According to OGJ, India had 38 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2007. The bulk of India’s natural gas production comes from the western offshore regions, especially the Mumbai High complex. The onshore fields in Assam, Andhra Pradesh, and Gujarat states are also major producers of natural gas. According to EIA data, India produced 996 billion cubic feet (Bcf) of natural gas in 2004.

India imports small amounts of natural gas. In 2004, India consumed 1,089 Bcf of natural gas, the first year in which the country showed net natural gas imports. During 2004, India imported 93 Bcf of liquefied natural gas (LNG) from Qatar.

As in the oil sector, India’s state-owned companies account for the bulk of natural gas production. ONGC and Oil India Ltd. (OIL) are the largest companies by production volume, while some foreign companies participate in upstream developments in joint-ventures and production sharing contracts (PSCs). Reliance Industries, a privately-owned Indian company, will also have a greater role in the natural gas sector in the coming years, as a result of a large natural gas find in 2002 in the Krishna Godavari basin.

The Gas Authority of India Ltd. (GAIL) holds an effective monopoly on natural gas transmission and distribution activities. In December 2006, the Minister of Petroleum and Natural Gas issued a new policy that allows foreign investors, private domestic companies, and national oil companies to hold 100 percent equity stakes in pipeline projects. While GAIL’s monopoly in natural gas transmission and distribution is not guaranteed by statute, it will continue to be the leading player in the sector because of its existing natural gas infrastructure (in 2004, GAIL piped 88 percent of the natural gas consumed in India).

There have been several large natural gas finds in India over the last five years, predominantly in the offshore Bay of Bengal. In December 2006, ONGC announced that it had found an estimated 21 to 22 Tcf of natural gas in place at the KG-DOWN-98/2 block off the coast of Andhra Pradesh in the Krishna Godavari basin. On the same day, ONGC announced another find in the Mahanadi basin off the coast of Orissa state, with an estimated 3 to 4 Tcf in place. Neither of these finds has been certified, but could potentially raise India’s natural gas reserve levels significantly. The discoveries also fit into the recent trend of large upstream developments in the Bay of Bengal, especially in the Krishna Godavari basin. State-owned Gujarat State Petroleum Corporation (GSPC) holds an estimated 20 Tcf of natural gas reserves in place at the KG-OSN-2001/3 block in the Krishna Godavari area. Reliance Industries recently secured government approval for the commercial development of the D-6 block in the Krishna Godavari basin, which holds 9 Tcf of recoverable natural gas reserves (14.5 Tcf total reserves in place). Under the development plan for the D-6 block, Reliance and its equity partner Niko Resources will spend $5.2 billion to bring the first natural gas to the market in 2009. At its peak, the D-6 block is expected to supply 2.8 Bcf/d of natural gas, which would more than double the country’s current production level.

Despite these large natural gas finds, most analysts expect natural gas demand in India to outstrip new supply in the years ahead. Indian natural gas consumption has risen faster than any other fuel over the last five years. ONGC has worked to maximize its recovery rate at the Mumbai High structure, which supplies the bulk of the country’s natural gas at present. BG International and Reliance Industries are also jointly working to expand production at the Tapti, Panna, and Mukti fields in the Mumbai High basin. The companies currently produce 300 million cubic feet per day (MMcf/d) at these three fields, although they have not announced a target production level for the expanded project plans.

Analysts expect that India’s natural gas import demand will increase in the coming years. To help meet this growing demand, a number of import schemes including both LNG and pipeline projects have either been implemented or considered.

India has considered various proposals for international pipeline connections with other countries. One such scheme is the Iran-Pakistan-India (IPI) Pipeline, which has been under discussion since 1994. The plan calls for a roughly 1,700-mile, 2.8-Bcf/d pipeline to run from the South Pars fields in Iran to the Indian state of Gujarat. While Iran is keen to export its abundant natural gas resources and India is in search of projects to meet its growing domestic demand, a variety of economic and political issues have delayed a project agreement. Indian officials have made it clear that any import pipeline crossing Pakistan would need to be accompanied by a security guarantee from officials in Islamabad. Apart from security concerns, tripartite talks in December 2006 fell apart over natural gas pricing disputes. Both Indian and Pakistani officials refused Iran’s proposed price of $8.00 per million Btu (MMBtu), stating that they would not pay more than $4.25/MMBtu (see the Iran and Pakistan Country Analysis Briefs for more information).

India has worked to join onto the Turkmenistan-Afghanistan-Pakistan Pipeline (TAP, and sometimes referred to as the Trans-Afghan Pipeline). The TAP project consists of a planned 1,050-mile pipeline originating in Turkmenistan’s Dauletabad-Donmex natural gas fields and transporting the fuel to markets in Afghanistan, Pakistan, and possibly India. India was invited to join the TAP project in February 2006, and is expected to announce its formal entry into the scheme in late January 2007, at which point it would be known as the TAPI project. Initial plans for the TAPI call for the line to have a capacity between 2 – 3 Bcf/d at an estimated cost of $3.3 billion. While India has publicly promoted this scheme while negotiations with Iran have slowed, the TAPI project faces a variety of hurdles. India has concerns about the security of the proposed line, which would traverse unstable regions in Afghanistan and Pakistan. Furthermore, a recent review of the TAPI project raised doubts that Turkmen natural gas supplies are adequate to meet its proposed export commitments (see the Afghanistan Country Analysis Brief and Central Asia Regional Brief for more information).

A third international pipeline proposal envisions India importing natural gas from Myanmar. In March 2006, the governments of India and Myanmar signed a natural gas supply deal, although a specific pipeline route has yet to be determined. Initially, the two countries planned to build a pipeline that would cross Bangladesh. However, after indecision from Bangladeshi authorities over the plans, India and Myanmar have studied the possibility of building a pipeline that would terminate in the eastern Indian state of Tripura and not cross Bangladeshi soil.

While there are various proposals under discussion for natural gas import schemes into India, there are concerns that India’s limited domestic transmission network will constrain natural gas consumption. Currently, much of GAIL’s domestic transmission system is concentrated in the country’s natural gas production centers, and there is little interconnection between regions. GAIL has announced an ambitious long-term plan to increase its transmission network from roughly 1,900 miles to 6,200 miles to establish a National Gas Grid. However, there are only a handful of actual expansion projects planned for the next few years.

Currently, India has two LNG import terminals, with several others that are planned or proposed. India started receiving LNG shipments in January 2004 with the start-up of the Dahej terminal in Gujarat state. According to EIA data, India imported 93 Bcf of LNG in 2004, reaching 222 Bcf in 2005. Petronet LNG, a consortium of state-owned Indian companies and international investors, owns and operates the Dahej LNG facility. The Dahej terminal has a capacity to handle 5 million metric tons per year (MMt/y, or about 975 Bcf/y) of LNG imports. Petronet LNG is also building a second LNG receiving terminal at Kochi, which is expected to have a capacity of 2.5 MMt/y (488 Bcf/y) when completed in 2009. India’s second LNG terminal started operations in April 2005 near Surat in Gujarat state. The facility is owned by Hazira LNG, a joint venture of Shell and Total. The facility has an initial throughput capacity of 2.5 MMt/y, with the option of expanding that to 5 MMt/y in the future.

There are several other planned or proposed LNG facilities in India. A 5-MMt/y LNG processing plant in Dabhol was originally scheduled to come online in 2001, but was subsequently delayed after former owner Enron declared bankruptcy. In 2005, the Ratnagiri Gas and Power Company purchased the Dabhol Power Company in an effort to revive the project. The Dabhol site is currently operating a power plant and an LNG regasification unit, but the LNG receiving terminal is not scheduled to begin operations until 2009. Several other companies are studying possible LNG import sites throughout India. However, these plans will largely depend on which, if any, natural gas import pipelines are completed.