OVERVIEW OF INDIA’S ENERGY SECURITY

Apurva ChandraJoint Secretary,

Ministry of Petroleum & Natural GasGovernment of India

June 2009

Global Economic SlowdownIndustrial recession together with financial and

housing sector crisis in the US led to global economic downturn.

Severest since the Great Depression of 1930s.

The World GDP annual growth rate fell from 5% in 2007 to 3.1 in 2008 – projected to be negative (-0.9%) in 2009.

Unprecedented oil price rise since 2004 aggravated the global economic condition.

Revival anticipated in 2010.

High High Oil Prices initially lowered oil consumption in Oil Prices initially lowered oil consumption in the developed countries. Economic slowdown the developed countries. Economic slowdown extended demand destruction across the world extended demand destruction across the world

The World oil consumption fell to 84.46 million barrels per day in 2008 – a decline of -0.6% over 2007.

The corresponding decline in US was -6.4% and in OECD -3.2%.

Price control by the Governments in developing countries helped reduce the adverse impact of high oil prices but created an enormous future financial burden.

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India’s growth story shows resilience India’s growth story shows resilience against global economic slump.against global economic slump.

India’s GDP growth during 2008-09 was 6.7% against around 9.0% in the preceding three years.

India’s GDP projected to grow at 6.5% to 7.0% during the current year (2009-10).

India seems to bounce back to recovery quickly – the industrial output growth during April 2009 is 1.4%. Consumer goods production increases by 16.9%.

International Energy Agency (IEA) projects India to register highest annual average real GDP growth of 6.4% during 2006-2030.

India’s energy consumption is also projected to grow at 3.5% p.a. in the next two decades.

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Country TPES (Mtoe)

TPES /Population (toe/capita)

TPES/GDP(PPP)

(toe/000 2000$)

USA 2321 7.74 0.21

UK 231 3.82 0.13

China 1879 1.43 0.22

Japan 528 4.13 0.15

India 566 0.51 0.15

World 11740 1.80 0.20

Energy Consumption Per Capita : India and the worldEnergy Consumption Per Capita : India and the world

IEA : Key World Statistics, 2008

• India’s per capita energy consumption among the lowest in the world

7% of USA 28% of the World

• India accounts for 17% world population, but only about 5% of world’s primary energy consumption,

But projected to rise faster than developed countries

• International Energy Agency (IEA), Paris forecasts India’s energy consumption growth at 3.5% by 2030, against world growth of 1.6%

TPES : Total primary energy supply GDP in 2000 US$Mtoe : Million ton oil equivalentPPP: Purchasing Power Parity

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Commercial Energy MixCommercial Energy Mix

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Oil32%

Natural Gas9%

7%

1%

Coal51%

2%

6%

Coal51%

Oil29%

Natural Gas12%

2007

2031

Oil36%

NaturalGas24%

Coal29%

5%6%

Oil35%

Natural Gas25%

Coal32%

5%3%

• Oil & Gas together accounted 41% of commercial energy in 2007• By 2031 Gas & Nuclear power will have an increasing share

• Oil will continue to be the single largest energy source (35%) in 2030• Coal share increases indicating adoption of CTL, CBM etc.

India World

Source: 2007 :BP Statistics 2008 2031: IEP Report, Govt. of India 2006 Source : 2007: BP Statistics 2008 2030 : IEA, WEO 2007

2007

2030

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Petro Product : Increasing DemandPetro Product : Increasing Demand

55

90108 112 113

120133

270

0

50

100

150

200

250

300

90-9

1

00-0

1

03-0

4

04-0

5

05-0

6

06-0

7

08-0

9

30-3

1

Demand In MMT• Transportation Fuels’ (Diesel, Petrol & ATF) share 51 % of demand- Diesel is nearly 40%.

• High economic growth key factor for higher demand.

• Price restraints imposed since 2004-05 boosted demand.

• Petro products consumption grew at a rate of nearly 7 % in 2006-07 and 2007-08 and fail to 3.5 % in 2008-09(Impact of industrial slow down)

• Demand growth projected at around 3% in the next 25 years – second highest growth in the world after China.

Source: PPAC,MOPNG & EIA (for 2030-31)

0

20

40

60

80

100

120

140

160

180

1990-91 01-02 04-05 08-09 11-12 2031-32

Natural Gas LNG

BCM• Stagnating domestic gas poised to pick up from 2008-09

• Share of Private/JV increases: RIL production in end-2008

• LNG availability since 2004- 05 augmenting domestic supply

Kochi & Dabhol Terminals to boost LNG supply by 2011-12

• Robust gas demand at above 6% per annum in the next 25 years – second highest growth in the world after China.

Source: XI Plan Sub-Group Report & Integrated Energy Policy Report, 2006 (for 2031-32)

1124 30

38

102

177

Both

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India’s Oil production stagnating since 2000sIndia’s Oil production stagnating since 2000sbut Gas potential risingbut Gas potential rising

Source: MOPNG

• No large oil finds since the Mumbai High in 1978. Oil Production stagnating around 33 MMT.

• Gas production at 32.8 BCM in 2008-09 but projected to rise substantially from 2009-10 onwards.

• Private / JV share increasing : 20% in 2020.

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Crude Oil: Production & ImportCrude Oil: Production & Import• Domestic Crude

production stagnant at around 33 MMTPA since the last ten years, while demand has risen faster.

• During 2007- 08 refineries imported around 122 MMT of oil.

• Dependence on oil import at present 78% - Projected to rise to 90% by 2030

8.430.2 35.2 32.2 34

34 33.313.6

15.1

27.2

99.4

111.5

121.7

128.2

0

20

40

60

80

100

120

140

160

180

1975-76 85-86 95-96 05-06 06-07 07-08 08-09

MM

T

Production imports

Source: Petroleum & Natural Gas Statistics, MOPNG & PPAC

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Natural Gas: Production & ImportNatural Gas: Production & Import• 32.8 BCM ( 29.5

MMtoe) gas production in ’08-09

Public Sector share is around 75 %

• Production likely to double by 2011-12, of which Private Companies’ share will be 60%

• LNG imports during 2008-09 = 28 MMSCMD (24% of domestic gas consumption)

2328

32 32 32 32 33

0

0

37 9 10

11

0

5

10

15

20

25

30

35

40

45

50

96-97 -00 -05 -06 -07 07-08 08-09

BCM

Imports Production

Source: Petroleum & Natural Gas Statistics, MOPNG & PPAC11

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New Exploration Licensing Policy-NELPNew Exploration Licensing Policy-NELP Notified in 1999 Award of licenses through international competitive bidding Fast track approval mechanism of bids through single

window Empowered Committee of Secretaries (ECS) Up to 100% foreign participation No Investment by Government of India Freedom to contractor to market oil and gas in the domestic

market at market determined prices 100% cost recovery of Exploration & Development

expenditure Fiscal stability over the contract period Government gets Profit Petroleum in addition to Royalty

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NELP- Augmenting Domestic ProductionNELP- Augmenting Domestic Production203 production sharing contracts signed since 2000

Area under exploration increased more than four times from 0.35 million sq. km in 2000.

68 hydrocarbon discoveries under NELP Regime.

Major gas discoveries by domestic and foreign companies – Gas self sufficiency likely in the medium term.

The Eighth Round of NELP expected in 2009- 70 exploration blocks to be offered for bidding

During the 11th Plan, 80% of Indian sedimentary basins to be covered under exploration – 100 % targeted by 2015.

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BOMBAY(12,5.5)

MATHURA(8.0)

GUWAHATI (1.0)

BARAUNI(6.0)

HALDIA (6.0)

COCHIN(7.5)

BARODA(13.7)

DIGBOI(0.65)

NARIMANAM(1.0)

MANGLORE(9.69)

PANIPAT(12.0)

VISAKH(7.5)

NUMALIGARH(3.0)

BONGAIGAON(2.35)

CHENNAI(9.5)

JAMNAGAR(33.0,29.0)

TATIPAKA(0.08)

Existing

Refineries in the Country(Capacity in MMT)

VADINAR(10.5)

BINA(6.0)

BHATINDA(9.0)

CUDDALORE (6.0)

PARADIP (15.0)

New

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Refining Self Sufficiency achieved since 2001-02

• Refining Self -Sufficiency is an important part of country’s energy security

• Private Sector share is 41% (February 2009)

• At present , Surplus Refining Capacity is 23 %

• Exports account for nearly 30 % of total refinery production in 2008-09

• India’s refining industry is well-placed to become Asia’s Refining Hub.

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Distribution Infrastructure

Distribution Infrastructure: 2002 to 2008 Distribution Infrastructure: 2002 to 2008

  Unit 1.4.2002 1.4.2008 % Growth

Retail Outlets Number 18848 36921 95.9

SKO Dealers Number 6451 6624 2.7

LPG Distributors Number 7486 9365 25.1

LPG Bottling Plants Number 128 181 41.4

LPG Bottling Capacity TMT 6263 8697 38.9

LPG Tankage TMT 532 670 25.9

Pipeline length Kms 5530 16805 203.919

Concept of National Gas Grid (NGGConcept of National Gas Grid (NGG)• The 2006 Pipeline Policy envisages NGG

• About 6500 km NG transmission pipeline already laid

• RIL’s 1375 km East- West Pipeline (Kakinada-Bharuch) nearing completion

•Study being undertaken by the Government with technical assistance from United States Trade Development Agency (USTDA)

•Total Investment Projected at USD 7.5 Billion (2006 Prices) 20

Source: XI Plan Sub-Group Report, 2006

Transnational Pipelines to IndiaTransnational Pipelines to India

Pipeline Pipeline

Length

(Kms)

Estimated Volume

(MMSCMD)

Imports from Iran

Iran – Pakistan – India pipeline

2000 60-90

Imports from Turkmenistan

Turkmenistan-Afghanistan-Pakistan-India pipeline

1700 40-70

•72% of world gas supply is through pipelines

•Both supply and upcoming demand is around Asia

•Pipeline is vital to develop a stable Asian gas market

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Mangalore (1.5 MMT) Vizag

(1 MMT)

Padur (2.5 MMT)

15 MMT in phases

5 MMT under construction

Strategic Storage to provide for Emergency Response Mechanism against supply disruptions 22

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Domestic Prices linked to International Price TrendDomestic Prices linked to International Price Trend

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Year $/bbl

2002-03 26.7

2003-04 28.0

2004-05 39.0

2005-06 55.7

2006-07 62.5

2007-08 79.3

2008-09 83.6

2009-10 (Up to May ’09) 58.020

40

60

80

100

120

140

$/bb

l.

Crude Oil

• India’s Oil Import dependency is projected to rise from 80 % today to 90 % by the year 2030.

• Oil price changes in International markets, therefore, affects domestic prices in India.

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Petrol / Diesel PricingPetrol / Diesel PricingAdministered Pricing Mechanism abolished from April

’2002.22 Price revisions were carried out during 2002-2004 in

line with import parity price.

The super spike in oil prices since 2004 necessitated price control to minimise adverse impact on the economy and the people.

In order to ensure life line energy, i.e. Kerosene & LPG, to the weaker sections of the society & to contain inflation, Government moderated the consumer prices of Petrol, Diesel, LPG and SKO.

Lower domestic prices resulted in huge under-realization of revenue by the Oil Marketing Companies(OMCs).

OMCs received price discount from Public Sector upstream companies and Oil bonds from the Government.

Diversifying EnergyDiversifying Energy Sources : Sources : Towards a sustainable Energy FutureTowards a sustainable Energy Future

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Acquisition of Equity Oil AbroadAcquisition of Equity Oil Abroad

Indian companies present in 22 countries and 43 projects

ONGC Videsh Limited (OVL) leads a group of Public Sector and Private sector companies in overseas E&P acquisitions

OVL’s oil and gas production in 2007-08 reached 8.8 MMtoe -14% of domestic production of oil & gas

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Exploitation of Coal Bed Methane (CBM)Exploitation of Coal Bed Methane (CBM)

Comprehensive CBM policy in July1997.

26 CBM blocks already awarded under the first three rounds of international offer.

6 TCF reserves of CBM Gas established in four blocks.

First CBM commercial production in July 2007 in Raniganj (WB) by Great Eastern Energy Corporation Limited.

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Underground Coal Gasification (UCG)Underground Coal Gasification (UCG)

The estimated UCG potential in India is equivalent to 19 Trillion cubic metres of Natural Gas.

ONGC in collaboration with Skochinsky Institute of Mining, Russia carries out seismic survey.

Vastan in Gujarat & Hodu Sindri in Rajasthan are the first two blocks suitable for UCG stations.

Pilot production to commence in 2009-10

Coal-to-Liquids (CTL) in pilot stage

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Gas HydratesGas Hydrates• In 2007, road map for National Gas Hydrate

programme prepared.

• About 2000 TCF reserves estimated

• The drill ship “JOIDES Resolution” has collected good quality gas hydrate samples from deep water basin.

• Presence of 128 m thick gas hydrate layer detected.

• India is one of the three countries in the world to have physically collected gas hydrate samples.

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• Ethanol-blended petrol (EBP) constrained by restrictive taxes imposed by states. About 5% ethanol blending on all-India basis has been possible, except a few states.

• Stability in supply and compatibility with automotive engines key to sustained development of EBP to reach the long term target of 10%.

• Bio-diesel yet to take off.• National Bio-Fuel Policy of the Government for

long term development

BiofuelsBiofuels

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Nuclear EnergyNuclear Energy

Electricity is the backbone of India’s energy structure

Nuclear fuel is projected to contribute 11% of electricity generation by 2031-32

The Nuclear Supplier Groups (NSG) exemption to India recently is a watershed in the development of nuclear power in the country

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Renewable EnergyRenewable EnergyReliable, affordable, socially acceptable and

environmentally sustainable energy for the millions of households, who live outside country’s Energy Highway

Wind, Solar and Bio-energy constitute the core

In wind power, India ranks fourth in the worldPower generation potential = 45,000 MWCurrently generated = Around 8,000 MW

(17%)Solar energy for lighting and cooking

12 lakh solar lanterns and cookers supplied• Remote Village Electrification programme

completed in 4200 villages / hamlets

• 39 lakh biogas plants in States/UTs33

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Energy Efficiency and Demand Side Energy Efficiency and Demand Side ManagementManagement

Limited conventional energy reserves and constraints of harnessing non-conventional energy resources call for greater emphasis on energy efficiency and conservation.

Energy efficiency measures will provide the most important virtual energy supply sources in the next 25 years.

Substantial energy saving potential – 19% of total energy demand.

Bureau of Energy Efficiency(BEE) promotes and regulates energy efficiency measures in the country.

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Controlling Air Pollution by Automobiles in the Controlling Air Pollution by Automobiles in the CountryCountry

India has adopted Euro standards of Fuel Quality for Petrol and Diesel.

The existing standards are: Euro III grades fuel for 13 most polluting cities and Euro II equivalent grade for rest of the country.

Euro-IV grade fuel in the most polluting cities from April 2010 and Euro-III in the rest.

Compressed Natural Gas (CNG) is being sold as fuel for automobiles – all public transport buses in Delhi converted to CNG.

Auto LPG is also being sold as alternative motor fuel.

Summing up

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To sum up, management of oil and gas sector in India will be focussed on the following: Enhancing customer satisfaction through efficient and transparent marketing and distribution methods as well as through dissemination of information for making informed choicesExpediting E&P efforts to augment domestic production and reduce dependence on unstable sources abroadImproving domestic pipeline infrastructure and promoting trans-national pipeline projects to strengthen the distribution network

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Promoting Bio-fuels and Non-conventional energy to supplement the conventional sources as well as improve environment.

Accelerating R&D to enhance recovery from the conventional sources as well as harness the potential of new energy sources

Managing geo-politics through diplomacy and regional cooperation for reducing supply risks

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