Unified tariff expected to make KG Basin gas more attractive to consumers
Based on the FY20 consumption levels, the Petroleum and Natural Gas Regulatory Board (PNGRB) has indicated that unified gas pipeline tariff would be around Rs 56.8 per million British thermal units (mmBtu).
The new unified gas pipeline tariff regulation, once implemented, is expected to significantly cut rates of gas to be procured from the Krishna Godavari Basin (KG Basin), Nomura analysts said. Based on the FY20 consumption levels, the Petroleum and Natural Gas Regulatory Board (PNGRB) has indicated that unified gas pipeline tariff would be around Rs 56.8 per million British thermal units (mmBtu).
Under the current additive pricing regime, the transportation cost of gas sourced from the KG Basin, touted to be the largest source of upcoming new gas in the country, is in the range of Rs 100 to Rs 193 per mmbtu.
For the Jagdishpur-Haldia-Bokaro-Dhamra (Urja Ganga) pipeline, rates of gas transportation from the KG Basin might fall by as much as Rs 128.3 per mmBtu — or 66% lower than current tariff levels — if the new unified tariff norms are put in place, the brokerage firm noted.
The unified tariff would be applicable on the integrated trunk network of 13 pipelines with combined volume of 113 million standard cubic meter per day (mmscmd)—about 75% of the country’s FY20 consumption levels— mostly run by state-run Gail and Gujarat State Petronet (GSPL).
Analysts at ICICI Securities pointed that unified tariff would help boost the Urja Ganga pipeline’s utilisation, as otherwise, its rates would be prohibitively high. The idea behind unified tariffs is the development of new gas markets in far flung areas by rationalising pipeline transportation rates.
The current additive pricing system raises pipeline charges every 300 km, discouraging potential consumers located in areas far from the gas production facilities and import terminals.
“Excluding a few customers in zone-1 of Gail’s Hazira-Vijaipur-Jagdishpur network and GSPL’s network in Gujarat, tariff will not increase meaningfully for other customers (compared to overall gas costs), even for Mumbai High gas of ONGC or LNG imports at Dahej,” Nomura said in a recent note on the Indian gas sector.
As FE reported earlier, industrial natural gas consumers had objected to the government’s unified tariff plan, pointing that since the new tariff structure will not be imposed on all the gas pipelines in the country, it will lead to market distortion. Customers will end up paying under multiple tariff regimes, depending on the pipelines used by them.