Expensive R-LNG compels Adani to raise CNG prices

Vol 11, PW 19 (07 Feb 08) Midstream & Downstream

Adani Energy has raised the price of CNG by 14% from its filling stations in Gujarat, blaming soaring demand and expensive R-LNG.

From February 1, customers buying CNG from Adani stations in Ahmedabad and Vadodra will have seen the CNG price rise from Rs25.50/kg to Rs29/kg. Justifying the hike, an Adani source tells us rising customer demand has forced the company to buy (spot) R-LNG, which is hugely more expensive than locally sourced domestic gas.

“Demand for CNG is going up,â€‌ we hear. “More and more private car owners are changing from expensive petrol to cheaper CNG.

â€‌ As of now Adani receives 150,000 cm/d from the Hazira gasfield (operated by Niko Resources and GSPC) exclusively for use as CNG. But this is not enough to meet soaring demand, now touching 215,000 cm/d.

Adani Energy is meeting the shortfall by buying spot R-LNG, but is having difficulty absorbing the cost. In January it was billed $11 per mmbtu for supplies purchased a fortnight earlier.

“Being billed up to $7/mmbtu (for R-LNG) is OK,â€‌ we hear. “You can insulate CNG prices by some tinkering with industrial PNG prices.

â€‌ But R-LNG at $11/mmbtu, says Adani, is beyond any “tinkeringâ€‌ and the company had no option but to increase retail CNG prices for consumers. “We asked the Gujarat government for permission to raise the price and it agreed.

â€‌ Adani says it is willing to re-consider the price rise, “if we get more low-priced natural gasâ€‌ to meet rising demand, highly unlikely. Adani Energy began selling CNG in Gujarat in September and October 2004.

On top of the 215,000 cm/d it sells as CNG, the company also sells 200,000 cm/d piped gas to industrial and commercial establishments in Ahmedabad. In Vadodra, it sells 40,000 cm/d PNG and 10,000 cm/d CNG.

Adani has no plans to raise piped gas prices in Ahmedabad and Vadodra, presently selling at Rs16/cubic metre. “We want to keep gas prices stable for a year at least,â€‌ says Adani.