No CGD support for gas allocation guidelines

Vol 25, PW 12 (19 May 22) Midstream, Downstream, Renewables

Almost nobody in the CGD sector is celebrating after the oil ministry's latest attempt to give a sop to them over domestic gas supplies.

Instead, most CGD companies have sharply criticised the oil ministry’s May 6 (2022) three-page guidelines to GAIL on domestic gas supplies for sale to homes and CNG to vehicles. "These guidelines bring no good news for us," says a source at a CGD company with operations across India.

"This is just an eyewash." At an April 2 (2022) meeting with oil secretary Pankaj Jain, CGD companies unsuccessfully sought an increase in the 17m cm/d of domestic gas set aside for the sector.

Cheap gas is vital for them as they face increasing CNG demand and meet stiff minimum work programme commitments for household connections. "All these guidelines do," adds our source, "is to ask GAIL to pool the domestic gas allocated to us with (domestic) HP/HT gas (from high-pressure/high-temperature fields), long-term and spot LNG."

Under the guidelines, signed by deputy secretary AK Jha, GAIL will supply pooled gas to CGD companies with quarterly revisions based on their actual consumption over the past three months and a 2.5% increase. The ministry adds the base price for pooled gas will be decided in consultation with its Petroleum Planning and Analysis Cell (PPAC); GAIL will charge a separate marketing margin.

But the uniform base price would likely be higher than the current domestic gas price of $6.10/mmbtu, in force since April 1 (2022), and more than double the earlier $2.9/mmbtu price. "These guidelines say nothing about increasing the domestic gas allocation to us beyond 17m cm/d," says another CGD source.

"We were hoping for an increased allocation even though the secretary (Jain) ruled it out (on April 2)." CGD sources add HP/HT gas is yet to be produced in India.

"It will be sold to the highest bidder, and that might be anyone, not necessarily GAIL," we hear. GSPC, IndianOil, GAIL, Adani Total, and Torrent Gas are already importing LNG and pooling it with domestic gas to supply CNG customers and homes.

"We don’t need government policy to pool long-term or spot LNG," adds a CGD source, "Individual importers are already doing it; only now GAIL will do it for the (CGD) sector and charge a marketing margin."