MonitorsPublished on Mar 26, 2008
Energy News Monitor |Volume IV, Issue 41
Carbon Capture and Storage: A New Hope for Old Assets

ONCE the world's sixth-biggest producer of oil and gas, Britain's bit of the North Sea is in terminal decline. Production peaked in 1999 at 4.5m barrels a day and has since fallen to 3m. A target to maintain that level until 2010 looks certain to be missed despite the sky-high oil price.


That worries ministers. Expensive oil pads tax receipts: oil and gas firms are now the biggest corporate contributors to the treasury; along with banks they paid three-quarters of the £13 billion ($26 billion) raised in corporation tax in 2007. A newly-assertive Russia has pushed energy security up the agenda. And the industry supports around 400,000 jobs.


But the problem may disguise an opportunity, for the fields are emptying just as empty fields may start to become useful assets. That is because of carbon capture and storage (CCS), a technology that removes planet-heating carbon dioxide from power-station chimneys and sequesters it safely beneath the ground.


The government is keen. Sir Nicholas Stern, asked by Gordon Brown to examine the economics of climate change, backs the technology. Last year's energy bill removed legal obstacles; in November ministers announced a competition to build a coal-fired demonstration plant by 2014.


Carbon capture and storage offers several advantages. Many existing fossil-fuel plants will shut down in the next decade, and despite the drive for renewables and nuclear power, much of the replacement capacity will be fossil-fired. Fitting CCS would reduce emissions from these new plants to almost zero.


“Post-combustion” CCS, where carbon is removed from the flue gases, could be retrofitted to many existing plants. And by cleaning up dirty fuels such as coal, CCS could improve security of supply. In contrast to natural gas, global coal reserves are widely dispersed and can be bought from politically stable countries such as Australia and America.


Officially, the government's pilot plant is a demonstration for others (particularly China, which is building coal plants at breakneck speed) designed to show that the embryonic technology works.


Privately, many hope for commercial benefits too. Sir Nicholas predicted that fossil fuels would still account for half of world energy supply by 2050; if climate change continues to be taken seriously, the market for cleaning them up could be huge.


Supporters argue that a combination of geology and know-how gives Britain an advantage. “The core technology for this will likely come from Germany or Japan,” admits Jeff Chapman, head of the Carbon Capture & Storage Association, a fledgling trade association.


“But equipment supply isn't everything: project design, process management and finance are all things we do well.” Mike Tholen, chief economist at Oil & Gas UK, the offshore industry's trade body, is more bullish, arguing that British firms can make the kit as well as manage it.


Both agree that geology is a strong card: there is thought to be enough space to store billions of tonnes of carbon in empty oil and gas fields alone, and far more in subterranean salt caverns. The offshore oil industry around Aberdeen—already used to handling gases underground at high pressure—is a ready source of skills.


Cynics are less sure. The government's competition seems half-hearted: it is aimed at developments of around 300MWs, far smaller than most modern coal plants, and the timescale looks leisurely.


Jon Gibbons, of Imperial College London, argues that a single competition will not be enough to create an industry. And despite aiming to reduce carbon emissions, CCS does not qualify for the government's main green energy handout.


Britain talks the talk on green technologies, but the walk is wavering. Grand ambitions were cherished for developing renewables, but countries with more generous subsidies are cornering the market in those technologies. Still, there are grounds for hope.


Several oil and gas engineering firms are pondering CCS. And building on existing skills has worked before. London has become the world's largest carbon market mainly thanks to its dominance of high finance.


Courtesy: The Economist, March 8-14, 2008













Peak Oil, the Rise of China and India, and the Global Energy Crisis (part - IV)

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


Continued from Issue No. 40…

Some claim that if low-grade and more expensive uranium ores are used, the recoverable uranium could amount to 100 million tonnes (or about 1.1 trillion tonnes of oil equivalent). However, with low-grade ores, it could take so much energy to mine and process uranium that the net energy return could become negative (Boyle et al., 2003: 450-4).

A few countries (USA, UK, France, Japan and Russia) have experimented with breeder reactors that use plutonium (which can be used to make nuclear weapons). With breeder reactors, the lifetime of uranium resource could be extended by 50-60 times. However, the breeder reactors have much more serious safety and security problems than the conventional reactors. Plutonium is regarded as the most poisonous material known on Earth. With an accident, it could explode like an atomic bomb. Liquid sodium, the coolant used by breeder reactors, explodes on contact with air or water. Because of these problems, breeder reactors are expensive to build and maintain and are susceptible to long shutdowns. The French Super Phoenix reactor, the world's largest breeder reactor, operated for less than one year during its ten years of service before it was closed (Boyle et al., 2003: 454-5; Heinberg, 2003: 134; Trainer, 2005: ch. 9).

Nuclear fusion is another proposed technology that could potentially provide a very large energy supply. Nuclear fusion is the reaction that takes place in the Sun and has been achieved by human beings in the form of hydrogen bombs. To use it for economic purposes, however, the reaction has to be controlled. To initiate a fusion reaction, a temperature of more than 100 million [degrees]C has to be reached and no known materials are capable of containing such temperatures. So far scientists have attempted to confine the reaction through different processes. But each process requires more energy than the reaction itself generates and has succeeded in sustaining the reaction for no more than a fraction of a second (Heinberg, 2003: 160).

The European Union, the USA, China, India, Japan, South Korea and Russia recently signed an agreement to launch an experimental nuclear fusion reactor (about one-sixth the size of a regular power station) that would cost 10 billion Euros. The researchers hope that by 2045 they could start generating commercial electricity from nuclear fusion reactors (Financial Times, 22 November 2006).

The currently proposed nuclear fusion technology uses lithium, which is a limited resource. Trainer (2006a) suggested that it would yield about as much energy as remains in fossil fuels (about three trillion tonnes of coal equivalent).

Current nuclear electricity is generally uncompetitive compared with conventional electricity without huge government subsidies. If low-grade uranium ores are used or if breeder reactors and fusion reactors are used on a large scale, nuclear electricity is likely to cost many times more than conventional electricity and could be prohibitively expensive. In any case, nuclear energy can be used only to generate electricity and cannot help to make up the shortage of liquid and gaseous fuels.

China, India and the Global Energy Crisis

At best, using rather optimistic assumptions regarding the potential of renewable energies, the world would have to live with a dramatic slow down in the expansion of world energy supply in the coming half-century. Between 1960 and 2004, the world energy efficiency (measured as dollars of GDP in purchasing power parity per tonne of oil equivalent of primary energy consumption) improved at an average annual rate of 0.8% a year. After the first oil crisis, efficiency improvement accelerated. Between 1973 and 2004, the world energy efficiency improved at an average annual rate of 1.3% a year.

During the second half of the twentieth century, world economic growth rates fell below 2% on only three occasions, in the mid-1970s, the early 1980s and the early 1990s. These were regarded widely as periods of world economic recession. This suggests that after the world oil production reaches the peak in 2010, world economic growth rates are likely to fall below 3% a year, comparable to the growth rates during the 1980s and the 1990s, widely considered as a period of economic stagnation. After 2030, when world coal production has to be cut in order to alleviate global warming, world economic growth rates would fall further to recession levels (below 1.5% a year). In effect, the world economy would suffer a prolonged depression.

Could efficiency improvement lead to somewhat higher growth rates? Although the world economy has experienced substantial improvement in energy efficiency over the past few decades, the scope for efficiency improvement is not unlimited. In the first place, improvement in energy efficiency is subject to the limit of physical laws. To the extent all economic activities involve certain physical and chemical transformations, there is a minimum amount of energy as is required by physical laws for these transformations to take place.

Investment in energy efficiency is also subject to the law of diminishing returns. While initially relatively large efficiency improvement may be accomplished with little or no economic and energy costs, overtime it may require increasingly greater financial and energy investments to accomplish a given amount of efficiency improvement (Heinberg, 2003: 160-4). Stern and Cleveland (2004) argued that the observed improvement in energy efficiency in advanced capitalist countries to a large extent reflects the shift from fuels of poorer quality to fuels of higher quality. They suggested that prospects for further large improvement in efficiency in the future may be limited.

Some suggest that in advanced capitalist countries, energy use may be cut by a factor of four without affecting living standards (Lovins and Weisacher, 1997). But Trainer (2006b) points out that most of their arguments and examples suggest 50-75% reductions and believes that 50% reductions may be plausible.

The projections for world economic growth have already assumed substantial improvement in energy efficiency in the coming decades. The annual improvement rate of 1.5% is faster than the historical rates. At this rate, by 2050, world energy efficiency would approximately double from today's level. In fact, such an assumption could be too optimistic. Renewable energies generally have lower net energy returns than fossil fuels (Heinberg, 2003:152-3). Further, the conversion from coal or biomass into liquid and gaseous fuels or the conversion from electricity into hydrogen would involve huge energy losses. All of these suggest that after the peak of the world oil and natural gas production, world energy efficiency could very well deteriorate rather than improve.

What are the implications of the coming global energy crisis for the economic rise of China and India, and vice versa? Several scenarios may be considered. Under the first scenario, suppose China and India maintain their growth momentum through the first half of the twenty-first century so that by 2050 the two countries reach per capita resources consumption levels comparable to those in today's high-income countries.

EIA (2006b) projected that under its reference case scenario, China's energy consumption would grow at 4.2% a year and India's would grow at 3.2% a year in the coming decades. Applying these growth rates to the period 2004-50, by 2050 China's energy consumption would increase by 6.6 times and India's would increase by 4.3 times. If China were to have a population of 1.4 billion by 2050, China's per capita energy consumption would be 7.6 tonnes of oil equivalent. This would still be less than the present US per capita energy consumption. If India were to have a population of 1.7 billion by 2050, India's per capita consumption would be 1.4 tonnes of oil equivalent. This would still be less than the present world average per capita energy consumption.

Under these assumptions, by 2050 China and India together would have a total energy consumption of 13,119 million tonnes of oil equivalent, or 84% of the projected world energy supply. If India by then were to have the same per capita energy consumption as today's high-income countries (4.7 tonnes of oil equivalent), then China and India together would have a total energy consumption of 18,670 million tonnes of oil equivalent, about 20% greater than the projected world energy supply, leaving no energy for the rest of the world. Obviously, there is no chance for this scenario to actually materialise.

Under the second scenario, suppose by 2050, the combined share of China and India in the world energy consumption increases from today's 19% to 35%, roughly the same as their projected share in the world population. This would result in a much more equal distribution of the world energy resources among the world population.

Under this scenario, the total energy consumption of China and India would grow at an average annual rate of 2.1%, implying an average economic growth rate of 3.6% (assuming efficiency improvement rate of 1.5%). Such a low growth rate would be barely acceptable for China and India and it is unclear whether such a growth rate would be high enough to accommodate the various social tensions that have been unleashed by the transformation processes that have taken place in China and India in recent years. For the rest of the world, however, the average annual growth rate of energy consumption would be reduced to less than 0.3%, or virtual stagnation. This would clearly represent prolonged economic difficulties (if not disaster) for the rest of the world.

Both the first and the second scenario assume that the rise of China and India will take place, in the sense that their relative weights in the world economy will increase dramatically in the coming decades. Is it conceivable that the existing high-income countries might use their remaining advantages in technology, military power and ideology to secure a more favourable distribution of world energy resources for themselves?

Under the third scenario, energy consumption in high-income countries is assumed to grow by 1% a year between 2004 and 2050, securing a satisfactory economic growth rate for them. As a result, the energy consumption of high-income countries would increase by nearly 60%, to 8,705 million tonnes of oil equivalent. However, given the projected world energy supply, the rest of the world (including China and India) would have to be content with an average annual growth rate of energy consumption of 0.5% (or a total increase of energy consumption of about 25% between 2004 and 2050). Such a scenario would be considered to be the failure of Chinese and Indian national development projects. (9)


(9) By the standard of the twentieth century, "failure" of development does not have to involve absolute declines in the levels of economic output. For example, Latin America is considered widely to have "failed" in development in the 1980s and the 1990s. Yet, between 1979 and 2000, the total GDP of Latin America increased by nearly 70% (with an average annual growth rate of 2.5%).

to be continued…


Courtesy: Journal of Contemporary Asia





Dhirubhai-39 KG well viable: RIL

April 1, 2008. Reliance Industries’ (RIL) gas find in a new Krishna-Godavari (K-G) basin block off the east coast has been assessed to be commercially viable for producing gas. RIL submitted a viability report for the Dhirubhai-39 discovery in block KG-DWN-2003/1, about 50 km off Machilipatnam in Andhra Pradesh, to the oil ministry and the Directorate General of Hydrocarbons.

The well KG-V-D3-A1 flowed 38.1 mcf per day of gas and the find was later named Dhirubhai-39. The block, awarded to RIL in the fifth round of auction under the New Exploration Licensing Policy (NELP), is in the same region as the prolific KG-D6 block, from where it plans to start producing 40 million standard cubic meters per day of gas later this year. Gas discovery was made in the very first well drilled in the 3,288 sq km KG-DWN-2003/1 block.

RIL holds 90 per cent interest in the block, while Hardy Exploration & Production India Inc has the balance 10 per cent. The well KG-V-D3-A1 was drilled at a water depth of 716 metres to a total depth of 1,937 metres. A thick reservoir was encountered with gross hydrocarbon column of around 84 metres. Subsequently, the well flowed at a rate of 38.1 mmscfd on conventional testing.

HOEC has relinquished Block CY-OSN-97/1

March 31, 2008. According to Hindustan Oil Exploration Co. Ltd. (HOEC) the Block CY-OSN-97/1 has been relinquished as the exploration period has come to an end. The company had 80% participating interest in the block. In the past, the consortium had drilled two exploration wells in Block CY-OSN-97/1, as per commitment under the Production Sharing Contract (PSC). The wells have been plugged and abandoned.

Rajasthan asset costs at $2 bn: Cairn India

March 31, 2008. According to Cairn India Ltd, a unit of UK's Cairn Energy Plc, development costs for its Rajasthan asset were expected to be $1.8 bn for 2008 and 2009. Cairn India’s, which has a 70 per cent stake in the Rajasthan block, other small fields were estimated to hold in-place reserves of 1.7 billion barrels of oil equivalent. The company would start construction of a pipeline to evacuate crude from the Rajasthan block in the second half of 2008. 

Fall in insurance costs, crude rally lift ONGC’s prospects

March 28, 2008. Along with the benefits of a super-spike in crude oil prices, India’s largest oil and gas company, ONGC, is also reaping the benefit of a soft international insurance market. The company, which has offshore assets worth close to $21 bn (Rs 84,000 crore), will have to shell out only a marginally higher insurance premium for 2008-09. This is despite increasing its asset valuation by close to $4 bn for the year. ONGC has received a lowest bid for a premium of $26.5 mn compared to $25 mn in 2007-08. The bidding, which attracted global insurance brokers Aon Global, Benfield, Marsh and Jardine, was completed this week. Over the past two years, ONGC has increased its asset valuation by close to a 100%, yet the premium paid out has not gone up much, thanks largely to a soft global market for energy insurance. ONGC has also had an incident-free record in the period. Public sector insurance company United India is the lead insurer for the deal. The risk will now be reinsured by the brokers in the international markets. Less than 1% of the risk will remain with the Indian insurer. Insurance placement is a risky business as Brazilian oil company Petrobras found recently when its lead insurers failed to place the risk at the lowest quoted price. ONGC has been adding new vessels, platforms and wells to its offshore network in a massive redevelopment programme of its assets. The project, aimed at increasing production, includes the Rs 10,000-crore ($2.5 bn) Mumbai High redevelopment which involves the overhaul of the old network. ONGC first revalued its assets from about $11 bn in 2005-06 to close to $16 bn in 2006-07 and this has now been increased to $21 bn. The company is still unsure of the exact claim and says it could range between $30 mn to $60 mn. However, on the plus side, the company has made substantial investments in safety and technology in recent years, that have reflected in the bids.

India likely to sign deal for Iran projects in April

March 26, 2008. According to Chairman, R S Sharma of the Oil and Natural Gas Corporation the company expects a meeting with Iranian officials on participating in the Azadegan and South Pars Phase-12 oil and gas fields in a month. Meeting with Iranians on joining South Pars Phase-12 and Azadegan is tentatively planned for mid-April. ONGC team had gone there recently, and now have to sign participatory agreement with Iranians. 

ONGC signs performance MoU for FY09

March 26, 2008. Oil & Natural Gas Corporation Ltd. (ONGC) signed a Memorandum of Understanding (MoU) with the Ministry of Petroleum & Natural Gas for its annual performance in the year 2008-09. ONGC has maintained production targets for crude oil and natural gas at the same level as last year. It is aiming for crude oil production of 29.04 mmt in the year starting April while natural gas output for the next fiscal year has been pegged at 25.05 bcm. Value added products' production is estimated at 3.320 MMTOE in FY09 as against 3.245 last year and reserve accretion is set at 64.5 MMTOE versus 55 last year. Crude oil, natural gas and reserve accretion targets include share from domestic, Joint Ventures fields / acreages. Reserve accretion / production target exclude overseas acquisitions. MoU target for oil and gas production has been kept higher at the 2007-08 MOU target level, even though the approved BE target is less for 2008-09. The weightage for Subsidiary Management has been increased to 10% (4% MRPL & 6% OVL) from 4% (2% each) in 2007-08. Consequent upon the recommendations of the Task Force certain new indicators of performance have been included in this MoU for the first time. Under ‘Project Management’ activity schedule of Coal Bed Methane (CBM) and Under Ground Coal Gasification (UCG) will be given weightage. A new Performance Indicator under Operational Parameters i.e., Hydrocarbon production from North East finds place.


RPL eyes $500 mn for Jamnagar SEZ refinery

April 1, 2008. Reliance Petroleum Limited (RPL), a company jointly promoted by Reliance Industries (RIL) and Chevron Corp, has mandated a consortium of six international banks to raise $500 mn. This amount will be used for the final phase of completion of the 27 mmtpa refinery project in Jamnagar SEZ. The refinery is expected to begin commercial production by the second quarter of this fiscal. It is learnt that Bank of America Securities Asia, Bank of Tokyo-Mitsubishi UFJ, HSBC, Mizuho Corporate Finance, Sumitomo Mitsui Banking and WestLB are the mandated banks on the new financing. The seven-year financing will be on similar terms of the $1.5-bn loan raised by RPL in August 2006, which was the single-largest resource financing mandated in Asian market the, excluding China. RPL is said to have approached as many as 15 banks for the financing, which was signed by the six lenders last week. Though there was no immediate need of funds, RPL was in a rush to sign the deal before the fiscal year ending March 31 so that it could avail the benefit under India’s external commercial borrowing (ECB) guidelines. The rules allow any company to seek approval from RBI for a borrowing of up to $500 mn in a financial year. Incidentally, RPL had not borrowed since October, 2006. The funds being raised will provide RPL the flexibility to tap another $500 mn loans through the offshore markets in the next fiscal year. 

Aegis Logistics acquires Hindustan Aegis LPG’s gas terminal

 March 28, 2008. Aegis Logistics Ltd has completed the acquisition of Hindustan Aegis LPG’s 20,000 MT gas terminal as part of its expansion plans in the LPG business.  The Gujarat High Court has accorded approval to the Demerger Scheme of Hindustan Aegis LPG Ltd’s throughput undertaking and the Scheme is effective April 1, 2007. The Board of Directors of Aegis Logistics Ltd. has approved the establishment of a wholly owned subsidiary in Singapore to pursue business opportunities in the Port Infrastructure sector, and to assist in procurement of Petroleum products. The Board has also approved the Scheme of Arrangement for merger of Tapi Finvest India Pvt. Ltd., an investment company of the Group into Aegis.  Post merger, there will be a net reduction of 117,327 Aegis shares outstanding and a corresponding increase in Earnings per Share for Aegis.

BPCL files draft for Bharat Oman Refineries Ltd

March 28, 2008. Bharat Petroleum Corp Ltd filed papers for an initial public offering of a joint venture company that is setting up a Rs 10,400-crore ($2.6 bn) refinery at Bina in Madhya Pradesh. Bharat Oman Refineries Ltd (BORL), BPCL's joint venture with Oman Oil Company, filed the Draft Red Herring Prospectus for the IPO with SEBI. BORL intends to raise Rs 3,850 crore ($966 mn) equity for the 6 mtpa refinery project at Bina. This equity includes contribution by BPCL, government of Madhya Pradesh and the public. The project will be funded with a mix of debt and equity in the ratio of 1.6:1. BORL has entered into an agreement with a consortium of lenders for a debt of Rs 6,400 crore ($1.6 bn). The present issued and paid-up equity share capital of BORL is Rs 151 crore ($37.9 mn), which primarily comprises equity shares held by, inter alia, BPCL and Oman Oil Company SAOC. The remaining equity of Rs 3,850 crore ($966 mn) will be raised through the issue of equity shares to BPCL, the government of Madhya Pradesh, certain investors pursuant to a pre-IPO placement and the public pursuant to the IPO. The refinery is designed to have a crude oil processing capacity of 6 million tons per annum and a higher complexity factor of 9.1, as measured using the Nelson Complexity Index. The project also includes a crude oil importing and storage system in Vadinar in the state of Gujarat, consisting of a single-point mooring facility that can receive crude oil shipments from very large crude carriers in sizes of up to 320,000 dead weight tonnage and a crude oil terminal with a capacity of 4,80,000 cubic meters. The crude oil terminal will be connected to the refinery through an approximately 935 kilometre long crude oil supply pipeline. 

Petroleum products output at 12 mt

March 26, 2008. The country’s crude oil production increased 2.3 per cent and natural gas output rose 4.7 per cent in February compared with the same month last year. The refinery output was up 5.8 per cent due to rise in domestic consumption. According to data released by the Petroleum Ministry, crude oil production at 2.728 mt in February was higher than 2.666 mt in the same month last year. However, the output was 3.6 per cent lower than targeted production of 2.83 mt for the month partly due to shortage of offshore rigs. Natural gas production was up at 2.63 bcm. For April-February period, crude oil output was almost unchanged at 31.192 mt, while the natural gas production went up 2 per cent. The country’s 19 refineries produced 12.784 mt of petroleum products in the month under review against 12.087 mt in the same month last year. Reliance Industries produced 2.921 mt of products, while Indian Oil Corporation saw a 2.3 per cent increase to 3.692 mt. Refineries operated at 108.3 per cent of their installed capacity in February and at 104.6 per cent of the capacity in the April-February period.

Transportation / Trade

Gujarat Gas to buy gas from GAIL

April 1, 2008. Gujarat Gas Co. Ltd. has executed a Term Sheet with Gail (India) Ltd. for the purchase and transmission of 2.13 mmscmd of gas under which supply has commenced. The provisions would be subsequently incorporated in to a Gas Sales and Transmission Contract valid up to December 21, 2019, or the expiry or termination of the Panna Mukta Tapti (PMT) production sharing contracts. The company had entered into two gas sales contracts with the PMT Joint Venture, each for the purchase of 0.70 mmscmd of gas (1.40 mmscmd in aggregate). In September 2006, the company had entered into a gas sales contract with BG Exploration and Production India for the purchase of 1.65 mmscmd of gas. Pursuant to the Government order dated November 26, 2007, BG India, while expressing its inability to perform its obligations under the GSC, terminated the contract with immediate effect.

GAIL to takeover PMT gas marketing

April 1, 2008. In a land mark development, state gas utility GAIL India Ltd signed contracts for taking over marketing of natural gas produced from Panna-Mukta and Tapti gas fields. GAIL signed a contract with the consortia of Reliance Industries, BG Group of UK and Oil and Natural Gas Corporation, who are the joint operators of the PMT fields lying in western offshore for buying the entire 17 mmscmd of gas produced from the fields. It then signed contracts for sale of the gas to consumers, including RIL at the Government approved price of $5.7 per mBtu. About 5 mmscmd gas would be supplied to power and fertiliser plants, while 2.13 mmscmd gas would be sold to BG's subsidiary, Gujarat Gas Co Ltd, for its city gas distribution projects in Gujarat and other consumers. Another 1.1 mmscmd gas would be given to Gujarat State Petroleum Corporation (GSPC) for 15 days to meet the requirement of small consumers in Gujarat. After this period, GAIL will takeover the supplies to these consumers. Torrent Power would get 0.9 mmscmd gas, while Rajya Vidyut Nigam Ltd (RRVUNL) 1.5 mmscmd gas. GAIL would get the remaining 2.8 mmscmd for extracting LPG from the fuel.

IOC mulls crude supply through pipeline from Paradip

March 29, 2008. IndianOil is mulling transportation of crude through pipeline from the upcoming SPM at Paradip in Orissa to solve the age-old crude availability constraints in Assam, and expand capacities of Guwahati refinery and Bongaigaon Refinery and Petrochemical Ltd. The latter is a subsidiary and is proposed to be merged with IOC. IOC was actively considering reviving an idle crude pipeline of Oil India Ltd (OIL) between Guwahati and Barauni to pump crude to Guwahati refinery. The pipeline was originally used to supply light sweet Assam crude to Barauni refinery. IOC has already held preliminary discussions with OIL for using the 3.5 mt pipeline between Guwahati and Barauni. A feasibility study has also been launched to explore the possibility of laying a new crude pipeline (between Guwahati and Bongaigaon) for taking the supplies up to Bongaigaon. Apart from the required investment over technology for usage of cheap heavy high sulphur crude, the considered pipeline transportation, if it comes through, may pave way for major expansion of Guwahati refinery and BRPL in the future. Built with Romanian technology in 1962, Guwahati refinery can process one mt of crude marginally higher than the smallest refinery in the country at Digboi and quite unviable in the current industry scenario. Apart from paving way for refining capacity expansion from the existing 2.35 mt, the availability of cheaper crude will add to BRPL’s margins. The company is currently on course to make major investments in adding higher value products in its portfolio. Meanwhile, delay in implementing the SPM at Paradip had led to further delay in transportation of crude through the Paradip-Haldia pipeline. The Rs 1,178-crore ($294 mn) project is now expected to be completed in April. The pipeline will be connected with the existing Haldia-Barauni pipeline to transport crude up to Barauni. Both the Haldia and Barauni refineries can process 6 mt each and is on an expansion mode.

Policy / Performance

Regulatory board notifies criteria for city gas projects

April 1, 2008. Companies interested in taking first steps into city gas projects can do so if they have a joint venture partner having experience in the sector, or three technically qualified persons on board having at least one year experience in the business. The Petroleum and Natural Gas Regulatory Board (PNGRB) issued regulations for authorising entities to lay, build, operate or expand city or local natural gas distribution networks (CGD). This notification paves the way for the development of CGD networks in the country. According to a PNGRB release, city gas distribution projects in over 200 cities will be awarded on the basis of network tariff, CNG compression charge, length of pipeline proposed to be laid and the number of households to be covered. The regulations authorising entities to lay, build, operate or expand city or local natural gas distribution networks provide for selection of an entity through an open bidding process for laying, building, operating or expanding a CGD network. The regulations specify the minimum eligibility criteria for an entity to participate in the bidding process. On the issue of exclusivity, the regulations stipulate that after five years of monopoly, the CGD network would be thrown open to competition. However, the new entrant would not be allowed to lay new pipelines, but use the original contractors’ network on common carrier principle after paying a fee. The exclusivity for the pipeline network would be for 25 years that may be considered to be further extended by 10 years. For the existing networks such as Indraprastha Gas Ltd and Mahanagar Gas Ltd, the period of exclusivity will be for five years, if the period of operation has been less than three years. In case the operations have been for more Regulations for determination of network tariff for CGD networks and compression charge for CNG for the networks are already in existence and have also been notified. The tariff will be determined using the discounted cash glow methodology and the rate of return on capital employed shall be 14 per cent post-tax. The open bidding is in respect of four parameters with different weightages. Observers say that companies which have their own gas source can bid very low network tariff that has 40 per cent weightage and CNG compression cost with 10 per cent weightage in the overall bid to win a city. The regulations also stipulate that inch-kilometre of steel pipeline proposed to be laid during the period of exclusivity would have 20 per cent weightage in the overall bid, while the number of consumers proposed to be covered in the same period would have a weightage of the remaining 30 per cent. The regulations specify service conditions and quality of service standards, and the consequences of default and termination of authorisation procedure. The regulations also specify the procedure to be followed, while dealing with the entities which have been laying, building, operating or expanding CGD network before the appointed day, either authorised by the Union Government or not.

India to focus on Angola after losing out in energy auctions

April 1, 2008. India, Asia’s third largest consumer of oil, will focus on obtaining energy assets in Angola after failing to secure supplies closer to home. State-run explorers from India and China have submitted bids for oil blocks in Angola as the world’s two most populous nations need imports to sustain economic growth. India’s oil shortage has spurred Petroleum Ministry to turn to Angola, the fastest growing member of the Organization of Petroleum Exporting Countries (OPEC) with reserves equivalent to 11 years of India’s imports, after losing out to China in $10 bn (Rs400 bn) of auctions. India’s energy independence has been threatened because it hasn’t been able to increase production at home, where output from three-decade-old fields is declining. India will also compete for oil in Nigeria, Africa’s biggest producer, and Sudan.

India has been beaten by China to auctions for energy assets in Kazakhstan and Myanmar in the past three years. India has offered to build ports and railways in Nigeria and Sudan, copying tactics used by China. The South Asian nation hosted a two-day India-Africa conference in November to discuss oil cooperation, where Petroleum Minister, Murli Deora, offered to build refineries and pipelines. India, the fastest growing economy after China, estimates demand for oil will rise 62% over the next five years to 241 mtpa, or 4.8 mn barrels a day. Deora will travel to Venezuela next month to complete an agreement to acquire a stake in fields in the biggest crude-exporting nation in the Americas. OVLwill invest up to $356 mn (Rs 1, 424 crore) in a venture with state-owned Petroleos de Venezuela SA to operate the San Cristobal area. OVL and China Petroleum and Chemical Corp., Asia’s largest refiner, are among 43 companies that will bid to explore for oil in Angola, according to state-run Sonangol SA. The African nation is offering 11 licences for fields with a potential of 9.6 billion barrels of oil reserves.

The bidding has been delayed after Angola extended the deadline indefinitely. The offers originally had to be submitted by 13 March. Angola, which became a member of OPEClast year, was set a daily production target of 1.9 million barrels at the group’s meeting in Abu Dhabi on 5 December. Angolan output increased 18% last year to 1.61 million barrels a day.

NELP-VII Singapore roadshow

March 29, 2008. The Government has successfully completed its road show at Singapore for promoting the latest auction of oil & gas exploration blocks under the seventh round of New Exploration Licensing Policy (NELP-VII). As many as 30 exploration & Production companies attended the investor's meet. These companies - 23 foregin and 7 Indian - included prominent foreign companies like Petronas, BP, CNOOC, Total, Aabar, Norwest Energy, Pacific Oil & Gas, Rutlede, Serica Energy, Salamander Energy, SPC and Ludin. The Government has offered 57 blocks - 19 deepwater, 9 shallow water and 29 onland - under NELP-VII. Besides the E&P companies, representatives of eight service providers, two bankers, three consultants also attended the Singapore road show.

 NELP-VII is being offered in the backdrop of 58 oil and gas discoveries, which have already been made in 17 exploration blocks by accertion of in place hydrocarbons reserves of more than 600mn metric tons of oil equivalent. Under the NELP regime, natural gas production in KG basin is likely to commence from the third quarter of 2008, initially at the rate of 40 mmscmd while peak production is estimated to be 80 mmscmd. Other discoveries of ONGC and GSPC are also likely to come into production, establishing the deepwater expertise of Indian comapnies. The Additional Secretary in the Petroleum Ministry also highlighted that every fifth block under the first three rounds of NELP has proven to be oil & gas bearing, as against the world average of one out of 10 blocks.

Government issues $2 bn oil bonds

March 28, 2008. Government on Friday issued oil bonds worth Rs 9,296.92 crore ($2.3 bn) in order to compensate public-sector oil marketing companies for their under recoveries. The Finance Ministry has announced the issuance of 8.40 per cent Oil Marketing Companies Government of India Special Bonds, 2025 for Rs 9,296.92 crore ($2.3 bn) (nominal). The Special Bonds are being issued to four oil marketing companies as compensation towards estimated under-recoveries on account of sale of sensitive petroleum products during the current financial year (Rs 9,076.41 crore) ($2.2 bn) and settlement of contingent liabilities.

The break up is: Oil and Natural Gas Corporation (Rs 197.37 crore) ($49.5 mn) and Indian Oil Corporation (Rs 23.14 crore) ($5.8 mn) pertaining to the administered price mechanism (APM) period, it said. The Special Bonds are being issued at par to IOC for Rs 5,121.62 crore ($1.3 bn), Bharat Petroleum Corporation Ltd (BPCL) for Rs 2,078.92 crore ($521.8 mn), HPCL for Rs 1,899.01 crore ($476.6 mn) and Oil and Natural Gas Corporation Ltd for Rs 197.37 crore ($49.5 mn). The bonds do not have an SLR status. The investment in the Special Bonds by the banks and insurance companies will not be reckoned as an eligible investment in Government securities for their statutory requirements.

Govt in a fix over Reliance's decision to close petrol pumps

March 26, 2008. Government is in a fix over closure of petrol pumps by Reliance Industries over denial of subsidy on par with public sector companies. Reliance plans to shut two-third of its 1,400 petrol pumps in the country by next month as it is unable to match the fuel price offered by state-run retailers, who get compensated by the Government for selling fuel below the cost. According to Petroleum Minister, Murli Deora, the Government had no ready solution to deal with the situation.

Reliance and Essar make huge losses on selling petrol and diesel at prices higher than Indian Oil, Bharat Petroleum and Hindustan Petroleum. On an average, fuel at private outlets is costlier by Rs 4 to 5 a litre than the PSU pumps. Public sector retailers too lose Rs 10.93 on sale of every litre of petrol and Rs 14.66 per litre on diesel but the losses are made up by issue of oil bonds by the Government and discounts from ONGC, GAIL and Oil India. The same compensation is not given to the private retailers like Reliance and Essar. Reliance still lost close to Rs 5 a litre on petrol and about Rs 8 a litre on diesel and had seen its market share fall from 14.3 per cent to less than a per cent in diesel.

India, Brazil may enhance cooperation in oil sector

March 26, 2008. Petroleum and Natural Gas Minister Murli Deora emphasised the need for India and Brazil to further enhance cooperation between both countries, especially in the oil and gas sector. Efforts are afoot in this direction as the two national oil companies of respective countries, Oil and Natural Gas Corporation (ONGC) (India) and Petrobras (Brazil) have entered into an arrangement for exploration and production of hydrocarbons in India and Brazil.



New coal deposits in Raigarh

April 1, 2008. A new deposit of coal has been found in Raigarh district while in Bastar region, presence of iron ore has been indicated in the mineral survey and prospecting. The deposits of bauxite and limestone have been discovered in Sarguja and Kabeerdham districts respectively. The coal deposit found in Pelma sector of Raigarh district is estimated to carry a reserve of 40 mt.

300 MW hydel project in Jammu

March 28, 2008. A 300 MW hydel power project is coming up at Panjtirthi on the river Ujh in Kathua district of Jammu region shortly. The power-starved state had taken many steps for bringing reforms in this sector. Out of the Rs 24,000-crore ($6 bn) special package announced for J&K, Rs 17,000 crore ($4.3 bn) is being spent on the power sector. 

Bhoruka Power targets Dadupur hydro project by ’09

March 27, 2008. Bhoruka Power Corporation Ltd has targeted to commission its 6 MW Dadupur hydropower project in Haryana by March next year. The project is BPCL's maiden hydel power venture outside its home state, Karnataka, where it currently has around 70 MW of operational capacity through nine mini and small hydropower projects. Civil works had recently started and were targeted to complete by January 2009. The civil works package awarded to Chandigarh-based P&R Infra Projects Ltd. In January 2009, work on the electromechanical package awarded to Bangalore-based Boving Fouress will begin. The Rs 42-crore ($10.5 mn) project is coming up on the Western Yamuna Canal flowing in Yamunanagar district. It will have four horizontal S-type Kaplan turbines of 1.5 MW each. Earlier this month, BPCL entered into a power purchase agreement with Uttar Haryana Bijli Vitaran Nigam, a state power distribution company. The entire power generated from Dadupur HEP will be sold to the state grid under a 35-year agreement. The PPA also brings Haryana closer to its target of sourcing three per cent of its total power purchase through clean energy sources, in the coming years. Bhoruka Power Corporation is India's first private sector company to set up an independent hydropower project. It did so in November 1992 when it commissioned the 18 MW Shivapur hydropower project in Koppal district of Karnataka. In July 2007, it commissioned the 24 MW Chayadevi project in Gulbarga district, which is the company's largest hydropower project so far. The company is also pursuing wind power capacity in Karnataka and Rajasthan.

NEEPCO power plant to be fueled by ONGC

March 26, 2008. Oil and Natural Gas Corp will supply natural gas to North Eastern Electric Power Corp Ltd for its power generation plant in Tripura. ONGC and NEEPCO have signed a Term Sheet, which is a precursor to signing a contract, for supply of 0.5 mmscmd of gas per day from future exploratory efforts of ONGC to NEEPCO's plant at Monarchak in West Tripura. NEEPCO plans to produce 104 MW of power by the end of 2010. After signing of this Sheet there is a 45-day period within which a formal contract is to be signed, but NEEPCO indicated that it is interested in hastening the process much before the due date. Tripura is energised by three thermal and one hydel power stations. But NEEPCO's gas-based power stations are vital for meeting the growing energy demands of the hilly state. 

Transmission / Distribution / Trade

ADB to loan $600 mn to Power Grid Corp

April 1, 2008. The Asian Development Bank will loan $600 mn to the state-run Power Grid Corp of India to part-finance the expansion of a power transmission project. In addition to this $600 mn loan, a potential second ADB loan of $400 mn is expected to be reviewed for approval later this year. Power Grid is constructing a high-voltage power transmission system to transmit clean and abundant hydro-power generated in the northern and the north-eastern parts of India to demand centres in the west and within the northern areas. The total cost of the project is estimated at $2.54 bn. Apart from the ADB loan, Power Grid will invest $762 mn and raise the balance funding from other financial institutions. Last month, the World Bank pledged a $600 mn loan to Power Grid. India aims increase power generation capacity by 78,600 MW by 2012, as part of its drive to scale up infrastructure to sustain a high economic growth.

MP aims at 8 GW power capacity

April 1, 2008. Effective measures taken since last four years to improve power transmission system has resulted in increased transmission capacity in Madhya Pradesh. The consolidation in transmission system has been possible due to priorities set by the state government and their effective implementation. As a result, the transmission capacity rose to 6493 MW in 2006-07 compared to 3890 MW in the year 2002-03. Now the state government has set a target of 8170 MW transmission capacity for the year 2008-09. Besides, during the last four years 41 sub-stations were set up in the state as compared to just 27 in the ten-year period ending 2003.

One of the examples of transmitting power to consumers with high quality is that during the last three years 3611 circuit kilometres of transmission lines of different capacities have been set up. These include 400 KV, 200 KV and 132 KV transmission lines while during the ten years period upto 2003, only 3044 circuit kilometres of transmission lines could be set up. Also during the last four years capacity of transformers at high-tension sub-stations has been increased significantly resulting in improving of transmission capacity. 

REL EPC arm bags contract worth $300 mn

March 31, 2008. EPC division of Reliance Energy Limited has bagged two contracts worth approx Rs.12bn ($300 mn), for execution of 400 KV extra high voltage transmission system in the Transmission Companies (IPTC), which are 100% owned companies of Reliance Power Transmission Ltd. The two contracts are for two projects named as Western Region System Strengthening Scheme (WRSSS) Project B and WRSSS Project C. The Project B covers about 1000 km of 400 kV double circuit transmission lines in Maharashtra, whereas Project C covers about 500 km in Gujarat. Two separate transmission license to this effect had been applied from Central Electricity Regulatory Commission. The nine lines comprising about 4300 towers made of approx. 60,000 tonnes of steel, 18,000 kms of conductor and about one mn insulators will be commissioned by the end of 2009. The project execution involves extensive survey, Right of Way (ROW) selection through the use of satellite mapping application for avoiding any adverse impact on nature or any existing installations. REL’s EPC division undertakes engineering, design, construction and execution of industrial projects in various fields like generation, transmission and distribution, mainly focusing on the power sector to achieve and set new benchmarks in the field of the power sector.

Inverters, generators demand in NCR to grow by 30 pc

March 31, 2008. Demand for inverters and generators this summer is likely to grow by about 30 per cent in the national capital region (NCR), which may face power shortage of up to 10 hours. The demand for inverters, their batteries and generators will rise to the extent of 30-35 per cent as NCR is unlikely to be supplied power supplies either from neighbouring region or else from far off power producing sources. Players in the organised inverter market like Su-Kam, Microtech and Luminous would face tough competition from the unorganised industry. Branded inverters are costlier by about Rs 2,000-2,500 a piece against the unbranded ones. The industrial and residential areas could witness power cuts in the range of 8-10 hours a day. The generator market, on the other hand, is expected to grow at least by over Rs 1,200 crore ($300 mn) from the current size of close to Rs 5,000 crore ($1.2 bn) to over Rs 6,200 crore ($1.5 bn). Since, hardly any capacity addition has been done in the region in the last couple of months, the power shortage will be met through installation of inverters and generators.

Power in Punjab cheap by 3.5 pc from April

March 30, 2008. Power in Punjab form April 1 will be cheaper by 3.5 per cent as Punjab state electricity Board (PSEB) will stop charging increased tariff on Punjab consumers in 2007-2008. The Punjab State Electricity Regulatory Commission (PSERC) had increased power tariff in September last year. Though the tariff has increased from April 1, it came in to enforce from September 1. The average increase for the whole year is 4.90 per cent. However, as the tariff is to be recovered in the remaining seven months, after annulisation it will become 8.4 per cent.

The tariff was raised in September last after a gap of almost two years and that too by taking a suo moto initiative by the commission because the PSEB had not filed the petition to raise the tariff to meet its enhanced annual revenue requirement (ARR). This year too keeping eye on panchayat polls and expected parliament elections the Punjab State Electricity Board (PSEB) did not seek any hike in power tariff in its petition filled on February 15 before the Punjab State Electricity Regulatory Commission (PSERC). PSEB on the direction of Punjab Government has left matter for tariff revision entirely on PSERC. 

Jurala joins State grid

March 30, 2008. The first unit of the 234 MW Jurala hydro-electric project on the Krishna river in Mahabubnagar district joined the State grid after successful synchronisation. To start with, only a part of the plant capacity is being operated now. The AP Genco wants to run the unit at its full capacity after further stabilisation in a few days.

NHPC commissions all 3 units of Teesta-V

March 29, 2008. State-run National Hydroelectric Power Corporation has commissioned all the three units of 510 MW Teesta Stage-V Hydroelectric Project in Sikkim. Two of the three units of 170 MW each are expected to become commercially operational shortly, while the first unit is already functional. The project would generate 2,573 million units of energy annually. The cost of the project is about Rs 2,650 crore ($661 mn) and the provisional tariff approved by the Central Electricity Regulatory Commission is Rs 1.62 per unit. Teesta-V is one of the six hydro projects identified for execution by NHPC in Sikkim. The company has added 1,420 MW of generation capacity in the last one year with the commissioning of 390 MW Dul Hasti project in Jammu and Kashmir, 520 MW Omkareshwar project in Madhya Pradesh, and Teesta-V. The run-on-river Teesta-V project would benefit states of Bihar, Orissa, Jharkhand, West Bengal and Sikkim. 

R-Power to place $3 bn equipment order

March 28, 2008. Reliance Power, the flagship company of the Reliance Anil Dhirubhai Ambani (ADA) Group, will place orders worth Rs 10,000 crore ($2.5 bn) for 12 boiler, turbine and generators (BTGs) for its power plants. This will be the largest ever such order worldwide to be placed with a power equipment manufacturer. Five international boiler and turbine manufacturers viz., Ansaldo from Italy, Doosan from Korea, Toshiba of Japan, Shanghai Electric of China and Power Machines from Russia are in the fray to bag this mammoth order. The order would be for 8,000 MW capacity. The equipments have to be supplied in 4-5 years as per the terms of the contract. The orders were mainly for the Rs 18,300 crore ($4.5 bn) Sasan Ultra Mega Power Project (UMPP) and the 4,000 MW Krishnapatanam UMPP, coming up in Andhra. Reliance Power is fast-tracking the 3,960 MW Sasan project to commission it ahead of the earlier deadline for the first phase in 2012.

The first phase of the 600 MW Rosa power project is also scheduled for commissioning in 2009-10. Reliance Power intends to become the largest private sector power generator in the country with 13 power projects (capacity 28,200 MW). Reliance Power would utilise a major portion of its initial public offering (IPO) and raise debt to fund the order. In January, the company had raised about Rs 12,000 crore ($3 bn) through the country’s largest ever IPO. 

Tata Power may sell stakes in units

March 28, 2008. Indian power utility Tata Power Co Ltd may sell stakes in holding Companies and assets to help fund its $6 bn capacity expansion plans. Tata Power, India's oldest private power producer, plans to raise its power generation capacity by more than five times to nearly 13,000 MW by 2013. Tata Power, which is part of India's salt-to-software Tata Group, is an electricity supplier in Mumbai, India's financial capital, and operates a distribution arm in Delhi. The company would use Rs60bn ($1.5 bn) rupees of internal funds and raise debt of Rs180bn ($4.5 bn) to pay for its expansion plans. Tata Power had Rs29bn of funds in hand and had raised another Rs19 bn through a preferential issue of warrants to Tata Sons Ltd, the group's holding company. Other debt would be raised in loans through domestic financial institutions, banks and capital Markets, and foreign loans through credit agencies and multilateral agencies.

PGCIL aims $1 bn turnover in FY09

March 28, 2008. Country's largest power transmission utility Power Grid Corp expects to achieve a turnover of Rs 5,400 crore ($1.3 bn) in the next fiscal, an 18 per cent rise over the previous year's revenues. As per a Memorandum of Understanding signed between PGCIL and the Power Ministry, the company targets to add about 5,500 circuit kms of extra high voltage transmission lines and about 6,300 MVA of transformation capacity.

Power exchange launch may be delayed

March 27, 2008. The roll-out of Indian Energy Exchange (IEX), the country’s first power bourse, is likely to be pushed back beyond the tentative April 1 launch target as fine-tuning of final rules and bylaws, besides the establishment of data transfer interface with system operators, are yet to be completed. The bourse was initially slated to go live in February, with the launch date being pushed back subsequently. IEX has roped in leading global electricity exchange Nord Pool ASA for operational expertise to ensure that the kick-starting the bourse goes without a hitch. IEX’s promoters Financial Technologies India Ltd (FTIL) and PTC India Ltd had earlier signed up Nord Pool’s technology provider, Swedish firm OMX Technology, to offer tech support to IEX. IEX has already got EoIs from some 100 prospective members, including a host of Central generating stations, distribution licensees across states and State generating stations. As per the design of the exchange, all transactions on the IEX platform will be carried out by or through registered members, each of whom will be designated as trading-cum-clearing member (TCM).

TCMs will be IEX’s immediate customers while every other participant on IEX will be a client of a TCM. Once the exchange goes live, all the participants will submit the bids for buying and selling of power to the exchange though a closed double side auction process. The power bourse would accept bids and offers from prospective buyers and sellers during the bid call period from 1,000 hours to 1,200 hours for each hour of the next day (hourly contracts). The bids would be displayed on the screens of IEX online work stations. The bids matched by the bourse mechanism would be settled at a uniform market clearing price and the energy flow would be arranged through inter-state transmission system.

Policy / Performance

NTPC signs MOU with Govt of India

April 1, 2008. National Thermal Power Corporation Ltd (NTPC) has signed a Memorandum of Understanding (MOU) with Ministry of Power, Government of India for generating 2.09 bn units of Electricity during the financial year 2008-09. In addition, the MOU includes targets of important milestones relating to Project completion schedule of ongoing power projects, coal mining activities, Total Quality Management, Human Resources Development, Business Development Activities including activities of Gas Exploration, Distributed Generation, R&R, ERP and R&D, Energy Technology Project Management Certification, Ash Utilisation and Environment measures and also the targets in respect of subsidiaries of NTPC, i.e. NVVN, NESCL, NHL and Vaishali (Power).

MP govt to transfer 3 mini hydel power projects to NHDC

April 1, 2008. The Madhya Pradesh government has decided to hand over three more mini hydel power projects to the Narmada Hydro Electric Development Corporation (NHDC), a joint venture of Madhya Pradesh and the Narmada Hydroelectric Power Corporation (NHPC). These three projects are first mini hydel power projects with a total capacity of 351 MW to be built on Narmada basin. Narmada Valley Development Authority (NVDA) decided to award the projects to NHDC, since private companies are more interested in thermal power generation. Hydel power projects involve social obligations. The new three hydel power projects will be constructed at upper Narmada zone at Raghavpur (20 MW), Rosra (25 MW) and Basania (20 MW). Survey of these projects have been completed and will cater to the power demand at upper Narmada zone that includes tribal dominated area districts like Mandla and Dindori.

Earlier the state government had floated tenders for one of the projects to involve private parties, however, it received lukewarm or no response from the private sector. NHDC has already completed two mega hydel power projects namely 1000 MW Indira Sagar and 520 MW Omkareshwar power projects on the Narmada river lower zone. NVDA has roped in Indian Institute of Rurki to gauge mini hydel power potential on Narmada Basin. The primary phase of which has already been completed.

NTPC gets investment cap waiver

March 31, 2008. The government has given its nod for removing the ceiling of Rs 1,000 crore ($250 mn) for equity investment by power giant NTPC to form financial joint ventures and wholly-owned subsidiaries in India or abroad. The move would help the company actively participate in large state projects. NTPC had been demanding special exemption from the government to bid for seven coal-based power plants in Maharashtra, Karnataka, Uttar Pradesh and Madhya Pradesh. The decision would facilitate participation of NTPC in the bidding for the development of power projects initiated by utilities and result in greater competition and establishment of more public sector power projects. Earlier, NTPC had to wait for the Union Cabinet’s approval for an over Rs 1,000-crore ($250 mn) equity participation while bidding jointly for power projects.

The country’s top power company has currently an installed capacity of 29,144 MW. It aims to have a total production capacity of 50,000 MW by 2012. The Cabinet Committee on Economic Affairs (CCEA) also gave its approval to Rs 1,650-crore ($412 mn) investment by Germany’s Daimler AG on its proposed JV with India’s Hero Group for manufacturing commercial vehicles. The JV would design, manufacture and sell light commercial vehicles and heavy commercial vehicles (HCVs) in the domestic market. It would also later export vehicles from the country.

CIL plans broad-basing of product range

March 28, 2008. Having failed to convince the Centre for a switch-over to the internationally accepted gross calorific value-based gradation for its produce, Coal India Ltd (CIL) is now hopeful of broad-basing its product range from the existing eight grades to approximately 30 varieties within the set parameters of useful heat value (UHV)-based gradation system. The switch-over is likely to take place in the next six months. The proposed product range will narrow down the UHV within the grades from the existing band of 900-1,100 kilo calorie (K Cal) to 200-300 K Cal. Coupled with the present move to switch over from linkage to the fuel supply agreement (FSA) regime, the broad-basing of product range with separate price tags for each variety, if approved by the Centre, will improve CIL’s earnings substantially in the future. The existing calorie band between the grades is a built-in disincentive for producers for not attending to quality. Redefining the product range will address the issue.

Such classification for raw coal may be done away with once CIL attains its vision of supplying only processed (washed) coal in the future, thereby creating an environment for a move to gross calorific value-based product classification. Meanwhile, CIL is targeting implementation of FSAs latest by May 15. Apart from introducing better discipline in the coal supply scenario in the country, the new regime is expected to substantially reduce the working capital requirement of CIL due to better inventory management.

PFC, RITES ink JV for coal import

March 28, 2008. Power sector financing company Power Finance Corporation (PFC) and railways’ technical advisory wing RITES signed an MoU to jointly import coal from countries, including Africa, to ease scarcity of the fuel in view of rising demand by electricity generators. An SPV may be formed later in partnership with other domestic and foreign companies for acquiring mining rights, outsourcing coal mining activities and import coal for sale within the country. The partnership will bring together financing muscle of PFC and engineering, design development and consultancy experience of RITES required for making inroads into the coal business.

 To start with, the two companies would explore possibilities of importing coal from African countries and other mineral-rich countries. A formal structure may be formed later depending on the demand for fuel. The two sides would also facilitate in the development of port network and augmentation of railway connectivity, crucial for transporting coal from ports to user centres. Besides, they would also jointly provide advisory services to Indian companies in acquiring mining rights overseas. As per the tie-up, RITES, besides being a technical partner, would identify countries where possibility of owning coal mines exists and excavation and transportation of coal is feasible for importing coal to India.

India seeks uranium from Namibia for enhancing nuke energy

March 27, 2008. In its global search for fuel to enhance nuclear power generation, India asked Namibia to supply uranium from its vast reserves. India and Namibia could explore a long-term relationship in uranium. India can assist Namibia in the field of information and communication technology, railway and telecom. The coalition Indian Government was trying to sign a civil nuclear deal with the US. Nuclear energy contributes less than three per cent of the country's installed generation capacity. India targets to add 78,577 MW power generation capacity during the 11th five year plan. Of this, about 3,800 MW is sought to be generated by nuclear plants. Namibia, which is not a member of the Nuclear Suppliers Group (NSG), has 8-9 per cent of the world's uranium resources. It can help India in meeting its energy requirements. India would be expanding its nuclear generating capacity, there was a need to explore sourcing uranium from countries across the globe. While there are uranium reserves in India, they cannot be explored fully due to the ecologically sensitive locations of the areas.

NHPC’s Myanmar failure may hit India’s energy security plans

March 27, 2008. National Hydroelectric Power Corp.’s (NHPC) plans to develop a hydropower project in Myanmar have come to a nought, a move that will likely have an impact on India’s efforts to improve its diplomatic as well as economic relationships with its neighbour, which has rich deposits of natural gas, a fuel that India desperately needs. Three years after submitting a feasibility report, NHPC has expressed its inability to commence work on the 1,200 MW hydropower project at Tamanti, that was scheduled to be operational by 2014, because it has too much to do back home. The project would have helped control floods and provide water for irrigation. In return, India would have received the bulk of the power generated.

The project failure will affect India’s chances of leveraging its infrastructure development efforts in Myanmar to sign long-term contracts for supply of natural gas. It will also hurt its chances of countering the growing influence of China in Myanmar. Tamanti is located in the north of Myanmar. Myanmar has a hydroelectric power potential of 39,720 MW and an installed capacity of around 747 MW. The successful completion of the project could have helped India develop more hydropower projects in that country and helped it tap the energy resources there. Myanmar has natural gas reserves of 89.722 tcf, of which 18.012 tcf are proven recoverable reserves or gas that can be easily extracted and tapped. Energy security is a key to sustaining India’s 8%-plus economic growth. The country’s consumption of petroleum products is around 112 mt per annum and it imports 78% of its energy needs. India has also been trying to get some gas from blocks in Myanmar, where ONGC Videsh Ltd and Gas Authority of India Ltd together hold a 30% stake. However, the Myanmar government recently decided that the gas from these blocks would be sold to China. India is likely to try and lobby for reversing the decision.

Gujarat plans mini-hydro projects

March 26, 2008. The state government is planning mini-hydro power projects with a total capacity of 10 MW along all major dams in central and south Gujarat. These plants are likely to come up on Karjan, Damanganga and Vanakbori projects in south Gujarat. The government has planned two units of 1.5 MW each on the Karjan project at an investment of Rs 16 crore ($4 mn). Similarly, it would invest Rs 24.40 crore ($6 mn) in the Damanganga project to generate 5.25 MW apart from 1 MW that will be generated on Vanakbori. According to the state govt. around 20,000 mcf water was being harvested as a result of 100,000 check dams built in various parts of the state. 




 More gas discoveries needed for electricity

April 1, 2008. New Zealand will need more gas discoveries even though the Government had set a target of generating 90% of electricity from renewable sources by 2025. The relative economics of gas against coal will improve under the emission trading scheme. The recent introduction to Parliament of an Electricity Act amendment would create a 10-year restriction on construction of baseload thermal generation above 10 MW whose fuel source was more than 20% fossil fuelled. Preliminary analysis of the recent seismic data acquisition in the unexplored basin, which lies north of East Cape in the North Island, has significantly strengthened earlier confidence in the existence of a petroleum system.

Forest Oil significant gas discovery in Utica Shale

April 1, 2008. Forest Oil Corporation announced a new natural gas discovery in the Utica Shale located in Quebec, Canada. Over the last two years, Forest has accumulated approximately 269,000 net acres, under lease or farm out, in the St. Lawrence Lowlands in Quebec, Canada. Two vertical pilot wells were drilled in 2007, testing the Utica Shale, to a total depth of approximately 4,800 feet. Production rates tested up to 1 MMcfe/d. Although the play is still in the early stages, Forest believes the initial results are encouraging due to the following factors: Shallow depth of the shale, Rock properties are comparable to other more established shale plays, High-quality natural gas with minimal impurities, Infrastructure in place with nearby access to major pipelines, and Premium natural gas pricing to NYMEX makes the economics compelling. Forest plans to drill three horizontal wells in 2008 to refine its drilling and completion techniques. Based on technical data and the vertical pilot well program, the preliminary net resource potential on Forest's acreage is estimated to be approximately 4 Tcfe. First production is expected in 2009 with the potential for a full scale drilling program in 2010 and beyond.

Argentina's oil production hits six-year low

March 28, 2008. According to National Institute of Statistics and Census (INDEC), Argentina's oil production hit a six-year low in 2007. Oil output stood at 257 million barrels in 2007, down 2.6 percent year-on-year and this was the sixth consecutive annual drop since 2002. South American country has decreased by 24.3 percent from its historic high in 1998, while fuel oil imports have surged 64 percent to US$3 bn last year. According to experts in Argentina's oil industry, the high tax on exports of crude oil and oil products was curbing foreign companies' enthusiasm for oil exploration and exploitation in Argentina. Pan American Energy discovered a number of oil fields earlier this year in the southern Argentine province of Chubut that could bring about a 40-percent increase in the country's oil production.

Cairn discovers 2 gas fields in Bangladesh

March 27, 2008. The Scottish company Cairn Energy has discovered gas at Magnama and Hatiya in the Bay of Bengal in Bangladesh. It has discovered gas at the structures near the southeastern port city of Chittagong and has sought permission to conduct appraisal to find out the size of the discovery. Cairn has already submitted an appraisal program to conduct further exploration in a bid to confirm the quantity of the discovery and how much of it can be extracted commercially.

A Petrobangla committee comprising technical and financial experts held meeting to review Cairn's appraisal program and would sit with the company to discuss its action plan. Cairn, which owns the right to explore gas and oil in the shallow-depth offshore block of 16 in the Bay of Bengal, started drilling and survey at over 150 square kilometers area in October last year. Seismic surveys conducted at Magnama and Hatiya in 2005 indicated potential gas reserves are 5.3 tcf in the two structures. If the company's discovery matches the potential gas reserve, it would be one of the biggest gas findings in the country's history. The discovery of gas at the offshore fields could bring cheers to the country, now facing soaring energy crisis amid booming industrial growth. Currently the country's total gas production is around 1,730 mmcfd. But the overall daily demand is around 1,840 mmcfd.


Petrobras, ExxonMobil complete Japan refinery purchase

April 1, 2008. Petrobras and TonenGeneral, an ExxonMobil subsidiary, completed the agreement for the purchase of an 87.5% share in Nansei Sekiyu, in Okinawa, a deal worth approximately $50 mn. The transaction is a very important milestone for Petrobras, which is now entering downstream operations in Asia for the first time. Nansei Sekiyu also has Sumitomo Corp. as a shareholder, which will remain holding a 12.5% stake in the company, in partnership with Petrobras. Nansei has a refinery capable of processing 100,000 barrels of light oil per day and produces high-quality derivatives, in the Japanese market's standards. Additionally, it also has an oil and derivative terminal capable of storing up to 9.6 mn barrels, three piers with potential to receive product vessels of up to 97,000 deadweight tonnage (dwt), and a monofloat for very large crude carrier (VLCC) vessels of up to 280.000 dwt. Over and beyond its regular activities, it is also foreseen that the terminal will be used to drive biofuel negotiations in Japan and in the Asian market.

As a result, Petrobras hopes to boost its technological exchanges with Japan, governed by ethics in business, with social responsibility, committed to sustainable development and to improving the citizens' quality of life. Since 2006, the Company has been guiding its social and environmental actions based on the principles set forth by the UN Global Compact and it is listed in the Dow Jones Sustainability Index (DJSI), among other international initiatives. The refinery acquisition is aligned with Petrobras' Strategic Planning with regards to increasing its oil refining capacity abroad, and it makes a significant contribution to increasing marketing efforts for the oil and derivatives the Company produces.

Wilhelmshaven upgrades in late planning stages

April 1, 2008. ConocoPhillips (COP) is in the advanced planning stages of a longstanding project to upgrade its Wilhelmshaven refinery by adding hydrocracking and coking units. The company is currently preparing cost estimates and applying for a construction permit for what it calls the Deep Conversion Project. Once the permit has been received, the plans will be submitted to the board of directors for approval. ConocoPhillips has intended to upgrade the refinery since it purchased it in March 2006 from Louis Dreyfus Energy Holdings Ltd. Wilhelmshaven refinery produces some 275,000 barrels a day. The plant will experience a short shutdown in the autumn for catalyst change works.

Valero seeks sale or swap deal for Memphis refinery

March 31, 2008. Valero Energy Corp., which bought the Memphis refinery in 2005, is looking for a buyer, perhaps, or another refinery that may be interested in swapping refineries with it. Memphis fits that category because of the investment it would take to make it more valuable to Valero, which specializes in refining lower-grade oils. Some of them trade about $20 less than sweet crude.

 With oil at more than $110 barrel, Valero has been able to improve its margins. Valero got the Memphis refinery when it purchased Premcor. Last year, it sold a refinery in Lima, Ohio, it also got in the acquisition. If Valero does sell, it expects a new buyer would make significant investment in the Memphis refinery, which has the capacity to refine 195,000 barrels a day. Its primary products are gasoline and jet fuel, which it sells to FedEx Corp. and other airlines at Memphis International Airport.

Husky, BP complete oil sands JV agreements

March 31, 2008. According to Husky Energy Inc. all necessary government and regulatory approvals have been received for the formation of an integrated oil sands/refining joint venture. This transaction is a creation of two 50/50 partnerships whereby Husky contributes and operates its Sunrise oil sands project in Alberta, Canada and BP contributes and operates its Toledo refinery in Ohio, U.S.A. Husky/BP have completed all agreements on schedule. The effective date for the transaction is January 1, 2008.

Transportation / Trade

MOL exec suggests new tool to achieve Nabucco support

April 1, 2008. At the Steering Committee meeting of Nabucco Gas Pipeline International GmbH, MOL Gas, advocated establishing a so-called Political Supporting Body. According to MOL, the body would give the needed momentum and provide the appearance of political harmony and support for Nabucco.

In addition to the representatives of the six member countries of Nabucco, MOL suggested also inviting representatives of European Union and Azerbaijan to join the Political Supporting Body. The body reportedly would accelerate the project’s implementation, facilitate EU-level decision-making, and provide political support in lobbying. MOL would be a very important facilitator in order to support the Nabucco Partners from financial and gas source points of view, along with easing the process for obtaining permits or exemptions. Nabucco Gas Pipeline International GmbH aims to establish the 3,300-km-long gas pipeline, which will deliver 31 bcm p.a. natural gas from the Caspian Sea region to Europe.

Petrobras announces new ethanol pipeline company

March 31, 2008. Petrobras, Mitsui & Co., LTD, and Camargo Correa S/A created the PMCC Projetos de Transporte de Alcool S.A., a corporation aimed at executing the ethanol pipeline project to be built between Senador Canedo (GO) and Paulinia (SP), in addition to the section that will interconnect the Tiete-Parana Waterway to the Paulinia Terminal.

The company's creation is an important factor to develop the international ethanol market and to ensure the Brazilian leadership in Biofuels, since with the appropriate logistics, Brazil can have competitive ethanol export prices. The ethanol pipeline is part of the Ethanol Exports Corridor, which begins at the Senador Canedo Terminal, in Goias, goes through Uberaba, in Minas Gerais, and extends to Ribeirao Preto, Paulinia and then Guararema, in Sao Paulo.

Projected Nord Stream pipeline cost nearly doubles

March 31, 2008. OAO Gazprom expects construction costs for the 1,200 km Nord Stream gas pipeline to reach 7.4 bn euros. The initial cost estimates for the pipeline indicated that it would cost slightly more than 4.0 bn euros. Gazprom holds a 51 percent interest in the project, while BASF SE and E.ON AG hold 24.5 percent each.

Crude prices likely to fall in ’08

March 27, 2008. According to a survey, a slowdown in industrial growth will bring down the crude oil prices in the international market, while food prices will continue to remain high fueling inflationary pressure in 2008. Oil prices are expected to decline from the record levels in 2008 due to slow pace of industrial growth, led by the United States. The survey, however, says that food prices are likely to remain high, posing greater inflationary risks because food accounts for a substantial proportion of consumer spending. It further pointed out that major currencies in the Asian region, including rupee, would continue to appreciate against the dollar, driven by the unwinding of large US imbalances with the rest of the world and the turmoil in global financial markets. Countries in the region will face twin blows - reduced demand and less competitive exports to the US. Although the currency appreciation sheltered the Asian economies from high oil and food prices, it dealt a blow to the competitiveness of exports. The countries whose currencies appreciated the most faced intensive competition from low cost producers in low-technology manufactured goods and agriculture commodities. 

Policy / Performance

Nigeria discussing gas-to-gasoline plant with ExxonMobil

April 1, 2008. President Umaru Musa Yar'Adua has directed Nigeria's Ministry of Petroleum to hold talks urgently with ExxonMobil regarding the oil company's proposals to build a gas-to-gasoline plant in the West African country. According to him, such a concept was feasible and would provide additional supply of petrol for the nation. He also directed the Nigerian National Petroleum Corp. (NNPC) to accelerate efforts to ensure adequate and timely private funding of the joint-venture agreements in the petroleum sector. He commended ExxonMobil for the proposal and for cooperating with the NNPC in ensuring the growth of the sector, as well as for its commitment to the development of the host communities. Company was capable of building a plant to produce up to 100,000 barrels of gasoline per day from natural gas, with other by-products such as liquefied petroleum gas.

CNOOC eyes refineries in Shandong

March 31, 2008. China National Offshore Oil Corp (CNOOC), the parent of CNOOC Ltd, is considering five refineries in eastern China's Shandong province as possible acquisition targets. The targeted plants include those of Fuhai Group, Kenli Petrochemical Co, Zhonghai Chemical, HaiKe Group and Shandong Shida Technology Group, each with processing capacity of 20,000-40,000 bpd. CNOOC is also considering two bigger plants in Shandong of 110,000 bpd capacity each, and discussions for such plants are now under way. Through these acquisitions, CNOOC expected to achieve refining capacity of more than 200,000 barrels per day in Shandong. CNOOC, China's top offshore oil and gas producer, earlier signed a framework cooperation agreement with the Shandong provincial government on refining, fuel storage and logistics facilities. The group is enhancing its downstream operations as it is seeks to become an integrated oil firm. In October, CNOOC agreed to acquire Hebei Zhongjie Petrochemical Group Corp, with plans to boost annual refining capacity at Zhongjie to 10 mt within three years. The company's 12 mt refinery project in Huizhou, in Guangdong, a joint venture with Royal Dutch/Shell, will start commercial operations before the end of this year.

Venezuela sends Chalmette oil to China

March 31, 2008. Venezuela is rerouting oil to China that had previously been sent to a U.S. refinery co-owned by its state oil company and Exxon Mobil Corp. Exxon has stopped ordering crude for a refinery in the New Orleans suburb of Chalmette as legal wrangling between the Irving, Texas-based company and Petroleos de Venezuela S.A., or PDVSA, continues. PDVSA and Exxon are locked in a fierce legal battle over compensation for the 2007 nationalization of a jointly owned heavy oil project in Venezuela's Orinoco basin. PDVSA's profits increased 15 percent last year, jumping to $6.2 bn from $5.4 bn in 2006 as world oil prices reached historic highs.

Nigeria will hit 4 mn bbl/d by 2010

March 31, 2008. According to the Nigerian Oil Minister Odein Ajumogobia the country will be able to meet the production target of 4 mn bbl/d by 2010. Nigeria, Africa's largest oil producer, has seen quite a bit of violence in the oil-rich Delta, such as the kidnappings offshore, yet the country continues to press forward and court foreign companies for possible ventures, as well as the strengthening of current ones.

Chevron to start producing oil in Cambodia in ’11

March 28, 2008. The Cambodian government estimates that U.S. oil giant Chevron will be able to recover 15 to 20 percent of the estimated 500 million barrels of oil in its offshore exploration block, starting in 2011. According to the Cambodian National Petroleum Authority (CNPA) engineering plans for how to extract the oil and get it to shore, as well as details of Chevron's commercial terms, are still being worked out. Chevron, which along with minority partners Mitsubishi and GS Caltex controls off-sea Block A, has remained mum about the size of its find and when and if it will commence commercial exploration.

Chevron signed a revenue-sharing agreement with the Cambodian government in 2003, the terms of which are now under renewed negotiations. Some dozen foreign drillers are now searching for oil and natural gas in six defined blocks in off-sea Cambodia. Chevron once claimed it had found the resource in its test wells, while other drillers still remained silent. Experts used to put the potential reserves of oil in offshore Cambodia at two billion barrels, but the Cambodian government usually appeared unsure of various estimates.



Pak signs contract with Chinese firm for power project

April 1, 2008. The Pakistan government signed a contract with a Chinese firm for setting up of a power project as part of its plans to generate 2,200 MW within a year to cope with a crippling energy shortage in the country. The cornerstone of the government's policy is to ensure energy sufficiency in the country on least cost basis, which is essential for the country to achieve high GDP growth and to ensure that the people are not subjected to load shedding. The Chichoki Malian power plant was approved by the government for fast-track implementation by China's Dongfang Electric Corporation. This plant will be located in a high power demand area. Among government’s first priorities is to redeem the alarming situation in the power sector, which has arisen due to non-addition of new generation over the past 10 years. The country now faced a challenging situation to bridge the power supply-demand gap in the shortest possible time. The government will soon announce long term energy policy.

Southern Nuclear looks to boost Vogtle output

April 1, 2008. Southern Nuclear Operating Co. filed an application with the U.S. Nuclear Regulatory Commission to build two nuclear reactors at the Alvin W. Vogtle Electric Generating Plant near Waynesboro, Ga. The Southern Co. would add two 1,150 MW reactors at Vogtle. Southern Nuclear, a subsidiary of Atlanta-based Southern Co., runs Plant Vogtle's two existing nuclear power units for plant owners Georgia Power, Oglethorpe Power Corp., the Municipal Electric Authority of Georgia and Dalton Utilities. Southern Nuclear applied for an early site permit for Vogtle in August 2006. Georgia Power also would need approval from the Georgia Public Service Commission before deciding to build the new nuclear units.

Nuclear innovation launched to develop power-generating projects nationwide

March 26, 2008. NRG Energy Inc. has formed a new company that will invest in new nuclear projects in select markets across North America. The company, Nuclear Innovation North America LLC, will take over the development of the planned nuclear plant expansion at the South Texas Project. Princeton, N.J.-based NRG is jointly developing two new nuclear reactors at the Bay City, Texas complex with San Antonio's CPS Energy. NRG will transfer its portion of the work to Nuclear Innovation North America. Japan's Toshiba Corp., which is serving as the prime contractor on the South Texas Project expansion, will become an equity partner with NRG on the new venture. Toshiba will invest $300 mn in the company over the next six years in return for a 12 percent equity stake in Nuclear Innovation. One advantage to the NRG-Toshiba venture is that Toshiba has agreed to extend pre-negotiated engineering, procurement and construction terms to Nuclear Innovation for two additional nuclear projects.

Transmission / Distribution / Trade

TransCan buys U.S. power plant for $3 bn

April 1, 2008. Canada's largest pipeline owner, TransCanada Corp., would buy a power plant in New York City for US$2.8 bn. The company has spent several billion dollars over the past few years scooping up pipelines and power generating plants in the U.S. TransCanada is buying the plant by acquiring a subsidiary of National Grid PLC called KeySpan-Ravenswood, which controls the 2,480 MW plant. The New York Public Service Commission ordered National Grid to sell the Ravenswood facility as a condition to its purchase of utility KeySpan Corp. The deal is subject to regulatory approval and expected to close by summer. Ravenswood is a gas and oil fired power generating plant with multiple units that employ steam turbine, combined cycle and combustion turbine technology. TransCanada absorbs about 200 Ravenswood employees as part of the agreement.

Power-hungry areas fighting for electricity

April 1, 2008. Electricity has become such a precious commodity that states are fighting over who gets it. In the latest dust-up, New Jersey regulators and consumer advocates are battling a plan by a state utility, Public Service Enterprise Group, to send power from a local plant to the more lucrative New York City market. Federal regulators helped clear the way for the project, which critics say will increase electric rates and threaten the reliability of the power grid in New Jersey and the rest of the Mid-Atlantic. Similar battles are playing out across the country as electricity demand surges and it becomes tougher to build power plants that spew global-warming gases, especially near population centers. The tug of wars are also a product of the power industry's deregulation in many states. That has allowed utilities to sell power out of state to the highest bidder.

Ukraine signs deal with U.S. firm on nuclear fuel supplies

March 31, 2008. Ukraine's nuclear power utility Energoatom had signed a contract with the U.S.-based Westinghouse Electric Company on fuel supplies for its nuclear power plants. Ukraine, which relies almost entirely on Russia for its nuclear fuel imports, has stepped up efforts in recent years to diversify supplies amid rising prices and energy disputes with Russia. The document signed by the parties stipulates nuclear fuel supplies for Ukrainian nuclear power plants in 2011-2015. The strong level of energy dependence on Russia, which also has almost total control over Ukraine's natural gas supply, prompted President Viktor Yushchenko to announce plans in January 2006 to create nuclear fuel production facilities. The decision was sparked by a fuel price hike by Russian corporation TVEL in late 2005, and a natural gas debt row with Russia's state gas giant Gazprom at New Year 2006, during which Russia turned the taps off to Ukraine.

Chinese power giants' profit dragged down by energy costs

March 29, 2008. China's four leading electric utilities companies released their annual reports to the country's two stock markets this week, saying their 2007 profits were largely affected by soaring energy costs. Huadian Power International Co Ltd reported its revenue hit 20.49 bn yuan ($2.94 bn). Its gross profit was 1.82 bn yuan, down 3.57 percent year-on-year. The decline came despite increasing demand for power as Huadian generated 70.27 billion kilowatt hours of electricity in 2007, up 40.46 percent.

The company said that the decline was mainly caused by higher prices for coal, its main fuel source. The overall cost, including crude material costs, taxation and other fees, was 16.53 bn yuan last year; coal accounted for 69.93 percent of the total cost. Revenue for Huaneng Power International Inc, the listed arm of China Huaneng Group, was 50.44 bn yuan, up 13.5 percent. Its gross profit slid 8.37 percent year on year to stand at 7.39 bn yuan. The company was exposed to increasing coal prices and ocean shipping fees at the end of last year and the beginning of this year, something caused by the energy strain. Huaneng generated 173.69 billion kilowatt hours of electricity in 2007, representing a growth of 13.21 percent.

It generated 8.8 bn kWh of electricity in 2007, up 11.75 percent from the previous year. China experienced its most severe winter in five decades starting in mid-January. This had caused a critical shortage of energy resources in the country's south. China, the world's largest producer and consumer of coal, saw its economy expand by 11.4 percent last year. The consumption of coal, which generates about 80 percent of the country's power, rose 7.9 percent to 2.58 billion tons.

Calgary's regulated default electricity rate for Apr ’08

March 27, 2008. The default electricity rate for Calgary will rise to 9.81 cents per kilowatt hour (kWh), effective April 1, 2008. Consumers who have chosen a fixed price energy plan will not be affected by this price change. As a result, the electricity bill for a typical Calgary household (using 625 kWh per month) will increase by 5.5 per cent compared with the previous month to $96.09. The technically correct name for the default rate is the Regulated Rate Option (RRO). It applies when no choice is made by a consumer. The owner of the local distribution system is required by legislation to provide the RRO to eligible customers (residential and small commercial customers who consume less than 250,000 kWh of electricity each year) in their service area. ENMAX Power is the local distribution company in Calgary and fully supports the competitive market for electricity and consumers' rights to choose their own energy plan.

Anyone who has not chosen to enter into an energy plan with a retail supplier receives the RRO by default. The default rate is calculated each month from prices in the wholesale electricity market using a process approved by the Alberta Utilities Commission. Forty percent of the rate comes from purchases made from sellers into the wholesale electricity market of supply contracts for the month of April, and the remainder comes from longer-term purchases made at market prices. As of July 1, 2007 this default rate reflects a higher percentage of shorter-term market prices in accordance with provincial government regulations introduced in 2006.

This could potentially cause the default rate to fluctuate more than it has in the past. Prices change with the energy market, depending on changing weather, seasonal consumption demands and fuel costs such as natural gas prices. A new price for the default rate is set each month that reflects current market price conditions. This change in regulation increases the importance of consumers examining their own energy cost control choices. ENMAX Power Corporation, a subsidiary of ENMAX Corporation, and its predecessors have provided Albertans with safe and reliable electricity for more than 100 years. One of the most reliable urban utilities in Canada, ENMAX Power owns, operates and maintains the distribution and much of the transmission network in and around Calgary, which are activities regulated by the Alberta Utilities Commission.

Policy / Performance

Energy giant calls for delayed decision on coal-fired power station

April 1, 2008. Environment campaigners said the Government suffered a major blow after the energy giant E.ON argued that a decision on whether it should build Britain's first coal-fired power station since 1984 should be delayed until later in the year. The company said that a decision on whether to approve the application, at Kingsnorth in Kent, should wait until ministers had finished their consultation into carbon capture and storage (CCS).

Dubai to have no shortage electricity: Dewa

April 1, 2008. The Dubai Electricity and Water Authority (Dewa) has got strategies in place to ensure sufficient electricity and water for all residents in Dubai even though the emirate is growing rapidly, including the population. The authority ruled out any possibility of power and water shortage in the emirate. Dewa plans to generate more power and water in line with the rapid development of the emirate. The authority is of the view that recently introduced slab system of tariff, would not affect the budget of most of the industries. Dewa had not increased the tariff in the past 10 years. With the signing of the agreement with DI, Dewa will open a new customer service office in DI to facilitate services. This is another strategic agreement by Dubai Industrial City to expedite the setting up of companies and allow investors operating in its township and the surrounding areas to complete their Dewa transactions and procedures with ease.

Latvia to pay Russia $0.7 mn for removal of spent nuclear fuel

April 1, 2008. Latvia's government made a decision to pay $700,000 to Russia for the removal and burial of spent nuclear fuel from the dismantled Salaspils research reactor. Last year, Latvia and Russia signed an agreement under which spent nuclear fuel from Latvian nuclear reactors would be transported to Russia for burial. Most of the expenses will be paid by the U.S. Department of Energy as Latvia is a party to the U.S. special program for the disposal of nuclear waste from Soviet reactors. The Salaspils research reactor halted operations in 2004 and has since been fully dismantled.

Partners to study nuclear role in oilsands

March 28, 2008. Use of atomic power for oilsands development will be investigated by a research partnership, between the Alberta and United States governments. The Alberta Research Council and the U.S. energy department's main nuclear laboratory in Idaho signed an agreement calling for work on potential bitumen belt applications of electricity, heat and chemical byproducts from reactors proposed north of Edmonton.

The Alberta Research Council has signed an agreement with the U.S. government to study the use of atomic energy in the oilsands. The partnership plans to work out a research agenda by late summer or early fall. Potential topics range from making nuclear reactors provide heat for steam used in thermal oilsands production to production of hydrogen and oxygen used in high volumes by bitumen upgraders.

ESA satellite technology enhances nuclear monitoring

March 28, 2008. The International Atomic Energy Agency (IAEA) is well known for their mission of monitoring the worldwide flow of nuclear materials and safeguarding the implementation of the Nuclear Non-Proliferation Treaty. From their headquarters in Vienna, the IAEA safeguards numerous nuclear facilities in many countries and across several continents.

To support the online monitoring of nuclear facilities, the IAEA has a remote monitoring data centre, which downloads data from over 140 systems worldwide. Fifty radiation detection systems and 90 surveillance systems (including 340 cameras producing 150,000 images per day) generate to up to two gigabytes per day of global data traffic. Online monitoring depends on reliable communications between the remote sites, IAEA headquarters and its regional offices in Tokyo & Toronto. Following intensive investigations of technological solutions, the IAEA in cooperation with ESA has now decided to verify the suitability of a worldwide satellite communications network. This project will play a very important role, assisting the IAEA in performing a thorough assessment and in obtaining evidence of the performance and benefits of a space-based communications infrastructure. For the IAEA, connectivity via satellite to reach the locations of geographic interest will be an important step forward.

 Reaching all corners of the world with a single hop via satellite makes IAEA communications independent of terrestrial networks. This is achieved by the multi-satellite and multi-transponder capability of the selected network technology. Furthermore, the new system allows the simultaneous carrying of all types of services at the same time via one network. Telephony, written reports, images and data can be all be sent, along with live videoconferencing.

French energy giant may lead new generation of British nuclear power plant

March 26, 2008. French expertise and money is likely to play a pivotal role in the drive to build a new generation of nuclear power plants in the UK. EDF, the energy company controlled by the French Government, wants to build four new nuclear power stations in Britain a far more ambitious proposal than any of the other five big utilities in the UK. The Government has estimated that each plant would cost about £2.8 billion to build, but the cost could run to as much as £3.6 bn.

 EDF has also stated clearly that all four of these would be to a French design developed by Areva, the nuclear energy giant that is also part-owned by the French state. With a generating capacity of 1.6 MW per unit, Areva's EPR reactor design is the world's most powerful. It is the most up-to-date version of the fleet of reactors used in France, which generate almost 80 per cent of its electricity.

Two such reactors are already under construction one in Finland and the other in northern France. Areva's EPR design could also be picked by other big power companies such as the German EON or Britain's Centrica, but the French contribution is unlikely to end there. Britain's current crop of ageing reactors most of which were built to a unique British design in the 1960s and 1970 are gradually being retired from service and only one, Sizewell B, will still be operating by 2023. Since they were built, Britain has lost many of the high-end engineering skills needed to oversee development of such a complex nuclear engineering project. French expertise will therefore probably be required to train a new generation of British nuclear engineers and help build and run the new plants.

Renewable Energy Trends


India to have new accounting norms for carbon trading

April 1, 2008. Anew set of norms to enable transparent accounting of the increasing number of carbon credits earned by Indian companies, which are presently classified as other income, is being written by the Institute of Chartered Accountants of India (ICAI), the premier accounting body in the country. The group constituted under accounting standard board of the ICAI is working on the nuances of carbon trading norms. At present, most companies show earnings out of carbon credit trading as other income as they are not recognized by tax laws.

Once an accounting standard is defined, companies will have to show these earnings separately. Carbon credit, or certified emissions reductions (CER), are awarded by the CDM (clean development mechanism) executive board, an arm of the United Nations, to projects in developing countries that ensure or certify reduced greenhouse gas emissions. India, along with China, lead countries in earning carbon credits. According to government statistics, around 35% of the total 819 projects registered by the CDM executive board are from India, the highest in the world. The Indian National CDM Authority has given host country approval to 753 projects, facilitating investments of more than Rs 63,000 crore ($15.6 bn). The CDM executive board only considers projects approved by the host country.

These projects, which are in the sectors of energy efficiency, fuel switching, industrial processes, municipal solid waste, and renewable energy, have the potential to generate 421 mn CERs by 2012. Indian companies sell CERs to companies in developed countries, especially in Europe, through bilateral deals or carbon exchanges. SRF Ltd, Gujarat Fluorochemicals Ltd, Oil and Natural Gas Corp. Ltd, and NTPC Ltd are some of the leading companies that use and sell carbon credits. The industry fears that once standardized, the government may decide to tax incomes earned through carbon trading as capital gains tax or even securities transaction tax if they are treated as instruments similar to equity shares.

NTPC, NGRI to set up geo-thermal projects

March 31, 2008. NTPC Ltd, the country's largest power producer, will set up a geo-thermal based power project in Chhattisgarh in association with National Geo-physical Research Institute. NTPC has signed a memorandum of understanding with Hyderabad-based NGRI for identifying potential sites to set up geo-thermal based power projects in India. Both the organisations have agreed to associate for formulating a long-term strategy to set up the first geo-thermal based power project in India. Tattapani in the state of Chhattisgarh has been identified as the first project site. Geo-thermal power projects utilise heat beneath the earth's surface to generate energy. 

33 grid interactive SPV power plants installed

March 31, 2008. A total of 33 grid interactive solar photovoltaic power plants have been installed in the country with financial support from the Government. These plants, with aggregate capacity of 2.12 MW, are estimated to generate about 2.55 mn units of electricity in a year. In addition, around 14.5 lakh decentralized off-grid solar photovoltaic systems aggregating to about 125 MW capacity have been installed in the country, which is capable of generating about 150 mn units in a year. Further, a collector area of about 2.15 mn square meter has been installed for solar water heating applications. The amount of energy generation depends on the use pattern of the system and climate of the place. Typically, a solar water heating system with 2 square meter of collector area can generate energy equivalent to up to 1500 units of electricity when the system is used for about 300 days in a year. The Government has taken several measures to reduce the cost of solar energy systems, which include:

1. Research and development to improve their performance and reduce the consumption of materials;

2. Subsidy on selected solar energy systems;

3. Interest subsidy to provide soft loan to users and the manufacturers;

4. Concessional or nil import duty on some of the raw materials, components and products;

5. Excise duty exemption; and

6. 80% accelerated depreciation in the first year etc.

Many incentive have been given to private agencies for research and generation of solar energy. All academic, research institutions and industries, including the private institutions are engaged in research in solar energy. They are eligible to receive grant for undertaking R&D. In addition, expenditure on R&D by the private industries is eligible for deduction from profits under Income Tax Act. Under grid interactive solar power generation, private companies are eligible to get production based incentive for power fed to the grid from megawatt capacity solar power plants set up on build own and operate basis in the country.

Proposal from any project developer with a maximum aggregate capacity of 5 MW, either through a single project or multiple projects of a minimum capacity of 1 MW each, are being considered under the programme. Preference is given to the projects from the States where the State Electricity Regulatory Commissions (SERCs) have announced or are in the process of announcing tariff for solar power. For projects approved and commissioned by 31st December, 2009, the Ministry will provide generation based incentive up to Rs 12 per kWh for solar photovoltaic power and Rs 10 per kWh for solar thermal power after taking in to account the tariff provided by the SERC or the utility.

IOC plans to enter ethanol production

March 30, 2008. Indian Oil Corporation Ltd (IOC) is studying various options for becoming an ethanol producer from being just a buyer. The company would be looking at both organic and inorganic prospects for expanding its business in the bio-fuel category. The company plans to seek expert advice on whether it is viable to purchase sick sugar mills or if it is better to set up a new project. Currently, to sell the five per cent ethanol-blended petrol, IOC has been procuring ethanol from other suppliers.

 The Government has already made five per cent blending of ethanol mandatory in notified States and Union Territories and 10 per cent blending is to become effective from October this year. The purchase price of ethanol has been fixed at Rs 21.50 per litre ex-factory on a uniform basis for three years from October 2007. Total requirement of ethanol by oil marketing companies for five per cent ethanol-blended petrol programme implementation is 0.6 million kilo litres per year and for 10 per cent, 1.20 million kilo litres per year for the notified States and Union Territories. Recently, Reliance Industries Ltd and public sector oil company Hindustan Petroleum Corporation Ltd (HPCL) were among the companies which were awarded financial contracts for the revival of State-run sugar mills in Bihar.

However, IOC had not participated in the bids. IOC has been focussing on bio-diesel projects till now. The company has already amended its memorandum of association to get into agri-related activities, particularly bio-crops that would enable it to carry out business in bio-fuels and allied products. This in effect allowed IOC to go in for cultivation of plants like jatropha to be used for blending with diesel. The company plans to be part of the full chain in the alternative fuels category.

Andhra to take up biodiesel plantations in 8,800 hectares

March 30, 2008. In a move that will boost the biodiesel industry in the State, Andhra Pradesh will raise pongamia plantations in over 8,800 hectares, spreading across 16 districts. The total cost for the project was estimated at Rs 23.41 crore ($5.8 mn). The National Bank for Agriculture and Rural Development (Nabard) had sanctioned the project under Rural Infrastructure Development Fund (RIDF) XIII to the State. Out of the total outlay, Rs 22.4 crore ($5.6 mn) would be the loan component from Nabard and Rs 1.17 crore ($0.3 mn) would be the Government share.

The Government of Andhra Pradesh was yet to grant administrative approval for the project. However, Rs 20 crore ($5 mn) had been released during the year 2007-08 under the previous RIDF biodiesel project and an expenditure of Rs 13.28 crore ($3.3 mn) had been incurred for raising bio-diesel plantations. The tree-borne oilseeds have promising potential to supplement vegetable oil supply in the country. These oil seeds grow in poor soils under low rainfall conditions without competing with annual food crops, thus filling gaps in the ecological niche. The promotion and development of such crops would also help meeting the societal needs of eco-conservation, expansion of rural industries, rural employment generation and also supplement the supply of alternate fuel to petro-diesel.

10 pc ethanol blended petrol from October’08

 March 29, 2008. Under alternative fuel for transportation systems, 10% Ethanol Blended Petrol (EBP) becomes mandatory from coming October. In October 2007, the Government made 5% blending of Ethanol with petrol mandatory while 10% blending was kept optional. During the last three years, the Government has taken various steps to develop and promote use of alternative fuels like ethanol, bio-diesel and hydrogen for transport applications. The Petroleum Ministry mandated the use of 5% Ethanol Blended Petrol (EBP), subject to commercial viability in the entire country with effect from November 1. However, North-Eastern states, Jammu & Kashmir, Andaman & Nicobar Islands and Lakshdweep were exempted. As a result, release of 5% EBP has commenced at all locations in 15 states and 4 Union Territories.

The modalities for implementation are being worked out by the Petroleum Ministry in consultation with stakeholders. A broad based programme for Research & Development (R&D), production and utilisation of bio-diesel is under implementation by different ministries. The Ministry of New and Renewable Energy has also prepared a Draft National Policy on bio-fuels. Under its ongoing research, development and demonstration programmes, the Ministry of New and Renewable Energy has supported field trials of different blends of bio-diesel in diesel cars, use of hydrogen as fuel in motorcycles and three-wheelers, and introduction of hydrogen compressed natural gas (CNG) blends in different vehicles. In addition, support is also being provided for development and promotion of battery operated vehicles.

Hydroelectric project in Idukki gets CDM certification

March 28, 2008. The Iruttukanam Small Hydroelectric project set up in Devikulam taluk of Idukki district has been certified under Clean Development Mechanism (CDM). This is the first project in Kerala to have registered under CDM. The international certification is accorded by a designated body, functioning under the Kyoto Protocol. The mechanism enables the 3 MW project to sell carbon emission reductions (CERs) achieved by it to various other entities across the world, which will provide additional revenue to the project. The project, set up by Viyyat Power Private Limited, was monitored by the Ministry of Environment and Forests, the designated National Authority for CDM in India. The certification is provided after a due process of examination of social, economic, environmental and technological parameters. The estimated reduction of carbon dioxide in tonnes per year by the project has been put at 10,131.

 The CER trading will be allowed for 10 years commencing from 2009. The project has received the CDM certification in the category of small scale renewable energy generation unit. The prerequisite, as per the CDM provisions, is that the project supplies electricity to an electricity distribution system that is or would have been supplied by at least one fossil fuel fired generating unit. The Iruttukanam project is executed in the western Kallar river, a tributary of Muthirapuzha river in Periyar basin. It can generate 11.92 MU of energy per annum. The generated electricity can be fed to 66 kV transmission line and then connected to the southern regional grid.

The power generated by the project helps in displacing electricity that would have been supplied by the thermal power plants connected to the grid, thus fulfilling a condition for the certification. The capital cost of the project is Rs. 15 crore ($3.7 mn) and the electricity tariff agreed by KSEB is Rs.2.40 per kWh. The CDM revenue is significant to make it attractive for investment and also to cover some of the hardships reportedly faced by it. The total installed capacity in the southern regional grid is 36447.52 MW as on March 31, 2006. The installed capacity of thermal, hydro, nuclear and renewable energy sources in the southern grid 20366.32 MW, 10967.71 MW, 880 MW and 4233.49 MW respectively. The major source of power generation in the grid is heavily dependent on thermal generation. The hydro potential in the country is estimated at 150,000 MW. The hydro electric scheme in operation as on March 31, 2006, accounted for only 19.08 per cent and those under execution were 5.61 per cent of the total potential.

Solar Semiconductor in supply pact with IBC

March 28, 2008. Hyderabad-based Solar Semiconductor Private Limited (SSPL), a rapidly growing producer of photovoltaic (PV) modules, has entered into a partnership with IBC Solar AG of Germany for supply of its products worth $575 mn (Rs 2,300 crore) over a period of next three years. IBC is a distributor and systems integrator of solar PV products in Europe.  Following this partnership, SSPL is expecting to post a turnover of $300 mn (Rs 1,200 crore) in the financial year ending December 2008.

SSPL had started commercial operations in September 2007 and did a business of $10 million (Rs 40 crore) during the four-month operations last year. Apart from expanding the installed capacity of its Hyderabad plant from 50 MW to 200 MW by this year-end at a cost of $100 mn (Rs 400 crore), SSPL has lined up investment to the tune of $300 mn (Rs 1,200 crore) to fund its expansion plans worldwide this year. SSPL would be investing Rs 4,400 crore ($1.1 bn) over the next 10 years for expanding the capacity of its existing manufacturing facilities in India. It is planning to come out with an initial public offering for this purpose next year. 


Texas approves biodiesel additive

April 1, 2008. As per the Irvine, Calif.-based company, the state of Texas has given an unprecedented second approval to Oryxe Energy International's biodiesel additive. The additive, Oryxe LED for Biodiesel, was the first biodiesel technology approved for use in the Texas Low Emission Diesel Program (TxLED) in February of 2007. The latest approval allows fuel producers to utilize the Oryxe additive with a lower treat rate in biodiesel blends up to B20. Under extensive testing at the West Virginia University Engine and Emissions Research Laboratory, Oryxe LED for Biodiesel eliminated the bump in oxides of nitrogen (NOx) associated with biodiesel.

A U.S. Environmental Protection Agency (EPA) report summarizing published studies shows that biodiesel reduces all regulated emissions, with the exception of NOx. The Texas Commission on Environmental Quality (TCEQ) recently developed an alternative testing protocol for biodiesel blends. Under the original protocol, B20 fuel (80% EPA diesel and 20% biodiesel) treated with the Oryxe additive was tested against a clean, prescriptively blended TxLED fuel. The significant difference in the new protocol is that the petroleum diesel component of the B20 fuel can now be TxLED-compliant, instead of EPA diesel. Therefore, the additive only has to address the increased NOx created from the biodiesel portion of the blend.

Gulf Ethanol looks to Central America for expansion

March 31, 2008. Gulf Ethanol Corp. met with government officials, investors and industry partners in Central America to discuss plans to manufacture biofuels in Central America. Central America has abundant sources of biomass. Negotiations identified a strong demand for biodiesel production in Costa Rica along with available, low cost, feedstock to produce it. With hardly any domestic hydrocarbon reserves, Central American countries rely heavily on imported oil for their energy needs. The countries of Central America, including Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama, have traditionally been dependent upon agricultural exports for a large portion of their economic activity.

However, in recent years, these countries have begun to diversify their economies towards manufacturing and tourism. As a result, the countries have been especially affected by high world oil prices in recent years. Gulf Ethanol is an alternative energy company focused on the development of the cellulosic ethanol industry with a particular emphasis on Texas and the Gulf Coast.

ConocoPhillips joins biofuels research alliance

March 31, 2008. ConocoPhillips and the U.S. Department of Energy's National Renewable Energy Laboratory (NREL), headquartered in Golden, Colo., announced a strategic research alliance with Iowa State University (ISU) to identify promising cellulosic biomass conversion technologies to further diversify the nation's energy sources and help meet growing energy demand. The collaboration will bring three independently established programs together to help identify the most efficient and cost-effective methods for making liquid transportation fuels from plants. Transportation fuels today primarily come from petroleum, corn grain or food crops. The collaboration between ConocoPhillips, NREL and ISU will develop conversion technologies that will use cellulosic materials such as corn stalks, stems, leaves, other non-food agricultural residues, hardy grasses and fast-growing trees as feedstocks for future transportation fuels. The processes that will be examined in this collaboration include gasification, pyrolysis and fermentation. The collaboration could lead to projects that could provide publicly available, peer-reviewed papers and models. Each party is providing its own time and resources and the collaboration is expected to produce an initial report by January 2009.

Int’l recognition for AESO efforts to integrate wind powered electricity

March 27, 2008. U.S. based Utility Wind Integration Group (UWIG), announced Alberta Electric System Operator (AESO), as one of its 2008 Honorees for Achievement in Wind Integration. The AESO team leading the efforts to address the challenges of integrating wind into the Alberta electricity market and to determine appropriate mitigation measures to ensure system reliability and fair, open and efficient market operation. AESO efforts with stakeholders also includes to develop a clear set of rules to guide participation of wind generators in the market and a wind forecasting pilot project to assist system operators in dealing with the variable nature of wind generation. All of this has resulted in Alberta becoming the Canadian leader in wind power development.

UWIG was established in 1989 to provide a forum for the critical analysis of wind technology for utility applications and to serve as a source of information on the status of wind technology and deployment in the United States. UWIG has over 120 members from the United States, Canada, Europe, and Australia, including investor-owned utilities; transmission system operators; and associate member corporate, government, and academic organizations. As an independent system operator, the AESO leads the safe, reliable and economic planning, development and operation of Alberta's interconnected power system. The AESO also facilitates Alberta's fair, efficient and openly competitive wholesale electricity market, which has about 200 participants and approximately $8 billion in annual energy transactions.

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