Indian Energy Scenario - IsA1 Mumbai_tcm55-328150

Indian Energy Scenario

Karan sahani

© Det Norske Veritas AS. All rights reserved Slide 28 April 2023

Agenda

Overview

Exploration

Refinery and Pipelines

Natural Gas

New and Renewable Energy

Power

Regulatory Framework

References


Overview

World 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%

India Overview

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%


EXPLORATION - History of discoveries and production


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)

India’s GDP would fall

by 1.5% for every USD

10 increase in the price

of oil per barrel


EXPLORATION AND PRODUCTION IN INDIA

SIZE

- Oil & Gas cater to 45% of India’s 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



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



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.


EXPLORATION - Scope for DNV

CHALLENGE TO SUPPLY ENERGY AT AFFORDABLE COST

ENHANCED LEVEL OF

E&P ACTIVITIES

REGULATORY

FRAMEWORK

& TAXATION POLICY

SCARCITY OF

RESOURCES

AND INCREASING

COST

BOOMING ENERGY

DEMAND


REFINING - World Consumption Pattern

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


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


REFINING - Existing Refining Capacity & Expansion Plans


Refined Products - Availability and Demand

189205

221236

122 125 128 132 137149

0

50

100

150

200

250

2007-08 2008-09 2009-10 2010-11 2011-12

Availability 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

- Govt. stress on quality improvement-by mid 2009, all refineries to meet Euro III/ IV norms for petrol/ diesel

- Emphasis on use of heavy and sour crude for processing


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

Controlled PricingMarket Determined Pricing

Administered Pricing


REFINING - Future

The Future

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

Way Forward

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


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


PIPELINES - Transportation

Pipelines59%

Coastal33.70%

Road5.10% Rail, 3.20%

Coastal7.50%

Pipelines25%

Rail 37.50%

Road27.50%

USA

INDIA

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)


REFINING AND PIPELINES - Scope for DNV

CHALLENGE TO SUPPLY ENERGY AT AFFORDABLE COST

$22 BILLION EXPECTED

INVESTMENT

REGULATORY

FRAMEWORK

RISING COST OF

FEEDSTOCK &

UPGRADATION OF EXISTING

REFINERIES

BOOMING ENERGY

DEMAND


Global Comparison India’s Gas Reserves / Production

Place Reserves (TCF)

Production (TCF/ Yr)

R/P (Years)

World 6263 98 60.3

India 37 1 35

Source (B P Statiscal Review 2008)


Indian Energy Sector – An Overview

Source : BP Statistical Review of World Energy June 2005

World Asia Pacific India

Energy Consumption (MTOE) 10224 3199 376

Energy Mix (%)

Coal 27% 47% 54%

Oil 37% 34% 32%

Natural gas 24% 10% 8%

Nuclear 6% 4% 1%

Hydro 6% 5% 5%

Oil & Gas Imports

(MTOE)

2467 836 98

(US$ 30 billion)

Growth in Energy (last 10 yrs)

Total Primary Energy 2.1% 4.2% 4.8%

Natural Gas 2.6% 6.0% 6.8%

India - 5th Largest Energy Consumer


LNG

Existing (7.5 MMTPA)

Transmission Pipelines

Existing (6,300 Kms)

Upcoming (16.25 MMTPA , US$ 2 Billion)

Planned (8,400 Kms, US$ 5 Billion)City Gas/ CNG

Existing (10 cities)Planned (40 cities, US $ 2 Billion)

Gas By Sea Receipt (Likely Location)LNG Terminal

GAS SECTOR INFRASTRUCTURE:CURRENT AND FUTURE –A COMPOSITE PICTURE

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

INTEGRATED GRID TO LINK ANY SOURCE TO ANY MARKET

JAGDISHPUR

PHOOLPUR

BHATINDA

JAMNAGAR

BAREILLY

DISPUR

DELHI

AGARTALA

BARODASURAT

KANPUR

LUCKNOW

PATNA

AHMEDABAD

RAJKOT

KOTA

MATHANIA

GWALIOR

UJJAIN

AGRA

KOLKATA

GAYA

BOKAROVARANASIJHANSI

DAHEJ I & II10 mmtpa*

HAZIRA2.5 mmtpa

MYANMAR-India PipelineA 1 BLOCK, MYANMAR

COIMBTORE

MANGLORE

MUMBAIBHUBANESHWAR

KRISHNAPATNAM

NELLORE

CHENNAI

TUTICORIN

TIRUCHCHIRAPALLI

PUNE

BHARUCH

HASANBANGLORE

KOLHAPUR HYDERABADSOLAPUR

RAJAMUNDRY

VIJAYAWADA

DAMRA

DABHOL5 mmtpa

COCHIN5 mmtpa KANJIRKKOD

AURAIYA

Iran-Pak-India Pipeline

Turk-Afg-Pak-India Pipeline

KAKINADA

BHOPALVIJAIPUR

INDORE

GOA

CUTTACK

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

India at present uses around 150 million cubic meter of gas a day.

At present economic growth rate, consumption to increase 3 fold by 2012.


Gas Sector Challenges

Gas Pricing

Competitiveness

Gas Sector Reforms

Upstream

Midstream

Downstream

Technology

Geo - Political issues

Integration with global pricing regimes

Global Competition

Need for International Charter - Legal / Regulatory framework

Management of Risks (Market / Price / Political)

Dependence on Imports

Sector PolicyRegulation / Gas Laws

Technical and Safety standards

Creating Infrastructure

Institutional Support StructureCreating Training Infrastructure -

Skilled manpower to support growth.

Creating an indigenous manufacturing base (Turbines, CNG kits, Compressors, Gas based Automobiles)

Creation of up front capacities - Coordinated development of gas value chain


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.


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

Demand supply gap

Strengthen India’s energy security

Concern for environment

Large untapped potential

Renewable Energy sources in India

Solar Energy

Hydropower

Biomass

Wind Energy

Non-commercial sources like fuelwood, agricultural waste & animal dung constitute ½ of the total energy consumption in India

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.


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


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)


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. StateGross Potential

(MW)(a)

Technical Potential(MW)

(b)

Installed Capacity(MW)

(c)

1. Andhra Pradesh 8275 1920 121.1

2. Gujarat 9675 1780 667

3. Karnataka 6620 1180 847

4. Kerala 875 605 2.0

5. Madhya Pradesh 5500 845 58

6. Maharashtra 3650 3040 1485

7. Orissa 1700 780 2

8. Rajasthan 5400 910 470

9. Tamilnadu 3050 1880 3460

10. West Bengal 450 450 1.6

11. Other States - - 0.5

Total 45195 MW 13390 MW 7114 MW

Source : M N E S


RENEWABLE ENERGY - Wind resource in India

Major Player

Suzlon

- Started in 1995

- Ranked 5th in terms of global market share

- 50% market share in India

- Suzlon is in the process of developing Asia’s largest wind park in Maharashtra (1,000 MW ).

Other major players – Vestas, Enercon and GE wind energy

India is second largest exploiter of Wind Energy – 1000 MW


RENEWABLE ENERGY - Biomass and Bio-fuel

BIOMASS

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

BIOFUEL

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


RENEWABLE ENERGY - Scope for DNV

CHALLENGE TO SUPPLY ENERGY AT GROWING DEMAND

RISING PRICES

OF CONVENTIONAL

FUELS

FAVOURABLE

REGULATORY

FRAMEWORK

AVAILABILITY OF

COST EFFECTIVE

TECHNOLOGY

BOOMING ENERGY

DEMAND


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.

Insustrial, 35.60%

Domestic, 24.80%

Commercial, 8.10%

Agriculture, 22.90%

Others, 8.60%

Consumption Pattern - Electricity

Hydro, 26%

Coal, 54%

Gas, 11%

Wind Renewable, 5%

Diesel, 1%

Nuclear, 3%

Power Generation – Sector wise Breakup


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

Still 19% villages haven’t seen what is electricity


POWER SECTOR - Future

FUTURE

Exponential demand growth

Capacity Enhancement

Increased significance of the role of the private players and foreign investments

New strategies and reforms

Increased significance of renewable sources of energy

SCOPE

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 framework for private investors.

Potentially, one of the largest power markets in the world


POWER SECTOR - Scope for DNV

CHALLENGE TO GENERATE ENERGY AT AFFORDABLE COST

INCREASING ROLE

OF PRIVATE

PARTICIPATION

LIBERALISATION

FROM GOVERNMENT

HUGE LOSSES IN

TRANSMISSION

AND PILFERAGE

BOOMING ENERGY

DEMAND


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


REGULATORY FRAMEWORK - Director General of Hydrocarbons

Upstream Regulator

Members

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

Director General

Deputy Director General Deputy Director General


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


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


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


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


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


Documents

Indian Energy Scenario - IsA1 Mumbai_tcm55-328150