RNCOS Says Demand Exceeding Supply of Natural Gas in India

According to a latest research report by RNCOS, “Indian Natural Gas Sector Analysis”, liquefied petroleum gas (LPG) and compressed natural gas (CNG) are positioning themselves as a future fuel option for both industrial and non industrial sectors in the domestic market.

The number of LPG customers is expected to grow at a CAGR of around 6.5% to touch the mark of around 147 Million by FY 2014-end. This will result in a sharp growth of LPG demand, thus exerting more pressure on its domestic production and imports.

RNCOS report further revealed that India produced 50.9 Billion Cubic Meter natural gas in 2010, which is still far less from the actual demand in the country. This shortfall has forced the government to opt for LNG imports at comparatively higher international prices. It is expected that the shortfall will further widen in FY 2014 with an expected demand of around 327 MMSCMD and supply of just 215 MMSCMD.

RNCOS report also reveals that the pricing system in India is relatively complex due to the existence of a dual pricing system resulting in two distinct gas markets. In one market, gas produced by PSUs is allocated under the Administrative Pricing Mechanism (APM) decided by the government. In the other one, gas is produced by JVs or private companies and sold at prices agreed according to the PSCs.