Ind-Ra: Share of City Gas in Domestic Gas Consumption on the Rise

The share of city gas distributors in domestic gas consumption pie is on the rise and is likely to increase in the short to medium term, according to India Ratings and Research (Ind-Ra) report on oil and gas sector. The government in the Domestic Gas Allocation Policy has accorded the highest preference to city gas distribution. Thus, the share of fertiliser sector came down gradually to around 25% in March 2018 from around 37% in November 2015 while that of city gas distributors increased to around 19% from around 11%. This has also led to an increase in pooled natural gas price for domestic urea manufacturers.

Additionally, with the government focusing on expanding the city gas distribution network and higher number of cities being bid for, the city gas distribution sector is likely to grow. This would result in a lower allocation of domestic gas to the fertiliser sector.

 

Refining throughput in April 2018 was 20.0mt, which was lower by 0.2% yoy. For FY18, the refining throughput was higher by 2.7% yoy. Public sector refineries processed higher volume, aiding the overall increase in volume. India's petroleum products output was higher by 3.0% yoy to 20.2mt during April 2018. On a cumulative basis, the production was 4.5% yoy higher in FY18.

Further, India's crude oil production decreased 0.8% yoy during April 2018. Production volume of Oil India Limited and fields under production sharing contracts increased by 0.4% and 5.5%, respectively, while it declined by 3.8% for Oil & Natural Gas Corporation Limited during April 2018, on a yoy basis. The crude oil import volume decreased by 5.4% yoy in April 2018. India's import dependency of crude oil had been around 82.8% during FY18. Petroleum Planning and Analysis Cell (PPAC) estimates crude import of 227 million metric ton (mt) in FY19 (FY18: 220mt).

Natural Gas (NG) production during April 2018 was 5.1% yoy higher. The production volume grew for Oil and Natural gas Corporation Limited (higher 10.1% yoy), whereas for Oil India Limited and 'from private/joint venture fields', it declined yoy (negative 8.2% and 6.4% yoy respectively). NG consumption increased by 5.2% yoy during April 2018. The increase in consumption was on account of an increase domestic demand. Additionally, there was a 4.5% yoy increase in liquefied natural gas (LNG) imports during April 2018. On a cumulative basis, the LNG import was higher by 7.3% yoy during FY18.

Domestic NG price has been raised by around 6% to USD3.06/mmbtu for April-September 2018. Prior to this, the gas price was raised by around 17% to USD2.89/mmbtu for October 2017-March 2018 after it was revised downward five times consecutively since the implementation of the domestic gas pricing formula in October 2014. The increase in gas prices is likely to impact the fertiliser, power and city gas distribution entities which are the primary consumers of NG.

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