State-run Oil and Natural Gas Corporation Limited, or ONGC, plans to create India’s first strategic natural gas reserve near its gas-producing assets in western India, according to two people familiar with the matter.
This development comes after the Indian government’s plan to store natural gas in underground salt caves failed due to high capital spending and technical complications.
The strategic natural gas reserve could mitigate the impact of crises such as the West Asian War, which disrupted global energy supplies and revealed India’s weakness, as the country imports about 55% of its natural gas needs, which are valued at about $15 billion annually.
The plan also comes on the heels of the company’s recent announcement of the construction of a strategic crude oil storage facility with a capacity of 1.75 million tons. New Delhi has strategic oil reserves of 5.2 million tons.
“The plan is to initially come up with a pilot project. The consideration now is to conduct a feasibility study and develop a reserve or storage in a depleted gas well, which will be ready to handle the pressure of natural gas and the geology is already for that,” said one of the two people cited above.
Options for storing natural gas
Aside from salt caverns, aquifers are another option for storing natural gas. Deep, porous, water-bearing rock formations can be converted into an underground artificial gas reservoir by injecting gas at high pressure to force the water out, safely trapping the gas beneath an impermeable caprock.
The Petroleum and Natural Gas Regulatory Board (PNGRB) is considering a proposal to the government to set up above-ground storage tanks near liquefied natural gas (LNG) terminals in the country, Mint reported on March 4.
However, when such strategic reserves are planned, a portion of them should also be reserved for commercial use, said Rajesh Mediratta, managing director and CEO of the Indian Gas Exchange.
“Assume the reserve is 5 billion cubic metres. About 2 billion cubic meters can be used under a commercial model that can be easily traded and refilled, and the rest should be kept for strategic use only in case of emergency. This will lead to the development of a functional revenue model as we have seen in Europe,” he said.
He added that the first preference for natural gas storage should always be for depleted fields, since the required infrastructure already exists and the capital expenditure is much lower than for salt caverns.
Queries emailed to ONGC and the Union Petroleum Ministry remained unanswered.
“It is the need of the hour for India to develop such strategic gas storages. Many countries, including China, the US, Germany and Europe as a whole, have set precedents in case of such long-term storage infrastructure,” said Manas Majumdar, partner and leader, oil and gas, PwC India.
Although India has diversified its oil imports over the past few years, its liquefied natural gas imports cannot be diversified this strongly, given the limited large sources available globally. Currently, the United States and Angola are among the main suppliers, along with Qatar and the United Arab Emirates, which have been affected by the war and conflict in the Strait of Hormuz.
According to data from S&P Global Commodities at Sea, there were a total of 16 transits through the Strait of Hormuz on July 20, down from pre-war levels of more than 130 ships.
