Govt Rejigs Gas Allocation; LPG, CNG, Piped Cooking Gas Get Top Priority

Amid disruptions to imported gas supplies caused by the widening West Asia conflict, the government has revised the priority order for allocating domestically produced natural gas, placing LPG production alongside CNG and piped cooking gas at the top.

Under the revised allocation, requirements of these sectors will be fully met first before gas is supplied to other sectors, according a gazette notification.

The fertiliser sector has been placed at the second place, with at least 70% of their past six months demand being met.

At No. 3, gas supply to tea industries, manufacturing and other industrial consumers will be maintained at 80% of their past six-month average gas consumption subject to operational availability, it said.

All city gas distribution (CGD) entities shall supplying gas to industrial and commercial consumers have been placed at No. 4 on the priority list.

Domestic gas production, which meets about half of the country's consumption of 191 million standard cubic meters per day, will be diverted to the priority sectors by curtailing supplies to petrochemical plants, power units and high-priced gas consumers.

Following US-Israeli strikes inside Iran and Tehran's sweeping retaliation across the region, maritime traffic through the Strait of Hormuz has sharply declined, insurance premiums have surged, and energy markets have responded with immediate volatility. Roughly one-fifth of the world's seaborne oil and nearly a third of global LNG shipments pass through this narrow channel linking the Gulf to global markets.

The artery is the conduct for supply of most of India's import of gas, inform of LNG, as well as LPG. With tanker movement being stall, the government has reworked domestically available gas to keep the priority segments such as cooking needs of households and vehicular transport going.

Natural gas pumped out of ground or below sea bed is used to generate electricity, produce fertilizer, turned into CNG to fire automobiles and piped to households kitchens for cooking. It is also used to produce cooking gas LPG.

"The Central Government has assessed that the ongoing conflict in the Middle East has resulted in the disruption of liquefied natural gas (LNG) shipments through the Strait of Hormuz and suppliers have invoked force majeure clause," the notification said, saying the supply cuts would entail diversion of natural gas to the priority sectors.

The allocation rejig has been done to maintain supplies and securing equitable distribution and availability of natural gas for priority sector.

The supply of natural gas to "domestic piped natural gas (cooking gas supplied to household through pipes) supply; Compressed Natural Gas (CNG) for transport, and LPG production including LPG shrinkage requirements" shall be treated as priority allocation and would be supplied 100% of their average past six month gas consumption, it said.

Pipeline compressor fuel and other essential pipeline operational requirements too have been put in this priority as without gas the pipelines cannot function.

"The supply of natural gas to the fertilizer plants shall ensure 70% of their past six month average gas consumption, subject to operational availability," it said adding the the units shall not use the gas supply for any other purpose except in the production of fertilizers and the allocation to a particular unit cannot be diverted to any other unit.

"The gas marketing entities shall ensure that gas supply to tea industries, manufacturing and other industrial consumers supplied through the national gas grid is maintained at 80% of their past six month average gas consumption subject to operational availability," the order said, placing the sector at No.3 priority.

All CGD entities shall ensure that industrial and commercial consumers supplied through their networks receive 80% of their past six month average gas consumption subject to operational availability.

"The gas required to meet the priorities shall be through full or partial curtailment of gas supplied in the following order of priority: (a) petrochemical facilities not limited to ONGC Petrol additions Ltd, GAIL Pata Petrochemical Complex, Reliance O2C and other High-Pressure High Temperature (HPHT) gas consumers; (b) power plants as required," it said.

The oil refining companies shall absorb the impact of LNG supply disruption to the extent feasible by reducing gas allocation to refineries to approximately 65% of the past six month gas consumption, it said.

State-owned gas utility GAIL has been tasked to manage the supplies of natural gas to implement priority order.