PresentationPresentationOnOn

Power and Oil & GasPower and Oil & GasByBy

Col (Col (Retd.) SP TomarRetd.) SP Tomar

I C T PvT LtdI C T PvT Ltd

15 June 201215 June 2012

Sequence of CoverageSequence 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 SectorIndian Power Sector Electricity SectorElectricity Sector Hydro Power & Availability from Each SectorHydro Power & Availability from Each Sector Nuclear Power, its Generation, Fusion & Fission Nuclear Power, its Generation, Fusion & Fission

Renewable & other Sources of EnergyRenewable & other Sources of Energy

Wind, Biomass & Solar etcWind, Biomass & Solar etc

Reforms in Power Sector & Expectation of IndustryReforms 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 economyGDP growth of the country showing promising trends-

expected to be around 7-8% in coming yearsProjection -India to be a strong economic force by 2020 Indigenous energy sources may not be adequate to meet

increasing power demandFor Sustainable development- right fuel mix based on

well-diversified portfolio of indigenous and imported sources of fuel necessary

Integration of all Sources of PowerNuclear Agreement between US & India, its Implications Investment in Public SectorCurrent Problems of Power SectorPrivate ParticipationAgreement 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 and higher molecular weight hydrocarbons, elemental sulfur, & sometimes helium & nitrogen.

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-à-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 gas-

powered 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 LNG-

and 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-à-vis alternate liquid fuels Regulation and policy making Environmental concerns New uses of natural gas (for example, co-

generation)

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 non-corrosive. 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 world’s 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. During next several years there would be significant increase in volume of LNG Trade and only within next three

years; about 82 MTPA of new LNG supply will come to the market.

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-à-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 owner’s requirements, the regulatory authority would force expansion of capacity for the use of the pipeline by other player.

India’s 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 owner’s 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 InfrastructureTransportation 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, non-delivery 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 : Public–Private 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 fund—one time or deferred grant—provided

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 & PPPSl No

Type of Agreement/ Models

Funding Consultant Executing Agency

Remarks

1 Construction Supervision (SQC-Supervision & Quality Control

NHAI/ NHDP, Centre & State, 100%

100 % Control for Technical & Contractual Obligations

Contractor

(No By Passing of Consultant)

Client- DPR-Bids-

Contractor- Consultant- Client

2 BOT (Build Operate Transfer)

PPP

30% + 70% (Equity sharing+ Annuity Models)

-RFIs– 30%

-Reviews

-Recommendations

-Consultants

-Funding-50%

-Known as IE

-Design

-Construction

-Contract Management

-Finance

Ownership

with Client,

Feasibility Studies &

Traffic Census etc

3 BOOT (Build Own Operate Transfer

As applicable Inbuilt/ Consultancy

PSUs

Private Sector Nuclear Projects

Classification of Road/Infrastructure Contracts

Sl No

Type of Agreement/ Models

Funding Consultant Executing Agency

Remarks

4 BOO (Build Own Operate)

As applicable

Not Obligatory Power & Tele Sectors

5 BOOST (BOO + Share Transfer)

Risk Sharing Management & Gradual Transfer of Assets

6 BOLT (Build Own Lease Transfer)

Govt/PSU Passing on Operations & Maintenance to Private Players

Transfer of Assets against Lease Rents, Power Sector etc

7 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

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

INDIAN POWER SECTOR : THE BUSINESS 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

REFORMS SO FAR :

Energy Consumption Scenario

India energy Installed Capacity

India Energy Consumption Matrix

53%

23%

2%3%

8%

11%Coal

Hydro

Nuclear

Oil

RES

Gas

Installed Capacity as on 31.10.10Installed Capacity as on 31.10.10Region Hydro Thermal Nuclear R.E.S

(MNRE)

Total

Coal Gas Diesel Total

Northern 13310.75 20062.50 3563.26 12.99 23638.75 1180.0 1856.37 39985.87

Western 7447.50 27015.50 8143.81 17.48 35176.79 1840.0 4020.62 48484.91

Southern 11107.03 17822.50 4159.78 939.3 22921.60 1100.0 6983.7 42112.33

Eastern 3904.12 16395.38 190.00 17.20 16602.58 0.00 272.41 20779.11

NEastern 1116.00 60.00 766.00 142.74 968.74 0.00 171.00 2255.74

Islands 0.00 0.00 0.00 70.02 0.00 0.00 6.10 76.13

All India 36885.40 81355.88 16822.8 1199.7 98378.48 4120 13310.2 153694.09

Installed Capacity as on 31.10.10Installed Capacity as on 31.10.10

Sector Hydro Thermal Nuclear Wind Total

Coal Gas Diesel Total

All 15627.0 52850.0 6843.4 0.0 59693.4 3380.0 0.0 78700.4

• Actual Power Supply PositionActual Power Supply PositionPeriod Peak

Demand (MW)

Peak Met (MW)

Peak Deficit/ Surplus (MW)

Peak Deficit/ Surplus (%)

Energy Reqmt (MU)

Energy Availa-bility (MU)

Energy Deficit/ Surplus (MU)

Energy Deficit/ Surplus

Oct 09 115113 101183 -13930 -12.1 69265 62736 -6529 -9.4

• Capacity Addition During 11Capacity Addition During 11thth Plan Plan

• Likely Power Supply Position at the End of 2011-12Likely Power Supply Position at the End of 2011-12

Period Peak Demand (MW)

Peak Met (MW)

Peak Deficit/ Surplus (MW)

Peak Deficit/ Surplus (%)

Energy Reqmt (MU)

Energy Availa-bility (MU)

Energy Deficit/ Surplus (MU)

Energy Deficit/ Surplus

2011-12 152746 145583 -7163 -4.7 968659 958004 -10655 -1.1

Installed Capacity as on 31.10.10Installed Capacity as on 31.10.10Region Hydro Thermal Nuclear R.E.S

(MNRE)

Total

Coal Gas Diesel Total

Northern 13310.75 20062.50 3563.26 12.99 23638.75 1180.0 1856.37 39985.87

Western 7447.50 27015.50 8143.81 17.48 35176.79 1840.0 4020.62 48484.91

Southern 11107.03 17822.50 4159.78 939.3 22921.60 1100.0 6983.7 42112.33

Eastern 3904.12 16395.38 190.00 17.20 16602.58 0.00 272.41 20779.11

NEastern 1116.00 60.00 766.00 142.74 968.74 0.00 171.00 2255.74

Islands 0.00 0.00 0.00 70.02 0.00 0.00 6.10 76.13

All India 36885.40 81355.88 16822.8 1199.7 98378.48 4120 13310.2 153694.09

Installed Capacity as on 31.10.10Installed Capacity as on 31.10.10States Hydro Thermal Nuclear R.E.S Total

Coal Gas Diesel Total

Chandigarh 46.74 27.09 15.32 0.0 42.41 4.84 0.0 93.99

Delhi 581.62 2346.96 808.01 0.0 3154.97 47.08 0.0 3783.67

Haryana 1327.68 2535.49 103.70 3.92 2643.11 76.16 68.7 4115.65

H.P. 1539.94 118.30 61.88 0.13 180.31 14.08 185.1 1919.45

J&K 1480.53 263.70 304.14 8.94 576.78 68.00 111.83 2351.5

Punjab 2962.89 3208.19 263.92 0.0 3472.11 151.04 251.47 6837.51

Rajasthan 1454.80 4024.48 665.03 0.0 4689.51 469 726.3 7339.61

U.P. 1597.42 6563.84 549.97 0.0 7113.81 203.72 402.98 9317.93

Uttrakhand 1919.18 261.26 69.35 0.0 330.61 16.28 109.97 2376.04

Chattisgarh 120.00 4083.00 0.0 0.0 4083.0 47.52 174.15 4424.67

Gujrat 772.00 6678.89 3894.49 17.48 10590.86 559.32 1397.50 13319.68

M.P. 3223.6 4282.1 257.18 0 4539.28 273.24 262.71 8298.89

Installed Capacity as on 31.10.10Installed Capacity as on 31.10.10States Hydro Thermal Nuclear R.E.S Total

Coal Gas Diesel Total

Maharashtra 3331.84 10703.05 3715.93 0.0 14418.98 690.14 2156.21 20597.17

Goa 0.0 277.03 48.00 0.0 325.03 25.80 30.05 380.88

D&D 0.0 19.04 4.20 0 23.24 7.38 0.0 30.62

D&N Havaili 0.0 22.04 27.10 0.0 49.14 8.46 0.0 57.60

A.P. 3617.53 6259.88 2347.40 36.80 8644.08 214.28 668.66 13144.55

Karnataka 3599.80 3902.67 220.00 234.42 4357.09 195.36 1841.34 9993.59

Kerala 1781.50 765.38 533.58 256.44 1555.40 78.10 119.04 3534.04

T.N. 2108.20 5519.81 1026.30 411.66 6957.77 478.50 4354.64 13899.11

P. Chury 0 207.01 32.50 0.02 239.51 16.28 0.0 255.81

D.V.C 193.26 3063.10 90.00 0.0 3153.10 0.0 0.0 3346.36

Bihar 129.43 1661.70 0.0 0.0 1661.70 0.0 50.40 1841.53

Jharkhand 200.93 1737.88 0.0 0.0 1737.88 0.0 4.05 1942.86

Installed Capacity as on 31.10.10Installed Capacity as on 31.10.10States Hydro Thermal Nuclear R.E.S Total

Coal Gas Diesel Total

Orissa 2188.93 1828.10 0.0 0.0 1828.10 0.0 32.30 4049.33

Sikkim 75.27 68.10 0.0 5.0 73.10 0.0 41.11 189.48

W. Bengal 1116.30 6756.34 100.0 12.20 6868.54 0.0 144.55 8129.39

Arp.P 97.57 0.0 21.05 15.88 36.93 0.0 45.26 179.76

Assam 429.7 60.00 441.32 20.69 522.01 0.0 27.11 978.84

Manipur 80.98 0.0 25.96 45.41 71.37 0.0 5.45 157.80

Meghalya 230.58 0.0 25.96 2.05 28.01 0.0 31.03 289.62

Mizoram 34.31 0.0 16.28 51.86 68.14 0.0 17.47 119.92

Nagaland 53.32 0.0 19.19 2.00 21.19 0.0 28.67 103.18

Tripura 62.37 0.0 160.84 4.85 465.69 0.0 16.01 244.07

A&N Island 0.0 0.0 60.05 60 0.0 0.0 5.3 65.40

Lakshdeep 0.0 0.0 9.97 9.97 0.0 0.0 0.76 10.73

States Likely to be Surplus in Power at the States Likely to be Surplus in Power at the end of 11end of 11thth Plan Considering Capacity Plan Considering Capacity

Addition of 74964 MWAddition of 74964 MW

Sl Sl NoNo

StateState Surplus CapacitySurplus CapacityPeak (MW)Peak (MW) Energy (MU)Energy (MU)

11 Himachal PradeshHimachal Pradesh 14721472 46094609

22 Jammu & KashmirJammu & Kashmir 188188 21182118

33 UttrakhandUttrakhand 772772 43444344

44 DelhiDelhi 20232023 2334423344

55 OrissaOrissa 898898 34363436

66 West BengalWest Bengal 109109 1138711387

77 SikkimSikkim 12141214 31373137

88 DVCDVC 16461646 1561015610

99 Arunachal PradeshArunachal Pradesh 4545 539539

1010 MizoramMizoram 66 234234

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 FUTUREPLANS 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 2012Supply of reliable & quality power at

reasonable ratesPer capita availability of electricity to be

increased to over 1000 units by 2012Minimum lifeline consumption of 1 unit/

household/ day by 2012Financial turnaround & commercial viability of

electricity sectorProtection of consumers’ interests

Tariff Policy - 2006AIMS & OBJECTIVES

Tariff Policy: Ensure availability of electricity –

reasonable & competitive rates Ensure financial viability & attract

investments Promote transparency, consistency &

predictability in regulatory approachesminimise perceptions of regulatory risks

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

Tariff policy elaborates tariff determination - u/s 62 & 63

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 PowerNuclear Power As of now 1.5 - 2% As of now 1.5 - 2% Installed capacity – 4120 MWInstalled capacity – 4120 MW Nuclear power option has major Nuclear power option has major

issues with Nuclear Safety, Waste Mgt issues with Nuclear Safety, Waste Mgt & Disposal Policies, being a Radio & Disposal Policies, being a Radio Active MaterialActive Material

R & D Organisation, better Technical R & D Organisation, better Technical Know how IAEA guidelines Know how IAEA guidelines

Dependence on Nuclear Fuel from Dependence on Nuclear Fuel from Foreign Countries Foreign Countries

Developing Nuclear Power OptionDeveloping Nuclear Power Option

Government/national commitment Government/national commitment National participation in nuclear power National participation in nuclear power

plant projectsplant projects Environmental aspects (site specific) Environmental aspects (site specific) Financing Financing Safety Measures, since high risk optionSafety Measures, since high risk option International treaties & agreements, nuclear International treaties & agreements, nuclear

fuel cycle.fuel cycle. Radioactive waste mgt, decommissioningRadioactive waste mgt, decommissioning Public acceptancePublic acceptance

Nuclear EnergyNuclear Energy Nuclear Fission Nuclear Fission

Involves splitting an atom of uranious nucleus into two smaller Involves splitting an atom of uranious nucleus into two smaller nuclei by adding a neutron & thereby relasing energy mostly as nuclei by adding a neutron & thereby relasing energy mostly as heatheat

2-3 Nutrons are emitted in splitting process2-3 Nutrons are emitted in splitting process Each emitted Neutron when slow down causes another nucleus of Each emitted Neutron when slow down causes another nucleus of

uranium split & releases energy uranium split & releases energy A continous such reaction of splitting the nucleus is called fission A continous such reaction of splitting the nucleus is called fission

processprocess

Nuclear Fusion Nuclear Fusion This is the process of forcing & combining together two light This is the process of forcing & combining together two light

atoms to make a heavier oneatoms to make a heavier one The fusion process create much more heat than fisionThe fusion process create much more heat than fision A hydrogen atom consists one proton & one electron A hydrogen atom consists one proton & one electron Two hydrogen atoms are united thus giving lot of heatTwo hydrogen atoms are united thus giving lot of heat The two heavy hydrogen atoms, isotopes when made to collide at The two heavy hydrogen atoms, isotopes when made to collide at

tremendous speed will generate the heat almost 30 million times tremendous speed will generate the heat almost 30 million times to fision process, thus gives an intensity of a Hydrogen Bombto fision process, thus gives an intensity of a Hydrogen Bomb

Nuclear ReactorNuclear Reactor Nuclear Fission Nuclear Fission Involves splitting an atom of uranious Involves splitting an atom of uranious

nucleus into two smaller nuclei by adding a nucleus into two smaller nuclei by adding a neutron & thereby releasing energy mostly neutron & thereby releasing energy mostly as heatas heat

2-3 Nutrons are emitted in splitting process2-3 Nutrons are emitted in splitting process Each emitted Neutron when slow down Each emitted Neutron when slow down

causes another nucleus of uranium split & causes another nucleus of uranium split & releases energy releases energy

A continous such reaction of splitting the A continous such reaction of splitting the nucleus is called fission processnucleus is called fission process

Nuclear FuelNuclear Fuel Uranium & PlutoniumUranium & Plutonium Natural Uranium consists of two Isotopes U 235 & Natural Uranium consists of two Isotopes U 235 &

U 238, Ratio 1:139U 238, Ratio 1:139 Plutonium 239 (obtained from Uranium 238)Plutonium 239 (obtained from Uranium 238) Uranium 233, obtained from Uranium 23 Uranium 233, obtained from Uranium 23 U 235, Plutonium 239 & Uranium 233 called U 235, Plutonium 239 & Uranium 233 called

Fissile MaterialFissile Material Uranium 238 & U 232 called Fertile MaterialUranium 238 & U 232 called Fertile Material Encriched Uranium, is nothing but Natural Encriched Uranium, is nothing but Natural

uranium in which concentration of isotope uranium in which concentration of isotope uranium 235 has been increased, used as Fuel in uranium 235 has been increased, used as Fuel in Nuclear Power PlantNuclear Power Plant

Nuclear Power PlantNuclear Power Plant Comparative StateComparative State

US US - 109- 109 UKUK - 37- 37 UkrainUkrain - 15- 15 RussiaRussia - 28- 28 JapanJapan - 44- 44 FranceFrance - 58- 58 CanadaCanada - 21- 21 IndiaIndia - 09 (05 Under - 09 (05 Under

Construction)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 Position- Peak 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 YOUTHANK YOU