Government to subsidise imported LNG under rationalisation policy

Under a new rationalisation policy, the government plans to subsidise costly imported gas by making users of cheaper domestic gas pay more, The Economic Times today reported quoting  an unidentified source.

Currently, imports of liquefied natural gas (LNG) work out to $ 5.7 per mmBtu as against $1.82 per mmBtu for fuel sourced from state-owned ONGC's fields and $ 4.2 per mmBtu for gas from Reliance Industries' KG-D6 field.

The ex-terminal price of LNG imports by Petronet LNG at Dahej from Qatar under a long-term contract is set to rise to $ 9.01 per mmBtu by 2012 and it would need to be substantially subsidised to avoid a rise in electricity generation costs and a hike in the fertiliser subsidy.

Under the new contract with Qatar, LNG is priced at least 25 per cent higher than the 2012 price and the oil ministry had asked the state-run gas utility GAIL to conduct a study on offering LNG at affordable rates, the source told ET.

GAIL retained Spain's Mercados Energy Markets India Pvt Ltd to suggest a 'common pool price mechanism' and though Mercados could not come across a single instance of a uniform gas price for consumers anywhere in North America, UK and western Europe, it recommended that gas prices from five different sources be averaged only for power and fertiliser units, the mainstay consumers.

According to the source, Mercados suggested a pooled price of $3.48 per mmBtu for the power sector and $3.81 per mmBtu for the fertiliser sector. He added that the report was under review by the ministry.