Maarg Manthan · Topic 21.4

Natural Gas and the Petroleum-Gas Value Chain

Geography › Mineral and Energy Resources · Topic 21.4

Natural gas, mostly methane, is the cleanest fossil fuel and occurs with oil as associated gas or alone as non-associated gas. It is transported by pipeline or as liquefied natural gas, LNG, and used as CNG in vehicles, PNG in homes, and as fuel and feedstock in power and fertiliser plants. The value chain runs from exploration and production through processing, transport and storage to distribution. India uses about 6 per cent gas in its energy mix and imports about half of its needs.

5 min read · UPSC Prelims · Geography · Mineral and Energy Resources

At a Glance

Main component Methane
Forms LNG, CNG, PNG, LPG
Largest reserves Russia, Iran, Qatar, United States
India’s share About 6 per cent of energy; target 15 per cent
Source of India’s gas Domestic about half, imports about half
Exam link UPSC Prelims, Geography: Mineral and Energy Resources

Where Does It Fit?

This is the fourth topic of the macro on mineral and energy resources. The previous topic described petroleum, and this one covers natural gas, which usually occurs with it. The next topic covers unconventional gas sources. Previous topic: Petroleum – Formation and Distribution. Next topic: Unconventional Gas – Coalbed Methane, Shale Gas and Tight Gas.

What Is Natural Gas, and How Is It Used?

In short: natural gas is a clean-burning fuel that is moved by pipe or cooled into a liquid for ships.

Origin and types: gas forms in the same way as oil, from buried organic matter, and is found in sedimentary basins, as in Petroleum – Formation and Distribution. Associated gas is found above or dissolved in crude oil; non-associated gas is found in reservoirs with little or no oil.
Forms: compressed natural gas, CNG, is stored under high pressure and used as a fuel for vehicles; piped natural gas, PNG, is supplied through pipes to homes, industry and commerce; liquefied natural gas, LNG, is cooled to about minus 162 degrees Celsius, which shrinks its volume about 600 times and allows transport in ships; liquefied petroleum gas, LPG, is propane and butane from refining and gas processing, used as cooking gas.
Uses: electricity generation, fertiliser production (urea uses gas as feedstock), petrochemicals, refineries, industrial heat, city gas and transport. It emits about half the carbon dioxide of coal when burned, so it is regarded as a transition fuel, though methane leaks from its supply chain are a climate concern, as in Coal – Formation, Classification and Distribution.

What Is the Petroleum-Gas Value Chain?

Segment	Activity	Examples
Upstream	Exploration, drilling and production of oil and gas, onshore and offshore	ONGC, Oil India, Reliance and bp in the KG basin
Midstream	Gathering, processing, treatment, pipeline transport, LNG liquefaction and regasification, storage	GAIL pipelines, LNG import terminals at Dahej, Hazira, Dabhol, Kochi, Mundra, Ennore and Dhamra
Downstream	Refining of crude into products, petrochemicals, marketing and distribution to consumers	Indian Oil, BPCL, HPCL refineries and petrol pumps; city gas distribution companies

Gas from the wells is processed to remove water and impurities and the heavier gases that form LPG and natural gas liquids. Pipelines carry the gas in bulk, and LNG tankers carry it overseas. At the destination, regasification terminals convert LNG back to gas. City gas distribution networks deliver PNG to households and CNG to filling stations in many cities and districts.

Where Is Gas Found, and What Is India’s Position?

World: the largest reserves are in Russia, Iran and Qatar, which shares the giant North Field–South Pars field with Iran, followed by the United States and Turkmenistan. The United States is the largest producer and a leading LNG exporter, and Qatar and Australia are also large LNG exporters. After the cut in Russian pipeline supplies to Europe in 2022, LNG became the main means of supply.
India’s output: about 36 billion cubic metres a year, mostly from Mumbai High, Bassein and the Krishna–Godavari basin, Assam, Gujarat and Rajasthan, and it has been flat or slowly falling, while demand has grown.
Imports: India imported about 35 billion cubic metres in 2025–26 as LNG, mostly from Qatar, the United States, the United Arab Emirates and Angola, so conflicts in the Gulf and the Strait of Hormuz put supply at risk.
Infrastructure: a gas pipeline grid of about 25,000 km, with the aim of One Nation One Gas Grid, and city gas networks that have grown to cover most of the country’s districts.
Policy: the target to raise the share of gas in the energy mix to 15 per cent by 2030, the pricing formula of 2023 that links domestic gas prices to the price of the Indian crude basket with a floor and a cap, and priority supplies to city gas for households and transport.

As an analytical point, India’s gas story is one of ambition and constraint: the policy objective of a gas-based economy faces limited domestic gas, high import prices and competition from coal and renewables. Gas will therefore find its place mainly where it is hard to replace, such as fertilisers, city gas, flexible power to balance renewables, and industries, not as a broad substitute for coal, as in Unconventional Gas – Coalbed Methane, Shale Gas and Tight Gas.

Why Is This Topic Important?

Concepts LNG, CNG, PNG asked
Policy Gas grid and pricing
Security Import risk

What Came Next?

The next topic describes the unconventional gas sources. Next topic: Unconventional Gas – Coalbed Methane, Shale Gas and Tight Gas.

Key People and Terms

LNG Liquefied natural gas
CNG Compressed natural gas
PNG Piped natural gas
Associated gas Gas found with oil
Regasification Turning LNG back to gas
City gas distribution Local gas supply networks

Exam Corner

Points to Remember

LNG is cooled to about minus 162 degrees Celsius.
CNG for vehicles; PNG for homes.
Value chain: upstream, midstream, downstream.
Gas emits about half the carbon dioxide of coal.
Target share of gas in India: 15 per cent by 2030.

Do Not Confuse With

LNG and LPG Methane liquefied by cooling versus propane and butane
CNG and PNG Vehicles versus pipelines to homes
Associated and non-associated gas With oil versus alone

Memory Hook

Drill, treat, pipe or chill; regasify and deliver: CNG for the car, PNG for the kitchen.

Mains Angle

Questions ask about the gas-based economy. These points add depth.

Role Cleaner transition fuel
Constraint Limited domestic output
Risk Import and price shocks

A Question You May Face

An original practice question, not a past paper question.

“Discuss the prospects and constraints of increasing the share of natural gas in India’s energy mix.”

How to Answer

Nature Gas types and uses.
Chain Upstream to downstream.
India Output, imports, grid.
Issues Price, security, climate.

GS Relevance

Prelims: associated and non-associated gas, LNG, CNG, PNG, terminals, pipelines, gas pricing. GS Paper 3: energy security, gas-based economy, climate.

Frequently Asked Questions

What is natural gas?

Natural gas is a fossil fuel that is mostly methane, formed from buried organic matter like oil and found in sedimentary basins. It burns more cleanly than coal and oil, and is used for power, fertilisers, industry, cooking and transport, either through pipelines or after being liquefied.

What is the difference between CNG, PNG and LNG?

CNG is compressed natural gas stored at high pressure as vehicle fuel. PNG is piped natural gas delivered through pipelines to homes and industries. LNG is natural gas cooled to about minus 162 degrees Celsius to become a liquid, so that it takes much less space and can be shipped by tankers.

What is the petroleum and gas value chain?

The value chain has three segments: upstream, which is exploration and production; midstream, which includes processing, pipelines, liquefaction, regasification and storage; and downstream, which includes refining, petrochemicals, marketing and distribution to consumers such as petrol pumps and city gas networks.

How much natural gas does India produce and import?

India produces about 36 billion cubic metres of natural gas a year, mostly from Mumbai High, Bassein and the Krishna–Godavari basin, and imports a similar volume as LNG, mainly from Qatar, the United States and the UAE. Gas is about 6 per cent of India's energy mix, with a target of 15 per cent by 2030.

What is the One Nation One Gas Grid?

One Nation One Gas Grid is a policy aim to build a national network of natural gas pipelines connecting gas sources and LNG terminals with all regions, to ensure the supply of gas at uniform tariffs. India has built about 25,000 kilometres of pipelines, with more under construction.

PYQ Practice — Statement Analysis

1 LNG is natural gas cooled into liquid form for transport.

True

It is at about minus 162 degrees Celsius.

2 CNG is supplied to homes through pipelines.

False

That is PNG; CNG is for vehicles.

3 Associated gas occurs with crude oil.