India is in talks with overseas suppliers to import 20 million metric tons a year of liquefied natural gas to bridge a local shortfall and is looking to nearly quadruple its capacity to convert LNG into gas, said Oil Minister Veerappa Moily.

India meets about a quarter of its natural gas consumption with imports, according to government data.

India’s gas shortage is widening mainly because of falling output from Reliance Industries Ltd.’s offshore block–the country’s biggest gas find yet–where the company says it is facing geological difficulties. State-owned Oil & Natural Gas Corp. is also reporting falling output from its wells which have been producing gas for many years. At the same time, demand is rising from gas consuming industries such as power and fertilizer.

India is the fifth-largest importer of LNG after Japan, South Korea, the U.K. and Spain, the minister said, adding that he expects the country’s LNG demand to grow 5%-6% every year until 2020.

India has already secured deals to import about 14 mmtpa of LNG and the 20 mmtpa for which it is currently discussing with suppliers are in addition to this, the minister said.

He didn’t name the potential suppliers or by when these deals could be signed.

India is adding regassification capacities to support the expected increase in imports. India expects its capacity to convert LNG into gas to be more than 50 million tons per annum by 2016-17 from 13.6 million tons at end-2012.

The price of imported gas will be a challenge to deal with, Mr. Moily said. Local consumers are used to government-fixed prices of $4-$5 per million metric British thermal units, but the cost of imported gas is at least $10-$12 mmBtu, he said.

Source: The Wall Street Journal