GoI has employed several strategies to develop the sector, the most revolutionary being enhancing domestic E&P through New Exploration & Licensing Policy (NELP). The GoI has so far completed eight rounds of offer of acreages under NELP where in so far 235 PSC’s have been signed, out of which 168 are in operation. This has been relatively successful: after stagnating since the early 2000s, Indian gas production is expected to increase due to the large scale exploration activities taking place under NELP.

Gas discoveries have resulted in substantial increase in reserves

Till 2002, almost 70% of India’s natural gas reserves were based in Bombay High basin and the western state of Gujarat. During that time, gas reserves were evaluated at approximately 763bcm. With the launch of NELP, India’s sedimentary basins have seen increased exploration and discoveries. There have been 118 oil and gas discoveries under the PSC regime of which 82 have been in NELP blocks. Most of the success has been in the deep waters off the east coast, and the east coast is being viewed as the new gas hub.

Currently, India has total reserves (proved & indicated) of 1437bcm of natural gas as on 2010 as against 1074bcm in 2009. In 2010, country’s total gas production was around 47.5bcm. At this rate Indian gas reserves are likely to last for 29 years as compared to oil reserves of 21 years(BP Statistics).

With increase in reserves, domestic gas production is expected to get a boost

As against the current availability of ~156mmscmd (including imported LNG), gas availability is expected to increase to 255mmscmd by 2015. Also, independent projections by oil ministry expect natural gas availability to go upto 272mmscmd by 2014.

For the short term, the working group on the petroleum & natural gas sector for the Indian government’s 11th Five-Year Plan (report published in November 2006) made detailed industrywide estimates for 2008 to 2012. The report estimated gas supply at 111mmscmd in 2008 and expected it to grow to 285mmscmd by 2012.

Supply from KG-D6 remains uncertain

Out of the total domestic production of 122mmscmd of gas about 43% is produced by Reliance and approximately 57% of the gas is produced by others. RIL production from KG D6 averaged about 40mmscmd (an exit rate of 60mmscmd) in FY10, half of the official forecast peak of 80mmscmd. RIL has recently announced that it would not be able to significantly increase production in the block from the current level till next year. This is far below the allocations of over 63mmscmd of KG-D6 gas made by the EGoM to various customers in the priority sectors. For our assumption, we have included a flat production level of 60mmscmd for FY12.

Several other discoveries to enhance domestic production in future:

Production is further expected to grow driven by: i) RIL KG D6 gas ramp up to 80mmscmd, ii) ONGC’s production from KG basin, Mahanadi basin and C-Series, iii) Gujarat State Petroleum Corporation’s (GSPC) production from its KG block (Deendayal field) by FY16 and Cambay fields.