Tuesday, November 13, 2007

Gas era set to dawn in India

Ships equipped with re-gasification gear an answer

Power shortages leading to blackouts are already taking their toll on production, and then the cumulative effect is filtering down to export markets. That’s the scene blurring grand visions of making India a manufacturing hub to alleviate poverty, which keeps more than two-thirds of the rural population engaged in a vicious cycle of an agricultural sector dependent on weather unpredictability.

With an economic boom touching nine percent over the last few years showing no sign of slowing down, India’s insatiable hunger for energy has not been matched by a proportionate increase in supply over the years. Estimates point that India’s energy needs are set to grow by 40 percent, moving it from sixth slot to fourth position in the world’s top consuming nations by 2012.

“Cleaner burning and more efficient than coal,” coupled with the fact that tonnes of stranded gas around the world are just looking for a market, natural gas seems to be the answer to the ever-increasing demand for power in the present Indian environs, where the ways and means to provide sustainable and reliable solutions are far from clear.

Government figures show that the country’s domestic gas supply is 65 million standard cubic metres per day, while demand stands at 231 mmscmd and the projections put it to rise to 313 mmscmd by 2011-2012. India’s Planning Commission in its approach paper to its 11th Five-Year Plan that an ongoing sequence since it was launched five decades ago identified that among other factors, “... above all, power supply are not comparable to those prevalent in our competitor countries.”

Warning that, “... this gap must be filled within the next five to 10 years if our enterprises are to compete effectively,” the paper stressed that, today, Indian companies are not asking for state protection but at least, “expect a level playing field.” It may be noted that although industrial units are savvy about their own power plants, the acute lack of feeding fuel remains a major stumbling block. With focus shifting to cleaner industrialisation, there is a gas era ready to come of age, but latest government figures show the country failed to import only a third of the gas it wanted in 2006-2007.

One of the major reasons is the inadequate infrastructure in the country to handle gas imports as only two of the planned four terminals for LNG (Liquefied Natural Gas) re-gasification viz. Shell’s Hazira terminal and Petronet’s Dahej terminal, are operating while the Kochi terminal and the Dabhol are yet to get commissioned. These special terminals are needed as gas is shipped in liquid form and needs to be re-gasified when the ship berths. Lack of such specialised terminals left not only the power sector but also the fertilizer sector literally gasping for gas.

The geo-political situation around the world has cast its long dark shadows on the Indian government’s options to get international pipeline projects like the Iran-Pakistan-India, the Myanmar-India and the Turkmenistan-Afghanistan-Pakistan-India to deliver.

According to tough-talking sector observers, the first one has an American negative influence on it, the second seems to be lost to Chinese efforts, while the third is losing to its preferred sister project moving toward Russia on its journey to the more lucrative market of Europe, giving leverage to Moscow over Brussels in energy matters.

Dashing any hopes of salvaging the Myanmar-India gas pipeline project, the Oil and Natural Gas Corporation Limited, ONGC – Videsh Limited or OVL scrapped the project in the footsteps of the Gas Authority of India Limited, GAIL. R S Butola, Managing Director of OVL said in New Delhi on May 14: “Since Bangladesh has disagreed to our proposal, the project is now becoming a costly affair while China is trying hard to procure gas from Myanmar through a pipeline because the country has been suffering from a huge energy crisis for long.”

He ruled out any further bid to get back the pipeline project without a cost-benefit analysis. Such a delayed scenario for pipelines leaves the door wide open for imports of gas through ports. The Indian west coast is already dotted with ports which have emerged as leading container handlers with overstretched capacity and the time is ripe for the eastern ports of Kolkota, Haldia and Paradeep to take the initiative to grab this golden opportunity to become a hub of gas imports to meet the energy needs of the parent state, and for the onward transport to other parts of the country.

Usually, it will cost around USD 500 million to equip each port with a re-gasification terminal and a number of years of construction before gas starts flowing to consumers, but pundits offer a new pioneering working model showing a simple way out. With tailor-made delivery-driven solutions catering to exponentially increasing demands for gas, there are technologically advanced vessels which have the facility to re-gasify LNG onboard and discharge natural gas into the pipeline system through an “Energy Bridge” process. The time frame for opening the tap to consumers for this unique way of the re-gasification equipped vessels docking at the ports needs just a year from the time the final decision is taken to when work starts to install various discharge points like a buoy (deepwater port), a turret (shallow water port) or quayside.

Moreover, this also takes care of concerns of vocal environmentalists who have been campaigning against new terminals aimed to boosting imports of LNG. One market expert on India predicted that the move can lead to frenzied investment from abroad in Bengal for constructing short delivery pipelines to industrial units across the region. Calling it “the financial backbone of the future for Bengal (an eastern Indian state),” which is a state striving to transform its poor agro-economy into an industry powered financial giant in the coming years, the expert said in Brussels, “The state can contribute with tax rebates during high risk initial phases with applicant shipping companies committing to help in getting gas contracts at affordable prices.” Time will show if the industry and the state can take advantage of this opportunity to agree on terms of development of gas inlets and beyond.

Written for New Europe, the European Weekly on May 19, 2007 - Issue : 730

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