Natural Gas/Lower price: RIL/RNRL/NTPC

Lower price will hurt gas industry: Bernssteingas price of $4.2 per mmBtu, was close to 25
Researchper cent. "By comparision with other provinces,
India cannot afford to let lower natural gas pricethis is at the lower end of what would be
of $2.34 per mmBtu prevail as the rate will hinderexpected for a deep water development and
development of a natural gas industry in thecertainly commensurate with the exploration risk
country, US-based Bernstein Research said in aand technical challenges of the project."
latest report.Bernstein said India has one of the lowest prices
Today, India has among the lowest prices ofof natural gas in Asia.
natural gas in Asia. This may suit consumers whoWhile state-run Oil and Natural Gas Corp (ONGC)
are fortunate enough to have supply, but doessells gas at $2 per mmBtu, neighbouring China has
not reflect the scarcity of natural gas resources,"doubled the rates to $4 per mmBtu in past 10
the investment research firm said in its reportyears.
dated September 11."Rather than helping, low gas prices are hindering
In its report titled 'Blood Brothers - There Canthe development of a natural gas industry in
Only Be One Answer', Bernstein talked of the gasIndia," it said.
dispute between the Ambani brothers wherein"Given that deepwater gas supply would be the
younger Anil's Reliance Natural Resources Ltd iskey to meeting domestic demand growth in India,
claiming gas from Mukesh's Reliance Industries atany disruption to investment in the exploration
$2.34 per mmBtu, rates which are 44 per centand developmnet of the KG basin will slow down
lower than the government price of $4.20 perthe supply of natural gas and increase India's
mmBtu.demand for expensive imported crude oil and
"Step aside Russia and Ukraine - this time it'sLNG," it added.
serious! Its hard to recall a spat in the world of"Moreover it will set lower expectations in the
gas which has been as contentious and caught theminds of other consumers on future gas prices
public eye as much as the one between theand continue to dissuade international E&P
Ambani brothers relating to the supply of gasmajors from participating in India's gas boom," it
from the giant Dhirubhai gas field in the KG basin,"said.
it said.The research firm said the only regions with lower
Endorsing RIL's KG-D6 field cost of $8.8 billion asgas prices than India are Russia and the Middle
"one of the lowest cost deepwater gas fields inEast where domestic gas prices were between
the world", Bernstein said, "if the lower gas price$1-2 per mmBtu. "Unlike India, these countries also
of $2.34 per mmBtu is approved and applied to allhave abundant gas reserves."
gas produced from Dhirubhai, we estimate the fullIn case of Russia, state-run Gazprom has been
cycle IRR would be less than 3.3 per cent, whichforced to use profits from its gas export
is below the cost of capital."business to Europe to subsidise the loss making
"The lower gas price (of $2.34 per mmBtu) callsdomestic gas supply. In the Middle East, low gas
into question the whole viability of theprices had also led to a lack of investment in
development of deepwater gas in India becuaseregional gas exploration and promoted countries
of the precedent it sets," Bernstein said.with abundant gas reserves to export gas as
RIL's gas finding and development plus operatinghigher priced LNG rather than supplying regional
costs comes to "extremely competive" $10 permarkets, it said.
barrel. "Does this mean RIL will make exorbitant"The impact of this has been seen in gas
profits? The answer is no."shortages and power outages across Kuwait, UAE
It said the full-cycle IRR on Dhirubhai assuming aand Oman.