The Hindu Business Line : Drop in natural gas availability to hit Gujarat Gas retail sales

Supply worries
There is no immediate possibility of the shortfall being met by LNG.
Shortfall in gas supplies may impact the company’s investment plans.

Pratim Ranjan Bose

Kolkata, March 12 Gujarat Gas Company Ltd (GGCL) is expecting a 10 per cent drop in availability of natural gas from Panna-Mukta-Tapti source beginning April.

According to industry sources, with no immediate possibility of replenishing the shortfall by LNG, the company’s retail sales may come down accordingly in the April-June quarter.

While Gujarat Gas official sources avoided discussions on the issue, industry sources said that beginning April, availability of contracted volumes from PMT sources to GGCL may come down from 3.1 million standard cubic metre a day (mmscmd) to 2.8 mmscmd.

The shortfall in availability may impact GGCL’s retail supplies on pro-rata basis. The bulk industrial supplies, however, will not be impacted. GGCL has already witnessed 0.8 mmscmd drop in spot supplies from PMT soon after the handover of the marketing rights of PMT gas to GAIL.

When contacted GAIL Chairman, Mr U. D. Choubey, did not confirm any such possibility. According to him, as per the guidelines laid down by the Union Ministry of Natural Gas, supplies to retail segment will be directly dependent on the allocations for the priority sector.

GGCL was previously pinning hopes on LNG options to meet the shortfall. While the spot LNG currently selling in Gujarat at $14-18 per mmBtu was not considered as a viable option for city gas distribution business, GGCL was particularly hopeful of LNG import strategies at threshold price being worked out by its parent British Gas. However, as things stand now, such options may not materialise in the short run.

Deferring Investments

It may be mentioned that the change in marketing principle of PMT gas which had taken place in end 2007 came as a bolt from the blue to GGCL. The company was earlier expecting to maintain its top line growth in 2008. Accordingly, it had also lined up a few investment plans.

To maintain profitability in the changed scenario, Gujarat Gas may have decided to postpone investments in areas other than CNG and domestic business in 2008. The company has already deferred the plan to create a new office space. Investments towards creation of more industrial load may also be postponed for the time being.

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