India's gas targets would need $10 bn investments: Crisil

Renewables are likely to be key driver, with govt targeting 175 GW of renewable power by 2022

The government's plan to more than double the share of natural gas in India's energy mix to 15 per cent would necessitate investments of at least Rs 65,000 crore just to augment gas import and pipeline infrastructure, a report said.

Crisil Research said if the share of gas in India's energy mix has to rise to 10 per cent by 2020, it would mean a doubling of gas consumption to over 100 billion cubic meter (BCM) from current levels.

But given that domestic gas production is limited, demand for imported LNG would surge three-fold to 65 BCM, or over 50 million tonnes. Collaterally, to import this LNG, India's regasification capacity will have to increase to 60 million tonnes compared with 25 million tonnes now.
 

Crisil Research said its analysis shows that would entail investments of Rs 30,000-35,000 crore. And for all that gas to be consumed, 9,000 km of pipelines would have to be laid in east and south India, which would cost another Rs 25,000- 30,000 crore.

The move to promote gas usage is in line with the commitment made at the Paris meeting on climate change (called the Conference of Parties 21, or COP 21), to reduce the carbon intensity of India's GDP by a third from 0.37 kg per capita of GDP in 2005, Crisil Research said in a statement.

Renewables are likely to be the key driver, with the government targeting 175 GW of renewable power by 2022. Gas, though a relatively cleaner fuel than coal and other liquid fuels, continues to be a higher cost option, which restricts its usage.

Weak pricing power of end-users further limits usage in the power and urea sectors.

"The government's ambitious plan to more than double the share of natural gas in India's energy mix -- from 6.5 per cent in 2015 to 15 per cent over the medium term -- would necessitate investments of at least Rs 65,000 crore (nearly USD 10 billion) just to augment infrastructure for gas import and for laying pipelines," it said.

Energy mix refers to the proportion of various fuels in overall energy consumption.

Crisil Research said to ramp up gas usage, LNG import and pipeline infrastructure needs to be expanded significantly. In particular, government financial support is necessary to revive stalled pipeline projects in east and south India, which have been dogged by viability worries stemming from subdued demand growth.

It believes that given the gas production constraints, low cost-competitiveness of liquefied natural gas (LNG), and under-developed infrastructure, meeting this ambitious target will be an onerous task, and will require significant push by the government through policies and incentives.

Additionally, gas consumption by the power sector needs to rise significantly if the energy mix goal is to be met.