Prospects for India’s natural gas demand

admin January 30, 2019 No Comments

Natural gas has an important role to play in parallel with the massive expansion of renewables as it is considered a very efficient and flexible energy source, with start‐up times of 40 minutes compared with 5‐7 hours for inflexible coal, and minimum output limits of 15‐30% compared with 40‐60% for inflexible coal. In light of these benefits, the share of industry energy and feedstock progressed from 44% to 58% between 2010 to 2015. The residential‐commercial sector also increased its share from 6% to 8%, while transportation kept a marginal share of 3%.

Energy today is considered a crucial sector to achieve India’s development ambitions, support its expanding economy and meet the needs of what is soon expected to be the world’s most populous country. The time span of the National Energy Policy (NEP) (2017‐2040) helps lay the foundation for India to match the energy consumption parameters of developed countries over a long period. The country is running one of the largest and most ambitious renewable capacity expansion programs in the world. The energy landscape in India is experiencing a paradigm shift and the potential for future growth of energy demand, including gas, is enormous. The energy consumption per capita is only around one third of the global average, indicating significant scope for future growth. India’s energy demand rises by 3.2%/year from 2016 to 2040. India contributes for the largest share, 30%, of the growth in global energy demand. In 2040, the country will account for 11% of global energy use, against 7% today.

India’s gas demand is forecast to grow by 5%/year between 2016 and 2040, while energy demand rises by more than 3%/year. Coal accounts for around half of the future growth in energy demand up to 2040, followed by oil (26%) and gas (11%). The share of gas in the energy mix is expected to grow from 5% in 2016 to 8% in 2040. However, this remains short of the government targets.

Several recent positive developments point to a changing and more robust outlook for natural gas demand in India.

GDP growth is projected at 7.5%/year over 2016‐ This positive outlook now hinges on strong fundamentals, like urbanization, expanding population and a favourable investment climate.
In 2016, India experienced an exceptional rise in LNG imports (+ 41%), and a rebound in gas demand (+ 9%). In 2017, India’s gas demand is estimated up 3.3% and natural gas production returned to growth (+ 4%), reversing a prolonged decline since its peak of 52 bcm in 2010. 2018 saw natural gas consumption rise by 6%, to 62 bcm.
The government intends to raise the share of natural gas in the energy mix to 15% in 2030. It also plans to double LNG import capacity in the short term, illustrating the intention to “shift India to a gas‐based economy”.
In March 2016, the Ministry of Petroleum and Natural Gas announced the decision to liberalise natural gas prices for discoveries in high‐pressure, high‐temperature reservoirs, and deep water and ultra-Deepwater areas. Following these changes, oil and gas companies will be able to freely sell their natural gas in the market subject to a price ceiling defined as the lowest price of
- imported fuel oil prices;
- weighted average of alternate fuels; and
- LNG import prices.

The intention to reduce urban pollution is clearly mirrored by government initiatives such as increasing gas usage and replacing diesel with CNG in public transport and LNG in M&HCV. In addition, India’s environmental targets submitted at COP21 include an aggressive plan to expand its renewable generation capacity, aiming to generate 40% of electricity from non‐fossil fuels by 2030 ‘with the help of technology transfer and low cost international finance’. Should the renewables targets not entirely be met in the next ten years, this opens up potential further opportunities for power gas.

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