AVAILABILITY & UTILISATION OF NATURAL GAS
- Natural gas has emerged as the most preferred fuel due to its inherent environmentally benign nature, greater efficiency and cost effectiveness. The demand of natural gas has sharply increased in the last two decades at the global level. In India too, the natural gas sector has gained importance, particularly over the last decade, and is being termed as the Fuel of the 21st Century.
- Production of natural gas, which was almost negligible at the time of independence, is at present at the level of around 87 million standard cubic meters per day (MMSCMD). The main producers of natural gas are Oil & Natural Gas Corporation Ltd. (ONGC), Oil India Limited (OIL) and JVs of Tapti, Panna-Mukta and Ravva. Under the Production Sharing Contracts, private parties from some of the fields are also producing gas. Government have also offered blocks under New Exploration Licensing Policy (NELP) to private and public sector companies with the right to market gas at market determined prices.
- Out of the total production of around 87 MMSCMD, after internal consumption, extraction of LPG and unavoidable flaring, around 74 MMSCMD is available for sale to various consumers.
- Most of the production of gas comes from the Western offshore area. The on-shore fields in Assam, Andhra Pradesh and Gujarat States are other major producers of gas. Smaller quantities of gas are also produced in Tripura, Tamil Nadu and Rajasthan States. OIL is operating in Assam and Rajasthan States, whereas ONGC is operating in the Western offshore fields and in other states. The gas produced by ONGC and a part of gas produced by the JV consortiums is marketed by the GAIL (India) Ltd. The gas produced by OIL is marketed by OIL itself except in Rajasthan where GAIL is marketing its gas. Gas produced by Cairn Energy from Lakshmi fields and Gujarat State Petroleum Corporation Ltd. (GSPCL) from Hazira fields is being sold directly by them at market determined prices.
- Natural gas has been utilised in Assam and Gujarat since the sixties. There was a major increase in the production & utilisation of natural gas in the late seventies with the development of the Bombay High fields and again in the late eighties when the South Bassein field in the Western Offshore was brought to production.
UTILISATION OF NATURAL GAS
- The gas produced in the western offshore fields is brought to Uran in Maharashtra and partly in Gujarat. The gas brought to Uran is utilised in and around Mumbai. The gas brought to Hazira is sour gas which has to be sweetened by removing the sulphur present in the gas. After sweetening, the gas is partly utilised at Hazira and the rest is fed into the Hazira-Bijaipur-Jagdhishpur(HBJ) pipeline which passes through Gujarat, MadhyaPradesh, Rajasthan, U.P., Delhi and Haryana. The gas produced in Gujarat, Assam, etc; is utilised within the respective states.
- Natural Gas is currently the source of half of the LPG produced in the country. LPG is now being extracted from gas at Duliajan in Assam, Bijaipur in M.P., Hazira and Vaghodia in Gujarat, Uran in Maharashtra, Pata in UP and Nagapattinam in Tamil Nadu. Two new plants have also been set up at Lakwa in Assam and at Ussar in Maharastra in 1998-99. One more plant is being set up at Gandhar in Gujarat. Natural gas containing C2/C3, which is a feedstock for the Petrochemical industry, is currently being used at Uran for Maharashtra Gas Cracker Complex at Nagothane. GAIL has also set up a 3 lakh TPA of Ethylene gas based petrochemical complex at Auraiya in 1998-99.
Natural Gas Allocation & Supply Scenario
- As against the total allocation of around 118 MMSCMD, the gas supplies by GAIL is of the order of 63 MMSCMD spread over about 300 major consumers. Around 32% is supplied to the fertiliser sector, 41% to power, 4% to sponge iron and the balance 23% (including shrinkage) goes to other sectors.
All India Region-Wise & Sector-Wise Gas Supply By GAIL - (2003-04)
OIL is also supplying around 3 MMSCMD in Assam against allocations made by the Govt.
|HVJ & Ex-Hazira
- Around 8.5 MMSCMD of gas is being directly supplied by the JVs/private companies at market prices to various consumers. This gas is outside the purview of the Government allocations.
IMPORT OF NATURAL GAS TO INDIA THROUGH TRANSNATIONAL GAS PIPELINES.
(a) Iran-Pakistan-India (IPI) Pipeline Project
- In pursuance of Government decision in February 2005, Minister (P&NG) led a delegation to Pakistan during 4-8 June 2005. During the talks, the two Ministers reviewed the Iran-Pakistan-India gas pipeline proposal. They agreed that the project, which envisaged supply of gas to Pakistan and India through a transnational pipeline, would go a long way in meeting the energy security requirements of the two countries, and thus should be seen as a significant project for the benefit of the people of these countries. The Indian and Pakistani delegations agreed to exchange information in regard to the financial structuring, technical, commercial, legal and related issues to realize a safe and secure world class project. To this end, it was agreed that the momentum pertaining to the project should be accelerated by constituting a Joint Working Group at the Secretary level at the earliest, which will meet regularly and report the progress to the Ministers to facilitate definitive decisions by them.
- 10.1 An Indian delegation also visited Iran from 11-14 June 2005 and discussed the issue of import of natural gas from Iran through on-land pipeline transiting via Pakistan. Both sides noted with satisfaction that as a result of regular discussions on technical issues pertaining to the project, a Heads of Agreement between NIGEC and the Indian companies concerned had been finalized. With a view to undertaking further studies and discussions in regard to relevant issues so that the project could take off by early next year, it was agreed to establish a special JWG on the Iran-Pakistan-India gas pipeline project.
- 10.2 A Pakistani delegation led by the Secretary, Ministry of Petroleum and Natural Resources, Govt. of Pakistan visited New Delhi on July 12-13, 2005 for the first meeting of India-Pakistan JWG. The second meeting of the JWG was held in Islamabad on 8-9 September, 2005. The first meeting of the Special JWG on Iran-Pakistan-India Pipeline Project was held in New Delhi on 3-4 August, 2005. The second meeting of the Special JWG on Iran-Pakistan-India Pipeline Project was held in Tehran on 24th October,2005. The Indian side was led by Secretary (P&NG).
Indian side has already appointed financial consultants i.e., M/s Ernst & Young and is in the process of finalizing appointment of legal & technical consultants for the project. During the 2nd JWG meeting, the Pakistani side informed that they will also shortly be appointing their Financial Consultants.
(b) Myanmar-Bangladesh-India Gas Pipeline Project.
To pursue the matter at the Government level, for bilateral and trilateral discussions with Myanmar and Bangladesh, the Minister (P&NG) visited Yangon during 11-13th January 2005. A Memorandum of Understanding (MOU) for cooperation in the petroleum sector between the two Governments was signed. The MOU provides for furthering cooperation in the hydrocarbon sector and for establishing a cooperative institutional relationship in the field of petroleum industry on the basis of equality and mutual advantage, taking into account the possibilities for cooperation available in each country. The two Governments will designate a body of experts comprising three representatives of each party to identify and implement the projects in the hydrocarbon sector.
- 11.1 A trilateral meeting between the Petroleum Ministers of India, Myanmar and Bangladesh held on 12.1.2005. After the meeting a Joint Press Statement was issued by the three Ministers. The three sides agreed to transport of natural gas from Myanmar to India by pipeline transiting through Bangladesh. The route of the pipeline will be determined by mutual agreements of the three Governments. It was also decided to establish a Techno-Commercial Working Committee (TCWC) comprising duly designated representatives of the three Governments to prepare a draft MOU prescribing the framework of cooperation among the three Governments, including the Myanmar-Bangladesh-India gas pipeline project. The MOU would be signed at Dhaka at the earliest mutually convenient date.
- 11.2 In pursuance of the MoU, a Techno-Commercial Working Committee has been constituted by the three Governments. The First Meeting of the TCWC was held on 24-25 February, 2005. The TCWC has finalized draft MoU proposed to be signed by the three oil Ministers.
- 11.3 However, there are certain bilateral issues which have to be sorted out with Bangladesh. Simultaneously, India is also exploring the other option of import of natural gas from Myanmar. A high level delegation led by Minister, Energy, of Myanmar recently visited India during July 5-7, 2005. All aspects of Myanmar-Bangladesh-India gas pipeline were discussed. Minister (P&NG) visited Bangladesh during 5-6 September 2005 to pursue the matter with Government of Bangladesh. The matter is being pursued vigorously and the proposed gas imports from Myanmar would be finalized shortly notwithstanding the response of Government of Bangladesh. GAIL has been asked to do a pre-feasibility study of the onland pipeline route from Myanmar to India through North-Eastern Indian States, bypassing Bangladesh territory. The option of getting Bangladesh on board is also being simultaneously pursued. Another official level meeting was held in Yangon on 29-30 August 2005, where
two sides agree to take definite steps for gas supply from Myanmar.
(c) Turkmenistan-Afghanistan-Pakistan (TAP) pipeline
Daulatabad area of Turkmenistan has reported to have sufficient gas reserves. The Governments of Turkmenistan-Afghanistan-Pakistan (TAP) proposed the transnational gas pipeline to exploit the available gas reserves in Turkmenistan. They designated ADB as the lead development partner. ADB has carried out the study and approached India for participating in the project. Minister (P&NG) discussed this matter with Pakistani side during his visit to Pakistan 4th to 8th June 2005. This was also discussed by Secretary (P&NG) with President ADB during the latter's visit to New Delhi on 1.9.2005. Although, India is not yet formally involved in TAP project, Minister (P&NG) has been invited to the next Steering Committee Meeting to be held in Ashgabat in early December, 2005.
Liquefied Natural Gas (LNG)
Natural gas at -1610C transforms into liquid. This is done for easy storage and transportation since it reduces the volume occupied by gas by a factor of 600. LNG is transported in specially built ships with cryogenic tanks. It is received at the LNG receiving terminals and is regassified to be supplied as natural gas to the consumers. LNG projects are highly capital intensive in nature. The whole process consists of five elements:-
LNG supply contracts are generally of long term nature and the prices are linked to the international crude oil prices. However, the LNG importing countries in recent times had started asking for medium/short term contracts with varying linkages.
- Dedicated gas field development and production.
- Liquefaction plant.
- Transportation in special vessels.
- Regassification Plant.
- Transportation & distribution to the Gas consumer.
LNG Imports to India
The LNG trade started in mid 60's and has increased rapidly. In 1992 it was around 80 Billion Cubic Metres (BCM) per annum and crossed the 100 BCM mark in 1996. World trade in LNG is currently in the range of 150 BCM. The major exporting countries of LNG are Algeria, Qatar, Indonesia, Malaysia, Australia, whereas, the major importers are Japan, South Korea, Taiwan and Western Europe.
Geographically, India is very strategically located and is flanked by large gas reserves on both the east and west. India is relatively close to four of the world's top five countries in terms of proven gas reserves, viz. Iran, Qatar, Saudi Arabia and Abu Dhabi. The large natural gas market of India is a major attraction to the LNG exporting countries. In order to encourage gas imports, the Government of India has kept import of LNG under Open General License (OGL) category and has permitted 100% FDI.
Petronet LNG Limited (PLL), a JV promoted by GAIL, IOCL, BPCL and ONGC was formed for import of LNG to meet the growing demand of natural gas. PLL has constructed a 5 MMTPA capacity LNG terminal at Dahej in Gujarat. The terminal was commissioned in February 2004 and commercial supplies commenced from March 2004. PLL is planning to expand this terminal to 10 MMTPA capacity by 2008-09 to meet the growing demand of LNG.
Shell's 2.5 MMTPA capacity LNG terminal at Hazira has been commissioned. Dabhol LNG terminal (total 5 MMTPA capacity, with about 2.9 MMTPA available for merchant sales) may also become operational by 2006 subject to availability of LNG for the project. LNG terminals at Kochi in Kerala, Mangalore in Karnataka and Krishnapatnam/Ennore in Tamil Nadu are also under active consideration and may fructify in next 4-5 years time.
The price of LNG for the Dahej project is linked to the JCC crude oil price. It has a fixed price for the first five years, i.e. upto December 2008 and a floating floor and ceiling price thereafter. At present the selling price of LNG in Gujarat is $4.87/MMBTU (Rs. 8777/MCM) and outside Gujarat is $4.88/MMBTU (Rs. 8800/MCM). At this price, LNG is comparatively cheaper than alternative fuels/feedstock's e.g. naphtha, Furnace Oil, LSHS, Light Diesel Oil, LPG, etc.
Prior to 1987, gas prices were fixed by ONGC/OIL. The price is being fixed by Government w.e.f. 30.1.1987. The price of APM gas of ONGC and OIL was last revised effective 1.7.2005. The salient features of the revised pricing order effective 1.7.2005 are as follows:-
- ONGC and OIL produced about 55 MMSClMD APM gas from nominated fields. The determination of producer price for this gas will be referred to the Tariff Commission. Till the Commission submits its recommendation and a decision is taken thereon, the consumer price of APM gas will be increased from Rs.2850/MCM to a fixed price of Rs. 3200/MCM on adhoc basis.
- It has been decided that all available APM gas would be supplied to only the power and fertilizer sector consumers against their existing allocations along with the specific end users committed under Court orders/small scale consumers having allocations upto 0.05 MMSCMD at the revised price of Rs. 3200/MCM. This price is linked to a calorific value of 10,000 K.cal/cubic metre. However, the gas price for transport sector (CNG), Agra-Ferozabad small industries and other small scale consumers having allocations upto 0.05 MMSCMD would be progressively increased over the next 3 to 5 years to reflect the market price.
- The gas supplies through GAIL network to non-APM consumers will be at the price at which GAIL buys from JV producers at landfall point, subject to a ceiling of ex-Dahej RLNG price of US$3.86/MMBTU for the current year i.e. 2005-06. For the North-East region, Rs.3200/MCM will be considered as the market price during 2005-06.
- The price of gas for the North-Eastern region will be pegged at 60% of the revised price for general consumers. Thus, the consumer price for the North-East region will increase from the existing price of Rs.1700 to Rs.1920/MCM.
- Subject to the determination of producer price, based on the recommendations of the Tariff Commission, any additional gas as well as future production of gas from new fields to be developed in future by ONGC/OIL will be sold at market-related price in the context of NELP provisions.
REGULATORY FRAMEWORK FOR THE GAS INDUSTRY
The Ministry of Petroleum & Natural Gas (MOP&NG) has been regulating the allocation and pricing of gas produced by ONGC and OIL by issuing administrative orders from time to time. The gas produced by the JVs and by NELP operators is governed by the respective production sharing contracts (PSC) between the Government and the producers. The setting up of a Petroleum & Natural Gas Regulatory Board is under the consideration of the Government and the bill is being drafted.
Under the existing policy, 100% Foreign Direct Investment (FDI) is allowed through the FIPB route for both LNG projects and natural gas pipeline projects. Import of LNG and natural gas is on OGL. If an entity requires the acquisition of Right of User (ROU) in land, it approaches MOP&NG for the acquisition under the Petroleum & Mineral Pipelines (Acquisition of Right of User in Land) Act, 1962 (P&MP Act, 1962). The draft natural gas pipeline policy covering transmission pipelines and local or city gas distribution networks is under formulation, with proposed provision in line with those under the draft regulatory board bill.