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Indian industry’s energy consumption pattern finally started shifting toward natural gas in 2009. This has led to a drastic reduction in consumption of liquid fuels like naphtha by sectors like power and fertiliser. Natural gas is a clean source of energy and is environment friendly. But the government’s efforts in the past to direct a shift in India’s energy usage pattern towards natural gas had been hobbled by the wide gap in the domestic demand-supply of the natural gas. The fact that international prices of natural gas were prohibitively high also did not help.
For example, the Union power ministry had envisaged a sizeable chunk of its capacity addition in the 10th Plan based on natural gas. However, most of these projects could not be commissioned in the absence of fuel linkage. The result was that coal continues to remain a fuel of choice for power generators and accounts for more than 50% of India’s primary energy consumption.
This trend has changed after Reliance Industries Ltd (RIL) started production from its D6 block in the KG basin in April. Fertiliser and power plants are switching to natural gas. This has helped fertiliser manufacturers to cut cost and increase production. That has in turn led to a reduction of Rs 4,000 crore in the government’s fertiliser subsidy burden. As per statistics available with the government, the fertiliser industry’s naphtha consumption declined by 64% this year.
Recently, Murli Deora, Union Minister for Petroleum and Natural Gas recently quoted that there is no gas shortage in the urea plants in the country with total capacity of more than 20 mmtpa. The increased gas supply from KG fields has helped our fertilizers plants to use indigenous natural gas rather than expensive naphtha and fuel oil. Accordingly, it was helping to reduce fertilizers subsidy. In power sector, increased gas supply has resulted in increase in power generation by around 5000 MW.
In addition to fertilizers and power sectors, the increased availability of natural gas is set to transform our city gas sector. Today, about 40 cities & towns are covered by CNG. Murli Doera quoted that "We intend to develop city gas in more than 200 more cities. Piped Natural Gas (PNG) in a greater number of big cities and metros would help us to divert LPG supplies to our rural areas".
Meanwhile, the impact of KG basin gas on the country’s industrial production became clear, with the mining sector registering double-digit growth in the last two quarters. Significantly, KG basin gas started impacting Indian industry’s energy consumption even when the D6 block was producing much below the potential. Now that RIL has ramped up production from 40 million metric standard cubic metre per day (mmscmd) to 80 mmscmd, the pace of change is expected to gain momentum.
But, there is a lot more to come. While RIL has developed only some of its gas finds, the coming decade could see other finds also being developed and put to production. If only few of the 18 gas finds can change India's energy landscape to this extent, the impact could only be a lot better when the remaining gas finds are developed and put to production. It should be noted that the proven capacities in Dhirubhai 4 is 1.7 trillion cubic feet and in Dhirubhai 2, it is around 2 trillion cubic feet. There are also other players other than RIL operating in KG basin.
Our 10in3 pick for the month of March 2010 will be a huge beneficiary out of the above developments. The company is a focussed player and provides services to the Oil and Gas majors in the country and has very bright prospects of giving multibagger returns.
- Team HBJ Capital
For example, the Union power ministry had envisaged a sizeable chunk of its capacity addition in the 10th Plan based on natural gas. However, most of these projects could not be commissioned in the absence of fuel linkage. The result was that coal continues to remain a fuel of choice for power generators and accounts for more than 50% of India’s primary energy consumption.
This trend has changed after Reliance Industries Ltd (RIL) started production from its D6 block in the KG basin in April. Fertiliser and power plants are switching to natural gas. This has helped fertiliser manufacturers to cut cost and increase production. That has in turn led to a reduction of Rs 4,000 crore in the government’s fertiliser subsidy burden. As per statistics available with the government, the fertiliser industry’s naphtha consumption declined by 64% this year.
Recently, Murli Deora, Union Minister for Petroleum and Natural Gas recently quoted that there is no gas shortage in the urea plants in the country with total capacity of more than 20 mmtpa. The increased gas supply from KG fields has helped our fertilizers plants to use indigenous natural gas rather than expensive naphtha and fuel oil. Accordingly, it was helping to reduce fertilizers subsidy. In power sector, increased gas supply has resulted in increase in power generation by around 5000 MW.
In addition to fertilizers and power sectors, the increased availability of natural gas is set to transform our city gas sector. Today, about 40 cities & towns are covered by CNG. Murli Doera quoted that "We intend to develop city gas in more than 200 more cities. Piped Natural Gas (PNG) in a greater number of big cities and metros would help us to divert LPG supplies to our rural areas".
Meanwhile, the impact of KG basin gas on the country’s industrial production became clear, with the mining sector registering double-digit growth in the last two quarters. Significantly, KG basin gas started impacting Indian industry’s energy consumption even when the D6 block was producing much below the potential. Now that RIL has ramped up production from 40 million metric standard cubic metre per day (mmscmd) to 80 mmscmd, the pace of change is expected to gain momentum.
But, there is a lot more to come. While RIL has developed only some of its gas finds, the coming decade could see other finds also being developed and put to production. If only few of the 18 gas finds can change India's energy landscape to this extent, the impact could only be a lot better when the remaining gas finds are developed and put to production. It should be noted that the proven capacities in Dhirubhai 4 is 1.7 trillion cubic feet and in Dhirubhai 2, it is around 2 trillion cubic feet. There are also other players other than RIL operating in KG basin.
Our 10in3 pick for the month of March 2010 will be a huge beneficiary out of the above developments. The company is a focussed player and provides services to the Oil and Gas majors in the country and has very bright prospects of giving multibagger returns.
- Team HBJ Capital
