By R. Sasankan

In my last Petro Intelligence Column I had shown that if Ministry of Petroleum and Natural Gas had followed its own stated policy of allowing markets to determine the price of petroleum products; current prices at the pump should have been lower by up to 30 %, all else being same. This would have benefitted the hapless consumer and lowered inflation. But clearly, the ministry has other unstated priorities. The case of Natural Gas is even more bizarre!

India's stated aspiration is to create a policy-market environment that ensures that natural gas (along with LNG) contributes 15% of the country's primary energy consumption. This target has been on the table for well over two decades and is currently set to be achieved by 2030 instead of 2020 as originally envisaged. The Energy Institute reported the 2023 share of gas in India's energy mix at under 5.8%. India's gas consumption grew from 64.3 BCM to 65.7 BCM in the 12 years ending FY 2023-24. This yields a growth rate of 0.18%/annum. Clearly achieving the stated target for share of gas in India's energy mix by 2030 is practically impossible even though it remains an essential component of India's energy transition. Per capita gas consumption has steadily declined during the 12- year period ending 2023-24.

By contrast, India's primary commercial energy consumption grew at 4.2%/annum in the ten-year period ending 2023 and grew 7% in 2023. If we assume a conservative 4.5% growth in our primary commercial energy consumption till 2040 to support the targeted 7-7.5% GDP growth per annum; gas will need to grow at 110 times and 59 times its actual annualized growth rate, during the 12- year period ending FY 2023-24, for a 15% share by 2030 and 2040 respectively!

In 2013, PNGRB estimated the 2030 gas demand as 272 BCM which is over 4 times the actual 2023-24 consumption. The petroleum minister recently set a target of 183 BCM for 2030 which is 2.8 times the 2023-24 actual and will yield about a 12% gas share by 2030. The demand estimates, are divorced from reality because they are made without reference to the price of gas. What is most worrisome is not the fact that none of the foregoing targets for gas are attainable but the much starker truth that there is no clear plan or strategy to get to the 15% gas share in the energy mix even by 2040.

India remains largely dependent upon LNG imports to grow the share of gas in its energy mix even as there are green shoots emerging in exploiting coal bed methane and biogas domestically. India established a huge capacity for LNG import and regasification, around half of which is currently lying idle. Some 24,000 MW of gas based power generation is also stranded.

A major impediment to raising gas consumption has been a misguided pricing regime and well-known failures in managing domestic fields and LNG imports. Without going into details, let me share a few serious historical anomalies/failures in India's gas sector.

Globally Natural Gas and LNG are two different commodities and, hence, priced differently and dealt with differently in framing gas policies. Nowhere in the world is natural gas priced, based on a formula or with linkage to crude. India does both. Our formulae and the linkage percentage also change for different domestic producers of natural gas. Nowhere in the world is there a separate pricing for what we call "difficult fields". In extractive industries, worldwide, resources in difficult horizons remain underground till they can be extracted economically - but not so in India. We hold the world record for dry wells, have destroyed producing fields with mismanagement and built huge surplus and stranded capacities in the gas and LNG sectors - all at the cost of the hapless tax-payer and consumer.

Importantly, when LNG is offered at a fixed price of $3 and $3.50/MMBTU under 20-year contracts we find reasons to not sign and when local gas is offered at $2.34/MMBTU under a 20-year contract, we allow the bidder to renege the offer and pay the bidder $4.20, $8.40 and even 12 dollar/MMBTU for local natural gas. Finally, we have poured billions into a high temperature high pressure deposits with no proven technology for such a horizon globally.

The policy framework failed to exploit multiple opportunities overseas, even in purely market driven economies (such as the US) with transparent regulations and rule of law. The US has emerged as the World's largest player in gas over the last two decades when India floundered from one gas blunder to another. During this time, on multiple occasions, the US offered opportunities to create large captive integrated LNG facilities from upstream gas production to gas transportation, to liquefaction and shipping to meet domestic gas demand in India at competitive rates.

Even earlier in 2024 experts estimated that such investments could be made viable at a price of around 6$/MMBTU for LNG landed in India on a long-term basis. Since then, natural gas prices have risen to 230% of their 2024 lows in the US, Natural gas production in 2025 is expected to go up by 6-7% from the lows in 2024 and LNG output from the US is expected to rise a further 40-50% by 2026! Spot LNG has moved from a low of $8.82/MMBTU in February 2024 to $14.03/MMBTU in November 2024 - even as oil prices have been falling.

Let me just say that Energy is a serious subject and only experts with long track records in the sector can create the right ethical policy environment. Opportunities will come again but is India willing and able to strike at the right time, based on the recommendations of real ethical experts, remains an open question. The track record thus far does not instil any confidence.