ONGC holds largest share of hydrocarbon acreages in India

The energy crisis is looming large in India. It is a subject of discussion in every forum. ONGC tenders also create news.  The reasons are obvious. The performance of Indian economy depends on the supply of appropriate energy to appropriate places. After all, the performance of industries depends on the availability of energy. The government is finding ways to mitigate the situation.

ONGC is always on the spotlight because of ONGC projects. The company holds largest share of hydrocarbon acreages in India. It contributes over 79 percent of Indian’s oil and gas production. ONGC’s refining capacity is about 12 MMTPA. The public sector giant created a record of sorts by turning around Mangalore Refinery and Petrochemicals Limited from being a stretcher case for referral to BIFR to the BSE Top 30, within a year.

ONGC tenders also suggest more than the numbers. One can deduce a lot more from these documents. They point to the availability as well as demand-supply gap of energy in the market. It also tell who are in the fray to utilise the available opportunity.

ONGC reports further provide the macro-picture of the economy’s energy need, possible areas of growth as well as the deficient areas where attention is required. The reports also suggest the course of action the public sector giant is likely to take in future. ONGC also acknowledges its financial health and how it plans to grow further. 

Being an oil exploration company, ONGC projects are its core strength. The projects, the public sector giant undertakes, are diverse and varies from location to location. These projects require diverse manpower with varied expertise.

Multiple usage of PNG only way to ensure spread of CGD in India

Although NTPC tenders and captive coal blocks make news, the future of the City Gas Distribution (CGD), especially the Piped Natural Gas (PNG) is uncertain, even as the sector is attracting new players in associations inked by ONGC and OIL with BPCL and IOCL due to the lack of enough domestic gas availability and the increase in the price of RLNG. Currently, the two main players in the City Gas Distribution are Indraprastha Gas Limited (IGL) in Delhi and NCR (a joint venture between GAIL, Bharat Petroleum Corporation and the Government of National Capital territory) and Mahanagar Gas Limited (MGL) in Mumbai.

Compared to delay in completion of NTPC projects, the introduction of PNG for households and CNG for the transport as part of CGD was done quickly to address the rising pollution levels. In 1990s, two major pilot projects were launched in Delhi and Mumbai through these two joint venture companies to minimise the air pollution in these top metros.

Unlike the NTPC projects, the present scenario is different. Due to the lack of availability of domestic gas, the City Gas Distributors supply imported gas or RLNG (an expensive fuel compared to domestic gas) to the consumers across domestic households and various industries. Thus, the consumers in India, who mainly use gas for cooking purposes at homes, find the government subsidised LPG (Liquid Petroleum Gas) cheaper to PNG. The government itself is still analysing whether PNG is a viable fuel for Indian domestic households.

Moreover, LPG is also highly subsidised and the government would never withdraw the entire INR 300 subsidy to the LPG anytime soon, which makes it very competitive for PNG to make way to Indian homes. The absurdity of supplying PNG to domestic homes can be gauged from the fact that a company like IGL gets RLNG at Rs 23 per cubic meter and has to sell it at just Rs 16.85 per cubic meter, which is no way sustainable. It is likely that this would make as much if not less news like the NTPC tenders.

However, IGL, one of the major CGD players is initiating tie-ups with brown goods appliances manufacturers such as A. O. Smith, Kohler to make gas powered geysers, water heaters and generators. This step would promote the usage of gas. The government should also focus on captive coal blocks.

Energy sector is the key thrust area in the upcoming five year plan

Availability and access to energy are essential catalysts for economic growth all around the world. With an eye on rapid development growth of energy sector in India has always been crucial and strategic part of the 5 year plans of the country. Initially India’s 11th five year plan targeted adding power capacity to 78,000 MW, however the target was revised to 62,000 MW. According to energy experts India will even miss the target of setting up the additional power capacity of 62,000 MW by March 2012 by about 4000 MW. This deficit calls for making energy sector the key thrust area in the 12th five year plan.

The approach paper of the 12th plan released by the Planning Commission presents “sustainable growth” as its main theme. Indicating that sustainable development is government’s priority to counter challenges while pursuing energy. Inclusive growth is being pushed as the social theme for development.

The Approach paper for 12th five year plan sets a target of 1,00,000 MW capacity building against 50,000 MW proposed in 11th plan. Planning commission says that India will need to import around 250 million tonnes in 2017-18 after making optimistic assumptions about Coal India achieving this target. India further needs expansion of new NELP (New Expansion and Licensing Policy) blocks wherein the stable and cleaner production sharing contracts will incentivize exploration and encourage further investments. The expansion of LNG pipelines is another focus area.

Talking about “other energy sources” the proposed plan stresses on continuing nuclear power programme with the required safety measures. It also underlines that the solar mission is seriously underfunded. Moreover, the approach paper mentions the foreseen constraints in the energy sector in India, such as – the coal availability, undermined long term health of power sector with yearly losses of Rs 70,000 crores, hindrance in hydro power developments owing to delay in forest and environment clearance procedures and regulators being held back from pursuing justified tariff increases.

But before India could start moving ahead to achieve the target set for the 12th plan the shortfall of around 4000 MW needs to be catered to. This would not only increase the target of the 12th plan but would further add to the perpetual constraints in the energy sector. It is imperative to look for other energy options which are not capital intensive for new capacity addition and that could be implemented in a comparatively shorter time frame.