The Energy Crisis (2)

8/8/2019 The Energy Crisis (2)

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The Energy Crisis:

Future Directions for Indias Energy Policy

Systems Research [email protected]

Pune, August 2004

1.25 MW Wind Capacity Installed in Tamil Nadu

Prepared by:

Gireeja Ranade


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Objective of this Presentation

As Indias oil consumption is increasing, world oil

supply will soon stabilise and then start dwindling

while oil prices are bound to rise further

For economic as well as environmental reasons weneed to shift to alternative non-polluting sources

of energy.

The aim of this presentation is to raise questions

and provoke discussion regarding the future ofIndias energy policy and to consider various

possible solutions


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Sections of the Presentation1. Global facts on Oil2. Our Oil Obsession

3. World Oil S

upply

4. World Oil Demand

5. Indias Energy Demand

6. The Oil Peak7. Peak Oil

8. Contradicting Optimistic Views

9. Oil Economy

10. Future Exploration11. Future Extraction

12. Illustrating Oil Extraction process

13. ERoEI

14. Future alternatives15. Non-conventional Oil to the Rescue?

16. After Oil Natural Gas?

17. SOS The Energy Emergency!

The Way to a New Tomorrow1. Sorry There are Limits to Supply

2. Reducing Our Requirements

3. The Population Predicament 1

4. The Population Predicament 2

5. Tackle the Transport Industry

24. Tackle the Transport Industry Urban 1

25. Tackle the Transport Industry Urban 2

26. Energy Reduction in Industry

27. GNP reductions after Oil Price rise

28. The transition toAlternative Energy Sources

29. Electricity From Renewable Sources

30. More Renewable Energy

31. Hydrogen Not a Feasible Fuel

32. WattsFrom the Winds 1

33. WattsFrom the Winds 2

34. Super Solar Power 1

35. Super Solar Power 2

36. Renewable Energy Policy

Formulating a Strategy 124. Formulating a Strategy 2

25. Formulating a Strategys 3



28. The Transition29. A Smooth Transition? 1

30. A Smooth Transition? 2

31. A Smooth Transition? 3

32. References 1

33. References 2


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OurOilObsession

Our civilization has evolved based on an abundant

supply of cheap oil

The transportation industry and agricultural

fertilizers heavily depend on oil The current world oil production and consumption

rates are almost equal

World oil consumption grew 2.9% from2003 to

2004 (projection from Quarter 1, IEA, 2004)

Oil demand is projected to rise to 121 million

barrels per day by 2025 (International Energy Outlook, EIA,2004)


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5Source: EIA, 2004

World Oil Supply

0.00

10.0020.00

30.00

40.00

50.0060.00

70.00

80.00

90.00

2000 2001 2002 2003

MillionBarrelsp

erDay

Total OECD

Total OPEC

Former USSR

China

Other Non-OECD

Total Supply


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6Source: IEA, 2004

World Oil Demand

0

10

20

30

40

5060

70

80

90

2001 2002 2003 2004

Mi

llionBarrelsperDay

Brazil

India

China

Europe (OECD)

US

World

World Demand

2001-2004

Growth Rate:

1.8 %p.a.


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Indias Energy Demand

From2001 2004, Indias oil

demand has been growing by

2.68% but it will grow by

6.33% from2003 2004

(projection from

Qtr 1, IEA

,2004)

Oil and gas represent 38% of

Indias energy consumption

(IBEF, 2004)

By 2010, India will be the

fourth largest consumer of oil

and gas in the world (IBEF,2004)

(In fact, Chinas demand growth is

even more - disastrously - rapid)

Oil Demand

0

1

2

3

4

56

7

2001 2002 2003 2004

Summary of Global Oil Demand

(Mb/day)

Mb/d China

India


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PeakOil

ASPO (Association for the Study of Peak Oil and Gas) predicts

world oil production will peak around 2007, asshown above.

PRO UCTION


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ContradictingOptimistic Views

The Energy Crisis is often overlooked based on thefollowing misconceptions:

1. Higher prices will bring in larger investments, which will

lead to more production2. Rise in prices will lower consumption

3. Oil shale and tarsands will replace conventional oil

4. Fudging of reported reserves by oil companies and countriesfor political/economic reasons

5. Many previous crisis predictions proved wrong this onewill too


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Oil Economy

The world market can be said to depend on OPEC almostentirely since it has 77% of the current world oil reserves

The day-to-day market prices of oil reflect many factors like thecurrent stocks, shipments, economic situation, speculativeinvestment, etc. and not so much the size of reserves of oil

We have now reached a stage in the exploitation of the earthwhere trying harder to produce more oil can have only limitedresults

Oil consumption on a short-term basis does not depend on theprice of oil, as is the case for other goods. There is a large time

lag before consumersshift to alternatives or reduce demand

In fact, some experts believe that a rise in oil pricesincreasesdemand on a short term basis. E.g Oil and natural gas demandgrowth rates in China have been in the range of 7-15% per yearsince 1999, despite the tripling of oil pricessince then


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Future Exploration

The

major oil field

sin the world have already beendiscovered the largest fields are always found first

Except forsome parts of the China Sea and of the

western desert in Iraq, major regions in the world have

been fully explored. Advances in geological technology allow us to predict

promising areas for oil we now know reasonably well

where new oil will be found

Oil in the Caspian Sea has high sulfur content which

corrodes the pipes and is expensive to extract and

refine. Caspian Sea oil is not likely to become a

significant factor in the world oil scenario.


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Future Extraction

The best known extraction techniques are already in use in manyof the giant fields in the Middle East

Increase in the fraction of Oil-in-Place which is actually

recovered will require diligent field management, technicalknowhow, motivation and discipline, as well as capitalinvestment, which may not always be feasible

Oil which can be recovered using these techniques could give usonly a breathing break, e.g. advanced recovery fromIndian

fields could amount to 4 MMM bbl more (Narayanan, 1999). Atcurrent Indian consumption rates, this would give us about 4yearsmore supply, though at world consumption rates, this willlast for less than 2months


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ERoEI

Oil is important to us as a source ofenergy; it is not amineral resource

A certain amount of energy must be invested to recoveroil from wells

ERoEI (Energy Returned on Energy Invested) mustbe greater-than-one for the extraction to be useful

Oil is not like gold the energy invested to extract thegold is irrelevant

If enhanced extraction requiresmore energy input thanthe output oil contains, clearly, that oil will neverbeextracted


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Non-conventionalOil to the Rescue?

Non-conventional oil produced from oil shale and tar

sandsmay become economical as oil pricesskyrocket

Canada and Russia may have 300 billion bbl of tar

sands and shale oil. Venezuela has 1.2 trillion bbl of oil(mixed with heavy metals and sulfur) (Campbell, 1998)

Extraction from oil shale and tarsands isslow,

expensive, heavily polluting and resource- (e.g. water)

and time-consuming It may not be possible to achieve the necessary rates of

production to meet demand by processing oil shale /

tar-sands, even when it is economical


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AfterOil Natural Gas?

Natural Gas cannot be a permanent replacement for oil

Use of natural gas in daily life, (e.g. as transport fuel)requires extensive infrastructure build-up

The production of natural gas will peak between 2020 -2030 as well, hence it is only a temporary solution(Goodstein)

Delhi hasshifted to running all its public transportationbuses on gas, greatly reducing the levels of air pollution

India does not have large gas reserves. The best optionfor India is to obtain gas from Iran, but a gas pipelineacross Baluchistan (Pakistan) may have significantsecurity liabilities


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SOS The Energy Emergency!

We seem to be running out of the cheap

sources of energy.

No solution is immediately apparent

The date of the oil peak is widely debated in

geological circles around the world.

We need to refocus our attention to the more

practical question ofWhat next? ratherthan debating When?


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The Way to a New Tomorrow

Three approaches to solution

Increase supply (Scientists/Technicians/Managers)

Reduce demand (Economists / Policy makers)

Alternative sources (Scientists and Economists) Efforts are required in all three arenas


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Sorry There are limits to

Supply

Geological, technical and economic

constraints limit supply growth

With advanced technology, we are aware ofmost of

the new discoveries which will be made

Increases in the ratio ofrecoveredoil to Oil-in-Placeare also limited; optimistic predictions (ofsuchincreases) should be viewed skeptically

Possibility of production improvements fromexploration and extraction are useful but limited

Increase in supply will only postpone, but notalleviate the problem.


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ReducingOur Requirements

Curbing demand and wanton use of energy

resources is a much more effective and practical

strategy

Energy conservation effortsmust be taken up byGovernment bodies and private agencies - on a

large scale. Very large savings are possible.

Energy pricesshould be graded to punish wasteful

behavior and reward efficiency

The three major areas to attack are

Energy reduction in industry

in Transport -- by the Pop ulation


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The Population Predicament 1

India has a comparatively low per

capita energy consumption of 1.5

barrels/capita-year, but it is increasing(Europe-Japan-US consume 12-25 barrels/capita-year,

McKillop, 2004)

Large population growth will itself

cause an increase in energy

consumption

World population grew 0.33% fasterfrom 1979-1999 than did world energy

production


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The Population Predicament 2

Policies to reduce population could be oriented

towards high energy consumption groups

Indian society is based on large families with many

children. Thismakes effectively implementing abirth control policy much harder.

A one child policy must considersociological and

cultural issues.

b u t

Efforts to reduce population will go a long way

towards reducing demand for energy


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Tackle the Transport Industry

90% of the transport industry is fueled by oil Improve public transportation quality of vehicles

and comfort of journey - use specialised bus-bodies

for different services.

Major obstacle Convenience of private vehicle v/s

that of public transportation

Encourage railway use for long distance goods

transport. Trains running on electricity are more

environment friendly as well asmore energy

efficient, since the frictional force of

steel on steel is the lowest


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Tackle the Transport Industry Urban 1

Unified ticket/pass valid along all routes could makethe journey more comfortable and viable

Have a shuttle service in residential areas to enablethe commute to busstation

Have different types of bus routesserving differentcustomers

E.g. Point-to-point Express buses for the businesstraveler at peak hours; but also frequent buses with

more stops forshoppers / casual travelers Gradation in quality of buses a/c buses, luxury

buses, regular buses etc, to suit the convenience ofthe passenger


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Tackle the Transport Industry Urban 2

Private contractors could operate large bus

stations, with facilities like bookstores, cafs,

restaurantsand parking

Involve employers to encourage use of public

transport (e.g. Bus-passes through employer etc)

Provide late night service and early morning

services

Etcetera


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Energy Reduction in Industry

Indian Industrial associations have had energy-

conservation programmes for a long time.

There are many energy-efficiency engineers

Now we need a Crash Programme, with many

more incentives and bonuses for energy reductions in

processes, product design and product user -- and

penalties for failure.

Japan hasshown that it is possible to drastically

improve its GNP:Energy ratio ..


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GNP reductions afterOil price rises

Although Japan imports virtually all of its oil, rising crude

prices do not hurt asmuch as they have in the past because

Japan's economy has now been made less oil-dependent.

Japan's dependence on oil for its energy needs, which

stood at 77% around the time of the first oil crisis of 1973,

has now dropped below 49%, according to Japan'sAgency forNatural Resources and Energy.

This decline reflects the progress ofefforts in industry

to reduce the amount of oil and energy used. As a direct

result of these efforts ...

For a $10 increase in oil price, according to the IMF (2004),

Japans GNP would lose 0.4%,. By way of contrast,

Chinas GNP would lose 0.8%;

The Philippines GNP would lose 1.6 %

Indias GNP would lose 1.0 %


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The transition to Alternative

Energy Sources

Demand can only be reduced in limited amounts

To sustain our population, we must make an

effectiveshift toward

salternative

s, and preferablyto renewable sources of energy

Asmooth transition to the new sources of energy

is also crucial and the importance of thismay be

overlooked. We need to start this transitionmechanismsoon, even if the oil peakmay not be

immediate


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Electricity From Renewable Sources

Maximal generation of electricity from renewablesources, like wind and hydro, on a large scale, is onedirection India could move toward in the post-peak era.

Wind farms are still very underdeveloped in India, theycan be linked to grids based on long distance

transmission of electricity at HV-DC which has verylow losses

Electricity is an environmentally friendly option, as itsuse does not result in any emissions

Electric vehicles could become economical with risingoil prices (Efficiencies of 50% are envisaged assuming renewablesources, battery losses of20%, regenerative braking, etc Rechsteiner,2004)

Hydel Power has been explored in our country; the

potential in Nepal has been explored, but not yet tapped


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More Renewable Energy

Energy from biomass and household use ofsolarenergy can effectively be implemented at a more locallevel

Biomass today generates about 468 MW (MNES, 2003.)

Biomass potential could be about 19,500 MW ofwhich 16,000 MW could be grid quality power(MNES,2003.)

Solar power for purposes of cooking and drying hasbeen used formany years in our country.

A box solar cooker forsmall families can save 3-4LPG cylinders / year. Larger cookers for 40-50 peoplecan save up to 30 LPG cylinders / year(MNES, 2003.)


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Hydrogen Not a Feasible Fuel Hydrogen is not a means to generate energy it is an

energy carrier Conversion of energy from one form to another always

involves a loss of energy

The breakdown of water to obtain hydrogen for fuel

cells and convert it to electricity will necessarily resultin a loss of net energy; hydrogen will always be moreexpensive perunit energy than the energy source usedto produce it (Rechsteiner, 2004)

Many friends of hydrogen fuel cells fail to consider allthe processes involved compression, liquefaction,transport, storage, re-expansion etc, while calculatingthe practicality of hydrogen fuel (Rechsteiner, 2004)


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Watts From the Winds 1 Indias wind power potential has been assessed

to be 45,000 MW but the installed capacityis only 1,700 MW (MNES, 2003)

Even so, India is the fifth largest wind power-producing nation in the world (MNES, 2003)

Locations having annual mean power density of150 MW at 30 meter height can be consideredsuitable for projects(Bakthavatsalam, IREDA, 2000)

Wind energy will prove to be one of the main

sources of renewable energy in the future The ERoEI for wind energy is very high in

the range 80 100 (Wind Power Note, 1997)

Despite high initial energy and monetary investment, the

zero fuel costsmake them economical on a life-cycle basis


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Watts From the Winds 2 A 1MW wind farm required, in 2000, an investment of

USD 1m

illion & annual

maintenance co

st of USD15,000 with a payback period of 5-6 years and FIRR

(Internal rate of return) of29% (Bakthavatsalam, IREDA, 2000); theeconomics are, in fact, improving every day with largergenerators(currently upto 3 MW perunit!)

Wind farms have short building times of2-20 weeks(Rechsteiner, 2004)

Other advantages include no emissions, no fuel ordisposal costs and low maintenance requirement

Wind energy is one of the largest contenders to buildour energy future we need to realize this and act!

Fluctuation in power output with wind-speed requireseither a largish grid or a mechanism (e.g. pumped

hydro) to store energy


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SuperSolar Power 1

India has the advantage of being atropical country which receivesmore

than 5,000 trillion kWh solar energy

per year. The main obstacle in utilizing solar power is the

high technology cost involved and low energy

density

Solar energy can be exploited using two methods:

Solar photovoltaic

Solar thermal


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SuperSolar Power 2

Solar water heaters are

being commercialized

and the pay back period

varies from26 years(MNES, 2003)

Solar Photovoltaic power

projects of an aggregate

of2.5MW have beenestablished in the country(MNES, 2003)

2500 lpd Solar Water Heating System at Teachers'

Training Center at Bellary, Karnataka


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Renewable Energy Policy Renewable energy currently accounts for3700MW, about

3.5% of total installed capacity from all sources (MNES,2003)

Solar power development has the largest budget of allrenewable energy sources

The budget for wind energy development ismuch smaller incomparison. The potential for large scale power generationfrom wind appears to be much higher than that ofsolar, andis also less capital intensive. Wind energy deserves more

attention. The current policy seems directed towards increasing use of

renewable energy sources for remote and rural areas wheregrid power is not available. In addition to this, we need tofocus now on replacingelectricity from fossil fuels bysolar and wind on a lar erscale


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Formulating a Strategy 1

We are not sure when oil is going to peak we cannot predict

the oil peak accurately because ofuncertainty of data and

technique -- but it does not matter. We need to start action NOW.

There are three aspects to consider in our energy outlook, and

each must be coordinated with the other two for the effort to be

successful. Isolated implementation will be ineffective. These

aspects are:

Who is involved?

Increase of supply (Scientists / Technicians / Managers)

Reduction of Demand (Economists and Policy Makers)

Alternative energy sources (Scientists andEconomists)


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We should endeavor to increase supply; but not relyon any significant increase, and plan for the worst

Our growing Population, the Transport sector and

Industry have the most significant impact on our

energy consumption and improvements here will

have far-reaching effects

Tax and Incentive Policy decisions to encourage

conservation and check carelessnessshould beimplemented

Control ofsupply and demand has limited scope;

therefore - implementation of alternative sources

is imperative for our survival


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Research and Development money may be spent onstudying, researching and evaluating various new

possibilities, such asmethane hydrates and hydrogen

fuel cells, to determine their potential, but

Given that India is a developing country with limitedresources, and many needs for investment, we must be

very conservative when making decisions about large

operationalinvestments in such new technologies

India should channel operational investments towards

more proven, but under-exploited, energy resources

such as wind energy, and proven techniques of

improved oil recovery from existing wells


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Renewables, Renewables, RENEWABLES!!!They will help us answer all the questions aboutthe future of energy

Localized applications Solar and Biomass

Large scale applications Wind, Hydro, Solar

Policy is currently focused on use of renewableswhere conventional powersupply does not reach,or is impractical. We need to start pushing forrenewables to replace other powersources

Wind Energy is the most promising Non-polluting, great potential, economically feasible


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Lastly, but not the least, we should also direct

attention to facilitating a smooth transition

between the current energy sources and the next

generation of energyso

urce

s.

Thi

stran

sitionperiod could be as long as20 years.

Effective planning and diligent

application will take us

towards a brighttomorrow


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ASmooth Transition? 1

Any transition to alternative energy sources will be a massiveworld wide event comparable to the extinction of dinosaurs,or to the dot-com era. It will involve changes in lifestyle foreveryone

Therefore, India needs a unified energy policy. There is today

a lack of coordination between the variousministries dealingwith Coal and Hydro, Electricity, Petroleum, Non-conventional energy, and Scientific energy research.

Systems (a consultation process? an organization?) must beestablished to coordinate their policies and develop a unified

energy policy for India. Such a policy should take intoaccount petroleum depletion, conservation efforts, and thetransition to renewable sources, as well as other relevantissues, such aspollution-control and global warming(which constrain many options, such asusing more Coal).


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ASmooth Transition? 2 The transition to the next generation of energy includes

-- Political recognition, at the highest level, of the importance of this transition

Accumulation of (our own) reserves of extractable oil through technologicalinnovation

Time-targeted set up of plants for alternative and renewable energy

Time-targeted and sector-wise reduction in our petroleum consumption and

CO2 generation (which leads to Global Warming) Anticipation of geo-political and economic changes that will occur in the world

as related to energy issues

Identification ofspecific sectors where reforms need to be implemented

Pr udent decision making regarding investment in research and development innewer energy sources (e.g. methane hydrates)

Implementation of effective and transparent politico-economic policies toencourage the setting up and profitable survival -- of renewable power plants,such as wind farms, micro-hydel power plants, solar thermal: covering issuessuch assubsidies v/s buyback v/s tax rebates v/ssimplified licensing, as wellas other incentives, and administrative facilitation.


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ASmooth Transition? 3

The transitional changesmust be gradual and will involve longterm planning and policy, starting from today

India as a developing country may have an advantage overmore developed countries; we have the opportunity to set up

infrastr

uct

ure with a broader o

utlook; o

ur econo

my i

snot yet a

slocked into petroleum assome others - and has a low percapita

consumption.

Renewable sources of energy are preferable in many ways tothe use of fossil fuels, we dont need to wait till we run out of

oil to change over Global policy needs to be considered so that we can continue

importing oil till we can sustain ourselves with other energysources thus, collaboration with other nations to introduceglobal rationing is definitely an idea to consider


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References 1

Ministry of Non-ConventionalEnergy Sources, Annual Report 2003, India Notes on Demands for Grants, 2001-2002, MNES, India

WindEnergy Development Incentives in Selected Countries, Louise Guey-Lee, EIA

WindEnergy in India, V. Bakthavatsalam, Indian Renewable Energy Development AgencyLtd., India

Power Generation from WindEnergy in India, www.techo-preneur.net

Potential for use of renewable sources of energy in Asia and their cost effectiveness in air

pollution abatement

o Tata Energy Research Institute, India

o Energy Research Institute, China

o Wageningen Agricultural University, The Netherlands

o IIASA, Austria

Wind Power: experiences and future direction, TERI, India www.teri.org

Viable Alternatives, Arcot Ramchandran, TERI, India Ten Steps to a SustainableEnergy Future, Rudolf [email protected]

The Association for Study of Peak Oil and Gas, Newsletter42, June 2004 www.peakoil.net

Energy Information Administration (EIA), India Report, March 2003www.eia.doe.gov

EIA website data, World Oil Supply 2000-2004

TheEnd of Cheap Oil, Colin J. Campbell & Jean H. Laherrre, Scientific American, Mar 98


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References 2

Nationmaster.com Worldoil.com

Radovic Oil, 1999

Oil market report, IEA, June 2004 www.oilmarketreport.org

Oil Strategy andEnergyEconomic Considerations for India, Andrew McKillop, March 2004

IndianEnergy Strategy and Central Asia, Maj. Gen S.C.N Jatar

Interview Dr. Colin Campbell, Petroleum Geologist, Dec 2002www.peakoil.net The Future ofEnergy, GuinnessAtkinson, 2004

Indias Quest forEnergy, India Brand Equity Foundation, 2004

Challenges and Opportunities for Re-development of Mature Fields, Dr. Kottilil Narayanan,Petrotech, 1999

Energy, Technology and Climate: Running Out of Oil, David Goodstein

ICFAI Questionnaire, Oil Shock v/s GlobalEconomy, Replies and Comments, Andrew

McKillop March, 2004

Energy Trends, Country Profiles, India 2000

Three World Oil Forecasts Predict Peak Oil Production, Richard C. Duncan, Institute onEnergy and Man

United States Geological Survey data

Predicting the World Oil Peak, Cavallo, April 2003

Asia

Tim

es

Online Ltd,Au

gus

t2004 www.ati

me

s.co

m

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The Energy Crisis (2)

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