Moving towards gas-based economy

Dharmendra Pradhan

Chennai: The devastating Australian bushfires have re-ignited fierce debates around pyro-geographies and carbon emissions. And, rightfully so. None of us will be immune to the grave effects of climate change should there even be a moderate increase of 0.3 to 1.7 °C in global surface temperatures. Our stakes are collective, so efforts have to be collective albeit contextual.

Under the leadership of Prime Minister Narendra Modi, India has given a strong turn in the energy roadmap towards renewables and rebalancing the energy mix. However, it would be unfair to expect India to wean itself off fossil fuels completely at this stage of our developmental cycle.

India’s per capita emissions today of 1.6 tonnes of CO2 is well below the global average of 4.4 tonnes while its share of global total CO2 emissions is about 6.4 percent. Nonetheless, robust efforts are underway to de-carbonise energy production and use least polluting fossil fuels to complement the shift to renewables.

Accordingly, we are consistently taking policy initiatives, revamping policies and building next generation infrastructure towards making India a gas- based economy initially, by increasing the share of gas in India’s primary energy mix from the current six percent to 15 percent, a goal laid out by Prime Minister Modi.

The government lays utmost emphasis on this stated goal as reiterated in the finance minister’s recent budget speech, which highlighted some facts and figures as we move towards a gas-based economy.

The world’s average natural gas share in the primary energy basket is about 24 percent. The only Indian State that has a higher gas mix than the global average –of approximately 25 percent –is Gujarat.

To realise our gas usage ambitions, in the past five years, we transformed the domestic gas pricing regime in 2014 by linking it with global gas market benchmarks, gave marketing and pricing freedom from 2016 onwards to attract investment in exploration and production activities, shifted focus from revenue maximization to production enhancement through awarding blocks with investors’ freedom, enhanced LNG import capacity by developing new terminals and augmented existing capacities, and, connected the eastern and north-eastern parts of the country with gas grid by developing the 2650-km Pradhan Mantri Urja Ganga project and the 1656- km North-eastern Region Gas Grid project. Capital support of about Rs 10,719 crore has been extended to these projects to make gas accessible in remote areas.

As emphasised in the 2020 budget speech, about 27,000 kms of national gas grid pipeline would be completed in the coming years connecting Kutch to Kohima and Kashmir to Kanyakumari.

We have placed a strong emphasis to expand city gas distribution (CGD) networks across the country covering more than 400 districts and about 70 percent of the population. CGDs supply cleaner cooking fuel (like, PNG) to households, industrial; commercial units as well as transportation fuel (like, CNG). There is an expected investment of Rs 120,000 crore in over the next decade.

In addition to natural gas, an initiative called Sustainable Alternative Towards Affordable Transportation (SATAT) has been taken up to extract economic value from bio-mass waste in the form of Compressed Bio Gas (CBG) and bio-manure. Municipal solid waste, sugar industry waste (press mud) and agricultural residue have significant potential for production of the same.

Our oil and gas PSUs have come forward to promote their use by offering fixed floor price to offtake CBG for the first 10 years through upfront commercial agreements. Given the abundance of biomass in the country, CBG has the potential to complement CNG in automotive, industrial and commercial uses in the coming years. We have proposed that CBG plants be primarily set up through independent entrepreneurs. CBG produced at these plants will be transported through cascades of cylinders to the fuel station networks of OMCs for marketing as a green transport fuel alternative.

Liquefied Natural Gas (LNG) has also emerged as a feasible alternate, economical and environment-friendly fossil fuel for the medium and heavy duty vehicles. To kickstart the development of LNG-based transport ecosystem in the country, thrust has been given to build LNG filling stations along the golden quadrilateral. Usage of LNG in the transport sector would also reduce the import bill.

These initiatives to develop gas infrastructure have opened up avenues for investment of about Rs 4 lakh crore with employment generation potential across the gas value chain. There are plans to have a free gas market through setting up of a gas trading exchange for efficient price discovery in the Indian market. In addition, rationalized pipeline tariff structure and harmonized tax regime by inclusion of natural gas under the ambit of GST would also be key to accelerating the shift towards a gas-based economy.

To meet our demand, we are in the process of diversifying the geographies in sourcing of gas. India imports LNG from Qatar, the US, Russia and Australia. However, some of the sectors that use or can potentially use gas, like the power sector and steel industry are constrained to opt for gas as a feedstock due to the current unattractive costs of LNG.

Therefore, it makes perfect business sense for gas-producing countries to realign existing long-term LNG contracts with the prevailing market conditions. Our greatest leverage is the size of our market and its increasing energy appetite.

(The writer Dharmendra Pradhan is Union Minister of Petroleum & Natural Gas and also Minister of Steel).

NT Bureau