Five reasons why India's natural gas push remains hot air
Lack of movement on policy front hinders India's attempt to produce more power using natural gas
Even as the world attempts to move away from fossil fuels in an effort to cut greenhouse gas emissions, at least one fossil fuel is being pursued by policy makers: natural gas. Electricity generated using natural gas (which is not the same as LPG) emits half as much CO2 as coal. The latter currently constitutes 79% of India’s electricity supply mix. In fact, the Government of India plans to double coal supply in the coming years in order to ensure universal access to power. While renewable sources of energy are also being given a large push, fossil fuels will continue to be a mainstay as renewables have issues related to intermittency of supply and there is no proven large scale energy storage system available.
In light of these facts, natural gas has the potential to provide relatively clean electricity supply while renewable and energy storage technology reach maturity. Unfortunately, India lacks adequate resources of this hydrocarbon. Partly for this reason, natural gas requires efficient policy and regulatory frameworks to be in place to ensure growing and consistent supplies, unlike coal, which has been a mainstay in spite of the rampant corruption and inefficiency in managing the sector.
On the 13th of May, the Minister of Petroleum and Natural Gas outlined the steps the government has taken to boost the supply of gas in India. He claimed that the government has, 1 intensified the “domestic exploration and production activities through New Exploration Licensing Policy (NELP) rounds”; 2. developed the shale gas policy framework; 3. made progress in the R&D of gas hydrate resources in the country; 4. worked towards the import of natural gas; 5. “explored the possibility of transnational gas pipelines”; 6. cleared projects for development given out under previous NELP rounds; 7. fostered exploration in the Mining Lease Area; and 8. encouraged the acquisition of overseas oil and gas assets by national oil companies.
The Minister claimed that this would lead to an increase of supply by 52% within three years. As the ministry and the erstwhile Planning Commission have historically overestimated supplies of natural gas while making projections, it would be useful to test the claims of these new developments. This is required especially in light of the fact that 14 GW of natural gas power plants currently lie stranded due to the lack of natural gas supplies.
Firstly, the NELP round (under which blocks are given out for exploration and production of oil and gas) that was due immediately after the Lok Sabha elections in 2014 has still not taken place. There were talks of replacing NELP with a new policy regime, but there has been no clarity on that front yet. The government has pushed ONGC and OIL to intensify the development of certain blocks, but it is hard to predict to what extent supplies from these blocks will increase.
Secondly, while the government has come out with a shale gas policy framework, it currently limits involvement only to public sector companies and there are only a few test wells in operation in Gujarat. However, the larger problem with shale gas development is the high water stress levels in India. The shale extraction process requires significant amounts of freshwater resources, which India does not have enough of.
Thirdly, the gas hydrate extraction programme is an untested technology globally. While there is a target to begin production by mid-2015, even the Directorate General of Hydrocarbons (a petroleum regulator in India) calls it a “far-fetched thought (sic)”.
Fourthly, there has been no significant push towards ensuring gas imports, with no long term contracts being signed in the last year. India’s gas import terminals are all currently running below capacity. The government, however, has been negotiating for lower prices in existing contracts, as imported gas costs nearly twice as much as domestic gas, which many industries cannot afford.
Fifthly, the government has been talking to a private company named SAGE to develop an undersea natural gas pipeline from Oman and Iran. Further, it has been working on ensuring supplies from Turkmenistan via Afghanistan and Pakistan via a pipeline. However, for supplies to begin within three years, all administrative, political and technological elements will have to fall in place neatly in the coming months, which seems unlikely given the geopolitical and security challenge that these projects present.
This is not to say that India will not see a rise in natural gas supplies. With a few new blocks set to go under production in the coming year, gas availability will improve. The government, on its part, has given greater clarity on natural gas pricing and has proposed a subsidy mechanism to bring back gas based power plants in business. However, much more needs to be done – much faster – to improve gas availability and facilitate a move towards a greener energy system.
Siddharth Singh, is an energy security researcher at a Delhi based think tank. This is his first post on his blog, The Energy Factor, on Business Standard’s platform, Punditry.