India

United States
Energy Information Administration

OIL NATURAL GAS COAL ELECTRICITY PROFILE

March 1996

India

India is important to world energy markets because it is one of the world's largest energy producers and consumers. While India contains large reserves of oil, natural gas, and coal, rising domestic energy demand will continue to make India a major force in world energy markets well into the next century. Also, India is examining alternative energy sources and is proceeding with an ambitious nuclear reactor program.

GENERAL BACKGROUND

India's government is currently in the midst of its largest corruption scandal since its independence. In mid-January 1996, charges were filed against three cabinet ministers and seven prominent politicians for taking 600 million rupees in bribes and kickbacks from illegal dealers in foreign currency. At the end of January 1996, the Indian Supreme Court ruled that all politicians, including Prime Minister P.V. Narasimha Rao, could be investigated to determine their complicity, if any, in the scandal. The corruption scandal resulted from a complex 1991 case in which police raided the estate of prominent New Delhi businessman Surendra Jain and found diaries detailing payments to politicians.

During 1995, Prime Minister Rao's 1991 reform package continued to have a positive impact on India's economic growth. The gross domestic product (GDP) growth rate, which averaged 4-5 percent between 1992 to 1994, is estimated at 6.3 percent in 1995. In 1995, India's strong industrial sector boosted annual gross domestic product (GDP) growth rates by an estimated 6.3 percent. Sustained annual GDP growth of over 6 percent is projected until 1998. Increased government borrowing has led to growth in the money supply. Consequently, inflation rates in 1995 remained at around 8.3 percent, above the government's target of 7 percent. In February 1996, the Indian rupee hit a two-year low against the U.S. dollar, with a rate of R37.30 per US$1 as compared to R31.4 per US$1 in 1993. Minister of Finance Manmohan Singh views the slide in the rupee's value as a natural correction which will boost the competitiveness of India's exports. However, India likely will continue to run a trade deficit, as industrial sector growth and increased consumer demand will spur increases in imported goods.

In December 1995, Minister of Finance Singh stated that India's economic reform process would continue, regardless of national elections results. In 1995, foreign investment was affected adversely by the Maharashtra state government's temporary cancellation in August of Enron Development Corporation's $2.8-billion Dabhol power plant deal. In January 1996, the Indian government decided to delay its privatization program until after the April 1996 national elections. The decision was made in light of weak stock market prices and means that revenues from asset sales will be only 2 percent of what was forecasted for 1995. The government's first public offering occurred in October 1995 and another originally was scheduled for last December.

OIL

Oil accounts for about one-third of India's total energy consumption. The majority of India's 5.8 billion barrels of oil reserves are located in the Bombay High, Upper Assam, Cambay, Krisha-Godavari, and Cauvery basins. Domestic oil production fell from 680,000 barrels per day (b/d) in 1989 to 543,000 b/d in 1993. Reasons for the decline in output included a lack of investment in exploration and development, poor reservoir management, and reliance on old Soviet-era equipment. However, increased investment and new fields have resulted in a rebound in oil ouput since 1993, from 585,000 b/d in 1994 and an estimated 710,000 b/d in 1995. Oil fields in Bombay High continue to account for the bulk of India's production, although, output from the basin has fallen recently, from 440,000 b/d in 1990 to around 250,000 b/d in 1995. India imported roughly half of its 1.5 million b/d domestic oil requirements in 1995. Oil imports came primarily from Saudi Arabia, Kuwait, Iran, Abu Dhabi, and Malaysia.

In an effort to increase domestic oil production and limit oil imports, India embarked upon an Accelerated Exploration Program (AEP) in 1993. The AEP originally proposed investing $23 billion in the oil sector between 1994 and 1996, and called for exploration of oil shales, deepwater drilling in fields up to 3,900 feet deep, development of coalbed methane, horizontal drilling, and implementation of enhanced oil recovery (EOR) projects. By 1998, the government optimistically hopes to increase the country's oil production to 890,000 b/d. Domestic oil demand is expected to reach 2 million b/d by 2000. Consequently, India's oil imports are expected to remain relatively constant at around 55-60 percent.

In 1995, the Indian government announced plans for a ninth upstream licensing round. Exploration acreage for offer will include 23 blocks held by state-owned Oil and Natural Gas Corporation (ONGC) and 5 blocks now licensed to state-owned Oil India Limited (OIL). In August 1995, blocks from the eighth bidding round were awarded to U.S.-based Samson International and Vaalco Energy.

In early 1994, Enron Corporation entered a profit-sharing agreement with India's Reliance Petroleum. Under this contract, Enron has undertaken development of India's largest upstream oil and gas projects. These comprise the 1.1-trillion cubic foot (Tcf) Mid and South Tapti fields as well as the offshore Mukhta and Panna fields, which have combined reserves of 175 billion barrels of oil and 250 billion cubic feet (Bcf) of gas. Also, ONGC is undertaking further development work at the offshore Neelam field, which has reserves of 460 million barrels of oil and 300 Bcf of gas. The Neelam field produced close to 80,000 b/d in 1995. The Indian oil industry is undergoing gradual privatization. In late 1995, however, further privatization efforts were postponed until the 1996/97 fiscal year and until after the April 1996 national elections. ONGC remains India's largest upstream oil company, with production of roughly 640,000 b/d of oil in 1995. Additionally, ONGC has extensive foreign holdings, including upstream operations in Egypt, Iraq, Tanzania, Vietnam, Thailand, Abu Dhabi, and Iran. In contrast, OIL accounted for about 75,000 b/d of national oil production in 1995. As limited corporations, ONGC and OIL are planning to invest $2.2 billion before 1997 in domestic exploration and production. The companies also are hoping to obtain another $2 billion by offering foreign investors large equity shares in new ventures.

Refining

In 1995, India's domestic oil demand rose over 9 percent, to almost 1.5 million b/d. This has necessitated an increase in the country's refining capacity through higher utilization rates, existing plant expansions, and new grassroots projects. In mid-1995, the state-owned Indian Oil Corporation (IOC) reported that capacity utilization in its six refineries was 103 percent in 1994. In late 1995, however, the supply problem was exacerbated by fires at refineries in Madras and Bombay. This led to higher product imports at higher prices, due to the rupee's depreciation during the last half of 1995. In order to slow the rise in refined product demand, the Indian government imposed a 10 percent tax on all products in November 1995.

In order to meet increasing domestic oil demand, India has embarked on an aggressive refinery expansion program with over 12 new projects underway. In November 1995, India's Foreign Investment Promotion Board approved a plan by Shell and Bharat Petroleum to construct a $770-million, 120,000-b/d refinery at Sultanpur in Uttar Pradesh. In September 1995, IOC and Kuwait Petroleum Corporation (KPC) signed a memorandum of understanding (MOU) to build a $1.3-billion, 120,000-b/d refinery in Orissa, in eastern India. The plant, which could be expanded to 200,000 b/d, is slated for completion by 2000.

Other planned projects include a $1.25-billion, 120,000-b/d refinery by Bharat Petroleum and Oman Oil Company at Bina in Madhya Pradesh, a $450-million, 96,000-b/d plant by Petro Energy at Pondicherry, a 60,000-b/d expansion of the 90,000-b/d Visakhapatnam refinery by Hindustan Petroleum, and two other expansion projects by IOC in West Bengal. Also of note, Hindustan Petroleum's $1.5-billion Mangalore refinery project was delayed in 1995 by environmental concerns expressed by local residents. In early 1996, a tentative agreement was reached between the involved parties and the project appears to be moving forward. In late 1995, Exxon and Hindustan Petroleum signed a MOU to conduct a feasibility study on building a LPG import terminal, bottling plants, and distribution infrastructure.

India's downstream sector also is undergoing privatization. Indian Oil Corporation (IOC) is the country's largest refining and marketing company, controlling a 55 percent share of India's refined product market. In late 1994, an initial 5 percent of IOC was offered to the public as the first step in plans to sell up to 49 percent of IOC. The IOC sale parallels the partial privatization of six other Indian refiners since 1991. These include Cochin Refineries (45%), Indo-Burma Petroleum (40.3%), Madras Refineries (33%), Hindustan Petroleum (30%), Bharat Petroleum (30%), and Bongaigon Refinery and Petrochemicals (25.6%). Also, in December 1995, the Indian Petroleum Ministry announced its intention to fully deregulate the downstream oil sector by 2001.

NATURAL GAS

Natural gas supplies about 10 percent of India's energy demand. Domestic gas consumption is expected to increase 15-18 percent per year through 2000 and to reach 4-6 billion cubic feet (Bcf) per day by 2005. Almost 70 percent of India's natural gas reserves are found in Bombay High and Gujarat. Over 20 percent of India's offshore gas production is flared, because of a lack of distribution infrastructure. The government hopes to reduce this level to 2 percent through new gas pipeline development. Gas Authority of India Limited (GAIL) plans to spend at least $2-billion by 2000 to expand India's gas production and related infrastructure. This would include a new gas pipeline link between Bombay and Bangalore as well as extensions to the country's Hazira-Bijapur-Jagdishpur (HBJ) trunkline, which started operating in 1989. Gail and British Gas also are forming a gas distribution venture called Manhanagar Gas, which will target residential and consumer markets, especially in Bombay.

In September 1994, India and Oman reached an initial agreement to build a $5-billion subsea pipeline to supply Omani natural gas to India's west coast. The project would involve laying two parallel lines a distance of 683 miles at a depth of up to 11,500 feet, or over four times the depth of any existing subsea pipeline. A feasibility study completed in September 1995 concluded that the project was feasible. In January 1995, however, the Omani Oil Ministry stated that it was unable to make the gas supply commitments required and that a further two years of "more dedicated exploration appraisals" would be needed before the project could proceed. Previously, initial shipments of 1 billion cubic feet per day (Bcf/d) had been scheduled to start in July 1997.

India is considering other gas pipeline options, including a 1.5-Bcf gas line from Iran which would run either of offshore or onshore from Assaluye in southern Iran to India via Karachi. In October 1995, Prime Minister Rao and Iranian Foreign Minister Ali Akbar Velayati discussed other routing alternatives, including one which would run through Turkmenistan, Afghanistan, and Pakistan.

GAIL is planning to form a joint venture which would expedite liquefied natural gas (LNG) shipments to India. As of December 1995, British Gas, Phillips Petroleum, Royal Dutch/Shell, and Total were potential partners in the project. The new venture would be responsible for both upstream and downstream aspects of facilitating LNG imports from suppliers such as Qatar, Malaysia, Oman, and Thailand. GAIL soon hopes to import up to 2.75 million short tons per year of LNG.

COAL

Coal satisfies about 60 percent of India's energy demands. India is the world's fifth largest coal producer and ranks third in the production of hard coal behind the United States and China. Roughly two-thirds of India's 530 operating mines are underground. Opencast mines accounted for roughly three-quarters of India's total coal production despite employing only about 16 percent of the mining workforce. Also, most of the coal industry's growth over the past 20 years has been in surface mining. India's coal reserves are estimated at 69 billion short tons, or 6 percent of the world's total. The country's reserves include lignite and bituminous coal, but not anthracite. The country's primary coal fields are located in Bihar, West Bengal, and Madhya Pradesh.

State-owned Coal India Limited (CIL) accounts for 90 percent of the country's coal production. Over 60 percent of India's coal is transported by state-owned India Railways. The National Thermal Power Corporation (NTPC), which has its own dedicated railway system, transports a large percentage of the remainder. As a result of both environmental constraints and land availability, surface mining is unlikely to support the growth in domestic coal demand after 2010.

The Indian government has begun to take steps to deregulate the nation's coal industry and to allow an increase in coal imports. In early 1995, the government cut the 85 percent steamcoal import tariff down to 15 percent. At the same time, CIL is planning to export Indian coal beyond its traditional markets in Nepal and Bangladesh, to new markets in Japan, Korea, and China, where high ash Indian coal could be blended with higher grade coal from other sources. Export earnings should help to offset any losses to domestic producers because of the cut in import tariffs. At present, CIL is evaluating the export potential of both the large Raniganj coalfield and the Orissa fields.

ELECTRICITY

At present, over 80 percent of India is electrified. The government estimates that the country will need 142,000 MW of new capacity by 2005. The current five-year development plan, in effect since 1992, called for adding 48,000 MW of electrical generating capacity to its then existing capacity of 75,000 MW. In 1994, this goal was lowered to 30,000 MW. About 3,000 MW of this capacity will come from independent power projects (IPPs) and the rest from NTPC projects.

In 1992, the government amended India's Electricity Act of 1910 and opened the sector to privatization and foreign investment. In 1993, an incentive package provided a five-year tax holiday for new projects in the power sector and, under World Bank advisement, a guaranteed 16 percent return on foreign investments. Additionally, the project approval system, which required up to 17 separate approvals in certain cases, was revised substantially. With these changes, IPPs are expected to add most of India's electrical capacity after the year 2000. In mid-1994, the Indian government ended its practice of subsidizing electricity sales. India's five regional power boards have cost the government over $1.6 billion in recent years.

In January 1996, Minister of Power N.K.P. Salve announced new guidelines governing how India's state-run electricity boards evaluate private power projects. According to the ministry, new projects now should be evaluated through competitive bidding, rather than through a single tariff system. A competitive bidding process will mean that independent power producers will no longer be guaranteed a 16 percent return on their investment, as they have been under the present "cost plus" formula. Even though India's states have the responsibility for negotiating their own power deals, they likely will follow the new guidelines as Power Ministry approval is required for new all new projects.

In January 1996, the World Bank and the Indian government began talks concerning a possible $850-million loan package to reform the power sectors in Orissa and Haryana. The reforms will be designed to encourage private investment in the power sector.

Thermal

On January 8, 1996, the Maharashtra state government agreed to revised terms concerning the second phase construction of Enron's Dabhol power project. Changes to the project include lowering cost from $2.8 billion to $2.5 billion, increasing capacity from 2,015-MW to 2,184-MW, and reducing tariffs by 22.5 percent. Initial tariff rates, which subsequently will rise over time, were lowered from 2.40 to 2.03 rupees per kilowatthour. Fuel for the project's first phase will be switched from distillate to naphtha, resulting in a cost savings. Also, the second phase's $495-million, LNG regasification plant will be build under a separate joint venture, which will be able to sell gas to third parties. Enron estimates that it lost $250,000 per day after the project's cancellation in August 1995. Consequently, the company is seeking compensation for its losses from the Maharashtra government, and arbitration tentatively is scheduled for June 1996.

The largest IPP currently under development is Hopewell Holding's 10,560 MW coal-fired power plant. In December 1995, Hopewell Holding, a subsidiary of Hong Kong's Consolidated Electric Power Asia Ltd. (CEPA), signed letters of intent to build up to six 660-MW power plants in Orissa. The project is expected to cost $12.7 billion. CEPA currently is seeking World Bank assistance to provide guarantees for the project.

In December 1995, Indian Power Secretary P. Abraham stated that the government would offer "counter-guarantees" to two power projects located in Andhra Pradesh. The two projects are part of India's eight "fast-track" power projects. Two other such projects include Enron's Dabhol plant and a venture by AES Transpower. In early 1996, India's Central Electricity Authority approved 11 gas-fired power projects worth roughly $8.5-billion. The proposed plants would have a combined capacity of 6.5 gigawatts (GW) and would be located in Maharashtra, Madhya Pradesh, Himachal Pradesh, Gujarat, Orissa, and West Bengal.

Cogentrix Energy, a General Electric subsidiary, signed an agreement in 1994 to build a $1.3 million, 1-GW, coal-fired plant in Mangalore, Karnataka. Construction began in 1995 and will take 3 years. In another project, HI Energy, a Houston Lighting & Power subsidiary, will build a 500-MW coal-fired plant in Madhya Pradesh. The plant will be powered by the Bursinghpur coal mine after construction is completed in 1999.

Nuclear

India has nine operational nuclear reactors and another eight under development. At the beginning of 1995, total net nuclear generating capacity was 1,493 MW, although actual utilization rates are estimated at under 30 percent. Planned reactors will add a projected 1,100 MW of capacity, and Indian officials estimate that the country has enough uranium supplies to support a nuclear power program of 8,000 MW. In mid-1995, designs for the $636-million, 500-MW Tarapur-3 power plant were completed. The Maharashtra site currently has two operable units with a combined capacity of 300 MW. A fourth, 500-MW unit also is anticipated. India's Atomic Energy Commission projects an increase of 880-MW in the country's nuclear generating capacity by 1998. This will occur with the completion of the Kaiga-1 and -2 units and the Kata-3 and -4 plants, which are located in Karnataka and Rajasthan, respectively.

In January 1996, India signed agreements with Brazil and Thailand to help those countries develop their nuclear energy programs. In December 1995, Russia's Ministry for Atomic Energy agreed to provide technical assistance for India's nuclear program. India has declined to sign either the Nuclear Non-Proliferation Treaty or the Comprehensive Test Ban (CTB) Treaty. Recently, Prime Minister Rao stated at a CTB meeting in Geneva that any such treaty should include a timetable for worldwide nuclear disarmament.

Hydro

In January 1996, India and Nepal signed a final agreement to build the $5-billion, 6,000-megawatt (MW) Pancheswar power plant, which will be located near the current Tanakpur plant on the Mahakali River. The Pancheswar project will take 8 years to build and will come online with an initial 2,000-MW.

Renewable

The Indian government is actively promoting the application of non-conventional sources of energy to supply the country's energy needs. A targeted increase from 600 MW to 2,000 MW has been set during the current five-year plan. This increase includes wind, hydro, biomass, and solar photovoltaic technologies. Partly as a result of initiatives taken by the U.S. Department of Energy, India signed 25 agreements with U.S. companies to develop non-conventional technology in December 1994.

COUNTRY OVERVIEW

President: Shankar Dayal Sharma
Prime Minister: Inder Kumar Gujral (as of April 1997)
Independence: August 15, 1947 (from United Kingdom)
Population (7/95E): 937 million
Location/Size: Southern Asia/3,287,590 sq km (2.04 million sq mi), slightly more than one-third the size of the U.S.
Major Cities: New Delhi, Bombay, Calcutta, Madras, Hyderabad, Bangalore, Ahmedabad, Lucknow, Jaipur
Languages: English, Hindi, Urdu, Telegu, Marathi, Tamil, Gujarati, Malayalam, Canada, Oriya, Punjabi, Assamese, Kashmiri, Sindhi, Sanskrit, Hindustani, Bengali, others
Ethnic Groups: Indo-Aryan (72%), Dravidian (25%), Mongoloid, and other (3%)
Religions: Hindu (80%), Muslim (14%), Christian (2.4%), Sikh (2%), Buddhist (0.7%), Jains (0.5%), other (0.4%)
Defense (6/93): Army (1,100,000), Air Force (110,000), Navy (55,000)

ECONOMIC OVERVIEW

Currency: Rupee
Official Exchange Rate (2/7/96): $1 = 37.30 rupees
Gross Domestic Product (GDP - market rates 1990 dollars)(1995E): $365 billion
Real GDP Growth Rate (1995E): 6.3%
Inflation Rate (1995E): 8.3%
Current Account Balance (1995E): -$1.5 billion
Merchandise Exports (1995E): $31.4 billion
Merchandise Imports (1994E): $32.4 billion
Major Export Products: Gems and jewelry, engineering goods, clothing, cotton textiles, iron ore, leather, chemicals
Major Import Products: Petroleum and related products, machinery, iron and steel, chemicals, edible oils, fertilizers
Major Trading Partners: Russia, United States, Japan, United Kingdom, Germany, Italy, Belgium
Monetary Reserves (1995E, non-gold): $25.8 billion
Total External Debt (1995E): $86.9 billion
Total External Debt (% of GDP)(1995E): 28%

ENERGY OVERVIEW

Minister of Power: N.K.P. Salve
Minister of Oil and Gas: Satish Sharma
Proven Oil Reserves (1/1/96): 5.8 billion barrels Oil Production (1995E): 710,000 barrels per day (b/d), of which 695,000 b/d is crude oil
Oil Production Capacity (1995E): 725,000 b/d
Oil Consumption (1995E): 1.5 million b/d
Crude Refining Capacity (1/1/96): 1.1 million bbl/d
Net Oil Imports (1995E): 790,000 b/d
Major Oil Suppliers: Saudi Arabia, Kuwait, Iran, UAE, and Malaysia
Natural Gas Reserves (1/1/96): 25.4 trillion cubic feet (Tcf)
Natural Gas Production (1994E): 594 billion cubic feet(Bcf)
Natural Gas Consumption (1994E): 594 Bcf
Coal Reserves (12/31/93): 77.1 billion short tons
Coal Production (1994E): 295 million short tons (Mmst)
Coal Consumption (1994E): 303 Mmst
Electricity Generation Capacity (1/1/94): 84 gigawatts
Electricity Production (1994E): 356 billion kilowatthours

OIL AND GAS INDUSTRY

Organizations: Oil and Natural Gas Corporation - ONGC (exploration and production), Oil India Ltd - OIL (exploration and production), Indian Oil Corporation - IOC (refining and marketing), Gas Authority of India Limited - GAIL (transportation, distribution, and marketing)
Major Oil Fields (Production-b/d)(1994): Bombay Offshore: Bombay High (258,000), Neelam (78,700), B-38 (Heera) (39,000); Eastern: Lakwa-Lakhmani (26,000); Western: Gandhar (38,600)
Major Oil Terminals: Bombay, Cochin, Haldia, Kandla, Madras, Vizag
Major Oil Refineries (1/1/96, capacity-bbl/d): Koyali- Gujarat (185,100), Mathura-Uttar Pradesh (156,000), Mahul-Bombay (134,860), Madras (130,660), Mahul-Bombay (110,452), Ambalamugal (93,400), Visakhapatnam (90,369), Barauni-Bihar (65,800), Haldia-West Bengal (61,000), Bongaigaon-Assam (27,110), Guwahati-Assam (19,920), Digboi-Assam (11,700)
Major Oil Pipelines: Salaya-New Delhi, Barauni-Digboi
Major Foreign Company Involvement: Bechtel, Caltex, Conoco, Elf, Enron, Exxon, Mobil, Pennzoil, Shell
Major Gas Fields: Agartala, Amalapuram, Banshkondi, S Bassein, Bhimanapalli, Gojalia, Hazira, Kosamba, Mandapetta, Olpad, Pasarlapudi, Razole, Tatipaka
Major Gas Pipelines: Hazira-Bijapur-Jagdishpur (HBJ)

Links to other sites:
Latest EIA Detailed Annual Data (1994)
1997 CIA World Factbook - India
EIA Privatization Report - India

If you liked this Country Analysis Brief or any of our many other Country Analysis Briefs, you can be automatically notified via e-mail of updates. Simply click here, put in your e-mail address, and check the box labeled "Country Analysis Briefs" on the list of products. You will then be notified within an hour of any updates to our Country Analysis Briefs.

Return to Country Analysis Briefs home page

File last modified: March 1996

Contact:

Douglas MacIntyre
dmacinty@eia.doe.gov
Phone: (202)586-1831
Fax: (202)586-9753

URL: http://www.eia.doe.gov/emeu/cabs/india.htm

If you are having technical problems with this site, please contact the EIA Webmaster at wmaster@eia.doe.gov