A part of the decline in imports has been offset by rising domestic output, which expanded 5% over the year in April-June. This has also resulted in lower capacity utilization at gas import terminals.
The decline in demand is mainly due to industries switching to alternative fuels, an industry executive said. Refiners switched to liquid fuels while generators have been less inclined to use expensive gas to produce power, he added.
During April-May, for which sectoral break-up is available, the fertilizer sector remained the biggest consumer of natural gas, with consumption rising 15%. The fertilizer sector, which can fully pass on input costs to customers, consumed 18% less domestic gas and 34% more expensive imported gas compared to a year earlier. Gas consumption by the power sector fell 24%, with the use of domestic gas declining 15% and imported gas falling 44%.
Refiners consumed 29% less gas, with the demand for imported gas halving. Consumption of relatively cheaper domestic gas at refineries, however, more than doubled during April and May. Fuel costs significantly weigh on refining margins.
Prices of domestic and imported gas were sharply higher in April-June quarter than in the corresponding period last year.
The price of domestic gas, determined by a government-set formula, has jumped nearly three-and-a-half times to $6.1 per mmBtu in a year while the price ceiling for gas produced from difficult fields has risen a little less than three-fold to $9.92 per mmBtu.
Local prices or ceilings are still lower than the imported rates. Long-term liquefied natural gas (LNG) prices that are linked to crude oil are around $13 per mmBtu at the current oil price of $100 per barrel.
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