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Much optimism on gas demand; consumption to zoom in the near term

Business Standard:  May 07, 2018

New Delhi: One more terminal for import of liquefied natural gas (LNG) was inaugurated last week. At first glance, one wonders why. For, the country’s demand is currently far behind the capacity to supply.

Pipeline utilisation of state-run GAIL India is a mere 40-45 per cent; it is having a problem finding further markets for imported LNG. "A majority of gas-based power plants have got stranded. Between 50 to 60 per cent of the LNG we have contracted from the United States will be sold outside or swapped due to demand shortage," said a GAIL official, asking for anonymity.

Of the 25,329 Mw total of gas-based power plants’ capacity in the country, at least 14,000 Mw is reportedly stranded. Despite this, at least 10 more LNG projects are to come up, with four already operational. Taking the total capacity of terminals to around 72.5 million tonnes per annum (mtpa).

According to a report by the Petroleum Planning and Analysis Cell of the government, against a projected consumption of natural gas of 494 million standard cubic metres a day (mscmd) for 2017-18, the consumption was 144.75 mscmd. Even so, import of LNG rose 6.6 per cent over the previous year. India is now the world’s fourth largest LNG importer.

Demand optimism

A four-mt Floating Storage Re-gasification Unit-based LNG terminal by H-Energy Gateway (energy venture of the Hiranandani Group) was launched last week at the JSW Jaigarh Port in Ratnagiri district of Maharashtra. The terminal is likely to be operational by the fourth quarter of 2018. "We have 100 districts in India where city gas licenses have been awarded. This June, of the 670 districts in India, another 100 will be awarded. So, demand will double. Total (annual) consumption of gas is now 40 mt and we think it will move to at least 80 mt in the next five to six years. Half of it comes from domestic sources. So, 22 mt we import and 20 mt we produce domestically," said Darshan Hiranandani, managing director of H-Energy.

He adds that all mega terminals might not but all small-scale terminals would do good business.

A rise in demand is expected from power, city gas, fertiliser and industrial consumers. According to Petronet LNG, the country’s demand is set to increase by 82 per cent to 654 mscmd by 2026-27. Demand from city gas is set to zoom from 22 mscmd in 2016-17 to 68 mscmd by 2026-27. And, power sector from 157 mscmd to 309 mscmd during the period.

"We expect a rise in demand post 2020 and are already in talks with refineries, power plants and petrochemical units near our planned and existing pipelines," the GAIL official added. India is set to bring its first LNG cargo from Gazprom in May, after the Russian company and GAIL agreed to bring down prices, based on a new formula agreed this January. The company also plans to bring at least 80 cargoes of LNG from America in this financial year. GAIL has already signed a $32-billion supply deal for 20 years with the Dominion Energy Cove Point project in Maryland and Cheniere Energy's Sabine Pass project in Louisiana.

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