Price is a beast that large consumers of crude oil and natural gas like India fear. Not only does it distort the fiscal math of the country, it also exposes how vulnerable we are to geopolitical challenges. Though Russia is not a very significant contributor to India’s oil and gas imports, the ongoing Russia-Ukraine war is definitely hurting India by way of steep volatility in the prices of these commodities.

How can India protect itself from such global uncertainties? This is not the first time that India is facing such a situation — not so long ago and still very much alive is the Iran issue, once a major supplier to India.

For example, the price at which India refiners buy their crude oil averaged $84.67 a barrel in January and was on the upside of $90 a barrel in February. Also, on a high was imported gas (liquefied natural gas) price — long-term contract was between $12-14 mmBtu (gas is measured in million British thermal units), spot market price was about $33 mmBtu, the market-driven price for Indian consumers was $6-13 mmBtu, and the administered price was $2.9 mmBtu.

Gas consumption is directly linked to supply availability. What is stopping India from taking some constructive decisions so that it can cushion the impact of such volatility? “We need big ticket reforms,” industry trackers would say. Speak to government officials and they will spell out the reforms that have taken place.

Clean energy

Prime Minister Narendra Modi, addressing a webinar on ‘Energy for Sustainable Growth’, said that sustainable growth is possible only through sustainable energy sources. “Whatever targets India has set for itself I do not see them as a challenge, but as opportunities. India is moving with this vision in the last few years and the same has been taken forward at policy level in this year’s Budget,” he said.

Modi also pointed towards the challenge of energy storage, which has received significant attention in the Union Budget.

The government maintains that the Ministry of Petroleum and Natural Gas works in collaboration with various Central Government Ministries/State Governments/stakeholders to achieve reduction in import dependency on oil.

While all this is happening, the government is clearly focused on clean energy and pushing to tap all resources available. According to the Ministry for Petroleum and Natural Gas, the share of natural gas in primary energy mix is envisaged to increase to 15 per cent by 2030 by boosting domestic production and procuring LNG.

LNG imports are under Open General Licensing category and establishment of LNG infrastructure, including LNG terminals, is also under 100 per cent FDI (automatic route). Besides regulatory support, the market of natural gas is being created by expansion of gas infrastructure including City Gas Distribution, Gas Grid Network and establishment of LNG retail outlets.

Also, the Ministry of Road Transport and Highways has notified LNG as transport fuel. LNG terminals/pipelines/city gas distribution networks are being established to expand the gas market. The government has been driving the initiative of setting up LNG stations across the Golden Quadrilateral, national highways, east-west highway, north-south highway and major mining clusters.

Cross-country pipeline

But at present there are no cross-country LNG pipelines and it is very difficult to have one given the technological challenges. It is a fact that transportation of natural gas through pipelines is an economical and safer mode. Petroleum & Natural Gas Regulatory Board (PNGRB), under the PNGRB Act, 2006, has notified Technical and Safety Regulations for Natural Gas Pipelines in line with the various national/international standards.

But such infrastructure cannot be built in a day. And while the focus is on building infrastructure, what about storage and maintenance of natural fuel in future? How secure and successful is India in creating storage facility?

While storage of natural gas is presently not being done by the government, Indian Strategic Petroleum Reserve Ltd (ISPRL), a government of India company, has established crude oil storage facilities with total capacity of 5.33 million metric tonnes (MMT) at three locations — Vishakhapatnam (1.33 MMT); Mangaluru (1.5 MMT); and Padur (2.5 MMT) — under Phase I of the Strategic Petroleum Reserves (SPR) programme.

The government has taken necessary steps to increase awareness amongst statutory and regulatory authorities for faster penetration of LNG in the transportation sector including expansion of national gas grid to about 35,000 km from the current 20,000 km, expansion of CGD network, and setting up of LNG terminals.

More effort needed

But considering the demand of natural gas across sectors and the possibility of LNG prices firming up in the current geopolitical situation, India’s goal to boost the use of gas in its energy mix may require a more dedicated effort. Of course, building the gas network in the country besides LNG terminals planned at different location is being taken up, but there is a lull as far as transnational pipeline is concerned.

All the stakeholders feel that something should be done. But why aren’t the required reforms not happening? Is it political?

Observers feel that it is more so because of bureaucratic hurdles. For example, there are currently different ministries like Petroleum & Natural Gas, Power, Renewable Energy, Coal, etc., handling the energy sector of the country and each of these ministries has to ensure that Finance Ministry is on the same page for managing the finances. However, can a bureaucrat take a call against his/her political masters?

As India will continue to be a major consumer of oil and gas, a coordinated approach with consistent policy is needed.

It’s time to change gears and ensure that the sector is given a boost.