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September 01, 2018

Sector Report: Natural Gas

This report is available to users in India for ₹40,000 + applicable taxes

 

Table of Contents

 

  • Summary
  • Overall
  • Fertiliser
  • Power
  • City Gas distribution
  • Petrochemicals & Refineries
  • Domestic supply
  • Liquefied Natural Gas (LNG)
  • Long-term outlook
  • Investments

 

Summary

 

Production to rise in fiscal 2018; domestic gas prices to hover around $3 per mmbtu on global cues

 

Gas prices in India are determined based on natural gas prices prevailing at the international hubs, as per an approved pricingformula. CRISIL Research believes gas prices will remain under pressure at about $2.8-3.2 per mmbtu (million metric Britishthermal units) in fiscal 2019, given the oversupply in the global LNG market.

 

Global energy prices have been under pressure since their mid-2014 highs. The primary competing fuel for natural gas, crudeoil, saw its price plummet from $99 per barrel (dated Brent) in 2014 to just $34 per barrel in January 2016. Gas demand fromthe European market has also been tepid, given the increasing penetration of solar and wind energy and the availability ofcheaper coal. Crude oil prices are expected to move upward, but remain at sub-$70/bbl in fiscal 2019, and their medium-termprice outlook remains stable.

 

In the latest half-yearly price revision, for the period from April 2018 to September 2018, domestic gasprice has been increased from $2.89 per mmbtu in October, 2017 -March, 2018 to $3.06/mmbtu on a gross calorific valuebasis. Outlook on domestic gas price

 

Similarly, spot LNG prices are expected to remain under pressure over the next two years, because of sluggish demand andrising supply, resulting in oversupply in the global market. We expect prices (delivered ex-ship) to hover around $7.0-7.4per mmbtu in fiscal 2019.