India's natural gas demand is forecast to more than double to 516.97 million cubic meters/day in fiscal 2021-22, according to a report commissioned by an oil ministry regulatory body.
Demand in fiscal 2016-17 is forecast at 378.06 million cu m/day, up 55% from estimated demand of 242.66 million cu m/day in fiscal 2012-13 (April-March), the report said.
Vision 2030: Natural Gas Infrastructure in India by downstream regulator Petroleum and Natural Gas Regulatory Board was prepared a year ago and made public in recent days.
It forecasts natural gas demand in India to grow at an average of 6.8%/year from 242.66 million cu m/day in fiscal 2012-13 to 746 million cu m/day in fiscal 2029-30 due to increases in demand for power generation, fertilizer production and city gas distribution.
"Gas-based power generation is expected to contribute the highest, in the range of 36% to 47%, to this demand in the projected period," the report said.
"The share of the fertilizer sector in overall gas consumption in the country is expected to go down from 25% in 2012-13 to 15% in 2029-30 owing to higher growth in other sectors," it added.
The report forecast 7.2% annual growth in gas supplies reaching 400 million cu m/day by fiscal 2021-22 and 474 million cu m/day in fiscal 2029-30.
Supply from domestic sources was projected to rise from 101.11 million cu m/day in fiscal 2012-13 to 156.7 million cu m/day in fiscal 2016-17 and 230 million cu m/day in fiscal 2029-30.
LNG imports were projected to rise sharply from 44.6 million cu m/day in 2012-13 to 143 million cu m/day in fiscal 2016-17 and 214 million cu m/day in fiscal 2029-30.
In a separate report by Ernst&Young released last Friday, analysts projected India's gas shortage to peak in the current fiscal year.
"Over the next few years, the shortfall in natural gas production in the country is expected to continue, with supply trailing demand. The shortage of gas is likely to reach its peak in fiscal 2014-15, with around 37% of demand being unmet," Ernst&Young said.
E&Y said incremental supply was expected to be met through LNG imports as domestic supply will fail to keep pace with the anticipated rise in demand, limiting its demand-supply projection for up to fiscal 2016-17.
LNG import potential is expected to increase to 150 million cu m/day by fiscal 2016-17, contributing around 42% of total supply, E&Y said.
CRITICAL OF GAS POLICY
The supply projections in the PNGRB report factor in a forecast 30 million cu m/day of gas that is expected to be received via the TAPI pipeline from fiscal 2021-22 onwards.
The PNGRB report was critical of the current government policy that determines priority in gas allocations and the volumes supplied.
The Gas Utilization Policy "creates artificial demand and discourages new suppliers and hence needs to be progressively removed," the PNGRB report said.
"A free market without compromising the long-term objectives of the nation would be a more prudent approach," it added.
The PNGRB report also touched on the controversial issue of gas pricing, saying the government had to make investment in the upstream and mid-stream gas sectors attractive to meet growing demand.
"Key to this would be sending the right price signals, which could be achieved by reforms in the power and fertilizer sectors to increase their affordability," the PNGRB report said.
In its report, E&Y said India's new gas pricing policy was expected to increase domestic production by encouraging upstream investment and overall it "augurs well" for the natural gas market.
India's cabinet approved a new gas pricing formula to come into effect from April 1 that would have almost doubled the prevailing $4.20/MMBtu gas price, but the oil ministry acted on the advice of the Election Commission to put the hike on hold due to ongoing elections that are due to end mid-May.
"This [new pricing] will improve India's energy security and increase availability of gas for its key gas-consuming industries... [and] is expected to increase certainty and transparency in the pricing of natural gas in India," E&Y said.
"So far, the gas market has been adversely affected by the government's current gas-pricing policy, and investment in the upstream sector declined to $1.8 billion in fiscal 2011-12 from $6.3 billion in fiscal 2008-09," it added.
The E&Y report, quoting Morgan Stanley, said gas prices of more than $8/MMBtu could result in incremental production of almost 95 million cu m/day over 20 years and would help to reduce India's LNG import costs by around $16 billion.
PNGRB said India's natural gas transmission network would increase from the current 13,000 km with a capacity of 337 million cu m/day to 28,000 km with a capacity of 721 million cu m/day over the next 5-6 years, connecting all major demand and supply centers in the country.
