MonitorsPublished on Dec 05, 2006
Why Gundia Hydro Electric Project Is Not Needed:
Why Gundia Hydro Electric Project Is Not Needed:

An analysis of its impact and benign alternatives for Karnataka

(By Shankar Sharma)

Synopsis: Karnataka Power Corporation Limited, Bangalore a state govt. owned generating company has submitted the Detailed Project Report (DPR) on Gundia Hydro Electric Project (2 * 200 MW capacity) for concurrence of Central Electricity Authority (CEA). While the Project Affected Families (PAFs) are strongly protesting the proposed project because of the serious impact on flora, fauna and humans in that area, the state govt. has indicated that it will go ahead with the project against peoples’ concerns.  This article throws light on those issues which seem to have been conveniently omitted in the DPR.

Salient features of the project:

¨        The project is planned in the rain forests, thick in vegetation, with very heavy rainfall area of Western Ghats of Hassan and Dakshina Kannada districts of Karnataka.

¨        Not a multipurpose project: no flood control or irrigation. Only electricity generation proposed.

¨        A high head power station (90 m) of capacity 2 X 200 MW Units.

¨        Anticipated generation: 1136 MU per year on a 90% dependable year.

¨        Total cost of the project: Rs.1200 Crores; excluding that of R&R and forest land

¨        Levellised tariff indicated: Rs.1.27/Unit.

Phase 1: Pooling up of water by linking smaller rivers Yettinahole, Kerihle, Hongadahalla and Bettakumeri through tunnels.  Water to be taken from the balancing reservoir to underground power house through a 7.8 KM underground headrace tunnel.  Water after generation of power goes back to Gondia River through a 3.1 KM long tailrace tunnel. Storage dam of 90 M height across Hongadahalla with a capacity of 132 million cum; 653 MU of electricity in the first phase.

Phase 2: Construction of two more tunnels bringing water from three more rivers through a 15 kM long tunnel. Additional 136 MU of electricity in the second phase.

Submersion of land: 489 Hectares of forest land; 10.2 hectares of garden land; 107.2 hectares of grass land; 101.6 hectares of agricultural land. Total 708 hectares. This is in addition to the forest land required for transmission lines, roads, quarries etc. during the construction.  78 % of the total land required for the project is forest land, of which most is reserve forest land.

Controversial Statements in the DPR: Few statements, which are not the correct reflection of the situation on the ground, are as follows:

DPR states that the area is of thick forests with very heavy rainfall, but also says that the environmental impact of drowning 489 Hectares of forest land, 10.2 hectares of garden land, 107.2 hectares of grass land and 101.6 hectares of fertile agricultural land is negligible. 

¨        DPR talks of a run-off-river project in one section of the report, and also indicates that the project is conceptualized for peaking assistance in another section. The project envisages 100 % generation in July, less than 70% in June and August, less than 44% in Sept. and less than 20% in the remaining 8 months. It also proposes two reasonably big size dams for water storage. It is not clear as to how the same project can be envisaged to meet the role of both a run-off-river project and peaking station. The monthly generation indicated tells that this is envisaged basically as a peaking power station for a small percentage of time.

¨        The DPR says that the degree of public participation and co-operation is as good. There has been continuous and stiff opposition to the project from the locals to such an extent that all the relevant Village Panchayats are known to have passed resolution against the project, and detailed survey of the land by the project proponents has not been allowed.

¨        Details of transmission system and forest destruction due to it are not shown, and that data from Karnataka State Remote Sensing Applications Centre have been used. This may indicate that detailed survey on land has not been conducted.

¨        DPR says that the forest land does not contain any rare or endangered species of plants. It is very strange that thick forests with very heavy rainfall in threatened Western Ghats do not contain any rare or endangered species of plants or animals.

¨        78 % of the total land required for the project is forest land, of which most is reserve forest land.  How can reserve forest land in a depleted forest region can be sought for the project?


Why the project is not in the best interest of the state:

1.        As per the norms the no cost benefit analysis of this project has been shown by KPCL.  Without such an analysis the DPR has failed to demonstrate that the proposed project is the best solution available to the society in the present circumstances. 

2.        As cursory look at the costs mentioned in the DPR indicates that the real costs to the society are very high compared to the meager benefits of 400 MW of peak load and annual energy of 1,136 MU at annual Load Factor of only 32.42%.  The costs of forest destruction and that of R&R of the Project Affected Families, which have not been included in the cost estimate, themselves may push the overall cost of the project to a high level.

3.        The value of the thick rain forests of highly sensitive Western Ghats alone, which are proposed to be submerged itself, may be many times more than the project cost of Rs. 1,200 Crores.

4.        The annual revenue to the forest department from this forest itself may be more than the monitory value of the energy estimated from the project. In addition, the real value of the livelihood it is providing to the locals, the value of herbs, of water source etc. will be very huge.

5.        Some of the value additions the thick rain forests of Western Ghats provide are: Production of oxygen; Control of soil erosion & maintenance of soil fertility; Recycling of water and control of humidity; Sheltering of animals, birds, insects & plants; Control of air pollution.

6.        It is reported that as per an indirect estimate of value of forests by Mathur and Soni in 1983 it is about 1.27 Crores per hectare per year. With about 490 Hectare of forests to be submerged under this project, the total value loss per year itself would work out to be about Rs. 620 Crore per year.     

7.        The value of annual energy production by this project @Rs. 1.27 per unit works out to Rs. 144 Crores. Even if we consider the replacement value of hydel energy by gas energy @ Rs. 4.00 per unit, the value of annual energy production by this project works out to be about Rs. 450 Crores.

8.       Whereas the revenue from a live forest is much more than quantified above and is perpetual, the energy production from the proposed hydel station is only for a limited period say, 50 years.

9.        Because of this simple economic analysis alone the project appears to be unviable.

10.     The project proponents have not considered any alternative to this project in order to meet the electricity demand of the state. Without deliberating on the alternatives, how do the project proponents know that this project is the most suited for the state at this juncture of time? Even if we agree for a minute that there is electricity shortage in the state, the first thing any company /organization would do under such a situation is to analyse the situation. One should ask the question why there has been shortage. If the officials care to analyse the situation objectively the following issues will become crystal clear.

¨        The Transmission and Distribution losses in Karnataka have been very high of the order of about 30 against the international norms of less than 10%; if these losses are brought down to 10% there will be virtual addition of more than a thousand MW to the available power; this will be more than treble the capacity addition possible through the proposed project;

¨        As of today the total available power for the state from various sources, including the share from the central sector is about 7,700 MW (as per MoP website).   If this capacity is used to the optimal level, (as per CEA norms about 10% is allowed for auxiliary consumption and unplanned outages), a peak hour demand of more than 6,500 MW can be easily met. But the peak hour demand met for the year 2005-06 was reported as 5,600 MW only. This shows that the infrastructure including the generating stations is not being put to maximum use.

¨        Similarly, the annual energy deficit reported for the year 2005-06 was less than 1%.  Even if we take the unrestricted demand into consideration, which was not very high during 2005-06, the same for the reason mentioned above was easily avoidable;

¨        In Karnataka there is huge scope for adopting various efficiency improvement measures like Demand Side Management (DSM) and utilization at users' end.  As per the Planning Commission the peak load can be reduced by more than 10% at the national level. The replacement of even 50% of all the incandescent lamps in the state by CFL can result in the reduction of about 1,000 MW of peak hour demand, and about 1,500 MU of energy demand per year. This can be achieved without any expenditure to the state if the cost of replacement is passed on to the consumers in small instalments.                                         (To be continued)

(Shankar Sharma, Consultant to Electricity Industry, Mysore, E-mail: [email protected])

Oil vs. Democracy: India's Strange Bedfellows in Energy Quest

(By Siddhartha Kumar, DPA)

As the global scramble for hydrocarbon reserves leaves fewer sources to tap, India is busy forging alliances with pariah states to fuel its booming economy. Several of its new energy partners have track records of oppression, the stifling of basic freedoms, some even of genocide.

But India's appetite for oil has gotten the upper hand. Energy needs now determine India's foreign policy and have led the world's largest democracy to back repressive and undemocratic regimes through multibillion-dollar energy deals. The most glaring example is right in the neighbourhood, in Myanmar (Burma). Gaining access to one of the largest energy projects in the region was a key reason for New Delhi to change tack from supporting the democracy movement there to courting an internationally condemned military junta.

India's state-run ONGC Videsh Ltd (OVL) and Gas Authority of India (GAIL) picked up stakes of 20 and 10 per cent, respectively, in the A-1 block of the Shwe gas field off the coast of Myanmar's western Arakan state - estimated to contain up to 102 billion cubic metres of gas. India is also exploring for gas in another Myanmar block and doing groundwork on a 1200-kilometre, 3-billion-dollar pipeline to transport gas from its neighbour.

India's investments in Myanmar's energy sector will only enhance the Rangoon military's grip on power by contributing to its largest source of income - energy profits of up to 3.2 billion dollars annually. New Delhi has ignored appeals by democracy activists and the indigenous Shwe Gas Movement to hold off on the projects. Critics charge that India will be legitimizing military rule, protecting the junta from Western sanctions and making democracy a distant dream for thousands fighting on its behalf in Myanmar. "People inside the country are very much disappointed with the position the government has taken towards Burma, especially when they realize now that the Indian government is supporting the generals and thus has ignored the aspirations of the Burmese people," said Soe Myint, editor of the Mizzima news agency, which focuses on Myanmar.

Farther a field, Sudan, whose Arab-dominated government is accused of war crimes against the country's black population, has emerged as India's biggest energy partner, drawing investments of more than 2 billion dollars. The Greater Nile Oil Project, in which OVL has a 25-per-cent stake at 669 million dollars, has been among the biggest overseas projects in terms of yield, officials said. OVL has earmarked another 300 million dollars for two blocks in Sudan and is also in charge of a pipeline project there.

Energy analysts defended the moves, saying that India was not nearly as hypocritical about its political ideals as the world's oldest democracy, the United States, and was toeing the US line on energy issues in Central Asia, a region brimming with dictators and tyrants. Washington, warming its ties to New Delhi with proposed support for nuclear power, is also keen to sponsor other energy deals to benefit India - such as a pipeline from Turkmenistan and an Asian power grid from Kazakhstan. The US would stand to benefit by thwarting a planned pipeline project from Iran. "We have been trying to obtain stakes in Kazakhstan and Uzbekistan," a petroleum ministry official said, requesting anonymity. "The government is trying to facilitate a positive environment for Indian companies to pick up equity."

During Indian Premier Manmohan Singh's visit to Uzbekistan, the two countries inked a pact to cooperate in gas and oil exploration and production. GAIL and Uzbekistan's Uzbekneftegaz are also to work together to build facilities in Uzbekistan to produce liquefied petroleum gas.

Energy experts want India to step up its energy diplomacy even further, saying the country is still not "as pragmatic" as other countries. "A country which imports 73 per cent of its oil cannot look at the political character of governments," energy analyst Narendra Taneja said. "Gas has no nationality. We need energy to sustain our economic growth, pull people above the poverty line, and create jobs. India has no option but to aggressively pursue its energy diplomacy."

Political analysts disagree.

"India definitely should look at long-term solutions for energy needs," Myint said. "More importantly, it should not encourage the regimes or should not be a party in violating the rights of other peoples under the name of energy or development." Asked about double standards on democracy, India's former foreign secretary made clear that India was not averse to striking deals with pariah states. "I think we deal with the world as it is," he said. "We deal with many countries, including our neighbours, which may not be democracies. We try and develop mutually beneficial relationships with all countries."

Courtesy: Antara News, Indonesian National News Agency.





Cairn to add 20 pc to oil output

December 5, 2006. Cairn UK Holdings Indian subsidiary is hoping to contribute 20 per cent to the country’s crude oil output by the turn of the decade once its Magala oilfield, in Rajasthan, becomes operational.  The upstream company of Scottish origin would produce 1.5 lakh barrels a day by mid-2009, of which Mangala field would contribute close to one lakh barrels.  The crude oil currently accounts for 60 per cent of the product mix of Cairn, which will go up to 93 per cent after 2009. 

Cairn India is coming out with the public offer of 32.8 crore shares at a price band Rs 160-190. It is hoping to mop up a minimum of Rs 8,600 crore through the maiden float, making it one of the biggest upstream IPOs in recent years. Cairn has estimated that the gross proved-plus-probable reserves attributable to the fields in production or under development, in which it has interest, are close to 754 million barrels of oil equivalent. Cairn’s share in these reserves will be 472 million barrels of oil equivalent. The energy major has interest in Ravva oilfield and two operating gas fields in Gujarat. Besides, it has big exploration blocks in Rajasthan, Mangala, Bhagyam, Rageswari and Aishwariya.  Cairn has also successfully bidden for blocks in Bihar and Uttar Pradesh. 

Vizag to host India's strategic crude reserve

December 5, 2006. India is planning to build its first strategic crude reserve at Visakhapatnam in Andhra Pradesh. The reserve will be in an underground rock cavern or concrete structure. There are also plans for a similar facility at Mangalore. The detailed feasibility report (DFR) for the project has already been submitted. The strategic crude reserve is under the government’s consideration for over two years. The project will be executed and managed by Indian Strategic Petroleum Reserves (ISPRL), now a subsidiary of Oil Industry Development Board (OIDB). The caverns will have a combined capacity to store up to five million tonnes of oil. The cost of the storage facilities at Vizag and Mangalore is pegged at Rs 1,360 crore and the project is proposed to be funded by crude cess and import duty on crude. The Vizag cavern will have a storage capacity of 1 million tonne and Mangalore cavern will have a capacity of 2.5 million tonnes.

Earlier, Indian Oil (IOC) was supposed to build the facility and had floated the special purpose vehicle (SPV) ISPRL, but now that OIDB is nominated as the nodal agency to execute this project, IOC’s equity in ISPRL was transferred to OIDB. IOC had also discussed with Saudi Aramco to partner in this project. Incidentally, HPCL is currently implementing a 60,000 million ton LPG underground cavern storage project at Vizag with Total of France. The facility is expected to commence commercial operations by second quarter of next fiscal. 

States look to RIL’s D6 fields for gas supplies

December 4, 2006. With production of gas from Reliance Industries’ D6 oilfields projected at 80 million metric standard cubic meter per day (mmscmd), Maharashtra, Gujarat, Karnataka and Uttar Pradesh are reworking plans to promote gas-based projects and expand the existing ones. These states are currently forced to operate existing plants at levels below their capacities for the want of gas. Some of them have deferred expansion of plants and new investments in gas-based power projects. The gas-based power projects, with a capacity for producing 5,000-10,000 MW, can benefit if they receive long-term gas supply from D6.

These states have started approaching RIL for booking gas, which is expected to  supplied from D6 from the middle of 2008. Maharashtra can seek gas supply of 25 mmscmd, Andhra Pradesh 20 mmscmd, Gujarat 45 mmscmd, Uttar Pradesh 18 mmscmd and Karnataka 8 mmscmd. Supply will be on a first-come-first-serve basis. he sources also said Reliance Gas Transportation Infrastructure Ltd is in the midst of creating the required gas transmission and distribution network. The construction of the 1,400-km Kakinada-Hyderabad-Ahmedabad sector of the pipeline has already begun.

In Andhra Pradesh, gas from D6 to be fetched through a pipeline would replace liquid fuel in the industrial, commercial and residential sectors. Against an allocation of 8.70 mmscmd, Anhdra Pradesh is currently getting 7 mmscmd. In Maharashtra, the present gas deficit is 8.30 mmscmd and it is expected to increase to 25 mmscmd. This can be overcome if the state succeeds in sealing the gas supply deal from D6. In Karnataka, the Karnataka Power Corporation’s Bidadi project alone will need 8 mmscmd of gas for a capacity addition of 1,400 MW. In Uttar Pradesh, the Anil Ambani-controlled Reliance Energy Ltd, which has planned a 7,200-MW project at Dadri, is relying on gas supply of 18 mmscmd from D6.

ONGC on feasibility test for 3 projects

December 4, 2006. ONGC is examining the feasibility of exports from its three greenfield refinery projects, before investing in them. Total investments on the three projects would work out to Rs 55,000-60,000 crore. ONGC has plans to invest in three greenfield refinery projects. One is a 15 million tonne state-of-the-art refinery at the special Petrochemical and Petroleum Investment Region (PCPIR) coming up at Mangalore.  Another is a 7 mt, scaleable to 15 mt, at Kakinada in Andhra Pradesh where another the PCPIR is expected to come up. 

The refinery is expected to be the anchor of the complex. The third refinery at Barmer in Rajasthan will receive crude from the Rajasthan fields being operated by Cairn Energy.  The company was planning to invest close to Rs 8,000 crore in upgrading and expanding its subsidiary Mangalore Refinery and Petrochemicals Limited (MRPL) refinery at Mangalore to 15 mt.  Together with the greenfield refinery, ONGC's refining capacity will be enhanced to 30 mt.  MRPL would roll out 30 retail outlets and was planning to market aviation turbine fuel and auto liquified petroleum gas (LPG). 

Bihar next big hope for oil & natural gas

December 4, 2006. Agrarian and underdeveloped Bihar could be India's next big hope for oil and natural gas with British exploration major Cairn Energy Search Ltd (CESL) set to begin operations in the state towards the end of this month. If the exploration proves fruitful, it will signal a turnaround for Bihar. The central and state governments have been eying Bihar's potential resources for several years following several positive studies. India imports some 70 percent of its crude oil needs.

 CESL, which has been given a seven-year license, will begin its operations in the Purnea basin comprising 13 districts spread over a 15,500 sq km after first building bridges with the local populace. The state government is ready to provide them support for the project to go through smoothly. The Edinburgh-based CESL had proposed the project two years ago but it got delayed due to various reasons. According to independent estimates, reserves in the Purnea basin could be as high as 465 million tonnes of crude and natural gas. The reserves can be tapped after drilling to 4,400 metres.

ONGC Videsh eyes stake in Sakhalin-3

December 2, 2006. India will invest $5 bn in various projects to source one billion barrels of oil and oil-equivalent gas from Russia to diversify its energy sources. The first shipment from the oil and gas field was received at the New Mangalore Port Trust complex. The consignment of 92,055 metric tonnes (672,000 barrels) of Sokol crude was ferried on board the Russian ship MK Viktortitov — the oil tanker of Primorsk Shipping Company on a charter of ONGC Videsh Ltd. The tanker set sail from Dekastri port in Russia Nov 14. The company will ship second cargo by the month-end. OVL has 20% stake in Sakhalin-1, acquired from two subsidiaries of Russian government oil firm Rosnett — SMNG-S and Rosneft-S.

OVL is now eyeing a stake in the prestigious Sakhalin-3 field in Russia. However, official sources disclosed that as against the earlier practice of securing oil and gas properties in Russia through the negotiations route, OVL will have to go through the bidding route to secure oil and gas properties in Russia. Getting a slice of equity in Russian oil and gas properties through the negotiations route seems a tricky situation now. As a result, OVL has already initiated discussions with Russian oil and gas majors-Rosneft and Gazprom for putting in a joint bid for acquiring a stake in Sakhalin-3 project.

The total recoverable oil and gas reserves from Skhalin-1 are 2.3 billion barrels of oil and 17 tcf of gas. The total investment commitment by the consortia partners of Sakhalin-1 project stands at a whopping $12.8 billion by 2013. Of this, OVL’s share stand at 20%. OVL was the first company to commit an investment as high as $1.7 billion in Russia's Sakhalin-1 in 2001 for a 20% stake in the project. This investment went up to $2.7 billion and included a $1.2 billion loan to Russian energy major-Rosneft.

Aban to buy out Norway drilling co in $1.3 bn deal

December 2, 2006. Chennai-based Aban Offshore is likely to take over Norwegian drilling company Sinvest with an open offer of $800 million on the Oslo Stock Exchange. The total deal value for Sinvest is pegged around $1.3 billion, making it India Inc’s largest cross-border acquisition.

ONGC to invest Rs 1.6 trillion in 5 yrs

November 29, 2006. Oil & Natural Gas Corporation (ONGC) plans to invest Rs 1,60,000 crore (Rs 16 trillion) over the next five years. The government has approved the budget, which will be spread over the XIth Plan period. Out of this, about Rs 29,000 crore will be spent on exploration. Capital expenditure worth around Rs 11,000 crore will be undertaken each year. ONGC also proposes to invest about Rs 5,000 crore every year in ONGC Videsh (OVL). As major crude oil finds are not possible in India, ONGC is focusing on acquiring oil assets globally. While the government had set OVL a target to get 20 million tpa of oil from outside by 2020, it now wants this to be achieved by 2012.

OVL has started producing 4 million tpa of oil, with 3 million coming from Sudan block. OVL has 25 properties spread across 14 countries. Against the target set for sourcing oil from abroad, the target for domestic production is marginally higher at 141 million tonnes for the XIth Plan period, which works out to around 28 million tonnes a year. ONGC’s production stands at 26 million tpa, with nearly two-thirds contributed by the Mumbai High offshore and on-shore fields. ONGC has set a target of generating 4.2 billion cubic metres of gas from the CBM blocks and through coal-gassification process. Out of the nine CBM blocks that ONGC has bagged, it has given contract for three blocks in Jharkhand to drill them. While Gujarat State Petroleum Corp and Reliance Industries have made big gas finds in the KG Basin, ONGC has been unlucky so far and has not found anything big.


Tatas to acquire 26 pc stake in Nagarjuna refinery

December 5, 2006. The Tata group is believed to be close to buying a stake in Nagarjuna group’ oil refinery project for about Rs 400 crore. In a move to increase its presence in the oil sector, the salt-to-software Tata group is believed to be in advanced stages of investing in the 6-million tonne, over Rs 4,000 crore plus refinery project coming up in Cuddalore, Tamil Nadu. The group is also in talks with some Russian and Middle East companies for funding the remaining equity portion of the project. The Tata group is believed to be buying about 26 per cent for about Rs 400 crore. The project’s equity base is about Rs 1,500 crore.

HPCL hunts for allies for capacity expansion

December 4, 2006. State-owned Hindustan Petroleum Corporation Limited (HPCL) is looking for strategic partners for investments, crude oil procurement and product marketing as part of its proposed expansion plans at the Visakha refinery. HPCL has decided to expand the capacity of its Viskha refinery by 9 million tonne.  Engineers India Limited in its draft report of the feasibility study submitted to HPCL for the proposed expansion estimated that the project cost would be around Rs 9,000 crore.

Currently, the Visakha refinery crude refining capacity is 7.5 million tonne per annum. To upgrade the products quality to Euro-3 and Euro-4 norms, the corporation has taken up `clean fuel project at an investment of about Rs 2,200 crore.  The project is expected to be ready by May-June 2007. After completion of the project, the refinery capacity will increase to 8.3 million tonne. After adding 9 million tonne capacity to the refinery, HPCL would dismantle one of its old plants, which had a capacity of 1.5 million tonne, he said adding that then the effective plant refining capacity of the refinery became about 15 million tonne per annum. 

As part of the expansion plans, HPCL requires an additional land of about 400 acres for construction of crude oil storage terminal near the existing refinery. In this regard, HPCL has approached the Vizag port, which has in principal agreed to allot land on a long lease basis.  In order to meet the huge financial requirement for carrying out expansion, and marketing its products in the domestic and international markets, HPCL is examining the possibility of finding strategic equity partners. 

Indian Oil, Bongaigaon boards okay merger plan

November 29, 2006. The board of directors of Indian Oil Corporation Ltd and Bongaigaon Refinery and Petrochemicals Ltd (BRPL) approved merger of BRPL with IOC. The swap ratio is pegged at 4:37 (four equity shares of Rs 10 each of IOC for every 37 shares of Rs 10 each of BRPL). According to notices issued by the company to NSE, the proposed merger is subject to approval of the Union Government and other relevant authorities. This is the second merger proposal forwarded by IOC. The merger proposal of IBP is in an advanced stage of implementation. IOC has already expressed its intentions of proposing a merger scheme for Chennai Petroleum Corporation following the merger of BRPL. BRPL refines a little over two million tonnes of crude oil. The refined products include 0.93 million tonne of high-speed diesel, 0.20 mt of motor spirit, 0.27 mt of kerosene, 0.05 mt of LPG and others.

Transportation / Trade

RIL pipeline to be ready by mid-2008

December 4, 2006. Reliance Industries the country's largest private sector exploration and production company, expects to complete its 1,400 km pipeline to transport gas from its fields on the offshore Krishna-Godavari basin to its customers on the west coast by the middle of 2008.  The Rs 5,000 crore pipeline, which will run from Kakinada on the Andhra Pradesh coast to Jamnagar in the west, will ensure that the entire gas requirement of RIL is met from its KG basin production.  The KG basin fields are expected to produce 80 million standard cubic metres per day (mmscmd).

The completion of the pipeline will be synchronised with the first gas from the fields.  It is on the basis of the assured availability of the KG basin gas that RIL has made a bid for the 2,184 MW Dabhol power plant.  The pipeline is also expected to give gas-starved industries access to gas. The current deficit in natural gas demand-supply in the country is pegged at 100 mmscmd. The project is being implemented by RIL's wholly-owned subsidiary Reliance Gas Transportation Infrastructure. All the materials required for the pipeline have been sourced, and the construction work is expected to completed by the middle of the next financial year. 

GSPC plans to part-sell stake in subsidiary

December 1, 2006. Even as state-owned Gujarat State Petroleum Corporation (GSPC) plans to hit the capital market next year, the company is looking at the possibility of equity sale in its wholly-owned subsidiary, GSPC Gas Company. The company, which is in the business of city gas distribution, has already initiated talks with a few oil and gas players and also financial institutions to explore opportunities to pick up stake in the company. Already, oil PSU Indian Oil Corporation and financial institution Infrastructure Development Finance Corporation (IDFC) have shown interest in picking up stake in the company and talks are on with both of them.

The subsidiary is already supplying city gas to retail consumers in Gandhinagar and has an extensive plan to set up city gas grid network in six other cities in Valsad, Vapi, Rajkot, Morbi, Nadiad and Navsari. Most of these cities are already on the state’s gas grid network with Rajkot and Morbi to be added by the end of the calendar year. The parent company GSPC is preparing to hit the capital market to part-fund its exploration and development plan in the Krishna-Godavari basin. Last year, the company claimed to have discovered gas of 20 trillion cubic feet which the company wants to commercialise by 2009. 

Cairn plans 500 km pipeline with ONGC

November 30, 2006. The vexed issue of evacuation of Cairn's “waxy” crude oil from its fields in Rajasthan is likely to be resolved soon.  Putting aside the plan for setting up a greenfield refinery in the state, Cairn Energy India, in a joint venture with ONGC, is planning to build a 500-km pipeline to evacuate crude oil from the Mangala, Bhagyam, and Aishwarya fields. Cairn was planning to invest an additional $500 million in the pipeline. The company has already worked out the logistics of the plan to build an insulated pipeline from Barmer to Mundra port, since the waxy crude oil discovered in Rajasthan can only be transported in a heated pipeline. 

The government’s nominee for crude offtake from the Rajasthan fields, MRPL, will then transport the crude oil to its Mangalore refinery. MRPL's Mangalore refinery is the only one in the public sector currently equipped to process waxy crude oil.  The other refining options for Cairn India include Reliance's upcoming second refinery at Jamnagar in Gujarat, and the Essar group's recently commissioned refinery at Vadinar, also in Gujarat.  However, this would mean cancelling the existing production sharing contract (PSC) with the government and negotiating a fresh one. The issue of crude offtake has been a major hurdle for the company, with MRPL asking for discounts on the price of the crude oil sold, given its quality.  Cairn, however, has refused to bring down its price from the $9 a barrel. Cairn had also toyed with the idea of entering the refining segment by setting up a refinery to process its production. 

AP, Reliance agree on gas supply

November 29, 2006. Reliance Industries and the Andhra Pradesh Government agreed to create a gas grid in the State and pave the way to formulate supply terms for gas from the Krishna-Godavari (KG) basin. The move follows a recent assurance made by Reliance Chairman that the gas produced from the KG basin will first meet the State requirement before being supplied to other consumers across the country. They agreed to provide the necessary gas supplies to industrial consumers, power and fertiliser plants, RTC buses and domestic consumers through a gas grid.

However, consumers would enter into a separate supply agreement depending on the requirements. Reliance is set to evacuate gas from the KG basin by June 2008. The State is concerned about gas supply. The Reliance assurance comes as a shot in the arm for the Government as gas-based power generating stations with total capacity of about 2,500 MW are unable to operate to capacity due to paucity of gas. In fact, of the 2,500 MW, about 1,200 MW is yet to go on stream due to inadequate gas.

Policy / Performance

Gas networks may get infra status

December 1, 2006. The finance ministry is considering a proposal to grant infrastructure status to natural gas pipelines and city gas distribution networks. The ministry of petroleum and natural gas has applied for the status as it is the best system of usage of fuel in households. The status entails a host of benefits including exemption of import duty on equipment bought for setting such projects. The government is in the process of finalising the policy for development of gas pipelines and city distribution networks in consultation with all stake-holders. 

The broad objective of the policy is to promote investment in natural gas pipelines and city or local natural gas distribution networks, to promote competition among entities, thereby avoiding any abuse of the dominant position by any entity. The policy is also aimed at securing consumer interest in terms of gas availability and reasonable tariff.  The government also proposes to set up a regulatory board as a monitoring mechanism to ensure uninterrupted supply of gas and oversee aspects like marketing and storage. The government was also trying to encourage the usage of compressed natural gas (CNG) as an alternate source of fuel for transport.

Govt to offer 60-70 oil & gas blocks in NELP-VII

December 1, 2006. The government will announce the seventh round of New Exploration and Licensing Policy (NELP) in April and bids for the oil and gas blocks will be invited by July.  The government was planning to offer around 60-70 oil and gas blocks, including offshore and onshore, under NELP-VII.  The government is in the final stages of NELP-VI under which 55 oil and gas blocks were awarded to investors for exploration.  165 bids were received for 52 blocks and 68 companies, including 36 foreign and 32 Indian, had bid either on their own or as a consortium.  Besides the oil and gas blocks, the DGH is also planning to offer new coal bed methane (CBM-IV) blocks for exploration.  The government has recently completed awarding 10 CBM blocks spread across six states under CBM-III.  Meanwhile, oil and gas body Directorate General of Hydrocarbons plans to launch an advanced seismic survey next year in the Krishna-Godavari Basin off Andhra Pradesh for further exploration of gas hydrates. 

Natural gas hydrates are solid crystals consisting of gas molecules enclosed within water molecules, and found in marine sediment beneath the ocean on continental shelves.  The government launched a 4-legged drilling programme for gas hydrate on May 5 under the National Gas Hydrates Programme, at a budgeted cost of $36 million. It announced in June that sizeable reserves of good quality gas hydrates have been discovered in the KG Basin while undertaking drilling activities in the area by the drillship JOIDES Resolution. Results had shown the presence of a 128-m thick layer of gas hydrate in the basin.  DGH plans to launch the ‘Q-Marine’ survey in KG Basin along with an international company specialising in undertaking such surveys.  It also plans to talk to Oil and Natural Gas Corp. and Reliance Industries, which are operating ‘Q-Marine’ vessels in the KG Basin, for using their vessels for the survey.



MMTC plans to set up 1,000 MW power plant

December 4, 2006.  MMTC Ltd plans to set up a 1,000 MW captive power plant in the eastern state of Jharkhand. MMTC would float a special purpose vehicle, in which it would hold a 50 per cent stake, to fund the 45 billion rupee. 

Goa Carbon eyes power generation

December 4, 2006. Dempo group company, Goa Carbon Limited (GCL), is planning to foray into power generation. The board has approved installation of the necessary plant and equipment to generate power by waste heat recovery at the three GCL plants located in Goa, Bilaspur and Paradip.  Further, the company also plans to expand the capacity of its calcined petroleum coke plant at Paradip.

Nuclear deal to power NPCIL’s capacity addition plans

November 30, 2006. State-run Nuclear Power Corporation of India Ltd (NPCIL) is gearing up to reap the benefits of the Indo-US civilian nuclear energy deal in a bid to play a key role in the country’s efforts towards adding a nuclear power capacity of 50,000 MW by 2032. NPCIL, with 16 reactors of 3,900 MW capacity in operation, has already begun constructing seven reactors with a total capacity of 3,380 MW. Moreover, the corporation has received an approval in principle for pre-project activities for an extra generation capacity of 6,800 MW. The company had adequate manpower of 16,000 employees and due to its sound financial track-record, it could add at least 1,000 MW annually.

Haryana inks MoU to set up 4 power projects

November 30, 2006. In the first phase under the new Renewable Energy Power Policy, the Haryana Renewable Energy Development Agency (HAREDA) has inked MoU with four private investors for setting up a biomass-based power project of 2 MW and three small hydro power projects of 4.7 MW.  For setting up a 2 MW Biomass Power Project at Barwala Block of Hissar, the MoU was signed with Chemical International Ltd of New Delhi. For small hydro power projects, MoUs were signed with Puri Oil Mill Ltd, Bahadurgarh, for the Augmentation Canal Musapur Project of 1.3 MW and Augmentation Canal Khukni Project, also of 1.3 MW. Another MoU for a small hydro power project of 2 MW at WJC main branch, Gogripur, was signed with P&R Engineering Services, Chandigarh. These projects would be implemented by private investors with a total investment of about Rs 38 crore. 

Kaiga power units to become operational by next year

November 29, 2006. All the four units of the Kaiga Generating Station of Nuclear Power Corporation of India Ltd (NPCIL) are likely to become operational by next year. Though two units are already in operation, the third unit is likely to be commissioned in January 2007. The unit four is in the advanced stage of construction. It will be taken up for further active commissioning works. The unit four will also be commissioned seven to eight months later. At Kaiga site, four units of 220 MW each will become operational by next year. The first two units at the Kaiga site were built at a cost of Rs 2,900 crore. The other two units are coming up at a cost of Rs 2,800 crore. The power produced from Kaiga Generating Station is distributed among Karnataka, Kerala, Tamil Nadu and Andhra Pradesh.

Transmission / Distribution / Trade

IVRCL Infrastructure bags Rs 6.08 bn orders

December 5, 2006. IVRCL Infrastructure and Projects has got orders worth Rs 608 crore (Rs 6.08 bn) for power as well as water distribution projects from the state governments of Jharkhand and Gujarat, thus taking its order book to more than Rs 7,700 crore. The infrastructure firm has bagged a Rs 469.46-crore order for setting up power distribution project for the Jharkhand State Electricity Board under the Rajiv Gandhi Vidyutikaran Yojana of Rural Electrification Corporation. The order has to be completed in 12 to 18 months.  Gujarat Water Supply and Sewerage Board has also awarded IVRCL a contract worth Rs 138.64 crore to set up water distribution network project for its Jamjodhpur, Bhanvad, Khambhalia, Kalyanpur, Kalavad and Lalpur talukas, under the Jamnagar District Distribution Network Project. 

Policy / Performance

Haryana thermal power plant to be ready by Nov.’07

December 5, 2006. The first phase of the third thermal power plant of Haryana executed by the Haryana Power Generation Corporation Ltd (HPGCL) at Rs 4,000 crore is expected to be completed by November next year. More than 58 per cent of the construction work has been completed within the stipulated time period. The erection work of the boiler of Unit-I is nearing completion and one of the major milestone of boiler drum lifting has been achieved. The hydraulic test of this boiler which was scheduled to be completed in May next year is now expected to be completed during February next year. The boiler drum of Unit-II is likely to be erected within a fortnight.  The two plants of 300 MW each will be commissioned in November 2007 and February 2008. The construction work of 275-metre high chimney shell is in the final stage and will be completed in time.

SAIL, NTPC, CIL, RINL ready to buy coal assets abroad

December 5, 2006.  Major coal consumers, Steel Authority of India Ltd (SAIL), National Thermal Power Corporation (NTPC), Coal India (CIL) and Rashtriya Ispat Nigam (RINL) are planning to set up a joint venture for acquiring coal assets abroad. The special purpose vehicle (SPV) is proposed to have a war chest of around $2.3 billion (Rs 10,500 crore). The new entity will also rope in private sector companies like Tata Steel and “other reputed MNCs” as partners in specific projects. The four partners will contribute an equity component of Rs 3,500 crore in the venure. As per the proposal, SAIL, NTPC, CIL would contribute Rs 1000 crore each equity for the new entity while RINL would put in Rs 500 crore. Based on this equity, the company would leverage debt of about Rs 7,000 crore taking the size of warchest to Rs 10,500 crore.

The new venture has been proposed as an alternative to proposed plan to set up Coal Videsh (CVL) as a subsidiary of CIL. If the proposal of CVL is cleared, then SAIL, NTPC and RINL may be asked to join it as equity partners or jointly participate in its projects. The new venture has been proposed to present a strong Indian contender in a highly competitive international market for securing energy resources. The venture would also help in meeting the coal shortages, particularly of coking coal, with imports expected to rise to 70 million tonnes by 2019-20. Even non-coking coal import is expected to rise to 26 million tonnes by that time. 

Self-reliance in energy by 2030 - President

December 4, 2006. Calling for the country to become "energy independent" by 2030, the President, Mr A.P.J. Abdul Kalam, suggested that India should pursue nuclear power generation using thorium and increase generation from wind, hydel and solar power to be prepared for diminishing fossil fuels. "Our target is to achieve energy security by 2020 leading to energy independence by 2030 and beyond. Nuclear power generation has been given a thrust by the use of uranium-based fuel. However, to meet the increased needs of nuclear power generation, it is essential to pursue the development of nuclear power using thorium, reserves of which are higher in the country.

CERC throws spanner in Bengal SEB plans

December 4, 2006. The West Bengal government faces a peculiar problem even as it prepares to split the West Bengal State Electricity Board (WBSEB) into two separate entities — West Bengal Transmission Corporation and West Bengal Distribution Corporation. The WBSEB unbundling exercise could actually get jinxed with the Central Electricity Regulatory Commission (CERC) conferring the status of state transmission utility (STU) on Damodar Valley Corporation. Under the Electricity Act 2003, a state can only have one STU. Since DVC’s command area includes West Bengal and Jharkhand, CERC’s decision paves the way for DVC to actually undertake power transmission in West Bengal. Something, that threatens to undermine the financial viability of the proposed West Bengal Transmission Corporation even before its official inception. The West Bengal government has described CERC’s move as ‘an alleged violation of the Electricity Act 2003’ and sought the intervention of Union power minister.

Hissar power project gets mega status

December 1, 2006. The Centre has granted mega project status to the thermal power project, which will be set up in Hissar.  The project will be eligible for benefits under the Mega Project Policy of the Centre. The mega status would reduce the installation cost of the project by Rs 400-450 crore. The HPGC has acquired 989 acres and has made arrangements for providing 50 cusecs of water for the project. The process of setting up the project after inviting competitive bids on a turnkey basis is in an advanced stage. 

The Corporation had decided to set up a 1,000-1,200 MW thermal power project with two units of 250-300 MW and one of 500 MW, or simply two units of 500-600 MW. The tentative cost of the project will be around Rs 4,000 crore and proposed to be financed with debt or equity in the ratio 80:20. The grant of mega status would reduce the cost of generation of each unit of electricity by 15 paise. The construction contract was scheduled to award by January. Generation will start by 2009. With the commissioning of these units about 190-230 lakh units of electricity will be available to consumers daily. 

BHEL, NTPC to jointly bid for UMPPs

December 1, 2006. State-run Bharat Heavy Electrical Ltd and NTPC Ltd have reached an understanding to jointly bid for Ultra Mega Power Projects. The government has agreed to waive the ceiling of Rs 1000 crore for equity investment by NTPC for enabling it to establish financial joint ventures for participating in the bidding of UMPPs. A Task Force set up by Power Ministry and headed by former power secretary P Abraham has recommended graded reduction of Aggregate Technical and Commercial (AT&C) losses by distribution utilities.

The recommendations were with the working group on 11th plan constituted by the ministry to finalise the approach paper. Minister of State for New and Renewable Energy said grid-interactive renewable power installed capacity was expected to touch 10,000 MW by March 2007 from 9,013 MW in October. Further capacity addition of 13,500 MW was planned during the 11th plan.

Reliance to get $925 mn for port, power plant

November 30, 2006. Reliance Ports & Terminals Ltd (RPTL) and Reliance Utilities Ltd., controlled by Mukesh Ambani, are getting $925 million of loans to build a port and a power plant. Reliance Ports is seeking a $500 million loan to fund the construction of a port. Reliance Utilities is getting $425 million for a 750 MW power plant. ICICI Bank Ltd. will arrange the loan. The port and the plant are to support Mumbai-based Reliance Petroleum Ltd. as it seeks to double the capacity of the world's third-largest oil refinery it operates. Refiners need to spend $487 billion in the next 25 years to boost capacity by 42% to 118 million barrels a day by 2030 to meet rising demand, according to the International Energy Agency.

RPTL has plans to develop port infrastructure in order to facilitate easy movement of large crude vessels that will supply raw material to Reliance Industries' new refinery coming up at Jamnagar at an investment of Rs 27,000 crore. The port will also cater to the SEZ that RIL plans to set up in Jamnagar. The new refinery, which will be completed by December 2008, will be the world's largest and will have a capacity of 580 kilo barrels per stream day (kbpsd) compared to 660 kbpsd capacity of its existing refinery. India needs to invest as much as $11 billion to upgrade its crude-oil refineries to meet rising demand.

MoP tells US not to miss the bus in power sector

November 30, 2006. Power secretary, R.V. Shahi asked the US investors to invest in India’s rapidly changing power sector. Though investors and developers from other countries were queuing up with their investment proposals in India, appraoch from the US investors has been slow. The US developers and investors could play a key role in the upcoming seven ultra mega power projects with the capacity of 4,000 MW each. While the capacity addition of 66,463 MW has been lined up during 11th plan period, Rs 20,000 crore plan to augment transmission infrastructure.

The financing power projects was not a problem as the projects with an investment of over Rs 3 lakh crore for the capacity addition of 43,000 MW were in various stages of completion. Of the 66,463 MW capacity addition planned for 11th plan period, as many as 46,000 MW would come from thermal, 17,200 MW hydro and 3,200 MW nuclear. On top of it, the centre has already made an allotment of captive coal blocks with coal reserves of 22 billion tones to generate 1 lakh MW.

M'shtra, Guj power firms tie up to explore coal in Orissa

November 30, 2006. Power generation companies of Maharashtra and Gujarat have joined hands to explore coal in Orissa.  A joint venture company, MAHAGUJ Collieries Limited, had been formed, which started operations since September. The company has been allotted two mining blocks, Machhakata and Mahanadi, with estimated coal reserves of 700 million tonnes.  Maharashtra will get 60 per cent coal mined by the joint venture company, which would be used in production of 2,000 MW for the next 30-years.  The Mahagenco and Gujarat Urja Vikas Nigam Limited will not be directly involved in mining operations. It would be outsourced to mining contractors. 

He said that the step had been necessitated for Maharashtra when its principal coal supplier, Western Coalfields Limited (WCL), expressed its inability to meet future demands of the state power utility.  New mines that WCL proposes to open, will only come in as replacement of its ageing underground mines.  The coal from Orissa will be used at the Koradi and Chandrapur thermal units. By 2009, Mahagenco expected to be self-reliant in coal linkage so as to get quality coal and at a cheaper price. 

NTPC all set for maiden overseas foray

November 30, 2006. Power generation major NTPC is all set to take its first step overseas. NTPC will be setting up a 500MW coal-based plant in Sri Lanka. The Rs 2,500-crore project will be executed by a joint venture between NTPC and Ceylon Electricity Board. The Indian power major is looking forward to get a nod from the Sri Lankan government. NTPC is likely to hold 50% equity in the proposed joint venture company while Sri Lanka’s power utility Ceylon Electricity Board will hold the remaining 50 per cent stake. The proposed plant will be set up on a build, operate, own and transfer basis.

The 500MW plant will be built in one go and would be run on imported coal. The annual requirement of coal would be around 2.5 million tonnes. At current prices, this will cost around Rs 600 crore per annum. It is likely that coal for the power plant will be imported from Indonesia through Sri Lanka’s Trincomalee port. Power from the plant will be sold in Sri Lanka. Though the MoU is yet to be signed, the NTPC-Ceylon Electricity Board joint venture seems to be a done deal. NTPC has been in talks with the Government of Sri Lanka since 2005 to set up a power plant in the country. The earlier proposal was for a 900MW LNG-based plant. The Sri Lankan government had expressed a preference to tie-up with NTPC rather than a private sector company. Signing up with NTPC would make the deal seem more like a government to government deal, as both the Indian power major and Ceylon Electricity Board are stateowned utilities. NTPC, which has an installed power generation capacity of 26,000 MW in India, plans to increase its capacity by nearly threefold over the next 10 years. 

Abu Dhabi to lend $1 bn for power projects

November 29, 2006. Infrastructure Leasing & Financial Services Ltd (IL&FS) and Abu Dhabi National Energy Co signed a Framework Agreement for joint development, financing and implementation of energy sector projects with associated transmission systems. According to the agreement, TAQA could commit up to $1 billion in select IL&FS-assisted power and transmission projects through a special purpose vehicle. IL&FS will identify projects in the country and TAQA will bring in the necessary funds to develop the projects. IL&FS is currently involved as developer and advisor in power generation projects with an aggregate generation capacity of around 6,400 MW in the country. It had earlier executed an agreement with India Infrastructure Financing Company in order to raise resources of Rs 6,000 crore to finance the senior debt requirements of IL&FS-assisted power projects.

Guidelines to ensure coal supply for power plants in the offing

November 29, 2006. The ministries of power and coal, and the Central Electricity Authority (CEA) are finalising new norms to remove various constraints faced by power utilities in procurement of coal. The regulatory utilities may be allowed up to 100 per cent of their certified requirement through fuel supply and transportation agreement (FSTA). To ensure fuel security to coal-based power plants, a tripartite FSTA would be signed by the coal company, railways ministry (for rail fed coal-based stations) and power utilities.

CEA has brought to the notice of power and coal ministries that self-regulations imposed by power utilities and unloading constraints at some thermal stations are critically affecting power production. In the past, some of the power stations had requested companies to restrict the supply of coal due to excessive stocks or lack of storage space. CEA has argued that power stations have adequate unloading capacity and rakes can be unloaded in free time allowed. However, oversized coal, stones and boulders and sticky coal during monsoon result in high detention of rakes. Bunching of rakes by railways also results in high detention of rakes.

NTPC has projected a shortfall of 10.5 million tonne per annum (mtpa) for NTPC’s Lara and Darlipalli integrated projects. Both the projects have size equivalent to an ultra mega power project. According to CEA, the shortfall is of 16 mtpa. In case of 11th Plan power projects of Damodar Valley Corporation, CEA has informed the power ministry that coal requirement for Mejia plant unit 4, 5 & 6 would be met from allotted Borjora (N) coal block, Mejia Phase-II (2x500 mw) from Khagra Joydeb and Kasta (E) coal blocks and Chandrapura (units 7 & 8) from Gondulpara coal block. For other power projects comprising Durgapur Steel plant (2x500 mw), Raghunathpur plant (2x500 mw), Koderma TPP (2x500 mw) and Bokaro-A replacement (1x500 mw), long-term linkages have been applied.




Mozambique contracts for oil and gas exploration

December 1, 2006. The Mozambican government signed three contracts in the central city of Beira with the companies M-10 Ltd, Sofala Offshore Ltd, and Zambeze Onshore, all members of the British American Natural Gas group, to prospect for oil and gas.  The three companies are named after the blocks allocated to them, two of them offshore and one onshore. The contracts will last for six years, and under then the companies pledge to undertake and interpret seismic work, in order find the best locations for drilling exploratory wells. In the event of the discovery of commercially viable deposits of oil or gas, a concession of 25 years on the block concerned is envisaged.The Zambeze block is an onshore area, and covers parts of Zambezia and Sofala provinces. The Sofala block is in relatively shallow water in the bay of Sofala, while M-10 is further south covering an area off the shore of both Sofala and Inhambane provinces. M-110 is thus close to the known onshore natural gas fields in northern Inhambane.

Rosneft and BP ink deal for Arctic cooperation

November 30, 2006. Rosneft and BP signed a bilateral Letter of Intent, to carry out joint studies in the basins of the Arctic region of the Russian Federation, in Moscow. The main purpose of the document is to identify specific areas of mutual interest within the region for the purposes of jointly accessing hydrocarbon exploration opportunities. The LoI states that the parties will seek to work together to obtain any rights to geological study and/or production of hydrocarbons in the region that may be offered by the Russian Government. Rosneft and BP agreed to form a joint working group by the end of 2006 to negotiate a cooperation agreement in the Arctic region based on the principles of the LOI. The companies agreed that the LoI would be effective until December 31, 2007 with the possibility of further extension.

OMV wins block 11 offshore Egypt

November 30, 2006. OMV strengthens its North African E&P core region with an expansion to Egypt. OMV's 100 per cent subsidiary OMV Exploration & Production GmbH has been awarded offshore exploration Block 11 in the 2006 EGAS (Egyptian Natural Gas Holding Company) International Bid Round. The block covers approximately 9,140 square kilometers, and is located in the Mediterranean Sea, extending north from the Egyptian coast in the vicinity of the town of Matruh offshore to deep sea. The acquisition of 100% operating interest of this Exploration block is subject to the final approval of the competent authorities. Work on the awarded block will commence next year with the acquisition of a 3D seismic survey

Norsk Hydro moves forward Brazil oil output start to '09

November 29, 2006. Norwegian energy firm Norsk Hydro ASA in late 2009 plans to start producing up to 100,000 barrels of oil a day from a Brazilian field. The company had earlier said it plans to start producing at the field in the BM-C-7 block in Brazil's oil-rich Campos Basin in 2010. Norsk Hydro has a 50% operating stake in the field, which it bought from EnCana Corp. for $350 million in August 2006, following a sales agreement in November 2005. Anadarko Petroleum Corp. holds another 50% stake in the field. Norsk Hydro now calls the field Peregrino, changing the name from Chinook, which had been used by EnCana.  The Norwegian firm since late 2005 has invested $400 million in Brazil. 

Santos finds gas at Barossa-1

November 29, 2006. Santos reports that testing of the Barossa-1 well in the Timor/ Bonaparte basin offshore Northern Territory has confirmed the presence of gas, and provided valuable reservoir and composition data. The Barossa-1 well has been drilled to a total depth of 4,310 meters, with logging and two drill stem tests now completed. The first test, of a lower-quality reservoir interval, flowed gas at a rate of approximately 0.8 million cubic feet per day through a 1 inch choke. The second test, of a higher-quality reservoir interval, flowed gas at a rate of approximately 30.1 million cubic feet per day through a 56/64 inch choke, with a condensate rate of 7 to 9 barrels per million cubic feet of raw gas as measured at the rigsite. The gas flow rate test was constrained by limitations of the surface equipment. Test results indicate a carbon dioxide content in the gas of approximately 16%. Barossa-1 is the third well to be drilled on this structure following the drilling of the Lynedoch-1 and 2 wells in 1973 and 1998 respectively.

Shell & PXP make oil discovery

November 29, 2006. Plains Exploration & Production and Shell have made a new oil discovery at the Friesian Prospect in Green Canyon Block 599. The block is approximately 200 miles south of New Orleans, Louisiana, and is located in approximately 3,800 feet of water. Operated by Shell Offshore Inc., the Friesian discovery was drilled to a total depth of 29,414 feet and encountered more than 120 feet of net oil pay. The discovery well is prepared for completion and temporarily abandoned.

Shell owns a 50 percent working interest and PXP owns the remaining 50 percent in this discovery. PXP is an independent oil and gas company primarily engaged in the upstream activities of acquiring, developing, exploiting, exploring and producing oil and gas in its core areas of operation: onshore and offshore California, and the Gulf Coast region of the United States. PXP is headquartered in Houston, Texas

Eni wins $140 mn bid for Brazil oil, gas E&P Block

November 28, 2006. Italian oil company Eni SpA and Brazil's state-run oil firm Petroleo Brasileiro SA were among the first winners in Brazil's annual oil and gas exploration and production block auction. Eni will have to pay Brazil's National Petroleum Agency, or ANP, 307 million Brazil reals ($140 million) for exploration and production rights in the SM-857 block, which lies in a new frontier area in deep waters in the Santos Basin off the coast of Sao Paulo.

Petrobras won a bid for the nearby SM-855 block, for which it will have to pay BRL167 million. The company also won a BRL33 million bid for the nearby SM-734 block. Both blocks are in an area considered by the ANP to have a high potential to find oil or gas. They lie close to the Merluza gas field, from which Royal Dutch Shell PLC (RDSB.LN) currently produces a little more than 1 million cubic meters of natural gas a day. Petrobras also won bids for smaller nearby blocks. Norwegian oil firm Norsk Hydro ASA led a BRL7 million winning bid for another block in the area and has a stake in two more winning bids for blocks that will have Spanish-Argentine oil firm Repsol-YPF and Petrobras as lead operators. ONGC Videsh, an overseas exploration unit of India's Oil and Natural Gas Corp., which participates for the first time in a Brazilian oil auction, won a bid for another block in the new frontier area, having to pay BRL1.5 million for it


Pertamina, Mitsui in $1 bn refinery deal

December 4, 2006. Indonesia’s state oil and gas firm Pertamina has signed an agreement with Japan’s Mitsui & Co to build a new gasoline cracking unit costing about US$1bn at the Cilacap refinery. Mitsui is ready to cooperate with Pertamina to support the Cilacap refinery expansion project. The refinery currently has a capacity of 348,000 bpd. Pertamina was looking into forming a joint venture with trading house Mitsui over the new unit.

3 Japan firms to tie up on LPG

November 29, 2006. Mitsui & Co., Marubeni Corp. and Sumitomo Corp. have agreed to a tie-up in the wholesale business for liquefied petroleum gas in the hope of reducing costs. The combined import share of LPG by the three firms will be about 20 percent, bringing the total sales to 300 billion yen. The new tie-up will create another large force in the nation alongside a joint company set up by Idemitsu Kosan Co. and Mitsubishi Corp. in April. As all-electric homes become more common in Japan, domestic LPG demand has been declining. With the new tie-up by the three major firms, the market reorganization is now expected to accelerate. LPG is mainly used as household propane gas, fuel for taxis and to generate power. Currently LPG is used in about half the nation's households.

Under the tie-up package, the three companies the share an LPG tanker to transport the gas from countries such as Saudi Arabia and the United Arab Emirates, develop a joint distribution network across the country, Abolish or merge sales bases. Since 2000, the three firms had separately been working on consolidating LPG-related projects, but had limited success in achieving operation efficiency within their own group companies. Therefore, with the need to pursue economies of scale, the firms agreed to the tie-up package. The import price of LPG has surged and hovers at about 500 dollars per ton from about 250 dollars in fiscal 2001, due to the high price of crude oil and economic growth of newly developing countries, such as China and India. Many LPG wholesale firms and retailers are community-based and small-scale operations, increasing distribution costs and making it difficult for them to compete with the electricity industry. The LPG industry therefore is now facing the need to lower both distribution costs and retail prices by rationalizing operations through market reorganization.

Four companies to buy stake in Qatar refinery

November 29, 2006. Marubeni Corp., Idemitsu Kosan Co., Cosmo Oil Co. and Mitsui & Co. have struck a deal to buy an equity stake totaling 29 percent in Qatar's Laffan Refinery Co. They will purchase the Laffan Refinery shares from Qatar Petroleum, a state-run concern. The company is scheduled to complete building a production facility with daily output of some 146,000 barrels in the second half of 2008. The project is located in an industrial complex called Ras Laffan Industrial City and estimated to cost $ 8 million.

The refinery will process condensate from the North Field, one of the world's largest natural gas fields, off the coast of the Persian Gulf state to produce naphtha, kerosene, gas oil and liquefied petroleum gas. Of the combined 29 percent interest in the firm based in the emirate's capital of Doha, Marubeni and Mitsui will account for 4.5 percent each and Idemitsu and Cosmo Oil for 10 percent. The refinery is also owned 51 percent by Qatar Petroleum, and 10 percent each by Exxon Mobile Corp. and Total S.A. Marubeni is already involved in a variety of natural resource development and other businesses in Qatar and says it hopes the latest agreement will serve as a springboard to further expand its oil refinery business.

Transportation / Trade

Iran signs deal to supply gas to China

December 4, 2006. Iran's state-owned gas exports company has agreed to supply Chinese company PetroChina with about three million tonnes of LNG a year. The supply will be for 25 years beginning in 2011. According to the agreement, 3m tonnes of LNG will be exported (annually) by Pars LNG project for a 25-year period to the Chinese market starting early 2011. The Pars LNG project, which teams up the National Iranian Oil Company, French Total and Malaysian Petronas, is one of three consortia in Iran producing LNG. Phase 11 of Iran's offshore South Pars gas field, which is still to be finalised, is slated to feed the LNG production facilities of the project. In April 2004, Iran awarded the $1.2 billion Pars LNG project to French oil giant Total

Transneft gets go-ahead to build East Siberia pipeline extension

November 28, 2006. Transneft has received permission to build the first leg of an oil pipeline under its Extension of East Siberia-Pacific Ocean project. The feasibility study was given a positive evaluation from a state expert appraisal agency. Earlier in the year, environmentalists condemned the East Siberia-Pacific Ocean (ESPO) pipeline, an ambitious project Russia is developing to pump oil from Siberia to Russia's Far East for exports to the Asia-Pacific region, particularly to energy-hungry China.

The construction of the 540-km (336 miles) first leg, which will connect Ust-Kut in the Irkutsk region and Talakan oilfield in East Siberia along the left bank of the River Lena, is expected to begin in January 2007 and include two pump stations, with contactors to be chosen in a tender in the near future. The new route will go to the village of Tynda, where it will join the preliminary projected ESPO system. Construction on the ESPO, estimated at $11.5 billion, began in April 2006. Since then, more than 100 kilometers (62 miles) have been laid, and 330 kilometers (205 miles) have been prepared for pipe installation. The pipeline is expected to pump 80 million metric tons (588 million bbl) of oil per year, including 30 million metric tons (220.5 million bbl) to China via an offshoot, whose construction is about to begin.

Policy / Performance

Qatar to become biggest LNG supplier to Japan

December 5, 2006. Qatar is expected to emerge as a country that holds the key to Japan's future energy security as it becomes the country's biggest supplier of liquefied natural gas (LNG) around 2010. The Persian Gulf state plans nearly to double LNG exports to Japan by 2010. Japan is the world's largest importer of LNG, purchasing 58 million tons from abroad in 2005, of which 25 per cent was from Indonesia. Qatar was Japan's fourth-largest LNG supplier in 2005, after Indonesia, Malaysia and Australia, accounting for about 11 per cent of Japan's total imports. Qatar, which has the world's third-largest proven gas reserves after Russia and Iran, with 25.78 tcm, is set to become the world's top exporter of LNG. Japan is also the world's second-largest crude-oil importer, after the United States. Japan imports almost all of its oil, about 90 per cent of which comes from the Middle East. Qatar is also Japan's fourth-biggest crude-oil supplier, after Saudi Arabia, the United Arab Emirates and Iran. While Japan's oil imports from Iran have been on the decline this year, its imports from Qatar are on the rise.

Russia offers to export Azerbaijani gas

December 5, 2006. Russia can help transport natural gas from Azerbaijan to third countries, as Azerbaijan develops alternatives to transit through Russia. Since gas extraction is growing from the Shah-Deniz reserves, Azerbaijan can cover its needs and later it will not need to buy from Gazprom any more. Russia's state gas monopoly Gazprom wants to increase the price for gas sold to Azerbaijan from 110 dollars per 1,000 cubic metres to 230 dollars as part of a series of price hikes for former Soviet republics. Azerbaijani could be forced to reduce oil transport through Russia in order to supply its own power generation facilities. Azerbaijan can ship oil to Turkey and to the Georgian port of Supsa. A new gas pipeline from Azerbaijan's Shah-Deniz reserves to Turkey is also due to become operational soon. All three export pipelines avoid Russian territory. Oil and gas exports from Azerbaijan through these three pipelines would deprive Russia of transit fees and dent its traditional influence in the region.

EU and Kazakh to increase energy cooperation

December 4, 2006. The European Union agreed to improve ties with energy-rich Kazakhstan in a move seen as a bid to reduce its dependence on gas supplies from Russia and the Middle East. The two sides signed a MoU that would make it easier to import gas and oil from the vast Central Asian republic. The 25-nation EU also signed a deal to promote the peaceful use of nuclear energy with a country that holds one-fifth of the world's known reserves of uranium. Kazakhstan and the European Union have laid the foundations of constructive cooperation in the energy sector.

Kazakhstan, which was part of the Soviet Union, is expected to pump 3.5 million barrels of oil a day in the coming decade. It also has immense gas reserves. At the moment, the EU is counting on Russia as a vital supplier of energy. Kazakhstan says it wants to help the union diversify its imports and make it less dependent on Moscow. The EU has signed similar agreements with Azerbaijan and Ukraine. The EU, meanwhile, is also trying to persuade Russia to ratify an international energy charter that regulates transit and investment in the energy sector and would allow for market competition between foreign and independent companies.

China seeks direct talks with OPEC

December 4, 2006. China wants to start direct negotiations with OPEC to secure a stable oil supply and an equitable share of the oil market, in comments that underline the Chinese economy's rapidly growing energy needs. Soaring demand for oil in rapidly industrializing China has been blamed as one of the chief causes for oil prices that have spiraled higher over the past two years. China is the world's third largest importer, behind Japan and the United States. China is an increasingly big consumer of raw materials and has been seeking a greater voice in pricing of several commodities. The country, which imports six percent of the crude traded globally, has been setting up strategic oil reserves and aggressively seeking new suppliers in Africa and South America to help diversify its crude supply. The Asian giant was opening its energy sector to outside investment and looking to cooperate with foreign partners across its oil sector. The country was looking for more formal ties with the Organization of Petroleum Exporting Countries, but didn't elaborate. China imported 3.1 million barrels a day of crude oil in 2005, and consumed 6.9 million barrels a day.

Gazprom talks natural gas cooperation with Egyptian

December 4, 2006. Gazprom discussed with Egyptian prospects for Russian-Egyptian cooperation in the natural gas sector within the framework of a joint memorandum. In March 2005, Gazprom, as part of its overseas expansion, signed a MoU with the Egyptian Natural Gas Holding Company (EGAS) that provided for Gazprom's possible involvement in existing projects for hydrocarbon production, transportation, processing and marketing, including liquefied natural gas (LNG).

They discussed in particular the possible involvement of the Russian energy giant in projects for the exploration and production of oil and natural gas in Egypt, production and delivery of LNG within the country, construction of gas transportation and distribution systems and other issues. The organization of Egyptian natural gas exports on the markets of Middle East countries was pronounced to be one of the promising directions of mutual cooperation. Egypt, which has proven natural gas reserves of 1.89 trillion cubic meters and oil reserves of about 500 million metric tons (3.68 billion barrels), produced 41 billion cubic meters of natural gas in 2005, putting about 8 billion cubic meters of the total volume for export, and 33 billion cubic meters for domestic use. The country began exporting gas via the Egypt-Jordan pipeline in 2003 and commissioned its first LNG plant in 2004.

Morales nationalizes Bolvia natural gas

December 3, 2006. President has signed contracts giving the government control over foreign energy companies' operations, completing a process begun May 1 with the nationalization of Bolivia's petroleum industry. The deals, signed by Morales and by companies last month, also grant the government a majority share of the foreign companies' revenues generated in Bolivia. Companies that signed contracts include Brazilian state energy giant Petroleo Brasileiro SA, Spanish-Argentine YPF, France's Total SA, and British Gas, a unit of BG Group PLC. The Royal Dutch Shell PLC had agreed to transfer to his government majority control of its Bolivian subsidiary Transredes, which operates the country's largest network of gas pipelines. Bolivia's natural gas reserves are South America's largest after Venezuela's.

Russia approves plan to double domestic natural gas prices

November 30, 2006. The Russian government approved a plan to more than double local natural gas prices by early next decade to make the economy more efficient, but it avoided a steep increase before parliamentary elections next year. The plan would now go to President for approval. Cabinet agreement came after repeated delays and failures by different ministries to reach a compromise. The cabinet will guarantee that there will be no steep price rises for ordinary Russians, while industry must be prepared to pay almost as much as Europe after adjusting for export duties and transportation costs.

Russian domestic natural gas prices are now at around $45 per 1,000 cubic meters of the level paid by export customers in Europe. The natural gas monopoly Gazprom has pushed for higher prices to curb local demand and free up more supply for lucrative exports. Independent producers like Novatek, which are not allowed to export, also want a better deal at home. The power monopoly RAO UES had initially opposed the move, but even after the price increases natural gas would be cheaper than alternatives like fuel oil. Analysts had said that the government would not support an immediate increase, which could undermine the fight against inflation before parliamentary elections in December 2007 and the election of a successor to Putin in March 2008.

The cabinet agreed to raise prices by 15 percent in 2007, in line with previous increases, while in 2008 the increase could go as high as 25 percent. Russia's economy is extremely inefficient in its use of natural gas, and some analysts estimate that up to 100 billion cubic meters a year, or one-sixth of total European consumption, could be saved through efficiency measures. The higher natural gas prices would encourage independent firms to produce more and supply 45 percent to 50 percent of domestic industrial clients' needs by 2010, up from 29 percent to 35 percent now. This would allow Gazprom to meet its export obligations and increase exports to Europe.

Indonesia, Japan sign energy contracts worth $2 bn

November 30, 2006. Indonesia and Japan have signed three new contracts on oil, gas and energy worth US$2 bn on LNG trading between state oil company PT Pertamina/BP Berau and Tohoku Electric Power. The 20-year-long contract on trading Production, Optimization Using NODAL Analysis, Deepwater Petroleum Exploration & Production. The other contract was signed by state electricity company PT PLN and Sumitomo Corporation on the Tanjung Jati B thermal power plant worth US$500 million. The 40-month long contract is expected to double the plant's 600 MW capacity. The third contract was signed by PT PLN and Marubeni Corporation worth US$500 million on a thermal power plant (PLTU) in Cirebon, West Java. The project is expected to increase the plant's capacity to 600 MW.

India & Pak reject gas price devised by Iran

November 30, 2006. India and Pakistan have rejected the gas import price worked out by a consultant company appointed by Iran as part of the over US$7 billion tri-nation pipeline project. The price worked out by the consultant, which was based on certain parameters given by Iran, was not acceptable to India and Pakistan. The consultant has been given revised parameters to work out the gas pricing. Iran had appointed Gaffney Cline and Associates to work out a price formula for the gas Iran wants to sell to the two South Asian neighbors.

New Delhi had, however, wanted the reference to be LNG contracts entered into during the past few years, which could then be extrapolated to produce crude oil prices. At the last trilateral meeting in New Delhi on August 3-4 Tehran had wanted a price equivalent to 10 percent of ruling Brent crude oil price, plus a fixed cost of $1.2 per million British thermal unit (mBtu). At $60 per barrel, the average Brent price during recent times, this translated into a price of 7.2 dollars per mBtu at the Iran-Pakistan border. Added to this would be the cost of transporting the gas through Pakistan. New Delhi, however, was willing to pay no more than 4.25 dollars per mBtu for gas delivered through the 2,100-km line at its border.

Kazakhstan seeks higher gas transit price for Russia

November 30, 2006. Kazakhstan is in talks with Russian energy giant Gazprom on raising its transit charge for Central Asian gas pumped via its territory to Russia by 45%. Kazakhstan currently charges $1.1 per 1,000 cubic meters per 100 kilometers for natural gas flowing through its pipelines to Russia from gas-rich Uzbekistan and Turkmenistan, a price that it wants to raise by 50 cents. Transit of Uzbek and Turkmen gas via Kazakhstan to Russia totals 45-50 billion cu m annually.

Marathon Oil sees 6-9 pct annual growth to 2010

November 29, 2006. U.S. oil and gas company Marathon Oil Corp. expects production to grow 6 percent to 9 percent a year through 2010. The company previously expected a compounded annual growth rate for the 2004 to 2008 period of 7 percent to 9 percent. Marathon still expects 2006 production to be between 360,000 and 370,000 barrels of oil equivalent per day. It is targeting 2010 production between 465,000 and 520,000 boepd, with much of the production growth expected to come from new resources the company is developing in the Bakken Shale, Piceance Basin and Barnett Shale regions of the United States. The Houston-based company is looking to develop a partnership to pair its refineries with an oil producer from the Canadian oil sands region and has invited producers to submit proposals for a potential linkup. Marathon has identified 13 potential bidders, including international majors, Canadian domestic majors and smaller players in the oil sands.  

Syria wants Iranian gas via Turkey

November 29, 2006. Turkey’s Energy Ministry has received a letter from Syria expressing interest in receiving Iranian natural gas via Turkish pipelines. Syria aims to buy 2 billion to 3 billion cubic meters of Iranian gas annually, from the three countries may meet in the next few days to discuss the issue. Turkey is examining with Russia, its main gas supplier, the possibility of extending the Blue Stream pipeline to Israel. Turkey is also central to a $5.8 billion pipeline that would pump Central Asian gas to Austria via the Balkans. Other pipelines across Turkish territory are planned. From Botas, which runs Turkey’s gas pipelines, said Syria could receive the gas via a planned pipeline that will link Nevsehir in central Turkey and Kilis, a town near the Turkish-Syrian border.

Indonesia may extend gas supply contracts with Japan

November 29, 2006. The Indonesian government will consider extending a number of gas supply contracts with Japan, if Tokyo agrees to increase its investment in Indonesia. Currently the contracts are scheduled to expire in 2010. On the one hand, Indonesia will ensure the supply of gas to Japan and on the other, Indonesia will ask Japan to increase its investment in Indonesia.

Gazprom, Rosneft sign oil & gas cooperation

November 28, 2006. Gazprom and Rosneft signed a parity deal on strategic oil and gas cooperation, valid until 2015. In line with agreements reached, Rosneft and Gazprom will develop cooperation in prospecting, producing, transporting and processing crude hydrocarbon resources, and purchasing and selling natural and associated gas. The sides plan to jointly participate in tenders and auctions to receive rights for mineral resource extraction, and to implement joint projects. The two companies will coordinate activities and exchange information while carrying out exploration and prospecting work and compiling geological and geophysical databases. Gazprom and Rosneft are also ready to cooperate in implementing projects to set up gas processing facilities in East Siberia and Russia's Far East. In line with the agreement, Gazprom will buy from Rosneft gas extracted from West Siberian deposits that are connected to the gas transportation system. A task force will soon be set up to consider joint implementation of projects with high potential in Russia and abroad.

ASEAN to cut dependence on conventional fuels

November 27, 2006. Southeast Asian nations, including India, are to reduce their dependence on conventional fuels and explore stockpiling oil as part of a sweeping energy programme. The draft is to be signed by the 10 leaders of the Association of Southeast Asian Nations (ASEAN) when they meet with their counterparts from Australia, China, India, Japan, South Korea and New Zealand in the second East Asian summit next month in the central Philippine province of Cebu. The leaders will pledge to work closely to limit dependence on "conventional fuels through intensified energy efficiency programs, expansion of renewable energy systems and bio-fuel production and utilization." ASEAN energy ministers earlier this year called for greater cooperation to boost renewable energy so as to minimise the impact of soaring oil prices which cast a shadow over one of the world's most dynamic regions. The pact will also call for a greater effort to minimise greenhouse gas emissions and to "harmonize standards for bio-fuels". The summit will also call on oil-rich countries to use the dollars they earn from rising world oil prices for "equity investment and long-term, low interest loan facilities" for developing countries that import energy.



KDEB to build power plant in Indonesia

December 5, 2006. Kumpulan Darul Ehsan Bhd (KDEB) has entered into an agreement with PT PLN (Persero), a utility company in Indonesia, to build RM50 mn mini hydroelectric plant in Kabupaten Solok, West Sumatra. The 10 MW plant marked the company's maiden foray overseas. KDEB would actively look for opportunities in China and South-East Asia. The construction would start in three months and take about a year to complete. KDEB and its Indonesian partner, PT Limaco Energi, would build, operate and manage the plant upon completion. They would set up a company for this purpose, with KDEB holding 60 per cent equity.

MAPNA launches major power plant project in Assaluyeh

December 4, 2006. Iran Power Plant Projects Management Co. (MAPNA) has launched a major electricity generation project in Iran’s southern region of Assaluyeh. The building of Bethat Power Plant in Iran’s oil- and gas-rich Assaluyeh region is aimed at supplying parts of the energy required by the oil and gas refineries in the South Pars oil and gas fields. MAPNA Co. has undertaken to build the power plant within a period of 24 months that is relatively a short time for the task. Upon completion, the 1000 MW Bethat Power Plant project will supply the electricity required by the 12 development phases of the South Pars Oil and Gas Field development program. Established in 1993, MAPNA Co. has developed more than 85 percent of the nation’s electricity production projects - over 32,000 MW of electricity. The projects have totaled around $13.9 million.

Progress to spend $72 mn on new power plant

December 2, 2006. Progress Energy plans to build a second power plant in Buncombe County in the western part of the state. It will build a 130 MW combustion turbine power plant near Woodfin. The new plant is expected to cost the Raleigh utility about $72 million and should be operational by December 2009. The plant will enable Progress to meet the growing electrical needs of the region. The plant will provide about 150,000 western North Carolina residents with power during peak consumption periods.

Taqa set to invest up to $1b in Indian power plants

November 30, 2006. Abu Dhabi National Energy Company (Taqa) signed a joint venture agreement with India's Infrastructure Leasing & Financial Services Ltd to build power plants across India with a total capacity of as much as 7,000 MW. Taqa will invest up to $1 billion over three to five years in a joint venture to build power plants in India. Under the terms of the arrangement, Taqa would invest in various power and transmission projects in India, enabling them to come online faster and more productively. By working together with IL&FS, Taqa believes that it is taking the straightest, fastest path to profitability in the Asian subcontinent. IL&FS is currently involved as developer and adviser in power generation projects with an aggregate generation capacity of more than 6,000 MW. These projects will require significant equity capital, and the intended partnership with Taqa is an initiative to mobilise equity funds for these projects, including a 750 MW gas-based power project in Tripura being implemented with ONGC as a partner.

Transmission / Distribution / Trade

AEP signs power supply contract with Ohio

December 4, 2006. American Electric Power has signed a multi-year wholesale power supply agreement with the City of Columbus, Ohio. According to the terms of the contract, AEP will begin supplying wholesale electricity to the City of Columbus Jan. 1, 2007. The City of Columbus has a peak load of approximately 190 MW. AEP was selected through a competitive bid process to serve Columbus' load. Contract details are not being disclosed for competitive reasons. AEP is one of the nation's largest wholesale suppliers of generation to municipal utilities and cooperatives. In 2006, AEP has provided approximately 3,275 MW of full requirements power to 55 municipal utilities and 25 electric cooperatives in the United States.

AEP to buy 480 MW plant from DPL

November 29, 2006. American Electric Power Co. that it would buy a 480 MW natural-gas fired plant in Ohio from DPL Inc. for about $102 million to keep up with growth and meet regulatory reserve requirements. The sale is part of a restructuring that includes a review of all its generation assets and which may also lead to the sale of other merchant "peaking" plants including Greenville and Montpelier. It had already announced that it was considering bids for all three locations. The company expects the sale of the Darby plant, located about 20 miles southwest of Columbus, Ohio, where AEP is based, to close in the first half of 2007.

Iran, Syria agree to connect power networks via Iraq, Turkey

November 30, 2006. Iran and Syria reached an agreement to connect their electricity networks via Turkey and Iraq. The transmission power lines have previously been posted at Iran-Iraq and Syria-Iraq borders. Syria has voiced its eagerness on the construction of a power plant by Iranian companies either on BOO (build-own-operate) or BOT (build-operate-transfer) bases. Iranian and Syrian ministers are due to sign an agreement on the expansion of Tehran-Damascus bilateral cooperation at the end of their negotiations. The agreement text is currently at final stage of assessment by experts.

Russia to fully liberalize electricity market, gas prices by 2011

November 29, 2006. Russia's electric power market and natural gas prices will be fully liberalized by 2011. All Russian electric power will be traded on the market; the country's electricity demand is expected to hit 1,426 billion kilowatt hours (kWh) by 2015, a 45% increase from an estimated 980 billion kWh in 2006. The domestic gas prices will be based on an average export price, but will be at least 40% below the global market rate, as it will not include exports duties and logistic expenses. The implementation of a new scheme will be based on long-term contracts, of up to five years. The scheme will initially be implemented for contracts between electric power sector players and natural gas producers. The power sector "will close take-or-pay long-term deals starting next year.

Policy / Performance

Indonesia, S. Korea to cooperate in promoting nuclear power plants

December 5, 2006. Indonesia and South Korea agreed to establish cooperation in promoting the building of a nuclear power plant in the country. Indonesia and South Korea signed a MoU on the cooperation after the 22nd meeting of the Indonesia-South Korea Joint Committee for Consultation on Energy and Mineral Resources Sector. The MoU was not on the construction of the plant but for promoting the government's plan to build a nuclear power plant in the future. It is hoped that by the promotion, familiarization and information campaign the public would later understand and accept the presence of a nuclear power plant, especially those living near the location of the power plant. The government decided to cooperate with South Korea in the promotion effort because that country had a wide experience in operating a power plant since the 1970s.Until now around 20 PLTNs have been operating in that country producing 17,700 MW of electricity. Another four PLTNs would be built in South Korea. The technology applied by South Korea matched with that already developed by Indonesia's National Atomic Energy Agency (Batan). Indonesia expected to operate a PLTN having a capacity 1,000 MW in the 2015-2017 period. Indonesia and South Korea have started consultations on energy and mineral resources back in 1979 for smooth Indonesian LNG exports to that country.

Russia, Indonesia sign deal on nuke power cooperation

December 1, 2006. Russia and Indonesia have signed an agreement on civilian nuclear power cooperation. Moscow is ready to take part in a tender for the construction of a nuclear power plant in Indonesia, to be announced by 2008. Russia possessed a wide range of competitive technologies in the nuclear power sector, including a floating NPP design that may attract Indonesia's interest. Russia's nuclear power equipment and service export monopoly, Atomstroyexport is currently building five nuclear power plants in China, India and Iran, on contracts worth $4.5 billion.

Georgia Power proposes big project in Smyrna

November 30, 2006. Georgia Power wants to replace its only coal-fueled plant in metro Atlanta with a natural gas-fueled generating unit, which it says would be more efficient and would help improve the area's air quality. Replacing coal-fueled Plant Jack McDonough in Smyrna, Ga., with a natural gas-fueled "combined cycle" generating unit would be more cost effective than retrofitting the plant with expensive environmental controls. The natural gas-fueled unit also will produce cleaner energy than McDonough's two coal units, even if those coal units were retrofitted with the additional controls. Plant Jack McDonough was built in the 1960s to provide electricity to metro Atlanta. The company recently demolished a 60-year-old coal plant Plant Atkinson at the same site. Georgia Power will propose in its Integrated Resource Plan filing in January with the Georgia Public Service Commission investing in a new 800 MW natural gas combined cycle unit at the 370-acre site. In a prior filing at the PSC, Georgia Power proposed adding two other 800 MW natural gas fueled generators at the McDonough site. The addition of a third unit to replace McDonough's coal-fueled units would bring the capacity of the site to 2,400 MW. Georgia Power will file a certification request for the first two units with the PSC in late January. If the PSC approves all of Georgia Power's proposals and the company gets the appropriate permits, construction is would start on the first gas unit in 2008. This unit is scheduled to be on-line late in 2010, and the total project would be finished by 2012.

Company shelves plans for "clean coal" power plant

November 29, 2006. A New Jersey-based power company will move ahead with its plans to build a natural gas-fired electricity generating plant in Montville, but has temporarily removed a "clean coal" component from the project. NRG will build the $1.6 billion power plant so that the coal technology part can be added at a later date. During the past year, NRG had proposed the "clean coal" plant as a way to use a cheap domestic source of fuel to produce electricity for 500,000 or more average-size homes while greatly reducing the effect on the environment. NRG had to remove the "clean coal" portion from the final financial bids to be submitted next month because the company would not be able to meet a 2010 deadline set by the Department of Public Utility Control, among other reasons. NRG could have the coal technology portion built by 2013. The company had to modify its bids to meet DPUC specifications for the planned 630 MW plant. The DPUC will soon be choosing a series of projects to receive state incentives designed to stimulate the construction of new power plants. Environmental groups were already fighting the proposed Montville plant, saying the new coal technology still produces carbon dioxide, which, unless captured, contributes to global warming. The technology to capture the gas is still being developed.

Chinese to invest in power, oil

November 28, 2006. Chinese giants, Gezlouba Corporation and Catic Company Ltd are among firms that will invest in medium and mini hydropower stations in Uganda, following an agreement between Kampala and the Asian giant. China Development Bank, one of the three policy banks in China responsible for financing large-scale infrastructure investment, has agreed to finance Uganda's hydropower developments in these two areas through soft loans. The economic co-operation agreement will also see Chinese investments in the petroleum and the Information and Communications Technology sectors. At the same time, Uganda aims to export more natural resources to China in a move to diversify its traditional export markets, which are dominated by Europe and the United States. Uganda hopes to export mainly coffee and cotton to China in addition to a variety of non-traditional exports. Uganda sought China's support for its hydropower and petroleum sector during the two-day Beijing conference aimed at building economic ties between Africa and China. The event attracted leaders from 40 African countries. The government is hopeful that with the implementation of the agreement, Uganda will be less vulnerable to the unstable world oil prices; its currently enormous energy costs has taken more than a third of its budget expenditure this financial year. Kenya in turn buys oil from abroad and this makes Uganda particularly vulnerable to swings in global oil prices. Currently, the government is paying four times what it would have paid for hydropower in the form of capacity charges for a total of 100MW of heavy diesel oil thermal power plant. At the moment, 45 per cent of available capacity is from thermal power, but it costs the government 87 per cent in the capacity charge. The EastAfrican that two Chinese companies would invest in development of the large hydropower sites of Ayago North (generation capacity of 300MW) and Ayago south (200MW), along the River Nile. The bank will send a team to Uganda next month to crosscheck the information offered by the government in the agreement and look into other possible areas of investment. To alleviate the current power crisis, the government plans to build two hydropower stations - Bujagali and Karuma, along the River Nile - as medium term interventions. The two projects are expected to come on board from 2010.Only a small portion of Uganda's hydropower potential has been developed. Much of the country's power network is poorly maintained and this, coupled with inefficiency, leads to loss of several megawatts of energy. The government team also negotiated with three Chinese companies on a number of oil blocks. China National Oil and Exploration Development Corporation (CNODC) and China National Offshore Oil Corporation International Ltd (CNOOC) will invest in drilling oil from the Albertine Graben region and western Rift Valley.

Woodward signs supply agreement with GE Energy

November 28, 2006. Woodward Governor Company signed a four-year supply agreement with GE Energy to provide gas turbine components and systems for the power generation industry. The agreement encompasses combustion system components for GE Frame series heavy-duty turbines, electronic control systems and software used on GE aeroderivative series turbines, mechanical controls, and accessories for heavy frame and aeroderivative turbines such as gas valves, liquid valves, actuators, and auxiliary valves. The agreement also includes a long-term technology partnership with GE to develop future products for commercial industrial turbine applications.

Renewable Energy Trends


M’shtra plans tidal energy project

December 4, 2006. The state government, Maharashtra Energy Development Agency (MEDA) and Sangli-based company, Apar Urja Pvt Ltd (AUPL) have signed a MoU to produce 15 to 25 KW of electricity from tidal waves at Budhalgaon in Ratnagiri district.  The cost of this project is estimated at around Rs 40 lakh and it is expected to start functioning from March or April next year. If this project becomes successful then the capacity of the project will be increased to 250 KW. Under the conditions of MoU, MEDA will finance the entire project and AUPL will bring the technology and once technology is proven and patented then royalty will be split between MEDA and AUPL on 50:50 basis. Maharashtra has 720 kilometer long coastline and various study shows that, Maharashtra has potential to generate 4 to 5 MW power per kilometer of coastline.


Puget Sound Energy plans solar power plant

December 5, 2006. Puget Sound Energy, the state's biggest utility, is seeking proposals for construction of a 500-kilowatt solar-powered generating facility. The plant would be located near the site of the Wild Horse Wind Project under construction in eastern Washington, the Bellevue-based utility. When the sun is shining, it will have the capacity to power 300 homes. That would roughly double the state's entire solar-powered electricity generation and be four times bigger than any solar facility now in existence in the Northwest. The Wild Horse wind farm will produce up to 230 MW in a strong breeze. The deadline for submitting proposals is Feb. 1, and the solar project may be completed by late next year.

Carotino planning second biodiesel plant next year

December 2, 2006. Palm oil producer Carotino Sdn Bhd aims to start its second biodiesel plant next year and has sold the entire output at its first unit up to March. High feedstock costs had spurred the company to raise its biodiesel price by US$10 a tonne to US$730 for April shipments.  Malaysia, the world’s top producer of palm oil, has approved licences for more than 50 biodiesel plants, but Carotino is one of the few that have so far started production. Carotino was not finding it hard to find customers despite a sharp decline in petroleum prices and a spike in crude palm oil, which had sparked a debate on the viability of vegetable oil-based biodiesel. Crude palm oil, the main raw material for biodiesel, or palm methyl ester, has risen more than 37% in price this year, boosted by firm soyoil prices and on forecast of strong biodiesel demand in the coming months.

The company was the first in the world to produce winter grade palm methyl ester that does not solidify in extreme cold, using technology developed by the Malaysian Palm Oil Board. The privately-owned Carotino is part of the J.C. Chang group, which owns about 40,470ha of palm plantations, four crude palm oil mills and a refinery. Having its own supplies of crude palm oil insulates Carotino from price shocks. The new 120,000-tonne plant coming up beside the existing unit in Pasir Gudang will boost Carotino’s combined biodiesel capacity to 180,000 tonnes by the third quarter of 2007. The company will be able to sell up to 15,000 tonnes of biodiesel a month upon completion of the new unit.

Tierra Energy to build Wyoming wind farm

November 30, 2006. Tierra Energy LLC has secured a contract to build a $55 million wind farm that will supply a Wyoming power company with renewable energy. Austin-based Tierra Energy's subsidiary, Happy Jack Windpower, will provide Cheyenne Light Fuel & Power with wind-generated energy over a 20-year period. Cheyenne Light Fuel & Power is a subsidiary of Rapid City, S.D.-based Black Hills Corp. When the Happy Jack project becomes operational in 2008, it will generate about 100 million kilowatt-hours of wind energy a year for the city of Cheyenne and surrounding communities.


Export of petroleum products from April to October


(In thousand metric tones)


































Lubes + Grs




























Source: The Economic Times, 5th December 2006

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