Price expectations are low from Indian buyers: Woodside Energy

Prospective Indian buyers of liquefied natural gas (LNG) from Australia such as Petronet LNG and GAIL (India) have to get more realistic on prices. The tendency to pitch for and stick to low prices that are not in line with the market could mean that India may lose out on long-term LNG supply from Australia.

This was the gist of a discussion that a group of three Indian journalists had with executives of Woodside Energy Ltd, the A$2.7-billion oil company with focussed interests in LNG, at Perth recently. "Price expectations are really low from Indian buyers... they are below market price," said Mr Paul Williams, Commercial Analyst, Woodside Energy.

Woodside produces 12 million tonnes of LNG from gas produced at its Northwest Shelf Project, off the north-west Australian town of Karratha. It currently operates four LNG trains and when the fifth one is commissioned by the last quarter of 2008, the Northwest Shelf Project's LNG capacity would touch 16 million tonnes per annum. LNG trains are processing units that separate, clean, compress and cool natural gas to liquid enabling its shipment to buyers.

Much of the LNG from the Northwest Shelf Project is shipped to Japan, with South Korea being the other customer. Recently, China came on board as the third buyer with China National Offshore Oil Company (CNOOC) picking up equity in the offshore venture.

The Northwest Shelf LNG is fully sold out for the long term and India has no opportunity there but Woodside is developing two other projects called Browse and Pluto in the same area.

Pluto project

Company officials said the Pluto project, with estimated reserves of 4.1 trillion cubic feet (LNG potential of 5-7 million tonnes per annum) and expected to send out its first LNG cargo by late 2010 has been sold out.

But they said that there is spare capacity available in the Browse project, which is a mega-sized one with reserves of 20 trillion cubic feet of gas and LNG potential of 7-14 million tonnes per annum. This project is scheduled to ship out its first LNG by 2011.

Company officials said that Indian buyers are in touch with them for long-term supplies but were tight lipped on the identity of the buyers and the extent and depth of the negotiations.

With the Gorgon project of ChevronTexaco off the West Australian coast mired in environmental problems, Woodside may be the only other LNG source Down Under for India. For Woodside, India is a potentially big customer though the focus now is on China and Japan. While there is interest on both sides, the stumbling block to an agreement appears to be the price.

Source: Business Line, Australia
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