Indian Court's Fuels Ban in Delhi Will Promote Gas Use
India's Supreme Court has banned the use of petroleum coke and 'furnace oil' -- a type of fuel oil -- in industrial units in Delhi and its satellite towns, known as National Capital Region (NCR). The ban will boost the usage of natural gas.
Taking cognisance of rising pollution in Delhi and nearby areas, the Supreme Court October 24 banned the use of petroleum coke and furnace oil in the NCR and also directed the governments of the states of Rajasthan, Haryana and Uttar Pradesh to notify the ban immediately, failing which its order will come into effect November 1.
The order is another step by the Supreme Court to curb pollution in the country’s capital, one of the world cities worst affected by industrial and vehicular emissions.
Rating agency ICRA believes this ban in addition to controlling pollution levels will have notable impact on industrial users and providers of alternate fuels like natural gas over a period of time.
K. Ravichandran, senior vice-president and group head, corporate ratings, ICRA says that as industrial units using petroleum coke and furnace oil would have to shift to alternate fuels such as natural gas. Accordingly, city gas distributors (CGDs) operating in the NCR should see a significant increase in their sales of piped natural gas to industries over the short to medium term.
“However, the shift will happen over time as these units will have to incur investment to switch fuels. Additionally, CGDs would have to extend their pipeline networks as many areas are not yet covered, and in areas which are covered last mile connectivity would have to be provided. Nevertheless several customers operating on dual fuel mode will be able to shift completely to gas immediately,” he said.
Petroleum coke has high levels of sulphur (up to 7% when produced from high sulphur crudes) and highly toxic metals such as vanadium and chromium.
Furnace oil also has high levels of sulphur (up to 4.5%), which would correspond to 'heavy fuel oil' elsewhere. Burning of these fuels releases oxides of sulphur and nitrogen which form particulate matter and accordingly are a cause for serious environmental and public health concern. However, these fuels are among the cheapest available to the industry and are widely used for heating and generating electricity.
ICRA believes that for consumers, the ban on pet coke and furnace oil would entail shift to more expensive fuels such as natural gas. At current prices, use of furnace oil is cheaper by about 30% than natural gas on an energy equivalent basis and pet coke price is a fraction of natural gas.
A shift to more expensive fuels might lead to some of the small players, especially those using pet coke, to shift out of NCR due to their business becoming economically unviable, ICRA said. But it adds that most furnace oil-based customers are expected to switch to alternative fuels, which will lead to additional piped natural gas (industrial) volumes to the CGDs.
Shardul Sharma