Natural gas flowing from Reliance Industries’ operated KG D-6 block has fast emerged as an alternative to spot Liquefied Natural Gas (LNG) in the country. It is the supply of gas from prolific KG D-6 block due to which the spot market of LNG is continuously shrinking. This could well be estimated from the fact that the business has faced beating in last one month at the Hazira LNG terminal of Shell and Dahej LNG terminal of Petronet. Of late, KG D-6 gas has replaced the spot LNG to a great extent and bridged the demand-supply gap of natural gas in the country. RIL operated KG D-6 is now producing 60 million standard cubic metre of natural gas every day (mmscmd) and has almost wiped out the spot LNG demand in the country.
Most of the power and fertilizer companies have diverted their attention from the spot market of LNG to KG D-6 gas as the domestically produced gas is available at far cheaper rate. This has resulted in sharp decline of LNG demand which was used in the absence of domestic gas supply. This is evident from the fact that before the allocation of KG D-6 gas, RIL itself was consuming almost 4 cargoes of LNG every month. According to the government sources, not even a single spot LNG cargo has been received at Hazira and Dahej terminals during last one month.
Chief Executive Officer and Managing Director of Petronet Mr. P Dasgupta said, "No one is interested in spot LNG deal today. The last LNG spot cargo had arrived in November, 2009. The demand (for spot LNG) can only be rekindled if new power and fertilizer plants will be commissioned. The present demand for the gas is being met by KG D-6 gas and the long-term import of LNG by Petronet."
According to the sources, the future price of LNG is about $8.2 per million british thermal unit (mmbtu), whereas KG D-6 gas is available at $4.20 per mmbtu. As mentioned earlier, till December, last year even RIL was buying spot LNG from Hazira terminal every month for its Jamnagar Refinery. After the allocation of gas from KG D-6 gas, the company has closed the spot LNG purchase. Similarly, other companies too, which have been allocated gas from RIL’s KG D-6 block, have stopped buying LNG from spot market. A Shell India official admitted that spot LNG business has slowed down; but, refused to divulge the details of decline in number of cargos.
Prior to KG D-6 gas supply, total gas supply in the country was staggering at around 110 mmscmd, including the long-term LNG sourced by PLL and Shell, as against the demand of about 175 mmscmd. Remaining gas demand was met through spot LNG. With the production of 60 mmscmd gas from KG D-6 field, the present demand of gas in the country is satisfied. However, the gas demand in the future is likely to rise again in the coming years as the domestic supply is unexpected to match the pace of growing energy demand of the nation.
Contribution from Business Standard
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