Are Shell Oil’s expansion plans good for India?

Shell, the American, Anglo-Dutch origins, oil company and a global giant in the energy sector, has some huge plans for India. With a current tally of 83 petrol bunks in the country and a reputation for quality fuel, they are making huge strides in becoming a force to reckon with, in the Indian oil market.
We are happy they are doing well. And we were very happy to learn about their “˜aspirations to expand operations in India“™ as well. More investment, more technology, more jobs and of course, more energy for India, sounds great and we are all for it. Except, there seems to be a tiny difference of opinion on how Shell sees our future”¦
About two-thirds of the India’s electricity generation is currently coal based. One of the best ways to provide more energy with fewer emissions is to move from coal fired to gas fired power plants,” said Shell”™s President Bruce Culpepper. And this is where the problem is.
A quick look at coal and natural gas brings out some seldom mentioned facts. The first point to be noted is that in India, we have a lot of coal!

As per the ministry of coal”™s website, we have estimated reserves of more than 300 billion tons. At 2.12 kWh/kg, that is enough coal to generate 636,000,000 GWh of electricity! In 2014, we produced 1,179,256 GWh of electricity. So, dividing one by the other, we have enough coal reserves to sustain our current electricity consumption rates for 539 years! This is not even taking into account our hydro and other resources, which account for more than a fourth of the electricity generated.

Even if we were to double our electricity consumption tomorrow, we”™d still have plenty of coal for several centuries of electricity generation.
In comparison, our natural gas reserve estimates currently stand at 1,427.15 billion cubic meters (BCM) which would produce a total of 4,990,000 GWh. This would last us just over 4 years, if we could put together the infrastructure required to produce electricity from natural gas instead of from our huge installed coal-based electricity production capabilities.

Now why does Mr. Culpepper want us to switch from coal based power generation to natural gas based power? So that they can ship the gas into India and profit from managing the supply chain, of course! Will it benefit us in any way though? Very unlikely, and here is why:

Natural Gas is often touted as the answer to all our pollution problems but if you look at it closely, it most definitely isn”™t! It is true that because it is a gas, it combusts better compared to solid coal. So there are fewer large sized particulates in the exhaust gases. But the main issue, the fact that when we burn fossil fuels, we are picking up liquefied dinosaurs from the bowels of the planet and are throwing up all that carbon into the atmosphere, still remains. Therefore, while natural gas is a better solution than coal for places close to large populations (such as cities), it isn”™t going to protect the environment or save the planet.
Similarly, it is very competent cost-wise compared to coal and would therefore be a good source of inexpensive energy if we could produce it within the country or have long-term mutually beneficial trade agreements such as the one with Qatar. Without that though, switching to natural gas would only be a huge drain on forex with high import bills. And we are not even considering the loss of all the jobs in the coal mining and processing industries here.

If one looks at the world”™s history, all big leaps in industrialisation and development in general, have always been on the basis of easy access to large amounts of inexpensive energy. Coal offer us a very inexpensive source of energy (< INR 2/ kWh) while importing natural gas from Shell isn”™t likely to. So unless Shell”™s parent countries agree to make India their exclusive trade partners for commodities that we would like to export, there is no great incentive for us to be very excited about the latest expansion plans.

India does however have an enormous potential for producing green diesel from straight vegetable oils that requires large refineries, logistics and supply systems of the sort Shell would be great at setting up and operating. Perhaps Shell could seriously consider a business model that benefits both them and India, centred on biofuels instead of fossil fuels. We would gladly cheer for their expansion plans then!

Tilottama Shrinivasa