CNG price hiked by Rs 1.96/kg and piped gas by Rs 2.13 a unit
The price of CNG in Mumbai will be hiked by Rs 1.96/kg to touch Rs51.57, while piped cooking gas rate will go up by Rs2.13/unit from Thursday. The piped gas price will rise from Rs29.40/unit to Rs31.53 for slab 1, and from Rs35/unit to Rs37.13/unit for slab 2 consumers. P 2 CNG price hiked by Rs 1.96/kg and piped gas by Rs 2.13 a unit This will affect public and private transport, and seven lakh households which have switched from LPG to piped gas. Nearly 70% BEST buses ply on the green fuel, and the hike will be an extra burden on the undertaking which makes a loss of Rs 1,000 crore annually. TOI had highlighted recently how nearly 8% of private cars in the region had switched to CNG, which had led to long queues at pumps. MGL statistics showed that more than 5.6 lakh vehicles run on CNG in Mumbai region, which includes 2.57 lakh private cars, 2.38 lakh autos and more than 61,000 cabs. Auto and taxi union leaders said there have been no fare hikes despite increasing fuel costs. The present hike of nearly Rs2 in CNG rates will increase operational costs and unions are likely to petition the state transport department for a rate hike. While the auto union is demanding a minimum Rs2 hike in basic fares, the taxi union wants the minimum fare to increase from Rs22 to Rs25. Senior transport officials declined to comment. MGL officials said the hike will have a “marginal impact” on per km running cost of autos and taxis. “After the rise in costs, CNG continues to be a very attractive proposition and offers savings of about 53% and 37%, compared to petrol and diesel respectively, at current price levels in Mumbai,” said an MGL spokesperson, adding, “Piped gas continues to deliver unmatched convenience, safety, reliability and environment friendliness to consumers.” An MGL official said after an increase in gas costs due to the recent increase in domestic natural gas price from $3.36/unit to $3.69/unit and other costs. The rates are being hiked after six months. A senior official said the price will be uniform across Mumbai, Thane, Navi Mumbai, Kalyan and Mira Road.
France’s Total signs 10-yr LNG deal with China’s Guanghui
France’s Total said on Wednesday it has signed a 10-year sales and purchase deal with China’s independent gas company Guanghui for annual supply of 0.7 million tonnes of liquefied natural gas (LNG). The super-chilled fuel will be sourced from the French company’s global portfolio and supplied into Guanghui’s regasification terminal in Qidong in East China, Total said in a press release. Total didn’t say when the supply will commence. In a separate statement, the Chinese firm said the new gas purchases will serve a growing gas market in Jiangsu province, where demand for the cleaner-burning fuel is forecast to reach 35 billion cubic metres in 2020. The deal was signed between Total and Guanghui International Gas Trading Co Ltd, a unit of Guanghui Energy. Guanghui’s receiving terminal will eventually have annual handling capacity of 3 million tonnes, the firm said, without giving a timeline. Guanghui started operating a 600,000 tonne-per-year receiving terminal in Qidong in mid-2017.
China’s LNG imports could reach 110 bn cubic metres by 2025: CNPC
China’s imports of liquefied natural gas (LNG) could reach 110 billion cubic metres, or about 80 million tonnes a year, by 2025, a senior executive from China National Petroleum Corp (CNPC) said on Wednesday. The growth will be driven by a stringent environmental policy and an accelerated restructuring of the country’s energy mix, among other factors, Ling Xiao told the LNG2019 conference in Shanghai. China’s LNG imports last year were about 54 million tonnes. CNPC accounts for about 60 percent of China’s overall gas imports and 70 percent of domestic production, Ling said. “LNG price will become one of the decisive factors for the amount of LNG imports,” he also said in his presentation. And that will become even more important with the startup of a gas pipeline between China and Russia – expected later this year – that could threaten LNG imports, he said. “LNG import prices are not competitive with pipeline gas now, and the opening of the Russia pipeline will pose further threat to LNG imports,” he said. “We are hoping for cheaper and shorter term LNG contracts and only in that way can LNG be truly competitive.” Deliveries of gas to China via the Power of Siberia pipeline were due to begin at the end of December 2019, but the project is only expected to reach full capacity in 2025.
Gas price hike may give temporary relief to gas producers
Even as the increase in domestic gas prices is in line with the rise in global gas indices, the price notified at $3.69/mmbtu is expected to provide only a partial relief to the gas producers, the report said. The domestic gas price is notified at $3.69/mmbtu (GCV basis) for H1 FY2020, an increase of 9.8 percent from the price of $3.36/mmbtu (GCV basis) applicable for H2 FY19, the rating agency Icra said in its report. “The increase in domestic gas price is in line with the rise in global gas indices primarily Henry Hub over the reference period and takes the price to its highest level in two and a half years. However, with prices of gas at various international hubs falling again, the domestic gas price increase looks likely to be reversed in H2 FY20,” it said. The agency further stated that the fall in prices of gas at international hubs is contributed by the commissioning of new gas liquefaction capacities with about 35 million tonnes coming online in CY18 and another about 30 million tonnes expected to come online in CY19. “Moreover, shale gas production continues to be robust in USA. Accordingly, Asian spot LNG prices which remained $10-11/mmbtu during the summers of CY18 have already declined to well below $5/mmbtu mark,” it said. Commenting on the findings, Icra’s senior vice- president K Ravichandran said, “the gas price for H1 FY20, though higher than H2 FY19, continues to remain low at an absolute level. Accordingly, gas production remains either a break even or a loss-making proposition for most fields for the upstream producers notwithstanding some decline in oil field services/equipment cost.” He further said the appreciation of rupee against dollar in the past few months, also dampens the realisations of the gas producers. “Going forward, with several new gas liquefaction capacities coming online globally, the supply glut is expected to keep prices of domestic gas low in the near to medium term leading to poor returns even as domestic gas producers especially ONGC ramps up gas production significantly,” Ravichandran said. Also, the absence of a floor and sustained low prices as has been seen in the past few years post implementation of the modified Rangarajan formula, make exploration and production unviable even for benign geologies. “Nonetheless, the government approved the reforms in upstream sector in February 2019, which allowed, marketing and pricing freedom for those new discoveries whose field development plan is not yet approved, and fiscal incentive provided for additional gas production over and above the normal production. This should be a credit positive for the exploration and production companies,” he added. Additionally, the ceiling on price for gas produced from deep water, ultra deepwater, high temperature and high- pressure fields has also been announced at $9.32/mmbtu for the period H1 FY20 which is 21.5 percent higher than the price ceiling of $7.67/mmbtu for the period H2 FY19 which could incentivise development of such projects.
Gas price hike to push up power prices, CNG and PNG rates
The increase in domestic gas price — notified at $3.69 per metric million British thermal unit (MMBtu) — for the first half (H1) of 2019-20 would jack up prices of power from gas-based plants apart from the prices of compressed natural gas (CNG) and piped natural gas (PNG). From the consumers’ perspective, the increase in domestic gas prices is negative, according to rating agency ICRA. “The upward revision in the domestic gas price would increase the cost of domestic gas-based power generation by about 3 percent,” the agency said in a report. It added, however, the recent decline in spot R-LNG prices will provide relief for power generation projects using imported R-LNG. For every $1/mmbtu decline in R-LNG price, the cost of generation would reduce by 55-60 paise per unit for gas-based power generation projects at the prevailing rupee-dollar exchange rate. Also, nearly 42 percent of the gas requirement of the fertilizer sector is met through domestic gas while the remaining is met through R-LNG imports. Prashant Vasisht, vice-president and co-head, corporate ratings, said: “The increase in gas price should result in an increase in CNG and PNG (domestic) prices by the city gas distribution (CGD) players. Assuming that the CGD players maintain their current absolute contribution margins in Rs/kg and Rs/scm terms, the CGD players could increase CNG price and PNG (domestic) prices by Rs 1.00-1.15/Kg and Rs 0.75-0.85/scm respectively.” He also said firm petrol and diesel prices would ensure that the benefit for the end consumers from conversion economics perspective will not be significantly affected. Further, PNG (domestic) would continue to be at par with subsidized LPG (and about 28 percent cheaper than unsubsidized LPG) in terms of energy cost and thus maintain its competitiveness. The gas price hike is expected to provide only partial relief to gas producers. The domestic gas price for the first half of FY20 is an increase of 9.8 percent from the price of $3.36/mmbtu (GCV basis) applicable for the second half (H2) of the previous financial year. “The increase in domestic gas price is in line with the rise in global gas indices primarily Henry Hub over the reference period and takes the price to its highest level in two and a half years. However, with gas prices at various international hubs falling again, the domestic gas price increase looks likely to be reversed in H2 FY20,” the report said. The fall in gas prices at international hubs is contributed by the commissioning of new gas liquefaction capacities with about 35 million tonnes coming online in 2018 and another about 30 million tonnes expected to come online in 2019. Shale gas production continues to be robust in the USA. Asian spot LNG prices, which remained $10-11 per MMBtu during the summer of 2018 have already declined to well below $5 per MMBtu mark. “The gas price for H1 FY20, though higher than H2 FY19, continues to remain low at an absolute level. Accordingly, gas production remains either a break even or a loss-making proposition for most fields for the upstream producers notwithstanding some decline in oil field services/equipment cost,” K Ravichandran, senior vice-president at ICRA, said. The appreciation of the Rupee against the dollar in the past few months also dampened the realizations of the gas producers. “Going forward, with several new gas liquefaction capacities coming online globally, the supply glut is expected to keep prices of domestic gas low in the near to medium term leading to poor returns even as domestic gas producers especially ONGC ramps up gas production significantly,” he said. The absence of a floor and sustained low prices — as seen in the past few years post implementation of the modified Rangarajan formula — make exploration and production unviable even for benign geologies. Nonetheless, with the goal to increase the mix of natural gas in the overall energy mix, the Union cabinet approved the policy framework on reforms in the upstream sector in February 2019. That allowed marketing and pricing freedom for new discoveries whose FDP is not yet approved and fiscal incentive provided for additional gas production over and above the normal production. That is an overall positive step for E&P companies. According to ICRA, the ceiling on price for gas produced from deep water, ultra-deepwater, high temperature, and high-pressure fields has also been announced at $9.32 per MMBtu for the period H1 FY20. That is 21.5 percent higher than the price ceiling of $7.67 per mmbtu for the period H2 FY19 which could incentivize the development of such projects.