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• Gas shortage is likely to reach its peak in 2014-15, with around 36 % of unmet demand.The Central Government should frame a transparent mechanism for pricing of natural gas that rewards producers for undertaking risky upstream business, Ernst & Young has said.“Framing of transparent pricing mechanism for natural gas is critical as it needs to reward gas producers for undertaking risky upstream operations,” E&Y said in its report ‘Synergy for Energy' released here.At present, domestically produced natural gas is priced at E 4.20-5.73 per million British thermal unit (mBtu) whereas imported gas cost three times that value.
• Some industry players say domestically produced gas is under-priced and a disincentive for putting risk capital.Dilip Khanna, Partner, Oil & Gas practice, E&Y, said: “Underdeveloped value chain and supply side constraints are severely limiting the enormous benefits that India can leverage by increased consumption of natural gas.”Power and fertilizer segments account for the majority of gas consumption in 2011-11 at 39 per cent and 26 per cent, respectively.
• “Demand for gas is expected to increase significantly, driven by increased requirement, particularly from the power, fertilizer and city gas distribution (CGD) sectors,” it said.E&Y estimated that the demand from power plants and fertilizer sector was expected to reach 207 million standard cubic metres a day (mscmd) and 106 mscmd, respectively in 2016-17. Demand from the CGD sector is projected to reach 46 mscmd by 2016-17.

GAS SHORTAGE

• Gas shortage is likely to reach its peak in 2014-15, with around 36 per cent of unmet demand. During 2013-17, total supply of natural gas is expected to increase 18 per cent to 359 mscmd in 2016-17.“India needs to develop a holistic approach by investing in all segments of the natural gas value chain to strengthen its domestic gas industry,” E&Y said. Besides, the government should give income-tax holidays for gas production.Simultaneously, subsidies on diesel and oil should be phased out to lessen the price difference between these modes of energy and Compressed Natural Gas (CNG) and piped natural gas.“The country should consider innovative ways to strengthen its liquefied natural gas (LNG) industry such as acquisition of stake in upcoming LNG export projects and/or gas fields in major natural gas exporting countries, offer equity in domestic LNG import terminals to LNG suppliers and negotiate with suppliers to link liquefied natural gas prices with global gas prices,” E&Y said.

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