Natural gas today is almost $3/mmBtu cheaper than crude oil, but it is yet to become a favoured fuel in the country.
The reason for this, according to industry sources, is lack of awareness and skewed Government policies.
Agreeing that liquefied natural gas or imported gas may not be a substitute for crude oil, the sources say that its use for specific applications in place of crude oil could result in substantial savings.
Domestic production
Today, natural gas demand is largely met through domestic production with imports contributing around 30 per cent of the total gas consumption as compared to over 75 per cent imports in the case of crude oil.
Considering the challenges being faced by the domestic gas sources to boost output, the companies have to focus on imports. The country’s crude oil import bill has increased from Rs 3,75,277 crore in 2009-10 to Rs 6,72,220 crore in 2011-12.
Besides the high crude oil import bill, India sells petroleum products — diesel, domestic LPG, kerosene — under the public distribution system at subsidised rates.
According to information gathered from GAIL (India), the country could make a saving of around $3/mmBtu vis-à-vis crude oil imports. Assuming crude oil price at $100 a barrel, it will translate to an energy equivalent price of around $18/mmbtu (conversion factor, one barrel = 5.6 mmBtu), and average liquefied natural gas prices based on actual in recent times are around $15/mmBtu.
At present, India imports around 12 million tonnes of LNG annually. This is expected to increase to 40 mtpa in the next 3-5 years.
Assuming 50 per cent substitution of crude oil with LNG, the savings would be around $2.34 billion.
During fiscal 2011-12, the average imported gas price was $13.22/mmBtu. The average price of imported crude oil (Indian basket) for the same period worked out to $19.28/mmBtu.
“Hence, on the energy basis, the price of LNG was lesser than crude oil by around $6/mmBtu. This difference would vary from consignment to consignment,” the Minister of State for Petroleum and Natural Gas, R. P. N. Singh, had informed the Rajya Sabha on August 14.
According to the industry, if the Government looks at giving natural gas the desired preference, it would not only lower subsidy outgo, but also lead to savings on crude oil imports.
Under-recoveries
The public sector oil marketing companies have reported an under-recovery of Rs 47,811 crore for April-June 2012.
A PricewaterhouseCooper study shows that by 2015-16 natural gas is likely to replace alternative fuels such as petrol, diesel, fuel oil and LPG by around 20 million tonne annually.
This, according to the study, is equivalent to the production of 2-3 refineries and would lead to cost savings of about Rs 70,000 crore.