Energy News Monitor |Volume V, Issue 36

Sustainable Hydro Power Policy for Himalayan States

Shankar Sharma, Consultant to Electricity Industry

 

Synopsis

.N. Bahuguna Garhwal University, Srinagar, Uttarakhand had organized a symposium on 14-15 Feb. 2009 on “Hydroelectric Projects in Uttarakhand: Opportunities, challenges, and conflict resolution”. This article is based on the paper presented by the author in this symposium. In view of the vast similarities of geography and climate with other Himalayan states, the relevant issues have lot of similarities too.

The natural resources of Himalayas and its ecology are not only crucial for the Himalayan states, but very important for the whole country. These states seem to be keen in exploiting their vast hydro electricity potential for net revenue earning; but there are credible risks of upsetting the delicate and complex equation of ecological sub-systems of the nature. Additionally, the economic and social impact of a large number of dams cannot be ignored. Hence a holistic approach to all the relevant issues is crucial before hydro power policy is considered for net revenue earning in these states.

Key terms: Biodiversity; Sustainability, Global Warming, Hydro electric power, Dams, Cost V/S benefits analysis, Precautionary Principle, Equity, Societal interests

1.        Introduction

The unique position of Uttarakhand as a state with hilly terrain, snow clad mountains, glacier fed rivers, and 65% forest cover provides it with both opportunities and threats.  While it may appear that there is huge potential for exploiting its natural resources for net revenue earning, there are also credible risks of upsetting the delicate and complex equation of ecological sub-systems of the nature. Hence an objective study of all the issues surrounding a sustainable development model will be critical for the long term welfare of not only the people in the state, but also of other riparian states of rivers like Ganga.  The huge potential in the area of hydro electricity generation and the potential for revenue generation for the state through it should be carefully viewed in this context.

Uttarakhand as a separate geographical entity is in a unique position.  As the background paper to the symposium indicates it is a state with hilly terrains, snow clad mountains, many glacier fed rivers such as Ganga and Yamuna, and has more than 65% area under forest cover. It has only about 13% of its land for agriculture. Rest of the area of the state is snow covered. However, it has very rich water resources. It is a home of 238 glaciers spread over 735 km². The total annual rainwater received over the state is estimated to be more than 66,000 million litres spread over 100 days on an area of 53,484 km². Uttarakhand is also the source of many major rivers (Ganga, Yamuna, Sharada, RamGanga, etc.). Thus, the Uttarakhand is being called as a tower of freshwater resources of Asia.

The background paper to the symposium says that “… the basic purpose for the creation of the new state was to accelerate the economic development of the hill region for improving the living standard of the people. We cannot use the forest resources for commercial exploitation, as the Indian Forest Act and the National and global requirements do not allow for this. We have limitations for industrial development in the fragile mountain ecosystem of the state. Now, the only option available is to tap the vast water resources for power generation. It is a renewable and most convenient source of energy. ….. At the same time, we have unlimited challenges in terms of handling environmental, socio-cultural and economic issues in planning, development and construction of hydroelectric projects in Uttarakhand due to its sensitive ecology. Therefore, every care should be taken from the identification of sites to development and construction of hydroelectric projects in the state. There should be a holistic approach for sustainable development of the entire river valley watershed. Any issue unattended may open up Pandora’s box.”

As the background paper to the symposium has correctly stated there is a dire need to consider all the relevant issues of the state in an objective sense, and take a well considered decision on the issue of hydro electric policy for the state, especially as a net revenue earner.

In view of the fact that all the Himalayan states have similar geography, climate, natural resources, life style, economy etc. the issues relevant to hydro-electric power policy as a net revenue earner are also similar.  Hence the discussion of Uttarakhand in this context can provide a bird’s eye view of the relevant issues in all other states.

1.1     Uttarahkand’s Power scenario

Uttarakhand’s own demand for electricity provides an interesting scenario. The state’s own installed electricity generating capacity is about 1,760 MW including that of private sector, and the total available capacity, including the central sector share, is about 2,400 MW as at the beginning of year 2009. (Ref. table 1A).

Table 1(A): Available power capacity in Uttarakhand (MW)                                                                (as on 30.11.2008)

State Sector (all types of fuels)	1,358
Private Sector	400
Share in Central Sector projects of Northern Region	642
Total	2,400

Source: CEA website as on 03.1.2009

Table 1(B) Installed power capacity in Uttarakhand (MW)                                                                   (as on 30.11.2008)

State’s Own capacity
Hydro	1248
Thermal	Nil
Renewable	110
Private Sector (Hydro Only)	400
Central Sector Share	642
Total	2,400

 Source: CEA website as on 03.1.2009

Against this installed generating capacity, the state was able to meet a peak demand of 1,150 MW with a deficit of 4.2% during the year 2007-08. During the same period the deficit in annual energy demand met was 2.9%. Table 2 below indicates that in recent years the state had not much difficulty in meeting its annual energy demand, but faced some difficulty in meeting the peak hour demand. As compared to the total available capacity of about 2,400 MW, there should not have been any difficulty at all in meeting both the peak demand and annual energy of the state even after allowing for the national level inefficiency in power sector such as 30% T&D losses, 15-20 % of utilization losses, and deficiency in Demand Side Management (DSM) measures. All that it required to meet the state’s electricity demand satisfactorily was to manage the existing electricity infrastructure more efficiently.       

As indicated in the table 3, the projected peak hour demand and annual energy demand for Uttarakhand during next 5 years is not huge, though it is about 7 % because of small a base. The available installed capacity of 2,400 MW even at conservatively assumed annual load factor of 35% can provide about 7,300 GWH per year, which is more or less equal to the projected annual energy demand in 2009-10. If we take into account the share of Uttarakhand from the forth coming central sector projects, and also of its own committed projects as of today, it can be surplus by a considerable margin for next few years if the electricity infrastructures are operated and maintained more efficiently.

Table 2 Electricity Demand, supply and shortage in Uttarakhand (Last 6 years)

	2002- 03	2003- 04	2004- 05	2005- 06	2006- 07	2007- 08	April- Nov. 2008
PEAK POWER
Requirement (MW)	771	777	846	991	1,108	1,200	1,251
Availability (MW)	705	737	794	857	991	1,150	1,251
Shortage (%)	8.6	5.1	6.1	13.5	10.6	4.2	0
ANNUAL  ENERGY
Requirement (MU)	3,774	4,197	4,628	5,115	5,957	7,047	5,079
Availability (MU)	3,670	4,108	4,470	5,008	5,599	6,845	5,047
Shortage (%)	2.8	2.1	3.4	2.9	6	2.9	0.6

Source: CEA Website as on 3.1.09

Table 3 Uttaranchal Electric Power Forecast  

Year	2008–09	2009- 10	2010- 11	2011- 12
Peak Demand (MW)	1,238	1,330	1,428	1,533
Annual Energy (GWH)	6,752	7,275	7,838	8,445

Source: 17th EPS, CEA      

Considering the data from Central Electricity Authority (CEA) it would appear that Uttarahkand’s power requirement varies from about 19MU/day during summer to about 23 MU/day during winter. Its own generation varies from about 12.5 MU/day during summer to as low as 7 MU/day during winter.  Along with the share from Central Sector Projects of the Northern Region the state records surplus during summer and a small deficit during winter months. However, this surplus is entirely dependent on the vagaries of the South West monsoon.

Because of its hilly terrain the growth in electricity demand is not expected to be huge on account of industries or agriculture, as could be expected from the states in plains.  Instead of large or energy intensive industries, if forestry based and agro based industries, are carefully planned and operated, they can not only be a sustainable source of employment but can also contain the electricity demand within a manageable level.  Keeping all this in view it is safe to aver that the state will not need the large number of additional power projects (150 projects as per one estimate) proposed to meet its own legitimate demand for electricity during next 10-15 years.

This credible scenario brings us to the question of harnessing the vast hydro-electricity potential of the state largely to export it to other states.  In addressing this question various issues associated with hydro-electric power must be considered objectively, and a sustainable development model has to be arrived at for the overall interest of the state.

2. Issues with hydro electric power plants

Hydro electric power plants are generally associated with dams and reservoirs of varying sizes and complexities. They play a major role on the general ecology of the region, but play a major role particularly in the lives of the people surrounding the project area, and on the people associated with the river as a whole. Their impact on the economic, social, and environmental aspects of not only the immediate surroundings but the larger society will require careful considerations before a decision is taken on the construction of dam based hydel plants. 

 

to be continued…

 

Views are those of the author                      

 

Funds for Forests: A Stock-Flow Mechanism (part – II)

Andrea Cattaneo Senior Scientist, Woods Hole Research Center,  [email protected]

 

 

Continued from Volume V, Issue No. 35…

 

Advantages of the stock-flow approach

educing emissions from deforestation and degradation has established itself as an important option in the policy toolkit for combating climate change. In the process, the debate has shifted from whether to pursue REDD, to how to implement it, and the challenges involved. How to finance forest related initiatives – whether through a market mechanism, a fund, or a combination of the two -- and what to finance are among the issues being discussed. In this respect, several countries (Brazil, India, China, Guyana, Indonesia, Malaysia to cite a few) expressed the need for incentives to be included also for sustainable forest management, and the maintenance and enhancement of carbon stocks (Climate Change Talks, Accra, Ghana, august 2008). Given the current context, the stock-flow approach:

·          avoids leakage since revenues to be distributed are based exclusively on reduction of emissions from deforestation at the global level

·          provides a positive incentive to maintain or enhance terrestrial carbon stocks

·          Is fair in that it compensates deforesting countries for costs incurred in reducing emissions while rewarding all participating countries with the same level of incentive to maintain or enhance carbon stocks because the dividend paid for a ton of carbon is the same for all countries

·          is compatible with full carbon accounting. In the stock-flow approach carbon flowing into storage could be considered an investment in the forest carbon stock, and be eligible for recovering investment costs and receive dividends.

·          Introduces transparent, dynamic incentives by linking explicitly dividend payments to the carbon stock, so that even if a mechanism takes 15-20 years to become fully operational, countries will have an incentive to reduce deforestation early to have a larger stock of carbon for which to claim dividends.

An additional advantage of the stock-flow mechanism is that the only value that must be negotiated is how much countries should be compensated per ton of avoided CO2 emissions below their baseline. Furthermore, the price paid for avoided emissions (P_AE) is a useful tool because if it were adopted in the context of a market mechanism, it can be negotiated so as to mediate between supply and demand, thereby limiting to some extent the impact of a REDD mechanism on the carbon markets. Countries avoiding emissions from deforestation will see P_AE as an incentive to limit emissions and not the full price of carbon on the global market (PC_t). This is equivalent to controlling the supply of REDD credits that enter the market, but done through the pricing structure rather than imposing a quantity limit.

A Simple Example

Next we work through an example where we assume that five countries participate in a stock-flow REDD mechanism as proposed here. The countries are chosen based on their characteristics in terms of forest carbon stock and deforestation rates so as to have a representative coverage of country types. We limit the example to five countries for the sake of simplicity and without a loss in generality.

Figure 1 Carbon stocks: relative size

Table 1 Forest Carbon stocks and emissions of CO2 of participants

Source: Strassburg et al. (2008)

Countries in Table 1 are reported in order of decreasing forest carbon stock. One notices the qualitative difference between countries, with Brazil having the highest stock and highest emissions, Indonesia’s emissions in second place but with a much lower stock base (implying a higher deforestation rate). At the other extreme there is China with a substantial stock of forest carbon, but no emissions from deforestation (and actually reforesting). The Democratic Republic of Congo with the second largest forest carbon stock, has a relatively low deforestation rate (0.3%), whereas Papua New Guinea has an intermediate deforestation rate (0.5%).

Table 2 Payments assuming participating countries reduce their deforestation by approximately 50%. We assume the price of a carbon credit to be 15$/tCO2.

Note: ⁽¹⁾ in this example we assume that afforestation does not receive compensation as an avoided emission, therefore China receives no avoided emissions payment. However, the approach is compatible with compensation for afforestation.

In Table 2 we present the results in terms of payments distributed using the stock-flow mechanism if each participating country reduces its emissions from deforestation by 50%. It is assumed that the price of a carbon credit is 15$/tCO2, and we present results for two different negotiation outcomes in terms of the price paid for avoided emissions: 5$/tCO2 and 10$/tCO2. Clearly the higher price for avoided emissions will leave fewer funds to be distributed as dividends.

The results indicate that countries that have a deforestation rate that is around average (0.45%-0.55%), such as Brazil and PNG, are not greatly affected (in aggregate) by the value assigned to the price paid for avoided emissions (PAE). The reason is that they have a “balanced portfolio” in terms of avoided emissions revenue and dividend revenue. In these cases a lower (higher) PAE is counterbalanced by higher (lower) dividend payment. This result is dependent on the assumption that all participating countries have a comparable reduction in deforestation rates.

On the other hand, participation in REDD for a country like China, which has no emissions from deforestation, is completely dependent on the revenue from dividends. At the other extreme, but equally affected by PAE, are high deforestation countries like Indonesia. Therefore, for these two types of countries the negotiated price for avoided emissions has a substantial impact on the aggregate revenue the country will receive from a REDD program.

Conclusions

The stock-flow approach proposed here has the advantage of providing intuitive incentives and having a clear economic rationale. It separates the incentives for lowering current deforestation rate and those for the maintenance of the existing carbon stock (avoiding leakage). The mechanism functions by negotiating a common price paid to avoid emissions from deforestation (P_AE), and the remaining funds (based on the price difference between the market price of carbon and P_AE) are distributed as dividend per ton of standing carbon stock to avoid leakage. The approach is compatible with existing mechanisms, such as CDM, and with any potential developments towards full carbon-accounting. Furthermore, the dynamic incentives put in place by a mechanism that compensates stocks are an important part of the solution.

In the proposed approach, how the compensation amount is spent is up to each country to decide, implying that how funds are distributed to forest stakeholders may or may not have a link with the internationally determined price of compensating for avoided emissions from deforestation or the level of dividends. However, as a further development, the fairness of the stock-flow approach could make it an interesting candidate approach for distributing funds inside a country. One possibility would be for the government to use the stock-flow approach to distribute funds between administrative regions. At the local level one could then distribute funds to different stakeholders based on their property rights to carbon stocks and on whether they are reducing their current deforestation activities. In this context, if property rights of Indigenous Peoples are recognized, indigenous populations could benefit from incorporating a carbon dividend for stockholders. The Woods Hole Research Center and the Amazon Institute for Environmental Research (IPAM) are currently simulating case studies of how the stock-flow approach might be applied to distribute REDD funds to stakeholders in the Amazon region and the implications for indigenous people.

 

 

Concluded

 

 

 

 

NEWS BRIEF

OIL & GAS

Reliance Industries seeks EGoM nod to allocate KG-D6 gas to power producers

February 24, 2009. Reliance Industries Ltd is seeking the Empowered Group of Ministers (EGoM) approval for allocating natural gas to power producers. The company has already received the list for bulk purchases from the fertiliser companies and hopes to sign agreements with both power and fertiliser companies in the next 10 days. With the supply of natural gas from the Krishna-Godavari basin fields (D6 block) expected to start by April, the company hopes to produce 80 million cubic metres per day, much earlier before the said date of 2012.

OIL makes most recondite hydrocarbon discovery

February 24, 2009. Oil India Ltd has reportedly made a significant oil discovery in upper Assam, the deepest commercial hydrocarbon site in the country. The discovery was made at the depth of more than 5,610 metres. A number of prospective oil and gas bearing sands, with a total net hydrocarbon pay of about 50 metres, were encountered in the discovery well Mechaki-2. The well was tested to have a production potential of over 1,000 barrels of oil equivalent per day. The company's production of crude oil from the North East is said to increase by about 12% over last year's production.

ONGC pares oil output target by 3.5 pc

February 24, 2009. ONGC, has trimmed its crude oil output target by around 3.5% for the current financial year to end-March because of infrastructure shortages and technical issues, although the state-run firm expects production to rise next year as several new fields come on stream. According to its annual plan document for 2009-10, crude oil production during 2008-09 was now expected to be 26.085 mmt as against the earlier estimate of 27.054 mmt, hit mainly by a 0.611 mmt shortfall from its offshore assets and a 0.358 mmt shortfall from its onshore fields mainly in Gujarat. But the company has marginally increased its production target for 2009-10 by 0.865 mmt anticipating crude oil production from Bassein & satellite, Neelam & Heera, Assam, Ahmedabad and Mehsana fields. ONGC expected to produce 22,248 mmscm of natural gas in 2009-10, slightly down from a revised estimate of 22,287 mmscm in 2008-09 but higher than its original estimate of 21,668 mmscm for the year. The company has also projected an increase in its initial in-place hydrocarbon reserves or the total amount of oil and gas found and the ultimate or economically recoverable reserves. It set a target of 285 mmtoe for initial in-place hydrocarbon reserve for 2009-10, up around 2.5% on the revised estimate of 277 mmtoe for the current fiscal year and around 13% higher compared with its original estimate of 251.3 mmtoe. The economically recoverable reserves for 2009-10 have been projected at 72.65 mmtoe, marginally higher from the revised estimate of 72.15 mmtoe in 2008-09 but significantly higher than the original estimate of 64.50 mmtoe. The report attributed the revised figures for 2008-09 to greater reserve accretion expected in the Krishna-Godavari (KG) and Assam & Assam Arakan (A&AA) basins.  

ONGC strikes oil in KG basin

February 23, 2009. ONGC has discovered oil in the hydrocarbon-rich Krishna Godavari (KG) basin, which may turn out to be significant for the country’s largest oil explorer. The discovery took place in the block KG-DWN-98/2. ONGC is now accessing the reserves. It will inform the upstream regulator directorate general of hydrocarbons (DGH) after the assessment of the reserve. An announcement on this is expected in a month or so. ONGC had earlier discovered gas from the same block which is adjacent to Reliance Industries’ KG-DWN-98/3 where RIL had made the country’s biggest gas discovery. The ONGC discovery reaffirms the abundance of oil in the country’s east coast. RIL has also started producing oil from KG-DWN-98/3, popularly called D-6. KG basin is turning out to be India’s Gulf of Mexico, with major oil and gas discoveries made by RIL, ONGC and Gujarat State Petroleum Corporation (GSPC).

ONGC has announced last month that it would invest $5.3 bn to develop gas and oil finds in the KG basin blocks to produce 25 mmscmd of gas and 8,000 barrels of oil per day (bopd) by 2012-13. This investment does not cover the fund required for its recent oil discovery and the ultra deep water gas discovery. ONGC roped in Statoil of Norway and Petrobras of Brazil as equity partners in the KG-DWN-98/2. Statoil and Cairn India hold 10% each in the block. Petrobras holds 15% while ONGC holds the remaining stake. ONGC plans to drill six appraisal wells in KG-DWN-98/2 block and three in KG-OS-DW4. ONGC would need 58 wells to produce the oil and gas planned for the fields.

Govt. may swap RIL’s KG basin gas with rich west coast output

February 19, 2009. The government is looking to swap the lean natural gas from Reliance Industries’ (RIL) Krishna-Godavari (KG) basin in the east coast with the rich gas produced from the west coast fields to get maximum value. A detailed mechanism to make this happen is yet to be evolved. RIL’s gas from its KG-D6 field is primarily methane (CH4) and can’t be used for producing petrochemicals or liquefied petroleum gas (LPG). However, the west coast plants of Bombay High, Panna, Mukta and Tapti operated by either public sector companies or their joint ventures produce rich gas that could be used for making petrochemicals and LPG. RIL’s KG basin gas has a low calorific value of around 8,100 kcal per standard cubic meter (SCM) and does not contain C2H6 (ethane), C3H8 (propane) or C4H10 (butane). In order to get better value of the natural resource (gas) produced in the country, the rich gas (from the west coast) must not be burnt merely as a fuel and could be substituted with the RIL’s KG basin gas. Experts say that the natural gas produced in the west coast are rich in ethane, propane and butane with a calorific value of 10,000 kcal/SCM or more. The calorific value or heating value of a fuel is the amount of heat released during the combustion of a specified amount and the price of natural gas is also determined on the basis of its calorific value. The contractor (RIL) will sell the gas from its KG basin block to specified customers as per the gas utilisation policy approved by the government. Petroleum & natural gas minister Murli Deora had told the parliamentary consultative committee that the supply of natural gas from KG D-6 field could begin by April 2009. The first 40 mmscmd of KG-D6 gas would be supplied to meet shortfall in existing gas-based urea units, LPG facilities and power plants. The gas would also be supplied to meet the requirement of piped natural gas (PNG) and compressed natural gas (CNG) for residential and transport sectors. 

Oil companies spent $2.2 bn on exploration

February 19, 2009. A few oil companies namely Oil & Natural Gas Corp., Reliance Industries Ltd. and other energy companies have reportedly spent U$2.22bn to explore for oil and gas in the country. The discoveries have been made in 37 of the 252 onshore wells drilled from 1999 until September 2008.

ONGC to review viability of setting up refinery in Rajasthan

February 24, 2009. ONGC is to review the viability of setting up a refinery in Rajasthan state and discuss with the state government regarding the fiscal incentives needed to make a refinery at Barmer. The feasibility and cost estimate of the project would depend on incentives from the state government.

Reliance cuts '09 Iran crude imports 25 pc

February 23, 2009. Reliance Industries will import about 25 per cent less crude oil on contract from Iran in 2009. Reliance will buy 90,000 barrels per day (bpd) of Iranian crude on term contract this year, down from 120,000 bpd in 2008. It was unclear why India's largest refiner would cut contract purchases from the world's fourth-largest oil exporter in a year when Reliance needs more crude to feed its giant new 580,000 barrels per day (bpd) Jamnagar refinery.  The reduction may be a sign that Iran is writing lower supply into its annual contracts due to curbs agreed with the Organization of the Petroleum Exporting Countries. OPEC has agreed cuts of 4.2 mn bpd since September. Iran's share of the reductions was around 560,000 bpd. In January, Iran cut supplies to Asia by 14 per cent, the first reduction to its core Asian customers in at least three years. Previously, Iran had cut spot sales of crude rather than reduce contract volumes. Reliance may have decided that the quality of crude from Iran was too poor to warrant the prices Tehran wanted. Among the grades which Reliance has purchased were the heavy and acidic Soroush and Nowruz crudes from Iran's offshore fields. The new Jamnagar refinery can process the oil, but with a glut on the market as the global economy slows, Reliance may have opted for better grades widely available. Politics might also have played a role in the decision. US major oil firm Chevron owns 5 per cent of the Jamnagar refinery and has an option to take a bigger stake. US refiners are forbidden from buying Iranian crude under sanctions in place. The US bank had approved two loan guarantees to Reliance worth $900 mn that included a $400 mn facility issued in August to help finance the Jamnagar refinery. The refiner shipped 750,000 barrels of fuel to Tehran in January. The Indian company already buys from across the globe, with suppliers including Latin American, African, and Middle Eastern oil producers. According to one of the industry source, Jamnagar could also buy Chevron's Gulf of Mexico crude output.

Oil India scraps Digboi project due to slowdown impact

February 20, 2009. Oil India Ltd (OIL) has reportedly scrapped its plan to set up a Rs4bn pilot coal-to-liquid (CTL) project at Digboi in Assam in a joint venture with Coal India, IndianOil and Engineers India Ltd (EIL).

GAIL clarifies reports on reducing gas supplies

February 24, 2009. GAIL has clarified that the force majeure has been necessitated owing to a cut back in supplies from the PMT consortium to GAIL. The PMT consortium, which includes British Gas, ONGC and RIL, maintains the sub-sea facilities till Hazira where the custody of the PMT gas is transferred to GAIL. It is understood gas supply has reduced due to some technical problem in sub-sea facilities resulting in partial force majeure declared by the PMT consortium. As a consequence, the downstream customers including Gujarat Gas, which is a member of BG Group, has been affected.  The reduction in gas supply is by the PMT consortium.  It may be mentioned that against the production level of 17.3 mmscmd, the production from the PMT fields was on an average around 15 mmscmd for the past few weeks. Most of the PMT gas is supplied to priority customers such as fertilizer and power plants.

January oil product sales up 2.3 pc yoy

February 20, 2009. Oil product sales in January have reportedly recorded an increase of 2.3% since 2008. Domestic diesel sales have seen a growth of 2.1% as a against last years and reaching 4.4MT in January.

Fuel supply agreement with power companies by March

February 18, 2009. Power utilities, led by NTPC, are likely to ink the assured fuel supply agreement with Coal India by March. The report stated that FSA is a long-term pact between coal producers and consumers aimed at ensuring a dedicated supply of fuel. It has been delayed by a few months due to differences over fixing of a trigger level. Trigger level is the minimum assured level of coal supply and off-take, failing which both the parties attract penalty. While power companies want assurance for 90 per cent of coal supply under the agreement, CIL intends to fix the trigger-level at 75%.

RIL accepted NTPC LOI, but didn’t sign GSPA

February 20, 2009. According to the Government, Reliance Industries Ltd. has accepted the Letter of Intent (LOI) from NTPC Ltd. for supplying gas to the state-run power major's plants, but has refused to sign gas sales and purchase (GSPA) agreement. In 2004, RIL had offered a delivered price of US$2.97 per mBtu for about 3 mt of gas a year from its eastern offshore fields to NTPC's power plants in Gujarat. This was the lowest quote NTPC received in its global tender and placed an LOI with RIL.

The LOI was issued to RIL on June 16, 2004, which was duly acknowledged and confirmed by RIL. But subsequently, RIL did not come forward to sign the GSPA. After the issuance of the LOI, RIL sought major changes in the agreed draft of GSPA. NTPC pursued the matter with RIL at various levels and at various meetings to sign the GSPA, as per the draft accepted by it during the bidding process. However, in spite of all the efforts, RIL did not sign the GSPA agreed during the bidding process.

Fares may be cut if aviation fuel gets declared goods status

February 20, 2009. Aviation sector has run into turbulent weather with the global economic meltdown. The load factor (passenger occupancy) on both the domestic and international routes is tumbling faster than the aviation fuel prices, which was the only burning issue till recently. Airlines across globe are grounding aircraft, trimming routes and cutting staff strength, besides exploring innovative measures to stay put in business. The domestic demand may have ring-fenced India aviation to an extent, but the already bleeding airlines are in no mood to be complacent. Cost of aviation fuel has come down drastically in the last few months. Every airline in the country is running at a loss even after the fall in aviation fuel prices. There are about 35-40 per cent excess capacity and almost all the airlines are selling tickets below cost.  There is a possibility that prices may come down if the Government assigns declared goods status to aviation turbine fuel. The move will result in a uniform four per cent tax across states.

Govt. mulls completion schedule for Iran gas pipeline

February 19, 2009. Government has reportedly said that India can’t lay down a completion schedule for the proposed US$7.4bn gas pipeline from Iran through Pakistan.  The price and delivery of gas, the project structure and the payments of fees to Pakistan are still being discussed.

MoF rejects proposal to sell fuel from EOU and SEZ

February 19, 2009. According to Jairam Ramesh, Minister of State for Commerce and Industry, MoF has reportedly rejected a proposal to allow sale of fuel from Export Oriented Units (EOU) or Special economic Zones (SEZ) refineries in the domestic market. The Export-oriented units (EOU) or those in Special Economic Zone (SEZ) are given fiscal benefits for committing to export products produced.

Seven-year glitch to be removed as gas companies too may get tax holiday

February 18, 2009. Oil and gas exploration companies, which may have been disappointed with the interim budget, need not lose heart. The government is expected to clear the air over the seven-year tax exemptions for producing natural gas soon. The proposal is under consideration. It could not be announced in the interim budget, but tax exemption, currently enjoyed for production of crude oil, will be extended to (natural) gas also.

The proposal is not to give any fresh tax incentive. It is only to remove certain anomalies related to the definition of mineral oil. A clarification regarding the definition is expected soon. It is likely to be taken up as a Cabinet decision soon. This will come as a major boost to gas-producing companies like RIL, ONGC and GSPC. The uncertainty over tax holidays for natural gas producers began after the Finance Bill 2008-09 proposed to redefine mineral oil in the section 80-IB(9).

The term ‘mineral oil’ does not include petroleum and natural gas. It was argued that the redefinition was aimed at clearing the ambiguity as different tax tribunals had taken varied positions on the issue. Currently, while crude oil producers can avail of a seven-year tax holiday, the new definition prevented natural gas producers from availing of the same exemption. Most exploration companies, led by RIL, ONGC and British Gas, had objected to this as it was biased against gas producers. It had been argued that an exploration company while bidding for a block is not aware of whether there would be oil or a gas find. The petroleum ministry has maintained that mineral oil must be defined as hydrocarbon (which can be either crude oil or natural gas or both). It argued that exploration & production (E&P) was undertaken for hydrocarbon and not for either oil or gas. In the exploration, the company could find oil or gas or both. Therefore, the definition of mineral oil must include both crude oil and natural gas.

The petroleum ministry has also argued its case for this tax holiday as it would have a bearing on the next round of bidding under the new exploration and licensing policy. The finance ministry is understood to have also proposed the re-introduction of duties on petrol and diesel. However, this is unlikely to get political approval given that elections are round the corner. In an election year, re-imposition of taxes would send the wrong signal to voters even if it would not lead to an increase in retail (pump) prices.

In a bid to reduce the impact of the surging global crude oil prices, the government had slashed duties on crude oil and products such as petrol and diesel in June 2008. It had reduced Customs duties on crude from 5% to zero and on petrol and diesel from 7.5% to 2.5%. Excise duties on non-branded diesel and petrol were also reduced by Re l a litre. 

POWER

Power Projects at Indo-Bhutan Border

February 24, 2009. There were press reports in Assam during 2007 that the Hydropower Projects in Bhutan are causing floods in the region.  Subsequently, Government of Assam also raised the concern on the issue.  Accordingly, the issue was discussed with the concerned Bhutanese authorities during the 2nd meeting of Joint Group of Experts on Flood Management between India and Bhutan. Following such discussions, it has been found that the Hydropower Projects in Bhutan are not directly responsible for the floods/ erosion in Assam. In July 2006, an agreement was signed between Government of India and Royal Government of Bhutan on cooperation in   Hydropower sector by which Government of India (GoI) agreed to import 5000 MW of hydropower from Royal Government of Bhutan (RGoB) by 2020.

During the visit of Hon'ble Prime Minister of India to Bhutan in May 2008, this target was subsequently revised to 10,000 MW. In July 2007, India and Bhutan signed an agreement to implement the 1095 MW Punatsangchu-1 Hydroelectric Project. Earlier in 1994, an Inter- Government Agreement between GoI and RGoB was signed on the Tala and Kurichu Hydroelectric Projects for loan repayment and tariff fixation.

Protocols to the Inter-Government Agreement on the Tala and Kurichu Hydroelectric Projects respectively, were signed in 2008.  In order to formulate the flood forecasts on transboarder rivers originating from Bhutan, a scheme titled Comprehensive Scheme for Establishment of Hydro-meteorological and Flood Forecasting Network on rivers common to India and Bhutan is in operation. The network consists of 35 hydro-meteorological/ meteorological stations located in Bhutan and is maintained by the Royal Government of Bhutan with funding from India. The data received from these stations are utilized in India by the Central Water Commission for formulating flood forecasts.

A Joint Expert Team (JET) consisting of officials from the Government of India and Royal Government of Bhutan continuously reviews the progress and other requirements of the scheme. Two meetings of JGE have been held between India and Bhutan so far. Further, Bodoland Territorial Council (BTC)has informed that they have currently taken up 10 number of schemes with a total estimated cost of Rs.97.42 crores  to protect Bodoland area from flood and erosion. The major rivers entering into India from Bhutan are Sankosh, Manas, Jaldhaka, Torsa, Wangchu , Gaurang, Pagladiya, Beki and Dhansiri.

Hydel power generation in Kerala falls sharply

February 24, 2009. With Kerala getting deficient rain during the South West monsoon phase, electricity generation from hydel sources has fallen nearly by half in 2008-09 compared to the previous year. The combined storage position in the reservoirs dipped to 4,900 mn units this year from 8,300 mn units in 2007-08. According to last week's data, the total storage in the reservoirs stood at 2,170 mn units against 2,547 mn units available during the corresponding period last year.

The state's share from the central pool had also gone down, making the power scarcity more severe this year. While the state's due from the central grid stood at 1,041 MW, it received this year an average of 650 MW. The Government had taken both short and long-term steps to bridge the growing demand-supply deficit for power. On the whole, another 4,000 MW was planned to be added to the state grid in 10 years.

Selection of developers for 2 more UMPPs likely this year

February 23, 2009. The Centre is likely to commence the process for short-listing the developers for two more ultra mega power projects (UMPPs) this year. The process (for selection of developer) could start for the two UMPPs in Orissa and Tamil Nadu in 2009. The Government had earlier announced that it had selected sites in Orissa (Bedabahal) and Tamil Nadu (Cheyyur) for the execution of these 4,000 MW projects at an estimated investment between Rs 16,000 crore and Rs 18,000 crore.

The Chhattisgarh Government has not shown any interest for the UMPP and the proposed UMPPs in Maharashtra and Karnataka have been objected to by the environmentalists. The Centre has already awarded four such projects to developers through international competitive bidding route. Three UMPPs one each in Madhya Pradesh (Sasan), Andhra Pradesh (Krishnapatnam) and Jharkhand (Tilaiya) have been bagged by Reliance Power while the one at Mundra in Gujarat was won by Tata Power.

Tata Power not looking at large projects

February 21, 2009. Tata Power Ltd. may not bid for the upcoming ultra mega power projects (UMPPs), as raising funds for setting up such large projects is quite tough given the global financial meltdown. The company recently withdrew from the bidding process for a 4,000 MW project at Tilaiya in Jharkhand. Tata Power, which is India's largest private sector power utility, is currently in the process of building a UMPP at Mundra in Gujarat at a cost of Rs170bn (US$3.4bn).

The Tilaiya project eventually went to Reliance Power, part of the Anil Dhirubhai Ambani Group (ADAG). This was the third time that Reliance Power had won a bid for a UMPP. It already has bagged two UMPPs at Sasan in Madhya Pradesh and Krishnapatnam in Andhra Pradesh. The Government plans to add 78,000 MW in generation capacity by 2012. The country, which faces a peak power shortage of 16%, plans to build nine UMPPs, with generation capacity of 4,000 MW apiece.

AREVA T&D receives order from BGR Energy

February 18, 2009. AREVA T&D has been chosen as the preferred partner by BGR Energy for 420 kV and 230 kV Gas Insulated Substation package for Mettur Thermal Power Project Stage III of Tamil Nadu Electricity Board. The order comprises Design, Engineering, Manufacturing, Supply and other associated activities of 15 bays of 420 kV and 8 bays of 230 kV Gas Insulated Substation and 2 km of Gas Insulated Lines.

The equipment against this order worth approximately Rs 1010 million is to be delivered in Q4 of 2009. Gas Insulated Substation is a fast growing market segment ARE VA T&D India is the first Company to localize high end Gas Insulated Substation from its plant at Padappal.

President awards NHDC on commissioning of Hydro Project

February 18, 2009. President Pratibha Devisingh Patil presented Gold Shield for the early commissioning of 520 MW Omkareshwar Hydroelectric Project of Narmada Hydroelectric Development Corporation Ltd,(NHDC), a Joint Venture of NHPC Limited and Madhya Pradesh Government.

The 8x65 MW Omkareshwar Hydroelectric Project, located in Khandwa District of Madhya Pradesh, has been commissioned in 2007 ahead of schedule. The annual generation from the project is 1166 million units. Power generated at the project is entirely supplied to the State of Madhya Pradesh. Earlier also, similar award was received in 2007 for 1000 MW Indira Sagar Hydroelectric Project of NHDC. 

Power cuts for industrial consumers likely in Andhra Pradesh

February 23, 2009. With the energy demand going up to 214 mn units a day, AP Transco and four distribution companies have begun two-hour power cuts to the industrial consumers in the State. By resorting to load shedding, AP Transco and the distribution companies plan to ensure adequate power supplies to domestic consumers more particularly to the farm sector consumers. This move is seen as a critical one to save the standing crops during the rabi season. According to Government sources, the power cuts would be about for two hours a day initially and may be further enhanced to four hours depending on the demand-supply situation.

In addition, the high tension industrial consumers have been directed to reduce their load during peak hours of 6-10 p.m., when power demand reaches its peak both from the domestic as also the farm sector that uses pump sets for water supply to standing cops. By resorting to these power cuts, the AP Transco expects to curtail demand and also ensure supply to other sectors. Already, AP Trasco is procuring additional power from Central generating stations and market purchase in order to bridge higher demand of about 20 million units and also for operating the Srisailam hydel power station.

According to estimates, demand is likely to further go up during March with the overall requirement likely to be about 225 million units a day. In accordance with the contingency plan, the State may consider some power cuts to even commercial trade establishments. However, the State officials are hoping that during the peak summer months of April and May, if the gas supplies from Reliance KG Basin comes through, they will be able to add about 1,800 MW of additional capacity through gas-based stations.

JSW Energy gets license for transmission project

February 20, 2009. JSW Energy Ltd has announced that a venture formed by its unit was given a transmission license by the Maharashtra Electricty Regulatory Commission. Jaigad power Transco Ltd will transmit electricity generated at the 1,200 MW Jaigad Power Project.

KLG Systel wins Rs300 mn order in Haryana

February 19, 2009. KLG Systel Ltd won an order worth Rs300 mn from state-run power company based in Haryana. The Gurgaon based technology solutions provider will set up thirteen 33 KV substations and lay down 33 KV and 11 KV electrical lines on turnkey basis for Uttar Haryana Bijli Vitran Nigam Ltd. KLG's power systems division last month received another Rs306 mn order from the same company.

NE states want study on the effect of dams

February 24, 2009. Dogged by repercussions in the downstream areas of hydro-electric projects, Northeastern states asked the Centre to undertake a cumulative study on the impact of hydro-electric projects. While the region is a storehouse of hydropower, the impact of hydro-electric projects in the downstream areas is a challenge.  The Centre has been requested to conduct a micro-level study in the basin areas of the region to study the impact of the projects. The upper Brahmaputra region has a potential of accommodating over 100 power projects, but a scientific study has to be conducted first to analyse their affects on the livelihood, biodiversity and cultivation in the downstream areas. The study could give parameters that should be accommodated while executing the power projects to help the downstream areas.

Major environmentalist organisations have been protesting construction of big hydel dams, which have come up in the north eastern region, stating that the projects are not only a huge ecological threat but could also cause serious destruction in a the seismologically unstable region. The NERPC also asked the Centre to fund a project to link the numerous assorted power projects in the region with the main grid and transmission lines to regulate the evacuation and transmission of power generated from them to realise the optimum benefit from the projects. Besides asking the Centre for State Load Dispatch Control centers (SLDCs) in all the Northeastern states for intra-region exchange of power, monitoring, regulation and dispatch, the NERPC also decided to provide training to the engineers of the region in latest technology.

Uttarakhand hydel projects face legal battle

February 24, 2009. With the suspension of three major hydel projects in Uttarakhand, non-government organisations (NGOs) are seeking a legal recourse to the vexed issue. After challenging the decision of the Uttarakhand government, the Rural Litigation and Entitlement Kendra (RLEK), a Dehra Dun-based NGO, has decided to file a fresh petition before the Uttarakhand High Court challenging the Centre’s decision to suspend NTPC’s 600 MW Lohari-Nagpala power project on the river Bhagirathi.

The project is expected to attract an investment of Rs 2,800 crore. Through the petition, NGO will highlight that the suspension of these projects would escalate their cost and severely jeopardise the country’s efforts to provide electricity to all villages. On the other hand, the Indian Council of Enviro-Legal Action has filed a petition in the high court for stopping the construction of all dams on the Bhagirathi between Uttarkashi and Gangotri areas. The Council also sought the court’s direction to restore the natural flow of the river and declare the area a national heritage site, saying these dams would destroy the biodiversity of the river. To counter this, RLEK has filed a petition in the high court seeking direction to the state government to restart the construction of two major hydel projects 480 MW Pala Maneri and 400 MW Bhairon Ghati on the Bhagirathi river. RLEK in its petition alleged that the state government halted the construction of these two projects under the pressure of various religious groups and has acted in violation of its own policy regarding hydropower generation.

The NGO also said the shortage of electricity would hit the growth of industries in the state, which will lead to loss of employment opportunities. Both the Pala Maneri and Bhairon Ghati projects were allotted to the state-owned the Uttarakhand Jal Vidyut Nigam Ltd. An investment of nearly Rs 5,200 crore was proposed in these two projects.

Process for selecting developers for 2 UMPPs soon

February 24, 2009. According to the Minister of State for Power Jairam Ramesh, the government was likely to announce the process for selecting developers for two more ultra mega power projects (UMPP) this year. The process (for selection of developer) could start for the two UMPPs in Orissa and Tamil Nadu in 2009. In late January, the fourth 4,000 MW UMPP at Tilaiya in Jharkhand was awarded to Reliance Power. The government had earlier announced that it had selected sites in Orissa (Bedabahal) and Tamil Nadu (Cheyyur) for the execution of these 4,000 MW projects, at an estimated investment between Rs 16,000 crore and Rs 18,000 crore.

BHEL bags Rs 3,150 crore contract from MP

February 23, 2009. State-run power equipment maker BHEL has bagged the Rs 3,150-crore contract from the Madhya Pradesh Power Generating Company Ltd. BHEL has bagged the Rs 3,150-crore order for installing main plant package (steam turbines and generators) at the Malwa Thermal Power Project from Madhya Pradesh Power Generating Company Limited (MPPGCL). This is the first order secured by BHEL for the new-rating units of 600 MW.

The company's scope of work in the contract includes design, engineering, manufacture, supply, erection and commissioning of Steam Turbines, Generators, Boilers and associated Auxiliaries, including Transformers, in addition to civil works for the main power block. The first set is scheduled to go on stream in 3 years, the second set will be commissioned in 43 months (over 3 three years) from the date of contract.

Conflict over Coal supply to power sector may end

February 23, 2009. The conflict over the proposed fuel supply agreement between Coal India Ltd and the power sector of the country led by NTPC may finally be resolved. In a recent meeting with Coal India, the Union Power Minister, Mr Jairam Ramesh, had agreed to set actual supply quantity (ACQ) by CIL to existing power plants as the benchmark for the fuel signing agreement. The Power Minister agreed to CIL’s proposal to set the trigger or the minimum guaranteed supply/off-take quantities at 90 per cent of the actual supplies made in 2007-08. Violation of the minimum guaranteed supply/off-take level will attract penalties on either the producer or the consumer.

The Power Ministry suggested that the tenure of the agreement may be reduced from the originally proposed 20 years to a five-year period. NTPC has approximately 24,000 MW thermal power capacity and procures over 100 mt of raw and beneficiated coal from CIL. Overall the company contributes approximately 37 per cent of CIL’s total sales of thermal coal to power utilities. According to the New Coal Distribution Policy, CIL was supposed to replace the linkages by firm supply agreements with all buyers (including the power sector) by June 30, 2008. The company initially proposed to set the trigger for the existing power plants at 60 per cent of the targeted supplies as set out in the Annual Action Plan for the respective year. However, the proposal was opposed by power utilities. NTPC, being the single largest consumer, had asked CIL to set the trigger at 90 per cent level for existing power plants. The coal major, however, contested the power sector’s demand. The row has forced CIL to extend the deadline repeatedly and till date the company could enter into only five such agreements with State utilities of Karnataka, Gujarat and Andhra Pradesh.

Coal supply above target

February 20, 2009. According to Santosh Bagrodia, Minister of State for coal, Coal firms supplied more fuel to power plants than their target. Coal India Ltd. and Singareni Collieries Company Ltd. supplied 115.75 mt of coal in the Oct-to-Jan period against a target of 111.8 mt. Demand for coal from the country’s power plants is estimated at 373 mt in the year ending March 31.

CERC takes a serious view of overdrawal from grid

February 20, 2009. The Central Electricity Regulatory Commission (CERC) has been keeping a close watch on the cases of overdrawals from the grid during the period of low frequency in the interest of grid security and safety. Weekly reports from RLDCs are being obtained about the states who indulge in overdrawal from the grid when frequency is at or below 49.0 Hz. In a number of cases of significant overdrawal during low frequency, CERC has imposed penalties on the defaulting utilities and has also issued show cause notices to the Managing Directors/ CEOs of the defaulting utilities.

CERC has made quarterly reports about supply management planning mandatory and the non-submission of reports would attract penalty under the Electricity Act, 2003. In a case relating to southern region, CERC in its order imposed penalty of Rupees one lakh each on Transmission Corporation of Andhra Pradesh Ltd., Karnataka Power Transmission Corporation Ltd., Tamil Nadu Electricity Board and Kerala State Electricity Board. In addition to dealing sternly with the defaulting utilities, the Commission had instructed all the State Transmission Utilities to furnish information regarding their plans to meet the forecast consumer load in January’09.

The reports received from utilities were examined and the Commission was satisfied that the exercise can serve as an effective mechanism for ensuring proper planning by the state utilities as well as for curtailing the overdrawal from the grid which off late has been acquiring devastating proportion. The Commission is anticipating that these reports would also provide data for evaluating the post event performance of the state utilities.

Accordingly, the Commission has decided to make the report of short-term planning for meeting the forecast demand a regular feature and has directed all the State Transmission Utilities including State Electricity Boards and Electricity Departments to submit the report under intimation to their respective State Commissions and State Governments and also the RLDCs, for the first week of every quarter in a month advance.

CESC to acquire project land near Dumka

February 19, 2009. RPG flagship CESC Ltd, which is setting up a 1,000 MW greenfield thermal station in Jharkhand, has restarted negotiations with local villagers to acquire project land near Dumka. The latest development comes after CESC sought the Jharkhand government's intervention after its land acquisition efforts in Dumka were decried by a section of local villagers. The company maintains that 90 per cent of the villagers are in favour of the project and is trying to establish contact with them through emissaries.

CESC, which is setting up its 1000 MW power plant in the Amgachi-Pokharia area in Dumka district, has also written to Dumka deputy commissioner to bring these local activists to the negotiating table. In an apparent confidence building exercise, CESC is also doing its bit to enhance awareness about the project through advertisements in local newspapers. Incidentally, the detailed project report for CESC's Jharkhand venture is ready.

The project will entail an investment of Rs 4300 crore and will be spread over 650 acres. CESC expects to start generation in Jharkhand by 2011-12.  CESC had put in an application for 327 acres of raiyati (private) land, 55 acres of government land and 42 acres of forest land. It plans to apply for more land soon. The company has been allotted the Mahuagarhi coal block in 50:50 JV company (with JAS Infrastructure). 

Troubled GMR’s Nepal operation resumes

February 19, 2009. India’s leading infrastructure development company GMR has resumed work at its hydro power project site in eastern Nepal, which was disrupted by locals.  Villagers had stopped work at GMR Energy’s 300MW Upper Karnali hydro power project site in eastern Nepal.  GMR Energy, which pipped other Indian rivals to bag the hydro power project contract last year, plunged into trouble after local people stopped work, arguing that they should be benefited from the implementation of the project.  The project site covers three districts of eastern Nepal, Dailekh, Achham and Surkhet, stronghold of the ruling Maoists.  According to media reports, the obstruction caused a loss of Nepali Rs 10 million per day to the company.

Demand for advance premium stalls large hydropower projects

February 18, 2009. India’s efforts to build large hydropower plants have run into trouble with some states insisting on a premium in advance for the projects and the Union government unwilling to yield to the demand. Arunachal Pradesh has the highest potential for hydropower in India.  The Central government’s UMPP model calls for creating special purpose vehicles—firms that work with state governments and local bodies to acquire land and obtain environmental and other clearances—typically to set up thermal power plants. These vehicles are then transferred to the successful bidder of the project. 

The role of a state government is critical as hydroelectric projects take a big toll on the environment, besides displacing local residents.  Arunachal Pradesh government charges an upfront premium of Rs1 lakh to Rs6 lakh per MW, depending upon the size of the project. The north-eastern state is at the centre of the controversy because it has the highest potential for hydropower in India.

The potential of hydropower of all the north-eastern states and Bhutan is about 58,000MW. Of this, Arunachal Pradesh alone accounts for 50,328MW. In northern India, Himachal Pradesh has a potential of producing 20,376MW from hydropower plants and Uttarakhand, 16,500MW.  Last year, state-owned NTPC Ltd’s refusal to pay an advance amount led to the cancellation of a contract to develop two hydropower projects in Arunachal Pradesh at an estimated cost of Rs22,500 crore.

 The state wanted NTPC to pay Rs5 lakh per MW as upfront payment for the projects at Etalin (4,000MW) and Attunli (500MW).  With the share of hydropower falling from 40% to 25% in the past 20 years, the government is worried, as the sector accounts for only 32,000MW of the country’s 147,000MW power generating capacity. 

In an attempt to create large hydropower capacities and attract investment in the sector, the power ministry had written to Uttarakhand, Himachal Pradesh and Arunachal Pradesh, asking them to identify and allocate projects with a potential of at least 500MW, to be awarded through the UMPP model.  Power sector experts have been sceptical of the efficacy of the UMPP model in hydropower since hydropower projects are extremely site-specific and are not as modular as thermal projects.

OIL & GAS

Dana discovers third oil field

February 24, 2009. Dana Petroleum has discovered a new oil field with the successful drilling of its well at the South East Rinnes structure in Block 210/24a in the UK Northern North Sea. This is the third oil field discovered by Dana in the Rinnes area and is located just 4km from the Company's operated Hudson producing oil field and only 1km from its Melville oil field. The Dana operated South East Rinnes well, 210/24a-12, in which the Company has a 64.8% equity interest, was drilled by the Stena Spey semisub to a total measured depth of 7,310 feet (6,546 feet true vertical depth subsea). In addition, Dana has completed the drilling of an exploration well on the shallower South West Rinnes structure. This was a more speculative target, some 5km to the south west of 210/24a-12. The South West Rinnes well, 210/24a-13, was drilled to a total measured depth of 5,095 feet (4,936 feet true vertical depth subsea). The well encountered excellent quality Brent reservoir, as prognosed, but the reservoir was water bearing at this location.

Mexican oil production falls rapidly

February 23, 2009. Mexican oil production fell 9.2% in January to its lowest level since November 1995 as output from the aging Cantarell oilfield continued to dwindle. This is in line with a recent academic study that points out high decline of giant oil fields and their importance for future oil supply. Cantarell lost its position as Mexico's largest single oil producer in January to the nearby Ku Maloob Zaap heavy oil complex. Cantarell pumped 772,000 bpd in January, down from 811,000 bpd in December and down about 38% from a year ago. Pemex exploration and production chief Carlos Morales said in a November interview he expected Cantarell to produce only 700,000 bpd at the end of this year.

New drilling could put Uganda in top 50 producers

February 20, 2009. An oil exploration firm in Uganda, Tullow Oil said that the wells it is planning to drill this year could put the country among the world's top 50 producers. Since 2006 when Uganda first discovered oil, some 600 mn barrels of oil reserves have been found around Lake Albert that straddles the Uganda-Congo border. Uganda could be a country with over a billion bbls of total reserves. That would put Uganda into the top 50 oil producers in the world. Commercial petroleum extraction is expected to start this year. Energy-hungry Uganda has discovered huge deposits of oil in its western region near the border with Congo. Oil experts estimate that there may be up to 2 bn barrels of oil reserves, most of it under Lake Albert. 

Apache sees modest production growth in ’09

February 19, 2009. In 2008, production declined 5 percent to 534,000 barrels of oil equivalent per day as a result of the June 3 pipeline explosion and fire at Apache's Varanus Island hub offshore Western Australia as well as the impact of two hurricanes in the Gulf of Mexico. Had those events not occurred, 2008 production would have increased 2 percent. Apache produced 1.6 bcf of natural gas and 265,000 barrels of liquid hydrocarbons per day in 2008, compared with 1.8 bcf and 262,000 barrels per day in 2007. In the fourth quarter, Apache produced 1.5 bcf of gas per day and 262,000 barrels of liquid hydrocarbons per day.

Varanus Island production is expected to be near pre-incident levels in the first quarter, but significant production volumes remain off-line in the Gulf because repairs of third-party pipelines have not been completed. Apache replaced 122 percent of production in 2008, including 118 percent through drilling. However, 2008 proved reserves declined 2 percent to 2.4 bn barrels of oil equivalent as a result of a 2.6-percent negative reserve revision associate ed with low commodity prices at year-end. Absent the revisions, Apache would have recorded its 23rd consecutive year of reserve growth. Nearly all of the reserve revisions were in fields located in North America, including U.S. oil fields with long-lived reserves, fields subject to the Alberta government's new royalty scheme, and high-cost shallow gas fields in Canada. The negative revisions in North America were partially offset by increased reserves from drilling in Egypt.

Apache's current 2009 exploration and development budget of $3.5 bn to $4 bn is based on cash-flow estimates that are predicated on benchmark prices of $4.50 per thousand cubic feet of gas and $40 per barrel of oil. Strong production growth from several development projects is expected to more than offset generally declining production in North America that will be the result of lower capital spending. In Egypt, two additional gas processing trains began producing at the end of 2008 after several years of investment. The processing trains are expected to ramp up to net production of 100 mmcf and 5,000 barrels of condensate. In Australia, the 20,000-barrels-per-day (net) Van Gogh development remains on schedule with first production expected in the second quarter. The Pyrenees development remains on track for a first-quarter 2010 start-up with an additional 20,000 barrels per day (net). In the Gulf of Mexico, the Geauxpher field, a large gas discovery at Garden Banks 462, is projected to commence production in May at a net rate of 50 mmcf per day.

Chevron may delay project in Cambodia

February 19, 2009. Falling oil prices are likely to delay U.S. oil giant Chevron's development of Block A near southwestern Cambodia. The company has already finished exploration of the offshore concession, but won't begin production until at least 2012. Chevron was now playing a waiting game in Cambodia after seeing oil prices plummeted in the past 6 months. At this stage, Chevron has finished exploration in Block A. If they decide to move on with development now, (first) production will be in 2012, predicting of US $200 mn of oil revenues for the same year.

However, Chevron was likely to wait longer to begin oil production from the concession, because the oil prices are in crisis. Therefore, production will be in 2014 or 2015. That depends on the oil prices. The oil and natural gas resources of Cambodia are found concentrated in its offshore area near the southwestern tip of its territory. This area has been divided into 6 blocks for a dozen of foreign companies to explore and develop. None of them starts production yet.

Arabian Oil to acquire interest in oil fields off Norway

February 18, 2009. According to AOC Holdings Inc., subsidiary Arabian Oil Co. will soon acquire a 10 percent stake in the Yme oil field off the southwest cost of Norway from Talisman Energy Inc., a Canadian oil explorer having a 70 percent interest in the North Sea field. Arabian Oil will also acquire a 10 percent stake each in two oil fields adjacent to the Yme field from Talisman. Oil production in the Yme field was undertaken in the past but is now suspended. Using the latest exploration technologies, production is due to resume in the October to December period of this year.

Resumed oil production in the Norwegian field is expected to average 25,000 barrels per day over four years, with initial output projected to peak at more than 40,000 barrels a day. Arabian Oil will spend some $100 mn on the deal, including the cost of production facilities, according to people familiar with the contract.

Panama allows more time for refinery feasibility study

February 20, 2009. Panama is giving Qatar Petroleum and Occidental Milinstring Projects more time to complete a feasibility study on a refinery in the western part of the country. The two companies were to have presented a report last December on the feasibility of the project to be carried out in the western province of Chiriqui, which borders Costa Rica. By the new deadline the two companies must report on the possibility of completing the project, which would enable the country to process and refine crude oil. The feasibility study, carried out since 2007 by Qatar Petroleum and U.S.-based Occidental Petroleum, will determine if it is advisable to build the refinery, specify the building plans and provide other details. Construction of the refinery, which has a budget of $8 bn and would be capable of processing about 350,000 barrels of crude oil per day, would require hiring approximately 5,000 people, while at least 1,000 more employees would be needed to operate and maintain the facility.

Golar secures position in Gladstone LNG project

February 20, 2009. Golar has signed a Heads of Agreement (HOA) with the Australian listed company Liquefied Natural Gas Ltd (LNG Ltd) covering the joint development of a project to produce LNG from Coal Seam Gas (CSG) in Gladstone, Australia. The HOA formalizes Golar's participation in the project and defines key commercial terms for both equity participation and the purchase of the LNG from the project on a FOB basis.

The project company Gladstone LNG Pty Ltd (GLNG) is intending to develop a mid-scale (1.5 mtpa) liquefied natural gas plant in the Port of Gladstone, Australia. The plant will purify and liquefy CSG sourced from the Arrow Energy Ltd gas fields, located in Central Queensland, north east Australia. Golar and LNG Ltd have agreed to each take an equity position of 40% in the GLNG joint venture. Arrow Energy has an option to take the final 20% equity in the project.

The current estimated development cost for the LNG facility is approximately US$ 500 mn. The CSG will be delivered by Arrow Energy to the LNG plant boundary at Gladstone. Once the CSG has been processed at the LNG plant, it will be loaded onto LNG Carriers for export markets. First production is currently scheduled for 2012. The project also offers attractive expansion opportunities.

Under the terms of the HOA signed with LNG Ltd, Golar has agreed to purchase the full LNG output from the project on an FOB basis. In parallel to the negotiations with LNG Ltd with respect to the purchase of the LNG, Golar has progressed discussions to sell its offtake on a delivered, long term basis to a credit worthy LNG buyer. Delivery of the LNG will utilize up to two of Golar's existing LNG Carriers. Golar anticipates that, in addition to financing to be raised at the project level, it will also be able to raise financing in connection with the offtake arrangements and thereby limit the requirement for new equity that may be required by Golar LNG.

Santos moves ahead with LNG plant

February 20, 2009. Oil and gas company Santos opened an office at Gladstone in central Queensland as it prepares to build its liquefied natural gas (LNG) processing plant. The Adelaide-based company announced a record $1.7 bn profit in 2008, boosted by a sale of 40 percent of its project stake to Malaysian company Petronas for $4 bn. The Gladstone plant is expected to be operating by 2014, turning coal seam gas from the Bowen and Surat basins into liquefied gas.

Nippon delays formation of venture with CNPC

February 20, 2009. Nippon Oil Corp. has decided to delay the formation in Osaka of an oil refining joint venture with China's biggest oil refiner China National Petroleum Corp. to June or later. The largest Japanese oil refiner and CNPC had planned to form the venture in April, charging it with producing petroleum products for export to the Asia-Pacific region. They plan to transform Nippon Oil's refinery in Osaka into the venture's assets. The global business environment for refiners has taken blows from the worldwide economic deceleration, which has undercut demand for petroleum products.

The development has led the two to discuss the necessity of cutting production expenses at the refinery, forcing a postponement in the conclusion of a final contract for the venture's establishment. There will be no change in equity stake numbers when the venture finally comes into existence, with Nippon Oil envisioning putting up 51 percent of the venture's capital and CNPC providing the reminder.

The Japanese refiner said the Osaka refinery will operate as usual as a Nippon Oil arm until the venture can be established and it takes over the refinery. Refineries in Japan have come to face excess capacities because of falling demand for petroleum products against the backdrop of the nation's slumping economic activity.

Daewoo Engineering wins $278 mn order for LNG facility

February 19, 2009. Daewoo Engineering & Construction Co., South Korea's largest builder received a US$278 mn order to build a liquefied natural gas (LNG) facility in Algeria. The deal calls on the builder to complete construction of the facility by January 2012.

Fluor to build Galp Refinery in Portugal

February 18, 2009. Fluor Corp. has been awarded an engineering, procurement and construction (EPC) contract for Galp Energia's Porto Refinery Conversion project in Portugal. Fluor began the front-end engineering and design (FEED) work in October 2007, which included conceptual engineering, front-end loading and early procurement of key equipment. The total installed cost of the project is expected to be about 350 mn euros (about US$455 mn) of which Fluor booked US$400 mn in the fourth quarter 2008.

The Porto Refinery Conversion Project, when completed, is expected to produce 2.5 mtpa of diesel, gasoline and kerosene fuels. The completed refinery will meet the most up-to-date European environmental regulations, will increase the utilization rate of the existing refineries and will be capable of processing heavier crude oil. Fluor's proven multi-office execution approach is being led by its Camberley, UK, execution center with significant assistance from professionals in its Madrid office. Project completion is expected sometime in the fourth quarter of 2010. Fluor previously built a naphtha hydrodesulfurization unit for Galp Energia in 2002. Fluor Corp. provides services on a global basis in the fields of engineering, procurement, construction, operations, maintenance and project management.

Shell plans Pernis work

February 18, 2009. Royal Dutch Shell is planning maintenance work at its Dutch Pernis oil refinery, Europe's biggest, in the October/November periods of 2009 and 2010. The capacity of the 412,000 barrels per day Pernis refinery was usually reduced by about 20-25 percent during its main turnarounds. The schedule showed that for 2009 the refinery planned to take several units offline, mainly during the four weeks of November. Units undergoing work on the schedule included a desulfurization unit, used to produce diesel, and a residue hydrocracker unit. There was also a small amount of maintenance planned in April. For 2010, the schedule showed that several units including those used in the production of gasoline, would be offline for all of October and all of November.

Energy Transfer holds open season for Tiger Pipeline

February 20, 2009. Energy Transfer Partners, L.P. (ETP) launched a binding open season to solicit market participation in its recently announced Tiger Pipeline project, an approximately 180-mile, 42-inch new interstate natural gas pipeline that will connect to ETP's dual 42-inch pipeline system near Carthage, Texas, extend through the Haynesville Shale and end near Delhi, Louisiana, with interconnects to at least seven interstate pipelines at various points in Louisiana. ETC Tiger Pipeline, LLC, a subsidiary of Energy Transfer Partners, is seeking binding bids from interested customers for contract terms of 10 years or longer. The open season will run from February 20, 2009 through March 20, 2009. The Tiger Pipeline is anticipated to have an initial throughput capacity of at least 1.25 bcf per day, which may be increased to 2.0 bcf per day based on the results of the open season.

ETP has a 15-year commitment from Chesapeake Energy Marketing, Inc. for firm transportation capacity of approximately 1.0 bcf per day. When completed, the Tiger Pipeline will provide takeaway capacity from the increasingly constrained Carthage Hub area in East Texas. The Carthage Hub area receives large volumes of natural gas from several producing basins in Texas, including the Barnett Shale and Bossier Sands basins as well as from the Permian Basin in West Texas.

The Tiger Pipeline will also provide takeaway capacity from the rapidly expanding Haynesville Shale play in East Texas and Northern Louisiana. Subject to receipt of the necessary regulatory approvals, the Tiger Pipeline is expected to be in service in the first half of 2011. Energy Transfer Partners, L.P. is a publicly traded partnership owning and operating a diversified portfolio of energy assets. ETP has pipeline operations in Arizona, Colorado, Louisiana, New Mexico, and Utah, and owns the largest intrastate pipeline system in Texas. ETP's natural gas operations include intrastate natural gas gathering and transportation pipelines, natural gas treating and processing assets and three natural gas storage facilities located in Texas. These assets include approximately 14,600 miles of intrastate pipeline in service, with approximately 250 miles of intrastate pipeline under construction. In addition, ETP owns 2,450 miles of interstate pipeline in service, with approximately 250 miles of interstate pipeline under construction. ETP is also one of the three largest retail marketers of propane in the United States, serving more than one million customers across the country.

Azerbaijan has enough gas for Nabucco

February 19, 2009. Azerbaijan is said to have enough gas reserves to fill the planned Nabucco pipeline. Currently, Azerbaijan has more than 2,000 bcm of gas reserves, of which 1,200 bcm are in the Sah Daniz field, 300 bcm in the Azari-Ciraq-Gunasli block of fields and 500 bcm in other fields. Azerbaijan had some other promising fields and that its current gas reserves enabled his country to take part in the Nabucco gas project.

Groups appeal Sparrows Point LNG project decision

February 20, 2009. Nearly a dozen government, business and community groups in three states have asked federal energy regulators to rescind approval of a proposed liquefied natural gas terminal at Sparrows Point in eastern Baltimore County and an 88-mile pipeline to Pennsylvania. The Federal Energy Regulatory Commission will have until March 16 to reply. The number of appeals is not at all unusual, given the interest in this issue. All requests will be addressed.

The commission can reaffirm its decision, modify it, or maybe the arguments are so compelling they will rehear the request. Besides filings by Maryland's attorney general and Department of the Environment and Baltimore County's attorney, appeals were submitted by homeowners' associations, developers and environmental activists in Maryland and Pennsylvania and by Columbia Gas Transmission LLC of Fairfax, Va. Most appeals contended that the FERC's January 15 decision in favor of Virginia-based AES Corp. was rushed. Columbia Gas said the proposed pipeline would be too close to its pipelines. There are so many points of law that FERC just blew by in its haste to issue this permit. The commission gave AES permission to proceed with the project once the company meets 169 conditions based on environmental and safety concerns. The appeals, which had to be filed, criticized the commission for ruling before critical environmental reviews by various state and federal agencies were completed. In addition to raising environmental issues in his appeal, Fisher discussed what he called the injustice of placing the project in the midst of some of Baltimore County's poorest neighborhoods, such as Turners Station.

China unveils rescue plan for petrochem sector

February 20, 2009. China's government has released details of a stimulus package designed to bolster the light industry and petrochemical sectors. The plan uses tax incentives, export rebates and credit support. The package is the latest in a series of recently-announced relief packages designed to support key industries ahead of the National People's Congress which takes place early next month. The package, approved by the State Council, will accelerate construction of mega-oil refining and ethylene projects, and step up the closure of outdated petrochemical plants. New regulations designed to block expansion at coal-to-chemical plants has also been announced. The majority of aid to light industry will come in the form of tax rebates on exports, the reports said. The plan will also expand a program to subsidise home appliance purchases by rural residents. The program was recently expanded to a national level after an initial trial in selected provinces.

Nigerian, Algerian officials discuss Saharan Gas Pipeline

February 20, 2009. The Nigerian government held talks with the Algerian government on the 4,300km long, 48-56 inches diameter Trans-Saharan Gas Pipeline (TSGP), which would connect the Niger Delta in Nigeria and Niger, to existing gas transmission hubs to the European Union at El Kala or Beni Saf in Algeria's Mediterranean coast. It is expected to cost $12 bn (about N1.87trillion naira). The Group Managing Director of the Nigeria National Petroleum Corporation (NNPC), Alhaji Sanusi Barkindo, who led the Nigerian delegation to the meeting held at the NNPC towers Abuja, described the project as one that would have multiplier effect on the economies of the nation involved and the consumers of the product.

The project has multiplier effects on our economies. It is a competitive project, a source of diversifying sources of energy and strengthening the global interdependency of both consumers and an avenue for producers. Barkindo stated that the project, which is already attracting the interest of consumers, participants and financiers, is strategic to the European Union (EU) and should not be bedeviled with commercial and technical issues. The immediate challenge is to clean up the draft Memorandum of Understanding (MoU) between our countries including Niger for the signatures of our three governments. All the commercial and technical issues relating to this project should be signed to the joint venture agreement. The MoU would be the umbrella document setting in broad terms, the objective of going into the project and would demonstrate to the international community, the preparedness of the respective countries involved to pursue it to a logical conclusion. The Nigerian Gas Master Plan would be the blue print for both the development of domestic and export gas and would provide infinite flexibility to meet the market demand of consumers.

Slovenia, Russia make progress on South Stream talks

February 20, 2009. Slovenia and Russia have taken a step forward in talks on the planned South Stream gas pipeline, a potential supply route to Europe which could run through Slovenia. Most of the agreement (on running South Stream through Slovenia) is harmonized to the satisfaction of both parties. It is due to be built by 2013 and will transport Russian gas from the Black Sea to southeast Europe, avoiding Ukraine, whose row with Russia left many countries in the region without gas in January.

POWER

WAPDA plans to construct 32 dams in Pakistan

February 24, 2009. The Water and Power Development Authority (WAPDA) has planned to construct 32 small and medium dams in all four provinces of the country in addition to implementing mega projects in water and hydropower sectors. The construction of eight small and medium dams, two in each province, would be undertaken in the first phase. These included Hingol and Naulong dams in Balochistan, Nai Gaj and Khadeji dams in Sindh, Bara and Chudwan Zam dams in NWFP and Ghabir Dam and Dera Ghazi Khan hill torrents in Punjab. These dams had been planned to tap the local water and power resources. The WAPDA adviser told the delegation the Authority was constructing five hydropower projects under ‘Vision 2025’. Four of them with accumulative power generation capacity of 323 MW would come on line in 2010 and 2011, while the 969MW Neelum Jhelum Hydroelectric project would be completed in 2016. Earlier, WAPDA member (finance) said WAPDA was fully focused on optimal utilisation of water and power resources for sustainable economic growth in the country. The centre was meant for fostering cooperation in the energy sector among SAARC members.

Swaziland studies 120-MW hydropower plant

February 24, 2009. The Swaziland Electricity Company (SEC) has invited submissions from engineering consultancy firms, for the full feasibility and predesign study for the Ngwempisi hydropower cascading scheme. Companies wishing to take part in the study would be required to attend a compulsory site visit on March 5. The SEC generation manager Alton Nhlengethwa told Engineering News Online that the SEC was investigating cascading schemes that could be operated to generate power during peak hours. The scheme was looking at the potential to generate 120-MW of power from three stations in series. Eskom’s new time-of-use tariffs, which made electricity more expensive in peak hours, meant that the Swaziland utility could reconsider the feasibility for operation of the cascading scheme in peak hours only. Swaziland currently generates some 60-MW of power from hydropower, which accounts for about 30% of the country’s 200-MW electricity demand requirement. If the Ngwempisi hydropower cascading scheme could produce 120-MW of power during peak periods, Swaziland would still have a small deficit of power and would thus still rely on importing power. The SEC was also investigating the possibility of building a coal-fired power station in Swaziland. Swaziland had an estimated one-billion tons of coal reserves, in the coal belt that stretched from Mpumalanga in South Africa, to Kwa-Zulu Natal. The coal was previously mined but that was discontinued, however, two coal miners have recently been given concessions, thus reviving the plans for mining in the country. Nhlengethwa emphasised that the coal fired power station was still in very early days, and that the utility was looking at all the options and possible arrangements, particularly since the coal was said to be of a high quality and could be used for export. Should Swaziland generate excess capacity, this would be exported to the Southern African Power Pool, and used wherever it was needed.

Italy signs deal with France for return to nuclear power

February 24, 2009. Nuclear power is set to return to Italy's energy portfolio.  Italy became the latest European country to embrace nuclear energy as it overturned a 21-year ban on nuclear power in the country and signed an agreement with France to build four new atomic plants. The deal was signed February 24, during a meeting in Rome between Italian Prime Minister Silvio Berlusconi and French President Nicolas Sarkozy. The pact covers research and waste treatment as well as the construction of the nuclear plants. As part of the accord, Italian and French energy firms ENEL and EDF are to build at least four European pressurized water nuclear reactors (EPRs), the first of which is to be operational by 2020. France's EDF said it would extend its nuclear know-how to Italian company ENEL for the plants' construction.

EPRs are considered the next generation of nuclear power plants.  Sarkozy hailed the deal as historic and said France was prepared to offer its southern European neighbor a limitless partnership on nuclear energy. Italy currently relies on foreign sources such as Russia and Algeria for 87 percent of its energy needs. Under the nuclear deal, Italy's ENEL is set to acquire a 12.5 percent share in France's second EPR, in addition to the 12.5 percent quota it already has in the country's first modern EPR. In November 1987, Italians voted in a referendum against nuclear power stations on their country's soil. The poll came one year after the Chernobyl nuclear disaster in Ukraine. Italy's four nuclear plants operating at that time were shut down. The decision taken by the Berlusconi government highlights renewed enthusiasm in some parts of Europe for nuclear energy. In early February, Sweden's ruling center-right party announced its intention to present a bill overturning a near-30-year ban on atomic plants in that country. In Britain, the government has adopted a generally pro-nuclear stance. In January this year, the UK government gave the green light for a new generation of nuclear plants to be built in Britain. Climate change and the need to secure long-term energy production have been cited as factors in those decisions.

Gasification plant awaits word on loans from DOE

February 23, 2009. The company that could bring a $2 bn energy project and up to 300 jobs to Moss Point is working to meet a March deadline for the plan's linchpin, $800 mn in federal loan guarantees. The project is a gasification plant at the old International Paper Co. site, which could produce 123 mcf of substitute natural gas daily. New York-based Leucadia National Corp., Mississippi Gasification's parent company, is focusing its efforts on a U.S. Department of Energy loan application. The project has already secured $300 mn in Gulf Opportunity Zone bond financing from Gov. Haley Barbour. In June, the DOE announced $30.5 bn in loan guarantees for projects that employ advanced energy technologies. Of that amount, $6 bn was set aside for coal-based power generation and industrial gasification. In December, Jackson County supervisors and Port Authority commissioners approved a lease option agreement that enabled Mississippi Gasification to apply for the loans, Freeland said. The company submitted the first portion of the application in January. The second and final phase is due March 23, with a decision expected in late spring. The company is initially paying $11,100 monthly to lease the 185-acre Moss Point Industrial and Technology Complex parcel. If funding is approved, Leucadia would lease it for $650,000 annually. The project would create 250-300 permanent jobs and about 2,000 construction jobs. It could generate $10 mn a year in tax revenues for the county, $8 mn-$10 mn for the Moss Point School District, and as much as $6 million for the city of Moss Point. The DOE loans are necessary for the project to come to fruition. The syngas can be burned to produce electricity, used as a feedstock in making other chemicals, or made into methane. Leucadia wants to use petroleum coke as a feedstock to produce methane and make substitute, or synthetic, natural gas. SNG is composed mostly of methane and is chemically similar to natural gas. It can be transported through natural gas pipelines and is stable. The feedstock petroleum coke, or pet coke, is made mostly of carbon and is a byproduct of oil refining. It's bottom of the barrel and looks like coal. The plant would not be reliant on Chevron's Pascagoula refinery for its pet coke supply. The company is in talks with a private supplier, which may or may not call on Chevron for pet coke.

Beirut signs deal with Cairo to receive Egyptian electricity

February 23, 2009. Beirut and Cairo inked an agreement to supply Egyptian electricity to Lebanon ranging between 150 MW to 450 MW. The agreement was signed in Cairo between Lebanese Energy and Water Minister Alan Tabourian and his Egyptian counterpart Hassan Younis. Egypt would supply Lebanon with electricity through a power grid passing through Jordan and Syria, adding that Beirut would receive power ranging from 150 MW to 450 MW during the off-peak period. If Jordan and Syria have sufficient electricity from their own power stations then Lebanon can receive as much as 450 MW. Lebanon will get at least 150 ME. Lebanon will start receiving Egyptian electricity in one month at the most if everything went according to plan. Power rationing in most areas in Lebanon would fall once the country gets connected to the regional grid. Most areas in Lebanon are currently experiencing a severe electricity rationing ranging between eight to 12 hours a day. The country's aging and poorly maintained power stations only supply consumers with 1,500 MW of electricity, while the actual need is 2,300 MW. There are three main regional power grids in the Middle East. The first links Libya, Egypt, Jordan, Syria, Lebanon, Iraq, Palestinian territories and Turkey. The second links Libya, Tunisia and Morocco while the third connects all the Gulf Cooperation Council members. Lebanon is also hoping to receive Egyptian gas in the coming few months to run one of the two turbines in Der Ammar gas fired station in Tripoli. The Lebanese government has been struggling to reduce waste in the electricity sector and increase output. Since 1992, all successive governments have heavily subsidized the purchasing of gasoil and fuel oil which runs most of the country's power stations. The current government has shelved plans to privatize the electricity sector due to the poor state of the stations and unfavorable market conditions.

NEC approves N303 bn for power projects inn Nigeria

February 24, 2009. National Economic Council (NEC) comprising the 36 states of the federation, and the Federal Capital Territory (FCT), approved the sum of N303 bn to address problems of power generation, transmission and distribution in the country. The money which is to be sourced from revenue from the excess crude may have finally set the stage for the declaration of emergency in the power sector as promised over a year ago by President Umaru Yar’Adua. The three tiers of government had in 2008, agreed to invest $5.3 bn to shore up power capacity in the country to 6,000 MW by end of 2009 and an additional 10,000 MW by 2011. Addressing State House Correspondents, after a meeting of the Presidential Committee on National Independent Power Projects (NIPP), at the Presidential Villa, Abuja, Gabriel Suswan, governor of Benue State, accompanied by Lanre Babaloa, minister of energy, said the money is expected to cover major power projects in Sapale, Delta State; Alaoje, Abia State; Papalanto, Ogun State; and Omotosho, Ondo State.

EDF and ENEL seal nuclear partnership

February 24, 2009. EDF and ENEL seal an industrial partnership for the development of nuclear energy in Italy at the Franco-Italian summit. During the Franco-Italian summit now taking place in Rome, in the presence of the French President and the President of the Italian Council, EDF and ENEL confirmed the signing of two industrial agreements on the development of nuclear energy, following the previous agreement in Nice in November 2007. The first agreement sets up a 50/50 consortium between EDF and ENEL to look into the feasibility of developing a least four nuclear reactors based on EPR technology in Italy. The agreement will therefore enable EDF to participate in the nuclear programme that ENEL is expecting to develop in Italy, although at this stage construction is still dependent on changes in the legislative and regulatory framework and on the technological choices. A second agreement also plans to extend ENEL's participation in the French new nuclear programme and to join forces with the Italian Group in the construction and operation of the new EPR reactor at Penly (Seine Maritime). ENEL already has a 12.5% interest in the EPR under construction at Flamanville (Manche) and will take a similar holding, alongside other partners, in the second French EPR to be built by EDF and brought into service in 2017. This partnership is consistent with the industrial partnership that the two companies signed up to in 2007 and provides for ENEL to participate in France's 3rd generation nuclear programme under EDF's plans for EPRs in France between now and 2023. EDF also has the option to take part in any nuclear projects that ENEL develops in Europe and in particular in Italy. The EDF Group, one of the leaders in the energy market in Europe, is an integrated energy company active in all businesses: production, transport, distribution, energy selling and trading. The Group is the leading electricity producer in Europe. In France, it has mainly nuclear and hydraulic production facilities where 95% of the electricity output involves no CO2 emissions. EDF's transport and distribution subsidiaries operate 1,246,000 km of low and medium voltage overhead and underground electricity lines and around 100,000 km of high and very high voltage networks. The Group is involved in supplying energy and services to more than 38 million customers around the world, including more than 28 million in France. The Group generated consolidated sales of E 64,3 bn in 2007, of which 47% in Europe excluding France. EDF is listed on the Paris Stock Exchange and is a member of the CAC 40 index.

US leaders urge action on better electricity grid

February 23, 2009. U.S. political, business and environmental leaders urged the nation to act quickly to build a unified, national electricity grid, both to diminish the impact of global warming and to boost the economy. Countries in Asia are outpacing the United States in such work, which includes more efficient power transmission lines. The Department of Energy plans to invest in research to devise better means of increasing and decreasing the voltage that flows along those lines so that communities can tap into off-ramps built into the power highway, much as they can use off ramps designed into the nation's interstate highways. The nation's current system of delivering power to the way water is delivered. But, under a smart system, electricity would be able to flow in more than one direction.  The agency plans to invest in ways to tap into solar and wind power to create grids that can support two-way flows of electricity. The biggest bottleneck is the failure of industry to agree on a single standard so that different systems could interact with one another. Until such a standard is set, community leaders will be reluctant to invest in the kinds of smart grids that will conserve energy, reduce dependence on foreign oil and slow global warming.

Govt. targets 430 MW of electricity in Nigeria

February 22, 2009. The Federal Government is targeting the generation of at least 430 MW of electricity, in the additional component of the Gurara Water project, under construction since 2001. The project originally conceived to transfer water to lower Usuma dam to address the problem of water shortage in the Federal Capital Territory (FCT), have so far gulped over N100 bn. Vanguard investigations at the project site, located in Jere, Kaduna State, revealed that, though at 65 per cent stage of completion, the inability of government to pay debt owed the contractor, Salini Nigeria Limited, may further stall progress of work and expected boost to the worsening power situation in the country. Studies have shown that, the down steam Gurara phase two has the possibility of over 430 MW of electricity to be generated in two years. Federal government investment on Gurara is over N100 bn and it has potential for over 30 MW. The irrigational component of Gurara dam is on the finishing touches, with already prepared 2,000 hectares of land available, with the potential for 8,000 hectares. The minister explained further that, the President Umaru Yar'adua administration is facing the challenges of securing funding for the project, aside the inherited crisis of disjointed plan and frame work that has created a very huge liability on the account of the funds that is available. The low cash projection of government has made it difficult to sufficiently fund projects for people to see the dividends on time.

Heavy power cuts to stay in Nepal

February 18, 2009. Senior officials said the current load-shedding hours would continue until towers in Sunsari toppled by Koshi floods in August last year are restored. The government expected to import 90 MW of electricity from India after the restoration of the towers.  Work on restoring the towers is at the final stage but Nepal cannot import more than 60 MW.  The Indian side has restored only one of the two circuits of its transmission line across the border but both the circuits need to be restored for supplying 90 MW. The 36-MW Bhotekoshi Hydroelectric Project, which was currently generating 14 MW, remains shut for the past two weeks due to technical problems.  Water levels in the river feeding various hydro projects have rapidly receded lately to the shock of NEA engineers. All the hydroelectric projects in the country, except Kulekhani, are built in run-of-the-river model. NEA has been operating the only storage-type Kulekhani project in its full capacity. This way officials say the reservoir could run dry so they must stop power generation from the plant will have to stop completely in the next 20-25 days, he said.

Renewable power tariff revision caught in deadlock

February 24, 2009. The Karnataka Electricity Regulatory Commission (KERC) has asked the stakeholders in the power sector to submit proposals so that the tariff fixed in 2005 could be revised. However, instead of the proposed revision of tariff by year 2010, private players, mainly constituting renewable energy generators are all for an immediate revision in tariff. In a petition addressed to KERC, the Renewable Energy Developers Association of Karnataka (REDAK) has requested KERC to revise the tariff as soon as possible. According to REDAK, five years is too long a period to stick to the same tariff (control period). REDAK's demand is based on the rationale that there has been a 'phenomenal' change since 2005 in all spectrums, including fiscal climate, project development and the power scenario in the state, and the tariff has not been revised accordingly; no real capacity addition can occur and investors would be subjected to difficulty owing to the constraints in installing the projects on the basis of project parameters considered for the old set of proposals. Meanwhile, KERC is opposed to the immediate revision by invoking the tariff order of 2005, which has a validity of five years and a revision will take place only at the end of 2009. A power purchase agreement is signed for a period of ten years. Rates are fixed at the time of signing the contract and is valid till the contract ends. If there are violations on either side (the buyer or seller), the Commission will arbitrate such issues. Owing to the stalemate, the assessed generation potential from mini hydro projects is 2,500 MW, of which less than 500 MW has been tapped. If not for the deadlock, private players moaned, there would have been even more investments in mini hydro projects. After hearing the views of the government and other stake holders, the KERC will prepare a draft of the new tariff order, which will be subject to changes depending on the outcome of the public hearing.It is to be noted that a similar situation arose in Tamil Nadu when the Tamil Nadu Electricity Regulatory Commission (TNERC) had relaxed the control period in view of the requests filed by a section of renewable energy generators.

Suzlon mulls power plant in Bagalkot

February 24, 2009. Mumbai-based Suzlon company will set up a 1000 MW wind power generation unit in Bagalkot district of Karnataka. The unit would come up on 1000 acre area between Kulageri and Kerakalamatti villages. The state government has approved the project. The government had special concern for north Karnataka region and was mulling over 100 per cent stamp duty exemption on KIADB lands in some cities. At a high level committee meeting held recently the government has approved projects worth Rs 82,000 crore in north Karnataka. Over 200 petitioners aired their grievances at the adalat. The grievances were largely related to power, land acquisition and NOCs from different departments. Nirani said the branch office of Visweshwaraiah Trade Centre had been opened in Dharwad. It will provide information about import and export to the industrialists of North Karnataka besides giving information about the requirements of industries across the globe. The new industrial policy to be announced soon will reduce the hurdles faced by the entrepreneurs while setting up industries.

Tata Power to generate 25 pc of output from green sources

February 20, 2009. In the next 10 years, Tata Power Company Ltd plans to produce 25 per cent of its total power output from renewable energy sources. It would be concentrating on wind, geothermal and hydro sources for the generation. It is in the strategic interest of the company to support sustainable energy. Even as the company is investing in thermal coal projects it is also exploring possibilities for investing in green energy. For combating climate change, the renewable energy policy is already in place but it needs to be implemented in an appropriate manner. For every unit of power produced by the company’s plants, the emission is 750 kg of carbon dioxide. Tata Power wants to source about 500 MW of power from geothermal sources over a period of time.

Bengal needs to switch from thermal power to other sources of energy

February 19, 2009. Thermal power accounted for more than 94 per cent of the power generated in West Bengal and there was an urgent need to look for non-conventional sources of energy. The State Government plans to allot land to The Energy and Resources Institute (TERI) at the Baruipur Township for studying the impact of climate change. The institute would provide scientific and knowledge inputs on various aspects and impact of climate change.

HPCL to focus on bio-fuel in a big way

February 19, 2009. HPCL is going ahead with its plan for bio-fuels in a big way with ethanol mix and jatropha.  HPCL is now experimenting with 10 % ethanol mix in petrol in Belgaum against the prevailing 5 % mix in the industry. The company is also going for a massive cultivation of jatropha in association with Chattisgarh Renewable Energy Development Agency (CREDA) in Chattisgarh in 15,000 hectares. The idea is to go for about 10 to 15 % ethanol mix in petrol and 20 % bio diesel from jatropha, which will improve the quality of fuel to a great extent. As for the conventional fuel, HPCL's 9 mt sophisticated refinery at Bhatinda in Punjab will get completed three months ahead of schedule by December 2010. The Rs 18,900 crore refinery being implemented in collaboration with Mittal Group will be producing fuel to Euro-5 standards. The company is also starting its 44th LPG bottling plant in Kochi at a cost of Rs 32 crore. It will have a capacity of 44,000 tonnes a year. The company has started making profit from January this year and hopes to end the quarter with better results. The last three quarters have been bad with oil prices crashing.

Suzlon installs 20 solar panels in Nashik

February 19, 2009. Suzlon Energy Ltd has installed 20 solar power panels at its wind farm in Adwadi, Nashik. It is the first wind farm of the company to utilise solar energy to power its site operations. TATA BP Solar has provided the photo-voltaic panels, which will supply power to the site office as well as the project yard. A company spokesperson said that as the power generated by the wind turbines is committed to the power grid and its customers, therefore it cannot be used for the wind farm operations. Plus most wind farms are located in remote regions, small back-up diesel generators are needed for basic requirements at the site offices. Therefore, it has opted for solar panels. The installed panels are approximately equivalent to a 10KVA diesel generator set. On an average a 10 KVA diesel set runs for 20 hours a day incurs annual operation and maintenance cost of Rs 4 lakh, while the cost of the solar panels and installations is about Rs 4.5 lakh. The project pays for itself approximately in a year’s time.

Nagpur selected first model solar city in India

February 18, 2009. The programme of development of solar cities is being launched in the country. Nagpur in Maharashtra will be the first solar city in the country. The Ministry of New and Renewable Energy proposed to develop 60 such cities during the 11th Plan Period. At least one city in each state to a maximum of five cities in a State will be supported by the Ministry. To meet the peak electricity demand of cities, to reduce dependence on fossil fuels and expensive oil and gas for energy and to promote increased use of renewable energy, this scheme has been developed.

Nagpur will become model solar city by 2012 under the scheme. Up to 10% of energy consumption of this city has been targeted to be met through Renewable energy and energy efficiency measures.50 % of the cost will be shared by the Ministry where Rs. 50 lakh will be provided for Master Plan, Solar city cell and promotional activities. Major solar energy system will be installed including street lighs, garden lights, traffic lights, hoardings, solar water heaters etc.

Energy Efficient Green Buildings also will be promoted on large scale in the city. To set an example for other cities to be developed as Solar Cities, it has been decided in the Ministry to develop two cities as Model Solar Cities. Financial support up to a maximum Rs95mn will be available to each of these Model Solar Cities for implementation of the Master Plan developed under the scheme from the Ministry. The support will be on 50% cost sharing basis from respective Municipal Corporation/City Administration/State Government. Release will be made after the city identified for development as Model Solar City submits its Master Plan for which a separate support is available under the scheme as per above. As the total funds of Rs190mn (MNRE support of Rs. 9.50 crore & the matching grant from Municipal Corporation/City Administration/State Government) for developing a city as Model Solar City may not be sufficient, the city, in addition to this grant will be eligible to draw separate support for installation of renewable energy systems from various ongoing schemes of the Ministry wherein the present restriction on the number/capacity of renewable energy systems/devices being supported in a city, if any, may not be applicable.

Eco clearance for 33 power projects pending

February 18, 2009. As many as 33 power projects pertaining to thermal and hydro-electric plants with capacity of 32,250 megawatt in various parts of the country are pending for environment clearance till January this year. In reply to a question in the Lok Sabha, Environment Minister, Mr Namo Narain Meena said Maharashtra tops the list seeking clearance for five thermal projects of total capacity of 6,125 megawatt.  There are a total of four hydro-electric projects including two in Himachal Pradesh which are waiting to get the approval from the ministry. The Environment Minister said no-submission of requisite information by the state government, non-availability of coal linkage, lack of water commitment for the project and non-conformity of the project site with the existing criteria were main reasons f or delay in grant of environment clearance.

IIT alumni form action group to save the Ganges

February 18, 2009. Former students of the Indian Institute of Technology (IIT) came together to form an action group to save the ecosystem around river Ganges.  The group 'IITians for Holy Ganga' is demanding immediate stoppage of work on the hydro electric projects on the Ganges river in its traverse through the upper reaches of the Himalayas.  A professor from IIT-Kanpur, GD Aggarwal, has been sitting on a hunger strike since Jan 13 in the national capital with similar demands.  The group has demanded that work on the Lahoari Nag Pala Hydro Electric Project in the stretch be stopped immediately.  The members also expressed concern for the deteriorating health condition of Aggarwal and asked the prime minister to immediately look into the matter. 

China to build 10 MW solar power plant

February 23, 2009. China is quickly moving into alternative energy in monstrous proportions. There will be an open-bid competition in March to choose a project lead for the construction of a 10 MWp (megawatt-peak) solar power plant in northwestern China. The plant is estimated to generate 16.37 mn kilowatt-hours of electricity a year. This follows a previous investment in a 400 megawatt-peak wind farm, which costs $659 mn to construct. The Chinese government expects the plant to cover a surface area of roughly 247 acres (0.38 square miles) in the desert of northwestern China. The cost of the on-grid solar power-generating station is expected to be about $73 mn. Were it scaled up to the 400 megawatt-peak level of the wind farm, it would cost in proportion $2.9 bn, making wind power more economical by a factor of over 4.4 times, meaning solar power costs $7.3 mn per MW, while wind costs $1.6 mn per MW, without factoring in long-term maintenance costs). There will be 38 competitors at the open bid, consisting of a Germany-based company and a Denmark-based one as well as 36 China-based enterprises including China Power Investment Corporation, China Huaneng Group, Suntech Power and Yingli Green Energy, the sources indicated.

The China government in 2008 approved the construction of a solar power-generating station located on an offshore island in Shanghai and another located in Inner Mongolia, with a feed-in tariff rate of four yuan per kilowatt-hour for each.  For this project, the China government will offer a feed-in tariff rate of below two yuan per kilowatt-hour, possibly as low as 1.7-1.8 yuan per kilowatt-hour under intensive competition. There are apparently five major plans for the construction of solar power plants underway, including a 166 MWp station in the Yunnan Province in southwestern China as well as a 1 GWp in the Qinghai Province in western China. China is expected to surpass Germany as the country with the largest absolute spend on renewable energy this year.

Wind Power Project Set For Portugal

February 20, 2009. Principle Power has signed an agreement to develop a floating, deep-water wind power project off the coast of Portugal for a major European energy utility. The Seattle-based startup and Energias de Portugal, the fourth-largest wind producer worldwide, will co-develop the project in three phases. Upon completion, the project will be Principle’s first commercial release of its WindFloat system, a floating foundation with features to dampen wave and wind turbine-induced motion.

The wind startup has worldwide exclusive rights to market and sell the WindFloat system from Berkeley, California-based Marine Innovation & Technology. Marine Innovation based the design off one of its oil and gas specific platform structures. Offshore wind development has been limited to near-shore installations in shallow water, generally less than 50 meters. WindFloat allows wind turbines to be sited in previously inaccessible locations in deeper water and with potentially better wind resources. But offshore wind projects, even those in shallow water, can be twice as expensive as onshore wind farms. And in shallow water, developers can use established foundation technology that fastens to the ocean floor. Still, offshore winds are strong and consistent and finding cost-effective ways to harvest that power in deeper water could open up otherwise untapped markets. The U.S. Department of Energy predicts that wind energy could provide as much as 20 percent of the nation’s energy needs.

SunPower completes Australia's largest roof-mounted solar system

February 18, 2009. SunPower Corp. a manufacturer of high-efficiency, solar cells, solar panels, and solar systems, has completed construction on a 305-kilowatt SunPower solar power system atop the roof of the Crowne Plaza Hotel in Alice Springs, Northern Territory. Invest North Pty Ltd. is the owner of the project, which is the largest roof-mounted solar power system in Australia. The Department of the Environment, Water, Heritage, and Arts (DEWHA) provided financial backing for this project as part of Australia's AUD $94 mn Solar Cities Program. Through the support of the Rudd Labor government, projects such as this set a clear standard for what is expected of Australian companies when reducing their environmental impact. SunPower entered the emerging Australian solar market in 2008, with the acquisition of Solar Sales Pty Ltd. Solar Sales had partnered with SunPower for several years prior as a leading systems integrator and product distribution organization. SunPower Corp. designs, manufactures and delivers high-performance solar electric systems worldwide for residential, commercial and utility-scale power plant customers. SunPower high-efficiency solar cells and solar panels generate up to 50 percent more power than conventional solar technologies and have a uniquely attractive, all-black appearance. SunPower is a registered trademark of SunPower Corp. All other trademarks are the property of their respective owners.

REpower bags big order from RWE Innogy

February 18, 2009. REpower Systems AG and RWE Innogy GmbH has signed a framework agreement on the supply of 250 REpower 5M/6M offshore wind energy units. With a potential volume of approx. EUR 2bn, this framework agreement represents one of the largest contracts in the history of wind industry and is at the same time the largest agreement ever in the area of offshore wind energy use. The first 30 offshore wind energy units of the REpower 5M model are scheduled to be delivered in 2011, and the delivery volume will continue to rise through the years 2012 to 2015. The units will for the most part be used in the planned Innogy Nordsee 1 wind farm, which will be built 40 kilometres to the north of the East Frisian island of Juist. Due to the distance, the wind farm will not be visible from the coast. With a nominal output of 5 and 6 MW and a rotor diameter of 126 meters, the 5M and 6M are among the largest and most powerful wind energy systems in the world. The rotor consists of three rotor blades of 61.5 meters in length and has an area greater than that of two football fields, while the turbine house has the dimensions of a semi-detached house. REpower is currently installing the first three machines of the 6M series in an onshore project on the border to Denmark.

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