India plans joint venture, PPP mode to build strategic gas reserve

India’s planned strategic gas reserve may come up as a joint venture of public sector companies or as a public-private partnership (PPP), two people familiar with the discussions said.

The reserve may be set up as a separate entity on the lines of the Indian Strategic Petroleum Reserve Ltd (ISPRL), which can store 5.33 million tonnes of crude oil at its underground facilities at Visakhapatnam, Mangaluru and Padur. Talks for a strategic gas reserve have gained momentum after the Russian invasion of Ukraine last year snapped supplies and drove up prices.

“It may be given to a public sector unit in the E&P (exploration and production) space to manage, which may form a joint venture. Public-private partnership is also being looked at,” one of the two people cited above said on the condition of anonymity.

Exhausted oil wells may be used as reserves to store liquified natural gas (LNG), or entirely new LNG infrastructure may be constructed, the second person added. New infrastructure would include more LNG terminals and large underground salt caverns.

“Either we can create a new LNG facility for storing the gas or use exhausted gas wells, where production has been stopped. But the problem with those wells is that there is a loss of efficiency. Only about 60% of the gas-filled into the well is recovered at the most,” the second person said.

Several countries have built gas storage systems to ensure supply security. The US accounts for nearly a third of global gas storage, while Russia, Ukraine, Canada and Germany together account for another major portion. China also has gas storage facilities.

Queries sent to a spokesperson for the Union petroleum ministry remained unanswered till press time.

India is likely to see a few more terminals come up, and locations around Haldia and Paradip ports on the east coast, among others, are being considered, the second person added. Currently, India has five LNG terminals at Dahej, Hazira, Dabhol, Kochi and Ennore. A floating LNG terminal is also coming up at Jaigarh in Maharashtra. The Kochi LNG terminal is yet to be connected to others through the national gas grid, and once connected, that would also boost LNG supplies across the country, the person added.

Developing a strategic LNG reserve would take several years, and gas companies would also wait for international prices to cool before filling these reserves. Indian companies have long-term LNG contracts amounting to 22 million tonnes per annum. The quest for securing LNG supplies accelerated after Russia’s Gazprom defaulted on promised supplies to GAIL in May, prompting a chase for supplies across the globe and turning towards expensive spot purchases. Gazprom stopped supplies as spot prices of gas far outpaced the price pegged under long-term contracts. Other state-run oil and gas companies have also enhanced their efforts to secure more and more long-term contracts for LNG.

India imports 85% of its energy needs, and it is the fourth-largest LNG importer. On 26 January, Mint reported that state-run Indian Oil Corp. Ltd and GAIL are in talks with the UAE’s Abu Dhabi National Oil Co. for a long-term LNG supply deal. India is also planning LNG pipeline connectivity with Myanmar, and Bangladesh.

The ISPRL is a wholly owned subsidiary of the Oil Industry Development Board under the Union petroleum ministry.


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