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Energy Security of India The Place & Price of Coal & Gas

T L Sankar

CII-PowerMart 2005

Power for Empowering East

Kolkata 16-17 Nov 05

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Purpose of the Presentation

Economic Growth calls for increase in supply of energy. While India has registered a commendable rate of economic growth in the recent past, this has been achieved with unsatisfactory supply of energy.The energy supply situation

is causing anxiety.Many fear that India’s aspiration to achieve 8% per year GDP Growth in the next decade may be constrained by lack of energy supplies.

This presentation seeks to probe ways in which India could meet its energy demand to support such a high rate of growth .

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What is Energy Security?

• Should ensure that the Country has a) on a sustainable basis (for ever) energy b)of adequate quantity to meet the needs of all people including the poor and remote area residents c) for all legitimate uses d) of appropriate quality and the desired fuel form e) at affordable prices by the Indian consumers * The production ,transport and utilization of energy is achieved\

all times with minimum adverse impact on environment. * Energy Security should be harmonious with the National Security

plans.

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APPROACH TO THE STUDY

• What fuels are used in the economy?• What determines the choice of fuels in the

different sectors?• What is consumption of Fuels now?• What would be the consumption of different

fuels in the future-2025?• How much of the requirement would be met

from fuels resources of India?• How to ensure adequate supply of indigenous

and imported fuels?• How to minimize use of imported fuels

&reduce the total fuel cost to the economy?

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S No.

Sector Preferred Fuel Alternate Fuels used

1. Domestic Kerosene/LPG (for Heat), Electricity (for Light)Fuel wood ,agri- waste

Coal/Soft cokeNatural Gas (piped)

2. Commercial Electricity (for light&space conditioning)

Kerosene

3. Agriculture Diesel/Kerosene for water pumpingDiesel/Kerosene for agriculture implementation

Bio fuelsAnimal power-

4. Industry Coal/Oil products (for heat)Electricity (for light & for moving machines)

-

5. Transport Diesel/Petrol/Electricity -

6. others All Fuels -

Sector-wise Fuel choice

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 mmt= million metric tonnes  

 

 

Year Coal mmt

Oil Productionmmt

Natural GasBCM

Total Electricity(Generation) BKWH

1980-81 109 32.26 2.4 119.00

2003-04 380 107.75 32.0 633

Annual Rate of Growth %(1981-2004)

5.4 5.4 11.9 7.5

         

   

India’s Energy consumption

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Per Capita Energy Consumption

Source : BP Statistical Review of World Energy 2004

In spite of this growth, the per capita energy consumption of India is far lower than that of the developed nations and some developing nations. Even to reach world average it has to increase five fold. With a population of over a billion, fast moving towards 1.5 billion, this would be a daunting task with some consequences for the world energy market.

TPES (MtOE)

7.96

4.05

0.96

0.3

1.65

0 1 2 3 4 5 6 7 8 9

World Avg

USA

Japan

China

India

MtOE

Electricity Consumption per Capita (kWh)

14378

8935

1247

526

2571

0 2000 4000 6000 8000 10000 12000 14000 16000

World Avg

USA

Japan

China

India

kWh

India’s approach towards Energy Security through self-reliance could help India & also other countries

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India – Energy Needs

Based on Elasticities set out, demand for Total Primary Energy Supply (TPES) and Electricity

supply have been projected assuming, a GDP Growth of 8% and official population estimates.

YearPopulation

Mn TPES MTOEElectricity

Bwh2004-05 1098 341 5872009-10 1180 501 8622014-15 1268 690 12012019-20 1362 1014 17642024-25 1463 1331 23042029-30 1573 1956 3385

These projections are in line with the other estimates when they are corrected for a higher GDP

Growth rate.

India - Energy Needs

0

500

1000

1500

2000

2500

3000

3500

4000

2004-05 2009-10 2014-15 2019-20 2024-25 2029-30

Population Mn

TPES MTOE

Electricity Bw h

Period TPES Electricity Generated (Utilities+non utilities)

1980-2003 5.10% 6.90%

2004-2019 7.54% 7.61%

2020-2030 6.79% 6.74%

The increased demand for total primary energy and electricity to sustain an 8% growth is only about 2 % above the rates achieved in the past.

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India – Specific Fuel Needs for Non Power uses

Coal Oil & Gas are used directly in several sectors. They are also used for power

generation.Power is also generated from primary sources like nuclear, hydro and

renewable. Direct use of fuels is estimated first.

Fuel Needs for Non Power use

Year Coal MMT Oil MMTNatural

Gas BCM2004-05 109 127 212009-10 130 152 252014-15 156 181 302019-20 186 216 362024-25 222 259 432029-30 265 309 51

Based on these growth rates, and adjusting for a higher 8% GDP

growth, the specific fuel needs are projected.

Fuel needs for Non Power Use

0

50

100

150

200

250

300

350

2004-05 2009-10 2014-15 2019-20 2024-25 2029-30

Coal MMT

Oil MMT

NaturalGas BCM

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Sources of Power generation

The preferred source of for power generation should be renewable non-fuel sources namely hydel, renewable and

nuclear. As these resources are limited, thermal power from coal, oil and gas are resorted to.

The production from non-fuel sources, however, is constrained by a few factors:•Nuclear – Policy constraints, uranium availability, date of commercialising fast breeder or

thorium based cycles.•Hydel – Adequate investigations, obtaining environmental clearance, making R&R

arrangements•Renewable – snags in technology, high costs

Keeping in view this, the following targets the following targets have been set by by official agencies. •Nuclear cumulative capacity 25,000 MW by 2030.•Hydel – 20% of total power generation by 2030.•Renewable – 5% of total electricity generated by 2030.

Non- Fuel based Power Generation

Total

Electricity

Supply Reqd (a)

Hydro –(20%)

(b)

Nuclear -

(c)

Fuel Based

=(a)-(b)-(c)-

(d)

2004-05 587 117 15 29 425

2009-10 862 172 25 43 622

2014-15 1201 240 41 60 860

2019-20 1764 353 66 88 1257

2024-25 2304 461 108 115 1620

2029-30 3385 677 175 169 2364

Year

All in Billion kWh.

Renewable(5%)

(d)

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India Fuel Needs for power

Coal is the preferred fuel for power generation. Even at Rs. 1000/ ton, the fuel cost will work out to

Rs. 0.70 per unit. If delivered price of Natural gas is $4/MMBTU, the fuel cost would be Rs. 1.40

per unit. Even at distances above 1500 kilometers, Coal is likely to be a the preferred fuel .

Predictability of future prices is higher in Coal than in gas. Long term fixed price contracts

indexed to labour costs are possible in case of Coal.

Scenario – I Gas based generation would be as at

present, 13% of total thermal generation and rest 87%

will be from coal.

Year Total Thermal Electricity (BkWh)

Coal based

BkWh

Gas based

BkWh

Coal Req.

MMT

Gas Req.

BCM.

04-05 425 370 55 259 11

09-10 622 541 81 379 16

14-15 860 748 112 524 22

19-20 1257 1093 163 765 33

24-25 1620 1410 211 987 42

29-30 2364 2057 307 1440 61

Scenario-II Coal production will be constrained to a

growth rate of 5% considered as easily achievable and

the rest of power requirement would be using gas.

To arrive at total fuel needs of India, two alternative scenarios are developed.

Year Total Thermal Electricity (BkWh)

Coal based

BkWh

Gas based

BkWh

Coal Req.

MMT

Gas Req.

BCM.

04-05 425 370 55 259 11

09-10 622 472 150 331 30

14-15 860 614 246 430 49

19-20 1257 805 452 564 90

24-25 1620 1051 569 736 114

29-30 2364 1357 997 957 199

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Energy Demand Scenarios

The total energy requirements both primary and secondary are summarized under the two scenarios.

Year 

Coal

MMT

Oil

MMT

Natural GasBCM

Total ElectricityB kWh

% which Non fuel based

Nuclear

Hydel

Renewable

2004-05 368 127 32 587 15 117 29

2009-10 509 152 41 862 25 172 43

2014-15 679 181 52 1201 41 240 60

2019-20 195 216 68 1764 66 353 88

2024-25 1204 259 85 2304 108 461 115

2029-30 1705 309 112 3385 175 677 169

Year 

CoalMMT

Oil MMT

Natural GasBCM

Total B kWh

% which Non fuel based

Nuclear

Hydel

Renewable

2004-05 368 127 32 587 15 117 29

2009-10 461 152 55 862 25 172 43

2014-15 586 181 79 1201 41 240 60

2019-20 750 216 126 1764 66 353 88

2024-25 958 259 157 2304 108 461 115

2029-30 1222 309 250 3385 175 677 169

Scenario-I

Scenario-II

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• Wind Potential 45000 MW• Potential exploited 1267 MW

•Tamilnadu 787 MW•Gujarat 166 MW•Andhra Pradesh 89 MW•Karnataka 37 MW•Kerala 2 MW •Madhya Pradesh 22 MW •Maharashtra 155 MW

•Hydro Potential 15000 MW• Himachal Pradesh 1624 MW• Uttar Pradesh 1472 MW• Arunachal Pradesh 1059 MW• Karnataka 652 MW• Maharashtra 599 MW• Kerala 466 MW• Madhya Pradesh 410 MW• Bihar & Zarkhand 367 MW

•Potential exploited 1341 MW

• Oil Reserves 732 Mn Tons• Gas Reserves 763 Bn Cu Mtr• Reliance Gas find 198 BCM• Cairn Gas Find 28 BCM• Present gas prod 30 BCM pa

Oil & Gas

• Coal Reserves 246 Bn Tons• Jharkhand 71.14 Bn Tons• Orissa 59.10 Bn Tons• Chattisgarh 38.13 Bn Tons• Total Coal Mines 561• Present production of Coal & Lignite in excess of 389 MT pa

Coal

•Biomass Potential 3500 MW• Maharashtra 1000 MW• Uttar Pradesh 1000 MW• Karnataka 300 MW• Andhra Pradesh 200 MW• Gujarat 200 MW• Punjab 150 MW

•Potential exploited 272 MW

Biomass

Small Hydro

Wind

• Municipal Potential 1000 MW• Industrial waste potential 700 MW• Projects implemented 9.5 MW• Projects under const. 5.2 MW• Projects under dev 21 MW

Waste

India has all forms of energy resources and they are available in all parts

Sources of Energy

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Coal Reserves & Production

248 Billion Tonnes of Coal Reserves out of which 93 Billion Tonnes are proven. Of these, the coking coal needed for steel production is only a small part.Present Production Levels – 382MT (2004-05). Reserves can sustain over 100 years of use at this level.Productivity of Coal mines in India is very low, ranging from 152 tones to 2621 tones per miner per year, compared to 12,000 tons in Australia and US. Huge potential exists to increase the production and productivity.Industry essentially comprises two large Government owned companies CIL & SCCL.The production plans as now projected by the Industry, leave a large gap between demand and supply.

Coal Reserves:

Source: Coal Vision 2025.

Bn tonnes = Billion tonnes.

Category Total Coal Reserves (Bn

Tonnes)

Coking Coal reserves out

of Total Reserves

(Bn Tonnes)

Proved 93 17

Indicated 117 14

Inferred 38 2

Total 248 33

2004-05 2009-10 2014-15 2019-20 2024-25 2029-30 Avg growth

(%)

Demand as foresee*

368 509 679 951 1209 1705 6.2

Public sector production*

361 509 679 942 1086 1200 5.0

MTCoal : demand supply gap

* CIL / SCCL production plans are under frequent revisions.

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Coal Sector – Strategies for Future

Liberalizing captive coal mining provisions.Use of modern technology to augment productivity and qualityAdoption of clean coal technologies, such as IGCC etc Allowing Private sector into coal mining and tradingReplacing Coal Linkages with Fuel Supply AgreementsAcquisition of Coal equities abroadCreate competition among public sector coal companies at the State and Central level.Rationalization of railway freightsInfrastructure status to coal industryClosing down uneconomic mines after duly compensating the affected stakeholders.

The Hope:

The coal industry consisting of only two companies has been able to achieve over 5% per annum growth. If more players are allowed into coal mining with adequate safeguard to workers and to coal conservation issues it is possible to step it up to 7%. China achieves an increase of over 100 million tonnes a year and is producing over 2000 million tonnes against India’s 400 million tonnes. Per capita coal consumption in India is slightly to be less than that of USA even in 2030.

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Natural Gas

Natural Gas production stands at close at 32 BCM per annum and the reserves at 922 BCM

Growth in Production of Natural Gas (BCM)

1.4 2.4

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29.5 29.7 31.4 32

0

10

20

30

40

1971 1981 1991 2001 2002 2003 2004

Figure 3.5: Reserves of Natural Gas (BCM)

62.29

410.65

729.79 762.95 750.71853.48

922.8

0100200

300400500600700

800900

1000

1971 1981 1991 2001 2002 2003 2004

• After a major jump in the production of

natural gas in late 90s, the production

has stagnated• With the success of 4 rounds of NELP,

the gas production is set to rise again.• The new gas finds especially in deep

off shore wells have added reserves.

• The new exploration licensing policy for gas is attracting private industry from India and abroad in large numbers. The mood in the industry is up beat.

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Natural Gas – Demand Supply

Year Demand Supply

2004-05 36 34

2009-10 41 57

2014-15 52 85

2019-20 68 105

2024-25 85 ?

2029-30 113 ?

If coal supply is adequate the demand and supply of gas will be as in the table.

The supply of gas from domestic sources and as LNG imports and pipeline import of gas is under advanced stage of discussion. New finds of gas deposits and promise of more have raised hopes of increasing the use of gas for power generation in replacement of coal. India’s unique location of being close to some of the world’s largest gas deposits in Qatar, Oman, Iran and Central Asia has raised hopes to get piped gas from these sources. LNG is the next best option.

The price of gas defines the sectors and levels of use. At $4 per MMBTU and above gas can be used only in fertilizer, petrochemical and as auto fuel and domestic fuel. If the price of imported gas is less than $3 per MMBTU, gas can substitute coal for power generation and its demand can become very large.

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Natural Gas

India has stepped up its quest for gas by resorting to NELP. The efforts to source gas from outside the country are also underway.

Blocks identified for exploration

Source : Directorate General of Hydrocarbons, Govt. of India

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Natural Gas – Supply Options

  2004-05 2009-10 2014-15 2019-20 2024-25

I. Domestic Supply 30 43* 43@ 45@ 45@

II. Coal Bed Methane 0 1 2 2 2

Sub Total (I + II) 30 44 45 47 47

III. Imports          

A. LNG          

1. Dahej Terminal 3 10 10 10 10

2. Hazira Terminal 0 3 3 3 3

3. Dabhol Terminal 0 - 7 7 7

4. Kochi Terminal 0 - 7 7 7

Sub Total (A) 3 13 27 27 27

B. Transnational Pipelines

         

1. Iran-Pakistan-India Pipeline

0 0 - 22 22

2. Myanmar-Bangladesh-India Pipeline

0 - 11 11 11

Grand Total 33 57 83 105 105

* includes 40 MMSCMD from Reliance K-G Basin. @ It is assumed that the additional gas finds will replace only the depleting production from the existing fields.

The important initiatives to augment gas supplies to India already finalize and under vigorous pursuit are as follows.

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Petroleum

India is the sixth largest oil consumer in the world with a share of 3.1% of the world consumption. The dependence on import for oil has reached a level of 72%.

The crude refining capacity of India today is at 132 MT. India has achieved self sufficiency in refining, at the present demand level.

0.26 0.456.82 10.51

33.02

8.2919.14

32.26

57.75 33.37

32.43

3.46

106.97

116.01

0

20

40

60

80

100

120

140

1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006

Years (1951-2004)(Production and Consumption Figures Pertain to the Year Ending of the Concerned Financial

Year)

Millio

n T

on

nes

Domestic Crude Oil Production Domestic Crude Oil Consumption.

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Alternative Fuels

In the long long run we have to depend on renewables. India is among the few countries were all possible sources and technologies are under investigation and development. In respect of wind power, small hydro, bio-mass and coal-bed methane commercialization has been achieved. Gas-hydrate is a distant prospect, but the resources are huge. :

Sources: MNES, NPCIL, BITS-Pilani, Dept. of Ocean Development, Infraline, Indo-US Co-operation Report

Source Potential Achieved so far Technically proven Commercially viable

WindGross Potential: 45,000 MWTechnical Potential: 13,000 MW 1,870 MW Y Y

Small Hydro (upto 25 MW) 15,000 MW 1,663 MW Y Y

Bio-MassBagasse based Co-gen: 3,500 MWBio-Mass: 19,500 MWBio-Mass Gasification: 16,000 MW

537 MW308 MW35 MW

Y Y

Solar Thermal 35 MW / Sq Km - - -

Solar Photovoltaic22 MW / Sq Km

2.24 MW / Sq Km

Coal Bed Methane400 Billion Cubic Meters Private investors

have taken up auctioned areas.

Y Y

Underground Coal Gasification 200 MSCMPDCommercial production to start 2007-08

Y Y

Gas Hydrate Not yet known, but huge potential - -

Ocean Energy Research is going on - - -

Fuel Cell Research is going on - - -

Hydrogen Research is going on - - -

Geo-Thermal Energy Research is going on - - -

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CONCLUSIONS

1. For the next 25 years if coal is used for power generation and gas is not considered for this purpose unless the price of domestic or imported gas is competitive with coal price, India’s import dependence will be limited to oil imports.

2. Oil imports requirements can be reduced by energy efficiency improvements, optimisation of transport modes and substitution by bio-fuels.

3. The importance of oil will remain irrespective of the price and the importance of gas will depend on it availability and price in competition with coal for power generation.

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Pricing of Coal & Natural Gas

• Energy security the availability,accessibility &affordability depends on price fixed for coal&gas

• Coal is priced on a cost of production plus a reasonable rate of return on investment basis.

• In site of low productivity the industry as a whole functions on a profitable lines at this price.* Natural gas