New Delhi: India’s dependence on imported gas as a fuel will grow, with the country’s liquefied natural gas (LNG) regasification capacity expected to more than double by 2025, rating agency Icra said in a report on Tuesday.

A regasification terminal converts LNG to gas before passing it on to customers.

In addition, India’s natural gas production is expected to increase 52% by then from the present level of 92 million standard cubic metre per day of gas (mscmd).

The projection assumes significance as India has four regasification plants with a total capacity of 25 million tones per annum (mtpa). Already, with a gas consumption of 51 billion cubic metres (bcm), India is the world’s 15th largest consumer and the fourth largest importer of LNG, sourcing 18 bcm.

“Based on relatively ‘firm’ regasification terminals plans in India, Icra projects the regasification capacity to significantly increase to around 47 mtpa (approximately 165 mscmd) by FY20 and around 55 mtpa (approximately 190 mmscmd) by FY25,” the report said.

India’s energy import bill of around $150 billion is expected to balloon to $300 billion by 2030. India, the world’s fourth largest energy-consuming country, imports 80% of its crude oil and 25% of its natural gas requirements. The country trails the US, China and Russia, accounting for 4.5% of global energy consumption. There has been a waning interest in the Indian hydrocarbon sector, with around 70% of Indian basins remaining largely under-explored.

“Post the decline from 97 mscmd in FY14 to 92 mscmd in FY15, the domestic natural gas production from existing or already-discovered fields is projected to increase to around 130 mscmd by FY20/21 on the back of likely commencement of GSPC’s Deen Dayal block and ONGC’s KG basin blocks along with marginal increase in RIL’s KG production. Icra projects the domestic production level to increase further to around approximately 140 mmscmd by FY25,” the report said, while cautioning that “the actual offtake could critically depend upon the price competitiveness”, at a time of depressed oil prices.

This comes in the backdrop of India adopting a more transparent and market-oriented regime for hydrocarbon exploration and production, with the government announcing the move to a revenue-sharing model. The change reorders incentives for hydrocarbon exploration in the country. The current production-sharing contract (PSC) framework allows for cost recovery by exploration and production (E&P) companies before they pay the government its share of revenue.

“A key challenge for the new terminals is their ability to tie up LNG supplies through long-term contracts at competitive prices and the competition faced by RLNG from liquid fuels. The risk related to tie up of LNG is partly mitigated by the fact that the global LNG supply demand balance is expected to ease from FY16 onwards,” the Icra report added.

This comes at a time when the Indian consumers have only taken 68% of the annual gas supplies contracted by Petronet LNG Ltd from Qatar as they perceive the price to be high. Petronet’s liquefied natural gas (LNG) contract is to import 7.5 million tonnes per annum (mtpa) from Qatar’s RasGas Co. Ltd for a period of 25 years. Of these, while 11 years have passed, the buyers’ aversion stems from the price of around $12.5 per million British thermal units (mBtu) compared with the spot market price of around $8 per mBtu.

“Asian spot LNG prices, currently at $8/mmbtu, have recovered from their earlier lows. However, the start up of Japanese nuclear plants could reduce the demand of LNG which could have a dampening effect on the spot prices. Additionally current low crude oil prices at $48-50/barrel would also weigh on spot gas prices,” the Icra report said.

Driven by the National Democratic Alliance (NDA) government’s desire to secure energy assets in a low price regime, Indian state-owned firms too have stepped up their acquisition efforts.

Petroleum product consumption in India has also been growing. According to the oil ministry, it grew 3.14% to around 163.17 million tonnes in 2014-15.