Natural Gas in India


Energy Scenario in India

India faces formidable challenges in meeting its energy needs and in providing adequate energy of desired quality in various forms in a sustainable manner and at competitive prices. To deliver a sustained growth rate of 8% through 2031-32 India needs to increase its primary energy supply by 4 times and, its electricity generation capacity/supply by 6 times of their 2003-04 levels.

According to the Integrated Energy Policy, 2006, India?s commercial energy supply would need to grow from 5.2% to 6.1% per annum while its total primary energy supply would need to grow at 4.3% to 5.1% annually from the 2003-04 base period to sustain the GDP growth rate of 8 per cent. In terms of per capita energy consumption India is likely to use only around 0.9 Tonnes of Oil Equivalent (toe) in 2030 as against a consumption of around 0.5 (toe) in 2006.

On the supply side, India?s oil import dependence was around 72% of its total oil consumption in 2007. The same is further slated to grow to 94% by 2030. Therefore, it becomes imperative for India to prioritize exploration of natural gas and enhance the usage of such competitive fuel source in its portfolio of primary energy consumption.

Oil and Gas Reserves in India

Of the extensive resource base in India, Exploration & Production has been initiated in earnest only in 44 per cent of the area. Since 1980, eight exploration rounds, one round for joint venture and seven rounds under NELP have been offered for global bidding. The Government of India offered 69 small and medium sized oil and gas fields in onshore and offshore to private sector, in 1992 and 1993. A total of 206 Production Sharing Contracts (PSC?s) have been signed in the Seven NELP rounds. The table below gives the summaries of exploration blocks awarded under each of the bidding rounds and subsequently signed.

Exploration blocks awarded under NELP bidding rounds
Parameter NELP -I NELP-II NELP-III NELP-IV NELP-V NELP-VI NELP-VII
No. of blocks offered48252724205557
No. of blocks bid for28 2324 21 20 55 45
No. of blocks awarded2523 23 21 2052 44
No. of PSCs signed242323 20 2052 44
Signed on2000200120032004200520072008
Source: Directorate General of Hydrocarbons

The total prognosticated resources of the country have been estimated at about 28 billion tonnes by Directorate General of Hydrocarbons (DGH). As on 1.4.2006, the balance recoverable reserve position of Oil plus Oil Equivalent of Gas (O+OEG) is about 1,856 MMT, which has increased by 25 percent from 1,485 MMT in 2002-03 mainly due to contribution of major discoveries by private/JV companies and NOCs.

Under NELP regime, natural gas production in KG basin has commenced from 2009 at the rate of 40 MMSCMD with peak production of 80 MMSCMD by December 2009. This is likely to increase the domestic availability of gas by nearly 40%.

Natural gas usage in India

Natural gas is used both as a fuel and a feedstock in various industries. It is used as a fuel in the power, industrial, tea plantation, Cement, Ceramics, Glass, as city gas for cooking and heating and for transportation, as CNG, sectors. It is used as a feed stock in Fertilizer, petrochemicals, LPG industries.

There has been an increase in natural gas off-take for energy purposes by nearly 20% from the period 1990-91 to 2007-08. Likewise, natural gas consumption for the non-energy purposes has increased by 9% over the same period. The figure below shows the natural gas off-takers in various sectors.

Table 2: Industry-wise off-takes of Natural Gas in India (Million Cubic Meters)
2000-01 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08*
Energy Purpose
Power Generation8801105101147812099118781196312037
Industrial Fuel2870293930993569378032053324
Tea Plantation151119142 142151170160
Domestic Fuel335654933437544339
Captive use/LPG shrinkage5004540948654944504850345618
Others3813612632311120401258
Sub-Total 17199 19767 20940 21328 22052 20855 22436
Non-energy Purposes
Fertilizer Industry8480795578898173776284979822
Petro-chemicals779102711281236117513771432
Others140212159483836639638
Sub- Total10661101979965944789731051311892
Total27860299643090530775310253136834328

Note: Excludes gas supplied to IGL, MGL, Bhagyanagar Gas, TNGCL, BMC & GGCL and sponge iron use.

Source: ONGC, OIL, DGH and GAIL. *: Provisional.

Gas Pipeline Infrastructure in India

In terms of transmission pipelines, there is an existing network of 6,968 kilometers including the Hazira-Vijaipur-Jagdishpur (HVJ) network, Dahej?Vijaipur Pipeline (DVPL), Kelarus?Malanpur Pipeline, and Thulendi?Phulpur Pipeline together with other regional networks. A number of pipelines, including those by the private sector, are at various stages of implementation and are likely to be commissioned during the XI Plan. . The table below gives the current status of existing GAIL pipelines.

Table 3: GAIL transmission pipelines in India (Jan 2009)
Network/Region Length in KM Size
HVJ including GREP & spur lines346336" To 8"
DVPL including spur lines77042"
Dahej-Panvel Dhabhol P/L58930"/18"
Assam/Lakwa824" To 3"
Tripura6112" To 4"
Ahemdabad15312" To 2"
Assam/Lakwa824" To 3"
Rajasthan6612"
Bharuch30918" To 4"
Undera32316" To 3"
Mumbai12526" To 4"
KG Basin83518" To 4"
Cauvery Basin26618" To 4"
Total6968
Source: GAIL

Apart from GAIL, ONGC and OIL, Reliance Industry Limited (RIL) has emerged as the private player in the natural gas pipeline sector with the completion of the East West Gas Pipeline having a total length of 1440 kilometers. The pipeline will mainly transport natural gas produced in RIL?s D-6 Block in Krishna-Godavari Basin in Andhra Pradesh. The pipeline emanates from Kakinada offshore in Andhra Pradesh to Baruch in Gujarat.

On the supply side, there are two LNG terminals at Dahej and Hazira in Gujarat which are already operational with a total existing capacity of 7.5 MMTPA. The third terminal in Dabhol with a capacity of 5 MMTPA is under commissioning. There is another terminal at Kochi which is under final stages of commissioning

Demand and Supply Projections for Natural Gas in India

In terms of efficiency of usage, natural gas owes the potential to replace the existing fuels in various sectors both for feedstock as well as for energy purposes. However, this substitution will depend upon the relative price of gas with respect to the cost of such alternate fuels.

The demand for gas in India continues to be influenced by the cost economics of natural gas vis--vis alternative fuels pertaining to each of the end use sectors, primarily power and fertilizer. The natural gas consumption in 2007-08 is primarily shared by the power and fertilizer sector to the tune of 40 percent and 29 percent respectively. This is followed by the petrochemicals ? 9 percent, city gas (CNG/PNG) ? 4 percent, LPG/other liquid hydrocarbons ? 4 percent and sponge iron/steel sector ? 3 percent.

1. Demand Projections by Various Agencies

Several demand projections of natural gas have been done by international organizations like the International Energy Agency (IEA), Organization for Economic Co-operation and Development (OECD) countries and Energy Information Administration (EIA) of USA. The following table illustrates the strong natural gas demand potential in India according to the independent international agencies.

Table 4: Projections of demand of Natural gas by various agencies- (Figures in MMSCMD)
EIA 2005 IEA 2005 IHV-2025 India Vision 2020
Reference Case High Case Low Case 2006 2000 BAU BCS
Energy Purpose
2004-05747774911958987
2009-10931019314027711511
2014-15124132109189329149142
2019-20155171132228358194177
2024-25195225155259391258226

Source: EIA, IEA, IHV, Ministry of Power

In the Indian context, the power sector would continue to be one of the major consumers for natural gas. The Ministry of Power has set a target addition of 70,000 MW generations for the 5 year period ending 2012, the terminal year of the XI Plan. The current thermal power generation is about 90,800 MW, of which 12 percent (10,900 MW) is based on gas.

According to the Standing Committee on Petroleum and Natural Gas (September, 2008), the projected demand for natural gas in various sectors is as given below.

Table 5: Gas Demand Estimate- Sector wise Gas Demand Projection- (Figures in MMSCMD)
Sector Estimated in.2011-12
Power126.57
Fertilizer79.36
City Gas 15.83
Industrial 19.66
Petrochemical / Refineries /Internal Consumption33.25
Sponge Iron / Steel 7.86
Total282.55

Source: Standing Committee on Petroleum and Natural Gas (September, 2008)

By the year 2011-12, LNG terminals at Dabhol, Mangalore and Kochi are likely to get commissioned. Also, the Dahej LNG terminal would be having an operational capacity of 12 mmtpa by 2012. The overall projected availability of natural gas in the country by 2011-12 after taking into account the projected availability of indigenous gas and LNG, is projected below:

Table 6: Projections of Natural Gas Supply
Gas Supply Projects 2011-12
Total Domestic Gas + LNG (Normal) (mmscmd)244.34
Total Domestic Gas + LNG (Optimistic) (mmscmd)252.09

Source: Ministry of Petroleum and Natural Gas

Expected Long Term Oil & Gas Production Profile

Long term Production Profile has been worked out by ONGC for all the producing fields and discoveries for which Development Plan and/or Declaration of Commerciality (DoC) has been approved and/or submitted. The production profile has not been prepared for discoveries which are at various stages of appraisal/evaluation and also excludes the RIL gas discovery. Figure 1: Long Term Gas Supply Projections in India

visionandmission

Source:ONGC

City Gas Distribution in India

In India, city-based piped gas distribution is at a nascent stage, accounting for just 2 per cent of total natural gas demand, while the fertilizer and power sectors account for the bulk of demand. Such a skewed demand structure is attributed to the scarcity of gas in India, lack of gas city gas pipeline infrastructure and the government?s policy of allocating the available supply of gas to the priority sectors viz. power and fertilizer.

Moreover, a pressing need for piped gas supply did not exist in a tropical country such as India; while in the cold western countries and in Japan and South Korea, piped gas supply forms an essential part of the residential heating system. In much of Europe, around half of the total gas consumption is from city gas and in Japan and South Korea city gas distribution accounts for 30 per cent. However, with huge discoveries of natural gas by Reliance Industries in the Krishna Godavari basin and other major discoveries along western India, the city gas distribution holds immense potential in India. Further, the Government of India is keen on developing city gas distribution due to the benefits natural gas brings to the country economy and environment.

In India, city gas supply exists in New Delhi (Indraprastha Gas), Mumbai (Mahanagar Gas), Surat, Bharuch and Ankleshwar (Gujarat Gas). However, city gas supply is predominantly used by the industrial sector and owing to the Supreme Court ruling transportation is emerging as the next major consuming sector. In 2007-08 domestic and commercial segments constituted 14 percent of the demand in Mumbai, 5 percent in New Delhi and 8.8 percent in Surat, Bharuch, and Ankleshwar (see figure below). Hence, more initiatives have to be taken to improve the demand from the commercial and residential segments to develop a full-fledged city gas distribution infrastructure.

The city gas distribution sector has simultaneously grown with the gas sector growth. From coverage of just 2 cities at the beginning of the Xth Plan, the city coverage has grown to 10 in 2005-06 across the western, northern and southern regions of the country. Currently, there is a total city gas distribution network of about 6,000 km. As far as Compressed Natural Gas (CNG) supplies are concerned, there are 278 stations dispensing CNG in the country and the number is expected to continuously grow in the coming years.

Availability of CNG in Various Cities

With the expected growth in the gas supply and the simultaneous creation of gas inter-state transmission infrastructure in India, this sector is bound to grow in the XI Plan period. With the emphasis on clean environment, this sector would get the necessary thrust in the coming years. In line with this, various players have drawn up ambitious plans to roll out city gas infrastructure across a number of cities in the country.

From the existing coverage of 10 cities, the coverage is expected to grow to 40 cities in the next 5-7 years. This sector can be expected to grow at double digit rates in the later part of the XI Plan period prepared by Planning Commission.

Assuming an annual growth of 8 percent, the demand would go up to about 13.83 MMSCMD, 14.8 MMSCMD and 15.83 MMSCMD in 2009-10, 10-11 and 2011-12 respectively.