The petroleum ministry has asked the department of fertilizers (DoF) to seek direction from Empowered Group of Ministers regarding gas availability for the existing and upcoming fertilizer plants. Further, it has also asked the department to finalize the pricing formula for future supply with GAIL in consultation with the petroleum ministry.
The total requirement of natural gas for existing urea manufacturing units in the country during 2012-13 to fertilizer industry was around 46.944 mmscmd. The total additional requirement of natural gas starting from year 2012-13 up to the year 2016-17 for 4 conversion plants from furnace oil or low sulphur heavy stock (LSHS) to gas, 6 conversion plants from naphtha to gas and 9 green field and brown field plants is expected to be approximately 34 mmscmd. Unless this additional volume of gas is made available, it would not be possible to convert existing plants to gas and also to establish new 9 plants in Brownfield and Greenfield.
The petroleum ministry has expressed its inability to ensure any future additional firm allocation of domestic natural gas to fertilizer sector from the present level considering the projection and uncertainties in availability of domestic gas. Meanwhile, GAIL has offered from its portfolio, pool price of 12 mmscmd of RLNG based on a pool of 50 per cent Henry Hub linked and crude linked RLNG contract on a long term basis to fertilizer sector for meeting the demand of conversion and expansion projects of urea manufacturing units.
The weighted average price will be around USD 12-13 per mmbtu. GAIL has proposed to the units to have an option of contracting 50 per cent of their requirement on firm long term basis and the balance to be addressed through short or medium term basis with a suitable exit option.
If the Units are totally dependent on RLNG, the cost of production of urea will be substantially high. The cost of urea will be around USD 483 per metric tonne in expansion or Brownfield project and USD 503 per metric tonne in Greenfield project, as per the recently approved New Investment Policy 2012. In view of this, DoF had requested the petroleum ministry to allocate natural gas to these projects from domestic sources.