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Addressing Increasing Natural Gas Demand

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March 17, 2018

What is the issue?

  • Most of the developed countries has a surge in Liquefied Natural Gas demand due to various reasons.
  • Even in India there is increasing energy consumption, India need to create infrastructures for serving this purpose.

What is the status of LNG demand globally?

  • Natural gas plays a major role in developed economies as a clean energy source.
  • An Arctic blast recently lowered temperatures across the European Union (EU) and the UK, which flared up gas prices to a 12-year high in the UK markets.
  • Significantly, citing supply outage for price surge, a key storage facility was shut down, which accounted for more than 70% of the UK’s total gas storage capacity, in its coverage.
  • In USA for past two decades there is a fluctuating demand for natural gas amidst relatively constant production levels.
  • In these developed economies there is a need for an ability of the market mechanism to ensure utilities and consumers with the supply of natural gas at market clearing prices.

What measures were taken to tackle demands?

  • US Natural Gas Market’s developed a competitive deregulated market supported by necessary market infrastructure to neutralise fluctuations in gas prices.
  • LNG storages units played a significant role in curtailing volatility in the natural gas markets arising out of weather fluctuations.
  • Enhanced transportation capacities also played a key role in ensuring round-the-clock availability of natural gas to domestic and industrial consumers.
  • Open access mandate also led to the development of markets for gas storage with the ability of the players to reap arbitrage opportunities.

What is the demand of natural gas in India?

  • With the government’s active pursuit of developing India as a gas-based economy, India’s gas imports (in the form of liquefied natural gas, or LNG) have been increasing supported by lower prices.
  • Gas imports during FY17 have nearly doubled from imports seen in FY11.
  • Estimates that LNG imports are expected to continue grow by 10% annually over the next five years, overtaking domestic production in 2019.

What measures needs to be taken by India to exploit LNG?

  • India has already started its efforts towards boosting domestic gas production and exploring transnational gas pipelines under projects like Urja Ganga.
  • The development of a distribution network will increase accessibility to the cleaner source of energy.
  • Development of storage facilities is equally critical to smoothen out the differences between unstable demand and supply situations.
  • Consequently, availability of adequate storage facilities will help even out market volatility, besides maintenance of operational integrity of the pipelines, by ensuring that pipeline pressures are kept within the design parameters.
  • About 90% of the industry respondents in India support the ‘carrier first, commodity later’ principle as the approach for gas sector development.
  • In India enabling regulations must play an active role in promotion and development of infrastructure facilities such as pipelines and storage facilities to meet the forecasted growth of the sector.
  • Thus for the successful transformation of the proposed natural gas markets there is a dire need for supporting infrastructure with optimum transparency and neutral outlook.

 

Source: Financial Express

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