LNG Imports Rise

Indian consumers are buying more LNG ? and agreeing to pay higher prices to do so. Surging naphtha prices and occasional gas shortages have led to strong demand for LNG in the country, resulting in a willingness to pay up to $11.64 per million BTU for imported LNG.

Naphtha, one of the main substitutes for natural gas in India, now costs about $20/ MMBTU. That high price convinced India?s government-controlled gas company, Gail, to pay $11.64/ MMBTU for a cargo of LNG that it purchased in June from Algeria?s Sonatrach.

Encouraged by strong demand, Gail says it is in negotiations to buy more LNG in southeast Asia, west Asia, and north Africa. It expects to import at least 10 shipments (63,000 tons each) during fiscal year 2006-07, which would add almost one billion cubic meters of gas to India?s supply (about three percent of last year?s 30 billion cubic meters).

Other companies are also getting into the act. In July, Petronet brought two spot cargoes into Dahej, a receiving terminal on India?s west coast which annually can handle about 6.5 million tons of LNG. Those cargoes were then sold to end users for about $8.72/MMBTU, not including transportation charges and taxes.

Additionally, Petronet officials say the consortium is on the verge of signing a deal in October with Australia?s Gorgon project that stipulates f.o.b. prices in the $4-$5/MMBTU range. The Gorgon supply is destined for an LNG terminal under construction at Kochi on India?s southwest coast that will handle 2.5 million tons per year, scheduled for early 2011 startup. It?s unclear whether the seller will be operator Chevron or one of the two non-operating partners, ExxonMobil and Royal Dutch/Shell, which each hold 25 percent.

Source: Energy Tribune, New Delhi, September 15, 2006
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