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Supply crunch: govt uneasy over falling KG output

The government is in a tizzy over the continuous and sharp decline in gas production from the KG-D6 field operated by Mukesh Ambani-led Reliance Industries Ltd. Anupama Airy reports.

business Updated: Dec 21, 2011 01:04 IST
Anupama Airy

The government is in a tizzy over the continuous and sharp decline in gas production from the KG-D6 field operated by Mukesh Ambani-led Reliance Industries Ltd.

The decline in production from the field — one of the world’s largest — seems to be hitting gas allocations to crucial core sector industries including power, fertiliser and even the city gas distribution sector that includes supplies of CNG to automobiles and piped gas to households.

To arrest this “worsening situation”, the government has initiated diplomatic parleys with major gas producing countries such as Australia, Brunei, Nigeria, Indonesia, Russia besides Qatar on which India has so far been depending heavily for the bulk of its LNG imports.”

The production from KG-D6, after peaking to a level of 60 million standard cubic meters of gas per day (mmscmd) has currently come down less than 30 mmscmd even though the company had promised to achieve a peak production of 80 mmscmd during the current fiscal year.

“The supply situation (from KG-D6) has worsened further …the country is faced with a shortage of natural gas, and we (India) will have to increasingly rely on imported LNG,” said an internal note of the ministry of petroleum and natural gas.

“The ministry is making diplomatic efforts at the government level with LNG-producing countries for long-term sourcing of LNG and is also encouraging GAIl and ONGC Videsh to invest in LNG plants abroad so that equity LNG can be brought into the country,” the note said.

The ministry’s note mentioned the Russian government’s Yamal LNG project in the Arctic. Novatek, Russia’s second-largest gas company, has invited OVL to participate in the project. OVL has submitted its indicative bid, on behalf of an Indian consortium, to take 15% interest in the project. Novatek has accepted the bid and invited OVL for discussions.

Some of the recent LNG deals include that of Petronet LNG Ltd (PLL) with Mobil Australia Resources Company for long-term supply of 1.4 MMTPA of LNG; MoU between PLL, GSPC, GAIL and IOC with Gazprom Marketing and Trading Singapore for long-term LNG sourcing of 2.5 MMTPA each (total 10 MMTPA) from LNG project in the Russian Federation. The MoUs relate to supplies over a period of 25 year and expected to commence from 2016.

The ministry’s note further said that in countries like Brunei and Indonesia, “GAIL has got an offer of long-term LNG supplies from Brunei. The two sides are in commercial negotiations and hope to clinch a long-term deal.”

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