Market overview.
India market overview
The Indian market is characterised by strong energy demand driven by a large population and energy intensive industries. This strong demand and limited domestic energy supply has created a significant and strong market for natural gas.
Total 1P reserves of natural gas have been estimated at 38.5 Tcf with most production from western offshore India. The onshore gas fields in Assam, Andhra Pradesh and Gujarat states are the other major producers of gas.
Recently there has been substantial development of gas infrastructure in India with a focus on city gas distribution projects and increasing availability of gas to the household and transport sector. It is estimated that in the next seven to eight years, over 100 cities will be converted to gas with further conversions to follow.
Other infrastructure being developed include gas transmission pipeline networks, gas processing facilities and support infrastructure.
Historically, the Indian market has been supply driven with gas prices fixed via an administered pricing mechanism. There has been a gradual movement toward a more demand-led gas market and unregulated pricing, which has seen significant increases in wellhead prices.
Dart Energy believes that with these fundamental improvements, the Indian market supports the prospect for development of a sizeable, profitable CBM business.
CBM market overview
India has an estimated 200 Tcf of CBM resources. The CBM industry is still at the early exploration stage and is largely undeveloped.
The Indian Government awards CBM blocks through a competitive bidding process. Four rounds of bidding have been successfully completed with 33 blocks awarded. The fourth and most recent round of CBM bidding occurred in October 2009.
Currently there is limited production of CBM in India, however, due to increasing demand from industry, particularly manufacturing, refining and steel, this is expected to double over the next five years.
Dart Energy's operations in the region have focused primarily on its Tatapani-Ramkola block and other blocks secured in the third round of CBM bidding, and more recently on blocks awarded in the fourth round of CBM bidding.