Domestic natural gas production increased 19.5% to 2,896.7 million standard cubic metre (mscm) in December on a year-on-year (Y-o-Y) basis, mainly due to higher production from Reliance Industries (RIL) and BP’s ultra-deep-water field in the KG-D6 Block of the Krishna Godavari basin on the east coast.
The output had fallen 8.1% Y-o-Y to 28,670.6 mscm in FY21 but has subsequently increased 21.5% Y-o-Y to 25,673.9 mscm in the April-December period of the ongoing fiscal. The production also commenced on August 31 from state-run Oil and Natural Gas Corporation’s (ONGC) U1B deep-water gas well located in KG-DWN 98/2 block, which has an estimated peak production of 1.2 million standard cubic meter per day (mscmd).
The rise in domestic production coincided with a substantial jump in international liquefied natural gas (LNG) prices, resulting in import dependency of natural gas reducing from 55.3% in April-November, 2020 to 47.1% in the corresponding period in 2021. In the first eight months of the fiscal, LNG import volumes fell 2.6% on a Y-o-Y basis to 21,854 mscm. However, the value of imports in the same time frame increased 65.9% YoY to $7.8 billion. Asian spot LNG rates ranged between $30-35/mBtu throughout December, at one point touching the peak of $49.4/mBtu.
The 2.5 million tonne of crude oil produced in the country during December was 1.8% lower than the production in the year-ago period. Around 85% of the country’s crude oil requirement has to be imported. During December, the price of the Indian basket of crude varied between $77 and $77 per barrel. The average crude oil price in October was $80.6 per barrel.
The Union government has raised the price of domestically produced gas under administered price mechanism by 62% to $2.9/mbtu, effective for six months starting October 1. The ceiling price for gas produced from the difficult fields, such as RIL-BP and ONGC blocks off the east coast, was also raised by 69% to $6.13/mbtu.
Demand for natural gas in the domestic market is traditionally dependent on fertiliser, city gas distribution entities, power, refineries and petrochemicals industries.
The impact of higher LNG prices is being felt disproportionately among users, depending on factors such as access to cheaper domestic gas and government subsidies. Also, since most of the LNG imports are carried out under long-term contracts at predetermined prices, the surge in end prices in the country is much lower than the rise recorded in global spot prices.
Source:financialexpress.com