Nearly 75 per cent of oil is imported putting a severe strain to current account deficit (CAD).

Domestic production and supplies from transnational pipelines will not be able to keep pace with the demand for natural gas in India and liquefied petroleum gas (LNG) represents the only opportunity to bridge this gap in future, according to a latest report jointly released by Oil and Natural Gas Corporation (ONGC) and the Boston Consulting Group (BCG) in the run-up to the Petrotech 2014 conference here.

According to the report titled ‘LNG-Global Challenges and Opportunities and Imperatives for India’, domestic production is expected to reach only 230 million metric standard cubic metres per day (mmscmd) while pipelines will add only 30 mmscmd to the supply by 2029-30. A gap of 486 mmscmd (131 million tonnes per annum) is expected between demand and supply by 2029-30, representing an enormous opportunity for LNG.

According to Kaustav Mukherjee, partner and director, BCG, “India needs more geographic diversity in its supply base for LNG and explore alternat[iv]e indexation to better reflect end-user economics. A collaborative platform with other Asian LNG importers (who are progressively facing price pressures themselves) could be an effective enabler for the same”.

According to the report, natural gas is critical towards attaining energy security for India as the country’s primary energy consumption is set to increase exponentially to 1,120 million tonnes of oil equivalent (MTOE) by 2031-32. Nearly 75 per cent of oil is imported putting a severe strain to current account deficit (CAD). On the other hand, the domestic coal sector is beset with poor mining and transport infrastructure, regulatory and bureaucratic oversight. So, natural gas represents the best alternative to meet the growing demand.

The report said natural gas demand was expected to reach 746 mmscmd by 2029-30 against the present consumption of 127 mmscmd. Demand from the power sector is expected to increase to 354 mmscmd while that of the fertilizer sector to 110 mmscmd due to conversion of naphtha plants to gas and enhanced domestic capacity. Similarly, city gas distribution demand is expected to go up to 86 mmscmd as the pipeline network expands to North and East India.

The report said the present gas market was very complex with different pricing regimes rendering LNG uncompetitive in some prominent sectors. APM (Administered Price Mechanism) gas was being provided at a price of $4.2 million British thermal unit (mBtu) against term LNG prices of $8.5 mBtu and average spot prices of $15 mBtu. The recommendations of the Rangarajan Committee raising the prices of APM gas to $8.4 mBtu, if adopted, will dramatically increase LNG prospects in India making it attractive to several sectors, the report adds.

More In: Economy | Business