What is the Value Chain of Natural Gas?
India's natural gas value chain involves various stages, from exploration and production to consumption. Natural gas exploration and production in India are primarily carried out by state-owned companies such as Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL), as well as private companies such as Reliance Industries, Cairn India, and Essar Oil. The natural gas reserves are mainly located in offshore areas of the Bay of Bengal and the Arabian Sea, as well as onshore in the states of Assam, Gujarat, and Rajasthan. Natural gas is transported through pipelines, which are primarily owned and operated by the Gas Authority of India Limited (GAIL). Other pipeline operators in India include Reliance Gas Pipeline Limited and Gujarat State Petronet Limited. Natural gas is distributed to end-users through City Gas Distribution (CGD) companies, which are authorized by the Petroleum and Natural Gas Regulatory Board (PNGRB). There are currently 24 CGD companies operating in India, with plans to add more in the coming years. Natural gas is consumed for various purposes in India, including cooking, heating, power generation, and industrial processes. The power sector is the largest consumer of natural gas in India, followed by the fertilizers and city gas sectors. The Indian government has set ambitious targets to increase the share of natural gas in the country's energy mix, with a goal of increasing the share of natural gas from the current 6.2% to 15% by 2030. To achieve this target, the government is promoting the development of new pipelines and LNG terminals, as well as incentivizing the use of natural gas in various sectors.
The natural gas industry is a comprehensive system that involves the upstream, midstream, and downstream processes working together as an integrated value chain.
- Upstream: The exploration and production (E&P) sector, also known as upstream, involves the search for and extraction of natural gas from underground reserves. To access these deposits, companies utilise drilling rigs to bore into the Earth's crust. After extracting the natural gas, it undergoes Processing and preparation for transportation.
- Midstream: The midstream segment in the natural gas industry encompasses activities such as storing, marketing, and transporting natural gas via onshore or offshore pipelines. Pipeline companies usually own pipelines, which are used to transport natural gas over extensive distances to reach consumers.
- Downstream: The downstream sector is responsible for the regasification of liquified natural gas. The midstream sector involves the sale and distribution of refined natural gas to end-users such as households, industries, and commercial establishments. This is typically done through gas utilities, which operate pipeline networks that deliver natural gas to customers.
Natural gas is used for a wide range of applications, including heating homes and businesses, generating electricity, and fuelling vehicles. Natural gas is also used as a feedstock for producing chemicals and fertilisers.
The natural gas value chain can vary from country to country, depending on the specific regulatory environment and market conditions. For example, in some countries, natural gas may be liquefied and transported by tanker ships rather than through pipelines. Additionally, in some markets, natural gas may be used primarily for power generation, while in others, it may be used more for heating and cooking in households.
