Natural Gas to Acquire 20% Share in India's Energy Mix by 2025, Estimates PNGRB

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Researched by Industrial Info Resources India (Delhi, India)--With the concern over use of coal increasing globally India's primary energy-mix is set to be altered by increased use of natural gas. According to a recent report from India's Petroleum Sector Regulator, Petroleum and Natural Gas Regulatory Board (PNGRB) (New Delhi) the share of natural gas in the country's energy-mix is expected to increase to 20% in 2025 and beyond from 11% in 2010. Although coal will continue to be India's primary fuel, the share of the solid fuel is likely to decline from 53% to 50% by that time. Likewise, use of oil is also set for a drop from current 30% to 25%.

Indian economy has been projected to achieve an average real GDP growth of 6.4% during 2008-2035. Energy availability is the key to economic growth and therefore, going forward high economic growth would lead to increase in the energy consumption of the country.

Based on the expansion plans in natural gas supply in the country backed by new Re-gasified Liquid Natural Gas (RLNG) terminals, nationwide transmission pipeline network and transnational pipelines, which is expected to materialize in next 5 to 10 years, it is envisaged that the share of natural gas in the country's primary energy-mix would reach 20% till 2030. However, according PNGRB, to achieve a 20% share of natural gas in the primary energy it is required to attract and sustain investments in the gas infrastructure including the cross country pipelines.

Historically, natural gas has been significantly cheaper than alternate fuels like motor spirit, naphtha, diesel and LSHS/ fuel oil. Although the price of natural gas is steadily increasing, newer technology and larger plants have now made it possible to ensure efficiency and economies of scale enabling increase in usage of natural gas.

The Regulatory Authority has further elucidated that Natural gas has now become the preferred fuel for fertilizer, petrochemical industries and has made inroads into power generation segment. Further, planned investments in the power, fertilizer, petrochemical and other areas including City Gas Distribution (CGD) suggest a sustained increase in the level of natural gas consumption in the country.

Pertinently, the demand for Natural Gas has seen a significant increase in recent years due to the increase in the availability of gas, development of transmission and distribution infrastructure, the savings from the usage of natural gas in place of alternate fuels and the overall favorable economics of supplying gas at reasonable prices to end consumers. It has become easier for the power, fertilizer and CGD sectors, as well as for the industrial and commercial establishments to switch over to natural gas to meet their energy requirements.

The total consumption of natural gas was 127 mmscmd in January 2013 with power and fertilizer sectors consuming 36 and 39 Million Metric Standard Cubic Meter Per Day (mmscmd) of gas respectively. While the consumption in the power sector accounted for 28% of the total natural gas consumed in India, the fertilizer sector accounted for 31% of the total consumption.

India can be divided into six major regional natural gas markets namely Northern, Western, Central, Southern, Eastern and North-Eastern market. Out of these, the Western market accounts for the highest consumption of natural gas with more than 50% of the total gas consumption in the country. This is followed by the Northern market that consumes ~25% of the overall consumption. The Eastern market accounts for the lowest consumption in the country among all the gas markets.

At present, natural gas markets remain mostly limited to the states where gas sources have been found. States closer to the gas source or having pipeline infrastructure (HVJ pipeline) have had the benefits of higher availability of gas and local development of gas market e.g. Gujarat, Maharashtra, Northern markets, Andhra Pradesh, etc. Other states like Punjab, Haryana, Jharkhand, Uttarakhand, Karnataka, Kerala, Bihar, Chattishgarh, etc. have not been able to utilize benefits of gas due to lower gas availability and inadequate pipeline infrastructure.

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