PNGRB may regulate LNG infrastructure

Written by Noor Mohammad | Noor Mohammad | New Delhi | Updated: Nov 26 2012, 07:20am hrs
After mandating third-party access to LNG terminals, the government now proposes to empower the downstream watchdog to regulate the development of LNG infrastructure to prevent disputes between access seekers and the terminal developers from derailing the government's ambitious programme of providing fuel for the industry. .

Currently, the mandate of the downstream regulator, the Petroleum and Natural Gas Regulatory Board (PNGRB), is limited to registering LNG terminals. PNGRB has no power to perform regulatory functions like determination of regasification tariff. But it is felt that prompt regulatory intervention would be required to resolve disputes once third-party access to terminals picks up in a big way.

The petroleum ministry has recently stipulated that 20% or 0.5 million tonne of a LNG terminal capacity be kept aside by a developer for use by third parties. While existing LNG terminals are exempted from the rule, new LNG terminals will be required to comply.

When contracted, a senior PNGRB official did not rule out such a possibility. However, he said it was still early to comment on the issue. We will comment on this matter only after we see detailed rules, said KK Jha, member (infrastructure), PNGRB.

The policy on third-party access will help bulk consumers of natural gas from sectors like power and fertiliser to import LNG without having to put up their own regasification facility. Until recently, the common carrier principle was applicable to gas pipelines, but not to LNG terminals.

This is the right decision, said BC Tripathi, CMD, Gail India, adding it will help bring more liquidity into the market. The minimum capacity of an LNG terminal must be 2.5 million tonne per annum if the eligibility criteria are to be fulfilled by developer. But industry experts say an LNG terminal with less than 5 mmtpa capacity may not be viable.

A senior Petronet LNG official said: The minimum capacity has been deliberately kept at a lower level to tempt new investors into the business who are expected to go for capacity later." Globally, spot cargoes account for 30% of the overall LNG market volumes. By stipulating common carrier capacity at just 20%, the government has offered incentive to investors to add more regasification capacity.

While the policy has positive implications for consumers and transporters, it is still not clear how it will affect LNG terminal investors, given that they will be required to add 20% more capacity just to comply with the rule.