SYS-CON MEDIA Authors: Pat Romanski, Sean Houghton, Glenn Rossman, Ignacio M. Llorente, Xenia von Wedel

News Feed Item

Indian Gas Sector - A Paradigm Shift in Pricing Dynamics

MUMBAI, March 20, 2014 /PRNewswire/ --

Bharat Book Bureau presents Indian Gas Sector A Paradigm Shift in Pricing Dynamics. The Cabinet Committee for Economic Affairs (CCEA) has approved the Rangarajan Committee's proposal to raise the price of natural gas from April 1, 2014. The price of gas is expected to be raised to around $8.4/MMBTU and then revised every quarter thereafter as per the Rangarajan formula. The price of gas is determined by averaging the netback wellhead prices of Indian imports and the gas prices prevailing at global trading hubs of US, UK and Japan. http://bit.ly/1oyE2iZ

     (Logo: http://photos.prnewswire.com/prnh/20130128/590935)

While upstream oil and gas companies have been demanding a gas price increase for a few years now, the fertilizer and power sectors have voiced serious concerns over any increase in gas price. The upstream companies felt that a low price of gas did not adequately compensate them for the substantial risks involved in exploration activities. Further, the E&P companies argued that offshore exploration and production is significantly costlier than onshore exploration and the low price of gas makes deepwater and ultra-deep water exploration and production unviable. On the other hand, the power and fertilizer sectors are extremely price sensitive and any increase in the price of gas has a big impact on their profit margins. Both these sectors have zero pricing power as the prices of fertilizers and energy are heavily regulated by the government.

Request  for  sample  pages: https://www.bharatbook.com/RequestSample.asp?pid=323079

The production of gas from RIL's KG-D6 block was expected to transform the gas market in India. The gas consumers embarked on an expansion spree encouraged by the prospects of cheap and abundant gas. Although the gas field showed great promise in the initial years of production, production has been on the decline over the last two years and production has decreased to just 14 MMSCMD compared to estimated production of 80 MMSCMD. The gas utilization policy of the government that assigns priority to various sectors for allocation of domestically produced gas resulted in a skewed distribution of gas supply when domestic production declined, benefiting the fertilizer sector at the expense of the power sector. While the supply of gas to the fertilizer sector was not affected due to the decline in domestic production, owing to higher priority, the supply to the power sector reduced substantially leading to an overall drop in gas power plants PLFs across the country. As a result, the power industry in India is facing an extremely tough business environment. The sourcing of fuel, both coal and gas, has become extremely difficult. The power companies are burdened by excessive debts and banks have become weary of lending to the sector.

The decline in domestic production of gas has increased the country's dependence on imported LNG. The share of LNG in total gas consumption has reached around 30% and has been increasing over the years. There was a huge disparity in prices of domestic gas and LNG. While domestic gas cost consumers around $4.2-5.5/MMBTU, LNG prices were in the range $13-18/MMBTU.

Private gas producers have argued that gas should be sold at a competitively determined 'arms length' price in line with provisions of the production sharing contracts. However, given the large supply-demand mismatch and dependence on imported LNG, competitive bidding for gas results in a price of gas which is almost at parity with imported LNG. GSPC and RIL conducted competitive bidding to sell gas from their Deena Dayal West (DDW) field and Madhya Pradesh CBM block respectively. The bidding resulted in gas prices as high as $12-14/MMBTU. There was however a difference of opinion between the petroleum ministry and the producers over the manner in which the bidding for gas took place. The ministry was of the view that the bidding should have been confined to only power and fertilizer companies, those who were in the priority allocation list.

The power ministry said that power generation from gas power plants would become unviable at a gas price above $5/MMBTU. Gas cannot compete with coal as a source of energy at higher prices due to increased cost of energy generation.

The increase in gas price will have a huge financial impact on the power and fertilizer sector. The impact on the power sector is expected to exceed Rs 46,000 crore per annum and the impact on the fertilizer sector will be more than Rs 17,000 crore per annum, according to some estimates. The government will need to support these two sectors to mitigate the financial impact of the price increase. The government hopes that increased revenue from oil and gas sector in the form of higher profit sharing, royalty and taxes will offset the financial subsidies outgo to the fertilizer and power sectors.

Availability of gas is expected to be a constraint for gas consumers at least for the next three years. The dependence on imported LNG will increase. The high price of gas is likely to hit demand in the power and fertilizer sectors. The rate of capacity addition in these sectors will slow down significantly due to high prices. The CGD sector will emerge as a major consumer of gas and will grow at the fastest pace among gas consumers. Gas is a viable replacement for liquid fuels such as diesel even at higher gas prices/LNG import prices. The CGD sector, refineries and other industrial users are expected to drive the demand for LNG imports.

The gas shortage is expected to ease after 2016-17 as investments in development of new fields and redevelopment of existing fields lead to higher domestic gas production. Imported LNG supplies are also expected to be ramped up with the commissioning of new LNG terminals and expansion of existing terminals. In the meantime, the struggle to source gas will continue and gas consumers will have to bear the burden of higher gas prices.

Request  for  sample  pages: https://www.bharatbook.com/RequestSample.asp?pid=323079

Table  of  Contents

  • Executive Summary
  • Industry Overview
  • The Current Pricing Paradigm: The Rangarajan Formula
  • Impact Analysis of Increase in Gas Price for Fertilizer and Power Sector
  • LNG Imports
  • Rangarajan Committee's Price Formula: Views of different stakeholders
  • Demand Side Dynamics of Gas
  • Dynamics of Gas Supply
  • Demand Supply Gap: An Analysis
  • KG-D6: Production Paralysis and its implications
  • Gas pricing mechanisms around the world
  • Case Studies: Pricing Formations in Foreign Countries
  • Conclusions

For  more  information  and  complete  table  of  content:

https://www.bharatbook.com/oil-and-gas-market-research-reports-323079/indian-gas-sector-a-paradigm-shift-in-pricing-dynamics.html

Related  Reports:

Related  Category:

About  Bharat  Book  Bureau

Bharat Book Bureau is the leading market research information aggregator that provides market research reports, industry analysis, company profiles, business reports, country reports, newsletters and online databases. Our clients include Corporate, Consulting firms, and Academic Institutions and Government departments across the globe. Bharat Book Bureau provides over a million reports from more than 400 publishers around the globe. The market research reports we provide, help global companies examine the different markets before setting up a business or expanding into different countries across the world. They give a complete perspective on the current market scenario, trends, segments and future outlook.

Contact  us:

Poonam

Bharat Book Bureau

USA/Canada - 1-866-279-8368 (Toll free)

India: +91-22-27810772, 27810773

Blog: http://blog.bharatbook.com

E: [email protected]

W: http://www.bharatbook.com

SOURCE Bharat Book Bureau

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
The BPM world is going through some evolution or changes where traditional business process management solutions really have nowhere to go in terms of development of the road map. In this demo at 15th Cloud Expo, Kyle Hansen, Director of Professional Services at AgilePoint, shows AgilePoint’s unique approach to dealing with this market circumstance by developing a rapid application composition or development framework.
“We help people build clusters, in the classical sense of the cluster. We help people put a full stack on top of every single one of those machines. We do the full bare metal install," explained Greg Bruno, Vice President of Engineering and co-founder of StackIQ, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
AppZero has announced that its award-winning application migration software is now fully qualified within the Microsoft Azure Certified program. AppZero has undergone extensive technical evaluation with Microsoft Corp., earning its designation as Microsoft Azure Certified. As a result of AppZero's work with Microsoft, customers are able to easily find, purchase and deploy AppZero from the Azure Marketplace. With just a few clicks, users have an Azure-based solution for moving applications to the...
SYS-CON Events announced today Isomorphic Software, the global leader in high-end, web-based business applications, will exhibit at SYS-CON's DevOps Summit 2015 New York, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Isomorphic Software is the global leader in high-end, web-based business applications. We develop, market, and support the SmartClient & Smart GWT HTML5/Ajax platform, combining the productivity and performance of traditional desktop software ...
The cloud is becoming the de-facto way for enterprises to leverage common infrastructure while innovating and one of the biggest obstacles facing public cloud computing is security. In his session at 15th Cloud Expo, Jeff Aliber, a global marketing executive at Verizon, discussed how the best place for web security is in the cloud. Benefits include: Functions as the first layer of defense Easy operation –CNAME change Implement an integrated solution Best architecture for addressing network-l...
“In the past year we've seen a lot of stabilization of WebRTC. You can now use it in production with a far greater degree of certainty. A lot of the real developments in the past year have been in things like the data channel, which will enable a whole new type of application," explained Peter Dunkley, Technical Director at Acision, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The major cloud platforms defy a simple, side-by-side analysis. Each of the major IaaS public-cloud platforms offers their own unique strengths and functionality. Options for on-site private cloud are diverse as well, and must be designed and deployed while taking existing legacy architecture and infrastructure into account. Then the reality is that most enterprises are embarking on a hybrid cloud strategy and programs. In this Power Panel at 15th Cloud Expo (http://www.CloudComputingExpo.com...
"BSQUARE is in the business of selling software solutions for smart connected devices. It's obvious that IoT has moved from being a technology to being a fundamental part of business, and in the last 18 months people have said let's figure out how to do it and let's put some focus on it, " explained Dave Wagstaff, VP & Chief Architect, at BSQUARE Corporation, in this SYS-CON.tv interview at @ThingsExpo, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The move in recent years to cloud computing services and architectures has added significant pace to the application development and deployment environment. When enterprise IT can spin up large computing instances in just minutes, developers can also design and deploy in small time frames that were unimaginable a few years ago. The consequent move toward lean, agile, and fast development leads to the need for the development and operations sides to work very closely together. Thus, DevOps become...
SYS-CON Media announced today that Aruna Ravichandran, VP of Marketing, Application Performance Management and DevOps at CA Technologies, has joined DevOps Journal’s authors. DevOps Journal is focused on this critical enterprise IT topic in the world of cloud computing. DevOps Journal brings valuable information to DevOps professionals who are transforming the way enterprise IT is done. Aruna's inaugural article "Four Essential Cultural Hacks for DevOps Newbies" discusses how to demonstrate the...
"Our premise is Docker is not enough. That's not a bad thing - we actually love Docker. At ActiveState all our products are based on open source technology and Docker is an up-and-coming piece of open source technology," explained Bart Copeland, President & CEO of ActiveState Software, in this SYS-CON.tv interview at DevOps Summit at Cloud Expo®, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
Verizon Enterprise Solutions is simplifying the cloud-purchasing experience for its clients, with the launch of Verizon Cloud Marketplace, a key foundational component of the company's robust ecosystem of enterprise-class technologies. The online storefront will initially feature pre-built cloud-based services from AppDynamics, Hitachi Data Systems, Juniper Networks, PfSense and Tervela. Available globally to enterprises using Verizon Cloud, Verizon Cloud Marketplace provides a one-stop shop fo...
SYS-CON Events announced today that Windstream, a leading provider of advanced network and cloud communications, has been named “Silver Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the Javits Center in New York, NY. Windstream (Nasdaq: WIN), a FORTUNE 500 and S&P 500 company, is a leading provider of advanced network communications, including cloud computing and managed services, to businesses nationwide. The company also offers broadband, p...
The Internet of Things is not new. Historically, smart businesses have used its basic concept of leveraging data to drive better decision making and have capitalized on those insights to realize additional revenue opportunities. So, what has changed to make the Internet of Things one of the hottest topics in tech? In his session at @ThingsExpo, Chris Gray, Director, Embedded and Internet of Things, discussed the underlying factors that are driving the economics of intelligent systems. Discover ...

ARMONK, N.Y., Nov. 20, 2014 /PRNewswire/ --  IBM (NYSE: IBM) today announced that it is bringing a greater level of control, security and flexibility to cloud-based application development and delivery with a single-tenant version of Bluemix, IBM's