Petronet LNG in talks to secure gas supply for Kochi

Petronet LNG (PLL) is in talks with West Asian countries, including Qatar, to secure gas supply for its Kochi terminal. Petronet has already tied up for 1.5 million tonnes per annum (mtpa) LNG from the proposed Gorgon project in Australia for its 2.5-mtpa LNG terminal in Kochi, which is expected to be operational in 2012.

“We are looking at West Asia for some additional supply of gas. We still have some capacity to be tied up with for the Kochi terminal. There is enough demand, it’s only the pipeline capacity that’s an issue,” said a senior official from Petronet LNG.

Qatar, the world’s largest LNG exporter, had till December 2008, sold LNG to Petronet at $2.53 per million British thermal unit (mBtu). Since January 2009, this price has been linked to moving average of international oil rates and is currently priced at $7 per mBtu.

The company has tied up additional supplies from RasGas for 2.5 mtpa from January 2010, in addition to the existing supplies of 5 mtpa — securing supply linkage for 7.5 mtpa out of the 11.5 mtpa capacity.

Petronet executed the expansion of the Dahej facility from 5 mtpa to 6.5 mtpa through de-bottlenecking in 2007 and recently to 11.5 mtpa in June 2009 through capacity expansion to help it increase volumes.

Qatar agreed to supply another 4 mtpa LNG to India after Petroleum Minister Murli Deora met Qatar’s Deputy PM and Energy Minister Abdullah bin Hamad Al Attiyah last month.

According to the proposal, Qatar is said to be supplying 0.3 million tonnes of LNG this year, 0.5 million tonnes in 2011, 2.5 million tonnes in 2012 and 4 million tonnes from 2013. Of this, about 2.5 mt will be received at Dabhol, while the remaining may be received at Kochi once the terminal is ready.

Analysts, however, are divided over the price contracted LNG would be sold at this year. While some say by December the price of contracted LNG would touch $10 per mBtu, others are of the view that the price should remain in check.

“LNG importers in the US and Europe cut demand last year due to the slowdown and thus Qatar diverted some surplus LNG to the tune of 1.5 million tonnes in 2008-09 to India for the Dabhol power plant. Qatar would also be bringing on stream two more plants with 15 million tonnes of LNG production capacity, which would raise its output to 77 million tonnes a year and thus the LNG prices should remain in check,” said a Mumbai-based analyst with a broking house.

However, the LNG from Qatar is expected to be priced at a premium of as as high as $10 per mbtu, say analysts. So, while the delivered price of imported Qatar LNG at Dabhol would be $13 per mBtu ($10.4 per mBtu plus import duty of 5 per cent and other local levies etc). LNG from Reliance Industries’ KG-D6 basin is delivered at the rate of $6.67 per mBtu.