After witnessing a decline till 2016-17 due to less than expected output from the Krishna Godavari (KG) basin and ageing wells, the country's natural gas production has bounced back, registering five per cent growth in April-August of FY17.
Natural gas output is expected to expand in the coming years. It is expected to touch a level of 36 billion cubic metres (bcm) by 2020, according to a report by Care Ratings.
The country plans to increase its gas usage in the energy mix to 15 per cent from the current 6.5 per cent. The global average for gas use in energy is 24 per cent.
The rise in production would also be supported by a number of investments in exploration and production segments. As per the estimates by the Ministry of Oil & Gas, there is scope of $300 billion worth of hydrocarbon projects in the country.
Reliance Industries Ltd along with its partner BP Plc, has decided to invest $6 billion for the development of new R-series gas fields in the KG-D6 block. Similarly, Oil & Natural Gas Corporation (ONGC) has plans to invest $11 billion in exploration and development of blocks in the KG basin, which is expected to increase gas production by around 30 per cent over the next three to four years. Also, ONGC has signed an agreement with the Andhra Pradesh government to invest around Rs 78,000 crore in the KG basin for producing hydrocarbons by 2021-22.
According to the Care Ratings report, the demand for natural gas in the country is predicted at 57.4-57.6 bcm by 2020. The demand of natural gas is likely to depict a strong growth with major demand from power and fertiliser sectors. City Gas Distribution (CGD) sector is expected to grow faster and its share in gas consumption will continuously increase over time. The government, along with cash-rich PSUs, are jointly investing over Rs 50,000 crore to revive closed fertiliser plants and setting up gas pipelines which would make India self-sufficient in urea manufacturing. Natural gas is used as a feedstock for urea manufacturing. There are 30 urea manufacturing plants, out of which 27 run on natural gas and according to the second phase of 'Gas Pooling Policy', the remaining three plants will also be converted to gas-based plants.
Imports in the form of LNG (liquefied natural gas) will continue to grow at steady levels to the extent of plugging in the structural gap between gas demand and domestic production. Currently, all re-gasification facilities are concentrated on the country's western coast. With the proposed new plants on the eastern coast, the disparity in LNG supplies is likely to be diminished.