The report has relied extensively on secondary sources of data for projecting supply, demand and pipeline infrastructure which the team would like to acknowledge, without which the basic structure of this report would not have been possible. The share of natural gas in the energy mix of India is expected to increase to 20% in 2025 as compared to 11% in 2010. In recent years the demand for natural gas in India has increased significantly due to its higher availability, development of transmission and distribution infrastructure, the savings from the usage of natural gas in place of alternate fuels, the environment friendly characteristics of natural gas as a fuel and the overall favorable economics of supplying gas at reasonable prices to end consumers. Power and Fertilizer sector remain the two biggest contributors to natural gas demand in India and continue to account for more than 55% of gas consumption. India can be divided into six major regional natural gas markets namely Northern, Western, Central, Southern, Eastern and North-Eastern market, out of which the Western and Northern markets currently have the highest consumption due to better pipeline connectivity.
In future, the natural gas demand is all set to grow significantly at a CAGR of 6.8% from 242.6 MMSCMD in 2012-13 to 746 MMSCMD in 2029-30. The total supply of natural gas is expected to grow at a CAGR of 7.2% from 2012 to 2030 reaching 400 MMSCMD by 2021-22 and 474 MMSCMD by 2029-30.
The supply profile for the projected period has been provided in the Table below.
Table: Consolidated source wise supply of natural gas from 2012-13 to 2029-30
|Gas Imports (Cross border Pipelines)||0.0||0.0||30.0*||30.0||30.0|
|* TAPI pipeline projected to get commissioned in 2017-18|
The design capacity of the pipeline network in India is expected to reach 815 MMSCMD in 2029-30.
However, considering the addition of capacity directly linked to the existing/planned sources of natural gas in the country, the gas grid capacity in India (pipeline emanating from source) is expected to reach 582 MMSCMD in 2029-30 from the present 274 MMSCMD. This capacity is expected to take care of the natural gas supply scenario in the projected period. In addition to the trunk lines regional gas pipelines, similar to the intra-state network of Gujarat, are recommended for highly industrialized states. It is expected that going forward the Southern and Northern part of India would catch-up with the Western part in terms of pipeline infrastructure while Eastern and North Eastern part of the country would lag behind and would require policy boost for industrial development to attract more investments.
The Indian economy has been projected to achieve average real GDP growth of 6.4% during 2008-2035. Energy availability is the key to economic growth and therefore, going forward high economic growth would lead to an increase in the energy consumption of the country. The primary energy mix of India is also set to alter on account of the substitution of oil by natural gas. The share of natural gas in the energy mix is expected to increase to 20% in 2025 and beyond as compared to 11% in 20104. The expected change in the primary energy basket for India in 2010 and 2025 has been presented in Table below.
India can be divided into six major regional natural gas markets namely Northern, Western, Central, Southern, Eastern and North-Eastern market. Out of these, the Western market accounts for the highest consumption of natural gas with more than 50% of the total gas consumption in the country. This is followed by the Northern market that consumes ~25% of the overall consumption. The Eastern market accounts for the lowest consumption in the country among all the gas markets.
The major Indian gas markets and their share of natural gas consumption have been provided in the Table below.
Regional gas markets in India
Power Sector Demand
Power sector has been the biggest consumer of natural gas in India in the past and is expected to remain so going into the future. However, the future demand for natural gas from the sector is likely to be constrained by the ability of the power plants to pay for a higher fuel expense, reduced availability of domestic gas supply and power sector reforms.
Gas contributes to about 10% of power generation in India. Gas based power generation is constrained by the higher cost of gas as a fuel and its availability across all the regions. In recent years the Plant Load Factor (PLF) of gas-based power plants has dropped to around 50% due to lack of natural gas availability at affordable prices. Natural gas demand for gas-based power generation remains highly price sensitive and it is expected to fall drastically at a price in excess of $8-$9/MMBTU.
The total Installed Generation Capacity in the country by the end of 11th Plan (as on 31.03.2012) is 1,99,877 MW comprising 38,990 MW Hydro, 1,31,603 MW Thermal (including 18,381 MW from gas), 4,780 MW nuclear-based power plants and 24,503 MW from renewable energy sources including wind. The region-wise and fuel-wise details of installed capacity in India as on 31st March 2012 is provided in the Table below.
Growth drivers of Oil and Gas Sector
The constituent states of these regional markets have been provided in the Table below.
The estimated region wise demand projections have been given below.
Natural gas demand from the Eastern region is expected to increase over six times over the projection period while the North Eastern region demand is likely to more than quadruple over the same period with demand rising from 5 MMSCMD in 2012-13 to 24 MSMCMD in 2029-30.
Present Supply Scenario
The present supply of natural gas in India is mainly from the nominated blocks, operated by ONGC and OIL, private and joint venture fields like Panna-Mukta &Tapti (PMT) and from the fields awarded under NELP like RIL’s KG D-6.
GAIL India (“GAIL”) owns the largest network of the natural gas transmission infrastructure present in the country. The company currently owns and operates 9,000km (approx.) of high-pressure natural gas pipelines with a transmission capacity of more than 160 mmscmd. The rest of the country’s natural gas trunk pipelines network is owned by Gujarat State Petro net Limited (GSPL) and Reliance Gas Transportation Infrastructure Limited (RGTIL) with a small network owned by Gujarat Gas Company Limited (GGCL) and Assam Gas Company Limited (AGCL). Although the gas pipeline coverage has increased, it is still inadequate to channelize the gas supply to demand centres in the country.
Geographical distribution of these pipelines has remained uneven as the states closer to the gas source have had the benefits of higher utilization of gas and local development of gas market e.g. Gujarat, Maharashtra, Andhra Pradesh, etc. Other states/underdeveloped have not been able to utilize the benefits of gas due to less gas availability and inadequate pipeline infrastructure.
Scope for further development
India is expected to have circa 32,727 Kms of natural gas pipeline with a design capacity of 815 MMSCMD in place by 2030. However, the addition of ‘capacity at source’ i.e. the capacity that actually connects supply points to the markets is likely to increase to 582 MMSCMD.
Regional markets with the biggest gap between the demand and planned addition in capacity need to be targeted for further expansion of pipeline infrastructure so that the infrastructure keeps pace with the ever-rising demand. The expected share of North East market in the total demand and planned pipeline capacity has been provided in Table below.
As can be seen above, the share of planned pipeline capacity for North East regions is likely to meet the share of demand for these markets till 2030. However since the difference is not substantial and pipelines do require additional capacities, more pipelines could be planned to cover these regional markets based on actual progress in the buildup of demand. It should also be noted that the share of natural gas demand and pipeline infrastructure in the North-eastern markets is significantly lower than that for the other regions. There is a need to commit more resources towards stimulating demand in these regions so that greater balance is achieved in terms of the availability of natural gas. The increase in natural gas demand in the eastern and north-eastern regions resulting from additional initiatives and resources would need to be coupled with the addition of more natural gas pipeline infrastructure here to support the development of the natural gas markets in these regions.
Pipeline capacity addition at source
Environmental and Social Impact
Oil and gas pipeline projects have been among the biggest infrastructure projects in developing countries in recent years. The climate change impact of methane leakage from ageing gas pipelines has been one of the biggest impacts of such projects in the past. Therefore it is important that the environmental and social impact linked to natural gas pipeline projects in the country also receives sufficient policy focus.
Environmental and Social Impact Assessment (ESIA) is one framework that may help in preventing /minimizing any adverse impact resulting from laying of pipelines.
Evaluate alternatives to the present differential tax regime
Natural gas attracts differential tax treatment in different states within India which restricts free movement and swaps across geographies. In swapping of natural gas the ‘title of ownership’ in gas is bartered with that of another entity, nearer to the end consumer, to enable delivery without gas having to travel over avoidable long distances. Swapping of gas helps in managing inherent limitations in handling, storage and transportation of natural gas.
Various options exist to resolve the above issues as discussed below:
- Change the Central Sales Tax (CST) Act to recognize the contractual path to demonstrate sale of gas under CST. (Currently, it follows the physical movement of the goods outside the state).
- Include gas sales under Goods and service tax (GST) maybe with the highest tax slab to offset any revenue loss to states.
- Bring gas under declared good status.
Independent operator for system discipline and security of supply
There is also a need to consider constituting an independent Pipeline System Operator (PSO) in order to streamline tariff-sharing among various pipeline system owners as well as ensuring system discipline.
The natural gas pipeline network operating in the country today is operated by six players – GAIL (India), Gujarat State Petro net Limited (GSPL), Gujarat Gas Company Limited (GGCL), Reliance Gas Transportation Infrastructure Limited (RGTIL), Indian Oil Corporation Limited (IOCL), and Assam Gas Company Limited (AGCL). In such a multi-operator environment, a revenue-sharing model may be implemented where all pipeline owners would be allowed to develop a network according to the PNGRB regulations while the PSO would work as a shell company, operating the entire network, having equity of each pipeline owner proportionate to the pipeline capacity that the owner entity offers to the PSO.
Alternatively, a model where the entry charge would be collected by the transporter, wherever the gas enters a pipeline system, and the exit charges would be collected by the PSO, who delivers the gas to a customer, may be implemented.