Differing views on trading in gas transmission capacity

Gas transporters and shippers have differed over the charges and duration of trading in gas transmission capacity proposed by the Petroleum and Natural Gas Regulatory Board (PNGRB). While transporters such as GAIL and Reliance Gas Transportation Infrastructure Ltd (RGTIL) are pushing for higher durations and rates, shippers such as NTPC and the fertiliser industry are seeking lower durations and rates.

“Contrasting comments have come from transporters and shippers. We need to take a view and finalise the concept to ensure optimum utilisation of gas pipeline capacity. It will be finalised in a month,” said L Mansingh, chairman of PNGRB.

PNGRB had proposed that companies which contract gas pipeline capacity for a year or more but are unable to use it temporarily (minimum five days) may be allowed to trade it with a third party, by charging a premium of up to 25 per cent of the actual rate.

However, at any point of time, the traded capacity should not exceed 10 per cent of the pipeline’s total capacity. It had invited comments from stakeholders.

Two primary transporters, GAIL and RGTIL, have suggested the minimum duration be a fortnight and a month, respectively. While GAIL has supported the 20 per cent administrative charge on the value transacted between the old and new shipper, it has said at least 10 per cent should be paid even if no transaction materialises.

Shippers like NTPC and the fertiliser industry, however, have suggested a lower administrative charge. Shippers have also suggested trading should be allowed for even one day.

NTPC, the country’s biggest power producer, has suggested the minimum trading period be further brought down from five days as trading matures. While the Board suggested the capacity be released in a range of 100-125 per cent of the approved rate, NTPC has said the range should be 50-125 per cent. The lower band of 50 per cent will act as an incentive, it said in its comments.

While the Board has suggested the shipper pay 20 per cent of the value from trading to transporter as handling and administrative charges, NTPC has said this should be five to seven per cent and jointly shared by shipper and replacement shipper.

While both GAIL and RGTIL have insisted trading be allowed only after the pipeline capacity has been fully contracted, Oil and Natural Gas Corporation, a shipper, said the purpose would be defeated if a transporter was maintaining idle capacity of a pipeline by either design or default, since the shipper cannot mitigate risk unless the idle capacity is booked.

“The final policy should incentivise all stakeholders, so that capacity trading gets an impetus and optimum capacity utilisation is achieved. Since there will be issues related to its implementation, a calibrated approach is required,” said Rakesh Jain, senior general manager (energy division), at Feedback Ventures.