New Delhi: India is planning an aggressive foray into the global market for natural gas, as it reckons that the output from Reliance Industries KG-D6 block would hardly meet the growing demand from key sectors like fertilisers. With the recent fall in prices, long-term contracts in the global gas market have shifted in favour of the buyer, a factor which has caught the attention of policymakers here.

Potential gas suppliers to India include producers in major liquefied natural gas (LNG) exporting countries such as Indonesia, Australia, Qatar, Oman, UAE and Algeria. New fertiliser units need not rely on RIL gas. State-owned Gail India has advised the government that now is the opportune time to strike global gas contracts, which could fetch gas at a competitive price of around $6-7 per unit at any fertiliser production facility in India, said a person privy to the development.

According to official estimates, even RIL gas will cost around $6 per million metric British thermal unit (mmBtu), including transportation cost by the time it reaches the customer. Production from RILs K-G D6 block is now at 60 million metric standard cubic metres a day (mmscmd) and the government has already allocated it to existing gas consumers, including fertiliser, power and steel producers. Production may rise further, but there are more consumers in queue. A Gail India official told FE that the global natural gas market is a buyers market now. The company is awaiting a firm view from the government about the gas requirement for new fertiliser capacity that would come up before entering into purchase agreements.

The ministry of chemicals and fertilisers is in the process of finalising a policy to promote investments in the production of urea, a mass-use fertiliser. The country hopes to achieve a 4% growth in agriculture output to drive 9% GDP growth in the coming years, so that it can find resources to spend more on rural jobs and healthcare. For fresh investments in urea, the government needs to facilitate long term availability of natural gas, the feedstock that accounts for four-fifths of urea production cost–at competitive rates. Official sources told FE that if imported at $6-7 per mmBtu for fertiliser plants, it is viable to set up fresh capacity. Even if the price goes up to $8 mmBtu, the facilities will still be viable, said a person familiar with the development. Natural gas is exported after condensing it into liquid form for…