with Ankleshwar and Mehsana being amongst the earliest gas field discoveries in the country. The Gujarat region is the second largest gas-producing region in the country with a share of 10% of the overall gas production in the country. The details of

• Gas Supply
• Supply Projections
• Gas Demand

Gas Supply

Gujarat has been one of the earliest oil/ gas producing states in the country with Ankleshwar and Mehsana being amongst the earliest gas field discoveries in the country. The Gujarat region is the second largest gas-producing region in the country with a share of 10% of the overall gas production in the country. The details of various gas sources in Gujarat are provided in table below:

Exhibit: Existing supply sources in the state

Sr. No.	Supplier	Source	Volume of supply (in MMSCMD)
1	ONGC	Onshore fields located near Ahmedabad region & Ankleshwar / Surat region and offshore (JV) fields in the Arabian Sea (Western Offshore – including PMT supplies)	20.00
2	GSPC/ Niko Resources	Hazira gas field	00.60
3	Cairn	CB-OS2 field in the Cambay basin	00.80
4	Petronet LNG Limited (PLL)	LNG from RasGas, Qatar	08.00
5	Shell, Hazira	LNG spot cargoes	00.00
6	RIL	KG D6 Gas	26.00
	Total		55.40

Source: CRISIL Analysis

Reliance Industries Limited is the largest existing gas supplier to the state. ONGC is Second largest and is operating gas fields in the Mumbai offshore and the Gujarat onshore regions and supplies natural gas to GAIL who markets it to the final consumers.

The other suppliers include GSPC and Niko resources producing gas from its fields located in Hazira; Cairn Energy supplying gas from its offshore fields -- Lakshmi and Gauri and the Cambay basin. Both GSPC and Cairn directly market the gas produced from their fields to the final consumers in the state.

Gujarat in addition to having access to domestic gas also is the only state in the country to have LNG import facility at two locations viz. Dahej & Hazira.

• Petronet LNG Limited (PLL) commissioned its Dahej terminal in April 2004 with an initial capacity of 7.5 MMTPA. PLL is sourcing its supplies from Qatar (RasGas) through a 25-year long-term contract for 7.5 MMTPA of LNG. PLL sells gas to GAIL, IOCL and BPCL that sell to consumers in Gujarat and other Northern States.
• Shell-Total combine commissioned the LNG regasification terminal at Hazira, Gujarat with an initial capacity of 2.5 MMTPA in April 2005, now expanded to 3.7 MMTPA throughput capacity. Shell Gas B.V holds 74 % of equity in the Hazira companies, while Total Gaz holds 26%. Hazira LNG has entered into contracts with both Gujarat State Petronet Limited & GAIL for transporting gas within Gujarat. Shell currently sells majority of its RLNG in Gujarat and plans to reach the markets of North India and Maharashtra once it finalises the consumers and gains access to the required transportation infrastructure.

In addition to the imports of LNG and domestic gas in Gujarat is being delivered from new finds in KG Basin, ONGC’s recent gas discoveries including Vasai West and NMT-2 in Western Offshore would flow into Gujarat further consolidating the State as a major consumption and transit point.

Supply Projections

The supplies of RLNG and new gas find volumes are likely to augment the availability of natural gas in Gujarat. New gas supplies are expected from the following sources:

• Petronet LNG Ltd, Dahej: PLL has been operating the LNG regas terminal since March, 2004. Currently, the terminal is operating at full capacity and is also bringing in spot cargoes in addition to the long term contract. RasGas and PLL have also contracted for additional 2.5 MMTPA, called Tranche A which would be available from end of FY2010. PLL is already enhanced the capacity of its Dahej terminal to 10 MMTPA to cater to the demand in Northern & Western India.
• Shell, Hazira: Shell is likely to increase supplies to a level of 10 MMSCMD or 2.5 MMTPA by FY09 and 3.5 MMTPA from FY2010 onwards and most of it will be consumed in Gujarat.
• Reliance Industries Limited (RIL): Reliance is expected to supply around 30 MMSCMD of natural gas to consumers in the State (including its own units in Gujarat). Any decline in the supply from the existing discovery of Reliance is likely to be reinstated from the other discoveries announced in the same block.
• Gujarat State Petroleum Corporation (GSPC): GSPC has a large discovery of natural gas from its KG basin shallow water block KG-OSN-2001/3 awarded during NELP III. The estimated in-place reserves were initially put at around 20 tcf by GSPC and in December 2010, Director General of Hydrocarbon has approved 2 TCF FDP. Considering the current state of progress the gas production would commence soon.
• GSPC LNG Terminal: GSPCLNG terminal is likely to come-up in Mundra and be commissioned by FY2014 to take advantage of the increased supplies of LNG in the world market by that time.
• Cairn Energy: Cairn has discovered CB-X and Ambe fields in the state of Gujarat, which are estimated to supply 1.2 MMSCMD by FY10 for a period of 7 years.
• Coal Bed Methane (CBM): The region of North Gujarat from Vadnagar to South of Ahmedabad has vast coal deposition at depths varying from 800-1300 meters. The total reserves of coal are estimated at 60 billion tonnes. CBM recovery from these coal seams appears to be a commercially viable proposition vis-à-vis mining.

The exhibit below provides the gas supply projections from FY2009 to FY 2020:

Exhibit: Supply projections for Gujarat

MMSCMD	2009	2012	2015	2020
ONGC - Onshore	5	4	3	1
PMT / HBJ Volumes	9	6	4	2
PLL	13	18	18	18
Shell	6	8	8	8
RIL	15	30	30	30
GSPC - KG Basin	0	8	8	8
GSPC – LNG	0	0	13	13
Cairn	0	1	0	0
CBM	0	3	3	5
New Gas finds	0	0	6	16
Total	47	78	96	101

Source: CRISIL Analysis

Gas demand

Gujarat by far is the most developed gas market in the country. Currently, Gujarat accounts for approximately 32% gas consumption in the country.

The per capita consumption of natural gas in India is only around 29 SCM as compared to the world average of 363 SCM. There is clear room for growth even accounting for the fact that gas may not be able to displace coal in the power sector to the extent it may have in other developed countries.

Broadly, the following factors are expected to drive the increased consumption of natural gas in India:

• Macroeconomic setting and policy making
  Overall macroeconomic conditions in the economy will set the demand for energy and the growth of energy demand. India has been enjoying higher growth rates since the early 1990s because of economic reforms. This growth will contribute to greater demand for energy.
• Cost of gas vis-à-vis alternate liquid fuels
  With the recent increase in crude oil prices, the prices of alternate liquid fuels like naphtha, fuel oil, Low Sulphur Heavy Stock (LSHS), etc. has increased substantially. In comparison, the gas prices have remained steady and less volatile. Moreover, the difference in the price and cleaner nature of gas with respect to liquid fuels is likely to spur growth in gas consumption in all the sectors.
• Growth of end-user segments
  The robust growth outlook for the Indian economy and the resultant increase in the end–user consumption of the natural gas is expected to drive the natural gas market in the future.
• Regulation
  The PNGRB Act, 2006 is an overarching framework that would attract, enable and sustain much needed capital into the entire sector. It will also take the shape of protecting consumer interests and those of industry participants. With regulatory clarity, it is envisaged that gas sector would develop in a big way with a number of cities being connected with gas pipelines and city gas distribution networks supplying natural gas to consumers.
• Environmental concerns
  With India becoming a signatory to the Kyoto Protocol, there is an emphasis on reduction of green house gas emissions. Gas is preferred as it has lower carbon emissions for per unit of energy generated. The promotion of gas can earn certified emission reduction credits and CDM project developers can gain monetarily from such projects / transactions.
• New uses of Natural Gas (eg. co-generation)
  Natural gas can be considered as “single fuel solution”, replacing power and fuel for heating and cooling requirements. Use of gas in co-generation of power, refrigeration and heating (CCHP- Combined Cooling, Heating & Power) gives 75% to 90% thermal efficiency. Given the economic advantage in terms of efficiency, industrial and commercial institution are likely to switch to the single fuel application, once natural gas becomes available.
The demand for gas can be categorized as under;
• Existing gas demand: The existing gas demand is defined as the present demand for natural gas by the entity based on current supplies from all sources or its gas allocation, whichever is higher.
• Switching gas demand: Switching gas demand is defined as the demand resulting from switching of units operating on alternate fuels such as Naphtha/ Fuel Oil/Light Diesel Oil to gas when the same is made available at economical price. This demand is expected to materialize gradually over the forecast period.
• Gas demand from capacity additions: This is the gas demand from green field / brown field capacity additions in various sectors and has been estimated on the basis of the demand/ supply outlook for the sector till 2020. This includes demand from capacities that have been announced and are expected to come up to meet the demand / supply gap in the sector.

The projections of gas demand is depicted in following exhibit.

Exhibit: Gas Demand build-up in Gujarat FY2009-2020

MMSCMD	2009	2012	2015	2020
Power	19	32	43	43
Fertilizer	10	12	12	12
Industry	35	49	53	73
Distribution	7	10	14	19
Total	70	102	122	146

Source: CRISIL Analysis