Even as the the major gas pipelines in the country remain under-utilised owing to low domestic production of gas and high imported or regasified LNG prices, GAIL India is recommending a move to gas pooling in order to resuscitate the numerous gas based fertiliser and power units.
RD Goyal, director (projects), at GAIL, speaking to FE cautioned that the time has come for the government to take hard decisions. While protection at some level is essential for industries like power, fertiliser and LPG, which supply essential goods, beyond that gas should be given to everyone at same price. ?Whatever gas is available should be pooled together,? said Goyal.
Pooling of gas essentially means creating a common gas collective where gas from different sources, domestic and international, are managed by a common operator. It will average out the price of cheaper domestic gas with costlier R-LNG. The subsidy for higher electricity tariffs or fertiliser prices in view of pooling of domestic and imported R-LNG, would be released quarter-wise GAIL.
Pooling of gas will help as the price for gas will remain within reasonable limits as compared to the three times higher prices that R-LNG currently quotes over domestic gas. The power ministry has already moved a cabinet note, seeking approval of pooling of gas and re-gasified liquefied natural gas (RLNG) within the power sector. It has also sought the appointment of GAIL India as the pool operator.
Companies, typically, get domestic gas from the NELP and KG D6 gas fields at a landed cost of $4.2/million metric British thermal units (mmBtu). ONGC C-series gas is sold at a base price of $5.25 per mmBtu, while gas from the Panna-Mukta-Tapti fields is priced higher at $5.6-5.7 per mmBtu. RLNG on the other hand is available at atleast three times the price at over 12/mmBtu.
To elucidate the benefits of gas pooling, Goyal pointed to an example in Firozabad city, near Agra, where gas pooling was done at the behest of the government to help certain industries suffering owing to shortage of gas. ?We have done gas pooling in a small way in Firozabad. Earlier APM (administered price mechanism) gas customers were there and there was a huge gap in prices with other gas users. So the growth in demand for gas was zero,? he said. He went to say that over the last one year the pooling of gas has led to 25% growth in gas sales in the city from about 1.1 million metric standard cubic metres per day (mmscmd) of gas to 1.4 mmscmd.
?There were some new companies trying to set up plants there and they only got new gas which was available at 12/mmBtu, but after pooling the gas is available at $5.2 mmBtu. The requirement of these customers is 0.3 mmscmd,? said Goyal.
The availability of domestic gas has fallen over the last two years to 101 million metric standard cubic metres per day (mmscmd) in FY13 from 143mmscmd in FY11 due to fall in production of KG-D6 block from 56 mmscmd in FY11 to 26mmscmd in FY 2013. On the other hand R-LNG imports in FY13 stood at around 46 mmscmd and is expected to touch 188 mmscmd by 2020-21 when India will become a net importer of gas.
GAIL officials say that under the current economic climate it cannot find clients for gas even at about $15/mmBtu, as compared to past sales at $20 per mmBtu. GAIL is now adopting a strategy of synchronising pipeline construction with the supply of gas.
GAIL operates around 11,000 kms of pipeline network and currently transmits only around 100 mmscmd compared to a capacity of 210 mmscmd. This translates into a pipeline utilisation of just around 48%.
