Summer Internship Report On FUTURE CHALLENGES IN ENERGY SECTOR By S.M.

OSAMA

MBA Class of 2012

Under the supervision of Ms.Sayedunisa Warsi. Faculty Department of JAMIA HAMDARD UNIVERSITY.

In Partial Fulfillment of Award of Master of Business Administration.

JAMIA HAMDARD UNIVERSITY Hamdard Nagar New Delhi, Delhi 110062 011 26059688

Oil Industry- Future Challenges

OVERVIEW:The deep waters of the Gulf of Mexico, the frigid regions of Russia, and the hot, dusty, undeveloped deserts of the Middle East are merely the geographic challenges facing todays oil and gas exploration and production industry. But other challenges just as serious and as threatening face the industry as well. Global geopolitical forces are creating a highly volatile, rapidly fluctuating crude oil and gas market. Global competition for depleting resources continues to drive the need to lower operating costs and increase finding and recovery rates. The number of skilled resources continues to decline.

Petroleum(L. petroleum, from Latin: petra (rock) + Latin: oleum (oil)

The Latin word petra is a loanword from Greek .

[1]

).

Petroleum or crude oil, is a naturally occurring flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. A fossil fuel, it is formed when large quantities of dead organisms, usually zooplankton and algae, are buried underneath sedimentary rock and undergo intense heat and pressure. Petroleum is recovered mostly through oil drilling. This comes after the studies of structural geology. It is refined and separated, most easily by boiling point, into a large number of consumer products, from petrol or (gasoline) and kerosene to asphalt and chemical reagents used to make plastics and pharmaceuticals.[4] Petroleum is used in manufacturing a wide variety of materials,[5] and it is estimated that the world consumes about 88 million barrels each day.

Proven world oil reserves,2209

EFFECT:The use of fossil fuels such as petroleum can have a negative impact on Earth's biosphere, releasing pollutants and greenhouse gases into the air and damaging ecosystems through events such as oil spills. Concern over the depletion of the earth's finite reserves of oil, and the effect this would have on a society dependent on it, is a field known as peak oil.

PETROLEUM INDUSTRY
The petroleum industry is involved in the global processes of exploration, extraction, refining, transporting (often with oil tankers and pipelines), and marketing petroleum products. The largest volume products of the industry are fuel oil and petrol. Petroleum is also the raw material for many chemical products, including pharmaceuticals, solvents, fertilizers, pesticides, and plastics. The industry is usually divided into three major components:upstream, midstream and downstream. Midstream operations are usually included in the downstream category. Petroleum is vital to many industries, and is of importance to the maintenance of industrialized civilization itself, and thus is critical concern to many nations. Oil accounts for a large percentage of the world's energy consumption, ranging from a low of 32% for Europe and Asia, up to a high of 53% for the Middle East. Other geographic regions' consumption patterns are as follows: South and Central America (44%), Africa (41%), and North America (40%). The world at large consumes 30 billion barrels (4.8 km) of oil per year, and the top oil consumers largely consist of developed nations. In fact, 24% of the oil consumed in 2004 went to the United States alone,[27] though by 2007 this had dropped to 21% of world oil consumed.[28] In the US, in the states of Arizona, California, Hawaii, Nevada, Oregon and Washington, the Western States Petroleum Association (WSPA) represents companies responsible for producing, distributing, refining, transporting and marketing petroleum. This non-profit trade association was founded in 1907, and is the oldest petroleum trade association in the United States.

New York Mercantile Exchange prices for West Texas Intermediate 19962009

FUELS:The most common distillation fractions of petroleum are fuels. Fuels include (by increasing boiling temperature range):
Common fractions of petroleum as fuels

Fraction

Boiling Range oC

Liquefied petroleum gas (LPG) 40

Butane

12 to 1

Petrol

1 to 180

Jet fuel

150 to 205

Kerosene

205 to 260

Fuel oil

205 to 290

Diesel fuel

260 to 315

ENVIRONMENTAL EFFECTS:Because petroleum is a naturally occurring substance, its presence in the environment need not be the result of human causes such as accidents and routine activities (seismic exploration, drilling, extraction, refining and combustion). Phenomena such as seeps[50] and tar pits are examples of areas that petroleum affects without man's involvement. Regardless of source, petroleum's effects when released into the environment are similar.

Global warming
When burned, petroleum releases carbon dioxide; a greenhouse gas. Along with the burning of coal, petroleum combustion is the largest contributor to the increase in atmospheric CO2. Atmospheric CO2 has risen steadily since the industrial revolution to current levels of over 380ppmv, from the 180 300ppmv of the prior 800 thousand years, driving global warming.[51][52][53] The unbridled use of petroleum could potentially cause a runaway greenhouse effect on Earth.

Extraction
Oil extraction is simply the removal of oil from the reservoir (oil pool). Oil is often recovered as a water-in-oil emulsion, and specialty chemicals calleddemulsifiers are used to separate the oil from water. Oil extraction is costly and sometimes environmentally damaging, although Dr. John Hunt of the Woods Hole Oceanographic Institutionpointed out in a 1981 paper that over 70% of the reserves in the world are associated with visible macroseepages, and many oil fields are found due to natural seeps. Offshore exploration and extraction of oil disturbs the surrounding marine environment.

Oil spills
Crude oil and refined fuel spills from tanker ship accidents have damaged natural ecosystems in Alaska, the Gulf of Mexico, the Galapagos Islands, France and many other places. The quantity of oil spilled during accidents has ranged from a few hundred tons to several hundred thousand tons (e.g., Deepwater Horizon Oil Spill,Atlantic Empress, Amoco Cadiz). Smaller spills have already proven to have a great impact on ecosystems, such as the Exxon Valdez oil spill Oil spills at sea are generally much more damaging than those on land, since they can spread for hundreds of nautical miles in a thin oil slick which can cover beaches with a thin coating of oil. This can kill sea birds, mammals, shellfish and other organisms it coats.

Volunteers cleaning up the aftermath of the Prestige oil spill.

Alternatives to petroleum
As we know the top three oil producing countries are Saudi Arabia, Russia, and the United States. About 80% of the world's readily accessible reserves are located in the Middle East, with 62.5% coming from the Arab 5: Saudi Arabia, UAE, Iraq, Qatar and Kuwait.In the United States in 2007 about 70% of petroleum was used for transportation (e.g. petrol, diesel, jet fuel), 24% by industry (e.g. production of plastics), 5% for residential and commercial uses, and 2% for electricity production.Outside of the US, a higher proportion of petroleum tends to be used for electricity.

Alternatives to petroleum-based vehicle fuels

Alternative fuel vehicles refers to both:

vehicles that use alternative fuels used in standard or modified internal combustion engines such as natural gas vehicles, neat ethanol vehicles, flexible-fuel vehicles, biodieselpowered vehicles, and hydrogen vehicles. vehicles with advanced propulsion systems that reduce or substitute petroleum use such as battery electric vehicles, plug-in hybrid electric vehicles,hybrid electric vehicles, and hydrogen fuel cell vehicles.

Typical Brazilian fuel station with fouralternative fuels for sale: diesel (B3),gasohol (E25), neat ethanol (E100), and compressed natural gas (CNG).

Alternatives to using oil in industry

Biological feed stocks do exist for industrial uses such as Bio-plastic production.

Alternatives to burning petroleum for electricity

In oil producing countries with little refinery capacity, oil is sometimes burned to produce electricity. Renewable energy technologies such as solar power, wind power, micro hydro, biomass and bio-fuels might someday be used to replace some of these generators, but today the primary alternatives remain large scale hydroelectricity, nuclear and coal-fired generation.

PEAK OIL:-

Global Peak Oil forecast

Peak Oil is the scientific projection that future petroleum production (whether for individual oil wells, entire oil fields, whole countries, or worldwide production) will eventually peak and then decline at a similar rate to the rate of increase before the peak as these reserves are exhausted. The peak of oil discoveries was in 1965, and oil production per year has surpassed oil discoveries every year since 1980.

Hubert applied his theory to accurately predict the peak of U.S. oil production at a date between 1966 and 1970. This prediction was based on data available at the time of his publication in

1956. In the same paper, Hubert predicts world peak oil in "half a century" after his publication, which would be 2006.

It is difficult to predict the oil peak in any given region, due to the lack of knowledge and/or transparency in accounting of global oil reserves.[71] The scientist and researchers from Oxford University argue that official figures are inflated because OPEC members over-reported reserves in the 1980s when competing for global market share.[72] Based on available production data, proponents have previously predicted the peak for the world to be in years 1989, 1995, or 19952000. Some of these predictions date from before the recession of the early 1980s, and the consequent reduction in global consumption, the effect of which was to delay the date of any peak by several years. Just as the 1971 U.S. peak in oil production was only clearly recognized after the fact, a peak in world production will be difficult to discern until production clearly drops off.

The International Energy Agency (IEA) says production of conventional crude oil peaked in 2006.Since virtually all economic sectors rely heavily on petroleum, peak oil could lead to a "partial or complete failure of markets.

India's Renewable Future: Challenges and Prospects:-

India is perceived as a developing country, but it is developing at a pace that is not matched by many others. We have experienced significant economic growth. Yet the fact remains that our growth is constrained by energy supply and availability. Although we have seen an impressive increase in installed capacity addition, from barely about 1,350 MW at the time of independence (1947) to about 160,000 MW today, over 90,000 MW of new generation capacity is required in the next seven years. A corresponding investment is required in transmission and distribution.

The increasing appetite for energy that has developed in the recent past has been further complicated by rapidly diminishing conventional sources, like oil and coal. To further add to the problems of increased demand and constrained supply, there are serious questions about pursuing a fossil fuel-led growth strategy, especially in the context of environmental concerns. The challenge facing a developing nation such as ours is to meet our increasing energy needs while minimizing the damage to the environment.

This is why, while striving to bridge our energy deficit, we want to increase the share of clean, sustainable, new and renewable energy sources. Whether or not renewable energy completely replaces fossil fuel, we are determined to develop renewable energy to its fullest potential.

Driving inclusive growth

India today stands among the top five countries in the world in terms of renewable energy capacity. We have an installed base of over 15 GW, which is around 9% of Indias total power generation capacity and contributes over 3% in the electricity mix. While the significance of renewable energy from the twin perspectives of energy security and environmental sustainability is usually well appreciated, what is often overlooked, or less appreciated, is the capacity to usher in energy access for all, including the most disadvantaged and the remotest of our habitations. In its decentralized or stand alone avatar, renewable energy is the most appropriate, scalable, and optimal solution for providing power to thousands of remote and hilly villages and hamlets. Even today, millions of decentralized energy systems, solar lighting systems, irrigation pumps, aero-generators, biogas plants, solar cookers, biomass gasifiers, and improved cook stoves, are being used in the remotest, inaccessible corners of the country. Providing energy access to be most disadvantaged and remote communities can become one the biggest drivers of inclusive growth.

The National Solar Mission

Selco solar panel installation | Photo: Selco Solar Light Ltd.

The Sun is the ultimate source of energy. The National Action Plan on Climate Change in June 2008 identified the development of solar energy technologies in the country as a priority item to be pursued as a National Mission. In November 2009, the Government of India approved the Jawaharlal Nehru National Solar Mission. This is a unique and ambitious transformational

objective that aims to establish India as a global leader in solar energy by creating the policy conditions for its diffusion across the country, as quickly as possible. The Mission aims to enable 20,000 MW of solar energy to be deployed in India by 2022 by providing an enabling policy framework. By leveraging domestic and foreign investments, this framework will facilitate and provide the foundation for the private sector to participate wholeheartedly and to engage in research and development (R&D), manufacturing and deployment, making this sector globally competitive. This is the largest and the most ambitious program of its kind anywhere in the world. The Mission is technology-neutral, allowing technological innovation and market conditions to determine technology winners. The Mission is not merely an effort at generating grid-connected electricity. Rather, two of its major objectives are to encourage R&D and encourage innovation, thereby facilitating grid-parity in the cost of solar power, and to establish India as the global hub for solar manufacturing. This is what makes it a uniquely ambitious and game-changing program. In the very first year of its existence, the Mission has succeeded in catalyzing investments in 200MW of grid-connected solar power plants, with another 500 MW expected to roll in shortly.

Wind, Biomass and Hydro Energy Generation

Though solar energy is the future, wind energy is where India competes globally in manufacturing and deployment in the present scenario. India has an installed capacity of over 11,000 MW of wind energy, and occupies the fifth position in the world, after USA, Germany, China and Spain. Our policy framework in wind energy generation is extremely investorfriendly, and an attractive tariff and regulatory regime provide a strong foundation for the growth of the sector. My ministry has recently taken the decision to introduce generation-based incentives, a scheme whereby investors, as well as getting the tariff as determined by the respective state regulatory commissions, will also receive a financial incentive per unit of electricity generated over ten years. The decision to incentivize the generation of power will create a level playing field between foreign and domestic investors, and I hope this will catalyze more investments in this field by large independent power producers and foreign investors.

One of the largest wind power companies in the world, is developing a 1,000 MW wind park site near Dhule, Maharashtra, India. | Photo: Suzlon

Biomass, which is an eco-friendly source for production of electricity, also holds considerable promise for India. Our estimates indicate that, with the present utilization pattern of crop residues, the amount of surplus biomass materials is about 150 million tones, which could generate about 16,000 MW of power. Hydro projects up to 25 MW capacities are termed as small hydro, and this energy stream has a potential of over 15,000 MW. At present, a capacity addition of about 300 MW per year is being achieved from small hydro projects about 70% is coming through the private sector. So far, hydropower projects with a capacity of over 2,700 MW have been set up in the country, and projects for about 900 MW are in various stages of implementation. The aim is to double the current growth rate, and take it to a capacity addition of 500 MW per year in next two-three years.

Reducing Costs
The challenge before us in the renewable energy sector generally, and in India particularly, is to reduce the per-unit cost of renewable energy. Hence, there is a continuous need to innovate to increase efficiencies and bring down costs. Innovations can be brought about in various ways it is possible to harness lower wind speeds; the energy of tides and waves can be channeled to produce electricity; alternate transport fuels can make our journeys less carbon intensive; hydrogen can be an ideal energy storage and carrier; and it is possible to have a larger grid with lower losses of electricity. Innovations need not always be technology-based. Insightful policy interventions can also significantly increase the use of renewable energy. For instance, in India we are working with the regulators to lay down the framework for tradable renewable energy certificates. While this will enable us to achieve a larger share of renewable energy in our electricity mix, the federal regulators recent announcement of normative guidelines for provincial regulators to fix tariffs for renewable energy will provide a mechanism for better returns for renewable energy developers. We are confident that all these policy interventions will further boost investments in the sector. We are also working towards closer engagement with the banks and lending agencies to help developers gain access to easy and cheaper sources of finance.

Immense Opportunities
For centuries, the Indian tradition has worshipped the sun, the wind, the earth, and water, as sources of life, energy and creation. Todays technology provides us with a real opportunity to transform the promise of boundless and clean energy into reality. From rooftop solar power in urban agglomerations, to decentralized and off-grid solutions in remote rural communities the opportunities in renewable power are immense. We believe that governments, in their facilitative role, have to create enabling ecosystems, which will, in turn, in facilitate the healthy unleashing of the entrepreneurial spirit of the private sector and lead to the rapid development and deployment of renewable energy.

My vision is to see that every citizen of the world has access to reliable and affordable clean energy. It is for us to rise up together to take advantage of these opportunities and translate the vision of a better world for all mankind into reality.

Dr. Farooq Abdullah is the Union Minister of New and Renewable Energy in the Government of India. He is best-known for his energetic leadership of the groundbreaking and transformational initiative in renewable energy The Jawaharlal Nehru National Solar Mission. He is also known for a number of other initiatives in the renewable energy space in India notably the introduction of generation-based incentives, and the move towards the introduction of renewable energy certificates.
(This article was originally published in Making It Magazine.)

Key challenges facing the oil and gas industry:-

There may be no other industry today that demands a more diverse set of human, political, mechanical and technological capabilities than the oil and gas exploration and production industry. Competition for natural resources has driven companies to explore and produce in harsh, remote and even hostile locations, where even the simplest of logistical tasks can be difficult and costly.And as the environment grows more diverse and unforgiving and the challenges more complex, skilled human resources are aging and growing scarce. Intelligent surveillance, utilizing down hole sensors to monitor wells, is key to moving the industry forward. But to be effective, new processes, roles and responsibilities must be determined, and personnel must be trained. Today, many field workers operate independently in remote oil and gas fields. Centralized monitoring of wells will require oversight and procedural changes that may be difficult to institute.

Gathering and analyzing data quickly and effectively in a controlled laboratory environment can be difficult; in an environment such as the North Sea or Sub-Saharan Africa, this can be a monumental task. And while new technology has shown the promise of great things to come, integrating this innovative technology with existing systems, new tools and a global network of diverse business partners can be arduous. Much of the potentially useful data captured today is not typically stored, nor is it distributed to the people who can use it the most. Complex production problems such as sanding, wherein solids, sand in particular, intrude and plug wells and adversely affect production require an understanding of the issues and the tools to critically analyze data and determine historical patterns. Turning this data into useful, relevant information that will help make business-critical decisions is one of the main challenges the industry faces today.

Way Forward Strategies:-

Accelerated Renewable Energy Use

With ~ 80% of its capacity needs to be added between now and 2031/32 and 60% between 2017/18 and 2031/32, Indias electricity sector lends itself well to clean interventions. Renewable energy technologies of solar, wind and biomass and nuclear power plants most desirable Need to move towards solar thermal with storage to meet the base load requirements. Technology development, demonstration & deployment required Need cost reductions Technology development: manufacture of wind turbines to suit Indias wind profile and large capacity wind turbines of over 5 MW Needed Need for mapping & exploiting Indias off-shore wind energy Potential

Energy Efficiency and DSM

A large scale program, supported by multilateral organizations, and well-designed market mechanisms could further accelerate deployment of energy efficient

technologies.

Bio-fuels

Address productivity enhancement & R&D in second generation technologies.

On demand solutions to add value to the oil and gas industry

Recent studies in the oil and gas industry show that a significant increase in asset value can be attained by managing those assets on demand, in realtime. Todays on demand gas and oil companies have integrated their business processes end-to-end across the company and with key partners, distributors and suppliers. With an on demand business strategy, these companies are designed to have the ability to respond quickly to change, whether to customer demand, a market opportunity or an external threat. By optimizing their value net their set of customers and vendors these companies are reducing complexity and cutting operational costs. By increasing their flexibility, they are able to manage market volatility and unpredictability and to extract better value from the data they generate. They are optimizing their IT investments and tearing down silos within their infrastructures that are difficult and costly to manage. They have streamlined processes to improve employee productivity and increase efficiency. On demand oil and gas businesses are gaining greater management oversight and bringing flexibility to staffing to help meet the personnel challenges of their industry. Real-time smart surveillance and early warning capabilities are enabling these businesses to support meaningful decisions and timely and accurate actions. Remote monitoring and management allow them to act more predicatively to better manage the complex economic, political and environmental challenges of running an oil field today. Adopting an on demand business model is helping companies to more productively and profitably manage wells and fields worldwide from centralized locations, such as Houston or London.