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 - Ready to shift gears... - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jul 15, 2000

    Natural Gas - Ready to shift gears...

    Natural gas is a colourless and odourless fuel. The chemical composition is chiefly methane. It is primarily used for heat generation in domestic, commercial and industrial settings.

    Over the last few years natural gas has gained importance as a source of energy compared to other traditional fossil fuels. The advantages of gas over its competitors are:

    • It is a cheaper fuel and has lower operating costs.
    • Results in lesser by-products.
    • Environmentally more cleaner.

    In the past, consequent to the crude oil production, a large part of the gas was flared. Till the 90's as much as 30% of the production was flared. This percentage has been reduced to 6-10%. The utilisation rates were low largely due to the inadequate availability of infrastructure. However, with the setting up of GAIL and the HBJ pipeline, commercial exploitation of the energy source has become possible.

    The cooling of the gas results in Liquefied Natural Gas (LNG). The liquefication of the gas is essential for it to be transported over long distances. In its natural state it is too bulky (volume) and makes transportation inconvenient. Liquid form makes transportation economically feasible.

    Over the last few years the consumption of LNG and LPG have grown at compounded rate of 6.5%. The drivers of growth in the past have been:

    • Increased availability
    • Increased demand from the power and fertiliser sector

    India is a power deficient country and to match demand with supply it is expected that India will need to set up 10,000 mega watts of generation capacity per annum for the next ten years. As more new projects set up LNG fired plants the demand should strengthen. The demand for LPG should also remain firm as more people shift to LPG from kerosene as a source of domestic fuel. LPG continues to remain one of the fastest growing petroleum products in the country. Thus in the future the growth will be driven by availability (supply) and not by the demand of these products.

    To overcome the shortfall in availability and reduce India's exposure to the volatility in the world fuel markets the Government is identifying new alternatives for gas exploration. The New Exploration and Licensing Policy (NELP) has been drafted to encourage exploration and production (E&P) of gas. Several new technologies for oil & gas exploration are being developed internationally such as deep-water exploration, coal bed methane (CBM) and natural gas hydrates. At last count India's reserves of natural gas stand at 692,000 million cubic meters (mcm) expected to last for a period of 28 years.

    Currently, the gas segment is partially regulated. The Government in FY98 chalked out a gas pricing mechanism, whereby the domestic price of gas was to be linked to a basket of international fuel oil prices. To enable a smooth transition to complete decontrol and gradually increase the price burden on the consumers the Government staggered the process. Under this mechanism consumer prices in FY98 were 55% of the basket price. This was to increase to 65% and 75% in FY99 and FY00 respectively.

    India's per capita consumption of gas is amongst the lowest in the world. Thus one can expect demand to continue to outstrip supply. This indicates significant demand growth potential and the industry looks to be entering its growth phase, as there is a ready market to cater to.



    Equitymaster requests your view! Post a comment on "Natural Gas - Ready to shift gears...". 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

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    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 18, 2017 (Close)