MonitorsPublished on Mar 12, 2008
Energy News Monitor |Volume IV, Issue 39
Peak Oil, the Rise of China and India, and the Global Energy Crisis (part - II)

(MINQI LI Department of Economics, University of Utah, USA)



Continued from Issue No. 37…

Global Warming and Limits to Fossil Fuels

The use of fossil fuels releases large amounts of greenhouse gases that have contributed to global warming. The potentially catastrophic consequences arising from global warming have been discussed widely, including rising sea levels, flood, drought, heat waves, spread of human and crop diseases, decline of food production and a possibility of triggering the next ice age (Kunstler, 2005: 147-66; Lovelock, 2006; Mobbs, 2005: 57-72).

A recent British government report written by a group of economists led by Nicholas Stern argued that if no action is taken to combat global warming, the global economy could shrink by between 5% and 20% over the next two centuries (reported in Financial Times, 31 October 2006). The potential human and ecological costs, however, could turn out to be much greater and the losses may be irremediable.

The Intergovernmental Panel on Climate Change estimated that to stabilise the concentration of carbon dioxide equivalent in the atmosphere at twice the pre-industrial level it is necessary to cut global annual emissions of carbon dioxide equivalent to 8-12 billions tonnes by 2100.

The current global emissions from fossil fuels stand at 27 billion tonnes. This suggests that the global use of fossil fuels needs to be cut by at least 55-70% by the end of the century. However, some argue that even such a reduction may not be sufficient to prevent global catastrophes (Goldsmith, 2005; Trainer, 2005: ch. 1).

Limits to Nuclear Energy

With the coming decline of fossil fuels, nuclear and renewable energies must play growing roles in meeting the world energy demand.

The generation of nuclear electricity uses uranium, which is a finite resource. The World Energy Council estimated the world's potentially recoverable high-grade uranium (including proven reserves, estimated additional resources and speculative resources) to be 10.7 million tonnes (WEC, 2001). The world's current rate of high-grade uranium consumption is about 65,000 tonnes a year. Thus, at the current rate of consumption, the world's recoverable high-grade uranium could last about 160 years. However, if consumption grows at 2% a year, it can only last 70 years.

Although there have been no major nuclear accidents since the Chernobyl accident in 1986, if nuclear energy is used on a large scale, then some human failure will be inevitable, and any nuclear accident could lead to catastrophic consequences. Nuclear reactors produce large quantities of radioactive waste that have hazardous effects lasting hundreds of thousands of years and there is no good long-term solution to the problem of nuclear waste storage (Mobbs, 2005: 96-101; Trainer, 2005: ch. 9).

Limits to Renewable Energies

Renewable energies generally have much less serious environmental problems than fossil fuels or nuclear energy. Renewable energies cannot be exhausted. However, within any given period of time, only a finite amount of renewable energies can be harvested. Unlike fossil fuels or nuclear energy, renewable energies have much lower intensity in terms of volume or weight. Energy production from renewable sources often requires large areas of land.

 The requirements of land impose physical limits to how much renewable energy can be made available. Moreover, renewable energies are characterised by intermittency and variability, which make them unreliable as the principal source of energy. Because of these problems, renewable energies are generally more expensive than fossil fuels. (5)

The estimates of electricity prices (costs) from different energy sources in the UK suggest that while wind power seems to be able to deliver electricity at a cost comparable to conventional electricity, other renewable energies are more expensive by between 50% and ten times.

Prices or unit costs data can be confusing or misleading sometimes, as it is not always clear whether prices or costs are subsidised or not and what items are included. Trainer (2005; 2006b) made direct estimates of capital costs of wind and solar power based on Australian prices. Trainer's estimates suggest that wind power is about 20% more expensive than a coal-fired power plant. Solar power costs range from 3 to 35 times those for coal-fired power.

 If solar power is used on a large scale, then given the intermittency and variability problems, storage would be necessary to deliver a reasonably reliable electricity output. Taking into account storage, the cost of solar power is likely to range from 6 to 35 times that of coal-fired power. (6)

How expensive is too expensive? If the entire world energy supply is provided in the form of oil, then the world's total energy spending would cost only 4% of world GDP. By comparison, electricity is much more expensive. If the entire world energy supply is provided in the form of conventional electricity (primarily generated from coal) then the total energy spending would cost 12% of world GDP. It is equivalent to an oil price of $US79 per barrel. In 1980, in the middle of the second oil crisis, the oil price in real 2000 dollars was $66 per barrel. The world's total gross saving (total world income in excess of private and public consumption, or the part of world income that can be used for capital investment) is about 20-25% of world GDP and net saving (gross saving less depreciation) is likely to be in the range of 10-15% of world GDP.

If the entire world energy supply is provided by an energy input that costs twice as much as conventional electricity, then the implied energy spending would be 23% of GDP, that is, nearly a quarter of world economic activities would have to be committed directly or indirectly to energy supply.

Such a severe burden could force society to sacrifice other essential goods or services in order to divert resources into energy supply. If one takes into account plausible future cost reductions, then any energy input that costs more than three times as much as conventional electricity would certainly be prohibitively expensive. Thus, financial considerations seem to rule out the large-scale applications of solar thermal and solar photovoltaic power plants in the foreseeable future. (7)

It seems that in the three large economies (China, USA and UK), the potential of renewable energies is not large. In China and the UK, all forms of renewable energies have a practical potential to supply about 20% of the present energy demand. In the USA, the total potential from biomass and onshore wind power amounts to about 12% of the present energy demand.

By contrast, Australia seems to have a large biomass potential. However, this is somewhat misleading, as the figure refers to the primary energy supply, or the gross energy embodied in the biomass. To be useful, however, biomass needs to be converted to liquid fuels or electricity. If biomass is used to make liquid fuels (such as ethanol or methanol), the net energy output available for final consumption is about one-quarter of the original energy content of the biomass input. At best, less than half of Australia's present demand for oil and gas may be replaced with biomass (Trainer, 2005: ch. 5).

World-wide, biomass may have a potential to replace about 20% of the world's present oil consumption and this assumes that 600 million hectares, or 40% of the world's total arable land, is used to grow energy crops. Given the constraints of land and water resources, and the very low net energy returns, the actual levels of biomass production in the coming decades most likely will fall below this potential.

Given the intermittent and variable nature of wind power, there would be great difficulty in using wind as a primary source of electricity or energy supply. When wind contributes to a very small proportion of the total electricity production, the problem is insignificant. However, as wind contribution rises, it starts to create an "integration" problem. It is commonly assumed that in good wind regions wind has a "penetration" potential of meeting 25% of electricity demand. But Trainer (2005: ch. 4) believes this is optimistic.

Boyle (2004: 285) cited an estimate that assumes wind power would generate 20% of the world's electricity by 2020. By this estimate, the wind power potential by 2020 would be 5,177 trillion watt-hours or 445 million tonnes of oil equivalent. Suppose world electricity consumption rises by 2% a year from 2020 to 2050 and wind meets 20% of world electricity demand by 2050, then the potential primary energy supply from wind by 2050 would be 806 million tonnes of oil equivalent, about 7% of the world's present primary energy supply.

The UK has a relatively large offshore wind potential. But for Western Europe as a whole, the offshore potential is estimated to be half of the onshore potential (Boyle, 2004: 285). Trainer (2005: ch. 4) cited an estimate that puts the US offshore wind potential at one-seventh of the onshore potential. Offshore wind potential, even if it were large, would not overcome the intermittency and variability problems and would be subject to the same penetration limit as the onshore wind.

Tide, wave and geothermal are unlikely to make a large world-wide contribution (Hayden, 2004: 209-12; Heinberg, 2003: 151-4; Trainer, 2006b). The potential for hydropower is also limited, especially in advanced capitalist countries. Hydropower also has environmental problems (Boyle, 2004: 177-82; 190-1; Heinberg, 2003: 149-50; Kunstler, 2005:119-21).


(5) On the potentials and limitations of renewable energies, see Boyle (2004), Hayden (2004), McCluney (2005), Mobbs (2005: 107-42) and Trainer (2005; 2006b).

(6) The ratios of solar and wind power cost relative to coal-fired power cost used in this paper are somewhat smaller than suggested by Trainer. Trainer's ratios are based on an estimate of coal-fired power plant capital and fuel cost at $A2.8 billion (Trainer, 2005: ch. 2). But, later, Trainer (2006b) suggested a higher estimate at $A3.7 billion. This paper uses the higher estimate.

(7) It is often claimed that the prices of solar photovoltaic cells have fallen rapidly in the past, suggesting that they could keep falling in the future. However, evidence from the last few years suggests that photovoltaic cell prices have stabilised (see Hayden, 2004: 197-203; Meadows et al., 2006: 98). Further, in the case of solar thermal and photovoltaic plants, the cost mainly has to do with the "balance of system" cost or the cost of plant construction, which is unlikely to be affected by technological progress.





to be continued…



Courtesy: Journal of Contemporary Asia

Short-Term Trading of Natural Gas: Some Risks Involved (part – III)

Ahmed El Hachemi Mazighi, Advisor, Strategy & Prospects, Sonatrach- Commercialisation, Algiers, Algeria



Continued from Issue No. 38…

Infrastructure-building risk

Unlike oil, where liquid and flexible markets have been developed during the last 30 years, the development of new LNG chains, which are necessary for the globalisation of the gas business, is very costly, in terms of infrastructure-building. Most often, due to a misunderstanding of the gas business (Banks, 2002, 2003), the risks related to the building of this gas infrastructure are neglected in the literature, even though such risks are highly important.

In fact, the security of gas supply is not only a question of having access to gas reserves; the building of the infrastructure — from field development to consumer equipment in the residential sector — is, without any doubt, the second layer of security of gas supply.

However, with the short-term trading of natural gas, the producer loses the guarantee that it can sell its gas; the volumes it can place on the market become uncertain. As a result, in its long-term planning, the producer will be obliged to replace known quantities on the basis of scenarios on demand growth.

In other words, certainty is replaced by uncertainty which, given the lack of accuracy of forecasts and the difficulty in accessing capital markets, can reduce the willingness of the producer to invest in infrastructure.

One of the lessons learned from the Californian crisis is that investment in capacity is reduced when producers have to face both volume and price risks. A second lesson is that risk-averse producers will only invest in the maintenance of existing capacity, which, when there is demand growth, will create structural disequilibrium and price shocks that are completely out of line with supply security requirements.

Another uncertainty is related to investment in the midstream gas sector (transportation) and in the reinforcement of gas interconnections in gas-consuming countries. Indeed, to make the principle of flexibility operate within a particular area, we need a high interconnection rate, so that excess demand and supply can clear rapidly.

How-ever, this seems to be very difficult to carry out. In a model of the vertically integrated market, the development of midstream gas was “subsidised” through the segments of gas sales to eligible and final consumers.

Indeed, midstream gas is more capital-intensive than the other segments. The unbundling of the different activities of the gas chain, combined with third-party access and regulation procedures in gas-consuming countries, creates disincentives to invest in the midstream and even disinvestment (Mercey, 2003), due to the relatively low return on this vital segment of the gas chain.

On the whole, the short-term trading of gas can be suitable for neither the development of greenfield projects, that are necessary to meet demand growth in the long term, nor the development of the midstream infrastructure. Certainly, long-term con-tracts will continue to be the norm in the gas industry in the coming years.

Concluding remarks

There is no free lunch. Switching from the long-term trading of gas to a short-term trading system is far from providing only benefits. Moreover, flexibility — which is considered to be the main benefit — is not an end in itself.

From the volume, price and infrastructure risks, one can ask which risk is the most threatening.

The price risk — paradoxically — is not, in my opinion, the most dangerous. In the case where markets are liquid enough, volatility is only a reflection of the fact that markets are operating efficiently, but the unpredictability of prices, that results from this efficiency, obliges the producer and the consumer to have recourse to hedging tools or create stabilisation funds, which is costly.

The volume risk requires us to give much attention to the building of storage facilities in the long term, because more and more power plants, in the coming years, will use gas only.

The infrastructure-building risk is certainly the most important risk, because it represents a direct threat to the development of new gas chains that are necessary to meet the long-term increase in natural gas demand.

 It is worth noting that there is a fundamental paradox between the willingness of developing countries to increase the relative share of natural gas and their intentions to increase the short-term trading of natural gas.

In the coming years, TOP contracts will certainly continue to be the norm for the development of greenfield gas projects and recourse to short-term trading will expand, as some long-term TOP contracts reach their expiry dates.




Courtesy: OPEC Review







ONGC investing $4 bn to improve oil recovery: Dinsha Patel

March 18, 2008. According to the Minister of State for Petroleum and Natural Gas, Dinsha Patel, Oil and Natural Gas Corp is investing over Rs 14,000 crore ($3.5 bn) in improving recovery from its major oil and gas fields in the country. ONGC has identified 14 of its major oil and gas fields which contribute nearly 80 per cent of the total production, for implementing Improved Oil Recovery (IOR) and Enhance Oil Recovery (EOR) schemes. The fields identified for IOR/EOR are Mumbai High, Heera, Neelam, Gandhar, Kalol, Sanand, NOrth Kadi, Santhal, Balol, Jotana, Sobhasan, Lakwa, Geleki and Rudra Sagar. The combined production performance of these fields has improved from 52,200 tons per day in April 2000 to 57,078 tons a day by March 2007, an increase of 9.3 per cent. The total incremental oil gain is expected to be 110.82 million tons by the year 2029-30. ONGC during the 10th Plan (2002-07) has made 35 hydrocarbon finds to accrete 676.76 million tons of oil and oil equivalent gas reserves. Of these, 240.88 million tons of oil and oil equivalent gas are recoverable.

RIL's KG block oil field to boost govt revenues

March 18, 2008. Reliance Industries' oil field in its predominantly gas rich KG-D6 block in Krishna Godavari basin will boost government revenues by at least 1.6 billion dollars. According to the Minister of State for Petroleum and Natural Gas Dinsha Patel the 1.6 billion dollar revenues from the MA oil find is in addition to the revenues expected from the development of D1 and D3 gas fields in KG-D6 that lie off the east coast. However, these revenues are dependent upon variation in the projected parameters such as quantum of production, capital costs, operating costs and prevailing oil and gas prices. Reliance is to initially produce 40 million standard cubic meters per day of gas, which will gradually increase to plateau production of 80 mmscmd. Reliance is to begin gas production from KG-D6 later this year.

ONGC sees 1.2 mbpd oil & gas output by ’09

March 17, 2008. Oil and Natural Gas Corp (ONGC), oil and natural gas production was expected reach a total of about 1.2 million barrels per day of oil equivalent (boepd) by 2009. The company would spend about Rs 76000 crore ($18.6 bn), including Rs 453oo crore ($11.1 bn) for overseas expansion, by fiscal 2012 to boost its production. By the next fiscal year that ends in March 2009, domestic oil and natural gas annual production was expected to hit a total of 1.03 million boepd, including 580,000 barrels per day of crude. Overseas production of oil and gas in the same period was likely to reach around 180,000 boepd. The company is of the view that the Rs 76000 crore ($18.6 bn) capex would be mostly funded by the company's internal resources. 

ONGC introduces SAP powered “Reverse Auction” process

March 17, 2008. Oil and Natural Gas Corporation Ltd. (ONGC), the largest Oil & Gas Exploration and Production company in Asia achieved another first by becoming the only PSU to introduce SAP powered “Reverse Auction” process. Termed as “Live Action Cockpit” (LAC), the system will enable ONGC to collect and compare price and bid information of various suppliers in a real-time, open bidding environment. The company said that it strongly believes in adopting world-class processes and technologies to generate better value for its stakeholders. The reverse auction will ensure transparency in the tendering process and thereby generate confidence amongst the bidders. It will also add speed to the process of procurement which will allow ONGC to source best in class technology. On the basis of the pilot project it is estimated that reverse auction will be able to accrue a cost saving of nearly 10%. LAC will be the sole procurement window for all ‘high value’ tenders, valuing more than Rs10mn. This process will provide a level playing field to bidders having necessary techno-commercial capabilities. Adhering to the guidelines of CVC the Reverse Auction process will ensure standardization of the procurement process of ONGC. The LAC will bring in higher efficiency, cost savings and transparency to ONGC’s procurement processes as it continues on its path of being a global Oil & Gas leader. Such initiatives prove that when it comes to harnessing technology for more efficient business operations, public sector companies like ONGC are second to none globally. The reverse auction process enables supplier selection process by facilitating vendors worldwide to participate in the bidding process seamlessly. ERP software implemented by SAP at ONGC, supports industry best practices in procurement and delivers advanced e-procurement. This is among the largest such projects undertaken by SAP in the public sector.


Bathinda refinery assures Punjab to start production by ’11

March 18, 2008. Guru Gobind Singh Refinery Project (GGSRP) assured Punjab Government that Rs. 18,900 crore ($4.7 bn) refinery, proposed to be set up in Bathinda, would be commissioned within stipulated time. GGSRP, a joint venture between HPCL-Mittal Energy Limited, assured Punjab that the plant would positively start functioning from January, 2011. The orders for the critical equipment required for the project had already been placed with the world renowned firms. The implementation of the project would be monitored by the top management from time to time to ensure its completion within the stipulated time frame. The management of the project had decided in principle to set up an industrial training centre in the vicinity of the Refinery to impart skill training to the local youth of the region to enable them to be finally employed in the up-coming project. The proposed training centre would primarily train the youth according to the requirements of the Refinery and to cater the needs of the downstream and ancillary units based on the byproducts of the project.

Essar Oil to raise $2 bn

March 14, 2008. Essar Oil today will raise $2 bn (Rs 8,094 crore) through securities for the proposed expansion of its refining and exploration capacity. The shareholders has approved the raising of Rs 8,000 crore ($1.97 bn) by issuance of Foreign Currency Convertible Bonds (FCCBs), Global Depository Receipts (GDR) and other securities, Essar Oil informed the BSE. 

Gujarat refinery scouts for more land in Vadodara

March 13, 2008. Indian Oil Corporation (IOC)'s largest refinery at Koyali in Gujarat is bracing for a bigger role in the coming years. The refinery, which was commissioned in 1965, is scouting for more land around the Koyali region to house its major proposed projects. The refinery is close to acquiring 25 acres of land near Koyali and is in negotiations with land owners to acquire a large chunk of land to add to its existing facilities. The company has set up a committee for the purpose of land identification. Sources said initial talks also explored applying for an SEZ status for the newly-acquired land but the proposal was yet to be formalised. The drive for acquiring more land comes at a time when the refinery is set to undertake two significant projects at its existing facility. These include setting up of a Rs 2,000-crore ($494.8 mn) paraxylene plant for which in-principle approval has been received. Paraxylene is the naphtha obtained from crude oil. Its primary commercial use is as feedstock for purified terephthalic acid (PTA), which is the main ingredient of polyester. The refinery will also undertake a residue upgradation and quality improvement project at a cost of Rs 5,693 crore ($1.4 bn). The project is expected to be commissioned in January 2010 and would process increased quantity of high sulphur crude among others. The refinery raised its capacity from 12.50 million metric tonne per annum (mmtpa) to 13.70 mmtpa this year. Aviation turbine fuel (ATF), which currently makes up 2.5- 3 per cent of its production is being looked as a high growing product in the coming years considering the aviation boom. IOC had recently signed a memorandum of understanding (MoU) with Ahmedabad-based Deep Industries, an oil and gas services company, for exploring the possibility of joint development of two CBM blocks, three marginal gas fields and marketing of gas. The feasibility study for the joint collaboration undertaken recently was expected to be completed within six months. 

Indian crude basket crosses US$100 per barrel

March 12, 2008. With crude oil futures in the US nearly crossing the US$110 per barrel mark, the Indian crude basket has crossed US$100 a barrel. The Indian crude basket reached US$100.17 per barrel, up 29 cents from March 7. The average crude oil price of the Indian basket in the current fiscal year is around US$78 per barrel as against US$62 in the last financial year. This is expected to lift the oil import bill in the current fiscal. Last year, the oil import bill was US$57bn. The Indian crude basket comprises Oman-Dubai sour (high sulphur) grade crude and Brent dated sweet (low sulphur) crude in the ratio of in 58:42. Meanwhile, crude oil retreated from a record in New York as the dollar gained after the Federal Reserve said it would lend up to US$200bn of Treasury securities in exchange for debt, including mortgage-backed securities. The dollar rose the most in six months against the yen and climbed from a record low versus the euro.

Transportation / Trade

Cairn India places $625 mn equity

March 18, 2008. Oil exploration and production company Cairn India raised $625 million (Rs 2,534.60 crore) through a private placement. The company has sold 5.97% of its equity to Malaysia’s state-owned oil firm Petronas and the Singapore-based private equity firm Orient Global Tamarind Fund. With this, Petronas will consolidate its stake in Cairn India to 12.7% from 9.93%. This stake sale will reduce Cairn Energy’s stake in Cairn India to 65%. According to the company this private placement will help the company meet its investment plans and provide greater financial and operational flexibility. Meanwhile, Cairn India plans to invest $500 million to build a 600-km pipelinefrom its biggest fields in Rajasthan to coastal state of Gujarat. The pipeline is yet to be cleared by the ministry of petroleum.

Confidence Petro enters into JV with US company

March 18, 2008. Confidence Petroleum India has entered into a joint venture with Energtek Inc to provide clean and affordable pipeless natural gas supply to automotive and industrial consumers. Energtek is a US based company engaged in manufacturing natural gas and adsorbed natural gas technology. It has subsidiaries in US, India, Ukraine, and Israel. Adsorbed natural gas technology provides cost-effective storage of natural gas, by maximising tank storage capabilities. Adsorbed natural gas technology utilizes activated carbons placed inside the tank to adsorb greater quantities of gas, similar to a sponge. In the first phase of the joint venture, Confidence Petroleum will make an investment of Rs 100 crore ($24.8 mn) for co-ownership of Energtek's subsidiary Primecyl LLC.

A new subsidiary of Primecyl LLC, Confi Energtek Asia, will be established in India to carry the joint venture businesses in India and throughout Southeast Asia which includes Bangladesh, Indonesia, Thailand, Singapore, Philippines and Pakistan. Primecyl LLC is also the owner of Ukcyl, a manufacturing facility for high-pressure cylinders in Ukraine. Confidence Petroleum plans to establish in the natural gas energy segment. This JV is one step towards goals of the company. Currently, there are over 1 billion motor vehicles on the road worldwide, and a growing majority of oil in the world is consumed annually by automobiles. Natural gas is the most practical existing motor fuel alternative to Petrol. The company plans to take ANG across India and make it available across all small & major cities of India.

IOC begins piped LPG in North-East

March 17, 2008. The Indian Oil Corporation (IOC) launched its first reticulated LPG supply system, which is also known as 'piped LPG' and has gained popularity in other parts of the country, in North East. In a reticulated system, the distribution of LPG to the customers is done through a pipeline network with metering facility. LPG is sourced from centralised cylinder bank or bulk LPG storage facility housed in the premises of the building. This system of LPG supply was launched in the country around one and half years back. IOC is now looking North East and wants to make the system popular.

In case of private apartments, the builder or the residents need to make the necessary investment, which would cost around Rs. 10,000 to Rs. 15,000 per flat depending on the number of flats and layout. In the case of commercial and industrial establishments, IOC "may invest" depending on the viability of the project. The advantages of reticulated system are that it ensures continuous supply of LPG, besides payment at the end of billing cycle for used quantity only. It also frees the consumer from the hassle of ordering a refill and waiting for delivery. 

Moreover, the reticulated connection of LPG comes with enhanced security and has in-built safety system that ensures LPG supply shut off in case of leakage. IOC conducts periodic safety audits to check the performance of the system in individual apartments. The reticulated system is also compatible with the piped natural gas distribution system, which has already gained popularity in parts of Assam. On all India basis, IOC has commissioned reticulated system in Pune, Kolkata, Chennai, Coimbatore, Kochi and Hyderabad and supplies piped LPG to as many as 4,900 flats.

Gujarat gas lines up $37 mn for household gas connections

March 17, 2008. Ahmedabad-based Gujarat Gas Company Limited (GGCL), primarily engaged in procurement and distribution of natural gas, is now focusing on household gas connections. The company has earmarked Rs 130-150 crore ($32 – 37 mn) for the same during 2008. GGCL will start providing household gas through pipeline in Kim, Karanj, Vyara, Bardoli, Jhagadia, Vilayat, Sachin, Bardoli, Olpaad, Pal, Veddabholi, Mota Varachha and Suroli this year. As of now, the company’s pipeline network covers over 2,100 km. GGCL has its base in the golden corridor of south Gujarat. It is establishing a pipeline network in the Vapi GIDC area.

Confidence Petro to acquire Agwan Coach

March 13, 2008. Confidence Petroleum India Ltd. has entered into a MoU for acquiring Mumbai-based petro logistics company Agwan Coach Pvt Ltd. The acquisition of Agwan Coach finds synergy with the existing business of the company and will increase the strength and support the bottling business. Confidence Petroleum is the flagship company of Nagpur-based Confidence Group involved in the business of LPG Cylinder manufacturing, LPG Bottling, LPG Marketing, LPG Blending, Auto LPG Cylinder Manufacturing & Auto LPG Dispensing for more than a decade. Agwan Coach is in the business of providing logistics support to oil companies from the last 14 years. Agwan Coach will become a 100% subsidiary of Confidence Petroleum.

Policy / Performance

ASSOCHAM for uniform VAT on Petrol & Diesel

March 14, 2008. Although sales tax has been abolished but state governments continue to subject oil companies to sales tax which varies from 33% to 18.9% in case of petrol and 34% to 8.23% for diesel and therefore it is suggested that a uniform VAT of 8% be levied on petrol and diesel so that oil companies are able to stand the burden of rising crude oil prices. These observations are made by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) on taxation part for petroleum products, saying that in addition to sales tax, the states continue to levy entry tax/octroi on movements of crude which also varies in different states between the range of 4% to 2% and thus put an additional burden of taxation on oil companies, that lead to shrinkage of their margins.

The element of taxation on petrol and diesel is to the extent of about 140% and therefore, at least their should be a uniform VAT of 8% on petroleum products particularly that of diesel and petrol so that oil companies are given some respite from higher crude oil prices internationally and aam adami is also not subjected to unnecessary burdens. The share of tax in the selling price of petrol in Sri Lanka, Thailand and Pakistan is 37%, 24% and 30% respectively.

 In the case of diesel, the other countries have kept the taxes to less than 20%. Out of the retail price of petrol in Delhi, 57% is tax component. For diesel, this component is 35%. The Chamber has also pointed out that ever since cess was imposed on diesel and petrol, the government collected Rs.65,000 crore ($16.1 bn). This amount is diverted to which account is not known to the public and should be suitably utilized for development of overall petroleum sector.

Although, with the recent hike in petrol and diesel prices, the oil companies are likely to get some relief but their losses would exceed Rs800bn for current fiscal as crude oil prices have gone up beyond imaginary levels and therefore, in the current budget session itself, the government should sacrifice its tax collections in the form of custom and excise on crude oil and rationalize the local levies and create consensus for uniform VAT of 8% on petrol and diesel. The Chamber stressed that the oil companies in the government sector should also be encouraged for export of petroleum products just as the private sector does it so that companies like Indian Oil Corporation Ltd., Bharat Petroleum Corporation Ltd., Hindustan Petroleum Corporation Ltd. etc. also avail of the benefits of duty drawback scheme. The Chamber is also of the view that the government should gradually phase out subsidies extended to sectors like food, fertilizer and petroleum and particularly this exercise should be commenced with energy sector as on the one hand the government claims huge outgo of its exchequer towards energy subsidies and on the other hand, it taxes the petroleum companies in the downsteam sector with heavy taxation burdens, which ought to be rationalized in the overall national interests.

GAIL plans arm for city gas supply

March 12, 2008. GAIL India, the country’s largest transporter and marketer of natural gas, will set up a wholly owned subsidiary to sell gas to households, vehicles and industries in cities across the country. GAIL will register the new company in next 2-3 months. The government-owned gas utility has already identified 17 cities to bid for gas distribution rights, for which the new company plans to spend around Rs 500 crore ($124 mn). The new company will bid for all new city gas distribution projects that the petroleum and natural gas regulator plans to offer. The company would have an equity capital of Rs 200 crore ($49.6 mn) and borrow another Rs 300 crore ($74.4 mn) for implementing its projects. The company will have a five-member board with GAIL chairman doubling up as the chairman of the new subsidiary. The setting up of the subsidiary will also help in compliance with the requirement of unbundling of the marketing and transportation functions under the petroleum and natural gas regulations.

GAIL already has joint ventures with other gas companies for distribution in various cities across the country. GAIL’s equity share in the existing joint ventures, such as Indraprastha Gas in Delhi and Mahanagar Gas in Mumbai, will not be transferred to the new company. The new subsidiary will also take up a compressed natural gas (CNG) corridor project for setting up CNG stations along highways. Initial capital of Rs 35 crore ($8.7 mn) has been earmarked for this project. The share of gas for distribution to cities in the country is around 4 per cent of the total available. In European countries, almost 40 per cent of the available gas is supplied to retail customers in cities. 



Indiabulls Power wins power plant bid in central India

March 18, 2008. Indiabulls Power Services Ltd, a unit of Indiabullls Real Estate, has won a bid to build a 1,600 MW power plant along with a coal mine in central India. The power plant, situated in Chhattisgarh state, will sell 65 percent of the power to the government at 81 paise per unit and the rest to private users. The company plans to sell 35 percent of the power at 4 rupees a unit and the overall sale price of power from the plant would be 2 rupees a unit. The coal mine has reserves of 350 million tonnes, which will be used to generate power.

China Light pips Lanco in bid for Haryana project

March 18, 2008. Hong Kong-based China Light and Power Holdings has emerged the lowest bidder for setting up the 1,326 mw power generation project at Jhajjar in Haryana. CLP had quoted a price less than Rs 3 a unit, while Lanco Infratech emerged the second lowest bidder at Rs 3.04 a unit. The third bidder was Torrent Power. Haryana Power Generation Corp is setting up the Rs 7,000 crore ($1.7 bn) power plant. Coal India will supply coal for this power plant through its subsidiaries Central Coalfields and Mahanadi Coalfields. The project is likely to be awarded to CLP next month and is likely to be commissioned by 2011-12 (April-March). 

Dhoot plans power units

March 17, 2008. Kolkata-based real estate development company, Dhoot Group has planned to invest Rs 1,000 crore ($245.6 mn) in real estate projects in West Bengal over the next two years. Some of the other projects of the company included installation a total of 11 MW power generation capacity in Darjeeling and 3 MW wind power generation capacity at Medinipore. According to the company on an average the investment needed for the generation of 1MW of power was close to Rs 35 crore ($8.6 mn). 

NTPC commissions 2nd unit at Kahalgaon project

March 17, 2008. National Thermal Power Corporation Ltd (NTPC) announced that the Second Unit of the 500 MW Kahalgaon Thermal Power Project - Stage II in Bihar has been successfully test synchronized on March 16. With the commissioning of this unit, the total running capacity of Kahalgaon Thermal Power Project is 1840 MW and the total installed capacity of the company is 29,144 MW.

R-Power to pick Indonesia coal mine

March 17, 2008. Reliance Power, the flagship power company of the Anil Dhirubhai Ambani group, has struck a deal to buy out a coal mine in Indonesia located in South Sumatra. The valuation of the coal mine, based on its reserves, is estimated to be around Rs 20,000 crore ($4.9 bn). The coal mine, which has resources of 2 billion tonnes, is spread over 100,000 acres, equivalent to Greater Mumbai area. The greenfield coal mine, a discovered asset, will be the prime source of fuel for Reliance’s power project in Krishnapatnam in Andhra Pradesh. It is estimated that the Krishnapatnam ultra mega power project would require about 14 to 15 million tonnes of coal every year.

Reliance Power is understood to have acquired the coal mine for about Rs 1,000 crore ($245.6 mn). It has acquired 100% interest in this coal mine. Experts say that this coal mine could be compared to one of the largest coal mines in India — the Gevera coalmine — in Chhattisgarh which has reserves of 1.2 billion tonnes and is producing around 35 million tonnes annually.

Given that the acquired mine has resources of 2 billion tonnes, it is expected that the production from this mine should be more than the largest mine in India. Although, the coal from this mine would be brought in for the Krishnapatnam project, it would also fuel other coal based power projects of the company. The acquisition is significant as it India is competing with energy hungry countries like China to acquire stakes in oil and coal blocks and secure energy security.

Tata Power, another leading power company which won the first imported coal based power project at Mundra have also bought a 30% stake in a coal company Bumi in Indonesia to meet its coal requirements. Other power and steel companies are also looking at Indonesian coal reserves with interest. In fact, the coal special purpose vehicle (SPV) formed by five leading public sector undertakings (PSUs) including NTPC is also likely to make its first coal acquisition in Indonesia. Indonesia presents an attractive market for Indian companies due to its proximity to country's shores.

Maharashtra signs MoU with Malu Paper

March 16, 2008. The Maharashtra government signed memorandum of understanding (MoU) with Malu Paper Company. Malu Paper will set up a newsprint manufacturing unit at Saoner taluka in Nagpur district for Rs 290 crore. The plant will have a capacity to manufacture 49,500 tonnes of newspaper print and 82,500 tonnes of writing and printing paper. The company will also set up a 15 MW captive power plant.

NCL, Neyveli plan $1 bn power plant

March 14, 2008. Northern Coalfields Ltd (NCL) and Neyveli Lignite Corporation (NLC) will be investing Rs 5,200 crore ($1.3 bn) for setting up a 1,000 MW pit-head power station at Gorbi mines in the Singrauli Coalfields. The scope of the project also includes mine development. While Rs 4,500 crore ($1.1 bn) would go in for setting up the pit-head power unit, another Rs 700 crore ($173.2 mn) would be invested for development of mines. The two PSUs have already inked a memorandum of understanding (MoU) to go ahead with the project.

The two companies would be forming a special purpose vehicle for the pit-head power unit and mine development. NLC is also holding talks with Mahanadi Coalfields (MCL) for setting up a 2,000 mw pit-head power unit at Vasundhara mines in the Ib Valley coalfields. The country’s largest coal producing company, South Eastern Coalfields, (SECL) has already entered into an MoU with Chhattisgarh State Electricity Board (CSEB) for setting up another pit-head power station.

According to the CIL, the necessity to set up pit-head power stations was mostly because of evacuation problems currently faced by its subsidiaries such as MCL and Central Coalfields. Huge amount of coal is lying unutilised in the Manoharpur and Gopalpur blocks of MCL. Similarly, north Karanpura coalfield in the CCL area is also facing evacuation problems.

With the Tori-Sibpur coal evacuation railway line yet to take shape, there is virtually no material movement from some parts of the Central Coalfields. The setting up of the pit-head power station at Gorbi mines will help NCL directly feed the power stations of Panipat, Rajghat and Indraprastha. Meanwhile, proposals are currently being looked into for expansion of capacity of the Jayanta coalmines in the Singrauli coalfields. Like other CIL subsidiaries, NCL is desperately trying to combat evacuation problems currently faced in the Singrauli coalfields. NCL currently has 8 open cast mines and no underground mines.

Jindal Stainless to enter power sector

March 14, 2008. India's largest stainless steel producer, Jindal Stainless Ltd, plans to set up an independent power project in Orissa. The company is setting up a separate firm, Jindal Infrastructure & Utility Ltd, for an infrastructure foray and will kick off with logistics first and then will enter the power sector. The parent would invest up to 5 billion rupees in a phased manner for setting up the firm.

Vedanta inks pact with West Bengal for power projects

 March 13, 2008. Vedanta group signed a development agreement with the West Bengal Industrial Development Corporation (WBIDC) for a Rs 20,000 crore ($4.9 bn) aluminium and power project. The project entails setting up a 6.5 lakh tonne smelter and a 3,000 mw power plant at Bidhanbagh in the Burdwan district. The plant would be operational within three years. Out of the total capacity of 3000 MW, the 1,500 MW would be for captive use and the balance could be supplied to the metals park.  The group has decided to locate the project in West Bengal because of the availability of coal. The project would create direct jobs for 2,500 people.

NTPC to invest $3 bn for adding 2.7 GW in FY09

March 13, 2008. As part of its ambitious plan to become a 50,000-MW company by 2012, state-run NTPC Ltd said it will invest Rs 13,000 crore ($3.2 bn) for adding 2,700 MW capacity during the next financial year. On funding, it said it would be a mix of equity and debt in 30:70 ratio. Its spending plan for FY'08 was Rs 11,000 crore ($2.7 bn). As part of the 11th Five Year Plan, NTPC aims to become a 50,000-MW company by 2012. The company is seeking three million LNG import from Nigeria.

Transmission / Distribution / Trade

JSW firms sign coal shipping deal with Japanese co

March 18, 2008. Sajjan Jindal’s JSW Steel Group has signed a $2 billion deal with a Japanese shipping firm for transportation of coal over ten years. JSW Steel and JSW Energy have contracted Tokyo-based Kawasaki Kisen Kaisha Ltd to ship coking coal and steaming coal on ten vessels. Ports of loading under these contracts could vary, but the coal will be imported exclusively from Australia and Indonesia.

The transport volume for the two companies could reach 12 million tonnes by 2015, when all the vessels enter the service. JSW Steel, which produces 4.5 million tonnes of crude steel, is expanding an existing mill at Vijaynagar and plans to build two greenfield mills in Jharkhand and West Bengal.  JSW Energy is expanding generation capacity to 15,000 mw by 2015.

Power shortage rises to highest level in Jan

March 18, 2008. According to the Centre for Monitoring Indian Economy monthly report the country’s power shortage rose to its highest level at 12.8 per cent in January 2008 as compared to 12.51 per cent in January 2007. The report said that growth of total power generation in India receded to 3.5 per cent in January. However, at 60.21 billion Kwh, the power generated was 1.7 per cent higher than the month-ago level. The country's total power generation has steadily increased from 58.20 billion Kwh to 60.81 billion Kwh in May 2007 and 59.70 billion Kwh in October 2007 and touched a high of 60.21 billion Kwh in January 2008. 

The year-on-year rise in hydro-power generation of 6.5 per cent was nearly offset by an equal fall in power generated by the nuclear plants. During January, thermal power output rose 3.9 per cent to 50.68 billion Kwh on the back of 9.2 per cent rise in coal dispatches. A healthy 5.5 per cent rise in thermal power generation together with a 9.6 per cent surge in hydel power output led to 6.3 per cent increase in total power generation during April-January 2007-08.

Power supply rose 6.5 per cent in April-January, while the demand for it increased by a lower 6.1 per cent, thus, leading to an improvement in power situation in the country with average power deficit marginally lower at nine per cent. 

BHEL bags order for NTPC’s Bihar project

March 18, 2008. Power equipment maker Bharat Heavy Electricals (BHEL) has secured order worth Rs 2,030 crore ($504.3 mn) for supply of main plant package to a 1,000-mw project in Bihar, being set up by NTPC and the Indian Railways. The order for the 1,000-mw Nabinagar Thermal Power project has been placed by Bhartiya Rail Bijlee Company, a JV of NTPC and the Indian Railways. With this, BHEL has won all the thermal power plant orders finalised by NTPC and its JVs.

Power scenario bleak in K`taka

 March 17, 2008. The state-owned Karnataka Power Transmission Corporation Limited (KPTCL), which handles transmission and distribution of power, is beginning to find itself in a piquant situation as it can afford to supply only about 125-130 MUs per day by harnessing all the resources at its disposal. In fact, when the demand for power peaked to 141 MUs per day in the summer of 2007, the effects on the common man and the industry were quite harsh. According to the KPTCL’s own projections, the total power required during February-May 2008 is 12,981 MUs and the power available from all sources is 11,155 MUs. By the end of May, power deficit is likely to touch 1,826 MUs and that would manifest in more power cuts. What has compounded the problem is the Union government’s recent decision to divert 100 MW of Karnataka’s share in the central grid to Tamil Nadu because of political compulsions. 

Reliance Energy eyes road, rail deals

March 17, 2008. According to the Reliance Energy Ltd, it will focus on infrastructure projects in its home market, where it sees the biggest opportunities. Reliance Energy, which is seeking shareholders' approval to change its name to Reliance Infrastructure, has diversified into construction in recent years. The firm has several projects underway that will require about $3.5 billion in capital expenditure, and is committed to developing two large special economic zones in India over 10 years at a cost of $10 billion.

Genus Power merges power unit of Genus Paper with self

March 17, 2008. Genus Power Infrastructures Ltd’s  board has approved spinning off a 6-megawatt power unit of Genus Paper Products. The power unit will be, now, part of Genus Power Infrastructures, it said in a statement. Shareholders of Genus Paper would get one equity share of Genus Power for every 60 equity shares held by them.

Delhi asks to Centre for more power

March 15, 2008. In an attempt to bridge a possible gap between peak demand and supply in the summer months, Delhi government has written to the Centre asking for up to 22 per cent allocation of their cheap power. The quantum of power- up to 350 MW- is urgently required by the Capital to avoid a power crisis when the temperature rises in the peak months from April to July.

The Union government has unallocated power at its disposal which it can allocate according to the needs of the states and the situation. Last month the Delhi government was worried that the promised 400 MW power from DVC was not going to come through on time and had even written to the Union power ministry over the issue. Delhi power secretary Rajender Kumar is of the view that from next summer, there will be no problem as Delhi will start getting power from Jhajjar power plant and one unit of the Bawana plant is also likely to become operational. DVC will also give the state the full quantum of 400 MW supply. NDPL’s 108-MW plant too will start production by June, 2009.

Policy / Performance

Coal India to launch e-auction for futures soon

March 18, 2008. Coal India will launch e-auction for forward contracts of coal from March 28, offering mostly high-grade coal from underground mines. A forward e-auction of coal would be held on March 28, where high-grade coal from Western Coalfields Ltd. will be offered. As per the auction schedule, the second forward e-auction would be held on March 31, in which coal from Northern Coalfields Ltd. would be offered. This will be followed by the offer from Mahanadi Coalfields on April 7, from Central Coalfields on April 10 and from Eastern Coalfields on April 15.

 Most of the underground mines run at a loss and since policy dictates that the selling price should recover production costs, customers should expect that the reserve price of superior coal from such mines would be higher than spot prices. The average spot price is currently at a 130% premium to the notified price and Coal India expects the premium to be higher in the forward e-auction.

BHEL, RPL may plug into largest PPP project

March 17, 2008. In what could transform into the biggest public-private joint venture in the power sector, public sector Bharat Heavy Electricals (BHEL) and Reliance Power (RPL) are exploring possibility of a tie-up for equipment manufacturing.

Reliance Power recently announced its intention to venture into power equipment manufacturing. The company, which is part of the Reliance-Anil Dhirubhai Ambani Group (R-ADAG), is in talks with the public sector engineering major to leverage its expertise in manufacturing. BHEL and Reliance Power would have equal equity partnership in the proposed special purpose vehicle (SPV).

Both the companies would have 50:50 equity partnerships. BHEL is tying up with several companies for increasing its manufacturing capacity. The government has set a target of adding over 78,000 MW of generation capacity during 11th Plan. BHEL would be able to meet just over 50% of this target even with its proposed expansion.

The company is, therefore, looking at all options to expand its manufacturing base. Reliance Power on the other hand has plans to set up 13 projects with total capacity of 28,200 MW. Of this, 10,300 MW is gas-based, 3,300 MW is hydel and the rest is coal-based. While the company is looking all over the globe for equipment suppliers, it has favoured its own manufacturing facilities to reduce cost of generation and timely completion of projects. It is expected that the proposed JV with BHEL would not be restricted for captive use of Reliance Power and venture would look for commercial business from other power stations too.

Electricity on demand by 2012: Shinde

March 17, 2008. Government said the country will have electricity on demand by 2012 and it needs nuclear energy to meet future demand. According to the power minister Sushilkumar Shinde, 78,577 MW electricity generation capacity will be added during the XIth Five Year Plan (2007-12) Period. He said that target for the XIth Plan does not include captive power plants being set up by industries.

The country had added 54,000 MW generation capacity during the last 15 years (8th, 9th and 10th Plans). He also pointed out that the country needs nuclear power for its future energy needs). According to him the Government proposes to introduce a restructured Accelerated Power Development and Reforms Programme (APDRP) in the XIth Five Year Plan to cut transmission and distribution losses. The APDRP was launched in 2002-03 with the objective of encouraging reforms, reducing aggregate technical and commerical loss and improving quality of supply of power. 

Haryana to invest $6 bn in power sector in 11th Plan

March 16, 2008. To augment power generation and strengthen its distribution system in the state, the Haryana government has prepared a mega investment proposal of Rs 24,316.82 crore ($6 bn) during the 11th five year plan. Out of this, Rs 10,042.01 crore ($2.5 bn) would be spent on power generation, while Rs 7,697.72 ($1.9 bn) crore is earmarked for transmission and Rs 6,577.09 crore ($1.6 bn) is for strengthening of distribution system in the state.

A comprehensive plan has been formulated to construct 255 new substations, augment 154 existing ones and construct associated transmission lines at cost of Rs 4020 crore ($1 bn) to strengthen the power transmission and distribution system in the state. Seventy new sub stations have been commissioned besides augmenting 180 existing sub stations and erecting 1100-km-long transmission lines at a cost of Rs 500 crore ($123.6 mn) after the present government came to power in Haryana. The DHBVN and the Haryana Vidyut Prasaran Nigam (HVPN) plan to spend Rs 460 crore ($113.7 mn) to strengthen Power transmission and distribution system in Bhiwani district.

India-Sri Lanka power transfer project feasibility report soon

March 15, 2008. The feasibility study for the proposed $450-million mega undersea power transmission link between India and Sri Lanka is slated to be ready shortly. The 200-km submarine cable would enable India to export electricity to the island nation and is likely to be set up with a capacity to wheel around 1,000 MW of electricity, government officials involved in the exercise said.

The report on the HVDC (high voltage direct current) link between the two countries is being prepared by State-owned transmission major Power Grid Corporation of India Ltd (PGCIL), which had earlier estimated that it can set up the link in around 40 months once all clearances are in place. The link is likely to connect Madurai in Tamil Nadu and Anuradhapura in Sri Lanka’s North Central Province.

While a joint Steering Committee has been set up to oversee the project, a task force comprising representatives of the Power Ministry, Central Electricity Authority and PGCIL on the Indian side and the Sri Lankan Energy Ministry and Ceylon Electricity Board (CEB) on the other, has been firmed up to study the feasibility report and make recommendations to the Committee. Indian utilities could get higher tariffs from electricity supplies to the country.

 Initially, surplus power would be transmitted from India to Sri Lanka using the link. With NTPC Ltd, already working on a 500-MW coal fired plant in Trincomalee, wheeling power from Sri Lanka to India could also be a possibility over the long term. Sri Lanka’s Cabinet of Ministers had, early last year, given its go-ahead to its Energy Ministry on the project and the United States Agency for International Development is reportedly extending technical assistance to Sri Lanka.

Sri Lanka currently uses diesel — one of the most expensive power generating resource — for nearly 65 per cent of its power generation. The generation cost there is around Sri Lankan Rupees 15 per unit (about Indian Rs 6.21 per unit), according to CEB data. India currently has transmission links with only Bhutan, as part of the 1,040 MW Tala hydroelectric power evacuation system. The proposal to link-up countries in the South Asian region is being seen as a forerunner to the proposed BIMSTEC power transmission network, which is under active consideration.

India considering 3 more large power projects

March 14, 2008. India is considering three more large power plants, in addition to nine projects each of 4,000 megawatts already planned. Under pressure to bridge a shortfall in electricity generation to feed a rapidly growing Economy, India has identified the coal-rich eastern state of Orissa for the plants.

The state government had written to the federal government offering coal blocks for the new plants. India has a power shortfall of 9 percent and at peak times the deficit shoots up to nearly 14 percent. To ease power cuts across much of India, the government has announced plans to build nine "ultra-mega", or 4,000 megawatt, power projects, one of which is in Orissa, which has large deposits of coal.

The government has awarded three of these projects- two to Reliance Power Ltd in south and central India, and one to Tata Power Co Ltd in western India. Other projects are still in the planning process. Indian plans to add more than 78,577 megawatts of power generation capacity by 2012, but analysts say this is insufficient to meet demand that is growing 8-9 percent a year.

Kalam pitches for more nuclear power plants

March 13, 2008. Amidst the debate over Indo-US civil nuclear deal, former President APJ Abdul Kalam has thrown his weight behind nuclear power saying energy independence in the country can be achieved by adding more atomic power plants. He said that energy independence has to be realized by restructuring energy resources by adding more nuclear power plants, a large number of solar power plants, wind energy-based power plants and hydel-power plants and reduce emphasis on coal and oil-based power plants.

 He expressed that very soon, oil and gas will see its finiteness. It is high time that we realize this factor and work towards the fuel of the future. Kalam said hydrogen fuel, emulsified fuels, solar energy, nano-technology, bio-fuel, high-octane synthetic diesel, seed processing, crushing and esterification plants are the imminent need of the hour. According to him, hydrogen holds the potential to provide a clean, efficient, reliable and affordable supply of energy for meeting the growing energy needs of India's economy while protecting the environment and ensuring energy security.




LLOG claims 3 new deepwater discoveries

March 18, 2008. LLOG Exploration Co., LLC announced three new deepwater discoveries from their 2007/2008 drilling program. The new discoveries are Mississippi Canyon (MC) 72 #1, Mississippi Canyon 503 #1, and Green Canyon (GC) 448 #1. All of these discoveries should be producing by mid-2008.

CNX gas predicts 72 bcf for ’08 output

March 18, 2008. CNX Gas Corp. expects to produce 72 bcf of natural gas this year and has hedged more of its expected output to reflect higher prices for the fuel. Consol, which owns a controlling stake in CNX, in January  announced plans to buy the remainder in a stock-for-stock deal in the first half of this year.

CNX has hedged 35.9 bcf of its expected 2008 production at an average price of $8.84 per 1,000 cubic feet. In addition, it has hedged 24.7 bcf of 2009 output and 5.6 bcf of 2010 production at average prices of $9.02 and $9.14 per 1,000 cubic feet, respectively.

Lukoil plans to produce 15 bcm of gas this year

March 18, 2008. OAO Lukoil plans to produce 15 bcm of gas this year. About 9 bcm will be natural gas while the remaining amount will be associated gas, released during crude oil extraction operations. Lukoil produced 14 bcm of natural gas last year.

Mexico’s proven hydrocarbon reserves 14.7bn boe

March 18, 2008. Mexico's proven hydrocarbon reserves fell 5.1% last year to 14.7 billion barrels of crude oil equivalent. Pemex replaced proven reserves at a rate of 50% last year, compared with 41% in 2006, but that it was still short of its goal of reaching 100% replacement.

Mexico's proven reserves as of January 1, 2008 were equivalent to 9.2 years of crude production, and 8.2 years of natural gas production. Pemex produced an average of 3.1 million barrels a day of crude oil last year, and 6.058 bcf a day of natural gas.

Lundin begins exploration drilling of Wan Machar

March 14, 2008. Lundin Petroleum AB's exploration well Wan Machar-1 (previously Umm Dandalo) has spudded in Block 5B, Sudan. The well is located in the swamp area of the block, on the eastern flank of the basin. The well, with a planned depth of 1,700 metres, will target the Upper to Lower Cretaceous sandstone reservoirs that have proved highly productive in other producing fields in the Muglad Basin. The gross unrisked recoverable prospective resource for the Wan Machar prospect is estimated at 1,542 million barrels of oil (mmbo).

 The partners in Block 5B are Petronas Carigali White Nile (5B) Ltd (Petronas) (39%), Lundin Petroleum (24.5%), ONGC Videsh Ltd (23.5%) and Sudapet Ltd (13%). Furthermore, the partnership has accepted the recommendation of the National Petroleum Commission to assign a 10 percent share to the National Oil Company of Southern Sudan to be allocated on a pro rata basis from each of the partners' shares. The operator of Block 5B is White Nile Petroleum Operating Company (WNPOC) a joint venture between Sudapet Ltd and Petronas.

WW energy signs LOI worth $500,000 per month

March 13, 2008. WW Energy Inc., a holding company that was created to acquire oil and gas service companies as well as oil and gas-related assets, announced that the Company has gone forward with the signing of a letter of intent which would lead to the production of wells in Terry County, Texas.

This purchase of the working interest in the Terry County, TX. Wells will generate revenues of $500,000.00 per month producing 2,150 bbls. of oil and 3,985 mcfd per day. Of the approximately 75 wells identified to be drilled, six have been completed and another twenty-four wells have been identified for drilling.

The strategic ownership of critical pipeline infrastructure, proprietary seismic data and participation in key wells and leases can bring nothing but excitement to this dynamic company. The addition of this revenue for this company will increase its position in the energy sector, enabling further exploration and development opportunities in the future.

VAALCO plans drilling in Gabon, Angola, North Sea

March 13, 2008. VAALCO Energy's current exploration and development schedule includes up to seven wells to be drilled in Gabon, Angola and the North Sea over the course of the next six to eighteen months. Each of the offshore prospects has gross reserve potential in excess of 20 million barrels, while the onshore targets, where VAALCO has a 100% working interest, range in potential from 10 to 20 million barrels. In Angola, VAALCO is studying a large structure that could be drilled in early 2009.

Dynamic's Cotton Valley efforts yield 80 feet of gas pay

March 13, 2008. Dynamic Resources reported that the project partners have drilled their fourth successful Cotton Valley test in its Sentell Field Development Program in Bossier Parish, Louisiana. The latest well, the Rendall 7-2, reached its planned total depth of 9,500 feet. Open hole logging and formation testing information indicates approximately 80 feet of net effective gas pay in the Cotton Valley interval. With this successful test, Dynamic continues its string of 100% success rate in the Cotton Valley.

The first three wells drilled to the Cotton Valley formation are completed and are producing to market. Completion operations are expected to commence expeditiously upon release of the drilling rig and scheduling of a completion rig and stimulation services. First production from the Rendall 7-2 well is expected during the month of April. The operator plans to move the rig, Nabors Well Services Rig 971, to the next Cotton Valley test, the Atkins-Lincoln 17-1 immediately after rig release from the Rendall 7-2 well. The operator expects to spud the Atkins-Lincoln well on or about March 18, 2008.


BP joins New Brunswick refinery project

March 18, 2008. BP and Irving Oil have entered into a Memorandum of Understanding to work together on the next phase of engineering, design, and feasibility for the proposed Eider Rock refinery in Saint John, New Brunswick, Canada. BP will contribute US$40 mn as its share of funding for this stage of the study and the two companies will also investigate the possibility of forming a joint venture to build the refinery should they decide to proceed.

Irving Oil conducted initial feasibility work and informal public consultation in 2006, and has been engaged since January 2007 in permitting, public consultation, and engineering design for the proposed 300,000 barrel per day refinery. The refinery would be situated close to Irving Oil's existing 300,000 barrel per day refinery and the existing Irving Canaport deepwater crude oil terminal which receives VLCC cargoes of crude oil and is located 65 miles (105 km) from the US border.

This next phase of engineering, design and feasibility work, combined with ongoing permitting and community engagement activities represents over US$100 mn of investment over the next 12-15 months. A final investment decision is not expected before 2009 and, although the final costings will only be clear once all the detailed engineering and design work is completed, the refinery is expected to cost at least US$7 bn.

 If permitting approval is received and an investment decision is made to proceed, site preparation would begin in 2010, and full scale construction would begin in 2011 with start-up expected in 2015. Irving Oil has committed to using the best available proven technology to develop a refinery with leading environmental performance and economic efficiency.

5 mn barrel shortfall expected at Syncrude for Q1

March 18, 2008. According to Canadian Oil Sands Trust (Canadian Oil Sands) crude oil production from the Syncrude facility is expected to average about 265,000 barrels per day (97,000 barrels per day net to the Trust) for the first quarter of 2008.

While Syncrude has been undergoing various initiatives with a view to achieving higher production, the reduced production to date following the disruption at the end of January/early February has resulted in a shortfall of about 5 million barrels, gross to Syncrude.

Shell to boost refining, downstream GTL assets by 8 pc

March 17, 2008. Shell is rejuvenating its portfolio for a world of higher and more volatile commodity prices, increased competition, and higher costs. As part of the annual review of strategy, Shell is building over 50 large projects that will underpin new cash flows for decades to come. Upstream, Shell has over 10 billion barrels of oil equivalent (boe) resources under construction, which will add 1 mn boe/d of production. Shell's industry-leading fuels and lubricants portfolio is being positioned into growth markets.

The company is also building significant new petrochemicals facilities, and new refining and downstream gas-to-liquids (GTL) capacity totaling 300,000 b/d for Shell. Major investments underway today include:

· Investment in some 10 billion boe of resources that will deliver 1 million boe/d of oil & gas, and are the foundation for long-term growth potential of 2-3%/year

· 60,000 b/d of oil sands capacity, an increase of more than 60% from today's levels

· Over 7 million tonnes per year of new liquefied natural gas (LNG) capacity, an increase of 50%

· New refining and downstream GTL assets, totaling 300,000 barrels per day of downstream capacity for Shell, an increase of some 8%.

· Positioning Shell's leading fuels and lubricants marketing businesses in new growth markets

· 800,000 tonnes per year of ethylene and 750,000 tonnes per year of mono-ethylene glycol. This is a 13% increase in Shell's ethylene capacity and a 60% increase in its mono-ethylene glycol capacity

· Over 100 MW of new wind power capacity. Renewables investment continues, with particular focus on wind power and next generation biofuels.

Looking beyond the portfolio that is currently under construction, Shell has significant additional resources that could be developed for production, and exploration portfolios in some 14 focus basins. Over 20 potential new projects are being designed, that could commercialize over 6 billion boe of discovered resources, and produce 0.8 million boe/d. There is particular potential in North America heavy oil and tight gas, and LNG in Australia.

Group oil and gas resources estimates have been increased to some 66 billion boe, with a resources life of some 55 years. This improvement reflects exploration performance, where Shell added 1.4 billion boe in 2007, and an update to the portfolio overall.

Mitsui set to join Vietnam refinery project

March 17, 2008. Japan's Mitsui Chemical is expected to become the fourth partner of a joint venture to develop Vietnam's second oil refinery in central Thanh Hoa province. The Nghi Son oil refinery has been the subject of long negotiations between state-owned Vietnam National Oil and Gas Group (PetroVietnam) and its two existing partners, Japan's Idemitsui and Kuwait's Petroleum International.

PetroVietnam expected a joint venture contract to be signed in early April. The Vietnamese group will hold a 25-percent stake with the three foreign partners dividing up the rest. The joint venture is expected to officially receive an investment license by June, and construction will start in 2010.

The refinery with annual processing capacity of some 10 million tons is slated for completion within 60 months. The project will include the oil refinery, refined and material factories, energy facilities, pipeline and storage systems and an informatics system.

 In addition to LPG, unleaded gasoline, kerosene, jet fuel, diesel and FO, the refinery is projected to produce bitumen, propylene and BTX as a raw material for the domestic petrochemical industry. Crude oil may come from the Su Tu Den (Black Lion) oilfield off Vietnam's southern coast, and imports from the Middle East.

The Nghi Son refinery and the Dung Quat oil refinery, Vietnam's first refinery under construction in central Quang Ngai province, will contribute 70 percent of the country's demand for petroleum products by the time they are fully operational in 2015.

PetroVietnam is working on another plan to develop the country's third oil refinery in Long Son Island off the coast of southern Ba Ria Vung Tau province. According to PetroVietnam, by 2010 the country's demand would be about 18 mt of refined products, while Dung Quat refinery being able to refine six mt of crude oil.

Transportation / Trade

Corrintec surveys subsea section of OCP

March 18, 2008. Corrintec, the specialists in subsea pipeline cathodic protection surveys, has carried out a survey on the final section of a 500-km pipeline that transports crude oil from the jungles of the Amazon, across the Andes, to a terminal near Esmeraldas on the Pacific Ocean.

The survey has been commissioned by SLEM S.A. on behalf of Oelducto de Crudos Pesados (OCP) who operate and maintain the pipeline. When completed in 2003, the OCP more than doubled the crude oil exported from Ecuador. Corrintec focused on the four submarine pipelines which connect the storage tanks at the Esmeraldas Marine Terminal to coupling buoys 7 km off the coastline. One of the buoys can serve tankers of up to 150,000 tons dwt and the other 325,000 tons dwt.

Each of the pipelines has a maximum flow rate of 60,000 barrels per hour. In addition, Corrintec engineers have carried out a 500 meter landfall survey on the four pipelines.

PGN to build gas pipeline in North Sumatra

March 17, 2008. Indonesian state gas distributor company PT Perusahaan Gas Negara (PGN) will build a 664-kilometer-long gas transmission pipeline linking Sumatra's towns of Duri, Dumai and Medan. The pipeline will have a capacity of carrying 250-300 mmscfd. Gas will be supplied by ConocoPhillips' gas fields in North Sumatra. Construction of the project is scheduled to begin in 2009 and will be completed in 2011. PGN has also been appointed by the government as project leader to build an LNG receiving terminal in West Java. The other consortium members are state-electricity company PT Perusahaan Listrik Negara and state-run oil and gas company PT Pertamina.

The LNG terminal will have a capacity to store 3.0 mt of LNG per year or 400 mmscfd. Gas will be supplied from the Bontang LNG project developed by Total, as well as from the Tangguh LNG project developed by BP.

European companies to explore integrated pipeline network

March 14, 2008. Gas transmission companies from Central and Southeast Europe have agreed to launch a feasibility study to explore the potential benefits of an independent, regionally integrated gas pipeline network. The initiative, known as New Europe Transmission System (NETS), was proposed by Hungarian gas company MOL in December 2007.

NETS would aim to attract capital, accelerate infrastructure development and inter-connectivity, enhance value, competition and the supply security of the region. The companies include Romania's Transgaz, Hungary's MOL, Bosnia Herzegovina's BH-Gas, Slovenia's Geoplin Plinovodi, Austria's OMV, Croatia's Plinacro and Serbia's Srbijagaz met in Bucharest to discuss the issue.

Williams, TransCanada propose new western gas pipeline

March 13, 2008. Williams and TransCanada Corp. are evaluating the joint development of Sunstone Pipeline, a major new natural gas transmission pipeline that would offer producers and end-users a cost-effective way to move natural gas supply from the Rockies to markets in the western United States.

The proposed Sunstone Pipeline is a 618-mile, 42-inch-diameter pipeline with capacity of up to 1.2 bcf per day. The project, which is proposed for service in 2011, would involve constructing a new pipeline substantially parallel to the existing Williams Northwest Pipeline system between the Opal Hub in Wyoming and Stanfield, Ore. Williams' Northwest system interconnects at Stanfield with TransCanada's Gas Transmission Northwest (GTN) pipeline system.

The project provides the option to deliver gas to markets served by the Northwest and GTN pipeline systems. Sunstone's open season will commence March 17 and run through April 30, 2008. GTN will hold an additional open season to offer existing capacity available on its pipeline system between Stanfield and GTN's terminus near Malin, Ore., near California's northern border.

Williams, through its subsidiaries, finds, produces, gathers, processes and transports natural gas. Williams' operations are concentrated in the Pacific Northwest, Rocky Mountains, Gulf Coast, and Eastern Seaboard. With more than 50 years' experience, TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure including natural gas pipelines, power generation, gas storage facilities, and projects related to oil pipelines and LNG facilities.

TransCanada's network of wholly owned pipelines extends more than 59,000 kilometers (36,500 miles), tapping into virtually all major gas supply basins in North America. TransCanada is one of the continent's largest providers of gas storage and related services with approximately 355 billion cubic feet of storage capacity.

Sinopec's oil pipeline network reaches more than half of refineries

March 12, 2008. Sinopec Group's crude pipeline network has covers 18 refineries in North China, East China, and Central China, which account for 53 percent of the group's refineries. Sinopec Group pipelined 66.56 mt of crude last year, 5.2 percent more than it did in 2006. It expects to transport more than 70 mt via pipeline in 2008. With more discoveries made in recent years, nationwide crude pipeline network is becoming an increasingly important way to transport crude oil and natural gas.

25 wells have been connected to Atmos gas gathering system

March 12, 2008. Australian-Canadian Oil Royalties Ltd. (ACOR) announced that 25 out of 34 of ACOR's existing gas wells operated by Resource and Energy Technologies Company (RETCO) are currently being connected to a natural gas gathering system owned by a unit of Atmos Energy Corporation and to a gas processing facility, and operated by RETCO. The gas plant is completely finished.

Policy / Performance

Keystone work to start in Q2

March 17, 2008. TransCanada Corp. (TransCanada), on behalf of TransCanada Keystone Pipeline, LP (Keystone), announced that the U.S. Department of State has issued a Presidential Permit to Keystone authorizing the construction, maintenance and operation of facilities at the United States and Canada border to transport crude oil between the two countries.

The Permit follows the Department of State's Record of Decision and National Interest Determination, which found that issuance of the Presidential Permit for the Keystone Pipeline would serve the national interest. The Presidential Permit is a significant regulatory approval required to proceed with construction of the Keystone Pipeline, which will move a growing supply of Canadian crude oil to key U.S. markets. Keystone received National Energy Board approval last year for two major regulatory applications to construct and operate the Canadian portion of the project. Keystone also received approvals in 2007 and early 2008 for major U.S. state-level regulatory applications. Affiliates of TransCanada Corporation will be responsible for constructing and operating the 3,456-kilometer (2,148-mile) Keystone Pipeline, which will be capable of delivering 590,000 barrels per day of crude oil from Hardisty, Alberta, to U.S. Midwest markets at Wood River and Patoka, Illinois, and to Cushing, Oklahoma. Initial deliveries to Patoka are expected to begin in late 2009. Keystone has secured firm long term contracts of 495,000 barrels per day with an average duration of 18 years.

Venezuela aims to increase ’08 oil output from old fields

March 17, 2008. Venezuela's Oil Ministry plans to focus this year on pumping more crude from the country's western region, an area known for its mature oil wells. The ministry will open more wells and use more drill equipment in these areas so that in 2008, production can reach an average of 937,000 barrels a day, up from 907,000 in 2007. With this in mind, the ministry will drill 485 new wells and will repair another 374 oil wells, the document showed.

Venezuela's western provinces include the oil-rich Maracaibo lake, as well as the country's Paraguana refining center. State oil company Petroleos de Venezuela SA, or PdVSA, aims to bring output to 1.2 million barrels a day in the west by 2013. Total crude output coming from Venezuela is a number few know with certainty.

The government claims to produce close to 3.2 mn barrels a day, but data from the Organization of Petroleum Exporting Countries and other sources puts total production closer to 2.4 mn barrels a day. The country has struggled with oil production since 2003 and when President Hugo Chavez fired thousands of PdVSA workers and executives following an oil strike.

OPEC to rake in $900 bn in 2008

March 16, 2008. The Organization of Petroleum Exporting Countries (OPEC) will earn more than $900 bn in oil exports this year as the average price for the group’s crude surpasses $100 a barrel for the first time. OPEC members may earn $927 bn from net oil exports in 2008, raising a January estimate by 9 per cent.



Oil export revenues
 2007, in billions

Per capita oil
export revenues

Saudi Arabia










































US crude futures have traded above $100 for most of the past three weeks and reached a record $111 on March 13. OPEC’s so-called basket price is cheaper than those futures, because OPEC oil is generally heavier and lower quality. OPEC pumps more than 40 per cent of the world’s oil. Oil prices have rallied against a backdrop of a US economic slowdown because Asia continues to drive consumption.

Adding to the gains are speculative investments in commodities as a hedge against inflation, as the value of the US dollar declines. OPEC’s net oil export revenue last year was $676 billion, according to EIA. Saudi Arabia, the world’s largest exporter, earned $194 billion, or 29 per cent of the group total. Collectively, OPEC earned $1,146 for each member of its population last year, according to EIA estimates. A price of between $60 and $70 a barrel may now act as a floor for oil because renewable energy sources were competitive at those levels, Saudi Arabian Oil Minister Ali al-Naimi said. In the past year, the OPEC basket has averaged $3.44 less than the benchmark US oil futures contract traded on the New York Mercantile Exchange.

The basket has gained 73 per cent in the past year, rising from $58.20 a barrel on March 9, 2007. OPEC ministers last week ignored calls by US President George W Bush to increase output in order to help the global economy and, instead, left production targets unchanged at the meeting, giving 12 of its 13 members a combined quota of 29.67 million barrels a day. Some members, including Iran, had argued that a supply cut might be needed to offset an anticipated reduction in world demand. OPEC crude output fell 120,000 barrels a day in February to 32.1 million barrels a day, the Paris-based International Energy Agency (IEA) estimated in a monthly report recently. 

DNO confirms production sharing agreement with KRG

March 14, 2008. DNO has signed revised agreements with the Kurdistan Regional Government (KRG) amending the production sharing contract it holds for the Dohok and Erbil license areas. The Dohok area has been divided into two license areas, one for the Tawke oil field and one for the remaining Dohok area. The Company now holds three Production Sharing Contracts (PSC) in Kurdistan with a 55% working interest in Tawke and a 40% working interest in both Dohuk and Erbil. The balance of the working interests in all PSC's is held by the KRG as a Government Interest and Third Party Interest to be appointed by the KRG.



Capacity crisis at JSW threatens global nuclear power plant production

March 17, 2008. A 100-year-old steel mill that once forged guns for the Japanese Imperial Navy has hit a production bottleneck that threatens to derail more than £150 bn of global nuclear power-plant construction. The capacity shortage at Japan Steel Works (JSW) has created a worldwide stampede among electricity producers to place orders with the Tokyo-based engineer for nuclear reactor cores a specialised component in which the company has an effective global monopoly. In some cases, European and American energy groups are placing huge deposits on equipment that will not be built for another decade.

Nuclear energy experts fear that in its haste to expand production, the nuclear industry may have overlooked this part of the equation, potentially jeopardising the future of the 237 reactors expected by The World Nuclear Association to be built between now and 2030. The drama surrounding JSW may not end at capacity problems. The company is growing increasingly uneasy that its near-complete dominance of key nuclear componentry makes it a prime takeover target by Russian, Chinese or other buyers. Recently the company has adopted a poison pill mechanism that would hugely dilute its shares in the event of a hostile bid. The bottleneck, which was described to The Times by the managing director of JSW, will not be eased even if the company doubles capacity for large containment vessels. JSW has between 80 to 100 per cent market share for its large reactor components in countries where they are sold. As growing Asian economies rush to meet surging electricity demand and developed nations look to lower their carbon emissions, the worldwide nuclear industry may be forced to redraw its plans. In response to the looming capacity crisis, other Japanese and South Korean steel companies are examining ways to replicate the JSW production technique, although JSW believes that any company trying to do so would take a minimum of five years.

Nigerian firm gives Sierra Leone electricity

March 14, 2008. Income Electrix Limited, a wholly African owned power solutions company has taken its competence beyond the shores of Nigeria, following its successful completion and commissioning of the phase one of a 36 MW Independent Power Plant (IPP) in Freetown, Sierra Leone recently. This first phase, with a capacity of 10 MW, is the first of the three IPP projects to be built by Income Electrix Limited under the country's three years emergency power plan. The diesel-fired plant, located on Black Hall Road, Eastern Freetown was commissioned recently amidst ecstatic jubilation by a large crowd of East Freetown residents and businesses that have lived without electricity for more than 11 years.

Bulgaria thermal power plant for sale

March 14, 2008. Bulgaria's Privatization Agency has invited potential strategic investors to take over a coal-fired power plant in the western part of the country. The starting price for full ownership of the 420 MW utility in Bobov Dol is set at 100 mn leva ($80 mn) and the tender will be launched in three months. Last year, Bulgaria canceled the sale to Greece's Public Power Corp. after it had protested the obligation to purchase coal from nearby mines arguing that its quality did not match EU environmental requirements.

Singapore's Temasek sells power plant to China

March 14, 2008. Singapore's state-owned investment company Temasek Holdings Pte. Ltd. has sold a power plant in the city-state to a Chinese power producer for 4.235 bn Singapore dollars (US$3.0 bn; €1.93 bn). Temasek sold Tuas Power Ltd. — one of three power generation companies that Temasek has on the block to China Huaneng Group through a bidding process, and expects the transaction to be completed by March 24.  China Huaneng is an established player with a strong track record in the power business. Tuas Power has a capacity of 2,670 megawatts and accounts for about a quarter of Singapore's electricity generation. Temasek is also selling PowerSeraya Ltd. and Senoko Power Ltd. The three companies together generate about 90 percent of Singapore's power. Temasek expects to complete the sale of the companies by the first half of 2009.

Application has been filed to build a nuclear power plant in Alberta

March 14, 2008. Bruce Power Alberta will begin consulting people in the Peace River area next month about the proposed nuclear plant project it now officially owns. The company announced yesterday that it closed a deal with Energy Alberta, which began its work in 2005 on what could be Alberta's first nuclear plant. The proposed plant would be built on private land next to Lac Cardinal, about 30 kilometres west of Peace River. Bruce Power Alberta's project would involve up to four reactors capable of producing 4,000 megawatts of electricity. The first unit could be ready in 2017. The company has not chosen a specific reactor design and is considering several options from around the world. The company intends to open an office in the Peace Country to co-ordinate its consultation, technical studies, site evaluation and planning activities. An application was filed with the Canadian Nuclear Safety Commission to prepare the site for potential construction of the province's first nuclear power plant. The company plans to begin consultations with neighbouring communities by hosting introductory open houses.

Transmission / Distribution / Trade

Chinese firm pips REL, GMR to buy Tuas Power

March 17, 2008. China’s largest power generator China Huaneng has outbid India’s Reliance Energy (REL) and GMR Group by placing the highest bid of $3.1 billion for a power firm put on block by Singapore’s investment arm Temasek Holdings. REL and GMR Group were the two Indian bidders for Tuas Power, one of the three power generating companies being privatised by the Singapore government. Besides, REL and GMR, three international firms, including China Light and Power and HongKong Electric, were also believed to have been in the race to acquire Tuas Power. Temasek Holdings has signed a share purchase agreement with SinoSing Power Pte Ltd, a wholly-owned subsidiary of China Huaneng, for the 100 per cent sale of Temasek’s wholly-owned Tuas Power Ltd for a cash consideration of 4.235 billion Singapore dollars. The transaction is expected to be completed by March 24, 2008. The process for disinvestment of Tuas Power was kicked off by Temasek in October. Tata Power, GMR and REL had submitted indicative bids for acquiring Tuas Power. GMR and REL qualified in the initial bidding stage of the two-step process. Besides Tuas Power, Singapore seeks to sell power firms PowerSeraya and Senoko, aiming to fetch $2 billion from each. Assets of Tuas Powers include 1,200 MW of oil-fired steam turbine plants and 1,470 MW of gas-fired combined cycle plants. The company caters to the National Electricity Market of Singapore. It earned revenues of 2.28 billion Singapore dollars and net profit of 177 million Singapore dollars in the fiscal ended March 31, 2007.

Russia's electricity monopoly sells stake in TGK-2 for $380 mn

March 14, 2008. A consortium of Germany's RWE and Russia's Sintez successfully bid $380 mn in an auction to buy a 33.47% stake in the TGK-2 generating company from Russian electricity monopoly UES. The territorial generating company unites assets in five regions of central and northern Russia. The deal brings the UES stake in the company down from 49.36% to 11.38%. RWE is a German electric power and natural gas public utility company.

The Russian electricity giant has also sold a 34.06% stake in another territorial generating company, TGK-6, to Integrated Energy Systems (IES holding) for 9.98 billion rubles ($421.3 mn). TGK-6 operates in four Russian regions and in Mordovia in the Volga area. Both deals were part of UES reforms in which generating assets are being privatized.

Govt. approves project for improved supply of electricity

March 12, 2008. The works of the third phase of the Project of Rehabilitation and Expansion of the Luanda Electric Network, aimed at improving and increasing power supply in the capital, was recently approved by Angolan Government. Angop the Luanda Electricity Supply Company (Edel - E.P) signed a Usd 28.4 mn contract with China Machine-Building International Co.

The works to last 22 months, include the repair of the medium and low tension network of the Luanda Centre and South regions, with the supply and construction of the Section-Gaps 25 and 26, (Tourada) and (Morro Bento) areas, respectively. The project includes house connections and construction of two offices at the Ngola Kiluange and Maianga sub-stations. The rehabilitation and reinforcement of the Luanda medium and low tension distribution networks will improve the service and increase the production of power.

Policy / Performance

State regulators approve FPL plan for 2 more nuclear generators

March 18, 2008. Florida Power & Light can go forward with plans to build two new nuclear generators at its Turkey Point facility south of Miami, state regulators. Florida's largest electric utility already operates two nuclear units, as well as gas-oil and natural gas plants at Turkey Point. The two new generators would come online in 2018 and 2020. The decision by the Public Service Commission, however, is just one step and a final decision could be more than a year away. The company still must get approval from the federal Nuclear Regulatory Commission, and the Florida Power Plant Siting Board, which includes the governor and Cabinet members. If it does go forward, FPL customers will start to see increases in their power bills to pay for the construction, likely next year. After the running of the power plants the fuel savings would be about $1 billion a year, which also would be passed on to consumers. The total cost for the project ranges from $12 billion to $24 bn, depending on the technology used in building the plant. If the company gains final approval, the two new generators would produce enough electricity to provide power for about 1 million homes using an average amount of electricity.

Juno Beach-based FPL, which serves 4.5 million customers in 35 counties, said it must increase its electrical generation capacity by nearly a third to meet projected growth in demand between 2011 and 2020. Earlier this month, the state's second-largest electric company, Progress Energy Florida, filed a request with the state commission to build a $17 bn facility with two nuclear generators in Levy County, along the Gulf Coast. They would go into service in 2016 and 2017.

ANPP warns FG against electricity tariffs hike

March 18, 2008. The Federal Government must desist from its recent plans to hike electricity tariffs, the All Nigeria Peoples Party (ANPP) has warned. The party lamented that the plan to increase the tariffs was another way of perpetuating hardship in Nigeria. There is breakdown of various economic activities that depends on electricity. This has resulted in joblessness in the labour market and increase in crime wave. The power sector needs to ascertain judicious application of the funds allocated to it and improve the quality of the workforce," the party stated. The party observed that the inability of the power sector to justify the huge resources invested in it which made no remarkable difference in the improvement of power generation need a careful and genuine examination of the power industry instead of diverting the frustration to the poor masses.

UK's nuclear giant in takeover talks

March 17, 2008. Nuclear power station operator British Energy is in talks about a possible merger or takeover - and could fall into foreign hands. The company’s eight nuclear sites produce around one sixth of the UK's electricity. It follows weekend reports that the Government is considering selling its 36% stake in the group. The company had been worth a total of around £6bn at last week's share price. Britain's largest nuclear power provider, British Energy could play a major role in any development of Britain's nuclear power supply. Officials from the Department for Business, Enterprise and Regulatory Reform (BERR) are said to have approached energy suppliers including British Gas owner Centrica and French power giant EDF to see if they are interested in taking on the government holding.

US plan would move nuclear waste to Idaho

March 17, 2008. A revised U.S. Department of Energy plan could send up to 9,000 containers of radioactive waste from southcentral Washington’s Hanford nuclear reservation to Idaho for repackaging. The Energy Department recently announced that it plans to make Idaho National Laboratory the nation’s primary processing center for transuranic waste from nuclear sites that don’t have their own processing capabilities. The federal government created Hanford in the 1940s as part of the top-secret Manhattan Project to build the atomic bomb. One of its reactors produced plutonium for the bomb that was dropped on Nagasaki, Japan, in August 1945. Hanford’s transuranic waste, which includes building, laboratory and other debris contaminated with plutonium, was temporarily buried after 1970 when Congress ordered that the waste be sent to a national repository. That was before the Waste Isolation Pilot Plant opened in New Mexico for permanent disposal of such waste. The Energy Department believes that sending some Hanford waste to Idaho would allow the waste to be packaged more efficiently than with the manual process that must be used at Hanford. About half of those overpacked drums have to be repacked manually at Hanford because they contain waste not approved for shipping or acceptance at the Waste Isolation Pilot Plant. The Energy Department expects about 9,000 containers will be retrieved at Hanford and will require an overpack but not need repackaging because of their contents. Hanford is one of 11 sites that will send transuranic waste to Idaho, and the Energy Department may choose to send waste from smaller sites first so they can be closed. The new plan amends a 1998 Energy Department decision declaring Hanford one of four sites that could receive transuranic waste from facilities that did not have their own treatment and packaging capabilities.

Marafiq releases RFP for power project

March 16, 2008. Power and Water Utility Company for Jubail and Yanbu (Marafiq), has announced the release of the Request for Proposals (RFP) for the Yanbu Independent Water and Power Project (Yanbu IWPP). This is the second IWPP project that is being tendered by Marafiq, the first being the Jubail IWPP, which achieved financial close in June 2007. The issuance of the RFP for Yanbu IWPP represents a major step forward in the development and privatization of the Kingdom’s water and power sector. The RFP is the product of significant work by various organizations in the Kingdom and has the full support of the Kingdom. This is also a reflection of the strong economy that the Kingdom is experiencing. Yanbu and Jubail industrial cities were symbols of the Kingdom’s strong growth in the industrial sector. The Yanbu IWPP’s production will meet the increasing demand for water and power in Yanbu Industrial City (YIC). Marafiq has issued the RFP to pre-qualified bidding groups to select a developer or a developer consortium to own 60 percent of a special-purpose project company that will build, own, operate and transfer (BOOT) the 1,700 MW and 150,000 cubic meters of water per day IWPP. The plant will be Cracked Heavy Fuel Oil fired, with Arabian Light Crude oil as backup. Marafiq will ultimately hold the remaining 40 percent of the shares in the project company. Marafiq’s owners are the Royal Commission for Jubail and Yanbu, Saudi Basic Industries Corporation, Saudi Aramco and the Public Investment Fund, each holding 24.81 percent. Private investors hold the remaining 0.76 percent. The project company will sell its entire capacity and output to a new off-taker company in Yanbu that is 100 percent owned by Marafiq. This will be done under a 25-year power and water purchase agreement with structured credit support from the Ministry of Finance. Bids are due to be submitted to Marafiq on August 27, 2008.

Jordan to hike electricity prices

March 13, 2008. The Jordanian government will raise the price of electricity later this week by up to 38 percent as the energy-starved kingdom phases out subsidies. The new prices will be higher by 20 to 38 percent, depending on consumption and that customers who consume less than 160 kilowatt a month will not be affected. The government cabinet approved the hikes after a cabinet meeting on Wednesday "in line with recommendation by the Electricity Regulatory Commission. Last month, Jordan raised the price of domestic fuel and kerosene by 76.1 percent ending an era of government subsidies. The country of nearly six million people used to be fully dependent on neighbouring Iraq for fuel which Baghdad supplied at a preferential price. But since the US-led invasion of 2003, Amman has had to buy its supplies at the market rate. The tiny desert kingdom, which lacks natural resources, has an estimated foreign debt of 7.2 billion dollars, and the new hikes are expected to burden already cash-strapped Jordanians.

China promotes new era of coal-fired energy

March 12, 2008. Despite global alarm about the threat that fossil fuel combustion poses to Earth's climate, coal appears poised to recover its 19th-century prominence as the world's top energy source. The growth of coal-fired electricity generation in China is unprecedented in the history of electricity infrastructure development. At present, oil accounts for 36 per cent of world energy consumption, followed by coal with 27 per cent, followed by lesser amounts of natural gas, nuclear and hydroelectricity. In 2006, China put into operation 105 gigawatts, which is [equivalent to] the entire electricity generation system of France. 90 per cent of that generation was from coal plants, and China followed by adding 91 gigawatts of coal generation in 2007. Coal was the energy of the 19th century, lost to oil in the 20th century, but clearly coal could be the fuel of reference for the 21st century. Other advantages include its abundance. Reserves are 1.5 times higher than combined proven reserves of oil and natural gas, and there's less supply and price risk because it's well-distributed, cheap and not subject to the price volatility of oil. China in particular is moving to end that disparity relative to Europe and North America, and they're using coal-fired generation to do it.

Renewable Energy Trends


Tata BP Solar in deal for 128-MW project

March 17, 2008.  Tata BP Solar has signed an agreement with Calyon Bank (Credit Agricole CIB) and BNP Paribas to raise $78 million to fund its 128-MW Solar Cell Expansion Project, which is in the advanced stages of implementation. The project eventually would be scaled up to a 180-MW solar cell manufacturing capacity. This is another step towards realising the designed potential of the 300-MW plant. The current manufacturing capacity of the company was 50 MW per annum. Tata BP Solar, a Tata Power and BP Solar joint venture, is India’s largest solar photo voltaic manufacturing company and the largest manufacturer of solar water heaters in India. The company delivers products and solutions that serve both the Indian and global markets. During 2006-07, Tata BP Solar achieved Rs 669-crore ($164.3 mn) sales revenue and is poised to exceed Rs 850 crore ($208.8 mn) during 2007-08. India’s growing solar market currently consumes about one per cent of the world’s photovoltaic products. Total domestic installed photovoltaic capacity was in excess of 100 MW. Most of the photovoltaics used in India are used for off-grid applications. However today there was an increasing interest in on-grid applications, as well as high tech applications for various high tech sectors, including telecommunications and the ‘green buildings’ sector.

KSEB inks pact with wind energy promoters

March 17, 2008. The Kerala State Electricity Board (KSEB) has signed agreements for purchase of power with four promoters of wind energy projects in the State. The wind energy projects are coming up in Palakkad and Idukki districts. A total of 33 wind mill units are being set up at Agaly in Palakkad district and 44 at Ramakkalmedu in Idukki district with private participation. The power purchase agreements were signed with Bhima Brothers, Poppy Umbrella Mart, Watts Electronics and Bangalore-based Shah Agency. At Agaly, each unit will have a capacity of 600 kilowatts, which will work out to a total installed capacity of 19.8 megawatts for 33 units.

DESI to take EmPower project to 10 more locations

March 17, 2008. Decentralised Energy Systems India Pvt Ltd (DESI) plans to expand its ‘100 village EmPower’ partnership programme to 10 more locations across India. Launched in 2005, the programme was first set up in Araria district, Bihar, where each village was envisioned to be equipped with a biomass gassifier-based power plant to provide energy services and electricity for micro industries to create jobs.

Commercial operations are running in four villages and 20 more will attain commercialisation in the next 18 months. DESI Power’s business model works by setting up low carbon, renewable energy systems through village level support (in the form of manpower), loan from banks and equity from social investors. Power generated is used for village level consumption and excesses are sold to buyers as carbon credits. About 50 per cent of the company’s investment comes from sale of carbon credits to countries such as Switzerland, Germany and the UK.

Signet signs MoU with TN to set up PV manufacturing unit

March 17, 2008. Signet Solar Inc, manufacturers of silicon thin film photovoltaic (PV) modules, will set up its first manufacturing plant at Sriperumbudur at an investment of Rs 2,000 crore ($491.3 mn) and has signed an MoU with the Tamil Nadu government in this regard. According to the company the construction of the 300 MW facility would begin later this year. The technology and manufacturing knowhow for the plant would be transferred from the company's German operations. The plant was expected to generate about 4,000 direct and indirect job opportunities. The Chennai plant would be the company's next major manufacturing unit after its German plant, with a planned capacity of over 300 MW of solar panels, produced every year.

The company's decision to expand manufacturing in India follows more than $400 million in advance orders for the first three years of production. The German plant, scheduled to start operations in the third quarter this year, would have a total annual production capacity of 60 MW and additional production lines would be added to increase manufacturing capacity to over 1,000 MW by 2010. Signet had last year announced plans to set up three solar photovoltaic manufacturing centres in India over a ten year period.

Eight small hydro projects set up in Manipur

March 15, 2008. The country had 615 small hydro power projects upto 25 MW aggregating 2108 MW as on 29.2.2008. Out of 615 projects, eight projects aggregating 5.450 MW were set up in Manipur. Sixty-eight projects aggregating 45.240 MW were Arunachal Pradesh; four projects aggregating 27.110 MW in Assam; four projects aggregating 31.030 MW in Meghalaya; 16 projects aggregating 17.470 MW in Mizoram; 10 projects aggregating 28.670 MW; 14 projects aggregating 39.110 in Sikkim and three projects aggregating 16.010 in Tripura.

According to the Union Minister of State for New and Renewable Energy Shri Vilas Muttemwar stated that 5,403 potential sites were identified in the country to install small hydro projects. The projects would have a total capacity of 14,294.24 MW. Out of 5,403 sites, 113 sites with a total capacity of 109.10 MW were in Manipur. Five hundred sixty six sites with a total capacity of 1333.04 MW were in Arunachal Pradesh; 60 sites with 213.84 MW in Assam; 102 sites with 229.81 MW in Meghalaya; 75 sites with 166.94 MW in Mizoram; 99 sites with 196.98 MW in Nagaland; 91 sites with 265.54 MW in Sikkim and 13 sites with 46.86 MW in Tripura. The respective State Governments and Agencies carried out the process for identification of potential sites for mini and micro hydro projects and their survey. No clearance was required from the Central Government for setting up any mini, micro or small hydro projects up to 25 MW station capacity.

Gore: India can be a leader in renewable energy tech

March 15, 2008. India can lead the world in renewable energy technologies as part of a solution to the climate change crisis, according to the former US Vice-President and Nobel Peace Laureate, Mr Al Gore. On the differences between developed and developing countries on greenhouse gas (GHG) emission cuts, Mr Gore said fast-developing nations like India have a right to aspire for higher standard of living and set whatever goals they think is appropriate. “My country is the largest source of pollution and most responsible for creating the problem. We need a change in policy in the US,” said Mr Gore said.

No renewable energy policy in place yet: Union Power Minister

March 12, 2008. The Union Government has set a target to generate 80,000 MW from conventional sources over the next four years, and is investing Rs 60,000 crore ($14.9 bn) in that period to generate, distribute and transmit electricity. However, the Union Power Minister, Mr Sushilkumar Shinde, has said that there is no policy in place as yet that makes it mandatory for a percentage of all power generated by a certain date to come from renewable sources. According to him there is a shortfall of 25,000 MW in the country today. In the last three five-year Plans, only 21,000 MW of the targeted 42,000 MW was added.

Goldstone Infra to foray into renewable sector

March 12, 2008. Goldstone Infratech Limited (formerly Goldstone Teleservices Limited), the country's largest manufacturer and supplier of composite insulators, is foraying into the renewal energy space by setting up a 5Mw solar power plant at an outlay of Rs 120 crore ($29.8 mn).  Besides, it is in the process of setting up a 40Mw-per-year capacity photo voltaic modules facility within its composite (polymer) compounds manufacturing plant at Charlapalli on the outskirts of Hyderabad. Work on phase-I of the project, to produce 20Mw of modules, will involve Rs 7 crore ($1.7 mn) through internal accruals or private equity placement, and Rs 13 crore  ($3.2 mn) debt. It will start commercial production in the next eight to nine months.

The company would initiate work on phase-II in six months from now. The company would primarily be targeting the European and the US markets for its photovoltaic modules and expects to garner Rs 160 crore  ($39.7 mn)revenues by utilising 50 per cent of the installed capacity of the phase-I in the first year of operations. Goldstone Infratech Limited, touted as the only company in India to have facilities for manufacturing polymer compounds for complete range of insulators from 11Kv to 400 Kv, expects to close the current financial year with over Rs 60 crore ($14.9 mn), as against Rs 30 crore ($7.4 mn) in the previous fiscal. 

First integrated renewable energy farm to come up near Pune

March 12, 2008. Gurgaon-based R.S. India Group is setting up the first integrated renewable energy farm in the country at Patan, in Satara district near Pune. The first phase of the Rs 700-crore ($173.6 mn) project, for which 1400 acres has been acquired will have an installed capacity to generate 100 MW wind power, 5 MW of solar power and extract bio-diesel from jatropha plantations on 225 hectares. The second phase of the project involves adding installed capacity of another 200 MW of wind energy and planting jatropha on 225 another 225 hectares.

The project is being set up with lease financial assistance of Rs 487 crore ($120.8 mn) by the Power Finance Corporation Ltd. The promoter, R.S. Group, is investing Rs 100 crore ($24.8 mn) in it, and the Power Trading Corporation has a 37 per cent equity participation in the new company formed for the purpose, R S India Wind Energy Pvt Ltd (RSIWEL) amounting to Rs 54 crore ($13.4 mn).

The first of the wind turbines, being put up by Denmark-based Vestas RRB, would be in place by the end of the month. The second phase will be commissioned by December, while a third phase, which would be financed through debt, is also on the anvil taking the total installed capacity to 500 MW by the end of 2009. The location of the facility has not yet been finalized.


Green Island Energy partners with Covanta

March 16, 2008. Green Island Energy Ltd., a private B.C. power developer, says it has struck a deal with Covanta Holding Corp., a New Jersey-based energy-from-waste producer, to advance the Gold River power project in British Columbia. The Gold river project is on the site of a former pulp and paper mill and would produce about 90 megawatts of electricity from waste for the BC Hydro electrical grid.

This project would be a boost to Gold River's economy while helping it meet the surging demand for clean, renewable energy. Covanta Energy, based in Fairfield, N.J., owns and operates 52 renewable energy projects around the world, 37 of which are energy-from-waste operations. Green Island Energy will work with Covanta to design the power plant and negotiate deals with B.C. municipalities, including Vancouver, for a supply of municipal solid waste as fuel to produce power from the plant.

Fluitecnik buys a Spire solar module manufacturing line

March 14, 2008. Spire Corp. received a contract from the solar division of Spanish renewable energy company Fluitecnik S.A. to provide a photovoltaic module assembly line for that company's operations in Portugal. Spire will provide Fluitecnik with a semi-automated crystalline module manufacturing line capable of producing up to 20 MW of solar modules per year for sale into the European solar marketplace.

Spire will supply the process technology and training to operate the factory, as well as assistance in qualifying the factory and its modules to meet International Electrotechnical Commission (IEC) standards and certification.  The line will integrate Spire's key stringing and tabbing, lamination and testing machines along with intermediate tooling stations.  The line will be designed to be easily expandable at a later date. Spire recently completed a 12 MW crystalline cell module line, expandable to 20 MW, for Fluitecnik in the Dominican Republic.

Wisconsin to purchase wind power from Minnesota

March 14, 2008. Wisconsin Public Service Corp. (WPSC), a subsidiary of Integrys Energy Group Inc. will buy wind power from a wind farm planned for southeastern Minnesota. WPSC plans to acquire a 150 megawatt portion of the High Country wind project, which located in Dodge and Olmsted counties. That's enough energy to power 44,000 homes. When completed, the project will include a total of over 300 megawatts of power. A sale of a portion of this project helps diversify High Country Energy's income stream and adds to the overall scale of the project, making it more competitive. The majority of the proceeds from the sale will remain within the community. The group said that construction on the project will start in about two years.

Davenport receives funding for newberry geothermal project

March 14, 2008. Ore.-based electric supplier Davenport Power will receive development capital for its Newberry geothermal project from US Renewables Group and Riverstone Holdings. Initial funds will be used to drill exploratory test wells in potential geothermal resource areas for underground geological features that have the right combination of heat and water to produce steam. If exploration is successful and a viable commercial resource is found during the exploratory drilling, Davenport will prepare and submit specific plans to develop a state-of-the-art geothermal energy facility that will provide clean, renewable energy. The Davenport-operated Newberry project is located on the western flank of Newberry Volcano 25 miles (40 km) southeast of Bend, Ore. The project is expected to ultimately produce renewable electric energy to satisfy a 20-year, 120-MW contract with Pacific Gas & Electric Company.

Petrobras and Mitsui to form bioenergy company

March 13, 2008. Petrobras and Mitsui signed documents needed to incorporate a company in Brazil to invest in bioenergy projects, particularly ethanol for exports to the Japanese market, in addition to power generation from sugarcane bagasse. Each company will hold a 50% stake in the new company. The new projects will focus on meeting the future Japanese demand for ethanol, and will be deployed in compliance with the socioenvironmental and energy efficiency requirements for biofuel production in the so-called Bioenergetic Complexes. The company will be called Participacoes Nippo Brasileira em Complexos Bioenergeticos S.A. Its creation is in line with Petrobras' strategic plan, which foresees boosting performance in the biofuel markets as a world-class integrated energy company.

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