Natural Gas Scenario for India

Natural Gas is rapidly becoming the most exciting resource of energy. Its share in the world energy consumption is expected to increase to 28% by 2025. India is making enormous efforts to maximize its share in the overall energy basket to meet economic growth targets. A gradual shift from Oil as the primary source of energy, to a more environmental friendly fuel like Natural Gas has already begun, but the momentum for large scale gas trade is yet to pick up.

India is a growing market and has seen an economic growth of around 6% during the past decade. Emphasis has been given for the Gas sector development to maximize its share in the overall energy basket to meet economic growth target of 8% every year. This sector has been given the highest priority and has also been opened for private participation in the country.

Usage Pattern
About 80% of the Gas is consumed in Power, Sponge Iron units & Fertilizer sectors. The balance goes to industrial units where it replaces Fuel Oil & LPG. Gas is also supplied to the residential and the commercial sectors in Mumbai, Delhi and a few towns of Gujarat, Assam and Tripura.

Rising trend in the use of Natural Gas
Natural gas has been steadily increasing its share in the Indian primary energy mix which is projected to capture 15% of the primary energy consumption by 2007. The advantages of Natural gas over other Hydrocarbons include - energy efficiency, multiple applications, and environmental, cost effectiveness and safe usability.

The demand drivers of Gas are sectors like Combined-Cycle Gas based Power plants, Fertilizer/Industrial sectors, Transport sector-CNG, Residential sectors-PNG etc.

Availability & Possibility
Production of Natural Gas at present is around 91 MMSCMD. The main producers are ONGC, OIL and JVs of Tapti, Panna-Mukta and Ravva. Under the PSC’s, Private parties are also producing Gas from some of the fields. Government has also offered blocks under NELP to private and public sector companies with the right to market gas at market determined prices.
An increasing thrust on LNG imports has led to positive developments on the supply front. Petronet LNG has signed a gas purchase contract with RasGas, Qatar, for the import of 5 MMTPA of LNG to Dahej and 2.5 MMTPA to Kochi.

Coal Bed Methane (CBM) being viewed as an alternative to Natural Gas, is available at Gondwana Basins viz., Jharia, Raniganj and Bokaro.

Pipelines The Government of India is mulling feasibility of various pipeluneswhich can only materialize after settling the security issues associated with the nations involved. These include Iran-Pakistan-India, Turkmenistan-Afghanistan-Pakistan-India, Myanmar-Bangladesh-India pipelines.

Investments
Currently in India Gas infrastructure exists for production and transportation of about 100 mmcmd of gas. The largest of the transmission systems is the HBJ pipeline (2,300 km) which transverses the states of Gujarat, Madhya Pradesh, Rajasthan, and Uttar Pradesh, and Haryana.
There also exist regional gas grids in the states of Gujarat (Cambay Basin), Andhra Pradesh (KG Basin), Assam (Assam-Arakan Basin), Maharashtra (Ex-Uran Terminal), Rajasthan (Jaisalmer Basin), Tamil Nadu (Cauvery Basin) and Tripura (Arakan Basin). These regional pipelines (about 725 km) were constructed and operated by ONGC, but with the commissioning of the HBJ pipeline in the late eighties, ownership and operator ship of these gas grids were passed on to GAIL.

Investments in LNG Imports
Petronet LNG Limited (PLL) commissioned a 5 MMTPA capacity LNG terminal at Dahej in February 2004 and commercial supplies commenced from March 2004. Shell’s 2.5 MMTPA capacity LNG terminal at Hazira has been commissioned. Dabhol LNG terminal (total 5 MMTPA capacity, with about 2.9 MMTPA available for merchant sales) has also become operational.

National Companies
1. Oil & Natural Gas Corporation 2. GAIL (India) Ltd
3. Gujarat State Petroleum Corporation Ltd 4. HPCL
5. BPCL 6. IOCL
7. Assam Gas Company Ltd 8. Indraprastha Gas Ltd
9. Mahanagar Gas Ltd 10. Oil India Ltd
11. Petronet LNG Ltd (a JV promoted by GAIL, IOCL, BPCL & ONGC)

Private Companies
1. Hindustan Oil Exploration Company Ltd 2. Gujarat State Petronet Ltd
3. Gujarat Gas Company Ltd 4. Gujarat Adani Energy Ltd
5. Reliance Industries Ltd 6. Bhagyanagar Gas Ltd
7. Jubilant Enpro Ltd 8. Tata Petrodyne Ltd
9. Essar Oil 10. Petrocon

Investment scenario
The Demand-Supply gap in Natural Gas will be as high as 350 MMSCMD by 2025. The Gas sector may need an investment of US $ 10 billion on setting up of LNG terminals, Trunk gas pipelines and necessary compression facilities for transmission and distribution of gas to the markets.
PLL is planning to expand Dahej LNG terminal to 10 MMTPA capacity by 2008-09. LNG terminals at Kochi, Mangalore and Krishnapatnam/Ennore are also under active consideration.
The HBJ pipeline system would be doubled to its existing capacity, requiring an investment of about US$1.5 billion.
Investments would also come in regional Gas Grids, Regional spur lines and networks for expanding coverage of gas market.

FDI Limits
• Exploration & Production – 100 per cent (automatic – no approvals required).
• Petroleum Product Pipeline & Marketing - 100 percent (automatic).
• Natural Gas / LNG Pipeline - 100 per cent (not automatic– Approvals required from the Foreign Investment Promotion Board, GoI.)
• Refining – In case of state owned companies, FDI is limited to 26 per cent (26 per cent held by NCOs and balance by public). In case of private Indian companies, FDI upto 100 per cent permitted under the automatic route.

For supplementing the future requirements of Natural Gas the following alternatives have been identified:
Coal Bed Methane (CBM)
Underground Coal Gasification (UCG)
Gas Hydrates
Deep-water Gas

Assessment
Considering the importance of Natural Gas to the Indian economy and taking view of the Demand-Supply deficit, expeditious Exploration & Production and upgradation of reserves has to be done. In the long term, Hydrate reserves and CBM are expected to be major potential indigenous resources. E&P in deep water areas should be taken up. Bureaucratic norms will need to be softened to increase investor’s confidence in Indian Gas business. R & D in Natural Gas field should be encouraged to upgrade the technical skills in this field. India should pursue pipeline supply options from all feasible sources in our neighborhood that can prove to be of benefit to the nation. New environmental concerns will need to be addressed after increased use of Natural gas in the future.