OIL & GAS

Range for imported gas price over next 2-3 yrs seen at USD 6-8/mmbtu, says Edelweiss Financial Services

The Petroleum and Natural Gas Regulatory Board (PNGRB) chairman yesterday told CNBCTV18 that guiding principles for open market access to gas customers will be put in the public domain in the next 3 months and in the 3 months thereafter, they will start ending the exclusivity enjoyed by city gas companies.

Discussing the impact of this development on gas companies, Jal Irani, oil & gas analyst, Edelweiss Financial Services said, “Essentially, it will be a function of what the tariff is going to be and the returns the companies will get on the open access, which is believed to be about 20 percent of the volumes,” said Irani.

“Assuming that it is a reasonable return of 14 percent on incremental 20 percent volumes this should be value accretive to the companies,” he said, adding that one will have to see how the whole thing works out.  There is a belief that since global gas prices are low, this would be best time to shift from other fuels to a clean energy like gas.

Irani said fall in global liquefied natural gas (LNG) prices is positive for Indian companies because there are different uses of gas. “Power which is the largest consumers of gas but at the same time coal has been more competitive than gas domestically.

At USD 3 free on board (FOB) if you add import duty, sales tax, regasification cost, then fully loaded price comes to about USD 5.5 mmbtu, which translates into a power tariff of about Rs 2.5 a unit for power generator,” he said, adding that “At that price it’s not only cheaper than imported coal but it is almost on par with even domestic coal for generation of power.

Source
CNBC
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