A report by credit ratings agency Icra said that the ballooning natural gas supply demand deficit created by a fall in output from Reliance Industries' eastern offshore KG D6 fields will fuel imports of expensive LNG.
It said that "India's natural gas supply has been adversely impacted in 2011-12 due to a fall in KG-D6 production to 46.6 million standard cubic meters per day in the first half of 2011-12 from 55.9 million standard cubic meters per day in 2010-11."
KG D6 production is likely to remain at subdued levels over the next couple of years, especially in comparison to the earlier anticipated production of 60 million standard cubic meters per day to 80 million standard cubic meters per day.
Mr K Ravichandran SVP and co head Corporate Sector Ratings at Icra said that domestic natural gas supplies are expected to increase to around 153 million standard cubic meters per day by 2014-15 from 143 million standard cubic meters per day in 201-11.
He added that "The current estimate is about 22% lower than our previous estimates of 195 million standard cubic meters per day, primarily due to lower KG D6 production and delays anticipated in commissioning of KG satellite fields."
Icra believes that gas demand will increase from new customers once the bottlenecks in the trunk pipeline are cleared in the near to medium term. It said that "Overall, Icra expects gas demand to rise to around 410 million standard cubic meters per day by 2019-20 from the actual consumption of around 177 million standard cubic meters per day in 2010-11."
Mr Ravichandran said that India needs to secure additional supplies of liquefied natural gas on a long term basis in view of less than anticipated domestic supply. He added that "India's reliance on LNG is expected to increase further, which will pose significant risks in a scenario of tight LNG supply demand scenario, leading to low availability and high prices of spot LNG."
As LNG is an expensive fuel compared to domestic gas and domestic imported coal, it was critical for a power producer to tie up domestic gas for a large share of the fuel requirement.
Icra said the additional demand from power (around 32 million standard cubic meters per day by 2012-13) along with lower KG-D6 production poses a significant fuel supply risk for gas-based power producers over the medium term.
(Sourced from NDTV)
