May 2016: Iran back on India’s Energy Radar

Lydia Powell, Akhilesh Sati and Ashish Gupta, Observer Research Foundation

Conventional Fuels

Oil & Gas

Energy cooperation is among the many items that is listed as a strategic issue for discussion when Indian leaders visit other countries that either have energy, energy technology or just a fat purse. The visit of the Prime Minister to Iran is not an exception. Iran is among countries that have a long and positive energy history with India and so the anticipation on energy benefits that are likely to flow through a renewed relationship with Iran filled the pages of the print media. It is difficult to highlight the benefits of cooperation in a world that is run primarily on commercial terms that do not necessarily place a value on cooperative friendship.  However all are entitled to optimism and hope. For his part the Minister of Petroleum declared that India will slowly move towards becoming an oil economy. Among other issues that was reported was the issue of settling $6.4 billion due to Iran towards oil imports through European banks. Out of this MRPL alone is said to owe Iran over $2 billion. In domestic news there wasn’t much to report on except the fact that the promise of a level playing field by the new Director General of Hydrocarbons. The commerce Minister declared that Petrol prices were slashed 32 times and hiked only 21 times probably to show that this government has decreased the prices more than it has decreased prices or to show that volatility in prices were on account of the market.  State elections and the announcement of prohibition by many potential rulers of States is reported to be a benefit to the oil industry which has not been able to meet the target on ethanol blending. Not many are convinced that the oil industry was waiting for its quota of booz.

The Cabinet Committee on Economic Affairs, chaired by the Prime Minister was reported to have approved the Pradhan Mantri Ujjwala Yojana scheme for providing free LPG connections to women from BPL Households. Rs 8000 crore is said to have been earmarked for providing 50 million LPG connections to BPL households. A financial support of Rs 1600 for each LPG connection to the BPL households is reported but it is not clear if this is for the stove or for the LPG. Curiously this newsletter made a plea to state governments and the Central government that India’s daughters need a dowry of LPG connections and not clean cook stoves in an article dated published in 20 November 2015 (ORF Energy News Monitor Volume XII, Issue 23). The point made by the plea was that if you want to give away something for free let it be LPG and not a clean cook stove.  We are grateful that our recommendation has been converted into policy in a matter of months!

Coal & Power

Thus far 35 Schedule II coal blocks have been auctioned under the provision of the Coal Mines (Special Provisions) Act, 2015. 10 coal blocks have commenced production as mine opening permission has been granted.  The rest of the 25 Schedule II coal blocks are in the process of starting mining operations after obtaining necessary statutory clearances as well as appointment of mining contractor. How many coal blocks will sustain production given the cap on output price is not clear.

As most companies have lost interest in coal block auction the coal Ministry is trying to hold coal linkages auction for the non-regulated sectors such as cement, steel/sponge iron and aluminium with a view to encourage off-take. The ministry is said to be hopeful that there will be demand of coal from the steel sector because duties have been imposed by the government on imported steel. But given the falling imported coal prices it is not clear if this auction process will bring intended benefits.

The ministry also passed an order directing Coal India to provide full quantity of coal committed to the power plants under Fuel Supply Agreement. This move appears to be driven more by the need to reduce stock piles of coal rather than the need to enforce contractual terms on CIL.

The Coal Ministry also launched a portal for Contract Labour Payment Management. The web portal has been created for monitoring compliance of labour payment and other benefits to the contract workers under the Contract Labour (Regulation & Abolition) Act, 1970. The system has in-built mechanism to validate minimum wages paid, generate wage slips and employment card etc. of contract workers as required under the Act. The portal provides access to all contract workers, through a Workers Identification Number (WIN), to view their personal details and payment status. The move will enhance proper monitoring of legal compliance under Contract Labour (Regulation & Abolition) Act, with regard to the payment of correct wages to the contract workers and PF deductions and deposit and other statutory obligations. The opening of NTPC’s Pakri-Barwadih coal mining project after a series of hurdles was an important development reported in May.

In the power sector soaring demand for power in Delhi which crossed a new high of 6000 MW in May was widely reported. Soaring temperatures and the growth in the number of air conditioners must be behind this figure as most of the electricity demand in Delhi comes from homes and businesses (as opposed to industries).  The possibility of a penalty for power outages that last longer than 2 hours by the Delhi government was reported.

Renewable Energy

In the renewable sector the news was mostly optimistic with new projects being initiated almost on a daily basis. On a more realistic note Bridge to India which tracks the solar industry observed that solar manufacturing was yet to take off in India. The biggest roof top project in the world is said to be launched in Punjab.  More importantly India was declared as the biggest solar energy lab in the world.

Views are those of the authors                    

Authors can be contacted at lydia@orfonline.org, akhileshs@orfonline.org, ashishgupta@orfonline.org

Courtesy: Energy News Monitor | Volume XII; Issue 50

 

 

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Coal washery not a healthy business proposition for now!

Ashish Gupta, Observer Research Foundation

In most of the coal producing countries almost 75% of coal is prepared or washed before putting it to use. The purpose of coal washing is to get a relatively pure marketable coal, with a higher calorific value since non-combustible material is separated from useful combustible material. The benefit of coal preparation is not limited to efficiency only. It (a) reduces land requirements; (b) decreases settlement costs (c) improves cultivation in the impact zone.

The foundation of coal washing was laid in Europe during 1915 – 1940 by using Baum jig. In India the process of coal beneficiation adopted during 1950s when eminent scientist Dr. A. Farquhar from TATA conducted washability tests on Jharia coals and came to the conclusion that Bhowra, Jamadoba, Malkera coal can be washed economically. Subsequently, TATA decided to construct two washeries: West Bokaro coal washery and Jamadoba coal washery in 1951 and 1952 respectively. Traditionally, most of the Indian coal washeries are based on outdated European technology and are relatively inefficient and inflexible particularly at low density separation.

Here are some reasons why are washeries in India under-utilised

  • Earlier washeries were constructed on turnkey basis with foreign assistance of foreign firms. This does not facilitate standardisation for Indian conditions.
  • These firms installed their own economic version of technology and equipment independent of Indian operating environment.
  • The beneficiation was restricted to coking coal as other users saw limited economic benefit
  • Most of the washeries do not have samplers and almost all washeries are designed without proper sampling of coal
  • Coal quality from washeries does not meet needs of user
  • The policy framework is biased against private coal washery operators.
  • Savings on freight cost is the only credible benefit of washing now but not all players in the value chain benefit from this

Current Trend in Coal Washing

image (4)

 

Source: Department of Scientific and Industrial Research, Government of India

What’s new?

Internationally, the trend is towards construction of modular mobile washery units. The MONOPOL plant in Germany (West) is one such plant that can be easily dismantable and possible to move to a different location, once reserves exhaust.  This kind of approach is worth emulating.

Way forward

There is a need for firm coal linkages for the existing and future washeries. The linkages should be awarded for a longer period for around 15-20 years so that effective operational planning in washeries is possible. Secondly, keeping in view the investments already made in washeries and likely to be made in immediate future, the coal washeries should be recognised as an industry. Thirdly, necessary infrastructure through demonstration or pilots should be built to encourage the industry to develop the know-how for application of the modern washing technology. Fourthly, the policy to wash all coal should be seriously followed. Fifthly, integrated mine-washery projects must be promoted to achieve economies of scale. Sixthly, adoption of dry beneficiation techniques must be adopted to avoid extra moisture in washed coal.  Lastly, coal washing must be promoted as an economic activity for the coal sector at large.

Views are those of the author                    

Author can be contacted at ashishgupta@orfonline.org

Courtesy: Energy News Monitor | Volume XII; Issue 49

 

Pollution from Diesel and Petrol Vehicles

Lydia Powell, Observer Research Foundation

Motorised transport makes a significant contribution to economic growth, trade and prosperity – all of which we desire directly or indirectly. However there are also undesirable side effects of using motorised transport such as pollution, noise and congestion called negative externalities. Time cost of delays arising out of congestion, healthcare costs caused by air pollution and long terms costs imposed on the society on account of climate change are among these externalities that societies want to control especially when they realise that they have gained the technological and financial capabilities to address them (i.e., when they have achieved a certain level of prosperity). Negative externalities can be minimised but cannot be eliminated as long as the use of motorised transport continues. A radically new technology could either change transportation or eliminate the need for transportation but until then we need to find ways to minimise externalities and more importantly figure out how the cost of minimising negative externalities can be allocated among users and non-users of motorised transport.  Who will pay is the question that is at the heart of all environmental debates – from global climate change to local urban pollution.  The debate on petrol and diesel vehicles in Delhi is not an exception.

Pollution from Internal Combustion Engines

The internal combustion engine (ICE) operates using fossil fuel derivatives such as petrol diesel, natural gas etc., which produce pollutants when the fuel is burnt in the engine and also through evaporation in other stages of its use. The combustion process results in the emission of volatile organic compounds (VOC) oxides of nitrogen (NO), particulate matter (PM) and carbon monoxide (CO) which come through the tailpipe of the vehicle when it is operating.

Halogen  containing  gases  and  hydrocarbons (HC) emitted  as  evaporative  emissions  are  also vehicle  pollutants but are  not  tail-pipe emissions. VOC can escape into the atmosphere through evaporation. VOC emissions occur when the vehicle is running as petrol is vaporised by the hot engine.  Evaporation can continue even when the engine is turned off as the engine remains hot for a long time or due to raising day temperatures and during refuelling at retail stations. Exhaust emissions from vehicles may contain green-house-gases such as carbon-di-oxide (CO2), methane (NH4), NOx and other general pollutants such as CO, sulphur oxides (SOx) non-methane volatile organic compounds (NMVOC) and PM. Toxic compounds such as benzene, aldehydes and methanol may also be emitted.

ICEs used in vehicles may be broadly classified as engines that use spark ignition (SI) such as petrol engines and engines that use compression ignition (CI) such as diesel engines and jet engines. Petrol engines may be two-stroke as in two wheelers and other small engines or four stroke as in motor cars. In a petrol engine (SI) the fuel is evaporated and mixed with oxidising agent before ignition while in CI engines the fuel is sprayed in the combustion chamber for combustion.

The main pollutants from four stroke gasoline engines are HC, CO and NOx which are exhaust emissions or evaporative emissions. PM is generally negligible and is produced mainly from oil components brought in the combustion chamber by the piston. SOx emissions are low but are strictly regulated now. Two-stroke engines emit a large share (20-50%) of their fuel unburnt in their exhaust but also oil is a component of the air-fuel mixture by design. Air pollution from two stroke engines are higher and includes a considerable amount of particulate matter. Two stroke engines with advanced fuel injection, lubrication and combustion systems have much lower emissions.

Direct ignition engines (diesel) are typical for medium and large vehicles. They provide higher power output and better efficiency than SI engines (petrol) but are noisier. Diesel engines may be either supercharged or turbo charged depending on the organisation of sir flow and its pressure before spraying the fuel.  If controlled well, emissions from turbo charged engines can be lower than other types of diesel engines.

Compared with petrol (SI) engines, heavy duty diesel engines have higher compression ratios and better fuel efficiency which lead to lower CO and HC emissions. Some of the smaller diesel vehicles may also emit less NOx compared to petrol engines but NOx emissions from heavy duty diesel vehicles may be higher. PM and HC (some carcinogenic) emissions could be 10 times as much as in petrol vehicles. They may also emit more sulphur on account of higher sulphur permitted in diesel fuel.

Under ideal conditions hydrocarbon fuels should burn to the corresponding oxides and so CO2 and water should be the most likely pollutants expected from the oxidation of hydrocarbons. However real world conditions are far from ideal. The quantity of air needed to burn 1 gram (g) of petrol completely is 14.7 g and 11 g of this being nitrogen.

Petrol and diesel are mixtures of hydrocarbons. In a perfect engine, oxygen in the air would convert all of the hydrogen to water and all of the carbon into CO2 and nitrogen (N) will remain unaffected. In reality the combustion results in partial and incomplete conversions. HC emissions result when fuel molecules in the engine do not burn or burn only partially. HC react in the presence of NOx and sunlight to form ground level ozone a major component of smog. Ozone can irritate eyes, damage lungs and aggravate respiratory problems. This is the most pressing urban air pollution problem. Some HC are also carcinogenic.

Under high temperature and pressure inside an automobile engine, N in the air reacts to form NOx which can cause acid rain apart from facilitating the formation of ground ozone. CO is the product of incomplete combustion and occurs when carbon in the fuel is partially oxidised to CO2. CO reduces the flow of oxygen in the bloodstream and is dangerous to persons with heart disease. CO2 does not directly affect human health but it is a GHG and is seen as the primarily villain in causing climate change.

image (1)

*Premium Grade       #PAH for BS VI shall be 8% wt

Source: Presentation made at 14th Petro India Conference by Ms Vartika Shukla, ED (R&D), Engineers India Ltd.

There are other technical issues related to the use of motor vehicles. Vaclav Smil an eminent energy economist says that despite the dramatic increase in efficiency of cars over the last century modern cars weigh too much given the dominant pattern of use which is one person for one vehicle. It is the worst weight to pay load ratio for any mechanised means of transportation in human history (that started with horses and other animals). According to Smil 92% of increase in power to weight ratio of engines from Model T (1 watt for 12 grams) to average modern car (1 watt for 1 gram) the mass of vehicles has tripled.  This according to Smil limits efficiency.  A 70 kg passenger on a bicycle has a pay load to weight ratio of 0.1; a modern bus 5 or less; Model T 7.7;  Fiat Palio 15; Toyota Camry 20; Maruti Suzuki (1983) 20, Tesla 30, Hummer 50 and so on.  Smil likens this to going after a fly with a steam shovel. But this is unlikely to change. As pointed out in an earlier article on mobility, in the decade after the Second World War, the advantage of motorized transport user over the pedestrian in the industrialized world was his speed in operating in an environment primarily designed to the pace of the pedestrian. By the 1970s the relative advantage of the motorized transport user over the pedestrian shifted to his distance advantage in an environment designed for the automobile. In that environment the absolute advantage of motorized transport declined as activities spaced themselves in keeping with the dominant capabilities of motorized transport. However, the relative advantage of motorised transport over the pedestrian has remained. This has been achieved by moving part of the home and workplace into the motor car. Much of the additional weight of cars are on account of features that add to personal comfort and entertainment which were only found in homes earlier. The optimum outcome would perhaps be achieved when a two wheeler (light weight) which will give lower payload to weight ratios and four stroke engines (better efficiency and lower pollution).  But which affluent individual will want to be seen on a motor bike?

The key point is that the issue of environmental pollution is not a simple problem that has a straightforward technical fix. The debate on banning diesel cars or rationing petrol cars is an oversimplified framing of a complex problem. Naturally an over-simplified framing of the problem can only give an over-simplified solution. But these are not sustainable solutions as we can see in Delhi. The society needs to realise that it is part of the problem as it wants growth, prosperity, cars and so on. Only then can it become part of the solution.

Views are those of the author                    

Author can be contacted at lydia@orfonline.org

Courtesy: Energy News Monitor | Volume XII; Issue 48

 

April 2016: Saudi Arabia decides to go into Rehab

Lydia Powell, Akhilesh Sati and Ashish Gupta, Observer Research Foundation

Conventional Fuels

Oil & Gas

The announcement by Prince bin Salman of Saudi Arabia that Saudi Arabia will be going into rehabilitation for oil addiction in preparation for a post oil economy took everyone by surprise. The Prince said that Saudi Arabia hopes to set up a sovereign wealth fund that has $2 trillion in assets to help the country make the transition. An IPO of a small fraction of Saudi Aramco is expected to provide some funds as early as 2017.  Saudi Arabia wants to wean itself away from oil by reducing subsidies to oil and imposing value added tax among other things. But the oil market did not show any panic from this renunciation from its chief beneficiary. Oil prices stayed at around $40/bbl in before and after the announcement. The world waited for Saudi Arabia and Iran to make statements on whether or not they will cut oil production to boost prices. Eventually Saudi Arabia declared that it will cut production only if Iran agrees to do likewise and Iran said that it will freeze production only after production reaches pre-sanction levels.

Meanwhile in the US the department of justice halted the merger of the world’s second and third largest oil services companies Halliburton and Baker Hughes when it filed a lawsuit on antitrust grounds. Both companies said that they will fight it out in court.  BP must have heaved its sigh of relief when the final settlement of $20 billion between BP and five states of the Gulf of Mexico was approved by a federal judge in the United States.  BP’s shareholders rejected the proposal to increase the pay package of the CEO by 20%. The move is understandable given the company had registered a record loss of $5.2 billion (in 2015). The decision is non-binding. Norway’s hopes of drilling in the Arctic suffered a blow when Shell withdrew its application in the latest licensing round.  Libya is reported to be poised to export oil for the first time through the newly set up state owned oil company.

OPEC, IEA and EIA released monthly reports with relatively optimistic predictions for oil prices.  IEA in particular said that oil surplus will shrink from 1.5 million bpd to 0.2 million bpd by the end of 2016. An IMF report released in April found that major Middle Eastern oil exporting countries lost $360 billion in oil revenue in 2015 on account of low prices. The figure is expected to increase to $500 billion in 2016. While there is definitely a sense of bullishness rising in the oil sector captured by prices that stayed in the region of $40/bbl in April, the rising number of oil tankers holding crude at sea seem to be signalling that the glut is yet to clear up. As per some reports 7 million barrels of North Sea crude and 10 million barrels of Nigerian crude have been spotted. Europe’s seven oil major oil companies have posted a 22 % drop in profit which is not good news even for anti-fossil fuel activists.

On the natural gas side surplus supplies entering the market has continued to exert downward pressure on prices. The $54 billion Gorgon LNG export terminal in Australia was shut down temporarily due to technical problems less than a month after its first shipment.  Australia’s current LNG export capacity stands at about 168 million cubic meters per day (mcm/d) and it is expected to increase to over 322 mcm/d by 2019.

 

image (1)

Source: IEA.

Chinese loans for Russia’s Yamal LNG was reported to be unlikely. Those who were predicting a Russia-China energy nexus will probably be disappointed. Though Chinese shale gas output lags target its shale gas reserves supposedly jumped fivefold. We can now look forward to reading stories on how China is going to take over the shale gas sector. Investors in the infamous TAPI gas are reportedly spending $200 million on studies.  Consultancies will be laughing all the way to the bank.

Coal & Power

April began with Tesla’s flamboyant CEO Elon Musk rolling out a mass market electric car. Millions were reported to have queued up at dealerships in the USA to secure a booking. Chevrolet’s Volt a luxury version of the electric car is also slated for release soon. Whether or not the rise of the electric car will end the rein of oil in transportation is not clear. The electricity for the electric car is likely to come largely from coal and natural gas which may not be what the anti-fossil fuel lobby ordered from the car industry. Tesla cars are reported to have contributed to a substantial increase in carbon di oxide (CO2) emissions in Hong Kong as Hong Kong relies on coal for power generation. The shift from oil to coal means a 20% increase in CO2 emissions compared to petroleum driven cars.

Venezuela which is reeling under the weight of its energy subsidies has introduced 4 hour daily power cut to deal with power shortage. India is more or less in the same situation but India imposes power cuts on its powerless and the voiceless poor and so no one hears about it.

A rally in European coal prices narrowed the discount to Asian benchmarks as a cold spell pushed up energy demand at a time when Europe usually starts moving towards milder spring weather with prices around $47/tonne. However the hope of a revival in coal price faded amid reality of slowing Asia demand.

China, the world’s largest coal consumer, is stepping up efforts to shrink both oversupply and a worsening pollution crisis in its major cities by reducing the number of working days for its coal miners to 276 a year from 330. China which has also halted the approval of new coal mines over the next three years expects to remove outdated production capacity of 700 million tonnes and redeploy around 1 million workers. The Chinese government is reported to have announced a ban on new coal fired power plants in regions that have over-capacity. The decision could have an impact on international coal prices.  Two major coal exporters Russia and Australia are reportedly banking on China imposing a ban on North Korean coal exports to boost their own export volumes. The ‘on now’, ‘off now’ saga approvals from the Australian government for Adani’s Carmichael coal mine continued with April saying ‘on now’. Japan is reported to have decided to open its electricity market and end power utilities’ monopoly. This may not be good news for its nuclear power plants.  On the Asian sub-continent Bangladesh is said to be set on pursuing its coal-power push despite opposition.  Most small poor nations in South Asia with a significant number of their population without electricity are looking at coal as an option because they have either run out of gas or because their hydro power resources are proving to be inadequate to meet growing demand.

The assault on coal from anti-fossil fuel activists continued. The latest was the Norwegian wealth fund which decided to exclude 52 coal-related groups. The irony is that this looks more like the pot calling the kettle black. All the wealth that Norway generated and continues to generate is from the sale of oil, a close cousin of coal.

Moody’s cautioned that low natural gas prices could force the closure of both coal and nuclear power plants in unregulated markets.

Climate Change & Renewables

The solar industry appears to be in good health compared to other energy industries even though one of its largest companies Sun Edison filed for bankruptcy. The company is expected to restructure its debt and re-emerge soon. San Francisco passed an ordinance requiring roof top solar panels on all new and medium sized buildings. Solar power is said to be taking off in the Middle East with recent bidding rounds in Jordan at $59.8/MWh which is close to levels achieved in Dubai bidding rounds. Saudi Arabia is said to be targeting 9.5 GW of renewable by 2030. Debt pricing is seen as key to Middle East’s cost advantage. Overall global renewable capacity additions is reported to have reached 152 GW in 2015.

The Paris Climate Change agreement opened for signature in April in New York at a ceremony convened by the UN Secretary General. The Paris Agreement will enter into force on the 30th day after the date on which at least 55 Parties to the Convention accounting in total for at least an estimated 55% of total global greenhouse gas emissions have deposited their instruments of ratification, acceptance, approval or accession with the depositary.

In the United States Presidential candidate Hillary Clinton is reported to have promised to get India and China to commit to reductions in GHG emissions. The baseless vilification of the Indian and Chinese as carbon gluttons by the western media needs to be challenged. If all the Indians and Chinese stop emitting carbon overnight it will bring down global emissions by less than 10%. Even the richest Indians do not emit as much carbon as the poorest Americans. People in India (and perhaps one day in the distant future China too) must hope for the day when their politicians can win elections on the promise that they will get Americans to cut carbon emissions!

Views are those of the authors                    

Authors can be contacted at lydia@orfonline.org, akhileshs@orfonline.org, ashishgupta@orfonline.org

Courtesy: Energy News Monitor | Volume XII; Issue 47