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India modifies natural gas allocation policy

The Indian Oil and Natural Gas Ministry has modified its gas allocation policy for the city gas sector, allowing state-owned GAIL (India) Ltd to import gas and buy from newer domestic fields to meet growing demand from households and transport sector.

GAIL will pool or average out the price of imported as well as newer field gas with the lower-priced regulated field gas to supply to city gas entities for sale as CNG to automobiles and piped natural gas to households, a ministry order said. Till now, city gas entities were allocated natural gas from older fields, called the regulated or APM gas. To promote the sector, the Cabinet had in 2014-15 made city gas a 'no-cut' sector, which meant all demand of the sector would be met from domestic fields.
But as the demand grew and APM gas production remained stagnant, the ministry modified the allocation policy. As per the ministry's May 6 order, gas allocation to city gas will be made on a three-month basis as against the previous policy of allocations on six-month basis. "Revision of allocation for supply of pooled natural gas to city gas distribution (CGD) entities for CNG and piped natural gas (PNG) segments will be done on a quarterly basis for better representation of consumption," it said.

To meet the growing demand of the sector, GAIL will supply pooled natural gas 2.5% and above the 100 per cent requirement of CNG and PNG for household segment of each city in quarterly allocation.
To meet the shortfall in the availability of domestic gas, GAIL will source gas from the difficult fields which are priced at a higher rate than APM gas for mixing with available regulated gas, the order. "For any further requirement, GAIL will also source long term LNG failing which spot LNG may be sourced for mixing with available APM gas," the order said.

"The sourcing will be done by GAIL within their procurement procedure and (ministry's) PPAC shall vet the procurement procedure during finalisation of the uniform base price." For the present quarter, in case long-term LNG is not available, GAIL may procure spot LNG for mixing in the pool, it added.
In India, domestic gas prices are fixed on a six-monthly basis. The APM price for the six months beginning April 1 is $6.1/million British thermal unit (mBtu) while the same for difficult fields like deep sea is $9.92/mBtu. LNG in the spot market is available at nearly three times the domestic deep sea gas prices. The pooled natural gas, including gas from difficult fields and imported LNG "will be supplied to CNG and PNG segment," the order said. "Pooled natural gas will be supplied by GAIL to all city gas entities at a uniform base price arrived at in consultation with PPAC." GAIL will charge a marketing margin on the supply of domestic gas to the city gas segment. At present, GAIL supplies the APM gas to the city gas sector. Current gas allocation to CNG and PNG sectors is about 18 million standard cubic metres a day while the demand is about 21 mcmd.