SUMMARY

Mandatory CBG blending in CNG and piped gas segments is expected to spur investment in the CBG sector and help the country cut reliance on costly LNG imports.

By Shardul Sharma

The Indian government’s recent announcement mandating the blending of compressed biogas (CBG) in compressed natural gas (CNG) and domestic piped natural gas (PNG) segments is expected to provide a boost to the CBG sector and help the country cut reliance on costly LNG imports, according to the government and industry experts.  

Under the new policy, the compulsory blending obligation will begin at 1% of total CNG and domestic PNG consumption in fiscal 2025-26, gradually increasing to 5% by fiscal 2028-29. The government expects this policy to stimulate demand for CBG, reduce imports of LNG, promote a circular economy by utilising organic waste, and contribute to achieving net zero emission targets.

India’s petroleum and natural gas minister Hardeep Puri said it will encourage investment of around 375bn rupees ($4.5bn) and facilitate the establishment of 750 CBG projects by fiscal 2028-29. 

Prashant Vasisht, senior vice president and co-group head - corporate ratings, ICRA told Gas Pathways that the policy decision will give a “major boost” to the setting up of CBG production units in the country and drive investments in the sector.

“ICRA expects 5% CBG blending for the city gas distribution sector to replace LNG imports worth $800mn-$1bn/year from fiscal 2029 onwards. Apart from the monetary savings, the same would also result in more environmentally responsible fuel usage in the country and also help the country meet its green energy targets,” Vasisht said.

ICRA’s calculation of $1bn/year of savings is based on an estimated gas demand of 105-110 m3/day in the CGD sector from FY2029.

A study done by the Indian Biogas Association (IBA) also found that India could make a substantial cut in LNG imports as a result of CBG blending. The proposed 5% blending of CBG in the CNG and PNG sectors could cut LNG imports worth $1.17bn/year, IBA said. The study further stated that the CBG blending can bring down per capita CO2 emissions by 2%, benchmarked to the 2019 figure, which was 1.9 tonnes of CO2/person in India.

India meets half of its annual gas demand through LNG imported from countries like Qatar, the US, the UAE and Russia. The country’s LNG import costs during the first seven months (April-October) of FY 2023-24 amounted to $6.60bn. The LNG import volumes during the period stood at 17.75bn m3, according to the latest government data.

According to the IBA, this blending initiative is in sync with the government’s aim to make India a gas-based economy, with a target to increase the current share of gas in the energy mix from 6% as of today to 15% by 2030.

CBG companies, such as Gurugram-based EverEnviro Resource Management, have expressed their support for the new policy. “This move will provide the necessary stability for CBG developers to make substantial investments in infrastructure, ensuring a reliable and sustained supply of CBG,” said Mahesh Girdhar, CEO of EverEnviro Resource Management.

Biogas, a versatile fuel, comprises approximately 55-65% methane, 35-44% carbon dioxide, and traces of other gases. In its raw form, biogas can replace liquefied petroleum gas (LPG) for clean cooking, lighting, motive power, and electricity generation. It can also substitute diesel in diesel engines by up to 80%, and with 100% biogas engines, complete replacement is possible. Furthermore, biogas can be purified and upgraded to 98% methane purity, making it suitable for transportation or filling cylinders at high pressure of 250 bar.

Investments and projects on the horizon

Some of the biggest companies in the Indian energy space have announced decisions to set up CBG plants in the country. Adani Group and Reliance Industries plan to set up CBG plants over the next few years.

Mumbai-based Reliance has set up two demo units for CBG at Jamnagar in the state of Gujarat. It has also commissioned the first commercial-scale CBG plant at Barabanki in the state of Uttar Pradesh. The company plans to scale this up to 25 CBG plants across India. Its target is to establish 100 CBG plants in the next five years, consuming 5.5mn tonnes of agro-residue and organic waste, thereby mitigating nearly 2mn tonnes of carbon emissions, and producing 2.5mn tonnes/year of organic manure. This would result in reduction of about 0.7mn tonnes/year of imported LNG, according to Reliance.

Adani TotalEnergies Biomass (ATBL) is Adani Total Gas’ (ATGL) wholly-owned subsidiary to tap into India’s huge potential of bio-mass derived energy. ATBL is currently building a CBG plant in Barsana near Mathura in Uttar Pradesh with an eventual 600 tonnes/day feedstock processing capacity. 

In addition to utilising agricultural and livestock waste as feedstock, ATBL is also actively seeking opportunities in the municipal solid waste segment to expand its CBG production footprint. CBG is suitable for transportation and utilisation in the CGD network and fits seamlessly in ATGL’s existing CGD play. ATGL commissioned its first CBG station at Varanasi in Uttar Pradesh.

ATGL, a joint venture between Adani Group and France’s TotalEnergies, is authorised to operate CGD networks in 33 geographical areas across India. The company additionally operates in another 19 geographical areas in a joint venture with state-owned Indian Oil Corporation.

EverEnviro is currently undertaking 20 CBG projects across India, with five projects slated for commissioning by March 2024. The company operates a CBG plant in Indore in the state of Madhya Pradesh. The Indore plant, which came online last year, has a capacity of 550 tonnes/day.

Thermax, a leading Indian energy and environment solutions provider, has secured an order worth over 5bn rupees ($60mn) from an unnamed energy conglomerate to set up five bio-CNG plants across India. The company will set up one plant in the state of Rajasthan, one in the state of Madhya Pradesh, two in the state of Maharashtra and one in Uttar Pradesh. With the capacity to produce 110 tonnes/day of bio-CNG, these plants will utilise local feedstock exceeding 1,000 tonnes/day, which includes rice straw, Napier grass, cane trash and soya trash.

Mumbai-headquartered pan India-focused biomass supply chain management firm Punjab Renewable Energy Systems Private is expected to announce its plans to develop multiple biogas plants in India in the next three to six months, the company's founder Lieutenant Colonel Monish Ahuja told Gas Pathways recently. 

Some challenges need to be tackled 

According to ICRA, India has the potential to produce around 25mn tonnes/year of CBG from various feedstock sources like cow dung, chicken litter, and agricultural residue. However, CBG production in the country is yet to rise materially with the number of commissioned projects lagging significantly behind the planned projects.

Several impediments like round the year availability of raw materials, slow pace of approval for land acquisition and biomass storage from state governments, and lack of adequate fiscal support in the form of subsidies have resulted in low investments in the CBG sector. Additionally, the lack of pipeline connectivity to the CGD network results in additional costs for CBG players while transporting the gas to the CNG stations.

“While the pricing of the CBG resulting in meaningful returns for the entrepreneurs remains a key unresolved issue, ICRA expects the government of India will be working towards resolving these critical issues to allow a meaningful increase in CBG production in the country,” Vasisht said.