Tomorrow’s Consulting Guru Challenge <br />“ India’s unmet energy demand: Increase Oil supply by 10%”<br />1<br />
2<br />Agenda<br />
3<br />Methodology<br />
 Energy Needs & Growth<br /><ul><li> India & China are the major drivers for energy growth
 By 2030, India & China would need around 28% of world energy consumption
 Energy demand in India expected to grow at a rate of 5.2% </li></ul>Production<br />Consumption<br /><ul><li> Importance ...
 Enhanced extraction requires more energy input than the output oil contains
 Extraction from oil shale and tar sands is slow, expensive, heavily polluting and resource- (e.g. water) and time-consumi...
 Energy Scenario: Oil & Gas<br />Consumption of Gas increasing at a higher rate<br />Total Energy Consumption = 469.5 Mtoe...
Problem<br />“ India’s unmet energy demand: Business model to increase Oil supply by 10%”<br />“Assume you have been hired...
3 Pronged Approach <br /><ul><li> Tendering process
 Alliance
 Local barrier
 Contract terms & conditions
Shale Gas/ Oil
 Coal Bed Methane
 Coal Gasification
 Enhanced Oil Recovery
 Gas Hydrate
 Marginal Oil Fields
 Total maintenance reliability
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India's Energy Sector - How to increase Oil Supply

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“ India’s unmet energy demand: Business model to increase Oil supply by 10%”

(done with Himanshu :) )

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  • Reservoir and well management practices
  • ONGC has ventured into Shale Gas exploration by spudding the first Shale Gas well RNSG-1 in Ichapur village near Durgapur in Burdwan District of West Bengal on September 21, 2010. The well is targeted to a depth of 2000 mts and will be assessing the Shale Gas potential of about 700 mts thick shale. of Permian age which is about 250 to 300 million years old. As its R&amp;D efforts, ONGC plans to drill three more wells in Damodar Valley by end of XI Plan.
  • The government is planning to raise the price of state-administered, or APM, gas sold to sectors other than power and fertilizer by over 10% to $5.25 per million British thermal unit. US, the cost of shale gas production varies from $3.3 per mmbtu to $6.4 per mmbtu Oil and Natural Gas Corporation has approved a research and development plan for the exploration of shale gas at CBM blocks at Raniganj and North Karanpura in the Damodar Basin, at a cost of $27.1m.
  • India's Energy Sector - How to increase Oil Supply

    1. 1. Tomorrow’s Consulting Guru Challenge <br />“ India’s unmet energy demand: Increase Oil supply by 10%”<br />1<br />
    2. 2. 2<br />Agenda<br />
    3. 3. 3<br />Methodology<br />
    4. 4. Energy Needs & Growth<br /><ul><li> India & China are the major drivers for energy growth
    5. 5. By 2030, India & China would need around 28% of world energy consumption
    6. 6. Energy demand in India expected to grow at a rate of 5.2% </li></ul>Production<br />Consumption<br /><ul><li> Importance of oil as a source of energy is still increasing
    7. 7. Enhanced extraction requires more energy input than the output oil contains
    8. 8. Extraction from oil shale and tar sands is slow, expensive, heavily polluting and resource- (e.g. water) and time-consuming</li></ul>4<br />
    9. 9. Energy Scenario: Oil & Gas<br />Consumption of Gas increasing at a higher rate<br />Total Energy Consumption = 469.5 Mtoe<br />Oil Consumption = 148.5 Mtoe <br />Gas Consumption = 46.7 Mtoe <br />Mtoe- Million Tonne Oil Equivalent<br />195.2 Mtoe<br />Source: BP Statistical Review of Energy 2010<br />5<br />
    10. 10. Problem<br />“ India’s unmet energy demand: Business model to increase Oil supply by 10%”<br />“Assume you have been hired by the Government of India to provide a series of recommendations on developing a business model to increase India’s oil production potential by 10 %”<br />6<br />
    11. 11. 3 Pronged Approach <br /><ul><li> Tendering process
    12. 12. Alliance
    13. 13. Local barrier
    14. 14. Contract terms & conditions
    15. 15. Shale Gas/ Oil
    16. 16. Coal Bed Methane
    17. 17. Coal Gasification
    18. 18. Enhanced Oil Recovery
    19. 19. Gas Hydrate
    20. 20. Marginal Oil Fields
    21. 21. Total maintenance reliability
    22. 22. Lean process execution
    23. 23. Superior contractor management
    24. 24. Recovery from flare & Coker in downstream</li></ul>7<br />
    25. 25. CBM & Gas Hydrate<br />Unconventional Sources <br />Coal Bed Methane (CBM)<br /><ul><li> Natural gas (CH4) and it occurs in coals as adsorbed gas
    26. 26. CBM resources to be estimated at 70-100 TCF
    27. 27. CBM Reservoirs is water saturated & requiring dewatering in initial phase& gas takes time to come on to the surface</li></ul>Gas Hydrate<br /><ul><li> Methane molecules trapped in ice, found in deep sea
    28. 28. Estimated 66,900 TCF of gas hydrate reserves in the country
    29. 29. NGHP (National Gas Hydrate Program) for achieving commercial production
    30. 30. Discoveries in KG-Basin, Andaman Islands, Mahanadi Basin
    31. 31. Still in the R&D stage</li></ul>8<br />
    32. 32. Shale Gas: India Potential<br />Unconventional Sources <br />Jharkhand<br />Assam<br /><ul><li>India has tremendous potential of Shale Gas. Reserves are estimated to be higher than natural gas.
    33. 33. The shale rock found in India is similar to those in the U.S. The cost of producing the gas may be different because the rocks are found deeper in the ground in India than in the U.S.
    34. 34. India’s largest gas field of Reliance Industries in the KG basin —estimated to hold some 10 tcf of gas.
    35. 35. The resource estimation of all potential shale gas areas has not been carried out except the preliminary one for Damodar and Cambay Basin.
    36. 36. India, US Sign Cooperation Pact To Tap Shale Gas Potential on Nov 8th 2010. US Geological survey will carry out studies on shale gas resources and will provide the report to India.</li></ul>Damodar Basin<br />35 TCF<br />Cambay Basin<br />90 TCF<br />Factors favouring rapid development of gas shales: <br /><ul><li> Advances in horizontal drilling
    37. 37. Advances in hydraulic fracturing
    38. 38. Rapid increases in natural gas prices in the last several years as a result of significant supply and demand pressures</li></ul>Source<br />9<br />
    39. 39. Shale Gas<br />Unconventional Sources <br />Costing<br /><ul><li>$.8- $1.3 million to drill a vertical well in US
    40. 40. $3 - $4 million to drill a horizontal well in US
    41. 41. Cost of producing estimated at $6.00 per MBTU
    42. 42. Indian cost would be 25-30 per cent more than the US It would be in the region of $7-8 per MBTU
    43. 43. So, unless the price of gas reaches $8-9 per MBTU, it would be unviable to trade shale gas
    44. 44. Non Core Sector gas price in India now at $4.75 per MBTU
    45. 45. Only basin areas with the size of above 200 square miles are commercially viable</li></ul>Policy<br /><ul><li>For a robust Shale Gas Sector development India need a sound Policy & backing by GOI
    46. 46. APM price be hiked to encourage exploration
    47. 47. Tax & other incentives need to be given
    48. 48. The experience with the case of coal bed methane is not inspiring — India has reserves of some 480 BCM , production only .5 BCM</li></ul>http://www.financialexpress.com/news/shale-gas-cant-do-without-us/711108/0<br />10<br />
    49. 49. Marginal Oil Fields & Oil Recovery<br />A field that may not produce enough net income to make it worth developing at a given time, if technical or economic conditions change such a field may become commercial<br />Fields will be marginal under following consideration:<br /><ul><li>Reservoir Size
    50. 50. Lack of Infra & Technology
    51. 51. Inaccessibility to the area of remoteness
    52. 52. Market for gas
    53. 53. Cost of development</li></ul>How to improve rate & recovery?<br /><ul><li> Smart Wells , Snake Wells
    54. 54. Dragon Wells , Multilaterals
    55. 55. Horizontal wells
    56. 56. It Reduces profile length
    57. 57. Reduces well counts, costs & improve economics</li></ul>Development of Marginal Fields is one of the strategic business pursuits of ONGC, for increasing production by unlocking small pools of discovered hydrocarbon reserves. <br />By 2012, ONGC plans to spend US$2.7 billion on the development of four clusters on the western offshore marginal fields<br />11<br />Unconventional Sources <br />Total Fields–104<br />Fields–32<br />Fields–72<br /><ul><li>Expected Peak Oil Rate ~ 160,000bopd in next 2-3 years
    58. 58. Peak Gas Rate – 13.5 MMm3/d
    59. 59. Total Oil Production by 2012 950 + 160* = 1110 (000b/d)</li></ul>* Source : J C Chaturvedi - ONGC<br />
    60. 60. Challenges & Actions in Award & Execution of Projects<br />Licensing & Tendering<br />Challenges<br />Action to be taken<br />Tendering Process<br />Contract Terms & Conditions<br />Award to the lowest bidder<br />Lack of Alliances<br />Local Barriers<br />12<br />
    61. 61. 13<br />Upstream Operations Improvement<br />Operational Improvement<br />Improvements in these areas can result in upto 30% higher NPV<br />World Class performance on one dimensions typically goes hand-in-hand with world class performance in all.<br /><ul><li>World-class operational execution can add up to 30 percent of value to the production asset base.</li></ul>Opportunities for Operational excellence<br /><ul><li> Total Maintenance Reliability
    62. 62. Lean Process Execution
    63. 63. Superior contractor management
    64. 64. World class well management system – Extracts more than 15% of the oil in comparison to the industry average </li></ul>Good Well management can have a big impact<br />Additional Volume delivered by well & reservoir management <br />17<br />GAP =16<br />1<br />4th Quartile 1st Quartile<br />$10 $2<br />Cost per barrel of oil equivalent<br />Source: Mckinsey Quarterly<br />
    65. 65. Key Issues & Opportunities<br />Opportunities<br />Challenges<br /><ul><li>Unexplored basins
    66. 66. Unconventional Resources – CBM (Coal Bed Methane), Gas Hydrates, UGC (Underground Coal Gasification), Shale Gas etc.
    67. 67. E&P based services
    68. 68. Enhanced Oil Recovery & Improved Oil Recovery
    69. 69. Conducive Policy Environment
    70. 70. Deepwater, Ultra deepwater exploration technological barriers
    71. 71. Transportation and logistics infrastructure to enable timely commercialization of E&P potential
    72. 72. Regulatory & Policy Risk
    73. 73. Capital Risk
    74. 74. Market Risk</li></ul>Key Issues/Risks<br />Technological Risk<br />Infrastructural Risk<br />Regulatory Risk<br />Capital Risk<br />Market Risk<br />14<br />
    75. 75. Finally - Meeting Supply – 10%<br />Actions<br />CBM<br />Shale Gas/Oil<br />UGC<br />Gas Hydrate<br />Flare recovery system – Saves 2-3% fuel <br />Coke to Natural Gas<br />Reducing T&D losses<br />Decreasing Demand <br />Without Reducing Growth<br />Upstream<br />Downstream<br />469.5 <br />Mtoe<br />(3.5 <br />million <br />bpsd)<br />10% <br />increase<br />46.7 <br />Mtoe<br />214.7<br />Mtoe<br />148.5 <br />Mtoe<br />Energy <br />Consumption<br />Increased <br />Oil + Gas<br />Consumption<br />Oil + Gas<br />Consumption<br />15<br />
    76. 76. Securing Global Supplies & Energy Storage<br />Global Supply - Diversify<br />Crude Import – Country wise share (FY 09)<br />India relies significantly on Saudi Arabia, Nigeria, Iran, Iraq and Kuwait. About 64% of India’s oil come from West Asia.<br />Need to diversify energy sources:<br /><ul><li> Make inroads for oil in Africa, Central Asia and South America, both in terms of trade and equity investments
    77. 77. Explore possibilities for trade in both liquefied and piped natural gas.
    78. 78. Deepening of ties with energy supplying countries</li></ul>Energy Storage<br />Our economy is highly vulnerable to supply disruptions<br />Following in the footsteps of all superpowers, we should build up reserves for 90 days of net oil Import<br />Government of India is in the process of setting up Strategic storage of crude oil in collaboration with gulf countries, at proposed locations like Mangalore, Maddur & Vishakhapatnam<br />The proposed setup capacity is around 15MT whereas our minimum requirements are around 30 MT<br />Considerations for Storage site selection:<br /><ul><li>Strategic & Safe location
    79. 79. Location of Refineries supplying Oil
    80. 80. Cluster of refineries to be supplied oil</li></ul>16<br />
    81. 81. Recommendations: Increasing Oil Supply by 10%<br />Action at Upstream:<br /><ul><li>Tapping unconventional oil reserves</li></ul> - Gas hydrates<br /> - Coal bed methane<br /> - Underground coal gasification<br /> - Shale gas exploration<br /><ul><li> Tapping from marginal fields
    82. 82. Adopting OALP (Open Acreage Licensing Policy) instead of NELP
    83. 83. More R&D funding in E&P (exploration & production) New methods of oil recovery</li></ul>Action at Downstream:<br /><ul><li> Coke to Natural gas: The coke that is received from the coker unit can be converted into natural gas by coal gasification upon Catalytic Cracking.
    84. 84. Flare Recovery system in the downstream of CDU: A recovery system to be placed in the downstream of CDU, to recover the gas & oil that are passed for flaring. On an average 8% of the fuel gets wasted in flaring .
    85. 85. Setting up more SEZ: As it is economical to put the recovery system at the large refinery rather then in the refinery of smaller capacity</li></ul>Preventive Steps:<br /><ul><li> Reducing T&D losses: Transmission & Distribution Losses takes away 29% of the total generation  Energy need of 13 states like Delhi.
    86. 86. Strategic Storage & Diversify Imports</li></ul>T&D loss in China 6%, in US it is 7%<br />17<br />
    87. 87. 18<br />Thank you<br /> Annexure<br />
    88. 88. Annexure- Refining Capacity<br />19<br />HMEL Bhatinda<br />(9.0)<br />Existing Capacity 178 MMT<br />Planned Capacity 78 MMT<br />IOC Panipat<br />(12.0, 3.0)<br />IOC Digboi<br />(0.7)<br />IOC Bongaigaon<br />(2.4)<br />IOC Mathura<br />(8.0)<br />IOC Barauni<br />(6.0)<br />IOC Numaligarh<br />(3.0)<br />IOC Guwahati<br /> (1.0)<br />BORL Bina<br />(6.0)<br />IOC Haldia<br />(6.0), (1.5)<br />IOC Koyali<br />(13.7)<br />RPL (SEZ) EOL <br />Jamnagar<br />(33.0, 29.0, 10.5+24.5)<br />East<br />19.1, 16.5<br />IOC Paradip <br />(15.0)<br />HPCL Mumbai (5.5, 2.4)<br />North & West<br />123.7, 44.9<br />Visakh<br />(7.5, 7.5)<br />BPCL <br />Mumbai (12)<br />ONGC Tatipaka<br />(0.08, 0.08)<br />MRPL Mangalore<br />(9.7, 5.3)<br />CPCL Chennai<br />(9.5, 1.7)<br />BPCL Cochin<br />(7.5, 2.0)<br />CPCL Narimanam<br />(1.0)<br />South<br />35.28, 16.58<br />
    89. 89. Annexure : Oil Exploration: India<br />NELP<br /><ul><li> GOI received tremendous response to NELP 6&7, but now response level is not the same
    90. 90. NELP 8 saw only 36 blocks bid for from the offered 70.
    91. 91. Number of bids are also decreasing from the peak of 180’s
    92. 92. NELP 9 is also not expected to generate interest as the blocks offered are small in size & are discarded by earlier bidders
    93. 93. Exploration efforts have increased in the past few years. Players are now focusing on Gas, Shale Gas in India.
    94. 94. Indian oil production got boost in 2010 due to starting of production from Cairn Oil fields
    95. 95. Production is expected to peak in 2012 at 950,000b/d
    96. 96. Big Oil companies were missing from NELP
    97. 97. In order to attract them GOI is coming with Open Acreage Licensing Policy (OALP), which will enable companies to bid round the year</li></ul>Indian Sedimentary basin: level of Exploration<br />Need to look for other unconventional sources of oil & gas - CBM, Shale Gas, Gas Hydrates<br />20<br />
    98. 98. Annexure - Natural Gas: India<br /><ul><li> Production of natural gas has increased over 3 times in the last two decades
    99. 99. Natural gas accounts for 9% of the India’s energy mix. Projected to reach at 15-16% by next decade
    100. 100. No fixed pricing mechanism today
    101. 101. Huge uncertainty in trans national pipelines: Iran, Myanmar, Bangladesh, Oman & Turkmenistan</li></ul>Energy resources diversification and overall energy security  Increase in Natural Gas consumption. At present 8%.<br />Investment in building LNG( Liquefied natural gas) terminals. LNG demand projected to double by 2015.<br />21<br />

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