A pragmatic approach to understand Indian natural gas market.

Author:Srivastav, Priyank
Position::Statistical table

Historically, India has relied on coal to generate power, liquid fuels as feedstock and oil for its transport sector. But for environmental reasons India needs to focus on cleaner fuels. Natural gas has emerged as the fuel of choice for many industries in India owing to its environmental benefits and higher economic efficiency. However, India's natural gas market is seeing a supply deficit due to its low domestic production.

The demand and supply gap is increasing, and there is no reason it will stop. MarketsandMarkets expect that the demand for natural gas will reach about 705 MMscm/d by 2029-30, up from about 260 MMscm/d in 2014-15.

Demand for natural gas has risen significantly due to demand from the fertilizer and power sector which cumulatively accounted for over 60% of gas consumption in 2014. The demand is also driven by growing usage in the city gas distribution (CGD) sector and industrial sectors such as refining and petrochemicals. Rising concerns on carbon emission have also contributed to the demand for natural gas in the country.

Viability of India's Gas Pipeline Options

India has been mulling several transnational gas pipelines, onshore or offshore--over the past two decades to meet the rising demand of natural gas, mainly from new power generation projects, fertilizer plants, and industrial users. But, till now none of the projects becomes a reality.

Over the years, several routes for gas pipelines have been proposed such as the Iran-Pakistan-India (IPI) Pipeline, Oman-India Deep Sea Pipeline and the most talked about Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline. However, all these projects were limited to the drawing board except for TAPI, which made some progress this year. The 1,735-km pipeline will run from Turkmenistan to India via Afghanistan and Pakistan.

The pipeline's designed capacity is 33 Bern annually. Investments are estimated at $7 billion. The multibillion-dollar TAPI project could be off to a year-end start, as the legal framework is expected to be in place by September, followed by the announcement of the consortium. However, TAPI pipeline faces an uncertain future with the recent oil price fall, ambiguity regarding transit via Afghanistan, and an increase in the estimated project cost.

Although energy companies such as Total, Chevron and ExxonMobil have shown interest in financing and running the pipeline project and have been shortlisted for the contract, no company or consortium has stepped forward to take...

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