Energy News Monitor |Volume IV, Issue 49

The Impending Oil Shock

brupt rises in the price of oil in recent years have helped revive concern about the long-term viability of a fossil-fuel-based economy. Many business writers have seen these rises as simply compensating for the oil glut of the 990s, or due to specific, localised, temporary difficulties such as Hurricane Katrina, the war in Iraq or unrest in Nigeria. More pessimistic analysts, however, argue that world oil production is peaking, and will soon start dropping, even as the demand for energy continues to soar.¹ That means at the beginning of the end of the oil age may be just around the corner, and the only question is whether the landing will be soft or hard – whether we will find ourselves in a truly post-industrial world, where new technology is effectively substituted for depleted natural resources, or in the midst of a Malthusian catastrophe and a new dark age.²

The coming energy crunch?

It is frequently reported that the world’s proven reserves of liquid petroleum are on the order of a trillion barrels, but what exactly this means is rarely explained. Oil reserves are classed as ‘possible’, ‘probable’ or ‘proven’, the latter being the categorisation most often discussed. ‘Proven’ means there is a 90% chance of it being economically feasible to recover a given quantity of oil. (By contrast, there is a 50% chance with a ‘probable’ reserve, and a 10% chance with a ‘possible’ one.) Of course, determining what is ‘economically feasible’ means making assumptions about the price of oil and he technology available to extract it. Even if not a single additional barrel is found, a higher price for the commodity, by justifying more expensive recovery techniques, can increase a ‘proven’ reserve, as can improvements in technology. It is frequently noted, for instance, that the percentage of oil recovered from deposits has risen from 22% to 35% since 1980 because of such improvements.³

Current estimates of the world’s proven reserves are generally on the order of 1–1.2tr barrels. According to the US Geological Survey, it may order of 1–1.2tr barrels. According to the US Geological Survey, it may and indeed optimists anticipate that these will meet the ‘proven’ standard in just a ‘few years’.⁴ The Survey also calculated that another 1tr barrels await discovery and exploitation.

This makes up to 3tr barrels of recoverable liquid oil.⁵ Translating as it does to a 100-year supply at current consumption rates, this would make any crisis appear far off.⁶ Nonetheless, oil consumption is expected to grow at rate of 1–2% every year for the foreseeable future. A 1.5% rate of growth would double consumption in 50 years, and by itself reduce current estimates to a 70-year reserve.

Perhaps more importantly, the process of calculating the amount of oil that might be recoverable from a deposit is neither exact nor transparent, so that the 3tr-barrel estimate cannot be blithely accepted.⁷ There is plenty of room for over-optimism, wishful thinking and outright lying – a 50% probable’ reserve easily turns into a proven one on paper. Close examination of ‘proven’ reserve estimates from year to year often shows suspicious changes, or a suspicious lack of change. Reserves commonly stay the same for years or even decades despite continuing production and an absence of obvious compensating changes.⁸ As many as 300 of the estimated 700bn barrels reported by OPEC countries may be suspect.⁹

Of course, vast unproven (and unlocated) supplies could more than compensate for such shortfalls, but again there are profound uncertainties. By definition, ‘probable’ and ‘possible’ supplies are an even less certain matter than ‘proven’ ones. Additionally, even if the world’s untapped reserves are s large as some observers claim, this is no guarantee that they will conveniently be found when needed, or even at all. It is certainly the case that newer supplies, such as the South Atlantic fields off Brazil and Angola, are being located and exploited.¹⁰ However, the rate at which new supplies are located started falling in the 1960s, and overall consumption has outpaced he rate at which oil has been discovered since the 1980s, so that today such discoveries replace only a quarter of what is used up each year.¹¹ It should also be remembered that it takes at least ten years to get production going on an economic scale at a site after finding oil, so there is a considerable lag between discovery and production.¹²

Many observers point out that energy companies have invested comparatively little in locating new supplies or expanding production since he 1980s – allowing their spare capacity to slip from 15% of the market in 1986 to a mere 2–3% in 2005.¹³ Until recently, this has usually been attributed to low oil prices, and taken as proof of justified confidence in the future. Additionally, given the glut of the 1990s and their high profits at present, both private and state-owned companies have little incentive to dramatically enlarge the oil supply through such investments.

There are alternative explanations. Considering the tendency of oil companies to exaggerate their reserves, it may simply be that the industry is deterred by diminishing returns on its investment.¹⁴ Not only is it taking more effort to get oil out of the ground, but there would seem to be relatively few places left to explore (as indicated by the emphasis on new technology and the importance of offshore and other difficult-to-reach supplies).¹⁵  

Consequently, even if the present scarcity of oil is temporary, oil producers will not automatically and smoothly ramp up output when supplies tighten – precisely the issue addressed by the controversial ‘peak oil’ argument.

Peak oil?

The peak oil theory, first propounded by Marion King Hubbert in 1956, asserts hat oil production from a particular territory, whether a field, a country or he whole planet, follows a bell-shaped curve, rising exponentially early on, hitting a peak and then declining terminally. This is because production in an oil field does not stay constant until the moment the wells tap out. All other things being equal, production in a well rises to a maximum, then starts tapering back down to zero because of dropping field-pressure after roughly half the oil has been extracted.

All other things are rarely equal, however. Extraction rates can be raised with more effort and made practical by technological improvements or higher prices, which has caused some observers to characterise Hubbert’s theory as overly simplistic. Another problem with peak prediction is that it must be used on the size of an oil reserve, calculations of which are highly uncertain. Whether a prediction assumes the trillion-barrel ‘proven’ figure to be grossly exaggerated or unduly pessimistic makes a great deal of difference.¹⁶

Nonetheless, Hubbert’s work has received widespread attention because he accurately predicted that US oil production would peak between 1965 and 1970 (it actually peaked in 1971). Other Hubbert predictions have proved less accurate (for instance, that the global peak would come in the 990s).¹⁷ Still, consistent with his projections, the world’s oil production is today concentrated in mature, ageing fields from which the extraction of additional supplies is increasingly costly in money and energy.¹⁸ Even Saudi Arabia increasingly depends on water injection (pumping seawater into oil deposits to keep field-pressure high) and mechanical aids to induce artificial lift.¹⁹ Consequently, a shrinking number of fields will produce a dwindling amount of oil as they each peak in their turn, causing the world’s total production to drop toward a point at which it will become too expensive to extract any more.²⁰

Even inside the typical parameters of this argument there are large unknowns, which quickly become apparent when one crunches the numbers. While production might peak at any time, the peak is usually predicted for some time between 2010 and 2020.²¹ Afterwards, oil production is projected to adjustment. The most obvious is to produce oil in ways other than pumping  drop at a rate of 2–6% a year.²² Such a sharp drop would necessitate massive adjustment. The most obvious is to produce oil in ways other than pumping liquid oil out of the ground, so ‘unconventional’ sources of oil such as sands, natural gas and coal have attracted great interest in recent years.

 

Notes:

1 The seminal paper on the subject is M. King Hubbert’s ‘Nuclear Energy and the Fossil Fuels’, Publication no. 95, Shell Development Company, June 1956. Also see Kenneth S. Deffeyes, Hubbert’s Peak: The Impending World Oil Shortage (Princeton, NJ: Princeton University Press, 2001).

2 See James Howard Kunstler, The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century New York: Atlantic Monthly Press, 2005).

3 Leonardo Magueri, ‘Two Cheers For Expensive Oil’, Foreign Affairs, vol. 85, no. 2, March–April 2006, p. 150.

4 Ibid., p. 150.

5 This would be 50% of an estimated world supply of 6tr barrels of oil. Other estimates are rather more conservative, assuming that only 30% might be recoverable – a difference of over a trillion barrels. See John H. Wood, Gary R. Long and David F. Morehouse, ‘Long-Term World Oil Supply Scenarios: The Future is Neither as Bleak or Rosy as Some Assert’, 18 August 2004, http://www. eia.doe.gov/pub/oil_gas/petroleum/ feature_articles/2004/worldoilsupply/ oilsupply04.html.

6 Annual oil consumption is today in the area of 30bn barrels a year. See Central Intelligence Agency, CIA World Factbook 2006, https://www.cia.gov/cia/publications/factbook/index.html.

7 Colin J. Campbell and Jean H. Laherrere, ‘The End of Cheap Oil’, Scientific American, March 1998, pp. 78–84.

8 As Matthew Simmons has noted, Saudi Arabia’s reserves have been set at 260bn barrels for nearly two  decades, despite the production of nearly 50bn barrels. Matthew Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and The World Economy (Hoboken, NJ: John Wiley & Sons, 2005). Optimists claim, by contrast, that the 260bn figure is low: Magueri, for instance, asserts that it is just a third of Saudi Arabia’s actual oil wealth. Magueri, ‘Two Cheers’, p. 153.

9 Campbell, ‘The End’, pp. 79–80.

10 Daniel Yergin, ‘Ensuring Energy Security’, Foreign Affairs, vol. 85, no. 2, March–April 2006, p. 74.

11 Leonardo Magueri, ‘Never Cry Wolf – Why The Petroleum Age Is Far From Over’, Science, no. 304, 21 May 2004, pp. 1114–15.

12 Deffeyes, Hubbert’s Peak, p. 10.

13 Magueri, ‘Two Cheers’, p. 151.

14 See Thomas Homer-Dixon, The Upside of Down (Washington DC, Island Press, 2006).

15 This is a matter of some controversy. ‘Oil optimists’ contend that while this may be the case with North America, the territory of some major producers like Russia and the Middle East may be under-explored, and they point to the smaller number of exploratory wells drilled inside these territories. Magueri, ‘Two Cheers’, pp. 150–1.

16 Colin Campbell’s widely publicised estimate is that there may be a total of a trillion barrels remaining to be recovered, just one-third of the USGS estimate, so that roughly half the world’s supply has already been used up, rather than a quarter or so in the USGS estimate. Campbell, ‘The End’, p. 81.

17 This can be explained to some degree by OPEC’s deliberate production cutbacks, which did not figure into Hubbert’s calculations.

18 Over 80% of production comes from fields found before 1973. Campbell, ‘The End’, p. 80.

19 Simmons, pp. 134–48. Water injection can cause such problems as the corrosion of the extraction equipment, and the biodegradation of the oil by bacteria in the water. Simmons, pp. 103–4.

20 John Dillin, ‘How Soon Will World Oil Supplies Peak?’, Christian Science Monitor, 9 November 2005, p. 3.

21 Some studies set the date much later than that, one putting the outside figure early in the twenty-second century – though this study judged the US Geological Survey to be conservative in its estimates, and assumed field growth outside the United States. See Wood, ‘Long-Term’.

22 The 6%-a-year drop may at first seem surprising, since according to peak theory, the production of oil drops at approximately the rate at which it rose. However, the use of more aggressive recovery techniques to stave off the peak is likely to mean an even more rapid drop when the peak finally does hit, given that well over 50% of the supply will have been depleted by then.

 

 

to be continued…

 

 

 

 

 

Climate Change: A Problem of Lifestyles?

(Marwaan Macan-Markar)

 

 

n eleventh hour intervention by the Indian delegation at a major U.N. climate change conference here pushed to centre stage the need for a dramatic shift in lifestyles rather than dependence on green-friendly technology for solutions to global warming.

The call by the Indians to include lifestyle changes and behaviour patterns to mitigate climate change was ‘'welcomed across the board,'' said an observer at the Intergovernmental Panel on Climate Change (IPCC), a meeting that drew scientists, environmentalists and government officials from over 120 countries.

''There was no opposition; it was approved without question,'' added Catherine Pearce of the environmental lobby Friends of the Earth International after the close of the week-long meeting ending Friday, with the release of the ‘Climate Change 2007: Mitigation of Climate Change' report. The over 1,000 page document, which was the subject of heated debate, lasting well after midnight on three days, was the third such document circulated this year to address the dire consequences the world faces due to greenhouse gas (GHG) emissions and the global response required.

‘'Changes in lifestyles and consumption patterns that emphasise resource conservation can contribute to developing a low-carbon economy that is both equitable and sustainable,'' stated the summary of the report for policy makers that was approved by the ninth session of the IPCC Working Group III.

''Changes in occupant behaviour, cultural patterns and consumer choice and use of technologies can result in considerable reduction in carbon dioxide emissions related to energy use in buildings,'' it added.

But this emphasis on shifts in individual behaviour to help cool an overheating planet does not translate into a call for sacrifices in lifestyle, leading members of the IPCC declared. ‘'We should not view it in terms of sacrifices,'' Ogulande Davidson, co-chairman of the IPCC Working Group III, said at the closing press conference.

''This is for a change of lifestyle without a change in comfort,'' added Rajendra Pachuri, chairman of the IPCC. ‘'One has to try to accept a different threshold of comfort.''

Non-governmental organisations (NGOs) who sat through the discussions interpreted this message that was included for the first time in an IPCC report differently. ‘'It is a strong message sent to the citizens of the United States and Europe to reassess their personal carbon footprint and help the rest of the world to achieve a common goal,'' Shailendra Yashwant, climate and energy team manager for the South-east Asia office of Greenpeace, told IPS.

According to the World Wildlife Fund, an average U.S. citizen requires 10 hectares of the planet to support his or her lifestyle, while an average European needs over five hectares. An average person in Africa, by contrast, draws on about one hectare of the earth's resources to live.

The case made by the Indians is due to receive attention in China which has emerged along with the U.S. as one of the leading producers of GHGs due to high dependency on fossil fuels. China is expected to top the list of GHG producers by 2009 and India is due to follow close behind in over a decade, given its projected increase in coal usage.

‘'When China adopted the open economy policy we used the U.S. model, but now we need to change that by stressing efficient use of energy and consumption that uses less energy,'' David Zhou, researcher at Beijing's Energy Research Institute and a member of the IPCC's body of experts, told IPS. ‘'We are trying to create new models by looking at some European countries.''

The solutions for greener future made out in this report were aimed at preventing the Earth's temperature increasing by a further two degrees Celsius to avoid an environmental catastrophe. For that, carbon dioxide emissions, by far the largest contributor to global warming, need to drop between 50 and 85 percent by 2050, the report states.

The economic cost of that, according to the U.N. panel, that draws on the contributions of over 2,000 scientists, would be only 0.12 percent of annual gross domestic product (GDP). And innovations in technology offered governments a way forward to achieve the urgently needed benchmarks, it adds.

Among the key mitigation technologies singled out in the blueprint for change were switching from coal to gas, nuclear power, hydropower, solar power, wind power and, in the future, ‘'advanced renewable energy, including tidal and waves energy.''

‘'New energy infrastructure investments in developing countries, upgrades of energy infrastructure in industrialised countries and polices that promote energy security can, in many cases, create opportunities to achieve GHG emission reductions,'' the report notes.

Investment in such ventures, expected to total over 20 trillion U.S. dollars between now and 2030, ‘'will have long term impacts on GHG emissions,'' it adds pointing to ‘'long life-times of energy plants and other infrastructure capital stock''.

But the challenge that awaits governments to take a radical turn in their energy supply line is daunting, given that renewable energy accounts for only 13 percent of the world's primary energy demands, of which, biomass is the largest alternative energy source.

According to Greenpeace, about 80 percent of primary energy supply still comes from fossil fuels, of which oil provides 36 percent of the world's fuel needs, while coal supplies 25 percent.

The first two reports by the IPCC that were released this year raised the alarm about the peril that current and future generations face if global warming continues at the current pace. For one, it could result in extreme weather patterns from hotter summers to warmer winters, rise in sea levels, stronger storms and hurricanes, droughts and melting of glaciers.

In fact, a rise in the global temperature by two degrees Celsius could result in the extinction of a third of the world's animal and plant species and the communities worst affected would be the world's poor, the previous reports warned.

‘'While governments have to take the lead in finding solutions, people also have to play their part in making changes to reduce GHG emissions,'' says Ismalel Elgizouli, a mathematician at the Khartoum University, Sudan, and an African representative at the IPCC. ‘'That is why changes in lifestyles are essential.''

‘'If people only use what they need they can help save energy without any change in their comfort,'' he explained to IPS. ‘'But it must be voluntary.''

 

 

Concluded

 

 

 

 

 

 

 

 

 

 

 

 

NEWS BRIEF

OIL & GAS

Blockade hits oil production in upper Assam

May 27, 2008. Crude oil and natural gas production by Oil India Ltd in Assam have been seriously hit by an oil blockade launched in January by an ethnic group demanding an economic package from the oil major. In March, state-owned OIL's oil and gas production fell short of the target by 7.6 per cent and 26.3 per cent respectively. Crude oil production was shorter than the target at Khagorijan, Chabua, Baghjan and Barekuri fields. Disruptive activities by miscreants compounded the problem and production further dipped. According to the figures available till March, OIL produced 0.292 mmt (million metric ton) crude in the oil fields of upper Assam against a target of 0.316 mmt in March. The blockade was launched by the All Assam Muttock Yuba Chatra Sanmelan to press OIL to announce a developmental package for the Muttock ethnic group that dominates certain areas of the company's operations.

ONGC to earn $0.18 mn in carbon credits

May 25, 2008. Oil and Natural Gas Corporation (ONGC) will earn Rs 77 lakh ($0.18 mn) annually as it's flare gas recovery project at Hazira in Gujarat has received United Nations' approval for earning carbon credits. The project entails installation of a tail gas recovery system that recycles all tail gases (sourced from control valves, pressure safety valves, fuel gas purge points, seal purge gas released from compressors and expanders and vessels) which were hitherto led to the flare system to put them back into the system to recover valuable hydrocarbons and thereby reduce the flaring to zero. The Asia-Pacific region made up slightly more than 15 per cent of the company's revenues of $315.5 mn (Rs 1,260 crore) for the first quarter of 2008. Growth in India is primarily driven by the rising demand for consumer electronics as the purchasing power of middle class continues to increase. Start-ups, government programmes, new fabs, solar applications and electro-mechanical solutions will all contribute to Synopsys' global revenues from India. The expected annual accruable Certified Emission Reduction is 8,793 for a period of 10 years.

Libya signs exploration accord with Sonatrach, Oil India

May 26, 2008. Libya, holder of Africa's largest oil reserves, signed a final agreement granting exploration and production rights to Algeria's state oil company Sonatrach, Indian Oil Corp and Oil India Ltd. The three companies will spend $152 million on exploration works that include drilling eight wells in Libya's Ghadames region. They will pay $10 million as a bonus to National Oil when the government approves the accord. 

ONGC looks to sell 30-40 pc in Vietnam oil blocks

May 22, 2008. ONGC, the country's largest oil and gas producer, is planning to sell 30 to 40 per cent each in two blocks in Vietnam to share the risks and drilling costs. ONGC owns 100 per cent in the two deepwater exploration blocks. There is a proposal to sell stake in the two blocks it won in 2006 because the cost of drilling has gone up substantially. However, it is not yet finalised if it wants cash or a swap agreement for the stake sale. ONGC owns the blocks Block 127 and 128 in the Phu Khanh basin in offshore Vietnam through its overseas investment arm ONGC Videsh Ltd (OVL). The cost of data acquisition and drilling in Block 127 is expected to go up almost three times to $123 mn from the earlier estimated $42 mn. For the smaller Block 128, the cost is expected to rise more than two-fold to $77 mn from $31 mn. OVL has already committed to spending $34 mn in the second and third phases of exploration in both the blocks, over and above the investment committed for the first phase, which is currently on. Drilling costs have risen sharply over the last year as the price of crude oil has more than doubled in the last 18 months. This has resulted in a rush to secure equipment such as drilling rigs and seismic vessels and manpower, all of which are in short supply globally. This has raised costs. OVL also holds 45 per cent in another offshore block (Block 06.1) in Vietnam in which gas has been discovered. BP Exploration Operating Company is the operator of the block and owns 35 per cent and PetroVietnam, the national oil company of Vietnam, holds 20 per cent. OVL is also likely to relinquish the Najwat Najem oil block in Qatar after it discovered that reserves in the block are low and not commercially viable. OVL had signed an agreement with the Qatar government in 2005 to appraise the Najwat Najem structure in which oil was discovered.

Reliance surrenders 3 exploration blocks to govt

May 21, 2008. Reliance Industries (RIL) has returned back to the government three out of the seven exploration blocks it had won in Kerala-Konkan basin off Tamil Nadu, as it did not find commercial quantities of hydrocarbon. Reliance had carried out the minimum work obligation in block KK-OSN-97/2 (awarded to the company in first round of New Exploration Licensing Policy), KK-DWN-2000/1 and KK-DWN-2000/3 (NELP-II) and decided not to enter the subsequent phase. The company, which had made 37 discoveries in nine of the 37 blocks it had won in various rounds, saw poor hydrocarbon prospectivity in the Kerala-Konkan basin and had applied to the government for research and development (R&D) status to these blocks to better understand the volcanic basin. The poor prospectivity of the basin was evident from NELP-VI round when the basin could not attract any bids for two blocks and a third block was awarded on a single bid. NELP-III block, KK-DWN-2001/1 and KK-DWN-2001/2 were due to be returned in October 2007, but sector regulator DGH announced a drilling moratorim policy. The blocks are being covered under the policy despite it coming into effect from January 1, 2008 as Reliance lost 341 days in each of the blocks due to delays in getting past data and environmental clearances.

RIL in talks with PSU refiners for KG basin crude

May 27, 2008. Reliance Industries is in talks with state-run oil refining companies to sell its crude oil to be produced from MA field in its prolific D6 Block in offshore Krishna-Godavari Basin. RIL plans to start oil production from the two existing production wells–P1 and P2–in MA field later this year. As per the development plan approved by the Directorate General of Hydrocarbons, RIL is expected to achieve a plateau production of 40,000 barrels a day of oil along with some associated gas. The RIL hopes to finalise crude off-take from the field by the end of June. The company is of the view that the KG Basin crude is of "good quality", and is unlikely to be used at its own 33 million tonne-a-year refinery in Jamnagar or Reliance Petroleum's upcoming 29 million tonne refinery. These (two refineries) are capable of processing complex variety crude and MA field crude is of good quality. RIL will start oil production using the floating production, storage, and offloading (FPSO) vessel hired from Norway's Aker Floating Production. The FPSO has a production capacity of 60,000 barrels oil a day and can store up to 1 mn barrels oil. It will be stationed at the oil production site, while RIL plans to hire shuttle vessels for offloading oil from the FPSO and carrying it coastal refineries. RIL is the operator of the D6 Block, with 90 per cent stake, while the Canadian company Niko Resources holds the remaining 10 per cent.

Rs 450 more for a new gas connection

May 27, 2008. A fortnight after the oil ministry read the riot act to state-owned oil marketing companies for stopping new cooking gas connections to cut losses, IndianOil Corporation, Bharat Petroleum and Hindustan Petroleum found a way to extract their pound of flesh by asking new consumers to pay Rs 400 more as security deposit for each cylinder and Rs 50 more for the regulator. This means anyone taking a new cooking gas connection will have to make a deposit of Rs 1,250 per cylinder against Rs 850 till now. In the northeast, where the deposit was lower at Rs 500 per cylinder, it has been raised to Rs 900. The companies will return the money if the connection is refunded. Similarly, new customers will have to pay Rs 150 for each regulator against Rs 100 till now.

The deposit and the price of regulator was raised to cover the rise in cylinder costs due to increase in steel prices. The oil marketing companies are going through a squeeze as they are losing Rs 580 crore ($135.3 mn) a day because the government has not allowed them to raise fuel prices in line with crude, which is ruling at $132-135/barrel range. The oil companies are losing about Rs 306 on each cooking gas cylinder, Rs 16.34 a litre on petrol and Rs 23.49 on diesel. There are about 10 million kitchens that run on cooking gas cylinders, using over 90% of the 11-12 million tonnes of the fuel consumed every year in the country. Since the government-run companies do not produce enough at their refineries, they either import bulk of the cooking gas or buy it from private producers such as Reliance and Essar at high international price. But when they sell a cylinder in Delhi for Rs 295, they get Rs 22.58 as dole from the Union Budget whereas their cost comes to approximately Rs 624.16. Cooking gas prices were raised by Rs 20 twice in 2004.

Oil PSUs likely to increase borrowing limits

May 24, 2008. Forced by increasing revenue losses, government-owned oil marketing companies are planning to increase their borrowing limit to raise more funds from the market. Indian Oil Corporation (IOC), the country's largest marketer of petroleum products, is planning to double its borrowing limit to Rs 80,000 crore ($18.7 bn) from Rs 40,000 crore ($9.4 bn). The company's current borrowings stand at Rs 37,000 crore ($8.7 bn). Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) are also planning to increase their borrowing limits but have not yet decided by how much.

HPCL's current borrowings are Rs 22,000 crore ($5.2 bn) while the figure for BPCL is Rs 16,000 crore ($3.7 bn). High crude oil and petroleum product prices in the international market and the cap on domestic retail prices of petrol, diesel, LPG and kerosene are resulting in IOC, BPCL and HPCL incurring revenue losses of around Rs 550 crore ($128.8 mn) per day. This has put a strain on liquidity.

IOC borrowed over Rs 35,000 crore ($8.2 bn) in 2007-08, up 29.6 per cent from the Rs 27,000 crore ($6.3 bn) it borrowed in 2006-07. So far this financial year, it has already borrowed over Rs 2,000 crore ($468.4 mn). Also, the oil bonds the government gives these companies to partly offset the revenue losses are usually sold at a discount due to lack of many buyers. IOC is likely to incur a revenue loss of Rs 10,000 crore ($2.3 bn) in 2007-08 despite getting bonds from the government and discounts from upstream oil companies. In 2006-07, it faced a loss of Rs 2,190 crore ($512.9 mn). The company plans to spend Rs 10,500 crore ($2.5 bn) on various projects in 2008-09. It has planned capital expenditure of Rs 50,994 crore ($12 bn) during the Eleventh Plan (2007-12).

Essar Oil offers Vadinar output to ease fuel deficit

May 23, 2008. Essar Oil, India's newest refiner, has offered to wipe out most of the fuel deficit in the country by supplying the entire output from its Vadinar refinery, where production has been raised to 12.5 mt. Effective May, throughput at Essar's Vadinar refinery in Gujarat has been raised to 12.5 million tonnes a year from 10.5 mt earlier. Though India is surplus in refining capacity, it is short in LPG and kerosene production. This year, it may even have to import diesel due to double digit demand growth. Currently, Essar supplies all of the 0.47 mt of LPG, 0.65 mt of kerosene, 4.44 mt of diesel and most of 1.95 mt of petrol to state-run Indian Oil, Bharat Petroleum and Hindustan Petroleum. At higher throughput, LPG production would rise to 0.54 mt, petrol to 2.23 mt, kerosene to 0.75 mt and diesel to 5.07 mt. Essar's Vadinar refinery started operation in November 2006 at 7.5 mtpa capacity. This is slowly ramped up and now the refinery is operating at 12.5 mt capacity.

IOC pipeline to cause Rs 180 cr loss to KoPT

May 21, 2008. The scheduled commissioning of Indian Oil Corporation's Paradip-Haldia pipeline later this year will reduce the Kolkata Port Trust (KoPT)'s annual revenue by Rs 180 crore ($42 mn) by bringing down the cargo movement in the three oil jetties of the Haldia Dock Complex (HDC). Besides, the three oil jetties at HDC, set up at a cost of about Rs 75 crore ($17.5 mn), would become underutilized and the Shipping Corporation of India (SCI) whose vessels 'lighter-aged' the cargo to Haldia, would also lose the IOC traffic. With the depth of the Hooghly ranging from six to nine metre between Sagar and Haldia, it is not possible for the IOC to bring in VLCC or ULCC vessels directly to Haldia for discharge of cargo.

These vessels with a parcel size of 3,00,000 to 4,00,000 tonne and a draft requirement of at least 20 metre, have to wait at the Port anchorage in the Sandheads for discharge the cargo into the Shipping Corporation of India vessels. Since the VLCC and ULCC vessels had to wait for 10 to 15 days for discharge of their cargo into the SCI vessels, the IOC had to bear demurrage running into several lakhs daily.

Crude import bill to cross $100 bn

May 21, 2008. A depreciation in the value of the rupee against the dollar, coupled with surging crude oil prices, are likely to push the country's crude oil import bill to over $100 bn in 2008-09, from $77.02 bn in 2007-08. In 2007-08, the bill rose nearly 40 per cent from $54.99 bn in 2006-07 as crude oil imports, including those by private sector refiners such as Reliance Industries and Essar Oil, rose 9.1 per cent to 121.67 mt (mt). In 2008-09, imports are likely to be over 134 mt. Along with rising demand, the depreciation of the rupee is also likely to inflate the import bill. Since May 1, the Indian currency has depreciated by nearly 6 per cent. A falling rupee increases the cost of imports.

The country imports around 78 per cent of its crude oil requirements. This is set to go up to 85 per cent in the next three years considering the nearly 10 per cent increase in demand for crude oil every year and almost stagnant supply from domestic oil fields. According to Indian Oil Corporation (IOC every Re 1 depreciation of the Indian currency against the dollar raises the company's crude oil import bill by Rs 3,000 crore ($701.6 mn). According to Bharat Petroleum Corporation (BPCL) every 1 per cent depreciation in the value of the rupee increases the under-recoveries of oil marketing companies by 80 paise per litre.

This translates into around Rs 20,000 crore ($4.7 bn) higher under-recoveries annually. At current crude oil price of around $120 per barrel, three public sector oil marketing companies IOC, BPCL and Hindustan Petroleum Corporation (HPCL) are projected to report under-recoveries of around Rs 1,80,000 crore ($42 bn). The depreciation of the rupee could increase this to Rs 2, 00,000 crore ($46.8 bn).

Govt may levy cess to bail out oil firms

May 27 2008. A cess or surcharge on income tax and corporate tax may be levied to bail out oil firms reeling under high global oil prices as Petroleum Ministry’s proposal to raise petrol price by Rs 10 a litre, diesel by Rs 5 per litre and that of LPG by Rs 50 per cylinder finds few takers. The new proposal follows Finance Minister P. Chidambaram’s reluctance to cut duties on crude oil and petroleum products unless alternate source of revenues are identified. Bharat Petroleum Corp., Ltd and Hindustan Petroleum Corp., Ltd have cash to buy crude oil only till July while Indian Oil can finance imports till September. The three firms face huge liquidity crisis as they are unable to realise full value of products sold. A cess or surcharge like the one levied after the Kargil war, may be imposed on income and corporate tax to make up for the cut in customs duty on crude oil to zero from 5% and an excise duty cut on petrol and diesel.

The Petroleum Ministry is proposing to raise petrol price by Rs10 a litre, diesel by Rs5 per litre and that of LPG by Rs50 per cylinder to cut the Rs580 crore (135.3 mn) per day loss made by the three oil firms by one-third. A Re1 a litre hike in petrol price would give oil firms Rs90 crore a month more revenue while the same quantum in diesel prices would result in Rs 360 crore ($84 mn) revenue a month. A Rs 10 per cylinder hike in LPG prices would fetch oil firms Rs58 crore per month. A Re one per litre cut in excise duty on petrol would result in government foregoing Rs1, 380 crore ($322 mn) revenue annually and the same on diesel would result in Rs 5,270 crore ($1.2 bn) revenue foregone per year.

Crude oil currently attracts an import duty of 5% and if this is eliminated it will help lower the Rs2, 72,699 crore ($63.6 bn) oil import bill of 2007-08. Customs duty is levied on petrol and diesel at the rate of 7.5 per cent and its reduction would help oil companies cover some of their losses. Petrol currently attracts Rs 14.35 a litre excise duty and diesel Rs4.60 per litre rate.

Govt oil, gas cos to pay lower royalty

TAXING USERS Break up of petrol, diesel prices in Delhi
(Rs/litre)	Petrol	Diesel
Sales tax	7.74	3.81
Customs	1.83	2.23
Excise	15.02	4.76
Total taxes	24.59	10.8
Without taxes	20.93	20.96
Total	45.52	31.76
Source: Petroleum Planning & Analysis Cell

May 25, 2008. The two government-owned oil and gas producers via., ONGC and Oil India Ltd (OIL) will together save around Rs 1,300 crore ($304.4 mn) per year with the petroleum ministry allowing them to pay royalty on the final price (net realisation) they get for the crude oil they sell to the country's refiners after giving them discounts. These companies were previously paying royalty on the pre-discounted price (gross realisation).  ONGC and OIL have been allowed to pay royalty for gas and crude oil sales on the net realisation per barrel rather than on the gross realisation.

SUBSIDY SHARING BY UPSTREAM COMPANIES (Rs crore)
	2006-07	2007-08
ONGC	17,026	22,000
OIL	1,994	2,200
GAIL	1,488	1,400

The royalty payment, at 20 per cent, on net realisation will be applicable from the 2008-09 financial year. In 2007-08, ONGC, the largest producer of crude oil in the country, sold oil at an average price of around $92 per barrel. After discounts to the crude oil refiners, ONGC realised around $55 per barrel of crude oil.  ONGC gives discounts to government-owned crude oil refiners which also market petroleum products to partly make up for these companies' retail losses. The oil marketing companies Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) sell fuels at subsidised prices. OIL will save between Rs 300 crore ($70.3 mn) and Rs 350 crore ($82 mn). In 2007-08, the company's gross realisation from a barrel of crude oil was $90 per barrel, while its net realisation was $60 per barrel. ONGC and OIL will together bear 31 per cent of the Rs 77,300-crore ($18.1 bn) retail losses of government-owned oil marketing companies in 2007-08. ONGC's share will go up to Rs 22,000 crore ($5.2 bn), higher by 29.21 per cent, from the Rs 17,026 crore ($4 bn) it paid in 2006-07. OIL will pay around Rs 2,200 crore ($515.2 mn), up 10.33 per cent from the Rs 1,994 crore ($467 mn) in 2006-07. GAIL's share, however, will be 5.91 per cent lower at around Rs 1,400 crore ($328 mn) compared with Rs 1,488 crore ($348.5 mn) in 2006-07. GAIL, which produces LPG, also gives discounts to oil marketing companies for the LPG it sells them. While ONGC's gross realisation has increased steadily with increase in crude oil prices, its net realisation has remained almost stagnant at around the $55 per barrel mark over the last couple of years due to the rising subsidy-sharing burden. 

 Centre plans package to give relief to oil companies

 May 23, 2008. A comprehensive package to deal with the impact of rising global crude oil prices is being considered by the government. This became clear with Prime Minister Manmohan Singh saying public sector oil companies will not be allowed to indefinitely suffer the consequences of an administered price regime that does not allow them to raise retail prices even as global crude touches new highs. The measures are likely to include a mix of some duty cuts, additional issue of bonds to the companies as well as a moderate increase in the prices of petrol and diesel. Oil ministry was yet to move a draft note for the consideration of the Cabinet. 

Govt overrules IGL derecognition

May 21, 2008. In a significant development, the Petroleum Ministry has set aside oil regulator P&NGRB's ruling derecognising CNG projects in the national capital saying the regulator was not competent to judge entities that were formed by government order prior to its coming into existence. The Ministry in a letter dated May 15 overruled Petroleum and Natural Gas Regulatory Board's (P&NGRB's) de-recognisation of Indraprastha Gas Ltd, saying Central government had 10 year ago authorised IGL to carry out city gas projects in Delhi, Noida, Gurgaon and Faridabad. P&NGRB had asked IGL, that was formed by state-run GAIL and BPCL and Delhi government to retail CNG to automobiles and piped natural gas to households in national capital region, to stop all incremental activities as it felt IGL did not have proper authorisation. The (P&NGRB) Act (of 2006) does not prescribe any particular manner in which the government should have granted authorisation to any entity before the appointed day (when P&NGRB came into existence). Interestingly, the P&NGRB Act provides that the Board can issue authorisation to Companies to begin city gas projects under Section 16. But the Government has not yet notified the section resulting in the Board not having legal powers to authorise any company for such projects. According to the Petroleum Ministry IGL had government authorisation and does not need to apply to P&NGRB for fresh authorisation. IGL is free to undertake new or incremental activities to spread the CNG/PNG network to greater number of customers in Delhi and its mentioned suburbs, without need of a fresh authorisation from the Board in this regard. After the P&NGRB order last month, IGL was forced to halt its expansion plans to meet needs of the Commonwealth Games. The regulator had not found the numerous letters from the government and the Supreme Court order for replacing diesel in public transport vehicles with environment-friendly CNG as strong enough ground for beginning of operations by IGL and had asked the company to "immediately stop" all its expansion plans in the national capital and Noida. P&NGRB came into existence only last year. The P&NGRB Act of 2006, the Ministry wrote to P&NGRB, does not prescribe, definitely not retrospectively, any particular manner for the government to grant authorisation to an entity. IGL has planned an extensive expansion of its CNG dispensing network and had planned to supply piped natural gas to the Commonwealth Games village for meeting its fuel needs. All this had been halted after the P&NGRB order. IGL had planned to double spending on adding and upgrading CNG outlets in 2008-09. It had planned to invest Rs 200 crore ($46.8 mn) on new and existing outlets. The company had also planned to expand CNG dispensing stations to 200 by 2010 from the current 166 and was expecting to supply gas to 3,00,000 vehicles and a similar number of homes. IGL is country's biggest gas distributor.

POWER

BHEL wins order from HPCL’s Bhatinda refinery

May 26, 2008. Bharat Heavy Electricals Ltd. (BHEL) has won a turnkey contract for setting up an energy efficient and environment friendly 153 MW captive power plant at the upcoming Guru Gobind Singh Refinery at Bhatinda in Punjab. Valued at Rs11.5bn, the order has been placed on the company by HMEL, a joint venture of HPCL and L.N. Mittal's Mittal Energy Ltd. The 153 MW gas turbine-based combined cycle power plant will meet the power and process steam requirement of the upcoming refinery and is slated for commissioning in a tight schedule of 30 months. BHEL's scope of work in the project envisages design, engineering, manufacture, supply, erection and commissioning of the captive power plant, in addition to complete civil works.

Kudankulam gets uranium fuel from Russia

May 26, 2008. Nuclear Power Corporation of India Ltd has received the first consignment of uranium fuel from the Russia Federation for unit-1 of 1,000-MW Kudankulam Nuclear Power Project. The project, located in Tamil Nadu’s Tirunelveli district, comprises two units of 1,000-MW each. It is being built with technical collaboration from the Russian Federation. According to Nuclear Power Corporation of India, through a sovereign guarantee of the Russian Federation, an assured fuel supply for the next 60 years has been made available to the project. The construction activities are being carried out round the clock at the project site and 86 per cent of the work has been completed. All major components have already been set up at the site. Concurrently, the pre-commissioning activities have commenced. Indian engineers and scientists have also been trained and qualified for commissioning, operation and maintenance activities. The two units of the project belong to advance design of VVER family, a pressurised water reactor constituting a majority of power reactors in the world. These reactors use light-enriched uranium as fuel. In many countries, since the 1980s, this kind of fuel is in use in VVER (1,000-MW units). The project was set up through a bilateral agreement between the erstwhile USSR and India.

MP power deal boosts R-Power’s Chitrangi project

May 23, 2008. Anil Ambani Group's flagship company Reliance Power's plans to set up a 4,000 MW coal-fired power project at Chitrangi in Sidhi district of Madhya Pradesh, got a fillip with the Madhya Pradesh Power Transmission Company (MPPTCL), the electricity distribution body of the state, agreeing to purchase 1,241 MW of power produced from the power plant. Reliance Power offered to give power at a price of Rs 2.45 per unit in the tariff-based international competitive bidding process, as per its revised bid on April 24, 2008. As per the bidding norms, Reliance Power will have to supply the agreed power from its plant with in 48 months (four years) of awarding the letter of intent (LoI). The LoI will be given to Reliance Power within three to four months. Reliance Power is now planning to fast track the project, to be commissioned before the scheduled supply period. As per the earlier understanding with the Madhya Pradesh government, the project was scheduled to begin only by 2014. Reliance Power is also discussing with the Maharashtra and Haryana governments to execute similar power purchase agreements. Reliance Power intends to become the largest private sector power generator in the country, with 13 power projects with a capacity of over 28,200 MW, including the 4,000 MW each ultra mega power projects of Sasan in Madhya Pradesh and Krishnapatinam in Andhra Pradesh.

ONGC set to open bids for Tripura plant by mid-June

May 23, 2008. ONGC seems to have made some progress in awarding EPC contracts for implementing the 740-MW gas-based ONGC Tripura Power. The energy major is now to set to open financial bids for the EPC contract by mid-June. BHEL and Alstom are the contenders for the contract. The Rs 3000-crore ($703 mn) thermal project is the single largest proposed industrial investment in the entire North-eastern region. The inadequate road network makes the project implementation extremely challenging. As things stand now, India should either improve the road conditions especially between Karimgunj in Assam and the project site at Palatana in Tripura to ensure transportation of equipment, each weighing approximately 280-300 tonne, or secure permission from the Bangladesh Government for transit through waterway from Kolkata to Asugunj in Bangladesh. Problems notwithstanding, if the project is implemented it would leave a major impact on ONGC’s bottomline due to monetisation of gas in Tripura. The low price regime, which is lower than even APM gas, and the lack of demand has prevented ONGC from bringing the larger part of the identified reserves in the State into production.

Jaypee buys Bina Power from Aditya Birla group

May 23, 2008. Jaypee group company, Jaiprakash Power Venture (JPVL), has acquired Bina Power Supply (BPSCL) from the Aditya Birla Group for Rs 150-175 crore ($35 – 41 mn). Aditya Birla Group had formed BPSCL in the early 1990s to develop a 1,000 MW power plant in two phases of 500 MW each at Bina in Madhya Pradesh, but didn’t pursue it after the initial progress. BPSCL had received government approvals for the power project, which was later cancelled. JPVL has now approached the Madhya Pradesh government for revival of the various approvals required for the setting up of the plant and the first phase of the project would commence operations within 48 months of receipt of all approvals. JPVL plans to commission 500 MW in the first phase at an investment of Rs 2,500 crore ($586 mn) and subsequently raise the capacity to 1,000 MW. The company didn’t give details on how it plans to raise the funds for the project. Indian regulation allows a debt-equity ratio of 70:30 for power projects. The Bina project is spread over 1,600 acres and had earlier obtained coal linkage for 500 MW, which was cancelled after the project failed to take off. Post the Bina acquisition, JPVL, which currently operates the 400 MW Vishnuprayag hydro-electric project, will have interests in almost 7,000 MW of power assets. These projects, which are at different stages of implementation include 1,000 MW Karcham Wangtoo Hydro Electric Project, 1,320 MW super critical technology coal-based power plant at Nigrie in MP, two projects totalling 2,500 MW in Arunachal Pradesh and two projects totalling 720 MW in Meghalaya.

Lanco Infra gets $150 mn IFC credit for power projects

May 21, 2008. Lanco Infratech Ltd has secured a $150-million line of credit from IFC, Washington, recently that will help the company part finance some of the power projects at various stages of execution. In Lanco Amarkantak, a 600-MW project now under way, IFC had invested in five per cent equity and other investor includes German investment arm DEG, part of KFW, which has taken 10 per cent stake. Lanco has structured most of the power projects with 80:20 debt equity structure and achieved financial closure for about 6,000 MW of the total 13,000 MW under various stages of implementation and clearance.

Reliance, GMR to bid for Singapore plants

May 26, 2008. Reliance Power and GMR Infrastructure are planning to bid for PowerSeraya and Senoko Power, which account for more than 60 per cent of the power produced in Singapore. The Singapore government-controlled Temasek Holdings, which controls over 90 per cent of power generation and distribution in Singapore, will soon call for bids to privatise the two companies. Last year, a joint venture between Macquarie Group of Australia and GMR Infrastructure and Reliance Power were among the suitors for Tuas Power, the first of the three power generation companies which Temasek put up for sale as part of its privatisation plan. Tuas was bought by SinoSing Power Pte Ltd, a wholly-owned subsidiary of China's largest power producer Huaneng Group, for $3 bn. Tuas, which accounts for 25 per cent of Singapore's power manufacturing market, has a capacity of 2,670 MW.

The other bidders for Tuas were Marubeni Corporation of Japan, Hong Kong Electric Holdings Ltd and Tanjong Plc of Malaysia. Senoko Power generates about 3,300 MW and PowerSeraya, with annual revenues of about S$2.6 bn in 2007, has 3,100 MW of installed capacity, with many power generating assets located at Jurong island, Singapore's oil, gas and petrochemicals hub. It controls 28 per cent of Singapore's energy market and has also diversified into oil storage, desalinated and cooling water solutions, energy trading, fuel management and bunker fuel blending and tank leasing. The electricity market in Singapore was liberalised in 1998 to allow a competitive wholesale and retail market allowing consumers to choose their own energy retailer.

KSEB to cut transmission loss to 15 pc

May 25, 2008. The Kerala State Electricity Board (KSEB) is taking steps to cut transmission loss to 15 per cent. The board had been able to reduce the transmission loss to 20 per cent and this would be further brought down to 15 per cent to match international standards.

Accord with Punjab to source power

May 25 2008. The Kerala State Government has reached an agreement with Punjab for sourcing 100 MW of electricity daily for use during peak hours. Currently, the State Government is losing Rs 5 crore ($1.2 mn) in preventing power cuts, after the blast at the Sabarigiri hydel project, Moozhiyar. The 25 MW Neryamangalam extension hydel power project in Idukki will be dedicated to the nation by Chief Minister V S Achuthanandan on May 25. The project, conceived in 2001, was completed in a time-bound manner, after a brief halt in work, at a cost of Rs 45 crore ($10.5 mn).

Power deficit increases

May 23, 2008. Growth in demand and lag in capacity addition worsened power deficit in April, the first month of the current financial year. Peak power deficit for the month went up to 16.7 per cent as against 13.9 per cent in the corresponding month last year. Average deficit for the month reached 12.1 per cent compared with 10.4 per cent in April 2007.

Total capacity addition in April (250 MW) is also short of the programmed 309 MW, according to the monthly capacity addition report released by the Central Electricity Authority (CEA). This comes at a time the government has set a capacity addition target of 78,577 MW in the 11th Plan period.

Areva T&D to invest $164 mn in 3 greenfield units

May 21, 2008. Areva T&D, part of the global French energy major Areva, will operationalise three greenfield manufacturing units in India, between December 5 and 7 this year. The India expansion, involves an investment of Rs 700 crore ($163.7 mn). The units are coming up in Vadodara in Gujarat, Hosur and Padappai in Tamil Nadu. The Hosur plant will produce instrument transformers up to 765 kV and later for 1,200 kV. It would also be the R&D centre for instrument transformer product line to support the global needs. The third greenfield site at Padappai will manufacture circuit breakers for 765 kV and eventually for 1,200 kV. It would be an expanded capacity compared with the existing plant at Perungudi. The company is already a market leader in the segment since 2001. The company has eight manufacturing plants at present and employs 3,500 people in India.

Coal India bets big on electronic procurement to boost efficiency

May 27, 2008. Public sector Coal India (CIL) plans to procure about one-third of its equipment, consumables, spare parts and other stores, electronically to cut delays and boost efficiencies. Coal India aims to purchase Rs 3,400 crore ($793.3 mn) worth of equipment and consumables in FY09 through this platform, helping to integrate buyers and suppliers. This is the first time that the public sector behemoth is offering 4-models of e-procurement and even its 8 subsidiaries might opt for this electronic platform, which till now was restricted to the holding company alone. Another public sector company, MSTC, has been selected as the service provider. The whole process has been undertaken as per the Information Technology Act of 2000 and the bidders have been asked to conform to the guidelines. CIL has already signed an integrity pact with Transparency International and is therefore committed to provide proper and secured services to its customers. The certifying agency will look into the security aspects of the system as well as audit of the entire process. The 4-models offered under e-procurement are e-tendering, e-tendering with multiple bids, reverse e-auction with price bid and reverse e-auction with quantity and price bidding. Under e-tendering, the physical system will be converted into an electronic tender, whereby buyers will be able to decide the eligibility of the vendor. Eligible vendors can quote from any place on the internet and the buyer will have the option of obtaining the techno-commercial bid manually or over the internet.

Power target may slip by 20 pc on bad roads

May 27 2008. India could miss by 20%, or 13,855MW, its target of adding almost 70,000MW of power over the next four years because of poor transport infrastructure. India’s roads and ports are in a bad shape. Even if the equipment gets delivered at the ports, moving them to the project sites is a nightmare. India’s policy and economic planning is done five years at a time through the eponymous Five-year Plans. The country is currently in the second year of the 11th Plan. In the five years to 2007, the country missed its target of adding 41,110MW by 49%. Currently, India has a power generation capacity of 143,000MW and it plans to add 78,577MW of generation capacity by 2012. India would achieve only 40-46% of this target. With the country adding only 9,300MW of generation capacity in 2007-08 against a target of 12,000MW, a capacity addition target of 69,277MW is to be achieved in the next four years. Around 20% of the remaining capacity will be delayed due to the problems faced in moving the equipment to the project sites. This capacity will be delayed by a year and may not come in the present Plan. Power shortages due to limited capacity and growing power theft have been identified as a significant bottleneck that threatens India’s ability to sustain the 9% per annum growth rate recorded in the past two years.

UP power regulator issues notice to Lanco over Anpara project

May 26, 2008. The Uttar Pradesh State Electricity Regulatory Commission (UPSERC) has issued notice to Lanco Anpara Power Pvt Ltd on a petition challenging the change in capacity of the Anpara C thermal power project from 1,000 MW to 1,200 MW. The project, located in Sonbhadra district, is already behind schedule by eight months. Lanco's application for increase in the capacity was approved by the UP government on August 20, 2007. According to state government in its order, Lanco would need the power regulator's approval to increase the capacity. But the application seeking permission from the regulator was moved by Uttar Pradesh Power Corporation Ltd (UPPCL). The regulator asked the UPPCL to submit a legal opinion whether the enhancement of the capacity would be lawful. The UPPCL, instead of replying to the regulator's query, decided to withdraw the petition seeking increase in the capacity. The petitioner has also asked the regulator to issue directions to invite fresh bids for the revised capacity or alternatively, direct Lanco to reduce the tariff by 20 per cent. The regulator will decide on the admissibility of the petition after hearing all the parties. The Anpara C project, touted as the first thermal power project to be awarded on tariff-based competitive bidding, was won by Lanco Kundapalli after outbidding Reliance Energy Ltd and Essar Energy Ltd in June 2006. The company won the contract by quoting the lowest price of Rs 1.91 per unit for the power to be generated at Anpara C. According to the contract, the company is required to complete the project within 39-42 months of the issue of Letter of Acceptance, i.e. by early 2010.

Gujarat plans plants totalling 5 GW

May 26, 2008. Faced with a herculean task of ramping up its installed power capacity to keep pace with huge investment inflows, the Gujarat government is planning to invite private companies to invest in five new power projects worth Rs 20,000 crore ($4.7 bn) during the upcoming Vibrant Gujarat Global Investors' Summit (VGGIS). The MoUs for five new projects totalling a capacity of 5,350 MW are likely to be signed during the Vibrant Gujarat summit. The state's present installed capacity is over 9,000 MW against the unrestricted power demand of 11,500 MW, a deficit of 2,500 MW. According to the 16th Electric Power Survey (EPS) carried out by the Central Electricity Authority (CEA), the demand is likely to grow to over 14,000 MW by 2012. The state would require an installed capacity of 18,700 MW by 2012 to meet the growing power demand. The state government has planned to add 11,164 MW by then. Leading power companies, including Essar, Adani, Torrent, and government-owned companies like GUVNL, are already on way to create power infrastructure to generate additional 11,164 MW. This would take the total installed capacity of the state to 20,000 MW by 2012. However, according to the EPS survey, the state's peak demand would be 18,500 MW by 2017. In addition to the state and the Centre's new projects, Bhavnagar has been selected as one of the potential site for setting up a 8,000-MW coastal nuclear power plant. Gujarat is likely to get a substantial share from this plant.

Coal India to develop abandoned mines

May 25, 2008. Coal India Ltd (CIL) is all set to float global tenders within a month for developing 26 abandoned mines on a joint venture basis. 26 mines having an expected coal reserves of around 10 million tonnes (mt) were already identified. Of these, around 10 mines are expected to be rich in coking coal, while the others will produce non-coking coal varieties. CIL will be floating expressions of interest (EOI) to invite global technology providers to develop these mines on a joint venture basis with CIL. This apart, Bharat Coking Coal Limited (BCCL) fixed the rates for selling coking coal to Steel Authority Of India Limited (SAIL) at Rs 6,300 per tonne for this fiscal as against Rs 4,500 per tonne in 2007-08. BCCL supplied 1.62 mt of washed coking coal to SAIL last year against its demand of 1.82 mt. It currently produces 2mtpa. In 2008-09, BCCL targets a coking coal production of 4.38 mt and this coal, when washed, will yield around 2.19 mt. BCCL meets nearly 20 per cent of SAIL's annual coking coal requirement and the revised rates could have a positive impact on the company's balance sheet. CIL will also be floating EOIs to invite bidders for contract mining for seven of its underground mines within this year.

SAIL agrees to pay 40 pc more for coal

May 24, 2008. Steel Authority of India Ltd (SAIL) has agreed to pay 40 per cent higher price for its coking coal procurement from Coal India in 2008-09. Compared to a price equivalent to $105 a tonne in 2007-08, the steel major would be paying prices equivalent to $150 a tonne in 2008-09. Bharat Coking Coal Ltd, a wholly owned subsidiary of Indian coal major, has recently entered into agreement with SAIL in this regard. BCCL will supply approximately 1.67 mt out of a total coking coal production of approximately 2 mt to SAIL during this fiscal.

Power trading deals to have longer tenures

May 24, 2008. Power trading in the country, currently limited to short-term contracts of three months to a year are headed for a major shift to medium-term contracts of up to 25 years. The industry players have been clamouring for such a move. In response, the Central Electricity Regulatory Commission (CERC) is likely to float a consultation paper soon. At present, all power trading in the country is done through short-term contracts. Long-term agreements are entered into for a period of 25 or more years. However, there is no regulation for medium-term contracts. Power trading companies are readying for a shift in their portfolio towards medium- to long-term trades. For instance, the country's largest power trader, PTC India Ltd, has signed long-term PPAs of close to 10,500 MW till March 31, 2008. PTC accounts for about a quarter of the total volume of electricity traded in the country. Another major player in the power trading sector, NTPC Vidyut Vyapar Nigam Ltd (NVVN), also has serious plans to ramp up its long-term trades in a few years. NVVN is a wholly-owned subsidiary of NTPC Ltd and also accounts for about a quarter of the total volume of electricity traded currently. Short-term trading leads to huge fluctuations in earnings because of day-to-day market variations. A long-term agreement, on the other hand, is more stable and leads to smoothening out of earnings. Another difficulty in committing to long-term power purchase and sales tie-ups is the cap of 4 paisa per unit imposed by CERC.

China quake may affect Indian power

May 22 2008. India’s ambitious plans to quickly ramp up its critical power capacity took an unexpected hit as a key Chinese supplier of equipment was dealt a blow by the recent devastating earthquake in the Sichuan province that claimed more than 41,000 lives. The tremors that have destroyed some of Dongfang Electric Corp.’s manufacturing facilities may delay equipment orders worth Rs32,000 crore ($7.5 bn), or enough to produce 8,000MW of power. India has been leaning on Chinese power equipment makers not only because shipping the goods from its neighbour is quicker and more cost-effective, but also because the equipment is priced more competitively than other suppliers such as the Europeans. Manufacturers in India are struggling to execute projects with their own order books bursting at the seams. Bharat Heavy Electricals Ltd, India’s largest maker of power generation equipment, has an order book of Rs90, 000 crore ($21 bn), whereas the country’s needs are for equipment worth Rs3 trillion. Dongfang is already working on a few projects in India, including two projects of the West Bengal Power Development Corp. with capacities of 600MW and 300MW at Sagardighi and Durgapur, respectively. It also won orders totaling 2,215MW from Lanco Infratech Ltd projects and plant orders for Durgapur Projects Ltd. Dongfang has a manufacturing capacity of 31,000MW per year. The company manufactures equipment for large hydroelectric power stations, thermal power stations and nuclear power stations. It also routinely bids for contracts for setting up power-generation stations and has taken up power project contracts in more than 10 countries. India has drawn up plans to generate 78,577MW of power in the next five years and has farmed out orders to other overseas suppliers as well. Equipment for about 20,000MW has been ordered from Chinese firms such as Shanghai Electric and Harbin Power, but nearly 40% of the order is sitting with Dongfang. Dongfang plans to set up a manufacturing base in India. The company also plans to jointly bid for power projects in India and is eyeing the government’s 4,000MW ultra-mega power projects.

Govt plans a power boost for fertilizer production

May 21 2008. In a bid to reduce carbon dioxide emissions from coal-fired power projects and increase India’s fertilizer production, the government is exploring the idea of setting up integrated power and fertilizer complexes. The plan is to use the carbon dioxide emitted from power plants and treat it with ammonia to manufacture urea. With India producing around 67% of its electricity by burning coal, the power sector is the biggest consumer of the fuel, absorbing nearly 78% of its production. The demand for coal is expected to grow rapidly as India seeks to add 78,577MW of generating capacity in the next five years. India currently has 143,000MW of generating capacity. This latest move is expected to cut the dependence on imported urea, thereby reducing the government’s outgo on subsidy. India currently imports about 17%, or 4 million tonnes, of its annual urea consumption. The country is expected to import 10 mtpa of urea by 2011-12; the total cash outgo on fertilizer subsidy during 2007-08 was Rs45,501 crore ($10.6 bn), which includes the bonds issued to fertilizer companies. Any fertilizer plant making urea gets its carbon dioxide requirement from the plant itself. The real problem in producing urea is making ammonia. Around 80% of the production costs are spent on producing ammonia and the rest is spent on converting it into urea. Currently, several companies are exploring various means to produce urea. State-run gas pipeline infrastructure firm GAIL (India) Ltd is planning an integrated ammonia and urea plant, which will use gas obtained from coal gasification, with Rashtriya Chemicals and Fertilizers Ltd in a Rs2,400 crore ($561.3 mn) joint venture at Talcher in Orissa. It will have the capacity to produce 1mtpa of urea. A typical bag of urea sells for Rs150, but only after the government gives the producer Rs100 in subsidy. Rising costs of raw materials such as fuel oil, coal, naphtha and gas used as feedstock for producing urea are further complicating matters.

‘No coal shortage’: Coal Minister

May 21, 2008. While power units are crying hoarse over coal shortage, the Union Minister for Coal, Mr Santosh Bagrodia, says there is actually a problem of plenty. Saddled with an inventory of 47 mt, the public sector coal companies are planning special efforts to liquidate 25 per cent of their holdings, besides sharply scaling up the monthly quantity sold under e-auction from 3 mt on an average to 15 mt in May. Any claim of shortage was because of their (power plants) failure to maintain the mandatory 21-day inventory. About 27 power units were in critical condition as their stock position was less than seven days. There was only 23,000 MW capacity addition last fiscal, against the targeted 1 lakh MW. The Power Ministry is claiming there is a 40 mt shortage, but the coal companies have 40 mt stock, where is the shortage? There is enough supply, but everybody wants coal compaies to hold the inventory. The Government was set to increase coal production by five to six per cent to 425 mt this year as against 405 mt last year. There would be no hike in coal prices this fiscal. Between April 2007 and May 2008, domestic coal prices increased 35 per cent to Rs 2,551 a tonne. Of the 182 blocks allocated to the private and public sectors, the Ministry would revisit the allotments and take stringent action, including cancellation, if developments were not up to the mark.

India seeks proposals for 4^th mega power plant

May 21, 2008. India plans to seek requests for qualification to build a fourth ultra-mega power plant in a few weeks. The contract for the power project in the eastern state of Jharkhand would be awarded by December. To bridge a power shortfall of 9 percent, India has announced plans to build nine ultra-mega, or 4,000 MW capacity power projects to be fired by coal. The government has awarded three of these projects; two to Reliance Power Ltd in south and central India, and one to Tata Power Co Ltd in western India.

PFC to soon invite proposals for Orissa mega power project

May 21, 2008. The Power Finance Corporation will soon call for proposals for the 4,000-MW Tilaiya Ultra Mega Power Project (UMPP) at Orissa. The project will start before the end of the calendar year. The ministry is also looking into the proposal from the Government of Orissa for three new sites for setting up UMPPs. A site near Tilaiya village in Hazaribagh district of Jharkhand has been identified by the Central Electricity Authority (CEA) in consultation with the Government of Jharkhand, for development of a pit head coal fired power project of 4,000 MW with the scope of expansion in future. About 3,355 acres have been identified for main plant and ash dyke. The process of land acquisition for UMPPs has been slow due to the opposition from the local population and huge area required for the projects. In the last one year the Power Ministry along with the CEA has done an exercise in order to optimise the land requirement for the projects. The CEA has done a rethink on the land requirement and has suggested reduction by 15 to 40 per cent. Coastal UMPPs do not require large area of land for handling coal because ash content of imported coal is less. There is a possibility of reducing land requirement.

OIL & GAS

Genting inks PSC with BPMIGAS for Kasuri Block

May 27, 2008. Genting Berhad’s 95% owned subsidiary Genting Oil & Gas Limited (GOGL) via Genting Oil Kasuri Pte Ltd (GOKPL) has signed a new Production Sharing Contract with BPMIGAS for the Kasuri Block in Indonesia. This block was awarded to GOGL by MIGAS following a Direct Offer license round for a signature bonus of US$19 mn and a commitment to undertake 5 exploration wells and seismic works. For the 5 blocks offered, 27 companies purchased the bid documents. For the Kasuri block for which GOGL had undertaken a Joint Study, the high commitment was offered by APEC Indonesia and GOGL was willing to match this high commitment and therefore the government decided in favour of Genting Oil. The Kasuri Block covers an area of 3,534 sq km onshore the Bomberai Peninsula in West Papua and is immediately adjacent to the offshore Tangguh Gasfields (with 14.4 tcf of certified proven gas). The Tangguh LNG Plant, which is located to the north of Kasuri will start selling this gas in liquefied form (LNG) in January 2009. In early 2007, GOGL undertook a Joint Study with the Institute Technology Bandung on the Kasuri Block.

NOC signs exploration and production sharing agreement in Libya

May 27, 2008. The National Oil Corporation (NOC) signed an Exploration and Production Sharing Agreement with a Consortium, including Sonatrach, Oil India and Indian Oil. Sonatrach leads the consortium. The Agreement covers Contract Area (95/96) Blocks 2/1, 2&4 in Ghadames basin in Libya, which the Consortium won in the Public Bid Round 4 for gas exploration. The Consortium is committed to a minimum work program of 2000 km of 2D, 2600 km2 of 3D and (8) exploration wells, at an estimate cost of US $152 mn. The Consortium will pay a signature bonus of US $10 mn one month following GPC's approval and after the effective date.

Total strikes gas in Block B offshore Brunei

May 27, 2008. Total reports a significant discovery of gas and condensates on Block B, offshore Brunei, in a water depth of 62 meters, approximately 50 kilometers from the coast. Total, with a participation of 37.5% is the operator of this block, in association with Shell (35%) and local partners (27.5%). With a final depth of 5,850 meters, the MLJ2-06 well is the deepest ever drilled in Brunei in a high pressure/high temperature (HP/HT) reservoir. In addition, Total holds a 60% interest in, and is the operator of, the exploration block J, situated deep offshore, for which a production sharing agreement had been signed in March 2003. Exploration activities on this block (5,000 square kilometers) have been suspended since May 2003, awaiting the resolution of a border dispute with Malaysia. Total's production in the Asia-Far East region, which stood at 252,000 barrels of oil equivalent per day in 2007 or 11% of the Group's total equity output, is mostly located in Indonesia. Recent years have seen the acquisition of interests in a number of exploration licenses in Australia, Indonesia, Bangladesh and in Vietnam, as well as a 24% stake in Australia's Ichthys LNG project.

Mexico April crude output lowest since Oct '99

May 23, 2008. Mexico's April oil output slid to the lowest level since October 1999, underscoring the inability of state-run Petroleos Mexicanos to reverse an output decline that began in 2004. April output was 2.77 million barrels a day, compared with 2.85 million barrels a day in March and 3.18 million barrels a day in April 2007. Meantime, April natural gas production hit a new record of 6.71 bcf a day, compared with 6.68 bn in March and 5.97 bn in April 2007. Natural gas output is increasing partially because the Cantarell oil field is pumping less oil. Oil wells that previously pumped oil are now pumping natural gas because the oil layer of the reservoir has narrowed as total reserves in the field are in decline.

BP finds oil in North Sea Block

May 21, 2008. BP and its co-venturers, ENI UK Ltd and Petro Summit Investment UK Ltd, have made an oil discovery in North Sea Block 16/23s, some 230 kilometers northeast of Aberdeen, to be named Kinnoull. BP and co-venturers are now evaluating the Kinnoull discovery and potential development options, including a subsea development tied back to BP's Andrew field which is located around 25 kilometers to the south. Kinnoull is BP's second operated exploration success this year in the UK Continental Shelf, following the discovery of the South West Foinaven field, west of Shetland, in January. Participants in Kinnoull are BP (77.07%), ENI UK Ltd (16.67%) and Petro Summit Investment UK Ltd (6.27%).

Iran inaugurates new refinery

May 27, 2008. Iran's oil minister Gholam Hossein Nozari inaugurated Masjed Soleiman gas refinery in southwestern province of Khuzestan. The refinery can produce one million cubic meters of gas per day, and has the potential to increase the figure to 1.4 mcm. Masjed Soleiman gas refinery which is one of the most modern of its kind in the world was constructed at a cost of $256 mn in 40 months. The minister will also inaugurate some other gas and oil projects to mark the centenary of oil drilling in Iran and the Middle East. The first modern oil wells of the Middle East were discovered and drilled in Masjed Soleiman. The first oil drilling in the Middle East took place in a region called Naftoon in center of the city.

Taiwan's state-owned refinery to hike gasoline, diesel prices

May 27, 2008. Taiwan's state-owned refinery CPC Corp will raise gasoline and other fuel prices. The price of No. 92 unleaded gasoline will rise to 33.9 twd per liter from 30 twd and the price of diesel fuel will rise to 31.9 twd per liter from 27.5. The increases reflected only 60 percent of the recent increase in crude oil prices. The government would absorb 20 percent of the crude price increase by adjusting its commodity tax on petroleum products and CPC would absorb the remaining 20 percent. Crude oil prices surged 43 percent from October 2007 until May 20 this year. The newly installed Kuomintang party government already lifted the freeze on gasoline and electricity prices imposed by the previous government last December.

Petrosa ups capacity at planned $11bn refinery

May 23, 2008. The Petroleum Oil and Gas Corporation of South Africa (PetroSA), the country's state-owned oil company, has increased the size of a planned refinery at Coega near Port Elizabeth. The plant, which will cost about $11 billion, will have a capacity of 400 000 barrels a day, rather than the previously proposed 250 000 barrels a day (kbpd). The company approved this increase, after evaluating the conclusions of a recently completed pre-feasibility study undertaken by a leading US-based refinery engineering company, KBR. The Coega refinery (known as Project Mthombo) will be the lowest cost producer in sub-Sahara Africa due to economies of scale, proven world-class technologies and crude processing flexibility. The design configuration to process a wide spread of feedstock, with prominence given to lower-cost heavy, sour and acid crudes, is the primary driver in maximising commerciality as well as security of supply. By 2014, when the refinery is due to be commissioned, South Africa will already be experiencing a shortfall of locally refined product of about 200 000kbpd. This will be due to its projected economic growth and low investment in existing refineries. This shortfall will be met by importing product an expensive solution that has a major impact on foreign exchange and increases potential supply vulnerability. PetroSA's original base case of a 250kbpd crude refinery on the east coast of South Africa proved robustly attractive to meet the country's medium term fuel growth requirements. However, acknowledging the National Oil Company's mandated role to reduce external dependency in national energy security requirements, combined with input from potential international partners who recognize the flexibility of Coega to supply diverse markets and mitigate risk, the Board of PetroSA has approved expanding the planned refining capacity to 400kbpd.

Petrobras to nearly double refining capacity

May 23, 2008. Brazilian state-run energy giant Petroleo Brasileiro SA (PBR), or Petrobras, plans to boost refining capacity to 3.6 million barrels a day by 2015. Petrobras is currently building a refinery in Pernambuco state, as well as a petrochemicals refinery in Rio de Janeiro state. In addition, the jump in refining capacity will also likely make Brazil self-sufficient in that area of the production chain. Currently, Brazil needs to import some light oil and products.

Accounting plan adds to Japan refiners' oil woes

May 23, 2008. Up to 50 listed Japanese companies may face a financial hit as a result of a proposed change to the country's inventory accounting methods, among them Japan's second- and third-largest oil refiners. With Japan's oil companies already struggling with runaway crude oil import prices, some of them are now concerned that the accounting changes will result in a deterioration in their balance sheets. The Accounting Standards Board of Japan is planning to eliminate the last-in-first-out method of valuing stocks as early as the start of the April 2010 fiscal year, as part of its efforts to align Japanese rules with international accounting standards. Last-in-first-out, also known as LIFO, assumes the last inventory purchase during a financial period is sold first, and that remaining stocks listed in the balance sheet are valued at prices paid when they were bought. Because of soaring crude oil prices and an obligation for Japan's oil companies to hold 70 days of commercial stocks, not using this inventory valuation system will be a big problem for TonenGeneral Sekiyu KK and Idemitsu Kosan Co., Japan's second and third largest refiners by capacity.

Other oil companies, like the country's largest, Nippon Oil Corp. won’t be affected, as they value their inventories on a system based on average prices. This periodic average method has been promoted by the authorities since the late 1990s on the grounds that using it when working out balance sheets better reflects market prices. Should LIFO be eliminated, companies using it now would have to account in their earning statements for any unrealized profits to be earned from their oil reserves before they switched to the new system. The paper profits they would earn before fiscal 2010 would result in higher tax liabilities. Companies holding large stocks of commodities such as oil and copper would be harder hit than those with small stocks, although several companies questioned on the scale of the impact on their financial results declined to quantify the possible hit. Extreme moves in crude oil prices cannot be properly reflected in earnings without LIFO. Based on the 70-day oil stock requirement and their previous sales volume figures, TonenGeneral and Idemitsu should be holding inventories of around 4.5 million kiloliters and 5.2 million kiloliters of oil products respectively.

While LIFO accounting may be appropriate for some companies holding inventories of goods that are subject to price volatility, the value of these assets on their balance sheets can be different from their value based on market prices. This is a major reason why LIFO accounting has been banned in E.U. since 2005. Japan's Accounting Standards Board has been asking the public for their views on the proposed change. It is due to announce by the end of September if and when LIFO accounting will be abolished. Some companies using LIFO appear ready to accept the change. These include major petrochemical makers Mitsui Chemicals Inc. and Sumitomo Chemical Co. and a major cable maker Fujikura Ltd.

Williams plant to expand Wyo. gas processing plant

May 22, 2008. Williams plans to significantly increase the processing and natural gas liquid (NGL) production capacities at the Echo Springs natural gas processing plant in Carbon County, Wyo. The expansion will add approximately 350 million cubic feet equivalent (MMcfe) per day of processing capacity and 30,000 barrels per day of NGL production capacity, roughly doubling the plant's volumes in both cases. Williams plant expects to bring the additional capacity online during late 2010, subject to all applicable permitting. Once the expansion is complete, the plant's processing capacity will be 740 MMcfe per day and its NGL production capacity will be 60,000 barrels per day.

Williams' gas processing plant in Opal, Wyo., currently has a processing capacity of 1.45 billion cubic feet equivalent (Bcfe) per day and produces 67,000 barrels of NGLs per day. Once the Echo Springs expansion is complete, the two plants in Wyoming will be capable of processing 2.19 Bcfe per day and producing 127,000 barrels per day of NGLs. For the Echo Springs expansion, Williams plans to spend up to $233 mn to construct a fourth cryogenic processing train and associated facilities at the plant. Construction is expected to begin during the second half of 2009.

BP finds shortcut to US West Coast refineries

May 27, 2008. BP Products North America (BPPNA) has entered into an agreement with Petroterminal de Panama S.A. (PTP) that will allow BP to ship crude oil to its US West Coast refineries through the Trans-Panama Pipeline (TPP). The 81-mile TPP originally carried crude oil through Panama from the Pacific to the Atlantic Ocean. PTP will modernize the pipeline and reverse the direction of flow, significantly reducing delivery times and transportation costs to the US West Coast. Previously, crude cargoes sailing from east to west took an additional 30 days to travel the thousands of miles around Cape Horn, South America. Following completion of the project, BP VLCCs (two-million barrel Very Large Crude Carriers) will be able to carry Angolan and other crudes to the port of Chiriqui Grande, Bocas del Toro on the Caribbean for the journey across the isthmus of Panama. Crude will be piped to the port of Charco Azul on the Pacific coast where it will be received by tankers for the journey to refineries on the US West Coast. Construction is expected to take about two years. Under the seven-year agreement, BP will acquire 5 million barrels of storage and commit to pipeline shipments of 65,000 barrels per day.

Palomar launches open season for Ore. gas pipeline

May 27, 2008. Palomar Gas Transmission LLC announced a non-binding open season to gauge interest in capacity from shippers seeking to move Rocky Mountain natural gas into markets in the Willamette Valley and I-5 Corridor. The results of Palomar's initial open season last year provided sufficient commercial support to proceed with the proposed pipeline's environmental pre-filing with the Federal Energy Regulatory Commission (FERC). Several months into that process, proposals for new pipelines to move Rockies natural gas into western markets have emerged. Palomar wants to provide those shippers the opportunity to express interest in capacity before Palomar makes its certificate application with FERC later this year. Palomar represents the shortest, most cost-effective route to move incremental supplies of natural gas into Pacific Northwest markets. Palomar represents a low cost alternative, diversifying delivery options and enhancing reliability for customers. Shippers on recently proposed pipelines heading west out of the Rockies have expressed interest in seeing how Palomar might help them better access prime markets such as Portland and Seattle. The Palomar pipeline will consist of approximately 220 miles of up to 36-inch-diameter pipeline. It will connect TransCanada's existing GTN System in central Oregon with Northwest Pipeline's Grants Pass Lateral and NW Natural's distribution system near Molalla, Oregon (the eastern segment), approximately 30 miles southeast of Portland, and a western segment to allow deliveries along NW Natural's distribution system west and north of Molalla. The system will provide transportation capacity of up to 1.3 bcf per day. If approved, Palomar would begin service in late 2011. Palomar is a joint venture of TransCanada Corp. and Northwest Natural Gas Co. NW Natural. TransCanada is a leader in the responsible development and reliable operation of North American energy infrastructure. TransCanada's network of more than 36,500 miles of pipeline taps into virtually all major gas supply basins in North America. TransCanada is one of the continent's largest providers of gas storage and related services with approximately 360 bcf of storage capacity. A growing independent power producer, TransCanada owns, controls or is developing approximately 8,300 MW of power generation. TransCanada's Gas Transmission Northwest system, headquartered in Portland, has been operating in Oregon since 1963. NW Natural, also headquartered in Portland, is the largest independent natural gas utility in the Pacific Northwest, serving approximately 657,000 home, business, and industrial customers in Oregon and southwest Washington.

Rockies natural gas speeds toward Eastern markets

May 23, 2008. Developers of the massive Rockies Express pipeline are a few steps closer to potentially reshaping the U.S. natural gas market. A deal announced between Spectra Energy Corp. (SE) and Rockies Express partner ConocoPhillips (COP) will bring more cheap Rocky Mountain gas from the $4.4 billion pipeline to eastern markets, where it will command top dollar. The pact comes just a day after the project's partners, including Kinder Morgan Energy Partners LP (KMP) and a unit of Sempra Energy (SRE), announced the completion of the 713-mile western portion of the pipeline. The pipe's eastern leg is due online by mid-2009. Once completed, the Rockies Express will stretch 1,678 miles from Colorado to Clarington in eastern Ohio. The companies are aiming for an online date of November 2010.

Instead of building one, large pipeline to connect the Rockies pipeline to a large eastern city like New York, Spectra is working on four different projects. Demand for Rockies gas is scattered across the East, so it makes sense to upgrade existing pipes to handle more gas, rather than deal with the high cost of building new facilities. The Spectra will expand its Texas Eastern Transmission pipeline at a cost of $500 mn or more to move 395 mcf a day of Conoco gas from Ohio to Pennsylvania.

Separate Spectra projects include the $150 mn Northern Bridge, which would boost capacity of a pipe from Clarington, Ohio, to Oakford, Pennsylvania, to 500 mcf per day by late 2009. Spectra's Time 2 and Time 3 projects would expand pipeline capacity to carry more Rockies gas to various points in Ohio and Pennsylvania. The Rockies Express could prompt a major shift in the U.S. market by making as much as 1.8 bcf a day of Rockies gas, recently selling at rock-bottom prices, available to key demand centers in the Northeast. Other gas from the Rockies Express will find its way to eastern markets through Williams Cos.'s Rockies Connector Pipeline and Northeast Connector Project.

Williams is seeking shipper commitments for the two projects, which would expand its Transco pipeline to ship Rockies gas to southeastern Pennsylvania and to New York. Kinder Morgan, which owns 51% of the $4.4 billion Rockies pipeline, bought the project from EnCana Corp. in 2006 for $244 mn. EnCana, Conoco, BP PLC, Ultra Petroleum Corp., EOG Resources Inc.  and Sempra unit Sempra Marketing hold capacity on the pipeline.

Oil transport company ready to pump Iraqi oil to Ukrainian refinery

May 22, 2008. Ukraine's oil transport monopoly, the open joint-stock company Ukrtransnafta, is ready to pump up to 1.8 mt of Iraqi Kirkuk oil via the Prydniprovska oil transport system to the Kremenchuk oil refinery (run by the closed joint- stock company Ukrtatnafta in Poltava Region - Interfax-Ukraine). The quality of the Iraqi oil will worsen significantly after been pumped to the oil refinery.

Chongqing gas field delivers gas daily to Sichuan

May 21, 2008. Natural gas produced by Chongqing Gas Field of CNPC Southwest Oil and Gas Field Company was once delivered directly to over one hundred large and middle sized enterprises and tens of million of households in Sichuang and Chongqing areas through the North-South trunk of Lanzhou-chengdu-chongqing Pipeline. Unfortunately, wells and stations of this gas field allocated in Kaixian, Liangping and Dazhu counties suffered from damage of different degrees due to the recent earthquake. Chongqing Gas Field immediately launched the contingency plan shortly following the quake and prompt and effective measures were taken to get the production back to normal. Chongqing Gas Field ensures a daily delivery of 11 mcm of gas to Sichuan with priority given to domestic use and CNG (Compressed Natural Gas) supply.

‘EU Countries should suspend VAT on petroleum products’: Sarkozy

May 27, 2008. French President Nicolas Sarkozy would create a fund to aid people who are the most affected by the spiralling cost of oil. The fund would be financed by surplus from state revenues from value added tax (VAT) on petrol, which amounted to about 150 to 170 mn euros (US$237 to 268 mn) per quarter. He intended to propose to other EU countries to suspend the VAT on petroleum products as a way of dealing with the rising price of crude oil. However, officials from the European Union's executive, the European Commission, were quick to point out that the bloc's rules mean that any proposals on changing VAT rates have to come from the commission and be approved by all 27 EU member states.

Libya aims to boost oil output to 2 MMbpd in ’08

May 26, 2008. Libya plans to boost its oil production to two million barrels per day this year and is targeting three million bpd in 2012. Production will rise to 2 million barrels per day this year and the plan is to reach almost 3 million barrels in 2012. Libya's natural gas output was running at 3.5 bcm, with that amount to be doubled by 2013.

The National Oil Company (NOC)_has opened the door to investment in the oil sector on the basis of two principles, total transparency and non-discrimination between oil companies, whatever their nationality: Arab, European, Asian or American. After 20 years of isolation and the lifting of UN sanctions in 2003, energy-hungry foreign firms have flocked to do business with Libya. Tripoli offered gas exploration contracts to foreign firms for the first time in December, and U.S. fuel giant Occidental Petroleum was among those granted permission to test for gas.

Total aims to be no. 1 in Angolan oil in 2-3 yrs

May 23, 2008. French oil major Total SA (TOT) hopes to become the biggest group in Angola in two to three years with production of 700,000 barrels a day. According to the company Angola is one of its main priorities in the Gulf of Guinea. Angola produced 1.873 million barrels a day in April, according to the latest report from the Organization of Petroleum Exporting Countries.

China, India resist fuel price hikes as neighbours act

May 22, 2008. Indonesia and Taiwan signaled higher domestic fuel prices are on the way, raising questions about how long China, India and Malaysia can maintain caps on pump prices in the face of record-high crude oil. Crude oil futures have more than doubled over the past year, and have jumped 40% in 2008 alone, to around $135 a barrel, testing the nerve of policymakers from New Delhi to Kuala Lumpur who want to shield consumers from the pain of having to pay more their fuel and spare themselves any political backlash. Protests have already broken out in Indonesia, where the government said fuel prices will soon go up by an average of 28.7% to prevent its budget deficit from ballooning out of control.

According to Indonesian Finance Minister Sri Mulyani Indrawati, the planned price hikes would cut the cost of subsidies this year to IDR132.1 trillion ($14.17 b
n), meaning the government will run a deficit of IDR82.3 trillion. As per the Economists, however, the increase may prove too small to make an appreciable difference to the budget shortfall, especially if global oil prices keep rising, and warn another increase may be necessary next year.

Taiwan's cabinet will allow local oil refiners to raise prices to catch up with surging global oil prices, though it pledged NT$12.5 bn (US$411.5 mn) in subsidies to public transportation to help keep domestic prices under control. Taiwan's government will also allow electricity prices to go up by an unspecified amount from July, the first such hike since 2006.

The Philippines also tweaked policy to offset the impact of high crude prices, removing the import tariff on oil products from June 1 to protect the economy. Malaysian government will have to spend slightly above MYR50 bn (US$15.6 bn) a year to subsidize retail fuel prices if crude oil futures average $130 a barrel. The region's biggest energy consumers viz., China and India, are also holding out. Subsidies are enormous in China, which is having to buy more cargoes of diesel, a key transport fuel used by farmers and fishermen from the Asian spot market to cover lower crude runs at home due to refinery maintenance.

In contrast, wholesale prices of diesel in the southern Chinese province of Guangdong are CNY7,200-CNY7,400 per ton. With inflation just off an 11-year high of 8.5% in April, Beijing has ordered state refiners to absorb refining losses, using policies such as the suspension of VAT on up to 3.5 million tons of gasoline and diesel imports in the April-June period to ease pressure on their bottom lines. It is very unlikely to have these caps lifted when the China consumer price index is going to climb in the next few months.

India's government is also reluctant to take the politically sensitive decision of raising motor and cooking fuel prices ahead of federal polls due May 2009. The government is sharing the losses with its state oil companies by paying them subsidies in the form of off-budget oil bonds even though that ultimately still hits the government's wallet.

POWER

White Energy completes clean coal plant

May 27, 2008. White Energy Co. has completed construction of its commercial scale cleaner coal production plant at Cessnock, New South Wales. The plant uses White Energy's licensed binderless coal briquetting technology to upgrade coal, increasing its energy efficiency. The plant has an installed capacity of 90,000 tons per year.

The Cessnock plant was completed on schedule and is now being tested in the cold commissioning phase. This will be followed by a hot commissioning program where feedstock coal is processed to ensure the plant is functioning. The commissioning phases are expected to conclude in around six weeks, after which the plant will be in full production mode. The plant will upgrade sub-bituminous coal to a higher energy, more stable coal briquette that can be transported and handled like normal coal but yet burn cleaner than traditional thermal coal.

The Cessnock Plant will also be used for continued development purposes and will be an important research and training facility for the company. White Energy will also be able to train its commissioning teams at the Cessnock Plant in preparation for the commissioning of plants planned to be built by the company in Indonesia, China and the USA during 2009.

 ‘Power plant construction costs expected to escalate’: CERA

May 27, 2008. According to the Cambridge Energy Research Associates (CERA) building a power plant costs more than twice as much as it did in 2000, and costs are expected to continue to escalate amid rising commodities prices. A slight decline in the cost of building a plant in the first quarter of this year belies an ongoing, upward trend.

The fundamentals that have driven costs upward for the past eight years, supply constraints, increasing wages and rising materials costs, remain in place and will continue during 2008. The 1% decrease in the IHS CERA Power Capital Costs Index in the first quarter came on an easing of nuclear equipment costs as price volatility has subsided and the lead times for orders have been extended. Costs for wind, natural gas and coal generation continued to rise during the quarter.

The cost of new power plant construction in North America has increased 130% since 2000, with a majority of the rise 69% coming since 2005. A power plant that cost $1 billion in 2000 now costs $2.31 billion to build, according to the index.

Yuguda inaugurates electricity project in Nigeria

May 27, 2008. Governor Malam Isa Yuguda of Bauchi State inaugurated the N265.8 million Azare 132/33 kv electrification project. The project would supply electricity to Giade, Misau, Shira, Jama'are, Itas-Gadau, Zaki, Gamawa and Dambam local government areas. The project would boost the development of small and large scale industries in the areas. The people of the areas would continue to support the administration's efforts to provide more social amenities in the state.

World energy prices forcing higher electricity rates in Nova Scotia next year

May 27, 2008. Volatile world prices for coal, oil and natural gas have forced Nova Scotia Power to seek an increase in electricity prices effective January 1, 2009. Rates have not changed since April 2007 and will remain frozen through the end of 2008.

The company filed an application with the Nova Scotia Utility and Review Board (UARB), requesting a fuel adjustment of 8.1% and 3.8% for reliability, customer service improvements and recovery of previously approved costs. The cost of fuel used to produce electricity in Nova Scotia will be $90 mn higher in 2009. Since electricity rates were last set in Nova Scotia, the price of fossil fuels has shot up. The price of coal has doubled, from about $60 to about $130 per tonne.

The price of oil has increased from about $60 to about $130 a barrel. Natural gas is up from less than $8 to about $12 per mmBTU. The average price for electricity in Nova Scotia has increased 23 per cent since 1996. Over the same period, the prices that Nova Scotians pay for home heating oil, propane and gasoline have increased by 140 to 170 per cent. Nova Scotia Power Inc. is the largest wholly-owned subsidiary of Emera Inc., a diversified energy and services company. Nova Scotia Power provides more than 95% of the generation, transmission and distribution of electrical power to 478,000 customers in the province.

Japan's TEPCO may raise electricity prices

May 24, 2008. Tokyo Electric Power Co Ltd (TEPCO), Asia's biggest power producer, said it may consider raising electricity rates as it tries to cope with sky-high oil prices and the shut-down of its biggest nuclear plant. TEPCO had to close down its Kashiwazaki-Kariwa plant, the world's biggest plant, following an earthquake, forcing it to buy more oil and gas to generate electricity, raising its thermal power costs. The closure and relentlessly rising oil prices led TEPCO to post its first annual net loss in 28 years in the business year ended in March, and it expects more losses for at least the first half of the current year.

China's ambitious plan for more nuclear power

May 27, 2008. Nuclear power companies in China aim to join automobile and electronics makers as export powerhouses, but big domestic expansion plans may not leave them the capacity to make an overseas push for more than a decade. A $1 billion deal signed with Russia to build and supply a uranium enrichment plant in China was another step toward civilian nuclear independence, less than two decades after China's first nuclear generator came on line.

The country sealed deals last year with Areva of France and Westinghouse for several third-generation reactors and the blueprints to allow them to develop domestic versions. The nuclear power companies have mastered the construction of older models at a speed that is impressing Asian neighbors who cannot afford nuclear models sold by Western companies or are not allowed to buy them.

Countries like Vietnam and Indonesia are eager to build plants to convey a sense of modernity and to cut their fuel bills, and they see Beijing as the answer to financial and political problems. The timing could not be better for China, as the fight against climate change and the search for cheaper energy sources revives global interest in nuclear power. But China is also ramping up its domestic nuclear expansion plans, aiming for a total of 60 GW by 2020.

Its current nuclear capacity is only 9 GW, under 2 percent of its total installed power generation capacity. Its own experts admit that they will have to devote most of the country's technical knowledge and a large portion of both listed and state-owned companies' capital to what will be the fastest nuclear build-out the world has ever seen.

China will need to start construction on about four new generators a year through 2015 to meet its ambitious target. The speed of the expansion is tying China to the second-generation models that have faced teething troubles rather than the safer third-generation plants it has begun buying.

Thorium Power to assist UAE in nuclear programme

May 27, 2008. Thorium Power has signed two consulting and strategic advisory service agreements worth $8.1 mn (Dh29.7 mn) with a UAE government entity involved in the nation's evaluation of a domestic nuclear energy programme. Under the two previously announced agreements, Thorium Power entered into a $3.8 mn contract to assist in the development of a roadmap report with recommendations related to the possible establishment of a civil nuclear energy programme in the UAE based on the principles of transparency, non-proliferation, safety and regulatory compliance.

Under the second contract, with professional fees of $4.3 mn, Thorium Power is currently consulting in the development of timelines, organisational structure and priorities for the establishment of a Nuclear Energy Programme Implementation Organisation (NEPIO) as well as an independent federal Nuclear Regulatory Authority (NRA).

The scope of services under both contracts was defined in consultation with appropriate authorities in the US government in compliance with all applicable US export controls.

Zimbabwe to benefit from coal production

May 25 2008. Zimbabwe will soon benefit from a rising world demand for coal, especially from Asia, necessitated by a sharp increase in oil prices, which touched a record high of $135 a barrel and rising gas prices. The African Development Bank predicts that, generally, coal production in Africa will increase at an average of three percent a year to 2011 due to the predicted rising demand.

The current sharp increases in oil and gas prices coupled with rising energy demand particularly from China and India, have boosted concerns about the security, diversity, affordability and reliability of energy supplies around the globe. Coal has recently come back into fashion due to three advantages over oil and gas: lower prices per energy unit, higher reserves-to-production ratio, and a different geopolitical distribution of reserves. Zimbabwe, with extensive coal reserves, was predicted to spend $20-billion on the development of coal and power projects over the next decade.

New York expected to have enough electricity this summer

May 22, 2008. The organization that oversees New York's electricity system expects the state to have a sufficient supply of power this summer. The New York Independent System Operator says the summer 2008 peak electricity usage will reach almost 34,000 MW, barring unexpected weather extremes. As per NYISO, about 5 percent higher than the peak of just more than 32,000 last summer and on a par with the summer peak in 2006.

Peak demand is the year's highest electricity demand for a one-hour period, and typically happens on a late summer afternoon. New York City and Long Island, which account for nearly half the state's summer electricity use are expected to have more than sufficient capacity.

Yash Birla mulls Brazilian JV for solar energy foray

May 26 2008. Yash Birla Group (YBG), the Rs 2300-crore ($540 mn) conglomerate with business ranging from auto to power, is betting big on the solar power business. The company is set to sign an agreement with a Brazilian energy company to set up a joint venture firm in Brazil known as Birla Braz, will look after its South American operations. Also, the company will start Indian operations under a new company, called Birla Surya. About Rs 2,000 crore ($469.5 mn) will be invested for its expansion in solar energy for the next five years. YBG will hold majority stake in Birla Braz. YBG will set up two plants each in Brazil and India with a total capacity of 50 megawatts. Both the plants are expected to be commissioned within the next 18 months.

The solar energy modules will be exported. Also, the company has plans to set up a plant for its waste to energy project. The plant will have a capacity of 700 tonne of waste to be converted to energy. In the initial phase, the company will invest Rs 500 crore ($117.4 mn) and in total, the investment will be about Rs 2000 crore ($469.5 mn).

Amara Raja gears up for battery-driven car markets

May 26, 2008. Amara Raja Batteries Ltd is gearing up for an era of battery-powered cars in India. The company is talking to a few Indian passenger car manufacturers to develop batteries for them. The company is of the view that the market for battery-driven cars is practically non-existent in India, but that will change. Vehicle manufacturers will come up with hybrid versions and those cars will need batteries.

For ARBL, the task on hand is not so much the technology for batteries as the use of the technology for developing an appropriate product for the Original Equipment Manufacturers. ARBL’s American collaborator, Johnson Controls, has the technology for Lithium Ion batteries, through a joint venture with the French battery producer, Saft. ARBL has just rolled-out a range of two-wheeler batteries and the plant that produces these small batteries can also produce those needed for powering electric motorcycles.

TN wind power producers get relief on captive use

May 22, 2008. The Tamil Nadu Electricity Regulatory Commission (TNERC) has given a three-month extension to wind energy producers to use the unutilised energy generated for captive consumption in 2007-08. In an order on a petition filed by members of the Tamil Nadu Spinning Mills Association (TASMA), the commission has said that as a one-time measure, the wind energy producers would have time up to June to utilise the power generated between November 2007 and March 2008.

Normally, wind energy generated for captive use has to be utilised by March 31, every financial year, after which it lapses. The wind mill owners had filed a petition to carry over the unutilised units in the banking account of 2007-08 to the financial year 2008-09. The petitioners had said that due to an acute power shortage in 2007-08, the TNEB could not supply uninterrupted HT power to industries. High levels of interruption in power supply, frequent power shedding, declaration of a weekly power holiday and peak hour restrictions had resulted in 25-40 per cent interruption in supply which prevented the industries from availing themselves of power. The power generated in the wind mills could not be adjusted in the HT consumption in full. The commission has also directed that the wind energy generators should immediately enter into a fresh agreement with the TNEB in line with the TNERC Order No. 3 of May 15, 2006, applying to wind mills commissioned after that date. The Order provides for encashment of unutilised wind energy at the end of the financial year at the rate of 75 per cent.

For the wind mills commissioned before May 15, 2006, Order No. 3 states that their existing agreements would continue till the wind mill owners and TNEB mutually opt for renegotiation in line with the order. TNERC has pointed out that power shortage is likely to recur during the current year also and wind mill generators and captive users have to provide for such contingencies by executing appropriate agreement with TNEB. There will be no justification for invoking this dispensation again.

Nandan Bio in pact for Jatropha plantation

May 22, 2008. The Hyderabad-based Nandan Biomatrix Ltd has formed a 50:50 joint venture with the Ahmedabad-based V Worldwide Group to cultivate jatropha in one lakh acres of unproductive wasteland in Gujarat and set up a Rs 150-crore ($35 mn) refinery to extract bio-fuel, to be sold to oil PSUs. The duo, in collaboration with Africans, is also working on cultivating Jatropha in 50,000 acres (200 square km) in Ethiopia, 600 km from the capital Addis Ababa, with possible investments from European investors.

Initially, the joint venture, Vitale Nandan Biopharma Science Pvt Ltd, has leased 5,000 acres of wasteland in Surendranagar and Patan districts of Gujarat where plantation of Jatropha would begin in a couple of months. The venture would establish a bio-diesel value chain including plantation as well as to crush and extract non-edible oil from jatropha. Nandan had already tied up with Bharat Petroleum Corporation Ltd (BPCL) and the Uttar Pradesh Government for a similar jatropha plantation project in the northern state having one million acres of wasteland.

Centre chalks out plan to develop 60 ‘solar cities’

May 22, 2008. With the power shortage situation worsening, especially across most urban and industrial centres, the Centre has come up with a plan to develop 60 cities as Solar Cities. The proposal envisages a minimum 10 per cent reduction in projected total demand of conventional energy at the end of five years in each of these cities through energy-efficiency measures and generation from renewable-energy installations. Drawing on similar moves being implemented in London, Tokyo, New York and Adelaide, the Government’s proposal aims at thrashing out a framework to assist the cities in assessing their present energy consumption status, setting clear targets for and preparing action plans for generating energy through renewable energy sources and in conserving energy utilised in conducting urban services. Besides, the possibility of carbon financing would also be looked at. Most Indian cities and towns are experiencing peak electricity shortages of over 15 per cent.

The local governments and the electricity utilities are finding it difficult to cope with this rapid rise in demand and as a result most of the cities are facing severe shortages. The goal of the programme is to promote the use of renewable energy in urban areas by providing support to the Municipal Corporations for preparation and implementation of a clear road map. States have been asked to forward the names of cities that they want to be taken up under the programme. Across the globe, with population pressure exerting tremendous shift in energy resources in urban areas, major cities have already taken up such initiatives. London, for instance, has announced 20 per cent carbon emission reduction by 2010, while New York and 200 other US cities have set a similar target. Tokyo has announced 20 per cent share of renewables in total consumption by 2020 and the Australian Government has initiated a similar Solar Cities programme.

Puri oil mills to invest Rs 100 cr in diversification

May 21, 2008. Puri Oil Mills, after remaining a front-runner with its flagship brand P mark mustard oil for over six decades, has decided to diversify into hydro-power generation and bio-fuel with an investment of Rs 100 crore ($23.4 mn). The company plans to produce about 18 MW from various projects.

Southridge enters into Brazilian ethanol supply deal

May 27, 2008. Southridge Enterprises, Inc. has entered into an ethanol sales agreement with Agrobin Hunt Corp (AHC) for the supply of 55 mn gallons of ethanol per year, with an option to extend for another two years. Deliveries are expected to begin in June 2008 with the ethanol being sourced from Petrozilian Energia SA (PES) in Brazil. The company purchased ethanol from supplier PES in Brazil and sold the product to AHC, which then had it shipped to the United Kingdom (UK). The purchase was financed with a Letter of Credit (LOC) supported in part by Joint Venture partner Micheles Borgan & Lea Capital (MBLC). Southridge Enterprises is a renewable energy company with a mission to become the ethanol producer of choice in the southeastern region of the United States. The company is focusing its efforts in an area which offers abundant supplies of corn, superior transportation infrastructure and expedited permitting processes. It is actively acquiring and developing ethanol production facilities and anticipates start-up of the first phase of these operations in 2009. Southridge Enterprises is headquartered in Dallas, Texas.

Swedish firm claims sustainable ethanol milestone

May 27, 2008. Swedish SEKAB announced that it is the first company in the world to supply verified sustainable ethanol. This ethanol from Brazilian sugarcane is quality assured from environmental, climate and social perspectives. Consumers and other stakeholders need guarantees that the ethanol is verified sustainable. SEKAB has, together with progressive Brazilian producers, developed criteria that cover the entire lifecycle of ethanol from the sugarcane fields to its use in flexi-fuel (FFV) cars.

The criteria are in line with demands highlighted in the ongoing processes being led by organizations like the UN, EU, ILO and a number of NGOs. SEKAB delivers about 90 percent of all ethanol in Sweden for E85 and ED95 (ethanol for heavy vehicles). SEKAB focuses on developing the market for bioethanol in northern Europe and the construction and operation of ethanol production facilities. SEKAB is also a world leader in development of technology and production processes for ethanol from cellulose, with a pilot plant in operation since 2004.

Houston Biodiesel refinery to open soon

May 23, 2008. GreenHunter Energy will open the taps on the nation's single-largest biodiesel refinery to date on June 2. The facility will produce 105 million gallons of white-water B100 biodiesel per year. The converted waste-oil refinery on the Houston Ship Channel gives GreenHunter's renewable fuels campus direct deepwater access and the ability to transport products via barge, rail, and truck. Generators at the site will provide enough electricity for GreenHunter to sell unneeded power back to the grid. GreenHunter's campus also includes basic terminal operations and 700,000 barrels of storage capacity for feedstock management. By producing biodiesel from multiple feedstocks, including non-edible sources such as tallow and jatropha.

South Africa switches on 1^st wind farm amid electricity crisis

May 23, 2008. South Africa's energy minister inaugurated the country's first wind farm, acknowledging that the government has done too little to develop renewable energy over the past decade. The wind farm will provide only a 100^th of national energy needs and will not ease the acute electricity shortages afflicting South Africa but the country's minerals and energy minister called it a first key step. South Africa, sunny and with a long, windy coastline, has enormous potential for renewable energy. Despite getting more sunshine than Europe, the country has done little to promote solar energy, while wind has the potential to meet at least 9 percent of its energy needs. But government red tape, environmental planning objections and opposition from state utility Eskom to the arrival of independent power producers had slowed progress.

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