Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Natural gas: Fuel for future - I - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Mar 5, 2007

    Natural gas: Fuel for future - I

    Natural gas is the cleanest source of energy available at the disposal of the mankind. It forms 23% of the total energy consumption globally, while in India it accounts for just 9% of the Indian energy matrix. The lower share could largely be attributed to supply side constraints. The demand side of the story continues to be buoyant with the same consistently outpacing supply. Supply side constraints were largely a factor of government regulation in Exploration and Production (E&P) along with the regulations on the pricing of natural gas. With increased E&P activity due to success of NELP (News Exploration Licensing Policy), the supply side business also looks promising.

    Going forward, major gas supplies are likely to come from private players (majorly Reliance), which in turn, is likely to deregulate the pricing of natural gas in the country. The government has allowed private players to market their gas directly to the consumers; following this stance the Panna-Mukta-Tapti consortium (joint venture between ONGC, British Gas and Reliance) has started selling gas at price of US$ 4.75 per MMBTU (million metric British thermal units).

    Supply side firming up...
    With increased supplies from the private sector players, the Indian gas market is set to liberate over the next 4-5 years. Reliance is going to commence production of 80 MMSCMD (million metric standard cubic meters per day) in the Krishna-Godavari basin from FY09 onwards. GSPC (Gujarat state petroleum corporation), a government of Gujarat enterprise, is also likely to commence production thereafter. There will also be increased gas volumes via the LNG (liquefied natural gas) terminal with scaling of capacities in Petronet's Dahej terminal (increase of 20 MMSCMD) along with commencement of operation at Kochi terminal (addition of 10 MMSCMD). Increased gas availability from the cross border pipeline via Iran-Pakistan-India (IPI) pipeline (supply of 60 MMSCMD) is also likely to boost the supply side.

    A closer analysis of the above charts reveal the fact that major consumers of natural gas in the country are power utilities and fertilisers (contributing over 63% of the total consumption in FY06). Captive consumption by producers accounts for a significant 20% (majorly used for production of petrochemicals). Historically, the price of natural gas has been highly regulated by the government. The reasons for the same being inefficiency in power and fertiliser sectors on the back of subsides.

    What does it means?
    With increased availability of natural gas from various sources, it is set to increase its share in the energy matrix of India. Bulk of the supplies is likely to come from private players along with cross border pipelines (at the international prices). We are also likely to witness deregulation of the Indian gas market, though in a very gradual manner. However, we believe that the Indian gas market is not homogeneous and every industry and region has its own paying capacity, which in turn will decide the consumer mix and prices of the natural gas going forward.

    Over the next few articles, we will try to peep into the future of natural gas in the country. We will also look into various companies in the gas chain (upstream and midstream).



    Equitymaster requests your view! Post a comment on "Natural gas: Fuel for future - I". Click here!


    More Views on News

    GAIL: A Good Show (Quarterly Results Update - Detailed)

    Mar 27, 2017

    GAIL (India) Ltd has announced results for the quarter ended December 2016. reported 9.4% year on year (YoY) decline in sales, while bottom-line grew 45.4% YoY.

    ONGC: Higher Realisations on Crude Support Performance (Quarterly Results Update - Detailed)

    Mar 17, 2017

    ONGC has announced results for the quarter ended December 2016. The company has reported 9.2 % year on year (YoY) growth in sales, while bottom-line grew 197% YoY.

    Oil India Ltd: A weak quarter (Quarterly Results Update - Detailed)

    Jan 24, 2017

    Oil India Limited announced results for the quarter ended September 2016. The company has reported an 6.5% and 7.8% Year on Year (YoY) decline in sales and net profit respectively during the quarter.

    GAIL: A Robust Quarter (Quarterly Results Update - Detailed)

    Dec 3, 2016

    GAIL (India) Ltd has announced results for the quarter ended September 2016. The company has reported 16 % year on year (YoY) decline in sales, while bottom-line grew 180% YoY.

    ONGC: Lower Write-offs Support Performance (Quarterly Results Update - Detailed)

    Nov 3, 2016

    ONGC has announced results for the quarter ended September 2016. The company has reported 10.3 % year on year (YoY) decline in sales, while bottom-line grew 6.3% YoY.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    The Most Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 23, 2017 03:36 PM