Customers will pay more for new MGL gas supplies

Vol 12, PW 8 (04 Sep 08) Midstream & Downstream

Mahanagar Gas expects most of the increase in supplies beginning from January next year to come from Reliance’s D6 field and R-LNG from the Dahej LNG terminal, where capacity doubling to 10m t/y is scheduled for completion by the end of this year.

Still cautious, MGL has not yet committed to increasing supplies for its 1000 existing industrial and commercial customers - all facing massive shortfalls up to 40% in what they’ve contracted. “We are telling our customers that from January onwards the situation will get better, with more gas coming in,â€‌ adds PK Gupta, managing director of MGL.

“We’ll start commercial negotiations once we have a clearer idea of our supplies.â€‌ At what price will these customers get this additional gas MGL currently pays Rs4.10/cubic metre for subsidised Mumbai High gas and any additional gas, says Gupta, will most likely be priced at an average of current market prices in western India.

“Panna, Mukta and Tapti gas is priced at $5.75/mmbtu, Dahej R-LNG price (original RasGas contract) is priced at $3.86/mmbtu and the (oil ministry approved) price of D6 gas is $4.22/mmbtu,â€‌ stresses Gupta. “So the price of additional gas that we’ll get could be somewhere between $4 and $6/mmbtu.

â€‌ Of course, adds Gupta, “the actual price will depend on the strategies of different suppliers.â€‌ In short, the wide difference between the prices of subsidised gas that MGL now receives and market-priced gas it expects from January means customers should get ready to pay more.

MGL says it will not be possible to have a situation where existing customers pay less for supplies on the integrated network than new ones. Shortly after additional gas starts flowing in, MGL hopes to have its Mahape gas receiving station ready on the outskirts of Mumbai, to augment the present sole station at Wadala within Mumbai.

The company has taken possession of two pieces of land, measuring about 4000-sq metres at Mahape. GAIL must build the city gate station, which MGL hopes will be ready by March-April 2009.

LNG Summit