India is making plans to establish a strategic natural gas reserve that can store up to 4 billion cubic metres (BCM) of imported gas. This reserve will serve as a backup in case of supply emergencies and help stabilize the domestic market, people familiar with the matter told ET. The decision to set up the gas reserve was given the green signal by oil minister Hardeep Singh Puri, who directed Oil and Natural Gas Corp (ONGC), Oil India, and GAIL to prepare a detailed feasibility report.
In the past, India has considered building a strategic gas storage facility as part of its energy security plan but was deterred by the high costs involved. However, the recent disruption in the global gas market due to geopolitical factors has prompted a reevaluation of this strategic policy. The targeted gas storage capacity is 3-4 BCM and is estimated to cost $1-2 billion.
India’s aim is to increase the share of gas in its energy mix to 15% by 2030, up from the current 6%. To achieve this, it is crucial to develop a robust domestic gas market with a large storage capacity, a well-connected pipeline network, and a mature gas exchange. Additionally, having a large gas storage facility will position India as a regional hub and enable it to supply neighboring countries such as Sri Lanka, Bangladesh, and Myanmar in the future, a source told the financial daily.
The feasibility report, which will be submitted in three months, will provide cost estimates, potential locations, construction timelines, and business and financial models for the gas reserves. The source mentioned the potential utilization of depleted wells from ONGC and Oil India for storage purposes. ONGC has pinpointed two such wells in Gujarat, while Oil India is pursuing similar initiatives in the North East.
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The report will also determine whether a strategic or commercial model, or a combination of both, would be most suitable for the country. The report will further outline the necessary government support to make the project financially viable and address the question of who can invest in the storage facility and how they can recover their investments.
As India aims to transition into a gas-based economy and with gas consumption expected to increase in the future, having a storage facility will be crucial in managing short-term market challenges. Currently, India imports about half of the gas it consumes. To ensure a stable supply and meet the growing demand, it is imperative to establish a strategic gas reserve, similar to what major gas-consuming economies like Europe and China have already implemented.