Lack of clarity in gas pricing is the biggest hurdle for fresh investment in the gas exploration sector. Increase in gas prices by the government will directly attract investments into exploration and result in increased output.
This was the view expressed by industry leaders and experts at an energy summit organised by the Indian School of Business here.
Karunakaran Hari, Head (Commercial) Cairn India, said gas pricing was a major driver for exploration and production companies to put in fresh investments.
The current price at which producers can sell gas is $4.2 per mmBtu. The Rangarajan Committee recommendations, which suggested uniform gas pricing based on volume-weighted average of international prices, could push up the price to $8.4 mmBtu.
Hari said studies have shown that if gas is priced at $6, there could be an additional 4.9 trillion cubic feet of gas production, as producers would be encouraged to put in fresh investments. At $8 per mmBtu, there could be additional 20 TCF of gas production and at $10 , the total additional production could even go up to20 TCF. There is a direct link between gas prices and fresh investments.
Debasish Mishra, Senior Director, Deloitte India (Energy Practices), agreed that there was no price signal for investors in India to put in fresh investments in the gas exploration sector. “No explorer will be willing to pump in investments if he is not clear at what price he could sell the gas,” he said.
He however felt that India would have to depend on coal for power production. “Shale gas will remain a local commodity. We expect gas prices could touch $11.5 and even at this level, gas-based power will be more expensive than coal, which today has a share of 72 per cent in the energy basket,” he pointed out.
N.K. Bansal, Executive Director (Corporate Planning) of Indian Oil Corporation, said investment plans in the Indian oil and gas sector for the 12{+t}{+h} Plan was Rs 436,250 crore, including Rs 311,000 crore for exploration and production.
On gas supplies, Bansal pointed out that the domestic gas demand could rise to 473 mmscmd by 2016-17, by which time domestic supplies could barely touch 209 mmscmd. He underscored the need for beefing up gas import infrastructure, including port handling and storage.