Production of natural gas, which was almost negligible at the time of independence, is at present at the level of around 87 million standard cubic meters per day (MMSCMD).  With the worldwide production of liquefied national gas (LNG) expected to double within the next five-to-six years and demand in the country set to expand, the Petroleum and Natural Gas Ministry is coming up with a new LNG policy .

The policy will provide level-field for new and old terminal operators, offer free-to-market LNG at market-driven prices and make Petroleum and Natural Gas Regulatory Board (PNGRB), the regulatory body for giving licence for pipelines.

According to documents floated by the Ministry and various stakeholders, the government has proposed that since the capital expenditure (capex) i.e. Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment involved in LNG terminal is very high, the LNG terminal company should be given freedom to market LNG at market-driven prices in adjacent areas without restrictions of city gas distribution circles. 

The PNGRB will be given the authority for granting permission for setting up captive/dedicated pipelines for transporting the fuel to the nearest market by the LNG player. It is also proposed that the LNG player should be asked to complete the project within six years from the date of registration, and the applicant has to start construction within two-and-a-half years from the date of registration.

It is also proposed that a land/floating LNG terminal should have a minimum import and re-gasification capacity of 2.5 million tonnes per annum. There should be provision for extra capacity to be made available for third party. Access to third party should be based on non-discriminatory tariffs to be determined by the PNGRB. A minimum of 25 per cent of design capacity shall be created as open access capacity at regulated tariff. For independent power producers (IPPs), backward integration should not be restrained by putting irrelevant criteria.

It is also stated that efforts should be made to ensure that regulatory hassles for small/medium-size players should be minimised. The applicant or company should be operating an infrastructure project of more than Rs.500 crore in capital cost, and the developer should have at least five years experience of owning/operation of hydrocarbon installations. 

The main producers of natural gas are Oil & Natural Gas Corporation Ltd. (ONGC), Oil India Limited (OIL) and JVs of Tapti, Panna-Mukta and Ravva.

Most of the production of gas comes from the Western offshore area. The on-shore fields in Assam, Andhra Pradesh and Gujarat States are other major producers of gas. Smaller quantities of gas are also produced in Tripura, Tamil Nadu and Rajasthan States. OIL is operating in Assam and Rajasthan States, whereas ONGC is operating in the Western offshore fields and in other states. The gas produced by ONGC and a part of gas produced by the JV consortiums is marketed by the GAIL (India) Ltd. The gas produced by OIL is marketed by OIL itself except in Rajasthan where GAIL is marketing its gas. Gas produced by Cairn Energy from Lakshmi fields and Gujarat State Petroleum Corporation Ltd. (GSPCL) from Hazira fields is being sold directly by them at market determined prices.