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GAIL Looking At Medium-Term Imported Gas Contracts

  • GAIL (India) Ltd is looking at medium-term imported contracts to meet the growing gas demand amidst limited domestic supplies. Medium-term contracts are for one to 12 months.The company is looking at Russia, West Asia, and South-East Asia for sourcing liquefied natural gas, Mr B.C. Tripathi, Chairman and Managing Director, GAIL, said. GAIL is not looking at Australia for imports for now.In GAIL's portfolio of gas mix, he sees an immediate demand of 2 million tonnes additional LNG, which can increase to 5 mt or more by 2016-17. The company plans to buy four spot cargoes in the January-March quarter of the current fiscal. The company is sourcing cargo from Marubeni (Japan), Sonatrach (Algeria), Rasgas (Qatar), as well as a US-based company.
  • GAIL has been in talks with five-six players, including Macquarie Energy, to source LNG. The price of gas should be attractive enough for GAIL to get it into India.On how practical will it be to source gas from the US (GAIL has recently tied-up supplies to start in 2016), Mr Tripathi said that the primary objective is to get gas to India, but the company also has the option of swapping.The US gas will be linked to Henry Hub (which decides futures gas price at New York Mercantile exchange) basis. The current Henry Hub price is $3.5/mBtu. The landed price in India will be higher, as it will include costs of liquefaction, loading, shipping, re-gasification, transmission, marketing margins, as well as local taxes and levies.
  • Industry observers say it could easily be over $11/mBtu.GAIL is in talks with Macquarie Energy, Macquarie Group's North American energy marketing and trading arm, and Freeport LNG Expansion LP, which are jointly developing and marketing liquefaction capacity at the LNG import terminal in Freeport, Texas, US, for two mt a year long-term LNG contract.In the US market, the Indian company already has a contract for supply of 3.5 mt a year LNG with Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, L.P.
  • The company has signed sales and purchase agreement for supply of LNG for over 20 years beginning 2017. Under the agreement, GAIL has an extension option of up to 10 years for supplies. The bridging supplies of LNG will start from 2016.The prevailing LNG price in the global market is $12-15/mBtu. In the domestic market, LNG from long-term contracts is being sold at about $8.5/mBtu, while that from spot is being sold at a higher price.

NTPC

  • Power sector major NTPC Ltd is in talks with GAIL and Petronet for long-term imported gas supply commitment at an affordable price.Mr Arup Roy Choudhury, Chairman and Managing Director, NTPC, told Business Line that if the power major gets long-term price commitment, then it could look at setting up some generation capacity based on imported gas for consumers who demand peaking power.Asked what will be a comfortable gas price for NTPC, he said, whichever is the most affordable price linked to international indices.

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