The role of liquefied natural gas in Asia is growing in importance. After successfully being used by China in its dramatic switch away from coal to gas to improve air quality, the Indian government is now using the global boost in LNG supplies to spearhead its anti-pollution policies for urban areas.
 |
Unlike in China, India’s clean-air policy will not be pursued aggressively as it was by the centralized Chinese government whereby non-compliance was backed by threats of dismissal for officials and legal punishments.
The government of India announced its National Clean Air Programme (NCAP) in January 2019, a national level public effort to combat growing air quality concerns.
Analysts say that while this is the nation’s first step along a path that China is leading, the progress of India will be much slower and with more bureaucratic and official obstacles to cross.
India’s NCAP reforms have set a deadline of 2024 to show results following record high levels of fine particle pollution in and around India’s capital, New Delhi, which drew significant public discontent throughout 2018.
Among the five main demands of India’s central government that will boost LNG use is the conversion of ageing coal-fired power plants to run on natural gas by 2024, according to an analysis from consultants Facts Global Energy.
“This will have to be implemented by the city-state governments but funded by the respective state governments,” explained the report.
“Lack of gas pipelines connecting the retrofitted plants to gas supply will remain a major hurdle,” it added.
Indian industry is also being required to switch to gaseous fuels before 2024.
“While gas-LNG will be able to compete with liquid fuels, solid fuels like coal and petroleum-coke will remain more economical. The gas pipelines deficit connecting factories to gas will still be a problem,” added the FGE report.
India’s LNG demand growth from 2018 levels of 22.9 million tonnes to 40.8 MTPA by 2025 will be considered modest for a market of its scale.
However, the reported said that it was still early days for NCAP and current policies have yet to specifically favour the consumption of natural gas and regasified LNG imports over cheaper but dirtier coal and pet-coke. This could come in a second phase of rules.
In China, the success of the clean-air policy at the city and provincial level was made a key performance indicator for the respective provincial governments.
Local and provincial governments faced the possibility of demotion or dismissal when unable to adequately enforce the policy.
Industries and enterprises also faced fines and criminal charges for non-compliance.
“A significant amount of financial support was offered in the form of subsidies from the central and the local governments of China to enforce the policy,” said the report.
The Indian reforms in their current form, are a five-year programme in effect from 2019 to 2024. NCAP aims to ensure that the annual average air quality standards are maintained at all locations in India.
“By 2024, the NCAP target is to achieve a 20-30 percent reduction in the national average of particulate matter from 2017 levels,” said the report.
“Despite setting a high target, the government has acknowledged that significant improvements will only be seen in the long term,” it added.
“We expect the government will miss this target and extend NCAP past 2024
with some revisions. Only then would we see a drastic switch from dirtier fuels like coal to natural gas,” explained the report.
It also noted that India is a nation with misaligned states that seldom see eye to eye when it comes to policies and they will have to go the extra mile to make NCAP work.
The report stated that pricing policy changes are also necessary to make gas more competitive against coal and pet-coke.
This could be in the form of carbon taxes, clean-fuel subsidies and power price reforms.
“Currently, power prices are regulated in India and so is the domestic coal price for power. This makes it harder for gas-LNG to compete with coal, the dominant fuel for power generation,” said the report.
“We expect such changes to NCAP and policies favouring cleaner fuels post-2025,” it added.
The report concluded that with sufficient infrastructure developments, including a build-out of natural gas pipelines and more LNG import terminals, particularly on the East Coast, India’s LNG demand could accelerate to be around 70 MTPA by 2030.
