Natural gas – UPSC Prelims

  • The government will invest around 60 billion USD in creating gas infrastructure in the country till 2024 and increasing gas’s share in the energy mix up to 15% by 2030.
  • Currently, gas accounts for 6% in the country’s total energy mix.
  • At present close to half of Natural Gas demand is fulfilled by imports.
  • At present, India is fourth largest importer of LNG.
What is Natural Gas?
Natural gas is a fossil energy source that formed deep beneath the earth’s surface. Natural gas contains different compounds. The largest component of natural gas is methane, a compound with one carbon atom and four hydrogen atoms (CH4).
What is Liquified Natural Gas (LNG)?
Liquefied natural gas (LNG) is natural gas that has been cooled to a liquid state, at about -260° Fahrenheit, for shipping and storage.
The volume of natural gas in its liquid state is about 600 times smaller than its volume in its gaseous state. This process makes it possible to transport natural gas to places where pipelines do not reach.
Importance of Gas:
  • Energy efficient: Natural gas produces more energy than any of the fossil fuels in terms of calorific value.
  • Cleaner fuel: Natural gas is a superior fuel as compared with coal and other liquid fuels; being an environment-friendly, safer and cheaper fuel.
  • Emission commitments: India made a commitment to COP-21 Paris Convention in December 2015 that by 2030, it would reduce carbon emission by 33%-35% of 2005 levels.
  • Diverse applications: Natural gas can be used as domestic kitchen fuel, fuel for the transport sector as well as a fuel for fertilizer industries and commercial units.
  • Regressive Taxation System:
    • The tax rates increase as the gas flows from one zone to another. This means that consumers situated at a distance from the source of gas pay a higher price than those closer to the source. Gas is not under GST.
    • The price of natural gas is complex as there are multiple price formulae.
      • One for gas produced from domestic fields by the public sector companies.
      • One for gas produced by private companies.
      • One for production from deep waters offshore under high temperature etc.
  • Monopoly of GAIL:
    • The Gas Authority of India Ltd (GAIL) is engaged in the production, transportation, and marketing of gas. This allows GAIL to influence its rights of the gas pipelines.
    • They deny their competitors access to the market. Assured and common access to all marketers is required.
    • Most countries have separated the production/import and marketing interests from transportation. GAIL’s business activities should be limited to pipeline construction and transportation.
  • Lack of coordination between Centre and States:
    • The Center and state have clashed over issues like land attainment, pipeline routing; and royalty payments. This is why India has not yet made a national pipeline grid.
    • Center-state alterations have also delayed the construction of import facilities and the creation of gas markets. The Centre and state should resolve these issues through an integrated decision-making process.
Proposed Infrastructure Plan:
  • It includes pipelines, LNG (Liquefied Natural Gas) terminals and CGD (City Gas Distribution) networks.
  • It has been envisaged to develop additional about 14,300 km pipelines to complete the National Gas Grid and are at various stages of development.
  • At present, the country has 6 operational LNG regasification terminals.
  • The government has further planned to have 1,000 LNG fuel stations across the country.
  • Coverage of CGD projects is being expanded to 232 geographical areas spread over 400 districts, with potential to cover about 53% of the country’s geography and 70% of population.
National Gas Grid:
  • Since a National Gas Grid (NGG) was conceptualized in 2000, India has built more than 16,000 km of gas network. Recent initiatives include:
Pradhan Mantri Urja Ganga Project: It seeks to cater to the energy requirements of Uttar Pradesh, Bihar, Jharkhand, Odisha and West Bengal.
North East Region (NER) Gas Grid: It will pass through Assam, Sikkim, Mizoram, Manipur, Arunachal Pradesh, Tripura, Nagaland and Meghalaya in a phased manner.
Related Government Initiatives:
  • Natural Gas Marketing Reforms: Cabinet Committee on Economic Affairs (CCEA) has approved the Policy framework on reforms in the exploration and licensing sector for enhancing domestic exploration and production of oil and gas.
  • Indian Gas Exchange: India’s first automated national-level gas trading platform was unveiled in June 2020, to promote and sustain an efficient and robust gas market and foster gas trading in the country
  • Pradhan Mantri Ujjwala Yojana: It aimed  to provide free cooking gas connections to poor families.
  • Gas4India Campaign: It is a multimedia, multi-event campaign to communicate to people, the national, social, economic and ecological benefits of using natural gas as the fuel.
  • Hydrocarbon Exploration and Licensing Policy (HELP): It is a contractual and fiscal model for award of hydrocarbon acreages towards exploration and production (E&P). It provides a single, or uniform, license for the exploration and production of all conventional and unconventional hydrocarbons from an entire contract area.
  • Promotion to Compressed Natural Gas based Public Transport.
Transnational Gas Pipelines:
  • Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline.
  • Middle East to India Deepwater Pipeline
Why are LNG Prices rising?
  • Supply Constraints: Global energy demand fell in 2020 when economies slipped into COVID-induced lockdowns. When growth returned this year, especially to Asian economies, demand shot up and energy producers struggled to meet the growing demand, pushing up prices.
  • Energy Geopolitics: As prices of LNG shot up amid growing worldwide demand and falling production in Europe, supplies from Russia via a pipeline that passes through Ukraine and Poland also reduced, which made the situation worse.
What are India’s plans for LNG?
  • India has a target of a 15% share for natural gas in India’s total energy mix by 2030. This is because environmental benefit from LNG is huge. There is no sulphur dioxide emission and nitrogenous emissions are reduced by 85%.
  • However, India needs to rethink its strategy if LNG prices remain high. Moreover, even if LNG becomes affordable, at best, India can manage to expand gas use to around 10% of its energy mix because of lack of adequate infrastructure and consumption.
  • International Energy Agency (IEA) expects the share of gas in India’s energy mix at just 12% in 2040 with import dependency rising to 69% t of demand from 50% in 2019.

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