Dash for Gas: Opportunities & Challenges

    Fifty years after the first LNG tanker sailed from Mississippi to UK in 1959 natural gas has finally matured into a global commodity. Gas is no longer limited to being a regional resource or a continental resource.

    India imports about 120 million tonnes (MT) of oil at a price of $108 to $110 per barrel which amounts to about $22 per million British thermal units (mmbtu). LNG at $15/mmbtu to meet 20 percent of oil demand could save something $5 to $7 billion every year. India should leverage the strategic opportunity and use ‘gas to gallop’?

    There is ample LNG availability to meet India’s growing gas demand. Globally, there are 56 MT LNG projects under construction or with final investment decisions (FIDs) and another 56 MT without FID but with good prospects for progress. This means that approximately a 110 MT of new capacity could potentially be created by 2020.
    India’s import dependence for natural gas is likely to increase ten fold in the next two decades and India will remain a price taker in the market. The energy planners in India need to double R-LNG capacity to 42 MT in the 12th plan period (2013-17) and further double in the 13th plan.

    The energy planners in India need to realize that going from one hype to another to fuel dreams of energy self-sufficiency and consequently affordability of energy is not a substitute for long term energy planning. Currently gas supplies at around 170 mmscmd lag pipeline capacity which stands at 330 mmscmd. In this light it is advisable for pipeline creators to depend on LNG supplies and not on domestic gas which is scarce and is subject to allocation.

    The mindset that gas should be available at the same price as it was 20-30 years ago needs to change. The price of natural gas or the price of imported LNG would be decided by the market forces and consumers must accept this.

    CGD is likely to be far more commercial compared to large gas consuming sectors like power and fertilizer and therefore CGD requires closer consideration by the regulator, so that it can be developed in tandem with other gas infrastructure.