India's Gas Output To Jump 52% By 2024 Led By ONGC, Reliance-BP

By 2024, India's natural gas production is expected to increase by 52% to 122 million standard cubic metres per day, as state-owned Oil and Natural Gas Corporation (ONGC) and Reliance Industries Ltd-BP combine to expand production from the KG basin fields.

According to HDFC Securities, natural gas output in 2019-20 was 85 mmscmd, and it is expected at 80 mmscmd the following year.

As per the estimates. the output is projected to increase in FY22 to 93 mmscmd, 107 mmscmd in the following year and 122 mmscmd in FY24.

The expansion of the output aligns well with the government plans for increasing the share of natural gas in the country's energy sector to 15% by 2030 from the current 6.2% in order to reduce emissions.

ONGC's production is expected to grow to 67 mmscmd in FY22 from 62 mmscmd the previous year. In FY23, this will increase to 69 mmscmd, and 75 mmscmd in FY24.

Non-PSU gas output will rise as a result of the Reliance-BP partnership, which started producing newer fields in their eastern offshore KG-D6 block in December 2020.

Domestic gas demand is expected to rise from 153.8 mmscmd in FY21 (April 2020 to March 2021) to 215.5 mmscmd in 2024-25, according to the study.

India's domestic gas supply is unlikely to fulfil all of the country's needs, so the country imports liquefied natural gas to make up the difference (LNG).

The KGD6 consortium has requested bids from customers in order to sell an additional 5.5 mmscmd of gas from the Krishna Godavari (KG) Basin block off India's eastern coast, according to HDFC Securities.

 

The extra gas will be available for purchase at the Gadimoga distribution point near Kakinada starting in the last week of April or early May 2021.

NGC has also issued a tender for potential buyers to bid on gas supplies from its KG-DWN-98/2 field off the coast of the KG Basin. The company plans to start supplying 2 mmscmd of gas from the field to the Odalarevu onshore terminal in Andhra Pradesh in June 2021.

This increased gas supply from domestic sources could help Indian gas utilities expand their earnings and valuations.

Tenders for gas from the KG Basin show that domestic gas production is ramping up faster than investors anticipated.

The KG-D6 consortium's and ONGC's tenders to sell gas from the KG Basin support our thesis of increasing domestic gas output. These and previous tenders suggest a complete increase in gas supply from domestic sources of about 20 mmscmd (23% of FY20 domestic supply) between December 2020 and July 2021

The KG-D6 consortium formed a Gas Sales and Purchase Agreement (GSPA) with customers to sell 4.8 mmscmd of gas from the KGD6 Basin in November-19 and 7.5 mmscmd of gas in February-21, respectively.

In December 2020, the consortium started producing gas from R-cluster, an ultra-deep water gas field. The first of the three projects to go operational is R-cluster.

The Satellites Cluster and MJ fields are scheduled to begin development in mid-2021 and 2022, respectively. By 2023, peak gas production from the three fields is estimated to be 30 mmscmd.

ONGC started producing gas from KG-DWN-98/2 in March 2020. In FY22, it is anticipated to exceed 3 mmscmd, and by FY24, it is expected to increase to 15 mmscmd.

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