The great leap to clean energy
This compilation of 24 essays edited by Vikram Mehta, Chairman, Centre for Social and Economic Progress, is a tour de force on all aspects of the natural gas industry, both global and local, that have a bearing on the Indian gas economy. It is a treasure trove of information and analysis, an invaluable contribution towards facilitating India’s energy transition to lower carbon pathways.
An overview of global developments traces the history of gas markets, the trajectory of regulatory liberalisation in major gas economies of the US, UK and the Netherlands, and the evolution of the LNG business. In the Indian context, the authors take a deep dive into sectoral demand issues in power, city gas, fertiliser, petrochemicals, MSMES and transport. Tucked away in these chapters are numerous business opportunities for gas penetration, especially in industry, LNG trucking and MSMES. These are waiting to be tapped, especially where the substitution of relatively high cost and polluting fuels with natural gas makes the proposition economically viable.
India is the world’s third largest energy consuming country, with 80 per cent of demand being met by coal, oil and solid biomass. Energy consumption has doubled during the last two decades, and the pace is expected to continue to 2040. The authors make a strong case to tap the potential of natural gas (the cleanest fossil fuel) as a bridge fuel during this energy transition. It is in this context that the Government of India has set a target for increasing the share of natural gas in the Indian energy mix from 6 per cent in 2015 to 15 per cent by 2030. There is no comprehensive road map, however, to move the gas needle in the desired direction. The purpose of the book is to provide such a road map, addressing all aspects of the gas value chain, which it does admirably through 24 chapters written by domain experts and policy analysts.
India’s gas situation is indeed dismal. Production has declined from 36.1 billion cubic metres (bcm) in 2009 to 26.9 bcm in 2019. India produced less gas in 2019 than Pakistan and Bangladesh, and much lower than China’s production of 177 bcm (according to BP Statistics). The penetration of gas in the energy mix was 70 per cent in Bangladesh and 46 per cent in Pakistan compared to 6-7 per cent in India. Globally, the development of the gas economy and competitive gas markets has been driven by massive gas discoveries as in the USA, the North Sea in the UK and Norway and the supergiant Groningen gas field in the Netherlands. A cursory look at international data bears this out with gas penetration in the energy mix ranging from 30 per cent in the USA, Canada and Australia to 53 per cent in countries of the Commonwealth of Independent States (including Russia), 65 per cent in Iran and 73 per cent in Qatar. India’s gas problem is, therefore, fundamentally a supply side problem, given the absence of large gas discoveries over the past few decades.
Besides the problem of difficult exploration geographies, the E & P effort has been hobbled by administrative price controls, lack of contract sanctity and complex contract conditions. Distorted price signals have been a major constraint. These issues have been elaborated in the chapters of domestic production and gas pricing and the suggestions offer a credible road map for the future. A study by IHS Markit has assessed gas reserves of over 100 trillion cubic feet. This potential needs to be tapped vigorously through strong price signals and incentives. The alternative routes of securing gas through pipelines have not fructified for geopolitical reasons, and the imported LNG route is likely to run into affordability barriers in a relatively poor economy. At 105.5 bcm, Japan was the largest importer of LNG globally in 2019 compared to 32.9 bcm imported by India. India’s imports of LNG have risen from 20 per cent of consumption to about 50 per cent at present, but further increases will face both energy security and affordability issues. India, therefore, faces deep structural constraints in moving the gas needle forward.
Another underlying theme that the book addresses concerns the development of competitive gas markets, expansion of the pipeline network, unbundling of state-owned processor and distributor GAIL India and restructuring the oil and gas regulator. The unbundling of GAIL is a complex issue, especially with regard to sequencing and timing. While some authors have emphasised unbundling, the chapter by Akshay Koshy Mason, which traces the pathways of gas market liberalisation in the US, UK and Netherlands over about five decades, presents a more nuanced picture. The unbundling of pipeline companies needs to be sequenced carefully, towards the end point of the liberalisation process. With India having about 17,000 km pipelines compared to 76,000 km in China, 1,10,000 km in Canada and 1,98,0000 km in the US, the priority at this stage of development should be to expand the pipeline network rather than to unbundle GAIL.
A brief review cannot do justice to the rich fare offered by The Next Stop . Suffice it to say that the book is an outstanding and timely contribution aimed at moving the Indian gas needle from 6 to 15 per cent.