Petronet LNG gets short-term stock for Dabhol plant

Petronet LNG has managed to secure short-term LNG supplies from Qatar for the Dabhol power project. It has secured supplies from March 2007 for 1.5 mmbtu of LNG at a discounted price to the global spot market. The LNG price is expected to be pegged to the international gas index Henry Hub. The discount will comprise the cost of regassification and the actual cost of shipping. The current Henry Hub price is at $8 per mmbtu, with the discount LNG for Dabhol would come at $6.40 per mbtu.

At the Henry Hub net back price, which Petronet LNG is negotiating, will mean that power from the Dabhol power plant continues to be expensive. The net back price will only provide marginal cushion as it would mean a price pegged at international indices less the cost of re-gassification which is $0.40 and the actual cost of shipping which has been worked out to $1.25.

When Ratnagiri Gas and Power, the special purpose vehicle floated by Gail and NTPC, took over the Dabhol Power Project, it aimed at Rs 2.30 as the cost of power per unit. At the time of restructuring, GAIL had pegged the cost of LNG at $3.65 per mmbtu. Since then the price of gas has touched the highs of $10 per mmbtu.

Even as Petronet LNG tries to firm up short-term gas supplies for the plant, there is talk of sourcing domestic natural gas to meet the longterm needs of the project. RIL is believed to approached the Centre with an offer to sell gas at $5 per mmbtu. In return it wants the exclusive use of the Dabhol?s LNG terminal. Even as Petronet is discussing LNG supply deals for the short term, the government is also toying with the idea of converting the plant on natural gas for the long term. The government has directed the petroleum ministry to talk to BG, ONGC and RIL to explore natural gas supply possibilities.

Source: The Economic Times, New Delhi, October 17, 2006
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