Center asks GAIL to import LNG to meet rising city gas demand


By Nidhi Verma

NEW DELHI (Reuters) – India has mandated state-run Ltd to import gas and buy from local difficult fields to meet growing demand growth from household and transport sectors as cheaper supplies from old blocks is not enough, a government order said.

City gas distributors (CGD) have set up sales network to supply gas to transport and households across the country, buoyed by Prime Minister Narendra Modi’s aim to raise the share of gas in India’s energy mix to 15% by 2030 from 6.7% now.

These companies gets a priority in half yearly allocation of gas from the old fields, sold at a cheaper rate of $6.1 per million British thermal units (mmBtu), and the shortfall is met through imports.

The distribution companies pass on the costs of gas purchases to their customers leading to differential pricing of fuel in the country.


Now, the oil ministry has asked GAIL to buy gas produced from the fields in difficult areas at the ceiling price fixed by the government or actual price which ever is lower.

The current ceiling price of the gas from difficult fields is $9.92/mmBtu, lower than the spot prices of the liquefied natural gas.

“For any further requirement, GAIL will also source long-term regassified liquefied natural gas failing which spot RLNG may be sourced” for mixing with domestic gas to arrive at a uniform base price of the fuel across India, the order said.


Current gas allocation to the transport and household sectors is about 19 million cubic meters a day (mcmd) while the demand is about 21 mcmd, said Bhanu Patni, senior analyst with India Ratings and Research, a Fitch Group Company.

“Gas pooling will evenly spread the risk of higher prices to all the customers and create a level playing field for the distributors,” Patni said.

At present, base price of gas is lower in low demand growth areas as the distributors’ reliance on imported gas is low.

The new rules allows quarterly allocation of gas for transport and households sector on the basis of demand in the previous three month, compared to the current norm of allocation in April and September.


Two government sources said the new rules for gas supplies to the transport and household sectors will be applicable from May 16. The oil ministry did not respond to Reuters request for comments.

To account for demand growth, GAIL will supply 2.5% additional gas for a geographical area, the order said.

(Reporting by Nidhi Verma; editing by David Evans)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard,

Digital Editor

Source link

Leave a Comment

Your email address will not be published. Required fields are marked *