Introduction India, the sixth largest energy consumer in the world, is currently in the process of undergoing major changes in its energy sector. While the country is planning major energy infrastructure investments, specifically for oil gas exploration, electric power generation and import of LNG (Liquefied Natural Gas), to keep up with the rapid economic growth, it is also going through significant regulatory change by way of privatization and easing of price controls.

The 1990s were a time of rapid economic change in India. After several decades of pursuing economic policies linked to a major share of government-owned industries, high impol1 tariffs and limitations on foreign investments, India began to open up to foreign investment and trade. By the mid-1990s, India's real GDP growth rate had reached a rate of 7.4% (1995-96) and fairly steady growth thereafter (e.g., 6.8% for 1998-1999 and 6.5% for 1999-2000). Several Indian and International agencies forecast real GDP, growth for India over 6% for the next few years. In this scenario, there is an urgent need to support such growth through the provision of adequate energy sources while striving to strike a balance between India's economic growth and its environment.

While India is rich in coal and hydro reserves, it only has moderate oil & gas reserves to fuel its growing economy. Most of the country's coal is located in the central and eastern parts of the country otherwise referred to as the coal belt of India. The countries hydro potential is significant and is spread across the country. Bulks of the current hydropower projects are located in the northern and southern parts of the country. As far as oil and gas resources are concerned, bulk of the discovered reserves lie in the western offshore region. The eastern offshore region is also expected to hold significant potential in the years to come. 

Environmental Issues

As the world's second most populous nation, India's rapidly growing population and the associated energy need have placed a severe strain on India's infrastructure and obviously on the country's environment. While deforestation, soil erosion and land degradation are hindering economic development in Rural India; rapid industrialisation in India's metropolises is causing serious environmental pollution problems.

With regard to carbon emissions, India ranked fifth in the world behind USA, China, Russia and Japan in 1997. India's reliance on coal would increase the rate of growth of carbon emissions in coming years.

Advantages of Natural Gas 

Given the urgent need to address these environmental concerns, a better understanding of the advantages of Natural Gas is required in India. Natural gas has many advantages over other conventional fuels. It is one of the cleanest conventional fuels, and thus provides for a thereby resulting in lower down time for machinery maintenance. Besides, being as natural gas is the cleanest burning fossil fuel, it can help improve the quality of air and water, especially when used in place of other more polluting energy sources. Natural gas combustion results in virtually no atmospheric emissions of sulphur dioxide or small particulate matter, and far lower emissions of carbon monoxide, reactive hydrocarbons, nitrogen oxides and carbon dioxide. In addition to its environment friendliness, natural gas has other advantages. It is lighter than air and therefore safer (in case of any leakage, being lighter than air it does not tend to accumulate and settle down). It is extremely convenient to use, as the customers just have to switch it on like electricity.

Emergence of Natural Gas

In spite of worldwide priority in exploration and development of oil reserves, global gas reserves by 1999, have increased to 1577 BCM which are equivalent to global oil reserves, whereas these were on by 50% of the Oil reserves in 1970. The share of gas in the world energy has reached to a level of 24% against 18% in 1990. Basically this evaluation occurred at the cost of Coal whose share in the world's primary energy dropped to 26%. Oil still holds the share of around 30%. The balance is contributed by Hydel and Nuclear Energy. While the share of oil in the world energy is more than that of gas but global ratio of reserves to production shows that this ratio is 61 years for Natural Gas against 43 years of crude oil. Also, the trend is that new finds from virgin areas or from deep sea are more in the form of Natural Gas improving its positioning as resource base and also in use since the global energy demand have been increasing with higher emphasis on environment, where gas scores over Coal and Oil. International trade of Natural Gas through pipeline or in the form of LNG has been showing significant growth. Natural Gas is placed to play a greater role in meeting the energy demand.

The consumption of natural gas (NG) in India has increased faster than any other fuel in recent years. From only 17 billion cubic meter (BCM) per year in 1995, NG use was about 23 BCM in 1999, and is projected to be about 85 BCM during 2006-07 and 115 in 2011-12. The current domestic NG production is only about 65 MMSCMD (million standard cubic meters per day) or about 24 BCM per year. Thus, currently, India is facing a large deficit of natural gas supply (ref. 9) as shown below.

Allocation Supply of Natural Gas:
2001- 01
(MMSCMD : Million Standard Cubic Meters per Day)
 Allocated to market 115 
 Actual Supply 65

Natural Gas Demand in India 

The pattern of gas mix, while developing Natural Gas Master Plan under study sponsored by ADB, is anticipated that the share of indigenous gas which is 100% at present is to reduce to 24% by year 2012 whereas share of LNG import, which would commence after 2002, would grow by 2012 to 34%. The pipeline importation, which may commence from 2006/07, would be 42% by year 2012. The 2 pipelines, which would contribute to importation of this volume, are Iran-India Pipeline and Bangladesh-India. Pipeline whereas the LNG contribution may come through six LNG terminals in different parts of the country.

FOCUS: The Eastern Sector 

Following the discovery of a world-class gas fields at Bibiyana, Moulvibazar, Jalalabad and Sangu fields in Bangladesh, Petrobangla along with other E&P players in Bangladesh are considering a gas export pipeline along with the Indian government from north-eastern Bangladesh to the markets in West Bengal and central and northern India. The Bangladesh-to-India Natural Gas Pipeline could be capable of    initially delivering an average of 5 billion cubic meters of gas per year (15MMSCMD). 

The proposed 1,350-kilometer (850-mile), 30-inch diameter pipeline would begin near the town of Rashidpur in Bangladesh and end at an interconnection with the HBJ Pipeline in the Delhi area. Approximately 350 kilometers (220 miles) of the pipeline would be located in Bangladesh and 1,000 kilometers (630 miles) in India. The pipeline would carry an initial volume of 5 billion cubic meters per year of natural gas (15 MMSCMD). The shortfall in gas demand along the HBJ Pipeline is expected to increase from 10 billion cubic meters per year (955 Mmcfd) in 2005 to over 73 billion cubic meters per year (over 7,000 Mmcfd) by 2020. Future gas demand from customers along the proposed pipeline route is projected to reach 44 billion cubic meters per year (4,225 Mmcfd) by 2020.

Potential customers for the Bangladesh-to-India Natural Gas Pipeline include:

• Power and fertiliser facilities serving the markets in West Bengal and central and northern India.
• Existing and new customers along the HBJ Pipeline in the states of Gujarat,            Madhya Pradesh, Rajasthan, Uttar Pradesh and Haryana.
• Domestic and industrial users along the proposed pipeline route ill Bangladesh and India. 

The proposed pipeline would include five compressor stations with a total of approximately 185,000 installed horsepower, metering stations, scraper facilities, mainline valves, a Supervisory Control and Data Acquisition (SCADA) system, and a fiber optic line for data transmission and voice communication. Financing and construction of the pipeline are expected to be completed in four years with “first gas" anticipated to begin following in the fourth year. The total estimated capital cost of the pipeline project is US $900 million. It is anticipated that the transportation tariff for the Bangladesh-to-India Natural Gas Pipeline will be calculated as a function of the natural gas flow rate (gas volumes) and pipeline costs. The resulting price range for delivered gas will provide a competitively priced fuel for customers and a maximum let back to Bangladesh at the well-head.

One of the top most focus of GAIL's efforts for consolidation of gas sources is through cross border sources on the Eastern part of the country. GAIL has entered into Gas Co operation Agreement with Govt. of West Bengal to help develop the markets and assess energy needs and carrying feasibility study for development of gas pipeline network. The proposed network is expected to be fed from the gas imported from Bangladesh. The Project will not only provide important gas sourcing for India but also help Bangladesh to earn valuable foreign exchange and provide opportunities for closure trade relations between the countries. Similarities of socio cultural background between Bangladesh and Eastern States of India will help forging stronger business relationship between the two countries.

Conclusion

The share of natural gas in India's energy mix has increased from 2.5% in the early 1980s to 7.7% now. Energy efficiency, multiple applications and coupled with negligible environmental problems would be the key factors dictating a further rise of gas demand in India. The demand could both be from the existing users or from newer applications for natural gas. The rising demand has implications for on enhancing the supply enhancement level. An increasing thrust on LNG imports signals positive developments on the supply front. Competitive pricing (vis-a-vis alternative fuels), project completion within the specified time and budget and adequate fiscal concessions from the government would be the key factors dictating the successful commercialisation of LNG in India.

Although the contribution of private players/joint ventures (JVs) has been insignificant so far, their share of in the total production is on the rise. One can expect these players to produce substantially higher amounts of natural gas in future. The example of Panna-Mukta-Tapti fields may be presented to show that encouraging results can be achieved with the right incentives. The Panna, Mukta and Tapti fields in Bombay High were originally discovered by ONGC. But because of financial constraints, ONGC could not develop these fields. In 1993, a consortium of Enron-Reliance-ONGC bid to develop these fields. After several years of development work, the recoverable reserves at the fields are now estimated at much higher levels than earlier envisaged.

However on the supply front, a lot depends on the thrust quantum provided by the government. The New Exploration and Licensing Policy (NELP-I and NELP-II) with their attractive fiscal incentives, sops are the right steps in the right direction. An increased thrust on natural gas exploration, by the awardees of the exploration blocks under NELP-I and NELP-II is likely to ensure a rise in new finds and hence, higher production in the future. Natural gas imports from Bangladesh and Iran will bolster supplies while results from exploration of the new blocks are awaited. This, in turn, would have positive implications for on the earnings prospects of the natural gas distributors in the country.