Page 134 - CW E-Magazine (6-8-2024)

Point of View

working to lower the carbon footprint. Alongside other initiatives, carbon capture and storage (CCS) can be done at both the reservoir
and liquefaction stages.

Domestic production and imports
In FY24, India imported 24-mt of LNG (30.917-bcm), compared to 19.9-mt in FY23. In comparison, domestic production of natural gas
was about 35.717-bcm, and gas consumption (natural gas + LNG) about 66.634-bcm. During FY24, the highest consumption of natural
gas was in the fertiliser industry at 31% (largely as fuel and feedstock for making ammonia for urea), followed by city gas distribution
(CGD) (including road transport) at 20%, power sector 13% and refinery operations 8%.

Thanks to long-term contractual arrangements, Qatar has consistently been the single largest supplier of LNG to India. In 2023,
it supplied 10.92-mt of LNG to India, relegating the US to a distant second spot at 3.09-mt. Other major suppliers in 2023 were UAE
(2.85-mt), Oman (0.88-mt), Nigeria and Angola (each 0.73-mt).
According to analysts at S&P Global Commodity Insights, India’s LNG imports in the first quarter of 2024 surged 44% year-on-year.
This growth was driven by a significant 51% decline in spot prices and robust demand across all downstream sectors. Prices below
$12 per mmBtU – expected to prevail this year – are expected to lure consumers in the refining segment (from utilising naphtha or
fuel oil), industrial segment (from LPG) and transportation (from gasoline), and so drive LNG demand.

Poor capacity utilisation of terminals – a matter of concern
As on July 1, 2024, India had seven operational LNG terminals with a cumulative 47.7-mtpa of import capacity. The largest is at
Dahej (17.5-mtpa), and other ones (each with a capacity of 5-mtpa) are at Kochi, Hazira, Dabhol, Mundra, Dhamra and Ennore. Barring
the last two, all are on the west coast. Largely due to lack of pipeline infrastructure to evacuate gas to customers, capacity utilisation
of all barring the one at Dahej has been far from satisfactory, representing a huge wastage of capital. The Kochi terminal, for example,
operated by Petronet LNG Ltd. (which also owns the one at Dahej) has been an abysmal 20%.

This has now caught the attention of the Petroleum and Natural Gas Regulatory Board (PNGRB), a regulator for the industry,
which recently released a draft proposal aimed at enhancing control over terminals, with a view to boosting their capacity utilisation.
Henceforth, entities planning to build an LNG terminal will need to notify the PNGRB before making a final investment decision, and
publicly disclose tariffs for regasification and other charges. Companies must also have a credible business plan for capacity utilisation
and need to furnish a bank guarantee equal to 1% of the estimated project cost of the terminal or Rs. 250-mn, whichever is less.

The regulator’s approval for new units or expansions will be based on several factors, including promoting competition among
operators, avoiding unnecessary investments, ensuring an adequate national gas supply, maintaining or increasing supply for equitable
distribution, protecting consumer interests, and providing the necessary gas pipeline infrastructure for transportation of regasified LNG
from the terminal.

While these rules may not apply to the three terminals now under construction – at Jaigarh (Maharashtra), Jafrabad (Gujarat) and
Chhara (Gujarat) – with a cumulative capacity of 17-mtpa (including expansion of the Dabhol terminal by 3-mtpa), newer ones will need
to comply.

Rise in LNG imports in 2024
While the fertiliser sector will remain the largest consumer of gas, the power and industrial sectors are poised to contribute significantly
to the import upswing if LNG spot prices align closely with the levels witnessed in 2023.

India’s current gas-based power capacity stands at approximately 25-GW, translating to an annual demand for 30-mt to 35-mt of
gas. A few, historically reliant on domestic gas due to high LNG prices, are likely to transition to LNG in 2024 owing to the anticipated
weakness in LNG prices. Consequently, India is expected to see an increase in LNG imports in 2024, though some of this growth could
be tempered by the increase in domestic gas production from ONGC’s KG gas field.

With the emphasis on raising the share of natural gas as a primary energy source in the local economy, expect to see more LNG
land in India’s shores in the years ahead!
Ravi Raghavan

134 Chemical Weekly August 6, 2024

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