Page 4 - AsianOil Week 48 2022

AsianOil COMMENTARY AsianOil

India's embrace of natural gas

backfires

India has adopted natural gas as a means of phasing out coal, but that strategy,
at least in the short term, has backfired.

INDIA INDIA has embraced natural gas in the last reservoirs, including those in deep waters or
few years as a means of safeguarding its energy subject to high pressure or high temperature,
WHAT: security at a low cost, even at the expense of was raised to $12.45 per mmBtu from $9.92.
India’s economy is its substantive domestic coal reserves. In the The price hikes have had a clear impact on
struggling in part years prior to the aftermath of the coronavirus gas consumption. Demand in the April-Sep-
because of high gas (COVID-19), this was a rational choice just on tember period of this year came to 31.48bn
prices. an economic basis. Global gas prices were so low cubic metres, down 4.7% year on year.
that domestic coal was uncompetitive compared The gas supply that falls under the adminis-
WHY: with international gas, and there was the added tered price mechanism (APM) is mostly deliv-
The country has bonus that the former offered lower emissions, ered as compressed natural gas (CNG) and
expanded the role of gas helping India fulfil its climate objectives. Now domestic pipe natural gas (PNG). They account
in its energy mix in recent the situation has changed. India is reverting to for 50% and 10% of the city gas volume respec-
years for economic and coal-fired power and heating out of necessity. tively, according to a report by CRISIL in early
environmental reasons. The price of international gas is simply too high. October.
The Indian government raised the price of “Demand for residential PNG, although
WHAT NEXT: regulated wholesale gas by 40% at the start of more resilient to higher prices, may also grow
India’s embrace of gas is October. While most of this burden represented a modest 2-5% as employees return to office
rational and will pay off the higher price paid for LNG imports, the price with the COVID-19 pandemic subsiding. CNG
in the long term, despite to most domestic gas producers was raised to demand is still expected to rise 25-30% on the
short-term pain. $8.57 per mmBtu, for the six-month period back of an expanding network of CNG stations
from October 1, 2022, from $6.1 per mmBtu to new geographic areas and higher sales of fac-
in the April 1-September 30 period of this tory-fitted CNG cars, despite narrowing price
year. The cost of gas from difficult-to-exploit differential with competing petrol and diesel,”

P4 www. NEWSBASE .com Week 48 05•December•2022