1. OVERVIEW OF INDIA’S ENERGY SECURITY Apurva Chandra Joint Secretary, Ministry of Petroleum & Natural Gas Government of India June 2009

2. Global Economic Slowdown Industrial recession together with financial and housing sector crisis in the US led to global economic downturn. Severest since the Great Depression of 1930s. The World GDP annual growth rate fell from 5% in 2007 to 3.1 in 2008 – projected to be negative (-0.9%) in 2009. Unprecedented oil price rise since 2004 aggravated the global economic condition. Revival anticipated in 2010.

3. High Oil Prices initially lowered oil consumption in the developed countries. Economic slowdown extended demand destruction across the world The World oil consumption fell to 84.46 million barrels per day in 2008 – a decline of -0.6% over 2007. The corresponding decline in US was -6.4% and in OECD -3.2%. Price control by the Governments in developing countries helped reduce the adverse impact of high oil prices but created an enormous future financial burden. 3

4. India’s growth story shows resilience against global economic slump. India’s GDP growth during 2008-09 was 6.7% against around 9.0% in the preceding three years. India’s GDP projected to grow at 6.5% to 7.0% during the current year (2009-10). India seems to bounce back to recovery quickly – the industrial output growth during April 2009 is 1.4%. Consumer goods production increases by 16.9%. International Energy Agency (IEA) projects India to register highest annual average real GDP growth of 6.4% during 2006- 2030. India’s energy consumption is also projected to grow at 3.5% p.a. in the next two decades. 4

5. Country TPES (Mtoe) TPES / Population (toe/capita) TPES/GDP (PPP) (toe/000 2000$) USA 23217.740.21 UK 2313.820.13 China 18791.430.22 Japan 5284.130.15 India 5660.510.15 World 117401.800.20 Energy Consumption Per Capita : India and the world IEA : Key World Statistics, 2008 India’s per capita energy consumption among the lowest in the world  7% of USA  28% of the World India accounts for 17% world population, but only about 5% of world’s primary energy consumption,  But projected to rise faster than developed countries International Energy Agency (IEA), Paris forecasts India’s energy consumption growth at 3.5% by 2030, against world growth of 1.6% TPES : Total primary energy supply GDP in 2000 US$ Mtoe : Million ton oil equivalent PPP: Purchasing Power Parity 5

6. Commercial Energy Mix 6 2007 2031 Oil & Gas together accounted 41% of commercial energy in 2007 By 2031 Gas & Nuclear power will have an increasing share Oil will continue to be the single largest energy source (35%) in 2030 Coal share increases indicating adoption of CTL, CBM etc. IndiaWorld Source: 2007 :BP Statistics 2008 2031: IEP Report, Govt. of India 2006 Source : 2007: BP Statistics 2008 2030 : IEA, WEO 2007 2007 2030

7. 7 Petro Product : Increasing Demand Transportation Fuels’ (Diesel, Petrol & ATF) share 51 % of demand- Diesel is nearly 40%. High economic growth key factor for higher demand. Price restraints imposed since 2004-05 boosted demand. Petro products consumption grew at a rate of nearly 7 % in 2006-07 and 2007-08 and fail to 3.5 % in 2008-09(Impact of industrial slow down) Demand growth projected at around 3% in the next 25 years – second highest growth in the world after China. Source: PPAC,MOPNG & EIA (for 2030-31 )

8. Natural Gas Demand Projection Stagnating domestic gas poised to pick up from 2008-09 Share of Private/JV increases: RIL production in end-2008 LNG availability since 2004- 05 augmenting domestic supply  Kochi & Dabhol Terminals to boost LNG supply by 2011-12 Robust gas demand at above 6% per annum in the next 25 years – second highest growth in the world after China. Source: XI Plan Sub-Group Report & Integrated Energy Policy Report, 2006 (for 2031-32) 11 24 30 38 102 177 Both 8

9. 9 India’s Oil production stagnating since 2000s but Gas potential rising Source: MOPNG No large oil finds since the Mumbai High in 1978. Oil Production stagnating around 33 MMT. Gas production at 32.8 BCM in 2008-09 but projected to rise substantially from 2009-10 onwards. Private / JV share increasing : 20% in 2020.

10. 10 Crude Oil: Production & Import Domestic Crude production stagnant at around 33 MMTPA since the last ten years, while demand has risen faster. During 2007- 08 refineries imported around 122 MMT of oil. Dependence on oil import at present 78% - Projected to rise to 90% by 2030 Source: Petroleum & Natural Gas Statistics, MOPNG & PPAC

11. 11 Natural Gas: Production & Import 32.8 BCM ( 29.5 MMtoe) gas production in ’08-09 Public Sector share is around 75 % Production likely to double by 2011-12, of which Private Companies’ share will be 60% LNG imports during 2008-09 = 28 MMSCMD (24% of domestic gas consumption) Source: Petroleum & Natural Gas Statistics, MOPNG & PPAC 11

12. 12 Exploration on Fast Track : Nearly half of country’s sedimentary area explored

13. New Exploration Licensing Policy-NELP  Notified in 1999  Award of licenses through international competitive bidding  Fast track approval mechanism of bids through single window Empowered Committee of Secretaries (ECS)  Up to 100% foreign participation  No Investment by Government of India  Freedom to contractor to market oil and gas in the domestic market at market determined prices  100% cost recovery of Exploration & Development expenditure  Fiscal stability over the contract period  Government gets Profit Petroleum in addition to Royalty 13

14. 14 NELP- Augmenting Domestic Production 203 production sharing contracts signed since 2000 Area under exploration increased more than four times from 0.35 million sq. km in 2000. 68 hydrocarbon discoveries under NELP Regime. Major gas discoveries by domestic and foreign companies – Gas self sufficiency likely in the medium term. The Eighth Round of NELP expected in 2009- 70 exploration blocks to be offered for bidding During the 11 th Plan, 80% of Indian sedimentary basins to be covered under exploration – 100 % targeted by 2015.

15. 15 Refining Capacity

16. BOMBAY (12,5.5) MATHURA (8.0) GUWAHATI (1.0) BARAUNI (6.0) HALDIA (6.0) COCHIN (7.5) BARODA (13.7) DIGBOI (0.65) NARIMANAM (1.0) MANGLORE (9.69) PANIPAT (12.0) VISAKH (7.5) NUMALIGARH (3.0) BONGAIGAON (2.35) CHENNAI (9.5) JAMNAGAR (33.0,29.0) TATIPAKA (0.08) Existing Refineries in the Country (Capacity in MMT) VADINAR (10.5) BINA (6.0) BHATINDA (9.0) CUDDALORE (6.0) PARADIP (15.0) New 16

17. 17 Refining Self Sufficiency achieved since 2001-02 Refining Self -Sufficiency is an important part of country’s energy security Private Sector share is 41% (February 2009) At present, Surplus Refining Capacity is 23 % Exports account for nearly 30 % of total refinery production in 2008-09 India’s refining industry is well-placed to become Asia’s Refining Hub.

18. 18 Distribution Infrastructure

19. Distribution Infrastructure: 2002 to 2008 Unit1.4.20021.4.2008% Growth Retail Outlets Number 188483692195.9 SKO Dealers Number 645166242.7 LPG Distributors Number 7486936525.1 LPG Bottling Plants Number 12818141.4 LPG Bottling CapacityTMT6263869738.9 LPG TankageTMT53267025.9 Pipeline lengthKms553016805203.9 19

20. Concept of National Gas Grid (NGG Concept of National Gas Grid (NGG) The 2006 Pipeline Policy envisages NGG About 6500 km NG transmission pipeline already laid RIL’s 1375 km East- West Pipeline (Kakinada- Bharuch) nearing completion Study being undertaken by the Government with technical assistance from United States Trade Development Agency (USTDA) Total Investment Projected at USD 7.5 Billion (2006 Prices) 20 Source: XI Plan Sub-Group Report, 2006

21. Transnational Pipelines to India Pipeline Pipeline Length (Kms) Estimated Volume (MMSCMD) Imports from Iran Iran – Pakistan – India pipeline 200060-90 Imports from Turkmenistan Turkmenistan-Afghanistan- Pakistan-India pipeline 170040-70 72% of world gas supply is through pipelines Both supply and upcoming demand is around Asia Pipeline is vital to develop a stable Asian gas market 21

22. Strategic Storages Mangalore (1.5 MMT) Vizag (1 MMT) Padur (2.5 MMT) 15 MMT in phases 5 MMT under construction Strategic Storage to provide for Emergency Response Mechanism against supply disruptions 22

23. 23 Managing High Oil Prices

24. Domestic Prices linked to International Price Trend 24 Year $/bbl 2002-0326.7 2003-0428.0 2004-0539.0 2005-0655.7 2006-0762.5 2007-0879.3 2008-0983.6 2009-10 (Up to May ’09) 58.0 India’s Oil Import dependency is projected to rise from 80 % today to 90 % by the year 2030. Oil price changes in International markets, therefore, affects domestic prices in India.

25. 25 Petrol / Diesel Pricing Administered Pricing Mechanism abolished from April ’2002. 22 Price revisions were carried out during 2002-2004 in line with import parity price. The super spike in oil prices since 2004 necessitated price control to minimise adverse impact on the economy and the people. In order to ensure life line energy, i.e. Kerosene & LPG, to the weaker sections of the society & to contain inflation, Government moderated the consumer prices of Petrol, Diesel, LPG and SKO. Lower domestic prices resulted in huge under-realization of revenue by the Oil Marketing Companies(OMCs). OMCs received price discount from Public Sector upstream companies and Oil bonds from the Government.

26. Diversifying EnergySources : Towards a sustainable Energy Future Diversifying Energy Sources : Towards a sustainable Energy Future 26

27. Acquisition of Equity Oil Abroad  Indian companies present in 22 countries and 43 projects  ONGC Videsh Limited (OVL) leads a group of Public Sector and Private sector companies in overseas E&P acquisitions  OVL’s oil and gas production in 2007-08 reached 8.8 MMtoe -14% of domestic production of oil & gas 27

28. 28 Exploitation of Coal Bed Methane (CBM) Comprehensive CBM policy in July1997. 26 CBM blocks already awarded under the first three rounds of international offer. 6 TCF reserves of CBM Gas established in four blocks. First CBM commercial production in July 2007 in Raniganj (WB) by Great Eastern Energy Corporation Limited. 28

29. 29 Underground Coal Gasification (UCG)  The estimated UCG potential in India is equivalent to 19 Trillion cubic metres of Natural Gas.  ONGC in collaboration with Skochinsky Institute of Mining, Russia carries out seismic survey.  Vastan in Gujarat & Hodu Sindri in Rajasthan are the first two blocks suitable for UCG stations.  Pilot production to commence in 2009-10  Coal-to-Liquids (CTL) in pilot stage 29

30. 30 Gas Hydrates In 2007, road map for National Gas Hydrate programme prepared. About 2000 TCF reserves estimated The drill ship “JOIDES Resolution” has collected good quality gas hydrate samples from deep water basin. Presence of 128 m thick gas hydrate layer detected. India is one of the three countries in the world to have physically collected gas hydrate samples.

31. 31 Ethanol-blended petrol (EBP) constrained by restrictive taxes imposed by states. About 5% ethanol blending on all-India basis has been possible, except a few states. Stability in supply and compatibility with automotive engines key to sustained development of EBP to reach the long term target of 10%. Bio-diesel yet to take off. National Bio-Fuel Policy of the Government for long term development Biofuels 31

32. Nuclear Energy Electricity is the backbone of India’s energy structure Nuclear fuel is projected to contribute 11% of electricity generation by 2031-32 The Nuclear Supplier Groups (NSG) exemption to India recently is a watershed in the development of nuclear power in the country 32

33. Renewable Energy Reliable, affordable, socially acceptable and environmentally sustainable energy for the millions of households, who live outside country’s Energy Highway Wind, Solar and Bio-energy constitute the core In wind power, India ranks fourth in the world Power generation potential = 45,000 MW Currently generated = Around 8,000 MW (17%) Solar energy for lighting and cooking 12 lakh solar lanterns and cookers supplied Remote Village Electrification programme completed in 4200 villages / hamlets 39 lakh biogas plants in States/UTs 33

34. 34 Energy Efficiency and Demand Side Management Limited conventional energy reserves and constraints of harnessing non-conventional energy resources call for greater emphasis on energy efficiency and conservation. Energy efficiency measures will provide the most important virtual energy supply sources in the next 25 years. Substantial energy saving potential – 19% of total energy demand. Bureau of Energy Efficiency(BEE) promotes and regulates energy efficiency measures in the country.

35. 35 Controlling Air Pollution by Automobiles in the Country India has adopted Euro standards of Fuel Quality for Petrol and Diesel. The existing standards are: Euro III grades fuel for 13 most polluting cities and Euro II equivalent grade for rest of the country. Euro-IV grade fuel in the most polluting cities from April 2010 and Euro-III in the rest. Compressed Natural Gas (CNG) is being sold as fuel for automobiles – all public transport buses in Delhi converted to CNG. Auto LPG is also being sold as alternative motor fuel.

36. Summing up 36

37. To sum up, management of oil and gas sector in India will be focussed on the following: Enhancing customer satisfaction through efficient and transparent marketing and distribution methods as well as through dissemination of information for making informed choices Expediting E&P efforts to augment domestic production and reduce dependence on unstable sources abroad Improving domestic pipeline infrastructure and promoting trans-national pipeline projects to strengthen the distribution network 37

38. Promoting Bio-fuels and Non-conventional energy to supplement the conventional sources as well as improve environment. Accelerating R&D to enhance recovery from the conventional sources as well as harness the potential of new energy sources Managing geo-politics through diplomacy and regional cooperation for reducing supply risks 38

39. Thank You 39