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.