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Domestic natural gas output falls 10% in July

Petroleum minister Dharmendra Pradhan recently attended a virtual conference with the CEO of Europe’s leading gas utility company SNAM.

Domestic natural gas production fell 10.1% year on year to 2,435 million metric standard cubic metre (MMSCM) in July. The 2.6 million tonne (MT) of crude oil produced in the country during the month was also 5% lower than the production in the year-ago period. This coincides with domestic natural gas consumption falling 14.3% y-o-y to 13,536 MMSCM in Q1FY21 when the lockdown to contain the spread of the coronavirus pandemic was implemented.

Domestic production fell 15.5% annually to 6,785 MMSCM while imports dropped 12.5% to 7,003 MMSCM in the three-month period.

According to Care Ratings, the gross production of domestic natural gas will fall by 10.6% during FY21 as “no company would aggressively want to increase production or get into high risk projects with such a low gas price”. The current price for gas produced from local fields has been revised to an all-time low of $2.39/mmBtu by the government, which is even below the breakeven point for most fields, the agency noted. Indigenous natural gas production caters about only 51% of the country’s requirements.

Demand for natural gas in the domestic market is largely dependent on the fertiliser (28%), power (23%), city gas distribution entities (16%), refineries (12%) and petrochemicals (8%) industries. Consumption of natural gas is seen to fall by 3.2% by the end of FY21 as demand is likely to be subdued on account of a steep decline in the sale of compressed natural gas (CNG), weaker demand from gas-based power plants and a cut in refinery throughput by oil refiners.

The country aims to increase the share of natural gas in its energy mix to 15% by 2030 from the current level of about 6%. In July, the ministry of petroleum and natural gas held several meetings with global entities on the country’s policy drive to attain a higher share of natural gas.

Petroleum minister Dharmendra Pradhan recently attended a virtual conference with the CEO of Europe’s leading gas utility company SNAM. The minister has welcomed SNAM’s keenness for collaborations in the areas of LNG, gas storage and hydrogen fuel. Over 31% of SNAM’s shares are held by holding company CDP Reti. The State Grid Corporation of China holds 35% of CDP Reti.

An online meeting with Fatih Birol, executive director, International Energy Agency, was also held to discuss the country’s expanding gas infrastructure and the efforts being taken towards free market pricing of natural gas.

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