Jul 15, 2000|
Natural Gas - Ready to shift gears...
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 too bulky (volume) and makes transportation inconvenient. 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 to match demand with supply it is expected that India will need to set up 10,000 mega watts of generation capacity per annum for the next ten years. As more new projects set up LNG fired plants the demand should strengthen. The demand for LPG should also remain firm as more people shift to LPG from kerosene as a source of domestic fuel. LPG continues to remain one of the fastest growing petroleum products in the country. Thus in the future the growth will be driven by availability (supply) and not by the demand of these products.
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 million cubic meters (mcm) expected to last for a period of 28 years.
Currently, the gas segment is partially regulated. The Government in FY98 chalked out a gas pricing mechanism, whereby the domestic price of gas was to be linked to a basket of international fuel oil prices. To enable a smooth transition to complete decontrol and gradually increase the price burden on the consumers the Government staggered the process. Under this mechanism consumer prices in FY98 were 55% of the basket price. This was to increase to 65% and 75% in FY99 and FY00 respectively.
India's per capita consumption of gas is amongst the lowest in the world. Thus one can expect demand to continue to outstrip supply. This indicates significant demand growth potential and the industry looks to be entering its growth phase, as there is a ready market to cater to.
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