Executive Summary
Concerns are currently being voiced the world-over regards adequate supply of energy at
affordable prices. Soaring oil prices coupled with supply disruptions due to geo-political
tensions are expected to take a toll on the global economy. Demand for energy is increasing by
the day but resources are drying up. In the recent past, we have not come across any significant
oil and gas discoveries and major production facilities have either peaked or are reaching peak
production in the near term. The distance between global crude production and spare capacity
has also narrowed down and almost diminished owing to the frequent supply disruptions. Hence,
production is struggling to keep pace with the rising demand for energy.
The quest has then been to look out for alternative resources of energy due to the spiraling crude
oil prices and supply concerns thereof. Hence, natural gas has now become the fuel of choice and
demand for the same has been surging. Bio-fuels have also found high acceptance and are
gaining momentum in developed countries. More and more sugar and corn are also being
diverted for Bio-fuels. But, this is giving rise to food inflation.
Back home, India being a coal-rich country, its primary energy demand is met by coal and is
expected to remain so in the near future too. Natural gas usage, as an industrial fuel and
transportation fuel, has also been gaining momentum on account of environmental issues and
soaring crude prices. Though currently natural gas constitutes a smaller proportion in the country's
Energy basket, it is poised to grow significantly over the next two decades. It is against this
backdrop that we find the Natural Gas Sector promising and a sound investment avenue going
ahead.
Outlook
We believe the Gas story in India is poised to take off from hereon. Currently, in India, the Natural
Gas demand-supply gulf is quite high (demand twice the supply). However, we believe by 2012,
this gap is expected to narrow down substantially, though some gap will continue to remain owing
to the benefits derived from natural gas. Domestic gas supplies are likely to double in FY2009
given availability of gas from RIL's KG basin and other discoveries from the KG basin. This along
with higher output from the existing fields will give a fillip to the overall domestic gas availability.
Global LNG availability is also expected to double by 2010, which will boost India's LNG imports.
As for the gas prices are concerned (both global and domestic), we expect it to remain firm in the
near future on account of the incessant rise in crude oil prices. Huge investments are proposed for
infrastructure development in the gas sector, which will benefit user industries like Power, Fertilisers,
Petrochemicals and City Gas Distribution (CGD) businesses. The Regulatory issues have
been addressed by the PNGRB Regulator, which has laid down guidelines for the CGD business.
Guidelines for transmission networks are expected to follow shortly. Overall, we expect the Gas
sector companies to gain from these positive developments. Hence, we are positive on the overall
growth prospects of these companies.

Table of Contents
Executive Summary 2
Global Energy Sector 4
Natural Gas Market 4
LNG Market 6
Natural Gas Price Trend 8
India's Energy Sector 9
Natural Gas demand 10
Natural Gas supply 10
LNG Imports 11
Trans-national Pipelines 11
Pipeline Infrastructure Development 12
Natural Gas Price Trend 13
APM Gas to get replaced by Market-priced gas 13
Petroleum and Natural Gas Regulatory Board (PNGRB) 15
PNGRB CGD Regulations 15
Natural Gas Value Chain 17
CGD - A Long Way to go 17
Key Concerns 19
Companies
Gujarat Gas 22
Gujarat State Petronet 30
Indraprastha Gas 36
Petronet LNG 42
Glossary 48