Friday, September 26, 2014

LNG: The Changing Global Dynamics

LNG The changing Global Dynamics sets up in the backdrop of some major shifts expected in the global LNG business market place. The Shale Gas Revolution in USA as well as large discovery of conventional gas in different parts of the world, notably East Africa has brought in new dimension for the global LNG trade in coming years and following few decades. US, certainly is very interesting story as it gets ready to enter LNG export market in big way.

Australia is progressing well with a huge ramp up in its Liquefaction capacity. Russia too has tweaked its gas export policies to have a bigger pie from LNG cake. Canada too has lined up of new projects aggregating to huge new liquefaction capacity. Many years down the road- USA, Australia, Qatar and possibly East Africa, Canada and Russian would emerge as major suppliers of LNG during this century.

Will LNG market transit to ‘Buyers Market’ or the demand growth would dictate the build up of new capacities so that it continues to be ‘Suppliers Market’ or more liquid LNG market will emerge. The oil indexed base pricing is witnessing growing pressure and hub based pricing has entered the scene. Possibility of regional LNG trading hubs is being discussed and debated. The so called Very Rigid LNG SPA’s are seemingly becoming more flexible and good volume of LNG is now being traded on non long term basis.

Importing of LNG is a relatively new phenomenon for many Asian countries: India started in 2005, China in 2006, Thailand in 2011, and Indonesia & Malaysia in 2012. Japan imports the largest quantity of LNG of any nation (87.4 million tonne in 2012), accounting for around 35% of global demand. China’s growing demand for cleaner fuel, combined with new re-gasification terminals, has pushed LNG imports to a new high, which saw the country importing close to 13 million tonne in the first nine months of 2013, up by 23% compared with 2012.

Needless to say, Asia Pacific has long stood as an important LNG market for both consumers and suppliers with Japan and South Korea primary import market players, together accounting for over half of global LNG demand.

India, with around 1.2 TCM of natural gas reserves is also set to play a key role in LNG demand in the next decade. With many of the country’s largest oil and gas companies looking to expand the country’s LNG re-gasification capacity, 2013 was expected to mark a turning point for the gas retail industry, which is in growing need of more supplies. India will become significant partner in this new global dynamics of LNG. India will soon revert back to high economic growth trajectory, would strengthen its manufacturing base very significantly and gas/LNG will have growing relevance in its energy basket.

                              By
      InfralineEnergy Oil & Gas Research Team           




 Disclaimer:

The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the Infraline Technologies (India) Pvt. Ltd. (organization). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.


Monday, September 8, 2014

Impact of Budget on Coal consumers

The Narendra Modi led government presented its first budget on 10th July 2014 that focused on key issues like widening fiscal deficit, high inflation, slumped economic growth (below 5 percent in last two years) and limited infrastructure facilities. The budget outlined the plan of new government for reviving the Indian economy by reducing the current account deficit, promoting FDI and push to manufacturing and infrastructure sector among others.

For coal sector, the budget offered proposals ranging from tax simplification, rationalization of supplies, and increasing production among others. In FY14, the values of India’s steam-coal and coking-coal imports were 1.9 percent and 1.3 percent respectively of the total imports, which sums around to be about 3.2 percent of the value of the total imports basket. The coal consuming industry, naturally, had mixed reactions on the new budget as it provides incentives on some counts but increases cost of procurement for several players.

Impact on the Imported Coal Consumer: The budget rationalized custom duty imposed on different grades of coal that is expected to remove assessment disputes and transaction costs associated with testing of various parameters of coal. Table below shows change in custom duty and impact on associated sectors.

Type of Coal
Before
After
Sectors Impacted
Impact
Basic Custom Duty
Non-Coking Coal
2%
2.5%
Power
Negative: Increased cost of generation;  major impact where cost of coal cannot be passed on to consumers through increase in tariffs
Cement
Negative: Increased cost of production; to not allow for increase in prices in a competitive market
Sponge Iron
Negative: Increased cost of production; to not allow for increase in prices in a competitive market
Coking Coal
Nil
2.5%
Steel
Negative: Increased cost of production; margins of players to shrink further
Met coke
Nil
2.5%
Counter Veiling Duty (CVD)
Non-coking

2%
2%
Power, Cement, Sponge Iron
Status Quo
Coking Coal
6%
2%
Steel
Positive: however increase in basic custom duty from zero percent to 2.5 percent to nullify the positives

Apart from custom duties, clean energy cess on coal has also been increased from INR 50 per tonne to INR 100 per tonne. This increase in clean energy cess will impact the power and metal producers using imported coal. This recent increase in duties and cess on imported coal in conjunction with slowing global coal prices has forced the industry to rethink their fuel sourcing strategies based on imports. The impact will be more on industries where increased cost cannot be passed on to the consumers.

Impact on Domestic Coal Consumer: The limited supply of domestic coal in the past and huge demand supply deficit has triggered the new government to augment domestic coal supply. In this regard, the government proposes to initiate exercise to rationalize coal linkages to optimize transportation of coal that will include provisions for swapping of FSA based coal linkages among power, steel and cement sector. Apart from this government is also considering comprehensive measures for enhancing domestic coal production specifically by reducing statutory delays.

The government has also increased clean energy cess for domestic coal from INR 50 per tonne to INR 100 per tonne, similar to imported coal. This increase in cess will directly be passed on to the consumers by coal producing companies affecting the cost of production for all coal consumers..

                            By 
      InfralineEnergy Metals&Mining Research Team



  
 Disclaimer:

The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the Infraline Technologies (India) Pvt. Ltd. (organization). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.

Monday, September 1, 2014

Wind energy-going above 200m

The current scenario:

Wind energy, the so called future of energy, has been growing at the rate, incomparable with other sources of energy. Total installed capacity of the segment has crossed the mark of 20GW. It remains one of the lead sources of generation in fleet of Renewable energy. Sector has seen a growth rate of double digits. Renewable energy is contributing a share of 12% in the Generation portfolio of India, lagging behind hydro by a mere 6% or so. For a country like India, where cost of electricity remains not just an issue of investment and growth but can even leads to change of government. Wind Energy seems to be a potential solution provider to our energy problem. National policies and state government policies have been favouring the development of wind energy. Foreign investment clubbed with the business calibre of local players has also added boost to the development of it.

But the picture doesn’t remain brighter throughout. There is another side of it, which is matter of concern for the power sector. The total quantum of units generated by a wind turbine remains low. Capacity utilization factor (CUF) barely touches an average of 22%, whereas a national average for a conventional coal based plant hovers around 70 %( Both figures are for Indian geographical conditions). Such data clearly speaks of the inability of the wind to meet the growing demand of World’s population. Reasons that attribute to such low generation are exogenous in nature and can’t be governed. Seasonal flow of winds and whimsy nature of wind makes it unreliable in a large power system, like that of India.

There have been few proposed solutions to this problem, one of which includes having a higher tower height for the turbine. The idea proposed behind this approach, is to tap the higher and consistent wind velocity present in the higher layer of atmosphere. Air turbulence remains low, as the altitude goes high. The average height of a wind turbine remains around 100m, and at this altitude wind blows with an average speed of 6-9m/s. also the nature of such wind remains inconsistent and this takes away the reliability factor from wind power. Also it involves huge cost and complex engineering to erect high towers and thereafter mounting hub on it. This raises the cost of wind turbine from a national average of INR 6 Crores (USD 1 mn, 1USD =INR 60) to a higher economically unfeasible.  But that doesn’t stop engineers from engineering a viable solution.

Solution:

One such possible solution emerges from the bright minds of the west, Corwin Hardham, Don Montague, and Saul Griffith formed Makani Power in USA, and their airborne turbine seems to be providing a technically and economically feasible solution. Engineered in an unorthodox manner, the turbine is actually a set of small turbines mounted over a kite, the kite which is tethered to a ground station, is capable of transferring power from the tower to the ground station through the tether itself. This technology seems quite attractive in terms of finance involved and hassles removed. Since the kite is tethered to a moveable ground station, it can be easily moved within the region, to tap the maximum potential. Not just this, but also it utilizes the wind’s kinetic energy at an altitude of 200 - 400m. The technology will help the wind energy developers to avoid hurdles like:

·         Land acquisition
·         Whimsical wind flow
·         Poor CUF
·         Reaching higher heights
·         High costs of tower erection etc.

The kite is controlled by a controller that monitors the real time data of wind velocity and other weather related parameters. Size of the turbine has been somewhat lower than tower mounted turbines, 400-500KW compared to 1-2.5 MW on a global average. But that too remains an area of development along with many others, for team at Makani Power. Just like other start ups acquired by bigger market players, Makani Power too has been acquired by Google in 2013. That would help Makani in funding its research work and continuing forward in the direction of wind turbine development. Innovation just doesn’t stop at one milestone, but it keeps modifying it forms and covers milestones. Similar airborne turbine called as The Buoyant Air Turbine (BAT) has been developed by Altaeros Energies, founded in 2010 at MIT, USA. Their concept involves a helium filled shell which has a turbine in its hollow centre; the helium filled shell easily reaches a height of more than 500m and channels the wind through the turbine. Energy generated is transferred through the tether.  The benefits of BAT remain more or less similar to that of turbines developed by Makani Power. And moreover both the technology avoids the high cost of tower erection and land acquisition.


Approach used by both the technologies involves tapping of air potential at higher altitude and providing mobility to the generator. This concept has been put to use in many parts of USA and Europe. For a country like ours, where land acquisition has remained an issue, and availability of finance to adopt new technology doesn’t exist, it remains an opportunity untouched to bring in this technology and end our power crisis. We have grown mature enough in the global world, and adopting new technologies has been one of the targets. I don’t see any hindrance or bounds that would prevent adoption of such technology in India. So it remains just a matter of time that it would take to enrich the share of wind energy in our energy mix. A cleaner and cheaper energy is all that would help us in reaching one of the Millennium Development Goals as well.


Fig 1. Turbine developed by Makani Power



Fig 2: Trajectory traced by Makani’s  turbine



Fig 3: The Buoyant Air Turbine(BAT)

    
                                   By
          InfralineEnergy Power Knowledgebase Team






Bibliography

1.     Makani Power - http://www.google.com/makani/
2.     Altaeros energies - http://www.altaerosenergies.com/index.html



Disclaimer:

The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the Infraline Technologies (India) Pvt. Ltd. (organization). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom