Spot LNG prices to soar, CNG biz to suffer
If the early indications come true, spot LNG prices in India are going to touch the roof in next two months. Shell – the primary supplier of spot LNG in India through its Hazira terminal – has indicated as high a price as $25 (ex-ship) a mmBtu (million metric British thermal unit) for October cargo to the prospective customers. This is an increase of 25 per cent from the already agreed $20/mmBtu for the September cargo. Prices were as low as $15 in June. Upon re-gassification and payment of taxes and duties, the landed cost of LNG in Gujarat – India’s largest market for natural gas as well as spot LNG - would be higher by approximately $2/mmBtu. Responses on the price negotiation for October cargo, price outlook and sustainability issues were not available from Shell. While the larger picture on the availability as well as price is yet to emerge, bulk consumers of Shell LNG in Gujarat told Business Line that such prices would no longer be sustainable. Gujarat’s dependence on spot LNG has increased manifold since the beginning of 2008. Accordingly, sources say, Shell’s throughput at Hazira terminal has gone up by nearly 50 per cent to 19 cargoes in the first half of 2008. The company is currently expanding the terminal capacities from 2.5 million tonne through a de-bottlenecking exercise. CNG biz in the red As all the city gas distributors in Gujarat, except Gujarat Gas Company, use spot LNG in different proportions, the spiralling of prices is leaving a telling impact on the margins of the CGD players catering to the retail as well as industrial customers. GSPC, the largest gas supplier in Gujarat, has reportedly increased its retail prices by 15 per cent in August in the face of 40 per cent increase in costs. According to sources, the most affected is the CNG (compressed natural gas) business. CNG is used as greener auto-fuel and operators could hardly pass on the increase in costs of procurement. Sources feel that Adani Energy, GSPC Gas and Sabarmati Gas (a JV of GSPC and BPCL) supplying CNG to the larger part of Gujarat could hardly generate profit margins in CNG segment.
