Natural gas as allternate fuel for electricity generation final report

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NATURAL GAS AS AN ALTERNATE FUEL

FOR ELECTRICITY GENERATION IN INDIA

Summer Project Report

Presented To

The Academic Faculty

By

Varun Kumar Choudhary

Roll no.- 11BM60019

Industry Guide-

Dr. A. P. Dash

Senior Faculty, Project Management Institute,

NTPC Ltd. New Delhi.

Mr. B. P. Rath

Manager, New Project Development

NTPC Ltd.

Faculty Guide-

Dr. Kalyan Kumar Guine

Professor, Vinod Gupta School of Management,

IIT Kharagpur.

Vinod Gupta School of Management,

Indian Institute of Technology, Kharagpur

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Acknowledgement

I express my profound gratitude to my supervisors, Professor A.P Dash and B. P Rath sir whose

benign guidance has enlightened my path through the course of this work. Besides their

dedication to academic life, their disciplined and austere habits have been a source of constant

inspiration to me. They are humane with willingness to help others, care for everyone, and

always being concerned about the progress. It was an enriching experience to work and learn

under them.

Varun Kumar Choudhary

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Table of Contents

1. Executive Summery - ........................................................................................................ 5

2. NTPC PROFILE:- ............................................................................................................ 6

3. Project Objective- ........................................................................................................... 11

4. Introduction- ................................................................................................................... 12

4.1 Electricity is prime mover of Indian economy: ............................................................................. 12

4.2 Electricity demand in India- ........................................................................................................... 14

4.3 Dependence of Electricity demand on GDP growth rate- .............................................................. 15

4.4 Major available resources for electricity generation-..................................................................... 17

5. Coal as a fuel for electricity generation- ....................................................................... 19

5.1 Predominant Position of Coal- ....................................................................................................... 19

5.2 Inventory of geological resources of coal in India- ....................................................................... 19

5.3 Type and category-wise coal resources of India- ........................................................................... 20

5.4 Consumption pattern of coal- ......................................................................................................... 21

5.5 Factors Affecting Coal Prices in India-.......................................................................................... 21

5.5.1 Domestic coal production and demand: .............................................................................. 23

5.5.2 Coal Import- ........................................................................................................................ 23

5.5.3 Domestic Coal Price Fixation- .................................................................................. 24

5.5.4 Quantity of Coal to be sold at market price:- ...................................................................... 25

5.5.5 Impact of crude oil price on Thermal coal prices:- ............................................................. 25

5.5.6 Impact of Exchange rate on coal prices:- ............................................................................ 26

5.5.7 Impact of availability of land on coal prices- ...................................................................... 27

6. Renewable resources in India:-...................................................................................... 29

7. Natural Gas in India:- .................................................................................................... 37

7.1 Current Natural Gas Scenario in India-.......................................................................................... 37

7.2 Demand and Forecasts for India- ................................................................................................... 38

7.3 Competitive demand from Fertilizer & City Gas Sector- .............................................................. 39

7.4 Structure of the natural gas sector in India- ................................................................................... 40

7.5 Domestic Natural Gas in India- ..................................................................................................... 41

7.6 Domestic Gas pipe lines network in India- .................................................................................... 43

7.7 Trance-national gas pipe lines- ...................................................................................................... 44

7.7.1 TAPI- pipeline- ................................................................................................................... 45

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7.7.2 Iran–Pakistan–India pipeline- ............................................................................................. 46

7.7.3 Myanmar-Bangladesh-India Pipeline- ................................................................................ 47

7.8 Liquefied Natural Gas (LNG) – ..................................................................................................... 49

7.8.1 Regasification Capacity of India-........................................................................................ 49

7.9 Coal gasification in India- .............................................................................................................. 50

8. 8 Factors affecting Natural gas pricing:- ...................................................................... 51

8.1 Natural gas pricing in India- .......................................................................................................... 51

8.1.1 APM (Administered Pricing Mechanism) Gas Pricing:- ....................................................... 54

8.1.2 Pricing of Gas under Pre-NELP Production Sharing Contracts (PSC)................................... 55

8.1.3 Pricing of Gas with reference to NELP Provisions- .............................................................. 55

8.2 Imported Gas (LNG) Pricing- .......................................................................................................... 55

8.3 Pricing Issue:- ................................................................................................................................. 57

8.4 Framework of New Pool Pricing Mechanism:- .............................................................................. 59

8.4.1 Need for Pool Pricing:- ........................................................................................................ 59

8.4.2 Proposed Roadmap of Pool Pricing Mechanism:- ............................................................... 60

8.5 Effect of Globalization of Gas market on gas prices:- .................................................................... 62

9. 9 Shale Gas:- .................................................................................................................... 66

9.1 Shale gas historical back ground and development:- .................................................................... 66

9.2 Shale Gas Reserve:- ........................................................................................................................ 68

9.3 Hydraulic fracking- breakthrough in shale gas:- ............................................................................ 69

9.4 Issues with Hydraulic fracking:- ..................................................................................................... 71

9.5 Implication of shale gas reserve on traditional gas producers in US:- .......................................... 71

9.6 Implication on Indian gas market:- ................................................................................................ 72

9.7 China planned for shale gas development:- .................................................................................. 72

10. Energy Security in India:- .............................................................................................. 74

11. Findings & Recommendations:- .................................................................................... 79

12. References:- ..................................................................................................................... 82

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1 Executive Summery -

In India installed capacity for power generation is 199.87 Gigawatt (GW) as of March 2012; the

world’s fifth largest, of which approximately 30,000 MW running idle due to shortage of fuel

supply. The International Energy Agency estimates that estimates India will add between 600

GW to 1200 GW of additional new power generation capacity before 2050. Due to acute

shortfall in domestic coal production to meet demand and higher exchange rate is severely

affecting power sector in India. Exploration of huge shale gas reserve of USA and China and

natural gas have changed prospective of fuel supply. Indian coal is of high ash content and low

sulfur content. Its contribution to power sector is around 56.4% and natural gas contribution to

power sector is around 9.2% of total power generation. Our objective is the scope of natural gas

as an alternate fuel for electricity in India. Due to higher prices of coal and petroleum,

substitutively fuel demand can be met by natural gas. Natural gas demand is continuously

increasing and furcating is done at different scenarios of growth rate. There are three options for

natural gas- domestic natural gas, piped natural gas and imported liquefied natural gas. Domestic

gas production in India is continuously falling down is not viable option. Presently we have a

country wide network of 12,000 km of gas pipeline and having capacity to transport 230 mmscmd

of gas. Study of natural gas pricing method in India and factors affecting natural gas pricing and

scope of new pricing method pool pricing in India. Demand from different sectors i.e. fertilizer,

city gas sector and power sector. And scope of shale gas exploration and production.

With a burgeoning population, we have to recognize that resources are scarce and plan

accordingly. End use efficiency, reduction of wastage and accountability has great potential for

improvement. Investment in coal base electricity needs critical appraisal because of availability,

land requirement, pollution, green house gas emission and ash disposal and increasing cost of

environment needs critical appraisal. Natural gas based electricity generator are generally not

approved because of lack of domestic availability of natural gas besides domestic gas sector has

received a thrust with shale gas and Hydraulic fracking technology in US. A relook into fuel

import i. e. import of coal vis a vis import of natural gas is a national imperative in view of the

need for electricity keeping in view all other collateral concerns. Diesel generator can be

replaced by natural gas plant- In India electricity generated by DG set- 1200 MW at cost of Rs.

12/kwh and grid power at cost of Rs 3/kwh. This market will grow at the rate of 20% for coming

years. Natural gas can be used for distributed power generation-Due to heavy distribution and

transmission losses (around 30%) distributed generation by natural gas is better option as it can

be produced at cost of Rs. 6 to 7 per kwh.

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2 NTPC PROFILE:-

NTPC Limited (formerly National Thermal Power Corporation) is the largest state-

owned power generating company in India. Forbes Global 2000 for 2010 ranked it 341th in the

world. It is an Indian public sector company listed on the Bombay Stock Exchange although at

present the Government of India holds 84.5%(after divestment the stake by Indian government

on 19october2009) of its equity. With a current generating capacity of 34194 MW, NTPC has

embarked on plans to become a 75,000 MW company by 2017. It was founded on November 7,

1975.

NTPC's core business is engineering, construction and operation of power generating plants and

providing consultancy to power utilities in India and abroad.

The total installed capacity of the company is 34,194 MW (including JVs) with 15 coal based

and 7 gas based stations, located across the country. In addition under JVs, 5 stations are coal

based & another station uses naphtha/LNG as fuel. The company has set a target to have an

installed power generating capacity of 1,28,000 MW by the year 2032. The capacity will have a

diversified fuel mix comprising 56% coal, 16% Gas, 11% Nuclear and 17% Renewable Energy

Sources(RES) including hydro. By 2032, non fossil fuel based generation capacity shall make up

nearly 28% of NTPC’s portfolio.

NTPC has been operating its plants at high efficiency levels. Although the company has 18.79%

of the total national capacity it contributes 28.60% of total power generation due to its focus on

high efficiency. NTPC’s share at 31 Mar 2001 of the total installed capacity of the country was

24.51% and it generated 29.68% of the power of the country in 2008–09. Every fourth home in

India is lit by NTPC. As at 31 Mar 2011 NTPC's share of the country's total installed capacity is

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17.75% and it generated 27.4% of the power generation of the country in 2010–11. NTPC is

lighting every third bulb in India. 170.88BU of electricity was produced by its stations in the

financial year 2005–2006. The Net Profit after Tax on March 31, 2006 was INR 58,202 million.

Net Profit after Tax for the quarter ended June 30, 2006 was INR 15528 million, which is

18.65% more than for the same quarter in the previous financial year. 2005).

In October 2004, NTPC launched its Initial Public Offering (IPO) consisting of 5.25% as fresh

issue and 5.25% as offer for sale by Government of India. NTPC thus became a listed company

in November 2004 with the Government holding 89.5% of the equity share capital. In February

2010, the Shareholding of Government of India was reduced from 89.5% to 84.5% through

Further Public Offer. The rest is held by Institutional Investors and the Public.

Pursuant to a special resolution passed by the Shareholders at the Company’s Annual General

Meeting on September 23, 2005 and the approval of the Central Government under section 21 of

the Companies Act, 1956, the name of the Company "National Thermal Power Corporation

Limited" has been changed to "NTPC Limited" with effect from October 28, 2005. The primary

reason for this is the company's foray into hydro and nuclear based power generation along with

backward integration by coal mining.

(NTPC) is in the 138th position in Fortune 500 in 2009. 10 Indian companies make it to FT's top

500.

Vision

“To be the world’s largest and best power producer, powering India’s growth.”

Mission

“Develop and provide reliable power, related products and services at competitive prices,

integrating multiple energy sources with innovative and eco-friendly technologies and

contribute to society.”

Core Values – BCOMIT

Business Ethics

Customer Focus

Organizational& Professional Pride

Mutual Respect & Trust

Innovation & Speed

Total Quality for Excellence

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Diversified Growth

As per new corporate plan, NTPC plans to become a 75 GW company by the year 2017

and envisages to have an installed capacity of 128 GW by the year 2032 with a well-

diversified fuel mix comprising 56% coal, 16% gas, 11% nuclear energy, 9% renewable

energy and 8% hydro power based capacity.

As such, by the year 2032, 28% of NTPC’s installed generating capacity will be based on

carbon free energy sources. Further, the coal based capacity will increasingly be based on

high-efficient-low-emission technologies such as Super-critical and Ultra-Super-critical.

Along with this growth, NTPC will utilize a strategic mix of options to ensure fuel security

for its fleet of power stations.

Looking at the opportunities coming its way, due to changes in the business environment,

NTPC made changes in its strategy and diversified in the business adjacencies along the

energy value chain. In its pursuit of diversification NTPC has developed strategic alliances

and joint ventures with leading national and international companies. NTPC has also made

long strides in developing its Ash Utilization business.

Hydro Power: In order to give impetus to hydro power growth in the country and

to have a balanced portfolio of power generation, NTPC entered hydro power

business with the 800 MW Koldam hydro project in Himachal Pradesh. Two more

projects have also been taken up in Uttarakhand. A wholly owned subsidiary,

NTPC Hydro Ltd., is setting up hydro projects of capacities up to 250 MW.

Renewable Energy: In order to broad base its fuel mix NTPC has plan of capacity

addition of about 1,000 MW through renewable resources by 2017.

Nuclear Power: A Joint Venture Company "AnushaktiVidhyut Nigam Ltd." has

been formed (with 51% stake of NPCIL and 49% stake of NTPC) for development

of nuclear power projects in the country.

Coal Mining: In a major backward integration move to create fuel security, NTPC

has ventured into coal mining business with an aim to meet about 20% of its coal

requirement from its captive mines by 2017. The Government of India has so far

allotted 7 coal blocks to NTPC, including 2 blocks to be developed through joint

venture route.

Power Trading: 'NTPC VidyutVyapar Nigam Ltd.' (NVVN), a wholly owned

subsidiary was created for trading power leading to optimal utilization of NTPC’s

assets. It is the second largest power trading company in the country. In order to

facilitate power trading in the country, ‘National Power Exchange Ltd.’, a JV of

NTPC, NHPC, PFC and TCS has been formed for operating a Power Exchange.

Ash Business: NTPC has focused on the utilization of ash generated by its power

stations to convert the challenge of ash disposal into an opportunity. Ash is being

used as a raw material input by cement companies and brick manufacturers. NVVN

is engaged in the business of Fly Ash export and sale to domestic customers. Joint

ventures with cement companies are being planned to set up cement grinding units

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in the vicinity of NTPC stations.

Power Distribution: ‘NTPC Electric Supply Company Ltd.’ (NESCL), a wholly

owned subsidiary of NTPC, was set up for distribution of power. NESCL is

actively engaged in ‘Rajiv Gandhi GraminVidyutikaranYojana’programme for

rural electrification.

Equipment Manufacturing: Enormous growth in power sector necessitates

augmentation of power equipment manufacturing capacity. NTPC has formed JVs

with BHEL and Bharat Forge Ltd. for power plant equipment manufacturing.

NTPC has also acquired stake in Transformers and Electricals Kerala Ltd. (TELK)

for manufacturing and repair of transformers.

Future Capacity Additions

NTPC has formulated a long term Corporate Plan upto 2032. In line with the Corporate Plan,

the capacity addition under implementation stage is presented below:

PROJECT STATE MW

Coal

1. Indira Gandhi STPP- JV with IPGCL & HPGCL ( 3 x 500) Haryana 1000

2. Sipat I (3 x 660) Chhattisgarh 1980

3. Simhadri II Unit - IV( 500) Andhra Pradesh 500

4. Vallur I -JV with TNEB ( 2 x 500) Tamilnadu 1000

5. Vallur Stage-I Phase-II -JV with TNEB ( 1 x 500) Tamilnadu 500

6. Bongaigaon(3 x 250) Assam 750

7. Mauda ( 2 x 500) Maharashta 1000

8. Rihand III(2X500) Uttar Pradesh 1000

9. Vindhyachal-IV (2X500) Madhya Pradesh 1000

10. Muzaffarpur Expansion (2x195) – JV with BSEB Bihar 390

11. Nabinagar TPP-JV with Railways (4 x 250) Bihar 1000

12. Barh II (2 X 660) Bihar 1320

13. Barh I (3 X 660) Bihar 1980

Hydro

1. Koldam HEPP ( 4 x 200) Himachal Pradesh 800

2. TapovanVishnugad HEPP (4 x 130) Uttarakhand 520

3. Singrauli CW Discharge(Small Hydre) Uttar Pradesh 8

Total 14748

Subsidiaries

NTPC Electric Supply Company Ltd. (NESCL)

The company was formed on August 21, 2002. It is a wholly owned subsidiary company of

NTPC with the objective of making a foray into the business of distribution and supply of

electrical energy, as a sequel to reforms initiated in the power sector.

NTPC Vidyut Vyapar Nigam Ltd. (NVVN)

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The company was formed on November 1, 2002, as a wholly owned subsidiary company of

NTPC. The company’s objective is to undertake sale and purchase of electric power, to

effectively utilise installed capacity and thus enable reduction in the cost of power. NVVN

NTPC Hydro Ltd. (NHL)

The company was formed on December 12, 2002, as a wholly owned subsidiary company of

NTPC with an objective to develop small and medium hydroelectric power projects of up to

250 MW. More>>

Pipavav Power Development Co. Ltd. (PPDCL)

A memorandum of understanding was signed between NTPC, Gujarat Power Corporation

Limited (GPCL) and Gujarat Electricity Board (GEB) in 2004 for development of a 1000 MW

thermal power project at Pipavav in Gujarat by forming a new joint venture company between

NTPC and GPCL with 50:50 equity participation. Pursuant to the decision of Gujarat

Government, NTPC Ltd. has dissociated itself from this company. PPDCL is under winding

up.

Kanti Bijlee Utpadan Nigam Limited, (formerly known as Vaishali Power Generating

Company Limited)

To take over Muzaffarpur Thermal Power Station (2*110MW), a subsidiary company named

‘Vaishali Power Generating Company Limited (VPGCL)’ was incorporated on September 6,

2006 with NTPC contributing 51% of equity and balance equity was contributed by Bihar State

Electricity Board. This company was formed to renovate the existing unit and run the plant.

The second unit has been successfully re-synchronized on October 17, 2007 after 4 years of

being idle. Renovation and modernization of the first unit is under progress. The company was

rechristened as ‘Kanti Bijlee Utpadan Nigam Limited’ on April 10, 2008.

Bharatiya Rail Bijlee Company Limited (BRBCL)

A subsidiary of NTPC under the name of ‘Bharatiya Rail Bijlee Company Limited’ was

incorporated on November 22, 2007 with 74:26 equity contribution from NTPC and Ministry

of Railways, Govt. of India respectively for setting up of four units of 250 MW each of coal

based power plant at Nabinagar, Bihar. Investment approval of the project was accorded in

January, 2008.

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3 Project Objective-

To find out viable option for fuel supply to set new power plant on India. Study of power sector

in India and all available fuel supply option for electricity generation in India to find out scope

of natural gas as an alternate fuel for electricity generation. Electricity demand projection in

India at different growth rate scenarios. Natural gas supply option as domestic natural gas

reserve and natural gas import. Study of piped natural gas and LNG import. To find out viable

natural gas supply option while keeping in mind price, gas reserve, infrastructure requirement

and time period required to be operational. Natural gas as a fuel for distributed power

generation to reduce transmission losses and replacement of DG sets by natural gas based

turbines. Natural gas price mechanism in India and in different regional gas market and impact

of globalization of gas market. Scope of shale gas exploration and impact of it on India and

traditional natural gas producer.

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4 Introduction-

4.1 Electricity is prime mover of Indian economy:

Electricity is the prime mover of growth and is vital to the sustenance of a modern economy. The

projected growth of the Indian economy depends heavily on the performance and growth of the

power sector. It is the endeavor of the Government to ensure that agriculture, industry,

commercial establishments and all households receive uninterrupted supply of electricity at

affordable rates. The electricity sector in India had an installed capacity of

199.87 Gigawatt (GW) as of March 2012, the world's fifth largest. Captive power plants generate

an additional 31.5 GW. Thermal power plants constitute 66% of the installed capacity,

hydroelectric about 19% and rest being a combination of wind, small hydro, biomass, waste-to-

electricity, and nuclear. India generated 855 BU electricity during 2011-12 fiscal year.

In terms of fuel, coal-fired plants account for 57% of India's installed electricity capacity,

compared to South Africa's 92%; China's 77%; and Australia's 76%. After coal,

renewal hydropower accounts for 19%, and natural gas for about 9%.

In December 2011, over 300 million Indian citizens had no access to electricity. Over one third

of India's rural population lacked electricity, as did 6% of the urban population. Of those who did

have access to electricity in India, the supply was intermittent and unreliable. In 2010, blackouts

and power shedding interrupted irrigation and manufacturing across the country.

The per capita average annual domestic electricity consumption in India in 2009 was 96 kWh in

rural areas and 288 kWh in urban areas for those with access to electricity, in contrast to the

worldwide per capita annual average of 2600 kWh and 6200 kWh in the European Union. India's

total domestic, agricultural and industrial per capita energy consumption estimate vary

depending on the source. Two sources place it between 400 to 700kWh in 2008–2009. As of

January 2012, one report found the per capita total consumption in India to be 778 kWh.

India currently suffers from a major shortage of electricity generation capacity, even though it is

the world's fourth largest energy consumer after United States, China and Russia.The

International Energy Agency estimates India needs an investment of at least $135 billion to

provide universal access of electricity to its population.

The International Energy Agency estimates India will add between 600 GW to 1200 GW of

additional new power generation capacity before 2050.This added new capacity is equivalent to

the 740 GW of total power generation capacity of European Union (EU-27) in 2005. The

technologies and fuel sources India adopts, as it adds this electricity generation capacity, may

make significant impact to global resource usage and environmental issues.

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India's electricity sector is amongst the world's most active players in renewable energy

utilization, especially wind energy. As of December 2011, India had an installed capacity of

about 22.4 GW of renewal technologies-based electricity, exceeding the total installed electricity

capacity in Austria by all technologies.

India's network losses exceeded 32% in 2010 including non-technical losses, compared to world

average of less than 15%. Both technical and non-technical factors contribute to these losses, but

quantifying their proportions is difficult. Some experts estimate that technical losses are about

15% to 20%, A high proportion of non‐technical losses are caused by illegal tapping of lines, but

faulty electric meters that underestimate actual consumption also contribute to reduced payment

collection. A case study in Kerala estimated that replacing faulty meters could reduce

distribution losses from 34% to 29%.

Key implementation challenges for India's electricity sector include new project management

and execution, ensuring availability of fuel quantities and qualities, lack of initiative to develop

large coal and natural gas resources present in India, land acquisition, environmental clearances

at state and central government level, and training of skilled manpower to prevent talent

shortages for operating latest technology plants.

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.

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.

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4.2 Electricity demand in India-

Electricity demand at peak load and at normal load is mentioned below in table. In past ten years

normal energy shortfall is regularly increasing, in 2003-04 it was 7.1 % and in 2008-09 it was

11.1% of demand. Peak load energy shortage is also high. Indian economy is one of fastest

growing economy of world. As economy is growing energy demand is also growing to meet

industrial demand.

Table- Electricity Demand and Supply

FY Energy Peak Demand

(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

2010-11 861,591 811,100 50,491 5.9 152746 137013.2 15732.84 10.3

Table- Electricity demand projection at different growth rate-

Energy Requirement Peak Demand Installed Capacity

Required

(Billion kWh) (GW) (GW)

GDP

growth at 6.00% 8.00% 9.00% 6.00% 8.00% 9.00% 6.00% 8.00% 9.00%

2011-12 1097 1,097 1,097 158 158 158 199 199 199

2016-17 1407 1,524 1,586 203 220 228 255 276 288

2021-22 1804 2,118 2,293 260 305 330 327 384 416

2026-27 2267 2,866 3,219 327 413 464 411 520 584

2031-32 2850 3,880 4,518 411 560 651 517 704 820

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Electricity demand projection as mentioned in above table was done on basis falling elasticity of

electricity, data source- report of planning commission of India.

Table- Elasticity used for projection-

Year Electricity

(falling Elasticity)

2011-12 to 2021-22 0.85

2021-22 to 2031-32 0.78

4.3 Dependence of Electricity demand on GDP growth rate-

Electricity is prime mover of growth rate. As industrialization grows power demand also grows

to maintain higher production rate. By analyzing past 20 years data, shows that growth in

electricity demand is varies as per GDP growth rate and we got following relationship between

electricity demand and growth rate-

Y = 29167X + 227827

Where Y= Electricity Demand

X= GDP growth rate

Also electricity demand projection was done for GDP growth rate of 6%, 8% and 9% for next

20 years at falling elasticity of electricity.

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Chart-As per data in Annexure -2

0

2

4

6

8

10

12

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

%

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Year

Electricity Demand and GDP Growth Rate

Electricity Demand(Mus) GDP Growth Rate(%)

y = 29167x + 227827 R² = 0.9736

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

1000000

5.5 4.8 6.7 7.6 7.6 4.1 6.2 7.4 4 5.2 3.8 8.4 8.3 9.3 9.3 9.8 7.6 9.1 8.8 6.9

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(

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GDP growth rate

Electricity Demand and GDP

Electricity Demand and GDP Linear (Electricity Demand and GDP)

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4.4 Major available resources for electricity generation-

Major power resources

option

Hydro Energy Coal

Domestic coal

Imported coal

Blended Coal

Legnite

Nuclear Energy

Wind Energy Solar Energy Natural gas

Domestic gas

Piped Natural gas

LNG

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The 17th electric power survey of India report claims-

Over 2010–11, India's industrial demand accounted for 35% of electrical power

requirement, domestic household use accounted for 28%, agriculture 21%,

commercial 9%, public lighting and other miscellaneous applications accounted for

the rest.

The electrical energy demand for 2016–17 is expected to be at least 1392 Tera Watt

Hours, with a peak electric demand of 218 GW.

The electrical energy demand for 2021–22 is expected to be at least 1915 Tera Watt

Hours, with a peak electric demand of 298 GW.

hydro 19%

coal 57%

gas 9%

Oil 1%

Neclear 2%

RES 12%

Sector wise power generation in 2012 in India

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5 Coal as a fuel for electricity generation-

5.1 Predominant Position of Coal-

-In terms of fuel, coal-fired plants account for 57% of India's installed electricity

capacity, compared to South Africa's 92%; China's 77%; and Australia's 76%. After coal,

renewal hydropower accounts for 19%, and natural gas for about 9%.

-A cumulative total of 285862.21 Million Tonnes of Geological Resources of Coal have

so far been estimated in India as on 1.4.2011.

-Coal is likely to remain our mainstay of fuel for power generation till 2030-31.

However, current shortage is cause of concern.

5.2 Inventory of geological resources of coal in India-

As a result of exploration carried out up to the maximum depth of 1200m by the GSI, CMPDI,

SCCL and MECL etc, a cumulative total of 285862.21 Million Tonnes of Geological Resources

of Coal have so far been estimated in the country as on 1.4.2011. The details of state-wise

geological resources of coal are given as under:

GONDWANA COAL FIELDS: - Annexure -2

TERTIARY COAL FIELDS- Annexure- 3

Categorization of coal resources-

The coal resources of India are available in older Gondwana Formations of peninsular India and

younger Tertiary formations of north-eastern region. Based on the results of Regional/

Promotional Exploration, where the boreholes are normally placed 1-2 Km apart, the resources

are classified into ‘Indicated’ or ‘Inferred’ category. Subsequent Detailed Exploration in selected

blocks, where boreholes are less than 400 meter apart, upgrades the resources into more reliable

‘Proved’ category. The Formation-wise and Category-wise coal resources of India as on

1.4.2010 are given in table below:

(in Million Tonnes)

Formation

Proved Indicated Inferred Total

Gondwana Coals 113407.79 137371.76 33590.02 284369.57

Tertiary Coals 593.81 99.34 799.49 1492.64

Total 114001.60 137471.10 34389.51 285862.21

* Includes 749.92 M.T. of Inferred resources established through mapping in North-

Eastern region.

20

5.3 Type and category-wise coal resources of India-

The Type and Category-wise coal resources of India as on 1.4.2011 are given in

table below:-

(in Million Tonnes)

Type of Coal

Proved Indicated Inferred Total

(A) Coking :-

-Prime Coking 4614.35 698.71 0 5313.06

-Medium Coking 12572.52 12001.32 1880.23 26454.07

-Semi-Coking 482.16 1003.29 221.68 1707.13

Sub-Total Coking 17669.03 13703.32 2101.91 33474.26

(B) Non-Coking:- 95738.76 12368.44 31488.11 250895.31

(C) Tertiary Coal 593.81 99.34 799.49* 1492.64

Grand Total 114001.60 137471.10 34389.51 285862.21

* Includes 749.92 M.T. of Inferred resources established through mapping in North-

Eastern region.

Status of Coal Resources in India during Last Five Years:

As a result of Regional, Promotional and Detailed Exploration by GSI, CMPDI and SCCL etc, the

estimation of coal resources of India has reached to 267.21 Bt. The estimates of coal resources in the

country during last 5 years are given below:

(in Million tonnes)

As on

Geological Resources of Coal

Proved Indicated Inferred Total

1.1.2006 95866 119769 37666 253301

1.4.2007 99060 120177 38144 257381

1.4.2008 101829 124216 38490 264535

1.4.2009 105820 123470 37920 267210

1.4.2010 109798 130654 36358 276810

21

5.4 Consumption pattern of coal-

By analyzing past 30 years data, shows that coal consumption is increasing year by yearas

power demand increasing in India. Due to limited coal reserves, if coal consumption keep

growing at same rate as per past trend, all economic coal reserve will be extracted within 30

years.we got following relationship for coal consumption pattern in India.

Y = 18035X + 41974

Where Y= Coal consumption

X= Year

Annexure- 4

5.5 Factors Affecting Coal Prices in India-

y = 18035x + 41974 R² = 0.9425

-0.05

0

0.05

0.1

0.15

0.2

0

100000

200000

300000

400000

500000

600000

700000

800000

900000

19

80

1

98

1

19

82

1

98

3

19

84

1

98

5

19

86

1

98

7

19

88

1

98

9

19

90

1

99

1

19

92

1

99

3

19

94

1

99

5

19

96

1

99

7

19

98

1

99

9

20

00

2

00

1

20

02

2

00

3

20

04

2

00

5

20

06

2

00

7

20

08

2

00

9

20

10

C

o

a

l

T

o

n

n

e

s

Year

Consumption

% Change

22

Significant demand from China and India is increasingly accounting for the bulk of worldwide

coal usage. Hence, coal demand and consequently coal prices will depend on the strength of the

economic recovery in the emerging markets, particularly China and India as mentioned. As

several of coal commodity currencies (Aussie Dollar, SA Rand and the Columbian Peso) have

floating exchange rates, any appreciation in the value of these currencies consequently increases

the prices for holders of non-commodity currencies.

Coal price

Coal Demand

and Production

Coal Import

Domestic coal

pricing

Coal to sold at market

price

Cost of Land

Crude oil prices

Exchange rate

23

5.5.1 Domestic coal production and demand:

Domestic coal production is not meeting demand. Currently around 37,000 MW capacities of

power plants running idle due to shortage of fuel supply. Coal India is also not meeting coal

production target. Due to coal supply shortage prices are going up. Due to industrialization,

power demand is growing. It is estimated that at the end of terminal year of 11th Five Year

Plan (2011-12), the coal demand would be about 713 Million Tonnes, whereas the indigenous

availabilitywould be about 630 Million Tonnes. Therefore, there is likely to be a gap of 83

Million Tonnes, which is required to be met through imports. The details are given below:-

(Fig. in million tonnes)

Source 2008-09 2009-10 2010-11 2010-11 XI Plan

Proj.

Actual Actual BE RE 2011-12

CIL 4

01.44

4

15.88

4

60.5

4

33.5

4

86.5

SCCL 4

4.54

4

9.37

4

7.05

5

0.5

4

7

Others 4

4.03

4

9.25

6

5.87

5

2.05

9

6.41

Total

indigenous

supply

4

90.01

5

14.5

5

73.42

5

36.05

6

29.91

Demand 5

50

5

97.98

6

56.31

6

24.78

7

13.24

Gap to be met

through imports

5

9.98

8

3.48

8

2.89

8

8.73

8

3.33

Total Import

(a+b)

5

9

7

3.25

8

2.89

8

8.73

8

3.33

5.5.2 Coal Import-

As per the present Import Policy, coal can be freely imported (under Open General License) by

the consumers themselves, considering their needs and exercising their own commercial

prudence. Due to higher international coal prices and regularly depreciating rupees value, import

of coal is not economical option for power generation. Coking coal is being imported by Steel

Authority of India Limited (SAIL) and other Steel sector manufacturing unites mainly to

bridge the gap between the requirement and indigenous availability and to improve the

quality. Coal based power plants, cement plants, captive power plants, sponge iron plants,

industrial consumers and coal traders import non- coking coal. Coke is imported mainly by

Pig-Iron manufacturers and Iron &Steel Sector consumers using mini-blast furnace. Details

of import of coal and products during the last five years are as under:

24

Table:-Coal import (Fig. in million tonnes)

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Coking Coal 16.89 17.88 22.03 21.08 23.46 27.6

Non Coking coal 21.7 25.2 27.76 37.92 44.28 52.02

Coke 2.62 4.69 4.25 1.88 2.2 4.63

Total Import 41.21 47.77 54.04 60.88 69.94 84.05

5.5.3 Domestic Coal Price Fixation-

Government of India deregulated the prices of Non-Coking Coal of grades A,B&C,

Coking coal and Semi/Weakly coking coal on 22.03.1996. Subsequently, on12.03.1997,

Government of India deregulated the prices of non-coking coal of grade D, Hard Coke

and Soft Coke and also allowed Coal India Ltd to fix coal prices for grades E,F&G till

Jan'2000 on every six months by updating cost indices as per escalation formula

contained in the 1987 report of the Bureau of Industrial Cost & Prices. With effect from

01.01.2000, CIL was free to fix the prices of all grades of coal in relation to the market

prices.

Pursuant of the above, CIL fixed the prices of coal from time to time and last such revision

has been made on26.02.2011, to be effective w.e.f 00 hrs of 27-02-11.

Grade wise Basic Price of coal at the Pit-head prices of all varieties of Run of

Mine Coal have been given in Table I to V applicable to the Power Utilities

(including IPPs), Fertilizers and Defense and in Table VI to X applicable to

consumers other than the Power Utilities, (including IPPs), Fertilizers and

Defense excluding statutory levies for Run-of-mine (ROM) Non-Long-

Flame Coal ,Long flame Coal, Coking Coal, Semi Coking Coal & Weakly

Coking Coal, direct feed Coal, Assam Coal for various subsidiaries of CIL as

shown below:

COMPANYWISEGRADEWISECOALPRICESOFCILFORPOWER

UTILITIES (INCLUDINGIPPs), FERTILIZERSANDDEFENCE

Basic Price of Run of Mine Non-Long-Flame Non-Coking Coal- Annexure- 5

Basic Price of Run of Mine of Other Non-Coking Coal- Annexure- 6

Basic Price of Run of Mine Long-Flame Non-Coking Coal- Annexure- 7

Coking Coal (Run of Mine) Annexure- 8

Semi Coking & Weakly Coking Coal (Run Of Mine) Annexure- 9

Direct feed Coking Coal (Run of Mine) Annexure- 10

Assam Coal (Run of Mine) Annexure- 11

25

5.5.4 Quantity of Coal to be sold at market price:-

Coal distribution through e-auction was re-introduced in the new coal distribution

policy in 2007 mainly to provide access to companies that do not have regular sources

of supply. Most of the through e-auction is transported through roads. Only 10% of

total coal production of Coal India Ltd is being sold by e-auctioning and prices for

remaining are being administered by Government of India. Coal India is being asked

to sign fuel supply agreement with power sector companies and not increase supplies

to other sectors. Present spot market prices are at least 60% higher than notified prices

of coal. Coal prices in domestic spot market have risen by 50% over past three years.

As mentioned below in table Coal India may cut e-auctioning 10 to 7% by 2016-17.

Diversion of coal from e-auction is expected to enable CIL to offer 47 MT more coal

to power sector.

Table- Coal e-auction plan for Coal India Ltd. up to 2016-17

Year 2012-13 2013-14 2014-15 2015-16 2016-17

Production(MT) 464 486 508 530 556

e-auction% 10 10 9 8 7

Amount(MT) 46 49 46 42 39

5.5.5 Impact of crude oil price on Thermal coal prices:-

The coal demand revived upon the energy price surges during the two oil crises. The

primary factor having spurred the revival was that coal was priced much cheaper than

the- then skyrocketing oil and gas prices. Then such demerits as handling difficulties and

environmental load, if taken into account, can undermine utility of coal unless it should

be priced cheap, the greatest merit. In short, the oil price sets the ceiling of coal prices.

Particularly up to first half of the 2008, coal has demonstrated price advantages over

crude oil. After that at the time of uncertainty during global recession, crude oil prices

fall abruptly while not in case of coal. Again in 2009 prices of both coal and crude oil

started rising, and from January, 2011 coal again demonstrated advantages over crude

oil.

As it is clearly shown in graph coal prices are directly related to crude oil prices, varies

according to crude prices change. Namely price ratio of steaming coal to crude oil has

been as small as staying within the 0.38 – 0.45 range. For these reasons, the ceiling on of

coal prices can be put at around 75% of the crude oil price equivalent heat value.

26

Table- Crude oil prices and coal prices per month

Annexure- 12

5.5.6 Impact of Exchange rate on coal prices:-

A sharp decline in the value of the rupee is bound to affect the power generation capability

of power plants that are heavily dependent upon imported coal for electricity generation.

This would mean an increase in the level of energy deficit in the country. Moreover, a fall

witnessed in power generation capacity is likely to have an adverse effect on all the three

sectors of the economy namely agriculture, industry and services.

Another dimension to the rupee depreciation episode is that not only has the expenditure on

imports increased but this coupled with an inflexible tariff structure means that the power

companies are going to suffer huge losses.

The global prices of thermal coal in November 2011 were lower than that in May 2011.

Yet, the depreciation of rupee has meant that the importer has to pay an additional Rs.

684.6 per tonne to import the same quantity of coal.

Please refer to table below:

Table: Impact of Rupee Depreciation on Thermal Coal Price-

Month Price $ Exchange rate Price Rs

May 127.6 45.05 5739.5

November 121.9 52.7 6424.1

Difference -5.7 7.7 684.6

Annexure- 13

0

50

100

150

200

250

0

20

40

60

80

100

120

140

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Jan

-11

Ap

r-1

1

Jul-

11

Oct

-11

Jan

-12

Ap

r-1

2

U

S

$

/

t

o

n

U

S

$

/

b

a

r

r

e

l

Relationship Between Crude oil and coal prices

Crude oil Price per barrel

Coal price per metric ton

27

5.5.7 Impact of availability of land on coal prices-

Due to soaring up of land prices and compensation to land owner as per new land

acquisition policy hues amount of money is paid for coal mining lease and that cost further

increasing coal prices. New land pricing policy detail is given bellow-

Land Acquisition Policy in India:-

The Indian Ministry of Rural Development introduces its new draft Land Acquisition and

Rehabilitation & Resettlement Bill which is a policy framework to balance

between land acquisitions for industrialization with the concerns of those who depend on

that land for livelihood.

The new draft Land Acquisition and Rehabilitation & Resettlement Bill of 2011 which will

go through a cabinet vote very soon, has been designed to address the concern of balancing

the need for land to support rapid industrialization on one hand, and the needs of the people

who depend on it for their livelihood.

India is the third largest economy in the world today, but it faces an urgent need for growth

through industrialization, especially through manufacturing. This puts the nation in need

for land for a number of purposes from fuelling the inevitable process of urbanization and

greater industrialization, to a variety of 'public purposes'.

The nation has had a land acquisition act since 1894 which as over the time, seen quite a

few amendments. But the recent heightening of public concern over land acquisition issues

and the absence of a comprehensive law covering the issues of resettlement, rehabilitation

and compensation of livelihoods, has highlighted the need for a wholesome law.

The bill states the legitimate reasons for land acquisition as the above mentioned ones and

additionally defines the purview of the term ‘public purposes’ as the following:

0

50

100

150

200

250

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

0.0

0

7-J

ul

7-O

ct

8-J

an

8-A

pr

8-J

ul

8-O

ct

9-J

an

9-A

pr

9-J

ul

9-O

ct

10

-Jan

10

-Ap

r

10

-Ju

l

10

-Oct

11

-Jan

11

-Ap

r

11

-Ju

l

11

-Oct

12

-Jan

12

-Ap

r

U

S

$

R

u

p

e

e

s

coal price in RS per MT coal price in US& per MT Exchange rate

28

1. Strategic purposes: e.g., armed forces, national security;

2. Infrastructure and Industry: where benefits largely accrue to the general public

3. Land acquired for R&R purposes

4. Village or urban sites: planned development -residential purpose for the poor and

educational and health schemes

5. Land for private companies for public purpose;

6. needs arising from natural calamities.

Rehabilitation and Resettlement

It has been observed in the past that the rehabilitation and resettlement aspect is frequently

neglected once the acquisition is over, leading to widespread resentment and rebellion from

the ‘affected families’, who are basically those people who either lose the and that they

own, or livelihood that they had derived from the acquired land. The current draft

necessitates the application of its rehabilitation and resettlement requirements if

the land acquired by private companies exceeds 100 acres.

The new bill states that the Government can either acquire land for its own use or for the

use of private companies for stated public purpose. But the draft makes it clear that

no acquisition can take place until 80% of the project affected families give their consent to

the acquisition. Also, the government can make no acquisition of multi-cropped or irrigated

lands or even land for the private purposes of private companies.

The rehabilitation and resettlement requirements which are a major highlight of this

draft included a number of minimum entitlements making a special provision of scheduled

castes and scheduled tribes.

Compensation and benefits

As per the compensation package, the award amount paid for the land acquired in case of

urban areas should be not less than double the market value determined, and not less than

six times in case of rural areas.

For landowners the entitlements include a subsistence allowance of Rs. 3000 per month per

family for 12 months along with Rs. 2000 per family as annuity for 20 years, with the use

of appropriate indexes for inflation. The loss of a house has to be compensated with the

building of a new one adhering to some minimum size requirements. Entitlements for

transportation and employment provisions also need to be guaranteed. An unemployment

benefit has to be paid if not even a single member of the family is given employment

opportunities. For those who lose their livelihood, the bill states similar entitlements.

29

6 Renewable resources in India:-

Status of renewable energy resources in India- New & Renewable Energy

Cumulative deployment of various Renewable Energy Systems/ Devices in the country as on

30/04/2012

Renewable Energy Program/

Systems

Target for

2012-13

Achievement

during

April,2012

Total

achievement

during 2012-

13

Cumulative

achievement u

p to 30.04.2012

I. POWER FROM RENEWABLES:

A. GRID-INTERACTIVE POWER (CAPACITIES IN MW)

Wind Power 2500 36.65 36.65 17389.31

Small Hydro Power 350 5.75 5.75 3401.06

Biomass Power 455 16.00 16.00 1166.10

Bagasse Cogeneration 7.50 7.50 1992.73

Waste to Power -Urban 20

- - 89.68

-Industrial - - -

Solar Power (SPV) 800 37.72 37.72 979.00

Total 4125.00 103.62 103.62 25017.88

B. OFF-GRID/ CAPTIVE POWER (CAPACITIES IN MWEQ)

Waste to Energy -

Urban

-Industrial

20.00 1.20 1.20 102.95

Biomass(non-bagasse)

Cogeneration

60.00 2.50 2.50 385.00

Biomass Gasifiers -

Rural- Industrial

1.50 - - 16.12

10.00 - - 134.09

Aero-Genrators/Hybrid

systems

0.50 - - 1.64

SPV Systems (>1kW) 30.00 - - 85.21

Water mills/micro hydel 2.00(500

Nos.)

-. - 1877 Nos.

Total 126.00 3.70 3.70 725.01

II. REMOTE VILLAGE ELECTRIFICATION

No. of Remote Village/Hamlets

provided with RE Systems

- - - -

III. OTHER RENEWABLE ENERGY SYSTEMS

Family Biogas Plants (No. in 1.25 - - 45.09

30

lakhs)

Solar Water Heating - Coll.

Areas (Million m2)

0.60 - - 5.46

Solar Energy in India:-

Solar water heaters have proved the most popular so far and solar photovoltaic for

decentralized power supply is fast becoming popular in rural and remote areas. More than

700000 PV systems generating 44 MW have been installed all over India. Under the water

pumping program more than 3000 systems have been installed so far and the market for

solar lighting and solar pumping is far from saturated. Solar drying is one area which offers

very good prospects in food, agricultural and chemical products drying applications.

The Jawaharlal Nehru National Solar Mission (JNNSM) has set ambitious targets for

power generation from solar energy in India. The Mission aims to have about 10 GW of

grid-connected solar power plants by 2022. The mission is divided into 3 phases and the

targets for grid-connected solar PV plants for each phase are-

Phase 1 2010-2013 500 MW

Phase 2 2013-2017 1,500 MW

Phase 3 2017-2022 7,000 MW

Total 10,000MW

In addition to the JNNSM, several state governments have separate solar policies

(Rajasthan, Gujarat and Karnataka) and many other state governments (Tamil Nadu,

Maharashtra, Andhra Pradesh etc) are drafting solar policies on their own. Apart from this,

the Renewable Purchase Obligation (RPO) is expected to drive the growth of the solar PV

power generation sector.

India is densely populated and has high solar insulation, an ideal combination for

using solar power in India. Much of the country does not have an electrical grid grid, so

one of the first applications of solar power has been for water pumping; to begin replacing

India's four to five million diesel powered water pumps, each consuming about

3.5 kilowatts, and off-grid lighting. Some large projects have been proposed, and a

35,000 km² area of the Thar desert has been set aside for solar power projects, sufficient to

generate 700 to 2,10 Gigawatts.

The Indian Solar Loan Program, supported by the United Nations Environment

Program has won the prestigious Energy Globe World award for Sustainability for helping

to establish a consumer financing program for solar home power systems. Over the span of

three years more than 16,000 solar home systems have been financed through 2,000 bank

31

branches, particularly in rural areas of South India where the electricity grid does not yet

extend.

Launched in 2003, the Indian Solar Loan Programme was a four-year partnership between

UNEP, the UNEP Risoe Centre, and two of India's largest banks, the Canara Bank and

Syndicate Bank.

Announced in November 2009, the Government of India proposed to launch its Jawaharlal

Nehru National Solar Mission under the National Action Plan on Climate Change with

plans to generate 1,000 MW of power by 2013 and up to 20,000 MW grid-based solar

power, 2,000 MW of off-grid solar power and cover 20 million sq. meters with collectors

by the end of the final phase of the mission in 2020.

Also, TERI's Lighting a Billion Lives Campaign started in 2008 aims to replace kerosene

and paraffin lamps with CFLs to provide off-the-grid lighting to villages and thus ease the

load on the power grid while at the same time provide the people with safe, non-polluting

light at night. So far, it has provided 35,000 CFLs to 640 villages in 16 states in India and

also about 500 CFLs in Myanmar. This campaign has reportedly benefited 175,000 people.

India's largest photovoltaic (PV) power plants- Annexure -2

Wind Energy:-

In progress are wind resource assessment programme, wind monitoring, wind mapping,

covering 800 stations in 24 states with 193 wind monitoring stations in operations.

Altogether 13 states of India have a net potential of about 45000 MW.

The development of wind power in India began in the 1990s, and has significantly

increased in the last few years. Although a relative newcomer to the wind industry

compared with Denmark or the United States, India has the fifth largest installed wind

power capacity in the world. In 2009-10 India's growth rate was highest among the other

top four countries.

As of 31 March 2011 the installed capacity of wind power in India was 16078 MW, mainly

spread across Tamil Nadu (6007 MW), Maharashtra (2310.70 MW), Gujarat (2175.60

MW), Karnataka(1730.10 MW), Rajasthan (1524.70 MW), Madhya Pradesh (275.50

MW), Andhra Pradesh (200.20 MW), Kerala (32.8 MW), Orissa (2MW), West Bengal (1.1

MW) and other states (3.20 MW). It is estimated that 6,000 MW of additional wind power

capacity will be installed in India by 2012. Wind power accounts for 6% of India's total

installed power capacity, and it generates 1.6% of the country's power. India's wind atlas is

available.

The worldwide installed capacity of wind power reached 197 GW by the end of 2010.

China (44,733 MW), US (40,180 MW), Germany (27,215 MW) and Spain (20,676 MW)

are ahead of India in fifth position. The short gestation periods for installing wind turbines,

and the increasing reliability and performance of wind energy machines has made wind

power a favored choice for capacity addition in India.

32

Suzlon, an Indian-owned company, emerged on the global scene in the past decade, and by

2006 had captured almost 7.7 percent of market share in global wind turbine sales. Suzlon

is currently the leading manufacturer of wind turbines for the Indian market, holding some

52 percent of market share in India. Suzlon’s success has made India the developing

country leader in advanced wind turbine technology.

Wind Power projects in India-

Power Plant Producer Location State Total

Capacity

(MWe) Vankusawade Wind

Park

Suzlon Energy Ltd. Satara Dist. Maharashtra 259

Cape Comorin AbanLoyd Chiles Offshore

Ltd.

Kanyakumari Tamil Nadu 33

KayatharSubhash Subhash Ltd. Kayathar Tamil Nadu 30

Ramakkalmedu Subhash Ltd. Ramakkalmedu Kerala 25

Muppandal Wind Muppandal Wind Farm Muppandal Tamil Nadu 22

Gudimangalam Gudimangalam Wind Farm Gudimangalam Tamil Nadu 21

Puthlur RCI Wescare (India) Ltd. Puthlur Andhra

Pradesh

20

LamdaDanida Danida India Ltd. Lamda Gujarat 15

Chennai Mohan Mohan Breweries &

Distilleries Ltd.

Chennai Tamil Nadu 15

Jamgudrani MP MP Windfarms Ltd. Dewas Madhya

Pradesh

14

Jogmatti BSES BSES Ltd. ChitradurgaDist Karnataka 14

PerungudiNewam Newam Power Company

Ltd.

Perungudi Tamil Nadu 12

Kethanur Wind Farm Kethanur Wind Farm Kethanur Tamil Nadu 11

Hyderabad APSRTC Andhra Pradesh State Road

Transport Corp.

Hyderabad Andhra

Pradesh

10

Muppandal Madras Madras Cements Ltd. Muppandal Tamil Nadu 10

PoolavadiChettinad Chettinad Cement Corp.

Ltd.

Poolavadi Tamil Nadu 10

Shalivahana Wind Shalivahana Green Energy.

Ltd.

Tirupur Tamil Nadu 20.4

33

Tidal Energy- • Tides generated by the combination of the moon and sun’s gravitational forces

• Greatest affect in spring when moon and sun combine forces

• Bays and inlets amplify the height of the tide

• In order to be practical for energy production, the height difference needs to be at

least 5 meters

• Only 40 sites around the world of this magnitude

• Overall potential of 3000 gigawatts from movement of tides

India set to get Asia’s first power plant-

With the proposed commissioning of a 50-Mw tidal power project off the coast of Gujarat

in 2013, India is ready to place its first “seamark” that will be a first for Asia as well.

London-based marine energy developer Atlantis Resources Corporation, along with

Gujarat Power Corporation Ltd, has signed a memorandum of understanding (MoU) with

the Gujarat government to start this project.

The cost for the plant is expected to be in the vicinity of Rs 750 crore. This plant is also is

expected to be scaled up to 250 Mw.

Timothy Cornelius, CEO, Atlantis Resources Corporation, said with just about 2 giga watt

of tidal power installations in the world today, this is a completely new and uncharted

power sources with immense potential. “Tidal power today is what wind energy was 10

years back,” he said.

Due to the high investment in setting up the project, a typical tidal power project is

expected to break even between 8 and 12 years after commissioning. Despite the long

gestation period to make it commercially viable, tidal power has unparalleled

environmental advantages.

“Tidal current power uses turbines to harness the energy contained in the flow of ocean

tides. It is unique as like tidal movements, power output is highly predictable and

sustainable with zero visual impact and the turbines are completely submerged. Tidal

power is like putting a wind turbine subsea and the turbine rotors rotate slowly, causing

very little environmental impact to marine flora and fauna,” said Cornelius.

The power offtaker would be Gujarat Power Corporation. The final cost of power per unit

will be determined at the completion of front-end engineering and design (FEED) phase,

but was expected to be competitive when compared to the large solar power projects

planned for development in Gujarat, the company said.

The project is currently owned by Atlantis and GPCL and project equity participants will

be sought at the completion of FEED phase.

34

Late last year, Atlantis became the turbine supplier to the largest planned marine power

project in the world, MeyGen, a 378-Mw tidal power project in the Pentland Firth in

Northern Scotland.

Current estimates suggest 15 per cent of the world’s power demands can be met by tidal

current power sources, while the estimates for India are currently around 5 per cent of its

annual demand for power.

“It is only an estimate, but it could be certainly more than 5 per cent, inclusive of wave

power and tidal power, from what we know now. However, resource investigation has just

begun and with so much coast line, I would expect this number to increase significantly,”

said Cornelius.

Sea water, which is 832 times denser than air, gives a 5 knot ocean current more kinetic

energy than a 350-km an hour wind, thus allowing ocean currents to have a very high

energy density. Accurate predictions of tidal current movements also make this one of the

most predictable and, therefore, reliable sources of renewable energy available today.

Nuclear Energy-

The global nuclear industry is moving forward at a brisk pace, only slightly slowed by the

Fukushima accident. The International Atomic Energy Agency’s most realistic estimate is

that 90 new nuclear plants will enter service by 2030. Ten new nuclear plants went online

over the past two years.

The home of more than one billion people, India has had one of the world’s fastest-growing

economies over the past decade. During this same time frame, the country has made big

strides in increasing its capacity for nuclear generation of electricity.

India now envisages increasing the contribution of nuclear power to overall electricity

generation capacity from 3.2% to 9% within 25 years. By 2020, India's installed nuclear

power generation capacity will increase to 20,000 MW.

India now ranks sixth in terms of production of nuclear energy, behind the U.S., France,

Japan, Russia, and South Korea.

There are now 439 nuclear reactors in operation around the world in over 30 countries,

providing almost 16% of the world’s electricity.

Given the emphasis on rapid expansions in the Indian nuclear power industry, it is

imperative to bring the Indian know-how and resources together with global nuclear skills

and experience to introduce a new dimension to the upcoming nuclear power projects.

Looking at all above important issues, UBM India is bringing its 4th International

Exhibition and Conference from 25 to 27 September 2012 at Mumbai. The exhibition and

the concurrent summit will be an excellent global networking opportunity for the

exhibitors, visitors and delegates. It will provide an opportunity for all companies showcase

35

their nuclear expertise and know-how and identify business opportunities in the Indian

market.

Presently Nuclear power is the fourth-largest source

of electricity in India after thermal, hydroelectric and renewable sources of electricity.As of

2010, India has 20 nuclear reactors in operation in six nuclear power plants, generating

4,780 MW while seven other reactors are under construction and are expected to generate

an additional 5,300 MW.

In October 2010, India drew up "an ambitious plan to reach a nuclear power capacity of

63,000 MW in 2032", but "populations around proposed Indian NPP sites have launched

protests, raising questions about atomic energy as a clean and safe alternative to fossil

fuels". There have been mass protests against the French-backed 9900 MW Jaitapur

Nuclear Power Project in Maharashtra and the 2000 MW Koodankulam Nuclear Power

Plant in Tamil Nadu. The state government of West Bengal state has also refused

permission to a proposed 6000 MW facility near the town of Haripur that intended to host

six Russian reactors. A Public Interest Litigation (PIL) has also been filed against the

government’s civil nuclear program at the Supreme Court. Despite these impediments the

capacity factor of Indian reactors was at 79% in the year 2011-12 as against 71% in 2010-

11. Nine out of Twenty Indian reactors recorded an unprecedented 97% Capacity factor

during 2011-12. With the imported Uranium from France, the 220 MW Kakrapar 2 PHWR

reactors recorded 99% capacity factor during 2011-12. The Availability factor for the year

2011-12 was at 89%.

Bio-mass Energy-

Bio-energy contribution to the total primary energy consumption in India is over 27%.

Indeed, this is the case for many other countries, because biomass is used in a significant

way in rural areas in many countries. However, the contribution of biomass to power

production is much smaller than this - currently, biomass comprises only about 2650 MW

of installed capacity, out of a total of about 172000 MW of total electricity installed

capacity in the country (May 2011).

India is the pioneer in biomass gasification based power production. While gasification as a

technology has been prevalent elsewhere in the world, India pioneered the use of biomass

gasification for power production. As a result, prominent Indian solution providers in

biomass gasification are implementing their solutions in other parts of the world.

EAI estimates the total installed capacity of biomass gasification based power production

in India will be about 140 MW, out of a total of about 2600 MW of biomass based power

(cumulative of grid connected and off grid). Of the total, biogas based power generation

has the share (about 1400 MW), followed by combustion-based biomass power production

(about 875 MW). While biomass gasification currently contributes little to power

production, EAI foresees significant growth for this sector in future.

Waste Resource-

36

Every year there is an estimated 30 million tons of solid waste and 4,400 million cubic

meters of liquid waste generated in urban areas of India alone. The problems caused by

solid and liquid wastes can be significantly mitigated through adoption of environment-

friendly waste-to-energy technologies. These technologies hold the promise of reducing

quantity of wastes and in addition, generate a substantial quantity of energy from them, and

greatly reduce pollution of water and air. In spite of the unquantifiable level of benefits,

they are still not seen as an attractive business opportunity. The reason for this is the lack of

understanding about the various (technology/process) options available and long term

viability of the waste to energy projects.

We at EAI have been researching the waste to energy industry for the past few years and

have developed a thorough understanding of the various technology options and their

viabilities. Diverse business opportunities along the value chain, the global scenario and the

market segment for each of the waste to energy technologies are well known to us and we

are poised to provide a balanced opinion about waste to energy industry.

can provide extensive research and consulting assistance for value generation from the

following types of waste:

Industrial solid waste

Municipal solid waste

Hazardous waste

Industrial liquid waste

Sewage and Fecal Waste

Agro and crop waste

We can also provide customized inputs for value and energy generation based on the

following processes:

Anaerobic digestion

Pyrolysis

Gasification

Combustion

Fermentatio

Limitation of Renewable energy resources in India- Renewable energy often relies on the weather for its source of power that is

unpredictable and intermittent.

Solar power is dependent on availability of sunlight. Thus the availability of power

fluctuates from zero to maximum every day.

The current cost of renewable energy technology is also far in excess of traditional

fossil fuel generation.

37

7 Natural Gas in India:-

7.1 Current Natural Gas Scenario in India-

India is the world’s seventh largest energy producer, accounting for 2.49% of the worlds

total annual energy production. It is the fifth largest energy consumer, accounting for

about

3.45 % of total energy consumption in 2004, which has been increasing by an average of

4.8 % percent a year since 1990. The share of commercial energy in total primary energy

consumption increased from 59.7 % in 1980-81 to 79.3 % in 2008-09. India’s GDP has

grown at more than 8-8.5 % during the last few years, and is expected to grow minimum at

the rate of 7.5-9 % in the coming few years. The growth has taken place despite the huge

deficit in energy infrastructure and infrastructure. Even today, half of the country’s

population does not have access to electricity or any other form of commercial energy, and

still use non- commercial fuels such as firewood, crop residues end during cakes as a

primary source of energy for cooking in over two-thirds of households.

Major gas projects in India-

Project State Commissioned Capacity (MW)

RGPPL, Anjanvel Maharashtra 1480

Dadri Uttar Pradesh 817

Paguthan Gujarat 654.73

Auraiya Uttar Pradesh 652

Jhanor-Gandhar Gujarat 648

Kawas Gujarat 645

Faridabad Haryana 430

Anta Rajasthan 413

Vemagiri Power Generation Ltd. Andhra Pradesh 388.5

Rajiv Gandhi CCPP Kayamkulam Kerala 350

38

7.2 Demand and Forecasts for India-

The demand of natural gas has sharply increased in the last two decades at the global

level. In India natural gas was first discovered off the west coast in 1970s, and today, it

constitutes 10 % of India’s total energy consumption. Over the last decade it has gained

importance as a source of energy and its share is slated to increase to about 25 % of the

total energy basket by 2025-2030. In its Reference Scenario, the IEA expects Indian gas

demand to increase to 94 billion cubic meters by 2020 and to 132 billion cubic meters by

2030, driven by the industrial and power generation sectors. This means anannual

increase of 5.4 % – one of the highest in the world. In the 450 Scenario, demand by 2020

would be slightly lower (89 billion cubic meters), but by 2030 would almost remain at

the same level as in the Reference Scenario –

132 billion cubic meters– as gas would be needed to displace coal. The latest available

Indian demand forecasts for the 11th

Five- year plan (2007-12) show gas demand

increasing by between 37 % and 58 % over that period and the power sector being the

main driver for incremental gas demand (see Table below).

39

Natural Gas Demand Projection

Reference- http://ebookbrowse.com/rr07-23-india-natural-gas-indd-pdf-d132734147

7.3 Competitive demand from Fertilizer & City Gas Sector-

Further, ICRA expects the prospects for the CGD business to remain good in the long term,

given the under-penetration of city gas in India in the absence of adequate gas and

transmission pipeline capacity. Natural gas allocation will invite Expression of Interest

(EOI) from those interested, henceforth called applicant, in the use of the gas as advertised.

It will also indicate the compression/transportation charges, as applicable, to each field in

advance and clarify that these shall have to be borne by the applicant (s).

EOIs shall be submitted in a sealed cover super scribing the priority sector they belong to.

The sectors have been prioritized as given below.

a. Gas-Based Urea fertilizer plants

b. LPG Plants

c. Power Plants supplying power to the grid/state utilities at regulated rates under PPA.

d. CGD systems for domestic and transport sectors

e. Steel/Refineries/Petrochemicals for feedstock purposes.

f. CGD for industrial and Commercial Consumers.

g. Any other customers for captive and merchant power, feedstock or fuel purpose.

Allocation shall start from applicants highest in the priority as mentioned above. Further,

only if the full gas demands of all applicants in the preceding sector are met, will the

succeeding priority sector be taken up for allocation in that sector.

Reference- http://www.petroleum.nic.in/

40

7.4 Structure of the natural gas sector in India-

Until recently, the exploration and production of natural gas in India was undertaken

exclusively by the state owned Oil and Natural Gas Corporation Ltd (ONGC) and Oil India

Ltd (OIL). As a result of government initiatives to encourage private sector investment in

exploration and production activities and to deregulate the oil and gas sector, several

private sector participants are also now engaged in exploration and production (figure 17;

PETROTECH Society and PwC 2007; GAIL 2007).

Under the New Exploration Licensing Policy (NELP), operating since 1999, foreign and

domestic private sector companies acquire exploration blocks and undertake exploration

activities either as joint venture consortiums with state owned companies or independently.

Reliance Industries Ltd (RIL) is the largest oil and gas acreage holder among the private

sector companies in the country. It is also India’s first private sector company in the

exploration and production sector to have discovered large natural gas reserves in the

eastern offshore Krishna–Godavari basin in late 2002. Other private sector participants in

exploration and production activities include BG India, Nikko Resources and Cairn Energy.

Pipeline gas transport is primarily undertaken by state owned GAIL (India) Ltd, formerly

the Gas Authority of India Ltd. GAIL is India’s largest gas transmission and marketing

company, with a high pressure pipeline network of around 5600 kilometers. The largest

pipeline network, Hazira–Vijaipur–Jagdishpur, with a total length of more than 2800

kilometres, covers the states of Gujarat, Rajasthan, Madhya Pradesh, Uttar Pradesh,

Haryana and Delhi in the north west of the country. The 610 kilometer long Dahej–Vijaipur

pipeline owned by GAIL transports regasified LNG received at the Dahej terminal operated

by Petronet LNG Ltd (PLL).

GAIL also has regional gas distribution grids, totalling around 1 800 kilometers of varying

length and diameter in Ahmedabad, Assam, Baroda, Cauvery basin, Hazira, Krishna-

Godavari basin, Mumbai, Rajasthan and Tripura. Other regional natural gas pipeline

operators include Gujarat Gas Company Ltd (GGCL) and Gujarat State Petronet Ltd

(GSPL) in Gujarat, Assam Gas Company Ltd (AGCL) and Tripura Natural Gas Company

Ltd (TNGCL) in Assam and Tripura respectively. Indraprastha Gas Ltd (IGL) in Delhi,

Mahanagar Gas Ltd (MGL) in Mumbai and GGCL in Gujarat are also developing city gas

distribution networks for the supply of compressed natural gas (CNG) and city gas in their

respective areas.

The gas produced by ONGC and part of the gas from joint venture consortiums, such as the

Panna/ Mukta and Tapti joint venture formed by BG India, ONGC and RIL, is marketed by

GAIL. The gas produced by OIL is marketed by OIL itself, except in Rajasthan where

GAIL markets its gas. Gas produced by Cairn Energy and Gujarat State Petroleum

Corporation Ltd (GSPC) is being sold directly by the respective companies.

Companies operating India’s LNG import facilities include Petronet LNG Ltd (PLL) and

Shell Hazira. PLL, the operator of India’s first LNG receiving and regasification terminal at

41

Dahej, Gujarat, is comprised of four state owned oil and gas companies

— GAIL, ONGC, Indian Oil Corporation Ltd (IndianOil) and Bharat Petroleum

Corporation Ltd (BPCL). The Hazira LNG Terminal and Port is partnered by Shell Gas BV

and Total GazElectricité Holdings France, representing two of the largest private LNG

suppliers in the world.

Ratnagiri Gas and Power Private Ltd (RGPPL) is a special purpose organisation that has

been incorporated to take over assets and revive the former Dabhol Power Company

project in the state of Maharashtra. The Dabhol project is an integrated facility consisting

of a gas fired power plant and an associated LNG receiving and regasification terminal. The

RGPPL shareholders include GAIL, state owned National Thermal Power Corporation Ltd

(NTPC), Maharashtra State Electricity Board Holding Co Ltd (MSEB) and Indian financial

institutions.

Production LNG Supplier Transport CNG

distribution

Gas Marketing

ONGC PLL (Daheg&

Kochi)

GAIL GGCL(Gujrat) GAIL

OIL Shell (Hazira) IOL MGL(Mumbai) GSP

BG India RGPLL (Dabhoi) GSPC IGL(Delhi) ONGC

GSPC ONGC

(MangAlore)

RIL RIL AGCL

RIL AGCL BG India RIL

Cairn India ONGC Indian Oil

Nikko

Resources

BPCL

OIL

BG India

Cairn India

Available option for Natural gas supply In India:-

1). Domestic Natural Gas Resource

2). Natural Gas Import- (A) Piped Natural Gas

- (B) Liquefied Natural Gas

3). Gasification of Coal

7.5 Domestic Natural Gas in India-

According to Oil and Gas Journal, India had approximately 38 trillion cubic feet (Tcf) of

proven natural gas reserves as of January 2011. EIA estimates that India produced

approximately 1.8 Tcf of natural gas in 2010, a 63 percent increase over 2008 production

levels. The bulk of India's natural gas production comes from the western offshore regions,

especially the Mumbai High complex, though fields in the Krishna-Godavari (KG) are

increasingly important.

42

In 2010, India consumed roughly 2.3 Tcf of natural gas, more than 750 billion cubic feet

(Bcf) more than in 2008, according to EIA estimates. Natural gas demand is expected to

grow considerably, largely driven by demand in the power sector. The power and fertilizer

sectors account for nearly three-quarters of natural gas consumption in India. Natural gas is

expected to be an increasingly important component of energy consumption as the country

pursues energy resource diversification and overall energy security.

Despite the steady increase in India's natural gas production, demand has outstripped

supply and the country has been a net importer of natural gas since 2004. India's net

imports reached an estimated 429 billion cubic feet (Bcf) in 2010.

Sector Organization

State-owned companies play a predominant role in India's gas sector, although their share

of production is smaller than in the oil sector. ONGC accounted for about half of India's

natural gas production in 2009-2010. Reliance Industries will also have a greater role in the

natural gas sector in the coming years, as a result of a large natural gas find in 2002 in the

KG basin. In June 2011, the Indian government approved a $7.2 billion joint venture

agreement between Reliance and BP that will focus on expanding offshore development.

Natural gas prices in India are regulated by the government. Administered Pricing

Mechanism (APM) natural gas – gas produced from fields handed to ONGC and OIL by

the Indian government – more than doubled in price in May 2010; from $1.8/million (MM)

Btu to $4.2/MMbtu, although some customers still receive subsidies. Prices for privately

produced gas, which are indexed to the price of oil, are slightly higher.

The Gas Authority of India Ltd. (GAIL) holds an effective monopoly on natural gas

transmission and distribution activities. Although the transmission sector was opened to

foreign investment in 2006, 80 percent of natural gas consumed in India was transported

through GAIL's 4,100-mile trunk pipeline network. The company expects to double the

size of this network by 2014. Reliance Industries is also investing heavily in the

transmission sector to move its KG-basin gas to market.

Exploration and Production

Until 2008, the majority of India's natural gas production came from the Mumbai High

complex in the northwest part of the country. Recent discoveries in the Bay of Bengal have

shifted the center of gravity of Indian natural gas production.

In April 2009, production from Reliance Industries' Dhirubhai 1 and Dhirubhai 3 gas fields

in the D6 block of the KG Basin has led to a massive expansion in domestic supply. The

block holds estimated reserves of 11.5 Tcf. Of the nearly 1.4 Bcf/d of initial production,

nearly half went to gas based power plants, the rest to fertilizer, LPG plants, and city gas

distribution entities. After reaching a production peak of 2.8 Bcf/d in December 2009,

Reliance decided in July 2010 to cap production of KG-D6 at 2.1 Bcf/d pending resolution

of infrastructure and field maintenance problems. Industry analysts expect the BP-Reliance

partnership to address these issues.

In addition to these new offshore finds, India plans to expand the development of

unconventional gas resources. The country already produces some coalbed methane and

seeks to expand these volumes soon. In addition, an EIA-sponsored study on world shale

gas resources reports that India possesses 63Tcf of technically recoverable shale gas

resources. The country has yet to hold a licensing round for its shale gas blocks.

43

As per the Ministry of petroleum, Government of India, India has 1,437 billion cubic

meters (50.7×1012

cu ft) of confirmed natural gas reserves as of April 2010. A huge mass of

India’s gas production comes from the western offshore regions, particularly the Mumbai

High complex. The onshore fields in Assam, Andhra Pradesh, and Gujarat states are also

major producers of natural gas. India imports small amounts of natural gas. In 2004, India

consumed about 1,089×109 cu ft (3.08×10

10 m

3) of natural gas, the first year in which the

country showed net natural gas imports. During 2004, India imported 93×109 cu ft

(2.6×109 m

3) of liquefied natural gas (LNG) from Qatar.

As in the oil sector, India’s state-owned companies account for the bulk of natural gas

production. ONGC and Oil India Ltd. (OIL) are the leading companies with respect to

production volume, while some foreign companies take part in upstream developments in

joint-ventures and production sharing contracts. Reliance Industries, a privately-owned

Indian company, will also have a bigger role in the natural gas sector as a result of a large

natural gas find in 2002 in the Krishna Godavari basin.

The Gas Authority of India Ltd. (GAIL) holds an effective control on natural gas

transmission and allocation activities. In December 2006, the Minister of Petroleum and

Natural Gas issued a new policy that allows foreign investors, private domestic companies,

and national oil companies to hold up to 100% equity stakes in pipeline projects. While

GAIL’s domination in natural gas transmission and allocation is not ensured by statute, it

will continue to be the leading player in the sector because of its existing natural gas

infrastructure.

7.6 Domestic Gas pipe lines network in India-

Presently we have a country wide network of 12,000 km of gas pipeline and having

capacity to transport 230 mmscmd of gas.

The UPA government under the Union Minister of Petroleum and Natural Gas Minister,

Shri S. Jaipal Reddy has dedicated a 2200km long natural gas pipeline to the nation. The

gas pipeline inaugurated on 23 March 2012 is built at a massive budget of 13100 crores

wherein 505 crore were paid to the landowners whose lands were acquired by GAIL (Gas

authority of India Limited) for the purpose. The new pipeline is capable of carrying 66

MMSCMD of natural gas and generating power up to 3500 MW. It will also help to

provide the CNG/PNG/ natural gas in the areas from where it will pass. The construction of

the pipeline was completed in 45 months and it crosses 25 national highways, 56 state

highways, 35 railway crossings, 399 water bodies and 53 other pipelines while passing

through the states of Gujarat, Madhya Pradesh, Uttar Pradesh, Rajasthan, Delhi, Haryana,

Punjab and Uttrakhand.

44

7.7 Trance-national gas pipe lines-

A. Tapi- pipeline

B. Iran-Pakistan-India pipeline

C. Myanmar-Bangladesh- India pipeline

45

7.7.1 TAPI- pipeline-

The 1,680-kilometre Turkmenistan-Afghanistan-Pakistan-India (Tapi) pipeline, Ashgabat’s

dream project that first appeared in 1995, has been on hold for many years due to the

Taliban insurgency in Afghanistan.

The presidents of Turkmenistan, Pakistan, and Afghanistan met for the first time to discuss

the project, while India was represented by the country’s Energy Minister MurliDeora.

They signed an intergovernmental agreement on the Tapi pipeline, with energy ministers

signing a separate framework document on the project, but no deal was reached on future

sales or the consortium for the future construction tender.

Gas Authority of India (GAIL) the state-owned company has signed this natural gas sale

and purchase agreement with TurkmenGaz for Turkmen gas shipped via the Turkmenistan-

Afghanistan-Pakistan-India (TAPI) pipeline.

Turkmenistan would be exporting 90 MSCMD through this pipeline of which 14 MSCMD

would be taken by Afghanistan and 38 MSCMD each by India and Pakistan. The pipeline

will be built at an estimated investment of $ 7.6 billion approximately.

Afghanistan’s President Hamid Karzai called it “a highly important project” and assured

that he would “put in efforts to ensure security both during construction and after

completing the project”.

Security of the pipeline inside Afghanistan has been questioned as the route would go

through a number of turbulent regions, including the Helmand and Kandahar provinces

which have become epicenters of violence.

The pipeline would also go through Quetta and end in Fazilka, an Indian city near the

India-Pakistan border.

“We are witnessing a historic project,” said Haruhiko Kuroda, president of the Asian

Development Bank which will fund the project. “It is not easy to make it happen. Efforts

must be made to ensure its security and the ADB is ready to help realize it.”

Turkmenistan, which is believed to hold the world’s fourth largest reserves of natural gas,

has been working to diversify away from its reliance on Soviet pipelines and has had rows

with Moscow over the projected trans-Caspian pipeline to Europe, Nabucco. Ashgabat has

also opened export routes to China and increased gas supply to Iran in the recent years.

Recently Mr. Reddy, the GSPA, signed by national oil companies of the four nations, was

witnessed by Turkmenistan Oil Minister, B. Nedirov, Pakistan's Petroleum Minister Asim

Hussain and Afghanistan's Minister of Mines Wahidullah Shahrani.

“Without a doubt, the economic benefits of the TAPI gas pipeline will be immense for our

energy-starved economies. The flow of natural gas will bring in industrial and economic

development in our countries,” Mr. Reddy said.

The Bangladesh government recently expressed its willingness to Afghanistan government

and sent a proposal in this regard. The Energy and Mineral Resources Division last month

sent a letter to Economic Relations Division (ERD) to move for connecting the country

with the multi-billion dollar project through the foreign affairs ministry. Later, the foreign

46

affairs ministry forwarded the government’s expression of interest letter to the Afghan

energy ministry, the official said.

7.7.2 Iran–Pakistan–India pipeline-

The Iran–Pakistan–India (IPI) pipeline was proposed more than a decade ago to transport

gas from the Persian Gulf through southern Iran and Pakistan to link with existing pipeline

infrastructure in north western India. Gas would be sourced from the South Pars/North

Dome gas field, which straddles the territory of Iran and Qatar in the Persian Gulf. The

current proposed pipeline route is around 2800 kilo meters in length.

The Iranian share of the gas field is estimated to contain around 13 trillion cubic meters of

gas. The volume of gas supplied by the IPI pipeline could reach 55 billion cubic meters a

year. India has sought around 37 billion cubic meters (equivalent to 27 million tonnes of

LNG), roughly equal to its current supply from domestic sources, while Pakistan would

take around 18 billion cubic meters.

The Indian Government is optimistic that the IPI pipeline could begin delivering gas to

India by around 2015. However, since the inception of the project, a number of factors

have caused substantial delays in its commencement. These include disagreements related

to gas pricing between India and Iran, as well as capital cost increases to around US$7

billion. In addition, geopolitical tensions in India–Pakistan relations, international concerns

47

over trade with Iran, as well as domestic opposition in Iran to gas exports, have also

hindered progress. The significant hurdles associated with the project, the potential for

further delays, the lengthy construction period and high capital costs heighten the

uncertainty surrounding a potential startup date. In this study, it is assumed that the project

will not be operational until sometime after 2020.

The prospects of IPI ever becoming a reality are also very bleak, despite the fact that

Pakistan has repeatedly expressed its resolve to go ahead with the venture. The US is

deadly against the IPI and has been applying continuous pressure on Pakistan to abandon

this project, going as far as threatening of dire consequences. Secretary of State Hillary

Clinton responding to questions in the House Appropriations Sub Committee on State and

Foreign Operations on 1, March 2012 warned that Pakistan could face US sanctions if it

pressed ahead with its proposed gas pipeline project with Iran. She said that the US

administration recognizes Islamabad’s essential energy needs. However, she added,

construction of a gas pipeline from Iran to Pakistan would mean a violation of US

legislation on sanctions against Iran.

7.7.3 Myanmar-Bangladesh-India Pipeline-

The lack of convergence in the energy security policies of India and Bangladesh has

impacted the outcome of the Myanmar-Bangladesh-India (MBI) pipeline project. This

project, envisaged as an important aspect of the energy security policy of India, has in the

48

past failed to accommodate the needs of Bangladesh; this has resulted in an indefinite delay

in project implementation. However, recent changes in the energy scenario of Bangladesh

have enabled greater convergence in the energy policies of both countries leading once

again to prospects of a revival of the project. Project implementation has also been stalled

by the construction of the Myanmar-China pipeline project which consists of dual oil and

gas pipelines originate at Kyaukryu port on the west coast of Myanmar and enter China at

Yunnan's border city of Ruili. Competition between the two projects stems from

uncertainty regarding just how much gas Myanmar actually has for export.

The respective national energy security policies of India and Bangladesh constitute the

main determinants of the success or failure of this project. The extent to which these

policies have been able to accommodate each other and the effect this has had on the

Myanmar-Bangladesh-India pipeline project is the crux of the following analysis.

Interestingly changes in the importance of natural gas and of natural gas pipelines to both

countries are important drivers in the evolution of the energy security policies of both

countries.

Myanmar-Bangladesh-India Pipeline Route

To be sure this is not a new project but trails back through current history to an initial lack

of convergence in the energy security policies of both countries which led to a breakdown

in negotiations in 2005; however changes in Bangladesh’s energy policies since then have

enabled the establishment of some common ground in the energy security policies of both

states leading to prospects of renewed collaboration over the last 24 months. Recently our

Prime Minister Mr. Manmohan Singh visits to Myanmar, once again creates hope for

revival of this project.

49

7.8 Liquefied Natural Gas (LNG) –

India began importing liquefied natural gas (LNG) in 2004. In 2009, India imported 434

Bcf of LNG, nearly 65 percent of it from Qatar, making it the sixth largest importer of

LNG in the world.

Currently, India has two operational LNG import terminals, Dahej and Hazira. India

received its first LNG shipments in January 2004 with the start-up of the Dahej terminal in

Gujarat state. Petronet LNG, a consortium of state-owned Indian companies and

international investors, owns and operates the Dahej LNG facility with a capacity of 6.5

million tons per year (mtpa) (975 Bcf/y). India's second terminal, Hazira LNG, started

operations in April 2005, and is owned by a joint venture of Shell and Total. The facility

has a capacity of 3.6 mtpa (488 Bcf/y). New terminals at Kochi and Dabhol are scheduled

to come online in 2012.

Demand for LNG will only expand to the extent that domestic production plans fall short of

stated goals. Further, plentiful and cheap domestic gas that sells at a discount to imported

LNG makes the international spot market a marginal option and complicates negotiations

for long-term supply contracts.

LNG is a clear, colorless, non-toxic liquid that can be transported and stored more easily

than natural gas because it occupies up to 600 times less space.

When LNG reaches its destination, it is returned to a gas at regasification facilities. It is

then piped to homes, businesses and industries.

LNG Terminal Capacity (MMTPA)

Dahej 5

DahejExp 5

Kochi 2.5

Shell Hazira 2.5

Dabhol 2.5

Mangalore 5

Kakinada 2.5

Total 25

Reference- http://petrofed.winwinhosting.net/upload/19-21_Oct_11/Session%20II_RKGarg.pdf

7.8.1 Regasification Capacity of India-

India’s LNG re-gasification capacity is expected to increase fourfold in the next five years.

Currently, the country has an LNG re-gasification capacity of 13.6 MMTPA, which is

expected to gallop to 53.5 MMTPA by 2016-17 as new terminals are commissioned.

50

On a yearly basis, the LNG import terminal capacity is projected to increase from 13.6

MMTPA in 2011-12 to 19.8 MMTPA in 2012-13, to 28.5 MMTPA in 2013-14, to 31

MMTPA in 2014-15, to 46 MMTPA in 2015-16 and further to 53.5 MMTPA in 2016-17.

In 2011-12, the LNG re-gasification capacity in the country stood at 13.6 MMTPA,

comprising 10 MMTPA at PLL’s terminal at Dahej and 3.6 MMTPA at Shell’s terminal at

Hazira.

7.9 Coal gasification in India-

Integrated Gasification Combined Cycle (IGCC), an advanced coal-based power generation

technology, may be an important technology to help India meet its future power needs. It

has the potential to provide higher generating efficiency, can be adapted to efficiently burn

India's high-ash coal, and has the potential to do so with greatly reduced emissions and

offers the longer term potential to assist India to manage its C02 emissions. Efficient

gasification technology also offers India the potential to produce a variety of fuels,

particularly transportation fuels, and chemicals. These potential benefits would be useful in

a country that has coal shortages, runs inefficient power plants, and imports the majority of

its transportation fuels. Driven by these potential benefits the Central Government-owned

power generating equipment manufacturing company (BHEL) is developing a fluid-bed

gasifier designed for Indian coals, but has not yet demonstrated it at a size larger than 6

MW. Outside of BHEL, there are many factors holding this technology back. First, the

technology is projected to be more expensive than pulverized coal (PC) power generation.

In the Indian environment, the capital costs are estimated to be 1.5 times higher, and the

levelized cost of electricity is estimated to be 33 % higher than for PC power generation.

13.6

19.8

28.5 31

46

53.5

0

10

20

30

40

50

60

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

M

M

T

P

A

Year

Regasification Capacity

Regasification Capacity

51

Gasification is a general term for various processes that converts fuels such as coal into

synthesis gas (Syngas) by reacting them with air/oxygen and steam at elevated

temperatures. Syngas is primarily made up of CO, H2 and CH4.

Due to high ash content in Indian coal, there is no suitable technology for coal gasification.

Still it is on pilot scale demonstration projects. ONGC drilled two pilot wells near Mehsana

city in north Gujarat. India’s first fluidized bed coal gasification pilot plant established in

Nashik, Maharastra by Chimeto technologies ltd.

Gail-Coal India plan coal gasification project

Gail (India) Ltd and Coal India Ltd have entered into a memorandum of understanding for

setting up a surface coal gasification project for production of synthesis gas for fertilizer

production. Recently, Gail had signed a similar MoU with Rashtriya Chemicals and

Fertilizers Ltd (Project monitor, January 7-13, 2008).

The coal gasification project will entail an investment of around Rs 2,400 crore. The two

companies will form a joint working group to evaluate detailed feasibility report prepared

by Gail to evaluate the viability of the project in terms of techno-economic feasibility for

the project.

Gail had earlier commissioned a study by Udhe India Ltd for examining the potential of the

project and it is estimated that the project will consume around 5,000 tonnes per day of coal

to produce 7.76 mmscmd of synthesis gas (equivalent to 3,000 tpd of ammonia) for

production of 3,500 tpd of urea. Gail will focus on the production and marketing of

synthesis gas.

Reference- http://dspace.mit.edu/handle/1721.1/38569,

http://fossil.energy.gov/international/Publications/ucg_1106_cmri.pdf

8 Factors affecting Natural gas pricing:- Natural gas pricing in India

Hennery Hub Pricing

Globalization of Natural Gas Market

Transportation cost

Alternate fuel pricing

Exchange Rate

8.1 Natural gas pricing in India-

Pricing and Allocation of Upstream and Midstream Gas

Natural gas is a scarce resource in India and Govt. of India plays an important role in its

allocation. Historically, gas has been allocated in priority to end-users such as fertilizer

producers and power plants. In 2007, the Govt. of India started working on a new Gas

utilization Policy. This was mostly a consequence of the dispute between the Ambani

brothers and the related issues on gas pricing and utilization, which created a very hot

debate in India. In2007, a price was agreed between RIL and the government

52

under the PSC so that RIL was to sell gas at USD 4.20/BTU for first five year of the production.

This price level, often reported, reflects the calculation under a formula linking the price of gas to

the price of oil:

GP= 2.5 + (OP– 25)^0.15

Where, OP is the annual average Brent crude price for the previous FY, with a cap of USD

60/bbl and a floor of USD 25/bbl. Since 2007, the annual Brent price has always been above

USD60.

This and the large gap between demand and available supplies prompted the government to

develop a Gas Utilization Policy and to go back to administrative control over prices (Govt. of

India introduced a price formula for all discoveries under the first six NELP rounds) and over

volumes to be allocated to end-consumers. Therefore, in 2008, the government introduced

Natural Gas in India new guidelines called the Gas Utilization Policy, which effectively took

away gas producers' rights to sell the gas they discover on the open market. These guidelines

would be applicable for the next five years and be reviewed afterwards. The recent ruling of

the Supreme Court in May 2010 regarding the dispute between RIL (Reliance Industries Ltd.)

and RNRL (Reliance Natural Resources Ltd.), reaffirms the role of the government in the

allocation and pricing of gas. Currently, the rules of the General Policy for the gas market

imply that gas will be allocated according to industry-wise priorities set up by the

government. This does not imply that the gas is “reserved”: if one customer is not in a

position to take the gas, the next one on the list becomes eligible. Existing users have priority

over Greenfield users. The gas is allocated as follows:

For Existing customers:

•Fertilizer producers

•LPG and petrochemicals

•Power plants

•City Gas Distribution (CGD)

•Refineries

•Others.

For Greenfield users, the priorities are:

•Fertilizer producers

•Petrochemicals

•CGD

•Refineries

•Power plants.

The above lists clearly show the preference for fertilizer producers, petrochemicals and power

plants as first category customers. CGD usually comes in second position. Govt. of India gave

priority to power generators and fertilizer producers, making them the major customers supplied

at the lowest rate (Administered Pricing Mechanism prices decided by the government) by the

state-owned oil and gas companies. Industrial users, which are interested in switching to gas, do

53

not have access to low-priced gas resources and have to pay higher prices to private companies

and LNG importers. This makes sense when gas is more economical than the fuel they use (for

example naphtha). This situation has changed with the increase of APM (Administered Pricing

Mechanism) prices to USD 4.2/ Million British thermal units in May2010.

Regulations for Pricing Downstream Gas

Historically, gas markets were entirely serviced by PSU with prices determined by the central

government. From 1987 to 2005, production and transport prices were fixed by the

Empowered Group of Ministers (EoGM). The APM mechanism for oil was formally phased

out in 2002, but most of the gas produced by ONGC and OIL and distributed by GAIL

continues to be sold at APM prices. In 2006, the regulator PNGRB was created to set up the

bases for a competitive market and has been developing regulations since then.

In the transmission sector, Govt. of India wishes to develop a policy concerning the approval

of pipeline construction that would be consistent, market-friendly, and would help avoid

duplication of gas transport routes. In December 2006, the monopoly on transmission

networks for GAIL was abolished enabling other companies to build and operate networks.

The regulator PNGRB setup the Access Code requiring third-party access for one third of the

capacity and setting the tariffs of transportation for third parties. PNGRB has therefore to

determine tariffs for existing pipelines as well as for pipelines authorized by the government

(before PNGRB was created). Typically, transport along the Hazira-Bijaipur-Jagdishpur

pipeline costs USD 0.58/Million British thermal units; GAIL proposed to charge USD

0.88/ MBtu for its 572 km-long Dahej-Uran-Panvel pipeline. For its 1400 km-long East-West

pipeline (EWPL), RGTIL (Reliance Gas Transportation Infrastructure Ltd.) opted for a two-

zone tariff and wanted to charge USD 0.3-0.4 /MBtu for the first zone and USD 1.25 /MBtu

for the second zone.

Current Pricing Mechanism in India

The natural gas pricing scenario in India is complex and heterogeneous in nature. There are

wide varieties of gas price in the country. At present, there are broadly two pricing regimes

for gas in the country-gas priced under APM and non-APM or free market gas. The price of

APM gas is set by the Government. As regards non-APM/ free market gas, this could also be

broadly divided into two categories, namely, domestically produced gas from JV fields and

imported LNG. The pricing of JV gas is governed in terms of the PSC (Production Sharing

Contract) provisions. It is expected that substantial gas production would commence from the

gas fields awarded by the Government under the New Exploration Licensing Policy (NELP).

As regards LNG, while the price of LNG imported under term contracts is governed by the

SPA (Special Purchase Agreement) between the LNG seller and the buyer, the spot cargoes

are purchased on mutually agreeable commercial terms.

54

8.1.1 APM (Administered Pricing Mechanism) Gas Pricing:-

APM gas refers to gas produced by entities awarded gas fields prior to the PSC regime. The

prices of gas from these fields are administered by Govt. of India. In 2005, the price of APM

gas of ONGC and OIL was revised. Based on recommendations of the Tariff Commission, the

Cabinet Committee on Economic Affairs decided that APM gas prices would be increased.

All available APM gas would be dedicated to power generators, fertilizers as well as specific

end users covered by Court orders and small-scale consumers having allocations upto 0.05

MCM/day. At that time, ONGC and OIL produced about 55 MCM/day APM gas from

nominated fields. The Government raised the consumer price be revised from Rs.

2,800/ MSCM to Rs. 3,200/ MSCM with effective from July 1st 2005 for the following

categories of consumers. It was also decided that all the APM gas will be supplied to only

these categories.

•Power sector consumers

•Fertilizers sector consumers

•Consumers covered under court orders

•Consumers having allocations of less than 0.05MMSCMD

This increase was on an adhoc basis and it was decided that the Tariff Commission would

examine the issue of producer price of natural gas. The Tariff Commission (TC) has since

submitted its report and has recommended Producer price of Rs. 3710/MSCM and Rs.

4150/MSCM for ONGC and OIL respectively. TC has also recommended that the consumer

price should be somewhat higher than the producer price, considering the substantial

difference between the recommended producer price and the price of market gas /alternative

fuels. Govt. of India also decided that the price of gas supplied to small consumers and

transport sector (CNG) would be increased over the next 3 to 5 years to the level of the market

price. With effect from May 6th

2005, the APM gas price to small consumers and CNG sector

has been increased by 20% to bring it to Rs.3840 / MSCM.

The price of natural gas for customers in the North-East has been kept at 60% of the price in

the rest of the country. Accordingly, the price for power and fertilizers sector in the North-

East is Rs. 1920/MSCM and that for court-mandated and small scale consumers in the region

is Rs.2304/MSCM.

APM gas prices for the transport sector (CNG), small industries and consumers would be

progressively increased from INR 3200/1000m3 (USD 1.79/MBtu) over the following years

to reflect the market price. As they became the second category after fertilizers and power

producers, small users/CNG saw prices increasing from INR 3 200/1000m3(USD 1.79/MBtu)

to INR 3 840/1 000m3

(USD 2.15/MBtu) in 2006 (INR 2 304/1 000m3 in the North East).

55

8.1.2 Pricing of Gas under Pre-NELP Production Sharing Contracts (PSC)

Production Sharing Contracts (PSCs) were executed by GOI with Ravva consortium and PMT

(Panna Mukta Tapti) consortium on October 28, 1994 and December 12, 1994 respectively.

The price of natural gas is determined by the provisions of PSC signed by the consortium with

GOI. Around 17.3 MMSCMD, 1 MMSCMD and 0.9 MMSCMD are supplied from PMT

fields, Ravva fields and Ravva Satellite fields respectively under the pre- NELPPSCs. Out of

this, GAIL supplies 5 MMSCMD from PMT fields and the production (1

MMSCMD) from Ravva fields at APM rate to APM consumers; the difference between PSC

price and APM price is being made up through the gas pool account mechanism.

8.1.3 Pricing of Gas with reference to NELP Provisions-

As regards the gas from NELP fields, the Government constituted an Empowered Group of

Ministers to consider interlaid issues relating to pricing of natural gas, produced under the

NELP regime. It has been decided there in that the provisions of the NELPPSC should be

honored. The following price basis/ formula for the purpose of valuation of natural gas has

been approved by the Government in case of KG-D6 Block of RIL/Niko.

Selling price (in US$/MMBTU)= 2.5 + (CP-25)0.15 (in US$/MMBTU),

Where CP= crude price in US $/barrel, with cap of CP=US $60/barrel. The price basis

formula comes to US $4.2/MMBTU for crude price greater or equal to US $60/barrel. It was

decided that price discovery process on arm's length basis will be adopted in the future NELP

contracts, only after the approval of the price basis formula by the Government.

Reference- http://petroleum.nic.in/nelp6.pdf

8.2 Imported Gas (LNG) Pricing-

A contract was signed with Ras Gas, Qatar for supply of 5 MMTPALNG (equivalent to about

18 MMSCMD) by Petronet LNG Limited (PLL) and supplies commenced from April 2004.

This quantity has subsequently increased to 7.5 MMTPA effective from January 2010. The

price for LNG has been linked to JCC crude oil under an agreed formula. However, the FOB

price for the period up to December 2008 has been agreed at a constant price of

$ 2.53/MMBTU. This price translates to RLNG price of $ 3.63/MMBTU ex-Dahej terminal.

The price would vary on monthly basis from January 2009. Further, in July 2007, PLL has

signed another contract with Ras Gas, Qatar for supply of 1.25 MMTPA LNG from July 2007

to September 2009 to meet the requirement of Ratnagiri Power Project in Maharashtra.

In order to make the price of spot RLNG affordable, EGoM has decided in the meeting held

on January 11th

2007 for pooling of prices of spot cargoes with LNG being imported on term

contract basis. This Ministry accordingly issued orders on March 6th

2007 in compliance with

the decision of EGoM. In addition to the above term contracts, LNG is also being

56

Sourced from spot market by PLL and Hazira LNG Pvt. Ltd. During 2007-08, an average

quantity of about 5.7 MMSCMD was brought into the country as spot cargos.

Table 3:Summary of Prices prevailing across India

Long-term contract with Qatar’s Ras Gas (Dahej)

For the first five years, Petronet paid a fixed-price agreed in the contract (USD 2.53/MBtu for

5mtpa). In January 2009, this price was raised to USD 3.12/MBtu while volumes increased to

7.5 mtpa in Q4 2009.

Short-term contracts

Petronet negotiated with Ras Gas until December 2008 for 1.5 mtpa, Petronet paid USD

8.50/MBtu, but the price for end-consumers was pooled with the USD 2.53/MBtu Petronet

paid for LNG under the long-term contract.

57

Spot cargoes

During the summer of 2009, several companies including Petronet and GAIL contracted spot

cargoes for Dahej. Delivered prices were at USD 4.50-4.75/MBtu. Similar prices were

observed for Hazira, a sharp drop compared to the cargos imported in October 2008 at USD

2022/MBtu.

Petronet’s terminal in Kochi to be commissioned by 2012 has contracted to receive LNG from

Exxon Mobil’s 25% stake in Australia’s Gorgon project in all likelihood at much higher

prices than existing LNG contracts. LNG supplies will start in 2014-15. The previous wide

disparity between APM prices and non-APM prices, whether for gas from pre-NELP or

NELP, has narrowed. Under long-term contract, LNG is at an idle point between APM and

non-APM prices but gas sold under the new long-term contracts is likely to be more

expensive. Spot LNG prices are usually the highest but depend on global market conditions:

they were effectively at the same level as non-APM prices during the summer of 2009 (see

Table 4).

Table 4: Gas Price Differentiation in Indian Market (2010)

8.3 Pricing Issue:-

The pricing issue in India has always been quite complex. Firstly, APM gas supplies have

been declining while non-APM gas saw a dramatic increase in volume and share.

Furthermore, APM gas has been allocated in priority to power producers and fertilizers, two

sectors expected to see their demand increasing over the coming decade. While the Ministry

of Petroleum and Natural Gas has been pushing for higher prices to limit losses from the PSU,

this has met with strong resistance from the Ministry of Power and Ministry of Chemicals and

fertilizers. The subsidies to fertilizers have already multiplied by five over the last five years

to reach INR 75849 crore (USD 16.6 billion) in 2008/09.

Supply Side Issue:-

From the supply side, keeping artificially low APM prices of ten sends the wrong signals

indeed, gas prices have to be high enough in order to attract upstream investments, and cover

production costs and the recovery of capital in order to limit under-recoveries from PSUs (the

difference between the international market prices and the domestic retail price). These,

unsurprisingly, complained that low prices had been resulting in substantial losses for them.

58

Furthermore, India is likely to need increasing LNG supplies and has to be able to contract

additional LNG supplies on global markets or spot LNG cargoes when these are available to

meet a growing supply-demand gap. Even if the slope in long-term contracts is no longer at

the 0.17 seen in the Asian region in 2008, it is certainly likely to result in higher prices that the

USD 3/MBtu price with Qatar.

Demand Side Issue:-

On the demand side, the challenge is to perform a transition to prices closer to market prices

while maintaining the consumer’s competitiveness. KG-D6gas price for the first five years of

production, namely USD 4.21/MBtu, will soon represent around half of India’s supplies.This

price, more than twice the former APM price level fixed by the government, has

unsurprisingly become a reference point. Being a private sector company, RIL cannot sell gas

at under cost; therefore their clients have to be able to pay cost-plus for any of their gas. Indeed

gas availability and affordability for customers are crucial for gas development in India.

Demand for gas is infinite at USD 2-3/MBtu but limited at USD 7-8/MBtu for Indian major,

priority customers– fertilizer production and power generation.

There are two direct competing fuels for gas in these two sectors: Coal (in the power sector)

and Naphtha, as well as the option to produce fertilizers off shore. Gas represents currently a

small portion of total power capacity. In most cases, coal-fired generation will be cheaper than

gas, but when one compares a coal-fired plant is located far from coal fields or using imported

coal with a gas-fired plant near the existing gas transmission infrastructure, this will not be the

case. Certainly, these two sectors will be tested by the increase of APM prices. The fertilizer

industry represents a big issue as increasing the gas price is likely require some policy

solution: this could be increasing the subsidies of these customers, something that the finance

ministry is unlikely to accept easily, or produce fertilizer in other countries which would face

opposition from the fertilizer producers themselves and would also affect India’s self-

sufficiency with respect to agricultural production.

Road Ahead:-

There have been many attempts under taken by Indian governments to liberalize revise the

dual system until the decision was taken in May 2010. Several suggestions had been made:

one was to increase the price paid to ONGC and OIL to USD 2.3/MBtu in 2010, to link it to a

59

Wholesale Price Index in the future, or to increase it progressively to USD 4.2/MBtu by

2013. Another idea developed by the Ministry was a uniform domestic price instead of a

multitude of prices. This would be achieved through a removal of the dual APM market

pricing by gas pooling, which should stabilize prices and thus serve as a benchmark.

The government has made a big leap forward by increasing APM prices directly to USD

4.2/MBtu, creating a reference price representing currently to an estimated two thirds of gas

supplies. Additional changes may happen. The idea of pooling gas prices is still under study.

The question is now to see how this will affect the market in the future and how gas users,

which had been allocated cheaper gas than the new reference price, will be adversely affected.

Whatever the choice, a new future pricing mechanism would need to incentivize gas

production, attract new LNG supplies, while being transparent to attract foreign or private

investors.

8.4 Framework of New Pool Pricing Mechanism:-

8.4.1 Need for Pool Pricing:-

The Indian gas market needs to match customer expectations, gas infrastructure expansion

with providing flexibility for new and marginal suppliers to enter the market. Price pooling is

a mechanism where the potential for balancing the customer and developer expectation with

that of suppliers.

The need and benefits of pooling for the Indian gas markets need to be considered in the

context of the market development objectives. These could be summarized as follows:

1. Introducing new gas sources in the market;

2. Ensuring stable price signals for long gestation investments based on gas;

3. Deepening the pipeline network to expand the gas markets geographically;

4. Sending appropriate price signals for efficient use of gas;

The Indian gas markets are relatively small as compared to the size of the economy, but are

expanding rapidly. However, as commented earlier, the expansion has not kept pace with the

demand. Domestic gas finds, while substantial, are inadequate to meet the burgeoning demand

for gas. In particular, the demand from bulk consuming sectors like power and fertilizer is

growing at a rapid pace. At the other end, the demand from city gas is also expected to

increase rapidly in the coming years. As a result of this expansion of demand, the country is

looking seriously at LNG as a potential source of supply expansion.

LNG, as an internationally traded commodity presents two challenges. Firstly, the price of

LNG is generally linked to the price of crude oil, especially for long term supplies. The

resultant prices of RLNG are typically significantly higher than the prices of domestic gas,

60

including from the NELP fields. Secondly, the prices of such supplies being linked to crude are

inherently volatile. The combination of relatively high prices and high volatility make it

difficult for user industries like power and fertilizer to plan investments based on LNG.

Price pooling can serve the objectives of introducing substantial quantities of new LNG

supplies. The existing base of the pool would serve to reduce the price volatility, and given

the impetus for infrastructure development. The graphic below illustrates the impact of 5

MMTPA of new LNG supplies (approximately adequate for 5000 MW of new power

projects), on the existing cost pool in India, at various supply price points.

Figure1: Pool Price at Various LNG Prices for 5 MMTPA New Supply

8.4.2 Proposed Roadmap of Pool Pricing Mechanism:-

The pooling options have been broadly divided into two major categories viz. Cost Based

pool and Bid Based pool. Cost based pool has been further divided into General pool and

Sectoral pool. The following section defines the various pools considered for this study.

General Pool- In this type of pooling arrangement all the gas producers or traders participate in the pool.

Gas is supplied to all the customers through the pool administrators. This could feature two

basic options as variants.

(i) Mandatory or compulsory pool- In mandatory pool all the gas producers or traders

have to participate in the pool and subsequently all the sale of gas will happen

through the pool. Similarly, all demand would be required to contract through the

pool for supplies.

(ii) Facilitated pool - Facilitated pool does not make it compulsory for the gas

producers or gas suppliers to participate in the pool. The gas producers or traders

can participate in the pool and exit from the pool as per the defined rules of the

pool. The same would apply for buyers from the pool.

61

Figure2: Pooling Options in India

(Source: Reporton Common Pool Pricing 2010, MoPNG)

Sectoral Pool

Sectoral pool is specifically for pre-identified sectors. As regards this study, this has been

considered for Power and Fertilizer segments, although variants could extend to other sectors

as well. Two basic forms of sectoral pools have been considered.

(i) Combined pool- In combined pooling arrangement there is a single pool for Power

and Fertilizer. The gas at pooled price is supplied to customers from both the

sectors through an identified mechanism.

(ii) Individual pool- In this type of pooling arrangement there will two different pools

for Power and Fertilizer separately. The pool operator may or may not be same.

The gas at pooled price is supplied to the respective customers through on

identified mechanism. The pooled price may or may not be same for both the

pools.

62

The above options have been discussed in the subsequent sections. It needs to be noted

that in all options presented herein, the existing cost structures of the gas supply from

producers (or importers) remain unchanged, and the revenues to be generated would

correspond to these costs, plus the transportation costs, taxes and duties as at present.

Hence there is no impact on subsidies as a whole, although the cost of gas to individual

consumer costs would be rationalized as a result of the pooling arrangements. In

subsequent years, with expansion of supplies in the pool, this would be altered based on

the cost and quantum of additional gas supplies. Hence, irrespective of the option

selected, specific pool rules would need to be agreed on the cost and quantity limits and

implemented by the pool operator accordingly.

8.5 Effect of Globalization of Gas market on gas prices:-

Potential for energy independence as fuel switching to natural gas, efficiency, and domestic

production lessen our dependence on oil imports from unstable regions. We are now in the

45 to 50 % range, trending down from above 60.

Potential for economic growth in the petro -chemical sector as production returns to the

US, attracted by current feedstock pricing. The Sierra club and other NGO’s are concerned

exports will drive more aggressive shale development. Industrial gas consumers and some

gas utilities who prefer today’s price.

Balance that with legitimate questions from the free trade lobby:

One would hope we take full advantage of this resource. Canadians are investing in natural

gas transportation fuel infrastructure just north of our border; combined heat and power

distributed generation enjoys improving economics; and the gas industry and regulators

must assure gas generation facilitates rather than discourages development of renewable

power.

The price difference between a commodity that is 5% oversupplied (the approximate level

of oversupply of NG in North America today) and one that is 5% under supplied is literally

unimaginable. Recall that as recently as mid-year 2008, at the onset of the most severe

portion of the recession, natural gas sold for $13+ per million BTUs. Some of the fall to

today’s approximately $2/MMBTU was due to lost demand, but much of that has been

recovered. For example, there was exactly zero fertilizer industry in the U.S. at those NG

prices. Most of those plants are now back on line. The real driver was/is on the supply side.

Natural gas is a North American commodity. As such, it is priced by commodity-on-

commodity competition. LNG is a global market. It is priced proportional to crude oil, the

price of which is dictated primarily by the national oil companies and traders. There is

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absolutely no reason to believe that prices will not retrace the 85% price drop seen in the

last four years if enough LNG export is allowed. Going the other way, that translates to a

550% increase in price. Say goodbye to the fertilizer industry. And to the displacement of

coal-fired power generation.

The current, ultra-low prices will not obtain for even the medium term. While there is an

enormous shale gas resource which can be drilled with very high technical probability of

success, only the liquids-rich areas like the Marcellus Shale are currently under

development in North America. As the price rises, which it inevitably will, that other,

lower liquids content shale gas opportunities will become economic. That will provide a

governor on the domestic price of natural gas for literally decades.

Unless we export LNG. The current North American oversupply of natural gas is due to

excessive enthusiasm on the parts of its developers. Now they wish that we the People to

socialize their shortfall via exports, bringing them up to world prices.

There are three distinct regional gas markets, each of which sets natural gas prices

differently. The US has gas-on-gas competition, Europe sets prices indexed to certain oil

products although nascent gas hubs are starting to change this pricing structure, and Asia

indexes its natural gas prices to crude oil, enforce in very long term contracts; this means

that Asian prices are around $16 per mmbtu, making LNG exports from the US a very

attractive option. There is limited trade between these three regional markets.

MIT modeled the price impacts in 2030 of a continuation of these regional markets

compared to a global market in gas where there is substantial trade between regions, like

today’s oil markets. The price impacts in the US were substantial, around a 30% drop in

prices for US consumers (I am remembering the numbers, not looking at them, they can be

seen in the MIT Future of Natural Gas study). Surprisingly, US production didn’t drop in

this scenario, it remained steady. This was due to the fact that overall demand for natural

gas increased in the US because prices were low. US entry into LNG exports would

certainly hasten the development of this global market.

Although I have very high regard for Lew’s work and observations, I do not find the story

line of a sensational movie to be a compelling reason to oppose either LNG exports or

imports. I believe that Sandia National Laboratory did a lot of LNG safety research after

9/11. I will try and find some links to this work but I don’t think the conclusions remotely

tracked the apparent thrust of this film. I am generally leery of Hollywood efforts to

present “facts” on energy and point to the China Syndrome as exhibit A, Gas land as

exhibit B. One is entertainment, one is advocacy, and both distort or conflate the real and

sometimes serious impacts of the ways we produce energy (none of which is benign,

including renewables). These films should not guide our responses to these impacts;

analysis, observation and data should.

Brookings just released a study on gas exports from the US (disclaimer: I was a member of

the study’s advisory group) and concluded that the USG should do nothing to either

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encourage or discourage exports. I tend to agree although I expressed reservations about

the political reaction to exports; this is borne out by the listing above of Sierra Club,

industry, etc. opposition to exporting gas, all of which is generated by advocacy positions,

which should be considered as such.

At the rollout of the Brookings study, I highlighted the investment uncertainty associated

with converting current LNG import sites in the US to liquefaction and export facilities

(not a small capital investment by any means). I noted that, as an investor, I might be

concerned about the development of global shale resources and its overall impacts on LNG

demand. China for example has 1275 Tcf of technically recoverable shale resources and

only consumes around 3Tcf of gas per year.

The US import market is a prime example of how shale gas can affect LNG import

opportunities. In the Bush Administration, the US increased LNG import capacity by an

order of magnitude (including Mexico and Canada volumes, destined for US markets),

from around 2 bcfd to 22 bcfd. In 2010, we imported just over 1 bcfd, leaving significant

stranded assets out there around the country. This is a cautionary tale for potential

investment in exports, and to me, suggests that any export volumes of LNG from the US

would likely be relatively small and self-limiting.

Finally, the US has a horrible track record on natural gas policy. Example 1 is the LNG

import debacle noted above. I also remind people, as example 2, that the Congress

outlawed the use of natural gas in power generation in 1978 (based on a completely flawed

understanding of what was really going on in US gas markets at the time). This coupled

with Three Mile Island (accompanied by the hysteria generated by the movie, The China

Syndrome), gave us the ancient, creaky, CO2 emitting coal fleet we have in the US today;

this underscores the fact that the energy infrastructure choices we make today will likely be

with us for the next 40-50 years.

Finally, I encourage everyone to consider Example 3, namely theoverbuild of NGCC

merchant plants when wholesale electricity markets were de-regulated in the mid-90s. We

have a fleet of highly efficient gas generation units that are operating at 41% capacity

factors, when they are designed to operate at 85-87%. Volatility in gas prices has ensured

that old, inefficient coal generation tends to get dispatched first over more efficient, much

lower CO2 and other criteria pollutants + non-mercury emitting NGCC plants. Shale gas

production has greatly diminished this price volatility, making the NGCC overbuild a good

luck/bad luck story — slowly but surely our old coal plants are being retired and we don’t

require new builds to replace them because we have so much surplus NGCC capacity. It

has however, taken 15 years or so to start correcting this market miscue, and perhaps the

capital that was stranded over that time period might have been put to better use.

The MIT group’s finding that N. American natural gas prices would enjoy a 30% drop

given the establishment of a global LNG trading market is very interesting. However,

given the already-85% drop in wholesale prices, perhaps some of its assumptions deserve

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revisiting. Moreover, the excess LNG import capacity provides the U.S. an option on the

benefits of such a market. Should MIT’s indicated results obtain, imports would once again

be competitive. Should the the situation suggest that export of LNG would be an act

beneficial to the national economy, such a policy could be pursued at that time.

Import/export control has historically been an element of the policy initiatives of most

nations. In this case, simply declining to enable LNG exports would be a relatively passive

policy imposition.

Secondly, you should be a bit cautious in applying the term “stranded assets” to either the

unused LNG import facilities or the oversupply of NG-fired combined cycle plants. The

term has previously been applied to electric utility assets that existed because of actions

within the framework of a regulatory compact. They became an issue in the context of

deregulation of that industry under the assumption that rate-of-return based retail rates

were going to be abandoned in the onslaught of deregulation (they weren’t). By contrast,

both of the over investment situations you cite above result from private decisions

regarding the deployment of capital. As such, the possibility of having employed that

capital differently is a subject utterly NOT a governmental policy question in a capitalist

system. I repeat, there is every reason to avoid socializing those failed investment decisions

on the part(s) of private enterprise(s) and every reason – except the desire to benefit a

select group of investors – to keep cheap NG prices at home. Salient among them, retiring

that “ancient, creaky, CO2 emitting coal fleet we have in the US today”. Don’t export LNG

at this time.

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9 Shale Gas:-

9.1 Shale gas historical back ground and development:-

Shale gas was first extracted as a resource in Fredonia, NY in 1825, in shallow, low-

pressure fractures. Work on industrial-scale shale gas production did not begin until the

1970s, when declining production potential from conventional gas deposits in the United

States spurred the federal government to invest in R&D and demonstration projects[18]

that

ultimately led to directional and horizontal drilling, micro seismic imaging, and massive

hydraulic fracturing. Up until the public and private R&D and demonstration projects of

the 1970s and 1980s, drilling in shale was not considered to be commercially viable.

Early federal government investments in shale gas began with the Eastern Gas Shale

Project in 1976 and the annual FERC-approved research budget of the Gas Research

Institute. The Department of Energy later partnered with private gas companies to

complete the first successful air-drilled multi-fracture horizontal well in shale in 1986. The

federal government further incentivized drilling in shale via the Section 29 tax credit for

unconventional gas from 1980-2000. Micro seismic imaging, a crucial input to both

hydraulic fracturing in shale and offshore oil drilling, originated from coal beds research

at Sandia National Laboratories. In 1991 the Department of Energy subsidized Texas gas

company Mitchell Energy's first horizontal drill in the Barnett Shale in north Texas.

Mitchell Energy utilized all these component technologies and techniques to achieve the

first economical shale fracture in 1998 using an innovative process called slick-water

fracturing. Since then, natural gas from shale has been the fastest growing contributor to

total primary energy (TPE) in the United States, and has led many other countries to pursue

shale deposits. According to the IEA, the economical extraction of shale gas more than

doubles the projected production potential of natural gas, from 125 years to over 250 years.

In 1996, shale gas wells in the United States produced 0.3 trillion cubic feet (8.5 billion)

cubic meters), 1.6% of US gas production; by 2006, production had more than tripled to

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1821: Natural gas is first extracted from shale in Fredonia, NY

1970s: Domestic gas production on the decline; Morgantown Energy Research Center (MERC) initiates the Eastern Gas Shales Project.

1976: Two MERC engineers patent early technique for directional drilling in shale.

1977: DOE successfully demonstrates massive hydraulic fracturing in shale(MHF).

1980: Congress creates Section 29 production tax credit for unconventional gas (lasts until 2002).

1986: First successful multi-fracture horizontal well drilled by joint DOE-private venture in Wayne County, West Virginia.

1991: GRI subsidizes Mitchell Energy’s first successful horizontal well in the Texas Barnett shale.

1998: Mitchell Energy engineers achieve commercial shale gas extraction.

2000s: Natural gas generation grows faster than any other energy source; shale gas boom pushes prices to record lows.

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1.1 trillion cubic feet (31 billion cubic meters) per year, 5.9% of US gas production. By

2005 there were 14,990 shale gas wells in the US. A record 4,185 shale gas wells were

completed in the US in 2007.

In January 2008, a joint study between Pennsylvania State University and State University

of New York at Fredonia professors Terry Engelder and Gary Lash increased estimates as

much as 250 times over the previous estimate for the Marcellus shale by the U.S.

Geological Survey. The report circulated throughout the industry. In 2008, Engelder and

Nash had noted a gas rush was occurring and the New York Times' "There’s Gas in Those

Hills" was an in-depth look at the development, noting investments by Texas-based Range

Resources and increased leasing amongst Anadarko Petroleum, Chesapeake

Energy and Cabot Oil & Gas.

Reference- http://geology.com/energy/world-shale-gas/

9.2 Shale Gas Reserve:-

The development of shale gas plays has become a "game changer" for the U.S. natural gas

market. The proliferation of activity into new shale plays has increased shale gas

production in the United States from 0.39 trillion cubic feet in 2000 to 4.87 trillion cubic

feet in 2010, or 23 percent of U.S. dry gas production. Shale gas reserves have increased to

about 60.6 trillion cubic feet by year-end 2009, when they comprised about 21 percent of

overall U.S. natural gas reserves, now at the highest level since 1971. [3]

The growing importance of U.S. shale gas resources is also reflected in EIA's Annual

Energy Outlook 2011 (AEO2011) energy projections, with technically recoverable U.S.

shale gas resources now estimated at 862 trillion cubic feet. Given a total natural gas

resource base of 2,543 trillion cubic feet in the AEO2011 Reference case, shale gas

resources constitute 34 percent of the domestic natural gas resource base represented in the

AEO2011 projections and 50 percent of lower 48 onshore resources. As a result, shale gas

is the largest contributor to the projected growth in production, and by 2035 shale gas

production accounts for 46 percent of U.S. natural gas production.

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Annexure -2

In total, the report assessed 48 shale gas basins in 32 countries, containing almost 70 shale

gas formations. These assessments cover the most prospective shale gas resources in a

select group of countries that demonstrate some level of relatively near-term promise and

for basins that have a sufficient amount of geologic data for resource analysis.

9.3 Hydraulic fracking- breakthrough in shale gas:-

Hydraulic fracturing (fracking) is the method used to make hard shale rock more porous,

thus allowing natural gas to flow through the shale to the wellbore. First, producers drill

into the earth several thousand feet until they reach the natural gas reservoir. Next, steel

casings are inserted to a depth of 1,000 to 3,000 feet, and the space between the casing and

the drilled hole is filled with cement to stabilize the well and prevent any leakage. After the

cement has set, this process is repeated, using a series of successively smaller casings until

the reservoir is reached, usually a distance of 6,000 to 10,000 feet. There are numerous

state and federal regulations that govern the casing and cementing process. Once the

drilling and casing is complete, typically 3 to 5 million gallons of water, mixed with sand

and fractional amounts of chemical additives, are pumped into the wellhead at high

pressure, creating cracks in the rock beds. Several videos provide a detailed explanation of

the fracking process. The hydraulic fracturing mixture is 95 percent water, 4.5 percent sand

and 0.5 percent chemical additives formulated to promote gelling and cleaning according

to the Ground Water Protection Council and U.S

0

200

400

600

800

1000

1200

1400 Shale Gas Reserves Reserves

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Over the past 50 years, there have been significant advances in hydraulic fracturing

technology. Different types of fracture treatments have been developed ranging from

packer and pumping equipment to variations in treatment fluids and prop pants. Each

natural gas reservoir is unique due to the variability in geology and geo mechanics.

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As a result, there will be different types of hydraulic fracturing treatments used depending

on what result is needed in the end and what the parameters of the zone are. Recent

developments of fracture technology coupled with horizontal drilling have allowed

numerous tight gas reservoirs to yield economic volumes on natural gas. These

technological breakthroughs have enabled significant natural gas resources to be added to

the country’s energy resource base and extending the potential supply by over 100 years.

9.4 Issues with Hydraulic fracking:-

This potentially poisonous method of natural gas drilling is now being used nationwide to

release rock bound natural gas formations and has been exempt from U.S. federal oversight

by the E.P.A. These natural gas drilling and exploration firms were also allowed to keep

secret the list of toxic chemicals they are using to inject into the ground....many of these

chemicals have seeped into wells and ground water formations near fracking operations

and poisoned people, caused gas explosions and poisoned/killed livestock.

Although state governmental agencies are required to regulate "fracking" for natural gas

being done by various firms. The drilling method seems to be going largely unregulated

with a wink and a nod by regulators.....perhaps because of the enormous profits/income to

be reaped by various individuals in the private and public sector. Up until recently these

fracking operations were done, largely, in remote, sparsely populated rural areas out west,

but now, in the eastern U.S., fracking is being done in close proximity to urban drinking

water supplies.

Reference-http://www.thepetitionsite.com/1/fracking-for-natural-gas-poisoning-us-water/

http://www.scientificamerican.com/article.cfm?id=fracking-linked-water-contamination-federal-

agency

9.5 Implication of shale gas reserve on traditional gas

producers in US:-

In the last 10 years – during which shale gas became commercial in the US – its use

has grown from near zero to about 20% of the already enormous US gas stream.

Booked shale gas reserves, at present rates of production, may still be onstream 100

years into the future, a figure that will increase if gas begins to approach oil on a

price parity basis.

In the case of shale gas, other countries are inverting that approach and bringing

capital in US, investing billions in the expertise and reserves of US shale gas

companies: Statoil of Norway, CNOOC of China, Mitsui of Japan, Reliance of

India, and Total of France, to name a few.

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US developing and converting gas import terminals into export terminals.

The distribution of shale gas is so widespread that locally produced shale gas may

become the standard fuel in many places. Traditional gas imports (by pipeline or as

LNG) may become incremental sources.

This unexpected development hits global LNG prices three ways: One, US demand

no longer supports extreme gas prices. Two, we may compete for LNG customers –

or help other nations establish their own production. Three, the economics of gas-

to-liquid projects have seemingly been immutably changed. Gas exporting

countries will still be suppliers but likely not as they anticipated.

9.6 Implication on Indian gas market:-

The Ministry of external affairs taken up the matter with the US, requesting

approval of shale gas/LNG export from all LNG exporter terminals in the US. This

is coming in way of GAIL’s efforts to finalize liquid shale gas export from USA to

India.

Reliance (India) is signing JV deals with US to gain experience and replicate the

shale gas success in home country. And Reliance Industries has invested $3.5

billion in US shale gas assets.

Washington, however, allows gas exports only to free-trade partners. India do not

have a FTA (free trade agreement) are not allowed to tap into the US energy

lifeline. So FTA with US will be helpful for India to import shale gas from US.

9.7 China planned for shale gas development:-

China has released its first five-year plan for the development of shale gas, setting

ambitious production targets and emphasizing the need for foreign co-operation and better

technology in developing the sector.

The world’s biggest consumer of energy, China is estimated to have huge shale gas

reserves but it is still unclear whether the country will be able to develop them on a

commercial scale due to geological and technological challenges.

Shale gas is natural gas that is trapped inside shale rock and is extracted by using highly

pressurized water mixed with chemicals to crack open the rock.

Its increased prominence has revolutionized the energy sector in the US and sent natural

gas prices there to the lowest for a decade.

Chinese policymakers are seeking to replicate the success of shale gas in the US, and the

blueprint released on Friday is the first official detailed statement about policies during the

2011-15 periods.

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It sets a goal of 6.5bn cubic meters of shale gas production by 2015, which is equivalent to

2-3 per cent of projected 2015 Chinese gas production, and more than 60bn cu m of shale

gas production by 2020. While those numbers are small compared with the scale of US

shale gas production, analysts say the 2020 target will be very difficult to attain given the

nascent state of China’s shale gas industry.

China does not have any commercial production of shale gas, but exploratory drilling for

shale has increased greatly in the past year.

The new blueprint emphasizes the need for foreign co-operation to develop shale gas

technologies, and companies including BP, ConocoPhillips, Chevron and Royal Dutch

Shell are involved in shale gas exploration joint ventures in China.

The five-year plan also states that competition within the shale gas sector will be

encouraged and market entry conditions will be clearly defined for companies wishing to

work in shale gas; these companies will be also highly encouraged to work with foreign

partners.

The plan also promised supportive financial policies and subsidies for shale gas, including

price subsidies, preferential tax treatment and land subsidies.

However, analysts have pointed out that as long as China’s state-controlled prices for

natural gas remain at their current levels, companies will not have an incentive to develop

shale gas resources because they can make more money from oil.

“There is a lot of talk about shale, but not a lot of action by the government in terms of

natural gas pricing reform,” said Gordon Kwan, an analyst at Mirae Asset Securities,

adding that natural gas prices needed to rise in order to make shale profitable.

China and India join forces in Exploration & Production:-

This MoU signed between ONGC and CNPC marks the intention of the fast emerging

countries India and China to establish and consolidate their energy portfolios globally

instead of competing to get access to oil and gas reserves, and in the development of

technologies to catch up with Majors IOCs.

The companies have already set up a robust relationship, mainly in the areas of upstream

exploration and production business.

With this MoU, the companies have agreed to foster their cooperation either directly or

through their subsidiaries by expanding cooperation in:

- Upstream exploration and production areas including LNG.

- Midstream including construction and operation of oil and gas pipelines.

- Downstream projects from refining or processing of crude oil and natural gas up to

marketing and distribution of petroleum products.

The areas of cooperation between ONGC and CNPC will also extend to joint participation

in suitable hydrocarbon projects in other countries of interest by exchanging information

and working for mutual growth and benefit by extending cooperation in hydrocarbon

sectors globally.

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This MoU has been initiated upon the positive and productive experience of ONGC

working with CNPC in ONGC Videsh Ltd (OVL), the overseas arm of ONGC,

in international operations in Syria, Sudan and the Myanmar Pipeline Project where CNPC

is a key participant.

OVL invested $2.5 billion in petroleum exploration and production in undivided Sudan as

part of Greater Nile Petroleum Operating Co., in which it owns a 25% stake.

Its partners are CNPC (40%), Petron as Carigali Overseas SdnBhd (30%) and Sudapet Co.

Ltd (5%).The last years co-operation through affiliates between both companies was also

marked by ONGC’s great achievements in E&P infrastructure at a level where only a few

companies worldwide can be proud of. CNPC and ONGC did have an earlier arrangement,

but limited to hydrocarbon exploration and production.

The primary purpose of the new agreement, however, seems to be to ensure that bidding

for global energy assets doesn’t get out of hand as it has in the past.

10 Energy Security in India:-

Indian energy consumption profile is varied. We use bio mass like agricultural waste and

animal waste like cow dung and wood, char coal for heating and cooking purposes as well

as refinery products like kerosene and LPG. While a small amount of electrified

transportation has been adopted by the railways most other transportation by road and

water is dependent on diesel and to a lesser extent petrol both of which are refinery

products. Industry depends on electricity as well as coal and fuel oil or diesel for its energy

needs.

Today we are importing over 80% of our oil needs which gets refined into kerosene, LPG,

petrol, diesel, fuel oil, naphtha etc. hence not only all our energy needs but also fertilizers

and plastics needs are susceptible to international crude prices. Even though India has

recoverable coal of about 70-80 billion tons, our needs are rising and our annual coal

consumption has crossed 800 million tons. Due to various restrictions on coal mining due

to environmental or forest issues or bottlenecks in railways for internal transportation;

imports of coal from South Africa, Australia and Indonesia are rising and many Indian

companies are buying mines in these countries to secure these supplies and building plants

in India along the western and eastern coastline. Imported coal is expensive but it has

already reached over 110 million tons this year and is expected to rise dramatically as

energy needs increase. Thus our economy is not only dependent on international crude

prices but also coal prices which are again getting linked to crude prices as natural gas

prices already have.

Electrification is an important component of modernizing the country’s productive forces

and increasing the quality of life of people.

Interestingly, Lenin in the emerging Soviet Union realized it very clearly and accordingly

the GOELRO ("State Commission for Electrification of Russia") was set up as early as

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1920. He endorsed the slogan, ‘The age of steam is the age of the bourgeoisie, the age of

electricity is the age of socialism.’ He said in a report in Feb 1920, “We must show the

peasants that the organization of industry on the basis of modern, advanced technology, on

electrification which will provide a link between town and country, will put an end to the

division between town and country, will make it possible to raise the level of culture in the

countryside and to overcome, even in the most remote corners of the land, backwardness,

ignorance, poverty, disease and barbarism. We shall tackle the problem as soon as we have

dealt with our current, basic task, and we shall not allow ourselves to be deflected for a

single moment from the fundamental practical task.”

The Soviet Plan included construction of a network of 30 regional power plants, including

ten large hydroelectric power plants, and numerous electric-powered large industrial

enterprises. It was intended to increase the total national power output per year to 8.8

billion kWh, as compared to 1.9 billion kWh of the Imperial Russia in 1913.The Plan was

basically fulfilled by 1931.

India’s current per capita electricity consumption is less than 750 KWH per annum where

as it is already 1500 in China. It is to be noted that in almost all economic indicators like

electricity, steel, telecom etc. India and China were on par in 1991. The consumption in

advanced countries of Europe and North America is much higher, while the world average

itself is 2500 KWH per capita. There are still over 10% villages which are not electrified

and according to 2009 data 33% of rural households and 6% of urban households still do

not have access to electricity.

The demand in India for electricity far outstrips supply reportedly the shortage varies

between 8-12%, which amounts to a huge 15,000—20,000 MW of power. Leave alone

rural areas even large cities and giant metropolises are subjected to regular load shedding

that is brown outs and black outs. There have been many instances of riots in many

provinces especially during the sowing season due to these brown outs when they need

electricity for tube wells and pumps. India needs rapid electrification to raise the standard

of living as well as for agriculture and industry.

In terms of medium and long term planning, Indian coal needs to be mined efficiently.

However it has large amount of silica, which appears as large amount of fly ash in power

stations, when it is burnt. This ash needs to be disposed of in a way that does not harm the

surrounding air and rivers and lakes. However much needs to be done in this respect.

Imported coal has much higher calorific value but also has sulphur and nitrogenous content

which leads to large release of sulphuric and nitric acids during rain, that is dangerous to

forests and environment. The fact that open pit mining itself needs to be handled properly

to limit the damage to the environment is only recently being addressed in India.

According to scientific studies, the fly ash emitted by a power plant—a by-product from

burning coal for electricity—carries into the surrounding environment 100 times more

radiation than a nuclear power plant producing the same amount of energy. Some of the

ecologically disastrous effects of coal based thermal power plants are already visible in

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Chhattisgarh, where large clusters of pithead coal powered thermal power plants are

scheduled to come up.

From the long term energy security perspective Indian coal reserves will get exhausted in

less than 50 years. Even worldwide the coal reserves are shrinking. Increasing reliance on

imported coal will lead to Indian economy being more and more at the mercy of global

coal prices as it already is with respect to oil prices. This is in addition to the extraordinary

burden that will be borne by our ports and railways for carrying coal. The effect on

greenhouse gases and climate; effect of ash on pulmonary diseases and people’s health and

so on are additional things to be worried about. Coal already provides 65% of power

capacity and will likely play a major role in the future also.

Natural gas offers a much cleaner alternative and power stations can also be set up quickly.

However while some discoveries of natural gas have been made by ONGC and Reliance

they are still relatively small compared to the existing demand. Imported gas through

pipelines of Central Asia, Iran, Bangladesh and Myanmar will also be expensive since the

gas prices are linked today to oil prices, assuming of course that political relations with

these and intervening countries were permitting such pipelines. More over gas is required

for urea fertilizer, plastics and steel industry as well and there will be a scramble for the

same. Thus gas will play a small role as it does at present (10%).

Methane from Coal Beds is another source that is being explored in Eastern India. Many

blocks have been auctioned to various companies and it will add a significant but still small

amount to the current gas availability.

Recently ONGC has drilled a R&D well for Shale Gas in PaschimBanga (West Bengal)

and studies are continuing. Shale Gas has been a great new success story in energy and has

meteorically risen to provide 25% of gas in US. However new environmental concerns are

being raised about the chemicals that are used in hydraulic fracking to release the gas from

layers deep down. Like Coal Bed Methane, Shale Gas too promises to be another source of

much needed gas for India.

Geophysicists tell us that India sits on a large ocean of Gas Hydrates at great depths.

However the technology to exploit these is not yet available globally and they may provide

a valuable gas source in the future.

Hydroelectricity is a renewable source of energy, since we expect every rainy season to fill

up our dams. However due to our high population density such dams lead to large scale

submersion of villages and forests causing social displacement and social tension.

Himalayas have great hydroelectric potential and that is why dams are being built

feverishly in Bhutan, Arunachal Pradesh, Uttarakhand, Himachal Pradesh, Sikkim and

Jammu & Kashmir. But Himalayas are very young mountains and there is a lot of soil

erosion and the dams would be silted heavily very soon. More over the dams are affecting

forests and causing submersion of agricultural land and villages there too, though on a

smaller scale than in the plains as in the Narmada Basin. That is why there is already a

strong opposition to these dams in the hill states even though we have tapped a very small

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amount of this potential. Thus hydro’s contribution to power generation will remain at

about the current levels of 20% and falling.

Many NGO believes in the mantra of “small is beautiful”, say that mini and micro hydro

projects are the answers to India’s energy problems. However, the facts on the ground

show that such potential is hardly 2,500 MW and that too at a high cost per megawatt

making it hardly a panacea.

Recently wind farms have come up in several regions. However inherently wind in India is

not enough to produce power efficiently unlike in some Nordic countries. It has been

estimated that the efficiency of production from wind is around 35%-25% in Europe and

North America but only about 15% in the windy regions of India. More over wind farms

also require large amount of land which is a problem in land starved India. Of course one

has to keep in mind that wind can only add on to an existing steady base level of

production in the grid and cannot be relied upon for continuous supply. Though India has

impressive figures in wind energy installation, it is a known fact that it has become a

source for exploiting tax loop holes for corporations and not a serious source of electricity

supply to the grid.

Many people naively believe that India having been blessed with ample amounts of sun

light, Solar would be a natural choice as a major source of electricity. However, converting

sunlight to electricity is a very expensive process and it currently costs about 4 times the

conventional. Even though the technology is more than 100 years old, a lot more

advancement has to happen in basic research in new materials to convert sunlight to

electricity more efficiently (currently it is only 12-16%) and cheaply. People who claim

that solar is environmentally friendly do not understand that the silicon chip making

process uses some of the most toxic chemicals, which are then let out as effluents. Today

India is buying a lot of solar panels from China and if we decide to start fab for the same in

India to lower prices then we will come across the associated environmental issues as well.

Moreover, solar electricity needs to be stored in expensive and environmentally harmful

lead batteries, since there is no Sun in the night. Any large scale use of solar power would

lead to serious issues over disposing of the batteries. Thus environmental friendliness of

solar technology is a over simplification. It is expected that further advances in science and

technology of materials, efficiency and storage will happen in perhaps the next 50 years.

We should also recognize that solar plants of say even a modest 100 MW require several

square kilometers of land.

India has developed nuclear power reactors using natural uranium and has been improving

the technology in the last 40 years. India does not yet have the technology for large

enriched uranium reactors and is hence planning to import them from Russia, France and

US. Indian Uranium resources are of very small and of very low quality. However the

opening up of international trade in nuclear materials in 2008 by the Nuclear Suppliers

Group has allowed India to import Uranium from large Uranium producing countries like

Kazakhstan and Russia. In the future, it can also do so from Canada and Australia. India

has also developed the technology to process the radioactive waste from these reactors and

extract useful plutonium from the waste. This reprocessing of fuel has largely resolved the

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waste disposal problem, which is very serious in North America and Europe. Plutonium

thus obtained has been used for making bombs as well as to develop power generation in

Fast Breeder Reactors. In fact that is the reason the reprocessing technology has been

strictly controlled by US and other powers. The first large Fast Breeder Reactor designed

by India is soon coming online in Kalpakkam near Chennai and will take India to the

cutting edge of this technology globally. India is also blessed with large amounts of

Thorium. The first Thorium reactor of the world has also been designed by India and the

construction of a 300 MW Thorium reactor known as AHWR will start soon. The world

will be looking forward to these innovations.

Nuclear reactors are small in size but need a radius of few kilometers around them to be

ready for evacuation in order to diminish the danger to human life in the highly unlikely

case of an accident. So far, in the nearly 42 years of operation there have been no serious

accidents in Indian reactors. Today’s reactors have been designed to take care of many

accidental scenarios of earthquakes, tsunamis, terrorist attacks etc. that have the potential

to damage the reactor core. The reactors are being designed to safely shut down in an

emergency. Thus no radiation need be leaked to the environment.

Uranium mining, handling, reactor maintenance are all potential sources of radiation

exposure to workers. Thus extreme care has to be taken regarding prescribed safety

procedures during the entire cycle.

Many people ask, “Is it (nuclear power) dangerous?” Since radiation is invisible it leads to

many irrational fears. The short answer is, “Yes it is” and it needs scientifically trained

staff to handle it at all stages. However looking at the energy security of India in the future

and considering the strengths and weaknesses of other sources of electricity available to us,

which have been discussed above, nuclear remains an important source of energy security

for India as our planet’s fossil fuels dwindle and become extremely expensive. It is also

environmentally benign due to no carbon emission or fly ash disposal and other problems.

Nuclear power especially with Fast Breeders and Thorium Reactors will be an important

source that can provide electricity at competitive rates to the teaming Indians for more than

100 years based on our own Thorium reserves.

It is clear that India cannot rely on one source of electricity: be it coal (domestic or

imported); gas (domestic or imported); hydro or nuclear. The bouquet will have all these

components. The weight of different components in the bouquet can change as economic

costs and environmental costs vary in the future. This requires rational and pragmatic

planning and not dogmas and irrational prejudices.

The problems of land acquisition and rehabilitation exist in all large industrial and

urbanization projects and are not peculiar to nuclear projects as in Jaitapur. The state

apparatus needs to handle these sensitively. Any layman’s concerns on safety, technology

etc. can be addressed adequately. We need to see the energy scenario 20-50 years ahead

and prepare for it while trying to address the rising expectation of people in terms of living

standards and energy availability for the same.

79

11 Findings & Recommendations:-

With a burgeoning population, we have to recognize that resources are scarce

and plan accordingly.

End use efficiency, reduction of wastage and accountability has great potential

for improvement.

Solar PV and offshore wind energy resource can to some extent.

Yet the reality is that we have to rely for the next 20 years on fossil fuel i.e. coal

or natural gas.

Investment in coal base electricity needs critical appraisal because of

availability, land requirement, pollution, green house gas emission and ash

disposal and increasing cost of environment needs critical appraisal.

Natural gas based electricity generator are generally not approved because of

lack of domestic availability of natural gas besides domestic gas sector has

received a thrust with shale gas and Hydraulic fracking technology in US. A

relook into fuel import i. e. import of coal vis a vis import of natural gas is a

national imperative in view of the need for electricity keeping in view all other

collateral concerns.

S. No. Description Reserve Price

1. Domestic gas reserves 1075 BCM 4.3 $/MMBTU

2. Piped Natural gas

reserves-

A). TAPI pipeline

B). Iran-Pakistan-India

C). Myanmar-

Bangladesh-India

16 TM3

14 TM3

283.2 BM3

13 $/MMBTU

3. LNG Worldwide huge gas

reserve

16 $/MMBTU

4. Henery-hub gas market 10.15 $/MMBTU

80

Year

Projected Natural

Gas Demand at

10% GDP growth

rate(C)

Year

Projected Natural

Gas Demand at

10% GDP growth

rate

2011 189 2021 427.3259

2012 205.065 2022 460.6573

2013 222.4955 2023 496.5886

2014 241.4076 2024 535.3225

2015 261.9273 2025 577.0776

2016 284.1911 2026 622.0897

2017 308.3474 2027 670.6127

2018 334.5569 2028 722.9205

2019 362.9942 2029 779.3082

2020 393.8487 2030 840.0943

Domestic gas production is decreasing and not violable option for new power

projects.

ONGC also have recommended that domestic gas exploration is not viable bellow

$7 to $8/MMBTU.

Piped natural gas is better option for new power projects. Estimated timeline for gas

pipeline projects to be operational-

S. No. Pipeline Estimated time to be

operational

Capacity

1. TAPI pipeline 5years (By 2017) 38 MSCMD

2. Iran- Pakistan-India pipeline 8 years (By 2020)

21.5 MSCMD

3. Myanmar-Bangladesh-India

pipeline

4 years (By 2016) 7 MSCMD

81

Due to uncertainty of completion of pipeline gas project, LNG import is better

option of fuel supply for power plants.

Diesel generator can be replaced by natural gas plant- In India electricity generated

by DG set- 1200 MW at cost of Rs. 12/kwh and grid power at cost of Rs 3/kwh.

This market will grow at the rate of 20% for coming years.

Natural gas based power plant can be used to supply uninterrupted power to some

specified industries such as hospitality and healthcare.

Natural gas can be used for distributed power generation-Due to heavy distribution

and transmission losses (around 30%) distributed generation by natural gas is better

option as it can be produced at cost of Rs. 6 to 7 per kwh.

82

12 References:-

Report- The planning commission of India, Integrated Energy Policy (2006), Page no.-20

Paper- Brian O’Keefe (2012), Exxon big bets on Shale gas, Page no.- 43

Paper- Crish Rumely et. All (Dec. 2007), Natural gas in India, prospects for LNG

imports, Page no.- 27

http://www.cea.nic.in- “Monthly executive report”, (06/2012) Central Electricity

Authority, Ministry of Power retrieved on 5 June 2012 from

http://www.cea.nic.in/reports/monthly/executive_rep/jun12/8.pdf

Paper – Shivanand Kanevi, Energy security and India (8 Jan. 2012)

“Inventory of coal resources of India”, (2011) Ministry of Coal retrieved on 7 May 2012

from http://www.coal.nic.in/welcome.html.

“GDP growth annual” (n. d.) The World Bank from

http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG .

Paper - Simpson, Lori Allison, Massachusetts Institute of Technology. Technology

and Policy Program, The suitability of coal gasification in India's energy sector

(2006)

Paper- Abrahm Lustgarten, Nicholas and ProPublica, EPA-Natural gas fracking linked to

water contamination, (Dec. 09)

-“Seventh offer of the block” (2007) Ministry of petroleum and Natural gas retrieved on 11

May 2012 from http://petroleum.nic.in/nelp6.pdf.

“Natural gas” (n. d.) Ministry of petroleum and Natural gas retrieved on 15 May 2012 from

http://petroleum.nic.in/ng.htm

“Monthly crude oil prices” (n. d.) retrieved on 10 May 2012 from

http://www.indexmundi.com/commodities/?commodity=petroleum-price-

index&months=60.

“World shale gas resources” (n. d.) News and information about Geology retrieved on 7

June 2012 from http://geology.com/energy/world-shale-gas/

“Monthly Thermal coal prices” (n. d.) retrieved on 17 May 2012 from

http://www.indexmundi.com/commodities/?commodity=coal-australian&months=60.

\

83

Annexure-1

Table- Indian GDP and Electricity Demand

Year

Indian GDP

growth rate

(%)

Electricity

Demand(MUs)

%

Change

1992 5.5 291250

1993 4.8 305266 4.812361

1994 6.7 323252 5.891911

1995 7.6 352260 8.973804

1996 7.6 389721 10.63447

1997 4.1 413490 6.098979

1998 6.2 424505 2.66391

1999 7.4 446584 5.201117

2000 4 480430 7.578865

2001 5.2 507216 5.575422

2002 3.8 522537 3.020607

2003 8.4 545983 4.486955

2004 8.3 559264 2.432493

2005 9.3 591373 5.741296

2006 9.3 631554 6.794527

2007 9.8 690587 9.347261

2008 7.6 737052 6.728334

2009 9.1 777039 5.425262

2010 8.8 830594 6.892189

2011 6.9 861,591 3.731908

Annexure -2

GONDWANA COALFIELDS (in Million Tonnes)

State Geological Resources of Coal

Proved Indicated Inferred Total

Andhra Pradesh 9296.85 9728.37 3029.36 22054.58

Assam 0 2.79 0 2.79

Bihar 0 0 160 160

Chhattisgarh 12878.99 32390.38 4010.88 49280.25

Jharkhand 39760.73 32591.56 6583.69 78935.98

Madhya Pradesh 8871.31 12191.72 2062.70 23125.73

Maharashtra 5489.61 3094.29 1949.51 10533.41

Orissa 24491.71 33986.96 10680.21 69158.88

Sikkim 0 58.25 42.98 101.23

84

Uttar Pradesh 866.05 195.75 0 1061.80

West Bengal 11752.54 13131.69 5070.69 29954.92

Total 113407.79 137371.76 33590.02 284369.57

Annexure -3

TERTIARY COALFIELDS (in Million Tonnes)

State Geological Resources of Coal

Proved Indicated Inferred

(Exploration)

Inferred(Mapping) Total

Arunachal Pradesh 31.23 40.11 12.89 6.00 90.23

Assam 464.78 42.72 0.50 2.52 510.52

Meghalaya 89.04 16.51 27.58 443.35 576.48

Nagaland 8.76 0 8.60 298.05 315.41

Total 593.81 99.34 49.57 749.92 1492.64

Annexure -4 Coal consumption pattern-

Year consumption change

year consumption change

1980 122,928.70 0 1996 326,294.10 0.90%

1981 144,012.60 17.15% 1997 351,419.10 7.70%

1982 150,294.60 4.36% 1998 362,411.30 3.13%

1983 157,906.10 5.06% 1999 388,133.80 7.10%

1984 186,706.20 18.24% 2000 403,408.50 3.94%

1985 194,065.20 3.94% 2001 417,498.20 3.49%

1986 208,829.60 7.61% 2002 424,971.90 1.79%

1987 210,933.90 1.01% 2003 437,462.20 2.94%

1988 221,892.00 5.20% 2004 483,579.60 10.54%

1989 236,378.50 6.53% 2005 504,908.20 4.41%

1990 247,863.50 4.86% 2006 539,485.50 6.85%

1991 269,813.80 8.86% 2007 587,255.30 8.85%

1992 281,854.40 4.46% 2008 640,524.50 9.07%

1993 295,959.60 5.00% 2009 705,204.80 10.10%

1994 312,526.20 5.60% 2010 721,986.40 2.38%

85

Annexture-5

Basic Price of Run of Mine Non-Long-Flame Non-Coking Coal

(In Rupees/Tonne)

Field/

Co.

A B C D E F G

ECL (for 12 units vide Annex II) 3690 3590 1290 1040 780 610 430

ECL/Mugma (for 19 units vide

Annex III)

IV)

3690

3590

1500

1240

990

740

480

ECL/Rajmahal (for 2 units

vide)

AnnexV

)

-

-

-

-

1020

870

700

BCC

L

3690 3590 1250 1040 830 660 470

CCL

3690

3590

1220

1000

790

630

450

NCL

3690

3590

1100

920

740

580

430

SECL 3690 3590 1050 880 730 570 430

MCL

3690

3590

1050

880

730

570

430

Annexure-6

Basic Price of Run of Mine of Other Non-Coking Coal

(In Rupees/ Tonne)

Field/ Co. A B C D E F G

ECL / Raniganj

(for 110 units vide

Annex I)

4100 3990 1820 1560 980 730 480

ECL / SP Mines

(for 3 units vide

Annex III)

4100 3990 1860 1610 1080 830 580

CCL (for 7 units

vide Annex VI) 4100 3990 1500 1250 990 750 510

CCL( for 16 units

vide Annex VII) 4100 3990 1410 1180 - - -

WCL 4100 3990 1410 1330 1090 860 650

SECL Premium

Collieries Coal

produced in Korea

Rewa Coalfields)

4100 3990 1300 1110 870 630 440

86

Annexure-7

Basic Price of Run of Mine Long-Flame Non-Coking Coal

(In Rupees/Tonne)

Field/

Co.

A B C D E F G

ECL/Rajmahal

-

-

-

1330

-

-

-

BCCL Long Flame Coal 4100 3990 1430 1210 - - -

NCL Long Flame Coal

4100

3990

1280

1080

-

-

-

SECL Long Flame Coal of

Korba

&RaigarhCoalfields

4100

3990

1180

1010

-

-

-

MCL Long Flame Coal

4100

3990

1180

1010

-

-

-

Annexure-8

Coking Coal (Run of Mine)

(Rs./Tonne) Subsidiary

Steel

Grd I

Steel

Grd II

Washary

Grd I

Washary

Grd II

Washary

Grd III

Washary

Grd IV

BCCL(for 53

units vide

AnnexVIII)

3750

3140

2740

1980

1480

1370

BCCL

-

-

2020

1680

1240

1150

ECL - - 2390 1990 1470 1370 CCL

-

-

1960

1620

1200

1120

WCL - - 1710 1410 1290 - Annexure-9

Semi Coking & Weakly Coking Coal (Run Of Mine)

(Rs./Tonne)

Subsidiary Semi Coking GrdI Semi Coking GrdII

Eastern Coal fields Limited (Raniganj) 215

0

179

0 South Eastern Coal fields Limited

174

0

145

0

87

Annexure-10

Direct feed Coking Coal (Run of Mine)

(Rs//Tonne.)

Grade of Coal

Direct feed Coking Coal of Collieries Listed in

Annexure IX (14 Units) (Ash exceeding 20% but not exceeding 21%)

(Note: Bonus/penalty @ Rs. 130/te. Per

percent decrease/increase in Ash)

3720

Annexure-11

Assam Coal (Run of Mine)

(Rs./Tonne.)

Unit/ Grade of Coal UHV Range (K Cal/Kg.) Price North Eastern Coal

fields "A"

Exceeding 6200 K cal/Kg, But not exceeding

6299 K. Cal./Kg.

4100

North Eastern Coal

fields "B"

Exceeding 5600 K cal/Kg, But not exceeding

6200 K. Cal./Kg.

3900

Note:-In Grade "A" for every additional UHV of 100 KCal/Kg. exceeding 6299 KCal/Kg,

Additional Rs.145/MT one shall be added to the price of "A" Grade. For UHV exceeding 7099 kCal./kg. the price of coal shall be Rs. 6010 per tone for ROM Coal and the price difference among the steam, slack and run of mine coal shall remain same.

Annexure-12

Month

Crude oil

Price per

barrel

Coal price

per metric

ton Month

Crude oil

Price per

barrel

Coal price

per metric

ton

12-Apr 65.1 60.13 12-Nov 77.56 84.43

12-May 65.1 60 12-Dec 74.88 89.04

12-Jun 68.19 66 12-Jan 77.12 103.93

12-Jul 73.67 72.12 12-Feb 74.72 100.92

12-Aug 70.13 74.3 12-Mar 79.3 101.12

12-Sep 76.91 73.33 12-Apr 84.14 107.3

88

12-Oct 82.15 80.15 12-May 75.54 107.28

12-Nov 91.27 90.64 12-Jun 74.73 105.2

12-Dec 89.43 97.5 12-Jul 74.52 102.84

12-Jan 90.82 98.3 12-Aug 75.88 96.19

12-Feb 93.75 141.43 12-Sep 76.11 101.66

12-Mar 101.84 126.7 12-Oct 81.72 104.41

12-Apr 109.05 131.79 12-Nov 84.53 114.81

12-May 122.77 142.71 12-Dec 90.07 126.74

12-Jun 131.52 171.16 12-Jan 92.66 141.94

12-Jul 132.55 192.86 12-Feb 97.73 137.53

12-Aug 114.57 169.71 12-Mar 108.65 135.14

12-Sep 99.29 160.71 12-Apr 116.32 131.25

12-Oct 72.69 115.71 12-May 108.18 126.84

12-Nov 54.04 98.84 12-Jun 105.85 127.8

12-Dec 41.53 84.27 12-Jul 107.88 128.57

12-Jan 43.91 85.71 12-Aug 100.45 127.79

12-Feb 41.76 80.76 12-Sep 100.83 131.3

12-Mar 46.95 65.36 12-Oct 99.92 127.49

12-Apr 50.28 68.1 12-Nov 105.36 121.93

12-May 58.1 69.11 12-Dec 104.26 117.49

12-Jun 69.13 76.48 12-Jan 106.89 124.18

12-Jul 64.65 79.07 12-Feb 112.7 123.38

12-Aug 71.63 77.68 12-Mar 117.79 112.59

12-Sep 68.38 72.47 12-Apr 113.75 107.95

12-Oct 74.08 76.15

Annexure-13

Month Rupee exchange

rate

coal price per metric ton in

US $

Coal price per metric ton in

Indian rupees

Apr-07 42.0176 60.13 2526.518

May-07 40.5561 60 2433.366

Jun-07 40.5905 66 2678.973

Jul-07 40.28 72.12

2904.994

Aug-07 40.6791 74.3 3022.457

Sep-07 40.17 73.33 2945.666

Oct-07 39.366 80.15 3155.185

Nov-07 39.3168 90.64 3563.675

0

10

20

30

40

50

60

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Ap

r-0

7

Sep

-07

Feb

-08

Jul-

08

Dec

-08

May

-09

Oct

-09

Mar

-10

Au

g-1

0

Jan

-11

Jun

-11

No

v-1

1

Ap

r-1

2

R

S

p

e

r

U

S

$

I

n

R

u

p

e

e

s

Coal price per metric ton in Indian rupees

Rupee exchange rate

89

Dec-07 39.3752 97.5 3839.082

Jan-08 39.2704 98.3 3860.28

Feb-08 39.6724 141.43 5610.868

Mar-08 40.1452 126.7 5086.397

Apr-08 39.9668 131.79 5267.225

May-08 41.8814 142.71 5976.895

Jun-08 42.7633 171.16 7319.366

Jul-08 42.723 192.86 8239.558

Aug-08 42.9248 169.71 7284.768

Sep-08 45.4264 160.71 7300.477

Oct-08 48.6196 115.71 5625.774

Nov-08 48.7905 98.84 4822.453

Dec-08 48.4804 84.27 4085.443

Jan-09 48.7326 85.71 4176.871

Feb-09 49.1914 80.76 3972.697

Mar-09 51.2062 65.36 3346.837

Apr-09 50.06 68.1 3409.086

May-09 48.55 69.11 3355.291

Jun-09 47.75 76.48 3651.92

Jul-09 48.4358 79.07 3829.819

Aug-09 48.3314 77.68 3754.383

Sep-09 48.3606 72.47 3504.693

Oct-09 46.7192 76.15 3557.667

Nov-09 46.5619 84.43 3931.221

Dec-09 46.5987 89.04 4149.148

Jan-10 45.9216 103.93 4772.632

Feb-10 46.3472 100.92 4677.359

Mar-10 45.4982 101.12 4600.778

Apr-10 44.4714 107.3 4771.781

May-10 45.8716 107.28 4921.105

Jun-10 46.5758 105.2 4899.774

Jul-10 46.8363 102.84 4816.645

Aug-10 46.5791 96.19 4480.444

Sep-10 45.9904 101.66 4675.384

Oct-10 44.425 104.41 4638.414

Nov-10 44.9986 114.81 5166.289

Dec-10 45.1192 126.74 5718.407

Jan-11 45.3975 141.94 6443.721

90

Feb-11 45.423 137.53 6247.025

Mar-11 44.9699 135.14 6077.232

Apr-11 44.3954 131.25 5826.896

May-11 44.9377 126.84 5699.898

Jun-11 44.8426 127.8 5730.884

Jul-11 44.4151 128.57 5710.449

Aug-11 45.365 127.79 5797.193

Sep-11 47.6585 131.3 6257.561

Oct-11 49.2856 127.49 6283.421

Nov-11 50.7911 121.93 6192.959

Dec-11 52.5228 117.49 6170.904

Jan-12 51.1976 124.18 6357.718

Feb-12 49.1978 123.38 6070.025

Mar-12 50.404 112.59 5674.986

Apr-12 51.7775 107.95 5589.381

Annexure- 14

India's largest photovoltaic (PV) power plants

Name of Plant DC Peak

Power

(MW)

GW·h

/year[7]

Capacity

factor

Notes

Mithapur Solar Power Plant - Mithapur,

Gujarat (Tata Power)[8]

25

Commissioned

February 2012

Waa Solar Power Plant - Surendranagar,

Gujarat (Madhav Power)[9]

10

Commissioned

December 2011

Gujarat Solar Park - Charanka, Gujarat 214

Commissioned April

2012

Adani Power Bitta,Gujarat 40

Commissioned

January 2012

Moser Baer Clean Energy Limited -

Banaskantha, Gujarat [12]

30

Commissioned

October 2011

Sivaganga Photovoltaic Plant 5

Completed December

2010

Kolar Photovoltaic Plant 3

Completed May 2010

Itnal Photovoltaic Plant, Belgaum 3

Completed April 2010

Azure Power - Photovoltaic Plant 2

2009

91

India's largest photovoltaic (PV) power plants

Name of Plant DC Peak

Power

(MW)

GW·h

/year[7]

Capacity

factor

Notes

Jamuria Photovoltaic Plant 2

2009

NDPC Photovoltaic Plant 1

2010

Thyagaraj stadium Plant-Delhi 1

April, 2010

Gandhinagar Solar Plant 1

January 21, 2011

Tata - Mulshi, Maharashtra 3

Commissioned April

2011

Azure Power - Sabarkantha, Gujarat 10

Commissioned June

2011

Tata - Mayiladuthurai, Tamil Nadu 1

Commissioned July

2011

REHPL - Sadeipali, (Bolangir) Orissa 1

Commissioned July

2011

TATA - Osmanabad, Maharastra 1

Commissioned 1st

Aug 2011

Green Infra Solar Energy Limited- Rajkot,

Gujarat [26]

10

Commissioned

November 2011

Total 363

Annexure-15

Technically Recoverable Shale Gas Resources by

Country

Country Reserves

Algeria 231

Argentina 774

Australia 396

Bolivia 48

Brazil 226

Canada 388

92

Chile 64

China 1,275

Colombia 19

Denmark 23

France 180

Germany 8

India 63

Libya 290

Lithuania 4

Mexico 681

Morocco 11

Netherlands 17

Norway 83

Pakistan 51

Paraguay 62

Poland 187

South Africa 485

Sweden 41

Tunisia 18

Turkey 15

Ukraine 42

U.K. 20

United States 862

Uruguay 21

Venezuela 11

Western Sahara 7

Total (rounded) 6,622

93

Company Certificate-