Reliance Power and Kakinada Seaports along with Royal Dutch Shell will jointly set up a liquefied natural gas (LNG) terminal on India's east coast to meet local gas demand, the companies said in a joint statement.The terminal will help Reliance Power, controlled by billionaire Anil Ambani, secure fuel supplies for its 2,400 megawatt (MW) gas-fired project at Samalkot in Andhra Pradesh.Reliance's plant and another 5,000 MW power project are almost ready in India but can't operate because of a local gas shortage.India's gas-based plants are facing uncertainty over supply as output from the D6 block off India's east coast operated by Reliance Industries has sharply declined, forcing power producers to look for substitutes.The joint venture company plans to set up an LNG terminal with an initial capacity of up to 5 million tonnes per annum by 2014 at Kakinada deepwater port in Andhra Pradesh, the statement said. Kakinada Seaports operates the Kakinada deepwater port.Shell already controlls and operates LNG import terminal in Gujarat.The statement didn't disclose the stake of each partner or the proposed investment in setting up the LNG terminal.(Reuters)
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As the temperature continues to rise, so does the demand for energy in the country, adding to the woes of both consumers and utilities. Making matters worse for both is capacity shutdown: it was 36,903 MW as on 24 June, up from 34,387 MW on 24 May. What is alarming is that this shutdown constitutes more than 20 per cent of the total installed capacity monitored by the Central Electricity Authority (CEA). Out of a total capacity of 1,78,571 MW, 36,903 MW is listed under power outage. Of this, only 8,248 MW is listed as planned outage, while 26,300 MW is under forced outage on account of either equipment failure or fuel shortage. And the rest, 2,355 MW, is listed under ‘other reasons'.The eastern region is the worst hit, with 32 per cent of its capacity shut down and most of it under forced outage. The western region has 20 per cent of its capacity lying unused owing to outages, while the southern, northern and north-eastern regions have outages of 18 per cent, 15 per cent and 12 per cent, respectively. States such as Haryana and Uttar Pradesh in the north; Maharashtra and Chhattisgarh in the west; Karnataka and Tamil Nadu in the south and Orissa, Bihar and Jharkhand in the east are among the worst off."Capacity under outage should not cross 10 per cent of the total installed capacity. The current outage is quite high. This is mainly due to fuel shortage, because of which many plants are operating at sub-optimal capacities or not operating at all," says Ashok Khurana, director-general at Association of Power Producers.The situation is expected to worsen, as the number of plants with critical stock levels (less than seven days of fuel) has gone up in the last few weeks. In May, as many as 27 thermal power stations (TPS) were listed as having critical stock levels and 13 stations as having super critical levels (less than four days); in June, their number rose to 31 and 18, respectively."Coal-based power generation has faced acute fuel shortages in the recent past. Estimates of capacities without fuel supplies is in the range of 20,000 MW. The demand-supply gap has been due to large capacity additions in the past three years; in the same period, coal production improved only marginally. Fuel supplies have become the most critical factor in capacity utilisation of power plants. They also constitute one of the most challenging hurdles to investments in new plants," says Dipesh Dipu, director-consulting (mining), Deloitte Touche Tohmatsu India.However, the current capacity shutdown cannot be blamed for long hours of load shedding, which happens largely due to the lack of proper planning by discoms as well as the poor state of their finances. "In the last fortnight, there have been more sell bids — rather than purchase bids — at the power exchanges," says Khurana. "This is because of the poor financial state of state power utilities, which prefer denying power to consumers and are loath to purchasing power."The consumers end up suffering the most. "Due to load shedding, consumers are forced to buy power generated through diesel gensets that cost Rs 13-15 (per unit), while cheaper power at Rs 3-5 is available at the exchanges," says Jayant Deo, MD and CEO, Indian Energy Exchange.(This story was published in Businessworld Issue Dated 09-07-2012)
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Oil edged up near $104 on Thursday as buyers moved back in after Wednesday's heavy sell off, but continuing nervousness around the demand outlook and the euro zone crisis kept oil on course for its biggest monthly per centage drop in two years.Brent crude futures for July delivery were up 50 cents at $103.97 per barrel by 0945 GMT, off a low of $102.90 hit earlier in the session. Prices were on track for a monthly loss of around 13 per cent, the biggest since May 2010, after slipping 3 per cent on Thursday.US crude for July delivery was up 36 cents to $88.18 per barrel. Prices were headed for a steep monthly loss of around 16 per cent - the worst since late 2008."The market is in a state of flux right now, driven by currencies and safe haven flights," said Ole Hansen, head of commodity strategy at Saxo Bank.Dollar weakness and the euro's recovery from a two-year low helped lift oil prices as London traders arrived at their desks. A weaker dollar makes commodities priced in dollars more affordable for buyers using other currencies.Hansen saw US crude finding support down towards $85 and ahead of $100 for Brent, as this is a crucial level from a technical point of view and given repeated statements by the Saudis."We are pretty close to a good support here," he said. "We've completely removed the geopolitical risk factor and now the demand side has come back into focus. There is some nervousness we could see a deeper slowdown than what was expected."He pointed to the poor economic performance data out of India, which has been one of the growth engines for energy consumption. India's annual economic growth slumped in the first quarter to a nine-year low of 5.3 per cent as the manufacturing sector shrank.EUROZONE CRISISThe ongoing crisis in the eurozone also continues to dominate market sentiment. Mario Draghi, president of the European Central Bank, warned on Thursday that the ECB could not fill the vacuum created by the lack of action by national governments.Spain's centre-right government has so far failed to spell out how it plans to finance a 23.5 billion euro rescue of Bankia, the country's fourth-biggest lender.This is unnerving markets and has driven the country's borrowing costs to levels at which Ireland and Portugal sought international bailouts. Spain's 10-year bond yield is currently around 6.58 per cent, close to the crucial 7 per cent mark."The situation in Spain at the moment is untenable, not only is there concern over the state of its banking sector but there is little confidence its government will actually be able to bail them out," said Michael Creed, an economist at the National Australia Bank.This is keeping investors on the sidelines. Adding to the nervousness in markets is the fact that the outcome of the Greek election remains finely balanced, as different polls in recent days have produced highly contradictory results."The market is still trying to digest what is going on - we might see a technical rebound but the problems that led to the slump are by no means solved," said Eugen Weinberg, an analyst at Commerzbank in Frankfurt."The risk is not yet priced in - that's what the market action is telling us."The market is also awaiting US oil inventories data from the US Energy Information Administration due for release later on Thursday. According to a Reuters poll, stockpiles are expected to see a 10th consecutive weekly rise for the week to May 25.(Reuters)
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The coal ministry has been busy. After pushing for a coal regulator earlier this year to bring in more efficiency and transparency to the sector, it has now proposed an inter-ministerial group (IMG) to periodically review development of captive coal blocks and recommend blocks for de-allocation. The group, headed by Zohra Chatterji, additional secretary of coal, will include members from the ministries of power, steel, law and justice, and the departments of economic affairs and industrial policy and promotion. Involving the other ministries concerned would also distribute accountability. In the past, the coal ministry has de-allocated 25 coal blocks which belonged to NTPC, Damodar Valley Corporation, Maharastra State Mining Corporation, among others. Going forward, the coal ministry wantsto build consensus before it goes ahead with de-allocations. It has recently issued 54 show-cause notices. Once the IMG is formed, it will take a call on what to do with these blocks.According to ministry officials, the recent Comptroller and Auditor General (CAG) report and CBI investigations into coal block allocations have made them more cautious. They say that if the ministry de-allocates coal blocks now, it will seem it is doing so because of the investigations. "We do not want anyone to point fingers," says a ministry source. The Prime Minister's Office (PMO), too is taking serious note of the sector. Coal ministry officials confirmed that three de-allocated NTPC blocks were given to Coal India (CIL) on orders from the PMO. 25 coal blocks have already been deallocated by the coal ministry The PMO is also trying to sort out the stalemate over fuel supply agreements (FSA) between CIL and power producers. It has accepted CIL's argument to scale down fuel supply guarantees from 80 per cent to 65 per cent for new FSAs. But if CIL is unable to supply 65 per cent of the contracted amount, it must face the usual 10 per cent penalty (0.01 per cent set by CIL earlier). According to the new terms, CIL must agree to supply at least 65 per cent in the first three years, 72 per cent in the fourth and 80 per cent in the fifth year. CIL's customers may or may not agree. Soon after reports of the new FSA conditions, NTPC CMD Arup Roy Chowdhury was quoted as saying, "We have no issues as long as CIL supplies coal. We have been given to understand that the company cannot supply more than 65 per cent in the first year, and that is all right with us."However, an NTPC spokesperson has told BW that it has commissioned a capacity of 4,300 MW between 1 April 2009 and 31 December 2011 for which FSAs are yet to be signed. NTPC says it has conveyed to CIL that it will sign FSAs for the full quantity of coal as mentioned in the Letters of Assurance for a period of 20 years, where penalties will be triggered if supply falls below 80 per cent (and incentives if it exceeds 90 per cent). A power ministry source says that settling for less than 80 per cent is difficult.Essentially the matter is still open. CIL's board is expected to decide on the conditions on 5 July.(This story was published in Businessworld Issue Dated 09-07-2012)
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State-run gas utility GAIL India plans to spend around 75 billion rupees this financial year on expanding its pipeline network to meet rising demand for gas, it said on Wednesday, as it reported a drop in quarterly profit.GAIL said fourth-quarter net profit fell 38 per cent, missing analysts' forecasts, due to an increase in discounts given to state-run refining companies to compensate for a shortfall from government-set retail prices of cooking gas.The planned capital spending for the current financial year is roughly similar to 2011-12 and will be funded by raising 45 billion rupees through debt.GAIL will launch a local bond issue of up to 7.5 billion rupees by next week, and plans to raise another $300 million through external commercial borrowings, chairman B.C. Tripathi told reporters.A growing number of power plants, industries, and city gas projects have pushed up natural gas demand in Asia's third largest economy, but problems at Reliance Industries's gas blocks, off India's east coast, have forced higher imports of expensive liquefied natural gas (LNG).To cater for the rising demand, GAIL is adding 5,500 kilometres of pipelines to its existing 9,000 kms network.The company, which is gradually branching out from its primarily gas transmission business into a major petrochemicals and LNG player, has outlined plans to spend nearly $5.5 billion on capacity expansion over the next four years.GAIL plans to import around 30 spot cargoes of LNG, Tripathi said.Q4 PROFIT SHARPLY DOWNGAIL reported net profit of 4.83 billion rupees for its fiscal fourth quarter ended March 31, down from 7.83 billion rupees a year earlier. Net sales, however, rose 17 per cent to 104.54 billion rupees.Analysts, on average, had expected a net profit of 8.8 billion rupees, according to Thomson Reuters.GAIL provided discounts of 13.98 billion rupees during the quarter, compared to 9.01 billion rupees a year earlier.India caps prices of petroleum products such as diesel, cooking gas and kerosene and producers such as ONGC and GAIL share the cost of subsidising refineries by selling oil and gas to them at a discount.State oil companies last week raised retail gasoline prices by 7.54 rupees/litre, but the government, faced with street protests, is yet to take a decision on diesel, cooking gas an d kerosene.Shares in GAIL, valued by the market at $7.6 billion, closed 1.4 per cent lower at 325.20 rupees ahead of the results in a weak Mumbai market. The stock is down 15 per cent so far in 2012, sharply underperforming a 5.5 per cent rise in the BSE Sensex.(Reuters)
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Reflecting slowdown in the economy, the growth rate of eight infrastructure sectors slowed to 4.6 per cent in May due to poor performance of crude oil, natural gas and fertiliser.The core industries that also include coal, electricity, cement, petroleum refinery products and finished steel, and carry 37.9 per cent weight in the Index of Industrial Production (IIP), had grown by 5.8 per cent in May last year.The cumulative growth rate of infrastructure industries during April-May 2012 also slowed down to 4.2 per cent, from 5 per cent in the same period last year, according to the data released today by the Ministry of Commerce and Industry today.Natural gas and fertiliser output contracted by 10.8 per cent and 15.1 per cent respectively during May.Petroleum refinery products and crude oil production slowed down to 2.9 per cent and 0.5 per cent, from 4.5 per cent and 9.8 per cent respectively during May 2011.Steel and electricity production too declined to 4.9 per cent and 5.2 per cent in May, from 8 per cent and 10.3 per cent in May 2011 respectively.However, cement and coal production grew 22.1 per cent and 8 per cent during the month under review, over May last year.(PTI)
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State-fuel retailers could cut retail prices of petrol by about two rupees a litre from next month if global oil prices and the rupee stabilise at current levels, said S.Roy Choudhury, chairman of Hindustan Petroleum Corp.State-fuel retailers are slated to review retail petrol prices on May 31.Indian firms last week raised retail petrol prices by Rs 6.28 a litre excluding taxes, translating to a hike of 7.54 rupees/litre at the retail level.To soften the blow of the steep rise, many states including Delhi have reduced local taxes on the increased component, restricting the rise to Rs 6.28 a litre.Separately, HPCL's head of marketing K. Murali said HPCL plans to import 264,000 barrels per day (bpd) of crude oil in 2012/13 as against 250,000 bpd in the last fiscal.HPCL has reduced the size of its annual deal with Iran by about 15 per cent to 30,000 barrels per day (bpd) for the current fiscal year and is looking at diversifying its crude import basket.The company's board has approved signing its first-ever annual import deal with Azerbaijan's national oil company SOCAR to buy 10,000 barrels per day (bpd) of oil in this fiscal year, Murali said.HPCL is currently paying in euros for Iran crude imports via Turkey's Halkbank <HALKB.IS>, it head of finance B. Mukherjee said.The state-run refiner operates a 166,000 bpd refinery at Vizag and a 130,000 bpd plant in Mumbai.It also has a stake in 180,000 bpd Bathinda refinery in northern Punjab state.(Reuters)
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Shares of Cairn India dropped more than 6 per cent after two sources familiar with the matter told Reuters its U.K. parent sold part of its stake to a clutch of institutional investors at a discount.Cairn sold about 66.8 million shares in the Indian unit, offering the shares at 307.40 to 317.50 rupees according to a term sheet seen by Reuters on Thursday, below its 327.35 rupee closing price that day.Cairn India shares were last down 6.4 per cent at 306.40 rupees.Citigroup was the book runner to the transaction, the sources said.On Thursday, sources have told Reuters that the British oil explorer plans to sell about 3.5 per cent of its holding in the company.(Reuters)
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