Dec 19, 2008

India - LNG to cost up to 35 pc more

NEW DELHI: Imported LNG for fertiliser and power plants like Dabhol is likely to cost by up to 35 per cent more from next month as Qatar will hike
rates for supplies from 2009.

About one-fourth of the nation's natural gas needs are met through import of liquefied natural gas (LNG) by state- promoted Petronet LNG Ltd, which currently sells the fuel at USD 4.98 per million British thermal unit.

This rate from January 1 would rise to USD 6.3 to 6.7 per mmBtu, pushing up cost of power generation and urea production, a source in know of the development said.

The price is not inclusive of sales tax, pipeline transportation charges and marketing margin. "The delivered price at burner tip is likely to range between USD 7.2 and 7.8 per mmBtu," he said.

This LNG would be the most expensive fuel in the country with Reliance Industries' D6 gas field at USD 4.2 per mmBtu being the cheapest outside the administrative pricing regime.

Petronet imports LNG from Qatar under two contracts - one long term at cheaper rates and the other short term on spot prices. These two rates are pooled to make price affordable to users such as Dabhol.

Currently, the long-term LNG costs USD 2.53 per mmBtu ex-ship while short-term LNG is priced at USD 8.5 per mmBtu and the two rates are pooled to get USD 4.98 per mmBtu price.

Sources said from January, the long-term rates will rise to USD 3.12 per mmBtu while the short-term LNG rates have been renegotiated at around USD 12 per mmBtu, the source said.

The short-term LNG contract for one million tonnes of LNG will run till September 2009 and has been pegged to Japanese Crude Cocktail (JCC) price of USD 60-70 a barrel.

Anticipating an increase in LNG price, the Government had recently decided to allocate D6 gas for Dabhol power plant. Dabhol currently gets pooled price gas from Petronet, but once Reliance starts gas production, the nation's largest gas-fired power plant would shift to D6 gas.

Petronet currently imports LNG from RasGas of Qatar at a fixed pre-shipping cost (or fob price) of USD 2.53 per mmBtu.

The five-year fixed price period will end in January when the price will move to a price band linked to Japanese Crude Cocktail (JCC), the source said.

From January, the free-on-board (fob) price will move up to USD 3.12 per mmBtu. After adding shipping cost, import duty, re-gasification charges, pipeline tariff, marketing margin and sales tax, the delivered price would be USD 5.5188 per mmBtu in January.

The ex-terminal price of RasGas LNG currently works out to be USD 3.86 per mmBtu. This would result in rise in fuel cost for power and fertiliser units, sources said.

The fob price will change every month based on the moving average of JCC, and LNG from Qatar will cost USD 4.25 per mmBtu in January 2010, USD 5.59 in 2011, USD 6.91 in 2012, USD 8.24 in 2013 and USD 8.73 per mmBtu in December 2013.

The source said the delivered price of Petronet's gas in January 2009 would be nearly four times the price of domestic gas produced by ONGC.

The gas produced by ONGC from fields given to it on nomination basis is priced at USD 1.9 per mmBtu. This price may go up to USD 2.4 per mmBtu if the government accepts Tariff Commission's recommendations for raising the fuel prices.

Of the free-market gas, Reliance Industries would be charging the least at USD 4.20 per mmBtu, while the Panna Mukta Tapti fields in Mumbai Offshore commands USD 5.70 per mmBtu price for fuel.

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