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2013 Asia Energy Outlook

insight

November 2012 insight 1

Publisher’s Note

Guest Editor’s Note

Martin Daniel

Patsy Wurster

Welcome to the 2012 Asia Energy Outlook issue of Platts Insight. This issue, high-lighted by an assessment of the 2012 Platts Top 250 Global Energy Company RankingsTM by Ross McCracken, Platts editor of Energy Economist, showcases Asia’s resilience in times of economic and political challenges.

In the following pages other distinguished Platts editors review some of those challenges and identify the most promising opportunities for shaping a new energy landscape.

Platts Top 250 Global Energy Company RankingsTM ranks the world’s top energy companies by fi nancial performance, identifi es who’s up and who’s down, who are the fastest growing, and who are biggest upward movers from the previous year. The Rankings also provides a breakdown of the Top 250 by industry and region while offering commentary on trends and movement within the list.

I hope you gain some new insight from this issue! Patsy Wurster Publisher, Platts Insight

“Ill blows the wind that profi ts nobody,” wrote English author William Shake-speare in a particularly blood-stained scene from Henry VI, Pt. 3. And the senti-ment remains just as true 420 years later, in an economic landscape that bears more than a passing resemblance to Shakespeare’s depiction of a society and polity under intense pressure.

Almost every loser has a countervailing winner, Shakespeare was saying. And the articles in this issue of Platts Insight bear this out in their analysis of key devel-opments in the Asian and global energy markets.

Take China’s willingness to take advantage of the opportunities thrown up by the 2008 fi nancial crisis and other global developments, in a story told from dif-ferent angles by Song Yen Ling and Henry Edwardes-Evans. The impact is also evident in Ross McCracken’s analysis of the rise of Chinese and other Asian enter-prises within the ranks of the top 250 global energy companies

The devastating impact of the March 2011 disaster on Japan’s nuclear indus-try also resulted in opportunities with, for example, renewables securing a major boost and a marked acceleration in the evolution of the Asian LNG market.

There are of course exceptions that prove the general rule. Thomas Hogue’s graphic analysis of the South China Sea disputes is a case in point, in a situation which has the potential to be a very ill wind indeed.

What these articles and the others carried here illustrate is that grasping market opportunities is impossible without seeing the whole story and its consequences—and this is where Platts plays an important role day in, day out. We can’t always promise you Shakespearean prose, but we do promise insights and analysis worthy of the bard himself.

Martin Daniel Editor, Platts Power in Asia

2 insight November 2012

Inside

Authors

1 Publisher’s Note Patsy Wurster

1 Guest Editor’s Note Martin Daniel

4 Europe: China’s New Backyard Henry Edwardes-Evans

8 South China Sea: Best Case Scenario Thomas Hogue

12 Crossed Wires: India’s Power Failure Martin Daniel

20 Test Year for Chinese Coal-Based SNG Ross McCracken

26 Coal Weathers the Storm James O’Connell

30 Platts JKM and LNG Spot Contracts Hong Chou Hui

36 Japan Looks to Renewables Martin Daniel

42 China’s Quest for Hydrocarbons Song Yen Ling

50 Asia Gains Traction (Platts Top 250 Global Energy Company Rankings™) Ross McCracken

Martin Daniel

Thomas Hogue Ross McCracken James O’Connell Song Yen Ling

Henry Edwardes-Evans Hong Chou Hui


Martin Daniel read Modern History at Oxford University. After research on economic history there, he joined the Economics Unit of the then British Coal Corporation, following which he became head of the Supply, Transport and Markets Group at IEA Coal Research. He then worked at a UK energy media and consultancy company until 2001 when he joined Platts, where he edits the newsletter Power in Asia. He is an active naturalist, specializing in Asian forest birds.

Henry Edwardes-Evans has a bachelor of arts degree from Oxford University, where he studied English Literature. As a trainee journalist at Financial Times Business, he worked on a number of energy-related publications before being appointed editor of EC Energy Monthly in 1996. Henry launched and edited the FT news-letter Power in East Europe, which subsequently became Platts Energy in East Europe. In 2000, he took over editorship of FT’s fl agship energy newsletter, Power in Europe, now Platts Power in Europe, developing power plant trackers and managing three other highly-regarded Platts newsletter titles—Energy in East Europe, Power UK and Power in Asia.

Hong Chou Hui graduated from the National University of Singa-pore. He is a multiple-award winning news editor and analyst who helped launch Platts’ spot LNG Japan Korea Marker benchmark in 2009. The JKM has grown into Asia’s leading spot LNG index. He has developed further LNG price points for Asia, while overseeing the start of Platts’ LNG market coverage in Europe.

Thomas Hogue is the associate editorial director for Asia, head-ing up and directing Platts’ oil and gas coverage for the region

since September 2010. His work in Asia as reporter and editor has spanned nearly 20 years, during which time he has written about oil and gas for Dow Jones and Bloomberg, covered general business news for The Associated Press, and helped to launch and lead the lifestyle desk for Indonesia’s English-language daily Jakarta Globe. He holds an MA in mathematics from the University of Oklahoma.

Ross McCracken, editor of Energy Economist, joined Platts in 1999 to run the European and West African crude desk. He was previ-ously an editor with an Oxford University-based political and eco-nomic consultancy, and has taught in Poland and China. He holds a master’s degree in European studies from the London School of Economics and his undergraduate degree is from the University of East Anglia.

James O’Connell, international coal managing editor, joined Platts Metals in 2001, covering global precious metals trading. He joined the coal team in early 2007, leading reporters in Europe and Asia producing news for the global coal, electrical and steel industries. He previously worked for Irish broadcaster RTE. He holds a BA in English and History and a Higher Diploma in Applied Communica-tions from the National University of Ireland.

Song Yen Ling is Platts’ chief China correspondent covering up-stream and downstream oil, natural gas and energy policy. Based in Singapore, she joined Platts in March 2012 after over six years with Energy Intelligence, also writing about China’s energy sector. She has a degree in communications from Singapore’s Nanyang Technological University.

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Chinese energy investors moved into Europe in 2012, some seeking long-term asset plays in utility and network operations, others new markets for thermal power generation equipment.

Beyond the value of diversifying into well-established European businesses, Chinese entrants are keen to benefi t from Iberian utility positions in Latin America and hydro/renewable portfo-lios that fi t with their own. Then there is the opportunity to gain fresh insight into European research and develop-ment and benefi t from the chronic need for regulated infrastructure in-vestment.

In return, the Chinese bring much-needed cash, excellent ratings and the ability to raise funds cheaply. Growth may have slowed in their home market but cashfl ow has been strong compared to that of European utilities facing de-mand destruction since 2008.

Political considerations may yet con-strain Chinese incursions into Euro-pean energy interests. In August 2012 both Spanish and UK authorities indi-cated that stakes sold in strategic as-sets would have to remain below cer-tain thresholds. And in one specialist boom market, solar PV, European sup-pliers are seeking anti-dumping mea-sures to stem the tide of Chinese pan-els. Nevertheless Chinese investment already committed in Europe is signif-icant and likely to engender goodwill in economies where, frankly, beggars cannot be choosers.

Hydro MarriageThe China Three Gorges Corporation

(CTG) set the ball rolling in December 2011, defeating rival bids from E.ON of Germany and Brazil’s Eletrobras and CEMIG to take a 21% stake in Energias de Portugal, Portugal’s dominant power utility.

The Chinese company agreed to pay Eur2.69 billion ($3.512 billion) for the stake, a premium of 53% on EDP’s stock price at the time, to become the group’s largest single shareholder.

Beyond the sale price, CTG is to in-vest Eur2 billion in stakes of between 34% and 49% in 1.5 GW of EDP’s re-newable energy capacity—Eur800 mil-lion in 2012 and the remainder by 2015. EDP said 900 MW would be in plants already in operation and 600 MW in ready-to-build projects. Most of the investment is expected to be channelled into EDP’s wind power de-velopment pipeline in the US, Brazil and Europe.

Further, CTG has lined up a commit-ment from an unnamed Chinese bank to provide EDP with up to Eur2 billion in long-term corporate debt with ma-turities of up to 20 years. EDP said this would cover its fi nancing needs by an additional two years, to mid-2015, and should raise earnings per share from 2012 onwards.

Finally, the Chinese group raised the possibility of a supply chain part-nership between EDP and Goldwind, China’s second largest wind turbine

China energy

Europe: China’sNew BackyardHenry Edwardes-Evans, Managing Editor, Platts Power in Europe


China energy

producer, potentially installing a pro-duction plant in Portugal with the ca-pacity to manufacture 800 turbines a year.

But at heart the deal makes most sense because of shared hydro exper-tise. EDP is half way though an ambi-tious program to increase its installed capacity by 42% to 7 GW through the delivery of 2.1 GW of new hydro plant, but has had to delay some fringe proj-ects because of fi nancial constraints. Those constraints may now be lifted.

Strong RatingSpeaking at an investor day in May

2012, EDP executive board member Joao Marques da Cruz underlined the fi nancial benefi ts of having CTG as a key shareholder. “Last time CTG went to the market was in March this year—for seven billion Chinese yuan, the coupon was 4.71%. The conclusion is very strong fi nancials, with access to long term funds,” he said.

The acquisition “marks the begin-ning of the end of a period of massive domestic investment by Chinese utili-ties, who can now use the huge cash fl ow generated to invest internation-ally,” a Lisbon banker close to the EDP/CTG deal told Platts. “EDP now has the funding available not only to weather the medium-term fi nancial storms that will hit Portugal, but also to invest in attractive international projects over the long term.”

The possibility of EDP buying back control of renewables subsidiary EDP

Renovaveis remained a “possibility, but not a priority” for CTG, the Lisbon banker said. Spain’s Iberdrola and EDF of France have already bought back their renewable spinoffs in an effort to lift their growth profi le.

Three Gorges was seen as having made “the best offer in terms of inde-pendence for EDP’s strategy and the de-

leveraging of its balance sheet,” accord-ing to analysts at Banco BPI.

Perhaps aware of political and pub-lic perception issues that have arisen in Spain and the UK, CTG has sought to portray its Portuguese investment as purely commercial, supporting the cur-rent management and saying it would not seek to increase its stake in EDP un-der a ‘standstill’ clause in the acquisi-tion agreement.

This is not to say that the Chinese company is not an active partner in EDP’s investment plans.

Under a joint steering committee and liaison offi ce, the partners have already set up fi ve teams focused on partner-ship execution, co-investment, fi nanc-ing, best practice and special initiatives.

In addition, CTG is looking at invest-ing and participating in EDP’s Venture Capital system to develop technology

Plant Start up date Type MW Output (GWh) Output net of pumping (GWh)

Picote II 2011 Nov Repowering 246 239 239

Bemposta II 2011 Dec Repowering 191 134 134

Alqueva II 4Q 2012 Repowering, pumping 256 381 30

Ribeiradio 1H 2014 New plant 77 134 134

Baixo Sabor 2H 2014 New plant, pumping 171 405 230

Venda Nova III Mid-2015 Repowering, pumping 740 1,337 18

Salamonde II Mid-2015 Repowering, pumping 207 274 81

Foz Tua 2H 2015 New plant, pumping 251 585 275

Total n/a n/a 2,139 3,489 1,141

1. Energias de Portugal’s new hydro program.

Source: Energias de Portugal

Perhaps aware of political and public perception issues that have arisen in Spain and the UK, CTG has sought to portray its Portuguese investment as purely commercial ....


China energy

and innovation, as well as establishing a joint venture for operation and main-tenance.

Premium for REN StakeTwo months after CTG’s deal with

EDP, State Grid Corporation of China took a 25% in Portugal’s transmission system operator Redes Energeticas Na-cionais (REN). The Oman Oil Corpora-tion took a further 15% in a deal that valued the 40% sold by the Portuguese state at Eur592 million.

The Chinese group agreed to pay Eur2.9 a share for 25% of REN, valuing the stake at Eur387 million, a 40% pre-

mium on the February 1, 2012 closing price. State-owned Oman Oil offered Eur2.56 a share for 15% of the Portu-guese group, a premium of 23%.

Portugal’s treasury secretary Maria Luis Albuquerque said the higher pre-mium paid by State Grid refl ected its fu-ture role as REN’s “principal industrial and strategic partner” and the bigger stake it was acquiring.

“This deal opens up China for REN and Portuguese suppliers and will pro-vide technical and fi nancial muscle for the group to develop in Africa and Bra-zil,” a Lisbon-based analyst told Platts. “In return, it will move State Grid fur-ther ahead with its international ex-pansion, with a bridgehead into Europe and Africa.”

State Grid, China’s biggest wires util-ity, has guaranteed fi nance of Eur1 bil-lion, to be provided through the China Development Bank, to help refi nance REN’s debt at competitive rates. The Portuguese group’s short-term refi nanc-ing requirements to 2015 amount to about Eur1.6 billion.

Its offer included large-scale com-mitments to support the expansion of REN in Portugal and overseas. REN is to become a strategic service provider to State Grid in Brazil, with an initial

project due to be launched in 2012.Joint ventures are also to be set up in

the former Portuguese colonies of An-gola and Mozambique. In addition, the Chinese group has agreed to support investment in a research center in Por-tugal and to assist REN in opening up new overseas markets, including China.

State Grid is committed under the deal to help REN build relationships in China, including an initial project in 2012 related to renewable energy, for which REN will be the sole service provider. It is also to help REN in se-curing new trans-European grid inter-connections.

International expansion is a key goal for State Grid, which already owns transmission assets in the Philippines and Brazil. The group is looking at oth-er transmission companies in Europe, including stakes in Spain’s Red Electrica and Enagas, and Ireland’s Eirgrid.

Spain, however, is reported to have already turned down two offers from State Grid for a 20% stake in Red Elec-trica, the fi rst at Eur35 ($43) per share and the second at Eur43 per share. Un-der the company statutes of Red Electri-ca and its gas network counterpart Ena-gas, no individual shareholder with the exception of the Spanish state may hold more than 10% of the company given the strategic nature of the business.

Franco-Sino Bid for HorizonTurning to opportunities in genera-

tion, the Chinese are again active in bidding for west European opportuni-ties. In July 2012 French nuclear en-gineering company Areva said it was considering submitting a joint bid with China Guangdong Nuclear Power Cor-poration for Horizon Nuclear Power, the UK development company being sold by Germany’s E.ON and RWE.

Also reported to have looked at Ho-rizon are Toshiba/Westinghouse and State Nuclear Power Technology Corpo-ration, its Chinese partner in AP1000 technology transfer that is building the fi rst AP1000s at Sanmen and Haiyang.

Horizon is developing proposals to build two nuclear power plants at Wylfa in Ang-lesey and Oldbury in Gloucestershire.

Joint ventures are also to be set upin the former Portuguese colonies of Angola

and Mozambique.


China energy

Areva offi cials called CGNPC “a cen-tral partner for France.” The Chinese utility is building two EPR units at Taishan in China’s Guangdong prov-ince, in a joint venture in which French utility EDF has a 30% stake. The two 1,700-MW units are on target to be the fi rst EPRs to start up, before those at Olkiluoto in Finland and Flamanville in France.

EDF, which is building Flamanville-3, is co-applicant with Areva for Generic Design Acceptance of the EPR design in the UK, and plans to build four EPRs there beginning with Hinkley Point C. At the time of writing a decision on that project was scheduled before the end of 2012.

EDF and Areva are also working with CGNPC to develop a third-generation 1,000-MW-class PWR for the Chinese market. CGNPC and EDF favor develop-ing the Chinese utility’s CPR1000 de-sign, derived from the three-loop PWRs in operation in France. Meanwhile Are-va has sought to promote the Atmea1 PWR, also of around 1,000 MW, it has developed with Japan’s Mitsubishi Heavy Industries.

The UK government has made much of the potential for specialist Chinese nuclear operators to foster competition in the market. Department of Energy and Climate Change offi cials, however, were reported in August to have warned that a Chinese holding in Horizon would be limited to a minority stake due to public and political acceptance issues. Going further, UK Conservative MP Mark Pritchard, a member of the parliamentary joint national security committee, said state-owned Chinese company involvement could create “major security concerns.”

East European ThermalMeanwhile the Balkans’ cash-

strapped utilities and governments are hoping to secure a share of the $10.5 billion in credit lines that Chinese Pre-mier Wen Jiabao announced in April 2012 would be available for investment in infrastructure projects in Central and Eastern Europe.

The single biggest investment thus

far is a Eur1 billion, 500-MW plant that the China Huadian Engineering Company will build at the site of the Rovinari thermal complex in Romania, according to a July statement by the country’s Ministry of Economy. The China Huadian Corporation subsidiary won a tender over a rival bid from Ja-pan’s Marubeni Corporation to build the project. The project will be the fi rst new coal-fi red power plant built in Ro-mania in the last 20 years.

Meanwhile China’s Gezhouba Group International Engineering is preparing

a feasibility study for construction of two coal-fi red units totalling 350 MW in northern Montenegro, according to the country’s Ministry of Economy. “The Montenegrin government and power company EPCG have defi ned the main parameters of the project, while the Chinese experts will structure the project. If an agreement is reached on implementation, the project proposal will be submitted to Montenegro’s par-liament for fi nal approval,” the minis-try said.

Finally in neighboring Serbia, talks are underway with the China National Machinery and Equipment Import & Export Corporation (CMEC) regarding construction of a new 350-MW unit at the Kostolac coal-fi red complex and the possible expansion of the feeder Drmno coalfi eld in eastern Serbia. TPP Kostolac is a subsidiary of the Serbian state-owned power company EPS.

A preliminary agreement has been signed and a fi nal technical proposal for the new unit could be forwarded to the Serbian government for approval before the end of 2012, TPP Kostolac said. Construction of the unit could start as early as 2014 with commission-ing planned in 2018 or 2019. ■

Meanwhile China’s Gezhouba GroupInternational Engineering is preparing afeasibility study for construction of twocoal-fi red units totalling 350 MW innorthern Montenegro ...


If this were a B-grade thriller, a su-per villain would have stolen a nuclear bomb, fi tted it on the end of a string of pipe reaching far below the ocean fl oor in the South China Sea, and threatened to blow up all the oil and gas there unless the six claimants to the area paid up bil-lions of dollars.

The usual cheap and unrealistic com-puter graphic would show the warhead getting closer and closer to a two-toned blob representing the oil and gas, and, of course, if it were a really “smart” thriller, the villain’s devious plan never would have been about blowing up the oil and the gas anyway.

It would have been about driving up oil prices by creating an energy crisis, pushing countries toward greater use of coal or sowing even more distrust among those claiming sovereignty over the seas and starting a war.

Unfortunately, this is not a second-tier Hollywood movie, and an aging Steven Seagal won’t be along to shut down the warhead with seconds to spare and kick the villains all about the place. What we have instead is a situation that’s just as dangerous and volatile and in which the contenders for the prize seem ever ready to poke a fi nger in the eye of the other guy.

That’s how we get naval stand-offs over atolls to the west of the Philippines, com-peting oil and gas licensing rounds off

the east coast of Vietnam, and dueling editorials condemning the latest insults to sovereignty.

Ostensibly, it’s all about territory and national pride. But the surmise of most observers is that it’s also largely about the oil and gas reserves that might be out there—especially considering the energy shortfalls expected over the com-ing years in the world’s fastest-growing economies.

Some estimates put the potential hy-drocarbon resources in the South China Sea at least as high as 200 billion barrels of oil equivalent—with some Chinese estimates running higher—although due to the lack of exploratory drilling there are no estimates of proven oil or gas reserves. But the 200 billion boe fi g-ure would be enough energy to fuel the economies of Southeast Asia and China for decades and, at a monetized value of $100/barrel, represents a $20 trillion treasure.

No wonder countries are loathe to give up any fair claim to the riches.

The mostly hotly contested disputes over the last couple of years have been between China and Vietnam, and be-tween China and the Philippines, al-though Brunei, Malaysia and Taiwan all stake claim to some of the island territo-ries in the region as well.

China itself claims sovereignty over

South China Sea

South China Sea: Best Case ScenarioThomas Hogue, Associate Editorial Director for Asia, Platts

In the South China Sea, the best case scenario is for cool heads and more of the same, because at least that means there hasn’t been an escalation beyond a war of words.


South China Sea

as much as 80% of the South China Sea as outlined by its so-called nine-dashed line, which ropes in the Paracel and Spratly islands as well as island and shoals closer to the Philippines.

One strategy of the Southeast Asian claimants, meanwhile, is to try to buddy up to the US to counter the weight and might of China, and the other is to try to use regional organizations such as the Association of Southeast Asian Nations (ASEAN) and Asia-Pacifi c Economic Co-operation (APEC) to face China on the issue collectively instead of individually.

Neither of those strategies has been particularly effective.

For one thing, while the US keeps call-ing for peace, cool heads and the easing of tension in the region, the State Depart-ment also offi cially makes it clear that it doesn’t back any particular party’s claims.

“Now is the time for everyone to make efforts to reduce the tensions and strengthen diplomatic involvement for resolving these tensions,” Secretary of State Hillary Clinton said on September 9 in Vladivostok, Russia, in a media brief-ing at the American consulate following the APEC-2012 Leaders’ Week meetings. “It’s not in the interests of any of the Asian countries, it’s certainly not in the interest of the United States or the rest of the world to raise doubts and uncertain-ties about the stability and peace in the region,” she said, according to comments posted on the State Department website.

Ironically, some of the most recent heated rhetoric has come out of the US. Lawmakers there in mid-September used harsh words in a hearing held by the House Committee on Foreign Affairs that focused on China’s designs on the region and its growing ability to intimi-date its smaller neighbors.

“While the world’s attention was turned to other crises, including Iran’s nuclear program and concerns over the faltering Euro, China has upped the ante, playing the role of a schoolyard bully towards its maritime neighbors,” Committee Chairwoman Ileana Ros-Lehtinen, Republican-Florida, said in an opening statement.

Even that rough language was followed by the adoption of a bill expressing the

sense of the Congress that the US should strongly support “peaceful resolution of maritime territorial disputes in the South China Sea, the Taiwan Strait, the East China Sea, and the Yellow Sea and pledge continued efforts to facilitate a collaborative, peaceful process to resolve these disputes.”

The non-binding resolution also con-demns the use of force by China and supports the role of the US military to defend navigation and air space rights in the area. But it’s clear that the US and other interested parties would like to see the regional claimants work their way to a peaceful solution on all the disputes.

While China has stressed that it has no plans to disrupt shipping in the area and is committed to free navigation through the disputed waters, its standard response to any other claims in the South China Sea is that there is no questioning its sov-ereignty over the region or over other ar-eas that are in dispute with Japan.

The standard Chinese line is that there is “plentiful jurisprudential and his-torical evidence” of China’s sovereignty over South China Sea islands and waters, as well as over the Diaoyu or Senkaku is-land that are in dispute between China and Japan.

Members of ASEAN—most of whom are not claimants to the seas—are wor-ried not only that tension between China and the other contending parties might break out into war, but that things might simply escalate to the point where ship-ping lanes through the seas are affected.

Singapore’s Prime Minister Lee Hsien Loong might have been speaking for all of ASEAN when he said in a pre-APEC speech on September 6 at the Central Party School in Beijing: “Trade is the lifeblood of our economy. Our foreign trade is three times our GDP. Freedom of navigation is therefore a fundamental interest, especially along our sea lanes of communications.”

He went on to say: “Therefore the South China Sea is strategically impor-tant for our survival and development. However the South China Sea disputes play out, freedom of navigation must be maintained. Ships of many nations use the South China Sea, so I am sure these


South China Sea

countries would share Singapore’s con-cern on this point.”

Lee, however, was also clear that Singa-pore was “not a claimant country, take(s) no sides in any of the territorial disputes, nor can (it) judge the merits of the vari-ous claims.”

He was just as clear that ASEAN should remain unifi ed in its dealings with China on the issue. This did not happen in July 2012 in Cambodia, when the group could not agree on the language for a joint state-ment on the development of a code of conduct for the South China Sea.

“For ASEAN not to address [the issue] would severely damage its credibility,” Lee said. “ASEAN must not take sides on the various claims, but it has to take and state a position which is neutral, for-ward-looking, and encourages the peace-ful resolution of issues.”

“We also hope that ASEAN and China will start talks on a Code of Conduct soon,” Lee said.

China, however, has been adamant that ASEAN and other regional organi-zations are not the “proper” forums for dealing with the territorial disputes. It wants to deal with its counter-claimants on a bilateral basis instead of dealing with any collective grouping, and fre-quently makes statements to that effect, as well as telling other countries that the territorial issues are China’s to work out with its neighbors.

That was its clear response to ASEAN in July, and also during the recently con-cluded APEC meetings, where China’s president Hu Jintao declined to meet with his Philippine counterpart, al-though Hu did meet with Vietnamese president Truong Tan Sang.

“As we all know, since its inception in 1989, APEC is an organization to discuss economic cooperation issues instead of political issues or territorial disputes,” said La Yifa, director general of the De-partment of International Organizations and Conferences, a division of China’s Foreign Ministry, in a press briefi ng dur-ing the APEC week in Vladivostok.

Nevertheless, some hope that econom-ic cooperation and integration such as that advocated by APEC will eventually lead countries toward peaceful resolu-

tions to regional territorial disputes, if only by putting a positive example be-fore the contending parties.

That was a point made on September 8 in Vladivostok by Yutaka Yokoi, press secretary for Japan’s Ministry of Foreign Affairs. He said that APEC economic integration might eventually make countries realize that “if you have any dispute, it will just hinder your [com-mercial] cooperation.”

Asked if there was any concrete progress in this direction during the week’s meet-ings, he said: “This is not easy, but we try.”

On the other hand, Yutaka also dem-onstrated just how entrenched a position countries can outline for themselves over some of the disputed territories. Ja-pan is involved in three territorial dis-putes of its own, with China, Russia and South Korea.

“Senkaku is an integral part of Japan, based on international law and historic facts,” he said, in response to a question about the dispute over the islands that China calls the Diaoyu islands.

The classic solution that observers like to throw out as the most rational solution to maritime disputes is that reached by Malaysia and Thailand over a disputed section of the Gulf of Thailand, in which the two countries recognized the ter-ritorial claims as intractable and agreed to joint commercial development while putting the question of sovereignty aside.

But, so far, none of the claimants in the South China Sea or other East Asia waters have seemed willing to accept that as an approach.

As Singapore’s Lee said in his speech: “Sovereignty disputes are complex and hard to resolve. No side can easily aban-don their claims without high political costs. The many overlapping claims by multiple claimants in the South China Sea are unlikely to be resolved any time soon. Hence in Singapore’s view, the in-volved parties must manage the disputes responsibly. All sides should avoid esca-lating tensions or precipitating confron-tations that will affect the international standing of the region.”

And given recent events and state-ments, that’s likely the best that can be hoped for in the foreseeable future. ■


The grid failure that affected much of India at the end of July 2012 was un-precedented in scale. More than half of India’s 1.2 billion people were without electricity after the northern regional grid collapsed on July 30, followed by the failure of the eastern and northeast-ern grids the next day.

While unprecedented in scale, the failure was not unprecedented in occur-rence. And while the immediate causes may differ, power transmission failures in India, the rest of Asia and beyond re-sult from the same underlying problem—insuffi cient transmission, generation or power station feedstock capacity caused more often than not by inadequate fund-ing and price signals in electricity mar-kets where prices refl ect the priorities of politicians rather than input costs.

BackgroundAn enquiry into the grid failures or-

dered by the power ministry and pub-lished in mid August found that “that no single factor was responsible for grid dis-turbances [but] identifi ed several factors which led to the collapse of the power systems on both the days.” The fac-tors included weak inter-regional links due to multiple outages of transmission lines, which effectively left the 400-kilo-volt Bina-Gwalior-Agra line as the only available line; overloading of this line by unscheduled withdrawals by north-ern region utilities, while some western utilities were under-drawing power; the failure to stop this continuing by state-level authorities; and the tripping of the link and subsequent grid collapses.

The problem of unscheduled with-drawals is far from new with some In-dian states persistently drawing more power from the grid than their alloca-tion, in spite of warnings from the re-gional load dispatch centers (RLDCs). The fi ve RLDCs come under the Nation-al Load Dispatch Center and coordinate the activities of the dispatch centers in individual states.

On July 10 the country’s Central Elec-tricity Regulatory Commission had, at the behest of the Northern RLDC, directed utilities in the northern states to stop overdrawing power if frequency fell below 49.5 Hertz. This came after June month data submitted by the Northern RLDC showed that frequency fell below 49.5 Hertz for 70% of the time on some days.

But data from the Northern RLDC showed the excessive drawdown contin-ued after July 10 and up to the time of the outage.

This was not surprising. Local analysts have pointed out that the RLDCs lack in-dependence and fail to disconnect states that draw excessive power from the grid, particularly if they are governed by rul-ing political parties or their allies.

The position of the RLDCs is further weakened by the fact that the main pen-alty for unscheduled withdrawals is to charge a higher price for the power than normal. However, the penalty charges can be less than the cost of buying elec-tricity from the spot market.

While state indiscipline in power with-drawals from the grid may have been the immediate cause of the grid failure, it merely refl ected underlying problems

India

Crossed Wires:India’s Power FailureMartin Daniel, Editor, Platts Power in Asia


India

in the market. On the demand side these center on the fact that Indian electricity consumption consistently and substan-tially exceeds available supplies, espe-cially at peak periods.

The gap between peak demand and sup-ply across India in the fi nancial year end-ing March 31, 2012 was 11.1%, up from the 10.3% reported by the government-run Central Electricity Authority (CEA) for the previous fi nancial year. The short-fall varied across India, with the southern and western regions seeing the highest defi cits at 15.6% and 13.8%, respectively, compared with a relatively modest gap of 3.7% in the eastern region.

The shortfall at peak periods was par-alleled by the inability to meet electric-ity demand overall. For the year ending March 2012 Indian electricity require-ments were 936.57 TWh, according to the CEA, whereas the available supplies were 8.5% lower at 857.24 TWh.

Moreover, the shortfalls exclude sig-nifi cant suppressed demand, since a large proportion of the population does not have access to grid electricity. About a third of India’s 246 million households did not have access to grid electricity in March 2012, according to the latest cen-sus data, with the fi gure rising to 45% for the 168 million rural households.

Conversely, existing electricity con-sumption is in some respects higher than it should be. This refl ects the fact that many customers get electricity at below cost and in cases for free—with agricultural consumers in some states being notable in this regard—under a system where retail electricity prices are set by state agencies and regulators rath-er than by market mechanisms.

The below-cost provision of a large proportion of electricity supplies means that some consumption is not economi-cally justifi ed. The situation is exacer-bated by high technical and economic losses in much of the country, with losses resulting from aging and poorly-maintained wires networks being com-pounded by power theft.

The upshot is that sales revenue is in-suffi cient for many state power distribu-tion and supply utilities to meet their op-erating, let alone fi nancial costs, with the debt burden of most utilities mounting fast. A late 2011 government-sponsored report on the utilities put their combined losses in the year to March 2011 at Indian Rupee 277.6 billion ($5.2 billion). Worse still, average costs and revenues were es-timated at the equivalent of $90/MWh and $70/MWh, respectively in the year ending March 2010, when average trans-mission and distribution losses were put at 27.15%.

Supply-Side IssuesNone of this means that the strong

recent and projected growth in Indian electricity demand is unjustifi ed. But the fi nancial woes of the state power utili-ties—which are the wholesale buyers and onward retailers of the great majority of power in India—do have implications for the electricity sector’s ability to invest in new transmission and generation capaci-ty or pay the market rate for fuel supplies for fossil energy-fi red generating plants.

R V Kanoria, the president of the Feder-ation of Indian Chambers of Commerce and Industry, has summarized the sup-ply-side issues as follows: “While main-taining grid discipline is important, we

Region Peak demand MW

Peak supply MW

Defi cit MW

Defi cit %

Requirement TWh

Availablilty TWh

Defi cit TWh

Defi cit %

Northern 40,248 37,117 3,131 8 276 258 18 6

Western 42,352 36,509 5,843 14 290 257 33 11

Southern 38,121 32,188 5,933 16 260 237 23 9

Eastern 14,505 13,971 534 4 99 95 5 5

Northeastern 1,920 1,782 138 7 11 10 1 10

National 130,250 115,847 14,403 11 937 857 79 9

1. Indian electricity demand in year ending March 2012.

Source: Central Electricity Authority, India


India

[must] ramp up capacity in the power sec-tor,” he said after the grid failure, adding that “reforms that would help make coal and gas available as per the nation’s re-quirement must no longer be held back.”

India has in fact added a substantial amount of generating capacity in recent years. In the year ending March 2012 a record 26,250 megawatts (MW) was com-missioned, with grid-connected capacity nationwide now exceeding 200,000 MW. The capacity installed at the end of March 2012 included 112,022 MW of coal, 18,381 MW of gas and almost 1,200MW of oil-fi red plant, as well as 38,990 MW of hydroelectric, 24,503 MW of renewable and 4,780 MW of nuclear plant.

By region, western India hosted most capacity at 64,394 MW, followed by the northern region with 53,925 MW and the

south with 52,740 MW. In terms of own-ership, private investors held 54,276 MW of the capacity installed at March 2012, while central government-owned enter-prises held 59,682 MW and state-owned companies operated a further 85,919 MW. The privately-owned capacity includes in-dependent power producer and merchant projects, but not the 30,000 MW and more of captive generating plant.

The impact of the recent increase in capacity can be seen from the CEA’s analysis of Indian electricity generation in June 2012, which at 76.31 TWh was 8.1% higher than in June 2011—an im-pressive year-on-year increase by Indian standards. With hydroelectric output down 5.5% on year due to depleted dam water levels against the background of low rainfall, fossil-fueled generation rose

TWh % on year % of total

Coal 52.78 16.75 69.2

Lignite 2.69 18.58 3.5

Gas 6.26 -20.28 8.2

Liquid 0.01 -84.31 0.1

Diesel 0.16 -0.05 0.1

Nuclear 2.72 8.83 3.6

Hydro 11.23 -5.47 14.7

Imports 0.44 -29.68 0.6

Total 76.31 8.08 100

2. Indian power generation in June 2012.


Coal Lignite Gas Liquid Diesel Nuclear Hydro Imports

3. India power generation by fuel.



India

11.37% from June 2011 to 61.91 TWh in June 2012, within which coal and lig-nite-fi red production was up more than 17% on year at 55.47 TWh.

Fuel Supply IssuesHowever, while coal-fi red generation

was well up on year it could have been higher, with the CEA noting that the 33 million metric tons (mt) of available coal during the month of June was only 82% of power plant requirements. The situa-tion for gas-fi red plants was even worse, with national gas shortages meaning that the 6.26 TWh of output in June 2012 was 20.28% lower than in June 2011.

This situation continued into July, with the CEA observing that just prior to the grid failure more than a fi fth of the 180,361 MW of grid capacity that it moni-tors was not operating. While 12,433 MW was closed for scheduled maintenance or other reasons on July 29, a further 27,032 MW was offl ine because of forced outages.

Ashok Khurana, the director general of the Association of Power Producers (APP), amplifi ed the position by noting that 35,000 MW of coal-fi red plant was working at less than 40% of its design capacity due to the lack of coal supplies and more than 9,000 MW of gas-based plant—about half the national total—was idle because of the lack of gas. On top of that, he noted that fi rm fuel sup-ply agreements remain to be signed for another 55,000 MW of plant which is scheduled to enter operation by 2015.

While both fuels fall short of demand, there are signifi cant differences between the problems confronting the Indian coal and gas supply sectors. On the coal front, new mines being developed both by state entities such as the central government-owned Coal India Limited (CIL) and by private investors on a cap-tive mining basis have been heavily de-layed or cancelled.

This is a result of changes to, and more stringent enforcement of, policies re-lated in particular to securing environ-mental approvals. Land and water avail-ability issues are also becoming acute for coalmine developers.

As a result the annual output of CIL, one of the world’s largest coal miners, has

been stagnant against the background of surging demand. CIL’s output rose only 1% to 435.8 million mt in the year to March 2012, following unchanged pro-duction the previous year.

The problem can be seen from the fact that 34,373 MW of coal-fi red capacity was commissioned in India in the three years to March 2012. That amount of capacity would require some 70 to 100 million mt of coal each year, whereas CIL added only 32 million of annual production in total over the same period.

CIL delivered 311 million mt of coal to power plants in the year ending March 2012, about three-quarters of the elec-tricity generation sector’s 417.56 million mt of coal consumption for the year. While CIL is targeting the delivery of about 36 million mt more in the year ending March 2013, this is well below potential requirements.

Private production of coal from re-sources dedicated to supplying specifi c generation projects on a captive basis is even worse placed—while 57 blocks have been awarded to private power gen-erators since 2004, only one has started production. Moreover, the award of the blocks faces legal and fi nancial scrutiny following the publication of an audit by the Comptroller and Auditor General of India in August 2012, meaning that power plants with 18,300 MW of capac-ity face likely further delays.

On the domestic gas supply front, the shortages center on problems facing the KG-D6 block off the coast of Andhra Pradesh state. Production from what was expected to be India’s biggest gas pros-pect by far had reached 61 million cubic meters per day in 2010.

But instead of then rising to 80 mil-lion cu m/d by April 2012, as envisaged in the fi eld development plan, produc-tion has fallen to about half this level because of the geological complexity of the gas reservoir.

Moreover KG-D6’s operator, the local Reliance Industries Limited, has pro-jected that the fi eld’s production will fall further to 22 million cu m/d by 2014. This is less than the 32 million cu m/d then allocated from the block to the power sector alone.

India


The collapse in KG-D6 production has dragged down overall Indian gas pro-duction. In the year ending March 2012 total gas output fell by 8.9% on year to 47.549 billion cubic meters, or around 130 million cu m/d.

The country’s gas-fi red plants require about 82 million cu m/d of gas to run at 90% capacity, but were getting less than 53 million cu m/d in early 2012. And the power ministry has said that availability is likely to drop to 28 million cu m/d in the year ending March 2014, with the average load factor of India’s gas-fi red plants having already fallen from 62.46% in June 2011 to 46.86% in June 2012.

Not only are many operating gas-fi red plants working at a low load factor, but much of the sizeable amount of plant under construction has no committed gas in spite of having signed fuel supply agreements. This has led to an effective moratorium on the approval of new gas-fi red capacity, at least where based on indigenous gas supplies, with the power ministry seeing no approvals until at least 2015 unless the situation changes.

Imports to the Rescue?The problems facing India’s domestic

gas and coal industries are multifarious and only partly refl ect the fact that they sell their output to generators at regulat-ed and low prices. But the low domestic feedstock prices do mean the fi nancially-pressed power utilities are unwilling to replace electricity generated from indig-enous supplies with that produced from imported coal or liquefi ed natural gas, whose market-set prices were respectively about double and triple those of indige-nous supplies in mid 2012.

CIL has thus been unwilling to accede to government requests that it should import coal to meet the shortfall in do-mestic supplies unless the onward sales are at international prices rather than the regulated prices paid by generators. It has been suggested that this could in-volve some form of pooling of domestic and imported coal prices to spread the cost of higher-priced imports across all power producers.

But the generators argue that state utilities would rather impose power cuts

than buy electricity at the higher prices resulting from the use of imported coal. Evidencing this, the APP has pointed out that distributors have not bought all the electricity offered through the country’s power exchanges, which for much of 2012 has cost more than that supplied under long-term contract, in spite of the shortfall in national electricity supplies.

Generators with fi rm long-term fuel supply contracts are also unwilling to lose their lower-priced supplies, arguing that they receive fi xed power sales tariffs predicated on the contract prices. And several states, including West Bengal, Chhattisgarh, Haryana and Gujarat, said in mid August that they would not pay more for power generated from domestic and imported coal where priced partly against international benchmarks.

The aversion to letting imports fi ll the widening gap between coal and gas re-quirements and domestic fossil fuel sup-plies applies in spite of the fact that, in terms of geography, India is one of the best placed international energy import-ers. It is located between the Gulf and Southeast Asian LNG exporters, among others, while it is well positioned to draw on thermal coal supplies from South Af-rica, Indonesia and elsewhere.

Resolving the fuel supply problems will be essential if Indian electricity demand forecasts are to be met. The base case pro-jections in the CEA’s National Electricity Plan issued in early 2012 see peak demand reaching 199,540 MW and consumption rising to 1,355 TWh in the year to March 2017, before rising to 283,470 MW and 1,905 TWh in the year to March 2022.

About 210,000 MW of new capacity is planned to enter operation in India be-tween April 2012 and March 2022, ac-cording to the CEA, with 98,190 MW due to be built in the fi ve-year period starting April 2012. But because of the moratorium only 1,086 MW of new gas-fueled capacity is planned by March 2017, with no new gas-fi red additions thereafter, whereas 66,600 MW of identi-fi ed coal-fi red plant is planned by March 2017, with a further 49,200 MW due to be added by March 2022.

The projected additions to March 2017 also include 18,500 MW of renewable,

India


9,204 MW of hydroelectric and 2,800 MW of nuclear plant, with private in-vestors expected to install about 50% of the total capacity and the overall in-vestment cost put at $120 billion. The 109,700 MW of capacity tentatively planned for installation from April 2017 to March 2022 also includes 18,000 MW of nuclear, 12,000 MW of hydroelectric and 30,500 MW of renewable energy-based plant, with the latter including 16,000 MW of solar and 11,000 MW of wind turbine capacity.

The projections also assume that hy-droelectric power imported from neigh-boring Himalayan countries such as Bhutan and Nepal will reach 1,200 MW by March 2017 and 8,040 MW by March 2022. In the high gas case they also as-sume, that if gas became available, a fur-ther 25,000 MW of identifi ed gas-fi red plant could be built by March 2017—this would take gas supply requirements then to 188.4 million cubic meters per day compared with 98 million cu m/day in the base case.

Given the emphasis on additional coal-fi red plant, CEA has unsurprising-ly fl agged up the fact that coal supply issues are of particular concern. It has projected power station coal require-ments in the year ending March 2017 at 842 million mt.

After taking into account the antici-pated output from CIL and other state-owned entities such as Singareni Collier-ies, as well as production from captive coal blocks, CEA anticipates that 164 million mt of imports will be needed to cover a shortfall in domestic supplies.

Moreover, this is in addition to the 54 million mt of overseas coal needed for power stations specifi cally designed to run on imported coal, giving an overall import requirement of 218 million mt.

Recent TrendsWhether India will achieve its ambi-

tious targets for capacity additions is a moot point. Power purchasers with poor creditworthiness together with severe power station fueling issues do not offer an attractive framework for investment in new generating capacity.

The problems are apparent from a Platts’ analysis of project activity throughout Asia in the fi rst half of 2012. This found that while there was signifi cantly less ac-tivity in Asia as a whole during the fi rst six months of 2012 compared with the same period of 2011, the difference was more than accounted for by plummeting activity in the Indian market.

The analysis, which uses data from the project tracker published monthly in Platts’ Power in Asia newsletter, is an aggregation of individual projects which are included in the tracker for a particular period only when they pass key milestones in the project develop-ment pipeline (as opposed to the much larger number of total projects under de-velopment in Asia). The analysis found that just over 103,800 MW of capacity registered a change in status throughout Asia in the fi rst half of 2012—down 11% compared with the same period of 2011.

However, the fall in activity across Asia was more than accounted for by the near-halving of Indian activity. At

20,000

40,000

60,000

80,000

100,000

120,000

1997-2002 2002-2007 2007-2012 2012-2017 2017-2022

MW

Coal Gas Diesel Nuclear Hydroelectric Renewables

4. Indian actual and planned capacity additions.



India

19,558 MW, activity was down from the 38,174 MW registered in the same peri-od of 2011, with reduced activity at all points in the project development pipe-line apart from that of capacity entering operation.

Thus almost no capacity was reported to have started construction in India during the period, while the amount of capacity which was announced or se-cured government and company approv-als fell by more than a half and about four-fi fths, respectively. Meanwhile the amount of Indian capacity signing equipment or engineering, procurement and construction (EPC) contracts was down on year by about a third in the fi rst half of 2012.

India was not alone in registering a decline in activity with China, for in-stance, also showing signifi cantly less activity in the fi rst half of 2012 than in the same period of 2011. However, there were differences across the project de-velopment pipeline and between fuels, with the dearth of Indian gas-fi red activ-ity not repeated in China.

In this respect the analysis found a notable difference at the Asia-wide lev-el between activity in the fi rst halves of 2011 and 2012—in the latter pe-

riod much more gas-fi red capacity was predicated on the use of imports, or im-ports in combination with indigenous gas supplies, than on domestic supplies alone. Across Asia, about 47% of the gas-fi red capacity had been predicated on the sole use of indigenous supplies in the fi rst half of 2011, whereas the fi g-ure dropped to 22% in the same period of 2012.

A similar Asia-wide trend was appar-ent for coal, with more generators ap-pearing to seek multiple sources of fuel for their projects. But India was again an exception to the rule, with slumping Indian activity one of the main reasons why there was a reduction in the overall amount of activity in the coal-fi red gen-erating sector and especially in plants predicated solely on domestic supplies.

Across Asia, the amount of coal-fi red capacity changing status throughout the project development pipeline fell from 61,371 MW in the fi rst half of 2011 to 57,265 MW in the same period of 2012, according to the Platts analy-sis. However, the fall was more than accounted for by a reduction in the amount of announced capacity, which dropped from 14,100 MW in the fi rst half of 2011 to 8,480 MW in the same

Announced Approved Contract signed Construction Operation Total

Coal - domestic 12500 10450 11018 6440 3760 44168

Coal -imported 1600 2600 8388 1400 960 14948

Coal - both 0 800 135 1320 0 2255

Oil 370 150 505 100 560 1685

Gas - local 0 3412 4018 806 1132 9368

Gas - LNG 1900 700 1013 570 0 4183

Gas - either 1600 1422 2966 510 0 6498

Oil/gas 150 0 0 560 0 710

Hydro 0 3399 5362 5253 1030 15044

Nuclear 3590 2000 0 0 0 5590

Wind 806 809 2536 1026 700 5877

Solar 2040 352 229 735 0 3356

CSP 200 0 0 0 0 200

Geothermal 302 455 171 0 0 928

Other 50 0 0 0 0 50

Total 25108 26549 36341 18720 8142 114860

5. Asian projects changing status in the fi rst half of 2011 by fuel, MW.

Source: Platts

India


period of 2012, with the drop in Indian activity again prominent.

The analysis thus indicates that on current trends India could fail to meet its ambitious program for adding gen-erating capacity during the coming de-cade. With limited potential for adding hydroelectric, renewable and nuclear plant, it will be reliant on building more fossil-fueled capacity.

This effectively means building much more coal-fi red capacity, unless the moratorium on gas-fi red capacity is lifted. But with the indigenous coal and gas industries both facing problems, and an aversion on cost grounds to the use of imported fossil energy, building and fueling the capacity will be a big ask, unless there is a thoroughgoing program of market liberalization and price reform.

ConclusionsMajor grid failures can have a pivotal

impact on electricity markets. Blackouts are unpopular with voters and investors, and have on occasion led to major shifts in national electricity policies. Witness the severe blackouts in Malaysia in the early 1990s, which led to the shift from monopoly state electricity provision to

the generation of a large part of electricity by independent power producer plants.

Whether the July 2012 outages will have a similar transformative impact on India’s electricity sector remains to be seen. Ownership of Indian electricity and energy assets is divided between na-tional, regional and state entities, with their operation being less than seam-less as a result of the plethora of agen-cies and companies existing even at the same level.

Reform of the sector would thus re-quire root and branch restructuring for which the political will and, perhaps more pertinently, parliamentary support remains unclear. And the track record is not promising since, while India has enacted sweeping energy market reforms over the past two decades, implementa-tion of many of the measures has been patchy at best.

At root, though, the outcome will de-pend on popular support for the mea-sures and there is certainly consider-able public outrage over the grid failure which will result in some form of action. But how effective the actions are will depend primarily on whether the same public is willing to pay an economic price for its power. ■

Announced Approved Contract signed Construction Operation Total

Coal - domestic 3580 2835 7370 0 4875 18660

Coal -imported 3500 11298 6820 0 800 22418

Coal - either 1400 5732 4940 1200 2915 16187

Oil 0 306 0 0 0 306

Gas - domestic 500 1900 1537 0 550 4487

Gas - imported 2376 0 6000 0 251 8627

Gas - either 450 4514 2587 0 0 7551

Oil/gas 450 0 800 0 339 1589

Hydro 9954 1300 1740 0 901 13895

Nuclear 0 0 0 2800 650 3450

Wind 1000 829 377 420 1028 3654

Solar 470 266 968 5 387 2096

CSP 0 0 250 0 0 250

Geothermal 5 440 0 130 0 575

Other 0 0 60 0 0 60

Total 23685 29420 33449 4555 12696 103805

6. Asia power trends in the fi rst half of 2012, MW.

Source: Platts


While China’s shale gas prospects have grabbed the headlines recently, less attention has been paid to the coun-try’s efforts in coal gasifi cation. Coal is China’s number one hydrocarbon re-source and the Chinese coal industry is the largest in the world. Further exploit-ing the country’s reserves, particularly coals unsuitable for power generation or inaccessible with traditional mining techniques, provides China with an ad-ditional means of offsetting its growing import dependency on oil and gas.

The syngas produced by coal gasifi ca-tion is versatile. It can be used as a direct burn energy source for power and heat, or be upgraded to Synthetic Natural Gas that can be fed into existing natural gas pipelines. It can also be used to make chemicals and via Fischer-Tropsch pro-cesses into liquid fuels.

There is also an environmental angle. Coal gasifi cation allows pre-combustion separation of carbon dioxide from the syngas, which is cheaper than current

methods of post-combustion separation from power plant fl ue gas. As a result, coal gasifi cation reduces the overall cost of Carbon Capture, Storage. However, for coal gasifi cation to be classifi ed as low carbon it must be combined with CCS, an as yet unproven and economi-cally challenging process.

Supply Contribution According to data from the state-

owned China National Petroleum Cor-poration, China’s annual gas demand is expected to rise to 350 Bcm by 2020 and 550 Bcm by 2030 from 130 Bcm in 2011. Other forecasts suggest demand could top 400 Bcm by 2020, while estimates made by the National Development and Reform Commission’s Energy Research Institute last year put the 2020 fi gure lower at 270-330 Bcm.

China has contracted for imports of Central Asian pipeline gas to rise to 65 Bcm/yr by the end of the decade and ex-pects to receive a further 12 Bcm/yr from

China energy

Test Year for Chinese Coal-Based SNGRoss McCracken, Editor, Platts Energy Economist

Coal-based Synthetic Natural Gas production in China may be on the brink of a step-change in the industry’s development. New projects coming on-stream this year promise the start of commercial scale production, moving the sector away from its traditional base in chemicals. SNG could provide a signifi cant contribution to the country’s gas supply, one that may outstrip shale gas in both quantity and timing.


China energy

Myanmar by pipeline. Domestic output is expected to double between 2009 and 2020, with unconventional gas sources playing a key role. Based on the NDRC fi gures—which are at the conservative end of the spectrum—LNG should be able to fi ll the gap between expected sup-ply and demand in 2020.

It is unclear where SNG sits within this framework. CNPC does not appear to take SNG production into account, focusing instead on conventional gas, tight gas, shale gas and coalbed meth-ane. US bank JP Morgan provides a mod-el which assumes Chinese gas demand of 400 Bcm in 2020, but specifi cally omits SNG production, owing to the technical, economic and infrastructural risks as-sociated with the sector’s development. However, the bank does see a potentially signifi cant additional contribution to China’s domestic gas supply from SNG, one currently not incorporated within the bank’s models.

Existing Gasifi cation China already produces signifi cant

amounts of coal gas, but the syngas pro-duced is used almost entirely in the chem-icals industry. Of total installed capacity, 66 of 69 gasifi cation facilities are directed towards syngas for chemicals production, representing 95% of syngas output by nameplate capacity, according to the Gas-ifi cation Technologies Council database.

The predominant gasifi cation feedstock is coal, which accounts for 55 projects or 89% of syngas output capacity. The remainder is made up primarily of pe-troleum residues, where there has been

a marked slowdown in new projects, the last being built in 2009 and the one be-fore that in 2003. However, 2012 should mark a new direction for the gasifi cation sector in China, with the start up of two projects designed to produce upgraded gas that can be put into natural gas pipelines.

JP Morgan’s research lists 15 coal gas-ifi cation projects under construction in China through to 2016. If fi rst phase completion is achieved under the time-tables described, total SNG output would reach 21.24 Bcm/yr of pipeline qual-ity gas by 2016. If full target capacity is reached, coal gasifi cation could sup-ply 89-96 Bcm/yr, not far short of 25% of total gas demand in 2020. According to the World Clean Coal Week confer-ence total projects under construction, planned and proposed amount to some 150 Bcm/yr gas, although many of these projects are unlikely to be realized.

The fi rst two commercial coal gasifi ca-tion projects are Qinghua Coal Group’s project in Yili, Xinjiang. First phase ca-pacity is 1.38 Bcm/yr, rising eventually to full potential capacity of 5.5 Bcm/yr, al-though the timeline for future expansion is unclear. The second project is Xinjiang Guanghui’s 0.5 Bcm/yr capacity plant, also in Xinjiang. Four more projects are slated for completion in 2013, two in In-ner Mongolia and two more in Xinjiang. Combined, these represent fi rst-phase ca-pacity of an additional 7.36 Bcm/yr, with scope for expansion to 22 Bcm/yr.

Although it is hard to assess the timing of project completion, as many of the proposed projects lack approvals, as well as likely operational levels, there have

25

50

75

20112007200319991995199119871983

Gas Petroleum Coal

1. Number of Chinese gasifi cation projects by feedstock (cumulative).

Source: Gasifi cation Technologies Council


China energy

been some concrete developments in ad-dition to the two plants expected to start up this year. The China Power Invest-ment Corporation’s 2-6 Bcm/yr project in Yili, for example, which is expected to produce fi rst SNG in 2015, has eight coal gasifi ers on order from Siemens En-ergy. Each gasifi er uses up to 2,000 tons of coal a day.

Transportation A notable aspect of these projects is

the high level of involvement in the SNG upstream of coal and power com-panies rather than China’s traditional oil and gas producers. However, China’s big state oil and gas companies do have a crucial role to play. Producing potential-ly large volumes of SNG in Inner Mongo-lia and Xinjiang—areas far from China’s demand centers—means the gas has to be piped long distances to consumers. Neither the coal nor power companies involved have the capacity to build the necessary pipelines.

Sinopec announced last year that it would invest in two pipelines with to-tal transmission capacity of 30 Bcm/yr to transport coal-based synthetic gas to China’s eastern coast. The fi rst will be 7,373 kilometers long and link Xinjiang with Guangdong and Zhejiang provinc-es. The expected cost is over Yuan 130 billion ($20.4 billion), including fi ve trunk lines. The second pipeline will also start in Xinjiang and run to Shandong and Jiangsu provinces, spanning over 4,463 km. The pipelines are expected to be operational by 2015.

Sinopec said that the longer pipeline

would serve 13 provinces and municipali-ties including Gansu, Ningxia, Shaanxi, Shandong, Jiangxi, Zhejiang, Guangdong and Fujian, while the second pipe will pass through seven major areas, including He-han, Anhui, Tianjin, Jiangsu and Beijing.

Sinopec signed a deal with the Xinji-ang government and nine local compa-nies—including state power company Huaneng—in December to procure syn-thetic gas for the pipelines. Of the 15 projects listed by JP Morgan that are ex-pected to complete by 2016, seven are in Xinjiang, with one each in Shanxi and Gansu, which could be connected to the longer of Sinopec’s two proposed pipes. Sinopec is also interested in SNG produc-tion itself and has a project in Xinjiang which is slated to start up in 2015—the same schedule as for the pipeline—with capacity of 8.0 Bcm/yr.

Sinopec’s Xinjiang SNG pipeline project was reported by local media to have been submitted to the NDRC for approval in August 2011. The pipeline appears to have fi rst been proposed in 2009, but no mention is made of it in the group’s 2011 annual report as a company priority. It is not clear wheth-er it forms part of the blueprint for the natural gas sector under the 12th Five Year Plan, which was submitted for ap-proval by the NDRC to the State Coun-cil in May, but has yet to be publicly released. SNG production comes under the chemical coal sector in the 12 th Five Year Plan, which was released in March. It only mentioned that syngas from coal should be developed but did not specify any output targets.

25

50

75

20112007200319991995199119871983

Motor fuels Gaseous Fuels Chemicals

2. Number of Chinese gasifi cation projects by product (cumulative).

Source: Gasifi cation Technologies Council


China energy

Supply Competition Media reports give the impression that

there is some competition between Sino-pec and CNPC in Xinjiang to secure SNG volumes. Xinjiang has traditionally been the preserve of CNPC. The company’s subsidiary PetroChina built the West-East pipelines that take Central Asian imports and Xinjiang’s own production to China’s east.

The fi rst West-East pipeline has capacity of 12 Bcm/yr and runs 3,843 km from the western Tarim Basin in Xinjiang to Shang-hai. It started operations in 2003. The 30 Bcm/yr Second West-East pipeline brings in Turkmen gas. It was fully commis-sioned in May, when the link to Shenzhen city in southern Guangdong province was launched. It was built at a cost of Yuan 142.2 billion, with a total length, includ-ing trunk lines, of 8,704 km and is already said to be operating close to capacity.

The third line is expected to cost Yuan 116 billion, according to The China Secu-rities Journal . The new pipeline will link with the Central Asia-China gas pipeline network and start in Horgos in western Xinjiang province on the border with Kazakhstan—the same start point as the Second West-East pipeline. It will pass through 10 provinces. The main trunk

line will be more than 5,000 km long, according to CNPC.

Construction of the third West-East pipeline may provide capacity for SNG to be taken east. CNPC signed framework agreements with local state-owned and private companies to secure funding for the 30 Bcm/yr Third West-East pipeline end-May. The company said then that construction would begin within a year, with commercial operations targeted to begin in 2015.

According to a report in July from Inter-fax , quoting a company source, the King-ho Energy Group will start trial output from its coal-to-gas project in Xinjiang this year before moving to the produc-tion phase in 2013. The project has even-tual capacity of 5.5 Bcm/yr. The report said key equipment for the fi rst phase of the project has been installed. According to the report, CNPC’s West-East gas pipe-line network will take the output. Other local media sources say 14 coal-to-gas projects were started in 2011 in Xinjiang.

The China National Offshore Oil Com-pany also has an interest in coal gasifi ca-tion, both upstream production and in transportation. Local media have report-ed that the company wants to build a 30 Bcm/yr capacity pipeline to take SNG from

Operator Location First phase (Bcm/yr) Target (Bcm/yr) Year of fi rst phase

Qinghua Yili, Xinjiang 1.38 5.50 2012

Xinjiang Guanghui Xinjiang 0.50 0.50 2012

Datang Inner Mongolia 1.40 4.00 2013

Xinwen Yili, Xinjiang 2.00 10.00 2013

Huineng Ordos, Inner Mongolia na 2.00 2013

Huaneng Zhundong, Xinjiang 4.00 6.00 2013

Shenhua Ordos, Inner Mongolia na 2.00 2015

Sinopec Xinjiang na 8.00 2015

Guodian Ulanhot, Inner Mongolia 2.00 10.00 2014

Xinjiang Guanghui Fuwen, Xinjiang 4.00 4.00 2015

Datang Fuxin ,Liaoning na 4.00 2016

China Power Investment Corp Yili, Xinjiang 2.00 6.00 2015

CNOOC New Energy Investment Shanxi 4.00 6 to 15 2015

Gansu Hongshengqi Gansu na 4.00 2015

Sichuan Petrochemical/Linde Sichuan na 15.00 MOU

3. Coal gasifi cation projects—under construction and proposed.

Source: Company data, JP Morgan


China energy

Inner Mongolia to more central and east-ern demand centers. CNOOC New Energy Investment has plans for a fi rst phase coal-to-gas project with capacity of 4.0 Bcm/yr in Shanxi, a province south of Inner Mon-golia, starting up in 2015.

Comparison with Shale Based on the projects outlined by JP

Morgan, SNG output from coal gasifi ca-tion could outstrip the contribution of shale gas to Chinese gas supply in the period to 2020. According to CEO Chris Faulkner of US independent Breitling Oil and Gas, China’s shale gas targets are over ambitious, owing to the size of the investments required and infrastructural constraints such as pipeline connections and water supply and disposal. These concerns have also been highlighted by offi cials from China’s state-owned oil and gas companies.

Beijing is targeting annual output of 6.5 Bcm/yr of shale gas output by end-2015, although state oil companies Pet-roChina and Sinopec have only outlined output targets of less than half that. Sinopec’s target of 2 Bcm includes shale, coalbed methane and tight gas.

Investment capital is also likely to be a constraint. Despite a number of coop-eration agreements with International Oil Companies, China’s Ministry of Land and Resources, which controls the country’s shale acreage, launched its fi rst bid round last year, with only a handful of local state-related companies allowed to participate.

Of the four areas offered, only two at-tracted bids, and those were awarded to Sinopec and Henan Provincial Coal Seam Gas Development and Utilization Co. A second round is expected this year, but participation is again expected to be limited to domestic companies.

Speaking at the Shale Gas World confer-ence in Singapore in July, Faulkner said, “There’s a massive gap between the activ-ity in the country and full-scale develop-ment … That’s why I really don’t think China is going to get anywhere by 2015 or 2020, for that matter. It’s going to be a 2022, 2025 play for them … The pace at which China is moving is not going to al-low it to create the amount of production it needs by 2015.”

Complementary Technologies China’s initial push for SNG produc-

tion is based on traditional coal min-ing, with the innovative phase coming in the gasifi cation and methanization that produces syngas and then upgrades it to SNG. The advantages include the more effi cient extraction of coal’s energy value, the potential use of poorer quality coals and the prevention of pollution in densely-populated areas.

Piping gas produced in Xinjiang or In-ner Mongolia to eastern and southern demand centres saves on rail and truck transport of coal to power stations in those areas. However, any SNG produced is as likely to displace oil products as much as direct coal burn because China’s expects a rapid increase in city gas consumption over the next decade and is putting the infrastructure in place to facilitate this.

Other technologies complement the expansion of coal gasifi cation. Foreign companies involved in Underground Coal Gasifi cation, for example, ap-pear to be migrating from their home patches, where resistance to coal-relat-ed technologies is stronger and envi-ronmental controls more stringent, to jurisdictions in Asia.

Australia’s Linc Energy, a leader in the UCG sector, recently agreed a joint venture with GCL Projects, a subsidiary of Hong Kong-based Golden Concord Holdings, to build its fi rst multi-gasifi er project in China. Linc offers integrated UCG to Gas-to-Liquids technology to produce transport fuels from coal.

Another Australian fi rm, Cougar En-ergy, is also reported to be in talks with local Chinese partners to use its UCG technology on prospective coal areas in Inner Mongolia. Focusing on UCG for power generation, Cougar is currently involved in site selection for a UCG proj-ect in the Wu Ni Te coal basin. Cougar saw its Kingaroy UCG pilot project in Australia shut down in July 2010 on en-vironmental grounds that it is still con-testing in court.

In July last year, at a UK-China sum-mit, a $1.5 billion partnership was an-nounced between UK UCG developer Seamwell International and the state-owned China Energy Conservation and


China energy

Environmental Protection Group to de-velop a 1,000 MW UCG project in China on the Yi He coal fi eld in Inner Mongo-lia. If built, the project would be the larg-est of its kind.

UCG involves the combustion of coal underground to produce syngas. It avoids the need both for traditional mining and an above ground gasifi cation plant, but is struggling to prove itself on envi-ronmental and operational grounds. If it can be made to work reliably at scale, it could hugely extend the exploitable coal resource. Given China’s vast coal reserves, UCG could represent a second develop-ment phase to complement current ef-forts in SNG production that, in theory at least, could create a new industry on a scale commensurate with existing con-ventional gas production.

The second complementary technol-ogy is Carbon Capture and Storage. Ow-ing in part to its heavy coal use, China’s greenhouse gas emissions are rising fast. As a developing country, China is not bound by any emissions reduction tar-gets other than those it sets itself. Coal gasifi cation is often portrayed as a ‘clean coal’ technology, but its main claim in this area is its effi ciency and its sepa-ration of CO2 pre combustion, which makes it easier to capture and store CO2. Without CCS, it represents a means of extending coal use rather than lowering its carbon impact. It may produce clean burning gas, but the CO2 is emitted ear-lier on in the process.

China has a number of CCS projects, but as in Europe and the United States, com-mercial deployment remains at least a de-cade away. For projects such as the Seam-well joint venture or that announced with US company CoalTek last year for a ‘clean coal’ processing facility in Inner Mongo-lia, the focus is on energy production and the effi cient use of coal rather than cap-turing and storing CO2.

According to an MIT report on one of the most advanced projects, Shen-hua’s Direct Coal Liquefaction Produc-tion Line at Ordos, Inner Mongolia, CO2 liquefaction in preparation for storage, as well as some pilot storage, has been achieved, but full-scale operation is not expected until 2020 at a cost of $1.46

billion. Similarly, the Tianjin GreenGen coal gasifi cation plant is behind sched-ule and is only the fi rst of three phases, the last being a CCS project, which is scheduled for 2015-2020.

Two projects announced in 2011 were also based on CCS enabling projects rather than CCS itself. Alstom Power in July last year said it was in discussion with China Datang Power to build a 350 MW Oxyfuel plant in Daqing, Hei-longjiang, China’s historic center of oil production. The plan is to use CO2 for enhanced oil recovery.

A second project under discussion was a partial post-combustion capture proj-ect for a proposed 1,000 MW plant in Dongying, Shandong, near the Shengli oil fi eld. At the time, Climate Change Minister Xie Zhenhua noted that cost effective uses for CO2 were essential and that anything beyond that would require international fi nance.

As a result, coal-based SNG production can be seen from two viewpoints. First, as a means for China to exploit more ful-ly its coal resource and thus ultimately to use more coal and make more emissions. Second, as a preliminary stage on the road to creating a genuinely low carbon process for the use of coal, which in its initial phase makes some emission gains through using coal more effi ciently.

Clearly, as in other countries, other motivations ride alongside environmen-tal concerns. China needs energy to de-velop and economic development is a key priority. It also wishes to reduce its growing dependence on imported oil and gas. As a domestic resource, SNG allows it to do both by substituting for imported gas and oil products in heating and cooking.

Based on the projects under construc-tion, the next 18 months are likely to demonstrate whether coal-based SNG can deliver commercial scale quantities of pipeline quality gas. If they do, and the oil and gas companies are suffi ciently confi dent to move ahead with their am-bitious pipeline proposals, there is a real possibility that SNG will make as big, if not a larger, contribution to Chinese gas supply than shale gas out to 2020, and possibly beyond. ■


But as we enter the fi nal stretch of 2012 news of a far more depressing na-ture is dominating the headlines—col-lapsing demand, rising costs and addi-tional taxes fi nd the industry in a state of turmoil. Add to this the declining reliability of long established bench-marks as liquidity shifts to lower calo-rifi c value (CV) or ‘off-spec’ markets and the winds of change have twisted into a Category 5 hurricane.

It’s not all doom and gloom. 2012 has seen the launch of several assessments that underpin the new lower CV mar-kets, buyers are increasingly happy that after several years of ‘runaway prices’ the tables have turned in their direc-tion and, as the fourth quarter gets un-der way, market sentiment is turning a little more positive, looking forward to an increase in Chinese consumer buy-ing and a more stable Indian Rupee. Maybe it is time to downgrade that storm to a Category 4?

The changing trade fl ows in recent years have been well documented. Eu-rope had long been the destination of a majority of thermal coal from South Africa, or Richards Bay to be more pre-

cise. But India, China and Korea now dominate this market.

This year has seen the trend of ex-ports from Richards Bay to Asia accen-tuate with an interesting angle—more and more of the tonnage is not standard specifi cation 6,000 kilocalories per ki-logram net as received (NAR) material. There has been a huge increase in the ‘off-spec’ market—material with a value of 5700 kcal/kg NAR or even lower.

Some sources suggest that this now accounts for between 40% and 50% of the total. And when you consider that this is a 65-70 million metric ton an-nual export business, this represents a signifi cant amount of coal that is under represented in the pricing market.

Much of this specifi c product is fi nd-ing its way to India which has been quietly active and possibly one of the stronger drivers of the lower calorifi c value markets.

2012 also saw a huge surge behind an ‘off-spec’ Australian product—FOB Newcastle 5500 NAR or the higher-ash Newcastle coal that has complete-ly taken over in the spot market from the traditional 6000 NAR benchmark.

coal

Coal Weathers the StormJames O’Connell, Senior Managing Editor, Platts Coal

What a difference a year makes. This time last year the coal industry was on a high—China and India were voracious consumers of the fuel and even up to February 2012 the market was characterized by traditionally high spot prices.


coal

With thermal coal exports of around 110 million mt, and with Japan taking more than 50 million mt of the stan-dard grade, the ‘off-spec’ market consti-tutes the greater majority of the most liquid high quality coal market in Asia.

With Japan buying almost exclusive-ly on an annual or term contract ba-sis, the change has left the traditional benchmark spot market devoid of both customers and liquidity. The new New-castle 5500 NAR market is most active and favored by Chinese, Korean and Taiwanese buyers.

The other lower calorifi c value market that bloomed in 2012 is for Indonesian coal with an FOB value of 4200 gross as received (GAR). The market has been growing steadily in recent years, and as higher quality material gets sucked up into contracts liquidity has shifted down to 5000 GAR and lower material.

As long ago as 2010, Platts was asked by major industry players to launch a 3,600 GAR Indonesia marker, but the transparency and liquidity in this seg-ment was, and remains, too opaque for truly accurate pricing. The market at the 4200 GAR level has, however, matured signifi cantly in the last 12 months and Platts has been publishing pricing at this level since mid-2012.

Another change blowing in the wind is the huge increase in United States

thermal coal exports. These have hit a 20-year high.

The high quality US coal comes at a price in the international markets—high sulfur. With the US coal-fi red pow-er generation industry in what is popu-larly described as terminal decline, US producers have actively sought export markets and discovered that Europe likes their product.

The US miners have also turned to Asia and to their delight China has also enthusiastically embraced the specifi cations. Employing their exper-tise at blending coal varieties they dis-covered that high calorifi c value, high sulfur US coal and low calorifi c value, low sulfur Indonesian coal are good boiler buddies.

Since the end of the fi rst quarter of 2012, end users have been spoiled for choice in terms of coal origin. With the US, Colombia, South Africa, Indo-nesia and Australia all competing for the same few buyers, something had to give.

Just as strained relations and defaults occurred at the top of the market, when the fl oor fell out of the price boom the relative newcomers to the international seaborne coal trade—the Chinese—were quick to spot an opportunity to knock a few more dollars off the price. A trickle of defaults turned into a tor-

($/mt)

65

75

85

95

105

24-Sep11-Sep29-Aug15-Aug02-Aug20-Jul09-Jul26-Jun

KalimantanRichards Bay Newcastle 6300 Newcastle 5500CIF ARA

1. Daily coal price trends (physical).

Source: Platts


coal

rent and, while it may have affected only US producers at the start, the fl ood enveloped Colombian, Indonesian and eventually even Australian producers.

With literally dozens of defaults on coals of all varieties, a separate mar-ket as good as cropped up for a num-ber of months up to mid-2012, with sources constantly telling Platts that “we’re only interested in defaulted cargoes.” The demand was there, it was just opportunistic.

With a hefty year-on-year jump in Chinese imports, stockpiles at the

country’s ports were at historic highs—and overfl owing onto adjacent roads in many instances. Meanwhile stocks at utilities were good for a record 30+ days, twice the norm, with one utility reporting enough stock for an incred-ible 72 days.

Indeed, having paid high prices the last couple of years and more there was an element of frustration that, at a time when prices were falling, China-based end users couldn’t take full advantage.

Not only have the traditionally high prices seen in recent years been instru-mental in creating the off-spec market, they have also contributed to wide-spread price sensitivity. Where once In-dia was the only country where ‘price sensitive’ buyers were reported, now purchasers in Korea, Taiwan and China have swelled the ranks.

In mid-2011 one major Singapore-based trader dismissed the Newcastle 5,500 NAR market, suggesting that it was a fl ash in the pan. Once prices of the standard Newcastle spec fell back to more realistic levels, consumers would return to the quality material, the argument went.

While producers are not earning a premium for this specifi c material, they are saving money on treatment pro-

cesses and should also experience labor and capital expenditure economies of scale in the short term. A well-respect-ed industry analyst has crunched the numbers and, after taking lower royalty payments into consideration, estimated a production cost saving of $7/mt for Newcastle 5500 higher-ash material over the benchmark grade product. A not inconsiderable amount, especially in these straitened times.

It must also be noted that Australian producers benefi t from annual contract sales in Japan. Agreed in February 2012 at $115/mt, the deliveries made at this annual contract price cushion the steep falls seen since for other sales. Even more so since the March 2011 earth-quake and tsunami, and the subsequent nuclear disaster, Japanese utilities place a signifi cant premium on security of supply and would appear to be content to pay a 20-30% premium to spot pric-es for this benefi t.

Given this kaleidoscope of frenetic and rapidly-evolving activity it is ap-parent that the thermal coal market is maturing, and another indication of this is that the spot window is short-ening. Once upon a time, when serious volatility in the coal markets was but a fi gment of the imagination, a 180-day window existed. And it wasn’t that long ago, either.

The 90-day spot window has domi-nated the market for the last decade or so. But the increasing hand-to-mouth buying trend that now prevails amongst the major consumers dictates that this is going to shorten.

In fact, the two thermal coal price assessments launched by Platts in 2012 have specifi ed a seven- to 45-day forward window. Truly replicating buying behavior and embracing the need for change, Korean and Taiwan-ese utilities are launching prompt ten-ders that are allowing two weeks’ no-tice for the winners to begin shipping their cargos. China as a very prompt buyer needs no introduction.

As the sun sets on 2012, the weather forecast is suggesting the storm may well just blow itself out. But it might take a little longer than expected. ■

Once upon a time, when serious volatility in the coal markets was but a fi gment of the

imagination, a 180-day window existed. And it wasn’t that long ago, either.


Platts daily Asian spot LNG price as-sessment, the Japan Korea Marker, is used as the outright pricing basis for up to two-fi fths of the spot LNG deals in the region. About 25% to 40% of Asian spot LNG deals are now priced off the JKM assessment and, if the marker is used in deals, they are priced directly to the JKM rather than in combination with other assessments, according to a prominent industry energy lawyer.

Platts launched the JKM on Febru-ary 2, 2009. The marker assesses the delivered price of spot LNG to Japan or South Korea on a daily basis.

The two north Asian nations bought almost half the 221 million metric tons (mt) of LNG sold worldwide in 2010. Japan bought more than 30% of the total, at about 70 million mt, while South Korea purchased around 15%, or 33 million mt.

Market observers estimate that spot LNG deals account for up to 20% of LNG volumes produced each year. The trade includes bilateral deals, inter-regional diversions, tenders, chained cargoes and a variety of other trans-actions. As much as 45 million mt of LNG, equivalent to 750 cargoes a year, is being traded on a spot basis.

The remaining 80% in volume terms is transacted under long-term con-

tracts that typically run from 10 to 30 years. By contrast, in many other ener-gy commodity markets, such as crude oil and naphtha, spot trades typically make up about 10% of the total vol-umes transacted.

Before Platts started assessing the JKM, spot trades were reported at prices as high as $25/MMBtu at the end of 2008, representing a signifi cant premi-um over oil-linked term contract prices of $15/MMBtu for shipments sent to Ja-pan at the same time. Long-term LNG contracts in Asia have traditionally been priced against oil, with many in the last few years yielding a delivered LNG price at about 15% of the JCC crude oil price.

The JKM was thus launched to serve an unfulfi lled segment of the LNG mar-ket that did not have a clearly defi ned pricing mechanism, while providing market participants with an index that would allow them to trade LNG ship-ments at prices based purely on the fundamentals of the LNG market. The new index enabled the nascent spot LNG market to break away from the industry’s long-established links to oil production and prices that arguably are no longer relevant to LNG.

The JKM began to gain traction in 2010 when Taiwan’s CPC Corporation

liquefi ed natural gas

Platts JKM and LNG Spot ContractsHong Chou Hui, Managing Editor, Platts Asia LNG



awarded some spot buy tenders for car-goes delivered across that summer at prices matching or close to the JKM values for the same month of delivery.

Matching Assessments to MarketPrices

Platts assesses the JKM for physical LNG cargoes delivered to Japan and South Korea in the third, fourth and fi fth half-month cycles forward from the date of trade. For example on Jan-uary 3, the fi rst working day of 2012, Platts assessed cargoes for delivery in H1 February, H2 February and H1 March, with the JKM assessment being the av-erage of the two half-month cycles that comprise the fi rst full month of deliv-ery. On January 3, the JKM month as-sessed was thus February 2012.

In the case of Japan, the country’s customs authorities release data regard-ing LNG imports almost three months after Platts completes the assessment for a particular month. In the example of February 2012, Japanese customs published the data for LNG shipments delivered to Japan at the end of March. Platts assessed the February JKM from

December 16, 2011 through January 15, and then rolled over to the March JKM on January 16.

An analysis of JKM spot monthly av-erage assessments and Japan customs data for the past three years showed a high correlation of spot cargo prices matching the published JKM values for the same month of delivery.

Prices of spot cargoes from Peru, Ye-men, Trinidad & Tobago, Algeria, and Norway coincided closely with JKM values for the same physical month of delivery. Peru LNG, Yemen LNG, Trini-dad’s Atlantic LNG, Norway’s Snohvit LNG and Algeria’s Sonatrach do not have any term contracts with Japanese buyers, limiting their commercial op-portunities to the spot market.

Nigeria LNG does have offtakers such as the UK-based BG and the Anglo-Dutch Shell who have term contracts with Japanese buyers, but the project held several spot sell tenders in 2011 for cargoes that were originally meant for delivery to Atlantic destinations.

Japan lost 12 gigawatts of nuclear plant in the immediate aftermath of the March 11, 2011 earthquake and

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JKM spot (against delivery)Nigeria customs

Equatorial Guinea customs USA customsTrinidad customsAlgeria customs

Yemen customs Peru customs Norway customs

3/09 5/09 7/09 9/09 11/09 1/10 3/10 5/10 7/10 9/10 11/10 1/11 3/11 5/11 7/11 9/11 11/11

1. JKM vs Japan.

Source: Platts



tsunami and replaced much of the re-actor output with gas-fi red capacity, resulting in additional spot demand of 15 cargoes every month. Some nuclear plants located close to earthquake fault lines were shut down from June 2011, while facilities that were shut for main-tenance before the disaster and subse-quently were not allowed to restart due to safety concerns.

By the end of 2011 this left Japan with 7.98 GW, or 16.3% of the pre-crisis nuclear capacity of 48.96 GW at 54 re-actors. By May 2012 this capacity had been shuttered too, with only two re-actors allowed to restart by September 2012, leaving a very large gap to be fi lled with oil and LNG.

As Japanese power generation de-mand for LNG increased, the JKM commanded a premium of more than $8/MMBtu over UK National Balanc-ing Point gas hub prices on several occasions. Japanese buyers purchased spot cargoes from Nigeria at or close to the JKM values for the same month of delivery.

Japan also bought spot cargoes from its term LNG suppliers in Russia, Qa-tar, Indonesia and Australia. However, these are not considered in this analysis

as the spot prices and shipments were mingled within the larger contract vol-umes and values.

In South Korea an analysis of JKM spot monthly average assessments and South Korean customs data from late 2009 through end 2011 similarly re-vealed a high incidence of spot cargo prices matching the published JKM values for the same month of delivery. The South Korean customs authorities publish the data for imported LNG car-goes two months after Platts completes the assessment for a particular month of delivery.

Prices of 28 spot cargoes from Nige-ria, Peru, Norway, Algeria and the US mostly matched JKM values for the same physical month of delivery. Nige-ria LNG, Peru LNG, Snohvit LNG and Sonatrach do not have term contracts with the South Korean buyers—Korea Gas Corporation, POSCO, SK E&S and GS Caltex—limiting their commercial opportunities to the spot market.

Five reloaded LNG cargoes from Loui-siana’s Sabine Pass terminal in the US were delivered to South Korea at or close to the JKM values for the same month of delivery.

Spot LNG buying activity in South

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JKM spot (against delivery)Nigeria customs

Equatorial Guinea customs USA customsTrinidad customsAlgeria customs

Yemen customs Peru customs Norway customs

3/09 5/09 7/09 9/09 11/09 1/10 3/10 5/10 7/10 9/10 11/10 1/11 3/11 5/11 7/11 9/11 11/11

2. JKM vs Korea.

Source: Platts



Korea was especially intensive during the winter months of late 2009 and ear-ly 2010. Thirteen cargoes from Nigeria, the US, Peru and Norway were delivered to the country as freezing temperatures swept across north Asia.

This was repeated during the win-ter of late 2010 and early 2011. South Korean buyers purchased several spot cargoes from Nigeria, the US, Peru and Norway matching the JKM values for the same month of delivery.

Thus Nigerian cargoes sent to South Korea in November 2010 and Febru-ary 2011 at $9.25/MMBtu and $9.84/MMBtu, respectively were virtually an exact match to the assessed JKM of $9.25/MMBtu and $9.85/MMBtu for the same periods.

In December 2010, South Korea re-ceived a Norwegian cargo at $9.49/MMBtu, priced only slightly below the December average JKM assessment of $9.55/MMBtu.

In Taiwan and China Platts includes a $0.1/MMBtu freight discount from the JKM for cargoes delivered to the two jurisdictions, as both Taiwan and China are slightly closer to LNG pro-

ducers in southeast Asia, the Middle East and Australia. Despite the dis-count, Taiwanese and Chinese buyers have paid prices close to or matching the JKM over the past three years to secure shipments.

Taiwan with a 5% share and China with 4% of the market together ac-counted for purchases of almost 20 million mt of global LNG supplies in 2010. Taiwan’s Directorate General of Customs publishes its LNG import data two months after Platts completes the assessment for a particular month of delivery, while China releases the same information three months later.

Taiwan’s CPC issued several buy ten-ders for more than a dozen cargoes de-livered across the summer months of April through August 2010. Customs data from the country revealed that car-goes from Trinidad & Tobago, Russia, the United Arab Emirates and Norway were transacted at or close to JKM values for the same physical month of delivery.

Prior to the country’s peak summer de-mand of 2010, CPC bought two Russian cargoes delivered in October and No-vember 2009 at prices of $5.14/MMBtu

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3/09 5/09 7/09 9/09 11/09 1/10 3/10 5/10 7/10 9/10 11/10 1/11 3/11 5/11 7/11 9/11 11/11

JKM spot (against delivery)

Nigeria customs

Equatorial Guinea customs

Egypt customs

Trinidad customs UAE customs Yemen customs

Peru customsNorway customs Russian customs Spain customs

3. JKM vs Taiwan.

Source: Platts



and $5.43/MMBtu, respectively. These lined up with JKM monthly average val-ues of $5.13/MMBtu and $5.39/MMBtu for the same periods.

China imported cargoes across a three-year period from the UAE, Peru, Belgium, Russia, the US and Oman at values matching or close to JKM val-ues for the same physical month of delivery. Neither of the country’s state-owned buyers, the China National Off-shore Oil Corporation and PetroChina, have long-term supply contracts with the UAE’s Adgas, Peru LNG, Oman’s Oman LNG and Qalhat LNG projects or Russia’s Sakhalin 2 facility.

Two reloaded spot LNG cargoes from Louisiana’s Sabine Pass terminal in the US and one reloaded spot shipment from Belgium’s Zeebrugge terminal were also sold to China.

Use of JKM in Spot and Term ContractsAn upcoming liquefaction project,

which would serve Asia, would price all its commissioning cargoes directly to the JKM, according to the earlier-cited industry energy lawyer. Two liq-uefaction projects are coming online

in 2012—Angola LNG’s 5.3 million mt/year facility in Angola and Woodside Petroleum’s 4.8 million mt/year Pluto project in western Australia.

Moreover, Woodside Petroleum’s ex-isting North West Shelf (NWS) LNG project introduced the JKM as one of its pricing bases in June 2012 for the fi rst time. It tendered three LNG cargoes for delivery in August, September and late October to early November.

Previous NWS sell tenders have not listed JKM before, according to a Japa-nese trader, although buyers still had the fi nal decision on which pricing ba-sis they wanted to use.

Bidders into the NWS tender had the option of bidding on the basis of Platts Asian Dated Brent, the JKM or a fi xed price, a Singapore-based trader said. The use of JKM in sell tenders could be not only the fi rst for NWS, but also a fi rst for the LNG industry. “This is the fi rst time I have seen JKM in an LNG tender document. It has never happened be-fore,” the Singapore-based trader said.

“Besides crude oil, [the UK’s] National Balancing Point and [NYMEX] Henry Hub, this is probably the fi rst time I’m

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JKM spot (against delivery) Nigeria customs

Equatorial Guinea customs USA customs

Trinidad customs

UAE customsYemen customs Peru customs

Belgium customs Russian customs

Egypt customs

Oman customs

4. JKM vs China.

Source: Platts



hearing JKM being quoted in a tender,” Tony Regan, principal consultant at Sin-gapore-based Tri-Zen International, said.

In another indication of its increas-ing usage, Japan’s Chubu Electric Power Company signed a sales and purchase agreement with BP Singapore in Febru-ary 2012 for the supply of around eight million mt of LNG over a 16-year pe-riod on an ex-ship delivery basis. The contract uses JKM spot prices for up to 10% of supply volumes.

Deliveries will start from the Japa-nese fi scal year ending March 2013 with the LNG being sourced from BP’s global LNG portfolio. A Chubu Electric spokesman declined to comment on any details of the term contract as part of its confi dentiality agreement with BP, while a BP spokesman in London declined to comment on “commercial-ly confi dential information” when con-tacted by Platts.

Sources said the deal could be the fi rst time Chubu Electric and BP have used spot LNG prices in their mid-term con-tracts. Market sources also said the deal includes a price linkage to the JKM for 5-10% of the Nagoya-based power util-ity’s lifting volumes.

A further indication was provided by Thailand’s PTT, which concluded a one-

year, 500,000-mt LNG supply agree-ment in 2011 with Spain’s Repsol. The contract, which started delivery in July 2011, was concluded using a formula of the JKM plus 50 US cents per MMBtu, various sources said.

The JKM in Financial TransactionsThe fi rst fi nancial LNG swap settled

against the JKM was done by CitiBank with an international oil major in Janu-ary 2011. Several more such JKM swaps have since been concluded by Citi with various other counterparties.

The LNG swaps have been transact-ed using small parcels in the range of 100,000 to 500,000 MMBtu. A full-sized LNG cargo has 3.5 million MMBtu.

Platts started assessing JKM swaps assessments for three forward months from June 1, 2012. And the CME Group and ICE started to clear JKM swaps from August 13 and August 28, respectively.

Besides north Asia, the JKM has had an impact on spot prices in India, which bought around 5% [11 million mt] of the world’s LNG in 2010. Before Platts launched the DES West India as-sessment on August 1, 2011, buyers and sellers in India would typically apply a discount of around $2/MMBtu to the JKM for their spot LNG transactions. ■

2

4

6

8

10

12

14

16

18

20

January March May July September November

$/MMBtu

2009 2010 2011 2012

5. JKM monthly average.

Source: Platts


With overcapacity in the global solar and wind power equipment manufac-turing sectors, and with many of the countries that previously led in the pro-motion of renewable energy now slash-ing their targets and tariffs, Japan’s in-troduction of generous feed-in tariffs in July 2012 has made it one of the hottest renewable energy markets worldwide. Solar projects are expected to benefi t in particular, given that the feed-in tariffs are higher than for some other Japanese renewable sources and technologies, and are much higher than for solar installa-tions in most European, North American and other Asian economies.

Japan is well placed to host renew-able energy projects, with its high retail electricity tariffs allowing the accom-modation of capital-intensive renewable energy systems. And it has a dearth of indigenous fossil fuel resources, making renewable energy an attractive option for supply diversity and increased energy self-suffi ciency.

However, renewable energy has tradi-tionally played second fi ddle in Japan to nuclear power, which up to 2011 provid-ed about 30% of total electricity supplies compared with well under 10% for re-newable energy. And nuclear power was seen as the main way of achieving more diversifi ed, secure and low carbon energy supplies in the future.

The Strategic Energy Plan issued by the Ministry of Economy, Trade and Industry (Meti) in June 2010 envisaged that at least 14 more nuclear plants would be built by 2030. The plan expected that the 68,060 megawatts of total projected nuclear ca-

pacity would generate 52.6% of the 1,012 TWh of overall output forecast for 2030.

The strong growth expectations for atomic energy ended with the March 11, 2011 earthquake and tsunami, and sub-sequent disaster at the Fukushima nucle-ar complex, which saw a substantial shift in public and political opinion against nuclear power. While the country’s elec-tric power companies remain supportive of a signifi cant, albeit reduced role for nuclear power, a large proportion of the population is opposed to a long-term role for nuclear power and in cases even to the resumption of operations at existing nuclear plants.

Most mainstream politicians are in favor of the resumed operation of some or all of the fi fty existing nuclear plants, although only after stringent stress tests. All fi fty plants had stopped operating in May 2012 after their mandatory closure for scheduled maintenance, but the fi rst reactors reopened in July 2012 after two units at the Kansai Electric Power Com-pany’s Oi nuclear complex passed the tests and received reactor restart approv-al from the relevant local authorities.

However, many politicians are skepti-cal about the longer term role of nuclear power, and are against building new reac-tors or operating existing ones for more than forty years. In September 2012 a government paper confi rmed this posi-tion, saying that it wanted to see nuclear power phased out over the next three decades with the reactor output to be replaced by production from renewables and clean energy technologies as well as demand-side conservation measures.

renewables

Japan Looks to RenewablesMartin Daniel, Editor, Platts Power in Asia


renewables

At the time of writing, Meti had not issued detailed revisions to the Strategic Energy Plan to achieve these policy goals. But the pursuit of more renewable energy was kick-started by the introduction of very generous feed-in tariffs in July 2012.

Under the tariff rules, Japan’s incum-bent power companies must buy the out-put from solar, wind, geothermal, small hydro and some biogas and biomass-fu-eled plants at premium prices. The addi-tional cost to the power companies can be passed on to fi nal users.

The feed-in tariffs vary by energy source, contract duration and plant size. The tariffs will be reviewed annually by Meti, although once an individual proj-ect has signed a power purchase agree-ment the tariff will be fi xed at the speci-fi ed level for that year for the duration of the contract.

Meti approved tariffs in June 2012 for an initial period running from July 2012 to the end of March 2013. They include a 20-year tariff of Yen 42/kWh ($530/MWh) for solar photovoltaic plants with more than 10 kilowatts of capacity, while the same tariff will apply to smaller solar facilities, but only for 10 years.

The tariffs for electricity generated from

wind farms with more or less than 20 kW of capacity will both run for 20 years. But the tariff is only Yen 23.1/kWh for the larger plants whereas facilities smaller than 20 kW will get Yen 57.75/kWh.

Tariffs were also set for geothermal, small hydro, biogas and biomass-fi red plants as tabulated in exhibit one. The government has also indicated that it will ease the usually stringent restric-tions on land use for some renewable en-ergy technologies, including solar, wind and small hydropower projects.

While the feed-in tariffs may be high, the prospect of a substantial stock of gen-erating capacity that does not rely on im-ported fossil fuels is currently very attrac-tive to Japanese politicians and planners. The temporary, and in four cases perma-nent, closure of nuclear reactors following the March 11, 2011 disaster has thrown Japan’s reliance on internationally-traded oil, gas and coal into sharp relief, with particular emphasis on oil and gas.

Coal is less at issue because the coun-try’s coal-fi red plants generally already operate on baseload and have thus been unable to increase production and help replace the lost nuclear output. The members of the Federation of Electric

Size, kW Years Yen/kWh

Solar photovoltaic:

<10 10 42

>10 20 42

Wind:

<20 20 57.75

>20 20 23.1

Geothermal:

<15,000 15 42

>15,000 15 27.3

Hydro:

<200 20 35.7

200-1,000 20 30.45

1,000-30,000 20 25.2

Biogas: 20 40.95

Waste (excluding wood) 20 17.85

Wood waste, various 20 13.65-33.60

1. Japanese feed-in tariffs to March 31, 2013.

Source: Meti


renewables

Power Companies Japan (FEPC) burnt 3.559 million metric tons (mt) of coal in June 2012, much the same as the 3.963 million mt they consumed in June 2010 prior to the disaster.

Instead, the output lost from the closed reactors has been replaced by liquefi ed natural gas (LNG) and crude and fuel oil, as well as by energy savings on the demand side. The International Energy Agency noted in the fi rst half of 2012 that LNG had replaced 56% of the lost nuclear output in 2011, rather than the 40% it had originally projected. But the Paris, France-based agency added that gas constraints—including both LNG import capacity and gas-fi red generating plant—would put an effective cap on LNG usage and require more oil use as 2012 progressed.

This was borne out by FEPC members’ use of 4.262 million mt of LNG in June 2012, or about 38% more than in June 2010. But their fuel oil use increased al-most threefold to 1.177 million kiloliters in June 2012 compared with June 2010, while crude oil consumption jumped more than fourfold to 1.060 million kl.

The use of more fossil fuels for power generation was a key reason why Japan posted a record trade defi cit of Yen 2.9 trillion ($37.3 billion) in the fi rst half of 2012. Much of the increased burden of imports occurred because of rising LNG and oil purchases.

Hence the willingness to offer gener-

ous incentives—at least in the initial years—to renewable plants that may be expensive to build but will replace power generated from imported fuels with in-digenous energy. The government esti-mated in April 2012 that renewable ca-pacity could increase by 2,500 MW as early as March 2013, with about 2,000 MW of the capacity projected to come from solar power complexes.

And the approval of the high solar tar-iffs—around double those paid in Ger-many—has resulted in a surge in project announcements. For instance the local Toshiba Corporation said after the an-nouncement that it would install 100 MW of solar photovoltaic capacity by March 2015.

Toshiba will install the capacity at Minami Soma city in Fukushima prefec-ture, which suffered severe damage as a result of the March 11, 2011 earthquake and tsunami. The company said the so-lar plants will cost about Yen 30 billion, equivalent to $3,800/kW.

Meanwhile the SB Energy Corporation, the energy subsidiary of the local Soft-bank Corporation, has said it will build at least 200 MW of capacity at Tomakomai on Hokkaido. And a 70-MW complex is planned by a consortium led by the local Kyocera Corporation at Kagoshima City in Kagoshima prefecture at an estimated cost of about Yen 27 billion, or $4,930/kW.

Some of the proposed projects involve

Jun-10 Jun-12 Difference

Power generation, TWh:

Thermal 35.653 49.569 13.916

Nuclear 22.479 0 -22.479

Hydroelectric 6.732 5.612 -1.12

New energy etc 0.195 0.206 0.011

Purchases 13.352 15.493 2.141

Total 77.712 70.459 -7.253

Fossil fuel use:

Coal (million mt) 3.963 3.559 -0.404

LNG (million mt) 3.083 4.263 1.18

Heavy fuel oil (million kl) 0.401 1.177 0.776

Crude oil (million kl) 0.263 1.06 0.797

2. FEPC generation and purchases.

Source: Federation of Electric Power Companies


renewables

dispersed installations rather than “mega-solar” plants at one location. For instance the local Mitsubishi Corporation and Na-tional Federation of Agricultural Coop-erative Associations have agreed to install solar plants on the rooftops of facilities owned by farmers and on shared facili-ties owned by the Federation.

Mitsubishi said it will cost about Yen 60 billion—or $3,835/kW—to install up to 200 MW of solar capacity on facilities owned by the Federation at up to 600 lo-cations in every prefecture from Hokkai-do to Okinawa by the end of 2014. And, as with Toshiba’s plan to site its project in the disaster-hit Fukushima prefecture, Mitsubishi said the initiative will have a socio-economic element since it will seek to “reactivate the agricultural sector and revitalize farming communities as well as to expand renewable energy options.”

Mitsubishi also said that, given Japan’s land space constraints, the “effective use of the roofs of existing facilities would be a very desirable way to enter the solar power business, while at the same time conserving agricultural land.”

Elsewhere the Tokyo-based leasing and fi nancial services conglomerate Orix Corporation said in late August that it plans to spend Yen 54 billion ($680 mil-lion) on both solar power stations and rooftop projects over a three-year period. The 200 MW of proposed capacity will be split about equally in capacity terms between mega-scale plants costing about Yen 30 billion and PV arrays costing about Yen 24 billion.

In late August the Tottori Yonago So-lar Park Corporation, a consortium com-prising SB Energy and Mitsui & Co., Ltd, said it had agreed to build and operate a 39.5-MW solar plant. The Softbank Tot-tori-Yonago Solar Park in the Sakitsu dis-trict of Yonago City in Tottori prefecture is scheduled to operate from July 2013.

Tottori Yonago Solar said that it had concluded agreements pertaining to the 534,000-square-meter plant with Tottori prefecture, Yonago city and the Tottori Prefecture Housing Supply Public Cor-poration. The power will be sold to the Chugoku Electric Power Company with output estimated at 39.5 GWh/year.

Foreign companies are also announc-

ing their entry into the Japanese solar market both as investors in solar genera-tion plants and manufacturing facilities. For instance Canadian Solar Inc has said it plans to build a manufacturing plant with up to 150 MW/year of capacity, pos-sibly in Fukushima prefecture.

The scale of the solar proposals can be gauged from the fact that in September 2008 the ten electric power companies grouped under the FEPC together com-mitted to build only 140 MW of large-scale solar plant at thirty sites by 2020—a fraction of the capacity proposed under the current plans.

Solar capacity apart, high feed-in tar-iffs are expected to result in additional geothermal and especially wind capac-ity. Japan hosted 537 MW of geothermal capacity and 2,557 MW of wind capacity at March 2012.

The Environment Ministry said in late August that it is targeting a six-fold increase in offshore wind, geothermal, tidal, wave and biomass-fi red capacity to 19,410 MW by 2030. The targets include 8,030 MW of offshore wind, 3,880 MW of geothermal power, 6,000 MW of biomass plant and 1,500 MW of ocean energy.

The Japan Wind Power Association (JWPA) said in February 2012 that wind capacity could rise to 50,000 MW in 2050, split equally between onshore and offshore capacity and supplying more than 10% of national power demand. Prior to that, it estimates that the capac-ity could reach 11,300 MW by 2020 and 28,800 MW by 2030.

However, the JWPA said in June 2012 that additions will be limited until at least 2015. The ending in 2010 of a pre-vious subsidy payment system for new wind farms meant that only 85.1 MW of new capacity was installed in the year ending March 2012, compared with 303.6 MW in the year ending March 2010. The JWPA added that planning and construction requirements mean that the new feed-in tariffs will only re-sult in capacity being added to the grid from the middle of the decade.

Hence the emphasis on solar power projects, which can be installed rela-tively quickly. The large number of near-term solar proposals is both intended,

renewables


given that the government wants to add a large amount of renewable capacity as soon as possible, and expected, given the high level of the feed-in tariffs and possi-bility that Meti will reduce the tariffs of-fered for projects agreed in future years. But some in the electricity industry are urging caution over the extent of the po-tential additions.

For instance the chairman of the FEPC, Makoto Yagi, has said the government’s renewable energy goals are “very ambi-tious.” He added that “I fi nd their feasi-bility questionable.”

He noted that “estimating grid stabili-zation costs to accommodate the large-scale introduction of photovoltaic and wind power generation requires more detailed research, and comprehensive discussions are needed on the heavy ad-ditional burden that would be placed on the public, specifi cally a signifi cant in-crease in electricity rates and a negative impact on the micro economy.” Yagi also said that nuclear’s share of total pow-er supplies should be “in the 20–25% range as the minimum requirement.”

Much of the debate has revolved around the cost of renewable energy, and in the long run that will certainly infl uence how much capacity Meti allows to be built

through its control of feed-in tariff levels. In this context fi gures published by the Cost Review Committee of the Energy and Environment Council in December 2011 have been used by proponents of both nuclear power and renewable energy to argue their case.

The fi gures indicate the lifetime cost of output from nuclear plants could remain low up to 2030. At the same time the cost of the output from solar installations in particular is projected to fall sharply over the period. However, analyses by lo-cal bodies such as the Institute of Energy Economics Japan note that the fi gures in all cases are critically dependent on assumptions such as the discount rate, plant life and capacity factor, and do not include extraneous expenses such as grid integration costs.

How much renewable capacity Japan will install in the longer term is thus unclear, as are the long-term implica-tions and outlook for the country’s nu-clear and fossil-fueled generating sectors. However, it is certain that the amount will be substantial in the fi rst few years at least, with the competition to enter what could potentially be one of the most lu-crative global renewable energy markets now well and truly under way. ■

2010 2020 2030

Nuclear (70% load) 9.0+ 9.0+ 9.0+

Coal (80%) 9.5 10.2 10.3

LNG (80%) 10.7 10.4 10.9

Oil (10% load) 36 36.4 34.9

Oil (50% load) 22.1 22.5 21

Hydro 10.6 10.6 10.6

Small hydro 20.6 20.6 20.6

Solar (mega) 38 19.1 16

Solar (residential) 35.9 15.4 12

Onshore wind 13.6 13.3 13.1

Offshore wind - 16.2 15.9

Biomass 24.8 24.8 24.8

Gas cogneration 10.6 11.1 11.5

Oil cogeneration 17.1 18.6 19.6

Fuel cells 101.9 20.4 11.5

3. Estimated generation costs for new plants, Yen/kWh.

Source: Energy & Environment Council Decision June 29, 2012 (National Policy Unit)

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There is no rest for the weary in China. The country’s state-controlled oil and gas companies have been busy acquiring assets all over the globe, from Australia to Africa, from Europe to North America, with no sign of any satiation.

The fruit of their labor has been signifi cant. China’s three state com-panies—China National Petroleum Corp. (CNPC) and its listed entity Pet-roChina, Sinopec and China National Offshore Oil Corp.—more than tripled their overseas oil and gas equity output from just over 500,000 barrels of oil equivalent/day in the mid-2000s to al-most 1.7 million boe/d in 2011, accord-ing to Platts estimates.

The expansion program is driven by China’s desire both to internationalize and offset declining domestic hydrocar-bon production, and is backed by strong cash reserves, the deep pockets of state-linked banks and a government eager to secure foreign energy resources at a time when crude imports account for over half of total Chinese oil demand.

Overseas oil and gas acquisitions started gathering pace in 2005, the same year that CNOOC made its am-bitious but ultimately unsuccessful $18.4-billion bid for the US-based and Asian-focused Unocal Corp.

Total transactions almost doubled to more than $11 billion the following

year. But they then tapered off as in-ternational oil prices rose above $140/barrel in 2007-2008 and the companies retreated to focus instead on domestic projects and increasing output from mature fi elds.

All that changed with the global fi -nancial crisis. This was seen as repre-senting a unique opportunity for the companies to take advantage of lower asset prices and reduced competition from other buyers, and acquisitions in-creased signifi cantly.

“The escalation in oil prices since the 2008-2009 recession has strengthened conditions for increased corporate con-solidation, particularly with the diver-gence between strong crude oil and in-ternational LNG prices, and depressed North American natural gas prices,” said IHS Herold in a July 2012 report.

In 2010, close to $25 billion worth of Chinese acquisitions were announced. Almost $15 billion was spent in Latin America and much of the rest on the acquisition of North American oil sands and shale.

Acquisitions in 2012 up to the time of writing (September) have already racked up a record total of $26.1 bil-lion. According to fi nancial analytics company Dealogic this compares with $17 billion in 2011 and has been largely driven by CNOOC’s proposed acquisi-tion—announced in July and valued at

China energy

China’s Questfor HydrocarbonsSong Yen Ling, Senior Writer, China, Platts


China energy

almost $17 billion including debt—of the Calgary, Canada-based Nexen.

The China Petroleum and Chemical Corp., known commonly as Sinopec, has been the most active of the three companies in the last few years. This is primarily because, as the dominant refi ner at home, its upstream growth is limited.

Most of its overseas activities are un-dertaken through subsidiary Sinopec International Petroleum Exploration and Production Corporation (SIPC). Its overseas production has been heavily skewed towards crude, but turned more toward unconventional gas and LNG in the last two years.

Since early 2010, Sinopec has spent over $22 billion on acquisitions. This included the $7.1 billion purchase of deepwater assets in Brazil from YPF in 2011; buying a 9% stake in Syncrude from ConocoPhillips for $4.7 billion; the purchase of producing proper-ties in Argentina from Occidental Petroleum for $2.5 billion; and a to-tal investment of $3.6 billion in the Australia-Pacifi c LNG project in the Australian state of Queensland.

Sinopec wants to more than double its overseas equity production from 475,000 boe/d in 2011 to 1 million

boe/d by 2015. In the fi rst half of 2012, its equity output rose by 24% on year to 523,600 boe/d.

CNOOC is the smallest of the three companies, but its listed unit has maxi-mized profi tability because it has no downstream exposure and does not suf-fer poor margins like its compatriots. It is now (late September) in the process of closing the Nexen deal, which is be-ing reviewed by the US, Canadian and other governments.

CNOOC’s target is for a third of its to-tal output to come from foreign projects by 2015. Analysts say that this would translate to 400,000 boe/d, double the current production of 200,000 boe/d.

Meanwhile PetroChina’s aim is that production from foreign projects will make up about half its total output within the next fi ve years—up from the current 9.4% and the 5% or so posted in 2005. This could mean that over-seas production will potentially reach 2 million boe/d compared with 343,400 boe/d in the fi rst half of 2012.

In 2012 alone, PetroChina plans to invest a third of its Yuan 300 billion ($47.3 billion) capital expenditure bud-get on foreign projects.

PetroChina is owned 86.4% by CNPC, which owns and operates assets

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010 2011 2012 YTD

$ billion

40

50

60

70

80

90

100

110

120

total deal value brent price

1. China outbound M&A volume in oil and gas sector.

Deal values include debt.

Source: Dealogic, Platts


China energy

in potentially politically risky coun-tries such as Sudan and Venezuela. CNPC said that its total overseas equity oil and gas output—including its share in PetroChina—hit 1 million boe/day in 2011, up from under 500,000 boe/day in 2005.

Given these lofty targets, acquisi-tions have increased despite oil prices staying high.

In 2011, Sinopec was the fourth-larg-est oil and gas sector spender globally, splashing out more than $8.5 billion to acquire 413 million boe of proved and

probable (2P) reserves, according to IHS Herold. CNOOC ranked eighth with $4.8 billion of expenditure to buy 543 million boe of 2P reserves.

The IHS Herold data indicates that Chinese companies are not paying ex-cessively for assets compared with their peers. PetroChina’s reserve replacement cost, which includes acquisitions, aver-aged almost $20/boe in 2011, while CNOOC’s was more than $22/boe. This compares with $19.50/boe for Royal Dutch Shell, but was higher than the $16.30/boe for the US’s Exxon Mobil and $17/boe for the UK-based BP, ac-cording to IHS.

Information for Sinopec is unavail-able. SIPC is held by the parent com-pany rather than the listed unit, and data on its foreign assets is not publicly available.

Evolving StrategiesWhile the visible backing of the Chi-

nese government and other state in-stitutions has proved useful, as with numerous oil-for-loans deals in Russia and Latin America as well as gas sup-ply agreements in Central Asia, Chi-

nese companies are warming to West-ern-style wheeling and dealing to help them meet their ambitious growth plans overseas. Their strategies have evolved in various ways over the years.

Following the failure of the Unocal bid, Chinese companies briefl y fl irted with the idea of teaming up for deals. Sinopec and CNPC formed Andes Pe-troleum to acquire projects in Ecuador, while the latter company and CNOOC agreed to explore offshore Kazakhstan in 2006.

The companies also formed consor-tiums with other Asian national oil companies (NOCs) for joint bids, al-though in India’s case this was more a consequence of its state-owned com-panies not being able to match the Chinese companies in competitive bids. CNPC and India’s Oil and Natu-ral Gas Corp. (ONGC) jointly acquired Petro-Canada’s assets in Syria for $575 million in 2006, while Sinopec and ONGC later teamed up to buy Omi-mex in Colombia.

In 2010, PetroChina formed an alli-ance with Shell to acquire Arrow Ener-gy’s Australian coalseam gas assets for an LNG export project in Queensland. The deal was seen as mutually benefi -cial, allowing the Chinese company to make inroads in the unconventional gas business while giving Shell a ready market into which to sell LNG.

PetroChina’s president and vice-chairman, Zhou Jiping, summarized the company’s modus operandi in Au-gust 2012. He said it would increase overseas production in three ways—corporate acquisitions, organic growth from existing assets and joint ventures with other companies.

Eschewing outright competition with other companies, China’s NOCs origi-nally targeted projects in regions their western rivals found too politically risky to operate, including countries in Central Asian, Africa and Latin Ameri-ca. While they are now targeting more regions and resource plays, their ap-proach is unlike the haphazard, scatter-gun strategy of before.

Prior to Nexen, CNOOC had shied away from corporate deals. It chose

While the visible backing of the Chinese government and other state institutions has

proved useful ... Chinese companies are warming to Western-style wheeling and

dealing to help them meet their ambitious growth plans overseas.


China energy

instead to made gradual inroads into North America through asset deals—both onshore US and in the Gulf of Mexico—to familiarize itself with the operating environment and host gov-ernment as well as its partners and competitors.

Aware of China’s increasing impor-tance in the global geopolitical sphere, there is also an increasing desire for acreage in politically stable environ-ments with relatively little regulatory and fi scal risk.

Sinopec’s Talisman deal marked not only its entry into the UK’s North Sea but also displayed its opportunistic ap-proach in targeting smaller companies with stated divestiture plans for their conventional assets in order to focus on newer, more valuable unconventional plays, according to Christopher Shee-han, IHS Herold’s M&A Director. In a presentation made in July 2012, Shee-han said that “Sinopec’s deal ... was at a favorable price per boe and does high-light that larger international compa-nies have pricing leverage when buying conventional assets from smaller E&Ps with stated divestiture plans.”

The companies are also not content to be silent minority stakeholders in projects and are striving for wholly- or majority-owned operated stakes.

In Iraq, PetroChina has shown that it can work alongside—and compete with—its western peers. It is operator of the Halfaya fi eld partnering France’s Total and Malaysia’s Petronas.

The fi eld started production in June 2012 at 70,000 b/d and is expected to

reach 200,000 b/d by 2013. PetroChina is also a partner with BP in the Rumai-la oil fi eld and operates the Al-Ahdab project on its own.

In 2011, PetroChina also acquired the remaining interest in the MacKay River oil sands project in Canada, becoming the fi rst Chinese company to fully con-trol an oil sands project overseas.

While previously their interest was in producing or development projects, the Chinese companies recognize the value that exploration breakthroughs can have in boosting reserves. This is evidenced by the large swathe of off-shore and deepwater blocks they have acquired in the last few years.

The companies are also becoming more adept at post-merger integration and operational management. More importantly, they are seeking to dispel the stereotype of China as a predator intent on stripping foreign countries of their energy resources, and instead to educate stakeholders about the benefi ts of the deals to the countries and their governments.

Zhou has said that PetroChina is now focused on building three central op-erational hubs to oversee its foreign as-sets. And CNOOC’s chief executive, Li Fanrong, said in August 2012 that the Nexen acquisition would be of ben-efi t to local communities, adding that CNOOC would retain Nexen’s opera-tional team and pledging to make To-ronto CNOOC’s North American base.

Unconventional resources have be-come a decided target. All three Chi-nese companies have a growing pres-

CNPC PetroChina Sinopec* CNOOC

2005 453.3 147.5 NA 40.5

2006 630.7 156.1 NA 47.8

2007 663.9 159.9 138 62

2008 694.7 252.7 180.9 64

2009 786.5 287.8 256.9 108

2010 906.7 273.4 369.3 149

2011 1059.7 331 443.2 145

2. Chinese national oil companies overseas production (kboed).

*Sinopec data refers only to equity crude output, data unavailable for 2005-06.

Source: Company data


China energy

ence in oil sands and shale acreage, particularly in liquids-rich areas in North America.

According to Dealogic, oil and gas has been the top sector for Chinese acquisi-tions in the US since 2011. In the fi rst eight months of 2012, the value of Chi-nese oil and gas deals in the US totaled $2.9 billion, more than double the $1.3 billion recorded during the same pe-riod of 2011.

The focus on unconventional re-sources will also increasingly skew their

incremental reserves towards gas. The fuel accounted for almost half of Petro-China’s reserves at the end of 2011, as well as a third of CNOOC’s reserves and over a fi fth of Sinopec’s.

Beyond the Big ThreeWhile the three state companies have

led the majority of mergers and acqui-sition activity, sovereign wealth fund China Investment Corp. (CIC) has also come to the fore. In August 2012 it agreed to pump $500 million into the US-based Cheniere Energy’s planned LNG export project.

In 2011, CIC took a 30% stake in GDF Suez’s upstream division, which in-cludes signifi cant assets in Europe, for $3.2 billion. Its other investments since 2009 have included stakes in the Singa-pore-based trader Noble, Kazakhstan’s Kazmunaigas Exploration Production and Russia’s Nobel Oil. It also has pow-er and mining holdings.

Worth more than $480 billion, CIC was created in 2007 and has part of China’s $3.2 trillion of foreign ex-change reserves at its disposal. But Chairman Lou Jiwei has said that, rather than acting as a vehicle for Beijing to control foreign energy re-sources, the fund’s main aim is to se-cure long-term investments to act as a

hedge against infl ation and currency depreciation.

Sinochem, which is commonly known as China’s fourth state oil and gas com-pany, has also ventured overseas, albeit starting from a relatively modest base. While new to the upstream sector, in 2009 it acquired the UK-listed Emerald Energy for $875 million.

A big chunk of Sinochem’s over-seas production now comes from the 100,000 b/d Peregrino fi eld offshore from Brazil, where it acquired a 40% stake from Norway’s Statoil in 2011 for $3 billion. It said in 2010 that it want-ed to almost quadruple its output to 300,000 b/d by the end of the decade.

Despite their successes, there have been speed bumps along the way, with a few signifi cant deals failing to take off. In 2011 PetroChina cancelled its $5.5-billion offer to farm into Encana’s Cutbank Ridge assets in Canada after both sides reportedly could not agree on post-merger operations and other terms. In Africa, too, China has failed to conclude a number of deals follow-ing opposition from governments and other stakeholders.

New regulations and oversight im-posed by the Chinese government on outbound deals could also complicate matters. The State-owned Assets Su-pervision and Administration Com-mission said in 2011 that it planned to issue more rules on outbound invest-ments in order to protect the value of state-owned enterprises and assets.

“Sometimes overseas targets are a bit cautious about the approvals processes in China, because they don’t neces-sarily understand it and the process,” says David Clinch, who is head of the China energy practice at international law fi rm Herbert Smith. The fi rm has advised the Chinese companies on nu-merous transactions.

Another Beijing-based M&A lawyer noted that “they have developed a perceived reputation for being eager to pay so they receive hundreds of op-portunities every year. But that means they need to invest more in due dili-gence in order to sieve out the value-accretive deals.” ■

In the fi rst eight months of 2012, the value of Chinese oil and gas deals in the US totaled

$2.9 billion, more than double the $1.3 billion recorded during the same period of 2011.


GLO

BA

L LEAD

ERS PROFILE

SPECIAL ADVERTISING SECTION

Cairn India is one of the largest independent oil and gas exploration and production companies in India with a market capitalization of approximately US$ 12 billion. Cairn India and its joint venture partners account for ~25% of India’s domestic crude oil production.

Cairn has been operating in India for more than 15 years and has played an active role in developing oil and gas resources. The company discovered the Man-gala � eld in Barmer, Rajasthan in 2004. This discovery is considered to be the largest onshore oil discovery in India in more than two decades.

Cairn has a strong record of exploration � rsts to its credit. To date, the company has opened three new frontier basins with over 40 discoveries, including 25 in the Rajasthan block. Four out of the eight signi� cant discoveries in India since 2000 were made by Cairn. Cairn India has over 1 billion barrels of reserves/resources base. The company is focused on exploiting their full potential.

The company has always been a front runner in innovative application of advanced technologies to mitigate risks as well as maximizing hydrocarbon recovery. Cairn introduced for the � rst time in India the campaign of hydraulic fracturing for enhanced productivity, drilling Extended Reach Drilling wells in shallow unconsolidated formations, drilling with casing technology and usage of non-damaging mud systems amongst other innovations.

Cairn India has a portfolio of 10 blocks—one block in Rajasthan, two on the west coast, � ve on the east coast of Indiaand one each in Sri Lanka and South Africa (Farm-in agreement signed on 16 August 2012; subject to South African regulatory approvals).

Cairn India produces oil and gas from three assets in India: Rajasthan and Cambay on the west coast of India and Ravva on the east coast of India. It is one of the lowest cost producers in South Asia.Cairn India places huge emphasis on health, safety and environ-ment and is committed towards making a positive contribution to the local community, wherever it oper-

ates. The company’s Health, Safety, and Environment (HSE) philosophy is based on commitment to protect its people, assets and the environment. All production sites operated by Cairn are ISO 14001 certi� ed. Cairn India maintains good relationships with local govern-ments, its joint venture partners and employees.

P. Elango, CEOMr. Elango has over 25 years of experience in the oil

and gas sector. He started his career with ONGC in 1985 and over a span of 10-years had served in diverse roles. He has been with Cairn since 1996.

Elango has spearheaded the planning for the stra-tegic growth of the company and led various depart-ments including Procurement and Supply Chain Management, Corporate Communications, Corporate Social Responsibility, Health, Safety, Environment and Quality, Security, Land Acquisition, Commercial & New Business and Business Transformation. He is on the boards of various fully-owned subsidiary groups of companies of Cairn India Ltd.

Mr. Elango holds an MBA from Annamalai Univer-sity and is a well known name in the oil & gas sector and various industry forums. He is a strong believer in people and ‘values’ based decision making for cor-porate excellence.

For more information visit us at www.cairnindia.com.

Cairn India Limited

P. ElangoCEOCairn India Limited

Milestones■ Mangala—Largest onshore discovery in India since 1985,

largest in the world for the year 2004■ Responsible for 4 out of 8 signi� cant discoveries in

India since 2000■ KG-ONN-2003/1 Block discovery is the largest onshore

discovery in the KG Basin to date■ Built the world’s longest continuously heated and

insulated pipeline ~590 km from Rajasthan to Gujarat in India

■ First company in the world to discover hydrocarbons in Sri Lanka

■ Potential resource for the Rajasthan block now estimated at 7.3 bn boe in-place


SPECIAL ADVERTISING SECTION

The Singapore International Energy Week (SIEW) 2012, in its � fth year, continues to address pertinent global energy issues facing the world today. Held at the Sands Expo and Convention Centre, Marina Bay Sands, on 22-25 October 2012, SIEW brings together top gov-ernment leaders, industry captains and academics to debate how governments and private companies could work together to “Shape a New Energy Landscape”.

Global growth, expanding populations and in-creased urbanisation will drive up energy needs in coming decades. Asia’s energy demand is expected to double over the next 20 years. Emerging trends in the energy space, like the unconventional gas revolution in North America, are expected to change the global energy mix. Advances in technology are also reshap-ing our views on energy use and deployment.

As with previous SIEW events, the SIEW 2012 programme encompasses high-level strategic discus-sions held on the � rst day, and industry-level business activities, including conferences, roundtable discus-sions, trade exhibitions and networking events, which run concurrently throughout the week.

Highlights from SIEW 2012 include:1. The SIEW Opening Keynote Address, where

Maria van der Hoeven, Executive Director of the International Energy Agency (IEA), shares her perspectives on new policy frameworks and policy directions needed to tackle the world’s energy challenges, as well as steps which govern-ments and businesses can take to shape a new energy landscape.

2. The Singapore Energy Summit, a senior-level forum bringing together Ministers, policymak-ers, business leaders and academics, including Jose Maria Figueres, President of the Carbon War

Room; and Ruth Cairnie, Executive Vice-Presi-dent Strategy and Planning, Royal Dutch Shell. These eminent speakers come together to share their views on the following topics:■ Options for the Future Energy Mix■ Financing Tomorrow’s Energy Needs■ Keeping the Door to 2°C Open■ Connecting the Dots: Energy–Water–Food Nexus

3. Specialist and Think-Tank Roundtable sessions on opportunities and challenges in the electric-ity sector in Asia and the world; the potential of LNG hubs in Asia; the latest developments and technologies in offshore renewable energy generation, transmission and distribution; and natural gas in transportation.

4. Business-to-Business conferences & exhibitions covering the entire spectrum of the energy in-dustry from oil and gas to clean and renewable energy, smart grids, electricity markets, carbon abatement and energy trading:■ Asia Future Energy Forum—23 to 24 October■ Asia Smart Grid—23 to 24 October■ Downstream Asia—24 to 25 October■ EMART Asia—23 to 24 October■ PV Asia Paci� c Expo—23 to 25 October■ Gas Summit Asia—24 to 25 October

5. Networking receptions and online business-matching systems for delegates to strengthen existing relationships and foster new contacts.

The Energy Market Authority (EMA) hosts the Singa-pore International Energy Week, which runs from 22 to 25 October 2012 at the Sands Expo and Convention Centre, Marina Bay Sands, Singapore. More information can be found at www.siew.sg.

“Shaping a New Energy Landscape”at Singapore International Energy Week 2012


Asia-Pacifi c’s energy companies have improved their relative position in the Platts 2012 top 250 rankings, placing 12 companies in the top 50 in com-parison with 9 in the 2011 listing. De-spite the number of Asian companies remaining the same, at 70, their aver-age rank rose to 130.6 in 2011 from 131.3 in 2010, a lower number denot-ing a better score.

There was a signifi cant shift in com-position within the 70 companies rep-resented. The number of Chinese com-panies has increased every year since 2008, but in 2011 it leapt from 18 to 23, making it by far the best represented country in Asia-Pacifi c. China now has more companies in the top 250 than any other country except the United States, overtaking both Canada and Ja-pan in 2011.

The strength of Chinese representa-tion is evident from the diversity of

the new entrants. Two were from the coal sector—Inner Mongolia Yitai Coal Co Ltd and Yangquan Coal Industry (Group) Co Ltd; there were two inde-pendent power producers (IPPs)—Hua-dian Power International Corp Ltd and Shenergy Co Ltd; and one Hong Kong-listed E&P company, Kunlun Energy Co Ltd, which is controlled by majority shareholder PetroChina Co Ltd.

Out of the eight industry categories, Chinese companies are the regional leaders in no less than four. PetroChi-na tops the Asia-Pacifi c leader board for integrated oil and gas companies, CNOOC Ltd in the E&P fi eld, China Shenhua Energy Co Ltd in coal and consumable fuels, and Hong Kong’s CLP Holdings Ltd in electric utilities.

Perhaps more indicative of the re-gion’s performance than overall posi-tion in the top 250 is its total domina-tion of the category of fastest-growing companies. Asia-Pacifi c accounts for 30 of the top 50 companies in this catego-ry, based on 3-year compound growth rates (CGRs), showing that if it is fast and sustainable growth that is required, Asia is the place to be.

Of China’s 23 companies in the top 250, no less than 20 appear in the top 50 fastest-growing company list. This provides almost too many rising stars to mention, but high amongst a strong fi eld in terms of growth is the 44.9% 3-year CGR delivered by independent

top 250 global energy companies

Asia GainsTractionPlatts Top 250 Global EnergyCompany Rankings™ Reviewed

Ross McCracken, Editor,Platts Energy Economist

Platts Top 250 Global Energy Company Rankings™ measures fi nancial performance by examin-ing each company’s assets, revenue, profi ts and return on invested capi-tal. All ranked companies have as-sets greater than (US) $4 billion. The underlying data comes from S&P Capital IQ, a business line of the McGraw-Hill Companies.



power producer and trader GD Power Development Co Ltd.

China is exceptional in more ways than one, but key aspects that stand out include the astonishing growth of the country’s IPPs, which make up fi ve of China’s eight fastest-growing com-panies based on 3-yr CGRs. Second, is the leading position of China’s coal and consumable fuels (C&CF) companies. Occupying a central role in the world’s largest coal industry, these companies demonstrate growth rates seemingly un-achievable elsewhere.

Top performer in terms of growth is Shanxi Xishan Coal and Electricity Pow-er Co Ltd with a 3-year CGR of 31.1%. This enabled the company to move up the overall top 250 rankings from 192nd to 158th place.

Success is not limited to the coal and power sectors. In oil and gas, China’s three giants—PetroChina, China Pe-troleum & Chemical Corp (Sinopec) and CNOOC—have all performed well. These companies’ growth rates stand out amongst their global peers.

CNOOC, in particular, recorded a 3-yr CGR of 38.5%, while PetroChina post-ed 23.2% and Sinopec 20%, all well above the global industry average.

Smaller companies are also breaking into the scene. Hong Kong’s Kunlun En-ergy recorded a remarkable 69.6% 3-year CGR, making it China’s fastest-growing company by this measure, not just in oil and gas but across the country’s energy sector as a whole.

Indian HonorsIndia took honors in both the IPP and

Gas Utility categories, with NTPC Ltd and GAIL (India) Ltd coming top of their respective regional segments. India also took honors with the fastest-growing company not just in Asia but the world. Cairn India Ltd posted an astonishing 119.8% 3-yr CGR to put it far in front of the fi eld.

In total, of the 12 Indian companies represented in the top 250, six are in the top 50 list of fastest-growing companies. Of all Indian companies in the top 250, Power Grid Corp of India Ltd has im-

3-year CGR %

Platts RankRank Company Country Industry

1 Cairn India Ltd India E&P 119.8 121

2 Kunlun Energy Co Ltd Hong Kong E&P 69.6 133

3 YTL Power International Bhd Malaysia DU 51.2 173

4 GD Power Development Co Ltd China IPP 44.9 132

5 YTL Corp Bhd Malaysia DU 41 196

6 CNOOC Ltd Hong Kong E&P 38.5 13

7 Reliance Industries Ltd India R&M 33.3 27

8 China Resources Power Holdings Co Ltd Hong Kong IPP 31.4 134

9 Shanxi Xishan Coal & Electricity Power Co Ltd China C&CF 31.1 158

10 Banpu Pcl Thailand C&CF 30.5 149

11 China Yangtze Power Co Ltd China IPP 30.2 120

12 PT Adaro Energy Tbk Indonesia C&CF 28.7 154

13 Huaneng Power International Inc China IPP 25.2 143

14 Datang International Power Generation Co Ltd China IPP 25.1 145

15 NHPC Ltd India IPP 24.7 195

16 China Longyuan Power Group Corp Ltd China IPP 23.6 213

17 China Shenhua Energy Co Ltd China C&CF 23.4 16

18 PetroChina Co Ltd China IOG 23.2 9

19 Reliance Infrastructure Ltd India EU 23.2 215

20 Yanzhou Coal Mining Co Ltd China C&CF 23 86

1. Fastest growing Asia companies.

Source: S&P Capital IQ/Platts

Fastest Growing is based on a three year compound growth rate (CGR) for revenues. The compound growth rate (CGR) is based on the companies revenue numbers for the past four years (current year included). If only three years of data was available then it is a two year CGR. All rankings are computed from data assessed on June 22, 2012.



Platts Rank 2012

Assets Revenues Profi tsReturn on

invested capital 3-year CGR%

Industry codeCompany State or country Region $ million Rank $ million Rank $ million Rank ROIC % Rank

1 Exxon Mobil Corp Texas Americas 331052 2 433526 2 41060 1 23 9 1 IOG

2 Royal Dutch Shell plc Netherlands EMEA 345257 1 470171 1 30918 3 15 28 1 IOG

3 Chevron Corp California Americas 209474 10 236286 6 26895 4 20 13 -2 IOG

4 BP plc United Kingdom EMEA 293068 5 375917 4 25698 5 16 21 1 IOG

5 OJSC Gazprom Russia EMEA 327675 3 139391 10 39289 2 14 31 12 IOG

6 Statoil ASA Norway EMEA 128698 17 108101 17 13192 9 19 14 -0 IOG

7 Total SA France EMEA 205485 11 208618 8 15377 8 12 42 1 IOG

8 ConocoPhillips Texas Americas 153230 16 235265 7 12436 11 13 36 1 E&P

9 PetroChina Co Ltd China Asia/Pacifi c Rim 301261 4 310291 5 20889 6 10 65 23 IOG

10 Rosneft Oil Co Russia EMEA 105968 21 90102 19 12452 10 14 34 10 IOG

11 OJSC LUKOIL Oil Co Russia EMEA 91192 23 133650 12 10357 14 14 35 8 IOG

12 China Petroleum & Chemical Corp China Asia/Pacifi c Rim 179810 14 393585 3 11504 12 10 60 20 IOG

13 CNOOC Ltd Hong Kong Asia/Pacifi c Rim 60370 34 37853 39 11037 13 23 7 38 E&P

14 Ecopetrol SA Colombia Americas 51609 49 36774 43 8642 16 24 6 25 IOG

15 OAO TNK-BP Holding Russia EMEA 35057 75 53404 30 9098 15 32 3 16 IOG

16 China Shenhua Energy Co Ltd China Asia/Pacifi c Rim 63011 31 32709 49 7176 18 14 31 23 C&CF

17 Eni SpA Italy EMEA 179051 15 137931 11 8593 17 8 91 0 IOG

18 Petróleo Brasileiro SA - Petrobras Brazil Americas 290582 6 118423 15 16156 7 7 107 4 IOG

19 Occidental Petroleum Corp California Americas 60044 35 23939 61 6629 20 15 24 0 IOG

20 Surgutneftegaz Russia EMEA 49701 51 22678 67 7009 19 15 25 9 IOG

21 Suncor Energy Inc Canada Americas 72797 28 38295 38 4190 27 9 73 11 IOG

22 Oil & Natural Gas Corp Ltd India Asia/Pacifi c Rim 40551 65 25623 59 4927 24 18 18 12 E&P

23 PTT Plc Thailand Asia/Pacifi c Rim 44080 59 76321 22 3310 32 10 59 7 IOG

24 Marathon Petroleum Corp Ohio Americas 25745 103 73583 23 2385 41 19 16 7 R&M

25 OAO AK Transneft Russia EMEA 55858 41 20148 75 5640 21 12 48 35 S&T

26 SK Innovation Co Ltd South Korea Asia/Pacifi c Rim 30232 89 59012 28 2735 36 13 36 9 R&M

27 Reliance Industries Ltd India Asia/Pacifi c Rim 57276 38 62757 26 3453 31 8 97 33 R&M

28 BG Group plc United Kingdom EMEA 61382 33 21073 72 4236 26 10 65 2 IOG

29 Valero Energy Corp Texas Americas 42783 60 125095 14 2096 49 9 73 6 R&M

30 Apache Corp Texas Americas 52051 46 16672 87 4508 25 12 41 11 E&P

31 Imperial Oil Ltd Canada Americas 24756 109 28382 54 3282 33 23 8 -1 IOG

32 Exelon Corp Illinois Americas 55092 42 18924 79 2495 39 9 71 0 EU

33 RWE AG Germany EMEA 116059 20 61963 27 2336 43 5 147 1 DU

34 Repsol SA Spain EMEA 88880 24 77036 21 2747 35 4 165 5 IOG

35 National Grid plc United Kingdom EMEA 73656 27 21523 70 3168 34 6 118 -4 DU

36 Enterprise Products Partners LP Texas Americas 34125 77 44313 33 2047 50 8 91 8 S&T

37 Enel SpA Italy EMEA 212695 9 98459 18 5196 22 4 203 9 EU

38 Husky Energy Inc Canada Americas 31567 82 22745 66 2165 46 10 58 -2 IOG

39 Iberdrola SA Spain EMEA 121381 18 39642 35 3513 30 4 173 8 EU

40 Electricite de France SA France EMEA 290232 7 81802 20 3770 28 4 203 1 EU

41 Hess Corp New York Americas 39136 68 38513 37 1703 57 7 106 -2 IOG

42 GDF Suez SA France EMEA 267314 8 113576 16 5014 23 3 224 10 DU

43 JX Holdings Inc Japan Asia/Pacifi c Rim 83064 25 133142 13 2118 47 4 187 R&M

44 Sasol Ltd South Africa EMEA 21101 121 16888 86 2347 42 16 23 3 IOG

45 TonenGeneral Sekiyu KK Japan Asia/Pacifi c Rim 13825 166 33238 48 1649 60 31 4 -6 R&M

46 Canadian Natural Resources Ltd Canada Americas 46026 55 13427 108 2573 38 8 78 -1 E&P

47 Southern Co Georgia Americas 59267 36 17657 84 2203 45 6 125 1 EU

48 Coal India Ltd India Asia/Pacifi c Rim 18722 131 10926 123 2587 37 35 2 15 C&CF

49 Inpex Corp Japan Asia/Pacifi c Rim 38071 71 14734 98 2409 40 7 98 3 E&P

50 OAO Tatneft Russia EMEA 18872 130 18495 82 1847 53 12 42 12 E&P

Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversifi ed utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent power producer and energy trader, R&M = refi ning and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 22, 2012.



Platts Rank 2012




51 OMV Aktiengesellschaft Austria EMEA 35590 73 42654 34 1332 79 6 122 10 IOG

52 Marathon Oil Corp Texas Americas 31371 83 14717 99 1707 56 8 85 -41 E&P

53 NextEra Energy Inc Florida Americas 57188 39 15341 92 1923 52 5 143 -2 EU

54 CEZ, a.s. Czech Republic EMEA 29079 92 9914 132 1982 51 10 62 4 EU

55 Cenovus Energy Inc Canada Americas 21606 120 15280 93 1439 70 10 61 -4 IOG

56 JSOC Bashneft Russia EMEA 13573 170 16549 88 1572 61 15 25 63 E&P

57 Devon Energy Corp Oklahoma Americas 41117 63 10573 127 2111 48 7 107 -9 E&P

58 Gas Natural SDG SA Spain EMEA 58248 37 26399 58 1660 59 4 196 16 GU

59 American Electric Power Co Inc Ohio Americas 52223 44 15116 94 1568 63 5 151 2 EU

60 Fortum Oyj Finland EMEA 28807 93 7717 158 2216 44 10 62 3 EU

61 China Coal Energy Co Ltd China Asia/Pacifi c Rim 25126 105 13790 106 1540 64 8 85 20 C&CF

62 NTPC Ltd India Asia/Pacifi c Rim 27179 97 11371 118 1718 55 8 91 15 IPP

63 S-Oil Corp South Korea Asia/Pacifi c Rim 11395 186 27545 56 1028 89 13 38 11 R&M

64 Chesapeake Energy Corp Oklahoma Americas 41835 62 11635 117 1570 62 5 129 0 E&P

65 Public Service Enterprise Group Inc New Jersey Americas 29821 90 11079 122 1407 73 8 88 -4 DU

66 Entergy Corp Louisiana Americas 40702 64 11229 121 1346 78 6 114 -5 EU

67 Duke Energy Corp North Carolina Americas 62526 32 14236 104 1702 58 4 187 3 EU

68 Idemitsu Kosan Co Ltd Japan Asia/Pacifi c Rim 33300 81 53515 29 799 100 4 173 4 R&M

69 PPL Corp Pennsylvania Americas 42648 61 12737 114 1487 66 5 143 18 EU

70 YPF SA Argentina Americas 12599 177 12894 112 1204 81 17 20 18 IOG

71 EDP-Energias de Portugal SA Portugal EMEA 51707 48 18940 78 1409 71 4 196 3 EU

72 Dominion Resources Inc Virginia Americas 45614 56 14379 101 1408 72 4 165 -3 DU

73 Sempra Energy California Americas 33356 80 10036 131 1357 77 6 109 -2 DU

74 OAO Novatek Russia EMEA 11526 184 5292 187 3597 29 36 1 30 E&P

75 Centrais Elétricas Brasileiras SA Eletrobras Brazil Americas 79122 26 14323 103 1810 54 3 221 -0 EU

76 Polska Grupa Energetyczna SA Poland EMEA 17207 136 8232 150 1445 69 11 50 13 EU

77 Centrica plc United Kingdom EMEA 30450 88 35515 44 688 117 4 157 3 DU

78 Murphy Oil Corp Arkansas Americas 14138 163 27689 55 741 110 8 83 0 IOG

79 HollyFrontier Corp Texas Americas 10315 200 15440 91 1023 90 14 30 38 R&M

80 Consolidated Edison Inc New York Americas 39214 67 12938 111 1051 88 5 151 -2 DU

81 Plains All American Pipeline LP Texas Americas 15381 153 34275 47 730 112 6 109 4 S&T

82 Indian Oil Corp Ltd India Asia/Pacifi c Rim 38482 69 71288 24 740 111 3 218 12 R&M

83 Polski Koncern Naftowy Orlen SA Poland EMEA 17198 138 31324 51 692 116 6 119 10 R&M

84 CLP Holdings Ltd Hong Kong Asia/Pacifi c Rim 27610 96 11807 115 1197 82 5 132 19 EU

85 Turkiye Petrol Rafi nerileri AS Turkey EMEA 8124 236 22814 65 684 118 18 17 11 R&M

86 Yanzhou Coal Mining Co Ltd China Asia/Pacifi c Rim 15263 154 7394 162 1403 74 12 49 23 C&CF

87 EOG Resources Inc Texas Americas 24839 108 9007 137 1091 87 6 114 12 E&P

88 Cia Energetica de Minas Gerais Brazil Americas 18118 134 7670 160 1171 83 9 72 13 EU

89 Formosa Petrochemical Corp Taiwan Asia/Pacifi c Rim 15435 152 26713 57 751 108 5 132 -3 R&M

90 Enbridge Inc Canada Americas 33434 79 18888 80 965 95 4 196 6 S&T

91 Woodside Petroleum Ltd Australia Asia/Pacifi c Rim 22740 116 4802 191 1507 65 8 81 -8 E&P

92 TransCanada Corp Canada Americas 47698 53 8897 139 1487 67 4 196 2 S&T

93 MOL Hungarian Oil & Gas Co Hungary EMEA 21732 117 23258 64 669 121 4 157 15 IOG

94 PG&E Corp California Americas 49750 50 14956 95 844 98 3 217 1 DU

95 OJSC RusHydro Russia EMEA 24402 110 10900 125 1013 92 5 135 50 EU

96 Peabody Energy Corp Missouri Americas 16733 140 7974 153 1017 91 8 78 7 C&CF

97 FirstEnergy Corp Ohio Americas 47326 54 15772 90 885 96 3 224 6 EU

98 Tesoro Corp Texas Americas 9892 206 29927 53 546 142 10 64 2 R&M

99 Xcel Energy Inc Minnesota Americas 29497 91 10655 126 835 99 4 157 -2 EU

100 JSC KazMunaiGas Exploration Production Kazakhstan EMEA 10327 199 4833 190 1400 75 15 25 6 E&P




Platts Rank 2012




101 Spectra Energy Corp Texas Americas 28138 95 5351 185 1159 85 6 125 2 S&T

102 CenterPoint Energy Inc Texas Americas 21703 118 8450 146 770 105 6 124 -9 DU

103 Talisman Energy Inc Canada Americas 24226 111 8266 147 776 104 5 135 -1 E&P

104 Federal Grid Co of Unifi ed Energy System JSC Russia EMEA 34980 76 4233 208 1477 68 5 147 25 EU

105 Galp Energia SGPS SA Portugal EMEA 12721 176 21176 71 542 143 6 109 4 IOG

106 Williams Companies Inc Oklahoma Americas 16502 142 7930 154 793 101 7 103 -13 S&T

107 JSC Interregional Distribution Grid Companies Holding Russia EMEA 26425 101 19076 77 672 120 4 203 17 EU

108 DTE Energy Co Michigan Americas 26009 102 8897 139 711 115 5 151 -2 DU

109 GAIL (India) Ltd India Asia/Pacifi c Rim 8934 221 7713 159 778 103 12 42 21 GU

110 ONEOK Partners LP Oklahoma Americas 8947 220 11323 120 682 119 9 68 14 S&T

111 Tokyo Gas Co Ltd Japan Asia/Pacifi c Rim 23141 115 21780 69 572 136 3 218 2 GU

112 Canadian Oil Sands Ltd Canada Americas 8392 233 3772 219 1114 86 21 11 -5 E&P

113 Snam S.p.A. Italy EMEA 26492 100 4486 201 990 94 5 155 23 GU

114 CONSOL Energy Inc Pennsylvania Americas 12526 178 5991 180 632 125 9 67 9 C&CF

115 CPFL Energia SA Brazil Americas 13295 172 6190 175 742 109 7 103 10 EU

116 SSE plc United Kingdom EMEA 30631 87 49364 31 308 186 2 256 8 EU

117 Osaka Gas Co Ltd Japan Asia/Pacifi c Rim 18322 132 16075 89 561 138 4 202 -1 GU

118 Saudi Electricity Co Saudi Arabia EMEA 56912 40 8151 151 590 129 2 247 11 EU

119 The AES Corp Virginia Americas 45333 57 17274 85 458 158 1 267 4 IPP

120 China Yangtze Power Co Ltd China Asia/Pacifi c Rim 24883 107 3250 234 1210 80 5 146 30 IPP

121 Cairn India Ltd India Asia/Pacifi c Rim 9357 213 2076 264 1390 76 16 21 120 E&P

122 Showa Shell Sekiyu KK Japan Asia/Pacifi c Rim 15003 157 34408 46 287 192 4 182 -5 R&M

123 Progress Energy Inc North Carolina Americas 35059 74 8907 138 580 130 2 239 -1 EU

124 GS Holdings Corp South Korea Asia/Pacifi c Rim 8998 218 7331 165 668 122 8 76 -40 R&M

125 Ultrapar Holdings Inc Brazil Americas 6665 261 23600 63 412 171 8 91 20 S&T

126 ELETROPAULO-Metropolitana Eletricidade de Sao Paulo SA Brazil Americas 5221 299 4770 192 762 106 24 5 9 EU

127 Enbridge Energy Partners LP Texas Americas 11370 187 9110 135 520 147 5 141 -3 S&T

128 AGL Energy Ltd Australia Asia/Pacifi c Rim 9738 208 7103 166 561 139 7 98 9 DU

129 The Hong Kong & China Gas Co Ltd Hong Kong Asia/Pacifi c Rim 10963 192 2890 242 792 102 8 76 22 GU

130 Power Assets Holdings Ltd Hong Kong Asia/Pacifi c Rim 12206 180 1314 298 1169 84 11 52 -7 EU

131 Santos Ltd Australia Asia/Pacifi c Rim 15883 149 2541 249 756 107 6 114 -3 E&P

132 GD Power Development Co Ltd China Asia/Pacifi c Rim 28622 94 7852 156 573 135 2 243 45 IPP

133 Kunlun Energy Co Ltd Hong Kong Asia/Pacifi c Rim 10832 194 3272 233 723 113 8 88 70 E&P

134 China Resources Power Holdings Co Ltd Hong Kong Asia/Pacifi c Rim 21693 119 7822 157 573 133 3 221 31 IPP

135 Thai Oil Pcl Thailand Asia/Pacifi c Rim 4875 314 13130 110 467 156 11 50 2 R&M

136 Ameren Corp Missouri Americas 23645 112 7337 164 519 148 3 210 -2 DU

137 ONEOK Inc Oklahoma Americas 13697 167 14806 97 358 177 4 194 -3 GU

138 Polskie Gornictwo Naftowe I Gazownictwo SA Poland EMEA 11117 189 6736 170 476 154 6 125 8 IOG

139 Wisconsin Energy Corp Wisconsin Americas 13862 165 4486 200 513 150 6 125 1 DU

140 Kinder Morgan Inc Texas Americas 30717 86 8265 148 478 153 2 256 -12 S&T

141 Southwestern Energy Co Texas Americas 7903 240 2953 239 638 124 12 46 8 E&P

142 Companhia Paranaense de Energia Brazil Americas 9274 214 3771 220 561 137 8 81 12 EU

143 Huaneng Power International Inc China Asia/Pacifi c Rim 40441 66 20885 74 185 230 0 285 25 IPP

144 E.ON AG Germany EMEA 191485 13 142134 9 -2797 327 -3 309 9 DU

145 Datang International Power Generation Co Ltd China Asia/Pacifi c Rim 38344 70 11354 119 300 190 1 279 25 IPP

146 Penn West Petroleum Ltd Canada Americas 15171 155 2926 241 621 127 5 135 -10 E&P

147 Tullow Oil plc United Kingdom EMEA 10634 196 2304 259 649 123 8 80 21 E&P

148 OJSC Moscow United Electric Grid Co Russia EMEA 7502 244 3889 215 540 145 11 56 26 EU

149 Banpu Pcl Thailand Asia/Pacifi c Rim 7072 253 3533 226 631 126 11 55 30 C&CF

150 Shanxi Lu'an Environmental Energy Development Co Ltd China Asia/Pacifi c Rim 5431 294 3441 227 603 128 19 15 10 C&CF




Platts Rank 2012




151 CMS Energy Corp Michigan Americas 16452 144 6503 173 413 170 4 184 -2 DU

152 Inner Mongolia Yitai Coal Co Ltd China Asia/Pacifi c Rim 4698 318 2664 245 863 97 20 12 21 C&CF

153 Korea Gas Corp South Korea Asia/Pacifi c Rim 31081 85 24593 60 157 245 1 284 7 GU

154 PT Adaro Energy Tbk Indonesia Asia/Pacifi c Rim 5659 282 3987 213 550 141 12 42 29 C&CF

155 Cheung Kong Infrastructure Holdings Ltd Hong Kong Asia/Pacifi c Rim 9898 205 525 325 998 93 10 57 13 EU

156 Sunoco Logistics Partners LP Pennsylvania Americas 5477 291 10905 124 259 200 9 69 2 S&T

157 Denbury Resources Inc Texas Americas 10184 202 2292 261 573 134 8 88 19 E&P

158 Shanxi Xishan Coal & Electricity Power Co Ltd China Asia/Pacifi c Rim 6071 274 4689 195 442 162 11 54 31 C&CF

159 Veolia Environnement SA France EMEA 63137 30 37136 41 -611 315 -2 300 -6 DU

160 Red Eléctrica Corporación SA Spain EMEA 10979 191 2074 265 577 132 7 103 14 EU

161 Tokyo Electric Power Co Inc Japan Asia/Pacifi c Rim 192892 12 66416 25 -9704 331 -9 326 -3 EU

162 Pacifi c Rubiales Energy Corp Canada Americas 5449 293 3381 230 554 140 14 31 80 E&P

163 Nexen Inc Canada Americas 19537 128 6260 174 385 176 3 218 -3 E&P

164 Korea Electric Power Corp South Korea Asia/Pacifi c Rim 117787 19 37573 40 -2909 329 -3 310 11 EU

165 Northeast Utilities Connecticut Americas 15647 151 4466 202 395 174 4 173 -8 EU

166 VERBUND AG Austria EMEA 14855 161 4882 189 442 163 4 187 1 EU

167 Newfi eld Exploration Co Texas Americas 8991 219 2471 252 539 146 8 85 4 E&P

168 Chubu Electric Power Co Inc Japan Asia/Pacifi c Rim 70112 29 30409 52 -1145 321 -2 302 -1 EU

169 Acciona SA Spain EMEA 25461 104 9267 134 253 203 1 267 -5 EU

170 Tauron Polska Energia SA Poland EMEA 8320 234 6066 178 357 178 6 119 EU

171 Kansai Electric Power Co Inc Japan Asia/Pacifi c Rim 93381 22 34905 45 -3008 330 -4 314 0 EU

172 PowerGrid Corp of India Ltd India Asia/Pacifi c Rim 16480 143 1805 274 578 131 4 163 22 EU

173 YTL Power International Bhd Malaysia Asia/Pacifi c Rim 11037 190 4591 198 427 168 5 155 51 DU

174 Yangquan Coal Industry (Group) Co Ltd China Asia/Pacifi c Rim 4385 327 4427 203 442 164 17 19 18 C&CF

175 Energy Transfer Equity LP Texas Americas 20897 122 8241 149 309 185 2 262 -4 S&T

176 Noble Energy Inc Texas Americas 16444 145 3568 225 453 161 4 187 -1 E&P

177 Manila Electric Co Philippines Asia/Pacifi c Rim 4950 310 6043 179 288 191 13 39 10 EU

178 Bharat Petroleum Corp Ltd India Asia/Pacifi c Rim 13622 168 37105 42 137 256 2 258 16 R&M

179 Origin Energy Ltd Australia Asia/Pacifi c Rim 26756 98 10389 128 187 229 1 273 8 IOG

180 NRG Energy Inc New Jersey Americas 26715 99 9079 136 188 227 1 270 10 IPP

181 SCANA Corp South Carolina Americas 13534 171 4409 204 387 175 4 182 -6 DU

182 Neste Oil Corp Finland EMEA 9109 216 17799 83 198 221 3 215 1 R&M

183 OGE Energy Corp Oklahoma Americas 8906 222 3916 214 343 180 6 119 -1 EU

184 NiSource Inc Indiana Americas 20708 125 5956 182 304 187 2 243 -12 DU

185 Exxaro Resources Ltd South Africa EMEA 4377 328 1479 289 720 114 23 10 -3 C&CF

186 Chugoku Electric Power Co Inc Japan Asia/Pacifi c Rim 35846 72 14667 100 31 288 0 289 0 EU

187 Whiting Petroleum Corp Colorado Americas 6046 275 1860 272 491 151 11 52 12 E&P

188 Edison International California Americas 48039 52 12760 113 -34 294 -0 292 -3 EU

189 Cimarex Energy Co Colorado Americas 5429 295 1758 278 518 149 15 29 -4 E&P

190 EQT Corp Pennsylvania Americas 8773 225 1640 284 480 152 8 91 1 E&P

191 Cosmo Oil Co Ltd Japan Asia/Pacifi c Rim 20797 124 38609 36 -113 298 -1 296 -3 R&M

192 The Abu Dhabi National Energy Co PJSC United Arab Emirates EMEA 31224 84 6585 171 203 218 1 282 13 DU

193 Pinnacle West Capital Corp Arizona Americas 13111 175 3241 237 328 181 4 163 0 EU

194 Electric Power Development Co Ltd Japan Asia/Pacifi c Rim 25034 106 8127 152 200 220 1 279 -2 IPP

195 NHPC Ltd India Asia/Pacifi c Rim 10554 197 1186 304 540 144 6 112 25 IPP

196 YTL Corp Bhd Malaysia Asia/Pacifi c Rim 15114 156 5748 184 324 182 2 236 41 DU

197 Pioneer Natural Resources Co Texas Americas 11524 185 2347 254 396 173 5 147 5 E&P

198 EnBW Energie Baden-Wuerttemberg AG Germany EMEA 44868 58 23610 62 -1086 320 -6 321 5 EU

199 Alliant Energy Corp Wisconsin Americas 9688 209 3665 221 302 188 5 143 0 DU

200 Concho Resources Inc Texas Americas 6850 256 1740 279 461 157 9 69 52 E&P




Platts Rank 2012




201 Tenaga Nasional Bhd Malaysia Asia/Pacifi c Rim 23364 114 10085 130 156 246 1 273 9 EU

202 Cameco Corp Canada Americas 7595 242 2321 257 438 165 7 100 3 C&CF

203 Kyushu Electric Power Co Inc Japan Asia/Pacifi c Rim 54977 43 18724 81 -2066 325 -5 316 -0 EU

204 Encana Corp Canada Americas 33918 78 8467 145 128 258 0 285 -26 E&P

205 Tohoku Electric Power Co Inc Japan Asia/Pacifi c Rim 52105 45 20919 73 -2879 328 -8 323 -3 EU

206 Pepco Holdings Inc District of Columbia Americas 14910 160 5920 183 260 198 3 228 -10 EU

207 INA-Industrija nafte d.d. Croatia EMEA 5128 304 5047 188 302 189 8 91 3 IOG

208 Continental Resources Inc Oklahoma Americas 5646 283 1680 282 429 167 12 46 20 E&P

209 Integrys Energy Group Inc Illinois Americas 9983 203 4709 194 228 211 4 173 -30 DU

210 UGI Corp Pennsylvania Americas 6663 262 6091 177 233 208 5 135 -3 GU

211 ATCO Ltd Canada Americas 12123 181 3885 216 318 183 4 203 7 DU

212 Hindustan Petroleum Corp Ltd India Asia/Pacifi c Rim 14981 158 32400 50 31 289 0 287 13 R&M

213 China Longyuan Power Group Corp Ltd China Asia/Pacifi c Rim 14156 162 2539 250 414 169 3 210 24 IPP

214 Enagas SA Spain EMEA 9667 210 1401 296 457 159 5 129 -3 GU

215 Reliance Infrastructure Ltd India Asia/Pacifi c Rim 10750 195 4138 209 278 195 4 196 23 EU

216 Terna SpA Italy EMEA 15891 148 1998 268 410 172 3 210 11 EU

217 El Paso Pipeline Partners LP Texas Americas 6297 267 1425 293 472 155 8 83 10 S&T

218 Anadarko Petroleum Corp Texas Americas 51779 47 13882 105 -2649 326 -8 323 -0 E&P

219 Fortis Inc Canada Americas 13203 174 3648 222 310 184 3 224 -1 EU

220 QEP Resources Inc Colorado Americas 7443 246 3159 238 267 197 5 132 11 E&P

221 MDU Resources Group Inc North Dakota Americas 6556 265 4050 210 225 212 5 129 -7 DU

222 Grupa Lotos SA Poland EMEA 5980 277 8568 142 190 225 4 173 22 R&M

223 TECO Energy Inc Florida Americas 7322 250 3343 232 271 196 5 141 -0 DU

224 Ultra Petroleum Corp Texas Americas 4870 315 1102 311 453 160 13 40 0 E&P

225 Hellenic Petroleum SA Greece EMEA 9005 217 11659 116 143 252 2 245 -3 R&M

226 Linn Energy LLC Texas Americas 8000 239 1173 306 434 166 6 122 15 E&P

227 Huadian Power International Corp Ltd China Asia/Pacifi c Rim 23418 113 8512 143 12 290 0 289 22 IPP

228 Edison SpA Italy EMEA 19837 127 14336 102 -333 309 -2 306 4 IPP

229 TransAlta Corp Canada Americas 9502 212 2592 248 282 193 4 194 -5 IPP

230 National Fuel Gas Co New York Americas 5285 297 1779 276 258 201 9 73 -10 GU

231 Atmos Energy Corp Texas Americas 7283 252 4348 205 197 222 4 173 -16 GU

232 EVN AG Austria EMEA 8606 230 3419 228 238 206 4 196 4 EU

233 Qatar Electricity & Water Co Q.S.C Qatar EMEA 6175 271 1228 299 357 179 6 112 25 DU

234 PT Bumi Resources Tbk Indonesia Asia/Pacifi c Rim 7368 249 4001 212 221 214 4 187 6 C&CF

235 EDP - Energias do Brasil SA Brazil Americas 6626 263 2620 247 238 205 5 147 5 EU

236 Hawaiian Electric Industries Inc Hawaii Americas 9593 211 3242 236 138 255 4 165 0 EU

237 Sunoco Inc Pennsylvania Americas 11982 182 44610 32 -1528 323 -29 331 -2 R&M

238 Essar Energy Plc United Kingdom EMEA 16259 147 14905 96 -509 313 -5 315 R&M

239 NuStar Energy LP Texas Americas 5881 278 6575 172 181 231 4 203 11 R&M

240 Westar Energy Inc Kansas Americas 8683 227 2171 263 228 210 4 187 6 EU

241 Energen Corp Alabama Americas 5237 298 1458 290 260 199 7 102 -2 E&P

242 Esso SAF France EMEA 5197 302 19946 76 58 280 3 231 2 R&M

243 Acea SpA Italy EMEA 8289 235 4032 211 177 234 3 210 2 DU

244 Emera Inc Canada Americas 6740 259 2010 267 235 207 4 157 16 EU

245 Public Power Corp SA Greece EMEA 20849 123 6906 168 -187 302 -1 298 -2 EU

246 Alpiq Holding AG Switzerland EMEA 18197 133 13291 109 -1422 322 -11 327 -1 EU

247 Shenergy Co Ltd China Asia/Pacifi c Rim 5538 289 3586 224 223 213 4 165 21 IPP

248 Interconexión Eléctrica SA E.S.P. Colombia Americas 14910 159 2443 253 188 226 2 258 11 EU

249 Shikoku Electric Power Co Inc Japan Asia/Pacifi c Rim 17074 139 7352 163 -116 299 -1 296 -2 EU

250 ARC Resources Ltd Canada Americas 5183 303 1187 303 279 194 7 100 -4 E&P




proved its overall ranking most, rising from 232nd in 2010 to 172nd in 2011, a gain of 60 places.

Other signifi cant moves include a rise of 21 places for leading power pro-ducer NHPC Ltd to 195th and amongst the electric utilities Reliance Infra-structure Ltd gained 17 places to come 215th in the overall top 250. Although these represent the bright spots for fi -nancial performance in 2011, 2012 may prove more challenging for In-dia’s power generators. Faced by fuel shortages, growing dependency on ex-pensive imports and regulated domes-tic retail electricity prices, the widely reported blackouts in northern India in July suggest 2011’s performance may prove hard to sustain.

The resilience of Indian companies should, however, not be underestimat-ed. A perhaps surprising entry at num-ber 2 in the return on invested capital (ROIC) rankings is Coal India Ltd with an ROIC of 35.3%. A new entrant to the rankings in 2010, when the compa-ny listed, Coal India has posted strong returns on invested capital in both years, a remarkable achievement given the challenges it faces. Dominating as a near monopoly its domestic market, Coal India is struggling to keep pace with output targets, while its overall profi tability is constrained by regulated domestic coal prices, which is forcing it to look abroad for new assets and also to import more expensive coal.

In contrast to Indian advances, Ja-pan saw two of its smaller electric utilities leave the top 250. The num-ber of Japanese companies in the list fell from 18 to 16, and the average ranking of those companies dropped from 132.1 in 2010 to 142.7 in 2011. Seven of the companies are electric utilities, which showed a negative or zero return on equity invested in the Japanese fi scal year 2011, which ended in March 2012.

The country’s power generation com-panies continue to suffer from the af-termath of the devastating earthquake and tsunami that hit the country in March 2011, and which resulted in the country’s entire nuclear fl eet coming off-line by May 2012. Without doubt worst hit was Tokyo Electric Power Co Inc, which has fallen to 161st in the current rankings from 131st in the pre-vious year.

However, other Japanese companies have managed to improve their posi-tions. Despite high crude prices and an enormously competitive environ-ment that saw a swathe of refinery closures in the US and Europe, Ja-pan’s biggest movers are both from the oil refining and marketing sector. Showa Shell Sekiyu KK was the big-gest improver, gaining 43 places in the overall top 250 rankings to come 122nd, while TonenGeneral Sekiyu KK moved up an impressive 36 spots to 45th.

3-year CGR %

Platts RankRank Company State or country Industry

1 Pacifi c Rubiales Energy Corp Canada E&P 80.1 162

2 Concho Resources Inc Texas E&P 52.3 200

3 HollyFrontier Corp Texas R&M 38.1 79

4 Ecopetrol SA Colombia IOG 24.7 14

5 Continental Resources Inc Oklahoma E&P 20.2 208

6 Ultrapar Holdings Inc Brazil S&T 19.8 125

7 Denbury Resources Inc Texas E&P 19 157

8 YPF SA Argentina IOG 17.6 70

9 PPL Corp Pennsylvania EU 17.5 69

10 Emera Inc Canada EU 15.7 244

2. Fastest growing Americas companies.


Fastest Growing is based on a 3 year compound growth rate (CGR) for revenues. The compound growth rate (CGR) is based on the companies revenue numbers for the past four years (current year included). If only three years of data was available then it is a two year CGR. All rankings are computed from data assessed on June 22, 2012.



Top Asia

Platts Rank 2012


invested capital Industry codeCompany State or country $ million Rank $ million Rank $ million Rank ROIC % Rank

1 9 PetroChina Co Ltd China 301261 4 310291 5 20889 6 10 65 IOG

2 12 China Petroleum & Chemical Corp China 179810 14 393585 3 11504 12 10 60 IOG

3 13 CNOOC Ltd Hong Kong 60370 34 37853 39 11037 13 23 7 E&P

4 16 China Shenhua Energy Co Ltd China 63011 31 32709 49 7176 18 14 31 C&CF

5 22 Oil & Natural Gas Corp Ltd India 40551 65 25623 59 4927 24 18 18 E&P

6 23 PTT Plc Thailand 44080 59 76321 22 3310 32 10 59 IOG

7 26 SK Innovation Co Ltd South Korea 30232 89 59012 28 2735 36 13 36 R&M

8 27 Reliance Industries Ltd India 57276 38 62757 26 3453 31 8 97 R&M

9 43 JX Holdings Inc Japan 83064 25 133142 13 2118 47 4 187 R&M

10 45 TonenGeneral Sekiyu KK Japan 13825 166 33238 48 1649 60 31 4 R&M

11 48 Coal India Ltd India 18722 131 10926 123 2587 37 35 2 C&CF

12 49 Inpex Corp Japan 38071 71 14734 98 2409 40 7 98 E&P

13 61 China Coal Energy Co Ltd China 25126 105 13790 106 1540 64 8 85 C&CF

14 62 NTPC Ltd India 27179 97 11371 118 1718 55 8 91 IPP

15 63 S-Oil Corp South Korea 11395 186 27545 56 1028 89 13 38 R&M

16 68 Idemitsu Kosan Co Ltd Japan 33300 81 53515 29 799 100 4 173 R&M

17 82 Indian Oil Corp Ltd India 38482 69 71288 24 740 111 3 218 R&M

18 84 CLP Holdings Ltd Hong Kong 27610 96 11807 115 1197 82 5 132 EU

19 86 Yanzhou Coal Mining Co Ltd China 15263 154 7394 162 1403 74 12 49 C&CF

20 89 Formosa Petrochemical Corp Taiwan 15435 152 26713 57 751 108 5 132 R&M

21 91 Woodside Petroleum Ltd Australia 22740 116 4802 191 1507 65 8 81 E&P

22 109 GAIL (India) Ltd India 8934 221 7713 159 778 103 12 42 GU

23 111 Tokyo Gas Co Ltd Japan 23141 115 21780 69 572 136 3 218 GU

24 117 Osaka Gas Co Ltd Japan 18322 132 16075 89 561 138 4 202 GU

25 120 China Yangtze Power Co Ltd China 24883 107 3250 234 1210 80 5 146 IPP

26 121 Cairn India Ltd India 9357 213 2076 264 1390 76 16 21 E&P

27 122 Showa Shell Sekiyu KK Japan 15003 157 34408 46 287 192 4 182 R&M

28 124 GS Holdings Corp South Korea 8998 218 7331 165 668 122 8 76 R&M

29 128 AGL Energy Ltd Australia 9738 208 7103 166 561 139 7 98 DU

30 129 The Hong Kong & China Gas Co Ltd Hong Kong 10963 192 2890 242 792 102 8 76 GU

31 130 Power Assets Holdings Ltd Hong Kong 12206 180 1314 298 1169 84 11 52 EU

32 131 Santos Ltd Australia 15883 149 2541 249 756 107 6 114 E&P

33 132 GD Power Development Co Ltd China 28622 94 7852 156 573 135 2 243 IPP

34 133 Kunlun Energy Co Ltd Hong Kong 10832 194 3272 233 723 113 8 88 E&P

35 134 China Resources Power Holdings Co Ltd Hong Kong 21693 119 7822 157 573 133 3 221 IPP


Refi ners in South Korea also proved to be their country’s star performers. SK Innovation Co Ltd gained a full 30 places to come 26th overall in the top 250, and in the R&M segment came second only to the newly demerged US company Marathon Petroleum Corp. While SK Innovation was South Korea’s top mover, S-Oil Corp came a close second, gaining 28 places to 63rd overall.

The Korea Gas Corp also did well,

moving up from 176th in 2010 to 153rd in 2011. Meanwhile back in Japan, Osa-ka Gas Co Ltd also bucked the trend in the gas sector by gaining 23 places to come 117th, while in the E&P seg-ment Inpex Corp put in a strong perfor-mance to move from 76th place in 2010 to 49th in 2011.

However, some of Asia Pacifi c’s big-gest movers come from further south. Although it was a mixed picture over-all for Southeast Asia, Indonesia’s PT

Asian companies in 2012 Top 250



Top Asia

Platts Rank 2012


invested capital Industry codeCompany State or country $ million Rank $ million Rank $ million Rank ROIC % Rank

36 135 Thai Oil Pcl Thailand 4875 314 13130 110 467 156 11 50 R&M

37 143 Huaneng Power International Inc China 40441 66 20885 74 185 230 0 285 IPP

38 145 Datang International Power Generation Co Ltd China 38344 70 11354 119 300 190 1 279 IPP

39 149 Banpu Pcl Thailand 7072 253 3533 226 631 126 11 55 C&CF

40 150 Shanxi Lu'an Environmental Energy Development Co Ltd China 5431 294 3441 227 603 128 19 15 C&CF

41 152 Inner Mongolia Yitai Coal Co Ltd China 4698 318 2664 245 863 97 20 12 C&CF

42 153 Korea Gas Corp South Korea 31081 85 24593 60 157 245 1 284 GU

43 154 PT Adaro Energy Tbk Indonesia 5659 282 3987 213 550 141 12 42 C&CF

44 155 Cheung Kong Infrastructure Holdings Ltd Hong Kong 9898 205 525 325 998 93 10 57 EU

45 158 Shanxi Xishan Coal & Electricity Power Co Ltd China 6071 274 4689 195 442 162 11 54 C&CF

46 161 Tokyo Electric Power Co Inc Japan 192892 12 66416 25 -9704 331 -9 326 EU

47 164 Korea Electric Power Corp South Korea 117787 19 37573 40 -2909 329 -3 310 EU

48 168 Chubu Electric Power Co Inc Japan 70112 29 30409 52 -1145 321 -2 302 EU

49 171 Kansai Electric Power Co Inc Japan 93381 22 34905 45 -3008 330 -4 314 EU

50 172 PowerGrid Corp of India Ltd India 16480 143 1805 274 578 131 4 163 EU

51 173 YTL Power International Bhd Malaysia 11037 190 4591 198 427 168 5 155 DU

52 174 Yangquan Coal Industry (Group) Co Ltd China 4385 327 4427 203 442 164 17 19 C&CF

53 177 Manila Electric Co Philippines 4950 310 6043 179 288 191 13 39 EU

54 178 Bharat Petroleum Corp Ltd India 13622 168 37105 42 137 256 2 258 R&M

55 179 Origin Energy Ltd Australia 26756 98 10389 128 187 229 1 273 IOG

56 186 Chugoku Electric Power Co Inc Japan 35846 72 14667 100 31 288 0 289 EU

57 191 Cosmo Oil Co Ltd Japan 20797 124 38609 36 -113 298 -1 296 R&M

58 194 Electric Power Development Co Ltd Japan 25034 106 8127 152 200 220 1 279 IPP

59 195 NHPC Ltd India 10554 197 1186 304 540 144 6 112 IPP

60 196 YTL Corp Bhd Malaysia 15114 156 5748 184 324 182 2 236 DU

61 201 Tenaga Nasional Bhd Malaysia 23364 114 10085 130 156 246 1 273 EU

62 203 Kyushu Electric Power Co Inc Japan 54977 43 18724 81 -2066 325 -5 316 EU

63 205 Tohoku Electric Power Co Inc Japan 52105 45 20919 73 -2879 328 -8 323 EU

64 212 Hindustan Petroleum Corp Ltd India 14981 158 32400 50 31 289 0 287 R&M

65 213 China Longyuan Power Group Corp Ltd China 14156 162 2539 250 414 169 3 210 IPP

66 215 Reliance Infrastructure Ltd India 10750 195 4138 209 278 195 4 196 EU

67 227 Huadian Power International Corp Ltd China 23418 113 8512 143 12 290 0 289 IPP

68 234 PT Bumi Resources Tbk Indonesia 7368 249 4001 212 221 214 4 187 C&CF

69 247 Shenergy Co Ltd China 5538 289 3586 224 223 213 4 165 IPP

70 249 Shikoku Electric Power Co Inc Japan 17074 139 7352 163 -116 299 -1 296 EU


Adaro Energy Tbk managed to gain 84 places, moving up to 154th place and grabbing the title of most-improved ranking in Asia-Pacifi c. Although up against tough competition from China, the Indonesia coal miner also managed to edge itself into the last spot in the top ten in the C&CF seg-ment, a major achievement compared with 2010.

The power sector in Malaysia pro-vided that country with some big im-

provers. YTL Power International Bhd gained 36 places to come 173rd overall, while YTL Corp Bhd jumped 31 spots to 196th. In Thailand, it was again the refi ning and marketing sector that gave the country its star performer; Thai Oil Pcl came in at 135th in 2011, up from 182nd in 2010.

But it was the emergent LNG giant Santos Ltd and multi utility AGL En-ergy Ltd in Australia that proved to be the second and third biggest movers

Asian companies in 2012 Top 250 (continued)


in Asia-Pacifi c. The former jumped 76 spots to 131st position and the latter 71 places to 128th.

Russia Sustains MomentumThe representation of companies

from Europe, Middle East and Africa in the Platts 2012 top 250 ranking fell to 67 from 79 the year before. Two Russian companies dropped from the table, but only because Gazprom Neft and Mosenergo—both full or nearly full subsidiaries of OJSC Gazprom—have been incorporated within the latter’s fi nancial results. The most se-vere attrition came in other parts of Europe, where ten companies left the rankings as a result of mergers and the stronger performance overall of com-panies elsewhere.

Gas giant Gazprom slipped two places in the rankings to fi fth, but re-

mains Russia’s and one of the world’s leading energy companies. Overall, Russian companies performed well on both a global and regional basis. The average ranking of the 13 companies has improved to 55.4, with eight mov-ing up and only one company losing any signifi cant ground. OJSC RusHy-dro was the country’s best improver, gaining 68 places to come 95th, ow-ing to a sharp jump in profi ts despite lower revenues, which also improved its ROIC.

Independent gas company OAO No-vatek, which has risen in the rankings progressively in recent years and has just signed a raft of new gas supply agreements, jumped 30 places to 74th. In terms of ROIC, the company came not simply fi rst in Russia but in the world, posting a 36% return. JSC Inter-regional Distribution Grid Companies Holding also put in a strong perfor-mance in the overall rankings, moving up 26 places to 107th.

State oil producer Rosneft Oil Co again proved the top performer amongst the country’s oil majors, placing 10th in the overall rankings, followed closely by OJSC Lukoil Oil Co at 11th. Both slipped one place from last year, but perhaps only be-cause of the re-emergence of BP in the top ten. Surgutneftegaz was top performer in terms of improvement in the oil and gas sector, jumping 15 places from 2011 to secure itself a po-sition in the top 20 energy companies globally. OAO Tatneft and JSOC Bash-neft also improved their standings, while oil pipeline monopoly OAO AK Transneft moved up an impressive 16 places to 25th.

OAO TNK-BP Holding claimed sec-ond place in terms of ROIC, posting 32%, which also meant it came third by this measure in the entire top 250. The company’s revenues jumped in 2011 to $53,404 million from $40,280 mil-lion in 2010, while its profi ts increased to $9,098 million from $6,540 million. Overall, TNK-BP’s performance earned it an extra fi ve places in the overall rankings, moving it into the top 20 en-ergy companies worldwide.


Industry Company Country Platts Rank 2012

IOG PetroChina Co Ltd China 9

E&P CNOOC Ltd Hong Kong 13

C&CF China Shenhua Energy Co Ltd China 16

R&M SK Innovation Co Ltd South Korea 26

IPP NTPC Ltd India 62

EU CLP Holdings Ltd Hong Kong 84

GU GAIL (India) Ltd India 109

DU AGL Energy Ltd Australia 128

3. #1 in Asia by industry.

Source: S&P Capital IQ/PlattsAll rankings are computed from data assessed on June 22, 2012.

Industry Company Country 3-year CGR % Platts Rank 2012

E&P Cairn India Ltd India 119.8 121

DU YTL Power International Bhd Malaysia 51.2 173

IPP GD Power Development Co Ltd China 44.9 132

R&M Reliance Industries Ltd India 33.3 27

C&CF Shanxi Xishan Coal &Electricity Power Co Ltd

China 31.1 158

IOG PetroChina Co Ltd China 23.2 9

EU Reliance Infrastructure Ltd India 23.2 215

GU The Hong Kong & China Gas Co Ltd

Hong Kong 22.0 129

4. Fastest growing Asian companies by industry.


Fastest Growing is based on a 3 year compound growth rate (CGR) for revenues. All rankings are computed from data assessed on June 22, 2012.



North AmericaNorth America’s stellar list of per-

formers remains pretty much the same at the top end of the rankings, led by global number one, Exxon Mobil Corp, but the real shift in the region’s repre-sentation came further down the list. The total number of North American companies fell in last year’s rankings to 84 from 91 the year before. But this year, North American companies have come back in force, with a total of 102 companies in the top 250. Six names have slipped from the list, but there were 23 new entrants and returnees.

Of these, refl ecting the strength of oil prices in 2011, 16 were in oil and gas. These included ten E&P, four refi ning and marketing, and two storage and transportation companies. Of the oth-ers, six were utilities—four electric, one diversifi ed and one gas—while the fi nal new North American entrant was an IPP. Canada provided fi ve of the new entrants and the United States the oth-er 18. Texas alone accounted for nine, all in the oil and gas segments.

South AmericaColombia’s national oil company

Ecopetrol SA has grabbed the highest ranking amongst South American en-ergy companies for the fi rst time, push-ing long-time record holder Brazil’s Petrobras into second place. The Co-lombian oil company fi rst entered the Platts rankings in 2009 at 30th, slipped

the next year to 34th, but has since made signifi cant headway on the back of strong gains in crude output.

Ecopetrol was ranked 23rd in 2010 and has now moved into the top 20 overall to become the 14th highest ranked company globally. Petrobras, by contrast, slipped six places in the rank-ings to 18th.

A further oil and gas success for Co-lombia was Canada-listed Pacifi c Rubia-les Energy Corp. The company, which operates mainly in Colombia, is a new entrant to the Platts top 250 rankings and posted ROIC of 14%, placing it 31st by that measure and 162nd overall.

The number of South American companies represented in the top 250 fell from 17 to 11 as a swathe of Chil-ean, Brazilian and Colombian electric utilities slipped from the list. Others moved down, but Interconexion Elec-trica SA E.S.P. of Colombia became a new entrant at 248th. Centrais Eletri-cas Brasileiras SA—Eletrobras gained 4 places to place 75th.

However, the biggest mover across the continent was Brazil’s Companhia Paranaense de Energia which jumped 19 places to 142nd. Another notable strong performer was oil and gas stor-age and transportation company Ultra-par Holdings Inc. The company gained nine places to move into 125th position in what represents a succession of up-ward moves since the company entered the rankings at 202nd in 2009.

3-year CGR %

Platts RankRank Company Country Industry

1 JSOC Bashneft Russia E&P 63.3 56

2 OJSC RusHydro Russia EU 49.9 95

3 OAO AK Transneft Russia S&T 34.6 25

4 OAO Novatek Russia E&P 30.5 74

5 OJSC Moscow United Electric Grid Co Russia EU 25.6 148

6 Qatar Electricity & Water Co Q.S.C Qatar DU 25.3 233

7 Federal Grid Co of Unifi ed Energy System JSC Russia EU 24.7 104

8 Snam S.p.A. Italy GU 23.4 113

9 Grupa Lotos SA Poland R&M 21.5 222

10 Tullow Oil plc United Kingdom E&P 20.7 147

5. Fastest growing EMEA companies.


Fastest Growing is based on a 3 year compound growth rate (CGR) for revenues. The compound growth rate (CGR) is based on the companies revenue numbers for the past four years (current year included). If only three years of data was available then it is a two year CGR. All rankings are computed from data assessed on June 22, 2012.



Oil to the ForeThroughout the foregoing regional

analysis it is apparent that the oil and gas sector extended its lead-ranks com-mand of the world’s top 250 energy companies in 2011, and a single fact does much to explain why. The average price for the international Dated Brent crude marker was $111.26/barrel.

That may not sound much when set against the fi nancial panic of 2008, which saw Dated Brent soar momen-tarily to a record $144.23/b. But profi ts over the year depend on 365 days of production, rather than headline-grab-bing price spikes.

Contrast the average price for 2011 with that of 2008. In 2008, the aver-age price of Dated Brent was $97.26/b, then a record. In 2011, average crude prices were 14.4% higher than 2008, and 39.9% up on 2010.

Given price trend differences, no oth-

er energy sector came close to match-ing oil and gas for revenues and profi ts. The revenue and profi t growth of the top ten companies in 2011—all of them in oil and gas—stands apart, with the companies showing $2.6 trillion in rev-enue, up 21.8% on 2010 and 11.6% up on the former record year of 2008.

Profi ts showed a similar noteworthy year-on-year rise. At $238 billion, the top ten companies saw their profi ts ad-vance 28.5% from the previous year and exceed the 2008 level by 11.3%. The higher plateau in oil prices also had an impact on the companies’ asset valuations, as these are based primarily on hydrocarbon reserves. The top ten’s asset value in 2011 was $2.4 trillion, up 8.7% from 2010 and 28.7% higher than in 2008.

Looking beyond the top 10 to the top 50 and the dominance of the oil and gas sector becomes even clearer. In

3-year CGR %

Platts RankCompany

1 Cairn India Ltd 119.8 121

2 Pacifi c Rubiales Energy Corp 80.1 162

3 Kunlun Energy Co Ltd 69.6 133

4 JSOC Bashneft 63.3 56

5 Concho Resources, Inc 52.3 200

6 YTL Power International Bhd 51.2 173

7 OJSC RusHydro 49.9 95

8 GD Power Development Co Ltd 44.9 132

9 YTL Corp Bhd 41 196

10 CNOOC Ltd 38.5 13

11 HollyFrontier Corp 38.1 79

12 OAO AK Transneft 34.6 25

13 Reliance Industries Ltd 33.3 27

14 China Resources Power Holdings Co Ltd 31.4 134

15 Shanxi Xishan Coal & Electricity Power Co Ltd 31.1 158

16 OAO Novatek 30.5 74

17 Banpu Pcl 30.5 149

18 China Yangtze Power Co Ltd 30.2 120

19 PT Adaro Energy Tbk 28.7 154

20 OJSC Moscow United Electric Grid Co 25.6 148

21 Qatar Electricity & Water Co Q.S.C 25.3 233

22 Huaneng Power International Inc 25.2 143

23 Datang International Power Generation Co Ltd 25.1 145

24 Ecopetrol SA 24.7 14

25 Federal Grid Co of Unifi ed Energy System JSC 24.7 104

3-year CGR %

Platts RankCompany

26 NHPC Ltd 24.7 195

27 China Longyuan Power Group Corp Ltd 23.6 213

28 China Shenhua Energy Co Ltd 23.4 16

29 Snam S.p.A. 23.4 113

30 PetroChina Co Ltd 23.2 9

31 Reliance Infrastructure Ltd 23.2 215

32 Yanzhou Coal Mining Co Ltd 23 86

33 The Hong Kong & China Gas Co Ltd 22 129

34 PowerGrid Corp of India Ltd 21.9 172

35 Huadian Power International Corp Ltd 21.8 227

36 Grupa Lotos SA 21.5 222

37 GAIL (India) Ltd 21.1 109

38 Shenergy Co Ltd 20.9 247

39 Tullow Oil plc 20.7 147

40 Inner Mongolia Yitai Coal Co Ltd 20.6 152

41 China Petroleum & Chemical Corp 20.2 12

42 Continental Resources Inc 20.2 208

43 China Coal Energy Co Ltd 19.8 61

44 Ultrapar Holdings Inc 19.8 125

45 CLP Holdings Ltd 19.1 84

46 Denbury Resources Inc 19 157

47 Yangquan Coal Industry (Group) Co Ltd 18.3 174

48 YPF SA 17.6 70

49 PPL Corp 17.5 69

50 JSC Interregional Distribution Grid Companies Holding 16.8 107

6. Top 50 fastest growing companies.

Source: S&P Capital IQ/PlattsFastest Growing is based on a 3 year compound growth rate (CGR) for revenues. All rankings are computed from data assessed on June 22, 2012.



S&P Capital IQ, a business line of the McGraw-Hill Compa-nies (NYSE:MHP), is a leading provider of multi-asset class and real time data, research and analytics to institutional inves-tors, investment and commercial banks, investment advisors and wealth managers, corporations and universities around the world. We provide a broad suite of capabilities designed to help track performance, generate alpha, and identify new trading and investment ideas, and perform risk analysis and mitigation strategies. Through leading desktop solutions such as the S&P Capital IQ, Global Credit Portal and MarketScope Advisor desk-tops; enterprise solutions such as S&P Capital IQ Valuations, and Compustat; and research offerings, including Leveraged Commentary & Data, Global Markets Intelligence, and com-pany and funds research, S&P Capital IQ sharpens fi nancial intelligence into the wisdom today’s investors need. For more information visit www.spcapitaliq.com.

2010, 16 electric and diversifi ed utilities fi gured in the top 50, but in 2011 only eight were left. All fi ve that made the top 30 in 2010 have sunk to the latter regions of the top 50. Gains were evi-dent across the board in oil and gas, not just from integrated oil and gas compa-nies and those focused on exploration and production, but also in the refi ning and marketing and in the transporta-tion and storage segments. All served to edge out the utilities.

While oil and gas companies led, coal suppliers followed them up the rank-ings buoyed by high international and, in cases, domestic prices. The most notable aspect of the C&CF segment in 2011 was that, almost without ex-ception, each company in the top ten improved their position signifi cantly in the overall 250 rankings, indicating the strong performance in the segment relative to many other parts of the en-ergy industry.

The leaders in the C&CF segment re-fl ected above all the continued strong growth of the Chinese coal industry.

Number one in the rankings, as in the previous year, was China Shenhua En-ergy, while in all China had fi ve of the companies in the top ten. Coal India came in second, while there were also a Thai and an Indonesian company and two US miners, demonstrating the Asian dominance of the sector. ■

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