Gas sector finds itself in bright spot
Driven by the steep fall in natural gas prices, the gas-based units generated 5,012 million units (kWh) in the month of April as compared to 4,301 million units in March this year, according to Central Electricity Authority (CEA) data
Ahmedabad: At a time when most industry sectors in the country are reeling from consequences of the Covid-19 pandemic, the gas sector seems to have found a bright spot. During the lockdown period, when the overall demand for power was down by at least 30 per cent in the country, a different story unfolded for the gas-fired power generating units. Driven by the steep fall in natural gas prices, the gas-based units generated 5,012 million units (kWh) in the month of April as compared to 4,301 million units in March this year, according to Central Electricity Authority (CEA) data. Gujarat is considered a hub for natural gas and of the 22,000MW of installed capacity for gas power plants in the country, about 6,500MW is from the state. Torrent Power’s SUGEN unit generated the highest among gas-based units at 452 million units in April, up from 349 million units generated in March. Torrent Power’s total generation from gas-based units went up to 1,000 million units in April as compared to 651 million units in the previous month, CEA data shows. Apart from using a cleaner fuel option, gas-fired power plants are also easier to adjust to fluctuating demands, said sources. In India, the declining imported gas (LNG) prices and rise in availability of cheap domestic gas will lower consumers’ average energy cost as much as 21 per cent in 2020, reversing price escalation seen over the past decade, Morgan Stanley said in a report on May 19.The fuelling infrastructure, it said was expected to rise five times and residential connections to increase seven times over the next decade, helping India achieve its target of gas contributing nearly 15 per cent of its energy mix by 2030, up from 6.2 per cent currently. The demand for gas was down to only 30 per cent in the month of April and this has currently gone up to 50 per cent after recent relaxations given to industries, said an industry expert. He said the gas demand got the much-needed cushion from power generating units in the month of April when lockdown restrictions were stricter.“For downstream natural gas companies, the revenue models are very robust. The sector will command and do well as the economy opens. The normalization of volumes is expected around October-November,” said Harshvardhan Dole, vice-president, IIFL Institutional Equities. He said that given the large number of licensees that have been awarded in the past few years, there is a talent crunch.Some new CGD entrants, including one Delhi-based company, have even considered giving pay hikes to their employees, said sources.Share prices of companies like Gujarat Gas, Indraprastha Gas, Mahanagar Gas and Adani Gas are trading at down 15-20 per cent as compared to March levels before Covid-19 lockdown.Companies like Shell Gas, GSPC LNG and Petronet LNG are currently selling re-gasified gas from the cargos that landed at their ports earlier but was stuck due to lockdown restrictions, said an official working with a leading gas transmission and distribution company. He said that new cargo will begin to arrive next month onwards.Covid-19-led demand concern have pulled down the spot LNG price to a new low of about US $2 per mmbtu, according to CLSA report on May 27 on the Indian oil and oil and gas sector. Futures suggest a sub-US $4 per mmbtu price for the rest of the year, it added.