1. 1 Energy Security of India The Place & Price of Coal & Gas T L Sankar CII-PowerMart 2005 Power for Empowering East Kolkata 16-17 Nov 05

2. 2 Purpose of the Presentation Economic Growth calls for increase in supply of energy. While India has registered a commendable rate of economic growth in the recent past, this has been achieved with unsatisfactory supply of energy.The energy supply situation is causing anxiety. Many fear that India’s aspiration to achieve 8% per year GDP Growth in the next decade may be constrained by lack of energy supplies. This presentation seeks to probe ways in which India could meet its energy demand to support such a high rate of growth.

3. 3 What is Energy Security? Should ensure that the Country has a) on a sustainable basis (for ever) energy b)of adequate quantity to meet the needs of all people including the poor and remote area residents c) for all legitimate uses d) of appropriate quality and the desired fuel form e) at affordable prices by the Indian consumers * The production,transport and utilization of energy is achieved\ all times with minimum adverse impact on environment. * Energy Security should be harmonious with the National Security plans.

4. 4 APPROACH TO THE STUDY What fuels are used in the economy? What determines the choice of fuels in the different sectors? What is consumption of Fuels now? What would be the consumption of different fuels in the future-2025? How much of the requirement would be met from fuels resources of India? How to ensure adequate supply of indigenous and imported fuels? How to minimize use of imported fuels &reduce the total fuel cost to the economy?

5. 5 S No. SectorPreferred FuelAlternate Fuels used 1.DomesticKerosene/LPG (for Heat), Electricity (for Light) Fuel wood,agri- waste Coal/Soft coke Natural Gas (piped) 2.CommercialElectricity (for light&space conditioning) Kerosene 3.AgricultureDiesel/Kerosene for water pumping Diesel/Kerosene for agriculture implementation Bio fuels Animal power- 4.IndustryCoal/Oil products (for heat) Electricity (for light & for moving machines) - 5.TransportDiesel/Petrol/Electricity- 6.othersAll Fuels- Sector-wise Fuel choice

6. 6 mmt= million metric tonnes YearCoal mmt Oil Production mmt Natural Gas BCM Total Electricity (Generation) BKWH 1980-81 10932.262.4119.00 2003-04380107.7532.0633 Annual Rate of Growth % (1981-2004) 5.4 11.9 7.5 India’s Energy consumption

7. 7 Per Capita Energy Consumption Source : BP Statistical Review of World Energy 2004 In spite of this growth, the per capita energy consumption of India is far lower than that of the developed nations and some developing nations. Even to reach world average it has to increase five fold. With a population of over a billion, fast moving towards 1.5 billion, this would be a daunting task with some consequences for the world energy market. India’s approach towards Energy Security through self-reliance could help India & also other countries

8. 8 India – Energy Needs Based on Elasticities set out, demand for Total Primary Energy Supply (TPES) and Electricity supply have been projected assuming, a GDP Growth of 8% and official population estimates. These projections are in line with the other estimates when they are corrected for a higher GDP Growth rate. PeriodTPESElectricity Generated (Utilities+non utilities) 1980-20035.10%6.90% 2004-20197.54%7.61% 2020-20306.79%6.74% The increased demand for total primary energy and electricity to sustain an 8% growth is only about 2 % above the rates achieved in the past.

9. 9 India – Specific Fuel Needs for Non Power uses Coal Oil & Gas are used directly in several sectors. They are also used for power generation.Power is also generated from primary sources like nuclear, hydro and renewable. Direct use of fuels is estimated first. Based on these growth rates, and adjusting for a higher 8% GDP growth, the specific fuel needs are projected.

10. 10 Sources of Power generation The preferred source of for power generation should be renewable non-fuel sources namely hydel, renewable and nuclear. As these resources are limited, thermal power from coal, oil and gas are resorted to. The production from non-fuel sources, however, is constrained by a few factors: Nuclear – Policy constraints, uranium availability, date of commercialising fast breeder or thorium based cycles. Hydel – Adequate investigations, obtaining environmental clearance, making R&R arrangements Renewable – snags in technology, high costs Keeping in view this, the following targets the following targets have been set by by official agencies. Nuclear cumulative capacity 25,000 MW by 2030. Hydel – 20% of total power generation by 2030. Renewable – 5% of total electricity generated by 2030. Non- Fuel based Power Generation Year All in Billion kWh. Renewable (5%) (d)

11. 11 India Fuel Needs for power Coal is the preferred fuel for power generation. Even at Rs. 1000/ ton, the fuel cost will work out to Rs. 0.70 per unit. If delivered price of Natural gas is $4/MMBTU, the fuel cost would be Rs. 1.40 per unit. Even at distances above 1500 kilometers, Coal is likely to be a the preferred fuel. Predictability of future prices is higher in Coal than in gas. Long term fixed price contracts indexed to labour costs are possible in case of Coal. Scenario – I Gas based generation would be as at present, 13% of total thermal generation and rest 87% will be from coal. YearTotal Thermal Electricity (BkWh) Coal based BkWh Gas based BkWh Coal Req. MMT Gas Req. BCM. 04-054253705525911 09-106225418137916 14-1586074811252422 19-201257109316376533 24-251620141021198742 29-3023642057307144061 Scenario-II Coal production will be constrained to a growth rate of 5% considered as easily achievable and the rest of power requirement would be using gas. To arrive at total fuel needs of India, two alternative scenarios are developed. YearTotal Thermal Electricity (BkWh) Coal based BkWh Gas based BkWh Coal Req. MMT Gas Req. BCM. 04-054253705525911 09-1062247215033130 14-1586061424643049 19-20125780545256490 24-2516201051569736114 29-3023641357997957199

12. 12 Energy Demand Scenarios The total energy requirements both primary and secondary are summarized under the two scenarios. Year Coal MMT Oil MMT Natural Gas BCM Total Electricity B kWh % which Non fuel based Nuclear Hydel Renewable 2004-05368127325871511729 2009-10509152418622517243 2014-156791815212014124060 2019-201952166817646635388 2024-251204259852304108461115 2029-3017053091123385175677169 Year Coal MMT Oil MMT Natural Gas BCM Total B kWh % which Non fuel based Nuclear HydelRenewable 2004-05368127325871511729 2009-10461152558622517243 2014-155861817912014124060 2019-2075021612617646635388 2024-259582591572304108461115 2029-3012223092503385175677169 Scenario-I Scenario-II

13. 13 Wind Potential 45000 MW Potential exploited 1267 MW Tamilnadu 787 MW Gujarat 166 MW Andhra Pradesh 89 MW Karnataka 37 MW Kerala 2 MW Madhya Pradesh 22 MW Maharashtra 155 MW Hydro Potential 15000 MW Himachal Pradesh 1624 MW Uttar Pradesh 1472 MW Arunachal Pradesh 1059 MW Karnataka 652 MW Maharashtra 599 MW Kerala 466 MW Madhya Pradesh 410 MW Bihar & Zarkhand 367 MW Potential exploited 1341 MW Oil Reserves 732 Mn Tons Gas Reserves 763 Bn Cu Mtr Reliance Gas find 198 BCM Cairn Gas Find 28 BCM Present gas prod 30 BCM pa Oil & Gas Coal Reserves 246 Bn Tons Jharkhand 71.14 Bn Tons Orissa 59.10 Bn Tons Chattisgarh 38.13 Bn Tons Total Coal Mines 561 Present production of Coal & Lignite in excess of 389 MT pa Coal Biomass Potential 3500 MW Maharashtra 1000 MW Uttar Pradesh 1000 MW Karnataka 300 MW Andhra Pradesh 200 MW Gujarat 200 MW Punjab 150 MW Potential exploited 272 MW Biomass Small Hydro Wind Municipal Potential 1000 MW Industrial waste potential 700 MW Projects implemented 9.5 MW Projects under const. 5.2 MW Projects under dev 21 MW Waste India has all forms of energy resources and they are available in all parts Sources of Energy

14. 14 Coal Reserves & Production 248 Billion Tonnes of Coal Reserves out of which 93 Billion Tonnes are proven. Of these, the coking coal needed for steel production is only a small part. Present Production Levels – 382MT (2004-05). Reserves can sustain over 100 years of use at this level. Productivity of Coal mines in India is very low, ranging from 152 tones to 2621 tones per miner per year, compared to 12,000 tons in Australia and US. Huge potential exists to increase the production and productivity. Industry essentially comprises two large Government owned companies CIL & SCCL. The production plans as now projected by the Industry, leave a large gap between demand and supply. Coal Reserves: Source: Coal Vision 2025. Bn tonnes = Billion tonnes. CategoryTotal Coal Reserves (Bn Tonnes) Coking Coal reserves out of Total Reserves (Bn Tonnes) Proved9317 Indicated11714 Inferred382 Total24833 2004-052009-102014-152019-202024-252029-30Avg growth (%) Demand as foresee* 368509679951120917056.2 Public sector production* 361509679942108612005.0 MT Coal : demand supply gap * CIL / SCCL production plans are under frequent revisions.

15. 15 Coal Sector – Strategies for Future Liberalizing captive coal mining provisions. Use of modern technology to augment productivity and quality Adoption of clean coal technologies, such as IGCC etc Allowing Private sector into coal mining and trading Replacing Coal Linkages with Fuel Supply Agreements Acquisition of Coal equities abroad Create competition among public sector coal companies at the State and Central level. Rationalization of railway freights Infrastructure status to coal industry Closing down uneconomic mines after duly compensating the affected stakeholders. The Hope: The coal industry consisting of only two companies has been able to achieve over 5% per annum growth. If more players are allowed into coal mining with adequate safeguard to workers and to coal conservation issues it is possible to step it up to 7%. China achieves an increase of over 100 million tonnes a year and is producing over 2000 million tonnes against India’s 400 million tonnes. Per capita coal consumption in India is slightly to be less than that of USA even in 2030.

16. 16 Natural Gas Natural Gas production stands at close at 32 BCM per annum and the reserves at 922 BCM After a major jump in the production of natural gas in late 90s, the production has stagnated With the success of 4 rounds of NELP, the gas production is set to rise again. The new gas finds especially in deep off shore wells have added reserves. The new exploration licensing policy for gas is attracting private industry from India and abroad in large numbers. The mood in the industry is up beat.

17. 17 Natural Gas – Demand Supply Year DemandSupply 2004-053634 2009-104157 2014-155285 2019-2068105 2024-2585? 2029-30113? If coal supply is adequate the demand and supply of gas will be as in the table. The supply of gas from domestic sources and as LNG imports and pipeline import of gas is under advanced stage of discussion. New finds of gas deposits and promise of more have raised hopes of increasing the use of gas for power generation in replacement of coal. India’s unique location of being close to some of the world’s largest gas deposits in Qatar, Oman, Iran and Central Asia has raised hopes to get piped gas from these sources. LNG is the next best option. The price of gas defines the sectors and levels of use. At $4 per MMBTU and above gas can be used only in fertilizer, petrochemical and as auto fuel and domestic fuel. If the price of imported gas is less than $3 per MMBTU, gas can substitute coal for power generation and its demand can become very large.

18. 18 Natural Gas India has stepped up its quest for gas by resorting to NELP. The efforts to source gas from outside the country are also underway. Blocks identified for exploration Source : Directorate General of Hydrocarbons, Govt. of India

19. 19 Natural Gas – Supply Options * includes 40 MMSCMD from Reliance K-G Basin. @ It is assumed that the additional gas finds will replace only the depleting production from the existing fields. 2004-052009-102014-152019-202024-25 I. Domestic Supply3043*43@45@ II. Coal Bed Methane01222 Sub Total (I + II)30444547 III. Imports A. LNG 1. Dahej Terminal310 2. Hazira Terminal03333 3. Dabhol Terminal0-777 4. Kochi Terminal0-777 Sub Total (A)31327 B. Transnational Pipelines 1. Iran-Pakistan-India Pipeline 00-22 2. Myanmar-Bangladesh- India Pipeline 0-11 Grand Total 335783105 * includes 40 MMSCMD from Reliance K-G Basin. @ It is assumed that the additional gas finds will replace only the depleting production from the existing fields. The important initiatives to augment gas supplies to India already finalize and under vigorous pursuit are as follows.

20. 20 Petroleum India is the sixth largest oil consumer in the world with a share of 3.1% of the world consumption. The dependence on import for oil has reached a level of 72%. The crude refining capacity of India today is at 132 MT. India has achieved self sufficiency in refining, at the present demand level.

21. 21 Alternative Fuels In the long long run we have to depend on renewables. India is among the few countries were all possible sources and technologies are under investigation and development. In respect of wind power, small hydro, bio- mass and coal-bed methane commercialization has been achieved. Gas-hydrate is a distant prospect, but the resources are huge. : Sources: MNES, NPCIL, BITS-Pilani, Dept. of Ocean Development, Infraline, Indo-US Co-operation Report SourcePotentialAchieved so farTechnically provenCommercially viable Wind Gross Potential: 45,000 MW Technical Potential: 13,000 MW 1,870 MWYY Small Hydro (upto 25 MW) 15,000 MW 1,663 MWYY Bio-Mass Bagasse based Co-gen: 3,500 MW Bio-Mass: 19,500 MW Bio-Mass Gasification: 16,000 MW 537 MW 308 MW 35 MW YY Solar Thermal 35 MW / Sq Km --- Solar Photovoltaic 22 MW / Sq Km 2.24 MW / Sq Km Coal Bed Methane 400 Billion Cubic Meters Private investors have taken up auctioned areas. YY Underground Coal Gasification200 MSCMPD Commercial production to start 2007-08 YY Gas Hydrate Not yet known, but huge potential -- Ocean Energy Research is going on --- Fuel Cell Research is going on --- Hydrogen Research is going on --- Geo-Thermal Energy Research is going on ---

22. 22 CONCLUSIONS 1. For the next 25 years if coal is used for power generation and gas is not considered for this purpose unless the price of domestic or imported gas is competitive with coal price, India’s import dependence will be limited to oil imports. 2. Oil imports requirements can be reduced by energy efficiency improvements, optimisation of transport modes and substitution by bio-fuels. 3. The importance of oil will remain irrespective of the price and the importance of gas will depend on it availability and price in competition with coal for power generation.

23. 23 Pricing of Coal & Natural Gas Energy security the availability,accessibility &affordability depends on price fixed for coal&gas Coal is priced on a cost of production plus a reasonable rate of return on investment basis. In site of low productivity the industry as a whole functions on a profitable lines at this price. * Natural gas