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India’s energy market: What’s ahead?

02 January 2019 IHS Markit Expert

Conversation between Atul Arya, Senior Vice President and Chief Energy Strategist, IHS Markit; Kurt Barrow, Vice President, Oil Markets, Midstream, and Downstream, IHS Markit; Tom De Vleesschauwer, Executive Director, IHS Markit; and Gauri Jauhar, Director, Energy Research & Analysis, IHS Markit; Michael Stoppard, Vice President & Chief Global Gas Strategist, IHS Markit; Paul Markwell, Vice President, Upstream Oil & Gas Research & Consulting, IHS Markit; Ravi Narayanaswamy, Vice President, Oil Markets, Midstream & Downstream, IHS Markit

This is an excerpt from India CERAWeek, Atul Arya orchestrates the discussion on India's energy landscape. Watch the full video.

Atul Arya:

There's a lot of discussion about electric mobility here in India and of course around the world. We are very fortunate that from our IHS Markit automotive team, we have one of our colleagues, well known in India now, Tom. So Tom, can you tell us what's changed globally and then of course in India in the last 12 months?

Tom De Vleesschauwer:

Great question to start with. A lot of things have changed. I think we've seen that from a global perspective, the momentum has really grown quite strongly, towards electrification. That's in most of the major markets. I think partly driven from a European perspective, we have the diesel scandal, which has been quite negative on that. So it's given a real fresh momentum to the whole industry globally. From an India perspective, I think it's been very interesting that a year ago when we were here, everybody wanted to know about India, what's happening. 100% EV by 2030. This is amazing. I think last year I made some of the comments here saying that it might be a little bit overambitious, potentially, to achieve that. But I think it was a masterstroke by Prime Minister Modi because it really put India and it's ambitions for this on the world map. And over the last year, I've had so many calls from clients saying we need to know what's going on in India, how serious is this? So the whole world knows that India wants to be a player in this, so I think it's been a really great move for that.

Atul Arya:

There seems to be a big focus in India on two-wheelers and three-wheelers. So is that the priority, you see, relative to LGB's?

Tom De Vleesschauwer:

For the time being, it will look like it. So at the Move summit a couple months ago here in India, the government seems to have laid out its initial views of the new plan for it. And it really seems to be primarily focused on two and three wheelers, because the costs associated with that are significantly lower, but it also moves a little bit beyond that. Government ambitions now will also include looking at fleet vehicles from the government, but also at these so called taxi aggregators, like the OLA's of this world. And trying to force them to use more electrified vehicles there, and hopefully bringing a change from that going forward.

Atul Arya:

So that's quite unique to India, isn't it? That in many parts of the world, OLA, and Uber, OLA are not there, but Uber and Lyft are considered to be the bad actors. Whereas in here, in India, it seems to be the government is encouraging them. Correct?

Tom De Vleesschauwer:

Yes, really, effectively, to some point, so though the government is really reaching out to stakeholders within the industry and saying look, we want to partner together, and we jointly engineer a solution, which is, in this case, more India-specific, I guess, but I also see, already, particularly in southeast Asia, similar moves happening where many of these taxi aggregators are starting to realize, well, If we want to contribute to this and embrace electrification, we will have to buy those vehicles and rent them to the drivers who'll be on our platform, because we can't wait until there is sufficient drivers who can afford to buy these cars. The business model is in a continued flux, really. And it's party driven by India and southeast Asian markets.

Atul Arya:

So Kurt, when you look at all of this, and you've been doing a lot of work around oil demand and mobility more broadly, how does it look? Are we going to have a peak in demand in the next five years or end of oil?

Kurt Barrow:

Yeah, so, it's quite interesting, right? It's hard in some ways over the long term to understate the impact that mobility's going to have. But probably not in the next five years. And the reason that everybody's so interested in this, if you look back over the last 20 years, the light-duty vehicle sector has accounted for about 40% of the oil demand growth. So it's a key growth driver. But if we look out the next 20 years, our scenarios would say that's probably flat, in an optimistic view, and is perhaps down as much as a quarter of today's demand in the light-duty sector. EV's are a part of that, I don't want to oversell the EV's, the EV's, in our basic-case case outlook, is maybe 15% of that demand trajectory change. We're still selling a lot more cars, and driving a lot more cars. We're going to essentially increase over the next 20 years the vehicle population and the trillions of vehicle miles traveled by 50%, 60%. So we're going to sell more cars, drive more cars, that's the upward trajectory, but they're going to be much more efficient vehicles on the road.

Atul Arya:

So you have been doing some studies on this, reinventing the wheel, reinventing the truck now. What's been the big findings from those studies?

Kurt Barrow:

One of the big findings is that government policies around the light-duty vehicles, this is the primary mechanism that national governments are using to reduce carbon in their transportation sector, and it looks like they will be quite successful in that, in talking with our automotive colleagues in terms of the technology that's needed to get there. On the truck side, it's interesting. There's actually even more demand, fundamental demand for ton-miles traveled, and that actually is getting more concentrated into the urban sector. If you look at long-haul versus short-haul. There's a lot of room for improvements in the basic diesel truck. And a matter of fact, policymakers have not really focused on commercial vehicles. That's really been a fairly recent policy initiative. There's less certainty, a lot of experimentation going on in terms of alternative powertrains, electrification, or CNG, LNG, the policymakers haven't really gotten involved yet to set some of those paths forward. There's going to be a lot of change in the trucking sector, but a lot of that'll be more in the medium-duty sector, maybe, versus the long-haul. But it depends on markets.

Atul Arya:

So, Gauri, I want to come to you and talk about India. So energy transition in India, and then bring it to mobility. How is India thinking about it?

Gauri Jauhar:

So Atul, the way we look at transitions, and the conference team is India's energy transition. Mobility is one of the three corners of the energy transition which India will see in the long term. The other two being urbanization and reliability. And they're all interconnected in some way. When we look at mobility, especially, tying back to comments which Tom has made and Kurt has made in terms of the growth in the LDV sector and the increase in the vehicle park, which we are going to see, it's interesting because we see that right now, India's car park is about 32 per thousand. And we expect to about 132 per thousand by about 2050, at least. It could be accelerated, and it'd be interesting to see how the OLA's and Uber's of the world accelerate that trend, as well, as people look at other mobility choices. So this could mean a lot in terms of changing the energy mix. But when we add all of the elements of the energy transition, we do see that the overall share of fossil fuels will still increase, and that means oil, gas, and coal. From now until 2050.

Atul Arya:

So, Gauri, just focusing on cars then, there is alternative fuels being explored in India, more so perhaps than in other countries recently, even including hydrogen into CNG, and then of course LNG for trucking. How realistic and how far is that progressed so far?

Gauri Jauhar:

Sure. In India, the transportation de-carbonization has two legs, one is the EV's, which is entering the mix now and is getting the government support now. But if we see CNG, for instance, CNG has been in the mix now for almost two decades. And we've seen very successful CNG penetration in New Delhi, in the public transport fleet, which actually came out of an order of the Supreme Court. And what I think we're seeing is a lot more judicial activism of both the Supreme Court and the National Gas Tribunal to drive the push of gas through mandates, because the economics, of course, works of gas as a liquid displacement option, because especially at an $85 oil world, we are looking at about 30 to 40% savings, also. So it's good economics, and it's a good environment, which presents us a de-carbonization option by looking at CNG. So that is CNG in terms of public transportation, auto rickshaws, but when you look at the long-haul sector, the heavy-duty vehicles, that is where some R&D has been done. There are some models that have been explored by TATA, for instance, but to actually get them into operation will require working on a ecosystem approach where you'd work with the OEM's, the LNG companies, and actually build it out across certain key arterial highways, for instance, where actually HDV's will make that impact, LNG-based trucking will make that impact. So that is still, I would say at least 10 years out to really start showing impact.

Atul Arya:

So Kurt, just building on that. You're truck study, are we going to see more globally different types of powertrains or fuels in the trucks?

Kurt Barrow:

Yeah, so like I said, we're really in a phase of experimentation here. And there's a couple different ways that pathway could go. And I think it's going to be very dependent on markets. So markets where you've got attractive gas and you've got the right sustained policy, we can certainly see LNG in some of the long-haul trucking. There's other places like in Europe where the prices of gases are higher and you've got city diesel bans. There we think things like hybrid trucks that are actually running on a diesel mode out on the open road, then they switch to a battery to come into town for local air quality. There's a lot of room ... I think the thing is that the ICE diesel engine, the internal combustion diesel engine, has got, because we haven't really focused on efficiency in there, we haven't had policy focus like we have had on the gasoline car going back to the '70s, back in the US, what our diesel experts are telling us is there's actually a lot of room for improvement. So that's a moving target. If we do battery trucks, or LNG trucks, they've got to beat not today's trucks, they've got to beat the diesel truck ten years from now, which is a moving target.

Atul Arya:

So Tom, you worked a lot with OEM's, the auto companies, what do they think about it? Are they thinking to have a foot in both the camps, in internal combustion engine and electric, for I'm thinking more about trucks right now than about cars.

Tom De Vleesschauwer:

Okay, well I think it's probably similar for cars and trucks to be honest, because it's the same kind of higher-level debate that needs to be had on this. In an ideal world, everybody wants to keep their feet in all the different pools really, but it's not feasible from a cost point-of-view nowadays to do that. So a lot of this is actually going to be driven by the regulatory framework, and that is giving it a very clear guidance from a light-duty vehicle perspective, for passenger cars, that the almost global political view I think at this point in time seems to support electrification. And there are many different forms of electrification. There are still like, the plugin hybrid kind of vehicles, which is seen as an intermediate solution, but which is much more attractive from a consumer perspective because we don't have the range anxiety, we can learn how to use an EV and then we're confident that we can make that move to a proper EV vehicle. And that's something that we see happening quite a bit today. On the heavy-duty side, it's all really to do about cost and I guess the confidence of the risk associated with a new powertrain. The trucking industry is notoriously slow in adopting new ideas and new concepts, because it works fine, it's reliable, why would we change it? Any minute of downtime is a cost for us. So it's much slower, what we see happening there. And I think it's slightly a little bit more right now driven by cost, where we're seeing, for instance, in Europe's ... southern Europe, there is a bigger interest in CNG trucking, because it works, it's cheaper than EV or any other alternatives, and it contributes to the air quality in the cities. We see localized solutions at this point in time, but I think moving forward, at least from what we're seeing on the heavy-duty side, there are still many miles left in the diesel engine when it comes to delivering goods and services around the world.

Kurt Barrow:

If I could just add to that, one of the interesting findings we had is we went into this thinking, okay, the consumer of light-duty vehicles, that's not a real economic decision, when we go buy a car there's other considerations. With trucks, would be just the economics. Lowest cost, total ownership, that would be the winner. But it turns out that it's more complicated than that, because the trucks, you buy ... the truck line buys a new truck and runs it hard, and then they sell it, so there's a secondary value there that's very important in the economics. It's a very fragmented industry, even in India, China, US, go around the world, the ownership of those trucking fleets are many, many small and medium-sized companies that just don't have the wherewithal, the risk tolerance to try new technologies and experiment, a several hundred thousand dollar experiment on their truck, not knowing the reliability and the resale value and the functionality and so forth. It's actually going to move slower, but if there are key winners in this, that's actually a driver for consolidation in the industry to where some of the big trucking lines can actually take that technology, have a competitive advantage, and actually create some consolidation in the trucking sector.

Atul Arya:

So Gauri, in India the transportation policy has been driven a lot because of air quality, dealing with local air quality. How do you see, how do we see as IHS Markit that evolving ... when you look at that versus all the different drive trains and things Tom and Kurt have talked about?

Gauri Jauhar:

Sure. Atul I think there will be a lot of emphasis on using, for instance, taxation as we've seen preferential taxes for EV's as opposed to other modes of diesel and petrol cars. So the taxation will be one tool to influence consumer choice. But I think we also need to look at behavioral changes in terms of ... India has a very young population, as we always say, there's a demographic dividend, and part of that dividend is capturing those behavioral changes in our own modeling, which we have been incorporating into the Reinventing the Wheel study, for instance, and that really means people going possibly increasingly onto public transport or actually availing the ride hailing services far more. So I think those are the two key behavioral changes to watch out for as we look at a population which is, in the future, going to be 65% under 35.

Atul Arya:

So, just a quick point on that, what is the utilization currently of the cars in India, and where is the target? Hopefully, that's some good news there?

Gauri Jauhar:

Yes, there is some good news there, because the current utilization is about 5%. And the targeted utilization is about 15%. These services, actually, the ride-hailing services, can increase that utilization rate while de-carbonizing the transport mix as well.

Atul Arya:

So we may see a path where hopefully we have the same number of cars which are used more often and those cars are electric or some hybrid, or CNG ...

Gauri Jauhar:

Right. Absolutely. I think there is an element of, for instance if you look at the Delhi CNG case, when CNG was adopted in Delhi back in 2002, we did actually see an improvement in air quality. So you will see changes because of that. Having said that, there are other sources of pollution as well, so air quality is not only linked to the transport mix. If you look at the sources of air quality issues across countries, it's a mix of power sector, coal burning, biomass, and transportation, so it has to be looked at more holistically, the de-carbonization issue in India, as well.

Atul Arya:

So Kurt, the other big thing happening in the world of energy is something called the IMO. Tell us and how is India position on that?

Kurt Barrow:

Sure, sure, and that one is not long-term. That one's like almost immediate. We're calling it the IMO scramble. So this is really uncertainty in the policy and in the compliance pathways really created a hindrance to investment in either the refining industry or the shipping industry. And now neither is going to be prepared. We think it's going to be quite disruptive Atul, a lot of very, almost extreme pricing, particularly around the bottom of the barrel. The Indian refining industry's in a pretty solid position just because of the complexity of the refining system you've got here. It's a fairly small bunker market here, but the price relationships and really the feed stock flows of the low-sulfur, high-sulfur residuals, India's probably in a pretty good place, depending on the asset.

Atul Arya:

I want to start with Gas. Michael, and Gauri, you may want to come in on this. Gas and renewables, this seems to be a common question, some people, and I think I would agree with them, that gas is the loser. Because of renewables, policy, incentives and coal. Because it's cheap.

Michael Stoppard:

That's one possible outcome, but I think of it as slightly different where I think of thermal generation as the loser. Every kilowatt hour of electricity that's produced by renewables, by wind or by solar, is a kilowatt hour less that will be produced by thermal generation. But here's the key. Here's the rub. As you bring in more and more renewable generation into the mix, it actually turns out that there's a strong case for gas acting in unison with renewables. A very good source of backup, very flexible, minimizes the emissions, and reduces the capital cost of the backup. So I think we need to slightly question or revisit the idea that coal is cheap if coal is not in the long term going to be operating on a base load basis.

Atul Arya:

Yeah, and Gauri, you always remind me there is captive power and there's grid power. And that makes a big difference. So what is the difference?

Gauri Jauhar:

Sure. The big difference Atul, if you look at grid-connected power, you are looking at a capacity of 315 gigawatts, but if you start looking at captive and diesel-backup gen sets, you're looking at another 100, 120 gigawatts, there are several ranges, estimates based on different sources. This is a segment which is paying three to four times the cost of coal-based electricity, which is the lowest in the merit order. So the merit order will clear coal, but will not clear gas in many instances. So I think the idea here is to see, at least in the captive, let's start, and I'll pick on the term which Kurt used earlier in the trucking side, the fragmented nature of the industry. This captive industry, this, especially the diesel gen set industry is highly fragmented. The gas industry has a challenge to go and actually deal with that fragmented industry and can work those customers either from diesel gen set backups into gas-based gen sets based on an economic advantage. And increasingly we set up a lot of foreign multinationals, for instance, who are in India, in cities like Bangalore, who have global targets for meeting their own commitments to investors on climate change.

Gauri Jauhar:

And they can meet those targets if their global centers in India, their knowledge centers, for instance, similar to the RE, 20-22 companies, actually meet those targets by making these choices. And we've increasingly seen that demand come up from the consumers to make those choices.

Gauri Jauhar:

And to Michael's point on gas renewable integration, I think in India we still haven't seen the impact of what high-penetration of renewables will do. We have huge targets, and the IHS Markit, our research shows that with about four years going to be out of achieving those targets, so we will not achieve it within the timeframe that has been set out. So we still really don't know what impact a high amount of renewables is actually going to have. And there are estimates that to have a high penetration of renewables that is being looked at, you need somewhere about 15 to 30 gigawatts of spinning reserves in the system, at least, at the penetration rates we're seeing right now.

Atul Arya:

So there is hope for gas in India?

Gauri Jauhar:

There is hope for gas.

Atul Arya:

So Michael, a lot of questions about the gas hub in India.

Michael Stoppard:

Just a word on the renewables, and then I'll come to the gas hub. Quick word on the renewables. If you want to look at what happens when you bring in a lot of renewables into a coal-based system with cheap coal dispatch, have a look at what's happened over the last 15 years at Spain in Iberia, that's a good case study, and I'm afraid it's a story of non-performing assets on the thermal side. And it's quite clear that investment in gas would have been a better bet than investment on coals. I'll just leave you with that provocative thought.

Michael Stoppard:

Gas hub, there are plans to get gas hubs going across Asia, and of course a big focus here in India. The motivation an the driver for that is to get transparency of pricing. Transparency of pricing is always a good and helpful thing to optimize a market. We wait to see the details. The challenge and the issue is when you have a different set of pricing in place of how that can operate. There are experiences around the world where once you get a hub and you get a transparent spot price, it will cause some tension and strain when you have different regulated prices in the mix. So that's the challenge that we see here in India.

Atul Arya:

Paul, I'll start with you on two questions. One is digital technologies, you showed a wonderful chart. I think there's a degree of skepticism as to hype versus reality.

Paul Markwell:

Yes. At Ceraweek last year, we termed it like there was a tsunami of opportunity for innovation. But very hard to actually pic the winners, the winning technologies. And I think I still would say that that's true. The winners in this new opportunity from digitization are probably those that quickly sift through and identify where they can actually add value and focus on those. Otherwise, with the amount of information and ideas that's available, you could spend all your time trying to absorb things. I think in the industry, though, there are some real nuggets of application. It will take a bit of time, but I think the industry will start to be able to adopt new practices.

Paul Markwell:

If I could just pick one as an example, the whole idea that you can develop the field based on a digital model, let's say of a development, it'd be like a digital twin. Meaning that it just makes it easier to, each time you go through development, use an existing design, look at what's been done before, quickly adopt it, you've already got your standards there, and get on and do it. It sounds really straight forward, but it hasn't been the practice of how the industry's operated for a long time. And now we're seeing more and more, particularly in the offshore situation, the North Sea, for example, is becoming the norm and helping to speed up development.

Paul Markwell:

So I think that there's ... and we see it. We study case examples in digitalization because to us that's the only way that we can get our heads around what's valuable and what isn't. But I think that's the way forward.

Atul Arya:

I think offshore is a good example. Because offshore has seen, and we can see in the North Sea a large number of innovations, both in Norway and well as in UK North Sea, right?

Paul Markwell:

Right. And I wanted to say, one of the challenges, let's say you crack that nut, so that you get smart at figuring out the right practices and getting focused, then the next challenge is actually deployment. Because it's all very well to have a practice and an approach that you can apply in one country with one set of regulations and say for a particular development type. Well the successful companies will be those that can replicate that across their portfolio. And if you've got a very wide portfolio internationally, a whole different range of local content, or local regulation about getting approvals, that just makes it more complex. I think that makes it very interesting as well.

Atul Arya:

Yeah. So there is a question on supply, and we are fortunate we have three of our top experts here sitting with me. So with the sanctions in Iran, and then Venezuela in decline, do we feel that Saudi Arabia, US, and Russia, the big three, can then make up that decline? Maybe Ravi, I'll start with you.

Ravi Narayanaswamy:

Sure. I think, if you look at it from a shorter-term perspective, like I said, the US, it's not so much about the producing capability, it is more of the off-take of the production to the market. So that is where the constraint is. What's happening in US market currently is that people are drilling wells and then also more or less it is completed and just waiting to produce. So they are in the stage where they are ready and once the off-take capacity comes online, they'll be able to ramp up production in a very short period of time.

Ravi Narayanaswamy:

So till that production volumes are ... or the off-take capacity constraints are relieved, we will still see that the market will remain in time, and once that off-take capacity comes online, we do see, yes, the market will start coming back to balance.

Atul Arya:

Paul, one other question related, maybe you can answer that, is sort of how do we see the maximum potential from US and convention, not in the next 18 months, but beyond that. How high could it go?

Paul Markwell:

Well, we showed a very rapid buildup of US unconventional out through about 2020, where the bottle-necking of the infrastructure and then quite rapid ramp up. I think our global outlook for tight oils, so it's mainly North America, but including Russia and Argentina and so on, we have it peaking more or less around 12 million barrels a day, as I recall, around 2022, 2023 level. Now that doesn't mean that ... that's an estimate, of course, there's a actually very high up-side on that. But it does reflect, I think, that recognition that in North America, the mature plays start to play out. It gets harder to find new plays. So you're really squeezing more from the existing ones if you want to increase that.

Paul Markwell:

I think the way the technology has developed in the last few years has surprised anyone. And I think at almost any point, if you'd been asked to look forward at future growth, you would have underestimated. It's very hard to say how much further that can go, but I'm always one that says there's a lot you don't know yet in innovation, and there's a lot more up-side. I think there's also a lot of up-side in lots of different countries that have hardly started yet on tight. And India, of course, has it's own share of tight rock to work with.

Atul Arya:

So Kurt, there is a question also on refining, reducing all this tight oil, which is quite large and is displacing some of the other more nastier crudes. So how do you see that kind of working out through the global refining? Is that a challenge for the refining system?

Kurt Barrow:

Yeah, it's a near-term town. So I'd say long-term we'll build the refining system we need to run the crudes that the world makes and produce the product that the consumers need. But we have seen, actually a really pretty notable shift in the resid bank because of those kind of three things. Those pipes that Ravi talked about that are constraining, Permian are also constraining some of the oil sands. I've seen some very deep discounts in the Canadian oil sands, the Venezuelan situation that Ravi laid out. So yeah, I think what it's really doing is dumbelling the crude supply, if you will. So a lot of light suite crude, some heavy sours that are still coming out of the Middle East region, and so forth. And now very much in the middle, so it's creating a bit of a challenge for refiners, but it's a pretty flexible system.

Atul Arya:

And also, you see more refineries being built here, in Asia.

Kurt Barrow:

Absolutely.

Atul Arya:

And where will they be shut down?

Kurt Barrow:

So they'll shut down more in the developed ... so if you, actually it's a very interesting question, right? Actually if you look back at the last decade, we've had what I'd call maybe planting and pruning. If you look at it, we've had about a million barrels a day Europe demand growth, per year over the last ten years. But we've built about two million barrels a day per year of new refining capacity, mostly here in east of Suez markets. At the same time, we've shut about a million barrels a day of refining capacities. We've shut like nine billion barrels a day of refining capacity. Where we've shut that, some of the Caribbean refineries that were uncompetitive, some of the European refineries were uncompetitive, Australia, Japan, OECD markets. We've seen a little bit of a pause in that, but that's really related to some of the feed stock supplies, and the IMO that actually makes some of these marginal refineries pretty competitive for a little while.

Kurt Barrow:

After we get out of this IMO period, we're expecting a pretty steep uptick in rationalization, a much more competitive refining market for a while. Because we're going to overbuild and overreact a little bit to the IMO. It won't be enough capacity to actually help a lot in 2020, but we get out in the mid 2020's period, we'll see refining margins come down.

Atul Arya:

So I have a question, I can ask everybody. So we are talking about energy transition, and hydrocarbon versus non-hydrocarbon. How do we see that balance going into the future? So maybe start with you Michael, gas is it transition fuel, destination fuel, both? How do you see outlook for transition?

Michael Stoppard:

Well I think you touched on it in your earlier question. For us, the question is whether the future particularly in power is going to be green and blue or green and black. Green and black is coal in renewables. Green and blue is gas and renewables. And it could go either way. Europe is a case study of green and black. You don't get the emissions that you need if we're to get any chance of really tackling the carbon budget that's being talked about last weekend by the UN. We've got to go for a green and blue, or renewable and gas transition.

Michael Stoppard:

The advantage of gas, and here's another key point, is not just that it's a low greenhouse gas emitter, but also it can be brought in very quickly, and that's really important.

Atul Arya:

Yeah, I think ... Gauri, how does the transition in India look in terms of climate balance?

Gauri Jauhar:

Sure. So Atul, I think it's different industries have different paths in the fuel mix. If you're looking at transportation, the choices will be moving from liquids to new generation fuels. Also looking at enhanced efficiency standards, cleaner specs on, like VS6 coming in. So it'll be cleaning the oil supply chain as well, but at the same time looking at biofuels, bio-ATF, bio-CNG. At the same time, if you look at the power sector, it's the coal-gas transition that Michael mentioned. And if you look at the whole urbanization transition, I think, which was sort of the three-legged stool we have of transition here, is in urbanization, we've seen 50% of India will be in urban centers by 2050. And that can mean a huge increase in things like air conditioners, and that means, again, a huge increase in electricity demand. And the drive towards efficiency is also very important to manage the per capita consumption. And I think the energy transition is very closely linked to economic variables. Right now our per capita income is $2,000 per capita. And we expect India to reach 5,000 by 2036. That's would be an inflection point, potentially, for things to really start turning, which we've seen in the transition stories of many countries. 5,000 is where things start changing for countries in terms of materiality.

Atul Arya:

So in interest of time, I'm going to give the last word to Tom. The auto sector is very much in the spotlight, isn't it, in terms of more broader, not just talking India, globally, as to be transitioning faster. Where do you see that happening and maybe use some data on how many cars, EV's, and what do we see, say, in 2030, 2040, pick your time?

Tom De Vleesschauwer:

Okay, well first of all, I don't think there's going to be like one clear winner in all of this, even in a fairly long timeframe that we see. It's not one winner takes all. There's so many different usage patterns for the modes of transport that we have, and so many localized solutions depending where we are in the world. So that's important to take into account. But it is clearer, I guess, from a long-term perspective, 2030, say as a starting point from that and beyond, as the work we did in Reinventing the Wheel, is that from a passenger car perspective, there is a huge pressure to move towards forms of electrification. Where does that bring us? I think I'll just bring it back to like the India perspective, really, for now. Is that we don't have expectations of 100% by 2030.

Tom De Vleesschauwer:

I think right now in India, there is a lot of kind of a bit of a lack of a firm regulatory vision for the future, and hopefully the forum today and tomorrow can help contribute to that discussion. Due to that uncertainty, I would kind of see it more that the vehicle manufacturers here in India are going to at least look at offering one product, maybe two or three if you're leading in the market. But overall by 2030, I think we would be very happy in the current uncertainty situation that we have something like five to eight percent electrification in light vehicles in India.

Tom De Vleesschauwer:

Now if we get a much more firmer or clearer vision from a regulatory perspective, that could easily double or more from that. So that's kind of the range that we need to look at.

Atul Arya:

Okay. Well thank you very much. Thanks everybody. Please join me in giving them a big hand. So all of these people are here for today and tomorrow. So please reach out to them if you have follow-up questions. I'm sorry I couldn't ask all the questions you had, there were some very, very interesting questions. We have our last session of the morning, so thank you again for your patience, and we have a real terrific opportunity because we have some very important colleagues here from OPEC, Dr. Ayed Al-Qahtani, who is the head of research, director of research at OPEC, and at OPEC has agreed to provide their 2018 oil markets outlook.

Posted 27 December 2018

This is the a conversation from India CERAWeek and has been professionally transcribed as accurately as possible. Please note, some words and phrases may have been unintentionally excluded.


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