MonitorsPublished on Jun 11, 2008
Energy News Monitor |Volume IV, Issue 52
Hydro-power Development in India: Challenges and Responses




nadequate and low quality supply (frequent power cuts) of electricity on the face of its rising demand is one of the greatest obstacles to India’s development. To meet India’s energy deficit of 9.9 percent and peak deficit of 16.6 percent (during 2007-08) has remained a major challenge. Besides this low per-capita consumption of 631.5 Kwh per annum (as on 31st March 2006) and unavailability of electricity supply to 20 percent of rural population (June, 2008) are some of the major areas concern. The total installed generation capacity of the country is 1, 44,565.1 MW as on June, 2008. The Government has set a target of adding 78, 7000 mw capacity during 2007-12 in order to achieve the dream plan of “Electricity for All by 2012”. Given that India added about 23,000 MW during 2002-07, the target during the 11th Plan will be quite a quantum jump. India’s energy portfolio today depends on coal-based thermal energy, while hydro power accounting for only 26 percent of total power generation. Because of raw material supply constraints like coal and gas and increasing negative externality on environment, meeting the high demand for power from the thermal power generation seems unviable. In this context more attention should be put on harnessing the country’s water resources for power generation. Hydro power occupies a special place among various sources of power generation because of its externalities. It is a renewable economic. Non-polluting and environmentally benign source of energy. The hydro power stations have inherent ability for instantaneous starting, stopping, load variations etc. and help in improving reliability of power system. Hydro stations are the best choice for meeting the peak demand. The generation cost is not only inflation free but reduces with time. Hydroelectric projects have long useful life extending over 50 years and help in conserving scarce fossil fuels. They also help in opening of avenues for development of remote and backward areas.

Growth of Hydro-power in India

During the year 1950, total installed capacity of hydro power was 560 MW, which was 32.7 percent of the total installed capacity. This has increased to 36,033.8 MW, as on 31st May 2008, which is 24.92 percent of the present total installed capacity. Hence the total capacity has increased by 64 times during last 58 years. The states have the major share in hydro power generation.

At present, the State Electricity Boards (SEBs) contribute the highest share of 72 percent in total installed generation capacity while the central sector and private sector constitute 24 percent and 4 percent respectively.

The importance of hydro power in total power mix has been declining. Some of the important points cited below can support this argument.

a)                   Indian power supply industry has always experienced the situation of shortages both in energy and peaking requirements. To tide over the shortage in shortest possible time, more dependence was placed on sources of power generation with shorter gestation period.  Obviously this short-term approach rather than a long-term perspective led to this problem.

b)                   With abundant coal reserves in the country, large capacity additions through coal based pithead power stations during the eighties and nineties increased the thermal proportion. 

c)                    Emergence of gas based combined cycle power stations based on indigenous natural  gas with gestation period of 2-2 ½ years also received priority in response to the anxiety to create capacity addition in shortest possible time. 

d)                   Nuclear power stations have also emerged as reliable modes of thermal generation. 

e)                   In spite of best efforts at the stage of planning and formulating projects in the hydro segment, a number of large projects got into long gestation period of construction on account of various reasons, namely environmental issues, rehabilitation & resettlement (R&R) problems, gap between investigations and field realities, etc.  We do have a number of successful stories on the hydroelectric projects but we also have large projects which have taken several years to get completed. 

The utilization of potential capacity in hydro power generation in India is quite minimum. As on 30th April 2008, the total hydro potential is 148701 MW in which 24 percent has been utilised for power generation. The reason for low capacity utilization goes to lack of investment because of the poor financial health and lack of credit worthiness of the sector. 

Thrust on Hydro power

The thrust on hydroelectric development is based on the following considerations:

a)                   Hydroelectric involves a clean process of power generation. Once the projects are constructed, there is no pollution ramification unlike many other power generation technologies and processes.

b)                   Since it does not suffer from the limitation of inflation on account of fuel consumption, in the long run, it is the most cost-effective option for power supply. In Indian context, where more than 45% of Indian population has yet to have access to electricity at an affordable price, this is an important consideration.

c)                    Indian power supply system has a peculiar limitation of huge variation between peak and off peak requirements. Management of peak load in an effective manner could be conveniently handled through availability of hydroelectric support. The system at present does suffer from large frequency variations. Better hydro support could address this problem better.

d)                   Locations of Hydroelectric projects in India are also in areas which need substantial support for their economic development.  These areas are North-East, Uttaranchal, Himachal Pradesh & Jammu & Kashmir where more than 80% of potential exists.  Developing projects in these areas will spur economic activities and will lead to overall economic development.

e)                   In an integrated hydroelectric project – there are many such projects – the schemes involve not only supply of electricity but also provision of drinking water and irrigation. These are important issues in many parts of India. Hydroelectric projects, in many cases, do have the ability to mitigate these problems.

f)                    Flood control is also an issue and quite often a challenge. Integrated hydroelectric projects could adequately address this concern.

Major challenges and responses

Development of Hydroelectric projects has thrown up a number of important challenges, the world over and particularly in Indian context.  Over a period of time, experiences have been acquired and India is responding to these challenges in the following manner.

First, Impact on Environment: Hydroelectric projects do create environmental issues emanating from sub-mergence of large areas also involving forest. The Govt. of India has a comprehensive legislation on environmental issues and based on this legislation, there are well laid down principles and guidelines. Environment Impact Assessment studies when properly carried out throw up the tasks to be undertaken by the project development agencies.  Over a period of time, both the processes of a) studies and preparation of the plans to mitigate environmental impact and b) procedure of clearances from the authorities, have been streamlined. Process of improvement on these areas continues to see as to how best the adverse environmental impacts are mitigated and also the procedure does not lead to delays.  It needs to be ensured that if the forest area is affected, sufficient amount of forest is created.  Ministry of Environment & Forest is working on a plan to create Forest Bank which would entail creation of huge afforestation with funding from project development agencies in advance so that this issue could be adequately responded.   The mechanism of compensatory afforestation through the Forest Bank will enable quicker clearances of projects.

Second, Rehabilitation & Resettlement (R&R) of Project Affected People (PAP) is another major issue affecting the smooth execution of hydroelectric projects particularly where in submergence areas, the number of project affected people are large.  Experience of last several years has brought about sufficient amount of understanding on the subject. The expectations of people, local authorities and project development agencies are being synthesized, so that there is greater degree of acceptability of the system of R&R. Govt. of India is contemplating a national policy on R&R for Project Affected People.  In the meantime, Ministry of Power of Govt. of India and its public sector undertakings are coordinating their efforts with the State Govts., so that, R&R issues are adequately addressed and project implementation is smooth.  In cases, where large projects are involved, specific monitoring mechanism has been put in place at senior most level in the Govt. so that proper implementation of R&R plans by project agencies is done in letter and spirit. With the above experiences now, it appears that in future, the concerned project development agencies would evolve proper plans and programmes well in advance so that the mitigatory measures are adequate and project implementation is smooth.

Third, another issue of concern is in relation to safety of dams.  Here again, experiences from some of the very large projects of the country have led to considerable amount of knowledge base and it is expected that in future projects, studies and findings on dam safety could provide much higher degree of confidence.  Some of the Indian institutions have equipped themselves both with hardware and software to properly address these concerns. Where required, project development agencies do depend on expertise available anywhere in the world for in depth studies and guidance.

Fourth, in view of complexity in development of Hydroelectric projects, particularly large ones, emanating from dam height, submergence, ramification of submergence, dam safety, drinking water schemes, irrigation, infrastructure etc., the process of clearances obviously gets linked with multiple agencies and authorities. Short cuts could create problems. Inordinate delays could entail huge cost and therefore unaffordable tariff.  Harmonious balance has, therefore, to be struck.  Here again, experience of last many decades has brought about a reasonable consensus on how to address this situation.  The process of improvement on this front also continues.  Procedures have been streamlined, and they would continue to be streamlined, to see that project development process, prior to commencement of main plant construction, by way of permission and clearances is made faster.  Ministry of Environment and Forest, Ministry of Power and other authorities continue to search for better solutions.

Fifth, reliability of detailed project report needs to be enhanced. There are a number of examples in Indian Hydro project development context of large variations from estimated costs primarily on account of differences between the outcomes of investigations and ground realities. Both in respect of hydrology and geology, the quality of studies, investigations, analysis and findings need substantial improvement. The silver line is that there are recent examples of project development where variations are within limits. Experience gained here again must lead to qualitatively better DPR’s and estimates and project could be completed without cost over runs, at least  with avoidance of such cost increases which are on account of variation in estimates germane to inadequacies in investigations.

Sixth, construction time is another area of concern, which needs to be compressed. Large projects have taken inordinately long time. There are two major aspects which could make a difference – one is relating to construction management techniques starting from planning to monitoring and another relates to construction technology. Here again, there are recent examples of making substantial improvement on both the fronts. Some of the projects which have been sanctioned in the recent months are being targeted to be completed within 4-5 years.

Seventh, based on the benchmarks which have been established, the techniques and technologies would be further improved. Choice of technology will have to be given serious consideration.  For the next few years, project development agencies are being advised to target 4 years  for completion of small projects, 4 ½ years for medium size projects and 5 years for large projects.  These schedules are significant improvement over the past performance.  After these results are achieved, the norms would be further improved. 

Eighth, communication with press, media and people at large to reduce the communication gaps on merits of hydro-projects and on mitigatory measures is another area of challenge which is being addressed. This also needs to be taken up appropriately at global level.


First, setting up of an exclusive highly trained technical agency by the Central Electricity Authority (CEA) to monitor and supervise the clearance of DPRs. The Agency should be conferred with the power to terminate the DPR in case of any irregularities and delays in executing the projects. Second, Hydro projects are considered as a national security. State’s indifference to finalise or delaying any projects in terms of giving clearances must be taken seriously by the Central Authority. Third, certain criterion like pre-qualification, asset declaration must be clearly defined before issuing a project to any party in order to quickly expedite the project and to increase the productivity as well. Fourth, time frame for execution of any project must be set after the finalization of DPR and all of its clearances. A centrally high powered committee to be set up for restricting the fraudulent activities of the parties who acquired the projects without executing within this time frame  and use these projects for increasing their asset value. Fifth, a corpus fund must be created for depositing the entire premium collected from the sanctioned projects. Sixth, state should provide all kind of infrastructure facilities needed to set up new hydro projects and upgrade the existing ones.




views are those of the author




The Impending Oil Shock (part – IV)

By Nader Elhefnawy

Continued from Issue No. 51…

State failure


ome states, particularly in the underdeveloped world, may not even be able to obtain sufficient energy resources to keep their economies functioning. Less-developed nations differ widely in the energy-intensiveness of their economies as well, but given the relatively low resource productivity of many; their obsolete, poorly maintained or otherwise inadequate infrastructure; and their obligation to pay for high-priced oil in hard currency; low-income oil importers will be in an especially poor position. In contrast to developed states enjoying more developed institutions and better access to capital and technology, less-developed nations have fewer of the resources needed to adapt to new circumstances, and any price shock would weaken such resources as they do have.71 Indeed, with adequate supplies of energy priced out of the reach of consumers, businesses and government, basic services might fail and states cease to be viable, even as developed nations continue to get by. Any price shock would come in an environment already favouring state failure: recent years have seen stagnating growth in Latin America and Africa; the removal of a great deal of foreign support for weak governments (a process that started with the Cold War’s end); and continued population growth in the poorest regions, putting pressure on infrastructure and resource bases. Many of these problems will get worse rather than better, particularly the relationship between population size and natural resources such as water and arable land. The salinated and damaged farmland on which a third of the world’s crops are presently grown is a case in point.72 Aside from the expensive repairs such lands require, drip-irrigation and other methods needed to keep them productive are much more energy intensive than current practices. Not having access to the required energy may mean disaster. Moreover, there will be spill over effects, such as refugee flows and the emergence of havens for terrorism and organised crime, as in Afghanistan and Somalia. There is also the danger that where one state fails, another may move in, either formally or informally. These interventions may be motivated by a sense of threat (guerrillas using the territory of failed states as a base of refuge), or the sighting of an opportunity to grab territory and resources – both of which were factors in the numerous invasions of the Democratic Republic of the Congo by its neighbours since the mid 1990s.73 The heightened risk of state failure will drive inreasingly desperate efforts to avoid it, especially given the lower efficacy of market-driven solutions in impoverished countries.74 Weak states may make ‘neo-feudal’ arrangements with sub-state actors like warlords, private militias and private corporations to shore up their positions. Alternatively, they may become more centralized and controlling, even totalitarian, and other, stronger nations may feel compelled to prop them up, despite the unsavoury character of their regimes.75 There may also be an increased demand for peacekeeping missions, demand that will likely overwhelm the ability of the major military powers to deliver; indeed, they have already been overwhelmed.76 The problem could become still more severe, not only because of more numerous crises, but because the lopsided conventional wars the major powers are most likely to fight require relatively few ‘boots on the ground’, while nation-building in the ever more populous and urbanised developing world requires larger numbers. Smaller countries are not the only ones at risk. The failure of large but economically fragile states on the model of the Soviet collapse is conceivable, and even more problematic at the global level, given that their size compounds their problems, making them more difficult to bail out or prop up, and introducing problems that are not a consideration with smaller states, such as the proliferation of sophisticated weaponry. The moment before a large nation collapses is especially fraught with peril.77 The Soviet Union made surprisingly little effort to resist dissolution in 1991, but there is no certainty that the next great power to go this way will not flail about dangerously prior to collapse. Great-power conflict is not out of the question; it may even be the most likely cause of conflict in the future, particularly if crises bring radical ideologies to the fore.78

Resource Wars

Resources have historically been a factor motivating and fueling armed conflicts. According to a study by Paul Collier, ‘a country that is heavily dependent upon primary commodity exports, with a quarter of its national income coming from them, has a risk of conflict four times greater than one without primary commodity exports’.79 This connection may be clearest   in the case of oil, which is not just ‘another natural resource’, particularly  where the onset of civil wars is concerned.80 More than other resources, the presence of oil seems to increase the danger of harsh ‘preemptive repression’ against insurgencies by central governments, as in Darfur; of other states interceding in internal conflicts, such as providing support for a separatist movement in an oil-rich state; and of secessionists prolonging conflicts  by selling off future exploitation rights.81 Explanations include the developmental problems common to resource dependent countries such as poor government, corruption, poverty and  high levels of inequality. High oil prices can exacerbate these problems by enabling failing states to stave off needed reforms, and increasing the attractiveness of the resource to rent-seekers, externally and internally. Dormant border disputes and secessionist movements could be reactivated as oil   revenue becomes more attractive in places outside the Middle East, such as Latin America and sub-Saharan Africa. Where states have been thoroughly ‘privatised’, as by warlords, criminal syndicates or state leaders with links   to multinational corporations, this risk is especially high.82 A global economic   crisis of the kind made likely by pinched oil supplies (particularly in less-developed regions) may also create openings for radical groups. Such problems affect not just oil-producing nations, but key states in the staggeringly complex worldwide energy distribution system. Besides the risk to overland pipelines, especially problematic in Central Asia, state collapse tends to translate into maritime insecurity as well, as with the intensified (although so far comparatively minor) pirate activity off the coast of Somalia in recent years.83 External powers routinely embroil themselves in the domestic affairs of states key to the production and transport of oil, exposing themselves to all the hazards such intervention can entail. For example, supporting repressive governments can provoke resentment among the local population, which may manifest itself in terrorist acts (as in Saudi Arabia). Overthrow of a client government can mean inter-state   conflict, as with the US and Iran since the 1979 revolution. Another risk is   that major powers might find themselves on opposite sides of an internal conflict, as in Georgia, the territory of which is crossed by a key pipeline for oil from the Caspian Sea basin. There, a US-backed government battles Russian-backed separatists in Abkhazia and South Ossetia – a conflict some experts have identified as resembling a Cold War proxy war.84 Even private companies, as they seek to develop resources in ever more unstable areas, may be implicated in local conflicts. Oil companies have run up large private-security bills in recent years, and oil corporations were among the earliest clients of private military corporations, as in Angola. The formation of new international alliances can also be a driver of conflict as large states pursue energy security. In Central Asia, Russia and China actively seek to counter US influence through bilateral military agreements and with the formation of regional blocs such as the Shanghai Cooperation Organisation and the Collective Security Treaty Organisation.85 Outside the Caspian Sea basin China is actively securing access to oil through relation ships with Iran and Sudan, and through the ongoing build-up of its naval capabilities. The problem of interstate conflict over oil may be exacerbated as an unintended consequence of some solutions to the world’s energy problems. For example, new technologies that permit cost-effective drilling for oil in deeper waters could create new flashpoints. Cheaper deep-water drilling, for instance, would make the oil under the contested South China Sea a more valuable prize.86 It might be hoped that deep-water oil will be less   likely to cause conflicts because the facilities and workers are relatively difficult   for disgruntled local populations to reach. While this may make the facilities less accessible, however, offshore oil still figures into international conflicts because of territorial sea and Exclusive Economic Zone claims. (Timor Leste’s claims to rich offshore oil fields were a factor in Indonesia’s attempts to control that country.) The development of alternative energy technologies may raise the value of particular natural resources – such as platinum, which can be used as a catalyst in hydrogen fuel cells – with similar results.  


71 Thomas Homer-Dixon, Environmental Scarcity and Global Security (Ithaca, NY: Foreign Policy Association, 1993), pp. 67–8.    

72 Russell Clemings, Mirage: The False Promise of Desert Agriculture (San Francisco, CA: Sierra Club Books, 1996).     

73 John Clark (ed.), The African Stakes of the Congo War (New York: Palgrave Macmillan, 2002).     

74 Homer-Dixon, Environmental Scarcity, pp. 67–9.      

75 Robert Kaplan, ‘The Coming Anarchy’, The Atlantic Monthly, February 1994, pp. 44–76.  

76 Michael O’Hanlon and P.W. Singer, ‘The Humanitarian Transformation: Expanding Global Intervention Capacity’, Survival, Spring 2004, pp. 77–96.     

77 Again, China and India represent particular dangers. Both are very densely populated and resource poor, with serious internal cleavages between their more-and less-developed regions (India further suffers from a high level of ethnic, religious and linguistic fragmentation). Additionally, despite their impressive rates of economic growth, simple arithmetic dictates that they will remain developing nations for decades to come.     

78 Harold James, The End Of Globalization (Cambridge, MA: Harvard University Press, 2001).     

79 Importantly, Collier notes that resources are not by themselves the cause of conflicts, and that they do not make it inevitable; he also identifies a correlation between low GDP growth and low education levels with the outbreak of these conflicts. Paul Collier, ‘Doing Well Out of War’, in Mats Berdal and David M. Malone (eds), Greed and Grievance: Economic Agendas in Civil Wars (Boulder, CO: Lynne Rienner Publishers, 2000), p. 97.     

80 Klare, Blood and Oil, pp. xii–xiii; Michael L. Ross, ‘What do We Know about Natural Resources and Civil War?’, Journal of Peace Research, vol. 41, no. 3, pp. 337–56.     

81 Michael L. Ross, ‘How does Natural Resource Wealth Influence Civil War? Evidence from 13 Cases’, International Organization, Winter 2004.   

82 Scott Pegg, ‘Globalization and Natural-Resource Conflicts’, Naval War College Review, Autumn 2003, p. 82–95. For a more general discussion of ‘criminalised states’, see Jean-  François Bayart, Stephen Ellis and Beatrice Hibou, The Criminalization of  the State in Africa (Bloomington, IN: Indiana University Press, 1999).     

83 While the figures provided by the International Maritime Bureau’s Piracy Reporting Centre indicate several hundred attacks a year, only a handful involve the removal of large quantities of bulk goods, or the outright seizure of ships. Moreover, the targeted vessels have generally been smaller than 10,000 tonnes displacement.

84 Fred Weir, ‘Georgia Risks War Over Separatists‘, Christian Science Monitor, 12 August 2004, p. 6. A similar risk            exists in the conflict between Armenia   and Azerbaijan.     

85 Anton Koslov, ‘Russia and the US in the New Balance of Power in Central Asia’, in Hall Gardner (ed.), NATO and the European Union: New World, New Europe, New Threats (Aldershot: Ashgate, 2004), pp. 232–41.   

86 Mark J. Valencia, China and the South China Sea Disputes (London: Oxford University Press, 1995).     

to be continued

Courtesy: Survival (volume 50, no. 2)





GSPC applies for commerciality of KG block discoveries

June 16, 2008. Gujarat State Petroleum Corporation (GSPC) has applied to the Directorate General of Hydrocarbons (DGH) for declaration of commerciality of its discoveries in the KG basin block. According to the application submitted, the discoveries may have a reserve of 1.6-5.6 tcf of natural gas. The DGH is evaluating the application. The Gujarat Government PSU has so far struck gas in three wells KG-8, 15 and 16 in the block. The company proposed to develop 15 sq km of the 95 sq km shallow water block KG-OSN-2001/3, renamed as Deendayal.

Exploratory drilling is underway in the residual part of the block. While a detailed field development plan will be submitted for due approval of the DGH once the commerciality is declared, preliminary estimates suggest that the GSPC may propose a production of 5-6 mmscmd of gas from Deendayal West. Production may increase if the company strikes more commercial reserves in the eastern part of the block.

The geological and geophysical model developed so far point out that the reserve is more prolific in the Eastern part of the block. GSPC has announced that it plans to part finance the development of the existing discoveries and the ongoing exploration activities in the field through a Rs 4,000-6,000-crore ($0.9 – 1.5 bn) initial public offer (IPO) slated in end 2008. The company has appointed issue advisors in this regard.

While the State Government is in the final stages of approving the IPO plan, the final reserve estimates and production plan of the field will have a bearing on the IPO pricing strategy. Apart from IPO, GSPC is also raising Rs 2,000 crore ($466.7 mn) of debt finance through a mixture of ECB and rupee loan.

IOC-led group to put $3 bn in Iran block

June 14, 2008. Three state-owned oil companies ONGC Videsh, Indian Oil Corporation (IOC) and Oil India (OIL), together expect to spend $3 bn if they get the right to develop the Farsi block in Iran. The consortium, which got the initial exploration rights, discovered both oil and gas in the block last year. ONGC Videsh, the overseas investment arm of Oil and Natural Gas Corporation (ONGC), and IOC hold 40 per cent stake each in the block, while OIL owns the remaining 20 per cent.

ONGC Videsh, IOC and OIL have completed the exploration contracts awarded to them with the submission of the feasibility report. The consortium spent $90 mn during the exploration phase of the Farsi block. The block is estimated to hold over a bn barrels of oil, around 10 per cent of which is recoverable. The consortium has submitted the feasibility report to the Iran government, which estimates recoverable gas reserves of 12.8 tcf in the block. This is almost equal to the recoverable reserves from Reliance Industries' block in the Krishna-Godavari basin.

Gas from Reliance's block is expected to double the availability of the fuel in India. Of the $3 bn investment, IOC's contribution would be around $1.2 bn. Oil and gas companies that operate in Iran do not get a share of the hydrocarbon they discover. They are, instead, reimbursed their investments along with agreed rate of return, which the companies agree on after negotiations with the Iranian government.

The Persian Gulf block is the first overseas asset for which Indian companies have been given exclusive exploration rights. A service contract was awarded to them in 2002. ONGC Videsh, IOC and OIL have completed the exploration contracts awarded to them with the submission of the feasibility report. The Iranian government will now evaluate if the gas discovery is commercially viable. It will now award the development contract to a consortium, which may or may not go to the ONGC Videsh-IOC-OIL combine. 

ONGC to make rigs with SCI

June 11, 2008. To tide over the current shortage of rigs, Oil & Natural Gas Corp. (ONGC) is planning to join hands with Shipping Corporation of India (SCI) to manufacture rigs and other offshore supply vessels (OSVs). The JV will soon float a global tender for technical support this regard. ONGC currently has access to 27 offshore rigs.

Apart from the 20 chartered ones, the company owns seven offshore rigs, including five jack-up rigs and deepwater rigs. ONGC is unable to drill its well UD-1 in the Krishna Godavari (KG) basin to prove its claim of having discovered over 20 tcf of gas. The discovery was made in December 2006 and the well has been capped since then as ONGC does not have ultra-deep water rigs.


Oilcos plan to stop supply of subsidised diesel to commercial establishments

June 16, 2008. Hospitals, hotels, malls, cinema halls and other commercial establishments will not be able to avail subsidised diesel anymore. They have to buy costlier premium (or branded) diesel. Public sector oil companies IOC, BPCL and HPCL plan to stop supply of subsidised diesel to commercial establishments. Retail price of branded diesel, which is currently about Rs 2.25/litre higher than normal diesel, is not regulated by the government and its price could be substantially raised, depending on the demand. Industry in the national capital region (NCR) alone is expected to lose Rs 500 crore ($117 mn) per year on account of this.

Situation in other places is even worse as the country is facing an acute power shortage and commercial establishments rely on diesel generators. It is estimated that consumption of diesel is growing at 22-25%. Most of the diesel is used by industrial establishments as it is cheaper than other fuels such as furnace oil and naphtha.

The government is also devising ways to reduce use of diesel. It recently imposed an additional excise duty on fuel-guzzling luxury cars, sports utility vehicles and multi-utility vehicles to discourage their use. As most of the SUVs and MUVs run on diesel, the move would help reduce pressure on oil consumption. Fuel subsidy bill which is mounting is likely to touch Rs 245,000 crore ($57.1 bn) for 2008-09.

Oil companies are also forcing petrol pumps to increase branded fuel sales to at least 50% of their total sales. Branded fuel is costlier (petrol Rs 4 per litre and diesel Rs 2.25 per litre) than the normal fuel in Delhi. The Federation of All India Petroleum Traders (FAIPT) has asked oil companies to stop this practice as it affects their business.

IOC plans to set up mini liquefaction plants

June 13, 2008. Indian Oil Corporation plans to set up mini liquefaction plants to source gas from the marginal fields of India. Currently, the company is considering three options like transporting through cascade, pipelines and liquefaction plants for taking gas from these fields to the market. Liquefaction is a process of converting natural gas into liquid so that its transportation becomes easier. IOC also considering the option of liquefying gas at the wellhead and transport it directly to the customer.

Transportation / Trade

Petronet trims gas supply after snag

June 17, 2008. Petronet LNG has cut gas supplies from its LNG terminal in western Gujarat state by nearly 23 percent, or 5 million standard cubic metres a day, due to a technical snag. The Dahej terminal normally supplies 24 mcm a day through two pipelines, mainly to industrial customers in western and northern states.

HPCL sells 30 Th tonne for mid-July

June 17, 2008. Hindustan Petroleum Corp Ltd is offering a 30,000 tonne, mid-July loading parcel of residual fuel oil via a tender. The 30,000-tonne parcel of 380-centistoke (cst) fuel oil, of 4.0 percent sulphur and 0.998 density, is slated to load between July 17-19 from the refiner's Vizag terminal on the East Coast of India, on a free-on-board basis. The tender closes on June 18. Asia's fuel oil market continues to be weighed heavily by ample supplies amid thin Chinese utility demand in the south of the world's second-largest oil consumer. 

Policy / Performance

Oil companies sell bonds to RBI at premium

June 17, 2008. The cash-crunch situation of the country's oil marketing companies have eased over the last 10 days as they are selling their oil bonds to the Reserve Bank of India (RBI) at a premium. Previously these bonds were being sold at a discount, primarily to Life Insurance Corporation of India, as there were very few buyers of the bonds.

Until a fortnight ago, these companies, Indian Oil Corporation (IOC), Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL), were running short of cash to even buy the crude oil they require for their refineries. Now, they have more working capital in spite of a nearly 6 per cent increase in prices of the basket of crude oil they buy since fuel prices were increased on June 5.

The higher price of the basket is projected to drive up the revenue loss from retail sales of the three companies to around Rs 690 crore ($160.9 mn) per day in the second fortnight of this month from around Rs 620 crore ($144.6 mn) per day in the first fortnight.

IOC's revenue losses (Rs / litre)


June 1-4*

June 5-15#

June 16-30+









* Before fuel price hike, duty cuts     # After fuel price hike, duty cuts

+ Projected

RBI already increased the cap on sales of oil bonds on June 11 to Rs 1,500 crore ($349.9 mn) per day from Rs 1,000 crore ($233.3 mn) per day on June 5. The more readily available cash has also slowed these companies' borrowings, which had almost reached the limit approved by shareholders.

IOC's borrowings now stand at around Rs 41,000 crore. The three public sector companies together spend over $4.5 bn (around Rs 19,200 crore) per month to buy crude oil. Half of the Rs 200 crore ($46.6 mn) per day reduction in the under-realisation, following the fuel price hike and duty cuts on June 4, incurred by the oil marketing companies have been negated in just over 10 days as global oil prices have risen nearly 6 per cent since the fuel price hike.

Before the fuel price hike, the three companies were losing around Rs 800 crore ($186.6 mn) per day which reduced to around Rs 600 crore ($139.9 mn) after the government increased prices of petrol, diesel and cooking and cut duties on oil and oil products on June 4. 

States ask Centre to share duty cut burden

June 16, 2008. Putting the ball back to the Centre's court on the issue of tax cut on petro products, states asked the Centre to share 50 per cent of Rs 8,000 crore ($1.8 bn) revenue loss caused by tax and duty reduction on fuels. Several of the states, in the meeting of Empowered Committee of state finance ministers on value added tax (VAT), confronted with this unusual situation (of the Centre's move to raise prices of petro products), have taken the decision to reduce sales tax on petrol and diesel and cut VAT rate on LPG or to provide subsidy. According to the states in the panel, they cannot take this beating further.

They have limited revenue raising power and huge developmental responsibilities. States would lose at least Rs 8,000 crore ($1.8 bn) due to cut in sales tax on petrol, diesel and on VAT on LPG as well as reduction in devolution to them caused by the Centre's move to cut customs and excise duties on petrol and diesel. To bail out oil marketing Companies, which are suffering losses due to surging global curde oil prices, the Centre had on June 5 announced a hike in prices of petrol, diesel and LPG.

The Centre also cut excise and customs duty on crude and other petro products, taking a hit of over Rs 22,000 crore ($5.1 bn). 10 of the total 33 states and Union Territories have cut sales tax on petrol, while 15 reduced sales tax on diesel. Some states like Delhi has cut only VAT on LPG. The panel states also wanted to know from the Centre the exact policy of price fixation of petroleum products and as to why prices of basic products differ from states to states.

LPG cylinders cheaper by Rs 10 in Bihar

June 15, 2008. The Bihar Government has decided to cut VAT on LPG cylinders by three per cent making them cheaper by Rs ten. According to the notification issued by the state commercial taxes department, the applicable VAT on LPG cylinders been reduced to one per cent from the earlier four cent.

Earlier, in a bid to cushion the consumers against the steep hike in petrol and diesel prices, the state Government promulgated an ordinance, on June 5, reducing the sales tax of the two commodities by 2.5 and 1.64 per cent respectively. While the sales tax on petrol has been reduced from 27 per cent to 24.5 per cent, and that on ordinary and high speed diesel it has been lowered from 20 per cent to 18.36 per cent. The cut in VAT on LPG cylinders would cost the state exchequer Rs 25 crore ($5.8 mn) annually.

Oilmin, regulator lock horns over IGL operations

June 14, 2008. The downstream regulator, Petroleum and Natural Gas Regulatory Boared (PNGRB), for oil & gas sector has locked horns with the government. While cautioning the oil ministry to refrain from interfering in its functioning, the regulator has said that the ministry should not encourage companies to defy its orders. The PNGRB has reacted to oil ministry’s letter which had stated IGL has been authorised by the Centre to operate city gas distribution (CGD) projects in Delhi, Noida, Gurgaon and Faridabad and therefore, it should not apply afresh for obtaining authorisation. The board had recently issued directive to CGD companies to obtain authorisation.

The directive forced IGL to stop all its developmental works in NCR, including its plan to set up about 40 new CNG stations in the Capital for the Commonwealth Games. IGL had sought oil ministry’s intervention after the regulator refused to acknowledge the Centre’s authorisation to the company for undertaking CGD business. In its letter to oil ministry, the board has condemned the ministry’s intervention over its decision, which it says was affecting its independent functioning.

In a clear show of legislative competence, the regulator has said that its orders were only open to judicial interpretation and should not be clarified upon by the government. Presuming that an entity (such as IGL) was not satisfied with the decision taken by the Board, the right course should have been to go in for an appeal. In its letter to the oil ministry, the board warned IGL of dire consequence for defying its directions. If the entity concerned defies the direction of the board, it shall have to face legal and other consequences under the Act and the relevant regulations.

Petrol prices up in Uttarakhand

June 13, 2008. Petrol in most of the filling stations in the Uttarakhand has been sold at Rs 52.15 per litre, 28 paise up since the central government announcement of hefty increase in the prices of petroleum products last week. As per the dealers, the prices of petroleum products would go further up in the hills due to the increase in transport charges.

This was in sharp contrast to the state government's announcement to lower the prices of petrol and diesel by 50 paise and domestic LPG cylinders by Rs 12.48. However, the prices of diesel fell by 12 paise to settle at Rs 36.90 per litre. The new price regime came into being after the government withdrew the old sale tax exemption and applied the new ones, the decision for which was taken by the state cabinet.

RIL to sell KG gas at one-fifth of oil price

June 13, 2008. Reliance Industries (RIL), the country's largest company in terms of valuation, will sell gas at $25.20 a barrel, equivalent to one-fifth of the current crude oil price of $135. According to the company, the gas from the Krishna-Godavari basin, off the country's eastern coast, would start flowing in the second half of the financial year.

The fuel from the KG basin will prune Rs 114,000 crore ($26.5 bn) from the country's import bill. The price of $4.2 per mBtu approved by the government for selling gas implies potential savings of about Rs 85,000 crore ($19.8 bn) for consumers. RIL's statement on gas pricing comes even as the government is considering a revision of the floor price of $4.2 mBtu that was approved in September 2007. The floor price is benchmarked against the crude price of $60 a barrel. When compared with the current crude price of $135 a barrel, the floor price is very low.

According to industry analysts, the government fears that the price would reduce the value of its profit-share considerably. About 80 installation vessels have been operating in the basin over the past five months to produce gas. About 90 per cent of the on-shore terminal facility and production infrastructure work has been completed.

Gas from KG D6 reservoirs will be transported through the East-West pipeline system. The company plans produce 80 mcm of gas a day from the basin. According to the company, six additional deep-water rigs will be contracted for exploration very soon. Along with targeting more acquisitions in the polyester space, RIL will try new initiatives in the alternative energy, rural retail and the overseas petroleum retail businesses.

The company is working out biofuel and solar energy programmes as natural extensions of its conventional energy portfolio. The company has submitted a proposal to the Union Government for setting up two manufacturing facilities under the Government’s scheme to promote semiconductor technology.

Solar power is heavily dependent on semiconductors. The company, which has closed down its fuel retail operations and asking for a level playing field to compete with public sector retailers, has begun retailing fuel in African countries, including Tanzania, Uganda and Kenya, through the recently acquired Gulf Africa Petroleum Corporation (GAPCO). Completion of the second refinery in Jamnagar will increase processing capacity of the group to 1.24 million barrels per day, equivalent to about 2 per cent of global capacity. The refinery will be completed in the second half of this financial year. In 2007-08, RIL made eight discoveries across major offshore basins in India.

‘Oil to play role in world power play’: PM

June 11, 2008. According to the Prime Minister Manmohan Singh, the quest for access to oil resources will become a major factor of power play in the world and the Chinese have moved far ahead. The demand is increasing faster than ever before. The Chinese have been going around the world in Africa, in Latin America, investing, exploring and developing the natural resources for increased oil production.

This tension will increase in the years to come. So, the quest for sensitive natural resources, oil security and energy security will emerge as a major source of interplay of forces in the evolving world Economy. India has to recognise that there would be increasing competition from China and those who were well entrenched in the energy sector. So, therefore, tensions will be part of the evolving world systems and how we handle our problems, how we project our national interests, will be a crucial determinant of our capacity to be successful in the race for development.

Govt sets up panel on oil PSUs

June 11, 2008. The Government has constituted a High Powered Committee to examine the financial position of public sector oil companies. B.K. Chaturvedi, Member, Planning Commission will head the panel, which will also comprise Dr. Saumitra Chaudhuri, Member, EAC and Dr. Arvind Virmani, Chief Economic Advisor. The Terms of Reference of the High Powered Committee are as follows:

·    To examine the impact of the increase in oil prices between 2004-05 and 2008 on the financial position of oil companies, including upstream exploration companies, refiners and downstream Oil Marketing Companies (OMCs).

·    To analyse the cash flows and the profitability of all three groups of companies so as to get a clear picture of the changes taking place in their operating positions, particularly the impact on access to credit and cash availability for their operations.

·    To revisit the concept of under recoveries and examine the reported deficit and the real deficit faced by OMCs as a result of price constraints imposed on them.

·    To estimate the financial needs of the refiners and OMCs in order to continue their normal business activities and to meet the energy needs of the economy and the possible sources of funds to meet their financial needs.

·    To examine the available options for burden sharing by all stakeholders, including upstream exploration companies, refiners, downstream OMCs and stand alone refiners.



Tata, Reliance Power qualified for Rajpura project

June 17, 2008. As many as nine power companies, including heavyweights like Reliance Power, Tata Power and Lanco Infratech, have been declared qualified bidders for Rajpura Thermal Power Project by Punjab State Electricity Board (PSEB). Now these companies would have to submit their proposals, mentioning at what rate they would sell the power, by November 7, 2008. In March, 13 companies had submitted their 'Request for Qualification' for the 1320 MW coal-based power project.

Other companies which have been adjudged qualified bidders are Essar Power, L & T Power Development Ltd, Gujarat Paguthan Energy Corp, Sterlite Energy Ltd, Indiabulls Power Generation Ltd and consortium of JSW Energy and Infrastructure Development Finance Co. The project, which would involve an investment of 5,000-6,000 crore ($1.1 – 1.3 bn), is proposed to be awarded to developers on build, own and operate (BOO) basis, through tariff-based international competitive bidding.

In this project, Power Finance Corp Ltd is the consultant for selection of developer of the project. PSEB has already formed a special purpose vehicle (SPV), Nabha Power Ltd. The SPV would be responsible for ensuring linkages for coal, water and to undertake studies for transportation, hydrological, topographical, other studies and surveys necessary for preparation of project report. The site of the proposed project has been cleared by the Central Electricity Authority and 1,085 acres of land has been identified. The state government has also initiated the process of acquisition.

Jain group’s power plant to start in ’12

June 16, 2008. The Jain Group of Industries will set up a thermal power plant of 1,000 MW in Madhya Pradesh. The company has inked a deal with the state government to implement the project. Jain Energy Ltd, one of the group companies, will execute the project, which is likely to be commissioned by 2012.

The company will invest Rs 5,000 crore ($1.1 bn). Work will commence from early next year. Jain Energy Ltd is also setting up a 1,000 MW coal-based power plant in Chhattisgarh. The plant will be set up at Balpur in Janjgir-Champa district. Additionally it is also in talks with the governments of Orissa, Jharkhand and West Bengal for setting up similar projects. Jain Energy has also given an expression of interest for hydro power projects in Arunachal Pradesh and Bhutan.

As many as 23 power companies including Reliance Energy, Essar, Tata, Lanco and the Sanghi group have proposed to set up thermal power plants in Sidhi district in Madhya Pradesh. However, land acquisition is the biggest issue for them.

Jindal Power’s 3rd unit starts power production

June 16, 2008. Jindal Steel & Power Ltd's subsidiary Jindal Power Ltd, has announced that third unit of 250 MW capacity has started generation of power for commercial purposes. With the commissioning of this Unit, JPL has now power generation capacity of 750 MW. Last unit of 250 MW is in the final stage of implementation and the total project (1000 MW) is likely to be operational by July, 2008.

Tata Steel to set up power plant in Orissa

June 16, 2008. Domestic steel giant Tata Steel will set up a coal based power plant in Orissa jointly with Jasper Industries. Tata Steel and its wholly-owned subsidiary Rawmet Ferrous Industries have entered into a share subscription agreement and shareholders' agreement with Jasper Industries in this regard. Pursuant to the shareholders' agreement, Tata Steel and Rawmet together would hold 26 per cent and Jasper Industries would hold 74 per cent of the stake of the equity in Bhubaneshwar Power Pvt Ltd (JV Company). Tata Steel along with Jasper Industries would set up a coal based power plant of 2 X 67.5 MW capacity at Anantpur Village in Tack, Orissa.

Amarkantak 210 MW unit synchronised

June 16, 2008. The 210 MW unit at the Amarkantak thermal power station of the Madhya Pradesh Power Generating Company in Anuppur district was synchronised on oil. The power station already has two 30 MW units and two 120 MW units operating. It would take another four months before the unit is scheduled to be in full commercial operation.

R-Power pips Lanco, bags UP projects

June 14, 2008. Reliance Power has emerged as the lowest bidder to build two power projects in the Allahabad district of Uttar Pradesh, pipping Lanco Infratech, National Thermal Power Corporation and two other bidders.  Reliance Power agreed to supply power at Rs 2.64 a unit for the 1,980 MW project in Bara and Rs 2.60 a unit for the 1,320 MW project in Karchchna.

The other bidders for the 3,300 MW projects included Lanco Infratech, National Thermal Power Corporation, Jindal Steel and Power and CESC. The Uttar Pradesh power regulator last month ordered fresh bids for the projects after the previous lowest bid of Lanco was rejected for being on the higher side. In the revised, Lanco bid Rs 2.651 and Rs 2.609 for the Bara and Karchchna projects, respectively , a whisker more than Reliance's offer.

NTPC and JSPL bid Rs 3.205 and Rs 3.348 for Bara project respectively. At Karchchna, CESC and JSPL bid Rs 3.129 and Rs 3.276 respectively. JSW, which had earlier bid for Karchchna, did not participate in the re-bidding, in which only previous bidders had qualified. The state power regulator had approved the re-bidding process on May 29.

In the previous bidding, Lanco had quoted Rs 2.88 for Bara and Rs 2.83 for Karchhana. Now the matter would be put before the evaluation committee and the energy task force for the final decision. The proposed Bara project based on super-critical technology was bid by Reliance, NTPC, Lanco and JSPL, while Karchchna was bid by Lanco, Reliance, JSPL and CESC.

The proposed power plants are not located at the coal pit head and the black mineral would be ferried from Singrauli situated at a distance of about 600 km. The UPPCL will acquire about 2,100 acres of barren tract in Bara and 990 acres in Karchchana for the power projects. In an earlier bidding, Lanco had pipped Reliance and was awarded the mega Anpara C project in Sonebhadra district, in which Essar had also evinced interest. The state government is trying to ramp up the total generation capacity by 10,000 MW in the current 11th Five-Year Plan in collaboration with NTPC, Bharat Heavy Electrical (BHEL) and the private sector players. 

Galva Steels to set up 60 MW captive power plant

June 13, 2008. Uttam Galva Steels Ltd, India's leading manufacturer, exporter of cold rolled and galvanized steel, plans to set up a 60 MW power plant close to its steel plant at Khopoli which is situated on the outskirts of Mumbai. The 60 MW captive coal fired power plant will be a part of Uttam Galva Steels Ltd and will be commissioned within 24 months with an investment of Rs3bn, which will be raised through a mix of debt and internal accruals. The company has applied to the Govt. of India for the necessary coal linkages. The plant will help the company to enhance its growth.

Transmission / Distribution / Trade

KEC Int’l bags order worth $37 mn from NTPC arm

June 17, 2008. KEC International Ltd. (KEC), a leading player in the power transmission EPC sector and part of the US$3bn RPG Group, has bagged an order worth Rs1.6 bn ($37.3 mn) from NTPC's Electric Supply Co. Ltd. (NESCL). The work awarded involves rural electrification on a turnkey basis in the Dumka district of Jharkhand.

This is the largest single value order awarded under the Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY) scheme till date. In terms of scale, KEC's scope of work covers electrification of 1454 villages, providing about two lakh BPL service connections and 14 33/11KV new/augmentation substations. Scheduled to be completed by December 2009, this is the second order received in the state of Jharkhand by KEC from NESCL.

Himachal for separate transmission company

June 16, 2008. With the Himachal cabinet giving its nod for separate transmission company in the state, the electricity board employees feel hoodwinked. The new transmission company will look after the transmission rights in the upcoming hydel projects in the state and the electricity board feel the new company would eventually take away the transmission rights from the Himachal Pradesh State Electricity Board (HPSEB). HPSEB at present is looking after generation, transmission and distribution of power but with the transmission company floated HPSEB would only be left with generation and distribution powers. In compliance to Electricity Act, 2003, Himachal should have completed the trifurcation of HPSEB by May 31 this year. Some of the HPSEB employees are of the view that considering the fact that T&D losses in state was just around 15 per cent where as in other state the losses were more than 20 per cent, the need for transmission company could not be justified.

Power Grid accused of violating safety norms

June 15, 2008. The Power Grid Corporation of India which is in the business of transmission of power from power projects in north-eastern region, connecting the national grid through their 400 KV, 220 KV, 132 KV lines, is found dealing with extra high tension power in a dangerous manner, ignoring all the provisions of security and safety codes and guidelines of the Government of India. During its presence in the north-eastern states in the last 20 years, several accidents have taken place during power transmission due to reluctance on the authorities’ part to adhere to these codes.

PowerGrid to seek $600 mn more from WB, ADB

June 13, 2008. State-owned PowerGrid Corp will seek fresh loan of $600 mn (Rs 2,400 crore) from the World Bank and the Asian Development Bank to fund its mega transmission projects, including those relating to the ultra mega power projects. PGCIL, which has won transmission projects for the three ultra mega power projects, would approach ADB for $400 mn and the World Bank for $200 mn.

This would be over and above $800 mn (Rs 3,200 crore) already sought from the two multilateral agencies and the loans would be guaranteed by the government, which owns majority shareholding in the PSU. The company expects to achieve a turnover of Rs 5,400 crore ($1.2 bn) in the next fiscal, an 18 per cent rise over the previous year's revenues. The country requires over Rs 70,000 crore ($16.3 bn) during 2007-12 for expanding and upgrading the electricity transmission network. Of this, private players would invest only about Rs 20,000 crore ($4.6 bn) and the remaining would have to be spent by PGCIL and other public sector utilities.

The company targets to add about 5,500 circuit kms of extra high voltage transmission lines and about 6,300 MVA of transformation capacity in this financial year (2008-09). The company, which recently received Navratna status from the government, is planning to foray into the neighbouring countries, beginning with Myanmar. After receiving the Navratna status, the public sector firm can now take investment decisions without seeking government's approval to form joint ventures for up to Rs 1,000 crore ($233.3 mn) or 15 per cent of its net worth. The company may also bid to set up electricity distribution networks in Turkey.

PGCIL is planning an investment of Rs 75,000 crore ($17.4 bn) during the XIth plan period. Out of which, Rs 55,000 crore ($12.8 bn) would be utilised to set up transmission lines in the country. And PGCIL would invest an additional Rs 20,000 crore ($4.6 bn) on its own for setting up these lines if there were no private sector participant. The company has set a target of Rs 250 crore ($58.3 mn) from the consultancy projects for 2008-09. It has realised consultancy fee of about Rs 235 crore ($54.8 mn) from its ongoing projects during the year.

Policy / Performance

ADB may lend $500 mn for Andhra ultra mega project

June 17, 2008. Reliance Power will get a $500 mn (approximately Rs 2,000 crore) loan from the Asian Development Bank (ADB) for the 4,000 MW ultra mega power project (UMPP) coming up at Krishnapatnam in Andhra Pradesh. The company is expected to achieve financial closure shortly, and that it is also talking to a few financial institutions for debt. The project may cost over Rs 18,000 crore ($4.1 bn), of which about 80 per cent will be debt.

Reliance Power is in discussions with Manila-based ADB and a project appraisal team will come to India within two weeks for the final round of discussions there. The coal-fired Krishnapatnam project is the third of the nine UMPPs planned by the central government to bridge the 20,000 MW power deficit in the country.

India to benefit from $10 bn intl. clean energy fund

June 17, 2008. Indian companies can access resources from clean energy fund initiated by the US and expected to attract contribution from G-8 countries. The fund would aim to assist greener power plants and renewable energy projects. According to the Council on Environmental Quality, the US has agreed to provide $2 bn to the fund which will be around 20 per cent of the total corpus. UK and Japan have so far agreed to participate with $3 bn and the Council would request other G-8 countries to contribute in the fund. It would take about two to three years for the entire fund to come in.

Prime Minister urged to help save Ganga

June 14, 2008. National Committee for Protection of Natural Resources (NCPNR) and Bhagirathi-Ganga Bachao Abhiyan urged Prime Minister Manmohan Singh to stop development projects that affected the flow in the stream channel between Gangotri and Uttarkashi in Uttaranchal. At a meeting, the committee stressed the need for conservation of the Bhagirathi-Ganga above Uttarkashi, which it said was threatened by the proposed hydel projects. First, the Tehri dam was built, then Maneri Bhali II at Uttarkashi.

A series of five dams had been planned between the Gangotri glacier and Uttarkashi for generation of electricity. At these sites, water would be stored and then released into the stream channel periodically through tunnels at some locations where power houses were built. The result of this was over a considerable period of time, there would be no flow in the channel.

India needs 1 TW power to sustain 9 pc growth’: PC

June 13, 2008. According to Planning Commission member (Energy) Kirit Parikh, India needs about 2,000 mt of oil and 1 mn MW (1 Tera Watt) of power by 2030 to sustain a growth rate of 9 per cent in the next 25 years, by 2030, and could fall well-short of meeting its future energy needs if the Indo-US nuclear deal failed to happen. If India do not get the nuclear agreement with the US, and is not able to import any uranium from abroad, at the most it can generate only 48,000 MW of power of the targeted 1 million MW by 2030.

On the electricity front, the country's power capacity would increase from the present 1,60,000 MW to 8,00,000 MW in the next 15-20 years. According to the Parikh, the country was short of fuel of all kinds, as the present oil consumption was around 110 mt, out of which domestic production was 33-34 mt.

By 2030, this may go up to 50 mt and the demand for oil from 110 mt to 400 mt. Nuclear (energy) is the one solution which India is planning to develop and currently the country has around 3900 MW of nuclear power installed capacity, just around two per cent of the total 1,60,000 MW capacity.




Calvalley to commence production on Roidhat field

June 17, 2008. Calvalley Petroleum Inc. has successfully finalized an agreement with the Ministry of Oil and Mineral Resources of the Republic of Yemen and the third party operator of Block 18 and the export facilities. The agreement will allow Calvalley to produce all oil from Block 9 and transport a blended crude having a specification equal to or better than 26 degree API. This agreement will enable Calvalley to commence production from the Roidhat field, which will be blended with the lighter oil produced from other fields in the Block. The Roidhat field, with estimated production capability of 10,000 bbls/d once fully developed, was shut in pending the conclusion of this agreement.

Calvalley solicited tenders from qualified Engineering firms to carry out the Engineering, Procurement and Construction Management of the pipeline project from Block 9 to connect to a third party pipeline system for the export of crude oil production. The tender has been awarded to Veco Engineering from UAE to work together with Calvalley's technical team to expedite the process of design, procurement and construction. Calvalley expects to commence the construction of a 16 inch pipeline, having a capacity of approximately 87,000 barrels per day, prior to the year end 2008. Commissioning of the pipeline is expected by mid-2009.

Stuart prepares to spud Subzero 1

June 17, 2008. Stuart Petroleum Limited will spud the Subzero 1 exploration well in Cooper/Eromanga Basin PEL 113. Subzero 1 will target probabilistic mean undiscovered oil reserves potential of 1.3 million barrels. Subzero is the second well in three well Cooper/Eromanga Basin exploration program which precedes the drilling of the Bazzard 1 exploration well in the Gippsland Basin permit Vic P53.

Oil production up by 7 pc for Petrobras

June 16, 2008. Petrobras' average oil and natural gas production in Brazil topped-out at 2,165,430 barrels of oil equivalent per day (boe) in May, 7% more than a year ago and 0.4% above April 2008. Only taking oil production in domestic fields into account, the rise was 5.2% over May 2007 and 0.7% compared to the previous month. This 12,000 bpd difference was the outcome of new wells going online in the Campos Basin, at platforms P-52 e P-54, both in the Roncador field. With four more platforms kicking-off their operations in 2008, three of which in the Campos Basin and one in Espirito Santo, 500,000 barrels will be added to the Company's production capacity per day.

Furthermore, the five platforms that went online in 2007 are expected to reach their top capacity during this year. Natural gas production in domestic fields reached 49.554 mcm per day, 18.6% more than the 41.797 mcm produced in May 2007. Considering both the fields in Brazil and abroad, the Company's total oil and natural gas production averaged 2,367,192 barrels of oil equivalent per day in May, i.e., 4.3% more than the total registered a year ago and at the same level as Petrobras' total production in April 2008. The volume of oil and natural gas lifted in the eight countries where Petrobras has production assets, in barrels of oil equivalent, was 201,762 barrels per day in May, 9.9% less than the previous month's mark.

Tui FPSO extension will yield 5 mn barrels of Oil

June 16, 2008. A three-year extension to the charter for New Zealand's Tui oil field's FPSO vessel Umuroa will allow at least five million barrels more oil to be recovered from the field. AWE estimates the extension to the contract with Umuroa owner and operator Prosafe will bring the proven and probable reserve from known Tui reservoirs to at least 47 million barrels. The fixed term of the charter has been extended by 3.4 years to the end of 2015.  A further seven, one-year options to extend, will give a maximum term of 15.4 years from the date of first production — July 2007. The four existing Tui field production wells continue to perform strongly. Oil production on the Umuroa has remained at close to 45,000 barrels a day despite rising water production. The cost of the charter for the financial year ending June 30, 2009, is forecast to be approximately $61 mn with the rate reducing annually.

StatoilHydro drilling results encouraging

June 16, 2008. StatoilHydro has drilled exploration wells in prospects at Haltenbanken three times this year. Gas has been struck in all of these prospects. Galtvort is the last gas find in line. StatoilHydro is completing the drilling of the second of the two exploration wells on the Galtvort prospect using the West Alpha semisub. The first well, 6407/8-4 S, which was drilled in May, confirmed the existence of gas. Well 6407/8-4 A, which is now being completed, is a side-track which confirmed the existence of gas in Jurassic sandstone. The prospect is located 30 kilometers northeast of the Njord field and 9 kilometers north-west of the Draugen field in the Norwegian Sea. Preliminary calculations show that the recoverable gas volume in the Galtvort discovery is in the order of one to three billion standard cubic meters.

The two wells are the first ones in production license 348, awarded in TFO 2004 (awards in pre-defined areas). The licensees in production license 348 are: StatoilHydro (30%), Gaz de France Norge (20%), Norwegian Energy Company (17.5%), E.ON Ruhrgas Norge (17.5%), Endeavour Energy Norge (7.5%) and Petoro (7.5%).

Sakhalin II secures $5 bn from JBIC

June 16, 2008. A $5.3 billion deal has been signed for the second phase to the world's largest integrated oil and gas development. Sakhalin Energy Investment Company Ltd. has signed a project finance contract with the Japan Bank for International Cooperation (JBIC) and a consortium of international banks for Sakhalin II Phase 2.

Sakhalin Energy, which is jointly owned by OAO Gazprom, Royal Dutch Shell Plc., Mitsui & Co. and Mitsubishi Corporation, said the funds will finance the construction, testing and commissioning of phase 2 of Sakhalin II, which will soon start delivering liquefied natural gas to customers in Japan, Korea and the North American West Coast. Japan's leading financial institution gave strong support to Sakhalin Energy, providing $3.7 bn. The consortium will contribute an additional $1.6 bn.

BG Group, Petro finds more oil in Santos Basin

June 13, 2008. BG Group Plc, the U.K.'s third- largest oil and gas company, and Petroleo Brasileiro SA made a second discovery in Brazil's Santos Basin. The Guara exploration well struck oil in the BM-S-9 concession area. That's in the same block as the Carioca discovery in September, which Brazil's petroleum regulator may contain as many as 33 bn barrels of oil.

Petrobras plans to invest about $33.5 bn in projects this year to ramp up production and explore the offshore fields. That would be the world's largest investment program in the oil and gas industry, followed by OAO Gazprom which has earmarked $30 bn and Royal Dutch Shell Plc with $27 bn. Guara and Carioca are ultra-deep wells beneath a salt layer under the seabed known as pre-salt fields. These fields lie below as much as 10,000 meters (33,000 feet) of ocean and seabed, forming a new province of Brazilian oil reserves beneath shallower existing fields.

OPEC production up 0.37 mn b/d this Month

June 13, 2008. The 13 members of the Organization of Petroleum Exporting Countries (OPEC) pumped an average 32.24 mn barrels per day (b/d) of crude oil in May, an increase of 370,000 b/d from April's 31.87 mn b/d. Production from the 12 members bound by output agreements rose 260,000 b/d to 29.75 mn b/d in May, from 29.49 mn b/d in April. A sharp fall in Nigerian production was the main reason for the lower April numbers. Nigerian output, estimated at 1.86 mn b/d in May, showed some recovery but was still well below pre-April levels of more than 2 mn b/d.

The biggest volume increases in May came from Saudi Arabia and Iraq. Saudi production was estimated at 9.24 mn b/d, up 140,000 b/d from April's 9.1 mn b/d. Iraqi volumes, which averaged 2.38 million b/d in April, rose to 2.49 million b/d in May, an increase of 110,000 b/d. Other smaller increases came from Angola, Ecuador, Kuwait, Qatar, the UAE and Venezuela. The increases were partly offset, however, by output drops in Iran and Libya.

The survey shows the OPEC-12 exceeding their 29.673 million b/d target by 77,000 b/d. OPEC ceilings and quotas had become largely irrelevant and that OPEC had a tacit understanding that those members capable of boosting crude production should supply as much oil as world oil markets needed.

Angola top Africa oil producer again in May

June 13, 2008. For a second month running, Angola topped Nigeria as Africa's biggest oil producer in May. The figures underscore Angola's success over the past two years in boosting its oil pumping capacity but also Nigeria's ongoing production woes amid regular militant attacks on oil infrastructure that have taken a big chunk out of output for many months.

Nigeria's oil output capacity is around 2.8 mn-3.0 mn barrels a day, but it pumped just 1.89 mn barrels a day last month. Angola produced 1.90 mn barrels a day in May, under its total capacity of around 2 mn barrels a day.

Striker to increase Welsh field production by 100 pc

June 12, 2008. Striker Oil & Gas, Inc. has filed a permit application with the State of Louisiana to convert a temporarily abandoned well in the Welsh field to a salt water disposal well. This will allow Striker to bring several of its shut-in wells online which could double its existing Welsh field production. Welsh has been producing approximately 35 barrels of oil per day from two productive wells with an additional two wells ready to produce that have been shut in due to the inability to dispose of the salt water. The Welsh Field has additional development opportunities through recompletions and new drilling locations.


Korean, Italian firms win $0.9 bn refinery order in Russia

June 17, 2008. South Korean builder GS Engineering & Construction Corp. has teamed up with an Italian firm to clinch a US$900 mn order for a refinery project in east central Russia.

The refinery, which will have a daily production capacity of 150,000 barrels, will be built in Nizhnekamsk, 170 kilometers east of Kazan, the capital of the Republic of Tatarstan, by 2011. GS Engineering & Construction had formed a consortium with Italian engineering group Maire Technimont SpA to get the order from Russia's Tatneft OAO.

Vietnam set to license $6 bn refinery project

June 16, 2008. Vietnam will attract over $23 bn of foreign direct investment (FDI) in the first half of this year, the biggest-ever amount in a year. Vietnam will lure considerable amounts of FDI from North America, Europe and Japan in the coming time although its macro economy is facing temporary difficulty.

Vietnam is trying to foster its auxiliary industries, simplify administrative procedures, and improve transport, communications, and electricity networks to entice more foreign investors. The government has intensified investment in many major infrastructure works.

Petrobras may build 0.6 mn b/d refinery in Maranhao

June 16, 2008. Petrobras, along with the government of Maranhao state in northeastern Brazil, will study the possibility of building a premium refinery with a 600,000-b/d capacity. The refinery's first operational phase is scheduled to start in 2013.

Petrobras and the state's government will study the terms of a memorandum of understanding to be signed within 120 days to establish the initial premises for the parts' performance in project implementation.

Abu Dhabi's IPIC approves $5 bn Morocco refinery

June 16, 2008. Abu Dhabi's $10 bn oil and gas fund, International Petroleum Investment Co., or IPIC, has approved plans to build a 200,000-barrel a day refinery in Morocco. Abu Dhabi government-owned IPIC will develop the estimated $5 bn refinery at Jorf Lasfar, located at the country's west coast. The refinery will supply refined products to the domestic market but no decision has been made on where to source the crude oil from. IPIC is also seeking to bring in an international oil company as technical partner in the refinery project, with Occidental Petroleum of the U.S. being one potential candidate.

Saras business plan to focus on organic growth

June 16, 2008. Italian oil refiner Saras SpA could announce investments exceeding the 600 million euros planned in its previous three-year plan, mainly to further upgrade its diesel-focused Sarroch refinery in Sardinia, and improve the efficiency of the site. Upgrading projects will be aimed at increasing its capacity to transform fuel oil and other heavy derivatives into light ones in demand on the market, such as diesel, whose margins should remain strong, driven by robust demand from Asia. More than half of the Sarroch refinery's production is middle distillates, mainly diesel, about 28 percent is gasoline and naphtha, and nearly 5 percent fuel oil. The refinery has a daily output of about 300,000 barrels.

Exxon getting out of US retail gas business

June 12, 2008. Exxon Mobil is getting out of the retail gasoline business, a market where profits have gotten tougher because of high crude oil prices. The world's largest publicly traded oil company will sell its 820-company owned stations and another 1,400 outlets operated by dealers to gasoline distributors across the U.S. About 75 percent of its roughly 12,000 stations in the U.S. are owned by branded distributors. Exxon Mobil will still sell gasoline to those stations and get paid for the use of its name.

The decision would affect Texas and Florida the most since they have the highest number of company-owned and operated stations at 190 and 175, respectively. California, New Jersey and New York have the highest concentrations of dealer-operated stations at over 200 each.

Transportation / Trade

MarkWest to build Marcellus pipelines, processing facilities

June 17, 2008. Range Resources Corp. and MarkWest Energy Partners, L.P. announced their agreement for MarkWest to construct and operate gas gathering pipelines and processing facilities associated with Range's Marcellus Shale acreage in the Appalachian Basin. MarkWest expects to invest approximately $50 mn in 2008 and anticipates investing up to an additional $125 mn in 2009 based on projects currently being developed.

Range Resources Corporation is an independent oil and gas company operating in the Southwestern, Appalachian and Gulf Coast regions of the United States. MarkWest Energy Partners, L.P. is a growth-oriented master limited partnership engaged in the gathering, transportation, and processing of natural gas; the transportation, fractionation, marketing, and storage of natural gas liquids; and the gathering and transportation of crude oil. MarkWest has extensive natural gas gathering, processing, and transmission operations in the southwestern and Gulf Coast regions of the United States and is the largest natural gas processor in the Appalachian region.

ETP presents plan for Peru gas pipeline

June 17, 2008. Energy Transfer Partners L.P. (ETP) has presented a proposal to construct a natural gas pipeline in Peru, which could require a $2 bn investment. The company, a partnership owning and operating various energy assets in the U.S., is proposing to construct an 880-kilometer pipeline through the Andes Mountains. This project will cost about $2.0 bn and will cover more or less 880 kilometers, helping to stimulate natural industry and create employment.

There are other bids to construct the pipeline, which would move natural gas from the Camisea fields to southern populated areas. The various proposals are being studied by Energy and Mines Ministry.

Private equity investment firm Conduit Capital Partners LLC was in talks with Colombia's Promigas SA and with an unnamed company about the possibility of forming a consortium to build the pipeline. Conduit Capital Partners controls Kuntur Transportadora de Gas SAC, which has proposed a $1.2 bn 1,085-kilometer pipeline from the Camisea gas fields in the Cuzco region to the southern regions of Moquegua and Puno.

Suez Energy Peru, a unit of Suez, has proposed building an $850 mn pipeline down the Pacific coast to the southern city of Ilo. Brazil's Petroleo Brasileiro SA (PBR), or Petrobras, and Canada's TransCanada Corp. (TRP) have also looked at forming a consortium to bid on the project. Gas and liquids are currently shipped from the jungle region to a plant near Pisco on the Pacific coast and then to the capital of Lima and elsewhere.

China starts work on its first CBM pipeline

June 16, 2008. China has started to construct its first coal-bed methane (CBM) pipeline in Qinxin country of northwest China's Shanxi province. The abundant CBM reserves in the region will be piped to link China's West-to-East Gas Pipeline, and then be transported to downstream markets in east China. It will be the first time that the country pipes CBM to trunk lines of natural gas pipeline. The CBM pipeline project is slated for completion in November.

Sinopec starts construction of Kunming-Dali oil pipeline

June 13, 2008. Sinopec recently started construction of the Kunming-Dali oil product pipeline. The new pipeline is designed to be 323 km long and have an annual carrying capacity of 2.9 mt to transmit diesel and gasoline via Kunming, Anning, Lufeng, Chuxiong, Nanfeng, Xiangyun, Midu to Dali. The company plans to invest 523 mn yuan in the entire project, and put it into operation by May 2009. Upon completion, the pipeline could effectively ensure oil product supply in western Yunan province.

Edison, Depa set up company for Italy-Greece gas pipeline

June 11, 2008. IGI Poseidon SA., the company that will build the natural gas pipeline between Greece and Italy is a 50-50 joint venture between Edison International Holding and Greece's state-owned Depa. The pipeline, which is already in an advanced authorization phase both in Greece and Italy, will import 8 bcm of natural gas per year from the Caspian Sea. Construction of the pipeline will begin in 2009 and it will start operating in 2012. Edison and Depa will invest about 500 mn euros in the project. Edison has started talks with upstream gas operators in Azerbaijan to secure gas supplies.

Gazprom’s pipeline to cross Slovenia

June 11, 2008. Russian energy giant Gazprom, Gazprom had finally decided on the route of its South Stream gas pipeline, revealing that on the way to Italy the pipeline would also cross Slovenia. The pipeline would run from Russia under the Black Sea to Bulgaria, from where its northwestern route would cross Serbia, Hungary, Slovenia and Austria. The pipeline's southwestern route would reach Italy through Greece.

The inclusion of Austria and Slovenia into the project, which is considered as a rival to the EU- and US-backed Nabucco pipeline, is said to have been agreed on at the Saint Petersburg International Economic Forum.

The South Stream gas pipeline, which is planned to carry 30 bcm of natural gas annually, is a joint project of Gazprom and Italian energy company Eni. Deliveries through the pipeline, which is expected to cost between EUR 7 bn and EUR 10 bn or by some estimates even twice as much, are scheduled to start by 2013.

Policy / Performance

China abolishes lubricant export quota

June 16, 2008. According to a joint announcement by the Ministry of Commerce, National Development and Reform Commission and China Customs China will annul the export quota for lubricant, grease and lubricating oil base stocks starting from July 1. Thereafter, China will adopt export license administration on the export of the above-mentioned goods. Meanwhile, China employs state-run trading on the export of lubricate, grease and lubricating oil base stocks under general trade terms.

At present, only Sinochem Corp., China international United Petroleum & Chemical Co., Ltd. and China National United Oil Corp. are allowed to deal in the state trade business. As for export under other terms, export-oriented enterprises shall apply export licenses from the Ministry of Commerce with customs declaration and application letter from provincial commerce departments.

Saudi Arabia to hike oil production

Jun 16, 2008. The kingdom’s Oil Minister Ali al-Naimi is learnt to have told UN chief Ban Ki-moon that Saudi Arabia will increase oil production by 200,000 bpd from June to July. The U.N. secretary-general met Saudi oil minister Ali al-Naimi in the port city of Jiddah during a one-day trip to the world's largest oil producer.

In May, the kingdom increased its production by 300,000 bpd. By July, production should be at 9.7 mn bpd, Al-Naimi is believed to have told the U.N. chief. Saudi Arabia has convened a meeting of oil producing and consuming countries on June 22 in Jiddah to discuss ways of combating soaring oil prices.

G-8 asks oil-producing nations to boost output

June 14, 2008. Finance ministers from the Group of Eight industrialised nations urged oil-producing nations to boost output to help stabilise record-high oil and food prices, calling the situation a serious threat to global economic growth. The world Economy faces uncertainty and inflationary pressures because of the recent rise in prices. This is not something that lends itself to short-term solutions.

The ministers from the G-8 nations - Britain, Canada, France, Germany, Italy, Japan, Russia and the US - also mapped out an agenda for a summit next month in northern Hokkaido. Oil prices, reaching nearly $140 a barrel last week, and the recent jump in the prices of corn, wheat, rice, soybeans and other food have been the main issues of the sessions. The ministers agreed on the importance of analysing the role of speculators, suspected of sending oil prices higher. The ministers asked the International Monetary Fund and the International Energy Agency to analyse the financial factors behind the surging oil and commodity prices, and their effects on the global Economy.

Nigerian President pledges to double oil output by ’10

June 12, 2008. According to Nigeria, the country plans to double its crude oil production to 4 mn barrels a day by 2010. Many experts have expressed doubts that Nigeria has the capacity for such an increase. For the last two years, Nigeria has lost about a quarter of its daily production because of attacks on pipelines and terminals and the kidnapping of key staff, foreign and Nigerian. It also lost its position as Africa's premier oil producer to Angola, according to the International Energy Agency.



Coal burnt for electricity soar up in New Zealand

June 17, 2008. The use of coal to produce electricity soared in the first three months of the year as dry weather conditions put the squeeze on hydro generation, new figures show. That pushed CO2 equivalent emissions from electricity generation up by almost a third from a year earlier.

Renewable generation accounted for 65 per cent of electricity in the March quarter, down from 72 per cent a year earlier, the Ministry of Economic Development's New Zealand Energy Quarterly shows. The 3566 gigawatt hours (GWh) of thermal generation in the March quarter, 35 per cent of the total, included 1020 GWh from coal, compared to 727 GWh a year earlier and just 589 GWh in the December quarter.

 Hydro generated 52 per cent of the total in the March quarter, 5275 GWh compared to 6035 GWh a year earlier. The country's diesel-fired reserve generator at Whirinaki had run at record levels during the quarter, generating 26 GWh, or 0.3 per cent of the total, according to the report.  A total of 10,130 GWh of electricity was generated in the March quarter, up 3 per cent from a year earlier.

The rise in the use of coal was the key factor in a rise of almost a third from a year earlier in this country's production of CO2 equivalent emissions from electricity generation. During the March quarter the figure was 1845 thousand tonnes of CO2 equivalent emissions, compared to 1405 a year earlier.

Efforts to reduce emissions had received a boost in the second half of 2007 after Genesis Energy's combined cycle gas turbine at Huntly went into full operation. That reduced the need to use coal, which produces more emissions per unit of electricity than gas does.

Meanwhile, New Zealand production of crude oil and condensate continued at near record levels during the March quarter, as a result of output from the Tui field which started production last July.

A total of 35.4 petajoules (PJ) of crude oil and condensate was produced in the March quarter, from 36.1 PJ in the previous three months. Imports were up to 57.4PJ from 50.1PJ, while exports eased to 32.5PJ from 35.1PJ.

U.S. coal production unlikely to sate world demand

June 16, 2008. U.S. coal production has room to grow, but expansion is unlikely to meet surging world demand because miners fear a boom-bust cycle, key reserves are declining, and regulation has tightened.

Despite soaring prices, the U.S. Energy Information Administration has cut projections of U.S. output rather than raised them, and now foresees a total of 1.166 billion short tons by 2010, barely up from a record 1.163 billion in 2006.

That is not enough to overcome what some coal officials see as a shortage of 25 to 35 tons this year in the 6-billion-ton world market and a shortfall of perhaps 70 mtpa. Closing the gap with U.S. coal would require spending billions of dollars to expand mines, rails and ports, investment difficult to recover if, as has happened before, supply growth exceeds demand and prices fall.

Europe has bid spot eastern U.S. power-plant coal past $110 a short ton, up from $45 a year ago, because booming Asia has bought up other supplies Europe had relied upon. But there has not been much of a U.S. supply response.

Johns Hopkins plans to build campus power plant

June 13, 2008. Johns Hopkins University plans to build its own power plant on the Homewood campus to cut its electric costs by about 15 percent and reduce its carbon emissions. Construction of the 3.5 MW cogeneration plant, on the 128-acre Baltimore campus, could begin by March 2009. The plant will cost an estimated $7.5 mn.

Once up and running, it could save about $1.5 mn annually on the university's nearly $10 mn energy bill. The proposed plant, which could be in use by October 2009, will be powered by natural gas and generate electricity and steam.

The university will use the electricity to power its classrooms, research labs and residence halls. The steam can be used to heat the buildings and also to power coolers on campus that provide air conditioning.

More electricity expected with 3 new power plants

June 12, 2008. More electricity could come online in Connecticut in two years as three power companies took the first step toward winning state approval to build power plants in Bridgeport, Milford and New Haven. The new plants, two of which are expected to operate by 2010, will generate nearly 700 MW, enough electricity to power between 525,000 and 700,000 typical homes.

Electricity customers have been paying a premium for electricity at peak times because the state does not have adequate power when demand for electricity is at its highest. The new plants should save customers more than $30 mn a year by delivering peak power. The companies were selected by the state Department of Public Utility Control in a draft decision.

Three power companies, including a partnership with United Illuminating, have been tentatively chosen by state regulators to build new peaking power plants alongside existing plants in Bridgeport, Milford and New Haven. The companies will be reimbursed through electric rates for the cost of building and operating the plants and for a return on their investments. The DPUC reviewed applications from seven companies that proposed nearly a dozen peaking plants in Connecticut.

The Milford plant, which will generate 194 megawatts, is expected to be completed in June 2010. PSEG Power LLC, which will build a 134 MW plant in New Haven, expects to finish construction in June 2012. Bridgeport Energy II plans to build a 360 MW plant in Bridgeport by December 2010.

Transmission / Distribution / Trade

Meralco lowers electricity rates in June

June 12, 2008. Electricity consumers in the capital region are going to get a break from the Manila Electric Company (Meralco), which announced a rollback of rates by about 50 cents per kilowatt-hour in June. The utility is willing to refund meter deposits soon but did not give a specific date. According to the company residential customers will enjoy a P0.4872 per kilowatt-hour reduction in their electricity bills this month because of lower generation and system loss charges.

The reduction is in lieu of a significant drop in prices at the Wholesale Electricity Spot Market, where the utility sources a portion of the electricity it distributes in its franchise area. From its May level of P4.8754 per kilowatt-hour, the generation charge or the cost of power Meralco buys from its suppliers that is passed on to consumers this month decreased to P4.4520 per kilowatt-hour.

Meralco sources bulk of its power supply from its contracted independent power producers and state-owned National Power Corp. Besides the lower generation charges, the company’s system loss charges also went down for all customer classes.

Residential customers will experience an additional reduction of P0.0638 per kilowatt-hour in their bills as a result of lower system loss charges. In April 2008, there were close to 700,000 customers consuming 50 kilowatt-hours or less. Those consuming 100 kilowatt-hours who are still in the lifeline category will be billed P42.92 less this June, a 6-percent reduction from the May billing. There were 1.6 mn residential customers in the lifeline category in April 2008.

A typical Meralco residential customer consuming 200 kilowatt-hours will pay P114.41 less this June, and his bill will be less by P0.5721 per kilowatt-hour. The Meralco welcomed the decision of the Energy Regulatory Commission (ERC) ordering utilities to refund meter deposits to consumers. Meralco can start refunding its customers by November after the company irons out kinks in the amount to be refunded and how it is to be disbursed.

Consumers who have paid meter deposits may ask for a cash or check refund or for credit to future billings or standing arrears. Based on initial computations, meter deposits collected by Meralco from 1985 to the time it stopped doing so in 2004, total P2.8 billion, including interests.

Policy / Performance

Commercial viability of Futuregen to be known in ’20

June 17, 2008. According to the White House on Environment Quality, the commercial viability and technical reliability of the US-sponsored Futuregen project, which is aimed at setting up zero emission coal-fired power plants and of which three Indian public sector energy companies, namely Coal India, NTPC and ONGC are partners will be known only in 2020 as the project is currently undergoing restructuring. Under the proposed restructuring, instead of earlier one-time funding to the tune of $2 bn, there would now be funding to the tune of $1 bn annually plus $9 bn worth of loan leverage. Also, instead of the earlier plan to set up one pilot plant by 2012, there would three to four commercial plants in addition to a dozen R&D plants across the world.

Iran’s demand for nuclear power justifiable’: Bush

June 16, 2008. US President George W. Bush said that Iran's demand for civilian nuclear power was justifiable. Bush held the conference with British Prime Minister Gordon Brown and the two are expected to present a united front against Iran's nuclear ambitions. Iran recently ruled out suspending uranium enrichment despite an incentives package by six world powers, including the United States, to persuade it to stop its nuclear work.

5 GW coal power scheme in Pakistan

June 14, 2008. According to Water and Power Development Authority [WAPDA], the government is planning to set up 5,000 MW power generation facilities using coal as fuel within next few years.

The country’s survival in the energy sector hinged on proper exploitation of its coal reserves, that 184 billion tons of coal reserves were available in Thar area alone. The authority expressed concern over the fact that Pakistan is generating only 0.1 per cent electricity from coal, though its neighbouring countries are doing well on this front; India generates 55 per cent power and China 74 per cent.

Three rental power houses would start generating 1,067 MW of electricity from September, October and November this year, respectively. The fourth rental power house would start generating 192 MW power from December 2008 at Piran Ghaib power station, Multan. The station would have another 350 MW electricity through a power plant. Malakand hydel power generation facility would start functioning next month to generate 81MW.

In addition to rental power houses, the power generation capacity of some independent power producers (IPPs) also would be enhanced. Agreements had been signed with China to establish power plants at Nandipur and Chichu ki Malian, and tenders had been issued for two 500 MW power plants at Dadu and Faisalabad which would be run by gas and furnace oil. An 800 MW power plant would be set up at Guddu.

The Muzaffargarh thermal power house, was not generating energy up to its full potential of 1,350 MW. It was generating 1,000 MW of electricity at present which would be enhanced up to the optimal level by overhauling its turbines.

Nigeria: ‘Multi-year tariff order, not about electricity increase’

June 12, 2008. According to the Nigerian Electricity Regulatory Commission (NERC), the multi year tariff order regime which recently got the nod of the Federal Government is not all about electricity price increase, but it is a way by which consumers will get value for their money.

NERC declared that, foreign direct investors can only come in when they are convinced of the return on their investments. Investors always want to predict and certified that they will do well. The country therefore needs to provide an enabling environment for them to operate .This include legal and regulatory framework.

The Multi Year Tariff Order (MYTO) is in the right order and not controversial as some people have alleged. It took the commission two years of consultation with stakeholders before it came up with MYTO. It stressed that those arguing against MYTO need to understand the calculations that goes into the pricing of electricity for them to come to terms with the workability of MYTO.

Renewable Energy Trends


Kochi to host renewable energy products expo

June 17, 2008. Urja 2008, national exhibition on energy efficient and renewable energy products and technologies, jointly organised by the Centre for Innovation in Science and Social Action and the Society of Energy Engineers and Managers will be conducted at Town Hall in Kochi from June 23 to 27. This is a unique event to showcase best practices, technologies, equipments and products in the field of energy efficiency and renewable energy sources. The exhibition is supported by ANERT and Energy Management Centre of the State Government. The French Agency for Environment and Energy Management and the Renewable Energy and Energy Efficiency Partnership, Vienna is also supporting it. All the major players in the area of solar energy, wind energy, bio gas, bio diesel and BEE (Bureau of Energy Efficiency) star labelled products have already confirmed their participation. The exhibition offers a broad range of products in the area ranging from improved biomass cook stoves, including potable models that are not so far propagated in Kerala, to latest the solar heating systems, wind solar hybrid systems, LED lighting systems, biomass gastifiers and range of biogas plant models. Energy efficient product managers in lighting, pumps, boilers, refrigeration and air-conditioning will also be participating in the exhibition. Several State government bodies in energy management and conservation, R&D organisations and NGOs working in energy conservation, energy efficiency, clean production and renewable energy are participating.

Guidelines for hydrogen-CNG vehicles likely in two months

June 16, 2008. The Ministry of New and Renewable Energy, with the Society of Indian Automobile Manufacturers (SIAM) and Indian Oil Corporation, is likely to come out with the technical guidelines to run vehicles with a blend of hydrogen and CNG in the coming two months. This would be based on tests carried out on the existing category of CNG vehicles. The Ministry, which is funding partially the project with Indian Oil dispensing the fuel, has already finished phase I of trial in the research labs. The project which started in September last year is now set to enter the next phase of field trials with the common blend of hydrogen- CNG for three-wheelers, commercial vehicles and cars.

The Government was in discussions with the Petroleum Safety and Explosive Organisation and Ministry of Road Transport to make the running of such vehicles feasible. These organisations have given their guidelines also. The project is being carried out using LCV of Ashok Leyland, Tata Motors and Eicher, Bajaj’s three-wheeler, a pick-up vehicle of M&M and a car of Tata Motors. Tests have been conducted in the research labs for blending hydrogen with CNG (in) different vehicles. The ministry is expecting that in the next two months it should be able to decide the uniform norms for the H-CNG fuel that would be viable for all vehicles under trial. The target was to blend hydrogen up to 30 per cent in the vehicles. But since the engine compatibility of the vehicles of different companies would vary, the project stakeholders were hoping to finalise the technical feasibility norms in the coming two months.

Naturol Bioenergy to export first shipment to Europe

June 14, 2008. Naturol Bioenergy Ltd will be sending its first shipment of 10,000 tonnes of biodiesel from Kakinada port in the next 10 days to a European buyer. The fully integrated oleo-chemical complex, established near Kakinada, has a capacity to produce 30 million gallons (one lakh tonnes) of biodiesel a year. It can also produce bio fatty acids as by-products and would be scaled up to produce 75 million gallons a year depending on the market demand. The company, a 100 per cent export-orient unit, plans to export 10,000 tonnes of biodiesel costing around Rs 50 crore every six weeks. The company reduced its dependence on palm crude by 20 per cent and the same would be brought down by 40 per cent next year. It instead plans to use fatty acids as the source for making biodiesel.

Naturol was set up with an investment of Rs 140 crore ($32.6 mn), of which Rs 84 crore ($19.5 mn) was through debt by the IDBI-led consortium of banks. Of the remaining amount, 60 per cent by three venture capital funds and the remaining was invested by promoters’ group. The company is also planning to expand its storage capacity and take up cultivation of feedstock for the raw material by supplying seed to farmers in India, Indonesia and East Africa. The company, which declared commercial production on April 28, expects the turnover to touch Rs 419 crore ($97.7 mn) in the remaining 11 months of the fiscal.

SRF commissions wind project in Tamil Nadu

June 12, 2008. SRF Ltd has successfully commissioned all the nine units of a 14 MW wind power project in Tamil Nadu at a total investment of around Rs 90 crore ($21 mn). The project, located in Tirunelveli district, is being implemented as a Clean Development Mechanism initiative under the Kyoto Protocol on greenhouse gas reduction. The SRF board had approved the wind energy project in December.

TN to set up 10 MW solar plant

June 12, 2008. The Tamil Nadu government is planning to set up a 10 MW solar power plant in association with the private sector. The state government invited investors to establish more windmills and solar power plants in the state. A solar energy plant costs Rs 18-22 crore ($4.2 – 5.1 mn) per MW, which is high compared with hydro power [Rs 5 crore (1.1 bn) per MW], thermal power [Rs 4 crore ($0.9 bn)], and windmill [Rs 6 crore ($1.4 bn)].

Due to this high cost, both private and public sector companies were not in a position to set up solar energy plants. Recently, according to the MNRE guidelines, the Centre was prepared to pay incentives up to Rs 12 per unit and has also asked state governments to pay Rs 3 per unit for grid interactive solar power generation. This would encourage more investments.


ASTM fuels subcommittee okays biodiesel blend specifications

June 17, 2008. Members of ASTM Subcommittee E voted overwhelmingly to recommend the passage of finished specifications for bio-diesel blends. Specifically, they will recommend the following to the ASTM D02 Main Committee at its final vote:

a) Finished specifications to include up to 5% biodiesel (B5) in the conventional petrodiesel specification (ASTM D975)

b) Changes to the existing B100 biodiesel blend stock specification (ASTM D6751)

c) A new specification for blends of between 6 percent biodiesel (B6) to 20 percent biodiesel (B20) for on and off road diesel.

In particular, automakers and engine manufacturers have highly anticipated the B6-to-B20 specification for more than five years. All three proposals were balloted to the D02 Main Committee for consideration at the semi-annual ASTM International (formerly the American Society for Testing and Materials) meeting being held in Vancouver this week.

The Main Committee members will render their final votes on June 19th. Biodiesel is a domestically produced, renewable alternative to diesel fuel and can be made from vegetable oils, animal fats, recycled cooking oils or new sources such as algae. Biodiesel must be properly processed to meet the approved ASTM specifications regardless of the feedstock used to produce it. Biodiesel blends using B100 meeting ASTM specifications can be used in any diesel engine without modifications, and nearly all major automakers and engine manufacturers in the U.S. currently accept the use of at least B5, with some such as Cummins, New Holland and Caterpillar already accepting blends of B20 or higher. Several more companies are expected to raise their approvals to B20 pending the expected passage of the final ASTM specifications for B6-B20 blends this week.

Honda rolls out zero-emission car

June 17, 2008. FCX Clarity, which runs on hydrogen and electricity, already creating quite a buzz Honda’s new zero-emission, hydrogen fuel cell car rolled off a Japanese production line and is headed to Southern California. The FCX Clarity, which runs on hydrogen and electricity, emits only water and none of the noxious fumes believed to induce global warming.

It is also two times more energy efficient than a gas-electric hybrid and three times that of a standard gasoline-powered car. Honda expects to lease out a few dozen units this year and about 200 units within three years. In California, a three-year lease will run $600 a month, which includes maintenance and collision coverage.

The FCX Clarity is an improvement of its previous-generation fuel cell vehicle, the FCX, introduced in 2005. A breakthrough in the design of the fuel cell stack, which is the unit that powers the car’s motor, allowed engineers to lighten the body, expand the interior and increase efficiency. The fuel cell draws on energy synthesized through a chemical reaction between hydrogen gas and oxygen in the air, and a lithium-ion battery pack provides supplemental power.

Biomass power station to be built in Lincolnshire

June 16, 2008. The Energy Ministry has given the go ahead to Helius Energy plc to construct a 65 MW biomass power station near Stallingborough in North East Lincolnshire. When it is built, the plant could produce enough green energy to power the equivalent of about 100,000 homes. It is expected to provide jobs during the construction phase and on working shift pattern when the plant is running.

This is another stepping stone towards powering a greener, cleaner UK. Not only does it help tackle climate change and increase secure supplies of energy, but the building and running of this biomass plant will also provide jobs in Lincolnshire. The power station will initially be fuelled by waste wood, specially grown crops and the leftovers from timber processing activities sourced from the UK and Europe.

Planning permission has also been granted to build an additional biomass processing facility and bioethanol and biodiesel refinery. The intention is that spent grains from the bioethanol plant and glycerol from the biodiesel plant will eventually be used as the fuel feedstock for the power station.  

Greenpeace declares war on coal in Australia

June 16, 2008. Green Peace environmental group has called for all coal-fired power stations to be shut down by 2030 as part of a radical energy plan. The environment group wants an immediate ban on new coal-fired power stations and extensions to existing plants and for the Federal Government to start planning on shutting them down for good.

The group has released a roadmap Australia's Energy (R) evolution to turn the tide of increasing greenhouse-gas emissions. Greenpeace's vision was for the coal industry to be replaced with wind, solar and geothermal power. A network of wind farms would spread around the country and out to sea. Solar farms would be built in the desert. Cities would generate much of their own electricity with office blocks and apartments kitted out with solar facades to generate electricity, and mini-power stations in cellars.

Heaters would be ditched and replaced with solar collectors. Greenpeace said the end of the coal industry would not cost jobs. The creation of a new green energy workforce would result in a net gain of at least 33,000 jobs but the Government did have a role to play in managing the transition and training up green workers.

Consumers would save money on electricity bills under the plan because coal will become more expensive. If Australians kept using energy the way they did now, greenhouse gas emissions would rise by 20 per cent by 2020. The roadmap would cause emissions to fall by 37 per cent in that time.

The roadmap urged the Government to double its commitment to renewable energy to 40 per cent of total energy supply by 2020. The Government has promised to cut emissions by 60 per cent by 2050, but Greenpeace urged a tougher target of at least 40 per cent by 2020.

Intel spins off solar energy technology

June 16, 2008. To spur new development and demand for renewable energy sources, Intel Corporation is spinning off key assets of a start-up business effort inside Intel's New Business Initiatives group to form an independent company called SpectraWatt Inc. Intel Capital, Intel's global investment organization, is leading a $50 million investment round in SpectraWatt and is joined by Cogentrix Energy, LLC, a wholly owned subsidiary of The Goldman Sachs Group, Inc., PCG Clean Energy and Technology Fund (CETF) and Solon AG.

The transaction is expected to close in the second quarter of 2008. SpectraWatt will manufacture and supply photovoltaic cells to solar module makers. In addition to focusing on advanced solar cell technologies, SpectraWatt will concentrate development efforts on improvements in current manufacturing processes and capabilities to reduce the cost of photovoltaic energy generation. SpectraWatt expects to break ground on its manufacturing and advanced technology development facility in Oregon in the second half of 2008 with first product shipments expected by mid-2009.

Solar cells are the discrete components in a solar energy generation system responsible for converting sunlight to electricity. The end-user market segment for solar technology in 2007 was approximately $30 bn, a 50 percent increase from 2006. Solar industry growth of 30 to 40 percent annually is expected to continue in years to come as the economics of solar, which is currently approximately twice the cost of delivered retail electricity on a per kilowatt basis, begins to approach that of traditional electricity-generation technologies.

Berkeley solar financing company Helio introduces new plan

June 16, 2008. Helio Micro Utility Inc. of Berkeley introduced a new financing plan for residential solar electricity systems that allows a homeowner to buy power from solar panels installed on their roofs without a large cash outlay. Under Helio's Green Energy Plan, Helio will finance, install, own and operate a solar system, and the customer is billed only for the power the system produces.

According to the Utility, under its plan, which is generally geared to those whose homes consume large amounts of energy, homeowners will pay less per kilowatt-hour than rates charged by their incumbent utility. The plan is initially available in the Santa Monica area and other select cities. In Northern California, Helio will determine a potential customer's eligibility depending on the size system needed and other factors.

In Santa Monica, Helio partnered with Solar Santa Monica, a city-sponsored solar demonstration program. Helio is one of several solar companies in California that have begun offering residential solar leasing or power purchase plans that mirror the types of financing that has become almost commonplace for large commercial or government solar systems.

Alternative energy companies in US look to Congress for help

June 13, 2008. Congress' decision not to put a price on carbon emissions this year probably won't slow the growth of wind and solar power, but failure to extend tax breaks for these renewable energy sources could. Legislation to cap carbon emissions and create a system for trading carbon credits failed to clear procedural hurdles in the Senate June 6. Supporters contend the bill is necessary to reduce global warming, and pledge to try again next year, when a new President and a new Congress take office. The legislation would encourage electric utilities to switch from coal, which is now the most common fuel for power generation, to lower-carbon fuels such as natural gas or zero-carbon sources such as nuclear power, wind power or solar power. Many experts predict the bill would dramatically increase the cost of natural gas, currently the second-largest source of electricity, because of limited supply.

PG&E faces renewable power dip

June 13, 2008. Pacific Gas & Electric Co. has under contract all of the renewable power it needs to meet state mandates by 2010, if the promised power systems can be built in time. Expiring tax credits, the lag in building utility-scale renewable energy and increased competition for renewable power sources are potential roadblocks for the Northern California utility and the state's two other major utilities. California has the strictest renewable mandates in the country. The state requires an investor-owned utility's energy portfolio to consist of 20 percent renewable energy by 2010. By comparison, Colorado, Hawaii and New Mexico give utilities an extra 10 years. The Maryland Public Service Commission requires 9.5 percent renewables by 2022. Missouri, Virginia and Vermont have set voluntary targets, and 21 states have no renewable mandates.

Neste awards Technip contract for renewable diesel plant

June 13, 2008. Technip has been awarded by Neste Oil Corp. a cost plus fee services contract for a new generation NExBTL renewable diesel plant to be built in Rotterdam, The Netherlands. The contract covers the engineering and the management of procurement and of construction activities. The plant will have a production capacity of 800,000 tons per year and will be one of the largest facilities producing diesel fuel from renewable feedstocks. The production process will be based on Neste Oil's proprietary NExBTL technology, which can use a wide range of raw materials. This technology was first applied in Neste Oil's Porvoo refinery in Finland, which has been in operation since the summer of 2007. Offering a product with excellent fuel properties, NExBTL can be used in all diesel engines. Technip's operating center in Rome, Italy, will execute the contract, which is scheduled to be completed in 2011. A contract for a similar plant in Singapore was previously awarded to Technip by Neste Oil in January 2008. Technip is a worldwide leader in the field of oil, gas and petrochemical engineering, construction and services. The Group's main operating centers and business units are located in France, Italy, Germany, the UK, Norway, Finland, the Netherlands, the USA, Brazil, Abu-Dhabi, China, India, Malaysia and Australia. In support of its activities, the Group manufactures flexible pipes and umbilicals, and builds offshore platforms in its manufacturing plants and fabrication yards in France, Brazil, the UK, the USA, Finland and Angola, and has a fleet of specialized vessels for pipeline installation and subsea construction.

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