrial Park, reshaping the landscape of the coastal area. The construction contracts have been awarded to four wind power companies, including the state-owned Taiwan Power Co. (Taipower). Of the 244 wind turbines, 98 will be constructed on land, with the remaining 146 to be installed in shallow waters off the coast of Changhua County.

Washington group to build ethanol plants in Midwest

November 12, 2007. Washington Group International has been awarded cost-reimbursable contracts by E85 Inc. to build E85's first three ethanol production plants in the Midwest. The contracts together are valued at approximately $150 mn. Washington Group will provide procurement, construction, commissioning, and start-up services for the facilities in Wahoo, Neb., and Red Oak and Council Bluffs, Iowa. Each of the facilities will be capable of producing 110 mn gallons of ethanol per year.

The corn-based ethanol will be blended with unleaded gasoline to create motor fuel, and the plant will produce commercially viable products in corn gluten feed and meal, corn germ, and wet and dry distiller grains with solubles. Work on the Wahoo plant started in late September, work on the other two plants is planned to begin during the fourth quarter of 2007.

DOE Funds Photovoltaic Technology Development

November 12, 2007. The United States Department of Energy (DOE) will invest $21.7 mn in next generation photovoltaic (PV) technology to improve the efficiency, lower the cost of production, and accelerate the adoption of photovoltaic technology. Next Generation Photovoltaic Devices & Processes, are an integral part of the President’s Solar America Initiative, which targets the development of cost competitive solar energy compared with conventional sources of electricity by 2015.

These projects help create a pipeline for the development of next generation solar technology. With a continued commitment from this Administration to develop and deploy clean, cutting-edge technologies, the Department is helping change the landscape for how this Nation utilizes its resources and produces energy. The DOE selected 15 Universities and 6 companies among a wide array of applicants requesting funding for their photovoltaic development projects. Each award averages about $900,000 over three years.

China launches project to enhance co-op on new and renewable energy

November 12, 2007. China launched a national science and technology project to boost international cooperation on new and renewable energy. According to the project, China will develop new patterns for international exchange and cooperation, encourage countries to complement each other with respective technological strengths and set up a platform for technological cooperation. Government support will be prioritized in five research fields, including solar power, biomass fuels and biomass power, wind power, hydrogen energy and fuel cells, and gas hydrates. The project will be jointly conducted by the Ministry of Science and Technology and the National Development and Reform Commission. An experts committee will be established to oversee the project.     Equal efforts will also be given to soliciting private capital and investment from the business sector, especially the international energy giants, to enhance international cooperation on new and renewable energy.

Shell, Codexis to advance next-generation biofuels

November 9, 2007. Royal Dutch Shell PLC and Codexis Inc., a specialist in clean biocatalytic process technologies, have teamed to find ways of converting biomass to clean, renewable liquid transportation fuels through super enzymes in the next generation of biofuels. This partnership builds on earlier collaboration that began in November 2006.

The companies will conduct research together over the next 5 years, with Shell making an equity investment in Codexis and becoming a member of the company's board. Research will focus on adapting enzymes to improve the conversion of a range of raw materials into high-performance fuels. It will assist Shell in developing the next generation of biofuels as it explores a number of non-food bio materials, new conversion processes, and alternative fuel products.

Global-warming gases will rise 57 pc by 2030.

November 7, 2007. Emissions of greenhouse gases will rise by 57% by 2030 compared to current levels, leading to a rise in the Earth’s surface temperature of at least three degrees Celsius (5.4 degrees Fahrenheit) according to the International Energy Agency (IEA). In its annual report on global energy needs, the Paris-based agency projected that greenhouse-gas pollution would rise by 1.8% annually by 2030 on the basis of projected energy use and current efforts to mitigate emissions. The IEA saw scant chance of bringing this pollution down to a stable and safer level any time soon. It poured cold water on a scenario sketched earlier this year by the Nobel-winning Intergovernmental Panel on Climate Change (IPCC), the UN’s paramount authority on global warming and its effects.

According to the IPCC to limit the average increase in global temperatures to 2.4 C (4.3 F), the most optimistic of any of its scenarios, the concentration of greenhouse gases would have to stabilize at 450 parts per million (ppm) of carbon dioxide (CO2) in the atmosphere. The IPCC warned that, to achieve this goal, CO2 emissions would have to peak by 2015 at the latest and then fall between 50 and 85 percent by 2050. But the 2007 edition of the IEA’s World Energy Outlook saw no peak in emissions before 2020.



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