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Natural Gas - will the industry ignite?

Jul 14, 2000

Natural gas is a colourless and odourless fuel. The chemical composition is chiefly methane. It is primarily used for heat generation in domestic, commercial and industrial settings. Over the last few years natural gas has gained importance as a source of energy compared to other traditional fossil fuels. The advantages of gas over its competitors are:

  • It is a cheaper fuel and has lower operating costs.
  • Results in lesser by-products.
  • Environmentally more cleaner.

In the past, consequent to the crude oil production, a large part of the gas was flared. Till the 90's as much as 30% of the production was flared this percentage has been reduced to 6%-10%. The utilisation rates were low largely due to the inadequate availability of infrastructure. However, with the setting up of GAIL and the HBJ pipeline commercial exploitation of the energy source has become possible.

The cooling of the gas results in Liquefied Natural Gas (LNG). The liquefication of the gas is essential for it to be transported over long distances. In its natural state it is to bulky (volume) and makes transportation inconvenient while the liquid form makes transportation economically feasible.

Over the last few years the consumption of LNG and LPG have grown at compounded rate of 6.5%. The drivers of growth in the past have been:

  • Increased availability
  • Increased demand from the power and fertiliser sector
India is a power deficient country and going forward the demand for gas is likely to continue to grow. The demand should receive a further boost as more people shift to LPG from kerosene as a source of domestic fuel. Thus in the future the growth will be driven not by demand but by availability (supply).

To overcome the shortfall in availability and reduce India's exposure to the volatility in the world fuel markets the Government is identifying new alternatives for gas exploration. The New Exploration and Licensing Policy (NELP) has been drafted to encourage exploration and production (E&P) of gas. Several new technologies for oil & gas exploration are being developed internationally such as deep-water exploration, coal bed methane (CBM) and natural gas hydrates. At last count India's reserves of natural gas stand at 692,000 m cubic meters (mcm) expected to last for a period of 28 years.

India's per capita consumption of gas is amongst the lowest in the world. Thus one can expect demand to continue to outstrip supply as it indicates significant demand growth potential. The industry looks to be entering its growth phase, as there is a ready market to cater to.

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