scorecardresearch
Friday, March 29, 2024
Support Our Journalism
HomeIndiaGovernanceNo relief for smog-choked cities as PM Modi’s goal to push natural...

No relief for smog-choked cities as PM Modi’s goal to push natural gas stalls

Follow Us :
Text Size:

After peaking to just above 10% six years ago, share of natural gas in energy mix has slid back toward 6%.

New Delhi/Mumbai: India’s drive to clean up some of the world’s worst air by burning more natural gas appears to be faltering.

Despite an overall rise in use over the past three years, infrastructure, policies, weak domestic production and competition from coal have conspired to keep the fuel’s share of the total mix stagnant. That’s complicating efforts to rid the nation of smog and risking investments estimated at 1.7 trillion rupees ($24 billion).

Prime Minister Narendra Modi, who won a United Nations environmental award in September for promoting solar power, has struggled to curtail pollution that non-profit Health Effects Institute estimate contributed to the deaths of more than 1.1 million Indians in 2015.

After coming to power in 2014, Modi’s government set a target to more than double the share of gas in the energy mix to 15 percent by 2030. But after peaking just above 10 percent six years ago, it’s slid back toward 6 percent.

To read more about India’s battle against deadly smog, click here.

Abundant coal supplies help the fuel dominate the nation’s power industry, accounting for 56 percent of its primary energy. Meanwhile, gas use retreated after domestic output crashed earlier this decade, which the nation has struggled to replace with imports.

“The market is price sensitive and cheap coal still poses a challenge to gas consumption,” Kaushik Chatterjee, senior analyst at Wood Mackenzie Ltd. said in an email, adding that the 2030 target seems achievable if some infrastructure and policy issues are resolved.

Spokesmen for the petroleum and environment ministries declined to comment. A spokesman for the prime minister’s office didn’t respond to calls and texts seeking comment.

Driven by power and industrial demand, India’s use of natural gas is estimated by the International Energy Agency to grow 4.9 percent per year through 2040 to 171 billion cubic meters, placing it as the second-biggest consumer in the region after China.

“But the share of gas in the energy mix remains less than 10% in 2040,” the IEA said in its annual World Energy Outlook earlier this month. “While the low share of gas today implies huge scope for growth, strong competition from coal and renewables for power generation, the lack of policy measures to push out coal and challenges around infrastructure developments all hamper this potential from being fully realized.”

Domestic exploration for new sources of supply have been damped by regulated prices. Most gas is pegged to a weighted basket of international prices and is revised every six months, most recently at $3.36 per million British thermal units. Gas produced from fields that are considered “difficult” is allowed a higher ceiling, currently at $7.67 per million Btu.

India’s own natural gas production peaked about eight years ago, driven by Reliance Industries Ltd.’s D6 block in the Krishna Godavari basin. Output has since collapsed as the field’s geology proved more challenging than expected. The KG-D6 block pumped about 3.7 million cubic meters a day last quarter, compared with 60 million in 2010.

Meanwhile, imported liquefied natural gas, which now accounts for about half of India’s consumption, has no price restrictions. January spot cargoes in India and the Middle East were assessed this week at $9.854 per million Btu, according to the Singapore Exchange Ltd.

Infrastructure will be crucial for the future of gas in India, according to the IEA. Only the nation’s west, where most of the gas is consumed, has a good pipeline network and LNG import terminals.

Among the biggest infrastructure hurdles is pipeline rights-of-way. For example, Petronet LNG Ltd.’s import terminal in the southwestern city of Kochi has been almost idle as protests by villagers and farmers delayed a pipeline connecting it to major consumers.

India must fast-track gas infrastructure, Wood Mackenzie’s Chatterjee said. A uniform tariff policy for pipelines would create a level playing field for distribution while higher taxes on coal may help gas compete in power generation.

The higher cost of imported fuel means India used barely a quarter of its nearly 25 gigawatts of gas-fired generation capacity, as the plants can’t compete with electricity from coal. India’s power industry follows a so-called merit order dispatch system, which mandates that utilities buy the cheapest electricity available first.

“We need to have a more holistic definition of merit,” B.C. Tripathi, chairman at GAIL India Ltd., the nation’s largest gas carrier, said at a conference last month. “Unless we do that, we will not be able to take advantage of the 1.7 trillion rupees of committed investments in the sector.”

“In our country,” he said, “what’s cheapest becomes meritorious, even if it’s the most polluting.”-Bloomberg

Subscribe to our channels on YouTube, Telegram & WhatsApp

Support Our Journalism

India needs fair, non-hyphenated and questioning journalism, packed with on-ground reporting. ThePrint – with exceptional reporters, columnists and editors – is doing just that.

Sustaining this needs support from wonderful readers like you.

Whether you live in India or overseas, you can take a paid subscription by clicking here.

Support Our Journalism

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular