Indian energy consumers are accepting higher international fuel rates as imports of LNG, which is three times as costly as local natural gas, are expected to jump 40% this year.
Gas distribution companies have rushed to import liquefied natural gas as Reliance's natural gas output from the D-6 field has fallen sharply, raising demand for imported fuel for cars, households and factories.
"To overcome the production shortfall at the D-6 block, Gail, Petronet LNG, Hazira LNG, RIL and GSPC will be importing around 36 additional cargoes of LNG this fiscal. Out of these, Gail will be importing 12 cargoes, one cargo every month, starting April 2011," an industry official, who did not want to be identified, told ET.
FACTS Global Energy, which monitors international trends in oil and gas, estimates that India's LNG imports in calendar 2011 would rise 40% to 12.5 million tonnes.
Customers have imported gas at prices up to $14 a unit in recent weeks, which is more than three times the prices of $4.2 for gas from Reliance. Oil industry officials said Indian consumers have also accepted higher petrol rates. Petrol demand has risen over 10% last year despite frequent increase in rates.
A key factor in boosting LNG demand is Reliance's D-6 field, which generated enormous demand before its output fell.
"A lot of investment started to pour into India's gas sector. Power producers started to set up new units and raise utilization rates of existing units; fertilizer units also were looking to do the same. Investments also started to pour into city gas projects and related infrastructure. All this brought about a significant change in the market and also created a latent demand," said Praveen Kumar, head of South Asia oil and gas team for FACTS Global energy.
Prices of liquid fuel has also risen significantly but Kumar expects demand for petroleum products to remain healthy in India.