The Indian energy sector. A complete analysis with respect to the natural gas cross country pipeline TAPI


Master's Thesis, 2016
86 Pages, Grade: 8.5

Excerpt

Table of Contents

Executive Summary

1.Introduction
1.1 Natural gas Utilization
1.2 TAPI Pipeline Facts
1.3 Natural Gas Production Scenario in participant countries

2. Literature Review
2.1 Natural Gas as a secondary fuel for India
2.2 Natural Gas Scenario for India
2.2.1 Conventional Natural Gas:
2.2.2 Unconventional Natural Gas
2.2.2.1 Coal Bed Methane
2.2.2.2 Shale Gas
2.3 Natural Gas Infrastructure of India
2.3.1 Pipelines
2.3.2 LNG Infrastructure
2.3.3 City Gas Distribution Infrastructure.
2.4 Indian Natural Gas Demand Scenario
2.4.1 Power Scenario of India
2.4.2 Fertilizer Sector of India
2.4.2.1 Natural gas dependency for fertilizer sector
2.5 Indian Natural Gas Supply Scenario
2.5.1 LNG Supply reduction in 2015-16
2.5.2 Negotiation Success
2.5.3 Average Availability of gas companywide
2.6 Indian Natural Gas Demand Supply Deficit
2.6.1 Trends in Supply of Natural Gas for India
2.7 Need for Natural Gas Cross Country Pipeline
2.8 Energy Comparatives
2.8.1 Chinese energy price comparison
2.8.2 China-India Pipelines Comparison

3. Research Methodology
3.1 Problem Definition
3.2 Type of Research
3.3 Research Process
3.4 Research Objectives

4.Data Analysis
4.1 Mapping of Demand Potential for natural gas pipeline in participated countries - India
4.2 Mapping of Natural Gas Supply Potential of Turkmenistan
4.2.1 Market Deterministic Approach:
4.2.2 Regression analysis and determination of supply potential for Turkmenistan
4.3 Risk Analysis of TAPI Pipeline
4.3.1 Mapping of geopolitical perspectives of TAPI pipeline assessment
4.3.1.1 Russian Perspective
4.3.1.2 Chinese Perspective
4.3.1.3 US, UK and Asia
4.3.2 Judgmental Analysis for Accessing Assessment of Risk on Judgmental basis with respect to US
4.4 Mapping of Pricing factors affecting natural gas pipeline in participating countries India
4.4.1 APM Pricing
4.4.2 NOC Pricing
4.4.3 Market base pricing
4.4.3.1 LNG import price
4.4.3.1.a Long Term LNG Pricing
4.4.3.1.b Spot LNG pricing
4.4.4 Pre- NELP pricing
4.4.5 NELP Pricing
4.5 Correlation model for Pricing of Natural Gas
4.6 Sensitivity Analysis for Pricing of Natural Gas

5. Mapping potential of economic factors of pipeline
5.1 Pipeline cost, Material cost, Labor cost and Compressor Cost
5.1.1Assessment of Tonnage for TAPI Pipeline
5.1.2 TAPI Pipeline Cost Assessment
5.1.3 Assumptions for Assessments
5.1.4 Project Cost
5.1.5 Interest During Construction
5.1.6 Financial Affordability of TAPI Pipeline Project

6. Strategy for Under Recoveries-Overburden of Adjustment of Natural Gas Price Differential
6.1. Opportunistic strategy
6.1.a Gas distribution with higher marketing margin
6.1.b Gas distribution with higher gas pricing
6.2. Negotiation strategy
6.2.a Cheaper natural gas purchase from Turkmenistan
6.2.b Discount in loan repayments by ADB
6.2.c Complete loan waiver from ADB
6.2.d Loan repayment by Turkmenistan
6.3. Development Strategy
6.3.a Allocation of different fund as Gas development from Oil Industry
6.3.b Reserved fund from financial institution
6.3.c Reserved fund from government in national financial budget
6.3.d Reserved fund under gas development scheme for India in the form of cess collection
6.3.e Dedicated fund from various manufacturing industries of India
6.3.f Collection of fund from industrial and domestic consumers
6.4. Cooperation Strategy
6.4.a Financial help from Turkmenistan government
6.4.b Financial help from other countries
6.4.c Financial help from other financial institutes

7. Future Implications with impact of some global events on pipeline project
7.1 Liberation of Kurdish Turkistan
7.2 BREXIT - Britain’s exit from European Union

8. Scope and Limitations

9. Conclusion

10. References

Acknowledgement

My project on “Risk Analysis of TAPI Pipeline” has been a great learning experience. I would like to take this opportunity to sincerely acknowledge all their inputs and support which led to the successful completion of this project. I would like to thank:

- My Mentor- Dr. Ankur Mittal, Associate Professor, UPES
- Owners and Senior Persons that belongs to the industries who cooperated and helped me to carry on my project work by providing all required assistance and help
- Lastly, my parents for their constant support throughout x Organizations heads
- Colleagues of the department (both industry and university) who rendered their valuable suggestions and criticism
- The executives in different organizations who provided data and literature for the research
- The type setting office and personnel.

List of Tables

Table 1 : Usage of natural gas

Table 2 : Calorific value analysis of various fuels

Table 3 : Pipeline Specifications of TAPI pipeline

Table 4 : Agreement Scenario of TAPI as on 31st March 2016

Table 5 : Project Flow

Table 6 : Natural Gas Reserves in Participated Countries from 2004-2013 in BCM

Table 7 : Impact analysis of TAPI Pipeline

Table 8 : Refinery Scenario of India

Table 9 : Year-wise reserves, production and consumption of India

Table 10 : Exploration and Production scenario of India no. of exploration blocks

Table 11 : India production standings from NELP-1 blocks

Table 12 : Coal fields of India and their categorization

Table 13 : Coal Bed Methane blocks awarded during bidding rounds of 1, 2 and 3

Table 14 : Coal Bed Methane New Blocks to be Offered

Table 15 : Prospective area of Sedimentary basin and Recoverable shale gas reserves

Table 16 : Expenditure till date on various shale blocks by ONGC Natural Gas grid connectivity Pipeline in India as of 1st Jan 2016 capacity in

Table 17 : MMSCMD and length in kilometers

Table 18 : LNG Infrastructure of India capacity in MMTPA

Table 19 : City Gas Infrastructure in India

Table 20 : CNG Sales in Thousand Metric Tonnes (TMT)

Table 21 : CNG Stations and Vehicles as on 30th September 2015

Table 22 : Natural Gas Demand Drivers for India

Table 23 : Sector wise installed capacity as on 15.3.2015

Table 24 : Fuel wise Installed capacity as on 15.03.2015 Programme, actual achievement and growth in electricity generation in the country

Table 25 : during 2009-10 to 2015-16 in Billion Units

Table 26 : The PLF in the country during 2009-10 to 2015-16 is as under

Table 27 : State wise installed capacity of power plants in MW as on 15.03.2013

Table 28 : The power supply position in the country during 2009-10 to 2015-16

Table 29 : Demand forecast of fertilizer products (thousand tonnes) 2012-13 to 2016-17 Consumption, Production and Imports of Fertilizers from 2000-2013 (thousand tons of

Table 30 : nutrients)

Table 31 : Government Subsidies on Fertilizer

Table 32 : Natural Gas based fertilizer units

Table 33 : Sector-Wise Demand for Natural Gas

Table 34 : Plan wise demand of natural gas in MMSCMD

Table 35 : Sector wise Supply of Natural Gas in MMSCMD

Table 36 : Structural Buying Scenario of LNG Cargoes capacity in MMTPA

Table 37 : Average availability of Natural Gas Company wise

Table 38 : Demand Supply Deficit of Natural Gas

Table 39 : Sale trends of Indian Natural Gas producing companies

Table 40 : Domestic Production of Natural Gas State wise in MMSCMD By Sandesh Tukaram Ghandat of UPES 2

Table 41 : Chinese imported natural gas price comparison

Table 42 : Natural Gas Transport Cost Comparison Estimation, 2018 (2012$/MMBtu)

Table 43 : Pipeline Comparison and future aspects for China and India

Table 44 : Data for regression analysis of natural gas Demand of India

Table 45 : statistics for regression analysis of natural gas Demand of India.

Table 46 : Correlation matrix between variables - analysis of natural gas Demand of India

Table 47 : Calculation of R2 and Adjusted R2 - analysis of natural gas Demand of India

Table 48 : Model parameters for the input variables - analysis of natural gas Demand of India

Table 49 : Equation of the model - analysis of natural gas Demand of India

Table 50 : Standardized coefficients - analysis of natural gas Demand of India

Table 51 : Predictions and residuals - analysis of natural gas Demand of India

Table 52 : Predictions for the new observations - analysis of natural gas Demand of India

Table 53 : Predictions for the new observations- analysis of natural gas Demand of India

Table 54 : Turkmenistan Reserves, Production, Consumption and Export

Table 55 : Export Scenario for Turkmenistan in 2014

Table 56 : Summary statistics for Supply Potential of Turkmenistan

Table 57 : Correlation matrix for Supply Potential of Turkmenistan

Table 58 : Multicolinearity statistics for Supply Potential of Turkmenistan

Table 59 : Analysis of variance for Supply Potential of Turkmenistan

Table 60 : Model parameters for Supply Potential of Turkmenistan

Table 61 : Equation of the model for Supply Potential of Turkmenistan

Table 62 : Standardized coefficients for Supply Potential of Turkmenistan

Table 63 : Export predictions for Supply Potential of Turkmenistan

Table 64 : Rule of Law as a parameter for analyzing security in US, UK and Asia

Table 65 : Regulatory Authority as a parameter for analyzing security in US, UK and Asia Political Stability and Absence as a parameter for analyzing security in US, UK and

Table 66 : Asia

Table 67 : Voice and Accountability as a parameter for analyzing security in US, UK and Asia

Table 68 : Government Effectiveness for analyzing security in US, UK and Asia

Table 69 : Control of Corruption deviation for analyzing security in US, UK and Asia

Table 70 : Rule of Law deviation for analyzing security in US, UK and Asia Political Stability and Absence of Violence deviation for analyzing security in US, UK

Table 71 : and Asia

Table 72 : Voice and Accountability deviation for analyzing security in US, UK and Asia

Table 73 : Government Effectiveness deviation for analyzing security in US, UK and Asia

Table 74 : Regulatory Quality deviation for analyzing security in US, UK and Asia

Table 75 : Asia Average Parametric Ranking based on mean

Table 76 : United Kingdom Parametric Ranking based on mean

Table 77 : United States Parametric Ranking based on mean

Table 78 : Correlation between risks parameters

Table 79 : US- INDIA Relation Analysis

Table 80 : Prevailing prices under NELP Net Market Value (NMV) in Asian LNG Importing Countries with JCC at Different

Table 81 : Oil Price Levels NMV $ per barrels By Sandesh Tukaram Ghandat of UPES 3

Table 82 : Price for Natural gas under APM $ per MMbtu

Table 83 : Natural gas prices under different hubs $ per MMBtu

Table 84 : Regulated and Deregulated Scenario

Table 85 : Correlation model for Regulated and Deregulated

Table 86 : Sensitivity Analysis of Price Change

Table 87 : Gas prices by type of user EUR per gigajoule Medium size households

Table 88 : Natural Gas Price 2013 $ per MMBtu

Table 89 : Manufacturer, Offered Max. at FOB

Table 90 : Average Export Cost

Table 91 : Quantity of Tonnes Assessment

Table 92 : TAPI Pipeline Cost Assessment

Table 93 : TAPI Pipeline Assumptions Assessment

Table 94 : Energy Units Conversion Assessment

Table 95 : Project Cost

Table 96 : Interest during Construction

List of Figures

Figure 1 : Route of Pipeline

Figure 2 : Production of natural gas in participated countries in BCM per year

Figure 3 : India Production Growth

Figure 4 : Shale Gas Sedimentary basins in the Indian sub-continent

Figure 5 : Research Methodology Flow

Figures 6 : Predictions and standard results for Supply Potential of Turkmenistan

Figure 7 : Supply, Demand, Finance, Risk Factors

Figure 8 : Understanding, Action, Checking Innovation, Improvement Factors

Annexure

Annexure A : Projected financial analysis for 2020 to 2050

Annexure B : Working of Depreciation, Interest and Loan

Annexure C : Expected Revenue generation for GAIL

Annexure D : Regional Cooperation and Integration Fund

Executive Summary

India’s economy is growing fast, standing seventh largest GDP over globe amounting total nominal GDP of USD 2.182 Trillion in 2015. The current economy growth rate is 7.3% in Q4 of 2015, one of the highest over the globe. India has world’s second largest population in the world and will be the largest populated country by 2030. The current population stands 1.23 billion people. Even if this is positive signs for any growing economy, India’s energy sector is still depended on imports and only 5% of total population using energy currently. IEA estimates that India’s economy will grow at higher rate and it will be same as US economy in 2040.

The distance from major fossil fuel reach countries to Indian borders are not more than 1000 to 2000 km either by sea or land route. The best possible mode for importing natural gas is trans-national pipelines from Turkmenistan, Myanmar or Iran. Turkmenistan, Afghanistan, Pakistan and India Pipeline - “TAPI Pipeline” is 1735 km long land pipeline travel through these countries. This pipeline will have annual discharge capacity of 33BCM play crucial role in domestic demand - supply. The research objective of this is to analyze different actors in risk, their role in the risks and their possible long term impacts. This risk categorized as security, price, geopolitics, environment, legal, economical, production and demand supply. The study develops some scenarios on the basis of changing circumstances and some pertinent issues with pipeline technical feasibility.

1. Introduction:

India still depends on imports of fossil fuels as domestic refiners import 70% of crude oil from Middle East and several others. In current “COP-21 Summit”, India confirms on reduction of carbon emission and will take aggressive steps to achieve it. Strategically, India shifts its focus to cleaner fossils fuels like natural gas and renewable energy. Natural gas consists of pure methane up to 99% and used mainly for industrial as well as domestic use.

1.1 Natural gas Utilization:

Natural gas mainly used for industrial feedstock and as a cooking gas largely. As our CGD sector is growing the potentiality of expansion of use of natural gas is growing further. Below is the usage of natural gas:

Table 1: Usage of natural gas

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Source: Published reports on usage of natural gas Natural gas is largest use fossil fuel in the world as it has less carbon emissions and it is cheapest petrochemical feedstock as compared to naphtha. It is also one of the cheapest fuel for the transportation the calorific value analysis for various fuels is as follows.

Table 2: Calorific value analysis of various fuels

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In India most of the natural gas consumption is in households and industries. Current economic growth boosts industrial output which eventually impacted the demand for energy. Natural gas also majorly used as fuel in transportation sector and India has large transport sector that running on fuel such as LPG and CNG.

Innovating technologies which helps in efficient use of fuel as natural gas is highly impacting in its demand. Recent innovation as LNG powered vehicles not yet commercialized over the globe but it puts huge impacts on global demand if practically applicable. Technological evolution made it possible to use fuel efficiently and financially affordable by industries and domestic households. Culturally and economically domestic people’s trend changes from traditional sources of energy to the natural gas as a source of energy. Also major rural population more than 50 lacks of people get LPG cylinders which are result of new and efficient energy schemes of India.

1.2 TAPI Pipeline Facts:

As of 2016 India-one of the most energy consuming and energy starving region has very limited access to the natural gas resources from other countries through pipeline. TAPI pipeline is much awaited cross country pipeline for India and neigh boring countries. It travels from Daulatabad field from Turkmenistan and reach to the Fazilka near Pakistan border. It is 1848 km of pipeline. As per ADB reports entire project will cost around USD 10 billion. This project will be fund by ADB with Debt to equity ratio of 70:30 and equity will be share by NOC’s of Turkmenistan, Afghanistan, Pakistan and India. The feasibility study has been done and the ADB is looking forward for implementation of this lucrative project with earliest possibility.

Table 3: Pipeline Specifications of TAPI pipeline

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TAPI pipeline Consortium Company established in December 2015 in Turkmenistan in the presence of all four country representative with a share of national gas companies as TurkmenGaz 85%, Afghan Gas Enterpises 5%, Interstate Gas System 5%, GAIL 5% participation share in newly formed company. The equity holders will be participant with 30% of total project cost which comes around to be $3 Billion shared with respective participation percentages.

Till date several agreements are done with ADB, participating countries and other institutes as part of pipeline agreement. However all the agreement records were keep by ADB only. The detailed overview of the Agreements and their current status with respect to 31st March 2016 is as below. Gas sales and Purchase agreement are the most important agreement that will give boost to this pipeline implementation project an upper edge globally.

Table 4: Agreement Scenario of TAPI as on 31st March 2016

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TAPI pipeline will travel through four countries while none of region it is crossing through is nearer to the national capital of these participation countries. However this pipeline will travel through the Baluchistan region which is the worst region with respect to pipeline security as this region is in holds of violent Baluchi tribes dominating a region in Pakistan and also some region in Afghanistan is under the Taliban administration where security negotiation is going positively.

Figure 1: Route of Pipeline

Source: ADB

As of now with establishment of Consortium Company had several agreements were carried out successfully and several are yet to be done. Transaction Advisory Services Agreement is made for the establishment of talks, promote pipeline for private entities to participate, creation of road shows as part of advertisements. This is initial spending of project which done by ADB with a cost of 1.5 million US dollars.

Table 5: Project Flow

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1.3 Natural Gas Production Scenario in participant countries:

Natural gas has high potential for exploration and production in Turkmenistan as host country has reserves of close to 10 TCM and major oil companies already has productive assets in the region. Though country is widely criticized by Russia politically for making efforts to gain its potential in European market and eventually it shifts its prospects towards Asian markets by proposing pipeline two decades ago. But again as there is cold war going around the Caspian region which holds assets by several trillions of dollars and is the region of tug of war situation to explore it. Russia eventually enter into backing Turkmenistan to support by gaining rights to develop assets in host nation by Gazprom-Russia’s NOC for developing and producing of natural gas. The production of natural gas in terms of quantity in Turkmenistan is high during 1980-1989 when it was a part of USSR region and all petroleum assets were with Russia only. But after Russian federation dissolved in 1990 as part of communist revolution and end of cold war with US primarily, Turkmenistan gets independent access to natural resources when major petroleum assets were nationalized. This results into decreased production as country is starving for technology and buyers to explore the natural resources. After drastic governmental efforts, policy reforms and US supports result into extreme production growth and it remains increasing till 2007. Again after global recession due to subprime mortgage crisis by US where three largest market leaders in finance such as Lehmann Brothers are bankrupts in just a week which has higher global impacts with their national economies tumbling. These has adverse effects that results into significant losses of buyers and the production continue to decrease till 2009 and then rise again after 2011 as economies shows positive changes globally.

Though India has very less proven reserves representing less than 1% of global reserves, the production continued at low level as major petroleum assets are poorly explored and available assets are already becoming premature. However, with new advanced technology measures production grows for time being in short run for limited period of time. After the pricing reforms with matured natural resources affects production contributing to lower growth and decrease in production for natural gas.

Pakistan also has similar production levels as of India with respect to their natural gas reserves and their production continued to increasing with almost stagnant production from 2005. But Pakistan also has similar domestic conditions, Social and economic differences, political instability and terrorism threats. Several terrorists’ attacks on major cities in the country in recent years made it difficult for implementing growth policy effectively in the country.

Afghanistan however uncertain about the reserves and the production as there is no statistical data available technically as country is widely criticized for terrorism where there is

higher involvement of Taliban and other anti-social groups. The military action of US in Afghanistan in year 2003-04 just after ‘Iraq war’ left country war torn. Until recently Obama led US-Government claims to remove all the soldiers from the region. This is in facts energy analyst claims to be ‘US left their part of war on the soil of Afghanistan but country will remain war torn for long time’. Other than this, another major problem is, Afghanistan rated as Asian capital for the production of drugs like cocaine and marijuana by ‘Western Media’. With very less social and economic morals with domestic people, this is not a good prospective for foreign entities to setup business opportunities.

Figure 2: Production of natural gas in participated countries in BCM per year

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Turkmenistan currently holds closed to 5% of world’s total reserves of natural gas. From 2004, major oil and gas multinational companies made significant efforts to generate potential of the region in terms of natural gas reserves estimation. The reserves estimation of natural gas in the region shows four-fold growth just in a decade and the region is gaining high prospects for doing business by foreign national companies for the exploration and production of natural gas.

Table 6: Natural Gas Reserves in Participated Countries from 2004-2013 in BCM

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Table 7: Impact analysis of TAPI Pipeline

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Source: Modified from ADB Reports with respect to current context

For primary study of TAPI pipeline ADB made impact analysis. Impact analysis shows the impact of possible initiatives, its outcome and risk associated with it and the assumptions on

which the possible impact estimation is done. This initiatives estimation carried out by ADB that supports possible feedback approach for project implementation and risk assessment that has to be done prior and in real time for successful completion in some dedicated time scenarios.

2. Literature Review:

India is one of the largest refiners in the world with 23 refineries with a capacity more than 230 MMTPA, mostly located on the coastal areas and managed by public sector as well as private sector entities with an average GRM of $8.47 currently. India is diesel based economy where largest production is petrochemical products that are exported to Middle East and neighboring countries.

Table 8: Refinery Scenario of India

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Since LPG which is major alternative for natural gas used widely in India and is major petrochemical product, it is highly important to view India’s position in petrochemical and refining sector. India globally third largest petroleum refining hub and its strategic position globally with respect to production and supply chain always have upper edge for natural gas development. The cost to develop refinery against natural gas distribution center is more than twice in Asian region. With oil price as low as $40-$50 per barrel and the price trend is highly volatile with decline continue in the global market until recently from past few years. Some analyst firms like Morgan-Stanley said that in future price will decline up to $20 per barrel.

However, it is believe that lower price of crude oil will be beneficial for Indian petrochemical sector; hence it is major key success factor for further growth. However, in the industrial consumption, LPG as a fuel can be directly replaced by natural gas with minimal financial involvement which is best opportunity for growth of natural gas sector in India.

Pakistan also has nine major refineries with total refining capacities is more than 500 thousand barrels daily. Pakistan has stagnant industrial growth due to its internal political and terrorism conflicts. Its largest refinery is Byco refinery in Sindh province of Pakistan. With similar economic growth as India Pakistan also has higher potential to grow by natural gas as it has existing natural gas infrastructure and the growing natural gas market will give an upper edge to boost natural gas market domestically.

2.1 Natural Gas as a secondary fuel for India:

India being major refiner in the world Natural Gas is a secondary fuel for India against Crude Oil as primary. The country which uses the type of large quantity of fossil fuel for its domestic and export purposes is a primary fuel for that country. Since India has highest crude oil consumption of almost 230 million metric tonnes annually, natural gas use is far less than expected. In India domestic natural gas pricing is also in developing stages and partially controlled by government. A Natural Gas projection shows high growth in domestic and global market in upcoming years. Even for India, industrial consumption of natural gas is gaining day by day in recent years.

2.2 Natural Gas Scenario for India:

2.2.1 Conventional Natural Gas:

India’s manufacturing sector is booming just after new government came into rule in 2013-2014. India’s several initiatives like ‘Digital India’, ‘Make up India’ and several others helps to grow manufacturing industry output by thousands of tonnes into production growth.

Indian natural gas consumption shows two-fold growth in past decade. Technological advancements and Government’s efforts towards sustainable energy made it possible to reach potential reserves of India which currently stands at 1488 BCM due to aggressive strategy in production by NOC’s. Production sector of India also shows almost two-fold growth where currently it stands to 57.48 BCM at five-year average of 57.48. Even if there is increase in production and reserve estimation of natural gas, the consumption pattern with respect to domestic growth is also increasing. Within just a decade of time span India’s natural gas consumption draws almost two fold growth towards the domestic consumption of natural gas where in 1999 natural gas consumption was 22.22 BCM which grows to two folds in 2015 when

consumption reached a level of 50.59 bcm in 2015. This is due to rapid economic growth and new initiatives for industrial production growth by new government and its successful yet effective implementation in domestic scenario. In other words both production and consumption grow hand in hand with relative demand supply gap for natural gas.

Table 9: Year-wise reserves, production and consumption of India

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Technological advancements and Government’s efforts towards sustainable energy made it possible to reach potential reserves of India which currently stands at 1.4 TCM and five-year average stands at 1.3 TCM. His does not includes the unconventional natural gas which India hosting if unconventional gas is added India’s reserves will increase by three folds. Even with this production sector of India shows almost two-fold growth where current production is 57.48 BCM. Overall status of India is as follows:

Table 10: Exploration and Production scenario of India no. of exploration blocks

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In recent year, some private and public foreign joint ventures enter into production sector of natural gas which boosts rapid production for India. For India, Ministry of Petroleum and Natural Gas (MoPNG) takes aggressive approach in recent years which shows significant increase in exploration and production activities. India’s production in some of the blocks is given below.

Table 11: India production standings from NELP-1 blocks

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Source: MoPNG and DGH

India’s production of natural gas is stagnant for years showing very less growth as it is expected. However, production efforts are much more aggressive from PSU and private players. In year 2010 India natural gas production was highest in decade as there are new players in natural gas development market. However just after that it is declining significantly due matured assets and pricing policy for natural gas. India’s overall production growth is as follows:

Figure 3: India Production Growth

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India’s long term structure for energy intensity helps planning for energy security in longer scenario. India made significant efforts both financially and politically towards middle east and other parts of Asia where natural gas resources significantly available. Bilateral ties with energy supplier countries and multimillion dollars of higher financial investment to develop Chabahar Port of Iran would be the best possible example towards strategic alliance of this major energy supplier.

2.2.2 Unconventional Natural Gas

2.2.2.1 Coal Bed Methane

Coal bed methane is natural gas explored through coal sequestration method. India is a country with one of the largest coal reserves. Though there is positive scenario for coal exploration and production, Indian coal is of poor quality on the basis of calorific value as compared to imported South African coal and Indonesian coal. Similarly, coal bed methane has very high sulfur quantity which is major reason for poor exploration from the reserves which are available on Indian soil. Very little participation from the private domestic players and foreign players in coal bed methane production and exploration are still the major hassle in growth of Indian CBM sector. Essar India is one of the largest producers of coal bed methane gas in India. Due to poor transportation infrastructure of natural gas and gas based market is located in western and central parts of India, CBM development in exploration and production is very low with less priority in energy sector of India from the view of Indian government.

Total Indian CBM is divided into four categories based on the coal characteristics. Assam- Arakan, Cambay and other regions are the dependent sources of this coal. Indian coal fields are divided into four major categories where it divided based on the coal properties and their volatilities. Monopoly of Coal India Limited in the development of coal in India is one of the reasons for lowest growth in Indian coal sector for last two decades. However, there is not involvement from major private sector entities and foreign direct investment in Indian coal sector that can boost the sector and can provide subsequent growth to the Coal bed methane development in India.

Table 12: Coal fields of India and their categorization

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and Reliance. However, till date after five bidding rounds not a single foreign entity able to manage any block from this bidding rounds.

Current production status for all the blocks that were allocated till date is still unknown statistically but the exploration and production is being carried out on all the blocks. Below is the summary of CBM blocks that were allocated during three CBM bidding rounds. Second bidding round is the highest allocated area till date as compared to other areas.

Table 13: Coal Bed Methane blocks awarded during bidding rounds of 1, 2 and 3

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Source: MoPNG, DGH, Company Data

Raniganj are in West Bengal is most prominent region for exploration of CBM where the exploration is given priority for that area amongst all other area in India. In upcoming bidding round following area is offered where Rajmahal area is having highest possible reserves of CBM estimated to 168 BCM of overall reserves.

Table 14: Coal Bed Methane New Blocks to be Offered

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Source: MoPNG, DGH, Company Data

2.2.2.2 Shale Gas

Energy demand, environmental pressure, Government initiatives for exploration of unconventional sources such as Shale gas and prioritize the Shale gas development to become an important part in Indian energy sector is strategically best development for Indian Energy scenario for past couple of years. India has significant shale gas reserves and these are one of the largest standing just after Chinese Shale reserves globally. However, the global shale gas market is primarily centered in US and North America. Its dominant effects have been seen by India too, when RIL acquiring stakes in US based Shale Gas Exploration assets, in which Hydraulic fracturing technology could be efficiently be used in Indian region which will shape domestic shale gas industry in India which will determine market competency for shale gas. This is expected to be a rationally good for the growth of Indian shale gas market. Globally analysts put an insight into the competitive landscape of shale gas market of India with respect to supplier, buyer, substitution for Shale gas, entry barriers for exploration, degree of rivalry, Government policy, Technological growth and taxation policies. The variation tendency of shale gas industry particularly into technology, financial expenditure and availability of resources is significant for country such as India.

Shale gas is an important unconventional source of natural gas that is stored in organic rich, matured fine sedimentary rock over the period of millions of years with respect to depth and pressure results in conversion of organic matter which is shale gas.

US government significant efforts towards advancements in horizontal drilling technology and hydraulic fracturing made impact of shale gas production and tremendous growth has been felt throughout the world specially in energy starving Asian economies India and China where primary sources of energy are imported oil from Middle East and several other regions over the globe. Commercial and economic Shale gas production growth made US from a country which is natural gas importer fifteen years ago to the natural gas exporter currently that revolutionize domestic energy sector of US and global energy sector which is major reason for the drop in international crude oil prices in 2014-2015 and continues the trend further.

Indian Government has done planning and proposing a strategy for assessment phase 1, for all the NOCs like ONGC and OIL. The SG resources are more than proven reserves of conventional natural gas resources in India, contributing to nearly equivalent up to 2000 TCM. Cambay Basin in Gujarat, the Assam-Arakan basin in northeast India, and the Gondwana Basin in central India are the regions primarily where Shale gas reserves are proven reserves estimated by government. Marine shale strata, sea-land-interaction strata and land-coal strata also have certain reserves which are probable reserves. Cambay area and Asam Arakhan basin located in the upper Indian region have significant development prospects. However, Indian Shale Gas resource is shallow burial and most is situated in folds and faults areas which results into technological barriers for exploitation of Shale gas.

Figure 4: Shale Gas Sedimentary basins in the Indian sub-continent

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Indian government started development of Shale Gas exploration in 2012 where PSU exploration companies shows good interest investing millions of dollars for development programme in 2013. However, Indian SG market still having a variety of resistances to achieve Shale Gas commercialization, such as technology, policy and capital.

Table 15: Prospective area of Sedimentary basin and Recoverable shale gas reserves

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Source: Various Company Reports

Prospective area where the largest Shale gas can be found is given statistically below. KG basin is one of the largest recoverable gas estimated to be explored amounting to 27 TCF~0.5-

0.8 TCM which will be sufficient for country like India to use it for 100 years in future

ONGC made significant effort for the exploration activity of Shale gas in Phase-1 which is planned by government. Maximum depth at which exploration activity has been done is of 4500 meters in Cambay Shale at an expenditure of 42 crores. The overall expenditure for each block is between 23-47 crores which is far less for a country like India.

Table 16: Expenditure till date on various shale blocks by ONGC

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Source: ONGC reports on Shale gas

2.3 Natural Gas Infrastructure of India:

2.3.1 Pipelines:

Nationwide gas grid connectivity gives good potential for domestic and industrial consumption. India starts its natural gas pipeline implementation four decades ago and currently has 13854 km of commissioned pipeline and several more pipelines are in developing stages. Also, India, in its natural gas vision planned to reach operational pipeline capacity of almost 25000 kilometers by 2020.

The drawback for pipeline sector is that there is very less utilization of pipeline after pipeline is commissioned and it’s in operation. Currently as of 2016, there is not a single pipeline in India which works with 100% efficiency utilization; also from the existing pipelines more than half are having less than 50% utilization due to non-stable market and weather conditions.

Table 17: Natural Gas grid connectivity Pipeline in India as of 1st Jan 2016 capacity in MMSCMD and length in kilometers

Abbildung in dieser Leseprobe nicht enthalten

Source: Various, Authors own analysis

2.3.2 LNG Infrastructure:

Currently India’s total capacity for LNG is 25 MMTPA where maximum capacity is at Dahej location in Gujrat. For LNG infrastructure sourcing of natural gas is major issue as Hazira and Dabhol both don’t have any long term contract and resting only on the market behavior of spot LNG cargoes. In current scenario which is very much different from the statement mentioned above. Now, as on May 2016, Spot cargo prices are standing towards 3-4 $/mmbtu which was 15-16 $/mmbtu five years ago. Government and PSU (GAIL) faces major loss of revenue due to which government has to take initiative to reopen price clause and renegotiating price where the current contracted price of natural gas in 25-year period of contract is 13-14 $/mmbtu against 3-4 $/mmbtu.

Table 18: LNG Infrastructure of India capacity in MMTPA

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*Scheduled expansion of 5 MMTPA by 2016, **1.24 MMTPA in phase-1 without break water to be increased to 5 MMTPA, ***5 MMTPA in phase 1 to be increased to 10 MMTPA

Source: MoPNG, DGH, PNGRB and Govt. Reports

LNG is economic and best possible source for natural gas for India due to its wide 7000km coastline and economic feasibility in transportation. Currently Gujrat state hosts two major regasification facilities of cumulative capacity of 15 MMTPA. Overall Indian capacity is

25 MMTPA and it is planning to reach 32.5 MMTPA by 2020. High efforts made towards new LNG regasification facilities which helps to decrease demand supply gap of natural gas. All existing LNG regasification facilities are currently present on west coast and now upcoming new LNG facilities are coming on to the east coast. Since absence of pipeline structures and related infrastructure is in development stage Kochi regasification terminal is very less capital utilization.

2.3.3 City Gas Distribution Infrastructure.

PNGRB took initiative for bidding rounds of CGD business for transparency, promotion and attractive policy for private investors. With five bidding rounds previously major cities are already covered with pipeline and regional gas grid development.

[...]

Excerpt out of 86 pages

Details

Title
The Indian energy sector. A complete analysis with respect to the natural gas cross country pipeline TAPI
College
University of Petroleum and Energy Studies
Course
MBA in oil and gas management
Grade
8.5
Author
Year
2016
Pages
86
Catalog Number
V337269
ISBN (eBook)
9783668287389
ISBN (Book)
9783668287396
File size
1380 KB
Language
English
Tags
indian, tapi
Quote paper
Sandesh Ghandat (Author), 2016, The Indian energy sector. A complete analysis with respect to the natural gas cross country pipeline TAPI, Munich, GRIN Verlag, https://www.grin.com/document/337269

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