Petronet may formalize LNG pact with Australia by June

With the Gorgon gas project in Australia overcoming the environmental hurdle, Petronet LNG Ltd (PLL) has inched closer towards firming up its long-term supply of 2.5-million-tonne liquefied natural gas from that country. PLL is hopeful of completing all formalities for sourcing LNG from Gorgon project by June 2007 for its upcoming terminal at Kochi.

Sources told Business Line, "The draft agreements are being exchanged. Almost eight agreements are likely to be signed, which would include those on security, guarantee, besides the one on supply." The supply of gas would be expected by early 2011. They, however, declined to give any indications on the price band for sourcing LNG. "It would be an affordable price," sources maintained.

International prices

Indications are that PLL may pay international prices for the LNG. Industry sources said the pricing for long-term contracts varies from project to project and also depends upon the buyer-seller relationship.

India currently has a contract to buy 7.5 mt of LNG a year from Qatar. However, the current supply from Qatar is only five mt.

PLL has a 25-year contract to buy LNG from Ras Laffan Liquefied Natural Gas Co Ltd II. Through this contract, PLL currently imports five mt at its Dahej terminal and would start importing 2.5 mt more from 2009.

Environmental approval

The Gorgon project is operated by the Australian subsidiary of Chevron in a joint venture with Australian subsidiaries of Exxon Mobil and Shell. Chevron Corporation had confirmed last Tuesday that Western Australia's environment minister has upheld the Gorgon proponents' appeal of the Western Australia Environmental Protection Authority's June 2006 advisory that recommended against the Gorgon project's Environment Impact Statement and Environmental Review and Management Plan. The environmental approval to the project was subject to certain conditions.

Asked whether availability of LNG from Gorgon project, if delayed, will have any impact on PLL's plans, sources said, "We are in talks with various other potential suppliers, including those in Algeria, Malaysia, Nigeria, Qatar, and Myanmar for import of LNG, since the requirement is far more than 2.5 mt, which we are looking to contract with Australia."

The company is planning to increase Dahej terminal capacity to 10 million tones per annum (mtpa) by 2008-09. The 2.5-mtpa capacity Kochi LNG terminals, with provisions for expansion up to 5 mtpa, are to be commissioned in 2010.

The demand for natural gas for 2007-08 in the country has been estimated at 179.27 million standard cubic meters per day (MSCMD), whereas the domestic production is estimated at 70.54 MSCMD. In 2005-06 PLL imported 4.81 mtpa of LNG and Hazira LNG Private Ltd imported 0.171 mtpa LNG.

Source: Business Line, New Delhi
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