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    Natural gas demand starts to rebound

    Synopsis

    Natural gas sales by GAIL has risen to 74 million metric standard cubic meters a day (mmscmd) from 56 mmscmd in the last week of March when the nationwide lockdown started, severely restricting mobility and shutting most industries. The volumes are still much lower than the 86 mmscmd GAIL supplied before the lockdown began.

    Rising demand could act as a signal for ONGC, which had to shut some wells as demand weakened during the lockdown, to raise local output and for other gas players to increase import.
    New Delhi: Natural gas demand has risen by a third from its recent lows as factory activity expanded and more gas-driven vehicles came on the roads following the easing of lockdown curbs, according to an executive at GAIL, the country’s largest marketer and transporter of gas.

    Natural gas sales by GAIL has risen to 74 million metric standard cubic meters a day (mmscmd) from 56 mmscmd in the last week of March when the nationwide lockdown started, severely restricting mobility and shutting most industries. The volumes are still much lower than the 86 mmscmd GAIL supplied before the lockdown began.

    Besides its own gas, GAIL also transmits about 24 mmscmd of gas marketed by other companies through its pipeline network. This volume had dropped to about 8 mmscmd at the beginning of lockdown but has now risen to about 12 mmscmd, signaling refiners and other gas players are also witnessing a consumption recovery. Rising demand could act as a signal for ONGC, which had to shut some wells as demand weakened during the lockdown, to raise local output and for other gas players to increase import.

    “With further easing of lockdown, the demand would continue to rise,” said a GAIL executive. The biggest jump in demand has come from fertilizer plants, which had slowed at the beginning of the lockdown but are now operating at full capacity or more to quickly deliver supplies to farmers for the current sowing season.

    GAIL has also restarted a petrochemical unit that was shut during the lockdown, contributing to increased gas demand.

    The city gas distribution business, which mainly caters to smaller factories, homes, shops and compressed natural gas (CNG) vehicles, has been the worst hit and the biggest contributor to gas demand slump during the lockdown. “It has also started picking up. With more private vehicles coming on the roads, the demand for CNG will go up,” the executive said.

    Further strengthening of gas demand would depend largely on how fast factories return to production levels seen before the lockdown. Factory activity will be challenged by the paucity of labour and demand in the economy, the executive said. Lakhs of migrant workers have gone to their villages from cities and getting them back to factories could take months.

    Besides, CNG demand growth would be determined by how quickly people start attending offices. The recent spurt in the Covid cases in the country may prompt companies to continue with work-from-home arrangement for their employees.
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