The Hindu Business Line : Spot LNG prices shooting up in line with crude

Supplied primarily by Shell through its Hazira terminal in Gujarat, spot LNG prices have shot up to from $ 15 million British thermal unit (mmBtu) to $ 20 per in June.

As if that was not enough, availability is also adding to the concern of consumers. Gujarat being most dependent on this form of energy, is also the worst affected by the crisis

Sources in GSPC Group, one of the major buyers of spot LNG, told Business Line that it had booked the next consignment due to arrive in mid July from Shell at a price of $20 per mmBtu.

The company is apprehending that prices may flare up to $24 per mmBtu in a month or so.

And, rest assured there would be no dearth of buyers, come what the price may be. “Gujarat is starving for gas for last 10 days,” a source said adding that buyers including fertiliser and power plants were left with little choice as the conversion cost of naphtha – the next alternative – comes out to be about $30 per mmBtu.

“The onset of monsoon has reduced the demand from power sector during the last one week, but fertiliser and other industries have little choice,” the source said.

Considering the widening gap between demand and supply of natural gas in the State – especially after the change in distribution policy of PMT gas beginning April this year – spot LNG has emerged as the energy lifeline to a vast majority of industries in Gujarat.

According to available estimates during May and June at least six shipments of LNG cargoes arrived in Gujarat. Needless to say that everything was sold out.

GSPC group, for example, meeting 50-60 per cent of its total peak daily requirement of approximately 12 million standard cubic metres a day (mscmd) through spot LNG pulled with about 2.5 mscmd natural gas supplies and 3 mscmd contracted LNG supplies from Petronet LNG.

While a part of its total purchases are for the group power plant, the rest is supplied to the end-consumers including city gas distribution (through GSPC Gas).

A higher procurement cost of GSPC would, therefore, leave a telling impact on the overall energy market of Gujarat.

Sources confirm that the rising cost of procurement is leaving a pressure on GSPC margins and the company may be forced to increase its supply prices to the end consumer sooner or later.

“Since April we have increased retail prices only once. But the going seems to be getting tough and we may not be able to hold retail prices at the current level for long,” the source said.

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