Oil companies say North Slope gas pipeline too pricey
Associated Press Newswires 

USA: U.S. Cash LPG-Market gains on NYMEX crude strength.
Reuters English News Service 

UK: Enron ups online metals transaction sizes.
Reuters English News Service 

INDIA: State-run Indian firms don't want Enron's assets.
Reuters English News Service 

Poland may have large gas surplus, expert says
BBC Monitoring 

India: Godbole panel submits report
The Hindu 

The Hindu-Editorial: Muddying a quagmire
The Hindu 
India: Talks on to solve Enron tangle
The Hindu 

Power rates in some areas expected
BusinessWorld (Philippines) 


Oil companies say North Slope gas pipeline too pricey

09/27/2001
Associated Press Newswires 
Copyright 2001. The Associated Press. All Rights Reserved. 

ANCHORAGE (AP) - Oil companies looking into the feasibility of building a natural gas pipeline from Alaska's North Slope to the Lower 48 say the project is too pricey. 
A preliminary analysis of the proposed project by Exxon Mobil, BP and Phillips Petroleum shows that the pipeline project would not provide them with what they want; a 15 percent return on their money.
The project works out to a 10 percent to 11 percent rate of return. 
"We see this as a very high risk project," Robbie Schilhab of Exxon Mobil told Gov. Tony Knowles' natural gas development team meeting this week in Anchorage. 
Schilhab and Phillips Petroleum's Joe Marushack presented their preliminary conclusions at a task force meeting. 
Whether the pipeline runs north through the Arctic Ocean to Canada's Mackenzie River delta or south along the Alaska Highway through Canada to the Lower 48, the answer is the same: for now, the project looks too expensive for Alaska's oil companies to undertake. 
For both the northern Arctic route and the southern Alaska Highway route, the costs would be huge: $15.1 billion for the offshore route and $17.2 billion for the highway route. 
"I think this could be made attractive to a number of investors," said Ken Thompson, a former oil company executive who sits on the governors' natural gas team. Thompson said that tax incentives, a lower return on investment and a higher value for liquid natural gas from the pipe would make the project a worthwhile investment. 
If the oil companies are not interested, natural gas transportation companies such as Williams, El Paso or Enron might be, Thompson said. 
Exxon, Phillips and BP are still refining their analysis of the project. But the two executives made clear that they consider the project a long shot both for its high costs and high risks. 
Schilhab said that opportunity remained to make the project an attractive investment by cutting construction costs. The companies also want to streamline the permitting process to avoid delays. 
The presentation dented but did not destroy the optimism of the governor's gas council. 
"I don't like seeing the number. But it's a lot different from saying no way, no how, we're shutting our doors and going home," said Pat Pourchot, state commissioner of natural resources. Pourchot said that the producers' position underlined the need for incentives like federal tax breaks similar to those being proposed by the Knowles administration. 
Exxon, BP and Phillips are split on the incentives. To address the risk of low prices, Phillips wants a tax credit if prices fall below a certain level. BP and Exxon say they want a project that is viable without tax breaks. 
Federal legislation is slated for consideration next week in Washington, D.C.


USA: U.S. Cash LPG-Market gains on NYMEX crude strength.

09/27/2001
Reuters English News Service 
(C) Reuters Limited 2001. 

NEW YORK, Sept 27 (Reuters) - U.S. cash propane prices gained early Thursday, and boosted other liquefied petroleum gas (LPG) prices tracking an uptick in crude oil futures on the New York Mercantile Exchange (NYMEX), traders said. 
Propane gained 1.75 cents to trade at 38.75 cents a gallon in Mont Belvieu, Texas and 1.00 cent to trade at 43.25 cents a gallon in Conway, Kansas, players said.
Midday, the NYMEX November crude oil contract traded 33 cents higher at $22.71 a barrel on short-covering and technical trade, after a seven-day slide that halted Wednesday. 
November natural gas futures lost 2.80 cents to be bid at $2.25 per million British thermal units (mmBtu) after bearish inventory data was released on Wednesday. 
Ethanes were steady, with no deals heard on mix in either hub, and purity trading steady at 23.75 cents a gallon in Belvieu. 
Trade on the heavies remained thin. 
Natural gasoline traded 2.00 cents higher in Belvieu with Enron barrels at 51.00 cents a gallon. Conway product talked at 63.00/67.00 cents a gallon, players said. 
Normal butane traded at 47.00 cents a gallon in Belvieu and at 39.38 cents a gallon in Conway compared to no confirmed deals on Wednesday, dealers said. 
Isobutane traded at 47.00 cents a gallon in Belvieu, while Conway product was offered 0.50 cent higher at 44.25 cents a gallon, traders said. 
- ((Soo Youn, New York Energy Desk, 646-223-6057, soo.youn@reuters.com)).


UK: Enron ups online metals transaction sizes.

09/27/2001
Reuters English News Service 
(C) Reuters Limited 2001. 

LONDON, Sept 27 (Reuters) - Commodities trader Enron has amended its internet trading platform EnronOnline (www.enrononline.com) to allow some users to increase the size of metals transactions. 
For selected clients, Enron is now making markets in three months copper and aluminium for maximum 200-lot transactions, compared with the standard 20-lot markets on the system.
For the larger-volume deals Enron is quoting a wider $4 bid-ask spread rather than the standard $2 spread. 
Joe Gold, president of Enron Metals, said, "The 200-lot market was developed because a number of people asked us to put something of a larger size on there." 
He said the 200-lot market was open to a restricted number of users, but was not focused on any one particular section of the market. 
"People who like large lots tend to be big producers, some of the funds, and so on. They're people who have a commercial relationship with us already," he said. 
Traders said the increased transaction size could give Enron an added edge when competing for fund business. 
"It's a big step up in liquidity. If I was them my first call would be to the top 10 fund managers to say 'why don't you stop messing around with phone calls and come to the screen where you can trade 200 lots at the click of a button?'" said one. 
"Even if they don't manage to get these guys' business, they've raised the bar. Their other clients may have to conform to the Enron model, offering 200-lot deals and maybe a $3 spread if they want to beat Enron." 
U.S.-based Enron Corp became a major player in the metals trade in May last year when it acquired MG plc, a leading independent international metals dealing firm in London which had previously absorbed fellow LME ring-dealers Rudolf Wolff & Co and Billiton Metals Ltd. 
In July last year the company announced the first physical metals transaction on EnronOnline. 
The system differs from the screen trading systems operated by the London Metal Exchange (LME) and UK-based metals and energy broker Spectron in that the trading platform is open to a broad range of users but Enron is the sole counter-party in each transaction. 
Both the LME's LME Select and the Spectron trading platform enable trading between individual users, but limit membership to Category 1 (ring dealing) and Category 2 (associate broker clearing) members of the LME.


INDIA: State-run Indian firms don't want Enron's assets.

09/27/2001
Reuters English News Service 
(C) Reuters Limited 2001. 

NEW DELHI, Sept 27 (Reuters) - Leading state-run firms have rejected proposals from financial institutions to acquire assets of U.S. energy firm Enron's Dabhol Power Co, officials said on Thursday. 
Enron wants to sell its 65-percent stake in Dabhol Power Co which is embroiled in a payments dispute with a local utility.
Officials said some financial institutions had suggested National Thermal Power Corporation (NTPC), Oil and Natural Gas Corp and Gas Authority of India Ltd could buy the troubled Dabhol Power Co's assets. 
NTPC Chairman C.P. Jain told reporters the company had written to the federal government that it was not interested in the project. "We don't think it is a commercially viable proposition for the organisation." 
Officials said financial institutions had also proposed that ONGC and GAIL could buy the LNG import and regasification facilities of the Dabhol plant south of Bombay. 
ONGC Chairman Subir Raha said ONGC was not interested. "Right now it is not on our table. We are not considering it," he told reporters. 
Dabhol's first phase has a generating capacity of 740 MW. It has been idling since May when Maharashtra State Electricity Board (MSEB), its only customer, stopped buying power saying it was too costly and that Enron had violated a part of the contract. 
Dabhol's second phase was 97 percent complete when further construction was stopped because of the dispute. 
The first phase used naphtha as fuel, but the second phase, that will have a generating capacity of 1,444 MW, will use LNG as fuel.


Poland may have large gas surplus, expert says

09/27/2001
BBC Monitoring 
Source: PAP news agency, Warsaw, in English 1443 gmt 27 Sep 01/BBC Monitoring/(c) BBC 
ext of report in English by Polish news agency PAP 
Warsaw, 27 September: Even in the most optimistic prognoses for gas consumption in Poland, there will be a large gas surplus due to contracts signed, Jaroslaw Astramowicz from Enron Poland Sp. z o.o. said on Thursday [27 September]. Astramowicz made the comment while taking part in a panel on diversification of gas supplies at the "oil and gas" trade fairs. According to Poland's energy policy, demand for gas will reach 18bn cubic metres annually in 2005, 20bn in 2010, 25bn in 2015, and almost 30bn cubic metres in 2020.
Astramowicz describes as "unlikely" the policy assumption that the electrical energy sector will be using 3.1-3.5 billion cubic metres per year by 2005. "The sector's level of gas consumption in 2005 will be considerably lower than that quoted in the government's programme, which means that in that sector alone there will be a huge surplus," Astramowicz says. He says the surplus could come to 2-2.5bn cubic metres. 
"There will definitely be too much gas, and that gas will come from long-term contracts. Poland will have big problems paying for contracted gas within existing and signed contracts," he said. 
Enron Poland trades in electrical energy and natural gas.


India: Godbole panel submits report
Our Special Correspondent

09/27/2001
The Hindu 
Fin. Times Info Ltd-Asia Africa Intel Wire. The Hindu Copyright (C) 2001 Kasturi & Sons Ltd. All Rights Res'd 
MUMBAI, SEPT. 26. The Godbole Committee - appointed by Maharashtra to negotiate power tariff rates with Enron - has made sweeping recommendations with a view to bring down the rate to Rs. 2.25-2.40 per unit. 
Since the Centre's counter-guarantee liability for the project is Rs. 2500 crores, New Delhi should raise the same amount by issuing bonds and lend it to the Maharashtra Government as an interest-free loan, the Committee has recommended.
The project should be exempted from paying custom duty on the import of the LNG and the machinery for handling the LNG and if Dabhol Power Corporation is not entitled to income tax concessions for 10 years, the facility should be extended to it. The Committee wants the shareholders to forgo 75 per cent value of their investment in the project and rescheduling of Dabhol's loans. Besides, efforts should be made to find an alternate investor to replace Enron. 
Other recommendations include the separation of the fuel facility from the project, renegotiation of fuel supply and shipping and restructuring of the tariff. 
The Maharashtra Chief Minister, Mr. Vilasrao Deshmukh, told reporters that the State Cabinet had taken note of the recommendations in its meeting today. 
The Committee has stated that it was not necessary to negotiate with Enron since the power major had expressed a desire to quit the project. The Committee spoke to representatives of the electricity boards of Karnataka, Madhya Pradesh, Delhi, Rajasthan and Haryana to explore the possibility of selling the excess power to them, but found that these States could buy electricity to some extent if the tariff was brought down to Rs. 2.25-2.40. The power needs of these States is temporary.


The Hindu-Editorial: Muddying a quagmire

09/27/2001
The Hindu 
Fin. Times Info Ltd-Asia Africa Intel Wire. The Hindu Copyright (C) 2001 Kasturi & Sons Ltd. All Rights Res'd 

ANY FAINT HOPES about the murky Dabhol Power Project crisis being sorted out by the contracting parties - the Enron Corporation, the Maharashtra State Electricity Board (MSEB), the State Government and the Centre which provided the sovereign guarantee in favour of Dabhol Power Company - now appear to have been ruined by the Maharashtra Government's resort to "the theatre of the absurd". 
The decision of the Vilasrao Deshmukh Government to have a judicial probe into the entire Enron deal abinitio is not a mere exercise in evasion of the responsibility of the State Government to strive for a process of renegotiation of the contract perceived to be loaded against the virtually bankrupt MSEB (which is unable to pay for power purchased from the Dabhol Plant-Phase I); what is involved is a brazen blackmailing strategy through which the State Government perhaps hopes to drive the Enron Corporation down to its knees to settle for an exit course at a substantial discount on its equity stake, estimated at $1.2 billion. The Centre is not blissfully unaware that its own obligation as a surety for the State Government is now seen as an empty promise with all its pervasive adverse image of the country as an undependable and vulnerable investment destination.
The reported remark of the Union Minister for Power, Mr. Suresh Prabhu, that the new twist to the Enron tangle is "unfortunate" but that it would not affect foreign investments in the future, in the power sector in India, is indeed adding insult to injury. 
The script, as it is unfolding in the Enron muddle, can leave nobody in doubt that from the very beginning the contract has had a large element of political manipulation driving it. The allegation that the Enron Corporation was able to manoeuvre itself into a power purchase agreement which was decidedly exhorbitant in power tariff owing to the "padding" of capital cost and the denomination of tariffs in U.S. dollar terms (apart from the use of naptha as feedstock) is said to have been corroborated by the Madhav Godbole Renegotiation Committee set up by the State Government. Assuming that a whole chain of bureaucratic scrutiny from the Power Ministry at the Centre down to the MSEB, over a four-year period, did not unravel the odious features of the Enron contract, how does it exonerate the MSEB, the State Government and the Centre now, from non-compliance with the contract in its different stages? 
Political muck-raking, which is what is now being sought to be substituted by the Vilasrao Deshmukh Government (with the tacit approval of the Congress High Command) for an honourable modusvivendi on the Enron imbroglio, can never pass muster so long as the arbitration clause in the Enron contract cannot be wished away. It would indeed be a reckless misadventure for the Vajpayee Government to let the Maharashtra Government renege on the power purchase agreement with the Dabhol company and simply watch the disintegration of India's first-ever and much-vaunted mega power plant put up on the basis of foreign investment. Given the deplorable inadequacies in the power infrastructure in the country even after ten years of liberalisation and the demonstrated incapacity to add even 5000 MW of power generation capacity a year, it would be utter folly to abandon the Dabhol project without its full capacity of around 2000 MW being leveraged for the industrial advancement of the country. 
Reports indicate that the U.S.-based Enron Corporation has expressed a desire to quit from the Dabhol project. The Indian financial institutions which have a substantial exposure to the capital cost of the project cannot afford to wait in supplication for some miracle to happen for the Dabhol project to stay afloat. It is no less a challenge to them as to the Vajpayee Government to find a way out of the morass. Let the project be revived as an earnest of India's commitment to development rather than be rubbished as a monument of political corruption.


India: Talks on to solve Enron tangle
Our Special Correspondent

09/27/2001
The Hindu 
Fin. Times Info Ltd-Asia Africa Intel Wire. The Hindu Copyright (C) 2001 Kasturi & Sons Ltd. All Rights Res'd 
NEW DELHI, SEPT. 26. Some serious behind-the-scene negotiations are on at the level of the Central Government to resolve the Enron tangle involving the Maharashtra State Electricity Board (MSEB) and the Enron-promoted Dabhol Power Company (DPC). A team of secretaries from the Ministries of Finance, Power, Law and Petroleum with the occasional inclusion of the Chief Secretary of Maharashtra, has been meeting frequently to explore ways to salvage project and to safeguard India's image as a favoured investment destination. 
The core group has had a series of meetings not only with the two parties but also with financial institutions and other interested parties who might consider taking over the power project. However, top sources in the Power Ministry declined to give any details at this juncture, saying it would jeopardise the negotiations.
The Ministry has, however, not taken kindly to the letter by the Enron Corporation chairman, Mr. Kenneth Lay, to the Prime Minister, Mr. Atal Behari Vajpayee, in which he has been critical of the Central and State Governments. "Writing letters will not resolve the problem. If that were the case, the Indian Government too has much to say on the issue, but it would only complicate matters," sources in the Power Ministry said here today. 
The Centre was playing the role of a facilitator and would soon find a solution to the problem as soon as possible, the sources said.


Power rates in some areas expected
Evangeline L. Moises

09/27/2001
BusinessWorld (Philippines) 
Fin. Times Info Ltd-Asia Africa Intel Wire. BusinessWorld Copyright (C) 2001 All Rights Res'd 
Power rates are likely to go up in the coming months as state-owned National Power Corp. (Napocor) tries to recover some P273.21 million in costs. 
In one of the last orders it issued before it was dissolved, the defunct Energy Regulatory Board (ERB) - now known as the Energy Regulatory Commission - allowed Napocor to recuperate about P1.333 billion in uncollected charges covered by Fuel and Purchased Power Cost Adjustments (FPPCA) from March 1996 to December 2000.
But at the same time, ERB ordered Napocor to refund customers in Luzon and Mindanao some P1.060 billion in overcharges during the same period. This leaves Napocor to collect the P273.21- million difference. 
FPPCA is an automatic pricing mechanism that allows Napocor to recover through rate hikes all additional costs arising from changes in fuel costs and the purchase price of power under Napocor contracts with independent power producers (IPPs). 
The ERB order allows Napocor to collect about P1.271 billion from customers connected to the Cebu-Negros- Panay grid. 
A big part of this amount covers uncollected adjustments from Napocor's contract with Philippine National Oil Co.-Energy Development Corp. for the operation of Leyte-Cebu and Leyte-Luzon geothermal plants. 
Napocor is also expected to collect some P4.87 million in fuel price adjustments from customers connected to the Bohol grid. Most of Napocor's power plants in the area use diesel and bunker oil. 
Napocor also stands to collect about P57.15 million from customers connected to the Leyte-Samar grid, as the Leyte-Luzon geothermal plant went on stream last year. 
On the other hand, Napocor is expected to reimburse some P22.34 million to customers in the Luzon grid, and P1.03 billion to customers in the Mindanao grid. 
"During the period March 1996 to December 31, 2000, there were also discrepancies in the purchased power cost adjustment due to the inclusion of two IPP contracts, namely Enron Subic 1 and Marcopper, which have already expired and the inclusion in the computation of the cost of operation and maintenance of several of its leasehold management contracts," ERB said. 
The board also directed Napocor to submit a proposal on how to implement the order before finally billing or reimbursing its customers. 
A Napocor official, who requested anonymity, told BusinessWorld in an interview yesterday that the firm may implement a uniform adjustment on all grids to recover the remaining P273 million. 
The alternative is to either refund or collect from specific grids, in which case the rate adjustments will be gradual, the official said. Customers in the Cebu-Negros-Panay grid will bear the biggest rate adjustments. 
At the same time, Napocor admitted that it cannot do a one-time refund of the entire P1.03 billion to customers in Mindanao given its financial condition.