Several cross-border gas pipeline projects, which could have addressed India's natural gas requirement, have been stuck over the past decade. However, with the US easing sanctions on Iran in November, South Asia Gas Enterprise's (SAGE) Middle East-India deepwater pipeline, which starts from Iran, is coming into focus.
If the project sees the light of the day, India could get gas at a well-head price of around $1.5-$1.75/mmBtu (metric million British thermal unit), which would mean a landed cost of around $10/mmBtu on the Gujarat coast, according to Subodh Kumar Jain, Director, SAGE, which is promoted by the Siddho Mal Group.
India is 13th largest gas consumer and fourth largest importer in the world. India has a demand of 286 million metric standard cubic metre per day (mmscmd) against a production of 80 mmscmd.
The country makes up for a good chunk of this shortage by importing LNG, which is a very costly preposition.
Domestic oil and gas exploration saw a severe setback after KGD6 production fell dramatically. Projects like Iran-Pakistan-India (IPI) and the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipelines have been stuck for almost 20 years now.
SAGE's sub-sea gas pipeline assumes importance in this context. The project was announced in 2007. The pipeline intends to create an energy corridor to India across Arabian Sea, through which India will be able to source gas from countries like Iran, Iraq and Turkmenistan. These countries have over 2000 TCF Natural Gas Reserves.
The SAGE project is likely to supply 31.1 mmscmd of gas per day for 25 years, which is sufficient to generate 7,500-8,000 MW power and produce a few million tons of urea/ ammonia fertilisers annually. The first phase of the $4 billion project will complete by 2017 end.
"Project development is at an advanced stage. Front End Engineering & Design Study (FEED)will be completed in 2014 or early 2015. The EPC contract for laying the pipeline is likely to be awarded then. The pipeline is likely to be laid by end-2017 early-2018," Jain said.
A large number of Indian and foreign companies are associated with the project for supply of equipment, investment, gas supply and purchase. These companies include GAIL, Indian Oil, GSPC, Engineers India, Welspun Corp, Jindal Saw, Peritus Intl UK, Saipem Spa, Heerema Marine Contractors, Intecsea, Sultanate of Oman, Fugro and NIGEC.
While SAGE sounds like one of the answers to India's gas woes, it will see the light of the day only if it gets strong support from the government and insurance firms. There is a strong lobby of LNG suppliers in West Asia, including giants like Shevron, Exxon Mobile, Shell and Conoco.
This lobby is naturally not keen on pipelines to India as it will impact their business. India imports LNG mainly through Petronet. Petronet has a long-term contract with Qatar to import 7.5 million tonnes at $13-$14/mmBtu. Spot LNG imports by Petronet in the past three months have hit a high level of $18.5-$19 per bum.
"We are hoping the government to bless the project. We have already made a presentation to the Kelkar committee, MOPNG, planning commission and they all think that it is a doable project now," Jain said.