View from Delhi: Gas has potential as dominant fuel in India

Things are hotting up on the energy front. Indian companies, both government and private, are getting ready to market the huge natural gas find on the east coast and other smaller finds elsewhere, along with imported LNG (liquefied natural gas).

There is going to be so much gas that state governments, not to speak of the centre, are vying with one another to grab as much gas as possible for new industries as well as old ones like fertilisers and power stations.

Two terminals to import LNG are under construction in Gujarat, one by Shell at Hazira and the other by Petronet, a consortium of four government companies, at Dahej. Both will be ready in 2004.

A third LNG terminal, an Enron project, is coming up at Dabhol but construction has been halted pending Enron's dispute with the state government.

All eyes now on the latest natural gas find off the coast of Andhra Pradesh by Reliance Industries, which is busy drawing up plans for its development. Together, they all add up to a great deal of gas which may one day replace oil as India's dominant fuel.

The costs involved in all these projects run into thousands of millions. The Reliance find alone will cost as much as Rs50 billion in the first phase. This week, GAIL (Gas Authority of India) and HPCL (Hindustan Petroleum) announced a joint venture far distribution of LPG and CNG in Andhra Pradesh involving an investment of Rs.10 billion.

The oil ministry says that finance should not be a problem as a number of foreign oil companies have shown interest in the new business. The government has yet to decide the marketing link-ups and the status of foreign companies in possible joint ventures.

Meanwhile, some consumers in Mumbai have started getting their piped natural gas and won't need LPG cylinders anymore.

This is quite a novelty for most consumers, though there used to be a gas company in Mumbai until about 30 years ago when it was shut down. The company offered piped coal gas. The new consumers will get natural gas, a much cleaner fuel and less expensive than LPG.

Things would have been much simpler all round had Dabhol Power Co. not collapsed as it did 18 months ago. Since then, all construction has come to a halt including the gas terminal.

Two U.S. companies, GE and Bechtel, who between them own 20 per cent of Dabhol's equity, have been pressing the government to pay them some extra money before they can get the plant restarted.

The government has said no, but negotiations are still on and construction is expected to resume soon.

The gas find on the east coast has put some life into the stock market which had been moribund for the last one year. The Bombay sensex has perked up by over 200 points in seven days, with Hindustan Lever and Reliance leading the race.

Reliance, which is also active on the telecom front, has announced tariff for the first tranche of their telephone services that promises to trigger a price war.

If you make an upfront payment of Rs14,400 over three years, or Rs400 per month, you will have to pay just five paise for a 15 second local call. For long-distance calls, it may be a little more, about 20 paise.

All incoming calls will be free. Five paise for a call? Sounds too good to be true, but just wait and see!