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India: a dynamic country

World Coal,

The full version of this article can be read in the April 2011 edition of Hydrocarbon Engineering.

India’s energy markets are at an exciting stage. With the Indian economy remaining one of the bright spots in the global economy, there is continual pressure to meet demand for energy. Development efforts are underway in many directions, yet there is a great deal of public debate on the types of developments, their costs and benefits, and on the proper order of events that can bring more sustainable development. In this article, the author discusses India’s energy markets, examining how demand is being met, developments in the coal, natural gas, and oil sectors, refinery capacity, expansion, and throughput, and the growing interest in clean energy and renewable energy sources, such as ethanol and biodiesel.

Hydrocarbon resources and supply/demand balance

India possesses a significant fossil energy resource base, and the country has many decades of experience in fossil energy exploration and development. Still, oil, natural gas and coal production fall far short of demand. According to BP in its Statistical Review of World Energy, India’s proved oil reserves are 5.8 billion bbls, with a reserve to production (R/P) ratio of 21.1 years. India owns 13.8% of Asia’s total proved oil reserves. Indian natural gas reserves are estimated at 1.12 trillion m3, with an R/P ratio of 28.4 years. India accounts for only 6.9% of Asia’s natural gas reserves. Indian coal reserves are more extensive, with reserves listed at approximately 58.6 billion t, or 22.6% of Asia Pacific reserves. The R/P ratio for Indian coal is 105 years.

The natural gas industry

India’s natural gas use was limited to domestic output for many years. Natural gas output rose significantly, growing from 0.6 million TOE in 1970 to 26.3 million TOE in 2004, and demand paralleled this. India became an LNG importer in 2004, and demand then decoupled from production. The first LNG was imported by India’s Petronet LNG Ltd. at the Dahej terminal in Gujarat, with imports totaling 2.63 billion m3 of LNG from Qatar. In 2005, LNG imports more than doubled to 6.04 billion m3, once again mainly from Qatar, but also with small volumes from Australia and Oman. The Dahej terminal began to accept larger volumes, and the Hazira terminal also opened, receiving its first cargo in April 2005.

In 2009, LNG imports grew to 12.62 billion m3, 69% of which came from the Middle East, mainly Qatar, with small amounts from Oman and the UAE. The Asia Pacific region also was an important source of supply, with an increase in Australian LNG imports plus smaller volumes from Malaysia and Indonesia. India also imported LNG from four African producers in 2009, Egypt, Nigeria, Equatorial Guinea and Algeria. Russian LNG also began to be delivered, totaling 0.67 billion m3.

In 2009, Indian natural gas production and use showed a major surge. This was almost entirely a function of a new gas development project at the Dhirubhai 6 block in the Krishna Godavari Basin (known as the KG-D6 block.) This was a major find, and it is the first deepwater development in India, run by Reliance Industries Ltd. (RIL), which has now emerged as India’s leading producer of natural gas. Production commenced in April 2009, and within nine months it had been ramped up to 60 million m3/d from 16 wells, with a design capacity of 80 million m3/d. Currently, production is averaging 50 - 52 million m3/d, though RIL states that the lower output is the result of having two inactive wells (of a total of 20). Furthermore, two additional wells will be completed in April 2011, which should bring natural gas output to 60 million m3/d. During the 2009 - 2010 fiscal year (FY), total production was 14 397 million m3, while oil production was 4.04 million bbls. Oil production has averaged 35 000 bpd, although it is currently being restricted to 18 200 bpd.

The oil industry

India’s recent crude oil production has focused on the offshore arena. Crude production has been stagnating and even declining slightly in some traditional onshore fields, led by those in Gujarat State in Western India and Assam and Nagaland States in Northeastern India. According to the Ministry of Petroleum and Natural Gas, onshore production of approximately 11.8 million t during the 1990s fell to approximately 11.2 million t in the 2007 - 2010 period. However, this loss was offset by gains in offshore production, which increased from 20.4 million t in 1990 to 22.9 million t in 2007 - 2008, before falling below 21.9 million t in 2009 - 2010. Offshore crudes account for approximately 65% of Indian output, which averaged 33.7 million t (approximately 674 000 bpd) during the 2009 - 2010 FY. Although the proved reserve base is somewhat limited, exploration and development activities are ongoing, and Indian crude output is expected to continue to grow modestly over the next five or 10 years, perhaps reaching approximately 45 million t (approximately 900 000 bpd) in the coming decade.

In terms of total demand, domestic output falls well below India’s demand. Crude production has risen impressively, particularly following the oil price hikes of the 1970s, yet output has languished since 1990. The 1990s were a boom time for oil demand growth and refinery construction. India’s oil market demand did not reach the 1 million bpd mark until after 1987, but demand soared to nearly 3.2 million bpd by 2009. Refinery capacity was built rapidly to keep up with demand. As demand and refinery capacity grew, and domestic crude output stayed roughly flat, imports of foreign crude soared. Foreign crude imports grew from approximately 1.917 million bpd in FY 2004 - 2005 to 3.185 million bpd in FY 2009 - 2010, an addition of 1.268 million bpd in just five years’ time.

The full version of this article can be read in the April 2011 edition of Hydrocarbon Engineering.

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