Market outlook
Bright future for natural gas in India
by M. Rajagopalan, Head of Industry Captive Sales and Head of Southern Region, Wärtsilä India Ltd.
The discovery of major gas fields
coupled with recent liberalization of
the power sector has created a fast
increasing market for Wärtsilä’s gas
engines as industry and utilities
seek independent reliable power.
Wärtsilä sees a buoyant future for
itself in this enormous
subcontinent.
India’s association with natural gas dates
back to 1886 when oil and gas were struck
at Digboi, Assam. But the gas market
evolved rather slowly, due to inadequate
production and supplies and until recently
India accounted for just 0.5% of the
world’s total natural gas reserves. Usage of
gas was localized near the production point.
The situation changed dramatically after
the discovery of a massive oil and gas field
off the western coast, Bombay High, which
went into commercial production in 1976.
This was soon followed by the South
Bassein free gas field in 1978.
The 1700 km long, 18.2 MMSCMD*)
capacity, Hazira-Bijaipur-Jagdishpur (HBJ)
cross-country gas transmission line was
completed in 1988. This linked Bombay
High and Bassein with the fertilizer, power
and industrial consumers in Western and
Northern India. This artery provided the
spark that has since catapulted India’s gas
production and utilization to new levels.
4 *) MMSCMD = million standard cubic metres per day
A 17.2 MW power plant, consisting of three lean-burn, natural-gas engines of the
Wärtsilä 18V34SG type in Andhra Pradesh.
Demand for gas surges
The power and fertilizer industries emerged
as the key demand drivers for natural gas
due to the scale of their operations, policy
intervention and social impact. In an
agrarian economy such as India’s, the
priority was the manufacture of fertilizers.
More than 58% of natural gas through the
HBJ pipeline is used as feedstock in
fertilizer plants, replacing naphtha.
However, the share of the power sector
has been ramped up in the last decade.
Another application to emerge is the use of
CNG for vehicles to replace liquid fuels, as
urban pollution grows to alarming levels.
More gas has been discovered in other
parts of the country. The discovery of a
major gas deposit in the Krishna-Godavari
(KG) Basin off the eastern coast represents
one of the largest finds in the world in
recent years.
LNG terminals, to store and market
imported liquefied gas, are also being
planned in various locations. A national gas
grid is envisioned and should connect most
parts of the country by 2008. The demand
for gas is expected to go up from a figure of
117 MMSCMD today to a level of 200
MMSCMD by 2012.
Diverse solutions from Wärtsilä
Almost all the gas-fired power plants
commissioned by the mid-1990s in India
were large, centralized plants put up by
utilities and based on gas turbines. It was
only when gas was made available to
industrial consumers that Wärtsilä sold its
first gas engines to customers in the
southern state of Andhra Pradesh.
The first Wärtsilä 34SG installation
came up in Andhra Pradesh again, at a
mini-power plant called Vathsasa Power
Ltd. This is a 17.2 MW power plant,
consisting of three lean-burn, natural-gas
engines of the Wärtsilä 18V34SG type.
This customer preferred gas engines to
turbines, after being convinced about the
lower capital cost, high full-load and
part-load efficiencies (with gas supply being
not very reliable), lower water requirement
and lower deration for high ambient
temperature. Another important
consideration was the much shorter lead
time required for gas-engine plants. The
plant has now clocked over 18,000 hours
and supplies power to the state transmission
company.
The second such plant to come up, OPG
Energy in the neighbouring state of
Tamilnadu, is again based on a configuration
of three Wärtsilä 18V34SG units. This is a
group-captive plant, commissioned in March
2004. Power is generated close to the gas
well, but wheeled to distant consumers
through the state grid. As the cost of
gas-off-the-well is quite low, the cost of
Energy News – Issue 20

generation is three US cents/kWh cheaper
than the cost of grid power.
Other success stories include the
Wärtsilä 18V32DF dual-fuel installation at
Videocon Glass in Gujarat, Western India,
where the gas supply is unpredictable and
the customer wanted the flexibility to run
the plant on heavy fuel oil as well.
A recent addition to the list is the 4 MW
power plant (Wärtsilä 12V34SG) for
Karaikal Chlorates. This plant produces
potassium chlorate by electrolysis. With
power generation accounting for 75% of
the total manufacturing cost, the
motivation to reduce the energy cost was
quite strong and a gas engine with a low
heat rate was preferred.
The breakthrough for the 8.5 MW
Wärtsilä 20V34SG gas engine came early
this year, with two customers, Chemplast
and Coromandel Electric, placing
confidence in Wärtsilä again. All three
engines are due for commissioning by the
end of October/early November 2004.
Road clear for decentralized power
Gas availability has improved considerably
in Western India with the commissioning
of the first LNG terminal at Dahej and
further development of the Hazira gas
fields. The HBJ expansion will take gas
lines to more parts of North India and to
major industrial cities. As further gas
reserves are discovered and the national gas
grid takes shape, gas will be available in
most parts of the country by 2008. Clearly,
gas will gain popularity and replace coal as
the fuel of choice.
In the next ten years, India will need to
invest heavily in power and other
infrastructure projects, to bridge the
existing huge gap between energy supply
and demand and to gear itself to meet the
growing needs of a fast-developing nation.
The Electricity Act 2003, passed by
Parliament, opens up many opportunities
for decentralized power – a niche which has
been a stronghold for Wärtsilä. The act
liberalizes the setting-up of captive power,
merchant power and rural electrification
plants. Many of these power plants will run
on gas.
With the widest range of high-efficiency
gas engines, an installation base of around
2700 MW of heavy fuel and gas engines
including over 500 MW under direct
operations & maintenance care, and a
strong organization with over 20 years of
experience in providing after-sales service in
the country, Wärtsilä India is well set to
serve the needs of the market and sees
exciting times ahead. n
Energy News – Issue 20
India in review – trends in the energy market
India streamlines its
power sector
India ranks sixth in the world in
terms of total energy demand.
The total installed capacity of
112,000 MW today is expected to
grow to 215,000 MW by 2012.
The government’s decisive action
to raise efficiency in the power
sector offers big opportunities to
Wärtsilä with its proven
capabilities in decentralized
plants and gas engines.
India’s primary commercial energy use is
mostly based on fossil fuels. Currently,
thermal power plants based on coal
account for about 50.4% of energy
generation in India. With a total reserve
of 220 billion tons, of which 84.4 billion
tons are proven, coal will continue to be
an important resource for centralized
power generation in the country for
several years to come.
Hydropower plants contribute about
25% of the energy generated. The
geographical distribution of such plants
is skewed, however, as 77% of the
potential is concentrated in the north
and north-eastern parts of the country.
Despite growth in energy
consumption in the last two decades, a
large part of India’s population,
especially in the rural areas, still does not
have access to electricity. The annual per
capita energy consumption is only about
350 kWh, against a world average of
1870 kWh.
Aggressive deregulation
The Indian energy market was until
recently tightly controlled by state utility
companies or the electricity boards.
Given India’s federal structure,
individual states set their own laws and
power policies. Political factors resulted
in a lop-sided tariff system packed with
cross-subsidies.
The Electricity Act, passed by the
Indian Parliament in 2003, seeks to
deregulate the energy market, bring
about a uniform policy framework,
encourage the entry of private players,
and liberalize the setting up of captive
power plants.
The National Planning Commission
has set an ambitious target of annual 8%
growth in the country’s GDP over the
next 5 years, which naturally would fuel
a corresponding increase in energy
consumption. Therefore the Indian
government is actively opening up all
avenues to enhance generation and
streamline the transmission and
distribution network in the country. The
Electricity Act will serve as the catalyst.
It is clearly recognized that the use of
natural gas must be aggressively
promoted and several means adopted to
ensure the availability of gas for power
generation. A national gas grid is being
laid and expected to be ready by 2007-8.
Several LNG terminals are planned and
will be strategically located.
India has witnessed increased
exploration and production following
the introduction of the New Exploration
Licensing Policy (NELP) and the entry
of several private players as well. Sizeable
reserves have been identified. A recent
strike by the Reliance Group in the
Krishna-Godavari basin has the potential
to deliver 40 MMSCMD, making it one
of the largest finds ever. n
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