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17 October 2019

India’s flight to gas puts it in Russia, USA pocket, costs $60 billion

India, like most other energy regimes that are heavily reliant on coal, has begun the painful, and often expensive switch towards natural gas. The likelihood is that any dollar spent on moving to gas, will have to be “re-spent” again getting to renewable energy. Time and time again we have reminded our audience that shifting to gas as an interim solution, to help get off coal, is a terrible move.

This week India announced that $60 billion will have been spent on a national gas grid and import terminals, to be completed by 2024. Laughably it says this is related to a bid to cut its carbon emissions, but of course, it has become increasingly obvious that most sources of natural gas, and especially fracking, release huge quantities of methane into the atmosphere, making it collectively – between where it is extracted and where it is burned – worse than coal. So if it buys its LNG from the US, it has already released tons of methane.

This is $60 billion that India is spending in order to become more dependent upon imports, when of course it is one of the world’s largest producers of coal. If you accept that gas is at least as polluting as coal, then the money is virtually wasted. But most oil companies have consistently pushed the idea that gas gives you thinking time, move from coal to gas and your country’s emissions will be calculated at a lower rate because only the gas burning is happening there, not the extraction. You can then more slowly plan your route to zero emissions much later. This is increasingly becoming a complete fallacy after pioneering work at Cornell University identified methane emissions as coming from fracking, not such much from cows, who previously got the blame.

India has a stated intent of pushing the use of gas, but it has struggled mostly due to lack of gas infrastructure and this is now being built, mostly by gas distribution companies with perhaps an unspecified amount coming from the government. This new investment was revealed by Oil Minister Dharmendra Pradhan talking at the India Energy Forum, and that the work would be complete by 2024.

The Indian government has already agreed targets to more than double the share of gas in India’s energy mix, taking it up to 15% by 2030.

The Oil Minister did not say how much of the $60 billion came from the government, but did say that progress all pointed to a point in mid-2024 for completion and a much higher use of gas. Most of this means the work will be carried out by the state run Gail (Gas Authority of India Limited) which already owns around two thirds of all gas pipelines across India. Specifically Gail has said it will shortly finish the 1,660 mile Urja Ganga pipeline project, connecting the eastern states of Bihar, West Bengal, Jharkhand and Odisha by the end of 2020.

About two years later the government plans to sell off Gail or a large shareholding in it, perhaps to get back investment monies it has ploughed into it, although as we have pointed out, that will almost certainly be a waste of money. The one redeeming thing would be if a global hydrogen industry emerged and hydrogen uniformly replaces natural gas in the 2040 timeframe, using much of the same infrastructure.

But already India cannot extract sufficient gas from its own exploration to fulfill the gas deliveries it has. And given that the US is one of the few countries which has excess production of natural gas, chances are that it can export much of India’s shortfall. The other major candidate is Russia, which would love to increase its sphere of influence.

Last month India agreed to buy LNG from Russia’s Novatek and to invest in the Russian company’s future projects. In return India will help to mine coking coal in Russia, so that influence is already rising.

The latest government figures suggest that 45% of the gas India uses is imported, costing the country about the $60 billion it is now spending on infrastructure each year in imports. It will now have to push exploration higher internally, and that will involve it with the global conspiracy of the oil companies to ignore the methane it shakes out of the ground when it fracks.

The issue India is currently getting over it that most of the landing apparatus for gas is in the West, and its needs to be connected to the East and the Northeast.