Dependence on natural gas import to increase as demand-supply gap widens

Dependence on natural gas import to increase as demand-supply gap widens
ICRA report reveals, the gas demand in India will rise to around 360 MMSCMD by FY 20 from the current demand potential of more than 250 MMSCMDOver the last two years natural gas production in India has steadily declined from 143 MMSCMD in FY 11 to 111 MMSCMD in FY 13. This can be attributed primarily due to fall in production of KG-D6 block from 56 MMSCMD in FY 11 to 26 MMSCMD in FY 2013. The problem has become graver as production from KG D6 has fallen further to less than 15 MMSCMD now. KG D6 problem is likely to remain as the production will continue to be at subdued levels, especially in comparison to anticipated production of 60-80 MMSCMD over the next 1-2 years. However, there could be modest increase in supplies by RIL and other domestic sources over the medium to long term. ICRA projects the domestic natural gas production from existing or already discovered fields to increase from 111 MMSCMD in FY 13 to around 125 MMSCMD by FY 16, which could further increase to around 183 MMSCMD by FY 20. Factoring in certain production from future discoveries, the domestic production could increase to about 200 MMSCMD by FY 25 notwithstanding the fall in the production from the existing fields. While the demand potential for natural gas is high, the actual offtake could critically depend upon the price competitiveness of gas against alternative fuels and timely commissioning of the proposed transmission pipeline infrastructure. According to a recent report by ICRA, the gas demand will rise to around 360 MMSCMD by FY 20 and further to around 435 MMSCMD by FY 25 from the current demand potential of more than 250 MMSCMD. It is to be highlighted that actual consumption of gas was around 140 MMSCMD in FY 13, which decreased in the last two years from 170 MMSCMD in FY 12 and 177 MMSCMD in FY 11 due to constrained gas availability. The report stated that a number of LNG regasification terminals are planned in India, which could significantly improve the R-LNG supply over the medium to long-term. The ability to complete the projects in a timely manner without material cost and time overrun and to tie up with the LNG suppliers as well as R-LNG customers would be key risks for the regasification segment, where the competition is expected to increase significantly over the longer term. Global LNG supply is expected to report modest increase during CY 2013 and 2014 and the demand growth would continue to outpace supply additions resulting in tight supply-demand during the short to medium term. However, global supply is expected to be boosted significantly during CY 2015 to 2017, which would considerably ease global supply-demand balance. Various reports project global LNG supplies to increase from 236 MMT in CY 2012 to around 300 MMT by CY 2015/16 and 410 MMT by CY 2019/20. The anticipated ease in global LNG market from CY 2016 onwards could benefit the existing and planned regasification terminals in India.

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