MonitorsPublished on Jun 25, 2009
The Future of Liquid Biofuels for APEC Economies
The Future of Liquid Biofuels for APEC Economies




he global production and use of biofuels have increased dramatically in the past few years, due to increasing oil prices, national security concerns, environmental considerations, and the urge to revitalize rural communities. The question today is no longer whether or not biofuels will be a part of the energy mix, but rather what are the economic, social, and environmental implications to their large-scale adoption. 

Biofuels refer to transportation fuels derived from biomass material: conventional food crops (grains, oilseeds, and sugar crops), dedicated energy crops (grasses, shrubs, and trees), and agricultural residues and waste streams. While fossil fuels (petroleum, natural gas, and coal) consist entirely of hydrocarbons (carbon and hydrogen), current biofuels contain oxygen as well as carbon and hydrogen, which affects their physical and chemical properties during combustion. As a result, the biomass-derived oxygenates have a reduced heating value compared to hydrocarbons, thus releasing less energy than hydrocarbons during combustion. Table 1 compares the typical lower heating value (LHV) 1 of several transportation fuels. 

Table 1 Lower Heating Value (LHV) of various liquid transportation fuels 



Petroleum Diesel


Fischer Tropsch (FT) Diesel










Dimethyl ether (DME)


Mixed Alcohols

27 – 36





Source: Iowa State University

Ethanol and biodiesel are the liquid biofuels most widely used for transport today. Ethanol (C2H5OH, ethyl alcohol) is produced by the fermentation of carbohydrate materials. Today, ethanol is made from starches and sugars, but an advanced conversion technology allows it to be made from more abundant “lignocellulosic” biomass sources such as forest and agricultural residues. Ethanol is used for production of alcoholic beverages, for industrial purposes (as a solvent, disinfectant, or chemical feedstock), and in recent years, as a blending agent with gasoline to increase octane and reduce carbon monoxide and other smog-causing emissions. Low-level ethanol blends such as E10 (10% ethanol and 90% gasoline) can be used in conventional vehicles, while high-level blends, such as E85 (85% ethanol and 15% gasoline) can only be used in specially designed vehicles, such as flexible fuel vehicles (FFVs). Global ethanol production is estimated at a record 62,000 million liters in 2007 (Figure 1), with the United States and Brazil accounting for approximately 70% of the total output. Fuel ethanol accounted for about 77% of all ethanol consumed in 2006, and it is likely that it reached 86% in 2007.3

Figure 1 Global Ethanol Production

Source: F.O. Licht, 2007; E – estimate

Figure 2 Global Biodiesel Production

Source: F.O. Licht, 2007; E – estimate

Biodiesel is a liquid fuel made from vegetable oils and animal fats through a chemical process (transesterification) that reacts the feedstock with alcohol (usually methanol) to produce chemical compounds known as fatty acid methyl esters (FAME). Biodiesel is the name given to these esters when they meet specifications such as American Society for Testing and Materials (ASTM) D6751 or EN14214 for use as transportation fuel. Biodiesel is used in blends with petroleum diesel or in its pure form.

B20 (20% biodiesel and 80% diesel) and lower-level blends such as B2 (2% biodiesel/98% diesel) and B5 (5% biodiesel/95% diesel) can be used in any diesel engine. B100 (pure biodiesel) or other high-level biodiesel blends can be used in some engines built since 1994.

Biodiesel is also used for space - and water heating in domestic and commercial boilers. Global biodiesel production has been growing rapidly during the past few years, and estimates show that it may have reached 10,000 million liters in 2007 (Figure 2). Europe accounts for 73% of the total production, with Germany; France; Italy; and Czech Republic leading the way.

In addition to ethanol and biodiesel, there are other types of biomass-derived fuels under development (Table 2). Biofuels production from starches, sugars, and vegetable oils are well-established technologies, but sometimes are seen as competition with the food and feed industries.

There are also environmental concerns, such as unregulated deforestation and heavier use of fertilizers; and ethanol from corn is controversial when it comes to the energy-balance question (mitigated if biomass is used to supply heat and power). These and other issues are driving research for second-generation feedstock, new, or more efficient conversion processes and fuels.

These technologies have the potential to substantially expand the feedstock base for biofuels production in the future (e.g., lignocellulosic biomass, nonedible vegetable oils, algae) and alleviate the food vs. fuel debate. However, none of the conversion processes using these feedstocks has reached the industrial stage.

Although some of these processes (e.g., gasification of biomass followed by synthesis to liquid fuels) have been known for the past few decades, low petroleum prices have prevented their further development during that time. Increasing oil prices and energy security concerns have renewed the interest in biofuels in the past few years, thus reviving the R&D in conversion technologies.  

As mentioned above, the advanced conversion technologies outlined in Table 2 are at different points in their development - experimental, in a demonstrational stage, or in a very early commercialization process.

The production of “green” diesel via hydro-treatment is perhaps the closest to a commercialization stage. Brazil's state energy company Petrobras has adapted four refineries to produce H-Bio diesel fuel using mineral and vegetable oil, but has not started mass production due to the high price of soy oil. Neste is constructing an 800 kilotonnes hydrogenated oil plant in Singapore (to be operational in 2010) using its NExBTLTM technology.

The next technology in line for commercialization could be bio-ethanol production from lignocellulosic biomass via biochemical4 or thermo-chemical5 conversion process. Iogen Corporation has successfully produced bio-ethanol from wood waste via biochemical conversion in its pilot plant in Canada. In the United States, six commercial cellulosic ethanol plants are under construction - four of them will use biochemical-conversion technology and two will apply the thermo-chemical conversion process.

China has several cellulosic ethanol pilot plants (using biochemical-conversion technology), and one exists in Japan. Australia is also building a pilot plant using this process. Within the next five years, more demonstration plants producing gasification-derived biofuels - such as Fischer Tropsh (FT) diesel, bio-methanol, and bio- Dimethyl Ether (DME) - are expected to come online.

Biodiesel produced from algae is among the technologies to be developed in the future, perhaps within the next 5-10 years. Before the technology is commercially available, significant technical and economic barriers need to be overcome to finish the laboratory phase, test the process, and develop it sufficiently. 


1 The lower heating value of a fuel is the energy that can be recovered when the water of combustion is released as a vapor.

2 MTBE (methyl tertiary butyl ether) is a liquid oxygenate produced from methanol and isobutylene, an oil refining product; ETBE (ethyl tertiary butyl ether) is a liquid oxygenate produced from ethanol.

3 F.O. Licht, 2006; Worldwatch Institute, 2007

4 Two key steps in biochemical conversion are biomass pretreatment and cellulose hydrolysis. During pretreatment, the hemicellulose part of the biomass is broken down into simple sugars and removed for fermentation. During cellulose hydrolysis, the cellulose part of the biomass is broken down into the simple sugar glucose. 

5 In thermo-chemical conversion, heat and chemicals are used to break biomass into syngas (a mixture of carbon monoxide and hydrogen) and reassemble it into products such as ethanol. 


Table 2 The Wide World of Liquid Biofuels






Conversion technology





Current Technologies



Grains /






Dry milling process - grains are ground into a flour, and the starch is converted into sugar with enzymes and fermented to produce ethanol.


Mature technology - many facilities

already operational and in construction.


Feedstock availability and production

is limited, and there is competition

with food products. Net energy

balance lower than projections for

cellulosic ethanol.





Grains /



Separation and



Wet milling process - grain separated into

components and starch is yeast  fermented and distilled


Mature technology - many facilities

already operational and in construction.









Sugar crops (like sugarcane) are crushed to extract the juice and fermented to produce ethanol.

Mature technology. More efficient than conversion of starches.

Limited feedstock availability in

temperate climates.





Vegetable oil

Animal fat





The feedstock is reacted with alcohol (usually methanol) in the presence of an alkaline catalyst to produce chemical compounds known as fatty acid methyl esters (FAME)


Ease of conversion, biodiesel can be used in diesel engines without adjustments. Significant heating oil


Cold climates technical issues.





vegetable oil



Vegetable oil

Animal fat


Future Technologies


Mechanical pressing

or solvent extraction


Filtering out particles and removing water


Viable fuel for tropical regions where saturated oils are available. Coconut oil can be blended directly with diesel and used in unmodified engines in tropical regions.

Not suitable for use in regular diesel

engines (except coconut oil and other

saturated oils).


Commercial (The

Philippines, Papua

New Guinea, EU)


Future Technologies

Green Diesel


Vegetable oil

Animal fat





Biomass oils conversion to diesel and other hydrocarbons via hydrotreating methods as in petroleum refinery


Low sulfur diesel. Capital & operating costs could be

substantially lower than those for transesterification.

Feedstock availability.


Early stage of

commercialization in

Brazil by Petrobras;

NESTE in Finland is

constructing a plant








hydrolysis and



Hemicellulose and cellulose converted to

sugars via enzymatic hydrolysis. Various

options for hemicellulose conversion

(pretreatment). Sugars converted to alcohol via fermentation.


Relatively low maintinance costs.

Potentially very high glucose yield.


Cellulase costs must be reduced.

Enzymes are sensitive to poisoning.


Demonstrational plant

currently operating in

Canada; 4 commercial plants are under construction in the US; Several pilot plants exist in China and one in Japan; A pilot plant is currently under construction in Australia.






Gasification and



Gasification to produce syngas (a gaseous mixture rich in hydrogen and carbon monoxide), which is then conditioned and compressed. The compressed gas is fermented to ethanol.

Higher yield of ethanol per ton of feedstock than direct fermentation

of biomass. Feedstock flexibility.

Gasification requires dried biomass.

High level of syngas clean-up required.

Two commercial plants Range Fuels and Alico) are under construction in the US



Tropsh (FT)






Gasification and FT



Gasification to produce syngas, which is then cleaned and purified. The clean syngas then undergoes a catalytic process to synthesize hydrocarbons and their O2 derivatives by the controlled reaction of hydrogen and carbon monoxide. The product is separated and upgraded.

FT diesel can substitute directly conventional diesel with lower emissions. Feedstock flexibility.


Gasification requires dried biomass. High level of syngas clean-up required.  Catalysts sensitive to poisoning & sintering. Requires improved yields.


facilities under way in

Germany, Austria,









Gasification and




Syngas production via biomass gasification, followed by catalytic conversion to a mixture of products (organic acids, ketones, and alcohols).


Mixed alcohols have higher energy content than ethanol. When

blending, the higher alcohols increase compatibility of gasoline & ethanol, which increa-ses water tolerance & decreases evaporative emissions. Higher alcohols also perform better in cold climates. Feedstock flexibility.

Gasification requires dried biomass.

High level of syngas clean-up required. Catalysts sensitive to

deactivation from sintering. Process

requires improved yeilds. Potential

groundwater contamination from

mixed alcohols usage.


facilities planned for

operation within 5










Traditional ABE



The anaerobic conversion of carbohydrates by strains of Clostridium into acetone, butanol and ethanol.


It can improve the blending of

ethanol with gasoline. It can be transported in existing gasoline

pipelines and produces more

power than ethanol.

High cost, low yield


DuPont and BP are

setting up a pilot plant











Biomass conversion to bio-oil via fast pyrolysis heating biomass in restricted contact with air. Vapours emitted from the reactor are collected and cooled to yield a liquid, called bio-oil.

Opportunity for co-processing with fossil fuels in petroleum refinery.

Using refinery technologies

already in place, ease of adoption

into current infrastructure


In early development stages. Refinery

integration issues.


Small scale

demonstration facilities are under way in Canada, the US, the Netherlands





Vegetable oil

Animal fat






Biomass is reacted in water at an elevated temperature and pressure to form oils and residual solids.


Low sulfur diesel.


Feedstock availability.


Demonstrational pilot

plant in the US

by Changing World

Technologies (CWT).







Gasification and


with catalyst)


Biomass is gasified first to produce a syngas from which the bio-methanol is produced


Biomethanol can be blended with

petrol up to 10-20% without any

infrastructure changes.


Low vapor pressure and energy

density. Safety measures need to be

considered (methanol is poisonous)

Pilot plants under

development in

Germany; R&D in










Gasification and



Bio-DME is produced from syngas by means of oxygenate synthesis.


Bio-DME can be used as a fuel in diesel engines; the process is highly efficient and permits a large scale production. It doesn't corrode metals.

Bio-DME can't be blended with fossil

diesel and it has a low energy content

half that of diesel). Can affect certain

plastics and rubbers.

Pilot plants under

development in

Sweden; R&D in China



Green Diesel





or catalytic



Lipids are derived from microalgae and

biodiesel is produced using conventional

transesterification technology. Alternatively, the oils can be used to produce “green” diesel via catalytic hydroprocessing.

High yield per acre; could be used

for CO2 capture and reuse.


High cost


R&D programs in the

US, Japan, New

Zealand, South Africa,

and Western Europe


HTU (Hydro-





biomass (wet)


Catalytical hydro-deoxigenation (HDO)

Biomass is converted to a heavy liquid at a high temperature and pressure, then the well established refinery technology HDO is applied.

It can be mixed with fossil diesel in any percentage without the need for engine or infrastructure changes.

Under experiment


Royal Dutch Shell is

experimenting with the









Anaerobic digestion

and hydrogenation


Anaerobic digestion of biomass with

methanogenic inhibition followed by

evaporation and fermentation. Produces a mixture of products (organic acids, ketones, and alcohols).


Mixed alcohols have higher energy content than ethanol. When

blending, the higher alcohols increase compatibility of gasoline and ethanol, which increases

water tolerance and decreases evaporative emissions. Higher

alcohols also perform better in cold climates. Feedstock flexibility.

No commercial partners at this time.

Potential groundwater contamination

from mixed alcohols usage.


Laboratory scale

research in academic




Source: U.S. National Renewable Energy Laboratory; Antares Group Inc.

 to be continued

Courtesy: Asia-Pacific Economic Cooperation


Who Gets What from Imported Oil?





here are still many misconceptions surrounding crude oil prices and the prices of products made from oil, such as gasoline.

The consumer

As every driver knows, filling up a tank can be an expensive business. What is not generally known is just where most of that money goes. The graph given below is intended to shed some light on this.

Taxes versus revenue

Source: Research Division, OPEC, Vienna, Austria, 2007

Who gets what from a litre of oil in the G7?


1. Figures are estimated prices in US dollars per litre for the      year 2006

2. Unleaded premium (95 RON) gasoline for France, Germany, Italy, UK; regular unleaded gasoline for Canada, Japan and USA

Source: Research Division, OPEC, Vienna, Austria, 2007

It shows that there are wide regional variations in product prices, and that these are not due to differences in crude prices, but to widely varying levels of taxation in the consuming nations of the G7 (Canada, France, Germany, Italy, Japan, the UK and the USA). These can range from relatively modest taxes (although by no means insignificant) in the USA and Canada, to very high levels in many European countries. In the UK, for example, the government receives around 1.7 times more from taxation than OPEC gets from the sale of its oil.

Let’s take a closer look at the figures. The first of the two graphs above shows that over the period 2002–2006, the G7 nations made a total of US$2,310 billion from oil taxation. This compares with the revenue of just US$2,045 billion for the OPEC Members over the same period. In addition, while the US$2,310billion in oil taxation by the G7 is pure profit, this is not the case for the OPEC nations, who must meet the cost of finding, producing and transporting that oil from their US$2,045 billion income. The second graph above shows the annual averages over that five-year period. While the OPEC nations averaged US$410 billion per year in sales revenue, the G7 countries raked inUS$460 billion per year in taxes — around US$50 billion per year more than OPEC. Thus, it is clear that the real burden on the consumer is taxation in the consuming countries. If gasoline were not so heavily taxed in countries such as France, Germany, Italy, Japan and the UK, it would cost only a fraction of the current price.


Courtesy: Organization of the Petroleum Exporting Countries





ONGC quit the US on Sudan backlash fears

July 1, 2008. ONGC Videsh Ltd, which is facing international wrath for investing in Africa’s civil war-ravaged Sudan, confirmed it had quietly exited its only hydrocarbon asset in the US, because it had anticipated a backlash in the West. Specifically, the company had feared that the US could invoke the Alien Tort Claims Act, which allows foreign victims of serious human rights abuse abroad to sue the perpetrators in US courts. OVL’s operations in Sudan have come under intense criticism from international groups, such as the Amnesty International, Genocide Intervention Network, or GIN, and Investors Against Genocide. GIN’s Sudan Divestment Task Force report has identified ONGC as one of the top four highest offenders indirectly contributing to the ongoing conflict in Sudan.

ONGC had previously taken a 10% stake in an offshore gas exploration project located near the Louisiana coast in the US through its Houston-based subsidiary, Sakhalin India, from US-based McAlester Fuel Co. in 2002. But it exited its participating interest in the exploration and production asset in January 2003, a month before it acquired a 25% stake in Greater Nile Petroleum Operating Co. in Sudan from Canada’s Talisman Inc. for $720 mn (about Rs 3,450 crore then). The other partners in the consortium are China National Petroleum Corp., or CNPC, (40%), Petronas Carigali Overseas Sdn BHD (30%) and Sudan National Oil Co. (5%). Expanding ONGC’s Sudan operations in May 2004, OVL had acquired a 24% stake in Block 5A and a 23.5% stake in Block 5B operated by the White Nile Petroleum Operating Co. Ltd from Austria’s OMV Aktiengesellschaft for $134 mn.

OVL has invested around $1 bn in its hydrocarbon blocks in Sudan. India consumes around 112 mt of petroleum products a year. It is also the world’s fifth largest oil importer and around 78% of its energy needs are met through imports. With the international price of crude at around $140 per barrel, developing economies such as India and China are engaged in a race to acquire equity stakes in the hydrocarbon blocks overseas. OVL registered a production of 8.802 mt of oil and oil equivalent gas and earned a net profit of Rs 2,397 crore ($553.5 mn) on a turnover of Rs 16,954 crore ($3.9 bn) in 2007-08. It is present in 38 oil and gas projects in 18 countries across the world and has proven reserves of 1.166 bn barrels. According to the sources the US is trying to scuttle India’s chances of achieving energy security in Africa and elsewhere. According to the shareholding data available with the Bombay Stock Exchange, as on March 31, foreign institutional investors, or FIIs, held nearly 8% stake in ONGC. At current market price, the entire FII holding is valued at around $560 mn. American Funds is the single largest FII investor in ONGC, holding 46,016,142 shares or a 2.14% stake.

Oswal targets E&P foray with NELP-VII

June 30, 2008. The Chhatral-based Oswal Industries (OIL) is looking at venturing into oil and gas exploration. The company, which is engaged in manufacturing check valves, has already submitted its bids in 7th National Exploration Licensing Policy (NELP) Round. The company’s turnover in 2006-07 stood at Rs 30 crore ($6.9 mn) which more than doubled during 2007-08 and rose to Rs 61 crore ($14.2 mn) with a net profit of Rs 5 crore ($1.1 mn) and OIL expects a substantial jump in its sales during 2008-09 as it has orders wroth Rs 35 crore ($8.1 mn) as on March 31, 2008. Its major clients include ONGC, Bharat Petroleum, Hindustan Petroleum, L&T, BHEL etc. 

ONGC, GAIL share in Myanmar blocks fall

June 30, 2008. India's Oil and Natural Gas Corp and GAIL (India) Ltd's equity in two gas rich offshore blocks in Myanmar have been cut following Myanmar's national oil company exercising its step-in rights in the fields, gas from where will be sold to China. ONGC had 20 per cent stake and GAIL 10 per cent stake in A-1 and A-3 offshore blocks, where independently certified reserves are put at 4.53 trillion cubic feet (tcf). South Korean trading company Daewoo International Corp was the operator with 60 per cent stake and Korean Gas Corp (KOGAS) had the remaining 10 per cent.

However, as per the production sharing contract for the field, Myanmar Oil and Gas Enterprise (MOGE) had a step-in right to take 15 per cent stake once discoveries are made. Subsequent to that, the stake of ONGC Videsh Ltd (the overseas arm of ONGC) has been cut proportionately to 17 per cent and that of GAIL to 8.5 per cent. Daewoo now holds 51 per cent and KOGAS 8.5 per cent. Daewoo recently signed a preliminary deal with Chinese state-run company PetroChina to sell natural gas to be produced at the field by 2013. The deal defines the terms of production, transportation and sale of natural gas to be produced in the A-1 and A-3 gas blocks. Under the deal, gas will be priced at $4.279 per million British thermal units (mmBtu) at the wellhead and will move in step with international oil prices every three months. The price offered by PetroChina is lower than $4.41 per mmBtu price offered by GAIL to piping the gas to India but the military-ruled Myanmar decided to sell gas to China.

Cairn, ONGC plans for gas fields in Gujarat coast

June 29, 2008. Cairn India and ONGC have near-finalised the plan for joint development of Ambe and North Tapti offshore marginal gas fields in the Gujarat coast. The project will lead to natural gas production of 1.5 mmscmd from Cairn operated Ambe field and 2 mmscmd by ONGC’s North Tapti. The entire production of 3.5 mmscmd gas and associated oil will be processed at Cairn’s existing operations at Hazira. ONGC and Cairn have opted for the joint development route to optimise the investment in pipeline, processing and other infrastructure in these marginal fields. Ambe is a satellite gas field of Cairn (40 per cent) operated CB/OS-2 joint venture in Cambay basin. The other partners in the joint venture are ONGC and Tata Petrodyne.

The satellite field, discovered in 2001, is surrounded by ONGC’s North Tapti. The Cairn-operated joint venture has already pegged the estimated cost of developing Ambe at approximately Rs 300 crore ($70 mn). ONGC may have to pump in Rs 500-600 crore ($116.8 – 140.1 mn) for development of North Tapti. ONGC proposes to build two platforms in North Tapti for production of 2-2.2 mmscmd gas and associated oil, which will be connected to Cairn’s existing pipeline network for processing at Hazira. The CB/OS2 JV would develop one production platform at Ambe. Apart from gas, the field was expected to produce 7,000 barrels of oil and condensate. The CB/OS-2 JV is currently producing a little more than 1 mmscmd (36 million standard cubic feet a day) of natural gas and 10,000 barrels of oil from Lakshmi, Gauri and CB-X fields. The offshore Lakhsmi and Gauri are ageing fields and are on a declining phase of production. CB-X is an onshore marginal field.

Crude oil production up 3.2 pc in May

June 27, 2008. Better performance by public sector ONGC has propelled 3.2 per cent rise in the domestic crude oil production in May compared with the same month last year, while the refinery output remained flat. The crude oil production in May stood at 2.908 mt (up from 2.818 mt), while refinery production remained nearly flat at 13.344 mt. During the April-May period, domestic crude output increased 2.1 per cent to 5.781 mt. A Petroleum and Natural Gas Ministry data showed that natural gas output rose 10.2 per cent to 2.89 bcm last month. The 17 public sector and two private sector refiners produced 13.344 mt in May (13.326 mt). Reliance Industries’ Jamnagar refinery produced 1.3 per cent more fuel at 3.18 mt. The refinery’s output was up 2.1 per cent at 26.396 million tonnes in April-May, the data showed. In May, the refineries operated at 105.6 per cent of their capacity and at 104.1 per cent in April-May.



ATF prices (in Rs/kl)

June 1

June 5

July 1

















BHEL bags order worth $119 mn from ONGC

June 26, 2008. BHEL has secured Rs.5.06 bn ($118.7 mn) contract for refurbishment and upgradation of onshore Drilling rigs and supply of new rig equipment from Indias premier upstream oil company, Oil and Natural Gas Corporation Limited ONGC. This is the 4th major order awarded to BHEL by ONGC under their programme of refurbishment and upgradation of ageing rigs with state of the art technology and is a testimony to the customers confidence in BHELs capabilities and technological excellence. The order envisages refurbishment and upgradation of 12 onshore Drilling rigs as well as supply of new rig equipment. These rigs were procured by ONGC in the Seventies and Eighties. Of these 12 rigs, nine were supplied by BHEL while the rest were supplied by American companies. The scope of work under this contract involves NDT, repair and replacement of structural members of mast and substructure, overhauling of rotating and hoisting equipment, revamping electrical systems and site erection and commissioning of these equipment. BHEL has established facilities and a dedicated group of expert engineers for carrying out refurbishment and upgradation of onshore Drilling rigs.  

RIL inks pact with UAE based Crescent Petro

June 25, 2008. Reliance Exploration and Production (Reliance E&P), a subsidiary of Reliance Industries Ltd. (RIL) has signed a cooperation agreement with the UAE-based petroleum company Crescent Petroleum. The cooperation agreement is intended to establish a sustainable framework for concluding specific accords to jointly undertake or participate in the development of oil, gas and other industrial projects of mutual interest in the region's energy sector. Cooperation prospects between the two companies are likely to include oil & gas related upstream and midstream projects, as well as industrial and petrochemical projects within the framework of Gas Cities LLC, a proprietary concept developed by Crescent with its partner company Dana Gas. The vision of Gas Cities is to develop private-sector-driven, state-of-the-art, integrated industrial communities relying on natural gas as fuel and feedstock, thereby maximizing the economic benefit of gas beyond what is achievable through the export of gas.


Aviation fuel prices increased by 7 pc

July 1, 2008. The country's oil marketing companies raised prices of aviation turbine fuel (ATF) by as much as 7 per cent, negating the reduction in prices on June 5 after the government cut Customs duty on the fuel from 10 per cent to 5 per cent. The airline industry remained largely undecided on the exact quantum of increase in fares following the hike in ATF prices. The prices might increase by Rs 150 for short haul routes and Rs 300 for long haul routes. ATF prices have been raised by 7.04 per cent in Kolkata, while prices in Delhi, Mumbai and Chennai have gone up by around 4.35 per cent.

Essar loses Kenya refinery

July 1, 2008. The Kenyan government has dumped the Mumbai-based group in favour of a Libyan company for a 50 per cent stake in a refinery project in Mombasa. Essar is still negotiating with the Kenyan government to invest in the project. In January this year, Essar Energy Overseas Ltd, a subsidiary of Essar Oil, had signed a memorandum of understanding with the Kenyan government to pick up 50 per cent in Kenya Petroleum Refineries Ltd from Shell, Chevron and BP Africa Ltd.

The Kenyan government held the rest of the stake and the crucial right of first refusal. Essar had planned to invest $450 mn in the Kenyan refinery, its first refinery investment outside India, excluding an undisclosed acquisition cost. The acquisition was to take the Essar group closer to its goal of refining one million barrels of crude oil per day. Industry insiders said hectic lobbying by Tamoil made the Kenyan government take a decision in favour of the Libyan firm.

According to the arrangement put in place by the Kenyan government, Essar could be accommodated in the refinery business by offering some shares only after the Libyans close the deal. Essar will now be at the mercy of Tamoil for a stake in the refinery. The intended modernisation programme is aimed at raising the production of liquefied petroleum gas from 30,000 tonnes to 120,000 tonnes per year.

Indian Oil gears up for Paradip refinery work

June 29, 2008. Indian Oil (IOC) will initiate the process of appointing the project management contractor (PMC) for setting up the Paradip refinery, early next month. The company has already appointed SBI Capital for tying up finances for the proposed grassroot refinery at an estimated cost of Rs 30,000 crore ($7 bn).

In the meantime, banking on the preliminary approval by the board, the company will float the tender for appointing the PMC which is the first step towards project implementation and the company has already identified the technology for setting up the refinery. In view of phenomenal increase in the project costs during the last two years, IOC has recently changed its original plan to set up an integrated-refining-cum petrochemicals complex at Paradip at a cost of Rs 25,000 crore ($5.8 bn).

Transportation / Trade

Indian basket at all-time high of $136.66

July 1, 2008. India's crude oil basket touched an all-time high of $136.66 a barrel (about Rs 5,862), up $5.02 a barrel from its previous close. The basket had earlier touched a record $132.77 per barrel on June 24. Crude oil prices on New York Mercantile Exchange rose to a fresh high of $142.99 a barrel on weak dollar and supply concerns after BP announced it was closing a key refinery in the Netherlands for maintenance and repair. A weakening dollar makes dollar-denominated commodities like crude oil and metals cheaper for buyers.

TN to grant subsidy of Rs 30 per cylinder

July 1, 2008. The Tamil Nadu government issued orders granting a subsidy of Rs 30 per LPG cylinder for families having only one gas connection. The Government order said all the LPG dealers in the state should maintain a separate list of those, who had only one gas connection. The dealers would be paid Rs 1000 per month as administrative expenses. The government would release the subsidy amount directly to the dealers through the state civil supplies corporation in districts and through the deputy commissioners of civil supplies department in Chennai. The subsidy would cost the exchequer Rs 80 crore ($18.4 mn) per month. 

Cairn to invest $2 bn on Rajasthan fields, pipeline

June 25, 2008. Cairn India plans to spend $2 bn to develop oil fields in Rajasthan and build a crude pipeline over the next 18 months. A project to develop fields in Rajasthan will cost $850 mn. Cairn India recently started construction on a 600-kilometer pipeline to transport crude oil from its Rajasthan fields to the country's west coast. Oil production from the Mangala field is expected to start in the second half of 2009. The output from the Bhagyam and Aishwariya fields will start in 2010. On March 31, Cairn India had raised its estimate for proven and probable reserves at the Mangala, Bhagyam and Aishwariya fields by 9% to 685mn barrels. Cairn India is developing 3.05 bn barrels of oil equivalent and its gross reserves are 5.1 bn barrels.

RIL, Essar Oil to buy crude from Cairn

June 25, 2008. RIL and Essar Oil have agreed to buy the entire crude oil from Cairn India's Rajasthan oil blocks. Cairn India has received an expression of interest from RIL, Essar, Indian Oil Corp. and MRPL to buy the Mangla crude. RIL has agreed to buy 60,000 barrels of oil per day (bod) from Cairn India while Essar Oil has agreed to buy up to 120,000 bpd of crude oil. IOC and MRPL will buy 20,000 bpd each.

At peak production, Cairn’s Mangala, Bhagyam and Aishwarya fields will aim to produce 1,75,000 bopd and will boost India’s domestic oil production by over 25%.

Policy / Performance

OPEC rejects India’s call for oil price band

July 1, 2008. Oil cartel, the Organisation of Petroleum Exporting Countries (OPEC), rejected India's call for regulating crude prices through a price band.  According to the cartel, the market was the best judge, and forecast prices climbing to $170 a barrel on summer demand in the US. It is of the view that producing and consuming nations never agree on any price and they never agreed with (OPEC) price band (that operated between 2000 and 2005). OPEC to operationalise a price band mechanism wherein crude prices move within a specified range.

Top names show up to dig for oil

July 1, 2008. India hopes to attract investments of around $3 billion in exploration of oil and gas in blocks offered under the seventh round of the New Exploration Licensing Policy (NELP VII), for which 181 bids were received from 99 companies, the most under any auction. Of the 57 blocks on offer, 12 blocks did not receive any bids. These were recycled blocks, or blocks which were offered in previous NELP rounds and had not found any bidder.

Global majors such as BHP Billiton, the world's largest mining company, and British Petroleum, the third largest oil company in the world, bid for blocks for the first time. British Gas, which won a block in Nelp VI, also bid. Nine global companies, which had not participated in previous NELP rounds, bid under this round. The blocks are likely to be awarded by August 31 this year. BHP Billiton bid for seven deepwater blocks in a consortium with infrastructure company GVK and has provisionally won all the bids. British Petroleum bid for two blocks in a consortium with Oil and Natural Gas Corporation (ONGC), India's largest oil producer, and for one block with Reliance Industries, which operates the world's third-largest refinery in Gujarat.

However, ExxonMobil, the world's largest oil company which had bought geological data for the blocks, abstained from bidding. Almost 60 per cent of the bids 106 of the total 181 were in small blocks, called S-Type blocks. Companies bidding for these blocks do not need to have the technical capability or experience in oil and gas exploration to bid. The bids were received in spite of the finance ministry withdrawing a crucial income tax holiday on gas production. India is looking to attract global oil companies such as Exxon, Chevron and Shell to bid for blocks in the country as it strives towards energy security.

Income tax holiday only for commercial production of crude oil

June 27, 2008. The Petroleum Ministry clarified that as advised by the Ministry of Finance, the Income Tax holiday will as of now be available for commercial production of crude oil only and not for natural gas. The bid submission date of the seventh round of New Exploration Licensing Policy (NELP-VII) had to be extended thrice earlier before the final date of June 30, due to. The uncertainty arising over the taxation issues had led to both domestic and international players adopting a more cautious approach before working out their bidding strategies for NELP VII. This uncertainty has led to many international players deciding against participating in the bidding round.

OVL gets govt nod for overseas investment

June 26, 2008. The Union Cabinet approved a plan by ONGC Videsh Ltd. (OVL), to invest $437 mn in exploring petroleum areas in Brazil and Trinidad and Tobago. OVL, the overseas arm of Oil & Natural Gas Corp., plans to invest $155 mn in the first phase of exploration in an area in Trinidad. OVL will spend another $281 mn on drilling two fields in Brazil.

Govt asks RIL to prioritize gas supply

June 26, 2008. The Government has chalked out an order of priority which Reliance Industries Ltd. (RIL) should adhere to while pumping natural gas from KG D6 block in the Krishna Godavari basin, off the east coast. RIL is expected to commence production from September. It will initially be about 25 mmscmd, and is expected to gradually increase to 40 mmscmd by March 2009. The empowered group of Ministers (EGoM) has decided that the existing gas based urea plants, which are now getting gas below their full requirement, should be supplied gas so as to enable full capacity utilization. A maximum quantity of 3 mmscmd should be supplied to existing gas based LPG plants. Up to 18 mmscmd natural gas should be supplied to power plants. A maximum quantity of 5 mmscmd should be made available to City Gas Distribution (CGD) projects for supply of Piped Natural Gas (PNG) to households and Compressed Natural Gas (CNG) to the transport sector. Any additional gas available should be supplied to existing gas-based power plants, as their requirement is more than 18 mmscmd.

The decision would benefit 22 urea plants in the country, as natural gas is the ideal feedstock for production of urea and, due to the shortfall in gas availability in the country, these plants have to use costlier alternate fuels like naphtha and fuel oil. Supply of gas for production of LPG would be greatly beneficial as about 25% of present requirement is met by imports. The LPG requirement in the country is expected to further go up in the coming years because of continuing enrolment. Supply of gas to power plants would result in utilization of idle assets and cheaper incremental cost of power on account of better utilization of existing assets. Gas-based power plants handle peak loads very well and they are also preferred for environmental considerations. Supply of city gas as a clean and cheap fuel for use of domestic purpose has become a vital necessity for the urban dwellers.

Presently, the country has 12 cities with more than 25 lakhs population. It is proposed that all cities with population of more than 25 lakhs will be connected within three years. Further, cities with population between 10 to 25 lakhs will be covered in a phased manner. The Government had set up an EGoM to examine issues relating to pricing and commercial utilization of gas under New Exploration Licensing Policy (NELP). The EGoM met on May 28, to deliberate upon issues pertaining to commercial utilization of natural gas. According to the EGoM, the contractors should sell natural gas to consumers in accordance with the marketing priorities determined by the Government. Consumers belonging to any of the priority sectors should be in a position to consume gas as and when it becomes available. So, the marketing priority does not entail any reservation of gas.

It implies that in case consumers in a particular sector, which is higher in priority, are not in a position to take gas when it becomes available, it would go to the sector which is next in order of priority. In case, if there is any default by a consumer under a particular priority sector and further in the event of alternative consumers not being available in the same sector, the gas will be offered by the contractor to other consumers in the next order of priority. The priority for gas supply from a particular source would be applicable to only those customers who are connected to existing and available pipeline network connected to the source.

So, if there is a marginal or small field that is not connected to a big pipeline network, then the contractor would be allowed to sell the gas to customers who are connected or can be connected to the field in a relatively short period (of say 3-6 months). Since the supply situation is expected to increase substantially in the near future in view of increased availability from domestic sources and imported gas (LNG/ transnational pipelines), these guidelines would be applicable for the next five years after which they would be reviewed.

ONGC highest taxpayer in the country

June 25, 2008. Even as oil marketing companies are reporting losses on rising crude oil prices, state-owned oil producer ONGC has emerged as the largest taxpayer in the country by paying as much as Rs 1,333 crore ($312.9 mn) advance tax for the first quarter this year. The oil major had paid Rs 1,010 crore ($237 mn) as advance tax during the same period last fiscal. Meanwhile, belying fears of industrial slowdown, the Government’s revenue collections from direct tax such as corporate and income tax continued the growth momentum and was up by 43.45 per cent at Rs 49,411 crore ($11.5 bn) during the April-June 21 period over the corresponding period last fiscal.



Kuttiadi scheme to be commissioned in May

July 1, 2008. According to the Kerala Electricity Minister, A.K. Balan, the 100 MW hydroelectric Kuttiadi additional extension scheme would be commissioned in May 2009. The Kerala State Electricity Board (KSEB) would issue tender notices for small hydel projects that could together generate another 100 MW of power. As per the minister, negotiations were on for setting up a 3,000 MW thermal project in association with Orissa and other States from which the State would receive 1,000 MW of power and work on detailed project reports of 26 projects, which would together help generate 500 MW of power by 2011-’12, was on.

Jai Balaji signed MoA with WBIDC

July 1, 2008. The West Bengal Industrial Development Corporation (WBIDC) has identified 1,200 acres in Purulia for the first phase of Jai Balaji group's five million ton integrated steel plant. The first phase of two mt steel plant, one million ton cement and 400 MW of captive power would be completed in 36-40 months. The investment in the first phase would be Rs 5,000 crore ($1.1 bn) and the total cost of the project is Rs 16,000 crore ($3.6 bn). The memorandum of agreement with the West Bengal government is for a 5 mt integrated steel plant, 3 mt cement plant and 1,215 MW captive power plant. Applications to the central government for coal blocks had also been made. A coke oven plant of 0.4 mt capacity was part of the investment.

BHEL bags contract to develop thermal power project in Syria

July 1, 2008. State-run engineering giant Bharat Heavy Electricals Ltd has bagged Rs 2,080 crore ($480.3 mn) turnkey contract to develop 400 MW thermal power project in Syria. The order has been placed by Public Establishment of Electricity for Generation and Transmission (PEEGT), Ministry of Electricity, Syria. With this order, the company makes its maiden entry into the Syrian Power Sector. The company will design, manufacture, supply, erect and commission the main plant equipment with associated auxiliaries, balance of plant and electricals and civil works. It would develop 400 MW thermal power project at Tishreen Thermal Power Plant Extension in Syria. The project would be executed in a period of 33 months. BHEL is targeting a six-fold increase in its physical exports by 2012.

UJVNL to construct Lakhwar-Vyasi project

June 30, 2008. Uttarakhand Jal Vidyut Nigam Ltd (UJVNL) claimed that the 420-MW Lakhwar-Vyasi hydel project on river Yamuna in Dehradun district has been handed over to it and the construction work would start soon. The government has so far remained non-committal regarding the allotment of the project, which is hanging fire for the last 20 years due to paucity of funds. An investment of nearly Rs 3,000-4,000 crore ($699 – 932 mn) is proposed in the project.

The project, which will benefit several northern states like Delhi, Haryana and Uttar Pradesh, was declared a national project due to efforts of the NHPC. The construction of the project was initially started in 1979 by the Uttar Pradesh Irrigation Department. But due to paucity of funds, the project could not see the light of the day.

After Uttarakhand came into being in 2000, the state government handed over the responsibility of preparing the revised DPR of the multipurpose project, being built on the river Yamuna, to NHPC. But after UJVNL's projects were staved off, the state government made up its mind to hand over the Lakhwar-Vyasi to its own enterprise. Once the project is completed, it would produce 927 million units of power besides irrigating 40,000 hectares of land through east Yamuna canal.

Reliance Infra bags order worth $3 bn

June 30, 2008. Reliance Infrastructure Ltd., controlled by Anil Ambani, won Rs 128 bn ($3 bn) order from group company Reliance Power Ltd. to build a 3,960 MW power project. The company has orders worth Rs 228 bn.

Shanghai Electric turbines for Reliance Power

June 28, 2008. Reliance Power has zeroed down on the $7 bn Shanghai Electric Group, a leading electrical and engineering equipment company of China, for the primary equipment supplies of the Sasan ultra mega power project. The Chinese major, which is planning to enter the Indian power sector in a big way, will supply boilers turbines and generators (BTG) to the Madhya Pradesh-based UMPP. Reliance Power is slated to formally sign the contract with Shanghai Electric in the next few days.

The BTG is one of the major components of the engineering procurement and construction work of the power project. Reliance Power is in talks with leading Chinese export credit agencies like the China Exim, Sinosure and China Development Bank to part fund the equipment purchase contract. The total EPC work of the project would cost an estimated Rs 12,000 crore ($2.8 bn).

Reliance Power had received bids from large equipment manufacturers like Bhel, Ensaldo of Italy, Power Machines from Russia and Chinese firms Dong Fang Electric, and Harbin for the BTG contract. Shanghai beat the competitors both on the price front and on the delivery schedule. Shanghai Electric, which has a manufacturing capacity of 33,000 MW annually in China, will supply six units of 660 MW each. Reliance Power has already appointed Ernst & Young to work on their project design development.

Essar plans $1 bn power plant in Vadinar

June 27, 2008. Ruias-promoted Essar Power is setting up a 1,200 MW co-generation power plant at an investment of Rs 4,800 crore ($1.1 bn). The captive plant for Essar Oil's refinery will come up in Vadinar, Gujarat. The company is planning to expand the refining capacity of the refinery to 34 mtpa from the current 10.5 mtpa. The order for equipments has already been placed and the work has started.

The refinery, which started commercial production in May this year, already has a 120 MW power plant for captive use. The new power plant will have both coal-based boiler and gas turbine for power generation. Coal for the plant will be imported, which will also cater to the needs of the company's other upcoming project in Gujarat. The company signed a power purchase agreement with Gujarat Urja Vikas Nigam and is in the process of setting up a 1,200 MW coal-based power plant close to Vadinar at Salaya. The Salaya plant is expected to be commissioned by 2012. The Vadinar plant will be completed in two phases. In the first phase, a 330 MW plant will be commissioned by September 2009. While in the second phase, a 900 MW plant will be commissioned by December 2010. The company is looking at a debt-equity ratio of 70:30 for the power plant.

GMR buys 50 pc in power utility InterGen for $1 bn

June 26, 2008. Leading infrastructure player GMR Infrastructure acquired a 50% equity stake in the US-based power utility InterGen for $1.1 billion. The deal makes the Bangalore-based company the country’s largest independent power producer and qualifies it to bid for building ultra mega power projects (UMPP). It (the buyout of InterGen) has been one of the most competitive acquisitions and will give the GMR access to developed power markets, superior power trading and hedging systems. The acquisition, through a special purpose vehicle, would be funded by a bridge loan with a two-year tenure, after which GMR would go for a long-term loan, including an equity component.

The $1.1-bn deal pegs the per mega-watt cost at $3,60,000, which is half the cost to set up a similar facility. The acquisition will add InterGen’s 13,000 MW capacity to GMR’s and will help the company meet the minimum 1,000 MW requirement to bid for UMPPs. 85% of the fuel used at its 12 plants was gas, while the remaining was coal. This eliminates the risk associated with coal. Also, since 50% of the gas used is through tolling, where the electricity buyer supplies gas and gets power in return, InterGen is not affected by fluctuations in gas prices.

NTPC to set up 4,000 MW plant in UP

June 26, 2008. National Thermal Power Corporation (NTPC) will be setting up a 4,000 MW power plant in Lalitpur district of Uttar Pradesh. The approval has been given by the state government. The UP government would hold a 30% equity in the proposed NTPC plant, and 75% of the power generated by the plant would be used by the state.

Transmission / Distribution / Trade

India’s 1st power exchange commenced operations

July 1, 2008. Financial Technologies India announced that Indian Energy Exchange (IEX), India's first power exchange, has commenced operations on June 27. IEX is promoted by Financial Technologies and PTC India, with the former holding a lion's share of 90 per cent. IEX received its approval from the Central Electricity Commission (CERC).

The Exchange received bids for 13,176 Mwh of power and the matched power was cleared at Market clearing prices between Rs6.46/kwh and Rs8.01/kwh for the different hours of the market. The power will now be scheduled on June 28, 2008 as IEX is trading day ahead power currently. Over 50 members and users have been identified for participation in phase 1.

Major members and clients that participated were from Maharashtra, Tripura, West Bengal, Karnatak and Madhya Pradesh. India joins the select group of developed countries which have power trading markets. The Central Electricity Regulatory Commission has issued the guidelines for setting up power exchanges, with the objective of fulfilling the manadate given in the Electricity Act, 2003 for developing competitive power markets in the country. The operation of power exchanges has become feasible due to transparent and non discriminatory inter-state open access regime implemented by the commission.

Gujarat to buy 3 GW from Adani, Essar

July 1, 2008. In a development that will help the state meet its power requirement, Gujarat government has tied up with Adani and Essar for purchasing 3000 MW power at a fixed rate for a period of 26 years. The state government will buy power from Adani and Essar at Rs 2.35 per unit to Rs 2.89 per unit. This arrangement is for a period of 26 years.

As per the agreement, which was signed a few months back, the companies will not be able to alter the rates under any circumstances. Both the companies have their mines as well as the infrastructure to supply power at such competitive rates. Of the 3000MW, the state will start getting 1000MW by the end of 2009. Gujarat's present installed capacity is over 9,000 MW against the unrestricted power demand of 11,500 MW, resulting in a deficit of 2,500 MW.

As per the 16th Electric Power Survey (EPS) carried out by the Central Electricity Authority (CEA), the demand is likely to grow to over 14,000 MW by 2012. The state would require an installed capacity of 18,700 MW by 2012 to meet the growing power demand. The state government has planned to add 11,164 MW by then. Leading power companies, including Essar, Adani, Torrent, and government-owned companies like GUVNL, are already on way to create power infrastructure to generate additional 11,164 MW. This would take the total installed capacity of the state to 20,000 MW by 2012. However, according to the EPS survey, the state's peak demand would be 18,500 MW by 2017.

State-owned power company plans power exchange

June 30, 2008. After NTPC, state-owned PSU Gujarat Urja Vikas Nigam Ltd is planning to set up an energy exchange platform for trading power. The company has begun initial spadework for the power exchange as it has already invited bids from trading members and is evaluating the cost of the project and other project details including joint venture partners.

The proposed joint venture will allow GUVNL to have a say in the management. GUVNL may have even less than 51% stake in the project. Recently, Triple Point Technology, a supplier of cross industry software for commodity exchanges has provided its flagship product Commodity XL to GUVNL. It is the first state electricity company to deploy the integrated trading and risk management solution.

The state-owned power company has invited bids from various traders for becoming the client member for trading the power through power exchange. GUVNL is evaluating the bids received from the members of exchange assuming 100 MW power round the year for both the transaction of purchase and sell through exchange at the tariff rate of Rs 8.00 per kwh and 12% rate of interest for credit period. Based on the bids received, GUVNL shall make cost-benefit analysis of trading power through exchange and select the Member (Trader) for becoming the client member.

Power Exchange sets fee structure

June 27, 2008. Power Exchange India Ltd (PXI), a joint venture of the National Stock Exchange and National Commodity and Derivatives Exchange has announced fee structure for trading members. The trading-cum-clearing members have to pay a one time fee of Rs 10 lakh and an annual fee of Rs 2.5 lakh, while the trading members have to set aside Rs 5 lakh as one time fee and Rs 1 lakh as annual fee. Members would also be required to keep deposits according to the PXI rules.

The fee structure for professional clearing members (PCM), who will facilitate clearing for trading members (TMs), will be announced shortly. Recognising the peculiarities of the power sector, a distinction, has been made within the TCM category as TSCM and TCM. TSCM will do only proprietary trades and clear for the deals themselves, while TCM would do proprietary trading, clearing and also trade and clear on account of their clients. A power exchange would basically function on the lines of commodity exchanges and provide a platform for buyers, sellers and traders of electricity to enter into spot contracts.

PXI, a nationwide spot exchange for power, will initially have only trade day-ahead contracts. It will provide an open market place for all stakeholders in the sector, including generators, distribution companies, independent power producers (IPPs), captive power producers (CPPs), traders and so on who can participate either by becoming members of PXI or by becoming constituents of the members. The exchange is expected to be operational in a few months.

NTPC signs PPA with GRIDCO

June 27, 2008. NTPC Limited signed a Power Purchase Agreement (PPA) with GRIDCO for supply of power from its 1320 MW (2X660 MW) Barh Project (Stage-II) in New Delhi. NTPC-Barh Stage-II project is being set up by NTPC in Bihar, the power from the project shall be supplied to the States of Eastern, Northern and Western Region. This is in addition to 1980 MW Barh stage-I being set up by NTPC. On completion the project will be the largest power station of NTPC in the Eastern Region.

GUVNL plans 10.5 pc hike in power tariff

June 26, 2008. After Torrent Power, the state-owned power company Gujarat Urja Vikas Nigam Ltd. (GUVNL) plans to hike tariff by around 10.5 per cent. The state government has given an in-principle approval to such a proposal prepared by the power company. Now, GUVNL will file a petition before Gujarat Electricity Regulatory Commission (GERC) in this regard. If GERC clears the proposal, around 80 lakh consumers shall have to shell out around Rs 1200 crore ($281.6 mn) more over the next three years. GUVNL has not increased power tariff after 2001-02.

However, the company has hiked fuel surcharge under the (Fuel Price and Power Purchase Agreement) FPPPA formula. As a result, consumers have had to pay Rs 1900 crore ($446 mn) more in the past six months. GUVNL has sought the tariff revision in the wake of high price it has had to bear in purchasing power. GUVNL buys nearly 45 per cent of its total supply from private players as well as other states. The rising input cost coupled with Centre's decision to take away 200 MW from the state has created a situation where GUVNL has to pay Rs 1200 crore ($281.6 mn) for purchasing power.

Kerala to face load-shedding from June 27

June 26, 2008. The Kerala State Electricity Board (KSEB) has imposed a half-hour load-shedding in the State from June 27. According to KSEB, the load-shedding will be between 6 p.m. and 10 p.m., the peak power consumption hours. KSEB had originally proposed a one-hour load-shedding in view of the poor storage position in the State’s hydel reservoirs. The State’s peak load demand now was in the region of 2,700 MW, while the maximum energy that can be put on the grid was 2,200 MW. Against the allocation of 1,041 MW for the State from the Centre, the availability now varied between 600 and 700 MW.

EMCO bags $13 mn order from MSETCL

June 25, 2008. EMCO Ltd., one of the leading Indian manufacturing companies and end to end solution provider in Power Transmission and Distribution sector, has bagged a prestigious project on turnkey basis from MSETCL (Maharashtra State Electricity Transmission Co. Ltd.) for the establishment of 220kV Gas Insulated Substation (GIS) at Bhandup in Mumbai. This is the second project that EMCO has received in last six months from MSETCL.

Earlier project was worth Rs 3250 mn ($76.2 mn) for commissioning of three 400 kV Conventional Substation. Gas Insulated Substations are essential in the transmission of electrical power to growing urban centers where conventional air insulated substations can no longer meet the requirements of available space, pollution, safety, maintenance and other similar expectations. The GIS substations are of great importance, especially where space is a constraint as its greatest advantage is that it uses only one fifth the space that is used by traditional substations. Its other advantages include noiseless operations, effective protection against atmospheric pollution, non-flammability, lower maintenance and minimum radio interference. 

Policy / Performance

Govt’s new climate change plan focuses on sustainable growth

July 1, 2008. The government released its action plan on climate change, focussing on achieving sustainable development through use of cleaner technologies without setting any targets for reducing greenhouse gas emissions. The National Action Plan on Climate Change looks up to solar power apart from seven other strategies to achieve sustainable development. The Plan has been prepared under the guidance and direction of Prime Minister's Council on Climate Change. The action plan, which has an accent on energy efficiency and cleaner technology, includes eight national missions on solar energy, enhancing energy efficiency, sustainable habitat, water conservation, for sustaining the Himalayan ecosystem, creating a Green India, sustainable agriculture, and establishing a strategic knowledge platform for climate change.

NTPC to get $2 bn from PFC

June 30, 2008. Country's largest power producer NTPC will get Rs 10,000 crore ($2.3 bn) from Power Finance Corporation for funding its various projects for capacity addition. A Memorandum of Agreement (MoA) in this respect was signed between the two public sector companies. Financing facility extended by PFC will be utilised by the company for its capacity addition programme, spread all across the country.

Delay in ancillary projects may derail power capacity targets

June 27, 2008. Tardy progress on award of ancillary projects accompanying upcoming thermal power stations could end up playing spoilsport to the Centre’s power capacity addition target for the current Plan period. While the Government has been focussed on expeditious placement of main plant equipment orders to minimise slippages in the current Plan period’s capacity addition target of 78,577 MW, the award of the ancillary units, collectively termed as balance-of-plant (BoP) packages, are trailing badly for thermal projects slated to come up during the current Plan.

Till mid-June 2008, BoP packages for over 45 per cent of the thermal projects slated to coming up during the current Plan are still to be placed with suppliers. Thermal projects are the mainstay of the capacity addition during the Eleventh Plan, forming nearly 75 per cent of the total capacity of 78,577 MW being targeted during the five-year period. Delays in placement of BoP packages, which unless done in tandem with the main plant order, can hold up a project and slow progress on BoP packages, have been singled out as among the biggest reasons for slippages witnessed in the last Plan period. Inadequate numbers of BoP equipment suppliers, besides lacklustre response from existing players, are among the key reasons cited for the slow progress in the award of BoP packages.

According to NTPC, at present, there are very limited vendors for each of the BoP packages and at times only a single quotation is received. As per the Ministry of Power, while the number of qualified vendors is not commensurate with the large capacity addition programme, as is planned for the current Plan period, there is also a very limited participation from foreign vendors in BoP packages.

Packages for 11th Plan thermal projects






Orders to be placed

Coal handling plant




Ash handling plant




Demineralised water plant




Cooling tower








Fuel Oil system




PT plant












Sources: Ministry of Power, data as on June 19, 2008

Electric supply may soon have a green element

June 26, 2008. Power distribution companies will now have to mandatorily buy a minimum quantum of green power for their consumers. The government is working on a set of regulations by which distribution companies must have a mix of conventional and non-conventional power in their kitty. Distribution companies normally have to buy power from generating companies within and outside the state to meet the electricity requirements of the state.

The idea behind the move is to see that every state includes some green power (electricity generated from non-conventional sources like wind, solar or biogas) in their total consumption. At present, only 14 states have set quotas for sourcing renewable energy for their grids. The Centre and state regulatory commissions are both working to bring in the regulations. With the revised regulations in place, power distribution companies may have to pay a heavy fine for not sourcing any renewable energy to the grid.

So far, only Maharashtra Electricity Regulatory Commission (MERC) has imposed stringent regulations to promote use of renewable energy by power distribution companies. MERC has made it mandatory for all power generating companies in the state to abide by renewable portfolio standards (RPS). To minimize dependence on conventional sources, Electricity Act, 2003 has directed state electricity regulatory commissions to promote use of a certain percentage of renewable energy by distribution companies.




Victoria confirms discovery at West Med field

July 1, 2008. Victoria Oil & Gas Plc has received a certificate from the Russian Ministry of Natural Resources confirming registration of a discovery at the West Medvezhye ("West Med") gas and gas condensate field in Western Siberia, Russia, for Well 103. This certificate completes the requirements for conversion of the West Med exploration license into its 20 year production phase.

Exploration around the location of the next target, Well 105, is continuing with a reinterpretation of the existing seismic and the new data obtained from the drilling of Well 103 being undertaken by local geological institute SibNats. A geochemical survey has also been completed to evaluate further potential target areas around the location of Well 103. This official certification confirms the recognition of Victoria's successful fulfillment of its exploration license obligations for West Med by the Russian authorities.

Dana hits new oil discovery in Egypt

June 30, 2008. Dana Gas discovered a new oil zone in its Egyptian concessions, marking the first discovery in the company’s $170 mn drilling campaign for 2008. The drilling campaign will cover 15 exploration wells and four development wells. The new well confirmed the first discovery, Al Baraka-1, in the Abu Ballas formation, and proved a new discovery in the underlying Six Hills formation. Drilling of the Al Baraka-2 well in the Komombo concession, where Dana Gas made its first commercial oil discovery last year, has been completed.

The recent oil discoveries made by Dana Gas in Upper Egypt, are of great importance as they prove the presence of a hydrocarbon system for the first time in the history of the area. Dana Gas is the sixth largest natural gas producer in Egypt today.  A report by the Middle East Economic Survey (MEES) confirmed that Dana Gas was the only private company from the region to make new Middle East oil and gas discoveries in 2007.

Shell inks preliminary agreement with BPZ

June 26, 2008. Shell Exploration Company (West) B.V. (Shell) and BPZ Energy Inc. have signed a preliminary agreement to jointly explore for oil and gas in northern Peru. The agreement calls for Shell to fund a three-phase exploration program in exchange for a 50% interest in parts of three BPZ blocks in northern Peru.

Under the agreement, Shell will evaluate progress at the end of each exploration phase and decide whether to proceed to the next one. The agreement covers BPZ blocks XIX and XXIII and parts of block Z-1. BPZ retains 100% rights for the parts of block Z-1 where there are existing discoveries. Under the agreement Shell has the possibility to buy into these areas at a later stage. The agreement complements Shell’s ongoing strategy of expanding its upstream oil and gas activities.


Iberian Peninsula refiners drive European refinery growth

July 1, 2008. Refineries in Spain and Portugal are set to deliver nearly half of Europe's refining capacity growth in the next five years. Spanish and Portuguese refineries are set to undergo a period of rapid change. Current refinery investment in the countries aims to redress the supply shortfall of middle distillate products in the Iberian region.

Net imports of diesel in the Iberian Peninsula have been increasing in recent years, as demand growth, averaging 5% over the last five years, has exceeded supply increases. The Iberian peninsula accounts for the second-highest diesel imports after France. A raft of new refinery projects are set to come online by 2013, geared toward producing more middle distillate products gasoil, diesel and jet fuel.

Refiners in the region are also moving to boost complexity at their refineries, ensuring that their facilities can produce better-quality products which garner higher market prices. The increasingly tight product specifications for transportation fuels that are due to come into force in Europe will necessitate significant investment even to maintain the status quo of Spanish refineries' competitive position.

The new wave of investment reflects a shift away producing low-quality fuel oil, as stricter environmental regulations and poor economics deter investment in the product. The prospect of tighter fuel oil specifications being introduced, both for inland and international marine bunkers (shipping fuel), will require additional hydrotreating investment which offers little opportunity for a satisfactory return on investment at today's market prices.





Estimated Completion









coking capacity





coking capacity




20,000-b/d coker

early 2009




hydrocracking capacity





hydrocracking capacity


Galp Energia




Galp Energia




CB&I to supply hydrogen plant for California refinery

June 30, 2008. CB&I has been awarded a contract for a large-scale hydrogen plant at a California refinery. The project is valued at approximately $90 mn. CB&I's scope of work for the project consists of the engineering, procurement and fabrication of a 100 mmscfd plant that will supply high purity hydrogen to help the refinery meet new clean fuel standards. The plant will use CB&I's proprietary HYFORMINGTM box furnace technology. CB&I's contract is scheduled to be completed in early 2010. CB&I combines proven process technology with global capabilities in engineering, procurement and construction to deliver comprehensive solutions to customers in the energy and natural resource industries.

Foster Wheeler wins contract for Russian refinery

June 26, 2008. According to Foster Wheeler Ltd., Milan-based Foster Wheeler Italiana S.p.A., part of its Global Engineering and Construction Group, has been awarded a services contract by Mariisky NPZ Ltd. for the planned expansion of the Mari-El refinery, located in the Republic of Mari-El, Russian Federation. Mariisky NPZ Ltd., a private company, owns and operates the refinery.

The objective of the expansion is to increase the refinery's crude processing capacity from 27,000 barrels per stream day (BPSD) to 90,000 BPSD and to increase its ability to convert lower-value products into higher-value products. Mariisky NPZ Ltd. plans to install a new refinery train including new crude and vacuum distillation units, hydrocracking, hydrodesulfurization, amine and sulfur recovery units based on Shell technology, a solvent deasphalting unit, a hydrogen production unit based on Foster Wheeler technology, and sour water stripping facilities.

In addition, a power plant will also be built to burn asphalt from a solvent deasphalting unit to produce steam for electric power generation for the refinery and for export to a public network. Nitrogen oxide and sulfur oxide removal systems will be installed to clean the boiler flue gases. New utility systems and storage and auxiliary facilities also form part of the expansion project. Foster Wheeler Italiana will define the design basis, then undertake the basic design package for the non-licensed process units, power plant, utilities and offsites, and front-end engineering design (FEED) for the entire expansion project.

The company also will provide assistance to the Russian design institute, which will undertake the permitting activities, and it will also coordinate and provide support to the licensors who will prepare the basic engineering packages for the licensed units. Foster Wheeler Italiana will also develop a schedule and execution strategy for the engineering, procurement and construction (EPC) phase of this expansion project, and it will coordinate and supervise the various entities working on the project, including the selected EPC contractor(s), up to ready for start-up of the new facilities, which is scheduled for 2012.

Transportation / Trade

UK, US firms to Pilot Tech for locating buried pipelines

July 1, 2008. ViaLogy Plc. has partnered with Texas-based oil and gas pipeline field services and survey company ASTFS LLC to offer its QSUB electromagnetic imagery fusion platform to help determine precise GPS locations. Under the agreement, ViaLogy and ASTFS, which is part of the Advanced Spatial Technologies Group of Oklahoma, will collaborate on a pilot survey deploying helicopter-mounted light detection and ranging, ground penetrating synthetic aperture radar sensors and advanced GIS analytics.

Following success of the pilot survey, ASTFS has agreed to deliver minimum revenues of $26.5 mn to ViaLogy for market exclusivity in North America over a period of five years. The problems and high operational costs that beset the task of locating buried pipeline should be reduced enormously by the simplified airborne survey approach enabled by the ViaLogy technology.

Bulgaria, Hungary urge faster work on Nabucco

June 27, 2008. Bulgaria and Hungary called for faster work and stronger political support for the Nabucco gas pipeline project, aimed at easing Europe's dependence on Russian gas. The European Union has made the 7.9 bn euro ($12.43 bn) pipeline a priority but both Bulgaria and Hungary are of the view that stronger commitment was needed for the plan to materialise. The pipeline is due to bring 30 bcm of Caspian or Middle Eastern gas annually from Turkey to an Austrian gas hub via Bulgaria, Romania and Hungary, and become operational in 2013. But the project faces a number of serious challenges, securing supplies, with only Azerbaijan committed, Russia's South Stream rival route and U.S. hostility to sourcing Iranian gas, although Washington backs the project.

Gazprom to play role in S. America pipeline project

June 26, 2008. According to Russian Deputy Prime Minister Aleksandr Zhukov, the Russian gas giant Gazprom intends to take an active part in the construction of the trans-American gas pipeline in its Venezuela-Brazil section. Gazprom is already doing certain work in this direction. According to the Vice-president of Venezuela, Ramon Carrizales, there are joint developments for utilizing deposits in the Orinoco River basin.

Policy / Performance

Nigerian O&G group wants Petro subsidy channeled to new refinery

July 1, 2008. Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has urged the Federal Government to channel the subsidy on petroleum products to the building of a new refinery. The group decried government's high expenditure on products' subsidy, through the Petroleum Support Fund (PSF) in the last few years, and the N304 billion estimated for this year. According to the group the money being spent on subsidy over the years was enough to build a new refinery. The group advised government to properly harmonize its policy on products' subsidy, saying there was no single approach to the issue. It stressed the need for government to ensure that all the refineries were fully operational to meet the increasing demands by Nigerians.

Cuba to boost refining capacity

June 30, 2008. Cuba will increase its capacity for refining crude by close to 30,000 barrels per day with the expansion of the Santiago de Cuba refinery being carried out by the authorities of the island and of Venezuela, the country that is financing the project. Cuba's goal is to get the Santiago refinery processing 50,000 barrels per day, more than double its current capacity, and make it capable of processing higher quality products. The refinery in Cuba's second largest city, located on the eastern end of the island, currently has a refining capacity of some 22,000 barrels per day.

Azerbaijan to supply oil for Odessa-Brody

June 30, 2008. According to Ukrainian President Viktor Yushchenko, the issue of supplying process oil for pumping it via the Odessa-Brody pipeline is solved and will be pumped in the originally planned direction [toward Europe] in the near future.

Canada's oil pipeline capacity remains tight

June 26, 2008. While there is spare capacity on some Canadian oil pipeline systems, as per the National Energy Board (NEB), oil pipeline capacity overall continues to be tight. According to the NEB's Canadian Pipeline Transportation System Assessment, additional capacity is soon needed to accommodate growing supply and provide greater market flexibility. This is best demonstrated by the recent number of announced and proposed pipelines and expansions to both traditional markets and new markets such as the U.S. Gulf Coast and offshore Asia and California. Capacity constraints on oil pipelines in Canada were evident in 2007. High capacity utilization of Canadian oil pipelines is being driven by growing oil sands production and continued strong demand in the U.S. Although some additional capacity will be added in 2008, tight conditions will likely exist for the remainder of the year.

According to the report, there is adequate capacity in place on existing natural gas pipelines. In fact, most NEB-regulated gas pipelines have some excess capacity, even during the peak winter season. Pipeline use declined for most natural gas pipelines in 2007. Stable or declining conventional supply from the Western Canada Sedimentary Basin, growing demand within western Canada, and competition from other supply basins, particularly in the western U.S., resulted in reduced flows on pipelines transporting gas from western Canada. The report also noted that shippers remain reasonably satisfied with the services provided by pipelines. With respect to the financial strength of pipeline companies regulated by the NEB, the report shows that key financial ratios continue to be stable and credit ratings continue to be investment grade. This annual report takes a look at the adequacy and economic efficiency of the more than 45,000 km of oil, gas and petroleum product pipelines regulated by the NEB.



Ormat gets $46 mn contract for power plant

July 1, 2008. Ormat Technologies Inc., the world's second-largest producer of geothermal electricity, won a NZ$60 mn ($46 mn) contract to build a power plant for Contact Energy Ltd. in New Zealand. The 23.3 MW binary generator will be built by Reno, Nevada-based Ormat at an industrial site near Taupo on the country's North Island. The plant, to be commissioned in 2010, is the first stage of a larger development of the nearby the Tauhara steam field. The total cost of the plant, including development drilling already completed, will be about NZ$100 mn.

Dominion begins construction of coal power plant

June 30, 2008. Construction is under way on Dominion Virginia Power's $1.8 bn coal-fired power plant in southwest Virginia. Dominion began construction on the 585 MW power plant in Wise County. The state Department of Environmental Quality (DEQ) already issued air permits that were approved last week by the state Air Pollution Control Board. The air board reduced emission limits recommended by the DEQ for sulfur dioxide and mercury, but environmentalists said they plan a court challenge to the plant.

Transmission / Distribution / Trade

Ipsa pins hopes on higher electricity tariffs in South Africa

July 1, 2008. Power plant developer Independent Power Southern Africa (Ipsa) is pinning its hopes on higher tariffs under Eskom's pilot national co-generation programme. Eskom is evaluating bids for its co-generation programme that will see various co-generation projects add as much as 3000 MW to the national grid to alleviate the power supply crunch. AltX -listed Ipsa is one of the companies that have submitted bids under the programme. Ipsa believes the new tariffs to be awarded under the (co-generation programme) tariff will be higher than those it already has and as a result, has deferred its refinancing of the Newcastle plant in anticipation of a further improvement to its long-term tariff. Ipsa would increase capacity at its gas-fired Newcastle co-generation plant by acquiring six Deutz gas engines for £1m. These are due to enter commercial service in the second half of this year, adding 8MW of nominal capacity to the 18MW of the original Newcastle (plant).

Hwange Colliery seals deal to export coal to Zambia

July 1, 2008. Hwange Colliery Company in Zimbabwe recently signed an agreement to export 10, 000 tonnes of coal fines a month to Konkola Copper Mines in Zambia. The coal miner was on a drive to increase its exports to the north, adding that the group had signed a two-year contract with Lafarge Zambia to initially export 10, 000 tonnes of coal a month. The tonnage is expected to go up to 20, 000 once logistics improve. In addition, 5, 000 tonnes were going into the Zambia industrial sector mainly breweries and food.

BP buys power plant for Whiting refinery

July 1, 2008. BP Alternative Energy has acquired the Whiting Clean Energy facility, a 525 MW natural-gas fired combined-cycle cogeneration power plant located in Whiting, Ind. The plant was acquired for $210 mn from NiSource Inc., a Fortune 500 company engaged in natural gas transmission, storage and distribution, as well as electric generation, transmission and distribution. The Whiting Clean Energy facility provides an efficient and consistent source of steam for BP's Whiting refinery. The acquisition also offers BP the opportunity to sell lower-carbon power into the local power market. BP's purchase of the Whiting Clean Energy facility will enhance the efficiency of its Whiting refinery and serve as a reliable source of energy for the Midwest. BP has received all necessary approvals from regulatory authorities including consents from FERC and the Federal Trade Commission and has taken over the day-to-day operational control of the plant.

Ekurhuleni hikes electricity price

July 1, 2008. A 12 percent increase in electricity costs will be effective in the Ekurhuleni metro. The municipality needed to pay Eskom an increase which amounted to 35.9 percent. However, it had decided to mitigate the severe effects of the increases to customers. Therefore it would effect an average increase of only 12 percent on July 1. The revenue income to Ekurhuleni would therefore increase by 12 percent but individual classes of customers could be affected by an increase greater than that. In general, residential users will only see an increase of 12 percent on 1 July 2008, these being on Tariff A and Tariff B consumers.

However from October 1, the metro would effect a further increase of 20.6 percent. The municipality will therefore bear the costs of the second Eskom increase for a period of three months, until 30 September 2008. The municipality would introduce a "lifeline" tariff with the second increase. This tariff would suit customers able to cope with 4600 Watts of power or a 20 Ampere supply and who had a prepayment meter. Alternatively, for residences without a geyser, all the lights can be on (assuming they are compact fluorescent lamps) plus a television set plus two small stove plates plus a refrigerator.

Electricity rates set to go down after ERC order

June 27, 2008. Power rates are set to go down in the coming months after the Energy Regulatory Commission (ERC) approved a long-awaited adjustment in the National Power Corp.’s (Napocor) generation and foreign exchange charges. The regulatory body has ordered the state-owned power company to reduce rates in Luzon by P0.7116 per kilowatt-hour and in Mindanao by P0.0246 per kilowatt-hour. But the Visayas will have a rate increase of P0.0878 per kilowatt-hour. The order was based on a petition lodged by Napocor in early June for an adjustment in its Generation Rate Adjustment Mechanism (GRAM) and Incremental Currency Exchange Rate Adjustment (ICERA) charges, as well as an application for revised basic generation rates.

The Generation Rate Adjustment Mechanism allows Napocor to adjust its generation rate to reflect changes in fuel and purchased power costs, while the Incremental Currency Exchange Rate Adjustment allows it to adjust its rates based on foreign exchange fluctuations. These charges are passed on to Napocor’s customers, including the country’s electric utilities and large companies. Customers of giant utility firm Manila Electric Company (Meralco) in the capital region and its outlying provinces are not expected to benefit dramatically from Luzon’s downward rate adjustment, as the Lopez-controlled utility sources less than half of the electricity it gets from Napocor.

The application for a basic rate adjustment, on the other hand, reflects the impact of the privatization of a number of Napocor’s power plants under the government’s power sector privatization program. Napocor’s petitioned rates, culled from adjustments in the billing period from July to December 2006, have long been awaited by the Energy Regulatory Commission, but these were much lower compared with the rates ordered by the latter. In its petition filed prior to the regulator’s order, Napocor adjusted its rates downward. But these would have only redounded to a decrease of about P0.0362 per kilowatt-hour in Luzon and P0.0039 per kilowatt-hour in Mindanao.

The Visayas grid, on the other hand, will sustain a rate increase of about P0.1591 per kilowatt-hour. The regulator directed Napocor to file a petition for a full-rate adjustment to cover July 2006 to March 2008, as Napocor’s latest adjustment filings did not cover this entire period. Because of this, the Energy Regulatory Commission imputed carrying charges on the amounts that should have been refunded in the period July 2006 to April 2008 to benefit the consumers who could have enjoyed such reductions earlier had Napocor filed its adjustment applications within the time prescribed in the regulator’s guidelines.

Policy / Performance

Indian govt tries to salvage nuclear deal with U.S.

July 1, 2008. The Indian government is desperately trying to salvage a landmark nuclear deal with the United States that has emerged not only as a personal test for Prime Minister Manmohan Singh, but also as a symbol of the difficulties of enacting policy in India's system of coalition politics. Once that has been done, Singh promised, he will bring the matter before the Indian Parliament before sending it on to the U.S. Congress for final approval during its current session.

The agreement, which would give India access to fuel and technology for nuclear power plants, has floundered for several months because of political opposition, most critically from four Communist factions that provide crucial support to Singh's coalition government. The leftists are against the deal on the ground that it would fortify strategic relations with the United States, a policy they oppose. The White House has said it remains hopeful that the Indian government will untangle its domestic political difficulties in time to get the deal to the U.S. Congress before the end of President George W. Bush's term.

Algeria plans law for nuclear power this year

July 1, 2008. Algeria's government will send a bill to parliament this year to regulate nuclear power generation, as the North African country aims to build a nuclear plant in 10 years. Algeria, Africa's largest natural gas producer, will also seek to develop renewable sources of energy. The country has the potential to generate 170,000 terawatt hour of electricity from solar energy, and 35,000 terawatt hour from wind energy. Algeria has already found enough uranium deposits to fuel two nuclear power stations for 60 years. Algeria, a mostly desert nation that is Africa's largest by area behind Sudan, would also use nuclear power for water desalination. Algeria's petroleum reserves are expected to last at least 40 years at current production rate.

New electricity tariff commences in Nigeria

July 1, 2008. In Nigeria, under the new tariff regime called Multi Year Tariff Order (MYTO) the price of electricity will rise from N6 per kilo- watt to N11 per kilowatt which represent about 95 percent increase. The new regime was approved and announced in April by the Federal Executive Council, saying that its introduction is expected to boost the confidence of lenders and investors alike in the profitability of investments in Nigeria's power sector as it provides for reasonable returns on capital investment. But the Electricity Consumers Association of Nigeria (ECAN) condemned the new tariff regime, saying it is not realistic. Electricity consumers even considered the previous tariff as a rip-off because they hardly get any value for their money.

State cuts FPL rate hike request

July 1, 2008. State regulators gave electric customers a big break by cutting in half the 16 percent increase that Florida Power & Light (FPL) had been asking for as compensation for its fuel charges. According to FPL, the change would mean a customer using 1000 kilowatt-hours a month would see his bill starting in August increase $8.14, from $102.63 to $110.77. Based on current market prices for fuel, a 1,000 kilowatt-hour monthly residential bill in 2009 would increase to approximately $122, or about 10 percent. This 2009 rate is a projection and may vary depending on factors such as the volatility of world fuel markets, hurricane events, and other bill impacts.

The program involves so-called net-metering, in which homes and companies that produce power can have it flow backward into the electric grid. In the process, they can get credit for it against their electric bills or, in some instances, get paid for what they produce. Almost all instances are likely to involve solar power. The consumers could still sell power to the utilities, but it will be under the old rule, in which participants get back only 3 or 4 cents per kilowatt/hour for the power they provide, far less than the 11 or 12 cents per kilowatt/hour consumers pay the utility.

Britain signs nuclear deal with Jordan

June 29, 2008. Britain signed a preliminary nuclear cooperation deal with Jordan, as the desert kingdom scrambles to meet growing energy needs and find alternative sources of power to desalinate water. Britain and Jordan agreed to cooperate on promoting the establishment of a reliable source of nuclear fuel for future civilian light water nuclear reactors in the kingdom, which imports around 95 percent of its energy needs. The two sides also agreed to work together to develop human resources and nuclear safety, as well as generate power and desalinating water through nuclear energy. In addition to its lack of energy, the kingdom of some six million people is one of the most water-deprived countries in the world, with a deficit of more than 500 mcm (more than 17 bcf) a year.

Amman, capital of Jordan, plans to extract around 130,000 tonnes of uranium from the country's 1.2 billion tonnes of phosphate reserves and build a nuclear reactor, with the help of a global partner. It has reached similar agreements with Canada, France and the United States, aiming to bring its first nuclear plant into operation by 2015 under a multi-billion dollar programme. Jordan, which hopes nuclear power will meet 30 percent of its energy needs by 2030, is the latest Sunni Arab country to announce nuclear plans in the face of Shiite Iran's contested atomic drive, following in the footsteps of Egypt and the Gulf Arab states.

Kenya hikes electricity

June 27, 2008. Energy Regulation Commission, Nairobi- Kenya has increased its electricity bill by 24 percent citing runaway inflation and the steep cost of fuel. It came as a government subsidy for power produced from state-owned generators ends by June 30, largely shifting the bill to the industrial consumers. Power tariffs have not changed since 1999. These changes were necessary to ensure improvements in the quality of supply and to attract investments in new power generation, transmission and distributions in a sustainable manner.

The hike comes two days after President Mwai Kibaki urged African nations to create functional regional power grids to end systemic blackouts that have blighted the continent. Rising food and oil bills pushed the country's overall inflation to 31.5 percent - up from 26.6 percent in May and the highest in 14 years. Energy costs in Kenya are nearly four times higher than the prevailing rates in South Africa and Egypt, the country's main rivals in the regional market.

Renewable Energy Trends


Energy body calls for rural electrification through renewable sources

June 30, 2008. The Society of Energy Engineers and Managers (SEEM) has unanimously resolved to accelerate efforts on rural electrification through off-grid renewable energy generation using solar, wind, biomass, small hydro, geo thermal and other sustainable energy routes on account of the serious environmental and energy crisis faced by the whole world. As per the body the present challenge faced by the Earth is to make it greener and cleaner before it is passed on to the next generation, without reducing the present level of energy services and certainly expanding on it through a less energy intensive route.

PM pushes for green energy tags

June 27, 2008. Amid spiralling crude oil prices, the Prime Minister, Dr Manmohan Singh, asked the Ministry of New and Renewable Energy to draft schemes and guidelines for the introduction of Renewable Energy Certificates to encourage States to promote and trade in renewable energy. Dr Singh underlined the importance of developing renewable energy in India. The proposed certificates would designate ‘green power’ as a tradable commodity and promote inter-State sales of renewable generation.

The Government has already kicked-off the process of hiring consultants for the development of a Renewable Energy Certification mechanism for India on the lines of ‘green tags’ being used in the US and the UK, which would provide a platform for trading between renewable energy surplus and deficit States, with provisions for a clearing house mechanism and energy accounting framework.

The Centre will soon set up a solar energy mission and promote the use of solar lanterns across the country. Members of the coordination committee emphasised the vital importance of replacing kerosene lanterns with solar lanterns on account of India’s import dependence on crude oil, the high fiscal subsidy for kerosene and the environmental benefits of solar energy over kerosene. The Prime Minister asked the Minister of New and Renewable Energy to come forward with a comprehensive action plan for new and renewable energy development in consultation with State governments.

‘No subsidies for hybrids cars’: MNRE

June 25, 2008. Auto companies planning to launch hybrid cars will not get any subsidies from the Government considering the cost of the car and fuel efficiency that it offers. The Ministry of New and Renewable Energy said that it can provide incentives on research and development for hybrid cars but it cannot offer subsidies on such cars as they are very expensive and beyond the reach of ordinary masses. However, a range of incentives are on the platter for battery-operated vehicle makers.

Three State governments are currently offering incentives on electric vehicles. The Delhi Government is offering the highest subsidy at 15 per cent on the base price of the vehicle, a 12.5 per cent exemption of VAT and refund of road tax and registration charges. Chandigarh is offering an exemption on VAT and Bangalore gave 4 per cent VAT waiver in the initial five years when the car was launched and on registration costs.

So the base price of Reva is around Rs 3.5 lakh in Bangalore and Rs 2.99 lakh on the same model in Delhi. Currently, hybrids that run on both petrol and battery attract an excise duty of 14 per cent as compared to fully electric vehicles on which the duty has been brought to zero. With battery vehicles being offered incentives, Reva Electric Car Company, (RECC) plans to launch another electric car that could travel up to 200 km sometime next year. The company’s existing model offers a range of 80 km.

German company to set up solar testing lab

June 25, 2008. The 136-year-old TUV Rheinland, global service provider for quality testing and certification, is set to establish its fourth testing laboratory facility focused on solar technologies in India. Its target is to set up the facility in India during 2009-10. Currently, the German major has three global laboratories based in Cologne (Germany), Yokohama (Japan) and Shanghai (China). The fast growth and big potential in the solar photovoltaic sector in India is the key factor for the company to decide on setting up the facility in India.

The company, which has a global revenue of over €1 billion, is witnessing a 12-15 per cent growth from India. Its India (headquarters in Bangalore and presence in 10 cities) revenues last year were Rs 18 crore (€3 million). TUV Rheinland has a 75 per cent share in the global solar photovoltaic (SPV) standards and quality certification market. In Asia, both in the booming markets of Japan and China, it is the dominant player. The company provides services to quality certify both systems and products, that is, the entire life cycle from design to product to recycling. More than 40 companies have announced plans to manufacture solar products.


$7 mn Mighty River wind power stake

July 1, 2008. Mighty River Power will spend around $7 mn for a 19.95 per cent stake in Christchurch-based wind power turbine company Windflow Technology. The two companies had also entered conditional arrangements under which Windflow would, subject to consents, build a proposed wind farm at Long Gully outside Wellington on Mighty River's behalf. The wind farm was expected to have between 20 and 50 turbines. Mighty River was seeking to add wind to its renewable electricity generation portfolio, with the aim of developing up to 500 MW of wind power by Windflow. The additional equity capital investment would enable Windflow to accelerate its development of new variants of the Windflow 500 wind turbine and entry into new market sectors. Its twin-blade turbines stand 47 m the highest point, less than half the height of the big European style machines in other parts of the country. Windflow Technology is part way through supplying 60 turbines for the Te Rere Hau wind farm on land near Palmerston North close to the existing Tararua Wind Farm owned by Trustpower. The Te Rere Hau wind farm is owned by a joint venture which includes NZ Windfarms Ltd, Babcock & Brown Windpower and NP Power.

Horizon Wind Energy signs PPA with PG&E

July 1, 2008. Horizon Wind Energy, LLC, a leading wind project developer, owner, and operator, owned by EDP Renovaveis, has just entered into a long-term agreement with Pacific Gas and Electric Company (PG&E) to sell renewable wind energy. Horizon Wind's Rattlesnake Road Wind Power Project will have an installed capacity of 102.9 MW of renewable wind energy. Located in Gilliam County, Oregon, the Rattlesnake Road Wind Farm will deliver 240 gigawatt hours (GWh) of clean electricity annually. The project is currently under construction and is expected to start producing clean, renewable energy late 2008. Clean wind power is an integral part of the company’s diverse renewable energy portfolio, which includes hydroelectric, geothermal, solar, wave and biomass resources. Renewable resources continue to play a critical role in company’s commitment to provide its customers with reliable, clean, environmentally preferred energy.

ConocoPhillips sponsors Colorado biofuel research

July 1, 2008. ConocoPhillips has signed a $5 million multi-year sponsored research agreement with the Colorado Center for Biorefining and Biofuels, a research center of the Colorado Renewable Energy Collaboratory, to develop new ways to turn biomass into low-carbon transportation fuels. The Collaboratory, a joint venture of the University of Colorado at Boulder, Colorado State University, the Colorado School of Mines and the National Renewable Energy Laboratory, formed the Colorado Center for Biorefining and Biofuels in March 2007, to conduct research at all four institutions. The new collaboration will build active research projects conducted by Colorado scientists and students to develop new sources of transportation biofuels. The first project will involve converting algae into renewable fuel. This agreement with the Collaboratory offers a unique opportunity to combine the technical strengths of the member institutions with ConocoPhillips' spirit of innovation to drive discovery of the next generation of transportation fuels. ConocoPhillips' agreement is the first multi-year sponsored research project for the center.

Wind provides 25 pc of Houston's operational electricity

July 1, 2008. Twenty-five percent of the city of Houston's operational electricity load will be purchased from wind energy. The wind energy will be purchased from west Texas wind farms. The city of Houston is one of the biggest energy consumers in the region and its five-year contract with alternative energy will be reflected in its budget. The city is receiving a fixed rate at 7.5 cents per kilowatt-hour and expects to use as much as 1.7 bn kilowatt-hours during the contract period. According to the Environmental Protection Agency's Green Power Partnership, the city of Houston is the top municipal purchaser of green power in the nation.

Santee Cooper to buy more green power

July 1, 2008. The state-owned utility Santee Cooper will buy an additional 1 percent of power from businesses that use renewable sources. Santee Cooper already is looking at potential suppliers. Most of the suppliers are located in South Carolina. The utility plans to buy 50 MW of biomass-derived power. It already generates about 15 MW from plants that burn landfill fumes. The purchase would provide enough power to serve 25,000 homes. Santee Cooper generates about 5,500 MW of power, about 80 percent of it by burning coal.

Hydrogen cars commercially unavailable until ’20

July 1, 2008. Hydrogen-powered cars will not be commercially available on a large scale before 2020, a Japanese auto maker Mazda said. The earliest that customers will use these environmentally-friendly vehicles in a normal way will be 2020. Infrastructure making it possible for drivers of hydrogen-powered cars to refuel must be put in place before the vehicles are widely used. A way to mass produce the cars at an affordable price must also be found before they take off as an alternative to traditional petrol (gasoline) powered vehicles. Mazda is one of several auto makers working on the development of hydrogen-powered cars amid growing concerns over soaring oil prices and pollution. Electric-powered vehicles are also in the works. Honda will start leasing the cars, which run on an electric motor powered by hydrogen fuel cells and only emit water vapour as waste, to residents of southern California by the end of August. The International Energy Agency has said that hydrogen and hydrogen fuel cells could play a key role in weaning energy users away from oil, gas and coal which have been blamed for climate change. 

U.K. biomass power station project moves forward

June 30, 2008. Helius Energy PLC received the go-ahead from U.K. Energy Minister for the biomass power station at Stallingborough in North East Lincolnshire. The proposed 65 megawatt biomass power station in the United Kingdom will require 430,000 tons of feedstock each year. This consent allows Helius Energy to begin to implement its plans for the production of renewable electricity from sustainable biomass. The company look forward to working closely with North East Lincolnshire Council to bring the project to completion. The project will not only put the area on the green energy map, but will create both direct and indirect employment opportunities in the local area.

Stallingborough is the first 65 MW project in a portfolio of similar sized plants under development by Helius in the U.K. Construction is expected to start later this year, with operations beginning by 2011. Helius has a dual strategy, developing large biomass power plants in areas where the transportation infrastructure makes the handling of large volumes feasible and smaller, modular biomass power plants using their trademarked GreenSwitch plant in locations with wet feedstocks such as breweries and distilleries. Helius announced late last year its first 7.2 MW GreenSwitch biomass power plant will be build in partnership with the Combination of Rothes Distillers Ltd. in Scotland.

Xcel offers rebates to solar energy users

Jun 29, 2008. Xcel Energy offers rebates to customers who use solar systems in residential and commercial applications. The company has paid nearly $31.3 million in rebates and purchases of Renewable Energy Credits through its Solar Rewards Program. The payments went to 1,525 consumers, and the company has received nearly 2,300 applications. Xcel will rebate customers $2 per watt of solar panels installed on customer premises, up to 10,000 watts or 10 kilowatts. Also as part of the program, the company will buy Renewable Energy Credits generated by customer systems for $2.50 per watt. These credits then will be counted toward the company's Renewable Energy Standard requirements, which were approved by voters in November 2004 under Amendment 37 and subsequently clarified by the legislature in the 2005 session.

The combination of the rebates and the credits will generate a total return to customers of $4.50 per watt under the Solar Rewards program. Total payments to customers through Solar Rewards would be in the $9,000 to $13,500 range, depending on two or three kilowatts of demand. Consumers also may pursue federal government tax credits for about $2,000, which covers about half the installation cost. In total, more than 5.84 MW of capacity has been added to the grid from the Solar Rewards Program for less than 10 kilowatts of demand. One megawatt-hour typically serves about 750 homes in Colorado.

REpower China unit bags order for 24 wind turbines

June 26, 2008. REpower North (China) Co. Ltd. has received an order for 24 wind turbines from Guangdong Baolihua New Energy Stock Co. Ltd., an energy and property company based in Guangzhou. The Chinese joint venture, in which REpower Systems AG has a majority interest of 50.01%, will deliver the turbines of type MM82, each with rated power of 2 MW, in summer 2009 for a wind farm on the coast of Guangdong Province, 2,000 kilometres southeast of Beijing. The turbines of type MM82, which REpower North has been constructing in Baotou since May 2008, are designed for the high wind speeds on the south Chinese coast and in northern China and are also available in Cold Climate Version (CCV) for temperatures down to - 40º C. China has a rapidly growing need for energy and will become one of the most important markets for wind power in the long term, particularly against the background of increasing prices for fossil energy. With the technological expertise and the support of its German parent company, REpower North is well equipped to position itself as a quality supplier. Baolihua plans to extend its activities in the wind sector with a 100 MW onshore wind farm and a 1,250 MW offshore wind farm in Lufeng, a coastal city in Guangdong Province. The company, which is listed on the Shenzhen Stock Exchange, has already made one of the largest investments in environmentally friendly energy production in China with the thermal power station built in Meizhou.

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