India is striving to become a gas-based economy and has been working aggressively to reach there.Its consumption of gas at 6% as of 2018 for its energy needs, is far below the global average of 22% in 2017. Only Gujarat betters the global average consumption of gas, accounting for 23% of its overall energy requirements.
But, that is to change over a period of next ten years as the stress on promoting gas natural use is going to become more than double. India is working towards increasing the share of natural gas in the overall energy mix from existing 6% to 15% by 2030. This, in volume terms would be around 600 Mmscmd from the current levels at 166 Mmscmd.
While the country wants to cut down its reliance on crude oil for obvious monetary reasons, it is helped by the fact that India’s urban population is only growing. The target of 15% natural gas in the overall energy mix is estimated to result in substantial savings for the government, to the tune of USD 22 billion in 2029-30.
It is being predicted by the energy-sector experts that the demand for energy will likely grow for the next two decades with urbanisation being the top trigger for consumption growth.
Urbanisation is taking place at a relatively rapid rate in India. The population residing in urban areas, in India,was 11.4% according to 1901 census, and this count went up to 28.53% according to 2001 census, and further reached to 31.16%, as per the 2011 census.
Moreover, the sixth largest economy is also aspiring to become a five trillion economy and its economic growth will be a crucial factor in determining how India consumes energy as a whole, let alone natural gas.
A task force was constituted by India Energy Forum – a consortium of private and public sector energy companiesto study the possibilities in the sector and the committee in its findings said that the country’s GDP will have to grow at 8% for the next decade with GDP elasticity of energy demand at 0.8 to achieve the target.
Though the task looks very ambitious and India is unlikely to achieve this target by 2029-30, even a slightly lower target would be a significant achievement.
The country has already started work in creating a National Gas Grid (NGG). The NSG is agas pipeline infrastructure which has been envisaged to facilitate an economical and safe mode of transporting the natural gas by connecting gas sources to gas consuming markets. The gas grid is crucial in determining the structure of the gas market and its development. The grid will ensure that there is an adequate availability and equitable distribution of natural gas in all parts of the country.
Around 17,000 km of gas pipeline is already in operation and another 14,000 km pipeline at different stages of development.
The overall tally of the city gas distribution (CGD) has reached to 228 areas across the country with the Petroleum and Natural Gas Regulatory Board (PNGRB) awarding 136 new geographical areas for CGD distribution during the financial year 2018-19 (Apr-Mar).
The government has announced that it will be spending a whopping 102 lakh crore on developing infrastructure in the next five years and there will be significant allocations on developing energy infrastructure. This augurs well for the oil and natural gas sector. The government previously announced its intentions to invest INR 70,000 crore (USD 9.9 billion) to expand the gas pipeline network across the country.
India is aiming at cutting the reliance on oil imports by at least 10% by 2020 and is looking for investments to prop up the natural gas sector. Petroleum Minister Dharmendra Pradhan had earlier said that there was a potential for investments by foreign investors to the tune of USD 300 billion in India in the oil and gas sector.
The country will require a higher investment for exploring new reserves and extracting from the existing ones which would require a huge investment. As on 31 March 2018, India had estimated natural gas reserves of 1,339.57 BCM.
The Indian government, in September 2018, approved fiscal incentives to attract investments and technology to improve recovery from oil fields. This could lead to an estimated production of hydrocarbon worth USD 745 billion in the next twenty years. The petroleum and natural gas sector attracted USD 7 billion in foreign direct investments (FDI) between April 2000 and March 2019 according to a data released by the Department for Promotion of Industry and Internal Trade Policy (DPIIT).
The government has also extended 40% grant to the 3,300 km long Jagduishpur-Haldia-Bokaro-Dhamra gas pipeline and also approved North-eastern gas grid project.
India was the fourth-largest importer of Liquefied Natural Gas (LNG)in 2017 after Japan, South Korea and China with imports reaching 26.11 billion cubic meters(BCM)in FY18 from 24.48 BCM in FY17, according to a media report.
Where will demand come from?
This study by IEFfurther states that the additional requirement of gas could come mainly from five sectors viz. city gas distribution (CGD), refineries, petroleum, power and fertiliser. All these sectors have the potential to create demand in access of 400 Mmscmd. CGD will likely take the biggest piece of the cake.
But there is a small caveat according to the IEF study. India will have to really aim high and work hard towards the implementation if it has to realise the 15% dream. The ministry will have to set higher targets for the piped natural gas (PNG) and compressed natural gas (CNG) by the CGD companies. At the same time, it will also have to soon begin the process of replacing the liquefied petroleum gas (LPG) consumed for residential purposes. It will also have to bring down the petrol and diesel consumption for transport and non-transport purposes. All this has to be done via use of natural gas.
India’s consumption of the fossil fuel as a percentage of global energy demand is expected to reach 11% by 2040 as against the existing 5.6% in 2017. This creates huge opportunity for the gas sector to flourish.
The power sector alone has the potential to generate a demand in access of 100 Mmscmd without any net addition of capacity. The industrial sector comprising of refineries and fertiliser sectors could generate demand in access of 68 Mmscmd, the study said.
There is an overwhelming demand to bring natural gas under the Goods and Services Tax (GST) regime from the oil and gas companies. While, these companies have been demanding for inclusion of all the five petroleum products – diesel, petrol, crude oil, natural gas, aviation turbine fuel (ATF) under the ambit of GST, they acknowledge that are revenue concerns of the governments at the state, so natural gas could be a way forward.
Lack of demand from the consumer side and project finance still remain the biggest challenge for the natural gas sector. To negate this, the industry has been demanding setting-up of gas infrastructure fund and Government of India (GoI)-funded special purpose vehicle (SPV) to takeover building gas pipe lines for next 5-6 years.
Also, a better coordination among the states and centre is needed to work together to facilitate companies in getting right-of-use (ROU) from states. The government also needs to bring necessary amendments in the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962.