For gas, turn to the US

The development of unconventional oil and gas in US has had a significant impact on oil and gas markets across the world. It has changed the rules of LNG trade, with geopolitical and economic implications. With the world’s third highest crude oil production at 7.7 million barrels/day and a gas output of nearly 1,883 mmscmd (million standard cubic metres per day), the world’s largest consumer of energy is now being talked about as a possible net exporter of energy by 2032.

India with its growing middle class, increased industrialisation and the spiralling demands on energy, is looking to learn from, collaborate and partner with the US.As a non-FTA country, India has successfully inked a gas trade agreement with two terminals on the eastern sea board. We are optimistic that this would be expanded to include other terminals as well.

Technology advantage The US has certain inherent advantages which has enabled the meteoric rise of unconventional oil and gas supplies. Some of these such as sparsely populated land acreages and availability of large quantities of water cannot be easily replicated. Others such as a policy which encourages private investment towards development of innovative exploration technology, can be adapted to leverage regional strengths and nuances. India and the US have complementary strengths in manpower expertise, technology research and customisation, presence of service provider companies and smaller and medium enterprises. This portends an almost unlimited potential for the countries to enter into mutually beneficial partnerships.

India’s energy sector has been in a constant uphill struggle to address the challenges of adequate fuel supply, enabling transport infrastructure and creating a policy framework which encourages a much higher domestic and foreign investment. While we look towards taking our engagement with US to a new orbit, our efforts towards strengthening the national energy ecosystem remains a matter of priority. In this regard there is a renewed thrust towards creating a national gas grid, which would enable a price discovery mechanism based on supply-demand fundamentals.

Price advantage The emerging hydrocarbon landscape across central Asia and Africa makes it possible for India and the US to explore joint venture opportunities in developing oil and gas assets in these economies.

This along with securing more non-FTA approvals and collaboration in technology transfer and infrastructure development could be considered as discussion points at the forthcoming Indo-US energy dialogue.

The US-based Henry Hub, which is currently at a price band of $3-5/mmbtu, gives a clear and competitive advantage against East Asian landed LNG prices which are nearing $20/mmbtu. Japanese energy demands post Fukushima, JCC indexation of LNG and the increased focus on cleaner gas based power across Asian countries is expected to keep the price of LNG high in the coming years. Hence, the need for a special long-term arrangement with the US.

India's LNG needs are largely met by just a few countries in the middle-eastern region.

The US with its existing LNG infrastructure of 12 terminals, backed up by robust gas pipeline network, provides for a lucrative export market for energy deficit countries like India.

The developments over the past decade in the US energy sector reaffirms our belief in the country’s ability to meet the world’s energy challenges.

(The writer is the Secretary-General of FICCI)