INDIA’S PUSH FOR A GAS BASED ECONOMY

GS 3 – Infrastructure: Energy, Ports, Roads, Airports, Railways etc.

Source : The Inian Express dated 02/05/2021 https://indianexpress.com/article/opinion/columns/indias-road-to-clean-energy-goes-via-natural-gas-7299417/

Context : Policy makers, climate negotiators, academicians, corporates and NGOs are currently fixated on the concept of “net zero carbon emissions” and the appropriate target year for achieving it.“Net Zero” offers everyone a tangible metric against which to measure progress.But rather than focusing only on the endgame of decarbonisation, India must first “green” its fossil fuel energy basket. This can be done by increasing the share of natural gas.

What is Natural Gas?
  • Natural gas is a fossil fuel source consisting primarily of methane.It commonly occurs in association with crude oil.It is often found dissolved in oil or as a gas cap above the oil.
  • Sometimes, pressure of natural gas forces oil up to the surface. Such natural gas is known as associated gas or wet gas.
  • Some reservoirs contain gas and no oil. This gas is termed non-associated gas or dry gas.
  • Often natural gases contain substantial quantities of hydrogen sulfide or other organic sulfur compounds. In this case, the gas is known as “sour gas.”
  • Coalbed methane is called ‘sweet gas’ because of its lack of hydrogen sulfide.
  • On the market, natural gas is usually bought and sold not by volume but by calorific value.
Uses of Natural Gas
  •  It is the cleanest fossil fuel among the available fossil fuels.
  • It is used as a feedstock in the manufacture of fertilizers, plastics and other commercially important organic chemicals as well as used as a fuel for electricity generation, heating purpose in industrial and commercial units.
  • Natural gas is also used for cooking in domestic households and a transportation fuel for vehicle
Distribution of Natural Gas in India

Krishna Godavari basin, Assam, Gulf of Khambhat, Cuddalore district of Tamil Nadu, Barmer in Rajasthan are the major natural gas reserves in India.

Natural Gas Distribution: India & World | PMF IAS
Why Natural Gas?
  • Excess usage of fossil fuels:
    • The average global share of fossil fuels in the energy basket is 84% which is even more for India.According to the International Energy Agency (IEA), India is the world’s third largest consumer of oil.
    • Dependence on coal and oil needs to be reduced and natural gas has to be used as much as possible.
  • Share of Natural Gas
    • While the world average share of natural gas in the energy basket is 23%, it is only 6% for India.However, the government of India has set the target to make it 15% by 2030.
    • Our consumption has been 1/3rd of world average. That would increase in future.
  • Energy Efficient: Natural gas produces more energy than any of the fossil fuels in terms of calorific value.
  • Cleaner fuel:
    • Natural gas is a superior fuel as compared with coal and other liquid fuels being an environment-friendly, safer and cheaper fuel.
    • India made a commitment to COP-21 Paris Convention in December 2015 that by 2030, it would reduce carbon emission by 33%-35% of 2005 levels.
  • Supply-chain convenience:  Natural Gas is supplied through pipelines just like we get water from the tap. There is no need to store cylinders in the kitchen and thus save space.
What has the Government done?
Exploration
  • HELP(Hydrocarbon Exploration and Licensing Policy (HELP)) is a policy indicating the new contractual and fiscal model for the award of hydrocarbon acreages towards exploration and production (E&P).HELP provides for a uniform licensing system that will cover all hydrocarbons such as oil, gas, and coal bed methane.
  • Open Acreage Licensing Policy-The OLAP was declared by the union government in June 2017.Under it, the potential investors choose the exact areas they are interested in, convey their interest to the government, which then places just those blocks up for bidding.Companies are allowed to choose the areas in which they want to explore oil and gas, under OALP. After choosing the area, companies put in an expression of interest which are then put on auction by the government.
Infrastructure
  • National Gas Grid(including City Gas Distribution(CGD)network
The Big Picture : One Nation, One Gas Grid
  • Pradhan Mantri Urja Ganga (PMUG) pipeline project currently under will provide connectivity to another flagship project, the North-East Gas Grid.
  • India is constantly moving to revive the 1,814 kilometre-long Turkmenistan-Afghanistan-Pakistan-India (TAPI) transnational gas pipeline which is in shamble for years.
Marketing reforms
  • Unified Gas Price System – to cut down the cost of transportation of natural gas by setting a fixed tariff for transportation to longer distances. 
  • Gas Price Pooling – price of cheaper domestic gas will be pooled or averaged with cost of expensive imported LNG to create a uniform rate for fertiliser plants.
  • HELP –  all gas production to be sold at market based prices,subject to a price ceiling.
  • IGX- Indian Gas Exchange – digital trading platform for imported natural gas
Challenges
  1. Limited Reserves: Resources of natural gas are limited in India; 55% of natural gas is imported in the form of Liquified Natural Gas (LNG) (which is even costlier).
    India’s reserves for natural gas are located in deep or ultradeep water which requires specific technology and higher cost and extraction is difficult.
  2. The fertilizer Industry: The impediment is most of the gas coming from the nominated fields is going to fertilizers which is highly subsidised, hence the sector does not have its control over marketing and setting prices.
  3. The Gas Authority of India Ltd (GAIL) is currently engaged in the production, transportation and marketing of gas.This allows GAIL to leverage its ownership of the bulk of the gas pipelines to deny its competitors access to the market. The policy calls for assured and common access to all marketers but GAIL can bend the policy to its advantage without breaching it.
What needs to be done?
  1. The authorities must prioritise natural gas. They must recognise its versatility. It is a competitive fuel; it is abundantly available in and within the Asian/ME subcontinent; it has multiple uses and it is the “greenest” of all fossil fuels.
  2. The authorities must correct the current disincentivising policy distortions.   The pricing of natural gas is,very complex. There are multiple price formulae. One for gas produced from domestic fields by the public sector companies; one for gas produced by private companies; one for production from deep waters offshore under high temperature etc. The taxation system is also comparably regressive. It is a cascading structure so that the tax rates increase as the gas flows from one zone to another. This means that customers located at a distance from the source of gas pay a higher price than those closer to the source. The result is the dampening of demand. Also, gas is not under GST.
  3. The authorities should revamp the structure of the industry.Most countries have tackled the conflict-of-interest situation(eg.GAIL in India) by separating the upstream (production/import) and downstream (marketing) interests from transportation. GAIL should also be so “unbundled”. Its business activities should be limited to pipeline construction and transportation.
  4. Enable better coordination between the central and state governments. One reason why India has not yet constructed a national pipeline grid is because the Centre and state have clashed over issues like land acquisition, pipeline routing; and royalty payments. Centre-state differences have also delayed the construction of import facilities and the creation of gas markets.
Way forward

With domestic production of gas stagnating and consumption growing at a CAGR of 4.5 per cent, there’s still a long way to go for transforming the economy to a gas-based one.
India stands a better chance of reaching the destination of a predominantly clean system if it moves forward incrementally. That is, if it makes natural gas the “next stop” in its energy journey.

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