India for promoting flexible, open gas market globally

Bangkok: India on Thursday called on natural gas producers and consumers to join hands to promote flexible and transparent global markets for gas.

In an address to the 7th Asian Ministerial Energy Roundtable here, Oil Minister Dharmendra Pradhan said share of gas in India's primary energy basket is 6.5 per cent against global average of more than 24 per cent.

"Government has envisioned to increase the share of natural gas in India's energy mix to 15 per cent by 2030," he said in speech, 'Natural Gas: Overcoming Market and Policy Hurdles to the Golden Age of Gas'.

Pradhan said although Asia is the largest natural gas- consuming region and accounts for 70 per cent of global LNG imports, the region lacks a transparent LNG pricing benchmark.

Asian LNG consumers have historically relied on long-term contracts to guarantee the security of supply because they lack indigenous natural gas resources and have limited access to pipeline trade, he said.

"Globally, we are seeing winds of change. The traditional ways of doing business, based on destination-restricted, oil- indexed long-term contracts are gradually disappearing.

"These are now making room for enhanced flexibility and interconnectivity, promoting a more liquid, competitive and transparent marketplace," he said.

In today's oversupplied market with increasing number of exporting countries, it is important for producers to understand the perspective of consumers, demand centres and the changes that have taken place in these demand centres, he said.

"It is in our mutual interest to usher in and expedite the golden age of gas. For this, both producers and consumers should join hands to promote flexible and transparent global markets for gas and promote infrastructure for natural gas," he said.

The global natural gas market, he said, is undergoing a major transformation driven by new supplies coming from the United States and Australia.

Mozambique, Tanzania, Egypt, Israel, Canada and Cyprus are expected to enter the LNG market in the coming years.

"With this, all industry players will need to adjust their operating models. They should expect softer prices, more short-term trades, and demands for contractual flexibility," he said.

India, as a regional economic hub, is keen to develop a South Asian gas grid connecting important neighbours such as Myanmar, Bangladesh, Nepal, Bhutan and Sri Lanka.

India, the world's fourth-largest importer of LNG behind Japan, South Korea and China, is developing a Natural Gas Trading Exchange where both imported LNG and domestically produced gas can be traded.

"We are looking to increase the consumption of natural gas through policy measures in each micro segment of consumption," he said.

Last year, India imported 19 million tonnes of LNG, an increase of around 15 per cent over the previous year. This is equivalent to domestic gas production.

It has signed long-term contracts for import of around 22 million tonnes per annum of LNG from different supply sources across world such as Qatar, Australia, Russia and USA.

"In order to reduce the delivered cost of LNG to Indian market, Indian importers have adopted innovative approaches like time swap of volumes, destination swaps and contract on Free on Board basis," he said.

India plans to more than double LNG import capacity to 50 million tonnes per annum by 2022 by adding six new terminals. Also, 15,000 km of new gas pipeline and use of gas in cities is being pushed.

Fertiliser, power and city gas distribution are the three main sectors which contribute to the natural gas demand in India. In coming years, industrial sectors such as refinery and petrochemicals, ceramics and glass, cement, steel and sponge iron, paints and dyes, chemicals and auto manufacturing are expected to give a boost to natural gas demand in the country.

"We have taken several far-reaching measures in India to increase domestic production of gas and also to promote the usage of gas. We have introduced pricing and marketing freedom for gas producers in future exploration bidding rounds," he said.