ONGC has discovered shale gas in a pilot project in West Bengal, which shows that India too has the resource potential for production of the unconventional fuel that has transformed the gas market scenario in the US. It is assuring that the government is working on a regulatory regime for shale gas exploration. But focusing on exploration alone would not help. India must develop a gas transportation network if it is to exploit its shale gas potential optimally.
?Metaphorically, India would be putting the cart before the horse by showing urgency for production of shale gas while the pipeline infrastructure remains dismally underdeveloped?, Sanjay Kaul, governing council member, University of Petroleum, Dehradun, said.
?What is important is that areas with commercially exploitable shale gas reserves should be identified and connected with a pipeline network on a priority basis,? says Kalpana Jain, director, Deloitte India.
India has not paid due attention to developing a pipeline network because of the domestic gas scarcity. The poor pipeline system has now become a serious obstacle to implementing the government’s plan to encourage the consumption of natural gas.
LNG imports have helped India cut the gap in demand and supply of natural gas in recent years. However, plans to step up LNG imports are constrained by inadequate pipeline network. Now the risk is that India’s ambitious plan to boost its energy security by undertaking shale gas exploration might also trip over the pipeline constraint.
India’s energy intensity is quite high. Meanwhile, it is also growing at a fast pace. The economy is projected to grow at 8-10% a year over the long term. That calls for commensurate growth in energy consumption as well. India can leverage the demand potential to develop the domestic gas market.
India has been meeting the bulk of its primary energy consumption through crude oil and coal. India is heavily dependent on imports to meet its crude oil. It is vulnerable to crude oil price shock. While India has rich deposits of coal reserves, coal quality is a concern. Besides, India is also facing international pressure to reduce its emissions.
India also cannot bank on nuclear, hydro and renewable sources to ensure its energy security. That leaves natural gas as the only credible choice for the country to meet the energy security of its fast-growing economy.
The production cost of shale gas is likely to be higher than conventional gas given the requirement of horizontal drilling. If transportation infrastructure is also missing, exploration companies might not show an interest in developing discovered fields. That could constrain the government’s plan to exploit shale gas to boost its energy security.
?Availability of transportation infrastructure is the key to the viability of gas production?, Kaul said.
That aside, transportation infrastructure is also a critical factor in creating a competitive gas market. In the absence of a well-developed transportation network, consumers have little choice. For example, the government has envisaged importing natural gas from Turkmenistan and Iran through transnational pipelines. But unless proper transportation infrastructure is in place, the increased gas availability might not go far enough to developing a domestic gas market.
GAIL and some private companies are involved in laying cross-country pipelines. However, the development of basic gas pipeline infrastructure cannot be left to entities operating on commercial considerations. They are unlikely to lay pipeline in areas where there is not much demand. The government should come forward to shoulder the responsibility of developing basic gas transportation infrastructure rather depend on corporates.
The government has envisaged a national gas highway authority to develop cross-country gas pipelines. It is the right move. But unfortunately, there is not much progress in implementing the proposal. Besides, the government also needs to offer fiscal incentives to encourage shale gas production in the same way as it provides for non-conventional energy sources like solar and wind.