For an economy that imports 90% of its oil and 50% of its gas to meet 35% of its primary energy needs (28% met by oil and 7% by gas), the Indian government has acted swiftly in the wake of the world’s largest ever supply disruption. Last week, it launched an effort to review old geological data and secure more of it to ignite investor interest in hydrocarbons.
Better data improves the odds of explorers finding oil and gas, but does not guarantee a commercially viable discovery. Seismic studies reveal only indicative spots to drill, imprecision can be unforgiving and a strike may turn out too small.
Another recent initiative holds greater promise: a hefty package of financial incentives with an outlay of ₹37,500 crore designed to fast-track projects that convert coal into gas.
This is potentially a giant leap towards India’s goal of energy independence by 2047, as set by Prime Minister Narendra Modi under the slogan of self-reliance. We have no dearth of extractable coal and this mission’s target of gasifying 100 million tonnes of coal every year by 2030 is ambitious: if met, it would give the country twice the volume of natural gas it currently consumes.
Syngas drawn from coal can serve as feedstock for a diverse range of products, from fertilizer and chemicals to hydrogen and transport fuels like ethanol, apart from dimethyl ether, an alternative to the single largest petroleum product we use, diesel.
Coal gasification, however, has challenges as well as a policy trade-off that must be assessed against the aim of self-reliance.
China’s story is instructive. It is the world’s largest coal producer but depends on imports to meet some three-quarters of its oil needs. With gas, Beijing’s pursuit of self-reliance began early; today locally gasified coal accounts for over three-quarters of its output of urea, the most widely used nitrogen-based plant nutrient.
In contrast, producers of urea from natural gas, like India, have been reeling from a 70% spike in the price of this input caused by the choke of Hormuz. At a time like this, we have a compelling case to gasify coal. India’s urea subsidy bill is likely to exceed ₹1.7 trillion, with this fertilizer sold at a tenth of its global price.
Advances in process technology, though, will determine how efficiently it is done and how quickly it scales; R&D pacts could guardrail the incentive package.
Coal’s syngas can support far more than urea production. The process yields hydrogen, for example, which is used by industries like steel and cement, whose final products are not under state control.
In such cases, especially, the Centre must assess global technology and prices before incentives are awarded. Late last year, globally, spiralling costs and weak demand led to almost 60 projects amounting to four times the world’s installed capacity for low-carbon hydrogen getting scrapped.
While global majors had embraced this clean-tech idea, they struggled to scale up. Now they are on the lookout for a cheaper and faster path ahead. We also have climate goals that the coal-to-gas initiative could help achieve, particularly if its use as an energy source reduces overall carbon emissions. But to gasify coal cleanly, we would need it done within coal mines with appropriate mechanisms to entrap carbon.
The technology for this, however, has some way to go before it can be deployed safely and at scale. All said, a complex mix of variables must be managed for an optimal policy balance between costs, self-reliance and carbon reduction.