Indian Natural Gas Price Sensitivity and Scenario Analysis

Abstract

A study was initiated to understand the entire value chain of Natural Gas in India. Natural gas industry started developing since 1960s in India. Two government organizations Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) started exploring blocks in search of more Natural Gas in India. This was called the nomination regime. Later private companies were allowed to enter into exploration through joint ventures (JVs) under pre-NELP regime. From the implementation of NELP in 1999 100% Foreign Direct Investment (FDI) was allowed in exploration business to enhance self sufficiency of India in crude oil and natural gas. Discoveries were made in Gujarat, KG basin, Cauvery basin, Tripura, Assam etc. The discovery at KG-D6 basin by Reliance Industries Limited (RIL) was very huge and had promised substantial reduction on imports by India but the sudden drop in production from the field came as a setback. Since the domestic production was insufficient to meet the growing demands of the country, India had to resort to import of natural gas. Transportation of natural gas is the major barrier in the natural gas business. Pipeline transport was the only mode developed by this industry. Accordingly Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, Iran-Pakistan-India (IPI) Pipeline and Myanmar-Bangladesh-India (MBI) pipeline were planned by India to import Natural gas to reduce the supply demand gap but unfortunately none of them took off, the first two due to geopolitics between India and Pakistan. This is when transport of natural gas in the form of Liquefied Natural Gas (LNG) gained momentum in the Natural gas industry and India started building regasification terminals on the western coast of India due to the source of supplies mainly concentrated on the western side. India hence struck a long term deal with Qatar for 20 years to source LNG from them.