Unhappy with gas pooling from July 1

Vol 18, PW 20 (04 Jun 15) News in Brief

Not everyone is happy with the oil ministry’s plan to introduce a uniform gas price from July 1 this year (2015).

On May 20 an oil ministry notice confirmed new guidelines to pool domestic gas with R-LNG to ensure all urea manufacturing factories pay the same price, in line with a cabinet decision on March 31. But fertiliser companies complain this will lead to upfront costs increasing as the government takes six-eight months to reimburse them for subsidies.

GAIL will be the gas pool operator, assessing demand and arranging gas. “But GAIL isn’t telling us what the price will be from July 1,” says a fertiliser producer.

“Unofficially we’re hearing pooled gas will cost us $10.40/mmbtu but this might be incorrect.” At present urea factories in north India pay $6.5/mmbtu for gas including marketing margin and transportation costs over the $5.01/mmbtu wellhead price.

“Every $1 increase in the gas price will affect us,” adds our source. “Our cost of producing a tonne of urea will rise by $28-$29.