Energy firms to cash in on LNG import needs

Last Updated: Tue, Mar 13, 2012 19:41 hrs

The absence of new gas finds and declining production from Reliance Industries’ flagship Krishna-Godavari-D6 field is making the business of gas import attractive.

In the past year, Petronet LNG and Shell's Hazira have talked of plans to expand capacity at their terminals. The Reliance Industries-BP combine and British Gas India have decided to import natural gas.

And, France's GDF Suez, a euro 90-billion European energy major, has decided to cash on India's growing need for natural gas. "GDF Suez considers Asia and especially India a core development region for its LNG (liquefied natural gas) business, with strong growth prospects and new supply potential,” said executive vice -president Jean Marie Dauger, after the French major signed a contract in November 2011 with Petronet LNG for 0.6 million tonnes (mt) of LNG by next year. The group has also bid for a 65.12 per cent stake in British Gas India's subsidiary, Gujarat Gas.

Petronet's Dahej terminal can import up to 11.5 mt a year of LNG. Petronet is owned by state-controlled Oil and Natural Gas Corporation, Indian Oil Corporation, Bharat Petroleum Corporation and Gail India, each with 12.5 per cent stake, in addition to GDF Suez with a 10 per cent interest; the Asian Development Bank with 5.2 per cent and public shareholders with the remaining 34.8 per cent.

India Gas Solutions, the equal joint venture between Reliance Industries and BP, set up for sourcing and marketing of natural gas in India, has said it will be setting up multiple terminals. It is presently searching for a location and quantifying the demand scenario in various regions.

British Gas India has also realigned focus on upstream and LNG businesses in India. It is rationalising its global portfolio, as it needs money to invest in exploration and production businesses in other parts of the world.

The company said the outlook for global gas and LNG demand was strong and it was well set to capitalise on these opportunities. It recently signed a ‘heads of agreement’ (HoA) with Gujarat State Petroleum Corporation (GSPC) for long-term supply of up to 2.5 mt per annum of LNG.

The HoA sets out the basis on which the BG Group will sell LNG to GSPC for a 20-year period, beginning 2014. The LNG will be sourced from the Group’s current and future global supply portfolio.

The LNG terminal at Hazira in Gujarat, a joint venture between Shell, the Anglo-Dutch energy company, and France’s Total, would take the annual capacity there to 10 mt yearly. The terminal now operates at a capacity of 3.6 mt. By 2013, this would be expanded to five mt. “With an increase in LNG consumption and new pipelines being laid, more gas would be required. To meet the future market requirement, we intend to increase the terminal's capacity to 10 mtpa,” a senior company executive told Business Standard.

The interest of these companies in LNG import is evident from the fact that India had, till January 2012, registered an 89.5 per cent increase in LNG import over a year. January LNG imports, term and spot, were 1.45 mt, of which 16 cargoes representing just over one mt of LNG were delivered to Petronet LNG’s terminal at Dahej. Hazira LNG’s terminal at Hazira received a total of five cargoes with around 446,000 mt of LNG in January, according to Platts.

LNG costs much more than domestic gas but is cheaper in comparison with other liquid fuels. Platts’ International Gas Report of December 2011 said the energy ministry had worked out tentative gas output and import for the five-year development plan period starting April next year.

“Petroleum ministry data suggests LNG imports in 2012-13 at 69 mscmd (million standard cubic metres per day), well over twice the quantity last year. From there on, the imports will increase over two and half times, to 184 mscmd, in 2016-17, with total gas availability estimated at 197 mscmd and 394 mscmd, respectively. This will increase the LNG share in five years from 37 per cent to 46 per cent,” it said.

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