‘No gas to power sector from ONGC fields’

The Empowered Group of Ministers (EGoM) stayed on the path suggested by the Petroleum Ministry of maintaining top priority in natural gas allocation for the fertiliser sector, followed by LPG, power and city gas distribution.
It also agreed with the recommendations that pre-NELP gas, sold under administered pricing mechanism, would be kept out of this pecking order. The Power Ministry was pushing for this gas to be diverted from non-priority sectors such as petrochemical plants.
“There is very little gas available (for diversion) in the first place... EGoM decided that things better be left as it is,” Oil Minister S Jaipal Reddy told reporters after the 70-minute meeting.
Power sector had been lobbying for diversion of the APM gas in view of a sharp dip in output from Reliance Industries' KG-D6 gas fields to about 35 million standard cubic meters per day from 61.5 MSCMD achieved in March 2010.
Reddy said the EGoM took note of the fall in output from KG-D6 but did not discuss price changes or pooling of rates as they were not on agenda.
The EGoM felt there was only 3.84 MSCMD of APM gas from state-owned ONGC's fields that currently goes to non-priority sector. Of this, only 1.92 MSCDM could be diverted as users of the rest cannot be switched due to reasons like low pressure.
Most of this gas is dedicated for priority sectors of fertiliser and power and there was 5.23 MSCMD that goes to CGD companies. The EGoM felt that CGD was also a priority sector as without APM gas, which is priced at one fourth the price of imported gas, prices of CNG and piped cooking gas would spiral.
In fertiliser, gas allocations will be made only to urea plants and fuel supply to phosphates and potassium producers would be ‘suspended’ not stopped, Reddy said.
APM gas and KG-D6 gas are currently sold at $4.2 per million British thermal unit.

IGL looks for expansion oppurtunity in Africa

Bombay Stock Exchange-listed city gas distribution company Indraprastha Gas Limited is mulling to spread its footprint into African countries. The gas utility company officials visited Trinidad & Tobago and Nigeria to study market dynamics.

“We are trying to participate in all free and fair discussions wherever they (African countries) want our advice or guidance. We would like to expand this model. IGL has been a role model for any CGD business,” IGL managing director M Ravindran said in an interview with Financial Chronicle.

“We have visited and tried to enter into a dialogue and understand their lookout. There have to be many policy changes that they have to make at their end such as subsidy for gas and kit manufacture.

Gail, one of IGL’s promoters, has an office in Egypt. We do interact on several proposals from Egypt also,” Ravindran said.

IGL’s promoters – Gail and BPCL – have spread business portfolios to several countries offering an edge to this city gas distribution company to enter into talks with overseas players. “Various business opportunities are coming up to understand the markets there (overseas). Frequent delegations come and they show interest to capitalise on gas reserves in their countries. Our people have already visited Trinidad & Tobago.

This time, our team has gone to Nigeria. We are trying to understand the business model there and what are the pricing policies. Every country has unique model of doing business. We are trying to understand dynamics of pricing policy,” Ravindran said.

At present, IGL sees an annual volume growth of 60-70 per cent from industrial customers, 15-16 per cent from CNG users and 40-50 per cent from domestic cooking gas buyers. Now, the gas utility supplies nearly 3.4 mmscmd of gas that is about 2.7 mmscmd of APM gas and remaining from imported and spot market.

“We have a mix of 70-75 per cent of APM and 18-19 per cent of LNG. Remaining 1-2 per cent is sourced from spot market. We do not want to increase the spot purchases and put burden on consumers. But we will have to live with 2-2.5 per cent of spot gas in the long run also. We are trying to source long-term gas from our promoters – BPCL and Gail,” Ravindran said.

RIL to charge $0.15 marketing margin on CBM gas

While the government has sent RIL's $0.135 marketing margin on the sale of KG-D6 gas to the oil regulator for approval, the Mukesh Ambani-led company has proposed to charge a $0.15 levy in lieu of marketing costs on the sale of gas produced from coal seams (CBM).
In newspaper advertisements issued on Friday calling for bids to purchase 3.5 million cubic metres a day of coal-bed methane (CBM) gas it plans to produce from its Sohagpur block in Madhya Pradesh by 2014-end, RIL said it will charge $0.15 per million British thermal units as a marketing margin over-and-above the gas sale price.
The Oil Ministry had on December 26 referred the $0.135 per mmBtu marketing margin RIL charges over-and-above the KG-D6 gas sale price of $4.205 per mmBtu to the Petroleum and Natural Gas Regulatory Board (PNGRB) after the levy was questioned by users like the fertiliser industry.

"The government of India hereby entrusts the determination of the quantum of marketing margin chargeable on sale of natural gas to end-consumers by each marketing entity on the basis of its actual marketing cost to the PNGRB," the ministry stated in its December 26 letter to the regulator.

RIL had originally proposed a $0.15 per mmBtu marketing margin for KG-D6 gas to cover risks like seller liabilities in case of non-supply, customers drawing less than their quota, non-payment of dues and settlement of disputes, but later agreed to a charge of $0.135 per mmBtu.

The levy is less than the $0.20 per mmBtu marketing margin charged by state-owned GAIL on the sale of gas produced from the BG Group-operated Panna-Mukta and Tapti fields in the western offshore and LNG imported by Petronet LNG Ltd.

RIL, in Friday's advertisement, proposed to price CBM as per the formula used to pay Qatar for import of liquefied natural gas (LNG) on a long-term contract.

It proposed a price of 12.67% of JCC, or Japan Customs-Cleared Crude, plus $0.26, plus 'V', where 'V' is the biddable number that users have been asked to quote. 'V' can be positive or negative.

The formula is the same at which Petronet, the nation's largest liquefied natural gas importer, buys 7.5 million tonnes per annum of LNG from RasGas of Qatar. RasGas charges 12.67% of JCC and Petronet a further $0.26 per mmBtu for shipping the gas in its liquid form from Qatar.

The price sought by RIL is in sharp contrast to the $4.205 per mmBtu rate fixed for natural gas produced from its Krishna-Godavari Basin D6 fields for five years ending March, 31, 2014.

Great Eastern Energy Corp (GEECL) sells CBM produced from its Raniganj block in West Bengal at $6.79 per mmBtu while Essar Oil has proposed a rate of $4.20 per mmBtu for CBM it plans to produce in the same state.