CheckMate: The Consulting Challenge

The event is a clue based and time bound online decision making challenge. It is a test of astute thinking and quick decision making.

2nd Round- 26th Sept, 2012

Participants will be evaluated on their approach and ability to think beyond the obvious and adapt to changing dimensions of the problems
2130 Hrs 2315 Hrs 2330 Hrs 0015 Hrs 0030 Hrs 0130 Hrs

Time

Caselet for Second Round would be uploaded on the Checkmate Event Page. Teams to submit their solution by email to events@nitie-prerana.com Scenario 1 released on the Checkmate Event Page. Teams to submit their changed solution by email to events@nitieprerana.com Scenario 2 released on the Checkmate Event Page. Teams have to submit the final solution by email to events@nitieprerana.com

Occurrence of event

Top 5 entries from the second round would be invited for the campus round

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Rules and Regulations: Your submission should be in a ppt/pptx format only The front slide should carry o Institute Name & address o Team Name o Detail of the team members (Name, Prerana ID, Course, Email IDs and Phone nos.) The number of slides (excluding the cover slides) should not exceed the below mentioned o Initial Case: 4 slides o Scenario 1: 2 Slides o Scenario 2: 2 Slides These details of the participants SHOULD NOT appear anywhere else in the entry submitted. DO NOT introduce the case again in your submission, write only your analysis Make suitable assumptions wherever required and mention them clearly The Prerana IDs of at least one team member should be present in the footer column on all slides. Entries should be mailed to events@nitie-prerana.com with the and subject name as: o CheckMate<space>College Name<space>Team Name The Document name for the three submissions should be (in order) o CheckMate_College Name_Team Name_Initial o CheckMate_College Name_Team Name_Scenario 1 o CheckMate_College Name_Team Name_Scenario 2 The submission should be made on time as mentioned in table above The decision of the panel of judges regarding evaluation will be final and binding. In case of any ambiguity, the decisions of the organizing committee

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Securing Indias Oil & Gas Needs Introduction It has been estimated that for Indias GDP growth to achieve and maintain a level of 8% and above, the energy supply must increase at a rate of over 6%. Being a hydrocarbon deficient state, India is heavily dependent on imported fuel i.e. Oil & Gas. Through its state run utility ONGC, India has been trying to pick up strategic stakes in Oil & Gas reserves in Central Asia, Africa and Russia. In spite of these moves India is still majorly dependent on only a handful of countries for securing its energy needs. Considering the geopolitics of South and Central Asia, Persian Gulf, where most of these sources lie, it is imperative that India pursues a strategy that minimizes risks like sabotage, high prices and political pressures. It can hence be argued that Indias strategy to secure energy sources must be an ensemble of measures like forward-looking energy diplomacy, active scouting for strategic stakes in foreign Oil & Gas fields, securing long-term supply contracts, efficient development of domestic reserves, building up strategic reserves for extraordinary situations like war and natural calamities, demand management, energy conservation and looking for alternatives fuels and unconventional sources of energy.

Current Scenario With a growing economy and burgeoning population which includes a newly confident and happy to spend middle class, the demands on energy resources are growing at a rapid pace. Presently, around 40% of Indias energy requirements are met by Oil and Natural gas. According to estimates by The Energy and Resources Institute (TERI), crude oil import make up almost 80% of the total oil requirements. Such dependence makes India vulnerable to oil shocks like disruption in supplies, price variations, and sanctions. Moreover, major portion of India's crude oil imports arise from the Middle East, with Saudi Arabia and Iran having the largest shares.
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Under such a scenario, it makes sense for India to not only ensure the security of oil supplies but also explore and develop a natural gas option since it is cheaper and more readily available. Indias current demand of natural gas far outstrips its production. Demand has ballooned up to a figure more than 75 billion cubic meters, with imports accounting for around 25-30% of the total requirements. Story So Far India has been proactive is in investing in Oil & Gas fields in regions ranging from Africa to Russia and at the same time allowing and encouraging private investments in exploration of domestic reserves. Additionally, it has been pursuing building pipelines to bring in gas from countries like Iran and Turkmenistan.

There have also been pipelines proposed from Iran, Turkmenistan and Myanmar. Due to the exorbitant cost of building a pipeline under the sea, a feasible route for bringing in gas from Central Asia or Iran will have to cross Pakistan, which is worrisome to India for obvious reasons. Security and stability in Pakistan remains a major concern, which is deterring India from going ahead with one of these pipelines, the most famous one being the Iran-Pakistan-India (IPI) pipeline.

The state owned ONGC, through its foreign arm ONGC Videsh Ltd. (OVL) has been investing billions of dollars in leases in countries like Libya (Sirte basin), Sudan (Greater Nile Oil Project), Iran (Farsi block), Syria (Production Sharing Contracts), Azerbaijan (Azeri, Chirag and Guneshli oil fields), Myanmar (A-1 and A-3 gas fields) and Russia (Sakhalin-I). But even with these investments, these are only expected to meet around 25% of Indias oil needs in 2020. Apart from this, there is increasing competition for assets from China as witnessed in Angola and Vietnam.

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Exhibit 1: Examples of Proposed Pipelines

(in million tons of oil equivalent) Supply Deficit (Imports Reqd.) 125 40 FY 2012

Oil

(in million tons of oil equivalent) Supply Deficit (Imports Reqd.) 25 50 FY 2012

Natural Gas

85 35 FY 2005

6 26 FY 2005

More recently, the $7.6-billion Turkmenistan-Afghanistan-PakistanIndia (TAPI) gas pipeline has come up. The pipeline is supposed to supply India around 38 million metric standard cubic metres a day
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These pipeline projects are in a state of stalemate either due to political quagmire or due to concerns over security and stability. But benefits of cheaper gas coming through a land-based pipeline are hard to ignore. Consider the IPI Pipeline (also called the Peace Pipeline), the 2700-km long pipeline (with 600-km run in Indian territory) which is estimated to be around 4 times cheaper than any other option, even after accounting for the transit fee to be paid to Pakistan. Notwithstanding the benefits, the project from the Indian side stands stalled due to uncertain situations in the region.

Exhibit 2: Growing Energy Demand Estimates, India (Source: McKinsey Quarterly)

(mmscmd) of gas by 2018. To put it in context, the Oil Ministry estimates that by the end of 12th plan, India's natural gas demand will be around 473 mmscmd. As long as some of these natural gas pipelines are not started, LNG will continue to be imported to fill the gap. Clearly, the role of these pipelines, in terms of overall environment of securing energy resources, is hard to ignore.

Apart from seeking sources outside, India has been trying to increase domestic exploration and production (E&P) activities. In order to attract oil majors, government created the New Exploration License Policy (NELP) in 2000, which brought in reforms and provided a level playing field for both public and private players. The downstream sector is also dominated by state-owned companies like IOCL, BPCL, etc.

India is also constructing strategic petroleum reserves (SPR) to minimize the effects of oil-shocks. Three facilities near Visakhapatnam, Mangalore and Padur are being commissioned. They will have a total capacity of around 40 million bbl of oil, which will be about ten days of refinery throughput. Apart from natural gas, India intends to develop unconventional gas resources. India already produces some coal-bed methane, with its expansion also being planned in future. In addition, India is also known to possess reserves of recoverable shale gas. Another aspect of securing Indias Oil & Gas resources is to reduce the dependence of these resources in the first place itself. For e.g. major use of Natural Gas is in Power sector. There can be an opportunity in reducing this requirement by developing alternatives for the Power sector. However, it must be added the when compared to oil, use of natural gas leads to much lower emission. Also, the strategy ahead must take into account sustainable development of resources. With increasing focus of the world in reducing the carbon footprint and emissions, the future path cannot be bereft of these aspects.
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Total Energy Consumption in India, by Type (2009)

Oil Natural Gas Other Renewables 7% 2% 1% 24% Nuclear Combustible Renewables and Waste Coal

24% 42%

Exhibit 3: Energy Consumption by Type, India (Source: The International Energy Agency)

Question:With due cognisance of various constraints, consider various options in terms of securing resources abroad, developing reserves, developing alternatives, etc. Prepare a framework for analyzing various steps that can be taken by India to secure its energy requirements (Oil & Gas) and thus, prepare a roadmap for India to secure its oil and gas supplies over next 10 years.

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