No room for complacency

Difficult as it may be to believe, India could soon move from the status of a gas-deficit country "" even though gas accounts for only 8 per cent of the country's primary energy consumption, against 24 per cent globally "" to a gas-sufficient one and, according to some projections, perhaps even a gas-surplus one. Supply could equal or exceed demand if the gas finds in the under-explored basins in the country, chiefly the Krishna-Godavari basin, are as large as some reports suggest. If things go to plan, Reliance Industries will in a matter of months be producing gas at a peak of rate 80 million cubic metres of gas per day (mcmd), a figure that could be revised upwards to 120 mcmd. This would more than double the gas supply in the country. Other discoveries in the KG-Basin and in other basins by the likes of Gujarat State Petronet and Oil and Natural Gas Corporation will come through subsequently, as will gas from alternative sources like coal bed methane.

These would have a tempering effect on gas prices in the country, currently ranging from a "controlled" price of $2 per million British thermal unit (mbtu) to over $10 per mbtu for liquefied natural gas (LNG) bought in the spot market. However, the surplus situation, even if it occurs, would be a transitory situation, since excess supply would drive prices down to the level where gas demand balloons and catches up with potential supply. The lower price signal would also affect the intensity of effort to supply, which, as in the case of all hydrocarbons, is also a function of price. Factor in the (uncertain) impact of the price of competing fuels on the supply of and demand for gas, and you can be reasonably sure that any projections on gas are only indicative.

The last thing the country needs therefore is complacency merely because of the prospect of a temporary self-sufficiency. A rapidly growing economy is going to need more energy, and gas is a preferred fuel for a variety of reasons including from the pollution angle. There should therefore be no let-up in the search for exploration acreage and producing blocks around the world, nor in attempts to get gas into the country through transnational pipelines that may look like risky projects just now. With no clarity on what the interplay between supply-demand and price would yield in the country's gas economy "" the optimistic estimates of the XIth Plan working group project a gas surplus in the second half of the current Plan while the "normal" projections show a growing gas deficit "" it is best to hedge on supply risks rather than risk a shortage and lack of availability.