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India becomes second-fastest growing gas market; $30 billion war chest ready for supply boom
India has become the second-fastest growing natural gas market globally as a result of a sustained policy push by the government that is aided by firm investment plans to the tune of a whopping $30 billion for production, import and distribution infrastructure.
“India is second-fastest growing gas markets globally. In recent years, there has been a significant policy push by the Indian government to improve infrastructure, which has included giving new licenses for city gas distribution, raising pipeline tariffs for long-haul pipes, and banning more polluting fuels like fuel oil and pet coke,” Morgan Stanley said today.
The multinational investment bank added that India is investing significantly to meet its growing demand. “The county has over $30-billion Capex allocated to the creation of gas import and distribution infrastructure and the revival of domestic gas production from the financial year 2019-20 onward for pipelines, city gas infrastructure, fuelling infrastructure, and doubling its LNG import facilities,” it said in a report.
The country has five new terminals under construction with 25.5 million tonne per annum of capacity that are likely to be completed by 2020. These terminals will ease import constraints in the existing western and northern market and also make gas available in the southern and eastern parts of the country. India’s LNG demand is expected to grow from 22 million tonnes (MT) in 2018 to 31 MT in 2025 at a compounded annual growth rate of 4 percent.
India, as a gas market, is extremely price-sensitive, with demand fluctuating between LNG, propane, and fuel oil, depending on the economics, especially for power and industrial gas usage. With gas prices set to remain low structurally after nearly 20 years of oil parity economics, the potential for this market to use gas could be as high as $12 billion to $15 billion by 2025, according to the report.
The banks also pointed out that cheap gas is a boon for Indian consumers at a time when gas will likely to form a big part of the solution to control fossil fuel pollution, with nearly 177 cities set to have gas networks by 2025.
“Gas infrastructure will cover 2.2 times more people or 50 percent of the population in five years, and five times more households will have access to gas. We estimate this will drive investment of about four times the current market cap of listed city gas players. By 2024, we see India’s gas penetration rising two times to about 12 percent, the equivalent of China in 2006,” it said.
The report also pointed out that despite significant growth, India is still a decade behind China – the fastest-growing gas market — on gas infrastructure and penetration, with current gas penetration levels similar to China in 2004. China is expected to maintain double-digit growth on gas consumption in 2019-21, supported by the government’s strong initiatives to improve air quality.
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