As a newly developing country, India is consuming more energy to develop and grow its economy faster. Looking at the history of the energy market in India shows that coal had dominated this market for several decades. After the economic reform in 1991, more energy sources found their way to India’s energy market. Using clean or less polluting energy sources that need cutting-edge technology became possible when India opened its doors to the international markets. Natural gas, Solar energy, and wind power could have great potential in the future of India’s energy mix.
The International Energy Market
Due to the existing problems related to saving produced both wind and solar power, natural gas could have a higher chance to dominate India’s market. This country needs to import approximately half of its needed natural gas regarding India’s proven gas reserves.
Nowadays, suppliers can extract more natural gas based on new technology than is needed in the international markets. This situation creates an opportunity for countries like India to provide their needed energy at a lower price.
It is an axiom that shutting down natural gas wells is both risky and costly for many experts. Wells may lose their initial pressure. In countries that need to export natural gas in the LNG form, the number of customers is a serious problem. There are limited countries in the world that are capable of receiving LNG. This situation makes natural gas suppliers try to provide their final products at the lowest possible price to guarantee their market for a long time.
As a growing market, India could use this leverage to reduce using its own natural gas reserves.
Suppliers need to fight over their market share in India’s market. This situation makes India insist on short-term contracts to avoid sticking to possible high prices from a supplier.
The Ideal Situation
This ideal situation makes policymakers think more seriously about an energy mix in the future based on natural gas rather than any other energy source. To do so, India needs to avoid relying on limited suppliers and should try to divide its market between different suppliers. Creating competition between producers could help India achieve its needed LNG flow at the lowest possible price. To do so, India could attract foreign direct investment to develop infrastructures to receive LNG from different countries at different parts of its territory.
As a demander in the international atmosphere, India is an axiom that is looking for the lowest possible prices. Short-term contracts could help India to make suppliers in the market fight for their market share in its energy sector. However, demanders prefer long-term contracts. This is to secure their products for more extended periods. But demanders in India successfully renegotiate their previous long-term contracts.
So, low prices and existing competition among suppliers make countries like India enjoy natural gas as a possible driving force.