VMR Mining Update: energy

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graph of components of the Goldman Sachs Commodity Index, as explained in the article text

Source: Bloomberg L.P.

The energy component of the widely followed S&P Goldman Sachs Commodity Index (GSCI) fell 41% from the start of 2015, a larger decline than the industrial metals, grains, and precious metals components, which declined 24%, 19%, and 11%, respectively, in 2015. Weakness in global economic growth contributed to the overall decline in commodity markets in 2015, but unique supply-side factors within certain commodity markets also affected prices.

Each of the 16 commodities in the S&P GSCI Energy, Grains, Industrial Metals, and Precious Metals indices declined in 2015, with prices of some of the energy commodities falling more than 30%. Nickel, diesel, and crude oil had the largest price declines among the 16 commodities in the four S&P GSCI indices, while lead, corn, precious metals, and gasoline had relatively smaller price declines. Each commodity in the S&P GSCI is reweighted each year based on the commodity's world production and trading volume to measure its relative importance in the global economy.

graph of commodity futures price changes, as explained in the article text

Source: Bloomberg L.P.
Note: These commodities are included in the S&P GSCI Energy, Grains, Industrial Metals, and Precious Metals indices. All price changes reflect changes in front month futures contract price for each commodity. WTI is West Texas Intermediate, RBOB is reformulated gasoline blendstock for oxygenate blending, and ULSD is ultra-low sulfur diesel.

Energy. West Texas Intermediate (WTI) and Brent, two of the major crude oil benchmarks, account for about 69% of the weighting in the S&P GSCI Energy index. As a result, the energy index tends to follow major price movements in the crude oil market. With sustained, high crude oil production from countries like Saudi Arabia, Iraq, the United States, and Russia, global liquid fuel inventories rose significantly in 2015, resulting in crude oil prices falling to 11-year lows in December.

Petroleum-based products such as reformulated gasoline blendstock for oxygenate blending (RBOB), ultra-low sulfur diesel (ULSD), and gasoil together comprise 27% of the S&P GSCI Energy index. RBOB not only had the lowest price decline of all energy commodities, but it also declined less than many nonenergy commodities because of increased gasoline consumption in the United States and in other countries. In contrast, gasoil and ULSD had the largest price declines of the energy commodities as a result of rising U.S. and global distillate inventories along with lower economic growth in emerging markets.

Natural gas accounts for the remaining 4% of the S&P GSCI Energy index, and in 2015, natural gas futures prices declined to the lowest level in 16 years in mid-December because of increased production and record-high inventory levels.

Grains. The S&P GSCI Grains index includes wheat, corn, and soybeans, with wheat accounting for close to 40% of the index. In late June through July, prices for all three grains rose significantly as adverse weather conditions affected planting and harvesting of grains in parts of the U.S. Midwest. In June, the U.S. Department of Agriculture (USDA) released a quarterly report that showed lower-than-expected corn and soybean inventories as of June 1. However, as harvesting began, updated projections by the USDA for production and inventories of grains were higher than expected, pushing down prices in the second half of 2015.

Metals. Copper and aluminum make up more than three-quarters of the S&P GSCI Industrial Metals index, with zinc, nickel, and lead making up the remainder. The prices of industrial metals were affected by declining activity in China's manufacturing sector along with the economic slowdown of many developed and emerging markets. Nickel had the largest price decline of all the major S&P GSCI commodities because of lower-than-expected demand for stainless steel from countries like China.

The S&P GSCI Precious Metals index is composed of gold and silver, with gold accounting for almost 80% of the index. Growth in the U.S. economy, the strengthening of the U.S. dollar, and the expectations of a rise in the U.S. federal funds rate, which the U.S. Federal Reserve officially voted to increase on December 16, likely contributed to lower precious metal prices.

(Source: EIA, January 4, 2015)

Eskom CEO Mr. Brian Molefe said no load shedding is expected until the end of April next year and also told Members of Parliament (MPs) South Africa urgently needs more nuclear power in its energy mix.

Mr. Molefe briefed Parliament’s Public Enterprises Committee yesterday.Eighty-seven days with just two and a half hours of load shedding, and Mr. Molefe said the lights are likely to remain on over the holidays and possibly into November next year.

“We do not think that it is possible to continue with an energy mix that excludes nuclear.” He came out in support of the government’s planned nuclear build programme.
When asked about the controversial nuclear build programme, with its estimated price tag of R1 tril-lion, Mr. Molefe didn’t beat around the bush.

“It is feasible to fund and operate further nuclear plants in South Africa and, in fact, it is urgent we do so.” He insisted the programme is doable and said a
nuclear reactor has a life of more than 60 years, but can be paid off around 20 years.

Eskom said the average age of its base load power stations is 34 years, that means unplanned breakdowns, a lot of maintenance, and the risk of load shedding.

While Mr. Molefe’s good news about load shedding was welcomed by the committee, there are concerns about the billions owed by Soweto and other municipalities and whether a shrinking economy has eased pressure on the grid.

The utility’s CEO said maintenance will be stepped up in December, when there’s lower demand for electricity over the holidays. He says this will ensure more units are available to ease the strained grid.

Mr. Molefe said the focus has been on proper planning to carry out maintenance without requiring load shedding. And while there may be problems in winter, he says plans are in place to deal with this.

(Source – Eyewitness News, 05-November-2015)

Last Week Top Headlines of Power Sector....

The 4,000 MW Tilaiya ultra mega power project (UMPP) in Jharkhand, abandoned by Reliance Power, is likely to be auctioned afresh as most of its consumers want to avoid litigation. In the meeting held last Tuesday, the procurers of Tilaiya UMPP generally appreciated that paying the Rs 125 crore compensation as per the contract will be the best solution in the interest of the project as legal recourse will only delay it. After paying off the company, the procurers can re-bid the plant.

Construction of two 700-MW nuclear power units at the Rajasthan Atomic Power Station (RAPS) is progressing fast and preparatory work to install the coolant channels was on. Welding of end shield and calandria is over. Preparation work for core components - coolant channels - has started. It will take six months to complete.

National Green Tribunal (NGT) has issued notices to NTPC and Bridge and Roof Company (India) Ltd for alleged illegal excavation of sand for construction of 1,600 MW thermal power station at Gardarwara in Narsinghpur district of Madhya Pradesh.

The tariff for electricity generated by the Kudankulam NPP will remain at the level set by the Indian Government in 2010 – 2011, with no hikes, Russian State Atomic Energy Corporation "Rosatom" has said.

The Mahanadi Coalfields Ltd (MCL) would set up a 1,600-MW super critical thermal power plant with a total capital investment of Rs 11,363.18 crore at Basundhara in Sundargarh district.

NTPC will invest over Rs.5,000 crore on expansion of Simhadri Super Thermal Power Station near Parawada. The district administration has been approached for allotment of site required for the Brownfield project.

Solar manufacturer and solutions provider Waaree Energies Ltd commissioned a 27.5-mw DC solar power plant for Roha Dyechem Pvt Ltd at Bhadla solar park in Rajasthan.

The central government will bail out close to 21,400 MW of power plants by assuring coal linkage through new fuel supply agreements (FSAs). These plants comprise the power projects whose commissioning date was delayed due to several reasons, including fuel supply crunch. Of this, 2,415 Mw would get tapering linkage and rest would be long-term linkage.

Odisha state government hopes to bag the Baitarani West coal block soon for its PSU, Odisha Thermal Power Corporation (OTPCL), a 50:50 joint venture between Odisha Mining Corporation (OMC) and Odisha Hydro Power Corporation (OHPC).

The government is likely to allow companies to divert coal supply to efficient power plants from inefficient plants to generate more electricity with the available fuel.

Coal imports dropped by 27.16 per cent to 12.6 million tonnes (MT) last month from a year-ago period on the back of rise in domestic production.

The Coal Ministry has made a one-time exception to allow captive power plants to participate in the e-auction for coal by Coal India.

In light of there being sufficient coal stocks at thermal power plants across India, producer Coal India Limited (CIL) has been granted greater flexibility in offering higher volumes for sale through e-auction.

Relaxing earlier restrictions, an expert panel of the environment ministry has recommended a two-fold increase in the ash content of imported coal from 12% to 25%, giving in to demands of the Association of Power Producers (APP), who are highly dependant on the imported fossil fuel.

Of the two key power transmission projects put up for tariff-based competitive bidding (TBCB), state-owned Power Grid Corporation of India (PGCIL) won the Rs 7,032-crore Vemagiri-II transmission project, one of the costliest projects to come under the bidding route this year.

Of the two key power transmission projects put up for tariff-based competitive bidding (TBCB), Kalpataru Power Transmission bagged the second project — the Rs 2,240-crore Bhutan inter-link. The project, based in West Bengal, would help in evacuation of power from upcoming hydro projects in Bhutan.

Renewable energy firm Gamesa has bagged a 100-MW wind power project from Hero Group to set up 50 wind turbines in Madhya Pradesh.

Virginia Mining Resources would be closely tracking the developments on the subject and other events in the mining & resource sector and bringing you the same.

India has moved up one position to become the world’s seventh most valued ‘nation brand’, with an increase of 32 percent in its brand value to USD 2.1 billion.

The US remains on the top with a valuation of USD 19.7 billion, followed by China and Germany at the second and the third positions respectively, as per the annual report on world’s most valuable nation brands compiled by Brand Finance.

The UK is ranked 4th, Japan is at fifth position and France is sixth on the list. While India and France have moved up one position each since last year, all the top-five countries have retained their respective places. However, the surge of 32 percent in India’s ‘nation brand value’ is the highest among all the top-20 countries on the list.

China has retained its second position despite a decline of one percent in its brand value to USD 6.3 billion. Brand Finance said it measures the strength and value of the nation brands of 100 leading countries using a method based on the royalty relief mechanism employed to value the world’s largest companies.

The nation brand valuation is based on five year forecasts of sales of all brands in each nation and follows a complex process. The Gross domestic product (GDP) is used as a proxy for total revenues.
The report also said that India’s ‘Incredible India’ slogan has worked well, while Germany suffered due to the Volkswagen crisis. About the US, the report said it remains a powerful brand with an inviting business climate.

“However its value comes in large part from the country’s sheer economic scale… The US’ world-leading higher education system and the soft power arising from its dominance of the music and entertainment industries are significant contributors too. This soft power will help the US to retain the most valuable nation brand for some time after China’s seemingly imminent rise to become the world’s biggest economy,” it added.

The study further said that China’s recent stock market turbulence and slowing growth will also extend the US’ tenure of the top spot. Among the BRICS nations, India is the only country to have witnessed an increase in its brand value with all others – Brazil, Russia, China and South Africa – seeing a dip in their respective brand valuations.

India is the second most valued among these emerging economies after China, followed by Brazil, Russia and South Africa.

(Source – Assorted with the Inputs from PTI)

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Construction of four India designed 700 MW pressurised heavy water reactors (PHWR) are progressing at a quick pace and the first one is expected to go on stream end 2016 or early 2017, said senior officials of Nuclear Power Corporation of India Ltd. (NPCIL).

The NPCIL is building two 700 MW atomic power plants each at Kakrapar Atomic Power Station (KAPS) in Gujarat and Rajasthan Atomic Power Station (RAPS). For NPCIL that has been building 220 MW and 540 MW pressurised heavy water reactors (PHWRs), it is a major jump to go in for 700 MW PHWRs."It is the first of its kind reactor in the country," Mr. Lokesh Kumar, project director for the third and fourth units at KAPS told IANS over phone from Kakrapar in Gujarat.

The Atomic Energy Regulatory Board (AERB), the sec-toral regulator, is carefully poring over the reports submitted by the units before according its sanction.
NPCIL has two units of 220 MW each at KAPS which are operating successfully. It is the third unit at KAPS with a capacity of 700 MW that is expected to go op-with a capacity of 700 MW that is expected to go operational first out of the four under construction.

According to him, work on commissioning of the other systems have begun while the civil construction work is nearing completion. Though the first unit was expected to go on stream in 2015, owing to erratic supply of components the progress of work got delayed, Mr. Kumar said.

As to the percentage of physical progress, Mr. Kumar said the third unit is 75 percent complete and the fourth unit is 65 percent."The overall project cost for the two units is around Rs. 11,459 crores. The project would be completed within the budget. There will be no cost escalation," he added.

At RAPS where the other two 700 MW reactors are built at an outlay of Rs. 12,300 crores, the preparatory work to install the coolant channels are on for the seventh unit under construction. "Welding of end shield and calandria is over. Preparation work for core components - coolant channels - has started. It will take six months to complete," B.C. Pathak, project director for 7th and 8th units at RAPS, told IANS.

He said the seventh unit was expected to go on stream sometime in 2017-18. NPCIL already has six units at RAPS, with a total capacity of 1,180 MW (4x220 MW and one each of 100 MW and 200 MW).

(Source – Deccan Herald)

In August, a Japanese utility company restarted the Sendai nuclear power plant, sparking controversy and protests. Like the rest of the country’s nuclear power generators, Sendai was shut down following the 2011 Fukushima disaster, in which a powerful earthquake and tsunami caused three reactors to melt down. Sendai is the first and so far only nuclear plant to reopen, and with memory of the catastrophe still fresh, the public outcry is hardly surprising. Applications by other plants to relaunch are also facing legal challenges.

Restarting Japan’s nuclear power plants is, however, the right decision, provided they can pass strict new safety checks instituted since Fukushima. The reason is simple: While nuclear power comes with risks, the primary alternative comes with bigger ones.

Turning off nuclear power requires either turning on another power source, or using less electricity. Japan has done both. Its total energy consumption is down 10 percent since 2010 due to the nuclear phase-out, but use of natural gas, a source of greenhouse gas emissions, is up 19 percent, and use of coal, which is even more harmful to the environment, is up 2 percent. (The data is available here.) Japan is now building 45 new coal power plants, but if it turned its nuclear power plants back on (except of course for the damaged Fukushima facilities), it could cut coal consumption in half. And coal poses more health and climate change dangers than nuclear power.

The primary harm caused by nuclear accidents is increased cancer risk from released radiation. But the radiation levels from Fukushima are so low that the cancer increase will be barely noticeable, and may not happen at all. To be sure, the radiation exposure would have been worse if the prevailing winds did not blow most of the radiation out to the Pacific. But as with the Chernobyl catastrophe in 1986, the Fukushima disaster caused more harm from overreaction to the radiation than from radiation itself. That’s partly because excessive evacuations can cause more deaths than they prevent. The anti-radiation stigma also levied a psychological toll, with some healthy people committing suicide. In Chernobyl, as many as 100,000 unnecessary abortions may have been performed due to fears of radiation’s impact.

Another nuclear power plant accident in the near future is, moreover, extremely unlikely. It is normal to pay attention to disasters that are fresh in our memory and overestimate the risk of another; psychologists call this the recency effect. But nuclear plant accidents do not come in bunches. According to the International Atomic Energy Agency (IAEA), the Fukushima accident is only the second Level 7 major accident in nuclear power history, the first being the Chernobyl disaster 29 years ago.

If anything, we should expect the probability of another accident in Japan to be smaller now because so many people are paying attention to the plants and the institutions overseeing them. Meanwhile, coal plants also damage human health,through asthma, bronchitis, cancer, and other illnesses. The difference is that nuclear plants only harm health following rare accidents, whereas working coal plants do so all the time. So by switching from nuclear to coal, Japan is rejecting a small chance of increased cancer in favor of a guaranteed increase in cancer and other maladies. In fact, one study found that coal causes 387 times more deaths per unit of energy than nuclear power. Since coal is also more expensive for Japan (as even critics of the nuclear restart have pointed out), restarting the nuclear plants appears to be very much in the country’s national interest.

It is also in the world’s interest. Of all major energy sources, coal is the worst emitter of greenhouse gases, warming the planet more per unit of electricity than anything else. According to the Intergovernmental Panel on Climate Change, nuclear power plants emit about one-tenth to one-twentieth of the greenhouse gases that coal plants do, with emissions coming mainly from power plant construction and uranium mining. And climate change, which affects the entire planet for millennia, is a bigger danger than nuclear plant accidents, which affect small regions for a few years.

True, nuclear waste can also survive for millennia, but carbon dioxide emissions are worse for both hu-manity and nature. They spread worldwide, whereas nuclear waste is confined to a fixed location. (A regu-latory double-standard currently exists across the world, in which the nuclear sector is required to sequester its waste for the long term, but the fossil fuel sector is not.) At worst, nuclear waste can render small regions uninhabitable, though it’s worth noting that the Chernobyl area now has flourishing wildlife. Carbon dioxide emissions, however, will ruin far more land via sea-level rise and other changes to the landscape such as desertification, invasive species, and ecological regime shifts. At worst, carbon dioxide emissions could render large portions of Earth’s surface uninhabitable for mammals: When temperature and humidity are so high that we cannot perspire to regulate our body temperatures, we overheat and die.

No accounting of nuclear power risks would be complete without considering the possibility that it can contribute to the spread of nuclear weapons. Since nuclear power can facilitate development of the materials and technology required to make such weapons, ordinarily one might expect the risk to increase with more power plants. However, due to a unique mix of technological and political factors, today, more nuclear power in Japan would actually lower the risk of nuclear weapons proliferation.
The reason for Japan’s unusual situation comes from the fact that it is the only non-nuclear-armed state that reprocesses plutonium. The intent is to plow the material back into nuclear reactors to make more electricity, but Japan’s resulting plutonium stockpile is now big enough to produce thousands of nuclear weapons. In 2016, the country plans to open the much-delayed Rokkasho Reprocessing Plant, which, in the absence of operational nuclear plants to consume the resulting plutonium, would increase the stockpile even further.

Japan currently has 47 metric tons of separated plutonium, 11 at home and 36 in France and the United Kingdom. If all of its nuclear power plants capable of consuming plutonium were restarted, and the Ohma plant, now under construction, were completed, Japan could consume about 4 metric tons per year—in principal drawing down its domestic supply within three years and its international supply in nine. However, if Rokkasho opens it will produce about 4.5 metric tons per year, exceeding Japan’s ability to use up its supply. And, as James Acton of the Carnegie Endowment for International Peace writes in a recent report, Rokkasho is likely to open because the surrounding area counts on it for economic development, whereas nuclear power plant reopenings, which are more controversial in their local communities, are less of a sure thing.

There is no reason to believe that Japan plans to use its extra plutonium for weapons, and the country cooperates closely with the International Atomic Energy Agency to ensure compliance with safeguards. Still, choosing to let the stockpile grow further could worsen regional tensions, especially with China, which may question Japan’s intentions. The reprocessed plutonium buildup also sets a harmful international precedent, for example with respect to Iran’s nuclear program. If Japan restarted more nuclear plants and decreased its plutonium stockpile, it could help ease concerns about its intentions and set a good example, helping to decrease global nuclear weapons risk.

Of course, nuclear and coal are not the only electricity options. Other fossil fuels pose the same global warming and health problems as coal, albeit to a somewhat smaller degree. Renewable do not, but Japan has been slow to adopt them. Ultimately a full transition to renewable may be a good idea, but that will take time, and nuclear power plants can be restarted now. Bringing them back online would be the best current energy option for Japan and for the world.

(Source – Bulletin of Atomic Scientist)

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