The Gas Industry

The distribution of natural gas reserves in the country is not uniform. Around 75% of the gas is produced in the Western Offshore fields, with the balance coming mostly from Gujrat and the North-Eastern States. The production of crude oil and natural gas is currently the responsibility of two public sector undertakings (PSUs), ONGC and OIL. The Gas authority of India Ltd. (GAIL), a PSU, and OIL are engaged in transportation, distribution and marketing of natural gas. The Government of India is keen to attract private investment in the production, transportation, etc. of natural gas. Contracts have been awarded for the development of some medium/smalll sized fields and it is expected that in 1997-98 about 6 MMSCMD of gas would be produced from the private/joint venture fields. Two private sector companies and the Municipal Corporation of Baroda are at present engaged in the distribution of the natural gas in the domestic/commercial sector in Gujrat and Mumbai. Two State Government undertakings are doing the same work in the North-Eastern states in a number of small towns. City gas for Delhi and a project for supply of gas to reduce pollution in and around Taj Trapezium area are being implemented.

Pricing of Gas

The price of gas is under revision for which the Government of India has set up a committee and it's recommendations are expected soon. Pending finalisation of the report, the price of gas as applicable on 31.12.95 is continuing and the current consumer price of gas is Rs. 1850 per thousand cu.m.. (US$ 1.50/MMBTU) exclusive of royalty, taxes and transportation charges. This price is lower than the CIF price of imported high sulpher fuel oil. However, the Government of India has signed production sharing contracts with multinational companies for development and production of various fields. The price of gas to be paid for gas purchased by the Gas Authority of India Ltd. From such joint ventures is linked to a basket of fuel oil. The balance gas may be marketed by the developers at negotiated prices.

Demand

Registered demand with Gas Authority of India Ltd. For natural gas in the country is around 260 MMSCMD. The Government of India has also constituted an Expert Group to assess the realistic demand for natural gas. This Expert Group has assessed the demand for gas at 146 MMSCMD by the year 2000 and 188 MMSCMD by the year 2004-5. In view of the large difference between availability and demand, natural gas supply is allocated by the Government generally based upon the Imputed Economic Values (IEVs) of natural gas use. Further, in order to utilise natural gas optimally, it is fractionated to derive the value added products and heavier fraction, C2/C3, is being used for petrochemicals industry and LPG as a domestic fuel. An allocation of 92.92 MMSCMD has been made so far. Power and fertiliser sectors get preference; allocation to power sector amounts to 42.41% and for fertiliser sector 32.05%. Natural gas to the extent of 11% is also being used as a fuel source in industries and balance for production of LPG and C2/C3.