Another gas price cut for industrial users in Gujarat

Vol 12, PW 15 (18 Dec 08) Midstream & Downstream

GSPC Gas and Adani Energy plan to cut gas prices a second time in as many months after failing to dissuade industrial users from switching to naphtha.

A GSPC Gas source tells us this round of price cuts could be between Rs1 to Rs4/cubic metre. But officially, GSPC Gas managing director PPG Sarma is cautious about any new cut.

"At this juncture it is very difficult to say anything about a second round of price cuts because everything depends on the price of spot LNG cargoes," he tells us. Adani Energy is more forthright on the scope for a price cut.

“There will be a second price cut by the third week of December,â€‌ says a company source. Industrial gas customers in Gujarat also expect GSPC Gas and Adani to cut prices because of fierce competition in 14 towns, as companies switch to cheaper naphtha.

On November 16, GSPC Gas cut prices by Rs4 to Rs19.50/cubic metre from Rs23.50/cubic metre. Adani also slashed prices by Rs4 to Rs22.7/cubic metre last month to retain about 300 industrial users at the Vatva, Narol and Naroda industrial zones on the outskirts of Ahmedabad.

But many industrial users still switched to imported naphtha, which is now selling at all-time lows. Globally, naphtha prices have crashed following a crude oil price fall below $50 a barrel from record highs of $147 a barrel in August.

Spot LNG is now at a severe disadvantage with prices also crashing, down markedly from the all-time high of $22/mmbtu – the highest ever such price in India - that GSPC is believed to have paid in August and September for LNG from Shell-Total at Hazira. GSPC Gas sells 1.5m cm/d of gas in Gujarat with industrial customers buying 1.35m cm/d.

Household gas users and vehicles that run on CNG have not received the same gas price cuts given to industrial users.

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