Domestic natural gas production increased 21% to 16,890.9 million standard cubic metre (mscm) in the first half of the ongoing fiscal on a year-on-year (Y-o-Y) basis, mainly due to higher production from Reliance Industries Ltd (RIL) and from 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% YoY to 28,670.6 mscm in FY21.
Production also commenced on August 31 from state-run Oil and Natural Gas Corporation’s (ONGC’s) 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).
Thankfully, the rise in domestic production coincided with a substantial jump in international LNG prices, resulting in import dependency of natural gas reducing from 54% in April-September, 2020 to 49% in the corresponding period this year. In the first six months of the fiscal, import volumes of liquefied natural gas (LNG) fell 0.8% on a Y-o-Y basis to 15,678 mscm. However, the value of imports in the same time frame increased 71% YoY to $5.3 billion.
Asian spot LNG rates had climbed from $6.9/ mbtu at the beginning of the fiscal to $17.7/mbtu at August-end. Prices crossed $33/mbtu in early October amid low stocks, high demand and limited supply of fuel, and are currently trading at around $35/mbtu.
Demand for the 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 are 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 are much lower than the rise recorded in global spot prices.
The Union government recently raised the price of domestically produced gas under 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. The 14.9 million tonne (MT) of crude oil produced in the country during the month was 3.2% lower than the production in the year-ago period. Around 85% of the country’s crude oil requirement has to be imported.
Output by ONGC during April-September, 2021 was 9.7 MT, 4.4% lower than the production during corresponding period of last year, mainly due to the impact of coronavirus and rainfall on operations. Crude oil import increased 12.9% to 100.7 MT in the first half of the fiscal while import value went up 127.7% to $51 billion in the same period.
The price of Indian basket of crude is currently at around $82/barrel, up from $69/barrel in mid-August, supported by global demand recovery and limited production from major oil exporting nations.