Natural gas is the only fossil fuel set to increase its share in the energy mix of the United States, China, and India by 2050, even as oil and coal usage decline globally, S&P Global Commodity Insights has predicted. The report says that scalability and commercial challenges are the biggest obstacles that will hinder a direct shift from coal to renewables, making natural gas a critical bridge in the global energy transition.
Fossil fuels continue to be the most dominant primary energy source across the globe despite the rapid growth of renewable energy. S&P Global has projected that renewables will supply 20% of global energy by 2050, up from just 4% currently. “By 2050, gas shall be the only fossil fuel with a potential increase in the energy mix for the US, China, and India,” the report stated.
The analysts note that coal-to-gas substitution has been driving the energy transition in the United States, Europe, and Southeast Asia while India has been lagging here. India’s energy mix remains heavily skewed towards fossil fuels, with oil and gas accounting for 77% of primary energy use while renewables contribute just 2%. However, S&P Global has predicted that fossil fuels’ share in India’s energy mix will fall to 66% by 2050, while renewables will rise to 16%. India will mainly use natural gas as a transition fuel during this period, as a more flexible and cleaner alternative to coal.
The report notes that the Indian government is playing a significant role in the transition, “The category of ‘other energy sources’, essentially traditional biomass (cooking), is declining sharply–being replaced by LPG. Government schemes such as ‘PAHAL’ and targeted LPG subsidies have driven this shift, leading to a reduction from 38 per cent to 19 per cent with expected further decline,” it noted. PAHAL (Pratyaksh Hanstantrit Labh or Direct Benefit Transfer for LPG) is a scheme wherein the Indian government directly transfers LPG subsidies into users' bank accounts.
Meanwhile, India's National Green Hydrogen Mission aims to make India a global hub for green hydrogen by targeting 5 million metric tons (MMT) per annum production by 2030, fostering energy self-reliance, decarbonizing the economy, reducing fossil fuel imports, and creating jobs. Launched in 2023, the mission will support the development of the entire green hydrogen ecosystem, from production to storage and distribution, encouraging indigenous manufacturing and technological innovation to achieve significant economic and environmental benefits.
However, fossil fuels are likely to dominate India’s energy mix for decades to come.
Last year, S&P Global Commodity Insights revealed that four largely unexplored sedimentary basins in India could hold up to 22 billion barrels of oil. In effect, lesser-known Category II and III basins, namely Mahanadi, Andaman Sea, Bengal, and Kerala-Konkan contain more oil than the Permian Basin, which has already produced 14 billion barrels of its 34 billion recoverable oil reserves.
India consumes significantly more oil than it produces, meeting only about 13% of its needs domestically and relying on imports for the rest. India’s oil demand is projected to surge, driven by economic growth and increased vehicle use. India is expected to contribute the most to global oil demand growth by 2030, although energy transition efforts like electric vehicles aim to curb this growth. Unfortunately, India's domestic crude oil production has been declining, averaging around 700,000 barrels per day (b/d) in 2023 and projected to fall to 540,000 b/d by 2030, leaving the country highly reliant on imports for its energy needs.
The Indian government has been trying hard to expand domestic oil and gas exploration and production (E&P) through policy reforms, increased investment, and a drive to reduce import dependence, aiming to increase exploration acreage and production to meet rising demand. India's New Exploration and Licensing Policy (NELP) aims to attract private and foreign companies to India's oil and gas sector through a competitive, open bidding process for exploration blocks. Companies sign Production Sharing Contracts (PSCs) where costs are recovered, and remaining "profit oil" shared with the government based on a bid formula. The policy aims to boost exploration, bring in technology and efficiency, allow for 100% FDI, and enable domestic market sales for crude oil.
Meanwhile, the country’s Hydrocarbon Exploration and Licensing Policy (HELP) promotes hydrocarbon exploration and production. Launched in 2016, HELP introduced the Open Acreage Licensing Policy (OALP), which allows companies to bid for blocks of their choice, unlike previous policies that had fixed bid rounds. Under OALP, numerous exploration blocks have been awarded to successful bidders.
By Alex Kimani for Oilprice.com
