The Petroleum and Natural Gas Regulatory Board or PNGRB’s notification about natural gas pipeline tariff regulations, with effect from Nov. 18, will introduce numerous positive amendments for the natural gas transmission sector, according to analysts.
These regulations pertain to both gas pipeline tariffs and pipeline authorisations, which were originally proposed in August 2022. PNGRB Update On Natural Gas Pipeline Tariff Regulations – Key Takeaways By Citi.
Introduction of more relaxed capacity utilisation/normative volume requirements – 30% to 100% (of 75%) over 10 years versus 60% to 100% (of 75%) over five years earlier. The aforementioned ramp-up would also be applicable for subsequent capacity expansion phases.
Capacity increase of pipelines due to the addition of new gas supply sources will attract tariffs only after five years.
The rules restricting a change in tariffs for capacity expansions of less t than 10% and requiring sharing of half the incremental tariff revenues for capacity expansions of more than 10% have both been done away with
If actual volumes are less than normative volumes, the company will be allowed set-off credits that can be adjusted against future year volumes. The lower corporate tax rate will be applicable prospectively (i.e., from FY23) for tariff determination.
These changes will have positive implications for pipeline tariffs and should incentivise capex, analysts said. In terms of capacity determination, the requirement to share 50% of incremental tariff revenue with customers after more than 10% capacity expansion seems to be done away with — this augurs well for Gujarat State Petronet Ltd’s and GAIL (India) Ltd.’s existing network-based expansion, they said.
The source-based capacity holiday for five years post pipeline connectivity with the source would potentially benefit GSPL as a couple of new LNG terminals are coming up in Gujarat. Channel checks of broking house Emkay indicate that the pipeline entities are largely satisfied with the amendments, as it paves the way for future expansion. The note further says that overall, regulatory overtones seem positive for the industry.Share This