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See avg gas price at $10-12/mmbtu post pooling: NFL

Neeru Abrol, Chairman & Managing Director, National Fertilizers believes pooling of gas will make business more attractive and the average price could be around USD 10-12 per mmbtu.

February 19, 2015 / 12:51 IST
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The fertiliser space has been buzzing after the oil ministry proposed pooling of gas prices for fertiliser plants to average out the prices of domestic gas as well as imported LNG. It could also make cost of fuel more uniform and affordable.Neeru Abrol, Chairman & Managing Director, National Fertilizers believes pooling of gas will make business more attractive and the average price could be around USD 10-12 per mmbtu. Currently, various urea units are sourcing gas at different prices, she added.

On an overall basis we get about 70 percent gas from domestic and 30 percent imported, she added.

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Below is the transcript of Neeru Abrol’s interview with Ekta Batra & Sonia Shenoy on CNBC-TV18.Sonia: Your comment on what this pooling of gas prices could actually mean for a company like yours? What would the average prices be if gas pooling is done?A: The controls of the policy I have not yet seen because the Ministry of Petroleum and Natural Gas (MoPNG) has submitted and apparently the cabinet will be discussing it today. Pooling has a concept in the sense what we have been discussing for quite sometime is because various Urea units; they are taking gas at different price. The people who had earlier getting at Administered Price Mechanism (APM) then some getting at regasified liquefied natural gas (RLNG) price then at spot, so average it could be some where around ranging between USD 10-12 per mmbtu. However, if this pooling comes it be around that otherwise spot for one of our units like Nangal and Panipat we are getting spot gas there the landed cost could be somewhere around USD 16-17. So, if the pooling takes place across the sector we expect that it should be somewhere around USD 10-12 most probably it will be about USD 12. Ekta: Which are your current plants which are functioning at what capacity and what feedstock are you using for them?A: We are the second largest urea producer in the country. It is about 16 percent share we have and we produce about 3.6 million tonne. Our units are at Panipat, Bhatinda, Nangal and Vijaipur. Vijaipur is our major one which produces about 2.1 and remaining three units they produce about 1.5 so our capacity is about 3.6 million tonne.Sonia: What is the percentage of gas that you get from domestic gas and how much comes from imported LNG and if this average prices is at USD 12 per mmbtu then what would that mean for a company like yours?A: In our case, Vijaipur is a unit where we have been allocated domestic gas; even Bhatinda has been allocated domestic gas. Panipat and Nangal  we resort to imported gas. On an overall basis you can say it is about 70:30. We still get about 70 percent will be our domestic and 30 percent imported.Ekta: Will this gas pooling encourage you to maybe take on some more capex plan?A: In any case even for Panipat and Nangal if we want to go beyond a 100 percent capacity if pooling of gas is there that will benefit us. Though at Vijaipur the cost will go up because there we were having quite a bit of APM and domestic gas the price goes up for them. On overall basis, NFL is taking a unit - you must have heard about we are just registered a company along with the M/s Engineers India Limited (EIL) and Fertilizers Corporation of India Limited (FCIL) that is at Ramagundam that is a fertiliser plant we are planning to set up there and that is about 1.29 million tonne. So, there we require about 2.3 mmscmd gas. Once we get the pooling of gas that workouts in our favour.

Sonia: Coming back on the point you made about getting 70 percent of your gas through the domestic route, domestic gas prices are currently at USD 4.2?A: It is not USD 4.2 in the sense that is only the APM but you have the other gasses also so the average will be about USD 10 and USD 4.2 has also gone up.Sonia: Will it make the cost of fuel more affordable for you and if yes could you quantify for us?A: I have not yet seen it, if we get about the average comes to about USD 12 that will be affordable for most of companies in the country. That stabilises at about between USD 10-12. Ekta: We have heard about gas pooling for the fertiliser space many times before are you confident that may be we could see it come through this time around may be based on our interactions with government officials?A: We are very hopeful it should be coming because the capacities what are going to be added over the next couple of years if pooling of gas is there that will be attractive for them to go ahead. Already the country is importing about 8 million tonne to urea and it is expected to further go up. So these domestic capacities what all people have planned if pooling of gas will be there it will be like level playing field for all of the manufacturers. Then people will be focusing more on the energy reduction because once the price is uniform then the focus will be more on reducing the energy cost which constitute about 80 percent of the cost of production.  Sonia: How much will your own working capital cost go down? How much of a relief it will give you as far as the debt is concerned? A: That will not be very dramatic because the units which are getting at less price for them the gas price goes off. The units which produce and getting gas at higher price they will be coming down. So, it could happen that on an average the working capital requirement could come down but not to a very dramatic effect I feel.

first published: Feb 19, 2015 12:20 pm

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