A sprawling liquefied natural gas terminal on India’s scenic southern coast stands testament to the country’s efforts to curb its coal addiction — and to its limited success.
Underutilized since it opened just over a decade ago, Petronet LNG Ltd.’s Kochi facility is all but silent. Last year, it operated at barely a quarter of its intended capacity, stranded by a lack of pipelines to ship fuel to towns and industrial centers across the region. It’s a story that repeats itself across the world’s most populous nation.
India’s infrastructure shortfalls have a long and complex list of causes, from uncertain returns that deter investors to local residents’ resistance, to high gas prices and an unfavorable tax regime.
All have hampered Prime Minister Narendra Modi’s desire to embrace gas — and threatened ambitious plans drawn up by producers like Shell Plc and TotalEnergies SE, which have invested billions of dollars in new gas supply with an eye on selling more to India.
“The pipeline network has some major missing gaps, which we need to plug,” Anil Kumar Jain, chairman of the Petroleum and Natural Gas Regulatory Board, told a New Delhi conference on India’s gas prospects last month. A regulatory panel is working on policies to make pipeline investments more lucrative, he said.
India aims to more than double the share of gas in its energy mix to 15 per cent by 2030, but for about a decade the share has remained static at less than half that level — a headache that will be top of the agenda for attendees gathered at India Energy Week in Delhi from Tuesday.
Hitting the target would require gas consumption to rise threefold to 600 million standard cubic meters a day, according to Observer Research Foundation, a New Delhi-based think tank. It will also require $67 billion of investment into everything from new pipelines to import terminals and last mile connections.
“This is a subject for all of us to contemplate — can India move from 6 per cent to 15 per cent? Can we help to reduce our emissions and march towards net zero if we do not have a vibrant gas market?” Jain said.
India currently uses roughly half of a nearly 23,573 kilometer-long gas pipeline network. Even that total capacity, though, can transport only about 60 per cent of the volumes the country needs in order to hit its gas consumption target by the end of the decade, Gajendra Singh, a member of the Petroleum & Natural Gas Regulatory Board, said this month.
Many of the pipelines are also idle due to a lack of last mile connectivity. Of the nearly 300 retail gas distribution areas auctioned to companies, about a quarter are not connected to the national trunk lines carrying gas from the domestic fields or the import terminals, dampening demand for the fuel.
All of this means that terminals built to receive inbound shipments are struggling. Only one of India’s LNG import facilities runs at full capacity — Dahej, in the western state of Gujarat. The six other plants which were online for the whole of last year ran at an average rate of only 29 per cent, according to BloombergNEF data. The global figure is closer to 40 per cent.
Pipe dreams
State-run Gail India Ltd.’s dominance in gas supplies and transport infrastructure is one concern often cited by developers and blamed for delays.
Getting access to land may be an even bigger headache. A pipeline connecting Gujarat and Punjab is now years behind schedule, in part because of access to land. To lay just 69 kilometers, a fraction of the total, developers have had to negotiate with 4,150 landowners across 26 villages, Deputy Petroleum Minister Suresh Gopi told lawmakers in December. Work began in 2011, but only a fifth of the pipeline is complete.
Regulators terminated a separate project in the southern state of Andhra Pradesh as the developer struggled with approvals and land permits. Nearly 96% of the nine key gas pipeline projects under construction in September had missed their target date of completion, government data show.
Landowners are holding back in part over safety fears, after several accidents in recent years. In June 2014, an explosion followed by a fire at Gail’s gas pipeline in Andhra Pradesh killed 21 and injured 18 people. The accident caused damage to nearby houses, tea stalls and coconut trees spread over a radius of 50 meters. In 2023, a pipeline blast in Bengaluru injured at least three people.
Change will not come swiftly for India’s LNG industry, with imports still struggling to rise above a 2020 peak. While the nation was the world’s fourth-biggest buyer last year, imports for January fell 12% year-over-year after a surge in spot prices made alternatives — like oil products — more attractive.
India’s focus on self-reliance is also holding back government enthusiasm for a fuel it will have to bring in from abroad — and may ultimately put a cap on demand.
“India has significant resources of coal which is much cheaper. Now renewables are much cheaper. On the other hand higher gas use will increase dependence on imported LNG,” said Manas Majumdar, who leads consultancy PwC India’s oil and gas practice. “While gas use will grow, its share will likely rise to about 10% of the pie by 2030. The 15% target has always been an aspiration.”
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