Moving India to a gas-based economy

Sashi Mukundan, Head of BP India, shares his views on moving India to a gas-based economy.

Date: 7 October 2016

Recently, I had the honour to be part of the annual Energy Conclave hosted by Mint. We discussed a crucial topic for collaboration within our industry - Moving India to a Gas-based economy. There is both a business and societal case for this.

The Union Cabinet of India last week ratified the Paris Agreement which has over 191 countries as its signatories. The Government has decided to reduce the country’s carbon emissions intensity by up to 35% from 2005 levels by 2030 by increasingly meeting energy needs with renewables and natural gas. An answer to redeem this pledge is to increase gas in the energy mix for India from the current 6.5% to close to global level by 2030. As key stakeholders, we have to start NOW supporting the concept of a ‘gas based economy’ and the Ministry’s call for #Gas4India.

Let me share my vision on how it can be done.

Natural gas at 25% of energy mix in 2030 is 970 mmscmd (34 bcfd) of gas consumption – this is a 7 fold growth over the next 15 years. To meet this level of demand there has to be a judicious combination of mainly domestic natural gas and imported LNG.

Here are 4 key initiatives:

1.    Augmenting natural gas supply

Deepwater gas discoveries are around 10 tcf, of which projects in advanced stages of preparation will help monetize around 7 tcf over the next 5 years with investments of over INR 1 lakh crores ($15 billion), employing close to 1 lakh skilled workers and producing around 75 mmscmd of gas by 2022. This needs to be followed by development of all remaining discovered resources and more through exploration. These will be in addition to existing production from on-land and shallow-water fields; most of which are associated gas. I expect domestic gas availability to reach at least 300-350 MMSCMD by 2030. We should aspire and set a goal to get this number to 500 mmscmd. 

This will then be supplemented by imported LNG.

 

 

 

Today, we have LNG import terminals with a capacity of 30 mtpa. In the next 5 years, an additional 25 mtpa is likely to be installed to cater to 200 mmscmd of LNG supply. We need to more than double this capacity by 2030 to meet the balance demand.

While I appreciate transnational gas pipeline are politically very challenging, a focus effort should be made towards this.  

HELP and OALP launch next year on the back of deep water projects being sanctioned would attract major players and help accelerate exploration to keep the development funnel and pipelines full.

2.    Expanding gas supply and distribution infrastructure

The gas value chain  is now a priority. Like the national and state highway projects it has to be driven by the government – as recently done by Minister Pradhan in the East coast.  We now need to look at a hub based approach like in Gujarat rather than a one size fits all. In the east coast the government has initiated a gas value chain build up using the Dhamra LNG project, a refinery as anchor customer, a potential gas grid, with 7-city gas distribution licenses all supported and gap funded by the Ministry.  This infrastructure would also support the potential development of the Mahanadi domestic deep water gas discoveries. Similar opportunity exists in the KG basin with infrastructure, trunk pipelines, and discoveries in place – it needs the last mile connectivity and development of Gas Economic Zones. Similar hubs can be developed around other domestic fields and LNG import facilities in the west and south. Bringing the state governments on board and accessing land through National Highways/State Highways, Railway lines, Water or Oil Pipelines would ensure speedy implementation of gas grids. 

3.    Linkages to tap global gas

India needs to fully tap the global gas glut. There are too many LNG projects coming up globally – one train every 8 weeks for the next 5 years! Gas is abundant; it is readily available.  This is the time to attract major gas players to come to India, invest and be part of the growth – similar to what is happening with the refining and fuels marketing business. These major players will then become India’s partner in ensuring uninterruptable supplies and also help in developing transnational pipelines so that India is linked to the global gas market.

4.    Policy reforms in downstream to move from monopoly to competition

For gas and gas based industry to prosper, we must move to a market place where the consumer is agnostic to the source of gas supply and they must have multiple competing gas supply options to ensure that supply is available, affordable and sustainable. Unbundling marketing and transportation assets like in many markets around the world; with true common carrier access to infrastructure will be needed to stimulate competition and provide supply options to the customer.  

The world is fast moving towards gas as its primary energy source and this growth is rising due to 4 key value propositions: Abundance, Availability,  Affordability (currently HH at $3 and spot LNG at $5-6), and Acceptability as it has a cleaner footprint than coal or liquid fuels.

I saved the best for last! A 10% replacement of liquid fuel by gas will reduce our import bill by nearly 3 billion dollars every year… if not for any of the other fine attributes of natural gas, but just for this significant savings, India has a business case to switch fast to natural gas.