A CASE STUDY

€ € Consumption of resources is said to 40% in next 5 years & will double by 2020 Production of coal is lagging behind since last 10years Import of Petroleum( 70 %) is making fiscal budget deficit of 4.Power generation sector reform. Turkmenistan & other gas rich countries Investments in oil fields from Russia to Sudan 2002 ² 2007 .losses due to theft and bad infrastructure have gone down by almost 1/3rd y y y y .5% Shortfall in electricity causes 17 major production disruption € € Steps taken by the government: y 2001.Additional electricity generation capacity than it did in previous 10 years Over last 5 years . recapitalized bankrupt state electricity Boards Agreement to build pipelines to bring natural gas from Iran.

4th largest reserves Coal ² India has a state owned monopoly which delivers 89% of coal to power plants down ( ) 96 % 2 years ago Shortfall to exceed 100 million metric tons by 2012 if increase in consumption Coal mining remains off limits to private companies unless steel mill or a power plant Higher coal imports may fill the gap but is not advise able Overburdened ports and railways Generation of Electricity from imported coal will increase the cost by 25 % This leads to competitiveness of Industries especially metals and manufacturing € € € € € € € € € € € .ELECTRICITY € COAL € € Currently India needs 90 giggawatts power generating capacity 2012 it will need 115 to 120 gigawatts Equivalent to duplicating entire UK·s generating capacity in 7 years Power line transmission cable will cost us $170 billion Rough terrain is a limitation for Hydroelectricity power generation. India·s nuclear power will take years to benefit from new assistance from US Coal and Gas are abundant in India and nearby countries but problems exist in these sectors too.

OIL & NATURAL GAS € 26 million tons of oil equivalent (MTOE) of natural gas in 2005 pushing the demand to 75 (MTOE) by 2012 as dependence on clean fuel rises 25 to 30 MTOE would come from recent discoveries such as Krishna ² Godavari basin & LNG terminals but the difference of 20 to 25 MTOE gain has to be imports. Sudan) which would account only about 1/4th of India·s thirst Demand for refined petroleum product is expected to outstrip by 2008-09 India has to invest as much as $10 billion to add 15 million ² 30 million metric tons of annual capacity LNG terminal has limited investment by concerns of cheaper natural gas from pipeline or inexpensive electricity from coal fired generators although Petronet LNG and Royal Shell have recently opened 2 terminals in Mumbai € OIL IMPORTS € € € REFINERIES & LNG TERMINALS € € € The question arises what steps should be taken to secure India·s growing energy need . Russia. Declining oil production in older fields has offset recent improvements in recovery of oil from new discoveries from a few major oil fields Imports at 70 % cost will cost India $ 29 billion in March 31 will 75 to 80 % by 2020 ONGC recently increased its foreign exploration investments by about $3billion (Iran. Libya.

Indonesia & South Africa To achieve its goals the government will have to overcome opposition from strong political parties and business interest within the sector. This will help the domestic comp to get hold and see to it that electricity prices don·t rise suddenly COAL-INDIA government owned entity must launch a fundamental makeover by investing in new technology and improve management processes. its mining cost are 50% higher than those of leading producers such as Australia.Coal Sector € The most important step . € € € € € € € .deregulating and rejuvenating the coal industry by taking full advantage of India·s vast resources Open coal mining to competition Allow formation joint ventures & other alliances. this will attract $10 billion $15 billion investment required by 2012 to upgrade existing mines and open new ones An independent regulator should be installed to allocate government blocks in a transparent and fair way Deregulation of prices should be gradual. imported coal cost $10 -$12 per million kilocal while domestic cost $4 -$5 per million kilocal.

Oil &Natural gas Sector € The Indian companies must improve their exploration technology € For eg .ONGC remains unable to find new domestic reserves as quickly as existing ones are depleted € Indian refineries must reduce their downtime. become better able to match the output to market demands € LNG arriving by boat will the gap in the near future too € Build a permanent presence in countries where they want to expand and bid on overseas opportunities to reduce risk from other established rivals € The National oil companies could reform quicker if they had fewer ties with the government as it still controls executive appointments and price setting € Resource rich nations of Africa. Asia & Middle East are attractive energy partners for India € better diplomatic ties and commercial ties in form of joint ventures and cross-shareholdings should be encouraged before India loses ground to China its nearest competitor .

€ Domestic energy supply must be supported by a good distribution network. railroads & electric lines requiring investment of $85 billion to & $95 billion Largest sum of about $40 billion is needed to strengthen the electric transmission network The government needs to accelerate the turnaround of ships by reducing idle time of machinery It plans to invest $2 billion in ports far less than required $30 billion Railways must increase its freight capacity to the coal producing eastern region and major ports to the demand center in the northern and central parts A better priority needs to given to freight trains thereby cut cost.$ 20 billion Reduce freight charges for coal and oil which currently subsidizes passenger fares India must spend estimated $5 billion in next 10 years to expand domestic oil and gas pipeline € € € € € € € € . raise speed and increase system reliability Special freight corridors with special tracks and to integrate them with existing rail operations by investing $15 billion . infrastructure like seaports that receive shipments of coal and oil to the pipelines.

they should be concentrating on a few important types of technology Nuclear power will be a high priority In petroleum research . energy ² efficient ways of getting electricity from power plant to consumers Scientific bodies such as CSIR & AEC will play important roles in collaborating with public and private entities .€ € € € € India·s numerous technology institutes are working on energy related R&D projects but in a fragmented manner. to extract methane from coal deposits and to extract heavy illiquid oil High voltage transmission and the optimization of distributing networks will be important to provide low-cost. to turn natural gas into liquid fuel.focus areas should be relevant to India such as technology to recover oil in deep water.

y y y y y y India needs to attract more private capital since government spending alone won·t be able to finance the more than $225 billion needed for energy projects now until 2012 The demand is growing at an alarming pace and if energy is not secure it tends to lose one percentage point in the growth rate every year As the government discovered when it opened domestic oil exploration to private investors. free market prices and dynamic company leaders for optimum utilization Better diplomatic ties and commercial ties will be needed to make such energy partnerships a reality Energy related matters should be handled by a single administration instead of the current 7 India has to be aggressive & take a tough stand in securing its energy needs to avoid crippling shortages and higher. the sooner economically attractive blocks are given success becomes visible and production begins There should be combination of competition. more volatile energy cost .

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