DRIVERS OF NATURAL GAS

DEMAND
UNIT 4
 Basic Drivers of Natural Gas Demand
• Natural gas is used in industrial, commercial,
residential and electric power applications. Natural gas
demand in the United States has remained virtually flat
for the better part of a decde.
• India is and shall remain heavily dependent on coal for
about half of its primary commercial energy
requirements with the other half being dominated by
oil and gas put together. The Indian hydrocarbon
industry is currently passing through a challenging
phase. Increasing concern for energy security,
increasingly stringent environmental regulations,
emergence of natural gas and soaring crude oil and
natural gas prices have thrown up both challenges and
opportunities to the Indian oil and gas industry
 GOVERNMENT POLICIES :NELP
• Exceptionally high crude oil prices in the international market
and an almost stagnant domestic crude oil production has
caused a drain on country’s foreign exchange reserves. The
Government is committed to mitigating these challenges and
has, in fact, met with accelerated domestic exploration
through its New Exploration Licensing Policy (NELP) policy
initiative. Some of the world class oil discoveries have
recently been reported from blocks offered under the NELP
regime.
 GOVT. POLICIES :NELP
• Five NELP rounds have resulted into 110 PSCs being signed
and the Sixth round offering 55 exploration blocks is still
underway. Besides augmenting domestic reserves, India has
successfully ventured overseas to acquire oil and gas assets
and entered into long-term Liquefied Natural Gas (LNG)
contracts as measures for enhancing energy security.
 Thrust Areas for the Petroleum and Natural Gas Sector Drivers of Demand

• Exploration & Production

• Increasing domestic production by attracting investments, both private and public, in the upstream
sector. This needs to be attempted by involving industry participants in formulating an investor
friendly E&P investment regime.
• Taking all steps to increase the production from ONGC’s (Oil and Natural Gas Corporation) assets
including their maturing field.
• Refining
• Equipping domestic refining industry both existing and planned to successfully meet the challenge
of producing fuels complying with prescribed environment friendly specifications which are
increasingly becoming stringent.
• Promoting India as a competitive and economically viable refining destination to service both the
domestic as well as the export market.
• Pipelines
• Increasing the coverage of pipelines throughout the country.
• Leveraging the inherent advantages of using pipelines to transport products and enhancing the
pipeline infrastructure in product pipelines.
• Building a sound gas transportation infrastructure to support the projected growth of the gas
market. Setting up of a regulator under the Petroleum and Natural Gas Regulatory Board Act, 2006
(PNGRB Act 2006) to regulate the downstream oil and gas sector, including gas infrastructure, is
expected to provide clarity and comfort to investors interested in India’s gas transportation sector.
 Thrust Areas for the Petroleum and Natural Gas Sector Drivers of Demand

• Marketing
• Steps need to be undertaken by all stakeholders to curb adulteration.
• Maintaining viability of retail outlets by synergy among public sector oil marketing
companies in setting up of new retail outlets.
• Introduction of automation of retail outlets throughout the country.
• Alternate Fuels
• Promoting use of ethanol-blended petrol and bio-diesel throughout the country.
• Exploring and exploiting country’s CBM resource.
• Research and Development
• Promoting Research and Development (R&D) activities through provision of
incentives and funds.
• Energy Conservation
• Encouraging energy conservation through campaigns aimed at sensitising the
people about the significance of efficient use of energy.
• Addressing Workforce Challenges
• Proactive planning for sustained availability of knowledge workers for the entire oil
and gas industry.
 Global Natural Gas Scenario

• The oil and gas producers and users across the world are
sitting up and revisiting their strategies in view of the
increasing prices. The issue of energy security and broad-
basing the energy portfolio has become every country’s
priority.
• Natural gas, accounting for 24 percent of the total global
primary energy supply, is the third largest contributor to the
global energy basket. Natural gas consumption is expected
to increase at an average of 2.4 percent per year from 2003
to 2030 as per EIA, IEO 2006. Among the end-use sectors,
the industrial sector remains the largest consumer of natural
gas worldwide, accounting for 52 percent of the total
incremental demand for natural gas between 2003 and
2030. Natural gas is also expected to remain an important
energy source in the electric sector, particularly for new
generating capacity.
 Global Natural Gas Scenario

• In a global context the natural gas era has truly begun during
the last five years. With cross border gas trade becoming a
Hobson’s choice for gas producers who aspire to achieve real
business growth, the global gas markets are fast integrating,
the commercial models are undergoing rapid changes and the
market structures are evolving and fast changing. More
importantly, the Asian gas markets are leading the growth in
global gas sector, with special investment focus on countries
like India and China.
 Global Natural Gas Scenario

• The most integrated gas market today is the European market.

The effective integration of sources and markets in Europe not
only resulted in physical demand being met but also ensured
the lowest gas prices amongst the gas importing nations. The
European Union (EU) Gas Directive took decisive shape during
2002-07, driving the gas market reforms of the member
nations. Thus NATURAL GAS /LNG is one of the major source
of ENERGY of EU
 Technology Drivers : Access to supply
• Asian markets, which would provide the major platform for
growth for the global gas sector. Asia today accounts for 70
percent of the total LNG trade; Japan and Korea are meeting
their entire gas requirement through imports. Natural gas
accounts for 3 percent of China’s primary energy consumption
and 9 percent of that of India. These two countries today
account for less than 3 percent of the global gas consumption.
But, with greater integration of the natural gas markets at a
global level, the share of natural gas consumption in China
and India together is expected to account for more than 17
percent of the total global natural gas consumption by the
year 2020 as has been reported in the Energy Intelligence
Agency Global Energy Forecast 2004.
THANKS