Oil & Gas Budget 2020: Government to Expand National Gas Grid

While unveiling the budget for 2020, the Finance Minister - Nirmala Sitharaman announced that her government plans to undertake further reforms to make the pricing of natural gas more transparent and also laid down plans to expand National Gas Grid to 27,000 km from the existing 16,200 km.

She noted that "To deepen the gas market in India further reforms will be undertaken to facilitate transparent price discovery and ease of transactions."

The production of domestic natural gas currently is not determined based on demand and supply dynamics. India presently uses a formula to price its domestically created natural gas which is revised bi-annually. As per the formula, the domestic gas price is weighed on the average price of four global benchmarks which includes Canada based Alberta Gas, Russian Gas, the US-based Henry Hub and UK based NBP. So the domestic price of the natural gas is based on the prices of these international benchmarks in the previous year and kicks in with a quarter's lag. It applies for six months.

As of now close to 7000 km of pipeline is under construction. Apart from this, the city gas distribution projects are expected to add several thousand more kilometres of steel pipeline.

India which is the biggest producer of greenhouse gases aims to reduce the emission targets which it had pledged during the 21st session of the Conference of the Parties (COP) in Paris by encouraging the use of green fuel and natural gas.