The production of natural gas in the country has declined from 32,202 million cubic metres (mcm) to 31,555 mcm, a decline of 2 per cent, according to data released by the ministry of petroleum and natural gas.

“The decline in production is due to the depleting gas reserves in the Bombay High basin, coupled with the fact that no new production fields have come online,” said PriceWaterhouseCoopers executive director Deepak Mahurkar. Natural gas has globally emerged as a preferred fuel, since it is clean and cost effective. Half of the LPG in the country is sourced from gas and it is an important raw material for the power and fertiliser industries.

However, there is a shortage of natural gas in the country, with demand (above 150 million standard cubic metres per day) far outstripping supply at 90 mscmd. “Every drop in production makes the problem of shortage even worse since some users get reduced allocation of gas. A lot of power plants are running at below capacity or using alternative fuels like Naphtha, which are far more expensive,” says Ernst and Young associate director Anish De.

Similarly, “independent power projects in Andhra Pradesh, which assume that natural gas would be available, have been impacted and are now running on petrol,” said , KPMG executive director Arvind Mahajan.

Production of natural gas in the country is expected to increase in 2008, when supply from the Reliance blocks in the Krishna Godavri basin is scheduled to start.