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BP Bets On India’s Gas Demand
BP plc is smart to increase its presence in the global upstream gas space, as these are the types of investments that make growing a ~5.7% yield possible. BP plc has been increasingly shifting its investments towards natural gas in a bid to make its upstream production base gassier.
The general idea is that natural gas demand is set to grow at a faster pace worldwide than oil over the coming decades, and the logistical constraints placed on the natural gas industry are significantly more onerous than the logistical constraints facing the oil industry. It is relatively easy to pick up a barrel of crude oil and send it across the world via a marine crude carrier, but relatively hard to do so with natural gas due to the need to cool the gas down so it becomes liquefied.
This is primarily why LNG supplies tend to trade at material premium to gas supplies moved through pipeline systems, and why major LNG importers are always looking for ways to diversify their gas supplies via domestic investments. BP plc partnered up with India’s Reliance Industries (OTC:RLNIY) to help address this issue. Let’s dig in.
Macro overview
For starters, let’s take a look at the size of the opportunity BP plc is targeting. In BP’s 2018 Energy Outlook report, the firm notes that India consumed 5 Bcf/d of natural gas per day in 2016. India only produced 3 Bcf/d of natural gas that year, with the remainder filled primarily via LNG imports. Looking out to 2040, BP expects India will consume 14 Bcf/d of natural gas, a trajectory-based largely on what one’s assumptions for the nation’s GDP growth rate are. That seems quite reasonable based on India’s current economic trajectory; if anything, it very well might consume a lot more natural gas than that by 2040. In BP’s press release, the firm noted that India “aspires to double gas consumption by 2022.” That implies a goal of consuming 10 Bcf/d by the early 2020s. Vinny Curry Womens Jersey
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