102 POWER PLANT ENGINEERING
Finally the government allowed alternate fuels and heavy fuel based Diesel Engine technology for the
medium and small sized liquid fuel based power plants became popular.
Heavy fuel, especially furnace oil grades is ideally used in diesel power stations. This type of
technology to burn furnace oil using four stroke engines is the most reliable type of power generation
system. The concept of using diesel engine being extended to IPPs due to fuel being furnace oil
makessense. The gestation for such projects could be as low as 14 months for a 35 MW power plant.
Furnace oil and LSHS being residual fuels have no other commercial use than combusting for energy
generation purpose. Naphtha as well as Natural gas is of use as feedstock to the fertiliser and the petro-
chemical industry. The concept of residual fuels is therefore limited to the power generation industry
and for marine propulsions only.
Generation cost from fuel oil power plants could be pegged at a low figure of about Rs. 3.50 per
KW hr. of energy. Such generation costs is considering into effect all variables like furnace oil cost, lube
oil cost, operation and maintenance cost, interest on capital and borrowings, depreciation etc.
The crude oil prices, the world over had touched the lowest levels of the decade during the past
two years. One of the fundamental reasons for the liquid fuel captive power plants in India moving to
diesel engine technology using heavy fuel was the comparatively less volatile nature of pricing of the
heavy fuel like furnace oil, LSHS and residual fuels over the past decade. The past couple of years are
also witness to weakening of the crude oil cartel mainly via the OPEC nations thus removing albeit by
default monopolistic nature of the oil pool or the cartel of the select countries that control 80% of
universal oil reserves.
The international benchmark Brent rests at $27–$28 per barrel. It will be strategically worth-
while for countries like India to adopt heavy fuel diesel engine technology for power generation for the
medium capacity (up to 150MW range) of the power stations. All the small and medium IPPs ideally
should look to this route to come to best operational economics in terms of low generation cost.
Supply and demand mechanics cannot be achieved by extraneous machinations. They are in fact
a function of free play of the market forces. To move the oil market positively, a better proposition
would be to increase cash inflow by enhanced sales and a better market share. Crude oil producers
working towards such a stratagem will be able to profit in the long run and fulfil the aspirations of their
own populace in terms of improved GDP, per capita incomes and technological upgradation etc.
Lack of consensus on oil pricing and stock mobilisation generates parallel monopolistic alliances
of oil exporters, bordering on opportunism. The aim of this informal consortium was to bulldoze OPEC
and reduce the crude oil production so as to enable it to fetch higher price. A host of reasons can be
assigned to explain this market pricing structure. A few of these are:
(1) Stock surplus in the global crude oil market.
(2) Low levels of industrial outputs worldwide.
(3) Energy markets effected by the global economic slumps and accompanied by consumption
drops.
It is in this perspective that India’s bilateral negotiation for a part barter deal with Iraq for supply
of crude at $7 per barrel should be seen as a positive progress. The rest of the payment will go as counter
trading of wheat of equivalent value to compensate for international pricing for the crude. It is such
pricing arrangements that we should welcome in India to control the ballooning oil pool deficit and eke
out positive technology and fuel options.