GAIL signs contract to import LNG from Qatar

State gas utility GAIL India will import a shipload of LNG from Qatar in January to meet rising energy demand this winter season.

GAIL has signed contract with RasGas of Qatar to import one cargo of liquefied natural gas (natural gas cooled to -162 degree Celcius to temporarily convert it into liquid form for ease of transporting in cryogenic ships) this month, a source privy to the development said.

"The company is trying to get more cargoes but for now it is importing one cargo from Qatar," the source said but could say what price the gas has been contracted at.

GAIL will receive the Qatar cargo at Petronet LNG Ltd's 10 million tonnes a year LNG receipt terminal at Dahej in Gujarat.

This year the winter has been severe across the country, resulting in added power loads. Gas-fired power plants have requisitioned for more fuel and GAIL is importing the cargo to meet that demand.

The source said the state-owned firm will in February get the first cargo under a three-year deal with Japanese trading house Marubeni.

GAIL had in October last year signed a three-year deal with Marubeni to buy 0.5 million tons of LNG beginning in 2011.

"Marubeni will supply eight cargoes of LNG every year for three years to GAIL. In all probability, two cargoes per quarter will be supplied," the source said.

Besides Dahej, the Marubeni cargoes may also go to the 5 million-tonnes-a-year Dabhol terminal in Maharasthra which is nearing completion.

Marubeni will sell LNG to GAIL at 9.75 per cent of the prevailing Brent crude oil price plus $1 per million British thermal unit. At Brent price of $92 per barrel, the Marubeni LNG will cost $9.97 per mmBtu.

After adding import duty, cost of converting LNG to its original gaseous state (regassifying), transportation charges and local levies, the Marubeni gas would cost customers close to $13 per mmBtu.

While GAIL is equal promoter of Petronet LNG along with Indian Oil Corp (IOC), Oil and Natural Gas Corp (ONGC) and Bharat Petroleum Corp (BPCL), it along with NTPC own the Dabhol LNG plant.

The source said GAIL-NTPC plan to commission the Dabhol plant in first quarter of 2011. Initially the plant will operate at 20-30 per cent capacity as the breakwater is not fully constructed.

Petronet imports 7.5 million tons per annum of LNG from RasGas under a long-term contract.