- CALCUTTA, India (UPI) --
The discovery of 7 trillion cubic feet of liquefied natural gas by Reliance
Industries Ltd. off India's eastern coast has set off speculation that
the country's energy supply economics are about to be rewritten.
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- Reliance -- India's largest privately held company --
said it had struck the huge reserve last week. According to the U.S. -based
oil consultancy firm, McNaughten, "it is the biggest gas discovery
in India in nearly three decades and one of the largest discoveries in
the world this year."
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- In terms of scale, it is roughly 40 times the size of
India's largest producing gas field, the Bombay High. In terms of production,
at a starting production capacity of 40 million cubic meters a day, it
could yield two-thirds of the country's current gas supply.
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- On a global scale, it is comparable to past gas discoveries
in the Gulf, the Sakhalin Islands and Vietnam.
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- But even as India's energy-starved market rejoices over
this massive fine, experts have begun speculating about what it will mean
to the country's energy future.
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- Will Reliance drive other LNG projects into bankruptcy?
Will it scupper plans to import piped gas? Will it replace coal as the
main fuel for power generation and oil as the main transportation fuel?
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- In terms of energy security -- India imports 70 percent
of its crude oil requirement, worth $12 billion a year -- this is good
news, according to Rajeev Thakur, energy expert with the credit rating
agency ICRA Ltd.
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- According to Oil Minister Ram Naik: "This find moves
India a step closer to securing its energy needs after deregulation."
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- India loosened controls on the oil sector in April, which
-- among other things -- allowed oil companies to enter and exit freely.
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- But according to some industry experts, Reliance's find
is big enough to unsettle the plans of many multinational and Indian oil
companies.
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- India's present gas demand is about 152 million cubic
meters per day, against supply of about 66 mcmd. The shortfall is made
up through imports.
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- Three state-owned oil companies account for 85 percent
of the supply, with the rest from other Indian and foreign oil joint ventures.
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- Thus, as Reliance opens its taps, about three years from
now, state-owned oil companies could lose their dominant position.
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- Foreign privately owned oil firms could also find it
rough. These companies include Petronet, Shell, British Gas, CMS Energy
Asia, Siemens Power Venture and Woodside Petroleum. And there are Indian
companies likely to be affected, such as Grasim Industries.
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- These companies, attracted by an open market and a projected
gas shortfall of 268 mmcd by 2012, have recently entered India with LNG
projects.
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- Another issue is the fate of India's high-profile, politically
contentious transnational gas pipeline projects from Iran, Turkmenistan
and Bangladesh. While all these projects are being held up by politics,
they might also be the first casualties of the new discovery. In total,
they were supposed to bring in about as much gas as the new find can produce
per day.
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- But optimists, such as Suresh Mathur, the chairman and
managing director of Petronet, says that the new discovery will have no
material impact on India's LNG situation. Mathur believes India will remain
gas-starved for years to come, even with the Reliance find.
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- Industry sources said it would take at least four more
such discoveries before the country achieves LNG self-sufficiency.
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- So there is much at stake -- but it is clear that the
country's energy scenario is in for a paradigm shift.
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- Newer finds of domestic natural gas could lead to large-scale
displacement of naphtha as a feedstock for fertilizer plants, and that
could reduce costs and lower petrochemical prices as well.
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- The find could also have some positive outcomes for supporters
of clean fuel. India is the world's third-largest user of coal -- the dirtiest
of all fuels -- with about 55 percent of its energy being drawn from this
resource. Oil is second, at 30.5 percent while natural gas, considered
the cleanest, accounts for only 7 percent of the energy used.
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- Any increase in LNG use, through increased supplies,
would be at the expense of coal.
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- Further, India spends a quarter of its import bill on
oil. So a significant domestic will help conserve foreign exchange.
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- Finally, it's estimated that Reliance will need $1.4
billion to extract and distribute the gas. That could mean opportunities
for financiers, infrastructure developers and energy-industry service providers.
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- Since partial funding through the markets would be required,
it could also mean another public offering from the Reliance group, which
-- with 15 million shareholders -- already has the world's largest number
of investors of any single company.
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