The recent CSO estimate of India’s
GDP for the second quarter of 2009-10 came like a whiff of fresh air amidst the
gloomy scenario that was painted last week by the Dubai debt crisis. GDP growth has received its
surprising but much-needed impetus from a booming mining and quarrying sector,
which grew by 9.5% in the second quarter of 2009-10 as compared to 3.7%
recorded during the second quarter in 2008-09. This has largely been attributed
to a bolstering growth in output from Reliance
Industries’ Krishna Godavari (KG)
basin, whose gas output alone is expected to shore up India’s GDP by nearly 0.3% every
year.
India’s
natural gas output from domestic fields has now reportedly exceeded the
threshold figure of 100 million cubic metres per day (mmcmd) of output as KG D6 has started operating in full
swing. The upstream natural gas sector in India is a classic example of
duopoly and comprises two major players, namely RIL and ONGC. Despite
holding a couple of big road shows within and outside the country, the
much-hyped latest round of NELP could hardly make any perceptible difference in
terms of increasing the number of players in the upstream sector.
Interestingly, RIL’s latest reported
output of 50.15 mmcmd from KG-D6 fields in the KG basin surpassed 49.6 mmcmd of
natural gas output reported by ONGC,
thus making RIL effectively the
largest player in the natural gas upstream sector. The lion’s share of ONGC’s
gas output comes from its Bassein and Mumbai High fields, which reportedly
account for 42 mmcmd of natural gas output. A relatively meagre 16 mmcmd of
output has been reported from Panna/Mukta and Tapti fields of BG India, which
again is a joint-venture between the BG Group, RIL and ONGC. The residual
amount comes primarily from the Rawa field, where stakeholders include Cairn Energy and ONGC.
RIL’s natural gas generated from KG basin in Bay of Bengal has heralded almost a new era in India’s energy sector with far-reaching
implications for India’s
‘clean energy’ security, especially in view of the heightened concern for
climate change. RIL has already
developed the D-1 and D-3 fields in KG basin and is pursuing a new integrated
development plan for its R-series of natural gas finds and nine other satellite
discoveries in the D6 block. The combined potential for these gas finds and
satellite discoveries has reportedly been estimated as lying between 2-3
trillion cubic feet. Until the middle of this year, ONGC and its western assets
in the Mumbai offshore area have dominated India’s oil and gas industry.
However, ONGC is now resorting to a look-east policy as the production of
Mumbai has started deteriorating and it is planning to recoup its losses by
developing its eastern assets (oil and gas discoveries in the KG basin off the
east coast). Moreover, RIL’s D6 block development in record time has also posed
a serious challenge for the public player.
Meanwhile, ONGC
has also stated on its Web site that a draft proposal on revision of
Administered Price Mechanism (APM) gas produced by national oil companies has
reportedly been circulated by MoPNG on the basis of recommendation of Tariff
Commission (TC) for consideration and approval by the Cabinet Committee on
Economic Affairs. The TC essentially wants to bring parity between the APM
price and the price of the gas produced from KG basin by 2013 in a phased
manner. The price of natural gas, which is produced by public players like ONGC
from government nominated blocks, is governed by APM and lies well below the
free market price of natural gas. This leads to a substantial loss for them.
The loss in the last financial year itself has been reported at Rs 47 billion.
Thus, ONGC is expected to benefit
considerably if the proposal gets finally approved. Under the proposal, ONGC’s
APM gas price would be Rs 4,142 per thousand standard cubic metres (mscm)
{$2.32 per million British thermal units (mmbtu)}, up from Rs 3,200 mscm ($1.79
mmbtu). This is indeed a welcome proposition and would provide a big push to
the public sector gas producer. However, MoPNG should also get back to its
agenda of complete deregulation of prices of refined petroleum products,
especially auto-fuels like petrol and diesel; otherwise after revision of APM
gas price, CNG might just lose out on its competitive edge as a cleaner and
cheaper automobile fuel in the cities that are currently receiving it.
The development of indigenous source of cleaner and cheaper
fuel like natural gas would serve the dual purpose of reducing our unhealthy
dependence on imported oil and enhance our ‘clean energy’ security, besides
boosting our GDP. Furthermore, the
International Energy Agency also recently reckoned that there would be a
continued glut in the natural gas market, which would depress the gas price in
the near and medium term.
Thus, the international liquefied natural gas producers are
expected to look eastwards, especially towards India
and China
as first ports of call. This would provide a great opportunity to India
in reducing its dependence on highly priced imported oil and shift to an
environmentally benign fuel, and thus, save largely on its precious foreign
exchange.
Source: http://www.financialexpress.com/news/adding-kgs-to-gdp/549593/3
For further detail, please refer to
http://oilandgasindia.blogspot.com/2009/12/rils-kgd6-adding-contribution-to-indias.html