India’s gas output to grow by 50% in the next three years

Mumbai: India’s natural gas production from hydrocarbon resources is expected to rise 52% in the next three years, outstripping the growth in demand from power and fertilizer firms during the same period, according to the oil ministry.

In a written reply to the Rajya Sabha, petroleum minister Dharmendra Pradhan said India’s natural gas output is projected to increase to almost 230 million metric standard cubic metres per day (mmscmd) by 2017-18 from the current 138.33 mmscmd as at the end of 2014-15, a growth of 52%. This is against a growth in demand of 27% from the core natural gas consuming sectors—power and fertilizer.

The reply said that demand from power and fertilizer companies during the same three-year period will grow from 130.821 mmscmd to 166.62 mmscmd, leaving almost 63 mmscmd to be tapped by other industries.

This is over and above the efforts taken by Prime Minister Narendra Modi’s government to increase the gas availability and utilization in the country.

“Government has taken several steps to improve the availability of gas which, inter-alia, include, intensification of domestic exploration and production activities through New Exploration Licensing Policy (Nelp) rounds, development of shale gas policy framework, research and development of gas hydrate resources in the country, import of liquefied natural gas (LNG), exploring possibility of transnational gas pipelines, clearance for exploration and development of some Nelp blocks, exploration in the mining lease area with certain conditions and acquisition of overseas oil and gas assets,” said the minister in his reply.

The increasing supply, however, is not sufficient to meet the burgeoning demand of natural gas in India as a substantial portion of the demand goes largely unmet and is not factored in to calculate the current demand number. Besides, at current consumption levels, the gas-starved Indian industries are heavily skewed towards imports of regassified LNG (R-LNG).

At the end of March, India’s total natural gas consumption stood at 134 mmscmd against an availability of 90 mmscmd, with the remaining met through imports of R-LNG, according to petroleum planning and analysis cell (PPAC), a statistical body under the oil ministry.

This is over and above the demand which is currently completely unmet due to unavailability.

“It is very difficult to put a number to the current rate of growth in natural gas demand in India as there are multiple user industries dependent on gas beyond power and fertilizer. Many of these industries are currently operating on costlier fuel or not operating at all,” said Salil Garg, director, corporates, Indian Ratings and Research Pvt. Ltd.

He said the demand of gas is mainly a function of three main factors – availability of natural gas, infrastructure available to transport the gas and the price of natural gas. When any of these factors turn favourable, the demand increases substantially.

In fact, India had been a laggard in even meeting its natural gas production target with the production at 3.365 billion cubic metres (bcm), down 5% from 3.54 bcm produced in 2013-14 and down 8.1% from the target production of 3.66 bcm, according to an oil ministry note released in April.

In the last 10 years, while India’s domestic production has grown by 10%, India’s imports of R-LNG has grown by 335% due to a major growth in demand, which has risen by almost 46%, according to PPAC.

Apart from power and fertilizer, other gas consuming sectors are automotives, which consume compressed natural gas, households, which consume piped natural gas, steel and cement companies and petroleum refineries.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.