NEW DELHI: With gas seen as an environment-friendly fuel, India expects the gas demand to go up 6 to 7 percent annually as against the four percent rise in oil demand. Reliance Industries has reported the preliminary estimate indicates reserves of over seven trillion cubic feet (about 198 billion cubic metres) in the KG DW-6/98 block in the Krishna-Godavari basin. This is comparable to the last major Oil and Natural Gas Corporation (ONGC) find of around nine trillion cubic feet (about 255 billion cubic metres) in the Vasai (earlier Bassein) field on the west coast. Depending on imports for 70 percent of its hydrocarbon needs, India is currently facing a shortfall on gas with the current availability of 65 million standard cubic meters per day (MMSCMD), about 50 MMSCMD short of demand. The gas demand in India is expected to grow to over 300 MMSCMD by 2025. "This new find that promises to deliver another 40 MMSCMD gas will help India more or less meet its immediate demand. With gas seen as the fuel of the future, the demand of gas is expected to go up more than that of oil," A.V Nayak, energy advisor with the Confederation of Indian Industry (CII) said. To bridge the growing gap between demand and supply, India has been pushing ahead with several LNG projects and also exploring other venues, including pipeline gas from Iran and neighbouring Bangladesh. "The new find opens up lots of possibilities. But currently the market, which has been used to subsidised gas for so long, is not yet ready for it," said Ardendhu Sen, energy expert with the Tata Energy Research Institute (TERI). The petroleum ministry is expected to finalise the long awaited gas policy by 2003 that would fix a price for indigenous supplies, more in line with international prices, or evolve a mechanism for pooling of the domestic and imported gas to make it more consumer friendly. In the case of pooling, some of the LNG projects, which are very cost-intensive, may be able to find off-takers as domestic gas currently costs only $2.5-$3 per million metric British thermal units (mmbtu), while LNG is expected to cost consumers $3.6-5 mmbtu. The Reliance block, in which Canadian firm Niko Resources has a stake, would involve a lot of investment over the next few years on development, being an offshore block. This will push up the cost of gas, feel experts. Among the LNG projects on the cards, the Indian Oil Corporation's Kakinada in Andhra Pradesh stands to be most affected. Others like Petronet LNG, which is expected to begin the delivery of gas from Qatar by early 2004, will also find it difficult to tie up with consumers. Already some of the major gas off-takers like the National Thermal Power Corporation are rethinking plans of picking equity in Petronet LNG, promoted jointly by four state-owned oil and gas majors. "Given the current reluctance of power and fertiliser units to pick up any extra tab for gas, it would be difficult for Reliance to find good and reliable customers for such a huge supply," said Sen. Added Rajeev Thakur, energy expert with ICRA Ltd: "This find is good news for the country as it looks to boost energy security. "However, it will offer significant competition to LNG suppliers. The consumers reluctant to commit themselves to long-term contracts with LNG suppliers may rethink as the domestic gas will definitely be cheaper even after price revision." On the heels of oil and gas discovery by other private explorers like Cairn Energy in the Krishna-Godavari basin, in Cambay offshore Gujarat and Sanchaur basin of Rajasthan, the Reliance find will act as an impetus to boost more private investment in exploration and development activity, said experts. "With this discovery the perception about Indian hydrocarbon potential will go up and will create more interest when bids are invited for the fourth round of blocks under the New Exploration Licensing Policy (NELP) in April," said Sen. The experts feel the new discovery, which is one-third of all gas find in the last few decades, will definitely attract more investment in the oil and gas sector as demand for new pipelines will be pushed up.
Source: IANS