The Cost of Competitive Politics & Fractured Mandates in the Energy Sector
|
I |
n the context of reforming the energy sector, the honourable Prime Minister of India once commented that it is difficult to implement policies that are ‘manifestly obvious’ because of ‘competitive politics’ and ‘fractured mandates’. While the Prime Minister could not have put it any better, there is one part which he did not articulate: much of the ‘competitive politics’ and ‘fractured mandates’ are creations of the Government that are meant to replace the ‘invisible hand’ in allocating scarce resources. Competitive politics and fractured mandates have meant that ‘policies’ that govern the energy sector today are merely a set of incremental decisions, some taken by the Government, some by the players in the industry but all heavily influenced by the existing patterns of energy supply and consumption and by political pressures to right wrongs imposed by international changes as they work through the domestic system. The precise impact of the jumble of controls, restrictions, subsidies and incentives are hard to measure with any accuracy. The point is that there is little or no coherent relationship between the objectives of ‘energy policy’ and the economic results attained.
Instead of soothing the ‘built-in’ conflict between producers and consumers of energy, Government interventions have facilitated a degenerative instability in the industry. The economic cost of this degenerative process is impossible to estimate with any precision but they are certainly very large. Sector instability (petroleum products), inter-sector conflict (power, coal, natural gas), consumer assertiveness and the propensity of the Government to respond to demands for protection from both industries and individuals in an ad-hoc, incremental fashion are illustrations of the degenerative process. Price controls on energy have created shortages (coal, power & natural gas) and shortages have invited the need to allocate scarce supplies; allocation has created a set of stakeholders who in turn perceive a threat from the return to market processes. The recent ruling by the Mumbai High Court over the contractual dispute between a producer of natural gas and a prospective consumer of natural gas illustrates this point. About a dozen ‘fixed prices’ each with its own logic, are allowed to operate in parallel in the natural gas sector. The judgement of the Mumbai High Court, just added another at the lowest end.
In keeping the ‘invisible hand’ out of the energy sector, the Government probably believes that it is sustaining the many opportunities it has for intervention along with the tools to do so to be considered a ‘Strong State’ in both the domestic as well as the international context. Government interventions, though initially undertaken for National purposes, has provided a mechanism for private claims on Government resources and thwarted original purposes of the Government confirming the postulate of organisation theory that the very act of intervention in a system may prepare the ground for subversion. The very policy tools and organisational resources that facilitated Government intervention has created opportunities for subunits to thwart Government policy goals. The subunits - various energy Ministries and Departments - have developed interests that are at variance with objectives at the National level. Interest groups and industries are merely exploiting opportunities that this divergence of interests has created within the Government bureaucracy. Measures of Government involvement in the economy and society are misleading indicators of ‘State Strength’. Government capacities can result in both action and inaction in interventions, deliberate abstractions and the withdrawal of interventions. If the Government intervenes in the economy to protect existing industries either by imposing a tariff or providing subsidised loans does its action indicate Government strength? If a Government withholds action allowing a non competitive industry to decline does it indicate weakness? The meaning of Government capacity does not lie in the degree of direct activity by Government units. The capacity of the Government to extricate itself or to resist intervention in the first place is a crucial aspect of Government capacity. The special kind of capacity – withdrawal – will eventually become the central vehicle of adjustment strategy for
The Case against Government Intervention in Energy Markets (part – III)
by Richard L. Gordon
Continued from Volume V, Issue No. 51…
Oil Import Problems in the Economics Literature
|
S |
tarting well before the oil turmoil of the 1970s, economists have found oil to be a major area for study. An enormous literature exists, and more accumulates on a regular basis. The material ranges over many issues and cannot be fully reported or reviewed here.
The single most critical contribution has been that of Professor M. A. Adelman of MIT. Starting in the 1960s, he undertook a comprehensive examination of the underlying economics of world oil and how it was affected by public policies around the world. His classic synthesis book reached completion just as the oil turmoil broke.20 Two decades later, he critically chronicled the evolution of oil markets from 1970 through the aftermath of the first Gulf War, with a particular focus on the behavior of oil-exporting countries.21 Adelman was by no means the only economist to explore this terrain—and many continue to work in these vineyards at present—but his contributions have proven the most important.
An interesting parallel to Adelman’s work was produced by President Nixon’s Cabinet Task Force on Oil Import Control.22 This was one of those rare government studies that seriously examined the issues. The effort received first-rate staffing, and sought and received excellent input on the issues. Several leading energy economists provided consulting reports, and interested parties were invited to provide input. The result was an impressive review of the issues, focusing on the centrality of fostering and preserving competition in oil and the unsuitability of the then-existing import quota system for oil. Unfortunately, the advice was ignored.
Numerous reviews of import dangers and policy have since emerged with important contributions by economists at Resources for the Future, such as Milton Russell, Douglas Bohi, Michael Toman,23 and, most recently, Ian Parry.24 The fascination with government oil stockpiles produced several efforts.25 The macroeconomic implications of oil-supply shocks have also received a great deal of attention. Professor James Hamilton at the University of California, San Diego, is the most quoted advocate of the argument that oil shocks cause major macroeconomic dislocations, but, as sketched below, many have concurred or dissented.26 The most comprehensive synthesis of oil economics and public policy, however, was produced by energy economist Robert L. Bradley Jr.27
Economics vs. Politics in World Crude Oil Markets
A long-standing conflict prevails between those who believe that the world oil supply is primarily driven by the conventional economic objective of wealth maximization, and those who believe that political influences are dominant. Neither view, however, should be pushed to its logical limits.
Proponents of the economic view generally recognize that at least one important departure from wealth maximization has arisen: the nationalization of the oil industry within OPEC countries during the 1970s. The ability of national oil companies to hire foreign managers, combined with prior efforts by OPEC members to arrange that its domestic workforce secured training in petroleum industry management, ensured that operations were not undermined. Investment decision making, on the other hand, was harmfully altered. During the private-ownership oil regime, foreign contractors concentrated on making profitable investments in capacity maintenance and addition. With nationalization, however, the funds derived from oil production became part of a national pool of wealth, and oil investments had to compete with other governmental priorities. The effects of this on the industry illustrate the fallacy of reliance on allegedly superior governmental investment skills (an issue to which I return later).28
One clear consequence of an economics based view of oil is that if oil policy is governed by national self-interest, the engagement with producers—so beloved among politicians and the NPC—is at best a waste of time, and at worst an arrogant presumption of superior knowledge. Exporting, if profitable, will be undertaken whatever foreign diplomats may suggest. Conversely, un profitability precludes exports.29 A key point here is that, to date, the danger from imports has been of temporary disruption of supplies due to some local crisis.30 This is a manageable problem that free-market institutions could have handled if they had not been thwarted by intervention (another matter to which I will return later). Eliminating or even sharply reducing oil imports is not a sensible response to such short-term disruptions.
It is premature to postulate and respond to the risk of longer-term supply disruptions. Indeed, it is hard to conceive of plausible long term threats. The advantages of oil trade to buyers and sellers are powerful incentives for both to maintain flows. Oil is more easily extracted, transported, transformed, and utilized than any other fuel. Rival energy sources are so costly that they prevent the energy transitions so eagerly advocated by many commentators. The resulting revenues to producing countries dwarf what they can earn elsewhere.
A classic illustration was Richard Nixon’s call for energy independence. Fortunately, the old Federal Energy Administration assembled a team of bright young operations researchers to synthesize the numerous studies commissioned to support the Project Independence initiative. Their well-designed (but necessarily very oversimplified) model nicely quantified what experienced energy observers sensed: the nature of petroleum use with its heavy concentration in the transportation sector makes substitution extremely expensive.31
Conversely, the political theory of producer behavior bears a strong resemblance to what economists call the “managerial-slack model” of firm behavior. In that model, producers supposedly have sufficiently limited objectives, so that they sacrifice opportunities for wealth maximization. The political theory of producer behavior, however, has the same inherent implausibility as the slack theories that it resembles.32
More critically, the key example cited to buttress the argument that politics drives producer behavior—the purported Arab oil embargo of 1973—implies no such thing. First, there was no embargo because selective embargos are infeasible.33Once oil hits the high sea, its destination cannot be controlled. Moreover, an embargoed nation can easily shift to other suppliers. Adelman’s classic 1995 analysis of world oil argues that what ever production reductions that were undertaken were motivated by a desire to force up oil prices rather than by a desire to punish anyone for support of
Further evidence is provided by the effects of the critical revolutions in
Similarly, Adelman’s 1995 book convincingly demonstrates that the special relation with
The nadir of this stress on diplomacy was the notorious 1971
As Adelman also warned, what has been critical is the oil dependence of these countries. Most possess nothing else that can produce significant incomes. Others have become so dependent on oil that other industries lie fallow. Maximizing wealth and spending the proceeds is far more rewarding to producer states than the capricious political manipulation of markets.
Some have suggested, at least tacitly, that the rise of Islamic fundamentalism profoundly alters the situation. That suggestion rests on at least two critical implicit assumptions: first, that because fundamentalists are willing to harm fellow Muslims, radical fundamentalist governments would take the ultimate step—avoided by the Iranian fundamentalists—of dooming Islamic nations by ceasing oil production; and second, that these fundamentalists have good prospects to assume power in many oil-producing states. A possible third tacit assumption is that the strategy of economic suicide could not be resisted any more than a scorpion could resist stinging the proverbial frog that was carrying it across the water. While all this might occur, it appears far too wild a possibility to be the core of national energy policies. Moreover, it is unlikely that any good strategy exists to prepare for this doomsday
The belief that oil producers are motivated by political considerations breeds the belief that some set of policies can ensure favourable access to oil relative to other customers. Of course, in markets governed by economic principles, access is secured by paying the prevailing market price, regardless of how competitive the market may be. With text book pure competition, everyone is a price taker, buying or selling what is economic at the prevailing market price. With imperfect competition, some sellers and buyers may affect the price, but sellers will still sell to all at whatever price results from the interaction.38
Logic and experience suggests that the search for favorable access is an exercise in futility. All parties in the oil trade face enormous pressures not to indulge in favoritism. By definition, favoritism is bad for the producing companies and countries. Favoritism can only mean selling to less remunerative outlets. Even the consuming countries suffer the consequences of diversion from what may be actual or potential allies.
Reality, however, has not prevented pursuit of special relations with oil producers. The classic illustration was the maneuvering to secure rights to develop oil in the
The NPC raises an alternative, more germane worry regarding access: the willingness of governments to allow the development of oil and gas resources. A good example of this problem is the reluctance of the
Notes:
20. M. A. Adelman, The World Petroleum Market (Baltimore, MD: Johns Hopkins University Press, 1972).
21.M. A. Adelman, The Genie out of the Bottle: World Oil since 1970 (Cambridge, MA: MIT Press, 1995). An anthology of his oil writings also was published: M. A. Adelman, The Economics of Petroleum Supply: Papers by M. A. Adelman 1962–1993 (Cambridge, MA: MIT Press, 1993).
22.
23.Douglas R. Bohi and Milton Russell, Limiting Oil Imports: An Economic History and Analysis (Baltimore: Johns Hopkins University Press, 1978); Douglas R. Bohi and W. David Montgomery, Oil Prices, Energy Security, and Import Policy (Washington: Resources for the Future, 1982); Douglas R. Bohi, Energy Price Shocks and Macroeconomic Performance (Washington: Resources for the Future, 1990); and Douglas R. Bohi and Michael A. Toman, Energy Security as a Basis for Energy Policy (Boston: Kluwer Academic Publishers, 1995). The American Petroleum Institute distributed the manuscript as a pamphlet without charge; that version was used here. At the time, Bohi and Toman were on the staff at Resources for the Future, but privately prepared the report for the American Petroleum Institute. Resources for the Future had a policy against accepting support from interested parties that failed to exclude government funding.
24. Parry, often with co-authors, has produced a series of useful studies, one of which is cited below, on the wisdom of various energy-related public policies, particularly involving motor vehicles.
25.Daniel H. Newlon and Norman V. Breckner, The Oil Security System (Lexington, KY: Lexington Books, D. C. Heath, 1975); David A. Deese and Joseph S.Nye, eds., Energy and Security (Cambridge, MA: Ballinger Publishing Company, 1981); James Plummer, ed., Energy Vulnerability (Cambridge,MA: Ballinger PublishingCompany, 1982);Alvin L.Alm and Robert J.Weiner, eds., Oil Shock: Policy Response and Implementation (Cambridge, MA: Ballinger Publishing Company, 1984); George Horwich and David LeoWeimer, Oil Price Shocks,Market Response, and Contingency Planning (Washington: American Enterprise Institute for Public Policy Research, 1984). Newlon and Breckner are the first of whom I amaware to blame the inadequacy of inventories on price controls. The other books discuss the problems of tapping the stockpile optimally.
26.His keyworks are: James D. Hamilton, “Oil and the Macroeconomy since World War II,” Journal of Political Economy 91, no. 2 (April, 1983): 228–48; James D.Hamilton“What Is anOil Shock?” Journal of Econometrics 113 (2003): 363–98; and James D. Hamilton and Anna Maria Herrera, “Oil Shocks and Aggregate Macroeconomic Behavior: the Role of Monetary Policy,” Journal of Money, Credit, and Banking 36 (April, 2004): 265–86.
27. Robert L. Bradley, Jr., Oil, Gas & Government: The
28. Adelman’s 1995 book makes these points.
29. As discussed below, further considerations relate to possible consequences of dealing with imported oil. Theories have proliferated onways to counteract monopolistic behavior of oil exporters and on the alleged macroeconomic effects of oil shocks.
30. This point is often made in the energy economics literature; the previously cited Resources for the Future studies and Adelman’s works previously cited are key examples.
31.
32. With the key exception of Oliver E. Williamson, the literature on slack is maddeningly imprecise. Williamson, however, developed a solid analysis of the behavior of managers who were able to divert profits from stockholders. He points out that the best strategy for managers in this situation is to maximize profits and then divert the money to themselves in wages and fringe benefits. He notes that cases can arise when the fringe involves undertaking an unprofitable venture. A firm’s output decisions would be altered undesirably when it hires employees who will produce more costs than revenues. Oliver E. Williamson, The Economics of Discretionary Behavior: Managerial Objectives in the Theory of the Firm (Chicago: Markham Publishing Company, 1967; Englewood Cliffs, NJ: Prentice-Hall, 1964).
33. Again Adelman’s 1995 book is a key source among the many presentations of this argument. The long lines at gas stations in the
34. This, too, is another argument of Adelman’s 1995 book.
35. Adelman’s warning that the U.S.-Saudi special relationship would prove a to be a fraud whenever seriously tested is still widely ignored, as was well illustrated by both President George W. Bush’s May 2008 failure to inspire Saudi output increases and Congressional complaints about the inadequacy of the effort.
36. The critical works on this again are Adelman’s. Both his oil books are relevant, as is M.A. Adelman, “Is the Oil Shortage Real? Oil Companies as OPEC Tax-Collectors,” Foreign Policy 9 (1973): 69–107 (reprinted in Adelman 1993, pp. 329–57). See also Anthony Sampson, The Seven Sisters: The Great Oil Companies and the World They Shaped (New York: Viking Press, 1975). Forbes did a remarkable reporting job that showed how the State Department blindly fostered acquiescence with oil-country demands. “Don’t Blame the Oil Companies, Blame the State Department,” Forbes, April 15, 1976. The State Department seems to have felt that this was the least bad possible outcome, but Forbes feels that the State Department overestimated the strength and resolve of the producing countries. The State Department characteristically failed to comprehend the importance of preserving competition.
37. M. A. Adelman, The World Petroleum Market (Baltimore, MD: Johns Hopkins University Press, 1972). M. A. Adelman, The Genie out of the Bottle: World Oil since 1970 (Cambridge, MA: MIT Press, 1995). Akins’s implicit rebuttal to Adelman can be found in James E. Akins, “The Oil Crisis: This Time the Wolf is Here,” Foreign Affairs 51, no. 2 (April, 1973): 462–90. I can attest from direct experience that Akins did not understand the limitation of his knowledge and was incapable of absorbing the substantial amount of advice available to him. In 1968, I presented a paper at an invitation-only seminar in
38. A further complication is “discrimination,” the ability to charge different prices for the same product to different parties. Whatever its role in the history of the oil industry and in special deals by some producers, it is not a factor in sales to large consuming countries.
39. This story appears in every one of the many histories of world oil of which the most celebrated example is Daniel Yergin, The Prize: The Epic Quest for Oil, Money & Power (New York: Simon & Schuster, 1991).
to be continued…
Courtesy: Cato Institute, Policy Analysis No. 628, December 1. 2008
Dedicated Freight Corridor: Logistics Simplified (part –V)
R K Tripathy, Research Analyst, InfralineEnergy Research
Continued from Volume V, Issue No. 51…
Mega Multimodal Logistics Parks to reduce the cost burden
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he Indian Railways have planned a few mega Multimodal Logistics Parks (MMPLs) - hubs providing state-of-the-art integrated logistic facilities with mechanized handling and intelligent inventory management at selected locations along the Dedicated Freight Corridors (DFCs) to reduce the overall logistics cost in the supply chain for the customers, duly leveraging the modern, high-capacity rail connectivity of the DFCs capable of meeting time-sensitive freight transportation requirement.
To develop these MMPLs through Public Private Partnership (PPP), the Ministry of Railways has invited Expression of Interests (EOI) in this regard, seeking essential information regarding proposed locations, land area required and type/segment of logistics business to be development etc. from large logistics service providers, Real Estate Developers, Third Party Logistics players Warehousing investors, Container operators, Financial institutions, Industrial houses etc. who are willing to participate in the development of these MMLPs.
For the Railways Logistics Park will add value to the supply chain, at least one part of the transportation, either the incoming or outgoing, has to be by rail.The Indian Railways would have to introduce innovative train services, so that customers shift to rail from road and use trains for either the incoming or outgoing from the hub. Currently about 80% of the products in
One simple innovation could be to introduce time-tabled container trains, time-tabled parcel trains etc. It is essential to have a few time-tabled freight trains, because reliability in a supply chain is a big cost saver [reduces inventory levels, improves customer service]
If the transportation, incoming and outgoing, is by road, then the
The Logistics hub should be multi-modal. It should have fast, regular and reliable connectivity with the port and airport. This can be by a dedicated railway line, with regular timetabled services or by good high speed highways.
The multi modal logistics parks along with dedicated freight corridor will significantly reduce the cost burden on Indian railways. It is upto the railways, whether it wants to build the parks on its own, or lease land to private parties to build, own and operate basis or develop the parks on a JV basis. Whatever it may be the concept is innovative and in long run will add to revenue generation for railways and ease the transport constraint for the nation.
DFC: The coal angle
Coal India Ltd, together with its subsidiary coal companies, is the single largest producer of coal in the world, nearly 400 million tonnes annually. The projection is that the volume will rise by more than 50 per cent in the next eight to nine years. Transportation of this huge volume is a major challenge not only for Coal
CIL produced 403.73 million tonnes (Mt) in 2008-09. Handling this huge volume is a big challenge. The producers are a handful but the consumers are spread all over the country. A few States, such as
The ratio is 60 per cent by rail, around 32-33 per cent by road and the balance by captive facilities such as merry-go-round (MGR), conveyor system and ropeways. In some cases the consumers pay more for transportation than for the price of the coal.
Coal, transported by railways, follows the preferential traffic order which is based on their end use and recommendation from the ministry. In the new FSA also, there is no obligation for railways to transport the coal but the time limits are fixed for delivery. Sometimes due to traffic congestion or unavailability of rakes or other constraints, coal could not reach to its destination affecting the production.
Around 40 -45 percent of the freight traffic is accounted for by coal. Out of this, about 70% is delivered to the thermal power stations, about 11% to the steel plants and rest to the others. Table below gives the Railway wise / Commodity wise loading upto March, 2009
Table: Railway wise / Commodity wise Loading Upto March, 2009
(Figures in Million Tons)
|
Commodity |
For Steel Plants |
For Washeries |
For Thermal Power Houses |
For Public Use |
Total |
|||||
|
2007-08 |
2008-09 |
2007-08 |
2008-09 |
2007-08 |
2008-09 |
2007-08 |
2008-09 |
2007-08 |
2008-09 |
|
|
Central |
0.38 |
0.42 |
0 |
0 |
24.51 |
23.27 |
1.85 |
2.08 |
26.74 |
25.77 |
|
Eastern |
0.91 |
1.38 |
0 |
0 |
23.98 |
25.87 |
4.26 |
5.11 |
29.15 |
32.36 |
|
East Central |
4.31 |
3.4 |
0.89 |
0.83 |
56.48 |
61.18 |
5.75 |
4.61 |
67.43 |
70.02 |
|
East Coast |
13.11 |
14.2 |
0 |
0 |
28.83 |
28.25 |
7.93 |
10.46 |
49.87 |
52.91 |
|
Northern |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
North Central |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
North Eastern |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
Northeast Frontier |
0 |
0 |
0 |
0 |
0 |
0 |
4.91 |
4.2 |
4.91 |
4.2 |
|
North Western |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
Southern |
0.18 |
0.27 |
0 |
0 |
7.84 |
9.08 |
7.37 |
8.18 |
15.39 |
17.53 |
|
South Central |
0 |
0.07 |
0 |
0.03 |
26.4 |
29.56 |
3.34 |
4.69 |
29.74 |
34.35 |
|
South Eastern |
10.75 |
12.25 |
0.03 |
0.7 |
6.38 |
7.07 |
1.36 |
1.04 |
18.52 |
21.06 |
|
South East Central |
2.66 |
2.54 |
0 |
0 |
62.22 |
72.63 |
23.49 |
24.08 |
88.37 |
99.25 |
|
South Western |
3.18 |
4.69 |
0 |
0 |
0 |
0.02 |
1.31 |
0.12 |
4.49 |
4.83 |
|
Western |
0 |
0.3 |
0 |
0 |
2.02 |
4.65 |
1.67 |
2.45 |
3.69 |
7.4 |
|
West Central |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0.0 |
|
Konkan |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0.0 |
|
Total |
35.48 |
39.52 |
0.92 |
1.56 |
238.66 |
261.58 |
63.24 |
67.02 |
338.3 |
369.68 |
Source: Indian Railways
Though Coal
The slowdown impact on Railway Sector
Railways cash surplus has grown to Rs 90,000 crore in the past five years. Due to implementation of the Sixth Pay Commission recommendations, Railways are expected to incur an additional burden of Rs 9,000 crore on salaries and Rs 4,500 crore on pensions. Railways invested Rs 36,773 crore in 2008-09 and plans to invest Rs 2.30 lakh crore in the next five-year plan. Indian Railways will stay on growth track in 2009-10 projecting cash surplus of Rs 18,847 crore after cutting most of the passenger fares, even as economic slowdown affected its freight business.
Freight loading in the current year has come down due to economic downturn because of which revenue has fallen. Average freight growth has been upto 8% in the last five years and freight earnings rose by 19% till September last year. Even as its industrial customers face a crippling slowdown, the railways expect to earn gross traffic receipts of Rs 93,159 crore in 2009-10, exceeding the revised estimates for the current fiscal by Rs10,766 crore
The pace of expansion is affected by the global downturn impacting the Indian business, but the balance-sheet of the country’s largest transporter remains robust. As the rest of the economy is grappling with business setbacks, the Railways would pay a higher dividend of Rs 5304 crore to its owners -- the government.
Owing to the global meltdown, railways may fail to meet the target in freight traffic in the current financial year. Railways have failed to achieve the target upto December 2008 and has been able to manage only 606.75 million tonnes (MT) loading against the target of 627.85 MT upto December 2008, thus falling short of 21.10 MT. The total goods earnings upto December is Rs 37,898.52 crores against the budget projection of Rs 38,356.32 crores, thereby leaving a gap of Rs 457.80 crores. However, Indian Railways is hopeful of meeting the target at the end of the current fiscal. Railways had set the target of 850 million tonnes (MT) freight traffic for the current fiscal ending in March 2009.Railways had created a record by exceeding the freight target in the last fiscal. The total freight loading was 794 MT in 2008-09 against the target of 790 MT.
Contrary to the fear, the freight loading of Indian Railways witnessed a 2.91 per cent growth in January 2009 against the corresponding period of the previous fiscal. The Railways carried 72.44 million tonnes (mt) traffic. The performance – in absolute freight loading and growth rate terms is almost the same as witnessed by the Railways in December 2008. Indian Railways in December 2008 loaded 72.15 mt of goods, up 2.98 per cent against the same period in the previous fiscal.
The numbers for freight loadings show an improvement compared with the previous two months -November (1.29 per cent growth) and October when the loadings registered a negative growth of 0.14 per cent. The Government has set a freight target of 850 mt in 2008-09, 7.1 per cent higher than 794 mt last year. For the ten month period of April 2008-January 2009, the Railways carried 681.28 mt of freight traffic, registering a 5.68 per cent growth. On the freight earnings front, Railways mopped up Rs 44,016.26 crore between April 1 and January 31, registering an increase of 13.64 per cent.
Conclusion
Though the whole world is struggling under severe economic recession and the growth rate is projected to slow down in the future, it is the best time to invest in infrastructure projects so as to take advantage of low cost and best minds. The growth in infrastructure will remain intact as the government plans for massive infusion of funds to this sector. This will definitely generate huge transportation demand. Recent data shows that augmentation of railway capacity is a must for
The government of
Concluded
Views are those of the author
Courtesy: InfralineEnergy
NEWS BRIEF
NATIONAL
OIL & GAS
Upstream
RIL-RNRL court verdict puts buyers of RIL gas in limbo
June 16, 2009. The Bombay High Court order directing Mukesh Ambani's Reliance Industries (RIL) to sell natural gas from Krishna Godavari (KG) basin to Anil Ambani’s Reliance Natural Resources (RNRL) has made the status of existing gas purchase deals uncertain. Most of the fertiliser and power companies that have signed gas purchase agreements with Reliance Industries in the past two months, however, say they will not be affected, as it was the government that prepared the priority list for KG gas allocation. The government said it is studying the order and will take appropriate action, after due consideration. In the judgment a division bench of the high court directed RIL to sign the gas supply deal with RNRL within a month’s time. According to analysts there could be two options: either stay with the priority given earlier or take a re-look in the light of the judgment.
Quippo investing Rs 1,400 cr to enhance onshore E&P, offshore oil services
June 13, 2009. Quippo Oil and Gas Infrastructure Ltd, promoted by infrastructure equipment financing company SREI, is investing approximately Rs 1,400 crore to expand its area of operation to onshore exploration and production and offshore oil services segments. The expansion, which had entered the onshore rig business two years ago, will be over in the next one year. Quippo’s fleet of onshore rigs will increase from two to four within a month as the construction of two heavy-duty rigs – of 1,000 HP and 2,000 HP and worth approximately $148 million (Rs 700 crore) – is completed and will be shipped from the
Reliance and Essar in talks with Cairn
June 12, 2009. Reliance Industries and Essar Oil are reportedly in talks with Cairn
RIL fails to find enough takers for KG gas
June 12, 2009. The tables have turned for Reliance Industries’ (RIL) gas from the Krishna Godavari (KG) basin. Barely two months ago, when RIL started production, Reliance Industries' KG-D6 facility there were many buyers eager to get the gas first to their starving units. But two months down the line, it’s a different story. Faced with the prospect of underutilisation of its gas, RIL is said to be scouting for consumers. The problem started with NTPC, which has still not signed the sales purchase agreement with RIL for buying gas. Of the total 18 mmscmd allocated for power, NTPC’s quota is about 3 mmscmd. However,
ONGC to hire RIL rig
June 12, 2009. Oil & Natural Gas Corp. (ONGC) has reportedly decided to hire the ultra deep-sea drill rig Dhirubhai Deepwater KG-1 (earlier christened Deepwater Pacific-1) from Reliance Industries Ltd. (RIL) for four years for over Rs39.14bn. ONGC is most likely to deploy the drill-ship for extracting natural gas from its UD-1 field in the Krishna Godavari basin and had been in talks with RIL for several months.
The public sector oil & gas producer's Board finally gave its go-ahead on June 6 after Brazilian national oil firm Petrobras also evinced interest in hiring the rig from RIL. Reports say that the deal with RIL had been stuck due to stiff opposition from some of ONGC's Independent Directors. But, they finally approved the deal once it became clear that alternate rigs were at least 10% costlier.
Gas losses drag ONGC shares down
June 12, 2009. Shares of ONGC have slipped after the company announced that it may have had Rs30bn of losses selling natural gas at lower price. ONGC sells gas to power and fertilizer companies from fields allotted to it.
Hardy Oil to heed DGH call on disclosure
June 10, 2009. Hardy Oil and Gas Plc has reportedly agreed to submit all claims of oil and gas discoveries to the Directorate General of Hydrocarbons (DGH). This was done after the company was pulled up by the Indian upstream oil regulator for disclosing potential reserves without its prior approval. The London-listed Hardy had made a premature disclosure of potential gas resources in two blocks in the Krishna Godavari basin in which it holds a 10% stake.
ONGC Mittal to start exploration in
June 10, 2009. The joint venture ONGC-Mittal plans to drill one well during this calendar year and the second in next calendar. OPL-285 is a deepwater block, where OMEL, through OMEL Energy
RIL increases LPG supplies to oil firms
June 10, 2009. Reliance Industries has increased LPG supplies to Indian Oil, Bharat Petroleum and Hindustan Petroleum from its twin refineries at
Transportation / Trade
Oil firms hike jet fuel prices
June 15, 2009. After two minor price increases, state-run oil firms hiked jet fuel or ATF rates by over 12 per cent on firming international oil prices. Indian Oil, Bharat Petroleum and Hindustan Petroleum raised avitation turbine fuel (ATF) price by Rs 3,949 to Rs 36,252 per kilolitre in
‘Dabhol LNG terminal to start by September’: GAIL
June 15, 2009. GAIL India Ltd. is expecting the Dabhol liquefied natural gas (LNG) terminal to start by September. GAIL India has no plans to dilute equity further. The company expects profit in the financial year to March 31 to exceed Rs30bn. Profit is expected to rise on higher gas volumes and the upside in polymer prices. Revenue for the year 2009-10 is expected to rise to Rs300bn. GAIL India, the public sector gas transmission monopoly, sees no upside in its subsidy burden.
Murli Deora calls for speedy construction of pipelines
June 11, 2009. Murli Deora, Union Minister for Petroleum & Natural Gas has said that a programme to expeditiously construct trunk pipelines to carry natural gas to new areas should be taken up. The Minister, holding a meeting with the Petroleum and Natural Gas Regulatory Board (PNGRB) underlined that the Ministry and the Regulator should jointly endeavor to ensure the same. Production of natural gas in the country would be doubling in the coming few months.
Policy / Performance
Govt asks RIL to sell gas to Essar, Ispat
Jun 16, 2009. The Government has asked Reliance Industries Ltd to sell natural gas from its eastern offshore KG-D6 fields to steel firms like Essar and Ispat to help the country's most prolific gas field to produce at an optimum level. The Ministry of Petroleum and Natural Gas issued orders directing Reliance to sell 3.75 million standard cubic metres of gas per day to Essar Steel, Ispat Steel and Vikram Ispat. Essar will get 2.86 mmcmd, Ispat 0.53 mmcmd and Vikram Ispat the remaining 0.36 mmcmd. Reliance is currently restricting output from KG-D6 to just 28 mmcmd as not all of the power and fertiliser customers identified by the Government are taking their full quota of allocation. After power and fertiliser, 5 mmcmd gas from KG-D6 was allocated for city gas projects but only 1.1 mmcmd can immediately be taken. The rest is now being distributed among steel firms.
Deora seeks tax holiday for natural gas production
June 15, 2009. The Petroleum Minister, Mr Murli Doera, during his pre-Budget meeting with the Finance Minister, Mr Pranab Mukherjee, sought a seven-year income-tax holiday on natural gas production similar to the one currently being provided for crude oil. Retail pricing of petro products was also discussed at the meeting. Mr Deora said he had appealed to the Finance Minister for providing a tax holiday on natural gas. Asked about the Finance Minister’s response, the Petroleum Minister said that Mr Mukherjee was “sympathetic” to it.
Deep Inds receives LOA from ONGC
June 15, 2009. Deep Industries Ltd has announced that the Company has obtained following Extention of Contract agreement with GACL and Letter of Awards from ONGC of following Compressors for Hiring of services for Natural Gas Compression aggregating to Rs 76.4mn. The company has received LOA from GACL, Vadodara wirth Rs4.4mn. The company has received LOA from ONGC Assam Asset at Rs18.7mn. The company also received another LOA from ONGC Rajahmundry Asset worth Rs53.2mn.
Private oil companies may hike prices
June 13, 2009. Even as the government is yet to take a decision on revising upward product prices of state-run oil companies, private oil firms, such as Reliance Industries' KG-D6 facility Reliance Industries (RIL) and Essar Oil, are close to deciding on a price hike. While Essar Oil has decided to hike prices from June 16, RIL has not yet taken a final decision. Essar Oil is planning to increase petrol prices between Rs 1 and Rs 3 and diesel prices by about Re 1 and Rs 2 per litre. However, diesel prices may not be increased in
Govt to raise fuel tax for financing roads
June 10, 2009. The government is reportedly said to increase the tax on petrol and diesel to help fund roads. Kamal Nath, Road Transport Minister has proposed as much as a Rs1 increase. Thereby raising the levy by Rs0.50 would help raise Rs50bn.
‘Overseas oil output may decline this year’: ONGC Videsh
June 10, 2009. Oil and Natural Gas Corp.'s (ONGC) overseas crude oil output may register a fall this year on the account of ageing fields, and an increase is likely after new areas in
POWER
Generation
Mizoram to get new power plant
June 16, 2009. The National Thermal Power Corporation (NTPC) will install a mega hydel-power plant between Lawngtlai and Saiha districts in Mizoram. The Government had signed an MoU with the NTPC a few months ago regarding the project. The power project is expected to generate 460MW of hydel power. Jairam Ramesh, the former Union minister of state for power, was instrumental in pushing this project in Mizoram. NTPC would require Rs 3,000 crore to set up this power plant, which would be one of the biggest in the Northeast.
Dibang project still awaits public hearing
June 14, 2009. A public hearing for the 3,000MW Dibang hydropower project in Arunachal Pradesh—postponed several times in the face of local opposition and last scheduled to be held in March—is still pending. The foundation stone for the project was laid by Prime Minister Manmohan Singh in January 2008. But the public hearing, required by law before an environmental impact assessment report is prepared, couldn’t be held due to local protests. The project assumes additional significance, given that
NTPC to buy Jharkhand’s thermal station
June 13, 2009. NTPC is close to acquiring Jharkhand State Electricity Board’s Patratu Thermal Power Station (PTPS). The plan is to set up 5-6 super-critical thermal units at the location, as the station has huge tracts of vacant land. The acquisition will help NTPC meet its targets to add fresh capacity without having to acquire additional lands in the area. A group to oversee the takeover has already been formed by NTPC. It is learnt that NTPC had helped JSEB with the renovation and modernisation of the PTPS to improve generation and PLF. However, it did not help much as generation dwindled. Subsequently, JSEB wished to strike a joint venture with NTPC for jointly running the plant. But the power major did not agree to the proposal and wanted to take over the plant. It is in the recent past that talks have reached an advanced stage. Last month, a team of professionals visited the Patratu site for a feasibility study that looked into all aspects of the plant, including land availability, water and coal.
Mahagenco to set up 1,320 MW thermal project near Dhule
June 12, 2009. In a move that could reduce power shortage in Maharashtra, the state power generation company Mahagenco has decided to set up a 1,320 megawatt
NTPC-BHEL join hands to set up manufacturing unit in AP
June 11, 2009. Public sector giants-- National Thermal Power Corporation and Bharat Heavy Electricals Limited--have joined hands to set up a major power projects equipment manufacturing unit in Andhra Pradesh. NTPC-BHEL Power Projects Pvt. Ltd, the joint venture company, incorporated last year by NTPC and BHEL, will set up the green field unit with an investment of Rs 6000 crore in Chittoor district of Andhra Pradesh. The state government has allotted 750 acres of land for the unit. The state cabinet approved the land allocation at Mannavaram village under Srikalahasthi mandal at a nominal price of Rs 100 per acre.
Transmission / Distribution / Trade
Monsoon deficiency may affect hydal generation in Kerala
June 16, 2009. With the South West Monsoon playing truant over Kerala after its early onset late last month, the state has experienced a 36 per cent deficiency in rains in the initial phase causing anxiety over the state's power scenario that relies heavily on hydel sources. According to Indian Meteorological Department here, the state received only 21 cm rainfall from June 1 to 16 in place of an average 33 cm during normal monsoon. Last year, the rain received during the South West monsoon was deficient by 22 per cent, forcing the state electricity board to impose restrictions on power consumption for several months for all categories of consumers including domestic users.
Electricity meters replacement far from complete
June 16, 2009. Though Punjab State Electricity Board (PSEB) boasts of keeping a check on power theft, gravity of the situation comes to light when one considers the fact that the project of phasing out old electric meters from houses is hanging fire and till now, only 40% work has been done by the department. The department had decided to move and replace electric meters out of houses in 2006 in a bid to check power theft. But it could not complete the project even after three years have elapsed since then and there is the least check on power theft in the city.
IVRCL Infra wins seven orders worth Rs 4.32 bn
June 16, 2009. IVRCL Infrastructure and Projects Ltd has announced that the Buildings, Power and Roads Divisions of the company has bagged orders valued at Rs4.32bn.
TNEB takes first step towards unbundling
June 15, 2009. Signalling the first move towards reforms in the power sector, Tamil Nadu government formed a separate entity – TN Transmission Corporation (TNTRANSCO), to handle power transmission in the state. The company was registered with the registrar of companies. This is part of the unbundling process, mandatory under the Central Electricity Act, for the state owned TN electricity board (TNEB). Official sources indicated that another company, TN generation and distribution corporation (TNGENDISCO), is in the process of being formed. TNEB will, then, be the holding company, with 100% stake in both the corporations.
Lanco Infra bags Rs 319-cr deal
June 13, 2009. Lanco Infratech Ltd has bagged two orders worth Rs 319.59 crore from the Maha Vitaran (Maharastra State Electricity Distribution Company). The projects to be executed by the construction wing of Lanco, pertain to the transmission and distribution network under the
Load-shedding to go in Kerala
June 13, 2009. The 30-minute cyclical load-shedding currently in force in the State will be lifted. Stating this at a press conference Electricity Minister of Kerala said the repair work undertaken at the Idukki hydro electric project would be completed by then. The load-shedding was necessitated by the need to shut down power generation at Idukki for the repair. Employees of the KSEB, who had worked round-the-clock at the Idukki project since June 7 to attend to the repair works would get cash awards and good service entries for the way they had responded to the challenge.
BHEL wins order worth Rs 40.15 bn from Hindalco
June 12, 2009. Bharat Heavy Electrical Limited (BHEL) has bagged Rs40.15bn order from Hindalco Industries Limited for the supply and erection of the main plant package for its upcoming captive power plant (6x150MW) at Aditya Aluminium in Sambalpur district of Orissa. The order comes close on the heels of an order placed on BHEL by Hindalco for a similar Boiler and Turbine Generator package for its captive power plant (6x150 MW) at Mahan Aluminium in Singrauli district of Madhya Pradesh.
Power Grid inks pact with NTPC for Dadri transmission line
June 12, 2009. Power Grid Corporation of India Ltd has signed a bi-lateral agreement with NTPC for turnkey execution of 44 km long 400 KV D/C Transmission line from Dadri to Loni at an estimated cost of Rs470mn. It is a time bound project linked with Commonwealth Games. POWERGRID will undertake complete design, engineering, tendering, evaluation, procurement, project management, erection, testing and commissioning of the Project.
Delta launches new compact E-Series UPS
June 12, 2009. Delta Group - the global Leaders in power management solutions, has introduced a new range of 1 KVA to 3 KVA UPS systems called E–Series in the Indian market. The company has strengthened its portfolio by announcing the launch of E-Series UPS for its clients in small and medium enterprises (SMEs) and corporate segment.
Mercator Lines targets 30 mt from
June 10, 2009. Mercator Lines,
Govt may allow pvt coal mining
June 16, 2009. In a bid to plug the demand and supply gap of coal in the country, the government is considering a proposal to open coal mining to the private sector. A Bill in this regard, introduced in the Rajya Sabha by the National Democratic Alliance (NDA) government in 2000, is still pending. The move is seen as the first step in the new government’s bid to speed coal sector reforms in the country. Earlier this month, President Pratibha Patil, while addressing the first session of Parliament, had said the “blueprint” for coal sector reforms had been prepared.
Govt to place order worth Rs 18,150 crore for power sector
June 15, 2009. In what could be a big boost to the capital goods industry, the Congress-led United Progressive Alliance government is poised to place a Rs18,150 crore order for the supply of power equipment to state-run NTPC Ltd and Damodar Valley Corp. (DVC). Part of the government’s agenda for its first 100 days, the order is an initiative designed to attract investment and create jobs in the domestic power equipment industry. The offer will include a precondition for the supplier to set up manufacturing facilities in
Govt asks NTPC to sign deal with RIL
June 14, 2009. Concerned at the slow progress in expanding electricity generation capacity, the power ministry has asked NTPC to sign the gas purchase deal with RIL for projects other than expanding the Kawas and Gandhar units, on which a legal dispute is on with the private company. The government had allocated 2.67 million cubic metres of gas per day (mmscmd) from Reliance Industries Ltd's KG-D6 basin to NTPC. The state-run firm was initially reluctant to take the allocation it had vehemently fought for on grounds that it may compromise its court case against RIL for allegedly not complying with a 2004 tender.
India needs more flexible power plants to meet demand
June 14, 2009.
NHPC role irks public
June 12, 2009. The 2000-MW Lower Subansiri Hydro Electric Project (LSHEP) proposed by the National Hydroelectric Power Corporation (NHPC) is facing stiff opposition from the people of the State because of the alleged non-transparent approach of the Power Corporation, if not for other reasons. Even, on the allegations levelled against them by many the organizations and individuals of the State, particularly of Dhemaji district, they are not willing to clarify their position for reasons best known to them.
Hydroelectric projects may pose threat to KNP: research team
June 11, 2009. Besides robbing the endangered Gangetic dolphins of their habitat in the Subansiri river, Ranganadi and Lower Subansiri Hydro Electric Projects may pose serious threat to the
Govt targets 5653 MW additional power in 100 days: Shinde
June 10, 2009. The target for the 100 days programme of capacity addition in the power sector by the new Government is 5653 MW, Union Power Minister Sushilkumar Shinde said. e also said that there will be a regular and close monitoring of all power generation projects being implemented in the country. hinde said that a high level committee/group would be set up shortly to keep the ongoing projects on track. Stating that the country is looking up to the power sector for delivering the promise of “Power for All”, the Power Minister emphasized the need to accelerate efforts.
Maharashtra to cancel KPTL contract
June 10, 2009. The
Rural Electrification plans to raise Rs 30 bn
June 10, 2009. Rural Electrification Corp. has sought government approval to raise as much as Rs30bn by selling shares to fund the expansion of networks. The New Delhi-based company may sell 170 mn shares, orabout 20 percent of its equity, to institutional investors or launch a follow-on public issue. Prime Minister Manmohan Singh wants to revive stake sales in state-owned companies as stocks rebound after his governing alliance scored the biggest election win in two decades.
INTERNATIONAL
OIL & GAS
Upstream
Nigeria discovers more crude oil in
June 16, 2009. The Nigerian National Petroleum Corporation (NNPC) has discovered crude oil from its Oil Mining Lease (OML) 64 situated in
StatoilHydro showcases Snohvit LNG as Pioneering Devt on NCS
June 16, 2009. StatoilHydro is showcasing Snohvit LNG, the first Liquefied Natural Gas (LNG) plant in Northern Europe and the first offshore field development in the
Canacol Energy updates on Capella heavy oil discovery in
June 15, 2009. Canacol entered into a farm-out agreement with Emerald Energy Plc., the operator of the contract, earning a 10% working interest, subject to the approval of the ANH, by paying 100% of the cost of the drilling and testing of the Capella 1 well. Emerald has completed initial well testing operations on the Capella 6 well, located approximately 4.2 km southwest of the Capella 1 discovery well.
TAMM O&G snaps up additional 5,000 Acres of oil sands leases
June 15, 2009. Peace River Oil SandsTAMM Oil and Gas Corp. has acquired an additional 5,120 Acres of oil sands leases in the Peace River region of
Cooper Energy confirms new oil discovery at Perlubie South-1
June 15, 2009. Further to the announcement on the Perlubie South-1 oil shows, Cooper Energy reported that the wireline logging program has been completed on the Perlubie South-1 well and has confirmed that Perlubie South is a new oil discovery. Beach Petroleum operates the well with a 75% working interest; Cooper Energy holds the remaining 25%.
Mexico to offer 3 gas blocks in July bidding round
June 12, 2009. State oil company Petroleos Mexicanos will offer three natural gas blocks in July in an effort to draw more international energy companies into
Pemex first rolled out natural gas service contracts in 2003 and 2004, attracting large and mid-size firms including Repsol YPF (REP); Brazil's Petroleo Brasileiro SA (PBR), or Petrobras; Japan's Teikoku; Texas-based Lewis Energy; and Argentina's Tecpetro.
Murphy Oil Scores 2 Discoveries Offshore
June 12, 2009. Murphy Oil has made two additional discoveries on its acreage offshore
American Petro-Hunter snaps up stake in 2nd
June 11, 2009. American Petro-Hunter has executed an agreement to acquire a 25% Working Interest for a second
Gygrid oil discovery could extend Njord's commercial life
June 11, 2009. Oil has been discovered by StatoilHydro in the Gygrid prospect about 20 kilometers northeast of Njord in the southern part of the
Vietnam-Russia JV taps 180 millionth tonne of oil
June 11, 2009. The Vietnam-Russia oil and gas joint venture, Vietsovpetro, announced it pumped out the 180 millionth tonne of oil on June 9. The event marked a milestone in the development history of the company as it is celebrating 28 years of the signing of the establishment agreement.
Pertamina aims to produce 171,000 bpd
June 10, 2009. Indonesian state-owned oil and gas company PT Pertamina has set itself to produce 171.9 thousand barrels of oil per day (bpd) in the face of its oil production decline by 18 percent per annum. In order to achieve the production target, which increases from 150 barrels per day in the previous year, Pertamina would optimize the production of its main oil fields in Sukowati, Tambun, Limau and Polent, Energy and Mineral Resources Minister Purnomo Yusgiantoro said.
World oil reserves dropped last year on
June 10, 2009. Global proved oil reserves fell last year, the first drop since 1998, led by declines in Russia, Norway and China, according to BP Plc. Oil reserves totaled 1.258 trillion barrels at the end of 2008, compared with a revised 1.261 trillion barrels a year earlier, BP said in its annual Statistical Review of World Energy today. BP and other oil companies are struggling to replace reserves as access to deposits becomes harder and older fields in places like the
Downstream
Dushanzi refinery to come online at end of July
June 16, 2009. PetroChina Co.'s expanded Dushanzi refinery in northwestern Xinjiang Uighur Autonomous Region is scheduled to come online around end-July. The planned official startup of the refinery -- with nearly doubled annual crude processing capacity of 10 million metric tons, or around 200,000 barrels a day -- may help explain China's high crude oil imports in May. It may also keep the nation's appetite for foreign crude at robust levels in coming months. The plant will rely on
China may adjust domestic fuel prices at end of June
June 16, 2009.
CNPC seeking feedstock for
June 15, 2009. CNPC's Chongqing Wanshou 10-mln-t/y refinery is seeking crude oil feedstock. Previous reports said that CNPC planned to feed on Middle East crude oil pumped via the Sino-Myanmar pipeline, which was designed to link
Pertamina won’t import more oil after refinery incident
June 12, 2009. Indonesian state-owned oil and gas company Pertamina will not increase its oil imports following a disturbance that forced its Cilacap refinery to stop operating. Pertamina imports 40 per cent of fuel oils of the normal need at home. In 2009, Pertamina's procurement of premium gasoline is set at 19.7 million kiloliters, consisting of its own production amounting to 10.9 million kiloliters and import of 8.8 million kiloliters.
Iranian firm plans to introduce CNG in
June 12, 2009. A new regime of low cost vehicle fuelling is set to unfold in
API issues statement on refinery safety
June 11, 2009. The American Petroleum Institute stated that .S. refiners have maintained a strong safety record despite a challenging work environment that involves heavy equipment, hazardous materials, high temperatures and high pressure equipment.
According to Bureau of Labor Statistics data, a refinery employee is four to five times less likely to be injured on the job than employees in other manufacturing sectors.
Refinery runs boosted by OECD,
June 11, 2009. The International Energy Agency raised its forecast for global refinery runs in the second quarter, citing increased throughputs and optimism over recovery in global demand. "Global forecast crude runs are raised this month, taking into consideration higher April preliminary data for OECD countries, reports of near-record-high crude runs in China, and slightly higher prospects for global demand," the IEA said in its monthly report. The Paris-based energy watchdog expects crude runs in the second quarter to average 71.3 million barrels a day, a rise of 200,000 barrels a day.
South Korea's Daelim industrial to build LNG plant for Iranian firm
June 10, 2009. Daelim Industrial Co., a South Korean builder, said it has signed a 139 billion won (US $111 million) deal with an Iranian firm to build a liquefied natural gas (LNG) plant. The deal with Iran LNG Co. calls for Daelim Industrial to complete the plant by June 2011, the Korean firm said in a regulatory filing.
Eni studying refinery offers; no quick decision
June 10, 2009. Eni SpA is assessing the offers it has received for its 84,000-barrels-a-day
Transportation / Trade
Construction of Sino-Myanmar O&G pipelines to begin in Sept.
June 16, 2009. The construction of pipelines that will transport oil and gas to
Origin secures gas pipeline capacity to link Eastern Australian portfolio
June 16, 2009. South West Queensland PipelineOrigin has entered into a conditional gas transportation agreement with Epic Energy which will result in the expansion of capacity on the 935 kilometer South West Queensland Pipeline and QSN Link from Wallumbilla to Moomba.
Russia may raise oil export duty 39 pc
June 15, 2009.
Russia sets the export duty by using the average price of
Niger militants warn against pipeline work
June 15, 2009. A Nigerian militant group that has damaged several Chevron oil facilities has told the company not to make repairs until the Niger-Delta crisis is resolved. The company reportedly began repair work on some of the facilities under the security of the Joint Task Force on the Niger-Delta.
New fuel pipeline built between
June 12, 2009. An Israeli construction team finished its work on a new pipeline for the transfer of fuel and natural gas from
Crosstex sells
June 10, 2009. Crosstex Energy has entered into a definitive agreement to sell its assets in
City of
June 10, 2009. Clean Energy has been awarded a new three-year contract from the City of Phoenix Public Transit Department, AZ to supply the City's Valley Metro Transit Fleet with liquefied natural gas (LNG) fuel to power its fleet of 400-plus LNG buses. When the new contract takes effect, Clean Energy will begin delivering approximately 6 million gasoline gallon equivalents of fuel annually to three fueling sites.
Policy / Performance
Ugandan President urges China to help set oil refinery, pipeline
June 16, 2009. Ugandan President Yoweri Museveni asked Chinese businessmen to help the east African country set up an oil refinery and a pipeline that will evacuate the oil from the fields in the western part of the country. A 16-member delegation of the Industrial and Commercial Bank of China (ICBC) was in the country to assess the business potential and investment opportunities. The ICBC owns 20 percent of Standard Bank which in turn owns 80 percent of
Africa oil collects new block for East African oil exploration portfolio
June 15, 2009. Africa Oil has signed an agreement to acquire all of the issued and outstanding shares of Turkana Energy Inc., a privately held oil and gas exploration company based in
Exxon must pay interest, own fees in
June 15, 2009. A federal appeals court ordered Exxon Mobil Corp to pay 5.9 percent interest back to 1996 on a judgment in the
Oil and Gas industry leads investments to cut greenhouse gases
June 15, 2009. U.S.-based oil and natural gas companies invested $58.4 billion from 2000 through 2008 in technologies to reduce greenhouse gas emissions, according to a new study by T² and Associates and the Center for Energy Economics at the
Five Flint Hills refining, chemical sites receive safety awards
June 15, 2009. Five Flint Hills Resources refining and chemical sites have earned safe work awards for their performance in 2008 from the National Petrochemical & Refiners Association. The awards were presented at NPRA's 2009 National Safety Conference and Awards Banquet in Grapevine,
Continental resources enters into natural gas fixed price swaps
June 15, 2009. Continental Resources has entered into natural gas fixed price and basis swaps for 600,000 MMBtu at an average price of $5.27 for December 2009 and for 600,000 MMBtu per month at an average price of $5.68 for calendar 2010. These hedges were put in place to underpin the Company's current and expected level of operations in the Arkoma Woodford play in southeastern
OPEC oil output rose by 300,000 bpd from April
June 12, 2009. The Organization of the Petroleum Exporting Countries (OPEC) increased crude oil production by 300,000 barrels per day (b/d) to 28.39 million b/d in May, according to a just-released Platts survey of OPEC members, oil industry officials and analysts. This is an increase from 28.09 million b/d in April.
Production had already risen in April for the first time since August 2008. According to the May production estimate OPEC-11 (those bound by production quotas) is at only 72% compliance with its 4.2 million b/d in crude output cuts agreed late last year. This is down from 78.7% compliance in April and 81.8% in March. May production increases totaling 320,000 b/d from
Pertamina: Indonesian govt agrees on Senoro gas price
June 11, 2009. President director of state oil and gas firm PT Pertamina said the government has agreed to the price of Senoro gas. Previously, the government asked a consortium of PT DS LNG, consisting of Pertamina, Medco, and Mitsubishi, to meet the six conditions. The six conditions include a revision of the price of gas, a revision of the planned development, approval from the shareholders, secured domestic gas supplies, clarification on unfair competition charges, and reasons for preference of downstream projects.
IEA raises oil outlook for first time in 10 months
June 11, 2009. The International Energy Agency raised its global oil-demand forecast for the first time in 10 months on signs that the economic slowdown is abating. The adviser to 28 nations increased its global oil demand estimate for this year by 120,000 barrels a day to 83.3 million barrels a day, driven by consumption in
OPEC will wait for $100 oil before raising output
June 10, 2009. OPEC, the supplier of 40 percent of the world’s oil, will only consider increasing output when the price of crude rises to $100 a barrel, according to Kuwaiti Oil Minister Sheikh Ahmed al-Abdullah al-Sabah. The Organization of Petroleum Exporting Countries, due to meet again in September, wouldn’t raise production with oil at $75, “but if it reaches $100, maybe,” Sheikh Ahmed said. Oil prices have increased because investors have bought crude as a hedge against a weakening U.S. dollar, not because demand is rising, Sheikh Ahmed said. OPEC predicted stronger demand as it decided May 28 in
POWER
China halts £18 bn hydropower dam project over environmental concerns
June 15, 2009. China's environment ministry sought to reassert its authority by blocking a 200bn yuan (£18bn) cascade of hydropower dams near Shangri-la that would generate as much electricity as the Three Gorges Dam. Despite pressure from local governments that want to push ahead with big ticket development projects to offset the financial downturn, the ministry suspended approval of the project along the Jinsha iver in
Generation up in Kulekhani with water level rise
June 10, 2009. Power generation has increased in Kulekhani hydropower project with the rise in water level in its reservoir. Nepal Electricity Authority is mulling further reduction in load shedding hours as Kulekhani I is producing 150,000 to 200,000 units daily. Currently, there is almost no load shedding although the country is officially facing four hours of power cuts daily. Before this, the project was generating only 73,000 units daily owing to low level of water in the reservoir. Currently, water level in the reservoir is 1494.15 meters.
Transmission / Distribution / Trade
VPhase device to cut electricity bills approved
June 15 2009. British technology company VPhase expects to come close to breaking even next year after getting safety clearance to start selling a device designed to cut household electricity bills by 10 percent. The Smart Voltage Management device is attached to a domestic fuse box and regulates the level of voltage coming into a house, cutting bills by about 10 percent, said VPhase, a subsidiary of Energetix Group.
NRG Energy, Inc. completes sale of ownership interest in MIBRAG
June 11, 2009. NRG Energy, Inc.completed the sale of its 50% ownership interest in mining company Mibrag B.V. to a consortium of Severoèeské doly Chomutov, the largest brown coal mining company in the Czech Republic and member of the CEZ Group, and J&T Group, a Czech Republic-based investment company. Mibrag B.V.’s principal holding is Mitteldeutsche Braunkohlengesellschaft mbH (MIBRAG), an integrated coal mining and power generating business located in central
US Stimulus money to be used for nuclear power
June 15, 2009. Stephen Chu, Obama's energy secretary, said that
Bhutan rejects Indian cos employment proposal
June 14, 2009. The
Senate panel hands FERC 'cease and desist' power for gas, electricity markets
June 12, 2009. The Senate Energy and Natural Resources Committee approved an amendment that hands the Federal Energy Regulatory Commission new power to quickly act against suspected manipulation of natural gas and electricity markets.
The "cease and desist" power would enable FERC, without a hearing, to quickly require parties to halt what it believes are manipulative practices and freeze assets. The amendment was approved by voice vote. It was not unanimous, but a roll call vote was not requested.
Constellation can't appeal while PSC decides
June 12, 2009. Constellation Energy can't appeal a ruling by
Renewable Energy Trends
National
Suzlon says it is considering options for its stake in Hansen Transmissions
June 15, 2009. Suzlon Energy Ltd, a leading wind turbine manufacturer, has said it is evaluating various alternatives regarding its shareholding in Hansen Transmissions, a Belgium-based gearbox producer In a communication to the stock exchanges on Monday, Suzlon said these considerations were at an early stage and “may or may not lead to any transaction.”
Suzlon acquired Hansen Transmissions in March 2006 for about Rs 2,500 crore. Hansen makes gearboxes for the wind energy industry. Suzlon, through a subsidiary, holds 61.28 per cent in Hansen. It raised about £290 million through an IPO for Hansen on the London Stock Exchange in December 2007 and sold 10 per cent in the Belgium-headquartered company in January 2009 to specialised investment firm Ecofin Ltd for £73 million.
Leitner Shriram to invest Rs 80 cr in wind turbine facility expansion
June 13, 2009. Leitner Shriram Manufacturing Company, the joint venture of Shriram EPC and Leitwind Technologies of the
First bio-diesel shipment from Vizag
June 12, 2009. The first bio-diesel shipment from Cleancities Bio-diesel India Ltd, the biggest bio-diesel plant in the country located in the
Maharashtra government orders probe into Suzlon land deals
June 11, 2009. The
Stand in the sun for extended talk time
June 10, 2009. Samsung
At the launch of the phone, Dr Farooq Abdullah, Minister for New and Renewable Energy, said that the world should be proud of this phone. ZTE, a Chinese company, also has a solar-powered phone ‘Coral-200-Solar’ for $40. It claims that the phone requires a one-hour charge in the sun for a 15-minute talk time. Japanese electronics giant Sharp is set to release its solar-powered phone ‘SH002’ for the Japanese market. ‘SH002’ can give one minute of talk time and two hours of standby with a 10-minute charge in the sun. The first few lots of the Samsung phone will be imported but the company will soon manufacture them at its factory in Noida near
Renewable energy to play larger role in India`s economy: Farooq Abdullah
June 10, 2009. New and renewable energy will increasingly play a larger role in meeting the development aspirations of a growing economy like
Global
U.S. scientists back biodiesel development
June 15, 2009. More than 100 scientists, including two university deans, have gone on record in the past four months in support of biodiesel by signing the "Scientists for Biodiesel" declaration. Scientists from U.C. Berkeley, Texas Tech,
First Solar gets 10 MW contract from
June 15, 2009. First Solar Inc. will supply an Australian company with 10 megawatts of panels destined for power development. The Tempe-based company signed an agreement with Bovis Lend Lease to supply them with panels, which the Australian company plans to incorporate into its development portfolio.
First Solar has developed a good customer base in Europe and is working on
Mainstream makes first
June 14, 2009.
Beijing plans subsidized pricing for solar power
Jun 14, 2009.
Utilities profit from customers using less electricity
June 12, 2009. Duke Energy Co. reached a deal with environmental groups that allow the power generator to charge customers more money even if they use less electricity. As odd as that may sound, it's part of a broader push to make utilities, and customers, even more efficient. Here is how a typical program might work: Historically, the more electricity utilities sold the greater their profit. Utilities now want to separate that traditional tie by charging customers more for electricity and using most of the money for programs that help customers’ lower consumption. Utilities pocket some of that rate increase as profit and spend the rest on becoming more efficient.
Largest solar plant in
June 12, 2009. Utility officials announced plans to build a giant solar energy plant in the
It will be similar in many respects to a steam plant, using the sun instead of fossil fuel to generate steam and produce electricity. It will look like a giant field of mirrors relatively low to the ground, interspersed with 180-foot towers topped by boilers. Motors on the mirrors will keep them aligned with the sun.
NRG Energy, eSolar to develop solar plant in
June 11, 2009. El Paso Electric has signed a power purchase agreement for the full capacity of a 92 megawatt (MW) concentrating solar power plant to be developed in southern
The plant is expected to be the first commercial-scale solar thermal project in
Shell first to sell gasoline blended with advanced biofuel
June 10, 2009. Customers at a Shell service station will become the first in the world to fill their tanks with gasoline containing advanced biofuel made from wheat straw. For one month starting June 10, the regular gasoline purchased at a Shell service station in
The biofuel is produced locally from non-food raw materials at Iogen Energy Corporation's demonstration plant, using advanced conversion processes. Iogen and Shell are partners in the plant, which now produces 40,000 litres of fuel per month. Cellulosic ethanol, as an end fuel, is identical to ethanol but it can offer up to 90% less lifecycle CO2 emissions than gasoline. It is a key part of Shell’s strategic investment and development programme in sustainable biofuels.
World carbon-dioxide emissions growth keeps focus on coal,
June 10, 2009. World carbon-dioxide emissions from energy use rose last year as
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