Insight - LNG infrastructure in India

Since 2011, India has been the world's fourth largest importer of LNG^[i], due to an increase in domestic consumption and a decline in domestic production. As the Government of India expands the share of gas in India's energy mix – and extends the country's pipeline network – this insight explores some of the opportunities open to Australian companies.

LNG in India today

Currently, LNG constitutes a relatively small share of India's total energy consumption. Fossil fuels dominate the energy mix, with coal and oil accounting for 82 per cent of consumption and natural gas just 6 per cent^[ii]. It is widely accepted that natural gas is the cleanest fossil fuel. To improve air quality, the Government of India has an ambitious target: to increase the share of natural gas within India's total energy consumption from approximately 6 per cent to 15 per cent by 2030^[iii].

India's LNG imports

• LNG imports for the 2019–20 financial year were 33,680 million metric standard cubic meters (MMSCM). This was 17 per cent higher than imports during the 2018–19 financial year, at 27,740 MMSCM.
• Domestic demand was expected to reach 25 million tons per annum (MTA) in 2020; however the disruption caused by COVID-19 could see this fall to 23 MTA.
• LNG is imported through Open General License (OGL) in India by the gas marketer under various long-term, medium-term and spot contracts. The price and utilisation of imported LNG is mutually decided by buyers and sellers.

In recent years, India has been unable to import large volumes of natural gas owing to inadequate import infrastructure, and limited storage and distribution networks. As a result, usage is limited. Currently, India uses LNG as a feedstock in the manufacturing of fertilizers, plastics and other commercially important organic chemicals. It is also used as a fuel for electricity generation, and for heating purposes in industrial and commercial units. LNG is also used for cooking in domestic households and as a transportation fuel for vehicles.

In the 2018–19 financial year, total domestic gas production was about 90.05 million metric standard cubic meters (MMSCMD)[iv]. Domestic LNG is supplied from oil and gas fields located in western and southeastern areas (including the Hazira Basin, the Mumbai Offshore Basin and the KG Basin) as well as the northeast region (Assam and Tripura). LNG is supplied and distributed according to government guidelines, which cover pricing and utilisation.

LNG infrastructure in India

The further development of LNG infrastructure is vital if LNG is to fulfil growing demand and complement domestic production. As in most parts of the world, gas reserves and natural gas consumers are geographically separated. The Ministry of Statistics and Programme Implementation (MoSPI) notes that 66.4 per cent – or 988.9 billion cubic metres (BCM) – of domestic natural gas reserves are offshore and only 33.6 per cent – or 499.6 BCM – is on onshore^[v]. Consequently, massive infrastructure development is required to transport natural gas from offshore production sites to consumption centres. This includes new processing platforms, offshore pipelines, cross-country pipelines and distribution pipelines.

LNG terminals

The west coast of India has three principal terminals, two in Gujarat and one in Maharashtra. These terminals account for approximately 75 per cent of India's overall import capacity. The Dahej terminal is owned by Petronet LNG Limited and the Hazira terminal is owned by Royal Dutch Shell and Total Gaz Electricite. Both are being expanded.

Besides these two terminals, a third at Mundra – also in Gujarat – is owned jointly by Gujarat State Petroleum Corporation (GSPC) and an Indian conglomerate, the Adani Group. The Indian Oil Corporation also owns a terminal at Ennore, near Chennai on India's east coast. GSPC's LNG terminal at Mundra and Indian Oil's Ennore LNG terminal were both commissioned in 2018–19 and are now ready for operation^[vi].

Besides existing regasification terminals, about 35.5–36.5 MMTPA of LNG regasification infrastructure is currently being planned or is under construction by various developers. It is important to note that some of these planned developments are still subject to technical and commercial feasibility studies. A table below includes all existing and planned LNG terminal infrastructure in India:

LNG terminal infrastructure in India

Source: Ministry Of Petroleum and Natural Gas, Government of India

LNG pipelines

To ensure adequate availability and an equitable distribution of LNG, the Government of India envisages an interconnected 'National Gas Grid.' India has a relatively under-developed gas pipeline infrastructure compared to developed countries. At present, India has 16,788km of pipeline, which the government wants to increase to 30,000km to ensure continuous nation-wide supply. This means approximately 12,678km of extensions are required to complete the planned National Gas Grid. The accompanying map shows current pipelines, as well as those that are planned or under construction[vii].

According to the Petroleum Planning and Analysis Cell, which is part of the Ministry of Petroleum and Natural Gas[viii], natural gas is primarily sourced domestically from KG-D6, the Mumbai Offshore Basin, the Cambay Basin, Ravva Offshore, the KG Basin and the Cauvery Basin, and then imported through various terminals.

There are three major pipeline entities engaged in natural gas transportation in India and two smaller entities. The principal organisations are GAIL (formerly, the Gas Authority of India Limited); Reliance Gas Pipeline Limited (RGPL); and Gujarat State Petronet Limited (GSPL) State-owned GAIL is by far the largest (see below).

Major gas pipeline companies in India

Major gas pipeline networks in India

Source: Pipeline Operating Companies, Compiled by Petroleum Planning & Analysis Cell, Government of India

Proposed gas pipeline projects in India

City gas distribution networks

Authorisation to develop a city gas distribution (CGD) network – including a piped natural gas (PNG) network – falls under the Petroleum and Natural Gas Regulatory Board (PNGRB) Act 2006. The CGD sector takes gas in two different forms:

• Compressed Natural Gas (CNG), which is predominantly used as auto-fuel
• PNG, which is used in domestic, commercial and industrial segments.

Regulations concerning authorisation for CGD networks and related bidding processes were amended in 2018. The revised regulatory framework attracted more involvement from the public and private sector in CGD networks. This has led to a planned expansion in CGD coverage to 228 geographical areas (GAs) spread over 406 districts in India. This expansion has the potential to cover about 53 per cent of India's geography and 70 per cent of India's population.

To promote the development of the CGD network, the Government has accorded priority to CNG and PNG in terms of domestic gas allocation. It has been decided to meet 100 per cent of the gas requirement for CNG (transport) and PNG (domestic) through the supply of domestic gas, which is cheaper than imported gas. At present, the CGD sector consumes approximately 14.4 MMSCMD of domestic gas for CNG (Transport) and PNG (Domestic). Around 10.9 MMSCMD of imported re-gasified liquefied natural gas (RLNG) is used by commercial and industrial customers within CGD networks^[ix].

Opportunities for Australian businesses

India currently imports LNG from Australia on long-term contracts. The Government of India allows 100 per cent foreign direct investment (FDI) into oil and gas in the following areas:

• Exploration activities in oil and natural gas fields
• Infrastructure related to the marketing of petroleum products and natural gas
• The marketing of natural gas and petroleum products
• Petroleum product pipelines and natural gas pipelines
• LNG regasification infrastructure
• Petroleum refining – subject to existing sectoral policy and regulatory frameworks.

Current project opportunities in the LNG sector

Source: Invest India

In addition, there are collaborative opportunities in India for Australian LNG operators, and services and equipment providers:

• Long-term technology, and research and development partnerships with Indian LNG companies
• Capacity-building partnerships with Indian technical training institutions in the LNG sector.

Opportunities for Australian businesses

Route-to-market insights

India is a relationship-driven market and finding the right partners will be the key to success.

A market-entry strategy must include an understanding of business culture, market-entry structures, a plan to find the right partners, and the insights to prioritise stakeholders and networks. It also requires an understanding of legal considerations.

Having a local partner in India is advantageous if not essential – though this could take the form of a distribution or an agency agreement. A local partner will have relevant in-market intelligence and contact networks, and can act as your eyes and ears on the ground.

Alternative approaches may include participation in exhibitions and specially curated business fact-finding missions, when COVID-19 restrictions allow. Such opportunities may provide a platform to network with key stakeholders across the value chain.

Austrade is well-positioned to assist and guide Australian businesses who want to investigate or enter India's LNG infrastructure market and its related value chain.