India to pay more than double the price for Australian gas

India to pay more than double the price for Australian gas

New Delhi: India will pay almost $10 per million British thermal unit (mmBtu) for the LNG it plans to import from Australia, more than double the price at which domestic natural gas is available.

At $70 per barrel crude oil price, natural gas in its liquid form (LNG) from Australia’s Gorgon project will cost $8.82 per million British thermal unit in the first year of import beginning 2014.

It will cost between $9.8-10.5 per mmBtu at the same level of oil price in the second/third year, an official privy to the pricing details said.

Petronet LNG Ltd, the nation’s largest liquefied natural gas importer, has contracted 1.5 million tonnes a year of LNG from Australia-LNG, a subsidiary of Exxon Mobil that is partner in the Gorgon project, for 20 years beginning 2014.

“The LNG is priced at 12.6 % of Japanese Crude Cocktail (the average price of a basket of crude oil that Japan imports). The price is capped at a maximum crude oil price of $70 per barrel," he said.

At $70 per barrel oil price, LNG will cost $8.82 per mmBtu in the first year of import. Another $1.2 per mmBtu would be the cost of shipping the LNG in crynogenic vessels from Australia to Kochi, where Petronet is building a receipt and regassification facility by 2012.

An import duty of 5 % ($0.50 per mmBtu) will be added to the landed cost before it is re-gassified at the Kochi terminal, he said, adding the final price to customer after adding pipeline transportation and local levies would be well over $12 per mmBtu.

The official said from second or third year, the JCC linkage would be raised to 14-15 % that would mean that the LNG would cost $9.8-10.5 per mmBtu.

As against this, Petronet’s long-term imports from Qatar at its Dahej terminal in Gujarat are around $5 per mmBtu (before regassification charges, local levies, transporation and marketing margin is levied).

Gas from Reliance Industries’ eastern offshore KG-D6 fields is priced at $4.205 per mmBtu and the delivered price to customers in Gujarat is less than $7 per mmBtu.

Petronet had in August last year signed a sales and purchase agreement (SPA) with the Australian subsidiary of Exxon Mobil Corp for buying 1.5 million tonnes a year of LNG for 20 years from the proposed Gorgon LNG project.

US energy major Chevron Corp is the operator of the Gorgon project with a 50 % stake while Exxon Mobil and Royal Dutch/Shell hold 25 % each.

The Gorgon Project plans to develop the Greater Gorgon gas fields, located between 130 km and 200 km off the north-west coast of Western Australia. The Greater Gorgon gas fields contain resources of about 40 trillion cubic feet of gas, Australia’s largest-known gas resource.