There is a massive surge in global gas prices and some of the consumer companies including IGL are talking about how there is a need to ensure adequate availability, perhaps increase the allocation for some of these city gas distribution (CGD) entities.
CNBC-TV18 spoke with Tarun Kapoor, Secretary, Ministry of Petroleum & Natural Gas, to know about how the government is looking at the international rise and the measures that can be taken.
In October, there will be a reset in domestic gas prices just because it is formula-based and that formula involves a blend of a lot of the major international hubs. So when asked if the government was looking at an additional gas allocation or in any way sort of helping the consumer sectors like city gas distribution.
Kapoor said there is an increase in the international price of natural gas and so, the LNG price has gone up. The price is expected to decline next year. Kapoor said that it is a temporary phenomenon because world production is going up and in the future, too, world production is expected to rise. In India, also domestic production is going up. This year itself, there's been an increase of 17 mmscmd of natural gas in the country, the domestic production. So going forward, things should cool down, Kapoor added.
“In the immediate future while the formula will be reset for the administered price gas (APM), so the price might go up slightly and that may have a slight impact on the city gas distribution because that's the first priority where this gas goes. But that price is quite low and even after reset, it is not going to be very high,” he said, adding that the other domestic gas which is outside APM, which is the otherwise market-determined price is also not very high because there is an upper cap to that, but the imported portion is going up. Overall, the government will be able to manage and then look forward to lower international prices next year, said the petroleum secretary.
When asked how much will the domestic production of natural gas increase by the end of this fiscal and the city gas distribution companies, have asked for a higher gas allocation, so what is the status there? Kapoor said city gas distribution companies automatically will get a higher allocation because there is a priority that has been set by the government. So, the highest priority is city gas distribution, then fertiliser and then power -- in that order.
However, APM gas, the domestic gas is of two types, one is the administered price gas, where the price is fixed by the government and the second is the open market gas. So the open market gas quantity has increased, the APM gas quantity has not increased. So a city gas distribution will get the extra quota and someone else's APM quota would get cut but then they will get the other domestic gas, he explained.
He further said that the other domestic gas though a little more costly than APM gas they are still not very costly because there is an upper cap there also. "We have already set a mechanism where the domestic gas can be sold through an open transparent bidding mechanism. Some quantities can also be sold in the gas exchange which is now fully functional. Therefore, the domestic gas supply, as it increases this year, and then next year also we expect another major increase to happen. That will take care of the increase in demand. Going forward, we want to invest more and more in exploration so that the domestic gas supply keeps increasing," specified Kapoor.
Currently, almost 50 percent of our gas consumption relies on imports, LNG imports are still a huge part and that is where the major pressure will be seen, on those consuming sectors.
Kapoor said this year, the increase has been about 17 mmscmd and next year, there will be some more increase in the total increase from KG Basin itself we expect would be over 30 mmscmd. So, an increase of a total of 30 mmscmd, which is around 40 percent of the domestic production before KG Basin gas started flowing in. There will also be more emphasis on exploration and the government can hope that it will have more discoveries in the country and therefore domestic gas production can go up, he added.
On BPCL divestment, he said the process is on track, and things are moving ahead. It is very major disinvestment, so the bidders also need time to probably understand and then be ready to give the financial bids. He said he could talk more details because he did not know who the bidders are.
Talking about investments into clean energy, he said clean energy is the future for the world and it's the future for India also. “As we transition into the different forms of energy, which would be more sustainable, our oil companies are also looking forward to this change and they are becoming a part of this change. So now clean energy on one side, we have wind, solar and hydro. On the other side, we also have biofuels. Our own oil companies are going into biofuels in a very big way. Ethanol is one and then compressed biogas is another and also biodiesel. Hydrogen is also coming up fast. The oil companies are playing a major role they are consumers of hydrogen,” said Kapoor.
For the entire discussion, watch the accompanying video