2010 11 - Indian Energy Sector by ibef
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According to the Central Electricity Authority (CEA), the average per capita electricity consumption in India is about 704 kWh as compared to global world wide per capita consumption of 2,752 kWh. The ...

According to the Central Electricity Authority (CEA), the average per capita electricity consumption in India is about 704 kWh as compared to global world wide per capita consumption of 2,752 kWh. The Government of India is keen to increase per capita consumption of energy to raise living standards in the country. An average Indian consumes 0.53 tonnesof oil equivalent (TOE) of energy compared to the global average of 1.82 TOE.Higher economic growth is driving income growth, which in turn is driving up industrial investment and fuel consumption. In general, demand exceeds supply and there is a broad-based energy shortage, which is either met by imports or remains unmet.

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2010 11 - Indian Energy Sector by ibef Presentation Transcript

  • 1. INDIA: ENERGY SECTORSeptember 2010
  • 2. INDIA: ENERGY SECTOR September 2010 Contents … (1/3)  Executive Summary  Industry overview – power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 2
  • 3. INDIA: ENERGY SECTOR September 2010 Contents … (2/3)  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 3
  • 4. INDIA: ENERGY SECTOR September 2010 Contents … (3/3)  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 4
  • 5. INDIA: ENERGY SECTOR September 2010 List of tables … (1/8)  Gross Domestic Product from Electricity Supply  Energy Indicators  Fuel-wise Generation Capacity  Sector-wise Installed Utility Capacity  Capacity of Thermal Power Plants by Fuel  Hydroelectric Potential and Development  RES Potential and Achievements  Growth in Transmission Lines (Ckm)  Growth in Sub-stations (MVA)  Growth in Inter-regional Transmission Capacity 5
  • 6. INDIA: ENERGY SECTOR September 2010 List of tables … (2/8)  Rural Electrification  Electricity Consumption  Electricity Demand and Supply  Projected Requirement of Electricity  Installed Capacity Addition Plan  Projected Transmission Line Length  Energy Saving Potential  Fund Requirement for R & M Activities  Fund Requirement for Distribution and Rural Electrification  FDI in Energy Equipment and Related Industries 6
  • 7. INDIA: ENERGY SECTOR September 2010 List of tables … (3/8)  Investments as of March 2010  Major Projects Expected to be Complete in 2010  Types of Utility and Industrial Boilers  Production of Boilers  Production, Import, Export and Consumption of Boilers  Technological Partnership for Supercritical Technology  Production of Various Types of Cables and Wires  Export and Import of Cables and Wires  Production of Transformers  Imports and Exports of Transformers 7
  • 8. INDIA: ENERGY SECTOR September 2010 List of tables … (4/8)  Production,Trade and Consumption of Turbines  Snapshot of Power Generation Scenario  Production of Switchgears and Circuit Breakers  Exports and Imports of Switchgears  Domestic Production of Transmission Towers  Exports of Transmission Towers  Installed Wind Power Capacity  Export and Import of Wind Turbine Generators  Production, Imports, Exports and Consumption of Diesel Engines  Production of Capacitors 8
  • 9. INDIA: ENERGY SECTOR September 2010 List of tables … (5/8)  Production of Energy Meters  Production, Import and Export of Storage Batteries  Gross Energy Generated  GDP from Petroleum Sector  Realisation of Excise and Customs Duties  Employment in Petroleum Sector  FDI Inflows to Petroleum Sector  Proven and Indicated Crude Oil Reserves  Basin-wise Hydrocarbon Area  NELP and CBM Achievements 9
  • 10. INDIA: ENERGY SECTOR September 2010 List of tables … (6/8)  The Krishna-Godavari Basin  Recent Discoveries  Planned Petroleum and Natural Gas Demand-Supply  Gas Production – Eleventh Five-Year Plan Projection  Projected Natural Gas Demand – Eleventh Plan Period  LNG Supply – Eleventh Five-Year Plan Projection  Crude Oil Production – Eleventh Five-Year Plan Projections  Crude Oil Imports  Net Exports of Petroleum Products  Import and Export of Crude Oil and Petroleum Products 10
  • 11. INDIA: ENERGY SECTOR September 2010 List of tables … (7/8)  Product Import Price vs Gross Export Realisation  Consumption of Petroleum Products  Natural Gas Demand Sectors  Share of Fuel Imports in Total Merchandise Imports  India‟s Share in World Oil and Gas Market  Percentage Demand Met from Domestic Sources  Refinery Capacity  Domestic Production of Petroleum Products  Gross Refining Margins for Domestic Refineries  NCI of Domestic Refineries 11
  • 12. INDIA: ENERGY SECTOR September 2010 List of tables … (8/8)  Crude Oil Production  Natural Gas Production  LNG Imports  Major Equipment Players  Major Energy Sector Players 12
  • 13. INDIA: ENERGY SECTOR September 2010 List of figures  Structure of Indian Power Sector and Ownership  Hydroelectric Electricity Generation Capacity  Nuclear Power Capacity  Category wise growth in Consumption  Fuel-wise capacity addition in Eleventh Plan Period  Price Revisions in Delhi 13
  • 14. INDIA: ENERGY SECTOR September 2010 Contents  Executive Summary  Industry overview – power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 14
  • 15. EXECUTIVE SUMMARYIndia: Energy Sector September 2010 Executive Summary … (1/2) The average growth rate of India‟s gross domestic product (GDP) during the period 2006-09, was about 8.6 per cent. The corresponding average growth rates of net national income and personal disposable income were 14.5 per cent and 14.7 per cent, respectively. The average growth in the index of industrial production (IIP) during this period was 7.2 per cent. IIP growth was 10.2 per cent in 2009-10. A high- growth economy has resulted in increasing demand for energy. In terms of purchasing power parity (PPP), Indian economy is the fourth-largest in the world. The country accounts for over 17 per cent of the total global population and about 7 per cent of world‟s GDP. However, according to the International Energy Agency (IEA), India‟s energy production accounts for just 4 per cent of the global energy production.The country accounts for 5 per cent of the total global energy consumption. According to the Central Electricity Authority (CEA), the average per capita electricity consumption in India is about 704 kWh as compared to global world wide per capita consumption of 2,752 kWh. The Government of India is keen to increase per capita consumption of energy to raise living standards in the country. An average Indian consumes 0.53 tonnes of oil equivalent (TOE) of energy compared to the global average of 1.82 TOE. Higher economic growth is driving income growth, which in turn is driving up industrial investment and fuel consumption. In general, demand exceeds supply and there is a broad-based energy shortage, which is either met by imports or remains unmet. 15
  • 16. EXECUTIVE SUMMARYIndia: Energy Sector September 2010 Executive Summary … (2/2) Energy reforms and policy changes in recent years have not only opened up avenues for investments in the sector, but have also resulted in private participation across its various segments. To attract foreign investment in infrastructure, including energy, foreign direct investment (FDI) norms have been relaxed over the years. Government of India has not only allowed 100 per cent FDI in the energy sector but also amended previous norms and practices to provide a climate conducive to investment. The reforms of last twenty years have yielded positive results. By 2012, India requires an installed capacity of about 200,000 MW, which entails a huge capital investment. This has created opportunities in the power generation, transmission, and distribution segments. Private participation and public-private partnerships are being encouraged to pool in investments and expertise. Apart from conventional fuel-based plants, renewable energy development has been placed on equal priority. Significant opportunities in the oil and gas sector relate to exploration and discoveries under the New Exploration Licensing Policy (NELP), refinery product and natural gas transmission infrastructure development, and market development for oil and gas products. The overall growth in India‟s energy sector has drawn investments into the electrical equipment industry, not only in the form of capacity expansions and green field projects from existing players, but overseas as well. The scope for expansion is significant as the energy sector itself offers investment opportunities in the next decade and beyond. 16
  • 17. INDIA: ENERGY SECTOR September 2010 Contents  Executive Summary  Industry overview – Power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 17
  • 18. INDUSTRY OVERVIEW-POWERIndia: Energy Sector September 2010 Industry overview – Power … (1/5) Background India‟s power sector has had a remarkable growth in past few decades. There has been a significant push towards opening the electricity sector to competition and to redesign the electricity markets to achieve more efficient outcomes. Consequently, the sector has moved from a mostly vertically integrated structure – with the state electricity boards (SEB) owning the generation, transmission and distribution businesses – to a more unbundled corporate structure. As compared to 23 integrated utilities, i.e. SEBs, that existed before the electricity reforms began in the 1990s, there are now more than 80 utilities or companies with varied ownership structures and mandates, viz., central government‟s power generation and transmission companies; state governments‟ generation, transmission and distribution utilities; city-specific private utilities; captive power units of companies; and independent power producers (IPP). Intra-state power transmission is the sole responsibility of the state transmission utilities (STU) while inter- state and inter-region transmission is entrusted to Power Grid Corporation of India Limited (PGCIL), a central public sector unit (CPSU). Distribution of power is mostly controlled by state distribution companies (discoms) though there are also a few private companies in this business in a few states and cities. To comply with the provisions of Electricity Regulatory Commission Act, 1998, most states have set up state electricity regulatory commissions (SERCs), which regulate tariffs for the generation, transmission and distribution companies. The Central Electricity 18
  • 19. INDUSTRY OVERVIEW-POWERIndia: Energy Sector September 2010 Industry overview – Power … (2/5) Regulatory Authority (CERC) fulfils this responsibility for the central power utilities. There is an appellate tribunal for disputes resolution.There are also a few power trading companies that facilitate the exchange of power between regionally separated companies and utilities at a price/margin determined by CERC. Section 246 of the Indian Constitution puts power sector on the `concurrent list‟, which implies that both the state legislatures and the Parliament have the power to create policies for the sector. However, in the event of a conflict, the central law prevails. In recent decades, the Government of India has focused on infrastructure development with top priority given to the power sector. Figure 1: Structure of Indian Power Sector and Ownership Power Sector Utilities: Generation companies: Transmission companies: SEBs, State -owned gencos Distribution companies: SEBs IPPs SEBs STUs CPSUs Private licensees PGCIL Private licensees State discoms Private companies Captive units 19
  • 20. INDUSTRY OVERVIEW-POWERIndia: Energy Sector September 2010 Industry overview – Power … (3/5) The history of governance in the sector dates back to The Electricity Act, 1910, which provided the initial legal framework. It was followed by an amended Electricity (Supply) Act, 1948, which provided the overall regulatory framework for the sector. Recognising the need for accelerating reforms, the Electricity Act, 2003 was enacted in June 2003. It repealed and replaced the earlier laws. Although, since then several additional rules and laws have been passed to regulate the sector, the Electricity Act, 2003, remains the basis for all legal provisions and guiding principles for the sector. Importance to Economy Electricity is a key driver of rapid economic growth and industrialisation of the country. Decades of economic planning have placed significant emphasis on developing the power sector. Rapid economic growth and higher standards of living depend considerably on the availability of adequate and reliable power at an affordable price. The gross domestic product (GDP) from electricity supply at constant prices was US$ 14.71 billion in 2008-09, accounting for 1.63 per cent of GDP. The employment generated by the sector is in excess of 1 million. 20
  • 21. INDUSTRY OVERVIEW-POWERIndia: Energy Sector September 2010 Industry overview – Power … (4/5) Table 1: Gross Domestic Product from Electricity Supply (US$ million) 2004-05 2005-06 2006-07 2007-08 2008-09 Constant Prices 11,159.29 12,046.67 14,380.95 16,395.52 14,723.91 Current Prices 11,158.85 12,262.44 14,980.24 16,722.14 15,078.91 External investment in India‟s electricity sector has also had a strong growth. Despite global economic problems, India has had only marginal variation in FDI inflows, and the inflows to power sector increased from US$ 157 million in 2006-07 to US$ 1.44 billion in 2009-10. However, as demand growth and power supply shortages increase, there is scope for even more investment in the sector. The average per capita electricity consumption in India is only 704 kWh as compared to worldwide per capita consumption of 2,752 kWh. 21
  • 22. INDUSTRY OVERVIEW-POWERIndia: Energy Sector September 2010 Industry overview – Power … (5/5) Table 2: Energy Indicators Indicator Unit India World Energy Production MTOE 450.92 11,939.53 Energy Consumption TWh 609.74 18,186.94 Total Primary Energy MTOE 594.91 12,029.27 Supply (TPES) TPES/Population TOE/capita 0.53 1.82 TPES/GDP (PPP) TOE/2 million US$ 0.15 0.3 Electricity Consumption* kWh/capita 704.4 2,752 CO2/TPES Tonne CO2/TOE 2.23 2.51 CO2/Population Tonne CO2/capita 1.18 4.38 Source: International Energy Agency – 2007 indicators, CEA Empirical analyses have confirmed that demand for electricity is closely linked to changes in GDP and this relationship is remarkably stable and broadly linear. The Central Electricity Authority (CEA) has identified that at a GDP growth rate of 9 per cent, the power sector must grow at over 7.2 per cent, annually. 22
  • 23. INDIA: ENERGY SECTOR September 2010 Contents  Executive Summary  Industry overview – Power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 23
  • 24. GENERATIONIndia: Energy Sector September 2010 Generation … (1/10) Overview The total generation capacity of the grid-connected power utilities was 159,398 megawatts (MW) as of March 2010. The thermal power capacity of utilities was 102,453.98 MW, followed by hydropower (36,863.40 MW), renewable energy sources or RES (15,521.11 MW) and nuclear power (4,560 MW). The following table summarizes the growth in installed capacity. Table 3: Fuel-wise Generation Capacity FY Capacity (MW) Share (%) Thermal Hydro Nuclear RES Total Thermal Hydro Nuclear RES 2003 76,762 26,767 2,720 1,628 107,877 71.2 24.8 2.5 1.5 2004 77,969 29,507 2,720 2,488 112,683 69.2 26.2 2.4 2.2 2005 80,902 30,942 2,770 3,811 118,426 68.3 26.1 2.3 3.2 2006 82,411 32,326 3,360 6,191 124,287 66.3 26 2.7 5 2007 86,015 34,654 3,900 7,761 132,329 65 26.2 2.9 5.9 2008 91,907 35,909 4,120 11,125 143,061 64.2 25.1 2.9 7.8 2009 93,998 36,878 4,120 13,243 148,238 63.4 24.9 2.8 8.9 2010 102,454 36,863 4,560 15,521 159,398 64.3 23.1 2.9 9.7 Source: CEA, IMaCS Research 24
  • 25. GENERATIONIndia: Energy Sector September 2010 Generation … (2/10) As of March 2010, the state government utilities owned 49.8 per cent of the total installed generation capacity of 159.39 gigawatts (GW). The remaining was owned by central utilities (32 per cent) and private utilities (18.2 per cent). In the past decade there has been a shift in the trend of capacity addition. After many decades of near monopoly of state utilities in fresh capacity creation, private utilities‟ share has grown significantly. Clearly, the reforms have succeeded in inducing private investment in the sector. Table 4: Sector-wise Installed Utility Capacity At end-FY 2002 2003 2004 2005 2006 2007 2008 2009 2010 State 62,995 66,582 67,380 65,942 70,184 70 095 74 689 76,388 79,392 Central 31,335 29,944 32,979 38,790 39,959 45,121 48,361 48,971 50,993 Private 10,717 11,351 12,325 13,688 14,144 17,108 20,010 22,879 29,014 Total 105,047 107,877 112,684 118,420 124,287 132,324 143,060 148,238 159,398 Source: CEA, IMaCS Research 25
  • 26. GENERATIONIndia: Energy Sector September 2010 Generation … (3/10) Thermal Generation India‟s electricity generation capacity is mainly coal-based. It is considered good for base-load power generation. An estimated 82.2 per cent of the installed thermal power capacity is based on coal as the fuel. In fact, the power sector accounts for about 75 per cent of India‟s coal demand. Table 5: Capacity of Thermal Power Plants by Fuel FY 1985 1997 2002 2003 2004 2005 2006 2007 2008 2009 2010 MW 27,030 61,010 74,429 76,762 77,969 80,902 82,411 86,014 91,907 93,725 102,454 Coal 26,311 54,154 62,131 63,951 64,956 67,791 68,519 71,121 76,049 77,649 84,198 Gas 542 6,562 11,163 11,633 11,840 11,910 12,690 13,691 14,656 14,877 17,056 Diesel 177 294 1,135 1,178 1,173 1,202 1,202 1,202 1,202 1,200 1,200 Share (%) 63.5 71.1 70.9 71.2 69.2 68.3 66.3 65.0 64.0 63.4 64.3 Coal 61.8 63.1 59.1 59.3 57.6 57.2 55.1 53.7 53.2 52.4 52.8 Gas 1.3 7.6 10.6 10.8 10.5 10.1 10.2 10.3 10.2 10.2 10.7 Diesel 0.4 0.3 1.1 1.1 1.0 1.0 1.0 0.9 0.8 0.8 0.8 Source: CEA, IMaCS Research 26
  • 27. GENERATIONIndia: Energy Sector September 2010 Generation … (4/10) The dominance of coal in India‟s generation capacity is mainly because of significant domestic reserves. As of April 2009, the coal reserves of India (to the depth of 1,200 m) have been estimated at 266 billion tonnes by the Geological Survey of India. The proven reserves are of 105 billion tonnes, indicated reserves of 123 billion tonnes and inferred reserves of 38 billion tonnes. India‟s proven reserves at current levels of production are enough to last about 200 years. Natural gas is now finding a greater role in India‟s energy mix. Its share in the total installed power generation capacity has increased from 4.4 per cent at end of 1991-92 to 10 per cent at end of 2008-09. Compared to coal-based plants, natural gas plants emit only about half as much carbon dioxide (CO2) per kWh. Also, with production starting at some recently developed gas fields in India, there is a greater potential for development of gas-based power plants. Hydroelectric Power Hydroelectricity is clean and its generation is largely free of the concerns of fuel supply and price volatility of imported fuels. However, its share in the fuel mix for power generation has declined because of high initial costs and development risks. In recent years, the government has tried to address many of the concerns in hydroelectric power project development to improve the share of hydropower in the hydro-thermal electricity generation mix. 27
  • 28. GENERATIONIndia: Energy Sector September 2010 Generation … (5/10) Figure 2: Hydroelectric Electricity Generation Capacity Source: CEA, IMaCS Research India‟s hydroelectric potential has been estimated to be 600 billion kWh per annum, corresponding to a capacity of 148.7 GW. States with high potential are Arunachal Pradesh (50.3 GW), Himachal Pradesh (18.8 GW), Uttarakhand (18.2 GW), and Jammu & Kashmir (14.1 GW). However, only 23 per cent of the potential has been realised so far. 28
  • 29. GENERATIONIndia: Energy Sector September 2010 Generation … (6/10) Table 6: Hydroelectric Potential and Development April 2009 Potential Capacity Per cent of Capacity under Per cent of Region (MW) Developed Potential Construction Potential North 53,395 13,772 25.8 7,064 13.3 West 8,928 5,804 65 400 4.5 South 16,458 9,395 57.1 786 4.8 East 10,949 3,049 27.9 2,211 20.2 North-East 58,971 1,203 2 2,724 4.6 Total 148, 701 33,223 22.3 13,185 8.7 Source: CEA, IMaCS Research A vision paper prepared by the Ministry of Power envisages harnessing the entire hydro potential of 148.7 GW by 2025-26. Moreover, renovation, modernisation, up-rating and life extension of some of the existing hydropower plants are expected to yield additional capacity of 4,300 MW during the Eleventh Five-Year Plan period (2007-2012). Renewable Energy Renewable energy sources (RES) have great potential to contribute to improving energy security of the country and reducing green-house gas (GHG) emissions. Using renewable sources to generate electricity has several advantages –a perennial energy source, potential for lower reliance on imported fossil fuels and lower CO2 emissions. However, at present, the principal constraint facing rapid expansion of renewable 29
  • 30. GENERATIONIndia: Energy Sector September 2010 Generation … (7/10) power is high initial cost as compared to the competing fuels. India‟s renewable energy resources are summarised below. Table 7: RES Potential and Achievements (MW) Achieved as of March 31, Source/System Potential 2010 Grid Interactive Renewable Power Bio-power (woody biomass) 62,000 866 Wind Power 45,000 11,807 SHP 15,000 2,735 Cogeneration – Bagasse 5,000 1,334 Waste to Energy 5,000 65 Solar Power 4-7 kWh/sq m/day 10 Sub Total 132,000 16,817 Distributed Renewable Power Rural 30,000 405 Captive generation-industrial, commercial 20,000 Sub Total 50,000 405 Total 222,000 17,222 Source: Ministry of New & Renewable Energy, IMaCS Research 30
  • 31. GENERATIONIndia: Energy Sector September 2010 Generation … (8/10) India is among the five largest wind power generators in the world. The share of RES in the country‟s total generation capacity has increased from 1.1 per cent at the end of 2001-02 to about 9.7 per cent at the end of 2009-10.The total renewable capacity is expected to increase to 23,476 MW by the end of March 2012.Wind power is expected to contribute almost 74 per cent of this capacity. Nuclear Power India‟s nuclear power self-sufficiency runs across the entire value chain: uranium exploration and mining, fuel fabrication, heavy water production, reactor design and construction, reprocessing and waste management. India‟s reserves in the reasonably assured resources (RAR) category are estimated at 77,185 tonnes of U308, the estimated additional resources (EAR)-I reserves are about 23,525 tonnes of U308.The remaining reserves are categorised as speculative resources (SR), which could become available for nuclear power programme with further exploration. After accounting for various losses, including mining (15 per cent), milling (20 per cent), and fabrication (5 per cent), the net uranium available for power generation is about 61,000 tonnes. The available uranium has electricity potential of 328 GWe of pressurised heavy water type reactors (PHWR) and 42,231 GWe of fast breeder reactors (FBR). The Atomic Energy Act, 1962, allows setting up of nuclear power stations only by government companies. Two government companies, Nuclear Power Corporation of India Limited (NPCIL) and Bharatiya Nabhikiya Vidyut Nigam Limited (BHAVINI), are responsible for setting up and operating nuclear power reactors. 31
  • 32. GENERATIONIndia: Energy Sector September 2010 Generation … (9/10) As of March 2010, nuclear power plants accounted for 2.9 per cent of the total installed capacity. Though nuclear power is under government-controlled entities, options are being explored to attract investment from private sector. Figure 3: Nuclear Power Capacity Source: CEA, IMaCS Research 32
  • 33. GENERATIONIndia: Energy Sector September 2010 Generation … (10/10) The Planning Commission‟s expert committee on an Integrated Energy Policy has suggested in its report that there is a possibility of reaching a nuclear power capacity of 21-29 GW by 2020 and 48-63 GW by 2030 through a mix of indigenous PHWRs, FBRs, and light water reactors (LWR). In July 2005, India and the US signed a joint statement designed to give India access to the global market for nuclear fuel and reactors. This was followed by a nuclear exports waiver by the Nuclear Suppliers Group (NSG) in September 2008. Subsequently, India has entered into deals with France and Russia to source fuel for its existing nuclear plants. 33
  • 34. INDIA: ENERGY SECTOR September 2010 Contents  Executive Summary  Industry overview – Power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 34
  • 35. TRANSMISSION AND DISTRIBUTIONIndia: Energy Sector September 2010 Transmission and distribution … (1/7) Power Transmission Adequate capacity addition and optimum utilisation are important aspects of power sector development. Commensurate with the capacity addition, an extensive network of transmission and distribution has been developed for evacuation of power and supply to consumers. Notwithstanding the substantial progress, many regions in the country still suffer from shortage of electricity. The new generation capacity additions as well as targeted increase in per capita consumption call for further strengthening and expansion of the transmission system. The capacity additions to transmission lines (220 kV and above) until the end of 2008-09 are indicated in the following table. Table 8: Growth in Transmission Lines (Ckm) Up to 2nd year Particulars 6th Plan 7th Plan 8th Plan 9th Plan 10th Plan of 11th Plan 765 kV - - - 1,160 2,184 3,118 ± 500 kV HVDC - 1,634 1,634 4,738 5,872 7,172 400 kV 6,029 19,824 36,142 49,378 75,722 89,496 220 kV 46,005 59,631 79,600 96,993 114,629 112,960 Source: CEA, IMaCS Research 35
  • 36. TRANSMISSION AND DISTRIBUTIONIndia: Energy Sector September 2010 Transmission and distribution … (2/7) With adoption of new technology, there has been a significant addition of transmission capacity at the extra- high voltage levels of over 500 kV. The 765 kV and 500 kV-HVDC technologies have raised grid efficiency and have strengthened the grid at the inter-regional links. Table 9: Growth in Sub-stations (MVA) Up to 2nd year Particulars 6th Plan 7th Plan 8th Plan 9th Plan 10th Plan of 11th Plan 765 kV - - - - - 4,500 ± 500 kV HVDC - - - 5,200 8,200 8,700 Converter/BTB Station 400 kV 9,330 21,580 40,865 60,380 92,942 111,202 220 kV 37,291 53,742 84,177 116,363 156, 497 177,189 Source: CEA, IMaCS Research At present, the country has five regional grids - one each for the Northern, North-Eastern, Southern, Eastern and the Western region. Except for the Southern region, all other regional grids have been synchronised. Expansion of the regional transmission networks is essential for transmission of power across the country, from the abundant generation areas to deficit areas. As part of its ambitious mission to provide electricity to the entire country by 2012, the Government has set a target of adding over 60,000 circuit kilometres (37,200 miles) of new transmission lines at a cost of about US$ 146 million. The integrated grid is expected to carry as much as 60 per cent of the power generated in the country. The government is also 36
  • 37. TRANSMISSION AND DISTRIBUTIONIndia: Energy Sector September 2010 Transmission and distribution … (3/7) carrying out US$ 126-million expansion of the five regional systems as well as the inter-regional grid to boost transmission capacity from 17,000 MW to 37,000 MW. Table 10: Growth in Inter-regional Transmission Capacity (Ckm) Year 2,002 2,005 2,007 2,010 2,012 765 kV - - 1,100 2,200 9,200 400 kV 1,000 2,400 7,800 11,400 16,400 HVDC bi-pole - 2,000 2,500 2,500 6,500 HVDC B-T-B 2,000 3,000 3,000 3,000 3,000 HVDC mono-pole 200 200 200 200 200 220 kV 1,850 1,850 1,850 1,850 1,850 Total 5,050 9,450 16,450 21,150 37,150 Source: CEA, IMaCS Research To facilitate greater private sector participation in transmission and to leverage advantages of competition, the central and state electricity regulatory commissions have harmonised their regulations for grant of transmission licenses. These regulations provide the framework for procurement of transmission licenses through competitive bidding. 37
  • 38. TRANSMISSION AND DISTRIBUTIONIndia: Energy Sector September 2010 Transmission and distribution … (4/7) Overall, the CEA has estimated a fund requirement of US$ 33.33 billion for implementation of transmission schemes during the Eleventh Plan period. This includes requirement of US$ 17.86 billion for the regional and the national grid transmission schemes and US$ 15.48 billion for the state sector transmission schemes. Power Distribution Distribution is a vital component of the electricity-supply chain, but this segment has lagged in operational efficiency as well as financial performance. Under-recovery of costs and poor collection efficiency of the power utilities have been a key concern. The consequent deterioration in operational efficiency has further aggravated the situation.With the restructuring of electricity utilities from their monolithic structures to separation of generation, transmission and distribution, the focus has finally shifted to making the distribution segment more efficient and financially viable. This has created significant opportunities in the segment. Recognizing the urgent need for reforms in the distribution sector, the Government of India introduced the Accelerated Power Development Programme (APDP) in 2001.The APDP was aimed at strengthening transmission and distribution networks and reduction in aggregate technical and commercial (AT&C) losses. Subsequently, incentive financing was integrated with the existing investment programme to achieve commercial viability of SEBs and power utilities and link it to the reform process. APDP was renamed Accelerated Power Development & Reforms Programme (APDRP) in 2002-03 for Tenth Plan period (2003- 07). The main objectives of the programme were to achieve financial viability of state utilities, reduce AT&C losses, improve customer satisfaction, and increase the reliability and quality of power supply. After a re- examination of the APDRP, The Cabinet Committee on Economic Affairs (CCEA) approved a restructured 38
  • 39. TRANSMISSION AND DISTRIBUTIONIndia: Energy Sector September 2010 Transmission and distribution … (5/7) APDRP (R-APDRP) for the Eleventh Plan period as a central sector scheme in July 2008. The focus of this programme is on actual, demonstrable performance in terms of AT&C loss reduction. Projects under the scheme are to be taken up in three parts. The activities covered under the three parts are: • Part A: Preparation of baseline data for project area, covering consumer indexing, geographic information system (GIS) mapping, metering of distribution transformers and feeders, automatic data logging for all distribution transformers and feeders, supervisory control and data acquisition (SCADA) and distribution management system (DMS). Initially, 100 per cent of the funds for the approved projects are to be provided through loans from the Government of India on terms decided by Ministry of Finance. The amount allocated for these activities is US$ 2.48 billion. • Part B: Renovation, modernization and strengthening of 11 kV level substations, transformers/transformer centres, re-conductoring of lines at 11 kV and lower levels, urban-rural load bifurcation, feeder separation, load balancing, HVDS (11 kV); laying aerial bunched conductor in high population-density areas; replacement of electromagnetic energy meters with tamper-proof electronic meters; installation of capacitor banks and establishing mobile service centres. 39
  • 40. TRANSMISSION AND DISTRIBUTIONIndia: Energy Sector September 2010 Transmission and distribution … (6/7) Initially, up to 25 per cent funds for the projects are to be provided through loans from the Government of India on terms decided by Ministry of Finance. For special category states, loan amount would be 90 per cent of the project cost. However, the project-wise requirement of gross budgetary support is to be decided by a Steering Committee. The remaining funds are to be raised from financial institutions.The amount allocated for these activities is US$ 9.95 billion. • Part C: Funding of activities related to promoting reforms in the power sector. The fund allocated for these enabling activities is US$ 292.78 million. Guided by various regulatory and policy initiatives for efficiency improvements in the distribution sector, several Public Private Partnership (PPP) models have been proposed. Successful PPP models include first corporate distribution franchise model in Bhiwandi and distributed-generation based franchise in Pune. The franchisee model is being promoted by state governments that are keen to improve their networks and collection efficiencies without complete privatisation. Private companies have also shown interest in distribution franchises offered by several states. 40
  • 41. TRANSMISSION AND DISTRIBUTIONIndia: Energy Sector September 2010 Transmission and distribution … (7/7) Rural Electrification In April 2005, the Government of India launched the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), a scheme for developing rural electricity infrastructure and household electrification. The scheme was aimed at achieving the incumbent government‟s National Common Minimum Programme (NCMP) promise of providing access to electricity to all households in five years. Rural Electrification Corporation (REC) is the nodal agency for implementation of the scheme. A capital subsidy of US$ 1.2 billion was budgeted for implementation of Phase I of the scheme during the Tenth Plan period. The scheme was reviewed towards the end of plan period and modifications were made for its implementation during the Eleventh Plan period. Accordingly, the Ministry of Power approved a capital subsidy of US$ 6.6 billion in February 2008. The current status of rural electrification is as mentioned in the following table: Table 11: Rural Electrification Rural Electrification Status* Total No of Villages 593,732 No of Villages Electrified 498,080 % of Village electrified 83.9% Source: CEA, Ministry of Power *As of May 2010 41
  • 42. INDIA: ENERGY SECTOR September 2010 Contents  Executive Summary  Industry overview – Power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 42
  • 43. DEMAND-SUPPLY POSITIONIndia: Energy Sector September 2010 Demand-supply position … (1/5) Overview For the past two decades, India has had to face increasing deficit in power supply, both for meeting its normal energy requirements as well as its peak load demand. The problem is acute during peak hours and summers, and necessitates planned load shedding by many utilities to maintain the grid in a healthy state. The average all-India shortages in 2009-10 were at 10 per cent in terms of normal energy requirement and about 13 per cent in terms of peak load. Table 12: Electricity Demand and Supply Energy Peak Demand FY (MU) (MW) Demand Availability Shortage % Demand Met Shortage % 2002-03 545,983 497,890 48,093 8.8 81,492 71,547 9,945 12.2 2003-04 559,264 519,398 39,866 7.1 84,574 75,066 9,508 11.2 2004-05 591,373 548,115 43,258 7.3 87,906 77,652 10,254 11.7 2005-06 631,024 578,511 52,513 8.3 93,214 81,792 11,422 12.3 2006-07 693,057 624,716 68,341 9.9 100,715 86,818 13,897 13.8 2007-08 737,052 664,660 72,392 9.8 108,866 90,793 18,073 16.6 2008-09 777,039 691,038 86,001 11.1 109,809 96,785 13,024 11.9 2009-10 830,594 746,644 83,950 10.1 118,472 102,725 15,747 13.3 Source: CEA 43
  • 44. DEMAND-SUPPLY POSITIONIndia: Energy Sector September 2010 Demand-supply position … (2/5) With the shortage at both the normal and the peak levels, Indian power industry does not exhibit much cyclicality. Further, with assured returns, the margins of players and their profitability is almost independent of the economic cycles. Electricity is the most important component of primary energy. India‟s electricity consumption has grown at an average rate of 7.3 per cent during the period 2002-07 to about 577.9 TWh. Consumption has increased at a faster rate since 2002-03, reflecting buoyant industrial demand. Industrial consumers are the largest group of electricity consumers, followed by the domestic, agricultural and commercial consumers, in that order. India‟s per capita electricity consumption increased from 178 kWh in 1985-86 to 704.4 kWh in 2007- 08. Over the period, 2001-08, per capita consumption has increased at an average rate of 4.45 per cent. It is still much lower compared to the international standards. Table 13: Electricity Consumption FY Consumption (GWh) Dom. Comml. Indl. Agri. Others Total 2003-04 89,736 28,201 181,970 87,089 31,338 418,334 2004-05 95,659 31,381 199,488 88,555 32,950 448,033 2005-06 100,090 35,965 214,121 90,292 33,983 474,451 2006-07 111,002 40,220 241,216 99,023 34,210 525,671 2007-08 120,981 46,685 265,407 104,182 40,706 577,960 Source: CEA, IMaCS Research 44
  • 45. DEMAND-SUPPLY POSITIONIndia: Energy Sector September 2010 Demand-supply position … (3/5) Electricity Requirement The demand for power is expected to increase to 975 billion kWh by 2011-12. However, at an average GDP growth rate of 8 per cent, the overall demand is expected to increase to about 1,097 billion kWh in 2011- 12, including the demand from non-utilities. Table 14: Projected Requirement of Electricity Energy Requirement Peak Demand Installed Capacity Required (Billion kWh) (GW) (GW) GDP growth at 8.0% 9.0% 8.0% 9.0% 8.0% 9.0% 2003-04 633 633 89 89 131 131 2006-07 761 774 107 109 153 155 2011-12 1,097 1,167 158 168 220 233 2016-17 1,524 1,687 226 250 306 337 2021-22 2,118 2,438 323 372 425 488 2026-27 2,866 3,423 437 522 575 685 2031-32 3,880 4,806 592 733 778 960 Source: IMaCS Research The 17th Electric Power Survey (EPS) has forecast a peak demand of 152,746 MW for 2010-11.That means a capacity addition requirement of about 72,000 MW during the Eleventh Plan period. Though the target set for capacity addition during the Eleventh Plan period is 78,700 MW, only 62,000 MW is expected to be added by the end of the period. 45
  • 46. DEMAND-SUPPLY POSITIONIndia: Energy Sector September 2010 Demand-supply position … (4/5) Capacity Addition Plan The following table provides the Eleventh Plan targets for adding generation capacity. In a reversal of the trend witnessed during the 1990s, a substantial contribution is expected from the hydropower sector. Also, the private sector is expected to account for 15 GW of the planned capacity addition of 78.7 GW during this period. Table 15: Installed Capacity Addition Plan (MW) Sector Thermal Hydro Nuclear Grand Total 11th Plan Total 59,693 15,627 3,380 78,700 Central 24,840 8,654 3,380 36,874 State 23,301 3,482 - 26,783 Private 11,552 3,491 - 15,043 Source: CEA, IMaCS Research Recognising the large potential of coal reserves in the country as an economic and readily available resource, a significant proportion of the future capacity additions is expected to be based on coal. Further, to reduce the environmental impact and to increase efficiency, the strategies proposed by the power ministry include introduction of large-sized units (660-800 MW) employing the super-critical technology. The source-wise capacity addition as envisaged under Eleventh Plan period is as given below: 46
  • 47. DEMAND-SUPPLY POSITIONIndia: Energy Sector September 2010 Demand-supply position … (5/5) Additional generation capacity would require Figure 5: Fuel-wise capacity addition plan (2007-2012) (%) commensurate investments in transmission infrastructure as well. Huge transmission capacity 4% enhancement is required under Phase-III of National Grid Programme, which targets an inter-regional 20% exchange capacity of 37,700 MW by 2012. With Thermal rapid industrialization and growing power Hydro requirements, many states have decided to set up Nuclear high-capacity intra-state power transmission systems. PPP model is being adopted by many 76% utilities to attract private investment in transmission sector. The future capacity addition plan envisaged is as given in the table below: Table 16: Projected Transmission Line Length (Ckm) Sector 11th Plan 12th Plan 765 kV 5,428 8,000 500 kV HVDC 5,206 4,500 400 kV 49,278 51,000 220 kV 35,371 50,000 Total 95,283 113,500 Source: CEA, IMaCS Research 47
  • 48. INDIA: ENERGY SECTOR September 2010 Contents  Executive Summary  Industry overview – Power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 48
  • 49. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (1/10) Overview Prior to 1991, power markets in the country were completely in the hands of the State Electricity Boards (SEBs).Their poor financial health and the wide-spread inefficiencies in the system resulted in the initiation of reforms in 1991. The reforms initially focussed on the generation side of the business. Power was removed from the list of activities reserved for the public sector in the Industrial Policy Resolution, and the Electricity Supply Act, 1948 was amended to lift many of the regulatory impediments to private investment in the sector. The policy allowed full local and foreign private ownership of power companies and offered a thirty-year license with the prospect of twenty-year renewals and higher financial returns. Subsequently, it was felt that reforms were also required on the distribution side of the business, as the SEBs were in a poor financial condition and unable to invest in fresh capacity. In addition to direct loans to SEBs, the state governments also provided substantial guarantees to financial institutions for enabling SEBs to raise requisite resources. Reform of power distribution was, and still is, a fundamental requirement for improving commercial performance and financial viability of the power sector in India and attracting public and private investment. Improvement in cost recovery in power sector also assumed significance, particularly in the context of provision of free or subsidised power to certain consumer segments by the state governments. The setting up of CERC and the state electricity regulatory commissions (SERC) was a key element of the reform process, whereby the regulatory control was passed on to independent regulators. The commissions 49
  • 50. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (2/10) are mandated to regulate the tariffs charged to consumers, promote investment and advise the government on power sector policies. The next step was separating the generation, transmission and distribution functions of the integrated SEBs. Starting with Orissa, many states have unbundled their SEBs to form separate entities. This has enabled independent functioning of the three segments in terms of every-day operations, investment assessment, project identification and deployment of funds. Key Policies The Electricity Act, 2003 The Electricity Act, 2003, provides a comprehensive yet flexible legislative framework for power sector development.The key objectives of the Electricity Act, 2003 are as follows: • Consolidation of the laws relating to generation, transmission, distribution, trading and use of electricity with broad measures conducive to development of the entire electricity industry • Promotion of competition in the industry • Protection of consumers‟ interest and facilitation of electricity supply in all areas 50
  • 51. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (3/10) • Rationalisation of electricity tariffs • Ensuring transparency of subsidies • Promotion of efficiency and environmentally benign policies • Constitution of CEA, regulatory commissions and establishment of an appellate tribunal National Electricity Policy, 2005 The National Electricity Policy (NEP), 2005 aims to achieve accelerated development of the power sector, supply of electricity to all, and protection of interests of consumers and other stakeholders. It has tried to address the issues pertaining to availability of energy resources, technologies for using those resources, economics of generation using different resources, and the country‟s energy security. The salient objectives of the policy are as follows: • Access to electricity for all households in next five years • Power demand to be fully met by 2012 • Energy and peaking shortages to be overcome and spinning reserve to be made available 51
  • 52. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (4/10) • Supply of reliable and quality power of specified standards in an efficient manner and at reasonable rates • Per capita availability of electricity to be increased to over 1,000 units by 2012 • Minimum lifeline consumption of 1 unit/household/day by year 2012 • Financial turnaround and commercial viability of the electricity sector • Protection of consumers‟ interests The policy requires the state governments to prepare a five-year plan with annual milestones to bring down AT&C losses. It also aims to facilitate investment in distribution by ensuring adequate returns for utilities. National Electricity Policy, 2005 In January 2006, the Government of India notified the National Tariff Policy, 2006, which aims to ensure the following: • Financial viability of the power sector 52
  • 53. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (5/10) • Attract investments • Availability of electricity to consumers at reasonable rates • Transparency and consistency in regulatory approach to tariff determination The regulatory commissions are guided by the Tariff Policy, which stipulates that procurement of future requirement of power is to be done through competitive bidding. A two-part tariff structure is to be followed for awarding all long-term contracts to facilitate merit order despatch. Furthermore, power purchase agreements (PPA) are required to ensure adequate and bankable payment security mechanism to mitigate the risk of default. Integrated Energy Policy, 2006 The broad vision behind the Integrated Energy Policy is to meet the energy demand of all, including the lifeline energy needs of vulnerable households.The emphasis is on safe and convenient energy at the least cost in a technically efficient, economically viable and environmentally sustainable manner. 53
  • 54. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (6/10) National Action Plan on Climate Change In 2008, India announced its first National Action Plan on Climate Change (NAPCC) outlining existing and future policies and programmes to address climate change mitigation and adaptation.The plan includes the National Solar Mission, National Mission for Enhanced Energy Efficiency, National Mission on Sustainable Habitat, National Water Mission, National Mission for Sustaining the Himalayan Ecosystem, National Mission for a “Green India”, National Mission for Sustainable Agriculture and National Mission on Strategic Knowledge for Climate Change. Industrial Policy for Renewable Energy The Government of India is promoting medium, small, mini and micro enterprises for manufacturing and servicing of various types of renewable energy systems and devices. The industrial policy measures include the following: • Exemption from industrial clearance for setting up renewable energy units. • Exemption from CEA clearance for power generation projects of up to US$ 238.1 million. • Five-year tax holiday for renewable energy power generation projects. • Soft loan made available through IREDA for renewable energy equipment manufacturing. 54
  • 55. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (7/10) • Facilities for promotion of export-oriented units for renewable energy industry. • Financial support extended to renewable energy units for taking up R&D projects in association with technology institutions. • Permission to private sector companies to operate as distribution licensees or generating entities. • Custom duty concession given for renewable energy parts and equipment, including for machinery required for renovation and modernisation of power plants. Excise duty on a number of capital goods and instruments in the renewable energy sector has been reduced or exempted. • Excise duty reduction or exemption on a number of capital goods and instruments used in the renewable energy sector. The Mega Power Policy Under the Mega Power Policy, projects of more than 500 MW (and 350 MW in special category states) with inter-regional power transmission capabilities qualify to receive financial incentives. Under the policy, a qualifying project can avail of financial concessions such as zero customs duty on import of capital equipment and deemed export benefits under the Foreign Trade Policy and income tax holiday under Section 80-IA of the Income Tax Act. Tax holidays are available to such projects for 10 years within 15 years of commissioning. States can also provide exemptions on local taxes and duties. Projects in the public sector get 15 per cent price preference. 55
  • 56. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (8/10) The Ultra Mega Policy The government has launched an initiative for developing 4,000 MW coal-based ultra mega power projects (UMPPs). The objective behind this initiative is to obtain cheaper tariffs using economies of scale and mitigate the risks related to acquisition of land, fuel, water and statutory clearances. These projects are awarded to developers on the basis of tariff-based competitive bidding. Project-specific shell companies (SPVs) have been set up as wholly-owned subsidiaries of Power Finance Corporation Limited to tie up necessary inputs such as land, captive mining blocks for fuel and water, and to facilitate in-principle environment and forest clearances. Each SPV is transferred to the selected developer along with the clearances obtained and resources secured. So far, nine sites have been identified by CEA for the proposed UMPPs.These include four pit-head sites, each, in Madhya Pradesh, Jharkhand, Orissa and Chhattisgarh, and five coastal sites, each in Gujarat, Andhra Pradesh, Tamil Nadu, Maharashtra and Karnataka. Some states are keen to have additional UMPP sites. The New Hydro Policy, 2008 A new hydro policy was approved by the Union Cabinet in January 2008.The key features of the policy are as follows: • Both the public sector and the private sector developers can be allocated projects without having to go through the tariff based competitive bidding route. The tariff would be decided by the appropriate regulatory commission. 56
  • 57. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (9/10) • The developers have been allowed merchant sales of up to 40 per cent of the saleable energy. This allows them the flexibility of diversifying revenue realisations instead of being bound by fixed PPAs. • The policy allows 12 per cent free power to the local state government and an additional 1 per cent for a local area development fund that would provide a regular source of income to build replacement infrastructure for the displaced people and to fund welfare schemes for them. • For the families affected by projects, the policy provides for 100 units of free electricity per month for a period of 10 years. In addition, the policy stipulates that at every project site, an industrial training institute would be set up six months before the beginning of the project work to train the affected people to undertake skilled and semi-skilled jobs on project. The 50,000 MW Hydroelectric Power Initiative The Central Government launched a 50,000 MW hydropower initiative in May 2003. It was felt that an ideal hydro-thermal mix in the ratio of 40:60 is necessary for building flexibility in power system operations to suit varying load patterns during a year. Both base-load and peak-load requirements can be sufficiently met with such a mix while maintaining the grid stability. The Electricity Act, 2003, requires hydropower developers to obtain approval from CEA, which in turn is required to assess whether a proposed project‟s river works could jeopardize the prospects of the best development of the river or its tributaries for power generation while being consistent with the requirements of drinking water, irrigation, navigation, flood-control or other public purposes. CEA must 57
  • 58. GOVERNMENT POLICY AND REFORMSIndia: Energy Sector September 2010 Government policy and reforms … (10/10) make this assessment in consultation with the central and the concerned state governments. Under this initiative, a pre-feasibility report (PFR) is completed by CEA before a project is offered to a developer. PFRs have been prepared for 162 projects with a cumulative capacity of 34,020 MW and now detailed project reports (DPR) are under preparation.The projects are located in Andhra Pradesh, Arunachal Pradesh, Chhattisgarh, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Orissa, Sikkim and Uttaranchal. Open Access and Power Trading Open access is a key feature of the Electricity Act, 2003. Open access to transmission and distribution on payment of charges to utilities enables a variety of licensees to use spare capacities to transmit power from generation points to load centres. Power trading through the open access system allows freedom to buy and sell electricity. This has also helped develop power exchanges in the country. 58
  • 59. INDIA: ENERGY SECTOR September 2010 Contents  Executive Summary  Industry overview – Power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 59
  • 60. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (1/10) Regional Cooperation South Asian countries have a great potential for electricity generation and have complementary endowments on a contiguous landmass, which is a prerequisite for developing an integrated power infrastructure, including power grids and gas pipelines. If India has an edge in producing coal-based energy, Pakistan and Bangladesh have the benefit of gas-based power generation, while Nepal and Bhutan have abundant potential for hydropower. These regional complementarities can be exploited for mutual benefit. A regional network of gas pipelines and power grid is expected to enhance energy security of India. It is also likely to significantly benefit the neighbours by reducing their cost of fuel transportation and help them in harnessing their energy resources optimally. Bangladesh has substantial reserves of gas – about 22.9 trillion cubic feet (TCF) – of which 16 TCF is proven reserves. There is potential for Bangladesh to export gas to India. There is a huge potential for hydroelectricity in the Hindukush-Himalayan region, of which only 11 per cent has been exploited so far. Bhutan has hydroelectric potential to generate 30,000 MW and Nepal could produce 43,000 MW, and the two could export power to India and Bangladesh. India is in the process of upgrading transmission lines to fetch power from Nepal and Bhutan to its states of West Bengal, Bihar and Uttar Pradesh. However, it may require a corridor through Bangladesh for transmission lines. 60
  • 61. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (2/10) Merchant Power Merchant power plants (MPP) are a product of the restructured electricity industry. MPPs fill different niches in the market: some provide steady supply to the grid while others fire up only when there is high peak- demand. Given this strong incentive of high returns, MPPs strive to produce power efficiently and supply to locations where it is needed the most. Private sector interest in power also stems from the possibility of selling power at high prices in the present supply-constrained scenario. Renewable Energy Option The country has an estimated renewable energy potential of 85,000 MW from commercially exploitable sources. The potential for wind power is 45,000 MW, for small hydro 15,000 MW and for biomass and bio- energy it is 25,000 MW. In addition, India has the potential to generate 35 MW per sq km using solar photovoltaic and solar thermal energy. The Central Government has proposed an addition of 15,000 MW of renewable energy generation capacities during the Eleventh Five-Year Plan period. The total investment on development of renewable energy sources during the plan period is expected to be about US$ 2 billion. The renewable energy industry is identified as a priority lending sector by the Reserve Bank of India. 61
  • 62. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (3/10) Government Incentives • SERCs have been mandated to promote renewable energy through renewable purchase obligations, which require distribution companies to source up to 10 per cent of their power from such sources. • The key incentives for wind energy include a provision for 80 per cent accelerated depreciation in the first year, a 10-year tax holiday, income tax waiver on power sold to utilities and privileged tariffs. • Projects that do not claim accelerated depreciation benefits are entitled to generation-based incentive of US$ 0.011 for each kWh of power sold to IPPs with capacity of more than 5 MW. • India offers several subsidies to solar power products, such as solar lanterns, home lighting systems besides generation-based incentives of up to US$ 0.286/kWh to solar power plants. • For small hydropower projects (less than 3 MW), incentives include concessions on customs duty, capital subsidies, 10-year tax holiday and other state-level incentives such as exemptions from sales and electricity tax and preferential tariffs. • Incentives for biomass energy include accelerated depreciation, import duty concessions, excise duty exemption, capital subsidies and a 10-year tax holiday. Several export incentives have made India a key player in the global market for wind turbine generators (WTG) and solar photovoltaic cells and panels. 62
  • 63. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (4/10) Policy Incentives • 100 per cent accelerated depreciation in the first year of the installation of projects and systems • No excise duty on manufacture of most of the finished products • Low import tariffs for capital equipment and most of the materials and components • Soft loans to manufacturers and users for commercial and near commercial technologies • Five-year tax holiday for power generation projects • Remunerative price for grid-feeding renewable energy units under the alternate power purchase policy of state governments • Facility for banking and wheeling of power • Facility for third-party sale of renewable energy • Financial incentives and subsidies for devices with high initial cost • Involvement of women in implementation of renewable energy programmes 63
  • 64. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (5/10) • Encouragement to NGOs and small entrepreneurs • Special thrust on renewable energy in the North-Eastern region of the country; 10 per cent of planned funds earmarked for North-East for enhanced and special subsidies • For municipal waste-to-energy projects, allotment of land on long-term basis at token lease rent and supply of municipal waste at project site free of cost In addition, the Central Government gives financial assistance to develop solar cities in the following manner: • Up to US$ 0.12 per city for a period of five years • Up to US$ 0.03 million for preparation of a master plan • Up to US$ 0.03 million for institutional arrangements • Up to US$ 0.5 million for awareness generation, capacity building and other promotional activities • Up to US$ 0.03 million for oversight of implementation during five years The government has created a liberal environment for foreign investment in renewable energy projects. Key highlights of the foreign investment policy are: 64
  • 65. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (6/10) • Permission for foreign investors to form joint ventures with Indian partners for financial and/or technical collaboration and for setting up of renewable power generation projects • Liberalised foreign investment approval regime for easy investment and technology flows to joint ventures • Automatic approval for proposals for up to 74 per cent foreign equity participation in a joint venture • Permission for 100 per cent foreign equity with special approval from the Foreign Investment Promotion Board (FIPB) • Permission for setting up liaison offices in India • Encouragement for foreign investment in renewable energy generation projects on build-own-operate basis State governments have also announced promotional policy packages in the form of wheeling, banking and buyback guarantee in addition to considerable tariff escalations for energy from wind, co-generation, small hydro, and biomass projects. In order to promote the sector, some state governments provide concession and exemption in state sales tax and octroi. In addition, state renewable energy development agencies play a hand-holding role in the development of renewable energy projects. 65
  • 66. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (7/10) Private Participation To enable the private companies to enter the power sector, the government has introduced many policies and regulations under the Electricity Act and the National Electricity Policy. By 2012, India requires an installed capacity of about 200,000 MW. A huge capital investment is required to meet this target. This has created investment opportunities in power generation, transmission, and distribution through the PPP mode. India‟s power sector is still ridden with a large demand-supply gap. This has necessitated some strategic initiatives. There are strong opportunities in transmission network area – additional 60,000 ckm of transmission network is expected to come up by 2012 with a total investment of about US$ 200 billion. Coal Linkages In 2003, the Government of India issued guidelines for allocation of coal blocks to power plants to ensure commensurate fuel supply for sustained generation at cheaper prices. Coal blocks are allocated to projects of CPSUs, state PSUs, joint venture companies, IPPs, UMPPs, captive power plants supplying at least 25 per cent of their capacity to the grid and MPPs: 66
  • 67. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (8/10) • Projects proposed to be executed by the CPSUs, state PSUs and SEBs are accorded the first priority. Moreover, their expansion projects get a higher priority over new projects. • Joint venture projects between the centre and a state or between the two states have the next priority. Joint ventures between private sector and the centre or a state have the same priority if the public sector partner has substantial say in the management. Carbon Credit Market The Clean Development Mechanism (CDM) is well accepted in India, which is among the leaders in the carbon credit market. The country is expected to generate 573 million Certified Emission Reduction (CER), or carbon credits, by 2012. The Government of India and industry have been very proactive in their approach to the carbon credit market. This has helped India gain an early mover advantage in CDM. As of July 2010, 520 projects have been registered, which is 22.5 per cent of the total projects registered with CDM Executive Board of UNFCCC. The majority of the CDM projects have come from renewable energy industry. Most of the CDM projects in India are undertaken on a unilateral basis – developed independently by local stakeholders. Indian companies in the power sector are involved in development of alternative sources of energy and have reaped benefits from carbon trading. 67
  • 68. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (9/10) Energy Efficiency and Conservation Under the Energy Conservation Act, the Bureau of Energy Efficiency (BEE) has begun to enforce mandatory energy audits and establish consumption norms for nine specified energy-intensive industries. In addition to government policies, efforts of multilateral and bilateral organizations to conserve energy across a wide range of sectors have attracted new domestic and international energy efficiency companies to this market. The increasing appeal of energy efficient processes and products over the past few years has led to investors‟ interest in funding the energy efficiency sector. The potential for energy savings is enormous: an estimated 183.5 billion kWh per year, according to reports prepared by the Asian Development Bank and the BEE. The sector-wise energy consumption on an all-India basis for the year 2007-08 is given in the following table. A conservative estimate of potential for savings from energy efficiency is about 15 per cent of the electricity consumption. 68
  • 69. OPPORTUNITIES IN THE INDIAN POWER SECTORIndia: Energy Sector September 2010 Opportunities in The Indian power sector … (10/10) Table 17: Energy Saving Potential (Billion kWh) Sector Consumption Saving Potential Agriculture Pumping 92.33 27.79 Commercial Buildings* 9.92 1.98 Municipalities 12.45 2.88 Domestic 120.92 24.16 Industry (Including SMEs) 265.38 18.57 Total 501.00 75.36 Source: Bureau of Energy Efficiency, IMaCS Research *Establishments with connected load >500 kW 69
  • 70. INDIA: ENERGY SECTOR September 2010 Contents  Executive Summary  Industry overview – Power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 70
  • 71. INVESTMENT OPPORTUNITIESIndia: Energy Sector September 2010 Investment opportunities … (1/3) Investment in Power Sector Government of India‟s estimate of the required investment in the power sector to meet the targets of the Eleventh Plan period is US$ 245.62 billion. It comprises funds required for adding power generation capacity, renovation and modernisation of existing power plants, expansion and up-gradation of transmission and distribution infrastructure, and decentralized distributed generation. The total requirement of funds for generation projects during the Eleventh Plan period is estimated at US$ 97.83 billion. Of that, US$ 48.11 billion are required by the central government projects, US$ 29.47 billion by state government projects and US$ 20.25 billion by the private sector. Opportunities in Generation, Transmission and Distribution Generation According to the 17th Electric Power Survey (EPS) of CEA, electricity demand is expected to grow to 968.7 billion kWh in 2011-12 and is further expected to grow to 1,392.06 billion kWh by the end of Twelfth Five- Year Plan period (2012-17). The estimated cost of non-conventional energy sources and captive power projects during the Eleventh Plan period is estimated as follows: • Non-conventional energy sources (13,500 MW at US$ 0.95/MW) US$ 16.07 billion • Captive power plants (12,000 MW at US$ 1.19/MW) US$ 11.43 billion 71
  • 72. INVESTMENT OPPORTUNITIESIndia: Energy Sector September 2010 Investment opportunities … (2/3) The Government of India has identified coal blocks with reserves of 3.2 billion tonnes for allotment by the screening committee of Ministry of Coal for MPPs and captive power plants. About 10,000 MW is expected to be developed through this initiative. The estimated funds required for this initiative are US$ 9.52 billion, at 1.19 per MW. Based on current prices, the fund requirement for renovation and modernisation (R&M) of thermal and hydro power stations for the Eleventh Plan period is estimated as US$ 3.78 billion. Table 18: Fund Requirement for R & M Activities Capacity Estimated Cost Particulars (MW) (US$ Billion) R & M of Hydropower 11,278.00 0.83 R & M of Thermal Power 12,389.00 2.95 Total Funds Requirement 3.78 Source: CEA, IMaCS Research Transmission Total fund requirement for inter-state transmission system has been estimated at US$ 17.9 billion and for intra-state transmission at US$ 15.5 billion. In order to mobilise resources from private sector, the Government of India issued guidelines for private sector participation in transmission sector in January 2000. These guidelines envisaged two distinct routes for private sector participation in transmission: the joint venture route (wherein the CTU/STU shall own at least 26 per cent equity and the remaining is to be contributed by the joint venture partner) and the Independent Private Transmission Company (IPTC) route (wherein 100 per cent equity shall be owned by the private entity). 72
  • 73. INVESTMENT OPPORTUNITIESIndia: Energy Sector September 2010 Investment opportunities … (3/3) Distribution It is estimated that to transmit the increased generation capacity, as envisaged in Eleventh Plan, to consumers, a matching distribution network of about 1,500,000 ckm of 33 kV, 11 kV and LV lines and 292,000 MVA of distribution transformer capacity will be needed. Installation of capacitors and re- conductoring of sub-transmission/ distribution network of about 3,000,000 ckm, and augmentation of distribution capacity of 198,000 MVA of various sub-stations would also be required. In addition to these, the estimated fund requirement of various other initiatives such as RGGVY under rural electrification and APDRP is as follows: Table 19: Fund Requirement for Distribution and Rural Electrification Amount Particulars (US$ billion) Sub-transmission and Distribution 46.90 RGGY 9.52 APDRP & Other Schemes 9.52 Others 2.38 Total Fund requirement 68.33 Source: Ministry of Power, IMaCS Research 73
  • 74. INDIA: ENERGY SECTOR September 2010 Contents  Executive Summary  Industry overview – Power  Generation  Transmission and distribution  Demand-supply position  Government policy and reforms  Opportunities in the Indian power sector  Investment opportunities  Industry overview – equipment industry 74
  • 75. INDUSTRY OVERVIEW– EQUIPMENT INDUSTRYIndia: Energy Sector September 2010 Industry overview – equipment industry … (1/5) Growth in India‟s energy sector has drawn investments into the electrical equipment industry too. This investment has come from the existing players and through FDI into capacity expansion and green field projects. Investments in the Energy Equipment Industry Over the last 10 years, the energy equipment and related industries have received foreign direct investment of US$ 2,955.5 million. Major investments have been made in electrical equipment industry followed by miscellaneous mechanical and engineering industries, boilers and steam generating plants and prime movers (other than electrical generators), as shown in the following table. Table 20: FDI in Energy Equipment and Related Industries (US$ million) Industry April 2000 – March 2010 Electrical equipment 2,146.5 Miscellaneous mechanical and engineering industries 795.9 Boilers and steam generating plants 9.4 Prime mover (other than electrical generators) 3.7 Total 2,955.5 Source: Department of Industrial Policy and Promotion, Ministry of Commerce and Industry 75
  • 76. INDUSTRY OVERVIEW– EQUIPMENT INDUSTRYIndia: Energy Sector September 2010 Industry overview – equipment industry … (2/5) Overall economic recovery in India as well as in some of the major export destinations has encouraged the industry players to take up expansion and green field projects. Investments have been mainly made in capacities for generators, transformers, switchgears, wires and cables, boilers and turbines (including steam, hydro, gas and wind energy turbines).The table below provides a snapshot of the investments made in electrical equipment industry as of March 2010. Table 21: Investments as of March 2010 (No., US$ million) Outstanding investments Projects under implementation Industry No. of Investment No. of projects Investment projects Generators, transformers, 5 218.6 3 168.6 switchgears Wires and cables 11 350.3 8 240.7 Boilers and turbine^ 23 5,738.9 12 2,678.1 Total 39 6,307.8 23 3,087.5 ^ Steam, hydro, gas and wind energy Source: CMIE 76
  • 77. INDUSTRY OVERVIEW– EQUIPMENT INDUSTRYIndia: Energy Sector September 2010 Industry overview – equipment industry … (3/5) Some of the major projects which are expected to be completed in 2010-11 are listed in the following table: Table 22: Major Projects (US$ million) Industry Company Investment Brief description The plant for manufacturing solid insulated switchgear is Switchgears Reyrolle 21.4 expected to commission in September 2010. The plant is expected to start producing 220 kV extra high Wires and cables Kei Industries 9.6 voltage cables from September 2010. Cords Cable Commercial production of high tension rubber wires and cable Wires and cables 12.2 Industries is expected to be commissioned in August 2010. The green field plant will manufacture 110 kV, 132 kV and 220 Wires and cables Polycab Wires 74.9 kV wires, AAC and ACSR^. The plant with capacity of 300 units is expected to start Wind turbine generators Regen Powertech 59.9 production in August 2010. The plant with capacity of 700 MW is expected to start Wind turbine generators R R B Energy 107.0 production in September 2010. Reliance The boiler, turbine and generator project is expected to be Boilers, turbines, generators 2,568.8 Infrastructure complete by December 2010. The project will be completed in December 2010 and will add Turbines Siemens 58.9 100 MW to Siemens‟ plant at Vadodara, Gujarat. Transformers Polycab Industries 145.6 - ^AAC: All Aluminium Conductors, ACSR: Aluminium Conductors Steel Reinforced Source: CMIE 77
  • 78. INDUSTRY OVERVIEW– EQUIPMENT INDUSTRYIndia: Energy Sector September 2010 Industry overview – equipment industry … (4/5) L&T-MHI (joint venture between Larsen and Toubro Limited and Mitsubishi Heavy Industries) has recently invested US$ 404 million in a 4,000 MW manufacturing facility for supercritical boilers and turbines at Hazira in Gujarat. The turbine and generator manufacturing facility was commissioned in April 2010 and the boiler facility was commissioned in June 2010. Budget Provisions in Energy Equipment Sector India‟s electrical equipment sector is highly sensitive to government policies given its dependence on the power sector, which is not only regulated by the government but also the investments in the sector are mostly controlled by government schemes. The central, state and private sectors together have projects to add about 62,000 MW of generation capacity during the Eleventh Five-Year Plan period. States are also undertaking projects for upgrading their power transmission and distribution systems. Rural electrification and grid-connected renewable energy projects are also underway to augment capacity and increase the power supply coverage area. All these projects are expected to have a positive impact on electrical equipment industry. In the Union Budget 2008-09, the government reduced custom duty on project imports by 5 per cent. However, a special countervailing duty of 4 per cent was imposed on a few specific power sector projects. The Budget also emphasised on increasing the pace of power generation capacity addition and continuing the reform process in power distribution.The initiatives in this respect include developing eight ultra mega power (UMPP) projects, each with a capacity of 4,000 MW, and allocated on the basis of competitive 78
  • 79. INDUSTRY OVERVIEW– EQUIPMENT INDUSTRYIndia: Energy Sector September 2010 Industry overview – equipment industry … (5/5) bidding as well as augmenting capacities in generation, transmission and distribution systems. In addition, US$ 186 million was provided for R-APDRP projects of 2008-09.These initiatives and provisions are expected to boost demand for transformers and switchgears – two major equipments used in transmission and distribution of power. Moreover, the Budget proposed the creation of a national fund for transmission and distribution reform. In the Union Budget 2009-10, the allocation under R-APDRP was increased by 139 per cent to US$ 445 million over the previous budget estimate. It was also proposed that customs duty on permanent magnets for synchronous generators above 500 KW used in wind-operated electricity generators be reduced from 7.5 per cent to 5 per cent. However, excise rate was doubled on items that previously attracted 4 per cent duty, albeit with the exception of certain items such as power driven pumps for handling water, vacuum and gas filled bulbs of retail sale price not exceeding US 42 cents per bulb, compact fluorescent lamps and medical equipment. The plan allocation for power sector, excluding the RGGVY, was more than doubled in the Union Budget 2010-11 to US$ 1,098 million from US$ 484 million in 2009-10.The plan outlay for the Ministry of New and Renewable Energy (MNRE) was increased by 60 per cent, to US$ 214 million from US$ 134 million in 2009- 10. The budget also laid out the plan for setting up solar, small hydro and micro power projects at a cost of about US$ 107 million in the Ladakh region of Jammu & Kashmir. Further, the budget exempted specified inputs required for the manufacture of rotor blades for wind energy generators from central excise duty. Excise on light emitting diodes (LED) lights was reduced from 8 per cent to 4 per cent and put at par with compact fluorescent lamps (CFL). 79
  • 80. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 80
  • 81. BOILERSIndia: Energy Sector September 2010 Boilers … (1/5) A boiler is a closed vessel which can sustain high pressure and is used to heat and vaporise water for use in heating and power generation and industrial processes. Apart from power generation industry, which uses boilers to produce steam at high pressure for operating turbines, industries such as fertiliser, petrochemical, refinery, steel and paper require boilers for heating and other process requirements. The Boiler Industry Major boiler manufacturers in India include Bharat Heavy Electricals Limited (BHEL), Thermax, L&T-MHI, Alstom India, Cethar Vessels and GB Engineering. These companies manage large turnkey projects which include design, detailed engineering, procurement, manufacturing, supply, erection, and commissioning of boilers (including repair and maintenance). The main types of boilers manufactured in India include the following: Utility boilers: Utility boilers are used for power generation applications. Utility boilers are classified mainly on the basis of the fuel used, the mode of firing, the number of boiler drums and circulation of water. Industrial boilers: Industrial boilers are used by a number of industries for captive power generation and process steam generation. These boilers are usually capable of handling a range of fuels such as coal, oil, gas and black liquor. Industrial boilers manufactured by Indian manufacturers cater to specific requirements such as dual pressure, multi-fuel firing, CO gas firing, import steam heating, drum coil heating and stand-by heating. In addition, Indian boiler makers manufacture circulating fluidised bed combustion boilers and heat recovery steam generators. 81
  • 82. BOILERSIndia: Energy Sector September 2010 Boilers … (2/5) Various types of utility and industrial boilers are given in the following table: Table 23: Types of Utility and Industrial Boilers Utility Boilers Industrial Boilers • Coal or oil or gas fired. • Vertical package (oil or gas fired). • Tangential or wall firing, direct or indirect firing. • Vertical units (oil, gas or coal fired). • Two-pass or single-pass. • Fluidised-bed combustion (coal and other • Front or rear or side mill layout. solid fuels). • Single drum or bi-drum. • Chemical recovery. • Natural or controlled circulation ort once-through. • Waste heat recovery. • Constant or sliding pressure operation. • Stoker fired. • Base load or cyclic or two-shift operation. • Cold primary air or hot primary air systems. Source: IMaCS analysis Supercritical boilers: Supercritical boilers are a new technology trend in the power generation industry, as fuel efficiency has become a major priority. Such boilers were originally developed in the 1950s in the US and over time they have undergone significant development. Supercritical conditions occur when the boiler pressure increases above the critical pressure of 3,208 psi /221.2 bars, above which the two phase mixtures of water and steam cease to exist. This eliminates the need for separation of water and steam in drums during operation and allows a simpler separator to be employed during start-up. The major advantage of supercritical boiler technology is that it requires less fuel per unit of power generated compared to conventional subcritical steam generators. Thus, it is also less harmful to environment and requires comparative lesser start-up time. 82
  • 83. BOILERSIndia: Energy Sector September 2010 Boilers … (3/5) Of late, the Indian power sector has started adopting this technology primarily because of the CEA mandating stricter energy efficiency benchmarks for the power sector. CEA has also issued guidelines for supercritical equipment to ensure reliability and good performance of power plants. Companies such as BHEL, L&T-MHI and Thermax are developing supercritical boilers manufacturing capabilities. Capacity and Production The total production of boilers in India in 2009-10 was valued at about US$ 2,723.9 million. The industry has been growing at an average rate of 37.7 per cent for the last six years. Table 24: Production of Boilers (US$ million) 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR Production 550.5 890.2 1296.2 2045.5 2208.3 2723.9 37.7% Source: CMIE, IMaCS analysis The value of total production of boilers in India increased four-fold, from US$ 550.5 million in 2004-05 to US$ 2,208.3 million in 2008-09. During the same period, domestic demand for boilers increased at a faster pace and was supported by imports. Until 2006-07, India was a net exporter of boilers. Since 2007-08, it has become a net importer. Most of India‟s imports of boilers are from China. 83
  • 84. BOILERSIndia: Energy Sector September 2010 Boilers … (4/5) Table 25: Production, Import, Export and Consumption of Boilers (US$ million) 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Production 550.5 890.2 1,296.2 2,045.5 2,208.3 41.5% Imports 24.7 55.6 30.1 346.8 492.1 111.3% Total Supply 575.2 945.8 1,326.4 2,392.3 2,700.5 47.2% Exports 59.1 68.8 111.3 182.0 207.7 36.9% Consumption 516.1 877.0 1,215.1 2,210.2 2,492.8 48.2% Source: CMIE, IMaCS analysis Industry Growth Drivers and New Technology Development Growth of boiler manufacturing industry is closely linked with the development of the power and process industries. The boiler manufacturers in India, including those with supercritical technology, are expected to benefit immensely from the large generation capacity addition plans for the Eleventh and Twelfth Five- Year Plan periods. Further, ageing of power plants in India and overseas is expected to increase opportunities for R&M boilers. In this regard, Alstom has partnered with National Thermal Power Corporation (NTPC), India‟s largest power generator, to undertake renovation, modernisation, retrofit and refurbishment of aging power plants. The revival of industrial activity – as indicated by the significant increase of 10.4 per cent in the IIP in 2009-10 – is expected to benefit the industrial boiler manufacturers. 84
  • 85. BOILERSIndia: Energy Sector September 2010 Boilers … (5/5) A shift towards supercritical technology is one of the major new developments in India‟s boiler industry. Indian boiler manufacturers are collaborating with foreign technology partners for inducting supercritical technology. Table 26: Technological Partnership for Supercritical Technology Indian Manufacturer Foreign Partner Bharat Heavy Electricals Limited Alstom, France (BHEL) Babcock and Wilcox Power Generation Groups, Thermax The USA Larsen and Toubro (L&T) Mitsubishi Heavy Industries, Japan Source: CMIE, IMaCS Research BHEL is also in the process of developing its own supercritical technology, which is expected to be inducted by 2013. The company has recently established a research facility to conduct heat transfer studies at supercritical pressure conditions (over 221 bars). This facility is also capable of analysing parameters for ultra supercritical boilers, which are being considered for economical power generation. L&T has also prioritised technology analysis of supercritical boilers and thermo-hydraulic design of once-through steam generator. 85
  • 86. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 86
  • 87. CONDUCTORS, WIRES AND CABLESIndia: Energy Sector September 2010 Conductors, wires and cables … (1/4) Wires are metallic conductors formed by drawing metals and are used to carry electricity and telecommunication signals. Conducting metals commonly used to manufacture wires and cables are copper, aluminium, steel and steel-reinforced aluminium, and galvanised steel. The Conductors, Wires and Cables Industry Cables and wires are mainly used in high-voltage transmission and distribution of electric energy, industrial and household electrical wiring, transmission of telecommunication signals, and electrical and electronic equipment. Major manufacturers of wires and cables in India include Havells India, Sterlite Technologies, Finolex Cables, Diamond Power Infrastructure, KEI Wires and Cables, Precision Wires India, Nicco Corporation, Universal Cables, Torrent Cables, Cords Cable Industries, Polycab Wires and Hindustan Vidyut Products. Cables manufactured in India cover a wide range in terms of insulation (PVC1, XLPE2 and sioplus), voltage (low, medium and high voltage up to 33 kV), conductors (copper wire, aluminium) and armouring. Cable manufactures often undertake EPC projects for laying underground and submarine cables as well as transmission and distribution cabling. 1Poly Vinyl Chloride 2Cross-linked poly-ethylene 87
  • 88. CONDUCTORS, WIRES AND CABLESIndia: Energy Sector September 2010 Conductors, wires and cables … (2/4) Capacity and Production Production of cables and wires in India has increased over last few years because of the growth of power sector and industrial activity. The total production of aluminium-based conductors increased from 27,625 tonnes in 2004-05 to 34,605 tonnes in 2009-10. During the same period, production of winding wires increased from 20,959 tonnes to 31,621 tonnes. Production of telecommunication cable has fallen for the last three years because of declining demand for wired telephones. Table 27: Production of Various Types of Cables and Wires Unit 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR ACSR/AAC Tonnes 27,625 28,057 26,848 16,187 17,407 34,605 4.6% Winding wires Tonnes 20,959 24,413 25,384 28,849 30,104 31,621 8.6% Insulated cables/wires Billion Km 7,408 8,960 8,169 25,797 57,028 96,509 67.1% Telecommunication Million 16,488 14,027 7,119 8,013 7,073 5,579 -19.5% cables metres Note: AAC: All Aluminium Conductors, ACSR: Aluminium Conductors Steel Reinforced Source: CMIE, IMaCS analysis 88
  • 89. CONDUCTORS, WIRES AND CABLESIndia: Energy Sector September 2010 Conductors, wires and cables … (3/4) In 2008-09, India‟s cables imports were valued at US$ 857.4 million. Cable imports have grown at 28.8 per cent over the last five years. India imports cables and wires mainly from China, South Korea, the US and Southeast Asia. Although India is a net importer of cables and wires, exports have increased five-fold, from US$ 95.3 million in 2004-05 to US$ 516.8 million in 2008-09. Major exports destinations are the Middle East, the US, the UK and Japan. Table 28: Export and Import of Cables and Wires (US$ million) 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Export 95.3 163.7 324.8 430.7 516.8 52.6% Import 311.4 350.4 488.0 917.8 857.4 28.8% Source: CMIE, IMaCS analysis Industry Growth Drivers Major growth drivers of the wire and cable industry are power transmission and distribution sectors, real estate development and general industrial activity. The Government of India has prioritised building of a strong national grid. About 22,100 MW of inter- regional transmission capacity is expected to be added during the Eleventh Five-Year Plan period. Further, in order to achieve the government‟s mission to provide electric power to every Indian and to 89
  • 90. CONDUCTORS, WIRES AND CABLESIndia: Energy Sector September 2010 Conductors, wires and cables … (4/4) reduce transmission and distribution losses, greater emphasis is being laid on technology-driven distribution of power. In addition, the RGGVY targets electrification of 125,000 un-electrified villages by building village electrification infrastructure and rural electricity distribution network. As such, these projects are the largest drivers of demand for cables and wires. 90
  • 91. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 91
  • 92. TRANSFORMERSIndia: Energy Sector September 2010 Transformers … (1/5) A transformer is a device that transfers electrical energy from one circuit to another through mutual induction. By appropriate selection of the ratio of turns in the circuits, a transformer allows an alternating current (AC) voltage to be „stepped up‟ or „stepped down‟. The Transformer Industry Transformers are indispensable to electricity generation, transmission and distribution. By stepping up voltage before transmitting electrical energy over long distances through wires and then stepping down voltage as required in the power distribution process, transformers help reduce resistive loss and ensure economic transmission of power over long distances. They are also used in electronic products in order to step-down the supply voltage to a level suitable for the circuits of electronic instruments.The other uses of transformers are in railway locomotives and traction equipment. The industry manufactures a wide range of transformers, such as generation transformers, distribution transformers, traction and locomotive transformers, and ultra-high-voltage instrument transformers (1,200 kV). Energy efficient transformers with low loss and low noise levels that meet international standards are also produced. Major manufacturers of transformers in India include EMCO, Bharat Bijlee, Crompton Greaves, Transformers and Rectifiers India Limited (TRIL), Kirloskar Electric,Voltamp Transformers and Indian subsidiaries of multinational companies such as ABB, Siemens, and Areva T&D. 92
  • 93. TRANSFORMERSIndia: Energy Sector September 2010 Transformers … (2/5) Indian manufacturers are fast aligning themselves with the changing power generation, transmission and distribution scenario. While generation capacity is being augmented, smart-grid technologies are increasingly being deployed to reduce transmission and distribution losses. Going ahead, greater use of 765 kV extra high voltage (EHV) transmission highways and High Voltage Direct Current (HVDC) links are expected to open up new opportunities for the industry. As the government has initiated bulk tendering of supercritical power plants, Power Grid Corporation of India Limited (PGCIL) has moved towards implementation of 800kV HVDC transmission lines and will adopt 1,200 kV AC lines next. Capacity and Production India has over 500 transformer manufacturers. In 2009-10, total production of power and distribution transformers in India was estimated at 176,427 MVA. The production has grown at a rate of about 17 per cent during the period 2004-2010. Of the total transformers produced, power transformers contributed 140,048 MVA while distribution transformers accounted for 36,379 MVA. 93
  • 94. TRANSFORMERSIndia: Energy Sector September 2010 Transformers … (3/5) Table 29: Production of Transformers (MVA) 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR Power transformers 60,787 62,577 77,674 94,390 119,101 140,048 18.2% Distribution transformers 19,369 27,181 35,188 40,412 34,272 36,379 13.4% Total 80,156 89,758 112,862 134,802 153,373 176,427 17.1% Source: CMIE, IMaCS analysis The power transformers market has grown at a rate of 18.2 per cent during the period 2004-2010, faster than the distribution transformer market, which registered a growth of 13.4 per cent. Further, the demand for small-size distribution transformers of 16 KVA to 100 KVA has grown significantly. Transformers ranging from 250 KVA to 630 KVA have also registered growth. Besides meeting the domestic requirement, India is exporting transformers to more than 50 countries, including the US, South Africa, Cyprus, Syria, Iraq and the countries in Europe, the Middle East and Far East. Exports of transformers grew over five-fold, from US$ 91.5 million in 2004-05 to US$ 466.2 million in 2008-09. During this period, imports grew from US$ 71.5 million to US$ 324.6 million. While transformers imported from China and South Korea pose pricing challenge to Indian manufactures, Indian products are of better quality and help recover good margins. 94
  • 95. TRANSFORMERSIndia: Energy Sector September 2010 Transformers … (4/5) Table 30: Imports and Exports of Transformers (US$ million) 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Export 91.5 130.6 206.0 318.0 466.2 50.3% Import 71.5 78.7 119.3 182.0 324.6 46.0% Source: CMIE, IMaCS analysis Industry Growth Drivers and New Technology Development The growth of power generation capacity and, transmission and distribution network is expected to boost demand for power and distribution transformers in India. Replacement of transformers installed during the Sixth Plan (1980-85) and Seventh Plan (1985-89) periods is also expected to add to demand. EMCO, a leading transformer manufacturer, puts strong emphasis on enhancing product portfolio through continuous and collaborative research and developmental activity. The company‟s sustained R&D efforts have resulted in development of „Smart Transformer‟. The company is also in the process of developing a „High Temperature Super Conducting Transformer‟. Further, it has developed an eco-friendly dielectric fluid for transformer in association with Electrical Research and Development Association (ERDA), Vadodara. 95
  • 96. TRANSFORMERSIndia: Energy Sector September 2010 Transformers … (5/5) The „Smart Transformer‟ is an intelligent, value added, and compact transformer with a monitoring and energy management system designed to provide comprehensive diagnostics and real-time performance information of transformers to utilities and large power consumers. It ensures shorter network down time and better load planning. The product is available at up to 630 kVA rating, 25 kV class and for single- and three-phase. Under the National Perspective Plan, EMCO has collaborated with Central Power Research Institute, a public sector institute to develop energy-efficient High Temperature Super Conducting Transformer. The project, which is jointly funded by Ministry of Power and EMCO, aims to develop 630 kVA, high temperature superconductor (HTS) distribution transformer using super-conducting elements. 96
  • 97. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 97
  • 98. TURBINESIndia: Energy Sector September 2010 Turbines … (1/4) Turbines are the most critical equipment in the electric power generation process. A turbine is a rotary engine that extracts energy from the source (steam, water, gas and wind) and converts it to useful work (rotating engine for generation of electric power). The Turbine Industry Turbines are primarily classified on the basis of speed, power output, input conditions (pressure and temperature at entry and exit of turbine) and input fluid – steam, water, gas and wind. Turbines are mostly used in power generation. However, in industrial processes, turbines may work as a source of mechanical energy to drive pumps and compressors. Major turbine manufacturers in India are BHEL, L&T-MHI, Alstom India, Triveni Engineering and Industries, Siemens and Kirloskar Brothers. Capacity and Production As of March 2009, the Indian turbine market was valued at about US$ 1,136 million. It grew at a rate of 44.1 per cent between 2004-05 and 2008-09.The growth was by power generation capacity addition.The demand for turbines is primarily met by domestic production, which was valued at US$ 912 million for 2008-09. 98
  • 99. TURBINESIndia: Energy Sector September 2010 Turbines … (2/4) Table 31: Production, Trade and Consumption of Turbines (US$ million) 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Production 198 261 505 874 912 46.5% Imports 84 167 186 252 293 36.5% Total Supply 283 428 690 1,126 1,205 43.7% Exports 19 30 58 52 69 37.6% Consumption 263 398 633 1,074 1,136 44.1% Source: CMIE, IMaCS analysis Both imports and exports of turbines have grown at over 35 per cent over the last few years. However, total imports of turbines largely outpace exports. In recent years, turbine imports from China and Korea have increased. Industry Growth Drivers and New Technology Development Growth of turbine industry is driven by augmentation of power generation capacity across fuel-segments. The table below summarises the power generation scenario in India. 99
  • 100. TURBINESIndia: Energy Sector September 2010 Turbines … (3/4) Table 32: Snapshot of Power Generation Scenario (MW) Particulars Capacity Capacity at the end of 10th Plan (March-2007) 132,329 Add: Likely 11th Plan capacity-addition (CEA / MoP estimate) 62,374 Add: Slippage from the 11th Plan (original target: 78,700 MW) 16,326 Add: Capacity under construction in the 12th Plan (LOA allotted) 46,500 Aggregate capacity at the end of 12th Plan (March 2017)) 257,529 Add: Renewable capacity addition in the 11th Plan (7,154 MW commissioned by 14,000 September 2009) Total by the end of 12th Plan, including renewable capacity 271,529 Expected capacity addition in the 12th Plan 100,000 Capacity in the 12th Plan, for which orders not yet placed 53,500 Capacity by the end of 12th Plan (assuming 100 per cent ordering 324,029 and execution of remaining orders) MoP: Ministry of Power, Government of India, LOA: Letter of Approval Source: CEA 100
  • 101. TURBINESIndia: Energy Sector September 2010 Turbines … (4/4) Indian manufacturers have well-qualified engineers and technicians who are capable of using advanced engineering design tools, finite elements method (FEM), computational fluid dynamics (CFD) and 3-D modelling. BHEL has developed a new single-cylinder reheat turbine in 120-150 MW range to meet customers demand for improved part-load efficiency and compact design. The main features of the newly- designed steam turbine include combined high pressure, intermediate pressure and low pressure turbines in a single casing with horizontally-split outer and inner casings, nozzle control with regulating stage and reaction blading, central admission, provision of extractions for regenerative feed heating cycle and high- pressure electro-hydraulic actuators. BHEL‟s compact design of split-stay ring for hydro turbines permits use of compact guide apparatus, which in-turn brings the generator closer to the turbine and facilitates adoption of semi-umbrella bearing arrangement.This design helps reduce weight for medium and high-head stay rings, and more importantly, permits accommodation of the semi-umbrella bearing arrangement in limited spaces of underground caverns. 101
  • 102. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 102
  • 103. SWITCHGEARSIndia: Energy Sector September 2010 Switchgears … (1/4) Switchgears are a combination of electrical disconnects and fuse and/or circuit breakers and are used to isolate electrical equipment within an electric power system or grid. The Switchgears Industry A switchgear is used both to de-energize equipment to allow work to be done and to clear faults downstream. A circuit breaker enclosed within switchgear is the key component that interrupts fault currents. Switchgears are primarily classified on the basis of voltage: low voltage switchgear (up to 1,100 V), medium voltage switchgear (up to 36KV) and high voltage switchgear (above 36 kV). Oil-filled circuit breakers have largely been replaced by air-blast, vacuum, or gas-insulated equipment, facilitating safer control of high currents and power levels by automatic equipments with digital controls, protection, metering and communications.There has been a higher demand for gas-insulated switchgear (GIS) because of space constraint in urban areas. Switchgears are required not only for transmission and distribution of electricity but also to access and control electricity. Major manufacturers of switchgears in India are L&T, Legrand India, Schneider Electric India, ABB India, Crompton Greaves, Havells India, Siemens India and Reyrolle. India‟s switchgear industry is well developed and it is capable of manufacturing products in the entire voltage range from 240 V to 800 kV. 103
  • 104. SWITCHGEARSIndia: Energy Sector September 2010 Switchgears … (2/4) Capacity and Production India‟s switchgear market is estimated at US$ 2.1 billion. While power contractors, low-tension circuit breakers (LTCB) and miniature circuit breakers (MCB) have grown at a rate of 18-22 per cent during the period 2004-2010, high-tension circuit breakers (HTCB) have grown at a rate of 9.9 per cent. Switch fuse and fuse switch units and HRC fuses have grown at a moderate rate of 5.7 per cent. The high growth of LTCB segment is primarily due to sustained demand from the housing sector, IT industry, services and infrastructure sectors. In the low-voltage switchgear segment, MCBs are fast replacing re-wireable switch fuses. High-voltage transmission projects have been the key driver for growth of HTCBs. Table 33: Production of Switchgears and Circuit Breakers (Thousands) 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR Power contactors 2,407 2,958 3,489 4,475 3,667 6,533 22.1% Low -tension circuit breakers 608 623 809 1,615 1,178 1,506 19.9% High-tension circuit breakers 35 44 52 59 59 55 9.9% Miniature circuit breakers 35,191 38,373 49,664 59,563 62,979 81,450 18.3% Switch fuse and fuse switch units 647 815 934 942 834 853 5.7% Source: CMIE, IMaCS analysis 104
  • 105. SWITCHGEARSIndia: Energy Sector September 2010 Switchgears … (3/4) Over the last five years, both exports and imports of switchgears have increased. However, imports have outpaced exports. Exports of switchgears, primarily MCBs, have increased from US$ 169 million in 2004- 05 to US$ 418 million in 2008-09. Switchgears manufactured in India are exported to over 40 countries including the UK, China, and Singapore and the countries in Southeast Asia, Middle East and Africa. During the same period, imports of switchgears have increased from US$ 286 million to US$ 918 million. Table 34: Exports and Imports of Switchgears (US$ million) 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Exports 169 250 323 401 418 25.4% Imports 286 383 513 653 918 33.9% Source: CMIE, IMaCS analysis Industry Growth Drivers and New Technology Development Growth in production of switchgears is driven by increased demand from power utilities, infrastructure projects, and industrial and residential consumers. Steady growth of use of the low-tension circuit breakers and miniature circuit breakers is expected to continue with the improvement in the real estate and services sectors. Strengthening of transmission and distribution network is expected to benefit medium and high voltage segments. 105
  • 106. SWITCHGEARSIndia: Energy Sector September 2010 Switchgears … (4/4) In-house R&D units of manufacturers have been using advanced computer-aided engineering tools such as electromagnetic and electrostatic analysis, structural and fatigue analysis, thermal analysis, coupled field analysis for design, and development of switchgears. The R&D effort in this industry is entirely consumer driven and involves new product development and enhancement of features of existing products. Crompton Greaves has developed customised software – „Virtual Laboratory Program for Switchgears‟ – which enables the company to optimise design and reduce cycle time. The technology cell of the company has published a number of technical papers on design and development of switchgears in journals of repute. Havells India has developed some new circuit breakers, such as a two-pole version of mini MCB, Type S RCCB and Type A RCCB, and ACBs in the range of 3,200 A to 4,000 A. In developing existing products, the company has been successful in: • Introducing glue (resin) in 63A MCBs for improved consistency in thermal tripping of circuit breaker. • Introducing parallel circuit in 63A breaker to reduce temperature rise of the breaker. • Upgrading RCCB from electromechanical design to PCB based electronic design. • Upgrading MCCBs with reverse feed applications. 106
  • 107. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 107
  • 108. TRANSMISSION TOWERSIndia: Energy Sector September 2010 Transmission Towers … (1/4) Transmission towers support transmission lines carrying high-voltage electricity from power generating units to substations for further distribution.They are fabricated by welding steel components and, galvanized and tested for design load before commissioning. The Transmission Tower Industry India‟s transmission tower industry has matured over the last two decades and is presently moving towards high-voltage transmission. The larger tower manufacturers in India, such as KEC International, Jyoti Structures, Kalpataru Power Transmission, Sujana Towers, and EMCO, provide turnkey solutions for designing, manufacturing, load testing and installation of a wide range of transmission lines. Indian tower industry produces structures that can carry transmission lines of up to 765 kV. Now, following the recent initiatives by Power Grid Corporation of India to introduce 1,200 kV transmission lines, India‟s tower industry is moving towards an era of extra high-voltage transmission. Outside India, these companies supply towers and structural components to power utilities and EPC contractors.Their overseas customers include ABB (Germany), AREVA T&D (France), Balfour Beatty Power Network(the UK), Cegelec (France), Cobra (Spain), Downer PTR (Australia), Enelpower S.p.a ( Italy), GYM (Peru), Pivot (Nigeria), Sumitomo Electric (Japan) and SAG (Germany). 108
  • 109. TRANSMISSION TOWERSIndia: Energy Sector September 2010 Transmission Towers … (2/4) Capacity and Production The global economic slowdown has impacted the transmission tower and lines business moderately. This impact was evident in lower capacity utilisations during 2008-09. However, most of the key players expanded capacities during this period. In 2008-09, total capacity of the top three players3 was 369,000 tonne, up from 273,000 a year ago. Total production in the industry in 2008-09 was 537,000 tonnes. The production increased at a rate of 17.4 per cent since 2004-05. Table 35: Domestic Production of Transmission Towers (Thousand tonnes) 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Transmission tower production 283 390 398 498 537 17.4% Source: CMIE, IMaCS analysis Exports of transmission towers increased from US$ 50.5 million in 2004-05 to US$ 212.8 million in 2008- 09. Indian companies have secured contracts in North America, Africa, Middle East and Southeast Asia. Indian companies are cost competitive and have the capability to tackle different types of challenging terrains, having done projects in the extreme terrains of India. 3KEC International, Jyoti Structures and Kalpataru Power Transmission 109
  • 110. TRANSMISSION TOWERSIndia: Energy Sector September 2010 Transmission Towers … (3/4) Table 36: Exports of Transmission Towers (US$ million) 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10^ CAGR# Exports 50.5 70.6 126.0 210.0 212.8 156.5 43.3% ^April-December 2009, #CAGR between 2004-05 and 2008-09 Source: CMIE, IMaCS analysis Industry Growth Drivers and New Technology Development The growth in transmission tower industry is driven by expansion of transmission network, introduction of higher voltage transmission and new technologies for bulk power transmission. It is estimated that in the Eleventh Plan period, 22,100 MW of transmission capacity will be added. CEA has estimated a fund requirement of over US$ 30 billion for implementation of transmission schemes in this period. In the international market, growth is expected in the Middle East where many large power generation projects are being planned to address power shortage. Further, there are plans to set up inter- country and regional lines, which will offer growth opportunities to integrated EPC players. Indian companies which have a presence in the African power transmission space are expected to benefit because of renewed funding by donor countries and multilateral agencies. These developments in domestic and international markets offer tremendous growth opportunities to India‟s transmission towers and lines industry. 110
  • 111. TRANSMISSION TOWERSIndia: Energy Sector September 2010 Transmission Towers … (4/4) Technology advancement and absorption by Indian transmission tower manufacturers primarily involves manufacturing process improvements.The production process of large players is suitably automated with use of CNC machines for drilling, cutting and punching operations. In order to enhance quality of products and reduce downtime, manufacturers continuously upgrade their facilities by employing imported advanced machines. 111
  • 112. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 112
  • 113. WIND TURBINE GENERATORSIndia: Energy Sector September 2010 Wind turbine generators … (1/4) A wind turbine is a rotating machine that converts wind energy into kinetic energy, which is used for production of electric power. Wind turbines are installed at locations with strong winds. These are designed employing advanced aerodynamic modelling to determine the optimum tower height, control systems, number of blades and blade shape. The WTG Industry Wind power generation is one of the fastest growing sources of renewable energy in the world. In India too, the share of renewable energy in the total installed capacity has been increasing rapidly. As of December 2009, the installed wind power capacity was 10,925 MW, which was about 6.3 per cent of the installed wind energy capacity in the world. Government policies have played a significant role in the rapid deployment of wind power systems. The Ministry of New and Renewable Energy (MNRE) is responsible for policy formulation at the Centre, while state governments have policies that follow the general directives of MNRE. The existing financial incentives for wind power developers include 80 per cent accelerated depreciation, customs duty exemption on specific critical components, excise duty and sales tax exemptions, income tax exemption on profits from power generation and preferential tariffs. WTG manufacturers in India include Suzlon,Vestas Wind technology India, Enercon (India), Siemens GE India, Pioneer Wincon, RRB Energy and Regen Powertech. They manufacture a wide range of wind turbine generators with capacity ranging from 250 kW to 2,100 kW. Besides manufacturing, Indian companies 113
  • 114. WIND TURBINE GENERATORSIndia: Energy Sector September 2010 Wind turbine generators … (2/4) also provide project solutions including land sourcing, wind resource assessment, infrastructure development, and installation and commissioning of generators. Capacity and Trade The annual production capacity of wind turbine generators in India is estimated at 3,000 MW. Wind power generation has grown at a rate of almost 30 per cent since 2004-05. Table 37: Installed Wind Power Capacity (MW) 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10^ CAGR# Installed capacity 3,593.5 5,341.7 7,114.4 8,697.9 10,246.2 10,925.0 29.9% ^ As of December 2009, #CAGR between 2004-05 and 2008-09 Source: MNRE, IMaCS Research Wind turbine generators and components, such as nacelle and hub and bolt box assembly, are exported to several countries, including the US, Australia, Nicaragua, Bulgaria and Brazil. 114
  • 115. WIND TURBINE GENERATORSIndia: Energy Sector September 2010 Wind turbine generators … (3/4) Table 38: Export and Import of Wind Turbine Generators (US$ million) 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Export 1.2 23.8 296.7 363.9 692.8 391.8% Import 2.2 7.6 2.4 1.1 2.4 2.1% Source: CMIE, IMaCS analysis Industry Growth Drivers and New Technology Development Government policy support is important for growth of wind energy generation.Volatile fossil fuel prices, heightened concern about energy security and growing preference for clean and green energy are positive factors for the industry. The export-oriented Indian wind generator manufacturers can potentially tap both the domestic and global markets. According to BTM Consultant ApS, wind power is a fast growing renewable energy resource: in 2009, 38 GW of wind power stations were installed worldwide and in 2014 fresh installations could nearly double to 72 GW. Most of the new installations will take place in the USA, China, India, and Southeast Asia. In the domestic market, there is a huge opportunity in states where installed wind power capacity is much less than their estimated potential.The states with high wind power generation potential are Gujarat (9,675 MW), Andhra Pradesh (8,275 MW), Karnataka (6,620 MW), Maharashtra (3,650 MW), Rajasthan (5,400 MW) and Orissa (1,700 MW). Their current installed capacities are far short of the potential. As of December 2009, the installed wind power capacity in Gujarat was only 1,711.8 MW, in Andhra Pradesh 122.5 MW, in Karnataka 1,390.6 MW, in Maharashtra 2,004.4 MW, in Rajasthan 855.4 MW and in Orissa less than 3 MW. 115
  • 116. WIND TURBINE GENERATORSIndia: Energy Sector September 2010 Wind turbine generators … (4/4) The thrust areas identified by MNRE for research and development are: design, development and manufacture of MW-scale wind electric generators (WEGs) up to 25 kW and WEGs for low-wind operations; development of materials used in MW scale WEGs; high efficiency electronics for protecting, controlling and optimizing performance, power management and conversion; and establishing connectivity with grid to export and/or import power. Large Indian manufacturers have dedicated R&D centres. For example, Vestas‟ has set up a R&D centre at Chennai, which is its largest R&D unit outside its home-country, Denmark. This centre does cutting-edge developmental work into all aspects of wind turbine engineering and design. Conversely, India-based Suzlon Energy has based its global R&D in Germany, Netherlands and Denmark, besides India. Suzlon‟s R&D activities are focused on increasing energy yield, reliability, ease of operation and cost reduction through weight decrease. 116
  • 117. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 117
  • 118. DIESEL ENGINESIndia: Energy Sector September 2010 Diesel engines … (1/3) A diesel engine is an internal combustion machine which compresses air to a sufficiently high temperature to ignite the diesel injected into its cylinder. The combustion expands the air in the cylinder and that actuates the piston. Thus, it converts the chemical energy stored in the fuel into mechanical energy, which can be used to generate electric energy. Diesel engines are mainly used for power generation, vehicle mobility and operating industrial equipment. The Diesel Engines Industry In India, diesel engines are used by a variety of industries and services, including telecom, construction, IT/ITES, real estate, hospitality, textiles, auto and auto ancillaries, food processing, pharmaceutical, oil and gas and manufacturing. Major diesel-engine manufacturers include Cummins India, Greaves Cotton, Kirloskar Industries, Birla Power Solutions, Swaraj Engines, Powerica and Wartsila India. These companies produce a wide range of engines in the 10-3,500 horse power (HP) range for mobile and stationary equipments. In the 10 HP and lower segment, engines are, mainly, manufactured for portable power generation sets and agricultural implements such as power sprayers, pump-sets and power reapers. Capacity and Production In 2009-10, the total production of diesel engines in India was estimated at 3.39 million units. Production has grown at a rate of 2.6 per cent during the period, 2004-2010. Although about 90 per cent of the domestic demand for engines is met from indigenous production, imports have grown in the last four 118
  • 119. DIESEL ENGINESIndia: Energy Sector September 2010 Diesel engines … (2/3) years because of cheaper supply from China and South Korea, and the growing popularity of diesel cars. Table 39: Production, Trade and Consumption of Diesel Engines (Thousand units) 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10^ CAGR Production 2,975 3,021 3,171 3,232 3,338 3,390 2.6% Imports 133 194 307 401 366 415 25.6% Total supply 3,107 3,215 3,479 3,634 3,704 3,805 4.1% Exports 295 149 192 145 179 179 -9.6% Consumption 2,812 3,066 3,287 3,488 3,525 3,626 5.2% ^ Estimate Source: CMIE, IMaCS analysis Industry Growth Drivers and New Technology Development Poor power supply in rural areas and frequent load shedding in industrial areas are the key drivers of demand for industrial diesel engines in India. The peak deficit of 13.0 per cent and normal deficit of 10.1 per cent create the need for auxiliary power supply. Although the government plans to reduce peak deficit and normal deficit to 6.5 per cent and 2 per cent, respectively, by 2012, power shortages are expected to continue because of slippage in installations of planned capacities, industrial growth, increasing urbanisation and rural electrification. The demand for diesel engines as substitute source of electricity is expected to remain strong in the foreseeable future. 119
  • 120. DIESEL ENGINESIndia: Energy Sector September 2010 Diesel engines … (3/3) The R&D effort in the diesel engine industry primarily focuses on introduction of new products and improvement of the existing products.The upgrades are mainly aimed at meeting the changing emission norms and improving fuel efficiency. 120
  • 121. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 121
  • 122. CAPACITORSIndia: Energy Sector September 2010 Capacitors … (1/3) Capacitors are passive electronic components that store energy. They consist of two conducting plates separated by an insulator, called the dielectric. A capacitor is identified by the type of dielectric or plate material used. Capacitors are used in electric and electronic equipment. The Capacitor Industry Capacitors are made with a variety of materials for different applications.The raw materials used include paper, plastic film, ceramic, mica, aluminium electrolyte and tantalum.Though capacitors are mostly used in appliances such as television and flash bulb of camera, they have a critical role in power factor correction in electricity networks. Major capacitor manufacturers include Havells India, ABB India, Schneider Electric India, BHEL, Universal Cable and Tibrewala Electronics. A wide range of capacitors are manufactured in India. They include high-voltage and low-voltage capacitors, single and three-phase capacitors, harmonic filters (high and low-voltage), surge protection capacitors, automatic power-factor correction (APFC) panels and motor-run capacitors. The manufacturers also provide a comprehensive range of technical services, including system study, energy audit, harmonic analysis, testing and commissioning of HT/LT capacitor banks and their associated equipment. 122
  • 123. CAPACITORSIndia: Energy Sector September 2010 Capacitors … (2/3) Capacity and Production In 2008-09, the total production of capacitors in India was 19,413 MVAr. Since 2005-06, production increased by over 24 per cent. Table 40: Production of Capacitors (MVAr) 2005-06 2006-07 2007-08 2008-09 Capacitors 15,556 15,020 16,388 19,413 Source: CMIE, IMaCS analysis Capacitors manufactured in India are exported to the US, Spain, Qatar, Turkey and the UAE. Imports are primarily from China, the US, Singapore, Germany, Taiwan and Japan. Industry Growth Drivers and New Technology Development Apart from the growing electronics market, capacitor demand is derived from the need for grid stabilisation and cutting out reverse flow of energy. Hence, grid expansions at the inter-state and intra- state levels are significant demand generators for capacitors. Indian manufacturers are engaged in developing new products to meet changing customer requirements. For example, the R&D unit of Universal Cables has developed a number of products including the following: 123
  • 124. CAPACITORSIndia: Energy Sector September 2010 Capacitors … (3/3) • High-stress low-voltage capacitors. • Mixed Dielectric power capacitors with nontoxic impregnant. • High-voltage all polypropylene film power capacitors. • Water cooled high-frequency capacitors for electric furnace. 124
  • 125. INDIA: ENERGY SECTOR September 2010 Contents  Boilers  Conductors, wires and cables  Transformers  Turbines  Switchgears  Transmission towers  Wind turbine generators  Diesel engines  Capacitors  Energy meters 125
  • 126. ENERGY METERSIndia: Energy Sector September 2010 Energy meters … (1/4) An electric meter or energy meter is a device that measures the amount of electrical energy consumed. The most common unit of measurement on the electricity meter is the kWh. Power utilities, industrial units, commercial establishments, agricultural and domestic consumers constitute the market for energy meters. The Energy Meter Industry Nowadays, meters are not limited to simple data logging; instead, they are seamlessly connected to telecommunication infrastructure and IT systems for continuous monitoring and data analysis. Therefore, meter manufacturers are transforming from product manufacturers into comprehensive solution providers. Indian companies in the energy metering industry undertake design, installation and commissioning of automatic meter reading solutions.These solutions involve networking of meters, collecting data from them and transporting the data over suitable cost-effective media to a central station for display, analysis and report generation. The major energy metering-system manufacturers are EMCO, Analog Devices, Crompton Greaves, L&T and Kaytee Switchgear. These companies produce a wide range of energy metering products that meet the national and international standards. The typical features of energy meters include monitoring of active, reactive and apparent energy, voltage, current, frequency and time-of-day use. There are meters that help in load survey, fraud monitoring, magnetic immunity at wide range of operating temperatures. They also make 126
  • 127. ENERGY METERSIndia: Energy Sector September 2010 Energy meters … (2/4) single-phase and three-phase meters for residential, commercial and industrial connections. Capacity and Production The total production of energy meters in India in 2009-10 was 16,145 units. It has grown at a rate of 19 per cent during the period, 2004-2010. Energy meters manufactured in India are also exported to countries in Europe, Southeast Asia, the Middle East and Africa. Table 41: Production of Energy Meters (Thousands) 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR Energy meters 6,774 9,417 12,480 11,064 9,713(E) 16,145 19.0% Source: CMIE, IMaCS analysis E-estimated Industry Growth Drivers and New Technology Development Industrial growth, urbanisation, rural electrification and replacement of old meters will drive the growth of India‟s energy meter industry. Agriculture is potentially a large market as only 40 per cent of the electricity consumed by this segment is currently metered. In terms of geographies, states such as Bihar, Jharkhand and Orissa are severely under-metered. A favourable policy environment exists for the growth of metering industry. Central schemes such as R-APDRP encourages metering at various network levels. 127
  • 128. ENERGY METERSIndia: Energy Sector September 2010 Energy meters … (3/4) The meter manufactures have set up state-of-the-art R&D facilities to develop solutions for detection of tampering, load management, revenue protection, energy accounting and communication. For example, EMCO has developed a software-interface for configuring meter functions such as programming and reading, report generation and, program development and maintenance. This software, called EDMS, has a flexible modular configuration. Its key features are as follows: • Client administrator module: This module provides controlled access with clear definition of groups and roles. • Inventory and help desk: This module helps track all meter details and also facilitates access to metered data on a computer using remote access. • Data analysis: This module is used for analysing meter data and generating reports. • Data exchange: This module is used to define data exchange formats and rules between the application and any third-party software, such as a billing system. 128
  • 129. ENERGY METERSIndia: Energy Sector September 2010 Energy meters … (4/4) • Energy audit: This module facilitates energy audit at several levels of distribution network. • Billing: This module helps in calculating and generating bills based on meter data. • Web access: This module allows online analysis of performance, consumption and billing pattern of a connection. 129
  • 130. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 130
  • 131. CONTROL PANELSIndia: Energy Sector September 2010 Control panels Control and relay panels facilitate centralised control of equipment in power stations, switching stations and industrial plants. The design of control and relay panels is based on the concept of unit assembly from standard parts. The panels are bolted together to form a board. This approach provides ease of replacement, extension, rearrangement and addition.The panels are usually of standard dimensions – height of 2,200 mm to 2,300 mm, width of 600 mm to 1,000 mm (in stages of 600, 750, 900 and 1,000 mm) and depth of 600 mm or 800 mm. The panel enclosure is usually made of sheet-steel and is equipped with interior lamps, anti-condensation heater and ventilation facilities. The metering panel usually incorporates measurements for voltage, current, energy, frequency or power factor. The Control Panels Industry BHEL, L&T and ABB India are the major control panel manufacturers in the country. There are many medium and small manufacturers who often act as contract manufacturers for the larger players. The companies manufacture a comprehensive range of control and relay panels as well as control desks for control, protection, alarm, indication, metering and synchronising functions for power stations, sub-stations and industrial plants. This industry‟s growth is assured with the expansion of power generation and increasing investment in other user segments. Control panels are used extensively in power plants and sub-stations.The process industries, such as fertilisers and cement, are also large consumers of control panels as they need to monitor and control plant operations remotely. The electronics industry also consumes a large volume of control panels, albeit, of smaller sizes. 131
  • 132. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 132
  • 133. OIL EXPLORATION AND DRILLING EQUIPMENTIndia: Energy Sector September 2010 Oil exploration and drilling equipment … (1/2) Drilling rigs are complex equipment used for creating boreholes in the earth‟s crust. Typically, rigs are used to sample or produce sub-surface reserve of oil or gas. Drilling rigs vary in size and applications. Some rigs are mounted on trucks or trailers for mobility while others are permanently installed on land or in sea. The Oil Exploration and Drilling Equipment Industry Apart from sampling and extracting oil and gas, rigs can also be used to install sub-surface fabrications such as underground utilities, instrumentation, tunnels or wells. Rigs are categorised as onshore and offshore depending on their location of use. Light-duty drilling rigs are often like a mobile crane mounted on a vehicle and are usually used to drill water wells. Oil rigs tend to be large, permanent structures. Initially, oil rigs used to be semi-permanent, as derricks were built on-site and dismantled after the completion of the well. These days, oil drilling rigs are usually heavy, complex and stationary. The major components of oil rigs are mud tank and pump, motors, various types of hoses (such as vibrating and Kelly hose), goose neck, flow lines (which facilitate movement of mud and drilling fluid), rotary tables, derrick and other hoisting equipment, drill bits to crush rocks , and valves such as blowout preventer which facilitate sealing and flow control. Building and maintaining rigs is rather expensive and therefore, oil exploration companies hire them at hefty daily rentals. Globally, about 10 major yards manufacture offshore oil-rigs. Singapore‟s Keppel FELS Limited has the largest capacity for making offshore rigs. 133
  • 134. OIL EXPLORATION AND DRILLING EQUIPMENTIndia: Energy Sector September 2010 Oil exploration and drilling equipment … (2/2) In India, offshore oil rigs are rented from global suppliers. Among the domestic rig makers, BHEL has the largest facilities and it manufactures mobile as well as stationary deep-drilling rigs. While its mobile rigs can drill to depths of 5,000 ft to 7,000 ft its deep drilling rigs can drill to depths of 3,600 m to 9,000 m. With demand of offshore drilling rigs increasing in India, BHEL is also in the process of collaborating with a US-based company for technical knowhow. Some of India‟s ship building companies such as Bharati Shipyard are also venturing into oil-rigs manufacturing. Besides manufacturing, the industry also undertakes refurbishment of offshore drilling rigs. The New Exploration Licensing Policy has boosted oil and gas exploration and production in India. Private sector participation and competition have resulted in new oil and gas discoveries and additional output. However, a combination of high rentals and non-availability of drilling rigs has adversely affected exploration. Only about 10 per cent of the 880 wells proposed for drilling in the first six rounds of the policy, have been drilled so far. However, India has the potential to become a manufacturing base for oil rigs, given its manufacturing base and availability of engineering skills. 134
  • 135. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 135
  • 136. STORAGE BATTERIESIndia: Energy Sector September 2010 Storage batteries … (1/4) A storage battery comprises one or more electrochemical cells, known as secondary cells, which are capable of deriving electrical energy from reversible chemical reaction. Different combination of chemicals are used in storage batteries, such as lead-acid, nickel-cadmium (NiCd), Nickel-metal-hybrid (NiMH), lithium-ion (Li-ion) and lithium-ion-polymer (Li-ion polymer). Storage batteries are widely used in electronic equipment, automobiles and manufacturing. The Storage Battery Industry The storage battery market is classified on the basis of usage – industrial and automotive. Automotive battery business is further classified into original equipment manufacturing (OEM) and replacement segments. Battery users in the industrial category include telecom, infrastructure, uninterrupted power supply (UPS) back-up, railways and power utilities. Storage batteries are also used in submarines and household inverters. India‟s storage battery market is estimated at about US$ 1.9 billion, in which the automotive battery segment accounts for about 55 per cent while the industrial battery segment accounts for the remaining. The organised sector market is estimated at US$ 1.37 billion at current Lead prices, which is almost equally shared by industrial batteries (US$ 675 million) and automotive batteries (US$ 696 million). Exide Industries, Amara Raja Batteries, HBL Power Systems and High Energy Batteries (India) are the major storage battery manufacturers in India. 136
  • 137. STORAGE BATTERIESIndia: Energy Sector September 2010 Storage batteries … (2/4) Capacity and Production In 2009-10, total production of storage batteries was 50.9 million units, compared to 43.1 million units a year ago. Production of storage batteries in India has grown at a rate of 5.8 per cent over the period 2004-2010. However, the demand is growing at a faster rate and is increasingly being met by imports, primarily from China. Table 42: Production andTrade of Storage Batteries (Million units) 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10^ CAGR Production 38.3 35.7 40.1 41.0 43.1 50.9 5.8% Export 0.8 1.0 0.9 1.3 2.8 2.2 21.2% Import 8.6 21.2 24.8 31.6 41.2 49.7 41.8% Demand 46.1 55.9 64.0 71.3 81.4 98.4 16.3% ^ Estimates Sources: CMIE, IMaCS analysis In 2008-09, total import of storage batteries in India stood at 41.2 million units with over 87 per cent of those coming from China. The remaining imports were mainly from Hong Kong,Vietnam and South Korea. The spike in imports from China is attributed to a change in market focus by Chinese producers whose traditional markets were sluggish because of economic downturn. At 2.8 million units, India‟s exports of storage batteries in 2008-09 were modest in comparison to imports. The UAE, Singapore, the USA and Spain are key export markets for India‟s storage batteries. 137
  • 138. STORAGE BATTERIESIndia: Energy Sector September 2010 Storage batteries … (3/4) Industry Growth Drivers The storage battery industry is expected to benefit from the growth in automobile manufacturing. It is expected to grow at 10-15 per cent per annum over the next five years. Increasing incomes and easy consumer credit are driving demand for automobiles and consumer appliances. Increasing demand for household and commercial inverters is another important source of growth for storage batteries. Exports could be a major source of growth given the availability of skilled manpower and cost-competitiveness. In the industrial segment, growth of storage batteries is linked to the industrial production. After dipping to a 2.7 per cent in 2008-09, India‟s industrial production grew by 10.4 per cent in 2009-10. According to Centre for Monitoring Indian Economy (CMIE), the growth has been broad based, and in 2010-11, industrial production will grow more than 9 per cent. Overall economic recovery, industrial growth and large investment proposed in infrastructure sector are expected to boost the industrial segment demand for storage batteries. Major growth opportunities are expected in large-scale power projects, telecom, mechanised farming and rural electrification. New Technology Development Continuous technical improvement to meet the changing requirements of the user industries is the driving force of technology development in the storage battery industry. For development of new products and enhancing features of the existing products, Indian storage battery manufacturers often take collaborative approach, which includes partnering foreign manufacturers for technology induction and automobile OEMs for developing customised products. 138
  • 139. STORAGE BATTERIESIndia: Energy Sector September 2010 Storage batteries … (4/4) Exide has entered an agreement with Furukawa Battery Company, Japan, for lead-acid storage batteries for vehicles, including hybrid batteries, „maintenance free batteries‟ ,VRLA batteries, and Idling Stop System (ISS) batteries. Exide is collaborating with Changxing Noble Power Sourcing Company, China, in development of the „deep cycling E-bike‟ batteries. Exide is evaluating possibilities of development of lithium-ion batteries for the emerging electric vehicle segments. The major R&D focus for Exide is development of state-of-the-art batteries for ISS vehicles (micro-hybrids), mild hybrid and electric vehicles. Other key R&D areas for company include: • Enhancement of re-chargeability and deep cycling capability in the new range of batteries • Development of materials and processes • Enhancement of shelf life of battery. Amara Raja Batteries has designed and developed a micro hybrid program for Tata Motors. The company has also entered into a development agreement with Honda, Japan, for VRLA batteries for motorcycles. 139
  • 140. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 140
  • 141. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (1/11) India is among the top ten importers of fuel in the world. Domestically produced oil and gas are able to meet less than one-third of the country‟s requirement of these energy sources. In 2009-10, the country imported about 85 per cent of its total crude oil requirement. Resources developed so far, have been able to meet just about 29-32 per cent of total oil and natural gas demand. India‟s growing economy requires rapid augmentation of energy resources, particularly to meet its increasing need for power, transportation and manufacturing. Rising income levels have led to higher energy consumption. Consequently, increasing dependence on imported oil and gas has become a major concern for India‟s energy security.Volatility in the international oil and gas market has added to this concern. Traditionally, fulfilling energy needs of the poor, particularly, for fuel and lighting purposes, has been a major reason for continuing subsidies. However, this has meant subsidising the non-poor as well, for want of comprehensive information on energy use patterns. In recent years, this has resulted in unsustainable financial burden for the oil and gas industry.To address this concern, the Government of India has introduced pricing reforms for oil and gas products.The government is also trying to make the allocation of subsidies more transparent and justifiable. Importantly, the Government has recognised the need for addressing rapid consumption growth through the development of domestic supplies. In 1999, the Ministry of Petroleum & Natural Gas (MoPNG) formulated the New Exploration licensing Policy (NELP) to increase investment in oil and gas exploration and production. Under the policy, exploration blocks are awarded through a transparent global competitive bidding process. So far, seven bidding rounds have been held and 203 exploration blocks have been awarded. 141
  • 142. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (2/11) The eighth round of bidding (NELP-VIII) was launched in April 2010, along with fourth round for coal bed methane blocks (CBM-IV). In this round, Government of India has offered 70-oil and gas exploration blocks covering an area of about 163,535 sq km. Simultaneously it has offered 10 coal bed methane blocks under CBM-IV, covering an area of about 5,000 sq. km and spread across seven states of the country. The oil and gas sector has consistently contributed 2.7-2.9 per cent of the GDP from 2004-05 to 2008-09. The GDP from petroleum and natural gas has grown at an average rate of 9 per cent. The share of petroleum products has been increasing in the total sector GDP, indicating a growing refinery and marketing industry.The GDP from petroleum products increased at an average rate of 18.8 per cent in the three-year period 2006-2009.The sector is also a significant contributor to central and state taxes. The sector accounts for 27.5 per cent of the total excise and customs collections of the Central Government. Oil refining industry has been continuously adding capacity and upgrading technology. Today, it is a net exporter. Its price realisations and gross refining margins are at par with international standards, sometimes even better. This industry is heavily dominated by government-owned entities. However, the private sector‟s presence in this area is increasing now. It is estimated that over the next two decades, India‟s oil and gas sector would require an investment of about Rs 10,500 billion (about US$ 233 billion). More than three-quarters of the investments in oil would be absorbed by the refining units. In the case of gas, over 90 per cent of the investment would be spread across exploration, transport and distribution. 142
  • 143. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (3/11) In a scenario of high oil prices and a dearth of new oil production fields in the country, it is imperative to increase production from the existing oil fields using enhanced oil recovery techniques. Currently, such techniques are being applied in 26 oil fields. Most of these are larger fields with probable reserves of more than 50 million barrels. Use of enhancement techniques in small fields has viability concerns. Although the demand for oil and gas products is growing, future demand for these resources could be impacted by the sustained emphasis on energy efficiency, development of alternative fuels and growth of mass rapid transport systems. Subsidy reforms would also have considerable effect on demand as removal of market distortions will align demand with the true economic prices of petroleum products. Importance to Economy India has over 17 per cent of the global population and accounts for about 7 per cent of the world‟s GDP. However, according to the International Energy Agency (IEA), India‟s energy production accounts for just about 4 per cent of the global energy production. In terms of absolute consumption, India accounts for about 5 per cent of the global energy consumption. An average Indian consumes 0.53 tonnes of oil equivalent (TOE) of energy as compared to 1.82 TOE used by an average global consumer. Though coal is still the predominant source of energy, the use of hydrocarbons in the total primary commercial energy supply has been increasing. During the three year period, from 2006-07 to 2008-09, the average growth in gross energy generated in the petroleum products, coal and electricity segments was 8.0 per cent, 6.6 per cent and 6.5 per cent, respectively. 143
  • 144. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (4/11) Table 43: Gross Energy Generated Unit 2004-05 2005-06 2006-07 2007-08 2008-09(P) Coal Million tonne 382.61 407.04 430.83 457.08 493.28 Lignite Million tonne 30.34 30.06 31.29 33.98 - Natural Gas Billion cubic metre 31.76 32.20 31.75 32.42 32.85 Crude Oil Million tonne 33.98 32.19 33.99 34.12 33.51 Petroleum Products Million tonne 129.36 131.08 148.27 158.74 164.59 Electricity Billion kWh 665.80 697.40 752.50 813.10 842.40 Source: Ministry of Petroleum and Natural Gas P-Provisional At current prices, the petroleum sector consisting of petroleum and natural gas production as well as petroleum products, has consistently contributed between 2.7 per cent and2.9 per cent of the GDP from 2004-05 to 2008-09. Over this period, refining and marketing have shown greater growth. In 2004-05, the contribution of oil and natural gas to the sector was 57 per cent and that of petroleum products was 43 per cent. By 2008-09, the share of petroleum products had increased to 54 per cent. While the GDP from oil and natural gas grew at an average rate of 9 per cent between 2006-07 and 2008-09, the GDP from refined products grew at about 18.8 per cent. 144
  • 145. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (5/11) Table 44: GDP from Petroleum Sector (US$ billion) Petroleum & Petroleum Petroleum Sector as % GDP Natural Gas products* sector of GDP 2004-05 656.55 10.44 7.82 18.26 2.78 2005-06 756.07 11.23 10.21 21.44 2.84 2006-07 938.54 13.46 13.98 27.44 2.92 2007-08 1,129.60 15.10 17.05 32.15 2.85 2008-09 1,136.36 14.24 16.67 30.91 2.72 Sources: Central Statistical Organisation, Ministry of Petroleum and Natural Gas *Estimated at 81per cent of GDP from rubber and petroleum products The sector is also a key contributor to the government‟s revenue through excise duties, customs duties, petroleum cess and dividends from the public sector companies. 145
  • 146. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (6/11) Table 45: Realisation of Excise and Customs Duties (US$ billion) 2004-05 2005-06 2006-07 2007-08 2008-09(P) Excise duties 9.55 11.50 13.78 14.98 12.91 Motor spirit 3.05 3.90 4.36 5.00 4.58 Kerosene oil 0.28 0.05 0.06 0.06 0.06 Diesel oil 3.47 4.95 5.97 6.01 4.74 Furnace oil 0.22 0.39 0.45 0.49 0.46 POL products 0.82 1.03 1.17 1.57 1.49 Petroleum gases 0.54 0.07 0.11 0.14 0.13 Cess on crude oil 1.16 1.11 1.67 1.71 1.44 Customs duties 2.93 2.53 3.34 4.51 2.43 Crude petroleum 2.16 1.59 1.81 2.26 0.60 Petroleum products 0.77 0.94 1.53 2.25 1.83 Other non-tax revenue 0.94 1.38 1.51 1.61 2.05 (RE) Total petroleum revenue 13.41 15.41 18.63 21.10 17.39 Source: Ministry of Petroleum and Natural Gas P-provisional RE-revised estimate About 138,000 persons are employed in the public and the private enterprises of the sector, contributing around 0.5 per cent of the total workforce. Between 2005 and 2009, the employment in the sector increased by 4.2 per cent. 146
  • 147. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (7/11) Table 46: Employment in Petroleum Sector (No. of persons) 2005 2006 2007 2008 2009 Exploration and Production 41,415 39,694 38,948 33,935 33,612 Refining 26,859 30,262 28,151 30,128 32,745 Marketing 40,628 43,317 42,970 44,995 42,183 Pipelines 7,318 7,816 7,510 8,933 4,598 R&D 2,096 2,071 2,029 1,964 2,076 Other 15,055 15,151 15,707 19,868 23,759 Total 133,371 138,311 135,315 139,823 138,973 Source: Ministry of Petroleum and Natural Gas In terms of foreign direct investment (FDI), the sector contributed about 1.6 per cent of the total FDI in 2009-10 and 2.2 per cent in 2008-09. Most of the investments have come in the oil refinery segment. Table 47: FDI Inflows to Petroleum Sector (US$ million) Total FDI Petroleum & Natural Gas Sector as % of total FDI 2006-07 12,547 95 0.76% 2007-08 16,874 1,364 8.08% 2008-09 20,950 460 2.19% 2009-10 19,586 316 1.61% Source: Department of Industrial Policy and Promotion 147
  • 148. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (8/11) While most of the investments have come via Mauritius and Singapore, other countries with over US$ 0.02 billion FDI in the sector include the USA, the UK, Netherlands and Cyprus. Acquisition of shares in oil exploration projects contributed about 8.8 per cent to the sector‟s FDI. Domestic Resources and Demand Gap According to the Planning Commission of India, the country‟s demand for various forms of energy including coal, lignite, natural gas and hydroelectric energy was predominantly met from domestic sources until the 1980s.This situation has reversed following the economic and energy reforms of the 1980s and 1990s, which resulted in higher economic growth and energy consumption. In fact, the energy demand and supply projections by the Planning Commission indicate a continuing unmet demand for many years to come. Indias proven and indicated reserves of crude oil amounted to 5.7 billion barrels at the end of 2009, equal to 0.5 per cent of global reserves. Table 48: Proven and Indicated Crude Oil Reserves (Million metric tonnes) 2005 2006 2007 2008 2009 Onshore 376 387 357 403 405 Offshore 410 369 368 366 369 Total 786 756 725 769 775 148
  • 149. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (9/11) The sedimentary basins of India, on-land and offshore (up to the 200m isobaths), have an area of about 1.79 million sq. km. So far, 26 basins have been identified for exploration and they have been divided into four categories based on their degree of prospectivity. Over the last 12 years, the unexplored area has come down to 15 per cent. Table 49: Basin-wise Hydrocarbon Area (Sq km) Basin Offshore On-land Total Proven commercial productivity Assam-Arakan 116,000 - 116,000 Cambay 51,000 2,500 53,500 Cauvery 25,000 30,000 55,000 Krishna-Godavari Offshore 28,000 24,000 52,000 Mumbai Offshore - 116,000 116,000 Rajasthan 126,000 116,000 242,000 Identified prospectivity Kutch 35,000 13,000 48,000 Mahanadi-NEC 55,000 14,000 69,000 Andaman-Nicobar 6,000 41,000 47,000 Prospective basins Bengal 57,000 32,000 89,000 Ganga Valley 186,000 186,000 Himalayan Foreland 30,000 30,000 Kerala-Konkan Lakshadweep 94,000 94,000 Saurashtra 52,000 28,000 80,000 VIndhya 162,000 162,000 Purnea 149
  • 150. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (10/11) Basin Offshore On-land Total Potentially prospective Bastar 5,000 5,000 Bhima Kaladgi 8,500 8,500 Chhattisgarh 32,000 32,000 Kuddapah 39,000 39,000 Deccan Syneclise 273,000 273,000 Karewa 3,700 3,700 Narmada 17,000 17,000 Pranhita Godavari 15,000 15,000 Satpura-S. Rewa-Damodar 46,000 46,000 Spiti Zanskar 22,000 22,000 Deepwater area within Eez 1,350,000 Total 1,390,200 394,500 3,134,700 Source: Directorate General of Hydrocarbons Of the 26 sedimentary basins, ONGC has tested 19 basins for their hydrocarbon potential through seismic survey and drilling. Seven basins have been upgraded to producing or Category I, basins. These are Cambay, Upper Assam, and Assam Arakan Fold belt, Mumbai offshore, Krishna-Godavari, Cauvery and Jaisalmer. Extensive exploration activities have started in these basins. Exploration activities are continuing in seven other basins – Mahanadi, Kutch, Andaman add Nicobar, Kerala-Konkan-Lakshadweep, Saurashtra and Bengal. 150
  • 151. INDUSTRY OVERVIEW – OIL AND GASIndia: Energy Sector September 2010 Industry overview – oil and gas … (11/11) About 80 per cent of current production is from fields which have passed their peak production. India has discovered a few significant gas reserves of late. These fields are expected to peak between 2020 and 2030, falling to 50 bcm by the end of the projection period. Energy security In recent years, new threats to energy security have emerged in the form of the increased global competition for energy resources due to the rapid pace of industrialisation in countries such as India and China.The key exporters of crude oil to India are the Middle-East, North and West African countries. To diversify energy risk, India is trying to boost its domestic oil and gas production, buy oil equity in international oil fields and enter into long-term supply contracts with several partner countries. To boost domestic production, Indian government has opened up the upstream sector to private Indian companies and multinationals. Seven rounds of bidding have occurred over the past decade and significant discoveries have been made in the North-western state of Rajasthan and the East coast regions of Krishna-Godavari and Mahanadi. Since December 2006, private investors have been allowed to develop their own infrastructure. Consequently, several Indian and foreign private companies have become active in the upstream oil sector. 151
  • 152. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 152
  • 153. INTERNATIONAL INTERESTIndia: Energy Sector September 2010 International interest … (1/8) International interest in New Exploration Licensing Policy The NELP was introduced in January 1999 to auction oil and gas blocks to global bidders for exploration and production. Earlier, the government had offered exploration blocks to private companies in nine rounds of bidding.The NELP took lessons from these nine rounds and incorporated several changes in the new policy. These changes were aimed at creating a level playing field for private bidders, Indian and foreign, and the established state corporations. Some of the highlights of the new policy were: • Removal of the compulsion to have government as a partner • Same competitive bidding standards for the public and private sector • Open availability of exploration acreages • Freedom to market produced crude oil and gas in the domestic market • Pricing at par with international prices • Abolition of cess levied on crude oil production 153
  • 154. INTERNATIONAL INTERESTIndia: Energy Sector September 2010 International interest … (2/8) • Import duty exemption on goods required for petroleum production • Seven-year tax holiday following commencement of commercial operations • Pre-tax sharing of profit oil In the first six rounds of NELP, 162 product sharing contracts (PSC) were signed. In response to an initial lack of interest from major oil and gas companies, the government allowed 100 per cent FDI in all upstream activities. In addition, deepwater projects were made attractive by pegging royalty at only 5 per cent for the first seven years of commercial production against 10 per cent royalty for other offshore projects and 12.5 per cent royalty for the onshore projects. In the last completed round of bidding, NELP-VII, 57 blocks were offered for exploration.The features of this round included the following: • Model production sharing contract (MPSC) • Option of seismic study only in the first phase of the exploration period • Up to 100 per cent participation by foreign companies • No signature, discovery or production bonus 154
  • 155. INTERNATIONAL INTERESTIndia: Energy Sector September 2010 International interest … (3/8) • No mandatory state participation • No carried interest by national oil companies • Income tax holiday for seven years from the start of commercial production • No custom duty on imports required for operations • Biddable cost recovery limit up to 100 per cent • Option to amortise exploration and drilling expenditures over a period of 10 years from the start of commercial production • Sharing of profit petroleum with the government based on pre-tax investment multiple achieved by the contractor • Royalty for on-land areas payable at a rate of 12.5 per cent for crude oil and 10 per cent for natural gas • For shallow water offshore areas, royalty payable at a rate of 10 per cent for both crude oil and natural gas 155
  • 156. INTERNATIONAL INTERESTIndia: Energy Sector September 2010 International interest … (4/8) • For deepwater offshore areas (beyond 400 m isobaths) royalty payable for both crude oil and natural gas at a rate of 5 per cent for the first seven years of commercial production and 10 per cent thereafter. Prior to the NELP, only 11 per cent of Indian sedimentary basin area was under exploration. At the conclusion of the seventh round, the area under exploration has increased to about 50 per cent. During the Eleventh Plan period, the target is to increase the coverage to 80 per cent. Table 50: NELP and CBM Achievements NELP-I to VII and CBM-I to III  Hydrocarbon reserves accretion of over 600 MMTOE.  68 oil and gas discoveries have already been made in 19 exploration blocks.  India has become oil and gas producer from deepwater area also.  Private sector interest in deepwater exploration and production has come from Indian and foreign companies (Reliance, NIKO, GSPC).  New discoveries in CBM as alternative fuel have brought India on the select list of CBM producing countries.  Contracts signed for 23 CBM exploration blocks.  More than 6 trillion cu. ft (TCF) reserves have already been established in four CBM blocks.  India‟s first commercial production of CBM commenced in July 2007 at the rate of about 72,000 cu. m per day. 156
  • 157. INTERNATIONAL INTERESTIndia: Energy Sector September 2010 International interest … (5/8) In the NELP-VIII, 70 exploration blocks (the highest number of exploration blocks offered at one go, so far) are available for bidding. Of these blocks, 24 are in deep water (more than 400 bathymetry depth), 28 in shallow water (400-bathymetry or less), eight onshore (200 sq km or more) and 10 are Type-S (less than 200 sq km). Also, for the first time, a new area has been proposed to be brought under exploration in West Andaman Sea. These blocks cover a sedimentary area of about 164,000 sq. km., which is 5.2 per cent of Indian sedimentary basin area. The 18 on-land blocks are in Assam (2), Gujarat (8), Haryana (1), Madhya Pradesh (3), Manipur (2) and West Bengal (2). During the process of formulating NELP-VIII, the government consulted various stakeholders, including the potential bidders, and factored in their views in the final terms and conditions of the auction. CBM-IV auction offers 10 CBM blocks covering an area of about 5,000 sq. km. These CBM blocks are in Assam (1), part Chhattisgarh and part Madhya Pradesh (1), Jharkhand (1), Madhya Pradesh (2), Maharashtra (2), Orissa (2) and Tamil Nadu (1). 157
  • 158. INTERNATIONAL INTERESTIndia: Energy Sector September 2010 International interest … (6/8) Table 51: The Krishna-Godavari Basin The NELP showcase India is expected to dominate the Asian region in terms of fields coming on stream over the next five-year period. Most of the new fields will be from the Krishna-Godavari basin. The success of Reliance in the KG-D6 block is presented as one of the foremost accomplishments of India‟s fledging deepwater industry and highlights what is possible when governments, private enterprise, and global engineering expertise integrate effectively. Using the experience of key contractors and deepwater engineering specialists from Asia, the US, Europe, and the Middle-East, the KG-D6 project took only six years from discovery to production compared to the industry average of nine years for similar deepwater facilities. With the success of D6, Reliance is looking to further develop the area. It already has a total of 36 discoveries in the KG-D6 block. The D-1 and D-3 discoveries are targeting eventual production of 80 mmcm/d (2.8 TCF/d), twice the current national gas production. NELP rounds over the previous decade have brought over US$ 10 billion in investment commitments. A total of 115 discoveries have been made so far and development plans for their exploitation are under progress. In addition, 26 blocks have been awarded for exploitation of CBM and 6 TCF (trillion cubic feet) of gas reserves have been identified so far. A number of Improved Oil Recovery (IOR) and Enhanced Oil Recovery (EOR) schemes have been implemented to enhance the indigenous production of crude oil. 158
  • 159. INTERNATIONAL INTERESTIndia: Energy Sector September 2010 International interest … (7/8) Table 52: Recent Discoveries Company No. Of Discoveries Investor type British Gas 1 Foreign Cairn Energy 27 Foreign Essar Oil 3 Indian private Focus Energy 3 Indian private GSPC 19 State owned Hardy Exploration 1 Foreign HOEC 2 Indian private Jubilant Oil & Gas 4 Indian private Niko Resource 2 Foreign ONGC 12 Central government RIL 41 Indian private Total 115 - Source: Directorate General of Hydrocarbons International Energy Relations India has entered into dialogues with over 50 countries to develop relations in the field of oil and gas exploration, technology absorption, acquisition of energy assets and development of alternative fuel markets. Some of the key cooperation initiatives with other countries are as the following: United Kingdom: Bharat Petro Resources Limited, a 100 per cent subsidiary of Bharat Petroleum 159
  • 160. INTERNATIONAL INTERESTIndia: Energy Sector September 2010 International interest … (8/8) Corporation Limited, has a 25 per cent participating interest in the UK North Sea blocks 48/2c and 1/d. Encore Petroleum is the operator of the blocks. These blocks are at the exploration stage. United States: ONGC supported Keshava Deva Malviya Institute of Petroleum Exploration (KDMIPE), Dehradun, has entered into Shale Gas Research Consortium Agreement with EGI, University of Utah, USA. KDMIPE has also sponsored shale gas research in ISM University, Dhanbad. ONGC has also taken up a pilot project with the help of Schlumberger through its acquired company Tera Tek, which is into geo-mechanical studies. KDMIPE is the nodal agency for monitoring and execution of the shale gas pilot project. Algeria: Engineers India Limited, a state-owned Indian company has been providing consultancy services in the hydrocarbon sector of Algeria for nearly two decades. OVL, ONGC‟s arm for investment in overseas E&P projects, signed a memorandum of understanding (MoU) with Sonatrach in Nov 2000 for, identification of suitable exploration and production projects in Algeria, India, Russia and other countries. Brazil: ONGC and Petrobras signed a MoU for strategic cooperation in key technology areas related to deepwater exploration and production of oil and gas in Brazil, India and other countries. It also involves cooperation in existing oil and gas exploration and production projects of both companies. China: In April 2005, China and India signed a joint statement to cooperate in the field of petroleum and natural gas, including cooperation in the areas of survey and exploration of petroleum and natural gas resources in third countries. 160
  • 161. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 161
  • 162. DEMAND SUPPLY PROJECTIONSIndia: Energy Sector September 2010 Demand supply projections … (1/4) Mandate for the Eleventh-Five Year Plan Considering the continuing gap between the demand and indigenous production of crude oil and natural gas and low crude oil reserves, national oil companies and private companies are being encouraged to venture abroad. The various strategic options in this regard include focus on ventures with producing fields for the short term, equity participation as a part of reserves portfolio management, emphasis on exploration acreages for the short to medium term and promoting upstream sector services for the long term. Table 53: Planned Petroleum and Natural Gas Demand-Supply Ninth Five-Year Tenth Five-Year Eleventh Five- Plan (Actual) Plan (Actual) Year Plan (P) Terminal year demand of petroleum products (Million tonnes) 100.43 119.85 141.79 Reserve accretion (MTOE) 795.13 1,652.92 2,129.44 Crude oil production (Million tonnes) 162.99 166.56 206.76 Natural gas production (bcm) 140.92 158.86 287.31 Net Imports – Terminal Year Crude oil - 111.50 Petroleum products - -15.77 Refining capacity (Million tonnes) 118.37 148.97 240.96 Source: Planning Commission; P-Projected 162
  • 163. DEMAND SUPPLY PROJECTIONSIndia: Energy Sector September 2010 Demand supply projections … (2/4) At the beginning of the Eleventh Five-Year Plan period (2007-2012), the Planning Commission had projected a demand for gas of 279.43 million metric standard cubic meters per day (mmscmd) in the terminal year of the period, compared to 179.17 mmscmd in the first year of the Plan. The corresponding projection for increase in gas production was 63.23 bcm compared to 33.78 bcm. Table 54: Gas Production – Eleventh Five-Year Plan Projection (bcm) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ONGC - 22.10 22.53 22.77 22.99 22.00 OIL - 3.13 3.21 3.25 3.28 3.56 Private/JV - 8.55 22.55 29.41 28.77 37.61 Total 31.55 33.78 48.29 55.43 55.03 63.23 Source: Planning Commission The projected demand for natural gas is the highest for the power sector, followed by the fertiliser, petrochemicals, city gas distribution and sponge iron and steel units. Any surplus gas after allocation to these industries would be available for sale to other units. 163
  • 164. DEMAND SUPPLY PROJECTIONSIndia: Energy Sector September 2010 Demand supply projections … (3/4) Table 55: Projected Natural Gas Demand – Eleventh Plan Period (mmscmd) 2007-08 2008-09 2009-10 2010-11 2011-12 Power generation 79.70 91.20 102.70 114.20 126.57 Fertiliser 41.02 42.89 55.90 76.26 76.26 City gas 12.08 12.93 13.83 14.80 15.83 Industrial 15.00 16.05 17.17 18.38 19.66 Petrochemicals 25.37 27.15 29.05 31.08 33.25 Others* 6.00 6.42 6.87 7.35 7.86 Total 179.17 196.64 225.52 262.07 279.43 Source: Report of the Working Group on Petroleum & Natural Gas Sector for the Eleventh Plan *Sponge iron and steel Since the demand-supply projections for gas leave a significant unmet demand of 38.22 bcm, it is evident that gas imports would increase. According to Planning Commission estimates, by the end of 2011-12, India would import about 23.75 million tonnes of LNG. That could still leave an unmet demand of about 10-11 bcm. 164
  • 165. DEMAND SUPPLY PROJECTIONSIndia: Energy Sector September 2010 Demand supply projections … (4/4) Table 56: LNG Supply – Eleventh Five-Year Plan Projection (Million tonnes per annum) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Dahej 5.00 5.00 5.00 7.50 10.00 10.00 Hazira 2.50 2.50 2.50 2.50 2.50 2.50 Dabhol - 1.20 2.10 5.00 5.00 5.00 Kochi - - - - 2.50 5.00 Mangalore - - - - - 1.25 Total 7.50 8.70 9.60 15.00 20.00 23.75 Source: Planning Commission While the demand for crude oil has been projected by the Planning Commission to be around 207 million tonnes in 2011-12, the projected domestic oil production in that year is only 39-40 million tonnes. Going by the current trends in demand for oil and domestic production, the unmet demand could be higher than projected. Table 57: Crude Oil Production – Eleventh Five-Year Plan Projections (Million tonnes) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 ONGC - 27.16 28.00 29.00 28.53 27.37 OIL - 3.50 3.55 3.73 3.91 4.30 Private/JV - 10.57 10.78 9.76 8.75 7.85 Total 33.98 41.23 42.33 42.49 41.19 39.51 Source: Planning Commission 165
  • 166. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 166
  • 167. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (1/24) Oil imports and refined products exports India imports about 85 per cent of its crude oil requirement. By volume, oil imports increased at an average rate of 10.9 per cent over the five-year period between 2004-05 and 2009-10. In terms of value, the increase was over 26 per cent. Table 58: Crude Oil Imports 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(P) By volume (Million tonnes) 95.86 99.41 111.5 121.6 128.16 159.26 By value (Rs billion) 1,170.03 1,717.02 2,190.29 2,726.99 3,418.87 3,753.78 By value (US$ billion) 25.89 38.16 52.15 67.84 76.95 79.55 P: provisional India may import over 80 per cent of its crude oil requirement, but it is a net exporter of petroleum products. In terms of quantity, exports of petroleum products have increased from 9.83 million tonnes in 2004-05 to 18.12 million tonnes in 2008-09 and 36.30 million tonnes in 2009-10. 167
  • 168. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (2/24) Table 59: Net Exports of Petroleum Products 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(P) By volume (Million tonnes) 9.38 10.02 15.77 18.32 18.65 36.31 By value (Rs billion) 15.04 22.00 40.51 49.79 56.56 110.28 By value (US$ billion) 3.38 4.93 8.92 12.43 13.76 23.45 P: provisional Along with the increase in domestic production of 19.6 per cent in 2009-10, export of petroleum products also increased 38 per cent. While crude oil imports increased 24.3 per cent during this period, net imports increased only 12 per cent. Table 60: Import and Export of Crude Oil and Petroleum Products (Quantity: thousand metric tonnes) FY 2009 2010(P) Change (%) US$ US$ US$ Qty Rs. billion Qty Rs. billion Qty Rs. billion million million million Imports 146,440 4,027.81 90,419 173,921 4,091.32 86,630 18.8% 1.6% -4.2% Crude oil 128155 3,418.87 76,957 159259 3,753.78 79,552 24.3% 9.8% 3.4% Products LPG 2,347 78.32 1,705 2,718 83.29 1,767 15.8% 6.3% 3.6% Naphtha 4,988 173.49 3,802 1,734 49.42 1,029 -65.2% -71.5% -72.9% Petrol 397 15.30 352 385 12.64 266 -3.0% -17.4% -24.4% 168
  • 169. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (3/24) FY 2009 2010(P) Change (%) US$ US$ US$ Qty Rs. billion Qty Rs. billion Qty Rs. billion million million million SKO 1,449 64.59 1,470 985 29.09 614 -32.0% -55.0% -58.2% HSD 2,734 96.56 2,214 2,531 63.90 1,332 -7.4% -33.8% -39.8% Lubes 1,145 47.21 995 1,418 35.18 733 23.8% -25.5% -26.3% FO/LSHS 2,602 78.92 1,746 896 19.35 406 -65.6% -75.5% -76.7% Bitumen 59 1.05 43 69 1.38 29 16.9% 31.4% -32.6% Others 2,564 5,3.50 1,136 3,925 43.28 902 53.1% -19.1% -20.6% Exports 18,285 608.93 13,462 14,662 337.53 7,078 38.0% 22.6% 12.1% LPG 109 4.55 92 131 4.91 104 20.2% 7.9% 13.0% Naphtha 7284 240.28 5,611 9911 298.47 6,318 36.1% 24.2% 12.6% MS/Petrol 5330 175.00 4,000 9762 311.70 6,643 83.2% 78.1% 66.1% ATF 3490 130.12 2,998 4588 133.31 2,824 31.5% 2.5% -5.8% SKO 77 3.62 79 46 1.54 32 -40.3% -57.5% -59.5% HSD 13769 475.20 11,008 18419 508.33 10,728 33.8% 7.0% -2.5% LDO 0.4 .013 0.3 41.0 0.87 18.2 - - - Lubes 93 4.78 148 24 1.08 19 -74.2% -77.4% -87.2% FO/LSHS 5932 117.95 2,738 5173 105.01 2,243 -12.8% -11.0% -18.1% Bitumen 40 0.67 17 39 0.75 16 -2.5% 11.9% -7.0% Others 807 22.39 534 2839 74.39 1,580 251.8% 232.2% 195.9% Net 109,510 2,853.23 63,194 122,948 2,650.95 56,104 12.3% -7.1% -11.2% Imports Source: Petroleum Planning and Analysis Cell P: provisional 169
  • 170. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (4/24) Gross export realisations for petrol, naphtha, ATF, HSD and FO were lower than their respective import costs in 2009-10. However, export realisations were higher for LPG, propane, SKO and lubes. SKO realisations were 150 times higher than import costs. Regional trade movements of the BP Statistical Study indicate that in 2009, India exported mainly to Singapore and other Asia-Pacific countries. Europe and Central America were the other two large importers from India. The country imported mainly from the Middle East. Demand Growth Segments Consumption of petroleum products has steadily increased in India, from 107.75 million tonnes in 2003-04 to 138.19 million tonnes in 2009-10. At the end of March 2010, the five-year average growth of total petroleum products consumption was 4.5 per cent. Table 61: Consumption of Petroleum Products (Thousand metric tonnes) 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(P) 5-year average growth (%) LPG 9,305 10,245 10,456 10,849 12,165 12,344 13,121 5.14 MS 7,897 8,251 8,647 9,286 10,332 11,258 12,818 9.25 NAPHTHA/NGL 11,868 13,993 12,194 13,886 13,294 13,911 10,239 -5.00 ATF 2,484 2,813 3,299 3,983 4,543 4,423 4,627 10.81 SKO 10,230 9,395 9,541 9,505 9,635 9,303 9,304 -0.18 HSD 37,074 39,650 40,191 42,897 47,669 51,710 56,320 7.32 LDO 1,619 1,477 883 720 668 552 457 -20.09 LUBES 1,427 1,336 2,081 1,900 2,290 2,000 2,657 17.56 FO/LSHS 12,945 13,540 12,829 12,618 12,717 12,588 11,589 -3.01 170
  • 171. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (5/24) 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10(P) 5-year average growth (%) Bitumen 3,373 3,339 3,508 3,833 4,506 4,747 4,919 8.17 Pet. coke - - - - 5,950 6,166 6,750 6.55 Others 9,529 7,596 9,586 11,274 5,449 4,597 5,397 -1.22 Total 107,751 111,634 113,215 109,239 120,751 133,599 138,196 4.50 Source: Ministry of Petroleum and Natural Gas; P-provisional Demand Sectors Transport Projections indicate that transport energy demand is expected to grow at 6.1 per cent per annum over the next two decades. The demand is expected to reach 162 MTOE by 2030. Also, the share of transport in final energy demand is expected to double over the next two decades. India currently accounts for only 2 per cent of global transport energy demand. However, in the long term – improved fuel efficiency of vehicles, higher fuel prices, switch to compressed natural gas (CNG) for public transport in major cities and greater use of public transport – are expected to impact the demand growth for transport energy. The number of vehicles on the road is the principal determinant of fuel demand for transport. The total vehicle stock in India increased from 19 million in 1990 to 68 million in 2004. It is projected to reach 295 million by 2030. Annual sales of new light-duty vehicles (LDV), which reached 1.2 million in 2005, are projected to increase to 13.3 million in 2030.Vehicle population growth will continue through the next two decades at 5.7 per cent per annum, faster than the 5.1 per cent growth rate of per-capita GDP. 171
  • 172. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (6/24) The fleet of LDVs is expected to increase faster than any other category of transport vehicles, from 11 million in 2005 to 115 million by 2030, marking an average growth rate of almost 10 per cent. Excluding two and three wheelers, there are currently 13 vehicles per 1,000 people in India. This ratio is expected to grow to 93:1000 by 2030. Despite this seven-fold increase, vehicle ownership in 2030 would still be only 15 per cent of what Japan has today, which is 600 vehicles per 1,000 people. Two-wheelers make up over 80 per cent of India‟s current vehicle stock, yet they consume only 15 per cent of road-transport fuels. The recent shift from two-stroke to four stroke engines for these vehicles has greatly increased their fuel-efficiency and reduced air pollution.Towards the end of the projection period, ownership of two-wheelers will begin to plateau, as more people are likely to purchase passenger cars. Two-wheelers would still account for over 50 per cent of the total vehicle stock in 2030. Experience around the world shows that vehicle ownership takes off when per-capita GDP, expressed in purchasing power parity terms, reaches a level of between US$ 3,000 and US$ 10,000, which allows a large portion of the population afford a personal vehicle. India has passed the US$ 3,000 tipping point and has had a corresponding increase in vehicle ownership rates. As the vehicle stock is expanding rapidly, small changes in the projected rate of growth have a large impact on transport oil demand by the end of the projection period. While the growth in the vehicle stock excluding two-wheelers is projected to increase by 9.4 per cent per year over the next two decades, only a slight increase in this rate of growth would significantly push up road fuel consumption. However, 172
  • 173. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (7/24) even if GDP and household incomes were to grow faster, infrastructure bottlenecks might constrain vehicle ownership growth and consequently the demand for transport fuel. Also, public spending on highways and measures to tackle traffic congestion will also have an impact on demand for transport fuel. Air transport has been growing rapidly in recent years. India is one of the world‟s more vibrant civil aviation markets. The economic growth has increased the propensity to fly. Moreover, the emergence of low-cost carriers has brought the cost of domestic air travel closer to the cost of train travel. Domestic Fuel Energy consumption in the residential sector grew at an average rate of 1.6 per cent during the period, 1990-2005. It is projected to maintain this growth rate from 2005 to 2030. Its share of total energy consumption is expected to decrease from 44 per cent in 2005 to 29 per cent in 2030. Also, the share of biomass in residential energy will drop from 79 per cent to 59 per cent in 2030, as cooking gas and electricity will become accessible to more people. According to the National Sample Survey Organisation (NSSO), rural households depend on biomass for almost 85 per cent of their cooking needs while LPG meets 56 per cent of this need in urban households. It is projected that in 2030, there will be more rural households relying on LPG as their primary fuel for cooking than today. However, biomass would still be used as a secondary fuel. Demand for biomass in urban areas is projected to fall by 15 per cent over the next two decades, and its share in urban household energy use will be a mere 12 per cent in 2030. 173
  • 174. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (8/24) Residential consumption of natural gas is still small in India and is limited to major cities. It is projected to grow by an average rate of 9.1 per cent per year during the period, 2005-2030. Several cities are setting up pipeline networks to supply gas to apartment complexes. But, natural gas consumption would still account for only 2 per cent of total residential energy use in 2030 and all of it would be in urban areas. In 2030, kerosene and LPG are expected to meet 80 per cent of the urban households‟ energy requirement for cooking. They will cater to cooking needs of about 32 per cent of the rural households. The share of urban households in total LPG consumption for cooking is expected to grow from 56 per cent today to about 80 per cent by 2030. Power Generation and Industrial Fuel Power generation accounts for about 29 per cent of total gas consumption in the country and 48 per cent of all the gas consumed for energy purposes. In 2008-09, gas consumption by the power sector was estimated at 12,603 million cubic metres (mcm) compared to 12,037 mcm in 2007-08. According to CEA, as of March 2008, the central, state and private utilities operated 150 gas-based units with a total capacity of 10,018.9 MW. In addition, there are 15 independent gas-based power plants with a total capacity of 3,903 MW. Some of the large gas turbine plants include Ratnagiri CCGT (2,220 MW), Uran CCGT (912 MW), Dadri CCGT (817 MW), Kawas CCGT (644 MW) and Gandhar CCGT (648 MW). 174
  • 175. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (9/24) Power industry is constrained by shortage of gas supply.That has resulted in not only loss of generation at the existing power plants but also in discouraging further investment in gas-based power plants. The loss of generation due to shortage of gas increased to 31.17 billion units in 2007-08 from 21.69 billion units in 2003-04.While the private sector plants achieved about 94.6 per cent of its target utilisation in 2007-08, the state sector achieved 85.7 per cent. Even the commitments of gas allocations made to power stations are not being fulfilled. Fertiliser and Petrochemicals In 2008-09, fertiliser industry consumed 21 per cent of the total gas sold in the country and 54 per cent of the total gas consumed by the non-energy sector. The share of transportation and petrochemicals industries were 2.6 per cent and 6.5 per cent, respectively. According to the Planning Commission, the demand for gas from the fertiliser industry is expected to increase by 35.22 mmscmd to 76.26 mmscmd in 2011-12 from the 2006-07 level. Likewise, the demand for gas from the petrochemicals and refining industry is expected to increase by 4.66 mmscmd to 19.66 mmscmd over this period. Gas is a cheaper feed stock for fertiliser industry compared to naphtha.With capacity expansions in the industry, the demand for natural gas is expected to increase. The fertiliser industry is likely to add 35 per cent more capacity in the coming three years in addition to converting old naphtha and fuel oil based plants to use gas as the feedstock. The industry may need additional 24 mcm gas a day to feed the new plants and the converted ones. While ONGC supplies about 15 mcm gas per day from its fields, the remaining has to be imported. The Government has asked the private gas producer, Reliance, to sell gas 175
  • 176. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (10/24) to fertiliser companies and power producers on priority at US$ 4.2 per million British thermal units (BTUs). Reliance has signed agreements with 12 fertiliser companies for supplies from its KG-D6 field. Buying from domestic sources ensures stable prices for gas users. Table 62: Natural Gas Demand Sectors (Million cubic meter) 2004-05 2005-06 2006-07 2007-08 2008-09(P) Energy 21,328 22,052 20,855 22,436 26,012 Power generation 12,099 11,878 11,963 12,037 12,603 Industrial fuel 3,569 3,780 3,205 3,324 5,912 Tea plantations 142 151 170 160 154 Domestic fuel 343 75 443 39 102 Captive use/LPG shrinkage 4,944 5,048 5,034 5,618 5,706 Others* 231 1,120 40 1,258 1,535 Non-energy 9,447 8,973 10,513 11,892 18,043 Fertiliser 8,173 7,762 8,497 9,822 9,082 Petrochemicals 1,236 1,175 1,377 1,432 1,105 Transport-CNG(mscm) - - - - 1,095 Others** 38 36 639 638 6,761 Energy & non-energy 30,775 31,025 31,368 34,328 44,055 Source: Ministry of Petroleum & Natural Gas P-Provisional *Mainly, City Gas distribution, **Mainly, Sponge iron units 176
  • 177. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (11/24) Share in Global Market According to the World Trade Organization (WTO), the share of fuel imports (crude oil, mineral fuels and feedstock, lubricants and related materials) in India‟ s total imports increased to 40.1 per cent in 2008 up from 34.7 per cent in 2000 and 29 per cent in 1990. This share was among the highest in the world. Table 63: Share of Fuel Imports in Total Merchandise Imports Value share (%) Country 2000 2008 Russia 3.7 1.6 Hong Kong 2.1 3.7 Argentina 3.7 7.2 Iran 2.2 8.4 Mexico 3.0 9.5 Bangladesh 6.2 9.9 Malaysia 4.8 10.8 China 9.2 14.9 European Union 8.5 15.2 Viet Nam 13.5 15.5 Australia 8.3 15.7 Brazil 14.8 19.8 Thailand 12.2 20.8 Philippines 11.1 21.2 Sri Lanka 7.7 22.4 USA 11.1 23.1 Indonesia 13.9 24.3 Singapore 12.1 27.3 177
  • 178. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (12/24) Value share (%) Country 2000 2008 Korea 23.7 32.7 Pakistan 33.1 33.2 Japan 20.4 35.0 India 34.7 40.1 Bahrain 45.5 51.9 Source: World Trade Organisation, 2008 According to the BP Statistical Review of World Energy, June 2010, global oil refining capacity in 2009 grew by 2.2 per cent, or 2 million barrels per day (b/d), the largest increase since 1999. Non-OECD capacity surpassed OECD capacity for the first time. The Asia-Pacific region accounted for more than 80 per cent of the global growth, largely, due to increases in capacity in India (19.5 per cent, or 580,000b/d) and China (10.5 per cent, or 820,000b/d). Table 64: India‟s Share in World Oil and Gas Market (%) Oil Gas Consumption 3.8 1.8 Production 0.9 1.3 Proved reserves 0.4 0.6 Source: BP Statistical Review of World Energy, June 2010 178
  • 179. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (13/24) Energy Demand Met from Domestic Sources India‟s demand for oil has always exceeded domestic supply. Moreover, since the 1970s, there has been an increasing shortage of other energy sources. Domestic coal, natural gas and hydroelectric power have fallen short of total requirement. The main reason for this shortage lies in slow and erratic development of domestic energy resources. Table 65: Percentage Demand Met from Domestic Sources (%) Indicators 1960-61 1970-71 1980-81 1990-91 2000-01 2011-12(P) Coal 100.00 100.00 99.70 97.80 96.10 93.02 Lignite 100.00 100.00 100.00 100.00 100.00 100.00 Oil 5.40 35.60 32.60 42.80 30.30 27.59 Natural Gas/LNG - 100.00 100.00 100.00 100.00 69.30 Hydro Power 100.00 100.00 100.00 99.93 99.96 95.94 Source: Planning Commission; P-Projected Also in recent years, India has been increasingly exposed to the vagaries of global oil supply. The country has become a significant participant in the global oil market, but it is not big enough to influence prices. In fact, after the unwinding of administered pricing in 2002 and floating the rupee, the country‟s balance of payments has been influenced by increasing share of oil imports. 179
  • 180. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (14/24) Growth of Refining Capacity The refining capacity has increased from 177.9 million metric tonnes per annum (mmtpa) in 2008-09 to 184.4 mtpa in 2009-10.The capacity addition has come from public sector companies. However, in 2009- 10, the refining output of public sector oil marketing companies remained constant but it increased by almost 11.5 per cent for the two private sector companies – Reliance and Essar. In fact, the private refineries‟ production increased the overall capacity utilisation from 88.3 per cent in 2008-09 to 101.2 per cent in 2009-10. There are 22 refineries in the country: 19 in the public sector and three in the private sector. The public sector refineries have a capacity of 105 mmtpa and the balance 72.9 mmtpa is contributed by the private sector. The 19 public sector refineries are located at Guwahati, Barauni, Koyali, Haldia, Mathura, Digboi, Panipat,Visakhapatnam, Chennai, Nagapattinam, Kochi, Bongaigaon, Numaligarh, Mangalore, Tatipaka, Narimanam and two refineries at Mumbai. The three private sector refineries are Reliances Jamnagar and Jamnagar SEZ refineries and Essars Vadinar refinery. Reliances Jamnagar refinery is the largest single crude oil refinery in India with a capacity of 33 mmtpa. IOCL dominates the multiple location refining capacity with a share of nearly 33.8 per cent. 180
  • 181. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (15/24) Table 66: Refinery Capacity (Thousand metric tonnes) Installed Capacity Crude Processed Capacity utilisation (%) FY 2009 2010 2009 2010 2009 2010 Public Sector IOC, Digboi 650 650 623 600 95.8 92.3 IOC, Guwahati 1,000 1,000 1,076 1,078 107.6 107.8 IOC, Koyali 13,700 13,700 13,852 13,206 101.1 96.4 IOC, Barauni 6,000 6,000 5,940 6,184 99.0 103.1 IOC, Haldia 6,000 7,500 6,042 5,686 100.7 75.8 IOC, Mathura 8,000 8,000 8,601 8,107 107.5 101.3 IOC, Panipat 12,000 12,000 13,070 13,615 108.9 113.5 IOC, Bongaigaon 2,350 2,350 2,163 2,220 92.0 94.5 IOC, Sub Total 49,700 51,200 51,367 50,696 103.4 99.0 HPC, Mumbai 5,500 5,500 6,652 6,965 120.9 126.6 HPC, Visakh 7,500 8,300 9,158 8,830 122.1 106.4 HPC, Sub Total 13,000 13,800 15,809 15,795 121.6 114.5 BPC, Mumbai 12,000 12,000 12,221 12,501 101.8 104.2 BPC, Kochi 7,500 9,500 7,738 7,875 103.2 82.9 BPC, Sub Total 19,500 21,500 19,959 20,376 102.4 94.8 KRL, Kochi 0 0 0 0 0 0 CPCL, Chennai 9,500 9,500 9,707 9,571 102.2 100.7 CPCL, Narimanam 1,000 1,000 418 517 41.8 51.7 CPCL, Sub Total 10,500 10,500 10,125 10,088 96.4 96.1 181
  • 182. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (16/24) Installed Capacity Crude Processed Capacity utilisation (%) FY 2009 2010 2009 2010 2009 2010 Public Sector BRPL, Bongaigaon 0 0 0 0 0 0 NRL, Numaligarh 3,000 3,000 2,251 2,619 75.0 87.3 ONGC, Tatipaka 78 78 83 55 106.4 70.5 MRPL, Mangalore 9,690 11,820 12,576 12,498 129.8 105.7 TOTAL PSU 105,470 111,900 92,211 91,751 87.4 82.0 JVC/PVT RIL, Jamnagar 33,000 33,000 31,971 31,379 96.9 95.1 RPL (SEZ), Jamnagar 29,000 29,000 31,971 29,555 110.2 101.9 EOL, Jamnagar 10,500 10,500 12,916 13,502 123.0 128.6 JVC/PVT Sub Total 72,500 72,500 76,858 74,436 106.0 102.7 GRAND TOTAL 177,970 184,400 169,069 166,187 88.3 101.2 Source: Ministry of Petroleum and Natural Gas P-provisional Indian refineries mainly produce liquid petroleum gas (LPG), Naphtha, motor spirit (MS), aviation turbine fuel (ATF), kerosene oil (SKO), high speed diesel (HSD), light diesel oil (LDO), lubricants, furnace oil (FO), low sulphur heavy stock (LSHS), and bitumen. Domestic production of petroleum products increased 19.6 per cent in 2009-10 over the previous year to 185 million tonnes. 182
  • 183. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (17/24) Table 67: Domestic Production of Petroleum Products (Thousand metric tonnes) FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010(P) 5-Year CAGR (%) LPG 7,651 7,817 7,717 8,454 8,868 9,170 10,345 5.9% NAPHTHA 12,641 15,796 16,016 18,176 17,978 16,453 18,782 3.9% MS 11,211 11,058 10,508 12,536 14,174 16,021 22,554 16.2% ATF 4,302 5,197 6,219 7,850 9,120 8,092 9,304 13.2% SKO 10,148 9,207 9,026 8,621 8,025 8,461 8,833 -0.7% HSD 43,129 46,081 47,730 53,676 58,482 63,031 73,249 9.8% LDO 1,628 1,385 944 803 713 609 472 -19.0% LUBES 666 646 676 967 882 870 950 9.3% FO 9,102 10,580 10,314 12,259 12,642 14,714 15,257 7.9% LSHS 4,608 4,235 3,804 3,266 3,315 3,046 2,627 -8.9% BITUMEN 3,379 3,347 3,575 3,838 4,450 4,620 4,873 7.9% Others 9,176 7,400 7,551 9,624 11,245 9,569 17,755 23.4% Total 117,641 122,749 124,080 140,070 149,893 154,654 185,000 8.8% Source: Petroleum Planning and Analysis Cell P: provisional Key Efficiency Achievements The refining industry has been expanding capacity and upgrading technology and refinery complexity at regular intervals. As a result, some of the new units, such as those of Reliance and Essar, have improved their gross refining margins significantly. 183
  • 184. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (18/24) Table 68: Gross Refining Margins for Domestic Refineries (US$/bbl) FY 2004 2005 2006 2007 2008 2009 IOC 5.30 6.20 4.60 4.19 9.02 6.28 HPCL-Mumbai 4.30 5.60 3.22 4.78 3.97 6.54 HPCL-Vizag 4.60 5.10 2.56 3.51 - BPCL-Mumbai 4.64 4.56 1.64 3.64 4.60 4.48 BPCL-Kochi 4.00 5.90 3.17 3.46 7.18 6.27 CPCL 4.39 5.36 4.37 5.00 8.47 - MRPL 3.90 5.68 - 4.60 7.00 5.32 RIL 8.80 10.30 11.70 15.00 12.20 Source: Company reports The Nelson Complexity Index (NCI) measures the level of secondary processing facilities of a refinery in relation to its crude distillation capacity. Indian refineries have a relatively lower refinery complexity (less than five) as compared to a global average of six. However, the refineries are upgrading their capacities to treat more types of crude. Also, with stringent environment regulations being implemented, Indian refineries have been forced to upgrade their units. 184
  • 185. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (19/24) Table 69: NCI of Domestic Refineries Company NCI IOCL 4.1 HPCL 3.6 BPCL 4.0 CRL 5.0 MRL 6.0 RPL 11.3 New Refineries HPCL, Bhatinda 9.6 RPL, Jamnagar 14.0 Production of Crude Oil India‟s crude oil production in 2008-09 amounted to 33.51 million tonnes. Its gas production was 33.84 bcm. About three-quarters of total production came from nine offshore fields. The 85 onshore fields supplied the rest. A few major fields discovered in the 1970s and 1980s account for the bulk of Indias oil output.The top five producing fields contribute half of all output. Most of the producing fields are now in decline, including the nine offshore fields. It is estimated that 80 per cent of current production comes from fields which have passed their peak. 185
  • 186. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (20/24) Reforms undertaken under the NELP have had a positive impact on domestic production. Private investors have developed new oil and gas fields. India‟s oil output is projected to increase to 39.51 mmt in 2011-12. A number of new projects, including Mangala, Bhagyam, D6-MA-1, Aishwariya, GS-29-1 and Vijaya are expected to compensate for the decline of existing mature fields. Table 70: Crude Oil Production (Million tonnes) 2004-05 2005-06 2006-07 2007-08 2008-09(P) Onshore 11.59 11.43 11.33 11.21 11.27 OIL 3.19 3.23 3.11 3.10 3.47 ONGC 8.32 8.10 8.06 7.92 7.56 Private/JVC 0.07 0.10 0.16 0.19 0.24 Offshore 22.39 20.76 22.66 22.91 22.23 ONGC (Bombay High) 18.17 16.31 17.99 18.02 17.80 Private/JVC 4.23 4.45 4.67 4.89 4.43 Total 33.98 32.19 33.99 34.12 33.51 JVC: Joint Venture Company; P-provisional 186
  • 187. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (21/24) Typically, the gestation period between discovery and the start of production is eight to ten years. The highest number of new field starts in India in a single year was 28, in 1999. It is estimated that an average of 25 fields would be brought into production every year between 2007 and 2013. But the increase in demand for drilling rigs would drive up costs. Only about 10 per cent of the 880 wells proposed to be drilled in the first six rounds of the NELP have been drilled so far, partly because of a poor availability of drilling rigs. Delays in drilling would result in a smaller contribution of those fields before 2015. Domestic Gas Production and LNG Imports India‟s natural gas production is projected to reach 63.23 bcm in 2012.The production from mature fields is projected to decrease from 24.78 bcm in 2006 to 3.53 bcm in 2030. Still, the domestic gas production has the potential to reach more than 50 bcm in 2020 because of major discoveries over the last seven years in the Krishna-Godavari basin. However, production is expected to peak between 2020 and 2030 and then to drop to 50 bcm at the end of 2030. The outlook for gas production also faces uncertainties. About 100 fields are already being appraised or developed, and they will undoubtedly boost output in the next decade. However, 150 more fields discovered in the last thirty years are still awaiting appraisal. Still, NELP has helped speed up fields‟ development. For example, some of the 20 fields discovered in the Krishna-Godavari basin since 2002 have started production in 2010. 187
  • 188. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (22/24) Table 71: Natural Gas Production (MCM) 2004-05 2005-06 2006-07 2007-08 2008-09(P) Onshore 9,094 9,578 9,272 9,099 8,763 OIL 2,010 2,270 2,265 2,340 2,268 ONGC 5,658 5,751 5,876 5,877 5,753 Private/JVC 1,426 1,557 1,131 882 742 Offshore 22,669 22,624 22,475 23,318 24,086 ONGC (Bombay High) 17,313 16,823 16,567 16,457 16,738 Private/JVC 5,356 5,801 5,908 6,861 7,348 Total 31,763 32,202 31,747 32,417 32,849 Source: Ministry of Petroleum and Natural Gas; P-provisional As production shifts from the mature producing fields in the Mumbai basin on the West coast to the relatively under-developed offshore Krishna-Godavari basin on the East coast, substantial investment is required for oil and gas transmission and distribution infrastructure, especially in the Southeast region of the country. Demand is currently concentrated in the Central and the Northern regions. 188
  • 189. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (23/24) Gas imports are projected to double between 2005 and 2010, reaching about 15 million tonnes per annum (MTPA). Imports are projected to stabilise for a decade thereafter and then quadruple between 2020 and 2030 to 61 bcm as demand continues to grow and domestic production peaks. LNG import capacity at the two existing LNG terminals at Hazira and Dahej currently amounts to 8.7 MTPA. If the two more planned LNG terminals become operational by 2011-12, they will increase LNG import capacity to 24 MTPA. This implies that there could be excess capacity of about 10 MTPA over the next decade. Major new capacity additions might be needed after 2025. However, these projections depend on the availability of supplies from LNG-exporting countries and the competitiveness of gas against other fuels in the market. Protracted negotiations over LNG imports have led to delays in finalising a number of planned gas-based projects. Price has been the main stumbling block, as increasingly expensive LNG struggles to compete against cheap coal and domestic gas. However, it is the most competitive way of filling the gap between the rising demand for gas and the indigenous production. It is extremely unlikely that the plans for piping gas from producing countries will materialise soon. Several international pipeline projects have been mooted, including those from Iran, Myanmar, Turkmenistan and Oman. The Iran-Pakistan-India pipeline, which would be more than 2,660 km-long and have a capacity of 60 mcm per day, has been under discussion since 1994. Geopolitical factors, transit charges and pricing have complicated the negotiations. 189
  • 190. DEMAND SUPPLY SCENARIOIndia: Energy Sector September 2010 Demand supply scenario … (24/24) Table 72: LNG Imports 2004-05 2005-06 2006-07 2007-08 2008-09(P) By volume (Million tonnes) 2.50 5.06 6.81 8.32 8.06 By value (Rs billion) 16.96 33.66 56.5 71.97 95.48 By value (US$ billion) 0.38 0.75 1.35 1.79 2.08 Source: Ministry of Petroleum and Natural Gas 190
  • 191. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 191
  • 192. GOVERNMENT ORGANISATIONSIndia: Energy Sector September 2010 Government organisations … (1/5) The Ministry of Petroleum and Natural Gas (MoPNG) formulates policies for the oil and gas sector and also regulates it. The MoPNG is entrusted with the responsibility of exploration and production of oil and natural gas and their refining, distribution and marketing. It also manages import, export and, conservation of petroleum products and LNG. There are several departments and organisations under the ministry. These are: • Centre for High Technology (CHT): CHT, established in 1987, is an advisory body to implement scientific and technological programmes for the oil sector. It acts as a forum for sharing of technical information amongst the refineries. • Directorate General of Hydrocarbons (DGH): DGH was established in 1993 under the administrative control of MoPNG. DGH‟s mandate is to promote sound management of the oil and natural gas resources, particularly ensuring adherence to appropriate technological, economic and environmental benchmarks. • Oil Industry Development Board (OIDB): The OIDB was set up in January 1975 under the Oil Industry (Development) Act, 1974 to provide financial assistance for the development of oil industry. 192
  • 193. GOVERNMENT ORGANISATIONSIndia: Energy Sector September 2010 Government organisations … (2/5) • Oil Industry Safety Directorate (OISD): OISD is a technical directorate under the MoPNG that formulates self-regulatory measures to enhance safety in the oil and gas industry and coordinates their implementation. • Petroleum Conservation Research Association (PCRA): The Government established the Petroleum Conservation Action Group in 1976 which was reconstituted as PCRA in 1978. PCRA promotes research, development and deployment efforts aimed at petroleum conservation and environment protection. • Petroleum Planning and Analysis Cell (PPAC): PPAC was created in 2002 to assist MoPNG with pricing and coordination issues following the dismantling of Administered Pricing Mechanism (APM) and the consequent dissolution of the Oil Coordination Committee. • Petroleum Federation of India (PFI): PFI was set up in 2002 to promote the interest of the petroleum industry and function as a facilitator for the Indian oil industry. • Petroleum India International (PII): PII is a consortium of public sector companies in the petroleum, petrochemicals and engineering sectors. PII was established in 1986 with the objective of mobilizing individual capabilities of its member companies in technical and managerial domains for international projects. 193
  • 194. GOVERNMENT ORGANISATIONSIndia: Energy Sector September 2010 Government organisations … (3/5) Reforms and Policies Energy sector reforms started in the early 1990s.The first phase of oil sector reform involved allowing private and foreign firms to participate in onshore exploration and production through production-sharing contracts. Between 1996 and 2002, in the second phase of reforms, private participation was allowed in oil and gas production, refining and marketing. In 1997, the government announced a New Exploration Licensing Policy (NELP) to provide a more attractive framework for private and foreign investment in oil exploration. In 2002, the government allowed private-public joint ventures in building oil product pipelines and in 2006, it allowed private investors to develop their own gas pipeline infrastructure. FDI in the gas sector is allowed in oil and gas exploration and production, and in LNG terminals. In 1998, GAIL, ONGC, IOCL and Bharat Petroleum Corporation Limited (BPCL) formed a joint venture, Petronet LNG, to build and operate LNG import terminals. Petronet LNG commissioned its first terminal at Dahej in 2004. Shell commissioned its LNG terminal in 2005 at Hazira. The government expects increased supply and greater competition to eventually remove the need for price fixing and subsidies. A government appointed expert group‟s report, “A viable and sustainable system of pricing of petroleum products”, released in February 2010, has recommended measures to achieve a sustainable pricing policy for the four controlled petroleum products - petrol, diesel, kerosene and LPG - which together constituted 63 per cent of total petroleum products consumption in 2008-09. The Integrated Energy Policy, 2006, delineates the policies of all energy sectors in the country and seeks 194
  • 195. GOVERNMENT ORGANISATIONSIndia: Energy Sector September 2010 Government organisations … (4/5) to promote competition. In fact, new entrants have been allowed to market transportation fuels - petrol, diesel, and aviation turbine fuel - since March 2002.The government has issued retail licenses to Reliance Industries, Essar Oil, Shell, ONGC, MRPL and the Numaligarh Refinery. With the recent discoveries in the Krishna-Godavari basin, domestic natural gas is expected to become the second most used source of commercial energy in India. Efforts are being made to raise imports of natural gas in the form of LNG and through transnational gas pipelines. Pricing Reforms In February 2010, the experts group, headed by former Planning Commission member Kirit Parikh, submitted its report on pricing policy for four major oil products.The committee has recommended that prices of petrol and diesel should be market-determined, both at the refinery gate and at retail stations whereas the prices of kerosene and domestic LPG could be partially raised by US$ 0.13 per litre and US$ 2.22 per cylinder, respectively. For kerosene and LPG, the committee has recommended linking fuel prices with per capita income and selective allocations to poorer families through smart cards issued by Unique Identification Authority. The committee has accepted the subsidy formula proposed by ONGC aimed at reducing subsidy burden of oil companies. The formula suggests an incremental rate of taxes on higher crude oil price realization from the nomination blocks of ONGC and OIL. Acting on the recommendation, the Government has effected retail price changes recently. 195
  • 196. GOVERNMENT ORGANISATIONSIndia: Energy Sector September 2010 Government organisations … (5/5) Figure 6: Price Revisions in Delhi 120 400 HSD (Rs./litre) PDS Kerosene (Rs./litre) 350 100 MS (Rs./litre) LPG (Rs./Cylinder-RHS) 300 80 250 60 200 150 40 100 20 50 0 0 Sep/92 Sep/97 Feb/99 Nov-00 Mar-01 Mar-02 Sep/02 Feb/03 Sep/07 Feb/10 Apr/89 Apr/98 Apr/99 Apr/00 Apr/03 Apr/06 Jun/98 Jun/02 Aug/02 May/03 Jun/03 Aug/04 May/05 May/06 May/08 Jun/10 Jul/96 Jul/05 Jul/08 Jul/09 Jan/94 Jan/00 Jan/03 Mar/03 Mar/04 Mar/07 Dec/97 Nov/02 Dec/03 Nov/04 Nov/06 Dec/08 Oct/90 Oct/02 Oct/03 Oct/09 Standard LPG cylinder weight: 14.2 kg 196
  • 197. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 197
  • 198. TRENDS AND OPPORTUNITIESIndia: Energy Sector September 2010 Trends and opportunities … (1/4) Investing in Overseas Oil Assets As part of its energy security strategy, India has forged new ties with Russia, Iran and China and built partnerships with Burma and Venezuela. The country has also carefully entered into cooperative relationships with several oil producing countries in Africa and in the Middle East. India has also allowed public sector companies such as ONGC and OIL to secure ownership of oil and gas fields and companies overseas. ONGC has acquired equity stakes in the oil fields in Iran, Iraq, Sudan, Libya, Angola, Burma, Russia,Vietnam and Syria. India is looking at Kazakhstan as an important emerging exporter of oil and gas. Kazakhstan is among the top ten countries in the world in terms of explored oil and gas reserves. The country depends significantly on overseas funding to develop these resources, which offers investment opportunities to India. Alternative Fuels Emerging alternative fuel sources include liquid coal, hydrogen fuel cell, coal bed methane and uranium. The developing carbon market, following the Kyoto Protocol, 1997, has also invigorated investment in alternative energy. Several diesel hydro desulphurization projects have been implemented in India‟s oil refineries. Stringent emission norms have been set for vehicular emissions in the form of Bharat Stage II, Bharat Stage III and Bharat Stage IV standards. The Bharat Stage IV (equivalent to Euro IV) norms were launched in Delhi in April 2010. Use of bio-diesel and ethanol blended petrol is also being encouraged through favourable pricing. 198
  • 199. TRENDS AND OPPORTUNITIESIndia: Energy Sector September 2010 Trends and opportunities … (2/4) Strategic Oil Reserves The concept of building a few months‟ strategic oil reserves was first conceived by the US in 1975 after the oil shock. It now has reserves of 727 million barrels in the Gulf of Mexico that can last 37 days. Subsequently, Japan built government-owned reserve of 320 million barrels to last 92 days and a private reserve of 129 million barrels to last 77 days. China and India started constructing their strategic reserves in 2004 and 2007, respectively. The initial Indian reserves are aimed at providing buffer stocks for two weeks. Investment and Infrastructure Development The reference scenario of 6.3 per cent GDP growth rate over the next two decades implies a need for investment of about US$ 228 billion in oil and gas sector. More than three-quarters of the US$ 165 billion oil-linked investments would be absorbed by the refining sector, which would be significantly export oriented. More than 90 per cent of the US$ 91 billion investments in gas will go into exploration, production, transportation and distribution.The upstream investments could be impacted by availability and cost of drilling equipment and skilled manpower. Investments in LNG re-gasification plants would be smaller, US$ 5.9 billion. In the high growth scenario, an average growth of 7.8 per cent in GDP during the period, 2005-2030, means a five time increase in per capita GDP by 2030. In this scenario, the primary energy demand is projected to expand by 4.2 per cent per year, compared to 3.6 per cent in the reference scenario. Coal and oil demand would account for most of the increase. Oil demand is expected to rise to 8.3 mbd in 199
  • 200. TRENDS AND OPPORTUNITIESIndia: Energy Sector September 2010 Trends and opportunities … (3/4) 2030, 1.8 mbd more than in the reference scenario, driven by a dramatic increase in the vehicle stock. Dependence on biomass would decrease further, as higher incomes would lead to greater use of cleaner, more efficient fuels. Per capital electricity generation would rise to 2,400 kWh in 2030. However, higher economic growth itself would require a substantial acceleration and deepening of structural, institutional and price reforms and more rapid infrastructure development. In the high growth scenario, cumulative investment in energy infrastructure would rise to about US$ 1.7 trillion during 2006- 2030 compared to US$ 1.2 trillion in the reference scenario. More than 70 per cent of the increase would be in power generation. Investments in oil would be about US$ 88 billion higher because of the deployment of enhanced recovery techniques. In contrast, investments in gas would increase by only 17 per cent to US$ 71 billion. The investments in coal would be US$ 11 billion more. The total investment under the first seven rounds of NELP stands at US$ 13.8 billion. Under NELP-VIII, oil companies have committed an investment of US$ 1.1 billion. India will sign contracts for 31 exploration blocks awarded to 23 companies, including BHP Billiton Petroleum International, BG Exploration and Production, and Cairn India. India plans to launch NELP-IX in the third quarter of 2010. In the refining segment, over 92 mmtpa of additional capacity is being planned by 2012. Natural gas demand is expected to increase by more than 100 mmscmd over the next four years. Recent gas finds and increased use of gas for power generation, petrochemicals, fertilisers and city gas distribution will raise the share of gas in the energy mix of the country. 200
  • 201. TRENDS AND OPPORTUNITIESIndia: Energy Sector September 2010 Trends and opportunities … (4/4) There are many areas of the sector that remain severely under-developed, such as city gas distribution, LNG import and re-gassification infrastructure, and pipeline networks. However, the growing demand- supply mismatch provides opportunities for investment in the entire value chain of petroleum and natural gas sector. Rising energy demand puts enormous strain on existing energy transport infrastructure. Ports, railways, roads are an important part of the supply chain of petroleum products. Public funds are insufficient to cover all required investments in roads, railways and ports. The government has turned to public-private partnerships as a way of bridging the funding gap. Gas transportation is also attracting significant investment. Government-owned GAIL is a major investor in gas transmission pipelines from well heads to bulk consumers. 201
  • 202. INDIA: ENERGY SECTOR September 2010 Contents  Control panels  Oil exploration and drilling equipment  Storage batteries  Industry overview – oil and gas  International interest  Demand supply projections  Demand supply scenario  Government organisations  Trends and opportunities  Companies 202
  • 203. COMPANIESIndia: Energy Sector September 2010 Companies … (1/3) Table 74: Major Equipment Players Company name Sector Key products Bharat Heavy Electricals Boilers, turbines, transformers, other power and oil Power equipment Limited (BHEL) exploration equipment Supercritical boilers, switchgears, electrical control system, Larsen & Toubro Limited (L&T) Power and other equipment metering solutions and relays, medical equipment, control and automation Cable and cable accessories, control systems, HV-products and systems, insulation components, MV-products and ABB India Power and automation technology systems, power protection and automation products, turbo- charging and transformers. Automation and control, energy, Transformers, switchgears, turbines, motors, generators, Siemens India healthcare and lighting switch and control boards. Electrical and power distribution switchgear, cables and wires, capacitors, building circuit Havells India Limited equipment protection, energy meters and fans. Transformers, energy meeting systems, power quality EMCO Limited Power equipment equipment, substations and transmission line and towers. Turnkey projects in power transmission lines up to 1,200 KEC International Limited Transmission tower kV, power distribution networks, substations, telecom, railways, cabling and engineering services. Suzlon Limited Wind turbines Wind turbines and related EPC contracts. Diesel engines in the 205 HP-2,365 HP range and dual-fuel Cummins India Limited Diesel Engines engines. Storage batteries for the automotive, industrial, and Exide Industries Limited Storage batteries submarine sectors. 203
  • 204. COMPANIESIndia: Energy Sector September 2010 Companies … (2/3) Table 75: Major Energy Sector Players Company name Sector Description Largest power generating company. Government- National Thermal Power Power generation owned. Mainly, thermal power generator, entering Corporation (NTPC) hydropower also. Government-owned, hydropower company. Installed NHPC Limited Power generation capacity of 4,622 MW. Several new projects ongoing. Joint venture between NHPC and Govt. of Madhya NHDC Limited Power generation Pradesh. Joint venture between Government of India and THDC Limited Power generation Uttar Pradesh. Operates the Tehri Hydropower Complex. Central Government-owned intra-regional power Power Grid Corporation of Power transmission transmission company. National transmission utility. India Limited (PGCIL) Also responsible for national load dispatch function. Private sector company. Implementing 300 km Reliance Power Transmission Power transmission transmission line for Parbati-Koldam project at Limited (RTPL) Himachal Pradesh. Power generation, transmission and Private sector company operating primarily in Tata Power Limited distribution. Mumbai and Delhi. Also implementing UMPP. Power generation, transmission and Private sector company operating primarily in Reliance Power Limited distribution. Mumbai and Delhi. Also implementing UMPP. GMR Energy Power projects developer Independent power producer company. GVK Power & Infrastructure Power projects developer Independent power producer company. Jaiprakash Power Ventures Hydropower project developer Independent power producer company. Limited Noida Power Company Limited Power distribution Private power distribution company. 204
  • 205. COMPANIESIndia: Energy Sector September 2010 Companies … (3/3) Company name Sector Description Power generation, transmission and Private sector company operating primarily in Torrent Power Limited distribution. Ahmedabad and parts of Maharashtra as franchisee. Malana Power Limited Hydropower project developer Independent power producer. Independent power producer. Has license for Essar Power Limited Power generation distribution and transmission. Oil and Natural Gas Government-owned, largest oil producer in the Oil and gas exploration and refining Corporation Limited (ONGC) country. Active in oil and gas exploration and activity. Large private sector oil producer in the country. Cairn India Limited Oil and gas exploration and production Recent discoveries in Rajasthan. Gujarat State Petroleum Oil and gas exploration and production, gas Among the largest gas trading companies in India. Corporation Limited (GSPC) transmission and distribution. Recent discoveries in KG-basin. Government-owned. Operates in exploration, development and production of crude oil and natural Oil India Limited (OIL) Oil and gas exploration and production gas, transportation of crude oil and production of LPG. Produces hydrocarbons from its nine assets in Russia, ONGC Videsh Limited (OVL) Overseas oil and gas exploration and equity Syria, Vietnam, Sudan, Venezuela and Brazil. Natural gas transmission and distribution Largest gas pipeline company in India. Also strong GAIL India Limited (GAIL) company CNG and city gas player. Petronet LNG LNG imports LNG terminal owner. Gujarat Gas Company Limited Natural gas transmission and distribution Largest private sector player. Operates in Gujarat. (GGCL) Jindal Drilling and Industries Offshore drilling for oil and gas, horizontal and Offshore drilling services Limited (JDIL) directional drilling and mud-logging services. Largest offshore drilling contractor in the private Aban Offshore Limited (AOL) Offshore drilling services sector. 205
  • 206. INDIA: ENERGY SECTOR September 2010 DISCLAIMER India Brand Equity Foundation (“IBEF”) engaged presentation to ensure that the information is accurate ICRA Management Consulting Services Limited (IMaCS) to the best of IMaCS‟s and IBEF‟s knowledge and belief, the to prepare this presentation and the same has been content is not to be construed in any manner whatsoever prepared by IMaCS in consultation with IBEF. as a substitute for professional advice. All rights reserved. All copyright in this presentation and IMaCS and IBEF neither recommend nor endorse any related works is solely and exclusively owned by IBEF. The specific products or services that may have been same may not be reproduced, wholly or in part in any mentioned in this presentation and nor do they assume material form (including photocopying or storing it in any any liability or responsibility for the outcome of decisions medium by electronic means and whether or not taken as a result of any reliance placed on this transiently or incidentally to some other use of this presentation. presentation), modified or in any manner communicated to any third party except with the written approval of Neither IMaCS nor IBEF shall be liable for any direct or IBEF. indirect damages that may arise due to any act or omission on the part of the user due to any reliance This presentation is for information purposes only. While placed or guidance taken from any portion of this due care has been taken during the compilation of this presentation. 206