Gas prices to rise to $14 mmbtu
It’s time to wake up and smell the coffee. Power, petrochemical and industrial plant developers planning to use gas as their fuel may have to either abandon their plans or start reworking on the costs.
By Soma Banerjee, TNN |
NEW DELHI: It’s time to wake up and smell the coffee. Power, petrochemical and industrial plant developers planning to use gas as their fuel may have to either abandon their plans or start reworking on the costs. As per recent studies, gas prices are set to move up at $13-14 mmbtu in the next five years. APM gas is sold at a paltry $2.3 per mmbtu. Power plants which have been running on such highly-subsidised gas may soon need to rework costs as the gas prices move towards market driven prices.
Globally, gas prices have seen huge spikes following the escalation in crude prices and analysts believe that this trend is likely to hold good in the near to medium term. India which has seen several players in the gas market now has a wide range of prices. While the APM gas sold primarily by ONGC is at highly subsidised rates supplied to the power and transport sector, gas producted by private players like British Gas or Reliance is selling at close to $5 mmbtu. There is a third lot of consumers who are now buying regassified LNG.
The power sector has been, however, demanding a separate gas pricing system for the power sector. A hike in gas prices has a direct bearing on the power tariffs and has to be checked if power tariffs are to be kept at affordable levels, sources say. In fact, officials at the planning commission say that India’s power sector cannot afford gas beyond $4 per mmbtu. In fact, it further goes on to say that coal is the only sustainable fuel option.
Officials say that the value of gas has been rising as ways and means are found to render gas more easily transportable across the world. Thus, since 82% of crude produced in the world is traded internationally — implying that crude is highly mobile — the price of crude is far higher than gas, which is not so mobile but which is much cleaner than crude. However, transportation of gas through transnational pipelines and LNG ships is slowly making gas more mobile and consequently pushing up its price.
Analysts have it that though gas was used first in the 1970s as a fuel, it was available for $1/mmbtu 15 years ago, for $3/mmbtu three years ago, but is not available even for $6/mmbtu currently. Spot market prices of has been trading at around $10 per mmbtu. India has had to import spot cargoes of LNG of late to meet the increasing demands of gas.
Globally, gas prices have seen huge spikes following the escalation in crude prices and analysts believe that this trend is likely to hold good in the near to medium term. India which has seen several players in the gas market now has a wide range of prices. While the APM gas sold primarily by ONGC is at highly subsidised rates supplied to the power and transport sector, gas producted by private players like British Gas or Reliance is selling at close to $5 mmbtu. There is a third lot of consumers who are now buying regassified LNG.
The power sector has been, however, demanding a separate gas pricing system for the power sector. A hike in gas prices has a direct bearing on the power tariffs and has to be checked if power tariffs are to be kept at affordable levels, sources say. In fact, officials at the planning commission say that India’s power sector cannot afford gas beyond $4 per mmbtu. In fact, it further goes on to say that coal is the only sustainable fuel option.
Officials say that the value of gas has been rising as ways and means are found to render gas more easily transportable across the world. Thus, since 82% of crude produced in the world is traded internationally — implying that crude is highly mobile — the price of crude is far higher than gas, which is not so mobile but which is much cleaner than crude. However, transportation of gas through transnational pipelines and LNG ships is slowly making gas more mobile and consequently pushing up its price.
Analysts have it that though gas was used first in the 1970s as a fuel, it was available for $1/mmbtu 15 years ago, for $3/mmbtu three years ago, but is not available even for $6/mmbtu currently. Spot market prices of has been trading at around $10 per mmbtu. India has had to import spot cargoes of LNG of late to meet the increasing demands of gas.
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