Fuel of future

Written by Amitabh Kumar | Updated: Oct 31 2012, 05:49am hrs
Policy alignments be done to make LNG central to Indias energy basket

With proven natural gas reserves of 208,000 billion cubic metres in 2011 and world production at less than 2% (3,276 bcm)according to BP statistical review of world energy 2012natural gas has tremendous growth potential. The acute awareness of climate change and carbon emission issues the world over makes gas one of the most environment friendly fossil fuels, which also offers scalability to meet growth needs.

Liquefied natural gas (LNG) is probably the fastest way to develop and monetise gas reserves. It is an excellent alternative, considering the geo-political issues facing transnational gas pipelines, challenges in domestic gas development in deep and ultra-deep waters (high cost, long lead time and technological uncertainties), extraneous influences on crude oil supply and prices, and environmental issues over coal.

Indias geographical location and a coastline which goes round from east to west gives it a unique advantage of not being too far from most LNG sources, whether in Asia, Middle East, Australia, or Africa. Clearly, LNG is becoming central to Indias energy basket, as we pursue energy security through diversity.

The share of natural gas in Indias energy basket currently at around 11% is expected to increase to 20% by 2025 (report by P&NG working group for Plan-XII). The share of LNG in natural gas, which was nil in 2003, is nearly 40% of total gas supplies to the Indian market today, with LNG coming from every major producing country in the world under a variety of commercial arrangements. This share of LNG in natural gas is expected to increase to 50%, if not higher, by 2020-21.

At this point, with LNG supply of almost 65 mmtpa (million metric tonne per annum), it will have become a fuel category in itself alongside coal, oil and natural gas. It deserves a comprehensive and thorough strategy to secure supply, develop price points, invest and absorb the technology across the value chain, and identify & develop downstream consumers who can purchase LNG on its commercial terms rather than any type of subsidised pricing mechanism to priority customers.India is likely to remain import dependent to meet its energy needs in the foreseeable future. In this situation the challenge is as much to secure supply as it is to manage affordability.

The environmental benefits of LNG in particular and the sustainable growth it offers to an emerging economy like India makes it central to the countrys energy basket and deserves alignment of policy efforts to make LNG the fuel for Indias future.

The author is senior manager, Deloitte Touche Tohmatsu India