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India, the world’s fifth largest importer of natural gas, is keenly observing the changing dynamics of global pricing as stakes run high. This is even as India itself is looking for suitable pricing mechanism for its domestically produced gas.
The new deals to import gas will be a watchable game, said the Petroleum & Natural Gas Minister, M. Veerappa Moily, at the third International Energy Forum (IEF) NOC-IOC (National Oil Companies-Independent Oil Companies) Forum conference on ‘Challenges, Investment & Cooperation’ here.
“Liquefied Natural Gas pricing is fast turning an issue. Importers now desire to move away from oil-linked gas prices to Henry Hub (traded price in the US) pricing on account of high price band in which oil is hovering around. So how new deals will take place, is fast turning into a watchable game,” he said.
India already has secured supply deal of around 14 million tonne per annum and around 20 million tonne per annum deals are in the pipeline, Moily said
But, the challenge is that the landed cost of gas is expected to be $10-$12 /mmBtu, and not in the range of $4-$5/mmbtu, which customers are used to, he said. Though this high price ($10-12/mmBtu) is in the lower range, the Minister said that making this LNG a cheaper comparable fuel option is a great task.
India has now become the fifth largest importer of LNG after Japan, South Korea, UK, and Spain and accounts for 5.5 per cent of the total trade. With LNG demand expected to grow at the rate of 5 per cent-six per cent annually till 2020 and at the rate of 2 per cent-3 per cent thereafter, India along with their other Asian counterparts is driving this growth.
A lot of capacities are being created in India and huge numbers of supply deals have been there, the Minister said. LNG re-gasification capacity is expected to be more than 50 million tonne per annum by 2016-17 with a supply of 198 mmscmd.
On macro issues, the Minister said, India needs to correct and consolidate its approach towards addressing the energy production and consumption issues in the right earnest.
On India’s exploration potential for hydrocarbons, he said that India has large resource base but a huge volume of these reserves has not been exploited yet. “We still have 12 per cent unexplored and 22 per cent poorly explored areas. Even after 9 rounds of NELP, about 80 per cent area yet to be explored extensively. In terms of drilling intensity too, India has a very low figure,” he said.
India has total prognosticated resource of 205 billion barrels of oil and oil equivalent gas, out of which only 68 billion barrels has been established as in-place volume.
On unconventional resources, the Minister said, “We are still at a very preliminary stage when it comes to tapping these unconventional resources.”
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