Gail to buy spot LNG from end Oct

Gail to buy spot LNG from end Oct

New Delhi: Gas transporter Gail will start importing liquefied natural gas every month from end-October or November to meet growing local demand for the cleaner fuel, chairman BC Tripathi said on Tuesday.

India is emerging as a key LNG market in Asia when traditional buyers like Japan and China are cutting purchases. Spot buying by Japan was dwindling with nuclear reactors back in action, while China’s August LNG imports fell 30% as peak summer demand drew to an end.

“We need gas," Tripathi told Reuters in an interview. “All depends on availability and who gives at what price."

He said Gail, which had previously imported two LNG cargoes in 2006 from Algeria on its own, could again either directly buy the gas or purchase from Petronet LNG Ltd and Hazira LNG Ltd that have LNG terminals in the western state of Gujarat.

Petronet has a 10 million tonne terminal at Dahej while Hazira, in which Royal Dutch Shell and Total hold stakes, has a capacity for 3.6 million tonnes a year.

Gail supplies 11 million cubic metres a day (mmscmd) of LNG from Dahej to Indian firms. It along with state firms Indian Oil Corp and Bharat Petroleum Corp have the marketing right for LNG regassified at Petronet’s terminal.

Gas supplies from Reliance Industries-operated fields in Krishna Godavari basin, off India’s east coast, were expected to curb LNG demand but gas flows are not in full swing.

Reliance executive director PMS Prasad said last month his firm was producing about 60 percent of its 60 mmscmd capacity as the government has selected customers for only 40 mmscmd.

“There is still demand in market," said Tripathi, who took over as head in August. “Currently it is 140 mmscmd and market can easily absorb another 10-15 mmscmd gas."

He said many industries such as steel plants were waiting for allocation.

Revenue source

“With our imports going up I will earn some marketing margins too," Tripathi said.

Gail currently transports a total of 85 mmscmd of gas but it is not allowed to earn marketing margins on 50 mmscmd that is produced from fields awarded to state firms on nomination basis.

For the 35 mmscmd Gail charges marketing margin varying from 12-17 cents per million British thermal units.

The transporter has sought government permission for charging marketing margins to cover some of its debt and investment on market development, Tripathi said last week.

Gail is currently executing projects worth Rs300 billion ($6.2 billion) to almost double its transmission capacity to 300 mmscmd from current 155 mmscmd.

“Some of our pipelines will be completed in December and then the demand for gas will further rise," he said.