Coal will nearly overtake oil as the dominant energy source by 2017, and only a drop in world gas prices could curb the use of the dirtier fossil fuel in the absence of high carbon prices, the International Energy Agency said. The IEA, the energy agency for developed countries, said earlier this year that without a major shift away from coal, average global temperatures could rise by 6 degrees Celsius by 2050, leading to devastating climate change. China will use more coal than the rest of the world put together, while India will overtake the United States as the world's second-largest consumer and become the biggest global importer, the Paris-based IEA forecast in its annual Medium-Term Coal Market Report, released on 18 December' 2012. "Coal's share of the global energy mix continues to grow each year, and if no changes are made to current policies, coal will catch oil within a decade,' IEA Executive Director Maria van der Hoeven said in a statement. Use of the highly-polluting fossil fuel has surged in the past decade, mainly because of stronger demand from China and India, where cheap coal-fired electricity has helped to drive breakneck economic growth. Coal now accounts for 28 per cent of total primary energy consumption, and demand for the fossil fuel rose 4.3 per cent in 2011 compared with 2010, the report said, underlining the world's continued addiction to a fuel source that helped turn the wheels of the 19th century industrial revolution. The world will burn around 1.2 billion more tonnes of coal per year by 2017 than it does today, which equals the current coal consumption of Russia and the United States combined, the IEA chief said. Global coal consumption is likely to reach 4.32 billion tonnes of oil equivalent (btoe) by 2017, compared with 4.4 btoe for oil, although the pace of growth is likely to be slower than over the past decade, the IEA forecast. Growth in coal use in developing countries will grow 3.9 per cent a year on average over the next five years if economies such as China return to previous patterns of economic growth, the report said, while coal use in developed nations would only fall 0.7 per cent by 2017. "Coal remains the backbone of the OECD power system throughout the outlook period," the report said. However, US demand for coal is forecast to fall by 3.7 per cent a year by 2017 due mainly to greater efficiency in industry, competition from natural gas and lower steel output. Asian developed economies will increase their coal use by only 0.7 per cent over the next five years, with increased use of coal most likely in South Korea, the IEA added. Western European demand is likely to rise only 0.4 per cent despite abundant supplies of cheap coal from the U.S, as older coal-fired power plants in countries such as Britain close and politicians try and engineer stronger carbon prices after the cost of permits hit a record low earlier this month. In the outcome that carbon prices in Europe and elsewhere are low, only strong competition from low-priced gas would be effective in making meaningful cuts in coal demand, the IEA said. "The US experience suggests that a more efficient gas market, marked by flexible pricing and fueled by indigenous unconventional resources that are produced sustainability, can reduce coal use, car emissions and consumers' electricity bills, without harming energy security," Van der Hoeven said. "Europe, China and other regions should take note," she added, referring to a boom in shale gas that has cut gas prices paid by US utilities by around half of 2008 levels and prompted a major switch away from coal. Without building new gas-fired power plants in Europe and elsewhere until new energy sources can be deployed on a large scale, "we are engaged in a dash for coal", said Dieter Helm, an energy economist with Oxford University. (Reuters)
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Indian infrastructure firm GMR will seek a compensation of over $800 million from Maldives for the termination of its airport deal here but Male is insisting on a "forensic audit" as it feels the actual amount would be less than half. "We have sent a letter to the Maldivian government indicating a number of more than $800 million as compensation amount. This is our initial estimate. The final figure would be based upon various calculations, loss of profit among others," GMR (Airports) CFO Sidharth Kapur said. Read: Maldives To Take Control Of GMR Airport The Maldivian government, however, debunked the calculations and insisted on getting a forensic audit done through an international firm. "We will go in for a forensic audit as we want to see how much money has poured in to GMR coffers through the Male International Airport and how much actual money has been spent here. As per our information, GMR has cashed in only $150 million of the about $350 mn loan it had bagged through a bank," Maldives President Mohamed Waheed's press secretary Masood Imad said. Asked if GMR is open to a forensic audit, Kapur told PTI, "Our books are transparent. The concession agreement signed with Maldives government did not have the clause of forensic audit. Having said that, I must add that we don't have any objection to an audit but it has to come through proper legal process". Sources in the Maldivian government say that the compensation amount, as per their calculations, should come to about a lower limit of $150 million and an upper limit of $350 million. "We will present our case before the Singapore Court and let them take the call," a source said. The $500 million airport project contract awarded to GMR for modernising and operating the Ibrahim Nasir International Airport (INIA), signed in 2010 during the previous regime of Mohamed Nasheed, was "unilaterally" terminated by the current government on 27 November. The airport was taken over by the Maldives Airports Company Limited after a high-voltage legal tussle in which GMR had initially got a stay order on the termination from the Singapore High Court. The airport was taken over by the Maldives Airports Company Limited after a high-voltage legal tussle in which GMR had initially got a stay order on the termination from the Singapore High Court. However, the Singapore Supreme Court ruled on 6 November, a day before the notice period expired, that Maldives has the power to take over the airport on 6 November. Replying to a query if GMR is not welcome in Maldives anymore, Masood said, "We don't have anything against GMR. We had objection to the contract that was signed under dubious conditions. We will in the future initiate a lot of infrastructure projects and GMR is welcome to bid for it." However, sources in the know said that the "unlawful" termination of the contract sends a "negative signal" to foreign investors, a stand taken by Indian government too. "It now feels that any contract signed with a particular regime can be scrapped when a new government comes in. It is a risky proposition," a source said. Asked if Maldives will seek fresh bids for the modernisation and the operations of the airport, Imad said the cabinet has given the nod to set up a new company called Maldives International Airport Limited that will takeover from MACL. However, he added the structure of MIAL is yet to be finalised. Refuting the allegations that the move to terminate the contract was a political one to whip up emotions before the elections next year, Imad said, "Protests against the contract have been taking place since the first day it was signed by Nasheed. There were regular protests and marches happening". He added, "We had a set of issues that needed to be looked into after we came to power. We are tackling them one by one and airport issue was one of them. We consulted reputed international law firms and they agreed with us that the contract was not valid. It is only then we terminated". "The President has not even said if he might or might not run for Presidency. It is completely wrong to say that it was done for political mileage. We are only setting the wrong done by Nasheed right," he added. (PTI)
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A year after solar power projects were allocated to developers, India’s sunrise sector is finally seeing some movement. The southern states of Tamil Nadu and Andhra Pradesh recently announced tenders for solar power projects to the scale of 1000 MW each. And if the consultation meetings in Tamil Nadu are anything to go by, there is palpable interest. The state had to hold two meetings instead of the one planned because of the sheer number of people who showed up. “There’s very little happening in Gujarat and other states. So there’s significant interest,” explains Sanjay Chakrabarti, national leader, cleantech, Ernst and Young. And it’s not just developers who are keen. “I came across a good number of solar cell and module manufacturers. The EPCs (engineering, procurement and construction companies) were most in numbers,” says Narasimhan Santhanam, director of Energy Alternatives India (EAI), a Chennai-based cleantech consultancy firm.Industry experts say issues like availability of finance and the possible anti-dumping duty (ADD) on solar cells and modules may take the sheen off things. A flood of cheap photovoltaic (PV) cells and modules from countries such as China have hit Indian manufacturers, prompting the government to begin ADD investigations. While this is beneficial for equipment manufacturers, imposition of ADD could prevent solar power developers from obtaining modules from the cheapest sources. The cost of financing for developers could also take a hit. “Since many of the manufacturers from the countries being investigated also facilitate low-cost financing, ADD on such manufacturers will cut-off cheaper financing options, reducing the viability many projects,” explains Madhavan Nampoothiri, founder and director RESolve Energy Consultants. Since the bidding process is expected to be over in both Tamil Nadu and Andhra Pradesh before the ADD investigations are completed, Nampoothiri believes bidders will bid cautiously at higher prices. For Tangedco or APTransco, this would mean having to sign power purchase agreements (PPA) at higher rates than if there was no investigation. Interestingly, Tamil Nadu hasn’t specified an upper limit on the size of the projects, only a lower limit at 1 MW. “I would’ve preferred 50-100 MW. That’s where you bring in economies of scale (in larger projects),” says Chakrabarti. Andhra Pradesh — contrary to the large scale that many in the industry believe the sector requires — has stipulated an upper limit of only 20 MW. How things finally shape up will only be evident once the pre-bid meetings are held on 14 December for Andhra Pradesh and 19 December for Tamil Nadu.(This story was published in Businessworld Issue Dated 24-12-2012)
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The Ministry of Petroleum and Natural Gas is preparing a roadmap for reducing the country’s dependence on crude oil imports. Veerappa Moily, the Union Minister for Petroleum and Natural Gas promised to bring down crude oil imports to 50 per cent of the country’s requirement by 2016-17 from the current 80 per cent at a function organised by the Kanara Chamber of Commerce and Industry (KCCI) in Mangalore recently. While confirming the news, ministry officials said the background work had already begun and all the stakeholders were being involved. The push to increase domestic oil output will involve looking at all possible measures — shale gas exploration, raising production from coal bed methane (CBM) blocks and acquisition of oil assets abroad.172.11 MMT — the provisional crude oil imports in 2011-12In a bid to increase domestic production, the ministry has given an in-principle nod to Coal India for the extraction of CBM from the coal blocks operated by it. Four rounds of CBM bidding have already taken place with seven blocks offered in the fourth round. The estimated CBM resources of these seven blocks are about 330 billion cubic meters with expected production potential of 9 MMSCMD. The tenth round of the NELP (New Exploration and Licensing Policy) is expected to take place in 2013. With the government focussing on quality over quantity, the number of blocks to be awarded are expected to be lesser this time, say ministry sources. Since 1997, when the NELP was first launched, nine rounds have been concluded bringing down the unexplored and poorly explored areas from 58 per cent in 1998-99 to 34 per cent in 2010-11. In addition, government-backed companies are moving towards acquiring oil assets abroad and the total investments made by various PSUs for acquisition of assets overseas stood at Rs 64,832.35 crore on 30 June 2011. Will all these efforts help in bringing down imports substantially? Unlikely, say experts. “It will be difficult to define a substantial quantum but the country will need at least 15 years before it can make any real progress in increasing the domestic crude oil production,” says Deepak Mahurkar, leader of oil and gas at PwC.STEPS AHEAD Greater domestic exploration activities Shale gas exploration Acquisition of overseas oil assets Increasing production from coal bed methane blocksIt is estimated that crude oil imports will rise to 90 per cent of the country’s requirement by 2030. According to a report by PwC, India’s oil trade deficit has risen drastically over the years and currently accounts for around 54 per cent of the country’s total trade deficit. Resultant to that, the drawdown of foreign exchange was to the tune of $12.8 billion in 2011-12. India is the sixth largest consumer of crude oil globally and its primary energy needs stood at 559 Mtoe (million tonnes of oil equivalent) in 2011 and is estimated to increase to 1464 Mtoe by 2035 as per the International Energy Agency. The provisional crude oil imports stood at 172.11 million metric tonnes (MMT) in 2011-12, an increase of 5 per cent over 163.59 MMT in 2010-11. Meanwhile, the contribution of domestic crude has progressively fallen from 26.68 per cent in 2002-03 to 16.45 per cent in 2011-12 (provisional figures). (This story was published in Businessworld Issue Dated 24-12-2012)
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Reliance Industries and its partner BP have shut a seventh well in the D6 block off the country's east coast due to sand and water ingress, bringing down the number of producing wells to 11, a source with direct knowledge of the matter said.The well at D1 and D3 gas fields was shut about a week ago, the source said on Friday.Declining gas output from the D6 block in the Krishna Godavari basin has impacted expansion plans of several power companies, and spurred demand for costly liquefied natural gas imports.Gas production from D6 has declined to about 23 million standard cubic metres a day (mmscmd), the source said.A Reliance spokesman declined to comment on the matter.Production at the block may average 22.6 mmscmd in the fiscal year starting April 2013 and is projected to decline to 20 mmscmd in 2014/15, only about a third of the 60 mmscmd it produced in 2010 and well below the planned peak capacity of 80 mmscmd.Reliance may have to shut under-performing gas fields in 2015-16, oil secretary G.C. Chaturvedi said in October, while Morgan Stanley analysts have said the key gas producing fields in D6 could be exhausted in 5 years.Reliance brought in the British oil and gas company last year, which paid $7.2 billion to invest in 23 oil and gas blocks with the Indian firm, hoping its offshore expertise would help arrest the decline in output.The D6 block, operated by Reliance, was expected to contribute up to a quarter of the gas supply for Asia's third-largest economy.Reliance and BP submitted a revised field development plan in September, cutting the gas reserves in the D6 block by about two-thirds to 3.4 trillion cubic feet, the oil ministry said last month.Reliance had government approval to drill 50 wells and had drilled only 22 with 4 turning out to be dry, the source said.Canadian company Niko Resources owns 10 per cent interest in the block, while Reliance holds 60 per cent and BP the rest.(Reuters)
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A day after Election Commission rap, Oil Minister M Veerappa Moily on 12 December' 2012 said the government has not yet taken any decision on raising cap on supply of subsidised LPG cylinders and the EC would have been informed before announcing any decision. "If the proposals had been concretised and it was to be announced or decision was to be taken... I would have definitely written to Election Commission of India," Moily told reporters here. Moily said the government had consistently maintained that the decision to cap supply of subsidised cooking gas (LPG) to six cylinders per household in a year is under review following widespread demands and he had reiterated the same position in reply to media queries on sidelines of a CII function here yesterday. "Not that I would like to do anything for political gain behind the back of Election Commission. That is not our intention. We are very clear about it. We are very transparent and objective about it," he said. Election Commission had taken a strong exception to Moily's statements ahead of the elections in Gujarat, that the cap would be increased to nine cylinders, and sought his explanation. In his formal response, Moily said: "The Government is yet to take a decision in the matter. As such my response to media queries... should not be treated as an announcement regarding decision of the government." "I would like to assure you that due regard to the applicable rules and procedures of the Election Commission of India shall be given as and when a decision in this regard is taken by the government," he wrote. Talking to reporters, Moily said there have been widespread demands including from about 100 Congress MPs, several chief ministers and union ministers, for revisiting the decision as only six cylinders per household was "not practical and away from reality". "Concerns had to be addressed today or tomorrow. But at the same time, I am conscious that I would not have done anything without writing to the Election Commission of India," he added. Moily said consequent on capping the number of cylinders, number of issues came up and concerns have been expressed particularly from the women. He admitted that consumption of cylinders in urban area was different than the same in rural areas and there were distribution problems in North-East, Jammu & Kashmir and other far flung places. Also, concerns had been expressed by many chief ministers, Union ministers and even by "our own Congress MPs exceeding 100 who have represented to the Prime Minister that the capping is not proper," he said. "I cannot say I should shut out my mind, I should shut my heart, shut my ears and I should shut out by voice (on these concerns)," Moily said, adding he had informally talked to one of the Election Commissioners on these concerns. "I was about to write to them to exclude (poll bound) Himachal Pradesh and Gujarat," he said but did not say what was the response of the Election Commissioner with whom he had discussed the issue. As per the September 13 decision, every household could avail of six LPG cylinders of 14.2-kg at subsidised rate of Rs 410.50 per bottle. Any requirement beyond will cost the market rate of of Rs 931 per cylinder. Only 44 per cent of households in the country consume six cylinders in a year, while the majority consume 9-12 bottles. Yesterday Moily had stated that the decision to raise the cap will be taken by the Cabinet "very shortly" and that he has had two rounds of discussions with Finance Minister P Chidambaram on the impact of the decision to raise the cap. The government will have to provide an additional Rs 9,000 crore annually if the cap is raised to nine cylinders.(PTI)
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Amidst government directive to PSUs to invest their surplus funds, Coal India Ltd, which is sitting on huge cash-pile, has lined up Rs 50,000 crore investment plans for the next five years. "We have investment plans. We have a five-year plan, almost Rs 50,000 crore lined up," Coal India Chairman and Managing Director S Narsing Rao told PTI in an interview. Earlier, Finance Minister P Chidambaram had said that government had already put PSUs on notice and no state-run firm would be allowed to fall short of the announced intention to invest. "If they (PSUs) have not invested and they still have surplus cash, they have been told to invest...the principle is use it or lose it," the Finance Minister had said. Rao said the PSU was sitting on a cash reserve of Rs 61,000 crore. "We don't have plan for the entire money. (It is) not possible to front load, because some of them are conditional...like we have lined up Rs 7,500 crore for railway connectivity," he added. Battling low production, Coal India (CIL) has earmarked Rs 24,500 crore capital expenditure, out of Rs 50,000 crore envisaged investment, over the next five years mainly to boost capacity. The Rs 24,500 crore would be spent mainly on developing more than 100 underground and opencast mines in seven coal producing subsidiaries in the 12th Five Year Plan (2012-17). CIL accounts for over 80 per cent of the domestic coal production also plans to set up 22 new washeries. World's biggest coal miner, CIL is also eyeing acquisition of assets abroad. "Something we are pursuing in South Africa. It has not reached at that stage, so too early to say," Rao said.(PTI)
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A unit of Indian conglomerate Hinduja Group has hired Deutsche Bank to consider options for a 49 per cent stake in a Saudi lubricants venture valued at up to $700 million, three sources said.Jeddah-based Petromin is a joint venture between Gulf Oil International Group - a unit of family-owned Hinduja, and Saudi group Dabbagh with a 51 percent stake.The partners have had differences over strategy, prompting Hinduja to hire an advisor and consider its options, the sources said on Tuesday, speaking on condition of anonymity as the matter has not been publicly disclosed.A Hinduja spokesman in Mumbai declined to comment, as did Deutsche Bank. Petromin was not available to comment.Any deal will most likely involve a third party buying out the Indian partner, one of the sources said, adding the business had an equity value of $600-$700 million."The business is good and it generates profit of around $200 million annually. The best option will be for a Saudi-based investor to come in and buy out the Indian group," one banking source said.Petromin, the oldest lubricant company in the Middle East and formed by royal decree in 1968, makes more than 150 lubricant products and exports to over 35 countries in the Middle East, Africa and Asia, according to its website.Dabbagh Group and Gulf Oil International Group paid $200 million to buy Petromin in 2007 from a joint venture between Saudi Aramco and Mobil Investments, an ExxonMobil affiliate.In 2010, Hinduja said it was planning a $1 billion initial public offering for Petromin and had hired Saudi British Bank to run the process. Hinduja said at the time Petromin had production capacity of 300,000 metric tonnes for lubricants and greases combined. The IPO did not go ahead.Hinduja's India-listed arm, Gulf Oil, bought US specialty chemicals company Houghton International <HGINL.UL> from a private equity fund for $1.05 billion earlier this month.The Hinduja Group, which has interests across banking, media, power and automobiles in India, has a sizeable presence in the Gulf including Hinduja Bank in Dubai.
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