DESALINATION

Desalination Service Providers/Equipment Manufacturers

Desalination service providers/ manufacturers can look for two types of business avenues

Desalination Service Providers/Equipment Manufacturers

Industrial Desalination Plants: Large companies’ inclination to have captive desalination plants to meet their process water demands.

State Government-Owned Desalination Plants: Government comes out with desalination plants to fulfill state’s household and municipal water needs

The model used in tenders/projects

by industrial institutions is custom

build and transfer. In some projects, O & M is also taken care for 3 to 5 years.

The model used in tenders/projects

by government is BOOT (build,

own, operate and transfer). Usual time spread is of 10 to 20 years

Competitive Landscape

12

The Indian desalination market is very nascent and in the development stage

Desalination market is expected to outperform the other water treatment markets.

Government support, private sector participation, and awareness will help in the growth of

this market

With Government support, private sector participation, and awareness will help in the growth

of this market. With foreign players eyeing this market, it will witness some best practices,

in terms of technologies and processes, being adopted in near future.

1245

1664

2164

0

500

1000

1500

2000

2500

FY11 FY12 FY13

Past Market Trend (INR in crs)

13

Gujarat and Tamil Nadu have been

more active in setting up desalination

plants in comparison to other coastal

states in India.

Others

16%

Tamilnadu

37%

Gujarat

47%

Others include states such as Maharastra,

AndhraPradesh, Rajasthan, Orissa, and

West Bengal. Large projects such as

Krishnapatnam port, Kasnau-Matasukh

Lignite Mines, Visakhapatnam, and so on

are scheduled to be functional in the

coming years.

Indian Desalination Services market: Current Desalination Plants State Wise

Capacity: 291,820 cum/day, (India), 2013-14

14

Market Drivers

Government and Political Support

Urban infrastructure development support under JNNURM and INR 536.60 billion has been allocated for urban water supply under 11th five year plan that will support more

desalination plants in India.

Political leaders agree to the argument of using desalination to rectify water problems in their respective states. Ms.Jayalalitha and Mr.Karunanidhi in Tamilnadu are strongly

supporting desalination. Gujarat’s t h en Chief Minister, Mr. Narendra Modi, has taken

inputs from companies like Hyflux and GE Water for using desalination plants in Gujarat.

Industrial Water Use Restriction

Increase in ground water contamination by industries is pushing state governments to impose restriction on ground water use. Such restrictions will give boost to

desalination plant usage by industrial setups.

Reduced Plant Prices

An RO plant costs approximately 60 percent of its cost 10 years ago. This reduced price gives incentives to build new plants.

Population Growth and Water Shortage

Water scarcity and decreased per capita water availably push the use of desalination plants.

15

Market Restraints

Cost of Production

Cost of production of water from desalination plants is as low as 15 paisa per liter, but

it is still high in comparison to water from other sources. Increase in cost of water will

inflate overall production costs for any industrial unit. This factor impedes the adoption of desalination plants.

Restructuring

Infrastructure maintained by industries, which started a decade ago will have to go for

restructuring to accommodate desalination plant. Such restructuring is not supported

by most of the industrial setups.

Wastewater Recycling and Improved Production process

Many industrial units are installing plants for water recycling and reducing water usage.

This, in turn, will reduce the opportunities for desalination plants.

Global Economic Recession

Although India is not much effected by global recession, still a few projects have been

put on hold by industries to keep their energies focused on the core work.

16

Industry

Challenges Faced:

Industry Fragmentation: Desalination market in India is

highly fragmented with so many Tier-2 and regional

players. Creation of industry wise standards is a major

challenge.

Bureaucratic

Hurdles: There

are many

desalination

projects, which

were announced

in 2005 in

Orissa, Andhra

Pradesh, and

Pondicherry. However, due to

slow execution

and bureaucratic

hurdles, they

have not started

yet.

Protests: Recent

Fishermen’s protest

against Adani

group’s SEZ and its

desalination plant in

Bhuj, Gujarat has

raised questions on

the growth of

desalination plants

near the coastal

Improper Training and Skill sets: As the desalination

market in India is new, there is a scarcity of proper human resources.

Challenges

17

Future Capacity Additions

India desalination market to grow at 22% CAGR till 2017 to reach INR 6000 Cr

─ India is expected to have over 500 desalination plants by 2017

─ With more than 300 plants being built in the states of Tamil Nadu, Gujarat and

Maharashtra

The top five states to emerge as desalination hubs are Maharashtra, Gujarat, Tamil Nadu, Karnataka and West Bengal

A 150-million-litre-a-day desalination plant to convert sea water to drinking water is to come

up adjacent to the Nemmeli desalination plan. The additional capacity will supply drinking

water to over 6.46 lakh residents in the suburbs to the south of Chennai which were added

to the City Corporation limits.

With growing demand and more focus on desalination by states, the capacity is expected to

reach 1,449,942 cubic m/day by 2015

Hyflux to start a new project at Dahej, Gujarat.

291,0

00

367,0

00

461,0

00

580,0

00

730,0

00

910,0

00

1,2

10,0

00

1,4

50,0

00

FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY14 FY15

Capacity

18

Future Capacity Additions

Recently completed projects:

For Tata chemicals GE installed a 5.8 MLD sea water desalination plant

IDE technologies has installed nine desalination plants at Jamnagar and two at

Kakinada for Reliance Petroleum, two each in Essar Oil limited and Sanghi Industries

limited, four for Nuclear Power Corporation of India and one for EID Parry BHEL has commissioned a desalination plant on a turkey basis in the Gulf of Mannar

in Tamil Nadu.

Chemplast has set up a desalination plant in Karaikal to meet the needs of its caustic

soda plant.

Tata Steel has a set up an integrated water and power plant for its Titanium Dioxide

facility in Tamil Nadu

Sterlite Industries has set up a desalination plant for its copper smelting plant at

Tuticorin in Tamil Nadu

L&T has set up a thermal desalination plant for its cement plant in Gujarat

Ramanathapuram in Tamil Nadu on PPP for rural water supply.

Hyflux to start a new project at Dahej, Gujarat.

19

Future Capacity Additions

Market Destined

20

OIL AND GAS

21

Overview: India

The oil and gas sector is one of the six core industries in India. It is of strategic importance

and plays a pivotal role in influencing decisions across other important spheres of the economy.

India is the fourth-largest energy consumer (2013) of oil & gas in the world, accounting for

37 per cent of total energy consumption. Oil consumption is estimated to reach four million

barrels per day (MBPD) by FY16, expanding at a compound annual growth rate (CAGR) of

3.2 per cent during FY08-16. By 2025, India is expected to overtake Japan to become the

third-largest consumer of oil.

The country has 5.7 billion barrels of proven oil reserves. It had 47.8 trillion cubic feet

(TCF) of gas reserves and produced 33.7 billion cubic meter (BCM) of gas in 2013.

India has 19 refineries in the public sector and three in the private sector. In FY14, public

sector refineries accounted for 53.4 per cent of total refinery crude throughput.

India has 9,460 km of crude oil pipelines and 14,083 km of product pipelines.

22

Oil and Gas Market in India:

Backed by new oil fields, domestic oil output is anticipated to grow to 1 MBPD by FY16.

With India developing gas-fired power stations, consumption is up more than 160 per cent

since 1995. Gas consumption is likely to expand at a CAGR of 21 per cent during FY08–17.

Domestic production accounts for more than three-quarter of the country’s total gas

consumption.

India increasingly relies on imported LNG; the country was the fifth-largest LNG importer in

2013, accounting for 5.5 per cent of global imports.

India’s LNG imports are forecasted to increase at a CAGR of 33 per cent during 2012–17.

State-owned ONGC dominate the upstream segment (exploration and production),

accounting for approximately 60 per cent of the country’s total oil output (FY13).

IOCL operates 11,214 km network of crude, gas and product pipelines, with a capacity of

1.6 MBPD of oil and 10 million metric standard cubic metre per day (MMSCMD) of gas. This

is around 30 per cent of the nation’s total pipeline network. IOCL is the largest company,

operating 10 out of 22 Indian refineries, with a combined capacity of 1.3 MBPD. Reliance launched India’s first privately owned refinery in 1999 and gained considerable

market share (30 per cent). Essar’s Vadinar refinery has a capacity of 20 MMTPA, currently

accounting for around 10 per cent of total refining capacity.

23

Key Projects and Investments:

According to data released by the Department of Industrial Policy and Promotion (DIPP), the

petroleum and natural gas sector attracted foreign direct investment (FDI) worth Rs 31,620 crore (US$ 4.97 billion) between April 2000 and September 2014.

Following are some of the major investments and developments in the oil and gas sector:

Petronet LNG Ltd plans to expand capacity of its Dahej terminal in the western state of

Gujarat to 17.5 million tonnes per annum (MTPA), said Mr A K Balyan, Managing Director,

Petronet LNG.

Gujarat State Petroleum Corp Ltd (GSPC) plans to pick up stakes in Vadodara Gas Co Ltd

(VGCL), which services the Vadodara municipality area and Sabarmati Gas Ltd (SGL) that

supplies gas in three northern district of Gujarat.

Finland-based Chempolis Ltd has signed a partnership agreement with Bharat Petroleum

Corporation Ltd's Assam-based refinery, Numaligarh Refinery Ltd (NRL), to build a world

class biorefinery.

Gulf Petrochem Group plans to invest an additional Rs 500 crore (US$ 78.59 million) in India to enter the cluttered and competitive lubricants market worth Rs 6,000 crore (US$

943.13 million).

ONGC Videsh Ltd (OVL) and Pemex-Exploracion Y Produccion, the National Oil Company of

Mexico, have entered into a memorandum of understanding (MoU) to cooperate in the

hydrocarbon sector in Mexico.

Bharat Petroleum Corp Ltd (BPCL) has planned to invest Rs 13,000 crore (US$ 2.04 billion)

in energy exploration and production in Mozambique and Brazil over the next four years. It

will be the firm's biggest investment in the upstream sector.

24

Petronet LNG Ltd plans to expand capacity of its Dahej terminal in the western state of

Gujarat to 17.5 million tonnes per annum (MTPA), said Mr A K Balyan, Managing Director,

Petronet LNG.

Gujarat State Petroleum Corp Ltd (GSPC) plans to pick up stakes in Vadodara Gas Co Ltd

(VGCL), which services the Vadodara municipality area and Sabarmati Gas Ltd (SGL) that

supplies gas in three northern district of Gujarat. Finland-based Chempolis Ltd has signed a partnership agreement with Bharat Petroleum

Corporation Ltd's Assam-based refinery, Numaligarh Refinery Ltd (NRL), to build a world

class biorefinery.

Gulf Petrochem Group plans to invest an additional Rs 500 crore (US$ 78.59 million) in

India to enter the cluttered and competitive lubricants market worth Rs 6,000 crore (US$

943.13 million).

ONGC Videsh Ltd (OVL) and Pemex-Exploracion Y Produccion, the National Oil Company of

Mexico, have entered into a memorandum of understanding (MoU) to cooperate in the

hydrocarbon sector in Mexico.

Bharat Petroleum Corp Ltd (BPCL) has planned to invest Rs 13,000 crore (US$ 2.04 billion)

in energy exploration and production in Mozambique and Brazil over the next four years. It

will be the firm's biggest investment in the upstream sector.

25

Government Initiatives:

Three landmark initiatives for energy efficiency – Design Guidelines for Energy Efficient Multi-

Storey Residential Buildings and Star Ratings for Diesel Gensets and for Hospital Buildings –

were launched by Mr Dharmendra Pradhan, Minister of State with Independent Charge for

Petroleum and Natural Gas, Government of India.

Some of the major initiatives taken by the Government of India to promote oil and gas sector

are:

India and Norway have discussed bilateral relationship between the two countries in the field of

oil and natural gas and decided to extend cooperation in hydrocarbon exploration.

India and Vietnam have stepped up cooperation in the energy sector as ONGC Videsh and

PetroVietnam Exploration Production Corporation has signed an agreement to explore three oil

blocks. The Government of India has planned to set up a Petroleum, Chemicals and Petrochemicals

Investment Region (PCPIR) near Bina, Madhya Pradesh with an investment worth around Rs 1

trillion (US$ 15.71 billion).

The Government of India gave its approval to sign a memorandum of understanding (MoU)

between India and the US for cooperation in gas hydrates for a period of five years.

26

Future Prospects:

India has been among the world’s fastest growing economies. With expanding economy comes an increasing demand for energy and, if current trends continue, India will be the world’s third

largest energy consumer by 2020.

Due to the expected strong growth in demand, India’s dependency on oil imports is likely to

increase further. Rapid economic growth is leading to greater outputs, which in turn is increasing

the demand of oil for production and transportation.

The National Gas Hydrate Programme (NGHP) Expedition-02 and 03 are under advanced stage

of planning and are due in the period 2014 - 2017. Under the programme the government plans

to core 20 sand prone sites and drill 40 wells.

References: Media Reports, Press Releases, Press Information Bureau, Ministry of

Petroleum and Natural Gas

27

POWER SECTOR.

28

Overview: India

Power or electricity is one of the most critical components of infrastructure, affecting

economic growth and wellbeing of nations.

The existence and development of adequate power infrastructure is essential for sustained

growth of the Indian economy. With a production of 1,006 terawatt hours (TWh), India is the fifth largest producer and

consumer of electricity in the world after US, China, Japan and Russia.

The Indian power sector is one of the most diversified in the world. Sources for power

generation range from commercial sources such as coal, lignite, natural gas, oil, hydro and

nuclear power to other viable non-conventional sources such as wind, solar, and agriculture

and domestic waste.

The demand for electricity in the country has been growing at a rapid rate and is expected

to grow further in the years to come. In order to meet the increasing requirement of

electricity, massive addition to the installed generating capacity in the country is required.

29

Power Sector in India:

Electricity production in India (excluding captive generation) stood at 911.6 TWh in FY13, a 4 per cent growth over the previous fiscal. During FY14, electricity production stood at 967

TWh. Over FY07–14, electricity production expanded at a compound annual growth rate

(CAGR) of 5.6 per cent.

The Planning Commission’s 12th Plan projects that total domestic energy production would

reach 669.6 million tonnes of oil equivalent (MTOE) by 2016–17 and 844 MTOE by 2021–

22.

As of April 2014, total thermal installed capacity stood at 168.4 gigawatt (GW), while hydro

and renewable energy installed capacity totalled 40.5 GW and 31.7 GW, respectively. At 4.8

GW, nuclear energy capacity remained broadly constant from that in the previous year.

Indian solar installations are forecasted to be approximately 1,000 megawatt (MW) in 2014,

according to Mercom Capital Group, a global clean energy communications and consulting

firm.

30

Key Projects and Investments:

The investment climate is positive in the power sector. Due to policy of liberalisation, the sector

has witnessed higher investment flows than envisaged. The Ministry of Power has sent its

proposal for the addition of 76,000 MW of power capacity in the 12th Five Year plan (2012-17),

to the Planning Commission. The Ministry has set a target of adding 93,000 MW in the 13th Five Year Plan (2017-2022).

The industry has attracted FDI worth US$ 9,269.45 million during the period April 2000 to

August 2014.

Some of the major investments made into the Indian power sector are as follows:

Three landmark initiatives for energy efficiency – Design Guidelines for Energy Efficient

Multi-Storey Residential Buildings and Star Ratings for Diesel Gensets and for Hospital

Buildings – were launched by Mr Dharmendra Pradhan, Minister of State with Independent

Charge for Petroleum and Natural Gas, Government of India.

Neyveli Lignite Corporation (NLC), as part of its entry into green energy generation, has

lined up renewable energy projects worth Rs 500 crore (US$ 81.51 million) to set up wind

and solar energy projects of 80 MW in India.

Larsen & Toubro Ltd (L&T) has signed a contract worth US$ 200 million to set up a 225 MW gas-based power plant at Sikalbaha in Chittagong, Bangladesh.

Adani Power has bought Lanco Infratech’s Udupi power plant for Rs 6,000 crore (US$

978.24 million), which has made it the largest acquisition in the thermal power space.

ReGen Powertech has forayed into solar power business as it plans to produce India’s first

solar powered inverter devices.

Astonfield Renewables plans to set up two 2 MW solar projects in Mauritius with an

investment of approximately US$ 8.2 million.

31

Government Initiatives:

India has emerged as one of the fastest growing economies in the world. Its current economic

performance reflects a healthy trend based on increased consumption, investment and exports.

Over the next five years, this growth is expected to continue. The Government of India has

identified the power sector as a key sector of focus to promote sustained industrial growth.

Some of the initiatives taken by the Government of India to boost the power sector of India are as follows:

The Government of India has planned to invest Rs 2 trillion (US$ 32.61 billion) in solar and

wind power projects in the deserts to compensate for India’s depleting fossil fuel reserves.

Mr Narendra Modi, the Prime Minister of India, has dedicated to the nation the four laning of

Pune-Solapur National Highway no 9 section and 765 kilovolt (kV) Raichur-Solapur

transmission lines.

The Government of India has dedicated the 1,000 MW stage I of Mouda Super Thermal

Power Project to the nation in Mouda, Maharashtra, on the August 21, 2014.

The Government plans to accelerate wind energy generation by adding an ambitious 10,000

MW every year, or five times the total new capacity that came up in the last fiscal, in order to

reduce India's dependence on costly energy imports.

The Government of India has decided to provide automatic clearance for coal linkage to new power plants and will also be allowed to enhance capacity up to 50 per cent.

The Government of Andhra Pradesh (AP) plans to set up a 1,000 MW solar park in Guntur

district. This move comes in the backdrop of AP seeking to offer 24x7 power supply from

October 2, 2014.

32

Road Ahead:

The government is targeting capacity addition of around 89 GW under the 12th (2012–17) and around 100 GW under the 13th (2017–22) Five-Year Plan. The expected investments in the

power sector during the 12th Plan (2012–17) is US$ 223.9 billion. There is a tangible shift in

policy focus on the sources of power. The government is keen on promotion of hydro, renewable

and gas-based projects, as well as adoption of clean coal technology.

Wind energy is the largest source of renewable energy in India; it accounts for an estimated 87

per cent of total installed capacity (18.3 GW). There are plans to double wind power generation

capacity to 20 GW by 2022.

Biomass is the second largest source of renewable energy, accounting for 12 per cent of total

installed capacity in renewable energy. There is a strong upside potential in biomass in the

coming years.

References: Ministry of Power, Press Information Bureau, Media Reports