India’s energy demand is likely to grow for the next two decades on the back of rapid urbanisation and continuous economic growth, with the share of oil and natural gas in the overall energy basket expected to see a significant uptake.
By Kumar S
India is working towards increasing the share of natural gas in its overall energy mix. The share of natural gas in India’s primary energy mix was just above 6% in 2018 which is far below the 2017 global average of 22%. At 23%, Gujarat is the only state on par with the world average.
The country aims to take it to 15% by 2030, which in volume terms would be 600 Mmscmd from the current levels at 166 Mmscmd.
India Energy Forum – a consortium of private and public sector energy companies – constituted a task force to study the possibilities in the sector. According to the findings of the task force, 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.
Urbanisation is taking place at a relatively rapid rate in India. According to a 1901 census, population residing in urban areas in India was 11.4%. This count went up to 28.53% according to a 2001 census, and further reached to 31.16% as per the 2011 census.
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 is striving to become a gas-based economy by creating a National Gas Grid (NGG). While the target of 15% natural gas in the overall energy mix will not only result in substantial savings for the government but also help it reduce its carbon footprint. It is estimated that the savings would be to the tune of USD 22 billion in 2029-30.
According to a media report, 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.
This study by India Energy Forum further states that the additional requirement of gas could come mainly from five sectors viz. power, fertiliser, city gas distribution (CGD), refineries and petroleum with CGD leading the way. All these sectors have the potential to create demand in access of 400 Mmscmd.
The study claims that the demand could be raised through setting and achieving higher targets for the piped natural gas (PNG) and compressed natural gas (CNG) by the CGD companies and also replacing the liquefied petroleum gas (LPG), petrol and diesel, consumed for residential, transport and non-transport purposes, with the natural gas.
The third biggest Asian economy will be the biggest consumer of the fossil fuel with its demand as a percentage of global energy demand to exceed 11% by 2040 as against 5.6% in 2017.
The power sector 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 claims.
Gas Infrastructure Network
Around 17,000 km of gas pipeline is already in operation and another 14,000 km pipeline at different stages of development. The Petroleum and Natural Gas Regulatory Board (PNGRB) has awarded 136 geographical areas with city gas distribution during 2018-19 taking the overall tally to 228 areas.
The government has extended 40% grant to the 3,300 km long Jagduishpur-haldia-Bokaro-Dhamra gas pipeline and also approved North-eastern gas grid project.
As of 31 March 2018, India had estimated natural gas reserves of 1,339.57 BCM. The country will require a higher investment for exploring new reserves and extracting from the existing ones. The government has announced its intentions to invest USD 9.9 billion to expand the gas pipeline network across the country.
In September 2018, the Indian government 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. Petroleum minister Dharmendra Pradhan 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, as the country looks to cut reliance on oil imports by 10% by 2022.
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).
While, the network expansion has seen a considerable uptick in recent years, the sector is not without challenges. One of the major concern areas is the lack of demand from the consumer side and project finance. 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.
The industry has also been facing problems in getting right-of-use (ROU) from states. The government needs to bring necessary amendments in the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962. Also, a better coordination among the states and centre is needed to work together in this direction.
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.