Govt moving towards a gasbased economy, but where is India’s domestically produced gas?
The government on Monday laid the foundation stone for a ₹12,500-crore, 2,500-km gas pipeline, which will connect West Bengal, Bihar, Jharkhand and Uttar Pradesh to the national grid.
The project will be undertaken by GAIL, and the Centre will fund 40% of the project cost. The project will be operational in the next two years. Once completed, this pipeline will carry clean fuel from the Dhamra port in Odisha to 40 districts and over 2000 villages.
The move seems to have come at the right moment, especially since litigation, arbitration and policy paralysis have taken the steam out of the gas sector.
Top sources in the government said while domestic production of gas is dwindling, a sharp increase in global production of gas and its subdued price have helped India’s imports. Global production of LNG (liquefied natural gas) is set to rise from 250 million tonnes to 400 million tonnes in the next five years. “Energy is a critical input for development. Even if we are not self-sufficient in gas production, for the first time a step is being taken towards creating infrastructure for storage and distribution of gas,” said a top source in the government, who did not wish to be named.
India has already renegotiated its long-term LNG purchase deal with Qatar. Around 45% of India’s gas requirement is imported and any sharp spike in prices will cost the country its precious foreign exchange.
Analysts, however, disagree. “The mood of the market does not show any sign of a sharp increase in prices in the next five to six years,” said Anish De, partner and head of oil and gas in KPMG.
The tilt towards a gaseconomy is necessary, especially at a time when India is committed towards reducing its dependence on coal and oil as part of the climate change programme. Gas is accepted as a cleaner fuel and is cheaper.
“The government is looking at identifying new customers for gas. From power and fertiliser plants, we are now targeting customers in cities for use as CNG in cars and as a fuel for cooking,” said a top source in the government, who did not wish to be named.
While the government’s efforts to put the infrastructure for storage and distribution of gas is being lauded, a question many are asking is: Where is India’s domestically produced gas?
“India pays about $6.5/ mmBtu for importing LNG but pays around $2.5/mmBtu to domestic producers. Increase in the domestic pricing will give a huge fillip to private investment in the gas sector,” said RS Sharma, former CMD of ONGC.