Surging prices threaten to scupper India’s coming-of-age gas party

What is the news?

India will need to review its plans of expanding the use of Liquefied natural gas(LNG) if the prices of LNG continue to stay at high levels.

What is Natural Gas?

Natural gas is a fossil energy source that formed deep beneath the earth’s surface. Natural gas contains different compounds. The largest component of natural gas is methane, a compound with one carbon atom and four hydrogen atoms (CH₄).

What is Liquified Natural Gas (LNG)?

Liquefied natural gas (LNG) is natural gas that has been cooled to a liquid state, at about -260° Fahrenheit, for shipping and storage. 

The volume of natural gas in its liquid state is about 600 times smaller than its volume in its gaseous state. This process makes it possible to transport natural gas to places where pipelines do not reach.

Why are LNG Prices rising?

Supply Constraints: Global energy demand fell in 2020 when economies slipped into COVID-induced lockdowns. When growth returned this year, especially to Asian economies, demand shot up and energy producers struggled to meet the growing demand, pushing up prices.

Energy Geopolitics: As prices of LNG shot up amid growing worldwide demand and falling production in Europe, supplies from Russia via a pipeline that passes through Ukraine and Poland also reduced, which made the situation worse.

What are India’s plans for LNG?

India has a target of a 15% share for natural gas in India’s total energy mix by 2030. This is because environmental benefit from LNG is huge. There is no sulphur dioxide emission and nitrogenous emissions are reduced by 85%.

However, India needs to rethink its strategy if LNG prices remain high. Moreover, even if LNG becomes affordable, at best, India can manage to expand gas use to around 10% of its energy mix because of lack of adequate infrastructure and consumption.

Note: International Energy Agency (IEA) expects the share of gas in India’s energy mix at just 12% in 2040 with import dependency rising to 69% t of demand from 50% in 2019.

Source: This post is based on the article “Surging prices threaten to scupper India’s coming-of-age gas party” published in Business Standard on 9th Dec 2021.