The Wild Pendulum of Oil Price
Only a few months ago, forecasts for oil prices above $ 200 per barrel sounded probable. Now there are predictions that world oil prices could easily fall below $40 a barrel and might even slip toward $35 or perhaps $30. This also seems probable. Generally most analysts and economists hedge their bets on oil prices with the prediction that oil prices could move in the opposite direction fairly quickly. This time is no different. Strangely that too does not seem improbable. Consuming as well as producing nations do not seem to have a choice but to adapt to this wild swings in oil prices.
Benchmark
The consensus among analysts is that the lower oil price goes, the further out of equilibrium the market is headed. The oil price collapse over the last four months has reflected several factors hitting the market at the same time. As the gravity of the global recession has become clear, economists have recalibrated their views of oil demand. The International Energy Agency (IEA), which advises 28 industrialized countries, slashed its global oil demand growth forecasts. It says demand has grown this year at the slowest rate in a generation and next year it is expected to expand by only 350,000 barrels per day (bpd).
World oil demand is now expected to average 86.2 million bpd in 2008, rising to just 86.5 million bpd in 2009. Some analysts say the IEA's assumptions are too conservative and that a dramatic contraction in demand in the major developed economies will offset growth in oil demand elsewhere and produce a rare absolute fall in global demand. Falling demand forecasts have led to widespread assumptions by oil traders that oil markets will be oversupplied.
The Organization of the Petroleum Exporting Countries agreed last month to cut its oil production by 1.5 million bpd from November 1 and many analysts think it will trim its output further. As prices continued to fall, OPEC members met in
Some OPEC members such as
But the impact on supply will take time to be felt. For example, the cuts by OPEC last month could take two or three months to work into the market. In the meantime, the momentum appears to be downwards. Driven by short-term as much by sentiment in futures markets as rational calculations over fundamental costs for production, many analysts say the oil price is likely to go well beyond the level justified even by a dramatic fall in demand. Analysts liken oil price moves to a weight on a piece of elastic: most of the time it swings within fairly narrow ranges, reacting to signals on supply and demand and other news but occasionally a big shock makes it swing to wild extremes. Just as on the upside went too far, so will the downside appears to be a commonly accepted principle.
Most analysts see prices recovering fairly quickly in the next few months, according to a poll of 34 analysts, which produced an average forecast for WTI next year of $81.30 and almost $90 in 2010. According to one bank, the price for
Analysts and economists can make a living out of predictions, irrespective of whether they are right but what can policy makers read out of the wild swings in oil price?
The energy market in general and the oil market in particular have some interesting characteristics. One is the relation of price to demand. Since oil is so essential to economic activity, the demand for oil is highly inelastic in the short run. This means that an increase in price may not precipitate a proportionate decrease in quantities demanded.
Not only demand but also supply is price inelastic owing to political rather than market stimuli. Rising prices may not elicit an increase in available supply and falling prices may not result in reduced prices. The reason is that Governments rather than businesses own oil deposits and control supply. In most OPEC countries production decisions are income driven.
The frictions arising out of government ownership in the oil market amplify the effect of short term disruptions. They contribute to the imbalances in production and income that threaten producers, anger consumers and perplex politicians. Policy makers in consuming countries such as
The frictions are unlikely to go away in the short term because the political price for change is too high for most Governments. What politicians in consuming as well as producing countries fail to acknowledge is that the economic cost of ‘no change’ could be far greater than the political cost of ‘change’. They ignore the long term problem of the average price paid and the average amounts of oil produced and choose instead to focus on the sudden fluctuation in supply which produces amplified fluctuations in price.
Energy policies in producing and consuming countries may have well intentioned goals of increasing income, decreasing imports, changing patterns of energy use and conferring benefits and losses on individuals and groups in the society. In the process of achieving these goals, the policy makers change the way resources are used.
Technically speaking these changes result in the loss of efficiency, i.e., a pattern of resource use that is less optimal in an economic sense that provides fewer services and produces fewer goods than would otherwise be the case. This does not in itself mean that the distortions in resource allocations are not justified. They may be necessary to attain other goals not encompassed by the narrow economic definition of efficiency such as security or equity. But even in that case it is important to be aware of the price paid for social goals.
ORF Energy Team
The Nuclear Illusion (part – VI)
AMORY B. LOVINS AND IMRAN SHEIKH
Continued from Volume V, Issue No. 25…
Nuclear Coal Large Large combined- Building- Recovered- End-
plant plant combined- wind cycle scale heat use
cycle gas farm Industrial cogen industrial efficiency plant cogen cogen
Fig. 2. How much coal-fired electricity can be displaced by investing one dollar to make or save delivered electricity by the means shown in Fig. 1. (please refer previous issue 25) To interpret the bar on the far right, note that the historic-average cost of U.S. electricity-saving programs is ~2¢ per saved kWh, though many programs, especially for business customers, have cost less than 1¢/kWh, far off the chart.
Fig. 2 shows the reciprocal of—i.e., 1.0 divided by—the costs of various options in Fig. 1 (converted from cents to dollars). It therefore shows how cheaper options displace more coal per dollar than costly options can.
That’s what “cheap” means. However, before comparing these different ways to displace coal-fired electricity, we must adjust for the carbon emitted by fossilfueled cogeneration.
Those emissions are lower than those of the power plants and boilers that cogeneration displaces, but they’re not zero (like efficiency and renewables). Thus cogeneration’s net carbon displacement is smaller than the gross carbon displacement shown in Fig. 2.
However, as Fig. 3 shows, it’s bigger (with good design) than the carbon displaced by combined-cycle gas-fired plants, which don’t capture and reuse waste heat for buildings or industrial processes as cogeneration does:
Nuclear Coal Large Large combined- Building- Recovered- End-
plant plant combined- wind cycle scale heat use
cycle farm Industrial cogen industrial efficiency gas plant cogen cogen
Fig. 3. Net carbon emitted per kWh of power delivered by operating typical electrical resources.
Coal is by far the most carbon-intensive source of electricity, so displacing it is the yardstick of carbon displacement’s effectiveness. A kilowatt-hour of nuclear power does displace nearly all the 0.9-plus kilograms of CO2 emitted by producing a kilowatt-hour from coal.
But so does a kilowatt-hour from wind, a kilowatt-hour from recovered-heat industrial cogeneration (ascribing its carbon emissions to the process heat that was being produced anyway), or a kilowatt-hour saved by end-use efficiency. And all of these three carbon-free resources cost at least onethird less than nuclear power per kilowatt-hour, so they save more carbon per dollar.
Combined-cycle industrial cogeneration and building-scale cogeneration typically burn natural gas, which does emit carbon (though half as much as coal), so they displace somewhat less net carbon than nuclear power could: around 0.7 kilograms of CO2 per kilowatt-hour.76
Even though cogeneration displaces less carbon than nuclear does per kilowatt-hour, it displaces more carbon than nuclear does per dollar spent on delivered electricity, because it costs far less.
With a net delivered cost per kilowatt-hour approximately half of nuclear’s, cogeneration delivers twice as many kilowatt-hours per dollar, and therefore displaces around 1.4 kilograms of CO2 for the same cost as displacing 0.9 kilograms of CO2 with nuclear power.
Fig. 4 compares different electricity options’ cost-effectiveness in reducing CO2 emissions, counting both their cost-effectiveness in delivering kilowatt-hours per dollar and their carbon emissions if any:
Nuclear Coal Large Large combined- Building- Recovered- End-
plant plant combined- wind cycle scale heat use
cycle farm Industrial cogen industrial efficiency gas plant cogen cogen
Fig. 4. Relative cost-effectiveness of different ways to save carbon emitted by coal-fired power plants. Since the “currency” here is kilowatt-hours, the cost of generating a coal-fired kilowatt-hour is irrelevant to this calculation. Nuclear’s apparent superiority over combined-cycle gas-fired power in carbon reduction per dollar is valid only for one plant in isolation (and only if the nuclear plant is relatively cheap and the gas relatively costly): in an actual power system, gas’s greater load-following ability enables it to displace more coal and to support more variable renewables (faster and at lower cost) than equivalent nuclear capacity could do.
Nuclear power, being the costliest option, delivers less electrical service per dollar than its rivals, so, not surprisingly, it’s also a climate-protection loser, surpassing in carbon emissions displaced per dollar only centralized, non-cogenerating combined-cycle power plants burning natural gas at the relative prices assumed.
Firmed windpower and cogeneration are 1.5 times more cost-effective than nuclear at displacing carbon. So is efficiency at even an almost unheard of 7¢/kWh. Efficiency at normally observed costs beats nuclear by a wide margin—for example, by about ten-fold for efficiency costing one cent per kWh.
New nuclear power is thus so costly that shifting a dollar of spending from nuclear to efficiency protects the climate severalfold more than shifting a dollar of spending from coal to nuclear. Indeed, under plausible assumptions, spending a dollar on new nuclear power instead of on efficient use of electricity has a worse climate effect than spending that dollar on new coal power!
Fig. 4 shows that making and delivering new nuclear power displaces 1.4 to ≥11 times less carbon per dollar than doing the same tasks by using electricity more efficiently or by providing electricity in other, cheaper ways that produce little or no carbon (windpower, cogeneration, or end-use efficiency, but not including combined-cycle gas-fired power plants). That is, every dollar spent on new nuclear power will produce 1.4–11+ times less climate solution than spending the same dollar on its cheaper competitors. For a power source merely to emit no carbon isn’t good enough; it must also produce the least carbon per dollar, and must do so sooner than its competitors.
That’s because, if climate is a problem, then we must invest judiciously, not indiscriminately, to buy the most solution per dollar and the most solution per year—best buys first, not the more the merrier. Buying a costlier and slower solution, like new nuclear power, will make the climate problem worse than it would have been if we’d bought cheaper, faster options instead.
Whether existing nuclear plants have displaced and are displacing any carbon emissions, as is often claimed,77 depends on what assets would have been bought instead to generate the same electricity. Buying coal-fired plants instead would have released more carbon. But buying low- or no-carbon micropower or negawatts instead would have released less carbon, because more of those cheaper coal-displacing resources could have been bought with the same money.78
Summarizing this analysis, the best investments for both the environment and the economy are those toward the upper-right corner of Fig. 5:
Fig. 5. The relative cost-effectiveness of different ways to spend a dollar to displace carbon emissions from coal-fired power plants (vertical axis) and to deliver new electrical services (horizontal axis). Options toward the lower left are worst for both priorities.
Some say we need to buy everything, so we needn’t actually make choices. But if you order that way from a Chinese restaurant menu, one item from each section, you can spend most of your money on the shark’s-fin soup, run out of money to buy rice, and go away hungry. We have only so much money and appetite, so we must choose wisely. The more urgent it is to protect the climate, the more vital it is to spend each dollar in ways that will displace the most carbon soonest.
This means focusing on big wins. To gain big climate benefits, deploying the efficiency and micropower resources that now provide upwards of half the world’s new electrical services is vital—but deploying the nuclear resource that provides ~1% of that service growth and yields ~1.4–11+ times less carbon saving per dollar is irrelevant or worse. Ignoring the former and fixating on the latter only reduces and retards climate protection.
The nuclear industry is eager that the public does not understand this argument, which to my knowledge has not previously been explained in major public or business media in the U.S., and rarely elsewhere. Rather, the industry emphasizes its belief that properly pricing carbon (figures like €20 or $30 per tonne of carbon are often cited) will make nuclear power cost-competitive.
That marginal price would be nearly three times McKinsey and Company’s 2007 estimate79 of the €2/tonne-CO2 average cost of abating 45% of the world’s 2030 business-as-usual greenhouse-gas emissions. This whole comparison, however, wrongly assumes that the competitor is a coal- or gas-fired central power plant. Those are the costliest but not the only competitors.
Properly pricing carbon will advantage all other zero-carbon resources—renewables and efficiency—as much as it advantages nuclear (and will also advantage low-carbon cogeneration to a lesser degree). Thus taxing or trading carbon will not help nuclear power beat its most formidable and successful competitors.
Some advocates claim that a hydrogen economy will rescue nuclear power by harnessing its electricity or heat to make hydrogen. But these processes are prohibitively costly. Hydrogen fuel cells in buildings, industry, or vehicles, far from giving nuclear power a vital new market, would instead add yet another fatal competitor to its electricity production.80
In the end, the nuclear industry’s increasingly explicit assumption (as in current French and UK policy) that governments must guarantee an above-market-clearing carbon price sufficient to ensure nuclear power’s competitiveness not only jettisons market logic and EU rules; it also reveals how thoroughly both the industry and those governments misperceive the competitive landscape.
Failure to recognize micropower and negawatts as authentic, successful, and major alternatives to nuclear power has not stopped those sources from already outgenerating, outcompeting, and far outpacing it, as we’ll see below.
Notes:
76 Since its recovered heat displaces boiler fuel, cogeneration displaces more carbon emissions per kilowatt-hour than a large gas-fired power plant does.
77 E.g., by the Nuclear Energy Industry’s Senior VP Alex Flint, in testimony to USHR Select Committee on Energy Independence and Global Warming, 12 Mar 2008, at p. 13: “At a global level, 439 nuclear plants produce 16% of the world’s electricity while avoiding the emissions of 2.6 billion metric tons of CO2 each year….”
78 This comparison, and this paper, neglect the fossil fuels needed to build and fuel nuclear plants or their low- or nocarbon competitors. My 1977 analysis of nuclear net energy with Dr. John Price (Non-Nuclear Futures, Ballinger [Cambridge MA], Part Two) found that a typical pressurized-water reactor over its lifetime would produce ~16× more electricity than was used to build and fuel it with the technologies of that time using 0.3% uranium ore, or ~8× with Chattanooga Shale. Today, uranium enrichment is more efficient, high-grade ores are scarcer, nuclear plants may have become more materials-intensive, and materials production has become more efficient. The net change is unknown but probably not great. Most comparisons show that embodied construction and fuel-cycle energy is broadly comparable for nuclear vs. renewable alternatives (nuclear is often a bit higher), but this indirect energy usage is not important unless the nuclear fleet is growing so quickly that at any given time its energy inputs rival or exceed its outputs (Non-Nuclear Futures provides a closed-form analytic solution for this dynamic analysis), as was the case with the high-growth nuclear forecasts of the 1970s. Such analysts as van Leeuwen and Smith (2004, www.stormsmith.nl) have published a different argument: they find a net energy loss for nuclear power in the static case too by assuming very-low-grade uranium resources and/or significant long-term energy inputs to manage nuclear wastes and decommissioning (http://nuclearinfo.net/Nuclearpower/WebHomeEnergyLifecycleOfNuclear_Power). Others have extended this theme by including their estimates of the amount of fossil fuel needed to win and use fossil fuel itself (e.g., http://blog.greenparty.ca/files/Nuclear_In_Out_3.pdf). These analyses are very complex and often inconclusive. Having helped create the generally accepted accounting principles for net energy analysis in the 1970s, I believe it’s simpler and clearer nowadays just to use normal economic analysis. However, global uranium resources and their net energy yield and economic cost would become a significant concern with a large and expanding nuclear program: Peter Bunyard’s brief tutorial is at www.i-sis.org.uk/DTNPM.php; cf., for contrasting views, cf. E. Schneider and W. Sailor, “Long-Term Uranium Supply Estimates,” Nucl. Technol. 162(3):379–387 (June 2008), and Mudd, G M and Diesendorf, M, 2008, “Sustainability of Uranium Mining: Towards Quantifying Resources and Eco-Efficiency, Envtl. Sci. & Technol. 42(7):2624–2630, 10.1021/es702249v, http://pubs.acs.org/cgibin/ sample.cgi/esthag/2008/42/i07/pdf/es702249v.pdf?isMac=793670.
79 The results are summarized for the world at www.vattenfall.com/www/ccc/ccc/577730downl/index.jsp and for the
80 This is as true of nuclear heat for thermolysis of water as of nuclear electricity for electrolysis: A.B. Lovins, “Twenty Hydrogen Myths,” 2003, www.rmi.org/images/other/Energy/E03- 05_20HydrogenMyths.pdf.
to be continued…
Courtesy: Rocky Mountain Institute (Ambio Nov 08 preprint, dr 18, 27 May 2008, DRAFT subject to further peer review/editing)
NEWS BRIEF
NATIONAL
OIL & GAS
Upstream
RIL halts oil production from KG-basin
December 15, 2008. Reliance Industries (RIL) has reportedly shut crude oil production from its Krishna Godavari basin D6 fields after a pipe rupture. The company was producing about 10,000 barrels per day of oil and the plant will remain shut for about three weeks.
On December 9 there was a rupture in a short pipe spool connected to the flare header in the FPSO (Floating Production, Storage & Offloading) operating in the field of D6 due to which an emergency shutdown of the production system at the FPSO was taken. The company's project partners Aker and DNV,
Reliance expects the production operations will remain suspended until the investigations are complete and recommended corrective actions are implemented.
ONGC, IOC join hands for exploration, marketing
December 12, 2008. Oil and Natural Gas Corporation Ltd (ONGC) and Indian Oil Corporation Ltd (IOC) have joined hands for mutual co-operation in the fields of oil and gas exploration, production, and marketing. ONGC said that the two entities have inked a memorandum of understanding (MoU) on December 11.
The MoU envisages ONGC supporting IOC in exploration under the New Exploration Licensing Policy (NELP), while IOC will extend support to ONGC for marketing its aviation turbine fuel (ATF). The two companies will jointly forge strategies for marketing of natural gas produced by ONGC. The MoU also incorporates IOC supplying diesel to ONGC for meeting latter’s operational requirements.
The umbrella understanding, which also includes finalisation of the long-pending crude oil supply agreement (COSA), will facilitate development of mutually beneficial agreements in the identified areas of co-operation and provide a platform to resolve commercial issues between the two.
Saudi Aramco, KPP in talks with HPCL for Vizag project
December 16, 2008.
The negotiations are at a standstill because of certain conditionalities put by both Saudi Aramco and KPC. While Saudi Aramco has sought a minimum of 30 per cent stake in the 15 million tonne (mt) refinery project, KPC is insisting on being the sole crude supplier and output being sold locally. Both the conditions are unacceptable to HPCL. State-run firms and private investors were to hold 49 per cent stake apiece in the five-way alliance project.
So, HPCL, gas utility GAIL and Oil India Ltd were to hold 49 per cent while Mittal Investment Sarl and French energy giant Total were to hold an equivalent stake. The remaining two per cent was to be offered to financial institution like SBI Caps. It was difficult to accommodate Saudi Aramco's request as Total, which is most keen on the project and is doing pre-feasibility study, would not like to give out majority share to the Saudi firm.
Similarly, it would be difficult for the project not to export the fuel it makes as sought by KPC which is building a refinery at home to cater to the demand in the region. Mittal put its investment in the project on hold due to global economic slowdown and HPCL and Total are likely to make an investment decision in March 2009.
Chevron to decide RPL deal by January
December 15, 2008. Chevron will take a final decision by the end of January 2009 on buying a 24% stake in Reliance Petroleum (RPL) and hold on to the 5% it already has in the company. Chevron, which had bought a 5% stake in RPL two-and-a-half years ago, is yet to sign a crude supply and product off-take agreement with RIL.
A slowdown in demand for refined petroleum products in key markets such as US and
According to the agreement between the companies, Chevron has time till June to buy an additional 24% stake in RPL at market price, or sell its existing 5% stake to RIL at a price of Rs 60 a share.
MRPL auguments refining capacity from 9.6mmtpa to 15 mmtpa
December 11, 2008. Mangalore Refinery & Petrochemicals Limited (MRPL) is augmenting its refining capacity from 9.6 million metric tonne per annum (mmtpa) to 15 mmtpa with cutting edge technologies incorporated in the process to get the maximum value from the hydrocarbon molecule. Preparatory work has been on for sometime now and the mandatory approvals have since been secured, process licensors appointed and work awarded for execution of PFCCU and SRU. Engineers India Ltd is the Project Management Consultant.
RPL to start
December 10, 2008. Reliance Petroleum Ltd. may fully start its 580,000 barrels per day only-for-exports refinery at
RPL's contractual commitment was to start production by end 2008 which it is sticking to. It had never committed to fully commission the unit by that time. Currently, pre-commissioning activities at the unit are underway and checks were being carried out. The crude distillation unit (CDU) may be ready to receive crude oil by end of third week of December. CDU is the front end of a refinery which converts crude oil into various products like naphtha, kerosene, diesel and petrol.
Transportation / Trade
Fertiliser, power firms drive up naphtha usage as prices fall
December 14, 2008. After being out in the cold, naphtha again seems to be back in the reckoning as a viable feedstock for players in the power and fertiliser sectors. With sharp decline in its prices, producers feel that the product is poised for significant growth in the coming months. This is despite the fact that the petrochemical sector, where naphtha is normally used as a feedstock, is going through a downswing.
A litre of naphtha currently costs Rs 20 (down more than half from its peak). In the international market, too, naphtha prices have almost come down to spot prices of liquefied natural gas (LNG) between $7 and $7.5 per million British thermal unit. At Rs 34 a litre (Chennai prices), diesel is almost Rs 14 higher than current naphtha prices. Fertiliser users have already started switching to naphtha, while power sector players, having gas stations with dual firing, are also moving to the cheaper feedstock.
The cost of naphtha has dropped to its lowest since February 2007 and the rupee has fallen by over 15 per cent against the dollar since August, prompting users to switch to the domestically produced liquid fuel than imported LNG. Naphtha consumption saw a growth of 2.3 per cent (0.79 mt) in November as against the same month last year. The cumulative growth for April-November has been 0.7 per cent (5.8 mt).
As opposed to this, LNG sales in November have seen a decline of almost 15 per cent to 0.6 mt (0.7 mt). In 2007-08, naphtha sales had come down by nearly 15 per cent to 8.8 mt, largely replaced by LNG, the consumption of which grew by 28.9 per cent. Diesel, which has significant usage in the transport sector, saw a growth of 8.8 per cent year-on-year in November at 4.5 mt and a cumulative growth (April-November) of 10.7 per cent.
While naphtha may have become cheaper, power units, especially smaller ones, are still cautious in investing in naphtha infrastructure. This is mainly because of the fluctuations in naphtha price trends and also the need for investment in separate storage facilities for storing the product. The urea production units of fertiliser companies such as Southern Petrochemical Industries Corporation Ltd and Fertilisers and Chemicals Travancore Ltd, which were closed mainly on account of viability issues pertaining to the high cost of naphtha, could be up for revival measures.
HPCL Kolkata gas supply plan hits hurdle
December 11, 2008. Hindustan Petroleum Corporation Ltd’s (HPCL) plans to enter the city gas distribution in Kolkata through acquisition of controlling stake in State government controlled Greater Calcutta Gas Supply Company (GCGSC) and Coal India Ltd’s Dankuni Coal Complex (DCC), has hit the valuation hurdle. Both DCC and GCGSC are loss-making.
GCGSC supplies piped coal gas manufactured by CIL at Dankuni in the industrial areas of the twin city of
Limited industrial use and high production and distribution cost of the gas has made the operations of both the Dankuni Coal Complex and GCGSC unviable. HPCL wanted a majority stake in both the companies. While GCGSC would have offered the gas distribution infrastructure, DCC would have served as a steady in-house source in the natural gas starved region. In future, the company may have blended coal gas with other emerging sources like coal bed methane (CBM) or natural gas or LNG.
While on paper both CIL and the State government found the HPCL proposal encouraging, in reality the government and HPCL widely differed over the valuation of GCGSC. While HPCL valued the company around Rs. 40 crore, government felt the valuation should be in excess of Rs 70 crore.
To resolve the differences, GCGSC has floated a global tender seeking an independent valuer. Though discussions progressed substantially with CIL over the acquisition of controlling stake in Dankuni coal complex, the deal may not be firmed up if HPCL finds GCGSC to costly to acquire. DCC is valued at Rs 91 crore.
MCX posts record volume in crude
December 11, 2008. Aided by the volatile crude oil prices, MCX posted a record volume of 16.68 mn barrels. The total turnover was Rs 1,266 crore. The previous record was of 14.78 mn barrels registered on December 2, 2008. Average open interest in November was 1.60 mn barrels against 1 mn barrel in October. Open interest was 2.80 mn on December 10.
Crude oil for December delivery hit a high of Rs 2,229 a barrel and low of Rs 2,115 a barrel before ending the day at Rs 2,211 a barrel against the previous close of Rs 2,203, registering a gain of Rs 8 during the first of the trading session. The January contract closed was up Rs 17 at Rs 2,354, while the contract for February delivery rose by Rs 9 to Rs 2,469 amid volatile trading. Crude oil prices in
OVL submits open offer for Imperial Energy
December 10, 2008. ONGC's overseas arm ONGC Videsh would make cash offer to acquire Imperial Energy at the agreed price of 1,250 pence-a-share after getting the nod of Cabinet committee on economic affairs (CCEA). OVL would require $2.6 bn to acquire the LSE-listed Imperial Energy. The Imperial Energy stock rose as much as 20% to 1,024 pence, putting the valuation of the company at $1.9 bn.
Due to falling oil prices and global meltdown, earlier, there was uncertainty about OVL's bid to acquire Imperial. Oil prices were hovering at $140 per barrel when ONGC had agreed to acquire Imperial Energy for $2.6 bn in July. A steep fall in oil prices and depreciation of the rupee against the dollar has taken sheen out of the proposed purchase.
IOC pact with Adani Energy for city gas distribution
December 10, 2008. Indian Oil Corporation (IOC) and Adani Energy Ltd, a subsidiary of Adani Group signed a MoU for setting up 50:50 city gas distribution (CGD) JV. CGD includes supply of compressed natural gas as auto fuel and piped natural gas for domestic, commercial and industrial use.
The JV will undertake the CGD in Uttar Pradesh, Haryana, Rajasthan,
Policy / Performance
Petrol, diesel prices may go down further
December 16, 2008. Government dropped hints that petrol and diesel prices may be cut further if the downward slide in international crude prices continues. Government earlier this month cut petrol price by Rs 5 a litre and diesel by Rs 2 per litre as crude oil prices dipped from an all-time high of $147 a barrel in July to under $45 a barrel.
Even after the price cut, public sector oil firms were making a profit of Rs 9.98 on sale of every litre of petrol and Rs 1.03 per litre on diesel. The further softening in global oil prices has seen these profits widen to Rs 11.48 per litre on petrol and Rs 2.92 a litre on diesel. The oil companies, however, continue to lose Rs 17.26 per litre on PDS kerosene and Rs 148.38 per domestic LPG cylinder.
Indian Oil, Bharat Petroleum and Hindustan Petroleum are together projected to lose Rs 111,500 crore in revenues this fiscal on fuel sales. Further reduction in the prices of petrol and diesel had not been found feasible (on December 6) in view of the continuing under-recoveries (losses) on sale of PDS kerosene and domestic LPG.
Government may move court to allow RIL 3rd party gas sales
December 15, 2008. Government may reportedly move to the Bombay High Court requesting it to remove an interim stay order that restrained Reliance Industries from selling gas from the Krishna-Godavari (K-G) basin to companies other than Reliance Natural Resources Ltd (RNRL) and NTPC, customers that had signed contracts for the fuel.
The government will file an application in the Bombay High Court by the end of December or early January. RIL on its part has already appealed against the order. The court’s interim order in May last year had directed RIL not to create third party interest for the disputed volume of 40 mscmd of gas from the K-G basin.
The move to get the interim order vacated comes just a day after the government withdrew its affidavit that had made it a party to the case being fought by RIL and RNRL in the Bombay High Court, saying it would expedite the two-year old case.
Reliance denied permission to export LPG
December 12, 2008. The government has declined Reliance Petroleum permission to export LPG from its under-construction only-for-exports refinery at
Petroleum Ministry declined RPL's request citing prevailing LPG deficit in the country. RPL, in which
Further, an additional 5,000 tons a day of LPG was sought to be exported after four months from start till all major units are commissioned which may take a period of over 3 months. Petroleum Ministry, wants RPL to sell the fuel to state-run retailers to meet domestic demand.
Reliance Industries' existing unit, which was converted into an only-for-export unit last year, too is not allowed to export LPG. All other products from the refinery as well as the new unit can be shipped to markets overseas.
‘Global oil prices have decisive role in domestic pricing’: Deora
December 16, 2008. According to Petroleum Minister Murli Deora, International oil prices have a decisive role in the domestic pricing, as
International prices have come down since August and the average price of Indian Basket of crude oil during November was $50.91 per barrel and the average price during 2008-09 (up to December 10) was $100.34 per barrel. He also emphasized that the benefit of softening of international oil prices has been partly offset by the recent depreciation of the rupee by around 25%.
Murli Deora said that as an interim measure, the Government has reduced the prices of Petrol and Diesel by Rs. 5/- per litre and Rs. 2/- per litre respectively at
However, based on the Refinery Gate Price (RGP) computed by the Indian Oil Corporation, for the first fortnight of December, 2008, the likely retail selling prices at
The Public Sector Oil Marketing Companies (OMCs), namely, Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPC) and Hindustan Petroleum Corporation (HPC) have declared combined losses of Rs. 144.31 bn during the first six months of 2008-09. Their total under-recoveries on the sale of sensitive petroleum products are projected to be Rs 1103.81 bn during 2008-09.
Their combined borrowings at the end of November 2008 stood at Rs 1150 bn with an interest burden of Rs 81 bn during 2008-09. He added that the financial health of the OMCs needs to be protected for ensuring the energy security of the country
India still needs Iran gas link via Pakistan
December 10, 2008.
As per the joint venture set up by the Indian government to import liquefied natural gas, security concerns rather than discussions over price were the main obstacle facing the $7.6 bn project. The joint venture view that Indian demand for LNG would fall sharply in 2009-2010, partly because of the economic slowdown but also because of rising domestic gas production and competition from other fuels.
It also view that India is going to be a very soft market for LNG and that demand for the fuel could rise from 2011 and that the economic slowdown was less important than rising India gas output. If the problems over security are resolved soon, work on the Iran-India pipeline may start next year and could be finished by 2012.
The pipeline is expected to initially transport 60 mcm of gas (2.2 bcf) daily to
POWER
Generation
Power-generation growth a dismal 2.7 pc for Apr-Oct
December 16, 2008. While the lack of credit may have stalled the progress of some of the major power projects in the country, the existing ones have also failed to perform this year. The total growth achieved by the country in power generation between April-October 2008 is a dismally low 2.74 per cent.
Even though the country was supposed to increase its hydro and nuclear power generation in the current fiscal the two have actually gone down. Thermal has shown growth but not met the projected growth target of 6.2 per cent. Hydro power has shown a negative 8.36 per cent growth between April-October this year vis-à-vis the corresponding period last year.
Even though nuclear power does not contribute significantly towards the country's power needs, it too has seen negative growth of 11.05 per cent in the period. As per the Ministry of Power, the reason being is low water inflows for hydro and shortage of nuclear fuel.
As far as thermal power generation is concerned, the Government managed a growth of only 6.02 per cent against an achievable 6.2 per cent. The major reason for this is the delay in achieving commercial operation of new thermal generating units synchronised during 2006-07 and 2007-08.
HPGCL achieves record generation
December 13, 2008. The Haryana Power Generation Corporation Ltd. (HPGCL) continues its trend of breaking records by achieving a record generation of 479.94 Lakh Units (1 Unit = 1 KWh) of electricity at a Plant Load Factor (PLF) of 92.74 per cent in a single day, Dec 12, which is the highest ever daily generation since its formation.
HPGCL had bettered its own record of power generation of 462.59 Lakh Units at a PLF of 89.42 per cent achieved on Dec 10, 2008 by generating around 17.35 lakh more units of electricity in a single day. Panipat Thermal Power Station-1 (PTPS-1) comprises four Units of 110 MW each and Panipat Thermal Power Station-2 (PTPS-2) comprises two 210 MW Units and two 250 MW Units.
The combined generating capacity of both the Thermal Power Stations at Panipat is 1360 MW. PTPS-2 has been giving excellent performance and has achieved a PLF of 102.35 per cent during the month of November 2008, which is the highest ever generation in a single month since the commissioning of the Plant. On December 12, the PTPS-2 generated 227.67 Lakh Units of electricity at a PLF of 103.11 per cent.
German expertise for thermal plants’ upgrade
December 13, 2008. Thermal power plants in
Evonik has studied four thermal power plants which were more than 25 years old in Tamil Nadu. The next step would be to identify the areas for upgrading equipment and training personnel. The study indicates that through selective investments, significant improvements could be achieved.
Thermal power plants need to continuously focus on efficiency not just for cost reduction and increasing power availability but also to control pollution. A one per cent improvement in efficiency would mean a saving of over 11 mt of coal in
The company was in discussions with the electricity boards in West Bengal, Punjab,
370 MW Vemagiri goes on stream with diverted gas
December 10, 2008. GMR Infrastructure Ltd’s Vemagiri Power Generation Ltd (VPGL) with installed capacity of 370 MW has commenced power generation with gas diverted from other plants in Andhra Pradesh. Vemagiri is a 100 per cent subsidiary company of the wholly-owned subsidiary GMR Energy Ltd, which in turn is a subsidiary of GMR Infrastructure Ltd.
The 370 MW of gas-fired plant is located at Vemagiri village in Kadiam mandal of
Based on the arrangement made by AP Transco, VPGL will operate on this diverted gas at a plant load factor of 60 per cent till May 31, 2009. Meanwhile, Reliance Industries KG basin gas is also expected to be available in the first quarter of calendar year 2009. The Andhra Pradesh Government had earlier this year decided to power some of the new gas-based plants Vemagiri, Gauthami, GVK extension with natural gas and manage existing gas plants with naphtha. Following this development, Lanco Kondapalli, GVK Jegurupadu and Spectrum will divert the natural gas and run their plants with naphtha.
This is because these projects have been designed to run on different fuels. With the price of naphtha coming down in the last few months, the cost of generation of one unit has come down from about Rs 12 a unit to Rs 9 last month and to about Rs 7 now. This is an interim arrangement till gas flows from KG basin.
Transmission / Distribution / Trade
Joint venture for power exchange incorporated
December 12, 2008. NTPC Ltd, NHPC Ltd, Power Finance Corporation and Tata Consultancy Services have incorporated their joint venture company to operate a nationwide power exchange. NTPC and NHPC will own 16.67 per cent each in the newly-formed company, National Power Exchange Ltd, while Power Finance will own 16.66 per cent and TCS will have a 50 per cent stake.
Earlier this year, the four companies had entered into a joint venture to set up and operate a national-level power exchange. The exchange would also ensure clearing of all trades in an efficient manner, with access to all the players in the power market.
Government expects atomic energy to produce 10 pc of its power by 2030
December 16, 2008. The government expects nuclear power to generate as much as 10% of its electricity by 2030 to meet rising energy requirements.
Nuclear Power Corporation of India Ltd plans to buy equipment from General Electric Co., Areva SA, Rosatom Corp. and Toshiba Corp.
Concern over thermal plants along Andhra coast
December 16, 2008. According to the Forum for Sustainable Development and the Forum for Better Visakha, the Andhra Pradesh Government is giving permission indiscriminately for private companies to set up thermal power plants in the State, especially along the coast, unmindful of the likely ecological damage and without any precautions whatsoever.
As per the forums, during recent months the State Government had granted large stretches of land, especially in ecologically fragile zones along the coast, to private companies for setting up thermal plants. According to the Forum for Sustainable Development, the CRZ norms and all other norms are being given the go-by and the State Government is not laying down any stipulations for safeguarding environment.
The forum is of the view that there is no necessity for such hurry and there are better, and ecologically desirable, alternatives. It also said that the 4,000-MW power project of the Reliance group at Krishnapatnam in
Both forums said thermal power plants should not be allowed on the coast and elsewhere too they should be permitted, only with due precautions and only when they were absolutely necessary. They also said that the State Government is not encouraging solar power and other renewable sources of power and resorting to dirty power such as thermal power and private companies are making a quick buck.
Both forums emphasized that these private companies are grabbing valuable chunks of land along the coast. They also sought greater teeth to the AP Pollution Control Board and they urged the State to reconsider the move on thermal plants.
Government forms committee for fast execution of power projects
December 15, 2008. The government has constituted a monitoring committee, to be headed by Power Secretary Anil Razdan, to expedite the commissioning of power projects for the Commonwealth Games. The government has identified five projects that would supply power for the Commonwealth Games in 2010.
The projects include National Capital Thermal Power Project at Dadri, Indira Gandhi Super Thermal Power Project at Jhajjar, Mejia Thermal Power Station and Durgapur Steel Thermal Power Plant in
All these projects are expected to be commissioned as scheduled, though there are minor delays of four-five months at the initial stages of construction activities in case of
Meanwhile, the government also said that growth in power generation is falling short of the rate of growth in demand for electricity, due to inadequate capacity addition, non-availability of coal, gas and nuclear fuel. Steps are being taken to improve the power supply position in the country, including augmentation of generating capacity, development of a number of ultra mega power projects of 4,000 MW capacity each and taking up new hydro-power projects in
Mega Power Policy under review
December 15, 2008. The Centre is considering a proposal to amend the Mega Power Policy. According to the Power Minister, Mr Sushilkumar Shinde, a proposal to review the Mega Power Policy, deleting the condition of privatisation of electricity distribution in cities, is under consideration.
The move comes in the wake of intense pressure from a bevy of States on the issue. One of the conditions for waiver of duty on imported equipment for mega power projects, under the Mega Power Policy, was that the State that purchases the electricity from these projects should privatise distribution in all its major cities.
According to the Power Ministry, privatisation of electricity distribution in cities with a population of more than one million, as a precondition for allocation of power to States from mega power projects, was stipulated in the Policy to encourage private investment in the sector.
Government may cancel coal block allotments to private sector
December 12, 2008. According to the Minister of State for Coal, Mr Santosh Bagrodia, the Centre may cancel the allotments of coal blocks made to private sector companies for captive mines if they are not developed within in a specific time frame. Though more than 190 blocks have been allotted development work has started only in very few of them.
The Minister said that show-cause notices have been issued to 20 such companies for going slow and now they have given time bound commitments for developing their mines. The Government was planning to offer 70 more coal blocks with reserves of about 20 billion tonnes, but whether there will be a direct allocation or a competitive bidding is yet to be decided.
The amendment to the Minerals and Metals (Development & Regulation) Act to introduce competitive bidding for captive coal blocks is currently being vetted by the Ministry of Law and will soon be sent for consideration by the Union Cabinet.
INTERNATIONAL
OIL & GAS
Upstream
Sibir, Shell break production record at Western Siberian fields
December 16, 2008. Sibir announced that the equity production rate from its upstream units has exceeded 80,000 barrels of oil 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 146,900 bopd from the Salym group of fields in
The new SPD production rate takes Sibir’s 50% share at Salym to over 73,450 bopd which, combined with production from its subsidiary Magma, brings Sibir’s total daily equity production rate to over 80,000 bopd. The 80,000 bopd production rate surpasses Sibir’s own ambitious target production rate for year-end 2008.
InterOil turns on taps at 2 more Mirador wells
December 16, 2008. InterOil has just completed two more successful production wells in
InterOil has drilled two more production wells in the Mirador area of Block III in
Heritage unlocks black gold, gas at
December 16, 2008. Heritage Oil has announced a significant new oil discovery with the Buffalo-1 exploration well in Block 1,
The
The Buffalo-1 well is now being suspended as a potential future production well. The gross oil and gas columns seen in the well are 75 meters and 48 meters respectively. Based on seismic interpretation, further exploration and appraisal drilling could prove up a very substantial accumulation of oil, giving
Buffalo is a major discovery and continues the 100% success rate in the
Sulige gas field's daily output exceeds 20 mcm
December 15, 2008. CNPC noted that on December 10, the Sulige gas field produced 20 million cubic meter (mcm) of natural gas, meaning that this uncompartmentalized gas field, which has the largest proven gas reserve scale in
According to the development program of the Changqing Oilfield, in the year 2015, Sulige will reach a production scale of 35 bcm per annum, accounting for 70% of the total gas output of Changqing. In 2008, there are totally 1,145 wells been drilled, 21 gathering stations been built, and a production capacity of 3.74 bcm been constructed in the Sulige gas field.
The second and the third gas processing plant, with annual capacity of five and three billion cubic meters respectively, have been constructed and put into commercial production.
Kuwaiti company makes huge gas find in
December 15, 2008. Kuwaiti oil and gas producer Aref Energy has found close to 5 trillion cubic feet (tcf) of recoverable natural gas in south-central
Heritage discovers more oil at
December 11, 2008. Heritage has discovered oil at the Kingfisher-3 well, Block 3A,
Kingfisher-3 well encountered oil in all three reservoir intervals with a gross hydrocarbon bearing interval of 110 meters and net oil pay of up to 40 meters. Kingfisher-3 was drilled to evaluate the south-west portion of the Kingfisher structure and was drilled down dip on the flank of the structure. Based on pressure data, the three intervals appear to be in communication with the three reservoir intervals previously production tested in the Kingfisher-1A and Kingfisher-2 wells at 9,773 bopd and 14,364 bopd respectively.
It is planned to suspend the Kingfisher-3A development well as a third producer, in addition to the previously drilled and suspended Kingfisher-1A and Kingfisher-2 wells. It is planned to drill the Kingfisher-3A sidetrack to an anticipated measured depth of approximately 2,860 meters, which is expected to be completed by late January or early February 2009.
Heritage is the Operator of Block 3A and Block 1 in
Planned Drilling Activity in 2008
|
Country |
Block |
Prospect |
Operated Interest |
Estimated Spud Date/Status |
|
Uganda |
Block 1 |
Buffalo |
50% |
Ongoing |
|
Uganda |
Block 1 |
Giraffe |
50% |
December 2008 |
|
Uganda |
Block 3A |
Kingfisher-3/3A |
50% |
Being drilled |
|
Kurdistan Region of |
Miran |
Miran West-1 |
100% |
December 2008 |
Norse confirms Petrobras' discovery at Copaiba well
December 11, 2008. Norse Energy, in partnership with Petrobras (Operator), Queiroz Galvao Oil & Gas and
The well confirmed the presence of oil bearing sandstone reservoir with 21% porosity, without identifying any oil water contact in this interval. In accordance with the established Concession Agreement, the extension and commerciality of the discovery will be appraised in an 'Evaluation Plan' to be submitted to ANP.
Russia's oil company interested in developing
December 10, 2008.
Although the Iranian license holder for the field, National Iranian Oil Company (NIOC), will enjoy a joint project with Gazprom Neft to develop the fields, the Russian crude oil producer will have to provide 100 percent of investment in the project.
Downstream
Shell may extend Pernis unit shutdown
December 16, 2008. Royal Dutch Shell is considering an extension of the shutdown of a gasoline-making unit at its advanced Dutch Pernis refinery until the end of January due to weak demand. Economic run cuts at complex plants like Pernis,
If Shell decides on the move, some analysts say it could be a sign that such actions will spread across
In
The potential cuts would be meant to support gasoline's crack, or relative value, to crude and overall refining margins, which have been pressured by falls in cracks of the main middle distillate products such as gas oil for heating and diesel for vehicles.
CNPC mulls building refinery in central Henan
December 15, 2008. CNPC, parent of PetroChina mulls building a 10 million tonne per annum (mtpa) refinery in central
CNPC has made a survey on land usage, power supply and environmental protection in Shangqiu, city in the east of
One of problems ahead of CNPC’s refining plan, however, is lack of oil source that also holds back Sinopec from building large-scaled refineries in central
Henan province has two big refineries in
CNPC’s Lanzhou-Zhengzhou-Changsha is capable of transport 8 mtpa of oil products from western
Caltex
December 12, 2008. Caltex Australia Ltd,
The supply of diesel is approximately a third of the refinery's capacity. Caltex is 50 percent owned by
Transportation / Trade
Gazprom export agrees to pipeline repair schedule
December 16, 2008. Russian gas export monopoly Gazprom has agreed its pipeline repair schedule for European exports for next year. Gazprom Export and representatives of European gas transport companies have agreed on a syncronised schedule of the 2009 planned maintenance works on the major Uzhgorod and Yamal export pipelines.
The repair work is for gas transport systems with a total length of about 8,000 kilometres across
Tesoro announces
December 16, 2008. Tesoro Corp. has entered into a throughput agreement that will allow the company to transport crude oil in a pipeline owned by Petroterminal de Panama (PTP). PTP has announced a project that will reverse the flow of its 81-mile trans-Panamanian pipeline. After the completion of the project, Tesoro has agreed to ship 107,000 barrels-per-day of crude through the pipeline under a seven-year agreement.
PTP expects the pipeline reversal project to be ready for start-up during the third quarter of 2009. The throughput agreement will allow Tesoro to economically deliver crude oils produced in Africa, the Atlantic region of South America and the North Sea to the company's five Pacific Rim waterborne refineries. Tesoro leases existing tankage from PTP but PTP has also agreed to build new dedicated tanks for Tesoro on both sides of the
Tesoro plans to use the pipeline and tanks to blend and distribute different grades of crude oils for its own use. Tesoro Corporation, a Fortune 150 Company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates seven refineries in the western
Tesoro's retail-marketing system includes over 880 branded retail stations, of which more than 390 are company owned under the Tesoro, Shell, Mirastar and USA Gasoline brands.
Acergy snags $250 mn gas pipeline in Angola
December 15, 2008. Acergy has announced the award from Angola LNG Limited of a contract for the development of the nearshore/onshore segment of the pipeline network required for the transportation of gas from Blocks 0, 14, 15, 17 and 18 to Angola LNG's plant in
The contract awarded to a consortium of Acergy
It also includes the shore approach and above water tie-ins for these pipelines, together with the offshore crossing and hydrotesting. Engineering will commence with immediate effect with offshore installation scheduled to commence in the fourth quarter of 2009, using Acergy Hawk, Acergy Legend and Acergy Polaris.
Pemex seeks bids for natural gas pipelines
December 15, 2008. Mexican state oil monopoly Petroleos Mexicanos’s seeking bids for the construction of two natural gas pipelines to transport gas in central
The pipelines are expected to transport about 400 mcf a day of natural gas, and that the project guarantees a minimum volume for the pipeline operators. The pipelines, expected to go into operation in 2011, will also allow Pemex to supply fuel to power plants in central Mexico operated by state electric utility Comision Federal de Electricidad.
Bids are expected by mid-April, with the contracts to be awarded in May. Natural gas transportation and distribution are among the areas of
Gazprom inks 25-year gas supply deal with
December 15, 2008. On December 12-13, as part of the cooperation with GDF SUEZ, Russia oil major Gazprom’s delegation participated in
More than 30 years have passed already from the moment of signing first contracts for Russian gas supply between Gazprom and Gaz de France. Its cooperation, in addition to gas supplies, is intensively developing in such areas as energy saving, UGS facilities construction & operation and LNG marketing.
Besides the existing export contracts extended until 2030, Gazprom and GDF SUEZ have reached an agreement to supply additional gas volumes via the Nord Stream gas pipeline. Strengthening the long-term partnership between Gazprom and GDF SUEZ will promote the security of gas supply to European consumers in the long term
Tunisia's Sotrapil scraps pipeline project
December 11, 2008. Tunisian oil and gas pipeline operator Sotrapil cancelled a fuel pipeline construction project that was due to link the
The 185 km (115 mile) pipeline, designed to carry refined fuel products between storage facilities in the coastal town of
Sotrapil also aimed to cancel capital increases approved by shareholders in 2007 and 2008 and replace them with a smaller share issue that would boost its capital to 16.359 mn dinars ($12 mn) from 15.730 mn dinars. Sotrapil's net profit was 830 million dinars in the first half of 2008, down from 1.0 billion dinars a year earlier.
Policy / Performance
Brazil government likely to cancel 8th round oil auction
December 16, 2008. The Brazilian government likely will cancel the suspended eighth-round auction of oil and natural concessions. According to a report, the government likely will transfer the blocks up for bids in the eighth-round auction to a new regulatory model currently under discussion. Possible changes to
The eighth-round auction was suspended in November 2006 after a local court granted an injunction halting the auction. Before the auction was halted, 38 of the 284 oil and gas exploration and production blocks up for bid were auctioned off.
While government has maintained that previous contracts would be honored, the winning eighth-round bids can't be considered official until a contract is signed with
Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, submitted winning bids on 20 of the 38 auctioned blocks. The winning bids represented a signing bonus of 588 mn Brazilian reals ($247 mn). The eighth round auction included blocks in
Flying V targets
December 15, 2008. Independent oil firm Flying V is negotiating with the government of
At the moment, lubricants under the brand name Citgo is already available in the country and they are also looking forward to bring in more petroleum products to the
They have a total of 14,000 gasoline stations in US and eight refineries. But when Chavez took over, other markets for their petroleum products have been opened up.
China confirms PetroChina 100 bcm gas find in Xinjiang
December 15, 2008.
PetroChina expects the field to produce 1 bcm of gas a year for at least 50 years and may increase its annual output. There is no information about when the company will start production in the field. The basin has possible gas reserves of 2.5 tcm. PetroChina is expected to produce 3.38 bcm of gas in the Junggar basin this year and raise it to 5 bcm by 2010.
NZ opens up offshore oil, gas exploration in East Cape and Northland
December 10, 2008. Energy and Resources Ministry of New Zealand announced the opening of bidding for new petroleum exploration permits across two large offshore areas, the Raukumara (
Two extensive blocks are being offered for bidding across Raukumara and six blocks across Northland, with a combined total area of over 66,000 square kilometers. A number of the major oil companies have already indicated interest in the
The current block offers keep up the momentum generated by previous block offer releases such as offshore Taranaki to realize gas reserves for the country’s domestic market and to discover potentially large oil and gas reserves in its deep water basins.
The government is maintaining exploration momentum in
POWER
Middle East requires $500 bn investments in power infrastructure
December 16, 2008. According to a research study, the
The rapid economic and population growth is putting pressure on regional utilities to add power generation capacity to avoid increasing supply demand imbalances, power outages and soaring electricity prices. The regional power demand is also fueled by major tourist and industrial developments as well as economic city projects like in
At only four per cent annually, growth of power generation capacity is lagging behind the region's economic growth rate of seven per cent. Growing demographics and wealth in the
A further challenge is how to calculate the necessary energy efficiency increase, as utility companies in the
Construction of $1.1 bn Power plant to start mid next year in
December 15, 2008. Aboitiz Power Corp. and Taiwan Cogeneration Corp. (TCC) will start construction of their $1.1 bn power plant in
Aboitiz and TCC are now working on the contract for a 50-50 partnership for the RP Energy Redondo Peninsula Energy Inc. project in
The target is to secure $200 mn in loans from Philippine banks and another $200 mn from the financial institutions in
Libya-Russia joint venture to build power plant in
December 14, 2008. According to
Construction of the facilities will be financed by Libya African Investment Portfolio, which will manage $6.73 bn for the projects in total. Top priority projects for Laptechno-Power will be the construction of a 1250 km electric transmission line with a capacity of 400 kW in
Technopromexport builds hydroelectric, thermal, geothermal and diesel power plants, and power transmission lines in 50 countries.
Transmission / Distribution / Trade
Mine exports slashed by $30 bn
December 16, 2008. After crippling markets and bringing banks to their knees, the global economic meltdown will slash almost $30 bn from
The economic research agency made the biggest cuts to forecasts for
The suite of downgrades follows steep falls in commodity prices and the collapse in the oil price, which has slid from a high of $147 a barrel in July to just above $40 a barrel. Despite the slowdown,
Electricity down 11 pc, gas bills to fall by 22 pc
December 15, 2008. Both the NIE Energy and the Phoenix Gas confirmed price cuts in electricity and gas for hard-pressed householders. NIE Energy is to reduce its electricity tariffs by 10.8% while Phoenix Gas rates will be slashed by 22.1%.
However, despite the cuts, cash-strapped consumers will still be paying 35.5% more for their electricity than they were in June and 18% more for gas. NIE Energy will pass on the savings from January 1 to its 792,000 customers while Phoenix Gas’ 120,000 customers will benefit from the decrease from January 8.
The reduced tariffs are the result of lower wholesale gas and coal prices. Prior to the announcements the average NIE Energy bill was £585 per year meaning that from next month on average consumers will be £63 better off annually. Phoenix Gas customers who pay on average £686 over a 12-month period will make an annual saving of £151.60.
Stormont’s
Policy / Performance
Baguio to pay royalties for hydro plant in Philippines
December 15, 2008. The
City Administration had recommended the release of P367,070 to the Tuba government, representing its 1-percent share from the profits of four mini-hydro plants that were ordered built for the city in 1924.
Tuba is entitled to this share based on the provisions of the Local Government Code. The city government reacquired the 3.8 MW plants from the Baguio Water District (BWD) and the Hydroelectric Development Corp. (Hedcor) in 2006. These firms operated the plants for 20 years under a development lease agreement.
Bautista had decided to let the city engineers run the plants themselves, saying the facilities could help bring down the cost of
EPA drops plan to ease air rules in Washington
December 11, 2008. Six weeks before leaving office, the Bush administration is giving up on an eight-year effort to ease restrictions on pollution from coal-burning power plants, a key plank of its original energy agenda and one that put the president at odds with environmentalists his entire tenure in the White House.
President George W. Bush had hoped to make both changes to air pollution rules final before leaving office January 20. Amid a coal-fired power plant construction boom, the rules would have made it easier for energy companies to expand existing facilities and to erect power plants in areas of the country that meet air quality standards. But the Environmental Protection Agency (EPA) recently conceded that it didn't have enough time to complete the rules changes, which were undermined by a federal court decision earlier this year that scrapped a signature component of Bush's clean air policies.
The EPA will continue to advocate for the important health benefits the initiatives would have achieved. Environmentalists, however, said the decision would leave intact for the incoming Obama administration the strongest tools under the law for dealing with power plant pollution. The proposal would have changed how existing coal-fired power plants calculate emissions increases to determine whether they need to install pollution control equipment.
The Bush administration wanted to base the calculation on an hourly rate, rather than an annual average. Environmentalists and governors of Northeastern states said such a change would have resulted in more of the pollution that causes acid rain and smog problems in the region.
The second rule would have made easier for power plants to be built in areas with some of the cleanest air in the country by changing how states, the EPA and others assess how the new source would affect air quality. That proposal was opposed by the National Park Service and some the agency's own regional air quality experts.
Renewable Energy Trends
National
Regulator proposes tariff hike for wind power
December 16, 2008. New wind farms are likely to get a higher tariff for the power they produce. Tamil Nadu Electricity Regulatory Commission (TNERC) plans to revise the tariff to Rs 3.40 a unit from the prevailing Rs 2.90. In a consultative paper on the wind power scenario in Tamil Nadu, the regulatory commission has said the higher tariff would be applicable to units set up after the issue of the proposed order. It has sought the wind energy industry’s comments on the proposed revision and a range of conditions that would go with it.
The objective is to encourage wind power generation capacity in the context of the prevailing power shortage in the State and the need to add to the State’s generation capacity fast. Wind industry representatives have welcomed the proposal to hike the tariff. The proposal would encourage investments in wind energy, including independent power producers.
Though the industry has been demanding a tariff of Rs 3.90, the hike envisaged is a good move. The tariff revision order usually takes effect prospectively from the date of the new order, but it would help if the existing players are also supported with a higher tariff.
However, the new tariff should be applicable to the existing capacities, also as the quality of wind power is the same and they play a crucial role in energy security. Tamil Nadu has over 4,100 MW of wind power capacity more than 40 per cent of the wind power capacity in
TNERC has also highlighted the shortage of power prevailing in Tamil Nadu. The power generation capacity connected to the State’s grid is 10,122.55 MW, apart from the wind generation capacity, 451 MW of cogeneration with sugar mills and 104 MW of biomass power. There is a deficit of 1,500 MW against the peak demand of 9,500 MW. The deficit is likely to increase in the coming years since addition of power in through thermal plants would take three-four years.
Solar power at Rs 15 per Unit
December 16, 2008. After signing a power purchase agreement (PPA) with West Bengal State Electricity Distribution Company Ltd (WBSEDCL) for its 5 MW solar photovoltaic (PV) plant in Bankura, Astonfield Renewable Resources (ARR) aimed to build a solid waste to power plant at Dhapa in Kolkata.
Astonfield Solar Private Ltd (ASPL), a subsidiary of ARRL, signed the PPA with WBSEDCL at a tariff of Rs 15 per unit for the next 20 years. Of this, the state government would pay Rs 5 per unit of power while the rest would come from the Centre as a part of the subsidy scheme for solar power generating companies. The solar PV plant coming up over 26 acres would cost $21 mn and go onstream in October 2009.
It would produce 7 million units of power every year. The company was in the final stages of negotiations with the Kolkata Municipal Corporation (KMC) to develop a 54 MW solid waste to power plant at the city's waste disposal ground in Dhapa near the Eastern Metropolitan Bypass. It would employ direct combustion technology to generate power from the solid waste deposited at the site which is roughly around 3200 tons per day.
The project would require around 20 acres for the purpose out of the 186 hectare area at Dhapa for the plant. Eight technical proposals from bidders had been submitted for the project. ARRL planned to develop the plant on a build-own-operate basis with an investment of around $100 mn with 70:30 debt-equity ratio. The power generated from the project would be pumped into the grid and a PPA with the West Bengal State Electricity Board would be signed.
ONGC sets eyes on Gorai for power
December 15, 2008. The ONGC has evinced interest in setting up a power generation project at the Gorai dumping ground. The corporation has decided to take up the project, which will enable it to generate 3 to 4 MW of electricity per day from methane gas. The ONGC will install the plant free of cost before handing it over to the Brihanmumbai Municipal Corporation (BMC).
Forty wells have been dug up at the site to capture, treat and release methane gas emitted from garbage. The Gorai closure is expected to be completed by the year end. Project for closure of the ground will cost about Rs 50 crore. The ONGC wrote a letter to the BMC expressing its desire to install a power generation plant at the Gorai site. The project will be started by the company as a corporate social responsibility. The Brihanmumbai Electric Supply Transport (BEST) will maintain the project and sell the electricity through its distribution network.
‘Every State must have an integrated energy plan’: World
December 14, 2008. According to the World Institute of Sustainable Energy (WISE), a Pune-based not-for-profit organisation working in the renewable energy sector, every State must work out an integrated energy plan for the next 20-25 years, not just on how it is going to meet its electricity needs but also at the transportation sector.
The Institute is working on integrated energy planning for Karnataka, Rajasthan and
The study would look at all energy options, including bio-fuels for electricity generation. One area that the Institute would like States to look at seriously for power generation was solar. Although it might appear an expensive option now, large-scale projects would bring down the costs.
A criticism against solar projects was that it was water-intensive. However, new technologies – such as Dish Stirling engine technology – were emerging that did not require water.
An American company, Infinia Corporation that offers this technology had set up an office in
WISE has been at the forefront of pushing for a separate legislation for the renewable energy sector, including preparing a draft legislation after extensive consultations and discussions and building public opinion for a national law. The Ministry of New and Renewable Energy had constituted a technical committee to study the proposed legislation.
It had also appointed legal advisors. By early next year, the draft would be finalised and presented in Parliament. The proposed RE law would cover all aspects – hydrogen cells, bio-fuels, rural electrification, solar and wind. There were no conflicts with the Electricity Act. It is a comprehensive, futuristic legislation.
WISE had held extensive consultations, studied renewable energy legislations in other countries and documented over 15,000 papers before finalising the draft RE law. It had taken the help of the
Global
Grand Island
December 16, 2008.
The Elkhorn Ridge facility at
Once electrical generation begins, the 80 MW will be distributed like this: 40 MW for NPPD, 25 megawatts for Omaha Public Power District, 8 for the Municipal Energy Agency of Nebraska, 6 for Lincoln Electric System and 1 MW for Grand Island Utilities.
Grand Island's cost is about $27,000 upfront and about $160,000 a year (set to increase about 2.5 percent annually) for enough electricity to power about 293 homes. That equates to about $50 per megawatt hour a cost that is higher than traditional generation methods using coal and natural gas.
Grand Island was also an inaugural participant in the 1998 creation of the Springview wind farm a project largely financed through a grant from the Nebraska Department of Energy. The reliability of the turbines at Springview proved inefficient and the project was shut down in August 2007.
Suzlon revises payment schedule for Martifer’s stake in REpower
December 16, 2008. Suzlon Energy Ltd and the Martifer Group of
Suzlon was supposed to buy out Martifer stake by December 15. But it could not raise the funds and also had to abandon its Rs 1,800 crore rights issue due to market conditions. According to the new terms, Suzlon will pay Martifer approximately €65 mn by year end, €30 mn in April 2009, and final tranche of €175 mn in May 2009. Upon completion of this transaction, Suzlon will hold 91 per cent stake in REpower.
Wind farm deal to boost CPS Energy’s renewable-energy profile
December 15, 2008. CPS Energy has signed a 15-year agreement to purchase power from the new Papalote Creek wind farm, located in San Patricio County east of
The project is still under construction and is expected to come online in the fall of 2009. CPS Energy is ranked No. 1 in the amount of wind energy capacity among the nation’s municipally owned utilities. The additional energy from the wind farm will boost CPS Energy’s total renewable energy capacity to 703.7 MW and will move the company closer to achieving its goal of generating capacity from renewable resources equivalent to 20 percent of customers’ peak electric demand by 2020.
CPS Energy, the nation’s largest municipally owned energy company, serves more than 690,000 electric customers and almost 320,000 natural gas customers in and around
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Only a few months ago, forecasts for oil prices above $ 200 per barrel sounded probable. Now there are predictions that world oil prices could easily fall below $40 a barrel and might even slip toward $35 or perhaps $30. This also seems probable. Generally most analysts and economists hedge their bets on oil prices with the prediction that oil prices could move in the opposite direction fairly quickly. This time is no different. Strangely that too does not seem improbable. Consuming as well as producing nations do not seem to have a choice but to adapt to this wild swings in oil prices.
Benchmark
The consensus among analysts is that the lower oil price goes, the further out of equilibrium the market is headed. The oil price collapse over the last four months has reflected several factors hitting the market at the same time. As the gravity of the global recession has become clear, economists have recalibrated their views of oil demand. The International Energy Agency (IEA), which advises 28 industrialized countries, slashed its global oil demand growth forecasts. It says demand has grown this year at the slowest rate in a generation and next year it is expected to expand by only 350,000 barrels per day (bpd).
World oil demand is now expected to average 86.2 million bpd in 2008, rising to just 86.5 million bpd in 2009. Some analysts say the IEA's assumptions are too conservative and that a dramatic contraction in demand in the major developed economies will offset growth in oil demand elsewhere and produce a rare absolute fall in global demand. Falling demand forecasts have led to widespread assumptions by oil traders that oil markets will be oversupplied.
The Organization of the Petroleum Exporting Countries agreed last month to cut its oil production by 1.5 million bpd from November 1 and many analysts think it will trim its output further. As prices continued to fall, OPEC members met in
Some OPEC members such as
But the impact on supply will take time to be felt. For example, the cuts by OPEC last month could take two or three months to work into the market. In the meantime, the momentum appears to be downwards. Driven by short-term as much by sentiment in futures markets as rational calculations over fundamental costs for production, many analysts say the oil price is likely to go well beyond the level justified even by a dramatic fall in demand. Analysts liken oil price moves to a weight on a piece of elastic: most of the time it swings within fairly narrow ranges, reacting to signals on supply and demand and other news but occasionally a big shock makes it swing to wild extremes. Just as on the upside went too far, so will the downside appears to be a commonly accepted principle.
Most analysts see prices recovering fairly quickly in the next few months, according to a poll of 34 analysts, which produced an average forecast for WTI next year of $81.30 and almost $90 in 2010. According to one bank, the price for
Analysts and economists can make a living out of predictions, irrespective of whether they are right but what can policy makers read out of the wild swings in oil price?
The energy market in general and the oil market in particular have some interesting characteristics. One is the relation of price to demand. Since oil is so essential to economic activity, the demand for oil is highly inelastic in the short run. This means that an increase in price may not precipitate a proportionate decrease in quantities demanded.
Not only demand but also supply is price inelastic owing to political rather than market stimuli. Rising prices may not elicit an increase in available supply and falling prices may not result in reduced prices. The reason is that Governments rather than businesses own oil deposits and control supply. In most OPEC countries production decisions are income driven.
The frictions arising out of government ownership in the oil market amplify the effect of short term disruptions. They contribute to the imbalances in production and income that threaten producers, anger consumers and perplex politicians. Policy makers in consuming countries such as
The frictions are unlikely to go away in the short term because the political price for change is too high for most Governments. What politicians in consuming as well as producing countries fail to acknowledge is that the economic cost of ‘no change’ could be far greater than the political cost of ‘change’. They ignore the long term problem of the average price paid and the average amounts of oil produced and choose instead to focus on the sudden fluctuation in supply which produces amplified fluctuations in price.
Energy policies in producing and consuming countries may have well intentioned goals of increasing income, decreasing imports, changing patterns of energy use and conferring benefits and losses on individuals and groups in the society. In the process of achieving these goals, the policy makers change the way resources are used.
Technically speaking these changes result in the loss of efficiency, i.e., a pattern of resource use that is less optimal in an economic sense that provides fewer services and produces fewer goods than would otherwise be the case. This does not in itself mean that the distortions in resource allocations are not justified. They may be necessary to attain other goals not encompassed by the narrow economic definition of efficiency such as security or equity. But even in that case it is important to be aware of the price paid for social goals.
ORF Energy Team
The Nuclear Illusion (part – VI)
AMORY B. LOVINS AND IMRAN SHEIKH
Continued from Volume V, Issue No. 25…
Nuclear Coal Large Large combined- Building- Recovered- End-
plant plant combined- wind cycle scale heat use
cycle gas farm Industrial cogen industrial efficiency plant cogen cogen
Fig. 2. How much coal-fired electricity can be displaced by investing one dollar to make or save delivered electricity by the means shown in Fig. 1. (please refer previous issue 25) To interpret the bar on the far right, note that the historic-average cost of U.S. electricity-saving programs is ~2¢ per saved kWh, though many programs, especially for business customers, have cost less than 1¢/kWh, far off the chart.
Fig. 2 shows the reciprocal of—i.e., 1.0 divided by—the costs of various options in Fig. 1 (converted from cents to dollars). It therefore shows how cheaper options displace more coal per dollar than costly options can.
That’s what “cheap” means. However, before comparing these different ways to displace coal-fired electricity, we must adjust for the carbon emitted by fossilfueled cogeneration.
Those emissions are lower than those of the power plants and boilers that cogeneration displaces, but they’re not zero (like efficiency and renewables). Thus cogeneration’s net carbon displacement is smaller than the gross carbon displacement shown in Fig. 2.
However, as Fig. 3 shows, it’s bigger (with good design) than the carbon displaced by combined-cycle gas-fired plants, which don’t capture and reuse waste heat for buildings or industrial processes as cogeneration does:
Nuclear Coal Large Large combined- Building- Recovered- End-
plant plant combined- wind cycle scale heat use
cycle farm Industrial cogen industrial efficiency gas plant cogen cogen
Fig. 3. Net carbon emitted per kWh of power delivered by operating typical electrical resources.
Coal is by far the most carbon-intensive source of electricity, so displacing it is the yardstick of carbon displacement’s effectiveness. A kilowatt-hour of nuclear power does displace nearly all the 0.9-plus kilograms of CO2 emitted by producing a kilowatt-hour from coal.
But so does a kilowatt-hour from wind, a kilowatt-hour from recovered-heat industrial cogeneration (ascribing its carbon emissions to the process heat that was being produced anyway), or a kilowatt-hour saved by end-use efficiency. And all of these three carbon-free resources cost at least onethird less than nuclear power per kilowatt-hour, so they save more carbon per dollar.
Combined-cycle industrial cogeneration and building-scale cogeneration typically burn natural gas, which does emit carbon (though half as much as coal), so they displace somewhat less net carbon than nuclear power could: around 0.7 kilograms of CO2 per kilowatt-hour.76
Even though cogeneration displaces less carbon than nuclear does per kilowatt-hour, it displaces more carbon than nuclear does per dollar spent on delivered electricity, because it costs far less.
With a net delivered cost per kilowatt-hour approximately half of nuclear’s, cogeneration delivers twice as many kilowatt-hours per dollar, and therefore displaces around 1.4 kilograms of CO2 for the same cost as displacing 0.9 kilograms of CO2 with nuclear power.
Fig. 4 compares different electricity options’ cost-effectiveness in reducing CO2 emissions, counting both their cost-effectiveness in delivering kilowatt-hours per dollar and their carbon emissions if any:
Nuclear Coal Large Large combined- Building- Recovered- End-
plant plant combined- wind cycle scale heat use
cycle farm Industrial cogen industrial efficiency gas plant cogen cogen
Fig. 4. Relative cost-effectiveness of different ways to save carbon emitted by coal-fired power plants. Since the “currency” here is kilowatt-hours, the cost of generating a coal-fired kilowatt-hour is irrelevant to this calculation. Nuclear’s apparent superiority over combined-cycle gas-fired power in carbon reduction per dollar is valid only for one plant in isolation (and only if the nuclear plant is relatively cheap and the gas relatively costly): in an actual power system, gas’s greater load-following ability enables it to displace more coal and to support more variable renewables (faster and at lower cost) than equivalent nuclear capacity could do.
Nuclear power, being the costliest option, delivers less electrical service per dollar than its rivals, so, not surprisingly, it’s also a climate-protection loser, surpassing in carbon emissions displaced per dollar only centralized, non-cogenerating combined-cycle power plants burning natural gas at the relative prices assumed.
Firmed windpower and cogeneration are 1.5 times more cost-effective than nuclear at displacing carbon. So is efficiency at even an almost unheard of 7¢/kWh. Efficiency at normally observed costs beats nuclear by a wide margin—for example, by about ten-fold for efficiency costing one cent per kWh.
New nuclear power is thus so costly that shifting a dollar of spending from nuclear to efficiency protects the climate severalfold more than shifting a dollar of spending from coal to nuclear. Indeed, under plausible assumptions, spending a dollar on new nuclear power instead of on efficient use of electricity has a worse climate effect than spending that dollar on new coal power!
Fig. 4 shows that making and delivering new nuclear power displaces 1.4 to ≥11 times less carbon per dollar than doing the same tasks by using electricity more efficiently or by providing electricity in other, cheaper ways that produce little or no carbon (windpower, cogeneration, or end-use efficiency, but not including combined-cycle gas-fired power plants). That is, every dollar spent on new nuclear power will produce 1.4–11+ times less climate solution than spending the same dollar on its cheaper competitors. For a power source merely to emit no carbon isn’t good enough; it must also produce the least carbon per dollar, and must do so sooner than its competitors.
That’s because, if climate is a problem, then we must invest judiciously, not indiscriminately, to buy the most solution per dollar and the most solution per year—best buys first, not the more the merrier. Buying a costlier and slower solution, like new nuclear power, will make the climate problem worse than it would have been if we’d bought cheaper, faster options instead.
Whether existing nuclear plants have displaced and are displacing any carbon emissions, as is often claimed,77 depends on what assets would have been bought instead to generate the same electricity. Buying coal-fired plants instead would have released more carbon. But buying low- or no-carbon micropower or negawatts instead would have released less carbon, because more of those cheaper coal-displacing resources could have been bought with the same money.78
Summarizing this analysis, the best investments for both the environment and the economy are those toward the upper-right corner of Fig. 5:
Fig. 5. The relative cost-effectiveness of different ways to spend a dollar to displace carbon emissions from coal-fired power plants (vertical axis) and to deliver new electrical services (horizontal axis). Options toward the lower left are worst for both priorities.
Some say we need to buy everything, so we needn’t actually make choices. But if you order that way from a Chinese restaurant menu, one item from each section, you can spend most of your money on the shark’s-fin soup, run out of money to buy rice, and go away hungry. We have only so much money and appetite, so we must choose wisely. The more urgent it is to protect the climate, the more vital it is to spend each dollar in ways that will displace the most carbon soonest.
This means focusing on big wins. To gain big climate benefits, deploying the efficiency and micropower resources that now provide upwards of half the world’s new electrical services is vital—but deploying the nuclear resource that provides ~1% of that service growth and yields ~1.4–11+ times less carbon saving per dollar is irrelevant or worse. Ignoring the former and fixating on the latter only reduces and retards climate protection.
The nuclear industry is eager that the public does not understand this argument, which to my knowledge has not previously been explained in major public or business media in the U.S., and rarely elsewhere. Rather, the industry emphasizes its belief that properly pricing carbon (figures like €20 or $30 per tonne of carbon are often cited) will make nuclear power cost-competitive.
That marginal price would be nearly three times McKinsey and Company’s 2007 estimate79 of the €2/tonne-CO2 average cost of abating 45% of the world’s 2030 business-as-usual greenhouse-gas emissions. This whole comparison, however, wrongly assumes that the competitor is a coal- or gas-fired central power plant. Those are the costliest but not the only competitors.
Properly pricing carbon will advantage all other zero-carbon resources—renewables and efficiency—as much as it advantages nuclear (and will also advantage low-carbon cogeneration to a lesser degree). Thus taxing or trading carbon will not help nuclear power beat its most formidable and successful competitors.
Some advocates claim that a hydrogen economy will rescue nuclear power by harnessing its electricity or heat to make hydrogen. But these processes are prohibitively costly. Hydrogen fuel cells in buildings, industry, or vehicles, far from giving nuclear power a vital new market, would instead add yet another fatal competitor to its electricity production.80
In the end, the nuclear industry’s increasingly explicit assumption (as in current French and UK policy) that governments must guarantee an above-market-clearing carbon price sufficient to ensure nuclear power’s competitiveness not only jettisons market logic and EU rules; it also reveals how thoroughly both the industry and those governments misperceive the competitive landscape.
Failure to recognize micropower and negawatts as authentic, successful, and major alternatives to nuclear power has not stopped those sources from already outgenerating, outcompeting, and far outpacing it, as we’ll see below.
Notes:
76 Since its recovered heat displaces boiler fuel, cogeneration displaces more carbon emissions per kilowatt-hour than a large gas-fired power plant does.
77 E.g., by the Nuclear Energy Industry’s Senior VP Alex Flint, in testimony to USHR Select Committee on Energy Independence and Global Warming, 12 Mar 2008, at p. 13: “At a global level, 439 nuclear plants produce 16% of the world’s electricity while avoiding the emissions of 2.6 billion metric tons of CO2 each year….”
78 This comparison, and this paper, neglect the fossil fuels needed to build and fuel nuclear plants or their low- or nocarbon competitors. My 1977 analysis of nuclear net energy with Dr. John Price (Non-Nuclear Futures, Ballinger [Cambridge MA], Part Two) found that a typical pressurized-water reactor over its lifetime would produce ~16× more electricity than was used to build and fuel it with the technologies of that time using 0.3% uranium ore, or ~8× with Chattanooga Shale. Today, uranium enrichment is more efficient, high-grade ores are scarcer, nuclear plants may have become more materials-intensive, and materials production has become more efficient. The net change is unknown but probably not great. Most comparisons show that embodied construction and fuel-cycle energy is broadly comparable for nuclear vs. renewable alternatives (nuclear is often a bit higher), but this indirect energy usage is not important unless the nuclear fleet is growing so quickly that at any given time its energy inputs rival or exceed its outputs (Non-Nuclear Futures provides a closed-form analytic solution for this dynamic analysis), as was the case with the high-growth nuclear forecasts of the 1970s. Such analysts as van Leeuwen and Smith (2004, www.stormsmith.nl) have published a different argument: they find a net energy loss for nuclear power in the static case too by assuming very-low-grade uranium resources and/or significant long-term energy inputs to manage nuclear wastes and decommissioning (http://nuclearinfo.net/Nuclearpower/WebHomeEnergyLifecycleOfNuclear_Power). Others have extended this theme by including their estimates of the amount of fossil fuel needed to win and use fossil fuel itself (e.g., http://blog.greenparty.ca/files/Nuclear_In_Out_3.pdf). These analyses are very complex and often inconclusive. Having helped create the generally accepted accounting principles for net energy analysis in the 1970s, I believe it’s simpler and clearer nowadays just to use normal economic analysis. However, global uranium resources and their net energy yield and economic cost would become a significant concern with a large and expanding nuclear program: Peter Bunyard’s brief tutorial is at www.i-sis.org.uk/DTNPM.php; cf., for contrasting views, cf. E. Schneider and W. Sailor, “Long-Term Uranium Supply Estimates,” Nucl. Technol. 162(3):379–387 (June 2008), and Mudd, G M and Diesendorf, M, 2008, “Sustainability of Uranium Mining: Towards Quantifying Resources and Eco-Efficiency, Envtl. Sci. & Technol. 42(7):2624–2630, 10.1021/es702249v, http://pubs.acs.org/cgibin/ sample.cgi/esthag/2008/42/i07/pdf/es702249v.pdf?isMac=793670.
79 The results are summarized for the world at www.vattenfall.com/www/ccc/ccc/577730downl/index.jsp and for the
80 This is as true of nuclear heat for thermolysis of water as of nuclear electricity for electrolysis: A.B. Lovins, “Twenty Hydrogen Myths,” 2003, www.rmi.org/images/other/Energy/E03- 05_20HydrogenMyths.pdf.
to be continued…
Courtesy: Rocky Mountain Institute (Ambio Nov 08 preprint, dr 18, 27 May 2008, DRAFT subject to further peer review/editing)
NEWS BRIEF
NATIONAL
OIL & GAS
Upstream
RIL halts oil production from KG-basin
December 15, 2008. Reliance Industries (RIL) has reportedly shut crude oil production from its Krishna Godavari basin D6 fields after a pipe rupture. The company was producing about 10,000 barrels per day of oil and the plant will remain shut for about three weeks.
On December 9 there was a rupture in a short pipe spool connected to the flare header in the FPSO (Floating Production, Storage & Offloading) operating in the field of D6 due to which an emergency shutdown of the production system at the FPSO was taken. The company's project partners Aker and DNV,
Reliance expects the production operations will remain suspended until the investigations are complete and recommended corrective actions are implemented.
ONGC, IOC join hands for exploration, marketing
December 12, 2008. Oil and Natural Gas Corporation Ltd (ONGC) and Indian Oil Corporation Ltd (IOC) have joined hands for mutual co-operation in the fields of oil and gas exploration, production, and marketing. ONGC said that the two entities have inked a memorandum of understanding (MoU) on December 11.
The MoU envisages ONGC supporting IOC in exploration under the New Exploration Licensing Policy (NELP), while IOC will extend support to ONGC for marketing its aviation turbine fuel (ATF). The two companies will jointly forge strategies for marketing of natural gas produced by ONGC. The MoU also incorporates IOC supplying diesel to ONGC for meeting latter’s operational requirements.
The umbrella understanding, which also includes finalisation of the long-pending crude oil supply agreement (COSA), will facilitate development of mutually beneficial agreements in the identified areas of co-operation and provide a platform to resolve commercial issues between the two.
Saudi Aramco, KPP in talks with HPCL for Vizag project
December 16, 2008.
The negotiations are at a standstill because of certain conditionalities put by both Saudi Aramco and KPC. While Saudi Aramco has sought a minimum of 30 per cent stake in the 15 million tonne (mt) refinery project, KPC is insisting on being the sole crude supplier and output being sold locally. Both the conditions are unacceptable to HPCL. State-run firms and private investors were to hold 49 per cent stake apiece in the five-way alliance project.
So, HPCL, gas utility GAIL and Oil India Ltd were to hold 49 per cent while Mittal Investment Sarl and French energy giant Total were to hold an equivalent stake. The remaining two per cent was to be offered to financial institution like SBI Caps. It was difficult to accommodate Saudi Aramco's request as Total, which is most keen on the project and is doing pre-feasibility study, would not like to give out majority share to the Saudi firm.
Similarly, it would be difficult for the project not to export the fuel it makes as sought by KPC which is building a refinery at home to cater to the demand in the region. Mittal put its investment in the project on hold due to global economic slowdown and HPCL and Total are likely to make an investment decision in March 2009.
Chevron to decide RPL deal by January
December 15, 2008. Chevron will take a final decision by the end of January 2009 on buying a 24% stake in Reliance Petroleum (RPL) and hold on to the 5% it already has in the company. Chevron, which had bought a 5% stake in RPL two-and-a-half years ago, is yet to sign a crude supply and product off-take agreement with RIL.
A slowdown in demand for refined petroleum products in key markets such as US and
According to the agreement between the companies, Chevron has time till June to buy an additional 24% stake in RPL at market price, or sell its existing 5% stake to RIL at a price of Rs 60 a share.
MRPL auguments refining capacity from 9.6mmtpa to 15 mmtpa
December 11, 2008. Mangalore Refinery & Petrochemicals Limited (MRPL) is augmenting its refining capacity from 9.6 million metric tonne per annum (mmtpa) to 15 mmtpa with cutting edge technologies incorporated in the process to get the maximum value from the hydrocarbon molecule. Preparatory work has been on for sometime now and the mandatory approvals have since been secured, process licensors appointed and work awarded for execution of PFCCU and SRU. Engineers India Ltd is the Project Management Consultant.
RPL to start
December 10, 2008. Reliance Petroleum Ltd. may fully start its 580,000 barrels per day only-for-exports refinery at
RPL's contractual commitment was to start production by end 2008 which it is sticking to. It had never committed to fully commission the unit by that time. Currently, pre-commissioning activities at the unit are underway and checks were being carried out. The crude distillation unit (CDU) may be ready to receive crude oil by end of third week of December. CDU is the front end of a refinery which converts crude oil into various products like naphtha, kerosene, diesel and petrol.
Transportation / Trade
Fertiliser, power firms drive up naphtha usage as prices fall
December 14, 2008. After being out in the cold, naphtha again seems to be back in the reckoning as a viable feedstock for players in the power and fertiliser sectors. With sharp decline in its prices, producers feel that the product is poised for significant growth in the coming months. This is despite the fact that the petrochemical sector, where naphtha is normally used as a feedstock, is going through a downswing.
A litre of naphtha currently costs Rs 20 (down more than half from its peak). In the international market, too, naphtha prices have almost come down to spot prices of liquefied natural gas (LNG) between $7 and $7.5 per million British thermal unit. At Rs 34 a litre (Chennai prices), diesel is almost Rs 14 higher than current naphtha prices. Fertiliser users have already started switching to naphtha, while power sector players, having gas stations with dual firing, are also moving to the cheaper feedstock.
The cost of naphtha has dropped to its lowest since February 2007 and the rupee has fallen by over 15 per cent against the dollar since August, prompting users to switch to the domestically produced liquid fuel than imported LNG. Naphtha consumption saw a growth of 2.3 per cent (0.79 mt) in November as against the same month last year. The cumulative growth for April-November has been 0.7 per cent (5.8 mt).
As opposed to this, LNG sales in November have seen a decline of almost 15 per cent to 0.6 mt (0.7 mt). In 2007-08, naphtha sales had come down by nearly 15 per cent to 8.8 mt, largely replaced by LNG, the consumption of which grew by 28.9 per cent. Diesel, which has significant usage in the transport sector, saw a growth of 8.8 per cent year-on-year in November at 4.5 mt and a cumulative growth (April-November) of 10.7 per cent.
While naphtha may have become cheaper, power units, especially smaller ones, are still cautious in investing in naphtha infrastructure. This is mainly because of the fluctuations in naphtha price trends and also the need for investment in separate storage facilities for storing the product. The urea production units of fertiliser companies such as Southern Petrochemical Industries Corporation Ltd and Fertilisers and Chemicals Travancore Ltd, which were closed mainly on account of viability issues pertaining to the high cost of naphtha, could be up for revival measures.
HPCL Kolkata gas supply plan hits hurdle
December 11, 2008. Hindustan Petroleum Corporation Ltd’s (HPCL) plans to enter the city gas distribution in Kolkata through acquisition of controlling stake in State government controlled Greater Calcutta Gas Supply Company (GCGSC) and Coal India Ltd’s Dankuni Coal Complex (DCC), has hit the valuation hurdle. Both DCC and GCGSC are loss-making.
GCGSC supplies piped coal gas manufactured by CIL at Dankuni in the industrial areas of the twin city of
Limited industrial use and high production and distribution cost of the gas has made the operations of both the Dankuni Coal Complex and GCGSC unviable. HPCL wanted a majority stake in both the companies. While GCGSC would have offered the gas distribution infrastructure, DCC would have served as a steady in-house source in the natural gas starved region. In future, the company may have blended coal gas with other emerging sources like coal bed methane (CBM) or natural gas or LNG.
While on paper both CIL and the State government found the HPCL proposal encouraging, in reality the government and HPCL widely differed over the valuation of GCGSC. While HPCL valued the company around Rs. 40 crore, government felt the valuation should be in excess of Rs 70 crore.
To resolve the differences, GCGSC has floated a global tender seeking an independent valuer. Though discussions progressed substantially with CIL over the acquisition of controlling stake in Dankuni coal complex, the deal may not be firmed up if HPCL finds GCGSC to costly to acquire. DCC is valued at Rs 91 crore.
MCX posts record volume in crude
December 11, 2008. Aided by the volatile crude oil prices, MCX posted a record volume of 16.68 mn barrels. The total turnover was Rs 1,266 crore. The previous record was of 14.78 mn barrels registered on December 2, 2008. Average open interest in November was 1.60 mn barrels against 1 mn barrel in October. Open interest was 2.80 mn on December 10.
Crude oil for December delivery hit a high of Rs 2,229 a barrel and low of Rs 2,115 a barrel before ending the day at Rs 2,211 a barrel against the previous close of Rs 2,203, registering a gain of Rs 8 during the first of the trading session. The January contract closed was up Rs 17 at Rs 2,354, while the contract for February delivery rose by Rs 9 to Rs 2,469 amid volatile trading. Crude oil prices in
OVL submits open offer for Imperial Energy
December 10, 2008. ONGC's overseas arm ONGC Videsh would make cash offer to acquire Imperial Energy at the agreed price of 1,250 pence-a-share after getting the nod of Cabinet committee on economic affairs (CCEA). OVL would require $2.6 bn to acquire the LSE-listed Imperial Energy. The Imperial Energy stock rose as much as 20% to 1,024 pence, putting the valuation of the company at $1.9 bn.
Due to falling oil prices and global meltdown, earlier, there was uncertainty about OVL's bid to acquire Imperial. Oil prices were hovering at $140 per barrel when ONGC had agreed to acquire Imperial Energy for $2.6 bn in July. A steep fall in oil prices and depreciation of the rupee against the dollar has taken sheen out of the proposed purchase.
IOC pact with Adani Energy for city gas distribution
December 10, 2008. Indian Oil Corporation (IOC) and Adani Energy Ltd, a subsidiary of Adani Group signed a MoU for setting up 50:50 city gas distribution (CGD) JV. CGD includes supply of compressed natural gas as auto fuel and piped natural gas for domestic, commercial and industrial use.
The JV will undertake the CGD in Uttar Pradesh, Haryana, Rajasthan,
Policy / Performance
Petrol, diesel prices may go down further
December 16, 2008. Government dropped hints that petrol and diesel prices may be cut further if the downward slide in international crude prices continues. Government earlier this month cut petrol price by Rs 5 a litre and diesel by Rs 2 per litre as crude oil prices dipped from an all-time high of $147 a barrel in July to under $45 a barrel.
Even after the price cut, public sector oil firms were making a profit of Rs 9.98 on sale of every litre of petrol and Rs 1.03 per litre on diesel. The further softening in global oil prices has seen these profits widen to Rs 11.48 per litre on petrol and Rs 2.92 a litre on diesel. The oil companies, however, continue to lose Rs 17.26 per litre on PDS kerosene and Rs 148.38 per domestic LPG cylinder.
Indian Oil, Bharat Petroleum and Hindustan Petroleum are together projected to lose Rs 111,500 crore in revenues this fiscal on fuel sales. Further reduction in the prices of petrol and diesel had not been found feasible (on December 6) in view of the continuing under-recoveries (losses) on sale of PDS kerosene and domestic LPG.
Government may move court to allow RIL 3rd party gas sales
December 15, 2008. Government may reportedly move to the Bombay High Court requesting it to remove an interim stay order that restrained Reliance Industries from selling gas from the Krishna-Godavari (K-G) basin to companies other than Reliance Natural Resources Ltd (RNRL) and NTPC, customers that had signed contracts for the fuel.
The government will file an application in the Bombay High Court by the end of December or early January. RIL on its part has already appealed against the order. The court’s interim order in May last year had directed RIL not to create third party interest for the disputed volume of 40 mscmd of gas from the K-G basin.
The move to get the interim order vacated comes just a day after the government withdrew its affidavit that had made it a party to the case being fought by RIL and RNRL in the Bombay High Court, saying it would expedite the two-year old case.
Reliance denied permission to export LPG
December 12, 2008. The government has declined Reliance Petroleum permission to export LPG from its under-construction only-for-exports refinery at
Petroleum Ministry declined RPL's request citing prevailing LPG deficit in the country. RPL, in which
Further, an additional 5,000 tons a day of LPG was sought to be exported after four months from start till all major units are commissioned which may take a period of over 3 months. Petroleum Ministry, wants RPL to sell the fuel to state-run retailers to meet domestic demand.
Reliance Industries' existing unit, which was converted into an only-for-export unit last year, too is not allowed to export LPG. All other products from the refinery as well as the new unit can be shipped to markets overseas.
‘Global oil prices have decisive role in domestic pricing’: Deora
December 16, 2008. According to Petroleum Minister Murli Deora, International oil prices have a decisive role in the domestic pricing, as
International prices have come down since August and the average price of Indian Basket of crude oil during November was $50.91 per barrel and the average price during 2008-09 (up to December 10) was $100.34 per barrel. He also emphasized that the benefit of softening of international oil prices has been partly offset by the recent depreciation of the rupee by around 25%.
Murli Deora said that as an interim measure, the Government has reduced the prices of Petrol and Diesel by Rs. 5/- per litre and Rs. 2/- per litre respectively at
However, based on the Refinery Gate Price (RGP) computed by the Indian Oil Corporation, for the first fortnight of December, 2008, the likely retail selling prices at
The Public Sector Oil Marketing Companies (OMCs), namely, Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPC) and Hindustan Petroleum Corporation (HPC) have declared combined losses of Rs. 144.31 bn during the first six months of 2008-09. Their total under-recoveries on the sale of sensitive petroleum products are projected to be Rs 1103.81 bn during 2008-09.
Their combined borrowings at the end of November 2008 stood at Rs 1150 bn with an interest burden of Rs 81 bn during 2008-09. He added that the financial health of the OMCs needs to be protected for ensuring the energy security of the country
India still needs Iran gas link via Pakistan
December 10, 2008.
As per the joint venture set up by the Indian government to import liquefied natural gas, security concerns rather than discussions over price were the main obstacle facing the $7.6 bn project. The joint venture view that Indian demand for LNG would fall sharply in 2009-2010, partly because of the economic slowdown but also because of rising domestic gas production and competition from other fuels.
It also view that India is going to be a very soft market for LNG and that demand for the fuel could rise from 2011 and that the economic slowdown was less important than rising India gas output. If the problems over security are resolved soon, work on the Iran-India pipeline may start next year and could be finished by 2012.
The pipeline is expected to initially transport 60 mcm of gas (2.2 bcf) daily to
POWER
Generation
Power-generation growth a dismal 2.7 pc for Apr-Oct
December 16, 2008. While the lack of credit may have stalled the progress of some of the major power projects in the country, the existing ones have also failed to perform this year. The total growth achieved by the country in power generation between April-October 2008 is a dismally low 2.74 per cent.
Even though the country was supposed to increase its hydro and nuclear power generation in the current fiscal the two have actually gone down. Thermal has shown growth but not met the projected growth target of 6.2 per cent. Hydro power has shown a negative 8.36 per cent growth between April-October this year vis-à-vis the corresponding period last year.
Even though nuclear power does not contribute significantly towards the country's power needs, it too has seen negative growth of 11.05 per cent in the period. As per the Ministry of Power, the reason being is low water inflows for hydro and shortage of nuclear fuel.
As far as thermal power generation is concerned, the Government managed a growth of only 6.02 per cent against an achievable 6.2 per cent. The major reason for this is the delay in achieving commercial operation of new thermal generating units synchronised during 2006-07 and 2007-08.
HPGCL achieves record generation
December 13, 2008. The Haryana Power Generation Corporation Ltd. (HPGCL) continues its trend of breaking records by achieving a record generation of 479.94 Lakh Units (1 Unit = 1 KWh) of electricity at a Plant Load Factor (PLF) of 92.74 per cent in a single day, Dec 12, which is the highest ever daily generation since its formation.
HPGCL had bettered its own record of power generation of 462.59 Lakh Units at a PLF of 89.42 per cent achieved on Dec 10, 2008 by generating around 17.35 lakh more units of electricity in a single day. Panipat Thermal Power Station-1 (PTPS-1) comprises four Units of 110 MW each and Panipat Thermal Power Station-2 (PTPS-2) comprises two 210 MW Units and two 250 MW Units.
The combined generating capacity of both the Thermal Power Stations at Panipat is 1360 MW. PTPS-2 has been giving excellent performance and has achieved a PLF of 102.35 per cent during the month of November 2008, which is the highest ever generation in a single month since the commissioning of the Plant. On December 12, the PTPS-2 generated 227.67 Lakh Units of electricity at a PLF of 103.11 per cent.
German expertise for thermal plants’ upgrade
December 13, 2008. Thermal power plants in
Evonik has studied four thermal power plants which were more than 25 years old in Tamil Nadu. The next step would be to identify the areas for upgrading equipment and training personnel. The study indicates that through selective investments, significant improvements could be achieved.
Thermal power plants need to continuously focus on efficiency not just for cost reduction and increasing power availability but also to control pollution. A one per cent improvement in efficiency would mean a saving of over 11 mt of coal in
The company was in discussions with the electricity boards in West Bengal, Punjab,
370 MW Vemagiri goes on stream with diverted gas
December 10, 2008. GMR Infrastructure Ltd’s Vemagiri Power Generation Ltd (VPGL) with installed capacity of 370 MW has commenced power generation with gas diverted from other plants in Andhra Pradesh. Vemagiri is a 100 per cent subsidiary company of the wholly-owned subsidiary GMR Energy Ltd, which in turn is a subsidiary of GMR Infrastructure Ltd.
The 370 MW of gas-fired plant is located at Vemagiri village in Kadiam mandal of
Based on the arrangement made by AP Transco, VPGL will operate on this diverted gas at a plant load factor of 60 per cent till May 31, 2009. Meanwhile, Reliance Industries KG basin gas is also expected to be available in the first quarter of calendar year 2009. The Andhra Pradesh Government had earlier this year decided to power some of the new gas-based plants Vemagiri, Gauthami, GVK extension with natural gas and manage existing gas plants with naphtha. Following this development, Lanco Kondapalli, GVK Jegurupadu and Spectrum will divert the natural gas and run their plants with naphtha.
This is because these projects have been designed to run on different fuels. With the price of naphtha coming down in the last few months, the cost of generation of one unit has come down from about Rs 12 a unit to Rs 9 last month and to about Rs 7 now. This is an interim arrangement till gas flows from KG basin.
Transmission / Distribution / Trade
Joint venture for power exchange incorporated
December 12, 2008. NTPC Ltd, NHPC Ltd, Power Finance Corporation and Tata Consultancy Services have incorporated their joint venture company to operate a nationwide power exchange. NTPC and NHPC will own 16.67 per cent each in the newly-formed company, National Power Exchange Ltd, while Power Finance will own 16.66 per cent and TCS will have a 50 per cent stake.
Earlier this year, the four companies had entered into a joint venture to set up and operate a national-level power exchange. The exchange would also ensure clearing of all trades in an efficient manner, with access to all the players in the power market.
Government expects atomic energy to produce 10 pc of its power by 2030
December 16, 2008. The government expects nuclear power to generate as much as 10% of its electricity by 2030 to meet rising energy requirements.
Nuclear Power Corporation of India Ltd plans to buy equipment from General Electric Co., Areva SA, Rosatom Corp. and Toshiba Corp.
Concern over thermal plants along Andhra coast
December 16, 2008. According to the Forum for Sustainable Development and the Forum for Better Visakha, the Andhra Pradesh Government is giving permission indiscriminately for private companies to set up thermal power plants in the State, especially along the coast, unmindful of the likely ecological damage and without any precautions whatsoever.
As per the forums, during recent months the State Government had granted large stretches of land, especially in ecologically fragile zones along the coast, to private companies for setting up thermal plants. According to the Forum for Sustainable Development, the CRZ norms and all other norms are being given the go-by and the State Government is not laying down any stipulations for safeguarding environment.
The forum is of the view that there is no necessity for such hurry and there are better, and ecologically desirable, alternatives. It also said that the 4,000-MW power project of the Reliance group at Krishnapatnam in
Both forums said thermal power plants should not be allowed on the coast and elsewhere too they should be permitted, only with due precautions and only when they were absolutely necessary. They also said that the State Government is not encouraging solar power and other renewable sources of power and resorting to dirty power such as thermal power and private companies are making a quick buck.
Both forums emphasized that these private companies are grabbing valuable chunks of land along the coast. They also sought greater teeth to the AP Pollution Control Board and they urged the State to reconsider the move on thermal plants.
Government forms committee for fast execution of power projects
December 15, 2008. The government has constituted a monitoring committee, to be headed by Power Secretary Anil Razdan, to expedite the commissioning of power projects for the Commonwealth Games. The government has identified five projects that would supply power for the Commonwealth Games in 2010.
The projects include National Capital Thermal Power Project at Dadri, Indira Gandhi Super Thermal Power Project at Jhajjar, Mejia Thermal Power Station and Durgapur Steel Thermal Power Plant in
All these projects are expected to be commissioned as scheduled, though there are minor delays of four-five months at the initial stages of construction activities in case of
Meanwhile, the government also said that growth in power generation is falling short of the rate of growth in demand for electricity, due to inadequate capacity addition, non-availability of coal, gas and nuclear fuel. Steps are being taken to improve the power supply position in the country, including augmentation of generating capacity, development of a number of ultra mega power projects of 4,000 MW capacity each and taking up new hydro-power projects in
Mega Power Policy under review
December 15, 2008. The Centre is considering a proposal to amend the Mega Power Policy. According to the Power Minister, Mr Sushilkumar Shinde, a proposal to review the Mega Power Policy, deleting the condition of privatisation of electricity distribution in cities, is under consideration.
The move comes in the wake of intense pressure from a bevy of States on the issue. One of the conditions for waiver of duty on imported equipment for mega power projects, under the Mega Power Policy, was that the State that purchases the electricity from these projects should privatise distribution in all its major cities.
According to the Power Ministry, privatisation of electricity distribution in cities with a population of more than one million, as a precondition for allocation of power to States from mega power projects, was stipulated in the Policy to encourage private investment in the sector.
Government may cancel coal block allotments to private sector
December 12, 2008. According to the Minister of State for Coal, Mr Santosh Bagrodia, the Centre may cancel the allotments of coal blocks made to private sector companies for captive mines if they are not developed within in a specific time frame. Though more than 190 blocks have been allotted development work has started only in very few of them.
The Minister said that show-cause notices have been issued to 20 such companies for going slow and now they have given time bound commitments for developing their mines. The Government was planning to offer 70 more coal blocks with reserves of about 20 billion tonnes, but whether there will be a direct allocation or a competitive bidding is yet to be decided.
The amendment to the Minerals and Metals (Development & Regulation) Act to introduce competitive bidding for captive coal blocks is currently being vetted by the Ministry of Law and will soon be sent for consideration by the Union Cabinet.
INTERNATIONAL
OIL & GAS
Upstream
Sibir, Shell break production record at Western Siberian fields
December 16, 2008. Sibir announced that the equity production rate from its upstream units has exceeded 80,000 barrels of oil 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 146,900 bopd from the Salym group of fields in
The new SPD production rate takes Sibir’s 50% share at Salym to over 73,450 bopd which, combined with production from its subsidiary Magma, brings Sibir’s total daily equity production rate to over 80,000 bopd. The 80,000 bopd production rate surpasses Sibir’s own ambitious target production rate for year-end 2008.
InterOil turns on taps at 2 more Mirador wells
December 16, 2008. InterOil has just completed two more successful production wells in
InterOil has drilled two more production wells in the Mirador area of Block III in
Heritage unlocks black gold, gas at
December 16, 2008. Heritage Oil has announced a significant new oil discovery with the Buffalo-1 exploration well in Block 1,
The
The Buffalo-1 well is now being suspended as a potential future production well. The gross oil and gas columns seen in the well are 75 meters and 48 meters respectively. Based on seismic interpretation, further exploration and appraisal drilling could prove up a very substantial accumulation of oil, giving
Buffalo is a major discovery and continues the 100% success rate in the
Sulige gas field's daily output exceeds 20 mcm
December 15, 2008. CNPC noted that on December 10, the Sulige gas field produced 20 million cubic meter (mcm) of natural gas, meaning that this uncompartmentalized gas field, which has the largest proven gas reserve scale in
According to the development program of the Changqing Oilfield, in the year 2015, Sulige will reach a production scale of 35 bcm per annum, accounting for 70% of the total gas output of Changqing. In 2008, there are totally 1,145 wells been drilled, 21 gathering stations been built, and a production capacity of 3.74 bcm been constructed in the Sulige gas field.
The second and the third gas processing plant, with annual capacity of five and three billion cubic meters respectively, have been constructed and put into commercial production.
Kuwaiti company makes huge gas find in
December 15, 2008. Kuwaiti oil and gas producer Aref Energy has found close to 5 trillion cubic feet (tcf) of recoverable natural gas in south-central
Heritage discovers more oil at
December 11, 2008. Heritage has discovered oil at the Kingfisher-3 well, Block 3A,
Kingfisher-3 well encountered oil in all three reservoir intervals with a gross hydrocarbon bearing interval of 110 meters and net oil pay of up to 40 meters. Kingfisher-3 was drilled to evaluate the south-west portion of the Kingfisher structure and was drilled down dip on the flank of the structure. Based on pressure data, the three intervals appear to be in communication with the three reservoir intervals previously production tested in the Kingfisher-1A and Kingfisher-2 wells at 9,773 bopd and 14,364 bopd respectively.
It is planned to suspend the Kingfisher-3A development well as a third producer, in addition to the previously drilled and suspended Kingfisher-1A and Kingfisher-2 wells. It is planned to drill the Kingfisher-3A sidetrack to an anticipated measured depth of approximately 2,860 meters, which is expected to be completed by late January or early February 2009.
Heritage is the Operator of Block 3A and Block 1 in
Planned Drilling Activity in 2008
|
Country |
Block |
Prospect |
Operated Interest |
Estimated Spud Date/Status |
|
Uganda |
Block 1 |
Buffalo |
50% |
Ongoing |
|
Uganda |
Block 1 |
Giraffe |
50% |
December 2008 |
|
Uganda |
Block 3A |
Kingfisher-3/3A |
50% |
Being drilled |
|
Kurdistan Region of |
Miran |
Miran West-1 |
100% |
December 2008 |
Norse confirms Petrobras' discovery at Copaiba well
December 11, 2008. Norse Energy, in partnership with Petrobras (Operator), Queiroz Galvao Oil & Gas and
The well confirmed the presence of oil bearing sandstone reservoir with 21% porosity, without identifying any oil water contact in this interval. In accordance with the established Concession Agreement, the extension and commerciality of the discovery will be appraised in an 'Evaluation Plan' to be submitted to ANP.
Russia's oil company interested in developing
December 10, 2008.
Although the Iranian license holder for the field, National Iranian Oil Company (NIOC), will enjoy a joint project with Gazprom Neft to develop the fields, the Russian crude oil producer will have to provide 100 percent of investment in the project.
Downstream
Shell may extend Pernis unit shutdown
December 16, 2008. Royal Dutch Shell is considering an extension of the shutdown of a gasoline-making unit at its advanced Dutch Pernis refinery until the end of January due to weak demand. Economic run cuts at complex plants like Pernis,
If Shell decides on the move, some analysts say it could be a sign that such actions will spread across
In
The potential cuts would be meant to support gasoline's crack, or relative value, to crude and overall refining margins, which have been pressured by falls in cracks of the main middle distillate products such as gas oil for heating and diesel for vehicles.
CNPC mulls building refinery in central Henan
December 15, 2008. CNPC, parent of PetroChina mulls building a 10 million tonne per annum (mtpa) refinery in central
CNPC has made a survey on land usage, power supply and environmental protection in Shangqiu, city in the east of
One of problems ahead of CNPC’s refining plan, however, is lack of oil source that also holds back Sinopec from building large-scaled refineries in central
Henan province has two big refineries in
CNPC’s Lanzhou-Zhengzhou-Changsha is capable of transport 8 mtpa of oil products from western
Caltex
December 12, 2008. Caltex Australia Ltd,
The supply of diesel is approximately a third of the refinery's capacity. Caltex is 50 percent owned by
Transportation / Trade
Gazprom export agrees to pipeline repair schedule
December 16, 2008. Russian gas export monopoly Gazprom has agreed its pipeline repair schedule for European exports for next year. Gazprom Export and representatives of European gas transport companies have agreed on a syncronised schedule of the 2009 planned maintenance works on the major Uzhgorod and Yamal export pipelines.
The repair work is for gas transport systems with a total length of about 8,000 kilometres across
Tesoro announces
December 16, 2008. Tesoro Corp. has entered into a throughput agreement that will allow the company to transport crude oil in a pipeline owned by Petroterminal de Panama (PTP). PTP has announced a project that will reverse the flow of its 81-mile trans-Panamanian pipeline. After the completion of the project, Tesoro has agreed to ship 107,000 barrels-per-day of crude through the pipeline under a seven-year agreement.
PTP expects the pipeline reversal project to be ready for start-up during the third quarter of 2009. The throughput agreement will allow Tesoro to economically deliver crude oils produced in Africa, the Atlantic region of South America and the North Sea to the company's five Pacific Rim waterborne refineries. Tesoro leases existing tankage from PTP but PTP has also agreed to build new dedicated tanks for Tesoro on both sides of the
Tesoro plans to use the pipeline and tanks to blend and distribute different grades of crude oils for its own use. Tesoro Corporation, a Fortune 150 Company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates seven refineries in the western
Tesoro's retail-marketing system includes over 880 branded retail stations, of which more than 390 are company owned under the Tesoro, Shell, Mirastar and USA Gasoline brands.
Acergy snags $250 mn gas pipeline in Angola
December 15, 2008. Acergy has announced the award from Angola LNG Limited of a contract for the development of the nearshore/onshore segment of the pipeline network required for the transportation of gas from Blocks 0, 14, 15, 17 and 18 to Angola LNG's plant in
The contract awarded to a consortium of Acergy
It also includes the shore approach and above water tie-ins for these pipelines, together with the offshore crossing and hydrotesting. Engineering will commence with immediate effect with offshore installation scheduled to commence in the fourth quarter of 2009, using Acergy Hawk, Acergy Legend and Acergy Polaris.
Pemex seeks bids for natural gas pipelines
December 15, 2008. Mexican state oil monopoly Petroleos Mexicanos’s seeking bids for the construction of two natural gas pipelines to transport gas in central
The pipelines are expected to transport about 400 mcf a day of natural gas, and that the project guarantees a minimum volume for the pipeline operators. The pipelines, expected to go into operation in 2011, will also allow Pemex to supply fuel to power plants in central Mexico operated by state electric utility Comision Federal de Electricidad.
Bids are expected by mid-April, with the contracts to be awarded in May. Natural gas transportation and distribution are among the areas of
Gazprom inks 25-year gas supply deal with
December 15, 2008. On December 12-13, as part of the cooperation with GDF SUEZ, Russia oil major Gazprom’s delegation participated in
More than 30 years have passed already from the moment of signing first contracts for Russian gas supply between Gazprom and Gaz de France. Its cooperation, in addition to gas supplies, is intensively developing in such areas as energy saving, UGS facilities construction & operation and LNG marketing.
Besides the existing export contracts extended until 2030, Gazprom and GDF SUEZ have reached an agreement to supply additional gas volumes via the Nord Stream gas pipeline. Strengthening the long-term partnership between Gazprom and GDF SUEZ will promote the security of gas supply to European consumers in the long term
Tunisia's Sotrapil scraps pipeline project
December 11, 2008. Tunisian oil and gas pipeline operator Sotrapil cancelled a fuel pipeline construction project that was due to link the
The 185 km (115 mile) pipeline, designed to carry refined fuel products between storage facilities in the coastal town of
Sotrapil also aimed to cancel capital increases approved by shareholders in 2007 and 2008 and replace them with a smaller share issue that would boost its capital to 16.359 mn dinars ($12 mn) from 15.730 mn dinars. Sotrapil's net profit was 830 million dinars in the first half of 2008, down from 1.0 billion dinars a year earlier.
Policy / Performance
Brazil government likely to cancel 8th round oil auction
December 16, 2008. The Brazilian government likely will cancel the suspended eighth-round auction of oil and natural concessions. According to a report, the government likely will transfer the blocks up for bids in the eighth-round auction to a new regulatory model currently under discussion. Possible changes to
The eighth-round auction was suspended in November 2006 after a local court granted an injunction halting the auction. Before the auction was halted, 38 of the 284 oil and gas exploration and production blocks up for bid were auctioned off.
While government has maintained that previous contracts would be honored, the winning eighth-round bids can't be considered official until a contract is signed with
Brazilian state-run energy giant Petroleo Brasileiro, or Petrobras, submitted winning bids on 20 of the 38 auctioned blocks. The winning bids represented a signing bonus of 588 mn Brazilian reals ($247 mn). The eighth round auction included blocks in
Flying V targets
December 15, 2008. Independent oil firm Flying V is negotiating with the government of
At the moment, lubricants under the brand name Citgo is already available in the country and they are also looking forward to bring in more petroleum products to the
They have a total of 14,000 gasoline stations in US and eight refineries. But when Chavez took over, other markets for their petroleum products have been opened up.
China confirms PetroChina 100 bcm gas find in Xinjiang
December 15, 2008.
PetroChina expects the field to produce 1 bcm of gas a year for at least 50 years and may increase its annual output. There is no information about when the company will start production in the field. The basin has possible gas reserves of 2.5 tcm. PetroChina is expected to produce 3.38 bcm of gas in the Junggar basin this year and raise it to 5 bcm by 2010.
NZ opens up offshore oil, gas exploration in East Cape and Northland
December 10, 2008. Energy and Resources Ministry of New Zealand announced the opening of bidding for new petroleum exploration permits across two large offshore areas, the Raukumara (
Two extensive blocks are being offered for bidding across Raukumara and six blocks across Northland, with a combined total area of over 66,000 square kilometers. A number of the major oil companies have already indicated interest in the
The current block offers keep up the momentum generated by previous block offer releases such as offshore Taranaki to realize gas reserves for the country’s domestic market and to discover potentially large oil and gas reserves in its deep water basins.
The government is maintaining exploration momentum in
POWER
Middle East requires $500 bn investments in power infrastructure
December 16, 2008. According to a research study, the
The rapid economic and population growth is putting pressure on regional utilities to add power generation capacity to avoid increasing supply demand imbalances, power outages and soaring electricity prices. The regional power demand is also fueled by major tourist and industrial developments as well as economic city projects like in
At only four per cent annually, growth of power generation capacity is lagging behind the region's economic growth rate of seven per cent. Growing demographics and wealth in the
A further challenge is how to calculate the necessary energy efficiency increase, as utility companies in the
Construction of $1.1 bn Power plant to start mid next year in
December 15, 2008. Aboitiz Power Corp. and Taiwan Cogeneration Corp. (TCC) will start construction of their $1.1 bn power plant in
Aboitiz and TCC are now working on the contract for a 50-50 partnership for the RP Energy Redondo Peninsula Energy Inc. project in
The target is to secure $200 mn in loans from Philippine banks and another $200 mn from the financial institutions in
Libya-Russia joint venture to build power plant in
December 14, 2008. According to
Construction of the facilities will be financed by Libya African Investment Portfolio, which will manage $6.73 bn for the projects in total. Top priority projects for Laptechno-Power will be the construction of a 1250 km electric transmission line with a capacity of 400 kW in
Technopromexport builds hydroelectric, thermal, geothermal and diesel power plants, and power transmission lines in 50 countries.
Transmission / Distribution / Trade
Mine exports slashed by $30 bn
December 16, 2008. After crippling markets and bringing banks to their knees, the global economic meltdown will slash almost $30 bn from
The economic research agency made the biggest cuts to forecasts for
The suite of downgrades follows steep falls in commodity prices and the collapse in the oil price, which has slid from a high of $147 a barrel in July to just above $40 a barrel. Despite the slowdown,
Electricity down 11 pc, gas bills to fall by 22 pc
December 15, 2008. Both the NIE Energy and the Phoenix Gas confirmed price cuts in electricity and gas for hard-pressed householders. NIE Energy is to reduce its electricity tariffs by 10.8% while Phoenix Gas rates will be slashed by 22.1%.
However, despite the cuts, cash-strapped consumers will still be paying 35.5% more for their electricity than they were in June and 18% more for gas. NIE Energy will pass on the savings from January 1 to its 792,000 customers while Phoenix Gas’ 120,000 customers will benefit from the decrease from January 8.
The reduced tariffs are the result of lower wholesale gas and coal prices. Prior to the announcements the average NIE Energy bill was £585 per year meaning that from next month on average consumers will be £63 better off annually. Phoenix Gas customers who pay on average £686 over a 12-month period will make an annual saving of £151.60.
Stormont’s
Policy / Performance
Baguio to pay royalties for hydro plant in Philippines
December 15, 2008. The
City Administration had recommended the release of P367,070 to the Tuba government, representing its 1-percent share from the profits of four mini-hydro plants that were ordered built for the city in 1924.
Tuba is entitled to this share based on the provisions of the Local Government Code. The city government reacquired the 3.8 MW plants from the Baguio Water District (BWD) and the Hydroelectric Development Corp. (Hedcor) in 2006. These firms operated the plants for 20 years under a development lease agreement.
Bautista had decided to let the city engineers run the plants themselves, saying the facilities could help bring down the cost of
EPA drops plan to ease air rules in Washington
December 11, 2008. Six weeks before leaving office, the Bush administration is giving up on an eight-year effort to ease restrictions on pollution from coal-burning power plants, a key plank of its original energy agenda and one that put the president at odds with environmentalists his entire tenure in the White House.
President George W. Bush had hoped to make both changes to air pollution rules final before leaving office January 20. Amid a coal-fired power plant construction boom, the rules would have made it easier for energy companies to expand existing facilities and to erect power plants in areas of the country that meet air quality standards. But the Environmental Protection Agency (EPA) recently conceded that it didn't have enough time to complete the rules changes, which were undermined by a federal court decision earlier this year that scrapped a signature component of Bush's clean air policies.
The EPA will continue to advocate for the important health benefits the initiatives would have achieved. Environmentalists, however, said the decision would leave intact for the incoming Obama administration the strongest tools under the law for dealing with power plant pollution. The proposal would have changed how existing coal-fired power plants calculate emissions increases to determine whether they need to install pollution control equipment.
The Bush administration wanted to base the calculation on an hourly rate, rather than an annual average. Environmentalists and governors of Northeastern states said such a change would have resulted in more of the pollution that causes acid rain and smog problems in the region.
The second rule would have made easier for power plants to be built in areas with some of the cleanest air in the country by changing how states, the EPA and others assess how the new source would affect air quality. That proposal was opposed by the National Park Service and some the agency's own regional air quality experts.
Renewable Energy Trends
National
Regulator proposes tariff hike for wind power
December 16, 2008. New wind farms are likely to get a higher tariff for the power they produce. Tamil Nadu Electricity Regulatory Commission (TNERC) plans to revise the tariff to Rs 3.40 a unit from the prevailing Rs 2.90. In a consultative paper on the wind power scenario in Tamil Nadu, the regulatory commission has said the higher tariff would be applicable to units set up after the issue of the proposed order. It has sought the wind energy industry’s comments on the proposed revision and a range of conditions that would go with it.
The objective is to encourage wind power generation capacity in the context of the prevailing power shortage in the State and the need to add to the State’s generation capacity fast. Wind industry representatives have welcomed the proposal to hike the tariff. The proposal would encourage investments in wind energy, including independent power producers.
Though the industry has been demanding a tariff of Rs 3.90, the hike envisaged is a good move. The tariff revision order usually takes effect prospectively from the date of the new order, but it would help if the existing players are also supported with a higher tariff.
However, the new tariff should be applicable to the existing capacities, also as the quality of wind power is the same and they play a crucial role in energy security. Tamil Nadu has over 4,100 MW of wind power capacity more than 40 per cent of the wind power capacity in
TNERC has also highlighted the shortage of power prevailing in Tamil Nadu. The power generation capacity connected to the State’s grid is 10,122.55 MW, apart from the wind generation capacity, 451 MW of cogeneration with sugar mills and 104 MW of biomass power. There is a deficit of 1,500 MW against the peak demand of 9,500 MW. The deficit is likely to increase in the coming years since addition of power in through thermal plants would take three-four years.
Solar power at Rs 15 per Unit
December 16, 2008. After signing a power purchase agreement (PPA) with West Bengal State Electricity Distribution Company Ltd (WBSEDCL) for its 5 MW solar photovoltaic (PV) plant in Bankura, Astonfield Renewable Resources (ARR) aimed to build a solid waste to power plant at Dhapa in Kolkata.
Astonfield Solar Private Ltd (ASPL), a subsidiary of ARRL, signed the PPA with WBSEDCL at a tariff of Rs 15 per unit for the next 20 years. Of this, the state government would pay Rs 5 per unit of power while the rest would come from the Centre as a part of the subsidy scheme for solar power generating companies. The solar PV plant coming up over 26 acres would cost $21 mn and go onstream in October 2009.
It would produce 7 million units of power every year. The company was in the final stages of negotiations with the Kolkata Municipal Corporation (KMC) to develop a 54 MW solid waste to power plant at the city's waste disposal ground in Dhapa near the Eastern Metropolitan Bypass. It would employ direct combustion technology to generate power from the solid waste deposited at the site which is roughly around 3200 tons per day.
The project would require around 20 acres for the purpose out of the 186 hectare area at Dhapa for the plant. Eight technical proposals from bidders had been submitted for the project. ARRL planned to develop the plant on a build-own-operate basis with an investment of around $100 mn with 70:30 debt-equity ratio. The power generated from the project would be pumped into the grid and a PPA with the West Bengal State Electricity Board would be signed.
ONGC sets eyes on Gorai for power
December 15, 2008. The ONGC has evinced interest in setting up a power generation project at the Gorai dumping ground. The corporation has decided to take up the project, which will enable it to generate 3 to 4 MW of electricity per day from methane gas. The ONGC will install the plant free of cost before handing it over to the Brihanmumbai Municipal Corporation (BMC).
Forty wells have been dug up at the site to capture, treat and release methane gas emitted from garbage. The Gorai closure is expected to be completed by the year end. Project for closure of the ground will cost about Rs 50 crore. The ONGC wrote a letter to the BMC expressing its desire to install a power generation plant at the Gorai site. The project will be started by the company as a corporate social responsibility. The Brihanmumbai Electric Supply Transport (BEST) will maintain the project and sell the electricity through its distribution network.
‘Every State must have an integrated energy plan’: World
December 14, 2008. According to the World Institute of Sustainable Energy (WISE), a Pune-based not-for-profit organisation working in the renewable energy sector, every State must work out an integrated energy plan for the next 20-25 years, not just on how it is going to meet its electricity needs but also at the transportation sector.
The Institute is working on integrated energy planning for Karnataka, Rajasthan and
The study would look at all energy options, including bio-fuels for electricity generation. One area that the Institute would like States to look at seriously for power generation was solar. Although it might appear an expensive option now, large-scale projects would bring down the costs.
A criticism against solar projects was that it was water-intensive. However, new technologies – such as Dish Stirling engine technology – were emerging that did not require water.
An American company, Infinia Corporation that offers this technology had set up an office in
WISE has been at the forefront of pushing for a separate legislation for the renewable energy sector, including preparing a draft legislation after extensive consultations and discussions and building public opinion for a national law. The Ministry of New and Renewable Energy had constituted a technical committee to study the proposed legislation.
It had also appointed legal advisors. By early next year, the draft would be finalised and presented in Parliament. The proposed RE law would cover all aspects – hydrogen cells, bio-fuels, rural electrification, solar and wind. There were no conflicts with the Electricity Act. It is a comprehensive, futuristic legislation.
WISE had held extensive consultations, studied renewable energy legislations in other countries and documented over 15,000 papers before finalising the draft RE law. It had taken the help of the
Global
Grand Island
December 16, 2008.
The Elkhorn Ridge facility at
Once electrical generation begins, the 80 MW will be distributed like this: 40 MW for NPPD, 25 megawatts for Omaha Public Power District, 8 for the Municipal Energy Agency of Nebraska, 6 for Lincoln Electric System and 1 MW for Grand Island Utilities.
Grand Island's cost is about $27,000 upfront and about $160,000 a year (set to increase about 2.5 percent annually) for enough electricity to power about 293 homes. That equates to about $50 per megawatt hour a cost that is higher than traditional generation methods using coal and natural gas.
Grand Island was also an inaugural participant in the 1998 creation of the Springview wind farm a project largely financed through a grant from the Nebraska Department of Energy. The reliability of the turbines at Springview proved inefficient and the project was shut down in August 2007.
Suzlon revises payment schedule for Martifer’s stake in REpower
December 16, 2008. Suzlon Energy Ltd and the Martifer Group of
Suzlon was supposed to buy out Martifer stake by December 15. But it could not raise the funds and also had to abandon its Rs 1,800 crore rights issue due to market conditions. According to the new terms, Suzlon will pay Martifer approximately €65 mn by year end, €30 mn in April 2009, and final tranche of €175 mn in May 2009. Upon completion of this transaction, Suzlon will hold 91 per cent stake in REpower.
Wind farm deal to boost CPS Energy’s renewable-energy profile
December 15, 2008. CPS Energy has signed a 15-year agreement to purchase power from the new Papalote Creek wind farm, located in San Patricio County east of
The project is still under construction and is expected to come online in the fall of 2009. CPS Energy is ranked No. 1 in the amount of wind energy capacity among the nation’s municipally owned utilities. The additional energy from the wind farm will boost CPS Energy’s total renewable energy capacity to 703.7 MW and will move the company closer to achieving its goal of generating capacity from renewable resources equivalent to 20 percent of customers’ peak electric demand by 2020.
CPS Energy, the nation’s largest municipally owned energy company, serves more than 690,000 electric customers and almost 320,000 natural gas customers in and around
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