Liquefied Natural Gas Current Affairs
On June 4, 2018, India received first shipment of its so far cheapest Liquefied Natural Gas (LNG) from Russian supplier Gazprom. The LNG has been delivered at a price close to USD 7 per million British Thermal Unit (mmBtu). This price is around 1.5 USD cheaper from the LNG imported from Qatar, which is India’s oldest and largest supplier of LNG. This price is also 1-1.5 USD per mmBtu cheaper than the LNG sourced from Australia and United States.
India’s Natural Gas Production and Import
According to official data, India’s total natural gas production in 2017-18 was 32.64 billion cubic meter of which 22.01 BCM is offshore production while 10.63% is onshore production. The natural gas production in India has fallen in recent years as shown in below graphics:
However, at present, close to half of Natural Gas demand is fulfilled by imports. India’s natural gas import dependence in 2016-17 was close to 45%. At present, India is fourth largest importer of LNG.
Natural Gas is one of the key inputs for generation of power and manufacturing products in fertilizer and steel industries. The current government policy also pushes towards a gas-based economy by raising the share of environment friendly fuel in the energy basket to 15 per cent from current 6.2 per cent.
India’s Gas Deals
At present, Qatar is biggest supplier of Natural Gas to India. The recent shipment from Russia has come under a 20 year deal between India’s State-owned gas company GAIL India Ltd and Russian supplier Gazprom. A few weeks before India had also imported its first ever LNG cargo from US under a long-term import deal. The government policy is to expand the LNG import basket to meet any contingency due to geopolitical or economic reasons.
The Union Cabinet approved signing of Memorandum of Cooperation (MoC) between India and Japan on establishing a liquid, flexible and global Liquefied Natural Gas (LNG) Market.
The MoC provides framework to cooperate in facilitating flexibility in LNG contracts, explore possibilities of cooperation in establishing reliable LNG spot price indices reflecting true LNG demand and supply and abolition of Destination Restriction Clause.
The MoC aims to promote bilateral relationship between India and Japan in the energy sector. It also seeks to contribute to the diversification of gas supplies for India to strengthen energy security and provide more competitive prices for consumers.
India and Japan are major consumers of energy in world. In LNG sector, Japan is world’s largest importer and India is 4th largest importer. Under the Japan-India Energy Partnership Initiative signed in January 2016, both countries had agreed to work together in promoting well-functioning energy markets and affirmed to promote a transparent and diversified LNG market through relaxation of Destination Restriction Clause.