July 14 (Bloomberg) -- India, Asia's third-largest energy consumer, may pay as much as $12 per million British thermal units for natural gas in 2010, U.S. consultant Facts Global Energy said in a report.

Consumers may pay twice as much for the cleaner-burning fuel because gas demand may grow at 5.1 percent a year between 2007 and 2015, and amid record crude prices, Facts said in a report e-mailed today. The price of delivered gas to consumers from Reliance Industries Ltd.'s gas discovery on the east coast is about $6 per million British thermal units, half of the U.S. benchmark gas price at Henry Hub.

``The general appetite for gas and the ability to pay amongst Indian gas consumers has gone up significantly,'' analysts Vijay Mukherji and Praveen Kumar said in the report. ``Industrial users as well as regional state-owned utilities have expanded their gas usage and are willing to pay higher prices.''

India is facing a shortage of natural gas with half of the 7.86 billion cubic feet a day of demand not met by domestic supplies as output is insufficient to meet surging demand. Reliance, Oil & Natural Gas Corp. and BG Group Plc are investing billions of dollars to explore in India.

The country may secure additional supplies via pipeline from Iran and by importing the fuel in liquefied form, the report said. Iran may supply as much as 1.1 billion cubic feet a day of gas by 2016, or about 28 percent of India's gas consumption today, for $12.5 per million Btu including transportation and margins, the report said.

Prices Rise

``Even the prices at which government-controlled companies sell gas have risen by as much as 25 percent to more than $5 per million British thermal units in the last two or three years,'' said Vinay Nair, Mumbai-based analyst at Khandwala Securities Ltd. ``Power and fertilizer companies in India will be willing to pay more for gas as long as prices are below those of naphtha and other comparable fuels.''

Supplies of LNG to India may rise by 46 percent to 12.3 million metric tons a year by 2010 and to 15.5 million tons by 2015 if the delivered price of the fuel is $12 per million Btu, according to the report. Petronet LNG Ltd., India's biggest buyer of liquefied natural gas, and Royal Dutch Shell Plc operate Dahej and Hazira LNG import terminals respectively on the country's west coast.

India must lift controls on domestic gas prices to attract investment and prevent shortages, the report said. The country's gas demand may reach 14.1 billion cubic feet a day by 2020.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.

Last Updated: July 14, 2008 08:54 EDT