Domestic natural gas output falls 9 per cent in November

Domestic natural gas production fell 9.1% year on year (YoY) to 2,333 million metric standard cubic metre (mmscm) in November. The 2.5 million tonne (MT) of crude oil produced in the country during the month was also 4.5% lower than the production in the year-ago period. Indigenous natural gas production caters to about 51% of the country’s requirements, while around 85% of the country’s crude oil is imported.

Domestic natural gas production fell 12.2% YoY to 16,373 mmscm in the April-October period, as operations became increasingly unviable for energy production companies with the government lowering selling prices. As noted earlier by Care Ratings, the gross production of domestic natural gas will fall 10.6% 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 $1.79/mmBtu by the government, which is much below the breakeven point for most fields, the agency pointed.

Domestic natural gas output fell 2.8% YoY to 31,168.4 mmscm in FY20, reversing the growth trend recorded since FY18. Demand for the natural gas in the domestic market is traditionally dependent on the fertiliser (28%), power (23%), city gas distribution entities (16%), refineries (12%) and petrochemicals industries (8%). However, due to fewer cars on roads during the coronavirus-induced lockdowns, CGD consumption has been less than refineries in the current financial year.

Domestic production has been falling with the ageing of existing fields and muted response from the industry to take up new projects, mainly due to lack of adequate incentives. Other reasons for lower output in FY20, as admitted by the government to a parliamentary committee, include lack of buyers, inadequate evacuation infrastructure and other technical constraints in hostile geographical terrains. The country aims to increase the share of natural gas in its energy mix to 15% by 2030 from the current level of about 6%.