SWOT Analysis On Power Generation Industries

Indian Energy Scenario
Karan sahani
Agenda
 Overview
 Exploration
 Refinery and Pipelines
 Natural Gas
 New and Renewable Energy
 Power
 Regulatory Framework
 References
© Det Norske Veritas AS. All rights reserved 3 April 2009 Slide 2
Overview
World Overview India Overview

 35% of world energy need is supplied by  India is the 5th largest energy consumer
crude oil, 25% by coal and 21% by gas.  India has vast potential in the Exploration
 Most of the reserve is concentrated in the Sector.
Middle-east region.  54% Coal, 32% Oil, 9% Natural Gas
 World Primary Energy Sector growing at  Indian Primary Energy Sector growing at
2%
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
ENHANCED LEVEL OF
E&P ACTIVITIES
ST
CO
BLE
RDA
FO
T AF
G YA
BOOMING N ER
ENERGY
L YE
U PP DEMAND
SCARCITY OF T OS
NGE REGULATORY
RESOURCES LLE
C HA FRAMEWORK
AND INCREASING
& TAXATION POLICY
COST
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
 Predicted refining capacity with export 236

250 221
potential of 100 MMTPA up to 2012 205
189
200
 Current installed capacity of 149 149
128 132 137
MMTPA, 5th largest refining capacity in 150 122 125
the world 100
 Significant investments projected in
50
new capacity additions
0
- Govt. stress on quality improvement-
by mid 2009, all refineries to meet Euro 2007-08 2008-09 2009-10 2010-11 2011-12
III/ IV norms for petrol/ diesel
Availability demand
- 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
Market Determined
Administered Pricing Controlled Pricing
Pricing
REFINING - Future
The Future Way Forward

 West coast refineries would continue to  The opportunity to emerge as a refining
cater to the western markets hub seems to be real and attractive
 High refining margins will allow  Cost competitiveness and timely project
competitive exports (RIL) commissioning is key
 Most Asian/SEA countries like Taiwan,  Competitiveness to be driven by product
Indonesia, Vietnam, Philippines, Sri slate and ability to process a wide range
Lanka, Pakistan and Bangladesh are of crude
expected to have a deficit of petroleum
products
 Integrated refining and petrochemical
facilities for higher value-addition
 Middle East refineries would be key
competitors
 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
Road
5.10%
 Share of pipeline transportation in
Rail, 3.20%
India much lower as compared to
Coastal
33.70% USA, inspite of its advantages
Pipelines
59%  Total POL pipeline length currently
USA under operation in India – 12,204
kms
Road
27.50%
 POL pipelines under
Rail 37.50%
implementation – 5,561 kms
(Investment of USD 1.5 bn)
Coastal
7.50%
Pipelines
25% INDIA
REFINING AND PIPELINES - Scope for DNV
$22 BILLION EXPECTED

INVESTMENT
ST
CO
BLE
RDA
FO
T AF
G YA
BOOMING N ER
ENERGY
L YE
U PP DEMAND
T OS
RISING COST OF
N GE
FEEDSTOCK & LLE REGULATORY
A
CH
UPGRADATION OF EXISTING FRAMEWORK
REFINERIES
Global Comparison
India’s Gas Reserves / Production
Reserves Production R/P

Place (TCF) (TCF/ Yr) (Years)
World 6263 98 60.3
India 37 1 35
Source (B P Statiscal Review 2008)
Indian Energy Sector – An Overview
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 2467 836 98
(MTOE) (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
Source : BP Statistical Review of World Energy June 2005

GAS SECTOR INFRASTRUCTURE:
CURRENT AND FUTURE –
A COMPOSITE PICTURE
Tu
rk-A
fg- TOTAL INVESTMENT – US$ 9 Billion
P ak
-I nd
ia
(Rs.40000 Cr – NEXT 5 YRS )
Iran Pip
-Pa eli BHATINDA
k-In ne
dia P
ipe
line
DELHI
BAREILLY
DAHEJ I & II AURAIYA LUCKNOW
AGRA DISPUR
10 mmtpa* MATHANIA KANPUR JAGDISHPUR India plans to bring 200 of its cities under the
PATNA
GWALIOR
PHOOLPUR gas pipeline network by 2020.
KOTA JHANSI VARANASIGAYA
UJJAIN VIJAIPUR AGARTALA
MY
India at present uses around 150 million cubic
RAJKOT BHOPAL BOKARO
AN
M A
meter of gas a day.
AHMEDABAD INDORE R-I
HAZIRA JAMNAGAR KOLKATA nd
ia P
2.5 mmtpa BHARUCH CUTTACK At present
A 1 BLOCK, ipe
lin
economic growth rate, consumption
BARODA e
SURAT DAMRA MYANMAR to increase 3 fold by 2012.
BHUBANESHWAR
MUMBAI PUNE LNG
DABHOL KRISHNAPATNAM Existing (7.5 MMTPA)
5 mmtpa SOLAPUR KAKINADA
KOLHAPUR
HYDERABAD RAJAMUNDRY Upcoming (16.25 MMTPA , US$ 2 Billion)
GOA VIJAYAWADA
Transmission Pipelines
NELLORE
Existing (6,300 Kms)
BANGLORE Planned (8,400 Kms, US$ 5 Billion)
HASAN CHENNAI City Gas/ CNG
MANGLORE
Existing (10 cities)
COCHIN
Planned (40 cities, US $ 2 Billion)
5 mmtpa KANJIRKKOD TIRUCHCHIRAPALLI
COIMBTORE
Gas By Sea Receipt (Likely Location)
TUTICORIN LNG Terminal
© Det Norske Veritas AS. All rights reservedINTEGRATED GRID TO LINK ANY SOURCE TO ANY MARKET
3 April 2009 Slide 21
Gas Sector Challenges
Gas Pricing Technology Creating Infrastructure

Creating an indigenous
Competitiveness • Upstream
manufacturing base
Gas Sector Reforms • Midstream (Turbines, CNG kits,
• Downstream Compressors, Gas based
Automobiles)
Dependence on Imports
Creation of up front capacities -
Geo - Political issues Coordinated development of
Integration with global pricing regimes gas value chain
Global Competition
Need for International Charter - Legal / Regulatory
framework
Management of Risks (Market / Price / Political)
Sector Policy Institutional Support

Regulation / Gas Laws Structure
• Creating Training Infrastructure -
Technical and Safety standards Skilled manpower to support
growth.
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 Renewable Energy sources in India

 Demand supply gap  Solar Energy
 Strengthen India’s energy security  Hydropower
 Concern for environment  Biomass
 Large untapped potential  Wind Energy
Non-commercial sources
Regulator :The Ministry of New and Renewable like fuelwood, agricultural
Energy (MNRE) is the nodal Ministry of the waste & animal dung
Government of India for all matters relating to new constitute ½ of the total
and renewable energy. energy consumption in
India
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 Only 20% of the
potential is currently
 Vishnugadh Pipalkoti Hydropower Project 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
Gross Potential Technical Potential Installed Capacity

Sl. No. State (MW) (MW) (MW)
(a) (b) (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 5 in terms of
th
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 BIOFUEL
 4th world ranking in power generation  Bio-fuel initiative using

- Jatropha
 Various Applications:
- Sugarcane Molasses
- Power Generation
- Biomass gasification for heating  Supreme Court of India ruling -
compulsory blending of 10% ethanol
- Cooking
 Technology
 Top 3 States in biomass potential
- Andhra Pradesh, Bihar, Gujarat  Initiatives - SBI, Indian Railways, AP
Government Agreement with Reliance
Industries
RENEWABLE ENERGY - Scope for DNV
RISING PRICES
OF CONVENTIONAL
FUELS
D
MAN
E
NGD
WI
G RO
Y AT
G
BOOMING N ER
ENERGY
L YE
U PP DEMAND
T OS
AVAILABILITY OF NGE FAVOURABLE
L LE
A
COST EFFECTIVE REGULATORY
CH
TECHNOLOGY FRAMEWORK
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%
Others, 8.60% 5%
Diesel, 1%
Hydro, 26%
Gas, 11%
Agriculture, Insustrial, 35.60%
22.90%
Commercial,
8.10%
Domestic, 24.80% Coal, 54%
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 Still 19% villages
haven’t seen what is
 Lack of grid discipline electricity
POWER SECTOR - Future
FUTURE SCOPE
 Exponential demand growth  Abundant coal reserves (enough to last
at least 200 years).
 Capacity Enhancement
 Vast hydroelectric potential (150,000
 Increased significance of the role of the
MW).
private players and foreign investments
 Large pool of highly skilled technical
 New strategies and reforms
personnel.
 Increased significance of renewable  Impressive power development in
sources of energy
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
INCREASING ROLE
OF PRIVATE
PARTICIPATION
ST
CO
BLE
A
O RD
AFF
A T
GY
N
BOOMINGEENERGY ER
TE
ADEMAND
E R
N
O GE
HUGE LOSSES IN GE T
N LIBERALISATION
L
TRANSMISSIONLE
A
CH FROM GOVERNMENT
AND PILFERAGE
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 - Regulatory
Authority
Government
of
India
Ministry of
Ministry of
Ministry of New and Atomic Energy
Petroleum and
Power Renewable Commission
Natural Gas
Energy
Petroleum &
Director General Central
Natural Central State Electricity Atomic Energy
of State Electricity Electricity
Gas Regulatory Electricity Regulatory Regulatory
Hydrocarbons Boards Regulatory
Board Authority Commission Board
(Upstream) Commission
(Downstream)
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
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

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Indian Energy Scenario

World Overview India Overview

 Oil was struck at Makum near Margherita in

 Spectacular growth in the refining sector over the years.

 Predicted refining capacity with export 236

 Strong profitability of Indian refining

The Future Way Forward

$22 BILLION EXPECTED

Reserves Production R/P

World 6263 98 60.3

Source (B P Statiscal Review 2008)

World Asia Pacific India

Energy Consumption (MTOE) 10224 3199 376

Energy Mix (%)

India - 5th Largest Energy Consumer

Source : BP Statistical Review of World Energy June 2005

Gas Pricing Technology Creating Infrastructure

Sector Policy Institutional Support

The Gas sector will be very active with lots of uncertainties to be

Increased growth of East coast E & P - likely that Rajamundry will

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.

Key drivers for renewable energy Renewable Energy sources in India

 High annual rainfall is a good indicator

Gross Potential Technical Potential Installed Capacity

Total 45195 MW 13390 MW 7114 MW

global market share

 4th world ranking in power generation  Bio-fuel initiative using

Consumption Pattern - Electricity Power Generation – Sector wise Breakup

 Oilfields (Regulations and development) Act 1948

Deputy Director General Deputy Director General

 Key Functions and Responsibilities

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

 212 blocks have been offered under 7 rounds

 57 exploration blocks on offer under NELP 7

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