MonitorsPublished on Oct 07, 2008
Energy News Monitor |Volume V, Issue 16
Gundia Hydro Electric Project: Issues of Contradictions and Contentions

Shankar Sharma, Consultant to Electricity Industry





he proposal to set up a 400 MW capacity hydro electric project in evergreen forests of Western Ghats in Hassan district of Karnataka has met with a lot of opposition from the locals and environmentalists. The Detailed Project Report of the proposal poorly backs up the project with many contentious issues. The proposed Public Hearing on environmental issues on 26.7.2008 at the project location is expected to be a stormy one with many people likely to vehemently oppose the proposal. This article highlights many contentious issues of the proposal.


The Western Ghats in Karnataka are the source of about 30 small and major rivers including Cauvery, Tunga, Bhadra, Sharavaty, Netravthy, Hemavathy etc. and are the main sources of water in the plains, in addition to being the life line of people of the state. In this scenario any more destruction, submersion and fragmentation of the Western Ghats will be suicidal, and hence any additional hydro electric project is not in the best interest of the people of not only Karnataka but also of the entire South India.  Western Ghats are also an important and sensitive ecological area in the world, and already several hydro electric projects, mining, road and rail have destroyed these unique forest ecosystems reducing the natural forests. It is very pertinent to note that any Environmental Management Plan (EMP) as may be proposed by project developers will not be able to compensate the loss of bio diversity.

The project proposal:

The proposal is to set up two hydro turbines of 200 MW each and use the stored waters of few rivers and streams including the river Gundia in thick rainfall forests of Western Ghats in Sakaleshapura Taluk, Hassan district in Karnataka. The Detailed Project Report (DPR) prepared by Karnataka Power Corporation Ltd. (KPCL) contentiously says that the project is to be developed as a run-of- river scheme but also to be used for peak load support. A cursory look at the costs mentioned in the DPR indicates that the costs are very high compared to the meagre benefits of 400 MW of peak load and annual energy of 1,136 MU at annual Load Factor of only 32.42%.  The costs of forest destruction and that of R&R of the Project Affected Families, which have not been included in the cost estimate, themselves may push the overall cost of the project to a high level.

The issues:

1.        Whereas the generally accepted norms require an effective cost benefit analysis for any project of such societal importance, no such analysis has been shown by KPCL.  Without such an analysis the DPR has failed to demonstrate that the proposed project is the best solution available to the society in the present circumstances. 

2.        A cursory look at the costs mentioned in the DPR indicates that the costs are very high compared to the meagre benefits of 400 MW of peak load and annual energy of 1,136 MU at annual Load Factor of 32.42%.  The costs of forest destruction and that of R&R of the Project Affected Families, which have not been included in the cost estimate, themselves may push the overall cost of the project to a high level.

3.        The societal value of the thick rain forests of highly sensitive Western Ghats alone, which are proposed to be submerged, itself may be many times more than the project cost of Rs. 1,200 Crores.

4.        The annual revenue to the forest department from this forest itself may be more than the monitory value of the energy estimated from the project. In addition, the real value of the livelihood it is providing to the locals, the value of herbs, of water source etc. will be very huge.

5.        Some of the value additions the thick rain forests of Western Ghats can provide are: Production of oxygen; Control of soil erosion & maintenance of soil fertility; Recycling of water and control of humidity; Sheltering of animals, birds, insects & plants; Control of air pollution.

6.        I understand that as per an indirect estimate of value of forests by Mathur and Soni in 1983 it is about 1.27 Crores per hectare per year. With about 490 Hectare of forests to be submerged under this project, the total value loss per year itself would work out to be about Rs. 620 Crore per year.      

7.        The value of annual energy production by this project @Rs. 1.27 per unit works out to Rs. 144 Crores. Even if we consider the replacement value of hydel energy by gas energy @ Rs. 4.00 per unit, the value of annual energy production by this project works out to be about Rs. 450 Crores. The economic value accruing to the society from these forests, hence, is much more than the projected revenue from the electricity generation.

8.       Whereas the revenue from a live forest is much more than quantified above and is perpetual, the energy production from the proposed hydel station is only for a limited period say, 50 years.

9.        Because of this simple economic analysis alone the project appears to be unacceptable to our society.

10.     Whereas the National Forest Policy stipulates 33% forest cover of the land for a healthy environment, Karnataka’s and national forest cover is understood to be below 20%.  Hence the proposal to submerge 490 Hectares of thick rain forests of highly sensitive Western Ghats will be against the letter and spirit of the said National Forest Policy, and hence should not be acceptable to our society.

11.      KPCL, as project proponents, has not considered any alternative to this project in order to meet the electricity demand of the state. Even if we agree for a minute that there is electricity shortage in the state, the first thing any company /organization would do under such a situation is to analyse all aspects of the situation. One should ask the question why there has been shortage: whether the existing infrastructure including the generating stations is being put to maximum use; identify all the relevant issues; study various options available etc. If the officials care to analyse the situation objectively the following issues will become crystal clear.

·          The Transmission and Distribution losses in Karnataka have been very high of the order of about 28% against the international norms of less than 10%; if these losses are brought down to 10% there will be virtual addition of more than a thousand MW to the available power; this will be more than treble the capacity addition possible through the proposed project;

·          As of today the total available power for the state from various sources, including the share from the central sector is about 8,000 MW (as per MoP website). If this capacity is used to the optimal level, as per Central Electricity Authority (CEA) norms, a peak hour demand of more than 6,500 MW can be met. But the peak hour demand met for the year 2005-06 was reported as 5,600 MW only. This shows that the infrastructure including the generating stations is not being put to maximum use.

·          Similarly, the annual energy deficit reported for the year 2005-06 was less than 1%.  Even if we take the unrestricted demand into consideration, which was not very high during 2005-06, the same for the reason mentioned above was easily avoidable;

·          There is huge scope for adopting various efficiency improvement measures like Demand Side Management (DSM) and utilization at users' end.  As per the Planning Commission the peak load can be reduced by more than 10% at the national level. The replacement of even 50% of all the incandescent lamps in the state by CFL can result in the reduction of about 1,000 MW of peak hour demand, and about 1,500 MU of energy demand per year. This can be achieved without any expenditure to the state if the cost of replacement is passed on to the consumers in small installments.

to be continued

Views are those of the author                      

Author can be contacted at [email protected]

The Economics of Nuclear Energy Markets and the Future of International Security (part – IV)

(Erwann O. Michel-Kerjan, The Wharton School, University of Pennsylvania

Debra K. Decker, Kennedy School of Government, Harvard University)


Continued from Volume V, Issue No. 15…

3.3. Prices

Term Market


he economics of these demand and supply forces are reflected in the evolution of uranium prices over time. In most countries, nuclear power plants and electric utilities secure the most important part of their required uranium by signing medium-term and long-term contracts with foreign uranium producers and suppliers. These contracts call for deliveries to start about 3 years after contract signing and run for an average of 6 years, according to Ux Consulting, which tracks market activity. Prices for such contracts are established through negotiation between the buyer and the seller. Prices are typically based on a set of various pricing formulas such as reference prices (based on spot market; see below) with or without price ceilings or floors, fixed prices that are only adjusted for inflation depending on delivery time, and so on. As a result, it is difficult to establish a robust quantification of the evolution of this market because the transactions are typically confidential. According to Ux and TradeTech which track most of these transactions though, in the last several years, the term market volume has more than tripled as buyers seek to lock in uranium supplies, if not the delivery price (contracts contain price floors and some ceilings). Contracts written in 2005 lasted much longer than before (several of them up to 10 years), leading to a higher volume of uranium under contract. According to these two companies, the average long-term price was $36 per pound at the end of 2005, up 45 percent from $25 per pound at the end of 2004. In December 2006, the long-term price had reached $69 per pound, and by March 2007 was as high as $85 (TradeTech, 2007).                                                                                                                         

That drastic increase in price makes some mining projects that were deemed uneconomic now look attractive. 

Spot Market 

What is not purchased through the term market is purchased directly in the spot market, which is for quick sell (deliveries from a few weeks up to one year or so, after contract signing). For many years the spot market for uranium remained quite low, typically trading below $20 a pound between 1984 and 2004 (Figure 4). As previously discussed, the radical increase of the demand in the post-oil crisis of the 1970s, combined with growing concern about a possible uranium supply shortfall, pushed prices up during this period. After that, the spot price almost always continuously decreased for the following 25 years due to the availability of secondary sources of supply (including excess inventories and dismantled Russian nuclear weapon stockpiles). Uranium spot market reached a twenty-six-year low record in 2000 at the NUEXCO Exchange Value—the longest-running price indicator in the uranium market since 1968—at less than $7 per pound U3O8. That has changed radically, however, in recent years. The price of uranium has grown since 2003, and in August 2006 it soared through the $50 level for the first time in its history, with a pound of U3O8 priced at $52. As Figure 4 depicts, only in the late 1970s was the Exchange value above $40 a pound (equivalent to nearly $110 in 2007 dollars). The price has continued to rise in the following months, however, reaching $75 in February 2007, up to an historic record high (even in real terms) at $140 in July 2007, before reaching the $75-$85 range again in September 2007. The combination of at least four elements explains the recent trend, which we believe might reveal the beginning of more radical change in nuclear markets. First, the global demand for energy continues to increase. For example, China’s increased energy demand has impacted oil markets, indirectly affecting nuclear markets as well (Combs, 2006). Further, the recognition that some of the secondary uranium sources cannot be sustained at least in the short term and the increasing concern about finding non-carbon energy sources pushes the demand upward in primary markets. As discussed in the introduction, several countries have now revised their plans and are looking to build more reactors.   

Figure 4 Evolution of Uranium Spot Market Prices, 1968–2007 (in current prices) 

Source: Data from TradeTech. (Dollars per pound equivalent U3O8)

Note: We determine annual price by averaging monthly prices over the year; last point on the graph is the average spot price over the first 9 months of the year 2007, $104 per pound. 

We believe this increasing primary demand constitutes one of the fundamental drivers of the recent evolution of prices on the uranium markets, and certainly represents a continuing driver in the future. Second, while the impending disparity between supply and demand has been well-known for years, external shocks such as natural and man-made disasters increased awareness of the potential effects from disruptions of production. Examples are the second large fire at the 2001 Olympic Dam mines (South Australia) and the 2003 flooding of the McArthur River mine (Canada), the world’s largest high-grade uranium mine, which closed for several weeks. Most recently, the October 2006 flooding of the new 18-million-pound Cigar Lake mine (Canada) has delayed production until 2010—three years later than planned (American Nuclear Society, 2007). Third, a new way of buying uranium has emerged: uranium auctions. As long as active demand for spot uranium continues to outpace active supply several fold, buyers have to expect to compete aggressively for the product. While the total volume exchanged through auctions remained low compared with the total consumption worldwide, the spot price almost always systematically increased after each of the 13 fixed bid price uranium auctions that took place in 2006 (TradeTech, 2006).  Fourth, uranium is now seen as a very profitable investment for investors looking for portfolio diversification. According to Ux, investors/hedge funds entered the market strongly in 2005 and accounted for 25 percent of the transactions by volume (tons) that year—although only 107 transactions were recorded. These discretionary purchases (not for immediate consumption) accounted for about two-thirds of the 2005 spot volume (35 million pounds). In 2006 the investors/funds accounted for about 35 percent of the spot market (Davis, 2007). With a 500% increase in price between 2004 and 2007, uranium might have been one of the most profitable energy investments.   


What will the uranium markets look like in the short term (2 to 5 years) and long term (10 to 25 years)? There is no easy answer to this question because it depends on several complex dynamics involving market, political, and international security concerns. In this section we discuss elements that, beyond the expected increase in energy demand discussed earlier, will also have a positive impact on the “nuclear renaissance” and further development of nuclear energy markets in the coming years. Here we focus on what we believe shall be two of the most important: (1) increasing concern about global warming and growing recognition by governments that nuclear energy can help address this issue; and (2) growing concern about energy independence. We end this section with a note on the status of nuclear energy development in the United States. In the following section we then turn to events that could negatively impact the future development of nuclear energy markets. 


 to be continued

Courtesy: Risk Management and Decision Processes Center, The Wharton School, University of Pennsylvania                        





OVL in talks with Iran for oil block

October 7, 2008. OVL is holding talks with the Iranian government for exploring an oil block in the northern part of the country. OVL is spearheading India’s effort to secure oil assets abroad as Asia’s third-largest economy imports more than 70 per cent of the oil it consumes. The integrated energy policy, recently approved by the Cabinet, lays emphasis on buying energy assets abroad.

OVL has interest in 37 oil and gas assets in 17 countries. It is producing oil and gas from six assets in Russia, Sudan, Syria, Vietnam and Colombia. The company acquired 11 assets in six countries in 2007-08. In August, OVL agreed to buy UK-listed Imperial Energy, which has assets in Russia and Kazakhstan, for $ 2.8 billion. The deal is awaiting the Russian government’s approval. OVL, along with Oil India and Indian Oil Corporation, has discovered oil and gas in the offshore Farsi block in Iran. The company is also seeking other oil and gas blocks in Iran, particularly in the South Pars field, the world’s largest gas field.

Oilex to continue drilling operations in Oman and India

October 7, 2008. Oilex Ltd., an Australian oil explorer, plans to continue drilling operations in Oman and India following excellent oil shows at Oman and an encouraging initial result at an Indian well. The Cambay 19Z well in India showed 20 to 55 barrels of oil and associated natural gas per day from its primary reservoir.

Cairn warns of output delay from Barmer fields

October 6, 2008. Cairn India has asked the Centre to assure Rajasthan the point of sale for the crude from its Barmer oil field would remain in the state and warned any uncertainty in this regard could affect production schedule. The state government is concerned over the loss of revenue due to the shift in delivery point from the Barmer field in Rajasthan to Salaya in Gujarat.

The petroleum ministry on April 30 approved the shifting of the delivery point and also allowed multiple delivery points for sale of crude. Cairn India has asked the Centre to issue a clarification to the state government that the point of sale would remain in Rajasthan even as delivery point would be shifted. Cairn India, which has started field development along with the 600-km pipeline, is expected to produce first oil in the second half of calendar year 2009. The company claims that at peak level the Mangala, Bhagyam and the Aishwariya fields would produce 175,000 barrels of oil per day (bpd) and boost India’s domestic crude production by about 25%.

ONGC exploring oil blocks in Angola and Brazil

October 5, 2008. ONGC is exploring the options to pick up blocks in Angola and Brazil. OVL Board has set a target of crossing 10 million tonnes of equity oil production abroad, in the next couple of years against the current equity oil production of an estimated 8 million tonne (mt) approximately.

In the next couple of years, ONGC is projected to pick up oil blocks in African and Latin American sub-continent, to ramp up its production capacity overseas through its arm-OVL. Targets at OVL for the same have also been set. In a joint venture ONGC has already tied up for two oil blocks in Venezuela, in June this year.

Cairn’s Ravva oilfield enters declining phase

October 3, 2008. Having produced at the plateau rate of 50,000 barrels of oil a day (bpd) since 1999, Cairn India operated Ravva oilfield has finally hit the declining phase in the July-September 2008 quarter. The ageing field, which has produced more than double the original reserve estimates, currently produces 43,040 bpd of oil on average.

According to industry sources, assuming that production may decline further during the year, the joint venture partners have set the target for 2008 (calendar year) at around 44,000 bpd. The shallow water offshore field located in the Andhra Pradesh coastline also produces approximately 2 mmscmd of gas, half of which is sold at the administered price. The current performance trend at Ravva is in line with expectations and is consistent with the ultimate recoverable reserve estimates. As with the industry practice, efforts are towards maximising production through infill drilling, exploratory drilling and facilities upgrade.

The company recently drilled two exploration wells in Ravva and struck small-sized oil and gas discoveries. Currently one such discovery is under extended testing and producing 525 bpd. Apart from Ravva, the CB-OS/2 joint venture in the Cambay basin is the other major operation of the company. Although a large part of the gas field had hit a declining trend some time ago, Cairn could marginally ramp up production in April-June 2008 through various infill development programmes.

The field currently produces 1.4 mmscmd of gas and 7,586 bpd of oil, up from 1.09 mmscmd and 6,042 bpd respectively in April 2008. The total working interest of the company was 18,764 barrels of oil equivalent per day (boepd) in the second quarter of 2008, marginally up from the first quarter of 2008 and down from 19,775 boepd in the second quarter of 2007. As Cairn’s major find in Rajasthan is slated to come into production in the second half of 2009, the performance of Ravva and CB-OS/2 and the crude price may play a major role in the company’s performance in the medium run.


IOC awaits changes in tax laws to buy diesel from RIL

October 3, 2008. Indian Oil Corp, the nation's largest oil firm, is looking at changes in tax laws to buy diesel from Reliance Industries to meet the fuel deficit. IOC, Bharat Petroleum and Hindustan Petroleum need just over 2.5 million tons (mt) of diesel during the remaining part of the fiscal and if they are allowed to buy from Reliance it would help them save Rs 650-700 crore ($138 – 148 mn).

Reliance has converted Jamnagar into an only-for-exports unit, thereby getting tax incentives like exemption from payment of income tax and duty free import of raw material. An Export Oriented Unit (EOU) is discouraged from selling products in domestic market through levy of double taxation. The state-run firms would have to pay Rs 9.51 a litre more in taxes on petrol and Rs 2.85 per litre on diesel if they buy fuel from Jamnagar. Sales from an EOU or a unit in Special Economic Zone are treated as imports and are first levied customs duty, then additional customs duty and then CVD. A 3 per cent cess is levied on the aggregate of these. On top of this, additional excise duty is charged and a 3 per cent cess is levied on aggregate of these. Multiple cess is not levied on direct imports.

Reliance Industries demands oil bonds

October 3, 2008. Reliance Industries demanded oil bonds and upstream assistance, the way state-run firms get, to restart its petrol pumps. The company had few months back shut down its 1500-odd petrol pumps in the country after it could not compete with its public sector rivals, which could sell petrol and diesel at prices way below market price because of government support. Due to huge losses, Reliance was forced to withdraw completely from domestic market for petrol and diesel.

Government compensates half of the losses incurred by state-run Indian Oil, Hindustan Petroleum and Bharat Petroleum on selling petrol and diesel below the cost through issue of oil bonds, while another one-third is met through assistance from upstream companies like ONGC. However, according to IOC, the government compensation was not adequate as oil bonds did not provide the much needed liquidity. Bonds which are repayable after a fixed tenure like 7-years, do not provide cash to the companies to buy raw material (crude oil). 

Reliance Industries seeks sops to sell fuel in India

October 3, 2008. Reliance Industries Ltd (RIL) is ready to sell diesel again if the government extends subsidies to private players as it does for state-run oil retailers. The company, India's largest in the private sector, has also sought the removal of extra taxes on transporting fuels to be able to remain competitive vis-a-vis prices of imported fuel. The company was forced to be get out of the domestic market after it was denied a level-playing field with public sector oil marketing companies.

RIL was currently supporting its dealers, mothballing its 1,400 fuel stations. Besides subsidies, diesel from the Jamnagar refinery, which was given export-oriented status in 2007, also faces double taxation on its products, if it tries to sell fuel in domestic market. It will not only pay customs and excise duty, but also an additional excise tax, increasing the price of Reliance diesel. It will be cheaper for them (PSUs) to import (diesel).

But, with the sharp rise in diesel demand for electricity generation, the petroleum ministry and state oil firms have been grappling with increased diesel bills. Demand has been rising at 18 percent, much more than the government's prediction of 14 percent. Buying diesel from the 33 mt capacity Reliance refinery has become an attractive solution but only if there were no additional taxes. RIL met finance and petroleum ministry, where it reportedly offered to sell diesel to state firms if double taxation was removed.

RIL is ready to commission its 29 mt second refinery in Jamnagar, to be run by Reliance Petroleum Ltd (RPL), before the year-end, with trial runs expected to start within a few days. The refinery will have the ability to process cheap, low-grade crude into gasoline and diesel that meet strict western emission standards. Fuel from the RPL refinery will be mostly exported to the US and Europe. With the two refineries, Reliance will have a total capacity of 10 mt of gasoline and 24 mt of diesel. With the new refinery, global refining margins will fall further.

Financial closure of Paradip refinery by November

October 1, 2008. IndianOil hopes to achieve financial closure of the proposed Rs 30,000-crore ($6.41 bn) grassroots refinery project at Paradip in Orissa by November. The company has already finalised funding the loan and equity components in the project. Initial agreement on the cost of borrowings has also been reached with the identified lending agencies. The loan agreements will be firmed up following board approval of the respective banks and financial institutions, paving the way for IOC to seek approval from its board for financial closure in November. The draft term sheet finalising the loan and equity components in the project are ready. Discussions with the banks and financial institutions as identified by SBI Caps are also over. The banks and financial institutions will now approach their respective boards for formalising the loan agreements. The process will take a little more time than usual due to the ensuing festive season and is expected to be over by the month-end.

Transportation / Trade

GAIL gets board nod for VV pipeline project

October 4, 2008. GAIL (India) Ltd, which is looking to double capacity of its Pata petrochemical complex in Uttar Pradesh to 800,000 tonnes (0.8 mt) a year, has received the nod of its board recently. Another project approved by the board, in principle, is the Vijayawada-Vijaipur Pipeline (VVP) running through central India. The board has also given its nod for the submission of Expression of Interest for the VVP pipeline project to Petroleum & Natural Gas Regulatory Board (P&NGRB). A draft feasibility report will be carried out before submission of the bid.

GAIL’s competitors in the petrochemicals business are Reliance Industries Ltd and Haldia Petrochemicals Ltd. The installed polymer capacity at Pata is 410,000 tpa. It will be increased to 800,000 tpa by leveraging existing facilities and augmenting them. The company proposed to augment the plant capacity to 500,000 tpa, gradually going up to 800,000 tpa. In fact, to strengthen its position in petrochemicals, GAIL has jointly assessed areas in north Asia and CIS States for setting up a mega petrochemical complex through public-private participation, for which RIL has been roped in. As regards the pipeline project, the length of the proposed trunk pipeline would be about 1,000 km and spur line would be over 500 km with a capacity to ferry approximately 30 mscmd (million standard cubic metre a day) of gas.

The starting point of the pipeline would be Vijayawada (Andhra Pradesh) and terminating point is Vijaipur (Madhya Pradesh). GAIL has an agreement with major domestic gas producers, such as RIL and ONGC, to ferry their gas. The VVP project is over and above the other pipeline projects that GAIL is working on. With the current projects, excluding VVP, GAIL is targeting raising its pipeline handling capacity to over 300 mscmd by 2011-12 at an estimated investment of Rs 20,000 crore ($4.26 bn).

Naphtha beats LNG as cheaper fertiliser fuel

October 4, 2008. For the first time, fertiliser companies have begun paying a higher price for spot LNG (liquefied natural gas) than for naphtha. September prices for spot LNG in India have registered a hike of almost $3 per mmBtu (million metric British thermal unit) compared to naphtha price. A fortnight ago, spot LNG was available at $20 per mmBtu against a projected price of $25 per mmBtu, on the back of dipping crude price and decline in the price of naphtha, often used as alternative feedstock to natural gas in times of shortage.

In mid-September, naphtha was priced at around $22 per mmBtu, lower than LNG, and was expected to dip to the $20 level, pushing spot LNG price downward and making it uncompetitive. In early August, the state-owned GSPC negotiated spot LNG price at a record $20 per mmBtu from the Shell group, against a backdrop of tight naphtha availability and projections that spot prices for LNG would shoot up for consumers to $22-24 per mmBtu. Acute shortage of gas availability for feedstock and the high price of naphtha had so far left the option of spot purchases of LNG for feedstock open to fertiliser companies to negotiate a reasonable price pegged lower than naphtha. That, though, will be a very difficult choice now if the companies are to continue operating units at optimum capacity utilisation.

On the one hand, the group new pricing system for urea manufacture precludes fertcos using feedstock priced higher than naphtha for producing fertilisers. On the other, naphtha availability is already facing shortage in the country, affecting output in several units in the recent past that have been using this for feedstock. Shortage in naphtha availability, in fact, became patently obvious in July-August, when fertcos began increasingly turning to this as feedstock in view of the tight squeeze on gas supply. Oil marketing companies found it difficult to meet the surge in demand, especially given their higher export commitment which itself was based on an anticipated drop in naphtha demand.

GAIL foresees surplus natural gas in India by ’12

October 3, 2008. GAIL, predicted the country becoming surplus in natural gas by 2011-12 and called for stepping up investments in creation of infrastructure for taking the fuel to the markets. From a deficit situation now, the country will turn surplus in 2011-12. While the current availability of 103 mmscmd of gas met just half of the demand, natural gas supplies are projected to rise to 279 mmscmd by 2011-12. This does not include imports from Iran or Turkmenistan through proposed pipelines.

Besides production from currently operational fields and LNG imports, the projections include 80-90 mmscmd gas from Reliance Industries' eastern offshore D6 fields, 10 mmscmd from GSPC's Krishna Godavari basin fields and 25 mmscmd from Oil and Natural Gas Corp's new fields. The demand which can be met through the infrastructure already in place to deliver the fuel would be 250 mmscmd.

Policy / Performance

Oil ministry considering dual pricing for diesel

October 6, 2008. As the subsidy burden increases, the Centre is taking a serious look at the subsidy on diesel that may cost more to car owners.  Ministry of petroleum and natural gas is considering a dual pricing framework for diesel to reduce the burden on central government’s coffers. Union petroleum minister Murli Deora, stated that a proposal to offer subsidised diesel to only public transport and agricultural sector is under consideration. The government will take a call on dual pricing of diesel soon. Currently, the Centre is paying a subsidy of Rs 16 a litre on diesel. However, the ministry has observed that diesel consumption by car owners and bulk users is resulting in unnecessary burden on the Centre that is keeping prices low in the interest of agriculture sector.

The Centre is not interested in offering subsidised diesel for cars. According to him, Centre had a subsidy burden of Rs 2,86,000 crore ($59.55 bn) during the previous fiscal on petroleum products which is likely to be around Rs 1,60,000 crore ($33.31 bn) this year. The Centre has shelled out Rs 1,34,000 crore ($27.9 bn) as subsidy on petroleum products.

Department of Fertiliser seeks early gas connection for fertiliser units

October 5, 2008. The Department of Fertilisers has urged the Empowered Group of Ministers (EGoM) on gas pricing to ensure early gas connections to naphtha-based units to bring down production costs, which will reduce the rising fertiliser subsidy bill. According to the department, highest priority would be given to the fertiliser sector once the gas is available.

The department is of the view that indigenously produced gas would also be made available in a year or two but unless that happens, unless pipelines are laid, one has to try for more judicious and effective use of fertilisers. Out of the fertiliser subsidy of around Rs 1.19 lakh crore ($25.43 bn) for the current year, approximately 70 per cent is for units that run on naphtha or fuel oil and 30 per cent is for gas-based plants, which constitute 70 per cent of the units.

Concerned over the increase in the use of fertiliser without simultaneous rise in foodgrain production, the department pointed out that 65 per cent of fertilisers get wasted as it falls on the ground and only 35 per cent is utilised. This is because the farmers traditionally spread the fertiliser over growing crop while only the portion that goes into the root provides nutrition.

ONGC Mittal Energy under scrutiny in Nigeria

October 2, 2008. Oil and Natural Gas Corporation and steel billionaire Lakshmi N Mittal combine's oil block in Nigeria has come under the scrutiny of African nation's Parliament for alleged irregularities in its allotment. ONGC Mittal Energy Ltd, the joint venture company floated by ONGC and Mittal Investment Sarl, had in November 2006 paid $100 mn to win OPL-246 block. Nigerian Government had vested the block from local company South Atlantic Petroleum (Sapetro) before allocating to OMEL.

An ad-hoc committee of the House of Representatives has been formed to investigate into the alleged irregularities in allotment of oil blocks between 2006 and 2008. Allotment of OPL-246 is one of the two blocks the committee is closely scrutinizing. The Committee found discrepancy in technical report prepared by Department of Petroleum Resources and applications for OPL 216 and 246 could not be traced in the files. It also reported to have discovered that OPL 246 was awarded to OMEL after the bid round for 2006 had been closed. The Committee noted from the records that OPL 246 was awarded to an oil company (Sapetro) before DPR gave it out to OMEL. The Committee has also sought to know how far OMEL had gone in fulfilling the investment it had committed in downstream projects to secure oil blocks in Nigeria. They have not moved an inch on those projects.

OPL 246 is the relinquished area of the billion-barrel Akpo oilfield of South Atlantic Petroleum (Sapetro) which is part-owned by Theophilus Danjuma, former defense minister. OMEL had in 2005 won rights to explore in OPL-279 and OPL-285 after committing to invest $6 bn in a 180,000 barrels per day Greenfield refinery, a 2,000 MW power plant and a railway line from east to the West of Nigeria. It paid a signature bonus of $50 mn for OPL-285 and $75 mn for OPL-279. These blocks are not being scrutinized as of now. 

Oil companies to unveil grievance redressal mechanism

October 1, 2008. The public sector oil marketing companies (OMCs) are set to unveil a public grievance redressal mechanism across the country for domestic LPG, petrol and diesel. According Ministry of Petroleum and Natural Gas, as part of the exercise the three OMCs viz., Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation, have separately provided toll free numbers for complaint registration and follow up on the complaints.

For complaints relating to Indian Oil the customers can dial toll free number 18002333555 from anywhere in the country and for the complaints relating to BPCL the toll free number is 1800222725. In the case of HPCL, the company has provided two separate toll free numbers: i) 18002333777 for LPG and ii) 18002333999 for petrol and diesel. The call centres are being operationalised region-wise to facilitate the customers lodge complaints in local language.

The customers are given a registration number and those customers who wish to know about the status of the complaints could ring up the call centres on the same toll free numbers. The field officers of the OMCs have been directed to attend to the complaints/grievances satisfactorily at the earliest. In addition to this, the companies have also geared up their normal grievance redressal mechanism.

United India bags IOC’s mega policy

October 1, 2008. Public sector United India Insurance Company Ltd (UIIL) bagged the prestigious Indian Oil Corporation mega risk cover at a premium of Rs 36 crore ($7.7 mn). The cover comprised three components viz., asset cover, business interruption and terrorism risk. Risk covers above Rs 10,000 crore ($2.13 bn) are treated as mega policies, under current guidelines of the Insurance Regulatory and Development Authority. IOC’s asset cover risk was estimated at about Rs 60,000 crore ($12.83 bn). The asset risk cover included all IOC’s refineries, pipelines and handling terminals at the major ports in the country. For business interruption or revenue losses in the event of accidents, the risk cover was for Rs 17,000 crore ($3.63 bn).

The terrorism cover that included third party liabilities as well was for Rs 74,000 crore ($15.83 bn). The policy comes into effect from the beginning of October. UIIL, would also share the risk, through coinsurance arrangements with the remaining three PSU insurers. This form of insurance syndication is normally done as a derisking mechanism. Private sector insurers were unlikely to be included in the syndication. The derisking also involved placing part of the risk with global reinsurers. The IOC risk cover was hotly contested between all the public and private sector companies, in view of the size of the deal.

The low claims ratio accordingly implied that IOC was a sought-after account among all the insurers. This brought down the premium rates down. IOC though was able to beat down premium only by 10 per cent over the corresponding period of last year. This was despite domestic premiums crashing by over 70 per cent post-deregulation. Last year, the premium was Rs 42 crore ($8.98 mn). IOC’s inability to capitalise on the fall in premiums was largely, because mega cover tariffs are largely reinsurance- driven.

USTDA extends two grants to support India’s petroleum sector

October 1, 2008. The US Trade and Development Agency (USTDA) has extended two grants totalling $946,221 to support activities in India’s oil and gas sector to further the agency’s commitment to the objectives of the US-India Energy Dialogue. According to USTDA, the first grant is to the Petroleum & Natural Gas Regulatory Board (P&NGRB) of India. The second grant is to public sector oil refining-cum-marketing company Hindustan Petroleum Corporation Ltd (HPCL) to fund investment analysis on a refinery upgradation project of HPCL’s Mumbai refinery.

According to the Development Agency, the $348,339-grant awarded to P&NGRB will support funding of a series of technical workshops in India and the US, site visits to US Federal and State regulatory authorities and private industry, and internships for P&NGRB personnel at a US public utility commission. In particular, the grant will assist the P&NGRB in developing midstream and downstream regulations in the areas of pricing, utility accounting and monitoring, safety, and licensing of infrastructure development for the oil and gas sector.

The P&NGRB has selected the National Association of Regulatory Utility Commissioners, a non-profit organisation based in Washington D.C., as the contractor to undertake the USTDA-funded technical assistance. The second grant of $597,882 to HPCL will fund investment analysis of a new refinery process unit at HPCL’s Mumbai refinery to convert heavy end residual products derived in the refining process to lighter end and higher value products.

The grant will determine the viability of applying a proprietary technology from Kellog Brown and Root LLC (KBR) of Houston, Texas, called Residuum Oil Supercritical Extraction, to achieve HPCL’s objectives. HPCL has selected KBR to undertake the study. In addition to the USTDA grant, both KBR and HPCL will contribute additional resources towards the study completion.



SRM Energy plans 2 GW plant in TN

October 7, 2008. Mumbai-based SRM Energy, a Spice Energy group, is planning to set up an 1,800 to 2,000 MW coal-based thermal power plant in Cuddalore district of Tamil Nadu. The company would invest around $2 bn (around Rs 9,200 crore) in the project. The company would fund the project through debt (80 per cent) and equity (20 per cent). The estimated time for the project is around five years. The first unit will commence operations by 2012.

The company is also planning to acquire 1,000 acre of land, negotiations for which are in the final stage. The company is planning to construct a jetty at the Cuddalore port or close to the project location to handle ships, which would be carrying imported coal. It has signed a coal sale purchase agreement with an Indonesia-based company. The Tamil Nadu Electricity Board (TNEB) is expected to buy 250 MW power, which might be increased to 500 MW. The company is also in talks with the Tata Power Trading Corporation and Power Trading Corporation of India. The company was also planning to set up a 2,000 MW pithead coal-based power plant in east India with an investment of $2 bn.

NTPC Kaniha to get coal soon

October 7, 2008. The 3000 MW NTPC Kaniha, India’s second largest power plant, will shortly get supplies of imported coal for operating all its six 500 MW units with full load. NTPC Kaniha, located 30 km from the Talcher Coalfields and feeding power to 17 states across the country, had been running five out of its six 500 MW units for some months as one of the units was under annual maintenance.

The NTPC Kaniha plant will receive two lakh tonnes of imported coal from October 15 out of 8.2 mt of foreign coal being imported by the utility major for its power stations located throughout the country. It may be noted that NTPC Kaniha had been grappling with acute coal shortage and the power plant had slipped into the super critical stage last month with coal stock of barely two days. The plant cannot run all its six units with full load without importing coal. The plant is now getting about 50,000 tonnes of coal every day from Mahanadi Coalfields Limited (MCL) through the Merry Go Round system and Railways from Talcher and Ib valley fields.

The plant gets about 30,000 tonnes of coal from Lingaraj mines of Talcher through Merry Go Round while the remaining coal is sourced from Ib valley fields and Talcher through railway rakes. With the import of coal, it is expected that there will be no problem of coal for the plant from October 15 when coal stock will be built up. The power plant has now a stock of about 70, 000 tonnes of indigenous coal. The plant requires about 60,000 tonnes of coal per day for running all its six units on full load.

ACC likely to set up hydropower plants

October 7, 2008. ACC, the country's largest cement maker, is mulling to get into hydropower projects as a part of its strategy to derive power from renewable sources and cut costs. The company is currently exploring hydropower projects, which are available for a takeover. This would probably be the first time for a cement company to go for a hydel project.

ACC has also bid for a hydropower project of 13 MW in Himachal Pradesh in an open tender with the state government. There are 2-3 ways for exploration. One is the possibility of new projects, another is looking at the existing hydropower companies, the smaller ones, and lastly projects, which are in an intermediate stage with all the approvals having been received. ACC, part of the Swiss cement giant Holcim, has recently set up its second wind power-based captive power plant of 7.5 MW capcity in Rajasthan’s Jaisalmer. The company's first wind power project with a capacity of 9 MW came up in Tamil Nadu last year.

Reliance Power wants one more coal block in MP

October 7, 2008. Reliance Power, an Anil Dhirubhai Ambani Group (ADAG) company, has sought another coal block (Bijul) near its Sasan ultra mega power project (UMPP) in Madhya Pradesh. The company is willing to invest about Rs 5,000 crore ($1.04 bn) in the next four-five years to develop the block. The coal produced from Bijul would be used by group’s power plants. ADAG preliminary planning shows that it can start the mining operation from Bijul block as early as next 4-5 years, i.e., at least 7-8 years before the current expectation of production. It would also bring in much needed investment of over Rs 5,000 crore ($1.04 bn) in coal sector.

The block is under Coal India. Its subsidiary Northern Coalfields proposes to bring the block under production after 12th Plan. Reliance Power has asked for the block as it is not only joining its existing three coal blocks namely Moher, Moher-Amlohri extension and Chhatrasal in Singrauli coalfields, but its development in isolation is not possible by any other company. The Sasan UMPP has three captive coal blocks for Sasan UMPP in Madhya Pradesh. The government has recently allowed Reliance Power to use excess coal from the three captive blocks (having about 750 million tonne of reserve) to its proposed 4000 MW Chitrangi power project in the state. The request for Bijul block came close on the heels of Reliance Power’s proposal to allot another coal block (Semaria) near Sasan UMPP. Semaria block also touches boundaries of its existing captive coal blocks allocated for Sasan UMPP. 

CM dedicates Jurala hydel units to nation

October 6, 2008. Chief Minister Y S Rajasekhara Reddy dedicated to the nation two units of 39 MW each of Priyadarshini Jurala Hydro Electric Project (PJHEP) at Revullapally village, Gadwal, in Andhra Pradesh. The State Government was taking all steps to ensure that there would be no power shortage in the State. Several power projects, which were under various stages, would be completed soon.

The total capacity of the PJHEP power house is 234 MW (6 x 39 MW). The project is designed with bulb type turbines first in the state and the biggest in the country. The total cost of the project is Rs 547 crore ($113.91 mn) and the annual average energy potential is 404 million units (MUs). Though it was to be a joint venture power project between Andhra Pradesh and Karnataka by sharing the cost and benefits equally, it was later agreed that the APGENCO would execute the project and Karnataka would buy 50 per cent power through the PPA on the same terms as applicable to the APTransco.

The first two units have been generating 48 MUs and the third unit will be commissioned by March 2009. The remaining three units will be commissioned at an interval of four months thereafter. The Chief Minister also laid the foundation for the Rs 908 crore ($189.08 mn) 240 MW Lower PJHEP. The six units, each with 40 MW capacity, will be of bulb type turbine generator units. The project will utilise the natural head available at Gundala falls and discharges of Priyadarshini Jurala flood during monsoon. The first unit will be commssioned by August 2011 and the other remaining five units in four months interval thereafter.

Thermax bags $94 mn order for captive power plant

October 6, 2008. Thermax has bagged a Rs 450 crore ($93.71 mn) order for setting up a captive power plant from an integrated steel unit. The 60 MW power plant will be built and commissioned on a turnkey basis for a green field integrated steel complex in Andhra Pradesh.

The plant will use process gases and blended coal as fuel. The scope of the order includes supply and commissioning of boilers and turbines, fuel and ash handling system, civil works, water treatment plant, pollution control system, storage reservoirs and balance of plant equipment. The captive power plant will support the integrated steel project of 1.25 mtpa expandable to 2.5 mtpa capacity. The power and steam generated will be used for some critical processes of the complex.

Adani group eyes nuclear power generation

October 5, 2008.  Adani group is interested to grab the emerging opportunities in nuclear power generation and is in the process of setting up a team for nuclear initiatives. The group is in advanced stage of negotiation to rope in a professional having rich experience in nuclear energy generation abroad to lead the initiative. The new recruit is expected to join the group in two months. Adani Power is currently setting up a thermal power station at Mundra in Gujarat. While the Mundra project will be commissioned in phases from January 2009 to 2010, the company has lined up a number of projects in Gujarat and Maharashtra to take the thermal capacity to 9,990 MW as early as 2012.

Adani has already bid for picking up 49 per cent strategic interest in the proposed Jangi-Thopan and Thopan-Powari twin hydro-electric projects with a combined capacity of 960 MW in Himachal Pradesh. The projects are implemented by Brakel Kinnaur Power, a SPV created by Brakel Corporation NV of the Netherlands. Though the Atomic Energy Act does not allow entry of private sector in the country’s nuclear power generation, India’s corporate sector is expecting the Government to carry out suitable amendments soon after operationalising the Indo-US civil-nuclear deal.

Accordingly, a number of major players in India’s energy sector, including NTPC (2,000 MW), Anil Ambani-led Reliance (1,000-1,500 MW), have already come out with proposals for setting up nuclear power projects. According to available estimates, India has the potential to generate 60,000 MW of nuclear power over the next 25 years involving an investment of over $100 bn.

Currently, the Government-owned Nuclear Power Corporation of India Ltd spearheads India’s nuclear power initiative. The company has cleared 4,210 MW of capacity, mostly based on indigenous technology, and is currently putting up units at Kaiga (Karnataka), Koodankulam (Tamil Nadu) and Rawatbhata (Rajasthan). Plans for setting up additional units of 700 MW each at Kakrapar (Gujarat) and Rawatbhata (Rajasthan) are in advanced stage of finalisation.

Power scenario grim in Madhya Pradesh

October 4, 2008. Madhya Pradesh is likely to face severe power crisis very soon as thermal power stations in the state have only two-three days coal in store and power generation of hydel stations has also declined owing to shortage of water in dams. Amarkantak Thermal Power Station has 108089 metric tons, Satpura Power Station has 168694 metric tons and Birsinghpur has 66360 metric tons of coal in storage. This coal storage can meet the demand of thermal power stations for only two to three days while the stock of Birsinghpur is going to last for only one-day.

Central Electricity Board has given instructions that thermal power stations should have coal in storage for 15 days. Units of Sanjay Thermal Power Station are working on 68 per cent plant load factor (PLF). On the other hand units of Satpura Thermal Power Station are operating on 70 per cent PLF. At number of places load shedding is done during daytime without any information. On the other hand power generation has reduced in hydel power stations due to shortage of water in dams. At present 100 MW electricity is purchased from other states and which is very expensive. This electricity is purchased at the rate of Rs 8 per unit but it is being sold at the rate of Rs 5 per unit.

Delhi govt asks BHEL to speed up work on power project

October 3, 2008. The Delhi govt. asked Bharat Heavy Electrical Ltd (BHEL) to speed up construction work of a new power station (1500 MW Pragati-III power project) at Bawana in the city as commissioning of it is crucial for ensuring uninterrupted power supply during the Commonwealth Games. Commissioning of the gas-based power station would go a long way in overcoming dependence of power on other states. BHEL has been awarded the contract in April and it has already started construction work at the site.

Gas Turbine Generator-1(GTG) in the station would be commissioned by March, 2010 to generate 250 MW power whereas GTG-2 is likely to be commissioned by May, 2010, which would also generate 250 MW of power. GTG-3 along with Steam Turbine Generator (STG)-1 would be commissioned by July, 2010 which will have a combined generation capacity of 500 MW.

As per schedule GTG-4 with capacity of 250 MW would be commissioned by September, 2010 and the complete power plant would be commissioned before commencement of the Commonwealth Games. Another 750 MW from Jhajjar would also become available by that time. The city has been facing acute shortage of power for last couple of months due to increasing gap between demand and supply. 

Siemens wins €40 mn order from Essar Oil

October 1, 2008. Siemens Energy has secured an order from Essar Oil Ltd. of India for the supply of four steam turbine generators for its Vadinar oil refinery in Gujarat. The purchaser is the Vadinar Power Company Ltd., a wholly owned subsidiary of Essar Oil. The steam turbines and generators will be installed in a cogeneration plant at Vadinar. The order is worth about €40 mn.

The scope of supply to Vadinar Power Company encompasses two steam turbines each rated at 105 MW, two 93 MW steam turbines and four generators. The four SST-600 industrial steam turbines will be manufactured in Brno in the Czech Republic and the generators will be produced in Erfurt, Germany. The company will supply the entire instrumentation & control equipment, the electrical systems and the auxiliaries. Delivery of the steam turbine generators is scheduled for completion by the fall of 2010. As of early 2011, the coal-fired plant will supply power and steam to the neighboring oil refinery operated by Essar Oil.

The Siemens Energy Sector is the world's leading supplier of a complete spectrum of products, services and solutions for the generation, transmission and distribution of power and for the extraction, conversion and transport of oil and gas. In fiscal 2007 (ended September 30), the Energy Sector had revenues of approximately €20.3 bn and received new orders totaling around €28.5 bn and posted a profit of €1.8 bn. The Energy Sector had a work force of 73,500 at the beginning of fiscal 2008.

Hindujas begins work on $15 bn power plan in India

October 1, 2008. The London-based Hinduja conglomerate has started work on the $15 bn investment plan for India's power sector that will result in generating 10,000 MW for the national electricity grid. A per the company, the Indian Government needs to pull up its socks for transparency and accountability in terms of clearing the mega projects.

The projected investment in India's infrastructure sector over a 10-year horizon is $1.5 trillion, which is equivalent to one and a half times of the country's present GDP. The government, which had earlier set up an 11th Plan target of 78,577 MW additional capacity, has revised it to 90,000 MW new power generation by 2012.

Transmission / Distribution / Trade

Kerela inching towards power crisis

October 7, 2008. Kerala appears to be heading towards power crisis following alarming decrease in water levels in reservoirs of hydel projects, as the South West monsoon is set to close with 22 per cent low rainfall. The state is now pinning its hopes on the North East monsoon, expected to set in after mid-October, which can slightly improve the situation if it brings good showers.

The 30-minute peak hour loadshedding for domestic consumers enforced two months back and 25 per cent cut for industrial users have failed to conserve any significant quantum of power. As there has been no improvement in the situation, the Kerala State Electricity Board has been forced to impose one hour day-time switch-off for domestic and commercial consumers. The proposal has been submitted to the State Electricity Regulatory Commission (SERC) which would soon take a decision.

The state's average power generation from hydro power projects has come down to 19.9 million units a day, against the total consumption of 42.33 million units. The difference is met largely from purchases from outside at higher rates, as power available from the state's non-hydel sources are meagre. As per the latest evaluation, storage in reservoirs has dipped to 2683 million units against 3970 million units during the corresponding period last year. The siuation is all the more grim in Idukki reservoir, which contributes a major share of the state's power, where the level has come down to less than half.

Two-hour power cut likely in Hyderabad

October 5, 2008. With restrictions being imposed by the Irrigation Department on the hydel power generation and the increasing demand from agricultural connections, matching the means with the ends is going to be a tight-rope walk for the Central Power Distribution Company Ltd. (CPDCL), in the coming days. With reduced inflows into the Srisailam and Nagarjuna Sagar reservoirs, Irrigation Department has imposed restrictions on the amount of water to be used for power generation.

Though the reservoirs are full as of now, there are no excess inflows with which to produce power and the department wants to save the water for Rabi cultivation. Despite the restrictions, special permission was sought to generate 2000 MW of hydel power.

The demand from CPDCL crosses 4200 MW without the existing load reliefs of 700 to 800 MW. Of this, the city’s share would be 1350 MW at the hour of highest consumption. With unusual temperatures in the city and the resultant use of AC units, power consumption as against the 13 to 14 million units during the same period last year, has scaled up to 15 to 17 million units now. While the scheduled load for CPDCL is 2,600 MW, the actual loads far exceed the limit.

A demand is to apply a separate schedule for the Greater Hyderabad region so that its loads would not interfere with or hamper the supply to rural areas.

L&T, Karnataka Power close to deal for Indonesian coal mine acquisition

September 1, 2008. Engineering major L&T Ltd and Karnataka Power Corporation Ltd (KPCL) are on the verge of entering into a joint venture agreement for acquiring a coal mine in Indonesia. KPCL is the Karnataka state government owned public sector power producer, with both thermal and hydel assets.

The financial modalities for the joint venture were still under discussion. But indications are that it was likely to be on a 50:50 basis and would be leveraging on each other’s core competencies. KPCL is among the largest integrated power producers in the country.

KPCL was also examining extension of the joint venture with L&T for building large power plants to overcome balance sheet limits. KPCL’s preference was for super critical plants or boiler turbine generation equipment of about 600 MW plus.

If the joint venture materialised it would be one of the first public private partnerships in the country between a state government owned entity and the private sector for power generation in the country. KPCL was pushed into looking for alternative coal sources.

KPCL was faced with a shortage supplies from Coal India in view of flooding in Mahanadi Coal fields. KPCL’s annual coal requirements are estimated to be in the region of about 17 lakh tonnes a year for its eight units (8 x 210 MW) of the Raichur Thermal Power Station and the 500 MW Bellary Thermal Power Station.

KPCL was importing some of its coal requirements from Indonesia and other South East Asian sources. However, there were tariff pressures. Imported coal currently costs about $200 (Rs 8700) a tonne cost insurance and freight. Domestic coal costs Rs 3,000 a tonne. Coal prices were treated as pass through item for fixing power tariff.

Policy / Performance

EPIC Energy completes energy saving project in Hyderabad

October 7, 2008. EPIC Energy Ltd. has successfully commissioned a 325 kVA energy saving project for the Hometel Group of hotels at its Hyderabad property. The project will lead to a minimum saving of 10 per cent of energy costs for the hotel on its mixed loads, i.e. Lighting, AirConditioning and Motor Loads.

ONGC to join hands with UCI for Uranium exploration

October 6, 2008. With the Indo-US nuclear deal throwing open new vistas of nuclear power generation in the country, Oil and Natural Gas Corporation Ltd (ONGC) would shortly sign a memorandum of understanding (MoU) with State-owned Uranium Corporation of India (UCI) for exploration and mining of the fissile matter.

AP Genco to take up work on 2x1 GW nuclear plant

October 6, 2008. The Andhra Pradesh government agreed to the proposal of AP Genco to establish a 2x1000 MW nuclear power plant at either in Kadapa or Srikakulam districts. Nuclear Power Corporation of India Ltd expressed keenness to set up a joint venture project with AP Genco. The State has uranium in Kadapa, Nuclear Fuel Complex in Hyderabad, heavy water plant at Manuguru in Khammam district, and easy availability of land and water.

The state government also announced that AP Genco would establish a second 4,000 MW Ultra Mega Thermal Power Project (UMPP) near Vodarevu in Prakasam district. The government directed the company to carve out a Special Purpose Vehicle and complete other formalities. The state government would lay the foundation stone for the ultra mega project in December.

This will be located near the Vodarevu Port. In addition to this, the Central Government is planning another ultra mega thermal power project of 4000 MW capacity either at Vodarevu or at Nizampatnam. The Central Electricity Authority technical team would visit the sites soon.

AP Genco supplies about 48 per cent of energy requirements of the State contributing 114.4 million units (MU) per day during September 2008 and 83.9 MU per day during April 2008 to September 2008. With AP Genco thermal stations experiencing shortage of coal supplies, the state government asked AP Genco to procure imported coal and also coal from Mahanadi mines.

The State plans to take up with the Prime Minister the issue of additional coal supply from Mahanadi and Sinagareni Collieries. Meanwhile, AP Genco is bidding for two new blocks of coal from Mahanadi for its future needs.

8 foreign firms bidding for coal

October 5, 2008. Leading coal miner Coal India Ltd (CIL) has received bids from 17 companies - both national and international - for extracting coal from 18 abandoned underground mines belonging to three of its subsidiaries.

The bidders are Xindia Steels, Walter Southeast Asia, Afcon Infrastructure, Essel Mining and Industries, Sunflag Iron and Steel, Anglo American Services India, Indo-Australia Mining, Reliance Infrastructure, Zhengzhou Coal Mining Machineries, Essar Mineral Resources, Electrosteel Castings, Sainik Mining and Allied Services, Tiandi Science and Technology, Future Metals, European Ventures, Rio Tinto India and Bucyrus DBT Europe GmbH.

The proposals are now being evaluated by the Central Mine Planning and Design Institute (CMPDI). CMPDI, a subsidiary of CIL, is one of India's largest consultancy firms in the field of exploration, mine planning and environment management. CIL had floated a global expression of interest (EoI) in May, inviting bids for underground mining jointly with the CIL or its subsidiaries.

The private players enter into the joint ventures would have access to only 50 percent of the total production. According to the global EoI notice, these 18 abandoned mines have an approximate reserve of 1.64 billion tonnes of coal. Underground mining would be revived in six abandoned mines of Eastern Coalfields, eight mines of Bharat Coking Coal, and four mines of Central Coalfields.

Bidders can express interest for more than one mine. For each mine, only one party would be finally selected after screening EoIs followed by bidding. In case of a single party being selected for more than one mine, all such mines would come under a single joint venture company to be formed between CIL and the selected company.

The joint venture will be managed by an independent board, in which both sides will have an equal number of directors. Bidders are also required to have at least 10 years experience in economically operating underground coal mines in difficult working conditions. They must have re-opened, salvaged and successfully operated at least one underground coal mine or part of the mine, abandoned for reasons of safety, and must have experience in dealing with underground coal fires.

GAIL & NTPC promoters ask govt to retain Dabhol LNG unit

October 4, 2008. NTPC and GAIL, principal promoters of Ratnagiri power plant (erstwhile Dabhol power project) are understood to have cautioned the government that any move to hive off the LNG plant and sell it off as a separate unit may not be acceptable as a commercial proposition.

Both the equity holders, who have the right of first refusal on the sale of the plant, believe that the 5 mt LNG plant is an integral part of the power project and selling it off would upset the revenue structures for the project.

The two companies have agreed to infuse Rs 950 crore ($202.68 mn) in Ratnagiri Gas & Power (RGPPL) equity capital on the condition that the terminal would not be sold to a third party.

A view is developing among the members of the empowered group of ministers (EGOM) that the LNG plant could be hived off and the sale proceeds could be used to pay off some of the outstanding debt. Lenders to the power project have a total exposure of almost Rs 7,000 crore ($1.49 bn). There is a lot of pressure from the lenders to pay off some of the debt.

The LNG plant was taken as an integral part of the power plant so that it could give an additional revenue stream to the company. The LNG plant at the power project has a total capacity of 5 mt while the power project would require a maximum of 2.1 mt at any given point of time. The balance was proposed to be sold to gas consumers in the country. The terminal could be a profit centre for the company as gas is emerging as future fuel for the industry.

The government has two options for the 2,150 MW power project, one with the LNG terminal and lenders addressing debt of about Rs 1,020 crore ($217.62 mn) and another with terminal being hived off and lenders addressing the same amount of debt. RGPPL is a special purpose vehicle set up by NTPC and Gail which acquired the assets of Dabhol power project for Rs 8,485 crore ($1.81 bn) in 2005. This was financed by term loans of Rs 7,011 crore ($1.49 bn) and equity of Rs 1,474 crore ($314.48 mn), out of total equity contribution of Rs 1,500 crore ($320 mn). 

‘Nuclear power in India could increase 15 fold’: CSTEP

October 3, 2008. According to the study, after the US Senate's approval of the Indo-US civilian nuclear deal, it is estimated that with international co-operation, nuclear power in India could increase fifteen fold to over 60,000 MW by 2030 from the present 4,120 MW.

A nuclear power program with the limited import of 30 to 40 light water reactors (1000-1600 MW each) enabling capacity addition in a relatively short period would require about Rs 30,000 to 40,000 crore ($6.3 – 8.4 bn) per year for next two decades, said the study carried out by a Bangalore-based Centre for Study of Science, Technology and Policy (CSTEP).

A very large fraction of this investment would be spent in the country itself and would provide opportunities for Indian industries to contribute in a major way. The US Senate's approval of the Indo-US civilian nuclear co-operation agreement completes the process of enabling India's nuclear power trade and commerce with other countries. If utilized fully, it could potentially transform India's nuclear power sector and make it a major contributor to national power generation and industrial growth.

Plants blueprint predates gas policy

October 3, 2008. Power major NTPC is likely to cite the provisions of the gas utilisation policy to press its case for gas supplies from the KG basin. The policy prioritises gas supplies to existing power plants and is against allocation to a new power project.

NTPC claims that both Kawas and Gandhar, the plants to which Reliance Industries (RIL) had committed gas, have been approved and cleared much before the utilisation policy and should, therefore, be not be treated as a new plant.

The company claims its Kawas and Gandhar plants, which were to get gas supplies from RIL’s KG basin, now being contested in court are not new plants as they have been approved with all clearances long ago. This would mean that supply of KG gas to the two power plants would not violate the provisions of the new gas utilisation policy, as was being projected earlier.

The 1,300 MW each Kawas and Gandhar power plants and their expansion programmes were conceived years ago. In fact, the two projects were supposed to be commissioned in line with flow of KG basin gas to them.

Under the new gas utilisation policy, all new gas sources would have to be supplied to the existing gas-based fertiliser plants. The second priority is to be given to LPG plants and third to the power plants that are lying idle and likely to be commissioned during 2008-09.

The policy would have meant that irrespective of the outcome of the NTPC-RIL legal battle, the public sector power utility could have been denied gas supplies for Kawas and Gandhar as the two are yet to be commissioned. NTPC has claimed the plants are stranded as it has received all regulatory clearances and has received main plant bids.

Only delay in getting assurance on gas supplies has delayed its commissioning. The gas demand for the fertiliser sector alone is assessed at 76.39 mmscmd for 2011-12, leaving little for the power projects. However, it is expected that some portion of the proposed 40 mmscmd of KG gas could be available to the power sector as not all fertiliser plants are on the route of gas pipelines. NTPC and RIL entered an agreement back in 2004 for supply of 12 mmscmd to the two power plants for 17 years at $2.34 per million British thermal units (mmBtu).

Coal India has more coal for e-auction than demand

October 1, 2008. The largest coal mining company of the country, Coal India Ltd (CIL), has more coal to offer through e-auctions than the actual demand. The total coal allocated at e-auctions during the first five months (April to August) of the current fiscal is 20.10 mt, against an offered quantity of 50.29 mt. This indicates that the coal major has more stocks to offer than the actual demand, which, however, is rising.

The situation was just the opposite last fiscal, when 13.05 mt were allotted for e-marketing, against an allocated of 10 mt. The demand rose after CIL reduced the floor price of coal sold through e-auction from 30 percent over and above the notified price to five percent. CIL introduced e-auctions to make coal available to non-core sectors and traders.

The coal for e-auctions is sourced from the subsidiaries of CIL - Eastern Coalfields, Bharat Coking Coal, Central Coalfields, Northern Coalfields, Western Coalfields, South Eastern Coalfields, Mahanadi Coalfields and North Eastern Coalfields. 




Sirte Oil Co. strikes oil in Libya's Ghadames Basin

October 7, 2008. Libyan National Oil Company (NOC)’s wholly owned subsidiary Sirte Oil Company discovered oil in Libya's Ghadames Basin. Oil was discovered in the Tannezuft Sands at a depth of 10,662 feet. Oil flows at a rate of 1,725 b/d and gas at a rate of 0.25 MMscf/d. API is 42.1 degrees.

The Wildcat well A1-NC216A is located on Block NC216A, 310 kilometers southwest of Tripoli. This is the first discovery and the first well drilled by Sirte on this block. This is the second discovery in as many months for NOC in the region. Previously announced on September 29, 2008, NOC with operator Verenex made another oil discovery at wildcat well C1-47/04, also in the Ghadames Basin. Sirte is one of NOC's largest operating subsidiaries, headquartered in Marsa El Brega, Libya. The company focuses on exploration, production, manufacturing and transmission of oil and gas; extraction and processing of LPG and Naphtha; and the liquefaction of natural gas, among other efforts.

Egypt's daily oil output reaches 0.7 mn barrels

October 6, 2008. Egypt has increased its oil output by 55,000 barrels per day (bpd), bringing the country's daily oil production to 700,000 barrels for the first time in 14 years. The announcement was in a report of the Egyptian General Petroleum Corporation (EGPC). The increase is attributed to the discoveries of new oil fields in the Gulf of Suez, the Nile Delta, the Western Desert and the Mediterranean Sea in the 2007-2008 fiscal year between July 1 last year and June 30 this year.

Reserves of crude oil have reached a record 4.2 billion barrels due to the new findings of oil fields in Egypt, one of the major oil producers in North Africa. Egypt's oil exports is the country's major sources of income along with tourism, remittances from expatriate workers and the revenues of the Suez Canal.

OPEC's September output falls 334,000 bpd

October 6, 2008. The Organization of Petroleum Exporting Countries lowered crude oil production in September, amid increasing fears that world oil demand will slow as global economies suffer from the U.S. financial crisis.

The survey estimates daily production in September by all 13 of the group's members fell 1.03%, or 334,000 barrels a day, from the previous month to 32.215 million barrels a day. The output drop is the biggest month-on-month decline by the OPEC-13 so far this year.

OPEC produces around 40% of the 87 million barrels of crude oil consumed globally each day. Output by the group's 12 members with production quotas also fell, with countries pumping 224,000 barrels a day, or 0.74% less in September versus August at 30.025 million barrels a day.

The drop is the first by the OPEC-12 since April. Iraq, Nigeria, Saudi Arabia and Iran led the production decline, according to the survey, which is based on input from oil traders, analysts and industry sources. Despite the decline, the OPEC-12 in September still produced about 352,000 barrels a day above the group's official production target of 29.67 million barrels.

The decline in overall OPEC output comes as the 13-nation group is trying to stem a decline of more than $55 a barrel in oil prices since July, driven by concerns that oil demand will fall as U.S. and European economies are weakening in the wake of America's financial system crisis. Iraq, the only OPEC member outside the quota system, saw production drop by about 110,000 barrels a day to 2.19 million barrels a day in September, due to technical problems at oil facilities in the south and production problems in the north.

Ongoing militant attacks on oil installations in Nigeria led to a loss of as much as 100,000 barrels a day of production to a daily rate of 1.8 million barrels a day. The drop followed a resurgence in violence by Nigerian militants. OPEC's top producer, Saudi Arabia, lowered output by about 75,000 barrels a day to 9.425 mn barrels a day in September, the lowest level since May.

OPEC members met in Vienna at the beginning of September and agreed to adhere more strictly to their production allocations. In line with this, Saudi Arabia eased back its production. Production in Iran, OPEC's number two producer, also declined, falling 50,000 barrels a day to 4 million barrels a day.

Eritrea govt, Defba ink Oil E&D agreements

October 6, 2008. The Government of Eritrea signed two agreements with Defba Oil Share Company on oil exploration and development (E&D). Accordingly, the company would undertake oil exploration activities in two blocks of the Eritrean northern territorial waters. Defba Oil Share Company has been set up through the partnership of the Eritrean government and Energy Alliance Company W.L.L.

Devon restores 30,000 boepd production in GOM

October 6, 2008. Devon Energy Corporation has restored approximately 30,000 barrels of oil equivalent per day (boepd) of offshore oil and natural gas production in the Gulf of Mexico. Devon was producing approximately 50,000 boepd from its Gulf of Mexico properties prior to suspending production in preparation for Hurricanes Gustav and Ike. Devon expects to restore approximately 5,000 boepd of additional offshore production during the fourth quarter of 2008 as repairs are made to production facilities and transportation systems.

Hurricane Ike toppled two of Devon's platforms in the Eugene Island area. As a result, offshore production of about 1,200 boepd will be curtailed indefinitely. Devon's remaining Gulf of Mexico production, about half of which is oil and half of which is natural gas, is expected to be restored in 2009 as third-party facilities are repaired. Onshore, approximately 600,000 boepd of additional U.S. oil and gas production was curtailed in the third quarter as a result of Hurricane Ike. The curtailed onshore production has been restored.

CNOOC discovers oil, gas at Bozhong well in Bohai Bay

October 6, 2008. CNOOC Limited made a new discovery, Bozhong (BZ) 35-2, located in Bohai Bay. The discovery well BZ35-2-2 has successfully completed its drilling process. BZ35-2-2 is located at the east of Yellow River Mouth Sag. The well penetrated oil pay zones with total thickness of 31.2 meters, and it was drilled to a total depth of 3,235 meters with water depth of about 20 meters.

During the drill stem test, the well was tested to flow at an average rate of 560 barrels of oil per day from the oil zones via 7.94 mm and 9.53 mm chokes, and approximately 32,000 cubic feet of gas per day. CNOOC Ltd. holds 100 per cent interests of the new discovery.

ExxonMobil to develop advanced gasification technology

October 5, 2008. ExxonMobil has entered into an agreement with Pratt & Whitney Rocketdyne to develop next-generation technology to convert coal, coke or biomass to synthesis gas, which could facilitate the use of carbon capture and storage to reduce greenhouse gas emissions from power generation.

Under the agreement, ExxonMobil Research and Engineering Company and Pratt & Whitney Rocketdyne will work together to develop and test new gasification technology to improve efficiency and reduce the cost of converting raw materials into gas. The work focuses on the development of a gasification-reactor system, which has the potential to offer significant advantages compared to conventional approaches.

Key features of PWR's rocket-engine expertise uniform feed distribution, high temperature combustion and rapid heat removal are utilized, resulting in a smaller and more cost effective system.

Turning coal and similar energy sources into synthesis gas would allow these sources to be converted into a range of products, including chemicals, transportation fuels and power plant feedstock. Gasification also helps enable the adoption of carbon capture and storage and therefore reduces emissions from the use of coal and other heavy feedstocks.

RWE Dea discovers more oil in Sirte basin

October 3, 2008. Libya's state-owned National Oil Co., RWE Dea, has made its eighth oil discovery in the NC-193 concession area in the Sirte basin with exploration well G1-NC 193. According to RWE, well G1-NC 193 encountered oil in the Upper Satal Formation at a depth of 4631-4661 ft.

Last month, RWE Dea scored its sixth and seventh oil discoveries in the NC-193 concession. NOC has a 68% stake in the NC-193 concession project, while operator RWE holds the remaining 32%.

Sterling strikes gas at East Breagh in UK North Sea

October 3, 2008. Sterling Resources Ltd. has announced the successful drilling of the East Breagh well located on Block 42/13 in the United Kingdom North Sea. Sterling holds a 45% interest and is the Operator of the block.

After detecting the presence of gas and sand while drilling at 7,500 feet (7,363 feet of true vertical depth (tvd)), a 110 foot core was taken. Preliminary analyses of both the core and the well logs indicate two gas bearing intervals with approximately 72 feet net sand in total.


East Java project feasible in Pertamina

October 7, 2008. A study shows that the oil refinery project called Greater Java Refinery to be built in Indonesia's coastal city of Bojonegoro in Banten is feasible. Oil refining technology provider Axen from France has completed the feasibility study as scheduled in October.

The Greater Java Refinery is a joint venture project between Pertamina and National Iranian Refining and Distribution (NIORD), each a 40 percent shareholder and Malaysia's Petrofield Refining Company Ltd a 20 percent owner.

Earlier it was estimated the project will need an investment of $4 bn if it is to have a processing capacity of 150,000 barrels of crude oil per day and $71 bn if it is to be built with a processing capacity of 300,000 barrels.

According to Pertamina, it is discussing with Axen plan to buy the refining technology to produce oil fuels with the Euro IV standard. The refinery is expected to be operational in 2013.

PetroChina eyes another refinery in Guangxi

October 6, 2008. PetroChina Co Ltd, the country's largest oil and gas producer, is considering building a second 10 million tonne capacity refinery in southwestern China's Guangxi region. The refinery will be located in the Beibu gulf area. The company's first refinery in Qinzhou, Guangxi, has an annual capacity of 10 mt. That facility involves total investment 15.2 billion yuan.

It is expected to come on stream this year. The refinery is designed to mainly process crude oil sourced from CNPC's overseas oil projects, with annual oil products output seen at over 7 mt. The target market is the southwest of the country. The refinery will process crude mainly from Sudan, and will pipe oil products to Yunnan and Guizhou provinces via the Maoming to Kunming pipeline.

PetroSA garners license for Coega refinery

October 4, 2008. South Africa's minerals and energy department has granted state-owned oil and gas group PetroSA a manufacturing license for the 400,000- barrels-per-day crude oil refinery at Coega, near Port Elizabeth.

The license allows PetroSA to manufacture refined petroleum products at Coega. In August, PetroSA appointed global financial services group HSBC as a financial adviser for the project, also known as Project Mthombo.

The $11 bn refinery is central to government's plans to ensure security of supply in the liquid fuels.

The refinery, said to be one of the biggest post-2010 investments, is in line with the recommendations of the department's energy security master plan which proposed that PetroSA procure at least 30% of all crude oil consumed in SA. The growth rate of demand for fuel justified the construction of a new crude oil refinery within the next five to seven years. The demand for automotive fuels in southern Africa exceeded local production capacity, and SA was increasingly dependent on the importation of refined products.

The refinery was part of a strategy to ensure that the unsustainable and urgent national fuels supply situation was reversed. PetroSA was looking for an engineering partner for the project and was expected to announce the winning bidder by the end of this month. PetroSA invited bidders for the engineering contract earlier this year.

The winning bidder would manage the various project phases of the refinery. The engineering partner would execute the feasibility, front-end engineering design and project management and the commissioning of the refinery.

The refinery, expected to be the biggest in Africa, will come on stream in 2014 and will create more than 25,000 direct and indirect jobs. PetroSA plans to provide new oil terminal facilities and upgrades in Cape Town, Mossel Bay, Port Elizabeth, Durban and Gauteng.

Transportation / Trade

PetroChina begins work on Baoji-Hanzhong gas pipeline

October 6, 2008. PetroChina has started building a 228-km pipeline from Baoji to Hanzhong, both in Shaanxi province of northwest China, in a bid to ease gas supply in southern Shaanxi and later northern Sichuan province.

Fed with gas from CNPC's Changqing gasfield, the pipeline is designed to transport 185.5 mcm each year and will come online by 2010. The pipeline project is forecasted to cost 553.69 million yuan.

GDF Suez signs sales and purchase deals with North Sea pipeline

October 2, 2008. Nederlandse Aardolie Maatschappij BV (NAM) and GDF SUEZ signed sales and purchase agreements for NAM assets situated along the NOGAT pipeline, covering exploration, production and transportation of oil and gas in the Dutch section of the North Sea.

The transaction, for a total consideration of 1,075 million euros, is subject to regulatory approvals and third party consents. The transaction is expected to be completed at the turn of the year.

Policy / Performance

EIA forecast Non-OPEC oil output growth cut in ’09

October 7, 2008. The U.S. Energy Information Administration cut its forecast for non-OPEC oil production growth for 2009 to 730,000 barrels per day from its prior forecast of 890,000 bpd. In its October short-term energy outlook, EIA also lowered its forecast for non-OPEC oil production in 2008 to 48.78 mn bpd from its previous forecast of 49.03 mn bpd. Separately, OPEC is expected to pump 32.44 mn bpd of oil in fourth quarter, down from the EIA's prior estimate of 32.83 mn bpd. For 2009, OPEC's output is expected to average 31.59 mn bpd, down from the 32.05 mn bpd the agency forecast last month.

Iran favors gas pipelines

October 6, 2008. According to Akbar Torkan, head of planning at the Iranian Oil Ministry, cost issues and sanctions that limit access to Western technology make it more beneficial for Iran to export natural gas via pipeline than by tanker after cooling it to liquid. France's Total and Royal Dutch Shell were behind schedule in carrying out multi-billion-dollar liquefied natural gas (LNG) export projects in Iran.

In July Total’s Phase 11 project of Iran's giant South Pars gas field was effectively frozen, although it would not abandon the project. In June it would pull out of South Pars Phase 13, but was not abandoning Iran altogether. European firms have become increasingly wary of investing in Iran due to heightened tension over Tehran's disputed nuclear programme. Iran sits on the world's second-largest gas reserves after Russia but sanctions have slowed sector development. Iran, which is also the world's fourth-largest oil exporter, has not yet exported any LNG but has previously, said it will be able to produce 77 mtpa by 2014.

The cost of transferring gas in pipelines is lower than exporting it with the LNG system. He listed Germany, Austria, Switzerland and Italy as target markets for Iranian gas and said supplying them via pipeline was more in Iran's benefit than LNG shipments. Washington, which bars its own firms from doing business in Iran's energy sector, accuses Tehran of trying to develop nuclear weapons and has spearheaded a drive for sanctions.

Iran says its work is for purely peaceful purposes but its refusal to halt sensitive atom activities has drawn three rounds of U.N. sanctions and separate U.S. measures. Equipment needed for LNG projects is mostly made in the United States or Europe. Without LNG plants to export gas by tanker to the highest bidder, Iran could pump some gas by pipeline to neighbours, analysts say. But they are relatively small markets. The only large-scale pipeline project, which would pump gas across Pakistan to India, is fraught with security concerns and pricing disputes, the analysts say.

Tokyo gas inks deal with North West Shelf LNG consortium

October 2, 2008. Tokyo Gas Co., Ltd. and six sellers of the North West Shelf LNG singed a sale and purchase agreement. Tokyo gas and the six sellers have established a long-term relationship through LNG trade since 1989. Tokyo Gas and the six sellers have been discussing this sale and purchase agreement, based on the heads of agreement dated December 11, 2006, to succeed the current contract which will expire in March 2009, and reached the agreement. Tokyo Gas will purchase around 1.6 million tons of LNG per year from April 2009, including the LNG from North West Shelf expansion project from which Tokyo Gas has been importing LNG since fiscal year 2004. This extension agreement with the North West Shelf LNG will contribute toward Tokyo Gas Co.'s stable procurement of LNG.



Jacobs wins contract for Alberta coal gasification project

October 7, 2008. Jacobs Engineering Group Inc. that it received a contract from EPCOR to provide engineering services for their proposed Genesee Integrated Gasification Combined Cycle (IGCC) project located 70 kilometers southwest of Edmonton, Alberta, Canada. The IGCC facility would demonstrate, on a commercial scale, coal gasification-based combined cycle electrical power generation technology in a single train unit, and is expected to offer significant efficiency and emissions benefits over existing conventional coal-fired power generation technologies. Jacobs' scope involves the pre-FEED (front-end engineering and design) and FEED engineering activities for this facility.

EPCOR is continually working to develop cleaner power technologies. This project alone has the capability to capture 1.25 mt of carbon dioxide emissions per year. The Genesee IGCC project is currently in its second phase, which is scheduled for completion in 2009. If subsequent investment and construction decisions go as planned, a 270 MW (net) generating station using the new technology would be targeted to commence operations in 2015.

PHCN records new high in electricity delivery in Nigeria

October 6, 2008. The Power Holding Company of Nigeria (PHCN) end of September recorded the highest peak energy generation of 86,564.89 MW hour with a continuous generation output of not below 3,400 MW throughout the day.

The record is the highest energy generation peak in the history of the electricity industry in Nigeria, adding that the highest level recorded in the past was 80,123.0MWH on 27th October 2006, (an improvement of 6,441.89MWH). Also, improvement in the maintenance and management of the national transmission grid, and distribution network contributed to the feat. By this, electricity consumers nation-wide recorded the highest power consumption in one day in the history of the country.

Atlantic Power paying $134.5 mn for Florida plant

October 1, 2008. Atlantic Power Corp., a U.S. company which trades on the Toronto Stock Exchange, is paying $134.5 million for Auburndale Power Partners, which owns a 155 MW natural-gas-fired generation plant near Tampa, Fla.

The transaction is expected to close in the fourth quarter. The power plant being acquired is owned by ArcLight Energy Partners Fund LP and a financing unit, which is partly owned by the Caisse de depot et placement du Quebec, one of Canada's biggest pension fund managers. Atlantic Power owns stakes in 13 power generation projects and one transmission line in major markets in the United States.

Transmission / Distribution / Trade

High-voltage power line gets nod of Va. regulators

October 7, 2008. State regulators said that a proposed high-voltage power line that would cross from Pennsylvania to West Virginia will ensure a reliable power source for the Mid-Atlantic states as they approved the northern Virginia segment. The State Corporation Commission endorsed construction of two portions of the 500-kilovolt transmission line, proposed jointly by the Trans-Allegheny Interstate Line Co. and Dominion Virginia Power. In its unanimous ruling, the SCC concluded the proposed power line meets standards set by Virginia law and must be approved. West Virginia regulators have already approved that state's portion of the line; Pennsylvania has yet to act. The SCC said work on the $243 million Virginia portion of the line could not begin until all the states have given it the green light. The $1.3 billion Trans-Allegheny Interstate Line would run some 240 miles from the southwestern corner of Pennsylvania, through north central West Virginia and through northern Virginia.

PUC approves PPL power purchase plan

October 2, 2008. The Pennsylvania Public Utility Commission has approved the fourth of six power purchase plans PPL Electric Utilities will submit to provide default service to customers in 2010, when rate caps come off. PPL serves customers in Cumberland, Dauphin, Lancaster, Lebanon and York counties. The Allentown-based company needs the power to provide electricity to small business and residential customers that do not pick their own provider in 2010.

State law requires PPL to purchase its default power supply from various energy-generation companies in the competitive market. Small commercial and industrial customers would pay an average of $111.94 per megawatt hour based on this round of bids. Residential customers would pay an average of $112.51. Small-business customers that use an average of 1,000 kilowatt hours per month would see bills increase by 25 percent in 2010 if the average prices for the remaining two power purchases match the prices approved by the commission so far. Midsize businesses would see about a 44 percent increase. Residential customers would see monthly bills grow by about 36 percent, or $38.48. PPL selected its fourth round of power providers from a pool of 14 companies.

S Africa export coal falls to four-month low as demand drops

October 7, 2008. Coal for shipment from Richards Bay, the site of the world's largest export terminal for the fuel, fell to a four-month low on weaker European demand. Rotterdam, Europe's largest port, had an average of 12 ships waiting to load or unload coal and ore last month, one more than August. Demand for the fuel may have fallen on warmer than usual weather. Richards Bay is the biggest coal source for Europe, which burns the fuel for about 30 percent of its power. Demand may drop as economic growth slows on financial market turmoil and soaring interbank lending rates. The port shipped 5.32 mt of coal last month, 7.2 percent less than a year earlier after rail accidents cut deliveries. Richards Bay Coal Terminal is owned by South Africa's biggest coal exporters, including Anglo American, BHP Billiton and Xstrata. While it is the largest coal export terminal, Australia's Newcastle port ships more of the fuel from two terminals.

Policy / Performance

Dirty coal power hit by Euro vote

October 7, 2008. Plans for a new generation of heavily polluting coal-fired power stations were dealt a blow in Europe when MEPs voted for tough regulations which would force energy companies to fit expensive equipment to trap the emissions.

The carbon dioxide emissions limit set by the European Parliament environment committee is the same as that set by California - 500 grams of CO2 per kilowatt/hour. Anti-coal campaigners in the US claim this has effectively outlawed coal power being sold to the state.

However the committee also voted for a €10 bn (£7.8 bn) fund to pay for trials of the carbon capture and storage (CCS) technology, which could trap most emissions. This could enable some coal stations to be built, using the EU funds to pay for the massive expected costs of CCS.

The amendments to the draft Directive on Geological Storage of Carbon Dioxide still have to pass at least two further levels. One is the powerful European council of environment ministers, where there is likely to be strong lobbying by some states, including coal-rich Poland. But environment campaigners hailed the decision as a huge development.

The new emissions performance standard, which would apply to all power stations from 2015, would rule out plans for the first new coal plant for a generation in the UK, proposed by E.ON at Kingsnorth in Kent. Although the UK government is expected to announce a small CCS trial next year, possibly at Kingsnorth, even supporters of CCS admit it would not be available at commercial scale until 2020 at least, and some experts claim it will be much later.

Emissions performance standards have already worked to stop new coal-fired power stations in California, and it's a welcome development that Europe is adopting a similar principle here. If this European proposal becomes law, E.ON's plans for a new plant at Kingsnorth would not be able to go ahead in their current form.

Delia Villagrasa of wildlife charity WWF said the ruling would impact 50 new coal-fired plants planned across Europe, including up to eight in the UK. The emissions limit is a crucial step to avoid a return to dirty coal in the EU, to combat climate change effectively and to support clean power.

North Carolina ranks low for energy efficiency

October 7, 2008. North Carolina ranks low on a list of energy-efficient states put out by an advocacy organization. The state is 29th on the list, released by the American Council for an Energy-Efficient Economy.

ACEEE advances the cause of energy efficiency as a means of promoting economic prosperity, energy security and environmental protection.

States were ranked on eight metrics, including their public policies on energy conservation, their building codes, and transportation policies such as emissions standards, transit funding and tax incentives for hybrid vehicles.

North Carolina did not rank highly in any of the metrics, though the state did get some credit for strict building codes and for a law enacted in 2007 that requires utilities to get a percentage of their power from renewable sources beginning in 2012. The 2007 law is not aggressive enough on actually saving energy versus merely getting energy from alternative sources.

Electricity consumers get customer complaints panel in Nigeria

October 6, 2008. Electricity consumers in the country can now heave a sigh of relief as the Federal Government has established a consumer complaints panel that would ensure the provision of good quality service by power producers and distributors. The forum has its membership drawn from the six geo-political zones of the country.

Also, the government has perfected plans to implement the Consumer Assistance Fund that would provide assistance to vulnerable customers who deserve it as they confront the realities of correct pricing of electricity down the road.

The various problems customers often complain about, including their bills, quality of supply, adequacy of electricity and safety of life and equipment, which has the first level of attention at the distribution company (DISCos) level, the customers would now be able to appeal to an independent body to look into complaints not handled to their satisfaction by electricity service providers.

Electricity consumers and power distribution companies alike will now have an arbitration process that would ensure that disputes are heard and completely addressed in line with the laws and the Electric Power Sector Reform Sector Act 2005.

The federal government has committed to subsidising all consumers in the power sector to the tune of N178.98billion for the next three years to manage rate shock and improve the supply.

The reforms in the power sector make consumers protection an imperative, adding that there are couple of reasons for this, which includes a measure to check the electricity service providers who may be tempted to exploit their market dominance.

NERC is well placed to ensure that the distribution companies performance in the area of over-billing, quality of services, safe operations, and reliable supply becomes the norm in the industry.

Also, it includes the need to facilitate correct market pricing, while also ensuring affordable electricity means that vulnerable customers need to be protected against. The success of the reforms and the sustainability of the power sector make the protection of the interest of operators generation and distribution companies, imperative too.

Thorium power hails US legislative breakthroughs

October 6, 2008. The U.S. Senate approved the landmark US-India Civilian Nuclear Cooperation Agreement and Senators Hatch and Reid introduced the, Thorium Energy Independence and Security Act of 2008.

The former opens the way for U.S. companies to seek opportunities in India's $150 bn nuclear market while the latter paves the way for thorium-fueled nuclear reactors in the United States, allocating $250 mn over five years for thorium fuel research at the U.S. Department of Energy.

IEEE and Korea electric association sign MoU

October 2, 2008. The IEEE Standards Association (IEEE-SA) and the Korea Electric Association (KEA) have signed a Memorandum of Understanding in order to share knowledge of each group's standards development activities, avoid technical duplication whenever possible, and perform and promote, directly or indirectly, regional and international standardization in their fields of common interest.

Under the terms of the MOU, IEEE-SA and KEA will exchange information about ongoing standards development activities, and will focus on working projects where there is a shared interest.

KEA will identify leaders and technical experts to engage in IEEE technical committees and help promote direct, active participation through review of and comment on IEEE (Institute of Electrical and Electronics Engineers, Inc.) draft standards. This will ensure that such standards meet the needs of KEA.

In addition, IEEE-SA will cooperate with KEA on standards education activities in Korea. The Memorandum of Understanding between IEEE-SA and KEA is effective for two years. The Korea Electric Association ("KEA") is a non-profit institution founded for the purpose of promoting and advancing the technologies in the fields of electric power generation, equipment manufacturing and construction, and electrical safety.

The IEEE Standards Association, a globally recognized standards-setting body, develops consensus standards through an open process that engages industry and brings together a broad stakeholder community. IEEE standards set specifications and best practices based on current scientific and technological knowledge.

The IEEE-SA has a portfolio of 900 active standards and more than 400 standards under development. The IEEE is the world's largest technical professional society. Through its more than 375,000 members in 160 countries, the organization is a leading authority on a wide variety of areas ranging from aerospace systems, computers and telecommunications to biomedical engineering, electric power and consumer electronics.

Process to upgrade power distribution system starts in Pakistan

October 1, 2008. The government has kicked off the process to strengthen the power distribution system as the existing one has dilapidated and the prevalent distribution lines are unable to carry out the more load keeping in view the increasing power load demand across the country.

This will lead to end to undue outages which the authorities are bound to do to avoid the collapse of the dilapidated distribution system. For this purpose, Pakistan have initiated phase-I under Power Distribution Enhancement Project at the cost of Rs 3.005 bn that includes foreign exchange component of Rs 240.74 mn and local component of Rs 2.76 bn.

Under this project the power distribution system of Peshawar Electric Supply Company (PESCO) would be upgraded. The project is proposed to be funded by Asian Development Bank and PESCO’S own resources. The proposed scheme will help to meet the requirement of overall distribution system efficiency and stability to deliver reliable power to their customers.

The project envisages extension of existing 132 kv grid stations and augmentation of transformer capacity at various locations, installation of capacitors within switchyard of the grid stations of 132 kv and on 11 kv feeders, distribution of power which includes laying of new 11 kv feeders and installation of distribution transformers for accommodating new rural and urban customers, Energy Losses Reduction (ELR) program for re-conducting and bifurcation of existing feeders, rehabilitation program under which outdated and under rated equipment at existing grid stations will be replaced with new ones and system modernization, which will entail remote metering pilot projects and use of aerial bundle conductor and other equipment like auto re-closers and sectionalizes for curtailing technical and non-technical losses and undue outages.

The existing power generation capacity is not sufficient to meet the ever increasing demand of the country. In the recent years, as economic activity picked up in Pakistan, there has been a sudden rise in power demand, as a result of which there is a supply and demand gap in the existing system which was recorder on May 2008 at more than 4000 MW power deficit.

The power demand projection based on growth rate shows that power demand at peak time will increase from 15, 138 MW in 2007-08 to about 20, 874 MW in 2010-11 in WAPDA system.

Renewable Energy Trends


ITC sets up wind energy project in TN

October 4, 2008. The success of the Chennai-based wind energy project Wimco has prompted ITC Ltd to foray into the use of wind energy in its packaging and printing business. The company has commissioned a 14 MW wind energy project in Tamil Nadu by installing four windmills in Theni District, near Madurai, and five windmills in the Radhapuram Taluk, Tirunelveli District, in September.

The generation from these windmills would be used for captive consumption of its packaging and printing plant at Tiruvottiyur, Chennai. The total capital cost involved in the project is about Rs 90 crore ($19.2 mn). Wimco, Chennai, is already using four turbines of 250 KW each feeding into the Tamil Nadu Electricity Board (TNEB) grid at Muppandal, Tirunelveli. Once the project was functional, it would generate an internal rate of return of about 13 per cent including the Clean Development Mechanism (CDM) under Kyoto Protocol.

RRB Energy bags prestigious IPP order for $76 mn

October 3, 2008. RRB Energy Ltd. formerly known as Vestas RRB India Ltd., one of the world’s leading manufacturers of Wind Electric Generators (WEGs), has been awarded a prestigious order amounting to Rs 3.58 bn ($76.02 mn) from Independent Power Producers (IPPs) for setting up wind farm projects.

It is a turn key assignment and will be executed in Tamilnadu and Maharashtra over a six month period. RRB Energy, pioneer in wind power in India since 1987, has established world class manufacturing facilities for production of WEG Blades and WEG Controllers and parts thereof in India. With lower cost, state of the art technology and a very highly skilled management capability, RRB Energy aims to become a global leader of the wind energy sector.

RRB Energy WEGs are of the Pitch Regulated type and are based on the well known and world proven Vestas technology. RRB Energy WEGs are equipped with microprocessor-controlled pitch regulation, ensuring continuous and optimal adjustment of the angles of the blades in relation to the prevailing wind. They are well known for their trouble free performance and are able to deliver high plant load factors even in low/medium wind regimes due to the design parameters incorporated into them.

Hundreds of Megawatts of wind power capacity based on different sizes of WEGs produced and installed for a number of clients by RRB Energy are operating successfully at numerous locations in various States of India.

RRB Energy offers custom-built turnkey solutions in the area of harnessing wind energy for power generation which includes site selection, micrositing, preparation of detailed project report, project engineering, erection, commissioning and after sales service of the wind power projects. The Company’s strategy is to establish a cost advantage through an ongoing process of augmenting its lateral and vertical manufacturing capability.

Ray of hope for solar power

October 1, 2008. India’s energy sector seems set for a sea change. The Special Incentive Package Scheme (SIPS), announced last year to encourage the manufacture of photovoltaic (PV) cells and generation of solar power, has met with an overwhelming response. As many as 14 proposals worth Rs 136,000 crore ($29.09 bn) are now before an appraisal committee, which will vet them with a view to extending the investment subsidy of 20-25 per cent proposed under SIPS. The world energy scenario is changing rapidly, particularly for emerging economies such as India and China, whose growth ambitions could come a cropper merely on account of the rising costs of oil and coal.

If wind power generation has risen sharply in the last decade to account for 80 per cent of India’s renewable energy output of over 10,000 MW, the next decade could belong to solar. While the installed capacity for wind power is close to 8,000 MW, it is little more than 2 MW in the case of grid-connected solar power. This could change, with mass production of silicon semi-conductors. India is a bit player in the world photovoltaic cells market, yet 69 per cent of its modules are exported.

The rest are put to use mainly in telecommunications and lighting homes. Germany, Spain, Japan, China and the US are the leading PV module makers, with Germany making up almost half the world’s output of about 3,800 MW. China’s PV cell output was 820 MW in 2007, 10 times that of India.


‘Cheap electricity generation needs be promoted’: Kenya

October 7, 2008. President Mwai Kibaki urged the Ministry of Energy to provide the necessary technical assistance to private sector firms with the capacity to generate cost-effective electricity from waste material and other by-products to generate their own power and surplus for sale to Kenya Power and Lighting Company.

President Kibaki said some sugar companies had demonstrated the possibility of generating power cost-effectively from cane fibre for own consumption, a technology which could be replicated with other crops. President Kibaki emphasized that availability of adequate and affordable electricity was crucial to sustained growth of the economy and improvement of the living standards of the citizens.

Mitsubishi to power solar winery project

October 7, 2008. Mitsubishi Electric & Electronics USA's Photovoltaic Division will provide high-efficiency solar panels for a 1.2 MW solar system installation at Constellation Wines US' Gonzales Winery in Monterey County, Calif. The installation will cover about 170,000 square feet (15, 793 sq m) of the main winery warehouse roof, and will provide about 60 percent of the winery's total energy requirements.

The installation will include 6,358 Mitsubishi Electric 185 W solar panels, and can generate 1,176,230 watts of DC power and deliver 1,000,040 watts of AC power to the grid. The reduced greenhouse gas emissions will be equal to taking 2,000 cars off the road each year, and the system's reduced carbon footprint will equal planting 2,500 acres of trees. The annual estimate annual offsets, or pollution avoided, by the solar installation include 1.6 mn pounds of carbon dioxide 1,636 pounds of sulfur dioxide and 2,909 pounds of nitrogen oxides. The project, which is being financed and built by Pacific Power Management and is expected to be completed by the end of the year, will add value even during the winery's off-season. During the summer months, when the winery is not processing grapes, the system will export enough electricity onto PG&E's power lines to supply all of the electrical needs for about 25 percent of the roughly 1,695 households in Gonzales.

N.J. vows to race to the sea for wind power

October 7, 2008. New Jersey is powering up an ambitious plan to become a world leader in the use of wind-generated energy. The government wants the Garden State to triple the amount of wind power it plans to use by 2020 to 3,000 MW. That would be 13 percent of New Jersey's total energy, enough to power between 800,000 to just under 1 mn homes.

Garden State Offshore Energy, a joint venture of PSE&G Renewable Generation and Deepwater Wind, was chosen to build a $1 bn, 345 MW wind farm in the ocean about 16-20 miles off the coast of Atlantic City. That plant would be able to power about 125,000 homes. There are currently no offshore wind power projects anywhere in the United States, but two others have been approved for areas off Rhode Island and Delaware. In Atlantic City, the local utilities authority has a wind farm consisting of five windmills that generate 7.5 MW, enough energy to power approximately 2,500 homes. It powers a wastewater treatment plant, with surplus energy going to the area power grid.

The state Commerce Commission assessed the potential costs and benefits of offshore wind on New Jersey's economy. This combination of wind and solar power in Atlantic City, N.J., generates enough electricity for 2,500 homes. The state Board of Public Utilities has set aside $19 mn for wind farm grants. Garden State Offshore Energy was one of five firms competing to do the latest project.

US Army prepares mega solar plant

October 7, 2008. US Army wants to get serious about having a daintier environmental footprint. The Army said it's enlisting several big new energy projects to promote less energy waste in local and overseas bases. Among its ambitions are rolling out a fleet of electric vehicles, establishing biomass fuel demonstrations at select Army posts, and constructing what could be one of the most powerful solar power plants in the world. Projects will be overseen by the Army's newly-established Senior Energy Council.

Among the most ambitious project proposed is partnering with the private sector to construct a 500 MW solar thermal plant at Fort Irwin, California in the Mojave desert. The plant is expected to provide renewable power to the entire fort, with excess power pumped into the Southern California Edison grid. Fort Irwin is currently one of SC Edison's top energy consumers. Presently, the world's largest solar farms produce a minor 10 to 14 MW, although a handful of much more ambitious projects are supposedly underway. The Army also plans on working with the private sector and the Navy to construct a geo-thermal plant at Hawthorne Army Depot in Nevada that can produce 30 MW of clean power.

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