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Rediff News  All News  » Business » India prepares for shift to gas-based economy

India prepares for shift to gas-based economy

April 27, 2009 09:15 IST

* In a few years, households receiving piped gas at home can use a fuel cell unit to produce power and heat, which can also be used to chill homes during summer. The fuel cell unit also produces hydrogen, which can be stored and used to run a motorcycle.

* Residents of an apartment or a colony can come together to buy a micro gas engine or a gas turbine that can power an entire apartment, office complex or industrial estate.

* Once gas is available in a large number of cities, city buses could switch over to compressed natural gas (CNG) as would many private cars. Malls, offices, hospitals and restaurants could be directly chilled by gas, using vapour absorption chillers.

Welcome to India's new gas economy. As gas supply increases and distribution infrastructure (cross-country pipelines and piped gas in cities) falls in place, India will transit from an oil-based economy to a gas-based one, says former head of the Directorate of Hydrocarbons, Avinash Chandra. He estimates that India will find at least 200 trillion cubic feet of gas from the country's east coast alone.

Reliance Industries, which has started producing gas from its D6 block on the east coast, will produce 40 million cubic metres per day or 235,230 barrels of oil equivalent a day by July, and double this by end-2009. This will take care of the deficit, as there's demand for 200 million cubic metres per day of gas (1.2 million BOE per day) against available supplies of 110 million cubic metres per day (647,432 BOE per day).

Two other companies, GSPC and ONGC, which also struck gas on the east coast, will bring in an additional 40 million cubic metres per day by 2012. In India, the fertiliser and power sectors account for 80 per cent of the demand for gas, which will continue. But as gas supplies increase, supply to other sectors like refining, petrochemicals, steel, industrial and city gas distribution will increase substantially.

There is a large unmet demand for power in India which will promote the use of gas for distributed generation (like DG sets we see in office blocks). But gas engines can be costly: a micro turbine costs around Rs 8 crore (Rs 80 million) per mega watt. "Everyone need not buy a turbine. An industrial estate or a business district can do so,'' says an expert. 'Need not' would read 'cannot' or 'should not' at these prices, even for business districts. Price, as we shall see, is key, and we're still waiting for technology innovation.

New gas-based applications are being developed. "The development of fuel cells can meet the total energy requirement of a household through generation of power, hydrogen and hot water from gas,'' says PMS Prasad, President & CEO (petroleum), Reliance Industries. Efforts are on to drive down the cost of fuel cells. Similarly, there's huge potential to use gas as CNG, which is cheaper and cleaner than liquid fuels.

A network of pipelines is emerging in the country. Reliance has laid the East-West pipeline, which connects to the HBJ and other regional networks. GAIL is expanding the HBJ network to the north and east. Next, Reliance and GAIL will lay pipelines in the south and along the east coast. Thus, India will have a quadrilateral of pipelines, all interconnected; a pipeline grid will further spur investments upstream.

Similarly, piped gas would be available in many cities soon and the government plans to issue licences for 74 Indian cities in phases. Once the city gas networks come up, gas could be sold to any new industrial unit, malls, offices, vehicles or homes. Deepak Mahurkar, associate director, PricewaterhouseCoopers, though feels it would take two-and-half years for a new city to get gas but existing city gas networks can expand much earlier.

Equipment makers are warming to the opportunity. Maruti Suzuki will launch CNG variants for three or four of its car models by 2010 or 2011. Many cars in Delhi and Mumbai already run on CNG. Tata Motors will soon launch CNG variants for trucks and Tata Magic, the passenger vehicle built on the Tata Ace platform. Its buses and small and light commercial vehicles are already available in CNG variants.

In Mumbai, geysers are available which run on gas. Thermax and Voltas make gas-fired vapour absorption chillers, used in malls, restaurants, theatres and offices. The smallest of these is of 15 tonnes of refrigeration, which can cool an area of 1,900-2,000 sq ft. The initial costs of Rs 12-13 lakh (Rs 1.2-1.3 million) for a 15 TR will be a deterrent, but it does cut operational energy costs by half.

Which brings us back to cost and pricing. Pinaki Bhaduri, head of strategy, Thermax, says the demand for gas will be a function of its price. ''If gas is priced at Rs 22 a kg, power generation doesn't make sense. It makes sense if the price is Rs 7-8 per kg. That will be a key driver for the growth of India's gas economy."

Ranju Sarkar in New Delhi