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INVESTMENT IN GAS INFRASTRUCTURE

INVESTMENT IN GAS INFRASTRUCTURE

 

Context

  • India is investing over USD 60 billion in developing a gas supply and distribution infrastructure as it chases the target of more than doubling the share of natural gas in its energy base to 15 per cent by 2030

More about Investment

    • Proposed Infrastructure Plan
  • It includes pipelines, LNG (Liquefied Natural Gas) terminals and CGD (City Gas Distribution) networks.
    • It has been envisaged to develop additional about 14,300 km pipelines to complete the National Gas Grid and are at various stages of development.
      • National Gas Grid (NGG) was conceptualized in 2000, India has built more than 16,000 km of gas network.
      • It includes Pradhan Mantri Urja Ganga Project which seeks to cater to the energy requirements of Uttar Pradesh, Bihar, Jharkhand, Odisha and West Bengal.
      • National Gas Grid intends to create a network of pipeline infrastructure to connect gas sources to major demand centers
      • It also aimed at removing regional imbalance in access to natural gas.
    • The government has further planned to have 1,000 LNG fuel stations across the country.
    • Coverage of CGD projects is being expanded to 232 geographical areas spread over 400 districts, with potential to cover about 53% of the country’s geography and 70% of population.

Government Initiatives for gas economy

    • Natural Gas Marketing Reforms: Recently, the Cabinet Committee on Economic Affairs (CCEA) has approved the Policy framework on reforms in the exploration and licensing sector for enhancing domestic exploration and production of oil and gas.
    • Indian Gas Exchange: India’s first automated national-level gas trading platform was unveiled in June 2020, to promote and sustain an efficient and robust gas market and foster gas trading in the country
    • Pradhan Mantri Ujjwala Yojana: It aimed to provide free cooking gas connections to poor families.
    • Gas4India Campaign: It is a multimedia, multi-event campaign to communicate to people, the national, social, economic and ecological benefits of using natural gas as the fuel.
    • Hydrocarbon Exploration and Licensing Policy (HELP): It is a contractual and fiscal model for award of hydrocarbon acreages towards exploration and production (E&P). It provides a single, or uniform, license for the exploration and production of all conventional and unconventional hydrocarbons from an entire contract area.
  • Promotion to Compressed Natural Gas based Public Transport.
  • Transnational Gas Pipelines
    • Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline.
    • Middle East to India Deepwater Pipeline

Advantages of natural gas

  • Natural gas is abundant–  If consumption remained at present levels, the International Energy Agency (IEA) estimates there are enough recoverable resources to last around 230 years.
  • It is versatile–  A gas-fired power station takes much less time to start and stop than a coal-fired plant. This flexibility makes it a good partner to renewable sources of energy such as solar and wind, which are only available when the sun shines and the wind blows.  
  • Gas is the cleanest-burning hydrocarbon, producing around half the carbon dioxide (CO2) and just one tenth of the air pollutants of coal when burnt to generate electricity. There is enormous potential to reduce near-term CO2 emissions and air pollution by using gas instead of coal.
  • Gas is now so widely available through LNG, that it can help countries deal with short-term supply disruptions. After the Fukushima disaster, Japan shut down its nuclear reactors and relied on LNG to make up much of its lost electricity supply.
  • In some cases, it is cheaper to produce gas than coal. The most efficient gas-fired plant has investment costs of $1,100 per kilowatt, according to the IEA, compared with $3,700 for the most efficient coal-fired plant. 
  • Gas-fired power becomes more competitive again when long-term costs associated with climate change and the impact of air pollution, both on people and the environment, are included.
  • Gas also has a growing number of uses, including the use of LNG as a lower-emission alternative to diesel and heavy fuel oil in transport.

Challenges to Gas economy

Policy Issues

  • Enabling efficient usage of gas / Infrastructure status to gas piplelines –  In order to provide adequate support to the development of natural gas market and encourage investment in the natural gas infrastructure in India, policy level initiatives would be required to allow gas to trade freely in the market where suppliers, large consumers, traders etc. could all participate
  • Strategic Storage  –  The share of natural gas in the primary energy mix of India is expected to go beyond 20% by 2030 increasing, as a result, the importance of natural gas in the context of energy security. Therefore, it is imperative that a comprehensive policy initiative be directed at exploring the option of maintaining strategic storage/buffer stock post 2020.
  • Evaluate alternatives to the present differential tax regime – Natural gas attracts differential tax treatment in different states within India which restricts free movement and swaps across geographies. Therefore, it is important to evaluate alternatives to the present differential tax regime for natural gas so that free movement and swapping of gas gets facilitated across India.
  • Capacity building (resources) to help development of natural gas infrastructure – Capacity building for the development of natural gas infrastructure, through development of training institutes for skilled and semi skilled workers, is an area that requires policy focus
  • Long term gas tie ups – in order to increase the consumption of natural gas in the country on a sustained basis, long term reliable supply arrangements/tie ups would be needed in addition to augmenting domestic energy resource base.

Regulatory Issues

  • Unbundling of Transportation and Marketing of natural gas – Unbundling of the activities of transportation and marketing of natural gas has yet to happen in the country. The unbundling of these two activities prevents cross subsidies between the two activities and creates a level playing field for all shippers, avoiding favours by transporters to its supply affiliate. 
  • Review of mechanism of infrastructure Development – For development of any infrastructure the developers need to be given assurance of reasonable returns, sustainable for a timeframe which helps them to achieve funding
  • HUBs/Spot markets – For the development of liquid trading HUBs in India, it is important to address the issue of transparency associated with trading at such platforms.

Way Forward 

  • Need for aggressive policy-driven actions including mandates to phase out old coal-consuming plants. 
  • Imposing environmental taxation or carbon prices. 
  • Progressing in energy market reforms. 
  • Reduce the dominance of polluting and carbon-intensive fuels 
  • Scaling up the gas share require policy effort from the government on both energy supply and demand sides.

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