Energy News Monitor |Volume V, Issue 20

State Role in the Development of the Nuclear Power Industry (part – III)

Continued from Volume V, Issue No. 19…

 

he development of the nuclear power generation industry in the United States from the 1940s to the 1980s led by the federal Government raises one important question: did the involvement of the Federal Government in the nuclear power generation industry produce the most efficient technological and economic outcome for the nation? On the technological side many experts have expressed doubt over whether the Light Water Reactor (LWRs) was the best choice from the point of safety and economic efficiency.

The LWR technology which has come to dominate the industry world wide benefited from the early push it received from the American Government. A number of reactor types, some safer than others, were considered for development in the early 1950s.  But in order to keep the private sector interested in the industry, LWRs which were closest to commercial development were pushed ahead of other options.

In effect the American Government which was driven by the political need to illustrate the peaceful uses of the atom as quickly as possible foreclosed the emergence of safer and probably more efficient technological options within and outside the United States. 

On the economic side nuclear power projects proved to be the least resilient to economic volatility and ended up as huge liabilities for power generating companies. The Shoreham nuclear power project in New York State’s Long Island is one of the most striking causalities of market changes in the 1970s. 

The project was conceived in the 1967 when enthusiasm for nuclear power was at its peak. However the project was not completed even by 1985 and not commercially operating even by 1990. As per a study by the Cato Institute, the plant was eventually sold to the State Government so that it could be dismantled.

A fully functional nuclear plant was never used despite uncertainties over long term power supply to Long Island. The failure of the project could be attributed, at least partly to change in market economics. 

Between the 1960s and 70s demand for electricity was strong and growing which appeared to justify the need for large nuclear generating plants.  The first oil crisis strengthened this view.

The Nixon administration’s Project Independence in 1974 called on nuclear power to meet 40 percent of the country’s electricity needs by 1990 and 50 percent by 2000. But energy prices continued to rise substantially through the 1970s. Coupled with slower economic growth this dampened the demand for electricity. 

Many utilities and State level Commissions regulating them began to question the justification for large nuclear plants.  The large political and economic risks associated with nuclear plants made them the least likely to withstand a downturn and nuclear plants ended up as the first causalities in the slow down.

For a variety of reasons, nuclear projects were associated with large cost and time overruns.  Since under regulatory accounting nuclear plants could not recover their costs until after the plant started operating, nuclear plants became untenable.  

It may be unfair to lay the entire blame for the decline of nuclear power generation on interventions of the Government.  Technological, economic, political and managerial problems that emerged in this period were known to all players in the industry and they made conscious choices based on their interpretations of the information.

However the existence of Government support allowed the industry to take risks which it may not have otherwise taken. Subsidies available to the nuclear industry essentially diverted resources from areas of their highest valued use. 

The subsidies made available to the nuclear industry do not necessarily establish the non-viability of the nuclear power industry because all subsidy components barring the provision of the Price Anderson Act could have been taken over by the private industry.

In spite of the free market rhetoric, the Reagan as well as the Bush administrations in the United States singled out the nuclear power industry for ‘socialist’ support. There is no question that the nuclear power generation industry has and will continue to require the crutch of Public support for survival in free markets.  While the threat posed by foreign oil justified the crutch during the oil crises it is climate change that has risen to the occasion now.   

 

 

Concluded

 

Lydia Powell

Visiting Fellow

ORF Centre for Resources Management

The Economics of Nuclear Energy Markets and the Future of International Security (part – VIII)

(by Erwann O. Michel-Kerjan, The Wharton School, University of Pennsylvania and Debra K. Decker, Kennedy School of Government, Harvard University)

Continued from Volume V, Issue No. 19…

Uranium as a Commodity

he long-term market-based approach would be to develop enriched uranium into a commodity product. For a good to be a commodity, however, it must be available as a standard product and bought in sufficient amounts to form a stable market. This might be possible at some point with enriched uranium products, given that this would certainly require additional security measures in place to prevent nuclear proliferation. While the dominance in the market of government-affiliated players would have to be managed, with agreements covering dumping, introduction of HEU supplies, and other issues, enriched uranium existing as a commodity would have several benefits. First, supply becomes more fungible, so purchasers need not be locked into one supplier. The diversity of suppliers and their actual presence in the market add to a utility’s security and allow for better risk management while futures markets and options trading also develop. As the commodity market is growing more robust, the mutual insuring entity we described above would not need to depend solely on supply options but could look to direct market purchases to fulfill its insurance obligations. Second, a well-organized market facilitates trade without respect to identity (although physical deliveries could go only to safeguarded, IAEA-approved sites). Standardized contracts could also facilitate title trading, all of which would help obviate political risk. Third, investors/speculators would draw more funds to the market, and this increased demand would drive up prices—and increasing supply. As a result, commodity product prices should decrease over time. Fourth, only the most efficient producers would dominate, discouraging new low efficient market entrants, which could reduce proliferation. If fuel is a commodity, some might worry about fluctuations in prices but not as much about the availability of supplies. Furthermore, futures markets could cover price fluctuations.  The IAEA or an IAEA-affiliated entity could set up an affiliated arm to educate buyers, actively form the market, and control contract deliveries. It could maintain a fuel bank with contracts purchased online from multiple suppliers but that it need not deliver to a warehouse—it could continually trade out to the future.

In fact, the NY Mercantile Exchange has just initiated a futures exchange for uranium—although without physical delivery (NY Mercantile Exchange, 2007). And New York Nuclear Corporation has instituted recently a trading platform in an attempt to standardize market trading of the physical commodity.²² The question is could IAEA set up a nonprofit Exchange-traded fund with effective delivery? 

7. CONCLUSION

Nuclear energy markets have long perplexed economists. They are not only opaque but also semi-government-controlled. Today the intrigue is even greater as we find nuclear energy markets at the crossroads of heightened economic, political, and military interests. These interests interact with each other in a complex dynamic that takes place on the national as well as international scenes. This article has attempted to dispel some of this perplexity and clarify the important underlying influences that have driven the market in the past and are expected to drive it – positively and negatively – in the future. The use of nuclear energy appears likely to continue to increase in the foreseeable future, both in absolute terms and in relative contribution to world electricity generation. As this so-called “nuclear renaissance” unfolds, uranium prices are reaching historic records in a marketplace not only defined by prices. The nuclear future will evolve quickly over the next several years — in terms of demand (defining how much nuclear power the public will accept if economic rates are promised) and supply (determining what new states, if any, will begin enriching). Thus, discovering sustainable ways to address the market’s challenges we discussed in this paper, especially its nuclear security challenge, becomes more vital as well. Indeed, as Tadatoshi Akiba, Mayor of the City of Hiroshima, warned, “We cannot and must not allow ourselves to have the message of Hiroshima and Nagasaki fade completely from our minds. For if we do, we have but one course left for us. And that flash of light will not only rob us of our vision, but it will rob us of our lives, our progeny, and our very existence” (Akiba, 1999). Here one must ask how the bad “genie” can be kept in the nuclear bottle—while fuel is supplied. The combination of nuclear fuel markets that have worked and the continuous monitoring and preventive actions by the international community have been critical in the past. As a result, the non-use of nuclear weapons since 1945 certainly remains the single most important phenomenon of the nuclear age (Tannenwald, in press). More countries have actually become non-nuclear who were than have become nuclear over the last several decades (e.g., Libya, Taiwan, South Africa, and South Korea have renounced their nascent nuclear weapons programs). About 50 countries have weapons-usable uranium to produce nuclear weapons but do not (Cirincione, 2007). However, the world is changing rapidly. As nuclear fuel demand increases, additional assurances may well be needed to keep the markets working and to assess any reason to initiate new nuclear capabilities. We believe the insurance and financial industry should be viewed by governments and the international community as a serious partner who could help develop an extra layer of assurance. By so doing, this sector could notably contribute not only to enhanced security but also to the economic development of tomorrow’s energy markets.   

Notes:

22 Investor expectation of good returns in the uranium market is evident in the Uranium Participation Corporation successfully raising C$100 million in 2006 for uranium investments; its stock is traded on the Toronto Exchange.                                                          Concluded

OIL & GAS

Diesel sales of OMCs grow by 16 pc for April-Aug’08

 

November 4, 2008. The diesel sales of public sector Oil Marketing Companies (OMCs) has increased to 21 million tonnes at a rate of 15.9 per cent for the period April-August 2008. It had stood up 46.4 million tonnes for the financial year 2007-08. Under recoveries on Diesel sales, by the OMCs, for the April-June 2008 period constituted around 63 per cent of the total under recoveries on the sales of four sensitive products namely PDS Kerosene, domestic LPG, Petrol and Diesel.

POWER

NTPC for enhancement of equity investments

 

November 4, 2008. National Thermal Power Corporation Limited (NTPC), a navratna company, which contributes about 29 per cent of electricity generation in the country, has put forward a request to Ministry of Power for enhancement of delegation of powers to NTPC board in respect of equity investments to establish financial Joint Ventures (JVs) and wholly owned subsidiaries in India or abroad. The company requested the Ministry that the ceiling on equity investment for NTPC to establish JVs and wholly owned subsidiaries in India or abroad should be 15 per cent of the net worth in any single project. It has further requested that the overall ceiling on such investments in all projects put together should be 50 per cent of the net worth of NTPC.

 

As per the existing navratna guidelines prescribed by the Government, a navratna company has a ceiling on equity investment to establish financial JVs and wholly owned subsidiaries in India or abroad at 15 per cent of the net worth in one project limited to Rs 1000 crores and overall ceiling for such investment at 30 per cent of the net worth. The company which is a major player in the power sector has been entrusted the task of adding capacity of about 22 GW during 11^th Plan and about 25 GW during 12^th Plan period. The company is of the view that existing ceilings would be highly restrictive towards achieving the Government’s ambitious capacity addition programmes of 78 GW for 11^th Plan and 80 GW for the 12^th Plan period.

COAL

Jhabua Power seeks allocation of coal linkage

 

November 4, 2008. Jhabua Power Limited, formerly Kedia Power Limited, a part of Avantha Group, has urged the Standing Linkage Committee on Coal that coal linkage Letter of Assurance (LoA) for the second phase of 2x300 MW thermal power plant is very critical. The plant which is in Madhya Pradesh is planned to be commissioned by September, 2011.

 

S V Power approached MoC for grant of coal

 

November 4, 2008. S V Power Private Limited (SVPPL), a company promoted by KVK Energy & Infrastructure Private Limited and Maytas Infra Limited, which is setting up a 2x50 MW coal reject based power plant at Renki Village, Korba District, Chhattisgarh has requested Ministry of Coal (MoC) for grant of coal linkage. The Central Electricity Authority / Ministry of Power have recommended grant of coal linkage of 2.4 Lakh tones to SVPPL. While the grant of coal linkage is under consideration by MoC, the company has gone ahead with the implementation of the project. The project which has already acquired land, obtained environmental clearance from Ministry of Environment and Forest, signed the Power Purchase Agreement (PPA) for the entire capacity and has achieved financial closure is expected to completed by June, 2009.

 

DPPL approached MoC for LoA for coal linkage

 

November 4, 2008. Dheeru Powergen Private Limited (DPPL), a subsidiary of Ranhill Dheeru (Malaysia) Sdn. Bhd., which has proposed to establish 1050 (3x350) coal fired power project in Korba district in Chhattisgarh has requested the Ministry of Coal to issue LoA for coal linkage for 700 MW. The company has already got the LoA for coal linkage for one unit of 350 MW. The project has been identified as a 11^th Plan Project and as one of the Fast Track projects by the Ministry of Power. The project has reached advance stage of Financial Closure. The entire project is scheduled to be complete by February, 2012.

 

Lanco Group requests coal linkage for 2^nd unit of Babandh Power Project

 

November 4, 2008. Lanco Group Limited whose Babandh Thermal Power Project which has a 2640 MW capacity and has been issued Letter of Assurance (LoA) for 1^st unit of 660 MW, has requested the Ministry of Coal for coal linkage for 2^nd unit of 660 MW. The group wants to expedite the Financial Closure for the 1^st Phase (2x660 MW) of the project. The project’s 1^st unit is expected to commence in the 4^th Quarter of the year 2011. Power Purchase Agreement for the project had been signed with GRIDCO.

 

NEWS BRIEF

OIL & GAS

ONGC hits dry well in Cauvery deepwater campaign

November 2, 2008. ONGC has not made a very positive beginning in its Cauvery deepwater block as it has hit a dry well in its first attempt. It plans to drill two more wells in the block this year. The first well drilled in the Block CY-DWN-2001/1 has not shown any result and has been termed a dry well. The work on the second well has already started. Depending on the results of the second well, the company will decide on the area to be carved out for the third.

The programme required three exploration wells to be drilled in the first phase, with options to extend into a second and third exploration phase on success. After completing the work commitment in Cauvery Block, the drilling ship would be shifted to the company’s Krishna Godavari offshore fields.

The financial implications of hitting a dry well largely depends on the results of the find in the rest of the area. If size of the discovery is not very big in the first well, it would not be economically very viable. Further, if two-three dry wells are drilled in the region, then the accumulated area is limited, thus making the success largely dependent on the size of the discovery, which is already made or to be made.

Studies of the block have indicated that it holds potential. Though ONGC is producing from the Cauvery Basin, it is from the onshore assets. The company is producing 0.299 mtpa (million tonnes per annum) of oil and 1.16 bcm of gas. The CY-DWN-2001/1 block was originally awarded to ONGC as operator with an 80 per cent equity share, and Oil India Ltd as partner with 20 per cent.

A subsequent farm-in agreement between Brazilian state oil company Petrobras and ONGC was announced in October 2007, in which Petrobras acquired a 25 per cent share. ONGC had further diluted its stake by giving 10 per cent stake to Norwegian company Rocksource ASA. The partnership will be made up of ONGC (45 per cent), Oil India (20 per cent), Petrobras (25 per cent) and Rocksource (10 per cent). The mean unrisked resources of the exploration Block are estimated by Rocksource to be approximately 2.9 billion barrels of oil equivalent.

India set to explore gas hydrates

October 30, 2008. With the launch of Chandrayaan-1 , India began its search for energy in outer space. Soon, the search will extend to the deep sea. Gas hydrates trapped in crystalline ice beneath the seabed are 160 times more efficient than petrol. In other words, if a litre of petrol can drive a car for 10km, a litre of gas hydrate can run it for 1,600km.

Moreover, gas hydrates are considered a clean fuel. Around 6.4 trillion tonnes of methane, sufficient to meet the energy needs, are believed to be trapped in the form of gas hydrates below the seabed.

After almost 10 years of geophysical survey, which confirmed the presence of gas hydrates in the Bay of Bengal, a team of 15 scientists from the National Institute of Ocean Technology (NIOT) here will take up seabed coring (a refined and more scientific way of drilling) for gas hydrates on the Krishna-Godavari basin off the Andhra Pradesh coast in six months.

Carrying the scientists and the US-made autonomous coring system for retrieving samples would be Sagar Nidhi, the state-of-the-art exploration vessel NIOT procured from Italian shipbuilder Fincantieri for Rs 232 crore ($47.13 mn) in January. Sagar Nidhi is now on a pilot project near the site. While reserves have been found in several parts of the world, ascertaining the extent of the presence of gas hydrates have remained difficult.

Storing gas hydrates, found at very low and very high temperatures, continues to be the big challenge. Ultrasonographic studies done by the National Geophysical Research Institute, Hyderabad, and the National Institute of Oceanography, Goa, have indicated a large presence of gas hydrates in the Bay of Bengal.

Gas hydrates are gases trapped inside cages of hydrogen-bonded water molecules at low temperature and high pressure. They are found about 100 metre under the seabed and are highly combustible and unstable under terrestrial conditions. 

Cairn India ties up $1.8 bn for Rajasthan oilfields

October 29, 2008. Cairn India had tied up funds for $1.8 bn for development of its Rajasthan oilfields and was on schedule to deliver first oil in second half of 2009. The company reported an over 12-fold jump in its third quarter net profit to Rs 293.3 crore ($59.4 mn) on back of high crude oil prices.

It plans to invest $1.8 bn in developing Mangala, Bhagyam and Aishwariya fields in Barmer district of Rajasthan and laying a pipeline to transport the oil to refineries on Gujarat coast. Of the $850 mn credit facility, the company is yet to draw about $700 mn.

The company was on schedule to deliver first oil from Rajasthan in second half of calendar year 2009 and reasonably confident of building the 580-km heated pipeline for transporting the crude before that. Rajasthan has delayed grant of right of user (ROU) for laying the pipeline but the company believed they would be in place soon.

 

RIL may reopen petrol pumps as crude falls

November 4, 2008. RIL is evaluating options to reopen most of its closed petrol pumps, thanks to more than 50% drop in crude oil prices in the past one year. RIL, which had closed down its retail fuel operations in March in the wake of spiralling crude oil prices, will restart the retail fuel business as soon as its rivals state-owned oil marketing companies drop prices of petrol and diesel, said sources close to the development. The idea of reopening the retail business is getting momentum at RIL ever since the government hinted a price cut in October-end.

GAIL inks pact with IOCL

October 31, 2008. GAIL (India) Limited and Indian Oil Corporation Limited (IOCL) signed a Memorandum of Understanding (MoU) for cooperation in the area of Petrochemicals to collaborate for exploring the possibility of setting up of cracker complex including downstream derivatives at Barauni.

A joint working committee consisting of two representatives from each company shall be formed for undertaking techno-economic feasibility study of the project including feedstock (naphtha and natural gas) management.

IOC to earn profit on petrol sales again

October 31, 2008. Indian Oil Corporation will again start earning profit on sale of petrol from November 1, as the international crude prices have come down. Petrol margins will turn positive from tomorrow. Based on the average crude price of second fortnight of October, it (margin) should be around Rs 4 a litre.

However, the company would continue to make losses on diesel sales at about Rs one a litre. Losses on sale of kerosene would be Rs 22 a litre and on LPG (cooking gas) Rs 343 per cylinder. Global crude prices, which touched a record USD 147 a barrel in July, have since receded to USD 64 level on fears of a global recession.

Oil companies to return to profit on petrol sale

October 31, 2008. For the first time in more than a year, oil companies will make profit on sale of petrol but a price cut does not appear to be on the horizon yet as they continue to lose over Rs 155 crore ($31.3 mn) per day on sale of diesel, domestic LPG and kerosene.

But IOC, Bharat Petroleum and Hindustan Petroleum will continue to make losses on diesel, domestic LPG and kerosene. Losses on diesel will come down to Rs 0.96 per litre. On kerosene IOC continue to lose Rs 22.40 per litre and on LPG the losses stand at Rs 343.49 per cylinder.

The margins till today were based on the average oil price of first fortnight of October and those from tomorrow would be based on average of second fortnight of October. Industry would make Rs 155 crore ($31.3 mn) loss per day on fuel sales.

Industry welcomes price reduction in hexane

October 31, 2008. The solvent extraction industry has welcomed the move by petroleum companies to revise downwards their hexane price by Rs 8,000 per kilolitre with effect from November 1.

The solvent extraction industry is using food grade hexane for processing oilseeds, oilcakes and rice bran. Following the decrease in crude oil price in the international market, Hindustan Petroleum Corporation and Bharat Petroleum Corporation Ltd have further reduced the food grade Hexane price by Rs 8,000 per kilolitre with effect from November 1, 2008. Earlier, petroleum companies had reduced prices by Rs 7,000 per kilolitre in two installments in the last two months. Food grade hexane price in one year had been increased by Rs 23,000 per kilolitre from Rs 33,000 in July 2007 to Rs 56,000 recently. This had increased the processing cost by Rs 200-300 per tonne and had a direct impact on edible oil price and inflation. 

GAIL, IOC ink deal for petrochem project in Bihar

October 31, 2008. GAIL (India) Ltd and Indian Oil Corporation Ltd (IOCL) signed an agreement for exploring the possibility of setting up a cracker complex (including downstream derivatives) at Barauni, Bihar. The two public sector undertakings are looking at setting up a Rs 10,000-crore ($2 bn) petrochemical plant at Barauni.

The two PSUs would prepare a techno-economic feasibility study for the unit that would take up to five years for construction. GAIL and IOC have yet to work out the project structure and equity participation. It could be a 50:50 joint venture or it could also be a public-private partnership.

The companies would constitute a joint working committee consisting of two representatives from each entity for undertaking techno-economic feasibility study for the project, including feedstock naphtha and natural gas management.

GAIL would also assess the prospect of natural gas availability from the Krishna-Godavari basin fields, including the potentiality of rich gas to be used as part of the feedstock for the unit. IOC would assess the prospect of availability of off-gas and naphtha not only from Barauni refinery but also from other operating refineries of the company, to be used as predominant feedstock for the proposed project.

Private players want to partner GAIL for Dabhol LNG terminal bid

October 30, 2008. The Essar Group, Adani Group and UK’s BG Group have independently approached state-owned gas utility GAIL (India) Ltd seeking a partnership to acquire the liquefied natural gas, or LNG, terminal associated with the controversial Ratnagiri Gas and Power Project Ltd, or RGPPL, formerly known as the Dabhol Power Company.

The overtures by these companies to the gas utility come in the wake of the government, in a significant departure from its earlier stand of not inviting private sector participation, considering a proposal which, if approved, would call for bids for the terminal.

The government wants to ensure that the LNG terminal continues to function in tandem with the power project even after it is sold or leased. The two were originally conceived as part of one integrated project. NTPC Ltd, India’s largest power generating utility and a significant shareholder in RGPPL, however, reiterated that it is opposed to any move to spin off the LNG terminal. NTPC and GAIL hold a 28.33% stake each in RGPPL.

The rest is held by Maharashtra State Electricity Board (15%), and several banks. The LNG terminal is part of the integrated power project with a capacity of 2,150MW that is being derated to 1,844MW. The project is fuelled by gas, which is transported typically by ship and always in liquid form. It needs to be converted into a liquid before shipping and reconverted into gas when it arrives at the terminal.

The terminal has a capacity of 1.2mtpa and this is to be raised to 5mtpa. The terminal has caught the private sector’s attention because firms need one such to source LNG supplies for gas-based projects. India has only two operational LNG regasification terminals and both are located in Gujarat.

IOC’s Paradip project on course

October 29, 2008. Thinning refining margin and a global crisis notwithstanding, Indian Oil will stick to its plans to set up the proposed 15mt Paradip refinery. The company is optimistic about completing the project at a cost lower than the estimated Rs 30,000 crore ($6 bn).

The sharp meltdown in commodity prices as well as the depression should bring down the project cost net of a devalued rupee. IOC is currently in the process of awarding the PMC (project management contractor) contract. This project was planned on a long-term perspective and I see no reason to rework on it.

IOC has finalised the loan and equity components for the project. Initial agreement was reached with the identified lending agencies on cost of borrowings. The loan agreements are slated to be firmed up in November. Meanwhile, IOC is set to register low refining margin in October. The company recorded a gross refining margin of $2-3 a barrel in September due to dual impact of squeeze in core margin as well as inventory loss.

IOC, BPCL, HPCL to get oil bonds worth $13.3 bn

October 29, 2008. Indian Oil, Bharat Petroleum and Hindustan Petroleum are likely to get oil bonds worth Rs 65,942 crore ($13.35 bn) this week to make up for half of their revenue loss on fuel sale during the first nine months of 2008. Parliament has already approved (issue of oil bonds).

BPCL, HPCL and IOC without the oil bonds, would post huge losses. Even with oil bonds, things are not going to be any better. The three firms would get Rs 14,956.17 crore ($3 bn) worth of oil bonds for selling petrol, diesel, domestic LPG and kerosene below cost in January-March quarter. They will get an additional Rs 24,408 crore ($4.94 bn) compensation for April-June quarter and the remaining will be for July-September quarter.

Government compensates half of the losses resulting from its dictate to oil companies to not to raise fuel prices in line with cost, through issue of oil bonds. For 2007-08, the oil companies reported a total revenue loss of Rs 70,579 crore ($14.29 bn) of which Rs 35,289.50 crore ($7.14 bn) is to be compensated through oil bonds.

The government has already issued, oil bonds worth Rs 20,333.33 crore ($4.11 bn) for April-December 2007 period. IOC, BPCL and HPCL in April-September lost Rs 92,853 crore ($18.8 bn) on fuel sales (audited figures) and are projected to lose Rs 1,47,486 crore ($29.87 bn) in the full fiscal. Half of the projected revenue loss is to be compensated through oil bonds.

ATF prices further down; no word on fares cut

November 3, 2008. The price of ATF is set to fall by more than Rs 2,000 a kilolitre in the four metros. This follows the public sector oil companies implementing the Government decision to abolish the 5 per cent customs duty on ATF. The reduction announced is the second downward movement in ATF prices in the past three days.

On October 31, the public sector oil companies announced a 15-17 per cent reduction in ATF prices being sold at the four metros reflecting the global dip in oil prices. The October 31 decision saw ATF prices dip by around Rs 9,000 a kilolitre in the four metro cities. The domestic air traveller will have to wait to see whether travel becomes cheaper. Despite the dip in oil prices, the domestic airline industry is yet to take a decision on whether it will lower the fares or surcharges being levied.

Iran to cut crude supplies to IOC

November 3, 2008. Iran and other OPEC member countries have told state-run Indian Oil Corp they will cut crude supplies to the firm by about 5 per cent from this month. ADNOC and Kuwait have informed us that they will be supplying 5 per cent less crude this month. Saudi Arabia had not informed the firm about any plans to trim supplies. IOC buys about 180,000 barrels per day from Kuwait, 30,000 bpd from Iran and 40,000 bpd from the United Arab Emirates. 

Gujarat industry substituting LNG with naphtha

November 2, 2008. Having suffered from acute energy crisis leading to skyrocketing price of energy for almost eight months, especially during the last six months, the industries in Gujarat are now enjoying abundant supply of low-cost energy thanks to over 60 per cent meltdown in global naphtha price.

The booming market for spot LNG which was selling in India at $20 (ex-ship) for every million metric British thermal unit (mmBtu) in September and $17/mmBtu in October, is now facing a major demand slowdown as large users in the power and fertiliser sector have started replacing the re-gassified LNG with low-cost naphtha during last two weeks.

With little change in naphtha price outlook, the trend may only gather strength. According to sources, among the power utilities that started replacing high-cost gas are NTPC Kawas, Gujarat Paguthan Energy (GPEC), Essar Power and others. If the trend continues, it may bring down the power tariff. Gujarat is now witnessing an energy boom. Globally naphtha prices have come down by almost two-thirds from as high as $1200 a tonne in June-July to $300 a tonne (landed price) due to demand slow down from petrochemicals sector.

The slide was so fast that naphtha is currently ruling below crude prices (and even fuel oil) resulting approximately $20 negative spread for refiners in October. In India, public sector oil companies have cut naphtha prices by nearly 35 per cent to approximately $425 (for power sector) on November 1 compared to the previous fortnight.

Accordingly, naphtha is now available for power sector at $14.2/mmBtu compared to $28-30/mmBtu in August and around $22/mmBtu in September. Prices are softer for the fertiliser sector. As oil PSUs use historic price average for current market pricing, naphtha prices may fall further in India in the coming weeks.

N-deal with US not at cost of IPI gas pipeline

November 2, 2008. As per India, Indo-US civil nuclear deal was not at the cost of the Iran-Pakistan-India gas pipeline as atomic power was one of its sources to ensure the fast growing economy's energy security.

Nuclear power is one source of energy, the other important source is the Iran-Pakistan-India (IPI) gas pipeline. One is not exclusive to the other. They were interacting with reporters after concluding the two-day Joint Commission Meeting set up by the two countries. Mukherjee asserted that the nuclear deal with the US will have no impact on the IPI gas pipeline.

India's energy requirement is quite substantial and we have to locate various sources of energy, including civil nuclear cooperation with countries like the US, France and Russia or any other country willing to cooperate with us. All negotiations have not been finalised. We will sign it when all negotiations are completed. India and Iran had signed the LNG project in 2005 but Tehran had raised issues of pricing of the gas citing rise in global prices leading to non-implementation of the deal.

Bangladesh not in a position to export gas to India

November 1, 2008. Bangladesh is not in a position to export any gas to India as its total gas reserve is not known. Bangladesh currently produces 1,750 million cubic feet of gas a day (mmcfd) and faces a shortage of nearly 200 mmcfd in its daily domestic consumption. The exports from Bangladesh could increase if India removed a number of non-tariff barriers.

Rural India continues to be deprived of LPG

October 31, 2008. Less than one in 10 rural households use liquefied petroleum gas (LPG) as their major cooking fuel. Three-fourths of households in rural India continue to depend on firewood and chips as their main cooking fuel. About nine per cent use dung cake and another nine per cent LPG, according to the National Sample Survey Organisation’s (NSSO) latest report on Household Consumption Expenditure in India: 2006-07.

The situation is much better in urban areas, where 59 per cent of households use LPG as the major cooking fuel. Rural India is also placed poorly in terms of access to electricity. Only 56 per cent of households use electricity as the major fuel for lighting, with these ranging from 11 per cent in Bihar, 26 per cent in Uttar Pradesh, 30 per cent in Orissa, 32 per cent in Assam and 37 per cent each in West Bengal and Jharkhand to 95 per cent in Punjab, 91 per cent in Haryana, 90 per cent in Tamil Nadu, 88 per cent in Karnataka, 87 per cent in Kerala, 84 per cent in Andhra Pradesh and 83 per cent in Gujarat.

As much as 88 per cent of households in rural Bihar use kerosene as major fuel for lighting, with these being 72 per cent in Uttar Pradesh, 69 per cent in Orissa, 67 per cent in Assam and 62 per cent each in West Bengal and Jharkhand. According to the report, the average monthly per capita consumer expenditure in 2006-07 for urban India, at Rs 1,312, was almost twice the corresponding Rs 695 for rural India. Moreover, out of every rupee spent by the average rural India, over 52 paise was on food, whereas this came to only 39 paise in the case of urban Indians.

Refiners cut jet fuel rates again

November 4, 2008. Responding to the government’s decision to exempt jet fuel from Customs duty three days ago, state-owned refiners have reduced the prices of the fuel by 4.5 per cent. The airlines, however, remained non-committal on slashing fares. The oil-marketing companies, viz., Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, had cut jet fuel prices by over 16 per cent on November 1 after international prices fell in October. The government had also reduced the Customs duty on the fuel to zero from 5 per cent.

After the latest price cut, which comes into effect from this midnight, the oil companies have reduced jet fuel prices by around 37 per cent since August this year. The companies would revise the prices again on November 15 in line with international prices. Jet fuel prices had risen nearly 88 per cent between July 2007 and July 2008.

The airlines, meanwhile, have claimed they are still incurring losses. As jet fuel prices rose till July this year, the airlines had raised fares to meet their increased costs. This resulted in lower seat occupancy, which in turn hit their income. The airlines have been seeking help from the government to keep themselves out of the financial crisis, with unpaid fuel bills running up to over Rs 2,000 crore ($422.29 mn).

The government-owned oil refiners have agreed to allow the airlines clear their dues in six monthly installments till March 2009 and give them 90 days credit instead of the earlier 60 days. These measures, coupled with lower oil prices, are expected to minimise the losses of the airlines.

Deora seeks more oil bond assistance to fuel retailers

October 30, 2008. Petroleum Minister Murli Deora met Finance Minister P Chidambaram, seeking an increase in the quantum of oil bonds issued to fuel retailers to partly compensate their losses on account of selling fuel below cost price. PSU oil marketing companies BPCL and HPCL reported net losses in the first quarter and they along with IOC are expected to report bad results in Q2 as well.

At present, 50 per cent of the revenue loss is met by the government through oil bonds and another 33 per cent comes from upstream companies and Deora made a pitch for increasing the bonds to meet the uncovered portion. IOC, BPCL and HPCL in April-September lost Rs 92,853 crore ($18.86 bn) on fuel sales (audited figures) and are projected to lose Rs 1,47,486 crore ($29.96 bn) in the full fiscal.

Half of the projected revenue loss is to be compensated through oil bonds. The three firms would get Rs 14,956.17 crore ($3 bn) worth of bonds for the January-March quarter. They will get an additional Rs 24,408 crore ($4.95 bn) compensation for April-June quarter and the remaining will be for July-September quarter.

According to Petroleum Ministry RIL open to price KG-D6 gas higher

October 30, 2008. The Petroleum Ministry has said that the $4.20 per mmBtu price fixed by an Empowered Group of Ministers for gas from Reliance Industries' KG-D6 fields was only for the purpose of valuation of Government share and the selling price could be higher. In a presentation on pricing of natural gas to the Parliamentary Standing Committee on September 11, the ministry said the minutes of the EGoM meeting held on September 12, 2007 suggest that the price formula approved was for valuation of the gas for the purpose of determining Government share.

The price formula approved last year had taken the biddable parameter in the formula at zero and since the EGoM had mentioned that the biddable character of the formula be retained and the actual selling price could be higher (than $4.20 per million British thermal unit). Reliance had submitted to the Government a formula for determining the selling price of gas from its eastern offshore KG-D6 fields which the EGoM tweaked to bring the price down by about 8 per cent.

The EGoM approved the price basis/formula according to which the minimum delivered price of gas at landfall point would be USD 4.20 per mmBtu for five years from the date of commencement of supply.

EGoM, had decided that price discovery process for determining the rates at which the fuel would be sold, would be on arm's length basis. The price thus discovered would be uniformly applicable to all the sectors. Reliance is to begin gas production from KG-D6 in January 2009 with an initial production rate of 5 million standard cubic meters per day. This would go up to 25 mmscmd by March 2009 and further to 40 mmscmd by May 2009 and 55 mmscmd by July 2009. 

Russia says ONGC buy of Imperial could limit competition

October 29, 2008. Russia's antitrust watchdog had received ONGC's bid to buy Imperial Energy but believes the deal could limit competition and wants more time to review the application. Interested parties have the right to present evidence of the effect on competition of the deals listed or other actions. In late August, India's biggest oil producer agreed a takeover of the mid-sized, London-listed Russian oil producer for $2.6 billion, but for the deal to go ahead it must have no strategic assets, and the deal must then be approved by FAS.

The natural resources ministry had deemed Imperial non-strategic, clearing the first of two regulatory hurdles and allowing it to be bought and fully developed by foreigners. Investors have been closely following Imperial's two approvals as the Russian investment climate worsens and foreign capital floods out, but a source close to the deal dismissed fears that the deal might not go ahead. By Russian law, FAS has 30 days from the day it receives a bid to reply to the bidder, but this can be extended if it needs additional information.

The deadline to make a decision on the deal is the end of December of this year. This could happen earlier. The deal would mark ONGC's second investment in resource-rich Russia. The Indian company is a partner in the Sakhalin-1 oil and gas consortium headed by US major Exxon. Oil minister Murli Deora is scheduled to visit Russia early next month to seek Moscow's help in securing stakes in energy assets. ONGC is eyeing further stakes in other oil and gas projects on the Pacific island of Sakhalin.

POWER

GMR may shift barge-mounted power plant to Turkey

November 4, 2008. Bangalore-based GMR Infrastructure, which has interests in power generation, airports, highways and urban infrastructure, is understood to be mulling over a plan to move its barge-mounted power projects to the shores of Turkey. This barge-mounted power generation unit, capable of producing 220 MW, is off the Mangalore coast and is being operated as a merchant plant. The move has been necessitated following the expiry of the seven-year old power purchase agreement (PAA) with Karnataka.

GMR, post the end of the PPA with Karnataka, had planned to move this naphtha fuelled project to near Kakinada in Andhra Pradesh and had planned to convert this to a gas-fired project. This plan had to be shelved as gas was not available from the K-G Basin for this project. While for some period of time this project will remain off the coast near Mangalore, GMR is working on a plan to move the project near Turkey. There is no problem of gas near the coast there and it is one of the reasons for this thought.

The company is having to scout for gas supply for this project as the prices of naphtha have been rising sharply and there are not many buyers for costly power. The cost of naphtha has shot up nearly ten times to Rs 48 a litre from Rs 5 a litre seven years ago.

Hydropower firm asked to stop work after breaking environmental laws

November 3, 2008. A hydropower firm has been asked to stop construction work on their power project in Himachal Pradesh for violating environmental laws. Om Power Corporation is executing a 15 MW power project near Palampur town in Kangra district and will be allowed to resume work only after they take corrective measures. A team of the forest department visited the construction site and found that the company is violating environment laws, from haphazard cutting of hills, damaging trees to unscientific dumping of debris in areas close to water channels.

The firm has also been told to stop all excavation, digging and construction activities until steps are taken to check further damage. Most of the hydro projects are violating environment laws, but the government is adopting a pick-and-choose policy to take action. It reacts only when there is a protest by local communities. The hill state has abundant water resources, with five major rivers flowing from the western Himalayas. Its power generation potential is 20,415 MW, about 25 percent of India's total hydropower potential, out of which only 6,150 MW has been tapped so far. In 2006, the state government approved a hydropower policy that aims to make Himachal Pradesh the hydropower state of India.

The government has allotted hundreds of micro and major run-of-river hydro projects. Local entrepreneurs are being encouraged to take up projects of between 2 MW and 5 MW generation capacity. The state government has allotted projects above 5 MW through open bidding. The Asian Development Bank last month announced it would provide Himachal Pradesh a $800 million loan for projects that will add 808 MW in all.

Twenty one farmers accept compensation for hydel project

November 3, 2008. A decision has been taken on the compensation to be given to 21 farmers who have to surrender their land for the proposed Thottiyar Hydroelectric Project near Valara in Idukki district. About 150 farmers in the area will have to be rehabilitated when the project is realised, as per the Kerala State Electricity Board’s (KSEB) estimate.

According to sources in the KSEB, the project, which aims to produce 40 MW of electricity, is expected to contribute substantially to the power grid. Those farmers agreed to accept the compensation package suggested by the KSEB. As per the consensus reached at the meeting, those who have title deeds for the land would be given Rs.22,000 to Rs.31,000 for a cent of land and those who do not have title deeds, the amount to be given will be half of it.

A decision on compensation to the buildings on the land which has pattas (title deeds) has also been agreed at the meeting. As per the initial estimate, about 14 acres of land with title deeds and 16 acres of land without title deeds have to be surrendered for the project.

A team of officials including the KSEB, led by the District Collector had visited the area on September 8 this year to finalise the compensation package and hear complaints from the land owners. The team also made an initial estimate of the total area likely to be submerged when the project is implemented.

The project, approved in June 2001, envisages the construction of a diversion weir of 75 M high and 22 M long in Thottiyar, a tributary of the Periyar. The KSEB has made an agreement with a Hyderabad-based company with the technical support of a Chinese company for the completion of the project.

As per the agreement, the project has to be completed within four years after the land acquisition process is finished. The project envisages constructing check dam on the Deviyar river for carrying water through a tunnel of about 2 km away from the Lower Periyar Power House. The power house, having a capacity of 40 MW will be constructed at Neendapara connected by a 2 km-long pen stock pipe.

Himachal allots two new hydel projects

November 3, 2008. Public sector Sutlej Jal Vidyut Nigam Ltd has signed two agreements with the Himachal Pradesh government to set up two hydro electric projects in the state. While the 775 MW Luhri project will be built on the Sutlej river at a cost of Rs 5,637 crore ($1.15 bn), the proposed 40 MW Dhalasidh project will be built on the Beas river near Sonotu in Hamirpur district.

The Luhri project involves building a lot of tunnels and will take seven years to complete. The Luhri project is being implemented between Nirath and Chaba in Shimla, Mandi and Kullu districts. SJVNL will have a 51 per cent equity, while the state government will have the remaining. At 21,000 MW, Himachal Pradesh has a quarter of the country’s hydro electric power potential. 

Hirakud commences non-monsoon season with less water capacity

November 2, 2008. Water Initiative of Orissa (WIO), an organisation that works for achieving judicious use of water in the State, on November 1, issued an alarm that the Hirakud reservoir began the non-monsoon season with 12.9 per cent less than its full utilizable water capacity.

Due to fast-depleting water level, the hydropower generation was severely hit at Burla and Chipilima. Water levels of Hirakud reservoir on November 1 of 2007 and 2006 respectively were 2.1 and 2.6 ft below the full level of the reservoir (FLR). This year it is about 3.3 ft below FLR. Non-monsoon water consumptions are calculated from November to June. Hence, the status of the reservoir on the beginning of November is very crucial.

The low level water could directly impact the irrigation in command area. There are also demands from industrial plants. It is apprehended that chaotic situation over distribution of Hirakud water could prevail this year also. The Hirakud reservoir on Mahanadi is the biggest dam in the State.

It is a multipurpose dam that caters to the need of irrigation and produces hydropower. However, peasants from all over western Orissa districts staged demonstration demanding adequate water from the reservoir for irrigation purposes last year.

They alleged that due to increase of industrial needs, flow of water into their paddy fields had come down over the years. As per WIO on October 1, power generation units at Burla and Chipilima had generated 270.375 MW. But that fell to below 150 MW level on October 20 and to 117 MW on October 27. But on the very next day a panic-stricken dam authority severely curtailed water release and only 65 MW could be generated on October 28.

Power generation has further fallen below 50 MW on October 31. Power generation has already been hit very hard since the beginning of this decade. Burla and Chipilima units together have failed in generating even 1000 MW of power in any year of this decade.

India Cements to invest $32 mn for captive power plant

October 31, 2008. India Cements plans to invest over Rs 160 crore ($32.31 mn) to set up 40 MW of captive thermal power generation facilities to address the rising cost of power. Increase in coal and fuel costs were major factors that dented the company’s net profit by 40 per cent in the second quarter compared with that of the corresponding quarter in the previous year.

The capacity utilisation was more than 100 per cent with gross realisation at Rs 4,173 a tonne (Rs 3,900). The drop in net profit is not a sign of slow down but high costs as demand and margins continued to grow during the quarter. The company has decided to set up two thermal power plants of 20 MW each to address the issue of rising power cost and power shortage.

The company’s expansion programme was on track with work initiated on the 1.5 mt cement plant in Rajasthan. A one million-tonne grinding unit at Chennai commenced operation in August. A grinding unit of similar capacity would start operation in Parli, Maharashtra, by the end of the third quarter.

Approval for NTPC, NPCIL talks

October 29, 2008. NTPC Ltd's board of directors has approved the proposal for initiating discussion with Nuclear Power Corporation of India Ltd (NPCIL) for entering into a memorandum of understanding for the formation of a joint venture company to establish a nuclear power project. In the proposed venture, NPCIL shall hold 51 per cent equity stake and remaining 49 per cent shall be held by NTPC.

Indu Group lines up $422 mn for coal mining business

November 4, 2008. Hyderabad-based Indu Group, with interests in infrastructure and realty, is gearing up to offer bundled services in coal mining. The company will spend about Rs 2,000 crore ($422.29 mn) in phases for the mining business. The group has formed a special purpose vehicle Indu Mineral Exploration Limited for mining coal and minerals. The mining vertical will handle resource mapping, mining plan, excavation and material handling. Mining was only an extension of its earth excavation works for its infrastructure and other projects. With most of the equipment already in place, the group felt it was the right time to enter contract mining. The company expects to begin its operations around March 2009. It is targeting a revenue of Rs 150 crore ($31.67 mn) from this vertical in the first year (2009 fiscal) and Rs 350 crore ($73.9 mn) by 2011.

It also aims to achieve 10 mtpa in about three years. Mining will be a steady revenue model as the product cycles are long (about 20 to 15 years). Initially, the focus will be on overburden, the material that is removed from the earth’s surface to uncover the coal. The group has set up a 5-mcm per month earth excavation capacity. The company is also in talks with a US-based Indian subsidiary washery to supply washed coal.

The formalities are expected to be completed in a month. Besides, it is negotiating with three other companies for material handling and making conveyor belts. The company is expected to sign a memorandum of understanding with a European underground mining company this month, Krishna said. As far as open cast mining is concerned, the group will go alone as it has the technology and equipment.

Power cuts are back in Bangalore

November 4 2008. The days of the virtual blackout are back in the city. On November 3, unscheduled power cuts returned to haunt the residents. Three units in Raichur Thermal Power Station (RTPS), a major supplier to the city, were shut down due to technical problems, resulting in about 1,000 MW shortage in the state and about 400 MW shortage for Bescom. The areas where power was cut for several hours were Chamarajpet, East Bangalore, Banaswadi, parts of Indiranagar, KR Puram and surrounding areas, Jayanagar, JP Nagar and other parts.

The sudden shortage is due to problems in RTPS and maintenance works in hydel power stations. The city usually requires about 1,600 MW on an average, which we were managing with staggered holidays and other solutions. Usually November is a slack season in terms of power consumption. But in 2008, there is a sudden spurt in power consumption pattern. According to statistics, there is a rise of about 10 million units in consumption of the state, which translates to a 10% rise. Even the city registered about a 10% rise in consumption.

KEC International bags 3 new orders from MEW, PGCIL & CSEB

November 3, 2008. KEC International Ltd. has bagged three orders worth Rs 2.35 bn ($48.34 mn). The company has bagged an order worth Rs1.35bn ($27.77 mn) from the Ministry of Energy and Water (MEW), Afghanistan; a Rs90mn contract from Power Grid Corporation of India Ltd. (PGCIL) and a Rs 10 mn ($0.2 mn) order from the Chhattisgarh State Electricity Board (CSEB).

Private power transmission making a comeback

November 2, 2008. After languishing for nearly two years, the Centre's efforts to build large power transmission lines with private sector participation, on the lines of the ultra mega power project series, is seen making a comeback. Nodal agencies Rural Electrification Corporation Ltd and Power Finance Corporation Ltd have entered the market with global requests for qualification for three projects together costing around Rs 7,000 crore ($1.41 bn), to be developed under the build-own-operate-maintain (BOOM) method.

REC has been entrusted with the augmentation of the Talcher-II transmission system in Orissa and that of grid strengthening of the northern and western regions to enable import of power from NTPC's North Karanpura power project in Bihar. PFC is seeking developers for the scheme to enable transmission of surplus power from the northeastern and eastern regions to the northern region. The bidding process would be coordinated by a newly-formed subsidiary, REC Transmission Projects Company Ltd. For each of the two projects, a shell company will be formed that will be transferred to the respective developer selected using the competitive tariff bidding route. He explained that the licence period for operating and maintaining the project would be 25 years, and the entire lifetime of the project would be considered as 35 years.

PFC has already floated a shell company, East-North Interconnection Company Ltd, which would initially be the corporation's wholly-owned subsidiary. Both the agencies are expected to pre-qualify developers by December-end. In late 2006, both REC and PFC had invited expressions of interest for developing these very projects on BOO basis. The exercise did not fructify for a variety of reasons including the irregularities seen in the award of the Sasan ultra mega power project in Madhya Pradesh for which PFC was the nodal agency. With REC and PFC now renewing the process, India can look forward to more private participation in the power transmission sector-an area that is currently dominated by Central utilities.

In 2006, the Centre announced an ambitious plan of developing around 14 large power transmission projects on the lines of the UMPP series. So far, the grid strengthening for the western region is the only large power transmission project that is being developed through 100 per cent private participation.

Reliance Infrastructure Ltd (formerly Reliance Energy Ltd) is developing two projects of this scheme under the tariff-based bidding route. Central power utility Power Grid Corporation of India Ltd has also formed minority joint ventures with private sector developers for setting up transmission facilities associated mainly with private (IPP) projects.

According to information available with Projectmonitor, PGCIL has formed such joint ventures, in which it would hold 26 per cent equity, with Reliance Infrastructure Ltd, Torrent Power Ltd, Jaiprakash Hydro Power Ltd and Teesta Urja Ltd.

The JV with Reliance Infrastructure is for the NTPC's 800-MW Koldam and NHPC's 800-MW Parbati (Stage II) hydropower projects. With the others, the joint venture will be responsible for power evacuation of the respective generation projects-Sugen (1,100 MW), Karcham-Wangtoo (1,000 MW) and Teesta-III (1,200 MW).

Coal India Limited counting upside potential in credit squeeze

November 1, 2008. At a time when corporate India is busy estimating the downside risk of a credit squeeze and falling demand, Coal India Ltd is busy counting the upside potential, riding on price advantage in the domestic market, increasing demand for thermal coal from domestic utilities, and a group cash reserve of Rs 20,000 crore ($4 bn). Though prices came down by 50 per cent from its peak of $201 a tonne in early July, thermal coal is currently sold at around $100 a tonne to power generators in Australia.

The prices in fact moved up marginally due to increased buying from Asian utilities. This meltdown, however, has little relevance to CIL selling the best quality thermal coal (raw coal) at Rs 1,800 (less than $40 at current exchange rate) a tonne.

Assuming that beneficiated coal has double the heat value, a back-of-the-envelop calculation suggests that CIL coal if washed should be priced at around $80, a clear 20 per cent lower than the international price.

The company is expected to finalise the draft bid document for development and operation of high-capacity underground mines in seven virgin blocks by the third week of November. Bids are invited for one washery at BCCL. Bids may be invited for three more washeries in Eastern Coalfields and Central Coalfields shortly. All the projects will be financed by CIL.

Produce clean energy, Advani tells State govt

November 4, 2008. Leader of the Opposition in Lok Sabha L K Advani advised the State government to stress on clean energy generation to prevent environment pollution. The growth in power sector should not pollute environment. Germany has enacted a clean power law for this purpose. Of the total target of 5,000 MW power that the Government plans to generate in the next five years, at least 30 per cent should be clean energy.

For this, solar, biomass, wind and small hydel sources should be effectively tapped. The State will be recognised at the international level as Gujarat Government led by Narendra Modi has been able to do.

The Jyothi Grama Yojana implemented to provide 24/7 power supply to rural areas (both to domestic and non-domestic consumers) in Gujarat, has been a big success. The State is losing good chunk of job opportunities as investors are turning back due to severe shortage of water and power supply. Water and power are crucial for development. Hence, the Government has accorded top priority to power generation. The State-owned Karnataka Power Corporation Limited (KPCL) will generate 5,000 MW of power in four years, increasing the State’s generating capacity from 9,000 MW to 12,000 MW.

By the end of 12th plan, the State aims to add another 10,000 MW. The Government is forced to take up thermal power projects as most of hydel power potential has been exhausted in the State. Presently, the State is producing highest quantum of hydro electric power in the country, which is over 55 per cent of the total supply.

The State has approached the Union Government to allot additional captive coal blocks to expand the capacity of Bellary Thermal Power Station. “It is also necessary that the Centre maintains control over the coal supply, which is vital for cost-effective power generation at the station.

NTPC forms JV with Ministry of Power and Japan International

November 3, 2008. Ministry of Power, NTPC Limited and Japan International Agency for Cooperation (JICA) has signed an agreement to undertake joint project with technical assistance of JICA experts for ‘Study on enhancing Efficiency of Operating Thermal Power Plants in NTPC – India’ in New Delhi.

The study will be implemented and coordinated by NTPC-Centre for Power Efficiency & Environmental Protection [CENPEEP], which is a group specifically working on ‘Efficiency Management System’ and GHG reduction for power plants in India. This agreement is the outcome of discussions under Indo-Japan Energy Dialogue.

A ‘Working Group on Energy Efficiency’ was set up under this dialogue, of which NTPC is a member, and extensive discussions were held between NTPC and JICA on technical cooperation in energy efficiency.

The proposed study has two objectives namely to identify areas for efficiency enhancement in selected coal fired power plants of NTPC and to learn relevant skills and technologies from Japanese experience. The study is scheduled to be completed in two years. The outcome of this study programme will also open up further cooperation possibilities between the two countries in this area.

Coal India hopeful on fuel supply pact

November 1, 2008. Coal India is hopeful to sort out the differences with power utilities on entering the fuel supply agreement (FSA) within the extended timeframe of November 30. Larger section of the power utilities led by NTPC refused to sign the pact unless CIL increased the guaranteed supply/offtake level (described as trigger) from the proposed 60 per cent to as high as 80-90 per cent.

According to the CIL Chairman, Mr. Partha S Bhattacharyya, the issue was discussed at a recent meeting between Union Power and Coal Ministries and more talks are likelyMr. Bhattacharya will meet the NTPC Chairman, Mr R. S. Sharma, on November 3 for discussion on FSA. The NTPC chief has reportedly refused to sign the agreement unless the trigger is raised to 90 per cent.

OIL & GAS

Pacific Energy reaches production target at Platform Eureka

November 4, 2008. Pacific Energy has announced that further to its news release dated October 7, 2008, the Company has reached its phase II production target of 2,000 barrels of oil equivalent per day from Platform Eureka. This target was achieved on October 23 and as such, will have a greater impact on the fourth quarter production. The average production for the Company for the month of October was approximately 7,300 boe/d consisting of approximately 3,300 boe/d from the Beta Field (1,700 boe/d Ellen and 1,600 Eureka) and 4,000 boe/d from Alaska.

Petrobras sets October oil export record

November 3, 2008. Petrobras set an exports record of 574,000 barrels of domestic oil per day in October, topping-out at 17,806,000 barrels in the month. This record surpassed the previous mark, set last April, by 42,000 per day. The exports were destined mainly to the United States, at 65.2%, followed by China (24.1%), Europe (5.5%), and South America (5.2%).

In addition to the volumetric challenge, logistics were even more complex on account of the need to combine different types of oil in a same shipment in order to attain better value for the Company. The record is the outcome of joint, integrated work carried out by the Exploration & Production, Transpetro, and Downstream, Logistics & Marketing areas, and it made a significant contribution to the Brazilian trade balance.

Total makes discovery in Block B offshore Brunei

November 3, 2008. Total has made a significant gas and condensate discovery in Block B offshore Brunei, in a water depth of 62 meters, around 50 kilometers from the coast. Total operates the block with a 37.5% interest, in association with Shell Deepwater Borneo Ltd. (35%) and local partners (27.5%). Drilled to a final depth of 5,227 meters, the ML-4 well discovered a new gas-bearing compartment in the Maharaja Lela/Jamalulalam Field.

A gas column of over 400 meters was encountered in reservoirs equivalent to those already in production in the field. Gas was also found in deeper, high-temperature/high-pressure (HT/HP) formations. Further appraisal is necessary to evaluate these discoveries. Following the successful MLJ2-06T well, the ML-4 well completes the first phase of an exploration drilling program that will resume in 2009.

Present in Brunei since 1986, Total operates the Maharaja Lela/Jamalulalam Field, with an average production of gas and liquids of 28,500 barrels of oil equivalent per day in 2007. The gas is delivered to the Brunei LNG liquefaction plant. Total also has a 60% interest in and operates deepwater exploration Block J, for which a production sharing agreement was signed in March 2003.

Exploration operations in this 5,000-square-kilometer block were suspended in May 2003, pending resolution of a border dispute with Malaysia. Total's production in the Asia-Pacific region averaged 252,000 barrels per day in 2007, accounting for 11% of the Group's equity output, and is mostly located in Indonesia.

China North East Petroleum increases oil production

November 3, 2008. China North East Petroleum Holdings has announced preliminary results for its 2008 third quarter oil production. Driven by production from new wells and increased capacity from existing wells, crude oil production for the quarter ended September 30, 2008 increased 86,508 barrels, or 99.7%, to 172,730 barrels from 86,222 barrels for the quarter ended September 30, 2007. On a sequential basis, crude oil production increased 37,537 barrels, or 27.8%, compared to the quarter ended June 30, 2008.

Devon grabs stake in Chevron's Drunkard's Wash gas field

November 3, 2008. Devon Energy has completed a transaction to acquire an interest in the Drunkard's Wash coalbed natural gas field in east-central Utah held by a subsidiary of Chevron Corporation. In the transaction, Devon transferred its 14.2 million shares of Chevron common stock to Chevron. In exchange, Devon received Chevron's interest in the Drunkard's Wash field and $280 million in cash.

Devon has held shares in Chevron since Devon acquired PennzEnergy in 1999. In August 2008, Devon retired exchangeable debentures originally issued by PennzEnergy that were associated with the Chevron shares. After retiring the exchangeable debentures, Devon was able to enter into this exchange transaction with Chevron. In the exchange, Devon acquired a 44 percent working interest in the Drunkard's Wash field. The field is approximately 51,000 net acres with current net production of about 40 mcf of natural gas equivalent per day.

StatoilHydro finds gas at Caurus in Barents Sea

October 31, 2008. StatoilHydro has confirmed the presence of hydrocarbons in an exploration well in the Caurus prospect in the Barents Sea, 160 kilometers north-northwest of Hammerfest in North Norway.

Hydrocarbons were confirmed in sandstone of middle and late Triassic age. The well was not formation tested, but comprehensive data gathering and sampling have been carried out. The late Triassic find is made in rocks of good quality and is in the size of 2-14 billion standard cubic meters of recoverable gas. The well was drilled in block 7222/11 in production license 228.

The purpose of the well was to confirm hydrocarbons in sandstone of middle and late Triassic age. The drilling in Caurus was carried out by the Polar Pioneer semisub at a water depth of 356 meters. Polar Pioneer will now start drilling appraisal well 7125/4-2 in the StatoilHydro-operated production license 393.

Exploration well7222/11-1 S was drilled to a total depth of 2,825 meters below sea level and was concluded in rocks of early Triassic age. The well is now being temporarily plugged and abandoned. Production license 228 was awarded in the Barents Sea project in 1997, when Saga Petroleum ASA was operator. Well 7222/11-1 (Caurus) is the second exploration well in the license.

The first exploration well, 7222/6-1, was drilled in January-February 2008 and confirmed hydrocarbons in the Obesum structure in the far northern part of the license. Another exploration well in the license has been scheduled, which will be a delineation of the Obesum discovery scheduled for start-up in December 2008. StatoilHydro is the sole licensee in the field.

Decision on new refineries at year end by Petrobras

November 4, 2008. Brazilian state-run energy giant Petroleo Brasileiro (PBR) will make a concrete decision on the construction of two premium fuel refineries in December. Petrobras' Paulo Roberto Costa told the local Estado news agency that the final decision on the $30 billion refineries will be included in the company's 2009-2013 strategic plan, which was delayed until December.

Only then are we going to have something definite. Costa, however, was adamant that construction of the two refineries - which will export high-quality diesel and jet fuel to the U.S. and Europe will go forward. According to Costa, the ongoing global financial crisis has caused Petrobras to move cautiously in evaluating its investment plans. Two refineries currently under construction, the Comperj petrochemical complex in Rio de Janeiro and the Abreu e Lima refinery in Pernambuco, were guaranteed to be built. Petrobras is in the midst of an effort to expand its refining capacity to 3.6 million barrels a day by 2015. The company currently processes about 1.9 million barrels a day.

Chevron sells marketing business in Kenya, Uganda

November 3, 2008. Chevron Corp. announced that its subsidiary Chevron Africa Holdings Limited has agreed to sell 100 percent of its shareholdings in Chevron Kenya Limited and Chevron Uganda Limited to Total Outre Mer S.A (Total). Under the terms of the sales, Total is to acquire Chevron's marketing businesses in both countries.

Chevron Kenya Limited and Chevron Uganda Limited's assets include 165 Caltex-branded service stations, one terminal, seven fuel depots, six aviation facilities, one lubricants blending plant, and a commercial and industrial fuels business.

These sales are part of our continuing effort to increase efficiency and improve returns by creating better alignment between our marketing and refining operations. The transactions are subject to obtaining relevant regulatory approvals and are expected to close in the first half of 2009.

Iran gives 80 pc of refinery to foreign investors

November 3, 2008. On the basis of an approval by the Islamic Consultative Assembly [the Majlis], the private sector will contribute to 80 percent of the building of a refinery in Khuzestan. The contractor of the refinery in Khuzestan said that US$3.5 bn will be invested in the building of the refinery. Over $2.8 bn of the investment will come from the private sector.

The priority for the building of the refinery would be given to foreign investors because they bring foreign currency to the country and the refinery, with the capacity of 180,000 b/d, will be constructed and fed with very heavy crude oil from Azadegan and Yadavaran oilfields. The refinery was being built to refine ultra-heavy oil and produce petrol, jet fuel and diesel oil and the refinery would be built in an area of 500 ha in three years.

Foster Wheeler wins Libya refinery contract

October 30, 2008. Foster Wheeler Ltd.’s Milan-based subsidiary Foster Wheeler Italiana S.p.A., part of its Global Engineering and Construction Group, has been awarded a contract by Zwara Oil Refinery Company Limited (ZORCO) for consultancy and project management services for a planned new 200,000 barrels per stream day crude oil refinery at Mellita, near Zwara, in the Great Socialist People's Libyan Arab Jamahiriya. ZORCO is a project company in which Tamoil Africa Holdings Ltd. holds the equity. Foster Wheeler scope under the contract includes the optimization of the refinery configuration, the selection of the licensors and the front-end engineering design (FEED), including preparation of a cost estimate.

Foster Wheeler will also prepare the tender documents for the engineering, procurement, construction (EPC) phase, will assist ZORCO in selecting the EPC contractor(s) and will act as project management consultant during the EPC phase.

The planned new facility, with an estimated total investment cost of about $4 billion, includes a state-of-the-art facility aimed at producing premium quality gasoline, jet fuel and diesel with minimal fuel oil production, and related utilities, offsites and marine facilities. This is a flagship project in North Africa requiring deep technical knowledge, experience and flexibility.

Foster Wheeler Ltd. is a global engineering and construction contractor and power equipment supplier delivering technically advanced, reliable facilities and equipment.

Tesoro sees Q4 throughput up to 615,000 bpd

October 30, 2008. Independent western U.S. refiner Tesoro Corp said throughput at its refineries in the fourth quarter was planned to be between 555,000 and 615,000 barrels per day, according to slides for a earnings presentation. Tesoro's seven refineries have a combined refining capacity of 660,000 bpd. In the fourth quarter, the company's California refineries are expected to process between 250,000 and 270,000 bpd. The company's Hawaii refinery is expected to run between 60,000 and 70,000 bpd. Tesoro's refineries in North Dakota and Utah are planned to run between 105,000 and 115,000 bpd in the fourth quarter, while the refineries in Alaska and Washington state are expected to process between 140,000 and 160,000 bpd.

NEB, Canadian offshore Petroleum Board ink pipeline MOU

November 4, 2008. A memorandum of understanding signed by the National Energy Board (NEB) and the Canada-Nova Scotia Offshore Petroleum Board (CNSOPB) makes the regulation of pipelines more efficient and effective. The National Energy Board and the Canada-Nova Scotia Offshore Petroleum Board have a long and successful history of working together.

This MOU will ensure we are able to continue this partnership in order to help both Boards efficiently implement flexible, goal-oriented regulation, foster innovation and make sound decisions in the public interest. The construction, operation, decommissioning, abandonment and removal of offshore pipelines falls under the jurisdiction of both the NEB and CNSOPB. This new agreement reduces regulatory overlap by setting clear criteria for areas where cooperation can occur, such as data sharing, emergency management, monitoring and enforcement, and staff exchanges.

The NEB is an independent federal agency that regulates important parts of Canada's energy industry. Its purpose is to promote safety and security, environmental protection, and efficient energy infrastructure and markets in the Canadian public interest, within the mandate set by Parliament in the regulation of pipelines, energy development and trade.

Canadian gas pipeline hit again

November 3, 2008. Canadian anti-terrorism officials are investigating the third bombing in three weeks of a natural gas pipeline in remote areas of British Columbia. The latest explosion in the isolated Dawson Creek area of north-eastern British Columbia appears to have been deliberately set, but did not pose any danger for area residents or pipeline workers.

The Royal Canadian Mounted Police indicated in a release that the latest attack was aimed at the same kind of sour-gas pipeline as the other two blasts on October 12 and 16. There is considerable local opposition to the expansion of such sour-gas well operations by EnCana Corp. Sour gas is natural gas tainted with toxic hydrogen sulfide, which many area residents believe pose risks to human and livestock health.

Iran urges India to commit to gas pipe plan

November 1, 2008. Iran wants India to commit to a project to export Iranian gas via Pakistan to the south Asian giant and measures have already been discussed to ensure supply security. Analysts say India has been treading cautiously over the $7.6 billion pipeline project because it wants to reduce the risk of supplies being cut during times of tension with Pakistan, its long-time rival. Iran would press ahead with the long- standing project even if India did not join in. The security of this project in each country will be with that country and negotiations so far have created conditions that have assured us this security will prevail.

The United States is trying to isolate Iran over its disputed nuclear plans and has been urging other countries and companies not to do business with the Islamic Republic. Iran, the world's fourth biggest oil producer with the second biggest gas reserves, wants nuclear energy so it can save its oil and gas for export. 

TAPI gas pipeline project hits snags

October 31, 2008. The much-delayed Turkmenistan-Afghanistan-Pakistan- India (TAPI) gas pipeline project has hit snags as Turkmenistan has failed to submit gas certification of the Daulatabad gas field to Pakistan. Turkmenistan was to submit a certificate about gas availability by October 1, 2008 which it again failed. The inordinate delay in submitting the gas availability certificate, has not only virtually marred the progress of the project, it also has swelled the cost of the project by 130 per cent to 7.6bn dollars in 2008 against earlier projected cost of 3.3bn dollars in 2004.

In the days to come, the cost of the project may further increase, keeping in view the projected escalation in price of cement, steel and other things required to build the pipeline. The provision of gas certification by Turkmenistan to buyer countries, particularly Pakistan and India, is mandatory to materialise the TAPI gas pipeline.

Pakistan, in its latest communication to the Asian Development Bank, which is playing a catalyst role between seller and buyer countries, registered its severe concern over the delay in gas certification by Turkmenistan. Turkmenistan claims that it has total gas reserves of 7.3 tcm but Pakistan and India want certification about the gas reserves before moving ahead with the TAPI gas pipeline project. Turkmenistan will supply 3.2 bcfd [billion cubic feet per day] and Pakistan, Afghanistan and India would share the gas. The Asian Development Bank would take up the issue of a comprehensive review of the feasibility study of the project.

US August oil demand down 975,000 bpd

October 30, 2008. U.S. oil demand in August was 975,000 barrels per day (bpd) less than previously estimated and down 1.758 million bpd from a year earlier, with petroleum consumption at the lowest level for any month since December 2001. U.S. oil demand in August was revised down by 4.8 percent from the EIA's early estimate of 20.242 million bpd to the agency's final demand number of 19.267 million bpd, and was 8.4 percent less than demand of 21.025 million bpd a year earlier. The final numbers were included in the EIA's monthly petroleum supply report and always differ from the initial estimates in the agency's weekly petroleum report. The monthly report reflects information on petroleum products supplied from all U.S. energy companies, while the weekly report surveys the biggest companies that represent about 90 percent of the market.

Crude oil supplies up slightly in Week

October 29, 2008. U.S. crude oil inventories increased by 0.5 million barrels in the week ending October 24. Crude inventories rose to 311.9 million barrels, reaching the upper half of their average range for this time of year. Gasoline inventories fell by 1.5 million barrels to 195 million barrels, putting gasoline stocks near the lower boundary of their average range.

Inventories of distillate fuels, which include heating oil, rose by 2.3 million barrels to 126.6 million barrels. Finished gasoline and gasoline blending components inventories also fell during the week.

EU clears Galp's buy of ExxonMobil Iberian units

November 4, 2008. The European Commission last week cleared, subject to conditions, the proposed acquisition by Galp Energia of Esso Portuguesa, Esso Espanola and a part of ExxonMobil Petroleum & Chemical.

The European Commission found that the proposed transaction as initially notified would have given rise to competition concerns in certain refined oil product markets in Portugal.

To resolve these competitive concerns, related to the Portuguese market, Galp Energia proposed to divest a sea terminal, which also includes a LPG bottling plant, a storage facility for liquid fuels and LPG and a blending plant for lubricants.

Moreover Galp Energia undertook to divest certain Esso shareholdings in airport joint ventures and other assets for into-plane operations in Portuguese airports.

The divestitures also include staff, customers and supply contracts. In light of these commitments, the European Commission concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

CNPC, KazMunayGas to cooperate on natural gas pipeline

November 4, 2008. On October 31, 2008, during the 7th prime ministers' meeting of the Shanghai Cooperation Organization held in Kazakhstan's capital Astana, CNPC and KazMunayGas signed a framework agreement on expanding natural gas and gas pipeline cooperation, witnessed by Premier Wen Jiabao and Kazak Prime Minister Karim Masimov.

According to the agreement, KazMunayGas shall take all necessary measures to ensure the natural gas produced by CNPC from Aktobe Oilfield be transported via the Kazakhstan-China Gas Pipeline (Phase II), in addition to supplying five billion cubic meters of natural gas to the pipeline as is promised.

Meanwhile, the two sides will jointly develop the Urikhtau gas condensate field and export 5 to 10 bcm of natural gas to China on the basis of meeting gas demand in Southern Kazakhstan. The Beineu-Bozoy-Kyzylorda-Shymkent section of the Kazakhstan-China Gas Pipeline will be constructed and operated together by the two companies under this principle.

The pipeline is designed to transport 10 bcm of natural gas per year. The two companies also agreed to build out the Kazakhstan-China Gas Pipeline (Phase I) judged on the amount of incremental natural gas resources.

Russia's Pacific oil pipeline to be completed by early ’14

October 31, 2008. According to Transneft a pipeline project linking Eastern Siberia and Russia's Far Eastern Pacific coast is expected be completed by early 2014. Transneft President Nikolai Tokarev said the construction of the western half of the Eastern Siberia-Pacific oil pipeline will be completed by the end of 2009 and the eastern half around late 2013 to early 2014.

The latest schedule means the joint project between Japan and Russia will be completed earlier than envisaged previously. In July last year, a senior official of Russia's Industry and Energy Ministry said construction on the eastern half of the route will begin in 2015 to 2017.

The pipeline is meant to ship Siberian oil to Japan and other markets. It will link the Siberian city of Taishet near Lake Baikal and Russia's Pacific coast via Skovorodino, the midpoint of the entire route.

The construction of the pipeline's China-bound branch line will begin in January to March 2009. Earlier this week, Russia and China struck a deal to build the branch line, running from the midpoint of the entire route to the Chinese border. Construction of the initial 2,400-kilometer route to Skovorodino started from Taishet in April 2006.

Putin pledges to clarify Mystery of pipeline sale

October 30, 2008. Kazakh President Nursultan Nazarbayev told Russian Premier Vladimir Putin the two states should jointly buy Oman's share in a major pipeline only to hear that Russia might have already bought it alone. Oman is a shareholder in CPC.

The proposal appeared to take Putin by surprise. Russia and Kazakhstan, the two governments with a stake in CPC, have first right of refusal on Oman's 7 percent stake in the consortium, the key export route for Kazakhstan's crude oil. Oman decided to sell its stake earlier this year but so far there has been no information on who may have bought it.

Russia has a 24 percent stake in CPC and Kazakhstan owns 19 percent. The rest belongs to private shareholders: Chevron, BP, Royal Dutch Shell, Exxon Mobil and Russian firms LUKOIL and Rosneft . BP is also considering selling its stake.

FERC okays waiver for Alliance pipeline

October 31, 2008. The Federal Energy Regulatory Commission (FERC) has approved a revision to the Alliance Pipeline L.P. (Alliance) tariff which allows Alliance to waive a gas quality specification on a first come, first served basis. The waiver will enable Pecan Pipeline (North Dakota), Inc. (Pecan North Dakota), a wholly owned subsidiary of EOG Resources, Inc. (EOG), to flow dense phase rich gas outside the liquefiable hydrocarbon specification currently contained in Alliance's FERC Gas Tariff. The Pecan North Dakota natural gas receipts will not have an operational impact on the Alliance system as this natural gas will be blended with much larger quantities entering from Canada, and the combined gas stream delivered to the Chicago market will remain within Alliance's FERC Tariff gas quality specifications. The FERC's decision shows a strong commitment to swiftly and effectively develop North Dakota's natural gas resources by utilizing existing infrastructure.

The Pecan North Dakota Transportation Agreement has an initial term of 10-years with options for renewal. The new interconnection near Towner, North Dakota, is scheduled to be on-line in mid 2009. Alliance Pipeline L.P. ("Alliance U.S.A.") owns the U.S. portion of the Alliance Pipeline system. Alliance U.S.A. is owned 50 percent each by affiliates of Enbridge Inc. and Fort Chicago Energy Partners L.P.

Iran cuts production by 199,000 bopd

October 31, 2008. Iran will cut its crude oil production by 199,000 barrels a day from November 1. The minister, Gholam Hossein Nozari, said the production decrease is in line with an OPEC decision last week to cut production by 1.5 million barrels a day in response to a sharp fall in oil prices.

OPEC may hold another urgent meeting if crude prices do not rebound. Benchmark crude prices slipped below $65 a barrel on the New York Mercantile Exchange, extending declines after data showed the U.S. economy contracted in the latest quarter.

Iran is OPEC's second largest oil exporter and has traditionally opposed any crude output increases by OPEC, arguing that it would cause prices to fall. Iran produces 4.2 million barrels of oil per day. The country's recoverable oil reserves are estimated at 137 billion barrels, or 12 percent of the world's overall reserves.

Indonesia awards 9 more oil, gas exploration licenses

October 31, 2008. Indonesia has awarded more oil and gas exploration rights on nine blocks to energy companies including U.S. firm Hess Corp. It has been offering new exploration rights and financial incentives for exploration in a bid to stem its steady production decline, which has turned the former OPEC member into a net importer of crude oil in recent years. There were many companies have bid for Semai V but Hess gave better terms for exploration.

The companies which awarded exploration rights will spend about $465 million for the first three years. There are potential oil and gas reserves at those blocks but we have to wait until the companies explore the wells there before we know the amount of reserves.

Indonesia also awarded Semai II blocks on offshore West Papua province to a consortium of Japan's Inpex, Thailand energy firm PTT, and U.S. firm Murphy Oil. The government awarded Downstream Mahakam block onshore of East Kalimantan to Singapore Petroleum. The government has awarded Gunting block, onshore and offshore of East Java province, to Esso Exploration International, a unit of Exxon Mobil.

Five other blocks were awarded to little-known domestic and foreign companies. Earlier this month, Indonesia awarded oil and gas exploration rights on 22 blocks to energy companies including Chevron Indonesia, a unit of U.S. oil major Chevron, and Conoco Phillips.

Romania, Gazprom discuss South Stream development, gas cooperation

October 29, 2008. Led by Vlada Rusakova, Member of the Gazprom Management Committee, Head of the Strategic Development Department, a Gazprom delegation paid a working visit to Romania. Participating in the delegation were also representatives of Gazprom export, Giprospetsgaz and the Russian Federation Embassy in Romania.

As part of the visit Vlada Rusakova met with Ioan Rusu, Director General of Transgaz S.A. and Lucian Stancu, Deputy Director General of Romgaz S.A. The meeting was held within the scope of the agreements reached during the Moscow meeting of Alexey Miller, Chairman of the Gazprom Management Committee, Constantin Grigorie, the Romanian Ambassador to Russia, Francisc Toth, Director General of Romgaz S.A. and Ioan Rusu, Director General of Transgaz S.A. on October 17, 2008.

The parties discussed cooperation prospects in the area of gas underground storage, as well as alternatives for developing the existing and constructing new transit capacities in Romania with due regard of the South Stream gas pipeline system projected in Southern and Central Europe.

 POWER

Power plant moves forward in southern Ohio

November 4, 2008. American Municipal Power-Ohio and its 81 participating member communities have voted to proceed with building a new coal-fired power plant in southern Ohio. The Columbus-based wholesale power supplier approved a limited notice to proceed. That does not mean construction will start. This is still contingent on receipt of all necessary permits and successful negotiations on state and local incentives.

But the limited notice to proceed means the project's contractor can start preliminary engineering and procurement of equipment related to the project. A deal with that contractor is to be finalized soon. The price tag on the project has climbed from $2.9 bn to just under $3.3 bn, and the plant would not be operating until 2014, about six months later than had been projected earlier. The delay is because of growing global demand for boilers and turbines. The new plant, near Racine in Meigs County, is being funded by communities in Ohio and four other states. These include Cuyahoga Falls, Hudson, Wadsworth, Orrville, Seville, Lodi, Brewster and Beach City. They will purchase the electricity from the 1,000 MW plant.

The project has come under fire from several environmental groups. Critics say the plant will contribute to global warming, and they call its anti-pollution system unproven and less effective. AMP-Ohio officials said the project will provide affordable and reliable energy to member communities, and they defended the Powerspan technology that is being used to clean up pollution.

The plant, with its ammonia-based scrubbing system, will be the cleanest in Ohio and one of the cleanest in the country. AMP-Ohio operates a coal-fired plant near Marietta, a hydroelectric project on the Ohio River and a commercial wind farm near Bowling Green.

American Municipal Power-Ohio and its 81 participating member communities have voted to proceed with building a new coal-fired power plant in southern Ohio. The Columbus-based wholesale power supplier approved a limited notice to proceed. That does not mean construction will start.

This is still contingent on receipt of all necessary permits and successful negotiations on state and local incentives. But the limited notice to proceed means the project's contractor can start preliminary engineering and procurement of equipment related to the project. A deal with that contractor is to be finalized soon.

Switzerland company to advise on hydropower projects in Myanmar

October 31, 2008. A Switzerland company will provide consulting services for implementation of hydropower projects in Myanmar. Under the agreement, signed by the Hydropower Implementation Department (HID) under the Myanmar Ministery of Electric Power-1 and the Colenco Power Engineering Limited of Switzerland in the new capital of Nay Pyi Taw, the Switzerland company will supply consulting services for in-house engineering services for the implementation of hydropower projects in Myanmar.

MoU signed earlier this month in Nay Pyi Taw between the Myanmar Ministry of Electric Power-1, the Italian-Thai Development Public Co. Ltd based in Thailand and the Windfall Energy Services Ltd of British Virgin Island based in Singapore, the two foreign companies will launch the hydropower project of 600 MW in Myanmar's southern Tanintharyi division.

The MoU came after India's National Hydroelectric Power Corporation Ltd took up two similar projects in Myanmar last month, namely the Htamanthi's of 1,200 MW generating capacity and the Shwesayay's of 600 MW under similar MoU. In recent years, companies from Thailand, China, South Korea, Bangladesh and India were engaged in Myanmar's hydropower projects. Myanmar has signed five contracts respectively with some Chinese companies since 2004 on the implementation of the country' s 790 MW Yeywa hydropower project on the Myitnge River which can generate 3.55 billion kilowatt-hours of electricity annually upon completion.

Other China-involved hydropower projects went to Upper Paunglaung by the Yunnan Machinery and Equipment Import and Export Co Ltd (YMEC) and the Upper Thanlwin by the Farsighted Investment Group Co Ltd and Gold Water Resources Ltd. Moreover, the China Power Investment Corporation (CPI) was also reportedly to build seven hydropower projects for Myanmar on the confluence of Ayeyawaddy river and Maykha and Malikha rivers in Kachin state with a combined capacity of 13,360 MW.

Ukraine to end electricity imports from Russia

November 4, 2008. Ukraine will stop importing electricity from Russia on December 1. Ukraine began importing electricity from Russia on September 15 due to a shortage of coal and unscheduled repairs to the Khmelnitsky nuclear power plant. From September 15 to November 1, Ukraine imported 637 million kW/h from Russia. Import volumes have considerably decreased. A decision has been taken to gradually decrease volumes to a minimum level and finish up at zero on December 1.

Duke doubles cost estimate for nuclear plant

November 4, 2008. Duke Energy Carolinas has raised the expected construction costs of its proposed Lee Nuclear Station to $11 bn, excluding financing costs. That is roughly twice the company’s original estimates. Based on the financing costs for Duke’s new coal-powered unit at Cliffside Steam Station, financing expenses would increase the nuclear plant’s price to more than $14 bn.

The new estimate is included in a cover letter Duke has sent to the N.C. Utilities Commission with its 2008 Integrated Resource Plan. That annual plan outlines Duke’s expectations for demand over a 20-year period and outlines how the utility expects to meet the demand. The plan also upgrades the expected capacity of the Cliffside unit to 825 MW. As originally designed, it was rated at 800 MW.

The plant is being built on the border of Cleveland and Rutherford counties. Duke’s plan also discloses that the troubled U.S. economy has prompted the company to delay the construction of its proposed Dan River and Buck combined-cycle natural gas plants. The construction of each plant will be delayed for a year because the weak economy may affect demand and because the current credit crunch makes financing unattractive. The first phase of the Buck plant in Rowan County will open in 2011, with construction of a second phase to start the following year. The Dan River facility in Rockingham County will open in the summer of 2012.

The cost estimates for Duke’s proposed nuclear plant in Gaffney, S.C., have proved controversial. Three years ago, Duke gave an estimate of $4 bn to $6 bn for the two 1,117 MW reactors it proposed to build. Duke had not updated those figures until now.

Opponents of the project have noted that nearly identical plants proposed in Florida will cost as much as $17.8 bn. The Lee plant is slated for completion in 2018. But Duke’s new estimates for the project are not adjusted for future inflation. Company spokeswoman Paige Sheehan says Duke did not attempt to calculate how much the final costs would be, with inflation factored in. The company chose to release its new estimate based on the current costs.

WB's partnership provides $8 mn to increase electricity access in rural area

November 2, 2008. The World Bank signed a $US 8 mn grant agreement with the Ethiopian Electric Power Corporation (EEPCo) to support increased access to electricity in rural towns and villages with grid access, within the context of the Universal Electricity Access Program (UEAP) in Ethiopia.

Acting as administrator for the Global Partnership on Output-Based Aid (GPOBA), the World Bank said in a statement that up to 228,571 low-income households will benefit from the scheme through a new or regularized electricity connection and the provision of two energy-efficient Compact Fluorescent Lamps (CFLs). The lamps will reduce their electricity consumption by 55 percent and make their bills more affordable.

The statement added that under the its scheme, GPOBA will provide a subsidy of US$35 for each new eligible rural household. EEPCo will bear all the construction and commercial risks as it will not receive the subsidy until after independent verification of the outputs or services. Among the benefits for rural households, better quality lighting will reduce indoor air pollution from kerosene lamps, help children to study at night, and enable families to increase their income by additional home-based economic activity.

EEPCo has been able to almost double the number of electrified towns and customers served in the last five years, with the support of international donors including the International Development Association (IDA), the concessional lending arm of the World Bank. However, even in areas with grid access, many families are unable to have a metered connection installed because they cannot afford the high one-time connection fee.

City of Dallas picks electricity provider

November 30, 2008. SUEZ Energy Resources NA, the retail energy business of GDF SUEZ, has been selected by the City of Dallas to supply all of the city’s electricity for municipal activities through December 2010. Forty-percent of the energy supply will come from renewable energy produced using wind. In a press statement, the City of Dallas said it was concerned with finding a provider that could maintain financial viability in rocky economy and well into the future.

Houston-based Suez Energy provides services in Texas, Delaware, Massachusetts, Maine, Maryland, New York, New Jersey, Pennsylvania, Illinois, Connecticut and Washington, D.C. The company will offer the city of Dallas almost 2,500 MW in the Oncor territory. Suez Energy Resources will continue on as the provider of electricity, delivering service to city office buildings, the convention center, water utilities and nondemand meters such as street lights and traffic lights.

Lower electricity tariffs, chamber tells Malaysian govt

November 4, 2008. According to Penang Chinese Chamber of Commerce government should lower electricity tariffs. According to PCCC president Tan Sri Tan Kok Ping the government should order Tenaga Nasional Bhd to lower its electricity rates to help the industries, the people and the country face the global economic slowdown.

The latest hike in electricity tariffs was effective July 1 following the petrol hike in June. Now that the government had brought petrol prices down by 65 sen since June, the electricity rates should likewise be brought down. Tan was responding to Prime Minister Datuk Seri Abdullah Ahmad Badawi’s statement that there was no reason for prices of consumer goods to remain high with the falling oil prices.

Libya, Russia sign civil nuclear deal

November 1, 2008. Libya and Russia signed a civil nuclear cooperation deal. A cooperation agreement was signed in the area of the peaceful use of civilian nuclear, particularly in the design and construction of reactors and the supply of nuclear fuel. The deal also extended to nuclear use in medicine and nuclear waste treatment. Russian officials, did not confirm the accord.

Korea to provide $45 mn loan for hydropower project

October 30, 2008. The Government of the Republic of Korea has agreed to provide a loan assistance of $45 million (about Rs 354.15 million) to the Government of Nepal for the implementation of the 30-MW Chameliya Hydroelectricity Project, located at Sikhar VDC in Darchula district.

The loan will be obtained from the Export-Import Bank of Korea, the external lending window of the government operating for the Economic Development Cooperation Fund (EDCF) of the government of Korea, according to the ministry of finance.

The objective of the project, according to the ministry, is to mitigate the country’s electricity deficit and respond to increasing demand for electricity in the Far Western Region.

The assistance will also help in raising living standards of the locals in the region and contribute to the development of regional industries. The project is being executed by the Nepal Electricity Authority and will be completed by May 2011.

Future still dim for nuclear power

October 29, 2008. Australia should be prepared to accept nuclear waste from overseas countries if we intend to sell uranium, but nuclear power is unlikely to attract significant private sector investment in the near future. Experts debated the future of nuclear power as part of a roundtable discussion on potential solutions to climate change at the Australia Unlimited conference in Melbourne.

Selena Ng, nuclear business development manager with Areva Australia, 40 nuclear power plants were being built in 14 countries and global nuclear capacity could quadruple by 2050. While the bulk of the growth would be in China and India, there would be new nuclear projects in Vietnam, Thailand and Indonesia. To meet the projected demand for nuclear power, the world will need well over 200,000 tonnes of uranium per year by 2050.

The majority will have to be by mining. Australia possesses more uranium than any other country but currently produces less than one-fifth of the uranium needed. Australia would be well placed to benefit economically from the growth in demand in nuclear power. In some sense, it has an obligation to do so to enable the emerging countries, in particular, to meet their clean energy needs.

Private sector participation in small hydro power projects

November 4, 2008. Twenty-three states have announced policy for private sector participation in Small Hydro Power projects. With this response, investment from private sector in small hydro power projects has been quite good. During the 10th Plan, out of a capacity addition of 537 MW from SHP projects, 336 MW have been set up by the private sector. SHP projects are governed by State Government Policies. The procedures of allotment of sites and other statutory clearances take some time in the State Governments. The Ministry has been pursuing the States to expedite the process in order to avoid delays.

PM refers bio-fuel policy to Pawar panel for a relook

November 3, 2008. The Centre is back to the drawing board on the national bio-fuel policy, with warnings emerging that it had jumped the gun by paving the way for commercial expansion of the alternative fuel without plugging the techno-economic gaps in the largely untested sector through an experimental phase. Even though a GoM chaired by Sharad Pawar had cleared the bio-fuel policy while rejecting the proposal for demonstration projects, the Prime Minister has referred it back to the Pawar panel for a relook.

The PM, who saw the proposal at a CCEA meeting in September, has sought a re-evaluation of the rural development ministry's suggestion that demonstration projects were required to test the ground for commercialisation. RD minister had protested to agriculture minister Pawar over the decision arrived at by the GoM in his absence after a year of the policy hanging fire before the panel.

With the GoM set to consider the bio-fuel policy afresh, there is anticipation in the fledgling industry if there would be a rethink on the course of action India should take in its bid to bring out the alternative to fossil fuel.

The demonstration project entailing plantation of Jatropha and Pongamia on five lakh hectares of waste, degraded and marginal land under rainfed conditions would help fill the knowledge gap on how viable was the idea which is seen as having a big potential to reduce the dependence on oil imports. It would, it is argued by experts, help refine the process through R&D, thus paving the way for commercialisation.

Wind power can prevent climate change

November 3, 2008. Wind power could produce 12 per cent of the world’s energy needs and prevent 10 billion tonnes of carbon dioxide emissions within 12 years. The ‘Global Wind Energy Outlook 2008,’ published by the Global Wind Energy Council (GWEC) and Greenpeace International, looks at the global potential of wind power up to 2050 and found that it could avoid as much as 1.5 billion tonnes of carbon dioxide emissions every year, which would add up to over 10 billion tonnes in this timeframe.

The report also explains how wind energy can provide up to 30 per cent of the world’s electricity by the middle of the century. China has the world’s fastest growing wind power market and is expected to become the biggest manufacturer of wind energy equipment by 2009-end.

Wind energy has already become a mainstream power generation source in many regions around the world and it is being deployed in over 70 countries. In addition to environmental benefits, wind energy provides a sustainable answer to increasing concerns about security of energy supply and volatile fossil fuel prices.

It is becoming a substantial factor in economic development, providing more than 3,50,000 ‘green collar’ jobs both in direct and indirect employment. By 2020, this figure is projected to increase to over 2 million.

The existing power sector is responsible for around 40 per cent of global carbon dioxide emissions and there are only three options to reduce this by 2020 energy efficiency, fuel switching, and renewables, predominantly wind power. A coalition of wind companies, associations and non-governmental organisations will launch a campaign shortly to increase government action on wind energy globally.

IOB offers support for biofuel projects

November 2, 2008. Indian Overseas Bank has offered to extend financial support to viable biofuel plant cultivation projects. Towards this, the bank conducted a workshop jointly with Nabard on ‘biofuel plant cultivation’. The programme was co-sponsored by Nabard under Agriculture Technology Transfer Fund Scheme.

AP to hike power purchase price for bio-mass units

October 29, 2008.  The Andhra Pradesh Government has announced enhancement of power procurement price for bio-mass generation units from Rs 3.15 a unit to Rs 3.79. This hike will be effective shortly after necessary notification is made. It will be valid for one year, impacting total generation capacity of about 200 MW of bio-mass projects in the State. However, the hike will be subject to approvals by the Andhra Pradesh Electricity Regulatory Commission.

According to the proposal, AP Transco and distribution companies will pay additional 64 paise a unit for these units even as the representatives of the bio-mass units in the State are demanding Rs 5 for a unit to make them financially viable.

The State Government has increased the power procurement price with the option of meeting the differential pricing with necessary financial support. The State has invoked certain provisions of the Electricity Act, 2003, wherein the Government is empowered to issue policy directives. These changes are subject to regulatory approvals.

ADM, Cabrera to produce ethanol from sugarcane

November 4, 2008. Archer Daniels Midland Co. and Grupo Cabrera an agreement to form a joint venture to produce ethanol from sugarcane. The partnership will bring together ADM's expertise in ethanol production, logistics and marketing with Cabrera's extensive knowledge of sugarcane agriculture and production.

As the world's need for food and energy grows, agriculture and ADM will provide renewable, responsible solutions. This joint venture will leverage the expertise of both participants to meet growing Brazilian demand for ethanol. Importantly, this partnership also advances ADM's goals of diversifying our feedstocks and growing our global bioenergy business.

The joint venture will construct two processing complexes, each consisting of a sugarcane plantation, a sugar mill, an ethanol distillery and a biomass- powered cogeneration facility to provide power and steam. The complexes will be located in Limeira Do Oeste in the state of Minas Gerais, and Jatai in Goias. Upon completion, each mill will have crush capacity of 3 mtpa.

Juhl Wind acquires next generation power systems

November 4, 2008. Juhl Wind bought Next Generation Power Systems and a commercial building in Pipestone. Juhl Wind acquired Next Generation Power Systems for 92,143 shares of unregistered Juhl Wind common stock, valued at $3.50 per share, and bought the Pipestone Building from Next Generation Power Properties for $144,000.

The purchase of Next Generation, a wind-turbine and solar company in Pipestone, will add smaller wind-turbine and solar expertise to its portfolio. The U.S. bailout package included an extension of solar tax credits and a lifting of any caps on such credits, [and] we believe we will be matching solar systems more frequently with our wind systems for these types of customers.

Xcel Energy planning wind project

November 3, 2008. Xcel Energy says it will be developing new wind farms in southeastern North Dakota and western Minnesota. Xcel and the enXco energy company will build a 150-megawatt wind farm in Dickey and McIntosh counties. It's called the Merricourt wind project. It will include 100 wind turbines and will cost about $400 million to build. Xcel hopes to get North Dakota regulatory approval for the project in the summer of next year, and start building in late 2010. The wind farm should be operating by December of 2011. Xcel Energy has about 87-thousand North Dakota electric customers. It provides electricity to Fargo, West Fargo, Grand Forks, Minot and some smaller nearby cities.

Madison gas & electric buying more wind power

October 31, 2008. Madison Gas and Electric is now buying 50 MW of wind power-generated electricity from a wind farm in northeast Iowa under a 10-year agreement with a unit of FPL Energy. The wind farm is among four new wind farms in Wisconsin and Iowa that began to produce electricity this year, expanding Madison-based MGE's wind power capacity by more than 12 times to 137 MW in 2008. The latest green power comes from FPL Energy's Endeavor II Wind Energy Center in Osceola and Dickinson counties in Iowa. Renewable energy is expected to account for more than 12 percent of MGE's total energy supply in 2009, up from 1.6 percent in 2007.

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