India Gas Master Plan

Shaping the Future of Energy in India
Although gas currently makes up less than 10 percent of India's energy mix, it is certain to be a key fuel in the country's future, as energy demand grows and reliance on imported fuels increases. Nexant recently completed a major study to determine the demand for gas and optimal import alternatives, producing India's first-ever master plan for guiding development of gas infrastructure.

The Challenge

Currently, all of the natural gas consumed in India comes from indigenous fields, located primarily in the western offshore region near Bombay. However, gas transmission infrastructure is concentrated in the country's northwest region. The major producing fields are in decline and there have been no major finds in the last 15 years.

Demand for gas far exceeds available supply and an allocation system is used to control demand. Although current forecasts show future demand far exceeding indigenous supply, the projections were made using existing, government-set gas price structures. Liberalization of the Indian hydrocarbon sector will see domestic prices rising to world market levels, which will likely constrain future demand projections.

In this context, the Asian Development Bank commissioned Nexant to develop a countrywide master plan for natural gas. The objectives of the plan were to:

  • Rationalize projected demand for gas
  • Establish optimal import alternatives
  • Develop a plan for future expansion of the gas infrastructure in India
  • Identify key economic, regulatory, and legal issues related to gas imports

Nexant reviewed existing demand projections for gas from all the key industrial sectors, in particular the power and fertiliser sectors. New demand projections were developed under various pricing scenarios. Supply projections were compiled from interviews with producers, ministry officials, and industry organizations. Supply and demand projections were then synthesized to determine alternative gas import requirements under various scenarios.

All of the potential import options, both pipeline and LNG, were considered from a technical, economic, and political perspective. The underlying economics of gas supply from the various exporting countries was analyzed, and each project was ranked according to both technoeconomic feasibility and risk. The master plan identified:

  • Key import LNG terminals and pipeline import projects
  • Optimal development of transmission infrastructure over time
  • Key supply and storage security issues

Nexant drew up a profile for each project, including cost estimates, implementation schedules, and key project risks. We also assessed the total financing requirements, and investigated the capacity of the local markets to raise project financing.

The Master Plan-Bluepring for Gas Development

The study showed clearly that gas is an extremely attractive fuel for the south, west, and northwest of India. It is both cheaper and more environmentally attractive than competing fuels. Demand for gas in India at international market prices was found to be hugely in excess of indigenous supply and options to import gas via pipeline or in the form of LNG would be economically viable. We also identified the optimal locations for establishing LNG receiving terminals. Nexant evaluated and ranked various import pipeline options from Iran, Bangladesh, Myanmar, and Turkmenistan, and established their economic and financial bases. Lastly, to support future gas development, we prepared a national infrastructure development plan, designed to serve as the blueprint for future gas sector growth in India.

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