The big-ticket transnational gas pipelines that India was planning seem to be in trouble. Although the government maintains that the three pipelines - one from Myanmar, another from Iran and the third from Turkmenistan - are still in the reckoning, officials in the petroleum ministry have started raising doubts on the pipelines.
With Myanmar deciding to sell the gas from its fields to China, the proposed Mynamar-India pipeline makes little economic sense.
"Even bringing our own share of gas from Myanmar would not make economic sense. The cost would be too high for such a small quantity of gas," an official in the oil ministry said.
India had the option of either bringing its share of the gas from Myanmar or selling it to other countries and using the foreign exchange earned to buy gas elsewhere, the official added.
ONGC Videsh, the overseas investment arm of Oil and Natural Gas Corporation, holds 20 per cent stake in two gas blocks in Myanmar, while GAIL India owns 10 per cent in the blocks. Recently, GAIL also acquired another stake in a third block in the country.
"The gas reserves in the two blocks were estimated at 4 trillion cubic feet before. Now, Myanmar is saying that the reserves are much lesser than that," the oil ministry official said. "Myanmar also wants over almost 3 trillion cubic feet for its own consumption," he added.
Myanmar told GAIL and OVL officials during a recent meeting that China was offering a better price for the gas that it planned to export. "There are also problems with the pipeline itself. The issue with the route of the pipeline through Bangladesh was never really resolved," the official added.
However, the country is still hopeful of additional exploration work being carried out in Myanmar. The country may be offered more blocks there. "If our share of the reserves rise significantly, we can think in terms of bringing the gas to India," the official said.
The country appears to be going through a problem of getting gas from overseas. "The gas from OVL's Sakhalin-I field and Kazakhsthan will most likely be sent to China because of its proximity. We are thinking in terms of converting that gas into LNG and shipping it to India. OVL is already in talks with Shell for liquefying its gas in its plant in Russia," the official said.
As for the Iran-Pakistan-India pipeline, the issues are political and commercial - there is political pressure from US against the pipeline and the economics of the gas are also not too alluring.
"We are not coming under pressure from the US to pull out of the Iran pipeline project," a senior government official said. "However, the price of gas at almost $8 per million British thermal unit may not find buyers in the current domestic market," he added.
Analysts say that although the high price of the gas is a deterrent, India is leveraging it to pull out of the deal fearing it would cast a shadow on the nuclear deal with the US.
Further, the domestic production of gas is expected to increase sharply in the next two years as gas finds in the Krishna-Godavari basin are commercialised. Reliance Industries, for example, expects to produce 80 million cubic metres per day, which is the country's current production.
According to projections shared by Reliance, the gap between demand and supply of gas would be wiped out by 2009-2010, when the total supply is seen at 243 mcmd (including LNG imports) while the demand is projected at 221 mcmd.
"We will soon have enough gas from domestic production. The nuclear deal with the US is more important to India," said an analyst.
With little progress on the Turkmenistan-Afghanistan-Pakistan-India pipeline, it seems that India may just end up doing without piped gas across its borders.
