LNG import may exceed domestic production

India’s import of natural gas will surpass domestic production in two years as output from fields like Reliance Industries’ KG-D6 field stagnates. The country’s imports of liquIfied natural gas (LNG), which cost three times the price of domestic gas, is projected to rise exponentially over the next 2-3 years, according to the latest projections made by the Oil Ministry.

Imports of LNG or natural gas – cooled to its liquid form for ease of transporting in ships – at 39.32 million standard cubic metres a day constituted 25.5 per cent of the total consumption of the fuel in India in 2011-12.

This share will rise to 41 per cent in the current fiscal and to 50 per cent in the next, the Ministry’s projections showed. In 2012-13, domestic natural gas production is estimated to be around 104 mmscmd, down from 114.90 mmscmd in the previous fiscal primarily because KG-D6 output has slipped to 23 mmscmd from over 30 mmscmd last year.

In the current fiscal, LNG imports will jump to 73 mmscmd and are projected to further rise to 105 mmscmd in 2013-14, equalling the domestic gas production of that year. In 2014-15, imports at 115 mmscmd will surpass domestic production of 113 mmscmd, the Ministry estimates said.

For a nation whose current account deficit is already battered by 79 per cent reliance on imports for meeting oil needs, higher share of LNG is not good news.
Industry officials said the domestic output has stagnated in the absence of remunerative prices.

UK’s BP Plc, which partners RILBSE -0.68 % in the flagging KG-D6 gas block and other gas discovery areas, recently wrote to Oil Minister M. Veerappa Moily saying around 5 trillion cubic feet of discoveries in KG-D6 and NEC-25 block in Mahanadi basin can be developed on price clarity.

The reserves RIL-BP have more than the remaining resource in the State-owned Oil and Natural GasBSE -1.22 % Corp’s fields.

Majority of domestic natural gas is priced at $ 4.2 per million British thermal unit which is one-third the price at which LNG is imported by Petronet LNG LtdBSE -0.90 % and other firms.

The Government has been resisting revising the domestic prices fearing its impact on power tariffs and fertiliser cost even as KG-D6 output has plummeted to less than half to 24 mmscmd.

It may be noted here that a couple of weeks ago, Argentina trippled wellhead price for new natural gas production to $ 7.50 per mmBtu. The South American nation too imported LNG at up to $ 15 per mmBtu rate, quite similar to the position in India. Pakistan also has announced a new exploration policy giving price of $ 7 for shallow water finds, $ 8 for deep sea discoveries and $ 9 for ultra deep exploration.

China too has offered subsidies to energy companies which develop the nation’s shale-gas resources.

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