Predicting hydrocarbon market is fraught with risks. Take the domestic market for LNG, for example. The imported fuel had no competition from domestic gas before Reliance Industries Ltd (RIL) started production from its D6 block in the Krishna-Godavari (K-G) basin, and was selling at a high premium.
However, the domestic LNG market scenario is changing after KG basin gas arrived in the market. Petronet LNG is conducting a review of the Indian gas market as RIL ramps up production from its D6 block in the Krishna-Godavari (KG) basin on the east coast.
?We are constantly evaluating the dynamics of the Indian gas market,? P Dasgupta, managing director and chief executive officer (CEO), Petronet LNG, told FE. ?Availability of K-G basin gas is one of the key reasons,? he said.
The global financial meltdown has also impacted India?s energy consumption growth. In the medium term, the actual growth in India?s energy consumption might be lower than what was projected before the global financial meltdown.
However, availability of K-G basin has long-term implications for LNG demand in the country because it is competitive priced at $4.2 million British thermal unit (mmBtu). In comparison, even after drastic fall in price, spot LNG is still trading at $5-6 per mmBtu in the spot market.
The company has installed re-gasification capacity of 10 million tonne per annum (mmtpa) at its Dahej LNG terminal after commissioning of its expansion project earlier this year. Against that, it has 7.5 mmtpa of LNG supply tied up under long-term contracts from Qatar?s Ras Gas. Meanwhile, the company is looking to procure additional 1.5 mmtpa of LNG to meet the fuel requirement of Pragati Power Ltd. That still leaves I mmtpa of its installed re-gasification capacity spare that the company utilises for re-gasifying LNG cargoes bought from the spot market to meet short requirements of its customers.
India imports LNG to meet the deficit in the domestic availability of natural gas. The current deficit in the domestic availability of natural gas is estimated at 40 million standard cubic meter per day (mmscmd). Against that, the current LNG import is 30 mmscmd.
?India is a supply-driven market, whether natural gas comes in the form of imported LNG or domestic supply. LNG is a peak-load saver. How much LNG is going to be imported depends on the deficit in the domestic availability,? Dasgupta said.
There is no shortage of LNG in the world market. However, its affordability can be an issue given that LNG price works out higher compared to domestic natural gas because of additional costs involved in liquefying, transporting and re-gasifying the fuel.
?Plentiful LNG is available in the world market. However, it all depends on affordability. Since LNG is the costliest, it has to go out first in case energy demand sags,? Petronet CEO pointed out.
Petronet is also setting up 2.5 mmtpa-capacity LNG re-gasification terminal at Kochi in Kerala. The project is expected to be commissioned by 2011. However, for planning further capacity addition, the company will consider price competitiveness of LNG vis-a-vis domestic gas as well as other sources of energy.