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Published:February 1, 2017 3:51 PM
The article throws light on the current scenario and probable suggestions for making India a gas based economy. The major concern in present situation lies under the 3A’s of Natural Gas in India. i.e.: • Availability • Accessibility • Affordability Availability: In today’s scenario the focus of Govt. of India is to strengthen the relations with the countries exporting the crude oil and LNG to Indian markets. Somehow the concept of exploring and developing the indigenous reserves in the country is still suffering. This can be proven by the fact that still 75% of the India’s sedimentary basins have to be explored effectively. At present, only 7 are currently in production out of total 26 sedimentary basins in the country. Since 1950, around 69 TCF of gas reserves have already been discovered. Still, only 42 TCF have been established and currently producing oil and natural gas. That means, 18 TCF of reserves are to be produced and around 27 TCF of reserves are to be developed. Agreeing to a research of 12 basins throughout India, roughly 64 TCF of risked recoverable resources are yet to be found. Above our conventional reserves of gas, India also has an estimated recoverable shale gas reserve of 63 TCF, but such reserves are presently considered to be a non-primary energy option. However, Govt. of India is encouraging exploration and production activities on shale reserves and leading oil majors of India, including OIL and ONGC, have employed pilot projects to evaluate the profitability from such reserves. The future of India’s energy vision is still hidden in uncultivated and difficult-to-access basins through the nation. Technological innovations can possibly make the exploration and discovery of such reserves possible. However, issues like stranded gas based power plants and under-utilized LNG terminals are majorly highlighting India’s logistical and infrastructure challenges towards a gas based economy. Following are some facts which prove the potential of Natural Gas in India: • Natural gas accounts for 7% share in the primary energy mix • Growth of gas demand in the priority sectors has outpaced the growth in domestic production and thus, the priority sector remains largely supply deficit due to their inability to switch to expensive re-gasified LNG • Refineries (Petrochemical) and City gas distribution (CGD) have the highest share in overall LNG consumption (~35%) • As per Industry projections, re-gasification capacity is likely to reach around 52 MTPA by 2020-21 Accessibility Natural gas value chain is a priority and a critical major to improvise gas consumption in the country. Development of natural gas sources in the country through indigenous production and setting up the facilities to import LNG requires a gas pipeline network and a secondary distribution network. Currently, India has a length of 16,240 KMS of existing gas pipeline network flowing across the country and majority of which is operated by GAIL which are 14 out of the total of 23 pipelines. For a better reachability and more complex pipeline coverage, around 10 gas pipelines projects of length 10,258 KMS are under construction. Once the under-construction pipelines get commissioned, the overall capacity of the existing gas pipeline network will shoot up to 962.1 MMSCMD from the current 431 MMSCMD. Meanwhile, at a prominent pace India is constructing LNG based import facility on both of its eastern and western coasts to boost the supply of Industrial gases and have reasonably been able to cater few demand centers. However, the fact that India’s gas production in the last fiscal dropped to 4.2%, while the LNG imports grew by 15%, clearly indicates the more inclination towards import dependence than in-house production. Acknowledging the distress with respect to the accessibility of gas and how it can hinder the overall profitability, Petronet LNG terminal at Kochi is a fitting specimen to justify the same. The key roadblocks to the under-utilization of LNG terminal at Kochi are: • Under developed gas pipeline network in the south India • Issues like land acquisition and opposition by farmers. Currently, the terminal operates at 2% capacity utilization and the losses incurred due to under-utilization is reported to be INR 3.5 Billion (~$51.2 Million) in the current fiscal. However, the positive waves are anticipated for Kochi LNG with the commissioning of two major gas pipelines including Kochi- Mangalore and Kochi-Bangalore via Tamil Nadu. The proposed pipelines will be the key route in connecting the terminal to its major demand centers in south of India. The officials are immensely positive about the capacity utilization the terminal to shoot 40% by the end of 2019. Affordability: Oil and gas is a high risk and high investment business. While moving towards the gas based economy and minimizing the dependence on crude oil, there has to be enormous cash inflow in: • Shaping the LNG infrastructure • Exploration activities for conventional and unconventional energy sources • Establishing major trunk gas pipelines • Developing secondary gas distribution network Majority of yearly expenditure goes out in importing LNG through various term contracts. Presently India is in long term contract with Rasgas, Qatar and is going to establish few more long term contracts with multiple suppliers as mentioned in the table below. Customer Supplier Start Term Volume (TPA) Petronet LNG RasGas 2005 25 years 5 million Petronet LNG RasGas 2010 25 years 2.5 million Petronet LNG RasGas 2016 12 years 1 million Petronet LNG Gorgon 2016 20 years 1.5 million Gail Cheniere 2018 20 years 3.5 million Gail Dominion Cove Point 2018 20 years 2.3 million Gail Gazprom 2019-2020 20 years 2.5 million GSPC BG Group By 2017 20 years 2.5 million IOC Mitsubishi 2018 20 years 700,000 Total 21.5 million With the increasing long term contracts of LNG, the overall import bills will rise by procuring gas from multiple sources. However, this can potentially turn the tables as stiff market competition can provide a fair room for negotiations. Thus putting India in a better position for extracting the best market price for buying LNG and somehow will able to minimize the overall financial burden. At present, for E&P majors, the affordability had been a root of all their constraints due to unstable and low crude oil prices globally. The E&P companies have pulled their investments due to huge losses and low affordability. Simultaneously, domestically produced gas is sold at quite a cheaper price than the RLNG. If the gas produced domestically can be sold at a price similar to the Import parity price, this definitely will motivate domestic producers to invest more and create surplus supply in order to cater the demand centers. Conclusion: Evidently the Natural gas is next generation fuel which is economical and cleaner than its counterparts. Numerous energies have been put to prioritize gas usage in the country and this can only be accomplished if the government focuses attentively in the common interest of shifting India towards gas based economy. Some of the ways can be summarized as: • Linking Domestic gas price to the Import Parity Price • Mandate for all the states to follow the common guidelines on the issues like land acquisition, environment approvals, tariff structures and tax rates • National gas pipeline infrastructure improvement should be the need of the hour InfralineEnergy Disclaimer: The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the InfralineEnergy (Technologies India Pvt. Ltd.). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.
The article throws light on the current scenario and probable suggestions for making India a gas based economy. The major concern in present situation lies under the 3A’s of Natural Gas in India. i.e.:
• Availability
• Accessibility
• Affordability
Availability:
In today’s scenario the focus of Govt. of India is to strengthen the relations with the countries exporting the crude oil and LNG to Indian markets. Somehow the concept of exploring and developing the indigenous reserves in the country is still suffering. This can be proven by the fact that still 75% of the India’s sedimentary basins have to be explored effectively. At present, only 7 are currently in production out of total 26 sedimentary basins in the country.
Since 1950, around 69 TCF of gas reserves have already been discovered. Still, only 42 TCF have been established and currently producing oil and natural gas. That means, 18 TCF of reserves are to be produced and around 27 TCF of reserves are to be developed. Agreeing to a research of 12 basins throughout India, roughly 64 TCF of risked recoverable resources are yet to be found.
Above our conventional reserves of gas, India also has an estimated recoverable shale gas reserve of 63 TCF, but such reserves are presently considered to be a non-primary energy option. However, Govt. of India is encouraging exploration and production activities on shale reserves and leading oil majors of India, including OIL and ONGC, have employed pilot projects to evaluate the profitability from such reserves.
The future of India’s energy vision is still hidden in uncultivated and difficult-to-access basins through the nation. Technological innovations can possibly make the exploration and discovery of such reserves possible. However, issues like stranded gas based power plants and under-utilized LNG terminals are majorly highlighting India’s logistical and infrastructure challenges towards a gas based economy.
Following are some facts which prove the potential of Natural Gas in India:
• Natural gas accounts for 7% share in the primary energy mix
• Growth of gas demand in the priority sectors has outpaced the growth in domestic production and thus, the priority sector remains largely supply deficit due to their inability to switch to expensive re-gasified LNG
• Refineries (Petrochemical) and City gas distribution (CGD) have the highest share in overall LNG consumption (~35%)
• As per Industry projections, re-gasification capacity is likely to reach around 52 MTPA by 2020-21
Accessibility
Natural gas value chain is a priority and a critical major to improvise gas consumption in the country. Development of natural gas sources in the country through indigenous production and setting up the facilities to import LNG requires a gas pipeline network and a secondary distribution network.
Currently, India has a length of 16,240 KMS of existing gas pipeline network flowing across the country and majority of which is operated by GAIL which are 14 out of the total of 23 pipelines. For a better reachability and more complex pipeline coverage, around 10 gas pipelines projects of length 10,258 KMS are under construction. Once the under-construction pipelines get commissioned, the overall capacity of the existing gas pipeline network will shoot up to 962.1 MMSCMD from the current 431 MMSCMD. Meanwhile, at a prominent pace India is constructing LNG based import facility on both of its eastern and western coasts to boost the supply of Industrial gases and have reasonably been able to cater few demand centers.
However, the fact that India’s gas production in the last fiscal dropped to 4.2%, while the LNG imports grew by 15%, clearly indicates the more inclination towards import dependence than in-house production.
Acknowledging the distress with respect to the accessibility of gas and how it can hinder the overall profitability, Petronet LNG terminal at Kochi is a fitting specimen to justify the same. The key roadblocks to the under-utilization of LNG terminal at Kochi are:
• Under developed gas pipeline network in the south India
• Issues like land acquisition and opposition by farmers.
Currently, the terminal operates at 2% capacity utilization and the losses incurred due to under-utilization is reported to be INR 3.5 Billion (~$51.2 Million) in the current fiscal. However, the positive waves are anticipated for Kochi LNG with the commissioning of two major gas pipelines including Kochi- Mangalore and Kochi-Bangalore via Tamil Nadu. The proposed pipelines will be the key route in connecting the terminal to its major demand centers in south of India. The officials are immensely positive about the capacity utilization the terminal to shoot 40% by the end of 2019.
Affordability:
Oil and gas is a high risk and high investment business. While moving towards the gas based economy and minimizing the dependence on crude oil, there has to be enormous cash inflow in:
• Shaping the LNG infrastructure
• Exploration activities for conventional and unconventional energy sources
• Establishing major trunk gas pipelines
• Developing secondary gas distribution network
Majority of yearly expenditure goes out in importing LNG through various term contracts. Presently India is in long term contract with Rasgas, Qatar and is going to establish few more long term contracts with multiple suppliers as mentioned in the table below.
Customer
Supplier
Start
Term
Volume (TPA)
Petronet LNG
RasGas
2005
25 years
5 million
2010
2.5 million
2016
12 years
1 million
Gorgon
20 years
1.5 million
Gail
Cheniere
2018
3.5 million
Dominion Cove Point
2.3 million
Gazprom
2019-2020
GSPC
BG Group
By 2017
IOC
Mitsubishi
700,000
Total
21.5 million
With the increasing long term contracts of LNG, the overall import bills will rise by procuring gas from multiple sources. However, this can potentially turn the tables as stiff market competition can provide a fair room for negotiations. Thus putting India in a better position for extracting the best market price for buying LNG and somehow will able to minimize the overall financial burden.
At present, for E&P majors, the affordability had been a root of all their constraints due to unstable and low crude oil prices globally. The E&P companies have pulled their investments due to huge losses and low affordability. Simultaneously, domestically produced gas is sold at quite a cheaper price than the RLNG. If the gas produced domestically can be sold at a price similar to the Import parity price, this definitely will motivate domestic producers to invest more and create surplus supply in order to cater the demand centers.
Conclusion:
Evidently the Natural gas is next generation fuel which is economical and cleaner than its counterparts. Numerous energies have been put to prioritize gas usage in the country and this can only be accomplished if the government focuses attentively in the common interest of shifting India towards gas based economy. Some of the ways can be summarized as:
• Linking Domestic gas price to the Import Parity Price
• Mandate for all the states to follow the common guidelines on the issues like land acquisition, environment approvals, tariff structures and tax rates
• National gas pipeline infrastructure improvement should be the need of the hour
InfralineEnergy Disclaimer:
The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the InfralineEnergy (Technologies India Pvt. Ltd.). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.
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