Chapter 3 Finding and Analysis

3.1 Natural Gas Introduction

Natural gas as the clean fuel of 21st century is fast emerging as a major energy source all over the world. According to estimates natural gas consumption would increase from 95 trillion cubic feet in 200 to 1!2 trillion cubic feet in 20 0. "onsumption of natural gas worldwide increases from 100 trillion cubic feet in 200# to 1$ trillion cubic feet in 20 0. %y energy source& the projected increase in natural gas consumption is second only to coal. Natural gas remains a 'ey fuel in the electric power and industrial sectors. (n the power sector& natural gas is an attractive choice for new generating plants because of its relative fuel efficiency. Natural gas also burns more cleanly than coal or petroleum products& and as more governments begin implementing national or regional plans to reduce carbon dio)ide emissions& they may encourage the use of natural gas to displace li*uids and coal. Natural gas can be considered as the single fuel solution& replacing power and fuel for heating and cooling re*uirements. +se of natural gas in co,generation of power refrigeration and heating -""./, combine cooling& heating 0power1 gives 253 to 903 fuel efficiency. 4otal natural gas reserves in the world are estimated at $&112 trillion cubic feet as on 5anuary 200$. Nearly three *uarter of the total global natural gas reserves are located in the 6est Asian and 7urasia regions. (ran& 8atar and 9ussia together accounts for nearly 5!3 of global natural gas reserve. :emand for natural gas growing at rapid clip during the past decade is e)pected to gather further momentum due to high price of oil as well as environmental concerns. 7lectrical and industrial sectors are two leading consumers of natural gas in the world. :eveloped countries led by +.;. are major consumers of natural gas at present. .owever& "hina and (ndia are fast emerging as 'ey players in natural gas demand. Natural gas is commercially produced from oil fields and natural gas fields. <as produced from oil wells is called casing head gas or associated gas. 4he largest two natural gas fields are probably ;outh /ars <as =ield in (ran and >rangey gas field in 9ussia& with reserves on the order of 101 m?. ;ee also @ist of natural gas fields. 8atar also has 25 trillion cubic
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meters of natural gas -53 of the worldAs proven supply1& enough to last 250 years at current production levels. "hina and (ndia are two major countries in which natural gas consumption is set register significant rise in coming years. (n (ndia at present natural gas is a minor component in overall energy mi) with a share of 23. .owever& natural gas consumption is set to have annual growth rate of 5.93 in (ndia during the ne)t 25 years. (ndia is having limited natural gas reserves and nearly #03 of its demand would be met by imports.

%ecause of its many economic and environmental benefits& natural gas has become the fuel of choice for electricity generation. (n the 1990s& there was a dramatic shift to natural gas for the generation of electricity. @arge coal and nuclear generating plants were the clear choice of electric utility planners in the 1920s and 19!0s& but a combination of economic& environmental and technological factors have resulted in a pronounced movement to gas. (n fact& virtually all new generating capacity being added today will rely on gas. <as,fired combined,cycle technology is the overwhelming choice in these new generating plants. "ombined,cycle plants offer e)tremely high efficiency& clean operation& low capital costs and shorter construction lead times. 4he efficiency of combined,cycle units is now approaching $0 percent compared with roughly # percent efficiency for traditional boiler units B regardless of the fuel source. .igher efficiency means lower fuel bills and less pollution. =or e)ample& replacing a coal generating unit with a gas,fired combined,cycle plant could eliminate sulfur dio)ide emissions -the primary cause of acid rain1& cut carbon dio)ide -the principal greenhouse gas1 by as much as two,thirds and cut nitrogen o)ides -the primary cause of smog1 by as much as 95 percent. Also& not only is the lead time for construction of a combined,cycle unit shorter than that of a new coal,fired plant& but construction can be implemented in a modular fashion. ;o rather than constructing one large coal or nuclear unit today and hoping that the forecasted demand for electricity will be realiCed& smaller gas units can be constructed as warranted,without the economic penalties associated with building DsmallD coal or nuclear plants. <as consumption by central,station electricity generating plants will more than double over the ne)t 20 years although the increase may be lower than projected by some forecasters. <as consumption at central,station electricity generating plants -including electric utility plants and independent power producers1 is currently at . *uads per year. 4he accelerated projection indicates consumption will more than double by 2020,to $.2 *uads per year. Although this growth is far above historic levels for this sector& the total is somewhat less than the current projection of 2.! *uads and significantly less than the 9.2 *uads forecast by the +.;. 7nergy (nformation Administration in its 1999 Annual 7nergy >utloo'. 6hile the accelerated projection includes a very high penetration rate for gas in new generating facilities& capacity additions are somewhat limited. 4hese limitations are due to the assumed life e)tensions of both nuclear and coal plants& increasing the use of coal and nuclear plants& growth in distributed generation and some construction of new coal plants in the later years of the forecast.

Indian power sector

;ince (ndependence& the (ndian power sector has grown manifold in siCe and capacity.

3.6 CDM projects in India

Car on Dio!ide "#issions
(ndia is a party to the +nited Nations =ramewor' "onvention on "limate "hange -+N="""1& and the objective of the convention is to achieve stabiliCation of greenhouse gas -<.<1 concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the worldEs climate system. 4o strengthen the developed country commitments under the +N="""& the /arties adopted the Fyoto /rotocol& which commits developed country /arties to reduce their emissions of <.<s to an average of appro)imately 5.2 percent below 1990 levels between the years 200!G2012. 4he Fyoto /rotocol was ratified by the government of (ndia in August 2002 to strengthen global efforts to meet the challenges adversely affecting the ecosystem. >ne of (ndiaEs objectives in acceding to the protocol was to fulfil the prere*uisites for implementation of projects under the "lean :evelopment Hechanism -":H1 in accordance with national sustainable priorities& where under developed countries would implement <.< reduction project activities in developing countriesBwhere the costs of <.< reduction project activities are usually much lowerBwith the purpose of assisting developing country /arties in achieving sustainable development -the ultimate objective of the +N="""1& and to assist developed country /arties in achieving compliance with their *uantified emissions limitation and reduction commitments (n the IEO2006 reference case& world carbon dio)ide emissions from the consumption of fossil fuels grow at an average rate of 2.1 percent per year from 200 to 20 0. 7missions in 20 0 total # &$2$ million metric tons. "ombustion of petroleum products contributes 5&02! million metric tons to the increase from 200 & coal !&!01 million metric tons& and natural gas #&!0# million metric tons . (n the absence of carbon constraints& coal use is projected to grow at about the same rate as natural gas use& from 200 consumption levels -in %tu1 that are nearly identicalI however& coal is a more carbon intensive fuel than natural gas& and thus the increment in carbon dio)ide emissions from coal combustion is larger than the increment in emissions from natural gas. 6ith oil prices in 2025 about 5 percent higher in the IEO2006 reference case than projected in IEO2005& oil consumption and related emissions increase at a
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slower rate in the IEO2006 projections -by an average of 1.5 percent per year& as compared with 1.9 percent per year in the IEO2005 reference case1& well below the growth rates for emissions related to natural gas and coal in this yearEs projections. As a result& coal (ndia offers a large potential for the "lean :evelopment Hechanism -":H1 because of (ndiaEs inherent dependence on fossil fuels for development& as well as its proactive government and the enabling environment recently put in place. (ndeed& (ndia is the most favoured destination for ":H projects globally. 4he government of (ndia has submitted a comprehensive national <.< inventory as part of its first national communication -NA4">H1 to the +nited Nations =ramewor' "onvention on "limate "hange -+N="""1. 4his inventory has been prepared for the base year of 199#. /rior to the NA4">H& the most widely cited national <.< inventory available was that prepared for the 1990 base year in the Asia @east,"ost <reenhouse <ases Abatement ;trategy -A@<A;1 study of the Asian :evelopment %an' -A:%,<7=,+N:/ 199!1. 4he A@<A; inventory covered emissions from three sectors& namely& energy& agriculture& and forestry and land,use change. According to the A@<A; study& the energy sector is the largest contributor of carbon dio)ide -">21 emissions in (ndia. 4he ">2 e*uivalent emissions from this sector are around 5$5.2#5 million tonnes& amounting to nearly 55 percent of total national emissions. 4hese included emissions from road transport& burning of traditional biomass fuels& coal mining& and fugitive emissions from oil and natural gas. 4able #.1 presents the estimates of (ndiaEs <.< emissions from both the NA4">H inventory and the A@<A; study.

<.< inventory estimates for (ndia

7mission sources -for energy production

">2 e*uivalent emissions -in million tonnes A@<A; 1990 base year NA4">H 199# base year

a. Fuel co# ustion 1."oal 2!.#00 2.>il products 1$2.200 .Natural gas 12.500 #.4raditional biomass $.5$9 b. Fugiti$e e#issions %ro#

212.5#9

%uels 1. ;olid fuels 2. >il and natural gas 4otal emissions from the energy sector -fuel combustion J fugitive emissions1

$.9 0 1 .1#$ 5$5.2#5

1 .$50 12.$21 2# .!20

Sources: GoI Mo"F &''() AD*+G"F+,ND- 1../

CDM potential %or power sector in India

;ector <.< /ossible options ":H potential (ssues that need

emissions -million /ower tonnesKyear # .9912

for <.< reductions L "oal washingM reduce #03 to 03 L =uel switchM imported @N< in current coastal coal plants L Hove towards critical and super,critical boilers L (ntegrated gasification combined cycle -(<""1 technology 2# million tonnes

to be addressed L .igh cost of technology L /oor financial health of state electricity boards L 4echnological barriers

ash content from ">2eKannum

Sources0GoI Mo"F &''() 1aghura#an &''&.) 1a#ana et al. &''&.) 2hu3la et al. &''3

Chapter ( Conclusions
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1. 4he /ower industry is e)pected to be the largest gas consumer in the future. <rowth in electricity demand and the diversification of fuel sources for environmental reasons are powerful incentives for setting up of gas,fired power generation. 2. 4he development of large,scale power generation is also critically important for anchoring large gas infrastructure projects li'e pipelines or @N<. Achieving this target will not be easy since in many regions of (ndia& gas is currently not competitive against coal in terms of base,load. 6hile efforts to get over this situation will continue& it is possible to develop new generating capacity for pea',shaving to promote gas mar'et development in (ndia.

. 4he premium mar'et for gas,fired generation in (ndia lies both in pea',load and in a distributed generation system that provides heating& cooling and power in populated areas via a large number of smallKmedium and decentralised units -50 H6 or below1. 4hose units offer basically the same economics as large onesI they can be installed close to demand centres and help reduce urban air pollutionI their waste heat could be more easily used for other purposesI and their deployment can also help in building a local gas distribution system.

#. ;79"s levy a variety of charges and fees on actual delivered power costs -surcharges& cross subsidy charges& open access fee etc1 that slow down reform progress and are of particular concern for (//s-(ndependent /ower /roducers1 and captive or "./-"ombined .eat 0 /ower1 plants because they prove a barrier to e)ploiting their capacities to the best level. (ts argued in the industry that such surplus power generation by "aptives or "./s& if allowed to flow into grid& would be a major source for meeting the deficits in generation capacities. 4he high efficiency gas based distributed power generation could thus be promoted.

5. /ower plant developers& however& have concerns in installing power generation capacities mainly for two reasonsM .

a1 <as availability is a major constraint and even if the domestic discoveries are commercialiCed at mar'et determined prices& the ability of power sector to grant an attractive power tariff is suspect. b1 4he inability of transmission and distribution companies to recover the economic value of utility supplies from the consumers and the inability to arrest the transmission and distribution -40:1 or administrative& technical and commercial -A40"1 losses& mainly due to the poor political and policy support. (t is estimated that arresting such losses would ensure the affordability of mar'et determined natural gas prices for power generation by power plant developers in (ndia. (t is& therefore& necessary to evolve enabling regulations and policy reforms to reduce such huge losses in the power sector. $. 4he global rising trend of gas prices& lin'age to the rising crude oil prices and non, availability of gas on long term commitment has reduced willingness of (ndian power generators to rely on gas as a fuel. 4he choice between coal and gas would continue to be guided by economic and commercial considerations including any policy prescriptions for pricing of certain environmental e)ternalities. Nevertheless& the overall prospect of the role of gas in (ndiaAs power sector remains positive given its potential for sustained high economic growth& recent shortages of coal supplies& the need to integrate (ndiaAs population into the commercial energy economy& large recent discoveries of indigenous gas and opening up of the countryAs first two @N< terminals. <as for power generation is an imperative from the environmental perspectives as well. 7nergy economists have projected that coal is here to stay. "onstraints in sourcing gas and accelerated growth in energy demand by the world will force countries to retain coal in their primary energy bas'et. (ndia would be no e)ception. %ut& from the other side& the environmentalistsA global community would continue to pressuriCe the major consumers li'e (ndia& "hina& +;A& etc

Gas 4ur ine

(n all there are 5 <as 4urbines stations operating under "entral sector& ;tate ;ector and /rivate +tilities as on 1. .200$ comprising 1#2 units of total capacity !211.9 H6. +se of combined cycle operation in the field 20 of <as 4urbines is being promoted for energy conservation. (n addition economic aspects show a high return of investment with combined cycle gas based plants& 2 Nos. combined cycle power projects are operating as on 1, , 200$. Gas *ased 2tation 5erses Coal *ased 2tation0 Concern + Ministry o% -ower 7)isting as price comparable to well head price in most developed countries ;tate 7lectricity %oard may not realiCe increase in cost of power due to increase in gas price. @N< and Natural <as to be treated as different commodities while pricing

Major constraints that need to e addressedM :evelop the domestic capacity to build small and medium,siCed gas turbines and "ombined "ycle <as 4urbines -""<4s1 in (ndiaI 6here conditions permit& see' ways of promoting base,load gas,fired power generation to support the *uic' development of a gas mar'et and anchor large,scale gas infrastructure developmentI 4ighten environmental regulations on coal,fired power plants and strengthen their enforcementI 7stablishing a fully developed gas grid by e)panding the gas transmission and distribution system through, out the country I :eveloping regulatory framewor' to encourage investments.

1e%erences0
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www.power#in.nic.in www.cea.nic.in www.eia.doe.go$ www.energy %or 3eeps.org www.orierc.org www.naturalgas.org www.cercind.org www.#perc.org6 www.#ercindia.org.in www.%icci.co# www.projects#onitor.co# www.in%raline.co# www.renewa leenergystoc3s.co#

1eports 1. "risil 9eport 200$ 2. (nfraline 9eport 200$ ->il and <as Homents 200$1 . /etrofed 200$ Natural <as 9eport #. /resentations of 9eliance& ;A(@& Nideocon 0 <A(@ on /rice :etermining =ormula 200$ 5. ("9A 9eport of (ndian Natural gas ;ector 200$ $. /resentation on Natural <as /ricing (nfarline 9eport 200 2. Ho/N< 9eport 200$ !. /etrofed 9eport November 200$

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