Energy News Monitor |Volume V, Issue 18

State Role in the Development of the Nuclear Power Industry

 

he nuclear power industry is the offspring of military research and development work in atomic energy in the United States after the Second World War.  The transition from military to civilian power in the country was critically important in shaping the character of the industry.  After the Second World War, there was no economic pressure to find alternatives to fossil fuels as energy costs from conventional fossil fuels were low and declining. The idea of developing nuclear power generation was initiated for political reasons – primarily to demonstrate the peaceful uses of nuclear power.  This birth-defect of nuclear power generation industry continues to haunt its life even today. 

The American Atomic Energy Act of 1946 which set the terms for research and military applications of atomic energy placed responsibility of developing nuclear power generation in the hands of a civilian agency, the Atomic Energy Commission (AEC) which operated under the close supervision of the Joint Committee on Atomic Energy.  The AEC invested many billions of dollars in R & D for military applications relying exclusively on private contractors to do the work.  Between 1946 and 1949 nuclear power was exclusively developed for navel propulsion.  Though there was an intention for the development of nuclear energy in the civilian sector the presumption was that it would just ride on the coat tails of military projects.  When the Soviet Union tested the atom bomb in 1949 military research was intensified at the expense of the civilian programme.  However private players who were contractually involved in the nuclear programme pressed on for a role in the commercial development of nuclear power generation. Finally the Atomic Energy Act of 1946 was revised in 1954 to permit private sector involvement in reactor development although the Congress chose to retain the ownership of the fuel itself. 

The 1954 Act permitted the AEC to grant money to groups outside the government in order to encourage nuclear energy R & D.  However, the AEC was not permitted to subsidize commercial facilities.  Within the limits of this restriction the AEC fully employed almost all conceivable forms of direct and indirect aid to licensed operators of non-commercial reactors. The forms of aid that were used included payments for R & D in advance of construction, the waiving of user charges on nuclear fuels and other materials furnished by the AEC, fuel reprocessing and waste storage and payments after construction for a specific period and purpose. The fundamental question as to what justified this extent of Government aid is difficult to answer. Since a new source of energy was not required at that time or even in the foreseeable future, the justification can only be found in foreign policy objectives, accelerating development to reduce programme costs and also to avoid accusations of the Government getting into the business of running power plants. 

The ambiguity of private and government responsibilities for reactor development in addition to the imprecise economic reasons for accelerating development became the heart of the policy conflict over nuclear energy in the Eisenhower administration. On the one hand there were those who supported the Government’s ‘wholesale’ support to the private sector to build nuclear power generators and also distribute the power generated. On the other hand there were those who wanted demonstration to be built by the AEC and the power sold to public utilities such as municipalities and cooperatives.  The Suez crisis in 1956 came to the rescue and postponed the ultimate Congressional battle over who should own and operate nuclear power plants.  

During the later part of 1957 nuclear cost estimates jumped following which equipment manufacturers, private utilities and publicly owned systems argued that the degree of government assistance for power reactor development had been too small. Equipment manufacturers indicated that they were financially unable to expand the heavy R & D outlays that had proved necessary for the first few private projects. They urged construction subsidies for private reactors. Private utilities said that they were prepared to build several prototypes, but lacked the incentive and resources necessary for building any large number of full-scale units. 

Public power systems (municipal and cooperative) argued that they had no funds available for non-competitive reactors.  Managers of these systems looked to the AEC for full assurance that if demonstration reactors were built they would not jeopardize the financial position of their systems.  However certain types of assistance – such as low user charges of government materials had become so built in that they could not be abandoned even in the event of commercialisation of the industry. 

One other factor that facilitated the development of the nuclear power industry was that the 1954 Act also established the AEC, as the agency that would oversee the reactor construction and use thus stipulating that nuclear electricity would be regulated in a manner different from electricity produced from conventional power plants. This meant that the agency that was responsible for promoting the expansion of the nuclear industry also had the responsibility of regulating the industry. 

The development of civilian nuclear power thus took place under comprehensive federal supervision and support.  The extent of the Government’s role in shaping the industry gave rise to comments that there would be no civilian nuclear power industry if the US Government had not subsidised it.   

The first American prototype reactor built at Shippingspost Pennsylvania was originally designed to power an aircraft carrier. It began supplying power to the grid in 1957. Then beginning in the 1960s, first General Electric and then Westinghouse and several other manufacturers began to build reactors for the generation of electricity.

The companies involved were chosen by the Government and not surprisingly the handful of companies that came to dominate the industry were in most instances the same companies that had been selected on non competitive basis to do military work for the Atomic Energy Corporation in the previous years. The Government provided fuel for free, contributed research results, bought back information generated by reactors and even undertook to protect utility companies by limiting their liability to offsite claims in case of a nuclear accident. 

As the number of new orders grew it began to appear that nuclear power plants would rapidly replace oil and coal fired power plants as the preferred technology. By the late 1960s American utilities had ordered nearly 50 plants with a generating capacity of 40,000 MW. 

As was the case with the petroleum industry an effective cartel emerged in the early 1970s to manage the market for uranium ore. In meetings in the capitals of producing countries 18 corporate groups allocated quotas and set prices in an effort to control competition. As a result prices rose by sevenfold in a few years. An interesting feature of the cartel was that the Governments of several countries – Australia, South Africa, France and Canada – were active participants. On the American part, the major conspirator was Gulf Oil Corporation which was eventually charged and forced to compensate customers.

Overall the nuclear power industry was highly concentrated but the part with the most diverse membership involved mining and milling uranium ore which in the United States was dominated by petroleum companies. More than half the milling capacity in the United States was owned by petroleum companies and the reminder by companies affiliated with them or also owning oil production facilities.  

The other stages of the industry were more concentrated. In 1980 fewer than four corporations controlled the entire activity in each. Competition to the extent promoted by the Government policies resulted in a ‘band wagon’ market in which the dominant firms – General Electric, Westinghouse, Babcox & Wilcox and Combustion Engineering sought to outbid each other giving generous supplemental guarantees and repeatedly revising downward their estimated cost of electricity. 

Federal policies had in effect assured the transition from public monopoly to private oligopoly and determined the character of the technology that was eventually deployed. It also promoted the growth of the industry long before economic conditions made it attractive to private players. These circumstances were important because they represented a type of public involvement in the emergence of an energy industry that was very distinctive.

In no other regime were market forces and competitive processes so systematically set aside in the United States even in the determination of which among many technical alternatives would predominate. When competition finally emerged it was over who would get a chance to profit from the construction of a technical system developed under Government direction – under strong political pressure to produce something of civilian and peaceful value from military oriented research – not over which company and technology could provide the most economical means of generating electricity.

Not only were costs unclear and technology unseasoned but reactors were ordered and built before complex support system they would need. In any other competitive industry such investments would have been considered speculative at best and reckless at worst. 

Many problems that surfaced in the 1970s and 80s in the Nuclear Power Generation industry are attributed to the fact that the set technologies were rushed to commercialisation in haste. The existence of major capital commitments to nuclear facilities after the onset of the energy crisis also became the principle source of trouble for the electricity regime.

 

to be continued…

 

Lydia Powell

Visiting Fellow

ORF Centre for Resources Management

 

 

 

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

(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. 17…

5. WHAT COULD BE THE LIMITATIONS TO THE DEVELOPMENT OF URANIUM MARKETS?

e now turn to events that could have a serious—if not irreversible—negative impact on the future development of nuclear energy, namely (1) a nuclear accident in one of the world nuclear power plants, (2) an explosion of a nuclear device or nuclear plant sabotage by terrorist groups, and (3) the incapacity of the international community to develop a sustainable solution to assure safe nuclear uses while constraining the proliferation of nuclear weapons capabilities.  

5.1. Safety Issues

Safety considerations deterred nuclear development as communities feared the long-term fallout effects from accidents and questions arose about the safety of workers (see Feinstein (1989) for a discussion of U.S. commercia1 nuclear power plants’ compliance and non-compliance to Nuclear Regulatory Commission (NRC)’s safety regulation).

As a result of past accidents, however, efforts to improve nuclear safety grew. Nuclear supporters point out that the Chernobyl accident occurred in a graphite-moderated reactor that had design deficiencies, which inspired changes in other reactors of this type to improve their safety. The World Association of Nuclear Operators (WANO) was formed in 1989 to share best safety practices. Containment structures and passive control systems have reduced the likelihood of accidents. All states with nuclear power plants signed the Nuclear Safety Convention in 1996, which sets international safety benchmarks.

Nonetheless, some recent incidents noted on the International Nuclear Event Scale occurred in 1999 in Japan, 2005 in the United Kingdom, and 2006 in Sweden. Human error and the lack of a safety culture caused the most deadly incident in Tokaimura, Japan, where two workers died from radiation exposure as a result of accidentally starting a critical reaction in preparing fuel for an experimental reactor. The potential for disaster is the largest fear and one the industry recognizes it must continually address. Although supporters of nuclear technology believe safety is not a major issue, many in the public disagree—with several developed countries disavowing development of nuclear power and some saying that fast nuclear energy growth could by stymied by a lack not only of specialized building supplies but also of knowledgeable and experienced personnel, thereby further compromising safety.

In addition to accidents, the other safety issue is spent fuel storage. How to manage long-term storage of an open fuel cycle’s radioactive waste products has never been satisfactorily resolved. In the United States, although the Department of Energy has designated Yucca Mountain as a repository for high-level radioactive waste, congressional and public opposition, as well as the very large cost associated with such storage, make the site’s eventual acceptance of waste questionable (Riddel and Shaw, 2003). Currently, holding tanks at nuclear electric generating sites store waste products. Other countries with the open fuel cycle face similar dilemmas. Reprocessing used fuel attempts to address this concern because a closed fuel cycle generates fewer tons of radioactive waste. That reduction of tonnage, however, comes with additional costs (Bunn, 2006; Von Hippel, 2001).¹⁴ 

5.2. Proliferation—Terrorism Threats

Another element moderating nuclear growth is the radical transformation of the nature of international terrorism. In the past 25 years, an increasing number of international extremist and religious-based terrorist groups such as al-Qaeda and Aum Shinrikyo have rapidly developed and emerged—groups whose interest in acquiring nuclear materials is well documented. Many of these groups have also publicly declared their desire to inflict massive casualties and cause major economic disruption to Western countries they consider legitimate targets. For instance, the world’s fifteen worst terrorist attacks, as indicated by the number of casualties and fatalities, have all occurred since 1982, with two-thirds occurring between 1993 and 2006 (Enders and Sandler, 2006; Hoffman, 2006). Al-Qaeda’s September 11, 2001, attacks, as well as other attacks before and after, clearly demonstrate that we have entered a new era of large-scale threats (Kunreuther and Michel-Kerjan, 2004). 

The scenario of the terrorist use of weapons of mass destruction is thus becoming more and more plausible. As a reference, a 10-kiloton nuclear bomb planted in a shipping container that explodes in the port of Long Beach, California, could inflict total direct costs estimated to exceed $1 trillion (not to mention ripple effects on trade and global supply chains that could even result in a global recession) (Meade and Molander, 2006). But even the explosion of a small nuclear device in a large metropolitan area would have tremendous economic impact. And the fear and economic implications of a dirty bomb (a device that disperses radiological material but does not sustain a nuclear reaction) are also major. 

The predominant danger is that terrorists need only to succeed once. In April 2006, Bill Emmott stepped down from editorship of the Economist. Following the longstanding tradition, he wrote his only signed article when he departed. Emmott’s valedictory provided a clairvoyant view on economic, technological, social, and political developments in the world during his thirteen-year tenure. He referred to the fast development of globalization as a critical element of those past years. While he forecasted an even faster and deeper globalization of economic activities in the future, he also challenged this path and asked what could stop or even reverse it. Among the potential candidates: “[E]ven more decisive tipping would come from the use by terrorists of some form of weapons of mass destruction. (…) Are these thoughts more apocalyptic than realistic? History suggests not” (Emmott, 2006). Emmott is not alone in this analysis. A 2005 survey of experts put the likelihood of a nuclear attack somewhere in the world within ten years at 20 percent; further survey response put the likelihood of a radiological attack at double that.¹⁵ 

Thus, fears surround the spread of nuclear energy and the possible diversion of nuclear materials from the fuel cycle process—either slightly enriched uranium for a dirty bomb, or the much harder-to-handle (but more deadly) reprocessed plutonium for a nuclear bomb (Levi, 2007). Fears also surround increased enrichment capabilities and the spread of weapons-grade material–making ability—because what inhibits terrorists from producing a nuclear device is not the physics of construction but access to fissile material (Zimmerman and Lewis, 2006).        

One final danger is the possibility of nuclear sabotage: a terrorist acting from within a nuclear plant and causing another Chernobyl-scale disaster or a group of terrorists directly targeting a nuclear power plant for either takeover or direct destruction.  Some have suggested the industry take the lead and establish a World Institute of Nuclear Security to work with the IAEA - at a higher level than the World Association of Nuclear Operators already does (Bunn, Weir, 2006). However, the point remains that the more nuclear facilities that exist, so do more dangerous possibilities for terrorist interference.

5.3. Proliferation—The Specter of the Multi-State Nuclear Weapon Capability

Absent any accident in one of the nuclear plants worldwide or of terrorist use of nuclear/radiological weapons, the main challenge for the development of the uranium market relates less to economics than to international security: that is, the nonproliferation challenge. It is rarely in a country’s economic interest to enrich its own uranium to make fuel for its nuclear reactors. Given industry returns to scale and significant technological investments, buying enriched uranium from established producers is currently cheaper (especially for small quantities). 

Nevertheless, some countries might decide not to buy but to develop their own uranium enrichment capacity for at least three reasons. First, full fuel cycle ability provides more stability to their fuel supply, which in turn lowers the expected discounted cost of the total electric power per kilowatt-hour delivered. Second, even if the local demand for nuclear energy is not high, an enrichment facility can cover part of its cost by providing enrichment services to other countries and other reactors (including research reactors). Finally, an enrichment capability provides more political stability, generates increased prestige and power, and allows for a possible “breakout” to nuclear weapon capabilities. The international community is highly concerned about the result of this possible race for enrichment capacity. As with the terrorism threat, this is where the future of nuclear energy markets crosses international security. Debate on the internationalization of the dangerous aspects of the nuclear fuel cycle actually predates the IAEA’s inception in the 1950s, but the issue, never fully resolved,¹⁶ has become even more vexing today.

On one hand, the end of the Cold War ushered in a major international effort to reduce nuclear weapon stockpiles worldwide. On the other hand, the world is not bipolar anymore, which means that more countries could develop their own enrichment capacity, build nuclear bombs and use them against other countries—or, intentionally or not, let them fall into the hands of terrorists. Iran and North Korea are two obvious examples, but others might very well follow suit. As Graham Allison, former U.S. Assistant Secretary of Defense and one of the leading experts on nuclear security, recently stated, “If Iran crosses its nuclear finish line, a Middle Eastern cascade of new nuclear weapons states could trigger the first multi-party nuclear arms race, far more volatile than the Cold War competition between the United States and the Soviet Union” (Allison, 2006). Today, it seems the finish line is about to be crossed by Iran.

Notes:

14 Safety and security concerns have prompted technological development to reduce some of those concerns, but in the process also reduces demand for uranium fuel. For example, the U.S. Global Nuclear Energy Partnership (GNEP) supports multinational efforts to develop new reactor recycling technologies taking reactors to a closed fuel cycle (but one that is proliferation resistant); India supports thorium-based nuclear power; and South Africa, with investment also from Russia, is developing flexibly fueled pebble bed reactors. Furthermore, the international investment in fusion research through Iter could one day change the nuclear landscape entirely.

15 This was the median. The average in this survey of 85 experts from Therese Delpech to R. James Woolsey put the likelihood of a nuclear attack over 10 years at 29.2 percent and the average likelihood at 40 percent, same as that median (Lugar, 2005, p. 6). 

16 Study and discussions –e.g., the Acheson-Lilienthal 1946 report on international control of atomic energy– predate even President Dwight D. Eisenhower’s 1953 proposal for an international fuel bank.

to be continued…

OIL & GAS

Cabinet Secretariat for declared goods status to natural gas

October 21, 2008. Cabinet Secretariat has put forward a request to Ministry of Power to place issues relating to the waiver of custom duty on liquified natural gas (LNG) and on granting status of declared goods to LNG/Regassified LNG/Natural Gas before the Group of Ministers (GoM).

BPCL imported 0.43 million tonne of crude for September

October 21, 2008. As per sources, BPCL has imported 427,708 metric tonne of crude for the month of September this year. BPCL has imported the high sulphur crude; Kuwait export crude, Arab mix crude and Al Shaleen crude as well as the low sulphur crude; Azeri Light crude and Quaiboe. Total crude processed by the refinery for September includes the Mumbai high indigenous crude at 985, 445 metric tonne.

RIL commences India’s 1^st deepwater oil production

October 21, 2008. According to sources in the Directorate General of Hydrocarbons (DGH) commercial crude oil production started from September 17, 08 at RIL-NIKO’s deepwater block KG-DWN-98/3. This is the first oil production from any deepwater field in India. As per the upstream sector watchdog, oil production was 83 per cent and gas production was 105 per cent compared to the estimated 08-09 targets for the month of September.

The major Oil & Gas production for September 2008

Name of the field	Production
Major Oil/Condensate production (in bopd)
Ravva	39500
Panna-Mukta	34218
CB-OS/2	7065
Tapti	6704
PY3	2990
Kharsang	1160
Major Gas production (in mmscmd)
Tapti	12.53
Panna-Mukta	5.15
Ravva	2.19
Hazira	1.58
CB-OS/2	1.06

 

Green Gas CNG sales for Sept. stood at 19 lakh kg

October 21, 2008. According to the Green Gas Limited’s monthly progress report for the month of September, the total CNG sales in Lucknow city is around 11.29 lakh kg while for Agra city it stands at 7.53 lakh kg. As per the report there are 4 CNG stations in Lucknow while 3 in Agra. Both Lucknow and Agra are having a 7077 and 6120 CNG based vehicles, private as well as public, respectively plying on the roads.

Iran-Pak for JV to raise funds for IPI pipeline

October 21, 2008. According to the sources in the Ministry of External Affairs, Iran and Pakistan agreed to float a joint venture company to raise funds for the Iran-Pakistan-India (IPI) gas pipeline. The decision was taken at a meeting between Iran and Pakistan on the sidelines of the UN General Assembly.

Nations to launch Friends of Pakistan Group

October 21, 2008. According to the sources in the Ministry of External Affairs, the foreign ministers of Australia, Canada, France, Germany, Italy, Japan and Turkey and representatives of China, the European Union and the United Nations met under the co-Chairmanship of Pakistan President and the foreign ministers of UAE, the UK and the US, to launch the Friends of Pakistan Group. The group agreed that it should work in strategic partnership with Pakistan in the areas of Energy, Institution-building, Development etc.

HPCL urges PetoMin to advice FinMin for ensuring availability of funds

October 21, 2008. Faced with mounting losses arising out of the control selling prices of sensitive petroleum products (Petrol, Diesel, Kerosene and LPG) Oil Marketing Company, HPCL, has requested the Ministry of Petroleum and Natural Gas (PetroMin)) to ask Ministry of Finance (FinMin) to ensure availability of funds at reasonable costs. According to HPCL, the net under-recovery absorbed by it was Rs 3,119 crores for the full year 2007-08, whereas in the Q1 of the current year itself HPCL has had to absorb a net under-recovery of Rs 2,757 crores. As a consequence of such large under-recovery its borrowing levels have increased from Rs 2,185 crores as of March, 2005 to more than ten times to about Rs 30,000 crores as on October 2008. As per the company, because of the time lag between issuance of oil bonds and actual cash realization, the interest cost has risen sharply and is expected to more than double- from Rs 792 crores in FY07-08 to about Rs 1800 crores during the current financial year. Further, the company mentioned that with the hardening up of interest rates in the country, the losses on sale of oil bonds have gone up from Rs 50 crores during April-June, 2007 to Rs 315 crores for April-June, 2008.

 POWER

MoP seeks gas allocated to LPG plants for power sector

October 21, 2008. On the issue of 18 million metric standard cubic metres per day (MMSCMD) gas earmarked for power sector from RIL’s KG D6 field, Ministry of Power (MoP) has sought 7 MMSCMD of additional gas to be given to NTPC so as to enable it to operate its existing plants at 90 per cent plant load factor (PLF) leading to 486 MW of additional power generation for Government of India to meet the emergency requirements of various states.

MoP has also requested for diverting 3 MMSCMD of gas earmarked for LPG plants to the power sector. This request of MoP has been circulated by Ministry of Petroleum and Natural Gas to the Department of Financial Services and the Cabinet Secretariat.

NTPC may provide advisory services for projects in Oman

October 21, 2008. The Indian Embassy in Oman has urged NTPC to provide advisory services for two new Independent Water and Power Projects (IWPPs) in the Sultanate of Oman. The projects are a 1 GW coal fired power plant at Duqm in the Wusta region, and a brown-field power and water project at Al Ghubrah in Muscat Governorate. The embassy had forwarded the tender document in this regard to NTPC Ltd.

The Oman has relied exclusively on gas based power so far, but is unable to cope with surging power requirements for industrialization due to the dwindling domestic gas reserves. It has constituted a team under the chairmanship of Deputy Chairman of the Shura Council, HE Sheikh Nasser Bin Hilal Al Ma’awali to study the possibility of using coal as an alternative source of energy in power generation. 

NTPC to launch coal mining subsidiary

October 21, 2008. According to sources in the public sector power major, NTPC, imported coal is only a short-term option to bridge the shortfall in supply of domestic. As per NTPC, for the Financial year 2007-08 the share of imported coal in the total coal consumption of 121.33 million tonne (mt) by NTPC stood at 2.12 per cent and had declined from 2005-06 level when it was 2.8 per cent.

NTPC’s current plan envisages development of coal based thermal power generation of more than 50 GW by the year 2017. NTPC has been allotted six coal blocks, one in Orissa, one in Chattisgarh and 4 in Jharkhand and have the production potential of about 50 mt per annum which can sustain about 10 GW of power. As per NTPC, it is committed to the timely development of these coal blocks and has no intention to continue with coal imports as long as the demand can met from the domestic coal. In-principle decision has been taken to establish a coal mining subsidiary for development of coal mines allocated to NTPC and specific proposal for approval of the Board is under process. The major issues hastening the process of development of the coal blocks in Jharkhand are land acquisition and forest clearance problems. NTPC has requested the Jharkhand government for its support and intervention in this regard.

Generation growth in coal stations; shortfall in gas stations of NTPC

October 21, 2008. According to the quarterly performance review of NTPC for the first quarter this year, coal stations gross electricity generation stood at 44.29 billion units which is 0.72 per cent higher than the same quarter previous year and is 2 per cent lower than the target set for the quarter. While for gas and liquid stations gross generation stood at 5.896 billion units which is 13.81 per cent lower than the same quarter previous year and 8 per cent less than the target set for this quarter. The average PLF for coal power stations also remained close to 92 per cent while it was 94 per cent in the corresponding quarter of the last year.

India-EU Summit issued JWP in Energy

October 21, 2008. The 9th India-EU Summit, held in France, inter alia, reviewed India-EU Joint Action Plan 2005 and issued a revised plan extending the Strategic Partnership to new areas. It issued a Joint Work Program (JWP) for cooperation in Energy, Sustainable Development and Climate Change.

The JWP envisages cooperation on, among others, clean coal technology, energy efficiency, fusion energy research and renewable energy, as also conclusion of fusion energy research cooperation agreement between EURATOM and India. Both India and the EU have already agreed to explore joint R&D on solar photovoltaics in the 4th round of India-EU Panel meeting held at New Delhi recently.

Japan to help India in energy efficiency improvement

October 21, 2008. At the 3rd minister level dialogue between India and Japan, the Japanese side offered to provide assistance in the concept formulation of Energy Efficiency Centres, in the study of renovation of coal fired power plants in India and provide advice on possible modifications for energy efficiency improvement.

On enhancing efficiency of operating thermal power plants, Japanese side will dispatch experts to examine efficiency deterioration of plant equipment and assess measures for improvement of operation and maintenance procedures. They also agreed to help India in oil stockpiling by dispatching experts and inviting Indian officials to visit a stockpiling base in Japan.

NEWS BRIEF

OIL & GAS

Panna-Mukta venture draws up plans to enhance recovery

October 19, 2008. The British Gas operated Panna-Mukta-Tapti joint venture plans a nine-well in-fill drilling programme to enhance recovery from the Panna-Mukta oilfield. The project estimated to cost around $150-160 mn (approximately Rs 720-760 crore at the current exchange rate) is now awaiting the regulatory approval. The project was aimed at enhancing the recovery from the matured field from 10 per cent to 20 per cent. The proposal was currently awaiting the approval of the management committee under the Union Petroleum Ministry. In-fill wells are aimed at pumping water inside the oil and gas reservoir for maintenance of reservoir pressure to retain or step up production from the existing production fields. The PMT joint venture produces approximately 17 mmscmd of natural gas and 50,000 barrels of oil daily from the three fields. Of the total, Panna-Mukta generates 40,000 barrels of oil and 5.5 mmscmd of associated gas. The project includes development of a satellite oilfield discovered in the region as well as stepping up oil production from Panna-Mukta field. The platforms are slated be commissioned before monsoon in 2009 followed by drilling activity.

Credit crisis would not hit Imperial purchase for ONGC

October 17, 2008. ONGC does not expect its $2.6 bn acquisition of UK-listed, Russian-focused oil producer Imperial Energy to be affected by the global financial turmoil. The company is not dependent on a $1 bn bridge loan. The public sector oil & gas company would continue to aggressively look for overseas assets. In late August, India's biggest oil & gas producer agreed to acquire the mid-sized, London-listed Russian oil producer for $2.6 bn. Imperial, which owns a number of licences in the west Siberian region of Tomsk, hopes to produce 35,000 barrels per day (bpd) by the end of 2009 and 80,000 bpd by 2011.

Saline water find to help raise Cairn's oil output

October 16, 2008. Cairn India, which found India’s largest oil field in Rajasthan in over 30 years, has discovered a saline water reservoir near its oil field that will help pump crude oil to the ground level and enhance production. Had this saline water not been found, the Indian subsidiary of Cairn Energy plc, would have resorted to other costly recovery methods. Oil from Cairn’s field has high wax content, making it difficult to suck out oil from the oil field. However, the oil has less sulphur content which enhances the output of petroleum products. Under this recovery method, saline water has to be heated above 40 degree Celsius and pumped into the oil field. As a result, water will flush out the waxy crude oil to the ground level. For every barrel of oil, the company will have to inject 1.1 barrels of water. One barrel is equal to around 160 litres. The saline water injection from the reservoir will help in enhancing oil production which will begin in the second half of 2009. The water injection process, usually resorted to after a few years of oil production from a field and decrease in pressure, is not likely to increase the cost of producing the oil, which is pegged at $4 a barrel. Water reservoir would be sufficient to meet the oil production demand. The company is expected to produce oil at a peak rate of 175,000 barrels per day, or around 20 per cent of the country’s total oil production, by 2012. This peak rate could be maintained for around four years. However, the company plans to extend this period by employing enhanced recovery methods. India consumed 3.03 million barrels per day of crude oil in 2007-08 and its imports constituted more than 75 per cent of the total demand. The company, at a later stage, will also add certain polymers to the water it injects into the field which will increase the recoverable reserves from the oil field by over 42 per cent to around 1 billion barrels from the current 700 million barrels. The enhanced oil recovery method would inflate the company’s cost of producing the oil to $8-12 per barrel from the current around $4 per barrel.

KS Energy to provide technical services to oil and gas industry

October 16, 2008. KS Energy Services Ltd. has announced the launch of its fourth business pillar, to provide specialised and qualified human resource and technical services to the oil and gas industry. This new business will be held under a newly established wholly-owned subsidiary. KSTR will spearhead KS Energy’s foray into this rapidly growing sector to meet demands from clients comprising drilling and accommodation contractors and drilling operators. The three other pillars of the KS Energy Group comprise i) drilling and accommodation rig management and capital equipment charter, ii) sales and distribution of industrial equipment and iii) marine and logistics services. KSTR will commence with the acquisition of a 100% equity interest in the Amsterdam based specialist manpower and human resources services provider, S.M.S. B.V. group of companies, for a consideration of Euro 3.0 mn (approximately S$6.0 mn). The surge in oil and gas exploration has resulted in a huge shortage of skilled and semiskilled specialist human resources for this sector. The establishment of KS Technical Resources and the acquisition of SMS are strategic moves for KS Energy.

Jindal Drilling leases rig to ONGC for $165 mn contract

October 16, 2008. Jindal Drilling & Industries Ltd (JDIL), a part of the D.P. Jindal group and engaged in offshore oil & gas drilling services, has provided the newly built jack-up rig "Discovery-I" to ONGC, which has been duly accepted by the public sector oil & gas major. With this, the rig has been successfully deployed and the operations under a contract commenced with effect from October 15 (16 days ahead of scheduled date) in the west coast, offshore India at a ONGC nominated location. This rig has been contracted by ONGC for a period of three years on a firm contract basis. The aggregated value of this contract is about $165 mn (equivalent to Rs 810 mn) to be spread over the next three years.

ONGC Videsh may bid for Iraqi oil, gas blocks

October 15, 2008. ONGC Videsh (OVL), is likely to bid for the eight oil and gas blocks that are being auctioned by Iraq, the country with the world's second largest proven oil reserves. OVL, along with global oil majors such as Royal Dutch Shell, ExxonMobil, Chevron, ConocoPhillips, British Petroleum, Total and China National Petroleum Corporation (CNPC), is one of the 35 companies short-listed by the Iraqi government for the auction, which includes six oil-producing blocks with recoverable reserves of 40 billion barrels of oil, making it the largest such auction in the world. The bidding is likely to take place in the next few months and the blocks may be offered by June next year. The auction of the oil and gas blocks in Iraq has revived the debate over whether the real intention of the US invasion of Iraq in 2003 was to secure the huge oil riches in the West Asian country rather than to flush out Saddam Hussein who allegedly sat on stockpiles of weapons of mass destruction which were never found. Iraq wants to ramp up output by 500,000 barrels per day in the next couple of years from the current average production of 2.5 million barrels per day, about equal to the amount being pumped before the March 2003 invasion. Exports of 2.11 million barrels per day currently form the bulk of the country's revenues, and Iraq is keen to raise capacity over the next five years to 4.5 million barrels per day.

Essar Oil partly restarts fuel stations

October 18, 2008. Essar Oil, has partly restarted its fuel stations in the country after crude prices started declining. Essar, in August, began reviving 1,250 closed fuel station in the country and by December, the company hopes to restart up to 70% of its closed retail outlets. According to Essar official's, company was selling petrol at Rs 2-5 a litre more than its PSU competitors and diesel at Rs 6-10 per litre higher than the PSUs.

IOC likely to benefit from foreign currency movements

October 16, 2008. At a time when all eyes are fixed on the sharp depreciation of the rupee vis-À-vis dollar and its possible negative impact on the foreign exchange loan exposure of the Indian corporate sector, IndianOil (and the two other oil marketing companies) is rejoicing at the natural risk cover it enjoys due to dollar-denominated product pricing. IOC’s $3 bn foreign currency loan portfolio will witness a sharp increase in interest outgo to about Rs. 800-900 crore ($164- 184 mn) in the July-September quarter this year. This is due to the 15 per cent depreciation of the rupee to Rs 46.45 a dollar compared to the corresponding period of last year. However the company expects to gain on foreign currency movements due to higher valuation of refining margin (denominated in dollar) and that of the product inventory. The company has foreign currency borrowings of about $3 bn. PSU companies catering to the domestic market generally have a high system inventory compared to its private counterparts. The total interest outgo of the company is set to spiral in the second quarter.

$9 bn investment likely on gas pipeline in 5 yrs

October 21, 2008. An investment of Rs 45,500 crore ($9.23 bn) is expected to expand gas-pipeline network in India in the next five years as the country gears up to promote utilisation of gas, a joint study of industry chamber Assocham and global consultancy firm Ernst and Young said. Currently, India has a gas-pipeline network of over 10,000 km, with Gas Authority of India Ltd (GAIL) having a share of 55 per cent and the remaining is in joint sector, including private players. As per the study, total investment of Rs 45,500 crore ($9.23 bn) is likely in view of the intensity with which petroleum sector is in for expansion of pipeline infrastructure. GAIL is implementing the National Grid Project to develop about 8,000 km of pipeline network across 15 states and Reliance Industries Ltd is also implementing network project, which includes the development of 1,440 km Kakinada-Ahmedabad EastWest Pipeline, and a southern India pipeline network. Gujarat State Petronet Ltd is developing a 1,200 km gas grid, while Andhra Pradesh is enhancing its gas distribution network. The study further said that the share of oil and gas in the primary commercial energy mix is expected to grow from the existing 36 per cent to 41 per cent in next 10 years. In order to give more fillip to exploration of oil and gas, the tax incentives under New Exploration and Licensing Policy brought out by the government needs to be broad based and widened to lure investors in domestic exploration business, it said. 

RIL ready to sell gas to RNRL on lines of NTPC contract

October 21, 2008. According to RIL’s senior counsel, Mr. Harish Salve, RIL was ready to sell gas to Reliance Natural Resources (RNRL) at the same terms present in its draft contract with NTPC. RIL’s draft contract with NTPC has the price of $2.34 per million metric British thermal unit (mmBtu) for a 17-year period, subject to government approval. NTPC contract recognises the importance of government approval while RNRL is not willing to accept government approval clause in the RIL-RNRL gas sales purchase agreement (GSPA). According to the counsel, RNRL will be offered gas at no terms and conditions unfavourable than RIL-NTPC deal. The government has approved price of $4.2 per mmBtu for natural gas sold by RIL. However, this price approval is without any prejudice to the RNRL and NTPC legal cases. Interestingly, NTPC has approached the government for buying gas from RIL at price of $2.34 per mmBtu but this has yet not been approved by the government. RNRL counsel had earlier argued that government approval was only required for valuation purpose only.

RNRL wants RIL to pay differential between prices

October 18, 2008. RNRL demanded RIL pay the difference between the price at which it will sell gas to other buyers and $2.34, the rate at which RNRL is seeking gas, as an interim solution to the dispute between them. RNRL is not averse to supply 12 mmscmd of gas at the rate of at $2.34 per million BTU to state-run NTPC till its power plant comes up in UP, if  RIL starts supplying gas to it immediately. RIL and RNRL are locked in a legal dispute over terms of Gas Supply Master Agreement whereby RIL is to supply gas to RNRL for latter's power plants. Gas production by Reliance Industries is slated to start next year but RNRL will take about three years to put up its power plant at Dadari in Uttar Pradesh.

Shell India’s LNG imports rise 50 per cent

October 17, 2008. Royal Dutch Shell's liquefied natural gas (LNG) venture in India, Hazira LNG Ltd. has increased imports of the fuel by about 50% every month this year. Shell owns 74% in the 2.5 mn tons-a-year LNG terminal and Total owns the rest. Hazira currently buys LNG in the spot market all over the world and is in discussions with potential customers for long- term agreements and will expand the terminal by the end of the year. The company has the area to accommodate as much as 10 mn tons of LNG-receiving capacity.

‘No sensitive documents given to RIL’: MoPNG

October 21, 2008. Government clarified that no papers of sensitive nature were ever given to RIL or its Canadian partner Niko Resources and added they were provided only those papers needed to implement the decision on pricing of natural gas from their field. Reliance and Niko being the parties to the production sharing contract (for the eastern offshore KG-D6 field) are required to implement the decisions taken by the Empowered Group of Ministers (EGoM).

In order to operationalise the decisions taken on sale of natural gas by the contractors (Reliance and Niko), the minutes of EGoM meeting were sent to them for implementation. The decisions taken in the EGoM meeting were also disseminated through a press release and put on oil ministry's website. Since the contents of the communication were also put in the public domain, there was no secrecy attached to the communication.

Oil companies to get oil bonds for three quarters

October 21, 2008. Finance Ministry has secured Lok Sabha nod to issue Rs 65,942 crore ($13.38 bn) oil bonds to state-run firms to compensate them for losses incurred in three quarters ending September 30, 2008. Indian Oil, Bharat Petroleum and Hindustan Petroleum will get oil bonds worth Rs 14,956.17 crore ($3 bn) for selling fuel below cost in January-March quarter. They will get an additional Rs 24,408 crore ($4.95 bn) compensation for April-June quarter and the remaining will be for July-September quarter.

Government compensates half of the losses, these companies incur on sale of petrol, diesel, kerosene and LPG through issue of oil bonds. For 2007-08, the oil companies reported a total revenue loss of Rs 70,579 crore ($14.32 bn) of which Rs 35,289.50 crore ($7.16 bn) is to be compensated through oil bonds. The government has already issued, oil bonds worth Rs 20,333.33 crore ($4.12 bn) for April-December 2007 period. For the current fiscal, three companies are projecting a revenue loss of Rs 147,592 crore ($29.96 bn), 50 per cent of which have to be met through oil bonds 

Oil firms give airlines new dues deadline

October 20, 2008. Even as the government is considering a rationalization of jet fuel prices, oil marketing companies have given India’s loss-making airline industry a new deadline to clear their fuel dues within 15 days. While the airlines received the notice last week, they continue to lobby state-run oil companies and ministries to extend the deadline to settle the dues. It is learnt that India’s airlines including Jet Airways (India) Ltd, Kingfisher Airlines Ltd and National Aviation Co. of India Ltd (Nacil), owe oil companies around Rs 1,800 crore ($367.57 mn) beyond their fully tapped, existing credit limits with the fuel suppliers. Some 60% of the dues has to be paid to IOC and the rest to Hindustan Petroleum Corp. Ltd and Bharat Petroleum Corp. Ltd.

According to IOC, Jet Airways has exceeded its credit limit of Rs 600 crore ($122.52 mn) by Rs 330 crore ($67.38 mn); Nacil, which has no credit limit in place, owes Rs 606 crore ($123.74 mn); and Kingfisher, which has a credit limit of around Rs 60 crore ($12.25 mn), has exceeded the limit by around Rs 40 crore ($8.16 mn). Jet fuel accounts for 45-55% of the operating expenses of airlines and costs 70% higher in India than in other markets because of multiple taxes, including one levied by states. India’s airlines are expected to end this year with aggregate losses of about $2 bn (Rs 9,740 crore), up from around $1 bn last year. Airlines are bleeding and it will be tough to pay outstanding dues to oil marketing companies. It is to be noted that airlines were imposing  nearly Rs 3,000 per ticket as fuel surcharge.

‘Need to cut jet fuel prices’: Aviation minister

October 19, 2008. Analysing the sharp fall in number of fliers, aviation minister Praful Patel said that Jet fuel in India is about 60% to 70% more expensive than other parts of the world. This difference translates into higher fares for passengers and an extra cost of Rs 8,000-9 ,000 crore for airlines , roughly the loss the latter expect to incur this year. The number of people taking domestic flights has fallen by 18.5%. This September's low is the straight fourth month in a row that domestic fliers have kept away compared to last year.

The number of domestic fliers this July fell to 58.51 lakh compared to 68.77 lakh last July, a fall of -14 .9%. The combined impact of high fuel prices and an economic slowdown has meant that as airlines raised fares, lesser and lesser number of people could afford to fly. With passenger numbers falling, airlines are now slashing capacity by withdrawing flights and returning excess planes. Despite reducing flights by 20 to 25%, airlines are still flying with nearly 40% seats unsold. Many airlines reported their lowest seat factor in September, with the figure ranging from 64% for Jet to 50.5% for Spice-Jet.

Clearly, low cost carriers have lost their sheen due to constant fare hikes now as many of their patrons have gone back to trains and buses. Jet fuel in India is about 60% to 70% more expensive than other parts of the world. This difference translates into higher fares for passengers and an extra cost of Rs 8,000-9 ,000 crore for airlines , roughly the loss the latter expect to incur this year. The minister warned that unless the base price of jet fuel and taxes on it were not rationalised, some airlines may have no option but to close down.

PPAC to study why diesel use is rising

October 19, 2008. The Petroleum Planning and Analysis Cell, intrigued by the constant rise in consumption of diesel, despite the fluctuations in crude oil prices, plans to undertake a study on the consumer pattern of the product. Domestic consumption of diesel, which is essentially a transportation fuel, has been seeing a growth of 18-20 per cent. For April-September of the current fiscal, diesel consumption saw an average growth of nearly 12 per cent against about 8 per cent for petrol. Industry watchers feel that there is a need to reduce the pace of increase in diesel consumption since the revenue loss on diesel alone accounts for over 50 per cent of the total under recoveries suffered by public sector oil marketing companies on retail sale of four petroleum products - petrol, diesel, kerosene and LPG - at controlled price.

In 2007-08, revenue loss on diesel stood at Rs 35,166 crore ($7.21 bn) of the total under recovery on four petroleum products of Rs 77,123 crore ($15.83 bn). The revenue loss on diesel is estimated to go up during the current fiscal. In September, diesel sales, which account for one-third of total petroleum product sales, are estimated to have increased by almost 17 per cent against the same month last year. The increase in consumption of diesel by industrial users negates the very purpose of offering the product at a subsidised price.

According to industry estimates, subsidy to consumers on diesel stood at Rs 11.48 a litre. In fact, the OMCs are of the view that the time has come to implement differential pricing of diesel for direct consumers, by offering the product at its economic value, while protecting the vulnerable customer. According to industry estimates, the sector-wise consumption growth of diesel showed that for the first quarter of 2008-09 (April-June), the power sector saw a phenomenal increase in demand by 152.4 per cent (53,000 tonnes) followed by fisheries at 39.4 per cent and marine at 39.2 per cent. The total consumption growth by direct consumers was 10.4 per cent compared with the same period last year, while retail sales saw a growth of 11.6 per cent. The combined growth registered in both the categories was 11.4 per cent during the period. To meet the growing demand, the public sector oil refining and marketing companies have to resort to imports. The three OMCs - Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation - can indigenously meet 12-15 per cent of the growth. The domestic production of diesel by the three PSUs would be close to 50 mtpa.

IPI gas pipeline project can become IPC

October 18, 2008. According to Foreign Minister of Pakistan Shah Mahmood Qureshi, the Iran-Pakistan-India (IPI) gas pipeline project could become the Iran-Pakistan-China project in view of New Delhi's delay in joining the venture. The minister said that India would be welcome to join the project whenever it chooses to do so but Pakistan could not delay the venture any further due to its growing energy requirements. Pakistan has been actively pursuing China to join the $7.4 bn project ever since India stayed away from several meetings held last year to discuss the finalisation of the pipeline. China has given no firm commitment on joining the project as yet. Both Pakistan and Iran decided to proceed bilaterally on the pipeline during Iranian foreign minister visit to Pakistan recently.

Plan panel member for NELP tax sops

October 18, 2008. According to member (energy), Planning Commission, Kirit S Parikh, more tax incentives should be included in the NELP to persuade investors to stay in India for oil and gas exploration. The minister has also demanded more powers for the oil regulator for deciding fair refining and retail petroleum pricing. He said that the pricing pattern for petroleum products in India has to be linked with crude volatility factor. He said that incentives and tax concessions are required in NELP so that exploration is made attractive to investors.

According to him, the gas regulator needs to be empowered to decide on fair petroleum prices both at the refining and retail ends. He is of the view that the current regime encourages monopolistic tendencies and creates little competition. This needs to be overhauled so that investors stay in India to compete with oil utilities, which will benefit consumers and increase the acreage of oil and gas in India. 

Petroleum Secretary moots forming nodal agency to nurture Oil & Gas industry

October 18, 2008. Petroleum Secretary, R S Pandey, has mooted formation of a nodal agency to facilitate talent development for the Indian Oil & Gas industry. Secretary, who has taken over reins of the Petroleum Ministry recently, said this Nodal Agency For Oil & Gas (NAFOG) should consist of representatives from the Industry, Academia and Government along with Oil Industry Development Board (OIDB). This NAFOG needs to be suitably empowered, so that it functions effectively to develop skilled manpower for the Indian Oil & Gas sector.

Petroleum Secretary urges PSUs to promote CDM projects

October 17, 2008. Petroleum Secretary R S Pandey, has urged the oil sector PSUs to promote the message of Clean Development Mechanism (CDM) to the community at large. Secretary, MoPNG has informed that climate change is a reality and must be addressed for the community at large. It is the 70/30 syndrome where 30 percent of population enjoys 70 per cent of energy. India, for example, though consumes 5% of the global energy, only has 30% per capita energy consumption compared to the global average.

Fuel price cutback on the agenda

October 17, 2008. With international crude oil prices dipping to last year’s levels, the government has put the issue of cutting motor and cooking fuel prices back on the agenda to tame inflation. However, the trigger for a price cut has been recalibrated. The oil ministry had earlier claimed that the oil companies viz., Indian Oil, Bharat Petroleum and Hindustan Petroleum would not incur losses selling petroleum products if crude prices touched $67 a barrel. The Indian basket of crude oil, which is used by domestic refineries, fell to $68 a barrel. But, with the rupee depreciating 10 per cent in the last quarter, import costs have risen sharply causing the ministry to revise the break-even point to $61 a barrel.

Analysts project oil prices to fall to $55 per barrel in the short-term as demand erodes in a slowing economy. Prices are around 13 per cent lower than they were in October 2007. Government  says even a Rs 2 to Rs 3 per litre cut in diesel prices would bring down inflation 60 to 70 basis points (100 basis points is equal to one percentage point). Inflation for the week ended October 4 was 11.44 per cent. Oil companies currently make profits on a third of their petrol sales. The companies sell premium petrol and diesel around Rs 4 per litre higher than normal petrol and diesel. These firms lose around Rs 2.85 on every litre of normal petrol and Rs 7.26 on every litre of normal diesel they sell.

India and South Africa to cooperate in oil sector

October 17, 2008. India and South Africa discussed ways and means to establish cooperation in the oil and gas sector between the two countries. Among the issues discussed were: setting up of LPG logistics in South Africa, collaboration with PetroSA of South Africa for utilization of Coal-to-Liquid (CTL) technology in India, bilateral cooperation in setting up of CNG network in South Africa, and availing of training facilities in India by South African personnel in the hydrocarbon sector.

Oil India Limited declares total dividend of 275 pc

October 16, 2008. Oil India Limited, India’s second largest oil and gas company as measured by total proved plus probable oil and natural gas reserves and production, presented a cheque for Rs. 315.00 crore ($64.43 mn) to Ministry of Petroleum and Natural Gas, Government of India, as the final dividend @ 150% for the financial year 2007-2008. The Company had earlier paid an interim dividend of 125% amounting to Rs. 262.50 crore ($53.69 mn) during the year. Thus, the total dividend paid to the Government of India for the year 2007-2008 amounts to Rs. 577.50 crore ($118.12 mn) being 275% of the paid up capital of Rs. 210 crore ($42.95 mn) held by the President of India.

The Company recorded a total income of Rs. 6,795.46 crore ($1.38 bn) and profit after tax of Rs. 1,788.93 crore ($365.9 mn) for the year 2007-08. Net worth of the Company increased to Rs. 7,932.97 ($1.62 bn) crore up by 16% over the previous year’s figure of Rs. 6,849.07 crore ($1.4 bn) even after providing for subsidy of Rs. 2305.09 crore ($471.48 mn) on crude oil and LPG sales to share a part of under recoveries suffered by oil marketing companies. The total dividend paid to the Government of India for the year 2006-2007 was Rs. 546.00 crore ($111.67 mn), which constituted 260% of the paid up capital of Rs. 210 crore ($42.95 mn) held by the President of India, out of which the first interim dividend was @ 110%.

OIL is producing at the rate of around 3.50 MTPA of crude oil and 7 MMSCMD of Gas from its fields. OIL has exploration and production acreages of about 1,50,000 sq km pan-India and overseas. It has participated in all the past seven NELP bidding rounds concluded so far, and has now acquired total 21 blocks till NELP VI. Out of these, 14 are onshore and rest 7 are offshore blocks located in the East Coast of the Country. The Company has overseas presence in seven countries, Libya, Gabon, Nigeria, Yemen, East Timor, Iran and Sudan. OIL has nine Blocks in Libya and it is operator in five of these blocks. These blocks are part of one of the most prolific basins in Libya. In Iran, OIL has 20% PI in Farsi Block. Discovery of oil and gas in the block has been made, which is being evaluated for commercialization.

In Gabon, OIL has one block where the first phase of exploration is in progress. One of OIL’s focus areas is to make a selective presence across the oil and gas value chain for balancing its risk portfolio. OIL has increased its stake in Numaligarh Refinery to 26%. OIL also has a 10% stake in the Assam Gas Cracker Project viz. Brahmaputra Cracker and Polymers Ltd. OIL has also signed an MOU with Total, Mittal Energy Investments Pte Ltd., HPCL and GAIL, for participation in the East Coast grassroot Refinery and Petrochemical complex at Visakhapatnam.

In the area of services business, OIL is concentrating on the Pipeline sector — its area of strength. The Company has recently completed its product-pipeline (NRL to Siliguri) which will generate additional gross revenue of over Rs 100 Crore ($20.45 mn) per annum. The Company has been present in the India oil and gas exploration and production industry for nearly five decades. The Company is primarily engaged in the exploration, development, production and transportation of crude oil and natural gas onshore in India.

India and Brazil discuss further cooperation in oil & gas

October 15, 2008. India and Brazil discussed measures to strengthen further ties of cooperation between the two countries in the oil and gas sector. VL has a significant presence in Brazil, having invested in an offshore block (BC 10) in Campos Basin in 2006. It later acquired exploration rights of two offshore blocks in Brazil in March 2008. ONGC and Petrobras, the premier oil and gas ompany of Brazil, are strengthening their partnership by swapping participating interests in three blocks. OVL and Petrobras are working jointly in an oil block in Colombia. Bharat Petro Resources Ltd., a subsidiary of Bharat Petroleum Corp. Ltd. (BPCL), has acquired 10 offshore petroleum blocks in Brazil in September, in partnership with Videocon Industries Ltd.

POWER

Adhunik Power signs MoU for 1000 MW with BSEB

October 20, 2008. MoU for setting up a 1000 MW power plant was signed on October 19 between the Kolkata-based Adhunik Group company, Adhunik Power and Natural Resources Ltd (APNRL) and the Bihar State Electricity Board (BSEB). The Rs 25 bn ($510.51 mn) Adhunik Group is an established player in steel, stainless steel, forgings, cement and power.

The group has manufacturing units in Bengal, Orissa, Jharkhand, Meghalaya and Maharashtra. It has mining rights in states of Orissa and Jharkhand. In the near future, the group plans to expand to other states as well. APNRL is setting up a 1000 MW thermal power plant based on coal as primary fuel which is expected to be commissioned by June 2011. The coal needed for the power project would be sourced from Ganeshpur, Jharkhand captive coal block of 65 mt which has been allotted to the company.

Hinduja plans investments in nuclear power plants

October 19, 2008. The Hinduja group were widening the scope of their investments in India to include nuclear power plants in collaboration with foreign partners. Besides continuing its investments worth several billion dollars in 10 core sectors such as infrastructure, power, finance and banking, health care and automotive industry, the Hinduja group was now looking at investing in nuclear power plants against the backdrop of the Indo-US nuclear deal.

Karnataka’s power scenario leaves industrialists frustrated

October 18, 2008. Industrialists vented their frustration over the dismal power scenario in the Karnataka state as prolonged periods of load shedding have begun to take their toll on production. Investors have become wary of setting up industrial projects in the state due to uncertainty over the power supply. The state has not been able to achieve its projected output of power during the last few years. Dependence on hydel power was the reason for chronic power shortage. The state has been depending mainly on hydroelectric power for its needs even though 75 per cent is available for utilisation. Also, environmental issues as well as delay in settlement of inter-state disputes have affected the full utilisation of available hydel potential.

Bhel mulls buying Czech firm Skoda Power

October 16, 2008. Bharat Heavy Electricals (Bhel) has joined the race for Czech power utility company Skoda Power. Skoda Power, a subsidiary of Skoda Holdings, is a leading European manufacturer and supplier of technological equipment and provides customer services in the field of power generation. The bidding will be held online and Bhel will be competing with 15 other global companies. Bhel is interested in acquiring the global business of Skoda Power, including its Indian operations.

The company mulls appointing a consultant for its overseas acquisition unit and has invited global advisors such as PricewaterhouseCoopers, Ernst & Young and KPMG. It will also be soon inking a deal with Infrastructure Leasing & Financial Services (IL&FS) for financing its international operations. The two companies may sign a memorandum of understanding (MoU), under which IL&FS will provide the financial packages for Bhel’s overseas project.

LT consumers told not to draw power during peak hours

October 15, 2008. Tamil Nadu Electricity Board (TNEB) gave a Knock Out punch to the Low Tension (LT) consumers asking them not to draw power from the State grid for four hours from 6 p.m. to 10 p.m. every day. The board warned that any consumer found violating the rule would have the connection snapped, and it would be restored only after 48 hours after payment of necessary reconnection charges.

As per the industry, because of the disruption, the productivity was hit and the latest diktat would mean that small units would not able to work for up to 10-11 hours a day unless they had their power back-up. Besides, the operational cost also would be high since they had to buy diesel paying Rs 50 a litre and whose supply also was erratic. The power generation cost worked out to Rs 12-16 a unit making it unaffordable to most of the tiny and micro units. They also faced the prospect of losing their orders to their rivals who have captive power generation facility.

Thermal plants face coal shortage

October 21, 2008. More than 60 per cent of India’s coal-based power plants are running with less than a week’s consumption of coal, threatening to affect power availability at a time when India’s peak deficit is hovering at around 15 per cent. The Central Electricity Authority (CEA), the apex power sector planning body, said that 50 out of 81 thermal power plants in India are having stocks less than 7 days of consumption in September. This is the highest number of plants having stocks below the critical level in recent times.

The CEA report cited non-receipt of coal, inadequate linkage and higher generation, as well as law and order problems as reasons for the current situation. At present, India has 81 coal-based thermal power stations which are largely fed by coal supplied by Coal India Ltd (CIL), the country’s largest coal production utility, and its subsidiaries. India is planning to add about 78,700 MW of power capacity in the current Plan period (2007-2012). A greater chunk of this capacity, 50,570 MW or 64 per cent is going to come from coal-based thermal power stations. According to the coal ministry, it is allotting coal in excess of what was being asked and whatever shortfall is there in availability of coal, it is due to non-import of coal scheduled by the utilities.

‘Nuclear deal consistent with India’s interest’: Pranab

October 20, 2008. According to the government, the Indo-US civil nuclear agreement was consistent with India’s interests. The pact incorporates provisions ensuring uninterrupted fuel supplies and the right to reprocess, besides the option to take corrective measures if warranted. The External Affairs Minister, Mr Pranab Mukherjee, said that after concluding civil nuclear agreements with the US and France, India was working towards finalising a similar pact with Russia during the upcoming visit of President. He also stated that the Safeguards Agreement entered into with the IAEA, as well as bilateral pacts with the US and France, entail no hindrance to India’s strategic programme.

NHPC outlined expansion plans

October 19, 2008. State-run power company NHPC, which had deferred its Initial Public Offer due to meltdown at bourses, will try its luck again once the benchmark BSE index touches 14,000-mark. NHPC Board had approved the IPO together with 5 per cent disinvestment of government stake in the first week of August and was hoping to raise up to Rs 5,500 crore ($1.12 bn) with face value of Rs 1,670 crore ($342.84 mn). NHPC accounts for 3.7 per cent of country's total power generation capacity and is targeting to double capacity by 2012 from the present 5,200 MW and has outlined expansion plans worth Rs 28,000 crore ($5.74 bn).

It has also proposed to come out with a public issue of about 111.82 crore fresh shares and 55.91 crore existing shares of Rs 10 each at a premium, which is expected to fetch the company about Rs 5,500 crore ($1.12 bn) and government about Rs 2,800 crore ($574.83 mn). The company would use the proceeds of the offer for financing seven hydro-electric projects, including 44-MW project at Chutak in Jammu and Kashmir, 2,000-MW Subansiri Lower project in Arunachal Pradesh and 160-MW Teesta Low Dam-IV in West Bengal.

‘MoU for setting up power projects not detrimental for J&K’

October 18, 2008. Denying reports that Jammu and Kashmir government's agreement with NHPC and PTC for setting up three power projects is detrimental for the state, an official spokesperson has said the deal is beneficial and J&K has got a better deal than other states. Several mainstream political parties, including the People's Democratic Party (PDP) and state unit of CPI(M) had described the MoU with NHPC and PTC as detrimental to the interests of the state.

The spokesman strongly refuted the reports claiming that the state government gifted seven hydro- electric projects to NHPC and the MoU signed with the corporation for harnessing hydro-electric potential was 'detrimental to the interests of the state'. He said that the MoU signed with NHPC on October 10 pertains to only three projects for execution by Joint Venture Company (JVC) and not seven as mentioned in the report. The projects slated to be taken up in joint venture are Pakal Dul, Kiru and Kawar. In fact, the state cabinet has approved the draft MoU for these three projects to be executed by JVC in April 2008. 

Universal aims to build 10,000 MW unit

October 17, 2008. The West Bengal government signed a memorandum of understanding (MoU) with NRI Prasoon Mukherjee’s, Universal Success for a mega independent power project and port. The group had signed several projects with the government in the last three years but failed to implement any. The investment in the first phase would be Rs 16,000 crore ($3.27 bn). The coal for the project would be imported from Indonesia and hence the port would have to capacity to handle 30 mt of coal. The first phase would be completed within four years from the date of possession of land. The land requirement for the first phase would be 1,000 acres while total requirement in the project would be 3,000-3,500 acres.

The location for the project had not been finalized as yet. A study would be conducted by Development Consultants to determine the location and facilities required for the project. The port would be adjacent to the power project. The project once completed to its full capacity of 10,000 MW would employ 5,000 people directly. At today’s rates, the total project cost was estimated to be around Rs 60,000 crore ($12.26 bn).

Govt permits captive coal block exploration by private companies

October 17, 2008. Ending monopoly of state-run mapping and exploration agencies like Central Mine Planning and Design Institute (CMPDI), the government has permitted companies in possession of captive coal blocks to get further examination of the asset done by private firms. Any company, which has been allocated coal blocks for captive use, is free to get the further exploration done by private agencies. This may come as a breather for steel and power utilities in possession of such blocks as it would ease out the processes, hitherto involved in getting the exploration work done by state agencies.

Earlier, state-run companies like Central Mine Planning and Design Institute and Mineral Exploration Corporation Ltd were responsible for carrying out detailed examination of captive coal blocks. As per the new provision, the government has laid certain guidelines, including drilling specifications and depth, for carrying out detailed exploration. The companies will need to follow guidelines laid by government.

Relaxing the exploration norms would help expanding the ambit of government agencies as they will be able to concentrate more on bringing virgin territories under their belt. Presently, around 190 captive coal blocks have been allocated to private and public companies with an estimated reserve of about 41 billion tonnes. Government has asked CMPDI and Geological Survey of India to increase their mapping capacities manifold and outsource exploration activities if the need be to match the spiralling demand for raw materials. 

Reliance Power to build 4,000 MW plant by ’13

October 16, 2008. Reliance Power Ltd will commission a giant coal-fired power project with a capacity of 4,000 megawatts, equivalent to India's current nuclear power capacity from 17 plants, by 2013. The plant at Sasan in central India, the first of nine ultra mega power plants planned by India, will commission three years ahead of schedule.

India, which imports 70 per cent of the oil it consumes, is encouraging coal-fired plants to ease chronic electricity shortages, which are seen as a major obstacle to faster economic growth. The first unit of 660 MW would be commissioned in December 2011, ahead of schedule. The whole Sasan project will consume 15 mt of coal a year from coal blocks allocated by the government.

The government has estimated India's power sector needs Rs 10 trillion ($205 bn) of investment in the five years to 2012. Asia's third-largest economy is estimated to suffer peak power shortages of about 18.1 per cent and an overall energy deficit of about 8.8 per cent in the current financial year.

SIMA urged TNEB for HSD oil model

 October 16, 2008. Southern India Mills Association (SIMA) has urged the Tamil Nadu Government to implement its suggestion of High Speed Diesel (HSD) oil model by reimbursing the cost of captive power generation for augmenting power supply in the State to ensure the survival of the textile industry that had invested over Rs 50,000 crore ($10.22 bn) in the past five years.

SIMA has expressed the view that if the Government failed to come out with a positive response before October 22, the textile mills in the State would be left with no alternative other than to join the one-day closure called for by the industries in the State. The mills wanted SIMA to appeal to the Government to accelerate the implementation of the diesel model and utilise idle capacity of HSD generators of over 3,500-MW available with the industry that the Government had indicated it would favourably consider to ensure the survival of the industry. SIMA was of the opinion that this was the only immediate solution to tide over the power crisis threatening the survival of the industry.

Govt not to reduce capacity of UMPPs

October 15, 2008. According to a report, the Government is unlikely to reduce the capacity of ultra mega power projects (UMPPs), from the present 4,000 MW, on Asian Development Bank's suggestion. The report stated that ADB had asked the Ministry of Power to consider reducing the size of UMPPs to 2,000 to 2,500 MW from current 4,000 MW so that more international financial institutions could lend their support.

Government has already awarded three UMPPs of 4,000 MW each, Sasan in Madhya Pradesh and Krishna Patnam in Andhra Pradesh to Reliance Power, Mundra in Gujarat to the Tatas. It has decided to set up three more UMPPs in Tamil Nadu, Maharashtra and Orissa. The reports stated that the UMPPs are high-value projects that need large amount of finance and the domestic private power sector companies are not fully equipped to take up such projects on their own. All three of the UMPPs awarded so far are expected to commission a few units aggregating about 3,000 MW within the 11^th five-year plan (2007-12).

OIL & GAS

DONG Energy start up production in ’10

October 20, 2008. DONG Energy and its license partners Bayerngas Norge and Faroe Petroleum have prepared a development plan for the Norwegian oil and gas field Trym, which is to provide a tie-back to the Danish production platform Harald. The investment is expected to total DKK 2.4 bn, with DONG Energy's share amounting to around DKK 1 billion. The development plan has been submitted for consideration and approval by the relevant Norwegian authorities. Subject to official approval by January 1, 2009, DONG Energy expects Trym to go into production by the end of 2010.

Trym is located in the Norwegian sector of the North Sea, immediately north of the Danish/Norwegian boundary, and will be tied back to the Danish DUC production platform, Harald, via a 6-kilometer pipeline. The development will be in the form of a subsea installation with two horizontal wells that will be tied back to and controlled from Harald. According to the plan, the gas from Trym will be transported from Harald via DONG Energy's pipeline to the Tyra platform and onwards to Nybro in Denmark or Den Helder in the Netherlands, respectively. Oil and condensate will be transported from Harald via the Gorm field to Fredericia in Denmark via DONG Energy's pipeline.

Dana Gas makes discovery at Al Tawil-1 well in Egypt

October 15, 2008. Dana Gas, the Middle East's first and largest regional private-sector natural gas company, has announced a gas and condensate discovery in its Egyptian concessions, marking the third discovery in the Company's $170 million drilling campaign for 2008. The "Al Tawil-1" exploratory well commenced drilling on September 5, 2008 and reached a total measured depth of 3,163 meters in the Qawasim formation. The well is located in the West Manzala concession, approximately 15 km south of Dana Gas's El Wastani gas processing facilities.

The Al Tawil-1 well encountered 34 meters of net hydrocarbon pay in the Qawasim sandstone reservoirs with excellent porosity and permeability. Upon testing, the well flowed at a daily rate of 23.5 million standard cubic feet of gas and 1,027 barrels of condensate (totaling approximately 5,000 barrels of oil equivalent per day). The added recoverable reserves, resulting from the successful drilling of the well, are currently estimated at 90 billion cubic feet of gas (16 million boe), in addition to 4 million barrels of associated condensate, which represent an increase of 20% to the current reserves of Dana Gas in Egypt.

Sibir's Siberian fields producing over 137,500 bopd

October 17, 2008. According to Sibir Energy, equity production from its upstream units exceeds 75,000 barrels per day (bopd). The new production record was reached as Salym Petroleum Development NV (SPD), Sibir's 50:50 joint venture with Shell, achieved production of over 137,500 bopd from the Salym group of fields in Western Siberia. The new SPD production record brings Sibir's 50% share at Salym to over 68,750 bopd which, combined with production from its subsidiary Magma, brings Sibir's total daily production to over 75,000 bopd.

Petroecuador's output tops 173,000 bpd

October 15, 2008. State-owned Petroecuador’s average total production is now 173,906 barrels per day, up from 165,480 bpd in June. The growth in production is due both to new wells and to intense efforts to revitalize existing fields in the Amazon. The firm expects to meet its goal of producing 175,000 bpd by year's end through drilling set to begin next month with 11 new rigs and through more effective recovery methods at established sites. Ecuador produces around 600,000 bpd of crude in all, and revenues from oil exports fund 35 percent of public spending.

Technip wins Gdansk refinery contract

October 20, 2008. Technip has been awarded by Grupa Lotos a lumpsum contract, worth approximately EUR70 mn, for the refinery in Gdansk, Poland. The contract covers engineering and procurement services for a new solvent deasphalting unit. The unit will have a feed capacity of 180 tons per hour. Technip's operating center in Rome, Italy, will execute the contract. This is the third contract assigned to Technip by Grupa Lotos over the last year, confirming the outstanding collaboration between the two companies. Solvent deasphalting is an extraction process in which heavy gas oil is dissolved in a solvent and heavier matter is separated as asphalt. Feedstock for solvent deasphalting can be atmospheric resid or vacuum resid or a mixture of both.

CNOOC wins approval for crude, fuel terminal

October 17, 2008. China National Offshore Oil Corp (CNOOC), the parent of CNOOC Ltd, has won approval to build a crude and oil products terminal serving its Huizhou refinery in southern China's Guangdong province. The project involves total investment of around 1.06 bn yuan, with 35 percent to be funded internally and the remainder financed by banks. The crude terminal is designed to accommodate one vessel of up to 300,000 dead load tons and can receive 18 mtpa of crude oil. The project also includes an oil products terminal with annual throughput of 7.4 million tons, and three other supporting berths.

PetroSA garners license for new refinery in South Africa

October 16, 2008. Oil and gas company PetroSA has been granted a manufacturing license for its planned R101.4 bn oil refinery at the Coega Industrial Development Zone outside Port Elizabeth, South Africa. The granting of a manufacturing license carried out by the Controller of Petroleum Products, a unit of the Department of Minerals and Energy is subject to certain normal business conditions, such as a permit to operate from the environmental authorities. The project was of strategic importance to South Africa's economic development aspirations. Expected to be the biggest on the African continent, the refinery will come on stream in 2014 and is expected to create over 25,000 direct and indirect jobs around the Port Elizabeth area.

Spectra holds open season for Greenway-Blue Ridge project

October 20, 2008. Spectra Energy Partners, LP, in response to strong market interest for additional market outlets and increased access to Appalachian natural gas supplies, is planning a further expansion of its East Tennessee Natural Gas (ETNG) system. After evaluating the requests received from the Greenway open season held in February, ETNG has determined the facilities required for the Greenway-Blue Ridge expansion of the system.

The expansion project will move substantial volumes of natural gas from the Appalachian supply basin to Southeastern and Mid-Atlantic U.S. markets. The Greenway-Blue Ridge expansion could provide up to 275,000 dekatherms per day (Dth/d) of firm capacity for customers wishing to move supply from the Appalachian producing region in Southwest Virginia to ETNG's Cascade Creek interconnect with Transcontinental Pipeline in North Carolina. The extent and nature of the new facilities associated with this expansion project will be finalized following the results of the open season. The expansion is expected to be placed into service as early as November, 2010.

TNK-BP says Kovykta deal with Gazprom close

October 17, 2008. Negotiations between Russian oil producer TNK-BP Holding and gas giant OAO Gazprom over the giant Kovykta gas field in Siberia will be concluded within weeks. The two sides have agreed on all major issues regarding the deal and at this point only technical issues remain to be resolved. The company would pull out of the agreement if the license for the field is not extended. TNK-BP, a 50-50 joint venture between U.K. oil major BP PLC and a group of Russian billionaires, currently has a 63% stake in Russia Petroleum, which holds the license for Kovykta. In June last year, TNK-BP agreed to sell its stake to Gazprom with an option to buy back a 25% plus one share stake in the project. But the talks have between delayed, due to a long-lasting dispute between shareholders at TNK-BP.

Gazprom considers new gas pipeline via Romania

October 17, 2008. Gazprom is considering building a new gas pipeline via Romania, as Russia seeks more partners to join its South Stream pipeline project. Its delegation will go to Romania soon to discuss the issues of prospects of cooperation in undeground gas storage, developing the existing transit capacities, as well as creating new ones. Gazprom, the world's largest gas producer and supplier of a quarter of Europe's gas needs, is seeking more partners to join its and Italian energy major Eni's South Stream gas pipeline which will run Russian gas from the Black Sea to south-eastern Europe. Russia has already agreed to route the pipeline via Bulgaria, Serbia, Hungary and Greece and is now in talks with Slovenia and Austria to join the project. Romania is a parter in another gas link, the EU and U.S.-backed Nabucco pipeline, which is expected to rival South Stream and take Caspian Sea gas to southern Europe. Europe has repeatedly stressed Nabucco is key for it to reduce dependence on Russian energy supplies.

Bahrain, Iran come closer on gas pipeline accord

October 16, 2008. Bahrain and Iran are in the final stages of setting up a joint venture company, with 50-50 stake, with a specific focus on energy, oil and gas sectors. The agreement on setting up a supply gap pipeline to Bahrain is also on the way. Both sides are seeking to seal an agreement on the import of gas from Iran to Bahrain, paving the way for linking Manama with world's largest gas reserves South Pars gas fields.

PetroSA pushes for Coega-Gauteng pipeline

October 16, 2008. State-owned oil and gas company PetroSA has once again made a strong case for a fuel products pipeline from Coega to Gauteng, saying the facility would benefit South Africa. PetroSA has been mulling over a feasibility study for a pipeline that could transport refined petroleum products from its planned 400,000- barrels-a-day refinery at Coega to inland markets. That would be in addition to the R11,2bn multiproduct fuel pipeline from Durban to Gauteng that transport and logistics group Transnet is building. The pipeline is due for commissioning in 2010.

China to build 150 th km of oil, gas pipelines in 12 years

October 20, 2008. China will build a total of 150, 000 kilometers of oil and gas pipelines in the coming 12 years. This information comes from the fifth China International Pipeline Exhibition in which more than 240 domestic and foreign enterprises from 20 countries participated. The start on the construction of the second west-to-east gas pipeline and the Middle Asia oil pipeline has unfolded a prelude to a new round of oil and gas pipeline building upsurge in China.

Trans-Balkan oil pipeline hit by delays

October 17, 2008. Construction of a trans-Balkan pipeline due to carry Russian oil to Greece via Bulgaria is expected to start later than planned, in Oct. 2009 and would come onstream in 2011. After 14 years of negotiations and delays, the three countries agreed last year on building the 1.0 billion euro ($1.35 billion) pipeline which aims to bypass the traffic-clogged Turkish Bosphorus Straits. Construction of the project, due to pump 700,000 barrels per day of Russian crude a year into the Aegean port of Alexandroupolis from the Bulgarian Black Sea port of Burgas, was previously expected to start in late 2008 or early 2009.

The three countries were yet to pick a bank to help them raise funding, prepare an updated feasibility study and work out the project details. The Dutch-registered Burgas-Alexandroupolis project company will pick a financial consultant between Societe Generale, Lazard Ltd and Citigroup by the end of this month.

The global financial crisis and tighter credit conditions might hinder efforts to raise funding for the project, which was initially estimated at between $600 mn and $900 mn. Rising construction and raw material costs have made many energy projects more expensive worldwide. Some analysts say the price tag of Burgas-Alexandroupolis pipeline is likely to jump well above the currently estimated 1 billion euros.

Oromin submits Santa Rosa exploration permit study to Govt

October 17, 2008. Oromin Explorations has advised that the environmental studies on the Santa Rosa Exploration Permit have been completed by its wholly-owned Argentine subsidiary and have been filed with the Environmental Control and Improvement Directorate of the Province of Mendoza. The Directorate will oversee the evaluation of the environmental studies by the appropriate government agencies and specialists prior to authorizing the first phase of exploration drilling, scheduled for the first quarter of 2009. The Santa Rosa Block has an area of 7,694 square kilometers with approximately 300 square kilometres. This area covers a large, untested, shallow dome structure that is defined by four surrounding seismic lines on a regional grid.

In addition to the environmental studies, a land surveying contract has been awarded to re-establish the corners and boundaries of the block in compliance with provincial regulations. The survey will also establish the locations of potential drill-sites and set up a reference grid for future exploration activities.

The CCyB-9 Santa Rosa Block is located within the Cuyana Basin in Mendoza Province, Argentina which has produced over 1.28 billion barrels of oil and has an established infrastructure of pipelines, a refinery, low operating costs and an experienced oil industry work force. Otto Energy Limited has a Letter of Intent with Oromin which enables it to earn up to a 41.24% working interest by the expenditure of up to US $2,297,381.

Gazprom may invest in Alaska

October 16, 2008. A high-level delegation from the Russian energy company Gazprom met in Anchorage, Alaska, with state officials to talk about investing in Alaskan energy projects. The Gazprom was seeking to take part in a consortium that is building a natural gas pipeline from Alaska to Canada. The company is also interested in investing in other energy initiatives in the state. Gazprom has accumulated great experience in exploring hydrocarbon deposits, building and using gas pipelines in the far north environment.

No oil output cuts for Norway

October 16, 2008. Norway's oil minister said that the non-OPEC country had no plans to cut oil production due to falling crude prices. Norway is the world's fourth biggest oil exporter, exporting most of its 2 million barrels per day production. Oil prices have dropped steeply from a July peak of over $147 per barrel as global economic growth has sputtered. Brent futures dropped more than $3 on October 16 to a new 17-month low of $67.17 before recovering partly to around $69.

POWER

Regulators    approve    power   plant   in Richmond County

October 20, 2008. State regulators have given the go-ahead to Progress Energy to build a $750 mn power plant in Richmond County, about 100 miles southwest of Raleigh in USA. The 600 MW power plant, to be fueled by natural gas, is expected to begin generating electricity in 2011 at the company's Richmond County Energy Complex near Hamlet. The approval was given by the N.C. Utilities Commission. The plant will provide intermediate-level generating capacity to back up the Raleigh-based utility's nuclear power plants and coal-burning plants that run round-the-clock.

China to help Pakistan to build more nuclear plants

October 20, 2008. China will help build two more nuclear power plants in the energy-starved Pakistan. The Pakistan-China deal however comes as Russia is helping to build a nuclear plant in Iran, highlighting the growing nuclear foothold each of the big three rivals have in three strategic countries stretching from the Persian Gulf to South Asia.

China already has helped Pakistan build a nuclear power plant at Chashma, about 125 miles southwest of the capital. Work on a second nuclear plant is in progress and is expected to be completed in 2011. The Chashma III and Chashma IV reactors would provide Pakistan with an additional 680 MW of generating capacity.

Pakistan, which began operating its first nuclear power station with Canadian assistance in 1972, has not signed the Nuclear Non-Proliferation Treaty, the main international agreement meant to stem the spread of nuclear weapons technology. However, it has placed several of its civilian reactors under International Atomic Energy Authority safeguards.

Arcadis selects Aconex for Texas power plant project

October 20, 2008. Aconex, the world's largest provider of online collaboration solutions to the construction and engineering industries, has secured a contract with Arcadis, an international project management, consulting and engineering firm. Arcadis will use Aconex to manage information and collaborate with external parties on its Nueces Bay Power Plant project in Corpus Christi, Texas.

Aconex provides a web-based platform for managing the flow of drawings, documents and correspondence on projects. Through using the system, Arcadis and other organizations involved with the development will be able to view, distribute and track their files in real time, from any location and at any time. The Nueces Bay Power Plant project will involve the demolition of the existing structure to accommodate the new Nueces Bay Energy Center. When operational in 2010, the new Center will be a highly efficient natural gas combined cycle facility.

Russia to ship equipment to finish Iranian nuclear plant

October 17, 2008. Russia will soon ship around 1,000 tons of equipment necessary to complete the construction of the Bushehr nuclear power plant in Iran. Russia is building the $1 bn Bushehr facility in the south of Iran under a 1995 contract. The project is subject to UN monitoring following Iran's refusal to halt its uranium enrichment program and Western suspicions that Tehran is seeking to build nuclear weapons.

Healdsburg electricity rates could rise sharply

October 20, 2008. Electricity rates in Healdsburg, California, USA, are poised to increase 20 per cent under a proposal being considered by the City Council. But many residential bills would be unchanged because the higher rates would fall on households that consume extra power. The city is making a transition from a flat rate to a tiered rate in which the cost per kilowatt goes up as more electricity is used.

The average home consumes about 600 kilowatts per month and has a winter bill of approximately $80 each month. The bill would not change under the proposed rate increase. But households that use more than 648 kilowatts a month can expect to see the monthly bill go up. The rate hike, which would go into effect January 1, is intended to cover increases in power procurement and transmission charges, as well as maintenance and capital improvements.

Australia Newcastle coal exports falls 10 pc

October 20, 2008. Exports from the world's largest coal export terminal, Australia's Newcastle port, fell to 1.71 mt from 1.91 mt from October 13 to October 20. According to the Newcastle Port Corp, consistent demand of coal and load-point availability were impacting loading. A total of 25 vessels were off the port waiting to load 2.06 mt of coal, versus 24 ships the previous week. The number of vessels arriving during the week rose by two to 22 ships. Xstrata Plc, the world's largest exporter of thermal coal, BHP Billiton Ltd and Rio Tinto Group are among mining companies that ship coal through Newcastle. Stockpiles at the Carrington and Kooragang loading terminals at the port rose to 1.05 mt. 

Exelon bids $6.2 bn for NRG Energy

October 20, 2008. In a deal that would create the USA's No. 1 power company, nuclear power giant, utility Exelon (EXC) is offering to buy NRG Energy (NRG) for $6.2 bn in stock. The merger would forge a giant with 47,000 MW of generating capacity enough to serve 45 million homes. It would let Exelon grow revenue without building costly power plants and would strengthen NRG's tenuous balance sheet.

NRG, which plans to build a nuclear reactor in Texas, would benefit from Exelon's stronger balance sheet and nuclear expertise. Exelon is a utility with 5.2 million customers in Illinois and Pennsylvania, and a wholesale electricity supplier. It's the USA's top nuclear power operator, with 17 reactors. The deal would let it diversify its generation mix with more coal and expand from its Midwest stronghold into Texas and the Northeast.

Azerbaijan offers to supply electricity to Pakistan

October 17, 2008. Azerbaijan has expressed interest in supplying electricity to Pakistan through Iran. Pakistan has invited Azerbaijan to invest in country’s energy sector. As per Pakistan, it would like to benefit from Azerbaijan’s expertise hydel-power generation. It assured Azerbaijan that the government would provide facilities to Azerbaijan for investing and participating in hydroelectric projects.

Pakistan government was taking measures to bridge the demand-supply gap by setting up fast-track power projects and giving priority to exploiting indigenous resources like coal, water and wind. The country’s first windmill farm in private sector would become operational next month.

Families face more massive hikes in gas and electricity bills

October 16, 2008. Not long after the good news of dropping petrol prices, struggling families, in UK, were dealt another blow as British Gas warned there was little prospect of energy costs coming down. According to industry experts, oil has slumped to less than half the highs seen in July, helping wholesale gas prices fall around 20 per cent since the record 100p a therm levels in the summer. But gas bought by Britain's main energy suppliers like British Gas remains well above previous year's prices.

Gas for delivery during the first quarter of next year- one of the benchmark industrial prices- was trading at 80p a therm today. This is up two-thirds from the 48p figure seen last year. Millions of UK households have been hit with two massive bill hikes this year due to the soaring wholesale prices. According to industry experts, oil prices take around six months to filter through to domestic supplies.

Philippines urged to join GNEP

October 21, 2008. The Philippines is being urged to join the Global Nuclear Energy Partnership (GNEP), which helps emerging countries eyeing use of nuclear as a source of power. The Bush administration had proposed a very ambitious plan for what it calls global nuclear energy partnerships. The gist of it is that for countries to consider expanding into nuclear power, rather than all make investments enriching fuel for the nuclear plants and having to eventually solve the disposal problem.

GNEP approach would enable the more advanced countries collectively  work together with the emerging countries for nuclear development so they would not have to develop that capability either for nuke fuel or for disposal, but instead, lease the fuel from one of these countries. The Philippines may want to take a look at what the GNEP could provide. The signatories to the GNEP may work out something for the country if it wants to.

‘Clean coal technology not progressing’: IEA

October 20, 2008. Not enough progress is being made towards developing "clean coal" technology, the International Energy Agency has warned. Carbon Capture and Storage (CCS) - burying the pollution from coal-fired power stations underground - is held to be central to the future of Australia's massive coal industry. But the IEA says the world is moving too slowly towards CCS. In a report released in Europe, the IEA said CCS could be a viable and competitive way to reducing the world's greenhouse gas emissions. But the technology needed a kickstart.

The IEA noted developed countries had endorsed its push to have 20 large-scale CCS demonstrations committed by 2010, with broad deployment by 2020. But, as per the report, current spending and activity levels are nowhere near enough to achieve these deployment goals. The report mentioned that CCS technology demonstration has been held back for a number of reasons; in particular, CCS technology costs have increased significantly in the last 5 years.

Energy giants plot revival of coal power

October 19, 2008. Britain's electricity generators are planning to build several coal-fired power stations despite the controversy over the greenhouse gas emissions that they would produce. The firms say they need to replace existing coal-fired stations because so many are being closed by European directives aimed at cutting pollution.

New coal-burning power stations will infuriate green groups, who fear that they will jeopardise Britain’s pledge to cut its greenhouse gas emissions by 80% by 2050. The country is supporting its plans to add another 5,000 onshore wind turbines to the 2,000 already built. This would add several gigawatts of renewable power generation capacity to the national grid but would industrialise many of Britain’s most beautiful landscapes. The generating groups have pledged to make any new coal-fired power stations ready for carbon capture if trials of the technology prove successful.

‘Over 50 countries considering to utilise nuclear power’: IAEA

October 17, 2008. According to the United Nations' atomic watchdog, over 50 countries have alerted the IAEA that they are considering utilising nuclear power with Turkey and Vietnam actively preparing their atomic programmes. One dozen countries, including Turkey and Vietnam, are actively preparing nuclear programmes, while China is constructing six power reactors and Russia intends to build dozens of both large and small reactors by 2020. As per the watchdog, it can take a minimum of 10 years just to put the basic infrastructure in place.

ISO-New England: England has enough power through ’14

October 17, 2008. New England has enough electricity resources available to keep the lights on through 2014, but significant challenges remain for the region in terms of ensuring reliable and environmentally friendly energy, according to the latest report by the region’s grid operator. ISO-New England said in its 2008 Regional System Plan that if all 34,077 MW of generation and demand-side energy resources procured in New England’s first forward capacity auction in February continue to be available in future auctions, it is likely the region will have sufficient capacity through 2014.

Starting in 2015, the region will need to auction an addition 360 MW, or the equivalent of a power plant. That power could come from additional demand-side resources, increased production from existing plants or generation from new plants or renewable projects.

By 2017, that requirement would grow to 980 MW. It estimates peak demand will be somewhat lower than the last 10-year demand forecast due to a lower growth trajectory in personal income. The report also notes progress in upgrading of transmission lines linking generation facilities to communities, but it notes additional improvements need to be made to meet federal reliability requirements. Other potential challenges include the integration of large amounts of wind and demand-side resources like efficiency programs into system operations, the diversification of fuel supply for generation and ensuring environmental goals are met. The report is ISO-New England’s main planning document, giving a status update on the state of the region’s power system and outlining challenges and opportunities in the next 10 years.

Pennsylvania law tries to cut electricity usage

October 16, 2008. Pennsylvania has begun a major effort to cut electricity use, requiring the state's 11 utilities to not only stop power usage from rising, but to cut it starting in 2011. Legislation requires the utilities to cut annual electricity usage by at least 1 percent by May 31, 2011, based on usage estimates made by state regulators, who can take into account a major anomaly, such as an unusually hot summer or a substantial surge in demand from a new user, such as a factory. To ensure that utilities take the task seriously, the new law allows up to $20 million in penalties for failure to meet the benchmarks for electricity usage cuts.

Utilities will have to find ways to get people and businesses to use less electricity on the hottest summer days, when electricity is the most expensive. That could include enrolling the owners of homes and office buildings in a program to temporarily switch off hot water heaters or air conditioners. To cut electricity usage at all other times, utilities will have to get more fluorescent lamps into light sockets to replace less efficient incandescent bulbs. They will have to figure out how to entice people to insulate their homes to save electric heat and replace old, energy-sucking refrigerators and other appliances with newer, more efficient models.

Electricity usage in the Pennsylvania and the United States grows at a rate of about 1 percent to 2 percent annually. By May 31, 2013, utilities have to cut usage by at least 3 percent, as well as slash 4.5 percent from electricity usage during the 100 highest-use hours of the year. Utilities said they are still in the early stages of developing proposals for how they will approach the mandate. They acknowledge that the law will force them to adopt new usage-reduction tactics beyond a raft of education programs they have, including Web sites that dissect each residential customer's electric usage and how to reduce it. By July 1, each utility must file a plan with the Pennsylvania Public Utility Commission to achieve the cuts. The commission must hold a public hearing on each plan and has about four months to approve or reject them.

Energy-hungry Poland eyes nuclear plants

October 16, 2008. Poland hopes to reduce its heavy reliance on coal, which produces harmful greenhouse gases, by building a few nuclear power plants by 2030. The country is currently working on a new energy strategy designed to meet the economy's booming demand for electricity and to modernize its communist-era power plants. Poland produces its energy almost entirely from coal and lignite, has no nuclear power plants at present and has yet to develop renewable energy sources such as wind farms favoured by the European Union, which Warsaw joined in 2004. Poland's existing power plants need urgent modernization but analysts say that will not be enough to meet expanding energy demand.

Nuclear power is virtually free of the CO2 emissions which contribute to global warming. Poland opposes the Commission's plan to force utilities to pay in full for CO2 emission permits from 2013, saying this would badly damage economic growth. Under this mechanism, known as benchmarking auctioning, the 27-nation bloc would set a free emission quota for producing a certain amount of energy that would equal the pollution by the most clean and technologically advanced producer.

OEB raises electricity rates more than 10 pc as generation costs swell

October 15, 2008. The Ontario Energy Board is raising basic electricity prices by more than 10 per cent - to 5.6 cents per kilowatt-hour for use of up to 1,000 kWh a month and 6.5 cents per kWh above that. The impact will be $2.40 per month on a residence consuming 1,000 kWh monthly, compared with the summer price. However, compared with last winter's rate, the increase would be $6 a month or 12 per cent. For power use above the 1,000-kilowatt per hour level, the increase is 10.2 per cent. The regulated electricity rate, reset at the start of each May and November, previously was five cents per kilowatt-hour up to the lower summer threshold of 600 kWh, and 5.9 cents per kWh for consumption above that level. Those basic prices had been unchanged since last November, when they were trimmed slightly.

The price increase, reflected on the electricity line of consumer utility bills is caused by several factors. The price of electricity is only part of the costs included in a customer's bill. Including all the costs, the typical household will see its bill rise about two per cent. The factors pushing up the electricity prices include new higher-cost renewable and natural gas generation projects coming into service, and an expected rise in the cost of electricity from nuclear and large hydro plants. The provincial regulator cites the expense of conservation initiatives, and the impact of the provincial government's directive to cut carbon dioxide emissions from coal-fired generation by a further one-third by 2011. The rest comes from Canada's most extensive network of nuclear plants, which produce more than half the province's electricity needs, as well as coal, hydroelectric, wind and alternative energy sources.

Technology to produce biodiesel from Algae to be developed

October 20, 2008. With the urgent need to replace petroleum transporation fuels in future, due to volatality in the oil prices, BPCL inked a memorandum of understanding with Tamil Nadu Agricultural University (TNAU) to develop alternative renewable energy technology.

The broad objective of the MoU was to develop a pilot plant technology for biodiesel production from algae, which possessed excellent biological frame work in its cellular capabilities, including more than 30 per cent of oil in its composition. Research was being done on microscopic algae which were particularly rich in oils and whose yield per hectare is considerably higher than that of sunflower or rapseed.

The Rs 30 lakh project would be for three years and depending on the nature of the success, the company would form a separate firm or a joint venture for largescale commercial production of biodiesel. With a consumption of 40 mtpa of diesel in India, at the maximum 20 per cent of this can be replaced by biodiesel from Algae.

HPCL forms subsidiary for biofuels

October 16, 2008. Hindustan Petroleum Corporation Ltd (HPCL) has formed a subsidiary Company i.e. CREDA - HPCL Biofuels Ltd in association with Chhattisgarh State Renewable Energy Development Agency (CREDA) constituted for the development of renewable energy sources in the state of Chhattisgarh for the purpose of cultivation of Jatropha Plants for the production of bio-diesel.

Moser Baer plans $800 mn investment

October 16, 2008. Moser Baer plans to invest over $800 mn in capex for its various businesses including optical media and photovoltaics, over the next 18 months. For FY09, its capex plans stands at $550 mn in capex across the Group. Of this, the capex for the optical media business would be limited. Close to $450 mn is earmarked for the photovoltaic business.

The company has already utilised nearly $275 mn of the capex earmarked for the current fiscal, in the last seven months. The company has secured lines of credit to the extent of $550-600 mn for the photovoltaic expansion for this and next fiscal, while another Rs 1,600 crore (about $355 mn) would come from a mix of cash available with the company, and cash to be generated from the blank optical business this fiscal. As per the company, bulk of the capex would flow towards the photovoltaic capacity expansion straddling various technologies.

Centre mulling removing cap of 49 MW for private units for wind power

October 16, 2008. Centre is considering removing a cap of 49 MW for private units in the area of wind power generation for providing them incentives and attract more players to the sector. According to the International Congress on Renewable Energy (ICORE) 2008, a proposal in this regard was pending before the Planning Commission. Private investments on renewable energy had clocked $100 bn in 2007, with a chunk of it invested in wind energy.

XL Telecom and Energy sets up solar power plant in Spain

October 16, 2008. XL Telecom and Energy Limited, engaged in non-conventional energy power generation, has set up a 1.6 MW solar power plant in Spain at a cost of euro 9.5 mn (about Rs 62.7 crore). It has signed a power purchase agreement for 25 years with a Spanish utility company for sale of energy generated by the plant. The project is expected to post revenues to the tune of euro 19 mn in the initial phase.

The Hyderbad-based company is setting up a 120 MW solar cell manufacturing unit at a cost of Rs 360 crore ($73.63 mn) in a special economic zone here. It has planned to establish a series of solar power plants generating about 300 MW in Europe over a period of next three years. The Spain unit is the first in the series and it is now looking for opportunities in Italy and France. Saptashva, a wholly-owned subsidiary of XL, is in the process of establishing the proposed solar farms and emerge as a leading player in the global non-conventional energy market.

Wind energy projects face a global shortage of turbines

October 17, 2008. Canada's booming wind energy sector is becoming a victim of its own success. A global surge in wind energy development is making it difficult for proponents to secure equipment for new projects, and waiting times for turbine blades and other components are increasing. There is a shortage of turbines internationally.

There is a finite number of companies that are actually producing the technology. Within Canada, a federal program providing a penny-per-kilowatt to green energy producers has touched off another kind of scramble, as wind power proponents across the country vie to take advantage of $1.5 bn in available funds.

The federal government has provided some assistance in supporting expansion of the industry through a four-year, $1.5 bn ecoEnergy program for renewable energy that pays green energy developers one cent per kilowatt to make them competitive with large-scale gas, coal and large hydro utilities. Response from wind and other green energy sectors has been tremendous.

Renewable energy EU’s priority despite financial turmoil

October 17, 2008. During European Council meeting, calls were made for intensive action to push through energy and climate legislation. European countries re-stated commitments made last year and in March this year over greenhouse gas reduction and renewable energy targets for 2020. However, financial concerns about the European Union (EU) energy and climate package are very much on the agenda ahead of the next European Council meeting in December.

World first in processing coal seam gas

October 17, 2008. A Queensland company has achieved a world first, producing synthetic fuel using technology that turns coal seam gas into liquid. According tp Linc Energy, the fuel made at its demonstration plant near Chinchilla, went through two processes, including underground gasification, and used coal which was previously too deep to mine. As per the estimates it can produce about a barrel and a half of liquid from a tonne of coal.

‘Ethanol passes key transportation test’: Kinder Morgan

October 16, 2008. Houston pipeline operator Kinder Morgan Energy Partners signaled progress in addressing a key hurdle to widespread distribution of renewable fuels in the U.S. The company completed a test that moved ethanol safely through an existing gasoline pipeline and is performing similar tests with biodiesel fuel blends. The tests could be important for a U.S. biofuels industry that now transports fuel only by truck, rail car and barge, and will require more efficient transportation options as it grows.

Kinder Morgan and other pipeline companies are still in the early stages of testing. Huge investments will be needed if the companies decide to ready more assets to handle biofuels, and upgrades could take years.

Pipeline operators have been reluctant to run ethanol in pipelines because it absorbs debris, rust and water, can damage components and taint petroleum fuels that share the lines. They have balked at biodiesel because of uneven quality and a residue that can damage jet fuel if it follows biodiesel through a pipeline.

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