Optimization of natural gas price for city gas distribution

Abstract

A slight increase in demand was anticipated when the global natural gas market began in 2022, but everything changed on 24th February when Russia invaded Ukraine. Along with being a terrible human tragedy, the invasion led to a significant crisis in the energy supply that impacted the world economy and energy picture. A competitive global market has resulted from Europe's explosive desire for LNG to replace the Russian pipeline gas supply. European gas prices have reached record highs, making the continent a premium market for LNG, attracting imports from other areas and causing supply conflicts and demand destruction in numerous markets. In 2022, it is anticipated that Europe's LNG needs will exceed supply capacity expansions and represent more than 60% of the net growth. The natural gas supply shortage that has been developing since mid-2021 has been made worse by Russia's invasion of Ukraine, driving up consumer prices, encouraging fuel substitution, and reducing demand. Additionally, it doubts natural gas's long-term market prospects, particularly in emerging nations where it was expected to be a key component of energy transitions. The demand for natural gas is anticipated to decrease in 2022 and stay low through 2025. Europe's aggressive pursuit of LNG increases the possibility of persistently tight markets to replace the Russian pipeline supply and the limited expansion of global LNG export capacity. In the worldwide transformation to net-zero energy systems driven by renewable Energy, Natural Gas is a crucial transition fuel. Natural Gas will be the key or major fossil fuel to experience an increase in demand over the short duration, due to its flexibility and less adverse environmental effects than coal and Oil. Natural Gas in cryogenic tanks has been cooled and liquefied for more accessible storage and transportation is known as liquefied natural Gas (LNG). The market share of LNG, a high-growth sector of the global natural gas industry, will develop dynamically, from around 9.6% in 2021 to roughly 11.5% by the end of 2030. City gas distribution companies are facing the heat of the high international price of Natural Gas. This high price has resulted due to many global events like war, climate change, natural calamities, etc. To optimize the price of natural gas, the Government of India, oil and gas companies and entrepreneurs are taking steps in the right direction. India has enormous potential in biogas generation due to the availability of agricultural waste, industrial waste, animal dung, etc. This waste can be made to use with the help of biogas. Until now, biogas has been used for domestic purposes, but in the last few years, biogas has been treated with the help of different processes to make it fuel-ready for automobile use. SATAT Scheme, announced by the Government of India, helps oil and gas companies and entrepreneurs who wish to invest and operate biogas plants for bio CNG fuel for the automobile. The oil and gas companies procure Bio-CNG from these Biogas plant operators after due agreement and validity checks. These benefits multiple stakeholders in the process. Bio-CNG plant not only helps waste handling and disposal but also gives rural employment. Oil and Gas companies benefit from the lower cost of Bio-CNG than imported natural gas. The country saves precious foreign exchange. The Indian Gas Exchange (IGX) is a digital, fully transparent platform that benefits Natural Gas buyers and sellers. India imports more than 65% of Natural Gas from international hubs. This platform which operates strictly on a delivery basis, helps to explore better prices for buyers and sellers. Different types of products are made available for customers based on need. The study has been conducted to understand the primary objectives, such as to figure out the entire value chain of Natural Gas globally and in India, to ascertain the pricing policy of the domestic and Imported Natural Gas, to get a sense of Regulatory Guidelines and Pricing reforms and to suggest some measures to overcome City Gas distribution. This report explains the global trends in Natural Gas and the evolution of the Natural Gas Business in India and analyses the different aspects of the challenges, roadblocks, and strategy framework of IGX. For this study, the relevant data have been collected and consolidated from primary sources such as Annual Report 2019-20 and Indian Petroleum & Natural Gas Statistics 2020-21 from the Ministry of Petroleum and Natural Gas), Indian Mineral Yearbook 2020 (Ministry of Mines Indian Bureau of Mines), Report of the Committee on Gas Pricing -2014, NITI Ayog Report, BP Statistical Review of World Energy 2021, Indian Biogas association and various Journal and books, etc. We discussed with Shri Rajesh Mediratta, CEO of Indian Gas Exchange (IGX), who rendered unconditional support during his visit to Ahmedabad. We were also helped by Shri Brijesh Panchal, Head - Gujarat (IGX), for discussion about the business. Shri Gaurav Kedia, Chairman - Indian Biogas Association, for his valuable guidance and Input to the company. Shri Abhijeet Mukherjee- Program Head at Indian Biogas Association, has helped by giving time twice and helping to understand the context in detail. Shri Udit Gupta - The risk Consultant at KPMG, has helped round the clock for understanding and connecting to the complexity of the subject.