uncertainty of world oil prices, make the economy more vulnerable. It would therefore be necessary to examine the oil intensity and de- pendence on petroleum products in each sector of the economy and to find ways to contain, and where possible to compress, the demand for the oil products.
8.12.10 The ratio of oil consumption in different sectors to the total consumption of oil in the country, the Oil Application Ratio (OAR) provides a measure of the importance of that sector in the consumption of petroleum products. Table 9 indicates the changes in OAR for different sectors over the last two decades.
8.12.11 The transport sector has remained the largest user of oil, its relative share having increased. Another important user is the household sector. Among other sectors the share of industry has declined while that of agriculture has shown some increase .
8.12.12 The intensity of oil use in a sector can be described in terms of the Oil Use Ratio (OUR), defined as the ratio of oil consumption in that sector to total energy consumption in that sector. Table 10 indicates the changes in OUR for different sectors over the last two decades.
8.12.13 There have been substantial increases in the intensity of oil use in the transport and household sectors over the years. In other sectors, the intensity of oil use has been declining.
8.12.14 The share of oil in the total commercial energy consumption has thus increased contrary to the recommendations of the Working Group on Energy Policy. One of the major factors contributing to this was the relatively lower prices and easy availability compared to alternate fuels. This led to a rapid growth in the consumption of LPG, Kerosene oil (SKO), motor spirit (MS) and diesel oil (both HSD and LDO). In the context of non-availability of alternate fuels for cooking and lighting at affordable prices, the demand for kerosene which is sold at subsidised price has increased steeply over the years. LPG is also priced low and the consumption of LPG has been constrained by the supply position. The demand for MS has been growing fast as a result of a rapid growth in the population of personal transport vehicles. The
Table: 9 Oil Application Ratio (OAR)
Sector of 1970-71 1973-74 1980-81 1985-86 1990-91
consumption
Industry 0.28 0.17 0.15 0.11 0.09
Transport 0.30 0.32 0.32 0.33 0.35
Household 0.18 0.14 0.14 0.17 0.18
Agriculture 0.04 0.08 0.10 0.09 0.09
Electricity
generation 0.06 0.06 0.08 0.08 0.07
*Provisional
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Table:10. Oil Use Ratio (OUR)
Sector of 1970-71 1973-74 1980-81 1985-86 1990-91*
consumption
Industry 0.18 0.20 0.18 0.11 0.10
Transport 0.38 0.44 0.61 0.76 0.89
Household 0.50 0.50 0.51 0.61 0.76
Agriculture 0.77 0.78 0.69 0.68 0.58
Electricity
generation 0.15 0.14 0.14 0.08 0.07
*Provisional
steep increase in the demand for HSDO has been caused largely by the large scale introduction of agricultural pumpsets based on diesel and the rapid rate of growth of road traffic in preference to both freight and passenger traffic carried by the railways.
8.12.15 The relative shares of LPG, MS and HSDO in the total consumption of petroleum products have changed during the last two decades as shown in Table 11.
8.12.16 HSDO and SKO together constituted about 54 per cent of oil consumption in 1990-91 and their share is likely to increase further unless suitable measures are taken to contain this trend. Both these products are imported at the margin in addition to the import of crude oil.
8.12.17 The world oil prices, after a steel) fall in the late eighties showed a steep upward trend during the Middle East War. Despite the end of this crisis and a fall in crude prices, substantial outgo of foreign exchange is taking place even for meeting the existing level of oil demand. Considering the prospects of different onshore and offshore basins in the country and the investment that can be visualised during the next decade or so, it does not appear feasible to augment the level of indigenous production on a large scale during the next 10-15 years. Against this background, if the demand for petroleum products is permitted to grow unhindered, it will lead to an increased dependence on oil imports which the country can ill-afford. This will place a serious strain on the limited foreign exchange resources of the country. It is from this point of
Table 11: Share of LPG, Motor Spirit and
Diesel oil in POL consumption
% share in consumption (excluding
RBF)
1970-71 1979-80 1984-85 1990-91
LPG 1.0 1.4 2.4 4.4
Motor 8.1 5.0 5.4 6.5
Spirit
HSD 21.4 32.8 35.3 38.6
LDO 6.1 4.2 3.1 2.7
SKO 18.3 12.9 15.4 15.4
* Provisional
view that there is an urgent need for demand management in the petroleum sector.
Energy Conservation 8.13.1 Energy conservation has been receiving considerable attention right from the first oil shock in 1973. The Fuel Policy Committee and the Working Group on Energy Policy bad both laid emphasis on the need for energy conservation. The Report of the Inter-Ministerial Group on Energy Conservation in 1983 examined spe- cific areas of energy conservation in different sectors. The Advisory Board on Energy (ABE) had recommended the setting up of a National Energy Conservation Organisation (NECO), backed by a comprehensive legislation on energy conservation. The Petroleum Conservation Re- search Association (PCRA) under the administrative control of Ministry of Petroleum & Natural Gas has done pioneering work in bring-
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ing about general awareness of the need to conserve the use of oil. Recently, the Department of Power has set up the Energy Management Centre to undertake studies and suggest an action plan for energy conservation and more efficient use of energy.
8.13.2 There has been some improvement over the years in the efficiency of use of commercial energy in several sectors of the econ- omy. However, these efficiency improvements have been far too inadequate to make any visible impact on the pattern of growth of demand for commercial energy. The targets to be set in this regard for the Eighth Plan period need to be quantified and the performance continually monitored with a view to bringing about efficiency in the use of energy in the different sectors. Further details in this regard are indicated in the section on Energy Conservation.
Energy Pricing 8.14.1 During the Sixth and Seventh Plans,emphasis was placed on evolving a rational pricing policy to reflect the true resource costs of energy production and supply to the economy. However, the regime of administered prices with implicit subsidies continues to exist, despite the recent price adjustments implemented in the case of some of the oil products. A tariff structure that does not fully reflect the cost of production and supply of domestic or imported energy resources is not conducive to efficient use of energy and optimum inter-fuel substitution. Moreover, such a tariff structure does not also provide adequate returns to the producing agencies so as to enable them to expand their operations in tune with the growing demand for energy. It is, therefore, imperative that a rationalised tariff structure is adopted in respect of different forms of energy. If subsidies are inescapable from the point of view of socio-economic imperatives, the concerned target groups need to be identified and subsidies restricted strictly to the target groups only. Indeed, alternate means of delivering the intended benefits to those target groups need to be carefully examined. This is particularly relevant in respect of electricity and certain petroleum products such as LPG and Kerosene oil. The tariff structure should be such that it optimises the use of energy for alternative productive purposes.
Long Term Energy Planning 8.15.1 Several expert bodies in the past, such as Energy Survey of India Committee (1965), the Fuel Policy Committee (1974), the Working Group on Energy Policy (1979) and the Advisory Board on Energy (1983- 88), have emphasised the need for integrated long-term energy planning. The Planning Commission has, therefore, carried out studies on long -run sectoral energy demand as well as long-run energy supply system optimisation. However, the earlier Five Year Plans have tended to reflect more of the short-term and medium-term concerns than the long- term policy imperatives in energy planning. Besides this, the emphasis of the earlier Plans has all along been on supply problems of the sector rather than on economy in the end-use of energy through conservation. During the Eighth Plan, importance will be given to long-term integrated planning with emphasis on energy end-use as well as efficient strategy of long-run energy supply. The studies of Planning Commission, as referred to above, need to be updated from time to time depending on the changes taking place in the internal and external environment and be used as a basis for integrated energy planning.
Energy Strategy for the Future 8.16.1 Against the above background, it is desirable to adopt a long-term energy strategy which is consistent with sustainable development. Such a strategy should ensure that the highest priority is accorded to meeting fully the basic energy needs of the rural and the urban poor in the immediate future. It should also ensure gradual shift from non-renewable resources to renewable ones with increasing emphasis on demand management, conservation and efficiency. The short-term, medium-term and long-term priorities should accordingly be as follows.
Short-Term 1. Maximise returns from the assets already created in the energy sector.
2. Initiate measures for reducing technical losses in production, transportation and end-use of all forms of energy.
3. Initiate action to reduce the energy intensity of the different energy consuming sectors
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of the economy and promote conservation, demand management through appropriate organisational and fiscal policies.
4. Initiate steps for meeting fully the basic energy needs of the rural and the urban households, so as to reduce the existing inequities in energy use.
5. Maximise satisfaction of demand for energy from indigenous resources.
Medium-term 6. Initiate steps towards progressive substitution of petroleum products by coal, lignite, natural gas and electricity so as to restrict the quantum of oil imports to the current level.
7. Initiate action for accelerated development of all renewable energy resources, especially the available hydro-electric potential.
8. Promote programmes to achieve self-reliance in the energy sector.
9. Promote R & D effort on decentralised energy technologies based on renewable resources.
10. Initiate appropriate organisational changes in the case of different energy sub-sectors consistent with the overall energy strategy.
Long-term 11. Promote an energy supply system based largely on renewable sources of energy.
12. Promote technologies of production, transportation and end-use of energy that are environmentally benign and cost efficient.
8.16.2 The Eighth Plan programme of energy development will be so oriented as to be consistent with this strategy.
OIL AND NATURAL GAS
Demand for Petroleum Products 8.17.1 Despite the concern expressed time and again, the demand for petroleum products continued to rise rapidly and the share of oil in commercial energy supply registered a steep increase during the last few decades. The growth of the sector during the Seventh Plan and thereafter and the major areas of concern for the Eighth Plan are discussed below.
Seventh Plan Review 8.18.1 As against the actual consumption of 38.8 million tonnes of petroleum products in 1984-85, the consumption in the terminal year of the Seventh Plan, i.e. 1989-90, was 54.1 million tonnes. This represents an average annual growth rate of 6.9% during the Plan which is higher than the growth rate of 6.4% anticipated for the Seventh Plan. This was also higher than the 5.4% per annum growth of consumption of petroleum products registered during the Sixth Plan. The factors contributing to this were broadly referred to in the preceding paragraphs.
8.18.2 On the other hand, as indicated in the following paragraphs, the increase in the indigenous availablity of crude oil has not kept pace with the rapid increase in the demand for petroleum products leading to a steady increase in oil imports.
8.18.3 The position however, underwent some change in 1990 when the world market price of oil and oil products increased sharply consequent to the Gulf crises and the Government had to increase the domestic price of petroleum products and impose a series of physical restrictions on the supply and distribution of motor spirit, diesel etc. As a result, the consumption of petroleum products could be restricted to 55.04 million tonnes in 1990-91 which represented a growth of only 1.7% over the previous year. Even during 1991-92, the level of consumption is expected to be around 56.7 million tonnes.
8.18.4 The actual achievements in relation to the goals set out in the Seventh Plan are briefly reviewed below.
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Exploration 8.19.1 The exploratory effort put in by the Oil and Natural Gas Commission (ONGC) and Oil India Limited (OIL) led to an achievement of 2324.49 thousand meters of exploratory drilling as against the target of 2820.8 thousand meters set for the Seventh Plan. Even though the achievement in exploratory drilling was only 82% of the target, geological reserve accretion of 1536 million tonnes of oil and oil equivalent of natural gas was achieved against the originally anticipated target of 1453 million tonnes. As a result, in spite of a substantial step up in the level of production of crude oil during the Seventh Plan, the Reserve-to-Production (R/P) ratio at the end of the Plan was as high as 21:1 against 17:1 at the beginning of the Plan. The achievements in exploratory drilling during 1990-91 and 1991-92 were also lower than the targets. Exploratory drilling in 1990-91 was 615.65 thousand meters against a target of 738.04 thousand meters. In 1991-92, about 628.52 thousand meters of exploratory drilling is expected to materialise against a target of 652.05 thousand meters.
8.19.2 When the Seventh Plan was formulated, equal emphasis in exploration was proposed to be placed on both Category I basins with commercial production and Category II basins where hydrocarbons have been discovered but commercial production is yet to start. This strategy was largely based on the premise that exploration in Category I basins had reached a mature stage of exploration and any incremental exploration investment would yield lower returns. However, the position altered slightly during the course of the Seventh Plan when significant discoveries (e.g. Dahej and Gandhar in Cambay basin and Neelam field in Bombay offshore basin) were made in the relatively less explored parts of Category I basins. The experience gained in the Seventh Plan therefore, suggests that prospects of future discovery of hydrocarbons are reasonably good in the structural and stratigraphic traps of Category I basins. Exploration in such areas is likely to lead to hydrocarbon discoveries at a low-risk, even though the size of the discoveries may be small. This has also been true for Category II basins which have recently been upgraded to Category I basins (e.g. Krishna-Godavari, Cauvery, Assam-Arakan) and where only 13-15% of the "resources" have been so far upgraded to "reserves". Intensive and extensive exploration work will need to be carried out in those basins which were explored in the past without success.
Production of Oil and Gas 8.20.1 During the Seventh Plan, the level of production of natural gas increased by almost two and a half times, whereas crude oil production increased by about 20% as shown in Table 12.
Table 12: Oil and Gas Production in the
Seventh Plan
1984-85 1989-90 1990-91 1991-92
OIL(Million Tonnes)
(i) Offshore 20.14 21.72 21.19 18.96
(ii) Onshore 8.85 12.37 11.83 11.38
TOTAL 28.99 34.09 33.02 30.34
GAS (Billion CuM)
(i) Offshore 4.41 13.09 14.08 13.88
(ii) Onshore 2.83 3.90 3.92 4.40
TOTAL 7.24 16.99 18.00 18.28
8.20.2 The total cumulative production of crude oil during the Seventh Plan was 157.13 million tonnes against a target of 159.14 million tonnes. As far as natural gas is concerned, cumulative production during the same period was 59.65 billion CuM against a target of 59.68 billion CuM. However, actual dispatches of natural gas for sale to consumers were only 40.41 billion CuM. The balance of the gas produced had to be flared due to technical constraints, non- lifting by consumers, non-availability of downstream facilities for utilising gas and also inadequacy of compression and transportation facilities for associated gas. The fall in oil production during 1990-91 and 1991-92 as compared to 1989-90 was largely due to the disruption in the oil production activity in Assam and technical constraints in other parts of the country.