OPEC deal not to hit govt’s plan to push gas: Pradhan
The government does not see the OPEC deal for reducing oil production and the resultant rise in crude prices as a spoiler for creating a gas-based economy, oil minister Dharmendra Pradhan said on Tuesday and sought “equitable deals” between LNG producers and buyers.
“The expanding market and consumer base in India, abundance of future availability from upcoming sources and long-term contracts will moderate (LNG) prices and ensure affordability,” Pradhan said after a session with International Gas Union organised by state-run gas utility GAIL as part of Petrotech 2016.
Traditionally, LNG deals are linked to crude. Soon after the OPEC production-cut deal was announced on November 30, LNG prices spiked to their highest level for 2016 in the Singapore market on December 2. This has sparked fears that gas prices may face upward pressure as oil rises in the wake of the OPEC deal.
We have to move to market mechanism. Currently we have some of it… segments such as CNG, PNG are linked to domestic gas and slightly lower than imported fuel. But as the consumer base expands in line with measures being taken by the government, a gas-based market will develop,” Pradhan said.
IGU president David Carroll supported Pradhan’s contention. “There is democratisation of gas trade… decoupling of oil and gas prices. Together with abundance of supplies from new facilities expected to come on stream, there will be downward pressure on gas prices,” he said.
Pradhan said there was no need to ring alarm bells as Opec was trying to rebalance the market and soak up extra stocks. “We have conveyed our views to Opec. They understand the imperatives (of producers and buyers). We have to watch how the deal works on the ground in coming days,” he said.
Being a net importer, the Indian economy is sensitive to oil and gas prices. The fall in oil prices in the last two years has allowed the government to initiate measures to raise the standard or living of the poor. This has expanded the country’s energy demand, which could shrink if oil prices rise exponentially. That, in turn, could put Opec back to square one — where stockpiles start building up on sluggish demand.
