India could surpass its target to increase the share of natural gas in the country's total energy mix as its economic growth prospects and thrust on decarbonization temper the impact of recent events, namely the COVID pandemic and the Russia-Ukraine war, Great Eastern Energy Corporation Limited Managing Director and CEO Prashant Modi said.
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The Indian government has set a goal to increase the share of natural gas in the country's total energy mix to 15% by 2030, from about 6%.
"Currently, the demand for gas is about 170 MMSCMD...In the coming years, this can grow over fivefold to reach up to 900 MMSCMD," Modi told S&P Global Commodity Insights in an interview.
Gas demand will get an impetus, thanks to a huge population, a burgeoning middle class and rising domestic economic activity, even though LNG prices are likely to stay elevated in the coming years.
In India, the weighted average delivered price of spot and long-term LNG on the West Coast stood at around $21.35/MMBtu so far in fiscal 2022-2023 ending April, according to Modi.
Platts, part of S&P Global, assessed the JKM for April at $15.575/MMBtu Feb. 16, while the LNG West India Marker was assessed at $14.575/MMBtu.
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Despite high prices, "big ticket investments in LNG terminals are coming up. So, obviously there is strong LNG demand."
Russia cut off pipeline supplies to Europe in retaliation to punitive sanctions imposed on it by the West. This resulted in the emergence of a big new LNG consumer, the EU, who was not there until last year, Modi said.
Meanwhile, exploration and production activity has been inhibited by a mindset that "oil and gas are bad," Modi said, noting that high gas prices have emanated from both the Russia-Ukraine war as well as man-made issues.
However, a mindset change is needed because oil and gas are not going anywhere, Modi added.
"If you make a windmill, the blades are made from oil, steel is made from coal and gas, cement is made from coal, oil, gas. Everybody forgets," Modi said. "So, I call it pollution migration and not pollution avoidance."
GEECL's CBM, shale gas exploration
A GEECL presentation showed that it was the first company to commercially produce coal bed methane, or CBM, in India.
"The Raniganj block [in West Bengal] is our focus for CBM and our plan is to take it from 156 to 300 wells for CBM, and post that drill another 500 odd wells in there," Modi said.
"We have 2.6 trillion cubic feet of original gas in place [at Raniganj], and normally 60% of that is recoverable," Modi said.
GEECL is also carrying out a shale gas exploration program at Raniganj, Modi said, adding that the initial plan envisaged drilling core wells to map out the geology.
"We'll do a few of those tests with 10 odd million dollars or so of spending to get an idea of what kind of prospects are out there," Modi said.
"After that, we will do a pilot well, drilling and then get into development. If that happens, as much as $2 billion go into it," he said.
As far as shale resources were concerned, the best estimate was 3.51 Tcf with a high estimate pegged at 8 Tcf, of which normally 25%-35% of that is recoverable, Modi said.
Meanwhile, the installation of a key pipeline by GAIL in the region will give GEECL ready access to a market, Modi said, noting that this was positive.
"Then the option is to carry the gas through a pipeline to our customers or sell it to them directly at a market price," he added.
India's renewable energy thrust
India's latest Union Budget will provide a big push to the renewable energy sector including solar, hydrogen, electric, CNG and bio-CNG, Modi said.
India's fiscal 2023-2024 (April-March) budget provided significant funding amounting to Rupees 350 billion ($4.3 billion) for energy transition in the shape of increased power transmission for renewables, biogas and green fertilizer support.
"In India, we are very lucky because we have sun throughout the year. Wind also is good." Modi said.
India also has a vast potential when it comes to production of hydrogen and ammonia.
Analysts at S&P Global estimated that demand for pure hydrogen in India may increase to 7.2 million mt by 2030, and exceed 22 million mt by 2050 from around 5.5 million mt in 2022.
According to Modi, the renewable policy should be looked at holistically.
"Traditionally in the oil and gas sector there was a cost recovery regime in India. It is a welcome move to a revenue sharing regime in this sector but unfortunately the cost recovery overhang is still there," he said.
The generation cost for solar power in the country, which was as much as Indian Rupees 16-17/Kwh, is around Rupees 2/Kwh now, Modi said. So, the production costs of green hydrogen, which is still very nascent, will come down too, Modi said.
The intention of the government is correct, and they are pushing ahead with it, which is a welcome move, he added.