India cuts diesel with gas [NGW Magazine]
India is looking to increase the share of natural gas in its energy mix to 15% by 2030 from a little over 6% at present. The rationale is to ease the severe air pollution in urban clusters. India’s primary source of energy is coal and imported crude oil. Natural Gas Vehicles (NGVs) can however play a significant role in helping the government achieve this target.
India’s NGV programme is almost two decades old but after the initial success in the national capital region (NCR) of Delhi, the western state of Gujarat and the city of Mumbai, it has not seen meaningful progress in other parts of the country. However, with the successful conclusion of the ninth and tenth city gas distribution (CGD) licence bidding round conducted by the downstream regulator Petroleum and Natural Gas Regulatory Board (PNGRB), things may be looking up for the sector.
According to a study on India’s CNG infrastructure, released by Nomura Research Institute (NRI Consulting & Solutions) during the NGV India Summit 2019 held in Delhi early-May, rapid development of infrastructure and the reduction in costs caused by domestic manufacturing will lead to a possible penetration of half the total fleet running on gas by 2030. India has about 3.3mn NGVs at present which could rise to 33mn by 2030.
It further stated that a projected network of 15,000 CNG and 1,500 LNG stations has the potential to transform the Indian mobility scenario. There are about 1,500 CNG stations in operation throughout India and no operational LNG stations.
The report points out that the transport sector is a major contributor to the crude oil burden, making up about 53% demand for petroleum products. The existing volume of oil import has developed into a strategic burden on the economy making it imperative to reduce import dependence. The economics also favour NGVs despite India importing almost half of its gas in the form of LNG since, per unit of energy, imports are a surprising 44% cheaper than crude oil and expected to remain the same, according to the report.
Apart from projections of a rapid rise in the number of CNG and LNG stations over the next decade, there are other factors, according to the report, that are working in favour of an NGV-focused ecosystem.
Original equipment manufacturers (OEMs) are increasingly offering CNG variants in the light, commercial and goods vehicle segments. Also, CNG retro fitment technology can be applied to vehicles running on conventional fuels. The use of LNG is growing worldwide as more people see it as an economically viable and environmentally friendly fuel for trucks, and this is giving confidence to companies working in the sector in India.
A partner at NRI Consulting & Solutions and one of the authors of the report, Ashim Sharma, said that the success of NGVs depends on three parameters: consumer acceptance, cost competitiveness and adequate infrastructure.
“In the case of India we have seen that there is clear consumer acceptance wherever there is sufficient infrastructure. In terms of cost, gas enjoys a cost advantage in all segments when compared with liquid fuels such as petrol and diesel. As for building infrastructure, I am confident that given the way industry has responded to the latest CGD bid rounds, that too will occur,” he said.
According to Sharma, all the entities allotted CGD licences will push for setting up CNG station because that is how they will make money. “There is a penalty if you do not start supplying gas within the stipulated time and in order to make money the licensees will have to roll out infrastructure,” he added.
The NRI report said that country level infrastructure development would prompt OEMs to launch dedicated NGV platforms, leading to better economies of scale as well as efficient products. The localisation of NGV components, such as cryogenic cylinders and certain CNG train components will reduce the cost for customers.
Gas supply bounce back expected
The numbers projected by the Nomura report point to a very bright future for the India NGV sector. However, for the NGV sector to fully optimise its potential, India will need to see stable and sufficient supply of natural gas as well. A presentation by the chairperson of PNGRB at the same Delhi event showed that gas supply in the Indian market is indeed expected to go up.
The chair of India’s downstream regulator DK Sarraf told the conference that supply-side bottlenecks in the Indian gas sector are gradually easing. The share of natural gas in the Indian energy mix has fallen to 6.2% compared with over 10% eight years ago. This decline has been mainly due to insufficient supply, Sarraf said.
Production pick up
Supply-side bottlenecks over recent years included a sharp decline in domestic output; a lack of sufficient LNG import and regasification capacity; the absence of a widespread pipeline grid; and underdeveloped city gas distribution networks. However, Sarraf argued that things are now starting to look up.
Indian gas output showed a continuous decline in 2012-2016 owing to falling production in the disappointing Krishna Godavari (KG) Basin off the east coast. However, production increased for a second year in a row in the 12 months to March 2019 (India's fiscal year 2018-2019), growing 0.7% year on year to 32.65bn m3, according to the Indian petroleum and natural gas ministry.
The gains were led by state-owned ONGC, which expanded production by 6.5% to 25.9bn m3. ONGC is expected to further ramp up output from its KG basin fields in the coming years, which should increase supplies to the domestic market. Indian energy and telecoms group Reliance and partner BP are also working on increasing production from their KG Basin assets by 2022.
Ships and pipes
Both Petronet’s Dahej terminal and Shell’s Hazira terminal operated at maximum levels through much of 2018. However, Sarraf also claimed LNG import and regasification capacity should significantly increase in the coming years, with new terminals due to be commissioned on both the east and west coasts and existing terminals set to expand capacity.
In a report published in March, Wood Mackenzie said should all plans be completed, India's regas capacity will reach 56.5mn mt/yr by 2025 from the existing 25.5mn mt/yr. Beyond this, India's ability to import significant volumes of LNG could be enhanced further if several other proposed regasification terminals proceed, it said.
Meanwhile, at 16,500 km, India’s gas pipeline grid is nowhere near large enough. The network is mostly concentrated in the western and northern parts of the country, with the densely populated eastern and north-eastern states completely off grid.
However, a recent initiative taken up by the government and state-owned Gail will see a substantial increase. Gail is executing around 5,500 km of pipeline-related projects to that will plug the eastern and southern parts of the country into the network.
Prime among these is the Jagdishpur-Haldia & Bokaro-Dhamra Natural Gas Pipeline (JHBDPL) and Barauni – Guwahati Pipeline (BGPL) projects. The 2,650-km JHBDPL, also known as Pradhan Mantri Urja Ganga, will pass through the eastern states of Uttar Pradesh, Bihar, Jharkhand, West Bengal & Odisha. The route will then be extended from Barauni to Guwahati in the northeastern state of Assam via a 729-km pipeline.
Gail has a further 1,400 km of pipeline under evaluation, with completion targeted by 2023, the company said in early May.
According to Sarraf, last-mile connectivity in the form of city gas distribution (CGD) networks will play a vital role in driving demand for gas in India. The regulator has recently concluded the country's ninth and tenth bidding rounds for CGD licences and reports a very strong response.
During the ninth round, which was launched in the middle of last year, 86 areas covering 174 districts in 22 states and union territories were open for bidding. A total of 406 bids were received; 35 entities participated in the process. Private sector firm Adani Gas won the highest number of licences.
The tenth round was launched in November. The 50 geographical areas that were open for bidding cover 124 districts in 14 states, constituting 18% of India’s territory and 24% of its population. PNGRB received 225 bids and has issued letters of intent to 12 successful entities.
Sarraf said that the two rounds were very well received, and significant investments are expected in both piped natural gas infrastructure and CNG stations. He said in the next eight years the number of CNG stations will increase to 10,000 from 1,500 at present. The number of households connected to the piped natural gas network is expected to rise many times, he added.