Power crisis looms over Karnataka as dry spell continues
A power shortage threat looms large over Karnataka, even as a chilly winter sets in. The dry spell is worrying the state government, which fears it may lead to a power crisis much before summer arrives. Normally, by now, all thermal units should start shutting down in a phased manner for overhauling. But this season, with no inflows into the reservoirs, and water levels in hydroelectric reservoirs reaching dead storage levels, thermal units have been working overtime, say official sources. A contingency plan on the power situation was finalized by a high-level meeting held last week by chief minister Siddaramaiah and attended by energy minister DK Shiva Kumar. It envisaged meeting the exigency by purchasing power from power traders and other states. This situation has resul ted from a prolonged drought, especially in South Karnataka where hydroelectric reservoirs are located. The state government has already declared drought in 110 taluks and is contemplating declaring another 25-30 taluks droughthit. Last year, an equal number of taluks was declared drought-hit. An official confirmed a crisis was brewing. “Water levels in hydroelectric projects are not bad since it’s the beginning of the dry season. When temperatures hit 35-36 degrees Celsius in February , electricity consumption will be much higher. As power demand for agriculture increases, there is more stress on the grid and this can lead to frequent outages,” the official added. Another official said the gap between demand and supply for power is estimated at 1,500MW to 1,800MW now.But this could go up to 2,5003,000 MW in April-May . The total demand for power in Karnataka is estimated to be more than 12,000MW, and 25% of this is consumed by Bengaluru . The crisis will be compounded by frequent repairs and maintenance activity at thermal plants in Udupi, Raichur and Ballari. A shortage of coal and water may make it worse as five of eight units at the Raichur station fell short of their production targets, due to shortage of water in the Krishna river last year. However, the government is confident it will be able to meet the situation without any cuts, except in the case of rural areas even during sum mer. P Ravi Kumar, additional chief secretary , department of energy , insisted industries would not be subjected to any cut and that seven-hour supply would be maintained at all costs to agriculture pumpsets. Government to buy power Sources said the government has issued instructions to the authorities to make arrangements to provide electricity for the maximum time, till the 2018 assembly elections. The government also restricted independent power producers from selling power to other states The additional burden will eventually be passed on to the consumer through a tariff hike. P Ravi Kumar, additional chief secretary, department of energy, said: “The state is set to become self-sufficient in the electricity sector after two new thermal plants at Ballari and Raichur are opened in one or two months. The government is aware of the power situation in summer and plans to purchase power only to safeguard the interests of the consumers.Buying power this time won’t be a problem as our neighbouring states, including Telangana and Tamil Nadu, have surplus power and the state can buy it cheaply any time.” Delano Hill Womens Jersey
UPPCL in overdrive to supply 24-hour power across state
A day after chief minister Akhilesh Yadav promised 24 hours of power supply across the state, the top brass of UP Power Corporation Limited (UPPCL) went into an overdrive to make arrangement of power in excess of demand. According to UPPCL sources, while demand was expected to touch 16,500 MW, the corporation has made arrangements of around 18,000 MW. This is almost 1,500 MW more than the expected demand. UPPCL MD AP Mishra said the idea was to provide 24 hours of power supply not only in urban but also rural areas. The excess arrangement was made in view of any exigency. UPPCL going into an overdrive to make adequate power arrangement comes at a time when UP heads towards the crucial assembly elections. According to the arrangement, UP on Sunday had 14,500 MW from sources like state-owned power plants, central sector and independent power producers. In addition, UPPCL made arrangement of 2,200 MW from the energy exchange. Mishra said the corporation purchased power worth around Rs 8 crore, the highest ever in a single day, on Sunday. The cost of power from the exchange varies between Rs 2 and Rs 3.5 per unit. In all, the corporation purchased around 27 million units from the exchange. Mishra said they might resort to thermal backing (shutting down the power plants which provide relatively expensive power) to strike a balance with power purchased and supplied. Experts said power availability should also be backed by a robust transmission and distribution system to avoid tripping.Chief secretary Rahul Bhatnagar had pointed out the fact soon after the state government announced 24 hours of power to the urban as well as rural areas. Kam Chancellor Jersey
GLOBAL LNG-Prices rise as South Korea to wrap up major tender award
Asian spot liquefied natural gas (LNG) prices rose this week as strong expected demand from South Korea added to appetite from India and Taiwan, while supply from the United States was slow to return from maintenance. The price of LNG for December delivery was $6.95 per million British thermal units (mmBtu), up around 15 cents from a week earlier. Attention was on a tender by Korea Gas Corp which has by all accounts exceeded its initial scope and drawn bids by 25 companies offering to supply around 50 cargoes in total – even though it only advertised demand for four shipments. In reality, though, Korea Gas Corp is expected to purchase up to 15 or more cargoes to cover strong winter needs as nuclear outages and low LNG stocks prompt a buying spree. Exact numbers could not be confirmed, but companies in line to supply include Royal Dutch Shell, BP, Trafigura, Statoil, PetroChina as well as others, trade sources said. Transaction levels are estimated in the high $6/mmBtu and, depending on delivery period, $7/mmBtu, traders said, while the large number of cargoes put forward suggests suppliers had more on tap than they were letting on. Two separate South Korean firms also picked up a cargo from Japanese trading firm Itochu in a tender, traders said. Taiwan’s CPC is to bring in two cargoes over November-December, traders said. Egypt also launched the world’s biggest mid-term LNG purchase tender for 96 cargoes over 2017 and 2018, drawing significant interest despite new rules forcing suppliers to wait up to six months to get paid. Given Egypt’s worsening credit profile, traders said participation in the bidding round could be less, potentially pushing some conservative oil majors into supplying the country through trade houses. Argentina, meanwhile, withdrew from further buying activity until March owing to low gas demand, ample hydroelectric reserves and high fuel oil stocks, according to traders. State-run buyer Enarsa has pushed back shipments due this year until August 2017, as well as having cancelled other cargoes altogether. Spot trading interest was firmly fixed on Far East markets, showing premiums to the Middle East, helping rekindle arbitrage plays between Atlantic and Pacific markets. Indian demand remains strong. Bharat Petroleum and Gail India are seeking to buy a combined four shipments over December-January and Torrent Power seeks 38 cargoes over four years beginning April 2017. Due back from its month-long maintenance a week ago, Cheniere Energy’s Sabine Pass liquefaction plant is only now moving to restart, judging by gas intake levels. Spot demand was weak in top LNG consumer Japan. “In November, Japanese utilities negotiate their annual delivery programmes (ADP) for next year, and so for January, February and March they won’t be looking seriously for spot cargoes if they get what they want in their ADP talks,” a source said. Dont’a Hightower Womens Jersey
OVL completes acquisition of 11% add’l stake in Vankor
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp, has completed the acquisition of additional 11 per cent interest in Russia’s Vankor oilfield, taking its total stake to 26 per cent. The company signed a deal with Rosneft Oil Company to acquire additional 11 per cent stake in the East Siberian field for USD 930 million on October 28. “We raised a bridge loan of USD 930 million from overseas lenders to pay for the acquisition cost of 11 per cent stake,” OVL CEO and Managing Director Narendra K Verma said here. OVL, which had previously bought 15 per cent stake in Vankor from Russian national oil firm Rosneft for USD 1.268 billion, will get an 7.3 million tons of oil equivalent from its 26 per cent stake. OVL will tie-up long-term financing in the next 6 to 9 months to replace the bridge loan, he said. Besides OVL’s 26 per cent, a consortium of comprising Oil India (OIL), Indian Oil Corporation (IOC) and Bharat PetroResources (BPRL) has acquired 23.9 per cent stake in the field at a cost of USD 2.02 billion, giving them 6.56 million tons of oil. After the stake sales, Rosneft holds 50.1 per cent stake in JSC Vankorneft, the company that operates the Vankor oilfield. Verma and Igor Sechin, CEO, Rosneft, had on September 14 in Moscow inked an agreement to take the additional equity stake in Vankor. That agreement was subject to certain conditions including approvals from the Indian and Russian governments. All approvals are in place, leading to closure of the deal, he said. “The completion within very short period of the binding agreement reflects the speed and cooperation with which both OVL and Rosneft have moved and the support that the investments by Indian companies in Russian oil sector enjoy with the Russian and Indian governments.” Vankor is Rosneft’s (and Russia’s) second largest field by production and accounts for 4 per cent of the country’s production. The daily production from the field is around 410,000 barrels per day of crude oil and 26 per cent stake would give OVL about 107,000 bpd. “The acquisition of additional 11 per cent would add about 30 per cent to the existing OVL’s production at the current rate and approximately 2.2 million tons of oil and 1.0 billion cubic meters of gas annually,” he said. The field has recoverable reserves of 2.5 billion barrels. The USD 2.2 billion OVL spent for acquiring 26 per cent stake in Vankor will be its third biggest acquisition. It had in 2013 paid USD 4.125 billion for 16 per cent stake in Mozambique’s offshore Rovuma Area 1, which holds as much as 75 Trillion cubic feet of gas reserves. In 2009, it had bought Russia-focused Imperial Energy for USD 2.1 billion. Prior to that, it had in 2001 paid USD 1.7 billion for 20 per cent interest in the Sakhalin-1 oil and gas field off Russia’s far eastern coast. Devontae Booker Jersey
Bangladesh considers buying Chevron’s local natural gas assets – sources
Bangladesh is considering buying Chevron Corp’s interest in three natural gas fields in the country, worth an estimated $2 billion, two senior government officials said, as Dhaka looks to secure the supply of a critical source of energy. Chevron, the second-largest U.S.-based oil producer, said in October last year that it plans to sell about $10 billion of assets by 2017 amid a prolonged slump in energy prices. Chevron recently said it is in discussions about the potential sale of three fields it operates in the northeast of Bangladesh. Dhaka sees the gas fields, which account for more than half of the country’s production, as a matter of “national interest” and a purchase is on the table, said Istiaque Ahmad, chairman of Petrobangla, the state-owned oil and gas company, on Thursday. He added, however, that their efforts were at a preliminary stage. Ahmad said Petrobangla was waiting for Chevron to approach it about a bid. Petrobangla is also likely to appoint a consultancy firm to assess the assets, including proven and recoverable gas reserves, to arrive at a valuation, he said. A Chevron spokesman said the company has been in commercial discussions about its assets but no decision had been made so far to sell them. “We will only proceed if we can realize attractive value for Chevron,” the spokesman said in an emailed statement on Monday. Bangladesh officials have said that the South Asian nation of 160 million needs more energy to realize its vision of becoming a middle-income country by 2021. The country is currently short of about 500 million cubic feet a day of gas, according to the energy ministry. Bangladesh will buy the assets through an open bidding process, a government source said last week. “Why should we hand it over to someone else?” the source said. Dhaka’s interest would likely make it harder for a third-party to buy the assets. The Chevron unit sells its entire output from the three fields to Petrobangla under a production sharing contract. Under the terms of the contract, the Bangladesh government has the right of first refusal in any asset sale, Mohammad Hussain Monsur, former Petrobangla chairman, said on Monday. Monsur also said that funding the purchase of the assets would not be a problem since the country could rely on its foreign exchange reserves, which stand at more than $31 billion. In 2015, Chevron’s net daily production in the country averaged 720 million cubic feet of natural gas and 3,000 barrels of condensate, accounting for more than half the gas production in Bangladesh. Cameron Artis-Payne Womens Jersey
Subsidized LPG prices hiked by over Rs 2 per cylinder; non-subsidized LPG costly by Rs 37.5
The Oil Marketing Companies (OMCs) on Monday raised the prices of subsidized cooking gas or Liquefied Petroleum Gas (LPG) by over Rs 2 per cylinder to Rs 430.64, the sixth such hike in four months since July this year. Post the price revision, effective from 1 November, every 14.2 Kilogram cylinder of subsidized LPG will cost Rs 430.64 in Delhi as compared to the existing rate of Rs 428.59, according to Indian Oil Corporation (IOC), the nation’s largest fuel retailer. Also, the OMCs raised the prices of non-subsidized LPG – which consumers utilize after exhausting their subsidized quota of 12 cylinders — by 7.6 per cent or a steep Rs 37.5 to Rs 529.5 per cylinder. Each 14.2 Kg cylinder of non-subsidized LPG is currently priced at Rs 492. The government had recently decided to take the diesel route for eliminating subsidies on LPG and kerosene. Diesel price was deregulated in November 2014 after the previous United Progressive Alliance (UPA) government effected 50 paise hikes every month to eliminate subsidies. The three fuel retailers — Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum — revise non-subsidised LPG prices on the first day of every month, based on the average international price in the preceding month. Conor Timmins Jersey
Indonesia offers three unconventional oil and gas blocks – official
Indonesia is offering three new unconventional oil and gas blocks on the islands of Sumatra and Kalimantan to potential bidders, an energy ministry official said on Monday. The assets on offer are one shale gas block in East Kalimantan, with potential resources of 7 trillion cubic feet of gas and 21 million barrels of oil, as well as two coalbed methane blocks in South Sumatra. Bidders can propose a production split or make an upfront payment for the right to develop the block, Tunggal, an upstream director at the directorate-general of oil and gas who goes by one name, told reporters. Previously, any split in production was pre-determined by the Indonesian government. Eddie Giacomin Jersey
Private sector has big role in energy security: Dharmendra Pradhan
Oil minister Dharmendra Pradhan wants a big role for the private sector in energy security and sees no reason for acrimony between the government and companies. Pradhan inherited a ministry mired in bitter disputes with companies including RIL, but transparent pricing policies have eased matters. Cairn India also went to court over contract renewal, but this dispute is also on its way to policy-based resolution. Also Read: Corporates and govt should not have acrimonious ties, says Pradhan “Why should there be an acrimonious relationship between corporates and government? They are equal partners of this growth story. Private investment has a big role in energy security. The relationship is better when they are based on policies; when discretion is reduced, decision making in isolation ends,” he told ET in an interview. The government allowed higher gas prices for challenging fields if the operator does not have a legal dispute. Pradhan said field-level activity suggested companies are preparing to pump gas from such fields. Nazair Jones Womens Jersey
Court order on Noida toll road brings user concerns back in focus
The Allahabad High Court’s decision to stall toll charges for the DND road between Delhi and Noida has been welcomed by users, primarily the residents’ welfare associations of Noida. But, the legal tangles of the project are not expected to end soon, as the Noida Toll Bridge Company Limited, a listed firm, is approaching the Supreme Court. The company’s stocks closed down over 19 per cent on Thursday. However, the move is expected to spook existing and potential private investors in infrastructure projects — also termed public-private partnerships (PPP) — particularly at a time when the country is looking to attract investors for toll roads of national and other state highways. Many highway operators in India are trying to get funds from foreign investors, such as Brookfield, Macquarie, Canadian Pension Fund, Cube Investments, among others. Some have already invested here. According to reports, the Allahabad High Court has said the company is profitable, as it has started paying dividends. But, this stance is likely to discourage special purpose vehicles of infrastructure companies across sectors from paying dividend to the parent company. Such a decision also highlights the importance that the toll road operators give to users and the steps they take to facilitate their movement. These roads, after all, are almost like natural monopolies. But, sadly, many years after the toll gates in Noida opened, services have not improved for the users to reduce their waiting time. This calls for operators to define ‘quality of service’ in terms of seconds, or minutes for waiting, beyond which users should be allowed to zoom through the gates for free. Such solutions have been implemented at times by toll road operators in areas where there is strong local resistance. For instance, an operator has drawn a line on the road a few metres away from the toll booths. After the waiting vehicles cross that line, they are allowed to cross the toll road gates for free. Also, there could be technology-based solutions, including tag-based tokens being sold at multiple points and probably with incentives, or even allowing use of credit or debit cards to pay the toll charges. That said, users had to cough up toll charges on the DND road, with collecting agents feigning ignorance about the implementation of the court order. Finally, which stakeholder steps in at the ground level to ensure a consistent long-term solution and quality service for users remains to be seen. Vince Williams Authentic Jersey
Despite massive returns, DND expressway cost rose from Rs 408 cr to Rs 5,000 cr
Even before the Allahabad High Court ruled to end the tolling on the DND expressway connecting Delhi and Noida on Wednesday, there was enough evidence to show the project was badly conceived from the very start, and that is what led to its dramatically escalating costs—the project that was structured as a R408 crore one when it started in the early 2000s has seen its cost escalate to R5,000 crore today. Apart from the fact that the project was not competitively bid out, it was assured a 20% return on total cost—most such assured returns are on equity, not debt. And, amazingly, if there was any shortfall in revenues, the contract allowed this to be added back to the costs on which a 20% return was to be ensured—this is why the costs are escalating—which effectively meant there was little project risk to justify this huge return. Worse, the contracting was so loose, there was no cap on costs. And, as a study for the Planning Commission pointed out in 2007, IL&FS, a project sponsor, was involved in conceptualising the project and was a member of the steering committee that decided the project would be implemented by a corporate entity promoted by itself—in other words, the project didn’t have the kind of checks and balances you would expect. The 20% return on project cost, the study calculated after looking at the interest costs paid, worked out to a 32% return on equity; and when the debt was restructured following traffic shortfalls in the initial years, this raised the return on equity to 47%. Adding back shortfalls to the capital each year and no cap in costs, in effect, meant the project would never break even, so the length of the concession would have to be raised from the original 30 years—in 2006, in the Noida Toll Bridge Company Limited’s (NTBCL) AIM listing document, the directors estimated the concession period would be over 70 years. By 2012, as a document revealed in the high court hearing showed, this had gone up to 100 years. Not surprisingly, the court has said the original award was ‘unfair’. After examining the manner in which the costs kept galloping—ideally, costs should reduce each year as debt gets paid off—the court talked of the concession lasting in perpetuity ‘due to wrongful arbitrary terms and conditions of the contract’ and recommended the parts of the contract that allowed this to happen be struck off. It then looked at the amount of toll NTBCL had collected and said this more than covered costs and reasonable returns/profits, so tolling had to be discontinued. Given there are still large public infrastructure projects across the country being given out on a nominated basis, even if to government-owned entities, it is important to ensure none of them are able to extract such high returns from an unsuspecting public. Jake Fisher Authentic Jersey