Petronas acquires 10 pc stake in Cairn India

Showing a keen interest in the Indian exploration and production sector, Malaysian petroleum giant Petronas (Petro Nasional Berhad) has acquired a 10 per cent stake in Cairn India for Rs 3,115 crore ahead of the company's initial public offer (IPO) of shares that rides on its huge oil reserves in Rajasthan.

In the largest-ever private placement before the IPO, Cairn India, the local unit of London-listed UK oil explorer Cairn Energy plc, has raised Rs 3,700 crore or $822 million mainly from Petronas. The remaining Rs 585 crore has been raised from a combination of Indian and international institutional investors, company officials said.

Cairn Energy Plc's chief executive Bill Gammell said, "We are delighted to have gained such substantial backing for our pre-flotation placing. The positive response confirms our belief that this is the best strategy for Cairn to develop and grow our world class business in India."

Cairn India said in a statement that it has divested nearly 21 crore equity shares at Rs 176.48 per share. Of this ,17.6 crore shares (representing approximately 10 per cent of the post-flotation share capital) have been subscribed to by Petronas. However, in case the IPO price, which will be decided through book-building process, is lower than Rs 176.48 per share, the placement price will also be reduced accordingly.

At this price, Cairn India’s market capitalisation would be a whopping Rs 31,154 crore.

After the completion of its private placement, the IPO size would be reduced to around 32.88 crore shares as against the original plan of 53.88 crore shares. Through the proposed IPO, which will be completed before February 10, the company plans to raise another Rs 5,797 crore.

In all the company would raise Rs 9,500 crore. Out of this, Rs 2,700 crore will be retained by Cairn India while the balance will be paid to the parent company, Cairn Energy Plc, for acquiring its entire asset base in the India.

The private placement is equivalent to 11.88 per cent of the issued share capital of Cairn India. Merrill Lynch and ABN AMRO Rothschild have acted as joint co-ordinators in the placement.

Article Link

Petronas reports 22% rise in fiscal first-half profit

Malaysian oil-and-gas company Petroliam Nasional Bhd. on Thursday reported a 22 percent rise in net profit for the first half of its financial year.

The state-owned firm, commonly referred to as Petronas, said its net profit for the six months ended Sept. 30 climbed to 24.66 billion ringgit (US$6.80 billion; euro5.28 billion) from 20.29 billion ringgit in the same period a year earlier.

Revenue rose 9.9 percent on year to 88.85 billion ringgit (US$24.50 billion; euro19.02 billion).

Petronas, which doesn't release quarterly earnings figures, didn't provide reasons for the better performance or a forecast for its future outlook.

Analysts expected Petronas to perform well due to increased production and high oil prices.

Petronas said its domestic operations contributed to 24.5 percent of revenue, while the balance was from export and international operations.

The company said its total production was 1.63 million barrels of oil equivalent per day, up 6.7 percent on-year.

Oil accounted for 43 percent of production and gas comprised the remainder. - AP

Article Link

Net Metering: "Freeing the Grid"

The Network for New Energy Choices (NNEC) report "Freeing the Grid,” is the first report ever to rank and grade the effectiveness of 34 state programs designed to help homeowners and small businesses generate their own distributed energy and sell the excess back to the central transmission grid. These ‘net metering’ programs have been described as having the most potential of any policy tool at any level of government to “green” American electricity sources.

“Every homeowner and every small business is a potential source of reliable, renewable electricity for their community,” noted NNEC Executive Director Chris Cooper. “Smart utilities realize that we will have to tap all of these small sources to meet future demand.”

By comparing regulations with customer participation rates, NNEC was able to identify which states had the best programs and which states had the worst (and why).

New Jersey ranked first out of 34 states with net metering programs. Indiana and Arkansas were profiled as states with “worst practices”. Oklahoma ranked last. Read the report to find out what your state is doing to require net-metering.

The Network for New Energy Choices (NNEC) is committed to providing state and local governments with new ideas and useful information to promote clean, affordable power from local, renewable energy sources. NNEC is promoting creative ideas for financing community-based clean energy, helping to dispel misinformation about renewable energy in the media and advocating for critical utility policy reforms that will usher in a new world of energy choices for all Americans.

While I applaud NNEC's efforts to encourage distributed energy, it is only part of the answer to our energy problem. I do not agree that net metering has "the most potential of any policy tool at any level of government to “green” American electricity sources." Energy conservation through the encouragement of plug-in hybrid vehicles and energy efficient homes using high efficiency lighting (compact fluorescent lights) and higher insulation standards for new homes could have a greater effect in a shorter time period. Net metering and higher insulation standards need legislation to require them, which takes time and is why organizations like NNEC are needed. Government research money for batteries and purchase, not subsidies, of hybrid and plug-in vehicles is perhaps the best use of taxpayer dollars in the field of energy.

Kencana gets Petronas jobs via open tender: Mokhzani

DATUK Mokhzani Mahathir has denied that his firm, Kencana Petroleum Bhd, is favoured by Petroliam Nasional Bhd (Petronas) although his father is a former prime minister and currently an adviser to the state-owned oil and gas firm.

Almost half of Kencana's RM437 million revenue in its financial year 2006 comes from Petronas and firms linked to the state firm, Kencana's prospectus showed.

Mokhzani told Business Times in Kuala Lumpur yesterday that Kencana has always bid for jobs on an open tender basis similar to other firms.

"Our contracts from Petronas and other oil and gas companies are all based on tenders. Their assessments are based on a company's track records and ability to perform, commercial and technical capabilities, time and space to finish a certain job," said Mokhzani.

Mokhzani controls Kencana, a firm that provides engineering services to the oil and gas industry. He is listing the firm on the main board of Bursa Malaysia to raise funds to repay debt.

The listing means a return to the corporate sector for Mokhzani, who once owned Tongkah and hospital group Pantai Holdings Bhd.

A petroleum engineer by training, Mokhzani said he wants to do what he knows best.

"It's always good to go back to what you know best. I have always been involved in the oil and gas industry and believe I could do more in these field," he added.

Mokhzani said Kencana is still in the process of bidding for new jobs from Petronas.

Apart from Petronas, Kencana has also submitted bids to other firms that are exploring new opportunities internationally and at home.

Kencana's clients include Murphy Oil Corp, Sarawak Shell Bhd, Nippon Oil Exploration and Talisman Ltd.

"If you look at the global oil and gas market, there are lots of opportunities especially in the Middle East and central Asia. In Malaysia, the market is also growing," he said.

He added that Malaysia will always remain an important market for Kencana and it will continue its efforts to scout for major works here to build the industry.

Mokhzani was appointed to the board of Kencana on November 25 2004.

He graduated with a bachelor of Science in Petroleum Engineering from the University of Tulsa, Oklahoma, in 1987.

He began his career as a Wellsire operations engineer with Sarawak Shell in 1987 followed by the appointment of group managing director of Tongkah Holdings Bhd in 1989.

Article Link

Interview with Tenaga Nasional Berhad chairman Tan Sri Leo Moggie

Abstracts of the interview with Tenaga Nasional Berhad chairman Tan Sri Leo Moggie on the proposed 300MW coal fired power plant at Silam in Lahad Datu District in the east of Sabah where people are opposed to it because of coal toxin pollutants that could affect both health and the environment.

He spoke with journalists after attending a Hari Raya Open House hosted by Tenaga subsidiary Sabah Electricity Sdn Bhd (SESB). Present were Tenaga president and CEO Datuk Che Khalib Mohamad Noh and the SESB managing director Safian Abu Talib.

On Why Tenaga Nasional is using coal technology for its proposed power plant near Lahad Datu.

Tan Sri Leo Moggie: Sabah Electricity Sdn Bhd decided to use coal fuel. In this country, we have various possible sources of fuel. At the same time, it is always prudent to diversify our sources (power generation) in planning for security in supply.

TNB chairman Datuk Leo Moggie

When you look at the possible choices of fuel to use, gas has a limited capacity and fuel oil is certainly not a workable option. Renewable energy of wind, solar, biomass has not reached a stage where it can give you assurance of continual source of supply.

Some of it can be used in a limited scale and in specific isolated areas. In terms of providing the overall source, the technology is still not proven yet.

Hydropower is a potential. (But) if you develop hydropower, it also raises questions on the environment and inundation of areas.

Coal supply compared to oil is more dependable, so in future coal will play an important part in our power generation diversification.

In the peninsula, we are already using a number of coal-based power plants. Coal, gas and hydropower are the sources of diversification and it a practical policy.

In the east coast of Sabah, gas is not available. Hydropower also tiada (not available). Biomass is still a very marginal way of power supply. So coal is the most practical fuel source and that’s why we decided on it. As I said that it not just us who is using coal but the world is using it. On why the proposed site is in an eco-sensitive area that could possibly affect environment stretching from Darvel Bay to pristine Danum Valley.

SESB looked at a number of potential sites and identified this site (a portion of state-owned Yayasan Sabah land where the abandoned Pacific Hardwood complex stood sandwiched by Darvel Bay and Silam Hill) as the most logical in terms of its centralised position for a power plant. So it is a logical place to build a power plant near to the coast.

There is not that much option.

Coal fired technology have been developed to be clean, good and used well enough worldwide. And the environmental impact is marginal. Obviously you have to make sure the equipment and plant you use fulfilled all the necessary environmental impact requirements.

We will make sure this will be done in Lahad Datu. When you look at coal fired power being developed worldwide, the technology utilised will demonstrate to you that the impact on the environment is not at an unacceptable level. Every development project will have some environmental impact but it is marginal and acceptable.

That is why we feel this particular location is appropriate. Will it affect the surrounding (Danum Valley and Maliau Basin) national parks? I don’t think it will principally because once the requirements of EIA are met, whatever damage and impact will be minimised.

We in the country are experienced in developing coal fire power. It is not something new to us. We have one in Klang which is a very heavily-populated area since the 1980s. It is functioning well although we are using a lot of coal in that plant as we have made sure the environmental impact technology is incorporated in its design.

We have another one in populated Lumut for four years now. The Janamanjung plant is just across Pangkor Laut which is still rated as one of the top holiday resorts worldwide. There is a five star hotel in Pangkor Laut. No problem at all.

In Johor, phase one of the coal power plant at Tanjung Bin with 700MW capacity is already in operation and will produce 1,400MW by next year. We will be constructing another IPP coal fuel plant at Port Dickson (Negri Sembilan) next year. We are also planning another coal plant in Kuching (Sarawak) similar to the one in Lahad Datu.

We don’t see any real negative impact on the environment in areas where coal power plants are operating It is important for us to realise that SSEB is equally conscious to make sure that environmental impact studies are properly conducted and put in place.

Datuk Khalib has reminded me to say that when people do power planning it is important (to look) at that location of the plant to the centre of usage of power so that the transmission is not too long.

We have power plants in the west coast and we have diesel set power plants in the east coast of Sabah. We are building the east west grid that will connect the east and west coast (of Sabah). But at the same time, we think it is prudent power utility to site a sizeable plant to handle a load requirement of a particular geographical region. The transfer of power from east to west and west to east grid will be continued. But we will not be relying on one particular source of power supply. In a break down at any particular source, at least the impact will be reduced. So when we look at the east coast of Sabah, Lahad Datu is a very logical place for the plant.

On whether Tenaga will be looking at other sites in view of the environmental factor and opposition to the power plant near Lahad Datu.

We don’t see any other alternative sites for the immediate use. We have been looking at the hydro potential in Sabah and we don’t see it in the time frame. Secondly we hope that the press will explain to the consumers and the public the actual position. The press will have an important role to make the public understand. We need you to explain to the public and the SESB management will make sure the public understand it. We are equally concern over environment and health issues.

Which are the companies bidding for the 300MW coal fired power plant in Silam.

We will make it known at the right time as professional evaluation is being done. SESB has appointed external consultants, one for technical and one for financial. The decision (on the company chosen for the project estimated to cost between RM1.3bil to RM1.6bil) will be very much guided by their evaluation.

On whether coal is cheaper than diesel or gas.

Not necessarily. If there is gas (in the east coast of Sabah), we will use it.

On how will Tenaga monitor the environmental impact of the proposed plant as in Sabah there many environmental problems including oil palm companies discharging pollutants but getting away with it?

Even if it is an IPP, the investor is subjected to quality control, which is monitored by the Energy Commission of Malaysia and DOE as well Tenaga and SESB. It is all a matter of enforcement by our authorities. We have modern technology for it.

On whether the coal for the Sabah’s first coal fuel plant will be sourced from Tenaga’s coal mine in Kalimantan Indonesia?

Not necessary from Tenaga’s coal mine but it could be from other mines in Kalimantan. Certainly not from the Tenaga coal mine.

On the fears of environmentalists that with coal power plant in Silam, Tenaga might ask Sabah to allow mining of coal under Maliau Basin known internationally as the Lost World?

The environmentalist always think of everything. Don’t worry we will take care of that. I don’t think we are in the business of coal mining. We are in the business of power supply industry.

Article Link

Fuel Cells in a Hydrocarbon Economy

Cleantech blog has got it right in Richard T. Stuebi's post on fuel cells on Nov. 13.

His main points are 1) (the hydrogen economy) to say the least, is not very likely, at least not anytime soon and 2) in stationary application the fuel cell market continues to show improving vital signs.

A good short read.

Ethanol Industry Growth to Slow, ISU Experts Say

The DesMoines Register reports: Look for a slowdown in the rapid expansion of the ethanol industry, Iowa State University economists cautioned Monday.

Increased costs and delays in ethanol plant construction, transportation bottlenecks in moving ethanol to market, and rapidly rising corn prices all signal that the expansion of the ethanol industry might be cooling, the ISU economists said in a webcast that originated from the ISU campus.

John Miranowski, an ISU economics professor said, The price of crude oil - and the resulting price of gasoline - is expected to remain at levels that make ethanol production profitable.

It is time to take a break in building new ethanol plants, until cellulosic ethanol processes are economical.

Resource-specialist exchange plan on track

THE Government's decision not to list Petroliam Nasional Bhd and Felda on Bursa Malaysia is not necessarily a blow to the stock exchange's plan to become a specialised exchange for resource-based companies, analysts said.

This is because there are already other resource-based companies that are listed that could be developed into much bigger entities, they said.

And there is also the possibility of new resource-based listings on Bursa, albeit not as big.

Petronas is Malaysia's biggest oil and gas (O&G) company while Felda is among the bigger plantations companies in terms of land bank.

"No doubt, the two are among the biggest companies, but not listing them does not necessarily affect Bursa's plan as there are quite a number of other resource-based companies that can be developed for a listing," said an analyst from AmResearch.

On top of that, more could be done to help the existing listed companies grow, she said, citing O&G player KNM Group as an example.

The company started out small upon listing, but today, it has a market capitalisation of about RM1 billion, making it among the bigger companies in that category.

As it stands, there are already two other units of Petronas listed on Bursa - gas distributor Petronas Gas Bhd and petrol retailer Petronas Dagangan Bhd.

Bursa itself does not think that the Government's decision would affect its ambition.

"It will not affect us because currently we already have resource-based companies that are trading with us," its chief executive officer Yusli Mohamed Yusoff told Business Times.

The Government had announced in March this year, plans to position Bursa as a specialised exchange for resource-based firms.

However, on Wednesday, Prime Minister Datuk Seri Abdullah Ahmad Badawi poured cold water on speculation that the Government might list Petronas and Felda on Bursa.

"Petronas alone would add at least RM400 billion ringgit to the market capitalisation of Bursa Malaysia and overnight transform it into one of the biggest stock exchanges in Asia," the prime minister said at the Umno annual assembly.

"But we will not forfeit strategic national interests solely for short-term gain," he said, adding that attracting investment and developing the stock market was not as simple as "preparing instant noodles".

Chris Eng, an analyst at OSK Research, said it would certainly be a boost for Bursa if the two companies were listed, but "it won't kill their plans either" if it doesn't happen, given that there are other resource-based firms to focus on.

Business Times

Bartlett, Udall Respond to CERA Report

Representatives Roscoe Bartlett and Tom Udall were quick to respond to the CERA report on the future supply of oil. (see immediately preceding post) The cofounders and cochairmen of the Congressional Peak Oil Caucus, said that a new report released today by CERA confirms the urgency for the United States government to adopt a crash program to mitigate the devastating consequences of peak oil.

Congressman Bartlett said that, "The CERA report agrees that world oil production will peak and projects it will occur within 20-25 years. However, world demand is growing exponentially - faster than production so the CERA report confirms the likelihood of future shortages of liquid fuel and much higher and volatile prices. A major flaw in the CERA report is its reliance upon questionable assessments of global reserves by the USGS. USGS estimates of future world reserves equate a 50 percent probability with a 50th percentile or mean. That is a bizarre and totally inaccurate use of statistics. It almost doubles the amount of projected reserves compared to the 95 percent probable estimate. Actual discoveries are tracking the 95 percent probable trend. That means world oil production will peak much sooner than CERA projects in this report."

Read the entire press release here.

Somewhat the opposite reaction that I might have expected, I guess these congressmen are smarter than I gave them credit for. As I said, who cares what the theory is, oil will get more expensive as conventional oil resources are depleted and we are forced to find alternate supplies. I think that CERA's assessment of reserves is probably incorrect for the short term, but there projections may be more accurate in the long term as we have to use more of our harder to use reserves. This is reflected in Canada's adding some oil sands reserves to its official reserves and Venezuela and China considering adding more of its heavy oil to reserves.

CPC to Ally With Petronas of Malaysia for Exploring Oil Fields

The state-run Chinese Petroleum Corp. (CPC), Taiwan`s largest oil refiner, will form a strategic alliance with Petroliam Nasional Bhd. (Petronas) to explore oil fields there.

Petronas is Malaysia`s national petroleum corporation that was established in August 1974. Wholly owned by the Malaysian government, Petronas commands the entire oil and gas resources in Malaysia and is entrusted to develop and add value to such resources.

Since its incorporation, Petronas has grown into an integrated international oil and gas company with business interests in 31 nations. As of the end of October 2005, the Petronas Group comprised 101 wholly-owned subsidiaries, 19 partly-owned outfits and 57 associated companies.
CPC chairman Pan Wen-yen said forming an alliance with Petronas would help his company to access oil and gas resources, as over half of the world`s oil fields are controlled by Muslim nations such as Malaysia and Indonesia, among others.
With promise from Petronas to jointly explore oil fields, Pan has instructed his company`s exploration department to draft an alliance-formation plan. Once such plan has been prepared, Pan personally or CPC president Chen Pao-lang will go to Petronas headquarters to sign a memorandum of cooperation.

In addition to working with Petronas, CPC will also vie for the right to bid to explore three oil fields in Libya, where CPC is setting high hopes to obtain such exploration right.

To develop the exploration of oil and gas fields, CPC has set up a task force comprising several specialists who are able to correctly assess the reserve volumes of such oil and gas fields. Pan stressed that only accurate evaluations can enable explorers to be profitable.

Boasting 5.9 billion barrels of crude oil in ground deposits, Petronas is a large conglomerate with consolidated businesses in up, mid, and downstream petrochemical industries. The Petronas Group racked up US$34.1 billion in revenues last year.

Article Link

CERA: The Undulating Plateau Theory of Oil Supplies

Cambridge Energy Research Associates (CERA) headed by the sometimes controversial chairman Daniel Yergin, released a new analysis of future oil supplies. They claim that rather than oil peaking and then rapidly declining the correct Model for Post-2030 Oil Supply is an undulating plateau.

In contrast to a widely discussed theory that world oil production will soon reach a peak and go into sharp decline, a new analysis of the subject by CERA finds that the remaining global oil resource base is actually 3.74 trillion barrels -- three times as large as the 1.2 trillion barrels estimated by the theory’s proponents -- and that the “peak oil” argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future. ....

Global production will eventually follow an “undulating plateau” for one or more decades before declining slowly. The global production profile will not be a simple logistic or bell curve postulated by geologist M. King Hubbert, but it will be asymmetrical – with the slope of decline more gradual and not mirroring the rapid rate of increase -- and strongly skewed past the geometric peak. It will be an undulating plateau that may well last for decades.

During the plateau period in later decades, according to the CERA analysis, demand growth will likely no longer be largely met by growth in available, commercially exploitable natural oil supplies. Non-traditional or unconventional liquid fuels such as production from heavy oil sands, gas-related liquids (condensate and natural gas liquids), gas-to-liquids (GTL), and coal-to-liquids (CTL) will need to fill the gap.

I tend to believe in the "undulating plateau" theory with some modifications. Four of my questions relating to this theory are: 1) when does this happen? 2) what fuels will be in the mix to supply the shortfall of fossil fuels? 3) What will be the price of fuels at that time? and 4) Does it really matter what the proper theory is?

Rather than the "undulating plateau" starting in 2030, I believe that, within a few years if not already, we will enter a period when energy prices continue to increase at a rate much higher than inflation and that this will continue until our renewable energy resources can reverse this trend. We have reached the peak of "conventional oil" and the shortfall is being made up by recovering oil from more expensive sources that in many cases is more expensive to refine.

Not to mention the global warming that will occur unless legislation is implemented worldwide requiring power plants to be built that discharge much, much less carbon than current plants do.

Energy conservation is the most effective means of reducing growth of energy needs. However we still have to build more renewable energy plants, more nuclear plants and accelerate the use of IGCC coal plants with carbon capture. No one source will keep up with demand even with the most drastic energy conservation programs. One of the main reasons for this is that developing countries must be allowed to use more energy to bring their standard of living to a higher level. China and India cannot do this with renewable energy alone, some of the smaller countries might be able to.

PM hoses down talk of Petronas listing

Prime Minister Datuk Seri Abdullah Ahmad Badawi hosed down speculation on Nov 15 that the government might float the country's biggest company, state-run oil firm Petroliam Nasional Bhd (Petronas), on the local stock exchange.

Abdullah, speaking to Umno's annual general assembly, said a listing of Petronas would be a quick fix for those who wanted to inject more life into the thinly traded Malaysian market.

"Petronas alone would add at least RM400 billion to the market capitalisation of Bursa Malaysia and overnight transform it into one of the biggest stock exchanges in Asia," he said.

"But we will not forfeit strategic national interests solely for short-term gain. Attracting investment and developing the stock market is not as simple as preparing instant noodles."

Malaysia's market is worth about RM800 billion and already includes two Petronas units, gas distributor Petronas Gas Bhd and petrol retailer Petronas Dagangan Bhd.

But the market is one of Asia's most thinly traded, partly because about a third of its listed equity is tightly held by the government. Small caps routinely generate more trade than the big state-linked blue chips that dominate market value.

Stock exchange operator Bursa Malaysia Bhd, itself part-owned by the state, has gently prodded the government to sell down more of its holdings, which range across most major market sectors, from telecoms and banking to construction and property.

But the government has shown little inclination to do so, apart from two outstanding bond issues that are convertible into portions of its holdings in dominant phone company Telekom Malaysia Bhd and toll road operator PLUS Expressways. - Reuters

What is the point of listing PETRONAS on the main board when the reason behind why the Malaysian market is a thinly traded one is because a thrid of its listings is tightly held by the goverment. Adding PETRONAS into the equation does not improve the local market situation only until PETRONAS becomes an independent private/public equity. Merely listing it on the market will only result in highering the risk for PETRONAS' future investments due to the proven trakc record of the regional market instability.

The only way for PETRONAS to boost its investments and status is through foreign listing ie London Stock Exchange/Dubai Stock Exchange/WallStreet.

The Edge Article

Rand: 25% of Energy from Renewables by 2025

The Wall Street Journal reports that a Rand Corp. study shows that if the the falling costs of ethanol, wind power and other forms of renewable energy continue to fall, as they have historically, such sources could supply as much as 25% of the U.S.'s conventional energy by 2025 at little or no additional expense.

This is certainly good news if costs continue to drop as they forecast, the problem they didn't mention is whether the manufacturing infrastructure can expand that rapidly.

The Rand study concludes that because prices for gasoline, natural gas and coal are likely to remain high, their cost advantage over renewables will erode, furthered by the hope that ethanol from farm wastes will be available by 2020.

I would agree that fossil fuel costs will remain high and that would allow cellulosic ethanol to be, not only competitive, but lower in cost than fossil fuels.

Renewable fuels now produce only 6% of the nation's energy, and about half of that comes from hydroelectric dams. The study assumes renewable-energy costs will keep dropping at the rate of recent years. It says raising the use of renewables to 25% of all U.S. energy consumed would reduce U.S. reliance on oil by about 20% or the equivalent of the imports from Saudi Arabia and Venezuela.

The goal of using renewable fuels is three fold 1) to reduce our reliance on imports 2) to hedge against higher prices of fossil fuels and 3) to replace declining supplies of fossil fuels.

Wall Street Journal Article

Build More Nuclear Plants

For the first time in its 32-year history, the International Energy Agency (IEA), in its World Energy Outlook 2006 urges governments around the world to help speed the construction of new nuclear power plants.

The IEA report – the first to offer advocacy rather than analysis – comes after the Group of Eight last summer asked the agency to come up with guidance on how governments could bolster energy security and combat global warming.

In the WEO 2006, the profile and significance of the World Alternative Policy Scenario is elevated and presented in the format that can be used as a ‘policy tool’ for governments to change the unsustainable trends of the reference scenario. The Alternative Policy Scenario is be built on policy measures such as energy efficiency and increased use of renewables and nuclear.

The Outlook demonstrates that nuclear power could make a major contribution to reducing dependence on imported gas and curbing CO2 emissions in a cost-effective way. But this will happen only if the governments of countries where nuclear power is accepted play a stronger role in facilitating private investment, especially in liberalized markets. “Nuclear power remains a potentially attractive option for enhancing the security of electricity supply and mitigating carbon-dioxide emissions – but financing the upfront investment cost may remain a challenge”, said Claude Mandil, Executive Director of the IEA.

The agency found nuclear power to be cost competitive with coal and gas, its main rivals, and concluded that there were enough uranium deposits to meet renewed demand.

The report also pushes for greater energy efficiency, especially in transport and home electrical appliances, and advocate renewable energy, especially biofuels for transport and wind for power generation.

The World Energy Outlook 2006 was released to International Press in London on 7 November 2006 and is available at World Energy Outlook 2006, 600 pages, ISBN 92-64-10989-7, paper €150, PDF €120 (2006)

World urged to build more N-plants, Financial Times

The World Energy Outlook 2006 Maps Out a Cleaner, Cleverer and More Competitive Energy Future, IEA

Sri Lanka to ask India's Reliance and Malaysian Petronas for Oil Supply Credit

Sri Lanka is to ask Reliance Industries of India and Petronas of Malaysia for extended credit on fuel purchases, to ease recent pressure on the exchange rate.

We will be requesting for extended credit for about three to six months from Reliance and Petronas because of the difficulty of the central bank in raising foreign exchange (to pay for purchases),� a top official with state run oil giant, Ceylon Petroleum Corporation, told LBO on Tuesday.

Sri Lanka currently buys refined products from Reliance through spot tenders on the world market, but Ceypetco says Reliance has been offering the best premiums in the past few months.

Negotiating for extended credit on oil bill payments, may also include Ceypetco tying up with Reliance for a longer term contract to buy refined products.

�It would be beneficial for us to go in for a longer term contract because they have become the lowest for prices in the past few months. It is very probable that they are among the best suppliers in the region,� the official said.

The island buys three to four shipments, of about 40,000 metric tonnes each, of refined products petrol, diesel and kerosene, each month or a total of 3.4 million metric tonnes a year.

An oil dependant country, Sri Lanka also imports 2.2 million metric tonnes of crude oil a year, 70 percent of which is from Iran, 20 percent from Saudi Arabia and 20 percent from Malaysia.

A team from Reliance Industries of India is due in the country in a week for discussions with the Treasury while Ceypetco will also be making a formal request to Petronas of Malaysia.

Sri Lanka expects to pay two billion dollars for oil this year, up from 1.6 billion dollars last year. The local retail fuel market is split between Ceypetco and Lanka Indian Oil Corporation.

Meanwhile, the government is also considering offering targeted subsidies for kerosene to Samurdhi beneficiaries, while allowing Ceypetco to sell at market rates, an official said.

Currently, kerosene is sold at 48 rupees a litre, well below the actual cost of 61 rupees.

The government recently removed fuel subsidies allowing both retailers to set rates, with a recent study by the International Monetary Fund showing that 74.9 percent of Sri Lanka�s fuel subsidies reached 60 percent of the highest income classes.

Lanka Everything

Is 100% Solar Power Economical?

SanDiegoDave100 writing in The Motley Fool ran some numbers on using Solar PV to provide 100% of his homes electricity and electricity to a Tesla electric car.

His current cost for 600 kWh per month costs $101 and gas for his car $180 for a total of $281.

At $0.25 kWh/mile and 1500 miles per month he would require 375 kWh of electricity, combined with 600 kWh for the house would require 975 kWh of solar power. He determined that he would require an 8 kW solar system, for a San Diego location, at an installed cost of $55,000 before rebates of $17,600 for a net of $37,820.

A home equity loan of $37,800 at the current 6.5% rate would be only $239/month, a saving of $40/month.

He neglected to state how he would store the electricity so he could operate his house and charge his car at night, but it still is an interesting calculation. Perhaps he could be tied to the grid and sell his surplus during the day and buy electricity at night, but he did not make that calculation. The rates might even be in his favor if he was selling at peak rates and buying at off peak rates.

The Motley Fool

Pulverized Coal VS Coal Gasification

Some 154 new coal-fired plants are on the drawing board in 42 states in the US. Should power companies be permitted to build new plants that pollute more but are reliable and less expensive? Or should regulators push utilities toward cleaner burning coal plants, even if it means they will cost more and are based on newer, yet still unproven, technology?

These are the points that an online article by Time/CNN discuses. The discussion is focused on whether pulverized coal units or coal gasification plants should be built. The article states that coal gasification plants are 20% more expensive to build, "but they also can be more efficient to operate and save utilities the hassle and expense of adding pollution-control devices." Not quite correct, in that pulverized coal plants can be built to clean coal standards, but gasification plants can achieve even lower emissions of criteria pollutants. Gasification plants can be adapted to carbon (CO2) capture much less expensively than pulverized coal plants but at a cost more than the 20% factor which does not include carbon capture. However gasificaction plants produce about 33% less CO2 emisions due to their higher efficiency. I would disagree with the premise stated above that gasification technology is unproven, although not proven to the extent that pulverized coal plants are. A few gasification plants are under construction and several are under development. The article does not discuss whether renewable energy or nuclear energy should be considered. The two main points of the discussion are illustrated by these two exerpts from the article:

(utilities are) driven by profits and are rushing to beat more stringent federal restrictions on carbon dioxide emissions in an era of escalating concerns over global warming.

Mike Morris, chairman for American Electric Power, said the pressures on power companies to burn fuel in the cleanest way possible will only gain momentum in coming years. "From our vantage point we think the technology for clean coal is there," he said. "It can be done, but there is a challenge." For it's part, TXU says turning the coal into synthetic gas remains an unproven technology and not as reliable as burning pulverized coal — the process the company's new plants would be designed to use.

TIME/CNN Article

China Gas Deal to Benefit MISC, Petronas Gas

MISC Bhd and Petronas Gas Bhd are set to benefit from the RM92 billion gas deal that parent Petroliam Nasional Bhd (Petronas) secured in China recently.

The contract, which involves Petronas supplying liquified natural gas (LNG) to Shanghai LNG Co Ltd for 25 years, will require many ships and sufficient gas to ensure uninterrupted supply.

MISC, the world's largest LNG carrier, will naturally fit the bill as the transport provider.

"This large China contract could take up to 50 ship loads per year to fill. Given that Petronas is MISC's major shareholder, it would naturally utilise MISC vessels in the transportation of the LNG," OSK Research said in a report yesterday.

Petronas, through its subsidiary Malaysia LNG Tiga Sdn Bhd, will supply 3.03 million tonnes of LNG per year from its facility in Bintulu, Sarawak. The deal marked Petronas' first entry into China.

With up to 10 Chinese LNG projects having receive tentative approvals, prospects for more LNG export contracts to China is bright, the research house said.

Out of the eight new ships that MISC has ordered, three remain uncontracted.

OSK Research is confident that the firm will secure clients for the remaining vessels with this new development.

Natural gas processor and distributor Petronas Gas, on the other hand, will be an indirect benefactor, the research house said.

The source of natural gas for Petronas' Bintulu facility becomes increasingly crucial because of the many contracts that the group has signed over the years.

Because of that, a natural gas pipeline between Kimanis and Bintulu is currently being built and will be operated by Petronas Gas.

"With the pipeline scheduled for completion in 2010, it is positioned to support further contracts with China and we remain confident that this pipeline may boost Petronas Gas value by some 10 per cent," OSK Securities said.

MISC shares closed up 5 sen at RM8.75, while Petronas Gas shares were unchanged at RM8.90 yesterday.

Petronas to Explore for Hydrocarbon in Timor Sea

PETROLIAM Nasional Bhd (Petronas) said it will be exploring for hydrocarbon with three partners in the joint petroleum development area between Timor Leste and Australia.

Petronas holds half of the production sharing contract while the remaining is shared between Korea Gas (30 per cent), Samsung (10 per cent) and LG International (10 per cent), it said in a statement yesterday.

The minimum investment for the exploration activities is US$40.5 million (RM147.42 million).

The deal marks Petronas' entry into the Timor Leste/Australia's upstream sector.

Petronas in China Car Engine Tie-up

Petronas has sealed a deal with Chinese automaker Nanjing Automobile Corporation and Brilliant Culture Group Ltd to jointly manufacture car engines.

“The project is scheduled to take off in December 2006 with production expected to commence in 2009 with an annual production capacity of 100,000 units,” Malaysia's national oil corporation said in a statement today.

Petronas said it will be the technology provider to the project and will provide support through its research and development centre in Malaysia. It did not state the value of the contract. - AFP