Domestic consumption drives India’s economy

India’s energy story is one driven by domestic consumption and growth — a story
that began over the last few years with GDP growth rates in excess of 8%. For many years, the services sector made up the bulk of India’s GDP. But lately, much like the United States, India’s depreciated currency, the rupee, has helped increase its exports —causing the manufacturing sector to grow faster than the services sector.

Growth in both the service and manufacturing sectors has led to better jobs with
increased salaries, leading to an improved standard of living. Computers are penetrating the middle-class population at an astounding rate; air conditioners are now considered a necessity rather than luxury. The Indian consumer is demanding more cars, more air travel, more power and more plastics.

All of these require hydrocarbons. Even as the world economy slows down, it appears as though India is among the few economies that may continue to grow. The negative effects of a global economic slowdown will likely reach its shores, however, India’s story will be driven by domestic consumption — and it appears as though Indians have only just begun consuming.

In the immediate future, India’s energy consumption is projected to grow nearly
three to five times as fast as that of the United States. When compared to Europe, it is likely to grow six times as fast. Studies indicate that as a country develops, less incremental activity is required to keep up the growth momentum. With a trilliondollar economy, India needs to improve installed capacity from 130 000 to 210 000 MW over the next five years to sustain the 8% growth rate of GDP, an addition in the range of 14 000 MW per year. Projects totaling 48 000 MW are already under construction and of the remaining roughly 30 000 MW capacity, the preliminary work of scouting for land is already under way for 25 000 MW. For the most part, the nuclear, hydroelectric and coal-based projects seem to be on schedule but the gas-based projects depend on efficient fuel pricing.

India is also moving toward increasing its crude oil production with great urgency and recently held another series of auctions for oil exploration. ONGC, the national oil exploration company, has been pursuing oil blocks with extraordinary vigor. Cairn Energy, Edinburgh, U.K., an independent firm actively exploring and producing oil and natural gas in India, sold its North Sea assets to focus on the Indian Subcontinent. In 2007, Cairn Energy spun off its Indian business as Cairn India Ltd.

Cairn India is building a 590 km, 61 cm pipeline to transport crude oil from the Mangala terminal in Barmer in the state of Rajasthan to the coast of Gujarat. The oil pipeline is scheduled to be completed in the latter half of 2009. An adjoining 20 cm natural gas pipeline is also being built. GE Energy is supplying Cairn India with 32 of its J420 GS Jenbacher gas engines that will generate electricity for what will be India’s first cross-country, heated crude oil pipeline. The engines will be installed at 32 sites along the pipeline’s route to meet the 1 MW load requirement at each station.

The engines, powered by natural gas supplied from the adjoining pipeline, will be primarily used to generate power for a Skin Effect Heat Management System (SEHMS) that will maintain the fluidity of the waxy crude oil as it’s transported. This is the largest single order of Jenbacher engines in India as the country works to rapidly expand its energy generation and delivery infrastructure to support continued national economic growth.

Once in operation, the Rajasthan field is expected to produce 175 000 barrels
of oil per day, bringing about an increase in the oil production levels for the Cairn India company and making a significant contribution to reducing India’s current oil supply and demand imbalance.

The upswing in the economy has also created a boom in offshore shipping. Caterpillar Marine Asia Pacific (CMAP), together with Caterpillar dealers Gmmco
Ltd. and TIL Ltd., have joined forces to address the needs of shipyards and customers on the Indian subcontinent. The CMAP office in Banglore, India, provides local marine expertise on demand.

Since 2005, more than 80 MaK engines have been sold into Indian yards, with deliveries scheduled through 2009. CMAP is confident that it can further increase its business with domestic yards and owners in the future. India will see several new shipbuilding facilities established by domestic and foreign investors in the medium and long term, many of those also dedicated to production of vessels matching the CAT and MaK power range.

Greatship Anjali.jpg


with two MaK 8 M 25 marine engines.

CMAP is confident that it can further increase its business with domestic yards
and owners in the future. India will see several new shipbuilding facilities established by domestic and foreign investors in the medium and long term, many of those also dedicated to production of vessels matching the CAT and MaK
power range.

Wärtsilä also has a large presence in India’s marine sector and was one of the first Finnish companies to enter the Indian market in the early 1980s. Over 300 Wärtsilä and Sulzer engines are installed on Indian flagged vessels belonging to the Navy, Coast Guard, Port Trusts and Merchant Shipping, apart from those on floating cranes and offshore oil rigs.

Recent order activity includes a propulsion package order from Sealion Shipping, the U.K.-based operator and manager of the Toisa fleet. The units are to be installed in a series of three multipurpose subsea and ROV offshore support vessels (OSVs), to be built at the ABG Shipyard in India.

Over the years, Wärtsilä extended its offering to the market by not just supplying equipment, but by positioning itself as a provider of turnkey packages. Wärtsilä has over 1000 employees in India and a total installed base of 4500 MW (power plants and marine engines).

To transform the Indian economy, the investment in power is not just essential but is also the most logical path going forward. Although India has a long way to go, the direction looks clear and strong. In these tentative times, India’s hydrocarbon space seems to hold promise as an economic safe haven — combining strong demand with a rapidly evolving supply scenario. Could this be the dawning of the next hydrocarbon society.

The new multipurpose.jpg


subsea and ROV offshore support vessels for sealion shipping are of
Vik-Sandvik design.

Leave a Reply