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Plans afoot to build strategic natural gas reserve

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India is drawing up a plan to build a strategic natural gas reserve with a capacity to store up to 4 billion cubic metres (BCM) of imported gas, which can be used in case of supply emergencies and to smoothen the domestic market, according to people familiar with the matter.

After oil minister Hardeep Singh Puri recently gave a green signal to the idea of setting up the gas reserve, the oil ministry directed Oil and Natural Gas Corp (ONGC), Oil India and GAIL to jointly prepare a detailed feasibility report on the same, people said. The companies are expected to submit the report in three months.

India has evaluated building strategic gas storage in the past as part of its energy security plan but didn’t go ahead with it due to its prohibitive costs. The geopolitics-driven frenzy in the global gas market last year, which disrupted India’s gas imports and forced some factories to cut production, has brought a strategic policy rethink, people said.

Plans afoot to build strategic natural gas reserve

The 3-4 BCM gas storage capacity being targeted now can cost $1-2 billion to build, the person cited previously said. India, which consumed 60 BCM of natural gas last fiscal year, aims to increase the share of gas in its energy mix to 15% by 2030 from the current 6%. A large multi-location storage, a well-laid pipeline network, and a mature gas exchange can help develop the domestic gas market. Large gas storage can also help India become the regional hub and supply to neighbouring countries like Sri Lanka, Bangladesh and Myanmar in the future, the person said.

The feasibility report will present cost estimates, probable locations, construction timelines, and the business and financial models for the reserves, he said. Depleted wells of ONGC and Oil India could be used for the storage, he said, adding that ONGC has already identified two such wells in Gujarat while Oil India is aiming to do the same in the North East.The report is expected to suggest the most optimal storage model and answer questions on whether a strategic or commercial model or a mix of both would be suitable for the country. It would also offer details on the commercial model and the government support needed to make it financially viable, the person said.Who can be permitted to invest in such storage and how they can recover their investments will also be part of the report. India aims to become a gas-based economy, and, with gas consumption expected to balloon in the future, it would need storage to tide over the short-term market challenges. The country imports about half the gas it consumes. Major gas-consuming economies like Europe and China have large artificial gas storages, which help manage domestic demand.

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