Hit by crude oil prices, India looks to gas, LNG

After failing to get the expected quantity of gas from the Krishna Godavari (KG) basin, India seems to have decided to step on the pedal on LNG and gas projects.

Announcing the signing of the gas sales & purchase agreement (GSPA) for TAPI Gas Pipeline Project in Turkmenistan, Indian petroleum minister came out as highly bullish on the prospects for LNG and natural gas in India.

India is facing extreme financial and foreign exchange stress due to the high price of crude oil. It imports about $100 billion worth of crude oil every year for its own consumption, accounting for about a third of its consumption of foreign goods.

The country ranked number 1 in a recent survey by Bloomberg for ‘pain at the pump’, or the impact of oil prices on consumers. Despite being a low-income country, India has gas prices that are much higher than those in the United States, and comparable to those in Europe.

India already imports a large quantity of natural gas, in the form of LNG, particularly from Qatar. It is estimated to have imported about 8 million tonnes of LNG from Qatar alone during the last financial year, about 7% of its total hydrocarbon consumption.

India currently consumes about 160 million cubic metres of gas per day (mmscd), and was expected to have more than 200 million at its disposal. However, due to the poorer than expected performance of the Bay of Bengal fields, many of the expectations have turned out to be misplaced.

Many companies are now rethinking their gas pipeline projects.

However, petroleum minister Jaipal Reddy seems to have figured out a way out of the scarcity — through LNG and pipelines such as the TAPI (Turkmenistan Afghanistan Pakistan India) project.

Even as oil prices have galloped away to near alltime highs, gas prices are at decade lows, especially in North America, at $2.50 per 1000 cubic feet.

The dichotomy has led to considerable interest in LNG projects as such units convert natural gas into a liquid (LNG) that can be transported in ships.

“We are keen to diversify our source of LNG supplies and are looking to LNG exporters across the globe for tying up our growing requirement of LNG imports,” Reddy said.

“We are interested in not only buying additional quantities of LNG, but also seek to have equity participation in existing and upcoming LNG liquefaction projects globally. We are also keen to explore farm-in opportunities in producing oil & gas blocks whenever they may be available,” he added.

According to Reddy, the natural gas sector in India is projected to grow at a compound annual growth rate of 19.5% in the next five years.

India’s consumption of natural gas is expected to grow from the current 166.2 MMSCMD to 473 MMSCMD in 2017.

“Hence, we are focusing on building LNG infrastructure on the one hand and expansion of gas pipelines across the country, on the other. India’s LNG re-gasification capacity is poised to go up from 13.5 million tonnes to 48 million tonnes by 2017,” he said.

India’s current internal gas pipeline network is around 13,000 km long with a capacity of 334 MMSCMD. It is projected to grow by more than double to 31,757 km by 2017 with a capacity of 876 MMSCMD, Reddy added.