A study commissioned by state-run natural gas marketer GAIL India Ltd has proposed a pooling mechanism that would reduce the huge disparities in the price of gas to consumers in each sector, but refrained from suggesting that such pooling should be mandatory.
Currently, the quantum of gas available in the country domestic production and imports is about 165 mmscmd. Gas from different sources are being priced variously?in a wide range from about $2 per British thermal unit (mmbtu) under administered pricing to over $6 mmbtu for imported re-gasified LNG (RLNG). The disparity is the result of different pricing methodologies used at different periods of time and mostly under the relevant production sharing contracts between the producers and the consumers.
So, the proposed pooling would come as a boon to consumers of RLNG or the other highly priced gas from the Panna, Mukta and Tapti fields. The proposed uniform pricing to the consumer would however hit the fertiliser and power plants who get APM gas. The consultant Mercados, in the report submitted to GAIL, has listed out various pooling options: omnibus pooling and resultant uniformity of prices to consumers from all sectors and sector-specific pooling. However, it favoured sectoral pooling.
Producers, who join the pooled price system, would not lose anything as they would get the price they have already agreed with their consumers and approved by the government as per the production sharing contract.
However, for the consumer, pooled price will make a lot of difference. Since it would iron out the variation in price of gas from different sources, those who get it cheaper now under government administered pricing will have to pay more. Those who pay more now for example, consumers of imported re-gassified liquefied natural gas (R-LNG) would get the fuel cheaper, a person familiar with GAIL?s recommendations to the government awaited in a few days told FE. RLNG accounts for 30% of the gas available in Indian market. ?Pooling of gas prices will also make costlier R-LNG more viable,? said the official. The government had asked GAIL to advice it on pooling of gas prices.
The government believes it is unfair for some consumers to pay more than others for gas. For example, gas from Reliance operated KG-D6 block is priced at 4.2 mmbtu, while gas from blocks operated by state-run companies ONGC and OIL is made available to power and fertiliser plants at the government administered price of about $1.82 per mmbtu.
Gas from the BG Group Plc operated Panna, Mukta and Tapti fields is priced at $5.73 per mmbtu. Gas from Cairn Energy operated Lakshmi field and Gujarat State Petroleum Corporation Ltd?s Hazira field are sold directly by them at market prices.
Sources said GAIL could recommend different pooled prices for consumers in different sectors such as fertiliser and power instead of having uniform price for all consumers across the board.