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Tuesday, 25 January 2011

RAND Says Alt Fuels Out, Coal & Biomass In, for Military

RAND National Defense Research Institute has released a study today amidst a firestorm of criticism with many claiming that the report sounds like an advertisement for the coal industry. The study, commissioned by the Department of Defense, was to conduct an examination of alternative fuels for military applications. For the past several years, the military has been testing alternative fuels, including biodiesel and algal fuels, in aviation and marine applications and has set clear goals to use alternative fuels by 2016 and beyond.

The report concludes that in the short term, “considering economics, technical readiness, greenhouse gas emissions, and general environmental concerns, FT fuels derived from a mixture of coal and biomass represent the most promising approach to producing amounts of alternative fuels that can meet military, as well as appreciable levels of civilian, needs by 2030.”
The report continues by saying, “It is highly uncertain whether appreciable amounts of hydrotreated renewable oils (biodiesel) can be affordably and cleanly produced within the United States or abroad.” The report questions whether renewable fuels can ramp up to commercial scale, be economically competitive and it questions their ability to reduce greenhouse gas emissions. All of these issues rule biodiesel and algae out, where too much money and resources are being spent, according to the report, as being a viable candidate to meet the military need’s over the next decade.
If these findings weren’t enough to stir up the hornet’s nest, the report also called for Congress to reconsider the military’s budget for alternative fuel-projects. This is a sure-fire way to invoke debate in Washington, especially as a Republican Congress searches for ways to cut the federal budget.
In a New York Times article, the report elicited quick criticism. “Unfortunately, we were not engaged by the authors of this report,” said Thomas W. Hicks, deputy assistant secretary of energy for the Navy. “We don’t believe they adequately engaged the market,” he said, adding, “This is not up to RAND’s standards.”
In an uncommon agreement, both biofuel groups and the environmental industry criticized the RAND report saying that it “underestimated the viability of algae and overestimated the availability and efficacy of carbon capture and storage technology.”
Paul Winters, a spokesman for the Biotechnology Industry Organization said in the article, “This would not be the first example of a military-driven research project where the civilian benefit far outweighs the military benefit. Witness the Internet.”

One area in which the report was very hung up was in the greenhouse gas reduction of the alternative fuels and cites that the Energy Independence and Security Act of 2007 requires that any alternative and synthetic fuels bought by federal agencies for “mobility-related use” must have the same or lower greenhouse gas emissions than those of conventional fuels using 2005 levels. The RAND report argues the GHG reductions are not significant enough to continue to pursue research.
A long-standing debate has been whether biofuels, both ethanol and biodiesel, offer lower GHG emissions as compared to other fuels such as conventional gasoline. The biofuels industry argues biofuels lower GHG emissions, even when factoring in unproven theories such as indirect land use, while biofuel opponents argue that biofuels actually increase GHG emissions.
Ultimately the RAND report concludes that the most promising fuels will be produced using the Fischer-Tropsch process, and more specifically, to turn a combination of coal and biomass into liquid fuel. However, to counter GHG emissions, there will have to be substantial carbon sequestration technology attached to the process, but the authors do not feel this is a deal-breaker, regardless of the fact that no proven, commercially available technology of the sort is currently available.
Executive Director Mary Rosenthal, in a statement on the Algal Biomass Organization’s website in response to the study, stated, “The positioning of the entire US algae industry as a “research topic” is patently false. We have more than 100 companies, academic institutions and national laboratories working to develop the algae-to-fuels industry. Algae-derived fuels have already been tested and/or used in motor vehicles and commercial aircraft, and last fall’s successful test of a Navy Riverine Command boat showed that algae fuels are ready for use. It is unclear to us whether or not any actual “green” CTL fuels have been produced or tested.”
Rosenthal continued, “We believe algae commercialization is far closer than RAND suggests. A 2010 report by Greentech Media Research projected annual US production of 6 billion gallons of algae fuel by 2022. On the contrary, the RAND report calls the potential for commercial production of CTL fuels over the next decade “very limited.”
She concluded, “We will continue to work on behalf of the US algae industry to inform policymakers of the true potential of algae-based fuels as a long term, viable source of renewable fuels for the military.”

Wednesday, 5 January 2011

India's NTPC in talks with Qatar on investment, LNG supplies

Mumbai (Platts)--22Dec2010/820 am EST/1320 GMT
Indian state-owned power utility NTPC Ltd is in talks with the Qatari government for LNG supplies and investment by Qatar in the company's gas-generated power projects, company sources said Wednesday.

Industry sources confirmed that the company has been in talks with Qatar about investment in NTPC's gas fired power generation project at Kayamkulam in Kerala, southern India. NTPC received intimations that Qatar would be interested in picking up a stake in the company's projects, so they could be speaking to them on gas supplies for them, sources said.

"We have initiated talks at the embassy level on getting around 1.3 million cubic meters a day of gas for our power plants," Arup Roy Choudhury, chairman and managing director of the company was quoted saying by Indian daily Daily News & Analysis.

NTPC Ltd signed agreements with public sector gas transporter GAIL and oil refining and marketing companies Indian Oil Corp Ltd and Bharat Petroleum Corp Ltd last year for supply of 1.2 million mt/year RLNG for 20 years.

RLNG supply for NTPC's 360 MW combined cycle power plant currently under operation at Kayamkulam would start from 2012, when Petronet LNG's Kochi terminal becomes operational, NTPC has said.

NTPC said the fuel agreement would be able to meet the requirement of the stage-I capacity of 360 MW currently being fired by naphtha and partly meet the requirement of stage-II expansion of 1.95 GW.

"The Qatari government is interested in investing in our power plants. So if, in return for gas, they take some equity, we are exploring that opportunity," Choudhury was quoted as saying by the newspaper.

"NTPC has gas availability issues and has been buying RLNG in the spot markets," equity analyst Rupesh Sankhe, who tracks the company for Angel Broking, said. "This is a good start. Maybe in the medium to long term they will end up with larger quantity/contract," he added.

NTPC has 3.955 GW of gas/liquid fuel based power generation capacity. In an investor presentation the company said it needs 17.35 million cu m/d of gas to run its plants at 90% plant load factor.

For the first quarter of the current financial year (April-March) the company said it received 15.12 million cu m/d of gas. In that quarter 3.92 million cu m/d of gas was from spot and fallback RLNG and it received additional natural gas of 1.77 million cu m/d from the eastern offshore KG D6 fields of Reliance Industries.

"After they started receiving gas from D6, PLF [plant load factor] has gone up to 80-85% from 60-65%, Sankhe said.

The Indian government had allocated 4.46 million cu m/d of gas from KG D6 and the company has signed gas supply and purchase agreement for 1.81 million cu m/d, the company said in an investor presentation in August.

NTPC and Reliance are involved in litigation over an earlier contract for 12 million cu m/d of gas from D6 at a price of $2.34/MMBTU.

NTPC has now made an additional request for allocation of 22.8 million cu m/d of gas which it is willing to buy at the government determined price for KG D6 gas, $4.2/MMBTU.

--Vaijayanthi Chakravarthy,

Liquid gas expands to fill Britain's energy gap

Virtual pipeline that ships LNG around the world is growing in importance – and reducing the UK's reliance on Russia. But it can't insulate the gas supply from disruptionisle of grain 

National Grid's liquefied natural gas terminal on the Isle of Grain. On one of the coldest days of the month, a record quarter of all gas consumed in the UK came from LNG. Photograph: Peter Macdiarmid/Getty Images

On a freezing morning, Simon Fairman, manager of National Grid's Isle of Grain liquified natural gas terminal, greets a blue-faced engineer in a control room. The engineer had just come inside after a morning checking nuts and bolts on the windswept new jetty which opened for business at the start of this month. Protruding some 300 metres into the murky River Medway, the jetty can accommodate tankers the size of aircraft carriers to offload their precious cargo of supercooled liquid gas.
The timely expansion – which coincided with the coldest weather for decades – means the £1bn liquified natural gas (LNG) terminal, the world's largest outside Japan and Korea, can now supply up to a fifth of the UK's average annual gas demand.
However, a tanker which had been expected to dock that day was not now due until the following week, giving engineers the opportunity to carry out maintenance. It is impossible to know precisely when LNG tankers – sailing mostly from Algeria, Qatar and Norway – will arrive. A maximum of five can dock there each week. Gas producers such as BP, Algeria's Sonatrach and Gaz de France pay National Grid to book berthing slots at the terminal but do not have to use them.
"They will pick and choose – they can change their mind up to the last moment," Fairman says. "If there is a demand for gas in Spain, they will take the cargo there because there is a better price rather than bring it to the UK, for example."
Last year one tanker from Algeria on its seven-day voyage to the Isle of Grain had got as far as the Straits of Dover when the ship's master was called by Sonatrach, owner of the cargo.
"There were some problems in Turkey and a need for LNG there," Fairman recalls. "They were saying: 'We may need you to divert, we may need you to turn round and go full speed to Turkey.'"
LNG is gas compressed into a liquid for shipping and then reconverted into gas after it reaches its destination. Fairman calls the growing number of LNG tankers and terminals such as the Isle of Grain around the world a virtual global pipeline.
The UK has three major terminals which between them are able to supply almost half of the country's average annual gas demand. Each of the largest tankers carries enough gas to supply about a third of the UK's average daily winter demand.

Gas glut

The International Energy Agency this year pointed to an unexpected global "gas glut" which it forecasts will last for a decade, the result of new ways of producing "unconventional gas" from shale or coal seams. This glut means that oil companies such as Shell will soon be producing more gas than oil for the first time.
Not relying on physical pipelines, LNG allows producers to reach new markets such as the UK. On one of the coldest days of the month – December 19 – a record quarter of all the gas consumed in the UK came from LNG. Ships flocked to UK terminals to meet demand – and to benefit from the high prices energy companies such as British Gas were prepared to pay to keep their customers supplied.
National Grid estimates that as supplies from the North Sea run out, the UK will be forced to import 70% of its gas by 2020, with two thirds of this coming from LNG. The gas glut and expansion of terminals such as the Isle of Grain have also eased concerns over security of supply as the country is less heavily reliant on imports shipped by pipeline from Europe and Russia.
However, the growth in LNG does not mean the UK will be entirely insulated from winter gas supply rows involving Russia and its European neighbours. In fact, the Guardian's visit to the Isle of Grain coincided with one by Russian energy group Gazprom, with the company talking to National Grid about booking new berthing slots.
"If you are a producer of LNG you will always be looking for new markets," Fairman says. "In the situation with Gazprom – they clearly would like to develop their capacity for LNG. From our point of view, there is an opportunity of having a conversation which prospectively could or could not lead to something."

Diverting demand

Nick Campbell, from energy consultancy Inenco, argues that relying more on LNG opens up the UK to the vagaries – and volatility – of global gas demand. He cites the example of an LNG tanker from Nigeria bound for the Dragon LNG terminal at Milford Haven in Wales in August, which was diverted at the last minute to Brazil. Lower-than-expected rainfall meant that Brazil's hydro plants were generating less electricity, requiring its gas plants to increase production.
The UK can import up to about 75% of its average winter demand via pipelines from Norway and the Continent, but this gas will flow elsewhere in Europe if the price is higher there.
"With pipelines we are competing against Europe for gas. With LNG, we are competing in a global market," Campbell says.
Whether LNG cargoes arrive in the UK depends on how much suppliers are willing to pay. "When people say we are running out of gas we are not, but the price may have to increase to incentivise shippers," Campbell says. "Gas producers are not the Salvation Army. They are not going to do anything for free."
But equally, he estimates that gas bought on the spot market would cost a quarter more had the UK's LNG capacity not nearly tripled in the last two years.
Fairman insists the destination of most LNG tankers is scheduled months in advance: "This not 'Where am I going to put it today?'" He says they should not be viewed any differently to oil tankers. "We don't worry about where oil tankers are going with our petrol.