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A passage to India

LNG Industry,

Natural gas currently occupies approximately 11% of India’s total energy basket, which is well below the world average of 24%. Presently, 73% of gas consumed by India is met from domestic supplies, and the current supply of approximately 90 million m3/d of domestic gas is failing to match demand. Currently, approximately 40 million m3/d is being fed by LNG imports. Given the country’s growth plans in the power, fertiliser and industrial segments, there is huge potential for increased consumption of natural gas in India.

The country’s natural gas consumption growth rate (CAGR) during 2001 - 2011 was around 8.75% and is expected to grow the fastest among all other energy forms at 4.5% per annum until 2050. Demand for natural gas is expected to reach more than 450 million m3/d by 2017 and over 600 million m3/d by the 13th Five Year Plan, ending in 2022.

Given this scenario, India will have to augment its domestic production as well as create sufficient downstream and regasification infrastructure for LNG imports during this period. It is envisaged that approximately US$ 14 billion needs to be invested by 2017 to develop the requisite pipeline infrastructure and there are plans to increase the regasification capacity from the current 27.5 million tpy to 50 million tpy at a likely investment of US$ 5 billion.


Geographically, India is strategically located, being flanked by countries holding large proven gas reserves. The country’s large natural gas market is a major attraction to LNG exporting countries. In order to encourage imports, the government of India has kept imports of LNG under the Open General License (OGL) category and has permitted 100% foreign direct investment (FDI) in LNG terminals. In order to meet the growing energy needs of the Indian market, it is crucial to make energising efforts towards gas sourcing and infrastructural development. Alternative business frameworks must also be deployed in place of deep rooted conventional systems. GAIL has assumed a key role in the development of the natural gas market in India and in meeting the country’s demand requirements.

Currently, India has a long-term contract from Qatar for the supply of 7.5 million tpa of LNG, of which GAIL is the largest off-taker. GAIL is also a significant off-taker from the 1.44 million tpa LNG supply contract with the Gorgon project in Australia. Currently, the company has been meeting the supply/demand gap through a series of short/medium-term contracts and spot transactions from time-to-time. The company had executed short/ medium- term agreements for approximately 1.4 million tpa supply with Marubeni, GDF Suez and Gas Natural Fenosa, and also imports close to 0.75 million tpa of LNG on spot basis from countries such as Qatar, Yemen, Nigeria, Algeria, Trinidad & Tobago, Norway, Equatorial Guinea, Oman, UAE, etc. GAIL currently owns and operates approximately 11 000 km of pipelines with a transmission capacity of 220 million m3/d and is investing approximately US$ 5 billion to increase its transmission capacity to 300 million m3/d. The company commissioned the 5 million tpy terminals at Dabhol in the state of Maharashtra in January 2013 and, as a result, it has become the largest regasification capacity holder in India.

Over the long-term, GAIL has made a giant leap to execute contracts amounting to 90 million m3/d of additional gas supply from diverse supply sources to constrain geo-political and price fluctuation risks for its long-term customers all in the last three year span.

GAIL became the first Asian company to execute a long-term contract with price indexed to Henry Hub in the US – a radical move away from conventional oil linked contracts. With a contract of 3.5 million tpa supply from Sabine Pass liquefaction project – the first and the only project to get both non-free trade agreement (FTA) export and Federal Energy Regulatory Commission (FERC) permits in the US – and a 2.3 million tpa liquefaction tolling capacity in the Cove Point LNG liquefaction terminal project – located at Lusby in the state of Maryland – GAIL has become one of the largest Henry Hub LNG portfolio players in the world. Cove Point is a premier facility in terms of direct access to the Marcellus and Utica shale plays, two of the most prolific shale gas basins in North America. GAIL will procure its own natural gas and deliver it to the Cove Point pipeline for liquefaction at the terminal and loading into ships brought to the facility on the Chesapeake Bay. This will enable the company to enhance its scale of operations in the US where it already has an established presence through participation in a shale gas asset in the Eagle Ford basin. GAIL is working towards arranging its own shipping for transporting these volumes, providing the company with the opportunity to market approximately 6 million tpy of LNG from the US, part of which may be traded in the international market through its Singapore-based subsidiary.

GAIL has also executed a 2.5 million tpa LNG supply agreement with Gazprom for supplies from Russia and a 38 million m3/d gas supply agreement with Turkmengaz for transnational pipeline supplies from Turkmenistan. The company is also keen to expand its foothold by acquiring upstream natural gas liquefaction facilities and actively pursuing potential opportunities, especially in North America and East Africa. Ever increasing demand and infrastructural access for natural gas in India will provide the impetus for more LNG tie-ups, some of which are under examination from potential LNG export hubs in East Africa, North America and the Middle East, etc.

GAIL has also mooted the concept of an Asian Gas Hub and the swapping of LNG parcels in order to optimise the number of nautical miles travelled and to take advantage of the arbitrage available to create a win-win situation for players involved.

Business and sustainability

GAIL is making efforts to reduce its carbon footprint through the use of energy efficient technologies, processes and equipment. This includes the installation of solar power systems, flare gas recovery, and improvements in lighting and cooling systems at various sites. Environmental sustainability and societal relevance continue to shape the long-term growth strategy of GAIL. The company believes that its growth offers the opportunity to truly commit towards aligning its business relationships in a fair, transparent and ethical manner, and thereby enhancing its contribution towards all stakeholder groups. The company is focused on ensuring an enduring performance of the triple bottom line in its quest to create value beyond business. The company follows a project-based approach in corporate social responsibility (CSR), which is aimed at transforming communities in and around its work centres and projects.

Future projects

GAIL will play a key role in developing the Indian gas market, from expanding its pipeline network and building regasification capacities to strengthening its trading capabilities so that domestic and international markets are addressed. Its long-term objective is to strengthen India’s energy security and play a pivotal role in the country’s socio-economic development.

The company will continue to pursue higher regional cooperation amongst Asian energy companies on matters of mutual and long-term interest. GAIL has commissioned a wind energy project in the state of Gujarat. Based on its success, commercial wind energy projects will be taken up. In addition to wind power, the company is moving into solar generation. To harness the natural convergence between gas and power businesses, diversification into gas-based plants and distributed power generation is in process.


Written by Prabhat Singh. Edited by Ted Monroe

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