Securing gas supplies

Updated: May 30 2007, 05:30am hrs
Myanmar's choice of China as the preferred destination for gas exports from blocks where Indian companies have an equity interest once again highlights the risky business that the search for energy is. Stagnant and declining domestic production of natural gas, in the face of surging demand for this environment-friendly and cost-effective fuel, has now pushed up the availability deficit in energy-starved India to more than 100% (that is, we have less than half the gas needed). Though the sectoral dominance of public sector utilities is slowly reducing, the full impact of the liberalisation measures will take some time to pan out. According to official projections, the production of gas by ONGC and OIL, which have not made a single major discovery over the last two decades, is set to stagnate in the 25-26 million metric tonnes (MMT) per annum range over the next five years. The only consolation is the pick up in private sector output, which is expected to rise by 12.5 MMT to 21.1 MMT by 2011-12. This will raise total domestic output to 46.6 MMT. Yet, it wont be enough. The output will have to be supplemented with imports from gas-rich countries like Iran, Myanmar and Russia.

There are problems with every foreign-supply option. Building gas pipelines from producer nations is a rather time-consuming process, apart from political-security issues. Large-scale LNG imports may not be easy either. Buoyant demand worldwide will double the share of LNG in global gas usage to 12% by the turn of the decade. So, India would have to compete fiercely with countries like China, Japan and South Korea if it is to secure reliable LNG supplies. And with the share of LNG in Indias total gas consumption projected to almost treble to 30% during this period, prices are expected to shoot upwhich means trouble for user industries. Though the Petroleum and Natural Gas Authority and the Policy for Development of Natural Gas Pipelines and City or Local Gas Distribution Networks have already been notified, their effectiveness is yet to be tested, and polices will have to be further fine-tuned by eliminating preferential prices for certain sectors like power and fertilisers. Also, we need a more efficient price discovery mechanism, without which investment just wont accelerate.