Page 6 - AsiaElec Week 34

AsiaElec GAS-FIRED GENERATION AsiaElec

Gazprom, Mongolia agree to set up

JV for gas transmission to China

CHINA RUSSIAN gas giant Gazprom and Mongolia the Siberian Power-2 project. With the pipeline,
have signed a memorandum to establish a joint Mongolia could earn $1bn a year by transiting
venture to develop a technical feasibility study 50bn cubic metres of gas per year.
for the construction and use of a trunk pipeline With the deal, Gazprom “has taken a small
for natural gas supplies to China, Gazprom said but necessary step along the way to eventu-
on August 25. ally bringing West Siberian gas to China,” BCS
Prime Minister of Mongolia Khurelsukh Global Markets analysts commented on August
Ukhnaa along with Mongolian agencies took 26, seeing the news as slightly positive for the
part in an online meeting with the Gazprom Russian gas giant.
board chairman Alexei Miller to discuss pros- Earlier this year Gazprom CEO Alexei Miller
pects for co-operation in the construction of signalled that Mongolia was now on the table as a
the pipeline running from Russia to China via transit country for the Western Route as an alter-
Mongolia. native to a direct route to China via the difficult,
During the meeting, Mongolian Deputy mountainous terrain of Altai, BCS GM reminds.
Prime Minister Sodbaatar Yangu and Miller However, BCS GM notes that project “will be
signed a memorandum of understanding (MoU) meaningless unless and until a supply agreement
on the establishment of a special-purpose com- has been signed with China.”
pany for the project. The company will operate in “As the project of a Mongolian export pipe-
Mongolia and develop the feasibility study. line to China is still in its initial stage, and there is
The project will involve Gazprom, CNPC no firm contract with China for supplies through
from China and Erdenes Mongol from Mongo- this pipeline (which Gazprom has mentioned is a
lia. A confidentiality agreement will be signed by pre-requisite for a pipeline to be constructed) or,
Gazprom and Erdenes Mongol next week. hence, sizable capex spending, we view this news
In March, Russian President Vladimir Putin as not market moving,” VTB Capital (VTBC)
gave Gazprom permission to start designing wrote on August 26.™

India mulls another gas price cut

INDIA INDIA is reportedly planning to reduce prices PTI reported on August 10 that ONGC was
for domestically produced natural gas to their already considering expanding its debt load to
lowest level in more than a decade, ignoring meet its capital expenditure commitments.
state-run producer complaints that already low The state-run major has been racking up
prices make development uneconomical. losses on its domestic gas production since the
The government is set to cut prices for the government introduced its gas pricing formula
six months from October 1 to $1.90 to $1.94 per in November 2014, the newswire’s latest report
mmBtu ($ per 1,000 cubic metres), local news- contends. The sources noted that ONGC had
wire PTI reported on August 16 citing unnamed advised the government that developing new gas
sources. If the government does follow through discoveries required a price of $5-9 per mmBtu
with a price cut, this will be the third consecutive in order to break even.
reduction over the past year. If the government does reduce prices it will
Under India’s current gas pricing system, the highlight the continuing rigidity of Indian pol-
central government sets prices for local pro- icy when it comes to the energy sector. Indian
duction every six months using the weighted Minister for Petroleum and Natural Gas Dhar-
average price of gas in hubs in the US, Canada, mendra Pradhan said on June 25 that the coun-
the UK and Russia. New Delhi slashed prices try would begin to make the transition towards
for conventional gas production to $2.39 per market pricing. His announcement comes after
mmBtu ($66.11 per 1,000 cubic metres) for the the launch of the Indian Gas Exchange (IGX) in
six months from April 1. mid-June, which has demonstrated that the mar-
The price cuts will spell something of a finan- ket is willing to pay a much higher price for gas
cial disaster for state-run Oil and Natural Gas than that set by the government.
Corp. (ONGC), which has repeatedly warned However, if New Delhi pushes through
that it cannot continue previously planned another price cut it will demonstrate the govern-
upstream developments at current prices, let ment’s ability to effect dramatic shifts in market
alone even lower rates. changes months after they happened.™

P6 www. NEWSBASE .com Week 34 26•August•2020