Realignment of India’s energy mix is must for sustaining economic growth, Natural gas is a better choice
Doha Bank and Phillip Capital jointly hosted “Energy Sustainability – The Next Decade” event at Hotel Trident on 15th December 2017, at Nariman Point, Mumbai. The keynote speaker for the event was Dr.R. Seetharaman, CEO of Doha Bank, opening remarks were given by Mr.Vineet Bhatnagar, Managing Director of Phillip Capital, Mr. Rahool Panandiker, and Partner & Director Energy Practice at Boston Consulting Group. The event was also attended by officials from Ministry of Oil & Gas, senior officials from Oil & Gas companies and member and ex-secretary of 7th Pay commission of India and reputed institutional and qualified investors also attended the conference.
Dr. R. Seetharaman spoke on Global economy, he said “The global upswing in economic activity is strengthening. Global growth, which in 2016 was the weakest since the global financial crisis at 3.2 percent, is projected to rise to 3.6 percent in 2017 and to 3.7 percent in 2018.
Broad-based upward revisions in the euro area, Japan, emerging Asia, emerging Europe, and Russia—where growth outcomes in the first half of 2017 were better than expected—more than offset downward revisions for the United States and the United Kingdom. But the recovery is not complete: while the baseline outlook is strengthening, growth remains weak in many countries, and inflation is below target in most advanced economies. Commodity exporters, especially of fuel, are particularly hard hit as their adjustment to a sharp step down in foreign earnings continues. In line with stronger-than-expected momentum in the first half of 2017, the forecast sees a stronger rebound in advanced economies in 2017 (to 2.2 percent), driven by stronger growth in the euro area, Japan, and Canada. Growth prospects for emerging and developing economies are marked up by 0.1 percentage point for both 2017 and 2018 relative to April, primarily owing to a stronger growth projection for China
Dr. R. Seetharaman spoke on Indian economy, he said “IMF Oct 2017 expects India to grow by 6.7% in 2017-18. India’s retail inflation or Consumer Price Index (CPI) grew 3.58% YOY in Oct 2017. The fiscal deficit for 2017-18 is at 3.2%, says Finance Minister. In August 2017 Reserve Bank of India Governor Urjit Patel-headed Monetary Policy Committee decided to cut the repo rate, or key lending rate, by 25 basis points to a seven-year low of 6 per cent. Reserve Bank of India cuts reverse repo rate by 25 bps to 5.75% GDP rose 6.3% in the July-September period, in line with independent estimates, compared with the three year low of 5.7% growth in the April-June quarter and 7.5% in the year earlier. This additionally indicates that perhaps the impact of 2 significant structural reforms — demonetization and GST — is behind us. In Nov 2017 the GST Council decided to reduce tax rate on a wide range of mass use items – from chewing gums to detergents – to 18 percent from current 28 percent. The goods and services tax (GST), implemented “from 1 July, has five tax slabs of 0 percent, 5 percent, 12 percent, 18 percent and 28 percent
Qatar plans to raise LNG production by 30% to 100mtpa within five to seven years after lifting a moratorium on gas development earlier this year and Qatar plans to remain a leading LNG supplier. In June 2017 Qatar gas has agreed to sell 5.5 MT of LNG to Shell. Under the sales and purchase agreement, Qatar will supply Shell with 1.1 million MT/year of LNG over five years from 2019.In Sept 2017 RasGas sealed a landmark 15-year liquefied natural gas (LNG) sales and purchase agreement (SPA) with Bangladesh Oil and Gas Corporation.
India is in the midst of the largest energy transformation project in the world. India is moving to promote gas usage is in line with the commitment made at the Paris meeting on climate change, which aims to reduce the country’s carbon emission intensity by up to 35% from 2005 levels by 2030 and producing 40% of the power from non-fossil fuel sources by 2030. Natural gas is a good fit for decarbonizing India’s energy system. The government also wants to make India a gas-based economy and raise the share of natural gas in the energy mix to 15% from 6% in 2016. India’s import bill is inflated on account of increase in oil prices from USD26 per barrel to USD57 per barrel which may not be sustainable for its high economic growth going ahead, so to sustain growth India has to change its energy mix for which Natural gas is better choice. It makes more sense to promote gas at US$ 7-8/mmbtu price than to import crude at US$60-65/bbl. Realignment of energy mix to natural gas will de-risk India’s high reliance on Oil and insulate India’s import bill from upward movement in oil prices. Qatar and India can jointly explore more synergies on this dimension which will further enhance bilateral trade relationships.