MonitorsPublished on Dec 05, 2007
Energy News Monitor |Volume IV, Issue 25
Ecological Imperialism: The Curse of Capitalism

John Bellamy Foster and Brett Clark

In the spring of 2003 the United States, backed by Britain, invaded Iraq, a country with the second largest oil reserves in the world. The United States is now working to expand Iraqi oil production, while securing for itself an increasingly dominant position in the control of this crucial resource as part of its larger economic and geopolitical strategy. Earlier, the same U.S. administration that invaded Iraq had pulled out of the Kyoto Protocol, designed to limit the growth in the emissions of carbon dioxide and other greenhouse gases responsible for global warming—a phenomenon threatening all life as we know it. It is no wonder, then, that the last few years have seen a growth of concern about ecological imperialism, which in many eyes has become as significant as the more familiar political, economic and cultural forms of imperialism to which it is related.

In 1986 Alfred Crosby published a work entitled Ecological Imperialism: The Biological Expansion of Europe, 900-1900, that described the destruction wrought on indigenous environments—most often inadvertently—by the European colonization of much of the rest of the world.i Old World flora and fauna introduced into New World environments experienced demographic explosions with adverse effects on native species. As the subtitle of Crosby’s book suggested, his historical analysis dealt mainly with “biological expansion” and thus had no direct concern with imperialism as a political-economic phenomenon. It did not consider how ecology might relate to the domination of the periphery of the capitalist world economy by the centre, or to rivalry between different capitalist powers. Like the infectious diseases that killed tens of millions of indigenous peoples following Columbus’ landing in the Americas, ecological imperialism in this view worked as a purely biological force, following “encounters” between regions of the earth that had previously been separated geographically. Social relations of production were largely absent from this historical account.

The ecological problem under capitalism is a complex one. An analysis at the level of the entire globe is required. Ecological degradation at this universal level is related to the divisions within the world capitalist system, arising from the fact that a single world economy is nonetheless divided into numerous nation-states, competing with each other both directly and via their corporations. It is also divided hierarchically into centre and periphery, with nations occupying fundamentally different positions in the international division of labour, and in a world-system of dominance and dependency.

All of this makes the analysis of ecological imperialism complicated enough, but understanding has also been impeded by the underdevelopment of an ecological materialist analysis of capitalism within Marxist theory as a whole.ii Nevertheless, it has long been apparent—and was stipulated in Marx’s own work—that transfers in economic values are accompanied in complex ways by real 'material-ecological' flows that transform relations between city and country, and between global metropolis and periphery.iii Control of such flows is a vital part of competition between rival industrial and financial centres. Ecological imperialism thus presents itself most obviously in the following ways: the pillage of the resources of some countries by others and the transformation of whole ecosystems upon which states and nations depend; massive movements of population and labour that are interconnected with the extraction and transfer of resources; the exploitation of ecological vulnerabilities of societies to promote imperialist control; the dumping of ecological wastes in ways that widen the chasm between centre and periphery; and overall, the creation of a global 'metabolic rift' that characterizes the relation of capitalism to the environment, and at the same time limits capitalist development.

The 'metabolic rift'

The main ecological contradictions of capitalism, associated with ecological imperialism, were already evident to a considerable extent in the writings of Marx. The accumulation of capital is in some respects a self-propelling process; the surplus accumulated in one stage becomes the investment fund for the next. One of the crucial questions in classical political economy, therefore, was where the original capital had come from that set off the dynamic accumulation that characterized the late eighteenth and nineteenth century. This raised the issue of prior, primary or “primitive” accumulation.

Taking Britain as the classical case, Marx saw primitive accumulation as having three aspects.  First, the removal of peasants from the land by land enclosures and the abrogation of customary, common rights, so they no longer had direct access to or control over the material means of production. Second, the creation by this means of a pauperized pool of landless labourers, who became wage labourers under capitalism, and who flocked to the towns where they emerged as an industrial proletariat. Third, an enormous concentration and centralization of wealth as the means of production (initially through the control of the land) came to be monopolized by fewer and fewer individuals, and as the surplus thus made available flowed to the industrial centres. Newly proletarianized workers were available to be exploited, while “Lazarus layers” of the unemployed kept down wages, making production more profitable.

The whole process of primitive accumulation—involving, as Marx put it, “the forcible expropriation of the people from the soil,” and the “sweeping” of them, as Malthus expressed it, into the towns—had deep ecological implications.iv Already land under feudal property had been converted into “the inorganic body of its lord.” Under capitalism, with the further alienation of the land (and nature), the domination of human beings by other human beings was extended. “Land, like man,” Marx noted, was reduced “to the level of a venal object.”v      

Marx’s concept of a 'metabolic rift' was developed in the context of the alarm raised by agricultural chemists and agronomists in Germany, Britain, France and the United States about the loss of soil nutrients—such as nitrogen, phosphorous and potassium—through the export of food and fibre to the cities. Rather than being returned to the soil, as in traditional agricultural production, these essential nutrients were being shipped hundreds or even thousands of miles away and ended up as waste polluting the cities. The most advanced form of capitalist agricultural production at the time, British “high farming,” was, the German chemist Justus von Liebig contended, nothing but a “robbery system,” due to its effects on the

Marx, who was a careful student of Liebig and other soil chemists, saw this antagonism between human beings and the earth as an important problem. Capitalism had, as he put it, created an “irreparable rift” in the “metabolic interaction” between human beings and the earth; a “systematic restoration” of that necessary metabolic interaction as a “regulative law of social production" was needed, but the growth under capitalism of large-scale industrial agriculture and long-distance trade intensified and extended the metabolic rift (and still does).  Moreover the wastage of soil nutrients had its counterpart in pollution and waste in the towns.vii


i Alfred W. Crosby, Ecological Imperialism: The Biological Expansion of Europe (Cambridge: Cambridge University Press, 1986).

ii The importance of ecological materialism is highlighted in John Bellamy Foster, Marx’s Ecology: Materialism and Nature (New York: Monthly Review Press, 2000).

iii For a detailed analysis of the relationship between material-ecological flows (usually expressed in terms of use values) and value flows in Marx’s analysis see Paul Burkett, Marx and Nature (New York: St. Martin’s Press, 1999).

iv Karl Marx, Capital, volume 1 (New York: Vintage, 1976), p. 896; Malthus to Ricardo, August 17, 1817, in David Ricardo, Works and Correspondence (Cambridge: Cambridge University Press, 1952), vol. 7, p. 175.

v Karl Marx, Early Writings (New York: Vintage, 1974), pp. 318-19.

vi For an elaboration of Liebig’s argument and its influence on Marx, see John Bellamy Foster, “The Communist Manifesto and the Environment,” Socialist Register 1999, p. 179.

vii Based on these observations Marx developed a view of the necessity of a sustainable relation between human beings and nature  (going beyond the issue of the soil)—a relation that had to be governed by the principle of maintaining (or improving) the earth for the sake of future generations. As he famously put it: “>From the standpoint of a higher socio-economic formation, the private property of particular individuals in the earth will appear just as absurd as the private property of one man in other men. Even an entire society, a nation, or all simultaneously existing societies taken together, are not the owners of the earth. They are simply its possessors, its beneficiaries, and have to bequeath it in an improved state to succeeding generations as boni patres familias [good heads of the household].” (See Capital vol I, London: Penguin Books, 1976, pp. 636-38; vol. III pp. 949-50 and 911).

to be continued..

Views are those of the author


China’s Active Energy Diplomacy

(China’s Quest for Energy- Part III)

Heinrich Kreft, Senior Foreign Policy Advisor, CDU/CSU Parliamentary Group in the German Bundestag

China's increasing reliance on foreign oil imported from unstable regions over huge distances via sea lanes that are difficult to control has had a notable impact on its military planning. According to some Western experts, Beijing is intent on expanding its naval capacity well beyond what is required to protect its coasts and the Straits of Taiwan. In support of this view they point to the sizable submarine fleet Beijing has built up as well as its efforts to conclude agreements on the use of port facilities along the tanker routes in the South China Sea and in Myanmar, Bangladesh, and Pakistan.

 Such moves could cause friction if China fails to seek cooperation with other Asian countries with similar concerns and above all the United States, on which, at least until the second half of the century, the security of the world's sea lanes will depend. Through its active energy diplomacy, China has in recent years become a major actor in a large number of commodity- and energy-rich countries and regions.

It has concluded energy alliances with and in many cases invested heavily in a whole series of international pariahs, including Sudan, Iran, Myanmar, Venezuela, and Uzbekistan. China's largest investments in the outside oil sector are in Sudan. Beijing has been accused of undermining the UN sanctions imposed on Khartoum in response to massive human rights violations in Darfur and opposing moves to increase their severity and scope.

 In Myanmar China is continuing to expand its activities; with Uzbekistan it recently concluded a deal on substantial investments in the country's energy industry; and with Venezuela's populist and anti-American President Chavez it has signed a strategic energy alliance. Looking beyond oil to commodities in general, it is striking to see what efforts China is also putting into intensifying relations with Robert Mugabe's Zimbabwe, another international pariah. This clearly runs counter to everything the international community is doing to promote respect for human rights and good governance.

In the medium term, China's efforts to enhance its energy security are likely to increase its influence in the Middle East. This will pose a challenge to U.S. dominance of this part of the world and further complicate the already difficult relations the U.S. has with a number of countries in the region, notably Iran, as the current dispute over Iran's nuclear ambitions--also viewed in Europe as a threat--has amply demonstrated. Even today almost two-thirds of Middle East oil is destined for Asia, a trend likely in future to become still more marked. A number of Gulf countries, including Saudi Arabia, are following Iran's example and actively expanding their relations with China in order to reduce their one-sided reliance on the United States.

Another important focus of China's energy diplomacy is Russia and Central Asia. The new Sino-Russian rapprochement of recent years has been driven partly by China's interest in Russian armaments but mainly by its insatiable appetite for energy. From Moscow's point of view, the current Sino-Japanese competition for Russian oil (and gas) greatly enhances its prospects for an Asian comeback. Given its concerns over China's new stature and growing economic and political clout as well as the pressures exerted on Siberia and throughout the Far East by China's expanding population, Moscow is determined to employ its energy trump card as effectively as possible.

That is the real motive for Moscow's decision to pipe its oil to the Pacific coast through its own territory, a decision that caused visible frustration in Beijing even though Moscow has now agreed to build a branch pipeline to China. China meanwhile, keenly aware of the vast energy reserves of Central Asia and mindful of the stability of the five Central Asian countries and the importance of securing its fuel imports from the region, has been steadily expanding the Shanghai Cooperation Organization. It has invested heavily in the Khazakh energy sector and recently outbid an Indian company for the Canadian-based PetroKazakhstan. Together with Kazakhstan, Beijing is in the process of building a large pipeline to western China.

What is to be done?

CHINA'S RISING DEMAND for oil and Beijing's drive for energy security are a political challenge of global dimensions. Failure to persuade China of the need for a cooperative approach in this area could have disastrous consequences not only for the environment, and especially the world climate (global warming), but also for the vitality of the world economy, stability and peace in Asia and elsewhere, and indeed the international order as a whole. China clearly needs assistance if it is to improve energy efficiency and make greater use of renewables, for that is the only way to check the soaring rise in energy consumption, the main cause of the prevailing sense of insecurity about the nation's fuel supplies.

Seen in this light, it would be important to explore ways of encouraging China to have greater confidence in the world oil market and view it as a cooperative alternative to its neomercantilist energy diplomacy, for the danger of its current strategy is that the efficient functioning of the market could be undermined in the medium term to the detriment of all concerned. Thought should likewise be given to how best to integrate China into global arrangements for collective oil stocks and reserves management, in which the IEA plays a pivotal role.

At key locations along its eastern coast, China is planning to build four new oil depots, which will be used to store part of its strategic reserve. It would surely make sense for China to coordinate these efforts and its contingency plans with the IEA so as to ensure that these reserves are put to the best possible use in the event of a crisis.

One way to address the security implications associated with the trend toward "energy nationalism" in Asia might be to develop regional energy institutions to promote multilateral energy projects and regional cooperation. Various existing institutions--APEC, ARF, and ASEM--could provide a platform for a really useful dialogue on energy and offer the further advantage that their membership includes players from outside the region, such as the U.S. and the EU, which have a stake in the region's stability.

A whole series of initiatives are under way aimed at involving China in international cooperation in the energy sector (G8, notably Gleneagles and follow-up; EU, notably the EU-China summit; a host of bilateral activities, also by Germany, on renewables; the International Energy Forum under IEA auspices). These efforts must be taken forward with all possible speed, for the challenge posed by China's appetite for energy is a challenge of global dimensions.

If energy issues are not dealt with by constructive cooperation, or if cooperation fails, the risk is high that they will become a source of competition, misperceptions, mistrust, and excuses for obstructing one another's interests. If Beijing believes that the U.S. and others are trying to use energy politics as a means to contain China, then it should not be surprising that it will be trying to use its growing energy influence to undermine Western foreign and security policies. This could include increasing "hoarding" of oil and gas fields and supplies, even closer ties to and ever more investments in pariah states, the promotion of security cooperation with anti-Western governments, and possibly a politization of global energy markets.

Such an environment could very well increase the influence of hard-liners within the Chinese leadership who perceive the U.S. as a threat to China's rise and want to increase military strength--and in particular develop blue water capabilities in order to challenge the U.S. control of the sea lanes of communications through which China's growing imports of oil (and LNG) are flowing--and generally decrease American influence in the region. Such a move would greatly concern other Asian powers from Japan and South Korea in Northeast Asia, over the ASEAN countries in the Southeast, to India in South Asia. Not only an arms race, but a wide range of negative outcomes could be imagined. Therefore, it is in the best interests of all--China, the U.S., European and Asian countries--to try to understand each other's energy insecurities and develop new ways for cooperation.



Courtesy: Policy Review 2006, Issue: 139.

Note: Analysis article “Pricing of Natural Gas: Lessons from History” (part XI) will be published in the next issue.






OIL ropes in BG to bid for NELP-VII deepwater blocks

December 11, 2007. State-owned Oil India (OIL) have roped in British major BG to jointly bid for seventh round of National Exploration and Licensing Policy (NELP) slated to start later this month. BG’s wholly-owned subsidiary BG Exploration and Production India (BGEPIL), along with OIL, will bid for deepwater and ultra-deep water blocks to be offered by the government. The government is likely to offer over 60 exploration blocks, comprising 30 onshore blocks, 15 shallow water blocks and 15 deep and ultra-deep water blocks in both east and west coast offshore area. Amongst other blocks, BGEPIL-OIL combine is expected to bid for three blocks with good prospects — KG-OS-DW III (‘GD’), KG-OS-DW (‘KD’) and KG-OS-DW (‘KD Extn’). They are located in the Krishna-Godavari (KG) Basin and are in the vicinity of several blocks in which there have been recent discoveries.

OVL's Iran dream gets jolt from China

December 11, 2007. India is being increasingly marginalised in Iran’s energy sector for reasons which range from political to economic. Its attempts at securing oil and gas blocks in the country and importing gas (as LNG and through a pipeline) seem to be hitting a dead end. The latest setback for India is the agreement between Iran and Chinese Sinopec for the Yadavaran oil and gas field. This effectively pushes out ONGC Videsh, the government’s overseas acquisition vehicle, which had shown an interest in the field. Iran’s agreement with Sinopec for the development of the field and supply of 10 mt of liquefied natural gas (LNG) a year for 25 years, nullifies the memorandum of understanding that Iran had entered into with OVL in 2005.  This promised the company three things viz., 5 mt of LNG, 10 per cent stake in Yadavaran field and 100 per cent stake in another field called Jufeyr. Opposition from the US to the pipeline, following Iran’s nuclear policy, is considered to be a major stumbling block. According to Iranian officials, if India did not move faster on the $7 billion gas pipeline deal, Iran would consider selling its gas to China. Indian oil companies are working on only one project in Iran. A consortium of OVL, Indian Oil and Oil India has discovered oil and gas in the Farsi block in the country and is now establishing its commerciality.

Sonatrach and OIL-IOC combine win Libya gas blocks

December 10, 2007. State-owned entities Oil India Ltd (OIL)-Indian Oil Corporation Ltd (IOC) that have partnered with Algerian firm Sonatrach have won areas 95 (1 block) and 96 (3 blocks)in Libya. OIL-IOC combine had qualified as financial investors for the first gas blocks licensing round of Libya. The Indian companies had associated with the Algerian firm, which will be the operator of these blocks which were awarded to the partners. Libya awarded four gas exploration contracts to exploration majors viz., Shell, Gazprom, Sonatrach and PKN Orlen. The blocks won by Sonatrach, OIL-IOC combine was located in the western Ghadames basin. Libya’s National Oil Company in September had said that 35 companies had qualified as operators and 21 as investors in the country’s first gas licencing round offering 41 blocks. OPEC member Libya is the African continent’s second-largest oil producer at 1.7 million barrels a day. It also has natural gas reserves estimated at 1,314 bcm.

OVL to join Hindujas in Iran oil & gas projects

Text Box: The two partners are reportedly in talks with Iranian oil firm NICO for buying a 50% stake in South Pars gas field and the Azadegan onshore oil block.December 5, 2007. Notwithstanding pressure from the Americans to reduce trade relations with Iran, India is pressing ahead with its economic interest with the Islamic nation. In line with this trend, ONGC Videsh Ltd. (OVL), in partnership with the Hinduja Group, is eyeing a 50% stake in Iran's South Pars gas field, arguably the largest in the world. The two partners are also believed to be in talks for a 50% stake in Azadegan, one of the world's biggest onshore oil blocks. OVL and the Hindujas are in talks with Switzerland-registered NICO, a subsidiary of the National Iranian Oil Co. An MoU for the deal has already been signed between NICO and the Hinduja group. The Petroleum Ministry has already granted its approval to OVL for the JV with the Hindujas. The Finance Ministry's views on the proposal are also likely to be tabled at the OVL Board meeting. OVL is likely to hold a majority 51% stake in the proposed JV while the Hindujas will own a 49% interest. Unlike most gas contracts in Iran, which does not allow for direct oil equity stakes, the MoU allows the Indian oil companies to export its share of oil and gas to India. Azadegan is estimated to have 33 billion barrels of oil while the South Pars gas field contains about 50% of Iran's gas resources. South Pars is jointly shared by Iran and Qatar.


Engineers India, Tatas to build oil refineries

December 11, 2007. The Tata Group and Engineers India, which designs oil refineries and chemical plants, plan to set up a joint venture for construction projects. New Delhi-based Engineers India has total orders worth Rs 5000 crore ($1.3 bn) at present compared with orders worth Rs 2000 crore ($509 mn) at the beginning of the fiscal year in March. The company may help Indian Oil Corp., to construct a refinery in Egypt. Indian Oil Corp. may team up with Egyptian General Petroleum Corp. to build a $9 bn refinery and petrochemicals project in the North African nation.  Engineers India has won orders to build Hindustan Petroleum Corp.’s Punjab refinery and Bharat Petroleum Corp.’s Bina refinery in central India.

Essar Oil Vadinar plant nears completion

December 11, 2007. Essar Oil’s Vadinar refinery in Gujarat will reach its full capacity of 10.5 mt by this month-end.  The refinery is currently operating at 7.5 mt capacity. The company was in the process of linking the refinery’s secondary units, which will enable it to produce petrol and diesel of Euro-III grade. Petrol and diesel produced from the refinery are transported to Essar petrol stations in Gujarat, Maharashtra, Madhya Pradesh and Rajasthan or exported. 

Essar Oil edges out RIL, BPCL in race for Kenyan refinery

December 11, 2007. Essar Oil is very close to sealing a deal to acquire a majority stake in Kenya Petroleum Refinery (KPRL), one of Kenya’s oldest refinery complexes with a capacity of 4 mt. Reliance Industries (RIL) and state-owned refiner Bharat Petroleum Corporation were also in the race to acquire the 50% stake held by Chevron, Royal Dutch/Shell and British Petroleum. The remaining 50% is held by the Kenyan government. The deal is likely to be announced within a week. The size of the acquisition, however, could not be ascertained. EOL has been trying to gain a foothold in the African oil refining business for the past three years, with little success so far.

The acquisition of the refinery, located in the coastal city of Mombassa, is expected to give Essar Oil a global footprint that would diversify its market. In the upstream oil exploration business, the company already has three exploration and production (E&P) blocks in Madagascar and one block in Nigeria. RIL has been interested in the KPRL refinery, in order to obtain a fuel source for the retail outlets of oil marketing company GAPCO, in which it recently acquired a majority stake. RIL wanted to make this acquisition through its wholly-owned subsidiary, Reliance Industries Middle East, a company registered in the UAE. Public sector refiner/marketer BPCL is setting up an LPG distribution system in Kenya.

IOC may go for $9 bn refinery JV in Egypt

December 10, 2007. Indian Oil (IOC) is embarking on an Egyptian safari. The company is planning a joint venture with Egyptian General Petroleum Corporation (EGPC) for building a refinery in the oil-rich country. As a bonus, IOC would get preferential treatment in allotment of oil and gas assets in that country. The proposed project could be the $9 bn refinery-cum-petrochemical complex near Gamasa. The project is currently in the evaluation stage and proposed to be commissioned in five years with a debt-equity ratio of 65:35. The production capacity of the plant is stated to be 20 mtpa or 350,000 barrels per day. Egypt intends to set up a complex, which could produce high quality petroleum products confirming to European specifications. A public sector company, EGPC is responsible for exploration and production of crude oil in Egypt. It is operating eight of the nine existing refineries in the country. Egypt plans to set up new refineries for export.

Bhatinda refinery changed to HPCL-Mittal Energy Ltd

December 7, 2007. With Lakshmi N Mittal picking 49 per cent stake in Hindustan Petroleum Corp Ltd's Bhatinda refinery, the name of the company implementing the Rs 18,919 crore ($4.8 bn) project has been changed from Guru Gobind Singh Refineries Ltd to HPCL-Mittal Energy Ltd. The Board of Guru Gobind Singh Refineries Ltd in its meeting on November 14 in Mumbai, approved changing name of the company to HPCL-Mittal Energy Ltd. The board also decided to rename the Punjab Refinery Project (the greenfield refinery at Bhatinda in Punjab) as Guru Gobind Singh Refinery. Mittal Energy Investment Pte Ltd and HPCL hold 49 per cent stake each in the nine million tons a year refinery project while financial institutions would take the remaining two per cent.

Kuwait Petro in refinery talks with Reliance

December 6, 2007. Kuwait Petroleum Corp is talking to Reliance Industries and other firms as it looks to build a large refinery and petrochemicals project in India. Kuwait in September approved a budget of 4 bn dinars ($14.29 bn) to build the Middle East's largest refinery, more than double the initial estimate. Reliance Industries and other private players have turned almost entirely to the export market as New Delhi forces the dominant state refiners to sell domestic fuel far below global crude costs, which have trebled in the last four years. Reliance Petroleum, a subsidiary of Reliance Industries, is building a 580,000 barrels per day (bpd) refinery next to its parent's existing 660,000 bpd plant in Gujarat.

Cairn oil shines on IOC clean chit

December 5, 2007. According to an internal study done by the country’s largest oil marketer and refiner, Indian Oil Corporation (IOC), Cairn India’s crude oil in Rajasthan may be waxy, but is also found to be sweet (high quality) with very good properties. The crude oil is sweet, with very good properties. The problem is about flowability and the high residue level. The high residue level in the crude oil means that refineries will still ask for discounts because it affects the throughput from refineries. Cairn expects the Rajasthan crude oil to be priced at 7 per cent discount to the Brent crude price, the global benchmark. There are 450 varieties of crude oil globally, with widely varying properties. According to a British Petroleum crude oil database, there are 31 varieties of crude oil more viscous than Cairn’s Barmer oil. Also there are 94 crude oil varieties heavier than Cairn oil.


Transportation / Trade

GAIL committed to serve PMT customers in Gujarat

 December 10, 2007. GAIL (India) Ltd. would take all necessary steps to uphold the interest of the consumers of the Panna-Mukta-Tapti gas across the country, including Gujarat. The public sector gas transmission company was reacting to reports regarding the impact on consumers in Gujarat, after it won the rights to sell the entire gas output from the Panna-Mukta-Tapti oil and gas fields, jointly operated by Reliance Industries Ltd. (RIL), BG Group Plc and Oil & Natural Gas Corp. Ltd. (ONGC). The PMT gas will be supplied in accordance with the Gas Utilisation Policy, and the interests of city gas consumers and industrial users in fertilizer, power and petrochemical sectors will continue to receive priority. In addition to its own network, the company would be using the available transportation network of other companies in Gujarat to market natural gas to consumers in the state. Gujarat today gets the major share of gas suppliers in the country. Out of the total availability of 99.38 mmscmd gas in the country, consumers in Gujarat get around 38.25 mmscmd or 38.5% of the total. Plus, all on-shore gas produced in Gujarat is supplied to consumers in the state only.

  GAIL enters into transmission deal with Reliance Gas

December 10, 2007. GAIL India and Reliance Gas Transportation Infrastructure have entered into an agreement for transmission of natural gas from the Krishna-Godavari basin. The agreement provides for transportation of natural gas from the exploration block located in the Krishna-Godavari basin in the east coast of India through GAIL's network and for booking of capacity by GAIL in RGTIL's East-West pipeline. GAIL currently has a network of 6,700 km with transmission capacity of about 150 million metric standard cubic meter per day. The utilisation of the pipeline asset will be increased by such arrangement. Reliance Gas is laying a 48 inch, 1,400 km long East-West pipeline from Kakinada to Gujarat.

HPCL offers January loading cargo

December 10, 2007. Hindustan Petroleum Corp Ltd (HPCL) has issued a tender offering 25,000-30,000 tonnes of mid-January loading fuel oil to a moderately supplied Asian market. The 380-centistoke (cst) cargo, of 4.0 percent sulphur and 0.998 density, is for loading on January 14-16 from its Vizag terminal, on a free-on-board (FOB) basis. HPCL last sold a similar lot, for December 15-17 loading from Vizag at a discount of about $20-21 a tonne to Singapore spot quotes on a FOB basis. The cargo was picked up by the Emirates National Oil Co (ENOC) and was re-sold into the Singapore marine fuel market, the world's largest. It was still unclear at what levels the tender would be concluded at as Western supply flows in the January market remain about 10 percent lower than the previous month at 1.825 mt.

Myanmar gas Daewoo picks PetroChina over GAIL

December 5, 2007. India has once again been edged out by China in the race to secure supply of critical natural resources to feed their fast expanding economies. According to reports, Daewoo International Corp. has chosen PetroChina as the preferred bidder for evacuating natural gas from Myanmar's biggest field. Daewoo and PetroChina are in discussion over the price and may reach an agreement soon. Previously, India's GAIL had the preferred bidder status on the A1 and A3 natural gas fields in the Bay of Bengal. The blocks are estimated to hold 4.8 tcf of natural gas with more exploration underway. According to Energy consultant Gaffney, Cline & Associates, A-1 and A-3 areas hold as much as 7.7 tcf of gas. Daewoo International is the operator of the fields and holds a 60% stake, India's ONGC Videsh Ltd. owns 20% and GAIL 10%. Korea Gas Corp. has the balance 10% stake in the two blocks.

IOC pipeline may go on stream in January

December 5, 2007. After prolonged delay, Indian Oil may be just weeks away from operationlising its Paradip-Haldia crude pipeline. The pipeline is expected to transport crude at lower cost to Haldia and Barauni refineries beginning January. Though the 330-km long pipeline was ready early this year, work on Single Point Mooring (SPM) facility at Paradip was stalled owing to issues ranging from technical problems to replacement of the contractor. While sources denied any impact on the project cost, Rs 1,178 crore ($300 mn) combining both pipeline and the SPM, so far, the delay in project implementation had refrained the company from gaining some extra margin at the refineries. The payback period of the pipeline, implemented as a separate project, may also be impacted.

IOC originally set a target date of completion of the entire project (pipeline and SPM) by March 2006. The ground realities, however, proved it was too steep a target to achieve. While the pipeline project was delayed due to the time-consuming process of securing environmental clearances for passing through the forests of Orissa, the estuaries of a number of rivers, including the Mahanadi on the coasts, posed technological challenges. The pipeline was finally in place in April-May this year.

IOC nets $28 mn savings through IBP merger

December 5, 2007.  The merger of IBP brings home an annual savings of Rs 111 crore ($28.2 mn) in operations cost of the merged petroleum retailing business of IOC, beginning this year. IBP Ltd was merged with IndianOil with effect from May 2 this year. Initially, a separate division (IBP division) was curved out to carry out the businesses (including petroleum retailing, explosives and cryogenic vessel manufacturing) of the erstwhile IBP Ltd. However, beginning August 2007, IOC brought the entire petroleum retail business under its marketing division.

Policy / Performance

GAIL signs GCA with Puducherry Govt.

December 11, 2007. As a part of the Agreement, a joint exercise for assessment of the demand potential of Natural Gas and allied products in the Union Territory will be initiated and usage of Natural Gas / CNG / PNG / R-LNG will be promoted. Gail India Ltd has announced that the company and Department of Industries and Commerce, Government of Puducherry signed a Gas Cooperation Agreement (GCA). The various areas for co-operation include pipeline infrastructure for distribution of Natural Gas, Liquid Hydrocarbons (including LPG), promotion of Joint Venture for City Gas Distribution projects for Domestic and transport sectors.

The joint action between the two parties envisages setting up of a co-ordination group to study the demand potential of the Union Territory of Puducherry for R-LNG / CNG / PNG to prioritize and take up the specific areas project for implementation for chalking out stage-wise development of infrastructure including for distribution of energy to the door-step of the consumers and to determine the modus-operandi for implementation of the projects through a Joint Venture (JV) of GAIL and Government of Puducherry. For Joint Venture route, the equity participation by GAIL / Department of Industries & Commerce, Government of Puducherry and other institutions / offices shall be decided based on the demand potential and techno-economic study.

Petrol, diesel prices set to go up a bit

December 11, 2007. The government may consider a marginal hike in petrol and diesel prices with a simultaneous reduction in excise duty. The group of ministers (GoM), constituted to study fuel prices, may recommend an upward revision of auto fuel prices. A hike in fuel prices, duty rationalisation and raising oil bonds are among the options that the GoM will consider when it meets for the first time on December 14. The measure would come as a major relief to the public sector oil marketing companies (OMCs), which are losing about Rs 240 crore ($61 mn) every day on selling petrol and diesel below cost.

Besides fuel price hike and excise duty cut, the GoM may also recommend a cut in sales tax by states. According to oil industry sources, public sector OMCs, viz., IndianOil (IOC), HPCL and BPCL, are estimated to have lost Rs 69,753 crore ($17.7 bn) on sale of petrol, diesel, LPG and PDS kerosene as they are not allowed to raise prices as per the market situation. While they are paying a high price for imported crude, they sell petrol at a loss of Rs 8.74/litre, diesel at Rs 9.92/litre, kerosene at Rs 20.53/litre and LPG at a loss of Rs 256.35 per cylinder. The government has, however, been helping them to meet their under-recoveries. The Cabinet had decided to compensate oil companies of 42.7% of their under-realisation on fuel sales through oil bonds.

‘Safety is paramount in oil and gas sector’: Srinivasan

December 11, 2007. M.S. Srinivasan, Secretary, Ministry of Petroleum & Natural Gas has emphasized the importance of safety in the operations undertaken in the vital sectors like oil and gas. He called upon the corporate undertakings to take no chances on the safety front and follow safety practices in a chain from the top management to the bottom levels in the organizations. Referring to the serious implications of accidents in oil and gas sector, Srinivasan pointed out that more than 100 products are produced from crude oil and so also natural gas which are life and blood for economic development. Similarly, technology is life and blood of the hydrocarbon industry.

The rapid evolution of technological applications, in oil and gas sector in terms of products and processes, needs to be carefully handled so that operations remain safe as even a small incident in complex scientific operations could lead to entire plants coming to a halt. Petroleum Secretary also called for increased on-site training of the manpower so that possibilities of accident led disruptions and losses are avoided. He pointed out that mostly it is human error which causes accidents due to the mistakes like wrong anticipation etc. He called upon Oil Industry Safety Directorate (OISD) to run various courses particularly short term as well as on-site for building competencies in this regard.

Pak to go ahead with IPI gas project

December 11, 2007. According to the President Pervez Musharraf, even if India does not agree to the terms of the Iran-Pakistan-India gas pipeline project, Pakistan will continue negotiations to import gas from Iran. He urged the need to ensure short-, mid- and long-term strategies to cover the power shortage in the country.

India to launch latest oil, gas asset sale

December 10, 2007. India will launch the next round of its oil and gas asset auctions on December 13. It will offer 57 exploration blocks in the auction, which will close on April 11. India, Asia's third-largest oil consumer, buys 70 percent of its crude and is keen to reduce its dependence on imports and attract greater interest from foreign majors in its oil and gas assets. It has so far awarded 162 blocks, under its new licencing policy introduced in 1999. 

Subsidy on LPG, Kerosene might exceed $17 bn

December 6, 2007. Murli Deora, Minister of Petroleum & Natural Gas informed the Lok Sabha in a written reply that the current projected annual under recoveries on petrol, diesel, PDS kerosene and domestic LPG are estimated to exceed Rs. 69,700 crore ($17.67 bn). Out of these under recoveries, he said about Rs. 33,600 crore ($8.5 bn) are on account of domestic LPG and PDS kerosene. As much as 42.7% of total under recoveries will be met by the Government through oil bonds while About 1/3rd of under recoveries will be met by PSU upstream companies. The balance will be absorbed by the PSU oil marketing companies. The Government has also extended the PDS kerosene and Domestic LPG subsidy Scheme, 2002 and Foreign Subsidy (for far flung area) Scheme 2002 for a period of 3 more years from April 1, 2007 – March 31, 2010. The rate of subsidy admissible under the schemes through the Budget would be the same as applicable for the year 2006-07, i.e., Re.0.82/litre for PDS kerosene and Rs.22.58/cylinder for domestic LPG. PDS kerosene is supplied at Rs. 9.09/litre (at Delhi) as against Rs. 24.39/litre (based on April-November 2007 international oil prices). Similarly, domestic LPG (at Delhi) is retailed at Rs. 294.75/cylinder against its international equivalent price of Rs. 487.95/cylinder for April-November 2007. The resulting under recoveries are being shouldered by the Government and the oil PSUs. International oil prices have increased to record levels and are above $86/bbl currently.

‘Govt. can review royalty on gas time to time’: Deora

December 6, 2007. According to the Minister of Petroleum & Natural Gas Murli Deora, the Government can review the royalty rates from time to time and shall not fix the royalty rate in respect of any mineral oil so as to exceed 20% of sale price of the mineral oil at the oilfields or the oil well-head as the case may be. Royalty rates are governed by the Oilfields (Regulation and Development) Act, 1948. After dismantling Administered Price Mechanism w.e.f. 1.4.2002, royalty rate regime was modified in consultation with stakeholders vide notification dated 16th December 2004 as follows:

   i.      Royalty on crude oil production from areas awarded on nomination basis to National Oil Companies(NOCs), exploration blocks awarded to Private/Joint Venture contractors prior to New Exploration Licensing Policy (NELP) and onland discovered fields awarded to Private/Joint venture contractors:

        a.      Onland areas@ 20% of Well Head Price.

        b.      Shallow water offshore areas (upto 400 metres water depth) @10% of Well Head Price.

        c.      Deep water offshore areas (>400 metres water depth) @ 5% of well head price during first 7 years after commercial production and normal rates as applicable to Shallow water areas (upto 400 metres water depth) during other periods.

       d.      Heavier Crude Oils of 25 API and less: 2.5% lesser than the applicable rates as above.

 ii.      Royalty on crude oil production from offshore discovered fields awarded to Private/Joint venture contractors is at the rates as specified in respective Production Sharing Contracts (PSCs).

iii.      Royalty on crude oil and natural gas production from areas under Production Sharing regime is determined in accordance with the provisions of respective Production Sharing Contracts. Under New Exploration Licensing Policy (NELP), royalty on crude oil in onland areas is 12.5% of well head price and 10% in offshore areas. Royalty on natural gas is 10% of well head price.

iv.      Royalty on natural gas production is 10% of the value of the natural gas obtained at well head.

The royalty received on crude oil and natural gas production from onland areas is paid to State Government exchequer from the date of oil and gas production. Royalty received from offshore areas is paid to the Central Government.



RIL goes to Australia for uranium

December 11, 2007. Reliance Industries (RIL), India’s biggest private sector company, has struck a deal to explore uranium in Australia, as soaring demand and prices turn the heavy radioactive metal into a lucrative commodity. RIL, through its subsidiary RIL (Australia) Pty, has signed an agreement with Uranium Exploration Australia (UXA) to buy 49% in eight exploration blocks owned by the company in South Australia and Northern Territory. RIL is expanding its range of exploration activities to include areas where it can add value by its internal technology skills or in development. This is the first time an Indian private sector company has ventured into uranium exploration within or outside the country. The agreement with UXA is only for exploration. It is not known if the partners will be successful in discovering uranium deposits. The agreement is subject to regulatory approvals. A heavy radioactive fissile material which is found in natural state, uranium is used widely in nuclear power generation. Highly-enriched uranium is used as raw material in nuclear weapons. India bans private sector participation in uranium exploration and mining. Nuclear power generation is also reserved for the public sector.

RIL’s move is significant in the light of soaring demand and prices for this highly radioactive commodity. Spot uranium prices hit a record of $136 per pound earlier this year, compared with $7 in 2000. Analysts expect prices to stay between $100-$150 per pound next year and to soften by 2012 as new mines come into production. About 33 nuclear reactors are under construction around the world today. About 94 are being planned and about 222 have been proposed. The amount involved in the transaction is small. RIL will pay $3.45 mn to UXA and contribute 49% share of future exploration expenditure which is estimated at about $19.4 mn.

NALCO for captive power plant in Indonesia

December 11, 2007. State-run National Aluminium Company (NALCO) plans to invest a whopping Rs 30,000 crore ($7.63 bn) over the next five years for setting up a smelter and a power plant in Indonesia to expand its overseas business. NALCO will invest about Rs 30,000 crore ($7.63 bn) to build a five lakh tonne smelter and a 1,500 MW captive coal-fired power plant in Indonesia. NALCO would initially invest Rs 15,000 crore ($3.8 bn) for a 2.5 lakh tonne smelter and a 750 MW power plant, the work for which would begin by the middle of 2009. The project is to be located in a southern Sumatran island. Nalco would conduct a feasibility study after signing the MoU and alumina required for the smelter would be sourced from India.

More land to be acquired for JLPP

December 10, 2007. Neyveli Lignite Corporation (NLC), the executing agency for the Jayamkondam Lignite Power Project (JLPP), has sent a proposal for acquisition of additional lands for the JLPP. The NLC has sent the proposal to the Special Commissioner and Commissioner of Land Administration, Chennai, to acquire additional 8,979 hectares for the JLPP. The lands were located in about 20 villages in Udayarpalayam taluk of the newly-formed Ariyalur district. The NLC has divided the lignite reserves in the area into two zones – north block and the south block. The extent of acquisition has been estimated at 3,686 hectares in the north block and 5,293 hectares in the south block. To start with, a thermal station with 2 x 800 MW each has been planned to be set up in the north block. The total project cost would be around Rs 10,000 crores ($2.54 bn) for the mine cut and the thermal station put together. In the south block, one unit of 800 MW would be set up later. The current acquisition plan would be in addition to 4,023 hectares already taken over by the Tamil Nadu Industrial Development Corporation (TIDCO) including 3,602 hectares of assigned land and the balance 421 hectares of poromboke land through alienation.

Coal India eyes foreign JV to raise output

December 10, 2007. State-run Coal India Ltd was open to a joint venture with a foreign company as it looks to raise production from underground mines. The company wants to increase its underground coal production to 75 mt by 2011/12 from the current 45 mt. 

Railways generates 2 MU of electricity by braking

December 7, 2007. Indian Railways generated about 2 million units (MU) of electricity during October this year by braking the new generation electric locomotives that generate electric power when brakes are applied. On an annual basis, the Railways consumes 13 bn units of electricity, out of which 10.4 bn are for traction use. The Railways needs 2,200 MW capacity for its entire network. According to an official release, the Railways is now employing new generation electric locomotive, which has a regenerative feature to generate electric power during braking by using three phase propulsion technology to convert kinetic energy as electric power during braking. Forty such locomotives are part of the fleet of the Northern Railway and pull the Rajdhani/Shatabdi express and other important Mail/Express trains. The energy generated during braking by these locomotives was about 2 million kilowatt hours during October 2007.

PSEB for 1,800 MW thermal power plant

December 6, 2007. The Punjab State Electricity Board (PSEB) will install a 1,800 MW thermal power plant at Talwandi Sabo to bridge the gap between demand and supply of power. The basic and mandatory studies for this project have been completed. The government had earlier issued a notification for the acquisition of land for the 2X270 MW Goindwal Sahib Thermal Project. In addition, a 1,320 MW coal-based thermal power plant at Rajpura, would come on BOO (build-own and operate) basis. Sites have been identified at Hazipur in Mukerian and Abohar for the development of thermal power plants. More than one third of the total allocation of about Rs 37,314 crore ($9.46 bn) in the plan period of 2007-2012 would go to the power sector.

NTPC, CIL to tie up for coal, power plants

December 6, 2007. Public sector Companies Coal India Limited (CIL) and NTPC Limited will soon enter into an agreement to form a special purpose vehicle (SPV) to build two 1,500 MW power plants and develop two coal mines in Jharkhand. The total investment is likely to be around Rs 8,000 crore ($2.02 bn). The move comes close on the heels of five public sector Companies viz., SAIL, RINL, NTPC, CIL and NMDC, forming an SPV to scout for coking coal reserves abroad. Both the Companies are likely to contribute an equal amount and the power produced from these plants will be commercially sold through power purchase agreements (PPAs). The final draft would soon be finalised. While, two integrated power plants will be established at an expected cost of Rs 7,500 crore ($1.9 bn), development of two coal mines in likely to cost Rs 500 crore ($126.7 mn). NTPC and CIL have been allocated two coal mines viz., Brahmini and Chichro Patrimal, with a reserve of 2,000 mt. The firms are also part of another SPV formed by public sector giants with a total corpus of Rs 4,000 crore ($1 bn), in which CIL will contribute Rs 1,000 crore ($253.5 mn) and NTPC Rs 500 crore ($126.7 mn).

BHEL sets up units in UP to boost expansion

December 5, 2007.  As part of its manufacturing capacity expansion to 15,000 MW per annum in the next two years, Bharat Heavy Electricals Ltd (BHEL) is setting up a new fabrication plant and a central stamping unit at Jagdishpur in Uttar Pradesh. The new units are being set up by BHEL at a cumulative initial investment of Rs 306 crore ($77.8 mn). The government had drawn up ambitious plans for additional 165,000 MW capacities to the power generating base in the country during the XIth and XIIth Five-Year Plans. The fabrication plant was being set up to meet the burgeoning requirement of fabricated component assemblies required by BHEL’s major units at Bhopal, Haridwar, Hyderabad and Trichy in view of the company’s capacity augmentation to 15,000 MW.  The plant would produce around 25,000 tonne per annum, including about 16,000 tonne of structures of boilers for direct dispatch to power plant sites in the eastern and northern regions.  The plant will become operational in three years.

Transmission / Distribution / Trade

Textile industry incurs loss due to power trippings

December 9, 2007. Textile industry in Tamil Nadu has incurred Rs 1,000 crore ($254.38 mn) loss due to capacity utilisation loss caused by the unscheduled power trippings. This has also negatively impacted on the jobs as over 20 lakh workers were rendered jobless due to the stoppage of electricity. For every one per cent utilisation loss incurred for a 25,000-spindle unit, the unit incurred an estimated production loss ranging between Rs 10 lakh and Rs 15 lakh per year and in the recent trippings, most mills had incurred 10-15 per cent utilisation loss, according to the apex textile industry body Southern India Mills Association (SIMA).

SIMA demanded the power shortage be distributed equally throughout the State and to minimise the losses incurred by the textile industry, a suitable power cut be announced immediately by the electricity board. In an adverse market condition as the present one faced by the industry, the utilisation loss arising on account of power trippings furthers the deteriorating working condition for the mills. In addition to the normal energy cost of Rs 3.50 per unit, the high tension power consuming textile industry is saddled with demand charge at 47 paise per unit, which is based on the connected load required.

Mahagenco to procure KG gas

December 8, 2007.  The state-owned Maharashtra Power Generation Company (Mahagenco) is close to signing a two-year contract with Reliance Industries (RIL) to procure gas from the latter’s Krishna-Godavari (KG) basin.  According to the state government’s energy department, the deal would enable Mahagenco to get 1 million standard cubic meter per day (mmscd) gas at the price of $ 4.34 per million metric British thermal unit (mmBtu). Gas from the K-G basin is expected to reach Mahagesco plant in Uran from July 2008 onwards. This will ramp up Mahagenco’s Uran plant’s capacity by 250 MW.  It is expected that RIL’s gas pipeline between Kakinada and Uran will be completed by May and the gas will be available at around $5 mmBtu.  Mahagenco was one of the 30-odd entities which had participated in the price discovery mechanism initiated by RIL. The Uran plant of Mahagenco has an installed capacity of 850 MW and is running at 350 to 400 MW due to non-availability of gas. Once enough gas is available, Mahagenco will able to ramp up capacity by another 250 MW. 

Punjab approves projects to upgrade transmission

December 6, 2007. In a significant decision, Punjab government has approved two projects of Rs 3,225 crore ($817.69 mn) for modernisation and up gradation of the existing power transmission and distribution system in Ludhiana, Amritsar, Jalandhar, Bathinda, Mohali and Patiala. Punjab chief minister Parkash Singh Badal took a decision to this effect while presiding over a high-level meeting of Punjab State Electricity Board. The state government would raise around Rs 800 crore ($202.8 mn) as seed money for these projects. Upgradation of the entire power network system had become mandatory both in urban as well as rural sectors because of the 23.91% of total power loss caused due to the snags in the prevalent transmission and distribution system. It was informed in the meeting that the state was losing Rs 1,000 crore ($253.5 mn) annually on this count which was much higher than the national figure. The state government had approved Rs 1,990 crore ($504.5 mn) for transmission project and Rs 1,235 crore ($313 mn) for distribution project. The projects would be completed in two-and-a-half years and help reducing the losses by 15%.

Power overdrawal to attract steeper penalties

December 5, 2007. In a bid to check overdrawal of power and encourage grid discipline, the Central Electricity Regulatory Commission (CERC) has hiked the ceiling rate for unscheduled interchange (UI) charges. Overdrawing power utilities causing danger to north, east, west (NEW) grid, will now have to pay the higher UI charges. The CERC, acting on a petition filed by the state-run PowerGrid Corporation against rampant overdrawal of power by the utilities from the northern region (NR), has proposed to retain zero UI rate at 50.5 Hz and above. Below 50.5 Hz a rise in 8 paise per unit step for each 0.02 Hz fall in frequency is proposed to reach Rs 2.80 per unit for 48.8-49.82 Hz step and then rising in 18 paise per unit step for each 0.02 Hz fall in frequency to reach Rs 10 per unit as the ceiling UI rate for all frequency below 49.02 Hz. The UI has been increased from the existing ceiling rate of Rs 7.45 per unit. While noting that the UI ceiling rate should be above cost of diesel-based generation, the CERC, however, made a compromise and covered only the naphtha cost while revising the ceiling rate. The Commission said that the revision in the UI rate would be in addition to the introduction of congestion charge of Rs 3 per unit. The congestion charge is applicable for northern region (NR) only, and for a situation when frequency is still in normal range but inter regional links are getting overloaded.

Policy / Performance

‘N-deal vital for energy needs’: Kakodkar

December 11, 2007. According to the Atomic Energy Commission chairman Anil Kakodkar, Indo-US nuclear deal is vital for India’s energy requirements as nuclear energy will be an important constituent of the country’s energy basket. Though India has huge reserves of thorium on which the three stage nuclear programme is based, it’s gestation period is longer. The urgency of the deal is because of the rapidly growing energy requirement of the country. According to him, if India can get uranium from other countries then we can generate energy from our stage-I of the nuclear programme. The deal is in line with the country’s sharply rising energy needs. The scientist said that the deal with US would be good for the world also as it will reduce the strain on global fossil fuel resources and the resultant escalation of prices. 

First fast-breeder reactor to be operational by ‘09

December 11, 2007. India’s first 500 MW fast-breeder reactor is likely to be operational by 2009. There are four such reactors being built in the country with the first one at Kalpakkam near Chennai by Bharatiya Nabhikiya Vidyut Nagam (Bhavini). India has huge thorium reserves, which can enable it to sustain 50,000-60,000 MW of power by 2050. A lot will depend upon the fast-breeder reactor being developed in the country. The first 500 MW fast-breeder reactor may be operational by 2009. As more of this gets built up, use of thorium would go up. India has extracted 30,000 tonne of thorium concentrate to prepare for the third stage nuclear power programme. The conversion of thorium into uranium-233 fuel would depend on the rate of growth of the second-stage, fast-breeder reactors. Once the reactor becomes operational, it can use about 30 tonne of thorium for conversion. India’s research on using thorium as nuclear fuel was making progress and it would get a boost if there was foreign co-operation. India has limited reserves of uranium, which suffices only for up to 10,000 MW capacity. Additional resources will have to be imported. This will depend upon India’s initiative with Nuclear suppliers Group (NSG). India is in the midst of signing an agreement with the US.

Tough going for NTPC’s power exchange plans

December 10, 2007. While the first power exchange in the country, the Indian Energy Exchange Ltd, promoted by Financial Technologies India and Multi Commodity Exchange (MCX), is in the process of finalising its members, the second one, proposed by NTPC, is facing birth pangs.  A power exchange (PX) functions on the lines of commodity exchanges and provides a platform for buyers, sellers and traders of electricity to enter into spot and forward contracts.  The proposal for the second PX has been anchored by the NTPC and National Commodity and Derivatives Exchange (NCDEX), with National Hydroelectric Power Corp (NHPC), the Power Finance Corporation (PFC) and the National Stock Exchange (NSE) as partners. Another willing partner, transmission major Power Grid Corporation of India (PGCIL), has been disallowed participation in any exchange by the power regulator. According to a senior official of the central electricity regulatory commission (CERC), a system operator like PGCIL cannot be part of any power exchange. With PGCIL out, NTPC along with NHPC and PFC would own a 50 per cent stake in the yet-to-be-floated firm while NSE and NCDEX would own the other half. The new company will be registered in the next few days. 

Centre to quadruple coal output by 2011-12

December 10, 2007. The Centre is aiming to ramp up coal output by as much as four times the current production levels to 104 mt by 2011-12, according to the Minister of State for Coal. Production during the current fiscal was expected to be 24.14 mt. So far, the Government has allocated 172 coal blocks with reserves of 38.78 billion tonnes to 129 end-users in the public and private sectors. Another 23 blocks are currently being allocated to steel and cement sectors and these blocks have the potential of producing about 700 mtpa of coal. The power sector has been allocated 78 blocks with reserves of 23.68 billion tonnes, which can support power generation of about 1 lakh MW of power every year. The Ministry of Power is currently in the process of implementing a massive capacity addition plan aiming to add over 78,000 MW during the current Plan period. 38 coal blocks allocated in 2003 would come into production by 2009-12 and are likely to produce 104 tonnes coal by 2011-12.

‘N-power capacity to rise 86 pc by 2012’: Govt.

December 10, 2007. The government has drawn up plans to increase power generation from nuclear energy by more than 86 per cent to 7,280 Mw by the end of 11th Plan period (2011-12). The government is proposing to add an additional 3,380 MW of nuclear power energy by the end of the 11th Plan, even as uncertainty prevails over the future of the Indo-US civil nuclear deal. The additional capacity will come from the nuclear plants that are under construction and to be placed before the National Development Council (NDC) for final approval on December 19. Currently, the country has installed nuclear energy capacity of 3,900 MW, which is 3.1 per cent of the total installed capacity of the power sector. As per the document, the government was making efforts to import nuclear fuel from abroad and the effect of this is likely to be visible in the 12th plan period. The Nuclear Power Corporation of India (NPCIL) has indicated a capacity addition of about 11,000 MW during the 12th plan. The government was also likely to involve other PSUs and the private sector in execution of the nuclear power projects in the future. The plant load factor (PLF) of the NPCIL, which increased from 60 per cent in 1956-96 to 82 per cent in 2000-01, came down to 57 per cent in 2006-07 mainly on account of constraints in availability of nuclear fuel. 

Energy sector needs $500 bn during 11th Plan

December 10, 2007. India’s energy sector would require $500 bn worth of investments during the Eleventh Five-Year Plan period. The Indian power sector group companies have achieved 154 per cent growth in market capitalisation indicating phenomenal amount of investors’ confidence. The power sector companies have grown by 19 per cent during 2006, compared to 16 per cent in the year before. The growth cycle turned from negative to positive during 2002-03 and since then it is growing continuously. The utility power, which is produced by the State electricity boards along with the private sector IPPs is at 1.35 lakh MW and is expected to touch eight lakh MW during the next 25 years. For the 11th Five-Year Plan, the Government has set a target of 78,000 MW of new capacity out of which 55,000 MW is already in the process of commissioning. A severe shortage of skilled manpower, increasing concern over greenhouse gases and lack of Government’s commitment towards process simplification in power sector could be the other stumbling blocks in the power sector growth story. India offers 19.33 per cent return on investment compared to 14.3 per cent by China. This particular parameter indicates better investment opportunities in India compared to China. New age transformers and accurate meter reading and digital meter reading from remote locations would help solving power sector problems to a large extent.

Time-bound plan for JLPP

December 9, 2007. A high-level meeting has drawn up a time-bound plan for the expeditious implementation of the mine-cut project and thermal power station of the Jayamkondam Lignite Power Project (JLPP) in 2008. The meeting decided to finalise the feasibility report for the mine and thermal station by February. The environment impact assessment (EIA) and the environment management plan (EMP) would be readied next month. They would be forwarded to the Tamil Nadu State Pollution Control Board for conducting a public hearing in April next year. The minutes of the public hearing will be received in May and the proposal would be sent to the Union Ministry of Environment and Forests in June for clearance by September. Meanwhile, a report on the project would be sent for approval to the Board of Directors of the Neyveli Lignite Corporation in March. The Public Investment Board would submit its report to the Union Ministry of Coal in May.

Hindustan newsprint bags energy conservation awards

December 8, 2007. Hindustan Newsprint Ltd, Kottayam, has won the Kerala State energy conservation award for 2007 under the category of large-scale enterprises. The company achieved a saving of Rs 1.12 crore ($0.28 mn) by implementing various energy conservation measures.

Tribunal upholds tariff charged by Damodar Valley

December 7, 2007. After more than a two-year long legal battle over the tariff for its power supplies, Damodar Valley Corporation (DVC) has gained substantial ground at the Appellate Tribunal for Electricity. According to DVC sources, in its judgment on November 23, the Tribunal has not only upheld the tariff charged by DVC but also opened up an opportunity before the corporation to seek an upward revision of the same in the future. DVC went to the Tribunal in October 2006 challenging an earlier order by the Central Electricity Regulatory Commission (CERC). The CERC order reduced the tariff to be charged by the corporation for 2004-09. This was irrespective of the fact that DVC’s tariffs were lower than those charged by state power utilities of Jharkhand and West Bengal and the major private operators in the region. The corporation generates over 2210 MW coal-based power and has lined up plans to expand the capacity to 9510 MW by 2010-11. The regulator had allowed DVC to recover only 60 per cent of the proposed Rs 1,535 crore ($390 mn) pension and gratuity contribution fund for its 12,000 employees from the consumers. DVC did not have any such fund and was provisioning the pension and gratuity benefits to superannuating employees on pay-as-you-go basis. The Tribunal has also found reason on DVC’s presentation over scope of including certain costs.

Power bonds up to Rs 50,000 may be tax-free

December 6, 2007. Vidyut Vikas Patras mulled to mobilise savings. With an eye on channelising domestic savings into the power sector, the finance ministry is considering granting income-tax exemptions for individual investments up to Rs 50,000 in power infrastructure bonds. It is also considering issuing vidyut vikas patras as a small saving instrument to mobilise savings to meet the envisaged funding gap of Rs 4,50,650 crore ($114.26 bn) for the sector during 2007-12. The measures are being discussed by the finance and power ministries for inclusion in the forthcoming Budget. Among other proposals, the power ministry has suggested tax exemptions on profits from energy-saving efforts by companies. It has also proposed rationalisation of the current duty structure on equipment and fuels to reduce the cost of power for consumers. It has sought lower excise and countervailing duty as well. It has also asked for only two rates of Customs duties, one for imports for mega power projects and the second for others. This duty structure should also be applicable on transmission equipment. To give a fillip to the rural electrification programme under Bharat Nirman, the power ministry has sought complete excise and Customs duty waiver for equipment for decentralised distributed generation projects (up to 5 MW). It has also sought to exempt franchises engaged in management of rural distribution system from service tax. The ministry has also recommended including the power sector in the category of infrastructure facility to ensure tax exemption to operation and maintenance bodies. 

Skoda Power scouts for nuclear biz in India

December 6, 2007. Czech major Skoda Power is keen to pitch for a pie of the nuclear power business in India, as and when opportunities for private sector are opened up. In preparation for this, Skoda Power has joined hands with Atomstroy Export, the Russian nuclear vendor, which is already working on several projects in India. The company intends to offer technology and expertise for nuclear reactors with turbines from 200 Mwe to 1200 Mwe range. Skoda Power has already demonstrated the capability in the 2X1000 Mwe nuclear power stations set up in the Czech Republic. The consortia with Atomstroy Export is involved in building a nuclear power plant of 1060 Mwe capacity in Bulgaria. Skoda Power has also forged a tie up with Enel, the Italian utility company, in the retrofitting of turbines for the nuclear power plant in Slovakia.

Arunachal scraps 2 NTPC projects

December 5, 2007. In a major setback to NTPC’s plans to add hydel-power capacity in the country, the government of Arunachal Pradesh has withdrawn two coveted hydro-electric projects awarded to the country’s largest power generation company. The projects include the 4,000 MW Etalin and the 500 MW Attunli hydro-electric power projects in the Debang valley of the state. This came as a big shock for NTPC, has already allocated considerable resources for timely and successful implementation of these projects. The reason, as cited by the Arunachal Pradesh government in its November 6 letter to the company, is the inability on part of NTPC to deposit an upfront payment of Rs 250 crore ($63.59 mn) to the state government.

SkodaExport bullish on Jharkhand power projects

December 5, 2007. SkodaExport, the EPC contractor from the Czech Republic for executing turnkey projects in large infrastructure sectors such as power, oil and gas, is upbeat on its prospects in the Indian power sector. The company has been chosen L1 in Jharkhand for executing the proposed three, 210 MW, coal-based power units, with investments of approximately Rs 2,300 crore ($585 mn). SkodaExport plans to completely indigenise the projects by forging partnerships with local companies for the civil works, manufacture of boiler and other components. Only the crucial engineering and design work would be done back in Czech Republic. The Czech company is also pitching for a 500 MW project in Tamil Nadu, where the tendering process is on. The company recently completed the modernisation and refurbishment of the Ennore Power plants in Tamil Nadu. They included the 260 MW and 110 MW units, at an estimated cost of $60-70 mn.




Verenex confirms 5th oil discovery in Libya

December 10, 2007.  Verenex Energy confirms its fifth oil discovery D1-47/02 in Area 47 in the Ghadames Basin in Libya. The D1-47/02 new field wildcat exploration well was drilled to a depth of 9,720 feet with the Ensign Rig 28 and was tested at a maximum flow rate of 7,742 barrels of oil per day (bopd) (gross) confirming its status as an oil discovery. The Libyan National Oil Corporation has also confirmed the well as an oil discovery. Measured API gravity of the crude oil ranged from 32 to 59 degrees.

Libya & Petro-Canada sign long term E&P agreements

December 10, 2007. Petro-Canada has signed binding heads of agreement with the Libyan National Oil Corporation (NOC) to convert its existing Participation Agreements and old Exploration Production Sharing Agreements (EPSA) to six new EPSA IV agreements. It is expected that the duration of the new EPSA agreements will be 30 years, well beyond the expiry dates of the existing agreements. This will enable Petro-Canada to design and implement jointly with NOC the redevelopment of major fields and exploration programs in the Sirte Basin. Under the new agreements, Petro-Canada will pay 50% of all development capital and will receive a 12% entitlement share of production. The redevelopment program for existing fields is estimated to require a total investment of $7 bn US gross. Petro-Canada will pay a signature bonus of $1 bn US in three stages, with the first payment due upon ratification of detailed contracts, which is expected some time in 2008. The signature bonus includes $100 mn US for social investment and capability development in Libya. Petro-Canada estimates that there are gross resources of almost two bn barrels of oil associated with the redevelopment program, which includes pipeline and facility upgrades, development drilling and waterflood expansion.

Libya awards exploration permits in gas licensing

December 10, 2007. Libya awarded four potentially lucrative gas exploration contracts to fuel giants Shell, Gazprom, Sonatrach and Polish gas monopoly PGNiG, the first ever given to foreign firms as relations warm between Tripoli and the West. The biggest award went to Algerian firm Sonatrach, in association with Oil India and Indian Oil, which was given four blocks covering 6,934 sq km. Russian giant Gazprom was awarded three exploration blocs with a total area of 3,936 sq km in the southern Ghadames basin. Gazprom beat off competition from Gaz de France, Inpex of Japan, Russian rival Lukoil, Britain's BG Group and PGNiG, agreeing to cede 90 percent of its eventual production to Libya's state-owned National Oil Corporation (NOC). Anglo-Dutch company Shell was handed a two-block contract to explore a 1,790 sq km area in the northern Sirte basin and PGNiG a two-block area in the southern Murzak basin. Shell was awarded its exploration rights following a bid of US $93 mn and 85 percent of its eventual production. The blocks cover a total of 72,500 sq km, an area the size of Scotland.

Sonatrach strikes gas in southwest Algeria

December 10, 2007. Sonatrach has made two gas discoveries in southwestern Algeria, one in the Ahnet Basin and one in the Gourara Basin. Sonatrach has 100 per cent stake in the Ahnet Basin discovery and the Gourara Basin discovery was made in partnership with StatoilHydro. The discovery at OTS-2 (Oued Tesa Araret-2) is located on the perimeter Tidikelt (Block 338a) in the Ahnet Basin.

This well produced gas from two reservoir formations encountered at depths of less than 1200 meters. The second gas discovery was conducted in partnership with StatoilHydro. The TNK-1 (Tinerkouk-1) well produced gas from the Carboniferous reservoir about twenty meters thick. This well is located on the perimeter Hassi Mouina (block 321b) in the Gourara Basin. Seven drilled by Sonatrach as the operator and eleven in partnership with other companies.

Halliburton wins multi-mn contract from Rosneft

December 10, 2007. Rosneft-YNG has awarded Halliburton's Completion and Production Division a multimillion-dollar contract for the provision of hydraulic fracturing services for 317 oil wells in Russia’s Priobskoye Field in 2008. Located in Western Siberia on the banks of the Ob River, the field comprises 5,446 square kilometers (3,384 square miles).

This area is environmentally sensitive and Rosneft will be relying on Halliburton to apply the technological advances to help minimize the operation's environment footprint. In addition, access to the site is often difficult when the Ob River floods in the spring and summer, as 60 percent of the Priobskoye Field is located in the flood plains.

Liberia opens bidding for 10 offshore oil blocks

December 10, 2007. Liberia has opened bidding for 10 offshore oil blocks in its second licensing round. The blocks, each measuring roughly 3,000 square kilometers and extending to about 3,000 meters in depth, will be on offer until the close of the licensing round on June 1, 2008. The company will have data rooms in London and Houston for companies to view available data on the blocks. Liberia's first licensing round was held in 2004. Repsol YPF SA and Woodside Petroleum Ltd. are among the companies developing the eight offshore blocks awarded in that round.

Nippon Oil & Petronas Carigali awarded block in Sarawak

December 7, 2007. Petronas awarded a production sharing contract (PSC) to Nippon Oil Exploration Limited (NOEX) and Petronas Carigali Sdn Bhd for onshore Block SK333 in Sarawak. The award of the PSC signals the possible revival of active onshore exploration activities in Malaysia, as part of Petronas' continuous efforts to enhance and augment Malaysia's hydrocarbon reserves.

The block was part of a concession awarded to Shell in 1907 where Miri, the country's first oil field was discovered. About 80 million barrels of oil was produced from the Miri field before the block was relinquished by Shell in 1981. Under the terms of the PSC, NOEX, with 75 per cent participating interest, will be the operator of the block while Petronas Carigali, the exploration and production arm of Petronas, owns the remaining 25 per cent.

Venezuela's PdVSA signs oil JV with Belarus company

December 7, 2007. Venezuela's Petroleos de Venezuela, or PdVSA, has partnered with Belarus state-run company Belorusneft in a joint-venture company to explore and develop oil and natural gas in the Andean country, one of several joint ventures between the two nations. The new company's activities will focus on fields located in the Guara Este area in the Anzoategui state, and Lake Maracaibo fields located in Western Venezuela. Under the terms of the deal, PdVSA would control 60% of the company and Belorusneft would own 40%.

The accord gives Belorusneft, a small oil company that pumps oil in Belarus, a place among top oil companies working in Venezuela. At the same time, Chavez has strengthened relations with national oil companies from close political allies, such as China, Russia, Belarus, Iran, India, Uruguay and Argentina. Venezuela has also signed a joint-venture accord for a construction and housing firm to address a critical housing shortage in the oil-rich country.

The official gazette notes that 51% of the company will be in the hands of the Venezuelan company and the rest owned by Belzarubezhstroi SA, a company owned by the Belarus government. Venezuelan government officials announced late in the day plans to sign joint-venture agreements to create tractor and mining truck assembly plants in Venezuela.

Petrobras confirms discovery in Espirito Santo basin     

December 7, 2007. Petrobras confirms the discovery of new natural gas reservoirs north of the Camarupim field in the Espirito Santo Basin through the drilling of wells 4-ESS-177 and 6-ESS-168. Both wells were drilled by Diamond Offshore's semisub Ocean Winner. This discovery confirms the high potential for oil and gas in this basin, which may result in the increase of expected recoverable volumes in this area, which is already responsible for a substantial part of the production projects of the Gas Production Anticipation Plan (Plangas).


 Motiva set to break ground on Port Arthur expansion

December 10, 2007. Motiva Enterprises LLC will officially break ground for its recently announced 325,000 barrel-per-day (b/d) refinery expansion in Port Arthur, Texas. The expansion will increase the refinery's crude oil throughput capacity to 600,000 b/d, making it the largest refinery in the U.S. and one of the largest in the world. The upgrades and modernization will lead to new supplies of transportation fuels for U.S. markets, add jobs to the local economy and decrease the refinery's ozone precursor emissions from present day levels. The expansion will bolster energy security in the U.S. by strengthening the supply of gasoline, diesel, aviation fuels and high quality base oils. The new production capacity is expected to be online in 2010 and will increase Motiva's supply of Shell-branded fuels to the company's wholesale and direct supply markets. In all, the refinery will produce about 23 mn gallons of transportation fuels per day. Motiva's expansion will lower most types of emissions from refinery operations on a per barrel basis by utilizing advanced technology in all new system installations and by replacing existing systems. The expansion of the refinery will decrease emissions from present day levels for ozone precursors, specifically nitrogen oxides and volatile organic compounds.

CNPC to build refinery in Weihai

December 10, 2007. China National Petroleum Corp(CNPC), the parent of PetroChina Co Ltd, plans to build a 10-million-ton capacity refinery in Weihai, in eastern China's Shandong province. CNPC, China's top oil and gas producer, signed a memorandum of understanding with the Shandong provincial government on Dec 5 covering major projects and oil, gas sales network. The company did not provide details on the projects. The two parties will jointly build a petrochemical base in Moye island, Weihai, which includes a 10 mt capacity refinery, a 10 mt capacity liquefied natural gas (LNG) project, a 1 mt capacity ethylene plant as well as a 1 mt capacity oil storage facility. The projects involve a total investment of 55 to 60 bn yuan.  (US$1 = 7.4 yuan)

Lukoil commissions Isomerization unit at Yolgograd refinery

December 10, 2007. President of OAO LUKOIL, and Head of Volgograd region, participated in the ceremony held in Volgograd to mark the commissioning of an isomerization unit at OOO LUKOIL-Volgogradneftepererabotka. The installation will produce a high-octane component of automobile gasolines called isomerizate. Its application will enable the Volgograd refinery to start producing gasoline fully complying with the Euro-3 standard in 2008. The capacity of the new unit is 385,000 tons of raw materials per annum. The operations and catalyst license was obtained from UOP (USA). Design and estimate documentation was elaborated by OAO LUKOIL-Rostovneftekhimprodukt and ZAO Neftekhimproekt. ZAO Globalstroy-Engineering acted as a general contractor for construction of the unit.

Marathon signs gas processing deal for Piceance production

December 7, 2007. Marathon Oil Co. has entered into long-term agreements with Enterprise Gas Processing LLC for the gathering, treating, processing, and compression of natural gas produced in the Piceance basin of northwest Colorado. Enterprise will construct 50 miles of gathering lines to connect Marathon's multiwell drilling sites to the partnership's 48-mile, 36-in. Piceance Creek Gathering System (PCGS) for delivery to Enterprise's Meeker processing complex. Gas production is expected to peak at 180 mmcfd. The Meeker complex, which was placed into service in October, is designed to process up to 750 mmcfd of gas and has the capability to extract as much as 35,000 b/d of natural gas liquids (NGL). Phase II of the Meeker complex, which will double the facility's capacity to 1.5 bcfd of gas and 70,000 b/d of NGL, is expected to begin operations in summer 2008. In addition to gathering pipelines, Enterprise also will build a compressor station to deliver gas into the PCGS.

Contract awarded for Colombia refinery expansion

December 6, 2007. Refinería de Cartagena SA has awarded to Chicago Bridge & Iron Co. a contract for a refinery expansion project in Cartagena, Colombia. CB&I will perform the engineering, procurement, and construction for the expansion, including adding 14 processing units. The $80 mn expansion project is designed to increase processing capacity at the facility to 150,000 b/d from 80,000 b/d. The upgraded facility will produce ultralow-sulfur gasoline and diesel from a heavy crude oil slate. Refinería de Cartagena is owned by Glencore International AG (51%) and Ecopetrol, Colombia's national oil company (49%).

Total, Sonatrach plan Algerian petchem complex

December 5, 2007. Total SA and Algeria's Sonatrach have signed a framework agreement to build a $3 bn petrochemical complex with a 1.4 mtpa ethane cracker in Arzew, near Oran, by 2012. The signing follows a memorandum of understanding signed in July. The facility will produce 1.1 million tonnes/year of ethylene, which will be processed into polyethylene (two units with a total capacity of 800,000 tonnes/year) and monoethylene glycol (550,000 tonnes/year). The companies plan to issue technology tenders for the units. Total will invest over $1.5 bn in the complex, which will export most of its products. Feed gas from fields in southern Algeria will be used at the complex. The project would expand the company's petrochemical activities based on world-class facilities. Total holds a 51% stake in the joint venture and Sonatrach 49%.

Transportation / Trade

Angola LNG receives final investment decision

December 10, 2007. Angola LNG Ltd. will become the latest African export project as the partners have taken the final investment decision to start deliveries in early 2012 to the Gulf LNG's Clean Energy regasification terminal in Mississippi. The 5.2 mtpa onshore liquefaction plant in the Soyo region in Zaire province will commercialize gas from Blocks 0, 14, 31, 15, and 18; gas from nonassociated fields; and gas that is otherwise flared. Related gas liquids products will also be produced from the 1 bcfd of gas that will be sent to the plant. Angola LNG is expected to supply as much as 125 mmcfd of gas to state-owned Sonangol for domestic use. Cabinda Gulf Oil Co. Ltd., a wholly owned subsidiary of Chevron Corp., has a 36.4% interest in Angola LNG, which has entered into an investment contract with the Angolan government and Sonangol to develop the project. Other Angola LNG shareholders are Sonangol 36.4%, and BP PLC and Total SA, 13.6% each. Regasified LNG will be sold to the US affiliates of the partners. Total Gas & Power North America will buy and market Total's 13.6% share, around 100 mmcfd.

Njord field gas flowing to European market

December 10, 2007. The first gas from the Njord field in the Norwegian Sea is now flowing through the pipelines towards the European gas market. Njord has thereby entered a new phase, with gas export added to oil production. Njord is now a gas exporter in addition to being an oil producer. An investment of NOK 1.2 bn makes extensive gas production feasible up to 2020. In the initial phase of the Njord field's lifetime the oil was recovered through 11 production wells while four injection wells sent the gas back into the reservoir as pressure support. In phase two, production is maintained with the help of several new production wells and by phasing in additional resources near the existing infrastructure. The field produces about 20,000 barrels of oil per day while gas exports will amount to roughly 6 mcm per day. Gas from Njord is exported through a new 40-kilometer pipeline tied in to the Asgard Transport line which in turn connects the field with the Karsto processing complex, north of Stavanger, and the trunklines to continental Europe.

Metgasco to extend Casino-Ipswitch gas pipeline

December 5, 2007. Sydney-based coal seam methane explorer Metgasco Ltd. is planning to extend its proposed 140 km Casino-Ipswitch gas pipeline further north to BP Australia's refinery on the Brisbane River. The pipeline previously was designed to deliver gas from the Casino area in northern New South Wales to CS Energy's Swanbank power station near Ipswitch, Queensland. The extension results from a tentative 15 petajoules/year (about 14 bcf/year) gas supply deal with BP to supply the latter's Brisbane refinery. This contract follows an 18 petajoules/year (16.7 bcf/year) contract signed last year with Queensland-owned CS Energy. The higher volume through the line will improve the economics of the entire project. The new schedule allows for another 30 months to complete environmental approvals and an additional 8 months for construction of the pipeline. If the timetable holds true, first gas would flow north towards the end of 2010.

Policy / Performance

Iran, China finalise $2 bn oil contract

December 10, 2007. Iran and China's Sinopec signed a $US2 bn ($2.28 bn) contract to develop a major Iranian oil field, a crucial deal for the Iranian energy industry at a time of mounting international pressure. The Iranian oil ministry and Sinopec inked the deal to pump oil from the Yadavaran onshore field in south-western Iran, which was first agreed back in late 2004, at a ceremony in Tehran. The initial estimation of cost of the project is about $US2 billion and the final cost of the project will be decided after the offering of the tenders. The field will be producing 185,000 barrels of oil a day (bpd) within seven years. The signing came at a time when the United States has been pressuring European and Asian firms, including oil majors, to cut their business ties with Iran to exert pressure on the Islamic republic in the nuclear crisis.

The signing shows that there is no lack of investment in Iran and we are solidifying our economic relations with China more. The second message is that if other countries are willing to invest in the big oil and gas fields of Iran they should not lose the opportunity. The deal is one of the biggest foreign energy contracts ever signed by Iran, which holds the world's second-largest oil and gas reserves and is seeking development of its oil fields. Sinopec had asked for a 15 per cent rate of return from its investment but this had been finalised at 14.98 per cent.

The period of reimbursement for Sinopec had been decreased from eight years in the initial agreement to four in the final contract. The first phase to produce 85,000 bpd will be carried out in four years and the second phase to produce another 100,000 bpd will be carried out in another 36 months. In total, the field will produce 185,000 bpd. The 2004 initial agreement also envisaged China's purchase of an annual 10 mt of Iranian liquefied natural gas (LNG) for 25 years, beginning in 2009.

Nigeria, Algeria ponder gas pipeline project

December 10 2007. Nigeria has proposed working with Algeria on the idea of building a transatlantic gas pipeline to make better use of gas reserves in the Gulf of Guinea. The two countries should set up a joint committee to work on the idea and Bouteflika accepted. The two presidents met on the fringes of a summit between Africa and the European Union in Lisbon.

Algeria is the third-biggest gas supplier to Europe and its coastline is on the Mediterranean Sea, unlike Nigeria which has an Atlantic coast. The Nigerian statement did not make clear what would be the benefit of Algerian involvement in a transatlantic gas pipeline project. Both countries are OPEC members and are already working together, along with Niger, on a plan to pipe Nigerian gas across the Sahara. It would then cross the Mediterranean via a growing network of pipelines that now transport Algerian gas. They are still looking for investors.

Nigeria is the world's eighth-biggest exporter of crude oil but even though it has the seventh-largest proven gas reserves in the world it has not developed its gas industry to anywhere near full potential. About 2,5 bcf of gas associated with the extraction of crude oil are burnt off every day because there is no infrastructure to make use of the gas. Nigeria exports about 3 bcf per day through a liquefied natural gas (LNG) plant but is able to supply only about 0,5 bcf to domestic power plants which are starved of gas and would require about four times that amount.

Mexico drafts new refinery plan

December 7, 2007. Mexican state oil monopoly Petroleos Mexicanos is drafting plans for a new refinery to help curb expensive gasoline imports. With refining capacity strained throughout the world, the new plant would lessen Pemex's import bill and free up imported products like gasoline and jet fuel for other markets. Mexico, like many oil producers from Ecuador to Iran, exports crude but imports refined products due to a lack of refineries. Many analysts say a global deficit in refining capacity has contributed to record high oil prices, as higher gasoline prices push up crude prices.

A presentation published on Pemex's web site lists tentative plans to build a new refinery to process 300,000 to 600,000 barrels a day of heavy crude oil. It would cost at least $7.3 bn to construct, and significantly expand the country's 1.6 mn barrel-a-day refining capacity. Pemex plans to present the project to Congress before the end of next June, a deadline set out in the country's budget plan. Pemex is drafting the refinery plan according to current legal guidelines, which forces Pemex to hold a 100% equity stake. The Congress, where members of the Senate energy committee are discussing energy reforms, could change the scope of the project if it allows Pemex more flexibility.

Phase-1 of Russia-China pipeline to cost $12 bn

December 5, 2007. The first phase of a pipeline that will bring crude oil from Russia to China has risen to $12 billion due to the weakening U.S. dollar against major currencies. Past reports had pegged the cost of the project a cornerstone of China's strategy to find enough guaranteed supply to meet its rising crude consumption at $11 bn.

China's policy of capping domestic fuel prices meant there were many risks to the crude export plan. China National Petroleum Corp. and Russia's state oil giant OAO Rosneft were still unable to agree on prices of crude oil supplies to China due to a low benchmark in their original cooperation agreement. As part of the oil supply plan, Rosneft and CNPC agreed to form a joint venture company to build a refinery with an annual capacity of 70 million barrels. The first phase of the pipeline will run to the Russian border town of Skovorodino, where it will connect with a spur line to China.

Costs of the pipeline had risen sharply before, when the initial route was lengthened to run north of Lake Baikal to reduce the potential environmental impact there. Russia and China are planning a second phase of the pipeline, extending it to the Pacific coast, although it isn't clear whether there is enough oil to fill it or when it will be built.



Melewar’s Thai project by ’10

December 11, 2007. Melewar Industrial Group Bhd (MIG) expects its inaugural power plant project in Thailand to generate annual revenue of about RM330 mn when the first phase commences operation in 2010. Its wholly-owned subsidiary Mperial Power Ltd owns 70% of Siam Power Generation Public Co Ltd (Sipco), which has been given the concession licence to build a 450 MW power plant in Ruyong, Thailand.  The first phase involves 160 MW, of which 90 MW would be sold to the Electricity Generating Authority of Thailand (EGAT) and 70MW to G Steel Public Co Ltd for 25 years. The selling price was about 7 US cents per kilowatt hour.

The second phase of another 90 MW were underway and expected these to be concluded by the first half of next year. The final phase involving 200 MW would depend on the off take of the first two phases. Sipco awarded the engineering, procurement and construction contract worth US$ 150 mn to a consortium comprising South Korea's Hyundai Engineering Co Ltd and Japan's Sojitz Corp. The operations and maintenance part, valued at some US$ 100 mn, was given to GE Energy for a period of 25 years. The Sipco power plant is also sourcing its gas turbines from GE. Sipco has also signed a 25-year contract from Thailand’s top energy firm, PTT Pcl, for the supply of gas for US$ 60 mn a year.

FPL wins approval to expand nuclear capacity

December 11, 2007. The Florida Public Service Commission on Monday approved Florida Power & Light Co.'spetition to expand capacity at two nuclear power plants. Miami-based FPL argued that without the increased capacity, the utility would fail to meet its 20 percent reserve margin beginning in 2012. The reserve is especially needed when Florida's temperatures rise and air-conditioning units are in constant operation. The commission approved FPL's request at pre-hearing rather than scheduling a public hearing and a vote by the commission.

The nuclear expansion is part of FPL's plan to increase nuclear-generated power to meet South Florida's high demand for electricity. FPL’s customer base is expected to expand from 4.4 mn to 5.9 mn by 2016. FPL's separate proposal for new nuclear plants comes before the commission in January. Under the plan approved, FPL will add a total of about 414 MW of nuclear generating capacity to two units at Turkey Point near Homestead and two units on Hutchinson Island in St. Lucie County beginning in 2011 and 2012. The expansion is estimated to cost about $1.5 bn while providing long-term savings to customers of $221 mn to $963 mn.

Philippines seeks 1 mt of thermal coal

December 10, 2007. State-run National Power Corp, the Philippines' largest power producer, has issued tenders for 1.08 million tonne (mt) of coal with a total budget of $78 mn for its three remaining coal-fired power plants for next year. The tenders contained in three separate bid invitations are for 6 lots of 65,000 tonnes of coal for the Sual plant with an approved budget of 1.16 bn pesos ($28 mn) and 6 lots of 65,000 tonnes of coal for the Pagbilao plant at a budget of 946 mn pesos. The tender notice is also seeking to buy 300,000 tonnes of coal locally for its Naga-Cebu plant with an approved budget of 1.15 billion pesos.

Demand for Balochistan coal

December 10, 2007. Balochistan plans to set up a coal-fired power plant of 50 MW to overcome power shortage in the province. Last week, the provincial government signed a memorandum of understanding (MoU) with a Canadian firm for undertaking the project by utilising locally extracted coal. Under the deal, Balochistan Power Generation Limited (BPG) and Canadian Everlight Energy Corporation (EEC) would prepare project feasibility and submit it to provincial Thermal Power Board for approval.

The Board would settle matters relating to tariff and supply of electricity between Quetta Electric Supply Company (QESCO) and these companies. The companies would be bound to spend five per cent of their total revenue on development of social sector in the areas where they supply power. Pakistan Steel Mills Corporation (PSMC) also plans to purchase 60,000 tons of coal during the current financial year from the province.

The PSMC chairman recently visited Balochistan and found the coal of good quality that fulfils the Pakistan Steel criteria. The coal can be used for power generation and in different industries. The coal reserves in the province are estimated at 196 mt. Presently about 1.5 mt are being mined from the various fields. The 60km-long Chamalang mines produce good quality coal that ranges from high volatile C bituminous to high Volatile A bituminous with a total reserves of six mt.

Presently, over 80 per cent of the local production of coal is being used by bricks makers, while the rest is being consumed by cement factories to blend it with the imported coal to reduce the cost of production. About one per cent coal is utilised by coal-based power plants. There is no facility of washing plant, and that’s why cement industry is forced to import coal.

There is vast scope for investment in coal-washing plants. Raw coal contains different impurities like sulphur, calcite, clay, rock and shale. This impure coal cannot be utilised in the industry hence impurities must be washed out. For saving energy and cost, there is a need to set up coal washing plants in the province.

According to an estimate, the use of coal instead of furnace oil can result in a saving of about Rs 495 mn per year for a plant producing 3,000 tons of cement per day. According to an estimate cement industry requires around 3.5 million tons of coal to run its plants. The government has decided to increase the share of coal in the country’s energy mix from 7.6 per cent to 18 per cent by the year 2018. In view of the rapidly mounting energy deficit, there is a need to modernise the province’s coal-mining sector.

Coal projects worth $955 mn to bolster local production

December 10, 2007. BHP Billiton and Anglo American, the world's biggest mining companies, approved South African coal projects worth $955 mn (R6.4 bn) as the price of the fuel increased to a record because of rising Asian demand. BHP Billiton would lift production at its Klipspruit mine 67 percent to 8 mtpa. The $450 mn project will boost output from the second half of 2009. Anglo American approved its Zondagsfontein coal project, expected to yield 6 mtpa, for $505 mn. Construction will begin early next year and output is expected in the second half of 2009.

Transmission / Distribution / Trade

Brazil auctions major hydroelectric contract

December 11, 2007. Brazil planned to sell the right to build a 12 bn real ($6.8 bn) hydroelectric project, reviving plans for large-scale dams in the Amazon to meet the energy needs of Latin America’s biggest economy. Paris-based Suez, Endesa of Spain and units of Centrais Eletricas Brasileiras, (Eletrobras), the state-controlled utility holding company, are among qualified bidders. The winner of a 30-year concession to build and run the 3140 MW Santo Antonio plant on the Madeira River must offer the lowest price for electricity.

Santo Antonio is Brazil’s first major hydroelectric project in 13 years, the first of three Amazon river dams that the government hopes will ease the need for fossil fuels. Brazil stopped building large dams in the 1990s as concern rose about their effect on the environment and public finance. The 14000 MW Itaipu dam alone saddled Eletrobras and the government with $20bn in debt. Brazil’s economy grew 5,4% in the second quarter, the last period for which there is complete data, the fastest rate in three years and the second-fastest growth in more than a decade.

Brazil gets 75% of its electricity from hydropower. The three Amazon projects would increase the country’s generation capacity 12%, or 12150MW. The Santo Antonio dam is scheduled to start operating at the end of 2012 and to be fully operational by 2016, when its 45 turbines are expected to generate energy for 10-million homes. Energy companies and consultants estimate the project may cost 12 bn real.

Electricity consumption projected to grow to 20,900GWh by ‘15

December 5, 2007. Electricity consumption in Ghana in West Africa is expected to grow from 6,900 GWh in 2000 to 20,900 GWh by 2015. According to the Strategic National Energy plan, 2006-2020, with Valco Limited in operation, electricity consumption would again reach a record high of about 25,800GWh by 2020, at a moderately high economic growth. Considering the economic targets that have been set under the Poverty Reduction Strategy (GPRS) II, the demand for wood fuel is also expected to increase to 40 mt by 2015 and could reach 4.5 mt by 2020.

Power supplier offers electricity on eBay

December 7, 2007. The high price of energy has been bid up even more in a Connecticut electricity supplier's unusual eBay auction. MXEnergy, one of several electricity suppliers in the state's deregulated market, is offering homeowners and small businesses electricity rates that are locked in, similar to power purchases by large commercial and industrial customers. To promote its business among United Illuminating's 320,000 customers, the Stamford-based MXEnergy is auctioning off 1 megawatt of electricity to the highest bidder before Dec. 13. MXenergy will accept the highest bid on a MW, or 1,000 kilowatts, of electricity and divide it by 1,000 to determine the rate at which the winner can purchase up to 10 MW in a year after signing up with MXenergy.

Policy / Performance

Iran, IAEA start new round of nuclear talks

December 11, 2007. Iranian officials and a team from the International Atomic Energy Agency (IAEA) started a fresh round of talks on Monday in Tehran to resolve remaining issues about Tehran's nuclear work.  The new talks are expected to focus on questions about the source of contamination with weapons-grade uranium found by IAEA inspectors at Tehran's Technical University. In August, Iran and the IAEA reached an agreement for Tehran to clarify the outstanding ambiguities over its nuclear program. Two rounds of UN Security Council sanctions have already been imposed on Iran for failing to heed a UN demand that it halt uranium enrichment.

Consumer prices key to electricity decision

December 8, 2007. Keeping consumer energy prices low will be a priority when the NSW government in Australia meets to deliberate on a proposal to privatise the state's electricity industry. Cabinet will review the Owen Report which recommends selling off the state's electricity generating and retail sectors. A Caucus meeting will follow with a deliberation on the proposal. Consumer price protection had always been a top issue in whether the state or the private sector owns and operates the electricity sector.

Power industry proposes electricity price hike

December 7, 2007. China Electricity Council (CEC), an organization representing the country's power industry, has recently submitted a proposal to the National Development and Reform Commission (NDRC) to raise electricity prices next year. As per the proposal, major coal enterprises in coal-rich provinces have issued a notice that new contracts for electricity coal in 2008 will include a price rise of more than 30 yuan (US$4.05) a ton. This would result in a sharp increase in electricity costs. In the proposal, the CEC suggested the NDRC peg electricity prices to coal prices. It was difficult to predict whether the NDRC would adopt this proposal, especially with China's currently soaring CPI growth. The proposal also suggested administrative regulations on coal prices, saying that if the prices continued to rise, most coal-powered electricity plants would suffer heavy loss. In the first nine months, statistics showed that coal price rose 25 yuan a ton from last year to 304 yuan a ton, an 8.9 percent increase over last year. The National Development and Reform Commission, a macroeconomic agency under the State Council, is the key department in charge of price regulation.

BPU scraps plans for coal-fired plant in KCK

December 7, 2007. After several years of planning, the Board of Public Utilities has shelved plans for a new coal-fired power plant in Kansas City, Kan. The utility’s administration would not include costs for a power plant in the 2008 budget. Instead, administrators would look into building a combustion turbine fueled by natural gas. Initially slated to be completed by 2012, the plant would have been designed to meet the BPU’s increasing demand for power in Wyandotte County. The utility had gone so far as to award a $2.7 million contract to Black & Veatch for preliminary engineering services in 2006. The utility was facing the prospect of additional costs, many arising from environmental regulations, which would push the project far beyond the latest estimates of roughly $600 mn. The BPU is already investing in a small amount of wind energy. The BPU has been the target of civil and criminal investigations from the Environmental Protection Agency.

Renewable Energy Trends


Haryana encourages use of unconventional sources of energy

December 10, 2007. The Haryana government would provide subsidy to those who install solar water heaters in their houses. Under the scheme, a subsidy of Rs 5,000 for 100 litres and Rs 10,000 for 200 litres would be given to those who opt to install these systems. Another scheme had been initiated for providing full financial assistance for installation of solar water heating systems in non-profit registered social institutions such as orphanages, old age homes, working women's hostels, juvenile homes and creches. A special project for installation of such solar systems, SPV street lighting systems, solar cookers in government buildings has been initiated, entailing a cost of about Rs 1.43 crore ($0.36 mn).

Govt urged not to fund bio-fuel programmes

December 7, 2007. A group of farmers, NGOs and intellectuals have called for immediate stoppage of channelising Government funds into schemes and programmes that are aimed at promoting bio-fuels. Briefing newspersons on the outcome of a national meet held on bio-fuels at Pastapur in Medak district, Mr P.V. Satheesh, Director of Deccan Development Society (DDS), said that the increasing focus on bio-fuels could threaten food security of the country as the effort was aimed at growing crops like jatropha and pongamia. Challenging the industry-Government argument that these crops were being grown in wastelands, Mr Satheesh said there was no land that was a waste for the farmers. Besides, bio-fuel production is not climate-friendly since the energy needed for the production and processing such fuels far exceeded the energy output.

Jatropha, he said, is considered to be a ‘hell oil’ by the farmers in certain States as it contained ‘allelopathy’ property, harming flora and fauna in the area. Asking the Government to recognise jatropha as a curse on flora and fauna, he reminded that the bio-fuel crop was considered to be a ‘Pest Bank’, hosting a multitude of pests. “Being carcinogenic, it is also a source of green cancer,” he said. The whole idea is to benefit the automobile industry and automobile users, he said.

The two-day meeting demanded that the government halt targets for conversion to fuel blending schemes until genuine research on fuel efficiency was done. It also opposed conversion of land use that would cause displacement of people. “Food and fibre crops should neither be used for fuel purposes nor be displaced from agriculture,” they demanded. The participants included representatives from Jharkhond Mines Area Coordination Committee, Jharkhandi Organisation Against Radiation, Shetkari Sangathana and Bharatiya Krishak Samaj.

Icrisat gets $1.5 mn funding for bio fuel research

December 6, 2007. Bio fuel research at Icrisat got a shot in the arm with International Fund for Agricultural Development (IFAD) of the United Nations announcing $1.5-million funding over a period of three years. “The project will facilitate farmers and entrepreneurs to utilise sweet sorghum stalks and cassava roots in producing ethanol, and seeds of jatropha in producing bio-diesel”, Dr William Dar, Director-General of International Crops Research Institute for the Semi-Arid Tropics, said. The Inter-Centre project, involving Icrisat, International Centre for Tropical Agriculture and some national bodies, is aimed at popularising the cultivation of sweet sorghum in the Philippines, China, Mali and India.

It would advocate for cassava in Vietnam and Colombia; and jatropha in Mali and India. The programme envisaged sensitising farmers, research partners and other stakeholders in the production and supply chain about biofuel production.

Suzlon to set up wind power plant for ONGC

December 5, 2007. Suzlon Energy has been chosen to execute 50 MW, Rs 500 crore ($127 mn) wind power project for Oil and Natural Gas Corp (ONGC). According to sources, the project involves installation of 34 units of 1,500 KW machines in the Kutch area of Gujarat. The 50 MW wind power project in Gujarat is a major initiative by ONGC towards development of non-conventional sources of energy for the future. Gujarat, with about 1,600 km coastline has a potential to generate about 17,000 MW of wind energy. Suzlon already has a power generating set up in the Kutch and Porbandar districts of Gujarat. ONGC's wind power project with Suzlon in Kutch will help meet the company's requirement of the comparatively costly conventional power, leading to substantial savings in the existing onshore work.

Bio-diesel unit at Vizag

December 5, 2007. Southern Online Bio Technologies Ltd will set up its second bio-diesel unit at the multi-product SEZ near Visakhapatnam at a cost of Rs 90 crore ($23 mn). The APIIC (Andhra Pradesh Industrial Infrastructure Corporation) has allocated 10 acres to take up the 250-tonne-a-day capacity unit at the SEZ coming up at Atchutapuram.

RIL plans solar project in Bengal

December 5, 2007. Mukesh Ambani controlled Reliance Industries Ltd is set to enter the renewable energy business even as Anil Ambani controlled Reliance Energy Ltd (REL) has announced its intention of generating power from renewables. Reliance Industries has decided to set up a 10mw solar plant in West Bengal and sought the help of the West Bengal Renewable Energy Development Agency (WBREDA). Reliance Industries had approached WBREDA in July and after a series of discussions decided to start by setting up a 10 MW solar unit in West Bengal. Although the company did not commit any investment, it has started scouting for land in the state. Purulia is likely to be the place where RIL would set up its solar plant. Reliance plant in West Bengal is like an experimental project but their plan is to make big investments in Rajasthan and Maharastra for making solar power there. West Bengal has a well set regulatory frame work for renewable energy and by the time the project comes up there will be preferential tariff in place too for solar power. The West Bengal State Electricity Regulatory Commission has recently announced preferential tariff for power from biomass, hydro and wind, which are Rs 3.35, Rs3.60 and Rs 4.00 respectively. The Regulatory Commission is likely to announce the tariffs for solar, bio-gas and municipal solid waste power next month. Around 200 MW green power to be produced by 32 Companies would be pushed to the grid. WBREDA has facilitated power purchase agreements with utilities like West Bengal State Electricity Distribution Company, CESC Ltd and Durgapur Projects Ltd, which would draw the power from the producers.


Renewable energy lags in power stakes

December 11, 2007. Renewable energy has become the increasingly poor cousin of fossil fuels, growing at less than a 10th of the rate of non-renewable sources of power over the last generation. An Australian Bureau of Statistics report released underlined the challenge facing the sector in a post-Kyoto environment, with just 5 per cent of the nation's power sourced from hydro, solar, wind and other clean energy. From 1975-76 to 2005-06, production of black coal, natural gas and other non-renewables has jumped by a massive 415 per cent. Over the same period, growth in renewables rose by a far slower 31 per cent. Even in the past five years, when the focus has been firmly fixed on greenhouse emissions, the mix of fuels used to provide energy has changed little. By 2005, Australia's emission levels had risen 2.2 per cent above 1990 levels within the 8 per cent increase allowed under its Kyoto commitments between 2008 and 2012. On a per capita basis, Australians were emitting 17.5 tonnes of carbon dioxide, compared with 11 tonnes for the rest of the OECD.

The nation's energy use has more than doubled since the mid-1970s. As a result, emissions per person have edged downward over the medium term, falling by 14 per cent between 1990 and 2005, partly because of cuts to land clearing rates, preventing the escape of greenhouse gases into the atmosphere. In the past five years, mining has posted the strongest growth in energy consumption, up 50 per cent, followed by manufacturing (14 per cent) and farming (9 per cent). Households recorded a more modest 6 per cent rise, but their cars contributed to transport's status as the biggest single energy user. The average Australian's price sensitivity could also have become a barrier to change. The report observed that people were more aware of green power schemes in 2005 than previous years but less willing to pay extra for green power than previously.

UK plans to ramp up wind-power

December 11, 2007. Britain unveiled plans to generate enough electricity through offshore wind farms to power every home in the country by 2020, increasing production more than 60-fold and changing the look of the country's coasts. The government planned to reach the target through a fourfold increase in the amount of space off Britain's coast allocated for wind farms. The move would change Britain's coasts, but the need for energy self-sufficiency left the country no choice.

The plans would depend on environmental impact studies. The British Wind Energy Association, a trade body which represents the country's wind and marine energy industries, welcomed plans for more offshore wind farm sites, but it would be difficult to raise Britain's wind power production to 33 gigawatts by 2020 from half a gigawatt currently. Eight gigawatts' worth of wind generation projects are already planned, but the limited supply of turbines meant the amount of wind energy produced by 2020 would likely be closer to 20 gigawatts.

Solar energy to power pumps at geothermal energy plant

December 11, 2007. A Roseville-based public power group plans to use solar energy to power the pumps for a geothermal energy plant in Lake County. The Northern California Power Agency, which produces, and distributes electricity to the city of Roseville and other municipal electric utilities, plans to put the solar-power array at the Geysers Geothermal Energy Plant near Middletown. The 1 MW solar-power system, one of the largest in the state, will produce 2.2 kilowatt-hours of electricity per year, enough for 300 homes. It will offset almost 800,000 pounds of carbon dioxide per year. SPG Solar of San Rafael will build the $8.2 mn system, which is expected to begin operating in September. The energy will replace electricity provided by Pacific Gas and Electric Co. to pump Lake County wastewater into the geysers. The resulting steam is used to generate electricity.

ASTM panel passes new spec for B20

December 10, 2007. After nearly six years of collaboration, ASTM has taken a leap forward in the process of creating a new specification that will cover blends of six-to-20 percent biodiesel (B6-B20). The biodiesel blend specification passed out of ASTM International's D02 Subcommittee E at the semi-annual ASTM meetings held in Phoenix last week and will clear the way for greater automaker approval of B20. B20 made with in-spec biodiesel is a good quality, reliable fuel, but OEMs, regulators and customers have demanded formal ASTM passage of a B20 blend spec in order to broaden their support for biodiesel blends. The biodiesel industry is delivering that. The majority of Original Equipment Manufacturers (OEMs) view the adoption of an ASTM blended fuel specification as a key component for full, universal acceptance of B20, a blend of 20 percent biodiesel and 80 percent petrodiesel.

Chrysler has previously announced the company plans to issue formal support for B20 once ASTM has formally approved B20 specifications. According to the ballot, the biodiesel portion of the B6-to-B20 specification must meet the standard for pure biodiesel prior to blending, and the finished blend must meet the widest of the specifications for either No. 1 or No. 2 diesel. Parameters to measure acid number and stability were also added to the finished blend specification as an additional assurance of the fuel's stability over time. In addition, the specifications allow the 90 percent distillation point to be 5 degrees C higher for the blend. The subcommittee also passed ballots that would allow the formal incorporation of up to 5 percent biodiesel into the existing specification for diesel fuel (ASTM D 975) and the existing specification for home heating oil (ASTM D 396). The biodiesel portion must meet ASTM D 6751 prior to blending; the specification limits the biodiesel content to 5 percent and lower; and the finished specifications remain the same as those currently in place for petrodiesel, with no changes. The subcommittee also made refinements to the current standard for pure biodiesel, ASTM D 6751.

$7.7 mn for four biofuels projects

December 7, 2007. The US Department of Energy (DoE) has announced the selection of four biofuels projects in which DoE plans to invest up to $7.7 mn. These projects will demonstrate the thermochemical conversion process of turning grasses, stover, the non-edible portion of crops and other materials into biofuel. Combined with this announcement, just this calendar year, DoE has announced over $1 bn in funding for biofuels research and development (multi-year funding) projects. Combined with the industry cost share, more than $15.7 mn is slated for investment in these four projects. Negotiations between the selected companies and DOE will begin immediately to determine final project plans and precise funding levels. Funding will begin in Fiscal Year 2008 and will run through FY 2010, subject to Congressional appropriations.

California sets key climate targets

December 7, 2007. California set key emissions targets and became the first state to require heavy industries to report their greenhouse gases, major steps in its landmark law to reduce global warming. Starting in 2008, owners of power plants, oil refineries, cement plants and other big polluters will tell the state how much carbon dioxide (CO2) and other gases they spew. By 2010, those reports will be independently verified. The California Air Resources Board set a specific emissions target for the state to meet by 2020. The CARB's actions were required by 2006 legislation signed by Gov. Arnold Schwarzenegger calling for a rollback of emissions to 1990 levels by 2020, a cut of nearly 30 percent from the estimated level if no actions were taken to curb emissions.

$45 mn wave energy deal signed

December 6, 2007. Block Island finds itself at the center of initiatives in both wave and wind energy that are meeting with mixed reactions from the state. The signing of an agreement between the state Office of Energy Resources, the Rhode Island Economic Development Corporation and wave energy company Oceanlinx Limited to create two wave energy plants in Rhode Island coastal waters, including a pilot plant off Block Island could reduce island electric rates. The agreement hinges on state legislators approving a key bill next session to establish a state power authority. A similar bill died in the General Assembly last session.


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