May 2007 - SIMA

iv) Overall Demand- Supply Gap (MMSCMD)
2007-08 2008-09 2009-10 2010-11 2011-12
SUPPLY
Domestic 80.54 119.98 115.97 113.09 108.30
LNG 30.45 33.60 52.50 70.00 83.12
TOTAL:
DEMAND
110.99 153.58 168.47 183.09 191.42
Demand 178.97 196.39 221.86 265.16 282.55
GAP 67.98 42.81 53.39 82.07 91.13
� It will be observed that scenario indicated above
reflects significant deficit which will have to be met
either from increased domestic supplies or LNG
import or both.
� There is another scenario where there is a possible
additional domestic supply for 2009-10 (74
MMSCMD), 2010-11 (84 MMSCMD) and 2011-12 (94
MMSCMD). If such supplies materialize than from
2009-10 onwards there will not be any deficit but
there will be little surplus. These additional quantities
have been estimated by DGH as 20, 30 and 40
MMSCMD from Reliance fields from 2009-10, 2010-
11 and 2011-12 respectively. 54 MMSCMD has been
estimated from GSPC in each of above years.
� How much of these additional supplies, which
turn the deficit into surplus, will actually fructify
is dependent on several factors yet to be firmed
up.
Conclusion
India currently produces 90 MMSCMD of Gas against
the demand of over 151 MMSCMD. For many years India
continues to be deficit in supply of natural gas as the
availability has been limited and therefore Government
had adopted the system of allocations and administered
price mechanism. With the new developments like import
of LNG and new finds of domestic gas in KG basin the
availability of natural gas / LNG is expected to go up
significantly while at the same time the existing sources
of supply from Bombay High etc. which are depleting will
affect overall availability. The significant new finds from
KG Basin yet to be monetized as the development work
at wells continues and pipeline infrastructure to bring the
gas on land is taking shape. The supplies from KG Basin
are expected from Reliance, ONGC, GSPC and British
Gas. Out of these players Reliance is expected to begin
supplies sometimes in 2 nd quarter of 2008, and if everything
goes well then the quantum of supplies that is expected
will be around 40 MMSCMD. Though Reliance have
claimed that they can supply upto 80 MMSCMD but the
same has not been confirmed by DGH. The certified
reserves for Reliance by Gaffiney, Cline and Associates
have put recoverable reserves at 11.3 TCF. This would
confirm supplies only upto 40 MMSCMD. Future factors
which will drive demand and prices would be dependant
upon (i) KG Basin supplies (ii) Long term LNG availability.
Current estimate indicate potential demand of around 20
MMSCMD for City Gas Distribution (CGD) along the
existing pipeline routes. This demand is potentially
favorable Vis-Vis alternate fuels. Spot LNG volumes in
2006 are a landmark for Indian market. The regassifiers
Petronet and Shell imported significant number of cargo’s
to meet the demand from Power, Steel and Fertilizer
sectors. The imports could have been more but for the
restricted availability of spot cargo’s which were priced
from $8 to $11 per MMBTU. It appears that in future also
India would need to compete with more attractive
markets. The challenge is to bring domestic gas to
production and source LNG on long term basis. Gas
markets would continue to be driven by existing
customers in the medium term. Power and Fertilizer will
be major sector consuming gas. LNG and new domestic
discoveries will compete for the incremental demand. Gas
will continue to be priced at a value “compared to alternate
options” till the time there is ‘gas to gas’ competition in
the market with significantly large volumes from domestic
sources. Competitive claims of other consumers both in
public and private sector may lead to some kind of
allocation by Government for Power and Fertilizer sector.
No clarity at present of additional supplies claimed by
Reliance and GSPC. Reserve certification and DGH
approval yet to happen. Producers from KG Basin may
manage production to keep prices in the vicinity of
international price. In view of overall deficit our additional
requirements may not be fully met from domestic sources.
MAY-2007/15