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Rising crude prices put paid to Petronet’s gas supplies strategy

Rising crude prices put paid to Petronet’s gas supplies strategy
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First Published: Tue, Jan 22 2008. 11 08 PM IST

Short supply: With India’s economy growing at 9%, natural gas imports are expected to increase from 5mtpa to 20mtpa by the end of 2012.
Short supply: With India’s economy growing at 9%, natural gas imports are expected to increase from 5mtpa to 20mtpa by the end of 2012.
Updated: Tue, Jan 22 2008. 11 08 PM IST
Plans by Petronet LNG Ltd, India’s largest liquefied natural gas importer, to tie up two 25-year contracts for supply of liquefied natural gas have been delayed.
The company proposed to import 1.25 million tonnes per annum (mtpa) of liquefied natural gas, or LNG, from Sonatrach, the national oil company of Algeria, and 2.5mtpa from Australia’s Gorgon gas project for its upcoming LNG terminal at Kochi, in Kerala.
Short supply: With India’s economy growing at 9%, natural gas imports are expected to increase from 5mtpa to 20mtpa by the end of 2012.
Unfortunately, the spurt in international crude prices pushed up prices for LNG, and the Algerian company is reluctant to fix the contract at $5-7 per million British thermal units (mBtu), said a senior Petronet executive who did not wish to be identified.
“For the Gorgon project, Shell has said that it will be able to take the final investment decision only by December this year. This has again led to delays,” the official added.
The plan for LNG by Algeria, which also holds the fifth largest gas reserves in the world, was announced by its Ambassador to India, Noureddine Bardad-Daidj, in September last year.
The gas is expected to come through the under-construction 4.5mtpa Skikda LNG liquefaction terminal in Algeria.
The Chevron Corp.-operated Gorgon project in western Australia has seen its investment costs double to $16 billion, which is likely to push up gas prices, as reported by Mint on 25 September. The gas from Australia is for the company’s upcoming LNG terminal at Kochi, which Petronet wants to get at a rate of $4.50 per mBtu for 25 years.
Companies such as Petronet, Gail India Ltd, Indian Oil Corp. (IOC) and NTPC Ltd have been scouting overseas to secure gas supplies, given the huge demand for gas in the Indian economy.
With the economy expected to grow above 9% annually, natural gas imports into India are expected to increase from 5mtpa to 20mtpa by the end of 2012, amid growing demand from sectors such as power, fertilizer and cement.
Says Deepak Mahurkar, associate director, oil and gas industry practice, PricewaterhouseCoopers: “The different and evolving LNG environment today and tomorrow demands a mind-shift by many players away from the predominant linear fixed supplier and buyer chain of supply to a more flexible, disaggregated model of the market.”
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First Published: Tue, Jan 22 2008. 11 08 PM IST