GAIL asks for lower LNG price from Australia’s Gorgon project
10 July 2013 11:11 PM GMT
In the first rumbling against India's most expensive LNG deal ever, state-owned gas utility GAIL has demanded renegotiation of price of gas from Australia's Gorgon project.
Petronet LNG Ltd, a private firm whose chairman is Oil Secretary, had in August 2009 signed a 20-year deal to buy 1.44 million tons per annum of liquefied natural gas (LNG) at a price equivalent to 14.5 per cent of the ruling oil rates.
The formula agreed when Prosad Dasgupta was the managing director and CEO of Petronet, translates into $14.5 per million British thermal unit price at $100 per barrel oil price. After adding shipping cost, 5 per cent import duty and the cost of converting liquid gas back into its gaseous state, the Australian gas will cost close to $17 at Kochi port.
This compares to US Henry Hub rate of about $4 using which GAIL has recently signed deals to import gas from the US. Qatar, the world's largest LNG producer, sells gas to India at much lower rates.
GAIL director (marketing) Prabhat Singh this month wrote to Petronet managing director A K Balyan seeking reduction in price of Gorgon LNG in view of changed scenario worldwide.
'I would like to bring to your kind attention that the circumstances under which the price provisions (at higher slope linked to Japanese crude) were agreed in the said sale purchase agreement (for Gorgon) have changed significantly and the same has long term implications for Petronet and the R-LNG off-takers viz GAIL, IOC and BPCL,' Singh wrote.
Besides difficulties in marketing of such high priced gas, rupee depreciation against US dollar will make the fuel even more costlier.
Petronet LNG Ltd, a private firm whose chairman is Oil Secretary, had in August 2009 signed a 20-year deal to buy 1.44 million tons per annum of liquefied natural gas (LNG) at a price equivalent to 14.5 per cent of the ruling oil rates.
The formula agreed when Prosad Dasgupta was the managing director and CEO of Petronet, translates into $14.5 per million British thermal unit price at $100 per barrel oil price. After adding shipping cost, 5 per cent import duty and the cost of converting liquid gas back into its gaseous state, the Australian gas will cost close to $17 at Kochi port.
This compares to US Henry Hub rate of about $4 using which GAIL has recently signed deals to import gas from the US. Qatar, the world's largest LNG producer, sells gas to India at much lower rates.
GAIL director (marketing) Prabhat Singh this month wrote to Petronet managing director A K Balyan seeking reduction in price of Gorgon LNG in view of changed scenario worldwide.
'I would like to bring to your kind attention that the circumstances under which the price provisions (at higher slope linked to Japanese crude) were agreed in the said sale purchase agreement (for Gorgon) have changed significantly and the same has long term implications for Petronet and the R-LNG off-takers viz GAIL, IOC and BPCL,' Singh wrote.
Besides difficulties in marketing of such high priced gas, rupee depreciation against US dollar will make the fuel even more costlier.
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