New Delhi [India], June 29 (ANI): India’s Petroleum and Natural Gas Regulatory Board (PNGRB) has released a draft proposal aimed at enhancing regulatory control over the country’s liquefied natural gas (LNG) terminals, as per S&P Global Commodity Insights (GPI).
This move, according to industry insiders, could effectively address the persistent issue of capacity underutilization that has been plaguing most of these facilities and bring about greater transparency in the sector.
The PNGRB’s proposal targets the problem of surplus capacity, which has been a significant concern for India’s LNG import terminals for several years.
Many of these facilities, with the exception of the Dahej terminal, are currently operating at less than 50 per cent capacity. This chronic underutilization has led the regulator to propose measures aimed at optimizing the use of existing infrastructure and ensuring more efficient operations.
“We’ve been putting up more capacity than required … so this move will tackle that aspect,” an industry source in India said.
Another source added that the proposed changes would allow new suppliers to access the terminals, fostering increased competition and potentially lowering costs.
Akshay Modi, South Asia analyst for natural gas, LNG, and hydrogen at S&P Global Commodity Insights, said, “Most LNG terminals, except Dahej, are operating way below 50 per cent capacity, leading PNGRB to consider regulating them due to underutilization.”
“While the regulation may slow down the development of LNG regasification infrastructure as licensing may take some time, it will enhance transparency for the downstream consumers as terminal information becomes publicly available and would also promote open access,” Modi added.
Despite the increased regulatory oversight, India’s reliance on LNG imports is not expected to diminish. According to analysts at Commodity Insights, India’s LNG imports in the first quarter of 2024 surged by 44 per cent year-on-year.
This growth was driven by a significant 51 per cent decline in spot prices and robust demand across all downstream sectors, indicating a strong and sustained demand for LNG in the country, irrespective of regulatory changes.
The draft proposal outlines several critical requirements for new LNG terminal projects. Entities planning to build an LNG terminal will need to notify the PNGRB before making a final investment decision.
Additionally, new LNG import projects will require a certificate of registration from the Board. Developers will also be required to publicly disclose their tariffs for regasification and other charges.
The regulator’s approval for new units or expansions will be based on several factors, including promoting competition among operators, avoiding unnecessary investments, ensuring an adequate national gas supply, maintaining or increasing supply for equitable distribution, protecting consumer interests, and providing the necessary natural gas pipeline infrastructure for the transportation of regasified LNG from the terminal.
Moreover, the PNGRB will have the authority to impose fines on developers if project schedules or start-up dates are delayed.
Companies planning new capacity must have a credible business plan for capacity utilization and will need to furnish a bank guarantee equal to one per cent of the estimated project cost of the terminal or Indian Rupee 250 million (USD 3 million), whichever is less. (ANI)
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