The Hindu Business Line : Gujarat Gas struggles to source supplies

Kolkata, May 18 Gujarat Gas Company Ltd seems to be running out of options in its bid to increase natural gas availability in the next couple of months.

While both GGCL and parent British Gas are tight-lipped on the developments, sources told Business Line that GGCL — a pioneer in private-sector investment in city gas distribution in India — has been forced to put its business on a “maintenance mode”.

Investments to create fresh supply infrastructure are on hold, and chances are high that the company may not be able to supply promised volumes to upcoming industrial capacities in the State during July-September 2008.

Price hike

GGCL’s volume sales have fallen nearly 25 per cent to 2.8 million metric standard cubic metres a day (mmscmd) compared to the corresponding period in 2007.

Adding to the problems, the cost of procurement has increased by no less than 15 per cent.

To maintain profitability, the company recently increased prices for domestic and CNG supplies, and is reportedly hoping to hike prices for industrial supplies by July 2008.

According to sources, plans to create a distribution joint venture with Gujarat State Petroleum Corporation (GSPC) are also on hold.

LNG import

Faced with reduced natural gas supply from the Panna-Mukta-Tapti joint venture following the transfer of marketing right to GAIL, GGCL was pinning hopes on BG to secure LNG supplies at a reasonable price to tide over the crisis.

Sources close to the development said that despite its best efforts BG has so far not been able to firm up plans to import LNG.

The global major was negotiating with Petronet LNG for third-party access to Dahej terminal.

While the exact nature of the stumbling blocks is not known, sources rule out the possibility of such imports in the near future.

GGCL’s chances of sourcing spot LNG from other sources are also limited on both availability and price concerns.

LNG crunch

A drastic reduction (by approximately 3 mmscmd) in PMT supplies to Gujarat (through both GGCL and GSPC) has already forced a number of power and fertiliser units in the State to switch over to spot LNG (which is costlier than natural gas, but cheaper than naphtha). This, in turn, has created an availability crisis of LNG, now selling at over $15 per million metric British thermal unit (mmBtu).

GGCL was receiving approximately 3.5-3.6 mmscmd of contracted gas during January-June 2007. While the bulk of the supplies (approximately 3 mmscmd) came from PMT, the rest were from Cairn-operated Cambay field, Niko-Bheema, GSPC-Hazira and APM supplies by GAIL (0.1 mmscmd).

Though supplies from GSPC were discontinued in July 2007, GGCL managed to step up the availability of contracted volume to 4.2 mmscmd in 2008 by leveraging BG’s share in the expanded PMT capacity.

The plan, however, went awry with after the Union Ministry of Petroleum and Natural Gas redefined the marketing principles of PMT gas.

Related Stories:
Drop in natural gas availability to hit Gujarat Gas retail sales

More Stories on : Petroleum | Outlook

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page