Tuesday, Apr 16, 2024 | Last Update : 09:21 PM IST
City gas cos likely to take a hit
“This, however, will have a bearing on the margins of CGD companies,” said Mayur Patil, associate director, Crisil Research.
New Delhi: The recent run-up in the global prices of liquefied natural gas (LNG) is unlikely to impact demand for the fuel in India, but would affect the margins of city gas distribution (CGD) firms, said rating agency Crisil on Thursday.
Over the past 5-6 months, LNG prices in Asia have increased by over 70 per cent, driven by rising imports from China, it said.
In the past, higher prices have impacted LNG consumption in India, a price-sensitive market. However, things are slightly different this time around, with consumption rising 6-7 per cent to 20 million tonne in fiscal 2018, said Crisil.
“The Supreme Court’s decision banning polluting fuels such as fuel oil and petcoke for industrial use ins ome northern states has been favourable for LNG demand. The Gujarat High Court has also tightened norms on use of coal gassifiers by ceramic companies in Morbi and Wankaner. These moves resulted in a 20 per cent on-year growth in LNG imports in the first half of fiscal 2018," said Rahul Prithiani, director, CRISIL Research.
What enhances the attractiveness of LNG as an industrial fuel is its improved competitiveness compared with alternatives such as fuel oil and LPG, it said. “The regulatory push to expand CGD networks is also stoking demand. At an average crude price of $75 per barrel, the landed cost of fuel oil and liquefied petroleum gas (LPG) is expected to be $14.3/mmBtu and $19.2/mmBtu, respectively. In comparison, at an LNG price of $9.5/mmBtu, industrial piped natural gas is expected to rule at $14.8/mmBtu,” said Crisil.
In the medium term, LNG demand will be supported by development of gas infrastructure in the largely untapped eastern region, it said. “The government’s focus on increasing the share of gas in India’s overall energy mix, and the development of infrastructure in terms of LNG terminals and pipeline connectivity, also bode well for LNG demand over the medium to long term,” it said.
“This, however, will have a bearing on the margins of CGD companies,” said Mayur Patil, associate director, Crisil Research.
