More D6 gas leaves spot market high and dry
Buyers for spot liquefied natural gas ( LNG) have dried up in India, with hardly any cargo movement seen in the past month at the two operational receiving terminals in India at Dahej and Hazira. The inflow of more D6 gas from the Krishna-Godavari basin has been a dampener for the spot market, already going through a slack period.
Most power and fertiliser companies have turned from the spot market to D6 gas. One of the largest consumers of spot LNG used to be Reliance Industries itself, the producer of D6. The company consumed four cargoes a month till it allotted D6 gas (allotments are decided by the Union government).
Petronet LNG MD & CEO P Dasgupta told Business Standard: “Nobody is importing spot LNG in the country. We got our last spot cargo in November. New demand could be created once new fertiliser plants or new power firms come up.”
| IN A SPOT |
| * Hardly any cargo movement has been seen for the past month at the two operational receiving terminals at Dahej and Hazira |
| * Most power and fertiliser firms have turned from the spot market to D6 gas from the K-G basin |
| * Reliance Industries consumed as much as four cargoes per month till it allotted D6 gas |
| * The price of spot LNG is about $8.2 per mBtu for doorstep delivery, much higher than D6 gas, available at $4.2 an mBtu |
| * The last spot cargo was received at the Hazira terminal by Gujarat State Petroleum Corporation in the first week of December |
The existing demand for gas is being met by D6 and Petronet LNG’s imports for long-term supplies, he added.
"The price of spot LNG is about $ 8.2 per mBtu for doorstep delivery, which is very high compared to D6 gas available at $4.2 per mBtu," said an an industry expert tracking the sector.
RIL would purchase a couple of spot cargoes every month from the Shell-operated Hazira terminal for its Jamnagar refinery till December. An official of Shell India admitted the market scenario for spot was dull, while refusing to comment on cargo movement. A senior official of Shell Hazira maintained they were bringing as much as cargo as required.
Government sources said the last spot cargo was received at the Hazira terminal by Gujarat State Petroleum Corporation (GSPC) in the first week of December. “This could be one of the longest gaps for Hazira terminal since it got fully commissioned in 2006,” added one.
Some of the prime consumers for spot LNG who turned to D6 gas last year include Essar Power and NTPC. Each had consumed two to three cargoes per month.
Gujarat Gas, a British Gas subsidiary, purchased gas from the spot market for some time, as its supplies from GAIL were constrained. The supplies were restored some months earlier, after which the company stopped buying spot, sources said.
A spokesperson of Reliance Industries said they were going slow on purchase of spot LNG. “At present, we are producing about 60 mscmd from D6. We are not able to ramp it up to 80 mscmd due to lack of connectivity,” he added.
Industry sources said RIL had started using Gujarat State Petronet Ltd’s network for taking D6 gas to the company’s refinery in Jamnagar. According to a research report by Angel Securities, 8.7 mscmd of gas is currently being transmitted to RIL’s Refinery out of the contract for 11 mscmd gas.
GSPL is transmitting a third of the 2.5 mtpa of gas received by Petronet LNG from January 2010 onwards. “Thus, around 3 mscmd will be transmitted in the fourth quarter of 2010, some of which will be replacing existing spot volumes of Petronet LNG,” the report stated.
The state government has an agreement with Petronet LNG for a dedicated further supply of gas to the state after expansion at Dahej. “Petronet LNG is doubling its capacity at Dahej from about 5 mtpa for an investment of about Rs 600 crore. There has been some mutual understanding for long supply of gas to GSPC. The company has recently got all the necessary approvals,” said sources in the Gujarat Maritime Board.
For Petronet LNG, the long-term contracts for LNG of 7.5 mtpa were going smoothly. Shell was also open to entering long-term contracts, sources said.