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Business Economy


Gas Economy may remain a pipedream for India in near future

Gas Economy may remain a pipedream for India in near future

New Delhi, Jul 4 (UNI) The much-vaunted Gas Economy drive propelled by the NDA Government, in pursuit of a cleaner and cheaper fuel is likely to be stumbled, at least in the short and medium terms due to the price shock that has forced major global suppliers to shut-in many of their projects and put planned investments on hold.

According to India Gas Foundation (IGF), a research NGO, the sharp decline in demand and prices have sent the global LNG (Liquified Natural Gas) industry completely out of gear resulting in severe impact on India’s plan for long term arrangement with the major producers.

“The Covid-19 Pandemic has hammered the demand by around 30 per cent and the situation is yet to look up as the industry consumption will take months, if not years, to normalise,” said Biswajit Roy, a research analyst at IGF.

The IGF researcher further explained that the price in the spot market is hovering below $2 per mmBtu when the producers expect a price between $5-$6. “Several projects were seen in an advanced stage for final investment decision (FID) even same time last year. “But now they have already withheld their FIDs or withdrawing from the projects,” says Roy.

Tellurian, one of the major US LNG producers, has already deferred its much hyped project, Driftwood in which India’s largest LNG player, Petronet LNG agreed to take up a 20 per cent stake for uptake of 5 million tonnes of LNG every year for next 40 years. The deal fell through because of the sheer uncertainties in the sector.

Tellurian is not alone. The global gas giant, Shell has also pulled out from its highly ambitious Lake Charles LNG project and reportedly mulling over the sale of a major stake in its Australian LNG business.

Exxon Mobil, another super major, with whom Petronet has a long term contract is also reportedly reengineering its LNG strategy, particularly in Australia either by cancelling or cooling-off its projects. The reason, said an industry insider, is the catastrophic price and supply glut. The Demand-Supply mismatch has been in place for some time now, but the global pandemic has only put the last nail.

All the energy majors are now pushing for long term contracts particularly with the companies in the developing countries like India to avoid the price shock in the spot market. The Indian companies including Gail India have already had long term contracts which are far more than the spot market price.

Another major hic-cup is the irrational delay in more or less or pipeline projects, which has already been cited by the IEA (International Energy Association) in its recent report on India’s energy outlook.

India, which is the fourth-largest consumer of LNG in the world has an ambitious plan to double the consumption from 6.2 per cent ( world average is 24 per cent ) to 15 per cent by 2022 in its energy-mix which is predominantly dominated by Coal and Oil.

But going by the current trend, mostly feel, the plan is shackled by too many constraints, some of which are beyond the control of Indian industry.

UNI PB SHK1949

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