East West Gas Pipeline: Steep hike in tariffs to hit user industries

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Published: June 6, 2019 6:48:22 AM

The tariff for zone 1 has been revised to Rs 65.50 per million British thermal unit (mmBtu) on the gross calorific value (GCV) basis from the existing Rs 15.

East West Gas Pipeline, EWNGP, city gas distributors, PNGRB, KG D6 gas, Mukesh Ambani, PIPLThe tariffs for zone 3, 4 and 5 have been revised upwards by 46%, 36% and 32%, respectively.

Starting July 1, transportation of natural gas for shorter distances through the East West Natural Gas Pipeline (EWNGP) is set to become expensive, potentially increasing input cost of fertliser makers and city gas distributors (CGDs). The Petroleum and Natural Gas Regulatory Board (PNGRB) in its zonal tariff order on June 4 approved a 337% hike in tariff for zone 1 and 79% hike in zone 2.

The tariff for zone 1 has been revised to Rs 65.50 per million British thermal unit (mmBtu) on the gross calorific value (GCV) basis from the existing Rs 15. A zone is a pipeline length of 300 km. The 1,400-km EWNGP runs from Kakinada in Andhra Pradesh to Bharuch in Gujarat.

On March 13, 2019, the PNGRB had approved a 37% rise in levelised tariff starting April 1, 2019 from Rs 52.23 per mmBtu to Rs 71.66 per mmBtu and had said zonal tariff will be announced after getting proposal from the pipeline operator. The loss-making pipeline transports Reliance Industries’ eastern offshore KG-D6 gas. Soon after tariffs were revised, Brookfield on March 15 announced that it would buy a 100% stake in the pipeline operator Pipeline Infrastructure (PIPL), owned by Mukesh Ambani.

Production of natural gas from KG D6 has fallen from 69.43 million standard cubic metre per day (mmscmd) achieved in March 2010 to under 3 mmscmd at present. The tariffs for zone 3, 4 and 5 have been revised upwards by 46%, 36% and 32%, respectively.

The PNGRB in its order noted that it found the zonal tariff proposed by PIPL for the first two zones to be significantly higher than the existing tariff and approved the same only after studying zone-wise volumes from FY10 to FY19. “…it is observed that actual average tariff realisation for PIPL is below the levelised tariff of Rs 52.23 in each of the years during the period FY2009-10 to FY2018-19.”

However, this may not be the case in future, as volumes of gas transported is likely to go up significantly once CGDs approved start operations. While 86 geographical areas have been awarded during the ninth round, 50 were awarded during the 10th round.

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