Indian Oil Corporation Ltd (IOC), India’s leading refiner, plans to import liquefied natural gas (LNG) from Algeria at a price of $4-5 per million metric British thermal units (mmBtu) on a long-term basis for its proposed regasification terminal at Ennore in Tamil Nadu.
Algeria has emerged as a favoured destination for IOC as the African nation aims to export 85 billion cubic metres of gas by 2010, up from about 62 billion cubic metres now. However, the company may have to wait for some time since this would be possible only after Algeria raises its production capacity of gas.
“We want LNG for our Ennore LNG terminal project at a freight-on-board price of $4-5 per mmBtu on a long-term basis from Algeria,” said B.M. Bansal, director for planning and business development at IOC.
The success of the Ennore project would depend on IOC’s ability to source LNG in an internationally competitive market at competitive prices.
In fact, limited availability of LNG for import had forced Hindustan Petroleum Corp. Ltd (HPCL), one of India’s leading oil-retail companies, to suspend its plans of setting up a five million tonne per annum (mpta) LNG terminal at Mundra in Gujarat.
Arvind Mahajan, executive director at accounting firm KPMG, welcomed the price with a bit of caution and said, “It is a good and reasonable price. Sourcing LNG has become a big problem as supplies from known markets such as Qatar have already been tied up. We have no option but to look at new options. However, IOC may see competition from Chinese firms for sourcing LNG.”
India has only two LNG regasification terminals. Both are located in Gujarat and are owned by Petronet LNG and Shell India. IOC in a consortium, along with GAIL, Bharat Petroleum Corp (BPCL) and Oil and Natural Gas Corp. (ONGC), already has a stake in Petronet LNG. The Ennore terminal is expected to have a capacity of 2.5mtpa with the provision for expansion to 5mtpa. The construction of this facility would give IOC an edge over its competitors.
Other terminals in the pipeline include one attached to the Dabhol project (5mtpa), and one each in Kochi (5mtpa) and Mangalore (1.25 mtpa).
In another development, IOC plans to import one million tonnes of LPG from West Asian spot markets to tide over LPG requirements ahead of winter.
“Whenever there is a requirement for import, IOC will go ahead and import LPG. We have the Kandla LPG import facility available as well as the Mangalore facility,” a senior IOC executive said.