Owing To Political Risk In Middle East And Growing Domestic Demand, India To Build Strategic Gas Reserves

After oil, India is set to build strategic reserve of natural gas, to further strengthen country's energy security and shield itself from supply disruptions coming from perennial political risk in the prime energy supplying countries in the Middle East and Africa.

The reserve will also help the country cope with demand spike and price rise in the event of border skirmishes and war like situation that played out with Pakistan recently. For building strategic gas reserve, the plan is to inject depleted gas fields with the fuel or develop storage in large salt caverns.

The plan for strategic gas reserves emerges from an official study that suggests that consumption of natural gas would grow two-folds by 2030 resulting in large gap between demand and domestic production. This would increase imports of gas and take it closer to levels of oil imports, where the country has depend on overseas supplies to meet over 80 per cent of domestic consumption. At present, almost of half of domestic consumption of natural gas is met from imports.

The suggestion for building strategic gas reserve has also come from Niti Aayog that is finalising a national Energy Policy. The policy draft has made a case for a gas storage required, if consumers have to be assured of un-interrupted supplies.

Official sources said that a panel in the petroleum and natural gas ministry is currently studying various suggestions for building the gas reserve and will take a call on the matter soon after report of experts on the issue come. It also plans to hire consultants to evaluate options.

It is expected that natural gas reserve would rely more on private sector to build gas storage capacity. In this regard, depleted oil and gas fields of national oil companies (NoCs) will be offered on competitive basis to interested gas marketers, both for strategic and commercial storages. A policy in this regard may be formulated by the oil ministry.

Also, other options like salt caverns and aquifers would also be explored to build strategic gas reserve. Once the storage is identified, bids would be invited to use the storage. Overseas gas producing companies may also be offered stake in such storage as is being done in the case of strategic oil reserve.

The storage facility may be chosen close to the pipeline infrastructure so that the fuel can be easily used in times of need.

"The strategic gas reserve would work well for the country as it would ensure uninterrupted fuel supply to key infrastructure projects. However, the cost structure for storage should be such that fuel price for customers is kept low. Close to 25,000 MW of gas based power projects are either under stress or functioning at very low capacity due to shortage of gas," said a power sector analyst not willing to be named.

For India strategic storage of gas would work well also because the domestic gas production has remained stagnant for past few years. In the current fiscal (FY20), upto September while gas production has declined by 1.5 per cent, LNG imports has risen 7.9 per cent.

India already has operational 5.33 million tonne underground strategic oil reserve facility at Vishakhapatnam, Mangalore and Padur. This is also being further expanded to augment strategic oil reserves facility with 90-100 days stock.

The idea about strategic gas reserve is not new to India. Several heavy energy consuming countries have build storage to ensure supply security. US has almost a third of global gas storage while Russia, Ukraine, Canada and Germany together account for another big chunk. China, also has gas storage facilities.

(This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.)