Domestic natural gas production fell 8.1% year on year (y-o-y) to 28,670.6 million standard cubic metre (mscm) in FY21. Natural gas production of 2,683.9 mscm in March was, however, the highest monthly output recorded in 24 months. The 30.5 million tonne (MT) of crude oil produced in the country during the fiscal was also 5.2% lower than the production in the year-ago period.
Indigenous natural gas production caters to about 51% of the country’s requirements, while around 85% of the country’s crude oil is imported. Domestic natural gas output had fallen 2.8% y-o-y to 31,168.4 mscm in FY20, reversing the growth trend recorded since FY18.
March gas output was up with the commencement of production from Reliance Industries and BP’s ultra-deep-water field in the KG D6 Block of the Krishna Godavari basin on the east coast. This new field started production in December 2020 at 1.3 mscm per day (mscmd) and ramped up to 9.6 mscmd in March 2021. Production has also started in the neighbouring field owned by Oil and Natural Gas Corporation and the state-run company has recently floated the tender for supplying 2 mscmd gas from the field starting June 30.
The current price for gas produced from local nominated fields has been revised to an all-time low of $1.79/ million British thermal units (mBtu) by the government, which is much below the breakeven point for most fields, deterring gas producers from aggressively increasing production or getting into new high-risk projects. For ultra-deep-water gas fields like the Krishna Godavari basin, which have higher pricing and marketing freedom, the current price cap is set at $4.06/mBtu.
Domestic production has been falling with the ageing of existing fields and muted response from the industry to take up new projects, mainly due to lack of adequate incentives. Other reasons for lower output include lack of buyers, inadequate evacuation infrastructure and other technical constraints in hostile geographical terrains. Lower procurement of gas by bulk consumers has also been cited as a reason for the fall in production in January.
Domestic consumption of petroleum products in FY21 fell 9.1% y-o-y to 194.7 MT, mainly on the back of low sales of transportation fuel. Petroleum sales have fallen for the first time since FY99, for which data is available with the government’s petroleum planning and analysis cell.
Diesel usage, which comprises about 40% of overall product sales, dipped 11.9% to 72.7 MT in FY21, while the demand for petrol fell 6.7% to 27.9 MT. In line with the government’s target of increasing the share of gas in the economy, liquefied petroleum gas sales were up 4.9% y-o-y to 27.6 MT in FY21.