Natural Gas and LNG Supply and Demand in India – List of Companies and Gas Market Review

Introduction

Natural gas is rightly termed as the Fuel of the 21st Century, has emerged as the most preferred fuel due to its efficiency and cost effectiveness. The demand of natural gas has sharply increased in the last two decades at the global level. The production of natural gas is around 87 million standard cubic meters per day. The main producers of natural gas are Oil & Natural Gas Corporation Ltd. (ONGC), Oil India Limited (OIL) and JVs of Tapti, Panna-Mukta and Ravva. Even private parties from some fields produce gas under Production Sharing Contracts. Government has also offered blocks under New Exploration Licensing Policy (NELP) to private and public sector companies with the right to market gas at market determined prices. In India most of the production of gas comes from the Western offshore area. The on-shore fields in Assam, Andhra Pradesh and Gujarat States are other major producers of gas. Smaller quantities of gas are also produced in Tripura, Tamil Nadu and Rajasthan States. OIL operates in Assam and Rajasthan States, whereas ONGC is operating in the Western offshore fields and in other states. Prior to 1987, gas prices were fixed by ONGC/OIL. since 1987, the price is being fixed by Government. The Ministry of Petroleum & Natural Gas has been regulating the allocation and pricing of gas produced by ONGC and OIL by issuing administrative orders from time to time. The gas produced by the JVs and by NELP operators is governed by the respective production sharing contracts between the Government and the producers. Under the existing policy, 100% Foreign Direct Investment (FDI) is allowed for both LNG projects and natural gas pipeline projects.

Natural Gas Allocation & Supply Scenario:

As against the total allocation of around 118 MMSCMD, the gas supplies by GAIL is of the order of 63 MMSCMD spread over about 300 major consumers. Around 32% is supplied to the fertiliser sector, 41% to power, 4% to sponge iron and the balance 23% goes to other sectors. Around 8.5 MMSCMD of gas is being directly supplied by the JVs/private companies at market prices to various consumers. This gas is outside the purview of the Government allocations.

Liquified Natural Gas:
Natural gas at -1610C transforms into liquid. This is done for easy storage and transportation since it reduces the volume occupied by gas by a factor of 600. LNG is transported in specially built ships with cryogenic tanks. It is received at the LNG receiving terminals and is regassified to be supplied as natural gas to the consumers. LNG projects are highly capital intensive in nature. The LNG trade started in mid 60’s and has increased rapidly.World trade in LNG is currently in the range of 150 BCM. The major exporting countries of LNG are Algeria, Qatar, Indonesia, Malaysia, Australia, whereas, the major importers are Japan, South Korea, Taiwan and Western Europe. Geographically, India is very strategically located and is flanked by large gas reserves on both the east and west. India is relatively close to four of the world’s top five countries in terms of proven gas reserves, viz. Iran, Qatar, Saudi Arabia and Abu Dhabi. The large natural gas market of India is a major attraction to the LNG exporting countries. In order to encourage gas imports, the Government of India has kept import of LNG under Open General License (OGL) category and has permitted 100% FDI.Petronet LNG Limited (PLL), a JV promoted by GAIL, IOCL, BPCL and ONGC was formed for import of LNG to meet the growing demand of natural gas. Shell’s 2.5 MMTPA capacity LNG terminal at Hazira has been commissioned.

List of Natural Gas and LNG Companies in India

Note most Oil and Gas Majors in India are involved in Natural Gas production as well as Oil and Natural Gas are generally found together.Below is the list of companies which have major natural gas and LNG production and distribution operations as compared to crude oil

GAIL India – GAIL (India) Limited, is India’s flagship Natural Gas company, integrating all aspects of the Natural Gas value chain right from exploration to marketing.It emphasizes on clean fuel industrialization, creating a quadrilateral of green energy corridors that connect major consumption centers in India with major gas fields, LNG terminals and other cross border gas sourcing points. With a market cap Rs. 58,000 crores GAIL is expanding its business to become a player in the  International Market. . The revenue earned was 24,000 crores (2009-10) with a net profit margin of 11%.The business has achieved laying of Natural Gas high pressure trunk pipeline, LPG Gas Processing Units & Transmission pipeline network, oil and gas Exploration blocks, OFC network offering highly dependable bandwith for telecom service providers etc. GAIL has been entrusted with the responsibility of reviving the LNG terminal at Dabhol as well as sourcing LNG.GAIL is one of the best performing stocks in the Energy Industry in India in the last couple of years.It is a well managed fast growing company in one of the best sectors in India with high competitive barriers.

Oil India Ltd.– With a market capitalisation of Rs. 31,000 crores, OIL is engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of LPG. It became a wholly-owned Government of India enterprise in 1981. The revenue earned by the company was 2,400 crores & with a net profit margin of 36% in Dec ’10. Very similar in profile to ONGC it  presently produces over 3.2 million tons pa of crude oil, Natural Gas and over 50,000 Tones of LPG annually. Most of this emanates from its traditionally rich oil and gas fields concentrated in the Northeastern part of India and contribute to over 65% of total oil & gas produced in the region. It has emerged as a consistently profitable international company with exploration blocks as far as Libya and sub-Saharan Africa.

Reliance  Industries – The Flagship Company of the Ambanis and India’s largest Private Company Reliance Industries is also an Oil and Gas Giant .The Company has seen very sharp growth in the last decade and is diversifying into Retail.With a market cap exceeding $30 billion it is India’s most valued company.The company is also one of the biggest exporters in India with one of the largest petrochemical and oil refining complexes in the world at Jamnager.It recently sold a stake in its valuable Godavari Basin to BP for a whopping $7.5 billion.Extremely cash rich with a horde of more than $15 billion,it has started on empire building through ventures in Finance ( DE Shaw) ,Communicatoins (buying of wirelss broadband spectrum),Shale Gas Buys in the USA,Hospitality (Buying up stakes in Hotel Companies).

ONGC Corp – With a market cap of Rs. 235,000 crores ONGC ranks 3rd in Oil & Gas Exploration & Production (E&P) Industry globally .It cumulatively produced 803 Million Metric Tonnes of crude and 485 Billion Cubic Meters of Natural Gas from 111 fields. ONGC’s wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian multinational, with 40 Oil & Gas projects in 15 countries. The company earned a revenue of approx Rs. 20,000 crores with net profit margin of 34% in Dec’10.It holds largest share of hydrocarbon acreages in India & contributes over 79 per cent of Indian’s oil and gas production. Created a record of sorts by turning Mangalore Refinery and Petrochemicals Limited (MRPL) around from being a stretcher case at BIFR to the BSE Top 30, within a year.

Petronet LNG Ltd. –  It was formed as a Joint Venture by the Government of India to import LNG and set up LNG terminals in the country, it involves India’s leading oil and natural gas industry players. The promoters are GAIL, ONGC, IOCL & BPCL. The company has a Market cap Rs. 9,000 crores. The revenues earned in Dec’10 was approximately Rs.3,600 crores with a net profit margin of 5%.

British Gas – BG Group is a key player within the gas industry in India, with a presence in both the E&P and T&D segments. BG Group has increased its exposure in India’s growing natural gas sector by developing its upstream position through licensing rounds and acquisitions.BG Group has held a 30% interest in the Mid and South Tapti gas fields and the Panna/Mukta oil and gas fields since 2002. In 2009, the combined fields produced 13.7 mmboe.BG Group has a 65.12% controlling stake in Gujarat Gas Company Limited (GGCL), with the remaining 34.88% publicly owned. GGCL is India’s largest private sector natural gas distribution company in terms of sales volume. As at end June 2010, GGCL served more than 296 000 residential, commercial and industrial customers through a pipeline network of over 3 500 kilometres. GGCL also fuelled compressed natural gas (CNG) to more than 119 000 natural gas vehicles (NGVs) as at 30 June 2010

Indraprastha Gas (IGL) – Incorporated in 1998, IGL took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly Gas Authority of India Limited).The project was started to lay the network for the distribution of natural gas in the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors. The 2 main promoters of the company are  – GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL)

Gujarat State Petronet Ltd. (GSPL) – It is  a Gujarat State Petroleum Corporation (GSPCGSPC Group company is a pioneer in developing energy transportation infrastructure and connecting natural gas supply sources including LNG terminals to growing markets. GSPL is first Pipeline Company in India operating on open access basis and is a pure transmission network.The transmission network of the company envisages development of systematic and seamless pipeline network across Gujarat connecting various suppliers and users.