In an updated analysis of India’s energy sector, The US Energy Information agency (EIA) reached the following conclusions on natural gas:
Natural gas mainly serves as a substitute for coal for electricity generation and as an alternative for LPG and other petroleum products in the fertiliser and other sectors. The country was self-sufficient in natural gas until 2004, when it began to import LNG from Qatar. Because it has not been able to create sufficient natural gas infrastructure on a national level or produce adequate domestic natural gas to meet domestic demand, India increasingly relies on imported LNG. India was the world’s fourth-largest LNG importer in 2013, following Japan, South Korea, and China, and consumed almost 6% of the global market, according to data from IHS Energy. Indian companies hold both long-term supply contracts and more expensive spot LNG contracts.
Consumption and imports
Natural gas consumption has grown at an annual rate of 8% from 2000 and 2012, although supply disruptions starting in 2011 resulted in declining consumption. Natural gas consumption in India was tied closely to domestic production until imports became available in 2004. In 2012, India consumed 2.1 trillion ft3 of natural gas. LNG imports accounted for about 29% of 2012 demand, and LNG is expected to account for an increasing portion of demand at least in the next several years as Indian energy firms attempt to reverse the country’s recent domestic production declines. Increasing LNG imports will depend on the pace of expansion in regasification terminal capacity and pipeline infrastructure connecting gas to markets that currently lack access. The country’s pricing system is undergoing revision to unlock regulated prices that are well below the import price levels. Raising gas prices would provide oil and gas firms with economic incentives for upstream development, especially in deepwater plays and technically challenging fields, and would allow LNG importers to compete more effectively for gas consumers in a higher-priced environment.
Demand and production
The majority of natural gas demand in 2012 came from the power sector (33%), the fertiliser industry (28%), and the replacement of LPG for cooking oil and other uses in the residential sector (15%), according to India’s MOPNG. The government has labeled these as priority sectors for domestic programmes, which ensures that they receive larger shares of any new gas supply before other consumers. The fertiliser sector, which is highly price-sensitive, has been able to maintain low fuel costs by using natural gas. The recent unexpected natural gas production declines since 2011 have forced electric generators to seek fuel alternatives, primarily coal. The government is promoting the use of natural gas in the residential sector as an alternative to LPG as a cooking fuel.Click here to read the full EIA report.
Adapted from press release by Ted Monroe
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