Plea for pooled gas gains steam amid renewed tensions in West Asia
City gas firms want the government to reinstate a pooled gas mechanism. This is due to ongoing supply and price uncertainties in West Asia. The mechanism was previously withdrawn after a perceived easing of regional tensions. Companies are now see...
Mumbai: City gas distribution (CGD) companies have urged the government to restore the pooled gas mechanism to partly ease pressures from continued uncertainty over supplies and prices amid renewed tensions in West Asia, said two senior industry executives.
The mechanism was introduced this March following the escalation of the West Asia crisis. The government however discontinued it in July after concluding that the situation around the crucial Strait of Hormuz waterway had eased.
Industry executives said the withdrawal has created a shortfall in gas supplies and heightened sourcing uncertainty for CGD companies.
"We have made a representation at the industry level after the withdrawal and are urging the government to bring back the gas pool mechanism again," said a senior industry executive, adding that the pooling mechanism had a direct impact on the CGD industry and consumers.
Domestic administered pricing mechanism (APM) and new well gas (NWG) currently account for 40%-50% of gas sourcing for the city gas distribution segment, while the rest is through long-term contracts and spot purchases, executives said.
"Following the withdrawal of pooled gas, CGD companies are looking at mid-term purchases to bridge the supply shortfall, and plan to enter into longer-term contracts once market conditions stabilise," said the executive cited above, adding companies are scouting for gas supply deals.
India, the world's fourth-largest LNG importer, normally sources more than 40% of its LNG requirements from Qatar. However, the Gulf nation was forced to halt production at parts of its Ras Laffan LNG complex following missile attacks by Iran. Disruptions to shipping through the Hormuz due to the war compounded its worries, eventually leading Qatar Energy to declare force majeure on gas exports, forcing Indian gas companies to scramble for alternative supplies.
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The government had introduced the mechanism in March, making available around 7-8 million metric standard cubic meters per day (mmscmd) of natural gas available to city gas distributors, fertiliser makers, and other industries via a pooling mechanism. Pooled gas was priced at around $11.60 per metric million British thermal unit (mmBtu).
The Ministry of Petroleum and Natural Gas didn't reply to email queries.
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Mahanagar Gas Ltd (MGL) said renewed tensions between the US and Iran have squeezed imported gas supply.
To partly offset higher input costs, CGD companies raised prices by about ₹5 per kg since February, with the full impact of the increase expected to reflect this quarter, the executives said. They said a revival of pooled gas could help cushion consumers and CGD companies from further volatility in international gas markets while ensuring adequate supplies to the sector.
