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Indian Energy Scenario
Karan sahani
© Det Norske Veritas AS. All rights reserved Slide 27 April 2023
Agenda
Overview
Exploration
Refinery and Pipelines
Natural Gas
New and Renewable Energy
Power
Regulatory Framework
References
© Det Norske Veritas AS. All rights reserved Slide 37 April 2023
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%
© Det Norske Veritas AS. All rights reserved Slide 47 April 2023
EXPLORATION - History of discoveries and production
© Det Norske Veritas AS. All rights reserved Slide 57 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 67 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 77 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 87 April 2023
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.
© Det Norske Veritas AS. All rights reserved Slide 97 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 107 April 2023
REFINING - World Consumption Pattern
At current rate of consumption & production, oil in India would last only for about 20 to 25 years.
© Det Norske Veritas AS. All rights reserved Slide 117 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 127 April 2023
REFINING - Existing Refining Capacity & Expansion Plans
© Det Norske Veritas AS. All rights reserved Slide 137 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 147 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 157 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 167 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 177 April 2023
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)
© Det Norske Veritas AS. All rights reserved Slide 187 April 2023
REFINING AND PIPELINES - Scope for DNV
CHALLENGE TO SUPPLY ENERGY AT AFFORDABLE COST
$22 BILLION EXPECTED
INVESTMENT
REGULATORY
FRAMEWORK
RISING COST OF
FEEDSTOCK &
UPGRADATION OF EXISTING
REFINERIES
BOOMING ENERGY
DEMAND
© Det Norske Veritas AS. All rights reserved Slide 197 April 2023
Global Comparison India’s Gas Reserves / Production
Place Reserves (TCF)
Production (TCF/ Yr)
R/P (Years)
World 6263 98 60.3
India 37 1 35
Source (B P Statiscal Review 2008)
© Det Norske Veritas AS. All rights reserved Slide 207 April 2023
Indian Energy Sector – An Overview
Source : BP Statistical Review of World Energy June 2005
World Asia Pacific India
Energy Consumption (MTOE) 10224 3199 376
Energy Mix (%)
Coal 27% 47% 54%
Oil 37% 34% 32%
Natural gas 24% 10% 8%
Nuclear 6% 4% 1%
Hydro 6% 5% 5%
Oil & Gas Imports
(MTOE)
2467 836 98
(US$ 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
© Det Norske Veritas AS. All rights reserved Slide 217 April 2023
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.
© Det Norske Veritas AS. All rights reserved Slide 227 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 237 April 2023
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.
© Det Norske Veritas AS. All rights reserved Slide 247 April 2023
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.
© Det Norske Veritas AS. All rights reserved Slide 257 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 267 April 2023
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)
© Det Norske Veritas AS. All rights reserved Slide 277 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 287 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 297 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 307 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 317 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 327 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 337 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 347 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 357 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 377 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 387 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 397 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 407 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 417 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 427 April 2023
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
© Det Norske Veritas AS. All rights reserved Slide 437 April 2023