By Categories: FP & IR

What is the scope of an international gas pipeline to India? Is it bright or is it dim?

Well, the answer is not straightforward at all. It depends on its geopolitical, financial and technical viability, as well its economic competitiveness relative to gas from others supply sources such as domestic gas and LNG imports. This competitiveness will also have to be assessed relative to other fossils and renewables in meeting demand. Eventually, to a large extent, it will also depend on how the energy markets will evolve in future, which most energy experts believe is not easily predictable.

Pipelines can be a useful way to boost the total supply of gas in the country. Gas will play a major role in Indian energy mix because it can be used effectively in several demand sectors.  In the power sector, it can be used to balance the variability of renewables, for a clear power generation mix; in the transport sector, a fuel switch from oil to gas can facilitate decarbonization. For these reasons, the total demand for gas is expected to double by 2029-30 (PNGRB, Vision 2030). But the domestic supply has not kept up to meet this demand. As a result, there is a huge supply deficit which is increasingly met by gas imports, almost 60% of the total gas supply. India ships 70% of its Liquefied Natural Gas (LNG) imports from Qatar, any tension in that area can threaten India’s energy security.

India has no international gas pipeline. All its gas import needs are met by shipments of LNG.  To complement this supply, international gas pipelines to India are proposed. Some steps were taken in this direction, for instance, the IPI (Iran, Pakistan and India Pipeline) and the TAPI (Turkmenistan, Afghanistan, Pakistan and India Pipeline), but none of them have materialized until now because of geopolitical tensions in land areas through which the proposed pipelines passed. For this reason, some critics admit that there is a bleak scope of the international gas pipeline via land to India. The discussions are therefore moving towards deep water pipelines to India which circumvent conflict areas. There are proposals for the construction of a deepwater pipeline from Iran through the Arabian Sea to India.

Market players are pushing for a deepwater pipeline on the grounds that it will be cheap relative to imported LNG.  50% of gas is consumed by Power and Fertilizer industry. There are several stranded gas- generation plants that have been unable to recover power generation costs as LNG is expensive. Similarly, fertilizer industries that use gas as input often have to be provided subsidized LNG.  They argue that a deep-water pipeline gas will lead to significant cost reduction compared to imported LNG.  The landed cost ($/MMBtu) for gas through the pipeline, will be almost 2$ to 3$ cheap, at $5.22 –$5.50 relative to imported LNG, which is priced at $7.50- $8.50.  This difference is mainly because in the case of a pipeline, the liquefaction, transportation and regasification cost from one port to the port, is almost zero.

In spite of these reasons, from discussions with government experts, one can gather that there is still not enough agreement in support of a deepwater pipeline. There are unanswered questions on the financial viability of such a project in a rapidly transforming energy market. A deepwater pipeline is a fixed asset which entails a huge capital cost, as the technology landscape transforms more and more, there are doubts as to whether a pipeline will be a sensible move, given that talks on floating LNG markets and LNG gas hubs are already doing rounds, which can bring favorable gas costs. Moreover, although several technical feasibility studies on deep water have been conducted, there are no finished projects of deepwater pipelines as of now, which creates venturing into this unexplored territory a risky proposition.

From where things stand, at present, it is difficult to say what lies ahead for the future of international gas pipeline to India.


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