Domestic natural gas production to increase around 183 mmscmd by FY20: ICRA

India's natural gas production has steadily declined over last two years to 111 mmscmd in FY13 from 143 mmscmd in FY11

Domestic natural gas production is expected to increase to 125 million standard cubic meter per day (mmscmd) of gas by FY16 from 111 mmscmd in FY13 from existing or already discovered fields.

This could further increase to around 183 mmscmd by FY20, according Icra’s latest study on Downstream Natural Gas Sector.

India’s natural gas production has steadily declined over the last two years to 111 mmscmd in FY13 from 143 mmscmd in FY11 primarily due to fall in production of KG-D6 block from 56 mmscmd in FY11 to 26 mmscmd in FY13.

Factoring in certain production from future discoveries, Icra estimates the domestic production could increase to about 200 mmscmd by FY25 notwithstanding the fall in the production from the existing fields.

While the demand potential for natural gas is high, the actual offtake could critically depend upon the price competitiveness of gas against alternative fuels and timely commissioning of the proposed transmission pipeline infrastructure. Icra believes the gas demand will rise to around 360 mmscmd by FY20 and further to around 435 mmscmd by FY25 from the current demand potential of more than 250 mmscmd. It is to be highlighted that actual consumption of gas was around 140 mmscmd in FY 13, which decreased over the last two years from 177 mmscmd in FY11 due to constrained gas availability.

Regarding domestic supply-demand gap, although the domestic gas production could increase over the next 5-6 years, the same is expected to remain significantly lower than the demand potential. The high level of domestic demand-supply deficit would prompt consumers to increase consumption of R-LNG, which is costlier than domestic gas but still economical in comparison to liquid fuels.

Ravichandran, Senior Vice President, Co-head, corporate sector ratings at Icra Ltd, stated, “The potential gas deficit (based on domestic supply and long term contracted LNG) will decrease from around 148 mmscmd in FY14 to around 125 mmscmd by FY20 in line with improving domestic supply. However, the deficit could increase to around 185 mmscmd by FY25 reflecting the need of more LT and spot LNG contracts to meet the deficit.”

Besides, improvement in domestic gas availability would be a positive trigger for R-LNG demand as it would help consumers to suitably blend additional high cost R-LNG along with relatively cheaper domestic natural gas to arrive at a reasonable weighted average cost of gas.