securing india’s energy needs

8/8/2019 Securing Indias energy needs

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A CASE STUDY


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Consumption of resources is said to 40% in next 5 years & will double by 2020Production of coal is lagging behind since last 10yearsImport of Petroleum( 70 %) is making fiscal budget deficit of 4.5%Shortfall in electricity causes 17 major production disruption

Steps taken by the government :y 2001- Power generation sector reform, recapitalized bankrupt state electricity

Boardsy Agreement to build pipelines to bring natural gas from Iran, Turkmenistan & other

gas rich countriesy Investments in oil fields from Russia to Sudany 2002 2007 - Additional electricity generation capacity than it did in previous 10

yearsy Over last 5 years - losses due to theft and bad infrastructure have gone down by

almost 1/3 rd


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ELECTRICITY

Currently India needs 90 giggawattspower generating capacity2012 it will need 115 to 120 gigawattsEquivalent to duplicating entire UKs

generating capacity in 7 yearsPower line transmission cable will costus $170 billionRough terrain is a limitation forHydroelectricity power generation.Indias nuclear power will take years

to benefit from new assistance fromUS

C oal and Gas are abundant in I ndiaand nearby countries but problemsexist in these sectors too .

COAL

4th largest reservesCoal India has a state owned monopolywhich delivers 89% of coal to power plantsdown ( ) 96 % 2 years ago

Shortfall to exceed 100 million metric tonsby 2012 if increase in consumptionCoal mining remains off limits to privatecompanies unless steel mill or a power plantHigher coal imports may fill the gap but isnot advise able

Overburdened ports and railwaysGeneration of Electricity from importedcoal will increase the cost by 25 %This leads to competitiveness of Industriesespecially metals and manufacturing


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OIL & NATURAL GAS26 million tons of oil equivalent (MTOE) of natural gas in 2005 pushing the demand to 75(MTOE) by 2012 as dependence on clean fuel rises25 to 30 MTOE would come from recent discoveries such as Krishna Godavari basin &LNG terminals but the difference of 20 to 25 MTOE gain has to be imports.

OIL IMPORTSDeclining oil production in older fields has offset recent improvements in recovery of oilfrom new discoveries from a few major oil fieldsImports at 70 % cost will cost India $ 29 billion in March 31 will 75 to 80 % by 2020ONGC recently increased its foreign exploration investments by about $3billion (Iran,Libya, Russia, Sudan) which would account only about 1/4 th of Indias thirst

R EFINERIES & LNG TERMINALSDemand for refined petroleum product is expected to outstrip by 2008-09India has to invest as much as $10 billion to add 15 million 30 million metric tons ofannual capacityLNG terminal has limited investment by concerns of cheaper natural gas from pipeline orinexpensive electricity from coal fired generators although Petronet LNG and Royal Shellhave recently opened 2 terminals in Mumbai

The question arises what steps should be taken to secure Indias growing energy need


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C oal Sector -The most important step - deregulating and rejuvenating the coal industry bytaking full advantage of Indias vast resourcesOpen coal mining to competitionAllow formation joint ventures & other alliances, this will attract $10 billion -$15 billion investment required by 2012 to upgrade existing mines and opennew ones

An independent regulator should be installed to allocate government blocks ina transparent and fair wayDeregulation of prices should be gradual, imported coal cost $10 -$12 permillion kilocal while domestic cost $4 -$5 per million kilocal.This will help the domestic comp to get hold and see to it that electricityprices dont rise suddenlyC OAL-INDIAgovernment owned entity must launch a fundamental makeoverby investing in new technology and improve management processes, itsmining cost are 50% higher than those of leading producers such as Australia,Indonesia & South AfricaTo achieve its goals the government will have to overcome opposition from

strong political parties and business interest within the sector.


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Oil &Natural gas Sector

The Indian companies must improve their exploration technologyFor eg - ONGC remains unable to find new domestic reserves as quicklyas existing ones are depletedIndian refineries must reduce their downtime, become better able tomatch the output to market demands

LNG arriving by boat will the gap in the near future tooBuild a permanent presence in countries where they want to expandand bid on overseas opportunities to reduce risk from other establishedrivalsThe National oil companies could reform quicker if they had fewer ties

with the government as it still controls executive appointments andprice settingResource rich nations of Africa, Asia & Middle East are attractive energypartners for Indiabetter diplomatic ties and commercial ties in form of joint venturesand cross-shareholdings should be encouraged before India loses ground

to China its nearest competitor


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Domestic energy supply must be supported by a good distribution network,infrastructure like seaports that receive shipments of coal and oil to the pipelines,railroads & electric lines requiring investment of $85 billion to & $95 billionLargest sum of about $40 billion is needed to strengthen the electric transmissionnetworkThe government needs to accelerate the turnaround of ships by reducing idle timeof machinery

It plans to invest $2 billion in ports far less than required $30 billionRailways must increase its freight capacity to the coal producing eastern regionand major ports to the demand center in the northern and central partsA better priority needs to given to freight trains thereby cut cost, raise speed andincrease system reliabilitySpecial freight corridors with special tracks and to integrate them with existing

rail operations by investing $15 billion - $ 20 billionReduce freight charges for coal and oil which currently subsidizes passenger faresIndia must spend estimated $5 billion in next 10 years to expand domestic oil andgas pipeline


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Indias numerous technology institutes are working on energy relatedR&D projects but in a fragmented manner, they should beconcentrating on a few important types of technologyNuclear power will be a high priorityIn petroleum research - focus areas should be relevant to India such astechnology to recover oil in deep water, to turn natural gas into liquidfuel, to extract methane from coal deposits and to extract heavyilliquid oilHigh voltage transmission and the optimization of distributingnetworks will be important to provide low-cost, energy efficient

ways of getting electricity from power plant to consumersScientific bodies such as CSIR & AEC will play important roles incollaborating with public and private entities


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y India needs to attract more private capital since government spendingalone wont be able to finance the more than $225 billion needed forenergy projects now until 2012

y The demand is growing at an alarming pace and if energy is not secureit tends to lose one percentage point in the growth rate every year

y As the government discovered when it opened domestic oilexploration to private investors, the sooner economically attractiveblocks are given success becomes visible and production begins

y There should be combination of competition, free market prices anddynamic company leaders for optimum utilization

y Better diplomatic ties and commercial ties will be needed to makesuch energy partnerships a reality

y Energy related matters should be handled by a single administrationinstead of the current 7

India has to be aggressive & take a tough stand in securing its energyneeds to avoid crippling shortages and higher, more volatile energy

cost


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THANK YOU

securing india’s energy needs

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