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    Indian Regulator Predicts Gas Bounce Back

Summary

Supply side bottlenecks in the Indian gas sector are gradually easing which will give a boost to local consumption and help in increasing the share of gas in the overall energy mix.

by: Shardul Sharma

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Indian Regulator Predicts Gas Bounce Back

Gas has an opportunity to increase its share in India's energy mix, the head of the Petroleum and Natural Gas Regulatory Board said in early May.

DK Sarraf, chair of India’s downstream regulator, told the NGV India Summit 2019 that took place in New Delhi recently that supply side bottlenecks in the Indian gas sector are gradually easing, and that should help the blue fuel halt its slide and boost local consumption.

Natural gas' share 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. The government is now working towards increasing the share of gas to 15% by 2030.

Production pick up

Supply side bottlenecks over recent years included a sharp decline in domestic output, lack of sufficient LNG import and regasification capacity, absence of a widespread pipeline gird and underdeveloped city gas distribution networks. However, Sarraf believes that things are now starting to look up.

Indian gas output showed a continuous decline in 2012-2o16 due to falling production in the 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. Sarraf said ONGC is expected to further ramp up output from its KG basin fields in the coming years, which should increase suppliesto 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 regas 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.

Last mile

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 10th round was launched in November. The 50 geographical areas that were open for bidding cover 124 districts in 14 states - constituting 18% of Indian territory and 24% of its population. PNGRB received 225 bids and has issued letters of intent (LoI) 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 manifold, he added.