The oil and gas sector has shown modest growth over the past year. The sector has undertaken various clean energy initiatives to reduce its carbon footprint, and the city gas distribution (CGD) sector has seen the uptake of digital technologies. India aims to increase the share of natural gas in its energy mix, thereby strengthening the country’s energy security. Industry experts comment on the progress in the oil and gas sector, digitalisation and automation trends, the key challenges and the sector outlook…
What has been the progress in the oil and gas sector over the past one year? What have been the key achievements/milestones?
Suresh Manglani ED & CEO, Adani Total Gas Limited
The Government of India has set a target of increasing the share of natural gas from 6 per cent to 15 per cent by 2030, with the objective of lowering greenhouse gas (GHG) emissions and diversifying the country’s energy basket. The entire country (except islands) has been covered by a CGD network spread over 305 geographical areas (GAs), thus paving the way for the government’s vision of providing natural gas access to each citizen. The success of the 9th, 10th, 11th and 12th bidding rounds has amply shown that the industry is ready to invest in the sector based on the government’s policies and clear focus on increasing the share of domestic gas in the country’s energy basket.
Natural gas consumption in the country, having increased by 12.5 per cent year on year in 2023-24, has breached the previous high set in 2011-12 after nearly a decade of stagnant demand. This stagnation was due to a combination of factors, such as reduction in domestic production, high volatility in international gas prices, the recessionary effects of the Covid-19 pandemic and availability of low-cost inferior fuels.
The major consumer segments that contribute to the bulk of the natural gas demand include fertilisers, CGD, power, petrochemicals and refineries, of which the CGD segment has shown the fastest growth over the past decade, with a CAGR of 12 per cent.
Akhil Mehrotra MD, Pipeline Infrastructure Limited
One of the core sectors, impacting many aspects of the Indian economy, is the oil and gas sector. India’s energy demand is projected to increase at around 3 per cent per year by 2040, which is higher than the global rate of 1 per cent. Moreover, 25 per cent of the global energy growth between 2020 and 2040 is expected to come from India because of its rapid economic and demographic changes.
The Indian oil and gas sector has made significant progress in 2023-24, marked by several key milestones and achievements:
- India’s operational natural gas pipeline length has increased by 6 per cent to 24,921 km. Further, about 10,789 km of natural gas pipelines are under execution. With the completion of these pipelines, the national gas grid will be completed, connecting all major demand and supply centres in India.
- The number of liquified natural gas (LNG) terminals has increased to seven, with a total capacity of 48 million metric tonnes per annum.
- The implementation of the unified tariff mechanism is one of the biggest developments.
- The CGD network has expanded, thus making gas, particularly piped natural gas (PNG)/compressed natural gas (CNG), available to as many people as possible.
- Domestic natural gas production saw a notable increase, bolstered by new discoveries and enhanced recovery techniques in existing fields.
- The sector has made strides towards cleaner energy through measures such as the promotion of biofuels and hydrogen blending with natural gas, aimed at reducing its carbon footprint.
- The integration of artificial intelligence (AI) and machine learning (ML) technologies in exploration and production processes, as well as in pipeline integrity management systems, has improved efficiency and safety.
What has been the impact of the recent initiatives taken by the government?
Suresh Manglani
The implementation of the administered pricing mechanism on domestically produced natural gas (conventional fields) for priority segments such as CNG and domestic PNG was an attempt to bring some relief from the high gas prices precipitated by volatility in international gas prices.
Infrastructure availability is being addressed by an aggressive push for the development of cross-country natural gas pipelines, CGD networks and LNG import terminals.
The government is also incentivising the development of the compressed biogas segment, which has the potential to reduce dependence on imported energy and encourage a circular economy by converting agri- and municipal solid waste to energy.
Finally, the progress on the Indian carbon market, which is being established to reduce GHG emissions intensity, will go a long way in incentivising industrial units to adopt cleaner fuel and energy efficiency measures.
Akhil Mehrotra
India’s oil and gas sector has been heavily reliant on imports, with 80 per cent and 50 per cent import dependency for oil and gas respectively.
Recent upstream milestones include the Hydrocarbon Exploration and Licensing Policy, the Open Acreage Licensing Policy, the National Data Repository, the Discovered Small Field Policy, reduction in the number of “no go” zones, and marketing and pricing freedom for natural gas.
Due to the increased focus on the development of CGD, from just 66 districts in 2014, the CGD network now covers 630 districts, taking the number of domestic PNG connections from a mere 2.54 million in 2014 to a whopping 13.12 million currently.
The development of the national gas grid, consisting of all major interconnected cross-country pipeline networks, and the advent of the unified tariff regime have been landmark developments for the natural gas pipeline segment. They were long overdue, and it is now expected that gas will be accessible to every consumer across the country at affordable rates, thereby increasing demand and pipeline capacity utilisation.
The establishment of the gas exchange has also been a key development in the sector in recent times.
What are the digitalisation and automation trends in the sector? What are the key initiatives?
Suresh Manglani
The CGD sector operates on a business-to-consumer concept. In order to ensure that businesses run efficiently and effectively, technology adoption is a must. Implementing digital innovations has gone from being an option to becoming a necessity.
To give an example, Adani Total Gas Limited (ATGL) has progressively embraced digitalisation and developed the “SOUL platform”, aiming to standardise and automate multiple operations across the company. It is a one-of-a-kind initiative facilitating the transition from applications to a digital business platform, catering to all aspects of ATGL’s CGD, electric vehicle and biomass businesses. Integrating all businesses with SOUL will lead to a transformation of efficiencies, helping enhance business key performance indicators and optimise costs. SOUL functions as an integrated business operations platform centre for monitoring the entire CGD network through supervisory control and data acquisition. It is a real-time monitoring platform that tracks gas usage, unaccounted gas, meter purchases, driver management systems, vehicle tracking systems, etc. Further, with digitally driven initiatives such as No Automation No Operation, ATGL is rapidly digitalising its internal business and management processes, building capacity.
Akhil Mehrotra
Digitalisation and automation are rapidly transforming India’s oil and gas sector. AI and ML are increasingly being used for predictive maintenance, anomaly detection and optimisation of operations. The use of big data analytics is growing, enabling companies to gain deeper insight into operations, streamline processes and improve efficiency. The adoption of internet of things (IoT) sensors and devices is enabling real-time monitoring and control of assets such as pipelines, refineries and rigs. Digital twin technology is being used to create virtual replicas of physical assets, enabling real-time simulations, predictive analytics and performance monitoring. The shift towards cloud-based solutions is facilitating scalable data storage, processing and collaboration across the sector. Advanced cybersecurity measures are being implemented to protect critical infrastructure and sensitive data from cyberthreats.
What are some of the key challenges?
Suresh Manglani
One of the key challenges is delays in obtaining the permissions required for setting up CGD infrastructure, which often needs approvals from more than 20 departments. There is a need for a uniform CGD policy, to establish streamlined approval processes, with ease of doing business initiatives such as single window clearance, moving from permit-to-dig to intimate-and-dig, and uniform/rationalised fees and charges.
Further, as natural gas is not under the goods and services tax (GST) regime, there are issues such as the cascading effects of multiple taxes (VAT sale, excise on compression and GST on transportation), making it less competitive than alternative fuels.
Finally, due to the limited availability of domestic gas, the average gas cost for non-residential consumers is volatile and higher than that of alternative fuels, and the share of domestic gas is consistently declining.
Akhil Mehrotra
- Lack of private investments: Currently, the majority of common carrier pipelines in India are owned and operated by government public sector undertakings, whereas in the upstream and downstream sectors there is a reasonable share of private sector funds. The limited participation of private entities in the midstream necessitates a review of regulatory provisions such as authorisation regulations, transporters holding all the volume risk, and no assurance of minimum annualised returns.
- Economic viability: On the gas pipeline front, allowing the laying of dedicated pipelines fed by sources along a common carrier pipeline is one of the major factors affecting the viability of common carrier pipelines that are already laid or being laid, apart from the total volume risk mentioned previously. With regard to commodities, the competitiveness of natural gas vis-a-vis other energy sources, particularly renewable energy, is a concern. Renewable energy, especially solar, has become the lowest cost option for setting up new electricity capacity.
- Multi-tax regime: Gas as a commodity is treated on a value added tax basis, while transmission services and certain consumers are under the under the GST regime. It is suggested that a uniform tax regime be instituted, and that gas be included in the GST regime, to enable seamless transactions.
- Availability: The high gas price in India limits the ability of customers to shift from coal power to natural gas as other countries have done. More than 50 per cent of the demand is met by costly and fluctuating imported gas. Thus, enabling and stable policy interventions must be considered and encouraged to promote natural gas as a fuel in the country.
- Right of use acquisition issues: Public opposition and land acquisition issues lead to project delays and cost overruns, eventually leading to inadequate infrastructure availability.
What is the sector outlook for the next one to two years? What are the capacity addition and investment plans?
Suresh Manglani
The Petroleum and Natural Gas Regulatory Board bears the mandate to enable the development of natural gas transportation and distribution infrastructure in the country. It is expected that, with CGD-authorised areas covering nearly 100 per cent of the country and the demand for natural gas from the power and fertiliser segments increasing continuously, gas consumption will rise.
For India to achieve its 15 per cent natural gas in the energy mix target by 2030, a radical shift is required in the way various sectors use energy. This needs to be driven by a combination of policy interventions, tax rationalisation, fiscal and non-fiscal incentives, long-term gas sourcing contracts, and stricter implementation of pollution control and air quality standards across the country.
For the promotion of PNG, it has been recommended that, at least in cities with mature CGD infrastructure, there should be a mandatory provision for the use of PNG in new constructions.
Further, micro, small and medium enterprises (MSMEs) should get incentives for using natural gas. This can be done through an incentive scheme or a direct benefit transfer, encouraging MSMEs to adopt natural gas. As per a study by ATGL, there is potential for an additional 100 mmscmd of gas to be used, should MSMEs adopt it. Adoption of new technologies such as smart gas meters will enable accurate and timely demand analysis and predictions, preventing redundancies and obsolescence as India moves quickly on the automation and digitalisation front.
Another segment that can substantially enhance the demand for gas is the transport sector. For medium and heavy commercial vehicles and mining equipment, LNG has emerged as a widely acceptable alternative to diesel as a decarbonisation solution. A recent report published by the Energy Transition Advisory Committee, formed by the Ministry of Petroleum and Natural Gas, has deemed LNG as a transitionary fuel for this segment for the next 10 to 15 years.
The next few years will prove to be pivotal for the natural gas sector in the country, requiring coherent and consistent efforts from all stakeholders – policymakers, regulators and industry alike.
Akhil Mehrotra
The outlook for India’s oil and gas sector over the next one to two years is optimistic, with considerable capacity additions and significant investment plans on the horizon.
Capacity additions
Efforts are ongoing under the “One Nation One Gas Grid” initiative, with plans to expand the gas pipeline network from the current 24,000 km to 35,000 km in the next few years. New LNG import terminals are being commissioned, with projects in states such as Gujarat, Odisha and Andhra Pradesh. These terminals will enhance the country’s LNG handling capacity and ensure a steady supply of natural gas. Major refinery upgrades and expansions are under way to increase refining capacity and improve the quality of petroleum products. The CGD network is being expanded to cover more geographical areas. The 11th CGD bidding round aims to extend PNG and CNG services to more cities and towns.
Investment plans
State-owned enterprises are planning substantial investments in exploration, production and infrastructure development. Private sector participation in oil and gas operations is expected to increase, particularly in pipeline infrastructure, LNG infrastructure, CGD networks and renewable energy projects.
The Indian government continues to encourage foreign direct investment in the oil and gas sector, expecting significant investments from global players. Investments in integrating renewable energy sources with traditional oil and gas operations are on the rise. Projects focusing on green hydrogen, biofuels and carbon capture and storage are expected to receive substantial funding.
Significant investments are being made in digital technologies such as AI, ML, IoT and blockchain to enhance operational efficiency, safety and sustainability. The focus will be on automating processes, improving data analytics capabilities and securing digital infrastructure.
Regulatory and policy support
Financial viability funding is being provided to increase private sector participation in natural gas infrastructure. Policy reforms continue to be aimed at simplifying regulations, ensuring ease of doing business, and providing fiscal incentives to boost exploration and production activities.
Government initiatives to support the development of the gas-based economy include subsidies, incentives for gas infrastructure projects and the rationalisation of the tax regime to include natural gas under the GST.
