The spot prices of LNG, a key feedstock for urea production, rose sharply to $19 per metric million Btu (MMBtu), from an average of $11-12 mmBtu in April-February this fiscal year, in the latest purchase by the state-owned GAIL, sources said.
The spot purchase of LNG was initiated on Tuesday after the virtual blockade of the Strait of Hormuz, a key import route from the Gulf countries, led to concerns about gas supplies.
70% Supply Mandate
Sources said the government has made a provision of over Rs 600 crore for augmenting LNG supplies to fertiliser plants from the spot market for the time being.
The fertiliser plants had requested over 8 million metric standard cubic meters per Day (MMSCMD) of LNG under the Empowered Pool Management Committee (EPMC) for March 18-31 period.
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“Around 7 MMSCMD have been awarded to bidders for supply”, source said. Spot LNG is expected to reach the country soon. With the purchase of gas from the spot market, fertiliser unit capacity utilisation could rise to 74% to 78%, sources said.
Strategic Diversification
Last week to boost LNG supplies, the government approved purchase of LNG from spot markets in countries such as Australia, Russia and the United States.
Currently, around 10% to 15% of LNG is purchased from the spot market while the rest is sourced under long term contracts with Qatar and the United Arab Emirates.
Officials said that given the supply constraints, the share of spot buying of LNG may increase, which will certainly put additional expenditure on the government.
This comes at a time when some gas-based urea units have advanced their dates of closure for annual maintenance due to the LNG situation. Currently, 50% of LNG used in domestic urea manufacturing is imported from Qatar, under a long-term agreement, while the supply has been disrupted because of conflict in west Asia.
Last week while invoking the Essential Commodities Act for the first time to ensure the supply of natural gas to fertiliser plants, the government had stated that it would ensure supply of natural gas to the fertilizer plants at 70% of their past six-month average gas consumption, subject to operational availability.
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About 80% of urea production in the country uses LNG while the rest uses domestic gas. At present, 30 out of 32 urea units use natural gas as feedstock.
The Fertiliser Association of India (FAI) stated that the current disruption has impacted gas supplies, a feedstock, and it is working closely with the Government to prioritise gas allocation for urea production.
TOPICSLNGThis article was first uploaded on March eighteen, twenty twenty-six, at twenty-five minutes past eight in the night.