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Petronet looks beyond Qatar for long-term LNG

Tuesday, 11 February 2014 - 6:00am IST | Place: Mumbai | Agency: DNA

Petronet LNG, which gets around 75% of its liquefied natural gas (LNG) supply from Qatar, is looking to reduce its dependence on that country.

The company is negotiating long-term LNG purchase contract with Angola, Mozambique, Yamal and Indonesia, Ashok Kumar Balyan, managing director and CEO said.

The company is looking at securing contracts for 2.5-3 million tonne (mt) of LNG through these deals. From Qatar, Petronet gets 7.5 mt LNG at $13-$14 per million metric British thermal unit (mmBtu) at its Dahej, Gujarat, terminal against the capacity of 10 mt. While Dahej terminal will be expanded to 15 mt by end 2016, the company also has a 5 mt capacity at Kochi, which is currently under-utilised as pipelines carrying the gas to customers are not ready.

"Long-term contracts will improve utilisation at both Dahej and Kochi. However, at what prices these contracts are decided is crucial as the company may not find any buyers if prices are too high," Dhaval Joshi, an analyst with Emkay Global Financial, said.

Petronet has been criticised for its expensive LNG import deal fromAustralia's Gorgon project. The 20-year deal signed for 1.44 mt LNG at a price of $14.5/mmBtu could land up at the Kochi terminal for around $15-$16/mmBtu and may ultimately cost the consumer $18/mmBtu.

Balyan, however, said the deal was still cheaper in comparison with spot LNG purchases.

"We have bought LNG in last three months at a price of $18.5-$19 from different places for the Indian market," he said.

Petronet LNG's deal with Qatar is also now more vulnerable to spikes as the price since December is completely linked crude oil unlike earlier where prices were decided monthly on a specific formula.

On Kochi terminal, Balyan said the company would hold a meeting with stakeholders on February 20 and the pipelines can be constructed within six months from the time of approval. The terminal has been facing lower capacity utilisation due to lack of adequate pipeline connectivity after the farmers' opposition on building pipelines on agricultural land. Balyan hopes to achieve 30% utilisation for Kochi refinery post pipeline connectivity.

The company will start construction of third terminal at Gangavaram in Andhra Pradesh in April, which is being developed at a cost of Rs 5,000 crore.

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