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www.platts.com November 2011

Securing Our Energy Future

page 47

Asian Nuclear Power — Balancing Risk

and Security page 24

2012

Asia Energy Outlook

Exclusive 2011 Platts

Top 250 Global Energy

Company Rankings ™

www.platts.com November 2011



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insight

November 2011 insight 1

Publisher’s Note

Guest Editor’s Note

Martin Daniel

Patsy Wurster

Tenth Anniversary of the Platts Top 250 Global Energy Company RankingsSees Dramatic Growth in Asia

Welcome to the 2011 Asia Energy Outlook issue of Platts Insight . In this issue RossMcCracken, Platts editor of Energy Economist, looks back over the past ten years of Rankings to see how the rapid growth of energy demand in China and India has

played a role in not only changing the landscape of energy in Asia, but in the world.The search for affordable, sustainable energy marches on as the world contin-

ues to struggle with economic crises and natural disaster fallout. In the followingpages distinguished Platts editors review some of the past year’s major challengesand identify the most promising opportunities for securing our energy future.

Platts Top 250 Global Energy Company RankingsTM ranks the world’s top energycompanies by financial performance, identifies who’s up and who’s down, whoare the fastest growing, and who are biggest upward movers in the previous year.The Rankings also provides a breakdown of the Top 250 by industry and regionwhile offering commentary on trends and movement within the list.

I hope you gain some new insight from this issue!Patsy Wurster

Publisher, Platts Insight

The theme of securing our energy future runs through this issue of Insight .Energy security requires many things, but the key ones are the availability of

adequate resources, technologies and market structures. Many other considerationscome into play, not least having a long-term perspective and policies, but thesethree factors are central.

At a time of high and volatile energy prices driven by apparently inexhaustibledemand it may seem surprising to say that Asia’s problem is not insufficient energyoptions but choosing within a wide range of them. However, this is one of the mes-sages to come out of many of the articles in this issue.

Whether it is undertaking energy conservation measures, deciding whether toretain nuclear power plants, choosing between the various new and renewable en-ergy options, pursuing decentralized but integrated energy systems, looking to un-conventional gas, opting for more conventional gas and other fossil fuel resourcessuch as coal, or—and linked to the latter—assessing the economic and technicalfeasibility of carbon capture and storage, the message is clear—it is not a lack of op-

tions but making optimal choices between them.While making the “right” choices is far from easy, and will certainly vary by ju-

risdiction, two things are clear. First, many of these choices will be made in Asia,not least by dint of its continued growth in economic activity and energy demand.

Second, making the right decisions requires as much information as possible. Thisis where the availability of resources and technologies must be complemented bymarket structures and mechanisms that allow informed choices, above all on price.

Putting those structures and mechanisms in place is largely down to govern-ments and industry players. But as several articles in this issue show, assisting theprocess through robust pricing and news services is also an integral component,and one that is central to Platts’ mission.

Martin Daniel

Editor, Platts Power in Asia



insight November 2011

Inside

Authors

1 Publisher’s NotePatsy Wurster

1 Guest Editor’s NoteMartin Daniel

4 Oil’s ‘Price-Demand Paradox’Ross McCracken

9 Asia Pacific Looks toUnconventional GasChristine Forster

13 The Asian LNG Market Strides AheadHong Chou Hui

19 Renewables Industry ContinuesShift to AsiaDavid R. Jones

24 Asian Nuclear Power — BalancingRisk and SecurityMartin Daniel

30 CCS in Europe: Filling the Funding VoidHenry Edwardes-Evans

36 Feeding the Dragon: China Fires Upthe Coal MarketJames O’Connell

40 India: New Policy DirectionsRoss McCracken

44 Steel Industry Evolution FavorsSingapore as Risk-Management CenterFrancis Browne

47 Securing Our Energy FutureChee Hong Tat, Energy Market Authority

50 Asia Forges Ahead(Platts Top 250 Global EnergyCompany Rankings™)Ross McCracken

Martin DanielFrancis Browne

David R. Jones Ross McCracken James O’Connell

Henry Edwardes-Evans Christine Forster

Hong Chou Hui




Francis Browne is a managing editor in the price group, responsiblefor market reporting in many markets outside of Oil. He joined Plattsin 2006 to head their steel initiative as Global Managing Editor of the

newly created newsletter Steel Markets Daily now being integratedwith Steel Business Briefings publications into the steel group at Platts.Before Platts he spent more than 20 years trading steel and raw mate-

rials internationally, after graduating in 1984 with a degree in Econom-ics from the University of Northumbria, UK.

Martin Daniel read Modern History at Oxford University. After researchon economic history there, he joined the Economics Unit of the thenBritish Coal Corporation, following which he became head of theSupply, Transport and Markets Group at IEA Coal Research. He then

worked at a UK energy media and consultancy company until 2001when he joined Platts, where he edits the newsletter Power in Asia. Heis an active naturalist, specializing in Asian forest birds.

Henry Edwardes-Evans has a bachelor of arts degree from OxfordUniversity, where he studied English Literature. As a trainee

journalist at Financial Times Business, he worked on a number ofenergy-related publications before being appointed editor of EC En-ergy Monthly in 1996. Henry launched and edited the FT newsletter

Power in East Europe, which subsequently became Platts Energy inEast Europe. In 2000, he took over editorship of FT’s flagship energynewsletter, Power in Europe, now Platts Power in Europe, develop-ing power plant trackers and managing three other highly-regarded

Platts newsletter titles—Energy in East Europe, Power UK andPower in Asia.

Christine Forster began writing for Platts based in London in 1987,initially covering European LPG markets and news. After a stint editingPlatts’ weekly petrochemicals newsletter, she was made the Editor-in-

Chief of Platts Petrochemicals. In 1992, Forster returned to her nativeAustralia, becoming Platts’ regional news correspondent, covering the

oil and gas, and metals and mining sectors. In 2006, Forster became theAsia Pacific Editor for Platts’ flagship daily newsletter, Oilgram News.She is currently Platts’ senior writer in the region, covering the up-

stream and downstream oil, natural gas and LNG industries in Australiaand the rest of Asia Pacific.

Hong Chou Hui graduated from the National University of Singapore.He is a multiple-award winning news editor and analyst who helpedlaunch Platts’ spot LNG Japan Korea Marker benchmark in 2009. The

JKM has grown into Asia’s leading spot LNG index. He has developedfurther LNG price points for Asia, with the latest launch of a deliveredWest India LNG price on August 1, while overseeing the start of Platts’LNG market coverage in Europe.

David R. Jones is Platts’ global renewable energy editor, based in

London. An environmental journalist with 20 years’ experience, Jonesedited newsletters on US state and local government, medical wastemanagement, oil pollution, and solid waste before joining Platts in 2001 to cover coal and energy policy.

Ross McCracken, editor of Energy Economist, joined Platts in 1999 torun the European and West African crude desk. He was previously

an editor with an Oxford University-based political and economicconsultancy, and has taught in Poland and China. He holds a master’sdegree 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 thecoal team in early 2007, leading reporters in Europe and Asia producingnews 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 Communications from the NationalUniversity of Ireland.

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Associate Editor: Murray Fisher

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Oil demand forecasts are shrinking

as the prospects for world economicgrowth falter, but prices remain high.Are the markets’ rational maximizersbeing slow to factor in supply and de-mand information, or are other forcesat work? Analysts continue to find ex-planations in oil market “fundamen-tals,” but a lack of any real predictivepower is bringing into question theirvalue as an analytical framework.

Demand for oil is still expected torise in 2012, but not by as much aspreviously thought. That is the mes-sage from bodies such as the US EnergyInformation Administration (EIA), theInternational Energy Agency (IEA) andthe Organization of the Petroleum Ex-porting Countries (OPEC). The newsshould be no surprise; reductions inforecasts for oil demand follow reduc-tions in estimates for world economicgrowth just as night follows day. Thebig macroeconomic numbers are fed

into other models, creating a cascadeof announcements that all derive frommuch the same source.

Even when bodies such as the IMF,whose numbers are widely used,change their forecasts, as they did in June, market actors should alreadyhave a good idea of where those num-bers are heading. Based on their ownmonitoring, market actors are con-stantly assimilating new demand andsupply-side information and adjusting

their market positions accordingly.That, at least, is the theory.

Forecast Revisions

The EIA in its September 2011 ShortTerm Energy Outlook, based its oil de-mand forecast on what it calls world“oil-consumption-weighted real GDPgrowth” of 3.1% in 2011 and 3.8% in2012. This compared with growth ex-pectations of 3.4% and 4.1% a monthearlier. Its forecasts for real US GDPgrowth have been chopped dramatical-ly from 2.4% in 2011 and 2.9% in 2012to 1.5% and 1.9%, respectively.

However, if its forecast for growthin oil consumption in 2012 has beenslashed by 250,000 b/d, that for 2011remains unchanged. In addition, itsprice forecast for 2011, for the US re-finer average crude oil acquisition cost,remained unchanged at $100/barrel.The EIA still presents a bullish outlook,expecting inventories to fall in fourth-quarter 2011 and beyond. But, hedgingits bets, it says that downside risks toprice “arguably predominate.”

OPEC has revised its expectations forworld growth from 3.7% in 2011 and4.0% in 2012 to 3.6% and 3.9%, respec-tively, following an earlier downgradein August. What was new in its analy-sis is that while the August reductionwas centered on slowing US growth,this time the downgrades reflect morewidespread economic weakness, withgrowth forecasts for the euro zone, Ja-pan and India all falling.

The IEA has also reduced its assump-

tions about world economic growth. InAugust, the IEA said it was “continuing

oil

Oil’s ‘Price-Demand

Paradox’ Ross McCracken, Editor, Platts Energy Economist




oil

to incorporate global GDP growth of 4.2% and 4.4% for 2011 and 2012 re-spectively, based on IMF forecasts madein June.” In its September report, theagency has assumed global GDP growthof 3.9% in 2011 and 4.2% in 2012 “with

significant downside risks.” This has re-sulted in a reduction in its forecast foroil demand in 2011 of 200,000 b/d and,in 2012, of 400,000 b/d.

Grim OutlookThe possibility of a broader econom-

ic malaise is supported by the OECD’scomposite leading indicators. The lat-est data released in September signaled,according to the OECD, “a widespreadslowdown in economic activity,” in-

cluding China. Both the EIA and OPEChave so far assumed an unchanged rateof GDP growth for China in 2012. TheOECD report said the leading indica-tors in both the OECD and the BRICcountries—Brazil, Russia, India andChina—all pointed more strongly toeconomic slowdown than they had theprevious month.

Moreover, Europe appears unableto escape the threat of a debt default,the knock-on consequences of whichcould be highly damaging for Europe-an banks, the euro zone and the widerEuropean economy. Greece’s inabilityto implement the fiscal austerity mea-sures demanded as part and parcel of its

EU-led financial bailout caused Germa-ny’s Economy Minister Philipp Roeslerto say that Europe could no longer ruleout an “orderly default.” After a seriesof crises and supposed solutions a de-fault, or partial default, looked more

likely than not at the time of writing(early October).The fact that oil prices have only

reacted temporarily to the weakeningeconomic outlook is in itself cause forconcern. For the year to mid-Septem-ber, prices have on average only been afew cents per barrel lower than in therecord year of 2008. Prices have beenpersistently high for a long time: whilethe 30 and 90-day rolling averages ap-pear to have peaked, the 12-month

rolling average for Platts’ Dated Brentcontinues to climb and towards theend of September surpassed the histor-ic peak of 2008.

The high price of oil acts as a con-sumption tax on consumers already hitby falling real incomes. Spending ontransport fuel and heating as a propor-tion of consumer expenditure is rising,making consumption more sensitive toprice increases. This is a reversal of theperiod leading up to 2008, when risingoil prices were unexpectedly absorbedby consumers because, analysts hur-riedly concluded, expenditure on oil,while expensive, had fallen as a propor-tion of household income.

30

60

90

120

150

Sep-11Sep-10Sep-09Sep-08Sep-07Sep-06

365-day average

90-day average

30-day average

Daily price

1. Dated Brent ($/barrel).

Source: Platts




oil

High PricesIf there are arguments for prices

falling, there are also reasons whyprices should remain high. First isthe Arab Spring. Libyan exportshave been lost almost entirely to the

market and the speed with whichthey will return is hard to gauge. Aresumption of full capacity by end-2012 is probably optimistic, althoughthis is what OPEC is predicting in itslatest monthly oil report.

Other less important exporters inthe region, such as Yemen and Syria,

remain in turmoil, while to the southSudan’s oil industry is wrestling withthe division of its upstream from itsexport infrastructure brought aboutby South Sudan’s secession from thenorth. While the big oil beasts of theMiddle East appear to have weath-ered the revolutionary storm, it ishard to say what currents of discon-tent continue to flow beneath thesurface and when they might erupt.The Middle Eastern risk premium isalive and well.

There is also the general assump-tion that Saudi Arabia in particular

has bought off protests only at thecost of much higher domestic expen-diture. Riyadh may have played a piv-otal role in increasing output to com-pensate for the loss of Libyan crude,but its price expectations have risen.It follows that it may intervene earlierthan before with output cuts shouldprices embark on a sustained down-ward path.

The IEA looks to short-term funda-mentals to explain what it calls the

“demand-price paradox.” It arguesthat consumption has been running

well ahead of supply. It estimates that“supply lagged demand by over 0.5million b/d in first-half 2011,” whilein July and August OECD industrystocks fell below the five-year aver-age for the first time since June 2008.

The IEA—its italics—contrasts “ac-tual and pronounced tightening inthe market evident since mid-2010”against the “ potential for slightlyeasier market fundamentals in themonths ahead.”

From Fundamentals to PriceFutures, it would now seem, are look-

ing backwards instead of forwards. In-stead of tomorrow’s prices today (lastyear’s analytical fashion), the market

is providing yesterday’s prices. TheIEA’s current analysis assumes thatthe drivers of oil price formation arefirmly located in recent short-termfundamentals. Oil prices are not (yet)reacting to the gathering headwindsaffecting the world economy. Investorsare gradually assimilating new marketinformation as it emerges and the bal-ance of risk, for the moment, remainson the upside.

Demand and supply make up the“fundamentals” of a market. These, ac-cording to orthodox economics, driveprices. Yet the relationship betweensupply and demand on the one handand prices on the other has almost nopredictive power. There is no knowingwith any certainty how the market willinterpret any particular piece of infor-mation regarding supply and demand.Events that should in theory move themarket often appear to be ignored,

while other seemingly insignificantevents sometimes trigger big changes.

Take May 5, 2011. Oil prices lostabout 9% of their value. What hadbeen worth $126/barrel one day wasworth $113/b a few days later. Therewas no major news concerning supplyand demand that day. The explanationgiven by analysts at the time was thatan assortment of small events had co-alesced to change market opinion enmasse on May 5.

Such sharp movements in price areoften described as “corrections”. The

Demand and supply make up the

“fundamentals” of a market. These, according

to orthodox economics, drive prices. Yet the

relationship between supply and demand

on the one hand and prices on the other has

almost no predictive power.



oil


The link between fundamentals and price

formation is complex. It is easier to say what

it is not rather than what it is because the only

thing that can be said with certainty is that

there is no straightforward relationship.

emphasis is on the market finding theright level after the correction. Less at-tention is paid to the fact that if a cor-rection has to be made at all it is becausethe market was formerly mispricing thecommodity. Nor is there much expla-

nation for what looks like a behavioralreaction rather than an orderly adjust-ment to new information.

With oil demand indicators weaken-ing and supply rising, it appeared at thetime of writing (early October) that theoil price is due one of its corrections,perhaps larger than the $6/b loss seenon September 22, if not a protracteddownward trend. But in September Dat-ed Brent prices were in fact on averagehigher than in August, despite a clearly

worse macroeconomic outlook.In the oil market downside and up-

side risks almost always coexist, mak-ing it possible to construct a plausibleargument for prices going in either di-rection. There is such a wide variety of factors at play that an argument can bemade to justify almost any price move-ment (particularly retrospectively). Itsimply depends on which factors aregiven more weight.

The link between fundamentals andprice formation is complex. It is easierto say what it is not rather than whatit is because the only thing that canbe said with certainty is that thereis no straightforward relationship. If there was, price forecasting would be amuch simpler business. It remains anenigma that no matter how clear andupfront price forecasters are about thepainful l imitations of their art, clientscontinue to ascribe value to largely

meaningless numbers.Yet it is an economics basic that

prices move in relation to supply anddemand. Writ large this is presentedin more complex form by somethingknown as the “dynamic stochasticgeneral equilibrium.” On top of this,according to the Financial Times col-umnist John Kay, comes the “efficientmarket hypothesis,” which assumesthat all available information is incor-porated into market prices, and then

the “capital asset pricing model,” whichKay describes as saying that prices are

outcomes made up of the decisions of rational actors acting on a belief in ef-ficient markets.

This all hangs together very nicely:prices are driven by fundamentals; allof the available information about these

fundamentals is incorporated into mar-ket decisions; and these decisions aremade by rational actors who believe in(and by and large work within) fairly

efficient markets. The outcome is accu-rate, market-driven prices.

However, a belief in these models alsoproduces an unswerving commitmentto a particular type of fundamentals-based analysis. As in any closed-loopphilosophical system, an explanationcan always be found; the lack of realpredictive power being brushed aside.Analysts looking to fundamentals haveto find an explanation for incongruousprice movements—such as the current“demand-price paradox”—handcuffedby the circular logic that if price bub-bles cannot exist then they don’t exist.

Market BehaviorThere is growing evidence to suggest

that oil prices are not formed solely bydemand and supply factors. A better

way to put this is that supply and de-mand remain critically important, butthe way new information about themis interpreted by market actors is influ-enced by a host of other factors. Thereis no simple relationship.

It might further be argued that mar-ket actors are not the rational maxi-mizers beloved of classical economics.With that, the whole complex—madeup of fundamentals, the efficient mar-ket hypothesis, and the capital asset

pricing model—appears to be on veryshaky foundations, as Kay argues. One




oil

way around this is to argue that marketactors are responding to a wider set of parameters than just information re-garding oil supply and demand.

While it may not be clear how thefinancialization of oil markets has af-

fected price formation, it is at least clearthat conditions are very different fromten years ago. There has been a hugerise in trading volume over the last tenyears in energy futures. In particular,the proportion of financial trade to

physical trade in energy commoditieshas multiplied many times over. Thishas been accompanied by the creationof commodity indices, such as the S&PGSCI. These have allowed investors pre-viously external to the market exposureto commodities without having to be-come embroiled in the complexities of physical trade.

This process was driven by a periodof poor returns in other markets whichprompted investors to look for new as-set classes. This is often also attributedto the partial deregulation of commod-ity markets in the US under the 2000Commodity Futures ModernizationAct. In addition, there was a widespread

belief—popularized by a 2004 articleentitled Facts and Fantasies about Com-modity Futures by Gorton and Rouwen-horst—that commodities represent ahedge against inflation and that returnswere not correlated with movements inother markets.

Backed by the likelihood that OPECwould act to support prices by restrict-ing supply if they fell too far, this gaveoil some of the characteristics of a safe-haven investment. This view expands

the factors that influence oil prices be-yond physical market supply and de-

mand, but doesn’t necessarily conflictwith the established doctrine of ratio-nal actors, perfect information and ef-ficient markets.

The idea that oil is like gold, the Swissfranc or US treasuries is also backed by

the wider narrative that continues todominate the oil market, although ithas been shaken by the financial cri-sis. That narrative is broadly that Asiangrowth in oil demand—its consum-ers protected by price regulation—willcontinue to outstrip any demand de-struction and contraction in oil con-sumption in the OECD by a consider-able margin.

On the supply side, investment willlag, production costs will rise and out-

put will increasingly be concentrated inthe hands of an OPEC keen to extractthe maximum value possible from itsnatural resources. As a result, oil can re-main strong even if western economiesstagnate and it will certainly look betterthan OECD equities or bonds. What-ever short-term gyrations the oil pricemight take, the long-term trend is up.

If prices defy short-term fundamen-tals, then an explanation can alwaysbe found by looking at fundamentalsin the medium or long term. For thosereasons, the oil market has a tenden-cy to overshoot; prices go higher andstay higher longer than they oughtto, resulting in periodic dramatic ad-justments, when high prices eventu-ally become unsupportable. Oil can bemispriced as a commodity within theenergy complex, but perhaps not in re-lation to other financial markets andinvestments.

However, this may be only half thestory. If oil has become just anotherclass of financial asset, then it followsthat it is as vulnerable to bubbles, spec-ulation and mispricing as any othermarket. From the South Sea Bubble tothe dot.com bubble to the gross mis-pricing of risk in the US mortgage bondmarket that was at the epicenter of themost recent financial crisis, it is becom-ing increasingly implausible to arguethat the oil world is a miraculous excep-

tion from the behaviors that character-ize other markets. ■

If prices defy short-term fundamentals, then an

explanation can always be found by looking at

fundamentals in the medium or long term. For

those reasons, the oil market has a tendency to overshoot; prices go higher and stay higher

longer than they ought to ...



The development of the region’s coal-bed methane (CBM) is underway, butgovernments in Asia have also beguneyeing shale gas, with hopes that itcould transform their domestic gas sup-plies as it has the US market in recentyears. According to the US Energy In-formation Administration (EIA), shalegas accounted for 16% of total domesticgas production of 21 trillion cubic feet(Tcf) in 2009, but is forecast to grow to12.2 Tcf or 47% of total output of 26.3Tcf in 2035.

Australia’s CBM industry is by far the

most mature unconventional gas sec-tor in Asia Pacific, now boasting threesanctioned liquefied natural gas (LNG)export projects based on reserves in theeast coast state of Queensland. Withinfive years, those projects will representtotal investment of around $50 billionand will be supplying more than 25million metric tons per year of LNG,mostly to buyers in Asia.

The approvals in 2010 and 2011of the world’s first CBM-based LNG

projects marked the culmination of a decade of rapid development in the

Queensland gas industry, sparked by agovernment policy requiring that 13%of electricity sold in the state from2005 onward be generated from gas.In 2007, the requirement was lifted to15% by 2010.

Development only got underway inearnest, however, when some of theworld’s biggest oil and gas companiesstarted taking notice of Queensland’smassive undeveloped CBM reserves,located on the doorstep of Asia’s fast-growing energy markets. According toAustralian consultancy EnergyQuest,

Queensland’s total proven and probableCBM reserves as at August 2011 were34,986 petajoules or around 33 Tcf.

The huge resources on offer attractedmore than $20 billion worth of mergerand acquisition transactions over thelatter part of the 2000s, as internation-al players jostled for gas to supply thedemand in Asia.

The M&A activity peaked around2008, when US oil major ConocoPhil-lips agreed to pay local player Origin

Energy nearly $8 billion for 50% of itsAustralia Pacific LNG project. Around


unconventional gas

Asia Pacific Looks to

Unconventional Gas Christine Forster, Platts Senior Writer, Asia Oil News

Australia has so far led the way among the Asia Pacific

nations looking to develop their unconventional gas reserves.

But other players in the region, notably China and India,

are now starting to turn their attention to this potentially

game-changing energy source.



0 insight November 2011

unconventional gas

that time, Australia’s Santos sold 40%of its Gladstone LNG project to Ma-laysia’s Petronas for $2.5 billion, andUK gas company BG Group acquiredQueensland Gas Company for $3.7 bil-lion and Pure Energy for $730 million

to provide resources for its QueenslandCurtis LNG project.The consolidation process heated up

again in 2010, when global giants Shelland PetroChina spent $3.2 billion tak-ing over local CBM producer Arrow En-ergy to underpin their own LNG proj-ect. Respective stakes of 27.5% and 15%in Gladstone LNG were also sold toFrance’s Total for $1.44 billion and Ko-rea Gas Corporation for $610 million.

In other 2010 deals, China National

Offshore Oil Corporation and TokyoGas bought interests of 5% and 1.25%,respectively in Queensland Curtis LNG.And 2011 has seen Arrow Energy offeraround $540 million for local gas com-pany Bow Energy, while China’s Sino-pec has paid $1.765 billion for 15% of Australia Pacific LNG.

Some of the focus has also shiftedto Queensland’s neighboring state of New South Wales, where EnergyQuestestimates proven and probable CBM re-serves are about 2.8 Tcf. Santos in July2011 unveiled plans to spend $984 mil-lion acquiring the 79.1% it does not al-ready own in Eastern Star Gas, holderof more than 1 Tcf of CBM resources inNew South Wales.

Meanwhile, Australia’s shale gas in-dustry began stirring into life in thelatter part of 2010 and 2011 as smalllocal players started to talk up the po-tential of the resource. A significant

milestone was passed in August 2011when Beach Energy booked a 2 Tcf contingent resource in central Austra-lia’s Cooper Basin, the country’s largest

onshore conventional oil and gas prov-ince, after the first successful testing of a shale gas well.

Although exploration of shale gas inAustralia’s central and western regionsis in very early stages, acreage held by

domestic juniors is starting to attractthe attention of heavyweights such asConocoPhillips and BG, who were soprominent in the development of theeast coast CBM industry. Their atten-tion has prompted speculation thatthe maturing of Australia’s shale gassector might replicate the CBM boom,and already some participants aretalking of developing projects for ex-port markets.

But not everyone with an interest in

Australia’s unconventional gas sectoris focused on pushing ahead with de-velopment. Environmental and farm-ing lobby groups are increasing theirscrutiny of the industry as it rolls out,with a particular focus on the impactsof CBM and shale gas drilling and hy-draulic fracture stimulation of wells onunderground aquifers and rural land.

The gas developers have so far satis-fied Australia’s governments and regu-lators that they are responsible opera-tors, but they have also acknowledgedthey are under a media and public mi-croscope and need to be accountableand transparent as they go about drill-ing tens of thousands of wells acrossprime agricultural land.

Big Plans in ChinaIn China, the development of CBM

is well underway, albeit more slowlythan Beijing had targeted. Shale gas,

however, is regarded as having massivepotential and its development has beenmade a priority by the State Council,the country’s cabinet.

Production Consumption Imports(Exports)

Proved naturalgas reserves

Technically Recoverable Shalegas resources (Tcf)

China 2.93 3.08 5% 107 1,275

India 1.43 1.87 24% 37.9 63

Australia 1.67 1.09 -52% 110 396

1. Asia shale gas resources

Source: US Energy Information Administration (April 2011)




unconventional gas

The US’s EIA in April 2011 estimatedthat China had one of the world’s largestrecoverable shale gas reserves of 1,275Tcf, considerably more than the 862 Tcf held by the US. In its International En-ergy Outlook 2010, the EIA said tight

gas, shale gas and CBM resources wereexpected to account for 56% of China’stotal gas production in 2035.

“Of the countries which are activelyseeking to develop unconventional gas,China is close to the top of the list interms of potential,” analysts Neil Bev-eridge and Ying Lou from Hong Kong-based Bernstein Research said in a July2011 report. “The reason for this is theunconventional resource base whichcould be enormous and the growth in

the Chinese gas market - which will bethe single biggest driver of global gasdemand over the next decade.”

China’s Ministry of Land and Re-sources in June 2011 held its first-everpublic tender for shale gas blocks in theSichuan and Tarim basins. It awardedpermits to Sinopec and Henan Provin-cial Coal Seam Gas in Nanchuan andXiushan, respectively.

Shale gas production by state-con-trolled giants PetroChina and Sinopecis expected to be just 106 Bcf by 2015,representing less than 2% of China’sdomestic production, according to Ber-nstein Research. The analysts cited esti-mates from PetroChina putting China’scurrent natural gas supply at 160 bil-lion cubic meters, or about 5.65 Tcf, of which 3.53 Tcf is produced locally and

2.12 Tcf is imported.PetroChina expects China’s gas de-

mand to reach between 8.5 and 9.2 Tcf by 2015 and 14.1 Tcf by 2020. By then,China’s production is expected to bearound 7.1 Tcf, of which 2.2 Tcf or 30%

would be shale gas, tight gas and CBM,Bernstein Research said.Of the 2020 gas production, CBM is

expected to account for 0.71 Tcf or 10%of the total. China is also aiming tohave established 0.53 to 1.1 Tcf of shalegas production capacity by that date,according to PetroChina figures quotedby the analysts.

Despite its potential, the develop-ment of China’s shale gas industrywill face challenges, Beveridge and

Lou said. Chinese shales are in moredifficult terrain and are deeper thanin the US, and they contain non-hy-drocarbon gases which will add to thecost of production.

In addition, water availability in thekey Tarim Basin, limited pipeline infra-structure and the highly consolidatednature of the Chinese industry in thehands of the three state-controlled oilcompanies might act as barriers to rapiddevelopment of shale gas, they added.

PetroChina and independent assess-ments have put China’s CBM resourcesat up to 1,300 Tcf, and in its 11th Five-Year Plan to 2010, Beijing was aimingfor production by the end of the periodof 177 Bcf. The target was missed, how-ever, with output estimated at around53 Bcf in 2010.

Project Operator Cost ($bn) Capacity (millionmt/year)

Status

Queensland

Curtis LNG

BG Group through

QGC

15 8.5 Approved for startup

2014

Gladstone

LNG

Santos 16 7.8 Approved for startup

2015

Australia

Pacific LNG-1

ConocoPhillips/

Origin Energy

14 4.5 Train 1 approved

startup 2015

Australia

Pacific LNG-2

ConocoPhillips/

Origin Energy

6 4.5 Train 2 FID expected

early 2012

Arrow LNG Shell/PetroChina n/a 8 FID expected 2012

2. Major Queensland CBM-to-LNG projects

Source: Platts




unconventional gas

But the industry has governmentbacking—with producers receivinga subsidy of Yuan 0.2 ($0.03) per cu-bic meter and enjoying tax breaks onequipment—and is expected to contin-ue expanding. According to state media

reports, the 12th Five-Year Plan will in-clude a CBM production target of 0.32Tcf from surface wells by 2015.

Indian ProspectsThe Indian government formulated

a policy in 1997 for the explorationand production of CBM and beganawarding blocks through internationalbidding rounds in 2001. In the fourrounds held up to July 2010, 33 blockshave been awarded containing total es-

timated resources of 62 Tcf, accordingto the Directorate General of Hydrocar-bons. DGH, which is India’s upstreamregulator, pegs India’s total CBM re-sources at 92 Tcf.

The first CBM producer was the lo-cal Great Eastern Energy, which be-gan commercial operations at its Ra-niganj fields in West Bengal state in July 2007. The fields are producingaround 150 Mcf/day, according to fig-ures from the DGH.

With more blocks due to start com-mercial production, Indian CBM out-put is projected to reach around 7,400Mcf/day by the fiscal year endingMarch 2015.

Meanwhile, the DGH and India’s oilministry are working on a policy frame-work for shale gas. The framework wasexpected to be ready by mid-2011, butit had not been published at the time of writing (September 2011).

The taskforce working on the policyis looking at issues such as land use, en-vironmental concerns and the simulta-neous exploitation of conventional oiland gas along with shale gas, accordingto DGH officials. Shale gas potentialexists in most of India’s conventionalfields, they added.

The oil ministry’s timeline envisagesthat the first shale gas auctions willbe held by the end of 2011. Six basinshave been identified for assessment in

the first phase.While Australia has led the way, and

China and India are positioning them-selves as major players, many other AsiaPacific countries are looking at the po-tential of unconventional gas. Indone-sia, for one, is seeking to develop its un-conventional gas resources as part of its

push to reduce its dependency on oil,according to government officials.CBM production is expected to start

in late 2011 at two sites in East Kali-mantan, with the local investor Ephin-do developing the Sangatta permit andVico, a joint venture between Italy’s Eniand the UK’s BP, working at the Sanga-Sanga block. Ephindo’s output will beused at a local electricity generatingplant, while Vico is expected to supplyits output to the Bontang LNG export

plant, said a spokesman for Indonesia’supstream regulator BPMigas.

The Indonesian government antici-pates full-scale development of CBMwill be underway by 2015, when it ex-pects production to be 500,000 Mcf/day. Output is forecast to rise to 1 Bcf/din 2020 and 1.5 Bcf/d in 2025.

Government estimates put Indone-sia’s CBM reserves among the world’slargest at 453 Tcf, more than double itsconventional natural gas deposits of about 190 Tcf.

Indonesia awarded a total of 32 CBMblocks over the period from 2008 to Au-gust 2011. In addition to state-ownedoil and gas company Pertamina, in-ternational players including BP, Totaland ExxonMobil have so far taken upCBM permits.

Developers of Indonesia’s CBM arealso being offered more favorable re-turns than are in place for conven-

tional gas production. CBM produc-ers will receive 45% of the after-taxprofit, with the remaining 55% go-ing to the government, comparedwith the 30:70 split for conventionalgas production.

Shale gas is still a long way from de-velopment in Indonesia, with Ministryof Energy and Mineral Resources’ of-ficials estimating that production is asfar off as 2020. Government estimatesput the country’s shale gas potential at

as much as 570 Tcf based on studies inSumatra, Java, Kalimantan and Papua. ■



LNG demand in Asia bounced backin 2010 on the back of extreme coldand hot temperatures coupled witheconomic recovery across the region,after the global financial crisis at theend of 2008 curtailed LNG purchasesin 2009. And as 2010 drew to a close,extreme winter temperatures in Europedrove LNG requirements up, providingsupport for Asia LNG spot values in thefirst quarter of 2011.

Then the March 11 earthquake andtsunami hit Japan, Asia’s top LNG buy-er. The permanent or temporary lossof a large amount of nuclear and other

generating capacity has dominated theAsian LNG market since then.

And all this in the region which isthe dominant market for LNG. Grow-ing shale gas production in the US hasreduced its need for imports to virtu-ally nil, while European demand hasbeen limited only to occasional spotpurchases during summer and winter.

Asia accounted for almost 61% of the2.1 billion barrels of oil equivalent of world LNG imports in 2010, according

to data from independent LNG consul-tant Andy Flower. Japan was Asia’s lead-

ing importer, purchasing 31.7% of totalLNG imports, followed by South Korea(14.8%), Taiwan (5%), India (4.2%),China (4.2%) and Kuwait (0.8%).

Japanese LNG imports in 2010 in-creased by 8.6% on year to 70.01 mil-lion metric tons (mt), reaching theirhighest-ever level, according to cus-toms data released by Japan’s Ministryof Finance. Similarly, South KoreanLNG imports in 2010 were up 26.3% onyear at 32.6 million mt, according to aPlatts’ estimate derived from the coun-try’s customs data.

Across the board, Asian buyers im-

ported more LNG in 2010 than in theprevious year. The trend has continuedin 2011.

Traditional buyers such as Japan andSouth Korea, which currently have al-most 180 million mt/year and 40 millionmt/year of LNG import capacity, respec-tively will continue to be a dominantforce. But more recent market entrantswill play an increasingly important role.

According to the IMF World Econom-ic Outlook, Chinese and Indian GDP

is projected to grow by around 10%and 8%, respectively in both 2011 and


liquefied natural gas

The Asian LNG Market

Strides Ahead Hong Chou Hui, Managing Editor, Platts Asia LNG

Asia’s LNG market continued to evolve in 2011, as the

volatility of the last few years, coupled with a major crisis

in Japan, shook up the region and increased players’ appetitefor further developments.




iquefied natural gas

2012, outperforming respective annualgrowth of 1% and 4% in Japan andSouth Korea over the same period. Cou-pled with state support for gas use onboth jurisdictions, a marked increase indemand for LNG imports is expected in

both countries.This is already translating into newLNG import capacity. For instance, In-dia is currently adding 10 million mt/year of regasification plant to its exist-ing 13.6 million mt/year.

Meanwhile China had 12.3 millionmt/year of regasification capacity atthe end of 2010 but plans to add muchmore. Of the 20 million mt/year of ca-pacity under construction at the startof 2011, some 6.5 million mt/year has

already entered service, with the state-owned PetroChina having started upthe 3.5 million mt/year Rudong facilityin May and the 3 million mt/year Da-lian terminal in September

Changing Seasonal PatternsNot only is the Asian LNG market

growing fast, it is also evolving rapidly.The surge in Japanese LNG demand afterthe March 11 disaster has significantlyaltered the traditional pattern of shoul-der month pricing in spot Asian LNG.

Platts’ Japan Korea Marker (JKM)for spot cargoes delivered in April andMay averaged close to $11/MMBtu, wellabove the previous winter levels. Thatprice boost, which also came prior to thetraditional summer buying season, waslargely led by Japanese utilities maxi-mizing output at their gas-fired plants.

With their generating capacity hav-ing been worst affected by the disas-

ter, the Tokyo Electric Power Company(Tepco) and Tohoku Electric, in partic-ular, ran their thermal plants at close tofull capacity, and purchased LNG car-goes through the spot market. TohokuElectric took 3-5 cargoes per month

from April through June, while Tepcotook more than 20 shipments acrossApril and May.

The buying activity in Japan coincid-ed with purchases by Taiwan’s CPC, Ku-wait Petroleum Corporation and DubaiSupply Authority in preparation for thesummer, as well as demand from In-dian and South Korean buyers. Mean-while PetroChina and Thailand’s PTTwere looking for cargoes to commissionnew LNG receiving terminals.

All this combined to boost spot LNGprices during the shoulder months of April and May. And a similarly atypi-cal pattern occurred in Septemberand October.

LNG demand and spot prices in Japanand North Asia have usually peaked be-tween December and March, as heatingrequirements drive gas consumption,and again from July to September, whenincreased air-conditioning require-ments boost electricity and thus gas de-mand. April to May and September toNovember have thus typically formedshoulder periods characterized by lowergas demand and spot LNG prices.

For example, from December 2009to March 2010 the average Platts’ JKMprice was $7.27/MMBtu, falling to anaverage of $5.86/MMBtu in April andMay 2010. The price then rose to average$7.51/MMBtu from July through Sep-tember, as Japan’s hottest summer on

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4

6

8

10

12

14

16

Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11

(million mt)

China South Korea Taiwan Japan India

1. Total Asian LNG imports.

Source: Platts





record boosted air-conditioner use andthus LNG demand, before falling again.

But for the reasons already noted,Platts’ JKM for April and May 2011 av-eraged $10.88/MMBtu compared withthe average of $9.82/MMBtu from De-

cember 2010 to March 2011. And at thetime of writing (mid September), the JKM for September and October 2011deliveries was averaging $15.31/MMB-tu, again atypically higher than the av-erage of $13.33/MMBtu for the periodfrom June to August.

The muted summer spot price re-flected various factors. The summerwas generally cooler in North Asiathan in 2010, with temperatures in Japan being only one degree Celsius

above the 20-year average, accordingto data from US’s NASA. And energydemand in Japan was further reducedby government-mandated conserva-tion measures following the March 11disaster, which was also still depress-ing the level of economic activity andthus energy demand.

The upshot was that “Tepco and oth-er Japanese companies imported morecargoes than planned in May and June[because of] the earthquake but addi-tional requirements will be stable in July and August,” according to a sourceclose to Tepco. The source added that Japan’s largest LNG buyer had lost theseasonal aspect of its gas demand as aresult of the March 11 disaster.

Tony Regan from Singapore-basedenergy consultancy Tri-Zen said “theausterity policy [of] switching off lightswill have an impact on demand, plusthere will be lower demand from ar-eas affected by the quake.” The Japa-

nese government asked companies tocut summer power use by around 15%through a host of initiatives with, forinstance, one trader telling Platts that“Kansai [Electric Power Company] hasshifted the lunch hour for its staff by anhour to 1-2 pm from 12-1 pm. The peakpower and air-conditioning demandperiod is typically from 1-4 pm so Kan-sai should be able to save some power.”

Chris Holmes from Purvin & Gertz’sLondon office noted that infrastructur-

al constraints would limit the impactof the disaster on overall Japanese gasdemand for power generation. “Japan’spower market is very fragmented, witheach of the 10 power companies hav-ing their own discrete service areaswith poor connectivity between serviceareas so there is limited scope to movepower into the Tepco service region,”Holmes said.

Continuing Price Impact Japan’s ongoing electricity supply prob-

lems could have a continuing impact onboth spot and term LNG prices, althoughthe impact of growing LNG demand onprices could be mitigated by additionalLNG supplies from newly-commissioned

2

4

6

8

10

12

14

16

18

Jan Mar May July September Nov

($/MMBtu)

2009 2010 2011

2. JKM monthly average LNG prices.

Source: Platts





liquefaction projects. Australia’s PlutoLNG project, for example, is due to startproduction in March 2012.

Holmes has said that, while sufficientLNG production capacity may be avail-able to meet likely demand over the

next couple of years, spot LNG pricescould still overtake term prices in Asia.In this context “it is no surprise that[upward quantity tolerance] clauseshave been invoked, although this maybe a pre-emptive move to send a sig-nal to the market that [Tepco] can liftLNG at term prices, thereby makingan attempt to prevent a significant risein spot prices as was the case after the2007 earthquake,” he said.

UQT clauses generally allow an LNG

buyer to take an additional 5-15% ontop of their contracted volume, accord-ing to a producer. Tepco last exercisedits UQT clauses after the Kashiwazaki-Kariwa nuclear complex was hit by anearthquake in July 2007.

Spot LNG prices have usually beenwell below long-term prices in Asia,where term LNG contracts have tradi-tionally been priced against oil. Manyterm contracts in the past few yearshave given a delivered LNG price in$/MMBtu equivalent to about 15% of the $ price per barrel for Japan custom-cleared crude oil.

In 2010 Asian term LNG contractstended to produce a price of around $13/MMBtu, while spot prices ranged from$5.30/MMBtu to $10.10/MMBtu. Butspot prices are rising fast, with Platts’

October JKM being assessed at a high of $16.85/MMBtu on September 15.

The Japan LNG Cocktail (JLC) pricefor Japan’s LNG imports has also beenheading north due to higher oil prices.In January 2011, the JLC was $11.48/

MMBtu, increasing to $13.10/MMBtuin April 2011, and rising further to$16.07/MMBtu in July. Back in July2010, the JLC had been $11.23/MMBtu.

Commenting on the LNG pricetrends, John Harris from the Beijing of-fice of the energy consultancy IHS Cerahas said that “if you look at the impactof a few high priced cargoes on the over-all weighted average cost of supply it isrelatively small. Thus for major buyerslike Japan and Korea it is not likely that

demand will taper off,” and “the upperlimit would tend to be where oil firedgeneration would be competitive forutilities.” But there could be some resis-tance from Chinese and Indian buyersto further price gains, he said.

Regan has said that “term prices areheading up to $18/MMBtu plus as theimpact of $115-120/barrel crude filtersthrough,” adding that buyers could tryto reduce their term liftings and buyspot cargoes. “If there is a rush back tothe spot market this will lead to a pricesurge,” Regan said.

The Arrival of SwapsMeanwhile interest in LNG swaps

and short-term contracts priced off spot LNG values has grown along withthe evolution of the spot market. This

5

10

15

20

25

Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11

($/MMBtu)

Japan Korea Marker US Henry Hub UK NBP Dated Brent

3. LNG, gas and oil price trends.

Source: Platts





is seen as a natural progression as theLNG spot market is attracting morebanks and trading houses, who wouldtake positions for cargoes.

The first LNG swap deal based off Platts JKM for delivered spot LNG car-

goes was executed in January 2011 byCitibank. The swap was the equiva-lent of a partial cargo and covered thefirst six months of 2011, according to asource close to the matter, who addedthat Citibank had concluded a furtherfive swap deals based off the JKM by themiddle of 2011.

LNG is currently hedged through theUS and UK gas futures, and oil for Asia.Oil hedging works for long-term AsianLNG cargoes that are priced against the

JCC but for spot Asian LNG, gas and oilhedging provides a poor correlation.

As the graph of US and UK gas fu-tures and Platts’ JKM shows, over thepast year the premium of the JKM toUS gas futures increased from less than$2/MMBtu to about $12/MMBtu. Overthe same period, the JKM was pricedabove UK gas futures most of the timesbut the premium could switch betweenthe JKM and NBP, highlighting the in-dependence of the Atlantic and AsianLNG markets.

As previously noted, long-term LNGcontracts in Asia are currently linked tooil prices, resulting in a disconnect be-tween spot and term LNG prices in theregion. This meant that term LNG pric-es in Asia during 2010 averaged $13/MMBtu, whereas spot prices rangedfrom $5.30/MMBtu to $10.10/MMBtu.

A comparison of Platts JKM spotmonthly average values against Japan’saverage LNG import price from early2009 through July 2011 shows that thecountry’s term cargoes are generallypriced almost $4/MMBtu higher than

spot shipments, although this halvedafter the March 11 disaster. But to dateneither buyers nor sellers have voicedstrong support for a shift away from oil-linked prices for term LNG contracts, asAsia’s spot LNG market is not as devel-oped as Europe’s gas markets and thereare no other LNG derivatives apart fromthe LNG swaps priced off Platts’ JKM.

Asian long-term LNG contracts arefairly restrictive, with contract volumeflexibility normally limited to 5%. Car-

go diversions are also restricted as theynormally involve multiple parties andrequire all to reach a consensus before ashipment can be diverted from its origi-nal destination.

The region’s long-term LNG contractsspecify source terminals, restrictingproducers to providing cargoes from apre-determined liquefaction facility.This eliminates the flexibility of takinga shipment from a portfolio of produc-tion facilities, even if the supplier’s orig-inal LNG plant has production issues.

Price negotiations are also relativelyinfrequent, with buyers and sellerslocked into price formulas over the 20-or 30-year duration of the contract.

However, Asia’s utilities appear tobe shifting in favor of greater flexibil-ity in their LNG portfolios, partly be-cause of the unpredictable impact on

2

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12

14

16

18

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

($/MMBtu)

JKM spot monthly average (against delivery)

Japan average import price

4. Term vs spot LNG prices.

Source: Platts





gas demand of extreme temperatures insome recent summers and winters. Forinstance, very cold weather from late2009 through the first quarter of 2010forced South Korean and Chinese buy-ers to scramble to secure a combined 45

spot LNG cargoes.There is some evidence that LNG buy-ers are accepting relatively high pricesin long-term contracts in exchange forincreased flexibility. Utilities acrossnorth Asia—Japan’s Kansai Electric,China National Offshore Oil Corpora-tion, South Korea’s Kogas and Taiwan’sCPC Corporation among others—havealso taken equity stakes in upstreamLNG projects such as Australia’s Gor-gon and Curtis to give them additional

supplies and leverage.In September 2010, Japan’s Chubu

Electric Power Company agreed to buy1 million mt/year of LNG from the 2million mt/year Donggi Senoro LNGproject in Indonesia. The contract termsagreed by Chubu Electric include theoption of 100% destination flexibility.

And in an attempt to increase theirsupply flexibility, several Japanese utili-ties have said that, where economicallyjustified, they would seek to purchasemore spot cargoes while exercising thedownward quantity tolerance clause in

their long-term contracts. A DQT clausein a long-term LNG contract allowsbuyers to reduce the number of liftedcargoes by 5-10%.

Behind many of these developments isa simple fact—gas is seen by an increas-ing number of Asian governments andutilities as central to their plans to se-cure their energy future on a sustainablebasis. Asian gas demand is thus risingfast, with much of the demand needingto be met by internationally-traded fuel.

At the same time supplying the fuelin the best way requires the adoptionof increasingly complex strategies andmechanisms by both governmentsand companies. Asian LNG demand isgrowing fast and a once-rigid industryis having to evolve faster to meet thatdemand in an optimal manner. ■

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As US and European renewable en-ergy markets mature and government

support becomes more uncertain, Asiancountries are laying plans to spark ma-jor growth in both renewables genera-tion and technology production.

The developments form part of a con-tinuing shift in the global renewablesindustry from West to East, as Chinamakes its bid to become the world’s re-newable energy leader, with India inhot pursuit.

Over the past two years the focalpoint of renewable energy generationand manufacturing has moved moreand more from European Union andUS markets to new opportunities inAsia. While America and EU coun-tries such as Germany and Denmarkremain powerful players in clean-en-ergy markets, nations like the CzechRepublic, Italy and Spain have slashedtheir feed-in tariffs for renewable en-ergy generation—in Spain, with ret-roactive cuts to previously promised

solar feed-in tariffs.In response, Asian countries are mov-

ing swiftly to fill the void. China is nowsetting the pace in solar photovoltaics(PV) production, while India has estab-lished ambitious goals for solar and bio-mass energy production.

While these two Asian economic gi-ants jockey for position in the global re-newables race, dark horses like Bangla-desh and the Philippines are emergingas they see the potential benefits of us-

ing renewable energy and manufactur-ing the equipment needed for its use.

China in the LeadA September 2011 study by Standard

& Poor’s (S&P) noted that capital costsfor wind turbines and solar panels haveplummeted in recent years. Manu-facturers several years ago geared upproduction of PV equipment in antici-pation of soaring demand that nevermaterialized following the 2008 finan-cial crisis and the continuing weaknessof the global economy.

“The primary source of these pricedeclines has been Chinese manufac-turers that have enormously expand-ed global capacity and that continueto fully utilize their plants despitelack of demand,” said S&P, which, likePlatts, is a subsidiary of the McGraw-Hill Companies, Inc.

The result is swollen inventoriesamong solar PV equipment producers,particularly in China. Global capacityof about 30 GW in 2011 will far out-strip expected demand of 15 GW to20 GW, according to the study, Regu-

latory and Political Headwinds May Slow Renewable Energy Growth, which alsonoted that Chinese PV companies nowrequire large and growing amounts of working capital.

To date, China’s banks have largelyfinanced this buildup through almostzero-cost debt. This “is being used byChinese solar companies to achieveeconomies of scale, to offer extendedcredit terms to customers to augmenttheir already industry-leading cost po-

sitions, and to gain market share,” thestudy said.


renewables

Renewables Industry

Continues Shift to Asia David R. Jones, Editor, Platts Renewable Energy Markets




renewables

Despite worldwide PV oversupply,domestic markets will help to sustainChinese PV manufacturers in the com-ing years. The country plans to have 10GW of installed capacity by 2015, ac-cording to Liang Zhipeng, the deputy

director general of the Department of Renewable and New Energy at China’sNational Energy Administration.

Though it holds a less dominant posi-tion in the wind equipment manufac-turing industry, China has taken theglobal lead in wind capacity. Accordingto the Global Wind Energy Council,China surpassed the US in 2010 whenits installed capacity reached 42.3 GW.This followed a doubling every year inChina’s total installed wind capacity

between 2006 and 2009.Yet grid connections for wind farms

lag far behind construction, particularlyin isolated regions like Inner Mongolia,as the state-owned grid companies havestruggled to integrate wind energy intoChina’s electric power infrastructure.

China has succeeded in attracting for-eign wind-equipment companies likeDenmark’s Vestas and Spain’s Gamesato set up shop, joining domestic manu-facturers such as Sinovel, Goldwind,UnitedPower and Dongfang Electric.However, while five Chinese companiesrank among the world’s top 10 windmanufacturing companies, they trailbehind their US and European counter-parts in producing the 3-MW to 5-MWand larger wind turbines which are ex-pected to power the anticipated boomin offshore wind development.

India on the MoveIndia ranks a distant second to China

in the Asian renewables market but isundertaking several major policy initia-tives to build its clean-energy capacity.Its flagship program is the Jawahar-

lal Nehru National Solar Mission, alsoknown as Solar India, which is target-ing the construction of 20 GW of on-and off-grid solar thermal and PV ca-pacity by 2022.

The program seeks to exploit In-dia’s plentiful sunshine. A Rabobankanalysis has noted that the nation hasabout 300 sunny days a year, and that“the potential of solar energy indus-try is huge.”

The National Solar Mission antici-

pates PV projects will achieve gridparity by 2022 and parity with coal-based thermal power by 2030. But it“recognizes that this cost trajectorywill depend upon the scale of globaldeployment and technology devel-opment and transfer,” according to aprogram summary.

The first phase of the National SolarMission, currently underway, will runto 2013, when installation of 1,300 MWof capacity is anticipated. Within this,about 300 MW spread over 37 projectsout of the 620 MW of grid-connectedcapacity allotted to investors in the firstphase is expected to begin operating bythe end of 2012.

But Rabobank cites several pitfallsthat could hinder solar energy de-velopment in India. These includelocal-content requirements, which

1

2

3

4

5($ billion)

Q2-11Q4-10Q2-10Q4-09Q2-09Q4-08Q2-08

1. US-listed Chinese panel manufacturers: receivables and inventory less payable.

Source: Credit Suisee Solar Snippet, Aug 28, 2011, by Satya Kumar and Brandon Heiken

Copyright 2011 by Standard & Poor’s Financial Services LLC (S&P), a subsidiary of The McGraw-Hill Companies, Inc




renewables

it warns could produce high solarmodule prices.

Like China, India has become a ma-jor center of wind equipment produc-tion, drawing such foreign companiesas Gamesa, GE, Vestas and WinWinD.

However, the domestic company Su-zlon remains the largest Indian windturbine manufacturer, with about a50% market share.

In addition, India has launched anational biomass program modeledon the Solar India initiative. The bio-energy program is designed to providea policy and regulatory framework tooffer a “predictable incentive structurefor rapid and large-scale capital invest-ments in biomass-fueled power genera-

tion,” according to New and RenewableEnergy Minister Farooq Abdullah.

Abdullah noted that “the aim is alsoto encourage development of rural en-terprises for project development andsustainable operation of bio-energy sys-tems.” And the minister, who estimatedthat India’s surplus biomass could pro-duce 16 GW of electricity, said one of the bio-energy mission’s first initiativeswould be to set up dedicated energyplantations on degraded wastelands.

India currently has 2,664 MW of biomass-fired power generation capac-ity. But biomass energy developers arefacing challenges because of the ris-ing cost of biomass materials—eventhough most state regulatory authori-ties refuse to allow them to increasetheir sales prices.

In contrast to China, India’s federalgovernment structure gives substantialauthority to state governments to forge

their own renewables policies. Thesouthern state of Tamil Nadu, for ex-ample, has committed to build 5 GW of wind energy and 3 GW of solar energycapacity over the next five years.

Japan at the CrossroadsA renewable energy bill several years

in the making finally passed the Japa-nese Diet, or parliament, in late August.Its importance was indicated by the factthat Naoto Kan postponed his resigna-

tion as prime minister and head of theDemocratic Party of Japan (DPJ) until

immediately after its passage.The DPJ took office in August 2009,

ending decades of rule by the conserva-tive Liberal Democratic Party and vow-ing to enact a comprehensive feed-intariff for renewable energy.

The new law creates a broad feed-in tariff for renewable energy. It alsowaives the feed-in surcharge for aboutthree-quarters of Japan’s intensive-en-ergy users, according to media reports,mirroring similar waivers in countriessuch as Germany with feed-in tariffsfor renewable energy.

It remains uncertain, however,whether the new law will attract inves-

tors from overseas, as China and Indiahave done. Also still unclear is whatrole renewable energy will play as Ja-pan rebuilds its energy infrastructurefollowing the March 11 tsunami andearthquake.

Frost & Sullivan analyst Roberta Gam-ble said the disaster could lead to oppor-tunities in Japan for growth in on-sitepower, or distributed generation, whichcan favor renewable use. She noted thatmajor power interruptions are one of the biggest drivers for DG in the US,though these on-site plants tend to besmall generators designed to fill imme-diate gaps in power supplies.

Gamble said, however, that a “na-

tional catastrophe can also mobilizesocieties and governments to demanddifferent power solutions.” She addedthat “the country may expect to seeincreased government policy and de-mand toward more distributed sourcesof electricity that can help rebuild thecountry’s power system and economy.”

Australasian TrendsAustralia, though a leading indus-

trialized Asia Pacific nation, has been

slow to take up renewable energy,hindered for years by governments

India currently has 2,664 MW of biomass-fired

power generation capacity. But biomass energy developers are facing challenges because of

the rising cost of biomass materials ...



renewables


that refused to enact strong laws pro-moting renewables. However, this hasbegun to change as successive Laborgovernments have pledged to createmarkets for carbon-emissions tradingand boost funding for renewable re-

source development.Though the previous administrationled by Kevin Rudd fell after failing tosecure parliamentary agreement on acarbon-trading bill, new Labour PrimeMinister Julia Gillard has won narrowsupport for the bills in both houses,thanks to deals done with the Austra-lian Greens and independent membersof parliament.

The government proposals wouldplace an A$23/metric ton ($23.6/mt)

tax on CO2 emissions starting July 1,2012. Draft legislation for the packageof measures, which includes initiativesthat would provide some $13.3 billionof federal funds for the renewable en-ergy sector, was released in late July.

The government is aiming to getthe carbon legislation passed throughboth houses of parliament by the endof 2011. But local mining and resourcescompanies have formed the Austra-lian Trade and Industry Alliance andlaunched an intensive lobbying andadvertising campaign against the legis-lation, warning the measure threatensjob losses, higher prices for consumersand lost business opportunities.

New Zealand has for years worked toexpand its clean-energy production,and renewables production has wonsupport from governments of varioushues. In the most recent energy strat-egy, issued in September 2011, the gov-

ernment affirmed its commitment torenewable energy, calling it a “key area”of the country’s energy strategy.

The country currently generates near-ly three-quarters of its electricity fromrenewables, including large hydroelec-tric plants. The government has set thetarget of securing 90% of national elec-tricity supplies from renewable energysources by 2015.

Renewable energy developers alsostand to benefit from a government

directive issued in April 2011 that re-quires local and regional authorities

to promote renewable energy in theirdevelopment plans and planning deci-sions. The National Policy Statementfor Renewable Energy Generation 2011“will drive a consistent approach toplanning for renewable energy genera-

tion in New Zealand by giving cleargovernment direction on the benefitsof renewable energy generation and re-quiring all local councils to make pro-vision for it in their plans,” accordingto a statement from the Ministry forthe Environment.

Emerging MarketsSeveral other Asian countries are be-

ginning to claim a stake in the renew-able energy industry by establishing

renewable energy policies designed togive investors confidence in new mar-kets. For instance, the Philippines gov-ernment, which issued a long-awaitedNational Renewable Energy Program(NREP) in June 2011, intends to boostits geothermal capacity by 75% and hy-droelectric capacity by 160% by 2030.

The Philippines Department of En-ergy said that it also plans to add 2,345MW of wind, 284 MW of solar and 277MW of biomass-fired capacity. Amongthe projected milestones, solar power isexpected to reach grid parity by 2020and wind energy by 2025, while thegovernment expects to have a con-centrated solar thermal demonstrationplant operating by 2015 and its firstocean energy facility on stream threeyears later.

As an archipelago comprising 7,107 is-lands—2,880 of which are inhabited—the Philippines relies on imported coal

and oil for half its electricity, accordingto the Renewable Energy and EnergyEfficiency Partnership. The fragmentedgeography makes power transmissionacross vast distances difficult, and thecountry’s three main grids have regular-ly suffered from the threat of blackouts.

Yet this lack of centralized powertransmission also makes the Philippinesa prime candidate for distributed genera-tion, including small wind and hydro-electric plants and solar energy. Aggres-

sive renewable energy development willbe “balanced with the need to provide




adequate, reliable and high-quality pow-er. It bears emphasis that while effortsto facilitate [renewable energy] into thegrid shall continue to be intensified, thestability of the grid shall be ensured aswell,” according to the NREP.

The government expects big pay-backs from renewables expansion, notjust from savings by cutting the fossilfuel imports on which the country cur-rently relies, but also the “employmentopportunities that will be generatedby increased economic activities withmore intensive private sector invest-ments in the sector,” the program said.

Meanwhile Bangladesh—which likeneighboring India has some of theworld’s best solar resources—is develop-

ing national policies to secure renew-ables investments. It has for the firsttime set a specific target for renewablepower generation by 2015.

The government is looking to pro-duce 500 MW of electricity from thevarious renewable energy sources—about ten times the country’s currentgeneration from renewables, accordingto Finance Minister Abul Maal AbdulMuhith. Parliament approved the plansas part of the passage of the country’snational budget in June 2011.

Bangladesh’s renewable energy capac-ity currently totals 55 MW. Under thestrategy established by the Power Min-istry, 200 MW will be generated fromsolar PV, 200 MW from wind, 45 MWfrom biomass, 45 MW from biogas and15 MW from other sources by 2015.

Changing PerceptionsThe developments in the Philip-

pines and Bangladesh are pointers tothe growing perception of the poten-tial benefits of renewable energy acrossAsia. Both countries suffer frequentenergy blackouts, are experiencingrapid growth in energy demand, andimport a substantial amount of theirenergy needs. In this context renew-able energy offers a way of meeting theburgeoning growth in energy require-ments while at the same time bolster-ing energy security.

What’s more, renewables—particu-larly off-grid, mini-grid and distrib-

uted generation applications like solarPV and small wind turbines—can helptackle the challenge of energy poverty.This is true not only in countries likethe Philippines and Bangladesh withlow per-capita income, but also in rap-

idly-industrializing countries, such asChina and India, which face growinggaps between rich and poor.

As new perceptions and perspectivesemerge about the value of renewableenergy, old stereotypes are falling bythe wayside. For example, while na-tions like India and China often havelower manufacturing costs than those

in North America and Europe, cheapproduction is no longer necessarily thedeciding factor in business decisions onproducing clean-energy technology.

Thus Germany’s SolarWorld report-ed in June 2011 that it had sold itsjoint venture production site in SouthKorea to concentrate on PV productionin the US and Germany. It plans tosupply PV technology to the growingAsian market out of the plants in theUS and Germany.

SolarWorld said it is pulling out of South Korea to focus on productionlocations with the highest-quality en-vironmental and social standards. Thecompany noted that allegedly lowerwage costs in Asia are not a crucialcost factor “because these account forless than 10% of product costs,” add-

ing that the cost of transport from Asiato Europe and the United States is sub-stantially higher than in the oppositedirection, in which international con-tainer vessels frequently travel empty.

So the increasing globalization of thefast-moving and dynamic renewablesindustry will not necessarily always bea one-way street. But that said, there isno doubt that the key trend is the con-tinuing shift in renewable equipmentmanufacturing and installation of new

capacity away from the US and Europeto Asia. ■

As new perceptions and perspectives emerge

about the value of renewable energy, old

stereotypes are falling by the wayside.

renewables




The March 11 earthquake and tsuna-mi in Japan, and the resultant disasterat the Fukushima-1 nuclear plant, havehad far-reaching consequences. Thedisaster not only devastated Japan’snuclear industry but also reshaped thenuclear landscape in Europe and NorthAmerica, decimating industries incountries with good safety records andnegligible seismic risk.

And yet in the much nearer econo-mies of Asia, the aftershocks have beenmuted. Within days of the disaster,most countries operating or planningto build reactors had reaffirmed theirprograms, albeit with caveats and plansto review safety measures and emergen-cy procedures.

This is not to deny that Fukushimahas had a substantial regional impact,with nuclear power facing increased lo-

cal and environmentalist opposition inmany countries. Nor is it to suggest thatnuclear power in Asia is in any sensemonolithic—each national programhas very specific characteristics.

But for the most part the local and en-vironmentalist opposition has built onexisting antipathy to the technology.And it is hard to resist the conclusionthat, while individual national nuclearprograms may differ significantly, inmost regional jurisdictions Fukushima

has been conscripted to promote exist-ing political and policy agendas, rather

than reshaping the wider energy debate.This article assesses nuclear prospects

in some key Asian markets against thisbackground. But first it asks why thecontinent seems so wedded to nuclearpower because, to paraphrase Voltaire, itat times seems that if nuclear power didnot exist, Asia would have to invent it.

The Asian Nuclear FitIn many Asian economies electricity

demand has been growing rapidly, atleast until very recently and certainlycompared with European and NorthAmerican levels. With much of thegrowth coming from the industrial sec-tor, which generally displays limited di-urnal and seasonal changes in demand,there is thus a need for substantial ad-ditional baseload capacity, for whichnuclear reactors are ideal.

The need is exacerbated by the factthat there are few electricity intercon-nections between Asian countries,and in cases within them. Achievingoptimal power flows and avoiding theduplication of capacity by cross-bor-der electricity trading is not possible,meaning that to ensure secure energysupplies each country needs a balancedand diversified generating portfolio, in-cluding baseload plant.

Nuclear plants do have disadvantag-

es—building each megawatt is moreexpensive and takes far longer than

nuclear

Asian Nuclear Power —

Balancing Risk and Security Martin Daniel, Editor, Platts Power In Asia




nuclear

building gas, oil or coal-fired plants.But their big advantage is that, onceoperational, reactor fuel costs are muchlower in absolute and percentage terms.Put simply, building reactors avoids re-liance on the fossil fuels whose prices

and volatility have been rising sharplyin recent years.This is especially pertinent in the large

number of Asian countries which are re-liant, and increasingly so, on importedfossil fuels. Buying more—and moreexpensive—internationally-traded fuelhas substantial foreign exchange as wellas security of supply implications.

Moreover, the increasing bill for fossilfuels has had a massive impact on gen-erator and utility balance sheets across

Asia in recent years. Electricity tariffsin much of Asia remain regulated bythe state at the wholesale and especial-ly retail level, with no automatic passthrough of fuel costs and no guaranteeof full or timely tariff increases. Andwith the current macroeconomic con-cern in much of Asia being the controlof inflation, tariff adjustments by thestate have been both meager and tardy,leaving power companies in the red orreliant on state subsidies.

In this context, nuclear plants, whosefuel costs form a small and to date gen-erally less volatile component of overallcosts than fossil-fired plants, are an at-tractive prospect for beleaguered powercompanies and state coffers. And forgovernments, which tend to be adverseto ceding control to market signals, aheavily-regulated technology has po-litical attractions as well.

These various factors favoring nuclear

are not likely to go away soon. Much of Asia is on a long-term growth trajecto-ry, large swathes of the continent’s elec-tricity market will remain a patchworkof national systems for a while to come,the consumption and import of fossilfuel is an increasing trend, and, largelyfor the foregoing reasons, the shift froman electricity supply industry based onregulation to reliance on market signalsis at regional level proving a slow andinconsistent process.

Nor are the attractions of nuclear pow-er limited to rapidly-growing economies

or the search for secure electricity sup-plies. For those of Asia’s more matureeconomies with established domesticnuclear programs, the export of nuclearequipment and expertise can representa significant business opportunity.

JapanOne country on which Fukushima

has had an obvious impact is Japan.Prior to the disaster the country’s 54nuclear reactors with 47,500 megawatts(MW) of capacity accounted for around30% of national electricity output. Andnuclear power was seen as central tothe country’s future energy mix, withreactors projected to provide 50% of total electricity supplies in 2030. By

then, it was planned that 14 new reac-tors would have entered operation, of which 12 were under construction oractive development in early 2011.

Few if any of the proposed plants arenow expected to enter service, whilethe fleet of operating nuclear plantshas been heavily depleted. Plants stillout of action as a result of the July 2007earthquake have been joined by thosereactors at Fukushima-1 which willdefinitely close because of the disaster,as well as other nuclear plants at leasttemporarily affected by the earthquakeand tsunami.

On top of that, all but one of the reac-tors closed for scheduled maintenanceat the time of the disaster or since re-main idle as a result of the need to com-ply with stringent central governmentstress tests and because of local authori-ties’ reluctance to approve restarts. Withneither of these constraints likely to ease

soon, and with national regulations re-quiring that all reactors must carry outscheduled maintenance at least once ev-ery 13 months, there is concern that byApril or May 2012 Japan may have nonuclear output for the first time since1966. In mid September only 11 of thetheoretical stock of 54 operating reac-tors were actually in service.

While output from at least some exist-ing nuclear plants may be expected to re-sume at some stage in the near to medi-

um term, the long-term prognosticationfor atomic energy production in Japan is




nuclear

not good. New Prime Minister YoshihikoNoda said in early September that, onceexisting reactors had reached the end of their lives, the country’s nuclear capacitycould be eliminated since he saw littleprospect of new reactors being built.

This position may of course change astime passes. Noda is less negative aboutnuclear prospects than his predecessor,

Naoto Kan, and on September 13 he re-fused to rule out any long-term futurerole for nuclear power. While energyconservation plus new and renewable

resources have been mooted as the keyreplacements for Japanese nuclear out-put, there appears to be little chancethat atomic power can be scrappedwithout much-increased reliance onimported fossil fuels.

Renewed support for domestic nu-clear projects could also be pushed bythe importance of nuclear technologyexports to Japanese companies. Thenational growth strategy formulated in2010 identified nuclear exports as oneof the mainstays of future economicgrowth, and exporters have alreadycomplained about being disadvantagedby inconsistent and negative govern-ment policies.

South KoreaSouth Korean enterprises are among

those hoping to pick up overseas con-tracts at the expense of Japanese com-panies. They also appear to have the

advantage of relatively limited opposi-tion to the country’s domestic nuclearprogram, with one post-Fukushimaopinion poll showing strong supportfor retaining the nuclear option.

This is not to say that there is no op-position or that it is not growing. Ina June 2011 filing with the US Securi-ties and Exchange Commission, thestate-controlled Korea Electric PowerCorporation (Kepco), whose subsidiaryKHNP operates the country’s nuclear

plants, acknowledged that “in recentyears, we have encountered increasing

social and political opposition to theconstruction and operation of nucleargeneration units.”

Kepco also said in a detailed analysisof the gamut of risks it faces that theFukushima disaster would add to pub-

lic and regulatory scrutiny, and requireadditional safety appraisals and inspec-tions. This meant that “KHNP is ex-pected to incur additional compliancecosts and capital expenditures,” it said.

But Kepco added that nuclear power“has a stable cost structure [and] is leastcostly among the fuel types used byour generating subsidiaries.” At 31.3%,it was the second largest contributor of grid electricity supplies in 2010 afterthe 43.6% provided by coal—and this

in a context where the first risk cited byKepco was increased fossil fuel prices ina regulatory system where the utilitycannot automatically pass on the addi-tional cost through higher tariffs.

Nuclear power is thus seen as criti-cal by Kepco, which through KHNPowns 21 reactors with 18,716 MW of capacity. It also has seven reactors with8,600 MW of capacity under construc-tion for operation from 2017, as part of the 17,200 MW of nuclear capacity at13 sites planned for operation between2011 and 2024.

Nuclear power is equally important forthe government, both for domestic se-curity and overseas trade reasons. Withsuccesses already chalked up in countriessuch as the United Arab Emirates, but set-backs in tenders in Vietnam and Turkey,the Ministry of Strategy and Finance issetting up a one-stop shop to coordinatethe supply of equipment, services and fi-

nance for overseas nuclear ventures.

ChinaChina hosts the largest nuclear de-

velopment program in Asia and indeedthe world. The State Council respond-ed to the Fukushima disaster on March16 by suspending the approval of fur-ther nuclear power projects until newsafety plans are in place, and requir-ing checks on operational, construct-ing and approved reactors. Checks on

operating plants were completed inmid 2011, with the inspections of con-

China hosts the largest nuclear development

program in Asia and indeed the world.




nuclear

structing plants nearing completion inSeptember 2011.

The suspension of unapproved proj-ects will not have an immediate impacton China’s nuclear program, given thenumber of projects that have already

been approved and started construc-tion. It does, however, chime with ex-isting central government concernsabout the uncontrolled promotion of reactors at local level.

In January 2011, the State CouncilResearch Office had expressed cautionabout unrestrained provincial enthu-siasm for nuclear projects. It said the2020 target for nuclear capacity shouldbe restricted to 70,000 MW to avoidproblems relating to safety, quality con-

trol and insufficiently trained person-nel. It also said that there should be aconcerted move to the use of third-gen-eration technology, and expressed con-cern about the large number of second-generation CPR1000 units which wereunder construction or on order.

Concerns were also expressed aboutthe numerous projects planned in less-developed inland provinces. And thereport reasserted the 2007 policy thatonly three state-owned generators – theChina National Nuclear Corporation,China Guangdong National Power Cor-poration and China Power InvestmentCorporation—may have controllingstakes in and operate nuclear plants.

With 14 operational reactors with11,271 MW of capacity at August 2011,increasing mainland Chinese nuclearcapacity to 70,000 MW by 2020 willbe a major but not unachievable effort.Some 27 reactors with 29,930 MW of

capacity were under construction inSeptember 2011, with a further 51 reac-tors with 58,770 MW of capacity thenlisted as firmly planned by the WorldNuclear Association.

Beyond that there is a furthertranche of proposed capacity. The 150or so proposed reactors together have154,000 MW of capacity, meaning thatChina hosts more than 240 identifiedprojects with around 254,000 MW of proposed, planned, constructing and

operational capacity.Official plans say that about 200,000

MW of this capacity will be operationalby 2030, while by 2050 the governmenttarget is for up to 500,000 MW of ca-pacity. By 2100, about 1,400,000 MWof nuclear plant is envisaged.

Relative to other countries this is a

very large and ambitious program. Butin the context of China’s double-digitelectricity demand growth, and provenability to expand its stock of generatingcapacity, it does not appear unattainable.

Chinese generating capacity increasedby 10.1% on year in 2010, according tothe Chinese Electricity Council, withoperational plant rising from 874,070MW at the end of 2009 to 962,000 MWon December 31, 2010. After takinginto account plant decommissioning,

the country commissioned more than90,000 MW of capacity during the year.

In this context, building up to 7,000MW of nuclear plant a year to 2020 and10,000 MW a year to 2050 cannot beseen as overly ambitious, with the Fuku-shima disaster unlikely to have a long-term impact on China’s nuclear growth.But the disaster has reinforced centralgovernment concerns about the technol-ogy, ownership and geographic spreadof future Chinese nuclear capacity, andit may be expected that new approvalswill be selective in these respects.

IndiaThe Indian government responded

to the Fukushima disaster in near re-cord time, with officials saying withina week that its nuclear program hadbeen recently reviewed and was funda-mentally safe. Additional tests will becarried out, and a Nuclear Safety and

Regulatory Authority is being set up toaddress concerns that the Departmentof Atomic Energy both regulates andoperates nuclear plants, but the mes-sage from Prime Minister ManmohanSingh down has been that it is businessas usual for nuclear power.

New Delhi’s deep commitment tonuclear power is understandable in acountry where power demand is surg-ing, national electrification and gridintegration programs are far from com-

plete, many hydroelectric projects arethe subject of intense local, environ-



nuclear


mentalist and religious concerns, andindigenous coal and gas production—the source of most Indian electricityoutput—is failing to keep pace with tar-geted output for commercial and otherreasons. While solar and other renew-

able energy resources offer some respite,energy planners see no alternative toclosing the ever-widening projected gapin demand than fswith either importedfossil fuels or nuclear power.

Nuclear power has a further politicalcachet in a country which, until 2008,had been denied access to interna-tional nuclear fuel and technology formore than forty years. Renewed accessto imported nuclear plant to comple-ment its longstanding but slow-grow-

ing indigenous nuclear program is thebasis for the planned step change ininstalled Indian nuclear capacity overcoming decades.

Operational Indian nuclear capac-ity comprises 4,385 MW at 20 reac-tors. The figure is planned to jump to62,000 MW by 2032.

But while Singh’s administrationremains committed to fast nucleargrowth, the program is running intoproblems. Many of the planned nuclearprojects face strong local opposition.

Notable is the 10,000-MW Russian-equipped nuclear park proposed at Har-ipur in West Bengal state. The new stateadministration led by Mamata Banerjeepromised to scrap the project ahead of its landslide victory in May 2011, andconfirmed its decision in August 2011.

The six 1,650-MW reactors plannedat Jaitapur in Maharashtra state alsoface strong local opposition. So too does

the 10,000-MW nuclear park plannedat Kovvada in Andhra Pradesh, whosestate government is also back pedalingon the project.

Much of the opposition relates to localland and employment issues rather thanmore general concerns about nuclearsafety, although Fukushima has proved auseful weapon in mobilizing opposition.And projects based on imported plantappear to be bearing a disproportionateshare of the opposition in an industry

where a vociferous lobby favors priori-tizing the development of indigenous,

eventually thorium-fueled reactors.Imported reactor projects have also

been hit by vendor concerns about thestringent supplier liability and compen-sation requirements included in legisla-tion approved by the Indian parliament

in October 2010. And all nuclear proj-ects face financial constraints resultingin large part from the monopoly stateownership of nuclear projects throughthe Nuclear Power Corporation of IndiaLimited and other central government-owned entities.

The upshot is that, with only five reac-tors with 3,900 MW of capacity currentlyunder construction and 4,385 MW in op-eration, achieving the massive proposedgrowth in capacity may be difficult. But

while Fukushima may loom large in fu-ture explanations for any shortfall in ca-pacity, financial, institutional, politicaland local issues are the key constraintsfor India’s nuclear program.

BangladeshThe authorities in neighboring

Bangladesh have also had no secondthoughts about a nuclear program thatwas first proposed in 1961 but only tookoff in 2007 after a succession of falsestarts. Prime Minister Sheikh Hasinasaid on March 20, 2011 that the coun-try would not step back from the con-struction of nuclear plants, while theBangladesh Atomic Energy Commis-sion’s chairman, Farid Uddin Ahmed,said “Bangladesh is neither in an earth-quake zone nor the [Rooppur] plant siteis prone to a tsunami.”

The administration went on to ap-prove the signing of an inter-govern-

mental agreement with Russia in August2011. In the first instance it is plannedthat Russia will build two 1,000-MWpressurized water reactors at Rooppurin the Pabna region for operation from2017, with Rosatom supplying the fuel,taking back the spent fuel, helping withnuclear waste management, and even-tually decommissioning the plants.

With looming gas supply problemsand limited coal resources, nuclear isseen by Dhaka as one of the best long-

term options for meeting the 8%/yearprojected growth in electricity demand.




nuclear

Currently more than 80% of power isproduced from indigenous gas, but im-ported oil, coal and gas will meet mostof the near to medium term growth ina sector where 20,000 MW of new ca-pacity is targeted by 2020.

VietnamVietnam’s ambitious nuclear pro-

gram also barely faltered after the Fu-kushima disaster. The program tookshape in the second half of the 2000sas surging electricity demand requireddiversification of the country’s electric-ity supply options.

A power sector based on hydroelec-tric plants up to the 1990s saw a shiftto gas-fired generators from the late

1990s. The emphasis on gas then gaveway to a focus on building coal-fueledplants in the current decade, but withnuclear power and renewable energyplanned to take up much of the run-ning from the 2020s.

The scale of anticipated electric-ity growth is prodigious. The 10-yearpower development plan approved bythe prime minister in July 2011 proj-ects a near tripling of demand to 330TWh by 2020 and, while most outputis projected to be from coal (46.8%),gas (24.0%) and hydroelectric (19.6%)plants, renewable (4.5%) and nuclear(2.1%) sources are projected to startmaking inroads.

One of the key milestones for nuclearwas the 2006 Power Development Plan,which posited the construction of four1,000-MW reactors in Ninh Thuan prov-ince for operation from 2020. The Na-tional Assembly approved the two-phase

project in November 2009, with Russiaand Japan being tapped in 2010 as coop-eration partners for the 2,000-MW NinhThuan-1 and Ninh Thuan-2 projects atPhuoc Dinh and Vinh Hai, respectively.

The four reactors in Ninh Thuan are

due to be followed by more capacityboth there and elsewhere. By 2025 some8,000 MW of capacity is planned at thetwo Ninh Thuan sites, while by 2030fourteen reactors with 15,000 to 16,000MW of capacity are planned in BinhDinh, Phu Yen, Ha Tinh and QuangNgai provinces as well as Ninh Thuan.

Fukushima has had little impact onthe nuclear program in general—it wasconfirmed on March 16—or Vietnam’swillingness to use Japanese technol-

ogy and resources. Thus Hitachi-GENuclear Energy, Ltd and the Tokyo In-stitute of Technology started their firstcourse in human resource trainingprogram for nuclear power projects in July in Vietnam.

ConclusionsThe full repercussions of the March 11

earthquake and tsunami on the Asiannuclear power and energy sectors willnot become apparent for some time tocome. While Fukushima has become aninstantly recognizable word and potentsymbol, exactly what it symbolizes is thesubject of very different interpretations.

However, one thing is clear from thevarious country accounts given here.While Asia may in some respects findit difficult to live with nuclear power,it is apparent that much of the regioncannot conceive of living without nu-clear power. ■

TWh %

China 71.0 1.8

India 20.5 2.9

Japan 280.3 29.2

South Korea 141.9 32.2

Pakistan 2.6 2.6

World 2,630 13.8

1. Nuclear generation for selected countries and world in 2010, TWh and % of total output.

Source: World Nuclear Association (September 2011)




CCS has been seen as a likelytechnology for deployment in Asia,which has a large stock of existingand planned coal-fired plants, vastresources of coal and an increasingawareness of the need for cleaner en-ergy production. For instance in lateSeptember Xie Zhenhua, vice chair-man of China’s National Develop-ment and Reform Commission, toldthe fourth carbon sequestration lead-ership forum in Beijing that CCS mayplay a critical role in emissions reduc-tion in the country, according to theofficial China Daily newspaper.

And the forum witnessed progresson some projects with, for instance,

the state-owned generator Datangand France’s Alstom agreeing a stra-tegic partnership to jointly developtwo CCS demonstration projects by2015. Alstom and Datang agreedto develop a project equipped withAlstom’s oxy-firing carbon-capturetechnology at a 350-megawatt coal-fired plant at the Daqing oilfield inHeilongjiang province, and anotherproject using unspecified carbon-capture technology at a 1,000-MW

coal-fired plant at Dongying inShandong province.

But the problems facing CCS proj-ects in Europe may indicate that itsacceptance and implementation inAsia may not be that straightforward.Indeed, there is already some evidencefor this—China has only six CCSprojects at the planning stage againstthe 270 that the International EnergyAgency says it should have by 2035 aspart of a global action plan, with Xieacknowledging that CCS is a “last re-sort” for China.

The economic malaise in Europeand North America—two key marketsfor CCS demonstration—has cappedcentral plant investment and pushedCCS down utility priority lists. As fi-

nancial crisis grips both continents,the aim of building a significant num-ber of 300-MW-scale demonstrationplants by 2015/16 looks ambitious.Bridging “death valley” thereafter toachieve full commercial operation,a preoccupation for many in the in-dustry, is an even bigger leap thatranks as one of Donald Rumsfeld’sunknown unknowns.

The rate of policy developmenthas not helped, to the extent that in

July 2011 the European Commissionlaunched infringement procedures

carbon capture and storage

CCS in Europe: Filling

the Funding Void Henry Edwardes-Evans, Managing Editor, Platts Power in Europe

Like many worthy but expensive emerging technologies,

carbon capture and storage is struggling to extricate itself from

events and step up to the pre-commercial demonstration level.





against 25 of the EU’s 27 memberstates for failure to transpose the EU’s2009 directive supporting carbon cap-ture and storage.

The most serious case is Germany.Despite the government’s best efforts

to encourage new, low-carbon fossil-fired plant, parliament has now twicerejected draft laws on carbon captureand storage. While it remains to beseen whether mediation can savethe latest bill—thrown out by theBundesrat, or upper house, on Sep-tember 23—developers say the billis unworkable anyway because it canbe reviewed in 2017 and requires theproponent to shoulder a 30-year stor-age liability.

In Germany as in many other EUjurisdictions, environmentalists andevidently many voters remain deeplysuspicious of storing carbon under-ground. When projects do emergethey face well-coordinated opposi-tion from protesters who believethese are big, bad coal plants dressedin low-carbon clothing. While non-governmental organizations are di-vided on the merits of CCS, Green-peace is against the use of publicmoney to support it, and has proveda fierce opponent of many new coalplants in Europe.

This is problematic because threeof West Europe’s six foremost CCSdemonstration projects are linkedto large new-build power projects.Permitting delays and reversals arebecoming commonplace for these

projects—even for some well into theconstruction phase.

Never cheap at the best of times,dozens of planned coal projects havebeen set aside in favor of gas-fired,combined-cycle gas turbine plantsor investments in subsidized windand solar assets. Rightly or wronglythis has reinforced the impressionthat, in Europe at least, carbon cap-ture is becoming less relevant as age-ing coal-fired plants close and thereplacement capacity is either zero

100(Euro/MWh net)

REF

2015

Hardcoal - Europe Gas - Europe

2030 2015 2030

REF

CCS

CCS

90

80

70

60

50 49€

+71%

+46%

+49%+33%

50€

73€

65€

55€

43€ 42€

84€

40

30

20

10

Transport & Storage CCS/Coal REF Capex & Opex

CCS/Gas REF Capex & OpexFuel Cost

1. The CCS cost equation.

Source: Alstom – PCC

In Germany as in many other EU jurisdictions,

environmentalists and evidently many voters

remain deeply suspicious of storing carbon

underground. When projects do emerge they

face well-coordinated opposition from

protesters who believe these are big, bad

coal plants dressed in low-carbon clothing.





carbon (renewables) or relatively lowcarbon (CCGT).

Underground Storage IssuesRegulatory risk, meanwhile, is prov-

ing equally challenging. The problems

are greatest where coal plants are in-land with no convenient route to off-shore store options.

Politically this has proved a hot po-tato, with public perception in theNetherlands and Germany particularlynegative. Consider the likelihood of

gaining the three levels of authoriza-tion needed in Germany to build a CO

2

pipe to a geological formation in thenorthwest of the country that involves1,600 landowners from power stationsite to store—an example facing onedeveloper. Then, once a suitable stor-age is identified, it could be lost at anytime to a renewables development un-der German law.

But the real showstopper is cost. TheEuropean Union, the US and Canadaare leading the way with public fund-ing, with Canada lining up $2 billion,the US $3.5 billion and the EU poten-tially €4-5 billion ($5.4-6.7 billion) via

the auction of CO2 allowances, havingalready disbursed some €1.05 billionthrough the European Economic Re-covery Program.

Even with support from these EUfunds, however, European developerssay national governments must con-tribute to the €1 billion-plus cost of a300-MW demonstration project if theyare to be built.

“If we only have these [EU] fundsI’m not sure projects are going to go

ahead,” Alstom Power’s Joan Mac-Naughton said at a Platts CCS confer-

ence held in London in 2011. Even inthe UK, where support was strongest,“we have a commitment to supportthree more projects [beyond Longan-net], but that funding is under re-view,” she said.

And the cost estimates are rising.One developer told Platts that hislarge continental demonstration proj-ect was now estimated to cost €1.5billion. At present he could expectaround €500 million from subsidies ina best case scenario. “This is not the50/50 split we’ve looked for,” he said.“Unless the utility can see a big potof gold at the end of this, it will notinvest in these conditions.”

Project Status in EuropeTo date in Europe only the UK and

the Netherlands have proposed signifi-cant funding for pre-commercial CCSprojects. The UK’s intention to leadthe way in Europe was underlined byits commitment to extend £1 billion($1.54 billion) to a first project award-ed following a competitive biddingprocess—enough to cover the full costof a large demonstration project run-ning for 10-15 years.

As noted, ScottishPower’s existingLongannet coal-fired plant is lined upto receive the funding. The CCS proj-ect there is a joint venture betweenScottishPower, transmission companyNational Grid and Anglo-Dutch en-ergy company Shell, along with con-tracting partners Aker Clean Carbonand Accenture.

The 2,400-MW Longannet com-plex in Scotland is the third largest

coal-fired power station in Europe.ScottishPower is to be responsible forretrofitting post combustion captureand compression equipment, whileNational Grid Carbon is responsiblefor onshore transport and compres-sion at St Fergus. Shell is responsiblefor offshore transport and storagefor the project, which is expected tocapture and store 20 million metrictons (mt) per year of CO

2over a 10 to

15-year period.

In March 2010 Longannet, alongwith E.ON’s proposed Kingsnorth

Consider the likelihood of gaining the three

levels of authorization needed in Germany to

build a CO 2 pipe to a geological formation in the northwest of the country that involves

1,600 landowners from power station site to

store—an example facing one developer.





coal-fired plant, were awarded un-specified funding to support front endengineering and design studies. Thestudies were to be completed withintwelve months and then compete forfull funding. But in the event E.ON

withdrew Kingsnorth from the com-petition, saying the economic cri-sis had delayed the need for the newplant. Environmental opposition toKingsnorth had been vociferous.

In the Netherlands, E.ON/Electra-bel’s joint CCS project at Maasvlakte,known as ROAD, is to receive €150 mil-lion from the Dutch government over2010-2019. This is additional to the €180 million that the European Com-mission has put up over 2010-2014.

All is not plain sailing, however. In January 2010, Greenpeace Nederlandplaced a procedural obstacle in theway of the project, with a Rotterdamcourt agreeing that E.ON’s construc-tion license was wrongly issued. Sowhile the plant is in constructionand heading for a 2013 completion,the developers continue to seek therequired permits.

ROAD’s demonstration phase aims tocapture 1.1 million mt/year of CO

2

andtransport it 20 kilometers (12 miles)offshore for storage under the NorthSea. Cooperation with the Abu DhabiNational Energy Company has beenagreed for this final stage of the process.

Other pre-commercial CCS plansto receive EU funds to date includeVattenfall’s Janschwalde project inGermany, Enel’s Porto Tolle facilityin Italy and 2CO Energy’s Hatfieldproject in the UK. All face hurdles

beyond the core question of cost, beit access to storage in Germany, per-mitting problems in Italy or insol-vency in the case of Hatfield’s origi-nal owner Powerfuel.

In April 2011, a draft CCS demon-stration law agreed by the Germanfederal government allowed the trialof a few CO

2storage sites in the first

phase, with a review in 2017. The lawforesees transfer of responsibility tothe state 30 years after a store’s clo-

sure. As noted, this draft was reject-ed by Germany’s upper house in late

European CCS projects based on NER300 applications

Thirteen CCS projects from across Europe have applied for a share of funding from the so-called NER300 scheme—a €4.5 billion fund to support CCS and renewables projects across the European Union. Seven countries applied for funding for CCS projects.The European Investment Bank is now evaluating the projects, with a final award decision expected from the European Commission in the second half of 2012. Up to three projects in each member state may be supported. The UK alone has put in seven projects, with six other EU states submitting one apiece.

◆

Alstom Consortium’s new Drax oxyfuel supercritical power station, Yorkshire, UK.◆ C.GEN’s IGCC power station at Killingholme,

Yorkshire, UK.◆ ScottishPower’s post-combustion capture project

at Longannet, Scotland,UK.◆ Peel Energy’s new supercritical coal-fired power

station with pulverized coal combustion (PCC) at Hunterston, Scotland, UK.

◆ Don Valley Power Project (formerly Hatfield) new IGCC power station in Yorkshire, UK, already

awarded €180 million from the European Energy Programme for Recovery (EEPR).

◆ Progressive Energy’s consortium bid for apre-combustion coal gasification project in Teesside, UK.

◆ Scottish & Southern Energy’s PPC retrofit at an existing CCGT power station at Peterhead, Scotland, UK.

◆ Air Liquide’s Rotterdam-based hydrogen project in the Netherlands.

◆ Enel’s Porto Tolle PCC project in Italy, already awarded €100 million from the EEPR.

◆ ArcelorMittal’s capture project at its Florange steelworks, northern France.

◆ Vattenfall’s Janschwalde project in Germany,which has received €180 million from the EEPR for an oxyfuel coal-based project.

◆ PGE’s amine-based CCS project at the Belchatow power plant in Poland, which has received €180 million from the EEPR.

◆ Termoelectrica’s Turceni power plant, in Romania,which is planning a PCC facility with storage

in nearby aquifers.





September, with Vattenfall effectivelysuspending its Janschwalde demon-stration plant as a result. “It is aston-ishing how a technology with suchgreat potential both for climate pro-tection and the industrial landscape

in Germany is treated here,” the com-pany said.Vattenfall has run into similar

problems in the Netherlands, whereunderground storage of CO

2was

banned in February 2011 by thegovernment, blocking Vattenfallsubsidiary Nuon’s plans to store CO

2

from its Magnum power station inthe Groningen gas fields.

Vattenfall has been one of the lead-ing European proponents of CCS with

pilot capture facilities at SchwarzePumpe, Buggenum and Ferrybridge.It also has a hand in the CO

2SINK re-

search project at Ketzin near Berlin,where underground storage is beingtested in a saline aquifer.

But how many more expensivesetbacks Vattenfall can absorb be-fore it draws back from CCS re-mains to be seen. All its work wasto have led to the full demonstra-tion of oxyfuel technology on thenew 250-MW lignite-fired unit at Janschwalde, which is due online in2015 and projected to capture 1.3million mt/year of CO

2. Together

with Verbundnetz Gas and Schlum-berger, Vattenfall has been lookingat two promising underground stor-age sites in Brandenburg some 150km away. The storage capacity of the two structures is estimated to bemore than 100 million mt.

Enel is another big utility pumpingits fair share of investment into CCS,with a pilot project in Brindisi, Italyand EU-backed plans for pre-commer-cial demonstration projects at PortoTolle in Italy and Compostilla inSpain. There is some light at the endof the tunnel for Porto Tolle, an oil-to-coal generating plant conversionthat appears to be making permittingprogress after fierce legal challenges.This is to be the site for post-combus-

tion capture of 810,000 cubic metersper hour of CO

2—equivalent to 40%

of the emissions from one of three660-MW units at the plant—whichwill be stored in a saline aquifer belowthe Adriatic Sea.

“And/Or” Versus “And/And”

Environmental opposition to thisproject encapsulates another dangerfacing CCS—the belief that it is asmokescreen for partisan interests,and a drain on resources neededelsewhere.

“I go further than saying that CCSwould only have captured some of the CO

2from this plant,” WWF Ita-

lia’s Mariagrazia Midulla told Plattsin May 2011 after Porto Tolle wassuspended by a court ruling. “I say

that CCS is still a dream used to driveattention away from the real pollu-tion problems of a coal-fired powerstation. The future is in energy effi-ciency and renewables.”

The CCS lobby argues that thetechnology is part of an “and/and”future, where the world needs arange of potential options includingrenewables, efficiency, new nuclearreactors and carbon capture. Euro-pean environmentalists argue thatin reality CCS is part of an “and/or”scenario—with budgetary choicesbeing made at the policy stage andwith subsidized CCS developmentspreempting funding for targets theydeem more deserving, such as re-newables and efficiency.

The EU is persuaded by the “and/and” argument. It sees fossil-firedpower stations as a global fact of lifefor the foreseeable future and CCS as

a commercial opportunity for Euro-pean equipment suppliers. The EU isalso persuaded by the carbon market,and its ability to draw in low carboninvestment. In both cases Europe istrying to lead a global drive to combatclimate change.

The question is, who is following?Until other jurisdictions start to acton climate change, and internationalmeetings start to deliver tangible com-mitments, the struggle will continue

to raise funds for carbon capture andstorage. ■



November 2011 insight xx

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E R S

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May 2011, he has been appointed to be the presidentdirector of PT Arutmin Indonesia and PT KaltimPrima Coal. Previously, he was the president directorof Enercorp, Ltd and director of PT Bakrie & BrothersTbk. He was born in Jakarta, on May 30, 1959.

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Ari S. HudayaCEO

PT Bumi Resources Tbk




The country’s swift move to becominga thermal coal importer caught manymarket players by surprise in 2008, butby the second half of 2011 even minersin the United States were casting theireyes over a lucrative market that couldhelp breathe life back into their indus-try. So what lies ahead?

The boom in consumer goods such aselectronics and automobiles, promptedin large part by the ever-increasing mi-gration of people from rural to urban ar-eas, has helped fuel China’s double-digiteconomic growth for year after year.

China should no longer be viewed solelyas a producer nation; it is fast becominga consumer society.

The urbanization of China has seen tra-ditional three-generation family homesbreak up, while the migration patternis no longer seasonal but permanent orsemi-permanent. Almost half of China’s1.35 billion people now live in an urbanenvironment—a sea-change from the1990 level of about 26%—resulting in ahousing boom in which each new apart-

ment is creating additional demand forwhite goods and other consumer dura-

bles. And experts suggest this workforceshift is unlikely to stop any time soon,with forecasts of the urban populationin 2035 ranging from 60% to 70%.

The process has been powered by aphenomenal growth in generating ca-pacity that has still failed to keep pacewith demand. In July 2011, the ChinaElectricity Council (CEC) estimatedthat national electricity shortages wouldreach 25-30,000 MW in the comingwinter following summer shortages of 30-40,000 MW. The CEC projected thatelectricity consumption will reach 4,700

TWh in 2011, up about 12% on year, af-ter demand rose 12.2% on year to 2,251.5TWh in the first half of 2011.

China’s national installed capacityis expected to hit a headline-grabbing1,050,000 MW by the end of 2011, upfrom 962,190 MW in December 2010. Of this 706,630 MW, or 73.4%, was fossil-fired, with the vast majority of the ther-mal plant in turn being coal-fired.

Although coal production is projectedto increase to about 3.5 billion metric

tons (mt) in 2011 compared with just overa billion mt a decade ago, China cannot

coal

Feeding the Dragon:

China Fires Up the Coal Market James O’Connell, Managing Editor, Platts Coal

China’s rapidly-expanding stock of coal-fired generating plant

has radically altered the traditional pattern of global coal trade

in the last three years, when for the first time the North Asian

nation became a net importer of thermal coal.




coal

produce enough fuel to feed the 1,000MW or so of coal-fired capacity it is add-ing to the grid each and every week. Thelargest coal producer in the world is thusfast becoming a major importer.

China’s emergence as a major player

in both the international thermal andcoking coal markets has seen producers,traders and other industry participantsscramble for a slice of the market. Netthermal coal exports of 35 million mt in2008 have switched to projected importsof about 80 million mt in 2011, with theshift placing additional demand on pro-ducers like Australia and Indonesia.

Barclays Capital analysts said in an Au-gust 2011 report that “Chinese coal im-ports hit a record high of 17.5 million mt

in July, up year-on-year by 34% toppingthe previous record of 17.34 million mthit in December last year.” They addedthat “the surge was powered by steamcoal imports, which hit a record of 9.8million mt, while coking coal imports—though elevated—were below all-timehighs, coming in at 4.05 million mt. Theincreased imports were due to Chineseconsumers restocking during the hottestseason of the year.”

The report pointed out a notable trendlong evident in the Indian marketplace.“Chinese imports in July have favoredlow-quality coal as anthracite importshave declined year-on-year and month-on-month, resulting in the strengthin coal imports not being reflected inbenchmark prices. Despite the openingof the Chinese arbitrage window for Aus-tralian coal, current Chinese/Newcastle

price differentials have yet to becomelarge enough to entice greater buyinginterest as easing domestic thermal coalprices and the availability of competi-tively-priced Indonesian thermal coalhave contributed to a slower pull for

Australian thermal coal,” it said.Chinese coal imports currently haveto pay 17% VAT, restricting volumes sup-plied from South Africa and even Austra-lia. This is one of the reasons why Chinais considering lowering VAT on coal im-ports, according to Hao Xiangbin, di-rector of the market department of theChina Coal Trade and Development As-sociation (CCTDA).

Hao, who was quoted by Chinese statemedia at the 2011 Coal, Coke and Steel

Industrial Chain Investment Forum heldin Beijing in late July, did not give de-tails about the possible cut in VAT. Butan analyst with the Beijing-based DexinYongming Consultation estimated thatVAT might be lowered by 5% to 12%.

The analyst added that the expectedVAT cut looked set to increase China’scoal imports, although she warned thata boost in Chinese imports could alsopush up international spot prices, even-tually resulting in even higher purchas-ing costs for power plants. However,some international coal industry playershave speculated that the mooted VATreduction was designed to dampen do-mestic thermal coal prices rather thanencourage additional imports.

At the forum, Hao said he expectedChina’s total coal imports would reach150 million mt in 2011 and increase

50

100

150

200

250

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

China India

1. Coal generation units installed per year in China and India.

Source: Platts UDI World Electric Power Plants




coal

further in 2012 and 2013. During 2010,China imported 164.83 million mt of alltypes of coal, including anthracite andlignite that Hao excludes. This was up31.5% on year, while total imports dur-ing the first half of 2011 reached 81.09

million mt, or 70.6% up on year.At the same forum, Dong Yueying, thesecretary general of the CCTDA said Chi-na’s domestic coal supplies are expected toincrease in the second half of 2011, whilecoal demand may ease. Dong said domes-tic production was 1.785 billion mt in thefirst half of 2011, up 13% on year, whilesales totaled 1.71 billion mt during the January-June period, up 13.8% on year.

The growth can be seen across the in-frastructure curve, according to prelimi-

nary figures released by China Customs.Chinese railroads transported just over1.1 billion mt of coal in the first half of 2011, up 129.43 million mt or 13.3% onyear. Meanwhile, China’s major northernports delivered 288 million mt of coal tothe south of the country during the firsthalf, up 19.3% on year.

Coal production is up, rail and portmovements are up, but exports are down.They fell to 710,000 mt in June, down19.3% on month and a whopping 44.1%on year, China Customs reported. Dur-ing the January-June period, the countryexported 8.75 million mt of coal, down13.7% on year.

The CCTDA secretary general’s opti-mism that demand in the second half of 2011 may ease is not shared by the CEC.The body stands by its estimate of a 25-30,000 MW winter shortage.

While some relief was afforded by in-creased hydroelectric generation levelsduring the summer, Macquarie Researchcautions that “coming toward the end of the wet season, there seems to be morechallenge for the Chinese power supply

moving into the winter with less hydroavailability.” This will translate into ad-ditional pressure on thermal supplies inthe short term.

In the medium term, China is target-ing the production of 3.8 billion mt of coal by 2015. To put this in context, Bar-clays Capital says that output will thusbe some 550 million mt higher than in2010. But it adds that production in 2010was 890 million mt higher than in 2005.

Xinjiang autonomous region will be

the key coal development area in the next10 years, as its coal resources amount toroughly 40% of the national total. Theconstruction of a new rail link fromXinjiang, due to be completed in 2013,should help improve transport signifi-cantly and allow regional coal output torise to 500 million mt in 2015 and a bil-lion mt in 2020, when it would represent26% of national output, according to theregional government.

China’s ability to move fast and deci-sively to tackle problems should neverbe underestimated, with its thermal coalmine consolidation program in recentyears a good example. But supplying coaldemand without recourse to substantialadditional imports will be difficult.

At the same time, it will seek to buyimports as smartly and cheaply as possi-ble. In this respect its sudden price sensi-

80

100

120

140

160

180

Sep-11Jun-11Mar-11Dec-10Sep-10

KalimantanRichards Bay NewcastleQinhuangdao Korea West

2. Coal price trends—physical ($/mt).

FOB Richards Bay (6,000 kcal/kg NAR); FOB Newcastle (6,300 kcal/kg GAR); FOB Kalimantan (5,900 kcal/kg GAR); CIF Korea West (6,080 kcal/kg NAR); FOBQinhuangdao (6,200 kcal/kg GAR)

Source: Platts




coal

tivity surprised many in the industry in2011, with standard South African andAustralian coals no longer in favor andattention turning to lower calorific val-ue, and hence cheaper, Indonesian coal.

Barclays Capital has commented that,

“for China, this heightened price sensi-tivity resulted in thermal coal importsfor H1 2011 falling 18% year-on-yearover a period in which Chinese thermalcoal generation showed a 12% increaseyear-on-year. This was due to domesticoutput growing 13% year-on-year for H1and China improving the use of domes-tic rail infrastructure, particularly theDaqin line, with China’s railways trans-porting 790 million mt of thermal coalin H1 2011, up 15.9% year-on-year (ac-

cording to figures from the NDRC).”The move to lower calorific coal has

also created a fresh product with Austra-lian producers offering what is describedas off-spec material, with the 5,500 ki-localories per kilogram product beingdistinct from the standard 6,000 kcal/kgoffering. Traders have reported low-keyChinese buying as supporting the New-castle thermal coal market at the sametime as free-on-board prices are fallingdue to pressure from rising freight pric-es—with the Baltic Exchange Dry Indexof bulk cargo freight rates reaching anine-month high of 1,907 points on Sep-tember 16—and the continued absenceof Japanese buyers on the spot market.

“The real demand in the market at themoment is the sub-bituminous and ultra-low calorific value coals from Indonesiaand off-spec Australian into China,” saidone market participant. “We have seenvery good demand for these products

from China in the last few weeks, andthis is keeping a floor in the market forthe time being,” he added.

The thirst for coal has also made foran active merger and acquisitions mar-ket. Countries like Australia and Mo-zambique, and regions of Indonesia likeKalimantan and Sumatra, have becomemajor targets.

With Australia a particular favorite of Chinese companies, some industry com-mentators have seen the election of a

Liberal-National coalition government inthe state of New South Wales in March

2011 as something of a setback. The newadministration made an election promiseto overhaul state planning laws for coalmining following criticism of the formerLabor government’s handling of large-scale coal projects.

Back in October 2008, China’s ShenhuaEnergy paid the New South Wales gov-ernment the equivalent of $250 millionto acquire a five-year exploration licensefor the Watermark thermal coal projectfollowing a competitive bidding process.Shenhua has identified a 500 millionmt coal resource at Watermark in theGunnedah coalfield, and hopes to com-mence production for export in 2013.

However, the NSW minister for re-sources and energy, Chris Hartcher, said

in a statement in mid-September that thestate government is tightening the con-ditions of Shenhua’s renewed coal explo-ration license for the Watermark projectin response to a campaign by local farm-ers and residents.

Chinese companies will not be alone infeeling the pinch. Hartcher said “similarlystringent conditions will remain in forcefor the renewal of the exploration licensefor BHP Billiton’s Caroona coal project,”noting that “the license of Shenhua Wa-termark Coal will be subject to tougherconditions and those of Caroona will bemaintained to ensure our valuable agri-cultural and water resources have muchgreater protection than was available un-der the former Labor government.”

One of the conditions attached to therenewal of Shenhua Energy’s explorationlicense is that farmland purchased for theWatermark project must continue to beused for agricultural purposes. And Hart-

cher has banned longwall mining under-neath the alluvial aquifers or opencastmining on or underneath the area’s floodplain at both Watermark and Caroona.

Tying in overseas coal resources forexport to China may thus prove to befraught with difficulties for Chinesecompanies. But with 1,000 MW andmore of coal-fired generating capacitybeing connected to China’s grids eachweek, no options can be ruled out fromthe raft of measures to secure the fuel

needed to underpin the country’s socialand economic transformation. ■




India has around 400 million peo-ple without access to electricity. It isalso home to the largest number of poor and malnourished people in theworld. It has a problem with both foodand energy security. As people arebrought out of poverty, they consumemore energy and more food, which, inaddition to population growth, puts

constant pressure on resources. India’saverage annual population growthis estimated at 1.1% out to 2030. By2030, it can expect to be the world’smost populous country.

Just as a growing population and ris-ing income levels put pressure on en-ergy resources, the growing demand forfood is creating serious constraints onwater. According to the InternationalWater Management Institute (IWMI),large areas of southern India already

suffer “physical water scarcity”—de-fined as 75% of river flows being allo-

cated to agriculture—while most of thecountry’s north suffers from “economicwater scarcity”—meaning that wateris abundant relative to use, but inad-equately distributed.

For both food and fuel, the currentpath is towards ever greater dependenceon imports, damaging the country’sbalance of payments and increasing its

exposure to price volatility in interna-tional markets. Already the world’s larg-est importer of edible oil seeds and puls-es, India is expected to start importingmore rice and wheat in future. Despiteits substantial domestic resources, evenimports of coal—in addition to oil andgas—are forecast to increase rapidly inthe next few years.

InterdependencyThe ability to manage one resource

will increasingly impinge on the abil-ity to manage others. An increase in

India

India: New

Policy Directions Ross McCracken, Editor, Platts Energy Economist

India is careering headlong down the rocky road of import

dependency. Agricultural and energy policies aren’t working

alone, and they certainly aren’t working together. The needfor an integrated approach to efficient resource use is pressing,

suggesting India needs a new model of rural development in

which water management and agriculture is combined with

localized energy production.




India

agricultural output points towards in-creased mechanization and fertilizeruse, but this in turn ties agriculturaloutput more closely to oil prices andimports. Any gain in food securitywould be offset by the commensurate

decline in energy security, with poten-tial for importing inflation.The increasing interdependence of

resources is nowhere more evidentthan with regard to India’s pursuit of new energy crops. These require ir-rigation and land. Addressing bothIndian and Chinese biofuels policies,the IWMI paper Biofuels and Agricul-tural Water Use: Blue Impacts of Green Energy concluded that “a worseningwater scarcity situation in both coun-

tries makes this prospect untenableand is likely to jeopardize sustainablewater use for food production.”

The issue of food security cannot besolved without greater access to bothwater and energy, preferably isolatedfrom the international oil market. Inshort, India faces not a set of indi-vidual challenges, requiring separatestrategies, but an overall problem of resource scarcity that requires a holis-tic approach to resource management.At the heart of this has to be a conceptof cross-commodity efficiency.

LocalizationThere are a number of factors that

point to a more distributed and de-centralized energy system being ap-propriate in India. Water manage-ment is largely a local issue and needsto be kept so. It is power intensive to

transport water long distances. Thatmore than half the population areexpected to remain in rural areas outto 2030 and beyond, unlike in Chi-na, suggests that localized networksto address rural electrification and

water management, combined withrenewables, could be a more efficientapproach than the build out of large-scale distribution and transmissioninfrastructure based on centralizedcoal-fired power plant.

India’s creaking distribution andtransmission system is very ineffi-cient and in some cases near bank-rupt. While on a falling trend, aver-age technical and commercial lossesin power distribution and transmis-

sion at the state level are generallyestimated at between 25-30%. More-over, a key weakness in the sector isthe provision of cheap or free elec-tricity to farmers. Breaking free fromthat dependence by providing alter-native sources of power generationmight prove easier than overcomingthe entrenched political resistance toimplementing electricity pricing re-form at the state level. The existingsystem could concentrate on supply-ing India’s growing urban centers,where its capacity to collect revenuefor the electricity it produces is muchgreater.

Gasification may also provide analternative energy route. First, almostanything can be gasified, from cartires to biomass, although it remainsan expensive technology option andcan have water use implications. Gas-

10

20

30

40

50

60

1950 1960 1970 1980 1990 2000 2010

Agriculture ServicesIndustry

1. GDP share of agriculture, industry and services in India.

Source: Central Statistical Organisation (CSO) from 1950-2007




ndia

ification can provide a fungible en-ergy commodity derived from mul-tiple feedstocks with product optionsin both the fuel and power markets.Second, India’s one truly abundantfossil fuel is coal. Underground coal

gasification could hugely expand theexploitable coal resource, bringinginto play reserves inaccessible by tra-ditional mining techniques and lowerquality coals unsuited to normal coal-fired power generation.

This could be integrated with bio-gas, coalbed methane and shale gas,and potentially the country’s experi-ments with compressed natural gas asa transport fuel. India’s current coalpolicies, where expansion of the do-

mestic industry is blocked by licensingand environmental barriers, simplyisn’t working in terms of adding suf-ficient new capacity, suggesting thatpolicymakers should be prepared tothink differently. The current favored“solution” appears to be buying coalproperties abroad.

It may seem a hard task to developinnovative new energy systems intandem with existing infrastructure,but neither India’s food nor energysecurity strategies are currently viable.A workaround solution is required toachieve greater sustainability in bothareas and bypass seemingly insur-mountable political and institutionalblockages. To ensure cross-commod-ity efficiency, the country needs topromote an agrarian model based onsustainable and combined water andenergy management.

India also has the opportunity, in

some senses, of a blank sheet—the400 million people without accessto electricity. Renewables are usuallycompared with fossil fuel generationoptions on the basis that the trans-mission and generation infrastruc-ture already exists. Renewables scorebadly because they incur system inte-gration costs as they are grafted ontoa system designed without them inmind. However, starting from scratchmeans that large-scale infrastructure

costs may be avoided, playing to re-newables’ advantage.

Innovative IndiaDespite the huge challenges, India

does display the capacity to “leapfrog”in part traditional modes of develop-ment. It has to some extent done soalready. India’s economy is distinctive

because of the growth of its servicessector, in comparison with China’sconcentration on manufacturing in-dustries. India has seen rapid growthin the fields of high-tech informationtechnology, communications andbusiness services.

Unusually for a developing econ-omy, service sector growth has out-stripped growth in industry andmanufacturing significantly since1990. The Indian services sector ac-

counted for 55% of GDP in 2007/08,compared with 30% in 1950; in con-trast agriculture’s share dropped from55% to less than 18% over the sameperiod, while industry grew from15% to just over 27%.

Business services tend to be moreknowledge intensive than manufac-turing and more innovative, suggest-ing India has a growing knowledgeeconomy with which to work. India’scapacity to innovate can be seen fromits use of the Patent Cooperation Trea-ty (PCT). While China leads middleincome countries by a long way, In-dia comes a strong second, with 1,313PCT applications in 2010.

Two aspects are notable. First is thatIndian PCT applications grew veryrapidly in 2010, by 36.6%, the sec-ond fastest growth rate in the worldbehind China. Second is that Indiais rapidly outstripping countries like

Russia and Brazil, with applicationsrunning at roughly double the num-ber in Russia and almost three timesthose in Brazil.

In addition, the share of applica-tions from companies—as opposed toindividuals and universities—is about70%, again second only to China,implying greater financial backingbehind patents and thus a greater ca-pacity to move ideas to market. Thiscompares with 49% for Brazil and

25% for Russia. India’s patent appli-cations are particularly strong in the




India

fields of organic fine chemistry andpharmaceuticals.

Focusing on localized energy andwater systems, which may rely heav-ily on solar, wind, energy efficiencytechnologies and storage, potentially

represents a significant new directionfor India’s manufacturing sector. Ac-cording to OECD research, to main-tain employment opportunities forits growing population and accom-modate rural to urban shift, India re-quires growth in industry and manu-facturing just as much as it does itssuccessful services sector. Given lowwage costs, the country is well placedto take advantage of the green econo-my’s export opportunities, as well as

supply the domestic market.

Combined PoliciesThis is not to understate the enor-

mous challenges that India faces.Rather, it is to draw attention to theinterdependencies of those challengesand the synergies that can be achievedthrough a more integrated approach toresource management and efficiency,one that combines both agriculturaland energy goals.

Current policies could be made towork better; notably meeting set targetsfor expanding coal production, but atfurther cost to both the local and glob-al environment. However, the political

reality is that coal production will con-tinue to lag demand and import depen-dency will rise.

Equally, there is no reason to giveup on power sector price reform. How-ever, just as in the EU and the US, the

means to reforming what are in effectagricultural subsidies is not to removethem entirely, but to change theirname and tie them more effectivelyto particular policy outcomes, ratherthan the simple buying of votes. Dis-tributed and decentralized energy pro-duction may deliver this. If agriculturehas to be subsidized with cheap power,then cross-commodity efficiency sug-gests doing so in a way that increasesthe agricultural sector’s capacity to

produce electricity.Nor is there reason to abandon at-

tempts to reduce losses in the trans-mission and distribution system. Butthat doesn’t mean it has to be the fo-cus of system expansion. Again, thereis a long-term lock-in to the fossil fueleconomy; centralized power systemsdepend, whatever their efficiency, oncentral power plants, where the mainoption for India remains coal. Instead,by moving outside of the current struc-tures, India might unblock some of itspolitical and institutional impasses andat the same time put itself on a moresustainable development path for bothfood and energy. ■

14.1

2.7

12.8

22.7

59.8

-3.8

6.3

13.1

57.8

48.8

7.3

Average Annual GrowthRate (%): 2005-2010

India

Russian Federation

Brazil

Turkey

Malaysia

South Africa

Mexico

Ukraine

Chile

Thailand

Others

0 200 400 600 800 1,000 1,200 1,400

1990

1995

2000

2005

2010

2. Top 10* middle income countries: PCT applications.

*Data excludes China

Source: WIPO




Many changes have occurred in theglobal steel industry over the last fewyears. Regional consolidation in theWest saved producers and service cen-ters from terminal over-capacity andnear bankruptcy at the beginning of the century. Rapid demand-led expan-sion in Asia is growing a new indus-try, particularly centered on China butwith new mills in India, South Korea,Indonesia, Vietnam and others.

Singapore, long an oil trading andregional financial markets hub, hasemerged as the frontrunner in the steeland mining industry’s gradual shift inutilizing risk-management products.

Some industry participants expectcontracts based on global finishedsteel products to also take off in thefuture, with the Shanghai FuturesExchange rebar contract already see-

ing trading volumes grow. Singaporeis regarded as a safe base to accessChina’s physical demand and futuresmarket potential and monitor regula-tory developments.

Steel is the most ubiquitous of in-dustrial materials, vital for economicgrowth and urbanization. It is said that“either something is made of steel ormade by something made of steel.”

The world made and consumed over1.413 billion metric tons of crude steel

in 2010 and is on target to reach 1.524billion mt in 2011, according to the

World Steel Association. At currentper annum growth rates, the worldcould make over 2 billion mt by 2016.It takes about 1.6 mt of iron ore and0.7 mt of coking coal and PCI coal tomake a ton of steel. This equation,fundamental to furnace economics,has led to interdependency betweenminer and steelmaker, tying their for-tunes together.

Interdependence led for many yearsto long-term supply contracts pricedannually that would benchmark theprice of iron ore and coking coal forall suppliers and consumers. Givenalso that steel and mining are bothreliant on huge fixed costs, invest-ment decisions needed to be for thelong term.

Consolidation of the steel industry inthe US, Japan, Germany and the rest of

Europe accelerated from the late 1980s,eradicating some overcapacity createdduring a period of state ownershipfrom the 1950s and leading to bettercontrol of production and margins. Inthe process, the steel industry becamefar more global.

The emerging-markets focused MittalSteel agreed to merge with Arcelor in June 2006. By late 2007 the merger wasfinalized, creating a single global steelproducer with more than 100 million

mt/year of capacity in the biggest tie-up in the history of the industry. The

steel

Steel Industry Evolution

Favors Singapore as Risk-Management Center Francis Browne, Senior Managing Editor, Platts Price Group




steel

purchase by India’s Tata Steel of Coruslater produced another global groupwith production in some 26 countries.Meanwhile Thyssen bought local rivalKrupp in Germany.

Russian producers like Severstal, Evraz

and NLMK took over long-establishedoperations in the US market. And mostrecently, Japan’s Nippon Steel group isset to grow into Asia’s biggest steelmak-er by finalizing the purchase of Sumito-mo Metals and expanding further over-seas, to leave closely-matched domesticrival JFE Steel in the shade.

During steel’s unprofitable yearsof overcapacity, miners could not fi-nance investment in new mining ca-pacity, due to concerns about the fi-

nancial health of their customers andoversupply.

This created a huge imbalance be-tween supply and demand for steel-making ingredients just as China’s steelindustry started a growth take-off inthe last decade.

In 2000, China produced 127 millionmt of crude steel; this increased almostfivefold to 626 million mt in 2010 andis on target to exceed 700 million mt in2011. To meet the shortfall in raw mate-rials supply, a spot market emerged forseaborne iron ore imports into China,which were being priced at a substan-tial premium over long-term contractmaterial priced annually.

Platts launched its IODEX series of price assessments in June 2008 to mea-sure the value of iron ore fines in thespot market that had emerged for mate-rial flowing into China.

The spot market is dynamic and

supplied by sources outside the tradi-tional big contract players located inAustralia and Brazil. A seaborne spotmarket of more than 200 million mthas emerged with 50% supplied byIndia and the balance coming frommany other countries including Iran,Ukraine, Mexico and Venezuela. Italso attracts material from the Atlan-tic basin from suppliers such as Cana-da and South Africa.

The growth of the iron ore spot mar-

ket and the transparent pricing thatPlatts and other publishers such asThe Steel Index (TSI), which is nowowned by Platts and operated as aseparate unit, brought to the marketchallenged the annually-agreed pric-ing within the long-term contractssystem. Since April 2010, most long-term contracts have switched fromannual pricing to frameworks pricedquarterly using a mechanism that re-fers to Platts IODEX price assessmentsfor the previous quarter.

At the same time that iron ore’sphysical market was undergoing arevolution in the way it was priced, aderivative market to create hedging in-

190

210

230

250

270

290

310

330

350

370

390

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

$

quarterly negotiations

$225$225

$209

$285

$315

$330

Platts Premium Low VolumeContract price

1. Spot prices guide contract settlements.

Source: Platts




steel

struments to offer price risk manage-ment tools was also evolving for thesteel ingredient.

Securities brokerages led by DeutscheBank and Credit Suisse in 2008launched iron ore swaps traded over

the counter, based on a contract grade62%-Fe content. These paper contractsmirror the physical market by trad-ing the future value of the monthlyaverage of various indices, like IODEXand TSI, that are measuring the dailyphysical spot market price normalizedto this grade.

In 2009, the Singapore Exchangelaunched a clearing contract for thisnascent iron ore swaps market settledagainst the TSI 62%-Fe iron ore index.

The value of swaps cleared by the ex-change in a month topped $1 billionfor the first time in August 2011.

The CME Group also offers a rangeof clearing for iron ore swaps as doesIntercontinental Exchange and LCHClearnet.

The CME Group offers clearing andoptions settled against both the ma-jor iron ore indices. It also launchedclearing for coking coal swaps in 2011,which should enable a more balancedhedging of the main steel raw materi-als. This follows a switch to quarterlyand monthly fixed-price sales for Aus-tralian and Canadian coking coal fromannual contracts since April 2010.

More miners have recently movedtrading operations to Singapore, posi-tioning sales and logistics operationsin the Southeast Asian equatorialstate to bridge their mainly southernhemisphere mines to the largest glob-

al importers in China, Japan and therest of Asia. At the same time, theycan tap into a growing banking andbrokerage community offering riskmanagement products.

Brazil’s Vale, the world’s biggest ironore exporter, in 2011 moved more se-nior executives to Singapore into anew global marketing office to serveAsia, its largest market. Xstrata Coal,the unit of the Switzerland-basedgroup that also manages its iron ore

operations, is eyeing a move to thecity state from Sydney, while Anglo

American is reportedly planning asimilar move.

BHP Billiton’s metallurgical coal mar-keting office has long been in Singa-pore, leading the sales from the group’smines in Queensland, Australia, owned

under the BHP Billiton-Mitsubishi Al-liance with Japan’s Mitsubishi Corp.Global traders Noble Group and Cargillcentralize their metallurgical coal busi-ness in Singapore. Hong Kong-basedNoble trades iron ore in its home loca-tion, while Cargill’s iron ore tradingteam is headed out of Singapore.

US coal giant Peabody Energyopened an office in Singapore to act asa trading hub in 2009, while US coaltrader Xcoal is representing Consol

Energy and other miners in Asia at of-fices in Singapore as well as in Beijing,Seoul and Tokyo.

As the steel industry gets familiarwith the idea of buying its raw mate-rials based on published prices it hasstarted to look downstream of theblast furnace, to semi-finished and fin-ished steel products, to sell them onthe same basis.

The need for robust and comprehen-sive price assessments from trusted andestablished publishers throughout thesteel value chains, combined with news,resulted in Platts’ acquisition in July 2011of Steel Business Briefing (SBB), a compre-hensive steel-dedicated news and pricepublisher and the parent of TSI.

The combined Platts, SBB and TSI willconsolidate its Asian presence in Singa-pore. From this base the enlarged steelgroup within Platts can develop andevolve price assessments for raw materi-

als and steel in the Asian region, whichwill provide global relevance and great-er transparency to the world’s steel andraw material markets.

Platts’ price assessments and newsmay help offer a basis for steel to betraded physically, for financial institu-tions and exchanges to develop pricerisk management tools, and for the en-tire industry to be better armed withquality insight and information. Assuch, Platts is likely to play a signifi-

cant role in the steel and mining in-dustries’ future. ■



Asia’s appetite for energy demand isrising rapidly. Energy has been an in-tegral part of the region’s economic de-velopment, and will be increasingly soas Asian countries continue to pursuegrowth. In a carbon-constrained world,Asia needs to find solutions which willmeet the region’s energy needs in acompetitive, reliable and sustainablemanner. The challenges are furtherintensified by recent geopolitical de-velopments in the Middle East, NorthAfrica and the Fukushima nuclear ac-cident in Japan.

Fossil fuels are likely to remain adominant energy source for some timeto come, even as renewable energysources such as solar, wind, hydro,geothermal power are contributing agreater share towards the global ener-gy mix. While the latter is a key partof the solution towards a low carbonfuture, they currently cannot replace

fossil fuels as base-load generation op-tions due to intermittency and highercosts of production. The exceptionsare countries that are blessed with hy-dro and geothermal energy resources,which can be tapped at relatively lowcosts. Such options are unfortunatelynot available to all countries, especial-ly small countries like Singapore whichare “alternative energy-disadvantaged”.

Natural gas is emerging as an increas-ingly important energy option within

the global energy mix. The potentialfor natural gas to take on a larger role

is further supported by its “cleaner”emissions relative to other fossil fuelssuch as coal and oil, as well as the im-provements to energy security broughtabout by diversified developments innatural gas markets. The Internation-al Energy Agency (IEA) has projectedthat natural gas will overtake coal asthe most dominant fuel option andreach up to 25% of the world’s energymix by 20351. The supply increase isbacked by significant discoveries of unconventional gas in different partsof the world, including the US, Chinaand Australia.

Asia, in particular, is well-placed toride on this trend towards the goldenage of gas. Within the Association of Southeast Asian Nations (ASEAN), weare seeing infrastructural develop-ments by several countries to preparefor the integration of liquefied naturalgas (LNG) as a fuel source for the re-

gion. Energy security is further boost-ed by ASEAN’s long-term goal of an in-tegrated energy market, underpinnedby ongoing initiatives such as theASEAN Power Grid and Trans-ASEANGas Pipeline.

Beyond physical energy supplies,securing our energy future alsomeans finding new solutions whichcan transform uncertainties into op-portunities. Such is the importanceof technology as a key enabler. Asia


special section

Securing Our

Energy Future Chee Hong Tat, Chief Executive, Energy Market Authority

1http://www.iea.org/weo/docs/weo2011/WEO2011_GoldenAgeofGasReport.pdf




special section

recognizes this and is participatingin global efforts in energy research,development and deployment. BothChina and India are top leaders inclean energy investments. Japan isalso a forerunner in promoting smart

energy technologies. Being major en-ergy consumers and innovators, theirefforts will impact the Asian energylandscape and catalyse opportunitiesin the development and deploymentof energy technologies. SoutheastAsia is no exception. Recognizing theimportance of achieving low carboneconomic growth, ASEAN is collabo-rating with the IEA to identify tech-nological options and chart develop-ment pathways for such a future.

Singapore’s Role and EffortsAmidst the volatile global energy

landscape, no single city or countrywill have all the answers. As a smallcity-state with no natural resources,Singapore is acutely aware of its en-ergy challenges. Our fuel mix haschanged to more than 80% naturalgas today from 71% fuel oil in 2001.Natural gas emits half as much car-bon dioxide as fuel oil, so each unit of electricity we use is now cleaner thanit was 10 years ago. This is one of thepositive outcomes of market liberal-ization, which had led to the rapid re-planting of more efficient and cleanergas-fired combined gas turbines, re-placing the oil-fired steam plants. Italso benefits consumers as gas-firedplants can produce electricity morecost-effectivelyly and efficiently com-pared with oil-fired steam plants. If

we had continued to use steam plants,our electricity tariff today would beabout 15 to 20% higher.

To strengthen Singapore’s energysecurity, we are building an LNG ter-minal to enable us to diversify our gasimports from different sources aroundthe world. The LNG terminal, whichis Asia’s first multi-user terminal, willbe ready by the first-half of 2013. Theterminal will enable Singapore to posi-tion itself as a regional LNG hub and

catalyse new business opportunitiessuch as LNG trading, LNG bunkering

and cold energy integration.We also seek to augment our lim-

ited energy supply options by miti-gating demand, thus making us morecarbon-efficient. Singapore’s energyintensity—measured by the energy

consumed per unit of GDP—fell by22% from 1990-2005. We plan toachieve another 35% improvement inour energy-efficiency levels from 2005to 2030. This means we continue togrow while consuming less energy.This has been made possible throughincentives to encourage the adoptionof more energy-efficient industrialequipment, and the “greening” of commercial buildings.

In the industry sector, we have grants

for companies to install energy-effi-cient equipment. We are also workingwith industry players to implementco-generation/tri-generation plants,which are more energy-efficient. In thearea of green buildings, we have intro-duced incentives to encourage develop-ers and owners to build and maintaingreener buildings. Under the GreenMark Scheme, new buildings and exist-ing buildings undergoing major retro-fitting are required to meet minimumrequirements on environmental sus-tainability equivalent based on this defacto yardstick for sustainable develop-ment in the tropics.

Singapore is investing in energy-relat-ed R&D because we recognise that tech-nology is a key enabler for achievingour objectives of having a competitiveenergy market, securing energy sup-plies and developing a dynamic energysector. New advances in smart grids,

green buildings, and carbon captureand utilisation will help mitigate ener-gy demand and carbon emissions. Werecently invested S$195 million underthe Energy Innovation Programme Of-fice to support the pursuit of such tech-nologies. This will involve industry,government, and the scientific commu-nity to develop innovative energy solu-tions, to strengthen our local researchcapabilities in clean energy. This willenhance Singapore’s role as a “living

laboratory” to demonstrate large-scaleviability of clean energy solutions.




Test-bedding is a necessary processfor the successful commercialisationof new energy technologies. Singa-pore is among the first in the regionto embark on an Electric Vehicle (EV)test-bed that aims to examine the

technical and operational feasibilityof using EVs in the city-state’s tropi-cal urban environment. We have alsoembarked on an Intelligent EnergySystem (IES) pilot project, which isan important step towards a smarterpower grid. The goal is to provideconsumers with more information,choice and real-time control overtheir electricity usage, thereby im-proving energy-efficiency for Singa-pore as a whole.

Our small energy demand notwith-standing, we hope to contribute to theglobal energy agenda by actively foster-ing dialogue and collaboration among

various energy stakeholders—be it lo-cally, within the region or beyond.Singapore facilitates such discussionson pertinent energy issues, strategiesand solutions through the SingaporeInternational Energy Week (SIEW),

which brings together energy profes-sionals and thought leaders alike. Aptlythemed “Securing Our Energy Future”,this year’s SIEW (31 October to 4 No-vember) reflects the urgent need torethink policies and strategies to meetthe growing energy demand, as we se-cure our collective energy landscape fora sustainable future.

Securing our energy future is a long-term endeavour that requires the jointefforts of all countries. Technological

innovation and international collabo-ration will be key as Asia continues tofind solutions to address our shared en-ergy challenges. ■

special section

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global energy industry.

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specialized

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experience and unbiased voice of the energy

industry.

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2010 was a year of recovery, but forsome more than others. Oil may havebounced back, but the energy com-plex as a whole was marked by distinctdisparities between commodities andregions. But if there is one consistentfactor, it is that Asia steals the show.Whether coal, gas, oil or electricity, re-cession or boom, Asia-Pacific’s rate of consumption growth outstrips all otherregions by a substantial margin.

At the heart of this is one of theworld’s largest mass migrations in his-tory, from countryside to city. Even if China’s population growth may haveslowed, it expects to add 16 millionurban dwellers a year out to 2020, cre-ating huge new demand for energy.

Urbanization across non-OECD Asia-Pacific is one of the key driving forcesbehind the region’s rapid growth in en-ergy consumption, so it is no surprisethat in the Platts 250 Asian companiesare once again to the fore.

However, companies’ ability to ben-efit from Asia’s growth depends onlocation, activity type and market.While crude, coal and to some extentLNG benefit from international pric-ing—and thus from Asian growth—gasand power markets are more regionallybased. Higher feedstock prices makeprofits for some, but represent coststo others. In Asia too, the impact of growth in energy demand is differenti-ated. Oil refiners and power producersoften find themselves caught betweenthe rock of international feedstock pric-

es and the hard place of regulated do-mestic markets.

Recovery and DeclineWorld oil demand in 2010 grew by

3.1% on year to 87.382 million bar-rels a day, surpassing its former peakin 2007 and more than reversing theprevious two years of contraction. Ris-ing demand was accompanied by risingprices: Platts’ physical crude benchmarkDated Brent averaged $79.50/barrel in

2010, its second-highest annual averageever and a big step up from the $61.67/b

top 250 global energy companies

Asia Forges

Ahead Ross McCracken, Editor,Platts Energy Economist

Platts Top 250 Global Energy

Company Rankings™ reviewed.

Platts Top 250 Global EnergyCompany Rankings™ measuresfinancial performance by ex-amining each company’s assets,revenue, profits and return oninvested capital. All ranked com-panies have assets greater than(US) $3 billion. The underlyingdata comes from S&P CapitalIQ, a Standard & Poor’s business

(like Platts, a division of The Mc-Graw-Hill Companies).





average seen in 2009. Asia saw the fast-est on-year growth in demand, at 5.3%,as opposed to Europe’s anemic 0.1%.

World gas consumption jumped by7.4% on year in 2010 to 3,169 billioncubic meters, also reversing the con-

traction of 2009 and reaching a newpeak. Although demand rose in all re-gions, the pricing picture amply dem-onstrated the benefits to consumers of gas-to-gas competition, and by contrastthe benefits of its absence to producers.It also illustrated the almost completedisconnection of the US gas marketfrom trade in LNG and thus the sever-ing of international gas price transmis-sion mechanisms.

In the US, gas prices at Henry Hub av-

eraged $4.09/MMBtu over 2009, rising toonly $4.4/MMBtu in 2010 as supply fromshale plays kept overall gas supply wellabove demand. This has caused a shiftin drillers’ attention from shale gas itself to liquids production. By contrast, gasprices at the UK National Balancing Pointjumped from an average of $4.775/MMB-tu in 2009 to $6.575/MMBtu in 2010.

But the runaway gas markets were,first, spot LNG prices in the Asia-Pacif-ic market, which increased 46.2% onyear from an average of $5.28/MMBtuin 2009 to $7.72/MMBtu in 2010, andsecond, long-term oil-linked gas con-

tracts. Although these rose less thanspot prices, they achieved the highestabsolute values, averaging, in Europe,$9.0058/MMBtu in 2010, up from$7.4038/MMBtu in 2009.

World coal consumption jumped7.6% on year to 3,555.8 million tons of oil equivalent (mtoe) in 2010, drivenby Asian demand. While this is also anall-time global high, the regional varia-tion is stark. Coal consumption in Eu-rope is in long-term decline. Although

consumption rose by 4.4% in 2010, andsteam coal prices delivered to NorthwestEurope jumped 39.6%, coal use remainswell below pre-financial crisis levels.

A similar trend is emerging in newlygas-rich North America. US steam coalprices on NYMEX averaged $61.60/short ton over 2010, up 26.3% from2009. But again, while North Ameri-

3-yearCGR %

PlattsRankRank Company Country Industry

1 Cairn India Ltd India E&P 116.5 120

2 PTT Aromatics & Refining Plc Thailand R&M 49.6 217

3 YTL Power International Bhd Malaysia DU 48.9 209

4 China Resources Power Holdings Co Ltd Hong Kong IPP 42.4 149

5 YTL Corp Bhd Malaysia DU 40 227

6 China Yangtze Power Co Ltd China IPP 35.8 112

7 GD Power Development Co Ltd China IPP 32.7 180

8 Shanxi Xishan Coal and Electricity Power Co Ltd China C&CF 29.5 192

9 Shanxi Lu'an Environmental Energy Development Co Ltd China C&CF 29.1 159

10 Reliance Infrastructure Ltd India EU 28.8 23211 Adaro Energy Tbk Pt Indonesia C&CF 28.7 238

12 Huaneng Power International Inc China IPP 28.1 127

13 Yanzhou Coal Mining Co Ltd China C&CF 28.1 100

14 China Longyuan Power Group Ltd China IPP 26.9 247

15 Banpu Pcl Thailand C&CF 26.3 151

16 CNOOC Ltd Hong Kong E&P 26.2 15

17 China Coal Energy Co Ltd China C&CF 25.1 97

18 Reliance Industries Ltd India R&M 24.7 24

19 Bumi Resources Tbk Pt Indonesia C&CF 24.5 226

20 Gail (India) Ltd India GU 23.1 109

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 fromdata assessed on June 8, 2011.





PlattsRank2011

Assets Revenues ProfitsReturn on

invested capital 3-yearCGR%

IndustrycodeCompany State or country Region $ million Rank $ million Rank $ million Rank ROIC % Rank

1 Exxon Mobil Corp Texas Americas 302,510 5 341,578 2 30,460 2 18 13 -2 IOG

2 Chevron Corp California Americas 184,769 13 189,607 6 19,024 6 16 20 -2 IOG

3 Gazprom OAO Russian Federation EMEA 330,261 2 118,401 12 32,443 1 13 39 14 IOG

4 PetroChina Co Ltd China Asia/Pacific Rim 254,914 8 220,177 5 21,034 3 12 41 21 IOG

5 Total SA France EMEA 206,640 11 189,153 7 14,234 7 13 35 1 IOG

6 Royal Dutch Shell plc United Kingdom EMEA 322,560 4 368,056 1 20,127 5 11 54 1 IOG

7 ConocoPhillips Texas Americas 156,314 15 175,752 8 11,358 8 12 46 1 IOG

8 China Petroleum & Chemical Corp China Asia/Pacific Rim 153,143 16 281,981 4 10,788 9 11 49 17 IOG

9 OJSC Rosneft Oil Company Russian Federation EMEA 93,829 21 61,942 25 10,400 10 14 30 9 IOG

10 Lukoil Oil Company Russian Federation EMEA 84,017 27 104,956 15 9,006 12 13 34 9 IOG

11 Statoil ASA Norway EMEA 119,203 19 89,523 17 6,473 16 12 47 0 IOG

12 Petrobras-Petroleo Brasilier Brazil Americas 328,193 3 125,937 10 20,779 4 9 84 8 IOG

13 E.ON AG Germany EMEA 219,815 10 125,833 11 9,007 11 9 78 11 EU

14 Repsol YPF SA Spain EMEA 97,241 20 74,779 20 6,319 17 11 56 2 IOG

15 CNOOC Ltd Hong Kong Asia/Pacific Rim 50,464 47 27,280 52 8,175 14 24 6 26 E&P

16 Eni SpA Italy EMEA 189,590 12 132,663 9 8,507 13 8 89 4 IOG

17 RWE AG Germany EMEA 133,828 18 68,593 21 4,454 24 10 67 7 DU

18 JX Holdings Inc Japan Asia/Pacific Rim 77,058 28 114,941 13 3,719 30 10 61 9 R&M

19 Endesa SA Spain EMEA 89,990 24 40,157 34 5,560 21 10 60 20 EU

20 TNK-BP Holdings Russian Federation EMEA 30,881 91 40,280 33 6,540 15 26 4 6 IOG

21 Oil & Natural Gas Corp Ltd India Asia/Pacific Rim 42,881 59 25,888 56 4,943 22 18 14 7 E&P

22 China Shenhua Energy Co Ltd China Asia/Pacific Rim 52,454 39 22,165 64 5,729 20 14 32 23 C&CF

23 Ecopetrol SA Colombia Americas 37,626 66 22,613 63 4,389 25 98 1 23 IOG

24 Reliance Industries Ltd India Asia/Pacific Rim 68,061 32 58,508 27 4,247 26 9 83 25 R&M

25 Centrica plc United Kingdom EMEA 31,732 85 35,405 37 2,957 36 19 11 11 DU

26 Scottish and Southern Energy plc United Kingdom EMEA 35,314 73 44,738 30 2,376 43 15 25 23 EU

27 Occidental Petroleum Corp California Americas 52,432 40 19,045 69 4,569 23 12 45 0 IOG

28 PTT Plc Thailand Asia/Pacific Rim 41,195 61 61,784 26 2,702 37 9 77 8 IOG

29 Gazprom Neft JSC Russian Federation EMEA 32,064 83 30,301 46 3,148 33 12 42 14 IOG

30 Marathon Oil Corp Texas Americas 50,014 50 67,113 23 2,568 40 8 92 4 IOG

31 Exelon Corp Illinois Americas 52,240 41 18,644 71 2,563 41 10 66 0 EU

32 GDF Suez France EMEA 265,503 7 113,751 14 6,216 18 4 183 21 DU

33 National Grid plc United Kingdom EMEA 76,388 29 22,647 62 3,409 31 7 104 8 DU

34 Enel SpA Italy EMEA 241,628 9 96,872 16 5,911 19 4 187 19 EU

35 Surgutneftegaz Russian Federation EMEA 46,682 53 17,640 77 3,894 28 9 73 0 IOG

36 Hess Corp New York Americas 35,396 72 33,862 40 2,125 47 10 72 2 IOG

37 BG Group plc United Kingdom EMEA 50,299 49 17,166 81 3,383 32 10 71 9 IOG

38 Iberdrola SA Spain EMEA 134,725 17 40,976 32 3,866 29 5 157 20 EU

39 Dominion Resources Inc Virginia Americas 42,817 60 15,197 88 2,963 35 11 57 -1 DU

40 Imperial Oil Ltd Canada Americas 21,246 127 23,494 59 2,197 46 17 18 0 IOG

41 AK Transneft OAO Russian Federation EMEA 50,767 45 11,759 111 4,033 27 10 68 20 S&T

42 Indian Oil Corp Ltd India Asia/Pacific Rim 40,850 62 67,824 22 1,724 55 7 114 14 R&M

43 EnBW Energie Baden-Wuerttemberg AG Germany EMEA 50,668 46 23,664 58 1,576 60 8 91 6 EU

44 Suncor Energy Inc Canada Americas 72,439 31 35,692 36 2,673 38 5 166 27 IOG

45 Sasol Ltd South Africa EMEA 22,925 120 17,305 79 2,256 45 14 28 8 IOG

46 Apache Corp Texas Americas 43,425 58 12,183 109 3,032 34 9 76 7 E&P

47 CEZ As Czech Republic EMEA 31,822 84 10,548 120 2,575 39 13 36 4 EU

48 Vattenfall AB Sweden EMEA 87,594 26 31,458 43 1,914 52 5 174 14 EU

49 Southern Co Georgia Americas 55,032 37 17,456 78 2,040 49 6 133 4 EU

50 NextEra Energy Inc Florida Americas 52,994 38 15,317 87 1,957 50 6 124 0 EUNotes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent

ower producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 8, 2011.





PlattsRank2011




51 Coal India Ltd India Asia/Pacific Rim 18,015 140 11,057 117 2,392 42 31 2 13 C&CF

52 Devon Energy Corp Oklahoma Americas 32,927 80 9,940 126 2,333 44 10 62 -4 E&P

53 OMV AG Austria EMEA 37,964 65 31,405 44 1,240 83 6 132 5 IOG

54 Tatneft OAO Russian Federation EMEA 20,281 129 15,664 86 1,563 62 11 52 10 E&P

55 Formosa Petrochemical Corp Taiwan Asia/Pacific Rim 15,761 149 23,336 61 1,348 75 12 44 -6 R&M

56 SK Innovation Co Ltd Korea Asia/Pacific Rim 27,005 101 47,147 28 989 98 7 116 1 R&M

57 Gas Natural SDG SA Spain EMEA 65,195 34 26,432 54 1,617 58 4 198 25 GU

58 NTPC Ltd India Asia/Pacific Rim 30,228 93 12,638 105 2,059 48 8 99 14 IPP

59 Public Service Enterprise Group Inc New Jersey Americas 29,909 95 11,793 110 1,557 63 9 80 -3 DU

60 Kansai Electric Power Co Inc Japan Asia/Pacific Rim 89,986 25 33,044 42 1,469 67 3 215 1 EU

61 EDP Energias De Portugal SA Portugal EMEA 58,216 36 19,081 68 1,453 69 4 186 9 EU

62 Bashneft OJSC Russian Federation EMEA 14,991 154 13,341 98 1,429 70 13 37 58 E&P

63 Fortum Oyj Finland EMEA 31,580 87 8,478 138 1,750 54 9 85 12 EU

64 EDF France EMEA 345,880 1 87,746 18 854 109 1 241 3 EU

65 YPF SA Argentina Americas 11,402 183 11,084 116 1,453 68 28 3 15 IOG

66 Chesapeake Energy Corp Oklahoma Americas 37,179 68 9,366 128 1,774 53 6 125 6 E&P

67 Saudi Electricity Co Saudi Arabia EMEA 50,905 44 7,437 150 608 138 12 43 10 EU

68 Entergy Corp Louisiana Americas 38,685 64 11,488 112 1,270 81 6 120 0 EU

69 Valero Energy Corp Texas Americas 37,621 67 81,342 19 923 103 4 188 -5 R&M

70 Idemitsu Kosan Co Ltd Japan Asia/Pacific Rim 30,994 90 43,656 31 724 125 5 142 -2 R&M

71 Canadian Natural Resources Canada Americas 44,050 57 12,730 104 1,687 56 5 173 5 E&P

72 Compania Espanola de Petroleos SA Spain EMEA 16,500 146 29,818 47 854 110 8 88 1 IOG

73 Edison International California Americas 45,530 56 12,409 108 1,304 80 5 148 -2 EU

74 Tokyo Gas Co Ltd Japan Asia/Pacific Rim 22,523 123 18,316 72 1,139 88 7 111 1 GU

75 Veolia Environnement SA France EMEA 74,064 30 46,841 29 814 112 2 226 2 DU

76 Inpex Corp Japan Asia/Pacific Rim 32,995 79 11,251 114 1,535 64 5 140 -8 E&P

77 Chubu Electric Power Co Inc Japan Asia/Pacific Rim 65,635 33 27,808 51 1,009 95 2 220 -1 EU

78 PG&E Corp California Americas 46,025 54 13,841 97 1,113 89 5 164 1 DU

79 Eletrobras-Centrais Electricas Brasileiras SA Brazil Americas 92,721 22 16,191 84 1,327 78 2 225 7 EU

80 Polski Koncern Naftowy Orlen SA Poland EMEA 18,609 137 28,284 49 803 115 7 109 9 R&M

81 TonenGeneral Sekiyu Corp Japan Asia/Pacific Rim 11,163 189 28,617 48 511 157 17 17 -8 R&M

82 American Electric Power Co Inc Ohio Americas 50,455 48 14,427 92 1,214 86 4 189 3 EU

83 Cia Energetica de Minas Gerais Brazil Americas 21,180 128 7,596 147 1,333 76 10 64 10 EU

84 Duke Energy Corp North Carolina Americas 59,090 35 14,272 93 1,317 79 3 210 4 EU

85 Husky Energy Inc Canada Americas 30,076 94 18,074 75 1,166 87 5 161 5 IOG

86 Murphy Oil Corp Arkansas Americas 14,233 160 23,401 60 798 116 9 81 8 IOG

87 Encana Corp Canada Americas 35,152 74 8,827 133 1,492 65 5 151 -25 E&P

88 SNAM Rete Gas SpA Italy EMEA 28,423 98 4,679 185 1,489 66 8 87 25 GU

89 Consolidated Edison Inc New York Americas 36,146 70 13,325 99 1,003 96 5 175 1 DU

90 Tenaga Nasional Bhd Malaysia Asia/Pacific Rim 24,469 109 9,772 127 1,032 93 7 113 9 EU

91 S-Oil Corp Korea Asia/Pacific Rim 9,285 202 18,141 74 619 134 13 33 11 R&M

92 MidAmerican Energy Holdings Co Iowa Americas 45,668 55 11,127 115 1,238 84 4 193 -3 DU

93 Federal Grid Co of Unified Energy System JSC Russian Federation EMEA 31,163 88 3,721 202 1,946 51 7 108 20 EU

94 Enersis SA Chile Americas 27,792 99 12,596 106 991 97 5 149 10 EU

95 CLP Holdings Ltd Hong Kong Asia/Pacific Rim 23,065 119 7,513 149 1,329 77 7 106 5 EU

96 Woodside Petroleum Ltd Australia Asia/Pacific Rim 20,196 131 4,193 194 1,575 61 10 70 4 E&P

97 China Coal Energy Co Ltd China Asia/Pacific Rim 18,592 138 10,708 119 1,038 92 7 107 25 C&CF

98 Galp Energia SGPS SA Portugal EMEA 13,153 165 18,936 70 594 141 9 82 4 IOG

99 KazMunaiGas Exploration and Production JSC Kazakhstan EMEA 9,830 194 4,149 195 1,597 59 19 10 8 E&P

100 Yanzhou Coal Mining Co Ltd China Asia/Pacific Rim 11,207 187 5,235 176 1,354 74 15 22 28 C&CFNotes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independentpower producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 8, 2011.





PlattsRank2011




101 PTT Exploration and Production Plc Thailand Asia/Pacific Rim 11,286 185 4,617 186 1,357 73 17 16 15 E&P

102 Cenovus Energy Inc Canada Americas 22,810 121 12,898 103 987 99 6 138 -20 IOG

103 Turkiye Petrol Rafinerileri AS Turkey EMEA 8,712 210 17,168 80 483 163 17 19 5 R&M

104 Novatek OAO Russian Federation EMEA 10,197 192 3,914 198 1,358 72 19 12 24 E&P

105 Enbridge Inc Canada Americas 31,095 89 15,040 89 964 100 4 197 8 S&T

106 CPFL Energia SA Brazil Americas 12,659 170 7,100 152 908 104 11 51 9 EU

107 Polska Grupa Energetyczna SA Poland EMEA 18,727 136 6,932 155 1,012 94 8 102 -4 EU

108 Transcanada Corp Canada Americas 48,096 52 8,018 142 1,265 82 3 212 -3 S&T

109 Gail (India) Ltd India Asia/Pacific Rim 8,886 207 7,727 145 885 105 14 31 23 GU

110 PPL Corp Pennsylvania Americas 32,837 81 8,521 137 955 101 5 170 9 EU

111 Empresa Nacional de Electricidad SA Chile Americas 12,896 169 4,888 182 1,088 90 12 48 12 IPP

112 China Yangtze Power Co Ltd China Asia/Pacific Rim 24,231 110 3,287 209 1,236 85 8 86 36 IPP

113 FirstEnergy Corp Ohio Americas 34,805 76 13,253 100 784 118 4 199 1 EU

114 Alpiq Holding AG Switzerland EMEA 21,663 125 14,539 90 655 129 5 152 2 EU

115 Polish Oil And Gas Co SA Poland EMEA 12,485 173 7,205 151 831 111 10 65 9 IOG

116 Anadarko Petroleum Corp Texas Americas 51,559 42 10,842 118 761 120 2 223 -1 E&P

117 Progress Energy Inc North Carolina Americas 33,054 78 10,190 123 860 108 4 195 4 EU

118 BP plc United Kingdom EMEA 272,262 6 297,107 3 -3,719 249 -3 249 1 IOG

119 Spectra Energy Corp Texas Americas 26,686 103 4,945 180 1,043 91 6 136 1 S&T

120 Cairn India Ltd India Asia/Pacific Rim 10,285 191 2,262 227 1,394 71 15 24 117 E&P

121 Plains All American Pipeline LP Texas Americas 13,703 161 25,893 55 505 160 5 139 8 S&T

122 Peabody Energy Corp Missouri Americas 11,363 184 6,860 156 777 119 11 59 14 C&CF

123 Eletropaulo-Metropolitana Eletricidade de Sao Paulo SA Brazil Americas 7,193 228 5,726 171 796 117 22 7 11 EU

124 Xcel Energy Inc Minnesota Americas 27,388 100 10,311 122 752 121 4 181 1 DU

125 GS Holdings Corp Korea Asia/Pacific Rim 26,037 104 37,107 35 448 174 3 211 16 R&M

126 Public Power Corporation SA Greece EMEA 23,293 114 7,825 144 751 122 5 150 4 EU

127 Huaneng Power International Inc China Asia/Pacific Rim 34,464 77 15,672 85 533 152 3 218 28 IPP

128 OMV Petrom SA Romania EMEA 12,106 177 5,932 165 701 128 10 63 15 IOG

129 Sempra Energy California Americas 30,283 92 9,003 130 749 123 4 190 -8 DU

130 Acea SpA Italy EMEA 9,173 205 3,340 208 868 107 18 15 0 DU

131 Tokyo Electric Power Co Inc Japan Asia/Pacific Rim 182,065 14 64,048 24 -14,881 250 -13 250 -1 EU

132 Mol Hungarian Oil and Gas Co Hungary EMEA 24,194 111 21,041 65 509 159 4 204 18 IOG

133 Interregional Distribution Grid Companies Holding JSC Russian Federation EMEA 7,128 229 134 250 1,618 57 25 5 EU

134 Ultrapar Participacoes SA Brazil Americas 8,199 216 25,085 57 452 172 8 98 29 S&T

135 DTE Energy Co Michigan Americas 24,896 107 8,557 136 630 132 5 171 0 DU

136 Kyushu Electric Power Co Inc Japan Asia/Pacific Rim 51,522 43 17,729 76 343 193 1 238 0 EU

137 Korea Electric Power Corp Korea Asia/Pacific Rim 92,035 23 34,611 39 -63 246 0 245 11 EU

138 Eskom South Africa EMEA 36,058 71 10,080 124 539 151 2 222 21 EU

139 Cosmo Oil Co Ltd Japan Asia/Pacific Rim 19,442 134 33,065 41 345 191 3 209 -8 R&M

140 Osaka Gas Co Ltd Japan Asia/Pacific Rim 17,693 142 14,163 94 548 148 4 191 -1 GU

141 Canadian Oil Sands Trust Canada Americas 7,243 227 3,162 213 881 106 14 29 -1 E&P

142 Hindustan Petroleum Corp Ltd India Asia/Pacific Rim 15,385 152 30,484 45 375 183 4 196 11 R&M

143 Bharat Petroleum Co Ltd India Asia/Pacific Rim 14,805 155 27,254 53 360 187 4 192 4 R&M

144 Caltex Australia Ltd Australia Asia/Pacific Rim 5,639 240 18,163 73 308 201 9 75 -1 R&M

145 Power Assets Holdings Ltd Hong Kong Asia/Pacific Rim 11,921 179 1,334 242 925 102 10 69 -6 EU

146 Tractebel Energia SA Brazil Americas 8,111 217 2,421 225 715 127 14 26 10 IPP

147 Sunoco Inc Pennsylvania Americas 13,297 163 34,915 38 257 218 4 178 -6 R&M

148 Moscow United Electric Grid OJSC Russian Federation EMEA 8,361 214 3,743 201 575 145 13 38 42 EU

149 China Resources Power Holdings Co Ltd Hong Kong Asia/Pacific Rim 18,391 139 6,248 163 631 131 5 167 42 IPP

150 Noble Energy Inc Texas Americas 13,282 164 2,904 217 725 124 8 95 -2 E&PNotes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent






PlattsRank2011




151 Banpu Pcl Thailand Asia/Pacific Rim 6,385 234 2,123 232 804 114 16 21 26 C&CF

152 Origin Energy Ltd Australia Asia/Pacific Rim 23,272 117 8,302 140 595 140 3 208 11 IOG

153 Hong Kong & China Gas Co Ltd Hong Kong Asia/Pacific Rim 9,344 201 2,492 224 718 126 11 58 11 GU

154 El Paso Corp Texas Americas 25,270 105 4,616 187 806 113 4 205 0 S&T

155 Energy Transfer Partners LP Texas Americas 12,150 176 5,885 167 617 135 6 134 -5 S&T

156 Tohoku Electric Power Co Inc Japan Asia/Pacific Rim 49,594 51 20,386 66 -402 248 -1 248 -2 EU

157 NRG Energy Inc New Jersey Americas 26,896 102 8,849 132 477 165 3 216 14 IPP

158 ONEOK Partners LP Oklahoma Americas 7,920 220 8,676 135 473 168 8 94 14 S&T

159 Shanxi Lu'an Environmental Energy Development Co Ltd China Asia/Pacific Rim 4,519 246 3,219 212 516 155 22 8 29 C&CF

160 Southwestern Energy Co Texas Americas 6,017 239 2,611 222 604 139 15 23 28 E&P

161 Companhia Paranaense de Energia Brazil Americas 11,272 186 3,999 197 583 144 8 97 9 EU

162 Datang International Power Generation Co Ltd China Asia/Pacific Rim 32,433 82 9,116 129 372 184 2 231 23 IPP

163 RusHydro JSC Russian Federation EMEA 23,279 116 14,002 96 351 188 2 228 106 EU

164 Neste Oil Oyj Finland EMEA 9,582 200 14,470 91 308 200 5 143 -4 R&M

165 Showa Shell Sekiyu KK Japan Asia/Pacific Rim 14,687 156 27,989 50 190 235 4 194 -9 R&M

166 Esso Saf France EMEA 5,326 241 16,942 82 199 234 9 79 5 R&M

167 AES Corporation Virginia Americas 40,511 63 16,647 83 -86 247 0 247 7 IPP

168 CenterPoint Energy Inc Texas Americas 20,111 132 8,785 134 442 175 4 201 -3 DU

169 Terna SpA Italy EMEA 15,492 151 2,064 234 628 133 6 126 6 EU

170 Cimarex Energy Co Colorado Americas 4,358 250 1,713 239 575 146 19 9 4 E&P

171 Nexen Inc Canada Americas 22,616 122 5,799 169 569 147 3 207 -4 E&P

172 Enel Green Power SpA Italy EMEA 18,880 135 2,856 218 609 137 5 156 9 IPP

173 ONEOK Inc Oklahoma Americas 12,499 172 13,030 102 335 195 4 177 -1 GU

174 Verbund AG Austria EMEA 16,234 147 4,306 192 540 150 5 169 2 EU

175 Wisconsin Energy Corp Wisconsin Americas 13,060 167 4,202 193 454 171 6 128 0 DU

176 Korea Gas Corp Korea Asia/Pacific Rim 22,520 124 20,020 67 184 237 1 234 17 GU

177 A2A SpA Italy EMEA 17,773 141 7,975 143 415 176 4 202 -5 DU

178 Chugoku Electric Power Co Japan Asia/Pacific Rim 34,850 75 13,055 101 21 244 0 244 0 EU

179 Talisman Energy Inc Canada Americas 24,976 106 6,763 157 406 177 2 224 -4 E&P

180 GD Power Development Co Ltd China Asia/Pacific Rim 23,107 118 6,126 164 361 186 4 203 33 IPP

181 Gasunie Netherlands EMEA 15,979 148 2,205 229 611 136 5 158 6 GU

182 Thai Oil Pcl Thailand Asia/Pacific Rim 4,835 244 10,352 121 293 206 8 100 7 R&M

183 Iberdrola Renovables SA Spain EMEA 37,165 69 3,018 214 485 162 2 227 33 IPP

184 Red Electrica Corp SA Spain EMEA 11,911 180 1,906 235 525 153 7 105 11 EU

185 CONSOL Energy Inc Pennsylvania Americas 12,071 178 5,163 179 347 189 6 130 13 C&CF

186 Empresa De Energia De Bogota SA Colombia Americas 6,479 232 502 248 589 142 11 55 27 GU

187 Companhia De Transmissao De Energia Eletrica Paulista Brazil Americas 4,375 248 1,332 243 480 164 14 27 20 EU

188 Cheung Kong Infrastructure Holdings Ltd Bermuda Asia/Pacific Rim 8,264 215 362 249 647 130 8 90 15 EU

189 Light SA Brazil Americas 6,056 238 3,843 200 340 194 11 53 14 EU

190 Tata Power Co Ltd India Asia/Pacific Rim 8,832 208 4,009 196 460 170 7 112 19 EU

191 Hellenic Petroleum SA Greece EMEA 9,866 193 11,414 113 242 220 5 162 0 R&M

192 Shanxi Xishan Coal and Electricity Power Co Ltd China Asia/Pacific Rim 4,456 247 2,546 223 397 178 12 40 29 C&CF

193 Newfield Exploration Co Texas Americas 7,494 226 1,883 237 523 154 9 74 2 E&P

194 Edison SpA Italy EMEA 23,743 112 14,066 95 28 243 0 243 8 IPP

195 Acciona SA Spain EMEA 29,478 96 8,433 139 225 228 2 232 -8 EU

196 CMS Energy Corp Michigan Americas 15,616 150 6,432 160 363 185 4 200 0 DU

197 Northeast Utilities Massachusetts Americas 14,522 158 4,898 181 388 180 4 176 -6 EU

198 Elia System Operator SA Belgium EMEA 8,489 212 1,265 245 541 149 8 93 10 EU

199 AGL Energy Ltd Australia Asia/Pacific Rim 9,263 204 6,431 161 346 190 5 145 21 DU

200 SCANA Corp South Carolina Americas 12,968 168 4,601 188 376 182 5 165 0 DUNotes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independentpower producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 8, 2011.





PlattsRank2011




201 Powergrid Corp Of India India Asia/Pacific Rim 17,191 143 1,896 236 588 143 4 184 23 EU

202 Cameco Corp Canada Americas 7,920 221 2,111 233 512 156 8 96 -3 C&CF

203 Abu Dhabi National Energy Co PJSC United Arab Emirates EMEA 31,595 86 5,681 172 277 214 1 236 36 DU

204 NiSource Inc Indiana Americas 19,939 133 6,422 162 295 205 3 213 -7 DU

205 Pioneer Natural Resources Co Texas Americas 9,679 198 1,803 238 475 167 7 110 1 E&P

206 Electric Power Development Co Ltd Japan Asia/Pacific Rim 24,772 108 7,587 148 234 223 1 235 3 IPP

207 Santos Ltd Australia Asia/Pacific Rim 14,676 157 2,167 230 486 161 5 172 -3 E&P

208 Canadian Utilities Canada Americas 9,720 197 2,642 221 476 166 5 141 3 DU

209 YTL Power International Bhd Malaysia Asia/Pacific Rim 11,203 188 4,333 191 390 179 5 168 49 DU

210 Shikoku Electric Power Co Inc Japan Asia/Pacific Rim 16,986 145 7,064 153 282 212 3 217 -1 EU

211 UGI Corp Pennsylvania Americas 6,374 235 5,591 173 261 217 7 103 1 GU

212 Kinder Morgan Inc Texas Americas 28,908 97 8,191 141 -41 245 0 246 -8 S&T

213 Brookfield Infrastructure Partners LP Bermuda Americas 13,109 166 634 247 467 169 5 153 EU

214 Enagas SA Spain EMEA 9,819 195 1,322 244 449 173 6 123 7 GU

215 Ameren Corp Missouri Americas 23,515 113 7,638 146 139 240 1 240 0 DU

216 NHPC Ltd India Asia/Pacific Rim 11,707 181 1,093 246 510 158 5 155 15 IPP

217 PTT Aromatics & Refining Plc Thailand Asia/Pacific Rim 5,055 243 8,902 131 206 231 6 137 50 R&M

218 Energias Do Brasil SA Brazil Americas 8,085 218 2,973 215 344 192 6 118 4 EU

219 Tauron Polska Energia SA Poland EMEA 8,524 211 5,210 177 291 209 5 147 EU

220 Pinnacle West Capital Corp Arizona Americas 12,363 175 3,264 210 330 197 5 163 -3 EU

221 Grupa Lotos SA Poland EMEA 6,453 233 6,663 159 230 224 6 129 14 R&M

222 Energen Corp Alabama Americas 4,364 249 1,579 240 291 208 11 50 3 E&P

223 International Power plc United Kingdom EMEA 23,289 115 5,280 175 229 225 1 233 13 IPP

224 OGE Energy Corp Oklahoma Americas 7,669 224 3,717 203 295 204 6 120 -1 DU

225 Essar Energy plc United Kingdom EMEA 12,474 174 10,006 125 202 233 2 221 200 R&M

226 Bumi Resources Tbk Pt Indonesia Asia/Pacific Rim 8,773 209 4,370 190 311 199 5 159 24 C&CF

227 YTL Corp Bhd Malaysia Asia/Pacific Rim 15,244 153 5,320 174 274 215 2 219 40 DU

228 Rabigh Refining & Petrochemical Co Saudi Arabia EMEA 12,600 171 12,503 107 56 242 1 242 168 R&M

229 AES Elpa SA Brazil Americas 7,791 222 5,778 170 222 230 5 143 11 EU

230 Hokkaido Electric Power Co Japan Asia/Pacific Rim 20,207 130 6,756 158 143 239 1 239 0 EU

231 Hokuriku Electric Power Co Japan Asia/Pacific Rim 17,002 144 5,896 166 228 227 2 229 1 EU

232 Reliance Infrastructure Ltd India Asia/Pacific Rim 8,436 213 3,220 211 334 196 5 146 29 EU

233 EOG Resources Inc Texas Americas 21,624 126 5,853 168 161 238 1 237 12 E&P

234 Alliant Energy Corp Wisconsin Americas 9,283 203 3,416 207 308 202 5 160 0 DU

235 El Paso Pipeline Partners LP Texas Americas 6,177 237 1,344 241 378 181 7 117 130 S&T

236 Fortis Inc Canada Americas 13,321 162 3,643 205 311 198 3 214 11 EU

237 MDU Resources Group Inc North Dakota Americas 6,304 236 3,910 199 244 219 6 127 -3 DU

238 Adaro Energy Tbk Pt Indonesia Asia/Pacific Rim 4,743 245 2,771 220 267 216 8 101 29 C&CF

239 Pepco Holdings Inc District of Columbia Americas 14,480 159 7,039 154 139 240 2 230 -9 EU

240 Integrys Energy Group Inc Illinois Americas 9,817 196 5,203 178 224 229 4 180 -20 DU

241 Mosenergo Ao Russian Federation EMEA 9,143 206 4,867 183 290 210 4 185 23 EU

242 AGL Resources Inc Georgia Americas 7,518 225 2,373 226 234 222 7 115 -2 GU

243 QEP Resources Inc Colorado Americas 6,785 230 2,246 228 283 211 6 119 7 E&P

244 MVV Energie AG Germany EMEA 5,230 242 4,544 189 187 236 6 122 14 DU

245 NSTAR Massachusetts Americas 7,934 219 2,917 216 238 221 6 135 -4 DU

246 EVN AG Austria EMEA 9,678 199 3,706 204 279 213 4 179 7 EU

247 China Longyuan Power Group Ltd China Asia/Pacific Rim 11,485 182 2,135 231 303 203 4 182 27 IPP

248 BKW Energie AG Switzerland EMEA 7,704 223 2,798 219 229 226 6 131 0 EU

249 Atmos Energy Corp Texas Americas 6,764 231 4,790 184 206 232 5 154 -7 GU

250 Atco Ltd Canada Americas 10,571 190 3,426 206 291 207 3 206 6 DUNotes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independent






can coal use rose 5.3% over 2009, it re-mained 9.5% below 2007 levels.

In Asia, the story is very different.Consumption rose by 9.1% on year to2,384.7 mtoe, reaching its highest-everlevel. Average Chinese steam coal prices

at Qinhuangdao leapt 31.6% in 2010 to$115.42/metric ton.

Top TenThe entry of German multi-utility

E.ON AG to the top ten in 2009—the only non-Integrated Oil and Gas(IOG) company to do so in the lastfive years—proved fleeting. The oil andgas giants reasserted their dominanceof the top ten rankings, taking all tenspots despite a stricken BP dropping far

from sight. On the back of higher oilprices, the top ten companies broughtin a combined $178.874 billion in prof-its, a 20.4% increase from 2009, butstill down from the bumper year of 2008, when profits hit an all-time highof $214.042 billion.

US giant Exxon Mobil Corp retainedthe top spot in 2010, while ChevronCorp moved up from ninth in 2009to second place as it boosted its re-turn on invested capital (ROIC) to16% from 10.2% in the previous year.Gazprom OAO, PetroChina Co Ltd,Total SA and the China Petroleum &Chemical Corp took third, fourth,fifth and eighth places, respectively,while Royal Dutch Shell climbed fromtenth to sixth.

Three re-entrants to the top ten in2010 included ConocoPhillips—nowthe subject of an innovative demergerinto upstream and downstream busi-nesses—which moved up from 24thplace to seventh. Meanwhile Russia’s

OJSC Rosneft Oil Company and LukoilOil Company rose from 14th and 11thplaces, respectively to take the ninthand tenth spots.

E.ON dropped back to 13th fromsixth, and Brazil’s Petrobras-PetroleoBrasilier fell from fourth in 2009 to12th in 2010. But the biggest omis-sion from the top ten was UK major BP.Ranked second in 2009, BP dropped to118th on account of the cost of the Ma-condo oil spill in the US Gulf of Mex-

ico. Although in dollar terms its assetbase expanded, as did its revenues, BP’sprofits were wiped out. The companyposted a loss for 2010 of $3.719 billion.

Here Come the RussiansAlthough the year-to-year changes

in the top ten companies can be small,the big trends can be seen from longer-term comparisons. In 2006, the top tenconsisted of five west European inte-grated oil and gas companies, three USmajors, PetroChina and Petrobras. In2010, there were still three US majorsbut now two Chinese and three Russiancompanies, with only two Europeancompanies remaining.

But among the top 20, there werestill eight European companies, includ-

3-year

CGR %

Platts

RankRank Company State or country Industry

1 El Paso Pipeline Partners LP Texas S&T 130.3 235

2 Ultrapar Participacoes SA Brazil S&T 28.7 134

3 Southwestern Energy Co Texas E&P 27.7 160

4 Suncor Energy Inc Canada IOG 27.5 44

5 Empresa De Energia De Bogota SA Colombia GU 27.2 186

6 Ecopetrol SA Colombia IOG 23.4 23

7 Companhia De Transmissao De Energia Eletrica Paulista Brazil EU 20.2 187

8 YPF SA Argentina IOG 14.9 65

9 Peabody Energy Corp Missouri C&CF 14.5 122

10 Light SA Brazil EU 14.3 189

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






TopAsia

PlattsRank2011


invested capital IndustrycodeCompany State or country $ million Rank $ million Rank $ million Rank ROIC % Rank

1 4 PetroChina Co Ltd China 254,914 8 220,177 5 21,034 3 12 41 IOG

2 8 China Petroleum & Chemical Corp China 153,143 16 281,981 4 10,788 9 11 49 IOG

3 15 CNOOC Ltd Hong Kong 50,464 47 27,280 52 8,175 14 24 6 E&P

4 18 JX Holdings Inc Japan 77,058 28 114,941 13 3,719 30 10 61 R&M5 21 Oil & Natural Gas Corp Ltd India 42,881 59 25,888 56 4,943 22 18 14 E&P

6 22 China Shenhua Energy Co Ltd China 52,454 39 22,165 64 5,729 20 14 32 C&CF

7 24 Reliance Industries Ltd India 68,061 32 58,508 27 4,247 26 9 83 R&M

8 28 PTT Plc Thailand 41,195 61 61,784 26 2,702 37 9 77 IOG

9 42 Indian Oil Corp Ltd India 40,850 62 67,824 22 1,724 55 7 114 R&M

10 51 Coal India Ltd India 18,015 140 11,057 117 2,392 42 31 2 C&CF

11 55 Formosa Petrochemical Corp Taiwan 15,761 149 23,336 61 1,348 75 12 44 R&M

12 56 SK Innovation Co Ltd Korea 27,005 101 47,147 28 989 98 7 116 R&M

13 58 NTPC Ltd India 30,228 93 12,638 105 2,059 48 8 99 IPP

14 60 Kansai Electric Power Co Inc Japan 89,986 25 33,044 42 1,469 67 3 215 EU

1570

Idemitsu Kosan Co LtdJapan 30,994 90 43,656 31 724 125 5 142 R&M

16 74 Tokyo Gas Co Ltd Japan 22,523 123 18,316 72 1,139 88 7 111 GU

17 76 Inpex Corp Japan 32,995 79 11,251 114 1,535 64 5 140 E&P

18 77 Chubu Electric Power Co Inc Japan 65,635 33 27,808 51 1,009 95 2 220 EU

19 81 TonenGeneral Sekiyu Corp Japan 11,163 189 28,617 48 511 157 17 17 R&M

20 90 Tenaga Nasional Bhd Malaysia 24,469 109 9,772 127 1,032 93 7 113 EU

21 91 S-Oil Corp Korea 9,285 202 18,141 74 619 134 13 33 R&M

22 95 CLP Holdings Ltd Hong Kong 23,065 119 7,513 149 1,329 77 7 106 EU

23 96 Woodside Petroleum Ltd Australia 20,196 131 4,193 194 1,575 61 10 70 E&P

24 97 China Coal Energy Co Ltd China 18,592 138 10,708 119 1,038 92 7 107 C&CF

25 100 Yanzhou Coal Mining Co Ltd China 11,207 187 5,235 176 1,354 74 15 22 C&CF

26 101 PTT Exploration and Production Plc Thailand 11,286 185 4,617 186 1,357 73 17 16 E&P

27 109 Gail (India) Ltd India 8,886 207 7,727 145 885 105 14 31 GU

28 112 China Yangtze Power Co Ltd China 24,231 110 3,287 209 1,236 85 8 86 IPP

29 120 Cairn India Ltd India 10,285 191 2,262 227 1,394 71 15 24 E&P

30 125 GS Holdings Corp Korea 26,037 104 37,107 35 448 174 3 211 R&M

31 127 Huaneng Power International Inc China 34,464 77 15,672 85 533 152 3 218 IPP

32 131 Tokyo Electric Power Co Inc Japan 182,065 14 64,048 24 -14,881 250 -13 250 EU

33 136 Kyushu Electric Power Co Inc Japan 51,522 43 17,729 76 343 193 1 238 EU

34 137 Korea Electric Power Corp Korea 92,035 23 34,611 39 -63 246 0 245 EU

35 139 Cosmo Oil Co Ltd Japan 19,442 134 33,065 41 345 191 3 209 R&M

Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independentower producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 8, 2011.

ing three utilities, just one less than in2006. US representation dropped fromsix to three, while Russia had four com-panies in the top 20 compared withthree in 2006. China is represented bythree companies compared with onlytwo five years earlier.

The entry of Russian companies intothe ranks of the world’s top energy en-terprises is a striking feature of the 2010list, and features not only oil and gas,

but also electricity industry compa-nies as a result of privatization in the

sector. Of the top ten fastest-growingcompanies, three are Russian: RusHy-dro JSC, Bashneft OJSC and MoscowUnited Electric Grid OJSC, with RusHy-dro recording a giant three-year CGR of 106.1%. There are now 15 Russian com-panies in the top 250, compared with11 in 2009 and nine in 2006.

Mighty Gazprom’s position remainspre-eminent in natural gas, based on itshuge production volumes and monop-

oly grip on Russia’s gas pipelines andexports. However, it may one day have

Asian companies in 2010 Top 250





TopAsia

PlattsRank2011


invested capital IndustrycodeCompany State or country $ million Rank $ million Rank $ million Rank ROIC % Rank

36 140 Osaka Gas Co Ltd Japan 17,693 142 14,163 94 548 148 4 191 GU

37 142 Hindustan Petroleum Corp Ltd India 15,385 152 30,484 45 375 183 4 196 R&M

38 143 Bharat Petroleum Co Ltd India 14,805 155 27,254 53 360 187 4 192 R&M

39 144 Caltex Australia Ltd Australia 5,639 240 18,163 73 308 201 9 75 R&M40 145 Power Assets Holdings Ltd Hong Kong 11,921 179 1,334 242 925 102 10 69 EU

41 149 China Resources Power Holdings Co Ltd Hong Kong 18,391 139 6,248 163 631 131 5 167 IPP

42 151 Banpu Pcl Thailand 6,385 234 2,123 232 804 114 16 21 C&CF

43 152 Origin Energy Ltd Australia 23,272 117 8,302 140 595 140 3 208 IOG

44 153 Hong Kong & China Gas Co Ltd Hong Kong 9,344 201 2,492 224 718 126 11 58 GU

45 156 Tohoku Electric Power Co Inc Japan 49,594 51 20,386 66 -402 248 -1 248 EU

46 159 Shanxi Lu'an Environmental Energy Development Co Ltd China 4,519 246 3,219 212 516 155 22 8 C&CF

47 162 Datang International Power Generation Co Ltd China 32,433 82 9,116 129 372 184 2 231 IPP

48 165 Showa Shell Sekiyu KK Japan 14,687 156 27,989 50 190 235 4 194 R&M

49 176 Korea Gas Corp Korea 22,520 124 20,020 67 184 237 1 234 GU

50178

Chugoku Electric Power CoJapan 34,850 75 13,055 101 21 244 0 244 EU

51 180 GD Power Development Co Ltd China 23,107 118 6,126 164 361 186 4 203 IPP

52 182 Thai Oil Pcl Thailand 4,835 244 10,352 121 293 206 8 100 R&M

53 188 Cheung Kong Infrastructure Holdings Ltd Bermuda 8,264 215 362 249 647 130 8 90 EU

54 190 Tata Power Co Ltd India 8,832 208 4,009 196 460 170 7 112 EU

55 192 Shanxi Xishan Coal and Electricity Power Co Ltd China 4,456 247 2,546 223 397 178 12 40 C&CF

56 199 AGL Energy Ltd Australia 9,263 204 6,431 161 346 190 5 145 DU

57 201 Powergrid Corp Of India India 17,191 143 1,896 236 588 143 4 184 EU

58 206 Electric Power Development Co Ltd Japan 24,772 108 7,587 148 234 223 1 235 IPP

59 207 Santos Ltd Australia 14,676 157 2,167 230 486 161 5 172 E&P

60 209 YTL Power International Bhd Malaysia 11,203 188 4,333 191 390 179 5 168 DU

61 210 Shikoku Electric Power Co Inc Japan 16,986 145 7,064 153 282 212 3 217 EU

62 216 NHPC Ltd India 11,707 181 1,093 246 510 158 5 155 IPP

63 217 PTT Aromatics & Refining Plc Thailand 5,055 243 8,902 131 206 231 6 137 R&M

64 226 Bumi Resources Tbk Pt Indonesia 8,773 209 4,370 190 311 199 5 159 C&CF

65 227 YTL Corp Bhd Malaysia 15,244 153 5,320 174 274 215 2 219 DU

66 230 Hokkaido Electric Power Co Japan 20,207 130 6,756 158 143 239 1 239 EU

67 231 Hokuriku Electric Power Co Japan 17,002 144 5,896 166 228 227 2 229 EU

68 232 Reliance Infrastructure Ltd India 8,436 213 3,220 211 334 196 5 146 EU

69 238 Adaro Energy Tbk Pt Indonesia 4,743 245 2,771 220 267 216 8 101 C&CF

70 247 China Longyuan Power Group Ltd China 11,485 182 2,135 231 303 203 4 182 IPP

Notes: C&CF = coal and consumable fuels, DNR = data not reported, DU = diversified utility, E&P = exploration and production, EU = electric utility, GU = gas utility, IOG = integrated oil and gas, IPP = independentpower producer and energy trader, R&M = refining and marketing, S&T = storage and transfer. All rankings are computed from data assessed on June 8, 2011.

a challenger in the form of private gascompany Novatek OAO, which is opera-tor of the planned Yamal LNG project.

Novatek has moved up from 126thposition in 2009 to 104th in 2010. Prof-its rose from $854 million to $1,358million with an impressive ROIC of 19% in 2010—the twelfth-highestROIC out of the entire top 250. It isalso the 34th fastest-growing companybased on its three-year CGR. Includ-

ing AK Transneft OAO, the country’soil pipeline monopoly, Russia now has

eight companies primarily focused onoil in the top 250 as well as two gas andfive power sector companies.

Returns and GrowthThe ROIC rankings are revealing. The

oil majors and big European utilitiesmay dominate in terms of asset base,revenues and profits, but when it comesto return on invested capital onlyone OECD-based company makes the

frame—the US E&P company CimarexEnergy Co, which is a new entrant to

Asian companies in 2010 Top 250 (continued)




the list with an overall ranking of 170.Instead, this is where Latin America

really makes its mark. Top of the boardis Colombia’s rejuvenated Ecopetrol SAwith a staggering ROIC of 98%. Argen-tina’s YPF SA is third with an ROIC of

28%, while Brazil’s Eletropaulo-Metro-politana Eletricidade de Sao Paulo SA isseventh ranked with an ROIC of 22%.Russian and Chinese companies arealso well represented, while Kazakh-stan’s oil and gas company KazMun-aigas Exploration and Production JSCtakes the tenth spot with an ROIC of 19%. Coal India Ltd, newly listed in2010, is second with an ROIC of 31%.

Distinct trends also emerge from thetop 50 fastest growing companies, the

leader of which is Essar Energy plc. Al-though Essar Energy is incorporated inthe UK, the credit for its three-year CGRof 199.5% has to go to India, as this isan Indian-owned and led company.Out of the top 50 fastest growers, 40 arefrom outside the OECD compared with36 in 2009. And while the oil industryis out in front in terms of absolute size,when it comes to growth it is ElectricUtilities, Independent Power Producersand Coal & Consumable Fuels compa-nies that dominate the top 50 list of fastest growers.

That said, oil companies still makeup six of the top ten spots. Perhaps sur-prisingly, three of these are oil and gasrefining and marketing companies—allnon-OECD and all export-orientated.They are India’s Essar Energy, SaudiArabia’s Rabigh Refining & Petrochemi-

cal Co and Thailand’s PTT Aromatics &Refining Plc. A fourth—El Paso PipelinePartners LP—is from the oil and gasstorage and transportation segment.There are three such companies amongthe top 50 fastest-growing companies,

as well as four refining and marketingbusinesses, compared with five E&Pand three IOG companies.

The E&P companies lead the IOGs.The E&P companies posting the fast-est growth are Cairn India Ltd, with athree-year CGR of 116.5%, followed byRussia’s Bashneft (57.9%) and then Tex-an company Southwestern Energy Co.(27.7%). Close on their heels are China’sCNOOC Ltd (26.2%) and Russian gasplayer Novatek (23.6%). By contrast, the

fastest-growing IOG is Canada’s Sun-cor Energy Inc, with a three-year CGRof 27.5%. The only other two IOGs tomake it into the top 50 fastest-growingcompanies are Colombia’s Ecopetrol(23.4%) and PetroChina (20.6%).

C&CFChinese companies increasingly dom-

inate the coal and consumable fuelscategory, reflecting a number of factors.First, China has the largest and mostrapidly-expanding coal industry in theworld. Second, the industry is undergo-ing a state-led process of consolidationthat is pushing smaller operations intomajor conglomerations. And third, asthe country’s coal imports continueto increase, Chinese companies arelooking to expand beyond their ownborders for supplies. While there werethree Chinese companies in the C&CFtop ten in 2009, there are now five, the

two new entrants being Shanxi Lu’anEnvironmental Energy DevelopmentCo Ltd. and Shanxi Xishan Coal andElectricity Power Co Ltd.

Another new entrant is Coal In-dia, which in 2010 undertook a mas-sive initial public offering which wasmore than 15 times oversubscribed.As India’s primary coal producer inthe world’s third largest coal market,this puts the company second behindonly China Shenhua Energy Co Ltd. It

also puts it 51st in the overall rankings.In addition, Thailand’s Banpu Pcl has


Industry Company Country Platts Rank 2011

IOG PetroChina Co Ltd China 4

E&P CNOOC Ltd Hong Kong 15

R&M JX Holdings Inc Japan 18

C&CF China Shenhua Energy Co Ltd China 22

IPP NTPC Ltd India 58

EU Kansai Electric Power Co Inc Japan 60

GU Tokyo Gas Co Ltd Japan 74

DU AGL Energy Ltd Australia 199

3. #1 in Asia by industry.

Source: S&P Capital IQ/Platts All rankings are computed from data assessed on June 8, 2011.





emerged in the C&CF group at numbersix, reflecting the company’s expan-sion into China, Laos and Indonesia.The emergence of these companies haspushed Indonesia’s Adaro Energy Tbkand Bumi Resources Tbk Pt out of the

top 10 C&CF companies, while the US’sPatriot Coal Corp has also dropped outto be replaced by Consol Energy Inc.

In terms of growth, there are eightC&CF companies in the top 50 fastestgrowing list. They are all Asian; five fromChina, two from Indonesia and Thai-land’s Banpu. Adaro Energy and BumiResources may have dropped out of thetop ten C&CF companies, but they canstill claim to be amongst the fastest-growing energy companies in the world.

UtilitiesThe Electric Utilities category remains

dominated by the European giants. Of the top ten, eight are European andtwo American. While there have beenslight changes in relative positions, thegroup remains largely as in 2009. How-ever, two companies have disappearedfrom the top ten—France’s EDF and UScompany NextEra Energy Inc—withthe latter performing well but just be-ing edged out into 11th place. Replac-ing them are Germany’s EnBW EnergieBaden-Württemberg AG and the US’sSouthern Co.

Nuclear giant EDF has dropped from22nd in the overall Platts’ rankings in2009 to 64th in 2010, the third year ina row it has slipped. While still rank-ing top in terms of assets, the decline inthe company’s financial performancereflects €2.9 billion ($3.9 billion) in

non-recurring risks and impairmentsin 2010, owing to deterioration in inter-national power and gas market condi-tions. Most of the impairments relate tothe US and Italian markets, but EDF isalso struggling with cost and construc-tion overruns with its new model nu-clear reactor at Flamanville in France.

In the IPP sector, the results are muchmore internationally diversified. India’sNTPC Ltd has moved to the top of theleader board, while the US’s Constel-

lation Energy Group Inc has droppedfrom first in 2009 to disappear from

the list altogether, following a net in-come loss of $931.8 million in 2010.The company is likely to re-emerge in2011, but in a new guise, if a proposedmerger with Exelon is completed.

There are now four Chinese compa-

nies in the IPP top ten compared withtwo in 2009. This group shows the larg-est change in composition with the newentrants including China Yangtze Pow-er Co. Ltd in third, Datang Internation-al Power Generation Co. Ltd in eighthand Enel Green Power SpA in tenthplace. In addition to Constellation En-ergy, the UK’s International Power Plchas dropped out of the top ten.

The picture is different when it comesto growth rather than absolute size. If

western Europe dominates the toprankings for EUs, Russia has the fast-est growth in the form of RusHydro JSC, Moscow United Electric PowerGrid, Mosenergo Ao and the FederalGrid Company of Unified Energy Sys-tem JSC. India’s Reliance InfrastructureLtd and Power Grid Corp of India arealso amongst the fastest growing EUs.There are no US companies in the fast-est-growing top ten, but Europe contin-ues to provide opportunities. The UK’sScottish and Southern Energy plc andSpain’s Iberdrola SA and Endesa SA arepresent, while South Africa’s Eskomcompletes the leader board.

There are seven IPPs in the fastest-growing top 50 companies, with sixcoming from China. The non-Chinese

Industry Company Country 3-year CGR % Platts Rank 2011

IOG PetroChina Co Ltd China 20.6 4

GU Gail (India) Ltd India 23.1 109

EU Reliance Infrastructure Ltd India 28.8 232

C&CF Shanxi Xishan Coal and

Electricity Power Co Ltd

China 29.5 192

IPP China Resources Power

Holdings Co Ltd

Hong Kong 42.4 149

DU YTL Power International Bhd Malaysia 48.9 209

R&M PTT Aromatics & Refining Plc Thailand 49.6 217

E&P Cairn India Ltd India 116.5 120

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 dataassessed on June 8, 2011.





company is Spain’s Iberdrola RenovablesSA with a three-year CGR of 33.0%. Anotable absence from the growth listare Chilean IPPs, with companies suchas AES Gener SA and Colbun SA, whichwere represented in 2009, failing to

maintain their places in 2010.

Asian LeadersThe number of Asian companies in

the top 250 continues to rise, reaching70 in 2010, up from 67 in 2009 and 56in 2006. In addition, despite havingmore companies represented, the aver-age ranking of Asian companies has alsoimproved from 135.2 in 2006 to 134.9 in2009 and 131.3 in 2010 (a lower numberdenotes a higher ranking). Asian compa-

nies are not just increasing in number,but are increasing their rankings relativeto their international peers.

Within Asia, the average ranking of Japanese companies overall has im-proved from 145.9 to 132.1. This partlyreflects the Japan Petroleum Explora-tion company dropping out of the top250, but the improvement is notablegiven the sharp fall in the ranking of the Tokyo Electric Power Co (Tepco)which was ranked 54th in 2009, but131st in 2010.

This is the result of the financial im-pact of the Fukushima nuclear disasterin March 2011 and Japanese reportingof financial data based on fiscal yearsrunning from April-March. Tepco re-corded a loss of $14,881 billion in fis-

cal 2010. Other Japanese companiesdropping down the rankings includeTohoku Electric Power Co, which fellfrom 119th to 156th and ChugokuElectric Power Co, which dropped from134th to 178th.

By contrast, Japan’s oil and gas com-panies performed well. JX Holdings wasthe shining star, rising from 129th in2009 to 18th in 2010. Idemitsu KosanCo Ltd increased its ranking from 144thto 70th. Tokyo Gas Company Ltd uppedits place in the list from 108th to 74th.

For China, most change was seenwithin the power sector. The number of Chinese companies in the top 250 wasthe same in 2010 as in 2009, but theShenzhen Energy Group, Huadian Pow-

er Intl Corp and Shenergy Co. Ltd weredisplaced by Shanxi Lu’an Environmen-tal Energy Development Co., ShanxiXishan Coal and Electricity Power Co.and China Longyuan Power Group. Inthe oil sector, PetroChina moved upfrom seventh in the rankings to fourth,and CNOOC from 29th to 15th. Thebiggest mover, however, was ChinaYangtze Power Co., which jumped from163rd in 2009 to 112th in 2010.

By contrast, India saw three new com-panies join the top 250 list—the newly-listed Coal India, oil and gas producerCairn India Ltd and the IPP companyNHPC Ltd. As in Japan, the oil sectoralso gave India its strongest movers.The Indian Oil Corp Ltd jumped from78th in 2009 to 42nd in 2010, while

3-year

CGR %

Platts

RankRank Company Country Industry

1 Essar Energy plc United Kingdom R&M 199.5 225

2 Rabigh Refining & Petrochemical Co Saudi Arabia R&M 167.5 228

3 RusHydro JSC Russian Federation EU 106.1 163

4 Bashneft OJSC Russian Federation E&P 57.9 62

5 Moscow United Electric Grid OJSC Russian Federation EU 42.4 148

6 Abu Dhabi National Energy Co PJSC United Arab Emirates DU 35.8 203

7 Iberdrola Renovables SA Spain IPP 33 183

8 Gas Natural SDG SA Spain GU 24.8 57

9 SNAM Rete Gas SpA Italy GU 24.8 88

10 Novatek OAO Russian Federation E&P 23.6 104

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






the Hindustan Petroleum Corp Ltd rosefrom 174th to 142nd.

The improvement in oil companiesvis-à-vis EUs and IPPs largely reflects thedifference between being on the cost orprofit side of rising feedstock prices. But

in terms of revenue growth, Asia comesout on top. Taking all Asian companiesin the top 250 into account, revenuesjumped 32.1% from 2009 to 2010. Thiscompares with an increase of 21.4% inSouth America, 19% in EMEA and just10.7% in North America.

However, the picture for companyprofits was rather different. These roseby 9.1% in EMEA and by 15.5% in Asia-Pacific. By contrast, they jumped 32.6%in South America and a huge 56.6% in

North America. Asia-Pacific’s relativelypoor performance reflects write-downsamongst Japanese electric utilities andregulated prices in key domestic markets

such as China and India. By contrast,the 2010 figures for North America areflattered by hefty write-downs in 2009by companies such as Chesapeake, Dev-on Energy and Talisman, all of whichbounced back to profitability in 2010. ■

3-yearCGR %

PlattsRankCompany

1 Essar Energy plc 199.5 225

2 Rabigh Refining & Petrochemical Co 167.5 228

3 El Paso Pipeline Partners LP 130.3 2354 Cairn India Ltd 116.5 120

5 RusHydro JSC 106.1 163

6 Bashneft OJSC 57.9 62

7 PTT Aromatics & Refining Plc 49.6 217

8 YTL Power International Bhd 48.9 209

9 Moscow United Electric Grid OJSC 42.4 148

10 China Resources Power Holdings Co Ltd 42.4 149

11 YTL Corp Bhd 40 227

12 Abu Dhabi National Energy Co PJSC 35.8 203

13 China Yangtze Power Co Ltd 35.8 112

14 Iberdrola Renovables SA 33 18315 GD Power Development Co Ltd 32.7 180

16 Shanxi Xishan Coal and Electricity Power Co Ltd 29.5 192

17 Shanxi Lu'an Environmental Energy Development Co Ltd 29.1 159

18 Reliance Infrastructure Ltd 28.8 232

19 Ultrapar Participacoes SA 28.7 134

20 Adaro Energy Tbk Pt 28.7 238

21 Huaneng Power International Inc 28.1 127

22 Yanzhou Coal Mining Co Ltd 28.1 100

23 Southwestern Energy Co 27.7 160

24 Suncor Energy Inc 27.5 44

25 Empresa De Energia De Bogota SA 27.2 186

3-yearCGR %

PlattsRankCompany

26 China Longyuan Power Group Ltd 26.9 247

27 Banpu Pcl 26.3 151

28 CNOOC Ltd 26.2 1529 China Coal Energy Co Ltd 25.1 97

30 Gas Natural SDG SA 24.8 57

31 SNAM Rete Gas SpA 24.8 88

32 Reliance Industries Ltd 24.7 24

33 Bumi Resources Tbk Pt 24.5 226

34 Novatek OAO 23.6 104

35 Ecopetrol SA 23.4 23

36 Gail (India) Ltd 23.1 109

37 Powergrid Corp Of India 23 201

38 Scottish and Southern Energy plc 22.9 26

39 Mosenergo Ao 22.9 24140 China Shenhua Energy Co Ltd 22.8 22

41 Datang International Power Generation Co Ltd 22.7 162

42 GDF Suez 21.2 32

43 Eskom 21.1 138

44 AGL Energy Ltd 20.6 199

45 PetroChina Co Ltd 20.6 4

46 Iberdrola SA 20.3 38

47 Federal Grid Company of Unified Energy System JSC 20.3 93

48 Endesa SA 20.2 19

49 Companhia De Transmissao De Energia Eletrica Paulista 20.2 187

50 AK Transneft OAO 20.1 41

6. Top 50 fastest growing companies.

Source: S&P Capital IQ/Platts Fastest Growing is based on a 3 year compound growth rate (CGR) for revenues. All rankings are computed from data assessed on June 8, 2011.

S&P Capital IQ, a brand of the McGraw-Hill Companies(NYSE:MHP), is a leading provider of multi-asset class data, re-search and analytics to institutional investors, investment advisorsand wealth managers around the world. We provide a broad suiteof capabilities designed to help track performance, generate alpha,identify new trading and investment ideas, and perform risk anal-ysis and mitigation strategies. Through leading desktop solutionssuch as Capital IQ, Global Credit Portal and MarketScope Advisordesktops; enterprise solutions such as S&P Securities Evaluations,Global Data Solutions, and Compustat; and research offerings in-

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