india

Updated: Feb 23, 2020 14:14 IST

President Donald Trump’s visit will see the signing of an agreement between India Oil Corporation (IOC) and US energy firms ExxonMobil and Chart Industries to facilitate the Narendra Modi government’s ambitious plan to supply clean fuel to remote areas without pipelines, people familiar with the plan said on Friday.

The two sides are expected to sign at least five agreements in areas ranging from nuclear power to homeland security during Trump’s two-day visit beginning on February 24. They are also expected to ink some defence deals, including a $2.6-billion contract for 24 MH-60R Seahawk helicopters for the Indian Navy.

The agreement between the energy companies is aimed at improving the supply of gas to the doorstep in areas where the pipeline infrastructure is currently not developed, the people cited above said on condition of anonymity.

“Till the time that the gas pipeline network is developed, transportation of gas in containers is an efficient alternative. US companies like ExxonMobil and Chart have expertise in transporting gas in containers,” said one of the people.

“This agreement will allow us to tap into the American expertise and facilitate clean and efficient access to gas in areas not yet connected to the pipeline network,” the person added.

A second person said IOC is expected to operationalise two separate memorandums of understanding (MoUs) with ExxonMobile and Chart and gain from their technical expertise in transporting liquefied natural gas (LNG) by road to implement the government’s “LNG at Doorstep” scheme. LNG is short for liquified natural gas.

The “LNG at Doorstep” initiative involves making LNG available to customers in areas not connected to gas pipeline infrastructure, an IOC executive said.

The scheme is based on highly specialised technology to transport gas through a cryogenic system, store the gas in a cryogenic holding tank at the target location, and then regasify it on-site using vaporisers so that it can be used as fuel.

“The entire operation, being concealed, eliminates the possibility of adulteration and pilferage,” the executive said, asking not to be named.

IOC signed an MoU with the global energy giant’s affiliate, ExxonMobil India LNG Limited, last October to explore opportunities for cost-effective transportation of gas to remote areas not connected to pipeline networks.

In March 2019, IOC also sighed an MoU with Chart Industries, a diversified global manufacturer of highly engineered equipment for industrial gas and energy, to promote development of the LNG market in India.

India is also looking to collaboration with the US in the energy sector and increased oil and gas purchases as a means to reduce the trade deficit and ensure balanced trade. These moves are also in line with New Delhi’s plans to diversify sources of energy and reduce over-dependence on the volatile West Asian region.

Over the past few years, the US has become India’s sixth largest source of crude oil and India is also the fourth largest customer for US hydrocarbons. In February 2019, IOC finalised term contracts for US crude oil imports - the first such deals by any Indian public sector unit. The total value of crude and LNG imports from the US is currently estimated at $6.7 billion.

“The US has emerged as a key partner for India in energy. India is an important market for US exports, and American energy resources are helping to provide the energy security and diversity required for India’s economic growth and ever-increasing energy demand,” said the first person cited above.

At the National Conclave on Emerging Opportunities in Natural Gas Sector, held in New Delhi on January 23, oil minister Dharmendra Pradhan said India would discuss long-term LNG deals with the US during Trump’s visit. This, he said, was part of India’s strategy to promote a gas-based economy that can attract investments of about Rs 4 lakh crore in the next five years.

India’s primary energy mix includes a 6.2% share of gas, while the global average is 24%. India plans to increase the share of gas to 15% by 2030. An India-US natural gas task force was created in 2018 to increase the share of gas in India’s energy mix.

In 2018, the two sides finalised the Partnership to Advance Clean Energy-Deployment (PACE-D) programme to accelerate the use of renewable energy (RE) technologies in India through technical assistance. The “Flexible Resources Initiative” under the US-India Clean Energy Finance Task Force was also launched last October to advance high-impact areas of collaboration to improve India’s energy security and air quality.

Former GAIL India chairman UD Chobey said: “There is no doubt India is a gas-deficient market and there is huge demand for clean fuel. But success of any scheme [such as LNG at Doorstep] will depend on the affordability for the consumer, that is, the price of domestic gas at the burner tip.”