• Currently natural gas is going through a phase of rapid growth as compared to other fossil fuels globally. In the last decade, gas consumption has grown at 2.3% annually, which is almost double the rate of growth in consumption of other fossil fuels, which are growing at about 1%, as shown in Table 1 below.
  • Only Renewables and Hydro-power generation have had faster rates of growth than gas. Hydro has had a growth rate of 2.9% annually from 2006 to 2016,but the share of Hydro out of the total energy mix is only 7%,as shown below in Chart 1.Hydro is not expected to have a major impact on the energy mix by 2040, as its share remains unchanged at 7%.
  • Natural gas as a fuel will have the highest growth out of any of the fossil fuel globally and will take on a larger share in global energy consumption. The country which will lead the world in the induction of gas into their energy consumption is expected to be China.
  • Australia is now fast emerging as the world leader in LNG exports and is expected this year to overtake Qatar in LNG exports in 2019. It is expected to remain in poll position from 2019/20 to 2024/25, but after that, as the Qatari expansion starts to come online by 2025/26, Australia may fall back to second place. Eventually, the US is slated to overtake Qatar in the mid-2030s with an estimated LNG supply of 115 MMTPA.
  • Spot prices or their assessments are good indicators as to the health of the LNG market, since they are based on demand and supply fundaments in the market and not linked to price of oil. Spot prices provide good guidance as to whether the market is over or under supplied. The spot assessment prices have shown that in 2018 prices were at a 3 year high during the winter months, which indicates that there is no LNG glut in the market as sellers had feared.
  • The population and economic growth of India is going to raise energy demand significantly and as a result of that, there will be a rise in greenhouse gas emissions. Currently,India is one of the largest energy consumers globally and is expected to be one of the fastest growing economies of the world in the future. This poses twin challenges for the Country of firstly, meeting the enormous energy demand and,secondly,controlling pollution and GHG emissions.
  • Main competitor for gas will be oil and that is the market in India gas is going to target for substitution. If one looks at projections of the BP Energy Outlook for 2040, the fuel mix does not paint a bright picture for the future of gas in India, as the percentage share of the total energy consumption of gas marginally rises to 6.7% from 6.4%. Coal is still very dominant, declining from 55% in 2020 to just 49.7% in 2040. A marginal decline in share of coal is very worrying as GHG emissions need to be controlled, for which coal share has to decline further. Oil consumption, the main target market for gas, still remains more or less the same, declining marginally by about 3%.
  • India is a gas starved nation and the government’s plan to raise gas’s share in the Country’s energy consumption is a great challenge. The government’s target is to raise natural gas consumption in India to 15%of the primary energy mix by 2030, when currently it is slightly above 6%. This requires a significant investment in gas infrastructure and a change in government policies which encourage private sector participation.
  • In India, pricing of any commodity controlled by government has always been a contentious issue.The current price of domestic gas is $3.69/mmbtu, while gas from deep water offshore field is more than double at $9.32/mmbtu. The concern is that government control on gas prices will discourage investment in gas exploration and production, as gas prices are kept artificially low. This in turn will make the Country more dependent on LNG imports, which are more costly. The below Table 11 shows the gas prices in India from the time the new pricing regime was brought by the government, to make it more market oriented. As India is not a gas rich country like USA, Russia and gas in India competes with liquid fuel and R-LNG, domestic gas prices have to be higher than they are right now to incentivize more production.
  • Petronet LNG is also looking at new uses for LNG as a fuel in India. One of them is using LNG directly in transport vehicles and for that purpose Petronet LNG is developing infrastructure to support this initiative in the form of LNG filling station for trucks and buses. The target is to establish fueling stations along the highways.Other LNG players in India are also planning to get into the LNG transport fuel market by developing LNG stations for transport.
  • Threat from Competition: All the major players in the Indian hydrocarbon business and many new players, including foreign entities, have plans to enter the natural gas business. Competition is expected across the gas value chain. PLL is prepared to face the competition in the market through long term tie-up of LNG/ Regas capacity.

One Thought on “Petronet LNG: Annual Report 2019 Notes”

  • Great reading, covered worldwide data and almost all aspects related to industry. In transportation sector there could be a competition from EVs as well although not much in heavy vehicles. Government is now focusing on gas and hydrocarbon more than oil so that could be a positive for the company.

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