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Gas Economy may remain pipedream for India in near future

July 04
21:00 2020
Gas Economy may remain 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 the India’s energy outlook.

India, which is 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

constrains, some of which are beyond control of Indian industry.


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Fayim Md

Fayim Md

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