Livemint: August 17, 2016
New Delhi: Oil and gas companies will invest about Rs.2.5-3 trillion in India over the next few years to produce around 10-15 trillion cubic feet of natural gas and help build a gas-based economy, said Sashi Mukundan, BP’s head of country, India.
Mukundan, who also chairs the hydrocarbon wing of the Confederation of Indian Industry, was speaking to reporters after sharing an industry road map with oil minister Dharmendra Pradhan. The road map is based partly on concrete investment commitments of individual companies and partly on projections, Mukundan said.
Private sector gas producers signalled their willingness to make fresh investments after the Union cabinet on 10 March approved a liberal pricing regime for natural gas produced in hard-to-reach areas. The proposed investments will help raise the share of gas in the country’s primary energy mix (comprising crude oil, gas and coal) from 6% now to about 15% by 2030, said Mukundan.
“The intent is to boost gas production by intensifying exploration, accelerating production from existing fields, enhancing hydrocarbon recovery and forging partnerships. If successful, it will generate investments of Rs.2.5-3 trillion in the upstream sector, revenues of Rs.2.5 trillion and replace almost Rs.10 trillion of imports,” said Mukundan.
Oil minister Pradhan had told Mint in an interview in March that greater use of gas—the cleanest among other primary fuels—will bring savings to the economy, and that more gas import terminals and pipeline network were being built.
The industry plan presented to the minister on Tuesday proposes savings based on enhanced domestic production which will replace not just other primary fuels, but also imported liquefied natural gas (LNG). The idea is to increase consumption in power, fertilizer, city gas distribution sectors and in industry in general.
The current low price of natural gas in world markets has turned out to be a blessing in disguise to make fresh investments in the energy-starved country as procuring equipment and services for gas field development has become cheaper.
“A lot of the investments in existing oilfield assets were made 10-15 years ago, when oil price was at $20-30 a barrel,” said Mukundan, adding that there was a lot of demand for gas in the economy and that there certainly will be takers for the fuel.
After the cabinet prospectively adopted revenue sharing as the basis for allowing exploration licences and a liberal pricing formula for gas to be extracted from deep sea, both the Reliance Industries-BP-Niko Resources consortium and state-owned Oil and Natural Gas Corp., with assets in the Krishna Godavari basin, revived their investment plans.
The industry blueprint envisages creation of infrastructure to boost consumption of gas, especially in city gas distribution. According to Anish De, partner, infrastructure & government practice, KPMG in India, gas consumption in India is currently significantly below potential and makes up only 6.5% of India’s energy basket, down from 12% a few years ago.
“Infrastructure deficit is one of the key reasons holding back sector development. The creation of infrastructure will also aid market creation, which is essential for sector development,” said De.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.