Presentation

On

Power and Oil & Gas

By

Col (Retd.) SP Tomar

I C T PvT Ltd

15 June 2012

Sequence of Coverage

Overview of Energy Sector Energy Requirements Natural Gas LNG Gas Pipeline Projects Oil & Gas Sector Policy

Infrastructure Developments Projects

Infrastructure Sectors The Infrastructure Sector in India 2005 Public Private Participation (PPP) in Infastructure Sector Indian Power Sector Electricity Sector Hydro Power & Availability from Each Sector Nuclear Power, its Generation, Fusion & Fission Renewable & other Sources of Energy
Wind, Biomass & Solar etc

Reforms in Power Sector & Expectation of Industry

SAMPLE PAPERS : POWER AND OIL & GAS

Private Public Participation Models Current Power Distribution, Transmission & Distribution First Generation & Second Generation Reforms allowing privatization & its Necessity A Pipeline Project Carries with it Certain Extremely peculiar risks Oil & Gas Sector Importaint Provisions of a PPA Environment & Social Assessment of a B.O.T. Road Concession/IPP Tolling, Shadow Tolling & Annuity. Innovative Financing methods for a B.O.T. Project The growth of Infrastructure in India through five year plan Detail the power sector of India & its future prospects Role of State & National Poer Grids in Power Distribution Infrastructure Development Nuclear power sector of India & its future Different Risk associated with cross country pipe line Hydrocarbon Vision 2025

BACKGROUND
India - On verge of transformation to a vibrant economy GDP growth of the country showing promising trendsexpected to be around 7-8% in coming years Projection -India to be a strong economic force by 2020 Indigenous energy sources may not be adequate to meet increasing power demand For Sustainable development- right fuel mix based on welldiversified portfolio of indigenous and imported sources of fuel necessary Integration of all Sources of Power Nuclear Agreement between US & India, its Implications Investment in Public Sector Current Problems of Power Sector Private Participation Agreement with other Countries

OVERVIEW OF ENERGY SECTOR

Policy is to reliably meet the demand for energy services of all sectors at
competitive prices. Wherever possible, energy markets should be competitive Pricing & resource allocations that are determined by market forces under an effective & credible regulatory oversight Transparent & targeted subsidies Ensuring Adequate supply of Coal with Consistent Quality Addressing Concern of Resource Rich States Ensuring Availability of Gas for Power Generation Power Sector Reforms Reduction in Cost of Power Rationalisation of Fuel Prices Energy Efficiency & Demand side Management Augmenting of Resources for Increased Energy Security Using Energy Abroad Role of Nuclear & Hydro Power Role of Renewables Ensuring Energy Security Household Energy Security Electricity & Clean Fuels for all An Enabling Environment for Competitive Efficiency Climate Change Concern The Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY)

OVERVIEW OF PETROLEUM & NATURAL GAS SECTOR

100% FDI is allowed in petroleum refining,
petroleum product & gas pipelines & marketing/retail through the automatic route Marketing/retail of petroleum products requires divestment of 26% in favour of the Indian partner/public within 5 years Virtual administrative price control of government over most petroleum products Petroleum & Natural Gas Regulatory Board Bill to be enacted shortly will result in the setting up of an Independednt Regulator for Oil & Gas Natural Gas Pipeline Policy to be enacted shortly

NEW EXPLORATION LICENSING POLICY

Possibility of seismic option in the first phase No minimum expenditure commitment No signature, discovery, or production bonus No mandatory state participation No carried interest by NOCs Income tax holiday for seven years from the start of commercial

production No customs duty on imports Biddable cost recovery limit upto 100%c. Option to amortise exploration expenditures over a period of 10 years from first commerical production Sharing of profit based on pre-tax investment multiple Royalty rates @ 12.5% for on land crude, 10% for natural gas & offshore crude & 5% for deep-water crude for first seven years of commercial production Provision for assignment Arbitration Act 1996 based on UNCITRL model arbitration for dispute settlement is applicable Successful bidders to enter into a production sharing contr5act based on the model production sharing contract

Energy Consumption Scenario

India energy consumption

Aspects in 2025 of Energy

Demand of Petroleum in India

Various Transportation Modes - USA

Various Transportation Modes - INDIA

Pipeline Network - US vs. India

HEAVY DEPENDENCE ON IMPORTS

Gas Pipeline In India

Natural Gas
Natural gas is a gas consisting primarily of methane. It is
found associated with fossil fuels, in coal beds, as methane clathrates, & is created by methanogenic organisms in marshes, bogs, & landfills. It is an important fuel source, a major feedstock for fertilizers, & a potent greenhouse gas.

Natural gas is often informally referred to as simply gas,

especially when compared to other energy sources such as electricity. Before natural gas can be used as a fuel, it must undergo extensive processing to remove almost all materials other than methane. The by-products of that processing include ethane, propane, butanes, pentanes

Development of a global natural gas market continues

Gas accounts for 34% of the energy basket in the Former Soviet Union region and in Europe, 24% in USA, 15% in Japan and 14% in Korea. The world average is 24%. In India, gas accounts for just 8% of the energy basket constrained by limited availability of gas and nascent transmission and distribution infrastructure. The share of gas in the global energy mix is set to increase primarily driven by the power sector, industrial sector, city gas distribution and gas-to-liquid opportunities. Gas is preferred because of its cost competitiveness and environmental advantages over other fossil fuels. Gas is also more convenient to use vis--vis other fossil fuels. Accelerating global demand, increasing import dependency, and the build-out of LNG infrastructure are supporting price discovery. Industry expectations suggest continued strength in global GDP over the long-term driven by developing economies of Asia and the Middle East and a 40% increase in LNG liquefaction capacity over the coming 3 years addressing 11% of global demand by 2010. Powerful trends are supporting demand growth and prices in both the developed and developing nations. In 2007-08, Henry Hub Prices averaged $ 7.4 / MMBTU. In Europe, the NBP prices averaged 40 pence per therm which is the equivalent of around $ 8 /MMBTU. The Asian LNG prices were $ 9.5 /MMBTU based on average for prices in Japan and Korea. Long term contracts signed by China for LNG are at around $ 10 /MMBTU (FOB). These contracts are for 2-3 MMTPA and the first sale is expected to commence in the year 2013-14.

Natural Gas in India

The landscape of the Indian natural gas market is set to witness significant change. Natural gas currently accounts for around 8% of the total energy mix in India as against the global average of 24%. However, with increased availability and spurt in transmission and distribution infrastructure, the share of natural gas in the energy mix is set to rise. For 2007-08, gas production is expected to be 88 MMSCMD and LNG consumption is estimated at 33 MMSCMD. The major demand centers, excepting the north-eastern market which is not connected to the transmission network of the rest of India, have been considered for making demand projections. The un-met demand for natural gas is estimated to increase from about 113 MMSCMD (FY 2007-08) to 396 MMSCMD by the year 2022 In the developed world, natural gas is the only near-term generation option to bridge the energy gap. A similar trend is clear in Asia and Australia. natural gas will remain the primary near-term alternative to meet the demand for growth in generation in developed and developing economies.

Natural Gas Processing

Uses of Natural Gas

Power generation Natural gas is a major source of electricity generation through the use of gas turbines & steam turbines. Most grid peaking power plants and some off-grid engine-generators use natural gas. Natural gas burns more cleanly than other fossil fuels, such as oil and coal, & produces less carbon dioxide per unit energy released. For an equivalent amount of heat, burning natural gas produces about 30% less carbon dioxide than burning petroleum & about 45% less than burning coal.[10] Domestic use Natural gas is supplied to homes, where it is used for such purposes as cooking in natural gaspowered ranges and/or ovens, natural gas-heated clothes dryers, heating/cooling & central heating. Transportation Compressed natural gas (methane) is a cleaner alternative to other automobile fuels such as gasoline (petrol) and diesel. As of December 2008, the countries with the highest number of CNG vehicles, ranked numerically, were Pakistan [11], Argentina, Brazil, Iran and India. Fertilizer Natural gas is a major feedstock for the production of ammonia, via the Haber process, for use in fertilizer production. Aviation Russian aircraft manufacturer Tupolev is currently running a development program to produce LNGand hydrogen-powered aircraft.[13] The program has been running since the mid-1970s, and seeks to develop LNG and hydrogen variants of the Tu-204 and Tu-334 passenger aircraft, and also the Tu-330 cargo aircraft. It claims that at current market prices, roughly equivalent to 60%, Hydrogen Natural gas can be used to produce hydrogen, with one common method being the hydrogen reformer. Hydrogen has various applications: it is a primary feedstock for the chemical industry, a hydrogenating agent, an important commodity for oil refineries, & a fuel source in hydrogen vehicles. Other Natural gas is also used in the manufacture of fabrics, glass, steel, plastics, paint, & other products.

The following factors are expected to drive the increased consumption of natural gas in India

Macro-economic factors Growth of end-user segments Cost of gas vis--vis alternate liquid fuels Regulation and policy making Environmental concerns New uses of natural gas (for example, cogeneration)

Storage & Transport

The major difficulty in the use of natural gas is transportation and storage because of its low density. Natural gas pipelines are economical, but are impractical across oceans. LNG carriers can be used to transport liquefied natural gas (LNG) across oceans, while tank trucks can carry liquefied or compressed natural gas (CNG) over shorter distances. Sea transport using CNG carrier ships that are now under development may be competitive with LNG transport in specific conditions. For LNG transport a liquefaction plant is needed at the exporting end & regasification equipment at the receiving terminal. Shipborne regasification equipment is also practicable. LNG transportation is established as the preferred technology for long distance, high volume transportation of natural gas, whereas pipeline transport is preferred for transport for distances up to typically 4.000 km overland & approximately half that distance over seas. For CNG transport high pressure, typically above 200 bar, is used. Compressors and decompression equipment are less capital intensive and may be economical in smaller unit sizes than liquefaction/regasification plants. For CNG mode the crucial problem is the investment and operating cost of carriers. in the past, the natural gas which was recovered in the course of recovering petroleum could not be profitably sold, and was simply burned at the oil field This wasteful practice is now illegal in many countries[15]. Additionally, companies now recognize that value for the gas may be achieved with LNG, CNG, or other transportation methods to end-users in the future. Natural gas is often stored underground inside depleted gas reservoirs from previous gas wells, salt domes, or in tanks as liquefied natural gas. The gas is injected during periods of low demand and extracted during periods of higher demand. Storage near the ultimate end-users helps to best meet volatile demands, but this may not always be practicable.

LNG
Liquefied natural gas or LNG is natural gas (Predominantly methane, CH4) that has been converted temporarily to liquid form for ease of storage or transport.Liquefied natural gas takes up about 1/600th the volume of natural gas in the gaseous state. It is odorless, colorless, non-toxic and noncorrosive. Hazards include flammability, freezing and asphyxia.The liquefication process involves removal of certain components, such as dust, acid gases, helium, water, and heavy hydrocarbons, which could cause difficulty downstream. The natural gas is then condensed into a liquid at close to atmospheric pressure (Maximum Transport Pressure set around 25 kPa (3.6 psi)) by cooling it to approximately 163 C (260 F). The reduction in volume makes it much more cost-efficient to transport over long distances where pipelines do not exist. Where moving natural gas by pipelines is not possible or economical, it can be transported by specially designed cryogenic sea vessels (LNG carriers) or cryogenic road tankers.

The energy density of LNG is 60% of that of diesel fuel.[1]

Features

LNG accounted for 7% of the worlds natural gas demand. The global trade in LNG, which has increased at a rate of 7.4 percent per year over the decade from 1995 to 2005, is expected to continue to grow substantially during next years The projected growth in LNG in the base case is expected to increase at 6.7 percent per year from 2005 to 2020. The world-wide interest in using natural gas-fired combined cycle generating units for electric power generation, By the end of 2007 there were 15 LNG exporting countries and 17 LNG importing countries. The three biggest LNG exporters in 2007 were Qatar (28 MT), Malaysia (22 MT) & Indonesia (20 MT) & the three biggest LNG importers in 2007 were Japan (65 MT), South Korea (34 MT) & Spain (24 MT). LNG trade volumes increased from 140 MT in 2005 to 158 MT in 2006, 165 MT in 2007, 172[8] MT in 2008 and it is forecasted to be increased to about 200 MT in 2009 and about 300 MT in 2012.

REGULATORY MECHANISM

The petroleum sector is of paramount importance for the growth of Indian economy. The Indian petroleum sector has historically been a regulated one with the exploration and production activities being concentrated in the hands of Government undertakings. The Government's growing concern over the widening gap between the demand for hydrocarbons and the domestic production have led to the announcement of several policy measures in recent times. These measures were designed to attract the much needed private Indian and foreign capital investment in the upstream sector in order to provide an impetus to exploration and production activities in the country. Need for regulation - While movement by pipelines is irrefutably the least-cost option for product movement, for transmission and distribution of gas, it is the sole option. In addition, product movements by pipelines require much less energy than by other modes. Trends in the modal shares confirm this. While current market shares for petroleum products are dictated by the sales plan entitlement scheme, market volumes in a deregulated scenario would be based on the competitive advantage that one company enjoys with respect to another, be it service, technology, quality, marketing skills, or prices. Given that distribution expenses contribute significantly to retail prices at the consumer end, a firm can exercise competitive advantage by streamlining its distribution system. Access to pipelines, which offer the most economic mode of transport, would thus be critical in a deregulated scenario. Key reasons generally cited for pipeline regulation as follows. Pipelines exhibit technical economies of scale Pipelines are not subject to significant inter-modal competition Pipelines construction is capital intensive, implying appreciable barriers to entry.

BENEFITS OF PIPELINE MODE OF TRANSPORTATION

Energy Conservation: - Pipeline transportation requires the least energy as compared to other modes, including rail movement. Transportation Cost: - The cost of transportation is least in the case of pipelines and moreover, reduces as the pipeline depreciates. On the other hand, freight charged by the Railways has been appreciating at intervals. Environment Friendly: - Pipeline transportation is environment friendly vis--vis rail / road movement. The environmental impact of the pipeline during construction, operation and maintenance phases is negligible. Safety: - Pipeline transportation results in enhanced safety as there is minimum handling of product. The subterranean nature of the pipelines also makes them intrinsically safer than other modes of transportation. Transportation Losses: - it is observed that these losses can be minimized in the pipeline mode. Experience shows that whilst pipeline transportation losses range between 0.1% to 0.15% the losses in the rail / road transportation are as high as 0.32% to 0.5% especially in lighter products like MS, which is also a high value product. Land Requirement: - Transportation by rail requires large amount of land for building up railway sidings which increases the cost of installations and also restricts the choice in selection of installation sites. Multi product benefit: - Pipeline transportation allows multi-product handling, using the same facilities, whereas different types of wagons are necessary for different "class" of product. Control: - Increase / decrease in transportation volume can be effective without much time delay / disturbance and cost in case of pipeline transportation. Effect Of Natural Calamities: - Natural calamities like floods, breaches, etc, disturb surface transport systems. As major part of the pipeline system traverses below the ground, the pipelines are normally less affected by natural calamities. Cost: -Land costs are minimal since the pipelines are laid underground. Further, in case of pipelines, the land can be restored back to its normal use after the construction work is completed. In case of rail transportation, the land use pattern is permanently changed. In the pipeline option, it is possible to traverse even through very difficult terrain

Pipeline Regulation
Pipelines have decreasing average and marginal costs of production. Given sufficient volumes, the larger a pipeline is built, the lower the tariff required to produce a certain net return on investment. A pipeline could, thus, be a natural monopoly in the area it serves, since expansion of capacity results in a reduction in costs per unit transported. In most countries, a common way of regulating a natural monopoly has been some form of a rate of return limitation.

In addition, it is generally accepted that a competitive environment induces self-regulation. However, it is inconceivable that a new entrant could duplicate existing pipeline infrastructure and offer products at competitive prices to that by an existing player. In summary,pipeline regulation is warranted on two counts, a) to limit the profits of an unregulated monopolist and b) to offer a level playing field to all players (fostering a competitive environment). Issues in pipeline regulation - Before moving on to issues in regulation, one must examine forms of regulation. There are three types of regulation relevant to pipelines.

- Structural Regulation; wherein a regulatory authority determines which firms can or must engage in particular activities. - Conduct Regulation; which involves measures to control the conduct of a firm. - Use of standards; which shape the behavior of firms in areas related to health, safety, and pollution.
Given the need and form of pipeline regulation, two key issues emerge, namely - Open access and - Tariff setting.

MANDATORY OPEN ACCESS

One of the main infrastructure requirements for a marketing company would be access to a pipeline to evacuate its products. Most commonly followed method of pipeline regulation the world over is the common carrier principle with a right of access to all players. While the ownership of existing pipelines would remain with present owners, the regulatory authority set up would regulate the access to others, as also the tariffs for the pipelines. Though, the owner will have right of first use to the extent of owners requirements, the regulatory authority would force expansion of capacity for the use of the pipeline by other player.

Indias Hydrocarbon Vision 2025

To keep pace with technological advancement and application and be at the technological forefront in the global exploration and production industry. To continue exploration in producing basins. To pursue extensive exploration in non-producing and frontier basins for knowledge building and new discoveries, including in deep-sea offshore areas. Finalize a programme for appraisal of the Indian sedimentary basins to the extent of 25% by 2005, 50% by 2010, 75% by 2015 and 100% by 2025. Provide internationally competitive fiscal terms, keeping in view the relative prospectivity perception of Indian basins, in order to attract major oil and gas companies and through expeditious evaluation of bids and award of contracts on a time bound basis. Continue technology acquisition and absorption along with development of indigenous Research & Development (R&D). Ensure adequacy of finances for R&D required for building knowledge infrastructure. Make E&P operations compatible with the environment and reduce discharges and emissions. Acquire acreages abroad for exploration as well as production

Grading

Trenching

Stinging of Pipes

Welding

Trenching And Welded Pipe

Lowering

Restoration after laying

PIPELINE INSPECTION AND MAINTENANCE

Operating pressure - Care shall be exercised to assure that at any point in the piping system the maximum steady state operating pressure and statics HEAD WITH the line in a static condition do not exceed at the point the internal design pressure and pressure rating for the components used . Communications - A communications facility shall be maintained to assume safe pipeline operations under both normal and emergency conditions. Markers - Markers shall be installed over each line on each side of road, highway, railroad, and stream crossings to properly locate and identify the system. Pipeline markers at crossings, aerial markers when used, and other signs shall be maintained so as to indicate the locations of the line. These markers shall show the name of the operating copany and where possible an emergency telephone contact. ROW maintenance - The ROW should be maintained so as to have clear visibility and to give reasonable access to maintenance crews. Access shall be maintained to valve locations. Diversion ditches or dikes shall be maintained where needed to protect against washouts of the line and erosion of land owners property. Patrolling - Each operating company shall maintain periodic pipeline patrol program to observe surface conditions on and adjacent to the pipeline ROW, Indication of leaks, construction activities other than that performed by the company, and any other factors affected the safety operation of the pipeline. Special attention to shall be given to such activities as road building, ditch cleanouts, excavations and like encroachments to the pipeline system. Patrol shall be made at intervals not exceeding 2 weeks. Underwater crossing shall be inspected periodically for sufficiency of cover, accumulation of debris, or for any other condition affected the safety and security of the crossings, and at any time it is felt that the crossing are in danger as a result of floods, storms, or suspected mechanical damage.

Identification of Risk in project

Technical External Environmental Organizational Project management Right-of-way Construction Regulatory
Economic Environmental Third party Right-of-way Management Geotechnical Design process Construction

Successful Use of Project Risk Management

A May 2001 survey conducted by DOE identified several characteristics of successful risk management programs
Feasible, stable, and well-understood user requirements. A close relationship with user, industry, and other appropriate participants. A planned and structured risk management process integral to the acquisition process. An acquisition strategy consistent with risk level and risk-handling strategies. Continual reassessment of project and associated risks. A defined set of success criteria for all cost, schedule, and performance elements (e.g., performance baseline thresholds). Metrics to monitor effectiveness of risk-handling strategies. Effective test and evaluation program. Formal documentation.

Type Of Infrastructure
Transportation infrastructure Road and highway networks, Railways, Canals Seaports and lighthouses Airports, including air navigational Mass transit systems (Commuter rail systems, subways, tramways, trolleys and bus terminals) Bicycle paths and pedestrian walkways Energy infrastructure Electrical power network, including generation plants, electric grid, substations and local distribution Natural gas pipelines, storage and distribution terminals, as well as the local distribution network Petroleum pipelines, including associated storage and distribution Water management infrastructure Drinking water supply, Sewage collection and disposal Drainage systems (storm sewers, ditches, etc..) Major irrigation systems (reservoirs, irrigation canals) Major flood control systems (dikes, levees, major pumping stations and floodgates) Communications infrastructure Waste management facilities Solid waste landfills Solid waste incinerators Hazardous waste disposal facilities; Geophysical monitoring networks Meteorological monitoring networks Remote sensing satellites

This poses challenges before the sector in several areas :

i) Capital accounts convertibility could also lead to large funds kept by Indians abroad flowing into India. The various estimates have put the NRI funds abroad at & 150-200 billion ii) India is not alone in seeking foreign funds in the core sector. China requires US $ 5000 billion in the next two decades. So does Korea. India has to complete with them. iii) One of the key problems in the commercialization of infrastructure is allocation or risks. The result projects once considered viable turn unviable when the bidders find their costs shooting up. This needs correction. iv) The other problem is that infrastructure demand for funds is mostly long term and can come from the insurance and pension funds. But, these two areas have not been opened up. v) Official and private perceptions over the viability of a project vary often widely. Differences have to be narrowed. vi) In an infrastructure constrained economy with a high interest rate any large programme of investment may add to inflationary potential unless gestation lags in the projects are reduce. vii) The report (IIR) says that on the basis of existing tariff levels, it will be possible for port authorities to service debt obligations and pay a reasonable return on equity. viii) The Ports will have to upgrade the facilities to international levels. In the modernised ports, cargo would be mechanically handled; there would be special facilities for handling container and bulk cargo and computer-based cargo clearance including customs clearance. ix) Similarly, the future of road development lies in finding out innovative ways of leveraging funds from the market to augment budgetary resources as also in adopting modern equipment-based technology leading to expeditious, construction of the much wanted roads.

GOVERNMENT POLICY FOR INVITING PRIVATE AND FOREIGN INVESTMENT

To encourage feign funds flow into the infrastructure sector, the Financing Ministry has allowed Foreign Institutional Investors (FIIs) also to invest in unlisted companies. This was aimed at helping infrastructure companies as they would not be in a position to list their shares in the initial phase. FIIs now deploy 100 per cent of their funds in corporate debt. Speaking at the World Infrastructure Forum, John Taylor, Director, Infrastructure, Energy and Financial Sector Department, ADB, emphasised that the "counter guarantee" scheme was designed to cover specific risks including "discriminatory government action of various kinds, nondelivery of inputs or non-payment for output by State-owned entitles, availability of essential public services, changes in the agreed regulatory framework or tax regime, provision of essential complementary infrastructure, compensation or delays caused by government action or political uncertainty, transfer risks, foreign currency availability and convertibility. In a bid to make the core sector attractive for FDI, the Cabinet Committee on Foreign Investment (CCFI) has modified the 49 percent cap on foreign equity in the infrastructure sector to render fund mobilisation easier. The new mechanism is designed to over come the constraints for foreign equity cap in the infrastructure sector. Under the norms, companies operating in the sector can bring in equity through the mechanism of an investing company for the purpose of making investment in a licensee company n the service sector where there is a prescribed foreign equity cap.

Concept : PublicPrivate Partnerships

The scheme covers roads, railways, seaports, airports, inland waterways, power, infrastructure projects in SEZs, international convention centres and other tourism infrastructure projects, urban transport, water supply, sewerage, solid waste management and other physical infrastructure projects in urban areas. Salient provisions under the scheme are:

infrastructure asset indirectly owned by the government; project built and maintained by a private sector entity; project designed and an estimate of viability gap given by a government entity; viability gap fundone time or deferred grantprovided by the government; viability gap fund not to exceed 20 per cent of the total project cost; but the entity that owns the project may provide additional grants up to another 20 per cent of the project cost from its own budget; a pre-determined tariff or user charge to be collected from user

Public-private partnership (PPP)

Public-private partnership (PPP) describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP, P3 or P3. In some types of PPP, the government uses tax revenue to provide capital for investment, with operations run jointly with the private sector or under contract. In other types (notably the private finance initiative), capital investment is made by the private sector on the strength of a contract with government to provide agreed services. Government contributions to a PPP may also be in kind (notably the transfer of existing assets). In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make it more attractive to the private investors. In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by providing guaranteed annual revenues for a fixed period. Typically, a private sector consortium forms a special company called a "special purpose vehicle" (SPV) to develop, build, maintain and operate the asset for the contracted period. In cases where the government has invested in the project, it is typically (but not always) allotted an equity share in the SPV. The consortium is usually made up of a building contractor, a maintenance company and bank lender(s). It is the SPV that signs the contract with the government and with subcontractors to build the facility and then maintain it. A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non medical services while the hospital itself provides medical services.

Classification of Infrastructure Contracts & PPP

Sl Type of No Agreement/ Models
1 Construction Supervision (SQC-Supervision & Quality Control BOT (Build Operate Transfer)

Funding

Consultant

Executing Agency
Contractor (No By Passing of Consultant) -Design -Construction -Contract Management -Finance

Remarks

NHAI/ NHDP, Centre & State, 100% PPP 30% + 70% (Equity sharing+ Annuity Models)

100 % Control for Technical & Contractual Obligations -RFIs 30% -Reviews -Recommendations -Consultants -Funding-50% -Known as IE

Client- DPRBidsContractorConsultantClient Ownership with Client, Feasibility Studies & Traffic Census etc

BOOT (Build Own Operate Transfer

As applicable

Inbuilt/ Consultancy

PSUs Private Sector Nuclear Projects

Classification of Road/Infrastructure Contracts

Sl No 4 Type of Agreement/ Models BOO (Build Own Operate) BOOST (BOO + Share Transfer) Funding As applicabl e Consultant Not Obligatory Executing Remarks Agency Power & Tele Sectors Risk Sharing Management & Gradual Transfer of Assets Govt/PSU Passing on Operations & Maintenance to Private Players Transfer of Assets against Lease Rents, Power Sector etc

BOLT (Build Own Lease Transfer)

DBFO (Design Build OMT)

Same Structure as PPP (BOT/BOOT)

Road Sector & Others

NATURE OF PRIVATE PARTICIPATION

Build & Transfer (BT) Contract Add & Operate (CAO) Develop, Operate & Transfer (DOT) Rehabilitate, Operate & Transfer (ROT) Rehabilitate, Own & Operate (ROO) Lease Renovate, Operate & Transfer
(LROT)

PRODUCT SHARING AGREEMENT

Selected private participants have to enter into an
agreement, termed as the Joint Operating Agreement (JOA) in relation to the development of the relevant oil field. This agreement referred to as JOA.

Selected consortium has to enter into an agreement with

the Union of India, under which the unincorporated joint venture is given the right to undertake exploration & production activities & a specific percentage of the oil & gas produced by the relevant field is purchased by the Union of India, at a pre-determined price. This agrement is referred to as Production Sharing Agreement (PSA).

A mining lease has to be procured & maintained by the

selected consortium, in order to be vested with the specific right to undertake the mining activities with respect to the relevant oil & gas field.

INDIAN POWER SECTOR

Power in Concurrent List. Both Central and State can legislate - Central law prevails in the event of conflicting provisions. Following the Electricity Act 1948, power sector in States come under Vertically Integrated State Electricity Boards Central Generation and Transmission from 1975 Central Public Sector Undertakings - Own 33% of the capacity Late 1990s : Unbundling of SEBs & Regulatory Commissions Act of 1998.

Electricity Act 2003, Energy Conservation Act

INDIAN POWER SECTOR : THE BUSINESS SO FAR

Pre Reform stage :
State Power utilities losses around Rs. 26,000 cr. High Transmission & Distribution losses

Energy & Peaking power shortages

Skewed tariff Uncovered subsidies

Un-metered power supplies

State Power utilities unable to raise resources for investments

Rural electrification virtually at standstill.

IPPs unwilling to come forward in generation Integrated power utilities not conducive to checking

losses and improving efficiency

REFORMS SO FAR :
Liberalized Policy notified in 1991; reviewed from time to time. Hydro Policy to augment addition of hydro capacity Revised norms with specific delegations to State Government in environment clearance for power projects Electricity Regulatory Commission Act, 1998 enacted for setting up of ERCs at Centre and States Electricity Conservation Act, 2001 enacted to ensure energy efficiency in consumption and Demand Side Management Electricity Act, 2003 enacted which would open up the sector and facilitate operations

Energy Consumption Scenario

India energy Installed Capacity

India Energy Consumption Matrix

11% 8% 3% 2% 53% 23%

Coal Hydro Nuclear Oil RES Gas

Installed Capacity as on 31.10.10

Region Hydro Coal Northern Western Southern 13310.75 7447.50 11107.03 20062.50 27015.50 17822.50 Thermal Gas Diesel Total 23638.75 35176.79 22921.60 1180.0 1840.0 1100.0 1856.37 4020.62 6983.7 39985.87 48484.91 42112.33 Nuclear R.E.S (MNRE) Total 3563.26 12.99 8143.81 17.48 4159.78 939.3

Eastern
NEastern Islands All India

3904.12
1116.00 0.00 36885.40

16395.38
60.00 0.00 81355.88

190.00
766.00 0.00

17.20

16602.58

0.00
0.00 0.00 4120

272.41
171.00 6.10 13310.2

20779.11
2255.74 76.13 153694.09

142.74 968.74
70.02

0.00 98378.48

16822.8 1199.7

 Actual Power Supply Position

Period Peak Demand (MW) Oct 09 115113 Peak Met (MW) 101183 Peak Deficit/ Surplus (MW) -13930 Peak Deficit/ Surplus (%) -12.1

Installed Capacity as on 31.10.10

Energy Reqmt (MU) 69265 Energy Availability (MU) 62736 Energy Deficit/ Surplus (MU) -6529 Energy Deficit/ Surplus -9.4

Capacity Addition During 11th Plan

Sector All Hydro Coal 15627.0 52850.0 Thermal Gas 6843.4 Diesel Total 0.0 59693.4 3380.0 0.0 78700.4 Nuclear Wind Total

Likely Power Supply Position at the End of 2011-12

Period Peak Demand (MW)
152746

Peak Met (MW)

145583

Peak Deficit/ Surplus (MW)

-7163

Peak Deficit/ Surplus (%)

-4.7

Energy Reqmt (MU)

968659

Energy Availability (MU)

958004

Energy Deficit/ Surplus (MU)

-10655

Energy Deficit/ Surplus

-1.1

2011-12

Installed Capacity as on 31.10.10

Region Hydro Coal Northern Western Southern 13310.75 7447.50 11107.03 20062.50 27015.50 17822.50 Thermal Gas Diesel Total 23638.75 35176.79 22921.60 1180.0 1840.0 1100.0 1856.37 4020.62 6983.7 39985.87 48484.91 42112.33 Nuclear R.E.S (MNRE) Total 3563.26 12.99 8143.81 17.48 4159.78 939.3

Eastern
NEastern Islands All India

3904.12
1116.00 0.00 36885.40

16395.38
60.00 0.00 81355.88

190.00
766.00 0.00

17.20

16602.58

0.00
0.00 0.00 4120

272.41
171.00 6.10 13310.2

20779.11
2255.74 76.13 153694.09

142.74 968.74
70.02

0.00 98378.48

16822.8 1199.7

Installed Capacity as on 31.10.10

States Hydro Coal Chandigarh Delhi Haryana H.P. 46.74 581.62 1327.68 1539.94 27.09 2346.96 2535.49 118.30 Gas 15.32 808.01 103.70 61.88 Thermal Diesel 0.0 0.0 3.92 0.13
8.94
0.0 0.0 0.0

Nuclear Total 42.41 3154.97 2643.11 180.31 4.84 47.08 76.16 14.08

R.E.S

Total

0.0 0.0 68.7 185.1

93.99 3783.67 4115.65 1919.45

J&K
Punjab Rajasthan U.P. Uttrakhand Chattisgarh Gujrat M.P.

1480.53
2962.89 1454.80 1597.42 1919.18 120.00 772.00 3223.6

263.70
3208.19 4024.48 6563.84 261.26 4083.00 6678.89 4282.1

304.14
263.92 665.03 549.97 69.35 0.0 3894.49 257.18

576.78
3472.11 4689.51 7113.81 330.61 4083.0 10590.86 4539.28

68.00
151.04 469 203.72 16.28 47.52 559.32 273.24

111.83
251.47 726.3 402.98 109.97 174.15 1397.50 262.71

2351.5
6837.51 7339.61 9317.93 2376.04 4424.67 13319.68 8298.89

0.0 0.0 17.48 0

Installed Capacity as on 31.10.10

States Hydro Coal Maharashtra Goa D&D D&N Havaili A.P. Karnataka Kerala T.N. P. Chury D.V.C Bihar Jharkhand 3331.84 0.0 0.0 0.0 3617.53 3599.80 1781.50 2108.20 0 193.26 129.43 200.93 10703.05 277.03 19.04 22.04 6259.88 3902.67 765.38 5519.81 207.01 3063.10 1661.70 1737.88 Gas 3715.93 48.00 4.20 27.10 2347.40 220.00 533.58 1026.30 32.50 90.00 0.0 0.0 Thermal Diesel
0.0 0.0 0 0.0

Nuclear Total 14418.98 325.03 23.24 49.14 8644.08 4357.09 1555.40 6957.77 239.51 3153.10 1661.70 1737.88 690.14 25.80 7.38 8.46 214.28 195.36 78.10 478.50 16.28 0.0 0.0 0.0

R.E.S

Total

2156.21 30.05 0.0 0.0 668.66 1841.34 119.04 4354.64 0.0 0.0 50.40 4.05

20597.17 380.88 30.62 57.60 13144.55 9993.59 3534.04 13899.11 255.81 3346.36 1841.53 1942.86

36.80 234.42 256.44 411.66

0.02 0.0 0.0 0.0

Installed Capacity as on 31.10.10

States Orissa Sikkim W. Bengal Arp.P Assam Manipur Meghalya Mizoram Nagaland Tripura A&N Island Lakshdeep Hydro Coal 2188.93 75.27 1116.30 97.57 429.7 80.98 230.58 34.31 53.32 62.37 0.0 0.0 1828.10 68.10 6756.34 0.0 60.00 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Gas 0.0 0.0 100.0 21.05 441.32 25.96 25.96 16.28 19.19 160.84 60.05 9.97 Thermal Diesel 0.0 5.0 12.20 15.88
20.69 45.41 2.05 51.86

Nuclear Total 1828.10 73.10 6868.54 36.93 522.01 71.37 28.01 68.14 21.19 465.69 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

R.E.S 32.30 41.11 144.55 45.26 27.11 5.45 31.03 17.47 28.67 16.01 5.3 0.76

Total 4049.33 189.48 8129.39 179.76 978.84 157.80 289.62 119.92 103.18 244.07 65.40 10.73

2.00 4.85 60 9.97

States Likely to be Surplus in Power at the end of 11th Plan Considering Capacity Addition of 74964 MW
Sl No
1 2 3 4 5 6 7 8 9 10

State
Himachal Pradesh Jammu & Kashmir Uttrakhand Delhi Orissa West Bengal Sikkim DVC Arunachal Pradesh Mizoram 1472 188 772 2023 898 109 1214 1646 45 6

Surplus Capacity
Peak (MW) Energy (MU)

4609 2118 4344 23344 3436 11387 3137 15610 539 234

ELECTRICITY ACT, 2003

Progressive & Futuristic
Main features of the Act

Creates liberal framework for Power Development.

Facilitates Private investment De-licensing Generation Create Competitive market driven Environment- protects interest of consumer & supplier Stringent Provisions for theft of Electricity Specific dispensation for power development in rural areas Mandates Creation of Regulatory Commissions Recognizes Power Trading Distinct activity to propagate competition

Open access in transmission

PLANS FOR THE FUTURE

Electricity

Act 2003 to pave way for future development in Power Sector

National

Electricity Policy notified by Government on 12th February 2005

National

Electricity Plan notified by CEA in August 2007

OBJECTIVES OF NATIONAL ELECTRICTY POLICY(NEP)

Provide access to electricity for all in the next

five years To meet demand in full by 2012 Supply of reliable & quality power at reasonable rates Per capita availability of electricity to be increased to over 1000 units by 2012 Minimum lifeline consumption of 1 unit/ household/ day by 2012 Financial turnaround & commercial viability of electricity sector Protection of consumers interests

Tariff Policy - 2006

AIMS & OBJECTIVES Tariff Policy:
Ensure availability of electricity reasonable & competitive rates Ensure financial viability & attract investments Promote transparency, consistency & predictability in regulatory approaches

minimise perceptions of regulatory risks

Tariff policy elaborates tariff determination - u/s

62 & 63

Promote competition, efficiency in operations & improvement in quality of supply

Rajiv Gandhi Gramin Vidyutikaran Yojana (2005)

Create Rural Electricity Backbone

Wire villages/hamlets
Power to all BPL families last mile
connectivity

Electrify public places

Develop franchisees

Hydro Power Development

Mainstay

of Country Innstalled capacity, 23%, 37000 MW Main States which contribute are Punjab, HP, Uttaranchal, Arunahcal & J & K Considered as low exploitation of hydro potential As compared to Norway 58%, Candada 48%, Brazil 31%, China 27% Environmental frontly virtually no carbon emission Opportunities potential upto 50000 60000 MW Preparation for DPRs of 162 Schemes going on Promotion of small & mini hydel projects upto 25 MW

Nuclear Power
As of now 1.5 - 2% Installed capacity 4120 MW Nuclear power option has major
issues with Nuclear Safety, Waste Mgt & Disposal Policies, being a Radio Active Material R & D Organisation, better Technical Know how IAEA guidelines Dependence on Nuclear Fuel from Foreign Countries

Developing Nuclear Power Option

Government/national commitment National participation in nuclear power
plant projects Environmental aspects (site specific) Financing Safety Measures, since high risk option International treaties & agreements, nuclear fuel cycle. Radioactive waste mgt, decommissioning Public acceptance

 Nuclear Fission

Nuclear Energy

Involves splitting an atom of uranious nucleus into two smaller nuclei by adding a neutron & thereby relasing energy mostly as heat 2-3 Nutrons are emitted in splitting process Each emitted Neutron when slow down causes another nucleus of uranium split & releases energy A continous such reaction of splitting the nucleus is called fission process

Nuclear Fusion
This is the process of forcing & combining together two light atoms to make a heavier one The fusion process create much more heat than fision A hydrogen atom consists one proton & one electron Two hydrogen atoms are united thus giving lot of heat The two heavy hydrogen atoms, isotopes when made to collide at tremendous speed will generate the heat almost 30 million times to fision process, thus gives an intensity of a Hydrogen Bomb

Nuclear Reactor
Nuclear Fission Involves splitting an atom of uranious
nucleus into two smaller nuclei by adding a neutron & thereby releasing energy mostly as heat 2-3 Nutrons are emitted in splitting process Each emitted Neutron when slow down causes another nucleus of uranium split & releases energy A continous such reaction of splitting the nucleus is called fission process

Nuclear Fuel
Uranium & Plutonium Natural Uranium consists of two Isotopes U 235 &
U 238, Ratio 1:139 Plutonium 239 (obtained from Uranium 238) Uranium 233, obtained from Uranium 23 U 235, Plutonium 239 & Uranium 233 called Fissile Material Uranium 238 & U 232 called Fertile Material Encriched Uranium, is nothing but Natural uranium in which concentration of isotope uranium 235 has been increased, used as Fuel in Nuclear Power Plant

Nuclear Power Plant

Comparative State
US UK Ukrain Russia Japan France Canada India - 109 - 37 - 15 - 28 - 44 - 58 - 21 - 09 (05 Under Construction)

NATIONAL ELECTRICITY PLAN

GENERATION EXPANSION PLANNING

Short Term- Tenth Plan

Target capacity addition- 41,110 MW capacity addition- 21,180 MW with %age achievement 51.5% Power Supply PositionPeak deficit- 13.8% Energy deficit- 9.6%

Medium Term- Eleventh Plan

Detailed (project wise) generation expansion plans evolved- about 78,530 MW revised to 78,700 MW due to change in unit size with fund requirement of 4,10,896 crore Various Scenarios considered Power Supply Position Peak deficit- 4.7% Energy deficit- 9.6%

Long Term 12th Plan

Tentative capacity addition of the order of 100,00 MW

NATIONAL RENEWABLE ENERGY POLICY

To support & accelerate power generation from renewables to meet the minimum energy needs Provides for supportive fiscal regime, single window clearance, leveraging additional budgetary resources from other departments, preferential prices for renewable electricity etc., Envisages Medium term (2012) Capacity addition goal of: Wind Energy 5000 MW 10000 MW Small Hydro 2000 MW Biomass Power/Cogeneration 2500 MW Urban/Industrial waste to Energy 220 MW SPV Power 30 MW Solar Thermal Power 250 MW

RENEWABLE ENERGY PLAN 2012

Achieving a 10% share for renewables in the new power capacity by adding up of about 10,000 MW through Renewables. Deployment of Solar Water heating systems in one Million homes Electrification by renewables for 24,000 unelectrified villages Deployment of 5 million solar lanterns & 2 million solar home lighting systems Coverage of 30 million households through improved wood stoves Setting up of further 3 million family size biogas plants

THANK YOU