Abstract

This research paper examines India’s evolving natural gas policy, focusing on the recent government approval of Natural Gas Marketing Reforms. These reforms aim to establish transparent and competitive market pricing. With a global shift towards cleaner energy sources, natural gas is emerging as a key alternative fuel, positioning India for a transition to a gas-based economy. To facilitate a functional gas market, India requires a supportive regulatory framework to address entry and exit barriers, balance pricing and delivery concerns, and align with sustainable development goals. India’s current gas pipeline infrastructure spans approximately 16,000 km, with plans to double capacity in the next 2-3 years. With proper policy and regulatory support, India can accelerate its transition to a market-driven gas economy. Policies promoting gas production from new wells through economic incentives like premium pricing, stringent monitoring, and reporting measures are expected to boost domestic gas output significantly. This study highlights India’s natural gas sector’s potential to drive the nation’s energy transition and economic development.

Introduction

Overview of natural gas in India

Within the complex fabric of the Indian Economy, the gas industry shines as a prominent sector, enlightening various industries with its significance. Apart from serving as a fundamental energy source for Indian households, it plays a vital role in the intricate web of global trade, influencing import and export dynamics. India, distinguished as the world’s third-largest consumer of energy and oil, also ranks fourth in the international market for liquefied natural gas (LNG). In April-May 2024, India welcomed 40.3 MMT of petroleum products and 11.3 BCM of natural gas, marking an incremental growth of 2.4% and 3.66% respectively from the previous year. These substantial consumptions reflect the nation’s expanding economy intertwined with a growing energy demand. Consequently, the future holds promise with significant investments enriching India’s oil and gas sector. 

Bharat Petroleum projects a twofold surge in India’s energy requirements and a fivefold upsurge in the demand for natural gas by the year 2050. India has 26 sedimentary basins covering an expanse of 3.4 million square kilometers, encompassing onshore areas, shallow waters up to 400 meters deep, and deepwater regions extending to the Exclusive Economic Zone (EEZ). As of May 2024, the cumulative production of crude oil had reached 23 million metric tons (MMT), while natural gas production stood at 3.15 billion cubic meters (BCM).

From April 1st to July 31st, 2022, eight blocks were assigned through the Open Acreage Licensing Policy (OALP). The government aims to increase the country’s exploration acreage by 0.5 million sq. km by 2025 and by 1.0 million sq. km by 2030.

Importance in India’s energy mix

Natural gas is pivotal in India’s transition towards more sustainable energy sources. The Indian government has set a target to elevate the natural gas share in the primary energy mix from 6% in 2021 to 15% by 2030. This shift is essential for diminishing the country’s dependence on carbon-intensive fuels like coal and aligns with global efforts to reduce emissions.

Adopting natural gas advances environmental objectives and presents substantial economic benefits. Research indicates that by pursuing a low-gas scenario in line with a 1.5°C trajectory, India could realize savings ranging from USD 9-24 billion in imports by 2030. To achieve this transition successfully, it is imperative to reassess energy policies and investment strategies to enhance the trade balance and diminish import reliance.

In India, the industrial sector is anticipated to be the primary driver of natural gas demand. Crucial industries such as ammonia production for fertilizers and the expanding oil refining sector are expected to account for approximately 80% of natural gas consumption by 2050. This underscores the growing significance of natural gas in ensuring self-sufficiency in critical sectors.

Natural gas plays a role in ensuring energy security and reliability within the power sector. Despite accounting for just 4% of the electricity generation mix in 2020, its prominence is anticipated to rise, driven by current policies prioritising cleaner energy alternatives over coal. The adaptability of natural gas plants to swiftly adjust generation levels is essential for meeting fluctuating electricity demands.

India’s ambitious targets to boost natural gas utilization face challenges due to its heavy reliance on imported liquefied natural gas (LNG). This dependence exposes vulnerabilities in energy security, susceptibility to price fluctuations, and geopolitical complexities. Furthermore, substantial investments in gas infrastructure could result in stranded assets if the shift toward renewable energy is not carefully orchestrated within the context of a global decarbonization effort.

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