Natural Gas in India

Key Facts – Natural Gas Sector in India

Today about 6% share in primary 50-50% share of LNG and
energy mix; government targets to
domestic gas in overall
increase it to 15% by 2030 consumption in 2017-18

Existing pipeline connectivity of

over 16,000 km; plans to
increase to over 30,000 km

50% of current consumption

Several new LNG capacity
addition being planned; from current
capacity of ~31.0 MTPA to 78 MTPA
in 2021-22
from prime consuming sectors Power
and Fertilizer, declining or stagnating
CGD and industrial use growing sectors
and likely to emerge as key drivers.
 The 15% Vision
• Current gas share in energy mix
India 6.2% World average 23%
• Per capita gas consumption
India 35 SCM World 441 SCM
For 15% gas share, gas consumption needs to quadruple by 2030
Increasing infrastructure to support the 15% vision
• Pipeline length/capacity
~17000 km/ 374 MMSCMD
• Additional 15000 km
pipeline coming up
• Sufficient to handle about
three times current
consumption
LNG driving consumption; pricing holds the key
• LNG imports rising 50% of consumption
• LNG regas capacity current 31 MMTPA
to increase to 60-70 MMTPA
• Most additionally capacity planned along East Coast
LNG Capacity (MMTPA)
90
80
78
70 65
60
50
40
30
27
20
10
0
2017-18 2019-20 2021-22
Rising gas consumption supporting the 15% vision
• 15% growth in gas consumption since
2014-15 ~ 145 MMSCMD
• Shift in consumption pattern away from
conventional segments
• CGD now the fastest growing segment,
holds the most potential
• Refinery and petrochemicals are other
two small but rising segments
CGD Prime Growth Driver of Gas Consumption
• 17% share in overall consumption at 24 MMSCMD
• Over 100 % increase in no. of GAs (179) in last two
years
• Over 50% in no. of CNG stations (1528) since 2014-15
• About 30% increase in no. of CNG vehicles since 2014-15
at 3.26 million
• About 65% increase in PNG connections since 2014-15
at 4.81 million
• CNG PNG almost equal consuming segments in sales at
45: 55
Gas demand would depend on …
• Marketing and pricing freedom for
natural gas
• Hydrocarbon Exploration Licensing
Policy (HELP)
• Setting-up of Natural Gas Trading
Exchange
• Ban on polluting fuels such as petcoke
and FO
• Promotion of CNG/ LNG vehicles
 LNG imports rising with declining production
Gas production / consumption / imports (mmscmd)

Source: PPAC

 Declining domestic gas production is being complemented by increasing LNG imports to meet the current demand level
 India has 5 operating LNG Terminals importing about 20 MTPA. 11 additional terminals are being planned which will take the regas capacity to 78 MTPA by
2022-23
LNG Infrastructure in India

Source: KPMG Analysis

 Pipeline Infrastructure in India
Gas pipeline network (as on 1.1.2019)
Total Length (km) 16793
Capacity (mmscmd) 374

Average flow during Apr-Sep 2018 (mmscmd) 293.4

Capacity utilisation during 2017-18 (%) 79.73

Gujarat
CGDs  Authorisation granted for additional
14,500 Kms of new gas pipelines
Legends
Existing Pipelines
Under Cons. P/L – work
under progress
Approved P/L – work
yet to start
CGD Network
Proposed CGD Network
(105 Nos.) on GAIL PLs
Existing LNG Terminal
Proposed LNG Terminal
 Sector Wise Natural Gas Consumption in India
Historical Gas Consumption (MMSCMD)
  2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
 The natural gas consumption
Power 62 44 31 29 30 32 33 in the country has been tepid
Fertiliser 38 40 43 42 44 42 40 in last 5-7 years.
CGD 15 16 16 15 15 20 24
Refinery 12 11 11 13 14 15 18  Except for petrochemical and
Petrochemical 5 7 7 8 10 11 11 CGD sector the consumption
Sponge iron 4 3 1 0 1 2 4 of natural gas has not
Industrial 1 1 0 1 1 2 2 witnessed a steady trend.
Misc 29 26 25 20 15 14 13
Total 166 148 134 128 131 139 145
 Power, fertilizer, CGD, Refinery
Sector-wise Gas Consumption (2017-18): 144.75 MMSCMD
and petrochemical sector
contributes to ~85 - 87
percent of the total gas
consumed in the country.
 CGD to be primary growth driver of gas
CGD growth story
2011- 2012- 2013- 2014- 2015- 2016- 2017- Jan
12 13 14 15 16 17 18 19
Total gas consumption by CGD 24
(mmscmd) 15.34 15.84 16.18 14.84 14.97 21.19 25
CNG Sales 6.46 7.17 7.61 8.04 8.5 9.33 10.5
PNG consumption 8.88 8.67 8.57 6.8 6.47 11.86 13.5
domestic           1.779 -
-
ind/com           10.081  
Number of GAs 52 64 78 93 179
1424
CNG Stations (at March end) 1010 1081 1233 1528
CNG Vehicles (million) 2.55 2.56 3.05 3.09 3.26
4.32
PNG Connections (million) 2.94 3.16 3.62 4.81
 Clearly the sector has grown, both geographically and in volume terms. The significant growth in the sector has been largely due to government
Source: MoPNG,
initiatives with thePPAC
CGD sector (CNG and PNG for residential) being accorded the highest priority for allocation of domestic gas.

 With 179 GAs now and 10th round with 50 more areas is on offer, the coming years should see lot of investment in the CNG and PNG infrastructure.
The sector is pegged to see an investment of Rs 70, 000 crore.
 Present

Future

Maharashtra, Goa,
Gujarat, Rajasthan,
Delhi NCR, Haryana,
Punjab, MP, etc
PROMOTING USE OF CNG – DEVELOPING THE INFRASTRUCTURE

80% of CNG Cluster

in Maharashtra, LNG Terminals
Gujarat & Delhi-NCR
Existing CGD
Areas
 Key Drivers for Gas Demand in India
1) Upstream – Investment Reforms
 Marketing and pricing freedom for natural gas
• Marketing and pricing freedom to sell at arm’s length price in the domestic market for oil and gas produced from
acreages awarded under OAL (HELP) and DSF regime

 Hydrocarbon Exploration Licensing Policy (HELP)

• The salient features of the policy are Open Acreage Licensing (OAL), single uniform license for conventional and
unconventional hydrocarbons, simpler and easier revenue sharing contract, full freedom for marketing and market
pricing for crude oil and natural gas and Low royalty rates.
2) Downstream - Market Reforms
 Setting-up of Natural Gas Trading Exchange
• The government has announced setting up of a gas trading exchange in the country which will enable transparent
price discovery and enable small consumers source gas as per their consumption requirement, moving away from the
current rigid gas contracts
3) Clean and Sustainable Energy Reforms
 Ban on polluting fuels such as petcoke and FO
• The government has banned usage of petcoke and FO in northern states of the country

 Promotion of CNG/ LNG vehicles

• In order to facilitate early roll-out of CNG/ PNG network in country, Government has accorded prioritized domestic gas
allocation to meet the full gas requirement of CNG and PNG (Domestic) consumer segments
 Indian market deregulation
Indian Gas Market is highly regulated. The gas market is regulated by the Petroleum and Natural Gas
Regulatory Board (PNGRB). It was established in 2006 to regulate the refining, processing, storage,
transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas so as to
protect consumer interest, ensure uninterrupted and adequate supply and promote competitive markets. The
key functions of the Board are –
• Authorize entities to lay, build, expand or operate pipelines and city gas distribution networks (CGD)
• Determination of tariffs for transportation of gas in common or contract carrier pipelines and CGDs
• Regulate access to pipelines and CGD as per access code, for fair trade and fostering competition
amongst operating entities
• Formulate and enforce service obligation for marketing entities
• Prevention of restrictive trade practices
• Formulation of technical standards and safety norms for construction and operation of gas
infrastructure and ensuring compliance by all entities
• Complaint and dispute resolution
• Maintain a data bank of information on activities relating to petroleum, petroleum products and
natural gas
 Indian market deregulation…
• Currently, the gas produced in India has a variety of different prices at the wellhead and the pricing is primarily segmented under three
broad regimes: Nomination regime (also known as the Administered Pricing Mechanism or ‘APM’), Discovered Fields regime (also known
as the Pre-New Exploration Licensing Policy regime or ‘Pre-NELP’), and the New Exploration Licensing Policy (NELP).

 The Government is making efforts to

provide marketing and pricing freedom
to the gas that would be produced from
the new gas field ensuring the gas
produces a fair price of the gas produced
and at the same time ensuring that the
end consumers get the gas at affordable
rates
Gas prices in India/International
Domestic gas price ($/mmbtu)
10  Gas prices have been rising, both
7.67
8
6 5.05 4.66
6.61
5.3 5.56
6.3 6.78
domestically and internationally
4
3.82
3.06 2.5 2.48 2.89 3.06 3.36  They have to compete with alternate
2
0 0 0 fuels in the consuming sectors.
0
Nov 14- Apr-Sep Oct 15- Apr-Sep Oct 16- Apr 17- Oct 17- Apr 18- Oct 18-  Domestically, gas competes very well
Mar 15 15 Mar 16 16 Mar 17 Sep 17 Mar-18 Sep 18 Mar 19
with alternate fuels in transport and
Domestic gas price (GCV basis)
Price cap for deepwater, ultra deepwater, high temp high pressure areas
industrial sectors.

International Gas/LNG prices ($/mmbtu)

12.00
10.00
8.00
6.00
4.00
2.00
0.00
Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18