LNG Penetration

Kiran Nambiar, Likhita K, Kevin Benny, Paul Joy & Ranjan Saxena 1
LNG PENETRATION IN INDIA
Moving towards Cleaner Future

Energy Mix
To meet its energy needs, each country uses the energy available to it, in different proportions.
This is what we call the energy mix. While it varies significantly from one country to another,
globally fossil fuels account for 80% of the energy mix.
It’s also the case that the same fuel can be processed into different forms of energy. Coal may
be burnt directly to produce heat in a factory to melt iron ore, or burnt in a power-station to
produce heat, to convert water to steam, to drive a generator and create electricity. When a
fuel is used in a ‘direct’ energy conversion process it is known as Primary Energy, when it is
converted through a two- or more stage energy-release process it is called Secondary Energy.
Electricity can be produced as Primary Energy by means of Hydro-Electric Power (HEP) and
photo-voltaic cells (solar panels), but is more commonly created by Secondary processes
through the burning of coal, oil and gas to produce steam in power-stations, or by the release
of radiation from uranium to convert water to steam in nuclear power stations.
Energy Mix India
The energy policy of India is largely defined by the country's expanding energy deficit and
increased focus on developing alternative sources of energy, particularly nuclear, solar and
wind energy.
The primary energy consumption in India is the third biggest after China and USA with 5.3%
global share in the year 2015. The total primary energy consumption from crude oil (29.45%),
natural gas (9.5%), coal (54.%), nuclear energy (1.26%), hydroelectricity (5.0%), wind power,
biomass electricity and solar power is 595 Mtoe (excluding traditional biomass use) in the
year2015.

Natural gas in energy mix
In the New Policies Scenario, India’s natural gas production increases from 35 bcm in 2013 to
nearly 90 bcm in 2040, but this still leaves a sizeable gap of around 80 bcm that needs to be
met by imported gas. Conventional gas production is dominated today by the ageing Vasai field
on India’s western coastal shelf: this field continues to attract investment by the operator,
ONGC, which has long experience in optimizing performance from mature fields. OECD/IEA,
2015 120 World Energy Outlook | Special Report Onshore conventional production consists of
many small projects, only a handful of which contribute more than 5% of total onshore supply.
There is potential for new gas discoveries onshore, considering the extent of unexplored
acreage, but the larger potential lies offshore, with the deep-water Krishna-Godavari basin the
center of activity since the initial discovery by Reliance, India’s largest private sector
corporation, at the KG-D6 block (since followed by large discoveries in neighboring blocks by
Reliance and ONGC). The discoveries are in water depths of between 700 and 1 700 meters,
and the wells are technically challenging, giving rise to a relatively high development costs. The
KG-D6 project itself has also suffered from well performance issues, including higher than
expected water production and sand entry, resulting in high decline rates.
power generation
natural gas
petroleum and other
liquids
nuclear
others
INDIA'S ENERGY MIX
power generation natural gas petroleum and other liquids nuclear others

Natural gas Consumption by various sectors
Natural Gas demand has increased significantly in recent years due to the increase in the
availability of gas, development of transmission and distribution infrastructure, the savings
from the usage of natural gas in place of alternate fuels and the overall favourable economics
of supplying gas at reasonable prices to end consumers. It has become easier for the power,
fertilizer and CGD sectors, as well as industrial and commercial establishments, to switch over
to natural gas for their energy requirements. In the near future power and fertilizer sectors are
expected to remain the anchor segments for natural gas demand in India. Going forward
though, with the additional supply of gas significant demand for natural gas is also expected to
come from the industrial (usage both in process and power generation - cogeneration) and CGD
segments. The total consumption of natural gas was 127 mmscmd (January 2013) with power
and fertilizer sectors consuming 36 and 39 mmscmd of gas respectively. While power sector
consumption accounted for 28% of the total natural gas consumption in India, the fertilizer
sector consumption accounted for 31% of the total consumption
India can be divided into six major regional natural gas markets namely Northern, Western,
Central, Southern, Eastern and North-Eastern market. Out of these, the Western market
accounts for the highest consumption of natural gas with more than 50% of the total gas
consumption in the country. This is followed by the Northern market that consumes ~25% of
the overall consumption. The Eastern market accounts for the lowest consumption in the
country among all the gas markets.
21%
3%
8%
2%
31%
6%
29%
Sectorwise N.G. Consumption in 2014-2016
power generation
industrial fuel
captive use
LPG shrinkage
fertilizer industry
petrochemical
others

LNG Terminals in India
PETRONET LNG, KOCHI
The LNG terminal in Kochi was commissioned in august 2013, with a capacity of 5 MMTPA. The
cost of construction of plant was Rs.4500.It has storage tanks of capacity 155000 cubic meters.
The current capacity utilization of the terminal is just 6 percent. The terminal capacity is mostly
underutilized due to the lack of pipeline connectivity to Mangalore and Bangalore which was to
be provided by GAIL but did not happen due to the problems with land acquisition with farmers
of Tamil nadu and kerala.The loss for the terminal in the year 2014-2015 was Rs.500 crore due
to underutilization. Petronet has signed an LNG SPA with Exxon Mobil for supply of 1.4 MMTPA
from gorgon LNG project Australia. Transportation will be done using vessel called ‘”prachi”
which will be transferring 1.5 MMTPA of LNG from Australia to Kochi.

DAHEJ LNG TERMINAL, GUJARAT
The Dahej LNG terminal was started with a capacity of 5 MMTPA later on the capacity was
increased to 10 MMTPA which was commissioned in 2009.The petronet has a long term
agreement with Ras Laffan Liquefied Natural Gas Co. Ltd,Qatar for LNG supply of 7.5
MMTPA.The terminal is currently operating at 130 percent of its capacity. It has added two LNG
storage tanks and vaporization facilities recently .The vessels used for transporting LNG from
Qatar are DISHA, RAAHI, and Aseem. Asian development bank is a stake holder in Dahej
petonet LNG plant.
Hazira LNG Terminal
This liquefied natural gas terminal is located in the Surat district of Gujarat, India. The
terminal is operated by the Royal Dutch Shell (74%) and Total Gas (26%) after signing a
concessionary contract with the Gujarat Maritime Board (GMB). This terminal is one of the
largest Greenfield investments in India. They have a design capacity of 5 MMTPA of LNG, which
can also be increased 10 MMTPA according to the market demands. Operation was started at
2.5 MMTPA, which was later upgraded to 3.6 MMTPA in 2008. Shell is currently planning to
achieve a capacity of 7.5 MMTPA by the end of 2017. The terminal is equipped with two
cryogenic storage tanks with storage capacity of 160000 cubic metres each.
RATNAGIRI GAS ANDPOWER PRIVATE LIMITED
Owned by Ratnagiri Gas and Power (formerly known as Dabhol Power Plant) is an LNG
import and re-gasification terminal located at Dabhol in Maharashtra. This terminal was built
with intentions to feed LNG gas to the Dabhol power plant for electricity production. Initially
operated at only 1.2MMTPA capacity, the GAIL and NTPC consortium now has expanded its
operations to 2.5 MMTPA, with proposed up gradation to 5 MMTPA in the coming years. GAIL-
NTPC has signed a three year valid gas contracts with Marubeni, for supply of 0.5MMTPA. The
terminal is equipped with a total storage capacity of 500000 cubic metres of gas in three
cryogenic storage tanks.

COP21
The agreementanda companiondecisionbypartieswere the keyoutcomesof the conference,known
as the 21st sessionof the UNFCCCConference of the Parties,orCOP21. Together,the ParisAgreement
and the accompanyingCOPdecision:
Reaffirmthe goal of limitingglobaltemperature increase well below 2degreesCelsius,while urging
effortstolimitthe increase to1.5 degrees;
Establishbindingcommitmentsbyall partiestomake “nationallydeterminedcontributions”(NDCs),and
to pursue domesticmeasuresaimedatachievingthem;
Commitall countriestoreportregularlyontheiremissionsand“progressmade inimplementingand
achieving”theirNDCs,andtoundergointernationalreview;
Commitall countriestosubmitnewNDCs everyfive years,withthe clearexpectationthattheywill
“representaprogression”beyondpreviousones;
Reaffirmthe bindingobligationsof developedcountriesunderthe UNFCCCtosupportthe effortsof
developingcountries,whileforthe firsttime encouragingvoluntarycontributionsbydeveloping
countriestoo;
Extendthe currentgoal of mobilizing$100 billionayearin supportby2020 through2025, witha new,
highergoal to be setfor the periodafter2025;
Extenda mechanismtoaddress“lossanddamage”resultingfromclimate change,whichexplicitlywill
not “involve orprovide abasisforany liabilityorcompensation;”
Require partiesengagingininternationalemissionstradingtoavoid“double counting;”and
Call for a newmechanism,similarto the CleanDevelopmentMechanismunderthe KyotoProtocol,
enablingemissionreductionsinone countrytobe countedtowardanothercountry’sNDC.
To be implemented,the treatyrequiresratificationof 55 Nations. AlongwithIndia’sratification
submitted on2nd
October2016, a total of 66 nationshave giventheirnodfortreatywhichwill be
implementedin2020. WithCOP21 it becomesthe responsibilityof the developednationstofinance
installationof cleanfuelinfrastructure.Indiabecause of itsequitabilitywouldreceiveasumof $100
Billion,of which$2.5 Billionhasalreadybeenreceived.
Honorable Ministerof foreignAffairsquotedthatIndiawouldhave 40% of non-fossilfuelsinitsenergymix
by 2030. The non-fossilfuelsourcesthatIndiaplanstoinstall are solar,solarthermal andwindenergy.But
these sourcesdeliverafluctuatingsupplyof powerbecause of dependencyonclimate,weatherand
daylight.Thusthere isa needof oscillatingpowergenerationunitwhichcanbe usedas desired.Natural
Gas fedpowerplantshave advantage of notjust beingamore cleanerfuel togenerate powerbutalsohave
control overtheiroutput.
COP21 emphasized onreducingthe carbonfootprintandlimitingthe global temperaturerise to2⁰ C.
Natural gas emits50-60% lessCarbonDi Oxide thancoal.Coal Poweredpowerplantsaccountfor53% of
India’sinstalledpowercapacity,whichisgrowingata rate of 16% per year.Because Chinaisanother
importerof coal ad itsdemandisexpectedtoincrease by$20-$30 and couldreach $130 to $140 pertonne
innear intermediate term.Thismakesdomesticnatural gaspoweredplantmore economical thanimported
coal poweredplant,asformerwill costRs.1.88per kilowatthourwhile the latterwill cost Rs.4 perkilo
watt hour.

Steps taken by the Government
Recently Government has taken many significant steps to promote the consumption of natural
gas. One step taken was to retrieve the stranded the gas-based capacities in the power and
fertilizer sector by making imported LNG affordable.
 In the power sector it is providing subsidy through reverse bidding scheme to allow stranded
power asset to operate at 30 % PLF and service the lenders
 In the fertilizer sector it aims to increase urea production by 3.7 mmtpa through gas pooling
policy.
 In future, the natural gas demand is all set to grow significantly at a CAGR of 7% from 226.7
MMSCMD in 2012-13 to 713.5 MMSCMD in 2029-30. Thus GAIL has entered into a contract
with the Henry Hub which will start shipping gas in 2022.
 India has renegotiated the deal with Qatar in January 2016. This deal gave India a waiver of
Rs.12,000 Cr. penalty and slashed the price from $12-13/MMBtu to $6-7/MMBtu. The equation
being used is:
PLNG=12.67% (3 month Brent average) +$0.52+$0.35
PLNG –Price of LNG in dollars
 KG-D5 block operated by ONGC, is divided into Northern Discovery Area and Southern
Discovery Area. The Northern discovery area will have 8 free gas producing wells. The expected
output is 16.56 MMSCMD by end of 2021.
 Seeking to reduce India's carbon footprints, the Centre has decided to switch over from diesel
to relatively less polluting Liquefied Natural Gas (LNG) as a fuel for vessels in the inland
navigation system. The proposed new fleet of 80 vessels in Ganga is likely to be the first
beneficiary of the move.
 42 districts have operational City Gas distribution Infrastructure and 27 still await either for the
infrastructure or are suffering the demand- supply gap.

Growing transmission and distribution infrastructure
 The PNGRB has authorized the construction of many cross-country gas pipelines (covering more
than 5,000 km of pipeline network). However, the projects have not materialized due to lack of
anchor customer demand, which has caused viability and financing concerns. India’s gas pipeline
infrastructure is relatively under-developed. It currently has a network of 17,421 km of natural
gas transmission pipelines with a design capacity of around 464 mmscmd (for major gas
pipelines). Realising that pipelines involves political negotiations, acceptance and is a central
pillar of infrastructure development, the government of India will now contribute 40% of capital
in GAIL’s pipeline projects.
Initiatives /proposals
 Make in India initiative : Plan to connect 326 cities with city gas distribution network (CGD) by
2022. In order to promote use of natural gas, priority for allocation of domestic gas was
accorded to PNG/CNG segments for meeting 100% demand and faster roll out of PNG
connections and CNG stations.
 Urbanization and urban pollution : Construction of another 15,000 km of gas pipeline network
for completion of national gas grid, which is currently under various stages of implementation.
 Providing 10 crore new LPG connections in next 3 years till 2019, of which 5 crore are for BPL
households The Government is focused on providing access to affordable, reliable, sustainable
and modern energy to every citizen.
 Step up in agriculture: Improvement in domestic fertilizer production required to support
increased agricultural activities , Gas is the preferred feedstock for production of nitrogenous
fertilizers
 Green corridors : Global (mainly the US, China and Europe) trend of commercial vehicles
(medium-to heavy duty) switching over to CNG/LNG.

The Way Forward
India’s consumption is of LNG is growing at 7%. The IPI and TAPI transnational pipelines seem to
be a pipe dream stuck in geopolitical glitches. GOI should realize the potential of Australia and
increase its re-gasification terminal capacity on East coast and also should work on pipeline
infrastructure associated with the same. Looking at the huge appetite of India and 6-7% growth
rate it should focus on buying gas from a country with Q/P ratio of over 50 years. This condition
is met by Pars Field (Offshore Qatar). India which has trade relations with Egypt should also
consider the recent discovery of gas by Shell in Egypt. Coal Bed Methane and other
unconventional sources such as Shale and hydrates require more R&D and studies to reach a
feasibility level in India. Iran which has 1201.4 TCF of gas and Turkmenistan which 617.3 TCF
can prove to be good suppliers if the geopolitical leverages are used correctly. The subsea
pipeline to Iran is high investment but a good plan for long term.

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