India’s city gas distribution companies seen tapping RLNG market on lower domestic gas

Indian city gas distribution companies, or CGDs, have seen their domestic gas volume allocation reduce substantially from Nov. 16, which will lead them to tap the regasified LNG market, market sources said.

Indraprastha Gas, Mahanagar Gas and Adani Total Gas informed the exchanges Nov. 16 about the reduction in allocation of domestically produced gas by varying percentages of 13%-20%.

These developments were shared with the CGDs in the week ended Nov. 11-15. The companies in their filings said this will have a major impact on profitability.

Market participants said some CGDs that used to meet nearly 64%-67% of their requirement from domestically produced gas, have had their allocation drop to nearly 40%.

The impacted CGDs would likely raise their downstream LNG prices, which will pass on to end-users, sources said.

Indraprastha Gas had already issued a tender for purchasing up to 2.2 million standard cu m/day of RLNG for December delivery that closed Nov. 14, sources said. Other companies would issue RLNG purchase tenders as well to meet requirements for December.

Market trades on the India Gas Exchange was noted at 652,700 MMBtu for the week ended Nov. 11-15, with companies trading to meet requirements for Nov. 16-30 and December deliveries.

A Gujarat State Petroleum Corp tender Nov. 12 was also issued in part to meet requirements in the CGD sector, market sources said. The tender was awarded near $13.8/MMBtu for December delivery.

Platts assessed the West India Marker -- the price for LNG cargoes delivered to West India, Dubai and Kuwait -- for December at $13.5/MMBtu Nov. 15. The WIM December average was at $13.21/MMBtu, S&P Global Commodity Insights data showed.