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Gas Authority of India Ltd (GAIL), the largest natural gas midstream player, accounts for three-fourth of transportation volume and more than half of gas marketed in India. GAIL with its size and increasing presence across the value chain of gas becomes the proxy play for booming natural gas sector in India.

Aggressive Capex Plan

GAIL is incurring capex of ~Rs270bn from FY11 to FY13 in their NG transmission, petro-chemical, E&P and CGD business. Post capex phase, the capacity of all their segments should more than double to drive future earnings of GAIL.

Higher prices could hamper the future demand for gas. We can see that at present there are atleast 15 different natural gas prices in India. Hence, there exists lot of price differential in different end-user sectors. Infact, consumers in the same sector also are subject to different prices. To bring about uniformity in gas prices and protect consumers from excessive volatility in gas prices, MOPNG has proposed gas price pooling.

As of 2009, India has a total natural gas pipeline infrastructure of around 10,776kms with a designated capacity of ~250mmscmd.

GAIL currently owns and operates around 67% of the total pipeline network, with over 7200 km of pipeline spread across the country. Its existing gas infrastructure can support the production and transportation of 142mmscmd of gas.

GSPL owns and operates 1,635km of pipeline with a transmission capacity of 50 mmscmd, occupying second place.

RGTIL “the east-west pipeline” has joined hands with GSPL and GAIL. It has a total pipeline network of ~1440km with a total carrying capacity to transport 120mmscmd.

Poor penetration of gas pipeline network in India

Looking at the overall demand projections and even the optimistic scenario of expected domestic supplies, it is very clear that there would be a supply shortfall. Despite recent domestic discoveries, demand is far ahead of supply. Slow ramp-up of RIL gas has further increased the concerns. In the current scenario demand for imported LNG has surged in India and the capacities are coming to tap this opportunity. Therefore, there is a need to step up imports in the coming 5 years.

RAMP-UP in LNG Capacity

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

Natural gas to come under focus – Set to play a pre-eminent role in India’s Energy Mix.