The market for imported natural gas in India is set to quadruple in value to nearly $15 billion in a couple of years due to a huge surge in investments on facilities meant to process the imported liquefied natural gas (LNG).
The supply of this fuel, costlier than scarce domestic gas, is expected to more than double in India from the present 39 million cubic metres a day (mmscmd) by next year.
This is because a clutch of companies is planning new capacities for LNG import infrastructure including India Gas Solutions (a Reliance-BP joint venture), Petronet LNG and public sector IOC and Gail India.
A robust parallel market for imported gas at free-market price would be too hard for the government to ignore while fixing the price of domestic gas from the fields of ONGC, Oil India and Reliance Industries that now sell at about $4.2 per unit, a fourth of the price the fuel commands in global spot markets.
Executives from leading LNG players in India said their companies are creating infrastructure to meet the demand for LNG that is expected to double in the next couple of years.
“Our Dahej Terminal would be one of the biggest in the world with a capacity to process 15 million tonnes in four years. Another 5 million tonne capacity would be ready in Kochi later this year. We will have a 20 million tonne capacity by this year end,” AK Balyan, MD & CEO of Petronet LNG told FE.
India’s LNG regasification capacity is set to go up from the present 13 million tonne to 30 million tonne by 2015. Balyan said another planned Petronet terminal (5 million tonne capacity in the east coast near Vishakhapatnam) may require R4,000-4,500 crore investment. The company will finalise the proposal next month.
According to Dilip Khanna, partner, (oil and gas practice) Ernst & Young, the current capacity expansion is the result of an investment of about $4 billion that is underway but the country needs $10-14 billion more investment to build sufficient muscle to make LNG available to an energy-hungry domestic industry. He said gas-rich nations are setting up facilities to ship their resources to customers such as India.
“Australia is investing about $250 billion in LNG liquefaction capacity (for exports). Besides, the US is converting some of its LNG regasification terminals into liquefaction capacity to facilitate shale gas exports, which would be available in the international market by 2015,” said Khanna.
Now the country produces roughly 140 million cubic metres a day of gas but it is expected come down in the next couple of years due to a decline in production from RIL’s D6 block in the Krishna Godavari basin.
ONGC’s output, which is expected to go up to 73 mmscmd in 2012-13 is also expected to gradually decline from 2015-16, which would further boost LNG demand.
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