Supply hiccups in raising natural gas share
India’s intention to increase the share of natural gas in the primary energy mix of the country will come with challenges of ensuring supply, according to sector watchers.
Industry estimates suggest that the share of natural gas has fallen to 6.3 per cent in FY21, down from 10.6 per cent in FY2010. This is largely on account of dwindled gas output and higher energy demand of the country.
The target before the country is now of achieving a 15 per cent share of natural gas in the total energy mix by 2030. Speaking shortly after taking charge as new minister for petroleum and natural gas, Hardeep Singh Puri reiterated this vision of Prime Minister Narendra Modi’s vision of a gas-based economy.
This goal, however, appeared to have been scaled down. According to the Vision 2030 report commissioned by the Petroleum and Natural Gas Regulatory Board (PNGRB) in 2013, natural gas use was to have a share of 20 per cent by 2030.
Lower share despite visions
That report was submitted when former fertiliser secretary S Krishnan was the PNGRB chairman from 2011 to 2015. An earlier goal was to achieve a 20 per cent share of natural gas in India’s energy mix by 2025 itself. Contrary to these visions, the percentage share of natural gas in India’s energy mix was 9.5 per cent in 2009, and 10.6 per cent in 2010, but it has fallen since.
“The current natural gas consumption of India is 166 million metric standard cubic metres per day (mmscmd) in 2021. Of this, the share of Liquefied Natural Gas (LNG), that is imported, is about 54 per cent. We expect gas consumption to go up to 280 mmscmd by 2030. Of which, about 65 per cent will be imported. At this stage, the share of natural gas will be about 7.5 per cent of the country’s energy mix,” Debasish Mishra, leader, energy, resources and industrials (ER&I) for Deloitte in India, told Business Standard.
Rising gas production
According to a report by the India Brand Equity Foundation, a trust established by the Ministry of Commerce and Industry, India’s natural gas production increased by 22.7 per cent year-on-year in April 2021, as Reliance Industries and its partner BP, increased production in the KG-D6 block on the east coast.
Public sector undertaking ONGC is also projecting healthy growth in total gas output. It has announced that by May 2021, it would increase natural gas output from a KG basin block to 2.5-3 million standard cubic meters per day.
The Centre is expecting an investment of $2.86 billion for doubling natural gas production to 60 billion cubic metres and drilling more than 120 exploration wells by 2022.
Grim outlook for local supplies
The longer-term outlook for domestic gas production, however, complicates the situation. While the production has achieved pre-covid levels in 2021, the projections are not bright enough to match the expected share in the energy basket. “The natural gas reserves in India will be depleted by 2040, and the price of domestically produced gas will double due to scarcity. In fact, domestic gas production has been declining since 2011,” a study by researchers from Indian Institute of Technology, Bombay, and Monash University, Australia, concluded.
Preparing for imports
While hiking domestic gas output has been on the government’s agenda, it appears to be dependent on the need for more imports and it is working in this direction. A draft LNG policy, released by the Ministry of Petroleum and Natural Gas, aims to increase the country’s LNG re-gasification capacity from 42.5 million tonnes per annum (mtpa) to 70 mtpa by 2030 and 100 mtpa by 2040.