ASIA: Refiners to favour diesel production over gasoline to increase profit margins, predicts consultant

(EnergyAsia, August 23 2012, Thursday) — As a result of a growing gasoline glut through 2015, Asian refineries will favour producing diesel and gasoil, said energy consulting group Wood Mackenzie.

A global surplus of gasoline reduces the export opportunity for Asian refiners but the rising diesel shortage in the region’s emerging economies provides an opportunity for refiners to switch from producing gasoline to diesel and gasoil.

Sushant Gupta, Wood Mackenzie’s senior downstream analyst, said:

“Due to a gasoline surplus, gasoline crack spreads versus Dubai crude are expected to reduce from 2010 to 2015 while diesel crack spreads are expected to strengthen from US$15.8 per barrel in 2010 to US$20.3 in 2015.

“To balance out the market for gasoline and diesel, as well as to secure profit margins, Asian refiners need to strategically shift on an average one-percent of production from gasoline to diesel.”

With Indian state refiners continuing to report the region’s largest diesel deficits, China’s strong demand growth will become the main driver of diesel trade flows in the region by 2015.

Wood Mackenzie believes that China’s import (including Hong Kong) will rise from 50,000 b/d in 2010 to about 300,000 b/d by 2015. Chinese demand growth will largely be driven by commercial freight.

Total Asian demand for diesel/gasoil is expected to grow from 8.65 million b/d to 9.78 million b/d from 2012 to 2015.

Mr Gupta said: “Growing deficits in China, India, Southeast Asia and Australia will provide more opportunities for refineries in Singapore, South Korea, Taiwan and India to increase exports to these closer-to-home markets. We forecast a reduction of approximately 250,000 b/d in exports from Asia to the rest of the world.

“However, growing deficits for gasoil, mainly in Europe and Africa, will continue to provide arbitrage opportunities for Asian exporters, thereby creating a need for greater diesel production.”

In contrast, the gasoline market will experience a growing surplus, with Asia’s gasoline surplus rising by 70,000 b/d from 2010 to 2015 mainly due to upgrading investments in Taiwan and South Korea, which will boost exports out of Asia.

However by 2015, Indian private refiners led by Reliance, and Singapore refiners will see a combined 140,000 b/d reduction in demand for their gasoline as their key markets in US, Iran and UAE become more self-sufficient.

As a result, Wood Mackenzie expects increased competition for market share among India, Singapore, South Korea and Taiwan refiners.

Mr Gupta said: “Refiners may face some challenges around the flexibility to switch yields with limitations around refinery configuration; crude slate for the refinery; overall economics of making this shift; and investment justifications needed to increase the flexibility. However in a situation where a refiner is unable to find markets for surplus gasoline and is unable to switch yields, its utilisation rates could come under pressure and affect profit margins.”

 

CHINA: Shell to build its seventh lubricants blending plant in Tianjin

(EnergyAsia, August 23 2012, Thursday) — European major Shell said it is building its seventh lubricants blending plant in Nangang in the northern Chinese city of Tianjin.

Due to start up in 2015 with an annual production capacity of 300 million litres, the plant can be expanded to 500 million litres at a later stage. It will add to the company’s existing blending plants in Tianjin, Zhapu in Zhejiang province and Zhuhai in Guangdong province.

The Anglo-Dutch major said it became the leader in China’s lubricants market in 2006 after acquiring a local company, Tongyi, which produces and markets the country’s leading independent lubricant brand, Monarch.

Shell followed that up by establishing a specialist lubricants technology service centre in Zhuhai city, and is on course to open a technology centre in Shanghai next year. 

“We are delighted to confirm this significant new investment in our supply chain in China, which is the fastest growing lubricants market globally. Supply chain is the foundation for the consistent delivery of our high quality lubricants products such as Shell Helix, Shell Advance, Shell Rimula, Shell Tellus and Shell Omala,” said Mark Gainsborough, Shell Global Commercial’s Executive Vice President.

According to Shell, the Asia Pacific region could represent more than 50% of global lubricants demand by 2020.

The company said: “Almost 50% of that growth is expected come from China. By 2015, when the new Shell Tianjin blending plant starts up, China is expected to overtake the US as the largest market for lubricants.

“Lubricants growth in China is expected to come from all market segments.  Consumer demand will be driven by the number of Chinese vehicles, which is expected to triple in the next 10 years to just over half a billion.

“Industry demand will be lead by the infrastructure related sectors (mining, construction, steel).  A fifth of all construction projects globally are soon expected to be in China.”

The new plant will be Shell’s seventh in mainland China, supplying a range of consumer, transport, industrial and marine lubricants. Shell also has blending plants in Hong Kong and Taiwan. Shell also established one of its three global storage hubs for Pearl Gas-To-Liquid Base Oils in Hong Kong, strategically chosen to serve the adjacent blending plants.

In Asia, Shell owns and operates lubricants blending plants in Singapore, Thailand, Malaysia, the Philippines, Vietnam, South Korea, Pakistan and India.

Three of its eight global base oil manufacturing plants are in Asia: Pulau Bukom in Singapore; Kaosiung in Taiwan and Yokkaichi in Japan.

In early 2012, Shell signed a conditional agreement with Hyundai Oil Bank to jointly develop, construct and operate a base oil manufacturing plant at the Daesan oil refinery in South Korea.

 

VIETNAM: Four-year plan with ADB to focus on “inclusive growth and economic efficiency

(EnergyAsia, August 23 2012, Thursday) — The Asian Development Bank (ADB) said it could lend Vietnam as much as US$3.8 billion to implement a new four-year partnership strategy that will focus on promoting inclusive and sustainable growth, and economic efficiency in the country.

The strategy will focus support on six core sectors: agriculture and natural resources; education; energy; finance; transport; and water supply and other municipal infrastructure. It will continue to support structural and policy reforms including state-owned enterprise reforms, promote inclusive growth by targeting disadvantaged regions, and strengthen the government’s ability to address environmental and climate change challenges.

Another area of concern is persistent inflation. While the country has weathered the global financial crisis well, its competitiveness is being held back by skilled labour shortages, inadequate infrastructure and structural rigidities including inefficiencies in state-owned enterprises (SOEs) and a shallow banking system.

ADB said its support for infrastructure, rural development, and education will help enhance the poor’s economic opportunities and access to services.

While Vietnam has made impressive progress in reducing poverty, the bank said regional disparities remain, with poverty most among ethnic minority groups.

ADB said its engagement in public sector management supports policy and institutional reforms for enhancing economic efficiency and improving social services for the poor while minimising the risk of external and internal shocks pushing them back into poverty.

“The poor are vulnerable to environmental degradation and climate change. Adapting infrastructure and building climate resilience in coastal and low-lying areas will safeguards human and natural resources, and protect the poor,” it said.

 “Vietnam has experienced rapid GDP growth and remarkable poverty reduction over the past two decades. There are still persisting pockets of poverty, however, and longer-term structural constraints continue to be a concern,” said Stephen P. Groff, ADB Vice-President for Operations in East Asia, Southeast Asia and the Pacific.

 

 

CHINA: Coal imports up more than 55% in first seven months of year

(EnergyAsia, August 22 2012, Wednesday) — Despite reports of slowing demand, Chinese coal imports have risen more than 55% to 164.1 million metric tons in the first seven months of this year. According to official customs data, China imported 105.5 million metric tons for the same period period last year. Undeniably, however, its coal purchases…

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CHINA: Consortium to build and operate 154-billion-yuan coal railway network

(EnergyAsia, August 22 2012 Wednesday) — China Coal Energy Co Ltd said it and 15 companies have formed a consortium to invest 154-billion-yuan in a new railway network to improve the transportation of coal from mines, ports and storage centres to power plants around the country. (US$1=6.36 yuan). China Coal Energy, the country’s second largest…

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INDIA: Punj Lloyd awarded contract to for underground crude oil storage in Karnataka state

(EnergyAsia, August 22 2012, Wednesday) — Indian infrastructure builder Punj Lloyd said it has secured a 3.3-billion rupee contract from the Ministry of Petroleum and Natural Gas.  Punj Lloyd will provide process facilities and utility services for an underground crude oil storage cavern being constructed on the country’s west coast. (US$1=55 rupees).

The cavern, sited near the Mangalore Refinery and Petrochemicals Limited (MRPL) complex in Mangalore city in Karnataka state, is designed to store up to 1.5 million tonnes of crude oil when completed by 2014. Comprising two identical underground caverns, each measuring 900 metres in length, the facility will store crude oil for use by the refineries of MRPL, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL).

“This is the first cavern project for the group and has been awarded by Indian Strategic Petroleum Reserves (ISPR), a wholly owned subsidiary of Oil Industry Development Board, Ministry of Petroleum and Natural Gas,” said Punj Lloyd.

The company will be tasked to provide a range of services including engineering, procurement, construction and commissioning of systems for crude oil receipt, pumping out, metering, recirculation, heating, waste water treatment, utilities production, flaring and operation buildings.

P.K. Gupta, a Punj Lloyd director, said:

“We have constructed over 300 tanks globally, with over eight million m3 of storage capacity. We are proud to be a part of this strategic initiative of the Indian government to build reserves of crude oil at important locations, which will feed a cluster of refineries.”

The Indian government has set a plan for the Ministry of Petroleum and Natural Gas to stockpile 5.33 million tonnes of imported crude oil in various locations around the country to meet at least 15 days of domestic consumption.

 

MARKETS: With ban on Iran oil, OPEC crude oil output fell to 31.45 million b/d in July, says Platts

(EnergyAsia, August 22 2012, Wednesday) — The start of a global trade ban on Iranian crude oil led to last month’s slight drop in crude oil production by Organisation of Petroleum Exporting Countries (OPEC) members, said US energy media Platts.

In a survey of OPEC and industry officials and analysts, Platts said OPEC output fell 270,000 b/d from 31.72 million b/d in June to 31.45 million b/d in July on the combined impact of US and European Union (EU) sanctions on Iran’s oil exports.

 “OPEC was producing well above demand in the second quarter, but now that the third quarter has begun – when demand historically starts to rise – the group has throttled back somewhat,” said John Kingston, Platts global director of news.

“And it is not just Iran; there are other reductions coming from places where it wouldn’t be expected, such as 80,000 b/d in Angola.

Iranian volumes plunged by 200,000 b/d to 2.9 million b/d in July, when sanctions directly targeting the Islamic regime’s oil sales came into full force.

Europe had already been preparing over several months for the EU embargo on the import of Iranian oil, which came into effect on July 1.

But the EU measures also include a ban on the provision of insurance for ships carrying Iranian oil, even to non-EU destinations. This appears to have had a bigger impact on Tehran’s customers in Asia than new US financial sanctions because most of the world’s shipping cover is linked to EU-based insurers.

In the run-up to the June 28 imposition of US financial sanctions on Iran, Washington dispensed 180-day waivers to Iran’s major customers in Asia in return for “significant” reductions in their oil purchases from Tehran.

Recipients include Japan, South Korea, India and, at the eleventh hour, China and Singapore, despite Beijing’s refusal to recognise non-UN sanctions.

According to Platts, official figures show that China, Japan and South Korea increased their imports of Iranian crude in June from May as the sanctions deadlines approached.

Another sizeable output dip of 100,000 b/d came from OPEC kingpin Saudi Arabia, although July’s total 10 million b/d was still around recent highs.

The Platts survey showed output dropped 80,000 b/d in Angola, 30,000 b/d in Libya and 10,000 b/d in Algeria.

Offsetting these losses, Platts said three countries increased production: Iraq by 80,000 b/d to 3.05 million b/d, Kuwait by 50,000 b/d to 2.8 million b/d and Nigeria by 20,000 b/d to 2.2 million b/d.

The July total leaves OPEC’s 12 members having overproduced their output ceiling of 30 million b/d by 1.45 million b/d in July. 

OPEC ministers agreed at their June 14 meeting in Vienna to maintain the ceiling, in effect since the beginning of the year.

The cartel’s Secretary General Abdalla el-Badri told reporters after the meeting that the effect of the decision on production was unlikely to be felt until July. There are no official individual country quotas.

MALAYSIA: MISC and Singapore’s CAO terminate plans to build oil storage in Johor state

(EnergyAsia, August 22 2012, Wednesday) — MISC Bhd, the Malaysian energy shipping firm, and Singapore’s jet fuel trader, China Aviation Oil (CAO), said they have terminated a shareholder agreement to jointly build and operate an oil storage tank terminal in the southern Malaysian state of Johor.

In separate statements, MISC, which owns and operates oil tankers as well as the world’s liquefied natural gas fleet, and CAO, Asia’s largest physical jet fuel trader, said the termination of the 2011 agreement was mutual as not all conditions were fulfilled within the required timeframe.

MISC’s 45%-owned unit Centralised Terminals Sdn Bhd (CTSB) held the majority stake of 76% in the proposed venture with 24%-shareholder CAO to build and operate the proposed 380,000-cubic metre terminal in Tanjung Langsat Port.

Malaysian engineering firm Dialog Group Bhd owns the remaining 55% stake in CTSB, which MISC said will continue to explore “suitable collaboration opportunities in the region” with CAO.

In a statement, the Singapore-listed company said the partners needed a longer concession period for the land to operate the terminal beyond the 30-year term granted by the Tanjung Langsat Port Sdn Bhd.

“As the entry into the concession agreement and lease would require a much longer period of time than envisaged, both CAO and CTSB have agreed to let the shareholders’ agreement lapse on August 20 2012 as it will no longer be commercially feasible to continue with the project,” said CAO.

Despite the cancellation of the Terminal Three Facility, Meng Fanqiu, CAO’s CEO, said his company is continuing to explore opportunities to lease or invest in storage facilities in Singapore, Malaysia and Indonesia that will include collaboration with CTSB.

“As Terminal Three Facility is a greenfield project which would have taken about two years to complete, the cessation of this project will not have any material impact on the current and future businesses or earnings of the CAO Group,” he added.

The company also holds a 26% stake in a storage terminal project in Yeosu in South Korea, that is due to start up next January.

Separately, the oil storage terminal at nearby Pengerang, also in Johor state, is on course to start up in January 2014 with current work on land reclamation and jetty construction proceeding on schedule.

Pengerang Terminals Sdn Bhd, jointly owned by Dialog Group, Dutch oil and chemical logistics company Vopak and the Johor state government, will initially build 1.284-million cubic metres of capacity for clean products and crude oil, with plans for another million cbm.

The terminal will start up with 432,000 cbm of clean products storage capacity and six berths in January 2014 that will be followed six months later by another 432,000 cbm of capacity. In January 2015, it will launch the third part of its first phase to store 420,000 cbm of crude oil, making this the first in Southeast Asia to offer independent storage for crude oil.

 

CHINA: Greenpeace predicts “widespread water crises” with new coal mines, power plants

(EnergyAsia, August 21 2012, Tuesday) — China’s worsening water supply shortages will become “severe widespread crises” if it succeeds in building 16 new major coal-based centres in the country’s north-western region by 2015, said Greenpeace. According to a study that Greenpeace commissioned a Chinese Academy of Sciences agency to undertake, the new centres comprising coal…

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CHINA: Sinochem aims to more than double Zhejiang oil storage capacity by 2014

(EnergyAsia, August 21 2012, Tuesday) — Chinese state commodities firm Sinochem Corp has started work on expanding an existing 31-million barrel oil storage terminal in eastern Zhejiang province. When completed in early 2014, the Aoshan Island terminal will become the country’s largest with the capacity store up to 50 million barrels of crude. The project…

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PEOPLE: GE appoints Hisham Albahkali as President and CEO for Saudi Arabia and Bahrain

(EnergyAsia, August 21 2012, Tuesday) — US business conglomerate GE has promoted Hisham Albahkali, previously Saudi Arabia’s executive for GE Energy, to President and CEO for Saudi Arabia and Bahrain.

A Saudi national, Mr Albahkali will lead GE’s expansion in its diverse range of businesses including oil and gas, power, water, aviation and healthcare in addition to aligning the company’s development programmes in line with the Saudi Vision 2020 to promote diversification and knowledge sharing.

Starting his GE career in 1997 as a GE Energy customer service manager, he has since been promoted to a number of leadership roles. Mr Albahkali holds a Masters degree in Electronic Technology and a Bachelors degree in Electrical Engineering from King Saud University in the Saudi city of Riyadh.

Nabil Habayeb, GE’s President and CEO for the Middle East, North Africa and Turkey, said:

“Saudi Arabia is one of our core markets in the region, where we have established long-term partnerships in growth sectors that bring a positive difference to the well-being of the people. We will continue to partner with the kingdom’s growth goals emphasising on economic diversification, creating jobs for its talented youngsters and promoting regional research.

“Hisham Albahkali has tremendous insights into the Saudi Arabian market having been associated with several key projects, and will work towards further driving our growth in the kingdom.”

Mr Albahkali said: “Saudi Arabia is witnessing one of the most exciting developmental phases, with strong investments in new and emerging technologies. GE’s focus on creating localised solutions and investing in long-term development will be strong assets in supporting the kingdom.

“Our priority areas will be to strengthen our existing partnerships, and continuing to create more growth opportunities for skilled Saudi professionals.”

Saudi Arabia is home to GE’s largest Middle East workforce with over 1,000 employees.

SINGAPORE: Jaya appoints George Horsington to lead business development, secures deals to build vessels

(EnergyAsia, August 21 2012, Tuesday) — Jaya Holdings, a Singapore-based offshore energy services company, said it has appointed George Horsington as President of Business Development.

Mr Horsington, 38, who has held senior management positions with UK’s Swire Pacific Offshore Operations Ltd, will join Jaya on September 6 to take charge of all areas of business development as well as contribute to its chartering business, and be the primary marketing resource for its ship-building and repair businesses.

Venkatraman Sheshashayee, Jaya Holdings CEO, said:

“This newly created post is a pivotal one for Jaya Holdings. With our new vision and strategic direction in place, we need to develop new markets and businesses and for us to do that successfully, we need a dedicated resource. George Horsington will oversee the development of new business for Jaya on a global basis and we have every confidence he has the track record and experience to be able to deliver that.”

Mr Horsington, who has been located in Singapore at various times since 2001, described Jaya as a company with exciting ideas that is well positioned to take advantage of the opportunities becoming available in the global offshore oil and gas sector.

As part of its long-term expansion, the company last month signed a wide-ranging agreement with IHC Merwede of the Netherlands matching Jaya’s strategy to build high-specification offshore vessels with the Dutch firm’s plans to expand its integrated shipbuilding and equipment manufacturing operations in Asia. Specifically, Jaya Shipbuilding and Engineering Pte Ltd will produce high-end vessels for IHC Asia Pacific while IHC Merwede will provide design and engineering support services to Jaya.

Denis Welch, IHC Asia Pacific’s CEO, said: “With this mutually beneficial agreement for both companies, IHC Merwede will have a reliable production partner in Southeast Asia.”

Jaya’s Mr Sheshashayee, said: “This tie-up with IHC Merwede represents a major step forward for Jaya Shipbuilding and Engineering. IHC Merwede brings a world-class track record of maritime engineering and technological innovations to this agreement and it is widely recognised as an industry leader in many areas of the maritime and offshore sectors.”

Singapore-listed Jaya Holdings provides a wide range of services and solutions to the offshore oil and gas E&P domain. Its specialised offshore assets including a fleet of 31 specialised vessels are designed and constructed at its fully owned facilities in Singapore and Indonesia’s Batam Island to  support offshore exploration and production, marine construction, mining and marine-related activities.

CHINA: Coal production to grow by 3.7% in 2012, down from 8.6% in 2011

(EnergyAsia, August 17 2012, Friday) — Under pressure from slowing domestic demand and rising imports, the world’s leading coal producing country will raise output by just 3.7% this year, down from 8.6% last year and 9% in 2010. The National Development and Reform Commission (NDRC), China’s main economic planning agency, has set a new coal…

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THAILAND: PTT to invest 100 billion baht in fuel storage terminals

(EnergyAsia, August 17 2012, Friday) — Thai state energy firm PTT said it is preparing to invest 100 billion baht to support the government’s plan to raise the country’s strategic oil stockpile from 43 days to 90 days of consumption. At a recent forum on oil risk management in Bangkok, a senior company official said…

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MARKETS: OPEC faces “period of no growth”, says ESAI

(EnergyAsia, August 17 2012, Friday) — Organisation of Petroleum Exporting Countries (OPEC) members will have little room to boost oil production over the next five years, US consulting firm Energy Security Analysis Inc (ESAI).

In its latest five-year forecast of the global crude oil markets, the Wakefield, Massachusetts firm said the call on the cartel’s crude supply will remain in the 30 to 30.5 million b/d range.

“If OPEC can get back to and keep production restrained in this manner, the members can prevent further price weakness. To manage this modest growth in demand for its oil, OPEC must adapt to changes in members’ productive capacity and enact a new and improved production allocation system,” it said.

ESAI also forecast that OPEC’s spare capacity will rise next year to around four million b/d, sufficient for the entire five-year period to temper the upside for oil prices and help the world to cope with small, short-term supply disruptions.

CHINA: ADB recommends green tax and fiscal reform to spur pro-environment economic growth

(EnergyAsia, August 17 2012, Friday) — The Asian Development Bank (ADB) has urged China to initiate comprehensive fiscal, economic and legal measures to achieve ambitious targets for reducing pollution while growing the economy.

While praising China’s green progress including its increased investment in environmental infrastructure, greater focus on achievable targets, and strengthened accountability and enforcement, the bank’s second environmental report on the country also noted various shortcomings.

The report, “Toward an Environmentally Sustainable Future”, said China has reduced chemical oxygen demand and sulphur dioxide emissions by 10% and energy consumption per unit of GDP by nearly 20% despite continued robust economic growth.

But these achievements have been offset by the country’s worsening threats of water pollution, water scarcity and rising output of solid waste. Additionally, China faces crises stemming from increasing output of urban and industrial wastewater and solid waste.

“Non-point source pollution including fertiliser run-off, pesticides and discharges from livestock facilities, threatens the aquatic health of lakes and estuaries. Addressing these issues will require innovative strategies, regulations and economic incentives,” said the ADB.

The report highlights four root causes behind the country’s environmental challenge: the rapid pace of economic growth, the economy’s heavy reliance on exports and investment, its high dependence on coal, and the rapid pace of urbanisation.

To change this unsustainable growth pattern, ADB has urged Beijing to reform the pricing of resources and introduce a green taxation system.

The new system would tax resource extraction, and pollutant and carbon dioxide emissions, and allow tax deductions to offset investments in pollution control equipment.

The bank also called for fiscal reform that would put new revenues and savings from environmental taxes into the hands of sub-provincial governments for use in environmental protection and resources conservation.

The report encourages Beijing to invest in natural resources through a national regulatory framework of “eco-compensation” where the government or private sector pays for ecological services protection by households, communities and local governments.

In developing a national eco-compensation ordinance, the government needs to evolve from being the main purchaser of ecological services to an “enabler” that encourages private sector participation.

Legal reform is critical to improving environmental governance. Such reform should clarify institutional responsibility, reduce ambiguity and redundancy in regulations, and empower enforcement authorities.

Under its Country Partnership Strategy for China (2011 to 2015), the ADB supports the government in pursuing clean and sustainable growth, prioritising renewable energy and energy efficiency, encouraging low-carbon transport systems; protecting degraded rural ecosystems, and developing livable cities.

“China’s environmental challenge is arguably the most complex that any country has confronted,” said Robert Wihtol, Director General of ADB’s East Asia Department. “While China’s environment has improved in many respects, the overall situation continues to deteriorate as environmental pressures increase. The country’s environmental situation has not yet reached a turning point.”

THAILAND: Foster Wheeler awarded contract for power plant’s waste heat recovery unit

(EnergyAsia, August 17 2012, Friday) — Foster Wheeler AG said a subsidiary of its Global Engineering and Construction Group has been awarded a contract to deliver a waste heat recovery unit for a power generation and heat recovery project at the Map Ta Phut Industrial Complex in Thailand.

Foster Wheeler will design, engineer and supply the waste heat recovery unit, including a selective catalytic reduction system and other associated equipment during the third-quarter of 2013.

The contract was awarded by South Korea’s Samsung Engineering Co Ltd, the engineering, procurement and construction and pre-commissioning contractor for the project being developed by Thai state energy firm, PTT Public Company Limited.

In 2010, Foster Wheeler, which declined to state the contract’s value, said it successfully delivered two similar waste heat recovery units to Samsung for PTT. The design for all three units is in accordance with applicable environmental standards.

 

PHILIPPINES: IMF team provides overview and update of upstream petroleum sector

(EnergyAsia, August 16 2012, Thursday) — The following is an edited version of a section of an International Monetary Fund (IMF) report on the state of the Philippines’ mining and petroleum industries, and the need for fiscal reforms.The report was published following an investigation undertaken in response to a request by Cesar V. Purisima, the…

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MALAYSIA: Malakoff starts building 1,000MW coal-fired coal-fired power plant in Johor state

(EnergyAsia, August 16 2012, Thursday) — Malaysian independent power producer, Malakoff Corporation Berhad, has started work on the construction of Southeast Asia’s largest coal-fired power plant in Tanjung Bin in the southern state of Johor.

The company is investing a total of RM6.5 billion in the 1,000MW plant which will more than triple the generating capacity in the Tanjung Bin area to 3,100MW when it starts up in 2016. (US$1=RM3.1).

In a competitive tender last year, Malakoff secured the contract from the state Energy Commission of Malaysia to build and operate the plant which will help meet the country’s fast-growing demand for electricity, in particular in Johor state’s Iskandar region which is expanding its manufacturing sector.

According to Malakoff, Iskandar’s power demand is expected to rise from 1,479 MW in 2010 to 2,254 MW by 2020 as a result of growth in the region’s port and marine services, warehousing, logistics engineering, hi-tech manufacturing, food production, petrochemical industry and entrepot trade.

At a ceremony this week, Ahmad Tajuddin Ali, chairman of the Energy Commission, expressed confidence that Malakoff would be able to “offer reliable (electricity) supply at competitive pricing.”

“The new Tanjung Bin project will help the government’s effort in boosting the development of Johor’s Iskandar region. The project will certainly bring a huge multiplier effect to the economy,” he added.

The new plant will incorporate latest energy-efficient and green technology utilising a supercritical steam turbine and generator, boiler and plant auxiliaries.

“We are committed to make this a successful venture as we chart the company’s growth plans as the leading independent power producer not only in Malaysia, but also in the region,” said Malakoff chairman Wira Syed Jabbar Syed Hassan.

Malakoff is Malaysia’s largest independent power producer with a net generating capacity of 5,020 MW from its six power plants that run on coal and gas. The company also has power and water ventures in Saudi Arabia, Algeria, Kuwait and Bahrain, with plans to expand into other countries in Southeast Asia.

IRAQ: Law firm Herbert Smith comments on bilateral investment agreement signed with Japan

(EnergyAsia, August 16 2012, Thursday) — The following is an edited version of a commentary by the Tokyo office of law firm Herbert Smith on a bilateral investment agreement or treaty (BIT) signed by Japan and Iraq on June 7 2012.As the first BIT between Iraq and a major economy, this is a significant and credible commitment by Iraq to the rights of foreign investors falling within the BIT’s protections. The treaty will enter into force 30 days after diplomatic notes are exchanged between the two governments confirming that national legal steps have taken place.

Despite facing on-going security difficulties, Iraq has a growing appetite for investment to develop its enormous — and world’s second largest — proven oil reserves. The government has stated its commitment to securing foreign investment and has taken steps on a domestic level to make the country more attractive to foreign investors.

Compared with most developed nations, Japan has been slow to enter into free trade agreements with other countries, reducing its opportunities for foreign investment. In the late 1990s, Japan began entering into agreements with Pacific Rim countries and negotiations with Canada and Mongolia with the aim of signing BITs.

The groundbreaking agreement with Iraq signals Japan’s recognition of the importance of BITs and its intention to take an active investment and development role in Iraq.

Japan initially strengthened its ties with Iraq by offering a considerable financial assistance package in 2003 in the aftermath of the conflict. The Japan-Iraq Comprehensive Partnership in 2009 has boosted bilateral ties and contributed to Iraq achieving greater self-reliance and political stability.

Japan has provided financial assistance beyond that pledged in 2003, with the money being used for four new projects in the areas of oil, telecommunications and health. Japanese companies are reported to be involved in the associated contracts.

Given that this is one of the first of Iraq’s BITs, the treaty contains a “most favoured nation” (MFN) provision at Article 4, giving investors of the other contracting party and their investments treatment no less favourable than that given to investors of a non-contracting party.

This will provide comfort to Japanese investors in the event that Iraq enters into subsequent BITs with other countries with more favourable provisions than these.

However, followers of investment treaty decisions will be interested to note that this MFN treatment is expressly stated not to apply to dispute resolution.

A further provision of note is Article 17 which sets out the process for settlement of investment disputes. This includes a three-month period for consultations before the dispute can be submitted to arbitration.

The interpretation and application of such negotiation provisions is a hot topic in the investment treaty community. It will be interesting to see whether investors are held to this three-month period to consult should any disputes arise under this BIT in future.

Although submission of disputes to the International Centre for Settlement of Investment Disputes (ICSID) is one of the options provided for in the BIT, Iraq is not a member of the ICSID (Washington) Convention. Submission of any disputes to ICSID, therefore, assumes that it will become a signatory at some point in the future, as expressly stated in the wording of the treaty.

There are other dispute resolution methods available in the BIT in the alternative, including arbitration under the UNCITRAL Rules.

For details of the Iraq-Japan treaty, please contact Peter Godwin,
Herbert Smith’s managing partner, and
Gaikokuho Jimu Bengoshi,
head of dispute resolution, in Tokyo at telephone 813-54125412.

CHINA: ADB provides support for development and implementation of carbon capture and storage plans

(EnergyAsia, August 16 2012, Thursday) — The Asian Development Bank (ADB) said it is assisting China in developing a road map for carbon capture and storage (CCS) to help achieve the country’s carbon dioxide (CO2) emissions reduction goals.

The bank is working with Chinese officials to develop a detailed plan for a staged demonstration and deployment of essential CCS technologies to prevent climate change. The technologies separate, capture, compress, transport and inject CO2 into a suitable underground storage.

The ADB said this project will pave the way for the launch of at least two large-scale CCS demonstration projects by 2016, with an installed capacity to capture at least two million tons of CO2 per year.

CCS application can prevent up to 90% of CO2 emission from large emission sources like fossil fuel-based power plants. However, its development has been slow. To date, no large-scale CCS project attached to a fossil fuel-based power plant is operational anywhere in the world, said the ADB.

“There is an urgent need to fast-track the demonstration and deployment of carbon capture and storage in the People’s Republic of China to cut CO2 emissions from the energy and industrial sectors and achieve the country’s long-term climate change mitigation goals,” said Annika Seiler, Finance Specialist for Energy at ADB’s East Asia Department.

The bank said it expects a comprehensive government-endorsed road map for CCS to encourage more demonstration projects in China.

In turn, a successful large-scale CCS demonstration project in China will help drive the technology’s commercialisation globally, reduce project costs and lead to resolution of technical challenges.

ADB said it is providing US$2.2 million, financed on a grant basis by the ADB-administered Carbon Capture and Storage Fund under the Clean Energy Financing Partnership Facility. In 2009, the Global Carbon Capture and Storage Institute contributed to establish the fund.

In April 2012, the UK announced financing for CCS development in developing and emerging countries.

Since 2008, ADB has been supporting the government’s efforts through capacity development projects, studies, and financial assistance. Incomplete policy and regulatory framework, low fiscal and financial support for CCS demonstration projects, and inadequate international funding mechanisms to support projects have been identified as key barriers to large-scale demonstration of CCS in China.

SRI LANKA: Power cuts to continue

(EnergyAsia, August 15 2012, Wednesday) — Sri Lanka may continue to suffer daily power cuts for at least a few more weeks due to constant breakdowns at a 17-month-old coal-fired power plant which accounts for nearly 10% of the nation’s 3.1-gigawatt generating capacity. The Chinese-built plant at Norochcholai has broken down at least five times…

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MALAYSIA: Petronas selects Air Products to provide expertise for floating LNG project

(EnergyAsia, August 15 2012, Wednesday) — US-based Air Products said its leading liquefied natural gas (LNG) technology and equipment will be used on a floating LNG (FLNG) production platform 180 km off the coast of eastern Malaysia.
 
State oil and gas company Petronas has selected Air Products for its first floating platform to produce 1.2 million tons per year of LNG when it starts up off Sarawak’s Bintulu town in late 2015.

At last month’s ceremony for the signing of an equipment and process licence agreement, Bill Kennington, Air Products’ major LNG account manager, said:

“This project will showcase not only our proprietary and leading LNG technology and equipment, but also Air Products’ worldwide manufacturing capabilities, as portions of the equipment will be fabricated and assembled in the US and Asia.

“This FLNG project is very important for Malaysia by unlocking and enabling economic development and commercialisation of significant gas reserves from locations where the resource was essentially stranded.”

Air Products signed the contract with PETRONAS Floating LNG 1 Ltd (PFLNG 1), a wholly owned subsidiary of the Malaysian state company.

The PFLNG 1 platform will use Air Products’ AP-N proprietary equipment including coil wound heat exchangers and compressor-expanders to be built and assembled in the US, and economiser cold boxes to be built in Malaysia.

 

CHINA: Sales of more than 152,000 plug-in electric vehicles by 2017 to fall short of government targets, says Pike

(EnergyAsia, August 15 2012, Wednesday) — China will not meet either of its ambitious production or sale targets for its plug-in electric vehicles (PEV) later this decade, said US-based Pike Research.

According to its latest report, China’s PEV production will fall well short of the government’s goal of manufacturing 500,000 PEVs a year by 2015 while sales will also prove disappointing.

Pike Research said PEV sales in the world’s largest automotive market will grow at a compound annual growth rate (CAGR) of 60% from 2012 to 2017, surpassing 152,000 units sold annually by 2017. However, that figure represents less than 1% of the country’s total light duty vehicle market.

The Chinese government has made vehicle electrification central to its aggressive plan for growing the automotive market both domestically and internationally and has created many national and local incentives for plug-in electric vehicle (PEV) purchases.

“Many members of the emerging middle and upper classes prefer imported vehicles with nameplates from the United States or Germany – especially larger sedans in which owners can sit comfortably while their drivers navigate China’s often congested roads,” said Pike’s research director John Gartner.

“The Chinese government initially overestimated consumer demand for electric vehicles, and has made adjustments to its incentive policies.

“Many members of the emerging middle and upper classes prefer imported vehicles with nameplates from the US or Germany – especially larger sedans in which owners can sit comfortably while their drivers navigate China’s often congested roads.”

According to Pike Research, China is adjusting its programme away from battery electric vehicles to be more inclusive of hybrids and plug-in hybrids.

Still, the government will find it difficult to implement its policies as the country’s fragmented regional governments and the close relationships between local governments and local vehicle manufacturers have created problems in implementation, especially for vehicle and technology standardization.

Competing interests, such as companies producing vehicles with proprietary technologies, have already delayed the release of China’s Energy Saving and New Energy Vehicle Industry Development Plan (2011-2020), making it difficult for companies to plan their investment in EV production and infrastructure, said Mr Gartner.

In the long-run, China’s EV ambitions will provide a huge boost to electric car development worldwide.

AUSTRALIA: ECT to apply for government funding for development of coal upgrading technology

 
(EnergyAsia, August 15 2012, Wednesday) — ASX-listed Environmental Clean Technologies (ECT) said it will apply for part of an A$90 million funding package offered by the Australian government to accelerate new lignite upgrading technologies in the Latrobe Valley.

Under the terms of the Advanced Lignite Demonstration Program (ALDP), funds will be allocated to companies, which can demonstrate pre-commercial coal upgrading technologies with the potential to deliver environmental and economic benefits.

Accessing funds under this programme will help companies fast-track commercialisation plans for selected technologies.

Announcing the joint State-Federal funding plan, Victoria state’s Energy Minister Michael O’Brien said the brown coal resource has underpinned economic growth and provided Victoria with a strong competitive advantage.

“There is a long term viable future for the Latrobe Valley based on the sustainable use of brown coal,” he said.

Federal Energy Minister Martin Ferguson said the programme would ensure continued opportunities for economic growth, employment in the Latrobe Valley region and a sustainable source of energy for Victorian industries and households.

“There is also potential for brown coal to develop into a valuable export, which would not be possible without the technological innovation that may also assist in meeting the government’s emissions reductions targets of five per cent fewer emissions than 2000 levels by 2020,” he said.

ECT said its Coldry lignite drying technology is a worthy contender for funding support under this assistance program.

The company said: “Not only do we have a technology that is a more environmentally friendly means of transforming raw lignite into a ‘black coal equivalent’ for energy supply, we have already commenced our detailed engineering designs for both a commercial demonstration plant and a commercial-scale (2 million tonnes per annum) plant. tender and targeted 2014 as our completion timeframe.

“While we have applied for government funding in the past, the narrow selection criteria that previously applied often prevented our Coldry technology from complying.”