Petronet explores 'gas swap' deal with K-G basin supplies

Indian gas companies may soon boast their first gas swap arrangement that could slash transportation costs by more than 50 per cent.

Petronet LNG, which operates a recently expanded ten-million-tonne gas regassification plant in Dahej on the west coast, is exploring a swap option with the gas from the Krishna-Godavari field (K-G D6) on the east coast owned by Reliance Industries Ltd (RIL).

This would enable Petronet to supply gas to some of RIL’s consumers (mainly fertiliser companies) on the west coast. In lieu, K-G D6 block will supply gas to Petronet’s consumers on the east coast.

Confirming the development, Prosad Dasgupta, managing director and CEO, Petronet LNG, said: “It is a win-win situation for us. There won’t be unnecessary transportation of gas. The transportation cost could come down by as much as 50 per cent,” he added.

Dasgupta said that transporting one million British thermal units (mmBtu) of gas from the eastern to western coast and vice-versa costs $1 and transporting gas in and around the same region would cost only 30 to 40 cents.

He said that to begin with there could be a swap to the tune of 5 million standard cubic metres (mscmd) per day.

A swap deal for 5 million mscmd could lead to saving of around Rs 50 lakh a day, say experts, adding that the saving would be much higher as traded volumes increase. Gas demand in India is estimated at 170 mscmd.

These arrangements do not require government permission. “A swap arrangement takes place between two companies. If it makes economic sense, companies can explore this option,” said R S Pandey, secretary, Ministry of Petroleum and Natural Gas.

An RIL spokesperson, however, denied talks with Petronet LNG. But he said the company was exploring the possibility of gas purchase from Petronet LNG and Shell India for captive use in its power and petrochemicals business.

RIL, which recently began pumping gas from its D6 block, is not allowed to use gas from its block initially because it has been allocated to the priority sectors of fertiliser, power and city gas projects by a group of ministers.

RIL is in the process of ramping up gas production from the block to 40 mscmd by July. Peak production is envisaged at 80 mscmd.