Southern states should demand gas from KG Basin

While Gujarat is massively expanding construction of pipelines and making available gas for domestic consumption, public transportation, fertilisers, petrochemicals, power and other industrial uses, the southern states seem to be blissfully ignorant of the value of this elegant and less polluting natural resource.

On Sept 30, Gujarat Chief Minister Narendra Modi inaugurated the 1147.5 MW gas turbine of Torrent Power at Sugen in Surat. A few such gas-based power plants are under construction in Gujarat and Maharashtra.

The production of natural gas is presently confined to the oil fields of Bombay High, onshore Gujarat, Assam and now in the Krishna-Godavari Basin off the Andhra Coast. Even after meeting the demand through imports, a number of power plants and fertiliser units are starved of natural gas; they operate below their installed capacity or they use more expensive naphtha or fuel oil rendering the cost of production very expensive.

Maharashtra and Gujarat have been the major beneficiaries of oil and gas produced since the 1970s on and off the west coast. In the first couple of decades after opening of the oilfields in Bombay High, the associated gas was flared. But in this period both Gujarat and Maharashtra gained knowledge of the myriad uses of gas for the production of fertilisers, petrochemicals, power.

Significantly, these two states emerged as the largest consumers of natural gas. A good deal of prosperity and development of these states was based on this precious natural resource.

By the 1980s two dynamic leaders from Uttar Pradesh — N D Tiwari who held the industry and finance portfolio in the Union government and Brahm Dutt, who was minister of petroleum and natural gas — succeeded in promoting the Hazira — Bijaipur — Jagdishpur gas pipeline to transfer gas from the Bombay High oilfields to UP via Rajasthan and Madhya Pradesh.

Six fertiliser plants, three gas turbines and three LPG fractionation plants were set up along the HBJ pipeline. The 1,900-km pipeline initially cost around Rs 1,900 crore. The capacity of the pipeline has been increased substantially to support more than doubling the capacity of the six fertiliser plants. A total investment of over Rs 50,000 crore has been made on the units using this gas. The pipeline has been extended to Haryana and Delhi, feeds the public transport system of Delhi and contributes substantially to the reduction of air pollution.

Today piped gas for domestic consumption is made available in Mumbai. This metro is also switching to natural gas for powering its vehicles in an increasing measure. The western region has several large capacity fertiliser plants.

Gujarat was also alert in setting up large capacity gas terminals at Dahej and Hazira to import natural gas in large quantities. Gujarat also set up a separate company, the Gujarat State Petroleum Corporation Ltd, to explore and produce gas not just in Gujarat but also at the KG Basin.

In the late 1980s when gas allocations from Bombay High  were made, I raised the case for the southern region getting a share of this production with M S Gurupadaswamy, the then minister of petroleum and natural gas, as also with the chief ministers of the southern states. Unfortunately, the southern leaders did not have much knowledge on the wonders natural gas can do for economic development.
Nearly three decades later, India is lucky in having a very large gas find at the KG Basin off Kakinada on the east coast. The technology for exploiting such finds in great depths has been developed in this interim period. This, coupled with the huge rise in the price of oil and gas, have attracted several companies to invest in exploration and production of gas from the KG Basin.

M S Srinivasan, former secretary, petroleum and natural gas, estimates a huge production of gas from the KG Basin which will be in excess of the total consumption at present. There are even some estimates that place production in excess of 150 mn standard cubic meters per day (a 1000 MW gas - based thermal station requires around four mmscmd of gas per day; around 2.5 mmscmd of gas can feed a million tonne urea plant).

The southern states have failed to realise the importance of this energy option. With the western and northern states busy building capacity for power, fertiliser, etc based on gas, understandably they will demand priority for allocation. Once the estimated production is committed, nothing much can be done to meet any demand made later.
South-based companies like Mangalore Chemicals and fertilisers and Cochin fertilisers are based on naphtha. Since 1990s more elegant and cheaper natural gas plants were set up in the north and the west. Lack of availability of gas forced the fertiliser plants in the south to continue to operate on naphtha; with the decontrol of prices of naphtha (presently ruling at over Rs 25,000 a tonne), MFL, SPIC, MCF, and FACT are all sick.
If only a gas grid for south is in position, these companies can be turned around. Chief Minister B S Yeddyurappa would do well to send a team to Gujarat to see what natural gas has contributed to the prosperity of the state.

For several years now, there have been plans on importing gas through pipeline from Iran and other countries in West Asia and Eastern Europe. Even when this matures, the landfall point can only be in Gujarat or Rajasthan. The best opportunity for the south, is therefore, to make a strong pitch for a share of gas from the KG Basin.

(The writer is an energy expert)