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LNG remains a 'Energy Bridge ' for import dependent rising economies like India.

When one compares the role of natural gas (8% out of which almost 50 % is imported) among India's primary energy mix (oil is 30 %) one is painfully reminded of it's 'huge swing value' in terms of energy security, environmental relevance and the relentless pursuit which is required to tap all sources including LNG.

Much analyst doubt whether the current low oil prices is actually a 'political east v/s west phenomenon' or an economic cyclical trend. However the consensus seems to be there that the real band lies somewhere around 80 plus and north. How much near or far we are from the band, is yet another speculation.

Economies like India (major importers plus increasing rate of hydrocarbon consumption) are currently benefitting from low prices but the more recent and the non-conventional (shale) producers in South and North America, Africa and Renewables with relative higher cost are already encountering viability and investment challenges.

A large consumer and producer like US will additionally face currency (USD) demand issues in the long term (putting pressure on the value of the currency) if the trend is prolonged as trillion of Dollars get out of demand for oil trade (due to low cost of oil and consequential lower global investment in Oil & gas E&P and infrastructure development).

LNG is not a cheap fuel but an 'available' and 'accessible' one. In other words it's easy accessibility through balancing of spot and long term prices can make this commodity serve as a virtual 'strategic reserve' without a physical facility. However in order to fulfill this role the Country must have adequate and well developed infrastructure in all three areas Terminals, distribution and marketing and dual or gas based fuel facility at users.

Difficult proposition

Imported LNG has been and continues to be a reliable 'energy security' interim and medium term solution, a buffer or a 'top up' fuel for India.

However lately it's potential, rather than being maximized, is getting tied down with issues of technical, financial viability, regulatory and marketing challenges.

While India has a long coastline, the potential for finding large waterfronts on the coast with required water depth is limited. This leads to a major technical viability issue as the few places where the required water depth/draft is available (e.g. Gujarat) come at a premium or State specific riders or interests.

On the distribution side and marketing, GSPC and GAIL are near monopolies owning most of the infrastructure creating a marketing challenge.

One billion USD is the minimum fresh fund investment for a 5 million Terminal, but it may have to be committed without the assurance of land allotment (which is now by tender) and subsequently without any commitment towards a timely handled environmental clearance regulatory process.

By not wholeheartedly entering the LNG option the industry and the Govt. is also missing on the technological potential offered by fast developing technologies in the area of marine transportation and Ship and building of floating facilities, power generation, land transportation and storage innovations specific to LNG .

Indicative developments FY15/16

Qatar was approached in April for proposing less delivery of long-term contracted quantities (as the spot price 6-8 $ fell below the long term price of 13 $). Subsequently Qatar played along in exporting gap quantities as spot exports off course through other intermediaries.

While pooling of spot and long term prices are always an option to get a median price and have been tried earlier, but perhaps temporarily, business realities and relationships seems to be holding.

While there is no spurt in domestic production one does observe gas imports being a major agenda item with all international bilateral meetings e.g. Mozambique (6 billion already invested another 6 billion committed to develop block and development of a LNG project), Iran (underwater pipeline, Urea export Plant), Kazakhstan, Russia, and Canada.

In private sector, Reliance Power is looking at Floating Gas Storage and regasification facility to supply Gas to a 3000 MW LNG based power plant in Bangladesh.

GAIL also launched tender for 17 cargoes of LNG while BG increased deliveries of LNG as demand from East Asian markets went down and production from its QCLNG facility at Curtis Island ramped up.

Future issues

The keys to LNG future perhaps lie in recognizing it's unique position as an important and stand alone 'bridging and hedging option' for India's Energy security.

For this purpose Regulatory regime, Central and respective state Govt. and Central Govt. policy mechanism need to converge on the need to support projects in LNG infrastructure in a 'investment promotion' mode.

Low hanging fruits would be to track and support all floating and land based terminals under project promotion/ implementation, actively promote Floating storage and Regas Units (FSRUs get implemented much faster), find ways for non monopolistic distribution and marketing and getting strategically and commercially engaged with more obvious sources like Russia, Iran, Qatar, Australia.

Govt. approval for imported gas to be used for fertilizers and power production is a positive step including NITI Aayog's announcement to present an 'integrated energy policy (2nd edition) "to bring out a road map for developing energy security and a right pricing mechanism to promote competition and quality standards".

However specific infrastructure, distribution & common carrier frameworks and market driven pricing mechanism specific to imported gas are urgently required with a focus to strengthen LNG potential.








  1. Gaurav Sharma, Director - Sanmarg Projects Pvt. Ltd.

  2. Mukul Kumar Saini, Sr. Manager - Sanmarg Projects Pvt. Ltd.

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