Call it poor judgment or bad luck, but India’s expansion of natural gas coverage to more than 90 percent of its population couldn’t have come at a worse time. In January, Adani Total Gas Ltd. and others won keenly-contested licenses to add new areas to city gas networks; in February, Vladimir Putin invaded Ukraine. Suddenly, billions of dollars in investment are on shaky ground.
After an extraordinary surge last month, European spot prices of natural gas are stabilising — at three times the average of the past decade. Contracted supplies of liquefied natural gas are cheaper, but with Europe scrambling to secure non-Russian fuel, the discount is shrinking, according to a Bloomberg News report last week. Worse still, it’s unlikely to be a blip: Credit Suisse Group AG predicts that the Russian gas deficit will lead to an annual global LNG shortage of nearly 100 million tons by the middle of the decade.
This isn’t what New Delhi anticipated when it decided to raise the share of natural gas in India’s energy mix to 15 percent by 2030 from under 7 percent now, as part of a plan to improve air quality. India had nine of the world’s 10 most polluted cities in 2020. Natural gas doesn’t eliminate carbon emissions, but it’s an improvement over diesel. It’s something to hold the fort until better options — such as green hydrogen — become affordable for emerging markets.
The environment, however, isn’t the only reason Prime Minister Narendra Modi has given a massive push to city gas projects. The move also has political significance. Piped natural gas (PNG) delivered to urban homes relieves the demand pressure on liquefied petroleum gas (LPG) cylinders. Those can then be pushed to rural areas where the government has helped poor families open 90 million new LPG accounts to help them migrate from burning wood, coal, dung-cake or kerosene to using cleaner cooking gas. The campaign buttressed Modi’s popularity with women voters, which is why the 2016 programme saw a jump in enrolment before his successful 2019 re-election bid.
But the economics of PNG — and compressed natural gas (CNG) supplied to motorists as an alternative to gasoline and diesel — is wobbly. State-run Oil & Natural Gas Corp. and Oil India Ltd. produce gas domestically, as does Reliance Industries Ltd. in partnership with BP Plc. Under a complex pricing formula, this output is allocated to city gas and fertiliser firms, the two biggest users, as well as power stations and LPG plants.
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