GAIL plans to buy 10 more LNG spot cargoes
State-owned GAIL (India) Ltd is planning to import 10 more cargoes of liquefied natural gas (LNG) following its success in selling the entire stock of the first shipment.india Updated: Aug 01, 2006 15:09 IST
State-owned GAIL (India) Ltd is planning to import 10 more cargoes of liquefied natural gas (LNG) following its success in selling the entire stock of the first shipment imported in May and sold to domestic industries after regassification.
"The success in selling the entire stock of the first spot cargo bought by the company from Algeria has given us the confidence to go ahead with plans to purchase more spot cargoes of LNG," company sources said.
"We are planning to import a total of 11 spot cargoes this year. While the first one was bought from Algeria, we are looking at other markets too for making similar purchases."
The company is in talks with Qatar, Oman, Egypt, Malaysia, Australia and Abu Dhabi in the United Arab Emirates (UAE) for spot purchases.
Normally, countries inform one month in advance if any LNG cargo of three trillion British thermal unit (Btu), or equivalent of 80 million standard cubic metre (MMSCM) of natural gas, is likely to become available. On the basis of competitive bids, the spot cargo is sold.
The spot cargo at $7.5-$9.3 delivered price is much higher than the long-term contracts India and other import dependent countries are negotiating.
After adding various taxes and other costs, it translates into a delivered price of $11.64 per mmBtu if sold outside Gujarat and $12.04 per mmBtu if sold within Gujarat, sources said.
Despite the high price of spot cargo, GAIL sources claimed that "other than the Rs 100 million earned by Petronet LNG Ltd (PLL) for regassification of LNG and another Rs 100 million by GAIL through transportation and sale, user industries, too, saved around Rs 200 million by replacing more expensive fuels like naphtha with natural gas".
The savings apart, GAIL does not see spot cargo model sustaining as a long term model, but as a short-term solution since the availability of LNG cargo and price of such purchases are risky.
Referring to Ratnagiri Gas and Power Ltd, formerly known as Dabhol power project, GAIL sources said LNG supplies are set to begin in March 2007 as against earlier plans of beginning imports from January.
The delay in completion of the pipeline from Dahej to Ratnagiri is cited as the reason for postponement of gas supplies from Qatar, which has agreed to supply additional 1.2 million tonnes of LNG on short term basis in addition to five million tonnes it is already supplying Petronet LNG under a long-term contract.
The price of the additional 1.2 million tonnes LNG is expected to be finalised this week with a team from Qatar's RasGas expected in New Delhi.