AsianOil: India's embrace of natural gas backfires

India has embraced natural gas in the last few years as a means of safeguarding its energy security at a low cost, even at the expense of its substantive domestic coal reserves. In the years prior to the aftermath of the coronavirus (COVID-19), this was a rational choice just on an economic basis. Global gas prices were so low that domestic coal was uncompetitive compared with international gas, and there was the added bonus that the former offered lower emissions, helping India fulfil its climate objectives. Now the situation has changed. India is reverting to coal-fired power and heating out of necessity. The price of international gas is simply too high.

The Indian government raised the price of regulated wholesale gas by 40% at the start of October. While most of this burden represented the higher price paid for LNG imports, the price to most domestic gas producers was raised to $8.57 per mmBtu, for the six-month period from October 1, 2022, from $6.1 per mmBtu in the April 1-September 30 period of this year. The cost of gas from difficult-to-exploit reservoirs, including those in deep waters or subject to high pressure or high temperature, was raised to $12.45 per mmBtu from $9.92.

The price hikes have had a clear impact on gas consumption. Demand in the April-September period of this year came to 31.48bn cubic metres, down 4.7% year on year.

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