New Delhi: Helped by new output from KG-D6 fields of Reliance-BP, India’s domestic gas production, which had been falling for more than a decade because of declining output from legacy fields, now looks in rude health, according to energy consultancy Wood Mackenzie.
Reliance Industries Ltd and its partner BP Plc of UK in December last year started putting the second wave of gas discoveries in eastern offshore KG-D6 block to production with R-Series started flowing gas. In April they started output from the Satellite Cluster fields.
This helped raise India’s gas production by almost 20 per cent, oil ministry data showed.
In the weekly blog ‘APAC Energy Buzz’, the energy consultancy’s Asia Pacific vice-chair Gavin Thompson said India’s domestic gas production has been in a sorry state for years.
“With output falling for more than a decade as legacy fields decline, India’s modest upstream prospectivity and challenging E&P regime have proven stubborn deterrents to new investment.
“And even as India’s gas demand has surged, the country’s notoriously byzantine business environment and more attractive opportunities elsewhere mean India’s upstream sector has remained firmly off the radar for many,” he said.
This proved to be good news for LNG. As domestic production has stalled, LNG imports have filled the gap.
In 2020, LNG demand increased by around 14 per cent to reach 25.7 million tonnes, with India climbing the ranks of the world’s most important LNG markets.
Last year’s low traded LNG prices saw India import over 9 million tonnes of spot LNG as the country’s price-sensitive buyers came in from the cold, he said.
“But this story is changing rapidly. After years of slow progress, the Reliance and BP deepwater KG-D6 fields are coming onstream, bringing over 900 million cubic feet a day into the market from its three phases combined and set to provide over a quarter of India’s total gas output by 2025,” he said.
With further supply from ONGC and Vedanta soon to come onstream and rising coal bed methane output, “India’s domestic gas sector now looks in rude health.”
With the KG-D6 deepwater projects ramping up and new output from onshore blocks in Rajasthan of Vedanta and coal bed methane projects, India’s gas producers are reversing years of decline.
Supporting this has been changes in government policy across gas pricing, marketing, and pipeline tariffs.
“A critical step has been allowing producers to freely market their gas, removing previous restrictions on how companies sold gas from production sharing contracts and opening up a far wider pool of potential buyers,” Wood Mackenzie said.
The rising availability of competitively priced domestic gas is injecting fresh life into India’s gas market.
“This is creating headwinds for Indian LNG demand. And while fears of significant reductions in LNG demand have yet to materialise with demand through May/June close to record levels, looking forward the growth in domestic gas production is set to reduce LNG demand into the fertiliser sector,” it said.
But beyond the projects of Reliance-BP, ONGC and Vedanta, India’s pipeline of pre-FID (final investment decision) domestic gas supply is perilously thin.
“While the current boom in domestic gas production will derail LNG demand growth in the short-term, the lack of significant pre-FID domestic supply and no discoveries of note in blocks awarded under the open acreage licensing rounds should ensure that beyond 2024 India’s LNG demand roars back,” it said.
LNG demand, it said, is expected to grow by around 5 per cent annually between 2024-2030, reaching almost 37 million tonnes per annum.
PTI
