India’s gas-based economy vision seeks subsea pipeline option.

India’s hunt for developing a sustainable economy should not only involve the push towards renewable energy sources but also a firm commitment towards increasing in natural gas base, as also reflected in the statement of India’s Petroleum Minister. The efforts to this direction include increase cheaper LNG imports and reviving its gas pipeline diplomacy through undersea gas pipeline such as Middle East to India Deepwater Pipeline (MEIDP).

Natural gas as a bridge fuel could address the uncertain nature of renewable energy sources, particularly with respect to financing capital cost and innovation. Natural gas can further compliment renewable energy by keeping the wholesale electricity prices low when renewables such as solar and wind are not producing optimally.

Though, the irony is that India, despite the appreciation of the fact that the share of natural gas in total energy mix has to be increased to curb emission, India has so far failed to do so. Resulting in falling domestic gas production and concurrent increase in its demand, India continues to move up in its trajectory of importing natural gas, which has now gone over 40 per cent of its total natural gas requirement.

According to Petroleum Planning and Analysis Cell (PPAC), India’s cumulative projected natural gas imports from April to June 2016 accounts for around 50 per cent of the total natural gas consumption, which is up by 9 per cent on year-on-year basis, signifying consistent increase in demand-supply gap. This gap is largely met through LNG supplies via four LNG terminals having a total capacity of 25 million metric tonnes per annum (MMTPA), albeit with low operational capacities such that of the Kochi terminal, mainly because of lack of evacuation infrastructure in place.

This accentuates the need for a small scale LNG value chain supported with more intensified natural gas grid, which as on April 1, 2016 is limited to 16,250 km pipeline with another 12,687 km to be added keeping an eye on India’s projected gas demand. According to the 2016 IEA Medium-Term Gas Market Report, India’s gas demand is set to grow at 6.5 per cent per year by 2021. Its consumption too is projected to grow by 38 per cent from 52 billion cubic metres in 2015 to 72 BCM in 2021.

While the current low oil and gas price regime is favouring India’s LNG imports, the tide may turn after crude oil prices start increasing because India’s most of the LNG are indexed to global oil prices. In such case an increase in global crude oil prices could push the LNG prices up unless Indian buyers accordingly re-negotiate long term contracts just like they did with Qatar’s RasGas and now in the process of repeating the same with Australia’s Gorgon Project. To mitigate the high LNG prices India can also get connected with hub based pricing, such as the Henry Hub or can even form a strong alliance with LNG buyers of Japan, China and South Korea.

While the LNG prices are expected to remain around the same levels in next 3-4 years resulting from additional gas supplies from countries like Australia, Canada and at the later stage from even Mozambique and Tanzania, it would be prudent for India to strive for undersea gas pipeline option, more steadfastly. This is despite the realization of the fact that LNG suppliers worldwide have invested heavily in their allied infrastructure.

Thus an additional and cost effective route to import natural gas from gas rich nations would help India to have a greater bargaining chip in the long run to fully reap the potential of its rising natural gas demand.

India’s pipeline diplomacy, which has largely revolved around three main transnational natural gas pipelines, namely, Turkmenistan-Afghanistan-Pakistan-India (TAPI), Iran-Pakistan-India (IPI) and Myanmar-Bangladesh-India (MBI), the revival of the same through MEIDP, initiated by SAGE India (SAGE), could be a better option.

This is because MEIDP is now considered to be a feasible option largely due to the technical advances made in undersea gas pipeline, ever since Oman-India Pipeline (OIP) Project was envisioned in 1990s and after export of natural gas from Iran’s giant gas field is now available to the world resulting from the Joint Comprehensive Plan of Action (Iran deal).

The 1300 km SAGE undersea gas pipeline, bypassing Pakistan’s territorial waters, is expected to start from Chabahar in Iran and Ras al Jafan in Oman and end in Porbandar, Gujarat, with an alternative tap-off to Mumbai under consideration, which can help India to diversify its natural gas supplies.

Nord Stream offshore pipeline, which is of the same length as that of the proposed MEIDP, is already transporting Russian natural gas to Germany and other parts of Europe. The successful operation of Nord Stream pipeline reinforces the faith in technology that can bring such a proposed project to reality.

Interestingly, low LNG prices in the near term, an array of LNG infrastructure proposed in the next five years and a comparable transportation tariff, may give rise to winds of skepticism around the policy makers as to whether the huge investment in MEIDP may be debated. However, MEIDP, with the incremental benefits comparable to other transnational natural gas pipelines in question, can form a cornerstone for India’s energy security, especially at a time when Iran is ready to offer natural gas at a reasonable price for the long term.

In addition, Chabahar port, being the proposed starting point for MEIDP, indeed fits in the geostrategic calculus of India to gain access through Persian Gulf as also to Central Asia, wherein swapping of gas from this region with that from Iranian gas is very much the possibility. Hence, the MEIDP can become a key piece in India’s energy security Jigsaw and play a vital role in offering concrete solution to India’s gas-based economy vision.

Source : moderndiplomacy.eu