Bookmark and Share

Can Imported Natural Gas replace expensive Crude Oil in India

0 Comment

Natural Gas Import in India

The demand for energy is ever-growing and the rising price of crude oil has been a cause for global concern. Over the price race of crude oil and insufficient production, natural gas seems to be a rescue product. Around 21% of global energy needs is currently served by gas. Though in India, the sector is plagued with too much uncertainty as there is a lack of clear policies. Penetration of natural gas in India is much less than what is at the global level, thus giving the country a huge potential demand for natural gas.

In India the import share of gas has risen significantly touching the quarter mark at 25.5% in FY12, if the trend continues, India will very soon likely become a net importer of gas. Share of imported LNG could touch the danger mark of 41% in the current fiscal, which could further rise to 50% in the coming years.

Also Read What is Natural Gas used for Today – Heating, Industry, Electricity and Cars.

US Leading the Natural Gas Industry

  • Thumbs up to US LNG exports – The export from US is likely to increase and as a result of which US would experience net economic benefits from exports. Higher revenues from LNG exports should more than offset higher energy costs and its impact on employment shall be minimal. Also due to rising exports, a surge in US gas prices is unlikely to happen.
  • More LNG exports from the US – Over two dozen filings for licenses to export LNG from the US are under hold for execution and approval.  The rising demand can now lead to these approvals to be executed soon. Currently, ~170 MMTPA of US exports are proposed. If exports to non-FTA countries are allowed it could lead to a long term benefit.
  • US to become a major LNG market player – US LNG exports could grow to ~90 MMTPA by 2035 putting the developed nation in the same league as Russia, Qatar which currently exports 75 MMTPA.  US’s production potential is very high and its current production is already exceeding the high production case for 2015, despite low prices. At around ~37-60 MMTPA, US LNG exports could supply 10-15% of the world LNG market by 2020.
  • LNG pricing would be undoubtedly impacted ­­- US LNG exports is already driving prices lower by giving importers pricing leverage, introducing more spot contracts, and limiting oil-linked contract pricing.

Also Read on GWI Will the 21st Century be the Century of Natural Gas?

Advantages of Using Natural Gas

1) Cheap and Abundant – The biggest advantages of Natural Gas is that it is now cheaper than almost any other fuel. New ways of extracting Natural Gas has made it abundant and in the coming days massive formations are waiting to be discovered.

2) Provides 24/7 and Continuous Source of  Power – Natural Gas can provide electricity 24 hours, 7 days a week unlike other sources of renewable energy. This makes it very important and some gas solar and gas wind hybrid plants are being developed. General Electric has developed very efficient Gas Boilers and Engines to improve the Efficiency of Gas to Energy Conversion.

3) Used for providing Peaking Power – Natural Gas is used to provide Peaking Power, that is Electricity when Demand is very High. Note Nuclear Plants and Hydro Plants run continuously and it makes no difference to cost to stop them. However Natural Gas has no constraint and it is used to provide power at peak times and is stopped when demand is lower. This makes Natural Gas important to the development of Renewable Sources of Intermittent Energy like Wind and Solar Energy

4) Most Important Fuel for Cooking and Heating – Natural Gas is the most commonly used fuel for heating and cooking. Oil is not used as it is costlier.

5) Easily Transported Through Pipelines and as Liquefied Natural Gas (LNG) – Natural Gas Infrastructure is being developed rapidly and it is now transported over land through big Pipelines and over Water through massive LNG Tankers. This is done in a cost effective manner which implies that Cost of the Gas is not increased too much.

Long-term benefit for India’s gas value chain

Given India’s large gas deficit due to rising demand, coupled with falling domestic output any incremental imports of reasonably priced LNG could be significantly positive for the country. LNG’s share in the Indian gas mix is likely to rise from ~30% now to ~45% by FY17. India is a price-sensitive gas market, especially in the case of end-user industries such as power and fertilizers. The current state of urea fertilizers in India are subsidized by the government so if the production of LNG is considered, it will only add to the subsidy burden of the government.

Read about List of Oil & Gas Companies in India.

Given the fact that over 78% of the country’s sedimentary area is yet to be explored, there is a huge potential for India to discover new gas basins. It is not true that the country lacks in the resources. Had it been the case, the foreign biggies would not have shown interest in partnership with the domestic companies. The problem of remunerative price in the sector is one of the key challenges, which is not helping the sector to grow according to its huge potential. Country’s gas pipeline coverage has increased substantially and India currently has a network of 9,900 km with capacity of 292 MMSCMD of transmission.

The power and fertilizer sectors in India drive the demand for gas in the country which is set to grow in future.



Niraj Satnalika

Niraj is an MBA in International Business (Finance). Prior to this he completed B.Tech in Electronics and Instrumentation. He is currently working with Confederation of Indian Industry (CII), Kolkata in capacity of Consultant. Satnalika is actively involved with an NGO and works towards promoting education among the underprivileged.

No Responses so far | Have Your Say!