A report by EY said that the new natural gas policy that almost doubles the price of the fuel will lead to an increase in domestic production as it improves the commercial viability of marginal and deep-water fields. “Overall, the new gas pricing policy augurs well for India’s natural gas market. It is expected to increase domestic production by encouraging upstream investment.
This will improve India’s energy security and increase availability of gas for its key gas-consuming industries,” said the report. The report titled ‘Natural Gas Pricing in India: Current Policy and Potential Impact,’ said the current gas-pricing mechanism is complex and heterogeneous and not conducive for upstream players to realise commercial gains. “This has resulted in a decline in upstream investments by both public and private players in the last few years, which has negatively impacted growth in the country’s natural gas segment,” it said.
This, coupled with rising demand for gas, has increased India’s dependence on imported liquefied natural gas, making the country the world’s fourth-largest importer of LNG. Since LNG procured through both long-term contracts and from the spot market is highly expensive, India is keen to reduce its dependence on imports. Higher production will help ease the supply crunch and reduce reliance on high-priced LNG, EY said.
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