Natural Gas market may remain below expectations: Wood Mackenzie


Natural gas demand may not be of a scale that many had estimated and the reduced domestic gas production is also likely to lower the growth of the LNG market, global energy consultancy Wood Mackenzie said today.

"In India, we are now seeing faltering domestic gas production and this is expected to limit the development of the gas market. Perhaps counter-intuitively to some, reduced

gas production will also lower the rate of LNG market growth in India," said Nicholas Browne, Senior Gas Market Analyst at Wood Mackenzie.

Wood Mackenzie said gas production from the D6 field would continue falling, reducing the overall gas availability for Indian gas production.

Production from Reliance's D6 block has fallen to 11 billion cubic metres (bcm) last year from a peak of 20 bcm in 2010.

Browne said: "This [decline in gas output] will constrain gas availability to the [Indian] market, mainly impacting the power sector in the medium term.

"In the longer term, reduced production will preclude the development of greenfield fertiliser production as it is not economical to develop facilities purely based on LNG imports".

"In addition, LNG demand growth in other industrial sectors is further limited by reduced economic growth expectations," he said.

The rate of India's LNG market growth may not be as sizeable as once thought, growing 20 million tonnes per annum (mmtpa) to 2025. But comparatively, the South East Asian markets offer better LNG growth for the same timeframe, growing by 45 mmtpa.

The combined South East Asian LNG markets would account for a third of overall Asian LNG demand growth by 2025, said Wood Mackenzie, calling on LNG suppliers to focus on Indonesia, Thailand, Malaysia and Singapore.

Browne said: "Indonesia will increasingly require LNG as we expect domestic demand to outpace domestic supply. Early coal bed methane pilot well results in South Sumatra indicate that production will not meet previous expectations providing

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