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Natural Gas: Demand, Supply and future in India

Saturday, December 21, 2013

Natural gas is a fossil fuel formed when layers of buried plants and animals are exposed to intense heat and pressure over thousands of years. The energy that the plants originally obtained from the sun is stored in the form of carbon in natural gas. Natural gas is a nonrenewable resource. Natural gas is a hydrocarbon gas mixture consisting primarily of methane, but commonly includes varying amounts of other higher alkanes and even a lesser percentage of carbon dioxide, nitrogen, and hydrogen sulfide. Natural gas is an energy source used for heating, cooking, and electricity generation. It is also used as fuel for vehicles and as a chemical feedstock in the manufacture of plastics and other organic chemicals.

Natural gas is found in deep underground rock formations or associated with other hydrocarbon reservoirs in coal beds and as methane clathrates. Most natural gas created over time by two mechanisms: biogenic and thermogenic. Biogenic gas is created by methanogenic organisms in marshes, bogs, landfills, and shallow sediments. Deeper in the earth, at greater temperature and pressure, thermogenic gas is created from buried organic material. The world's first industrial extraction of natural gas started at Fredonia, NY in 1825.

Uses and Application

Domestic Use

Natural gas dispensed from a simple stovetop can generate heat in excess of 2000°F (1093°C) making it a powerful domestic cooking and heating fuel. In developed world it is supplied to homes via pipes where it is used for many purposes including natural gas-powered ranges and ovens, natural gas-heated clothes dryers, heating/cooling, and central heating. Home or other building heating may include boilers, furnaces, and water heaters.

Compressed natural gas (CNG) is used in rural homes without connections to piped-in public utility services, or with portable grills. CNG is less economical than LPG, so LPG (propane) is the dominant source of rural gas.


CNG is a cleaner alternative to other automobile fuels such as gasoline (petrol) and diesel. The energy efficiency is generally equal to that of gasoline engines, but lower compared with modern diesel engines. Gasoline/petrol vehicles converted to run on natural gas suffer because of the low compression ratio of their engines, resulting in a cropping of delivered power while running on natural gas.

Power Generation

Natural gas is a major source of electricity generation through the use of cogeneration, gas turbines and steam turbines. Most grid peaking power plants and some off-grid engine-generators use natural gas. Particularly high efficiencies can be achieved through combining gas turbines with a steam turbine in combined cycle mode. Natural gas burns more cleanly than other hydrocarbon fuels, such as oil and coal, and produces less carbon dioxide per unit of energy released. ]

Combined cycle power generation using natural gas is the cleanest source of power using hydrocarbon fuels, and this technology is widely and increasingly used as natural gas can be obtained at reasonable costs. Fuel cell technology may eventually provide cleaner options for converting natural gas into electricity. Locally produced electricity and heat using natural gas powered Combined Heat and Power plant (CHP or Cogeneration plant) is considered energy efficient and a rapid way to cut carbon emissions.


Natural gas is a major feedstock for the production of ammonia, via the Haber process, for use in fertilizer production.


Russian aircraft manufacturer Tupolev is running a development program to produce LNG- and hydrogen-powered aircraft. The advantages of liquid methane as a jet engine fuel are that it has more specific energy than the standard kerosene mixes do and that its low temperature can help cool the air which the engine compresses for greater volumetric efficiency, in effect replacing an intercooler. Alternatively, it can be used to lower the temperature of the exhaust.


Natural gas can be used to produce hydrogen, with one common method being the hydrogen reformer. Hydrogen has many applications: it is a primary feedstock for the chemical industry, a hydrogenating agent, an important commodity for oil refineries, and the fuel source in hydrogen vehicles.


Natural gas is also used in the manufacture of fabrics, glass, steel, plastics, paint, and other products.

Natural Gas in India

As per the Ministry of petroleum, Government of India, India has 1,437 billion cubic metres. A huge mass of India’s natural gas production comes from the western offshore regions, particularly the Mumbai High complex. The onshore fields in Assam, Andhra Pradesh, and Gujarat states are also major producers of natural gas. India imports small amounts of natural gas.

As in the oil sector, India’s state-owned companies account for the bulk of natural gas production. ONGC and [Oil India] Ltd. (OIL) are the leading companies with respect to production volume, while some foreign companies take part in upstream developments in joint-ventures and production sharing contracts. The [Gas Authority of India Ltd.] (GAIL) holds an effective control on natural gas transmission and allocation activities. In December 2006, the Minister of Petroleum and Natural Gas issued a new policy that allows foreign investors, private domestic companies, and Government oil companies to hold up to 100% equity stakes in pipeline projects.

Liquefied Natural Gas

Liquefied natural gas or LNG is natural gas (predominantly methane, CH4) that has been converted to liquid form for ease of storage or transport. LNG achieves a higher reduction in volume than compressed natural gas (CNG). This makes LNG cost efficient to transport over long distances where pipelines do not exist. Specially designed cryogenic sea vessels (LNG carriers) or cryogenic road tankers are used for its transport.

LNG is principally used for transporting natural gas to markets, where it is regasified and distributed as pipeline natural gas. It is used in natural gas vehicles. High cost of production and the need to store it in expensive cryogenic tanks have hindered widespread commercial use.

Demand and Supply

In recent years the demand for natural gas in India has increased due to its higher availability, development of transmission and distribution infrastructure, the savings from the usage of natural gas in place of alternate fuels, the environment friendly characteristics of natural gas as a fuel and the overall favorable economics of supplying gas at reasonable prices to end consumers. Power and Fertilizer sector remain the two biggest contributors to natural gas demand in India and continue to account for more than 50% of gas consumption. India can be divided into six major regional natural gas markets namely Northern, Western, Central, Southern, Eastern and North-Eastern market, out of which the Western and Northern markets currently have the highest consumption due to better pipeline connectivity. This demand represents the Realistic Demand for natural gas in India. Gas based power generation is expected to contribute the highest, in the range of 38% to 49%, to this demand in the projected period (2012-13 to 2029-30).

The supply of natural gas is likely to increase in future with the help of increase in domestic gas production and imported LNG. However, the expected increase in domestic production at present is significantly lower than earlier projections due to a steady reduction in gas output from the KG D6 field. The capacity of RLNG terminals in India is expected to increase from 13.60 MMTPA (Million Metric Tonne Per Annum) in 2012-13 to 73 MMTPA in 2029-30 assuming all the existing and planned terminals in India would materialize.


Imports of liquefied natural gas (LNG) by India will soar in the next decade to fuel an expanding economy.

India’s trillion-dollar economy is one of world’s largest importers of LNG. The extra supplies that India needs are likely to come from Qatar and Australia. Qatar already supplies India on long-term contracts.

Buyers often complain of the link with expensive oil in long-term Asian contracts for liquefied natural gas, India will have no choice but to sign up quickly if it wants to avoid being beaten to the supply by Japan and China. Competition for supply is likely to be intense. Indian buyers have to outbid Japan for spot, or immediate delivery, shipments of LNG from Qatar. Signing long-term deals would ensure more profitable operations for importers of LNG, who are planning to build expensive import facilities.

Lacklustre domestic exploration results give little reason to expect a turnaround at home. India’s pipeline network need an overhaul and expansion to get the gas to market, work that would require an investment of as much as Rs 350 billion.

Few Oil and Natural Gas Producers


Oil and Natural Gas Corporation Ltd

Oil India Ltd

Bharat Petroleum Corporation Ltd

GAIL (India) Ltd

Adani Group

Oil and Natural Gas Research Centre

The Energy and Resources Institute

Gujarat Energy Research & Management Institute

Petroleum Conservation Research Association

Source: NPCS Team

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