Underground gas storage should be a priority for India

Vol 10, PW 10 (07 Sep 06) Midstream & Downstream

Gaz de France has invited oil secretary MS Srinivasan to France for a tour of its underground gas storage facility at Blois near Orleans.

GdFs facility can hold up to 7bn cubic metres of gas, equivalent to 30 days supply in France. Only Russia holds a larger facility.

PETROWATCH learns GdF has suggested 19th, 20th and 21st September as possible dates but as we go to press, its unclear if Srinivasans schedule will permit the visit. Should he go, however, it would underline just how badly India needs such a facility.

Unprecedented monsoon rains and the havoc this wreaked last month on (already erratic) gas supplies to customers, not to mention wildly fluctuating spot LNG prices, are a timely reminder of why. It was a catastrophic situation, reveals a source.

When ONGCs gas processing plant was shut it affected 40% of the countrys gas supply. You can imagine the chaos if Delhis public transport system (which runs on CNG) shut down because gas supplies dry up.

With underground storage (of gas) you can avoid disruption to supplies. Such a facility also makes commercial sense.

You can buy LNG when it is cheap and store it underground, he adds. When the price rises you can take it out and use it.

Unlike Japan, Korea and Taiwan, demand for gas in India is broadly stable and not as dependent on the seasons. India could buy cheap spot LNG during summer when Asian demand is low and reduce purchases in winter when the price is high.

Gas demand fluctuation in India is not as much as in East Asia, we hear. But supplies of LNG to India are rising fast.

Underground storage is needed. CRISIL estimates that by 2010 imports of LNG to India will make up 30% of gas supply against 26% today.

GAILs infamously over-priced Algerian cargo is another argument for a strategic storage facility. No one wanted to buy it, we hear.

Petronet-LNG couldnt store it so GAIL pumped it through its system at full capacity. This stopped cheaper LNG coming through.