Monday, July 6, 2009

India’s hydrocarbon profile sees a sea change .....

India’s hydrocarbon profile sees a sea change .....

Daily gas production has already crossed oil production figures

India’s hydrocarbon profile is on the cusp of a major change — the country is becoming more of a natural gas producer than a crude oil producer.
Consider this: While India’s current oil production is around 660,000 barrels a day, that of gas has touched 676,000 barrels of oil equivalent a day. Reliance Industries Ltd (RIL), which has started pumping natural gas from its deepwater discovery in the Krishna Godavari (KG) basin, alone accounts for around 35 per cent of this. Before production from the D6 oilfield at the KG basin started on April 2this year, the total gas production was 500,000 barrels of oil equivalent a day, which met only 55 per cent of the country’s demand.
PM S Prasad, RIL’s president, petroleum business, said the company was currently producing around 28 mmscmd, which is approximately 176,000 barrels of oil equivalent a day. “Once gas production from the KG D6 reaches the planned production level of 80 million standard cubic metre a day (mmscmd) — about 528,000 barrels a day of oil equivalent — the total gas production in the country would be about 1.5 times domestic oil production,” Prasad said.
This could still be quite a conservative estimate. Former Director General of Hydrocarbons Avinash Chandra said RIL had made several other discoveries in the same block and as and when they came on stream, the combined output would be much higher than 80 mmscmd.
To be sure, RIL is not alone in contributing to this makeover. The game changer in the energy share composition would be Gujarat State Petroleum Corporation and Oil Natural Gas Corporation’s gas discoveries in the KG basin and ONGC’s Mahanadi discovery. While estimates of the ONGC discovery are not yet known, GSPC in a recent filing to DGH said it would start producing about 38,00057,000 barrels a day of oil equivalent gas by 2012.
Coal bed methane production by Great Eastern Energy, Essar and ONGC-CIL in Asansol – Durgapur region in West Bengal and in Jharia will also bring a significant change.
Compare this with the crude oil scenario. The projected increase would come only from Cairn’s oil find in Rajasthan besides the MA field of RIL. Rakesh Jain, general manager (Energy) at Feedback Ventures, said the increase in crude oil production was not keeping pace with the gas output. This is a direct result of ageing oilfields and new discoveries being more in gas than in crude oil though the two are found together.
Official figures prove that. Director General of Hydrocarbons VK Sibal, who heads the country’s oil and gas exploration and production regulatory body, said in the production sharing contract (PSC) regime, 106 discoveries had been made so far, out of which 43 were oil discovery and 63 gas discoveries. These 106 discoveries did not cover the discoveries made by national oil companies in the nomination blocks.
Going forward, the share of natural gas in the domestic energy basket would continue to rise. “In 2008-09, gas production at 32.481 bcm (214 million barrels of oil equivalent) in the country was marginally less than the oil production at 33.507 million tonne (245 million barrels). However, with gas from deepwaters in the KG basin by RIL, the gas production in the country is expected to exceed the oil production in the current year, Sibal said.
While these are projections, the actual production is a clear signal to the future scenario. The latest figures released by the ministry of petroleum and natural gas show that during the first two months of the current fiscal, domestic crude oil production stood at 40.3 million barrels, with natural gas production only a tad behind at 5.67 billion cubic metre (bcm), translating into around 37.4 million barrels of oil equivalent.
The sharp rise in natural gas production means that the energy consumption scenario is also expected to see a sea-change. The current share of natural gas in India’s total primary energy consumption is currently only 8-9 per cent compared to the global average of 24 per cent. Prasad cited analyst reports to say that RIL’s 80 mmscmd of gas could lead to 3 per cent savings in India’s import bill.
Analysts said with the country importing 70 per cent of its crude oil requirement of about 100 million tonne, increased production of natural gas would obviously see a change in the user pattern, especially among industrial users. A case in point is the switchover seen in the fertiliser sector. Following the availability of gas from D6, fertiliser companies moved from naphtha, a refinery product derived from crude oil, to natural gas.
About 140,000 households in Delhi and 390,000 in Mumbai, which use piped gas instead of LPG for cooking, also witnessed the change. Besides, compressed natural gas has substituted diesel and petrol for use in about 430,000 vehicles in both the cities.
“In India gas consumption had been limited by availability. Coupled with availability and growth in infrastructure, gas would find diversified usage beyond conventional power and fertiliser sectors, in areas like automotive fuels, replacement of LPG cylinders, development of distributed power generation and increased usage as industrial fuel etc. Most of these usages would replace oil and oil products reducing dependence of oil,” Prasad said.
Production and availability of natural gas would also open up the option of cleaner fuel, said Sibal, though he added that a change in the user pattern depended not only on the availability of gas but also on economic viability, long-term commitment and switchover options.
In terms of price, Prasad pointed out that gas was at present priced at around $25 a barrel whereas crude oil is around $70 and this would lead to an energy-led GDP growth. Besides, natural gas does not require much processing and needs to be transported through pipelines as opposed to crude oil that requires to be processed in refineries.

Read the sentence"Daily gas production has already crossed oil production figures".....that is a great sentence......if that happens and that is what is true then we are just waiting for the news.
If we produce more Gas then Oil then future is very bright for India and only Gas production can rake India to different shepre internationally as when cars and LCV's etc starts running on Gas then our dependent on Oil will definately decrease and that will save lots of foreign exchange and the import bills will be trimmed down drastically as our biggest import bill is from one commodity and that is Oil.
As soon as that start happening we will have healthy fiscal deficit and Current account and trade deficit.Rupee will become stronger which will make FII invest more money in India.... and obvioulsy the gas distriburtion co like Gail and Gas kit making co like Minda Ind, Everest Kanto,Comfidence Petro,Aegies Logistic will be beniffited immensely.
There are other cos in this sector as well but I am not able to recall it while writing this so if someone finds it do write here.......


  1. Rajeev,

    My understanding is if 1$ = 48 INR; it makes sense for FI t invest as if they invest 1000$ then they will have 48500 INR to buy and after that if INR is becoming stronger then they will gain more.

    But one thing I didn't understand is how FI will be mre benificial if INR is becoming stronger like 1$ = 40 INR then they will have only 40000INR to buy for an investment of 1000$.

    I would request you to explain a bit on this.


  2. Dear Rajeev,

    Not to forget PSL Ltd which will also be one of the biggest beneficiaries of the gas transport.It will get a major chunk of laying out the huge pipelines that will be required to trasport this gas.
    Also i have read some provision in the budget whuich is beneficial to gas pipeline manufacturers too.

    Will recheck and update the same.

  3. Rajeev,

    Rakesh Jhunjhunwala sold his stake in indage vintners

    and promotors of kirloskar electricals have sold good quantity in kirloskar electricals.

    What is your comment on this?

    Promoter selling

    2009-07-07 Kirloskar Electric Company Ltd Vijay R Kirloskar 03/07/2009 -1500 0.0 3857087 7.63
    2009-07-07 Kirloskar Electric Company Ltd Vijay R Kirloskar 01/07/2009 - 02/07/2009 -182000 0.0 3858587 7.64


  4. Dear Dhiman,
    As you wrote if rupee is weak it is good for FII as they can buy more papers in India but weak currecy has no strength and FII consider as a weak economy.So as rupee gets stronger more moeny can pourin...
    Moreover rupee slided due to FII selling and not because of weak economy and when the flow will come back rupee will appreciate.
    And when after say 2-3-4 yrs when Gas will start getting used commercially in full fledge in India then INR will become more strong.