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Feature | February 2017

Insufficient gas infrastructure suppressing demand

Deepak Mahurkar, Partner and Leader - Oil & Gas Industry Practice, PwC India

LNG capacity is expected to double by 2022, What is the projection for India´s LNG capacity in the next 5 years?
India´s demand for stranded assets and for those with potential to displace other liquids has been assessed by agencies to be about 500 MMSCMD. However, these projections are modest, when the potential of gas availability to bring to fore the latent demands is factored in. Up to 800 MMSCMD gas can be estimated in supply unconstrained scenario.

Elaborate on India´s LNG (RLNG) plans?
The end consumers have been asking for supplies. They include power and fertiliser companies, as also the CGD consumers, process industries, refineries, and such others. Hence, the market demands more LNG terminals and specially in the eastern and southern regions.

How far has we succeeded in developing gas infra?
This is a continuing agenda. Newer models of PPP pipelines are being explored. FSRU, SS LNG are in their formative stages of exploitation.

What can improve the infrastructure situation?
Gas pricing policy re-look, more domestic gas, many folds rise in LNG infrastructure will be some of the changes needed to cause supply of needed volumes in sustainable manner.

What are the hurdles in developing LNG terminals?
The risk to LNG re-gas plant developer of efficient off-take is high in India due to insufficient gas infrastructure. The tariff regulations, swap restrictions, local transaction taxes, unclear tax credit mechanisms, forex fluctuations, restricted distribution framework - all add to the risks of developer. The project development risks make it further restrictive.

In India, the gas market structure makes a favourable case for gas aggregators to put up re-gas plants. Hence inward investing independents and majors are not finding the proposition attractive. Similarly, infrastructure companies find pure tariff revenue to be insufficient to cover risks.

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