Instead of just increasing LNG imports, India will have to work rapidly on gas pipeline network, gas distribution system and market reforms.
India wants to increase the use of natural gas in the coming years, but this goal will not be achieved by merely increasing the LNG import capacity. A new report by the International Gas Union (IGU) says that if India has to take advantage of cheap and sufficient gas, it will have to rapidly expand the gas pipeline network. Besides, major reforms will have to be made in the gas distribution system, gas-based industries and gas market rules. According to the report, India has increased the capacity to import LNG in recent years, but the pipelines and gas supply network have not been able to grow at the same pace. This is the reason why gas consumption in the country is not increasing as expected.
The report also mentions the recent Iran-Israel tension and the situation arising in the Strait of Hormuz. It said that India is largely dependent on countries like Qatar, Australia, America and Russia for its LNG and LPG needs. Especially a large part of the gas coming from Qatar comes through the Strait of Hormuz. In such a situation, if there is any obstruction in this sea route, then India’s energy security can be directly affected and gas prices can increase rapidly.
However, there is also good news for India in the report. IGU believes that if tensions in West Asia ease, the supply of LNG around the world will increase significantly in the next few years. This may lead to a fall in gas prices in the international market. Due to weak demand for gas in some countries of Asia, prices may also come down, which may benefit India. But the benefit of this opportunity will be available only when India’s domestic gas market is more flexible and competitive.
The report suggests that the government should take steps such as easier access to LNG terminals, expansion of pipeline networks, reforms in gas transport charges and market-based pricing reforms. Especially in North, East and Central India, the pipeline network is still quite limited, due to which gas reaches the industries at a higher cost. For this reason, many companies still consider it cheaper to use coal.
IGU says that consumption in India will not increase just because gas becomes cheaper in the international market. For this, strong infrastructure, better contract system, transparent rules and reforms in the gas market are very important. According to the report, if India implements these reforms quickly, natural gas can play a bigger role in the country’s energy mix. This will strengthen energy security, provide cheaper fuel to industries and will also help in reducing pollution.
