10th World Petro-Coal Congress International Conference

Dr Basudev Mohanty,

Former Member, Petroleum & Natural Gas Regulatory Board

Unconventional Hydrocarbons – India’s roadmap for natural gas

NDMC Convention Centre, New Delhi, 16 February 2020

Conventional

• What was conventional years back is becoming conventional

• Ten years back, when the US Govt. declared USA would become energy independent, many raised eyebrows: But Shale gas changed all that.

• Eight years back, when IEA posed the issue: Are we entering a Golden Age of Gas, a large number of critics appeared on both sides.

• Today, with each passing year, more countries are switching over to Gas.

conventional Unconventional

conventional

Share of gas in World primary energy demand projected to increase and Coal and Oil, to fall during 2017-2040

Figure : Share of fuels (%) in World Primary Energy Demand, 2005, 2017 & 2040 , New policy Scenario

Source of Data: "World Energy Outlook", 2008 and 2018 editions, International Energy Agency, OECD, Paris.

Note: (i) The IEA crude oil price is a weighted average import price among IEA member countries. (ii) Natural gas prices are weighted averages expressed on a gross calorific-value basis. (iii) The US natural gas price reflects the wholesale price prevailing on the domestic market. (iv) The European Union and China gas prices reflect a balance of pipeline and liquefied natural gas (LNG)

imports, while the Japan gas price is solely LNG imports; (v) the LNG prices used are those at the customs border, prior to regasification. Source: World Energy Outlook, 2018, International Energy Agency, OECD, Paris.

2017 2025 2030 2035 2040

Oil (World) 52 88 96 105 112

Gas ( USA) 3 3.3 3.8 4.3 4.9

Gas (EU) 5.8 7.8 8.2 8.6 9

Gas (China) 6.5 9.2 9.4 9.5 9.8

Gas (Japan) 8.1 9.8 10 10 10.1

Projection of prices of crude oil ($ / barrel) and Natural Gas ($ / Mmbtu)

Gas price in international markets projected to remain low

during 2025-2040 evidencing long term supply-demand balance

LNG trucks for road transport in China since 2010

The world leader, China can achieve spectacular success, largely because of Chinese Government’s Blue Sky policy in 2017 providing subsidy for LNG trucks and imposing curbs on diesel use in heavy vehicles

15 21 25 35 46 56 75 97 119 121 121 121 121 121 121 121

51 88 105 117 122 124 126

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LNG fueled ships set to increase from 15 in 2009 to 240 in 2018.

LNG demand for ship fuel is estimated to increase from 12 Mmtpa at present to 30 Mmtpa by 2030

Growth of LNG Fuelled Fleet in the World: 2008 - 2024

Note: The fleet does not include LNG carriers and inland water vessels Source: DNV.GL “LNG Regulatory Update” (10 April 2018), Oslo, Norway

Bio-Methane production and utilisation needs to be incentivised

10% 5%

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World USA Brazil EU Africa ME Russia China Japan India SE Asia

2017 2040

Share of bioenergy in total primary energy demand of selected countries in the World, 2017 and 2040. (Per cent)

Source: “World Energy Outlook, 2018”, International Energy Agency, OECD, Paris

Use of biomethane in Electricity production ( Germany), in automobiles (Sweden), biofuels (Brazil) and as feedstock in specialty chemical industries would not have been possible without Fiscal and Regulatory support from Governments. Indian Oil Corporation estimates India’s Compressed Bio Gas (CBG) potential could be 120 million Tonne. The Govt of India aims to set up 5000 CBG plants by 2022/23

The latest World Energy outlook 2019 estimates Biomethane supply to cover 20% of today’s gas demand.

India has also hitched on to the Gas Bandwagon

In 2015, for the first time in the history of energy policy in the country, the Government outlined an action plan for gas based economy in India

• Gas was part of policy making in MoP&NG since 1970.

• In its reply to a Question in Lok Sabha on 22nd November 2016, the Government

specified three broad policy areas to make India a gas-based economy:

Development of gas sources either through domestic gas exploration &

production activities or through building up facilities to import natural gas in the

form of LNG.

Development of gas pipeline infrastructure and secondary distribution networks.

Development of gas consuming markets like Fertilizer, Power, Transport and

Industries etc.

Various dimensions of the Government’s plan for setting up a Gas-Based Economy in India

Long term (15 years or more: 2030 and after)

i) The share of gas in the primary commercial energy consumption to rise from 6.5% in 2015 to 15% by

2030 .

Medium term (7 years: up to 2022)

i) Reduction in oil imports by 10%, primarily with increase in domestic production of Gas by 2022.

Short-term (less than 5 years: up to 2018/2019)

i) Setting up the national gas pipeline grid

ii) One crore PNG consumers to be connected to the respective CGD networks

iii) Expansion of CGD networks to over 200 cities

iv) Setting up Gas Trading Hub

v) Development of 100 smart cities with facilities for gas use

There are several challenges to be overcome before the Indian economy reaches 15% Gas

share in its primary energy mix

Inter-country comparisons hold important lessons

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production consumption net imports

Natural gas production, consumption and imports since 1950

Source of data : Energy Information Administration, Govt of USA Source of data: World Bank National Accounts data

(i) China had sharp GDP growth in 2000s (ii) Gas pipeline coverage increased from around 24,000 Km in 2006 to 65,000 KM in 2015 and projected to reach 1,63,000 Km in 2025.

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Growth of GDP ( US $ trillion at current prices) of China and India

Rapid growth in Gas consumption in USA and China was driven by three factors: (i) GDP (ii) Urbanisation

and (iii) law on air quality.

During 1945-1970, USA had

(i) GDP growth 7.45 times, or CAGR of 7%

(i) Expansion of pipelines 4 times

(i) Gas consumption growth Over 6 times

(i) Annual Gas consumption growth

rate (increment of 19.4 Bcm /year) 7 %

Laying of gas pipelines remained subdued till 2018. Recent financial and non financial supports by the Government has set the ball rolling

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Onshore Gas pipelines as on 1st April of the Year)( km)

After the Lull, the Leap

The Government has finally extended substantial capital grant to Urja Ganga (3305 KM) and Indradhanush Gas grid ( 1656 KM).

PNGRB for the first time plans to seek EOI from Bidders for Gas pipeline projects of 2710 KM

The Central Govt Budget for 2020-21 puts the total Gas pipeline length to reach 27,000 KM during the year.

Big Push for City Gas Distribution (CGD)

9th CGD bidding Round 10th CGD bidding Round

Going by PNGRB’s 2020 EOI for

44 new Geographical Areas,

total number of CGD networks in

the country could reach 272 -

over 80 % of population and 60%

of area of the country.

The most recent study by Indian

Energy Forum Task Force (Oct

2019) estimates CGD to be

contributing nearly 50% of

additional gas demand required

for 15% Gas share by 2030 But, areas of concern remain

as before

While Gas off-take in Refineries and CGD sectors increased and power sector reduced, Fertiliser maintained around 40 mmscmd.

38 40 43 42 44 42 40 41

62 44 31 29 30 32 33 33

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Fertilizer Power City Gas Refineries Petrochemicals Industrial/Others Total

Figures for 2018-19 are provisional and subject to revision. Source: GAIL (India) Ltd. & Petroleum Planning &Analysis Cell, MoP&NG.

• From an energy transitions perspective, natural gas can provide near-

term benefits when replacing more polluting fuels. A key longer-term

question is whether gas grids can deliver truly low- or zero-carbon

energy sources, such as low-carbon hydrogen and biomethane.

• Initiatives from individuals, civil society, companies and investors can

make a major difference, but the greatest capacity to shape our energy

destiny lies with governments

Source: World Energy Outlook 2019, IEA