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Gas can help secure India’s energy future – IEA chief

23rd March 2012

With great power, comes great responsibility: Emerging economies, such as India, will have to play an ever more important role in global energy markets as energy consumption soars.

Domestic gas supplies in India will be key to meeting to meeting future energy demand

Gas can provide India with a relatively reliable energy resource as demand rises sharply in the next two decades, International Energy Agency (IEA) Executive Director Maria van der Hoeven said at an event in New Delhi this week.

Although coal will be central to Indian power generation for the foreseeable future, domestic production will struggle to keep pace, as will infrastructure for imports and distribution, said der Hoeven at the 7th Asia Gas Partnership Summit on 23 March.

“Increasing the share of gas as well as other sources, in particular renewables, will be good for Indian energy security,” she said, adding:

 “This will also have environmental benefits, not just in terms of atmospheric carbon dioxide levels, but also for the millions of people affected by local pollution.”

Indian energy demand is projected to more than double over the next 25 years. “Oil and coal will maintain their shares in the primary energy mix, while gas will see its share increasing to 11% mostly at the expense of traditional renewable energy like biomass,” said der Hoeven.

According to analysis by the IEA Indian electricity demand alone is projected to more than triple to over 3200TWh by 2035. “This would imply that over 650 GW of new capacity will have to be built”, said the IEA chief.

By 2035, gas is expected to be the second largest source of electricity generation. But to unleash this supply, India will need to mobilise vast amounts of private capital. This will require an effective and stable policy framework which encourages investment by allowing reasonable and predictable returns, warned der Hoeven.

Power generation is the strongest driver behind gas demand everywhere, which increases at 1.8% per year, according to IEA’s New Policies Scenario.

The real story, according to der Hoeven is outside the developed economies, where gas demand rises are limited. Non-OECD countries are projected to account for approximately 80% of gas demand growth to 2035. And in Asia, demand is projected to increase by over 4% per year.

In particular, Chinese gas demand is due to surge significantly, reaching up to 500 bcm by 2035. “That represents a quarter of additional gas demand globally”, der Hoeven told delegates.

Over the same period, Indian demand is likely to triple to 190 bcm. Domestic gas production in India will not be able to keep up, requiring investment in import capacity, for example in LNG.

Global LNG trade has grown by around one third between 2009 and 2011, said der Hoeven. “It is becoming an important feature of global gas markets, helping countries such as India to bridge the widening gap between production and demand”, she said.

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