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Figure 11.5 Natural gas production by type, 2011-18

Source: MoPNG (2018a), Indian Petroleum and Natural Gas Statistics 2017-18,

http://petroleum.nic.in/sites/default/files/ipngstat_0.pdf.

The Ministry of Petroleum and Natural Gas (MoPNG) projects a doubling of production by 2021/22 and significant changes in the production mix, as private producers under the PSC regime are expected to increase their output by five times (Table 11.1).

Table 11.1 Projected natural gas production (bcm)

Source: MoPNG (2018a), Indian Petroleum and Natural Gas Statistics 2017-18,

http://petroleum.nic.in/sites/default/files/ipngstat_0.pdf.

The GoI sees strong potential for India to produce biogas from agricultural and other waste, and has set a target for the annual production of 15 Mt of compressed biogas by 2023 under the policy of Sustainable Alternative Towards Affordable Transportation (SATAT).

Institutions

The Ministry of Petroleum and Natural Gas (MoPNG) oversees the oil and gas industry, from exploration and production to distribution, marketing and pricing. It has authority over state-owned oil and gas companies (PSUs).

The Directorate General of Hydrocarbons (DGH) was established in 1993 under the administrative control of MoPNG and has several responsibilities, including the implementation of the NELP, HELP and Discovered Small Field Policy, as well as matters concerning PSCs and revenue-sharing contracts for discovered fields and exploration blocks. DGH is also engaged in opening up unexplored areas for future exploration and development of non-conventional hydrocarbon energy sources, for instance coal bed methane.

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The Petroleum and Natural Gas Regulatory Board (PNGRB) was constituted in 2006 to protect the interests of consumers, to promote competitive markets and to regulate the refining, processing, storage, transport, distribution, marketing and sale of petroleum, petroleum products and natural gas (excluding production of crude oil and natural gas).

Gas infrastructure

India’s natural gas transport network has 16 800 km of long-distance pipelines, which connect western, northern and south-eastern markets. Several new pipelines are under construction to the east and north-east of the country, adding another 15 000 km in the coming years, notably trans-regional gas pipelines. State-controlled GAIL owns and operates over two-thirds of the gas pipeline network. India has no international pipeline connections. There are currently no underground storage facilities for natural gas.

India has four LNG terminals located on the country’s west coast and one new LNG terminal (Ennore) on the east coast, all with a total receiving capacity of 34 million tonnes per annum (Mtpa, or the equivalent of 37.4 bcm). This includes the expansion of the existing Dahej terminal. One more LNG facility has started up operations in 2019, Mundra, which was inaugurated in September 2018 and will bring up the total number of LNG facilities to six in 2020 with a total capacity of almost 40 Mtpa or 53 bcm (Table 11.2).

Table 11.2 Operational and under-development LNG terminals

Notes: Data as of February 2019; FSRU = floating storage and regasification unit.

Sources: MoPNG (2018a), Indian Petroleum and Natural Gas Statistics 2017-18, http://petroleum.nic.in/sites/default/files/ipngstat_0.pdf, and information from project owners.

Several projects are under development and may add some 25 Mtpa of annual capacity, including the construction of a breakwater at the Dabhol terminal (which currently cannot

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receive cargoes during monsoon season). The new facilities will be offshore, using FSRU vessels. Jaigarh FSRU is expected to be the first to begin commissioning in January 2020 while Jafrabad is announced to start in the third quarter of 2020.

India is also investing abroad into the diversification of its supplies. In 2019 US Tellurian Inc. and Petronet LNG Limited of India agreed to a joint venture, with Petronet investing USD 2.5 billion in Tellurian’s proposed Driftwood LNG export terminal in the United States in exchange for the rights to 5 Mt of LNG supply per year over 40 years. Most LNG imports are held under long-term contracts, mostly Petronet, GAIL and IOCL. GAIL India Limited and Gazprom successfully renegotiated their long-term LNG sale and purchase agreement reflecting the current global gas market dynamics (PIB, 2018).

Gas policy

Rising natural gas consumption in India is the result of several factors, including growing domestic supply, new gas infrastructure and rising gas production and imports.

Domestic gas is allocated to various sectors, including the city gas distribution sector, fertiliser production and the power sector, against projected gas production as per the approved field development plan and in accordance with the respective gas utilisation policies framed by the GoI. The actual gas supplied against the allocation to various sectors is made according to the availability of domestic gas. The government prioritises the allocation of natural gas first to the city gas sector (for residential use and use in transport), then the fertiliser sector, power generation and other sectors (PIB, 2019). This priority list of consumers constitutes the current gas utilisation policy of the GoI.

City gas distribution has priority as the government aims to increase gas demand by expanding the network to new cities and neighbourhoods. This policy is part of the GoI’s overall effort to reduce the country’s dependence on imported crude oil by 10% in 2022, partly by fuel switching in favour of natural gas. As of September 2018, 18 states and union territories (covering 96 cities, towns and districts) in India had city gas networks. Around 4.6 million Indian households are connected to the gas network, and there are over 26 000 commercial and 7 600 industrial connections. To expand the city gas network, the regulator PNGRB launched the 9th city gas distribution bidding round in April 2018 for 129 districts in 22 states and union territories. This round is expected to add 20 million households to the city gas network, along with 4 600 CNG stations for vehicles, by 2026. In November 2018 the 10th bidding round was announced, which concluded in March 2019. Once city gas network expansion under these two rounds is fully implemented, the network in India will cover 53% of its area and 70% of its population (PIB, 2018). The developer of a city gas network receives exclusivity to market gas in the region for up to ten years, and exclusivity for infrastructure development for 25 years.

The Achilles heel of India’s natural gas sector remains gas-based power generation. India has a large installed gas power capacity, which is, however, underutilised. Lower-than- expected domestic natural gas production and the high price of imported gas (see Parliament of India [2019]) are the reasons for some 14 GW of stranded generation assets (see also Chapter 7 on electricity). Gas power generation peaked over three years from 2009 at 116 TWh, but fell back to levels of around 60-70 TWh owing to a sharp drop in domestic gas production (primarily from the KG-D6 fields following its shutdown by Reliance), thus leaving gas power plants running at a very low utilisation rate of 20%. In

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