Moving towards a gas-based economy

The devastating Australian bush fires have reignited fierce de­bates around pyrogeographies and carbon emissions. 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 degrees Celsius in global surface temperatures. Our stakes are collective, so efforts have to be collective albeit contextual. 

Under Prime Minister Narendra Modi India has taken a strong turn in the energy road map towards renewables and rebalancing the energy mix. However, it would be unfair to expect India to wean itself off fossil fuels at this stage of our developmental cycle. India’s per capita emission 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 per cent. Nonetheless, efforts are un­der­way to decarbonise 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 6 per cent to 15 per cent, 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 per cent. The only Indian state that has a higher gas mix than the global average — of approximately 25 per cent — is Gujarat. 

As emphasised in the 2020 Budget speech, about 27,000 km of national gas grid pipeline would be completed in the coming years connecting Kutch to Kohima and Kashmir to Kanniyakumari

To realise our gas use 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 2016 onwards to attract investment in exploration and production activities, shifted focus from revenue maximisation 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 2,650-km Pradhan Mantri Urja Ganga project and the 1,656-km North East 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 km of national gas grid pipeline would be completed in the coming years connecting Kutch to Kohima and Kashmir to Kanniyakumari. 

We have placed a strong emphasis to expand city gas distribution (CGD) networks across the country covering more than 400 districts and about 70 per cent of the population. CGDs supply cleaner cooking fuel (such as PNG) to households, industrial and commercial units as well as transportation fuel (such as CNG). There is an expected investment of Rs 1.2 trillion in over the next decade. 

In addition to natural gas, an initiative, Sustainable Alternative Towards Affordable Transportation (SATAT), has been taken up to extract economic value from biomass 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 alternative, economical and environment-friendly fossil fuel for medium and heavy-duty vehicles. To kick start the development of LNG-based transport ecosystem in the country, thrust has been given to build LNG filling stations along the golden quadrilateral. The use 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 trillion with employment generation po­tential across the gas value chain. There are plans to have a free gas market with the setting up of a gas trading exchange for efficient price discovery in the Indian market. In addition, a rationalised pipeline tariff structure and a harmonised tax regime by in­cluding natural gas under the ambit of GST would be key to accelerating the shift towards a gas-based economy. 

To meet our demand, we are in the process of diversifying the ge­og­raphies to source gas. India im­ports LNG from Qatar, the US, Ru­ssia and Australia. However, some sectors that use or can potentially use gas — like the power sector and the steel industry — are constrained to opt for gas as a feedstock due to the current unattractive cost 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 author is Minister of Petroleum & Natural Gas and Steel