India's gas output to double to 211 mmscmd by 2026-27

India's natural gas production will more than double to 211 million standard cubic metres per day by 2026-27 on back of desired policy support and correct pricing signals, the oil regulator has said.

New Delhi: India's natural gas production will more than double to 211 million standard cubic metres per day by 2026-27 on back of desired policy support and correct pricing signals, the oil regulator has said.

Domestic gas production, which was 101.1 mmscmd in 2012-13, is projected to rise to 156.7 mmscmd in 2016-17 and to 182 mmscmd in 2021-22, according to a study commissioned by the Petroleum and Natural Gas Regulatory Board (PNGRB).

The report further projected the output to rise to 211 mmscmd in 2026-27 and to 230 mmscmd in 2029-30.

The natural gas sector, it said, is at the threshold of rapid growth in India supported by ever increasing demand, increased exploration efforts, commissioning of LNG import terminals and the development of a nation wide natural gas pipeline grid.

"However, there is a need to provide a proactive enabling environment to support the fast-paced development of natural gas infrastructure," the report said. "An enabling environment includes providing desired policy support and the correct pricing signals for investment in the sector."

The report comes amidst government accepting a formula proposed a committee headed by Prime Minister's economic advisor C Rangarajan for pricing of all domestically produced natural gas at an average of international hub rates and cost of imported LNG. Gas price as per this formula will double to USD 8.4 per million British thermal unit when implemented in April 1, 2014, a rate which has been hotly contested.

The PNGRB commissioned report said the enabling environment also includes "reforming the present set of regulations to adopt to changing needs and making them more robust and addressing the distortions in the fiscal regime applicable for natural gas."

India's demand for natural gas, it said, is likely to more than double to 517 mmscmd day by 2021-22 from 242.66 mmscmd in 2012-13. It will further rise to 746.03 mmscmd in 2029-30.

Demand will outstrip supplies even after considering import of gas in its liquid form (liquefied natural gas or LNG) and transnational pipeline from Turkmenistan seeing light of the day.

Total supplies of 145.7 mmscmd in 2012-13 was short of demand of 242.66 mmscmd. The supplies made up of 101.1 mmscmd from domestic fields and another 44.6 mmscmd coming from LNG imports.

In 2021-22, LNG imports will outstrip domestic production with an estimated 188 mmscmd being shipped into India. Together with production of 182 mmscmd from domestic fields and another 30 mmscmd coming rom the TAPI pipeline, the total supplies will be 400 mmscmd, far less than 516.97 mmscmd demand.

"The Government of India currently allocates gas produced domestically as per Gas Utilisation policy. This creates artificial demand and discourages new suppliers and hence need to be progressively removed.

"A free market without compromising the long term objectives of the nation would be a more prudent approach," the report by the Industry Group for PNGRB said.

The aim of the gas policy, it said, should be to attract investments and develop gas markets.

Also, policy initiative should be taken to facilitate development of a market for gas through initiatives like developing trading hubs and trading platform to discover prices and thereby creating sufficient depth in the Indian natural gas market.

"This would help more investment find its way into the hydrocarbon exploration and infrastructure sector and ensure efficient usage of the infrastructure," it said.

To meet the growing demand for gas, government needs to achieve the objective of attracting investments in the upstream and midstream gas sector.

"Key to this would be sending the right price signals which could be achieved by reforms in the power and fertiliser sector (main consumers of gas) to increase their affordability," it said.

The government should also evaluate alternatives to the present differential tax regime for gas which is hindering free movement and swaps.

"In future, the natural gas demand is all set to grow significantly at a CAGR of 6.8 per cent from 242.6 mmscmd in 2012-13 to 746 mmscmd in 2029-30," the report said.

Nearly half of this demand will come from power sector while fertiliser sector's requirement in the overall basket will shrink to 15 per cent in FY 2030 from 25 per cent in FY 2013.

The capacity of LNG import terminals in India is expected to increase from 17.3 million tons per annum in 2012-13 to 83 million tonnes in 2029-30 assuming all the existing and planned terminals materialise.

Natural gas availability through non-conventional sources like Shale Gas and Gas Hydrates has not been considered in gas supply projections in the absence of data, it said.

The total supply of natural gas is expected to grow at a CAGR of 7.2 per cent from 2012 to 2030 reaching 400 mmscmd by 2021-22 and 474 mmscmd by 2029-30.

The demand-supply gap of 97 mmscmd in 2012-13 is likely to reach about 272 mmscmd by 2029-30 as increase in supply lag behind a steady increase in demand, it said.

India, currently, has a network of about 13,000 km of natural gas transmission pipelines with a design capacity of around 337 mmscmd. This pipeline network is expected to expand to around 28,000 kms with a total design capacity of around 721 mmscmd in next 5-6 years.