A Case Study On India’s Dependency On Crude Oil And AN Analysis Of Alternative Solutions

1. INDIAN INSTITUTE OF PLANNING AND
MANAGEMENT
A CASE STUDY ON INDIA’S DEPENDENCY ON
CRUDE OIL AND ANALYSIS OF ALTERNATIVE
SOLUTIONS
S. NARAYANAN
C1113FIIPMPGPC20001
1

2. Acknowledgements
I would like to thank M/s Precision Infomatic Pvt Limited for giving me an
opportunity for carrying out this case study and sponsoring the same.
Special thanks to Mr. R. Subramanian, Vice- President and Mr. S. Suresh
Kumar, Project Engineer R&D, for their valuable guidance in making the
findings and analyses of this report valuable and accurate.
Special thanks to my college for all the support in making this internship a
successful one.
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3. CONTENT:
S. No Topic Page No
1 Summary 4
2 Introduction 5
3 History 6
3.1 Formation of Earth and Ocean 6
3.2 Presence and Mining of Crude Oil from Oceans 7
3.3 Oil Industry in India 7
4 Crude Oil 8
4.1 Production v/s Consumption 8
4.2 Crude Oil Percentage Composition 11
4.3 Crude Oil Indian Scenario 11
5 Alternative for Fossil Crude Oil 12
5.1 Bio Fuel 13
5.1.1 Bio Alcohols 13
5.1.1.1 Bio Ethanol 13
`
5.1.1.2 Bio Butanol 16
5.1.2 Algae Based Bio Fuel 18
5.1.3 Bio Diesel 20
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4. 5.2 Alcohol Fuels 22
5.2.1 Methanol & Ethanol 22
5.2.2 Propanol& Butanol 22
5.3 Ammonia as Fuel 24
5.4 Hydrogen Fuel 26
5.5 HCNG 28
5.6 Electric Vehicles 29
6 Bibliography 30
4

5. Summary:
Globally, there are a lot of uncertainties surrounding the crude oil
such as how much time crude oil will be around and what would the
alternate mode of energy / transportation when it gets fully exhausted.
Previous energy transitions ie from wood to coal and then from coal
to oil were gradual and evolutionary. But the transition from oil is filled with
a lot of uncertainties and looking to be abrupt and revolutionary.
This study indents to explore to bringing in some predictability on
these uncertainties and a comprehensive view of the various alternate
solutions.
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6. Introduction:
India is the 5th highest crude oil consumer in the World (1), but 70% of
our consumption is imported (2). Additionally, the automobile industry in
India grows at the rate of 12.32% (3) last year and so does the rate of
crude oil production. India ranks 24 th in the crude oil production and it
contributes just 1.04% to the world share (4). Hence we import crude oil
from other countries.
Average worldwide per-capita oil consumption is 14 barrels ( per
person per year ) while in India it is just1.2 barrels per person per year.
Even at this level of reduced consumption it is a great burden to the
exchequer with an oil bill of 26 Billion $ every year. This is so large that
even a small change in the oil price in the global market can upset the
economy and the lifestyles by a great degree.
As it is a fossil fuel, it is a limited resource. It is getting depleted day
by day without any significant replenishment. But the consumption is going
up day by day and therefore an avalanche inevitable. However, when it
would happen, what would be the social and geopolitical impact of the
same and the various solutions to handle the situations are analyzed in
detail in this study.
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7. HISTORY:
Formation of the Earth and Ocean:
The earth was formed around 4.54 billion years back. Initially
the earth was in molten state due to extreme volcanism and frequent
collision with other bodies. There was sudden large collision that tilted the
earth to an angle and this led to the formation of moon. As time went by
many other collisions occurred and this allowing the Earth to cool and form
a solid crust. The comets and asteroids brought water to the earth which
condensed as clouds and oceans. This made the life possible on earth.
Oceans are almost 4billion years old and they were formed by
out gassing of the earth’s deep interior. Scientifically they were formed by
the let off water vapors from the melted rocks of the earth. These vapors
formed clouds and surrounded the earth. After the fall in temperature of the
earth below the boiling point of water rain occurred and which fell for
millions of years and the accumulated on a cracked surface of the earth
and thus the oceans had formed. It was the force of gravity that helped to
hold this water on its surface.
After the formation of oceans life began in the form algae and
zooplanktons. Then slowly fishes and other creatures evolved in the ocean.
These algae, zooplanktons and fishes after their life span, they decay and
form fossils beneath the ocean. The fossils undergo immense heat and
pressure, which melted and formed the crude oil.
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8. Formation of the Earth and Ocean:
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9. Presence and Mining of Crude Oil from the Oceans:
Beneath the oceans we can find large amount of dead and
decay matter known as the fossils. These fossils under intense pressure
melt under the sea and from which crude oil is drilled. The crude oil is
mined by oil drilling which is then separated based on various boiling points
into different consumer products.
The first oil drilling happened in the 1800’s in California where
large amount of oil and natural gas was present in their landscape. But they
found that more oil was present near the oceans. They built a wharf for
erecting the oil rig. An oil rig is a large structure with facilities to drill oil wells
from the sea. New technologies are developed by the Americans to drill oil
and people started using gasoline as the main fuel for their internal
combustion engine. After few years they started exploring the offshore and
more oil was drilled and this became the main revenue. Recently as
technology has developed and drilling of oil was found to be easy.
Oil Industry in India:
The first oil deposits in India were found in Digboi, Assam in the
year 1889. The first well was completed in 1890 and was established in
1899 for production. During the British rule there was not much progress in
the oil drilling. Post independence, the foreign countries played the key role
in the oil industry and Oil India was still a joint venture along with the British
Company. In 1959 ONGC was formed to plan, organize and implement
programs for the development of oil resources and petroleum products.
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10. CRUDE OIL:
Crude oil is naturally occurring flammable liquid consisting of
complex mixture of hydrocarbons of various molecular weights and other
liquid organic compounds which are found in geological formations beneath
the Earth’s surface. Fossil fuels formed by the dead organisms,
zooplankton and algae buried underneath as sedimentary rocks in the sea
underwent intense heat and pressure and got melted from which crude oil
was drilled. Crude oil drilled was sent to refineries and where separated
into various fractions based on their boiling point.
Production vs. Consumption:
In the Initial years production, crude was available very close to the
surface of the earth. Only half a barrel was required to pump out 5 barrels.
But over a period of time, it has gone deeper and deeper that currently 3
barrels have to be expended to pump out 5 barrels of crude.
The total crude available, the cumulative production so far, the
balance left out and the yearly production are in the graphs below.
Renowned Geologist Dr King Hubbert’s peak oil theory , proposed in
1956 has been proved to be accurate for the more than 50 years. The
theory states that for a given geographical area the rate of petroleum
production tends to follow a bell- shaped curve. At first the rate of
production increases because of the discovery rate of oil well. Then slowly
it declines due to the depletion of resources. Below is a graphical the
representation of the production rate described in the theory.
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11. We notice that the year 2013 is well past the peak. That means that
the production should only decline from now onwards.
But the number of vehicles increase day year by year. This creates a
double whammy situation that the consumption is raising while the supply
is falling.
This will steeply widen the gap between the supply and demand, which will
create steep increases in the oil prices year on year, the signs of which is
already evident.
However, the chart below indicates that the production has not been
reduced as proposed by Hubbert till now. In fact it has been increased
marginally. This means that the problem has been pushed in to the future.
That indicates that the issue would surface out late, but abrupt.
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12. World crude oil consumption grew on an average of 1.76% per year from
1994 to 2006, with a high of 3.4% in 2003- 2004. After reaching a high of
85.6m barrels per day in 2007, the consumption decreased in the next two
years by 1.8% due to raise in fuel costs. Despite the increase in fuel cost
the world crude oil consumption will increase to 21% by 2030 with a base
year as 2007.
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13. Crude Oil Percentage Composition:
Crude Oil in Indian Scenario:
India is one of the growing economies and an increasing consumer of
energy. The price of crude oil is shooting up. India mostly relies on the
imports as the production in India is very less as well as the production rate
decreases year by year. The reason for decrease in production is due to
lack of technology and depleting energy assets, due to this India exports
crude oil from other countries. The rate of import is almost 85% in the
current year.
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14. Alternative for Crude Oil
• Bio Fuel
o Bio alcohols
o Algae based fuels
o Biodiesel
• Alcohol Fuels
• Ammonia
• Hydrogen
• HCNG
• Electric Vehicles
Bio Fuel:
Bio fuel is a type of fuel whose energy is derived from biological
carbon fixation. Bio fuel includes fuels derived from bio mass conversion as
well as solid bio mass, liquid fuel and various bio gases. Due to increase in
price of oil bio fuel is considered one of the alternative resources for petrol.
Bio Alcohols:
Bio Ethanol:
Bio alcohols are produced by the action of
microorganisms and enzyme through the fermentation of sugar, starches or
cellulose etc. Bio butanol is considered to be direct replacement for
gasoline as no modification is to be made to the engine.
Ethanol fuel is one of the most common bio fuels. Ethanol
fuel can be used is petrol engine as a replacement for gasoline by mixing it
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15. with gasoline to any percentage. Generally a blend of 15% ethanol to
gasoline is preferred. Since the energy density if ethanol is less than that of
gasoline more fuel is consumed for the same amount of gasoline hence
this decreases the engine efficiency. The main advantage is that ethanol
has a higher octane rating.
Production of bio ethanol:
The basic steps involved in the production of bio ethanol
are fermentation of sugar, distillation and dehydration. Starch and cellulose
are converted into sugar for undergoing microbial fermentation. The
cellulose part is where the ethanol is present which is broken down into
sugar and converted into ethanol.
For ethanol to be used as a fuel, water from ethanol is to
be removed by distillation. When water is removed from ethanol we get
hydrous ethanol which can be used as a fuel, whereas anhydrous ethanol
can be used in any blend along with gasoline as a fuel. Hydrous ethanol
when treated further and the water is fully removed can be used as a fuel
with gasoline.
Dehydration is where the hydrous ethanol is treated
further to remove the water completely and burnt in different combinations
with gasoline to use as a fuel.
Indian Scenario:
In India the price of ethanol is Rs.31 and price of petrol is
Rs. 70 hence the government can have a tie up with the oil industries and
make sure that the fuel bill can be reduced. The blend of ethanol can be up
to 20%. Ethanol can also be mixed with diesel as well with a blend of 5%
ethanol. In some states like Karnataka ethanol is blended at 5% with diesel
in state transport vehicles.
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16. Pros:
• Ethanol is a renewable source of energy where it uses
sunlight or solar energy to get raw materials which can be
used for making ethanol.
• As an additive with gasoline can reduce emissions from
vehicles.
• The production of sugar is more and hence producing
ethanol from it will be easier.
• The cost of oil can be reduced hence we can save money
of our imports and use ethanol fuel.
Cons:
• Other source such as corn has to be imported to India in
order to produce ethanol from other sources than sugar.
• Lack of technology to produce ethanol based fuel.
• Ethanol based fuel can reduce the efficiency of the
vehicle and hence can damage the engine permanently.
• The higher ratios of ethanol can cause more emissions;
already India is a country where pollution is high.
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17. Bio Butanol:
Butanol can be used as a fuel for internal combustion
engines. Since butanol consist of a longer carbon chain its similar to
gasoline compared to that of ethanol. The importance of number of carbon
atoms in any molecule is directly related to energy. Butanol can be used as
a fuel without any modification of the engine. It can be produced from
biomass and also from fossil fuels where both bio butanol and petro
butanol have the same chemical properties.
Bio butanol now days are produced by genetically
modified micro organisms, which set the stage to surpass ethanol as a fuel
in vehicles. Bio butanol has high energy density and this makes butanol a
more economy based fuel and a superior motor fuel compared to ethanol.
Production of bio butanol:
Bio butanol is obtained from fermentation of sugars in bio
mass. Initially butanol was fermented from simple sugars in a process that
produced acetone and ethanol along with butanol. The process is called
ABE and has used unsophisticated microbes where the concentration of
butanol was very less.
Since the old method of fermenting the sugar produced
less concentration of butanol hence researchers created designer microbes
which can tolerate high concentration of petrol.
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18. Pros:
• Bio butanol has higher energy content compared to ethanol
hence lower loss of fuel economy.
• Bio butanol can be easily blended with gasoline at higher
concentrations for use in unmodified engines.
• Butanol is less susceptible to separation in the presence of
water it can be easily distributed via conventional
infrastructure.
• It is less corrosive in nature as well as less explosive.
• EPA tests have showed that bio butanol reduces emissions
of toxic gases in the atmosphere.
• The retrofitting of ethanol plants to bio butanol plants is
feasible and when more micro organisms are produced
converting ethanol to bio butanol plants will be much easy.
• Bio butanol long chain of hydro carbon can be a stepping
stone for hydrogen fuel vehicles to the main stream.
Cons:
• The main disadvantage is that there are many ethanol
refineries compared to butanol hence production of butanol
is very less.
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19. Algae based Fuel:
Algae based bio fuel is an alternative to fossil fuel that uses algae as
its source of natural deposits. Harvested algae like fossil fuel release CO 2
when burnt but unlike fossil fuel the CO 2 let into the atmosphere is taken
out by the algae. The main advantage of algae is that it yields more oil
compared to other second- generation fuel crops.
The growth rate of algae is much faster compared to terrestrial crops.
They are easily accessible to water, CO2 and dissolved nutrients as they
grow in aqueous state. Microalgae are capable of producing large amount
of biomass and useable oil in either high rate algal ponds or photo
bioreactors.
Fuels produced using Algae:
• Bio diesel
• Bio butanol
• Bio gasoline
• Methane
• Ethanol
• Straight Vegetable Oil
• Jet Fuel
Indian Scenario:
As algae is a third generation bio fuel can be an ideal solution
for the fuel crisis. India’s has a vast coastline and tropical climate can
facilitate the cultivation of algae in India in mass scale. Many
advantages are present in India for the production of algae. The
following are the advantages
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20. • The diversity is vast in the country hence production can be
easy.
• There is a vast coast line available of 7517Km.
• Sufficient solar energy.
• Growing of algae will not compete with other crops for land
availability.
• Can grow in places away from forests thus minimising eco and
food damage.
• Algae can yield 100 to 200 tonnes of oil per acre per year (5).
Pros:
• It is a renewable source of energy.
• Absorbs CO2 as it grows.
• High energy per acre of than other bio fuels.
• Both CO2 and waste water can be used as nutrient.
• Can be grown in land unsuitable for other types of agriculture.
Cons:
• Need to be grown under controlled temperature conditions.
• Requires a large amount of land and water.
• Requires phosphorus as a fertilizer which is becoming scarce.
• Capital cost is high.
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21. Bio Diesel:
Bio diesel refers to vegetable oil or animal fat based diesel fuel
consisting of long chain alkyl esters. Biodiesel is typically made by
chemically reacting lipids with an alcohol producing fatty acid esters. Bio
diesel is mainly used in standard diesel engines. It can be used directly or
by blending with petro diesel. It can also be used as a low carbon
alternative to heating oil.
Bio diesel is produced by transesterification of vegetable oil or animal
feedstock. There are several methods available for transesterification
reaction such as the batch process, super critical pressure, ultrasonic
methods and microwave methods.
Indian Scenario:
Bio diesel in India is produced by the cultivation and processing
of Jatropha plants seeds which are very rich in oil. Jatropha oil has
been used in India for several decades as bio diesel for the diesel
fuel requirements of remote and rural communities. It can be used
directly after extraction in engines. The rate of bio diesel in India is
Rs. 26.5 which much less than the petro diesel. Jatropha oil has more
pros than cons hence it can be used as a fuel in India. One hectare
can yield around 2.2- 2.7 tonnes of oil (6).
Pros:
• Emission of toxic gases is less when bio diesel is used as a
fuel.
• Better lubricant compared with petro diesel hence increases the
life of engines.
• When burnt gives few particulates which does not harm people.
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22. • Easier to ignite for complete and efficient combustion .
Cons:
• Production of bio diesel is very expensive.
• For increasing the production more crops are to be grown which
might reduce the production of food crops.
• Bio diesel gels at higher temperature hence separate heating is
required during cooler climates.
• Degrades rubber hoses used in older engines.
Alcohol Fuel:
Although fossil fuels have become a dominant energy resource,
alcohols can also be used as fuel. The first four aliphatic alcohols are of
interest as fuels because they can be synthesised chemically or biologically
and have the characteristics to be used in modern day engines. The main
advantage of these alcohols is that they have a high octane rating. This
high octane rating helps to increase the fuel efficiency and hence the fuel
economy is high compared to gasoline.
Methanol & Ethanol:
There are many methods from which both ethanol and
methanol can be derived. Enzymes can be used instead of
fermentation. Methanol is a simpler molecule and ethanol can be
produced from ethanol.
Both methanol and ethanol have advantages and disadvantage
as a fuel. Methanol fuel is proposed as a future bio fuel often as an
alternative to the hydrogen economy. Ethanol is been used as an
additive to gasoline.
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23. Propanol & Butanol:
Both propanol and butanol are less toxic and less volatile than
methanol. Butanol has a flash point which has a benefit of fire safety,
but during cold season it will be difficult to start the engine. Both
propanol and butanol are produced by fermentation of cellulose,
which is a tricky process. Unlike the other three alcohols propanol
cannot be used as a fuel directly to engines but can be used as a
solvent. It is used as a source of hydrogen in some types of fuel cell.
Indian Scenario:
In India except ethanol no other alcohol has been tried as a
replacement for gasoline. Even though all the alcohols are cheap the
Indian government has not spoken to the oil industries for the
blending of alcohols with gasoline. This can be very cheap and can
be economically feasible. Proponal cannot be used as a fuel for
automobiles but can be used for hydrogen cell.
Pros:
• All three alcohols methanol, ethanol and butanol have high
octane rating and Anti- Knock index.
• In spark ignition engines alcohols can run at higher exhaust gas
recirculation rate and with higher compression ratios.
• Butanol long carbon chain makes it a better fuel than other
alcohols, the energy density is high.
Cons:
23

24. • Methanol and ethanol contain soluble and insoluble
contaminants; the soluble contaminants increase the
corrosion as well and can clog the fuel system.
• Methanol and ethanol are incompatible with some of the
polymers, causing swelling and reduce the tensile strength.
• Propanol’s 3 carbon chain cannot be used as a fuel.
• Propanol is difficult to produce compared to butanol.
Ammonia as Fuel:
Anhydrous ammonia can be a substitute for petroleum as a transport
fuel. Production of ammonia can be made from its primary sources as well
as from the cheapest, cleanest and greenest sources. Ammonia can be
used in internal combustion engines with minor modifications. Ammonia
has high octane rating compared with gasoline and can be used in high
compression engines. However the energy density is less compared to that
of gasoline, fuel mileage also is less.
Ammonia is a gas at low pressure but at high pressure it can be
stored as liquid. Transportation and storage is of liquid ammonia is easy.
Ammonia does not contribute to carbon emission as it does not contain
carbon. It may contribute a small amount of nitrous oxide emission which
can be controlled. Ammonia can also be used in diesel engines. But the
problem is it ignites only at high pressures, so small amount of high cetane
fuel is added. A blend with bio diesel can be used as a fuel for farm
machinery.
Indian Scenario:
India is one of the major countries in producing ammonia. They
rank 2nd in the world. The cost of ammonia is also cheap. It should be
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25. blended with gasoline in order to run the vehicles. Free from carbon
emissions hence can also reduce pollution. There are no talks about
using ammonia as a fuel in India, whereas in some countries it has
been tried. Modification of the engine is to be done which is also not
expensive.
Pros:
• Ammonia as a fuel produces much cleanser emissions than
fossil fuel burning vehicle.
• Cut the CO2 emissions drastically.
• Cost of engine modification will be less.
• Cost efficient when ammonia is blended with gasoline.
Cons:
• Commercial ammonia need to be manufactured.
• Low energy density compared with hydrocarbons.
• Its toxic in nature due to the emission of other nitrogen
components.
• Since it has less energy density the vehicle efficiency will be
low.
Hydrogen Fuel:
Hydrogen fuel is a zero emission fuel which used electrochemical
cells or combustion in internal engines to power vehicles and electric
devices. It is also used in the propulsion of spacecrafts and can be
produced in mass which can serve as a fuel for passenger vehicles and
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26. aircrafts. It is environmentally friendly fuel which can help to reduce our
dependency over crude oil but certain measures are to be taken in order to
use it as a fuel.
Hydrogen has high energy content by weight but in terms of volume
its low. The storage of hydrogen is a big challenge which requires high
pressure, low temperature or chemical processes for storage. Hydrogen
can be produced from different methods
• Steam reforming
• CO2 Sequestration
• Partial Oxidation
• Plasma reforming
• Coal
• Electrolysis of water
Indian Scenario:
In India BHU Varanasi, MCRC group Chennai, IIT Kharagpur
are among the leading research groups working on biological, bio
mass and other renewable energy routes to produce hydrogen. The
MCRC and MNES have demonstrated hydrogen production in batch-
scale from distillery waste. The pilot plant is able to produce 18000
litres of hydrogen per hour.
The BHU, IIT Chennai and the National Physical Laboratory are
working on different methods for the storage of hydrogen. The BHU
has developed various types of metal hydrides with storage capacity
up to 2.4% by weight. The storage of 1.6% by weight has been
demonstrated in pilot scale in BHU.
Hydrogen fuel operated vehicles have been developed and
demonstrated on 2 wheelers as well as on three wheelers with slight
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27. modification by BHU Varanasi. Hydrogen fuel can also save 100% of
the diesel and petrol used up today.
Pros:
• Hydrogen powered vehicles will only produce water and
therefore it is pollution free.
• It is efficient and 90% of the energy produced by the fuel cell
can be converted into electrical energy.
• Since hydrogen is found in abundance there are no chances of
exhaustance.
• No engine modification is required and can be used in any
installed engine.
Cons:
• Due to its highly flammable nature it will be hard to store in
tanks since a slight bump might lead to explosion.
• The fuel cells used in cars require the use of platinum in order
to make it work but platinum is costly and found rarely.
Hydrogen-Enriched Compressed Natural Gas:
HCNG is a mixture of compressed natural gas and 4-9 percent
hydrogen by energy. It can be used as a fuel in ICE and home appliances.
Normal CNG has been used in vehicles but it was found that the emissions
from them where high and caused pollution. Hence when hydrogen is
blended with CNG the emissions can be reduced and this can be used as a
fuel and can meet the Euro norms.
Indian Scenario:
In India companies like GAIL and IOC have taken the steps to
used HCNG as a fuel in vehicles. The ARAI has already developed a
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28. four- cylinder engine with a blend of 18% hydrogen with CNG. Eden
Energy of Australia has made a joint venture with GAIL and IOC for
using HCNG in transport. The ARAI is developing a six-cylinder
engine for transportation of the urban buses.
Electric Vehicles:
An electric vehicle is one which uses electric motors for propulsion.
Three main types of vehicles occur those that are directly powered from
external power station second from stored electricity from external power
source and powered by an on- board electric generator. Electric vehicles
first came into existence in the mid 19th century where electricity was
considered as major source of propulsion. Electricity can be generated
from various sources and hence they are different from fossil fuel vehicles.
The battery is charged and the vehicles run on the battery.
Indian Scenario:
The first electric car was introduced by the Reva Car Company
which was founded in the year 1994. Many companies tried to launch
electric vehicle but no one was successful and Reva was launched in
2001. But electric cars are not so found off in India. Even electric
bikes are available but they are also not so popular in India. As we all
know that the availability of electricity in India is less and people
would not prefer for electric vehicles.
Pros:
• All electric cars are zero emission vehicles as there is no use of
fossil fuel in it.
• The acceleration is fast and smooth.
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29. • They do not cause noise pollution.
Cons:
• Electric vehicles cannot be used for long distances.
• The charging of vehicle is a big challenge and cannot be
charged if the vehicle stops in the middle of the drive.
Bibliography:
1. https://www.cia.gov/library/publications/the-world-
factbook/rankorder/2174rank.html.
2. http://escapefromindia.wordpress.com/2008/01/01/india-imports-
about-70-percent-of-its-oil/
3. http://www.siamindia.com/scripts/industrystatistics.aspx
4. https://www.cia.gov/library/publications/the-world-
factbook/rankorder/2241rank.html
5. http://www.bionavitas.com/faqs.html
6. http://www.nuglobalnrg.com/jatropha_facts_and_figures.html
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