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India's oil minister: 'We want to increase gas consumption'

Natural gas is cheap, abundant and cleaner than other fossil fuels. It’s the fuel for India, says the oil and natural gas minister, Dharmendra Pradhan

INDIA wants to become a natural gas-based economy, generating far-reaching economic, environmental and social benefits, says oil and natural gas minister Dharmendra Pradhan. It's a bold message, and it will be heard from Australia to Qatar and the US.

Gas accounts for just 7% of India's primary energy consumption. But, with global gas prices expected to remain "reasonable for a long period", Pradhan says the government plans to triple gas's share of the energy mix. "We want to put it to around 20%," he tells Petroleum Economist in an exclusive interview. 

"We have to provide easy access to energy to our citizens. We have to provide affordable energy," he says. "We want to provide clean energy to our citizens, to our industry, to our energy sector. Coal will be there for a long period, but we want to remix and remodel our energy basket … We want to create new marketing plans (for) how do we increase gas consumption." 

It could bring a doubling of India's gas consumption, he suggests. At present, liquefied natural gas imports, mainly from Qatar, amount to 15m-20m tonnes a year, and domestic gas production is equivalent to around 30m t/y - a combined total of 45m-50m t/y. But, says Pradhan, a further 15m-20m t/y have been secured under long-term LNG supply deals with various suppliers, including Australia, Canada, the US and Mozambique. Beyond this, he adds, "we may need another 20m-30m t/y of gas." 

Success will hinge on the rapid expansion of existing gas markets - the fertiliser and power industries, for instance - and the creation of new ones too. Road haulage, for instance, will gradually shift from diesel to gas, as long-distance trucks are converted to run on LNG and an LNG-refuelling network is built. The government wants to encourage a similar transformation on its under-used waterways, with ships converted from traditional bunkering fuel to LNG - absorbing freight traffic from the country's polluting roads and rebalancing transport fuels, to some extent, away from oil and towards gas. 

Grasp with both hands

No opportunity seems too small. In June, Pradhan launched a government-industry pilot project in New Delhi to retrofit mopeds to run on compressed natural gas. As is often the case in India, economies of scale are everything: a moped engine might be small, but - countrywide - two-wheeled vehicles constitute a huge market for gas suppliers. And, given that gas is substantially cheaper than oil products on an energy-equivalent basis, demand will be robust. 

Switching to gas has considerable environmental benefits too - an urgent matter, given that several Indian cities are among the world's most polluted. In the capital, two-wheeled vehicles generate 30% of the particulate matter (PM) in the city's air, according to the New Delhi-based Centre for Science and Environment (CSE) - more than cars. 

Gas-based strategies for tackling pollution are underway in other segments of the economy too. The government has offered to supply cheap gas to New Delhi's under-used Bawana power plant, encouraging local authorities to reduce coal-fired generation. In the longer term, gas is the natural partner to solar power and other fast-developing forms of renewable energy. "We want to synergise solar energy and we want to synergise gas-based energy," says Pradhan. But he stresses that this doesn't mean the country is pulling back from other fossil fuels, which will remain vital sources of affordable energy as the country expands its manufacturing capability under the incipient Make in India programme. "From coal to renewables, all the components of energy will be there in our basket," says Pradhan. 

The immediate problem for gas, though, is the infrastructure - or lack of it - to bring the fuel into India and ship it to consumers. Few consumption centres are grid-connected and all the country's LNG-import terminals are on the west coast. Efforts are underway to rectify this: three terminals are being built on the east coast - at Chennai (5m t/y, expandable to 15m t/y), Kakinada (4.5m t/y, expandable to 9m t/y) and Dhamra (5m t/y). Pipelines are planned that would take regasified product to parched markets inland. 

The government wants to import piped gas in large volumes too. 

The Turkmenistan-Afghanistan-Pakistan-India Pipeline remains a viable prospect, says Pradhan. And Moscow and New Delhi are planning to build a gas pipeline - a "mega infrastructure project" - from Russia to India, he adds. "This is one of the major discussions with my counterpart Alexander Novak. He's very keen. India is very keen … I'm hopeful." 

Clear terms 

Indeed, improved diplomatic relations, fostered by prime minister Narendra Modi, are an important aspect of India's drive to secure competitively priced long-term energy supplies, says Pradhan - oil as well as gas. In Russia, state-owned Indian companies are taking stakes in Rosneft's Vankor field amounting to almost 50%. The Russian government is considering selling a stake in Rosneft - possibly up to 20% - and Indian companies may be among the buyers. In Iran, another Indian consortium is negotiating to develop the Farzad-B gas project. Africa and the UAE are other possible destinations for state-backed investment in upstream projects, says Pradhan. 

Given that India imports 75-80% of its energy needs, expanding domestic oil and gas production is a priority too. Indeed, Modi has set a target of reducing oil and gas imports by at least 10% by 2022. The government hopes simplified, more transparent upstream-licensing terms, free of pricing controls, will attract a new wave of investment to India's moribund oil and gas sector under its new Hydrocarbon Exploration Licensing Policy (Help). Feedback from potential investors on the as-yet untested Help model is encouraging, says Pradhan. "I'm confident … We are sensing good vibes in the market." 

India could become an energy hub in Asia - supplying Nepal, Bhutan, Bangladesh, Sri Lanka, the Maldives, Mauritius and Myanmar

But market reforms designed to appeal to investors will co-exist with social policies that acknowledge the purchasing power of individual consumers, with a tiered pricing system. "I know my country's paying capacity … where I should give cheap energy and where I can provide market-driven energy … What price I give to the poorest of the poor, I should not give it to the richest man," says Pradhan. "We have our own model."

India's model incorporates the notion of wider regional cooperation too - and not necessarily with a commercial agenda. The government sees the country as an energy hub for South and Southeast Asia - supplying countries such as Nepal, Bhutan, Bangladesh, Sri Lanka, the Maldives, Mauritius and Myanmar. In exchange, India will absorb the experience and ideas of partner countries in energy management; or it may benefit from reciprocal services. Pradhan mentions Bangladesh, which is helping create an internet gateway to northeast India in exchange for energy. "Providing energy to my neighbours is not a business for me. It's a responsibility," says Pradhan. "It's not a market economy. It's a welfare state."

While free-market principles will prevail for the affluent and in India's market economy, the welfare principle is being assiduously applied to the poorest segments of society within the energy industry. Power for All, which aims to make electricity available to every Indian household by 2022, is ahead of schedule, says Pradhan. When Modi came to power in 2014, 18,500 villages did not have access to electricity; since then, nearly 8,000 have been grid-connected and the programme could be complete as early as 2019. In a separate initiative, the government is providing 50m LPG cylinders and stoves to poor, rural households - where cooking on open fires, using coal and biomass, often in poorly ventilated spaces, is a widespread cause of premature death.

Eventually, says Pradhan, such policies will pay economic dividends. Sustainable, affordable and clean energy will empower the "bottom of the pyramid", generating myriad economic and social benefits - greater wealth and savings, better education, job creation and access to the internet, for example. "There will be a new atmosphere in those households," says Pradhan. "That positivity will create a new mechanism - a new workforce."

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