JAIPURIA INSTITUTE OF MANAGEMENT

APROJECT ON

MANAGERIAL ECONOMICS

SUBMITTED BY:-

ROMANA AFTABHEENA KUMARI

ANSHU AGGARWALKANAK KUMARISATYAM KUMAR

NILANSHU PANDEY

INDIAN NATURAL GAS MARKET

INTRODUCTION

Natural gas is one of the most abundant energy resources on the planet, yet more than one-third of global natural gas reserves remain stranded and undeveloped.

70% of gas traded internationally is exported by pipeline; 30% by liquefied natural gas (LNG).

Alternative technologies have been refined and developed in recent years but are yet to make serious inroads into the challenges of developing remote gas fields

TECHNOLOGIES AVAILABLE TO TRANSPORT NATURAL GAS LONG DISTANCES

CONSUMPTION TRENDS

ENERGY MIX & EMISSIONS BY SOURCES: INDIA

ENERGY MIX PROPOSED WITH 25 BCF/D NATURAL

GAS CONVERSION

12%

36%33

%

4%8%1%5%

coaloilnatural gashydronuclearwindblomass/others

ENERGY MIX TODAY

20%

39%

23%

4%

8%1%5% coal

oilnatural gashydronuclearwindblomass/others

DEMAND AND SUPPLY GAP FOR NATURAL GAS

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

0

50

100

150

200

250

300

SupplyDemand

CHANGES IN DEMAND AND SUPPLY GAP IF ADDITIONAL GAS IS ANTICIPATED (PLAN XI)

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

0

50

100

150

200

250

300

SupplyDemand

INDIA NATURAL GAS SECTOR

CURRENT PRICING MECANISM IN INDIA

Pricing of gas- Administered price mechanism

In Xth plan, under APM-gas from nominated ONGC & OIL fields priced uniformly at Rs.2,850/(SCM). uniformly for all customers except in North East, wherein the customers were charged a price of Rs.1700 per 1000 SCM

With effect from 1.7.06, the gas pricing for APM gas was changed. all available APM gas would be supplied only to the power and fertilizer sector consumers.

All other consumers would be supplied natural gas at market

related price subject to a ceiling of ex-Dahej RLN. Free market gas -JV/Private sector, re-gasified LNG etc.

DEMAND SIDE ISSUE

On the demand side, the challenge is to perform a transition to prices closer to market prices while maintaining the consumer’s competitiveness. This price, more than twice the former APM price level fixed by the government, has unsurprisingly become a reference point. Being a private sector company, RIL cannot sell gas at under cost; therefore their clients have to be able to pay cost-plus for any of their gas. Indeed gas availability and affordability for customers are crucial for gas development in India.

SUPPLY SIDE ISSUE

From the supply side, keeping artificially low APM prices often sends the wrong signals: indeed, gas prices have to be high enough in order to attract upstream investments, and cover production costs and the recovery of capital in order to limit under-recoveries from PSUs. These, unsurprisingly, complained that low prices had been resulting in substantial losses for them.

INDIAN GAS MARKET OVERVIEW

MAJOR PLAYERS

E&P -

- ONGC, OIL, RELIANCE, BRITISH GAS, CAIRN, NIKO, GSPC

LNG -

- PETRONET LNG LTD (JV OF PSU,s, GDF, ADB)

- SHELL HAZIRA LNG LTD (SHELL, TOTALFINA-ELF)

- RATNAGIRI PROJECT

GAS TRANSMISSION & MARKETING - GAIL (INDIA) LTD

REGIONAL / RETAIL - MGL, IGL, GCC, GSPC, AGC, TNGCL, PLAYERS BGL, GSPL, GGL & OTHERS

MARKET SHARE

32%

21%

24%

19%

4%

Market share

RELIANCEGAILONGCCNGOTHERS

THANK YOU…