RIL, BP could script new gas story for India

Our Bureau Mumbai | Updated on March 12, 2018

The Reliance Industries, British Petroleum alliance is a clear indication of the growing importance of gas in India. It also comes at a time when there is enormous uncertainty on world crude oil prices, a result of the unrest in Egypt which could spread to West Asia.

In fact, Mr Mukesh Ambani, Chairman of RIL, had said some months ago that crude oil prices would touch $100 a barrel.

With Brent crude ruling at $103/bbl, it is proving to be particularly difficult for a country like India where diesel, kerosene and cooking gas are heavily subsidised. This is a big price to pay considering that the country imports nearly 80 per cent of its crude oil requirements. The subsidies, in turn, have been crippling the finances of public sector oil companies.

It is in this context that the role of gas becomes significant. With RIL hitting paydirt in the Krishna Godavari basin, this could just be the beginning of a bigger story in India.

This optimism is obviously shared by BP which has committed to invest $9 billion in 23 of the company's blocks including the prolific D6 in the KG basin.

The fact that the two companies have decided to form a joint venture for sourcing of gas and marketing it in India also reflects their intent to create a strong energy vertical.

State-run Bharat Petroleum Corporation is also in talks with Mitsui of Japan for a similar business model where gas will be brought into India from Mozambique.

The biggest challenge, of course, is readying the infrastructure for a comprehensive gas grid which can meet the needs of many more parts of the country. For instance, in the case of compressed natural gas, its availability is confined to Delhi, Mumbai and parts of Gujarat and Andhra Pradesh. There is a crying need to extend its reach to the South, North and the central region which are also on the move.

With the potential of gas applicable to a host of sectors be it auto, power, fertilisers, households etc, it remains to be seen how quickly India can ramp up the network and ensure that it is accessible to more end-users. It is getting increasingly clear that the days of cheap petrol, diesel and cooking gas will be a thing of the past.

The last eight months have seen petrol prices going up by nearly Rs 10 a litre but its consumption continues to grow at 15 per cent, a clear indication that the middle class is no longer deterred by high prices.

The bigger problem relates to availability of these fuels especially when an economy is booming and demand is constantly on the rise.

For the moment, gas promises to be present a lot longer right through the 21st century. However, like petrol and diesel, it will also get progressively expensive.

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Published on February 22, 2011
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