NEW DELHI: Free pricing and supply security will be key to the growth of natural gas sector, according to Dr Abdul Rahim Hashim, President, International Gas Union, Malaysia.
For the liquefied natural gas sector to grow, studies have suggested that, prices should be at least $6 a mmBtu, perhaps even $8 a mmBtu, Dr Hashim told Business Line during his recent visit toIndia.
Compared with the other markets, Asian prices have maintained a strong premium relative to Henry Hub (pricing point for natural gas futures contracts traded on the New York Mercantile Exchange). It has risen sharply in the wake of last year’s Tsunami and earthquake. For example, the Japanese differential to Henry Hub stood at $11.72 a mmBtu in August last year.
The spread was wide enough to divert LNG cargoes from the Atlantic to Asia, he said.
In fact, at the recent seventh Asia Gas Partnership Summit, the Prime Minister, Dr Manmohan Singh, had said that the Government had initiated gas pricing reforms to incentivise production of natural gas.
Domestic gas producers such as Reliance Industries have been seeking a revision in gas pricing to make the market competitive. Currently, natural gas in the country from various sources is sold at prices ranging from $4.2 a mmBtu to $17 a mmBtu (excluding taxes and other charges).
Taking cue from what the Prime Minister said, the Minister of State for Petroleum and Natural Gas, Mr R.P.N. Singh, also said that “remunerative pricing” was the answer to attract more investments into the sector.
To create parity in pricing of gas from various sources for the end consumers, GAIL has been talking about sectoral pooled price as an option.