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chris rumley, marina kim, allison ball,

and robert curtotti


december 2007
abare research report 07. 23
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natural gas in india
prospects for LNG imports
abareconomics.com
ii
Commonwealth of Australia 2007
This work is copyright. The Copyright Act 1968 permits fair dealing for study,
research, news reporting, criticism or review. Selected passages, tables or
diagrams may be reproduced for such purposes provided acknowledgment of the
source is included. Major extracts or the entire document may not be reproduced
by any process without the written permission of the Executive Director, ABARE.
ISSN 1037-8286
ISBN 978-1-921448- 07-2
Rumley, C., Kim, M., Ball, A. and Curtotti, R. 2007, Natural Gas in India
Prospects for LNG Imports, ABARE Research Report 07.23 Prepared for the
Australian Government Department of Resources, Energy and Tourism, Canberra,
December.
Australian Bureau of Agricultural and Resource Economics
GPO Box 1563 Canberra 2601
Telephone +61 2 6272 2000 Facsimile +61 2 6272 2001
Internet abareconomics.com
ABARE is a professionally independent government economic research agency.
ABARE project 3126
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natural gas in india abare research report 07.23
foreword
Consumption of natural gas in India has the potential to rise signicantly, on the
basis of robust economic growth, an expanding population and recent large
domestic gas discoveries. However, realising this potential will depend on
addressing several issues, including further deregulation of the gas sector, reforms
in gas pricing and in key consumer markets, and the development of further gas
infrastructure. These issues are creating signicant uncertainties about the prospects
for future LNG imports, which play a small but growing role in the domestic gas
market.
The objective in this study is to assess the potential growth in natural gas demand
in India over the period to 2025 and to consider how such demand might be
met. A number of gas supply options are considered, including the delivery of
gas from existing and recently discovered domestic gas sources, the commence-
ment of pipeline gas imports from Iran, and increased imports of LNG. The study
concludes that LNG imports are likely to rise, particularly from the middle of the
next decade, but that the share of LNG will be affected by the rate at which other
gas supply options are developed.
The study also considers whether India will be able to secure the additional LNG
it requires. Existing and planned LNG terminal capacity is expected to be sufcient
to meet Indias gas requirements over the medium to longer term. However, compe-
tition from major LNG consuming countries that are willing to pay high prices may
be a constraint to Indias ability to secure long term LNG supplies.
Phillip Glyde
Executive Director
December 2007
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natural gas in india abare research report 07.23
acknowledgments
This study was funded by the Australian Government Department of Resources,
Energy and Tourism, with assistance from BHP Billiton Petroleum Pty Ltd and Santos
Ltd.
The authors wish to thank several colleagues for their valuable contributions
throughout the course of the study: in ABARE, Karen Schneider, Terry Sheales,
Jane Melanie, Paul Ross, Leanna Tedesco and Andrew Schultz; in the Department
of Resources, Energy and Tourism, Geoff Stone and Willie Senanayake; in the
Australian High Commission, New Delhi, Victoria Walker.
In addition, the authors gratefully acknowledge the information, insights and
comments on a draft report that were provided by BHP Billiton Petroleum Pty Ltd,
Chevron Australia Pty Ltd, ExxonMobil Australia Pty Ltd, ConocoPhillips Australia
Pty Ltd, North West Shelf Australia LNG Pty Ltd, Santos Ltd, Shell Development
(Australia) Pty Ltd and Woodside Energy Ltd.
Many organisations in India also provided valuable information and insights. The
authors are grateful for contributions from: The Energy and Resources Institute (TERI),
ExxonMobil Gas (India) Private Limited, GAIL (India) Limited, Indian Council of
World Affairs, India Energy Forum, Ministry of Petroleum and Natural Gas, National
Thermal Power Corporation (NTPC) Limited, Observer Research Foundation, Petro-
leum and Natural Gas Regulatory Board, Petronet LNG Limited, Planning Commis-
sion of India, PricewaterhouseCoopers Pvt Ltd and Reliance Industries Limited (RIL) .
conversions for natural gas and LNG
billion billion million million trillion
cubic metres cubic feet tonnes oil tonnes British
NG NG equivalent LNG thermal units
1 billion cubic metres NG 1.00 35.30 0.90 0.73 36.00
1 billion cubic feet NG 0.028 1.00 0.026 0.021 1.03
1 million tonnes oil equivalent 1.111 39.20 1.00 0.805 40.40
1 million tonnes LNG 1.38 48.70 1.23 1.00 52.00
1 trillion British thermal units 0.028 0.98 0.025 0.02 1.00
Source: BP (2007).
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natural gas in india abare research report 07.23
contents
summary 1
1 introduction 8
2 energy and natural gas in India 11
primary energy consumption 11
natural gas consumption 18
natural gas supply 23
gas pricing 33
3 factors affecting Indias future natural
gas demand 38
gas market reform 38
end use market reforms 40
security of energy supply 45
environmental issues 46
4 projecting natural gas demand in India 48
analytical framework 48
key assumptions 49
outlook for energy consumption, by fuel 52
outlook for natural gas demand, by sector 58
5 natural gas supply considerations 61
domestic natural gas production 61
cross border pipelines 63
existing LNG import contracts 67
natural gas supply and demand balance 67
LNG import infrastructure 70
international LNG outlook 71
prospects for Australian LNG 75
6 conclusions 79
references 81
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natural gas in india abare research report 07.23
boxes
1 recent economic performance in India 12
2 household consumption of noncommercial fuels in India 21
3 structure of the natural gas sector in India 27
4 evolution of gas pricing in India 34
5 alternative projections for Indias energy outlook to 2025 53
6 coal seam methane potential in India 63
7 international pipelines and LNG 65
gures
A natural gas consumption, by sector, 2005 India 2
B natural gas consumption, by sector, reference case India 4
C potential gas demand and supply India 6
1 total primary energy consumption India 11
2 international comparison of primary energy
consumption, 2005 11
3 GDP and per person income India 12
4 distribution of Indias population, 2005 12
5 foreign direct investment in India 13
6 structure of the Indian economy 13
7 international comparison of energy intensity, 2005 14
8 international comparison of energy consumption per
person, 2005 15
9 fuel mix in primary energy consumption India 16
10 electricity output, by fuel India 17
11 annual growth in electricity generation, by fuel,
19902005 India 18
12 natural gas consumption, by end use India 19
13 energy consumption in key sectors, by fuel India 20
14 energy consumption in the residential sector, by fuel India 21
15 natural gas supply India 25
16 LNG imports, by source India 26
17 natural gas sector structure India 27
18 gas pricing reform direction India 35
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natural gas in india abare research report 07.23
19 trends in population growth India 50
20 assumed fuel mix in electricity generation, reference case
India 51
21 fuel mix in electricity generation, 2025 India 53
22 comparison of energy consumption growth projections,
200525 India 54
23 comparison of natural gas demand projections,
2025 India 54
24 total primary energy consumption, by fuel India 56
25 projected average annual growth in energy consumption,
200525 India 56
26 fuel mix in total primary energy consumption India 57
27 projected electricity generation, by fuel India 58
28 natural gas consumption, by sector India 59
29 distribution of population between urban and rural areas
India 60
30 natural gas production scenarios India 62
31 potential gas demand and supply India 68
32 potential LNG imports India 69
33 world LNG trade 71
34 Australian gas production and LNG exports 77
35 Australian LNG exports, by destination 77
36 outlook for LNG capacity in Australia 77
maps
1 natural gas reserves India 24
2 natural gas infrastructure India 33
3 proposed international pipeline routes serving India 65
4 Australias natural gas reserves and infrastructure 76
viii
natural gas in india abare research report 07.23
tables
A Indias total primary energy consumption, 2005 2
B Indias LNG imports, by source, 2006 4
C potential gas demand and supply balance India 7
1 major energy and economic indicators India 15
2 total primary energy consumption India 16
3 installed electricity generation capacity, 2004- 05 India 17
4 natural gas consumption, by end use India 18
5 city gas consumer base India 22
6 distribution and consumption of compressed natural gas
in India, 2005- 06 23
7 natural gas production India 25
8 existing LNG terminals India 29
9 changes in natural gas prices, by sector India 36
10 regions and sectors in GTEM in this study 49
11 GDP and population assumptions India 50
12 growth in Indias GDP and primary energy consumption 55
13 potential international gas pipeline projects India 67
14 potential gas demand and supply balance India 68
15 LNG terminals in India 70
16 existing LNG plants Asia Pacic market 72
17 LNG plants under construction and planned
Asia Pacic market 74
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natural gas in india abare research report 07.23
summary
Since the discovery of large gas reserves off the west coast of India in the
1970s, natural gas has played an increasingly important role in meeting
Indias growing energy demand. This trend is expected to continue, with
forecast strong growth in natural gas demand over the period to 2025. Until
recently, India relied on state controlled domestic production to meet its natural
gas requirements. However, with mature domestic gas elds facing a decline
in production, India is embracing the need for increased private sector partici-
pation in the gas supply chain.
Following the commissioning of Indias rst LNG (liqueed natural gas) import
terminal in 2004, LNG imports rose to 6.2 million tonnes in 2006, just under a
quarter of Indias natural gas consumption. LNG imports will continue to play
an important role in supplying Indias demand for natural gas.
The outlook is for increasing natural gas demand in India, given an expected
combination of high economic growth, an expanding population and recent
large domestic gas nds. However, realising this potential depends on
addressing several major issues, including further deregulation of the gas
sector, reforms in gas pricing and key consumer markets, such as electricity
generation and fertiliser production, and the development of a national gas
grid linking gas sources with geographically dispersed demand centres. These
issues, particularly uncertainties about the prospects for domestic gas produc-
tion and pricing, are creating some uncertainty over the outlook for LNG
imports and future LNG procurement.
While there are ambitious LNG import plans in India, this is not likely to
translate into a signicant increase in LNG imports in the short to medium term.
Pipeline natural gas imports could also provide an additional source of gas
supply over the longer term, although these projects face signicant obstacles.
energy and natural gas consumption in India
Energy consumption in India has increased by almost 5 per cent a year since
1990, driven by rapid growth in economic output and population, and rising
personal incomes. Total primary energy consumption (excluding noncommer-
cial fuels, referred to as combustible renewables and waste) reached 379
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natural gas in india abare research report 07.23
million tonnes of oil equivalent
(Mtoe) in 2005, compared with
186 million tonnes of oil equivalent
in 1990. Coal is the main source
of energy in India, accounting for
55 per cent of primary energy
consumption in 2005, followed by
oil, natural gas, renewable energy
and nuclear power (table A).
Natural gas use in India has grown
at an average rate of more than 7
per cent a year since 1990, albeit
from a small base. It accounted
for 8 per cent of primary energy
consumption in 2005. This rapid growth has been driven by government poli-
cies to encourage natural gas use, including gas allocations to priority sectors
such as electricity and fertilisers at subsidised prices, and expansions in gas
infrastructure. In 2005, natural gas consumption in India was 32 billion cubic
metres (equivalent to 23.4 million tonnes of LNG). Consumption, however, has
been constrained by natural gas availability and, as such, does not reect the
true potential for natural gas demand in the country.
The electricity and fertiliser sectors are the main consumers of natural gas in
India, partly subsidised by the government. These sectors, including captive
electricity generation, accounted for 70 per cent of Indias natural gas
consumption in 2005 (gure
A; IEA 2007a).
The use of LNG has been
growing rapidly since its
introduction to the Indian gas
market in 2004. India currently
has two operational LNG
terminals on the west coast
Dahej and Hazira with
a combined capacity of 8.9
million tonnes. The Dahej
terminal is supplied from Ras
Gas in Qatar under a long
term contract, supplemented
by spot cargoes from other
table A Indias total primary energy
consumption, 2005
consumption share
Mtoe %
coal 208.0 54.9
oil 128.6 33.9
natural gas 28.8 7.6
nuclear 4.5 1.2
renewables a 9.1 2.4

total 379.0 100.0
a Includes hydro/solar/wind/other; excludes combus-
tible renewables and waste.
Source: IEA (2007a).
other 3%
residential 2%
other
industries 25%
fertiliser 26%
electricity 44%
2005
natural gas consumption, by sector fig A
India
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natural gas in india abare research report 07.23
sources, while the Hazira terminal imports spot LNG cargoes as required
(table B). Indias third LNG terminal, Dabhol in the south west, with an annual
capacity of 5 million tonnes, is expected to be commissioned toward 2009.
factors affecting Indias future natural gas demand
A range of factors will affect the extent and prole of Indias future natural gas
demand, including the development of a national gas pipeline network and
the implementation of energy market and broader economic reforms. One of
the most important factors will be the continuing deregulation of the domestic
gas market. The government has made signicant progress in developing a
regulatory framework to facilitate open access to the pipeline network and
to promote public and private investment in gas pipeline infrastructure. The
establishment of an independent regulator to monitor pipeline access and gas
transport tariffs is expected to facilitate the development of a market based
regime in Indias natural gas sector.
The continuing transition from state administered, subsidised gas pricing
toward market pricing is also a key factor in improving the overall availability
of natural gas in India and will affect gas demand over the outlook period.
The complex mix of administered and market gas prices that vary across
consumer segments reduces incentive to invest in the expansion of domestic
gas production and LNG imports.
The reform processes in key end use markets, such as electricity and fertilisers,
are also likely to have a direct impact on future gas demand in India. Recent
policy initiatives in the fertiliser industry seek to convert the majority of nitrog-
enous fertiliser production in India to natural gas. Electricity market reform,
including government plans for substantial generation capacity augmentation,
is likely to provide incentives for new investment in gas red power plants. The
extent of natural gas use in electricity generation, as well as in fertiliser produc-
tion, will depend to a large extent on gas availability and pricing.
projecting natural gas demand in India
The analysis of the potential demand for natural gas in India over the period
to 2025 presented in this report is based on results from ABAREs global
trade and environment model (GTEM). The projections of energy demand
are based on an assumption that Indias GDP will grow at an average annual
rate of 6.5 per cent over the period 200525 in the reference case. In an
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natural gas in india abare research report 07.23
alternative high growth scenario, GDP growth
is assumed to average 9.0 per cent a year over
the same period, supported by higher levels of
economic reform and productivity growth than
in the reference case. This higher rate of GDP
growth is consistent with the upper range of
Indian Government projections.
The projections are also based on assumptions
relating to the fuel mix in electricity generation.
In India there is considerable uncertainty about
the expected fuel mix over the period to 2025.
This is reected in the wide range of alterna-
tive projections from Indian and international
sources. In this study, the share of natural gas
in electricity generation is assumed to be 7 per
cent in 2025, around 2 percentage points lower than in 2005. This reects an
assumed continued expansion in nuclear and coal red electricity generation
over the projection period (IEA 2006a).
On the basis of these assumptions, total primary energy consumption in India
is projected to expand by 4 per cent a year to reach 837 million tonnes of oil
equivalent in 2025. Natural gas consumption is projected to grow by 5 per
cent a year between 2005 and 2025 to reach 74 million tonnes of oil equiva-
lent in the reference case in 2025 (equivalent to 82 billion cubic metres and 60
million tonnes of LNG) (gure
B). In the high growth scenario,
gas consumption is projected
to reach 89 million tonnes
of oil equivalent in 2025
(equivalent to 99 billion cubic
metres and 72 million tonnes
of LNG). Driving this growth
will be increases in demand
in the fertilisers and other
industrial sectors. This growth,
however, will be dependent
on the development of natural
gas infrastructure, including
transmission networks, and new
sources of supply.
table B Indias LNG
imports, by source, 2006
imports share
Mt %
Qatar 5.19 84.3
Egypt 0.42 6.8
Oman 0.19 3.1
Australia 0.12 1.9
Abu Dhabi 0.06 1.0
Malaysia 0.06 1.0
Algeria 0.06 1.0
Trinidad 0.06 1.0
total 6.16 100.0
Source: FGE (2007a).
20
10
30
bm
3
India
2005
2015
2025
residential other
industry
fertiliser electricity
natural gas consumption, by sector,
reference case
fig B
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natural gas in india abare research report 07.23
natural gas supply considerations
India has three options to meet the anticipated growth in natural gas demand
over the period to 2025 increase domestic gas production; increase LNG
imports; and import natural gas via pipeline.
It is assumed that there is a continued decline in production from existing
mature domestic gas elds. However, the rate of this decline is expected to be
slowed by the production of gas from recently discovered elds in the offshore
Krishna Godavari (KG) basin from late 2008. While this and other new
natural gas discoveries have the potential to expand domestic output signi-
cantly, the production timetables of these elds remain highly uncertain.
Over the longer term, there is potential to develop pipeline natural gas
imports. Several international pipelines have been under discussion in India
for many years, including from Iran, Turkmenistan and Myanmar. Only the
IranPakistanIndia pipeline project is considered to have potential as a
source of supply to India over the period to 2025. Given the uncertainties
that surround the supply of pipeline gas from Iran, a possible startup date is
assumed to be after 2020.
Indias decision to import pipeline gas will depend signicantly on geopolitical
and energy security issues but the competitiveness of pipeline gas with other
sources of gas will also play an important role. Distance and volume are
key variables that affect the unit cost of transporting LNG and pipeline gas.
While transporting natural gas via pipeline can be more cost effective than
transporting LNG in some cases, the political risks associated with transiting
through other countries can increase the costs of pipeline projects. In contrast,
the exibility of LNG supply can largely avoid geopolitical sensitivities and
may address some of the energy security concerns of gas importing countries.
indicative gas supply and demand balance
A potential natural gas supply and demand balance for India is provided in
gure C and table C, based on demand projections and current and expected
gas supply. This balance assumes that production from gas elds in the KG basin
would add supply of around 14.6 billion cubic metres a year to existing domestic
production, starting from late 2008. Production from elds operational as at June
2007 is assumed to gradually decline over the outlook period. It is also assumed
that the supply of LNG under long term contract with Qatar reaches 7.5 million
tonnes a year (10.4 billion cubic metres) from 2009 and that an international
pipeline from Iran could add 37 billion cubic metres a year after 2020.
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natural gas in india abare research report 07.23
Based on these assumptions, it is expected that around 4.0 billion cubic
metres (2.9 million tonnes) of additional gas will need to be procured by
2015. Additional gas requirements are projected to expand to 18.6 billion
cubic metres (13.6 million tonnes) in 2020, and 31.6 billion cubic metres (23.1
million tonnes) in 2025. Assuming that this additional gas will be sourced from
LNG, Indias total LNG imports are projected to reach 10.5 million tonnes in
2015 and 21.1 million tonnes in 2020. The introduction of imported pipeline
gas from Iran by 2025 could meet the requirement in that year. However, if the
pipeline does not proceed, Indias total LNG imports would be 30.6 million
tonnes in 2025.
In the high growth scenario, additional gas requirements are projected to be
6.9 billion cubic metres (5.1 million tonnes) in 2015 and 27.1 billion cubic
metres (19.8 million tonnes) in 2020. Signicant additional gas is still required
in 2025 even if the pipeline from Iran eventuates. This implies that Indias
total LNG imports in the high growth scenario would be 12.6 million tonnes
in 2015 and 27.3 million tonnes in 2020. If the pipeline from Iran does not
proceed by 2025, total LNG imports would be 42.7 million tonnes in 2025.
While existing and planned LNG terminal capacity should be adequate to
meet Indias LNG requirements over the medium to longer term, sourcing the
additional gas and uncertainty about domestic and imported gas timetables
60
40
20
80
60
40
20
80
bm
3
bm
3
India
reference case high growth case
2025
Iran
pipeline
2025
no Iran
pipeline
2020 2015 2005 2025
Iran
pipeline
2025
no Iran
pipeline
2020 2015 2005
pipeline gas from Iran
gas supply shortfall/additional LNG
actual gas consumption
domestic gas supply
contracted LNG supply
potential gas demand and supply fig C
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natural gas in india abare research report 07.23
are likely to provide a challenge for India in the coming years. It also suggests
that new long term LNG supply contracts will be required to meet demand.
There are currently a number of LNG supply projects in the Asia Pacic region,
both existing and planned, that have the capacity to meet Indias long term
gas requirements. However, the current world LNG market is characterised
by a tight supplydemand situation. Hence, competition from major LNG
importing countries that are willing to pay high prices may be a constraint to
India securing long term LNG supplies.
Over the period to 2025 there is the potential for Australia to become a more
signicant supplier of LNG, including to India. A number of LNG projects
currently under construction or in the planning stage could add substantial
capacity to Australias LNG export infrastructure. Other areas of potential
future cooperation between Australia and India include research and develop-
ment and the transfer of technology (for example, in the development of coal
seam methane resources) and investment in upstream and downstream gas
sectors in each country.
table C potential gas demand and supply balance India
2015 2020 2025 2015 2020 2025
billion m
3
billion m
3
billion m
3
Mt Mt Mt
assumed natural gas supply
contracted LNG supply 10.4 10.4 10.4 7.5 7.5 7.5
domestic gas supply 43.1 40.6 40.5 31.5 29.6 29.6
pipeline gas from Iran 0 0 37.0 0 0 27.0
total 53.4 51.0 87.8 39.0 37.2 64.1
projected natural gas consumption
reference case 57.4 69.5 82.4 41.9 50.8 60.2
high growth scenario 60.4 78.1 99.0 44.1 57.0 72.3
gas supply shortfall/possible additional LNG including pipeline gas from Iran
reference case 4.0 18.6 2.9 13.6
high growth scenario 6.9 27.1 11.2 5.1 19.8 8.2
gas supply shortfall/possible additional LNG excluding pipeline gas from Iran
reference case 4.0 18.6 31.6 2.9 13.6 23.1
high growth scenario 6.9 27.1 48.2 5.1 19.8 35.2
total LNG imports excluding pipeline gas from Iran
reference case 14.4 28.9 41.9 10.5 21.1 30.6
high growth scenario 17.3 37.4 58.5 12.6 27.3 42.7
8
introduction
Indias economy has undergone signicant transformation since a range of struc-
tural reforms were undertaken in the 1990s. These reforms included opening the
economy to more international trade and investment, abolishing industrial licensing,
oating the exchange rate, and increasing domestic and foreign private partici-
pation in nancial markets. The reform process has stimulated strong economic
growth in India, with gross domestic product (GDP) expanding at an average rate
of 6.1 per cent a year between 1990 and 2006. As a result, India now has the
worlds third largest economy (on a purchasing power parity basis).
The expansion in economic output, supported by a large and growing population,
has led to a strong rise in energy consumption in India. Primary energy consump-
tion (excluding combustible renewables and waste) has increased at an average
annual rate of nearly 5.0 per cent since 1990, and India now ranks fth in the
world in terms of energy consumption. However, unlike many other countries in
Asia that have had sustained periods of high economic growth, including China,
much of Indias growth has been led by the services sector. This sector is less
energy intensive than the industry sector and has moderated the rate of growth
in Indias energy requirements. Even so, because of Indias sheer size, the actual
expansion in energy consumption has been signicant.
Indias energy mix is currently dominated by coal and oil, although the role of
natural gas has been increasing. Natural gas consumption grew by 7.4 per cent
a year between 1990 and 2005 and accounted for nearly 8 per cent of primary
energy consumption in 2005. The main natural gas consumers in India are the
electricity generation and fertiliser industries, which account for more than two-
thirds of natural gas use. The consumption of natural gas in other industries and in
households is relatively small, although growing rapidly.
While demand for natural gas in India is strong, actual consumption has been
constrained by the availability of natural gas supplies. India has relatively large
natural gas reserves and prospects for further discoveries are good. However,
the natural gas market has been dominated by government owned companies
selling gas at heavily subsidised prices, reducing incentives for private investment
in production facilities. Production of gas from mature domestic elds is dwindling,
and has resulted in the Indian Government restricting gas supplies to mainly the
1
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natural gas in india abare research report 07.23
priority sectors. However, private sector participation in Indias gas market is
increasing, which should lead to an increase in domestic gas production. Gas
sold privately is based on market prices, creating a complex domestic gas pricing
system.
Imports of liqueed natural gas (LNG) to India commenced in 2004, after more
than a decade of planning. In 2005, LNG imports accounted for around a fth of
natural gas consumption in India. Two LNG import terminals are operational on
the west coast of India, and a third is near completion, although imports are still
well under capacity. To date, LNG imports have mainly been sourced from Qatar
under a long term contract. But with high natural gas demand, India has also
imported a number of spot cargoes of LNG, including from Australia. In 2006,
India accounted for 6 per cent of Asias total LNG imports.
Natural gas demand is expected to continue to grow strongly in India, fuelled
mainly by continued economic and population growth and hence growing
demand for electricity. Continued switching to natural gas by fertiliser plants will
also be a key driver of demand, particularly given the high price of alternative oil
based feedstock. Realising this potential growth will depend on the availability
and competitiveness of natural gas supplies, both domestic and imports, and the
rate of development of gas infrastructure. Other factors likely to affect the outlook
for natural gas demand include the pace of market oriented reforms in gas, elec-
tricity and fertiliser markets, including in gas pricing, and an increasing emphasis
on energy security and environmental concerns.
There are plans to expand LNG import infrastructure signicantly in India, although
there is considerable uncertainty about the likely size of Indias future LNG market.
The availability and competitiveness of other gas supplies and other fuels and
the development of infrastructure will govern the penetration of LNG in India, as
will developments in international LNG markets. In the next few years, the outlook
for the supplydemand balance in the international LNG market is expected to
become increasingly tight, in which case India would need to be willing to pay
higher prices to secure additional LNG cargoes. Over the longer term, there is
sufcient potential in the Middle East and the Asia Pacic, including in Australia, to
supply LNG to India, although many potential projects will require a commitment
to long term contracts from buyers to underpin their development.
Natural gas imports via pipeline could also provide an additional source of supply
to the Indian market over the longer term. Several options have been under consid-
eration for some time, including from Iran. In addition to cost effectiveness, these
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natural gas in india abare research report 07.23
projects will have to overcome signicant geopolitical issues and the associated
development risks that have stalled their development to date.
The key objective in this study is to assess the potential growth in natural gas
demand in India and, in particular, the role that LNG could play in that market. A
range of projections of energy and natural gas demand in India are presented,
reecting the uncertainty surrounding prospects for Indias gas market. As well as
economic and population growth, other factors that could inuence the outlook for
natural gas in India are examined, including further reforms in gas and end user
markets and environmental and energy security policies.
Potential sources of natural gas supply are also assessed, including the capacity
to expand domestic gas production, options for natural gas imports by pipeline,
and the scope for increasing LNG imports. An update of recent developments in
international LNG markets, including the potential for Australia to supply LNG to
India, is also provided.
11
energy and natural gas in India
primary energy consumption
Primary energy consumption in
India has grown rapidly since
1990, at an average rate of 4.8
per cent a year. (The focus in this
study is commercial fuels. Unless
otherwise noted, references to
energy consumption exclude
noncommercial fuels, principally
combustible renewables and
waste.) In 2005, primary energy
consumption was 379 million
tonnes of oil equivalent, compared
with 186 million tonnes of oil
equivalent in 1990 (gure 1; IEA
2007a). India was the worlds
fth largest energy user in 2005,
behind the United States, China,
the Russian Federation and Japan
(gure 2; IEA 2007a,b).
Driving the growth in energy
consumption has been Indias
increasing population and strong
economic performance. Together
these factors have underpinned rising
personal incomes and increasing
urbanisation. GDP in India grew at
an average annual rate of 6.1 per
cent between 1990 and 2006,
following the implementation of
reforms in the early 1990s (box 1).
2
300
100
200
Mtoe
1990 1995 2005 2000
renewables
nuclear
gas
oil
coal
total primary energy consumption
India
fig 1
2000
1000
500
1500
Mtoe
Australia India Japan Russian
Federation
China United
States
international comparison of
primary energy consumption, 2005
fig 2
12
natural gas in india abare research report 07.23
box 1 recent economic performance in India
The Indian economy has grown strongly since the early 1990s. The strengthening of
economic activity has been underpinned by broad based structural reforms imple-
mented in 1991. These included liberalisation of tax and tariff policies, the opening
of fteen industries that had previously been restricted to the public sector, liber-
alisation of parts of the nancial sector, and an easing of foreign direct investment
restrictions.
Average annual growth in the Indian
economy between 1990 and 2004
was around 5.7 per cent. In the three
years since then, GDP growth has
increased even further, to average
8.9 per cent a year (gure 3; IMF
2007a). Higher growth rates have
led to strong increases in per person
incomes and signicant falls in the
proportion of the population living
in poverty. In addition, there has
been steady growth in the share
of the population living in urban
areas (gure 4; World Bank 2007).
Indias ination performance has also
improved, despite sustained capital
inows and continued increases in
fuel prices.
Although India has had several
governments since the program of
reforms began, each government has
made growth and reform a focus of
its economic agenda. This continued
commitment to reform has encour-
aged both Indian and foreign busi-
nesses to substantially increase their
investment in the economy. From
4000
2000
1000
3000
US$
PPP
1992 2007 2002 1997
%
2
4
6
8
annual GDP growth
GDP
per
person
GDP and per person income
India
fig 3
1000
600
400
200
800
million
rural population
urban population
1990 1995 2005 2000
distribution of Indias population,
2005
fig 4
continued...
13
natural gas in india abare research report 07.23
box 1 recent economic performance in India continued
1992-93 to 2006- 07 investment spending grew from 1.8 trillion Indian rupees
(US$42.8 billion) to 12.2 trillion Indian rupees (US$182.8 billion) (IMF 2007b).
Although the share of foreign direct investment is still low relative to the size of Indias
economy, in real terms it has increased by around 27 per cent a year to reach more
than US$15.7 billion in 2006- 07 (gure 5; Ministry of Commerce and Industry 2007).
The services sector has been the
main driver of economic growth in
India, accounting for more than half of
economic output in 2005 and contrib-
uting almost three-quarters to overall
growth over the period 19902005
(gure 6; ADB 2006). The growth in
the services sector is mainly due to its
lower reliance on Indias weak infra-
structure (for example, electricity and
transport) and its ability to benet from
technological changes, particularly IT.
After an initial decline in the post-
reform period, the industry sector has
begun a gradual recovery, supported
by growth in both domestic and
export demand. The manufacturing
sector, in particular, has beneted
from licensing and trade reforms.
Although the share of agriculture in
the economy fell from 31 per cent
in 1990 to 19 per cent in 2005, the
sector provides employment for more
than 60 per cent of the workforce.
Lifting the growth rate in the agriculture
sector is one of the major challenges
faced by the Indian Government in
ensuring an ongoing reduction in
poverty.
2006-07
US$b
1994
-95
1998
-99
2006
-07
2002
-03
8
4
12
foreign direct investment in India fig 5
services
41%
industry 28%
agriculture 31%
services
54%
industry
27%
agriculture
19%
1990
2005
structure of the Indian economy fig 6
14
natural gas in india abare research report 07.23
Indias energy intensity, or energy consumption per unit of economic output,
declined by 15 per cent between 1990 and 2005, as the services sector, which
is less energy intensive than the industry sector, continued to expand its share of the
economy (table 1). The current level of energy intensity in India, at 0.1 tonnes of oil
equivalent per US$1000, is low relative to other major energy consuming econo-
mies (gure 7; IEA 2007a,b).
Energy consumption per person
has risen by more than 58 per cent
since 1990 to 0.35 tonnes of oil
equivalent in 2005. Indias popula-
tion expanded by almost a third
over the same period, to reach
1.1 billion in 2005 as a result of
a historically high fertility rate and
a declining mortality rate. Energy
consumption per person in India is
one of the lowest in the world and
is signicantly lower than in other
major energy consuming countries
(gure 8; IEA 2007a,b).
0.4
0.2
0.1
0.3
Australia India Japan Russian
Federation
China United
States
toe/2000
US$'000
international comparison of energy
intensity, 2005
fig 7
box 1 recent economic performance in India continued
To sustain high rates of economic growth, India needs to undertake further structural
reforms, particularly those leading to improvement in the state of its physical infra-
structure, notably roads, ports and electricity. Recognising that infrastructure decit
is a major barrier to Indias long term growth potential, the government is working to
address regulatory and investment issues in order to attract foreign investment into
the sector. Another key challenge is to improve education and labour policies to
take advantage of Indias imminent demographic dividend the expansion in the
working age population that has the potential to create growth in both the supply of
labour and domestic saving. Ongoing effort to continue scal consolidation, agricul-
tural and trade liberalisation, and reforms in the areas of energy, environment, health
and welfare is also required.
Sources: Reserve Bank of India (2007); McKinsey and Co (2007).
15
natural gas in india abare research report 07.23
fuel mix in primary energy consumption
Coal accounts for the largest share
of primary energy consumption
in India, at 55 per cent in 2005
(gure 9; IEA 2007a). Strong
economic growth has led to an
increase in coal use in the past few
years. Demand for coal grew at
an average rate of 4.6 per cent a
year from 1990 to 2005 reaching
208 million tonnes of oil equivalent
in that year (table 2). India has
large reserves of coal, which is its
most abundant domestic energy
source. The country is the worlds
third largest coal producer and
consumer after China and the
United States (MoC 2006).
Oil is also an important energy source in India, accounting for 34 per cent of
primary energy consumption in 2005. Oil consumption grew at an average rate
of 4.9 per cent a year between 1990 and 2005 and its share of primary energy
consumption remained largely unchanged. The combination of rising oil consump-
tion and fairly stable production has left India increasingly dependent on imports.
table 1 major energy and economic indicators India
annual growth
1990 2000
1990 2000 2005 2000 2005
% %
energy consumption a Mtoe 186.3 310.7 379.0 5.2 4.1
GDP b US$b 1 406.3 2 402.1 3 362.1 5.5 7.0
GDP per person b US$ 1 655.4 2 364.4 3071.5 3.6 5.4
population million 849.5 1 015.9 1 094.6 1.8 1.5
energy intensity a b toe/US$000 0.13 0.13 0.11 0.2 2.7
energy consumption per person a toe 0.22 0.31 0.35 3.4 2.5
a Excludes combustible renewables and waste. b In 2000 US dollars on a purchasing power parity basis.
Source: IEA (2007a).
6
4
2
Australia India Japan Russian
Federation
China United
States
toe
international comparison of energy
consumption per person, 2005
fig 8
16
natural gas in india abare research report 07.23
Indias oil import dependency
(imports as a share of consump-
tion) increased from 48 per cent in
1990 to 88 per cent in 2005 (IEA
2007a), giving rise to concerns
over energy security.
Indias consumption of natural gas
rose at an average rate of 7.4 per
cent a year from 1990 to 2005,
reaching 29 million tonnes of oil
equivalent (equivalent to 32 billion
cubic metres of gas or 23 million
tonnes of LNG) in 2005. This
rapid growth, albeit from a small
base, is a result of the increasing importance of natural gas as a fuel in electricity
generation, and the production of fertiliser and steel. Until 2004 when LNG imports
commenced, natural gas consumption was met entirely from domestic production.
Renewable energy, including hydropower, contributes only a small part of Indias
primary energy consumption, at 2 per cent in 2005. Supportive government
programs providing subsidies and tax and nancial incentives seek to increase the use
of renewable energy as a means of achieving a cleaner fuel mix and meeting energy
security objectives. Although use of nuclear power has grown steadily, it accounted
for only 1 per cent of total primary energy consumption in 2005. The pace of nuclear
power development has been constrained by modest domestic uranium resources.
renewables
nuclear
gas
oil
coal
%
1990 1995 2005 2000
40
20
80
60
fuel mix in primary energy
consumption India
fig 9
table 2 total primary energy consumption India
1990 2000 2005
Mtoe % Mtoe % Mtoe %
coal 106.1 56.9 164.3 52.9 208.0 54.9
oil 62.6 33.6 114.4 36.9 128.6 33.9
natural gas 9.8 5.3 21.0 6.8 28.8 7.6
nuclear 1.6 0.9 4.4 1.4 4.5 1.2
renewables a 6.2 3.3 6.5 2.1 9.1 2.4
total 186.3 100.0 310.7 100.0 379.0 100.0
a Includes hydro/solar/wind/other. Excludes combustible renewables and waste.
Source: IEA (2007a).
17
natural gas in india abare research report 07.23
electricity generation
Electricity consumption in India grew more rapidly than overall energy use in the
period 19902005, at 6.1 per cent a year, to reach 699 terawatt hours in 2005.
The largest electricity consumers in India are the industry sector, accounting for
nearly half of electricity use in 2005, and the residential and services sectors at 22
per cent and 20 per cent respectively
(IEA 2007a). Electricity generation
is dominated by state owned utilities,
which account for almost 90 per cent
of Indias total installed capacity.
However, the share of private sector
generators is growing, particularly in
captive or own use electricity genera-
tion.
Electricity generated from coal is the
largest source of electricity genera-
tion in India, at 69 per cent in 2005
(gure 10; IEA 2007a). Current coal
red power plant capacity repre-
sents more than half of total electricity generation capacity in the country. The
share of hydroelectricity, the next largest source of electricity generation in India,
has declined from 25 per cent in 1990 to 14 per cent in 2005, as the growth in
thermal generating capacity has outstripped that of hydro (table 3).
Natural gas represented nearly 9 per
cent of electricity generation in 2005,
compared with 3 per cent in 1990 and
was the fastest growing thermal fuel
(gure 11; IEA 2007a). It is being used
in gas turbine and combined cycle gas
power plants, which currently account
for more than 10 per cent of Indias elec-
tricity generation capacity. Oil red elec-
tricity generation accounted for 4.5 per
cent, while nuclear power accounted for
2.5 per cent in 2005. Electricity genera-
tion from renewables other than hydro
accounted for around 1 per cent of total
generation in 2005.
table 3 installed electricity
generation capacity, 2004-05 India
capacity share
GW %
coal 67.8 57.2
oil 1.2 1.0
natural gas 11.9 10.1
nuclear 2.8 2.3
hydro 30.9 26.1
other renewables 3.8 3.2

total 118.4 100.0
Source: CEA (2006a).
%
1990 2005 2000
40
20
80
60
hydro + other
renewables
nuclear
gas
oil
coal
electricity output, by fuel
India
fig 10
18
natural gas in india abare research report 07.23
natural gas consumption
As discussed above, natural gas consumption in India has grown steadily over
recent years, at an average rate of more than 7 per cent a year since 1990. In
2005, consumption of natural gas by end use sectors was 32.0 billion cubic metres
(equivalent to 23.4 million tonnes of LNG), compared with 10.9 billion cubic
metres (7.9 million tonnes) in 1990 (table 4). These consumption levels do not,
however, reect the underlying demand for natural gas in India over this period as
consumption has been limited by natural gas supplies.
Until recently, all natural gas produced in India was subject to allocation by the
Ministry of Petroleum and Natural Gas, on the recommendation of the intermin-
isterial Gas Linkage Committee.
Natural gas allocations were
based on sectoral priorities, gas
availability and potential gas
markets in particular regions. At
present, a large proportion of
natural gas continues to be allo-
cated to priority consumers such as
the electricity generation and ferti-
liser sectors, while the remaining
quantity is traded directly between
buyers and sellers.
30 40 % 10 20
other renewables
natural gas
oil
nuclear
coal
hydro
annual growth in electricity generation,
by fuel, 19902005 India
fig 11
table 4 natural gas consumption by end
use India
1990 2000 2005
billion m
3
billion m
3
billion m
3
electricity 3.8 10.3 14.2
fertiliser 5.9 9.8 8.3
other industries 1.1 2.7 8.0
residential 0.0 0.3 0.7
other 0.1 0.2 0.9
total 10.9 23.3 32.0
LNG equivalent
(million tonnes) 8.0 17.0 23.4
Source: IEA (2007a).
19
natural gas in india abare research report 07.23
gas consumption, by sector
Electricity generation currently accounts for almost half of Indias natural gas
consumption. Natural gas use by electricity utilities grew at an average rate of
over 9 per cent a year, from 3.8 billion cubic metres in 1990 to 14.2 billion cubic
metres in 2005 (table 4 and gure 12; IEA 2007a).
Existing gas red power plants in India require more than 19 billion cubic metres of
natural gas a year to operate at full capacity. However, as a result of difculties in
securing natural gas supply, gas red power plants have been running at less than
full capacity, switching to higher cost liquid fuels such as naphtha where feasible.
The fertiliser sector is the second largest consumer of natural gas in India, accounting
for around a quarter of natural gas consumption in 2005. Demand for natural gas from
the fertiliser industry grew at an average annual rate of 2 per cent from 1990, to reach
8.3 billion cubic metres in 2005 (IEA 2007a). The expansion in the use of natural gas
by the fertiliser industry reects the high priority placed by the government on boosting
agricultural production through greater fertiliser use.
India currently produces nitrogenous (mainly urea) and phosphatic fertilisers, with
natural gas used as a feedstock in urea production. During 2004- 05, natural gas
based fertiliser production accounted for 66 per cent of total fertiliser production.
Production based on naphtha, fuel oil and low sulfur heavy stock (a residual fuel
processed from crude oil that can be used in the place of fuel oil) constituted the
remaining 34 per cent (MoPNG
2006a). Gas prices for both
electricity generation and fertiliser
production are partly subsidised by
the government.
Other industrial users, including iron
and steel, glass, ceramic and elec-
tronics manufacturers are rapidly
increasing their share of natural gas
consumption. Gas consumption in
the industry sector has grown at an
average rate of 14 per cent a year,
from 1.1 billion cubic metres in 1990
to 8.0 billion cubic metres in 2005.
There has been substitution away
30
10
20
25
5
15
billion
m
3
1990 1995 2005 2000
other
other industry
fertiliser
electricity
residential
natural gas consumption, by end
use India
fig 12
20
natural gas in india abare research report 07.23
from coal in this sector toward electricity and, to a lesser extent, natural gas (gure
13; IEA 2007a).
While small in absolute terms, natural gas use in the residential sector has grown
strongly, at an average rate of 20 per cent a year since 1990. Household natural
gas consumption was virtually nonexistent in 1990, but rose to more than 0.7
billion cubic metres in 2005. Rapid economic growth and rising incomes have
led to a shift in consumer preferences from coal and noncommercial fuels to more
convenient and clean fuels such as petroleum products and electricity (see box 2).
Natural gas constitutes a marginal share in the residential fuel mix, although use
of natural gas has been growing rapidly in recent years following an expansion in
gas supply infrastructure.
city gas
Natural gas is supplied to residential, commercial and industrial consumers via
underground pipeline distribution networks within metropolitan areas. Residential
consumers use city gas for cooking, water and space heating, and air condi-
tioning, while commercial and industrial consumers also use gas for steam raising
and power generation, dryers, furnaces and boilers.
City gas distribution systems in India are not well developed, primarily as a result
of limited supplies of natural gas and the allocation of gas to priority sectors such
as electricity generation and fertilisers. However, city gas distribution has been
%
1990 1990 2005 2005 2000 2000
industrial residential
40
20
80
60
electricity
natural gas
petroleum
products
coal
energy consumption in key sectors, by fuel
India
fig13
21
natural gas in india abare research report 07.23
box 2 household consumption of noncommercial fuels in India
Indian households have traditionally relied on noncommercial or biomass fuels,
including rewood, crop residue and animal waste, as a source of energy, primarily
for cooking. In 2004, 69 per cent of the Indian population, or 740 million people,
are estimated to have relied on biomass resources as their primary fuel for cooking,
predominantly in rural households (IEA 2006a, 2007a).
If noncommercial fuels are included in the residential fuel mix, they constitute the largest
share of residential energy consumption in India, at 124 million tonnes of oil equiva-
lent in 2005, or 79 per cent of energy consumption in the sector. While demand for
noncommercial fuels has traditionally
been strong, their share has declined
from 84 per cent in 1990 (gure 14,
which includes combustible renewables
and waste; IEA 2007a). However, there
are some uncertainties over the reliability
of these data, given the informal nature
of the sector.
In the past, the Indian Government has
initiated various measures to promote
the use of cleaner fuels in the residen-
tial sector, primarily by subsidising
petroleum products such as kerosene
and liqueed petroleum gas. This
approach had limited success, particu-
larly in lower income households, which still rely predominantly on noncommercial
fuels. Abundant supplies of biomass fuels at zero cost, together with low afford-
ability and poor delivery infrastructure for commercial fuels have inhibited and will
continue to inhibit wider penetration of modern fuels in the residential sector.
Some reluctance to discontinue cooking with rewood may also reect taste prefer-
ences and the familiarity of cooking with traditional technologies. For instance,
many wealthy households in India retain a wood stove for baking traditional
breads. As incomes increase and fuel options widen, the fuel mix may change, but
wood is unlikely to be entirely excluded (IEA 2006a).
%
1990 2005 2000
40
20
80
60
electricity
natural gas
petroleum
products
coal
combustible
renewables
and waste
energy consumption in the
residential sector, by fuel India
fig14
22
natural gas in india abare research report 07.23
growing rapidly over the past few years, from two cities Delhi and Mumbai
in 2002- 03 to ten cities in 2005- 06 across the western, northern and southern
regions of the country (MoPNG 2006a).
The largest city gas distribution networks currently operate in the cities of Mumbai
and Delhi, and the state of Gujarat (cities of Surat, Bharuch and Ankleshwar), with
more than 500 000 consumers in various sectors. City gas sales grew to almost
2 billion cubic metres in 2005- 06, compared with 1.6 billion cubic metres the
previous year, an increase of 22 per cent (table 5).
compressed natural gas
Compressed natural gas (CNG) is used as an automotive fuel in a limited number
of cities in India. The initially sluggish growth in CNG demand from the automotive
sector has picked up as a result of recent directives by the Supreme Court of India
to control air pollution caused by vehicular trafc through the promotion of CNG
use. The directives included expansion of CNG infrastructure, conversion of buses,
taxis and auto-rickshaws from liquid fuel to CNG, and allocation of natural gas to
the transport sector in Delhi and Mumbai.
In 2003, the Supreme Court ordered the government to draw up plans for the
introduction of clean fuels such as CNG in eleven cities apart from Delhi and
Mumbai Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Sholapur,
Surat, Lucknow, Kanpur, Agra and Pune (De 2004).
table 5 city gas consumer base in India
sales volume
industrial commercial residential total 2005-06 a 2004-05 a
no. no. no. no. million m
3
million m
3
MGL (Mumbai) 40 819 258 433 259 292 455 413
IGL (Delhi) 47 215 46 727 46 989 445 405
GGCL (Gujarat) 750 2 500 200 000 203 250 1 088 813
total 837 3 534 505 160 509 531 1 988 1 631
a Includes CNG. MGL = Mahanagar Gas Ltd; IGL = Indraprastha Gas Ltd; GGCL = Gujarat Gas Company Ltd.
Sources: MGL (2007); IGL (2007); GGCL (2007).
23
natural gas in india abare research report 07.23
CNG sales have grown recently at an average rate of 61 per cent a year, from
around 69 million cubic metres in 2000- 01 to around 690 million cubic metres
in 2005- 06 (MoPNG 2006a). In 2005- 06, the CNG distribution network
included 281 stations in Delhi, Mumbai and Gujarat, with CNG powering more
than 300 000 vehicles in these cities (table 6; MoPNG 2006a).
natural gas supply
domestic gas reserves
Indias proved natural gas reserves have increased from 0.7 trillion cubic metres
in 1990 to more than 1 trillion cubic metres in 2006. This represents less than 1
per cent of total proved gas reserves in the world. These reserves can sustain the
current level of production for around 34 years (BP 2007). Around 70 per cent of
Indias proved gas reserves are located in offshore basins (map 1; IEA 2007c).
The recent discovery of natural gas in the KrishnaGodavari basin and neigh-
bouring areas, off the east coast of India, was the biggest gas nd since the
Bombay High (now Mumbai High) discovery on Indias western offshore territory
in the 1970s. Reliance Industries Ltd (RIL) was the rst to announce a gas discovery
in the KrishnaGodavari basin in 2002, followed by a number of discoveries
by Gujarat State Petroleum Corporation Ltd (GSPC) and Oil and Natural Gas
Corporation Ltd (ONGC). Estimated gas reserves of these combined discoveries,
yet to be certied, exceed 1.5 trillion cubic metres (IEA 2006a).
Substantial parts of Indias territory remain unexplored, suggesting potential for
further growth in domestic gas reserves from future gas discoveries and more accu-
rate estimation of existing reserves.
table 6 distribution and consumption of compressed natural gas in India, 2005-06
Delhi Mumbai Gujarat total
CNG stations units 146 120 15 281
CNG vehicles units 106 483 170 003 33 403 309 889
price Indian rupees/kg 18.00 20.1921.30 22.5523.41
consumption billion m
3
a year 0.47 0.29 na
na Not available.
Source: MoPNG (2006a).
24
natural gas in india abare research report 07.23
natural gas reserves India map 1
lamma aa1 |a:|m|
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gas and oil field
gas and oil basin
gas field
BANGLADESH
BHUTAN
NEPAL
Mumbai
offshore
KrishnaGodavari Basin
25
natural gas in india abare research report 07.23
domestic gas production
Natural gas production in India
increased at an average rate
of 4 per cent a year, from 11.9
billion cubic metres in 1990 to
28.8 billion cubic metres in 2005
(gure 15; IEA 2007d), although
estimates of Indias gas production
vary between sources. Around
70 per cent of domestic produc-
tion comes from offshore elds,
operated by ONGC and private
sector companies/joint ventures.
The Mumbai High elds account
for almost three-quarters of Indias
offshore gas production (table 7).
20
10
30
1990 2005 2000 1995
billion m
3
imports
domestic gas production
natural gas supply
India
fig 15
table 7 natural gas production India
1990-91 2000-01 2004-05 2005-06 s
billion m
3
billion m
3
billion m
3
billion m
3
onshore
Gujarat 1.70 3.15 3.71 3.83
Assam/Nagaland 2.01 2.20 2.25 2.41
Arunachal Pradesh 0.03 0.03 0.04 0.05
Tripura 0.07 0.38 0.50 0.48
Tamil Nadu 0.06 0.20 0.68 0.91
Andhra Pradesh 0.05 1.60 1.71 1.66
Rajasthan nil 0.16 0.21 0.24
total onshore 3.92 7.73 9.09 9.58
of which
OIL 1.52 1.86 2.01 2.27
ONGC 2.40 5.56 5.66 5.75
joint ventures/private nil 0.31 1.43 1.56
offshore
ONGC (Mumbai High) 14.08 18.47 17.31 16.82
joint ventures/private nil 3.29 5.36 5.80
total offshore 14.08 21.75 22.67 22.62
grand total 18.00 29.48 31.76 32.20
s Estimated. Note: These data for total gas production differ from IEA (2007a,d). For consistency, IEA data have been used
throughout this report, however, these data have been included to provide state based data that are not available from the IEA.
Source: MoPNG (2006a).
26
natural gas in india abare research report 07.23
Until the opening up of the oil and gas sector to private participation in the late
1990s, natural gas production in India was dominated by two national oil compa-
nies, ONGC and OIL (box 3). These companies still account for the largest share
of domestic gas production, at 77 per cent in 2005- 06. Private companies/joint
ventures, which make up the rest of Indias gas production, have increased their
share rapidly from nil in 1990-91 to nearly 23 per cent in 2005- 06.
Existing onshore and offshore gas elds operated by national oil companies are
facing declining production over the medium term, which places an increased
emphasis on identifying new sources of gas supply, either domestic or imported.
LNG imports
India has placed increasing focus on LNG imports as a potential means of meeting
domestic natural gas demand. LNG imports have risen steadily since the commis-
sioning of Indias rst LNG terminal at Dahej in the State of Gujarat in early 2004.
From just under 2 million tonnes that year, LNG imports reached more than 6 million
tonnes in 2006. In the rst half of 2007, LNG imports by India were 4.1 million
tonnes, a rise of more than 66 per cent compared with the rst half of 2006.
While Qatar was the sole supplier of LNG to India in 2004 and remains the
largest LNG supplier at present, the range of suppliers is becoming increasingly
diverse. In 2005, India imported LNG from Australia and Oman. Additional
supplies were sourced from Egypt,
Trinidad and Tobago, Abu Dhabi,
Malaysia and Algeria in 2006
(gure 16; FGE 2007a).
At present, India has two opera-
tional LNG import terminals Dahej
and Hazira in Gujarat state,
while a third terminal at Dabhol in
the state of Maharashtra is under
construction (table 8). There are
several other proposed LNG
terminals in various stages of plan-
ning. These are discussed further in
chapter 5.
Mt
2006 2005 2004
6
4
2
Australia
other
Egypt
Oman
Qatar
LNG
import capacity
LNG imports, by source country
India
fig 16
27
natural gas in india abare research report 07.23
box 3 structure of the natural gas sector in India
Until recently, the exploration and production of natural gas in India was undertaken
exclusively by the state owned Oil and Natural Gas Corporation Ltd (ONGC) and
Oil India Ltd (OIL). As a result of government initiatives to encourage private sector
investment in exploration and production activities and to deregulate the oil and gas
sector, several private sector participants are also now engaged in exploration and
production (gure 17; PETROTECH Society and PwC 2007; GAIL 2007).
Under the New Exploration Licensing Policy (NELP), operating since 1999, foreign
and domestic private sector companies acquire exploration blocks and undertake
exploration activities either as joint venture consortiums with state owned companies
or independently.
Reliance Industries Ltd (RIL) is the largest oil and gas acreage holder among the
private sector companies in the country. It is also Indias rst private sector company
in the exploration and production sector to have discovered large natural gas
reserves in the eastern offshore KrishnaGodavari basin in late 2002. Other
continued...
natural gas sector structure
India
fig 17
production LNG suppliers transport city gas/
CNG distribution
gas marketing
GAIL GAIL ONGC PLL (Dahej & Kochi) GGCL (Gujurat)
OIL GSP/Niko OIL Shell (Hazira) MGL (Mumbai)
GSPC ONGC BG India a RGPLL (Dabhol) b IGL (Delhi)
RIL AGCL GSPC
ONGC
(Mangalore) c
BGL (Andhra Pradesh)
AGCL RIL RIL RIL
ONGC IndianOil Cairn Energy BG India
BPCL Niko Resources
BG India
OIL
Cairn Energy
a BG India is a partner in the Panna/Mukta and Tapti (PMT) joint venture with ONGC and RIL.
b LNG terminal under construction. c LNG terminal planned.
28
natural gas in india abare research report 07.23
box 3 structure of the natural gas sector in India continued
private sector participants in exploration and production activities include BG India,
Niko Resources and Cairn Energy.
Pipeline gas transport is primarily undertaken by state owned GAIL (India) Ltd,
formerly the Gas Authority of India Ltd. GAIL is Indias largest gas transmission and
marketing company, with a high pressure pipeline network of around 5600 kilome-
tres. The largest pipeline network, HaziraVijaipurJagdishpur, with a total length
of more than 2800 kilometres, covers the states of Gujarat, Rajasthan, Madhya
Pradesh, Uttar Pradesh, Haryana and Delhi in the north west of the country. The
610 kilometre long DahejVijaipur pipeline owned by GAIL transports regasied
LNG received at the Dahej terminal operated by Petronet LNG Ltd (PLL).
GAIL also has regional gas distribution grids, totalling around 1 800 kilometres
of varying length and diameter in Ahmedabad, Assam, Baroda, Cauvery basin,
Hazira, Krishna- Godavari basin, Mumbai, Rajasthan and Tripura. Other regional
natural gas pipeline operators include Gujarat Gas Company Ltd (GGCL) and
Gujarat State Petronet Ltd (GSPL) in Gujarat, Assam Gas Company Ltd (AGCL)
and Tripura Natural Gas Company Ltd (TNGCL) in Assam and Tripura respectively.
Indraprastha Gas Ltd (IGL) in Delhi, Mahanagar Gas Ltd (MGL) in Mumbai and
GGCL in Gujarat are also developing city gas distribution networks for the supply
of compressed natural gas (CNG) and city gas in their respective areas.
The gas produced by ONGC and part of the gas from joint venture consortiums,
such as the Panna/Mukta and Tapti joint venture formed by BG India, ONGC
and RIL, is marketed by GAIL. The gas produced by OIL is marketed by OIL itself,
except in Rajasthan where GAIL markets its gas. Gas produced by Cairn Energy
and Gujarat State Petroleum Corporation Ltd (GSPC) is being sold directly by the
respective companies.
Companies operating Indias LNG import facilities include Petronet LNG Ltd (PLL)
and Shell Hazira. PLL, the operator of Indias rst LNG receiving and regasication
terminal at Dahej, Gujarat, is comprised of four state owned oil and gas companies
GAIL, ONGC, Indian Oil Corporation Ltd (IndianOil) and Bharat Petroleum
Corporation Ltd (BPCL). The Hazira LNG Terminal and Port is partnered by Shell
Gas BV and Total Gaz Electricit Holdings France, representing two of the largest
private LNG suppliers in the world.
continued...
29
natural gas in india abare research report 07.23
Dahej terminal, Gujarat
Petronet LNG Ltd (PLL) was formed by the Indian Government as a joint venture
to set up LNG terminals and import LNG. GAIL, ONGC, Indian Oil Corporation
Ltd (IndianOil) and Bharat Petroleum Corporation Ltd (BPCL) are the key partners
and promoters of PLL. The terminal at Dahej has an annual design capacity of 6.5
million tonnes of LNG. The company plans to expand the capacity to 10 million
tonnes of LNG a year by the end of the decade.
table 8 existing LNG terminals India
project commis- potential
location developer capacity supplier sioned expansion
Mt pa
Dahej, Petronet LNG Ltd (PLL) 6.5 a RasGas, Qatar; 2004 10 million tonnes a
Gujarat spot cargoes year by 2010
Hazira, Shell Hazira LNG 2.4 spot cargoes 2005 planned expansion
Gujarat Terminal and Port to 510 million
tonnes a year
Dabhol, Ratnagiri Gas and 5.0 yet to be delayed by
Maharashtra Power Private Ltd nalised various issues,
(RGPPL) expected 2009
a Debottlenecking increased capacity from 5 million tonnes a year to 6.5 million tonnes a year in early 2007.
Sources: PLL (2007a); Shell (2007).
box 3 structure of the natural gas sector in India continued
Ratnagiri Gas and Power Private Ltd (RGPPL) is a special purpose organisation that
has been incorporated to take over assets and revive the former Dabhol Power
Company project in the state of Maharashtra. The Dabhol project is an integrated
facility consisting of a gas red power plant and an associated LNG receiving
and regasication terminal. The RGPPL shareholders include GAIL, state owned
National Thermal Power Corporation Ltd (NTPC), Maharashtra State Electricity
Board Holding Co Ltd (MSEB) and Indian nancial institutions.
30
natural gas in india abare research report 07.23
PLL has a long term sale and purchase agreement with Ras Laffan LNG Company
Ltd (RasGas) for the phased supply of 7.5 million tonnes of LNG a year from Qatar
to India, starting in 2004 and expiring in 2029. The rst phase of 5 million tonnes
of LNG a year is already in progress, while the second phase of an additional 2.5
million tonnes of LNG a year is due to begin in 2009. GAIL, the sole transporter of
the regasied LNG, has upgraded the HaziraVijaipurJagdishpur (HVJ) pipeline
from Dahej to Vijaipur to synchronise with the LNG terminal.
GAIL, IndianOil and BPCL market the regasied LNG to their respective customers.
The gas is sold to existing industrial customers requiring increased volumes of gas
or to those who currently use liquid fuels such as naphtha or fuel oil in their manu-
facturing process. These customers are located in the states of Gujarat, Mahar-
ashtra and along the HVJ pipeline.
Hazira terminal, Gujarat
The Hazira terminal in the state of Gujarat is partnered by Shell Gas BV and Total
Gaz Electricit Holdings France. The rst LNG shipment, sourced from Australia,
arrived at the terminal in April 2005. The Hazira terminal has an annual capacity
of 2.4 million tonnes, which can be increased to 510 million tonnes a year,
if required. To date the Hazira LNG terminal has been operating well below
capacity. Terminal partners source LNG from various projects around the world as
required, rather than on a long term contract basis.
The Hazira LNG terminal has access to existing pipeline infrastructure to transport
and deliver gas to customers. A pipeline from Hazira to Mora has been laid to
connect to the Gujarat grid operated by Gujarat State Petronet Ltd (GSPL). The
terminal is also connected to GAILs pipeline network, and Shell and GAIL have
initialled a broad framework of agreement to deliver gas from the Hazira terminal
to GAILs customers.
Dabhol terminal, Maharashtra
Ratnagiri Gas and Power Private Ltd (RGPPL) was set up in 2005 under the Indian
Governments restructuring plan to take over the assets and revive the former
Dabhol Power Company project. The project includes a 2184 megawatt gas
red power plant and a linked LNG import and regasication facility. The Dabhol
power project was shut down in May 2001 following a power tariff dispute
between its initial promoter, Enron Power Corporation, and the only customer,
Maharashtra State Electricity Board Holding Co Ltd (MSEB).
31
natural gas in india abare research report 07.23
RGPPL is now a wholly owned Indian project with GAIL, National Thermal Power
Corporation Ltd (NTPC), MSEB and Indian nancial institutions as the main share-
holders. GAIL was given the mandate to revive the LNG facility, while NTPC was
to revive the associated power plant. The power plant resumed operation in April
2006 using naphtha as fuel in the absence of gas supply. In July 2006 the power
plant was shut down again as a result of the high cost of naphtha supplies. The
plant restarted in late August 2007, using imported LNG (Platts 2007a).
The Dabhol LNG import terminal is planned to have an annual capacity of 5
million tonnes of LNG, of which 2.1 million tonnes is required for the power plant,
with the remaining quantity available for supply to various consumers. Commis-
sioning of the terminal has been delayed, primarily as a result of signicant cost
overruns, and is now expected to occur toward 2009 after the completion of
associated facilities.
In the absence of long term supply contracts, RGPPL has entered into a medium
term arrangement with PLL for the supply of spot LNG to be delivered at PLLs
Dahej terminal and transported to Dabhol via the recently completed Dahej
Dabhol pipeline. PLL signed a short term LNG import agreement in mid-2007 with
Qatari supplier Rasgas to meet RGPPL requirements and is also sourcing cargoes
from the spot market (Platts 2007b).
gas supply infrastructure
Indias natural gas pipeline network is made up of high pressure interstate transmis-
sion pipelines, located mostly in the north western part of India, and regional gas
distribution grids in western, southern and eastern regions of the country. India
currently does not have any major storage facilities for natural gas.
The total length of the gas transmission system is 6300 kilometres, of which more
than 5600 kilometres are operated by GAIL. Other gas pipeline operators include
Gujarat Gas Company Ltd and Gujarat State Petronet Ltd in Gujarat, Assam Gas
Company Ltd and Tripura Natural Gas Company Ltd in Assam and Tripura respec-
tively. At the core of Indias transmission system is the HaziraVijaipurJagdishpur
(HVJ) pipeline, which carries natural gas from the western offshore elds to end
users in Gujarat, Madhya Pradesh, Rajasthan, Uttar Pradesh, Haryana and Delhi.
The HVJ pipeline is more than 2800 kilometres long, and has a design capacity
of 12.2 billion cubic metres a year (equivalent to 8.9 million tonnes of LNG)
(MoPNG 2006a; GAIL 2007).
32
natural gas in india abare research report 07.23
GAIL also operates more than 1800 kilometres of regional gas pipelines in
Ahmedabad, Assam, Baroda, Cauvery basin, Hazira, KrishnaGodavari basin,
Mumbai, Rajasthan and Tripura. These pipelines are smaller and vary in length
from less than 1 kilometre up to 55 kilometres. In addition, there are a number of
city gas distribution grids, which supply gas to households, commercial and indus-
trial users, and the transport sector.
While GAIL is the largest gas transmission and distribution company in India, it
also provides access to third parties for the transmission of natural gas. Currently,
transmission tariffs on the interstate gas pipelines HVJ and DahejVijaipur are
regulated, while transmission tariffs on the regional gas pipelines and LPG pipe-
lines are not regulated.
The total capacity of the transmission network is 51.1 billion cubic metres a year
(equivalent to 37.3 million tonnes of LNG). The amount of gas transmitted via GAILs
pipeline network has increased by almost 30 per cent in recent years, from 22.5
billion cubic metres in 2001- 02 to 28.8 billion cubic metres in 2005- 06 (GAIL
2006).
GAIL has drawn up major plans for the expansion of the interstate gas transmission
grid, which would allow expansion of Indias gas supply infrastructure and provide
connections between various gas sources and geographically dispersed markets
(map 2; GAIL 2006). The proposed grid would add a further 8400 kilometres
of natural gas transmission pipelines in line with the emergence of gas sources on
the west and east coasts of the country, and require investment of approximately
US$5 billion. Several private companies also have plans to construct interstate
pipelines, including in Andhra Pradesh, Maharashtra, Gujarat, Goa, Madhya
Pradesh, Orissa, West Bengal and Tamil Nadu (MoPNG 2006a).
The integrated gas pipeline network would also enable the development of city
gas distribution projects in the country by catering to a large number of cities and
towns falling in the catchment area of the existing and future pipeline networks.
Recent developments in downstream petroleum and natural gas regulation, such as
the enactment of the Petroleum and Natural Gas Regulatory Board Act in 2006
and the formulation of the Gas Pipeline Policy, are expected to provide further
impetus for the expansion of gas supply infrastructure in the country. The regulatory
framework in the natural gas sector is discussed further in the following chapter.
33
natural gas in india abare research report 07.23
gas pricing
Until recently, all natural gas produced in India was subject to an administered
pricing mechanism, based on subsidised consumer prices. After an attempt to
bring gas prices to parity with import prices of alternative fuels in the late 1990s
proved unsuccessful, the Indian Government has set gas prices on an ad hoc basis
(see box 4 on the evolution of gas pricing in India). At present, India has a mix
of administered and market gas prices that vary across consumer segments and
depend on their eligibility for administered gas pricing.
Jaipur
Amritsar
New
Delhi
Chandigarh
natural gas infrastructure India map 2
Dahej
Hazira
Kochi
Kolkata
Chennai
existing pipelines
proposed pipelines
existing LNG import terminals
under construction/planned LNG import terminals
Bangalore
Mangalore
Dabhol
Pune
Hyderabad Kakinada
BANGLADESH
BHUTAN
NEPAL
Kota
Ahmadabad
Jamnagar
Vijaipur
Mumbai
Jagdishpur
Bhatinda
Srinagar
Bhopal
Patna
34
natural gas in india abare research report 07.23
box 4 evolution of gas pricing in India
Historically, natural gas prices in India have been regulated using a variety of mecha-
nisms. Until the 1970s, gas prices were based on recommendations made by expert
committees. During the 1970s and most of the 1980s, prices were determined by the
monopoly gas producers ONGC and OIL on a negotiated basis. Since 1987,
the government has set uniform gas prices across the country, with an exception of
the north east region, which receives gas at concessional prices.
In 1997, natural gas prices were pegged to the import parity price of a basket
of internationally traded fuel oils. Prices were set to increase progressively as a
proportion of the fuel oil basket price, from 55 per cent in 1997-98 to 85 per cent
in 2000- 01. To curb any major uctuations in gas prices, the government set a
price band, with a oor price of 2150 Indian rupees per thousand cubic metres
and a ceiling price of 2850 Indian rupees per thousand cubic metres. However,
in 1999-2000 gas prices reached the ceiling price, as international fuel oil prices
continued to increase. The process of raising gas prices to achieve full import parity
was stalled and gas prices remained at this ceiling until 2005- 06.
In July 2005, the gas price for priority sectors electricity generation and fertiliser
sectors and other users specied on occasion by the government or court was
revised upwards to 3200 Indian rupees per thousand cubic metres. The price
of gas in the north east region was pegged at 60 per cent of the revised price.
However, the price of gas for consumers in all other sectors more than doubled to
6893 Indian rupees per thousand cubic metres (table 9).
Administered gas prices were revised further in 2006, with prices for nonpriority
sectors such as steel raised by around 23 per cent, and by 20 per cent for city
gas distribution companies and customers consuming less than 18.25 million
cubic metres a year. The priority sectors continue to pay 3200 Indian rupees per
thousand cubic metres. Further rises in gas prices are anticipated once the Tariff
Commission under the Ministry of Commerce and Industry makes recommendations
on prices for gas sold under the administered pricing mechanism.
There have been recent disputes over privately produced gas not subject to admin-
istered pricing, including the pricing formula for gas sourced from RIL elds in the
KG basin. RIL proposed a landed price of US$4.33 per million British thermal units
to the government for approval in mid-May 2007 and stated that there would be
35
natural gas in india abare research report 07.23
However, the Government has recognised the need to move to market based
prices to enable potential customers to secure imports and to encourage domestic
gas exploration and production. In 2005, the government started a gradual
phasing out of the administered pricing mechanism, with an increasing number of
natural gas producers and consumers moving toward market prices. The ultimate
goal of domestic gas pricing reform is market pricing that is aligned with global
trends and makes natural gas competitive against alternative fuels (gure 18; PLL
2007b).
Currently, administered prices apply only to natural gas produced by ONGC and
OIL from nominated domestic gas elds and supplied to priority sectors, namely
electricity generation and fertiliser production. The current output of natural gas
from the nominated elds accounts for approximately 60 per cent of total gas
production in the country (MoPNG 2007).
box 4 evolution of gas pricing in India continued
delays in the commencement of production should prices remain unresolved.
The price for gas proposed by RIL is substantially higher than the prices paid by
customers who currently have access to subsidised gas. The government subse-
quently made changes to the pricing formula proposed by RIL where the landed
price of KG basin gas would be US$4.20 per million British thermal units. However,
as of late September 2007, the issue remained unresolved (Platts 2007c).
gas pricing reform direction
India
fig 18
past
present future
100 per cent
government controlled
single price for all
users and sources
cost plus basis
government controlled
in priority sectors
electricity
fertiliser
CNG/small consumers
market prices
private/joint ventures
regasified LNG
free market pricing
competitive with
alternative fuels
alignment with
global trends
36
natural gas in india abare research report 07.23
Gas prices in the transport sector and for small customers (consuming less than
18.3 million cubic metres a year) are expected to be progressively increased
over three to ve years to reect market prices. City gas distribution companies
are already required to pay market rates to GAIL for gas sold to industrial and
commercial customers, which was previously charged at subsidised rates.
The total price of gas to the consumer is a combination of the government regu-
lated wholesale price, royalty charges, pipeline transmission tariffs and applicable
taxes and duties. As at August 2006 the total price of gas sold to priority sectors
was estimated at around US$3.07 per million British thermal units, compared with
a market driven price of US$6.22 per million British thermal units (table 9; ICRA
2006; MoPNG 2007; ABARE research).
To provide incentives for private players to invest in gas exploration and produc-
tion, the government has permitted natural gas produced under the New Explora-
tion Licensing Policy (NELP) conditions to be sold in the open market at competi-
tive prices. These prices are based on the production sharing contracts between
the government and successful NELP bidders, and gas sales agreements. Gas
pricing for pre-NELP blocks, including Panna/Mukta and Tapti and Ravva elds
in the countrys western and eastern offshores, is partly covered by the adminis-
tered pricing mechanism and partly market determined. Natural gas produced by
table 9 changes in natural gas prices, by sector India
cost to the
price pre price post price post consumers as at
July 2005 July 2005 June 2006 August 2006 b
Indian rupees Indian rupees Indian rupees US$ per million
per 000 m
3
per 000 m
3
per 000 m
3
British thermal units
priority consumers 2 850 3 200 3 200 3.07
CNG, small consumers 2 850 3 200 3 840 3.52
nonpriority consumers 2 850 6 893 8 482 a 6.22
priority consumers (north east) 1 700 1 920 1 920 1.50
nonpriority consumers (north east) 1 700 3 515 5 089 a 3.38
regasied LNG (Dahej) 6 893 6 893 4.88
Panna/Mukta and Tapti joint venture 6 893 8 482 a

a From April 2006. b For consumers located outside Gujarat and along the HVJ pipeline.
Note: Priority consumers include electricity, fertilisers and specic end users as per court orders. Nonpriority consumers
include other industries such as steel, sponge iron and ceramics. There is considerable variation in prices reported by
different sources therefore prices should be interpreted as indicative only.
Sources: ICRA (2006); MoPNG (2007); ABARE research.
37
natural gas in india abare research report 07.23
ONGC and OIL from the new elds that are not subject to administered pricing is
also expected to be sold at market determined prices.
Regasied LNG prices are based on the gas sale and purchase agreements. The
price of LNG for the Dahej project is xed for the rst ve years, up to December
2008. Thereafter, the pricing structure will be gradually aligned with JCC (Japa-
nese crude cocktail) prices. As at September 2007, the selling price of LNG was
US$4.87 per million British thermal units in Gujarat and US$4.88 per million British
thermal units outside Gujarat. At this price, LNG is cheaper than alternative fuels,
such as naphtha, fuel oil, low sulfur heavy stock, light diesel oil and LPG (MoPNG
2007).
In the rst half of 2007, Indian buyers were paying around US$8 per million
British thermal units for spot LNG to be used primarily in electricity generation, to
replace naphtha in combined cycle plants and to meet peak load requirements
(Platts 2007d). While spot cargo purchases have shown the gas markets ability
to absorb marginal LNG volumes at current high global prices, it is unlikely that
this pricing can be sustained in the form of long term contracts for more signicant
volumes, as fertiliser and power producers continue to rely on low administered
prices for supplies from domestic elds and resist attempts to move toward market
pricing, particularly while the selling prices of their end products are also capped.
38
factors affecting Indias future
natural gas demand
While natural gas demand has the potential to grow strongly in India, a range of
factors will affect the extent and prole of future demand. These include the pace
of gas market reform and pipeline network development; reforms in energy end
use markets, including electricity and fertilisers; and policy responses to energy
security concerns and environmental factors.
gas market reform
A central issue for gas market reform in many economies has been how to create
more competitive and exible markets in the presence of natural monopolies in
transmission and distribution. Pipelines, the only economic option for transporting
gas across land, involve large xed costs and low marginal costs of operation
such that a given level of demand can usually be met at lower cost by using one
pipeline intensively rather than building a second pipeline. Even when a market
grows beyond the initial design capacity of a pipeline, capacity can usually be
expanded by adding compressors at considerably lower cost than building a new
pipeline.
One of the purposes of gas market reform is to separate the market for the gas
commodity from the market for gas transport services. In the traditional model for
gas supply in many economies, including India, consumers have only been able to
purchase delivered gas from a single pipeline owner at a bundled price incor-
porating the cost of the gas plus the cost of transporting it. Unbundling and open
access to pipelines creates the opportunity for gas consumers and producers to
negotiate directly for the sale of gas, and then separately arrange for its transport.
In recent years, the Indian Government has made signicant progress in estab-
lishing a regulatory framework for pipeline access and pricing, seeking to promote
downstream competition and increased public and private investment in natural
gas pipeline infrastructure. In early 2006, the Indian Parliament passed the
Petroleum and Natural Gas Regulatory Board Act, which envisaged setting up an
independent regulator to monitor post production activities.
3
39
natural gas in india abare research report 07.23
The Petroleum and Natural Gas Regulatory Board, which is currently being
established, will regulate laying, building, operating and expanding natural gas
pipelines and city or local gas distribution networks, including access, tariffs and
technical standards. The objective of the board is to protect consumer interests by
fostering fair trade and competition among entities engaged in specied activities
relating to natural gas, to ensure uninterrupted and adequate supply of natural gas
in all parts of the country and to promote competitive markets in India.
To underpin the Petroleum and Natural Gas Regulatory Board Act, the government
has formulated the Gas Pipeline Policy for the development of natural gas pipe-
lines and city or local gas distribution networks, which came into effect at the end
of 2006. The objective of the policy is to promote public and private investment
in natural gas pipelines and city or local gas distribution networks, to facilitate
open access for all players to the pipeline network on a nondiscriminatory basis,
to encourage competition among entities and to protect consumer interests in terms
of gas availability and reasonable gas transport tariffs. A Gas Advisory Board will
be set up to promote and develop the gas pipeline network in India.
Currently, open access to the transmission network is allowed on a limited scale.
For example, Petronet LNG joint venture partners use HaziraVijaipurJagdishpur
and DahejVijaipur networks to sell regasied LNG. New regulations are
expected to permit open access on a larger scale and in a transparent manner,
thus enabling private producers and LNG terminal operators to sell gas directly to
their customers. State governments are expected to play a key role in facilitating
timely completion and operation of pipelines and city or local natural gas distribu-
tion networks by ensuring statutory and other clearances are given without delay.
As the natural gas market in India matures, the policy envisages the unbundling of
gas transmission and marketing activities to avoid conicts of interest and to ensure
that pipeline ownership does not provide competitive advantage to any gas seller,
and all players have open access to the gas grid on a nondiscriminatory basis.
Importantly, the policy permits 100 per cent foreign direct investment in laying
natural gas pipelines under the automatic approval route, seeking to boost invest-
ment in natural gas infrastructure development and to supplement domestic sources
of nance.
Some of the contentious issues raised by the industry in relation to the new natural
gas regulations concern the power of the board to regulate contract carriers,
where pipelines are laid exclusively for consumers, and the decision on the pipe-
line is made between the network operator and a specic consumer. The board
40
natural gas in india abare research report 07.23
also has the power to determine a period of exclusivity for city or local gas distri-
bution networks, a power that is supported by network operators and contested
by prospective new entrants (ICRA 2006).
Development of a national gas pipeline network will be a key driver of growth in
Indias natural gas market. Passage of the Petroleum and Natural Gas Regulatory
Board Act and release of the associated Gas Pipeline Policy is a signicant step
forward in creating a robust regulatory framework for downstream natural gas
activities. The appointment of members of the proposed regulatory board and
nalisation of further policy directives governing the gas market are expected to
trigger much needed investment in the expansion of gas transmission and distribu-
tion infrastructure. The Indian Government estimates that investment by public and
private entities could reach almost 400 billion Indian rupees (around US$9 billion)
over the ve years to 2011-12. Gas transmission pipelines account for more than
half of the expected investment, followed by LNG terminals and city gas distri-
bution networks at nearly one quarter (MoPNG 2006a). However, clarity on
unresolved or contentious issues is critical for investment to start owing into the gas
infrastructure sector and for a competitive gas market to emerge. If investment in
coming years is less than optimal, it will have a dampening effect on gas demand.
end use market reforms
Further development and reform processes in the electricity generation and
fertiliser production sectors will have a direct impact on Indias future gas demand
levels and prole, as they are likely to remain signicant customers.
fertiliser policy initiatives
Fertilisers have made a signicant contribution to Indias agriculture sector, not only
in terms of meeting domestic food grain requirements, but also generating a grain
surplus for export. To further boost agricultural production, the Indian government
has placed high priority on increased output and efciency in the fertiliser sector,
the removal of regional imbalances in production and distribution of fertilisers,
and securing long term supply arrangements for feedstock and raw materials. To
make fertilisers more affordable for farmers, the government subsidises input costs,
including natural gas for fertiliser producers.
Prior to the 1980s, production of nitrogenous fertilisers (mainly urea) in India was
primarily based on naphtha, fuel oil and low sulfur heavy stock. As natural gas
41
natural gas in india abare research report 07.23
has become increasingly available as more domestic gas elds came online,
there has been a steady increase in the number of gas based fertiliser plants.
Natural gas is more efcient than alternative feedstocks in urea production. At
present, natural gas based plants account for more than 66 per cent of urea
production capacity, naphtha is used for less than 30 per cent of urea produc-
tion, and the remaining capacity is based on fuel oil and low sulfur heavy stock
(DoF 2007a).
The fertiliser industry is one of the few highly regulated industries in India, with
prices, subsidies, distribution, imports and choice of technology and feedstock
controlled by the government. While phosphatic and potassic fertilisers were
deregulated in the early 1990s, the pricing and distribution of urea remain largely
under state control.
The government is reviewing the urea pricing mechanism and considering options
to lower the subsidy to urea producers. However, to avoid potential negative
impacts on food grain production in the country, it is unlikely that urea will be
fully deregulated in the near future. The current pricing scheme provides nancial
support to urea producers in earning a reasonable return on their investment in the
administered price environment and favours conversion to natural gas/LNG. The
current stage three of the scheme, which commenced in October 2006, directs all
operating urea plants using naphtha and fuel oil/low sulfur heavy stock to convert
to natural gas/LNG within three years. After that period, the government will limit
subsidy payments to non gas based urea producers.
To meet anticipated growth in urea consumption, the government encourages
urea plants to produce above capacity by means of debottlenecking or plant
modernisation. Such measures, based on natural gas/LNG only, are expected to
result in at least a 10 per cent increase in existing production capacity. Increases in
production capacity based on alternative, more expensive feedstock, and feed-
stock substitution for enhanced production capacity are not permitted. The new
and expanded urea projects can receive full subsidy payments only if they are
based on natural gas/LNG and sell urea directly to the agricultural sector. Simi-
larly, resumption of production by closed urea plants has been permitted if based
on natural gas/LNG.
These recent policy initiatives to convert the majority of urea production in the
country to natural gas suggest that the fertiliser industry has signicant potential to
increase natural gas consumption over the coming years, supported by continued
strong demand for fertilisers by Indias growing population. Based on proposals
42
natural gas in india abare research report 07.23
received, the government has estimated that natural gas consumption in the ferti-
liser industry could rise by 86 per cent between 2007- 08 and 2011-12.
However, any marked increase in gas consumption in the fertiliser sector depends
on the availability and pricing of natural gas/LNG, the development of neces-
sary gas infrastructure, and the successful implementation of the policy initiatives
described in this section.
electricity reform
Electricity sector reform in many economies has been based on the objective of
encouraging efcient energy supply and use. The basic elements in most reform
models include: separation of generation from transmission and distribution;
competition between generating companies (privately owned or corporatised);
provision of access by transmission and distribution companies (privately owned or
corporatised) to all network users on nondiscriminatory terms; establishment of an
independent regulatory body; and all or part of the retail market open to competi-
tion.
Similar to other economies, privatisation is a key feature of electricity sector reform
in India, driven by government budget considerations and a desire to encourage
better performance by utilities. The electricity sector in India is mainly publicly
owned and operated. The central government, through public companies, owns
and operates a third of the electricity generation capacity and interstate transmis-
sion. At the state level, the state electricity boards own and operate most of the
remaining two-thirds of the generation capacity, as well as single state transmission
and distribution systems. The states also dene their own tariff structures.
The central government has for a long time given priority to developing access
to electricity. This has frequently meant low prices for domestic and agriculture
consumers and relatively higher prices for electricity supplied to the industry and
commercial sectors. However, the growth in the electricity demand has outstripped
the growth of the public money available to bear the cost of the increasing subsi-
dies, which has led to the sector facing nancial constraints.
Since the early 1990s, the government has focused on attracting private invest-
ment in the sector. The government has gradually introduced competition in
bidding for generation projects and established a regulatory framework for private
sector participation in electricity distribution. Most states in India have reorganised
their state electricity boards, which have been typically unbundled into separate
43
natural gas in india abare research report 07.23
companies for generation, transmission and distribution. Several states have also
opted to partially or entirely privatise generation and distribution while keeping
transmission as a state monopoly. However, the results of this reform have fallen
below expectations. The state electricity boards are increasingly unable to pay for
the electricity they purchase from central government owned utilities or from inde-
pendent power producers. The level of network losses is estimated to be as much
as 3040 per cent, largely as a result of theft and because the network consists of
many long distance low voltage lines.
The electricity sector in India incurs signicant nancial losses of around US$6
billion a year (KPMG 2007), which leads to underinvestment in new capacity
and shortfalls in electricity generation. Inadequate generation capacity and the
poor quality of the distribution network have resulted in poor quality of supply,
characterised by planned and unplanned interruptions and deviations in voltage
and frequency from prescribed parameters. In recent years, availability of fuel for
electricity generation has also become a signicant constraint. Coal shortages are
increasing and gas shortages are leading to a situation where plants are not able
to operate to full capacity.
recent policy initiatives
In recognition of the key role of electricity in driving rapid economic growth and
poverty alleviation, India has set the target of providing access to electricity to all
households by 2009 and increasing availability of electricity to more than 1000
kilowatt hours per person by 2012. The latter target would require an estimated
capacity addition of more than 100 000 megawatts by 2012 (ADB 2005). The
government has identied further electricity sector reform that includes promoting
competition in interstate transmission, setting up an independent government
authority to ensure nondiscriminatory grid access for competing generators,
launching a program for capacity additions, reducing transmission and distribu-
tion losses, and attracting private investment. To meet the above objectives, a new
policy and regulatory framework is being put in place.
The Electricity (Amendment) Act 2007 provides an enabling environment for accel-
erated and more efcient development of the power sector, seeking to encourage
competition with appropriate regulatory intervention. There is no licensing require-
ment for electricity generation and captive generation has been freed from all
controls under the Act. The national electricity policy sets out guidelines for the
accelerated development of the power sector, providing supply of electricity to all
areas and protecting the interests of consumers and other stakeholders, keeping
44
natural gas in india abare research report 07.23
in view the availability of energy resources, available technologies, economics of
electricity generation, and energy security issues. Other key initiatives in the sector
include the rural electrication policy, and megapower projects (thermal genera-
tion projects of at least 700 megawatt capacity and hydropower plants of at least
350 megawatt capacity that supply electricity to more than one state).
implications for natural gas
The electricity sector policies provide an indication of the role that gas red
power generation can play in Indias future electricity supply mix. For thermal
power, including natural gas, the economics of generation and supply of elec-
tricity is expected to be the basis of fuel choice. New gas red power generation
capacity could be based on domestic gas nds and emerge as a major source
of power generation subject to reasonable prices. A national gas grid covering
various parts of the country is expected to facilitate the development of gas red
generation capacity. Imported LNG based power plants are also a potential
source of electricity but the pace of their development will depend on their
commercial viability.
The government target of an additional 100 000 megawatt capacity by 2012
is a strong incentive to consider natural gas as a fuel source. Gas red power
plants have signicant advantages over coal, including a shorter construction
period, high thermal efciency, ability to meet peak load requirements, and lower
levels of greenhouse gas and other pollutant emissions. The government has
implemented policies that encourage the existing power plants that use liquid
fuels to switch to natural gas/LNG, to reduce the cost of electricity generation
and reduce air pollution (IEA 2006b).
A reliable supply of natural gas will be a key driver of further expansion in gas
red electricity generation capacity in India. Gas pricing will be another critical
factor. Sensitivity to gas prices in India differs by region, with locations close to
coal mines in the east of the country being more price sensitive than those on the
west coast, located close to domestic gas supplies and existing and proposed
LNG terminals. In addition, gas red power plants that supply electricity to industry
can afford substantially higher gas prices than those plants dedicated to supplying
the public power sector. Estimates about an affordable delivered price of gas
based on comparisons with alternative fuels range from US$3.634.00 per
million British thermal units for additional capacity to US$4.60 per million British
thermal units for existing but underutilised capacity. Some sources put an afford-
able price of natural gas/LNG for a power plant at US$910 per million British
thermal units (IEA 2006b; ICRA 2006).
45
natural gas in india abare research report 07.23
Coal is the major competitor fuel for gas, and future coal policies, and in particular
the path and extent of coal industry deregulation, are also important determinants
of potential natural gas demand in the electricity sector in India. Thermal plants
adjacent to coal mines that supply electricity to regional load centres are estimated
to be the cheapest source of electricity at most locations in the country. Coal that
is produced and supplied by state owned companies is available at much lower
prices to power plants than coal supplied at international prices. However, over the
past few years the growth in coal demand for electricity generation has outstripped
domestic supply increases, leading to rising imports of thermal coal. Domestic coal
supply constraints stem largely from structural and regulatory issues relating to the
pricing regime (domestic coal prices remain below international parity) and the
limited scope for private participation (Thapa and Kumar 2006).
While coal is likely to remain the main fuel for meeting future electricity demand
in India, given limitations in the use of coal for electricity generation resulting from
environmental considerations, quality and supply constraints, natural gas can still
be expected to play an important role in Indias electricity sector.
security of energy supply
Because of the strong link between economic growth and energy consumption,
India has sought to strengthen its energy security through a variety of means. These
include diversication of the fuel mix, broadening of energy supply sources, and
the implementation of energy conservation measures. Concerns over growing
energy import dependence, together with global and domestic supply risks, have
further added to the challenge of energy security.
A key measure of Indias energy security policy has been the expansion of
domestic oil and natural gas production. As part of this, the government launched
the New Exploration Licensing Policy (NELP) to boost the level of exploration
activity in the country, and to encourage an increase in oil and gas production.
The policy aims to provide a level playing eld for public and private companies
competing for exploration areas. The government offers exploration blocks, both
onshore and offshore, on a regular basis and awards them through an open inter-
national competitive bidding system.
The NELP provides signicant benets to prospective investors, including the provi-
sion for 100 per cent foreign direct investment, a seven year tax holiday, freedom
to sell natural gas in the domestic market at market determined prices, and no
46
natural gas in india abare research report 07.23
minimum expenditure commitment during the exploration period. This has already
resulted in committed investment of around US$5 billion in oil and gas exploration
after the rst ve bidding rounds (MoPNG 2006a).
India is also looking to exploit its coal bed methane and natural gas hydrate
potential as alternative sources of domestic energy. Exploration activities have
resulted in signicant coal bed methane discoveries in the eastern and central
parts of India. Small scale production of coal bed methane commenced in 2007
(DGH 2007).
Proposals to import gas via pipelines are also being driven by the need to diversify
the fuel mix in the economy and the source of energy imports. The Indian Govern-
ment also encourages domestic companies to participate in the LNG supply chain,
including investment in LNG exporting countries, to ensure security of supply. The
government permits 100 per cent foreign direct investment in LNG projects and the
import and export of natural gas, including LNG, is unrestricted. Investors are free
to choose the locations for proposed LNG terminals, subject to regulatory authori-
sation and environmental clearances.
The government also promotes equity participation of domestic companies in the
exploration and production of overseas resources of oil and gas as an additional
source of supply to enhance energy security. For example, Indian companies
currently have investments in Myanmar, Viet Nam, the Russian Federation, Iran,
Australia and a number of other countries. It is estimated that natural gas produc-
tion from overseas assets could reach more than 2 billion cubic metres by 2011-12
(MoPNG 2006a). Another policy option under consideration is to create natural
gas strategic storage facilities as a means of providing security against supply
disruptions and shortfalls.
environmental issues
Indias economic development, underpinned by strong industrial growth and
urbanisation as well as its vast population, has resulted in environmental problems,
including deforestation, soil erosion, air and water pollution, and land degrada-
tion. More than 35 cities or urban areas in India have populations greater than
one million, and some of them, including New Delhi, Mumbai, Chennai and
Kolkata, are among the worlds most polluted (OECD 2006).
47
natural gas in india abare research report 07.23
The broad vision that underpins Indias energy policy is for energy to be supplied
in a sustainable manner and at competitive prices. Indias energy needs are to be
met in a technically efcient, economically viable and environmentally sustainable
manner (Government of India 2006).
To reduce current levels of air pollution, the Supreme Court of India has mandated
the use of cleaner automotive fuels, such as compressed natural gas (CNG), in
a number of cities across the country. Following the Supreme Court directives, the
government adopted a fuel policy to control the levels of vehicular pollution. The
policy provides a roadmap for emission norms over a period of time and corre-
sponding fuel quality requirements. While it does not recommend any particular fuel
or technology to achieve the desired emission norms, it does encourage the use of
CNG in the transport sector. These initiatives have resulted in CNG emerging as a
small but rapidly growing source of demand for natural gas, with public and private
companies announcing CNG projects in a growing number of Indian cities.
There are no specic environmental policies promoting the use of gas in electricity
generation in India. However, environmental legislation aimed at the coal sector
can have the indirect impact of making gas red generation potentially more attrac-
tive. For example, the government has directed power plants to use coal with ash
content below 34 per cent if they are located beyond 1000 kilometres from the
pithead or in critically polluted areas, urban areas and ecologically sensitive areas.
Since Indian coal has an average ash content of 3540 per cent, this directive
provides another argument in favour of gas as a fuel source (IEA 2006b; TERI
2006a).
Energy efciency policies could also have a positive effect on the uptake of gas
in the electricity generation sector, given the relatively high efciency and low
emission levels of gas red power plants. One of the recommendations made by
the Planning Commission in the eleventh ve year plan (200712) is to design
and implement policies to increase energy efciency in the power sector by 20
percentage points to limit the harmful effect of carbon combustion on the environ-
ment (Planning Commission 2006).
48
4
projecting natural gas demand
in India
In this chapter, a reference case (business as usual) scenario and a high growth
scenario for energy and natural gas demand in India are developed for the period
to 2025 using ABAREs global trade and environment model (GTEM). GTEM is a
multiregion, multisector, dynamic general equilibrium model of the world economy.
The GTEM reference case represents the likely outlook for energy and natural gas
demand in India in the absence of any signicant policy changes or other external
shocks. The reference case projections are compared with other demand forecasts
for natural gas in India, including from the International Energy Agency, the US
Department of Energy, and various agencies of the Indian Government.
analytical framework
GTEM is an appropriate framework for analysing energy markets because it
takes into account the interaction between different sectors of the economy and
between economies through trade linkages. The model includes a high level of
commodity disaggregation, including a detailed treatment of energy and energy
related sectors, and a sophisticated representation of technological change and
interfuel substitution possibilities in the energy sector. This enhances the capacity
of GTEM to analyse the impacts of changes in energy policies and other external
factors that could inuence the operation of energy markets.
At its most disaggregated level, GTEM consists of equations and data that describe
the production, consumption, trade and investment behaviour of representative
producers and consumers in 87 regions across 67 sectors. The database used to
analyse the potential demand for energy and natural gas in India in this report has
been aggregated to the 18 regions and 28 sectors presented in table 10.
The sectoral aggregation was chosen to include the three fossil fuels coal, oil
and natural gas and electricity, and the major energy intensive industries that are
likely to inuence total energy consumption. The regional aggregation identies
major energy producing and trading regions, in particular existing and potential
gas suppliers to India.
49
Further information on GTEM is provided in Matysek et al. (2006) and on
ABAREs website (abareconomics.com).
key assumptions
In projecting energy and natural
gas demand in India using
GTEM, a number of key assump-
tions have been made. These
include economic and popula-
tion growth and the fuel mix in
electricity generation.
economic and population
growth
The principal driver of energy
consumption is economic growth.
In this study, it is assumed that
economic growth in India will
average 6.5 per cent a year over
the period from 2005 to 2025
(table 11). This is supported by
expectations of ongoing produc-
tivity improvements and expan-
sion in Indias labour supply.
In the high growth scenario,
economic growth is assumed to
average 9.0 per cent a year, with
the higher growth rate achieved
through further economic reforms
and productivity gains. These
rates are comparable with the
Indian Planning Commissions
(2006) possible target average
annual growth rates 7.0 per
cent, 8.0 per cent and 9.0 per
cent in the eleventh ve year
plan, for the period 200712.
natural gas in india abare research report 07.23
table 10 regions and sectors in GTEM in this
study
regions sectors
1 Australia 1 brown thermal coal
2 United States 2 black thermal coal
3 Canada 3 coking coal
4 European Union 4 oil
5 Russian Federation 5 natural gas
6 rest of CIS a 6 petroleum products
7 Japan 7 biofuels
8 China 8 electricity
9 Republic of Korea 9 uranium ore
10 Chinese Taipei 10 other ores
11 India 11 iron and steel
12 Indonesia 12 alumina
13 rest of ASEAN b 13 primary aluminium
14 Brazil 14 other nonferrous metals
15 Mexico 15 chemicals, rubber and
16 Middle East plastics
17 South Africa 16 bauxite
18 rest of world 17 other minerals
18 nonmetallic mineral products
19 other manufacturing
20 water transport
21 air transport
22 other transport
23 livestock
24 crops
25 forestry and shing
26 food
27 wood and paper products
28 services
a The rest of the Commonwealth of Independent States (CIS), comprises
Azerbaijan, Armenia, Belarus, Georgia, Kazakhstan, Kyrgyzstan,
Moldova, Tajikistan, Turkmenistan, Uzbekistan and Ukraine. b The rest of
the Association of South East Asian Nations (ASEAN) comprises Brunei,
Cambodia, Lao Peoples Democratic Republic, Myanmar, Malaysia, the
Philippines, Singapore, Thailand and Viet Nam.
Source: ABARE.
50
natural gas in india abare research report 07.23
table 11 GDP and population assumptions
India average annual growth, 200525
GDP population
% %
ABARE reference case 6.5 1.2
ABARE high growth scenario 9.0 1.2
International Energy Agency a 5.4
US Energy Information Administration b
reference case 5.8
high growth 6.2
Indian Planning Commission 7.09.0
United Nations
high 2.0
median 1.6
low 1.2
a Interpolated from data in IEA (2006a). b Interpolated from data in
EIA (2007a).
Sources: IEA (2006a); United Nations (2007); EIA (2007a); Planning
Commission (2006).
50 50 100 million
years
100
9099
8089
7079
6069
5059
4049
3039
2029
1019
09
male
2000 age
female
50 50 100 million 100
male
2025
female
trends in population growth India fig 19
In this study, Indias popula-
tion is assumed to grow at an
average annual rate of 1.2 per
cent between 2005 and 2025,
reaching 1.4 billion people in
2025. This will be accompanied
by a signicant expansion of the
population in the working age
range. For example, the United
Nations projects that the propor-
tion of people in the 2069 age
bracket will grow to 62 per cent
in 2025, up from 52 per cent in
2000 (gure 19; United Nations
2007). The increase in labour
supply, or demographic dividend,
is an important factor in raising
economic output and income per
person in India, similar to other
rapidly growing Asian econo-
mies, including China.
Also important for economic growth will be ongoing structural economic reforms,
especially in the high growth scenario. Recognising that the infrastructure decit is
a major barrier to Indias long term growth potential, the government is working
51
natural gas in india abare research report 07.23
to address regulatory and investment climate issues to attract foreign investment in
key sectors. The acceleration of economic growth and increased urbanisation of
the expanding population can be expected to place additional pressure on Indias
already strained infrastructure, including energy supply infrastructure. Another key
challenge is to improve education and labour policies to take advantage of Indias
imminent demographic dividend.
fuel mix in electricity generation
A further key assumption that will underpin projected natural gas demand in India
is the fuel mix used for electricity generation. The fuel mix adopted in India will be
inuenced by a range of factors, including the availability of resources and the rela-
tive prices of competing fuels. Government policy favouring particular fuels will also
play a role. The shares of electricity produced from different fuels (coal, oil, natural
gas, nuclear, hydro and other renewables) in India over the period to 2025 are
determined exogenously in GTEM on the basis of data from the IEA (2006a). The
assumptions reect only a moderate change in the current fuel mix used for elec-
tricity generation over the period to 2025 (gure 20).
Coal is expected to continue to be the main source of electricity generation in India
over the outlook period, accounting for almost 70 per cent of output in 2025. The
continued reliance on coal reects the availability and competitiveness of domestic
coal in India relative to other fuels. The share of nuclear power is projected to
increase to 7 per cent of electricity generation by 2025, from around 3 per cent
in 2005. The expansion in nuclear
power is underpinned by govern-
ment policy responses to a growing
reliance on energy imports. The
share of hydropower is expected to
decline to 11 per cent of electricity
generation by 2025, while oil is
expected to fall to 3 per cent.
Natural gas is projected to account
for 7 per cent of electricity genera-
tion in 2025, around 2 percentage
points lower than in 2005. An
expansion in nuclear and coal
red electricity output because
of government policy and the
%
60
40
10
50
20
30
renewables
hydro
nuclear
gas
oil
coal
2005
2015
2025
assumed fuel mix in electricity
generation, reference case India
fig 20
52
natural gas in india abare research report 07.23
competitiveness of these options is the main reason behind the fall in the share of
natural gas. Further, gas red electricity generation is currently affected by natural
gas availability and uncertainties about its future availability and price, which may
constrain its contribution to the fuel mix in the projection period. If a higher share of
gas red electricity generation eventuated, then projected gas consumption would
be higher than presented in this study.
There is considerable uncertainty surrounding the projected fuel mix in electricity
generation in India over the period to 2025. This is reected in the range of
alternative projections of Indian electricity, energy and gas demand, as well as
signicant downward revisions to the expected share of gas red electricity in
India in recent years (box 5).
oil price outlook
Future international oil prices will have some bearing on natural gas demand
through various price transmission mechanisms. Oil prices are transmitted to some
extent to international gas prices through price linkages in long term natural gas
contracts. There are also indirect linkages to coal prices through substitution possi-
bilities between fuels in the electricity generation sector.
In the reference and high growth scenarios, oil prices are assumed to remain
high in the short term, owing to limited potential to expand production. Over the
medium and longer term, oil prices are assumed to decline in response to higher
global oil production and an increase in oil stocks. Reecting these projected
movements in oil prices, international gas prices in real terms are projected to
decline gradually over the period to 2025.
outlook for energy consumption, by fuel
The reference case and high growth scenario projections in this study represent
a possible outlook for energy demand, and in particular natural gas demand,
in India over the period to 2025 in the absence of any major policy changes
or external shocks. The results, however, are not forecasts of what will actually
happen in the economy. They are projections based on the set of assumptions
outlined earlier that are considered plausible at the present time. If these assump-
tions are realised, the projections could provide a reasonable estimate of energy
developments in India.
53
natural gas in india abare research report 07.23
box 5 alternative projections for Indias energy outlook to 2025
Long term projections of energy supply and demand outlook are based on
assumptions of economic growth, population, fuel and technology mix, and energy
efciency. The differences in assumptions used in various energy projection models
is reected in a wide range of projections from Indian and international sources.
electricity generation
A recent Indian Government report on Indias energy policy options presents eleven
possible long term energy scenarios, each emphasising a different fuel mix or a
degree of specic technology adoption in the electricity sector (Government of
India 2006). The uncertainty surrounding the fuel mix in electricity generation is
also reected in projections made
by the IEA in recent years. IEA
(2006a) differs from IEA (2004)
in that the emphasis changes from
natural gas and hydroelectricity
toward coal, nuclear and renew-
able energy based electricity
generation (gure 21). The share
of gas in the 2006 projections is 7
per cent in 2025 (used by ABARE
in this study), compared with
15 per cent in the 2004 projec-
tions. In the latest IEA projections
released in November 2007, the
share of gas increases to 10 per
cent in 2025 (IEA 2007c). The fuel
shares reported in the reference
case in IEA (2006a) also differ from those in the reference case in EIA (2007a) and
many scenarios reported in Government of India (2006) that reect a higher share
of gas. For example, scenario 5 in Government of India (2006) emphasises the
role of natural gas and is based on an assumption that policy measures lead to an
electricity generation share of 16 per cent from natural gas by 2025.
energy consumption
Figure 22 compares ABARE projections of Indias energy consumption growth using
GTEM with a range of other projections. ABARE energy consumption projections
are higher growth than those in IEA (2006a) and EIA (2007a), consistent with a
higher assumed economic growth rate over the projection period. Projections
%
60
40
10
50
20
30
hydro
+other
renewables
IEA2004
EIA2007a
IEA2006a
nuclear gas oil coal
fuel mix in electricity generation,
2025 India
fig 21
continued...
54
natural gas in india abare research report 07.23
box 5 alternative projections for Indias energy outlook to 2025 continued
of energy consumption made
in Government of India (2006)
assuming GDP growth of 8 and 9
per cent are higher than in ABARE
and other international projections.
(IEA 2006a; EIA 2007a). This is
also true for the business as usual
(BAU) scenario reported in TERI
(2006b).
natural gas consumption
As is the case for energy consump-
tion, the projected growth in
Indias natural gas consumption by
different energy projection models
varies. Figure 23 compares the projected level of natural gas consumption using
GTEM with a range of other projections. ABAREs natural gas demand projections
in the reference case are higher than those in IEA (2006a), but lower than projec-
tions made in the reference case scenario in EIA (2007a). The latter is largely attrib-
utable to the higher share of natural gas assumed in electricity generation in EIA
(2007a). Projections made in Government of India (2006) for scenario 5 (forced
increase in uptake of natural gas) and the business as usual scenario reported in
TERI (2006b) are also higher than ABAREs projections, reecting their higher share
of gas in electricity generation.
TERI 2006b
GOI 2006 9%
GOI 2006 8%
EIA 2007a
IEA 2006a
ABARE high
ABARE reference
% 1 2 3 4 5 6
comparison of energy consumption
growth projections, 200525
fig 22
average annual growth, India
bm
3
25 50 75 100 125 150
GOI 2006 8%
(scenario 5)
TERI 2006b
EIA 2007a
IEA 2006a
ABARE high
ABARE reference
comparison of natural gas demand projections, 2025
India
fig 23
55
natural gas in india abare research report 07.23
Underpinned by a signicant expansion in economic output, total primary energy
consumption in India in the reference case is projected to grow at an average rate
of 4.0 per cent a year, to reach 837 million tonnes of oil equivalent in 2025 (table
12 and gure 24; IEA 2007a). This slower rate of annual growth than GDP implies
a continuing decline in Indias energy intensity over the outlook period, reecting
efciency gains in energy use in many sectors and continued restructuring of
the economy toward less energy intensive sectors. In the high economic growth
scenario, average annual growth in energy consumption is projected to be 5.3 per
cent a year, reaching 1057 million tonnes of oil equivalent in 2025.
Natural gas consumption in the reference case is projected to grow by 4.8 per
cent a year between 2005 and 2025, from 29 to 74 million tonnes of oil equiva-
lent (gure 25). The increase in overall consumption of natural gas is moderated
by improvements in the efciency of gas use in industry and electricity generation.
The share of gas in total primary energy consumption is expected to increase
by 1 percentage point to around 9 per cent. Under the high growth scenario,
natural gas consumption is projected to increase by 5.8 per cent a year to reach
89 million tonnes of oil equivalent in 2025. The share of natural gas in the total
primary energy mix is expected to fall marginally, reecting higher growth rates
for oil, nuclear and renewables (gure 26; IEA 2007a). Greater than expected
investment in gas supply infrastructure and gas supplies could lead to higher demand
growth than that projected in this study.
table 12 growth in Indias GDP and primary energy
consumption
total
primary energy
real GDP a consumption b
billion
US$b Indian rupees Mtoe
reference case
2005 781 34 432 379
2025 2 726 120 236 837
average annual growth % % %
200525 6.5 6.5 4.0
high growth scenario
2005 781 34 432 379
2025 4 368 192 619 1 057
average annual growth % % %
200525 9.0 9.0 5.3
a 2005 prices and exchange rates. b Excluding combustible renewables and waste.
56
natural gas in india abare research report 07.23
800
400
200
600
Mtoe
India
2005 2010 2015 2020 2025
reference case
other renewables
hydro
nuclear
gas
oil
coal
2005 2010 2015 2020 2025
high growth case
total primary energy consumption, by fuel fig 24
%
12
8
2
10
4
6
other
renewables
hydro
nuclear
gas
oil
coal
high growth scenario
reference case
projected average annual growth
in energy consumption, 200525 India
fig 25
Coal consumption in India is projected to grow more slowly than in previous years,
at an average annual rate of 3.1 per cent in the reference case, to reach 382
million tonnes of oil equivalent in 2025. Underpinning much of the growth in coal
consumption will be growth in electricity generation. As a result, coal will remain a
major energy source over the outlook period, although its contribution to the primary
energy mix is projected to fall to 45 per cent in 2025, from 55 per cent in 2005.
In the high growth scenario, growth in coal consumption is projected to increase by
4.2 per cent a year to reach 476 million tonnes of oil equivalent in 2025.
Consumption of oil is projected
to grow by 4.8 per cent a year
over the period to 2025 in the
reference case to reach 331
million tonnes of oil equivalent.
Oils contribution to total primary
energy consumption is projected
to rise to around 40 per cent in
2025, up from 34 per cent in
2005. A signicant proportion
of the growth in oil consumption
is accounted for by the transport
sector, which, in turn, reects the
impacts of high GDP growth and
rising personal incomes on the
57
natural gas in india abare research report 07.23
demand for freight and passenger travel. In the high growth scenario, consump-
tion of oil is projected to grow by 6.0 per cent a year over the period to 2025 to
reach 428 million tonnes of oil equivalent.
Nuclear energy is expected to be one of the fastest growing energy sources in
India, driven by the increasing role it is assumed to play in electricity generation.
Growth in energy sourced from nuclear power is projected to average around
9.6 per cent a year over the period 200525 in the reference case and 11 per
cent a year in the high growth scenario, to reach 28 and 36 million tonnes of oil
equivalent at 2025 respectively, or around 3 per cent of primary energy consump-
tion. Underpinning these projections is the assumption that there will be sufcient
investment in nuclear power infrastructure to support the growth in consumption
and increased availability of uranium as a fuel source.
Renewable energy consumption, including hydropower, is projected to grow by
4.4 per cent a year in the reference case to reach 22 million tonnes of oil equiva-
lent by 2025. This growth is underpinned by the higher deployment of new renew-
able energy technologies, such as wind, solar and advanced biomass combustion,
reecting government policies that focus on research and development of alterna-
tive energy sources and encourage their further deployment. In the high growth
scenario, renewable energy consumption, including hydropower, is projected to
rise at an average annual rate of 5.7 per cent over the period to 2025 to reach
28 million tonnes of oil equivalent.
2005
379 Mtoe
2025 high growth
1057 Mtoe
2025 reference case
837 Mtoe
oil 34% coal 55%
other renewables 0.1%
hydro 2%
nuclear 1%
gas 8%
oil 40%
coal 46%
other renewables 0.4%
hydro 2%
nuclear 3%
gas 9%
oil 41%
coal 45%
other renewables 1%
hydro 2%
nuclear 3%
gas 8%
fuel mix in total primary energy consumption
India
fig 26
58
natural gas in india abare research report 07.23
2000
1000
500
1500
TWh
India
2005 2010 2015 2020 2025
reference case
other renewables
hydro
nuclear
gas
oil
coal
2005 2010 2015 2020 2025
high growth case
projected electricity generation, by fuel fig 27
outlook for natural gas demand, by sector
Total natural gas consumption in the reference case is projected to reach 82 billion
cubic metres in 2025, and 99 billion cubic metres in the high economic growth
scenario. The electricity sector is projected to remain a key driver of gas demand
in India in the future. Electricity generation is expected to grow by 4.5 per cent
a year over the period to 2025 to reach 1700 terawatt hours in the reference
case, compared with 702 terawatt hours in 2005. In the high growth scenario,
electricity consumption rises more rapidly, at 6.1 per cent a year to 2287 terawatt
hours in 2025 (gure 27).
Gas red electricity generation is projected to grow at an average rate of 3.4 per
cent a year in the reference case, to reach 127 terawatt hours in 2025. Natural
gas consumption in the electricity sector is projected to be 23.4 billion cubic
metres in that year, an increase of 64 per cent on the 2005 level. Despite this
growth, the electricity sectors share of total natural gas consumption is projected
to decline to around a third in 2025 owing to higher projected growth in gas
consumption in other sectors (gure 28). In the high growth scenario, gas red
electricity generation is projected to increase by 5.6 per cent a year, to reach
192 terawatt hours in 2025. As a result, consumption of natural gas in the sector is
projected to increase to 33.6 billion cubic metres in 2025.
59
natural gas in india abare research report 07.23
The latest IEA projections (IEA 2007c) assume a higher share for gas in electricity
generation in 2025 10 per cent compared with 7 per cent in this study and in
IEA (2006a). It is estimated that increasing the share of gas in electricity genera-
tion to 10 per cent in this study could add around 10 billion cubic metres to gas
consumption in 2025 in the reference case.
The competitiveness of natural gas against alternative petroleum based feedstock
in the current high oil price environment, and continuing conversion of fertiliser
plants to natural gas are expected to support strong growth in gas demand in the
fertiliser sector. As a result, natural gas consumption in the sector is projected to
grow at 5 per cent a year in the reference case, to reach 21.9 billion cubic metres
in 2025. In the high growth scenario, gas use in the sector is projected to increase
by 6 per cent a year to 25.9 billion cubic metres in 2025.
Natural gas consumption in other industries, such as the manufacturing, transport
and agriculture sectors, is projected to increase at nearly 7 per cent a year in the
reference case, to reach 32.1 billion cubic metres in 2025. The high rate of growth
will be supported by increased gas availability and infrastructure and the ability of
the sector to absorb higher cost sources of gas.
Gas demand is projected to grow fastest in the residential sector, at 10 per cent
a year over the outlook period in the reference case, although the level of gas
consumption in the sector will remain relatively low, at 5 billion cubic metres in
20
10
30
bm
3
India
reference case
2005
2025
high growth case
residential other
industry
fertiliser electricity residential other
industry
fertiliser electricity
2015
natural gas consumption, by sector fig 28
60
natural gas in india abare research report 07.23
60
40
20
80
%
1995 2025 2015 2005
rural population
urban population
distribution of population between
urban and rural areas India
fig 29 2025. In the high growth scenario,
natural gas consumption in the sector
reaches 6.5 billion cubic metres in
2025. Underpinning this increase
in demand is the continued switch
from coal and biomass to more
convenient and clean fuels such as
natural gas and electricity, driven
by rising urbanisation in India. The
United Nations projects that under
its median scenario the percentage
of Indias population living in urban
areas will rise to 37 per cent by
2025, compared with 29 per cent
in 2005 (gure 29; United Nations
2007).
61
natural gas supply
considerations
Meeting the signicant potential for growth in natural gas demand in India will
require a substantial increase in gas supplies. This could be achieved through
a number of avenues, including an increase in domestic gas production, the
construction of natural gas pipelines from international sources of supply, and the
expansion of LNG imports. Each of these options has different cost proles, energy
security implications and other characteristics that will affect its contribution to
Indias growing natural gas requirements over the medium to longer term.
domestic natural gas production
As discussed in chapter 2, a number of domestic gas elds currently supply Indias
gas requirements. Offshore elds, mainly the Mumbai High eld, produced around
22.6 billion cubic metres of gas (equivalent to 16.5 million tonnes of LNG) in
2005- 06, around 70 per cent of Indias total gas production (MoPNG 2006b).
Onshore elds, particularly in Gujarat, Assam and Andhra Pradesh, produced 9.6
billion cubic metres of gas (equivalent to 7.0 million tonnes of LNG) in 2005- 06.
While there has been some growth in natural gas production from onshore elds
over the past decade, production from offshore elds peaked in 2003- 04 and has
since declined as resources in the Mumbai High gas eld are depleted.
A number of offshore natural gas discoveries in India over the past several years
have increased the countrys gas reserves. The most notable recent nds have
occurred in the Krishna Godavari (KG) basin located in the Bay of Bengal off
Indias east coast. Indias total proved gas reserves are 1.1 trillion cubic metres and
at current production rates will last for 34 years (BP 2007). This does not include
many of the recent KG basin nds, which are yet to be proven.
The rst gas from the KG basin is due to be delivered onshore by the end of 2008,
initially producing around 14.6 billion cubic metres of gas a year (equivalent to
10.7 million tonnes of LNG). In early 2007, a gas transport and gas sale and
purchase agreement was signed between Reliance Industries Limited (RIL) and
5
62
natural gas in india abare research report 07.23
60
50
40
30
70
2025 2020 2000 2005 2010 2015
billion m
3
optimistic
normal
natural gas production scenarios
India
fig 30
GAIL. The agreement will enable RIL to use GAILs pipeline network in Andhra
Pradesh, Madhya Pradesh and other states, and entitle GAIL to sell a share of RILs
gas from the KG basin. The capital costs of RILs KG basin project are estimated to
be US$5.2 billion (RIL 2007).
Ofcial Indian Government natural gas production projections for the 11th ve
year plan (covering the period 200711) show a signicant increase in produc-
tion from 2008, when the KG basin is due to commence production (MoPNG
2006b). However, this is balanced against falls in supplies from existing gas elds
over the life of the plan. Two scenarios are presented by the Indian Government,
with natural gas production projected to range between 39.5 and 73.8 billion
cubic metres in 2011 in the normal and optimistic scenarios respectively. The
Indian Government has stated that there are a number of uncertainties surrounding
the commencement of supplies in the optimistic scenario. Reecting this, ABARE
has used the normal scenario as a basis for projected natural gas supply over the
outlook period (gure 30).
Over the period 201225, production from the KG basin is assumed by ABARE to
remain constant at 14.6 billion cubic metres. It is also assumed that production of
gas by the major existing producers falls at an average annual rate of 0.9 per cent
over the period. This decline is equal to that projected in the nal year of the plan
for existing elds in the normal scenario.
However, there are upside risks to
the normal scenario that could lead
to higher domestic production over
the period to 2025. Under the opti-
mistic scenario, it is assumed that
additional production occurs in RILs
elds in the KG basin planned
expansion of production by RIL may
reach around 29.2 billion cubic
metres of gas a year by 2012. It
also assumes the commencement
of gas production at GSPCs gas
elds, also off Indias east coast,
in 2010. However, the production
timetables for these projects and
their capacities are still not nalised,
and hence have not been included.
63
natural gas in india abare research report 07.23
As mentioned earlier, recent exploration has yielded signicant new gas reserves
in the KG and other basins. There is also potential for other sources of domestic
gas, such as coal seam methane (box 6). However, the existence of reserves
alone will not necessarily translate into a substantial increase in gas production.
Many of the new elds are in private hands. These investors will need certainty
about pricing, infrastructure and the regulatory framework governing the gas
market before development can occur.
cross border pipelines
India is located in a region with signicant reserves of natural gas. Several interna-
tional pipelines have been under discussion in India for many years, including from
Iran, Turkmenistan and Myanmar. There is considerable support in India among
government and industry for the development of international natural gas pipelines
for economic and strategic reasons, including its likely cost competitiveness and
energy security concerns related to the sources of Indias energy supplies and the
box 6 coal seam methane potential in India
In addition to conventional natural gas reserves, coal seam methane (CSM) has
emerged as an important alternative source of gas production in many countries.
CSM can be extracted by drilling into coal seams to release the methane that is
absorbed within them.
Given Indias substantial coal reserves, there is signicant potential to exploit the
CSM located within these deposits. Recognising this, the Indian Government has
awarded a number of exploration blocks for CSM over the past several years.
Because of the infancy of the sector, there is little information on whether these
areas will hold economically viable reserves of CSM.
Indias rst CSM project commenced production in Jharkhand in late 2007 (Argus
Media Limited 2007). However, a number of uncertainties surround the startup of
production at other CSM projects in India (Barrow Jonker 2007).
Future gas production from these sources has not been included in this study
because of uncertainties surrounding the overall size of the reserves and the timing
of production of those projects that have been proposed. However, given its poten-
tial in India, CSM could provide a signicant additional source of domestic natural
gas supply over the medium to longer term.
64
natural gas in india abare research report 07.23
diversity of its fuel mix. Only the IranPakistanIndia pipeline project is considered
to have potential as a source of supply to India over the period to 2025.
IranPakistanIndia pipeline
The IranPakistanIndia (IPI) pipeline was proposed more than a decade ago to
transport gas from the Persian Gulf through southern Iran and Pakistan to link with
existing pipeline infrastructure in north western India (map 3; EIA 2007b). Gas
would be sourced from the South Pars/North Dome gas eld, which straddles the
territory of Iran and Qatar in the Persian Gulf. The current proposed pipeline route
is around 2800 kilometres in length.
The Iranian share of the gas eld is estimated to contain around 13 trillion cubic
metres of gas (Omidvar 2007). The volume of gas supplied by the IPI pipeline
could reach 55 billion cubic metres a year. India has sought around 37 billion
cubic metres (equivalent to 27 million tonnes of LNG), roughly equal to its current
supply from domestic sources, while Pakistan would take around 18 billion cubic
metres (Platts 2007e).
The Indian Government is optimistic that the IPI pipeline could begin delivering gas
to India by around 2015 (MoPNG 2006a). However, since the inception of the
project, a number of factors have caused substantial delays in its commencement.
These include disagreements related to gas pricing between India and Iran, as
well as capital cost increases to around US$7 billion (Platts 2007e). In addition,
geopolitical tensions in IndiaPakistan relations, international concerns over trade
with Iran, as well as domestic opposition in Iran to gas exports, have also hindered
progress (box 7). The signicant hurdles associated with the project, the potential
for further delays, the lengthy construction period and high capital costs heighten
the uncertainty surrounding a potential startup date. In this study, it is assumed that
the project will not be operational until sometime after 2020.
other proposed pipelines
Other potential sources of pipeline natural gas to India considered by the govern-
ment and industry have included the TurkmenistanAfghanistanPakistanIndia
(TAPI) pipeline and the MyanmarBangladeshIndia (MBI) pipeline (table 13).
The TAPI pipeline proposal would source gas from the Dauletabad eld in south
east Turkmenistan and follow a route through Afghanistan and Pakistan to India.
While Turkmenistan has indicated that it supports the pipeline (Platts 2007f), ques-
tions remain as to the projects viability and security owing to the conict in Afghan-
istan. There is also some uncertainty about the extent of the elds gas reserves.
65
natural gas in india abare research report 07.23
Iran
Afghanistan
Pakistan
Myanmar
Bangladesh |aa:||
Turkmenistan
1sv
|s|||
|a||a|a
India
||| j|je||ae
I||| j|je||ae
M?| j|je||ae
Persian
Gulf
Gulf
of Oman
proposed international pipeline routes serving India map 3
box 7 international pipelines and LNG
The further development of natural gas imports by India will depend to a large
extent on the competitiveness of pipeline natural gas and LNG imports with domestic
gas sources and other fuels. Other factors, including energy security, supply diversity,
regional cooperation and geopolitical issues, will also play important roles.
International natural gas pipelines are characterised by high capital costs, lengthy
construction times and often complex international transit and geopolitical issues.
These and other issues are important in assessing the overall viability of pipeline
projects into India and their competitiveness with alternative gas supplies.
The size and quality of natural gas reserves that provide pipeline gas supplies will
be a critical determinant of the viability of any projects. These projects will be viable
only if the gas reserve is large enough to recover the costs incurred in constructing
continued...
66
natural gas in india abare research report 07.23
box 7 international pipelines and LNG continued
the pipeline and in bringing the gas to end markets. If clusters of reserves are
located near the original development, this may increase the lifespan and viability
of the project. The gas base must also be dependable, as continuity of supply is
an essential issue not only for producers but also for nanciers and other parties
involved in the project. While Iran, for instance, has large gas reserves, signicant
volumes of gas designated for export could be diverted for injection into maturing
oilelds to stabilise production and to fuel its own domestic energy needs.
Because of the high capital costs of nancing pipeline projects, access to nance
could be an important determinant of their viability. This could involve domestic as well
as foreign capital. Well dened legal, taxation, and foreign exchange systems will be
important in terms of encouraging the appropriate ow of foreign funds. For example,
access to global nance for an international pipeline originating in Iran and transiting
Pakistan may be difcult owing to ongoing tensions between India and Pakistan as
well as international sanctions against Iran and concerns about its nuclear program.
Transit fees, either nancial or in kind through physical deliveries of gas, can add
substantially to gas pipeline transit costs, particularly if the pipeline must traverse
more than one country. In the case of the IranPakistanIndia pipeline, the transit
issue is compounded by the geopolitical situation surrounding the relationship with
Pakistan, which could add to risks for the security of gas supplies. Negotiations over
transit fees have been delaying the project, and these are still ongoing.
Distance and volume are the key variables that affect the unit cost of transporting
LNG and pipeline gas. For both forms of transport, unit costs increase with distance
and decrease with the volume of gas being transported. Over shorter distances,
pipelines tend to be the more cost effective form of gas transport. The point at
which transporting LNG via tanker is cheaper than transporting natural gas via
pipelines occurs at a distance of around 2000 kilometres for offshore pipelines and
3800 kilometres for onshore pipelines (EIA 2003). On this basis, the IPI and other
regional pipelines are likely to be competitive with LNG imports.
However, there are other reasons why LNG might be preferred over pipeline
supply options. These include the fact that LNG supply can be more exible
smaller amounts of gas usually can be delivered more cost effectively by LNG
than by pipeline. This means that LNG projects can build delivery capacity in line
with an expanding market whereas pipelines will be underutilised and potentially
uneconomic until maximum capacity is reached. In addition, delivery lead times
tend to be shorter for LNG projects than for pipeline projects. For countries where
energy security concerns are important, such as in India, LNG offers the opportunity
to have a diverse portfolio of suppliers, as well as minimising risks of potential gas
supply disruptions.
67
natural gas in india abare research report 07.23
In the case of the MBI pipeline, while ofcials from all countries have agreed in
principle to support the export of natural gas to India, the emergence of China
as a foundation customer for Myanmar pipeline gas exports is likely to divert gas
away from India. This pipeline to India is not expected to proceed.
existing LNG import contracts
As discussed in chapter 2, India currently has one long term LNG supply contract
between Petronet and Qatars Ras Laffan LNG company for the phased supply
of 7.5 million tonnes a year, with 5.0 million tonnes contracted from 2004 to 2009
and the full volume from 2009 to 2029. While other long term agreements have
also been signed, including with Iran, these agreements have not been nalised
and have not been included in the study.
natural gas supply and demand balance
In the next few years, India will continue to require additional LNG imports above
contracted levels, most likely in the form of spot cargoes or short term contracts.
The expected commencement of production from the KG basin in late 2008 will
substantially increase domestic gas availability and, assuming no delays, is likely to
reduce requirements for signicant additional LNG imports until early next decade.
In the reference case, the requirement for additional gas is projected to reach
around 4.0 billion cubic metres a year (2.9 million tonnes) in 2015. This is projected
to expand to 18.6 billion cubic metres a year (13.6 million tonnes) in 2020 and
31.6 billion cubic metres (23.1 million tonnes) in 2025 (gure 31; table 14).
table 13 potential international gas pipeline projects, India
project length cost volume volume
km US$b bcm/yr Mt of LNG
equiv./yr
IranPakistanIndia (IPI) pipeline 2 775 7 55 40.1
TurkemenistanAfghanistan
PakistanIndia (TAPI) pipeline 1 900 45 31 22.6
MyanmarBangladeshIndia (MBI) pipeline 950 2 510 3.77.3
Sources: Platts (2007e,f).
68
natural gas in india abare research report 07.23
table 14 potential gas demand and supply balance India
2015 2020 2025 2015 2020 2025
billion m
3
billion m
3
billion m
3
Mt Mt Mt
assumed natural gas supply
contracted LNG supply 10.4 10.4 10.4 7.5 7.5 7.5
domestic gas supply 43.1 40.6 40.5 31.5 29.6 29.6
pipeline gas from Iran 0 0 37.0 0 0 27.0
total 53.4 51.0 87.8 39.0 37.2 64.1
projected natural gas consumption
reference case 57.4 69.5 82.4 41.9 50.8 60.2
high growth scenario 60.4 78.1 99.0 44.1 57.0 72.3
gas supply shortfall/possible additional LNG including pipeline gas from Iran
reference case 4.0 18.6 2.9 13.6
high growth scenario 6.9 27.1 11.2 5.1 19.8 8.2
gas supply shortfall/possible additional LNG excluding pipeline gas from Iran
reference case 4.0 18.6 31.6 2.9 13.6 23.1
high growth scenario 6.9 27.1 48.2 5.1 19.8 35.2
total LNG imports excluding pipeline gas from Iran
reference case 14.4 28.9 41.9 10.5 21.1 30.6
high growth scenario 17.3 37.4 58.5 12.6 27.3 42.7
60
40
20
80
60
40
20
80
bm
3
bm
3
India
reference case high growth case
2025
Iran
pipeline
2025
no Iran
pipeline
2020 2015 2005 2025
Iran
pipeline
2025
no Iran
pipeline
2020 2015 2005
pipeline gas from Iran
gas supply shortfall/additional LNG
actual gas consumption domestic gas supply
contracted LNG supply
potential gas demand and supply fig 31
69
natural gas in india abare research report 07.23
This would need to be met by increased gas production or, more likely, increased
gas imports. Assuming that this additional gas will all be sourced from LNG, Indias
total LNG imports are projected to reach 10.5 million tonnes in 2015 and 21.1
million tonnes in 2020. The introduction of imported pipeline gas from Iran by 2025
could meet the gas import requirements in that year. However, if the pipeline does
not proceed by then, Indias total LNG imports could reach 30.6 million tonnes in
2025 (gure 32).
In the high growth scenario, the requirement for additional gas is projected to
reach 6.9 billion cubic metres (5.1 million tonnes) in 2015, growing to 27.1 billion
cubic metres (19.8 million tonnes) in 2020. Assuming this is all sourced from LNG,
Indias total LNG imports would be 12.6 million tonnes in 2015, rising to around
27.3 million tonnes in 2020. If the pipeline from Iran does not proceed by 2025,
total LNG imports could reach 42.7 million tonnes in that year.
The signicant uncertainties over the Indian gas market such as domestic
gas production potential and timing, the timing and likelihood of pipeline gas
imports, the pace of Indias gas market reform, gas pricing, as well as more
general economic growth and energy mix uncertainties make projecting LNG
imports difcult. For example, downside risks for LNG imports include higher
than projected domestic production, lower than anticipated growth in Indias gas
30
40
20
Mt
India
reference case
10
high growth case
2025
no Iran
pipeline
2020 2015 2006 2025
no Iran
pipeline
2020 2015 2006
potential LNG imports fig 32
70
natural gas in india abare research report 07.23
consumption and the early delivery of gas from international pipelines. Upside
risks that could increase the requirement for additional LNG imports include higher
than anticipated growth in Indias gas consumption, lower than expected domestic
production or delays in the startup of newly discovered gas elds and delays in
developing the regulatory and physical infrastructure to support the delivery of gas
to consumers throughout India. The timing of the construction of the IPI pipeline
would also decrease/increase the requirements for LNG imports substantially.
Any expansion in natural gas supply, either domestic gas or pipeline gas imports,
in India beyond that assumed in this study may translate into higher consumption,
rather than reduced LNG imports, as more customers gain access to natural gas
supplies.
LNG import infrastructure
A number of expansions to existing LNG terminals and construction of additional
terminals are planned in India. LNG import capacity is currently around 8.9 million
tonnes and is expected to expand to 13.9 million tonnes once the Dabhol terminal
is completed in 2009. A planned expansion of the Dahej terminal in 2010 could
raise Indias total LNG import capacity to 17.4 million tonnes and an expansion at
the Hazira terminal in Gujarat
is also possible given the
infrastructure that is present at
the site (table 15).
In addition to expansions to
existing terminals, the construc-
tion of a number of new LNG
terminals is under consid-
eration. Of these, proposed
terminals at Kochi (2.5 million
tonnes) and Mangalore (2.5
million tonnes) appear to be
the most advanced. The Kochi
terminal is planned to come
on line around 2010 and the
Mangalore terminal around
2011. Other LNG terminal
projects have also been
table 15 LNG terminals in India
year of
terminal status completion capacity
Mt
Dahej operational 2004 6.5 a
Hazira operational 2005 2.4 b
Dabhol under construction 2009 5.0
Dahej expansion planned 2010 3.5
Kochi planned 2010 2.5
Mangalore planned 2011 2.5
total 22.4 c
a Includes debottlenecking that increased capacity in early 2007.
b Current throughput capacity at Hazira is 2.4 million tonnes but an
expansion to 5.0 million tonnes would be possible using existing infra-
structure and an increase to 10.0 million tonnes would be possible with
the construction of additional LNG storage tanks. c Does not include
any possible expansion at Hazira.
71
natural gas in india abare research report 07.23
proposed over the past decade, but appear to have been put on hold for the time
being, including Kakinada and Ennore.
This existing and planned LNG terminal capacity should be adequate to meet
Indias gas requirements to 2025. However, proposed LNG import capacity will
not automatically translate into additional LNG imports. Most of the planned
capacity is not likely to materialise until long term contracts with LNG suppliers, and
also buyers, are in place. The potential volume of additional gas required LNG
or other sources will provide a challenge for India in the coming years. It suggests
that new LNG contracts, for medium or long term duration, will be required.
Buyers in India appear to be delaying entering into new long term LNG contracts
until the regulatory framework for gas supply and pricing is clearer. As discussed
in chapter 2, under current arrangements Indias power and fertiliser sectors are
guaranteed prices at well below world market levels. Buyers in India will need
to be willing to pay higher prices, like some independent power producers and
industrial users currently are, otherwise Indias LNG supply options may be limited.
Some of the delays may also be because buyers are waiting to see if international
gas prices remain at their current highs.
international LNG outlook
Indias geographic location in south Asia and its proximity to both the Asia Pacic
and the Middle East makes suppliers in that region a logical choice for Indian
world LNG trade fig 33
25
Mt
50
75
100
125
150
25
50
75
100
125
150
Mt
imports
Atlantic
China
India
Chinese
Taipei
Korea
Japan
exports
2002 2004 2006 2002 2004 2006
Atlantic
Alaska
other
UAE
Brunei
Oman
Australia
Qatar
Malaysia
Indonesia
72
natural gas in india abare research report 07.23
LNG customers. In 2006, India took cargoes of LNG from suppliers in Qatar,
Oman, Australia, Malaysia and Abu Dhabi, accounting for 6 per cent of the
Asia Pacic LNG market. India also purchased spot LNG cargoes from suppliers
outside the region, including Algeria, Egypt and Trinidad and Tobago.
World LNG trade was 154 million tonnes in 2006 (gure 33; BP 2007; FGE
2007). While Asia Pacic and Middle East supplies dominate world LNG trade,
there has been substantial growth in supplies from the Atlantic basin.
A trend over the past decade
has been the growing impor-
tance of the Middle East as
a source of LNG exports.
In particular, LNG export
capacity in Qatar, the worlds
largest LNG producer, has
risen to 26 million tonnes a
year (14 per cent of world
exports).
There are currently fourteen
LNG plants in the eight
countries that supply the Asia
Pacic market on a regular
contractual basis (table 16).
Qatar has the largest LNG
operating capacity, followed
by Indonesia, Malaysia and
Australia. Collectively, the total
capacity of all existing plants
as at June 2007 was about
123 million tonnes a year. The
Asia Pacic is also supplied
from Algeria, Nigeria,
Trinidad and Tobago, Egypt
and other counties on a short
term or spot basis, with these
countries becoming increas-
ingly regular suppliers to the
region.
table 16 existing LNG plants Asia Pacic
market
number of operating
country project trains capacity
Mt /yr
Asia Pacic
Australia North West Shelf 4 11.9
Darwin 1 3.7
Brunei Darussalam Lumut 5 7.2
Indonesia Arun 6 6.8
Bontang 8 22.5
Malaysia Bintulu MLNG I 3 8.1
Bintulu MLNG II 3 7.8
Bintulu MLNG III 2 6.8
Oman Oman LNG 2 6.6
Qalhat LNG 1 3.7
Qatar Qatargas 3 10.0
Rasgas 5 20.7
United Arab Emirates Das Island 3 5.8
United States Alaska 1 1.3
total 44 122.9
other suppliers to the region a
Algeria Arzew 3 1.7
Bethioua 12 16.1
Skikda 3 3.0
Egypt Damietta 1 5.0
Ikdu 2 7.2
Trinidad and Tobago Point Fortin 4 15.0
total 25 48.0
a Do not have long term contracts in the region.
73
natural gas in india abare research report 07.23
Demand for LNG in the international market has been strong and this is expected
to continue over the outlook period, driven by economic growth and electricity
demand in traditional consuming markets, such as Japan, Korea and Chinese
Taipei. In addition, the emergence of India and China as LNG importers is
expected to underpin demand growth in the global market. The potential for new
consumers to enter the Asia Pacic market for LNG, such as the west coast of the
United States, New Zealand, Thailand and Singapore, also has the potential to
provide support for demand growth over the medium to longer term.
Reecting the robust outlook for gas demand in the region, there are a number of
new gas supply projects under construction. Liquefaction plants under construction
in the Asia Pacifc region include Australias North West Shelf Train 5, and others
in Indonesia, Qatar, the Russian Federation and Yemen (table 17). Together these
projects could deliver an additional 81.4 million tonnes a year, with start dates
from late 2007 to 2010. Much of this LNG is already contracted to Europe, Japan
and Korea. The projects may be able to meet Indian demand for spot cargoes but
long term contract opportunities for India may be limited.
Other LNG liquefaction projects are at various stages of planning and approval.
These include several in Australia and others in Brunei Darussalam, Indonesia,
Papua New Guinea and Iran (table 17). Realisation of these plans would result
in an increase in LNG production and export capacity of around 85 million
tonnes by 2015. Despite the outlook for strong LNG demand over the medium
to longer term, a number of producers face high raw material prices, long lead
times for equipment and a shortage of skilled labour. These factors may act as
constraints in the short to medium term on the commencement of a number of
projects. In addition, new LNG plants are unlikely to begin construction without
the existence of long term contracts with buyers and many have already had their
start dates extended several times.
Supply has been tight in the Asia Pacic region in recent years because of a
number of constraints in the LNG chain. These issues include long lead times for
gas projects, input cost pressures including labour and materials as well as
concerns about the availability of natural gas feedstock for certain LNG plants.
In addition, declining gas feedstock from mature elds particularly in Indonesia
has partially offset LNG production increases in Qatar and Australia. These
shortages have resulted in suppliers from outside the Asian region, including from
Egypt, Algeria, Nigeria and Trinidad and Tobago, entering the market to sell LNG
on a spot or short term basis. Along with strong demand, tight supply has also
resulted in high prices for spot cargoes Japan received three cargoes from Egypt
74
natural gas in india abare research report 07.23
in October 2007 for US$11.24 per million British thermal units, compared with
Japans average LNG import price for 2007 (January to October) of US$7.40
per million British thermal units (FGE 2007b).
Given the tight supplydemand balance for LNG over the medium term, India will
face competition from established and new buyers for limited cargoes.
table 17 LNG plants under construction and planned Asia Pacic market
number of startup operating
country project trains date a capacity
Mt/yr
projects under construction
Australia North West Shelf Train 5 1 2008 4.4
Pluto 1 2010 4.8
Indonesia Tangguh 2 2009 7.6
Malaysia MLNG II debottleneck na 2007 1.4
Russian Federation Sakhalin II 2 2008 9.6
Qatar Qatargas II Trains 4 and 5 2 2008 15.6
Qatargas III Train 6 1 2009 7.8
Qatargas IV Train 7 1 2010 7.8
RasGas III Train 6 and 7 2 2009 15.6
Yemen Yemen LNG 2 2009 6.8
total 14 81.4
projects planned or proposed
Australia Browse 2 2013+ up to 15.0
Gorgon 2 2012 10.0
Ichthys 1 2013+ 6.0
Pilbara 1 2013+ 5.0
Darwin LNG expansion 2 2015+ 5.0
Santos Gladstone LNG 1 2014 up to 4.0
Arrow Energy / LNG International 1 2010 1.0
Brunei Darussalam Lumut Train 6 1 2010 5.0
Indonesia Sulawesi LNG 1 2009 2.5
Iran Pars LNG 2 2011+ 10.0
Persian LNG 2 2011+ 16.0
Papua New Guinea Liquid Nuigini Gas 2 2012 up to 5.0
total 18 84.5
a As published by project proponents and industry publications.
75
natural gas in india abare research report 07.23
A range of factors will inuence the competitiveness of alternative potential LNG
suppliers into the Indian market. Transport costs will be one factor and these are
affected to a large extent by distance. With Indias geographic proximity to LNG
suppliers in the Middle East, suppliers in that area are likely to have transport cost
advantages over other LNG suppliers. Reecting this, India has been seeking to
secure LNG from new suppliers in the Middle East such as Iran and Yemen. Other
factors such as availability of future LNG supplies, reliability, exibility and diver-
sity, as well as the opportunity to secure equity in gas elds will also play a role
in determining the overall attractiveness of suppliers.
prospects for Australian LNG
To date, Australia has had a limited role in supplying LNG to India, with trade
restricted to several spot cargoes. Indias growing gas requirements and desire for
diversity in gas supply sources, and Australias potential to expand its LNG exports
may lead to an expansion in Australian and Indian gas links over the outlook
period.
natural gas reserves
Australia has abundant supplies of natural gas, with reserves located in all
Australian states and the Northern Territory. Identied gas reserves have
increased fourfold over the past two decades owing to extensive exploration
and discoveries. As at 1 January 2006, Australias economically demonstrated
conventional gas resources were 2429 billion cubic metres (equivalent to 1773
million tonnes of LNG). At current production rates, there are sufcient economi-
cally demonstrated resources of gas to sustain production at current levels for
around 58 years (Geoscience Australia 2007).
Most major natural gas reserves are located offshore and far from major domestic
markets. The gas basins with the largest recoverable reserves are the Carnarvon
and Browse basins in Western Australia and the Bonaparte basin which straddles
Western Australia and the Northern Territory (map 4). Together these three basins
account for more than 90 per cent of Australias conventional gas reserves.
In addition to its substantial conventional natural gas reserves, coal seam methane
(CSM) has emerged as an important new source of gas production in Australia.
Stored within coal seams, CSM is found in the Bowen and Surat basins in Queens-
land and a number of areas in New South Wales, including the Sydney basin. As
76
natural gas in india abare research report 07.23
Gippsland Basin
Basin
n
Amadeus Basin
Bass
Basin
Carnarvon
Oil and gas basins
Perth Basin
Carnarvon Basin
Browse Basin
Otway Basin
Bowen/Surat
Bonaparte Basin
Cooper/Eromanga
Basin
Adavale
Basin
Joint Petroleum Development Area
Gas processing
Existing natural gas pipelines
Natural gas pipelines under construction
LNG export terminals existing/under construction
WOLLONGONG
SYDNEY
MELBOURNE
HOBART
scale in kilometres
400 200 0 800 600
PERTH
PORT KEMBLA
BRISBANE
DARWIN
ADELAIDE
Australias natural gas reserves and infrastructure map 4
at 31 December 2006, Australias CSM reserves were around 218 billion cubic
metres (Energy Quest 2007).
gas production and exports
Natural gas production in Australia has grown steadily over the past two
decades to reach 43.2 billion cubic metres in 2006 (equivalent to 31.5 million
tonnes of LNG). This represents average annual growth of around 5.5 per cent
since 1986. The domestic market absorbs around 55 per cent of Australias gas
production (gure 34).
Australia also exports LNG. It currently has two gas liquifaction plants the North
West Shelf, located at Karratha in Western Australia, and Darwin LNG in the
77
natural gas in india abare research report 07.23
Northern Territory. The North West Shelf commenced operations in 1989 and has
four trains, with 11.9 million tonnes in capacity. The Darwin LNG 3.7 million tonne
rst train came online in early 2006. Australias total LNG export capacity is 15.6
million tonnes.
In 2006, Australias LNG exports were 13.8 million tonnes, with the strong
growth in that year reecting the startup of new capacity. In 2006, Australia was
the worlds fth largest LNG exporter and accounted for 9 per cent of world
LNG trade. Around 87 per cent of Australias LNG exports in 2006 were to
Japan, reecting long term supply
contracts. In 2006, Australia also
exported LNG to the Republic of
Korea, Chinese Taipei, India and
China. Spot LNG trade with India
accounted for less than 1 per cent
of the total (gure 35; BP 2007).
outlook for Australian LNG
supply
Australias LNG exports are
expected to grow strongly over
the period to 2025 on the basis of
new liquefaction capacity under
40
30
20
10
2006 1997 1970 1979 1988
billion m
3
gas production
LNG exports
Australian gas production and
LNG exports
fig 34
12
6
4
2
10
8
Mt
2002 2003 2006 2005 2004
other
India
China
Korea
Japan
Australian LNG exports, by
destination
fig 35
20
10
40
30
Mt
planned under
construction
existing
outlook for LNG capacity in
Australia
fig 36
78
natural gas in india abare research report 07.23
construction and proposed (gure 36). Australia has two LNG projects under
construction. The North West Shelf 4.4 million tonne fth train is expected to
come online in late 2008. In addition, the nal investment decision for Woodside
Energys Pluto LNG project has been announced and the single train of up to 4.8
million tonnes is due for completion in 2010. This will increase Australias LNG
export capacity to around 24.8 million tonnes. Most of this capacity is under-
pinned by long term contracts with Japan, but some volumes are likely to be avail-
able for spot trade or further long term contracts.
Projects at various stages of planning include Browse, Gorgon, Ichthys, Pilbara
and the Darwin LNG expansion, all located off the north west coast of Australia.
In addition, two projects based in Gladstone in Queensland are proposed based
on CSM as gas feedstock for LNG production. Together these projects account
for 46.0 million tonnes, around three times Australias current capacity.
There is potential for Australian projects to supply LNG to India on a spot or
long term basis as Australia is likely to be an attractive supplier of LNG to India.
Together with abundant reserves of natural gas, Australia has a reputation for
reliable delivery, is politically stable and support for exports of natural gas. In addi-
tion, current projects have demonstrated an ability to offer exible supply condi-
tions. However, given the large capital costs of new LNG projects, the develop-
ment of increased capacity is likely to require signing of some long term contracts
with customers, such as those in India.
There is also potential for further cooperation between Australia and India, espe-
cially related to research and development and technology sharing. For example,
Australia is successfully using its CSM resources as an alternative source of gas
supply. As there is strong potential for the development of CSM resources in India,
opportunities exist between the two countries to collaborate on technology and
expertise on future projects. There may also be opportunities to invest in both
upstream and downstream gas sectors in both countries.
79
conclusions
Ongoing growth in Indias economy and population has led to a signicant expan-
sion in energy consumption in India. Energy consumption is expected to continue
to grow strongly over the period to 2025. Meeting this growth will pose signicant
challenges for India, particularly as there is already signicant pressure on elec-
tricity supply systems and fuel availability in many parts of the country.
While coal and oil will continue to dominate Indias energy mix, natural gas,
including imports of LNG, will play an important role. Given assumptions about
economic and population growth and the fuel mix in electricity generation, natural
gas consumption is projected to reach 82 billion cubic metres in 2025 and 99
billion cubic metres under a high economic growth scenario, compared with 32
billion cubic metres in 2005. This growth will be underpinned by increased use
of gas in industry, the electricity sector, and to a lesser extent, in households. If
the share of gas in electricity generation is higher than assumed in this study, then
future gas consumption is likely to be even higher.
Realising the potential growth in gas consumption will depend on the availability
and competitiveness of natural gas supplies compared with other fuel sources and
the rate of development of infrastructure for gas supply and transmission. Consump-
tion of gas in India to date has been limited by the availability of gas supplies.
While there is potential for gas production in India to increase substantially, there
are a number of risks that may continue to hinder the availability of gas.
Although gas market reforms are occurring in India, major natural gas consumers,
principally the electricity and fertiliser sectors, continue to pay gas prices that are
considerably below world prices. The ability of consumers that rely on subsidised
gas prices to adjust to market determined prices may affect the penetration of
gas in the Indian market over the period to 2025. In addition to further regulatory
reforms in the gas market, signicant investment in gas transmission and distribution
infrastructure will also be necessary to bring increased gas supplies to market.
Later this decade, Indias domestic gas production is projected to increase as
supplies from the KrishnaGodavari basin come online, delaying the need for
signicant additional LNG imports. However, in the absence of substantial addi-
tions to Indias domestic gas production over the medium to longer term, India will
6
80
need to source additional gas supplies as imported LNG or from international
pipeline gas sources to meet its projected consumption growth.
In ABAREs reference case, the requirement for additional gas imports is projected
to reach around 4.0 billion cubic metres a year (equivalent to 2.9 million tonnes
of LNG) in 2015. This is projected to expand to 18.6 billion cubic metres a year
(13.6 million tonnes) in 2020 and 31.6 billion cubic metres (23.1 million tonnes) in
2025. Assuming this is all met by LNG, total LNG imports could reach 10.5 million
tonnes in 2015 and 21.1 million tonnes in 2020. After 2020, the requirement for
additional LNG imports could be affected by the potential commencement of the
IranPakistanIndia pipeline, which faces signicant hurdles to overcome before it
is built. Any delays in the development of domestic gas or other import sources will
provide opportunities to further expand LNG imports.
While the planned increase in regional LNG capacity is signicant, India is likely
to face competition in the short and medium term from major LNG consuming
countries that seek LNG cargoes and are willing to pay high prices. For India to
procure the additional LNG it is likely to require, it will need to be willing to pay
international prices.
While Australia currently has only supplied a small number of spot LNG cargoes
to India, there are a number of opportunities for future cooperation between India
and Australia in relation to gas. Australia has plans for a signicant expansion in
LNG export capacity that could potentially supply India on a long term competi-
tive basis. An increase in bilateral investment in both upstream and downstream
gas infrastructure, as well as in gas exploration in both Australia and India, could
also be facilitated by a deeper understanding of the potential opportunities
that exist in each country. Australia also has expertise in the area of coal seam
methane development, which is a potential additional source of gas supply in
India over the longer term.
81
natural gas in india abare research report 07.23
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07.07
Asia Pacic Economic Cooperation Secretariat
Association of Southeast Asian Nations Secretariat
AusAid
Australian Centre for Excellence in Risk Analysis
Australian Centre for International Agricultural
Research
Australian Fisheries Management Authority
Australian Greenhouse Ofce
Australian Government Department of the
Environment and Water Resources
Australian Government Department of Resources,
Energy and Tourism
Australian Government Department of Prime Minister
and Cabinet
Australian Government Department of Transport and
Regional Services
CRC Plant Biosecurity
CSIRO (Commonwealth Scientic and Industrial
Research Organisation)
Dairy Australia
Department of Business, Economic and Regional
Development, Northern Territory
Department of Primary Industries, Victoria
Fisheries Research and Development Corporation
Fisheries Resources Research Fund
Forest and Wood Products Research and
Development Corporation
Grains Research and Development Corporation
Grape and Wine Research and Development
Corporation
Independent Pricing and Regulatory Tribunal
International Food Policy Research Institute
Meat and Livestock Australia
Murray Darling Basin Commission
National Australia Bank
NSW Sugar
Rural Industries Research and Development
Corporation
University of Queensland
Wheat Export Authority
RESEARCH FUNDING ABARE relies on nancial support from external organ isations to
complete its research program. As at the date of this publication, the following organisations
had provided nancial support for ABAREs research program in 2006-07 and 2007-08.
We gratefully acknowledge this assistance.