India's Petcoke Import Ban to Help Gas Sector: Report
India's August 17 decision to ban the import of petroleum coke (petcoke) as fuel will benefit the city gas distribution (CGD) and LNG sector, ratings agency ICRA said in a note August 20. Some sectors, however, including cement, are exempt from this ban.
The ban comes in response to the high levels of pollution in several cities in the country. India is the world’s largest consumer of petcoke, which is the second most consumed petroleum product in the country after diesel. While coal attracts a clean-energy levy of rupees 400/metric ton ($5.7/metric ton), petcoke was exempt. As it is among the cheapest fuels available to the industry, it is widely used for heating and generating electricity. However, burning the fuel causes serious health problems.
“CGD entities should see an increase in their piped natural gas (industrial) volumes over the short to medium term. The shift will happen over time as many industrial units who currently use petcoke will have to incur investment to switch fuels. Also, as players such as Gas Authority of India and CGD entities increase their penetration levels by expanding their pipeline networks to virgin areas and in covered areas where last mile connectivity has to be provided, they will benefit further,” said K Ravichandran, senior vice-president at ICRA.
Except for a few industries such as cement, which have been exempt from the ban for use of petcoke in their manufacturing process, all other industrial users will have to shift to alternative fuels such as gas over a period of time.
“From the consumers’ perspective,” ICRA said, “at the current prices, pet coke price is a fraction of natural gas. A shift to more expensive fuels might lead to operations becoming unviable for some of the small players." But it said most customers are expected to switch to alternate fuels, including gas delivered by pipeline or as LNG.
India recently concluded the ninth CGD bidding round, which saw strong response from the industry. Private sector firm Adani Gas has won the highest number of city gas distribution (CGD) licences so far. During the ninth round, 86 areas covering 174 districts in 22 states and union territories were open for bidding. Technical bids were opened by India's downstream regulator July 12-18. A total of 406 bids were received for the 86 areas; and 35 entities participated in the process.