Ensuring adequate gas supply should be national priority: McKinsey
Even as the country is debating the desirability of India-US nuclear agreement, a recent independent study has proposed that both nuclear power and securing adequate natural gas should be India’s national energy priority.
By ET Bureau |
NEW DELHI: Even as the country is debating the desirability of India-US nuclear agreement, a recent independent study has proposed that both nuclear power and securing adequate natural gas should be India���s national energy priority.
The study, Powering India, the Road to 2017, by McKinsey & Company emphasised that given India���s proximity to the Middle East which has the world���s largest gas reserves, regional pipelines were the most economically viable transportation solution to bring gas into the country.
It pitched for New Delhi pursuing key regional pipelines such as Iran-Pakistan-India and Myanmar-India , even while geopolitical priorities are being kept in mind. ���These (the two pipelines) together can provide 110 to 140 mmscmd of gas annually, significantly augmenting supply. Other pipelines such as those from Turkmenistan and the undersea pipeline to the Middle East should also be evaluated,��� the report added.
It may be noted that in response to the Left parties��� charge that the government has caught cold feet on the over $7-billion pipeline, the UPA government has recently said that the trilateral talks between Iran, Pakistan and India in this regard would resume in the next few weeks.
The McKinsey report threw light upon the fact that lack of easy access to fuels like coal and natural gas is a serious impediment because of ���local factors��� . ���This (local factors) not only hamper capacity addition efforts but also inhibits the full use of existing capacity. Despite large coal reserves , domestic coal production continues to lag behind demand and consequently imports continue to grow,��� it said.
As regards nuclear power, the report said it was becoming an area of focus across the world because it is environment-friendly and economical. Nuclear power has the potential to fulfil a significant share of demand beyond 2017, the report said, but added that achieving this will require access to uranium supplies and accelerating fast breeder reactor programme, a view that buttresses the rationale behind India-US nuclear deal.
The study, Powering India, the Road to 2017, by McKinsey & Company emphasised that given India���s proximity to the Middle East which has the world���s largest gas reserves, regional pipelines were the most economically viable transportation solution to bring gas into the country.
It pitched for New Delhi pursuing key regional pipelines such as Iran-Pakistan-India and Myanmar-India , even while geopolitical priorities are being kept in mind. ���These (the two pipelines) together can provide 110 to 140 mmscmd of gas annually, significantly augmenting supply. Other pipelines such as those from Turkmenistan and the undersea pipeline to the Middle East should also be evaluated,��� the report added.
It may be noted that in response to the Left parties��� charge that the government has caught cold feet on the over $7-billion pipeline, the UPA government has recently said that the trilateral talks between Iran, Pakistan and India in this regard would resume in the next few weeks.
The McKinsey report threw light upon the fact that lack of easy access to fuels like coal and natural gas is a serious impediment because of ���local factors��� . ���This (local factors) not only hamper capacity addition efforts but also inhibits the full use of existing capacity. Despite large coal reserves , domestic coal production continues to lag behind demand and consequently imports continue to grow,��� it said.
As regards nuclear power, the report said it was becoming an area of focus across the world because it is environment-friendly and economical. Nuclear power has the potential to fulfil a significant share of demand beyond 2017, the report said, but added that achieving this will require access to uranium supplies and accelerating fast breeder reactor programme, a view that buttresses the rationale behind India-US nuclear deal.
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The report admits that situation concerning gas is worse than other cases. At present, most existing plants do not get the required supply and, as a result, operate at either low plant load factors (PLFs) or use relatively expensive fuels like naphtha. This explains why only a few gas-fired plants have achieved financial closure in the recent past.
Ensuring easy and quick access to coal and gas supplies is critical, the report said. The report said even if all the hydro potential in India is captured, the country would still need 120 mmscmd of natural gas by 2017. ���Even at the current liquid natural gas contract price of $10 to $12 per mmbtu, gas-fired peaking power is an economical alternative to diesel-based power.���
India has estimated coal reserves of 300 billion tonnes and of this, 120 billion tonnes are extractable. ���If India is able to exploit its coal reserves, it can fulfil its coal requirement beyond 2040, despite a continuous acceleration in power demand. In addition, finding and developing prognosticated reserves could make available another 100 billion tonnes of extractable reserves. Opening up the coal sector to competition is critical for India to realise the full economic value of this natural resource,��� said the report.
Drawing attention to the success of the new exploration and licensing policy (NELP) in the oil and gas sector in identifying new reserves and bringing them to market, the report called for similar effort in the coal sector to improve its performance standards. It is essential that discovery and exploitation of coal reserves are augmented . Given that merchant mining is unlikely to materialise in the near to medium term, developing captive mines and building infrastructure to facilitate imports must be immediate priorities.
Highlighting the importance of captive coal blocks, the report said though several such blocks have been allocated, the pace of development has been slow. Cumbersome and complex approval and development processes and the tendency of some players to squat on the allocated reserves are the culprits. If allocated mines were developed to their full potential, coal supply would increase by roughly 40 million tonnes, a quantity sufficient to partially replace 53 million tonnes of import.
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As for development of captive mines, the McKinsey & Company report proposed measures such as adoption of single window mechanism to speed up mining-related approvals, firm time limits for development of blocks and creation of a body akin to the DG-hydrocarbons for the coal sector. It also said infrastructure to facilitate coal imports needs to be created. It said India would need 40 million tonnes of additional port, rail and handling infrastructure. Start a SIP with as low as ₹500 with ET Money App!
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