Energy News Monitor |Volume V, Issue 22

How suitable is coal based power policy for India? (part– II)

 

he fast receding Himalayan glaciers, increase in sea level rise as experienced in Sundarbans, unpredictable weather patterns etc. have all been experienced and confirmed in recent years. These corroborate the findings of a report titled as “BLUE ALERT “commissioned by Greenpeace, in which about 120 Million people are estimated to migrate to larger cities towards the second half of this century because of the direct/ indirect effects of Global Warming in the business-as-usual scenario. The colossal impact of such large scale migration to large cities, whose infrastructures are already stretched to limits, is hard to imagine. This report concludes by saying that Climate Change is the most serious environmental problem South Asia has ever faced, and in the absence of early policy intervention, it is likely to cause devastating social and economic problems for the region.  Taking very cautious approach towards burning large quantities of fossil fuels should be the primary plank on which such positive policy interventions are needed. In this regard adding coal based power plants should be the last resort in meeting the legitimate demand for electricity.

For these and many other reasons a number of countries around the world are contemplating decommissioning of old and inefficient coal power plants, and also not approving new plants. The idea of clean coal power and carbon sequestration largely appears to be theories only so far, and may not turn out to be environmentally and commercially viable. 

Costs & Benefits and societal issues

The above discussed issues are particularly relevant to states like Karnataka which have no known fossil fuel reserves, and which may be highly water stressed states. The Karnataka’s CM is on record saying that locating coal power stations in the state is not economical because of the need to transport coal over long distances. He is reported to have said this at the time of signing the agreement with Chattisgarh to set up a coal power plant in that state for Karnataka’s use. It is ironical that the same state government is planning to set up few coal power stations in Karnataka, in addition to asking the central government for setting up two Ultra Mega Power Projects in Karnataka.

The National Forest Policy recommends a forest/ tree cover of 33% of the land surface for a healthy environment, whereas at present this percentage is less than 20% both in Karnataka and India. The “Economics of Climate Change” by Sir Nicholas Stern has estimated that preventing deforestation is the quickest and cheapest way of reducing the Green House Gas (GHG) emissions. In this background it is worthy of notice that large addition of coal power capacity will reduce the forest cover at an accelerated pace, because most of the coal deposits are below or close to thick forests.  Setting coal power stations in these areas will also demand sizable chunk of forests for buildings, townships and transmission lines.  It should be a matter of great concern to the civil society that while forests are well known to be very good sinks of Carbon-di-Oxide, setting up of coal power stations will not only reduce forest cover but will also result in large addition of GHG emissions. 

If an objective study of costs V/S benefits of setting up a coal based power station is carried out, the direct and indirect costs to the society will be so heavy that the benefits will be tiny in comparison. Such analysis of costs V/S benefits in case of each coal based power station should be insisted for by the society for all future projects.

Sustainable alternatives

It is also amazing that many people in influential positions are advocating adding hugely to the generating capacity without even mentioning the potential impact of such additional capacity on social and environmental aspects of our densely populated society.  Our society would do well to take a holistic look at the electricity needs of all sections of the society without ignoring other needs of the society such as clean air, water, agricultural and forest lands, right to live in one’s ancestral property without being forcibly evacuated etc. We have no other option but to take an "integrated energy resource management" approach which will include the highest possible operational efficiency of every asset, effective Demand Side Management, optimal energy conservation and wide spread use of new and renewable sources of energy.

An application of such a holistic approach, in a pilot study for Karnataka, has demonstrated that it is techno-economically feasible to meet fully the legitimate demand for electricity of all sections for next 10-15 years without having to add a single MW of generating capacity based on conventional energy sources. There is a huge potential available for our society in the areas of energy efficiency, Demand Side Management, energy conservation and wide spread use of new and renewable sources of energy. Being a tropical country, India has tremendous potential in the areas of renewable energy, which has many advantages as compared to the conventional sources of energy.  It would be a great disservice to burden the society with huge liabilities of coal based power stations without fully optimizing the use of existing electricity infrastructure. Keeping in view the social and environmental obligations to the present and future generations, the option to go for large size conventional energy sources should be only a last resort.

Instead of dreaming to blindly emulate Chinese practice of adding huge capacity addition of coal power units, it is essential to address effectively the pathetically low efficiencies in the usage of our existing power infrastructure. If we objectively take into account the operational inefficiencies in generation, transmission, distribution and utilisation, the overall efficiency in the usage of the generated electricity for productive or developmental purposes is probably only about 50%, whereas at the international level it is known to be about 85 to 90%. With Aggregate T&D loss of about 33% and with about 40% loss in the agricultural pumping system (which itself is known to be consuming about 35% of all the electricity sold in the country) we can never hope to provide energy security to our masses without increasing the energy efficiency to a much higher level. With so much enthusiasm at various levels of the government to increase the generating capacity, it may even be possible to increase it by five times by 2031-32, as recommended by Planning Commission, but at a huge cost to the society. By that time our environment would have reached a point of no return. 

It is pertinent to mention here that it is not inconceivable to meet most of our electricity needs without basing our policy on coal. A recent report by Earth Policy Institute, USA has discussed the feasibility of meeting the electricity needs entirely without coal based power. In this report titled, ”Time for Plan B: Cutting Carbon Emissions 80% by 2020”, it has been convincingly demonstrated that a good combination of efficiency improvement measures and renewable energy sources can eliminate the need for coal based power stations.  In Indian scenario, if such feasibility appears to be unrealistic, the potential to drastically reduce the need for coal based power stations cannot be questioned.

Our society must take tough decisions such as taking stock of the situation in an objective manner, and adopting a holistic approach to the needs of various aspects of our society than just adding coal based power plants. The present generation has the obligation not to leave polluted rivers or barren agricultural lands or degraded forests or mountains of ash to the future generations just to meet our insatiable demand for electricity. The present generation will probably go down in the history of the mankind as being directly responsible either for saving the bio-diversity against so many odds or for leading to the destruction of human race.  

 

 

Concluded

Views are those of the author                       

 

The Nuclear Illusion (part– II)

AMORY B. LOVINS AND IMRAN SHEIKH

Continued from Volume V, Issue No. 21…

uring the nuclear revival now allegedly underway, no new nuclear project on earth has been financed by private risk capital,⁸ chosen by an open decision process, nor bid into the world’s innumerable power markets and auctions.⁹ No old nuclear plant has been resold at a value consistent with a market case for building a new one. And two strong global trends—greater transparency in governmental and energy decision-making, and wider use of competitive power markets—are further dimming nuclear prospects.

The Economist observed in 2001¹⁰ that “Nuclear power, once claimed to be too cheap to meter, is now too costly to matter”—cheap to run but very expensive to build. Since then, it has become severalfold costlier still to build—and in a few years, as old fuel contracts expire, it is also expected to become severalfold costlier to run. As we’ll see, its total cost now markedly exceeds that of other common power plants (coal, gas, big wind farms), let alone the even cheaper competitors described below—cogeneration, some further renewables, and efficient end-use of electricity. Higher fossil-fuel prices since 2001 haven’t improved nuclear power’s economic case, for two reasons: its own costs have risen even more (its actual fossil-fuel competitors don’t include oil), and its formidable new competitors use little or no fossil fuel and generally exhibit falling, not rising, prices.

U.S. nuclear operators’ impressive success¹¹ in improving reliability and performance (through experience, better management, ownership consolidation, shut-down lemons, and com-pliant regulation) have been unable to offset prohibitive capital costs. To deemphasize this hurdle, the industry emphasizes its low operating costs, often comparing the cost of just running plants already built with the total costs of building and operating other kinds of new plants. The term “generating costs” or “production costs,” widely used in such misleading comparisons, refers to bare operating costs without capital costs for construction or (usually) for major repairs.¹²

The nuclear industry has consistently underestimated its capital costs, often by large factors, and then claimed its next low forecasts will be accurate.¹³ Of 75 U.S. plants operating in 1986, the U.S. Energy Information Administration found two-year-cohort-average cost overruns of 209–381%.¹⁴ This bankrupted a New Hampshire utility. In the Northwest, the Washington Public Power Supply System (WPPSS) fiasco caused the biggest-ever U.S. municipal bond de-fault ($2.25 billion), saddled the Bonneville Power Administration with a $6-billion debt, and raised wholesale electric rates more than 500%. Seasoned investors still bear the scars. As Mark Twain remarked, a cat that sits on a hot stove lid will not do so again, but neither will it sit on a cold one. Yet some widely quoted recent studies claim new-nuclear costs will match or beat the lowest ever observed in the United States¹⁵—assuming standardization and construction stream-lining that so far are not actually occurring.¹⁶ 

The U.S. experience with 1970s and 1980s nuclear construction was uniquely dismal—as Forbes put it,¹⁷ “the largest managerial disaster in U.S. business history, involving $100 billion in wasted investments and cost overruns, exceeded in magnitude only by the Vietnam War and the then Savings and Loan crisis.” That economic failure is the main reason why no U.S. nuclear plant ordered after 1973 was completed, and all orders placed since 1978 and 48% of all 253 U.S. orders ever placed were cancelled. Moreover, no new orders have yet been placed: recent license applications are placeholders in the queue for subsidies, which are largest for early applicants, but are not orders and are not yet financed. 

The industry blames its U.S. disappointments chiefly on citizen intervention. Yet most if not all other countries with big nuclear programs but no effective citizen intervention, such as Canada, Britain, Germany, France, Japan, and the Soviet Union, also suffered substantial nuclear-cost escalation, and their nuclear construction forecasts collapsed in similar fashion^.18 Thus whatever the political and regulatory system, new nuclear plants’ costs, compared with competitors’, are the dominant predictor of whether they will be ordered and whether, if built, they can repay their investors. Without confidence of a fair risk-adjusted return on and of their capital, capitalists won’t invest.¹⁹ Are they now confident that the causes of past cost overruns have been corrected and that new causes of runaway costs are not emerging?  What would new nuclear plants cost?  Decades-old cost data can be a poor guide to a different future, so in 2003, a prominent MIT team published the first of just two thorough, independent, and evidence-based²⁰ economic analyses. It found that new nuclear plants could not compete with new central power plants burning coal or natural gas,²¹ though the gap might be considerably narrowed by high carbon taxes plus, if effective, huge subsidies (since approved) for the next half-dozen U.S. nuclear units to be built. 

In June 2007, a Keystone Center study group²² sponsored by eleven organizations—nine of which sell, buy, or are allegedly about to buy nuclear plants—raised the MIT study’s nuclear cost estimates from 7.7–9.1¢/kWh (kilowatt-hour) to 8.3–11.1¢/kWh (all in 2007 $ at the power plant). This was mainly due to rapidly escalating capital costs, but the Keystone group also raised projected nuclear fuel costs, after current contracts expire in ~2012, by ~2–3× with open or ~2× with closed (reprocessing-based)²³ fuel cycles, due to long-mismanaged uranium and enrichment activities. 

At some sponsors’ insistence, the Keystone group studied nuclear costs in isolation and didn’t compare them with any alternative. Those have escalated too, though by less: in the three years ended 3Q2007, North American nominal construction costs for power plants surged 76%, to 2.31× year-2000 levels for all main types or 1.79× for non-nuclear types.²⁴ But regardless of how non-nuclear plants fared, the Keystone new-nuclear busbar-cost estimate definitively rebuts 2–3×-lower industry claims: indeed, leading trade journal Nuclear Engineering International dryly remarked that the industry’s choice “to either focus on other aspects—in particular the ‘finding’ that nuclear is a viable option for dealing with climate change—or ignore the [Key-stone] report altogether” is “anomalous, and suggests a certain amount of discomfort with the findings.”²⁵ For instance, the Nuclear Energy Institute continues deliberately to misrepresent the Keystone findings.²⁶  

Since the Keystone findings, new nuclear plants’ uniquely rapid capital-cost escalation, far from abating, has accelerated. The same top trade journal summarizes how the latest analyses, including one by Keystone coauthor Jim Harding (former director of strategic planning at Seattle City Light), have found the Keystone report’s lower cost range of $3,600/kW “no longer believable” and its upper range of $4,000/kW “probably low.”²⁷ Harding’s estimate of total cur-rent construction costs (2007 $ including interest during construction) of ~$4,300–4,550/kW matches prospective customer Constellation’s published, then redacted, estimate of ~$4,300/kW.²⁸ That’s slightly above Standard & Poor’s (S&P’s) May 2007²⁹ and American Electric Power’s August 2007 estimates of ~$4,000/kW, but well below Moody’s October 2007 estimate³⁰ of ~$5,000–6,000/kW—which Moody’s called admittedly “only marginally better than a guess” but still solid grounds for caution.

Notes:                                                 

8 Some vendors and prospective buyers, however, have made relatively small internal preconstruction investments in design, licensing, or fees to reserve manufacturing slots for critical components. 

9 P. Bradford, “Nuclear Power’s Prospects in the Power Markets of the 21st Century,” 2005, Nonproliferation Educa-tion Center, www.npecweb.org/projects/Essay050131NPTBradfordNuclearPowersProspects.pdf.

10 Cover story, 19 May 2001.

11 Thanks to a market-driven combination of plant- and firm-level reforms and support by the Institute of Nuclear Power Operations. The results are summarized by prominent economist Paul Joskow, “Prospects for Nuclear Power: A U.S. Perspective,” U. of Paris—Dauphine, 19 May 2006, http://econ-www.mit.edu/files/1187.

12 Much of the existing global nuclear fleet has incurred major maintenance costs, e.g., to replace corroded steam generator tubes. A common U.S. practice is to capitalize such “net capital additions” rather than expensing them, so they appear on the owner’s balance sheet but are not counted as an operation and maintenance cost as normal repairs are. This can significantly understate operating costs while causing negative depreciation on the balance sheet.

13 P. Joskow (ref. 11): “Nobody has ever overestimated the construction cost of a nuclear power plant at the pre-construction stage.” Joskow also correctly notes that many industry cost estimates exclude certain “owner’s costs” such as engineering, land, insurance, spares, training, and licensing/regulation.

14 USEIA data summarized in www.neimagazine.com/journals/Power/NEI/November_2007/attachments/Table1.jpg, from M. Gielecki and J. Hewlett, Commercial Nuclear Power in the United States: Problems and Prospects, USEIA, 1994 (http://tonto.eia.doe.gov/ftproot/features/hewlett1.pdf). These “overnight costs,” a common conven-tion, exclude interest during construction or other owner’s costs, which can as much as double total construction costs. The authoritative analysis of the initial U.S. reactor program is I.C. Bupp and J.-C. Derian, Light Water: How the Nuclear Dream Dissolved, Basic Books (NY), 1978.

15 J.G. Koomey and N. Hultman, “A Reactor-Level Analysis of Busbar Costs for U.S. Nuclear Plants, 1970–2005,” En. Pol. 35(11):5630–5642 (Nov 2007), http://dx.doi.org/10.1016/j.enpol.2007.06.005; N.E. Hultman, J.G. Koomey, and D. Kammen, “What History Can Teach Us About the Future Cost of U.S. Nuclear Power,” Envtl. Sci. & Tech-nol. pp. 2088–2093, 1 Apr 2007 (American Chemical Society); N.E. Hultman and J.G. Koomey, “The risk of sur-prise in energy technology costs,” Envtl. Res. Letters 2(034002):1–6 (2007).

16 M. Wald, “Plan to Build Reactors Is Running Into Hurdles,” N.Y. Times, 5 Dec 2007, www.nytimes.com/2007/12/05/business/05nuke.html. So far, of three firms seeking U.S. licenses to build and run five reactors, one firm wants more than a dozen significant changes to a preapproved design, and two propose de-signs not yet finally approved. A fourth firm has ordered parts for a plant whose design isn’t yet even submitted to regulators. Regulators had hoped for just 2–3 standard designs, but there are already five with more on the way.

17 J. Cook, “Nuclear follies,” 11 Feb 1985. 

18 A.B. Lovins, “The origins of the nuclear power fiasco,” pp. 7–34 in J. Byrne and D. Rich, eds., The Politics of Energy Research and Development, Energy Policy Studies, Vol. 3 (Transaction Books, New Brunswick / Oxford), 1986, RMI Publ. #E86-29.

19 Some industry observers emphasize logistical and political constraints that jeopardize any nuclear revival, e.g. at the 2007 American Nuclear Society meeting: “Nuclear Renaissance Faces Formidable Challenges,” Power Eng. Intl., Aug 2007, http://pepei.pennnet.com/display_article/303716/6/ARTCL/none/none/Nuclear-Renaissance-Faces-Formidable-Challenges/. Those constraints are real, but I think those of economics and financing are more basic.

20 As distinguished by industry and government projections that just quoted each other’s hopes, such as the World Nuclear Association’s “authoritative” claim of ~$1,000–1,500/kW twin-unit overnight costs (~2004 $) (“The New Economics of Nuclear Power,” Dec 2005, www.world-nuclear.org/reference/pdf/economics.pdf), or the 2004 Uni-versity of Chicago study, whose sketchy analysis of observed costs led it to project new-reactor power costs, in favorable regulatory regimes, at or below the lowest ever observed in the United States (Koomey and Hultman, ref. 15).

21 J. Deutsch and E. Moniz, eds., The Future of Nuclear Power, http://web.mit.edu/nuclearpower/. For lack of time and funding, the MIT study explicitly didn’t examine the non-central-station competitors compared here, and there-fore has no analytic basis for its “judgment” that nuclear power merits continued subsidy and support.

22 Nuclear Power Joint Fact-Finding, June 2007, Keystone Center (Keystone CO), www.keystone.org/spp/documents/FinalReport_NJFF6_12_2007(1).pdf.

23 A concise summary of why reprocessing complicates waste management and nonproliferation is Gilinsky and Macfarlane’s dissent to the National Research Council’s Review of DOE’s Nuclear Energy Research and Development Program, 29 Oct 2007, http://books.nap.edu/catalog.php?record_id=11998.

24 Cambridge Energy Research Associates’ Power Capital Costs Index (PCCI, http://ihsindiexs.com/index.htm) is based on overnight costs for three overseas nuclear plants adjusted to U.S. factor costs, plus ten combined-cycle gas-fired units, nine coal, four gas-fired turbines, and four wind farms. Another estimate, from Table 3.1 in MIT’s 2007 study The Future of Coal, http://web.mit.edu/coal/, found 2004 busbar costs for new utility coal plants ~5¢/kWh (2007 $) but pegged 2004–07 real capital-cost escalation at ~25–30%. Some estimate 30–50%. Jim Harding’s Nov2007 NPEC-Carnegie speech suggests coal busbar costs ≥9¢/kWh, vs. ~12–15¢ nuclear, for plants ordered around the end of 2007.

25 “How much?” Nuclear Engineering Intl, 20 Nov. 2007, www.neimagazine.com/storyprint.asp?sc=2047917.

26 In summer 2007 I corresponded with the NEI’s President, retired Vice Admiral Skip Bowman and his VP of Communications, Scott Peterson. I pointed out that NEI’s press release’s headline falsely claimed that the study “affirms nuclear energy’s competitiveness in [a] climate-constrained world,” although the study made no economic comparison and the NEI press release says nothing about the study’s unfavorable cost findings. NEI admitted to me that its claim of competitiveness was only NEI’s opinion based on its own analyses—then refused to amend its re-lease, still up at www.nei.org/newsandevents/newsreleases/keystonecenterreportaffirmsnuclearenergyscompetitiveness/.

27 Quoted in Nucl. Eng. Intl, ref. Error! Bookmark not defined.; J. Harding, “Economics of Nuclear Power and Proliferation Risks in a Carbon-Constrained World,” El. J. 30(20):1–12 (Nov. 2007), doi:/10/1016/j.tej2007/10/012, www.energy.ca.gov/2007_energypolicy/documents/2007-06-25+28_workshop/presentations/panel_4/Jim_Harding_Economics_of_Nuclear_Power_and_Proliferation_Risks.pdf; “Seven Myths of the Nuclear Renaissance,” Euratom 50th Anniv. Conf., Eur. Parl. (Brussels), 7 Mar 2007, www.nirs.org/nukerelapse/neconomics/jimharding382007.pdf. The Keystone range assumed 0–3.3%/y real escala-tion and 5–6-year construction. Interest during construction was included. A 7-year construction time would raise the upper estimate to $4,200/kW.

28 Quoted in Nucl. Eng. Intl, ref. Error! Bookmark not defined.

29 “Which Power Generation Technologies Will Take The Lead In Response To Carbon Controls?” S&P Viewpoint, 11 May 2007.

30 Moody’s Investors Service, “New Nuclear Generation in the United States: Keep Options Open vs. Addressing An Inevitable Necessity,” 10 Oct 2007.

 

 

 

to be continued…

 

OIL & GAS

 

RIL requests amendments to supply of MS & HSD in the domestic market

 

November 18, 2008. Reliance Industries Limited (RIL) has requested Ministry of Petroleum and Natural Gas (MoP&NG) for two regulatory prerequisites to enable release of products into domestic market from its EOU/SEZ refinery units. It requested the Ministry that domestic supplies of Motor Spirit (MS) and High Speed Diesel (HSD) to be counted as foreign exchange and secondly, the excise duties on the petroleum products from its EOU/SEZ refineries for domestic sale to be at par with Essar/MRPL refineries.

 

According to RIL’s estimates for October 08 to March 09 period, net foreign exchange earnings for its EOU refinery at Jamnagar would be around $60 million. The company is of the view that while the values may change marginally with variation in international prices, it is clear that there is no scope for significant domestic sales of MS or HSD. As per the Foreign Trade Policy EOU/SEZ units shall be net foreign exchange positive at all points of time.

 

Shortage of Molasses in Uttar Pradesh

 

November 18, 2008. According to sources, expected production of Molasses in the state of Uttar Pradesh for the year 2008-09 is estimated at maximum 325 lakh Quintals. This amount includes 25 lakh quintals of exports to Uttaranchal.  It is mainly used for production of Alcohol; a part of which in turn is used for ethanol requirements of the state for 5 percent Ethanol Blended Petrol (EBP) programme. 

 

UAPBIDA, which represents the Alcohol based Chemical Industries in Uttar Pradesh, has requested to Government of Uttar Pradesh to ban Molasses/Alcohol export outside the state as most of the Alcohol based chemical units are either closed or are operating partially due to shortage of molasses.

 

UNSD-INEGI Workshop on Energy Statistics

 

November 18, 2008. United Nations Statistics Division (UNSD) is organizing an International Workshop on Energy Statistics, jointly with the National Institute of Statistics, Geography and Informatics (INEGI) of Mexico, from 2 to 5 December 2008 in Mexico. The Workshop is being organized as part of the consultation process on the draft International Recommendations for Energy Statistics (IRES).

 

The main objectives of the Workshop are to train participants on current methods and practices in energy statistics; review and discuss issues they face in the collection, compilation and dissemination of energy statistics; and to contribute to the development of international recommendation for energy statistics.

 

The United Nations Statistical Commission (UNSC) recommended development of energy statistics as part of official statistics and called for revision and further development of the relevant international standards. To implement this decision, the UNSD in cooperation with the Oslo Group on Energy Statistics and the Inter-Secretariat Working Group on Energy Statistics have embarked in the preparation of IRES.

 

IRES is intended to cover a broad range of issues from basic concepts, definitions and classifications to data sources, data compilation strategies, energy balances and dissemination. Once approved by the Commission, IRES will provide a firm foundation for a long-term development of energy statistics based on the Fundamental Principles of Official Statistics.

 

BPCL’s additional HSD requirements from RIL refinery

 

November 18, 2008. Bharat Petroleum Corporation Limited (BPCL) informed Ministry of Petroleum and Natural Gas (MoP&NG) that its additional HSD requirements over and above the quantities firmed through domestic sources/imports already tied up are 1.05 million tones.

 

(in TMT)	E3 HSD	BS2 + HF HSD	Total
Dec-08	20	100	120
Jan-08	70	240	310
Feb-08	70	230	300
Mar-08	80	240	320
Total	240	810	1050

 

 

 

 

 

 

 

NEWS BRIEF

OIL & GAS

OVL snaps up 2 exploration blocks in Colombia

November 18, 2008. ONGC's wholly-owned subsidiary ONGC Videsh Ltd. (OVL) has bagged two blocks in Colombia, viz. Block CPO 5 and Block SSJN 7. Block CPO 5 is in the highly prospective onshore Llanos Basin and Block SSJN 7 is in prospective onshore Sinu San Jacinto Basin. OVL secured these two blocks amid stiff competition from International companies, in Colombia Round 2008, announced earlier by the Government of Colombia, through its regulatory agency Agencia Nacional de Hydrocarbons (ANH). 43 blocks in four basins namely, Sinu San Jacinto, Cesar Rancheria / Guajira, Eastern Cordillera and Llanos basin were offered in the Colombia Round 2008. A number of E&P Companies applied for qualification; ONGC Videsh was among the companies to be shortlisted as Operator including Petrobras, Shell, etc. In a public ceremony in Bogota, Colombia on the 7th November, 2008; companies submitted bids for the various blocks on offer which were opened same day. ONGC Videsh was declared the winner with 100% interest in block CPO 5 in the Llanos Basin and 50% interest with Pacific Stratus for Block SSJN 7 in the Sinu San Jacinto Basin. With this, OVL has further consolidated its presence in Colombia where it presently holds interest in a producing asset and in three offshore exploratory assets.

I-T Dept shelves move to tax ONGC

November 18, 2008. A move by the Income-Tax Department to levy additional tax on ONGC for giving huge subsidies to the oil marketing companies (OMCs) has been shelved. Last year, ONGC paid a subsidy of Rs 22,000 crore ($4.42 bn). During the last two quarters in the current fiscal, it has already paid a whopping subsidy of Rs 22,474 crore ($4.52 bn) to the OMCs. ONGC, plea that subsidy discounts reflect heavily on the company’s revenue, reducing the corporate tax paid. On the other hand, subsidy reduces input material cost of OMCs’ profit and in turn increases corporate tax there. ONGC is the biggest taxpayer in Uttarakhand. This year, it paid a tax of over Rs 8,000 crore ($1.6 bn). Nearly 90 per cent of the tax revenue collected in Uttarakhand comes from ONGC.

Oil sector officers threaten indefinite strike

November 15, 2008. Oil Sector Officers Association (OSOA), representing around 50,000 executives of the 14 public sector oil companies has threatened an indefinite strike to press for pay revision. The oil companies together will stand to lose around Rs 1,125 crore ($230.67 mn) a day in terms of revenue because of the strike which would lead to cut in production and the Centre would lose more than Rs 100 crore ($20.5 mn) in excise duty a day. In the upstream, the loss of revenue on account of loss of crude production, sale of gas and value added products will be to the tune of Rs 183 crore ($37.52 mn) a day for ONGC alone and more than Rs 225 crore ($46.13 mn) a day in all. In the downstream, the revenue loss is likely to be around Rs 600 crore ($123 mn) a day for IOC alone and more than Rs 900 crore ($184.53 mn) for all the oil marketing companies together.

OSOA demands include bringing all oil sector PSUs under the A+ category, introduction of open-ended scale, removal of 50 per cent ceiling on perks and allowances, five year periodicity and the same annual and promotional increment levels of four and six per cent respectively. The Ministry of Petroleum and Natural Gas has agreed to the demands made by the officers association and has recommended the same to the Department of Public Enterprises for consideration.

ONGC Videsh and IPR Red Sea make second oil discovery in Egypt

November 14, 2008. ONGC Videsh Ltd., the overseas arm of Oil & Natural Gas Corp. (ONGC), and IPR Energy Red Sea Inc. have made a second oil discovery in the Gulf of Suez, off Egypt. The North Ramadan-2 reservoir produced 800 barrels of oil a day during tests. The first find, NR1, had produced 3,000 barrels a day during tests. The two companies plan to begin drilling at North Ramadan-3 in the first fortnight of this month.

GSPC-Essar to invest $8 mn in Indonesian block

November 14, 2008. State owned Gujarat State Petroleum Corporation has bagged an onshore block in Indonesia in collaboration with Essar. GSPC-Essar consortium has signed an MoU with Badan Pelaksana Kegiatan Usaha Hulu Minyak and Gas Bumi (BPMIGAS) on November 13. The South East Tungkal Block is spread in an area of 2309.59 sq km and has been bagged on direct offer negotiation basis. Essar as a partner holds 49 per cent stake in the block while GSPC is the operator with 51% stake. This block was one of the 22 new oil and gas blocks out of the 25 that Indonesia had offered for bidding. A few months ago, GSPC had discovered gas in a new well (KG-22) in the Deendayal block, which it had won under the third round of the New Exploration Licensing Policy (Nelp-III). The 3 tcf find is said to be the highest ever from any single well in India. GSPC has chalked out plans to spend Rs 4,000 crore ($817.66 mn) over the next three to four years to produce oil and gas from the KG Basin block. The company is also looking to raise money through the public offer next year.

ONGC Videsh to bid for Imperial in three weeks

November 12, 2008. ONGC, Videsh will bid for UK’s Imperial Energy within the next three weeks. The company has received approval from Russian authorities for acquiring Imperial. Imperial has oil producing assets in Siberia and north Kazakhstan. According to ONGC Videsh (OVL), the overseas subsidiary of ONGC, the Federal Anti-Monopoly Service, Russia’s anti-trust agency, has approved the proposed acquisition. The approval by two Russian government agencies will now allow ONGC Videsh to make an open offer for the shares of Imperial within three weeks.

ONGC had on August 26 agreed to buy Imperial for 1,250 pence per share, taking the valuation of the company to 1.4 bn. Oil prices at that time were around $120 per barrel and have since dropped to below $60 per barrel. OVL has been granted approval in respect of the ownership of Russian entities by entities controlled by a foreign government. On the above basis, OVL confirms that both of the pre-conditions to the offer have been satisfied. On September 5, ONGC had applied to two Russian government agencies for approval of the deal. Another government commission approved the ownership of Russian entities by entities controlled by a foreign government. This acquisition, once completed, would be ONGC’s biggest buyout of an overseas oil company.

At present, ONGC has 36 oil and oil assets in 16 countries. It also owns 20 per cent in the Sakhalin-I oil and gas project in Russia. OVL will acquire Imperial shares through its Cyprus-based, wholly-owned subsidiary called Jarpeno. The delay in the approval has proven to be a blessing in disguise for the Indian company as it would save at least half-a-billion dollar. Under the agreement, ONGC has committed to pay in sterling, which has depreciated by 20 per cent against the dollar since August when the deal was announced. This would bring the transaction value down to around $2.1 bn as against the original estimate of $2.6 bn. OVL has already acquired over 15 per cent in Imperial Energy 6.3 per cent from the management and 9.2 per cent from Baillie Gifford & Co.

RIL mulls reopening of fuel outlets

November 18, 2008. Reliance Industries may reopen domestic retail outlets to sell petrol and diesel following the decline in global oil prices. Reliance is also seeking to sell diesel from its export-oriented refinery at Jamnagar to public sector oil companies and private retailers to help meet a shortfall. Earlier, Reliance had shut its fuel stations partly because of the Government's decision to restrict fuel subsidy to public sector refiners that sell petrol and diesel below cost.

L&T wins major refinery order

November 17, 2008. Larsen & Toubro has secured a major order valued over Rs. 700 crores ($142.27 mn) from HPCL-Mittal Energy Limited (HMEL), a joint venture of Hindustan Petroleum Corporation Limited and Mittal Energy Investments. The project order involves setting up two 44000 TPA capacity Hydrogen Generation Units (HGU) for HMEL's grassroots refinery in Bathinda, Punjab. The plant will be designed for operation with straight run naphtha' and DHDT naphtha as feed stock. The 9 mtpa refinery will generate products that meet EURO IV specifications. The order for the HGU has been awarded to L&T on a Lump Sum Turnkey basis, affirming customer confidence in L&T's integrated capabilities to execute critical sections of refineries.

Denmark-based Haldor Topsoe has been selected by HMEL as the process licensor. L&T's scope of work includes residual process design, detailed engineering, procurement, supply, transportation, storage, fabrication, inspection, construction, installation, testing, mechanical completion, pre-commissioning and commissioning. Secured against competition from global EPC contractors, the HMEL order augments L&T's long track record in the mid and downstream hydrocarbon sector. The refineries in India and abroad have conformed to exacting hydrocarbon quality requirements, while meeting stringent delivery schedules.

Public sector oil firms make profit on petrol, diesel sales

November 16, 2008. Public sector oil companies have for the first time in more than a year started making profit on sales of petrol and diesel, strengthening the case for a fuel price cut soon. But the oil companies do not want to reduce prices now as they continue to lose Rs 82 crore ($16.8 mn) per day on PDS kerosene and domestic LPG. Indian Oil, Bharat Petroleum and Hindustan Petroleum, who started making profit on sales of petrol from November 1, have now broken even on diesel sales. With international crude oil prices sliding further on falling demand as major economies slow down, the three firms are making a net 70 paise per litre profit on sales of diesel while they earn Rs 9.86 per litre extra on selling petrol above the imported cost.

Based on the average international oil prices in the first fortnight of November, the state-run firms are earning a margin of Rs 16 crore ($3.27 mn) per day on petrol and Rs 5 crore ($1 mn) a day on diesel. However, they continue to lose on kerosene sold through ration shops and domestic LPG. Kerosene is being sold at a loss of Rs 22.40 a litre and LPG at Rs 343.49 per cylinder. The fall in international oil prices will result in lower revenue loss on fuel sales this fiscal. IOC, BPCL and HPCL will end the 2008-09 fiscal with Rs 122,710 crore ($25.15 bn) revenue loss, Rs 92,853 crore ($19 bn) of which has already been accounted for in the first half of the fiscal. It is good news that oil companies have started to make profits. The profit being earned on petrol and diesel will not be enough to wipe out the net losses the three firms reported in the second quarter ended September 30, 2008. The government compensates the three refiners for half of their revenue loss on fuel sales by way of oil bonds. Another one-third of the losses are met by companies like ONGC and OIL by way of discounts on crude oil they sell to them.

Aviation fuel turns cheaper than petrol

November 18, 2008. Aviation turbine fuel (ATF) used by airlines has become much cheaper than the price you pay for petrol. While the ATF price has dropped from Rs 73.67 per litre to Rs 40.69 in the past four months, the price of petrol had gone up by Rs 5 and is available at Rs 55.07 in Mumbai. Interestingly, the ATF price was reduced by the petroleum ministry (MoP&NG) on five separate occasions between August 1 and November 16. State-run oil companies cut aviation turbine fuel prices by over 12 per cent or Rs 5,580 per kilolitre in line with fall in international oil prices. With this reduction, the ATF or jet fuel prices are at par with levels that prevailed in September 2007. Prices have been lowered further because oil companies have now shifted to fixing rates in every 15 days instead of the previous practice of revising the prices based on average oil price in the preceding month.

Iran scraps agreement to sale LNG to India

November 17, 2008. Iran has reportedly scrapped a $22 bn agreement to sell 5 mn metric tons of liquefied natural gas (LNG) per year to India after a dispute over prices and lack of approvals. The National Iranian Oil Co.'s board of directors did not approve the agreement.

Oil firms’ stocks gain as crude slides

November 17, 2008. Shares of public sector oil marketing companies were traded higher in line with the drop in crude oil prices, and the Prime Minister's remarks last week that fuel prices will not be slashed till public sector oil companies start making profits again on sale of petroleum products. The state-run oil marketing companies have been incurring heavy losses over the past few quarters as crude oil surged to an all-time high of $147 per barrel in mid-July and the Government capped the retail fuel prices to reign in inflation. Crude oil for December delivery dropped as much as $1.44, or 2.5 percent, to $55.60 a barrel in after-hours electronic trading on the New York Mercantile Exchange. BPCL was up 3% at Rs 321.55.

Oil firms raise prices of commercial LPG

November 16, 2008. At a time when prices of petroleum products have fallen, oil marketing companies (OMCs) have increased prices of commercial liquefied petroleum gas (LPG) by 1.21 per cent in November as global prices of the fuel have gone up ahead of the higher winter demand. International LPG prices in October were marginally higher compared with September. Prices of this fuel generally rise as winter approaches. LPG is a combination of butane and propane gases. During winter, the demand for propane, which is used for heating purposes in the US and Europe, increases driving up LPG prices. IndianOil raised prices of commercial LPG, which is sold in 19-kg cylinders, to Rs 1,108.5 per cylinder on November 1, 2008, from Rs 1,095.24 per cylinder on October 1.

Commercial LPG is not subsidised and the oil companies revise their prices in line with international prices on the first of every month. The oil companies have taken an internal decision to keep auto LPG prices lower than petrol prices in order to make it competitive. It is more of a promotional strategy. Auto LPG prices on November 1 were revised to Rs 34.38 per litre from Rs 36.32 on October 1. An economic slowdown across the world has resulted in demand for fuels come down leading to increase in inventories. This has driven down prices of all fuels from petrol to diesel and naphtha.

India to take up TII pipeline issue with Turkish Prime Minister

November 14, 2008. Turkey-Israel-India (TII) pipeline proposal would figure during the Turkish Prime Minister, Mr Recep Tayyip Erdogan’s talks with the Prime Minister, Dr Manmohan Singh. Turkey’s Ambassador to India, Mr Levent Bilman, while stressing the importance of the Turkey-Israel-India pipeline said that it would help India achieve energy security as there are apprehensions on the security of the other proposed Iran-Pakistan-India pipeline. Senior Indian officials had met Turkish and Israeli counterparts in Ankara last month to work out the technical details of an offshore pipeline project to bring Central Asian and Russian oil to India. 

Goods carriers want diesel price lowered

November 17, 2008. The All-India Confederation of Goods Owners’ Association has urged the Union Government to reduce the diesel price immediately, more so when the price of aviation turbine fuel is being systematically reduced. The movement of goods vehicles throughout the country would come to a halt if the Government failed to take decision on the reduction of the diesel price soon. The fuel cost accounted for around 55 per cent of the airlines’ operational cost while diesel accounted for 70 per cent of the operating cost of the commercial vehicles. As per the Association, besides, the airlines enjoyed credit facility from the public sector oil companies while the operators of commercial vehicles must buy diesel in cash. The last diesel price hike of Rs 3/litre came into force from the first week of June this year when the crude price was as high as $147/barrel. It said that the crude price has since dropped to around $55/barrel but with no consequent cut in diesel price despite assurance from the Government that a reduction would be considered once the crude price came down to $67/barrel.

Government claims final say in Krishna Godavari gas pricing

November 15, 2008. The Union government filed a fresh affidavit in the Bombay High Court, which is hearing a dispute over supply of gas from Krishna Godavari (KG) basin, stating that any sale price less than $ 4.2 per mmBtu is not compatible with decisions taken by a ministerial panel. The affidavit also states that selling price should be determined based on arm’s length concept- where transaction is conducted purely on commercial terms.

Further, it stated the formula under which the price is determined have to be mandatorily approved by the Government of India prior to the sale of gas. The government in the affidavit said if the interim stay on sale of gas from KG basin is vacated, the allocation will be based on the gas allocation policy laid out by empowered group of ministers (EGoM).

As per the allocation policy, fertiliser plants will have the first claim followed by idle power plants and city gas distribution in that order. The Bombay High Court had asked the Government of India counsel to file a fresh affidavit making a categorical statement on the pricing of gas and explaining why gas pricing is binding on all. The price of gas is the most contentious issue in the court battle.

Mukesh Ambani-controlled Reliance Industries (RIL) and Anil Ambani's Reliance Natural Resources (RNRL) are involved in a legal battle over the gas supply master agreement, whereby RIL is to supply natural gas to RNRL for its power plants. The government of India, which has been made a party to the case, says it can regulate the contract between RIL and RNRL. But RNRL is opposed to the government determining the price, claiming that its entitled to the gas at a much lower price of $2.34 per mBtu. The government official, who filed an affidavit in the RIL-RNRL gas supply dispute between the Ambani brothers, was asked by the Bombay High Court to remain present on November 27.

Indian crude basket likely to fall below $50 a barrel

November 13, 2008. The Indian crude basket is expected to be in the range of $48-50 a barrel on in sync with the dip in global prices. The last time Indian basket had dipped below $50 was in early 2005. This dip has led to the expectation that the Government may consider reducing the prices of auto and cooking fuels.

The continued volatility in currency rates and international crude oil prices, however, makes it difficult for the Government to consider a price cut on the retail front at this juncture. The Prime Minister has also said so. The Government caps the retail selling price of petrol, diesel, kerosene and LPG. This has led to public sector oil marketing companies (OMCs) incurring a revenue loss of Rs 14,000 crore ($2.84 bn) in the first six months of the current fiscal.

However, the under-recovery for the full fiscal is expected to be Rs 1,14,000 crore ($23.19 bn), from the earlier estimate of Rs 1,28,135 crore ($26 bn). When crude prices were at $147 a barrel, it was estimated that the loss would be Rs 2,50,000 crore ($50.87 bn). If crude remains at $55-57 a barrel range and the rupee appreciates to around Rs 41 and stays there for some time, then perhaps, in December the companies could make marginal profit on sale of all four products.

But this still would not be enough to wipe out the losses already booked in the first and second quarter of the fiscal. For the first fortnight of November the companies are expected to make a marginal profit from diesel sale if crude continues at the current level. Currently, the OMCs are incurring a revenue loss on sale of diesel, LPG, and kerosene. They are losing Rs 0.96 a litre on diesel, Rs 22.40 a litre on kerosene and Rs 343.49 a cylinder on LPG. They are making a profit of Rs 4.12 a litre on petrol. Besides, the gains from fall in crude prices have been offset by depreciation of rupee. The OMCs, which are integrated refining-cum-marketing entities, are processing crude that has been bought at $75-80 a barrel, thus leading to inventory losses and a dip in the gross refining margins.

POWER

BHEL gets $266 mn order

November 18, 2008. Bharat Heavy Electricals (BHEL) has secured a Rs 1,325 crore ($266.49 mn) order from  Andhra Pradesh Power Generation Corporation (APGenco) for setting up a 600 MW thermal power generating unit at Kakatiya Thermal Power (Project Stage-II) at Bhoopalapally in Warangal district of Andhra Pradesh.

The scope of work in the contract includes design, engineering, manufacture, supply, erection and commissioning of steam turbines, generators, boilers, associated auxiliaries and electricals, besides state-of-the-art controls and instrumentation. The unit is slated for synchronisation in the next 42 months. APGenco had placed a similar order with BHEL for setting up a 500 MW thermal power generating unit at the Stage-I of the same power station.

Lanco Infra sole bidder for Rajpura power plant

November 14, 2008. Lanco Infratech has emerged the sole bidder in the competitive bidding process for the development of a 1,320 MW coal-based power plant at Rajpura in Punjab. The Rs 7,000-crore ($1.43 bn) project is to be executed on a build, own and operate model for the Punjab State Electricity Board. Lanco’s was the sole bid filed with the authorities even though there were five-six others in the fray in the earlier stages.

Those in the contention initially included Reliance Power, Tata Power, Essar and Sterlite. It is for the Punjab Government to take a call on award of the project to Lanco. The matter has been referred to the State Electricity Regulatory Authority for its decision. A special purpose vehicle created by the Punjab State Electricity Board will provide all the necessary clearances for the project and also facilitate coal linkages from domestic coal mining companies.

GMR Infra to relocate power plant in AP

November 12, 2008. GMR Infrastructure Ltd has announced that the GMR Energy Ltd (GEL), the Company's 100% subsidiary Company, having 220 MW power plant at Mangalore, has deferred its plan of relocating the barge mounted power plant to Kakinada, State of Andhra Pradesh. The company proposed to operate the plant from existing location on merchant basis and accordingly the plant has started generation. At present, it is supplying power to Rajasthan State Electricity Board and is negotiating with various others for supply of power on merchant basis. 

ADB supports energy conservation fund for Madhya Pradesh

November 14, 2008. The Asian Development Bank (ADB) is to help set up a fund that will mobilize financing for energy efficiency projects in Madhya Pradesh. The planned Energy Conservation Fund (ECF) will complement an ongoing ADB investment program in Madhya Pradesh’s power sector which is focused on reducing the gap between power supply and demand, and improving efficiency in transmission and distribution. ADB will provide a $1.7 mn technical assistance through the Second Danish Cooperation Fund for Renewable Energy and Energy Efficiency in Rural Areas.

The government of Madhya Pradesh will contribute an equivalent of $400,000. The technical assistance will support the ECF by financing the initial operational expenditures. The ECF will be used to implement programs through technical and financial assistance, benefiting all stakeholders including the Government of Madhya Pradesh, power sector companies, and consumers. The Energy Conservation Fund will facilitate the financing of revenue-generating energy efficiency projects implemented by public and private sector entities and it will develop a modality that could be replicated in other states of India.

The sustained support for the ECF in its start-up years will encourage interest from commercial banks and other private financial institutions which are typically reluctant to finance energy efficiency projects mainly because of the requirement of collateral security for loans. The potential for energy savings in India is enormous, as energy efficiency projects alone could create nearly 25,000 MW of capacity, and energy conservation projects could save 23% of total generation. India has vowed to make power available to all its citizens by 2012.

Bihar Electricity Board seeks additional power from Centre

November 14, 2008. With the state facing severe power crisis due to fall in generation at hydel power stations and coal supply, the Bihar State Electricity Board (BSEB) has made a fervent plea to the Union power ministry for allocating an additional 300 MW of power to Bihar. The availability from Central sector has dropped due to fall in generation at the Tala hydro electric project. To make matters worse, severe coal crisis has reduced the normal generation of power at NTPC’s Talchar, Kahalgaon and Farakka power generating plants. Despite import of coal from abroad, the crisis still persists.

As a result, the state’s joint venture plant, Kanti Vidyut Utpadan Nigam Limited has not been generating power on a regular basis. However, frequent breakdown of power plants have also hit power generation in the state. The availability of power from the Tala and Chukkha hydel power plants from November have fallen and a situation similar to the last year is apprehended.

Bihar had faced a serious power crisis last year from October to March due to fall in generation from Tala and Chukkha hydel power plants. The situation aggravated further due to withdrawal of equal allocation from the Kahalgaon Super Thermal Power Plant. The power crisis led to mass protests and the situation in Kahalgaon went out of control leading to police firing on agitators.

Unscheduled power cuts for 12 hours in villages, two hours in Bangalore

November 13, 2008. People in Bangalore will have to face unscheduled power cuts of two hours a day from November 14 to December-end, while villages being served by Bangalore Electricity Supply Company will get only two hours of power supply during the day. This means that farmers have to work in their fields at night to take care of standing crops. According to a notification issued by the electricity supply company, villages will go without power for 12 hours a day. During the 12 hours when power is available, there will be six hours of three-phase supply (when irrigation pumpsets can operate) and six hours of single-phase supply (when only domestic lighting and non-motive power can be used).

The single-phase power supply will be during the night. While only two hours of the three-phase power supply will be available during the day, the remaining four hours will be at night, at any time between midnight and the early hours. In Bangalore, the power cut for domestic consumers will be broken into two one-hour schedules, both during the peak hours between 6 a.m. and 10 a.m., and 6 p.m. and 10 p.m.

Industries and commercial consumers in Bangalore will bear the brunt for two hours between 10 a.m. and 6 p.m. Outside of Bangalore, other urban areas under the power company’s jurisdiction will face four-hour power cuts daily. This crisis is mainly due to the sharp increase in the demand for power and the failure to boost generation capacity. The demand is said to have grown at the rate of 15 per cent to 20 per cent of late.

The State’s generation capacity from all sources is 8,425 MW. But the shortage itself is in the range of 1,500 MW to 1,700 MW during the normal period when all the generating units are working. This translates to a shortage of 15 million units to 20 million units a day. But in real terms, the shortage is greater as the State is not getting its full quota of power from the central generating stations, especially the nuclear and gas-based plants, which have been underperforming because of uranium and gas shortage. This has resulted in reduction in the availability of power by about 400 MW.

TN chamber pleads for priority to streamlining power distribution

November 12, 2008. According to Tamilnadu Chamber of Commerce and Industries, State Government of Tamil Nadu must accord top priority to 24-hour power supply unmindful of cost to prevent a breakdown of the economy. The chamber is afraid that the number of public welfare schemes implemented by the Tamil Nadu Government would be of no avail if the Government does not set right the immense production deceleration, loss of employment and price escalation caused by the present unprecedented power shortage in the State.

Though the scheme for granting subsidy for small and medium industries to purchase generators is praiseworthy, with the cost being as high as Rs 12 per unit, the chamber has expressed its scepticism over the scheme producing the desired result. Large industrial units possessing high-power diesel generators and keeping them idle should be motivated to generate power by ensuring supply of adequate diesel and the Tamil Nadu Electricity Board should procure power produced by them at cost price and supply it to the industrial sector.

The temporary permission of third party sale by private power producers should be made a permanent policy and they should be allowed to sell power to those having 100 KW connected load so that the benefit accrues to small and medium industries.

Power up cash, electric gear companies tell Finance Ministry

November 18, 2008. Manufacturers of power equipment have urged the Finance Ministry to fast-track spending on electricity generation, which would stimulate growth in the power sector as well as in the overall economy. The government needs to push public sector power companies like National Thermal Power Corporation (NTPC) and National Hydel Power Corporation to place orders for power equipment at the earliest. This would go a long way in supporting the equipment makers who are fighting a slow down. There are a total of 17 power projects projected to add 20,000 mw over the next few years, for which equipment orders are set to be placed.

Growth in electricity generation had been dismally low in the previous few months, particularly in August when it fell below 1%, before picking up in September. In the first half of the current fiscal, power generation grew by 2.5%, way below the 7.7% recorded in the same period a year ago. NTPC should immediately invite tenders for bulk purchase of equipment for all the projects in the pipeline. Increased government spending would give stimulus to the economy.

India to help Nepal set up power trading entity

November 18, 2008. India has entered into an agreement with Nepal to help it set up a power trading entity, which the Himalayan nation has asked for to be able to export power, on the lines of Power Trading Corporation of India. India will have a 30 per cent equity stake while the rest will be owned by Nepal. By setting up an electricity regulator, Nepal wants to introduce competition in the power sector and boost the confidence of investors.

With Nepal set to become a power exporting country by 2013, India has decided to convert power transmission lines between the two countries from the present 66 KW and 132 KW to 400 KV. The transmission line improvement project will be implemented in the next two years at a cost of Rs 200 crore ($40.22 mn). 

Dabhol may retain LNG terminal

November 18, 2008. The government may allow the two promoters of Ratnagiri Gas & Power Pvt Ltd (RGPPL, erstwhile Dabhol Power), GAIL India and NTPC, to keep 5 mtpa LNG terminal as an integral part of the 1,850 MW power project. It may accept the two promoters’ demand to treat the terminal as a profit centre on the condition that about 2.9 mtpa surplus capacity of the terminal would be used by third parties for a fee. The two promoters had threatened to walk out from the project if the terminal was hived off and sold to a third party. The LNG plant has a total capacity of 5 mtpa, while the power project would require a maximum of 2.1 mtpa at any given point of time. The balance capacity would be available for use by third parties.

Earlier, the government had proposed to hive off this terminal to a third party so that funds from the sale could be used for wiping off the company’s rising debt obligation. The hive off plan now seems to have been shelved in the interest of the promoting companies. A formal decision, however, would be taken after the meeting of empowered group of ministers (EGoM) later this month.

A committee of secretaries has already discussed the proposal. One of the promoters has suggested that RGPPL retains control over the LNG terminal and use it as a profit centre offering services to third parties to meet their regasification needs on paying an agreed toll. This seems to be an acceptable solution. The change in the government’s position has come due to a strong stand taken by both NTPC and GAIL.

The two promoters threatened to divest out of the project if government went ahead with its plan on hiving off the LNG terminal. NTPC and GAIL, who have the right of first refusal on the sale of the terminal, believe that the LNG plant is an integral part of the power project and selling it off would upset the revenue structures for the project. The revival cost of the project has escalated and the government wants the promoters to put in more equity to salvage the project. From less than Rs 10,000 crore ($2 bn), the completion cost of the 2,150 MW power project has now crossed over Rs 20,000 crore ($4 bn).

‘Gains must accrue to consumers’: CERC

November 15, 2008. According to Central Electricity Regulatory Commission (CERC), the financial gains made by power distribution licensees from better performance compared to the norms set by the Regulatory Commissions should be shared with the consumers every year. The Commission is of the view that two -third of such financial gains should be accrued to the distribution licensees and the remaining one-third passed on to the consumers.

The Commission said that the distribution licensees will have to bear a penalty in the form of reduction on their return on equity if they fail to ensure the availability of distribution network as per the norms. This will also be applicable if distribution licensees fail to contract power generation capacity for meeting the projected demand of the consumers.

Dutch firm wants hearing over controversial project deferred

November 15, 2008. Dutch power major Brakel Corp, which wants the Himachal Pradesh government's green signal to save a controversial hydropower project allotted to it, asked the government to postpone its personal hearing over the project to next week. The state cabinet at its meeting November 3 decided to grant a personal hearing to the company to rectify the alleged financial and technical misrepresentation of the Rs 40 bn Thopan-Powari-Jangi hydropower project in Kinnaur district.

The government also set up a high-level seven-member committee, headed by Chief Secretary Asha Swaroop, to review the case. It (Brakel) sent a missive to the panel, demanding deferment of the personal hearing till November 19 and reconstitution of the review committee. The company has raised objections to the inclusion of Principal Power Secretary Ajay Mittal in the review panel.

Earlier this month, Mittal recommended to scrap the project, mired by allegations of financial and technical incompetence, and forfeit an upfront payment of Rs1.95 bn that the company had deposited with the government. The project was allotted to Brakel in 2006 by the then Congress government.

Andhra may get $1.6 bn for power reforms

November 15, 2008. The Centre is likely to provide a grant of Rs 8,000 crore ($1.64 bn) to Andhra Pradesh under the Accelerated Power Development Reforms Programme (APDRP) during the Eleventh Plan. The state will submit a detailed project report to the Centre in this regard in December. The Rs 51,577-crore ($10.57 bn) APDRP project aims at bringing down transmission and distribution losses to less than 15 per cent and will cover towns with a population of over 30,000. About 142 towns in the state would be eligible for the scheme.

Under this, baseline data and IT applications for energy accounting would be set up besides modernising and strengthening 11 kv level substations, separating transformers from feeders and agricultural loads from mixed feeders, and replacing old meters. Initially, 50 per cent of the project cost would be provided as grant and the remaining as loan, which could be converted into a grant based on specified targets achieved. Investments incurred by the distribution companies on IT initiatives during 2007-08 and 2008-09 would be reimbursed.

Satluj begins hydropower project survey in Nepal amid dissent

November 14, 2008. Indian public sector hydropower undertaking Satluj Jal Vidyut Nigam has kicked off survey on a coveted 402 MW project in north Nepal amidst local rumblings. Satluj, a joint venture of the central government and Himachal Pradesh, started the survey on the Arun III hydropower project in Nepal's Sankhuwasabha district, almost four months after being awarded the survey licence by the Nepal government after a global bidding that was dominated by Indian companies. The survey is expected to be completed in 24 months, after which the Indian company will once again have to apply to the government of Nepal for a power generation licence.

Power-starved Nepal is hoping that the plant would be ready for generation by 2015. During the BIMSTEC Summit in New Delhi, Nepal's Water Resources Minister Bishnu Poudel reportedly urged the Indian Minister of State for Power and Commerce Jairam Ramesh to ask Satluj to speed up the work. Currently Nepal, relying mainly on hydropower, is facing an acute power crunch due to the water level of its electricity-producing rivers dipping alarmingly because of the advent of winter.

The state-run Nepal Electricity Authority (NEA) has warned that power outages would go up to around 14 hours daily, which has alarmed industries. The crisis has also been aggravated by a flood in south Nepal in August that destroyed roads and power transmission lines used to import energy from India during acute shortages.

Though NEA signed an agreement with India's Power Trading Corp in September to buy 60MW to tide over the shortfall, the deal is yet to be implemented due to the damaged transmission lines. New power projects in Nepal have been hampered by protests by local groups and law suits. The awarding of Arun III was challenged in court by another Indian bidder, Jindal Steel and Power, which had offered Nepal more free power than Satluj. Now Satluj would have to grapple with local residents who want jobs as well as land and free shares.

Residents of Sankhuwasabha and neighbouring Bhojpur districts have formed the Arun III Stakeholders Group, which is demanding development projects, jobs and land. They have submitted an eight-point charter of demands to the Indian company as well as Nepal's political parties. The start of work, initially slated for September, was delayed due to such hindrances.

Bids for Tilaiya mega power project soon

November 14, 2008. By the end of November, bids for the fourth ultra mega power project (UMPP) at Tilaiaya in Jharkhand will be invited. The three UMPPs, which have been awarded, the Mundra power plant, now under development by Tata Power, is at an advanced stage of implementation and has made progress and has ordered for equipment. The other two plants at Sasan and Krishnapatnam, won by Reliance Power are at different stages.

While the Sasan unit is in the process of finalising plans, the Krishnapatnam has gone a step ahead and has chosen Shanghai Electric for supply of equipment. Apart from these projects, UMPPs are being proposed at Orissa, Tamil Nadu and Karnataka. In addition, the Power Ministry has received another proposal for an UMPP in Andhra Pradesh. The Union Minister would like more public enterprises to take part in large UMPPs.

Obama, supporter of Indo-US nuke deal

November 14, 2008. The US President-elect, Mr Barack Obama, is a keen supporter of the civil nuclear agreement with India. The President-elect looks upon this agreement as a very important step in strengthening the relationship between India and the US. The Indo-US nuclear deal, signed on October 10, ended India’s three-decade isolation and allows the US companies such as General Electric and Westinghouse to sell atomic reactors and fuel to India. As per the US Nuclear Regulatory Commission, the change in the (US) Government would not affect the nuclear accord.

The US suppliers want India to sign a treaty that would help shield them from liability in the event of a nuclear accident at the plants they expect to help build. The US industry would like to see India become a part of that convention. The liability treaty is known as the Convention on Supplementary Compensation for Nuclear Damage and makes plant operators (NPCIL in India’s case) responsible for damages from any accident and shields suppliers from liability.

Both the national governments are continuing the process of putting into place the new Section 123 US-India Agreement for Civil Nuclear Cooperation. In the meantime, both the US and India are anticipating and preparing for new business development and trade in the nuclear industry. The US can help India by sharing its technology and expertise in the civil nuclear field, both on the academic as well as the business levels, the Indo-US deal had opened the doors for greater cooperation.

NMDC, West Bengal Mineral Development & Trading Corporation to join hands

November 12, 2008. The West Bengal government will shortly sign a memorandum of understanding (MoU) with India’s diversified mineral resource company NMDC for exploration and development of one of the largest non-coking coal sites having reserves in excess of 2 bt. The coal block would be jointly held by NMDC and West Bengal Mineral Development & Trading Corporation (WBMDTC) in equal partnership.

12 companies interested in reopening mines of Coal India

November 12, 2008. Twelve companies, including a host of national and international majors, expressed interest in re-opening underground mines in a 50:50 joint venture with Coal India Limited (CIL). Among the parties expressing interest are global steel and mining majors ArcelorMittal, Rio Tinto and Titan Mining (Australia). Indian majors who have joined the fray are Reliance Natural Resources, Sterlite, JSW Steel, Monnet Ispat, Essar Steel, a joint venture of SAIL and Tata group. Andhra Pradesh-based GVK power has also submitted an EoI.

CIL has identified 18 abandoned mines located in West Bengal and Jharkhand under subsidiaries Eastern Coalfields, Bharat Coking Coal and Central Coalfields for redevelopment through the joint venture route. Four or five were coking-coal mines. Though proved unviable for CIL to continue operations, the mines reportedly have substantial quantities of coking and thermal coal reserves.

According to the conditions set by CIL, the production of reopened mines should be sold to Coal India. However, the joint venture partner may enjoy the first right of refusal over 50 per cent of the coal production from the re-opened mines provided it is a captive user of the coal (like a thermal power producer for non-coking coal and steel maker for coking coal).

Earlier this year, ArcelorMittal and Ispat group approached CIL with joint venture proposals for exploring the opportunity of re-development of abandoned mines on nomination basis. CIL avoided striking deals on nomination basis but saw an opportunity of making its closed assets especially the coking coal assets operational through such private participation. The company initially decided to invite EoIs for redeveloping 26 closed mines. The number was later reduced to 18.

OIL & GAS

Chevron shuts-in 90,000 bpd at Nigerian Joint Venture

November 18, 2008. According to U.S. energy giant Chevron around 90,000 barrels per day of oil production was shut in at its Nigerian joint venture following an attack on one of its pipelines. Chevron Nigeria Limited (CNL) confirms that one of its pipelines was breached and its onshore production was shut in Delta state. Repair plans are being prepared and it would be premature to estimate completion time.

Delta state is one of three main states in the Niger Delta, a network of mangrove creeks which are home to Africa's biggest oil and gas industry. Attacks by militants and criminal gangs have cut oil output in the region by a fifth since early 2006. The pipeline, which feeds into the Chevron-operated Escravos export terminal in Delta state, was hit in Abiteye, where community members have attacked oil facilities in the past.

Armed youths blew up the Abiteye-Olero pipeline in June, forcing Chevron to cut around 120,000 bpd for nearly a month. Chevron operates onshore in Nigeria in a joint venture with state-run oil firm the Nigerian National Petroleum Corp (NNPC). Chevron holds 40 percent while NNPC holds 60 percent.

Qatar Petroleum, Wintershall ink EPSA for offshore Qatar Block

November 17, 2008. On behalf of the Government of the State of Qatar, Qatar Petroleum has signed an Exploration and Production Sharing Agreement (EPSA) for Qatar Offshore Block-4North (Khuff) with Wintershall Holding AG (German Company). This new agreement is part of QP's plans to implement the wise policy and guidance of H.H. The Emir, Sheikh Hamad Bin Khalifa Al-Thani to increase the country’s hydrocarbon reserves base, oil and gas production potential and firm up Qatar's economy.

The signing ceremony was also attended by senior officials of Qatar Petroleum and Wintershall Holding AG. The Block-4North (Khuff) Area is located north of Qatar within Qatar territorial waters. The block covers 544 km2 (approximately 18.15 Km x 30 Km) offshore acreage. It is situated northwest of Qatar's giant North Field and Al-Shaheen Oil Field. The total term of this agreement is for twenty five (25) years and starts with a thirty (30) months Exploration Period.

During the Exploration Period, Wintershall Holding AG will implement a work program comprising of technical studies, 2D & 3D seismic acquisition, processing, re-processing and interpretation and drilling of exploration wells to Khuff Formation. Pending the results, hydrocarbon development will be carried out. All relevant operations and studies will be conducted with QP supervision and support.

Saxon receives new field designation for New Mexico oil discovery

November 17, 2008. Saxon has received a new field designation from New Mexico regulatory authorities for its Eumont State No. 1 oil discovery in Lea County, New Mexico. New Mexico designated the Eumont well as the discovery well in the Urssey Tank: Yates-Seven Rivers Pool. Special pool rules are in effect from the date of first production in May 2008, which set allowable production at 350 barrels of oil per day (BOPD) per 40-acre proration unit plus a discovery allowable of an additional 28 BOPD for two years.

The Eumont well continues to flow oil at rates exceeding 150 BOPD on a 16/64-inch choke and cumulative oil production has surpassed 30,000 barrels of oil. To optimize ultimate oil recovery, the operator has elected not to increase the flow rate to the allowable limit at this time. The operator does plan to drill at least one offset well on an adjacent proration unit in the first quarter 2009. Saxon owns a 15% working interest and a 12.5% net revenue interest in this well and offset locations.

Sterling unlocks oil at UK North Sea's Bowstring East

November 17, 2008. Sterling has announced the successful drilling of the Cladhan well located on the Bowstring East Prospect, Block 210/29a, in the United Kingdom North Sea. Sterling holds a 39.9% interest and is the operator of the License P1064. Well 210/29a-4 has encountered an oil column in excess of 110ft (34m) with no observed oil-water contact, in an Upper Jurassic sequence below 9,450 ft (MDRT) containing 25 ft (8m) of sandstones with log porosity exceeding 20% and showing high oil saturations.

Although the well will not be flow tested, an extensive pressure test measurement program and the collection of oil samples through a Modular Formation Tester (MDT) logging tool, suggest good reservoir mobility and therefore promising productive potential. The well will be suspended providing the group the option to re-enter, side-track, flow test, at a later date, once the data-set collected has been evaluated for potential resource size and commercial options. Its immediate plan is to integrate the well results with the seismic data and to determine the size of the oil accumulation before submitting our appraisal strategy.

Sterling bags 2 North Sea blocks adjacent to Breagh discovery

November 13, 2008. Sterling has been successful in the UK 25th Offshore Licensing Round awards, which were announced on November 12th by the UK Department of Energy and Climate Change. The blocks awarded are 42/10 and 42/15, which are immediately adjacent to Sterling's existing 12 block position surrounding the Breagh gas discovery. Sterling is to be the operator of the newly awarded blocks and will hold a 60% working interest.

NPD averages petroleum production from Norwegian continental shelf

November 13, 2008. The Norwegian Petroleum Directorate noted that the average daily production was about 2,003,000 barrels of oil, about 165,000 barrels of NGL (Natural Gas Liquids) and about 54,000 barrels of condensate, a total of 2,222,000 barrels of liquid on the Norwegian continental shelf. In September 17.0 million standard cubic meters of oil equivalents were produced. This is 1.1 million standard cubic meters of oil equivalents less than in September 2007.

The average daily production has been about 2.1 million barrels of oil and a total of about 2.4 million barrels of liquid. The total production is about 176.7 million standard cubic meters of oil equivalents. This is 2.4 million standard cubic meters of oil equivalents higher than in the same period last year. Preliminary production figures for October 2008 show an average daily production of about 2.205 million barrels of oil and 0.321 million barrels of NGL and condensate.

Fort hills could link to Edmonton refinery

November 17, 2008. Petro-Canada (PCZ) could channel the oil sands production from its Fort Hills oil sands development to its Edmonton refinery, after announcing an indefinite delay to the project's costly oil sands processing facility. The Calgary-based company and its partners Teck Cominco Ltd. (TCK) and UTS Energy Corp. (UTS.T) have put the oil sands upgrader on hold after estimated costs for the Fort Hills project in northern Alberta jumped more than 50%.

But delaying or even canceling the costly facility could have a major impact on the project's economics. The oil sands mine is set to produce 160,000 barrels of bitumen a day and the upgrader would have processed this low-grade output into a lighter, more valuable crude.

The company had just completed a C$2.5 bn conversion project to install a coker at its 135,000 barrel-a-day Edmonton refinery, which could handle the bitumen. Petro-Canada is also mulling a C$1 bn conversion at its 130,000 barrel-a-day Montreal refinery, but has delayed the investment decision until it settles an ongoing labor dispute.

Foster Wheeler snags Colombia refinery project

November 15, 2008. Foster Wheeler Ltd.’s two of its subsidiaries, Foster Wheeler USA Corporation and Process Consultants, Inc., part of its Global Engineering and Construction Group, has been awarded a front-end engineering design (FEED) and project management consultancy (PMC) contract by Ecopetrol S.A. for the Barrancabermeja Refinery Upgrade Project in Colombia. Foster Wheeler will include the FEED award, approximately 30 percent of the total contract value, in its fourth-quarter 2008 bookings.

The full PMC scope will not be booked until the project is approved to proceed into the engineering, procurement and construction phase. The project will increase refining capacity from 250,000 barrels per stream day (BPSD) to 300,000 BPSD, add heavy crude processing capability, and provide a processing configuration to meet the projected 2013 Colombian clean fuels product specifications.

The scope includes the following new units: a crude unit, delayed coker, hydrocracker unit, coker naphtha hydrotreating unit, hydrogen unit, sour water strippers, amine regeneration unit, and sulfur recovery unit, plus associated utilities and offsite units. The project will also include revamps to the diesel hydrotreater, gasoline hydrotreater and dismantling of two existing atmospheric and vacuum distillation units.

In addition, the contract includes the procurement of long-lead items. Foster Wheeler Ltd. is a global engineering and construction contractor and power equipment supplier delivering technically advanced, reliable facilities and equipment. The company employs over 14,000 talented professionals with specialized expertise dedicated to serving our clients through one of its two primary business groups.

The company's Global Engineering & Construction Group designs and constructs leading-edge processing facilities for the upstream oil and gas, LNG and gas-to-liquids, refining, chemicals and petrochemicals, power, environmental, pharmaceuticals, biotechnology and healthcare industries.

Ryazan oil refinery commences Euro-5 diesel production

November 13, 2008. Ryazan Oil Refinery Company, a closed joint-stock company incorporated in TNK-BP, started output of diesel fuel of class Euro-5 with a sulfur content of no more than 10 ppm. According to TNK-BP, this fuel meets the latest worldwide ecological standards. This product was first put out on October 7, and the first lot was supplied to customers on October 16. A total of 85,000 tons of this new diesel fuel was produced in October 2008, and 144,000 tons will be produced in November. Implementation of the project for reconstruction and upgrade of production facilities for production of diesel fuel with improved ecological characteristics began a little more than a year ago. Investments into this project amounted to approximately $50 mn.

Turkey's $12 bn Iran investment to include pipeline

November 18, 2008. Turkish Energy Minister Hilmi Guler anticipated that Turkey may make a $12bn investment in Iran on the basis of an agreement signed between the two countries in Tehran. According to the report, the money will be spent on developing Iran's offshore gas fields in southern Iran and construction of a 1,800-kilometer gas pipeline from Assalouyeh, the gas field in southern Iranian province of Bushehr to Turkish border.

Iran and Turkey also inked a memorandum of understanding (MoU) according to which Turkey will invest in developing gas fields in southern Iran and will buy 50 percent of its produced gas when the project is completed and also Turkmenistan's gas will be transferred via Iran to Turkey to be piped to Europe. Iran will transfer 35 bcm of Turkmen gas to Turkey annually.

BTC oil pipeline to pump more in December

November 17, 2008. The BP-led Baku Ceyhan oil pipeline is expected to pump around 780,000 barrels per day (bpd) in December, up sharply from November. December shipments are scheduled to total 24.2 million barrels, according to a copy of the loading schedule.

In November, the pipeline was expected to pump about 455,000 bpd. The volume is up because Tengiz crude has been added to the flow of Azeri Light oil and production of Azeri crude was expected to be higher in December after production problems earlier in the year. Output was reduced after some Azeri production was shut down in September following a gas leak at the Azeri-Chirag-Guneshli group of fields in the Caspian Sea.

Nigeria oil spill caused by Sabotage

November 13, 2008. Saboteurs used a hack-saw to cut through a Royal Dutch Shell oil pipeline in southern Nigeria, but the Anglo-Dutch giant had managed to contain the resulting spill. The damage to the Adibawa delivery pipeline in the Okordia-Zarama community in Bayelsa state was reported and a team of investigators was sent to the location to determine the cause of the spill.

They determined that the spill was caused by sabotage. There was a hack-saw on the delivery line. It was not clear who was behind the attack. The same line was sabotaged nine times between January and June this year. Last year, it was sabotaged 10 times.

Shell, formerly Nigeria's biggest oil producer, has been the hardest hit by a campaign of sabotage launched by militants more than two years ago which has slashed output from Africa's biggest oil industry by at least a fifth. Shell's Nembe Creek trunk line, which carries 130,000 barrels of crude a day to the Bonny export terminal, was attacked in May by the Movement of the Emancipation of the Niger Delta (MEND) militant group, leading to a spill.

Crime and militancy are intertwined in the Niger Delta, which pumps nearly all of the oil output from the world's eighth biggest crude exporter.

Junggar gas pipeline network starts up operation onshore China

November 13, 2008. In early November, the gas pipeline network around Junggar Basin became operational after a two-week trial. The pipeline network has a total length of 1515 kilometers with a delivery capacity of 12 bcm per annum. The completion of this pipeline network provides a preparation for gas production growth and will expand the development space of natural gas industry in the area.

It is predicted that the pipeline network will satisfy the need for gas deliverability of the basin in the next 10 years. The Junggar Basin is strategically significant for China's onshore oil and gas production replacement due to its abundant natural gas resources. Xinjiang Oilfield produced 2.9 bcm of natural gas in 2007, and has planned to produce 5 bn in 2010, and 10 bn around 2015. The Junggar Basin is also the stand-by gas supplier for the Second West-East Gas Pipeline.

Russian oil firms may cut output if unprofitable

November 18, 2008. The world is heading toward a sharp deficit of oil production capacity and Russian companies could cut output and exports should they become unprofitable. Oil companies should decide themselves. Almost all OPEC members probably with the exception of Saudi Arabia, are seriously unhappy about the current oil price levels. The situation today is that many countries are on the brink of production profitability.

Russia heavily depends on oil revenues to fund its budget needs including high social spending, support stability of the national currency and help its firms refinance heavy foreign debts. Russia's benchmark Urals crude has been trading below $50 per barrel since last week, while the Russian budget is balanced at $75 for this year and $95 for 2009.

Russian private oil producer LUKOIL has called on the government to join OPEC and its oil output cuts, but government officials have said the country would maintain independent policies. The Organization of the Petroleum Exporting Countries meets in the Egyptian capital Cairo on November 29 to discuss tumbling oil prices amid calls from some members on non-OPEC producers to join production cuts.

Court ruling Jeopardizes Egypt's natural gas deliveries to Israel

November 18, 2008. An Egyptian administrative court earlier this week overruled a government decision to allow natural gas exports to Israel. The court accepted a challenge to the decision filed by a group of lawyers opposed to the exports. The petitioners claim that Egypt's natural gas reserves are not sufficient to justify exports.

They also oppose the exports because of the low price Israel pays for the natural gas. Energy sources claim that the court ruling only applies to the contract that was the subject of the case, and will have no effect on Egyptian natural gas deliveries to Israel. The court ruling is subject to appeal, and that the Egyptian government sometimes ignores rulings it does not like.

Israel and Egypt have signed a 15-year contract for the delivery of seven bcm of natural gas. Egypt's East Mediterranean Gas Co. (EMG) has a contract to delivery natural gas to Israel Electric Corporation (IEC) at $2.75 per British Thermal Unit. Deliveries through a pipeline from El Arish in Sinai to Israel began in May. However, deliveries have been irregular for technical reasons.

NEB okays Westcoast South Peace Pipeline Project

November 18, 2008. Canada's National Energy Board (NEB) approved an application from Westcoast Energy Inc., carrying on business as Spectra Energy Transmission, (Westcoast) to construct the South Peace Pipeline Project. The proposed South Peace Pipeline Project is an approximately 92 km extension of Westcoast's existing raw gas gathering system near Fort St. John, British Columbia.

The new 508 mm (20 inch) diameter pipeline would carry gas from the area south of Fort St. John and the Peace River northward to connect to Westcoast's McMahon processing plant, in Taylor, British Columbia. The project, with an estimated construction value of $95 million, would connect to either end of an existing pipeline across the Peace River.

Canadian Standards Association (CSA) standard Z662-07 establishes essential requirements and minimum standards for the design, materials, construction, operation, and maintenance of gas pipeline systems. The CSA standard has specific provisions for sour gas service pipelines. Westcoast committed to meet all applicable provisions in the standard.

Russia to build gas pipeline to Georgian region

November 17, 2008. Russian gas giant Gazprom would build a pipeline directly to Georgia's rebel region of South Ossetia because of problems with natural gas supplies to the enclave after a war with Georgia. According to Gazprom the new pipeline was needed because the current pipeline goes through the territory of Georgia proper.

The pipeline had been damaged and added that supplies were complicated by the fact that Gazprom had no direct transit agreement with Georgia for gas supplies through its territory to South Ossetia.  

BHP, Shell eye stake in Philippine oil, gas project

November 13, 2008. BHP Billiton and the Philippine unit of Royal Dutch Shell both want to bid for a 20 percent stake the government is selling in an oil and gas exploration project. State-owned Philippine National Oil Co-Exploration Corp (PNOC-EC) is selling part of its 50 percent interest in a project looking for oil and gas in the southwestern Palawan province.

PNOC-EC's joint venture partner, Australia-based Nido Petroleum, was also looking to sell part of its 50 percent stake in the exploration project and could unload up to 35 percent. The new partner, if it wins both stakes, will have a controlling stake of 55 percent. Both Shell Philippines Exploration and BHP, the world's biggest mining group, were also interested in Nido's stake.

The project site is near the Camago-Malampaya gas field off the coast of Palawan, the Southeast Asian nation's biggest hydrocarbon discovery supplying nearly all of its natural gas. The Malampaya gas field is run by a consortium headed by a unit of Royal Dutch Shell. The company expects to hold the bidding later this month and award the contract in December or early January.

Nido is part of the consortium behind the Galoc oilfield, the Philippines' first major oilfield since the 1990s, which began producing crude oil in October. Manila is pursuing oil exploration projects as it seeks to cut its dependence on costly imported fuel. It imports nearly all of its crude oil needs.

POWER

Power generation from Thar Coal to start in next five years

November 18, 2008. According to Federal Minister for Water and Power, Raja Pervaiz Ashraf power generation from Thar Coal deposits will start within the next five years. Presently, the country is short of 3500 MW to 4000 MW of electricity.

Another major step in this direction is the construction of Bhasha Diamir dam and the contract of which has been awarded to the Chinese Consortium. The project has 25,000 MW identified potential. China excels in the construction of dams. The Government has also purchased 1100 MW from Iran for Balochistan.

The long term plan, we need $13 bn for power generation, $10 bn out of which will be from the private sector. By the end of 2009, there will be no load-shedding in the country. The Federal Minister said that the present government was trying its best to provide maximum relief to the common man despite the economic recession, which is a global phenomenon.

The government has offloaded the burden of $4 bn from the shoulders of the public by revising the electricity tariff. Now, the government will have to bear the burden of $117 bn.

96 MW added to city’s power grid, claims KESC

November 18, 2008. The Karachi Electric Supply Corporation (KESC) announced the immediate generation of 96 Megawatts (MW) of electricity from its Korangi Thermal Power Plant as the privatised power utility took over the first phase of commercial operations at the newly-installed generation plant.

In line with its stated commitment to increase generation capacity within the organisation, the KESC took over the first phase of the commercial operations at the Korangi Thermal Power Plant. Announcing immediate generation from the plant, the KESC said that it has added 96 Megawatts (MWs) out of a total potential capacity of 220 MW to Karachi’s power grid.

This addition is part of the KESC’s initiative to ensure self reliance in meeting the city’s power needs, aiming to increase capacity which can help minimise power shortages in the city. According to the KESC, the addition of Korangi Thermal Power Plant follows the addition of a 50-MWs rental power earlier this month, which is expected to be at full capacity by December this year.

Apart from the 220-MWs Korangi power plant and the 50-MWs rental power generation, the KESC would also install another 200-MWs power generation plant on a fast track basis. Another 50 MWs additional power would be generated through enhancing capacity of existing generation plants, while 50 to 70 MWs would be availed from the industry that would be surplus to its needs.

China's monthly power output falls for 1^st time in 4 years

November 13, 2008. China's monthly power generation fell for the first time in four years, as per the data by the National Bureau of Statistics showed, suggesting a significant drop in industrial demand due to the global financial crisis. Power generation in October fell 4% from a year earlier to 264.5 bn kilowatt-hours, the data showed.

Coal-fired power generation slid 5.2% in October from a year earlier, accounting for most of the overall reduction. Coal-fired power generation accounts for about 80% of the country's total power generation. Hydropower output fell 1.4% on year in October, while output of nuclear power grew 11.2% on year.

A number of export-oriented manufacturing and packaging factories in coastal China, particularly in Guangdong and Zhejiang provinces, went bankrupt over the past few months amid a plunge in overseas demand. China's GDP rose only 9.0% on year in the third quarter, the lowest level in around five years.

Economists expect China's economy to slow further in the fourth quarter, meaning power demand will likely fall further. Falling electricity output will reduce power companies' revenue and profits in the fourth quarter significantly, dealing them yet another blow after they were hit by surging coal costs in the first half of the year.

SA mulls buying electricity from Moz

November 18 2008. Power-starved South Africa's state utility Eskom is considering purchasing electricity from neighbouring Mozambique. South African officials had met with the EDM power company in Maputo about its plans for a $1,3-billion gas-fired plant. There are several options available to Eskom, including entering into a power purchase agreement with the developers of the power plant.

The station would produce up to 680 megawatts, powered by gas from Mozambique's Inhambane gas fields, according to AIM. It would be built in Moamba, 60 kilometres (35 miles) northwest of Maputo. Beleaguered Eskom last week signed a $500-mn (about R50-bn) loan with the African Development Bank (ADB) to aid its expansion programme.

Eskom's expansion programme seeks to increase generation capacity and strengthen the transmission and distribution grid, to support growth in the region. Eskom currently generates about 45 percent of electricity used on the continent and 95 percent of electricity used locally.

Niles considers reviving dam to supply electricity

November 16, 2008. The Niles dam on the Dowagiac River has been idle for more than a decade, but that could change. Te dam mainly serves as the source of a fishing pond and an occasional cause of flooding problems as happened in September. Interest in renewable energy is growing because of a new Michigan law requiring utilities to get 10 percent of their power from green sources by 2015. The Niles utility is exempt from the state law because it buys it from American Electric Power Co. Green power could become a hot enough commodity to make it worth the investment. Electricity produced in Niles would not necessarily be used by the city's utility customers but could be sold on the open market. That would help offset the electricity costs for city customers.

Coal takes lumps as China cuts clobber prices

November 18, 2008. A few months ago, coal was riding high alongside oil and natural gas, in demand with lofty prices. But like the other fossil fuels, coal prices have fallen amid the global economic crisis and shrunken demand even from its biggest fan, China. Demand weakness stands out in China, which became a net importer of coal last year, because its industrial production rose by 8.2 percent last month, the smallest gain in seven years.

In September, that production rose 11.2 percent. But most alarming, is a 17 percent drop in China’s crude steel output, signalling a significant contraction in demand for metallurgical coal, the kind used to make steel. The kind used to generate electricity is called thermal coal. The price of Central Appalachian coal on the New York Mercantile Exchange has fallen to less than $80 a ton from its July peak of $143.25. Simmons said the price of coal first made a notable jump in 2004 when it doubled to $60 a ton.

China’s hunger for coal had been a boon for the U.S. coal exports because it added coal generation capacity equivalent to the United Kingdom’s electric grid last year and nearly that much in 2006. The reduction in steel production has a twofold impact on coal markets. Given that it is a very energy-intensive process, it reduced the amount of coal that is needed as an input fuel.

Moreover, as production of metals and steel declines, metallurgical coal will be looking for new buyers. Thermal coal demand is down as well. Blanch said power production in China, which gets most of its electricity from coal, has fallen to negative 4 percent from 19 percent growth at the beginning of 2008.

Electricity sale by end of 2009

November 18, 2008. The NSW Government hopes to finalise the sale of the state's electricity assets by the end of 2009, after it was forced to abort plans to sell the electricity generators earlier this year. Under its revamped plan, the Government hopes to sell the electricity retailers EnergyAustralia, Integral Energy and Country Energy along with development sites for power stations, and also trading rights from the generators.

The sales strategy for the assets to be sold would be finalised within three to four weeks, and the full sales strategy finalised by February or March. The sales were to be completed by the end of next year. Because of the recent turmoil in financial markets, financing approaches had changed, he said, and bidders would use more equity and less borrowings to fund any purchases. There would be a greater focus on risk, and the due diligence process is longer.

Even though the electricity market trading rights of the power generators will be sold, the Government will still be exposed to the significant risks attached to volatile wholesale electricity prices. The Greens MP John Kaye claimed the sale of the trading rights would give the buyers significant sway over the activities of the state-owned generators.

Energy firms under pressure to pass on new low oil prices

November 18, 2008. Britain's energy suppliers came under intense pressure to knock billions of pounds off domestic fuel bills yesterday after the price of oil fell to a new two-year low. With the price of oil on a steep downward trend, the Energy minister, Ed Miliband, urged chief executives of the big six companies to pass on the falls in wholesale prices to consumers coping with high food and petrol costs.

The price of oil hits fuel bills because it is linked to the price of gas the UK imports from the Continent to supply homes and to generate electricity. One industry expert estimated that the companies could reduce energy bills by £3.5bn, about £150 for each of Britain's 24 mn households. The first round of cuts expected to knock at least £100 off annual bills is expected as soon as January but an energy commentator, Joe Malinowski, said political pressure could force it to be made quicker, with an outside chance of a cut before Christmas.

Energy bills soared by 40 per cent in the first half of this year, with companies blaming the soaring price of oil. Brent crude rose to a new high of $144 a barrel in July but fell back yesterday to hit $53 a barrel, its lowest since January 2007. Despite the 63 per cent cut, fuel bills have stayed high since the summer, averaging £1,292 for an annual dual-fuel deal. The industry body, the Energy Retail Association, insisted the power companies would have to wait for a sustained period of low prices before passing them on to consumers, because they had entered long-term contracts when the oil price was high.

Romania to sign nuclear power deal

November 18 2008. Romania is due to sign a deal with selected foreign bidders to build two more reactors at its nuclear power plant in Cernavoda on November 20, one of the investors, GDF Suez. Earlier this year, the Balkan country decided to retain a 51 percent stake in the planned reactors and leave the remaining 49 percent for the six bidders it chose last year as partners.

The partners are Belgian Electrabel, owned by French power giant GDF Suez, German power giant RWE, Czech utility CEZ, Italy's Enel, Spain's Iberdrola and a Romanian unit of steel giant ArcelorMittal. The things that had to be completed were selecting a supplier, receiving authorisation from the European Commission and achieving agreement among the many investors on the various aspects of the project.

Romania's Prime Minister, Calin Tariceanu, has estimated the investment in the two new units at Cernavoda, which has two existing reactors, at around 4 bn euros ($5.05 bn). Work at the Cernavoda plant began 30 years ago. The plant's first unit went on stream in 1996 and the second in 2007. The two new units, planned at 706 MW each, should be completed by 2015.

Govt to review need for new power plants in Malaysia

November 18, 2008. The Malayasian government will review the need for new power plants by the end of 2009 as electricity consumption has weakened in the last one year. The decision was made yesterday by a committee, the Jawatankuasa Perancangan Pelaksanaan Pembekalan Elektrik dan Tariff (JPPET), which the minister chairs. Demand for electricity has fallen by 4.8 per cent this year.

Malaysia has a total installed generation capacity of 19,743 MW, while in contrast, the maximum demand was 14,007 MW. Power consumption is expected to increase by 3.0 to 3.5 per cent in five to six years. The current 42 per cent reserve is expected to rise to 47 per cent next year with the commissioning of a new independent power producer (IPP) in Jimah, Negri Sembilan.

Malaysia's reserve margin is expected to come down to only 25 per cent as a result of the decommissioning of five IPPs in 2016. If there is demand for power, he said, the five plants could be recommissioned to supply electricity at a cheaper rate.

Electricity deregulation in Texas deemed a success

November 17, 2008. In a study commissioned by Reliant Energy Inc. and released Monday, a Boston economic consulting firm has determined that Texas’ transition into deregulated electricity markets was successful. After examining the performance of Texas’s electricity market from a qualitative and quantitative perspective, it is evident that Texas has had an overall successful competitive power market experience.

Device to provide cheap renewable electricity developed

November 17, 2008. Researchers have developed a device that harnesses the power of the sea to push water uphill to provide cheap renewable electricity. According to a report in The Times, the invention, known as Searaser, is designed to pump water hundreds of feet above sea level from where it can gush downhill to drive hydroelectric generators. Pumping is made possible by the motion of waves lifting the device, as it floats in the sea, and gravity bringing it down again in the wave troughs.

Alvin Smith, the engineer who developed Searaser, has already envisaged alternative uses of the device such as pumping desalinated water inland for irrigation in dry countries. Its main use would be to help Britain to end its reliance on fossil fuels and so reduce the man-made emissions of carbon dioxide that are blamed widely for causing, or at least contributing significantly to, climate change. If successful, the device could help Britain to meet its target of getting 15 per cent of its energy from renewable sources.

According to Smith, one of the big advantages of the wave device is that the turbines that would be used to generate electricity are a proven technology and have been in use for years in hydroelectric installations in hilly areas where water can be held in reservoirs. The wave pump consists of two floats, one above the other, fitted to a double-acting piston. Water is pumped as the floats are forced together and apart by the motion of the waves. Chains and weights fix the device to the sea floor and the pump is able to operate in water as shallow as 30ft (9m) as well as in extreme weather conditions.

Each of the pumps has a capacity of just 0.25mw, but they are expected to be used together in their dozens, or even hundreds, side by side along the coast or further out at sea. A prototype has just completed tests in which it pumped water more than 160ft (50m) uphill through a pipe the diameter of a saucer.

Lanco Infra divestment in biomass projects

November 14, 2008. Lanco Infratech Ltd has entered into share purchase agreements with Agri Gold Projects to divest its stake in two biomass projects in favour of the latter. According to company sources, the agreement was executed by Lanco Infratech Ltd, and other promoters to divest stake in Rithwik Energy Systems Ltd and Clarion Power Corporation Ltd. Both are biomass projects and subsidiaries of the company.

The move will enable Lanco Infra to divest 100 per cent equity in these biomass plants. The company believes that it would prefer to focus on larger projects and stay away from biomass projects. The Clarion Power plant is based near Ongole and has 12 MW capacity and Rithwik, a 6-MW project, is located at Srikakulam. The company did not disclose the transaction value.

L&T goes green, plans to enter solar power generation business

November 14, 2008. L&T is in talks with two firms to make machinery Engineering and construction company Larsen and Toubro Ltd (L&T) plans to enter solar power generation and expand its offering in the green energy technology business that includes nuclear and hydel power. L&T is in talks with two firms to make machinery for solar panels, but declined to elaborate.

Environment-friendly energy technology has attracted firms including Wipro Ltd, Tata BP Solar India Ltd and Reliance Industries Ltd. Global interest in renewable energy such as solar and wind power has grown in recent years because of rising crude oil prices, which touched a peak of $147 (Rs7,173.60) a barrel in July before starting to decline.

Subsidies announced by the Indian government this year for firms that generate electricity from solar panels are also an incentive for companies to enter green energy technology. In 2007, L&T set up L&T Power Projects Ltd, an investment arm for all its power projects, and L&T Power Development Co. Ltd, a subsidiary that will execute coal-fired and multi-fuel power plants in the country. According to consulting firm Frost and Sullivan, the installed capacity for solar power plants in India was 4.8MW in February.

This is expected to increase to 1,000MW by 2017, according to a government panel on solar energy. Maturing technologies such as photovoltaic cells and solar thermal power generation (an alternative to coal-based thermal power plants) make it timely for firms such as L&T to set up renewable energy projects and win carbon credits. Companies that shift to cleaner technologies that reduce greenhouse gas emissions win carbon credits that they can sell for a price.

Draft policy speaks of SEZs for renewable energy sector

November 14, 2008. The proposed renewable energy policy of Karnataka to be unveiled on January 1 is likely to envisage measures to set up dedicated Special Economic Zones (SEZs) for the renewable energy sector a concept that is said to be the first of its kind in the country.

Such a measure has been mentioned in the draft renewable energy policy prepared by the Karnataka Renewable Energy Development Limited, the nodal agency of the State Government for promotion of renewable energy. The draft policy will be finalised by the Government in consultation with experts, industrialists and stake-holders.

The 15-page draft policy has laid emphasis on promoting solar, wind and bio-mass energy in a big way to tide over the power shortage. It has also envisaged a plan for tapping various other forms of non-conventional energy, such as tidal wave energy and geo-thermal energy.

At present, Karnataka is tapping nearly 2,000 MW of renewable energy. Of this, wind energy contribution is 1,120 MW while the small hydel energy share is 416 MW. The draft policy envisages increasing the generation capacity of renewable energy by 3,392 MW by 2012 and 6,050 MW by 2018.

Of the proposed increase of 3,392 MW, about 3,000 MW is planned to come through additional generation in solar, wind and bio-mass sectors. The draft policy notes that the planned addition of 3,392 MW by 2012 is expected to bring investments of about Rs. 22,341 crore ($4.56 bn) to the State, while an addition of 6,050 MW by 2018 will fetch investments to the tune of Rs. 46,250 crore ($9.45 bn).

The break-up of the target for various energy sources for 2012 is as follows: wind energy (present installed capacity 1,120.68 MW) 3,500 MW; small hydel (416 MW) 900 MW; co-generation (339 MW) 450 MW; bio-mass (81 MW) 400 MW. The main intention is to bridge the power shortage by providing a boost to renewable, energy which is eco-friendly.

The draft policy has also stressed the need for establishing a single window clearance mechanism for looking into various clearances and sanctions to be obtained by the renewable energy projects from government agencies.

Such a mechanism should also cover execution of power purchase agreement and the payment to the private generators for the electricity sold to the distribution companies, the draft policy has suggested. Several incentives have also been proposed for the renewable energy projects, including the exemption from entry tax on generation equipment.

IOC eyes wind power to cut loss from fuel sales

November 12, 2008. For IndianOil Corporation, the answer may be blowing in the wind. Stung by mounting losses from fuel sales due to government's oil pricing policy, the flagship refiner-marketer is foraying into wind power with Pune-based windmill-maker Suzlon to cut down its energy bill and maybe earn some carbon credits in the process and tax breaks.

According to sources, a wind power plant is being set up at the port city of Kandla in Gujarat at an investment of Rs 130-140 crore ($26.4 – 28.4 mn). The plant will have a capacity to produce about 25 MW electricity that will power the infrastructure such as storage depots and pump houses along pipelines etc used for IndianOil's field operations.

The project, conceptualised by IndianOil's director (business development) A M Bansal, does not envisage any equity participation by wind turbine-maker Suzlon. There is no proposal for giving any equity to Suzlon. It will be the supplier of the equipment. The project is seen as being economical if the power is used internally.

Kandla has been chosen because of the wind-swept nature of the coastal town and presence of extensive field infrastructure in the region.  The company’s main consumption centres are refineries, that may come later as and when issues like space and geographical parameters are studied. The Kandla project will make IndianOil the third state-owned oil company to foray into wind power generation.

Flagship explorer Oil and Natural Gas Corporation was the first to draw up plans for such a project three years back to power its oil-pumping operations in Gujarat's Kutch region and elsewhere in the country. Last year, the company said it could pump up to Rs 1,200 crore ($243.9 mn) into such projects.

It has placed orders for a wind power farm with a capacity of 50 MW but other plans appear to be doddering. Refiner-marketer Hindustan Petroleum followed suit announcing last year its plans to set up a plant with 25 MW capacity. The project, however, is facing hurdles on account of land and other issues.

Generation utility NTPC too has announced plans to set up wind power projects at an investment of up to Rs 500 crore ($101.62 mn). Wind power is attracting corporates as these are seen as eco-friendly and economical due to tax breaks enjoyed by such projects. Besides, these could also be used to earn carbon credits which can then be traded for money. 

Cow Power is coming to Kern County

November 18, 2008. County Supervisors have issued permits clearing the way for construction next year of a Biogas Distribution Network. For the first time in Kern County, renewable natural gas will be produced from cow manure, generating power for utility customers. The same company that built the plant, Bio-energy Solutions, will construct the distribution facility south of Shafter.

The network will take methane gas from cow manure from as many as nine dairies, upgrade the gas to utility standards, and deliver it to a PG&E pipeline. I think the time has come and this is a tremendous step forward. It is the largest step that is occurred in the dairy industry to completely revolutionize the way they operate and eliminate most of the emissions coming from dairies.

Piedmont natural gas joins council for responsible energy

November 17, 2008. Piedmont Natural Gas Co. Inc. has joined the Council for Responsible Energy, a national coalition that promotes the use of natural gas. Research clearly shows that customers want to do the right thing when it comes to the environment and our long-term energy goals, but they are unaware of the many ways natural gas helps them do that.

The time is right to educate the public that by choosing natural gas you can help save energy, reduce emissions and protect the environment, without compromising performance or lifestyle. The Council for Responsible Energy has more than 190 member organizations.

EPA announces RFS for 2009

November 17, 2008. The 2009 renewable fuel standard (RFS) will be 10.21 percent to ensure that at least 11.1 billion gallons of renewable fuels be blended into transportation gasoline.

The Energy Independence and Security Act of 2007 (EISA) established the annual overall renewable fuel volume targets, reaching a level of 36 bn gallons in 2022. To achieve these volumes, EPA calculates a percentage-based standard by November 30 for the following year.

Based on the standard, each refiner, importer and non-oxygenate blender of gasoline determines the minimum volume of renewable fuel that it must ensure is used in motor vehicle fuel. The 2008 standard was 7.76 percent, equating to roughly 9 billion gallons.

 

 

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