Pakistan’s Energy Security: A brief Analysis (part – II)

Radhika Mohan Gupta

Phd Scholar, Department of South Asian Studies, JNU, Delhi

 

Continued from Volume V, Issue No. 11…

 

Domestic Dimension of Energy Security

n an effort to better its past efforts, the Government, since January 2008, has also been in the process of preparing a National Energy Model for the country. This model, through an integrated approach, would help in framing various strategies to look into the proper planning and development of the different sectors of energy. It would be an all-encompassing model that will cover finance, technology, energy efficiency and socio-political impacts as well. The establishment of this energy model would help the Planning Commission to determine the economic, environment, and energy security consequences of various energy policies. Moreover, its work profile would also entail refining the existing Energy Security Action Plan of 2005 by carrying out detailed energy sector planning studies, and thus come out with better ones⁷. All the while, the goals of sustainable development and energy conservation are being stressed on as well.

In the indigenous development of energy in the country, the private sector has been actively courted in Pakistan since the beginning and the trend continues even today. The government, is thus, actively trying to create an environment conducive to the participation of the private sector and enhancing participation in the energy sector, including manufacturing of plants and equipment by strengthening regulatory frameworks and related institution and development of infrastructure⁸.

Multilateral Dimension of Energy Security

True energy security for Pakistan, however, can be guaranteed only through collaboration between the domestic and the multilateral level. Thus, Pakistan is continuing to actively pursue an extremely important potential source of external energy for itself: gas from Central Asia, namely the IPI, TAPI pipelines and another one from Qatar. The pursuit of policy at the multilateral level ties Pakistan in an interwoven web of the national, regional and the international levels, creating inter-linkages between all of them. Thus, while the pipeline option is being pursued by Pakistan for the promotion of its own national security, it will bring benefit to the entire region, by bettering relations between India and Pakistan, two antagonistic neighbours.

                  In this respect, the multilateral option for energy security can also be viewed within the framework of ‘cooperative security’. The theory of cooperative security refers to a condition wherein “Zero–sum” strategies are replaced by a more peaceful, but rather idealistic approach to security through increased international harmony and cooperation. The concept of cooperative security however dates back to the period before the Cold war and, is, therefore, not a post-Cold war invention, as is often thought⁹. However, the term has acquired frequent usage in the post cold war era. It is a reflection of the fact that having moved well beyond the Cold War, it is necessary to develop new thinking on the concept of security, in relation to the developments taking place post cold war. The theory of Cooperative Security would help in explaining why it is meaningful for all the participating parties to cooperate towards building an environment of common security for themselves.

Cooperation in the energy sector is especially important for developing nations in South Asia because unlike the developed nations which have adequate capital, resources and mechanisms to use sophisticated technology, both for the development of hydrocarbon production and transport as well as an expensive alternative energy resources to deal with supply disruptions, developing nations do not have the required finances or the unifying institutions to deal with energy security issues. Given the geographic continuity in the South Asian region, nations can find a practical solution to energy security in terms of joint and cooperative consultation, especially in the areas of infrastructure and technology development, in ensuring sustainable development and ensuring national and regional security¹⁰.

Pakistan’s concerns in its pursuit of a multilateral strategy for energy security can be viewed from three broad dimensions. One is dominated by the economic -developmental or political-security-strategic considerations. The other is the extent to which they are specific to countries and sub-regions in its neighbourhood. The third is the extent to which its relations with its neighbours can potentially influence its relations with some of its major supporter/detractor countries outside its neighbourhood. Encompassing all of these is the internal concern for how its relationships with other countries affect the capacity of that country, and its internal political stability¹¹. All these affect its foreign energy policy.

In 2007, the Minister of Petroleum and Natural Resources of Pakistan, Amanullah Khan Jadoon, spoke of Pakistan’s involvement in the South Asian region on the matter of energy security, thus: “There is big challenge ahead of us. We are keen to exploit all opportunities of regional and international cooperation to meet our increasing energy deficit. Cooperation within the SAARC region figures at the top of our regional energy cooperation.”¹²

This nexus between the national, regional and international levels occurs in the case of Pakistan due to its unique geographical location at the confluence of East, Central and South Asia, its proximity to oil and gas hubs of the world, the Middle East and Central Asia, respectively, it historical relations to the US, EU and China and because of its economic potential in the future. Due to these reasons, Pakistan will continue to remain an important country in the future as well¹³.

At the moment, there is no concrete policy on the ground in the form of energy cooperation agreement among South Asian Nations in which Pakistan could be involved. Yet, due to the growing need for energy by all South Asian nations and due to the enormous benefits that can be enjoyed through cooperation, especially in the energy sector, the wheels are turning towards this goal, albeit at a very slow pace.

Notes:

  7 Kakakhe, Ijaz (2008), “National Energy Model in pipeline to manage future energy demand”, Daily Times, 22 February, 2008 Accessed on 28 February 2008, [Online: Web], URL: Daily%20Times%20-%20Leading%20News%20Resource%20of%20Pakistan%20%20National%20Energy%20Model%20in%20pipeline%20to%20manage%20future%20energy%20demand.webarchive

 8 ‘Energy Security’ (2005), [Online: Web] Accessed on Feb. 21. 2007 URL: http//: www.Pakistan.gov.pk.

  9 Richard Cohen, “Cooperative Security: From Individual Security to International Stability” http://www.marshallcenter.org/site-graphic/lang-en/page-coll-mcp-1/static/xdocs/coll/static/mcpapers/mc-paper_3-en.pdf

 10 Dadwal, Shebonti Ray (2002), Rethinking Energy Security in India, New Delhi: Knowledge World.

 11 Waqif, Arif A. (), “Dimensions of Pakistan’s Regional Concerns”, Ramakant, et al. (ed.), Contemporary Pakistan, Trends and Issues, Vol. I Delhi:Kalinga.

  12 “Pakistan advocates Energy Cooperation in S Asia: Minster”, Daily Times, March 08, 2007.

  13 Mukhtar H. Sahir and Arshad H. Qureshi (2007), “Specific Concerns of Pakistan in the context of Energy Security Issues and Geopolitics of the Region”, Energy Policy, 35(4): 2031-2037 AND Sharan, Parmatama (1968), Political System of Pakistan, Meerut: Meenakshi Prakashan

 

Concluded

Fundamentals of Crude Oil Prices & the Role of Commodity Futures Markets (part – III)

 

Continued from Volume V, Issue No. 11…

 

Concentrated Spare Capacity

orld surplus production capacity remains low (the estimated1.35 million barrels per day in June 2008 is equivalent to less than 2 percent of consumption, an amount well below the 1996-2003 annual average of 3.9 million barrels per day). This puts upward pressure on prices and leaves world oil markets vulnerable to supply disruptions. (Figure 7) In addition, this surplus capacity is highly concentrated in a few countries, with Saudi Arabia holding almost all of this capacity. Without significant surplus capacity, market participants can no longer rely on increased production from key members of OPEC to off set supply disruptions and restore balance without the need for significant price changes(as was the case in the 1990s).The combination of these factors means that prices react strongly to actual or perceived supply disruptions.

Figure 7 Lower Surplus World Oil Production Capacity

Source: Energy Information Administration, Short- term Energy Outlook June 2008

Low Inventories

OECD stocks were at record lows in 2003, following a major strike by oil workers in Venezuela. (Figure 8) Preliminary OECD inventory data for the first part of 2008 shows that OECD stocks have again fallen below levels seen in 1996-2002. Because oil use has been growing over time, inventories are even tighter when considered on a “days of supply” basis (defined as dividing inventories by the level of consumption). In addition, U.S. inventories for crude oil and key petroleum products are relatively low. After remaining relatively high for much of 2006 and the first half of 2007, U.S. crude oil inventories have fallen toward the bottom end of the average range. Crude oil and petroleum product stocks in other OECD regions exhibit the same declining trend.

 

Figure 8 OECD Commercial Stocks

Source: Energy Information Administration, Short- term Energy Outlook June 2008 and latest IEA data

Geopolitical Uncertainty

There is currently a high degree of uncertainty in world oil markets due to fears about the adequacy of oil supplies in the future. Current world oil supplies are highly concentrated, and much of those supplies are held by nations that limit access to private investment, thereby preventing full development of production through enhanced expertise and technology. In 2007, the top 10 oil producers represented about half of total world production. In addition, geopolitical risk surrounds many of these top producers, either because of current supply disruptions (Iraq, Nigeria) or the perceived threat of a disruption (Iran, Venezuela). Finally, as noted previously, there is little surplus production capacity available to offset any disruption.

Supply disruptions are a frequent occurrence in the oil industry. During the past 24 months, there have been almost two dozen supply disruptions, lasting from a few days to many weeks, which affected world oil production and exports. These disruptions were caused by power failures, worker strikes, pipeline leaks and explosions, cyclones and hurricanes, saboteurs, and civil wars. More than half of these disruptions resulted in oil production outages exceeding 100,000 barrels per day. The most significant of these to oil markets resulted from the ongoing strife in Iraq and Nigeria. These disruptions have varied in size over time, with Iraq losing more than 500,000 barrels per day of exports in March 2008 and Nigeria reaching more than 1.4 million barrels per day of shut-in production at one point in April 2008.

Actual supply disruptions directly affect world oil markets due to a loss of physical barrels available to the market. Concern over the impact of potential supply disruptions is reinforced by the limited amount of spare production capacity available. As long as potential disruptions, either realized (as in Iraq and Nigeria) or perceived (as in concerns about the potential loss of supply from Iran), exceed the amount of additional production capacity that can be brought online quickly, geopolitical concerns will weigh heavily on oil markets.

Price-Inelastic Supply and Demand

The current short-run demand for oil is relatively price inelastic, meaning the quantity demanded does not change much relative to price changes (it takes a very large price increase to reduce the quantity demanded significantly). In the short run, the supply of oil is inelastic as well: the quantity supplied is not responsive to changes in market price, due to low spare capacity, the inability to bring new supplies online quickly, and relatively low inventories to draw down. If both supply and demand are not very responsive to prices, it takes large price increases to return markets to equilibrium if they get out of balance temporarily.  

As noted previously, world oil production has remained relatively flat in recent years as global economic growth has kept demand strong. Consequently, oil prices have risen to keep world oil consumption in line with production (the two must be equal aside from changes in inventories). As oil demand is very insensitive to moves in oil prices in the near term, the rise in oil prices has been disproportionately large in order to offset the robust, income-driven rise in demand.

An implication of these structural features of the oil market is that large and rapid movements in oil prices are not, by themselves, evidence that prices are behaving in a manner that is inconsistent with the fundamentals of demand and supply.  Indeed, in such tight market conditions, relatively small changes in demand and supply should be expected to lead to large price swings. That said, there is a certain degree of uncertainty regarding the true state of market fundamentals at any point in time.

Macroeconomic Variables

Exchange Rates

The relationship between exchange rates and oil prices is complex, and the causality can run both from exchange rates to oil prices and from oil prices to exchange rates. Typically, a depreciation of the dollar would be expected to lead to a rise in the dollar price of oil. As oil is priced in dollars, a lower exchange value of the dollar reduces the foreign-currency price and thus boosts demand. To clear the market, the dollar price of oil must then rise, assuming (reasonably) that supply is not perfectly elastic.

Empirical studies do not reveal a clear, precisely estimated relationship between oil prices and the exchange value of the dollar. The available evidence suggests that oil prices respond approximately proportionately to changes in the dollar when all other economic factors are held constant.  In other words, a 10 percent depreciation of the nominal, trade-weighted, multilateral exchange value of the dollar is associated with a 10 percent rise in the dollar price of oil when other factors are held constant. That finding suggests that the depreciation of the dollar since 2002 has contributed to the rise of the dollar price of oil, but can explain only a portion of the overall run-up. This point is also evident in Figure 9, which graphs the spot price of West Texas Intermediate crude oil in several currencies.  Clearly, oil prices have risen sharply regardless of the currency of denomination. Moreover, from mid-March through June 2008, the dollar was stable, whereas oil prices increased appreciably.

Figure 9 Oil Prices and Exchange Rates

Source: Federal Reserve Board. The measure of the dollar is the broad nominal index, and the oil price is spot West Texas Intermediate crude oil.

An additional linkage between exchange rates and oil prices may arise through the production decisions of key oil exporters. Oil exporters suffer a decline in the purchasing power of their revenues when the dollar depreciates. To defend their international purchasing power, these producers could, in principle, seek an offsetting increase in the dollar price of oil by curtailing supply.

Shocks specific to the oil market can also feedback into exchange rates. As the United States is both a major producer and consumer of oil, increases in oil prices tend to lead to depreciations against the currencies of major oil exporters and appreciations against the currencies of major oil importers. Empirically, these bilateral exchange rate movements often tend to cancel out, resulting in little net change in the multilateral value of the dollar.  During the past few years, however, the nominal value of U.S. oil imports has soared, resulting in a significantly wider trade deficit than would have otherwise occurred. This widening may have exacerbated concerns about the sustainability of the current account deficit, thereby putting downward pressure on the dollar.

Interest Rates

The relation between interest rates and oil prices can vary, as it depends on the interactions of many economic variables. A decline in interest rates by itself might be expected to raise oil prices to some extent, suggesting a negative correlation between these two variables. But if the decline in interest rates is in reaction to a downturn in economic activity, oil prices may very well fall in response to that weaker demand, resulting in a positive correlation.

One mechanism by which declines in interest rates could push up oil prices is through a reduction in the costs associated with storing oil and other commodities. An implication of this hypothesis is that inventories of oil should tend to rise when interest rates decline.  Such increases, however, are not evident in the available data.

Another channel through which lower U.S. interest rates could drive up oil prices is by leading to excessively expansionary policies and faster increases in oil demand in countries that peg their currencies to or manage their currencies against the dollar. In the current setting, the stance of monetary policy in the United States, which has come in response to concerns about the domestic economic outlook, may not be appropriate for many fast-growing, commodity-intensive economies. In practice, however, much uncertainty surrounds the extent to which foreign central banks have matched U.S. monetary policy moves, the effect of this on foreign economic growth, and its ultimate influence on commodity prices.

 

to be continued…

 

 

 

NEWS BRIEF

OIL & GAS

ONGC eyes stake in Angola oil block

September 9, 2008. ONGC Videsh (OVL), the wholly-owned subsidiary of Oil & Natural Gas Corp. (ONGC), has reportedly put in a bid to acquire a stake in a discovered oil block in Angola. A consortium of two Chinese companies has already bid USD 1.5bn for the same block last month. The value of the bid cannot be ascertained, but it has to be higher than the USD 1.5bn joint bid by China’s Sinopec and Chinese National Offshore Oil Corporation (CNOOC).  OVL has reportedly bid for a 20% stake in the Angolan Block 32, which is owned by a consortium of firms led by French oil giant Total. US-based Marathon Oil is selling 20% in the block. After the sale, it will still own 10%.  The Angolan block is believed to have 1.5 billion barrels of oil reserves, the production of which is slated to start in 2012. Angola is the largest supplier of oil to China, which is the world's second largest crude oil importer.  Meanwhile, OVL has formally sought regulatory approvals from the Russian government for acquiring UK-based Imperial Energy, which has its oil assets in Russia and Kazakhstan.  OVL has emerged as the preferred buyer for Imperial Energy for US$2.9bn.

GSPC hopes to get nod for commerciality of KG-8 discovery soon

September 6, 2008. Gujarat State Petroleum Corporation is expecting the approval of the Directorate-General of Hydrocarbons (DGH) on the commerciality of the KG-8 discovery in KG basin offshore block (KG-OSN-2001/3) in the next couple of weeks.  The approval would help GSPC to leapfrog towards the development of the field and submit the draft red herring for the planned Rs 4,000-6,000-crore ($0.8 – 1.3 bn) IPO.  

The DGH has sought certain clarifications in regard to the application for declaration of commerciality of the KG-8 discovery which havce since been answered by GSPC.  KG-8 is one of the major discoveries by GSPC in the block. The group has recently struck another rich find at KG-22 well. DGH had initially estimated the reserve size at 1.6 trillion cubic feet (tcf). However, based on the results on the appraisal drilling, GSPC now approached the DGH for revision of reserve estimates of the find — covering only 15 sq km out of the total area of 95 sq km — up to 5.6 tcf. The company is carrying out exploratory drilling 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 production of 5-6 million standard cubic metre of gas a day (mmscmd) from Deendayal West. Anticipating DGH’s approval, the company has already carried out the sensitivity study and the front end engineering design (FEED) study on field development. The company estimates a total capital requirement of Rs 1,200-1,500 crore ($268.6 – 335.8 mn) in its E&P operations during this fiscal.

Fire at ONGC rig: operations suspended

September 6, 2008. ONGC’s contractual rig ‘Pride Pennsylvania’, while carrying out drilling operations at Mumbai High South field, encountered a mechanical malfunctioning, causing fire this afternoon. Five crew members were injured.  In a statement issued here, ONGC said that the rig, carrying out drilling operations at well No. 15 in the Western offshore field, caught fire at 1:50 p.m.  Drilling operations were suspended and the well has been closed.  According to company officials, this is not expected to have any impact on the production from Mumbai High fields as it was just a well under drilling and was not producing, a company official said.  The rig is owned and operated by US-based offshore drilling firm Pride International.

OVL eyes Canada’s Tanganyika Oil

September 5, 2008. ONGC Videsh (OVL) is reportedly in talks to acquire Canada’s Tanganyika Oil Co. for US$1.2-1.5 bn (Rs53.4-6.68bn). The wholly owned subsidiary of ONGC plans to buy 38.8% stake owned by Tanganyika's main shareholders, including the Lundin family and Iceland's Straumur Burdaras, the paper says. Tanganyika is listed on the Stockholm exchange and has production and exploration assets in Egypt and Syria. OVL has asked audit and consulting firm Ernst and Young’s (E&Y) Indian arm to advise it on the acquisition, the business daily says, adding that the discussions are at an advanced stage. It may be recalled that OVL has recently submitted a US$2.6bn bid to acquire Russia-focused Imperial Energy Plc and is awaiting Moscow's approval.

OIL plans to invest $3 bn for various expansion plans

September 4, 2008. Rs47.54bn ($1 bn) would be set aside for exploration and appraisal, developing oil fields, purchase of capital equipment, among others Oil India Ltd. (OIL) is reportedly planning to invest around Rs130bn ($2.9 bn) over the next five years on its various expansion plans. According to a leading business daily, Rs47.54bn ($1 bn)) would be set aside for exploration and appraisal, developing oil fields, purchase of capital equipment, among others.

The public sector oil & gas producer is aiming to hit the capital markets in the first half of November to raise around Rs16bn ($358.4 mn). OIL, which had planned an IPO in February, says that the issue got delayed partly because it could not appoint independent directors on its Board.

Punj Lloyd to tie up with Italian firm for Singapore LNG project

September 8, 2008. Punj Lloyd, one of India's leading engineering companies, and Saipem SpA, Europe's biggest oil-field services contractor by market value, will jointly bid for a project to construct Singapore's first natural gas import terminal. According to reports, the two companies are competing against KBR Inc. and Technip SA to construct the liquefied natural gas (LNG) terminal. The project is estimated to cost US$725mn and is scheduled to be commissioned by 2011. The proposed LNG terminal will have a capacity of three million tons per year.

HPCL to produce Euro-IV petrol

September 8, 2008. State-run Hindustan Petroleum Corp (HPCL) will start producing superior quality Euro-IV petrol from both its Mumbai and Vizag refineries by the year end, thereby reducing its naphtha output by almost two-third.  Investment of between Rs 1,800 to 2,000 crore ($403.5 – 448.4 mn) in each of the refineries for petrol upgradation projects is expected. The company's two refineries will produce diesel complaint with Euro-IV norms by 2010.   While petrol and diesel meeting the stringent Euro-IV specifications is to be supplied in seven metro cities of Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad and Ahmedabad from April 1, 2010, Euro-III grade fuel is to be supplied in rest of the country from that date.  

Currently, Euro-III petrol and diesel is supplied in the seven metro cities and Euro-II grade fuel in rest of the country.   The upgrade to Euro-IV would mean that naphtha output from the two refineries would be reduced. Currently, Mumbai refinery produced 60,000 tons of naphtha per month while Vizag makes 80,000 tons a month. This is expected to fall to about 20,000 tons each.  Fall in naphtha production would mean that the company cuts down on its naphtha exports to one shipment in three months.  

MRPL sells jet fuel, first time since Jan '07

September 8, 2008. State-run refiner MRPL has agreed its first sale of jet fuel since January last year, and a company source said exports would continue as they offered better margins than diesel.  Based on market economics, MRPL is expected to continue to export ATF.  MRPL had awarded a 36,000-tonne jet fuel cargo to ENOC Singapore Pte Ltd, to be loaded in the third week of September at a premium of around $4.50 a tonne to Arab Gulf quotes. MRPL last sold a jet fuel cargo, of a similar size, to trading house Glencore in January 2007. It fetched a premium of $21.3 to $21.5 a tonne to Singapore quotes. Asia's gas oil contango widened on Monday, as the market was mired in heavy supplies and a lack of imports into China. By contrast, jet fuel stocks in the Amsterdam-Rotterdam-Antwerp hub were lower, helping boost the jet-kerosene's cash differential. There was a possibility MRPL may float monthly jet fuel cargoes or finalise a term contract. MRPL is also said to be talking to ENOC for a term deal. MRPL runs a 194,000 barrels per day (bpd) coastal refinery in the southern Indian state of Karnataka. 

CPCL to invest $1.7 bn for expansion

September 8, 2008. Chennai Petroleum Corporation Ltd, a group company of Indian Oil Corporation announced that they proposed to invest about Rs 7,800 crore ($1.7 bn) over the next four years for expansion at its Manali refinery near here.  Funding for the projects would be through internal accruals and borrowings from outside.  Some of the projects that include the Resid Upgradation project and Auto Fuel Quality Upgradation projects to meet Euro IV standards, revamp of Naphtha hydro treating and catalytic reforming unit at Manali and to produce high quality MS, Capacity expansion of Refinery III at Manali from 3.0MMTPA to MMTPA.  The Company also declared a final dividend of 120 per cent for the year 2007-08.  CPCL has been maintaining an uninterrupted divided paying record for the 37th consecutive year.  Fuel demand has grown by 35 per cent and CPCL had increased production from five per cent to eight per cent.

Patels Airtemp bags order from Essar Oil

September 8, 2008. Patels Airtemp India Ltd has received an order of worth Rs161mn for Shell and Tube Heat Exchangers for Essar Oil Refinery Project, Gujarat.

Oil marketing Co. top gainers during the week

 September 5, 2008. The oil marketing companies were in demand throughout the week as crude oil fell after Hurricane Gustav caused less than expected damage to the oil facilities in the Gulf of Mexico. Oil declined more than 6% this week as the euro dropped to the weakest level this year against the dollar amid growing signs of a slowdown in Europe.  The top gainers in oil & gas sector were BPCL (up 25.2%), HPCL (up 21.6%), IOC (up 13.4%), Great Offshore (up 12.1%) and ONGC (up 7.3%).  On the other hand, prominent losers were Cairn India (down 8.1%), GSPL (down 2.1%), Essar Oil (down 1.8%) and Shiv-Vani Oil (down 0.4%).

BPCL to shut Kochi refinery units in Nov

September 4, 2008. Bharat Petroleum Corp Ltd. (BPCL) will be shutting down some units at its Kochi refinery for planned maintenance in November, with a 90,000-bpd crude distillation unit (CDU) closing for about a month. The company will reportedly shut down a 4.5mn tons per year CDU and a 1.75mn tons a year FCCU for about 25 to 30 days from November 15.   BPCL recently bought 1mn barrels of Nigerian crude Forcados for October lifting for the 150,000-bpd Kochi plant. It is expected that there will be no impact on supplies because of the shutdown.

Gail to step up petrochem capacity

September 3, 2008. State-run Gail India is planning to increase its petroleum production capacity by two-and-a-half times to 10 lakh metric tonne with an investment of Rs 500 crore ($112.4 mn) in five years. This expansion plan will be discussed at the forthcoming board meeting of the company this month. As part of this expansion plan, the company has decided to set up petrochemical units in Dibrugarh and Vizag with its JV partners. Some other plants may also be set up to reach the target.

Currently, Gail has a gas-based petrochemical plant at Pata, Uttar Pradesh, with a capacity of 3 lakh tonne per annum (TPA) of ethylene and 3,10,000 TPA of polymers.  Gail plans to expand the Pata plant capacity to 5 lakh TPA by installing a sixth furnace at the gas cracker unit with an estimated investment of around Rs 100 crore ($22.4 mn).  After the completion of its 1 lakh TPA new high-density polyethylene plant late last year, the polymer production capacity of the Pata plant stands at 4.1 lakh tonne. The cracker plant’s ethylene output is likely to go up to 4.4 lakh tonne in another six months utilising 10% more than the designed capacity due to the installation of the fifth furnace.  

Gail also plans to increase its share in the lucrative petrochemical business, which contributed nearly 32% to its bottomline last year. During 2007-2008, Gail’s polymer production rose 9% to 3.86 lakh tonne as against 3.54 lakh tonne in a year-ago period. The sale of polymers increased 13% to 3.91 lakh tonne from 3.47 lakh tonne.  Gail is also going ahead with its JV plans with Reliance Industries (RIL) and HPCL to set up two greenfield petrochemical plants. In India, the company is planning a 1-million tonne petrochemical unit at Vizag through a five-way joint venture.

The other joint venture partners in the project are Hindustan Petroleum, Oil India, Mittal Energy and French oil major Total. Similarly, the company is evaluating plans to set up petrochemical plants in Qatar and Kazakhstan with a proposed joint venture with RIL.  The company along with Reliance Industries is looking for a mega petrochemical plant in Qatar, at an estimated investment of around $1.2 billion, the official added.  

GSPC-Adani receives 13 EoIs for LNG supplies

September 8, 2008. GSPC-Adani combine seems to be making steady progress towards commissioning the proposed LNG terminal at Mundra. The company has received expression of interest (EoIs) from 13 parties from across the world for helping GSPC to tie-up LNG supplies.  The venture has invited EoIs from interested parties to tie up short, medium and long-term LNG supplies at the proposed 5-7.5 million-tonne LNG terminal, slated to be commissioned in 2012. The tender is said to have received adequate response with a total of 13 parties expressed interest in the project.   GSPC holds a controlling 50 per cent stake in the joint venture. The Adani group has a participatory 25 per cent stake. EoI apart, the company is also engaged in bilateral discussions with several global LNG suppliers.  

Detailed feasibility report (DFR) of the project is in its final stage of preparation and is expected to be submitted to the company in a couple of days. Land for the project has already been identified at the Mundra Port and SEZ and is expected to be transferred to the joint venture shortly.  Once the DFR and the front end engineering design report is approved by the GSPC board, the company may go ahead with placing orders for the necessary plant and machinery.  

Meanwhile, GSPC-Adani may delay the financial closure of the project till inclusion of a third partner.  While GSPC-Adani is determined to make fast progress towards project commissioning, the cash call for the project may be limited in next couple of months. To take advantage of the situation, the group may keep on implementing the project and wait for selling the residual 25 per cent stake in the project to a third partner at a premium.  

It may be mentioned that GSPC initially invited Essar to be the third partner in the project. Essar, however, is yet to show any interest. An informal expression of interest from HPCL for 50 per cent stake was turned down by GSPC.

GAIL shareholders approve bonus issue

September 4, 2008. The shareholders of GAIL (India) Ltd. have approved the issuance of 1 bonus share for every 2 equity shares held in the 24th Annual General Meeting (AGM) of the company held in New Delhi. The paid-up capital of the company is Rs8.46bn and the Reserves & Surplus as on March 31, 2008 were approximately Rs1.22bn.

The Board of the company had earlier, in June, had recommended the issuance of bonus shares. The shareholders also approved the payment of 100% dividend for the year 2007-08.

GAIL said that the Authorized Share Capital of the company is proposed to be increased from Rs10bn to Rs20bn. GAIL has completed the expansion of Pata plant by commissioning a new HDPE plant with additional capacity of 100,000 TPA. It is proposed to further augment the capacity to 5,00,000 TPA gradually going up to 800,000 TPA.

Industry chamber seeks diesel subsidy

September 7, 2008. The Tamilnadu Chamber of Commerce and Industry has urged the Chief Minister to implement the assurance given by the Electricity Minister to provide 60 per cent of the extra cost incurred by industries as diesel subsidy for captive power generation.  Mr S. Rethinavelu, President of the Chamber, said that industrial units throughout the State have been facing insurmountable problems due to frequent power sheddings daily. Many are on the verge of closure and that would result in greater unemployment.  

The Madurai District Tiny and Small Scale Industries Association (Maditssia) has demanded uniform power cut across the State and has strongly objected to the partisan treatment favouring Chennai city. 

In a telegram sent to the Chief Minister of Tamilnadu, the Minister for Electricity, the Minister for Small Scale Industries and the Chairman of Tamilnadu Electricty Regulatrory Commission, the association pointed out that while the Tamilnadu Electricity Board has announced 5 hours power cut in the district, the power cut to Chennai city is restricted to just one and half hours, violating the basic principle of equal rights.

Oil Cos keen on Colombian hydrocarbon sector

September 5, 2008. Domestic companies in the hydrocarbon sector have expressed interest in pursuing various business ventures in Colombia. While public sector undertakings ONGC and Oil India Ltd envisaged interest in acquiring oil and gas fields in that country, gas transmission and marketing major GAIL (India) Ltd showed keenness in petrochemical and CNG projects in Colombia. The companies expressed this during a bilateral meeting and subsequent Memorandum of Understanding signing for cooperation in hydrocarbon sector between the two countries. 

The MoU provides an umbrella framework to facilitate and enhance bilateral cooperation in this sector. The two sides have agreed to cooperate in the entire spectrum of hydrocarbon sector, particularly in the areas of exploration and production of oil and gas, exchange of training and human resource development, and exchange of visits of professionals and technicians.

A Joint Working Group would be set up in the hydrocarbon sector for enhancing cooperation between the countries. While ONGC sought more oil blocks and expressed a desire to participate in the latest licensing round of Colombia, OIL also expressed interest for acquiring exploration blocks on nomination basis.

GAIL was interested in building a petrochemical plant, setting up gas pipeline network and city gas distribution projects in that country. ONGC Videsh Ltd, the overseas investment arm of ONGC, and private sector major Reliance Industries Ltd (RIL) already have assets in Colombia.  

OVL has a producing asset in Colombia as a joint venture with Chinese company Sinopec. This asset has current crude oil production of 25,000 barrels per day. Besides, OVL also has three offshore exploration blocks in Colombia. It is the operator in two of these blocks.

SIAM to educate consumers on saving fuel

September 4, 2008. Come January, vehicle users will know exactly how much their vehicle will run for a litre of fuel. They will also get tips on saving fuel. After propagating safety, the Society of Indian Automobile Manufacturers (SIAM), the apex body of automobile manufacturers, is focussing on educating users in better use of the vehicles.

SIAM plans to launch Fuel Consumption Consumer Information and the Fuel Economy Information Brochure. The fuel consumption information brochure will have details of the vehicle’s manufacturer, type of vehicle, engine capacity and mileage as tested by the company.

Though the sector contributes only 10 per cent of the carbon dioxide emissions, it is taking initiatives to preserve the environment. All SIAM members will display the fuel consumption consumer information at the point of sale of cars and two-wheelers. In addition the information would be supplied to all customers along with the documentation of the vehicle.

Diesel may cost more for car owners

September 3, 2008. The PM has asked oil minister Murli Deora to begin work on a system, which if finally implemented, could see owners of such vehicles as well as industrial users pay a higher price than transporters or farmers.   Options discussed included levying a prohibitive duty of up to half the value of foreign-made non-commercial diesel vehicles to curb their imports.  

Imported private vehicles attract a tax of roughly 114%, including customs. The new levy will be in addition to the existing levies and is being considered as a ban on vehicle imports was felt to be against India’s WTO norms. The spurt in international crude oil prices over the last one year or so has seen this loss rise as the gap between diesel and petrol has widened to over Rs 10 a litre.

The companies now lose Rs 13.69 on each litre of diesel against Rs 6.31 on petrol. The gap has driven sale of diesel vehicles, which recorded a growth of around 33% in recent times. This has fuelled consumption.

Demand has been fuelled by industrial users like small factories, hotels and malls which have started using diesel to run furnaces and generators as government’s pricing policy has rendered diesel cheaper than other industrial fuels such as naphtha and furnace oil.

The net result has been that diesel demand has grown by 18% despite industrial slowdown against 6-8 % earlier.  The issue of supplying subsidised diesel to bulk users like railways and state transport utilities was also discussed.

Illiquid Oil Cos seek bonds, higher credit

September 3, 2008. Reeling under acute liquidity crunch, public sector oil companies IOC, BPCL and HPCL may not be able to carry their operations beyond this month, unless the government takes necessary steps. Pressing a panic button, the oil ministry said that even after excluding Rs 20,000 crore ($4.4 bn) capital investment by IOC in Paradip refinery project, the company’s borrowing limit would be constrained for carrying out its operations beyond September.  It said the un-exhausted credit limits and oil bonds to HPCL and BPCL would not last beyond September, making it difficult for them to continue their operations.

In other words, oil PSUs would not be able to import crude oil and petroleum products, essential to maintain normal supply of fuels in the country. Oil ministry has proposed a bail-out package that includes additional credit limit to companies, revival of the special market operations (SMOs) by the Reserve Bank and advance payment of bonds. Some breather is already given to OMCs. IOC’s request to exclude Rs 20,000 crore ($4.4 bn) committed for lending to the Paradip refinery is excluded while reckoning the permissible single borrowers limit by the consortium of banks funding the project. 

It would be appropriate to provide for the estimated oil bonds to be issued to OMCs for the second and the third quarter in the first supplementary Budget itself, based on actual under-recoveries during the first quarter of 2008-09 so that the release of oil bonds do not have to await further Parliamentary approval as per some officials.

OMCs are expected to get oil bonds worth Rs 24,432.50 crore ($5.4 bn) for the under-recoveries [Rs 48,865 crore ($10.9 bn)] incurred in the first quarter of 2008-09. The government is yet to issue about Rs 14,000 crore ($3.1 bn) oil bonds to OMCs for the last quarter of 2007-08.Bonds for the first quarter of 2008-09 and for the last quarter of 2007-08 will be issued to companies after the Parliament approves the supplementary budget in October. 

Cooling crude raises demand for domestic price cuts

September 3, 2008. The drop in world crude oil prices to a five-month low of $105 (Rs4,652) per barrel will lessen the subsidy burden on state-run oil firms, but political pressure could mount on the government to reduce domestic prices, against the backdrop of inflation at a 16-year high and expectations of a further drop in crude. 

The government raised domestic fuel prices by about 10% on 4 June, when the international crude oil price was $123 per barrel.  Crude oil fell below $106 a barrel as energy companies prepared to resume production at platforms in the Gulf of Mexico closed by hurricane Gustav. Oil is down more than $40 from its July record.  The absence of serious structural damage from Gustav when the market was braced for the worst has caused prices to turn decisively downwards said analysts.  As technical selling takes hold, analysts think that it is likely that price will breach $100. Although petroleum minister Murli Deora ruled out a price cut, some sections of the Congress party are preparing to lobby party president Sonia Gandhi to get political mileage. 

Opposition parties were quick to seize the initiative, with the Left parties, which parted ways with the ruling United Progressive Alliance, or UPA, in July over the government’s decision to push ahead with the Indo-US nuclear deal, leading the charge.

The Bharatiya Janata Party, or BJP, the largest opposition party, is proposing to include the demand in the agenda of a three-day national executive meeting scheduled to begin from 12 September. Crude oil price had risen 250% since the UPA came to power in 2004 while the government had increased prices by only 50%. 

POWER

Officials’ team visits hydel project area in Idukki

September 9, 2008. A team of officials led by Idukki District Collector visited the Thottiyar mini hydroelectric project area in connection with the acquisition of land for the project.  The Collector also received complaints of the people related to the land acquisition for the project which will be completed within 44 months.  

The Kerala State Electricity Board had entered into an agreement with a Hyderabad company, for which technical assistance will be provided by a Chinese company.  The 10-12m high dam will be constructed at Thottiyar near Valara on Kochi-Madura National Highway. A pen stock pipe will carry water from Thottiyar through Kuthirakuthy hills.  The electricity will be produced at a power house to be constructed near the Lower Periyar power house with a capacity of 40 MW, officials said.

BHEL bags $490 mn power plant order

September 9, 2008. State-run power equipment maker Bharat Heavy Electricals Ltd said that it had received an order worth 22 billion rupees ($490 million). The contract is for setting up a power plant with a combined output of 726.6 MW in Tripura in north-eastern India for ONGC Tripura Power Co, a venture of Oil and Natural Gas Corp, it said in a statement.  The first part of the contract will be completed in 42 months, with the second part scheduled to be completed in 45 months, it said.

Videocon, Jindal, 38 others vie for N-plants

September 8, 2008. Within days of Nuclear Suppliers Group giving a go-ahead to nuclear trade with India, industry body Assocham said about 40 companies, including Videocon and Sajjan Jindal Group, are in talks with companies abroad to set up power plants, envisaging an investment of about Rs 2 lakh crore ($44.8 bn). They have already asked the Prime Minister Manmohan Singh to amend the legislations regarding nuclear power to facilitate the entry of private sector in generation of nuclear power.  

Welcoming the clearance given by NSG to India at Vienna, Asochem said that 40 companies are in the fray to set up nuclear power plants, which is likely to add 40,000 MW of power in the next 15 years.   It is expected that power produced from the nuclear plant will be cheap and will reduce the overall tariffs.

Karnataka inks MoU with Chhattisgarh on 1200 mw plant

September 8, 2008. The Karnataka government signed a Memorandum of Understanding with Chhattisgarh to set up a 1,200 MW thermal power project in this state as it seeks to augment generating capacity at lower costs. The pit-head station - two 600 MW units - is proposed to be established in Godhna in Janjgir district and is expected to be completed by October 2012, energy Department officials of Karnataka said.

The pact was inked by senior officials of the Chhattisgarh State Electricity Department and state-owned Karnataka Power Corporation Limited (KPCL), which will put up the plant, requiring an investment of Rs 6,000 crore ($1.3 bn). Power generated at this pit-head plant, the first by KPCL outside the state, is expected to cost Rs.2.44 per unit compared to Rs.3.90 for a similar venture located in Karnataka.

WBPDCL to invite bid for 1,320 MW Sagardighi TPP

September 7, 2008. The West Bengal Power Development Corporation (WBPDCL) will seek international competitive bid for the 1,320 MW super critical power project (2X600 MW) in Sagardighi in West Bengal by mid-September.  The tender will be released between 12-14 September.  The largest state-owned power generating utility has gone ahead with the expansion of the second phase of the Sagardighi power plant after the utility faced a problem in land acquisition at the Katwa greenfield power plant.  

WBPDCL was to acquire 1,000 acres for the 2x600 MW thermal power plant at Katwa in Burdwan district. It changed priorities after facing land acquisition problem for Katwa project and is now concentrating on Sagardighi.  The cost of each MW for the project would be higher at Rs 5 crore ($1.1 mn) as it would be built from super critical boilers.  

WBPDCL has undertaken an unprecedented capacity addition programme, aggregating 5,420 MW by the year 2012. WBPDCL, having a capacity of 2,900 MW with 18 units running at Kolaghat, Bakreswar, Bandel and Santaldih, caters to around 60 per cent of the power demand of West Bengal. 

R-Infra invites bid for 50 MW power

September 6, 2008. Reliance Infrastructure (R-Infra), formerly REL, which distributes power in Mumbai suburbs, has invited bids from power generation companies for supplying 50 MW as part of its strategy to reduce dependence on short-term or spot buys to meet the demand-supply gap. Purchase of power through long-term contracts will also bring substantial savings to the company and its consumers.  R-Infra has a dedicated coal-based generation capacity of 500 MW at Dahanu near Mumbai.

Currently, the power utility is facing a shortfall of around 350-400 MW, which is fulfiled through spot purchases or short-term contracts. However, these short-term and spot buys are costly, ranging Rs 7.50-13 per unit. Earlier, the Brihanmumbai Electricity Supply and Transport (BEST), which is a power utility in the island city, and Tata Power Co (TPC) had signed a power purchase agreement (PPA) for 800 MW, leaving only around 533 MW of TPC’s generation capacity for R-Infra. R-Infra used to get around 760 MW from Tata Power. This has put R-Infra in a difficult situation. On the one hand, it has to meet a regular shortage of 150-200 MW, but also to source additional power to ensure Mumbai doesn’t have to face power cuts, increasing its dependence on short-term and spot buys.

N-plants account for only 2.83 pc of capacity

September 6, 2008.  The 17 nuclear power plants now in operation across the country with an aggregate capacity of 4,120 MWe account for just 2.83 per cent of the total installed generation capacity of 145,588 MW at the end of July 2008. The capacity addition programme drawn up for the 11th Plan period too envisages only a marginal role for nuclear power; 3,380 MWe of a total of 78,530 MW, or a little over 4 per cent of the planned addition.  At the end of the 11th Plan period, if the capacity addition programme goes on schedule, nuclear power at 7,280 MWe will contribute just 3.5 per cent of the total installed capacity of 204,756 MW. 

Three nuclear power plants are under construction – the fourth unit at Kaiga of 220 MWe; two units of 1,000 MWe each at Koodankulam and units five and six of 220 MWe each at the Rajasthan Atomic Power Plant.  According to the Central Electricity Authority (CEA), the tariffs for the nuclear power plants range from 93.56 paise a kWh in the case of the two units at Tarapur to 279.50 paise a unit for the two units at Kaiga. 

The Nuclear Power Corporation envisaged an installed capacity of 20,000 MWe by 2020. According to the corporation, India’s uranium resources can support a first stage programme of about 10,000 MWe based on pressurised heavy water reactors using natural uranium as fuel and heavy water as coolant.  However, the contribution of nuclear power to the country’s overall power situation is expected to increase now that fuel supply will be assured.

Jindal Steel starts 4th power generating unit

September 5, 2008. Jindal Steel & Power announced that Jindal Power Ltd. (JPL), a subsidiary of the company, has commissioned its fourth power generating unit of 250 MW.  With this, the subsidiary company has completed the 1000 MW power project and has now the capacity to generate 1000 MW power from this plant. This power plant is located at Raigarh in Chhattisgarh.

Test trials begin on Baglihar hydro project

September 5, 2008. The 450-MW Baglihar hydro electric power project on the Chenab river has commenced its test trials, following the clean chit received from Pakistan.  The project is likely to be commissioned by end of this month. Test trials of its three turbines and first turbine was switched on.  The Baglihar project, which has three turbines of 150 MW each was started in 1999. On July 31 this year, a three-member team from Pakistan led by Central Water Commission (Indus Water Treaty) Commissioner Syed Jamait Ali Shah had visited Baglihar project and had given a clean chit to the project in its report, after complete inspections.  

Earlier in December 2006, the team had recommended to the World Bank that height of the dam should be decreased to 143 meters from the present 145 meters - a recommendation India subsequently accepted and implemented in 2007.  The project was started in 1999 and is almost complete after much delay due to dispute raised by Pakistan and changes undertaken in design. Around Rs 4,125.92 crore ($922.4 mn) has been spent on the project, been constructed by J P Industries.  This is first state-owned power project in Jammu and Kashmir.   

NCDEX to launch futures trading in thermal coal

September 9, 2008. Leading agri-commodity bourse National Commodity and Derivatives Exchange (NCDEX) will launch futures trading in thermal coal. The first set of contracts in thermal coal would be launched on September 10.  The exchange said that it would initially launch October, November and December contracts and subsequent contracts would be launched next year.  

Trading and delivery units are fixed at 100 tons each, it said, adding that the main delivery centre would be Nagpur, Maharastra. Daily price fluctuation limit is set at six per cent.  The seller would be required to give their intention at least five trading days prior to the expiry of the contracts.  If the buyer with outstanding positions at maturity or a seller, who has agreed to deliver, fails to meet the obligation, he would have to pay penalty structured by the regulator, it added.  NCDEX registered a business of Rs 30,057 crore ($6.7 bn) during the first fortnight of August. Mustard seed trading surpassed soyabean with a turnover of Rs 6,919 crore ($1.5 bn). 

Karnataka drawing on thermal plants to meet demand

September 8, 2008. Hit by low inflows into hydel storage reservoirs, Karnataka has begun drawing on its thermal plants for meeting the power demand.  Demand in the State is currently about 110 million units (mu) a day. But actual supplies were only about 75.94 mu a day.

To sustain this demand, the State Government-owned power generator, Karnataka Power Corporation Ltd (KPCL), deferred maintenance shutdowns of some thermal plants.  Karnataka’s thermal capacity is about 1,470 MW, comprising the seven units of the Raichur Thermal Power Station (RTPS). The 500-MW Bellary Thermal Power Station (BTPS) is yet to fully reach the commercial operations date. This is expected to happen during the month.

However, the State utility faced a fuel shortage for the thermal stations.  The coal supply from the domestic supplier, Coal India, was disrupted in view of flooding in the Mahanadi Coalfields. Stock position is precarious with only about 4 days of supplies left. The Central Electricity Authority’s prescribed standard is 30 days of fuel supplies. KPCL’s daily coal linkage is about 28,300 tonnes with Coal India for RTPS. BTPS has begun generating power, feeding about 2.5 MUs. Once fully-commissioned, BTPS’ requirement is expected to be about 3 million tonnes.  With a shortfall in domestic supplies, KPCL was importing some of its coal requirements from Indonesia and other South East Asian sources.

All the imports, however, were on the basis of spot market prices.  Currently, State-owned coal consumers seldom get into long-term supply contracts with foreign suppliers. Imported coal currently costs about $200 (Rs 8,700) for a tonne cost insurance and freight. Domestic coal costs only Rs 3,000 a tonne. Coal prices were treated as pass-through item for fixing power tariff. As a result, there was mounting tariff pressures.  Impact on tariff was mitigated in view of the high efficiency of international steam coal.

The heat rates on imported coal were in excess of about 6,000 kilocalories (kcals) for a kg. Domestic coal was about 3,000 kcals. Consequently, imported and domestic coals were blended for achieving the prescribed heat rate for domestic boilers of around 2,800 kcals for every kilowatt hour.  Heat rate is the measurement of thermal power plant efficiency. The blending of the coal brought down fuel consumption.

KEC International bags two orders worth $49 mn

September 8, 2008. RPG group company, KEC International, has bagged two orders worth Rs 217-crore ($48.6 mn) from NTPC Electric Supply Company Limited (NESCL) and Power Grid Corporation of India.  KEC has bagged the order from NESCL, worth Rs 120-crore ($26.9 mn), for a turnkey rural electrification project in Keonjahr (Orissa), a company press release said.  The project covers electrification of 2,195 villages and providing electricity connection to 1.85-lakh BPL (below poverty line) families, besides construction of eight 33/11 kw new/augmentation of substations, the release said.  The project is to be completed before March 2010. The second order, another tunkey project worth Rs 97-crore ($21.7 mn), is for 765 kv and 185-km long single-circuit Balia-Lucknow transmission line in Uttar Pradesh, the release said.  The job involves supply of towers and line materials and commissioning, it said, adding that "the project is scheduled to be completed before June 2010." 

ICSA India secures orders worth $53 mn

September 8, 2008. ICSA India Limited, said that it has secured work orders for a total contract value of Rs 236.14-crore ($52.9 mn) from the Maharashtra State Electricity Distribution Company (Mahavitaran) and MP Paschim Kshetra Vidyut Vitaran Company Limited.  

The Rs 202.22-crore ($45.3 mn) order from Mahavitaran was for the construction and commissioning of sub-transmission lines, power transformers, new sub-stations, augmenting of existing sub-stations, distribution transformers of varying capacities and allied works, a press release issued here stated.  The second order worth Rs 31.92-crore ($7.1 mn) from MP Paschim Kshetra Vidyut Vitaran Company was for the supply of material, survey, erection and installation and commissionig of 11 KV line and bays with VCB and metering, the release said.  

TCS signs JV to set up power exchange

 September 8, 2008. Software services and consulting firm Tata Consultancy Services said it will incorporate a joint venture firm for which it has entered into an agreement with state-run NTPC, NHPC and Power Finance Corp to operate a national level power exchange.  The JV company would be registered as a Public Limited Company with an authorised capital of Rs 50 crore ($11.2 mn) for setting up the power exchange to provide neutral and transparent electronic platform for power trading.  The exchange would also ensure clearing of all trades in an efficient manner with access to all the players in the power market. 

Dark days ahead in AP

September 7, 2008. Reduced inflows into Srisailam and Nagarjunasagar reservoirs have prompted the authorities to minimise hydel generation and “save” the waters for summer.  The existing generation of 1400-1500 MW may be reduced by half after the Assembly session. Already load reliefs are being enforced in rural and industrial quarters of Ranga Reddy District.  

A unit of the Simhadri Super Thermal Power Project if taken for overhauling as per schedule, will compound the problems. It will bring down the available supply to the extent of 500 MW. The situation might not improve for about two months, till the agricultural loads recede.  The area cultivated has increased this year and so has the power usage.

IBM, NDPL join hands to reduce transmission loss

September 3, 2008. IT giant IBM said it has entered into a strategic partnership with utility firm NDPL, a Tata Power and Delhi government joint venture, to help the latter bring down their transmission losses below 10 per cent in the next three to seven years.  IBM would provide solution to help the utility firm adopt 'smart grid' technologies which in turn would help it bring down the transmission losses from current 18 per cent to 10 per cent.   

The national average for transmission loss is 35 per cent. North Delhi Power Limited (NDPL) distributes electricity across North and North Western part of Delhi.  The monetary details of the partnership are being worked out by both the firms. As per the partnership, NDPL became a member of the IBM-led Intelligent Utility Network coalition, which aims to use technology for improving operational efficiency, reducing network losses and ensuring reliable power to consumers.  India's energy demand is growing rapidly and it is imperative to ensure a robust distribution network by adopting latest technologies to sustain this.  The coalition which includes seven utility firms from North America, the US, Europe and Asia-Pacific regions would collaborate to create solutions.

Detailed hydro project plans to cut costs, tariff

September 9, 2008. The power ministry, in a serious bid to give a much-needed push for the development of hydro-power projects in the country, proposes to create shelf of detailed project reports (DPRs) for such projects. The need for creation of shelf of DPRs is very important as the availability of bankable DPRs will enhance competition, obtain lower tariff and cut-off the project cost.  The ministry’s initiative is crucial, despite India has an estimated hydro generating potential of about 1, 50,000 mw, only a little over 35,000 mw has been developed so far. 45 hydro projects aggregating to a capacity of over 15,000 mw are presently under construction while another 120 projects aggregating to an installed capacity of over 48,000 mw are under various stages of survey and investigation. Bulk of the potential yet to be developed is along the Himalayas that is in the hill states of Jammu & Kashmir, Himachal Pradesh, Uttarakhand and the North East. It is, therefore, imperative that the development of vast hydroelectric potential is tapped expeditiously as the power sector is the key driver of economic growth.

Therefore, there is an urgent need to substantially enhance power availability at a rapid pace, which is crucial for the development and prosperity of the country.  Sources recalled that the Centre has already announced a new policy to attract more investments in the hydroelectric power sector. The policy envisages that the developers will provide money equivalent to 1% of power generated from the project to a fund managed by the district authorities. The funds will be further used for the development of the area affected by the project. The state government will give a matching grant from the 12% free power given to it by the developer. Locals affected by the project will have a say in the use of the fund.  The new policy also mandates that 100 units of free electricity per month be given to the families affected by the project in the last 10 years. The families will be free to consume this power or sell it. The policy has also introduced penalties for delays. If the developer is not able to complete the project within four years of its financial closure, the quantum of power available for sale as merchant power will be reduced from 40% to 35%.

 ‘Decision favouring RPL doesn’t apply to other firms’: CEA

September 9, 2008. In a move that raises questions on the uniformity of policies regarding coal supply for large power plants that India wants set up, an arm of the government says that a change in rules made last month by a group of ministers applies only to one such plant being developed by the Reliance-Anil Dhirubhai Ambani Group, or R-Adag.  That the change made by the ministerial group (also called empowered group of ministers, or eGoM, because decisions taken by it need not be ratified by the cabinet and are binding) was an exception was made clear by the Central Electricity Authority, or CEA, during a late-August conference with eight companies, or consortia, that are bidding for a power plant at Tilaiya in Jharkhand.  In response to a question from one of the firms, Tata Power Co. Ltd, CEA said surplus coal from the blocks meant to supply the fuel to the Tilaiya plant could not be used to power other projects.  The Tata Power representative raised the issue of whether the successful bidder for the Tilaiya project will be allowed to use surplus coal from the captive coal blocks allocated for the Tilaiya project for its (the successful bidder’s) other projects. The CEA representative said that there was no such proposal. In August, the ministerial group had allowed Reliance Power Ltd, or RPL, part of R-Adag, which is developing a power plant at Sasan in Madhya Pradesh, to use surplus coal from the captive blocks meant to feed this plant in its other projects.  Tata Power’s query on the use of surplus coal becomes significant given the shortage of the fuel. A company that knows it can use extra coal from blocks meant for one project in others will likely lower its bid for the first project. Power projects are usually awarded on the basis of bids listing the unit cost of power generated by the plant. The winner is the company that quotes the lowest rate.  The plants at Tilaiya and Sasan are part of several large power plants, each with the capacity of 4,000MW, that the government wants developed. To encourage companies to bid for these projects, the government sets up a company for each project, starts the land acquisition project, identifies and allots captive coal mines that can supply fuel in some cases and then transfers this company to the successful bidder. Bids for three such power plants, at Sasan, Mundra in Gujarat, and Krishnapattnam in Andhra Pradesh have already been awarded to RPL (Sasan and Krishnapattnam) and Tata Power (Mundra).  These plants are called ultra mega power plants, or UMPPs, by the government and those that are located near coal mines (also called pithead projects) are allotted captive coal blocks. Those that aren’t are located near ports because they will have to ship in coal.  The late-August meeting with bidders was attended by companies such as Tata Power, RPL, Larsen and Toubro Ltd, China Light and Power, and NTPC Ltd. Representatives of CEA, India’s apex planning body in the power sector, and Power Finance Corp., the agency responsible for UMPPs, were also present.  The ministerial group, on 14 August, decided to allow RPL to use the surplus coal from the Sasan project in other projects being developed by the company.  The plant may require around 14 million tonnes per annum, or mtpa, of coal for a period of 25 years. The coal will be from Kirandhari B and C coal blocks of North Karanpura coal fields. The geological reserves for the coal blocks are expected to be around 972 million tonnes. With the amount of coal involved in the Tilaiya project, some analysts feel that it is more of mining project than a power project.  UMPPs are critical to the government’s efforts to enhance the country’s power generation capacity. Currently, India has a power generation capacity of 143,000MW and it expects to add generating capacity of 78,577MW by 2012. After Tilaiya, the government will award projects at Cheyuur in Tamil Nadu, and Munge in Maharashtra. The request for qualification (or RFQ) applications for these two projects is expected to be issued by March 2009.

Kerala Regulator for continuing curbs on supply

September 8, 2008. The Kerala State Electricity Regulatory Commission (KSERC) has decided to continue with the restrictions on power supply already in force in the State, till further orders.  In its interim order issued after a public hearing on a petition filed by the Kerala State Electricity Board (KSEB) praying for further restrictions, SERC has said that it will review the power situation in the State on or before November 1, to decide whether to extend or relax the restrictions. It has also directed KSEB to furnish all the necessary data for the review. SERC has pointed out that though KSEB had requested for extension of the restrictions to all categories of consumers, it has not submitted any specific proposal in this regard.  The commission is of the view that such a proposal needs to be considered seriously and hence the board should file a petition before it for implementation of power restrictions on LT consumers, if required. As of now, power supply has been restricted to 75 per cent for HT and EHT consumers in the State.  For further supply of power, the KSEB had requested the commission to allow it to levy the actual cost of the power purchased by it from outside.   The commission in its interim order has fixed Rs 10.16 for every unit used by the HT and EHT consumers over and above the restricted 75 per cent.  At the public hearing, KSEB said the overall hydro-electric power situation in the State had not improved and the availability of power from the Central generating stations had further come down due to shortage of coal. In the event, the board projected an average availability of 16 million and 16.2 million units from the hydel and Central generating stations, respectively, per day between August 2008 and March 2009.  In the circumstances, the board had proposed that to limit the additional requirement of power over and above the availability from hydel and central generating stations, additional restrictions to the tune of 4.56 million units a day had to be imposed on all categories of consumers.  Alternatively, the board had suggested that it be allowed to procure additional power to the tune of 1,884 million units from liquid fuel power stations and traders and pass the additional cost to consumers in the current financial year itself.

‘US biz lobby will ensure nuke deal is approved’

September 8, 2008. The large American business community would use its lobbying powers to ensure that the Indo-US nuclear deal is ratified by the US Congress in this session, said Mr Frank G. Wisner, Vice-Chairman, American International Group.  Mr Wisner was the US Ambassador to India more than a decade ago.  A delay in ratification could put American firms at a disadvantage, as India could enter into nuclear trade with other countries, like Russia and France, he added.  He stressed the need for prioritising Indo-US relations after new Governments take charge in both the countries. 

Nuclear action to kick off at Jaitapur, Koodankulam

September 8, 2008.  Post the NSG (Nuclear Suppliers Group) waiver, action on the Indian nuclear space is likely to kick-off at Jaitapur in Maharashtra, where up to six imported reactors of 1,600 MWe are slated to be set up by State-owned Nuclear Power Corporation of India Ltd (NPCIL) through a collaboration with the French Government, and Koodankulam in Tamil Nadu, where four additional reactors of 1,000 MWe each are likely to come up with Russian assistance.  According to Department of Atomic Energy officials, the Jaitapur coastal site in Ratnagiri district — one of the six locations earlier identified by a Government site-selection panel for housing imported light water reactors — is likely to host European pressurised reactors (EPR) developed by Areva NP, a joint venture between Areva SA of France and Siemens AG of Germany.

While the Centre had initially envisaged two units of 1,000 MWe each for the Jaitapur plant, NPCIL is also preparing a techno-economic evaluation report for the deployment of Areva’s latest 1,600 MWe reactors.   Besides Jaitapur, the Koodankulam site — where two 1,000 MW units are already under construction through Russian assistance — could see the construction of four additional units at the same location. The collaborations on the new units are expected under a pact, reached between India and Russia in January last year. Under the pact, both countries agreed to collaborate on building up to 10 nuclear units across various sites in India.  In case of the two Koodankulam units currently under construction, the Russians are slated to shortly ship to India custom-built equipment designed specially for the Koodankulam station — a 300-tonne airlock manufactured by Russian firm OMZ and a reactor refuelling system made by Uralmash OJSC. The delivery is expected to speed up the work in the reactor compartment to enable the project to kickstart operations of its first unit by late this year, and the second one in 2009. With the key shipment coming in, the procedure for the first 1,000 MWe Koodankulam unit’s criticality, including loading the enriched uranium fuel bundles into the reactor, would start over the next couple of months.

CIL looking at JVs to revive abandoned mines

September 7, 2008. Coal India Ltd (CIL), which had floated a global expression of interest (EoI) for reopening some of its abandoned mines through joint ventures with private companies, will give preference to companies offering reciprocal opportunities for development and operation of abandoned coal mines abroad.  Such development of foreign mines would be undertaken by the same joint venture companies, officials said. CIL had floated global EoI for 18 abandoned coal mines where production had been stopped mostly due to safety reasons such as fire in some cases and water logging in the other cases.  There would be more than one joint venture and there could even be one each for every mine, officials said. Out of the total, six belongs to Eastern Coalfields Limited (ECL) – Sangramgarh, Seetalpur, Kapasara, Shyampur A, Sripur and Girimint. Another eight abandoned mines for which joint venture partners have been invited belong to Bharat Coking Coal Limited (BCCL).  These are Dharmaband, Gaslitand, Industry, Kendwadih, Kustore, Kujama, Victoria and Begunia. 

The remaining four mines – Hindegir, Associated Karanpura, Khas Karanpura and Pipradih – belong to Central Coalfields Ltd (CCL).  CIL is primarily looking for internationally accredited, experienced and financially capable companies having wide experience in underground mining and proven technical and managerial expertise in salvaging, rehabilitation and operation of abandoned/derelict mines under hazardous environment.  Highest emphasis would be given to the safety of personnel and the property including surface structures belonging to third parties before formalising these joint ventures, officials while adding that till now there had been several oral enquiries but no formal EoIs has been received. As the last date of submission of EoIs is October 13, 2008, many companies can also go in for on the spot assessment of the mines by their experts before submitting their bids.

FICCI to submit report on power crisis

September 7, 2008. The Federation of Indian Chambers of Commerce and Industry, along with CRISIL Infrastructure Advisory group, would be submitting to the Ministry of Power next week its recommendations on the looming threat of power crisis that could drag down the growth of Indian businesses.  The joint study on ‘Indian Power Sector: Holistic Capacity Building’ estimates that with peak electricity demand deficit estimated at13 per cent and energy shortage of 6 per cent, there needs a concerted action on building adequate capacity in terms of manpower, material and resources.  The report stated that close to 2 million trained people would be required for the electricity sector during the 11th and 12th Plan periods, which have laid down the target of generating an addition of at least 161 GW of capacity during the period.  Meeting the manpower requirement of this magnitude would require creation of more Industrial  

Tata Power loses Senoko bid to Japan’s Marubeni

September 6, 2008. Tata Power, India’s largest private sector utility firm, lost in the auction to acquire Singapore firm Senoko Power to a consortium led by Japanese conglomerate Marubeni which agreed to pay $2.5 billion.  The Indian company had reportedly made arrangements of around $3 billion funds with the help of India’s largest bank, State Bank of India, but failed to make it to the tape with a good offer.  In a statement, Temasek Holdings — the parent firm of Senoko, said it found Marubeni-led Lion Power’s proposal most attractive in terms of price and commercial terms among a field of highly reputable investors. The members of the consortium, Marubeni Corporation, GDF SUEZ SA, Kansai Electric Power, Kyushu Electric Power and Japan Bank for International Co-operation, have formed a special purpose vehicle — Lion Power — for the acquisition.  

India to leverage edge in reactors, thorium technology

September 6, 2008. India’s entry into the global civilian nuclear fraternity is unlikely to be just a one-way street in terms of technology flows and business opportunities. India, which has established global leadership in research involving Pressurised Heavy Water Reactors (PHWR), Fast Breeder Reactors and thorium cycle, hopes to leverage its edge in these niche areas on a commercial basis globally.  

The statement of the External Affairs Minister, Mr Pranab Mukherjee, clearly stated India’s intentions to leverage the opportunity, with the country “interested in participating as a supplier nation, particularly for thorium-based fuel and in establishment of international fuel banks, which also benefit India.” Besides, India is exploring the possibility of exporting indigenous 220-MWe reactor to developing nations eyeing nuclear power generation but constrained by small-sized electricity grids, as well as capitalising on growing opportunities for heavy water exports out of India.  

Brahmaputra Board readies projects

September 5, 2008. Facing brunt of the attack for falling to come up with a full-proof plan to control floods in Assam, Brahmaputra Board has claimed that it has completed Detailed Project Reports (DPRs) for five projects in the North Eastern Region (NER), while eight others are in various stages of implementation. Under attack for delay in executing the long pending revamp of the Board, official sources said that the five projects under execution included Siang Single stage, Subansiri single stage in Arunachal Pradesh, Tipaimukh in Manipur and Mizoram, Pagladiya in Assam and Bairabi in Mizoram. Siang and Subansiri dam projects have been handed over to National Hydro Power Corporation (NHPC) for execution.  

R-Power, Spain's Isolux bid for Allahabad projects

September 5, 2008. Top names in the power and infrastructure sector, including Reliance Power, Lanco Kondapalli and Spanish firm Isolux Corsan, have evinced interest in setting up two power plants in Uttar Pradesh’s Allahabad district. The state government wants to set up two power plants at Bara and Karchhna in Allahabad with a cumulative capacity of 3,300 mw.

Sixteen companies submitted a request-for-qualification (RFQ) for Bara (nine bids) and Karchhna (14 bids). NTPC, Indiabulls, JP Power Ventures, Lanco, GVK, L&T, Adani Power, Reliance and Isolux have bid for the Bara project. Karchhna was bid for by JSW Energy, L&T, KSK Energy, Indiabulls, Reliance, Lanco, GVK, Adhunik Metallics, Adani, Bhushan Steels, HDIL Energy, Videocon, CESC and JP. Three units and two units at Bara (1,980 MW) and Karchhna (1,320 MW), respectively, have been proposed to be set up. Each unit will have a capacity of 660 MW. This is the third time that the state government has resorted to inviting bids for the two projects as there was only a lukewarm response from companies earlier and also since the tariff quoted was high. Meanwhile, a committee will evaluate these bids and only qualifying companies will be eligible to submit request for proposal (RFP) documents containing technical and financial detail. On July 19, the state energy task force (ETF) recommended an invitation of fresh bids, since the lowest bid, which came from Reliance, was found to be quite high. Later, the same was ratified by the state Cabinet.

CIL plans coal imports to meet surging demand

September 5, 2008. Coal India Ltd plans to import coal for the first time to meet surging domestic demand and could source up to 4 million tonnes (mt) of thermal coal from overseas this year. Import of coal is aimed at tiding over a shortage of the commodity faced by power generators, especially small-sized players.  The company may buy up to 4 mt of coal from overseas after buyers confirm their orders.  CIL plans to do about 4 mt this year but is yet to decide on the process. It will be mainly for small buyers who can’t import on their own.  The Government estimates that the country will import around 60 mt of coal annually by 2012 to boost supplies. The company’s output, which is currently around 380 mt, is expected to rise to 405 mt next year and 520 mt by 2012.  CIL is also scouting to acquire mines in Indonesia, Mozambique and Australia. 

CIL — along with NTPC Ltd, Steel Authority of India Ltd, Rashtriya Ispat Nigam Ltd and NMDC Ltd — has already formed a joint venture company to buy coal assets overseas.  The Coal Secretary, Mr H.C. Gupta, said that the Government is considering setting up a regulator for the sector. The Government has been awarding coal blocks to private and public sector companies for captive use in the last two years in a bid to raise production. By the end of the current Five Year Plan (2007-12), the Government hopes to have captive coal production of 105 mt compared with 25 mt currently.  

XI Five Year Plan for energy efficiency initiated

September 6, 2008. The Ministry of Power has initiated a number of programmes in the XI Five Year Plan (2007-12) for energy efficiency and conservation through the Bureau of Energy Efficiency, a statutory organization under its administrative control. An assessment of the energy savings during 2007-08 (the first year of XI Plan) related to the programmes of MOP/BEE indicates electricity savings of 3731.5mn units and fuel savings equivalent to 1.709mn tons of oil.   The electricity savings also imply an avoided capacity addition of 623.1 MW. The reported values of energy savings have been verified by an independent agency, the National Productivity Council.

The programme-wise energy savings highlights are tabulated below:

Programme	Electricity saved (million units)	Avoided capacity addition (mw)	Fuel saved as oil equivalent (million tons of oil)
Standards and labelling of appliances (Refrigerators, ACs and Tubelights)	1425.8	260.4	Nil
As assessed under National Energy Conservation Awards	1612.3	236.0	1.641
State level energy conservation programmes	693	126.78	0.068

In addition to this, 306 commercial buildings which are compliant to the Energy Conservation Building Code are under construction throughout the country. On completion, these buildings are likely to result in 316 MW of avoided capacity. Under the guidance and supervision of Bureau of Energy Efficiency, Energy Conservation Action Plans have been prepared by 28 States through the State Designated Agencies notified under the Energy Conservation Act and it is expected that, when these action plans will be implemented with aid and assistance of Ministry of Power, more energy savings will take place, which will be documented and verified by an independent agency.  The Ministry of Power will continue to strive to realize more energy savings to help the country in its economic development.

OIL & GAS

Total tests positive gas in UK North Sea

September 9, 2008. Total has announced a significant increase in the potential of the West Franklin field in the Central Graben Area of the UK North Sea, following the drilling of the West Franklin B appraisal well by the jackup Rowan Gorilla V. The West Franklin field is located in Blocks 29/5b and 29/4d, approximately 240 kilometers east of Aberdeen and 4 kilometers west of the Franklin wellhead platform, from where it was drilled. Total is the Operator (35.784%) and is now considering options for the next phases of development of the field, all of which will maximize synergies with existing Elgin Franklin facilities.

Devon gets go-ahead for oil sands development

September 8, 2008. Devon Energy Corporation has received regulatory approval for the Company's second oil sands project in Canada. Construction of the 100% Devon-owned Jackfish 2 project will begin immediately.  Once fully operational in 2012, Jackfish 2 will produce about 35,000 barrels of oil per day through a recovery method known as Steam Assisted Gravity Drainage, otherwise known as SAGD. Over the life of the project, Devon expects to recover about 300 million barrels of oil from Jackfish 2.

527 production platforms in GoM evacuated, Sshut-in

September 4, 2008. Based on data from offshore operator reports, personnel have been evacuated from a total of 527 production platforms, equivalent to 73.5 % of the 717 manned platforms in the Gulf of Mexico.   Personnel from 63 rigs have also been evacuated; this is equivalent to 52.1 % of the 121 rigs currently operating in the Gulf.  From the operators' reports, it is estimated that approximately 95.2 % of the oil production in the Gulf has been shut-in. Estimated current oil production from the Gulf of Mexico is 1.3 million barrels of oil per day. It is also estimated that approximately 87.5 % of the natural gas production in the Gulf has been shut-in. Estimated current natural gas production from the Gulf of Mexico is 7.4 billion cubic feet of gas per day.

Motiva restarting Norco refinery

September 5, 2008. Motiva Enterprises, the refining joint venture between Royal Dutch Shell Plc and Saudi Aramco, has begun restarting its 240,000 barrels per day refinery in Norco, Louisiana, which was shut last week ahead of Hurricane Gustav, Shell said on its website Friday.  Shell said the Norco plant should begin to produce gasoline as early as Sunday.  Shell said Motiva's refinery in Convent, Louisiana, was continuing to repair damaged power lines and expected to restart some units next week.

Enviro group Sues Calif. city over refinery upgrade

September 5, 2008. Environmentalists are challenging the Richmond City Council's decision to approve Chevron Corp.'s plans to upgrade its Bay Area oil refinery.  In a lawsuit, three environmental groups claim the city's environmental review concealed that the project would lead to more air pollution and higher risks for major accidents and oil spills.  Despite strong opposition, the city council voted 5-4 in July to approve a permit for Chevron to replace old equipment, build a new power plant and make other changes at its Richmond refinery.  In exchange, the San Ramon-based oil company offered the city $61 million for programs to help the community. The Richmond City Attorney's office says it hasn't seen the complaint and can't comment.

Oil products under strain after Gustav

September 4, 2008. Short-term stresses appearing in the U.S. petroleum supply chain following Hurricane Gustav may lead to higher gasoline and diesel prices in the long term.  While no significant damage has been reported since Gustav made landfall in Louisiana as a powerful hurricane, many refineries, pipeline pumping stations and port facilities remain without power from the electricity grid.

Petrofac, Mubadala form Abu Dhabi-based JV

September 3, 2008. Petrofac Limited, the international oil & gas facilities service provider, and Mubadala Petroleum Services Co. LLC (MPSC), a wholly owned subsidiary of Mubadala Development Co., announced their plans to establish a joint venture company, Petrofac Emirates LLC. Based in Abu Dhabi and scheduled to begin operation within the next few months, the new company will provide a full range of engineering, design, procurement and construction services for onshore oil and gas, refining and petrochemical projects throughout the United Arab Emirates.  Mubadala Development Company (Mubadala) is a Public Joint Stock Company headquartered in Abu Dhabi, capital of the United Arab Emirates.

Reliance sets up trading hubs in London, Singapore

September 9, 2008. Reliance Industries Ltd. said it has established two units in the trading hubs of London and Singapore to market products from its new and existing refineries.  Reliance, India's largest company by market capitalization, expects to commission its new 580,000 barrel a day refinery ahead of its December schedule with trial runs likely to commence within weeks.  The new export-oriented refinery sits next to Reliance's existing 660,000 barrel a day refinery in Jamnagar in the western Indian state of Gujarat. The two will together form the world's largest refinery complex with a capacity of 1.24 million barrels a day.  Its London unit will be headed by Peter Ward, who was formerly the president of Shell Trading's gas and power division, Reliance said in a statement.   The Singapore unit will be led by Michael Ng, who until recently was the president of Fair Energy and has also been the head of Shell's international aviation business in Asia, the company said.  Reliance earlier said it plans to tap the European market to sell its diesel and the U.S. for gasoline exports. The new refinery is being built by its unit Reliance Petroleum Ltd in which U.S. oil major Chevron Corp has a 5% stake.

Serbia clears way for Gazprom pipeline, storage

September 9, 2008.   Serbia's parliament ratified an accord on Russian investment in the Balkan country's oil and gas industry by a vast majority on Tuesday.  The deal clears the way for Russian gas giant Gazprom to build a pipeline in southern Serbia and an underground gas storage facility in northern Vojvodina province, and to buy the Serbian oil monopoly NIS.   

Czech Republic wants share in Transalpine pipeline

September 9, 2008. The Czech Republic is negotiating to buy a share in the Transalpine Pipeline (TAL), which pumps Azeri oil from the Italian port of Trieste to Germany, in a bid to lower energy dependence on Russia, a Czech official said.  According to earlier reports, the Czech Republic has been negotiating with pipeline's eight shareholders to buy a 2-percent stake. Bartuska declined to elaborate.  The central European former Soviet satellite receives some 30 percent of its oil via the IKL pipeline, which connects to TAL in Ingolstadt, Germany. The rest of country's oil arrive via the Druzhba pipeline from Russia.  

EU sees security in Trans-Sahara gas pipeline

September 9, 2008. A giant gas pipeline carrying Nigerian gas north across the Sahara desert could help the European Union diversify its energy sources, the EU's energy commissioner said.  The EU relies on Russia for about 40 percent of its gas and a third of its oil, but it has been seeking to reduce that heavy dependency since disputes between Russia and transit states like Ukraine highlighted the frailty of EU energy supply.  Friction over Russia's invasion of Georgia last month has pushed energy security further towards the top of the bloc's agenda.  

TransCanada, Canadian utilities reach deal

September 9, 2008. Canadian Utilities' indirectly wholly owned subsidiary, ATCO Pipelines and TransCanada Corp.'s wholly owned subsidiary, NOVA Gas Transmission Ltd. (NGTL), have reached a proposed agreement to provide seamless natural gas transmission service to customers. The gas transmission model will utilize a single suite of services to provide integrated gas transmission service which is expected to add value for customers as a result of seamless efficient service throughout Alberta.  

Nabucco 'On Track' despite Georgia-Russia conflict

September 5, 2008.  The Nabucco gas pipeline, which seeks to link central Asia's gas fields with Europe, is on track despite the Russia-Georgia conflict, the project's chief executive said in an interview.   The 3,300-kilometer (2,050-mile) pipeline is to run via Turkey and the Balkan states to Austria, and Mitschek said that a market survey had shown "huge demand" for it.  

Gazprom resumes gas deliveries to Europe

September 4, 2008. In view of the partial completion of repairs by the companies EuRoPol Gaz and Wingas, the Gazprom public company resumed the transportation of gas through the Yamal-Europe pipeline.  All customer requests are being met in full at present, the Gazprom information directorate said.  The delivery of gas through the Yamal-Europe pipeline was suspended at the request of the companies EuRoPol GAZ and Wingas for scheduled repairs in Polish and German territory. The decision about the repairs had been made back in February 2008.

‘Trans-Caspian pipeline viable’: US diplomat

September 4, 2008. A senior U.S. diplomat says a Western-backed gas pipeline from energy-rich Turkmenistan across the Caspian Sea to the European market remains a viable proposition despite the emergence of rival routes linking the country to Russia and China.  Deputy Assistant Secretary for South and Central Asian Affairs George Krol said in a visit to the Turkmen capital that the immediate focus will be on investing in extraction of hydrocarbon resources.  

Sumitomo, Saudi Aramco eye refinery expansion

September 9, 2008. Sumitomo Chemical Co. Ltd., and Saudi Arabian Oil Co. may sign a preliminary agreement to expand their $10 billion Petro Rabigh refinery and chemicals project in the kingdom before the end of the year.  

The expansion would represent the second phase of the giant complex, for which Aramco and Sumitomo signed up in 2005.  Under the project's first phase, the two companies are developing and integrating an existing 400,000-barrel-a-day refinery at the Rabigh site with petrochemical plants to benefit from economies of scale.  

Saudi approves extending Chevron concession

September 9, 2008. Chevron Corp. will continue to operate in the partitioned neutral zone shared between Saudi Arabia and Kuwait after the extension of its concession was approved by Saudi Arabia's cabinet, the official Saudi SPA news agency reported.  "  Chevron, the U.S.' second biggest oil company, has been negotiating an extension of the concession, which covers Saudi Arabia's share of the PNZ, with the kingdom's authorities beyond its expiration in 2009.  The 60-year concession was awarded in 1949 to the U.S.' Getty Oil Co., which in 1984 was taken over by Texaco, the oil major that later merged with Chevron.  

'Iraq pumping 2.5 mbpd of oil'

September 9, 2008. The oil price is fair at current levels above $100 a barrel, Iraqi oil minister Hussein al-Shahristani said Tuesday.  The Iraqi oil minister also mentioned that Iraq is now producing 2.5 million barrels a day and aims to increase that level to pump 2.7 million barrels a day by the end of this year, Shahristani said.  

OPEC, gathering for its third meeting of the year on Tuesday, is widely expected to hold output steady as it surveys oil prices that have fallen sharply over the past few months.  Shahristani said the government has approved an agreement with Shell to jointly develop domestic gas infrastructure in the country's south.

DOE grants Marathon 250k barrels of oil

September 8, 2008. The Department of Energy says Marathon Oil will receive 250,000 barrels of oil from the Strategic Petroleum Reserve to compensate for refinery disruptions from Hurricane Gustav.  Marathon was the second oil company to request crude from the nation's reserves, though Venezuela's government-controlled Citgo Petroleum withdrew its request after a shipping channel was reopened, allowing deliveries by ship to continue.  

Peru's oil production to rise 20k bopd

September 5, 2008. Peru will increase its production of oil and other hydrocarbon products to an average of 132,000 barrels a day in September from 112,000 barrels a day now, government agency Perupetro said.  The coming into production of Block 56, a natural-gas block in southern Peru that is owned by a consortium, will lead to the increase.    

Putin strikes energy deal with Uzbekistan

September 4, 2008. Russian Prime Minister Vladimir Putin in Tashkent has secured an agreement with Uzbekistan to start building a new gas pipeline to Russia in a deal that bolsters Moscow's sway over Central Asian energy supplies.  

In the wake of Russia's conflict with Georgia, it also strengthens Moscow's hand with the European Union, which has been looking to secure energy supplies that bypass Russia.  Uzbek President Islam Karimov, after meeting with Putin in Tashkent, announced that the new pipeline would carry up to 30 billion cubic meters of gas from Turkmenistan and Uzbekistan, boosting Russian imports by 50 percent.  

Kazakh Kashagan might start oil production in ’14

September 4, 2008. Commercial production at Kazakhstan's giant Kashagan oil field could start later than the agreed 2013 deadline. Kashagan would produce 450,000 barrels per day in 2014.

Indonesia approves Chevron gas field plans

September 4, 2008. Indonesia has approved U.S. oil major Chevron Corp's proposal to develop natural gas fields offshore from East Kalimantan, Borneo island, the mines and energy minister said.  The Gehem and Gendalo deepwater natural gas projects would be the deepest offshore gas fields in Indonesia, at water depths ranging from 2,500-6,000 feet.   

Nigeria now Africa's no.1 oil producer

September 3, 2008. Nigeria has regained its position as Africa's biggest oil producer after months of battling with militants in the troubled oil-rich Niger Delta region.  Nigeria ceded the position to Angola at the end of the first quarter of 2008, due to civil unrest in the region. Statistics provided by African Oil Journal said Nigeria's production at the end of July rose by 400,000 bpd to 1.92 million bpd, up from 1.88 million bpd recorded in June.  Angola, on the other hand, lost a production of 200,000 bpd, which reduced its capacity from 1.92 million bpd in June to 1.90 million bpd in the month under review.  It is uncertain what led to Angola's losses.

POWER

Coal plant answer to climate change tested

September 9, 2008. Swedish energy company Vattenfall opened a small coal plant in Germany which will produce almost carbon-free power in a test of technology that could help the fight against climate change. The project will produce enough electricity for a town of 20,000 people to pilot a process called carbon capture and storage (CCS), which supporters hope can tackle both energy security and climate change woes.  At 30 megawatts the pilot is still less than one tenth the size of a full-scale coal plant and commercial-scale tests of the technology are at least five years off, analysts say.  CCS works by trapping those gases from coal plants and burying them in porous rocks underground.

NRC renews license for Scriba nuclear plant

September 9, 2008. Nuclear Regulatory Commission has renewed the operating license of the James A. FitzPatrick nuclear power plant for an additional 20 years. The NRC says the license was extended until Oct. 17, 2034. Plant owner Entergy Nuclear Operations Inc. submitted the renewal application two years ago, The FitzPatrick plant, located at Nine Mile Point on the eastern shore of Lake Ontario, began operating in 1975. Its license was set to expire in 2014.

‘Iran Nuclear Plant nearly ready’: Russia

September 8, 2008. The Russian state-run company building Iran's first nuclear plant said that preparations for the reactor's launch had entered their final stage. Atomstroiexport chief Leonid Reznikov said that by year's end the company will take steps that will make the launch of the Bushehr plant "irreversible." Company spokeswoman Irina Yesipova said the launch date will be determined after talks between Russian and Iranian nuclear officials this month. Iranian officials have said that Bushehr would be launched this fall. Iran is paying Russia more than $1 billion to build the 1,000-megawatt light-water reactor.

Coega plan to boost electricity in South Africa

September 9, 2008. Coega's gas-fired power station will come on stream in 2011, the Coega Development Corporation (CDC) said. The gas-fired power station would be rolled out in three phases with phase one contributing 800 Megawatts of electricity to the national grid. Preliminary studies showed that further phases of the project would entail expansion to 1600MW, 2400MW and possibly in phase three up to 3200MW by late 2012.  

South Africa consumes less electricity

September 4, 2008. The estimated consumption of electricity in July 2008 decreased by 0,7 percent compared with July 2007, Statistics SA said. The estimated volume of electricity (available for distribution) for the three months ending July 2008 decreased by 1,8 percent compared with the three months ending July 2007. Electricity consumption after seasonal adjustment for the latest three months ending July 2008 decreased by 0,9 percent compared with the previous three months ended April 2008.  Production of electricity also decreased, and - after seasonal adjustment - showed a drop of 0,9 percent for the three months ending July 2008 compared with the preceding three months.

EdF doubles stake in Constellation Energy

September 9, 2008. French nuclear power giant Electricite de France SA said it has nearly doubled its stake in electric utility Constellation Energy to almost 10 percent in a move to strengthen its position ahead of expected growth in the U.S. nuclear power industry. 

Queensland plant will process coal seam gas

September 9, 2008. Queensland's Origin Energy has struck a $9.6 billion deal to build a liquid natural gas plant at Gladstone. The gas will come from coal seam gas projects in the state. US company Conoco Phillips will become a 50 per cent partner in the project, subject to the approval of the Foreign Investment Review Board.  Origin is looking to extract coal seam gas from the Bowen and Surat basins and is planning a liquefied natural gas (LNG) plant at Gladstone.  Conoco Phillips already operates LNG plants in Darwin and other parts of the world.

Estonia seeks nuclear power

September 8, 2008. The speaker of Estonia's parliament urged lawmakers to back calls in the country for a nuclear power plant to be built, to reduce energy dependence on Russia. Ene Ergma said during an open parliamentary session that "in a situation where Russia is using its energy supplies as a political weapon, it would be right to consider all possibilities, including the construction of a nuclear power plant in Estonia." 

Australian among world's worst polluters

September 5, 2008. Despite having one of the world's most advanced economies, Australia has an electricity system that is one of the worst greenhouse-gas polluters.  The performance of only a handful of countries, including Cuba, Botswana, Kazakhstan, Libya, Malta and Bahrain, rates more dismally.  The extraordinary finding was made by Ross Garnaut, the Government's independent adviser on climate change, in his last report.  He will deliver his long-awaited advice on how much Australia should aim to cut greenhouse gas emissions by 2020. 

Nigeria to subsidise electricity for the poor

September 3, 2008. Nigerian Electricity Regulatory Commission (NERC), said "the poor" will still enjoy some subsidies on electricity after the three-year moratorium granted by the government. The Federal Government in July, approved the take-off of Multi-Year Tariff Order with a three-year moratorium on subsidies. 

Renewable energy policy soon for Kerela

September 9, 2008. Kerala will join the Renewable Energy and Energy Efficiency Partnership (REEEP) based in Vienna, Austria. Electricity Minister A.K. Balan and Director of the Energy Management Centre Dharesan Unnithan held discussions with International Director of the REEEP Marianne Osterkorn and Deputy Director Binu Parthan in Vienna and came to an understanding on the State joining the partnership.

Velcan Energy cancels 4 biomass power projects

September 8, 2008. Velcan Energy has cancelled the investment in the Dheeru (7.5 MW), Mangalam (7.5 MW), Shimoga (10 MW) and KR Nagar (10 MW) biomass power projects in the States of Maharashtra and Karnataka (India). Since the acquisition of those licences, the company has won a number of significant hydro power projects.  The board of the company has concluded that it was in the shareholder’s interest to focus the company on these bigger investment opportunities. The licences have been given back to the consent Authorities. The guarantee deposits of 120,000 Euros have already been given back to the company. The development costs have been written off and will have a negative impact of 209 KEuros on the year 2008 accounts.  

Tea Board embarks on an energy conservation project

September 8, 2008. The Tea Board has embarked on a four-year project to help plantations conserve energy and cut energy consumption costs by at least 20 per cent. The four-year project, which began in March this year, has been launched in South India and targets to cut the emission of carbon di-oxide by at least 1.5 lakh tonnes every year.  Tea estates in the South, numbering about 1.2 lakh, emit 7.5 lakh tonnes of carbon di-oxide every year.  

Suzlon completes wind power project for ONGC

September 8, 2008. Wind turbine maker Suzlon announced the completion of its 51 MW wind power project for oil and gas major ONGC in Kutch district of Gujarat. The project features 34 units of Suzlon's S82-1.5 MW turbines and will provide captive generation capacity for ONGC, powering centres at Ankleshwar, Ahmedabad, Mehsana and Vadodara, a press release issued in Mumbai stated.  This investment is a clear validation of the importance of wind and renewable energy in powering the world of tomorrow.   

Mercedes to launch hybrid cars by 2010

September 5, 2008. Germany’s luxury car major Mercedes Benz will be launching both its first hybrid and electric vehicles in Europe in 2010. This will be followed by the launch of fuel cell-powered cars in 2012.

NeST, EPV Solar to set up silicon panel unit in Kochi

September 5, 2008. The Kochi-based NeST Group has signed a memorandum of understanding with EPV Solar of the US for setting up a facility in Kochi for manufacturing silicon panels.  Estimated to cost Rs 4,000 crore ($894.2 mn) and planned to be completed in four phases, the proposed manufacturing unit will come up at the electronic hardware park being established by NeST Hi-Tek Park Private Ltd in association with the Kerala Industrial Infrastructure Development Corporation (Kinfra). The facility, when completed in four years, will have an annual capacity of 420 megawatts, providing direct employment to 4,000 people and indirect employment to many more, according to the Managing Director of NeST Group, Mr N. Jehangir.  EPV Solar is a manufacturer of amorphous silicon thin-film photovoltaic modules headquartered in New Jersey, USA.   The facility in Kochi will utilise EPV Solar’s proprietary manufacturing technology and its internally designed production equipment.

Tata Power to buy 11 pc in Geodynamics

 September 4, 2008. Tata Power has agreed to invest A$44.1mn (US$37mn) in Australia's Geodynamics in a bid to expand its business to include geothermal energy. Tata Power has agreed to buy 29.4mn Geodynamics shares at A$1.50 apiece, Brisbane-based Geodynamics said in a statement to the Australian stock exchange.   

The stake represents 11.4% of Geodynamics' current outstanding shares, or 10% after the issue of new stock. said CFO Paul Frederiks.  Geodynamics and Tata Power have also agreed to examine potential geothermal energy prospects outside Australia as well.  

Gujarat  1^st state to procure 5 MW solar power

September 4, 2008. Gujarat has emerged as the first State in the country to have signed a power purchase agreement (PPA) in the area of solar power generation under which the State would purchase 5 MW of power from a private sector company at a fixed tariff of Rs 3.37/ kilowatt hour (per unit) for 20 years, renewable thereafter. The company, Euro Solar Power Pvt Ltd, promoted by the diversifying Euro Group, plans to invest Rs 125 crore ($28 mn) in the project in Kutch district.

Moser Baer’s solar PV biz gets $92 mn funding

September 4, 2008. Moser Baer India Ltd said its wholly-owned photovoltaic subsidiary has raised Rs 411 crore ($92 mn) from a clutch of global investors including Nomura, CDC Group, Credit Suisse, Morgan Stanley, IDFC PE and IDFC.  

Moser Baer has diluted 6.5 per cent stake in the PV business for raising these funds, which would now be utilised for expansion of its solar PV capacity both in crystalline silicon and thin film solar verticals, largely at the Greater Noida. The capex for 2008-09 is $400 million (about Rs 1,760 crore) for expansion in crystalline silicon and thin film capacities.  

Solazyme claims world's first Algal-based Jet Fuel

September 9, 2008.  Solazyme Inc. announced that it has produced the world's first microbial-derived jet fuel.  Solazyme's algal-derived aviation fuel as analyzed by the Southwest Research Institute (SwRI), one of the nations leading fuel analytical laboratories, passed the eleven "most challenging specifications needed to meet the ASTM D1655 standard for Aviation Turbine Fuel. The tested areas included the key measurements for density, thermal oxidative stability, flashpoint, freezing point, distillation and viscosity among others. Of the eleven tested parameters, the Solazyme aviation fuel passed the ASTM D1655 requirements for every measurement.

Duke continues wind-power investment

September 9, 2008. Duke Energy Corp. has continued its investment into wind-powered energy, announcing plans to build a windmill farm in Wyoming that would sell power to a West Coast utility.  Charlotte-based Duke said it has a 20-year-contract to sell 99 megawatts to PacifiCorp, a Portland, Oregon-based utility that serves customers in six Western states. The wholesale power operation would be unregulated.

Solar power firm shines light on Anmore grid

September 9, 2008. Day4Energy, a Burnaby-based manufacturer is cranking out solar panels at a frantic pace. All of the company's output is fully booked through July 2009, even taking into account a planned doubling of manufacturing capacity in the near future.

European-developed technology behind the panels - coupled with the engineering savvy of Day4 Chair and CEO John MacDonald, co- founder and former chairman-CEO of MacDonald Dettwiler & Associates - is giving the company a distinct edge in the booming international market for solar power products. 

3M hopes on new renewable energy unit

September 9, 2008. The Minnesota manufacturing giant announced that it will create a new business unit to focus on renewable energy and increase its tiny stake in the business.  3M generates about $200 million a year making Fresnel lenses, mirrored solar panels, mirror films and other components for the $20 billion solar-energy industry. Company officials told investors that they want a bigger share of the industry, which has the potential to grow to $50 billion by 2012.

US wind turbine market to reach $ 60 bn by ’13

September 8, 2008. BCC Research, the veteran market research firm, has published 'Wind Turbines: The US Market', written by Hillpoint Energy's Ben Spitz. The 228-page report takes a detailed look at the US wind turbine market and projects market conditions to 2013 on a statewide basis, for both complete wind turbine systems as well as components.

'Wind power is a key clean energy source that is poised to make significant inroads into mainstream electrical power production,' said Ben Spitz, CEO of Hillpoint Energy. 'Worldwide electrical demand is unprecedented, the economics of wind energy are becoming more attractive and the technical obstacles including transmission and storage are being worked on aggressively.

Northern Ethanol to build plant in Niagara Falls

September 4, 2008. Northern Ethanol, LLC, a wholly owned subsidiary of Northern Ethanol, Inc., has announced that it has entered into an agreement to acquire a 70 acre site from Praxair, Inc in Niagara Falls on which it will locate its Niagara Falls, NY ethanol plant. The property is well served by CSX Rail, St. Lawrence Seaway dockage, adjacent interstate highway and abundant low cost water and other services. In May, the Niagara Falls Ethanol project was approved for 9,000 kilowatts of low-cost hydro-electric power from the New York Power Authority, with a saving of approximately $35million over the life of the contract.

Electricity feed back to grid approved

September 4, 2008. After months of discussion, the Public Service Commission approved agreements from the Florida’s five investor-owned power companies so that customers can receive credit for electricity that they feed back to the grid from solar panels and other forms of renewable energy on their property. 

The concept, called net metering, is to promote the development of customer-owned renewable energy by minimalizing costs. Excess power that the customer generates and doesn't use will be allowed to go into the grid, and then the utility will give the homeowner a credit for that power. 

The new measure applies to customers of Florida Power & Light, Progress Energy Florida, Gulf Power, Tampa Electric and Florida Public Utilities.  Under a previous rule, only renewable systems of 10 kilowatts or smaller were eligible. That has been expanded to two megawatts, meaning large businesses with solar panels occupying rooftops can now qualify for the program. 

GT Solar signs contract with DC Chemical

September 3, 2008. GT Solar Incorporated, a global provider of specialized equipment and technology for the solar power industry, announced that on July 11, 2008, it signed a $173 million contract with DC Chemical Co., Ltd., a leading Korean chemical company. The signing of the contract has previously been disclosed.   Under the terms of the agreement, GT Solar will provide DC Chemical with state-of-the-art polysilicon CVD reactors, which are used to manufacture polysilicon, a key raw material utilized to produce solar cells. This latest agreement marks the third contract between the two companies since GT Solar began offering CVD reactors and related equipment in 2006.

DC Chemical has constructed its first polysilicon plant, has begun manufacturing polysilicon, and recently announced a large-scale expansion. GT Solar has been a provider of equipment and expertise to DC Chemical since the companies’ entered the high-value, high-growth polysilicon business more than two years ago. Polysilicon is a highly purified form of silicon that is used to make both semiconductor wafers for microelectronics applications and solar wafers. The chemical vapor deposition process involved in the production of polysilicon takes place in a specialized CVD reactor using a variety of complex chemical processes.  

Dear Reader,   You may have received complimentary copies of the ORF Energy News Monitor. Our objective in bringing out the newsletter is to provide a platform for focused debate on India’s energy future. You could be a partner in this effort by becoming a subscriber. You could also contribute recommendations for India’s energy future in the form of brief insightful articles.   We look forward to receiving your patronage and support.   ORF Centre for Resources Management

 

ORF ENERGY NEWS MONITOR   Subscription Form Please fill in BLOCK LETTERS

Subscription rate slabs for Commercial entries, Research Institutes, Academics and Individuals will be provided on request. The subscription can be made for soft copy or for hard copy or for both. Selected ORF publications as well as advertising space in one issue of the ORF Energy News Monitor are offered as introductory free gifts for Commercial Sector only.

Yes! I/we would like to receive copies of the weekly ORF Energy News Monitor for a period of ______year(s).  I/we shall be entitled to one hard copy along with the option of soft copies to a list of e-mail addresses provided by me/us for the period of subscription.  I/we also note that I/we shall get select ORF publications brought out during the period of subscription free.    Name……………………………Address…………….………………………Telephone……………………Fax………………….E-mail………………… Please find enclosed cheque/Bank Draft No.........................dated …………………drawn at New Delhi for Rs.........……….favouring ‘Observer Research Foundation’   Please fill in this form and mail it with your remittance to   ORF Centre for Resources Management OBSERVER RESEARCH FOUNDATION 20 Rouse Avenue New Delhi - 110 002 Phone +91.11.4352 0020 extn 2120 (Vinod Tomar) Fax: +91.11.4352 0003 E-mail: [email protected]

 

 

 

• Energy
• India
• Gas
• Oil

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.