Sunday, 5 April 2020

Natural Gas Reliable Partner In Energy Market

Updated: April 6, 2016 1:41 pm

Over the years, concerns of the increasing carbon levels owing to usage of fossil fuels have been growing. The recently held Paris Conference (COP21) was successful in establishing binding commitments by all nations to make “national determined contributions” (NDCs), and to pursue domestic measures aimed at achieving them.

There has been a strong movement towards stricter legislations across the world for cleaner liquid fuels and adoption of natural gas, especially in the transport sector. Natural gas, with its clear advantages, is emerging as the favoured fuel in many countries. This aspect, coupled with the fact that natural gas reserves are likely to last much longer than liquid fuels, is driving the demand for natural gas in the world.   From 1980 to 2015, the share of oil has dropped from 44.94 per cent to 32.82 per cent in the world’s primary energy demand, while share of natural gas has increased from 19.53 per cent to 24.16 per cent.

The shift has primarily been driven by economical and environmental factors. Although fossil fuels will continue to remain the dominant source of world’s energy, the shift towards lower-carbon fuels will continue to be a key growth driver of natural gas consumption, which is expected to be the fastest growing fossil fuel during the next two decades.

At the present rate of production, the natural gas reserves are expected to last more than oil reserves. The success of shale gas has been instrumental in the increased supply of gas. Notwithstanding the current low prices, which has adversely impacted   shale gas industry production in total gas production is expected  to increase from 11 per cent in 2014 to 24 per cent by the year 2035, mainly driven by production in North America and significantly in Asia Pacific.

The growth of consumption, especially in gas importing countries was, however, impacted by the high import prices during 2013-2014. The subsequent oil price crash and related gas price plunge has helped achieve better affordability of gas imports, resulting in higher consumption. On the other hand, this has impacted several planned Energy & Petroleum projects around the world. The rebalancing in energy market is expected to remain low in the short term.


India witnessed consistent growth in demand for energy resources even during the period of global downturn. For the period 2002 to 2015, the primary energy consumption in India grew at 6 per cent. The primary energy demand is expected to increase in future with increasing industrialisation and urbanisation in the country. Though coal is expected to continue to be the major source of primary energy in the country, the share of other fuels in the energy mix is expected to increase. Domestic coal sector has witnessed a lot of challenges in the recent years and has not been able to meet the demand. This has been mainly on account of insufficient mechanisation in mining, delays in developing new blocks, environmental clearances, transportation issues and lack of adequate planning to meet the demand.  India’s domestic oil production has not been able to meet the increasing demand, and today India imports about 80 per cent of the total oil demand. Though hydroelectric power has huge potential in India, the sector has witnessed issues in the recent past related to environmental concerns, longer gestation periods, etc. which have slowed down the pace of growth of this sector.   While renewable energy sources like wind and solar have immense potential, they are infirm in nature and the sector is still in an evolution phase.


As the economic growth shifts towards the developing world, the energy demand is also expected to grow to support this. The non- OEDC (the Organisation for Economic Co-operation and Development) countries are expected to account for 90 per cent of the global increase in primary energy   consumption in the next three decades. Among them, China, India and Association of Southeast Asian Nations (ASEAN) members will account for 55 per cent. As per the projections of British Petroleum (BP), India will account more than a quarter of the growth in global energy demand during 2025-35.


Meeting the growing energy demand of India is a huge challenge and natural gas is poised to play a very important role in all sectors of the economy. Over the past three decades, natural gas consumption in India grew at a Compound Annual Growth Rate (CAGR) of 9.1 per cent. This growth has, however, reduced to 4.7 per cent over the past decade primarily owing to slow domestic gas production and inadequate infrastructure. The total consumption of natural gas in India during 2014-2015 was 121.13 mmscmd and 80.02 mmscmd. The stagnating production is a continuing challenge requiring policy initiative that is likely in near future.

International Energy Agency, in its India Energy Outlook , 2015, has projected India’s domestic gas production to reach a level of 162 mmscmd by 2030. Petroleum And Natural Gas Regulatory Board (PNGRB), on other hand, has projected this to be 230 mmscmd. The demand by then is expected to be in excess of 700 mmscmd. Hence, India will need to increasingly depend on imported Liquefied Natural Gas (LNG) to meet its growing energy demands. Augmenting natural gas transmission and distribution infrastructure in the country will be critical in ensuring that market growth meets required shift in energy mix. This will also ensure viability of the many LNG import terminals with announced capacities of over 80 MMTPA on both coasts of India.


Petroleum Minister Dharmendra Pradhan said: “The Indian economy is poised to take off on a higher trajectory of microeconomic growth and socio-economic development in an environmentally sustainable manner. To successfully attain these objectives, equitable access to adequate and affordable energy is essential. As a green fuel of the century, the role of natural gas in India’s energy is critical.”

“The challenges which the sector is grappling with are well organised. The government has committed itself to the growth of the gas sector in the country. Revisiting the domestic gas pricing policy was a first step in this direction and efforts are ongoing for policy formulation in the areas of gas production, gas pooling infrastructure development, city gas distribution etc. to promote a conducive investment climate to ensure that the industry is benefitted and that investments in this sector are attracted and sustained.”

Recently the gas sector in India has shown first-rate growth. Substantial investment in infrastructure relating to import of LNG and transportation of domestic gas across India is planned for the next 5-6 years. The current planned investments along with incremental investments in future would be sufficient to meet the growing demand for gas from various consumers segments. In order to ensure the projects get implemented on a fast tract basis, Government of India and PNGRB need to take various policy and regulatory measures as suggested in the report. This would help sustain higher investments in the gas chain including exploration leading to a sustained and healthy growth of the sector, ensuring that the share of gas is at least 20 per cent in the primary energy mix by 2030.

By Sanjay K Bissoyi

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