Main content | back to top
Unlocking India’s natural gas resources
India could face increasing energy shortages as its economy continues to grow. Its natural gas resources could be one way to help meet rising demand, but a number of obstacles need to be overcome first.
By Rustom Davar
December 19, 2008
Set amid lush greenery on the outskirts of Delhi, the eco-friendly Pragati power station (pictured left) stands as a beacon of hope for one of the world’s most polluted cities. It is one of the few power plants in India that uses clean-burning natural gas rather than coal, and its recycled water supply comes from a nearby sewage plant. And while Delhi’s coal-fired plants (like the one pictured below) belch out harmful fumes, Pragati boasts the lowest level of polluting emissions of any power station in the country.
Earlier this year, however, the plant struggled to keep going because gas supplies ran short. At the same time, the city’s coal-fired plants were also failing to meet soaring demand. The people of Delhi had to endure another stiflingly hot summer punctuated by five-hour power cuts that disrupted industry and hit small businesses.
No wonder then that further south, in the state of Andhra Pradesh, excitement has been growing over a vast new gas field. Supplies from the Krishna Godavari basin are expected to more than double the country’s daily production of natural gas by 2011, giving rise to the prospect of more power plants like Pragati.
India’s energy demand is expected to double by 2030, according to the International Energy Agency (IEA). Faced with this challenge, the Indian government is keen to move away from dependence on coal and develop alternative sources of fuel. Imports of liquefied natural gas (LNG) have so far helped fill gaps in energy supply but may not be enough on a wider scale. The government is looking at a range of options including importing more liquefied natural gas, wind, hydro-power and nuclear And it believes new natural gas fields like Krishna Godavari will play an increasingly important part in its energy future.
“Given India’s current situation, I don’t believe it can afford to overlook any energy source at all,” says Nitin Zamre, energy specialist at consultancy CRISIL Infrastructure Advisory. “But thanks to the Krishna Godavari field are expected to the role of natural gas to grow rapidly in the next five years.”
Challenges ahead
Several obstacles need to be overcome, however, before natural gas use increases dramatically in India. These include the appeal of cheaper, yet dirtier coal and the heavy investment needed to build vital infrastructure: the discovery of the Krishna Godavari field required the building of a huge, costly East-West pipeline linking the states of Andhra Pradesh to customers in Gujarat. Government regulation of prices and its efforts to make sure gas goes chiefly to key industries such as fertiliser manufacturing may also hamper expansion, according to Zamre and other industry observers.
Zamre expects Krishna Godavari’s impact to slow after the initial burst, increasing the natural gas share in India’s energy mix from its current 9% to only about 12% by 2030. “That’s mainly because I personally don’t see the Indian government’s approach encouraging suppliers,” he says.
Independent oil and gas consultant YR Mehta believes price control for gas in India is a major obstacle: “The government should not interfere on allocation and pricing. It’s only then that gas will become a credible commodity.”
Spearheading demand
India’s gas story is reflected elsewhere in Asia. With the exception of Japan – which has long relied on LNG imports – the region has traditionally used much less gas than the West because of the lack of infrastructure, and abundance of coal. Demand for gas in the region is growing, however, although production in Indonesia, Malaysia and Brunei struggles to keep up.
New projects are under way, and the IEA believes Asia’s developing countries will spearhead global demand for natural gas over the next 20 years. In 2005, Shell set up an LNG regasification plant at Hazira in the state of Gujarat to supply fuel for local homes and businesses, and to help generate power. The plant has seen sales steadily rise.
Cleaner air
For the Indian government, the environmental benefits of increasing gas use are clear: “The environmental pay-off that comes from using natural gas is very important, especially if you compare it to coal,” says Manu Srivastava, Director of the country’s Ministry of Petroleum and Natural Gas.
His government is doing what it can to increase cleaner power generation. In March this year, Prime Minister Manmohan Singh laid the foundation stone of another new gas power station for Delhi. The Pragati Phase III Bawana Power Project will help ease the power crunch in the city and keep emissions down. If all goes as planned, Delhi’s 14 million citizens may one day enjoy uninterrupted power, with a cleaner-air bonus attached.
