Gas has started to flow from Reliance’s gigantic East Coast discovery.  This has significance not simply because of the monetary benefits that will accrue to the company and the government (the two principal shareholders), or because of the uptick in power generation and fertiliser production that it will enable, or indeed because of the savings on account of a reduced oil import bill and lowered financial subsidies — but also because it will accelerate the shift of our economy towards a ‘cleaner’ energy basket.  We all acknowledge the importance of containing carbon emissions and of weakening the link between our economic growth, energy demand and environmental pollution.  But as yet  our actions have not matched  our rhetoric.  The significance of the Reliance discovery is that it will compel  a broader constituency of interest groups to advocate the benefits of a relatively clean fuel.

Gas is an environmentally preferred fuel to oil and coal.  It emits fewer noxious fumes.  It is also operationally more efficient.  A combined cycle gas fired power plant can achieve thermal efficiencies of more than 60 per cent compared to 40 - 45 per cent for the latest coal technologies.

Notwithstanding, we have been slow in establishing gas as the fuel of choice. This is because unlike oil, a gas discovery can only be monetised if the associated pipeline transmission and  distribution are in place and the producers and consumers have agreed on the terms of the sales and supply contract.  Gas is not a fungible commodity and it is not possible under normal circumstances to store it other than for short periods and without special underground caverns that have been specially created for the purpose. It has to be consumed upon production (or else flared). Reliance, for instance, could only commence production after it had completed its 1440 km long East-West  gas pipeline from Kakinada in Andhra to Bharuch in Gujarat and upon finalisation of sales and supply agreements with the various fertiliser and power companies located en route this pipeline, built earlier by GAIL.  The gas discoveries in Tripura or the reserves in Bangladesh have on the other hand  remained undeveloped because there has been no comparable downstream infrastructural development and because there are no “bankable” customers within proximity of these discoveries.  I should add that the cost of forging an umbilical relationship between the gas producer, the pipeline company and the various customers is massive and that most bankers have generally been reluctant to finance as projects other than those promoted by companies with solid balance sheets.

... contd.