“Come and invest in India’s energy sector”. The words of India’s Prime Minister Narendra Modi, announced at the start of a new gas pipeline on February 17, sent a clear message: the country’s energy landscape is undergoing fundamental changes and will try to attract foreign investors.
After the Covid-19 crisis devastated the country and caused major unrest in local industries, India is slowly recovering. With promise of double-digit economic growth in 2021, India is expected to become the world’s largest consumer of energy – especially for fossil fuels – along with China – in the coming years. Indian energy demand is expected to grow by about 3% per year until 2030, Minister of Oil and Gas Dharmendra Pradhan said at the 11th IEF-IEA-OPEC Symposium on energy forecast.
To power this dynamic growth, Modi outlined the “gas economy” goal, where the proportion of gas in the energy mix would jump from 6% today to 25% by 2030. The target was revise this ambition from the 15% target announced earlier in 2020. So Modi hopes to start on the road to sustainability by relying heavily on natural gas as a primary fuel, and at at the same time developing renewable energy at the same time. As announced in 2019, a total budget of $ 60 billion will be dedicated to modernizing India’s gas infrastructure, which is currently ranked third in the world in terms of GHG emissions.
But in addition to industry and transportation, the fertilizer sector is also a key driver for this natural gas demand in India. Of course, methane will be used as a raw material for making fertilizers and other chemicals, and new plants will be planted for that purpose in the coming years.
India’s steady decline in domestic gas production necessitated the introduction of LNG. In 2019, India was ranked fourth in the world in terms of volumes of LNG imported, with 20 million metric tons. So far, the country has been taking advantage of low spot prices on the Asian LNG hub, concluding contracts at rates below $ 10 per MbBtu before this winter’s rise in prices. While Qatar is India’s historical supplier, the United States and the United Arab Emirates are also increasingly important.
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Coming to about half of the gas basket in India, LNG is a key part of this “gas conversion”. The Ministry of Oil and Gas recently unveiled a new plan aimed at boosting the country’s redesign capacity, and in particular promoting LNG for the transport sector (especially for long haul trucks). This recording capacity is expected to increase from 41 million cbm per year to 57 million cbm, according to Minister Pradhan’s statement during the 11th IEF-IEA-OPEC conference.
The challenge of grid extension
Today, however, India does not have pipelines capable of transporting gas from LNG plants to the endpoints of consumption, and access to natural gas is unbalanced in the eastern and western parts of the world. country. Most of the existing LNG lines are located in the West, making up about 75% of India’s import capacity, leaving the Eastern region on the periphery from gas . That is why the Urja Ganga pipeline project aims to solve that issue and connect the Eastern region to the national gas grid.
The main challenge now is to make energy accessible throughout the Indian region, and especially in rural areas. This is exactly the aim of the “One Nation, one grid” program, launched in 2019, which aims to expand the gas network from 17 000 km to 35 000 km. In addition, PM Modi announced on February 17 that he intended to introduce natural gas into the Goods and Services Tariff regime, which will bring gas prices into line across the country and allow investment.
With 53% of natural gas consumed in the country currently being imported, several pipeline projects are already planned, paving the way to India’s energy independence. On February 18, Prime Minister Narendra Modi dedicated the Ennore-Ramanathapuram pipeline. He established the Kochi-Mangaluru gas pipeline earlier, on January 5, by video conference.
Shy investment in clean gases
At the same time, a nationwide program dedicated to biofuels was announced earlier in 2020. Hydrogen choice is not being actively explored, although a report by the Institute of Energy and Resources (TERI) forecast a 50% drop in costs for hydrogen production by 2030, which is likely to stimulate demand. However, subsequent investment will be required in CCS infrastructure, which is far from being developed in India.
All that being said, conditions for future natural gas demand are far from certain. While the International Renewable Energy Agency estimates that natural gas will go around 2025, the Gas Exporting Countries Forum expects the gas sector to rise to 28% in the global energy mix. by 2050, led largely by the Asia-Pacific market. One thing is clear: for India, natural gas is the most pragmatic solution to offset the grid among ambitious targets in renewable generation, while at the same time capturing in the growth of the blue fuel.
By Tatiana Serova for Oilprice.com
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