A new pricing strategy for petroleum product pipelines is being planned by the regulator
The Petroleum and Natural Gas Regulatory Board is currently looking to amend the tariff policy for the product pipelines laid out by the state-owned oil marketing companies and private refiners after releasing a unified tariff for natural gas pipelines, a member of the regulatory board who did not want to be identified told FE.
The pipeline’s internal rate of return (IRR), capex, and capacity utilisation will all affect the new pricing structure. With the exception of LPG (liquified petroleum gas), where it is 100%, the product pipeline tariffs are now determined as the 75% of rail tariffs on similar rail distance along the pipeline route. This will be a huge change.
Although the precise effect won’t be known until updated tariffs are issued, it is anticipated that the new regulations would increase the profitability of pipeline projects.
“Railway freight costs are currently connected to the product pipeline tariff. Like with gas pipeline charges, we intend to provide them with a new formula,” the insider said. “We understand that the person installing the pipeline ought to be compensated financially and receive reasonable returns.”
The board member pointed out that while pipeline operating costs have grown, the railway freight charges have not changed much, and the static railway tariff has led to the maintenance of a steady pipeline rate.
In addition, the Board seeks to unify all product pipelines under a single rule to guarantee optimal capacity utilization across the board. “Today, everyone working in this field installs their own pipeline and charges the customer. For efficient use, we propose that all product pipelines be subject to control,” the member said.
In addition, PNGRB is working to amend the Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006 after the elections. These amendments are anticipated to include rules governing the fees charged by regas terminals, the transportation of compressed biogas and green hydrogen, and the establishment of a Transport Service Operator.
As of right now, we can see that some terminals are idle, and we may build a pipeline to allow them to offtake gas. However, regulations must to be in place so that your investment in the pipeline is protected if you have made it.
To satisfy customer needs, a transport service operator will make sure that gas capacity is distributed fairly.
“At the moment, you must contact the entity; they will negotiate for you to get the capacity. The insider said, “We want a TSO so they can see capacity is being distributed equally to everyone, meeting consumer demand.” “You will get capacity if that’s what you want.”
