Natural Gas-The Growing Relevance: India’s Energy Landscape

It is a global consensus that 21^st Century shall belong to gas. Gas is set to occupy this position driven by number of factors covering growing concerns and acceptance about global warming, technological advantages of gas use in power generation and other end use sectors, growing substitutability of liquid petroleum products by gas, more wider geographical distribution of gas reserves globally, advances made in scaling up LNG production and shipping capacities, growing concerns about nuclear power generation after Fukushima and, finally, emergence of new and unconventional gas resources, like Shale gas, as very credible supply sources over long term.

Natural gas is thus set to play an increasingly important role in the global energy mix. Currently, gas consumption is 24 percent of the total primary energy consumption globally and global gas demand is projected to increase from 3200 bcm now to 4500 bcm by 2030 thus registering a growth rate of 40 percent. The US shale gas revolution seems to have given a significant boost to the industry however it will take some time before the real impact of shale gas resources becomes visible. Meanwhile new conventional gas reserves in large accumulations have also been discovered around the world notably the recent discoveries in eastern Africa.  

In spite of global economic down turn over the past few years the demand for LNG continues to be robust especially in light of the shutdown of nuclear capacity shut down by Japan and growing gas demand in few other countries. During 2012, the total global LNG trade was 236 mmtpa and this is projected to increase to 400 mmtpa by 2025.

While new liquefaction capacities are being added in many exporting countries, it is worth noting the projected very large growth of LNG trade originating from Australia including Coal Seam Methane to LNG Project of BG Group slated to go on stream during 2014. New and emerging suppliers include USA, Canada, and east African counties Mozambique and Tanzania. Gas reserves in Mozambique are now estimated at around 100 tcf with around 20 tcf in Tanzania as of now. It is understood Mozambique is making rapid progress in LNG project development with Eni and Anadarko signed heads of agreement (HOA) for the joint development of liquefaction plant to develop their respective resources. Thus, LNG trade is rapidly increasing its footprints geographically with a continuous rise in the number of LNG exporters and importers participating in the LNG trade.

India, presently facing a natural gas supply crunch primarily owing to the decline of KG-D6 gas production levels, is in dire need to secure additional gas/RLNG as well as diversify its natural gas basket. Natural gas production in India in 2012-13 was 144 mmscmd as compared to total demand of 275 mmscmd. The total LNG imports in India in 2012-13 were 52 mmscmd i.e. 26.5 percent of total gas consumption. The gas demand is expected to increase to 470 mmscmd by the end of 2017. However, given the domestic gas supplies outlook, sluggish progress with  commercial exploitation of unconventional resources  CBM; and also, uncertain schedule for  in transnational pipeline projects it is evident that India will need larger and larger imports of LNG to meet the overall gas demand besides meeting the gas requirement of existing gas based power and fertilizer plants.

At present 3 LNG receiving terminal are operational in India, at Dahej- Hazira and Ratnagiri with a combined capacity of 14.8 mmtpa (53 mmscmd). Both Dahej and Hazira terminals have been recently expanded and would go for further expansion.   Considering the future gas demand projections and the supply gaps, a number of LNG terminal are under construction/completion ( Kochi) and advanced stages of FID (Ennore and Mundra) which are expected to add  a combined capacity of 37.8 mmtpa with requiring capital expenditure of more than Rs 240,000 Crore.

With a coastline of 7,517 km, floating terminals, particularly FSRU can serve the purpose in best possible way for Indian market scenario in view of several advantages such as low cost, short lead time and flexibility. Many players such as GAIL, Petronet LNG, GDF and Swan are pursuing LNG project opportunities through FSRU terminal in India. Presently, GAIL is planning to deploy a FSRU in the eastern coast of India. The company has started carrying out feasibility study and also invited tender for the FSRU vessel from global players. Swan energy has already started the work for FSRU in Pipavav in western coast and FSRU is expected to commission by FY15. PLL is also planning to have a LNG terminal on the east coast of India. Gangavaram port of Andhra Pradesh is finalized for this project. FSRU is expected to have a capacity of 5 mmtpa catering to the gas demand of eastern part of country.

Moving forward, LNG players in India will need to proficiently strategize and assess the feasibility of integrated business models in order to sustain the growth momentum in the country. Further, the LNG operators should thrive to build upon a diversified LNG supply portfolio and an optimal mix of spot, short-term and long-term cargoes. India is at an advantageous position to secure its LNG supplies with credible source to its west as well as to its east. Simultaneously, the regulatory and policy framework of the country should impart stability and clarity which would facilitate the swift progress of R-LNG business in India. One aspect is clear- India will emerge as one of the major LNG importer in the world over medium term.

Keeping in account the importance on Natural Gas in 21^st century Infraline Energy has came up with a publication “Natural Gas-The Growing Relevance: India’s Energy Landscape” entailing the current scenario and forecast of natural gas production, exploration and LNG imports in India. This publication provides a detailed analysis of the impact of the proposed gas price hike on the end consumers. 

                        Infraline Energy Oil & Gas Research Team