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US may be India's future gas source

Petronet LNG in talks with two American firms to import gas GAIL is also interested

Ajay Modi  |  New Delhi 

Gas-abundant US could emerge as the future supply source for energy-starved India.

With the crash in US gas prices, a dozen of gas importing terminals are in the process of converting to export terminals. For India, which faces an increasing demand-supply gap, it makes sense to explore gas imports from the US.

India’s biggest gas importer, Petronet LNG, has started talks with two companies. GAIL is also keen to source US gas. It recently signed an agreement to import 3.5 million tonnes (mt) of liquefied natural gas (LNG) from Sabine Pass, a subsidiary of Cheniere Energy. US has, so far, allowed only Cheniere Energy to export LNG from Sabine Pass terminal.

Qatar is the main import source at the moment.

“There are a dozen import terminals in the US who have applied for conversion to export terminals. Some of them are functional, while some are under construction. Some just had approvals to built terminals. They all now want to export. We are in talks with two such US companies, but I cannot name them at this stage,” said A K Balyan, managing director and chief executive officer, Petronet LNG.

“They may put some restriction. But if prices remain same, it would be attractive to look at the US market. The landed cost, considering whatever projections are available, may still be competitive,” he added.

Shale gas, natural gas formed from being trapped within shale formations, in the US has turned the market there from shortage to glut.

According to the US Energy Information Administration, the US has the world’s second-biggest shale gas reserve of 862 trillion cubic feet (tcf) after China’s 1,275 tcf. The boom has led to a crash in the US gas prices and proved a negative for companies such as Chesapeake and Exxon Mobil’s XTO.

The US gas price is currently in a range of $2.5 to 3 per million British thermal units (mBtu). In India, domestic gas is sold between a price range of $4.2 and $5.65 per mBtu. Imported gas is sold for $13-14 per mBtu. Of the 46.236 mt gas consumed in the country, imports account for 10.13 mt.

“Export of gas by the US will give support to domestic prices there. However, large exports may take four-five years, during which, the importing terminals will be converted to exporting terminals,” said an analyst.

For India, imported gas has become important in the event of an uncertain domestic output. RIL-operated Krishna Godavari D6 block, the country’s biggest gas field, has seen a 50 per cent drop in output since last financial year.

First Published: Sun, July 01 2012. 00:15 IST