GAIL seeks price renegotiation of Gorgon gas

State-owned gas utility GAIL has demanded renegotiation of price of gas from Australia’s Gorgon project.

Petronet LNG Ltd, a private firm whose chairman is Oil Secretary, had in August 2009 signed a 20-year deal to buy 1.44 million tons per annum of liquefied natural gas (LNG) at a price equivalent to 14.5 per cent of the ruling oil rates.
The formula agreed when Prosad Dasgupta was the Managing Director and CEO of Petronet, translates into USD 14.5 per million British thermal unit price at USD 100 per barrel oil price. After adding shipping cost, 5 per cent import duty and the cost of converting liquid gas back into its gaseous state, the Australian gas will cost close to USD 17 at Kochi port.

This compares to US Henry Hub rate of about USD 4 using which GAIL has recently signed deals to import gas from the US. Qatar, the world’s largest LNG producer, sells gas to India at much lower rates.
Several long-term LNG deals including Russian giant Gazprom’s agreement to sell gas into Europe have been renegotiated in recent past in view of slump in benchmark gas prices.

Besides difficulties in marketing of such high priced gas, rupee depreciation against US dollar will make the fuel even more costly.

Petronet is to get Gorgon LNG in second half of 2015, with initial supplies of being about 0.48 million tons, ramping up to contracted 1.44 million tons in two years.

Filed in: Miscellaneous

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