Low Gas Prices May Help Revive Power Assets
Gas prices in international spot markets are at lowest at about $3 per mmbtu, a boon for the ailing 1 lakh crore power assets if the Centre is able to pull off the proposed revival scheme announced in the budget for 2019-20. The present prices may be short-lived, with some countries banning Chinese shipments due to Covid-19 scare, but experts said the rates are likely to be in the range of $4-4.5 per mmbtu for a few more years owing to less demand and excess supply. ET had reported on January 7 that the Union power ministry had finalised two schemes to procure 4,000 MW from gas-based power plants to rescue the stranded plants. The schemes include procuring 2,000 MW from gas-based plants through auction and bundling it with an equal capacity of solar power. Another 2,000 MW will be procured through online reverse auction, on a model similar to previous such schemes. A senior government official said the scheme is close to finalisation and will be put up before the Union Cabinet for approval. He, however, said approval from state governments on waiver of taxes is still pending. “Ample LNG supply is lined up from key countries in the next five years and demand is sluggish in picking up. Hence, structurally LNG prices will remain below $5 per mmbtu,” said Debasish Mishra, leader, energy and resources for Deloitte in India. “India must take advantage of this and make a serious push on renegotiating oil-linked contracts on supply side and make use of the 24 GW of stranded gas power capacity either on standalone basis or combined with RE (renewable energy).” He said spot LNG prices in Asia are at an all-time low below $3 per mmbtu, against $20 per mmbtu following the Fukushima nuclear power plant disaster in February 2014, when Japan shut down more than 50 nuclear reactors. Industry experts said warmer winters in Korea and Japan, restart of Japanese nuclear power plants and Covid-19 outbreak coupled with increase in LNG capacity in Australia and the US and pipeline connectivity of China and Russia have led to glut-like conditions in global LNG markets. This has led to record low prices of the imported gas.
Shell, RIL Win in English Court Against Govt in PMT Dispute
In a big win for Shell and its partner Reliance Industries (RIL), the English High Court has rejected Indian government’s challenge to the recovery of certain costs in the western offshore Panna-Mukta and Tapti oil and gas fields they operated. The government had sought $3.5 billion in dues from RIL and Shell-owned BG Exploration & Production India Ltd based on an October 2016 partial award of an international arbitration tribunal over the recovery of certain costs from the sale of oil and gas produced from the Panna-Mukta and Tapti fields. The two firms had gone to the English High Court against the 2016 partial award. Sources with direct knowledge of the development said the English High Court had previously directed the tribunal to reconsider certain issues. The tribunal subsequently in 2018 issued another award to uphold the two companies right to recover costs. This award was challenged by the government. Justice Robin Knowles of the English High Court (EHC) delivered a judgement on February 12 rejecting all of government of India’s five challenges to the 2018 award, sources said. When contacted, RIL declined to comment on the issue. The government had used the 2016 partial award not just to raise a $3.5-billion demand on Reliance and Shell but also sought to block RIL’s $15-billion deal with Saudi Aramco on grounds that the company owed money to it. RIL and Shell had countered the government petition in the Delhi High Court saying, “The petition is an abuse of process as no arbitration award has fixed any final liability of dues on the company.”
ACC clears Manoj Jain as GAIL chairman ahead of co split
The appointments committee of the Cabinet has cleared Manoj Jain as the next chairman & managing director of state-run gas utility GAIL. He will take over after incumbent Ashutosh Karnatak moves up to join APTEL (Appellate Tribunal for Electricity) as member technical (oil and gas). Jain is currently director (business development) in GAIL and is expected to take over in a few days as the government has also cleared Karnatak’s appointment to APTEL. Karnatak has time till June in GAIL but is expected to take up his new assignment earlier. Jain’s appointment coincides with the government move to split the company into two entities for marketing and transportation, with the possibility of divesting the latter to a strategic partner. Thus, as chairman, he has his task cut out — ensuring smooth transition and retain market hold in the changed scenario. Jain will also have to ensure timely execution of 5,700-km of major pipeline projects to expand the gas grid and city gas projects at a total cost of Rs 45,000 crore.