OVERVIEW OF ENERGY SCENARIO WRT INDIA

 5th largest energy consumer (Share 3.7% of global energy)

 Per capita energy consumption - about one third of world average

 Energy consumption projection(2031-32)

 to grow at 5 % CAGR (8% GDP growth) as per Integrated Energy Policy

 3.4% CAGR upto 2025 (GDP: 5%)

 Energy import dependence is 30% (26% on account of oil & 4% for Coal + Power) and is likely
to climb to 40-45% by 2025

 Oil import dependence is around 72% currently. Likely to go upto 90% level

TOTAL WORLD ENERGY

2500 2337
CONSUMPTION: 10537 MTOE
2000
1554
1500

1000
680
525
500 387 324 318

0
USA China Russian... Japan India Germany Canada
 PER CAPITA ENERGY CONSUMPTION

9000 7794
8000
7000
6000
5000
kgoe 4000
3000 1674
2000 1138 1068
512
1000
0
World US India China Brazil

Primary Commercial Energy Mix

2003 WORLD 2030

Nucl
Nucl
5%6% OilOil
33%39%
Coal
Coal
27%
24%

Gas
Gas
26%
24%

Oil And Gas Continue To Play Major Role

2003 INDIA 2030

Oil
Oil
29%36%

Coal
Gas
51% Gas
12%
9%
 Coal And Oil Continue To Play Major Role, Gas Is Emerging

Import Dependency of Crude & Gas

 Oil Import dependency for India is about 71% compared to 67% for US

 China fares better in oil import dependency at 51%

 Gas accounts for about 25% through LNG imports

 Gas demand is expected to be about 390 by 2025 and 500 MMSCMD by 2030

Distribution and marketing infrastructure

No. 383

LPG Bottling Plants No. 170

Aviation Fuel Stations No. 126

Retail Outlets No. 37953

LPG Distributors No. 9366

SKO/LDO Dealers No. 6614

Policy on Marketing of Petroleum Products

 Marketing of petroleum products except subsidized products allowed to private companies

 Marketing of Transportation Fuels authorized:

– Subject to entities making investment or proposing to invest Rs. 20 billion in exploration

/ refining / pipelines / terminals /infrastructure etc.

Need for a Regulatory Body

 India A Over Regulated Country but Existing Systems Discretionary, Ineffective and Often
Obsolete : Obstacle to Growth & Initiative

 Statutory Independent Regulators set up in the US through Acts of Congress

 In India, This Development Linked to Process of Liberalisation for

 – Providing level playing field

– Promoting Investment / FDI

– Protection of Consumers’ Interest

– More Effective Regulation

PNGRB Act, 2006

 Enacted by Parliament in March’06

 All provisions (except Section 16) of the Act notified w.e.f. 1.10.2007

 PNGRB formally established w.e.f. 1.10.2007

 One Chairperson and four full time Members

 Basic Objectives –

– To protect the interest of consumers and entities

– To ensure uninterrupted and adequate supply in all parts of the country

– To provide level playing field

– To promote competitive markets

Salient Functions of the PNGRB

• Fostering fair trade & competition amongst entities

• Register entities for-

• Marketing

• g petroleum, petroleum products & natural gas

• establishing & operating LNG terminals

• establishing storage facilities

• Authorize entities for-

• Laying, building, operating or expanding a common carrier or contract

carrier for transportation of natural gas or petroleum products
 • Laying, building, operating or expanding city or local natural gas
distribution network

• Declaring pipelines as common carrier or contract carrier & specify access code for allowing
access to such pipelines

• Lay down technical standards & specifications including safety standards in activities relating to
petroleum, petroleum products & natural gas

• In respect of notified petroleum, petroleum products & natural gas -

• Ensure adequate availability

• Monitor prices & take corrective measures to prevent restrictive trade

practices

• Enforce retail service obligations & marketing service obligations

PNGRB - Major Tasks on Hand

 Notification of Regulations
 Declaring/Authorizing petroleum products & natural gas pipelines and city gas distribution
networks on common carrier basis
 Specifying market service and retail service obligations to protect consumers’ interests
 Fostering Fair Trade and Competition
 Laying down Standards and Safety Norms

Estimated Investment in P&NG Infrastructure

 Total about Rs.76,000 - 84,000 crore investment is estimated to be required for setting up
Petroleum & Natural Gas infrastructure in next five years -
– Natural Gas Pipelines ~ Rs. 60,000 crore
– CGD Networks ~ Rs.10,000 - 15,000 crore
– Petroleum Product Pipelines ~ Rs.6,000 - 9,000 crore

Competition in Natural Gas and Product Pipelines

 PNGRB empowered to declare any existing pipeline as common/contract carrier for
transportation of natural gas or petroleum products
  Under Government Policy and PNGRB Regulations, all common carrier pipelines must have
33% for natural gas and 25% for products as common carrier capacity
 All necessary facilities and equipments included in the common/contract carrier pipelines to
facilitate third party non discriminatory access
 With Emerging National Gas Pipeline Grid and Regional Networks with Regulatory
Framework, Foundation of the Market has been laid

Role of Markets in a Modern Regulatory Framework

 Competitive markets necessary pre-condition for a modern regulatory framework
 Facilitation of competitive market forces and prevention of distortions and manipulations
primary responsibility of the Regulator
 Section 66 of the Electricity Act, 2003 – Regulator to promote the development of a market
(including trading) in power
  No such provision in PNGRB Act, 2006
  Section 11(a) of the PNGRB Act :
– The Board shall “protect the interest of consumers by fostering fair trade and competition
amongst the entities”

Hurdles in the way of Development of a Competitive Market in the Petroleum Products

 Dominance of CPSUs in this market even after opening up of the market
 Government continues to determine price of Petrol & Diesel marketed by CPSUs inspite of
formally abolishing APM
 Heavy subsidization of Kerosene & LPG leading to distortions in the product market
 Existing transportation and storage infrastructure owned by CPSUs without third party access
 Production, Supply and Distribution of Natural Gas till now controlled by the Government with
APM price and allocation on case-to-case basis
 APM Gas highly subsidized distorting market forces as competitive has no access
 New discoveries has brought in only one supplier
 Even in this case Government have determined price and allocation

Development of a Competitive Market

 Market forces should decide pricing and allocation with Regulator preventing manipulations /
distortions
  Specifications should be made uniform and mandatory to facilitate trading and protect interest of
consumers
 Active spot and future trading of Petroleum Products and Natural Gas should be allowed in
conformity with guidelines and over-view of the Regulator

Steps initiated by PNGRB so far

 Affiliate Code of Conduct
 Entities required to maintain separate accounts for different business sections
 Prohibition of cross subsidization
 Competitor cannot be treated less favorably than one’s own division / subsidiary
 Access Code (Natural Gas)
 Provides third party non-discriminate Access to Transportation and Distribution Network
for Natural Gas at tariffs fixed by the Regulator
 Lays down technical parameters / obligations to maintain surplus capacity to ensure
availability of capacity to third party
 Technical specifications such as band of calorific value lay down to ensure grid discipline
 Grid Management System being finalized to ensure smooth functioning of the Gas Grid
 Product Pipeline
 Storage tanks at beginning and end point and at storage depots being included in the
definition of pipeline for third party discriminate access