Indian Energy Scenario

Karan sahani

Agenda

Overview Exploration Refinery and Pipelines

Natural Gas
New and Renewable Energy Power

Regulatory Framework
References

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Overview

World Overview

India Overview

35% of world energy need is supplied by crude oil, 25% by coal and 21% by gas. Most of the reserve is concentrated in the Middle-east region. World Primary Energy Sector growing at 2%
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India is the 5th largest energy consumer India has vast potential in the Exploration Sector. 54% Coal, 32% Oil, 9% Natural Gas Indian Primary Energy Sector growing at 5%
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EXPLORATION - History of discoveries and production

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EXPLORATION - Overview of exploration sector in India

Oil was struck at Makum near Margherita in Assam in 1867 First commercial oil was discovered in Digboi in 1889 Giant Discovery - Bombay High field in 1974 in west coast offshore Public sectors companies, ONGC and OIL have discovered over 260 oil and gas fields. India has 5.6 billion barrels of proven oil reserves Oil and Gas Industry Size is estimated at USD 110 bn (about 15% of Indian GDP)
Indias GDP would fall by 1.5% for every USD 10 increase in the price of oil per barrel

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EXPLORATION AND PRODUCTION IN INDIA

SIZE - Oil & Gas cater to 45% of Indias primary energy requirements - Crude oil demand is currently about 146 MMT while the domestic production of crude is only 34 MMT - Natural gas demand is currently about 179 MMSCMD while the domestic supply is only 80 MMSCMD STRUCTURE - ONGC and OIL, largest upstream companies, with about 82% share of the total domestic oil and gas production - Exploration and Production sector witnessing increased private sector participation

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EXPLORATION AND PRODUCTION IN INDIA

POLICY - 100% FDI is allowed in the exploration of Crude Oil and Natural Gas through the automatic route - New Exploration Licensing Policy (NELP) is in place (since 1998) to facilitate private sector participation in Oil and Gas exploration - Coal Bed Methane (CBM) Policy has been formulated which provides for attractive fiscal and contract terms for the exploration of CBM blocks - Regulatory Body - Director General of Hydrocarbons (DGH)

OUTLOOK
- Crude oil demand is likely to increase to about 235 MMT by 2012 - Gas demand is expected to reach 279 MMSCMD by 2012

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EXPLORATION AND PRODUCTION IN INDIA

POTENTIAL - Growing demand-supply mismatch provides ample opportunities for investment - Exploration and production of crude oil, gas and CBM - Active promoting and creation of strategic oil and gas reserves through partnerships with the private sector - 22% of the Indian sedimentary area is unexplored discovery of oil fields by investors such as Cairn Energy and giant gas fields by Reliance, ONGC, etc. indicate a large potential for profitable investment in exploration

- An investment need of US$40 billion is expected in exploration and production by 2012

- Reliance alone plans to spend over US$10 billion in oil & gas exploration and production over the next 3 years.

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EXPLORATION - Scope for DNV

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REFINING - World Consumption Pattern

At current rate of consumption & production, oil in India would last only for about 20 to 25 years.
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REFINING - Background

Spectacular growth in the refining sector over the years. In 1947, there was only one refinery located in Digboi with a capacity of 0.25 MMTPA. Subsequently, Standard Vacuum Oil Company put up a refinery in Bombay in 1955: and Caltex at Visakhapatnam in 1957. 5th largest petroleum refining capacity in the world today - close to 150 MMTPA. (3 MBPD)

Indian refineries are further expanding capacities and are expected to have a total refining capacity of 242 MMTPA by 2011-12.
Environmental considerations Future Energy Policy Hydrocarbon Vision 2025 - Strategic plan to meet future energy requirement

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REFINING - Existing Refining Capacity & Expansion Plans

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Refined Products - Availability and Demand

Predicted refining capacity with export potential of 100 MMTPA up to 2012 Current installed capacity of 149 MMTPA, 5th largest refining capacity in the world Significant investments projected in new capacity additions
250 200 150 100 50 0 2007-08 2008-09 2009-10 2010-11 2011-12 149 122 189 125 221 236

205 128

132

137

- Govt. stress on quality improvementby mid 2009, all refineries to meet Euro III/ IV norms for petrol/ diesel
- Emphasis on use of heavy and sour crude for processing

Availability demand

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REFINERY GRM trends

Strong profitability of Indian refining companies driven by strong export earnings Substitution of light crude by heavier, sour crude oils to leverage spread GRMs expected to stay robust with high crude prices and global demand-supply forecasts

Administered Pricing
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Market Determined Pricing

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Controlled Pricing
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REFINING - Future
The Future

Way Forward

West coast refineries would continue to cater to the western markets High refining margins will allow competitive exports (RIL) Most Asian/SEA countries like Taiwan, Indonesia, Vietnam, Philippines, Sri Lanka, Pakistan and Bangladesh are expected to have a deficit of petroleum products Middle East refineries would be key competitors

The opportunity to emerge as a refining hub seems to be real and attractive Cost competitiveness and timely project commissioning is key Competitiveness to be driven by product slate and ability to process a wide range of crude

Integrated refining and petrochemical facilities for higher value-addition

Environmental and product quality specs in export markets

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PIPELINES - Crude and LPG Pipe Lines

Increasing urbanization and greater concern for environment and safety, the share of pipeline transportation is likely to increase in India About 50-60% of the primary transportation of petroleum products in developed countries is done through pipelines Pipeline network of Indian Oil has grown to 9273 km with a capacity of about 62 million metric tonnes per year. GAIL owns and operates 6700 km. of natural gas transmission network which is over 82% of the total pipeline infrastructure in the country

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PIPELINES - Transportation
Road 5.10% Coastal 33.70% Pipelines 59% Rail, 3.20%

Share of pipeline transportation in India much lower as compared to USA, inspite of its advantages Total POL pipeline length currently under operation in India 12,204 kms POL pipelines under implementation 5,561 kms (Investment of USD 1.5 bn)

USA

Road 27.50% Rail 37.50%

Coastal 7.50% Pipelines 25%

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INDIA
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REFINING AND PIPELINES - Scope for DNV

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Global Comparison Indias Gas Reserves / Production

Place

Reserves (TCF)

Production (TCF/ Yr)

R/P (Years)

World

6263

98

60.3

India

37

35

Source (B P Statiscal Review 2008)

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Indian Energy Sector An Overview

World Energy Consumption (MTOE) Energy Mix (%) Coal Oil Natural gas Nuclear Hydro Oil & Gas Imports (MTOE) 27% 37% 24% 6% 6% 2467 47% 34% 10% 4% 5% 836 54% 32% 8% 1% 5% 98 (US$ 30 billion) Total Primary Energy Natural Gas 2.1% 2.6% 4.2% 6.0% 4.8% 6.8% 10224 Asia Pacific 3199 India 376

Growth in Energy (last 10 yrs)

India - 5th Largest Energy Consumer

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Source : BP Statistical Review of World Energy June 2005

GAS SECTOR INFRASTRUCTURE: CURRENT AND FUTURE A COMPOSITE PICTURE

TOTAL INVESTMENT US$ 9 Billion (Rs.40000 Cr NEXT 5 YRS )
BHATINDA
DELHI

BAREILLY
AURAIYA LUCKNOW JAGDISHPUR

DAHEJ I & II 10 mmtpa*

MATHANIA

AGRA
GWALIOR

DISPUR PATNA

KANPUR

KOTA
RAJKOT UJJAIN AHMEDABAD
JAMNAGAR BHARUCH

HAZIRA 2.5 mmtpa

PHOOLPUR JHANSI VARANASIGAYA VIJAIPUR BOKARO BHOPAL INDORE CUTTACK

India plans to bring 200 of its cities under the gas pipeline network by 2020.

AGARTALA

India at present uses around 150 million cubic meter of gas a day.
At A 1 BLOCK,present economic growth rate, MYANMAR to increase 3 fold by 2012.
LNG Existing (7.5 MMTPA) Upcoming (16.25 MMTPA , US$ 2 Billion)

KOLKATA
BARODA

consumption

SURAT MUMBAI PUNE SOLAPUR KOLHAPUR GOA

DAMRA

BHUBANESHWAR
KRISHNAPATNAM KAKINADA RAJAMUNDRY HYDERABAD VIJAYAWADA NELLORE

DABHOL 5 mmtpa

Transmission Pipelines City Gas/ CNG

Existing (6,300 Kms) Planned (8,400 Kms, US$ 5 Billion)

HASAN MANGLORE

BANGLORE

CHENNAI

COCHIN 5 mmtpa

KANJIRKKOD
COIMBTORE

TIRUCHCHIRAPALLI

Existing (10 cities) Planned (40 cities, US $ 2 Billion) Gas By Sea Receipt (Likely Location) LNG Terminal

TUTICORIN

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INTEGRATED GRID TO LINK ANY2012 15 July SOURCE TO ANY MARKET

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Gas Sector Challenges

Gas Pricing
Competitiveness

Technology
Upstream Midstream Downstream

Creating Infrastructure
Creating an indigenous manufacturing base (Turbines, CNG kits, Compressors, Gas based Automobiles) Creation of up front capacities Coordinated development of gas value chain

Gas Sector Reforms

Dependence on Imports
Geo - Political issues Integration with global pricing regimes Global Competition Need for International Charter - Legal / Regulatory framework Management of Risks (Market / Price / Political)

Sector Policy
Regulation / Gas Laws Technical and Safety standards

Institutional Support Structure

Creating Training Infrastructure Skilled manpower to support growth.

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What does this mean for DNV?

The Gas sector will be very active with lots of uncertainties to be managed. Increased growth of East coast E & P - likely that Rajamundry will develop as support centre. Significant LNG degasification developments LNG supply chain issues critical to India energy sector Major onshore/offshore pipeline development projects expected.

Regulated industry but government requires significant education.

Fertilizer sector is strongly inter-related to the Indian gas sector.

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RENEWABLE ENERGY - Introduction

India has installed close to 10,000 MW of grid connected renewable energy (Sept, 2007) Wind energy market size has increased in the 1,500-1,700 MW per year $2250miillion 2500million per annum

Key drivers for renewable energy

Renewable Energy sources in India

Demand supply gap

Solar Energy Hydropower Biomass Wind Energy

Non-commercial sources like fuelwood, agricultural waste & animal dung constitute of the total energy consumption in India

Strengthen Indias energy security

Concern for environment Large untapped potential

Regulator :The Ministry of New and Renewable Energy (MNRE) is the nodal Ministry of the Government of India for all matters relating to new and renewable energy.
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RENEWABLE ENERGY - Solar Power

Location advantage Average annual temperature 25-27 degree centigrade South-East coast has the highest temperature

Major players PV cell - Central Electronics Ltd., BHEL

Reliefs offered by Government on SPV manufacturers and users of SPV based products
- No excise duty for manufacturers - Low import tariff for several raw materials and components - Soft loans to users, intermediaries and manufacturers

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RENEWABLE ENERGY - Hydro power

High annual rainfall is a good indicator The dominant annual rainfall is located on the north-eastern part of India: Arunachal Pradesh, Assam, Nagaland, Manipur and Mizoram Good water management and storage needed. Advantages

Start up and shut down quick and economical Long and productive lives Eg. Bhakra Nangal dam Proposed Hydro Power projects in India

Rampur Hydropower Project Vishnugadh Pipalkoti Hydropower Project

Only 20% of the potential is currently being utilized (18000 MW out of 90000 MW)

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RENEWABLE ENERGY - Wind Energy

Wind energy is plentiful, renewable and clean. Therefore, it is considered by experts to be more environmentally friendly than many other energy sources. Wind Energy Potential In India
Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. State Andhra Pradesh Gujarat Karnataka Kerala Madhya Pradesh Maharashtra Orissa Rajasthan Tamilnadu West Bengal Other States Total
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Gross Potential (MW) (a) 8275 9675 6620 875 5500 3650 1700 5400 3050 450 45195 MW
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Technical Potential (MW) (b) 1920 1780 1180 605 845 3040 780 910 1880 450 13390 MW

Installed Capacity (MW) (c) 121.1 667 847 2.0 58 1485 2 470 3460 1.6 0.5 7114 MW
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Source : M N E S

RENEWABLE ENERGY - Wind resource in India

Major Player

Suzlon
- Started in 1995

- Ranked

5th in terms global market share

of

- 50% market share in India - Suzlon is in the process Other

of developing Asias largest wind park in Maharashtra (1,000 MW ).

major players Vestas, Enercon and GE wind energy

India is second largest exploiter of Wind Energy 1000 MW

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RENEWABLE ENERGY - Biomass and Bio-fuel

BIOMASS BIOFUEL

4th world ranking in power generation Various Applications: - Power Generation - Biomass gasification for heating - Cooking Top 3 States in biomass potential - Andhra Pradesh, Bihar, Gujarat

Bio-fuel initiative using

- Jatropha - Sugarcane Molasses

Supreme Court of India ruling compulsory blending of 10% ethanol

Technology Initiatives - SBI, Indian Railways, AP Government Agreement with Reliance Industries

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RENEWABLE ENERGY - Scope for DNV

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POWER SECTOR - Current Scenario

2.4% of the overall world energy output

6th largest energy user, comprising about 3.3% of the overall global energy expenditure per year. The gross electricity production capability of Indian Power Sector is placed at around 111 GW.

Consumption Pattern - Electricity

Power Generation Sector wise Breakup

Wind Renewable, Nuclear, 3% 5% Diesel, 1% Gas, 11% Hydro, 26%

Others, 8.60%

Agriculture, 22.90%

Insustrial, 35.60%

Commercial, 8.10% Domestic, 24.80% Coal, 54%

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POWER SECTOR - Weakness

MAJOR REASONS

Inadequate power generation capacity Lack of optimum utilization of the existing generation capacity Inefficient use of electricity by the end users Inadequate inter-regional transmission links Huge T&D losses (theft) and skewed tariff structure, making SEBs unviable Inadequate and ageing sub-transmission & distribution network leading to power
cuts and local failures/faults

Slow pace of rural electrification Lack of grid discipline

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Still 19% villages havent seen what is electricity

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POWER SECTOR - Future

FUTURE SCOPE

Exponential demand growth Capacity Enhancement Increased significance of the role of the private players and foreign investments

Abundant coal reserves (enough to last at least 200 years). Vast hydroelectric potential (150,000 MW). Large pool of highly skilled technical personnel. Impressive power development in absolute terms (comparable in size to those of Germany and UK). Enabling investors. framework for private

New strategies and reforms

Increased significance of renewable sources of energy

Potentially, one of the largest power markets in the world

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POWER SECTOR - Scope for DNV

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REGULATORY FRAMEWORK - Laws

Oilfields (Regulations and development) Act 1948 Petroleum and Natural Gas Rules 1959 Petroleum and Natural Gas Regulatory Board Act 2006

Electricity (Supply) Act, 1948

Electricity Laws (Amendment) Act, 1998 Electricity Regulatory Commission Act, 1998

Electricity Act 2003

Atomic Energy Act Environment (Protection) Act, 1986

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REGULATORY FRAMEWORK - Director General of Hydrocarbons

Upstream Regulator Members

Director General

Deputy Director General

Deputy Director General

Key Functions and Responsibilities

Review exploration Programs of companies for adequacy Cost monitoring, statutory payments to government, Profit sharing to government Monitoring of safety, Security and Environment aspect To reassess the hydrocarbon reserves estimated by the operating companies Monitoring of CBM blocks Technical advice to MOP&NG on issues relevant to exploration and optimal exploitation of oil & gas - Advise Government on policy formulations

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REGULATORY FRAMEWORK - New Exploration and Licensing Policy (NELP)

NELP was launched to accelerate the pace of Hydrocarbon exploration in India

in 1997-98

212 blocks have been offered under 7 rounds

- 7th round launched in 2008

57 exploration blocks on offer under NELP 7

- 29 onshore blocks - 9 shallow water blocks - 19 deepwater blocks

Model Production Sharing Contract Income Tax holiday for 7 Years from the start of commercial production 100% FDI allowed Assured marketing rights in domestic markets
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REGULATORY FRAMEWORK - Petroleum and Natural Gas Regulatory Board

Downstream Regulator PNGRB formally established with effect from 1.10.2007 Regulate refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas Promote competitive markets Functions of the Board
- Registration of entities - Authorization - Declaring, laying, building, etc., of common carrier or contract carrier and city or local natural gas distribution network - Rights of first use - Transportation Tariff

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REGULATORY FRAMEWORK - Central Electricity Regulatory Commission

Mandatory Functions
Regulate the tariff of generating companies Regulate the inter-State transmission of electricity Determine tariff for inter-state transmission Issue licenses to persons to function as transmission licensee and electricity trader Specify Grid Code having regard to Grid Standards Specify and enforce the standards with respect to quality, continuity and reliability of service by licensees - Fix the trading margin in the inter-State trading of electricity

Advisory Functions
- Formulation of National electricity Policy and tariff policy - Promotion of competition, efficiency and economy - Promotion of investment in electricity industry

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References

http://petroleum.nic.in/ http://mnes.nic.in/ http://uttara.in/

http://www.acus.org/
http://www.energymanagertraining.com/ http://www.hinduonnet.com

http://southasianmedia.net
http://www.indiaenergyportal.org/ http://indiastatistical.wordpress.com

www.energywatchgroup.org

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References

www.ongcindia.com www.iocl.com www.bharatpetroleum.com

www.hindustanpetroleum.com
www.cercind.gov.in/ www.cairnindia.com

www.teriin.org
www.suzlon.com www.ril.com

www.oil-india.com

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