India’s domestic natural gas output falls by 10% in July 2020

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India’s domestic natural gas production fell by 10.1 per cent year on year to 2,435 million metric standard cubic metre (MMSCM) in July 2020. The 2.6 million tonne (MT) of crude oil produced in the country during the month was also 5 per cent lower than the production in the year-ago period.

This coincides with domestic natural gas consumption falling 14.3 per cent y-o-y to 13,536 MMSCM in Q1FY21 when the lockdown to contain the spread of the coronavirus pandemic was implemented. Domestic production fell 15.5 per cent annually to 6,785 MMSCM while imports dropped 12.5 per cent to 7,003 MMSCM in the three-month period.

According to Care Ratings, the gross production of domestic natural gas will fall by 10.6 per cent during FY21 as “no company would aggressively want to increase production or get into high risk projects with such a low gas price”. The current price for gas produced from local fields has been revised to an all-time low of $2.39/mmBtu by the government, which is even below the breakeven point for most fields, the agency noted. Indigenous natural gas production caters to about 51 per cent of the country’s requirements.

Demand for natural gas in the domestic market is largely dependent on the fertiliser (28 per cent), power (23 per cent), city gas distribution entities (16 per cent), refineries (12 per cent) and petrochemicals (8 per cent) industries. Consumption of natural gas is seen to fall by 3.2 per cent by the end of FY21 as demand is likely to be subdued on account of a steep decline in the sale of compressed natural gas (CNG), weaker demand from gas-based power plants and a cut in refinery throughput by oil refiners.

The country aims to increase the share of natural gas in its energy mix to 15 per cent by 2030 from the current level of about 6 per cent. In July, the ministry of petroleum and natural gas held several meetings with global entities on the country’s policy drive to attain a higher share of natural gas.

Petroleum minister Dharmendra Pradhan recently had an online meeting with Fatih Birol, executive director, International Energy Agency, to discuss the country’s expanding gas infrastructure and the efforts being taken towards free market pricing of natural gas.

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