A robust gas pipeline infrastructure plays a pivotal role in facilitating the transportation of natural gas and connects the resources to gas-consuming markets. The development and structure of gas markets are primarily determined by the gas pipeline grid. For these reasons, it is essential for a country to build a well-connected gas pipeline network. In line with this objective, the Indian government has envisaged an interconnected National Gas Grid to ensure the adequate availability and equitable distribution of natural gas across the country.
As of June 2023, the country’s operational natural gas pipeline network spanned more than 23,000 km. In order to make natural gas available across the country, an additional 12,000 km of pipelines are under construction to complete the National Gas Grid. This expansion will ensure the easy availability of natural gas across regions and also help achieve uniform economic and social progress.
Global scenario
According to Pipeline Infrastructure Limited, 59,000 km of natural gas pipelines are under construction globally. An additional 151,000 km of gas pipelines have been proposed. The length of natural gas pipelines under development is growing at a rate of 9 per cent annually. Globally, gas pipeline construction is being led by China and India, with around 18,000 km and 12,000 km of pipelines under construction, respectively. These are followed by Pakistan, Iran and Russia.
Pipeline infrastructure in India
With the aim to create a National Gas Grid (One Nation, One Gas Grid) and increase the availability of natural gas
across the country, the Petroleum and Natural Gas Regulatory Board (PNGRB) has authorised a natural gas pipeline network spanning about 33,753 km across the country (as of June 2023). Of this, 23,478 km of pipelines, including spur lines, tie-in connectivity, sub-transmission pipelines and dedicated pipelines, are operational. At present, the gas pipeline network serves western and northern India while the eastern and southern regions are yet to be integrated with the National Gas Grid. The ongoing pipeline expansion is based on the gas demand assessment of various regions. The pipeline grid is expected to support the growth of city gas distribution (CGD) projects in addition to enhancing access to clean energy. Further, the country’s pipeline density is expected to double with the addition of nearly 12,000 km of under construction gas pipelines. Many gas pipeline projects (totalling approximately 6,000 km) are also facing delays. These projects have been under execution since 2016 or earlier.
Despite the demand, natural gas pipelines in India are currently underutilised, resulting in tariff under-recoveries and affecting the pace of investment. According to industry experts, hydrogen blending has the potential to increase the utilisation rates. Several players, including Pipeline Infrastructure Limited, are preparing for hydrogen blending in their pipelines. Pipeline Infrastructure Limited is expected to implement one of the first hydrogen blend-related projects in the transmission sector.
Key recent developments
In August 2023, Indradhanush Gas Grid Limited (IGGL) and GAIL (India) Limited signed an agreement to connect the North-East natural gas pipeline to the Barauni-Guwahati natural gas pipeline at Jalpaiguri in West Bengal, and Baihata and Panikhaiti in Assam, making the North-East pipeline a part of the National Gas Grid. The interconnecting pipeline will be laid out by GAIL (India) Limited at an estimated cost of Rs 151.6 million. The North-East natural gas pipeline grid involves the development, operation and maintenance of a 1,656 km long natural gas pipeline connecting eight states – Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura at an investment of Rs 92.65 billion. Besides, 75.52 per cent work has been completed on the North-East natural gas pipeline grid project.
In another important development, the gas supply in Guwahati is likely to commence by December 2023 via the Barauni-Guwahati natural gas pipeline. Once commenced, it will link Assam with the National Gas Grid. Meanwhile, in July 2023, PNGRB granted authorisation to GAIL (India) Limited for the development of the Gurdaspur-Jammu natural gas pipeline project. The bids for the project were invited by PNGRB in January 2023.
Pain points
The government has taken various measures to increase the share of natural gas in the country’s energy mix. These include the expansion of the national gas grid pipeline, expansion of the CGD network, setting up of liquefied natural gas (LNG) terminals, and allocation of domestic gas to compressed natural gas (transport) and piped natural gas (domestic) sectors.
However, the development of the pipeline network is facing several issues such as regional disconnects between pipelines and the disconnect between Southern India and the National Gas Grid. Apart from this, the significant amount of funding and capital investments required for pipeline construction also pose a challenge. The sector requires viability gap funding (VGF) due to high initial investments. Other issues that hinder progress include the lack of provisions for right of way, land acquisition issues, delays in statutory clearances, uncertainty around development of anchor customers and CGD infrastructure, all of which lead to time and cost overruns, thereby impacting the overall expansion of the pipeline infrastructure. Bureaucratic bottlenecks also impede progress. The fluctuating gas demand makes it challenging to plan and justify the necessary investments. Apart from this, the lack of standardisation in contractual provisions hampers pipeline development.
The road ahead
According to GAIL (India) Limited, the global gas demand is expected to remain steady in 2023, and witness a moderate growth of 2 per cent in 2024. The rapidly growing markets in the Asia-Pacific region are expected to account for around 80 per cent of the incremental gas demand by the end of 2024. Meanwhile, India’s natural gas demand is expected to increase at a compound annual growth rate of 8 per cent during 2022-30, primarily driven by CGD, industries and the road transport sector.
Going forward, the government plans to invest Rs 7.5 trillion in the development of the oil and gas infrastructure in India over the next five years. Of this, 40 per cent, roughly Rs 3 trillion, will be used for building gas infrastructure including pipelines, LNG terminals and CGD networks.
According to industry experts, the rapid execution of gas pipeline projects is essential for meeting the increasing demand. It is critical to address the non-equitable distribution of the cross-country pipeline network and LNG terminals in a timely manner to fully leverage their potential. Further, initiatives such as government policies that include VGF for cross-country pipelines, single-window clearances and accelerated asset monetisation are expected to expedite the creation of natural gas infrastructure. To address the capital-intensive nature of these projects, there is a need to promote the participation of private operators and international investors in India’s gas infrastructure development, especially with 100 per cent FDI. For the expeditious and timely development of the National Gas Grid, coordinated efforts are required by stakeholders across the natural gas value chain, complemented by government support.
