World Energy Outlook 2007

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South Asia is the least integrated region in the world, with trade among the countries in the region at only 2% of GDP. Trade could increase substantially if more conducive framework agreements were put in place on transport, custom formalities and other trade-related issues (World Bank, 2006c). India has been using the South Asian Association for Regional Cooperation (SAARC) 9 , in which it plays a leading role, as a forum for rapprochement with Pakistan. Trade between India and Bangladesh is heavily weighted in India’s favour and Bangladesh sees a more balanced trading regime as one condition for enhanced co-operation in other areas. Energy, particularly natural gas, and transport are key areas for co-operation between SAARC countries. Fiscal Discipline The persistence of high fiscal deficits is a potential threat to continued rapid growth in India. India’s combined central and state government fiscal deficit was around 6.3% of GDP in 2006, while the level of public debt stood at around 75% of GDP in March 2007 (OECD, 2007). The Planning Commission argues that fiscal targets should be subordinated to social spending needs, but the current fiscal deficit and public debt constrain the scope for financing much-needed public investment in infrastructure through borrowing. The large deficit also crowds out credit to the private sector. The government has accordingly proposed measures to cut the deficit, including reducing subsidies, widening the tax net and cutting government employment; but these face stiff opposition in parliament. States, too, mostly face high levels of debt which limit their ability to increase investment through borrowing. Some progress has nonetheless been made. The central government introduced a value-added tax in 2005 to increase state savings and is committed to abiding by the framework established in the Fiscal Reforms and Budget Management Act, enacted in 2003. The goal is to reduce the fiscal deficit to no more than 3% of GDP by March 2009. Curbs on spending will be crucial to meeting this goal. Some states have begun to increase user charges to limit subsidies and to reform pension systems for their employees. 10 Others, however, are lagging behind. Funding for infrastructure development could be made available by creating favourable conditions for a sustained increase in private investment. Progress in reducing the fiscal deficit in order to garner the needed funds for infrastructure investment in all sectors will be an important determinant 9. Created in 1985 by Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. Afghanistan joined in April 2007. 10. See IMF (2007) for a review of the fiscal performance of India’s states. 436 World Energy Outlook 2007 - INDIA’S ENERGY PROSPECTS
of growth in energy demand. How the deficit is cut will also be important. Reducing energy subsidies is important, even though it will make consumers more vulnerable to high international oil prices. Cutting employment in the state-owned coal sector has proven to be very difficult. Privatising the electricity sector has had mixed results in India (see Chapter 17). Investment and Business Climate The framework conditions for doing business in India have improved as a result of economic reform. India has simplified business registration, cutting the time required to set up a business from 71 to 35 days. Tax payments have been simplified and the corporate income tax rate reduced. In addition, a Supreme Court decision to simplify the rules governing loan collateral has helped to ease access to credit. Import and export processing times have fallen following the introduction of new risk-management procedures in customs and investor protection has improved as a result of changes in stock-exchange rules. But there is still considerable room for improvements. India is ranked 134th in the World Bank’s global rankings of the ease of conducting business (World Bank, 2007). Compared to China, potential investors in India face greater regulatory hurdles and other constraints on investment. India has accordingly attracted far less foreign direct investment (FDI). In 2005, FDI amounted to $72.4 billion in China, and only $6.6 billion in India. 11 But FDI has increased rapidly in India since 2004, including a three-fold increase in the year to March 2007 (OECD, 2007). The introduction in India of special economic zones (SEZs), which have been successful in attracting foreign investment in China, should increase foreign capital flows even further (Box 14.2). Foreign investment flows currently differ widely between Indian states, since production and labour market reforms have progressed at varying speeds. The richest states attract most of the foreign direct investment and those states with the most FDI also have the highest rates of investment generally. According to the World Bank, six states – Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Punjab and Tamil Nadu – attracted over 66% of total FDI in 2003, down only slightly on their 72% share in the 1990s (World Bank, 2006a). Seven of the least developed states – Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, Orissa, Rajasthan and Uttar Pradesh – attracted only 13% of FDI in the 1990s. Capital formation is an important source of economic growth in emerging economies. In India in 2000, the level of capital formation as a percentage of GDP was below that of China and roughly equivalent to that of Japan, 14 11. http://stats.unctad.org. Chapter 14 – Political, Economic and Demographic Context 437
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INTERNATIONAL ENERGY AGENCY WORLD E
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INTERNATIONAL ENERGY AGENCY WORLD E
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FOREWORD World leaders have pledged
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ACKNOWLEDGEMENTS This study was pre
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Helen Dickinson Carmen Difiglio Sim
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Tarhan Feyzioğlu John Fu Hu Gao We
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Comments and questions are welcome
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GLOBAL ENERGY TRENDS ENERGY TRENDS
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Explaining China’s and India’s
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Oil Resources and Reserves 318 Oil
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16 17 Reference Scenario Demand Pro
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List of Figures Introduction 1. Sha
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3.9 Share of Energy in World Intern
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9.7 International Comparison of Fle
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13.5 Contribution of the Coastal Re
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18.4 India’s CO 2 Emissions in th
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2.2 Sectoral Shares in Final Energy
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11.6 Key Policy Assumptions in Chin
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List of Boxes Introduction 1. Model
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16.5 Kerosene Use in Rural Areas of
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World Energy Outlook Series World E
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above current levels in 2030. To ac
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Reference Scenario. In the High Gro
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Reference Scenario, primary energy
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By contrast, faster implementation
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of this increase. China is by far t
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There are large potential gains to
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India are now so big that they are
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of the two giants in international
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second trading period (2008-2012) o
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Table 1: World Population Growth (a
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high (see below). In the longer ter
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Table 3: Fossil-Fuel Price Assumpti
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$41 per tonne to $63 in 2006 (in ye
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In line with last year’s Outlook,
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equilibrium for international trade
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CHAPTER 1 GLOBAL ENERGY TRENDS
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standards for vehicles and new meas
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Figure 1.2: Increase in World Prima
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Global primary energy intensity, me
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Figure 1.6: Share of Transport in P
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Russia, Central Asia, Latin America
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It is certainly possible that decli
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Table 1.5: World Primary Natural Ga
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developments in clean coal technolo
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in the form of coking coal, grow st
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(Table 1.8). India and China experi
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Table 1.9: Cumulative Investment in
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policy implementation is critical:
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transition economies, because there
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15.1% in 2030, compared with 11.7%
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Table 1.12: World Primary Natural G
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Figure 1.19: Incremental Non-Fossil
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Figure 1.20: Fuel Mix in World Powe
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Table 1.14: World Primary Energy De
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The regional effect on oil imports
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in the Reference Scenario to 1 481
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The High Growth Scenario projection
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Reference Scenario Energy Demand Th
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having rebounded in the early part
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80% Figure 2.3: Fuel Mix in Power G
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SPOTLIGHT Are China and India Follo
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For both China and India, the story
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imports are projected to rise furth
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equires $956 billion of capital spe
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Table 2.4: Primary Energy Demand in
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Figure 2.9: Primary Energy Demand i
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China and India in the Global Econo
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production and exports of manufactu
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International Trade and Financial F
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total coal use in 2005, and the sec
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total stock of Chinese ODI amounted
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fear that Chinese and Indian export
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SPOTLIGHT (continued) In general, e
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Box 3.2: Modelling Economic and Ene
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Table 3.2: Fossil-Fuel Prices in th
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etween 5% and 8% in the High Growth
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Table 3.3: World Real GDP Growth in
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The results presented here should b
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Energy Security in a Global Market
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■ Adequate investment in producti
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efined products are global commodit
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Figure 4.1: Share of China and Indi
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Figure 4.3: Share of China and Indi
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Figure 4.4: Oil Export Flows from t
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Table 4.3: Net Natural Gas Imports
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Coal Coal dominates energy use in C
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Energy savings Diversification of f
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In China, oil security has emerged
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deprive the companies of profits an
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western markets. Any disruption to
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2015 and 20% higher in 2030. The ri
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Figure 4.10: Major World Oil Supply
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imports is demonstrated by the Alte
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prices to all consuming countries m
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Energy-Related CO 2 Emissions Globa
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In the past two-and-a-half decades,
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Transport contributes roughly a fif
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Box 5.1: Regional Air Quality (Cont
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Box 5.2: Which Countries Emit the M
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egion (Table 5.3 and Figure 5.10).
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Figure 5.11: Change in Carbon Inten
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Table 5.4: CO 2 Concentrations and
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illustrate the magnitude and urgenc
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Energy Demand by Sector CO 2 emissi
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Figure 5.13: Electricity Generation
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The capital costs involved in stabi
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Focus on Prospects for Clean Coal T
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Technologies involving the absorpti
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There are a number of barriers to t
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scheduled to operate in the first h
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CHAPTER 6 ENERGY POLICY RAMIFICATIO
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■ Conserving energy: Conservation
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The results of our Alternative Poli
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increasing need for oil and gas. Th
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Co-operation is a two-way street; I
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Technology Co-operation and Collabo
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continue to make an important contr
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een registered, are being validated
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PART B CHINA’S ENERGY PROSPECTS
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The Political Context 1 Established
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percentage points over 2001. 3 In 2
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education. However, the government
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Capital accumulation was boosted by
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several times since the beginning o
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Yet pockets of extreme poverty rema
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year over the projection period, re
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infrastructure, housing and service
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CHAPTER 8 OVERVIEW OF THE ENERGY SE
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In the 1980s and 1990s, energy dema
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Industry has long been the largest
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Figure 8.3: China’s Energy Produc
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Figure 8.4: Organisation of Energy
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Box 8.2: Energy Goals in China’s
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Box 8.3: Coal-Based Alternative Fue
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projects are still the largest alte
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of these businesses. In its early s
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and retail competition, but much wo
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Access to Modern Energy China has a
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CHAPTER 9 REFERENCE SCENARIO DEMAND
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growth (Table 9.1). It is possible
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Table 9.3: China’s Primary Energy
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with an 89% share in 2005. By 2030,
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exported goods was only 197 Mtoe, o
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energy intensity of 9% in steel pro
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Non-Metallic Minerals The non-metal
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to 7.0% in 2005-2015 and 4.4% in 20
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Box 9.2: Prospects for Alternative
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develop their own-brand vehicles in
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standards are most stringent for he
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nearly one-fifth of the increase in
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in cities is assumed to grow steadi
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Appliance efficiency improvements w
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FGD units installed, along with the
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Table 9.8: Emissions of Major Pollu
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generate almost 1.2 billion CERs by
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CHAPTER 10 REFERENCE SCENARIO SUPPL
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Figure 10.1: China’s Oil and Gas
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Table 10.2: China’s Oil Productio
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Oil Refining China’s refining cap
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Saudi Aramco taking combined stakes
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Box 10.2: China’s Emergency Oil S
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which close to 90% are onshore (Tab
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Table 10.5: China’s Natural Gas P
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e built, because of concerns about
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coal resources lie in the provinces
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Table 10.7: China’s Coal Producti
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of 829 Mt of coal each year by the
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An outside-plan spot market has exi
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Figure 10.13: China’s Hard Coal T
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Figure 10.14: Electricity Generatio
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China is pursuing a dual objective
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Capacity Requirements In the past t
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to consumers approximately 70% of a
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8 Figure 10.17: Plant Generating Co
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undertaken because of its economic
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China designated biofuels as a prio
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could help China achieve its object
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Background and Assumptions China’
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and consumption technologies. By 20
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Reference Scenario. More than two-t
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The most striking difference concer
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The slow-down in the growth of CO 2
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power generation and improving the
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of nuclear power reaches 6% of tota
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educing industrial consumption, eit
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towards gas-based ammonia productio
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Summary of Results In the Alternati
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Table 11.8: Policy Assumptions in C
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improve and appliance ownership inc
Page 388 and 389: Box 11.2: Cost-Effectiveness of Imp
Page 390 and 391: Investment in fossil-fuel supply is
Page 392 and 393: On the other hand, higher economic
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Page 396 and 397: Of the main final sectors, the tran
Page 398 and 399: Higher international prices also bo
Page 400 and 401: 128 bcm to 216 bcm in 2030. In orde
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Page 404 and 405: Though higher economic growth would
Page 406 and 407: The magnitude of the region’s imp
Page 408 and 409: Table 13.1: Economic Indicators by
Page 410 and 411: Figure 13.2: Share of the Coastal R
Page 412 and 413: Figure 13.3: Provincial Energy Inte
Page 414 and 415: incremental final energy demand. Fo
Page 416 and 417: Industry Industry is today the main
Page 418 and 419: the population in Beijing having ac
Page 420 and 421: The coastal provinces, with a deman
Page 422 and 423: APPENDIX TO CHAPTER 13: CHINA COAST
Page 425: PART C INDIA’S ENERGY PROSPECTS
Page 428 and 429: The Political Context India is a fe
Page 430 and 431: up from 9% in 2005 and 8.3% in 2004
Page 432 and 433: Assam are on average poorer than ma
Page 434 and 435: in manufacturing productivity was t
Page 436 and 437: Economic Challenges Continuation of
Page 440 and 441: Box 14.2: Special Economic Zones in
Page 442 and 443: ecently extended into petrochemical
Page 445 and 446: CHAPTER 15 OVERVIEW OF THE ENERGY S
Page 447 and 448: after China and the United States.
Page 449 and 450: Box 15.1: India's Energy Statistics
Page 451 and 452: which was created in 1984 to reduce
Page 453 and 454: ■ Electricity Regulatory Commissi
Page 455 and 456: and production, and in liquefied na
Page 457 and 458: (because of the captive restriction
Page 459 and 460: Table 15.3: India's Integrated Ener
Page 461 and 462: of Finance's Economic Survey 2006-2
Page 463 and 464: Box 15.3: Public-Private Partnershi
Page 465 and 466: CHAPTER 16 REFERENCE SCENARIO DEMAN
Page 467 and 468: Most energy prices in India are con
Page 469 and 470: Energy demand in the residential se
Page 471 and 472: Iron and Steel Industry India’s i
Page 473 and 474: 80%. Past subsidies eliminated ince
Page 475 and 476: The transport sector currently cons
Page 477 and 478: Box 16.3: Upside Potential of Trans
Page 479 and 480: Figure 16.6: Residential Fuel Mix i
Page 481 and 482: Biomass use in urban households 14
Page 483 and 484: Kerosene and LPG supply 83% of the
Page 485 and 486: Other Sectors The services sector a
Page 487 and 488: from other sources - mainly industr
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Despite improvements in thermal eff
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Oil Supply Resources and Reserves I
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and decline to just under 400 kb/d
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expansions of cracking units. Betwe
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For crude oil alone, India's import
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Figure 17.5: Main Oil and Gas Infra
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come from offshore non-associated g
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Figure 17.7: India's Natural Gas Ba
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98 billion tonnes, principally in J
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Table 17.8: Coal Production in Indi
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15 000 Figure 17.9: Coal-Mining Pro
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Figure 17.10: India's Coal Producti
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India's coal-fired power plants are
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Box 17.4: CO 2 Capture and Storage
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Box 17.5: India's Nuclear Power Gen
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8 Figure 17.13: Electricity Generat
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India receives abundant solar radia
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in power generation alone is estima
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In 2005, revenues from electricity
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Figure 17.17: Electricity Losses by
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were shut down. Despite past proble
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CHAPTER 18 ALTERNATIVE POLICY SCENA
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Key Results Energy Demand Primary e
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energy demand in the Alternative Po
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18 Figure 18.3: Local Air Pollutant
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Box 18.1: The Impacts of Climate Ch
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Summary of Results Total electricit
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Box 18.2: Performance of India's Co
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1970s hydropower accounted for arou
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35 Figure 18.8: India's Energy Savi
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to compressed natural gas (CNG), wh
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Delhi has encountered problems rela
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Policy Scenario, it is assumed that
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Figure 18.11: Change in Investment
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tariffs in the services and industr
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Background and Assumptions There ar
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period by passenger cars, is the ma
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Box 19.1: The Vehicle Stock in the
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Oil and Gas The production profile
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Electricity Electricity generation
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in 2030 will still be low, at 2.7 t
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and rising emissions of CO 2 , NO x
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Outlook for Clean Cooking Fuel and
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focus of government policy is to ex
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The government has focused many pro
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Expanding Access to Electricity in
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stoves. According to the World Heal
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Subsidies on Kerosene and LPG, and
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Uttar Pradesh (4.4 million) and Wes
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ANNEXES
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Reference Scenario: World Energy de
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Alternative Policy Scenario: World
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Reference Scenario: China Energy de
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Alternative Policy Scenario: China
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Reference Scenario: India Energy de
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Alternative Policy Scenario: India
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Reference Scenario: OECD Energy dem
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Reference Scenario: OECD North Amer
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Reference Scenario: United States E
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Reference Scenario: OECD Pacific En
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Reference Scenario: Japan Energy de
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Reference Scenario: OECD Europe Ene
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Reference Scenario: European Union
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Reference Scenario: Transition econ
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Reference Scenario: Russia Energy d
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Reference Scenario: Developing coun
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Reference Scenario: Developing Asia
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Reference Scenario: Latin America E
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Reference Scenario: Middle East Ene
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Reference Scenario: Africa Energy d
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ANNEX B ABBREVIATIONS, DEFINITIONS
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Coal-bed Methane Methane found in c
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Other Renewables Includes geotherma
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international marine bunkers, excep
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Rest of Developing Asia Developing
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IAEA IEA IGCC IMF IOC IPCC IPP LDV
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ANNEX D REFERENCES Introduction Int
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Stevens, C. and J. Kennan (2006), H
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— (2004), World Energy Outlook 20
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International Energy Agency (IEA, 2
Page 657 and 658:
Chew Chong Siang (2006), Current St
Page 659 and 660:
Williams, R. O., A. McKane et al. (
Page 661 and 662:
Garg, A. et al. (2006), “The sect
Page 663 and 664:
Malti, G. (2007), Carbon Capture an
Page 665:
Pachauri, S. (2007), An Energy Anal
Page 674:
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