 "Moily says double-digit gas price will halve demand")
The share of natural gas in the total energy consumption in the country is projected to nearly double from existing 11% to 20% by 2025, he said in his keynote speech at the 2nd LNG Producer-Consumer Conference in Tokyo.
Quoting a recent study on the gas sector, he said total gas demand would be around 260-350 million standard cubic metres per day if the city gate or delivered gas prices are $5.8-6.5 per million British thermal unit.
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Currently most of the gas produced in India is sold at $4.2 per mmBtu at well-head and delivered price is up to $6.5, at rate which generates an additional demand of 204 mmscmd over and above present consumption of 145.7 mmscmd.
"In case the prices rise to $10-12 per mmBtu, potential domestic gas demand would be lower at around 180 mmscmd, generating additional demand of only 72 mmscmd, whereas at prices above $12 and up to $18 per mmBtu, the potential demand would be limited to 38 mmscmd only," he said.
The Government had in late June approved pricing of all domestically at an average of international hub rates and cost of imported LNG, which will translate into a wellhead price of $8.4 per mmBtu when implemented in April 2014. The delivered price will be over $10.
The gas price hike has not just been opposed by user industries, a petition has also been filed in the Supreme Court saying the rate increase was to benefit only a single corporate.
"On the supply side, India has large proven reserves of gas that remain unexploited. While the total proven reserves are 1.3 trillion cubic metres (tcm), what is currently exploited is only 0.04 tcm, which gives a production to reserve ratio of 1:33," Moily said.
Stating that investors had been expressing concerns about low price of gas in the country, he said the the Government had recently decided to raise the price of domestically produced gas, effective from 1st April 2014.
"This would certainly make India an attractive destination for investment in the sector," he said.
Gas demand in India, he said, is projected to rise by 94% over the period 2012-17 with compounded annual growth rate of 14.2%, whereas production is expected to rise only by 66% during the same period.
Moily said the LNG prices in the Asia-Pacific region are significantly higher than that in North America and UK/Europe.
"This is in spite of the fact that the Asia-Pacific region is the largest consumer of LNG globally, accounting for 66% of the global consumption and also hosts the major producers of LNG.
"This unreasonable burden on the buyers of the Asia-Pacific region is the 'Asian Premium'. We don't find any rationale for such a premium now," he said.