Sustainable Infrastructure for Natural Gas

A study by IHS Energy shows that India was the fourth largest importer of liquefied natural gas (LNG) in 2013. (Japan, South Korea and China – in that order – were the largest.)

India’s infrastructure for transport of natural gas to meet the domestic demand has never been adequate. The present pipeline is not enough to keep pace with the supply surge through increased domestic production, LNG imports and gas imports.

LNG imports are expected to account for much of the gas supply; its increase will depend on the pace of expansion in regasification terminal capacities and pipeline infrastructure connecting gas to markets.

Source: Petroleum and Natural Gas Regulatory Board

The geographical distribution of existing pipelines continues to remain uneven as states closer to gas sources devour the benefits of higher utilisation and local development of the market. Of the 12,144 km of gas pipelines in India, around 60% is concentrated in Maharashtra, Gujarat, Delhi, Uttar Pradesh, Haryana and Rajasthan.

Region % of gas pipeline network % of consumption States with favorable infrastructure States lacking pipeline infrastructure
Western 40 53 Gujarat, Maharashtra Goa
Northern 20 26 Delhi, Uttar Pradesh, Haryana and Rajasthan Punjab, Jammu and Kashmir, Himachal Pradesh, Uttarakhand
Central 13 3 Madhya Pradesh Chhattisgarh
Southern 16 14 Tamil Nadu, Andhra Pradesh Kerala, Karnataka
Eastern NIL NIL NIL Bihar, West Bengal, Jharkhand, Odisha
North Eastern 10 4 Assam, Tripura Meghalaya, Sikkim, Arunachal Pradesh, Mizoram, Manipur, Nagaland

Petroleum and Natural Gas Regulatory Board

Though the government has promised to expand the pipeline network by 15,000 km to complete the grid, the situation is not encouraging. Only 17% of the targeted 15,918 km in the 12th Five Year plan (2012-17) is complete; another 4,000 km is a work in progress. Projects related to 6,200 km of pipelines are in various stages of bidding, while the fate of the final 3,700 km is unclear.

It’s likely, then, that supplies will improve by 2017 via LNG terminals and domestic sources but India won’t have the infrastructure to transport gas to its eastern and central regions.

A major hurdle is the tariff structure. The uneven development of pipeline infrastructure is the result of different tariffs to transport the same amount of gas across the same distance in different parts of the country. Manish Aggarwal, partner and head of energy and natural resources at KPMG India, told “Many delays are due to issues with local clearances, project coordination and centre-state conflicts because of the project’s impact on farmers.”

Ideally, for a slowly evolving market like India, a uniform pipeline tariff – also known as ‘postalised tariff’ – for all customers, irrespective of their distance from the gas field, is prudent. This may have a further positive impact through greater investment in deep-water projects for domestic gas exploration and increased competition for LNG imports.

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